UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY

Morgan Stanley Insured California Municipal Securities

(Exact name of registrant as specified in charter)

522 Fifth Avenue, New York, New York		10036
(Address of principal executive offices)		(Zip code)

Randy Takian
522 Fifth Avenue, New York, New York 10036
(Name and address of agent for service)

Registrant’s telephone number, including area code: 212-296-6963

Date of fiscal year end: October 31, 2010

Date of reporting period: January 31, 2010

 

 

Item 1. Schedule of Investments.

The Trust’s schedule of investments as of the close of the reporting period prepared pursuant to Rule 12-12 of Regulation S-X is as follows:

Morgan Stanley Insured California Municipal Securities*

Portfolio of Investments § January 31, 2010 (unaudited)

PRINCIPAL
AMOUNT IN						COUPON				MATURITY
THOUSANDS						RATE				DATE				VALUE
				Tax-Exempt Municipal Bonds (106.6%)
				California (105.4%)
$	235			Alameda County Joint Powers Authority, Ser 2008 (AGM Insd)			5.00	%			12/01/24			$	248,722
	280			Alhambra Unified School District, Ser 2009 B (AGC Insd) (a)			0.00				08/01/35				55,185
	450			Alhambra Unified School District, Ser 2009 B (AGC Insd) (a)			0.00				08/01/36				82,796
	185			Alvord Unified School District, Ser 2008 A (AGM Insd)			5.00				08/01/28				189,897
	2,000			Anaheim Public Financing Authority, Electric System Ser 2007 A (NATL-RE Insd)			4.50				10/01/37				1,834,340
	680			Bay Area Toll Authority, San Francisco Bay Area Ser 2009 F-1 (b)			5.25				04/01/26				739,568
	760			Bay Area Toll Authority, San Francisco Bay Area Ser 2009 F-1 (b)			5.25				04/01/29				809,392
	205			Beverly Hills Unified School District, Election of 2008 Ser 2009 (a)			0.00				08/01/26				87,713
	430			Beverly Hills Unified School District, Election of 2008 Ser 2009 (a)			0.00				08/01/32				124,881
	2,000			California Infrastructure & Economic Development Bank, Bay Area Toll Bridges Seismic Retrofit 1st Lien Ser 2003 A (FGIC Insd)			5.00				01/01/28	(c)			2,342,700
	1,500			California State Department of Veterans Affairs, Home Purchase Ser 2002 A (AMBAC Insd)			5.35				12/01/27				1,505,790
	230			California State Public Works Board, Department of Mental Health Coaling Ser 2004 A			5.00				06/01/25				215,678
	500			California State University, Ser 2005 A (AMBAC Insd)			5.00				11/01/35				494,250
	590			Campbell Union High School District, Election of 2006 Ser 2008 B (AGC Insd)			5.00				08/01/35				589,156
	1,000			City & County of San Francisco, City Buildings Ser 2007 A (COPs) (NATL-RE & FGIC Insd)			4.50				09/01/37				899,350
	1,360			City & County of San Francisco, Lugana Honda Hospital Ser 2005 I (AGM Insd)			5.00				06/15/30				1,385,595
	3,025			City of Fairfield, Water Financing Ser 2007 A (COPs) (XLCA Insd) (a)			0.00				04/01/30				762,118
	1,030			City of Los Angeles, Ser 2004 A (NATL-RE Insd)			5.00				09/01/24				1,099,628
	360			City of Redding, Electric System Ser 2008 A (COPs) (AGM Insd)			5.00				06/01/27				366,116
	500			City of Riverside, Issue of 2008 D (AGM insd)			5.00				10/01/28				514,140
	1,000			City of San Jose, Airport Ser 2001 (NATL-RE & FGIC Insd)			5.00				03/01/25				1,002,160
	1,000			City of Simi Valley, Public Financing Authority Ser 2004 (COPs) (AMBAC Insd)			5.00				09/01/30				1,005,650
	105			Clovis Unified School District, Election of 2004 Ser A (NATL-RE & FGIC Insd) (a)			0.00				08/01/29				32,154
	890			Corona-Norca Unified School District, Election of 2006 Ser 2009 B (AGC Insd) (a)			0.00				08/01/28				286,491
	2,860			Dry Creek Joint Elementary School District, Election 2008 Ser 2009 E (a)			0.00				08/01/48				209,409
	615			El Segundo Unified School District, Election of 2008 Ser 2009 A (a)			0.00				08/01/33				138,935
	1,055			Fontana Unified School District, Ser 2008 B (AGM Insd) (a)			0.00				02/01/33				240,572
	750			Gilroy Unified School District, Election of 2008 Ser 2009 A (AGC Insd) (a)			0.00				08/01/29				229,673
	1,000			Golden State Tobacco Securitization Corp., Enhanced Asset Backed Ser 2005 A (FGIC Insd)			5.00				06/01/38				863,250
	775			Grossmont Union High School District, Ser 2006 (NATL-RE Insd) (a)			0.00				08/01/24				336,776
	775			Grossmont-Cuyamaca Community College District, Election of 2002 Ser 2008 C (AGC Insd) (a)			0.00				08/01/30				230,222

