<PAGE> 1
MORGAN STANLEY DEAN WITTER INSURED CALIFORNIA MUNICIPAL SECURITIES
Two World Trade Center
LETTER TO THE SHAREHOLDERS April 30, 2000 New York, New York 10048
DEAR SHAREHOLDER:
The U.S. economy continued its unprecedented expansion into the new year. Strong
growth pushed the unemployment rate to a 30-year low. Rising commodity prices
heightened concern about inflation. The price of oil moved above $30 per barrel
prior to ending April at $25 per barrel. Between June 1999 and March 2000, the
Federal Reserve Board raised the federal funds rate in five, 25 basis-point
moves to reach 6.00 percent. The Fed subsequently demonstrated its resistance to
inflation by raising the federal funds rate another 50 basis points to 6.50
percent in May. Economic growth and a less accommodative monetary policy caused
long-term interest rates to increase throughout 1999. In February, the U.S.
Treasury announced plans to retire debt with the federal budget surplus. This
precipitated a 50-75 basis-point rally in longer Treasury maturities.
MUNICIPAL MARKET CONDITIONS
The long-term insured municipal index began 1999 near a record low yield of 5.05
percent but increased to 5.97 percent by calendar year-end. This index reached a
high of 6.18 percent in January 2000 before ending April at 5.93 percent.
Because bond prices move inversely to changes in interest rates, higher yields
caused bond prices to decline significantly last year and improve modestly in
the first four months of 2000.
The ratio of municipal yields as a percentage of Treasury yields has been used
historically as a measure of relative value. Over the past five years the ratio
has ranged between an average high of 93 percent and an average low of 85
percent. The increase in the ratio from 92 percent at the end of 1999 to 99
percent at the end of April 2000 was primarily the result of the magnitude of
the rally in long Treasuries. A rising yield ratio indicates weaker relative
performance by municipals.
Higher interest rates reduced municipal market underwriting in 1999. New-issue
volume declined 20 percent last year. Refunding activity, the most
interest-rate-sensitive component of supply, was down more than
<PAGE> 2
MORGAN STANLEY DEAN WITTER INSURED CALIFORNIA MUNICIPAL SECURITIES
LETTER TO THE SHAREHOLDERS April 30, 2000, continued
50 percent. In the first four months of this year, volume was 30 percent lower
than in the same period last year.
30-YEAR BOND YIELDS 1994-2000
[GRAPH]
<TABLE>
<CAPTION>
U.S. Insured Insured Municipal
Treasury Municipal Yields as a Percentage
Yields 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
6.00 6.29 95.39
5.97 6.48 92.13
2000 6.18 6.49 95.22
6.04 6.14 98.37
5.82 5.83 99.83
5.91 5.96 99.16
</TABLE>
Source: Municipal Market Data -- A Division of Thomson Financial Municipal Group
and Bloomberg L.P.
PERFORMANCE
During the six-month period ended April 30, 2000, the net asset value (NAV) of
Morgan Stanley Dean Witter Insured California Municipal Securities (ICS)
increased from $14.42 to $14.58 per share. Based on this change, plus a
reinvestment of tax-free dividends totaling $0.375 per share, the Trust's total
NAV return was 4.00 percent. ICS's value on the New York Stock Exchange (NYSE)
increased from $12.9375 to $13.00 per share during this period. Based on this
change plus reinvestment of tax-free dividends, ICS's total market return was
3.43 percent. On April 30, 2000, ICS's share price was at a 10.84 percent
discount to its NAV.
Monthly dividends for the second quarter of 2000, declared in March, were
unchanged at $0.0625 per share. The Trust's level of undistributed net
investment income was $0.07 per share on April 30, 2000, versus $0.06 per share
six months earlier.
2
<PAGE> 3
MORGAN STANLEY DEAN WITTER INSURED CALIFORNIA MUNICIPAL SECURITIES
LETTER TO THE SHAREHOLDERS April 30, 2000, continued
PORTFOLIO STRUCTURE
The Trust's investments were diversified among 11 long-term sectors and 29
credits. At the end of April, the portfolio's average maturity was 21 years.
Average duration, a measure of sensitivity to interest rate changes, was 9.4
years. Current information on the portfolio's credit enhancements and sector
distribution is provided in the accompanying charts and tables. Optional call
provisions and their respective cost (book) yields are also shown.
LOOKING AHEAD
The Federal Reserve Board has expressed concern about consumer wealth and rising
prices. We anticipate that the central bank will continue to increase short-term
interest rates in an effort to slow the economy. We believe municipal bonds
continue to offer tax-conscious investors good long-term value.
