<PAGE>
MORGAN STANLEY DEAN WITTER INSURED
MUNICIPAL INCOME TRUST Two World Trade Center,
LETTER TO THE SHAREHOLDERS October 31, 2000 New York, New York 10048
DEAR SHAREHOLDER:
The U.S. economy continued to register solid economic growth over the 12-month
period ended October 31, 2000. Unemployment reached a 30-year low and real
personal consumption accelerated. The tightening labor market and rising oil
prices led to increased concern that inflationary pressures would surface. In
response, the Federal Reserve Board increased the federal funds rate 100 basis
points in three moves between February and May. The federal funds rate
currently stands at a nine-year high of 6.50 percent. The Fed's shift toward a
tighter monetary policy, which began last year, caused long-term interest rates
to increase in 1999. Early this year, however, the U.S. Treasury announced its
plans to utilize a growing federal budget surplus to reduce its debt. This
announcement precipitated a rally in the bond market. By the end of October
2000, long-term interest rates had declined significantly. Vigilance by the
Federal Reserve in controlling inflation and signs of moderating economic
activity also contributed to more favorable bond market conditions.
MUNICIPAL MARKET CONDITIONS
The long-term insured municipal index, which stood at 6.03 percent at the end
of October 1999, reached a high of 6.19 percent in mid January before declining
to 5.65 percent at the end of October 2000. Because bond prices move inversely
to changes in interest rates, bond prices declined in 1999 but improved this
year. The municipal yield curve flattened 79 basis points during the year and
the pickup for extending maturities from one to 30 years declined from 225
basis points in October 1999 to 146 basis points at the end of this October.
The ratio of municipal yields as a percentage of Treasury yields has
historically been used as a measure of relative value. A rising yield ratio
indicates weaker relative performance by municipals, a declining ratio stronger
performance. Over the past 12 months, this ratio has averaged 98 percent.
Long-term municipal yields have generally followed the trend of U.S. Treasury
yields. For the past three years the high and low ratios have been 100 percent
and 83 percent, respectively.
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS October 31, 2000, continued
During the first 10 months of 2000, municipal underwriting was 17 percent below
the same period last year. Refunding activity, the most interest-rate-sensitive
component of supply, dropped nearly 60 percent. Approximately 40 percent of the
underwritings were enhanced with bond insurance, versus an average of 50
percent in the previous three years.
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%
11/30/98 5.00 5.06 98.81%
12/31/98 5.05 5.10 99.02%
01/31/99 5.00 5.09 98.23%
02/28/99 5.10 5.58 91.40%
03/31/99 5.15 5.63 91.47%
04/30/99 5.20 5.66 91.87%
05/31/99 5.30 5.83 90.91%
06/30/99 5.47 5.96 91.78%
07/31/99 5.55 6.10 90.98%
08/31/99 5.75 6.06 94.88%
09/30/99 5.85 6.05 96.69%
10/31/99 6.03 6.16 97.89%
11/30/99 6.00 6.29 95.39%
12/31/99 5.97 6.48 92.13%
01/31/00 6.18 6.49 95.22%
02/29/00 6.04 6.14 98.37%
03/31/00 5.82 5.83 99.83%
04/30/00 5.91 5.96 99.16%
05/31/00 5.91 6.01 98.34%
06/30/00 5.84 5.90 98.98%
07/31/00 5.73 5.78 99.13%
08/31/00 5.62 5.67 99.12%
09/30/00 5.74 5.89 97.45%
10/31/00 5.65 5.79 97.58%
Source: Municipal Market Data - A Division of Thomson Financial Group and
Bloomberg L.P.
PERFORMANCE
During the 12-month period ended October 31, 2000, the net asset value (NAV) of
Morgan Stanley Dean Witter Insured Municipal Income Trust (IIM) increased from
$13.69 to $14.44 per share. Based on this change, plus a reinvestment of
tax-free dividends totaling $0.8625 per share, the Trust's total NAV return was
12.75 percent. IIM's value on the New York Stock Exchange (NYSE) decreased from
$13.25 to $12.8125 per share during this period. Based on this change plus
reinvestment of tax-free dividends, IIM's total market return was 3.29 percent.
As of October 31, 2000, IIM's share price was at a 11.27 percent discount to
its NAV.
2
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS October 31, 2000, continued
Monthly dividends for the fourth quarter of 2000, were declared in September.
Beginning with the October payment, the monthly dividend was reduced from
$0.0725 to $0.065 per share. The new dividend reflects current earning and the
Trust's level of undistributed net investment income which was $0.051 per share
on October 31, 2000, versus $0.117 per share 12 months earlier.
PORTFOLIO STRUCTURE
The Trust's investments were diversified among 13 long-term sectors and 77
credits. Issues in the refunded bond category comprised 7 percent of net
assets. These bonds have been refinanced and will be redeemed on the dates
shown in the portfolio. At the end of October, the portfolio's average maturity
was 19 years. Average duration, a measure of portfolio sensitivity to interest
rates, was 7.6 years. Generally, bonds with longer durations have greater
volatility. The accompanying charts and tables provide current information on
the portfolio's credit enhancements, maturity distribution and sector
diversification. Optional call provisions and their respective cost (book)
yields by year are also shown.
