<PAGE>
MORGAN STANLEY DEAN WITTER INSURED Two World Trade Center,
MUNICIPAL BOND TRUST New York, New York 10048
LETTER TO THE SHAREHOLDERS April 30, 1999
DEAR SHAREHOLDER:
We are pleased to present the semiannual report on the operations of Morgan
Stanley Dean Witter Insured Municipal Bond Trust (IMB) for the period ended
April 30, 1999.
The financial markets have begun to recover from last year's global economic
difficulties. The turmoil which included the Asian crisis, the Russian debt
default and the rescue of a major U.S. hedge fund has given way to more normal
financial conditions. The major catalyst for this return to stability was the
liquidity provided by the Federal Reserve Board's 75 basis point reduction in
the federal-funds rate during the fourth quarter of 1998.
International economic problems precipitated a "flight to quality" rally in
fixed income securities and U.S. Treasury yields reached 30-year lows in
October 1998. As the world markets recovered, foreign investors repatriated
funds and Treasury yields began to rise. Interest rates also rose in response
to the surprisingly robust domestic economic growth reported over the second
half of 1998. The bond market became concerned that the central bank might
become more restrictive by taking back some of the liquidity provided during
the crisis.
MUNICIPAL MARKET CONDITIONS
During 1998, municipal yields were less volatile than Treasury yields. This
pattern of stability continued into 1999. Long-term insured index yields stood
at 5.25 percent at the end of April, only 20 basis points higher than their
October 1998 levels. In contrast, Treasury bond yields rose 50 basis points
from 5.15 to 5.65 percent. During the past six months, the yield pick up for
extending tax-exempt maturities from one to 30 years averaged 225 basis points.
The modest rally of municipals during 1998 created a favorable relative value
relationship to Treasuries. Municipals underperformed Treasuries and the ratio
of municipal yields to Treasury yields climbed to 99 percent by December. The
higher the ratio, the more attractive municipals are relative to Treasuries.
Municipals have outperformed Treasuries this year and the ratio declined to 92
percent by April. The high-to-low annual range of municipal/Treasury yields for
the past five years has averaged 93 to 84 percent.
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
LETTER TO THE SHAREHOLDERS April 30, 1999, continued
In addition to lagging 1998's Treasury rally, municipals also experienced a
glut of new-issue supply. Underwriting volume of $284 billion was up 28 percent
from the prior year and approached 1993's record. Issuers actively refinanced
at lower interest rates and refundings were 29 percent of the total volume.
This year's rise in interest rates has reduced the amount of refunding
activity. Refunding volume was down 42 percent in the first four months of 1999
while total underwriting declined 22 percent.
PERFORMANCE
The Trust's net asset value (NAV) decreased from $15.64 per share to $15.35 per
share for the six-month period ended April 30, 1999. Based on this change plus
reinvestment of tax-free dividends totaling $0.465 per share, the Trust's total
NAV return was 1.10 percent. IMB's value on the New York Stock Exchange
decreased from $16.125 to $15.4375 per share during the same period. Based on
this change plus reinvestment of tax-free dividends, IMB's total market return
was -1.44 percent. As of April 30, 1999, IMB's share price was a 0.57 percent
premium to its NAV.
Monthly dividends for the second quarter of 1999 remained $0.0775 per share.
The Trust's level of undistributed net investment income remained unchanged at
$0.133 per share.
30-YEAR BOND YIELDS 1994 - 1999
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%
Source: Municipal Market Data - A Division of Thomson Financial Municipal Group
2
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
LETTER TO THE SHAREHOLDERS April 30, 1999, continued
LARGEST SECTORS AS OF APRIL 30, 1999
(% OF NET ASSETS)
Mortgage 22%
Water & Sewer 15%
Transportation 14%
Refunded 12%
Education 9%
IDR/PCR* 7%
Electric 6%
*Industrial Development Pollution Control Revenue
Portfolio structure is subject to change.
