<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
LETTER TO THE SHAREHOLDERS October 31, 1999
Two World Trade Center,
New York, New York 10048
DEAR SHAREHOLDER:
The U.S. economy, led by consumer demand, has continued to experience robust
growth this year. The fixed-income markets anticipated that the Federal Reserve
Board would remove the liquidity it provided during last year's international
economic crises. The Fed changed monetary policy and raised the federal-funds
rate 50 basis points to 5.25 percent during the summer. By October long-term
interest rates had risen to levels last seen two years ago. Subsequently, the
Fed raised the federal-funds rate an additional 25 basis points to 5.50 percent
in November.
MUNICIPAL MARKET CONDITIONS
Long-term insured municipal index yields began 1999 near a record low of 5.05
percent. By the end of October, municipal index yields had increased 100 basis
points to 6.05 percent. Since bond prices move inversely to changes in interest
rates, these higher yields resulted in significantly lower bond prices. The
increase in yields translated into a 13 percent price decline for a generic
insured municipal bond with a 30-year maturity.
The municipal market outperformed U.S. Treasury bonds early in the year but
gradually gave ground. The ratio of long-term insured municipal index yields to
benchmark 30-year Treasury yields is a measure of relative performance. The
ratio declined from 99 percent at the end of 1998 to 91 percent in May before
rising to 98 percent by the end of October. A declining ratio means that
municipals have outperformed Treasuries. Over the past five years the ratio has
ranged from a high of 99 percent, to a low of 82 percent.
Higher interest rates led to a reduction in municipal market underwriting this
year. New issue volume declined 20 percent in the first ten months of 1999.
Refunding activity, the most interest rate sensitive component of supply, was
down 50 percent.
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
LETTER TO THE SHAREHOLDERS October 31, 1999, continued
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
30-YEAR BOND YIELDS 1994-1999
AAA AAA
Date Ins Tsy % Relationship Date Ins Tsy % Relationship
12/31/93 5.40% 6.34% 85.17% 11/29/96 5.50 6.35 86.61%
01/31/94 5.40 6.24 86.54% 12/31/96 5.60 6.63 84.46%
02/28/94 5.80 6.66 87.09% 01/31/97 5.70 6.79 83.95%
03/31/94 6.40 7.09 90.27% 02/28/97 5.65 6.80 83.09%
04/29/94 6.35 7.32 86.75% 03/31/97 5.90 7.10 83.10%
05/31/94 6.25 7.43 84.12% 04/30/97 5.75 6.94 82.85%
06/30/94 6.50 7.61 85.41% 05/30/97 5.65 6.91 81.77%
07/29/94 6.25 7.39 84.57% 06/30/97 5.60 6.78 82.60%
08/31/94 6.30 7.45 84.56% 07/30/97 5.30 6.30 84.13%
09/30/94 6.55 7.81 83.87% 08/31/97 5.50 6.61 83.21%
10/31/94 6.75 7.96 84.80% 09/30/97 5.40 6.40 84.38%
11/30/94 7.00 8.00 87.50% 10/31/97 5.35 6.15 86.99%
12/30/94 6.75 7.88 85.66% 11/30/97 5.30 6.05 87.60%
01/31/95 6.40 7.70 83.12% 12/31/97 5.15 5.92 86.99%
02/28/95 6.15 7.44 82.66% 01/31/98 5.15 5.80 88.79%
03/31/95 6.15 7.43 82.77% 02/28/98 5.20 5.92 87.84%
04/28/95 6.20 7.34 84.47% 03/31/98 5.25 5.93 88.53%
05/31/95 5.80 6.66 87.09% 04/30/98 5.35 5.95 89.92%
06/30/95 6.10 6.62 92.15% 05/29/98 5.20 5.80 89.66%
07/31/95 6.10 6.86 88.92% 06/30/98 5.20 5.65 92.04%
08/31/95 6.00 6.66 90.09% 07/31/98 5.18 5.71 90.72%
09/29/95 5.95 6.48 91.82% 08/31/98 5.03 5.27 95.45%
10/31/95 5.75 6.33 90.84% 09/30/98 4.95 5.00 99.00%
11/30/95 5.50 6.14 89.58% 10/31/98 5.05 5.16 97.87%
12/29/95 5.35 5.94 90.07% 11/30/98 5.00 5.06 98.81%
01/31/96 5.40 6.03 89.55% 12/31/98 5.05 5.10 99.02%
02/29/96 5.60 6.46 86.69% 01/31/99 5.00 5.09 98.23%
03/29/96 5.85 6.66 87.84% 02/28/99 5.10 5.58 91.40%
04/30/96 5.95 6.89 86.36% 03/31/99 5.15 5.63 91.47%
05/31/96 6.05 6.99 86.55% 04/30/99 5.20 5.66 91.87%
06/28/96 5.90 6.89 85.63% 05/31/99 5.30 5.83 90.91%
07/31/96 5.85 6.97 83.93% 06/30/99 5.47 5.96 91.78%
08/30/96 5.90 7.11 82.98% 07/31/99 5.55 6.10 90.98%
09/30/96 5.70 6.93 82.25% 08/31/99 5.75 6.06 94.88%
10/31/96 5.65 6.64 85.09% 09/30/99 5.85 6.05 96.69%
10/31/99 6.03 6.16 97.89%
Source: Municipal Market Data-A Division of Thomson Financial Municipal Group
and Bloomberg L.P.
