N-CSR 1 file001.htm SEMIANNUAL REPORT



                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM N-CSR

                   CERTIFIED SHAREHOLDER REPORT OF REGISTERED
                         MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-06053

Morgan Stanley Insured Municipal Bond Trust
               (Exact name of registrant as specified in charter)

1221 Avenue of the Americas, New York, New York 10020
         (Address of principal executive offices)                     (Zip code)

Ronald E. Robison
1221 Avenue of the Americas, New York, New York 10020
                     (Name and address of agent for service)

Registrant's telephone number, including area code: 212-762-4000

Date of fiscal year end: October 31, 2004

Date of reporting period: April 30, 2004


Item 1 - Report to Shareholders

Welcome, Shareholder:

In this report, you'll learn about how your investment in Morgan Stanley Insured Municipal Bond Trust performed during the semiannual period. We will provide an overview of the market conditions, and discuss some of the factors that affected performance during the reporting period. In addition, this report includes the Trust's financial statements and a list of Trust investments.

Market forecasts provided in this report may not necessarily come to pass. There is no assurance that the Trust will achieve its investment objective. The Trust is subject to market risk, which is the possibility that market values of securities owned by the Trust will decline and, therefore, the value of the Trust's shares may be less than what you paid for them. Accordingly, you can lose money investing in this Trust.



	Fund Report
	For the six-month period ended April 30, 2004

Market Conditions

The U.S. economy continued to show improvement over the six-month period under review. On the positive side, gross domestic product growth topped 4 percent in both quarters. While strength in output has historically led to higher interest rates, yields remained stubbornly low across the curve. These yields reflected low levels of observed inflation in the economy and gradual improvement in employment. The Federal Open Market Committee maintained its accommodative monetary policy.

Surprising job growth in March, combined with escalating oil prices, led investors to anticipate that the Fed would raise interest rates sooner rather than later. Yet at its April meeting, the Federal Reserve did not change its short-term lending rate but did signal a prospective shift in policy. As a result, bond yields spiked across sectors and maturities.

The supply of new municipal bonds in calendar 2003 reached record levels as municipalities took advantage of historically low interest rates. Many cities and states reduced expenditures by refinancing existing debt at lower yields. In other cases, municipalities attempted to meet budget needs by issuing additional debt. In the first months of 2004, bond sales began to slow.

Low interest rates also had an impact on the demand for municipal bonds. Retail and mutual fund activity slowed as holders of municipal bonds saw little reason to sell bonds purchased at higher yields and reinvest at historically low yields. However, insurance companies and hedge funds purchased municipal bonds based on their attractiveness relative to taxable securities. Additionally, investors stretched for yield by buying lower-rated bonds, causing credit spreads to tighten.

Performance Analysis

The net asset value (NAV) of Morgan Stanley Insured Municipal Bond Trust (IMB) decreased from $15.84 to $15.35 per share for the six-month period ended April 30, 2004. Based on this change plus reinvestment of tax-free dividends totaling $0.435 per share, short-term capital gains of $0.01193 per share and long-term capital gains of $0.100688 per share, the Trust's total NAV return was 0.52 percent. The Trust's value on the New York Stock Exchange (NYSE) decreased from $14.50 to $13.64 per share during the same period. Based on this change plus reinvestment of distributions, the Trust's total market return was –2.42 percent. On April 30, 2004, IMB's NYSE market price was at an 11.14 percent discount to its NAV. Past performance is no guarantee of future results.

Monthly dividends for the second quarter of 2004, declared in March, were unchanged at $0.0725 per share. The dividend reflects the level of the Trust's undistributed net investment income and projected earnings power. The Trust's level of undistributed net investment income was $0.087 per share on April 30, 2004, versus $0.120 per share six months earlier.

The Trust's duration* was targeted to be shorter than its benchmark index. The duration, adjusted for leverage, was 11.3 years. Treasury futures were sold to reduce interest-rate exposure without raising cash in the portfolio. We maintained an average tax-exempt bond maturity objective of 20 years to take advantage of the steepness of the municipal yield curve. Revenue bonds in sectors with reliable income streams from essential services such as municipal electric, transportation and water and sewer systems were emphasized. The Trust's net assets, including preferred shares, of $99 million were diversified across 46 credits in 13 long-term sectors.

As discussed in previous reports, the total income available for distribution to holders of common shares includes incremental income provided by the Trust's outstanding Auction Rate Preferred Shares (ARPS). ARPS dividends reflect prevailing short-term interest rates on maturities ranging from one week to two years. Incremental income to holders of common shares depends on two factors: the amount of ARPS outstanding and the spread between the portfolio's cost yield and its ARPS auction rate and expenses. The greater the spread and the higher the amount of ARPS outstanding, the greater the amount of incremental income available for distribution to holders of common shares. The level of net investment income available for distribution to holders of common shares 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 six-month period, ARPS leverage contributed approximately $0.07 per share to common-share earnings. The Trust has one ARPS series totaling $30 million and representing 30 percent of net assets, including preferred shares. The series is currently in a two-year auction mode maturing in July 2004, with a yield of 2.199 percent.

