-----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, TdMmlgMAj2WjmlVttWthk+eAyndLbJFkecf1igctdqG1CSUCkj1RoFkLNVZrOzAL VZ5SNfOxR0TylaeApZArjw== 0000950136-99-001600.txt : 19991223 0000950136-99-001600.hdr.sgml : 19991223 ACCESSION NUMBER: 0000950136-99-001600 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991031 FILED AS OF DATE: 19991222 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: 99779336 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 ANNUAL REPORT MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST LETTER TO THE SHAREHOLDERS October 31, 1999 Two World Trade Center, New York, New York 10048 DEAR SHAREHOLDER: The U.S. economy, led by consumer demand, has continued to experience robust growth this year. The fixed-income markets anticipated that the Federal Reserve Board would remove the liquidity it provided during last year's international economic crises. The Fed changed monetary policy and raised the federal-funds rate 50 basis points to 5.25 percent during the summer. By October long-term interest rates had risen to levels last seen two years ago. Subsequently, the Fed raised the federal-funds rate an additional 25 basis points to 5.50 percent in November. MUNICIPAL MARKET CONDITIONS Long-term insured municipal index yields began 1999 near a record low of 5.05 percent. By the end of October, municipal index yields had increased 100 basis points to 6.05 percent. Since bond prices move inversely to changes in interest rates, these higher yields resulted in significantly lower bond prices. The increase in yields translated into a 13 percent price decline for a generic insured municipal bond with a 30-year maturity. The municipal market outperformed U.S. Treasury bonds early in the year but gradually gave ground. The ratio of long-term insured municipal index yields to benchmark 30-year Treasury yields is a measure of relative performance. The ratio declined from 99 percent at the end of 1998 to 91 percent in May before rising to 98 percent by the end of October. A declining ratio means that municipals have outperformed Treasuries. Over the past five years the ratio has ranged from a high of 99 percent, to a low of 82 percent. Higher interest rates led to a reduction in municipal market underwriting this year. New issue volume declined 20 percent in the first ten months of 1999. Refunding activity, the most interest rate sensitive component of supply, was down 50 percent. MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST LETTER TO THE SHAREHOLDERS October 31, 1999, continued [THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE PURPOSE OF EDGAR FILING.] 30-YEAR BOND YIELDS 1994-1999 AAA AAA Date Ins Tsy % Relationship Date Ins Tsy % Relationship 12/31/93 5.40% 6.34% 85.17% 11/29/96 5.50 6.35 86.61% 01/31/94 5.40 6.24 86.54% 12/31/96 5.60 6.63 84.46% 02/28/94 5.80 6.66 87.09% 01/31/97 5.70 6.79 83.95% 03/31/94 6.40 7.09 90.27% 02/28/97 5.65 6.80 83.09% 04/29/94 6.35 7.32 86.75% 03/31/97 5.90 7.10 83.10% 05/31/94 6.25 7.43 84.12% 04/30/97 5.75 6.94 82.85% 06/30/94 6.50 7.61 85.41% 05/30/97 5.65 6.91 81.77% 07/29/94 6.25 7.39 84.57% 06/30/97 5.60 6.78 82.60% 08/31/94 6.30 7.45 84.56% 07/30/97 5.30 6.30 84.13% 09/30/94 6.55 7.81 83.87% 08/31/97 5.50 6.61 83.21% 10/31/94 6.75 7.96 84.80% 09/30/97 5.40 6.40 84.38% 11/30/94 7.00 8.00 87.50% 10/31/97 5.35 6.15 86.99% 12/30/94 6.75 7.88 85.66% 11/30/97 5.30 6.05 87.60% 01/31/95 6.40 7.70 83.12% 12/31/97 5.15 5.92 86.99% 02/28/95 6.15 7.44 82.66% 01/31/98 5.15 5.80 88.79% 03/31/95 6.15 7.43 82.77% 02/28/98 5.20 5.92 87.84% 04/28/95 6.20 7.34 84.47% 03/31/98 5.25 5.93 88.53% 05/31/95 5.80 6.66 87.09% 04/30/98 5.35 5.95 89.92% 06/30/95 6.10 6.62 92.15% 05/29/98 5.20 5.80 89.66% 07/31/95 6.10 6.86 88.92% 06/30/98 5.20 5.65 92.04% 08/31/95 6.00 6.66 90.09% 07/31/98 5.18 5.71 90.72% 09/29/95 5.95 6.48 91.82% 08/31/98 5.03 5.27 95.45% 10/31/95 5.75 6.33 90.84% 09/30/98 4.95 5.00 99.00% 11/30/95 5.50 6.14 89.58% 10/31/98 5.05 5.16 97.87% 12/29/95 5.35 5.94 90.07% 11/30/98 5.00 5.06 98.81% 01/31/96 5.40 6.03 89.55% 12/31/98 5.05 5.10 99.02% 02/29/96 5.60 6.46 86.69% 01/31/99 5.00 5.09 98.23% 03/29/96 5.85 6.66 87.84% 02/28/99 5.10 5.58 91.40% 04/30/96 5.95 6.89 86.36% 03/31/99 5.15 5.63 91.47% 05/31/96 6.05 6.99 86.55% 04/30/99 5.20 5.66 91.87% 06/28/96 5.90 6.89 85.63% 05/31/99 5.30 5.83 90.91% 07/31/96 5.85 6.97 83.93% 06/30/99 5.47 5.96 91.78% 08/30/96 5.90 7.11 82.98% 07/31/99 5.55 6.10 90.98% 09/30/96 5.70 6.93 82.25% 08/31/99 5.75 6.06 94.88% 10/31/96 5.65 6.64 85.09% 09/30/99 5.85 6.05 96.69% 10/31/99 6.03 6.16 97.89% Source: Municipal Market Data-A Division of Thomson Financial Municipal Group and Bloomberg L.P. PERFORMANCE In this interest rate environment, the net asset value (NAV) of Morgan Stanley Dean Witter Insured Municipal Bond Trust (IMB) declined from $15.64 to $14.09 per share for the fiscal year ended October 31, 1999. Based on this change plus reinvestment of tax-free dividends totaling $0.925 per share the Trust's total NAV return was --4.25 percent. IMB's value on the New York Stock Exchange (NYSE) fell from $16.125 to $12.50 per share during the fiscal year. Based on this change plus reinvestment of tax-free dividends, IMB's total market return was --17.60 percent. On October 31, 1999, IMB's NYSE market price represented a 11.28 percent discount to its NAV. Monthly dividends for the fourth quarter of 1999 were declared in September. Beginning with the October payment, the dividend was decreased from $0.0775 to $0.0725 per share. The new dividend rate reflects the Trust's estimated earnings over the next 6 -- 12 months and its $0.104 per share cushion of undistributed net investment income on October 31, 1999. 