PERFORMANCE
In this interest rate environment, the net asset value (NAV) of Morgan Stanley
Dean Witter Insured Municipal Bond Trust (IMB) declined from $15.64 to $14.09
per share for the fiscal year ended October 31, 1999. Based on this change plus
reinvestment of tax-free dividends totaling $0.925 per share the Trust's total
NAV return was --4.25 percent. IMB's value on the New York Stock Exchange
(NYSE) fell from $16.125 to $12.50 per share during the fiscal year. Based on
this change plus reinvestment of tax-free dividends, IMB's total market return
was --17.60 percent. On October 31, 1999, IMB's NYSE market price represented a
11.28 percent discount to its NAV.
Monthly dividends for the fourth quarter of 1999 were declared in September.
Beginning with the October payment, the dividend was decreased from $0.0775 to
$0.0725 per share. The new dividend rate reflects the Trust's estimated
earnings over the next 6 -- 12 months and its $0.104 per share cushion of
undistributed net investment income on October 31, 1999.
2
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
LETTER TO THE SHAREHOLDERS October 31, 1999, continued
PORTFOLIO STRUCTURE
The Trust's investments were diversified among 11 long-term sectors and 42
credits. At the end of October, the portfolio's average maturity was 19 years.
Average duration, a measure of sensitivity to interest rate changes, was 5.9
years. Issues in the refunded bond category comprised 12 percent of net assets.
These bonds have been refinanced and will be redeemed on the dates shown in the
portfolio. The accompanying charts provide current information on the
portfolio's credit enhancements, sector distribution and geographic
diversification. Optional call provisions by year with their respective cost
(book) yields are also charted.
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 $0.11 per
share to common share earnings. The yield on the Trust's only ARPS series
ranged between 3.65 and 3.85 percent. In comparison, the yield on 1-year
municipal notes increased from 3.04 percent at the end of 1998, to 3.77 percent
at the end of October 1999. The series totaled $30 million and represented 29
percent of net assets.
LOOKING AHEAD
The Federal Reserve Board raised interest rates twice in the summer and again
in November 1999. This confirmed its previously disclosed bias of becoming less
accommodative in the face of continued strong domestic economic growth.
Depending on the impact of tight labor markets and higher commodity prices on
inflation, the central bank may raise short-term interest rates further.
However, we believe municipal bonds continue to offer long-term investors good
value especially in 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
3
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
LETTER TO THE SHAREHOLDERS October 31, 1999, continued
addition, we would like to remind you that the Trustees have approved a
procedure whereby the Trust, when appropriate, may purchase shares in the open
market or in privately negotiated transactions at a price not above market
value or net asset value, whichever is lower at the time of purchase. 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 year ended October 31, 1999 the Trust purchased
and retired 42,000 shares of common stock at a weighted average market discount
of 10.16 percent.
