<PAGE>
MORGAN STANLEY DEAN WITTER CALIFORNIA INSURED Two World Trade Center,
MUNICIPAL INCOME TRUST New York, New York 10048
LETTER TO THE SHAREHOLDERS April 30, 1999
DEAR SHAREHOLDER:
We are pleased to present the semiannual report on the operations of Morgan
Stanley Dean Witter California Insured Municipal Income Trust (IIC) for the
period ended April 30, 1999.
The financial markets have begun to recover from last year's global economic
difficulties. The turmoil which included the Asian crisis, the Russian debt
default and the rescue of a major U.S. hedge fund has given way to more normal
financial conditions. The major catalyst for this return to stability was the
liquidity provided by the Federal Reserve Board's 75 basis point reduction in
the federal-funds rate during the fourth quarter of 1998.
International economic problems precipitated a "flight to quality" rally in
fixed income securities and U.S. Treasury yields reached 30-year lows in
October 1998. As the world markets recovered, foreign investors repatriated
funds and Treasury yields began to rise. Interest rates also rose in response
to the surprisingly robust domestic economic growth reported over the second
half of 1998. The bond market became concerned that the central bank might
become more restrictive by taking back some of the liquidity provided during
the crisis.
MUNICIPAL MARKET CONDITIONS
During 1998, municipal yields were less volatile than Treasury yields. This
pattern of stability continued into 1999. Long-term insured index yields stood
at 5.25 percent at the end of April, only 20 basis points higher than their
October 1998 levels. In contrast, Treasury bond yields rose 50 basis points
from 5.15 to 5.65 percent. During the past six months, the yield pick up for
extending tax-exempt maturities from one to 30 years averaged 225 basis points.
The modest rally of municipals during 1998 created a favorable relative
value relationship to Treasuries. Municipals underperformed Treasuries and the
ratio of municipal yields to Treasury yields climbed to 99 percent by December.
The higher the ratio, the more attractive municipals are relative to Treasuries.
Municipals have outperformed Treasuries this year and the ratio declined to 92
percent by April. The
<PAGE>
MORGAN STANLEY DEAN WITTER CALIFORNIA INSURED MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS April 30, 1999, continued
high-to-low annual range of municipal/Treasury yields for the past five years
has averaged 93 to 84 percent.
In addition to lagging 1998's Treasury rally, municipals also experienced a
glut of new-issue supply. Underwriting volume of $284 billion was up 28 percent
from the prior year and approached 1993's record. Issuers actively refinanced
at lower interest rates and refundings were 29 percent of the total volume.
This year's rise in interest rates has reduced the amount of refunding
activity. Refunding volume was down 42 percent in the first four months of 1999
while total underwriting declined 22 percent.
PERFORMANCE
The Trust's net asset value (NAV) decreased from $15.00 per share to $14.88 per
share for the six-month period ended April 30, 1999. Based on this change plus
reinvestment of tax-free dividends totaling $0.375 per share, the Trust's total
NAV return was 1.76 percent. IIC's value on the New York Stock Exchange
increased from $14.4375 to $14.6875 per share during the same period. Based on
this change plus reinvestment of tax-free dividends, IIC's total market return
was 4.36 percent. As of April 30, 1999, IIC's share price was a 1.29 percent
discount to its NAV.
