<PAGE>
Two World Trade Center,
New York, New York 10048
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
LETTER TO THE SHAREHOLDERS October 31, 2000
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 BOND 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.
30-YEAR BOND YIELDS 1994-2000
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 Bond Trust (IMB) increased from
$14.09 to $14.56 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
10.42 percent. IMB's value on the New York Stock Exchange (NYSE) increased from
$12.50 to $13.125 per share during this period. Based on this change plus
reinvestment of tax-free dividends, IMB's total market return was 12.12
percent. As of October 31, 2000, IMB's share price was at a 9.86 percent
discount to its NAV.
2
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND 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 earnings and the
Trust's level of undistributed net investment income which was $0.090 per share
on October 31, 2000, versus $0.104 per share 12 months earlier.
PORTFOLIO STRUCTURE
The Trust's investments were diversified among 12 long-term sectors and 47
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 7.2 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 $0.06 per
share to common share earnings. The yield on IMB's 12-month ARPS series with a
July 2001 rollover is 4.67 percent. 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. The Trust's ARPS series totaled $30 million
and represented 30 percent of net assets.
3
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND 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 211,643 shares of
common stock at a weighted average market discount of 9.57 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, 2000, continued
LARGEST SECTORS AS OF OCTOBER 31, 2000
(% OF NET ASSETS)
WATER & SEWER 25%
TRANSPORTATION 19%
MORTGAGE 12%
ELECTRIC 10%
REFUNDED 7%
EDUCATION 6%
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
CREDIT EHANCEMENTS AS OF OCTOBER 31, 2000
(% OF TOTAL LONG-TERM PORTFOLIO)
Ambac 19%
FGIC 23%
FSA 18%
U.S. GOV'T BACKED 6%
MBIA 34%
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
DISTRIBUTION BY MATURITY
(% OF NET ASSETS)
WEIGHTED AVERAGE
MATURITY 19 YEARS
UNDER 1 YEAR 6.3%
1-5 YEARS 0.0%
5-10 YEARS 5.0%
10-20 YEARS 39.6%
20-30 YEARS 42.5%
30+ YEARS 8.9%
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
5
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND 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
2000 0%
2001 25%
2002 0%
2003 2%
2004 0%
2005 6%
2006 10%
2007 2%
2008 3%
2009 19%
2010+ 33%
YEARS BONDS CALLABLE
WEIGHTED AVERAGE
BOOK YIELD: 6.3%
COST (BOOK) YIELD*
2000 0%
2001 7.6%
2002 0%
2003 6.2%
2004 0%
2005 6.1%
2006 6.8%
2007 5.6%
2008 5.9%
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 7.6% ON 25% OF THE LONG-TERM
PORTFOLIO THAT IS CALLABLE IN 2001.
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
6
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND 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:
<TABLE>
<S> <C>
Edwin J. Garn
For .............. 4,031,350
Withheld ......... 88,751
James F. Higgins
For .............. 4,042,240
Withheld ......... 77,861
Michael E. Nugent
For .............. 4,034,940
Withheld ......... 85,161
Philip J. Purcell
For .............. 4,040,996
Withheld ......... 79,105
</TABLE>
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 ............. 4,060,999
Against ......... 12,716
Abstain ......... 46,386
</TABLE>
7
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND 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 (96.0%)
General Obligation (1.1%)
$ 2,000 North Slope Borough, Alaska, Ser 2000 B (MBIA) ............................... 0.00 % 06/30/11 $ 1,151,780
--------- ------------
Educational Facilities Revenue (6.2%)
3,000 Massachusetts Health & Educational Facilities Authority, Boston University
Ser 1991 Ser K & L (MBIA) .................................................. 8.676++ 10/01/31 3,213,750
2,000 New York State Dormitory Authority, St John's University Ser 1996 (MBIA) ..... 5.70 07/01/26 2,008,440
1,000 Pennsylvania Higher Educational Facilities Authority, Duquesne University
Refg Ser A of 1991 (MBIA) .................................................. 6.75 04/01/20 1,008,120
--------- ------------
6,000 6,230,310
--------- ------------