2 MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST LETTER TO THE SHAREHOLDERS October 31, 1999, continued PORTFOLIO STRUCTURE The Trust's investments were diversified among 11 long-term sectors and 42 credits. At the end of October, the portfolio's average maturity was 19 years. Average duration, a measure of sensitivity to interest rate changes, was 5.9 years. Issues in the refunded bond category comprised 12 percent of net assets. These bonds have been refinanced and will be redeemed on the dates shown in the portfolio. The accompanying charts provide current information on the portfolio's credit enhancements, sector distribution and geographic diversification. Optional call provisions by year with their respective cost (book) yields are also charted. THE IMPACT OF LEVERAGING As discussed in previous shareholder reports, the total income available for distribution to common shareholders includes incremental income provided by the Trust's outstanding Auction Rate Preferred shares (ARPS). ARPS dividends reflect prevailing short-term interest rates on maturities normally ranging from one week to one year. Incremental income to common shareholders depends on two factors. The first factor is the amount of ARPS outstanding, while the second is the spread between the portfolio's cost yield and ARPS expenses (ARPS auction rate and expenses). The greater the spread and amount of ARPS outstanding, the greater the amount of incremental income available for distribution to common shareholders. The level of net investment income available for distribution to common shareholders varies with the level of short-term interest rates. ARPS leverage also increases the price volatility of common shares and has the effect of extending portfolio duration. During the 12-month period, ARPS leverage contributed approximately $0.11 per share to common share earnings. The yield on the Trust's only ARPS series ranged between 3.65 and 3.85 percent. In comparison, the yield on 1-year municipal notes increased from 3.04 percent at the end of 1998, to 3.77 percent at the end of October 1999. The series totaled $30 million and represented 29 percent of net assets. LOOKING AHEAD The Federal Reserve Board raised interest rates twice in the summer and again in November 1999. This confirmed its previously disclosed bias of becoming less accommodative in the face of continued strong domestic economic growth. Depending on the impact of tight labor markets and higher commodity prices on inflation, the central bank may raise short-term interest rates further. However, we believe municipal bonds continue to offer long-term investors good value especially in relationship to Treasuries. The Trust's procedure for reinvestment of all dividends and distributions on common shares is through purchases in the open market. This method helps support the market value of the Trust's shares. In 3 MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST LETTER TO THE SHAREHOLDERS October 31, 1999, continued addition, we would like to remind you that the Trustees have approved a procedure whereby the Trust, when appropriate, may purchase shares in the open market or in privately negotiated transactions at a price not above market value or net asset value, whichever is lower at the time of purchase. The Trust may also utilize procedures to reduce or eliminate the amount of outstanding ARPS, including their purchase in the open market or in privately negotiated transactions. During the fiscal year ended October 31, 1999 the Trust purchased and retired 42,000 shares of common stock at a weighted average market discount of 10.16 percent. We appreciate your ongoing support of Morgan Stanley Dean Witter Insured Municipal Bond Trust and look forward to continuing to serve your investment needs. Very truly yours, /s/ CHARLES A. FIUMEFREDDO /s/ MITCHELL M. MERIN - -------------------------- --------------------- CHARLES A. FIUMEFREDDO MITCHELL M. MERIN Chairman of the Board President 4 MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST LETTER TO THE SHAREHOLDERS October 31, 1999, continued LARGEST SECTORS AS OF OCTOBER 31, 1999 (% OF NET ASSETS) Catagory IMB - -------- --- Transportation 20% Water & Sewer 16% Mortgage 15% Refunded 12% Education 9% IDR/PCR* 8% Electric 6% Hospital 5% * INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE. CREDIT ENHANCEMENTS AS OF OCTOBER 31, 1999 (% OF TOTAL LONG-TERM PORTFOLIO) MBIA 36% FGIC 34% AMBAC 12% FSA 12% GNMA 6% Total 100% PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE. GEOGRAPHIC SUMMARY OF INVESTMENTS Based on Market Value as a Percent of Net Assets October 31, 1999 Arizona ...................... 1.9% California ................... 8.7 District of Columbia ......... 