<PAGE> 1
MORGAN STANLEY DEAN WITTER NEW YORK QUALITY MUNICIPAL SECURITIES
Two World Trade Center
LETTER TO THE SHAREHOLDERS October 31, 1999 New York, New York 10048
DEAR SHAREHOLDER:
The U.S. economy, led by consumer demand, 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.
<PAGE> 2
MORGAN STANLEY DEAN WITTER NEW YORK QUALITY MUNICIPAL SECURITIES
LETTER TO THE SHAREHOLDERS October 31, 1999, continued
30-YEAR BOND YIELDS 1994-1999
<TABLE>
<CAPTION>
Insured Municipal
Insured Yields as a Percent
Municipal Yields U.S. Treasury Yields of U.S. Treasury Yields
---------------- ---------------------- ------------------------
<S> <C> <C> <C>
1994 5.40% 6.34% 85.17%
5.40 6.24 86.54
5.80 6.66 87.09
6.40 7.09 90.27
6.35 7.32 86.75
6.25 7.43 84.12
6.50 7.61 85.41
6.25 7.39 84.57
6.30 7.45 84.56
6.55 7.81 83.87
6.75 7.96 84.80
7.00 8.00 87.50
6.75 7.88 85.66
1995 6.40 7.70 83.12
6.15 7.44 82.66
6.15 7.43 82.77
6.20 7.34 84.47
5.80 6.66 87.09
6.10 6.62 92.15
6.10 6.86 88.92
6.00 6.66 90.09
5.95 6.48 91.82
5.75 6.33 90.84
5.50 6.14 89.58
5.35 5.94 90.07
1996 5.40 6.03 89.55
5.60 6.46 86.69
5.85 6.66 87.84
5.95 6.89 86.36
6.05 6.99 86.55
5.90 6.89 85.63
5.85 6.97 83.93
5.90 7.11 82.98
5.70 6.93 82.25
5.65 6.64 85.09
5.50 6.35 86.61
5.60 6.63 84.46
1997 5.70 6.79 83.95
5.65 6.80 83.09
5.90 7.10 83.10
5.75 6.94 82.85
5.65 6.91 81.77
5.60 6.78 82.60
5.30 6.30 84.13
5.50 6.61 83.21
5.40 6.40 84.38
5.35 6.15 86.99
5.30 6.05 87.60
5.15 5.92 86.99
1998 5.15 5.80 88.79
5.20 5.92 87.84
5.25 5.93 88.53
5.35 5.95 89.92
5.20 5.80 89.66
5.20 5.65 92.04
5.18 5.71 90.72
5.03 5.27 95.45
4.95 5.00 99.00
5.05 5.16 97.87
5.00 5.06 98.81
5.05 5.10 99.02
1999 5.00 5.09 98.23
5.10 5.58 91.40
5.15 5.63 91.47
5.20 5.66 91.87
5.30 5.83 90.91
5.47 5.96 91.78
5.55 6.10 90.98
5.75 6.06 94.88
5.85 6.05 96.69
6.03 6.16 97.90
</TABLE>
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 New York Quality Municipal Securities (IQN) declined from $14.73 to
$13.03 per share for the fiscal year ended October 31, 1999. Based on this
change plus reinvestment of tax-free dividends totaling $0.7525 per share, the
Trust's total NAV return was -6.44 percent. IQN's value on the New York Stock
Exchange (NYSE) fell from $14.0625 to $12.3125 per share during the same period.
Based on this change plus reinvestment of tax-free dividends, the IQN's total
market return was -7.39 percent. On October 31, 1999, IQN's NYSE market price
represented a 5.51 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 increased from $0.0625 to
$0.065 per share. The new dividend rate reflects the Trust's estimated earnings
over the next 6-12 months and its $0.098 per share cushion of undistributed net
investment income on October 31, 1999.
2
<PAGE> 3
MORGAN STANLEY DEAN WITTER NEW YORK QUALITY MUNICIPAL SECURITIES
LETTER TO THE SHAREHOLDERS October 31, 1999, continued
PORTFOLIO STRUCTURE
The Trust's investments were diversified among 12 long-term sectors and 28
credits. At the end of October, the portfolio's average maturity was 18 years.