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
4
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
LETTER TO THE SHAREHOLDERS October 31, 1999, continued
LARGEST SECTORS AS OF OCTOBER 31, 1999
(% OF NET ASSETS)
Catagory IMB
- -------- ---
Transportation 20%
Water & Sewer 16%
Mortgage 15%
Refunded 12%
Education 9%
IDR/PCR* 8%
Electric 6%
Hospital 5%
* INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
CREDIT ENHANCEMENTS AS OF OCTOBER 31, 1999
(% OF TOTAL LONG-TERM PORTFOLIO)
MBIA 36%
FGIC 34%
AMBAC 12%
FSA 12%
GNMA 6%
Total 100%
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
October 31, 1999
Arizona ...................... 1.9%
California ................... 8.7
District of Columbia ......... 1.3
Florida ...................... 2.2
Hawaii ....................... 4.2
Illinois ..................... 8.2
Indiana ...................... 3.6
Kansas ....................... 1.7
Maine ........................ 4.9
Massachusetts ................ 6.2%
Michigan ..................... 3.7
Missouri ..................... 6.8
Nebraska ..................... 3.4
New Hampshire ................ 8.4
New Jersey ................... 0.3
New Mexico ................... 3.7
New York ..................... 7.8
North Carolina ............... 1.3
Oregon ....................... 1.6%
Pennsylvania ................. 2.8
South Carolina ............... 6.6
Tennessee .................... 0.1
Texas ........................ 1.6
Virginia ..................... 3.9
Washington ................... 2.0
Wyoming ...................... 1.0
----
Total ........................ 97.9%
====
Portfolio structure is subject to change.
5
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
LETTER TO THE SHAREHOLDERS October 31, 1999, continued
CALL AND COST (BOOK) YIELD STRUCTURE
OCTOBER 31, 1999
PERCENT CALLABLE*
Call Dates IMB
- ---------- ---
1999 1%
2000 11%
2001 32%
2002 6%
2003 2%
2004 0%
2005 6%
2006 13%
2007 0%
2008 6%
2009 16%
2010+ 7%
WEIGHTED AVERAGE CALL PROTECTION: 5 YEARS
YEARS BONDS CALLABLE
COST (BOOK) YIELD**
Yield Dates IMB
- ----------- ---
1999 7.39%
2000 7.39%
2001 7.00%
2002 6.62%
2003 6.21%
2004 0.00%
2005 6.08%
2006 6.31%
2007 0.00%
2008 5.38%
2009 5.53%
2010+ 5.78%
WEIGHTED AVERAGE BOOK YIELD: 6.45%
* % BASED ON LONG-TERM PORTFOLIO.
** 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 EARNED A BOOK YIELD OF 7.4% ON 11% OF THE LONG-TERM
PORTFOLIO THAT ARE CALLABLE IN 2000.
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
6
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
RESULTS OF ANNUAL MEETING (unaudited)
* * *
On October 28, 1999, an annual meeting of the Trust's shareholders was held for
the purpose of voting on three separate matters, the results of which were as
follows:
(1) ELECTION OF TRUSTEES BY ALL SHAREHOLDERS:
Wayne E. Hedien
For ........................................... 3,543,229
Withheld ...................................... 63,441
John L. Schroeder
For ........................................... 3,567,217
Withheld ...................................... 39,453
(2) ELECTION OF TRUSTEE BY PREFERRED SHAREHOLDERS:
Dr. Manuel H. Johnson
For ........................................... 540
Withheld ...................................... 0
The following Trustees were not standing for reelection at this meeting:
Michael Bozic, Charles A. Fiumefreddo, Edwin J. Garn, Michael E. Nugent
and Philip J. Purcell.
