<PAGE> 1
MORGAN STANLEY DEAN WITTER NEW YORK QUALITY MUNICIPAL SECURITIES
Two World Trade Center
LETTER TO THE SHAREHOLDERS April 30, 1999 New York, New York 10048
DEAR SHAREHOLDER:
We are pleased to present the semiannual report on the operations of Morgan
Stanley Dean Witter New York Quality Municipal Securities (IQN) 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
<PAGE> 2
MORGAN STANLEY DEAN WITTER NEW YORK QUALITY MUNICIPAL SECURITIES
LETTER TO THE SHAREHOLDERS April 30, 1999, continued
relative to Treasuries. Municipals have outperformed Treasuries this year and
the ratio declined to 92 percent by April. The 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 $14.73 to $14.58 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 1.67 percent. IQN's value on the New York Stock Exchange
decreased from $14.0625 per share to $13.875 per share during the same period.
Based on this change
<TABLE>
<CAPTION>
Insured
Municipal Yields
30-Year Insured 30-Year U.S. as a Percentage
Municipal Yields 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
</TABLE>
2
<PAGE> 3
MORGAN STANLEY DEAN WITTER NEW YORK QUALITY MUNICIPAL SECURITIES
LETTER TO THE SHAREHOLDERS April 30, 1999, continued
LARGEST SECTORS as of April 30, 1999
(% of Net Assets)
[LARGEST SECTORS BAR CHART]
<TABLE>
<S> <C>
Hospital 16%
Education 14%
General Obligation 12%
Mortgage 9%
Nursing & Health 9%
Transportation 8%
Electric 7%
Public Facilities 7%
IDR/PCR* 6%
</TABLE>
*Industrial Development/Pollution Control Revenue
Portfolio structure is subject to change.
CREDIT RATINGS as of April 30,1999
(% of Total Long-Term Portfolio)
[CREDIT RATINGS PIE CHART]
<TABLE>
<S> <C>
Aaa or AAA 30%
Aa or AA 19%
A or A 37%
Baa or BBB 14%
</TABLE>
As measured by Moody's Investors Service, Inc. or Standard & Poor's Corp.
Portfolio structure is subject to change.
CALL STRUCTURE as of April 30, 1999
(% of Total Long-Term Portfolio)
WEIGHTED AVERAGE
CALL PROTECTION: 7 YEARS
[CALL STRUCTURE BAR CHART]
<TABLE>
Years Bonds Percent
Callable Callable
----------- --------
<S> <C>
1999 0%
2000 0%
2001 0%
2002 0%
2003 49%
2004 21%
2005 1%
2006 2%
2007 0%
2008 13%
2009 6%
2010+ 8%
</TABLE>
Portfolio structure is subject to change.
3
<PAGE> 4
MORGAN STANLEY DEAN WITTER NEW YORK QUALITY MUNICIPAL SECURITIES
LETTER TO THE SHAREHOLDERS April 30, 1999, continued
plus reinvestment of tax-free dividends, IQN's total market return was 1.35
percent. As of April 30, 1999, IQN's share price was a 4.84 percent discount to
its NAV.
Monthly dividends for the second quarter of 1999 remained $0.0625 per share. The
Trust's level of undistributed net investment income was $0.113 per share on
April 30, 1999, versus $0.125 per share on October 31, 1998.
PORTFOLIO STRUCTURE
The Trust's investments were diversified among 12 long-term sectors and 28
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 7.1
years. The accompanying charts provide current information on the portfolio's
call structure, largest sectors and mix of credit ratings.
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 $0.04 per
share to common share earnings. Weekly ARPS yields ranged between 2.00 and 4.875
percent. Two ARPS series totaling $24 million represented 24 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.
4
<PAGE> 5
MORGAN STANLEY DEAN WITTER NEW YORK QUALITY MUNICIPAL SECURITIES
LETTER TO THE SHAREHOLDERS April 30, 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 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.