The Trust's procedure for reinvesting all dividends and distributions in 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.

* A measure of the sensitivity of a bond's price to changes in interest rates, expressed in years. Each year of duration represents an expected 1 percent change in the price of a bond for every 1 percent change in interest rates. The longer a bond's duration, the greater the effect of interest-rate movements on its price. Typically, Trusts with shorter durations perform better in rising-interest-rate environments, while Trusts with longer durations perform better when rates decline.


LARGEST SECTORS
Transportation	24.8	%
Water & Sewer	15.6
Refunded	13.1
General Obligation	11.2
Hospital	8.3


CREDIT ENHANCEMENTS
MBIA	36.0	%
Ambac	27.1
FGIC	17.0
FSA	16.5
U.S. Government Backed	3.4

Data as April 30, 2004. Subject to change daily. All percentages are as a percentage of long-term investments. Provided for informational purposes only and should not be deemed a recommendation to buy or sell the securities mentioned. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services.



	Distribution by Maturity
	(% of Long-Term Portfolio) As of April 30, 2004

Weighted Average Maturity: 18 Years

Portfolio structure is subject to change.

Geographic Summary of Investments
Based on Market Value as a Percent of Total Investments


Alaska	2.9	%
Arizona	2.3
California	3.7
Colorado	3.5
Florida	9.1
Georgia	5.7
Hawaii	3.3
Idaho	1.3	%
Illinois	10.1
Kansas	1.1
Louisiana	1.1
Michigan	3.7
Missouri	2.2
Nevada	3.1
New Hampshire	4.7	%
New Jersey	1.8
New Mexico	1.1
New York	11.9
North Carolina	3.5
Ohio	2.1
Oregon	1.8
Pennsylvania	4.3	%
Puerto Rico	3.3
South Carolina	1.1
Texas	4.2
Virginia	5.9
Washington	2.2
Joint exemptions*	(1.0	)
Total	100.0	%

* Joint exemptions have been included in each geographic location.



	Call and Cost (Book) Yield Structure
	(Based on Long-Term Portfolio) As of April 30, 2004

Years Bonds Callable — Weighted Average Call Protection: 6 Years

Cost (Book) Yield^(a) — Weighted Average Book Yield: 5.5%

(a)

Cost or "book" yield is the annual income earned on a portfolio investment based on its original purchase price before the Trust's operating expenses. For example, the Trust is earning a book yield of 7.1% on 1% of the long-term portfolio that is callable in 2004.

Portfolio structure is subject to change.

Morgan Stanley Insured Municipal Bond Trust

Portfolio of Investments April 30, 2004 (unaudited)


PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE		VALUE
		Tax-Exempt Municipal Bonds (137.7%)
		General Obligation (15.4%)
$	2,000	North Slope Borough, Alaska, Ser 2000 B (MBIA)		0.00	%		06/30/11	$	1,496,280
	2,500	Mount San Antonio Community College District, California, 2001 Ser B (MBIA)		5.00			08/01/28		2,504,775
	2,000	Hawaii, Ser 2001 (FGIC)		5.375			08/01/18		2,143,680
	1,500	Chicago Park District, Illinois, Harbor Ser 2003 C (Ambac)		5.00			01/01/24		1,507,755
		Illinois,
	1,400	Ser 2000 (MBIA)		5.75			12/01/17		1,554,000
	1,300	Ser 2000 (MBIA)		5.75			12/01/18		1,443,000
	10,700								10,649,490
		Educational Facilities Revenue (5.3%)
	1,500	New Hampshire Health & Education Facilities Authority, University of New Hampshire Ser 2001 (Ambac)		5.125			07/01/33		1,514,145
	2,000	New York State Dormitory Authority, St John's University Ser 1996 (MBIA)		5.70			07/01/26		2,131,400
	3,500								3,645,545
		Electric Revenue (6.5%)
	1,400	Alaska Industrial Development & Export Authority, Snettisham Hydroelectric 1st Ser (AMT) (Ambac)		5.00			01/01/27		1,374,758
	1,000	South Carolina Public Service Authority, 1997 Refg Ser A (MBIA)		5.00			01/01/29		1,002,130
	2,100	Snohomish County Public Utility District # 1, Washington, Ser 2004 (FSA)		5.00			12/01/22		2,137,380
	4,500								4,514,268
		Hospital Revenue (11.4%)
	2,000	Mesa Industrial Development Authority, Arizona, Discovery Health Ser 1999 A (MBIA)		5.875			01/01/16		2,225,800
	2,000	University of Missouri, Health Ser 1996 A (Ambac)		5.50			11/01/16		2,132,480
	2,500	New York State Dormitory Authority, Memorial Sloan Kettering 2003 Ser I (MBIA)		5.00			07/01/24		2,528,250
	1,000	University of North Carolina, Hospitals at Chapel Hill Ser 1999 (Ambac)		5.00			02/15/24		1,008,520
	7,500								7,895,050
		Industrial Development/Pollution Control Revenue (1.5%)
	1,000	Burlington, Kansas, Kansas Gas & Electric Co Ser 1991 (MBIA)		7.00			06/01/31		1,053,300