(3) RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
ACCOUNTANTS:
For ........................................... 3,522,208
Against ....................................... 9,510
Abstain ....................................... 74,952
7
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
PORTFOLIO OF INVESTMENTS October 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- -------- ---------- ------------
<S> <C> <C> <C> <C>
TAX-EXEMPT MUNICIPAL BONDS (94.7%)
General Obligation (1.5%)
$ 2,000 California, Refg Dtd 10/01/98 (MBIA) ..................................... 4.50 % 10/01/28 $ 1,569,840
-------- ------------
Educational Facilities Revenue (9.1%)
6,000 Massachusetts Health & Educational Facilities Authority, Boston University
1991 Ser K & L (MBIA) .................................................. 6.66 10/01/31 6,275,880
2,000 New York State Dormitory Authority, St John's University Ser 1996 (MBIA) . 5.70 07/01/26 1,916,880
1,000 Pennsylvania Higher Educational Facilities Authority, Duquesne University
Refg Ser A of 1991 (MBIA) .............................................. 6.75 04/01/20 1,024,760
-------- ------------
9,000 9,217,520
-------- ------------
Electric Revenue (6.3%)
3,000 Piedmont Municipal Power Agency, South Carolina, 1991 Refg Ser (FGIC) .... 6.50 01/01/11 3,124,110
1,500 South Carolina Public Service Authority, Santee Cooper 1997 Refg Ser A
(MBIA) ................................................................. 5.00 01/01/29 1,253,175
2,000 Snohomish County Public Utility District #1, Washington, 1993 Ser (FGIC) . 6.00 01/01/18 1,991,040
-------- ------------
6,500 6,368,325
-------- ------------
Hospital Revenue (5.1%)
2,000 Mesa Industrial Development Authority, Arizona, Discovery Health
Ser 1999 A (MBIA) ...................................................... 5.875 01/01/16 1,978,220
2,000 University of Missouri, Health Ser 1996 A (AMBAC) ........................ 5.50 11/01/16 1,892,280
1,500 University of North Carolina, Hospitals at Chapel Hill Ser 1999 (AMBAC) .. 5.00 02/15/24 1,293,900
-------- ------------
5,500 5,164,400
-------- ------------
Industrial Development/Pollution Control Revenue (7.7%)
2,500 Jasper County, Indiana, Northern Indiana Public Service Co Collateralized
Ser 1991 (MBIA) ........................................................ 7.10 07/01/17 2,632,950
1,000 Rockport, Indiana, Indiana & Michigan Power Co Ser B (Secondary FGIC) .... 7.60 03/01/16 1,054,990
1,000 Burlington, Kansas, Kansas Gas & Electric Co Ser 1991 (MBIA) ............. 7.00 06/01/31 1,050,480
3,000 New Hampshire Industrial Development Authority, Canal Electric Co (AMT)
(FGIC) ................................................................. 7.375 12/01/20 3,140,250
-------- ------------
7,500 7,878,670
-------- ------------
Mortgage Revenue -- Multi-Family (3.0%)
2,955 New York State Housing Finance Agency, 1996 Ser A Refg (FSA) ............. 6.10 11/01/15 3,017,823
-------- ------------
Mortgage Revenue -- Single Family (12.0%)
1,320 District of Columbia Housing Finance Agency, GNMA Collateralized
Ser 1988 E (AMT) ....................................................... 7.70 12/01/22 1,347,456
50 Hawaii Housing Finance & Development Corporation, Ser 1989 A (AMT)
(Bifurcated FSA) ....................................................... 7.70 07/01/29 50,837
620 Sedgwick & Shawnee County, Kansas, GNMA Collateralized 1990 Ser B
(AMT) (AMBAC) .......................................................... 7.80 06/01/22 641,824
4,830 Maine Housing Authority, Ser 1991 A (Bifurcated FSA) ..................... 7.40 11/15/22 4,996,055
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
PORTFOLIO OF INVESTMENTS October 31, 1999, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- -------- ----------- ------------
<S> <C> <C> <C> <C>
$ 1,310 Missouri Housing Development Commission, GNMA-Backed 1991 Ser A (AMT) ...... 7.375% 08/01/23 $ 1,350,689
3,400 Nebraska Investment Finance Authority, GNMA-Backed 1990 Ser 1 & 2 (AMT) .... 7.631 09/10/30 3,512,132
280 New Jersey Housing & Mortgage Finance Agency, Home Buyer Ser E (MBIA) 7.65 10/01/16 285,522
75 Tennessee Housing Development Agency, Homeownership Issue S (AMT)
(Secondary MBIA) ......................................................... 7.625 07/01/22 77,734
-------- ------------
11,885 12,262,249
