<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS April 30, 1997
Two World Trade Center, New York, New York 10048
DEAR SHAREHOLDER:
We are pleased to present the semi-annual report on the operations of
InterCapital Insured Municipal Income Trust (IIM) for the period ended April
30, 1997.
Economic growth moderated during the third quarter of 1996, causing
fixed-income yields to move lower through November. However, an acceleration
of economic activity led by consumer spending developed in the fourth quarter
of 1996 and continued into the first quarter of 1997. This contributed to
rising interest rates between December and April. On March 25, 1997, the
Federal Reserve Board raised the federal-funds rate 25 basis points to 5.50
percent in a preemptive move against a possible acceleration in the rate of
inflation. Subsequently, the fixed-income markets began to anticipate the
possibility of additional rate hikes by the Fed.
MUNICIPAL MARKET CONDITIONS
Municipal yields followed the trend of Treasury yields, but were less
volatile. Long-term insured revenue bond yields moved as low as 5.45 percent
in November 1996, before rising to 5.75 percent in April 1997.
BOND YIELDS 1994-1997
<TABLE>
<CAPTION>
Insured Municipal
30-Year Insured Revenue Yields
Municipal 30-year U.S. as a Percentage of
Revenue Yields Treasury Yields U.S. Treasury Yields
<S> <C> <C> <C>
5.45 6.35 0.8586
Jan '94 5.29 6.24 0.8481
5.64 6.66 0.8468
6.19 7.09 0.8728
6.24 7.31 0.854
6.23 7.43 0.8387
6.31 7.61 0.8293
6.15 7.4 0.8314
6.17 7.45 0.828
6.42 7.82 0.8212
6.66 7.97 0.8356
6.99 8 0.8738
6.65 7.88 0.8438
Jan '95 6.42 7.7 0.834
6.12 7.44 0.8222
6.07 7.43 0.8167
6.05 7.34 0.8245
5.84 6.65 0.8784
6 6.62 0.9066
5.99 6.85 0.875
5.98 6.65 0.8997
5.97 6.5 0.9184
5.79 6.33 0.915
5.61 6.13 0.9151
5.49 5.95 0.923
Jan '96 5.42 6.03 0.8989
5.55 6.47 0.8577
5.89 6.67 0.8835
5.94 6.91 0.8601
5.99 6.99 0.8571
5.86 6.87 0.8529
5.77 6.97 0.8278
5.82 7.12 0.8176
5.71 6.92 0.8248
5.6 6.64 0.8431
5.45 6.35 0.8583
5.56 6.64 0.8372
Jan '97 5.63 6.79 0.8293
5.53 6.8 0.8129
5.83 7.1 0.8216
5.74 6.96 0.8251
</TABLE>
Source: Bloomberg L.P.
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS April 30, 1997, continued
Similarly, yields on one-year municipal notes moved from 3.70 to 3.95 percent
over the past six months. The yield curve pick-up for extending maturities
from 1 to 30 years increased to 180 basis points.
The ratio of 30-year insured revenue bond yields to 30-year U.S. Treasury
yields declined from 86 percent at the end of October 1996 to 82 percent in
April 1997. A declining ratio means that municipals have outperformed
Treasuries, but have become relatively more expensive. The ratio has ranged
from 81 to 92 percent over the past three years.
New-issue municipal volume was down 6 percent during the first four months of
1997. However, underwriting volume for the full year is expected to exceed
bond maturities and redemptions.
PERFORMANCE
Over the six-month period ended April 30, 1997, the Trust's net asset value
(NAV) moved from $13.86 to $13.75. Based on this NAV change plus reinvestment
of tax-free dividends totaling $0.39 per share, the Trust's total NAV return
was 2.43 percent. IIM's market price on the New York Stock Exchange moved
from $11.625 to $12.125 per share. Based on this change in market price plus
reinvestment of tax-free dividends, IIM's total market return was 7.69
percent. On April 30, 1997, the Trust was trading at a 12 percent discount to
NAV. Undistributed net investment income available for dividends increased
from $0.088 to $0.106 per share.
FIVE LARGEST SECTORS AS OF APRIL 30, 1997
(% OF NET ASSETS)
ELECTRIC 18%
HOSPITAL 14%
WATER & SEWER 12%
IDR/PRC* 12%
HOUSING 9%
ALL OTHERS 35%
*INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
CREDIT ENHANCEMENTS AS OF APRIL 30, 1997
(% OF TOTAL LONG-TERM PORTFOLIO)
MBIA 38%
AMBAC 24%
FGIC 25%
FSA 13%
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS April 30, 1997, continued
PORTFOLIO STRUCTURE
The Trust remained fully invested in long-term municipal bonds during the
period. Investments were diversified among 13 long-term sectors and 71
credits. IIM's average maturity and call protection were 22 years and 7
years, respectively. To assure the timely payment of principal and interest,
each position in the portfolio was backed by triple "A" rated bond insurance.