See Notes to Financial Statements

Morgan Stanley Insured Municipal Bond Trust

Portfolio of Investments April 30, 2004 (unaudited) continued


PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE		VALUE
		Mortgage Revenue – Multi-Family (4.0%)
$	2,640	New York State Housing Finance Agency, 1996 Ser A Refg (FSA)		6.10	%		11/01/15	$	2,765,426
		Mortgage Revenue – Single Family (3.2%)
	755	New Jersey Housing Mortgage Finance Authority, Home Buyer Ser 2000 CC (AMT) (MBIA)		5.875			10/01/31		783,728
	1,405	Virginia Housing Development Authority, 2001 Ser J (MBIA)		5.20			07/01/19		1,426,482
	2,160								2,210,210
		Public Facilities Revenue (10.1%)
	3,000	Broward County School Board, Florida, Ser 2001 A COPs (FSA)		5.00			07/01/26		3,010,770
	1,500	Jacksonville, Florida, Excise Tax Ser 2003 C (AMT) (MBIA)		5.25			10/01/19		1,579,065
		Randolph County, North Carolina,
	1,330	Refg Ser 2004 COPs (FSA)		5.00			06/01/19		1,384,490
	1,000	Refg Ser 2004 COPs (FSA)		5.00			06/01/20		1,035,320
	6,830								7,009,645
		Recreational Facilities Revenue (4.9%)
	1,250	College Park Business & Industrial Development Authority,
		Georgia, Civic Center Ser 2000 (Ambac)		5.75			09/01/26		1,341,600
	2,000	Hamilton County, Ohio, Sales Tax Ser 2000 (Ambac)		5.25			12/01/32		2,026,560
	3,250								3,368,160
		Tax Allocation Revenue (1.6%)
	1,000	Long Beach Bond Finance Authority, California, Downtown North Long Beach Poly High and West Beach 2002 Ser A (Ambac)		5.375			08/01/18		1,069,290
		Transportation Facilities Revenue (34.2%)
	2,000	Chicago, Illinois, O'Hare Int'l Airport Passenger Ser A (AMT) (Ambac)		5.375			01/01/32		2,026,040
	3,000	Illinois Toll Highway Authority, Priority Refg 1998 Ser A (FSA)		5.50			01/01/15		3,325,621
	1,500	Wayne County, Michigan, Detroit Metropolitan Wayne County Airport Refg Ser 2002 D (AMT) (FGIC)		5.50			12/01/17		1,596,990
	3,000	Nevada Department of Business & Industry, Las Vegas Monorail 1st Tier Ser 2000 (Ambac)		5.375			01/01/40		3,062,130
	2,500	New Hampshire, Turnpike 1991 Refg Ser B & C (FGIC)		12.415	‡		11/01/17		3,130,175
		Metropolitan Transportation Authority, New York,
	1,000	State Service Contract Ser 2002 A (MBIA)		5.50			01/01/20		1,075,520
	2,000	State Service Contract Ser 2002 B (MBIA)		5.50			07/01/20		2,154,160
	1,000	Port Authority of New York & New Jersey, Cons 121 Ser (MBIA)#		5.125			10/15/30		1,008,980
	2,000	Southeastern Pennsylvania Transportation Authority, Ser A 1999 (FGIC)		5.25			03/01/18		2,118,920

See Notes to Financial Statements

Morgan Stanley Insured Municipal Bond Trust

Portfolio of Investments April 30, 2004 (unaudited) continued


PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE			VALUE
$	2,000	Dallas-Forth Worth Int'l Airport, Texas, Refg & Impr Ser 2001 A (AMT) (FGIC)		5.50	%		11/01/31		$	2,048,720
	2,000	Texas Turnpike Authority, Central Texas First Tier Ser 2002 A (Ambac)		5.50			08/15/39			2,082,460
	22,000									23,629,716
		Water & Sewer Revenue (21.5%)
	2,000	Miami Beach, Florida, Water & Sewer Ser 2000 (Ambac)		5.75			09/01/25			2,156,380
	2,000	Augusta, Georgia, Water & Sewerage Ser 2000 (FSA)		5.25			10/01/22			2,086,740
	2,000	Henry County Water & Sewer Authority, Georgia, Ser 2000 (FGIC)		5.625			02/01/30			2,112,940
	1,000	Honolulu City & County, Hawaii, Wastewater Jr Ser 1998 (FGIC)		5.25			07/01/17			1,062,530
	1,000	Rio Rancho, New Mexico, Water & Wastewater Refg Ser 1999 (Ambac)		5.25			05/15/17			1,062,120
	2,000	Allegheny County Sanitary Authority, Pennsylvania, Sewer Ser 2000 (MBIA)		5.50			12/01/24			2,116,600
	4,000	Norfolk, Virginia, Water Ser 1995 (MBIA)		5.875			11/01/20			4,286,960
	14,000									14,884,270
		Refunded (18.1%)
	3,000	Denver, Colorado, Civic Center Office Ser 2000 B COPs (Ambac)		5.50			12/01/10†			3,400,680
	2,000	Miami-Dade County School Board, Florida, Ser 2001 A COPs (MBIA)		5.00			05/01/11†			2,197,840
	1,750	Detroit, Michigan, Water Supply Ser 1999 A (FGIC)		5.75			01/01/10†			1,994,720
	1,425	Port of Portland, Oregon, Portland Int'l Airport Ser Seven B (AMT) (MBIA)		7.10			01/01/12†			1,713,662
	3,000	Puerto Rico Infrastructure Financing Authority, 2000 Ser A (ETM)		5.50			10/01/32††			3,209,730
	11,175									12,516,632
	90,255	Total Tax-Exempt Municipal Bonds (Cost $89,329,025)								95,211,002
		Short-Term Tax-Exempt Municipal Obligations (3.5%)
	1,290	Idaho Health Facilities Authority, St Luke's Regional Medical Center Ser 2000 (FSA) (Demand 05/03/04)		1.10	*		07/01/30			1,290,000
	1,100	East Baton Rouge Parish, Louisiana, Exxon Corp Ser 1993 (Demand 05/03/04)		1.03	*		03/01/22			1,100,000
	2,390	Total Tax-Exempt Short-Term Investments (Cost $2,390,000)								2,390,000
$	92,645	Total Investments (Cost $91,719,025) (a) (b)					141.2	%		97,601,002
		Other Assets In Excess of Liabilities					2.3			1,572,496
		Preferred Shares of Beneficial Interest					(43.5	)		(30,054,972	)
		Net Assets Applicable to Common Shareholders					100.0	%	$	69,118,526