-------- ------------
Transportation Facilities Revenue (20.0%)
3,000 Hawaii, Airports Second Ser 1990 (AMT) (FGIC) .............................. 7.50 07/01/20 3,115,410
3,000 Illinois Toll Highway Authority, Priority Refg 1998 Ser A (FSA) ............ 5.50 01/01/15 2,924,490
Wayne County, Michigan, Detroit Metropolitan Wayne County Airport
2,000 Sub Lien Ser 1991 B (AMT) (MBIA) ......................................... 6.75 12/01/21 2,100,240
2,000 Ser 1998 B (MBIA) ........................................................ 4.875 12/01/23 1,675,040
5,000 New Hampshire, Turnpike 1991 Refg Ser B & C (FGIC) ......................... 6.806 11/01/17 5,388,850
2,000 New York State Thruway Authority, Highway & Bridge Ser 1999 B (FGIC) ....... 5.00 04/01/19 1,751,520
2,000 Southeastern Pennsylvania Transportation Authority, Ser A 1999 (FGIC) ...... 5.25 03/01/18 1,836,460
2,000 North Texas Tollway Authority, Dallas North Tollway Ser 1998 (FGIC) ........ 4.75 01/01/29 1,617,740
-------- ------------
21,000 20,409,750
-------- ------------
Water & Sewer Revenue (16.0%)
2,000 East Bay Municipal Utility District, California, Water Ser 1998 (MBIA) ..... 4.75 06/01/34 1,610,000
2,250 Broward County, Florida, Utility Ser 1991 (FGIC) ........................... 6.00 10/01/20 2,255,918
1,200 Honolulu City & County, Hawaii, Wastewater Junior Ser 1998 (FGIC) .......... 5.25 07/01/17 1,100,220
2,000 St Louis, Missouri, Water Refg Ser 1998 (AMBAC) ............................ 4.75 07/01/14 1,776,120
2,070 Rio Rancho, New Mexico, Water & Wastewater Refg Ser 1999 (AMBAC) ........... 5.25 05/15/17 1,911,334
1,500 New York City Municipal Water Finance Authority, New York, 1999 Ser B (FSA). 5.00 06/15/29 1,275,000
3,000 Charleston, South Carolina, Refg Cap Impr Ser 1998 (Secondary FGIC) ........ 4.50 01/01/24 2,371,530
4,000 Norfolk, Virginia, Water Ser 1995 (MBIA) ................................... 5.875 11/01/20 3,964,280
-------- ------------
18,020 16,264,402
-------- ------------
Other Revenue (1.9%)
2,000 Las Cruces, New Mexico, Ser 1995 (AMT) (MBIA) .............................. 5.50 12/01/15 1,893,660
-------- ------------
Refunded (12.1%)
5,000 Eastern Municipal Water District, California, Water & Sewer Ser 1991
COPs (FGIC) .............................................................. 6.50 07/01/01+ 5,300,200
5,000 Cook County, Illinois, Ser 1992 A (MBIA) ................................... 6.60 11/15/02+ 5,397,700
1,425 Port of Portland, Oregon, Portland International Airport Ser Seven B
(AMT) (MBIA) ............................................................... 7.10 01/01/12+ 1,628,775
-------- ------------
11,425 12,326,675
-------- ------------
97,785 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $95,153,919) ................................... 96,373,314
-------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
PORTFOLIO OF INVESTMENTS October 31, 1999, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- ------ -------- -----------
<S> <C> <C> <C> <C>
SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (3.2%)
$ 400 California Pollution Control Financing Authority, Pacific Gas & Electric Co 3.55*% 11/01/26 $ 400,000
Ser 1996 F (Demand 11/01/99) ................................................
1,900 Missouri Health & Educational Facilities Authority, Washington University
Ser D (Demand 11/01/99) ..................................................... 3.55* 09/01/30 1,900,000
1,000 Lincoln County, Wyoming, Exxon Corp Ser 1984 B (Demand 11/01/99) .............. 3.60* 11/01/14 1,000,000
-------- ------------
3,300 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS
-------- (Identified Cost $3,300,000) ........................................................................ 3,300,000
------------
$101,085 TOTAL INVESTMENTS (Identified Cost $98,453,919) (a) ........................................ 97.9% 99,673,314
========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ............................................. 2.1 2,112,202
---- ------------
NET ASSETS ................................................................................. 100.0% $101,785,516
============
</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
$3,622,174 and the aggregate gross unrealized depreciation is
$2,402,779, resulting in net unrealized appreciation of $1,219,395.