THE IMPACT OF LEVERAGING
As discussed in previous shareholder 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 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 leverage also increases the price volatility of
common shares and has the effect of extending portfolio duration.
During the 12-month period, ARPS leverage contributed approximately $0.07 per
share to common share earnings. The Trust's five ARPS series totaling $155
million represented 28 percent of net assets. The yield on IIM's three weekly
ARPS series ranged between 3.00 and 5.30 percent. Yields on series with
rollovers in July and September 2001 are 4.45 and 4.32 percent, respectively.
In comparison, the yield on 1-year municipal notes increased from 3.77 percent
at the end of October 1999 to 4.19 percent at the end of this October.
3
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS October 31, 2000, continued
LOOKING AHEAD
The slower pace of economic growth and moderate inflation have caused the bond
market to anticipate a shift by the Federal Reserve Board to a neutral bias in
its monetary policy and the possibility of easing in 2001. This should create a
favorable environment for municipal bonds.
The Trust's procedure for reinvestment of all dividends and distributions on
common shares is through purchases in the open market. This method helps
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 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 period
ended October 31, 2000, the Trust purchased and retired 872,400 shares of
common stock at a weighted average market discount of 7.07 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 /s/ Mitchell M. Merin
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
4
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS October 31, 2000, continued
[BAR GRAPH]
LARGEST SECTORS AS OF OCTOBER 31, 2000
(% OF NET ASSETS)
WATER AND SEWER 17%
ELECTRIC 13%
TRANSPORTATION 12%
HOSPITAL 11%
IDR/PCR* 10%
MORTGAGE 8%
GENERAL OBLIGATION 7%
REFUNDED 7%
* INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE.
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
[PIE CHART]
CREDIT EXHANCEMENTS AS OF OCTOBER 31, 2000
(% OF TOTAL LONG-TERM PORTFOLIO)
MBIA 37%
FGIC 23%
Ambac 21%
FSA 19%
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
[BAR GRAPH]
DISTRIBUTION BY MATURITY
(% OF NET ASSETS)
WEIGHTED AVERAGE
MATURITY: 19 YEARS
UNDER 1 YEAR 3.0%
1-5 YEARS 2.6%
5-10 YEARS 3.4%
10-20 YEARS 48.1%
20-30 YEARS 36.4%
30+ YEARS 4.2%
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
5
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS October 31, 2000, continued
CALL AND COST (BOOK) YIELD STRUCTURE
(BASED ON LONG-TERM PORTFOLIO)
OCTOBER 31, 2000
WEIGHTED AVERAGE
CALL PROTECTION: 6 YEARS
BONDS CALLABLE
[BAR CHART]
2000 0%
2001 2%
2002 14%
2003 48%
2004 3%
2005 1%
2006 1%
2007 1%
2008 4%
2009 6%
2010+ 20%
WEIGHTED AVERAGE
BOOK YIELD: 5.8%
COST (BOOK) YIELD*
[BAR CHART]
2000
2001 6.0%
2002 5.8%
2003 5.9%
2004 5.8%
2005 5.9%
2006 5.9%
2007 5.6%
2008 5.3%
2009 5.6%
2010+ 5.7%
* COST OR "BOOK" YIELD IS THE ANNUAL INCOME EARNED ON A PORTFOLIO INVESTMENT
BASED ON ITS ORIGINAL PURCHASE PRICE BEFORE TRUST OPERATING EXPENSES. FOR
EXAMPLE, THE TRUST IS EARNING A BOOK YIELD OF 6.0% ON 2% OF THE LONG-TERM
PORTFOLIO THAT IS CALLABLE IN 2001.
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
6
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
RESULTS OF ANNUAL MEETING (unaudited)
* * *
On October 24, 2000, an annual meeting of the Trust's shareholders was held for
the purpose of voting on two separate matters, the results of which were as
follows:
(1) ELECTION OF TRUSTEES:
Edwin J. Garn
For ......................................... 20,823,995
Withheld .................................... 351,762
James F. Higgins
For ......................................... 20,827,287
Withheld .................................... 348,470
Michael E. Nugent
For ......................................... 20,830,783
Withheld .................................... 344,974
Philip J. Purcell
For ......................................... 20,831,804
Withheld .................................... 343,953
The following Trustees were not standing for reelection at this meeting:
Michael Bozic, Charles A. Fiumefreddo, Wayne E. Hedien, Dr. Manuel H. Johnson
and John L. Schroeder.