THE IMPACT OF LEVERAGING
As we have discussed previously, the total income available for distribution
to common shareholders includes incremental income provided by the Trust's
outstanding Auction Rate Preferred Shares (ARPS). ARPS dividends reflect
prevailing short-term interest rates on maturities normally ranging from one
week to one year. Incremental income to common shares depends on two factors:
first, the amount of ARPS outstanding, and second, the spread between the
portfolio's cost yield and ARPS expenses (ARPS auction rate and expenses).
The greater the spread and the amount of ARPS outstanding, the greater the
amount of incremental income available for distribution to common
shareholders. The level of net investment income available for distribution
to common shareholders varies with the level of short-term interest rates.
ARPS yields ranged between 2.90 and 5.125 percent during the six months ended
April 30, 1997. Over the same period, ARPS leverage contributed $0.04 per
share to common share earnings. Five ARPS series totaled $155 million and
represented 27 percent of net assets.
LOOKING AHEAD
With the collapse of flat-tax proposals, municipal bonds have improved
relative to U.S. Treasury securities. Although tax-free yields are currently
somewhat "rich" in their historical relationship with Treasury yields, the
long-term benefit of tax-exemption remains intact.
The Trust's procedure for reinvestment of all dividends and distributions on
common shares is through purchases in the open market. This method helps to
support the market value of the Trust's shares. In addition, we would like to
remind you that the Trustees have approved a procedure whereby the Trust,
when appropriate, may purchase shares in the open market or in privately
negotiated transactions at a price not above market value or net asset value,
whichever is lower at the time of purchase. During the six-month period ended
April 30, 1997, IIM purchased and retired 1,182,700 shares of beneficial
interest at a weighted average market discount of 12.89 percent. The Trust
may also utilize procedures to reduce or eliminate the amount of outstanding
ARPS, including their purchase in the open market or in privately negotiated
transactions.
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS April 30, 1997, continued
We appreciate your ongoing support of InterCapital Insured Municipal Income
Trust and look forward to continuing to serve your investment needs.
Very truly yours,
/s/ Charles A. Fiumefreddo
CHARLES A. FIUMEFREDDO
Chairman of the Board
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS April 30, 1997 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS (97.7%)
General Obligation (8.3%)
District of Columbia,
$ 5,000 Refg Ser 1993 B (AMBAC) ........................................ 5.50 % 06/01/09 $ 4,951,900
6,000 Refg Ser 1993 B (FSA) .......................................... 5.50 06/01/10 5,884,620
2,000 Aurora, Illinois, Refg Ser 1993 A (FGIC) ........................ 5.125 01/01/19 1,795,880
3,000 Chicago, Illinois, Refg Ser 1993 A (MBIA) ....................... 5.50 01/01/17 2,844,450
10,000 Cook County, Illinois, Ser B (FGIC) ............................. 5.50 11/15/22 9,387,600
5,000 River Rouge School District, Michigan, 1993 Bldg & Site Unltd
Tax (FSA) ..................................................... 5.625 05/01/22 4,840,400
3,000 Vicksburg Community Schools, Michigan, 1993 Refg (MBIA) ......... 5.625 05/01/20 2,900,520
7,215 Clark County Sanitation District, Nevada, Refg 1993 (FGIC) ...... 5.70 07/01/12 7,224,596
8,000 Washoe County, Nevada, Reno -Sparks Convention Ltd Tax
Ser 1993 A (FGIC) .............................................. 5.75 07/01/22 7,873,840
------- -----------
49,215 47,703,806
------- -----------
Educational Facilities Revenue (3.9%)
4,000 Alabama State University, General Tuition & Fee Ser 1993 (MBIA) . 5.70 05/01/15 3,989,280
4,500 Indiana University, Student Fee Ser J (FGIC) .................... 5.00 08/01/18 3,992,715
10,000 Wayne State University, Michigan, Ser 1993 (AMBAC) .............. 5.50 11/15/18 9,597,800
Rhode Island Health & Educational Building Corporation,
2,500 Providence College Ser 1993 (MBIA) ............................. 5.60 11/01/15 2,428,275
2,500 Providence College Ser 1993 (MBIA) ............................. 5.60 11/01/22 2,345,475
------- -----------
23,500 22,353,545
------- -----------
Electric Revenue (17.5%)
16,000 Redding, California, Ser 1993 A COPs (FGIC) ..................... 5.684 06/01/19 15,357,760
Massachusetts Municipal Wholesale Electric Company,
6,000 1993 Ser A (AMBAC) ............................................. 5.00 07/01/10 5,672,640
10,000 1993 Ser A (AMBAC) ............................................. 5.45 07/01/18 9,318,400
20,000 North Carolina Municipal Power Agency #1, Catawba Ser 1993