DATE AAA INS TSY % RELATIONSHIP
12/31/93 5.40% 6.34% 85.17%
01/31/94 5.40 6.24 86.54%
02/28/94 5.80 6.66 87.09%
03/31/94 6.40 7.09 90.27%
04/29/94 6.35 7.32 86.75%
05/31/94 6.25 7.43 84.12%
06/30/94 6.50 7.61 85.41%
07/29/94 6.25 7.39 84.57%
08/31/94 6.30 7.45 84.56%
09/30/94 6.55 7.81 83.87%
10/31/94 6.75 7.96 84.80%
11/30/94 7.00 8.00 87.50%
12/30/94 6.75 7.88 85.66%
01/31/95 6.40 7.70 83.12%
02/28/95 6.15 7.44 82.66%
03/31/95 6.15 7.43 82.77%
04/28/95 6.20 7.34 84.47%
05/31/95 5.80 6.66 87.09%
06/30/95 6.10 6.62 92.15%
07/31/95 6.10 6.86 88.92%
08/31/95 6.00 6.66 90.09%
09/29/95 5.95 6.48 91.82%
10/31/95 5.75 6.33 90.84%
11/30/95 5.50 6.14 89.58%
12/29/95 5.35 5.94 90.07%
01/31/96 5.40 6.03 89.55%
02/29/96 5.60 6.46 86.69%
03/29/96 5.85 6.66 87.84%
04/30/96 5.95 6.89 86.36%
05/31/96 6.05 6.99 86.55%
06/28/96 5.90 6.89 85.63%
07/31/96 5.85 6.97 83.93%
08/30/96 5.90 7.11 82.98%
09/30/96 5.70 6.93 82.25%
10/31/96 5.65 6.64 85.09%
11/29/96 5.50 6.35 86.61%
12/31/96 5.60 6.63 84.46%
01/31/97 5.70 6.79 83.95%
02/28/97 5.65 6.80 83.09%
03/31/97 5.90 7.10 83.10%
04/30/97 5.75 6.94 82.85%
05/30/97 5.65 6.91 81.77%
06/30/97 5.60 6.78 82.60%
07/30/97 5.30 6.30 84.13%
08/31/97 5.50 6.61 83.21%
09/30/97 5.40 6.40 84.38%
10/31/97 5.35 6.15 86.99%
11/30/97 5.30 6.05 87.60%
12/31/97 5.15 5.92 86.99%
01/31/98 5.15 5.80 88.79%
02/28/98 5.20 5.92 87.84%
03/31/98 5.25 5.93 88.53%
04/30/98 5.35 5.95 89.92%
05/29/98 5.20 5.80 89.66%
06/30/98 5.20 5.65 92.04%
07/31/98 5.18 5.71 90.72%
08/31/98 5.03 5.27 95.45%
09/30/98 4.95 5.00 99.00%
10/31/98 5.05 5.16 97.87%
11/30/98 5.00 5.06 98.81%
12/31/98 5.05 5.10 99.02%
01/31/99 5.00 5.09 98.23%
02/28/99 5.10 5.58 91.40%
03/31/99 5.15 5.63 91.47%
04/30/99 5.20 5.66 91.87%
2
<PAGE>
MORGAN STANLEY DEAN WITTER CALIFORNIA INSURED MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS April 30, 1999, continued
LARGEST SECTORS AS OF APRIL 30, 1999
(% OF NET ASSETS)
Water & Sewer 20%
Public Facilities 17%
Tax Allocation 14%
Electric 13%
General Obligation 9%
Refunded 9%
Hospital 7%
Transportation 7%
Portfolio structure is subject to change.
CREDIT ENHANCEMENTS AS OF APRIL 30, 1999
(% OF TOTAL LONG-TERM PORTFOLIO)
MBIA 54%
AMBAC 23%
FGIC 19%
FSA 4%
Portfolio structure is subject to change.
CALL STRUCTURE AS OF APRIL 30, 1999 WEIGHTED AVERAGE
(% OF TOTAL LONG-TERM PORTFOLIO) CALL PROTECTION: 6 YEARS
PERCENT CALLABLE
Years Bonds Callable
1998 0%
1999 0%
2000 2%
2001 0%
2002 17%
2003 65%
2004 1%
2005 1%
2006 1%
2007 2%
2008 3%
2009 1%
2010+ 7%
Portfolio structure is subject to change.
3
<PAGE>
MORGAN STANLEY DEAN WITTER CALIFORNIA INSURED MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS April 30, 1999, continued
Monthly dividends for the second quarter of 1999 remained $0.0625 per share.
The Trust's level of undistributed net investment income was $0.110 per share
on April 30, 1999.
PORTFOLIO STRUCTURE
The Trust's investments were diversified among 10 long-term sectors and 41
credits. At the end of April, the portfolio's average maturity was 19 years.