(2) RATIFICATION OF THE SELECTION OF DELOITTE & TOUCHE LLP AS INDEPENDENT
AUDITORS:
<TABLE>
<S> <C>
For ......................................... 20,707,268
Against ..................................... 132,680
Abstain ..................................... 335,809
</TABLE>
7
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS October 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
TAX-EXEMPT MUNICIPAL BONDS (94.7%)
General Obligation (7.4%)
District of Columbia,
$ 5,000 Refg Ser 1993 B (Ambac) ...................................................... 5.50 % 06/01/09 $ 5,204,400
6,000 Refg Ser 1993 B (FSA) ........................................................ 5.50 06/01/10 6,239,820
7,000 Cook County, Ilinois, Ser B (FGIC) ........................................... 5.50 11/15/22 6,816,810
5,000 River Rouge School District, Michigan, 1993 Bldg & Site Unltd Tax (FSA) ...... 5.625 05/01/22 5,019,700
3,000 Vicksburg Community Schools, Michigan, 1993 Refg (MBIA) ...................... 5.625 05/01/20 3,007,680
6,000 Clark County Sanitation District, Nevada, Refg 1993 (FGIC) ................... 5.70 07/01/12 6,148,200
8,000 Washoe County, Nevada, Reno - Sparks Convention Ltd Tax Ser 1993 A
(FGIC) ....................................................................... 5.75 07/01/22 8,067,600
--------- ------------
40,000 40,504,210
--------- ------------
Educational Facilities Revenue (3.0%)
4,000 Alabama State University, General Tuition & Fee Ser 1993 (MBIA) .............. 5.70 05/01/15 4,078,680
3,000 District of Columbia, American Association for the Advancement of
Science Ser 1997 (Ambac) ..................................................... 5.125 01/01/27 2,774,340
4,000 Illinois Educational Facilities Authority, DePaul University Refg Ser 1997
(Ambac) ...................................................................... 5.50 10/01/19 3,971,920
3,000 Indiana University, Student Fee Ser J (FGIC) ................................. 5.00 08/01/18 2,822,040
2,500 Rhode Island Health & Educational Building Corporation, Providence College
Ser 1993 (MBIA) .............................................................. 5.60 11/01/15 2,527,550
--------- ------------
16,500 16,174,530
--------- ------------
Electric Revenue (13.1%)
8,000 Redding, California, Ser 1993 A COPs (FGIC) .................................. 6.623++ 06/01/19 8,140,000
Massachusetts Municipal Wholesale Electric Company,
5,000 1993 Ser A (Ambac) ........................................................... 5.00 07/01/10 5,034,800
5,000 1993 Ser A (Ambac) ........................................................... 6.27++ 07/01/18 4,656,250
10,000 North Carolina Municipal Power Agency #1, Catawba Ser 1993 (MBIA) ............ 6.42++ 01/01/20 9,962,500
4,000 Piedmont Municipal Power Agency, South Carolina, Refg Ser 1993 (MBIA) ........ 5.375 01/01/25 3,912,360
10,000 South Carolina Public Service Authority, 1993 Refg Ser A (MBIA) .............. 5.50 07/01/21 9,853,500
10,000 Lower Colorado River Authority, Texas, Refg Ser 1999 A (FSA) ................. 5.875 05/15/16 10,448,800
10,000 Washington Public Power Supply System, Nuclear Proj #1 Refg Ser 1993 A
(MBIA) ....................................................................... 5.70 07/01/17 10,113,300
10,000 Wisconsin Public Power Incorporated, Refg Ser 1993 A (Ambac) ................. 5.25 07/01/21 9,562,000
--------- ------------
72,000 71,683,510
--------- ------------
Hospital Revenue (10.9%)
5,000 Mesa Industrial Development Authority, Arizona, Discovery Health
Ser 1999 A (MBIA) ............................................................ 5.875 01/01/16 5,215,350
2,100 District of Columbia, Children's Hospital Refg Ser 1992 A (FGIC) ............. 6.25 07/15/10 2,186,793
5,000 Sarasota County Public Hospital Board, Florida, Sarasota Memorial Hospital
Refg Ser 1998 B (MBIA) ....................................................... 5.25 07/01/24 4,803,300
3,000 Indiana Health Facilities Financing Authority, Deaconess Hospital Inc
Refg Ser 1993 (MBIA) ......................................................... 5.75 03/01/15 3,038,670
</TABLE>
See Notes to Financial Statements
8
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS October 31, 2000, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
----------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
$ 5,000 Kentucky Economic Development Finance Authority, St Elizabeth Medical
Center Inc Ser 1993 A (FGIC) .................................................. 6.00 % 12/01/22 $ 5,159,550
3,935 Maine Health & Higher Educational Facilities Authority, Ser 1993 A (FSA) ...... 5.50 07/01/23 3,820,609
5,500 Massachusetts Health & Educational Facilities Authority, Lahey Clinic
Medical Center Ser B (MBIA) ................................................... 5.625 07/01/15 5,554,505
5,000 Missouri Health & Educational Facilities Authority, SSM Health Care
Ser 1998 A (MBIA) ............................................................. 5.00 06/01/22 4,665,800
4,000 Washington County Hospital Authority, Pennsylvania, Washington Hospital
Ser 1993 (Ambac) .............................................................. 5.625 07/01/23 3,941,720
4,000 Chattanooga-Hamilton County Hospital Authority, Tennessee, Erlanger
Medical Center Refg Ser 1993 (FSA) ............................................ 5.50 10/01/13 4,047,840
Amarillo Health Facilities Corporation, Texas,