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. During the six-month period ended April 30, 2000,
the Trust purchased and retired 1.8 percent of its common stock (76,400 shares)
at a weighted average market discount of 10.51 percent. The anti-dilutive effect
of acquiring treasury shares is reported in the table of financial highlights on
page 17.
We appreciate your ongoing support of Morgan Stanley Dean Witter Insured
California 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>
3
<PAGE> 4
MORGAN STANLEY DEAN WITTER INSURED CALIFORNIA MUNICIPAL SECURITIES
LETTER TO THE SHAREHOLDERS April 30, 2000, continued
[LARGEST SECTORS BAR GRAPH]
<TABLE>
<CAPTION>
LARGEST SECTORS as of April 30, 2000
(% of Net Assets)
<S> <C>
TAX ALLOCATION 26%
HOSPITAL 13%
WATER & SEWER 12%
TRANSPORTATION 11%
GENERAL OBLIGATION 10%
MORTGAGE 8%
EDUCATION 5%
</TABLE>
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
[CREDIT ENHANCEMENTS PIE CHART]
<TABLE>
<CAPTION>
CREDIT ENHANCEMENTS AS OF APRIL 30, 2000
(% OF TOTAL LONG-TERM PORTFOLIO)
<S> <C>
MBIA 36.00%
AMBAC 35.00%
FGIC 14.00%
FSA 12.00%
CONNIE LEE 3.00%
</TABLE>
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
4
<PAGE> 5
MORGAN STANLEY DEAN WITTER INSURED CALIFORNIA MUNICIPAL SECURITIES
LETTER TO THE SHAREHOLDERS April 30, 2000, continued
CALL AND COST (BOOK) YIELD STRUCTURE
APRIL 30, 2000
WEIGHTED AVERAGE
CALL PROTECTION: 5 YEARS
[BAR GRAPH]
<TABLE>
<CAPTION>
YEAR
BONDS PERCENT
CALLABLES CALLABLE*
<S> <C>
2001 0%
2002 0%
2003 42%
2004 38%
2005 3%
2006 0%
2007 0%
2008 10%
2009 4%
2010+ 3%
</TABLE>
WEIGHTED AVERAGE
BOOK YIELD: 6.13%
<TABLE>
<CAPTION>
YEAR COST
BONDS (BOOK)
CALLABLES YIELD**
<S> <C>
2001 0.0%
2002 0.0%
2003 6.2%
2004 6.3%
2005 6.3%
2006 0.0%
2007 0.0%
2008 5.7%
2009 5.9%
2010+ 5.1%
</TABLE>
*% 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 6.2% on 42% of the bonds in the
long-term portfolio that are callable in 2003.
Portfolio structure is subject to change.
5
<PAGE> 6
MORGAN STANLEY DEAN WITTER INSURED CALIFORNIA MUNICIPAL SECURITIES
PORTFOLIO OF INVESTMENTS April 30, 2000 (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 (9.5%)
$ 3,000 California, Various Purpose 03/01/94 (FSA).................. 5.50% 03/01/20 $2,915,130
3,000 Moulton-Niguel Water District, 1993 Refg (MBIA)............. 5.00 09/01/19 2,693,940
------- ----------
6,000 5,609,070
------- ----------
Educational Facilities Revenue (4.6%)
California Educational Facilities Authority,
1,500 National University Ser 1994 (Connie Lee).................. 6.20 05/01/21 1,534,636
690 Santa Clara University Ser 1999 (AMBAC).................... 5.25 09/01/16 675,144
545 Santa Clara University Ser 1999 (AMBAC).................... 5.25 09/01/17 528,666
------- ----------
2,735 2,738,446
------- ----------
Electric Revenue (3.1%)
1,000 Anaheim Public Financing Authority, San Juan 2nd Ser
(FGIC)..................................................... 5.75 10/01/22 992,480
1,000 Burbank, Electric Ser 1998 (FSA)............................ 4.75 06/01/23 841,520
------- ----------
2,000 1,834,000
------- ----------
Hospital Revenue (12.6%)
2,000 Anaheim, Anaheim Memorial Hospital Association COPs
(AMBAC).................................................... 5.13 05/15/20 1,830,100
3,000 California Health Facilities Financing Authority, Catholic
Healthcare West
Ser 1994 B (AMBAC)......................................... 5.00 07/01/21 2,623,230
3,000 California Statewide Communities Development Authority,
Sharp Health Care COPs (MBIA).............................. 6.00 08/15/24 3,019,980
------- ----------
8,000 7,473,310
------- ----------
Mortgage Revenue - Multi-Family (5.2%)
3,000 Los Angeles Community Redevelopment Agency, 1994 Ser A
(AMBAC).................................................... 6.45 07/01/17 3,057,660
------- ----------
Mortgage Revenue - Single Family (2.6%)
1,550 California Housing Financing Agency, 1995 Ser B (AMT)
(AMBAC).................................................... 6.25 08/01/14 1,532,981