See Notes to Financial Statements

Morgan Stanley Insured Municipal Bond Trust

Portfolio of Investments April 30, 2004 (unaudited) continued

Note:

The categories of investments are shown as a percentage of net assets applicable to common shareholders.

AMT

Alternative Minimum Tax.

COPs

Certificates of Participation.

ETM

Escrowed to maturity.

†

Prerefunded to call date shown.

††

This security has been physically segregated in connection with open futures contracts in the amount of $105,750.

‡

Current coupon rate for inverse floating rate municipal obligation. This rate resets periodically as the auction rate on the related security changes. Position in inverse floating rate municipal obligation has a total value of $3,130,175 which represents 4.5% of net assets applicable to common shareholders.

Joint exemption in New York and New Jersey.

Current coupon of variable rate demand obligation.

(a)

Securities have been designated as collateral in an amount equal to $6,982,393 in connection with the open futures contracts.

(b)

The aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes. The aggregate gross unrealized appreciation is $6,234,477 and the aggregate gross unrealized depreciation is $352,500, resulting in net unrealized appreciation of $5,881,977.

Bond Insurance:

Ambac

Ambac Assurance Corporation.

FGIC

Financial Guaranty Insurance Company.

FSA

Financial Security Assurance Inc.

MBIA

Municipal Bond Investors Assurance Corporation.

Futures Contracts Open at April 30, 2004:


NUMBER OF CONTRACTS	LONG/SHORT	DESCRIPTION, DELIVERY MONTH AND YEAR	UNDERLYING FACE AMOUNT AT VALUE	UNREALIZED APPRECIATION
30	Short	U.S Treasury Note 5 Yr June/2004	$(3,298,125)	$69,996
60	Short	U.S Treasury Note 10 Yr June/2004	(6,630,000)	193,755
		Total unrealized appreciation		$263,751

See Notes to Financial Statements

Morgan Stanley Insured Municipal Bond Trust

Financial Statements

Statement of Assets and Liabilities

April 30, 2004 (unaudited)


Assets:
Investments in securities, at value (cost $91,719,025)	$	97,601,002
Cash		30,229
Receivable for:
Interest		1,485,726
Investments sold		203,467
Prepaid expenses and other assets		41,106
Total Assets		99,361,530
Liabilities:
Payable for:
Investment management fee		33,937
Common shares of beneficial interest repurchased		28,791
Variation margin		25,781
Accrued expenses and other payables		99,523
Total Liabilities		188,032
Preferred shares of beneficial interest, (at liquidation value) (1,000,000 shares authorized of non-participating $.01 par value, 600 shares outstanding)		30,054,972
Net Assets Applicable to Common Shareholders	$	69,118,526
Composition of Net Assets Applicable to Common Shareholders:
Common shares of beneficial interest (unlimited shares authorized of $.01 par value, 4,501,720 shares outstanding)	$	62,284,080
Net unrealized appreciation		6,145,728
Accumulated undistributed net investment income		393,734
Accumulated undistributed net realized gain		294,984
Net Assets Applicable to Common Shareholders	$	69,118,526
Net Asset Value Per Common Share, ($69,118,526 divided by 4,501,720 common shares outstanding)	$	15.35

See Notes to Financial Statements

Morgan Stanley Insured Municipal Bond Trust

Financial Statements continued

Statement of Operations

For the six months ended April 30, 2004 (unaudited)