3,020 Baptist St Anthony's Hospital Ser 1998 (FSA) .................................. 5.50 01/01/16 3,050,744
5,075 Baptist St Anthony's Hospital Ser 1998 (FSA) .................................. 5.50 01/01/17 5,096,213
4,000 Washington Health Care Facilities Authority, Swedish Health Ser 1998
(Ambac) ....................................................................... 5.125 11/15/22 3,698,200
5,500 Wisconsin Health & Educational Facilities Authority, Sisters of the Sorrowful
Mother Health Care Ser AA (MBIA) .............................................. 6.25 06/01/20 5,610,715
--------- ------------
60,130 59,890,009
--------- ------------
Industrial Development/Pollution Control Revenue (10.0%)
7,500 Adams County, Colorado, Public Service Co of Colorado Refg 1993 Ser A
(MBIA) ........................................................................ 5.875 04/01/14 7,672,725
4,000 St Johns County Industrial Development Authority, Florida, Professional Golf
Hall of Fame Ser 1996 (MBIA) .................................................. 5.875 09/01/23 4,104,720
5,000 Hawaii Department of Budget and Finance, Hawaiian Electric Co Ser 1999 C
(AMT) (Ambac) ................................................................. 6.20 11/01/29 5,173,950
12,000 Indiana Development Finance Authority, PSI Energy Inc Ser 1993 B (AMT)
(MBIA) ........................................................................ 5.75 02/15/28 11,722,680
4,900 Monroe County, Michigan, Detroit Edison Co Ser CC (AMT) (MBIA) ................ 6.55 06/01/24 5,153,281
5,400 Forsyth, Montana, Puget Sound Power & Light Co Ser 1993 (MBIA) ................ 5.875 04/01/20 5,457,078
Washoe County, Nevada, Sierra Pacific Power Co
3,000 Ser 1987 (Ambac) .............................................................. 6.30 12/01/14 3,113,010
5,000 Ser 1987 (AMT) (MBIA) ......................................................... 6.65 06/01/17 5,240,100
3,000 New York State Energy Research & Development Authority, Brooklyn
Union Gas Co 1991 Ser A & B (AMT) (MBIA) ...................................... 6.931++ 07/08/26 2,812,500
4,000 Brazos River Authority, Texas, Texas Utilities Electric Co Ser 1993 A
(AMT) (Ambac) ................................................................. 6.05 04/01/25 4,044,120
--------- ------------
53,800 54,494,164
--------- ------------
Mortgage Revenue - Multi-Family (0.7%)
4,000 West Virginia Housing Development Fund, Ser A (Ambac) ......................... 5.65 11/01/21 3,946,800
--------- ------------
</TABLE>
See Notes to Financial Statements
9
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS October 31, 2000, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
----------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Mortgage Revenue - Single Family (7.1%)
$ 15,005 Connecticut Housing Finance Authority, 1992 Ser A-2 (AMT)
(Secondary FSA) ............................................................ 6.05 % 11/15/25 $ 15,121,889
1,195 Maine Housing Authority, Mortgage Purchase 1990 Ser A-6 (AMT)
(Secondary MBIA) ........................................................... 6.35 11/15/22 1,197,749
12,500 New Jersey Housing & Mortgage Finance Agency, Home Buyer 1990 Ser F-3
(AMT) (MBIA) ............................................................... 5.95 04/01/25 12,584,500
10,000 Virginia Housing Development Authority, 1992 Ser B (AMT) (Secondary FSA).... 6.30 01/01/27 10,162,000
--------- ------------
38,700 39,066,138
--------- ------------
Public Facilities Revenue (1.8%)
10,000 Marion County Convention & Recreational Facilities Authority, Indiana,
---------
Excise Tax Refg Ser 1993 A (Ambac) ......................................... 5.50 06/01/21 9,842,200
------------
Student Loan Revenue (3.3%)
18,000 Pennsylvania Higher Education Assistance Agency, 1988 Ser D (AMT)
---------
(Ambac) .................................................................... 6.05 01/01/19 18,250,380
------------
Transportation Facilities Revenue (12.3%)
5,000 Tucson, Arizona, Street & Highway Jr Lien Refg Ser 1993 (MBIA) ............. 5.50 07/01/12 5,112,950
9,000 Long Beach California, Harbor Refg Ser 1998 A (AMT) (FGIC) ................. 6.00 05/15/18 9,789,030
5,000 Chicago, Illinois, Chicago-O'Hare Int'l Airport Second Lien Refg 1993
Ser A (AMT) (MBIA) ......................................................... 5.60 01/01/18 4,924,850
4,000 Illinois Toll Highway Authority, Priority Refg 1998 Ser A (FSA) ............ 5.50 01/01/15 4,118,920
3,000 Kentucky Turnpike Authority, Econ Dev Road Revitalization Refg Ser 1993
(Ambac) .................................................................... 5.50 07/01/11 3,066,540
2,500 Minneapolis-St Paul Metropolitan Airports Commission, Minnesota,
Ser 1999 A (FGIC) .......................................................... 5.125 01/01/31 2,331,250
1,250 Clark County, Nevada, Las Vegas-McCarran Int'l Airport, Sub Lien
Ser 1999 A (MBIA) .......................................................... 6.00 07/01/29 1,298,800
12,000 Nevada Department of Business & Industry, Las Vegas Monorail, 1st Tier
Ser 2000 (Ambac) ........................................................... 5.375 01/01/40 11,319,120
9,000 Pennsylvania Turnpike Commission, Refg Ser O 1992 (FGIC) ................... 5.50 12/01/17 9,025,560
5,000 South Carolina Transportation Infrastructure Bank, Ser 1999 A (Ambac) ...... 5.50 10/01/16 5,068,400