Morgan Stanley Insured California Municipal Securities*

Portfolio of Investments § January 31, 2010 (unaudited) continued

PRINCIPAL
AMOUNT IN						COUPON				MATURITY
THOUSANDS						RATE				DATE				VALUE
$	1,280			Huntington Beach Union High School District, Ser 2004 (AGM Insd)			5.00	%			08/01/26			$	1,317,402
	1,110			Kern County Board of Education, Refg Ser 2006 A (COPs) (NATL-RE Insd)			5.00				06/01/31				1,114,107
	245			Kern County Water Agency Improvement District No. 4, Ser 2008 A (COPs) (AGC Insd)			5.00				05/01/28				250,299
	1,100			La Quinta Financing Authority, Local Agency Ser 2004 A (AMBAC Insd)			5.25				09/01/24				1,103,498
	450			Los Angeles County Metropolitan Transportation Authority, Ser 2005 A (AMBAC Insd)			5.00				07/01/35				459,724
	500			Los Angeles County Metropolitan Transportation Authority, Ser 2006 A (AGM Insd)			4.50				07/01/29				501,505
	1,000			Los Angeles Department of Water & Power, Ser 2001 A (AGM Insd)			5.25				07/01/21				1,044,900
	800			Los Angeles Municipal Improvement Corp., Police Headquarters Ser 2006 A (NATL-RE Insd)			4.75				01/01/31				770,184
	1,240			Metropolitan Water District of Southern California, Ser 2009 B (b)			5.00				07/01/27				1,332,350
	2,000			Moorpark Unified School District, Election of 2008 Ser 2009 A (AGC Insd) (a)			0.00				08/01/31				514,920
	315			Moreland School District, Ser 2014 C (AMBAC Insd) (a)			0.00				08/01/29				91,993
	1,020			Murrieta Valley Unified School District Public Financing Authority, Election of 2006 Ser 2008 (AGM Insd) (a)			0.00				09/01/31				261,232
	820			Murrieta Valley Unified School District Public Financing Authority, Election of 2006 Ser 2008 (AGM Insd) (a)			0.00				09/01/33				184,270
	235			Oakland Joint Powers Financing Authority, Oakland Administration Buildings Refg 2008 B (AGC Insd)			5.00				08/01/26				241,387
	1,000			Oxnard Financing Authority, Redwood Trunk Sewer & Headworks Ser 2004 A (NATL-RE & FGIC Insd)			5.00				06/01/29				1,006,520
	3,920			Patterson Joint Unified School District, Election of 2008 Ser 2009 B (AGM Insd) (a)			0.00				03/01/49				301,370
	250			Placer County Water Agency, Ser 2008 (COPs) (AGM Insd)			4.75				07/01/29				251,370
	2,095			Planada Elemantary School District, Ser 2009 B (AGC Insd) (a)			0.00				07/01/49				157,397
	730			Poway Unified School District, School Facilities Improvement District No. 2007-1, 2008 Election Ser A (a)			0.00				08/01/31				187,946
	790			Poway Unified School District, School Facilities Improvement District No. 2007-1, 2008 Election Ser A (a)			0.00				08/01/30				219,675
	1,000			Rancho Mirage Redevelopment Agency, Ser 2003 A (NATL-RE Insd)			5.00				04/01/33				898,660
	1,235			Rocklin Unified School District Community Facilities District, No. 2 Ser 2007 (NATL-RE Insd) (a)			0.00				09/01/34				234,440
	1,255			Rocklin Unified School District Community Facilities District, No. 2 Ser 2007 (NATL-RE Insd) (a)			0.00				09/01/35				221,144
	1,230			Rocklin Unified School District Community Facilities District, No. 2 Ser 2007 (NATL-RE Insd) (a)			0.00				09/01/36				200,084
	1,025			Rocklin Unified School District Community Facilities District, No. 2 Ser 2007 (NATL-RE Insd) (a)			0.00				09/01/37				154,570
	675			Roseville Joint Union High School District, Election of 2004 Ser 2007 C (AGM Insd) (a)			0.00				08/01/25				275,737
	180			Sacramento City Financing Authority, 1999 Solid Waste & Redevelopment (AMBAC Insd)			5.75				12/01/22				180,481