1.3 Florida ...................... 2.2 Hawaii ....................... 4.2 Illinois ..................... 8.2 Indiana ...................... 3.6 Kansas ....................... 1.7 Maine ........................ 4.9 Massachusetts ................ 6.2% Michigan ..................... 3.7 Missouri ..................... 6.8 Nebraska ..................... 3.4 New Hampshire ................ 8.4 New Jersey ................... 0.3 New Mexico ................... 3.7 New York ..................... 7.8 North Carolina ............... 1.3 Oregon ....................... 1.6% Pennsylvania ................. 2.8 South Carolina ............... 6.6 Tennessee .................... 0.1 Texas ........................ 1.6 Virginia ..................... 3.9 Washington ................... 2.0 Wyoming ...................... 1.0 ---- Total ........................ 97.9% ==== Portfolio structure is subject to change. 5 MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST LETTER TO THE SHAREHOLDERS October 31, 1999, continued CALL AND COST (BOOK) YIELD STRUCTURE OCTOBER 31, 1999 PERCENT CALLABLE* Call Dates IMB - ---------- --- 1999 1% 2000 11% 2001 32% 2002 6% 2003 2% 2004 0% 2005 6% 2006 13% 2007 0% 2008 6% 2009 16% 2010+ 7% WEIGHTED AVERAGE CALL PROTECTION: 5 YEARS YEARS BONDS CALLABLE COST (BOOK) YIELD** Yield Dates IMB - ----------- --- 1999 7.39% 2000 7.39% 2001 7.00% 2002 6.62% 2003 6.21% 2004 0.00% 2005 6.08% 2006 6.31% 2007 0.00% 2008 5.38% 2009 5.53% 2010+ 5.78% WEIGHTED AVERAGE BOOK YIELD: 6.45% * % BASED ON LONG-TERM PORTFOLIO. ** COST OR "BOOK" YIELD IS THE ANNUAL INCOME EARNED ON A PORTFOLIO INVESTMENT BASED ON ITS ORIGINAL PURCHASE PRICE BEFORE TRUST OPERATING EXPENSES. FOR EXAMPLE, THE TRUST EARNED A BOOK YIELD OF 7.4% ON 11% OF THE LONG-TERM PORTFOLIO THAT ARE CALLABLE IN 2000. PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE. 6 MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST RESULTS OF ANNUAL MEETING (unaudited) * * * On October 28, 1999, an annual meeting of the Trust's shareholders was held for the purpose of voting on three separate matters, the results of which were as follows: (1) ELECTION OF TRUSTEES BY ALL SHAREHOLDERS: Wayne E. Hedien For ........................................... 3,543,229 Withheld ...................................... 63,441 John L. Schroeder For ........................................... 3,567,217 Withheld ...................................... 39,453 (2) ELECTION OF TRUSTEE BY PREFERRED SHAREHOLDERS: Dr. Manuel H. Johnson For ........................................... 540 Withheld ...................................... 0 The following Trustees were not standing for reelection at this meeting: Michael Bozic, Charles A. Fiumefreddo, Edwin J. Garn, Michael E. Nugent and Philip J. Purcell. (3) RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT ACCOUNTANTS: For ........................................... 3,522,208 Against ....................................... 9,510 Abstain ....................................... 74,952 7 MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST PORTFOLIO OF INVESTMENTS October 31, 1999
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------- -------- ---------- ------------ TAX-EXEMPT MUNICIPAL BONDS (94.7%) General Obligation (1.5%) $ 2,000 California, Refg Dtd 10/01/98 (MBIA) ..................................... 4.50 % 10/01/28 $ 1,569,840 -------- ------------ Educational Facilities Revenue (9.1%) 6,000 Massachusetts Health & Educational Facilities Authority, Boston University 1991 Ser K & L (MBIA) .................................................. 6.66 10/01/31 6,275,880 2,000 New York State Dormitory Authority, St John's University Ser 1996 (MBIA) . 5.70 07/01/26 1,916,880 1,000 Pennsylvania Higher Educational Facilities Authority, Duquesne University Refg Ser A of 1991 (MBIA) .............................................. 6.75 04/01/20 1,024,760 -------- ------------ 9,000 9,217,520 -------- ------------ Electric Revenue (6.3%) 3,000 Piedmont Municipal Power Agency, South Carolina, 1991 Refg Ser (FGIC) .... 6.50 01/01/11 3,124,110 1,500 South Carolina Public Service Authority, Santee Cooper 1997 Refg Ser A (MBIA) ................................................................. 5.00 01/01/29 1,253,175 2,000 Snohomish County Public Utility District #1, Washington, 1993 Ser (FGIC) . 6.00 01/01/18 1,991,040 -------- ------------ 6,500 6,368,325 -------- ------------ Hospital Revenue (5.1%) 2,000 Mesa Industrial Development Authority, Arizona, Discovery Health Ser 1999 A (MBIA) ...................................................... 5.875 01/01/16 1,978,220 2,000 University of Missouri, Health Ser 1996 A (AMBAC) ........................ 5.50 11/01/16 1,892,280 1,500 University of North Carolina, Hospitals at Chapel Hill Ser 1999 (AMBAC) .. 5.00 02/15/24 1,293,900 -------- ------------ 5,500 5,164,400 -------- ------------ Industrial Development/Pollution Control Revenue (7.7%) 2,500 Jasper County, Indiana, Northern Indiana Public Service Co Collateralized Ser 1991 (MBIA) ........................................................ 7.10 07/01/17 2,632,950 1,000 Rockport, Indiana, Indiana & Michigan Power Co Ser B (Secondary FGIC) .... 