4,000 Salt Lake City, Utah, Airport Refg Ser 1993 B (FGIC) ....................... 5.875 12/01/18 4,035,560
2,000 Richmond Metropolitan Authority, Virginia, Expressway 1992 Ser B (FGIC) .... 6.25 07/15/22 2,062,300
5,000 Port of Seattle, Washington, Ser B (AMT) (MBIA) ............................ 5.625 02/01/24 4,894,800
--------- ------------
66,750 67,048,080
--------- ------------
Water & Sewer Revenue (16.7%)
2,000 Honolulu City and County, Hawaii, Wastewater Sr Ser 1998 (FGIC) ............ 4.75 07/01/28 1,712,960
15,000 Central Lake County Joint Action Water Agency, Illinois, Refg Ser 1993
(FGIC) ..................................................................... 5.375 05/01/20 14,619,900
10,000 Louisville & Jefferson County Metropolitan Sewer District, Kentucky,
Ser 1993 (MBIA) ............................................................ 5.30 05/15/19 9,735,100
2,470 Detroit, Michigan, Sewage Refg Ser 1993 A (FGIC) ........................... 5.70 07/01/13 2,531,701
5,000 Grand Rapids, Michigan, Sewer Impr & Refg Ser 1998 A (FGIC) ................ 4.75 01/01/28 4,347,300
5,000 Cleveland, Ohio, Waterworks Impr & Refg 1998 Ser I (FSA) ................... 5.00 01/01/23 4,602,350
</TABLE>
See Notes to Financial Statements
10
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS October 31, 2000, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
----------- ---------- ------------- ------------
<S> <C> <C> <C> <C>
$ 4,000 Allegheny County Sanitary Authority, Pennsylvania, Sewer Ser 2000 (MBIA) ...... 5.50 % 12/01/24 $ 3,952,440
5,000 Philadelphia, Pennsylvania, Water & Wastewater Ser 1998 (Ambac) ............... 5.25 12/15/14 5,049,450
Houston, Texas,
15,000 Water & Sewer 1992 Ser C (MBIA) ............................................... 5.75 12/01/15 15,288,150
10,000 Water & Sewer Jr Lien Refg Ser 2000 B (FGIC) .................................. 5.25 12/01/30 9,437,800
Seattle, Washington,
10,000 Sewer Refg Ser Y (FGIC) ....................................................... 5.70 01/01/15 10,121,700
5,000 Sewer Refg Ser X (FGIC) ....................................................... 5.50 01/01/16 5,019,900
5,000 West Virginia Water Development Authority, Loan Program II Refg Ser A-11
(FSA) ......................................................................... 5.50 11/01/23 4,916,750
--------- ------------
93,470 91,335,501
--------- ------------
Other Revenue (1.1%)
3,000 Florida Department of Environmental Protection, Preservation 2000
Ser 1999 A (FGIC) ............................................................. 5.25 07/01/13 3,040,650
3,000 Alexandria Industrial Development Authority, Virginia, Institute for
Defense Analysis Ser 2000A (Ambac) ............................................ 5.90 10/01/30 3,051,720
--------- ------------
6,000 6,092,370
--------- ------------
Refunded (7.3%)
13,700 Louisiana Public Facilities Authority, Our Lady of the Lake Regional Medical
Center Ser 1993 D & E (FSA) ................................................... 5.90 05/28/04+ 14,440,211
6,065 Maine Health & Higher Educational Facilities Authority, Ser 1993 A (FSA)
(ETM) ......................................................................... 5.50 07/01/23 5,933,814
5,000 Allegheny County Hospital Development Authority, Pennsylvania,
Pittsburgh Mercy Health Ser 1996 (Ambac) (ETM) ................................ 5.625 08/15/18 5,060,800
10,000 Rhode Island Depositors Economic Protection Corporation, Refg 1992 Ser B
(MBIA) (ETM) .................................................................. 6.00 08/01/17 10,387,300
4,360 Piedmont Municipal Power Agency, South Carolina, Refg Ser 1993 (MBIA)
(ETM) ......................................................................... 5.375 01/01/25 4,290,109
--------- ------------
39,125 40,112,234
--------- ------------
518,475 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Cost $510,411,485) ........................ 518,440,126
--------- ------------
</TABLE>
See Notes to Financial Statements
11
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS October 31, 2000, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
----------- -------------- ------------ ---------------
<S> <C> <C> <C> <C>
SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (3.0%)
$ 5,000 Massachusetts Municipal Wholesale Electric Company, 1993 Ser A (Ambac)
(Auction reset 01/02/01) ................................................ 4.63**% 07/01/18 $ 5,000,000
10,000 North Carolina Municipal Power Agency #1, Catawba Ser 1993 (MBIA)
(Auction reset 01/02/01) ................................................ 4.78** 01/01/20 10,000,000
1,300 Harris County Health Facilities Development Corporation, Texas, Methodist
---------
Hospital Ser 1994 (Demand 11/01/00) ..................................... 4.60* 12/01/25 1,300,000
------------
16,300 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (Cost $16,300,000) .............................. 16,300,000
--------- ------------
$ 534,775 TOTAL INVESTMENTS (Cost $526,711,485) (a) ............................................ 97.7% 534,740,126
=========
OTHER ASSETS IN EXCESS OF LIABILITIES ................................................ 2.3 12,772,630
----- ------------
NET ASSETS ........................................................................... 100.0% $547,512,756
===== ============
</TABLE>
---------------
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
ETM Escrowed to maturity.
