<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS October 31, 1998
Two World Trade Center,
New York, New York 10048
DEAR SHAREHOLDER:
We are pleased to present the annual report on the operations of Morgan Stanley
Dean Witter Insured Municipal Income Trust (IIM) for the fiscal year ended
October 31, 1998.
On December 21, 1998, after the close of the period under review, the Trust
changed its name from InterCapital Insured Municipal Income Trust to Morgan
Stanley Dean Witter Insured Municipal Income Trust. Information on the name
change was mailed to shareholders in mid-December under separate cover.
Since our last report six months ago, global financial turmoil, including the
Russian currency crisis, has continued to affect the securities markets. This
led to a flight-to-quality rally for U.S. Treasury bonds, with yields falling to
30-year lows. Municipal bond yields declined, but lagged the downward trend of
Treasury yields.
The deflationary impact of the international financial crisis began to temper
U.S. economic growth prior to the summer's tumultuous market activity. Lower
commodity prices, cheaper imports and improved
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
Date AAA Ins Tsy % Relationship
- ---- ------- --- --------------
12/31/93 5.40% 6.34% 85.17%
01/31/94 5.40 6.24 86.54%
02/28/94 5.80 6.66 87.09%
03/31/94 6.40 7.09 90.27%
04/29/94 6.35 7.32 86.75%
05/31/94 6.25 7.43 84.12%
06/30/94 6.50 7.61 85.41%
07/29/94 6.25 7.39 84.57%
08/31/94 6.30 7.45 84.56%
09/30/94 6.55 7.81 83.87%
10/31/94 6.75 7.96 84.80%
11/30/94 7.00 8.00 87.50%
12/30/94 6.75 7.88 85.66%
01/31/95 6.40 7.70 83.12%
02/28/95 6.15 7.44 82.66%
03/31/95 6.15 7.43 82.77%
04/28/95 6.20 7.34 84.47%
05/31/95 5.80 6.66 87.09%
06/30/95 6.10 6.62 92.15%
07/31/95 6.10 6.86 88.92%
08/31/95 6.00 6.66 90.09%
09/29/95 5.95 6.48 91.82%
10/31/95 5.75 6.33 90.84%
11/30/95 5.50 6.14 89.58%
12/29/95 5.35 5.94 90.07%
01/31/96 5.40 6.03 89.55%
02/29/96 5.60 6.46 86.69%
03/29/96 5.85 6.66 87.84%
04/30/96 5.95 6.89 86.36%
05/31/96 6.05 6.99 86.55%
06/28/96 5.90 6.89 85.63%
07/31/96 5.85 6.97 83.93%
08/30/96 5.90 7.11 82.98%
09/30/96 5.70 6.93 82.25%
10/31/96 5.65 6.64 85.09%
11/29/96 5.50 6.35 86.61%
12/31/96 5.60 6.63 84.46%
01/31/97 5.70 6.79 83.95%
02/28/97 5.65 6.80 83.09%
03/31/97 5.90 7.10 83.10%
04/30/97 5.75 6.94 82.85%
05/30/97 5.65 6.91 81.77%
06/30/97 5.60 6.78 82.60%
07/30/97 5.30 6.30 84.13%
08/31/97 5.50 6.61 83.21%
09/30/97 5.40 6.40 84.38%
10/31/97 5.35 6.15 86.99%
11/30/97 5.30 6.05 87.60%
12/31/97 5.15 5.92 86.99%
01/31/98 5.15 5.80 88.79%
02/28/98 5.20 5.92 87.84%
03/31/98 5.25 5.93 88.53%
04/30/98 5.35 5.95 89.92%
05/29/98 5.20 5.80 89.66%
06/30/98 5.20 5.65 92.04%
07/31/98 5.18 5.71 90.72%
08/31/98 5.03 5.27 95.45%
09/30/98 4.95 5.00 99.00%
10/31/98 5.05 5.16 97.87%
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS October 31, 1998, continued
productivity offset the potential inflationary impact of strong domestic
employment. With inflation held in check, the Federal Reserve Board provided
liquidity to the markets by lowering short-term interest rates. Since the end of
September, the Federal Reserve Open Market Committee cut the federal funds rate
75 basis points from 5.50 percent to 4.75 percent in three separate moves.
MUNICIPAL MARKET CONDITIONS
Municipal bond yields followed the downward trend of Treasury yields at a more
moderate pace. At the end of October, long-term insured municipal index yields
stood at 5.05 percent, index yields declined 30 basis points over the last 12
months. In contrast, 30-year U.S. Treasury bond yields fell 100 basis points
during the same period.