CREDIT ENHANCEMENTS AS OF APRIL 30, 1999
(% OF TOTAL LONG-TERM PORTFOLIO)
MBIA 39%
FGIC 32%
FSA 15%
GNMA 8%
AMBAC 6%
Portfolio structure is subject to change.
CALL STRUCTURE AS OF APRIL 30, 1999 WEIGHTED AVERAGE
(% OF TOTAL LONG-TERM PORTFOLIO) CALL PROTECTION: 5 YEARS
PERCENT CALLABLE
Years Bonds Callable
1999 2%
2000 17%
2001 34%
2002 5%
2003 2%
2004 0%
2005 6%
2006 13%
2007 0%
2008 6%
2009 11%
2010+ 4%
Portfolio structure is subject to change.
3
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
LETTER TO THE SHAREHOLDERS April 30, 1999, continued
PORTFOLIO STRUCTURE
The Trust's investments were diversified among 12 long-term sectors and 40
credits. At the end of April, the portfolio's average maturity was 19 years.
Portfolio duration, a measure of sensitivity to interest-rate changes, was 4.6
years. Issues in the refunded bond category comprised 12 percent of net assets.
These bonds have been refinanced and will be redeemed on the date shown in the
portfolio. The accompanying charts provide current information on the
portfolio's call structure, largest sectors and mix of credit enhancements.
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 the ARPS expenses (ARPS
auction rate and expenses). The greater the spread and the larger 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 this six-month period, ARPS leverage contributed approximately $0.06 per
share to common share earnings. The yield on the Trust's only ARPS for the
six-month period was 3.65 percent. The ARPS series totaled $30 million and
represented 28 percent of net assets.
ARPS leverage also increases the price volatility of common shares and has the
effect of extending portfolio duration.
LOOKING AHEAD
The combination of a flight to quality and the flood of new municipal issues
made the municipal-to-Treasury yield relationship more favorable late last year
than it had been in the previous 10 years. Although municipals have thus far
outperformed Treasuries in 1999, we believe that municipals still offer
investors considerable value versus their historical relationship to
Treasuries.
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.
4
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
LETTER TO THE SHAREHOLDERS April 30, 1999, continued
On May 1, 1999, Mitchell M. Merin was named President of the Morgan Stanley
Dean Witter Funds. Mr. Merin is also the President and Chief Operating Officer
of Asset Management of Morgan Stanley Dean Witter & Co. and President, Chief
Executive Officer and Director of Morgan Stanley Dean Witter Advisors Inc., the
Trust's Investment Manager. He also serves as Chairman, Chief Executive Officer
and Director of Morgan Stanley Dean Witter Distributors Inc. and Morgan Stanley
Dean Witter Trust FSB.
We appreciate your ongoing support of Morgan Stanley Dean Witter Insured
Municipal Bond 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
5
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
PORTFOLIO OF INVESTMENTS April 30, 1999 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TAX-EXEMPT MUNICIPAL BONDS (92.6%)
General Obligation (1.7%)
$ 2,000 California, Refg Dtd 10/01/98 (MBIA) ......................................... 4.50 % 10/01/28 $ 1,809,660
-------- ------------
Educational Facilities Revenue (8.9%)
6,000 Massachusetts Health & Educational Facilities Authority, Boston University
Ser 1991 Ser K & L (MBIA) .................................................. 6.66 10/01/31 6,471,360
2,000 New York State Dormitory Authority, St John's University Ser 1996 (MBIA) ..... 5.70 07/01/26 2,129,360
1,000 Pennsylvania Higher Educational Facilities Authority, Duquesne University