(MBIA) ......................................................... 5.60 01/01/20 19,003,200
4,000 Piedmont Municipal Power Agency, South Carolina, Refg Ser 1993
(MBIA) ........................................................ 5.375 01/01/25 3,793,120
15,000 South Carolina Public Service Authority, 1993 Refg Ser A (MBIA) . 5.50 07/01/21 14,268,150
6,000 Lower Colorado River Authority, Texas, Jr Lien Refg 4th Ser
(FSA) .......................................................... 5.625 01/01/17 5,849,760
8,000 Texas Municipal Power Agency, Refg Ser 1993 (MBIA) .............. 5.25 09/01/12 7,713,680
10,000 Washington Public Power Supply System, Nuclear Proj #1 Refg
Ser 1993 A (MBIA) .............................................. 5.70 07/01/17 9,730,500
10,000 Wisconsin Public Power Incorporated, Refg Ser 1993 A (AMBAC) .... 5.25 07/01/21 9,131,700
------- -----------
105,000 99,838,910
------- -----------
Hospital Revenue (13.7%)
2,100 District of Columbia, Children's Hospital Refg Ser 1992 A
(FGIC) ......................................................... 6.25 07/15/10 2,186,142
8,000 Fulton-DeKalb Hospital Authority, Georgia, Grady Memorial
Hospital Refg Ser 1993 (MBIA) .................................. 5.50 01/01/20 7,640,480
4,000 Indiana Health Facilities Financing Authority, Deaconess
Hospital Inc Refg Ser 1993 (MBIA) .............................. 5.75 03/01/15 3,951,360
5,000 Cedar Rapids, Iowa, St Lukes-Methodist Hospital Refg Ser 1993
(FGIC) ........................................................ 5.75 08/15/22 4,908,000
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS April 30, 1997 (unaudited) continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------------
$ 5,000 Kentucky Economic Development Finance Authority, St Elizabeth
Medical Center Inc Ser 1993 A (FGIC) ........................... 6.00 % 12/01/22 $ 5,046,500
12,000 Louisiana Public Facilities Authority, Our Lady of the Lake
Regional Medical Center Ser 1993 D & E (FSA) ................... 5.90 12/03/21 11,653,200
10,000 Maine Health & Higher Educational Facilities Authority, Ser 1993
A (FSA) ....................................................... 5.50 07/01/23 9,380,700
5,000 Massachusetts Health & Educational Facilities Authority, Lahey
Clinic Medical Center Ser B (MBIA) ............................. 5.625 07/01/15 4,874,700
10,000 Michigan Hospital Finance Authority, Oakwood Hospital Refg Ser
1993 A (FGIC) .................................................. 5.625 11/01/18 9,585,200
5,000 Allegheny County Hospital Development Authority, Pennsylvania,
Pittsburgh Mercy Health Ser 1996 (AMBAC) ....................... 5.625 08/15/18 4,822,300
5,000 Washington County Hospital Authority, Pennsylvania, Washington
Hospital Ser 1993 (AMBAC) ...................................... 5.625 07/01/23 4,772,550
4,000 Chattanooga-Hamilton County Hospital Authority, Tennessee,
Erlanger Medical Center Refg Ser 1993 (FSA) .................... 5.50 10/01/13 3,947,920
5,500 Wisconsin Health & Educational Facilities Authority, Sisters of
the Sorrowful Mother Health Care Ser AA (MBIA) ................. 6.25 06/01/20 5,638,600
------- -----------
80,600 78,407,652
------- -----------
Industrial Development/Pollution Control Revenue (11.7%)
7,500 Adams County, Colorado, Public Service Co of Colorado Refg
1993 Ser A (MBIA) .............................................. 5.875 04/01/14 7,608,000
4,000 St Johns County Industrial Development Authority, Florida,
Professional Golf Hall of Fame Ser 1996 (MBIA) ................. 5.875 09/01/23 4,022,720
15,000 Indiana Development Finance Authority, PSI Energy Inc Ser 1993 B
(AMT)(MBIA) .................................................... 5.75 02/15/28 14,454,300
4,900 Monroe County, Michigan, Detroit Edison Co Ser CC (AMT) (MBIA) .. 6.55 06/01/24 5,130,986
5,400 Forsyth, Montana, Puget Sound Power & Light Co Ser 1993 (MBIA) .. 5.875 04/01/20 5,404,752
5,000 Washoe County, Nevada, Sierra Pacific Power Co Ser 1990
(AMT)(MBIA) ................................................... 6.65 06/01/17 5,309,600
New York State Energy Research & Development Authority,
6,000 Brooklyn Union Gas Co Ser D-1 & 2 (AMT)(MBIA) .................. 5.635 07/08/26 5,616,300
4,000 New York State Electric & Gas Corp 1987 Ser A (AMT) (MBIA) ..... 6.15 07/01/26 4,032,680
15,000 Brazos River Authority, Texas, Texas Utilities Electric Co Ser
1993 A (AMT)(AMBAC) ............................................ 6.05 04/01/25 15,055,200
------- -----------
66,800 66,634,538
------- -----------
Mortgage Revenue - Multi-Family (1.5%)
8,675 West Virginia Housing Development Fund, Ser A (AMBAC) ........... 5.65 11/01/21 8,417,700
------- -----------
Mortgage Revenue - Single Family (7.7%)
3,000 Alaska Housing Finance Corporation, Governmental 1995 Ser A