+ Prerefunded to call date shown.
++ Current coupon rate for residual interest bond. This rate resets
periodically as the auction rate on the related short-term
securities fluctuates.
* Current coupon of variable rate demand obligation.
** Current auction rate.
(a) The aggregate cost for federal income tax purposes approximates
the aggregate cost for book purposes.
The aggregate gross unrealized appreciation is $10,384,900 and the
aggregate gross unrealized
depreciation is $2,356,259, resulting in net unrealized appreciation of
$8,028,641.
Bond Insurance:
---------------
Ambac Ambac Assurance Corporation.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
See Notes to Financial Statements
12
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS October 31, 2000, continued
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
<TABLE>
<S> <C> <C> <C>
Alabama ...................... 0.7% Maine ........................ 2.0%
Arizona .................... 1.9 Massachusetts ................ 3.7
California ................... 3.3 Michigan ................... 3.7
Colorado ..................... 1.4 Minnesota .................... 0.4
Connecticut .................. 2.8 Missouri ..................... 0.9
District of Columbia ......... 3.0 Montana ...................... 1.0
Florida ...................... 2.2 Nevada ....................... 6.4
Hawaii ....................... 1.3 New Jersey .................. 2.3
Illinois .................... 6.3 New York ..................... 0.5
Indiana ...................... 5.0 North Carolina ............... 3.6
Kentucky ..................... 3.3 Ohio ......................... 0.8
Louisiana ................... 2.6 Pennsylvania ................. 8.3
</TABLE>
<TABLE>
<S> <C>
Rhode Island ................. 2.4%
South Carolina ............... 4.2
Tennessee .................... 0.7
Texas ........................ 8.9
Utah ....................... 0.7
Virginia .................... 2.8
Washington ................... 6.2
West Virginia ................ 1.6
Wisconsin .................... 2.8
----
Total ........................ 97.7%
====
</TABLE>
See Notes to Financial Statements
13
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2000
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments in securities, at value
(cost $526,711,485)............................ $534,740,126
Cash ............................................. 77,400
Receivable for:
Interest .................................... 10,051,102
Investments sold ............................ 3,000,000
Prepaid expenses ................................. 293,244
------------
TOTAL ASSETS ................................. 548,161,872
------------
LIABILITIES:
Payable for:
Dividends to preferred shareholders ......... 344,808
Investment management fee ................... 167,471
Common shares of beneficial interest
repurchased .............................. 25,560
Accrued expenses ................................. 111,277
------------
TOTAL LIABILITIES ............................ 649,116
------------
NET ASSETS ................................... $547,512,756
============
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, 27,191,713 shares
outstanding) .................................. 392,059,812
Net unrealized appreciation ...................... 8,028,641
Accumulated undistributed net investment
income ........................................ 1,387,035
Accumulated net realized loss .................... (8,962,732)
------------
NET ASSETS APPLICABLE TO COMMON
SHAREHOLDERS ................................. 392,512,756
------------
TOTAL NET ASSETS ............................. $547,512,756
============
NET ASSET VALUE PER COMMON SHARE
($392,512,756 divided by 27,191,713 common
shares outstanding) .............................. $14.44
======
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 2000
<TABLE>
<CAPTION>
NET INVESTMENT INCOME:
<S> <C>
INTEREST INCOME ............................... $30,814,958
-----------
EXPENSES
Investment management fee ..................... 1,895,026
Auction commission fees ....................... 507,751
Transfer agent fees and expenses .............. 102,730
Professional fees ............................. 91,840
Shareholder reports and notices ............... 61,662
Auction agent fees ............................ 41,092
Registration fees ............................. 33,181
Trustees' fees and expenses ................... 16,537
Custodian fees ................................ 14,911
Other ......................................... 45,904
-----------
TOTAL EXPENSES ............................ 2,810,634
Less: expense offset .......................... (14,840)
-----------
NET EXPENSES .............................. 2,795,794
-----------
NET INVESTMENT INCOME ..................... 28,019,164
-----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain ............................. 954,002
Net change in unrealized depreciation ......... 20,377,877
-----------
NET GAIN .................................. 21,331,879
-----------
NET INCREASE .................................. $49,351,043
===========
</TABLE>
See Notes to Financial Statements
14
<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, 2000 OCTOBER 31, 1999
------------------ -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ...................................... $ 28,019,164 $ 28,472,222
Net realized gain .......................................... 954,002 1,342,564
Net change in unrealized appreciation/depreciation ......... 20,377,877 (51,093,174)
------------- -------------
NET INCREASE (DECREASE) ................................. 49,351,043 (21,278,388)
------------- -------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Preferred .................................................. (6,116,742) (5,349,191)
Common ..................................................... (23,811,275) (23,908,726)
------------- -------------
TOTAL DIVIDENDS ......................................... (29,928,017) (29,257,917)
------------- -------------
Decrease from transactions in common shares of
beneficial interest ...................................... (11,187,324) (4,993,279)
------------- -------------
NET INCREASE (DECREASE) ................................. 8,235,702 (55,529,584)
NET ASSETS:
Beginning of period ........................................ 539,277,054 594,806,638
------------- -------------
END OF PERIOD
(Including undistributed net investment income of
$1,387,035 and $3,295,888, respectively)................. $ 547,512,756 $ 539,277,054
============= =============
</TABLE>
See Notes to Financial Statements
15
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 2000
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter 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 income and net realized capital
gains are determined in accordance with federal income tax regulations
16
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 2000, continued
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 tax purposes are reported as distributions of paid-in-capital.