As municipals lagged the rally in Treasuries, the ratio of municipal yields to
Treasury yields rose sharply to 98 percent. (A rising ratio means that
municipals have underperformed Treasuries and have become more attractive on a
relative basis.) This increase was similar to the jump witnessed in 1986, when
tax-reform proposals threatened the favorable tax advantage of municipal bonds.
The overall decline in interest rates has led to a substantial increase in
new-issue municipal volume. Municipal issuance is on a pace to challenge 1993's
underwriting record of $292 billion. Year-to-date, total municipal volume of
$234 billion is up 32 percent. Half the underwriting volume was enhanced with
bond insurance. Refundings represented 30 percent of total new issuance.
PERFORMANCE
The Trust's net asset value (NAV) increased from $14.69 to $15.47 per share
during the fiscal year ended October 31, 1998. Based on this NAV change plus
reinvestment of tax-free dividends of $0.785 per share, the Trust's total NAV
return was 11.41 percent. IIM's price on the New York Stock Exchange moved from
$13.25 to $14.8125 per share. Based on this change in market price plus
reinvestment of dividends, the Trust's total market return was 18.27 percent. On
October 31, 1998, the Trust traded at a 4.25 percent discount to NAV.
Monthly dividends for the fourth quarter of 1998 were declared in September.
Beginning with the October 1998 dividend, the monthly dividend was raised from
$0.065 per share to $0.07 per share, to more closely reflect the Trust's
anticipated income. The level of undistributed net investment income increased
from $0.122 to $0.144 per share.
2
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS October 31, 1998, continued
AS OF OCTOBER 31, 1998
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
[PIE CHART] [PIE CHART]
LARGEST SECTORS AS OF CREDIT ENHANCEMENTS AS OF
OCTOBER 31, 1998 OCTOBER 31, 1998
- ------------------------------ -----------------------------------
CATAGORY
- --------
Electric 18% MBIA 39%
Water & Sewer 13% AMBAC 26%
IDR/PCR* 11% FGIC 19%
Hospital 11% FSA 16%
Mortgage 9%
Refunded 9% TOTAL 100%
General Obligation 8%
Transportation 6% As measured by Moody's Investors Service Inc.
All Others 15% or Standard & Poor's Corp.
Total 100% Portfolio structure is subject to change.
*Industrial Development/
Pollution Control Revenue.
Portfolio structure is subject
to change.
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
[BAR GRAPH]
CALL STRUCTURE AS OF
OCTOBER 31, 1998
- --------------------------------------
CALL DATES
- ----------
1998 0%
1999 0%
2000 2%
2001 0%
2002 15%
2003 59%
2004 4%
2005 2%
2006 1%
2007 1%
2008 4%
2009+ 12%
Weighted Average Call Protection: 7 Years
Portfolio structure is subject to change.
3
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS October 31, 1998, continued
PORTFOLIO STRUCTURE
The Trust remained fully invested in long-term municipal bonds during the fiscal
year. Investments were diversified among 12 long-term sectors and 73 credits. As
illustrated in the accompanying chart, the distribution of call dates in the
portfolio produced 7 years of weighted average call protection.
The Trust's weighted average maturity was 21 years. Average duration (a measure
of price volatility to interest rate changes) was 6 years. 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 discussed in previous reports, 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 shareholders depends on two
factors. The first factor is the amount of ARPS outstanding, while the second is
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.
During the 12-month period, ARPS leverage contributed approximately $0.08 per
share to common share earnings. Weekly ARPS yields ranged between 2.99 and 5.125
percent. Five ARPS series totaling $155 million represented 26 percent of net
assets.
LOOKING AHEAD
Global economic conditions seem likely to keep inflationary pressures under
control and have contributed to lower interest rates. The fixed-income markets
have also begun to anticipate the possibility of additional monetary easing by
the Fed. With the municipal relationship to Treasuries more favorable than it
has been in the last 10 years, the outlook for municipal bonds is positive.
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 may,
when appropriate, 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. The Trust
4
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS October 31, 1998, continued
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. During the fiscal year, the Trust purchased and retired 1,150,500
shares of common stock at a weighted average market discount of 8.69 percent.
We appreciate your ongoing support of Morgan Stanley Dean Witter 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
5
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
RESULTS OF ANNUAL MEETING (unaudited)
* * *
On October 20, 1998, an annual meeting of the Trust's shareholders was held for
the purpose of voting on three separate matters, the results of which were as
follows:
(1) ELECTION OF TRUSTEE BY ALL SHAREHOLDERS:
Michael Bozic
For .............. 21,169,262
Withheld ......... 446,933
(2) ELECTION OF TRUSTEE BY PREFERRED SHAREHOLDERS:
Charles A. Fiumefreddo
For .............. 2,471
Withheld ......... 5
The following Trustees were not standing for reelection at this meeting: Edwin
J. Garn, John R. Haire, Wayne C. Hedien, Dr. Manuel H. Johnson, Michael E.
Nugent, Philip J. Purcell and John L. Schroeder.
