<PAGE> 1
MORGAN STANLEY DEAN WITTER TAX-EXEMPT SECURITIES TRUST Two World Trade Center
LETTER TO THE SHAREHOLDERS June 30, 2000 New York, New York 10048
DEAR SHAREHOLDER:
The U.S. economic expansion continued during the six-month period ended June 30,
2000. Real personal consumption accelerated and unemployment reached a 30-year
low. At the same time, a surge in oil prices heightened the risk of inflation.
The Federal Reserve Board responded by further tightening monetary policy. Three
increases in the federal funds rate, totaling 100 basis points, have occurred
since February. The rate now stands at a nine-year high of 6.50 percent.
Strong economic growth and a less accommodative monetary policy caused long-term
interest rates to increase throughout 1999. This January, however, the U.S.
Treasury announced plans to use the federal budget surplus to reduce its debt.
This announcement initially precipitated a 50 to 75 basis point drop in yields
of longer maturity Treasuries. Municipal bond yields also declined but lagged
the trend of Treasury yields. Long-term interest rates rose in April, but began
to decline in May and June as signs of an economic slowdown developed.
MUNICIPAL MARKET CONDITIONS
The long-term insured municipal index began the year at 5.97 percent. This index
reached a high of 6.19 percent in mid January and ended June at 5.84 percent.
Because bond prices move inversely to changes in interest rates, higher yields
caused bond prices to decline significantly last year and improve marginally in
the first six months of this year.
The ratio of municipal yields as a percentage of Treasury yields has
historically been used as a measure of relative value. The increase in the ratio
from 92 percent at the end of 1999 to 99 percent at the end of June may be
attributed to the magnitude of the rally in long-term Treasuries. A rising yield
ratio indicates weaker relative performance by municipals. Over the past five
years, the ratio has ranged between an average annual high of 93 percent and an
average annual low of 85 percent.
During the first six months of this year, new-issue volume was 22 percent lower
than the same period last year. Refunding activity, the most
<PAGE> 2
MORGAN STANLEY DEAN WITTER TAX-EXEMPT SECURITIES TRUST
LETTER TO THE SHAREHOLDERS June 30, 2000, continued
interest-rate-sensitive component of supply, dropped more than 70 percent and
represented less than 10 percent of total volume. Approximately 40 percent of
the underwritings were enhanced with bond insurance.
[30-YEAR BOND YIELDS CHART]
30-YEAR BOND YIELDS 1994 - 2000
<TABLE>
<CAPTION>
Insured U.S. Insured Municipal Yields as a
Municipal Yields Treasury Yields Percentage of U.S. Treasury Yields
<S> <C> <C> <C>
1994 5.4% 6.34% 85.17%
5.4 6.24 86.54
5.8 6.66 87.09
6.4 7.09 90.27
6.35 7.32 86.75
6.25 7.43 84.12
6.5 7.61 85.41
6.25 7.39 84.57
6.3 7.45 84.56
6.55 7.81 83.87
6.75 7.96 84.8
7 8.00 87.5
6.75 7.88 85.66
1995 6.4 7.70 83.12
6.15 7.44 82.66
6.15 7.43 82.77
6.2 7.34 84.47
5.8 6.66 87.09
6.1 6.62 92.15
6.1 6.86 88.92
6 6.66 90.09
5.95 6.48 91.82
5.75 6.33 90.84
5.5 6.14 89.58
5.35 5.94 90.07
1996 5.4 6.03 89.55
5.6 6.46 86.69
5.85 6.66 87.84
5.95 6.89 86.36
6.05 6.99 86.55
5.9 6.89 85.63
5.85 6.97 83.93
5.9 7.11 82.98
5.7 6.93 82.25
5.65 6.64 85.09
5.5 6.35 86.61
5.6 6.63 84.46
1997 5.7 6.79 83.95
5.65 6.80 83.09
5.9 7.10 83.1
5.75 6.94 82.85
5.65 6.91 81.77
5.6 6.78 82.6
5.3 6.30 84.13
5.5 6.61 83.21
5.4 6.40 84.38
5.35 6.15 86.99
5.3 6.05 87.6
5.15 5.92 86.99
1998 5.15 5.80 88.79
5.2 5.92 87.84
5.25 5.93 88.53
5.35 5.95 89.92
5.2 5.80 89.66
5.2 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 97.89
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
5.91 6.01 98.34
5.84 5.90 98.98
</TABLE>
Source: Municipal Market Data - A Division of Thomson Financial Municipal Group
and Bloomberg L.P.
PERFORMANCE
For the six-month period ended June 30, 2000, Morgan Stanley Dean Witter
Tax-Exempt Securities Trust's Class A and D shares returned 4.09 percent and
4.18 percent, respectively. During the same period, the Lehman Brothers
Municipal Bond Index returned 4.48 percent.(1) For the same period, the Fund's
Class B and C shares returned 3.87 percent and 3.82 percent, respectively. The
performance of the Fund's four share classes varies because of differing
expenses. Total return figures assume the reinvestment of all distributions but
do not reflect the deduction of any applicable sales charges.
