<PAGE> 1
MORGAN STANLEY DEAN WITTER INSURED CALIFORNIA 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 Insured California Municipal Securities (ICS) 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 INSURED CALIFORNIA 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) declined from $16.00 per share to $15.67 per
share for the six-month period ended April 30, 1999. Based on this change plus
reinvestment of tax-free dividends totaling $0.38 per share and a long-term
capital gains distribution of $0.1566 per share, paid on December 18, 1998, the
Trust's total NAV return was 1.38 percent. ICS's value on the New York Stock
Exchange
30-YEAR BOND YIELDS 1994-1999
<TABLE>
<CAPTION>
Insured
Municipal Yields
as a
30-Year Insured 30-Year U.S. Percentage of U.S.
Municipal Yields Treasury Yields 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>
Source: Municipal Market Data - A Division of Thomas Financial Municipal Group
2
<PAGE> 3
MORGAN STANLEY DEAN WITTER INSURED CALIFORNIA 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>
Tax Allocation 26%
General Obligation 12%
Hospital 12%
Water & Sewer 11%
Transportation 9%
Mortgage 8%
Electric 6%
Education 5%
</TABLE>
Portfolio structure is subject to change.
CREDIT ENHANCEMENTS as of April 30, 1999
(% of Net Assets)
[CREDIT ENHANCEMENTS PIE CHART]
<TABLE>
<S> <C>
MBIA 37%
AMBAC 29%
FSA 18%
FGIC 13%
Connie Lee 3%
</TABLE>
Portfolio structure is subject to change.
CALL STRUCTURE as of April 30, 1999
(% of Total Long-Term Portfolio)
WEIGHTED AVERAGE
CALL PROTECTION: 6 YEARS
[CALL STRUCTURE BAR CHART]
<TABLE>
<CAPTION>
Percent Years Bonds
Callable Callable
<S> <C>
1999 0%
2000 0%
2001 0%
2002 0%
2003 41%
2004 41%
2005 3%
2006 0%
2007 0%
2008 12%
2009 1%
2010+ 2%
</TABLE>
Portfolio structure is subject to change.
3
<PAGE> 4
MORGAN STANLEY DEAN WITTER INSURED CALIFORNIA MUNICIPAL SECURITIES
LETTER TO THE SHAREHOLDERS April 30, 1999, continued
declined from $15.25 per share to $15.0625 per share during the same period.
Based on this change plus reinvestment of tax-free dividends and a long-term
capital gain distribution, ICS's total market return was 2.25 percent. As of
April 30, 1999, ICS's share price was a 3.88 percent discount to its NAV.
Monthly dividends for the second quarter of 1999 remained at $0.0625 per share.
The Trust's level of undistributed net investment income was $0.067 per share on
April 30, 1999, versus $0.072 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 21 years.
Portfolio duration, a measure of sensitivity to interest-rate changes, was 7.1
years. Issues in the refunded bond category comprised 3 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.
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 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.
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.
4
<PAGE> 5
MORGAN STANLEY DEAN WITTER INSURED CALIFORNIA MUNICIPAL SECURITIES
LETTER TO THE SHAREHOLDERS April 30, 1999, continued
We appreciate your ongoing support of Morgan Stanley Dean Witter Insured
California 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 INSURED CALIFORNIA 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>
CALIFORNIA TAX-EXEMPT MUNICIPAL BONDS (97.4%)
General Obligation (12.0%)
California,
$ 3,000 Various Purpose 03/01/94 (FSA)............................. 5.50% 03/01/20 $3,129,810
2,000 Refg 10/01/98 (MBIA)....................................... 4.50 10/01/28 1,809,660
3,000 Moulton-Niguel Water District, 1993 Refg (MBIA)............. 5.00 09/01/19 2,977,110
------- ----------
8,000 7,916,580
------- ----------
Educational Facilities Revenue (4.5%)
California Educational Facilities Authority,
1,500 National University Ser 1994 (Connie Lee).................. 6.20 05/01/21 1,654,170
690 Santa Clara University Ser 1999 (AMBAC).................... 5.25 09/01/16 727,046
545 Santa Clara University Ser 1999 (AMBAC).................... 5.25 09/01/17 571,242
------- ----------
2,735 2,952,458
------- ----------
Electric Revenue (6.0%)
1,000 Anaheim Public Financing Authority, San Juan 2nd Ser
(FGIC)..................................................... 5.75 10/01/22 1,059,430
3,000 Burbank, Electric Ser 1998 (FSA)............................ 4.75 06/01/23 2,851,200
------- ----------
4,000 3,910,630
------- ----------
Hospital Revenue (12.4%)
2,000 Anaheim, Anaheim Memorial Hospital Association COPs
(AMBAC).................................................... 5.125 05/15/20 2,002,880
3,000 California Health Facilities Financing Authority, Catholic
Healthcare West Ser 1994 B (AMBAC)......................... 5.00 07/01/21 2,936,820