------- ----------
Public Facilities Revenue (3.3%)
1,000 Glendale Unified School District, 1994 Ser A COPs (AMBAC)... 6.00 03/01/19 1,016,130
1,000 Los Angeles Convention & Exhibition Center Authority, 1993
Refg Ser A (MBIA).......................................... 5.38 08/15/18 965,480
------- ----------
2,000 1,981,610
------- ----------
Tax Allocation Revenue (26.3%)
3,000 Bay Area Government Association, Pool 1994 Ser A (FSA)...... 6.00 12/15/24 3,027,480
2,000 Brea Redevelopment Agency, 1993 Refg Ser AB (MBIA).......... 5.75 08/01/23 1,982,080
2,000 Cerritos Public Financing Authority, Los Coyotes Redev Ser
1993 A (AMBAC)............................................. 5.75 11/01/22 1,985,020
3,000 Corona Redevelopment Agency, Area A 1994 Refg Ser A
(FGIC)..................................................... 6.25 09/01/13 3,161,460
3,000 Pittsburg Redevelopment Agency, Los Medanos Refg Ser 1993 A
(AMBAC).................................................... 5.00 08/01/17 2,721,930
3,000 Yorba Linda Redevelopment Agency, Ser 1993 A (MBIA)......... 5.25 09/01/23 2,743,680
------- ----------
16,000 15,621,650
------- ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 7
MORGAN STANLEY DEAN WITTER INSURED CALIFORNIA MUNICIPAL SECURITIES
PORTFOLIO OF INVESTMENTS April 30, 2000 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Transportation Facilities Revenue (11.2%)
$ 600 Port of Oakland, 2000 Ser K (AMT) (FGIC).................... 5.88% 11/01/17 $ 610,668
San Francisco Airports Commission, San Francisco Int'l
Airport
1,680 Second Ser Refg Issue 4 (MBIA)............................. 6.00 05/01/20 1,700,227
1,700 Second Ser Refg Issue 2 (MBIA)............................. 6.75 05/01/20 1,811,435
3,000 San Francisco Bay Area Rapid Transit District, Sales Tax Ser
1998 (AMBAC)............................................... 4.75 07/01/23 2,523,660
------- ----------
6,980 6,645,990
------- ----------
Water & Sewer Revenue (12.2%)
2,000 East Bay Municipal Utility District, Water Ser 1998
(MBIA)..................................................... 4.75 06/01/34 1,625,740
1,000 Eastern Municipal Water District, Water & Sewer Refg Ser
1998 A COPs (FGIC)......................................... 4.75 07/01/23 839,030
2,900 Garden Grove Public Finance Authority, Water Ser 1993
(FGIC)..................................................... 5.50 12/15/23 2,781,419
2,000 Los Angeles, Wastewater Refg Ser 1993 A (MBIA).............. 5.70 06/01/20 1,988,520
------- ----------
7,900 7,234,709
------- ----------
Other Revenue (6.8%)
2,000 Sacremento Financing Authority, 1999 Solid Waste & Redev
(AMBAC).................................................... 5.75 12/01/22 1,990,120
2,000 South Orange County Public Financing District #88-1, 1994
Ser A (MBIA)............................................... 6.00 09/01/18 2,034,480
------- ----------
4,000 4,024,600
------- ----------
60,165 TOTAL CALIFORNIA TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $56,135,190)....... 57,754,026
------- ----------
CALIFORNIA TAX-EXEMPT SHORT-TERM MUNICIPAL OBLIGATION (0.8%)
500 California Pollution Control Financing Authority, Pacific
------- Gas & Electric Co Ser 1996 F (Demand 05/01/00) (Identified
Cost $500,000)............................................. 5.75* 11/01/26 500,000
----------
$60,665 TOTAL INVESTMENTS (Identified Cost $56,635,190)(a).................... 98.2% 58,254,026
=======
OTHER ASSETS IN EXCESS OF LIABILITIES................................... 1.8 1,048,956
----- ----------
NET ASSETS............................................................. 100.0% $59,302,982
===== ==========
</TABLE>
---------------------
<TABLE>
<C> <S>
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
* 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 $2,044,839 and the aggregate gross
unrealized depreciation is $426,003, resulting in net
unrealized appreciation of $1,618,836.
Bond Insurance:
---------------
AMBAC AMBAC Assurance Corporation.