Net Investment Income:
Interest Income	$	2,535,863
Expenses
Investment management fee		179,205
Auction commission fees		74,687
Professional fees		34,739
Transfer agent fees and expenses		17,424
Custodian fees		14,217
Shareholder reports and notices		10,133
Registration fees		7,412
Trustees' fees and expenses		4,261
Auction agent fees		3,979
Other		9,604
Total Expenses		355,661
Net Investment Income		2,180,202
Net Realized and Unrealized Gain (Loss):
Net Realized Gain (Loss) on:
Investments		722,239
Futures contracts		(685,735	)
Net Realized Gain		36,504
Net Change in Unrealized Appreciation/Depreciation on:
Investments		(2,167,109	)
Futures contracts		576,403
Net Depreciation		(1,590,706	)
Net Loss		(1,554,202	)
Dividends to preferred shareholders from net investment income		(361,435	)
Net Increase	$	264,565

See Notes to Financial Statements

Morgan Stanley Insured Municipal Bond Trust

Financial Statements continued

Statement of Changes in Net Assets


	FOR THE SIX MONTHS ENDED APRIL 30, 2004			FOR THE YEAR ENDED OCTOBER 31, 2003
	(unaudited)
Increase (Decrease) in Net Assets:
Operations:
Net investment income	$	2,180,202		$	4,581,129
Net realized gain		36,504			799,757
Net change in unrealized appreciation/depreciation		(1,590,706	)		175,316
Dividends to preferred shareholders from net investment income		(361,435	)		(747,426	)
Net Increase		264,565			4,808,776
Dividends and Distributions to Common Shareholders from:
Net investment income		(1,969,967	)		(4,131,366	)
Net realized gain		(511,378	)		(1,064,712	)
Total Dividends and Distributions		(2,481,345	)		(5,196,078	)
Decrease from transactions in common shares of beneficial interest		(606,034	)		(1,406,893	)
Net Decrease		(2,822,814	)		(1,794,195	)
Net Assets Applicable to Common Shareholders:
Beginning of period		71,941,340			73,735,535
End of Period
(Including an accumulated undistributed net investment income of $393,734 and $544,934, respectively)	$	69,118,526		$	71,941,340

See Notes to Financial Statements

Morgan Stanley Insured Municipal Bond Trust

Notes to Financial Statements April 30, 2004 (unaudited)

1. Organization and Accounting Policies

Morgan Stanley 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 following is a summary of significant accounting policies:

A. Valuation of Investments — (1) portfolio securities are valued by an outside independent pricing service approved by the Trustees. The pricing service uses both a computerized grid 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 mean between the last reported bid and asked price. 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. The Trustees believe that timely and reliable market quotations are generally not readily available for purposes of valuing tax-exempt securities and that the valuations supplied by the pricing service are more likely to approximate the fair value of such securities; (2) futures are valued at the latest sale price on the commodities exchange on which they trade unless it is determined that such price does not reflect their market value, in which case they will be valued at their fair value as determined in good faith under procedures established by and under the supervision of the Trustees; and (3) 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. Discounts are accreted and premiums are amortized over the life of the respective securities. Interest income is accrued daily.

C. Futures Contracts — A futures contract is an agreement between two parties to buy and sell financial instruments or contracts based on financial indices at a set price on a future date. Upon entering into such a contract, the Trust is required to pledge to the broker cash, U.S. Government securities or other liquid portfolio securities equal to the minimum initial margin requirements of the applicable futures exchange. Pursuant to the contract, the Trust agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments known as variation margin are recorded by the Trust as unrealized gains and losses. Upon closing of the contract, the Trust realizes a gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.

Morgan Stanley Insured Municipal Bond Trust

Notes to Financial Statements April 30, 2004 (unaudited) continued

D. Federal Income Tax Policy — It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable and nontaxable income to its shareholders. Accordingly, no federal income tax provision is required.

E. Dividends and Distributions to Shareholders — Dividends and distributions to shareholders are recorded on the ex-dividend date.

F. Use of Estimates — 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.

2. Investment Management Agreement

Pursuant to an Investment Management Agreement with Morgan Stanley Investment Advisors Inc. (the "Investment Manager"), the Trust pays the Investment Manager a management fee, calculated weekly and payable monthly, by applying the annual rate of 0.35% to the Trust's weekly net assets including preferred shares.

3. Security Transactions and Transactions with Affiliates

The cost of purchases and proceeds from sales of portfolio securities, excluding short-term investments, for the six months ended April 30, 2004, aggregated $9,923,668 and $12,977,336, respectively.

Morgan Stanley Trust, an affiliate of the Investment Manager, is the Trust's transfer agent. At April 30, 2004, the Trust had transfer agent fees and expenses payable of approximately $4,200.

The Trust has an unfunded noncontributory defined benefit pension plan covering certain 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 factors which include years of service and compensation. Aggregate pension costs for the six months ended April 30, 2004, included in Trustees' fees and expenses in the Statement of Operations amounted to $3,515. At April 30, 2004, the Trust had an accrued pension liability of $56,192 which is included in accrued expenses in the Statement of Assets and Liabilities. On December 2, 2003, the Trustees voted to close the plan to new participants and eliminate the future benefits growth due to increases to compensation after July 31, 2003.