Portfolio duration, a measure of sensitivity to interest-rate changes, was 5.2
years. Issues in the refunded bond category comprised 9 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 call structure, largest sectors and mix of credit enhancements.
THE IMPACT OF LEVERAGING
As discussed in previous 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 the ARPS expenses (ARPS
auction rate and expenses). The greater the spread and the larger the 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.
During this six-month period, ARPS leverage contributed approximately $0.03 per
share to common share earnings. Weekly ARPS yields ranged between 2.38 and 4.75
percent. Four ARPS series totaling $65 million represented 25 percent of net
assets.
ARPS leverage also increases the price volatility of common shares and has the
effect of extending portfolio duration.
LOOKING AHEAD
The combination of a flight to quality and the flood of new municipal issues
made the municipal-to- Treasury yield relationship more favorable late last
year than it had been in the previous 10 years. Although municipals have thus
far outperformed Treasuries in 1999, we believe that municipals still offer
investors considerable value versus their historical 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 addition, we would like to
remind you that the Trustees have approved a procedure whereby the Trust
4
<PAGE>
MORGAN STANLEY DEAN WITTER CALIFORNIA INSURED MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS April 30, 1999, continued
may, when appropriate, purchase shares in the open market or in privately
negotiated transactions at a price not above market value or net asset value,
whichever is lower at the time of purchase. The Trust may also utilize
procedures to reduce or eliminate the amount of outstanding ARPS, including
their purchase in the open market or in privately negotiated transactions.
During this six-month period, the Trust purchased and retired 6,800 shares of
common stock at a weighted average market discount of 3.27 percent.
On May 1, 1999, Mitchell M. Merin was named President of the Morgan Stanley
Dean Witter Funds. Mr. Merin is also the President and Chief Operating Officer
of Asset Management of Morgan Stanley Dean Witter & Co. and President, Chief
Executive Officer and Director of Morgan Stanley Dean Witter Advisors Inc., the
Trust's Investment Manager. He also serves as Chairman, Chief Executive Officer
and Director of Morgan Stanley Dean Witter Distributors Inc. and Morgan Stanley
Dean Witter Trust FSB.
We appreciate your ongoing support of Morgan Stanley Dean Witter California
Insured Municipal Income 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
5
<PAGE>
MORGAN STANLEY DEAN WITTER CALIFORNIA INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS April 30, 1999 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- ---------- ---------- ---------------
<S> <C> <C> <C> <C>
CALIFORNIA TAX-EXEMPT MUNICIPAL BONDS (97.9%)
General Obligation (9.2 %)
California,
$ 9,000 Various Purpose Dtd 04/01/93 (FSA) ....................................... 5.50 % 04/01/19 $ 9,344,340
4,000 Veterans Ser BD, BE & BF (AMT) (AMBAC) ................................... 6.375 02/01/27 4,048,320
2,000 Refg Dtd 10/01/98 (MBIA) ................................................. 4.50 10/01/28 1,809,660
Industry,
3,000 Refg Issue of 1993 (MBIA) ................................................ 5.50 07/01/13 3,129,870
4,900 Refg Issue of 1993 (MBIA) ................................................ 5.50 07/01/16 5,087,523
------- ------------
22,900 23,419,713
------- ------------
Educational Facilities Revenue (0.4 %)
1,000 California Educational Facilities Authority, Santa Clara University
------- Ser 1999 (AMBAC) .......................................................... 5.25 09/01/18 1,044,620
------------
Electric Revenue (12.8 %)