Average duration, a measure of sensitivity to interest rate changes, was 10
years. The accompanying charts provide current information on the portfolios
credit quality and sector distribution. 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 $0.07 per
share to common share earnings. Weekly ARPS yields ranged between 2.00 and 4.875
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
Trust's two ARPS series totaling $24 million represented 27 percent of net
assets.
LOOKING AHEAD
The Federal Reserve Board raised interest rates twice in the summer and again in
November. 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.
3
<PAGE> 4
MORGAN STANLEY DEAN WITTER NEW YORK QUALITY MUNICIPAL SECURITIES
LETTER TO THE SHAREHOLDERS October 31, 1999, continued
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, 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 93,300 shares of common stock at a weighted
average market discount of 6.27 percent.
We appreciate your ongoing support of Morgan Stanley Dean Witter New York
Quality Municipal Securities and look forward to continuing to serve your
investment needs.
<TABLE>
<S> <C>
Very truly yours,
/s/ CHARLES A. FIUMEFREDDO /s/ MITCHELL M. MERIN
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
</TABLE>
4
<PAGE> 5
MORGAN STANLEY DEAN WITTER NEW YORK QUALITY MUNICIPAL SECURITIES
LETTER TO THE SHAREHOLDERS October 31, 1999, continued
LARGEST SECTORS AS OF OCTOBER 31, 1999
(% OF NET ASSETS)
<TABLE>
<CAPTION>
GENERAL NURSING PUBLIC
HOSPITAL EDUCATION OBLIGATION MORTGAGE & HEALTH TRANSPORTATION ELECTRIC FACILITIES
-------- --------- ---------- -------- -------- -------------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
16.00% 13.00% 12.00% 9.00% 9.00% 8.00% 7.00% 7.00%
<CAPTION>
IDR/PCR*
-------
<S> <C>
5.00%
</TABLE>
* INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE.
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
CREDIT RATINGS AS OF OCTOBER 31, 1999
(% OF TOTAL LONG-TERM PORTFOLIO)
<TABLE>
<CAPTION>
Aaa/AAA Aa/AA A/A Baa/BBB
------- ----- --- -------
<S> <C> <C> <C> <C>
28.00% 22.00% 40.00% 10.00%
</TABLE>
AS MEASURED BY MOODY'S INVESTORS SERVICE, INC. OR
STANDARD & POOR'S CORP.
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
5
<PAGE> 6
MORGAN STANLEY DEAN WITTER NEW YORK QUALITY MUNICIPAL SECURITIES
LETTER TO THE SHAREHOLDERS October 31, 1999, continued
CALL AND COST (BOOK) YIELD STRUCTURE
OCTOBER 31, 1999
<TABLE>
<CAPTION>
PERCENT CALLABLE*
WEIGHTED AVERAGE
CALL PROTECTION: 6 YEARS
<S> <C>
1999 0.00%
2000 0.00%
2001 0.00%
2002 0.00%
2003 49.00%
2004 22.00%
2005 1.00%
2006 3.00%
2007 0.00%
2008 12.00%
2009 6.00%
2010+ 7.00%
<CAPTION>
COST (BOOK) YIELD **
WEIGHTED AVERAGE
BOOK YIELD: 5.6%
<S> <C>
1999
2000
2001
2002
2003 5.69%
2004 5.59%
2005 6.15%
2006 6.18%
2007
2008 5.17%
2009 5.38%
2010+ 5.18%
*% 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 5.7% on 49% of the long-term portfolio
that is callable in 2003.
Portfolio structure is subject to change.
