-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PPgzTqUOmCx0y4mzs1ARZkzycHl+D1hZTgliWGVqRxussVUr8D9/qVK/1ZhUey5T 8aulqlqCKSennNh8G9t1mQ== 0000950136-00-001852.txt : 20001227 0000950136-00-001852.hdr.sgml : 20001227 ACCESSION NUMBER: 0000950136-00-001852 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20001031 FILED AS OF DATE: 20001226 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST CENTRAL INDEX KEY: 0000861185 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-06053 FILM NUMBER: 795460 BUSINESS ADDRESS: STREET 1: TWO WORLD TRADE CTR CITY: NEW YORK STATE: NY ZIP: 10048 BUSINESS PHONE: 2123922550 MAIL ADDRESS: STREET 1: TWO WORLD TRADE CENTER CITY: NEW YORK STATE: NY ZIP: 10048 FORMER COMPANY: FORMER CONFORMED NAME: INTERCAPITAL INSURED MUNICIPAL BOND TRUST DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: ALLSTATE MUNICIPAL PREMIUM INCOME TRUST II DATE OF NAME CHANGE: 19901202 N-30D 1 0001.txt ANNUAL REPORT 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. 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 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 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 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 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 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: 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
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: For ............. 4,060,999 Against ......... 12,716 Abstain ......... 46,386
7 MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST PORTFOLIO OF INVESTMENTS October 31, 2000
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ------------------------------------------------------------------------------------------------------------------------------------ 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 - ---------- -----------
SEE NOTES TO FINANCIAL STATEMENTS 8 MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST PORTFOLIO OF INVESTMENTS October 31, 2000, continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ------------------------------------------------------------------------------------------------------------------------------------ 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 --------- -----------
SEE NOTES TO FINANCIAL STATEMENTS 9 MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST PORTFOLIO OF INVESTMENTS October 31, 2000, continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------------------------------- 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 ===== ============
- --------------- 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 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 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
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
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 % ======
- --------------- * Joint exemptions have been included in each geographic location. SEE NOTES TO FINANCIAL STATEMENTS 11 MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES October 31, 2000 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 ======
SEE NOTES TO FINANCIAL STATEMENTS 12 MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST FINANCIAL STATEMENTS, continued STATEMENT OF OPERATIONS For the year ended October 31, 2000 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 ==========
SEE NOTES TO FINANCIAL STATEMENTS 13 MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST FINANCIAL STATEMENTS, continued STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR FOR THE YEAR ENDED ENDED OCTOBER 31, 2000 OCTOBER 31, 1999 - --------------------------------------------------------------------------------------------- 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 ============ ============
SEE NOTES TO FINANCIAL STATEMENTS 14 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 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 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.
AMOUNT IN RESET RANGE OF SHARES* THOUSANDS* RATE* DATE DIVIDEND RATES** - --------- ------------ ------------ ------------ ----------------- 600 $30,000 4.67% 07/05/01 3.85% - 4.67%
- --------------- * 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:
CAPITAL PAID IN PAR EXCESS OF SHARES VALUE PAR VALUE ------------- ----------- -------------- 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 ========= ======== ============
- --------------- * The Trustees have voted to retire the shares purchased. 17 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:
AMOUNT PER SHARE RECORD DATE PAYABLE DATE - ------------- ------------------- ------------------- $0.065 November 3, 2000 November 17, 2000 $0.065 December 8, 2000 December 22, 2000
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 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:
FOR THE YEAR ENDED OCTOBER 31* --------------------------------- 2000 1999 - -------------------------------------------------------------------------------- ------------- 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 % FOR THE YEAR ENDED OCTOBER 31* ----------------------------------------------- 1998 1997 1996 ------------------- ------------- ------------- 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%
- ------------- * 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 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 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 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 (This page has been left blank intentionally.) 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 -----END PRIVACY-ENHANCED MESSAGE-----