3,000 California Statewide Communities Development Authority,
Sharp Health Care COPs (MBIA).............................. 6.00 08/15/24 3,242,220
------- ----------
8,000 8,181,920
------- ----------
Mortgage Revenue - Multi-Family (4.9%)
3,000 Los Angeles Community Redevelopment Agency, 1994 Ser A
(AMBAC).................................................... 6.45 07/01/17 3,189,900
------- ----------
Mortgage Revenue - Single Family (2.9%)
1,810 California Housing Financing Agency, 1995 Ser B (AMT)
(AMBAC).................................................... 6.25 08/01/14 1,895,812
------- ----------
Public Facilities Revenue (3.2%)
1,000 Glendale Unified School District, 1994 Ser A COPs (AMBAC)... 6.00 03/01/19 1,082,870
1,000 Los Angeles Convention & Exhibition Center Authority, 1993
Refg Ser A (MBIA).......................................... 5.375 08/15/18 1,023,200
------- ----------
2,000 2,106,070
------- ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 7
MORGAN STANLEY DEAN WITTER INSURED CALIFORNIA 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>
Tax Allocation Revenue (25.6%)
$ 3,000 Bay Area Government Association, Pool 1994 Ser A (FSA)...... 6.00% 12/15/24 $3,275,820
2,000 Brea Redevelopment Agency, 1993 Refg Ser AB (MBIA).......... 5.75 08/01/23 2,121,680
2,000 Cerritos Public Finance Authority, Los Coyotes Redev Ser
1993 A (AMBAC)............................................. 5.75 11/01/22 2,109,620
3,000 Corona Redevelopment Agency, Area A 1994 Refg Ser A
(FGIC)..................................................... 6.25 09/01/13 3,357,510
3,000 Pittsburg Redevelopment Agency, Los Medanos Refg Ser 1993 A
(AMBAC).................................................... 5.00 08/01/17 2,967,900
3,000 Yorba Linda Redevelopment Agency, Ser 1993 A (MBIA)......... 5.25 09/01/23 3,038,460
------- ----------
16,000 16,870,990
------- ----------
Transportation Facilities Revenue (8.6%)
1,000 Alameda Corridor Transportation Authority, Sr Lien Ser 1999
A (MBIA)................................................... 5.25 10/01/21 1,021,950
San Francisco Airports Commission, San Francisco Int'l
Airport
1,680 Second Ser Refg Issue 4 (MBIA)............................. 6.00 05/01/20 1,818,163
1,700 Second Ser Refg Issue 2 (MBIA)............................. 6.75 05/01/20 1,894,990
1,000 San Francisco Bay Area Rapid Transit District, Sales Tax Ser
1998 (AMBAC)............................................... 4.75 07/01/23 950,290
------- ----------
5,380 5,685,393
------- ----------
Water & Sewer Revenue (10.6%)
1,000 East Bay Municipal Utility District, Water Ser 1998
(MBIA)..................................................... 4.75 06/01/34 933,800
1,000 Eastern Municipal Water District, Water & Sewer Refg Ser
1998 A COPs (FGIC)......................................... 4.75 07/01/23 950,290
2,900 Garden Grove Public Finance Authority, Water Ser 1993
(FGIC)..................................................... 5.50 12/15/23 3,010,519
2,000 Los Angeles, Wastewater Refg Ser 1993 A (MBIA).............. 5.70 06/01/20 2,098,240
------- ----------
6,900 6,992,849
------- ----------
Other Revenue (3.3%)
2,000 South Orange County Public Financing District #88-1, 1994
Ser A (MBIA)............................................... 6.00 09/01/18 2,177,960
------- ----------
Refunded (3.4%)
2,000 San Mateo County Joint Powers Financing Authority, San Mateo
------- County Health Center 1994 Ser A (FSA)...................... 5.75 07/15/04+ 2,222,500
----------
61,825 TOTAL CALIFORNIA TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $58,256,804)....... 64,103,062
------- ----------
CALIFORNIA TAX-EXEMPT SHORT-TERM MUNICIPAL OBLIGATION (1.1%)
700 California Statewide Communities Development Authority, John
------- Muir/Mt Diablo Health Ser 1997 COPs (AMBAC) (Demand
05/30/99)
(Identified Cost $700,000)................................. 4.10* 08/15/27 700,000
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
MORGAN STANLEY DEAN WITTER INSURED CALIFORNIA MUNICIPAL SECURITIES
PORTFOLIO OF INVESTMENTS April 30, 1999 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
$62,525 TOTAL INVESTMENTS (Identified Cost $58,956,804) (a).................... 98.5% $64,803,062
=======
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES........................... 1.5 997,238
----- -----------
NET ASSETS.............................................................. 100.0% $65,800,300
===== ===========
</TABLE>
- ---------------------
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
+ Prerefunded to call date shown.