</TABLE>
6
<PAGE> 7
MORGAN STANLEY DEAN WITTER NEW YORK QUALITY MUNICIPAL SECURITIES
RESULTS OF ANNUAL MEETING (unaudited)
* * *
On June 22, 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:
<TABLE>
<S> <C>
Wayne E. Hedien
For......................................................... 3,917,690
Withheld.................................................... 76,642
John L. Schroeder
For......................................................... 3,906,574
Withheld.................................................... 87,758
</TABLE>
(2) ELECTION OF TRUSTEE BY PREFERRED SHAREHOLDERS:
<TABLE>
<S> <C>
Dr. Manuel H. Johnson
For......................................................... 461
Withheld.................................................... 0
</TABLE>
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:
<TABLE>
<S> <C>
For......................................................... 3,873,696
Against..................................................... 16,014
Abstain..................................................... 104,622
</TABLE>
7
<PAGE> 8
MORGAN STANLEY DEAN WITTER NEW YORK QUALITY MUNICIPAL SECURITIES
PORTFOLIO OF INVESTMENTS October 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NEW YORK TAX- EXEMPT MUNICIPAL BONDS (95.0%)
General Obligation (12.2%)
New York City,
$ 3,000 1994 Ser C................................................. 5.50% 10/01/08 $ 3,030,030
4,000 1994 Ser D................................................. 5.75 08/15/09 4,072,480
Puerto Rico,
2,035 Pub Impr Ser 1999.......................................... 5.25 07/01/16 1,899,754
2,000 Pub Impr Refg Ser 1993..................................... 5.25 07/01/18 1,820,180
------- -----------
11,035 10,822,444
------- -----------
Educational Facilities Revenue (12.7%)
New York State Dormitory Authority,
4,000 City University Ser 1993 F................................. 5.50 07/01/12 3,889,520
1,000 Ithaca College Ser 1998 (AMBAC)............................ 5.00 07/01/21 869,700
5,000 State University Ser 1993 C................................ 5.375 05/15/13 4,793,300
2,000 University of Rochester Ser 1998 A (MBIA).................. 5.00 07/01/18 1,750,560
------- -----------
12,000 11,303,080
------- -----------
Electric Revenue (6.7%)
3,000 Long Island Power Authority, Ser 1998 A (FSA)............... 5.125 12/01/22 2,650,530
4,000 Puerto Rico Electric Power Authority, Power Ser DD (FSA).... 4.50 07/01/19 3,336,600
------- -----------
7,000 5,987,130
------- -----------
Hospital Revenue (16.3%)
2,000 New York State Dormitory Authority, Rochester General
Hospital - FHA Insured Mtge Ser 1993....................... 5.70 08/01/33 1,880,460
New York State Medical Care Facilities Finance Agency,
3,240 Hospital & Nursing Home - FHA Insured Mtge 1993 Ser B...... 5.50 02/15/22 3,011,904
4,000 Hospital & Nursing Home - FHA Insured Mtge 1993 Ser A...... 5.90 08/15/33 3,863,480
4,000 Presbyterian Hospital - FHA Insured Mtge Ser 1994 A........ 5.25 08/15/14 3,839,400
2,000 St Lukes - Roosevelt Hospital - FHA Insured Mtge Ser A..... 5.625 08/15/18 1,902,980
------- -----------
15,240 14,498,224
------- -----------
Industrial Development/Pollution Control Revenue (5.1%)
New York State Energy Research & Development Authority,
2,000 Consolidated Edison Co of New York Inc Refg Ser 1993-B..... 5.25 08/15/20 1,790,180
3,000 New York State Electric & Gas Co Ser A (AMT)............... 5.95 12/01/27 2,766,330
------- -----------
5,000 4,556,510
------- -----------
Mortgage Revenue - Multi-Family (5.5%)
3,000 New York City Housing Development Corporation, FHA Ins Mtge
Ser 1993-B................................................. 5.85 05/01/26 2,898,210
1,975 New York State Housing Finance Agency, 1996 Ser A Refg
(FSA)...................................................... 6.10 11/01/15 2,016,989
------- -----------
4,975 4,915,199
------- -----------
Mortgage Revenue - Single Family (3.6%)