7.60 03/01/16 1,054,990 1,000 Burlington, Kansas, Kansas Gas & Electric Co Ser 1991 (MBIA) ............. 7.00 06/01/31 1,050,480 3,000 New Hampshire Industrial Development Authority, Canal Electric Co (AMT) (FGIC) ................................................................. 7.375 12/01/20 3,140,250 -------- ------------ 7,500 7,878,670 -------- ------------ Mortgage Revenue -- Multi-Family (3.0%) 2,955 New York State Housing Finance Agency, 1996 Ser A Refg (FSA) ............. 6.10 11/01/15 3,017,823 -------- ------------ Mortgage Revenue -- Single Family (12.0%) 1,320 District of Columbia Housing Finance Agency, GNMA Collateralized Ser 1988 E (AMT) ....................................................... 7.70 12/01/22 1,347,456 50 Hawaii Housing Finance & Development Corporation, Ser 1989 A (AMT) (Bifurcated FSA) ....................................................... 7.70 07/01/29 50,837 620 Sedgwick & Shawnee County, Kansas, GNMA Collateralized 1990 Ser B (AMT) (AMBAC) .......................................................... 7.80 06/01/22 641,824 4,830 Maine Housing Authority, Ser 1991 A (Bifurcated FSA) ..................... 7.40 11/15/22 4,996,055
SEE NOTES TO FINANCIAL STATEMENTS 8 MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST PORTFOLIO OF INVESTMENTS October 31, 1999, continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------- -------- ----------- ------------ $ 1,310 Missouri Housing Development Commission, GNMA-Backed 1991 Ser A (AMT) ...... 7.375% 08/01/23 $ 1,350,689 3,400 Nebraska Investment Finance Authority, GNMA-Backed 1990 Ser 1 & 2 (AMT) .... 7.631 09/10/30 3,512,132 280 New Jersey Housing & Mortgage Finance Agency, Home Buyer Ser E (MBIA) 7.65 10/01/16 285,522 75 Tennessee Housing Development Agency, Homeownership Issue S (AMT) (Secondary MBIA) ......................................................... 7.625 07/01/22 77,734 -------- ------------ 11,885 12,262,249 -------- ------------ Transportation Facilities Revenue (20.0%) 3,000 Hawaii, Airports Second Ser 1990 (AMT) (FGIC) .............................. 7.50 07/01/20 3,115,410 3,000 Illinois Toll Highway Authority, Priority Refg 1998 Ser A (FSA) ............ 5.50 01/01/15 2,924,490 Wayne County, Michigan, Detroit Metropolitan Wayne County Airport 2,000 Sub Lien Ser 1991 B (AMT) (MBIA) ......................................... 6.75 12/01/21 2,100,240 2,000 Ser 1998 B (MBIA) ........................................................ 4.875 12/01/23 1,675,040 5,000 New Hampshire, Turnpike 1991 Refg Ser B & C (FGIC) ......................... 6.806 11/01/17 5,388,850 2,000 New York State Thruway Authority, Highway & Bridge Ser 1999 B (FGIC) ....... 5.00 04/01/19 1,751,520 2,000 Southeastern Pennsylvania Transportation Authority, Ser A 1999 (FGIC) ...... 5.25 03/01/18 1,836,460 2,000 North Texas Tollway Authority, Dallas North Tollway Ser 1998 (FGIC) ........ 4.75 01/01/29 1,617,740 -------- ------------ 21,000 20,409,750 -------- ------------ Water & Sewer Revenue (16.0%) 2,000 East Bay Municipal Utility District, California, Water Ser 1998 (MBIA) ..... 4.75 06/01/34 1,610,000 2,250 Broward County, Florida, Utility Ser 1991 (FGIC) ........................... 6.00 10/01/20 2,255,918 1,200 Honolulu City & County, Hawaii, Wastewater Junior Ser 1998 (FGIC) .......... 5.25 07/01/17 1,100,220 2,000 St Louis, Missouri, Water Refg Ser 1998 (AMBAC) ............................ 4.75 07/01/14 1,776,120 2,070 Rio Rancho, New Mexico, Water & Wastewater Refg Ser 1999 (AMBAC) ........... 5.25 05/15/17 1,911,334 1,500 New York City Municipal Water Finance Authority, New York, 1999 Ser B (FSA). 5.00 06/15/29 1,275,000 3,000 Charleston, South Carolina, Refg Cap Impr Ser 1998 (Secondary FGIC) ........ 4.50 01/01/24 2,371,530 4,000 Norfolk, Virginia, Water Ser 1995 (MBIA) ................................... 5.875 11/01/20 3,964,280 -------- ------------ 18,020 16,264,402 -------- ------------ Other Revenue (1.9%) 2,000 Las Cruces, New Mexico, Ser 1995 (AMT) (MBIA) .............................. 5.50 12/01/15 1,893,660 -------- ------------ Refunded (12.1%) 5,000 Eastern Municipal Water District, California, Water & Sewer Ser 1991 COPs (FGIC) .............................................................. 6.50 07/01/01+ 5,300,200 5,000 Cook County, Illinois, Ser 1992 A (MBIA) ................................... 6.60 11/15/02+ 5,397,700 1,425 Port of Portland, Oregon, Portland International Airport Ser Seven B (AMT) (MBIA) ............................................................... 7.10 01/01/12+ 1,628,775 -------- ------------ 11,425 12,326,675 -------- ------------ 97,785 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $95,153,919) ................................... 96,373,314 -------- ------------