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.
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, 2000
aggregated $60,469,763 and $59,936,642 respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager,
is the Trust's transfer agent. At October 31, 2000, the Trust had transfer
agent fees and expenses payable of approximately $1,800.
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, 2000
included in Trustees' fees and expenses in the Statement of Operations amounted
to $5,062. At October 31, 2000, the Trust had an accrued pension liability of
$39,720, 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
17
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 2000, continued
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 4.05% 11/06/00 3.00% - 5.30%
2 900 45,000 4.32 09/10/01 3.85 - 4.32
3 1,000 50,000 4.45 07/09/01 3.60 - 4.45
4 400 20,000 3.70 11/06/00 3.30 - 5.30
5 400 20,000 4.13 11/06/00 3.35 - 5.30
</TABLE>
------------
* As of October 31, 2000.
** For the year ended October 31, 2000.
Subsequent to October 31, 2000 and up through December 4, 2000, the Trust paid
dividends to each of the Series 1 through 5 at rates ranging from 3.70% to
4.45% in the aggregate amount of $922,980.
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.
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, 1998 ............................................... 28,433,013 $284,330 $ 407,956,085
Treasury shares purchased and retired (weighted average discount 5.33%)* (368,900) (3,689) (4,989,590)
---------- -------- -------------
Balance, October 31, 1999 ............................................... 28,064,113 280,641 402,966,495
Treasury shares purchased and retired (weighted average discount 7.07%)* (872,400) (8,724) (11,178,600)
---------- -------- -------------
Balance, October 31, 2000 ............................................... 27,191,713 $271,917 $ 391,787,895
========== ======== =============
</TABLE>
------------
* The Trustees have voted to retire the shares purchased.
18
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 2000, continued
6. FEDERAL INCOME TAX STATUS
During the year ended October 31, 2000 the Trust utilized approximately
$954,000 of its net capital loss carryover. At October 31, 2000, the Trust had
a net capital loss carryover of approximately $8,963,000 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>
$ 3,930 $4,412 $621
========= ====== ====
</TABLE>
7. DIVIDENDS TO COMMON SHAREHOLDERS
On September 26, 2000, the Trust declared the following dividends from net
investment income:
<TABLE>
<CAPTION>
AMOUNT RECORD PAYABLE
PER SHARE DATE DATE
------------- ------------------- -------------------
<S> <C> <C>
$ 0.065 November 3, 2000 November 17, 2000
$ 0.065 December 8, 2000 December 22, 2000
</TABLE>
8. EXPENSE OFFSET
The expense offset represents a reduction of the custodian fees for earnings on
cash balances maintained by the Trust.
9. RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS
The Trust may invest a portion of its assets in residual interest bonds, which
are inverse floating rate municipal obligations. The prices of these securities
are subject to greater market fluctuations during periods of changing
prevailing interest rates than are comparable fixed rate obligations.
At October 31, 2000, the Trust held positions in residual interest bonds having
a total value of $25,571,250, which represents 4.7% of the Trust's net assets.
19
<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*
---------------------------
2000 1999
------------- -------------
<S> <C> <C>
SELECTED PER SHARE DATA:
Net asset value, beginning of period ....................... $ 13.69 $ 15.47
------- --------
Income (loss) from investment operations:
Net investment income ..................................... 1.01 1.01
Net realized and unrealized gain (loss) ................... 0.79 (1.77)
------- --------
Total income (loss) from investment operations ............. 1.80 (0.76)
------- --------
Less dividends from:
Net investment income ..................................... (0.86) (0.84)
Common share equivalent of dividends paid to preferred
shareholders ............................................. (0.22) (0.19)
-------- --------
Total dividends ............................................ (1.08) (1.03)
-------- --------
Anti-dilutive effect of acquiring treasury shares .......... 0.03 0.01
-------- --------
Net asset value, end of period ............................. $ 14.44 $ 13.69
======== ========
Market value, end of period ................................ $ 12.813 $ 13.25
======== ========
TOTAL RETURN+ .............................................. 3.29 % (5.17)%
RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS :
Total expenses ............................................. 0.73 % 0.70 %
Net investment income before preferred stock dividends ..... 7.27 % 6.71 %
Preferred stock dividends .................................. 1.59 % 1.26 %
Net investment income available to common shareholders ..... 5.68 % 5.45 %
SUPPLEMENTAL DATA :
Net assets, end of period, in thousands .................... $547,513 $539,277
Asset coverage on preferred shares at end of period ........ 352% 347 %
Portfolio turnover rate .................................... 11% 5 %
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31*
--------------------------------------------------
1998 1997 1996
------------- ---------------- -------------------
<S> <C> <C> <C>
SELECTED PER SHARE DATA:
Net asset value, beginning of period ....................... $ 14.69 $ 13.86 $ 13.69
------- --------- ----------
Income (loss) from investment operations:
Net investment income ..................................... 1.00 1.00 0.97
Net realized and unrealized gain (loss) ................... 0.71 0.70 (0.01)
------- --------- -----------
Total income (loss) from investment operations ............. 1.71 1.70 0.96
------- --------- -----------
Less dividends from:
Net investment income ..................................... (0.78) (0.78) (0.75)
Common share equivalent of dividends paid to preferred
shareholders ............................................. (0.20) (0.19) (0.17)
-------- --------- -----------
Total dividends ............................................ (0.98) (0.97) (0.92)
-------- --------- -----------
Anti-dilutive effect of acquiring treasury shares .......... 0.05 0.10 0.13
-------- --------- -----------
Net asset value, end of period ............................. $ 15.47 $ 14.69 $ 13.86
======== ========= ===========
Market value, end of period ................................ $14.813 $ 13.25 $ 11.625
======== ========= ===========
TOTAL RETURN+ .............................................. 18.27% 21.21% 7.81%
RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS:
Total expenses ............................................. 0.69% 0.68%(1) 0.68%(1)
Net investment income before preferred stock dividends ..... 6.60% 7.04% 7.06%
Preferred stock dividends .................................. 1.30% 1.31% 1.25%
Net investment income available to common shareholders ..... 5.30% 5.73% 5.81%
SUPPLEMENTAL DATA :
Net assets, end of period, in thousands .................... $594,807 $ 589,728 $ 591,016
Asset coverage on preferred shares at end of period ........ 383% 380% 381%
Portfolio turnover rate .................................... 7% 2% 1%
</TABLE>
-------------
* The per share amounts were computed using an average number of shares
outstanding during the period.