3,485 New York State Mortgage Agency, Homeowner Ser 29 A.......... 5.25 04/01/15 3,247,462
------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 9
MORGAN STANLEY DEAN WITTER NEW YORK QUALITY MUNICIPAL SECURITIES
PORTFOLIO OF INVESTMENTS October 31, 1999, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Nursing & Health Related Facilities Revenue (9.1%)
New York State Dormitory Authority,
$ 2,990 Department of Health Ser 1993.............................. 5.70% 07/01/09 $ 3,034,431
1,750 Mental Health Refg Ser 1999 C (MBIA)....................... 4.75 08/15/22 1,453,498
New York State Medical Care Facilities Finance Agency,
2,000 Mental Health 1993 Ser F................................... 5.375 02/15/14 1,835,080
2,000 Mental Health 1993 Ser D................................... 5.25 08/15/23 1,762,780
------- -----------
8,740 8,085,789
------- -----------
Public Facilities Revenue (6.5%)
4,000 New York State Dormitoty Authority, Court Facilities Ser
1993 A..................................................... 5.625 05/15/13 3,901,880
2,000 New York State Urban Development Corporation, Correctional
1998 Ser B (AMBAC)......................................... 5.25 01/01/16 1,851,780
------- -----------
6,000 5,753,660
------- -----------
Transportation Facilities Revenue (8.1%)
1,000 Buffalo & Fort Erie Public Bridge Authority, Toll Bridge Ser
1995 (MBIA)................................................ 5.75 01/01/25 967,650
2,000 New York State Thruway Authority, Local Hwy & Bridge Ser
1993....................................................... 5.125 04/01/08 1,971,040
3,000 Triborough Bridge & Tunnel Authority, Ser 1993 B............ 5.00 01/01/20 2,648,280
2,000 Puerto Rico Highway & Transportation Authority, 1998 Ser
A.......................................................... 4.75 07/01/38 1,576,200
------- -----------
8,000 7,163,170
------- -----------
Water & Sewer Revenue (3.9%)
New York City Municipal Water Finance Authority,
2,000 1994 Ser B................................................. 5.50 06/15/19 1,872,280
2,000 1999 Ser A (FGIC).......................................... 4.75 06/15/31 1,609,960
------- -----------
4,000 3,482,240
------- -----------
Other Revenue (5.3%)
2,000 New York City Transitional Finance Authority, 2000 Ser A.... 5.75 08/15/24 1,928,220
3,000 New York Local Government Assistance Corporation, Ser 1993 B
Refg....................................................... 5.50 04/01/21 2,786,220
------- -----------
5,000 4,714,440
------- -----------
90,475 TOTAL NEW YORK TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $88,694,405)......... 84,529,348
------- -----------
NEW YORK TAX-EXEMPT SHORT-TERM MUNICIPAL OBLIGATIONS (3.5%)
100 Nassau County Industrial Development Agency, Cold Spring
Harbor Laboratory
Ser 1999 (Demand 11/01/99)................................. 3.55* 01/01/34 100,000
3,000 Syracuse Industrial Development Agency, Syracuse
------- University - Eggers Hall
Ser 1993 (Demand 11/01/99)................................. 3.55* 03/01/23 3,000,000
-----------
3,100 TOTAL NEW YORK TAX-EXEMPT SHORT-TERM MUNICIPAL OBLIGATIONS
------- (Identified Cost $3,100,000).................................................... 3,100,000
-----------
$93,575 TOTAL INVESTMENTS (Identified Cost $91,794,405) (a)................... 98.5% 87,629,348
=======
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES.......................... 1.5 1,374,361
----- -----------
NET ASSETS............................................................. 100.0% $89,003,709
===== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE> 10
MORGAN STANLEY DEAN WITTER NEW YORK QUALITY MUNICIPAL SECURITIES
PORTFOLIO OF INVESTMENTS October 31, 1999, continued
- ---------------------
<TABLE>
<S> <C>
AMT Alternative Minimum Tax.
* 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 $360,117 and the aggregate gross unrealized
depreciation is $4,525,174, resulting in net unrealized
depreciation of $4,165,057.