Electric Revenue (9.9%)
2,680 Wyandotte County, Kansas, Kansas City Utility Ser 1998 (MBIA) ................ 4.50 09/01/28 2,207,838
4,000 Long Island Power Authority, New York, Ser 2000 A (FSA) ...................... 0.00 06/01/20 1,328,120
3,000 Piedmont Municipal Power Agency, South Carolina, 1991 Refg Ser (FGIC) ........ 6.50 01/01/11 3,068,490
1,500 South Carolina Public Service Authority, 1997 Refg Ser A (MBIA) .............. 5.00 01/01/29 1,344,825
2,000 Snohomish County Public Utility District #1, Washington, 1993 Ser (FGIC) ..... 6.00 01/01/18 2,043,320
--------- ------------
13,180 9,992,593
--------- ------------
Hospital Revenue (5.4%)
2,000 Mesa Industrial Development Authority, Arizona, Discovery Health
Ser 1999 A (MBIA) .......................................................... 5.875 01/01/16 2,086,140
2,000 University of Missouri, Health Ser 1996 A (Ambac) ............................ 5.00 11/01/16 2,006,420
1,500 University of North Carolina, Hospitals at Chapel Hill Ser 1999 (Ambac) ...... 5.50 02/15/24 1,390,545
--------- ------------
5,500 5,483,105
--------- ------------
Industrial Development/Pollution Control Revenue (4.6%)
2,500 Jasper County, Indiana, Northern Indiana Public Service Co Collateralized
Ser 1991 (MBIA) ............................................................ 7.10 07/01/17 2,584,825
1,000 Rockport, Indiana, Indiana & Michigan Power Co Ser B (Secondary FGIC) ........ 7.60 03/01/16 1,028,560
1,000 Burlington, Kansas, Kansas Gas & Electric Co Ser 1991 (MBIA) ................. 7.00 06/01/31 1,031,970
---------- ------------
4,500 4,645,355
---------- ------------
Mortgage Revenue - Multi-Family (4.0%)
1,000 New Jersey Housing Mortgage Finance Agency, Home Buyer Ser 2000 CC
(MBIA) (AMT) ............................................................... 5.875 10/01/31 998,520
2,955 New York State Housing Finance Agency, 1996 Ser A Refg (FSA) ................. 6.10 11/01/15 3,044,477
---------- ------------
3,955 4,042,997
---------- ------------
Mortgage Revenue - Single Family (7.5%)
25 Hawaii Housing Finance & Development Corporation, Ser 1989 A (AMT)
(Bifurcated FSA) ........................................................... 7.70 07/01/29 25,170
4,715 Maine Housing Authority, Ser 1991 A (Bifurcated FSA) ......................... 7.40 11/15/22 4,839,382
1,130 Missouri Housing Development Commission, GNMA-Backed 1991 Ser A
(AMT) ...................................................................... 7.375 08/01/23 1,154,476
1,500 Nebraska Investment Finance Authority, GNMA-Backed 1990 Ser 1 & 2
(AMT) ...................................................................... 10.567++ 09/10/30 1,554,375
---------- -----------
7,370 7,573,403
---------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
PORTFOLIO OF INVESTMENTS October 31, 2000, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Public Facilities Revenue (3.0%)
$ 3,000 Denver, Colorado, Civic Center Office Building Ser 2000 B COPs (Ambac) ** 5.50 % 12/01/21 $ 2,985,030
--------- ------------
Recreational Facilities Revenue (3.1%)
1,250 College Park Business & Industrial Development Authority,
Georgia, Civic Center Ser 2000 (Ambac) ..................................... 5.75 09/01/26 1,271,363
2,000 Hamilton County, Ohio, Sales Tax Ser 2000 (Ambac) (WI) ....................... 5.25 12/01/32 1,893,300
--------- -----------
3,250 3,164,663
--------- -----------
Transportation Facilities Revenue (19.1%)
3,000 Illinois Toll Highway Authority, Priority Refg 1998 Ser A (FSA) ** ........... 5.50 01/01/15 3,089,190
Wayne County, Michigan, Detroit Metropolitan Wayne County Airport
2,000 Sub Lien Ser 1991 B (AMT) (MBIA) ........................................... 6.75 12/01/21 2,070,820
2,000 Ser 1998 B (MBIA) .......................................................... 4.875 12/01/23 1,774,520
2,000 Nevada Department of Business & Industry, Las Vegas Monorail Project,
1st Tier Ser 2000 (Ambac) .................................................. 5.375 01/01/40 1,886,520
2,500 New Hampshire, Turnpike 1991 Refg Ser B & C (FGIC) ........................... 8.968++ 11/01/17 3,034,375
2,000 New Jersey Transportation Trust Authority, 1998 Ser A (FSA) .................. 4.50 06/15/19 1,752,120
2,000 New York State Thruway Authority, Highway & Bridge Ser 1999 B (FGIC) ......... 5.00 04/01/19 1,880,620