-------- Refg Ser A of 1991 (MBIA) .................................................. 6.75 04/01/20 1,051,890
------------
9,000 9,652,610
-------- ------------
Electric Revenue (6.2%)
3,000 Piedmont Municipal Power Agency, South Carolina, 1991 Refg Ser (FGIC) ........ 6.50 01/01/11 3,182,940
1,500 South Carolina Public Service Authority, Santee Cooper 1997 Refg Ser A
(MBIA) ..................................................................... 5.00 01/01/29 1,456,980
2,000 Snohomish County Public Utility District #1, Washington, 1993 Ser (FGIC) ..... 6.00 01/01/18 2,154,740
-------- ------------
6,500 6,794,660
-------- ------------
Hospital Revenue (1.9%)
2,000 University of Missouri, Health Ser 1996 A (AMBAC) ............................ 5.50 11/01/16 2,073,380
-------- ------------
Industrial Development/Pollution Control Revenue (7.4%)
2,500 Jasper County, Indiana, Northern Indiana Public Service Co Collateralized
Ser 1991 (MBIA) ............................................................ 7.10 07/01/17 2,703,025
1,000 Rockport, Indiana, Indiana & Michigan Power Co Ser B (Secondary FGIC) ........ 7.60 03/01/16 1,081,530
1,000 Burlington, Kansas, Kansas Gas & Electric Co Ser 1991 (MBIA) ................. 7.00 06/01/31 1,078,240
3,000 New Hampshire Industrial Development Authority, Canal Electric Co (AMT)
-------- (FGIC) ..................................................................... 7.375 12/01/20 3,214,320
------------
7,500 8,077,115
-------- ------------
Mortgage Revenue -- Multi-Family (2.9%)
2,955 New York State Housing Finance Agency, 1996 Ser A Refg (FSA) ................. 6.10 11/01/15 3,199,674
-------- ------------
Mortgage Revenue -- Single Family (19.0%)
1,485 District of Columbia Housing Finance Agency, GNMA Collateralized
Ser 1988 E (AMT) ........................................................... 7.70 12/01/22 1,528,778
70 Hawaii Housing Finance & Development Corporation, Ser 1989 A (AMT)
(Bifurcated FSA) ........................................................... 7.70 07/01/29 71,564
800 Sedgwick & Shawnee County, Kansas, GNMA Collateralized 1990 Ser B
(AMT) (AMBAC) .............................................................. 7.80 06/01/22 836,432
4,830 Maine Housing Authority, Ser 1991 A (Bifurcated FSA) ......................... 7.40 11/15/22 5,081,643
4,720 Massachusetts Housing Finance Agency, Ser 14 (Bifurcated FSA) ................ 7.60 12/01/14 4,949,439
1,525 Missouri Housing Development Commission, GNMA-Backed 1991 Ser A
(AMT) ...................................................................... 7.375 08/01/23 1,596,050
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
PORTFOLIO OF INVESTMENTS April 30, 1999 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 3,800 Nebraska Investment Finance Authority, GNMA-Backed 1990 Ser 1 & 2
(AMT) .................................................................... 7.631% 09/10/30 $ 3,977,042
620 New Jersey Housing & Mortgage Finance Agency, Home Buyer Ser E (MBIA) 7.65 10/01/16 642,419
1,910 Tennessee Housing Development Agency, Homeownership Issue S (AMT)
-------- (Secondary MBIA) ......................................................... 7.625 07/01/22 2,018,011
------------
19,760 20,701,378
-------- ------------
Nursing & Health Related Facilities Revenue (1.7%)
2,000 New York State Dormitory Authority, Mental Health Ser 1999 C (MBIA) ........ 4.75 08/15/22 1,889,440
-------- ------------
Transportation Facilities Revenue (14.0%)
3,000 Hawaii, Airports Second Ser 1990 (AMT) (FGIC) .............................. 7.50 07/01/20 3,184,710
2,000 Illinois Toll Highway Authority, Priority Refg 1998 Ser A (FSA) ............ 5.50 01/01/15 2,148,240