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
10
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $98,453,919) ........................................ $ 99,673,314
Cash ................................................................... 142,013
Receivable for:
Interest ........................................................... 1,835,141
Investment sold .................................................... 353,371
Prepaid expenses ....................................................... 82,673
------------
TOTAL ASSETS ....................................................... 102,086,512
------------
LIABILITIES:
Payable for:
Dividends to preferred shareholders ................................ 98,094
Shares of beneficial interest repurchased .......................... 59,356
Investment management fee .......................................... 36,539
Accrued expenses ....................................................... 107,007
------------
TOTAL LIABILITIES ................................................... 300,996
------------
NET ASSETS .......................................................... $101,785,516
============
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, 5,095,563 shares outstanding)......................... 70,406,010
Net unrealized appreciation ............................................ 1,219,395
Accumulated undistributed net investment income ........................ 530,306
Accumulated net realized loss .......................................... (370,195)
------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS ....................... 71,785,516
------------
TOTAL NET ASSETS ................................................... $101,785,516
============
NET ASSET VALUE PER COMMON SHARE
($71,785,516 divided by 5,095,563 common shares outstanding).......... $14.09
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ............................... $ 6,417,373
-----------
EXPENSES
Investment management fee ..................... 377,140
Professional fees ............................. 112,759
Auction commission fees ....................... 112,500
Transfer agent fees and expenses .............. 21,588
Trustees' fees and expenses ................... 18,150
Shareholder reports and notices ............... 17,625
Registration fees ............................. 16,669
Auction agent fees ............................ 8,164
Custodian fees ................................ 5,638
Other ......................................... 15,825
-----------
TOTAL EXPENSES ............................. 706,058
Less: expense offset .......................... (5,621)
-----------
NET EXPENSES ............................... 700,437
-----------
NET INVESTMENT INCOME ...................... 5,716,936
-----------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss ............................. (294,427)
Net change in unrealized appreciation ......... (7,575,355)
-----------
NET LOSS ................................... (7,869,782)
-----------
NET DECREASE .................................. $(2,152,846)
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 1999 OCTOBER 31, 1998
------------------ -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income .............................. $ 5,716,936 $ 6,142,230
Net realized gain (loss) ........................... (294,427) 209,427
Net change in unrealized appreciation .............. (7,575,355) 347,409
------------ ------------
NET INCREASE (DECREASE) ........................ (2,152,846) 6,699,066
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT
INCOME:
Preferred .......................................... (1,118,346) (1,103,850)
Common ............................................. (4,752,063) (5,060,382)
------------ ------------
TOTAL DIVIDENDS ................................ (5,870,409) (6,164,232)
------------ ------------
Decrease from transactions in common shares of
beneficial interest .............................. (531,923) --
------------ ------------
NET INCREASE (DECREASE) ........................ (8,555,178) 534,834
NET ASSETS:
Beginning of period ................................ 110,340,694 109,805,860
------------ ------------
END OF PERIOD
(Including undistributed net investment income of
$530,306 and $683,779, respectively) ............ $101,785,516 $110,340,694
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1999
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
14
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1999, 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 year ended October 31, 1999
aggregated $29,774,963 and $33,530,610, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager,
is the Trust's transfer agent. At October 31, 1999, the Trust had transfer
agent fees and expenses payable of approximately $250.
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, 1999
included in Trustees' fees
15
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1999, continued
and expenses in the Statement of Operations amounted to $5,668. At October 31,
1999, the Trust had an accrued pension liability of $43,111, 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 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 3.85% 07/06/00 3.65% - 3.85%
</TABLE>
- ---------------
* As of October 31, 1999.
** For the year ended October 31, 1999.
Subsequent to October 31, 1999 and up through December 3, 1999, the Trust paid
dividends at a rate of 3.85% in the aggregate amount of $193,026.
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.
16
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1999, continued
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, 1997 and 1998 ....................................... 5,137,563 $51,376 $70,886,557
Treasury shares purchased and retired (weighted average discount 10.16%)* (42,000) (420) (531,503)
--------- ------- -----------
Balance, October 31, 1999 ................................................ 5,095,563 $50,956 $70,355,054
========= ======= ===========
</TABLE>
- ---------------
* The Trustees have voted to retire the shares purchased.