5,000 Los Angeles Department of Water & Power, Refg Issue of 1993
(Secondary MBIA) ........................................................ 5.875 09/01/30 5,362,900
8,000 M-S-R Public Power Agency, San Juan Refg Ser F (AMBAC) .................... 6.00 07/01/20 8,692,400
7,000 Northern California Transmission Agency, California -- Oregon
Transmission Refg Ser 1993 A (MBIA) ...................................... 5.25 05/01/20 7,086,170
Sacramento Municipal Utility District,
3,000 Refg 1993 Ser D (FGIC) ................................................... 5.25 11/15/12 3,131,400
7,000 Refg 1993 Ser D (MBIA) ................................................... 5.625 11/15/15 7,332,220
1,080 Puerto Rico Electric Power Authority, Power Ser GG (FSA) .................. 4.75 07/01/21 1,038,398
------- ------------
31,080 32,643,488
------- ------------
Hospital Revenue (7.0 %)
4,150 Bakersfield, Adventist Health West Ser 1993 (MBIA) ........................ 5.50 03/01/19 4,259,934
California Health Facilities Financing Authority,
3,000 Cedars -- Sinai Medical Center Ser 1997 A (MBIA) ......................... 5.25 08/01/27 3,040,110
3,000 Children's Hospital -- San Diego Ser 1993 (MBIA) ......................... 5.75 07/01/23 3,142,260
5,000 California Statewide Communities Development Authority,
UniHealth America 1993 Ser A COPs (AMBAC) ................................ 5.50 10/01/14 5,370,050
2,000 Marysville, Fremont -- Rideout Group Health Refg Ser 1993-A (AMBAC) ....... 5.55 01/01/13 2,121,660
------- ------------
17,150 17,934,014
------- ------------
Mortgage Revenue -- Single Family (1.2 %)
3,000 California Housing Financing Agency, Home 1996 Ser E (AMT) (MBIA) ......... 6.05 08/01/15 3,183,690
------- ------------
Public Facilities Revenue (16.9 %)
10,000 Alameda County, Santa Rita Jail 1993 Refg COPs (MBIA) ..................... 5.70 12/01/14 10,810,900
14,000 Beverly Hills Public Financing Authority, 1993 Refg Ser A (MBIA) .......... 5.65 06/01/15 14,747,880
9,000 California Public Works Board, Corrections Refg 1993 Ser B (MBIA) ......... 5.50 12/01/12 9,639,720
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
MORGAN STANLEY DEAN WITTER CALIFORNIA INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS April 30, 1999 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- ---------- ---------- ---------------
<S> <C> <C> <C> <C>
$ 3,000 Irvine Unified School District -- Community Facilities District #86-1,
Special Tax Ser 1998 (AMBAC) .......................................... 5.00% 11/01/19 $ 2,992,380
5,000 Modesto, Community Center Refg 1993 Ser A COPs (AMBAC) .................. 5.00 11/01/23 5,007,000
------- ------------
41,000 43,197,880
------- ------------
Tax Allocation Revenue (14.3 %)
7,000 Long Beach Financing Authority, Ser 1992 (AMBAC) ........................ 5.50 11/01/22 7,151,760
5,000 Orange Redevelopment Agency, Southwest Refg Issue of 1993 A (AMBAC)...... 5.70 10/01/23 5,266,050
6,000 Port Hueneme Redevelopment Agency, Central Community 1993 Refg
(AMBAC) ............................................................... 5.50 05/01/23 6,210,480
5,000 Poway Redevelopment Agency, Paguay Sub Refg Ser 1993 (FGIC) ............. 5.50 12/15/23 5,190,550
3,000 Riverside Redevelopment Agency, Merged Refg 1993 Ser A (MBIA) ........... 5.625 08/01/23 3,138,960
5,000 Santa Clara Redevelopment Agency, Bayshore North 1992 Refg (AMBAC) ...... 5.75 07/01/14 5,366,100
4,000 Simi Valley Public Financing Authority, 1993 Refg (MBIA) ................ 5.50 09/01/15 4,137,760
------- ------------
35,000 36,461,660
------- ------------
Transportation Facilities Revenue (6.8 %)
2,000 Alameda Corridor Transportation Authority, Sr Lien Ser 1999 A (MBIA) .... 5.25 10/01/21 2,043,900
6,000 Los Angeles County Metropolitan Transportation Authority, Sales Tax
Refg Ser 1993-A (MBIA) ................................................ 5.625 07/01/18 6,248,160