(MBIA) ......................................................... 5.875 12/01/24 2,937,660
16,990 Connecticut Housing Finance Authority, 1992 Ser A-2 (AMT)
(Secondary FSA) ................................................ 6.05 11/15/25 17,040,290
1,195 Maine Housing Authority, Mortgage Purchase 1990 Ser A-6
(AMT)(Secondary MBIA) .......................................... 6.35 11/15/22 1,211,455
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS April 30, 1997 (unaudited) continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------------
$13,000 New Jersey Housing & Mortgage Finance Agency, Home Buyer 1990
Ser F-3 (AMT)(MBIA) ............................................ 5.95 % 04/01/25 $12,816,440
10,000 Virginia Housing Development Authority, 1992 Ser B (AMT)
(Secondary FSA) ................................................ 6.30 01/01/27 10,145,400
------- -----------
44,185 44,151,245
------- -----------
Public Facilities Revenue (4.1%)
10,000 California Public Works Board, Corrections Refg 1993 Ser A
(AMBAC) ........................................................ 5.00 12/01/19 9,140,200
5,000 Florida Department of Management Services, Pool Refg Ser 1992
(AMBAC) ........................................................ 5.40 09/01/14 4,856,100
10,000 Marion County Convention & Recreational Facilities Authority,
Indiana, Excise Tax Refg Ser 1993 A (AMBAC) ................... 5.50 06/01/21 9,403,000
------- -----------
25,000 23,399,300
------- -----------
Student Loan Revenue (3.2%)
18,000 Pennsylvania Higher Education Assistance Agency, 1988 Ser D
(AMT)(AMBAC) ................................................... 6.05 01/01/19 18,021,060
------- -----------
Transportation Facilities Revenue (7.4%)
5,000 Tucson, Arizona, Street & Highway Jr Lien Refg Ser 1993 (MBIA) .. 5.50 07/01/12 4,971,650
5,000 Chicago, Illinois, Chicago-O'Hare Int'l Airport Second Lien Refg
1993 Ser A (AMT)(MBIA) ......................................... 5.60 01/01/18 4,702,450
14,000 Regional Transportation Authority, Illinois, Ser 1993 B (FGIC) .. 5.85 06/01/23 13,833,120
3,000 Kentucky Turnpike Authority, Econ Dev Road Revitalization Refg
Ser 1993 (AMBAC) ............................................... 5.50 07/01/11 2,979,360
10,000 Pennsylvania Turnpike Commission, Refg Ser O 1992 (FGIC) ........ 5.50 12/01/17 9,606,800
4,000 Salt Lake City, Utah, Airport Refg Ser 1993 B (FGIC) ............ 5.875 12/01/18 3,944,440
2,000 Richmond Metropolitan Authority, Virginia, Expressway 1992 Ser B
(FGIC)............................ ............................ 6.25 07/15/22 2,070,040
------- -----------
43,000 42,107,860
------- -----------
Water & Sewer Revenue (11.7%)
17,000 Central Lake County Joint Action Water Agency, Illinois, Refg
Ser 1993 (FGIC) ................................................ 5.375 05/01/20 15,763,590
10,000 Louisville & Jefferson County Metropolitan Sewer District,
Kentucky, Ser 1993 (MBIA) ...................................... 5.30 05/15/19 9,311,600
3,000 Detroit, Michigan, Sewage Refg Ser 1993 A (FGIC) ................ 5.70 07/01/13 2,997,210
15,000 Houston, Texas, Water & Sewer 1992 Ser C (MBIA) ................. 5.75 12/01/15 14,948,250
Seattle, Washington,
10,000 Sewer, Refg Ser Y (FGIC) ....................................... 5.70 01/01/15 9,811,500
10,000 Sewer, Refg Ser X (FGIC) ....................................... 5.50 01/01/16 9,495,900
5,000 West Virginia Water Development Authority, Loan Program II
Refg Ser A-11 (FSA) ............................................ 5.50 11/01/23 4,740,000
------- -----------
70,000 67,068,050
------- -----------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS April 30, 1997 (unaudited) continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------------
Other Revenue (2.6%)
$ 5,000 Indianapolis, Indiana, Gas Utility Ser 1994 A (AMBAC) ........... 5.875% 06/01/24 $ 4,982,900
10,000 Rhode Island Depositors Economic Protection Corporation, Refg
1992 Ser B (MBIA) .............................................. 6.00 08/01/17 10,044,100
------- ------------
15,000 15,027,000
------- ------------
Refunded (4.4%)
9,700 Metropolitan Pier & Exposition Authority, Illinois, McCormick
Place Ser 1992 A (Secondary AMBAC) ............................. 6.50 06/15/03++ 10,650,794
4,360 Piedmont Municipal Power Agency, South Carolina, Refg Ser 1993
(MBIA)(ETM) .................................................... 5.375 01/01/25 4,189,916
5,000 Shelby County Health, Educational & Housing Facility Board,
Tennessee, LeBonheur Children's Medical Center Inc Ser D
(MBIA)(ETM) .................................................... 5.50 08/15/19 4,905,150
5,000 Loudoun County Sanitation Authority, Virginia, Refg Ser 1992
(FGIC) ......................................................... 6.25 01/01/03++ 5,332,750
------- ------------