Bond Insurance:
- ------------------------------
AMBAC AMBAC Assurance Corporation.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE> 11
MORGAN STANLEY DEAN WITTER NEW YORK QUALITY MUNICIPAL SECURITIES
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
ASSETS:
Investments in securities, at value
(identified cost $91,794,405).............................. $87,629,348
Cash........................................................ 58,540
Interest receivable......................................... 1,431,710
Prepaid expenses............................................ 26,332
-----------
TOTAL ASSETS............................................ 89,145,930
-----------
LIABILITIES:
Payable for:
Investment management fee............................... 32,052
Shares of beneficial interest repurchased............... 22,298
Accrued expenses............................................ 87,871
-----------
TOTAL LIABILITIES....................................... 142,221
-----------
NET ASSETS.............................................. $89,003,709
===========
COMPOSITION OF NET ASSETS:
Preferred shares of beneficial interest (1,000,000 shares
authorized of non-participating $.01 par value, 480 shares
outstanding)............................................... $24,000,000
-----------
Common shares of beneficial interest (unlimited shares
authorized of $.01 par value, 4,988,513
shares outstanding)........................................ 71,021,121
Net unrealized depreciation................................. (4,165,057)
Accumulated undistributed net investment income............. 490,801
Accumulated net realized loss............................... (2,343,156)
-----------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS............ 65,003,709
-----------
TOTAL NET ASSETS........................................ $89,003,709
===========
NET ASSET VALUE PER COMMON SHARE
($65,003,709 divided by 4,988,513 common shares
outstanding)............................................... $13.03
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE> 12
MORGAN STANLEY DEAN WITTER NEW YORK QUALITY MUNICIPAL SECURITIES
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $ 5,057,511
-----------
EXPENSES
Investment management fee................................... 337,332
Professional fees........................................... 112,891
Auction commission fees..................................... 57,784
Transfer agent fees and expenses............................ 24,774
Shareholder reports and notices............................. 23,015
Auction agent fees.......................................... 21,374
Registration fees........................................... 15,094
Trustees' fees and expenses................................. 8,760
Custodian fees.............................................. 5,516
Other....................................................... 20,242
-----------
TOTAL EXPENSES.......................................... 626,782
Less: expense offset........................................ (5,444)
-----------
NET EXPENSES............................................ 621,338
-----------
NET INVESTMENT INCOME................................... 4,436,173
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain........................................... 284,493
Net change in unrealized appreciation....................... (8,810,577)
-----------
NET LOSS................................................ (8,526,084)
-----------
NET DECREASE................................................ $(4,089,911)
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE> 13
MORGAN STANLEY DEAN WITTER NEW YORK QUALITY MUNICIPAL SECURITIES
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 1999 OCTOBER 31, 1998
- ------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................ $ 4,436,173 $ 4,534,994
Net realized gain.................................... 284,493 788,894
Net change in unrealized appreciation................ (8,810,577) 2,336,084
----------- -----------
NET INCREASE (DECREASE).......................... (4,089,911) 7,659,972
----------- -----------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Preferred............................................ (766,540) (835,297)
Common............................................... (3,812,064) (3,544,386)
----------- -----------
TOTAL DIVIDENDS.................................. (4,578,604) (4,379,683)
----------- -----------
Decrease from transactions in common shares of
beneficial interest................................. (1,190,074) (528,543)
----------- -----------
NET INCREASE (DECREASE).......................... (9,858,589) 2,751,746
NET ASSETS:
Beginning of period.................................. 98,862,298 96,110,552
----------- -----------
END OF PERIOD
(Including undistributed net investment income of
$490,801 and $633,232, respectively)............. $89,003,709 $98,862,298
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE> 14
MORGAN STANLEY DEAN WITTER NEW YORK QUALITY MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS October 31, 1999
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter New York Quality Municipal Securities (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 federal,
New York State and New York City income taxes. The Trust was organized as a
Massachusetts business trust on March 3, 1993 and commenced operations on
September 29, 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.
14
<PAGE> 15
MORGAN STANLEY DEAN WITTER NEW YORK QUALITY MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS October 31, 1999, continued
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Trust records dividends
and distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations 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 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 year ended October 31, 1999 aggregated
$11,898,022 and $13,212,700, 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 $400.
15
<PAGE> 16
MORGAN STANLEY DEAN WITTER NEW YORK QUALITY MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS October 31, 1999, 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 and 2 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**
- ------ ------- ---------- ----- -------- ----------------
<C> <C> <C> <C> <C> <S>
1 260 $13,000 3.55% 11/02/99 2.00% - 4.50%
2 220 11,000 3.65 11/05/99 2.10 - 4.875
</TABLE>
- ---------------------
* 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 to Series 1 and 2 at rates ranging from 2.75% to 3.70%, in the
aggregate amount of $78,891.