(3) RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS THE TRUST'S
INDEPENDENT ACCOUNTANTS:
For ............. 20,995,310
Against ......... 138,707
Abstain ......... 482,178
6
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS October 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- -------- ---------- ---------------
<S> <C> <C> <C> <C>
TAX-EXEMPT MUNICIPAL BONDS (98.0%)
General Obligation (7.7%)
District of Columbia,
$ 5,000 Refg Ser 1993 B (AMBAC) .................................................... 5.50 % 06/01/09 $ 5,421,600
6,000 Refg Ser 1993 B (FSA) ...................................................... 5.50 06/01/10 6,514,260
10,000 Cook County, Illinois, Ser B (FGIC) .......................................... 5.50 11/15/22 10,475,200
5,000 River Rouge School District, Michigan, 1993 Bldg & Site Unltd Tax (FSA) ...... 5.625 05/01/22 5,257,000
3,000 Vicksburg Community Schools, Michigan, 1993 Refg (MBIA) ...................... 5.625 05/01/20 3,165,450
6,000 Clark County Sanitation District, Nevada, Refg 1993 (FGIC) ................... 5.70 07/01/12 6,453,480
8,000 Washoe County, Nevada, Reno -- Sparks Convention Ltd Tax Ser 1993 A
(FGIC) ..................................................................... 5.75 07/01/22 8,585,360
-------- ------------
43,000 45,872,350
-------- ------------
Educational Facilities Revenue (5.2%)
4,000 Alabama State University, General Tuition & Fee Ser 1993 (MBIA) .............. 5.70 05/01/15 4,240,960
3,000 District of Columbia, American Association for the Advancement of
Science Ser 1997 (AMBAC) ................................................... 5.125 01/01/27 2,993,130
4,000 Illinois Educational Facilities Authority, DePaul University Refg Ser 1997
(AMBAC) .................................................................... 5.50 10/01/19 4,228,680
4,000 Indiana University, Student Fee Ser J (FGIC) ................................. 5.00 08/01/18 3,979,800
10,000 Wayne State University, Michigan, Ser 1993 (AMBAC) ........................... 5.50 11/15/18 10,331,400
Rhode Island Health & Educational Building Corporation,
2,500 Providence College Ser 1993 (MBIA) ......................................... 5.60 11/01/15 2,623,525
2,500 Providence College Ser 1993 (MBIA) ......................................... 5.60 11/01/22 2,648,225
-------- ------------
30,000 31,045,720
-------- ------------
Electric Revenue (18.4%)
16,000 Redding, California, Ser 1993 A COPs (FGIC) .................................. 5.684 06/01/19 16,797,920
Massachusetts Municipal Wholesale Electric Company,
6,000 1993 Ser A (AMBAC) ......................................................... 5.00 07/01/10 6,174,300
10,000 1993 Ser A (AMBAC) ......................................................... 5.45 07/01/18 10,389,800
20,000 North Carolina Municipal Power Agency #1, Catawba Ser 1993 (MBIA) ............ 5.60 01/01/20 20,799,799
4,000 Piedmont Municipal Power Agency, South Carolina, Refg Ser 1993 (MBIA) ........ 5.375 01/01/25 4,247,600
15,000 South Carolina Public Service Authority, 1993 Refg Ser A (MBIA) .............. 5.50 07/01/21 15,676,050
6,000 Lower Colorado River Authority, Texas, Jr Lien Refg 4th Ser (FSA) ............ 5.625 01/01/17 6,234,900
8,000 Texas Municipal Power Agency, Refg Ser 1993 (MBIA) ........................... 5.25 09/01/12 8,356,560
10,000 Washington Public Power Supply System, Nuclear Proj #1 Refg Ser 1993 A
(MBIA) ....................................................................... 5.70 07/01/17 10,413,900
10,000 Wisconsin Public Power Incorporated, Refg Ser 1993 A (AMBAC) ................. 5.25 07/01/21 10,094,400
-------- ------------
105,000 109,185,229
-------- ------------
Hospital Revenue (11.0%)
2,100 District of Columbia, Children's Hospital Refg Ser 1992 A (FGIC) ............. 6.25 07/15/10 2,289,756
5,000 Sarasota County Public Hospital Board, Florida, Sarasota Memorial Hospital
Refg Ser 1998 B (MBIA) ..................................................... 5.25 07/01/24 5,194,050
8,000 Fulton-DeKalb Hospital Authority, Georgia, Grady Memorial Hospital
Refg Ser 1993 (MBIA) ....................................................... 5.50 01/01/20 8,311,200
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS October 31, 1998, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- -------- ---------- ---------------
<S> <C> <C> <C> <C>
$ 4,000 Indiana Health Facilities Financing Authority, Deaconess Hospital Inc
Refg Ser 1993 (MBIA) ......................................................... 5.75 % 03/01/15 $ 4,227,560
5,000 Kentucky Economic Development Finance Authority, St Elizabeth Medical
Center Inc Ser 1993 A (FGIC) ................................................. 6.00 12/01/22 5,479,400