24,060 25,078,610
------- ------------
573,035 TOTAL MUNICIPAL BONDS (Identified Cost $563,010,810) ................................. 558,209,276
=======
SHORT-TERM MUNICIPAL OBLIGATIONS (0.5%)
1,200 Missouri Health & Educational Facilities Authority, Washington
University Ser 1996 C (Demand 05/01/97) ....................... 4.00* 09/01/30 1,200,000
100 Harris County Health Facilities Development Corporation, Texas,
Methodist Hospital Ser 1994 (Demand 05/01/97) .................. 3.85* 12/01/25 100,000
1,800 Sweetwater County, Wyoming, Pacificorp Ser 1994 (AMBAC)
(Demand 05/01/97) .............................................. 3.85* 11/01/24 1,800,000
------- ------------
3,100 TOTAL SHORT-TERM MUNICIPAL OBLIGATIONS (Identified Cost $3,100,000) .................. 3,100,000
------- ------------
$576,135 TOTAL INVESTMENTS (Identified Cost $566,110,810) (a) ..................... 98.2% 561,309,276
========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES .......................... 1.8 10,129,080
------------
NET ASSETS .............................................................. 100.0% $571,438,356
============
</TABLE>
- --------------
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
ETM Escrowed to Maturity.
++ Prerefunded to call date shown.
* Current coupon of variable rate demand obligation.
(a) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$2,866,743 and the aggregate gross unrealized depreciation is
$7,668,277, resulting in net unrealized depreciation of
$4,801,534.
Bond Insurance:
- ---------------
AMBAC AMBAC Indemnity Corporation.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS April 30, 1997 (unaudited) continued
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
April 30, 1997
Alabama 0.7%
Alaska 0.5
Arizona 0.9
California 4.3
Colorado 1.3
Connecticut 3.0
District of Columbia 2.3
Florida 1.6
Georgia 1.3
Illinois 10.3
Indiana 6.4
Iowa 0.9
Kentucky 3.0%
Louisiana 2.0
Maine 1.9
Massachusetts 3.5
Michigan 6.1
Missouri 0.2
Montana 0.9
Nevada 3.6
New Jersey 2.2
New York 1.7
North Carolina 3.3
Pennsylvania 6.5
Rhode Island 2.6%
South Carolina 3.9
Tennessee 1.6
Texas 7.6
Utah 0.7
Virginia 3.1
Washington 5.1
West Virginia 2.3
Wisconsin 2.6
Wyoming 0.3
----
Total 98.2%
====
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1997 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $566,110,810).......................................... $561,309,276
Cash..................................................................... 57,045
Interest receivable...................................................... 10,814,218
Deferred organizational expenses......................................... 5,948
Prepaid expenses ........................................................ 75,760
------------
TOTAL ASSETS........................................................... 572,262,247
------------
LIABILITIES:
Payable for:
Common shares of beneficial interest repurchased........................ 403,801
Investment management fee............................................... 184,923
Dividends to preferred shareholders..................................... 115,892
Accrued expenses ........................................................ 119,275
------------
TOTAL LIABILITIES...................................................... 823,891
------------
NET ASSETS:
Preferred shares of beneficial interest (1,000,000 shares authorized of
non-participating $.01 par value, 3,100 shares outstanding) ............ 155,000,000
------------
Common shares of beneficial interest (unlimited shares authorized of
$.01
par value, 30,283,113 shares outstanding)............................... 433,236,506
Net unrealized depreciation.............................................. (4,801,534)
Accumulated undistributed net investment income.......................... 3,224,423
Accumulated net realized loss............................................ (15,221,039)
------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS........................... 416,438,356
------------
TOTAL NET ASSETS....................................................... $571,438,356
============
NET ASSET VALUE PER COMMON SHARE
($416,438,356 divided by 30,283,113 common shares outstanding) ......... $13.75
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the six months ended April 30, 1997 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME....................... $16,587,820
-----------
EXPENSES
Investment management fee ............ 1,011,864
Auction commission fees .............. 192,367
Transfer agent fees and expenses ..... 80,263
Professional fees..................... 55,626
Auction agent fees.................... 20,280
Registration fees..................... 17,928
Custodian fees........................ 13,788
Shareholder reports and notices ...... 13,511