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
<PAGE> 17
MORGAN STANLEY DEAN WITTER NEW YORK QUALITY MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS October 31, 1999, continued
5. COMMON SHARES OF BENEFICIAL INTEREST
Transactions in common shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
CAPITAL
PAID IN
PAR EXCESS OF
SHARES VALUE PAR VALUE
--------- -------- -----------
<S> <C> <C> <C>
Balance, October 31, 1997................................... 5,122,613 $51,226 $72,688,512
Treasury shares purchased and retired (weighted average
discount 9.86%)*........................................... (40,800) (408) (528,135)
--------- ------- -----------
Balance, October 31, 1998................................... 5,081,813 50,818 72,160,377
Treasury shares purchased and retired (weighted average
discount 6.27%)*........................................... (93,300) (933) (1,189,141)
--------- ------- -----------
Balance, October 31, 1999................................... 4,988,513 $49,885 $70,971,236
========= ======= ===========
</TABLE>
- ---------------------
* The Trustees have voted to retire the shares purchased.
6. FEDERAL INCOME TAX STATUS
During the year ended October 31, 1999, the Trust utilized approximately
$284,000 of its net capital loss carryover. At October 31, 1999, the Trust had a
net capital loss carryover of approximately $2,343,000, 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:
<TABLE>
<CAPTION>
AMOUNT IN THOUSANDS
- --------------------------
2002 2003 2004 2005
- ------ ---- ---- ----
<S> <C> <C> <C>
$1,135 $854 $332 $22
====== ==== ==== ====
</TABLE>
7. DIVIDENDS TO COMMON SHAREHOLDERS
On September 28, 1999, the Trust declared the following dividends from net
investment income:
<TABLE>
<CAPTION>
AMOUNT RECORD PAYABLE
PER SHARE DATE DATE
- --------- ----------------- ------------------
<S> <C> <C>
$0.065 November 5, 1999 November 19, 1999
$0.065 December 3, 1999 December 17, 1999
</TABLE>
17
<PAGE> 18
MORGAN STANLEY DEAN WITTER NEW YORK QUALITY MUNICIPAL SECURITIES
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a common share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31*
----------------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
Net asset value, beginning of period....................... $ 14.73 $ 14.08 $ 13.07 $12.86 $ 10.90
------- ------- ------- ------ -------
Income (loss) from investment operations:
Net investment income..................................... 0.87 0.89 0.89 0.88 0.87
Net realized and unrealized gain (loss)................... (1.69) 0.61 0.92 0.15 1.98
------- ------- ------- ------ -------
Total income (loss) from investment operations............. (0.82) 1.50 1.81 1.03 2.85
------- ------- ------- ------ -------
Less dividends from:
Net investment income..................................... (0.75) (0.70) (0.69) (0.72) (0.73)
Common share equivalent of dividends paid to preferred
shareholders............................................ (0.15) (0.16) (0.16) (0.16) (0.16)
------- ------- ------- ------ -------
Total dividends............................................ (0.90) (0.86) (0.85) (0.88) (0.89)
------- ------- ------- ------ -------
Anti-dilutive effect of acquiring treasury shares.......... 0.02 0.01 0.05 0.06 --
------- ------- ------- ------ -------
Net asset value, end of period............................. $ 13.03 $ 14.73 $ 14.08 $13.07 $ 12.86
======= ======= ======= ====== =======
Market value, end of period................................ $12.313 $14.063 $12.688 $11.25 $ 11.25
======= ======= ======= ====== =======
TOTAL RETURN+.............................................. (7.39)% 16.92% 19.65% 6.52% 23.58%
RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS:
Total expenses............................................. 0.87%(1) 0.86%(1) 0.89%(1) 0.93%(1) 0.99%
Net investment income before preferred stock dividends..... 6.13% 6.15% 6.64% 6.74% 7.31%
Preferred stock dividends.................................. 1.06% 1.13% 1.16% 1.22% 1.37%
Net investment income available to common shareholders..... 5.07% 5.02% 5.48% 5.52% 5.94%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands.................... $89,004 $98,862 $96,111 $93,050 $94,591
Asset coverage on preferred shares at end of period........ 371% 412% 400% 389% 394%
Portfolio turnover rate.................................... 13% 14% -- 5% 1%
</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 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
<PAGE> 19
MORGAN STANLEY DEAN WITTER NEW YORK QUALITY MUNICIPAL SECURITIES
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER NEW YORK QUALITY MUNICIPAL SECURITIES
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 New York
Quality Municipal Securities (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 9, 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
<PAGE> 20
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
NEW YORK
QUALITY
MUNICIPAL SECURITIES
Annual Report
October 31, 1999