SEE NOTES TO FINANCIAL STATEMENTS 9 MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST PORTFOLIO OF INVESTMENTS October 31, 1999, continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------- ------ -------- ----------- SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (3.2%) $ 400 California Pollution Control Financing Authority, Pacific Gas & Electric Co 3.55*% 11/01/26 $ 400,000 Ser 1996 F (Demand 11/01/99) ................................................ 1,900 Missouri Health & Educational Facilities Authority, Washington University Ser D (Demand 11/01/99) ..................................................... 3.55* 09/01/30 1,900,000 1,000 Lincoln County, Wyoming, Exxon Corp Ser 1984 B (Demand 11/01/99) .............. 3.60* 11/01/14 1,000,000 -------- ------------ 3,300 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS -------- (Identified Cost $3,300,000) ........................................................................ 3,300,000 ------------ $101,085 TOTAL INVESTMENTS (Identified Cost $98,453,919) (a) ........................................ 97.9% 99,673,314 ======== CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ............................................. 2.1 2,112,202 ---- ------------ NET ASSETS ................................................................................. 100.0% $101,785,516 ============
- --------------- AMT Alternative Minimum Tax. COPs Certificates of Participation. + Prerefunded to call date shown. * Current coupon of variable rate demand obligation. (a) The aggregate cost for federal income tax purposes approximates identified cost. The aggregate gross unrealized appreciation is $3,622,174 and the aggregate gross unrealized depreciation is $2,402,779, resulting in net unrealized appreciation of $1,219,395. Bond Insurance: - --------------- AMBAC AMBAC Assurance Corporation. FGIC Financial Guaranty Insurance Company. FSA Financial Security Assurance Inc. MBIA Municipal Bond Investors Assurance Corporation. SEE NOTES TO FINANCIAL STATEMENTS 10 MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES October 31, 1999
ASSETS: Investments in securities, at value (identified cost $98,453,919) ........................................ $ 99,673,314 Cash ................................................................... 142,013 Receivable for: Interest ........................................................... 1,835,141 Investment sold .................................................... 353,371 Prepaid expenses ....................................................... 82,673 ------------ TOTAL ASSETS ....................................................... 102,086,512 ------------ LIABILITIES: Payable for: Dividends to preferred shareholders ................................ 98,094 Shares of beneficial interest repurchased .......................... 59,356 Investment management fee .......................................... 36,539 Accrued expenses ....................................................... 107,007 ------------ TOTAL LIABILITIES ................................................... 300,996 ------------ NET ASSETS .......................................................... $101,785,516 ============ COMPOSITION OF NET ASSETS: Preferred shares of beneficial interest (1,000,000 shares authorized of non-participating $.01 par value, 600 shares outstanding)............. $ 30,000,000 ------------ Common shares of beneficial interest (unlimited shares authorized of $.01 par value, 5,095,563 shares outstanding)......................... 70,406,010 Net unrealized appreciation ............................................ 1,219,395 Accumulated undistributed net investment income ........................ 530,306 Accumulated net realized loss .......................................... (370,195) ------------ NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS ....................... 71,785,516 ------------ TOTAL NET ASSETS ................................................... $101,785,516 ============ NET ASSET VALUE PER COMMON SHARE ($71,785,516 divided by 5,095,563 common shares outstanding).......... $14.09 ======
SEE NOTES TO FINANCIAL STATEMENTS 11 MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST FINANCIAL STATEMENTS, continued STATEMENT OF OPERATIONS For the year ended October 31, 1999
NET INVESTMENT INCOME: INTEREST INCOME ............................... $ 6,417,373 ----------- EXPENSES Investment management fee ..................... 377,140 Professional fees ............................. 112,759 Auction commission fees ....................... 112,500 Transfer agent fees and expenses .............. 21,588 Trustees' fees and expenses ................... 18,150 Shareholder reports and notices ............... 17,625 Registration fees ............................. 16,669 Auction agent fees ............................ 8,164 Custodian fees ................................ 5,638 Other ......................................... 15,825 ----------- TOTAL EXPENSES ............................. 706,058 Less: expense offset .......................... (5,621) ----------- NET EXPENSES ............................... 700,437 ----------- NET INVESTMENT INCOME ...................... 5,716,936 ----------- NET REALIZED AND UNREALIZED LOSS: Net realized loss ............................. (294,427) Net change in unrealized appreciation ......... (7,575,355) ----------- NET LOSS ................................... (7,869,782) ----------- NET DECREASE .................................. $(2,152,846) ===========