2,000 Wayne County, Michigan, Detroit Metropolitan Wayne County Airport
Sub Lien Ser 1991 B (AMT) (MBIA) ......................................... 6.75 12/01/21 2,163,080
5,000 New Hampshire, Turnpike 1991 Refg Ser B & C (FGIC) ......................... 6.805 11/01/17 5,836,150
2,000 North Texas Tollway Authority, Dallas North Tollway Ser 1998 (FGIC) ........ 4.75 01/01/29 1,870,240
-------- ------------
14,000 15,202,420
-------- ------------
Water & Sewer Revenue (15.3%)
2,000 East Bay Municipal Utility District, California, Water Ser 1998 (MBIA) ..... 4.75 06/01/34 1,867,600
2,250 Broward County, Florida, Utility Ser 1991 (FGIC) ........................... 6.00 10/01/20 2,354,558
2,000 Lee County, Florida, Water & Sewer 1999 Ser A (AMBAC) ...................... 4.75 10/01/23 1,892,120
1,200 Honolulu City & County, Hawaii, Wastewater Junior Ser 1998 (FGIC) .......... 5.25 07/01/17 1,217,136
2,070 Rio Rancho, New Mexico, Water & Wastewater Refg Ser 1998 (AMBAC) ........... 5.25 05/15/17 2,112,062
1,000 New York City Municipal Water Finance Authority, New York, 1999 Ser A
(FGIC) ................................................................... 4.75 06/15/31 930,040
2,000 Toledo, Ohio, Waterworks Impr & Refg Ser 1999 (FGIC) ....................... 4.75 11/15/17 1,939,980
4,000 Norfolk, Virginia, Water Ser 1995 (MBIA) ................................... 5.875 11/01/20 4,306,320
-------- ------------
16,520 16,619,816
-------- ------------
Other Revenue (1.9%)
2,000 Las Cruces, New Mexico, Ser 1995 (AMT) (MBIA) .............................. 5.50 12/01/15 2,067,500
-------- ------------
Refunded (11.7%)
5,000 Eastern Municipal Water District, California, Water & Sewer Ser 1991
COPs (FGIC) .............................................................. 6.50 07/01/01+ 5,408,700
5,000 Cook County, Illinois, Ser 1992 A (MBIA) ................................... 6.60 11/15/02+ 5,572,000
1,425 Port of Portland, Oregon, Portland International Airport Ser Seven B
(AMT) (MBIA) ............................................................. 7.10 07/01/12+ 1,744,898
-------- ------------
11,425 12,725,598
-------- ------------
95,660 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $94,538,128) ................................... 100,813,251
-------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
PORTFOLIO OF INVESTMENTS April 30, 1999 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (5.5%)
$ 1,500 East Baton Rouge Parish, Louisiana, Exxon Corp Ser 1989
(Demand 05/03/99) ............................................... 4.25*% 11/01/19 $ 1,500,000
1,500 Missouri Health & Educational Facilities Authority, Cox Health Care
Ser 1997 (MBIA) (Demand 05/03/99) ............................... 4.25* 06/01/15 1,500,000
3,000 Lincoln County, Wyoming, Exxon Corp Ser 1984 B
--------- (Demand 05/03/99) ............................................... 4.15* 11/01/14 3,000,000
------------
6,000 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS
-------- (Identified Cost $6,000,000) .............................................................. 6,000,000
------------
$101,660 TOTAL INVESTMENTS (Identified Cost $100,538,128) (a) ......................... 98.1% 106,813,251
========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ............................... 1.9 2,041,718
------ ------------
NET ASSETS ................................................................... 100.0% $108,854,969
====== ============
</TABLE>
- ---------------
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
+ 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
$6,601,371 and the aggregate gross depreciation is $326,248, resulting in
net unrealized appreciation of $6,275,123.