2,000 Port Authority of New York & New Jersey, Cons 121 Ser (MBIA) (WI) # .......... 5.125 10/15/30 1,871,000
2,000 Southeastern Pennsylvania Transportation Authority, Ser A 1999 (FGIC) ........ 5.25 03/01/18 1,948,780
--------- -----------
19,500 19,307,945
--------- -----------
Water & Sewer Revenue (25.4%)
2,250 Broward County, Florida, Utility Ser 1991 (FGIC) ............................. 6.00 10/01/20 2,263,590
2,600 Miami Beach, Florida, Water & Sewer Ser 2000 (Ambac) ......................... 5.75 09/01/25 2,664,870
2,000 Augusta, Georgia, Water & Sewerage Ser 2000 (FSA) ............................ 5.25 10/01/22 1,941,620
2,000 Henry County Water & Sewer Authority, Georgia, Ser 2000 (FGIC) ............... 5.625 02/01/30 2,003,940
1,200 Honolulu City & County, Hawaii, Wastewater Jr Ser 1998 (FGIC) ................ 5.25 07/01/17 1,170,000
1,750 Detroit, Michigan, Water Supply Ser 1999 A (FGIC) ............................ 5.75 07/01/26 1,771,420
2,000 St Louis, Missouri, Water Refg Ser 1998 (Ambac) .............................. 4.75 07/01/14 1,865,800
2,070 Rio Rancho, New Mexico, Water & Wastewater Refg Ser 1999 (Ambac) ............. 5.25 05/15/17 2,029,614
1,500 New York City Municipal Water Finance Authority, New York, 1999 Ser B
(FSA) ........................................................................ 5.00 06/15/29 1,362,360
2,000 Allegheny County Sanitary Authority, Pennsylvania, Sewer Ser 2000 (MBIA) ..... 5.50 12/01/24 1,976,220
3,000 Charleston, South Carolina, Refg Cap Impr Ser 1998 (Secondary FGIC) .......... 4.50 01/01/24 2,528,760
4,000 Norfolk, Virginia, Water Ser 1995 (MBIA) ..................................... 5.875 11/01/20 4,100,160
--------- -----------
26,370 25,678,354
--------- -----------
Refunded (6.7%)
2,000 Las Cruces, New Mexico, Ser 1995 (AMT) (MBIA) ................................ 5.50 12/01/05++ 2,096,560
1,425 Port of Portland, Oregon, Portland International Airport Ser Seven B
(AMT) (MBIA) ............................................................... 7.10 01/01/12++ 1,663,901
3,000 Puerto Rico Infrastructure Financing Authority, 2000 Ser A (ETM) ............. 5.50 10/01/32 3,003,270
--------- -----------
6,425 6,763,731
--------- -----------
101,050 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Cost $94,012,802) ....................................................... 97,019,266
--------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND 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 (6.3%)
Missouri Health & Educational Facilities Authority, Washington University,
$ 1,200 1996 Ser C (Demand 11/01/00) .............................................. 4.60* % 09/01/30 $ 1,200,000
600 1996 Ser D (Demand 11/01/00) .............................................. 4.60* 09/01/30 600,000
1,200 Harris County Health Facilities Development Corporation, Texas,
St Luke's Episcopal Hospital Ser 1997 B (Demand 11/01/00) ................. 4.65* 02/15/27 1,200,000
3,400 North Central Texas Health Facilities Development Corporation, Texas,
Presbyterian Medical Center Ser 1985 D (MBIA) (Demand 11/01/00) ........... 4.65* 12/01/15 3,400,000
--------- ------------
6,400 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (Cost $6,400,000) ..................................... 6,400,000
--------- ------------
$ 107,450 TOTAL INVESTMENTS (Cost $100,412,802) (a)................................................. 102.3 % 103,419,266
=========
LIABILITIES IN EXCESS OF OTHER ASSETS .................................................... (2.3) (2,330,392)
----- ------------
NET ASSETS ............................................................................... 100.0 % $101,088,874
===== ============
</TABLE>
---------------
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
ETM Escrowed to maturity.
WI Security purchased on a "when-issued" basis.
+ 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.
# Joint exemption in New York and New Jersey.
* Current coupon of variable rate demand obligation.
** This security is segregated in connection with the purchase of
"when-issued" securities.
(a) The aggregate cost for federal income tax purposes approximates
the aggregate cost for book purposes. The aggregate gross
unrealized appreciation is $3,544,751 and the aggregate gross
unrealized depreciation is $538,287, resulting in net unrealized
appreciation of $3,006,464.