SEE NOTES TO FINANCIAL STATEMENTS 12 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, 1999 OCTOBER 31, 1998 ------------------ ----------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income .............................. $ 5,716,936 $ 6,142,230 Net realized gain (loss) ........................... (294,427) 209,427 Net change in unrealized appreciation .............. (7,575,355) 347,409 ------------ ------------ NET INCREASE (DECREASE) ........................ (2,152,846) 6,699,066 ------------ ------------ DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME: Preferred .......................................... (1,118,346) (1,103,850) Common ............................................. (4,752,063) (5,060,382) ------------ ------------ TOTAL DIVIDENDS ................................ (5,870,409) (6,164,232) ------------ ------------ Decrease from transactions in common shares of beneficial interest .............................. (531,923) -- ------------ ------------ NET INCREASE (DECREASE) ........................ (8,555,178) 534,834 NET ASSETS: Beginning of period ................................ 110,340,694 109,805,860 ------------ ------------ END OF PERIOD (Including undistributed net investment income of $530,306 and $683,779, respectively) ............ $101,785,516 $110,340,694 ============ ============
SEE NOTES TO FINANCIAL STATEMENTS 13 MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST NOTES TO FINANCIAL STATEMENTS October 31, 1999 1. ORGANIZATION AND ACCOUNTING POLICIES Morgan Stanley Dean Witter Insured Municipal Bond Trust (the "Trust") is registered under the Investment Company Act of 1940, as amended, as a diversified, closed-end management investment company. The Trust's investment objective is to provide current income which is exempt from federal income tax. The Trust was organized as a Massachusetts business trust on February 27, 1990 and commenced operations on February 28, 1991. The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. The following is a summary of significant accounting policies: A. VALUATION OF INVESTMENTS -- Portfolio securities are valued by an outside independent pricing service approved by the Trustees. The pricing service has informed the Trust that in valuing the portfolio securities, it uses both a computerized matrix of tax-exempt securities and evaluations by its staff, in each case based on information concerning market transactions and quotations from dealers which reflect the bid side of the market each day. The portfolio securities are thus valued by reference to a combination of transactions and quotations for the same or other securities believed to be comparable in quality, coupon, maturity, type of issue, call provisions, trading characteristics and other features deemed to be relevant. Short-term debt securities having a maturity date of more than sixty days at time of purchase are valued on a mark-to-market basis until sixty days prior to maturity and thereafter at amortized cost based on their value on the 61st day. Short-term debt securities having a maturity date of sixty days or less at the time of purchase are valued at amortized cost. B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses on security transactions are determined by the identified cost method. The Trust amortizes premiums and accretes discounts over the life of the respective securities. Interest income is accrued daily. C. FEDERAL INCOME TAX STATUS -- It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable and nontaxable income to its shareholders. Accordingly, no federal income tax provision is required. D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Trust records dividends and distributions to its shareholders on the ex-dividend date. The amount of dividends and distributions from net investment 14 MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST NOTES TO FINANCIAL STATEMENTS October 31, 1999, continued income and net realized capital gains are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification. Dividends and distributions which exceed net investment income and net realized capital gains for financial reporting purposes but not for tax purposes are reported as dividends in excess of net investment income or distributions in excess of net realized capital gains. To the extent they exceed net investment income and net realized capital gains for tax purposes, they are reported as distributions of paid-in-capital. 2. INVESTMENT MANAGEMENT AGREEMENT Pursuant to an Investment Management Agreement with Morgan Stanley Dean Witter Advisors Inc. (the "Investment Manager"), the Trust pays a management fee, calculated weekly and payable monthly, by applying the annual rate of 0.35% to the Trust's weekly net assets. Under the terms of the Agreement, in addition to managing the Trust's investments, the Investment Manager maintains certain of the Trust's books and records and furnishes, at its own expense, office space, facilities, equipment, clerical, bookkeeping and certain legal services and pays the salaries of all personnel, including officers of the Trust who are employees of the Investment Manager. The Investment Manager also bears the cost of telephone services, heat, light, power and other utilities provided to the Trust. 