* Current coupon of variable rate demand obligation.
(a) The aggregate cost for federal income tax purposes
approximates identified cost. The aggregate gross unrealized
appreciation is $6,029,872 and the aggregate gross
unrealized depreciation is $183,614, resulting in net
unrealized appreciation of $5,846,258.
Bond Insurance:
- ------------------------------------------------------------------------
AMBAC AMBAC Indemnity Corporation.
Connie Lee Connie Lee Insurance Company.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
8
<PAGE> 9
MORGAN STANLEY DEAN WITTER INSURED CALIFORNIA MUNICIPAL SECURITIES
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1999 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $58,956,804)............ $64,803,062
Cash...................................... 83,307
Interest receivable....................... 998,619
Prepaid expenses.......................... 622
-----------
TOTAL ASSETS.......................... 65,885,610
-----------
LIABILITIES:
Investment management fee payable......... 22,186
Accrued expenses.......................... 63,124
-----------
TOTAL LIABILITIES..................... 85,310
-----------
NET ASSETS............................ $65,800,300
===========
COMPOSITION OF NET ASSETS:
Preferred shares of beneficial interest
(1,000,000 shares authorized of
non-participating $.01 par value, none
issued).................................. --
-----------
Common shares of beneficial interest
(unlimited shares authorized of
$.01 par value, 4,198,513 shares
outstanding)............................. $59,355,572
Net unrealized appreciation............... 5,846,258
Accumulated undistributed net investment
income................................... 279,599
Accumulated undistributed net realized
gain..................................... 318,871
-----------
TOTAL NET ASSETS...................... $65,800,300
===========
NET ASSET VALUE PER COMMON SHARE
($65,800,300 divided by 4,198,513 common
shares outstanding)...................... $15.67
===========
</TABLE>
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the six months ended April 30, 1999 (unaudited)
NET INVESTMENT INCOME:
INTEREST INCOME........................... $ 1,733,129
-----------
EXPENSES
Investment management fee................. 115,265
Professional fees......................... 21,742
Shareholder reports and notices........... 13,241
Transfer agent fees and expenses.......... 9,161
Registration fees......................... 8,056
Trustees' fees and expenses............... 6,082
Organizational expenses................... 2,622
Custodian fees............................ 1,745
Other..................................... 6,180
-----------
TOTAL EXPENSES........................ 184,094
Less: expense offset...................... (1,742)
-----------
NET EXPENSES.......................... 182,352
-----------
NET INVESTMENT INCOME................. 1,550,777
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain......................... 318,874
Net change in unrealized appreciation..... (1,015,824)
-----------
NET LOSS.............................. (696,950)
-----------
NET INCREASE.............................. $ 853,827
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE> 10
MORGAN STANLEY DEAN WITTER INSURED CALIFORNIA MUNICIPAL SECURITIES
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX
MONTHS ENDED FOR THE YEAR
APRIL 30, ENDED
1999 OCTOBER 31, 1998
- --------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................ $ 1,550,777 $ 3,207,781
Net realized gain.................................... 318,874 683,210
Net change in unrealized appreciation................ (1,015,824) 1,470,354
----------- -----------
NET INCREASE..................................... 853,827 5,361,345
----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO COMMON
SHAREHOLDERS FROM:
Net investment income................................ (1,574,386) (3,264,337)
Net realized gain.................................... (657,307) --
----------- -----------
TOTAL DIVIDENDS AND DISTRIBUTIONS................ (2,231,693) (3,264,337)
----------- -----------
Decrease from transactions in common shares of
beneficial interest................................. -- (29,498)
----------- -----------
NET INCREASE (DECREASE).......................... (1,377,866) 2,067,510
NET ASSETS:
Beginning of period.................................. 67,178,166 65,110,656
----------- -----------
END OF PERIOD
(Including undistributed net investment income of
$279,599 and $304,458, respectively)............. $65,800,300 $67,178,166
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE> 11
MORGAN STANLEY DEAN WITTER INSURED CALIFORNIA MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS April 30, 1999 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Insured California Municipal Securities (the "Trust")
is registered under the Investment Company Act of 1940, as amended, as a
diversified, closed-end management investment company. The Trust's investment
objective is to provide current income which is exempt from both federal and
California income taxes. The Trust was organized as a Massachusetts business
trust on October 14, 1993 and commenced operations on February 28, 1994.