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
8
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
PORTFOLIO OF INVESTMENTS April 30, 1999 (unaudited) continued
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
April 30, 1999
<TABLE>
<S> <C> <C> <C> <C> <C>
California ................... 8.3% Massachusetts ................ 10.5% Oregon ...................... 1.6%
District of Columbia ......... 1.4 Michigan ..................... 2.0 Pennsylvania ................. 1.0
Florida ...................... 3.9 Missouri .................... 4.7 South Carolina .............. 4.3
Hawaii ....................... 4.1 Nebraska ................... 3.6 Tennessee .................... 1.8
Illinois ................... 7.1 New Hampshire ................ 8.3 Texas ....................... 1.7
Indiana ...................... 3.5 New Jersey ................. 0.6 Virginia ..................... 4.0
Kansas ....................... 1.7 New Mexico ................... 3.8 Washington ................... 2.0
Louisiana .................. 1.4 New York ..................... 7.5 Wyoming ...................... 2.8
Maine ........................ 4.7 Ohio ......................... 1.8 ----
Total ....................... 98.1%
====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1999 (unaudited)
<TABLE>
<S> <C>
ASSETS :
Investments in securities, at value
(identified cost $100,538,128) ........................................ $ 106,813,251
Cash .................................................................... 360,408
Interest receivable ..................................................... 1,876,618
Prepaid expenses ........................................................ 26,877
-------------
TOTAL ASSETS ......................................................... 109,077,154
-------------
LIABILITIES:
Payable for:
Dividends to preferred shareholders .................................. 91,248
Investment management fee ............................................ 36,704
Accrued expenses ........................................................ 94,233
-------------
TOTAL LIABILITIES .................................................... 222,185
-------------
NET ASSETS ........................................................... $ 108,854,969
=============
COMPOSITION OF NET ASSETS:
Preferred shares of beneficial interest (1,000,000 shares authorized of
non-participating $.01 par value, 600 shares outstanding) ............. $ 30,000,000
-------------
Common shares of beneficial interest (unlimited shares authorized of
$.01 par value, 5,137,563 shares outstanding) ......................... 70,937,933
Net unrealized appreciation ............................................. 6,275,123
Accumulated undistributed net investment income ......................... 681,696
Accumulated undistributed net realized gain ............................. 960,217
-------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS ......................... 78,854,969
-------------
TOTAL NET ASSETS ..................................................... $ 108,854,969
=============
NET ASSET VALUE PER COMMON SHARE
($78,854,969 divided by 5,137,563 common shares outstanding) .......... $15.35
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the six months ended April 30, 1999 (unaudited)
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ............................... $ 3,279,542
------------
EXPENSES
Investment management fee ..................... 190,816
Auction commission fees ....................... 55,788
Professional fees ............................. 46,895
Transfer agent fees and expenses .............. 12,710
Shareholder reports and notices ............... 9,572
Trustees' fees and expenses ................... 9,324
Registration fees ............................. 8,278
Auction agent fees ............................ 4,025
Custodian fees ................................ 2,634
Other ......................................... 7,803
------------
TOTAL EXPENSES ............................. 347,845
Less: expense offset .......................... (2,627)
------------
NET EXPENSES ............................... 345,218
------------
NET INVESTMENT INCOME ...................... 2,934,324
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain ............................. 1,035,985
Net change in unrealized appreciation ......... (2,519,627)
------------
NET LOSS ................................... (1,483,642)
------------
NET INCREASE .................................. $ 1,450,682
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
APRIL 30, 1999 OCTOBER 31, 1998
---------------- -----------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ............................. $ 2,934,324 $ 6,142,230
Net realized gain ................................. 1,035,985 209,427
Net change in unrealized appreciation ............. (2,519,627) 347,409
------------ ------------
NET INCREASE ................................... 1,450,682 6,699,066
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT
INCOME:
Preferred ......................................... (547,488) (1,103,850)
Common ............................................ (2,388,919) (5,060,382)
------------ ------------
TOTAL DIVIDENDS ................................ (2,936,407) (6,164,232)
------------ ------------
NET INCREASE (DECREASE) ........................ (1,485,725) 534,834
NET ASSETS:
Beginning of period ............................... 110,340,694 109,805,860
------------ ------------
END OF PERIOD
(Including undistributed net investment income of
$681,696 and $683,779, respectively) ............ $108,854,969 $110,340,694
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1999 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Insured Municipal Bond 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 February 27, 1990
and commenced operations on February 28, 1991.