3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES The cost of purchases and proceeds from sales of portfolio securities, excluding short-term investments, for the year ended October 31, 1999 aggregated $29,774,963 and $33,530,610, respectively. Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager, is the Trust's transfer agent. At October 31, 1999, the Trust had transfer agent fees and expenses payable of approximately $250. The Trust has an unfunded noncontributory defined benefit pension plan covering all independent Trustees of the Trust who will have served as independent Trustees for at least five years at the time of retirement. Benefits under this plan are based on years of service and compensation during the last five years of service. Aggregate pension costs for the year ended October 31, 1999 included in Trustees' fees 15 MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST NOTES TO FINANCIAL STATEMENTS October 31, 1999, continued and expenses in the Statement of Operations amounted to $5,668. At October 31, 1999, the Trust had an accrued pension liability of $43,111, which is included in accrued expenses in the Statement of Assets and Liabilities. 4. PREFERRED SHARES OF BENEFICIAL INTEREST The Trust is authorized to issue up to 1,000,000 non-participating preferred shares of beneficial interest having a par value of $.01 per share, in one or more series, with rights as determined by the Trustees, without approval of the common shareholders. The Trust has issued Auction Rate Preferred Shares ("Preferred Shares") which have a liquidation value of $50,000 per share plus the redemption premium, if any, plus accumulated but unpaid dividends, whether or not declared, thereon to the date of distribution. The Trust may redeem such shares, in whole or in part, at the original purchase price of $50,000 per share plus accumulated but unpaid dividends, whether or not declared, thereon to the date of redemption. Dividends, which are cumulative, are reset through auction procedures.
AMOUNT IN RESET RANGE OF SHARES* THOUSANDS* RATE* DATE DIVIDEND RATES** - --------- ------------ ------------ ------------ ----------------- 600 $30,000 3.85% 07/06/00 3.65% - 3.85%
- --------------- * As of October 31, 1999. ** For the year ended October 31, 1999. Subsequent to October 31, 1999 and up through December 3, 1999, the Trust paid dividends at a rate of 3.85% in the aggregate amount of $193,026. The Trust is subject to certain restrictions relating to the preferred shares. Failure to comply with these restrictions could preclude the Trust from declaring any distributions to common shareholders or purchasing common shares and/or could trigger the mandatory redemption of preferred shares at liquidation value. The preferred shares, which are entitled to one vote per share, generally vote with the common shares but vote separately as a class to elect two Trustees and on any matters affecting the rights of the preferred shares. 16 MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST NOTES TO FINANCIAL STATEMENTS October 31, 1999, continued 5. COMMON SHARES OF BENEFICIAL INTEREST Transactions in common shares of beneficial interest were as follows:
CAPITAL PAID IN EXCESS OF SHARES PAR VALUE PAR VALUE ------------- ----------- -------------- Balance, October 31, 1997 and 1998 ....................................... 5,137,563 $51,376 $70,886,557 Treasury shares purchased and retired (weighted average discount 10.16%)* (42,000) (420) (531,503) --------- ------- ----------- Balance, October 31, 1999 ................................................ 5,095,563 $50,956 $70,355,054 ========= ======= ===========
- --------------- * The Trustees have voted to retire the shares purchased. 6. FEDERAL INCOME TAX STATUS At October 31, 1999, the Trust had a net capital loss carryover of approximately $370,000, which may be used to offset future capital gains to the extent provided by regulations, which will be available through October 31 of the following years: AMOUNT IN THOUSANDS - -------------------------- 2004 2005 2007 - ------- ------ ------ $48 $28 $294 === === ==== 7. DIVIDENDS TO COMMON SHAREHOLDERS On September 28, 1999, the Trust declared the following dividends from net investment income: AMOUNT RECORD PAYABLE PER SHARE DATE DATE - --------- ---------------- ----------------- $0.0725 November 5, 1999 November 19, 1999 $0.0725 December 3, 1999 December 17, 1999 17 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* ------------------------------ 1999 1998 ------------- ---------- SELECTED PER SHARE DATA: Net asset value, beginning of period ....................... $ 15.64 $ 15.53 ------- ------- Income (loss) from investment operations: Net investment income ..................................... 1.11 1.20 Net realized and unrealized gain (loss) ................... (1.53) 0.11 ------- ------- Total income (loss) from investment operations ............. (0.42) 1.31 ------- ------- Less dividends from: Net investment income ..................................... (0.92) (0.99) Common share equivalent of dividends paid to preferred shareholders ............................................. (0.22) (0.21) ------- ------- Total dividends ............................................ (1.14) (1.20) ------- ------- Anti-dilutive effect of acquiring treasury shares .......... 