+ Total 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 return does not
reflect brokerage commissions.
(1) Does not reflect the effect of expense offset of 0.01%.
See Notes to Financial Statements
20
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
OF MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST:
We have audited the accompanying statement of assets and liabilities of Morgan
Stanley Dean Witter Insured Municipal Income Trust (the "Trust"), including the
portfolio of investments, as of October 31, 2000, and the related statements of
operations and changes in net assets, and financial highlights for the year
then ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit. The statement of changes in net assets for the year ended October 31,
1999 and the financial highlights for each of the respective stated periods
ended October 31, 1999 were audited by other independent accountants whose
report, dated December 8, 1999, expressed an unqualified opinion on that
statement and financial highlights.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation
of securities owned as of October 31, 2000, by correspondence with the
custodian. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Morgan Stanley Dean Witter Insured Municipal Income Trust as of October 31,
2000, the results of its operations, the changes in its net assets and the
financial highlights for the year then ended, in conformity with accounting
principles generally accepted in the United States of America.
Deloitte & Touche LLP
New York, New York
December 8, 2000
2000 FEDERAL TAX NOTICE (unaudited)
For the year ended October 31, 2000, 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.
21
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
CHANGE IN INDEPENDENT ACCOUNTANTS
On July 1, 2000 PricewaterhouseCoopers LLP resigned as independent accountants
of the Trust.
The reports of PricewaterhouseCoopers LLP on the financial statements of the
Trust for the past two fiscal years contained no adverse opinion or disclaimer
of opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principle.
In connection with its audits for the two most recent fiscal years and through
July 1, 2000, there have been no disagreements with PricewaterhouseCoopers LLP
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of PricewaterhouseCoopers LLP would have caused them to
make reference thereto in their report on the financial statements for such
years.
The Trust, with the approval of its Board of Trustees and its Audit Committee,
engaged Deloitte & Touche LLP as its new independent auditors as of July 1,
2000.
22
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL INCOME TRUST
REVISED INVESTMENT POLICY
On January 26, 2000, the Trustees of Morgan Stanley Dean Witter Insured
Municipal Income Trust (the "Trust") approved an investment policy whereby the
Trust would be permitted to invest up to 10% of its assets in inverse floating
rate municipal obligations. The inverse floating rate municipal obligations in
which the Trust will invest are typically created through a division of a fixed
rate municipal obligation into two separate instruments, a short-term
obligation and a long-term obligation. The interest rate on the short-term
obligation is set at periodic auctions. The interest rate on the long-term
obligation is the rate the issuer would have paid on the fixed income
obligation: (i) plus the difference between such fixed rate and the rate on the
short-term obligation, if the short-term rate is lower than the fixed rate; or
(ii) minus such difference if the interest rate on the short-term obligation is
higher than the fixed rate. The interest rates on these obligations generally
move in the reverse direction of market interest rates. If market interest
rates fall, the interest rate on the obligation will increase and if market
interest rates increase, the interest rate on the obligation will fall. Inverse
floating rate municipal obligations offer the potential for higher income than
is available from fixed rate obligations of comparable maturity and credit
rating. They also carry greater risks. In particular, the prices of inverse
floating rate municipal obligations are more volatile, i.e., they increase and
decrease in response to changes in interest rates to a greater extent than
comparable fixed rate obligations.
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MORGAN STANLEY
DEAN WITTER
INSURED
MUNICIPAL
INCOME TRUST
TRUSTEES
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Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
James F. Higgins
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
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Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Mitchel M. Merin
President
Barry Fink
Vice President, Secretary and General Counsel
James F. Willison
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
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Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center-Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT AUDITORS
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Deloitte & Touch LLP
Two World Financial Center
New York, New York 10281
INVESTMENT MANAGER
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Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
Annual Report
October 31, 2000