3,935 Maine Health & Higher Educational Facilities Authority, Ser 1993 A (FSA) ....... 5.50 07/01/23 4,074,456
5,000 Massachusetts Health & Educational Facilities Authority, Lahey Clinic
Medical Center Ser B (MBIA) .................................................. 5.625 07/01/15 5,253,050
5,000 Missouri Health & Educational Facilities Authority, SSM Health Care
Ser 1998 A (MBIA) ............................................................ 5.00 06/01/22 4,904,750
5,000 Washington County Hospital Authority, Pennsylvania, Washington Hospital
Ser 1993 (AMBAC) ............................................................. 5.625 07/01/23 5,226,900
4,000 Chattanooga-Hamilton County Hospital Authority, Tennessee, Erlanger
Medical Center Refg Ser 1993 (FSA) ........................................... 5.50 10/01/13 4,312,560
5,075 Amarillo Health Facilities Corporation, Texas, Baptist St Anthony's Hospital
Ser 1998 (FSA) ............................................................... 5.50 01/01/17 5,400,308
5,000 Washington Health Care Facilities, Swedish Health Services Ser 1998
(AMBAC) ...................................................................... 5.125 11/15/22 4,928,500
5,500 Wisconsin Health & Educational Facilities Authority, Sisters of the
Sorrowful Mother Health Care Ser AA (MBIA) ................................... 6.25 06/01/20 5,975,860
-------- ------------
62,610 65,578,350
-------- ------------
Industrial Development/Pollution Control Revenue (11.3%)
7,500 Adams County, Colorado, Public Service Co of Colorado Refg 1993 Ser A
(MBIA) ....................................................................... 5.875 04/01/14 8,098,725
4,000 St Johns County Industrial Development Authority, Florida, Professional
Golf Hall of Fame Ser 1996 (MBIA) ............................................ 5.875 09/01/23 4,335,920
12,000 Indiana Development Finance Authority, PSI Energy Inc Ser 1993 B (AMT)
(MBIA) ....................................................................... 5.75 02/15/28 12,558,720
4,900 Monroe County, Michigan, Detroit Edison Co Ser CC (AMT) (MBIA) ................. 6.55 06/01/24 5,426,211
5,400 Forsyth, Montana, Puget Sound Power & Light Co Ser 1993 (MBIA) ................. 5.875 04/01/20 5,810,616
Washoe County, Nevada, Sierra Pacific Power Co
3,000 Ser 1987 (AMBAC) ............................................................... 6.30 12/01/14 3,267,690
5,000 Ser 1990 (AMT) (MBIA) .......................................................... 6.65 06/01/17 5,521,800
6,000 New York State Energy Research & Development Authority,
Brooklyn Union Gas Co Ser D-1 & 2 (AMT) (MBIA) ............................... 5.635 07/08/26 6,199,380
15,000 Brazos River Authority, Texas, Texas Utilities Electric Co Ser 1993 A
(AMT) (AMBAC) ................................................................ 6.05 04/01/25 16,168,200
-------- ------------
62,800 67,387,262
-------- ------------
Mortgage Revenue - Multi-Family (1.5%)
8,675 West Virginia Housing Development Fund, Ser A (AMBAC) .......................... 5.65 11/01/21 8,947,829
-------- ------------
Mortgage Revenue - Single Family (7.6%)
3,000 Alaska Housing Finance Corporation, Governmental 1995 Ser A (MBIA) ............. 5.875 12/01/24 3,162,780
16,015 Connecticut Housing Finance Authority, 1992 Ser A-2 (AMT)
(Secondary FSA) .............................................................. 6.05 11/15/25 16,678,982
1,195 Maine Housing Authority, Mortgage Purchase 1990 Ser A- 6 (AMT)
(Secondary MBIA) ............................................................. 6.35 11/15/22 1,261,538
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS October 31, 1998, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- -------- ---------- ---------------
<S> <C> <C> <C> <C>
$ 13,000 New Jersey Housing & Mortgage Finance Agency, Home Buyer
1990 Ser F-3 (AMT) (MBIA) ................................................... 5.95 % 04/01/25 $ 13,383,240
10,000 Virginia Housing Development Authority, 1992 Ser B (AMT)
(Secondary FSA) ............................................................. 6.30 01/01/27 10,477,700
-------- ------------
43,210 44,964,240
-------- ------------
Public Facilities Revenue (4.4%)
10,000 California Public Works Board, Corrections Refg 1993 Ser A (AMBAC) ............ 5.00 12/01/19 10,183,000
5,000 Florida Department of Management Services, Pool Refg Ser 1992 (AMBAC) ......... 5.40 09/01/14 5,323,300
10,000 Marion County Convention & Recreational Facilities Authority, Indiana,
Excise Tax Refg Ser 1993 A (AMBAC) .......................................... 5.50 06/01/21 10,426,600
-------- ------------
25,000 25,932,900