Morgan Stanley Insured California Municipal Securities*

Portfolio of Investments § January 31, 2010 (unaudited) continued

PRINCIPAL
AMOUNT IN						COUPON				MATURITY
THOUSANDS						RATE				DATE				VALUE
$	1,000			Sacramento Municipal Utility District, Election Ser U (AGM Insd)			5.00	%			08/15/24			$	1,081,380
	5,495			San Bernardino Community College District, Ser 2009 B (a)			0.00				08/01/48				406,685
	700			San Diego County Water Authority, Ser 2004 A (COPs) (AGM Insd)			5.00				05/01/29				719,467
	2,000			San Francisco Public Utilities Commission, Water Refg Ser A 2001 (AGM Insd)			5.00				11/01/31				2,015,220
	1,000			San Jose Evergreen Community College District, Election Ser 2008 B (AGM Insd) (a)			0.00				09/01/32				247,500
	130			San Rafael City High School District, Election Ser 2002 B (NATL-RE & FGIC Insd) (a)			0.00				08/01/25				53,089
	500			San Ysidro School District, 1997 Election Ser 2007 E (AGM Insd) (a)			0.00				08/01/27				171,585
	760			San Ysidro School District, 1997 Election Ser 2007 E (AGM Insd) (a)			0.00				08/01/29				225,028
	1,870			School Facilities Financing Authority, Grant Joint Union High School District Ser 2008 A (AGM Insd) (a)			0.00				08/01/33				391,709
	480			Simi Valley Unified School District, Election of 2004 Ser 2007 C (AGM Insd) (a)			0.00				08/01/28				149,870
	380			Simi Valley Unified School District, Election of 2004 Ser 2007 C (AGM Insd) (a)			0.00				08/01/30				99,815
	1,000			Southern California Public Power Authority, Transmission Refg Ser 2002 A (AGM Insd)			5.25				07/01/18				1,082,020
	250			Tustin Unified School District, No. 2002-1 Election of 2002 Ser 2008 C (AGM Insd)			5.00				06/01/28				260,715
	250			Twin Rivers Unified School District, Ser 2009 (BANs) (a)			0.00				04/01/14				218,760
	1,000			University of California, Ser 2007 A (NATL-RE Insd)			4.50				05/15/37				912,040
	1,000			University of California, Ser 2007 J (AGM Insd)			4.50				05/15/31				984,450
	500			University of California, Ser 2009 O			5.25				05/15/39				524,510
	1,435			University of California, Ser 2009 W (b)(d)			5.00				05/15/34				1,483,763
	1,000			Upland Unified School District, Election 2000 Ser 2001 B (AGM Insd)			5.125				08/01/25				1,044,070
	675			Val Verde Unified School District, Ser 2005 B (COPs) (NATL-RE & FGIC Insd)			5.00				01/01/30				612,407
	8,115			Victor Valley Community College District, Election of 2008 Ser C (a)			0.00				06/01/49				576,571
	1,375			Washington Unified School District-Yolo County, Ser 2004 A (NATL-RE & FGIC Insd)			5.00				08/01/22				1,430,880
	245			West Basin Municipal Water District, Refg Ser 2008 B (COPs) (AGC Insd)			5.00				08/01/27				245,674
	570			Yosemite Community College District, Election of 2004 Ser 2008 C (AGM Insd) (a)			0.00				08/01/25				240,261
	2,515			Yosemite Community College District, Election of 2004 Ser 2008 C (AGM Insd) (b)			5.00				08/01/32				2,565,728
	1,000			Yucaipa Valley Water District, Ser 2004 A (COPs) (NATL-RE Insd)			5.25				09/01/24				1,024,490
															51,167,159
				Guam (0.2%)
	95			Territory of Guam Section 30, Ser A			5.625				12/01/29				96,029
				Puerto Rico (0.5%)
	240			Puerto Rico Sales Tax Financing Corp., Ser 2009 A			5.00				08/01/39				252,091
				Virgin Islands (0.5%)
	240			Virgin Islands Public Finance Authority, Matching Fund Loan Diago A			6.625				10/01/29				253,493
				Total Tax-Exempt Municipal Bonds (Cost $52,225,901)											51,768,772