Effective April 1, 2004, the Trust began an unfunded Deferred Compensation Plan (the "Compensation Plan"), which allows each independent Trustee to defer payment of all, or a portion, of the fees he receives for serving on the Board of Trustees. Each eligible Trustee generally may elect to have the deferred amounts credited with a return equal to the total return on one or more of the Morgan Stanley funds that are offered as investment options under the Compensation Plan. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the net asset value of the Trust.

Morgan Stanley Insured Municipal Bond Trust

Notes to Financial Statements April 30, 2004 (unaudited) continued

4. Preferred Shares of Beneficial Interest

The Trust is authorized to issue up to 1,000,000 non-participating preferred shares of beneficial interest having a par value of $.01 per share, in one or more series, with rights as determined by the Trustees, without approval of the common shareholders. The Trust has issued Auction Rate Preferred Shares ("Preferred Shares") which have a liquidation value of $50,000 per share plus the redemption premium, if any, plus accumulated but unpaid dividends, whether or not declared, thereon to the date of distribution. The Trust may redeem such shares, in whole or in part, at the original purchase price of $50,000 per share plus accumulated but unpaid dividends, whether or not declared, thereon to the date of redemption.

Dividends, which are cumulative, are reset through auction procedures.


SHARES*	AMOUNT IN THOUSANDS*		RATE*			RESET DATE		RANGE OF DIVIDEND RATES**
600	$	30,000		2.199	%		07/08/04		2.199	%

As of April 30, 2004.

For the six months ended April 30, 2004.

Subsequent to April 30, 2004 and up through June 4, 2004, the Trust paid dividends at a rate of 2.199% in the aggregate amount of $109,944.

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.

Morgan Stanley Insured Municipal Bond Trust

Notes to Financial Statements April 30, 2004 (unaudited) continued

5. Common Shares of Beneficial Interest

Transactions in common shares of beneficial interest were as follows:


	SHARES			PAR VALUE			CAPITAL PAID IN EXCESS OF PAR VALUE
Balance, October 31, 2002		4,637,620		$	46,377		$	64,224,804
Treasury shares purchased and retired (weighted average discount 6.42%)*		(94,900	)		(949	)		(1,405,944	)
Reclassification due to permanent book/tax differences		—			—			25,826
Balance, October 31, 2003		4,542,720			45,428			62,844,686
Treasury shares purchased and retired (weighted average discount 7.12%)*		(41,000	)		(410	)		(605,624	)
Balance, April 30, 2004		4,501,720		$	45,018		$	62,239,062

The Trustees have voted to retire the shares purchased.

6. Dividends to Common Shareholders

On March 30, 2004, the Trust declared the following dividends from net investment income:


AMOUNT PER SHARE	RECORD DATE	PAYABLE DATE
$0.0725	May 7, 2004	May 21, 2004
$0.0725	June 4, 2004	June 18, 2004

7. Expense Offset

The expense offset represents a reduction of the custodian fees for earnings on cash balances maintained by the Trust.

8. 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.

To hedge against adverse interest rate changes, the Trust may invest in financial futures contracts or municipal bond index futures contracts ("futures contracts").

These futures contracts involve elements of market risk in excess of the amount reflected in the Statement of Assets and Liabilities. The Trust bears the risk of an unfavorable change in the value of the underlying securities. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts.

Morgan Stanley Insured Municipal Bond Trust

Notes to Financial Statements April 30, 2004 (unaudited) continued

9. Federal Income Tax Status

The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification. Dividends and distributions which exceed net investment income and net realized capital gains for tax purposes are reported as distributions of paid-in-capital.

As of October 31, 2003, the Trust had temporary book/tax differences primarily attributable to book amortization of discounts on debt securities and mark-to-market of open futures contracts.

Morgan Stanley 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 SIX MONTHS ENDED APRIL 30, 2004			FOR THE YEAR ENDED OCTOBER 31,
	FOR THE SIX MONTHS ENDED APRIL 30, 2004			2003			2002			2001			2000			1999
	(unaudited)
Selected Per Share Data:
Net asset value, beginning of period	$	15.84		$	15.90		$	15.70		$	14.56		$	14.09		$	15.64
Income (loss) from investment operations:
Net investment income*		0.48			1.00			1.03			1.07			1.09			1.11
Net realized and unrealized gain (loss)		(0.35	)		0.21			0.28			1.06			0.43			(1.53	)
Common share equivalent of dividends paid to preferred shareholders*		(0.08	)		(0.16	)		(0.18	)		(0.25	)		(0.25	)		(0.22	)
Total income (loss) from investment operations		0.05			1.05			1.13			1.88			1.27			(0.64	)
Less dividends and distributions from:
Net investment income		(0.44	)		(0.90	)		(0.82	)		(0.78	)		(0.86	)		(0.92	)
Net realized gain		(0.11	)		(0.23	)		(0.14	)		—			—			—
Total dividends and distributions		(0.55	)		(1.13	)		(0.96	)		(0.78	)		(0.86	)		(0.92	)
Anti-dilutive effect of acquiring treasury shares*		0.01			0.02			0.03			0.04			0.06			0.01
Net asset value, end of period	$	15.35		$	15.84		$	15.90		$	15.70		$	14.56		$	14.09
Market value, end of period	$	13.64		$	14.50		$	14.31		$	14.29		$	13.125		$	12.50
Total Return†		(2.42)	% ⁽¹⁾		9.27	%		7.01	%		15.19	%		12.12	%		(17.60	)%
Ratios to Average Net Assets of Common Shareholders:
Total expenses (before expense offset)		0.98	%⁽²⁾		0.98	% ⁽⁵⁾		0.94	% ⁽⁵⁾		0.93	% ⁽⁵⁾		0.95	% ⁽⁴⁾		0.91	%⁽³⁾
Net investment income before preferred stock dividends		6.02	%⁽²⁾		6.27	%		6.66	%		7.00	%		7.67	%		7.36	%
Preferred stock dividends		1.00	%⁽²⁾		1.02	%		1.16	%		1.65	%		1.75	%		1.44	%
Net investment income available to common shareholders		5.02	%⁽²⁾		5.25	%		5.50	%		5.35	%		5.92	%		5.92	%
Supplemental Data:
Net assets applicable to common shareholders, end of period, in thousands		$69,119			$71,941			$73,736			$74,599			$71,089			$71,786
Asset coverage on preferred shares at end of period		330	%		339	%		345	%		348	%		336	%		338	%
Portfolio turnover rate		10	%⁽¹⁾		7	%		16	%		16	%		26	%		29	%