-------- ------------
Student Loan Revenue (3.3%)
18,000 Pennsylvania Higher Education Assistance Agency, 1988 Ser D (AMT)
(AMBAC) ..................................................................... 6.05 01/01/19 19,367,460
------------
Transportation Facilities Revenue (5.9%)
5,000 Tucson, Arizona, Street & Highway Jr Lien Refg Ser 1993 (MBIA) ................ 5.50 07/01/12 5,363,900
5,000 Chicago, Illinois, Chicago-O'Hare Int'l Airport Second Lien Refg 1993 Ser A
(AMT) (MBIA) ................................................................ 5.60 01/01/18 5,184,050
3,000 Kentucky Turnpike Authority, Econ Dev Road Revitalization Refg Ser 1993
(AMBAC) ..................................................................... 5.50 07/01/11 3,226,290
2,000 Minneapolis-St Paul Metropolitan Airports Commission, Minnesota,
Ser 1998 A (AMBAC) .......................................................... 5.00 01/01/30 1,968,800
10,000 Pennsylvania Turnpike Commission, Refg Ser O 1992 (FGIC) ...................... 5.50 12/01/17 10,349,200
3,000 North Texas Tollway Authority, Dallas North Tollway Ser 1998 (FGIC) ........... 4.75 01/01/29 2,856,720
4,000 Salt Lake City, Utah, Airport Refg Ser 1993 B (FGIC) .......................... 5.875 12/01/18 4,223,560
2,000 Richmond Metropolitan Authority, Virginia, Expressway 1992 Ser B (FGIC) ....... 6.25 07/15/22 2,188,060
-------- ------------
34,000 35,360,580
-------- ------------
Water & Sewer Revenue (12.7%)
15,000 Central Lake County Joint Action Water Agency, Illinois, Refg Ser 1993
(FGIC) ...................................................................... 5.375 05/01/20 15,283,950
10,000 Louisville & Jefferson County Metropolitan Sewer District, Kentucky,
Ser 1993 (MBIA) ............................................................. 5.30 05/15/19 10,187,700
3,000 Detroit, Michigan, Sewage Refg Ser 1993 A (FGIC) .............................. 5.70 07/01/13 3,244,890
5,000 Grand Rapids, Michigan, Sewer Impr & Refg Ser 1998 A (FGIC) ................... 4.75 01/01/28 4,757,350
5,000 Cleveland, Ohio, Waterworks Impr & Refg 1998 Ser I (FSA) ...................... 5.00 01/01/23 4,944,350
15,000 Houston, Texas, Water & Sewer 1992 Ser C (MBIA) ............................... 5.75 12/01/15 15,890,100
Seattle, Washington,
10,000 Sewer, Refg Ser Y (FGIC) .................................................... 5.70 01/01/15 10,715,900
5,000 Sewer, Refg Ser X (FGIC) .................................................... 5.50 01/01/16 5,195,450
5,000 West Virginia Water Development Authority, Loan Program II
Refg Ser A-II (FSA) ......................................................... 5.50 11/01/23 5,239,350
-------- ------------
73,000 75,459,040
-------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS October 31, 1998, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Refunded (9.0%)
$ 5,000 Indianapolis, Indiana, Gas Utility Ser 1994 A (AMBAC) ......................... 5.875% 06/01/04+ $ 5,566,450
13,700 Louisiana Public Facilities Authority, Our Lady of the Lake Regional
Medical Center Ser 1993 D & E (FSA) ......................................... 5.90 05/28/04+ 15,224,673
6,065 Maine Health & Higher Educational Facilities Authority, Ser 1993 A (FSA)
(ETM) ....................................................................... 5.50 07/01/23 6,284,371
5,000 Allegheny County Hospital Development Authority, Pennsylvania,
Pittsburgh Mercy Health Ser 1996 (AMBAC) (ETM) .............................. 5.625 08/15/18 5,516,650
10,000 Rhode Island Depositors Economic Protection Corporation, Refg 1992 Ser B
(MBIA) (ETM) ................................................................ 6.00 08/01/17 11,000,000
4,360 Piedmont Municipal Power Agency, South Carolina, Refg Ser 1993 (MBIA)
(ETM) ....................................................................... 5.375 01/01/25 4,679,414
Shelby County Health, Educational & Housing Facility Board, Tennessee,
5,000 LeBonheur Children's Medical Center Inc Ser D (MBIA) (ETM) .................. 5.50 08/15/19 5,429,150
-------- ------------
49,125 53,700,708
-------- ------------
554,420 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $544,057,730) .................................... 582,801,668
-------- ------------
SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (0.2%)
500 California Pollution Control Financing Authority, Pacific Gas & Electric Co
Ser 1996 F (Demand 11/02/98) ................................................ 3.60* 11/01/26 500,000
1,000 Missouri Health & Educational Facilities Authority, Washington University
-------- Ser 1996 C (Demand 11/02/98) ................................................ 3.70* 09/01/30 1,000,000
------------