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 for the Trust 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 INSURED CALIFORNIA 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.
E. ORGANIZATIONAL EXPENSES -- Morgan Stanley Dean Witter Advisors Inc. (the
"Investment Manager") paid the organizational expenses of the Trust's common
shares in the amount of $40,000 which have been reimbursed by the Trust for the
full amount thereof. Such expenses have been deferred and were fully amortized
as of February 28, 1999.
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
$2,321,648 and $6,018,293, respectively.
12
<PAGE> 13
MORGAN STANLEY DEAN WITTER INSURED CALIFORNIA MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS April 30, 1999 (unaudited) continued
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 $2,400.
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 preferred shares 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.
Upon issuance, the Trust will be 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, 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.
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................................... 4,200,513 $42,005 $59,343,065
Treasury shares purchased and retired (weighted average
discount 5.09%)*........................................... (2,000) (20) (29,478)
--------- ------- -----------
Balance, October 31, 1998 and April 30, 1999................ 4,198,513 $41,985 $59,313,587
========= ======= ===========
</TABLE>
- ---------------------
* The Trustees have voted to retire the shares purchased.
13
<PAGE> 14
MORGAN STANLEY DEAN WITTER INSURED CALIFORNIA MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS April 30, 1999 (unaudited) continued
6. 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 INSURED CALIFORNIA 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 PERIOD
FOR THE SIX FOR THE YEAR ENDED OCTOBER 31** FEBRUARY 28, 1994*
MONTHS ENDED -------------------------------------------------- THROUGH
APRIL 30, 1999** 1998 1997 1996 1995 OCTOBER 31, 1994**
- ---------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA:
Net asset value, beginning of
period....................... $ 16.00 $15.50 $ 15.02 $14.84 $13.15 $14.06
------- ------ ------- ------ ------ ------
Income (loss) from investment
operations:
Net investment income........ 0.37 0.76 0.78 0.78 0.76 0.41
Net realized and unrealized
gain (loss)................ (0.16) 0.52 0.50 0.12 1.59 (0.92)
------- ------ ------- ------ ------ ------
Total income (loss) from
investment operations........ 0.21 1.28 1.28 0.90 2.35 (0.51)
------- ------ ------- ------ ------ ------
Less dividends and
distributions from:
Net investment income........ (0.38) (0.78) (0.81) (0.75) (0.72) (0.36)
Net realized gain............ (0.16) -- -- (0.01) -- --
------- ------ ------- ------ ------ ------
Total dividends and
distributions................ (0.54) (0.78) (0.81) (0.76) (0.72) (0.36)
------- ------ ------- ------ ------ ------
Anti-dilutive effect of
acquiring treasury shares.... -- -- 0.01 0.04 0.04 0.04
------- ------ ------- ------ ------ ------
Offering costs charged against
capital...................... -- -- -- -- 0.02 (0.08)
------- ------ ------- ------ ------ ------
Net asset value, end of
period....................... $ 15.67 $16.00 $ 15.50 $15.02 $14.84 $13.15
======= ====== ======= ====== ====== ======
Market value, end of period... $15.063 $15.25 $14.375 $13.50 $12.50 $11.00
======= ====== ======= ====== ====== ======
TOTAL RETURN+................. 2.25%(1) 11.71% 12.64% 14.33% 20.51% (24.55)%(1)
RATIOS TO AVERAGE NET ASSETS:
Total expenses................ 0.56%(2)(3) 0.58%(3) 0.56%(3) 0.58%(3) 0.72%(3) 0.65%(2)
Net investment income......... 4.71%(2) 4.84% 5.14% 5.22% 5.35% 4.45%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands.................... $65,800 $67,178 $65,111 $63,753 $64,469 $58,822
Portfolio turnover rate....... 4%(1) 12% -- -- 3% --
</TABLE>
- ---------------------
* Commencement of operations.
** 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
INSURED
CALIFORNIA
MUNICIPAL
SECURITIES
Semiannual Report
April 30, 1999