0.01 -- ------- ------- Net asset value, end of period ............................. $ 14.09 $ 15.64 ======= ======= Market value, end of period ................................ $ 12.50 $16.125 ======= ======= TOTAL RETURN+ .............................................. (17.60)% 7.03% RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS: Total expenses ............................................. 0.91 %(1) 0.87%(1) Net investment income before preferred stock dividends ..... 7.36 % 7.65% Preferred stock dividends .................................. 1.44 % 1.37% Net investment income available to common shareholders ..... 5.92 % 6.28% SUPPLEMENTAL DATA: Net assets, end of period, in thousands .................... $101,786 $110,341 Asset coverage on preferred shares at end of period ........ 338 % 367% Portfolio turnover rate .................................... 29 % 6% FOR THE YEAR ENDED OCTOBER 31* -------------------------------------------- 1997 1996 1995 ----------- ----------- ----------- SELECTED PER SHARE DATA: Net asset value, beginning of period ....................... $15.35 $ 15.41 $ 14.16 ------ ------- ------- Income (loss) from investment operations: Net investment income ..................................... 1.20 1.21 1.22 Net realized and unrealized gain (loss) ................... 0.16 (0.17) 1.30 ------ ------- ------- Total income (loss) from investment operations ............. 1.36 1.04 2.52 ------ ------- ------- Less dividends from: Net investment income ..................................... (0.96) (0.90) (1.04) Common share equivalent of dividends paid to preferred shareholders ............................................. (0.22) (0.22) (0.23) ------ ------- ------- Total dividends ............................................ (1.18) (1.12) (1.27) ------ ------- ------- Anti-dilutive effect of acquiring treasury shares .......... -- 0.02 -- ------ ------- ------- Net asset value, end of period ............................. $15.53 $ 15.35 $ 15.41 ====== ======= ======= Market value, end of period ................................ $16.00 $14.125 $14.625 ====== ======= ======= TOTAL RETURN+ .............................................. 20.62% 3.06% 22.10% RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS: Total expenses ............................................. 0.89%(1) 0.92% 0.91%(1) Net investment income before preferred stock dividends ..... 7.80% 7.85% 8.16% Preferred stock dividends .................................. 1.43% 1.41% 1.53% Net investment income available to common shareholders ..... 6.37% 6.44% 6.63% SUPPLEMENTAL DATA: Net assets, end of period, in thousands .................... $109,806 $109,232 $110,718 Asset coverage on preferred shares at end of period ........ 365% 363% 369% Portfolio turnover rate .................................... 2% 5% 6%
- ------------- * The per share amounts were computed using an average number of shares outstanding during the period. + Total return is based upon the current market value on the last day of each period reported. Dividends and distributions are assumed to be reinvested at the prices obtained under the Trust's dividend reinvestment plan. Total return does not reflect brokerage commissions. (1) Does not reflect the effect of expense offset of 0.01%. SEE NOTES TO FINANCIAL STATEMENTS 18 MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST REPORT OF INDEPENDENT ACCOUNTANTS TO THE SHAREHOLDERS AND TRUSTEES OF MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Morgan Stanley Dean Witter Insured Municipal Bond Trust (the "Trust") at October 31, 1999, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trust's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 1999 by correspondence with the custodian, provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP 1177 Avenue of the Americas New York, New York 10036 December 8, 1999 1999 FEDERAL TAX NOTICE (unaudited) For the year ended October 31, 1999, all of the Trust's dividends from net investment income received by both common and preferred shareholder classes were exempt interest dividends, excludable from gross income for Federal income tax purposes. 19 TRUSTEES - ------------------------------------------ Michael Bozic Charles A. Fiumefreddo Edwin J. Garn Wayne E. Hedien Dr. Manuel H. Johnson Michael E. Nugent Philip J. Purcell John L. Schroeder OFFICERS - ------------------------------------------ Charles A. Fiumefreddo Chairman and Chief Executive Officer Mitchell M. Merin President Barry Fink Vice President, Secretary and General Counsel James F. Willison Vice President Thomas F. Caloia Treasurer TRANSFER AGENT - ------------------------------------------ Morgan Stanley Dean Witter Trust FSB Harborside Financial Center - Plaza Two Jersey City, New Jersey 07311 INDEPENDENT ACCOUNTANTS - ------------------------------------------ PricewaterhouseCoopers LLP 1177 Avenue of the Americas New York, New York 10036 INVESTMENT MANAGER - ------------------------------------------ Morgan Stanley Dean Witter Advisors Inc. Two World Trade Center New York, New York 10048 MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL BOND TRUST ANNUAL REPORT OCTOBER 31, 1999 -----END PRIVACY-ENHANCED MESSAGE-----