4,230 San Francisco Airports Commission, San Francisco Int'l Airport
Second Ser Refg Issue 2 (MBIA) ........................................ 6.75 05/01/20 4,715,181
San Francisco Bay Area Rapid Transit District,
1,255 Sales Tax Ser 1995 (FGIC) .............................................. 5.50 07/01/20 1,306,129
1,000 Sales Tax Ser 1998 (AMBAC) ............................................. 4.75 07/01/23 950,290
2,000 San Joaquin Hills Transportation Corridor Agency, Toll Road
Refg Ser 1997 A (MBIA) ................................................ 5.25 01/15/30 2,025,640
------- ------------
16,485 17,289,300
------- ------------
Water & Sewer Revenue (20.2 %)
10,000 California Department of Water Resources, Central Valley Ser L
(Secondary MBIA) ...................................................... 5.75 12/01/19 10,610,300
2,000 East Bay Municipal Utility District, Water Ser 1998 (MBIA) .............. 4.75 06/01/34 1,867,600
7,000 Eastern Municipal Water District, Ser 1993-A COPs (FGIC) ................ 5.25 07/01/23 7,061,810
10,000 Los Angeles, Wastewater Refg Ser 1993-A (MBIA) .......................... 5.80 06/01/21 10,639,600
3,000 Oceanside, Water 1993 Refg COPs (AMBAC) ................................. 5.70 08/01/14 3,230,970
3,500 Redding Joint Powers Financing Authority, Wastewater Refg 1992 Ser A
(FGIC) ................................................................ 6.00 12/01/11 3,805,795
5,000 Santa Maria, Local Water & Refg Ser 1993 COPs (FGIC) .................... 5.50 08/01/21 5,146,400
9,000 South County Regional Wastewater Authority, Morgan Hill Ser 1992 B
(FGIC) ................................................................ 5.50 08/01/22 9,280,260
------- ------------
49,500 51,642,735
------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
MORGAN STANLEY DEAN WITTER CALIFORNIA INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS April 30, 1999 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- ---------- -------------- --------------
<S> <C> <C> <C> <C>
Refunded (9.1%)
$ 12,000 Southern California Public Power Authority, Power 1993 Sub Refg Ser A
(FGIC) (ETM) ............................................................ 5.45% 07/01/17 $ 12,696,840
10,000 Puerto Rico Telephone Authority, Refg Ser M (MBIA) ........................ 5.45 01/01/03+ 10,635,100
-------- ------------
22,000 23,331,940
-------- ------------
239,115 TOTAL CALIFORNIA TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $235,611,997)......................... 250,149,040
-------- ------------
CALIFORNIA TAX-EXEMPT SHORT-TERM MUNICIPAL OBLIGATIONS (0.5%)
1,000 California Pollution Control Financing Authority, Pacific Gas & Electric Co
Ser 1996 F (Demand 05/03/99) ............................................ 4.25* 11/01/26 1,000,000
400 California Statewide Communities Development Authority, John
Muir/Mt Diablo Health COPs (AMBAC) (Demand 05/03/99) .................... 4.10* 08/15/27 400,000
-------- ------------
1,400 TOTAL CALIFORNIA TAX-EXEMPT SHORT-TERM MUNICIPAL OBLIGATIONS
-------- (Identified Cost $1,400,000) ...................................................................... 1,400,000
------------
$240,515 TOTAL INVESTMENTS (Identified Cost $237,011,997) (a)................................ 98.4% 251,549,040
========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ..................................... 1.6 4,095,059
----- ------------
NET ASSETS ......................................................................... 100.0% $255,644,099
===== ============
</TABLE>
- ---------------
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
ETM Escrowed to maturity.
+ 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
$14,679,612 and the aggregate gross unrealized depreciation is $142,569,
resulting in net unrealized appreciation of $14,537,043.