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 New York
Quality Municipal Securities 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> 6
MORGAN STANLEY DEAN WITTER NEW YORK QUALITY MUNICIPAL SECURITIES
PORTFOLIO OF INVESTMENTS April 30, 1999 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NEW YORK TAX-EXEMPT MUNICIPAL BONDS (95.2%)
General Obligation (11.8%)
New York City,
$ 3,000 1994 Ser C................................................. 5.50 % 10/01/08 $ 3,157,110
4,000 1994 Ser D................................................. 5.75 08/15/09 4,229,560
Puerto Rico,
2,035 Pub Impr Ser 1999.......................................... 5.25 07/01/16 2,136,262
2,000 Pub Impr Refg Ser 1993..................................... 5.25 07/01/18 2,009,260
------- -----------
11,035 11,532,192
------- -----------
Educational Facilities Revenue (13.6%)
New York State Dormitory Authority,
4,000 City University Ser 1993 F................................. 5.50 07/01/12 4,143,400
1,000 Hamilton College Ser 1999 (MBIA)........................... 5.125 07/01/16 1,017,800
1,000 Ithaca College Ser 1998 (AMBAC)............................ 5.00 07/01/21 981,530
5,000 State University Ser 1993 C................................ 5.375 05/15/13 5,163,900
2,000 University of Rochester Ser 1998 A (MBIA).................. 5.00 07/01/18 1,990,100
------- -----------
13,000 13,296,730
------- -----------
Electric Revenue (6.9%)
3,000 Long Island Power Authority, Ser 1998 A (FSA)............... 5.125 12/01/22 2,993,760
4,000 Puerto Rico Electric Power Authority, Power Ser DD (FSA).... 4.50 07/01/19 3,747,480
------- -----------
7,000 6,741,240
------- -----------
Hospital Revenue (16.0%)
2,000 New York State Dormitory Authority, Rochester General
Hospital - FHA Insured Mtge Ser 1993....................... 5.70 08/01/33 2,060,140
New York State Medical Care Facilities Finance Agency,
3,305 Hospital & Nursing Home - FHA Insured Mtge 1993 Ser B...... 5.50 02/15/22 3,372,224
4,000 Hospital & Nursing Home - FHA Insured Mtge 1993 Ser A...... 5.90 08/15/33 4,185,359
4,000 Presbyterian Hospital - FHA Insured Mtge Ser 1994 A........ 5.25 08/15/14 4,107,640
2,000 St Lukes - Roosevelt Hospital - FHA Insured Mtge Ser A..... 5.625 08/15/18 2,057,900
------- -----------
15,305 15,783,263
------- -----------
Industrial Development/Pollution Control Revenue (6.2%)
New York State Energy Research & Development Authority,
3,000 Consolidated Edison Co of New York Inc Refg Ser 1993-B..... 5.25 08/15/20 3,009,600
3,000 New York State Electric & Gas Co Ser A (AMT)............... 5.95 12/01/27 3,066,600
------- -----------
6,000 6,076,200
------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 7
MORGAN STANLEY DEAN WITTER NEW YORK QUALITY MUNICIPAL SECURITIES
PORTFOLIO OF INVESTMENTS April 30, 1999 (unaudited), continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Mortgage Revenue - Multi-Family (5.4%)
$ 3,000 New York City Housing Development Corporation, FHA Ins Mtge
Ser 1993-B................................................. 5.85 % 05/01/26 $ 3,173,250
1,975 New York State Housing Finance Agency, Mortgage 1996 Ser A
Refg (FSA)................................................. 6.10 11/01/15 2,138,530
------- -----------
4,975 5,311,780
------- -----------
Mortgage Revenue - Single Family (3.6%)
3,500 New York State Mortgage Agency, Homeowner Ser 29 A.......... 5.25 04/01/15 3,524,990
------- -----------
Nursing & Health Related Facilities Revenue (9.0%)
New York Medical Care Facilities Finance Agency,
2,000 Mental Health 1993 Ser F................................... 5.375 02/15/14 2,034,520
2,000 Mental Health 1993 Ser D................................... 5.25 08/15/23 1,994,380
New York State Dormitory Authority,
2,990 Department of Health Ser 1993.............................. 5.70 07/01/09 3,181,151
1,750 Mental Health Refg Ser 1999 C (MBIA)....................... 4.75 08/15/22 1,653,260
------- -----------
8,740 8,863,311
------- -----------
Public Facilities Revenue (7.4%)
4,000 New York State Dormitory Authority, Court Facilities Ser
1993 A..................................................... 5.625 05/15/13 4,154,200
3,000 New York State Urban Development Corporation, Correctional
1998 Ser B (AMBAC)......................................... 5.25 01/01/16 3,084,210
------- -----------
7,000 7,238,410
------- -----------
Transportation Facilities Revenue (8.2%)
1,000 Buffalo & Fort Erie Public Bridge Authority, Toll Bridge Ser
1995 (MBIA)................................................ 5.75 01/01/25 1,064,060
2,000 New York State Thruway Authority, Local Hwy & Bridge Ser
1993....................................................... 5.125 04/01/08 2,059,020
3,000 Triborough Bridge & Tunnel Authority, Ser 1993 B............ 5.00 01/01/20 2,992,140
2,000 Puerto Rico Highway & Transportation Authority, Ser A....... 4.75 07/01/38 1,901,160
------- -----------
8,000 8,016,380
------- -----------
Water & Sewer Revenue (4.0%)
New York City Municipal Water Finance Authority,
2,000 1994 Ser B................................................. 5.50 06/15/19 2,046,780
2,000 1999 Ser A (FGIC).......................................... 4.75 06/15/31 1,860,080
------- -----------
4,000 3,906,860
------- -----------
Other Revenue (3.1%)
3,000 New York Local Government Assistance Corporation, Ser 1993 B
Refg....................................................... 5.50 04/01/21 3,072,810
------- -----------
91,555 TOTAL NEW YORK TAX-EXEMPT MUNICIPAL BONDS