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
13
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1999 (unaudited) continued
income and net realized capital gains are determined in accordance with federal
income tax regulations which may differ from generally accepted accounting
principles. These "book/tax" differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in nature,
such amounts are reclassified within the capital accounts based on their
federal tax-basis treatment; temporary differences do not require
reclassification. Dividends and distributions which exceed net investment
income and net realized capital gains for financial reporting purposes but not
for tax purposes are reported as dividends in excess of net investment income
or distributions in excess of net realized capital gains. To the extent they
exceed net investment income and net realized capital gains for tax purposes,
they are reported as distributions of paid-in-capital.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with Morgan Stanley Dean Witter
Advisors Inc. (the "Investment Manager"), the Trust pays 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, in addition to managing the Trust's
investments, the Investment Manager maintains certain of the Trust's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Trust who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services,
heat, light, power and other utilities provided to the Trust.
3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the six months ended April 30, 1999
aggregated $11,323,913 and $17,026,570, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager,
is the Trust's transfer agent. At April 30, 1999, the Trust had transfer agent
fees and expenses payable of approximately $100.
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 six months ended April 30, 1999
included in Trustees' fees and expenses in the Statement of Operations amounted
to $2,959. At April 30, 1999, the Trust had an accrued pension liability of
$45,516, which is included in accrued expenses in the Statement of Assets and
Liabilities.
14
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1999 (unaudited) continued
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 Auction Rate Preferred Shares
("Preferred Shares") which have a liquidation value of $50,000 per share plus
the redemption premium, if any, plus accumulated but unpaid dividends, whether
or not declared, thereon to the date of distribution. The Trust may redeem such
shares, in whole or in part, at the original purchase price of $50,000 per
share plus accumulated but unpaid dividends, whether or not declared, thereon
to the date of redemption.
Dividends, which are cumulative, are reset through auction procedures.
<TABLE>
<CAPTION>
AMOUNT IN RESET RANGE OF
SHARES* THOUSANDS* RATE* DATE DIVIDEND RATES**
- --------- ------------ --------- ---------- -----------------
<S> <C> <C> <C> <C>
600 $30,000 3.65% 07/08/99 3.65%
</TABLE>
- ---------------
* As of April 30, 1999.
** For the six months ended April 30, 1999.
Subsequent to April 30, 1999 and up through June 4, 1999, the Trust paid
dividends at a rate of 3.65% in the aggregate amount of $182,496.
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
PAR EXCESS OF
SHARES VALUE PAR VALUE
----------- ---------- --------------
<S> <C> <C> <C>
Balance, October 31, 1997, 1998 and April 30, 1999, respectively ......... 5,137,563 $51,376 $70,886,557
========= ======= ===========
</TABLE>
15
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1999 (unaudited) continued
6. FEDERAL INCOME TAX STATUS
At October 31, 1998, the Trust had a net capital loss carryover of
approximately $76,000 of which $48,000 will be available through October 31,
2004 and $28,000 will be available through October 31, 2005 to offset future
capital gains to the extent provided by regulations.