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
PORTFOLIO OF INVESTMENTS October 31, 2000, continued
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
<TABLE>
<S> <C>
Alaska .................... 1.1 %
Arizona ................... 2.1
Colorado .................. 2.9
Florida ................... 4.9
Georgia ................... 5.2
Hawaii .................... 1.2
Illinois .................. 3.0
Indiana ................... 3.6
Kansas .................... 3.2
Maine ..................... 4.8
</TABLE>
<TABLE>
<S> <C>
Massachusetts ............. 3.2 %
Michigan .................. 5.5
Missouri .................. 6.7
Nebraska .................. 1.5
Nevada .................... 1.9
New Hampshire ............. 3.0
New Jersey ................ 4.6
New Mexico ................ 4.1
New York .................. 11.4
North Carolina ............ 1.4
</TABLE>
<TABLE>
<S> <C>
Ohio ...................... 1.9 %
Oregon .................... 1.6
Pennsylvania .............. 4.9
Puerto Rico ............... 3.0
South Carolina ............ 6.9
Texas ..................... 4.5
Virginia .................. 4.1
Washington ................ 2.0
Joint Exemption* .......... (1.9)
------
Total ..................... 102.3 %
======
</TABLE>
---------------
* Joint exemptions have been included in each geographic location.
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2000
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(cost $100,412,802) .................................................. $103,419,266
Cash ................................................................... 10,775
Interest receivable .................................................... 1,588,467
Prepaid expenses ....................................................... 82,091
------------
TOTAL ASSETS ........................................................ 105,100,599
------------
LIABILITIES:
Payable for:
Investments purchased ............................................... 3,772,395
Dividends to preferred shareholders ................................. 115,152
Investment management fee ........................................... 30,922
Accrued expenses ....................................................... 93,256
------------
TOTAL LIABILITIES ................................................... 4,011,725
------------
NET ASSETS .......................................................... $101,088,874
============
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, 4,883,920 shares outstanding)......................... 67,711,535
Net unrealized appreciation ............................................ 3,006,464
Accumulated undistributed net investment income ........................ 440,176
Accumulated net realized loss .......................................... (69,301)
------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS ........................ 71,088,874
------------
TOTAL NET ASSETS .................................................... $101,088,874
============
NET ASSET VALUE PER COMMON SHARE
($71,088,874 divided by 4,883,920 common shares outstanding).......... $14.56
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the year ended October 31, 2000
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ............................... $6,069,799
----------
EXPENSES
Investment management fee ..................... 352,703
Auction commission fees ....................... 112,809
Professional fees ............................. 91,641
Transfer agent fees and expenses .............. 21,527
Shareholder reports and notices ............... 18,286
Trustees' fees and expenses ................... 16,882
Custodian fees ................................ 16,852
Registration fees ............................. 16,394
Auction agent fees ............................ 8,041
Other ......................................... 13,381
----------
TOTAL EXPENSES ............................. 668,516
Less: expense offset .......................... (16,841)
----------
NET EXPENSES ............................... 651,675
----------
NET INVESTMENT INCOME ...................... 5,418,124
----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain ............................. 300,894
Net change in unrealized appreciation ......... 1,787,069
----------
NET GAIN ................................... 2,087,963
----------
NET INCREASE .................................. $7,506,087
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
13
<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, 2000 OCTOBER 31, 1999
---------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income .............................. $ 5,418,124 $ 5,716,936
Net realized gain (loss) ........................... 300,894 (294,427)
Net change in unrealized appreciation .............. 1,787,069 (7,575,355)
------------ ------------
NET INCREASE (DECREASE) ......................... 7,506,087 (2,152,846)
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Preferred .......................................... (1,237,704) (1,118,346)
Common ............................................. (4,270,550) (4,752,063)
------------ ------------
TOTAL DIVIDENDS ................................. (5,508,254) (5,870,409)
------------ ------------
Decrease from transactions in common shares of
beneficial interest .............................. (2,694,475) (531,923)
------------ ------------
NET DECREASE .................................... (696,642) (8,555,178)
NET ASSETS:
Beginning of period ................................ 101,785,516 110,340,694
------------ ------------
END OF PERIOD
(Including undistributed net investment income of
$440,176 and $530,306, respectively)............. $101,088,874 $101,785,516
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 2000
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 income and net realized capital
gains are determined in accordance with federal income tax regulations
15
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND 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 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.
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 $30,344,045 and $24,689,960, 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 $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 $5,388. At October 31, 2000, the Trust had an accrued pension liability of
$44,271, 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.
16
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 2000, continued
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 4.67% 07/05/01 3.85% - 4.67%
</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 at a rate of 4.67% in the aggregate amount of $230,304.
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, 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
Treasury shares purchased and retired (weighted average discount 9.57%)* . (211,643) (2,116) (2,692,359)
--------- -------- ------------
Balance, October 31, 2000 ................................................ 4,883,920 $ 48,840 $ 67,662,695
========= ======== ============
</TABLE>
---------------
* The Trustees have voted to retire the shares purchased.