Trustees' fees and expenses .......... 9,375
Organizational expenses............... 3,568
Other................................. 23,325
-----------
TOTAL EXPENSES...................... 1,441,895
LESS: EXPENSE OFFSET ............... (13,707)
-----------
NET EXPENSES........................ 1,428,188
-----------
NET INVESTMENT INCOME .............. 15,159,632
-----------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss..................... (9,936)
Net change in unrealized
appreciation......................... (5,755,728)
-----------
NET LOSS ........................... (5,765,664)
-----------
NET INCREASE ......................... $ 9,393,968
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
APRIL 30, 1997 OCTOBER 31, 1996
- -----------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ............................ $ 15,159,632 $ 31,410,887
Net realized loss ................................ (9,936) (620,558)
Net change in unrealized appreciation............. (5,755,728) 440,974
------------ ------------
NET INCREASE.................................... 9,393,968 31,231,303
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT
INCOME:
Preferred......................................... (2,667,068) (5,551,293)
Common............................................ (12,052,231) (24,369,679)
------------ ------------
TOTAL........................................... (14,719,299) (29,920,972)
------------ ------------
Decrease from transactions in common shares of
beneficial interest.............................. (14,252,106) (23,133,162)
------------ ------------
NET DECREASE.................................... (19,577,437) (21,822,831)
NET ASSETS:
Beginning of period............................... 591,015,793 612,838,624
------------ ------------
END OF PERIOD
(Including undistributed net investment income
of $3,224,423 and $2,784,090, respectively) .... $571,438,356 $591,015,793
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1997 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
InterCapital Insured Municipal Income Trust (the "Trust") is registered under
the Investment Company Act of 1940, as amended, as a diversified, closed-end
management investment company. The Trust's investment objective is to provide
current income which is exempt from federal income tax. The Trust was
organized as a Massachusetts business trust on March 12, 1992 and commenced
operations on
February 26, 1993.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- Portfolio securities are valued by an outside
independent pricing service approved by the Trustees. The pricing service has
informed the Trust that in valuing the portfolio securities, it uses both a
computerized matrix of tax-exempt securities and evaluations by its staff, in
each case based on information concerning market transactions and quotations
from dealers which reflect the bid side of the market each day. The portfolio
securities are thus valued by reference to a combination of transactions and
quotations for the same or other securities believed to be comparable in
quality, coupon, maturity, type of issue, call provisions, trading
characteristics and other features deemed to be relevant. Short-term debt
securities having a maturity date of more than sixty days at time of purchase
are valued on a mark-to-market basis until sixty days prior to maturity and
thereafter at amortized cost based on their value on the 61st day. Short-term
debt securities having a maturity date of sixty days or less at the time of
purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). Realized gains
and losses on security transactions are determined by the identified cost
method. The Trust amortizes premiums and accretes discounts over the life of
the respective securities. Interest income is accrued daily.
C. FEDERAL INCOME TAX STATUS -- It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable and nontaxable income to its
shareholders. Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Trust records dividends
and distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1997 (unaudited) continued
income and net realized capital gains are determined in accordance with
federal income tax regulations which may differ from generally accepted
accounting principles. These "book/tax" differences are either considered
temporary or permanent in nature. To the extent these differences are
permanent in nature, such amounts are reclassified within the capital
accounts based on their federal tax-basis treatment; temporary differences do
not require reclassification. Dividends and distributions which exceed net
investment income and net realized capital gains for financial reporting
purposes but not for tax purposes are reported as dividends in excess of net
investment income or distributions in excess of net realized capital gains.