7. DIVIDENDS TO COMMON SHAREHOLDERS
On March 30, 1999, the Trust declared the following dividends from net
investment income:
<TABLE>
<CAPTION>
AMOUNT RECORD PAYABLE
PER SHARE DATE DATE
- -------------- --------------- ---------------
<S> <C> <C>
$0.0775 May 7, 1999 May 21, 1999
$0.0775 June 4, 1999 June 18, 1999
</TABLE>
16
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a common share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR ENDED OCTOBER 31*
MONTHS ENDED -------------------------------------
APRIL 30, 1999* 1998 1997
------------------------------------- ----------------
(unaudited)
<S> <C> <C> <C>
SELECTED PER SHARE DATA :
Net asset value, beginning of period ......................... $ 15.64 $ 15.53 $ 15.35
------- ---------- ---------
Income (loss) from investment operations:
Net investment income ....................................... 0.57 1.20 1.20
Net realized and unrealized gain (loss) ..................... (0.29) 0.11 0.16
------- ---------- ---------
Total income (loss) from investment operations ............... 0.28 1.31 1.36
------- ---------- ---------
Less dividends from:
Net investment income ....................................... (0.47) (0.99) (0.96)
Common share equivalent of dividends paid to preferred
shareholders ............................................... (0.10) (0.21) (0.22)
------- ----------- ---------
Total dividends .............................................. (0.57) (1.20) (1.18)
------- ----------- ---------
Anti-dilutive effect of acquiring treasury shares ............ -- -- --
------- ----------- ---------
Net asset value, end of period ............................... $ 15.35 $ 15.64 $ 15.53
======= =========== =========
Market value, end of period .................................. $15.438 $ 16.125 $ 16.00
======== =========== =========
TOTAL RETURN+ ................................................ (1.44)%(1) 7.03 % 20.62%
RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS :
Total expenses ............................................... 0.88 %(2) 0.87 %(3) 0.89%(3)
Net investment income before preferred stock dividends ....... 7.41 %(2) 7.65 % 7.80%
Preferred stock dividends .................................... 1.38 %(2) 1.37 % 1.43%
Net investment income available to common shareholders ....... 6.03 %(2) 6.28 % 6.37%
SUPPLEMENTAL DATA :
Net assets, end of period, in thousands ...................... $108,855 $ 110,341 $ 109,806
Asset coverage on preferred shares at end of period .......... 362 % 367% 365%
Portfolio turnover rate ...................................... 11 %(1) 6% 2%
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31*
----------------------------------------------
1996 1995 1994
-------------------------------- -------------
<S> <C> <C> <C>
SELECTED PER SHARE DATA :
Net asset value, beginning of period ......................... $ 15.41 $ 14.16 $ 16.75
-------- ---------- --------
Income (loss) from investment operations:
Net investment income ....................................... 1.21 1.22 1.34
Net realized and unrealized gain (loss) ..................... (0.17) 1.30 (2.49)
--------- ---------- --------
Total income (loss) from investment operations ............... 1.04 2.52 (1.15)
--------- ---------- --------
Less dividends from:
Net investment income ....................................... (0.90) (1.04) (1.21)
Common share equivalent of dividends paid to preferred
shareholders ............................................... (0.22) (0.23) (0.23)
--------- ----------- --------
Total dividends .............................................. (1.12) (1.27) (1.44)
--------- ----------- --------
Anti-dilutive effect of acquiring treasury shares ............ 0.02 -- --
--------- ----------- --------
Net asset value, end of period ............................... $ 15.35 $ 15.41 $ 14.16
========= =========== ========
Market value, end of period .................................. $ 14.125 $ 14.625 $ 12.875
========= =========== =========
TOTAL RETURN+ ................................................ 3.06 % 22.10 % (22.37)%
RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS :
Total expenses ............................................... 0.92 % 0.91 %(3) 1.03 %
Net investment income before preferred stock dividends ....... 7.85 % 8.16 % 8.68 %
Preferred stock dividends .................................... 1.41 % 1.53 % 1.49 %
Net investment income available to common shareholders ....... 6.44 % 6.63 % 7.19 %
SUPPLEMENTAL DATA :
Net assets, end of period, in thousands ...................... $109,232 $ 110,718 $109,377
Asset coverage on preferred shares at end of period .......... 363% 369% 312 %
Portfolio turnover rate ...................................... 5% 6% 12 %
</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 and distributions 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) Not annualized.
(2) Annualized.
(3) Does not reflect the effect of expense offset of 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE>
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<PAGE>
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<PAGE>
TRUSTEE
- ---------------------------------------
Michael Bozic
Charles A. Fiumefreddo MORGAN STANLEY
Edwin J. Garn DEAN WITTER
Wayne E. Hedien INSURED
Dr. Manuel H. Johnson MUNICIPAL
Michael E. Nugent BOND TRUST
Philip J. Purcell
John L. Schroeder
OFFICERS
- ---------------------------------------
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Mitchell M. Merin
President
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
The financial statements included herein Semiannual Report
have been taken from the records of the April 30, 1999
Trust without examination by the independent
accountants and accordingly they do not
express an opinion thereon.