(Identified Cost $89,801,515)............................... 93,364,166
------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
MORGAN STANLEY DEAN WITTER NEW YORK QUALITY MUNICIPAL SECURITIES
PORTFOLIO OF INVESTMENTS April 30, 1999 (unaudited), continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NEW YORK TAX-EXEMPT SHORT-TERM MUNICIPAL OBLIGATION (1.2%)
$ 1,200 Syracuse Industrial Development Agency, Syracuse University
------- Eggers Hall Ser 1993 (Demand 05/03/99) (Identified Cost
$1,200,000)................................................ 4.25*% 03/01/23 $ 1,200,000
-----------
$92,755 TOTAL INVESTMENTS (Identified Cost $91,001,515)(a)..................... 96.4% 94,564,166
=======
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES........................... 3.6 3,498,034
----- -----------
NET ASSETS.............................................................. 100.0% $98,062,200
===== ===========
</TABLE>
- ---------------------
<TABLE>
<C> <S>
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 $3,649,627 and the aggregate gross
unrealized depreciation is $86,976, resulting in net
unrealized appreciation of $3,562,651.
Bond Insurance:
- -------------------------------------------------------------------
AMBAC AMBAC Indemnity Corporation.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 9
MORGAN STANLEY DEAN WITTER NEW YORK QUALITY MUNICIPAL SECURITIES
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1999 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $91,001,515)............ $94,564,166
Cash...................................... 20,308
Receivable for:
Investments sold...................... 2,089,473
Interest.............................. 1,484,139
Prepaid expenses.......................... 17,857
-----------
TOTAL ASSETS.......................... 98,175,943
-----------
LIABILITIES:
Investment management fee payable......... 33,048
Accrued expenses.......................... 80,695
-----------
TOTAL LIABILITIES..................... 113,743
-----------
NET ASSETS............................ $98,062,200
===========
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, 5,079,313 shares outstanding)..... 72,177,027
Net unrealized appreciation............... 3,562,651
Accumulated undistributed net investment
income................................... 575,532
Accumulated net realized loss............. (2,253,010)
-----------
NET ASSETS APPLICABLE TO COMMON
SHAREHOLDERS......................... 74,062,200
-----------
TOTAL NET ASSETS...................... $98,062,200
===========
NET ASSET VALUE PER COMMON SHARE
($74,062,200 divided by 5,079,313 common
shares outstanding)...................... $14.58
===========
</TABLE>
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the six months ended April 30, 1999
(unaudited)
NET INVESTMENT INCOME:
INTEREST INCOME........................... $ 2,523,652
-----------
EXPENSES
Investment management fee................. 171,425
Professional fees......................... 46,525
Auction commission fees................... 29,237
Shareholder reports and notices........... 13,839
Transfer agent fees and expenses.......... 13,501
Auction agent fees........................ 9,349
Registration fees......................... 8,056
Trustees' fees and expenses............... 4,344
Custodian fees............................ 2,612
Other..................................... 11,185
-----------
TOTAL EXPENSES........................ 310,073
Less: expense offset...................... (2,581)
-----------
NET EXPENSES.......................... 307,492
-----------
NET INVESTMENT INCOME................. 2,216,160
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain......................... 374,639
Net change in unrealized appreciation..... (1,082,869)
-----------
NET LOSS.............................. (708,230)
-----------
NET INCREASE.............................. $ 1,507,930
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE> 10
MORGAN STANLEY DEAN WITTER NEW YORK QUALITY MUNICIPAL SECURITIES
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
<S> <C> <C>
FOR THE SIX
MONTHS ENDED FOR THE YEAR
APRIL 30, ENDED
1999 OCTOBER 31, 1998
<CAPTION>
- --------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................ $ 2,216,160 $ 4,534,994
Net realized gain.................................... 374,639 788,894
Net change in unrealized appreciation................ (1,082,869) 2,336,084
----------- -----------
NET INCREASE..................................... 1,507,930 7,659,972
----------- -----------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Preferred............................................ (368,611) (835,297)
Common............................................... (1,905,249) (3,544,386)
----------- -----------
TOTAL DIVIDENDS.................................. (2,273,860) (4,379,683)
----------- -----------
Decrease from transactions in common shares of
beneficial interest................................. (34,168) (528,543)
----------- -----------
NET INCREASE (DECREASE).......................... (800,098) 2,751,746
NET ASSETS:
Beginning of period.................................. 98,862,298 96,110,552
----------- -----------
END OF PERIOD
(Including undistributed net investment income of
$575,532 and $633,232, respectively)............. $98,062,200 $98,862,298
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE> 11
MORGAN STANLEY DEAN WITTER NEW YORK QUALITY MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS April 30, 1999 (unaudited)
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.