Morgan Stanley Insured California Municipal Securities*

Portfolio of Investments § January 31, 2010 (unaudited) continued

PRINCIPAL
AMOUNT IN						COUPON				MATURITY
THOUSANDS						RATE				DATE				VALUE
				California Short-Term Tax-Exempt Municipal Obligation (1.3%)
$	600			City of Irvine, Limited Obligation Ser 85-7 A (Demand 02/01/10) (AGM Insd) (Cost $ 600,000)			0.22	%(e)			09/02/32			$	600,000
				Total Investments (Cost $52,825,901) (f)(g)							107.9	%			52,368,772
				Other Assets in Excess of Liabilities							1.2				598,107
				Floating Rate Note and Dealer Trusts Obligations Related to Securities Held
				Notes with interest rates ranging from 0.17% to 0.23% at January 31, 2010 and contractual maturities of collateral ranging from 04/01/26 to 05/15/34. (h)							(9.1	)			(4,415,000	)
				Net Assets Applicable to Common Shareholders							100.0	%		$	48,551,879

BANs		Bond Anticipation Notes.
COPs		Certificates of Participation.
(a)		Capital appreciation bond.
(b)		Underlying security related to inverse floater entered into by the Trust.
(c)		Prefunded to call date shown.
(d)		Security is subject to a shortfall agreement which may require the Trust to pay amounts to a counterparty in the event of a significant decline in the market value of the security underlying the inverse floater. In case of a shortfall, the maximum potential amount of payments the Trust could ultimately be required to make under the agreement is $955,000. However, such shortfall payment would be reduced by the proceeds from the sale of the security underlying the inverse floater.
(e)		Current coupon of variable rate demand obligation.
(f)		Securities have been designated as collateral in connection with inverse floating rate municipal obligations.
(g)		The aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes.
(h)		Floating rate note obligations related to securities held — The Trust enters into transactions in which it transfers to Dealer Trusts (“Dealer Trusts”), fixed rate bonds in exchange for cash and residual interests in the Dealer Trusts’ assets and cash flows, which are in the form of inverse floating rate investments. The Dealer Trusts fund the purchases of the fixed rate bonds by issuing floating rate notes to third parties and allowing the Trust to retain residual interest in the bonds. The Trust enters into shortfall agreements with the Dealer Trusts which commit the Trust to pay the Dealer Trusts, in certain circumstances, the difference between the liquidation value of the fixed rate bonds held by the Dealer Trusts and the liquidation value of the floating rate notes held by third parties, as well as any shortfalls in interest cash flows. The residual interests held by the Trust (inverse floating rate investments) include the right of the Trust (1) to cause the holders of the floating rate notes to tender their notes at par at the next interest rate reset date, and (2) to transfer the municipal bond from the Dealer Trusts to the Trust, thereby collapsing the Dealer Trusts. The Trust accounts for the transfer of bonds to the Dealer Trusts as secured borrowings, with the securities transferred remaining in the Trust’s investment assets, and the related floating rate notes reflected as Trust liabilities. The notes issued by the Dealer Trusts have interest rates that reset weekly and the floating rate note holders have the option to tender their notes to the Dealer Trusts for redemption at par at each reset date. At January 31, 2010, Trust investments with a value of $6,930,801 are held by the Dealer Trusts and serve as collateral for the $4,415,000 in floating rate note obligations outstanding at that date.
Bond Insurance:
AGC		Assured Guaranty Corporation.
AGM		Assured Guaranty Municipal Corporation.
AMBAC		AMBAC Assurance Corporation.
FGIC		Financial Guaranty Insurance Company.
NATL-RE		National Public Finance Guarantee Corporation.
XLCA		XL Capital Assurance Inc.