The per share amounts were computed using an average number of common 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)

Not annualized.

(2)

Annualized.

(3)

Does not reflect the effect of expense offset of 0.01%.

(4)

Does not reflect the effect of expense offset of 0.02%.

(5)

Does not reflect the effect of expense offset of 0.03%.

See Notes to Financial Statements


Trustees Michael Bozic Charles A. Fiumefreddo Edwin J. Garn Wayne E. Hedien James F. Higgins Dr. Manuel H. Johnson Joseph J. Kearns Michael E. Nugent Fergus Reid Officers Charles A. Fiumefreddo Chairman of the Board Mitchell M. Merin President Ronald E. Robison Executive Vice President and Principal Executive Officer Barry Fink Vice President Joseph J. McAlinden Vice President Stefanie V. Chang Vice President Francis J. Smith Treasurer and Chief Financial Officer Thomas F. Caloia Vice President Mary E. Mullin Secretary Transfer Agent Morgan Stanley Trust 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 Investment Advisors Inc. 1221 Avenue of the Americas New York, New York 10020 The financial statements included herein have been taken from the records of the Trust without examination by the independent auditors and accordingly they do not express an opinion thereon. Investments and services offered through Morgan Stanley DW Inc., member SIPC. © 2004 Morgan Stanley 37931RPT-RA04-00254P-Y04/04		MORGAN STANLEY FUNDS
		Morgan Stanley Insured Municipal Bond Trust Semiannual Report April 30, 2004



Item 2.  Code of Ethics.

Not applicable for semiannual reports.


Item 3.  Audit Committee Financial Expert.

Not applicable for semiannual reports.


Item 4. Principal Accountant Fees and Services

Not applicable for semiannual reports.


Item 5. Audit Committee of Listed Registrants.

Not applicable for semiannual reports.


Item 6. [Reserved.]


Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.

Not applicable for semiannual reports.


Item 8. [Reserved.]


Item 9 - Controls and Procedures

(a) The Trust's principal executive officer and principal financial officer have
concluded that the Trust's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Trust in this Form N-CSR
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.

     There were no significant changes or corrective actions with regard to
significant deficiencies or material weaknesses in the Trust's internal controls
or in other factors that could significantly affect the Trust's internal
controls subsequent to the date of their evaluation.



(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.

Item 10 Exhibits

(a) Code of Ethics - Not applicable for semiannual reports.

(b) A separate certification for each principal executive officer and principal
financial officer of the registrant are attached hereto as part of EX-99.CERT.

                                        2




                                   SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

Morgan Stanley Insured Municipal Bond Trust

/s/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer
June 22, 2004

     Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.

/s/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer
June 22, 2004

/s/ Francis Smith
Francis Smith
Principal Financial Officer
June 22, 2004

                                        3


                                                                   EXHIBIT 10 B1

                  CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

                                 CERTIFICATIONS
                                 --------------

I, Ronald E. Robison, certify that:

1.   I have reviewed this report on Form N-CSR of Morgan Stanley Insured
     Municipal Bond Trust;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations, changes in net
     assets, and cash flows (if the financial statements are required to include
     a statement of cash flows) of the registrant as of, and for, the periods
     presented in this report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Rule 30a-3(c) under the Investment Company Act of 1940) for the
     registrant and have:

a)   designed such disclosure controls and procedures, or caused such disclosure
     controls and procedures to be designed under our supervision, to ensure
     that material information relating to the registrant, including its
     consolidated subsidiaries, is made known to us by others within those
     entities, particularly during the period in which this report is being
     prepared;

[b)  Omitted.]