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
11
<PAGE> 12
MORGAN STANLEY DEAN WITTER NEW YORK QUALITY MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS April 30, 1999 (unaudited), continued
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, 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
$9,954,802 and $10,230,250, 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 $3,400.
12
<PAGE> 13
MORGAN STANLEY DEAN WITTER NEW YORK QUALITY MUNICIPAL SECURITIES
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 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 3.65% 05/04/99 2.00% - 4.50%
2 220 11,000 3.60 05/07/99 2.10% - 4.875%
</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 and 2 at rates ranging from 3.00% to 3.30%, in the
aggregate amount of $75,961.
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> 14
MORGAN STANLEY DEAN WITTER NEW YORK QUALITY MUNICIPAL SECURITIES
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................................... 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 7.07%)*........................................... (2,500) (25) (34,143)
--------- ------- -----------
Balance, April 30, 1999..................................... 5,079,313 $50,793 $72,126,234
========= ======= ===========
</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
$2,627,000, 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>
$1,419.. $854 $332 $22
====== ==== ==== ===
</TABLE>
7. DIVIDENDS TO COMMON SHAREHOLDERS
On March 30, 1999, the Trust declared the following dividends from net
investment income:
<TABLE>
<CAPTION>
AMOUNT RECORD PAYABLE
PER SHARE DATE DATE
- --------- ------------ -------------
<S> <C> <C>
$0.0625 May 7, 1999 May 21, 1999
$0.0625 June 4, 1999 June 18, 1999
</TABLE>
14
<PAGE> 15
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 SIX FOR THE YEAR ENDED OCTOBER 31,*
MONTHS ENDED ----------------------------------------------------
APRIL 30, 1999* 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <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 $13.99
------- ------- ------- ------ ------ ------
Income (loss) from investment operations:
Net investment income................................... 0.44 0.89 0.89 0.88 0.87 0.92
Net realized and unrealized gain (loss)................. (0.14) 0.61 0.92 0.15 1.98 (2.98)
------- ------- ------- ------ ------ ------
Total income (loss) from investment operations........... 0.30 1.50 1.81 1.03 2.85 (2.06)
------- ------- ------- ------ ------ ------
Less dividends from:
Net investment income................................... (0.38) (0.70) (0.69) (0.72) (0.73) (0.72)
Common share equivalent of dividends paid to preferred
shareholders.......................................... (0.07) (0.16) (0.16) (0.16) (0.16) (0.17)
------- ------- ------- ------ ------ ------
Total dividends.......................................... (0.45) (0.86) (0.85) (0.88) (0.89) (0.89)
------- ------- ------- ------ ------ ------
Anti-dilutive effect of acquiring treasury shares........ -- 0.01 0.05 0.06 -- --
------- ------- ------- ------ ------ ------
Offering costs charged against capital................... -- -- -- -- -- (0.14)
------- ------- ------- ------ ------ ------
Net asset value, end of period........................... $ 14.58 $ 14.73 $ 14.08 $13.07 $12.86 $10.90
======= ======= ======= ====== ====== ======
Market value, end of period.............................. $13.875 $14.063 $12.688 $11.25 $11.25 $ 9.75
======= ======= ======= ====== ====== ======
TOTAL RETURN+............................................ 1.35%(1) 16.92% 19.65% 6.52% 23.58% (32.18)%
RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS:
Total expenses........................................... 0.84%(2)(3) 0.86%(3) 0.89%(3) 0.93%(3) 0.99% 1.08%
Net investment income before preferred stock dividends... 5.98%(2) 6.15% 6.64% 6.74% 7.31% 7.31%
Preferred stock dividends................................ 1.00%(2) 1.13% 1.16% 1.22% 1.37% 1.31%
Net investment income available to common shareholders... 4.98%(2) 5.02% 5.48% 5.52% 5.94% 6.00%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands.................. $98,062 $98,862 $96,111 $93,050 $94,591 $92,671
Asset coverage on preferred shares at end of period...... 408% 412% 400% 389% 394% 297%
Portfolio turnover rate.................................. 11%(1) 14% -- 5% 1% 17%
</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 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> 16
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
The financial statements included herein have been taken from the records of the
Trust without examination by the independent accountants and accordingly they do
not express an opinion thereon.
MORGAN STANLEY
DEAN WITTER
NEW YORK
QUALITY
MUNICIPAL
SECURITIES
Semiannual Report
April 30, 1999