To the extent they exceed net investment income and net realized capital
gains for tax purposes, they are reported as distributions of
paid-in-capital.
E. ORGANIZATIONAL EXPENSES -- Dean Witter InterCapital Inc. (the "Investment
Manager") paid the organizational expenses of the Trust's common shares in
the amount of $36,000 which have been reimbursed for the full amount thereof.
Such expenses have been deferred and are being amortized by the straight-line
method over a period not to exceed five years from the commencement of
operations.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement, the Trust pays the Investment
Manager a management fee, calculated weekly and payable monthly, by applying
the annual rate of 0.35% to the Trust's weekly net assets.
Under the terms of the Agreement, the Investment Manager maintains certain of
the Trust's books and records and furnishes, at its own expense, office
space, facilities, equipment, clerical, bookkeeping and certain legal
services and pays the salaries of all personnel, including officers of the
Trust who are employees of the Investment Manager. The Investment Manager
also bears the cost of telephone services, heat, light, power and other
utilities provided to the Trust.
3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the six months ended April 30, 1997
aggregated $4,922,650 and $21,343,038, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Trust's transfer agent. At April 30, 1997, the Trust had transfer agent fees
and expenses payable of approximately $30,900.
The Trust has an unfunded noncontributory defined benefit pension plan
covering all independent Trustees of the Trust who will have served as
independent Trustees for at least five years at the time of retirement.
Benefits under this plan are based on years of service and compensation
during the last five
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1997 (unaudited) continued
years of service. Aggregate pension costs for the six months ended April 30,
1997 included in Trustees' fees and expenses in the Statement of Operations
amounted to $2,555. At April 30, 1997, the Trust had an accrued pension
liability of $28,167 which is included in accrued expenses in the Statement
of Assets and Liabilities.
4. PREFERRED SHARES OF BENEFICIAL INTEREST
The Trust is authorized to issue up to 1,000,000 non-participating preferred
shares of beneficial interest having a par value of $.01 per share, in one or
more series, with rights as determined by the Trustees, without approval of
the common shareholders. The Trust has issued Series 1 through 5 Auction Rate
Preferred Shares ("Preferred Shares") which have a liquidation value of
$50,000 per share plus the redemption premium, if any, plus accumulated but
unpaid dividends, whether or not declared, thereon to the date of
distribution. The Trust may redeem such shares, in whole or in part, at the
original purchase price of $50,000 per share plus accumulated but unpaid
dividends, whether or not declared, thereon to the date of redemption.
Dividends, which are cumulative, are reset through auction procedures.
<TABLE>
<CAPTION>
AMOUNT IN RESET RANGE OF
SERIES SHARES* THOUSANDS* RATE* DATE DIVIDEND RATES**
------ ------- ---------- ----- ---- ----------------
<S> <C> <C> <C> <C> <C>
1 400 $20,000 3.55% 06/30/97 3.55% - 3.685%
2 900 45,000 4.05 05/05/97 2.90 - 4.05
3 1,000 50,000 4.05 05/05/97 3.24 - 4.05
4 400 20,000 3.50 07/14/97 3.50 - 3.70
5 400 20,000 4.50 05/05/97 3.00 - 5.125
</TABLE>
- --------------
* As of April 30, 1997.
** For the six months ended April 30, 1997.
Subsequent to April 30, 1997 and up through June 6, 1997, the Trust paid
dividends to each of the Series 1 through 5 at rates ranging from 3.50% to
4.50%, respectively, in the aggregate amount of $665,227.
The Trust is subject to certain restrictions relating to the preferred
shares. Failure to comply with these restrictions could preclude the Trust
from declaring any distributions to common shareholders or purchasing common
shares and/or could trigger the mandatory redemption of preferred shares at
liquidation value.
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1997 (unaudited) continued
The preferred shares, which are entitled to one vote per share, generally
vote with the common shares but vote separately as a class to elect two
Trustees and on any matters affecting the rights of the preferred shares.
5. COMMON SHARES OF BENEFICIAL INTEREST
Transactions in common shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
CAPITAL
PAID IN
EXCESS OF
SHARES PAR VALUE PAR VALUE
-------- ----------- -----------
<S> <C> <C> <C>
Balance, October 31, 1995 ................................................ 33,455,313 $334,553 $470,287,221
Treasury shares purchased and retired (weighted average discount 14.91%)* (1,989,500) (19,895) (23,113,267)
---------- -------- ------------
Balance, October 31, 1996 ................................................ 31,465,813 314,658 447,173,954
Treasury shares purchased and retired (weighted average discount 12.89%)* (1,182,700) (11,827) (14,240,279)
---------- -------- ------------
Balance, April 30, 1997 .................................................. 30,283,113 $302,831 $432,933,675
========== ======== ============
</TABLE>
- --------------
* The Trustees have voted to retire the shares purchased.