17
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND 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
$301,000 of its net capital loss carryover. At October 31, 2000, the Trust had
a net capital loss carryover of approximately $69,000, which will be available
through October 31, 2007 to offset future capital gains to the extent provided
by regulations.
7. DIVIDENDS TO COMMON SHAREHOLDERS
On September 26, 2000, the Trust declared the following dividends from net
investment income:
<TABLE>
<CAPTION>
AMOUNT
PER SHARE RECORD DATE PAYABLE 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 $7,802,500, which represents 7.7% of the Trust's net assets.
18
<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*
---------------------------------
2000 1999
-------------------------------------------------------------------------------- -------------
<S> <C> <C>
SELECTED PER SHARE DATA:
Net asset value, beginning of period ....................... $ 14.09 $15.64
------- -------
Income (loss) from investment operations:
Net investment income ................................... 1.09 1.11
Net realized and unrealized gain (loss) ................. 0.43 (1.53)
------- -------
Total income (loss) from investment operations ............. 1.52 (0.42)
------- -------
Less dividends from:
Net investment income ................................... (0.86) (0.92)
Common share equivalent of dividends paid to preferred
shareholders ........................................... (0.25) (0.22)
------- -------
Total dividends ............................................ (1.11) (1.14)
------- -------
Anti-dilutive effect of acquiring treasury shares .......... 0.06 0.01
------- -------
Net asset value, end of period ............................. $ 14.56 $ 14.09
======= =======
Market value, end of period ................................ $13.125 $ 12.50
======= =======
TOTAL RETURN+ ............................................. 12.12% (17.60)%
RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS:
Total expenses ............................................. 0.95%(2) 0.91 %(1)
Net investment income before preferred stock dividends ..... 7.67% 7.36 %
Preferred stock dividends .................................. 1.75% 1.44 %
Net investment income available to common shareholders ..... 5.92% 5.92 %
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands .................... $101,089 $101,786
Asset coverage on preferred shares at end of period ........ 336% 338 %
Portfolio turnover rate .................................... 26% 29 %
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31*
-----------------------------------------------
1998 1997 1996
------------------- ------------- -------------
<S> <C> <C> <C>
SELECTED PER SHARE DATA:
Net asset value, beginning of period ....................... $ 15.53 $15.35 $ 15.41
------- ------ -------
Income (loss) from investment operations:
Net investment income ................................... 1.20 1.20 1.21
Net realized and unrealized gain (loss) ................. 0.11 0.16 (0.17)
------- ------ -------
Total income (loss) from investment operations ............. 1.31 1.36 1.04
------- ------ -------
Less dividends from:
Net investment income ................................... (0.99) (0.96) (0.90)
Common share equivalent of dividends paid to preferred
shareholders ........................................... (0.21) (0.22) (0.22)
------- ------ -------
Total dividends ............................................ (1.20) (1.18) (1.12)
------- ------ -------
Anti-dilutive effect of acquiring treasury shares .......... -- -- 0.02
------- ------- -------
Net asset value, end of period ............................. $ 15.64 $15.53 $ 15.35
======= ====== =======
Market value, end of period ................................ $16.125 $16.00 $14.125
======= ====== =======
TOTAL RETURN+ ............................................. 7.03% 20.62% 3.06%
RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS:
Total expenses ............................................. 0.87%(1) 0.89%(1) 0.92%
Net investment income before preferred stock dividends ..... 7.65% 7.80% 7.85%
Preferred stock dividends .................................. 1.37% 1.43% 1.41%
Net investment income available to common shareholders ..... 6.28% 6.37% 6.44%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands .................... $110,341 $109,806 $109,232
Asset coverage on preferred shares at end of period ........ 367% 365% 363%
Portfolio turnover rate .................................... 6% 2% 5%
</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%.
(2) Does not reflect the effect of expense offset of 0.02%.
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
OF MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST:
We have audited the accompanying statement of assets and liabilities of Morgan
Stanley Dean Witter Insured Municipal Bond 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 the 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 and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Morgan Stanley Dean Witter Insured Municipal Bond 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.
20
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNCIPAL BOND 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.
21
<PAGE>
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST
REVISED INVESTMENT POLICY
On January 26, 2000, the Trustees of Morgan Stanley Dean Witter Insured
Municipal Bond 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: (1) 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.
22
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
TRUSTEES
---------------------------------------------
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
----------------------------------------------
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 AUDITORS
-----------------------------------------------
Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281
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, 2000