Morgan Stanley Insured California Municipal Securities*
Notes to the Portfolio of Investments § January 31, 2010 (unaudited)

Fair Valuation Measurements

Fair value is defined as the price that the Trust would receive to sell an investment or pay to transfer a liability in a timely transaction with an independent buyer in the principal market, or in the absence of a principal market the most advantageous market for the investment or liability. GAAP utilizes a three-tier hierarchy to distinguish between (1) inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in determining the value of the Trust’s investments. The inputs are summarized in the three broad levels listed below.

     • Level 1 — unadjusted quoted prices in active markets for identical investments

     • Level 2 — other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit
     risk, etc.)

     • Level 3 — significant unobservable inputs (including the Trust’s own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities and the determination of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each security.

The following is the summary of the inputs used as of January 31, 2010 in valuing the Trust’s investments carried at fair value:

		FAIR VALUE MEASUREMENTS AT JANUARY 31, 2010 USING
						UNADJUSTED
						QUOTED PRICES IN
						ACTIVE MARKET				OTHER
						FOR				SIGNIFICANT				SIGNIFICANT
						IDENTICAL				OBSERVABLE				UNOBSERVABLE
						INVESTMENTS				INPUTS				INPUTS
INVESTMENT TYPE		TOTAL				(LEVEL 1)				(LEVEL 2)				(LEVEL 3)
Tax-Exempt Municipal Bonds		$	51,768,772				—			$	51,768,772				—
California Short-Term Tax-Exempt Municipal Obligation			600,000				—				600,000				—
Total		$	52,368,772				—			$	52,368,772				—

Valuation of Investments — (1) portfolio securities are valued by an outside independent pricing service approved by the Trustees. The pricing service uses both a computerized grid 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 mean between the last reported bid and ask price. 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. The Trustees believe that timely and reliable market quotations are generally not readily available for purposes of valuing tax-exempt securities and that the valuations supplied by the pricing service are more likely to represent the fair value of such securities; (2) futures are valued at the latest sale price on the commodities exchange on which they trade unless it is determined that such price does not reflect their market value, in which case they will be valued at their fair value as determined in good faith under procedures established by and under the supervision of the Trustees; (3) interest rate swaps are marked-to-market daily based upon quotations from market makers; and (4) 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, which approximates market value.

Item 2. Controls and Procedures.

(a) The Trust’s principal executive officer and principal financial officer have concluded that the Trust’s disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Trust in this Form N-Q was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, based upon such officers’ evaluation of these controls and procedures as of a date within 90 days of the filing date of the report.

(b) There were no changes in the Trust’s internal control over financial reporting that occurred during the registrant’s fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Trust’s internal control over financial reporting.

Item 3. Exhibits.

(a) A separate certification for each principal executive officer and principal financial officer of the registrant are attached hereto.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Morgan Stanley Insured California Municipal Securities

/s/ Randy Takian
Randy Takian
Principal Executive Officer
March 23, 2010

     Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ Randy Takian
Randy Takian
Principal Executive Officer
March 23, 2010

/s/ Francis Smith
Francis Smith
Principal Financial Officer
March 23, 2010