1,500 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS
-------- (Identified Cost $1,500,000) ....................................................................... 1,500,000
------------
$555,920 TOTAL INVESTMENTS (Identified Cost $545,557,730) (a) .......................... 98.2% 584,301,668
========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ................................ 1.8 10,504,970
----- ------------
NET ASSETS .................................................................... 100.0% $594,806,638
===== ============
</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
$38,766,433 and the aggregate gross unrealized depreciation is
$22,495, resulting in net unrealized appreciation of $38,743,938.
<PAGE>
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
10
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS October 31, 1998, continued
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
October 31, 1998
<TABLE>
<S> <C>
Alabama .................... 0.7%
Alaska ....................... 0.5
Arizona ...................... 0.9
California .................. 4.6
Colorado ................... 1.4
Connecticut .................. 2.8
District of Columbia ......... 2.9
Florida ...................... 2.5
Georgia ...................... 1.4
Illinois .................... 5.9
Indiana .................... 6.2
Kentucky ..................... 3.2
</TABLE>
<TABLE>
<S> <C>
Louisiana ................... 2.6%
Maine ...................... 2.0
Massachusetts ............... 3.7
Michigan ..................... 5.4
Minnesota .................. 0.3
Missouri ..................... 1.0
Montana ...................... 1.0
Nevada ..................... 4.0
New Jersey .................. 2.3
New York .................... 1.1
North Carolina ............. 3.5
Ohio ......................... 0.8
</TABLE>
<TABLE>
<S> <C>
Pennsylvania ................. 5.9%
Rhode Island ................. 2.7
South Carolina ............... 4.1
Tennessee .................... 1.6
Texas ...................... 9.2
Utah ......................... 0.7
Virginia .................... 2.1
Washington ................. 6.1
West Virginia ................ 2.4
Wisconsin .................... 2.7
----
Total ....................... 98.2%
====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $545,557,730) ................ $584,301,668
Cash ............................................. 600,739
Interest receivable .............................. 10,229,460
Prepaid expenses ................................. 315,930
------------
TOTAL ASSETS ................................ 595,447,797
------------
LIABILITIES:
Payable for:
Dividends to preferred shareholders ......... 332,048
Investment management fee ................... 206,568
Accrued expenses ................................. 102,543
------------
TOTAL LIABILITIES ........................... 641,159
------------
NET ASSETS .................................. $594,806,638
============
COMPOSITION OF 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, 28,433,013 shares
outstanding) .................................. 408,240,415
Net unrealized appreciation ...................... 38,743,938
Accumulated undistributed net investment
income ........................................ 4,081,583
Accumulated net realized loss .................... (11,259,298)
------------
NET ASSETS APPLICABLE TO COMMON
SHAREHOLDERS ............................. 439,806,638
------------
TOTAL NET ASSETS ............................ $594,806,638
============
NET ASSET VALUE PER COMMON SHARE
($439,806,638 divided by 28,433,013
common shares outstanding) .................... $15.47
======
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1998
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ............................... $32,021,231
-----------
EXPENSES
Investment management fee ..................... 2,081,427
Auction commission fees ....................... 506,378
Transfer agent fees and expenses .............. 142,925
Professional fees ............................. 95,664
Shareholder reports and notices ............... 48,156
Auction agent fees ............................ 41,001
Registration fees ............................. 32,965
Custodian fees ................................ 27,690
Trustees' fees and expenses ................... 19,071
Organizational expenses ....................... 2,324
Other ......................................... 46,849
-----------
TOTAL EXPENSES ........................... 3,044,450
Less: expense offset .......................... (27,518)
-----------
NET EXPENSES ............................. 3,016,932
-----------
NET INVESTMENT INCOME .................... 29,004,299