c)   evaluated the effectiveness of the registrant's disclosure controls and
     procedures and presented in this report our conclusions about the
     effectiveness of the disclosure controls and procedures, as of a date
     within 90 days prior to the filing date of this report based on such
     evaluation; and

d)   disclosed in this report any change in the registrant's internal control
     over financial reporting that occurred during the registrant's most recent
     fiscal half-year (the registrant's second fiscal half-year in the case of
     an annual report) that has materially affected, or is reasonably likely to
     materially affect, the registrant's internal control over financial
     reporting; and

5.   The registrant's other certifying officer(s) and I have disclosed to the
     registrant's auditors and the audit committee of the registrant's board of
     directors (or persons performing the equivalent functions):

                                        4


a)   all significant deficiencies and material weaknesses in the design or
     operation of internal control over financial reporting which are reasonably
     likely to adversely affect the registrant's ability to record, process,
     summarize, and report financial information; and

b)   any fraud, whether or not material, that involves management or other
     employees who have a significant role in the registrant's internal controls
     over financial reporting.

Date: June 22, 2004

                                                     /s/ Ronald E. Robison
                                                     Ronald E. Robison
                                                     Principal Executive Officer

                                        5




                                                                   EXHIBIT 10 B2

                  CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

                                 CERTIFICATIONS

I, Francis Smith, certify that:

6.   I have reviewed this report on Form N-CSR of Morgan Stanley Insured
     Municipal Bond Trust;

7.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

8.   Based on my knowledge, the financial statements and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations, changes in net
     assets, and cash flows (if the financial statements are required to include
     a statement of cash flows) of the registrant as of, and for, the periods
     presented in this report;

9.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Rule 30a-3(c) under the Investment Company Act of 1940) for the
     registrant and have:

b)   designed such disclosure controls and procedures, or caused such disclosure
     controls and procedures to be designed under our supervision, to ensure
     that material information relating to the registrant, including its
     consolidated subsidiaries, is made known to us by others within those
     entities, particularly during the period in which this report is being
     prepared;

[b)  Omitted.]

e)   evaluated the effectiveness of the registrant's disclosure controls and
     procedures and presented in this report our conclusions about the
     effectiveness of the disclosure controls and procedures, as of a date
     within 90 days prior to the filing date of this report based on such
     evaluation; and

f)   disclosed in this report any change in the registrant's internal control
     over financial reporting that occurred during the registrant's most recent
     fiscal half-year (the registrant's second fiscal half-year in the case of
     an annual report) that has materially affected, or is reasonably likely to
     materially affect, the registrant's internal control over financial
     reporting; and

10.  The registrant's other certifying officer(s) and I have disclosed to the
     registrant's auditors and the audit committee of the registrant's board of
     directors (or persons performing the equivalent functions):

c)   all significant deficiencies and material weaknesses in the design or
     operation of internal control over financial reporting which are reasonably
     likely to adversely affect the registrant's ability to record, process,
     summarize, and report financial information; and

                                        6


d)   any fraud, whether or not material, that involves management or other
     employees who have a significant role in the registrant's internal controls
     over financial reporting.

Date: June 22, 2004

                                                     /s/ Francis Smith
                                                     Francis Smith
                                                     Principal Financial Officer


                                        7




                            SECTION 906 CERTIFICATION

                Certification Pursuant to 18 U.S.C. Section 1350,
                             As Adopted Pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002

Morgan Stanley Insured Municipal Bond Trust

     In connection with the Report on Form N-CSR (the "Report") of the
above-named issuer for the period ended April 30, 2004 that is accompanied by
this certification, the undersigned hereby certifies that:

1.   The Report fully complies with the requirements of Section 13(a) or 15(d)
     of the Securities Exchange Act of 1934; and

2.   The information contained in the Report fairly presents, in all material
     respects, the financial condition and results of operations of the Issuer.



Date: June 22, 2004                                  /s/ Ronald E. Robison
                                                     ---------------------------
                                                     Ronald E. Robison
                                                     Principal Executive Officer


A signed original of this written statement required by Section 906 has been
provided to Morgan Stanley Insured Municipal Bond Trust and will be retained by
Morgan Stanley Insured Municipal Bond Trust and furnished to the Securities and
Exchange Commission or its staff upon request.

                                        8



                            SECTION 906 CERTIFICATION

                Certification Pursuant to 18 U.S.C. Section 1350,
                             As Adopted Pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002

Morgan Stanley Insured Municipal Bond Trust

     In connection with the Report on Form N-CSR (the "Report") of the
above-named issuer for the period ended April 30, 2004 that is accompanied by
this certification, the undersigned hereby certifies that:

1.   The Report fully complies with the requirements of Section 13(a) or 15(d)
     of the Securities Exchange Act of 1934; and

2.   The information contained in the Report fairly presents, in all material
     respects, the financial condition and results of operations of the Issuer.



Date: June 22, 2004                                  /s/ Francis Smith
                                                     ---------------------------
                                                     Francis Smith
                                                     Principal Financial Officer


A signed original of this written statement required by Section 906 has been
provided to Morgan Stanley Insured Municipal Bond Trust and will be retained by
Morgan Stanley Insured Municipal Bond Trust and furnished to the Securities and
Exchange Commission or its staff upon request.




                                        9