6. FEDERAL INCOME TAX STATUS
At October 31, 1996, the Trust had a net capital loss carryover of
approximately $15,211,000 to offset future capital gains to the extent
provided by regulations, which will be available through October 31 of the
following years:
<TABLE>
<CAPTION>
AMOUNT IN THOUSANDS
- ----------------------------
2002 2003 2004
------ ------ ----
<S> <C> <C>
$10,178 $4,412 $621
======= ====== ====
</TABLE>
7. DIVIDENDS TO COMMON SHAREHOLDERS
The Trust declared the following dividends from net investment income:
<TABLE>
<CAPTION>
DECLARATION AMOUNT RECORD PAYABLE
DATE PER SHARE DATE DATE
---- --------- ---- ----
<S> <C> <C> <C>
April 29, 1997 $0.065 May 9, 1997 May 23, 1997
May 27, 1997 $0.065 June 6, 1997 June 20, 1997
</TABLE>
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a common share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR ENDED OCTOBER 31** FEBRUARY 26, 1993*
MONTHS ENDED ------------------------------- THROUGH
APRIL 30, 1997** 1996 1995 1994++ OCTOBER 31, 1993**
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(unaudited)
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ........................ $ 13.86 $ 13.69 $11.41 $ 14.95 $14.06
Net investment income........................................ 0.50 0.97 0.96 1.10 0.63
Net realized and unrealized gain (loss)...................... (0.20) (0.01) 2.22 (3.53) 0.96
-------- ------- ------ ------- ------
Total from investment operations............................. 0.30 0.96 3.18 (2.43) 1.59
-------- ------- ------ ------- ------
Less dividends from:
Net investment income....................................... (0.39) (0.75) (0.80) (0.90) (0.45)
Common share equivalent of dividends paid to preferred
shareholders................................................ (0.09) (0.17) (0.16) (0.21) (0.11)
-------- ------- ------ ------- ------
Total dividends.............................................. (0.48) (0.92) (0.96) (1.11) (0.56)
-------- ------- ------ ------- ------
Anti-dilutive effect of acquiring treasury shares............ 0.07 0.13 0.06 0.01 --
-------- ------- ------ ------- ------
Offering costs charged against capital....................... -- -- -- (0.01) (0.14)
-------- ------- ------ ------- ------
Net asset value, end of period............................... $ 13.75 $ 13.86 $13.69 $ 11.41 $14.95
======== ======= ====== ======= ======
Market value, end of period.................................. $ 12.125 $11.625 $11.50 $10.375 $15.00
======== ======= ====== ======= ======
TOTAL INVESTMENT RETURN+ .................................... 7.69%(1) 7.81% 19.11% (25.81)% 3.05%(1)
RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS:
Total expenses .............................................. 0.68%(2)(3) 0.68%(3) 0.71%(3) 0.80% 0.63%(2)
Net investment income before preferred stock dividends ...... 7.15%(2) 7.06% 7.51% 8.23% 6.49%(2)
Preferred stock dividends ................................... 1.26%(2) 1.25% 1.38% 1.55% 1.14%(2)
Net investment income available to common shareholders ..... 5.89%(2) 5.81% 6.13% 6.68% 5.35%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands...................... $571,438 $591,016 $612,839 $592,759 $783,879
Asset coverage on preferred shares at end of period.......... 368% 381% 395% 304% 313%
Portfolio turnover rate ..................................... 1%(1) 1% 1% 7% 3%(1)
</TABLE>
- --------------
* Commencement of operations.
** The per share amounts were computed using an average number of shares
outstanding during the period.
+ Total investment return is based upon the current market value on the
last day of each period reported. Dividends are assumed to be
reinvested at the prices obtained under the Trust's dividend
reinvestment plan. Total investment return does not reflect brokerage
commissions.
++ Restated for comparative purposes.
(1) Not annualized.
(2) Annualized.
(3) Does not reflect the effect of expense offset of 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TRUSTEES
- -------------------------------------------------
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
- -------------------------------------------------
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and General Counsel
James F. Willison
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
- -------------------------------------------------
Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
- -------------------------------------------------
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
- -------------------------------------------------
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
The financial statements included herein have
been taken from the records of the Trust without
examination by the independent accountants and
accordingly they do not express an opinion
thereon.
INTERCAPITAL
INSURED
MUNICIPAL
INCOME
TRUST
Semiannual Report
April 30, 1997