Bond Insurance:
- --------------
AMBAC AMBAC Indemnity Corporation.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
MORGAN STANLEY DEAN WITTER CALIFORNIA INSURED MUNICIPAL INCOME TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1999 (unaudited)
<TABLE>
<S> <C>
ASSETS :
Investments in securities, at value
(identified cost $237,011,997)................. $251,549,040
Cash ............................................. 9,524
Interest receivable .............................. 4,345,922
Prepaid expenses ................................. 74,168
------------
TOTAL ASSETS ................................ 255,978,654
------------
LIABILITIES:
Payable for:
Dividends to preferred shareholders ......... 154,600
Investment management fee ................... 86,096
Accrued expenses ................................. 93,859
------------
TOTAL LIABILITIES ........................... 334,555
------------
NET ASSETS .................................. $255,644,099
============
COMPOSITION OF NET ASSETS:
Preferred shares of beneficial interest
(1,000,000 shares authorized of
non-participating $.01 par value,
1,300 shares outstanding) ..................... $ 65,000,000
------------
Common shares of beneficial interest
(unlimited shares authorized of
$.01 par value, 12,808,913 shares
outstanding) .................................. 180,508,176
Net unrealized appreciation ...................... 14,537,043
Accumulated undistributed net investment
income ........................................ 1,405,186
Accumulated net realized loss .................... (5,806,306)
------------
NET ASSETS APPLICABLE TO COMMON
SHAREHOLDERS ............................. 190,644,099
------------
TOTAL NET ASSETS ............................ $255,644,099
============
NET ASSET VALUE PER COMMON SHARE
($190,644,099 divided by 12,808,913
common shares outstanding) .................... $14.88
======
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended April 30, 1999 (unaudited)
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ............................... $6,666,383
----------
EXPENSES
Investment management fee ..................... 445,823
Auction commission fees ....................... 108,495
Professional fees ............................. 46,065
Transfer agent fees and expenses .............. 20,199
Auction agent fees ............................ 16,544
Registration fees ............................. 12,659
Shareholder reports and notices ............... 12,628
Trustees' fees and expenses ................... 9,853
Custodian fees ................................ 5,473
Other ......................................... 17,743
----------
TOTAL EXPENSES ........................... 695,482
Less: expense offset .......................... (5,423)
----------
NET EXPENSES ............................. 690,059
----------
NET INVESTMENT INCOME .................... 5,976,324
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain ............................. 93,419
Net change in unrealized appreciation ......... (1,705,322)
----------
NET LOSS ................................. (1,611,903)
----------
NET INCREASE .................................. $4,364,421
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
MORGAN STANLEY DEAN WITTER CALIFORNIA INSURED MUNICIPAL INCOME TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
APRIL 30, 1999 OCTOBER 31, 1998
---------------- -----------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................... $ 5,976,324 $ 12,055,419
Net realized gain ....................................... 93,419 841,577
Net change in unrealized appreciation ................... (1,705,322) 8,536,604
------------ -------------
NET INCREASE ......................................... 4,364,421 21,433,600
------------ -------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Preferred ............................................... (1,105,858) (2,380,800)
Common .................................................. (4,804,952) (9,642,125)
------------ -------------
TOTAL DIVIDENDS ...................................... (5,910,810) (12,022,925)
------------ -------------
Decrease from transactions in common shares of beneficial
interest .............................................. (98,279) (1,247,652)
------------ -------------
NET INCREASE (DECREASE) .............................. (1,644,668) 8,163,023
NET ASSETS:
Beginning of period ..................................... 257,288,767 249,125,744
------------ -------------
END OF PERIOD
(Including undistributed net investment income of
$1,405,186 and $1,339,672, respectively) ............. $255,644,099 $ 257,288,767
============ =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
MORGAN STANLEY DEAN WITTER CALIFORNIA INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1999 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter California Insured Municipal Income Trust (the
"Trust") is registered under the Investment Company Act of 1940, as amended, as
a non-diversified, closed-end management investment company. The Trust's
investment objective is to provide current income which is exempt from both
federal and California income taxes. The Trust was organized as a Massachusetts
business trust on November 2, 1992 and commenced operations on February 26,
1993.
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
11
<PAGE>
MORGAN STANLEY DEAN WITTER CALIFORNIA INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1999 (unaudited) 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, 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.
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 six months ended April 30, 1999
aggregated $3,091,590 and $3,346,796, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager,
is the Trust's transfer agent. At April 30, 1999, the Trust had transfer agent
fees and expenses payable of approximately $200.