Connie Lee Connie Lee Insurance Company - A wholly owned subsidiary of
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
7
<PAGE> 8
MORGAN STANLEY DEAN WITTER INSURED CALIFORNIA MUNICIPAL SECURITIES
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2000 (unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $56,635,190).............................. $58,254,026
Cash........................................................ 96,635
Interest receivable......................................... 1,014,270
Prepaid expenses............................................ 11,423
-----------
TOTAL ASSETS............................................ 59,376,354
-----------
LIABILITIES:
Payable for:
Investment management fee............................... 17,305
Shares of beneficial interest repurchased............... 3,909
Accrued expenses............................................ 52,158
-----------
TOTAL LIABILITIES....................................... 73,372
-----------
NET ASSETS.............................................. $59,302,982
===========
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, 4,068,813 shares
outstanding)............................................... $57,664,518
Net unrealized appreciation................................. 1,618,836
Accumulated undistributed net investment income............. 254,257
Accumulated net realized loss............................... (234,629)
-----------
TOTAL NET ASSETS........................................ $59,302,982
===========
NET ASSET VALUE PER COMMON SHARE
($59,302,982 divided by 4,068,813 common shares
outstanding)............................................... $14.58
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 9
MORGAN STANLEY DEAN WITTER INSURED CALIFORNIA MUNICIPAL SECURITIES
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the six months ended April 30, 2000 (unaudited)
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $1,698,234
----------
EXPENSES
Investment management fee................................... 103,940
Professional fees........................................... 32,131
Registration fees........................................... 8,039
Shareholder reports and notices............................. 7,952
Transfer agent fees and expenses............................ 7,813
Trustees' fees and expenses................................. 6,188
Custodian fees.............................................. 2,799
Other....................................................... 3,325
----------
TOTAL EXPENSES.......................................... 172,187
Less: expense offset........................................ (2,796)
----------
NET EXPENSES............................................ 169,391
----------
NET INVESTMENT INCOME................................... 1,528,843
----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain........................................... 189,886
Net change in unrealized appreciation....................... 339,146
----------
NET GAIN................................................ 529,032
----------
NET INCREASE................................................ $2,057,875
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE> 10
MORGAN STANLEY DEAN WITTER INSURED CALIFORNIA MUNICIPAL SECURITIES
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
APRIL 30, 2000 OCTOBER 31, 1999
------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................ $1,528,843 $3,110,561
Net realized gain (loss)............................. 189,886 (424,512)
Net change in unrealized appreciation................ 339,146 (5,582,392)
---------- ----------
NET INCREASE (DECREASE).......................... 2,057,875 (2,896,343)
---------- ----------
DIVIDENDS AND DISTRIBUTIONS TO COMMON
SHAREHOLDERS FROM:
Net investment income................................ (1,540,741) (3,147,617)
Net realized gain.................................... -- (657,304)
---------- ----------
TOTAL DIVIDENDS AND DISTRIBUTIONS................ (1,540,741) (3,804,921)
---------- ----------
Decrease from transactions in common shares of
beneficial interest................................. (988,111) (702,943)
---------- ----------
NET DECREASE..................................... (470,977) (7,404,207)
NET ASSETS:
Beginning of period.................................. 59,773,959 67,178,166
---------- ----------
END OF PERIOD
(Including undistributed net investment income of
$254,257 and $266,152, respectively)............. $59,302,982 $59,773,959
========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE> 11
MORGAN STANLEY DEAN WITTER INSURED CALIFORNIA MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS April 30, 2000 (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, 2000 (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 with Morgan Stanley Dean Witter
Advisors Inc. (the "Investment Manager"), the Trust pays a management fee,
calculated weekly and payable monthly, by applying the annual rate of 0.35% to
the Trust's weekly net assets.
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, 2000 aggregated
$2,577,292 and $3,276,250, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager, is
the Trust's transfer agent.
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.
12
<PAGE> 13
MORGAN STANLEY DEAN WITTER INSURED CALIFORNIA MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS April 30, 2000 (unaudited) continued
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, 1998................................... 4,198,513 $41,985 $59,313,587
Treasury shares purchased and retired (weighted average
discount 9.43%)*........................................... (53,300) (533) (702,410)
--------- ------- -----------
Balance, October 31, 1999................................... 4,145,213 41,452 58,611,177
Treasury shares purchased and retired (weighted average
discount 10.51%)*.......................................... (76,400) (764) (987,347)
--------- ------- -----------
Balance, April 30, 2000..................................... 4,068,813 $40,688 $57,623,830
========= ======= ===========
</TABLE>
---------------------
* The Trustees have voted to retire the shares purchased.