6. FEDERAL INCOME TAX STATUS
At October 31, 1999, the Trust had a net capital loss carryover of
approximately $370,000, which may be used to offset future capital gains to the
extent provided by regulations, which will be available through October 31 of
the following years:
AMOUNT IN THOUSANDS
- --------------------------
2004 2005 2007
- ------- ------ ------
$48 $28 $294
=== === ====
7. DIVIDENDS TO COMMON SHAREHOLDERS
On September 28, 1999, the Trust declared the following dividends from net
investment income:
AMOUNT RECORD PAYABLE
PER SHARE DATE DATE
- --------- ---------------- -----------------
$0.0725 November 5, 1999 November 19, 1999
$0.0725 December 3, 1999 December 17, 1999
17
<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 YEAR ENDED OCTOBER 31*
------------------------------
1999 1998
------------- ----------
<S> <C> <C>
SELECTED PER SHARE DATA:
Net asset value, beginning of period ....................... $ 15.64 $ 15.53
------- -------
Income (loss) from investment operations:
Net investment income ..................................... 1.11 1.20
Net realized and unrealized gain (loss) ................... (1.53) 0.11
------- -------
Total income (loss) from investment operations ............. (0.42) 1.31
------- -------
Less dividends from:
Net investment income ..................................... (0.92) (0.99)
Common share equivalent of dividends paid to preferred
shareholders ............................................. (0.22) (0.21)
------- -------
Total dividends ............................................ (1.14) (1.20)
------- -------
Anti-dilutive effect of acquiring treasury shares .......... 0.01 --
------- -------
Net asset value, end of period ............................. $ 14.09 $ 15.64
======= =======
Market value, end of period ................................ $ 12.50 $16.125
======= =======
TOTAL RETURN+ .............................................. (17.60)% 7.03%
RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS:
Total expenses ............................................. 0.91 %(1) 0.87%(1)
Net investment income before preferred stock dividends ..... 7.36 % 7.65%
Preferred stock dividends .................................. 1.44 % 1.37%
Net investment income available to common shareholders ..... 5.92 % 6.28%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands .................... $101,786 $110,341
Asset coverage on preferred shares at end of period ........ 338 % 367%
Portfolio turnover rate .................................... 29 % 6%
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31*
--------------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
SELECTED PER SHARE DATA:
Net asset value, beginning of period ....................... $15.35 $ 15.41 $ 14.16
------ ------- -------
Income (loss) from investment operations:
Net investment income ..................................... 1.20 1.21 1.22
Net realized and unrealized gain (loss) ................... 0.16 (0.17) 1.30
------ ------- -------
Total income (loss) from investment operations ............. 1.36 1.04 2.52
------ ------- -------
Less dividends from:
Net investment income ..................................... (0.96) (0.90) (1.04)
Common share equivalent of dividends paid to preferred
shareholders ............................................. (0.22) (0.22) (0.23)
------ ------- -------
Total dividends ............................................ (1.18) (1.12) (1.27)
------ ------- -------
Anti-dilutive effect of acquiring treasury shares .......... -- 0.02 --
------ ------- -------
Net asset value, end of period ............................. $15.53 $ 15.35 $ 15.41
====== ======= =======
Market value, end of period ................................ $16.00 $14.125 $14.625
====== ======= =======
TOTAL RETURN+ .............................................. 20.62% 3.06% 22.10%
RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS:
Total expenses ............................................. 0.89%(1) 0.92% 0.91%(1)
Net investment income before preferred stock dividends ..... 7.80% 7.85% 8.16%
Preferred stock dividends .................................. 1.43% 1.41% 1.53%
Net investment income available to common shareholders ..... 6.37% 6.44% 6.63%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands .................... $109,806 $109,232 $110,718
Asset coverage on preferred shares at end of period ........ 365% 363% 369%
Portfolio turnover rate .................................... 2% 5% 6%
</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 return does not reflect brokerage commissions.
(1) Does not reflect the effect of expense offset of 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Morgan Stanley Dean Witter Insured
Municipal Bond Trust (the "Trust") at October 31, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Trust's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1999 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
December 8, 1999
1999 FEDERAL TAX NOTICE (unaudited)
For the year ended October 31, 1999, all of the Trust's dividends
from net investment income received by both common and preferred
shareholder classes were exempt interest dividends, excludable from
gross income for Federal income tax purposes.
19
<PAGE>
TRUSTEES
- ------------------------------------------
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
- ------------------------------------------
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
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
MORGAN STANLEY
DEAN WITTER
INSURED
MUNICIPAL
BOND TRUST
ANNUAL REPORT
OCTOBER 31, 1999