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 six months ended April 30, 1999
included in Trustees' fees and expenses in the Statement of Operations amounted
to $3,265. At April 30, 1999, the Trust had an accrued pension liability of
$36,500 which is included in accrued expenses in the Statement of Assets and
Liabilities.
12
<PAGE>
MORGAN STANLEY DEAN WITTER CALIFORNIA INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1999 (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 Series 1 through 4 Auction Rate
Preferred Shares ("Preferred Shares") which have a liquidation value of $50,000
per share plus the redemption premium, if any, plus accumulated but unpaid
dividends, whether or not declared, thereon to the date of distribution. The
Trust may redeem such shares, in whole or in part, at the original purchase
price of $50,000 per share plus accumulated but unpaid dividends, whether or
not declared, thereon to the date of redemption.
Dividends, which are cumulative, are reset through auction procedures.
<TABLE>
<CAPTION>
AMOUNT IN RESET RANGE OF
SERIES SHARES* THOUSANDS* RATE* DATE DIVIDEND RATES**
- -------- --------- ------------ ------------ ---------- -------------------
<S> <C> <C> <C> <C> <C>
1 200 $10,000 3.50 % 05/03/99 2.38% -- 3.55%
2 400 20,000 3.489 09/07/99 3.489
3 500 25,000 3.65 07/12/99 3.65
4 200 10,000 3.50 05/03/99 2.39 -- 4.75
</TABLE>
- ---------------
* As of April 30, 1999.
** For the six months ended April 30, 1999.
Subsequent to April 30, 1999 and up through June 4, 1999 the Trust paid
dividends to Series 1 through 4 at rates ranging from 2.60% to 3.65%,
respectively, in the aggregate amount of $331,864.
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.
13
<PAGE>
MORGAN STANLEY DEAN WITTER CALIFORNIA INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1999 (unaudited) continued
5. COMMON SHARES OF BENEFICIAL INTEREST
Transactions in common shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
CAPITAL
PAID IN
EXCESS OF
SHARES PAR VALUE PAR VALUE
-------------- ----------- ---------------
<S> <C> <C> <C>
Balance, October 31, 1997 ................... 12,906,413 $129,064 $181,725,043
Treasury shares purchased and retired
(weighted average discount 6.02%)* ......... (90,700) (907) (1,246,745)
---------- -------- ------------
Balance, October 31, 1998 ................... 12,815,713 128,157 180,478,298
Treasury shares purchased and retired
(weighted average discount 3.27%)* ......... (6,800) (68) (98,211)
---------- -------- ------------
Balance, April 30, 1999 ..................... 12,808,913 $128,089 $180,380,087
========== ======== ============
</TABLE>
- ---------------
* The Trustees have voted to retire the shares purchased.
6. FEDERAL INCOME TAX STATUS
At October 31, 1998, the Trust had a net capital loss carryover of
approximately $5,900,000, which may be used to offset future capital gains to
the extent provided by regulations, which is available through October 31 in
the following years:
AMOUNT IN THOUSANDS
- -------------------------------
2002 2003 2004
---- ---- ----
$3,683 $1,938 $279
====== ====== ====
7. DIVIDENDS TO COMMON SHAREHOLDERS
On March 30, 1999, the Trust declared the following dividends from net
investment income:
AMOUNT RECORD PAYABLE
PER SHARE DATE DATE
--------- ------------ -------------
$0.0625 May 7, 1999 May 21, 1999
$0.0625 June 4, 1999 June 18, 1999
14
<PAGE>
MORGAN STANLEY DEAN WITTER CALIFORNIA INSURED MUNICIPAL INCOME TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a common share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
APRIL 30, 1999*
------------------
(unaudited)
<S> <C>
SELECTED PER SHARE DATA:
Net asset value, beginning of period ......................... $ 15.00
---------
Income (loss) from investment operations:
Net investment income ....................................... 0.47
Net realized and unrealized gain (loss) ..................... (0.12)
---------
Total income (loss) from investment operations ............... 0.35
---------
Less dividends and distributions from:
Net investment income ....................................... (0.38)
Common share equivalent of dividends paid to preferred
shareholders ............................................... (0.09)
Net realized gain ........................................... --
---------
Total dividends and distributions ............................ (0.47)
---------
Anti-dilutive effect of acquiring treasury shares ............ --