6. FEDERAL INCOME TAX STATUS
At October 31, 1999, the Trust had a net capital loss carryover of approximately
$425,000 which will be available through October 31, 2007 to offset future
capital gains to the extent provided by regulations.
7. DIVIDENDS TO COMMON SHAREHOLDERS
On March 28, 2000, 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 5, 2000 May 19, 2000
$0.0625 June 9, 2000 June 23, 2000
</TABLE>
13
<PAGE> 14
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 SIX FOR THE YEAR ENDED OCTOBER 31*
MONTHS ENDED -----------------------------------------------------
APRIL 30, 2000* 1999 1998 1997 1996 1995
---------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA:
Net asset value, beginning of period................ $14.42 $ 16.00 $15.50 $ 15.02 $14.84 $13.15
------ ------- ------ ------- ------ ------
Income (loss) from investment operations:
Net investment income.............................. 0.37 0.74 0.76 0.78 0.78 0.76
Net realized and unrealized gain (loss)............ 0.14 (1.43) 0.52 0.50 0.12 1.59
------ ------- ------ ------- ------ ------
Total income (loss) from investment operations...... 0.51 (0.69) 1.28 1.28 0.90 2.35
------ ------- ------ ------- ------ ------
Less dividends and distributions from:
Net investment income.............................. (0.38) (0.75) (0.78) (0.81) (0.75) (0.72)
Net realized gain.................................. -- (0.16) -- -- (0.01) --
------ ------- ------ ------- ------ ------
Total dividends and distributions................... (0.38) (0.91) (0.78) (0.81) (0.76) (0.72)
------ ------- ------ ------- ------ ------
Anti-dilutive effect of acquiring treasury shares... 0.03 0.02 -- 0.01 0.04 0.04
------ ------- ------ ------- ------ ------
Offering costs charged against capital.............. -- -- -- -- -- 0.02
------ ------- ------ ------- ------ ------
Net asset value, end of period...................... $14.58 $ 14.42 $16.00 $ 15.50 $15.02 $14.84
====== ======= ====== ======= ====== ======
Market value, end of period......................... $13.00 $12.938 $15.25 $14.375 $13.50 $12.50
====== ======= ====== ======= ====== ======
TOTAL RETURN+....................................... 3.43%(1) (9.83)% 11.71% 12.64% 14.33% 20.51%
RATIOS TO AVERAGE NET ASSETS:
Total expenses...................................... 0.58%(2)(3) 0.58%(3) 0.58%(3) 0.56%(3) 0.58%(3) 0.72%(3)
Net investment income............................... 5.15%(2) 4.80% 4.84% 5.14% 5.22% 5.35%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............. $59,303 $59,774 $67,178 $65,111 $63,753 $64,469
Portfolio turnover rate............................. 5%(1) 9% 12% -- -- 3%
</TABLE>
---------------------
* The per share amounts were computed using an average number of shares
outstanding during the period.
+ Total return is based upon the current market value on the last day of each
period reported. Dividends and distributions are assumed to be reinvested at
the prices obtained under the Trust's dividend reinvestment plan. Total
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
14
<PAGE> 15
MORGAN STANLEY DEAN WITTER INSURED CALIFORNIA MUNICIPAL SECURITIES
REVISED INVESTMENT POLICY (unaudited)
On January 26, 2000, the Trustees of Morgan Stanley Dean Witter Insured
California Municipal Securities (the "Trust") approved an investment policy
whereby the Trust would be permitted to invest up to 10% of its assets in
inverse floating rate municipal obligations. The inverse floating rate municipal
obligations in which the Trust will invest are typically created through a
division of a fixed rate municipal obligation into two separate instruments, a
short-term obligation and a long-term obligation. The interest rate on the
short-term obligation is set at periodic auctions. The interest rate on the
long-term obligation is the rate the issuer would have paid on the fixed income
obligation: (i) plus the difference between such fixed rate and the rate on the
short-term obligation, if the short-term rate is lower than the fixed rate; or
(ii) minus such difference if the interest rate on the short-term obligation is
higher than the fixed rate. The interest rates on these obligations generally
move in the reverse direction of market interest rates. If market interest rates
fall, the interest rate on the obligation will increase and if market interest
rates increase, the interest rate on the obligation will fall. Inverse floating
rate municipal obligations offer the potential for higher income than is
available from fixed rate obligations of comparable maturity and credit rating.
They also carry greater risks. In particular, the prices of inverse floating
rate municipal obligations are more volatile, i.e., they increase and decrease
in response to changes in interest rates to a greater extent than comparable
fixed rate obligations.
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, 2000