-----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain ............................. 3,722,951
Net change in unrealized appreciation ......... 16,764,229
-----------
NET GAIN ................................. 20,487,180
-----------
NET INCREASE .................................. $49,491,479
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 1998 OCTOBER 31, 1997
------------------ -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income .............................. $ 29,004,299 $ 30,175,414
Net realized gain .................................. 3,722,951 228,854
Net change in unrealized appreciation .............. 16,764,229 21,025,515
------------- -------------
NET INCREASE .................................... 49,491,479 51,429,783
------------- -------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT
INCOME:
Preferred .......................................... (5,734,332) (5,619,615)
Common ............................................. (22,792,814) (23,735,459)
------------- -------------
TOTAL ........................................... (28,527,146) (29,355,074)
------------- -------------
Decrease from transactions in common shares of
beneficial interest .............................. (15,886,137) (23,362,060)
------------- -------------
NET INCREASE (DECREASE) ......................... 5,078,196 (1,287,351)
NET ASSETS:
Beginning of period ................................ 589,728,442 591,015,793
------------- -------------
END OF PERIOD
(Including undistributed net investment income of
$4,081,583 and $3,604,430, respectively)......... $ 594,806,638 $ 589,728,442
============= =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1998
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Insured Municipal Income Trust (the "Trust"),
formerly InterCapital Insured Municipal Income Trust (the Trust changed its name
effective December 21, 1998), 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.
14
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1998, continued
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 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 -- Morgan Stanley Dean Witter Advisors Inc. (the
"Investment Manager"), formerly Dean Witter InterCapital Inc., 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 were
deferred and fully amortized as of February 26, 1998.
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 year ended October 31, 1998 aggregated
$39,289,488 and $55,340,647, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager, is
the Trust's transfer agent. At October 31, 1998, the Trust had transfer agent
fees and expenses payable of approximately $1,500.
15
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1998, continued
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 years
of service. Aggregate pension costs for the year ended October 31, 1998 included
in Trustees' fees and expenses in the Statement of Operations amounted to
$5,934. At October 31, 1998, the Trust had an accrued pension liability of
$34,906 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 RESET RANGE OF
SERIES SHARES* IN THOUSANDS* RATE* DATE DIVIDEND RATES**
- -------- --------- --------------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
1 400 $20,000 3.10% 11/02/98 2.99% -- 5.125%
2 900 45,000 3.52 09/07/99 3.52 -- 3.80
3 1,000 50,000 3.58 07/12/99 3.58 -- 3.84
4 400 20,000 3.20 11/02/98 3.20 -- 5.125
5 400 20,000 3.15 11/02/98 3.15 -- 5.00
</TABLE>
- ---------------
* As of October 31, 1998.
** For the year ended October 31, 1998.
Subsequent to October 31, 1998 and up through December 21, 1998, the Trust paid
dividends to each of the Series 1 through 5 at rates ranging from 2.99% to 3.58%
in the aggregate amount of $852,848.
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.
16
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1998, 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
PAR EXCESS OF
SHARES VALUE PAR VALUE
--------------- ----------- ---------------
<S> <C> <C> <C>
Balance, October 31, 1996 ................................................ 31,465,813 $ 314,658 $ 447,173,954
Treasury shares purchased and retired (weighted average discount 11.49%)* (1,882,300) (18,823) (23,343,237)
---------- --------- -------------
Balance, October 31, 1997 ................................................ 29,583,513 295,835 423,830,717
Treasury shares purchased and retired (weighted average discount 8.69%)* . (1,150,500) (11,505) (15,874,632)
---------- --------- -------------
Balance, October 31, 1998 ................................................ 28,433,013 $ 284,330 $ 407,956,085
========== ========= =============
</TABLE>
- ---------------
* The Trustees have voted to retire the shares purchased.