---------
Net asset value, end of period ............................... $ 14.88
=========
Market value, end of period .................................. $ 14.688
=========
TOTAL RETURN+ ................................................ 4.36% (1)
RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS:
Total expenses ............................................... 0.73% (2)
Net investment income before preferred stock dividends ....... 6.28% (2)
Preferred stock dividends .................................... 1.16% (2)
Net investment income available to common shareholders ....... 5.12% (2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ...................... $255,644
Asset coverage on preferred shares at end of period .......... 392%
Portfolio turnover rate ...................................... 1% (1)
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31*
--------------------------------------------------------------------------
1998 1997 1996 1995 1994
-------------- ------------- ------------ ------------------ -----------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA:
Net asset value, beginning of period ................... $ 14.27 $ 13.55 $ 13.40 $ 11.29 $ 14.87
--------- -------- -------- --------- ---------
Income (loss) from investment operations:
Net investment income ................................. 0.94 0.94 0.93 0.92 1.07
Net realized and unrealized gain (loss) ............... 0.72 0.68 0.05 2.12 (3.57)
--------- -------- -------- --------- ---------
Total income (loss) from investment operations ......... 1.66 1.62 0.98 3.04 (2.50)
--------- -------- -------- --------- ---------
Less dividends and distributions from:
Net investment income ................................. (0.75) (0.75) (0.72) (0.77) (0.87)
Common share equivalent of dividends paid to preferred
shareholders ......................................... (0.19) (0.18) (0.17) (0.18) (0.20)
Net realized gain ..................................... -- -- -- -- (0.01)
--------- -------- -------- --------- ---------
Total dividends and distributions ...................... (0.94) (0.93) (0.89) (0.95) (1.08)
--------- -------- -------- --------- ---------
Anti-dilutive effect of acquiring treasury shares ...... 0.01 0.03 0.06 0.02 --
--------- -------- -------- --------- ---------
Net asset value, end of period ......................... $ 15.00 $ 14.27 $ 13.55 $ 13.40 $ 11.29
========= ======== ======== ========= =========
Market value, end of period ............................ $ 14.438 $ 13.375 $ 12.00 $ 11.75 $ 11.125
========= ======== ======== ========= =========
TOTAL RETURN+ .......................................... 13.88% 18.22% 8.54% 12.93% (22.82)%
RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS:
Total expenses ......................................... 0.74% (3) 0.74% 0.76% 0.81% (3) 0.89 %
Net investment income before preferred stock dividends . 6.39% 6.85% 6.93% 7.39% 8.12 %
Preferred stock dividends .............................. 1.26% 1.29% 1.24% 1.44% 1.54 %
Net investment income available to common shareholders . 5.13% 5.56% 5.69% 5.95% 6.58 %
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $257,289 $249,126 $244,210 $249,232 $243,676
Asset coverage on preferred shares at end of period .... 395% 382% 375% 383% 287 %
Portfolio turnover rate ................................ 5% 4% 1% 1% 12 %
</TABLE>
- -------------
* The per share amounts were computed using an average number of shares
outstanding during the period.
+ Total return is based upon the current market value on the last day of each
period reported. Dividends and distributions are assumed to be reinvested at
the prices obtained under the Trust's dividend reinvestment plan. Total
investment return does not reflect brokerage commissions.
(1) Not annualized.
(2) Annualized.
(3) Does not reflect the effect of expense offset of 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE>
TRUSTEE
- ---------------------------------------
Michael Bozic
Charles A. Fiumefreddo MORGAN STANLEY
Edwin J. Garn DEAN WITTER
Wayne E. Hedien CALIFORNIA
Dr. Manual H. Johnson INSURED
Michael E. Nugent MUNICIPAL
Philip J. Purcell INCOME TRUST
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
The financial statements included herein Semiannual Report
have been taken from the records of the April 30, 1999
Trust without examination by the independent
accountants and accordingly they do not
express an opinion thereon.