6. FEDERAL INCOME TAX STATUS
During the year ended October 31, 1998, the Trust utilized approximately
$3,723,000 of its net capital loss carryover. At October 31, 1998, the Trust had
a net capital loss carryover of approximately $11,259,000, which may be used to
offset future capital gains to the extent provided by regulations, which is
available through October 31 of the following years:
<TABLE>
<CAPTION>
AMOUNT IN THOUSANDS
---------------------------------
2002 2003 2004
---- ---- ----
<S> <C> <C>
$6,226 $4,412 $621
====== ====== ====
</TABLE>
7. DIVIDENDS TO COMMON SHAREHOLDERS
On September 29, 1998, the Trust declared the following dividends from net
investment income:
<TABLE>
<CAPTION>
AMOUNT RECORD PAYABLE
PER SHARE DATE DATE
--------- ---- ----
<S> <C> <C>
$0.070 November 6, 1998 November 20, 1998
$0.070 December 4, 1998 December 18, 1998
</TABLE>
17
<PAGE>
MORGAN STANLEY DEAN WITTER 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 YEAR ENDED
OCTOBER 31*
------------------------
1998 1997
---- ----
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ........................... $14.69 $13.86
------- ------
Net investment income .......................................... 1.00 1.00
Net realized and unrealized gain (loss) ........................ 0.71 0.70
------- ------
Total from investment operations ............................... 1.71 1.70
------- ------
Less dividends from:
Net investment income ......................................... (0.78) (0.78)
Common share equivalent of dividends paid to preferred
shareholders ................................................. (0.20) (0.19)
------- ------
Total dividends ................................................ (0.98) (0.97)
------- ------
Anti-dilutive effect of acquiring treasury shares .............. 0.05 0.10
------- ------
Offering costs charged against capital ......................... -- --
------- ------
Net asset value, end of period ................................. $15.47 $14.69
======= ======
Market value, end of period .................................... $14.813 $13.25
======= ======
TOTAL INVESTMENT RETURN+ ....................................... 18.27% 21.21%
RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS:
Total expenses ................................................. 0.69% 0.68%(1)
Net investment income before preferred stock dividends ......... 6.60% 7.04%
Preferred stock dividends ...................................... 1.30% 1.31%
Net investment income available to common shareholders ......... 5.30% 5.73%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ........................ $594,807 $589,728
Asset coverage on preferred shares at end of period ............ 383% 380%
Portfolio turnover rate ........................................ 7% 2%
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31*
------------------------------------------
1996 1995 1994
------------- -------------- -------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ........................... $13.69 $11.41 $14.95
------- ------ -------
Net investment income .......................................... 0.97 0.96 1.10
Net realized and unrealized gain (loss) ........................ (0.01) 2.22 (3.53)
------- ------ -------
Total from investment operations ............................... 0.96 3.18 (2.43)
------- ------ -------
Less dividends from:
Net investment income ......................................... (0.75) (0.80) (0.90)
Common share equivalent of dividends paid to preferred
shareholders ................................................. (0.17) (0.16) (0.21)
------- ------ -------
Total dividends ................................................ (0.92) (0.96) (1.11)
------- ------ -------
Anti-dilutive effect of acquiring treasury shares .............. 0.13 0.06 0.01
------- ------ -------
Offering costs charged against capital ......................... -- -- (0.01)
------- ------ -------
Net asset value, end of period ................................. $13.86 $13.69 $11.41
======= ====== =======
Market value, end of period .................................... $11.625 $11.50 $10.375
======= ====== =======
TOTAL INVESTMENT RETURN+ ....................................... 7.81% 19.11% (25.81)%
RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS:
Total expenses ................................................. 0.68%(1) 0.71%(1) 0.80%
Net investment income before preferred stock dividends ......... 7.06% 7.51% 8.23%
Preferred stock dividends ...................................... 1.25% 1.38% 1.55%
Net investment income available to common shareholders ......... 5.81% 6.13% 6.68%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ........................ $591,016 $612,839 $592,759
Asset coverage on preferred shares at end of period ............ 381% 395% 304%
Portfolio turnover rate ........................................ 1% 1% 7%
</TABLE>
- -------------
* 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.
(1) Does not reflect the effect of expense offset of 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Morgan Stanley Dean Witter Insured
Municipal Income Trust (the "Trust"), formerly InterCapital Insured Municipal
Income Trust, at October 31, 1998, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at October
31, 1998 by correspondence with the custodian, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
December 21, 1998
1998 FEDERAL TAX NOTICE (unaudited)
For the year ended October 31, 1998, all of the Trust's dividends from net
investment income received by both common and preferred shareholder
classes were exempt interest dividends, excludable from gross income for
Federal income tax purposes.
19
<PAGE>
TRUSTEES
- -------------------------
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
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
- --------------------------
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
- --------------------------
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
- --------------------------
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
MORGAN STANLEY
DEAN WITTER
INSURED
MUNICIPAL
INCOME TRUST
ANNUAL REPORT
OCTOBER 31, 1998