---------------------
(1)The Lehman Brothers Municipal Bond Index tracks the performance of municipal
bonds with maturities of two years or greater and a minimum credit rating of
Baa or BBB, as rated by Moody's Investors Service, Inc., or Standard & Poor's
Corporation, respectively. The index does not include any expenses, fees or
charges. The index is unmanaged and should not be considered an investment.
2
<PAGE> 3
MORGAN STANLEY DEAN WITTER TAX-EXEMPT SECURITIES TRUST
LETTER TO THE SHAREHOLDERS June 30, 2000, continued
PORTFOLIO STRUCTURE
The Fund's net assets of approximately $981 million were diversified among 14
long-term sectors and 103 credits. During the past six months the cash and
short-term investment position ranged between 7 and 9 percent of net assets.
Issues in the refunded bond category comprised 10 percent of net assets.
Refunded bonds have been refinanced and will be redeemed on the dates shown in
the portfolio. At the end of June, the portfolio's average maturity was 15
years. Average duration, a measure of sensitivity to interest-rate changes, was
7 years. The accompanying charts provide current information on the portfolio's
credit quality, maturity distribution and sector concentrations. Optional call
provisions and their respective cost (book) yields are also charted by year.
LOOKING AHEAD
The Federal Reserve Board has expressed concern about consumer wealth and rising
prices. We anticipate that the central bank will continue to focus on inflation
and may increase short-term rates if it feels that the economic momentum is not
slowing sufficiently. We believe municipal bonds continue to offer tax-conscious
investors good long-term value.
As explained in footnote 7 of the Notes to Financial Statements, the Fund
acquired Morgan Stanley Dean Witter Multi-State Municipal Series
Trust -- Massachusetts, Michigan, Minnesota and Ohio Series on July 24, 2000.
We appreciate your ongoing support of Morgan Stanley Dean Witter Tax-Exempt
Securities Trust 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 TAX-EXEMPT SECURITIES TRUST
LETTER TO THE SHAREHOLDERS June 30, 2000, continued
[LARGEST SECTORS BAR CHART]
LARGEST SECTORS AS OF JUNE 30, 2000
(% OF NET ASSETS)
<TABLE>
<S> <C>
GENERAL OBLIGATION 16%
TRANSPORTATION 15%
ELECTRIC 13%
MORTGAGE 10%
REFUNDED 10%
WATER & SEWER 10%
</TABLE>
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
[CREDIT RATINGS PIE CHART]
CREDIT RATINGS AS OF JUNE 30, 2000
(% OF TOTAL LONG-TERM PORTFOLIO)
<TABLE>
<CAPTION>
Aaa or AAA Aa or AA A or A Baa or BBB NR
---------- -------- ------ ---------- --
<S> <C> <C> <C> <C> <C>
63% 25% 9% 2% 1%
</TABLE>
AS MEASURED BY MOODY'S INVESTORS SERVICE, INC. OR
STANDARD & POOR'S CORP.
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
[DISTRIBUTION BY MATURITY BAR CHART]
DISTRIBUTION BY MATURITY
(% OF NET ASSETS)
<TABLE>
<S> <C>
UNDER 1 YEAR 8.0%
1-5 YEARS 6.4%
5-10 YEARS 18.5%
10-20 YEARS 35.9%
20-30 YEARS 27.8%
30+ YEARS 2.0%
</TABLE>
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
4
<PAGE> 5
MORGAN STANLEY DEAN WITTER TAX-EXEMPT SECURITIES TRUST
LETTER TO THE SHAREHOLDERS June 30, 2000, continued
CALL AND COST (BOOK) YIELD STRUCTURE
JUNE 30, 2000
[BAR CHART]
WEIGHTED AVERAGE
CALL PROTECTION: 6 YEARS
<TABLE>
<CAPTION>
YEARS BONDS CALLABLE PERCENT CALLABLE*
-------------------- -----------------
<S> <C>
2000 2%
2001 12%
2002 7%
2003 9%
2004 5%
2005 11%
2006 7%
2007 10%
2008 10%
2009 6%
2010+ 21%
</TABLE>
COST (BOOK) YIELD**
[BAR CHART]
WEIGHTED AVERAGE
BOOK YIELD: 6.2%
<TABLE>
<CAPTION>
COST (BOOK) YIELD**
-------------------
<S> <C>
2000 8.2%
2001 6.5%
2002 6.6%
2003 7.5%
2004 5.9%
2005 6.7%
2006 5.8%
2007 5.9%
2008 5.3%
2009 5.6%
2010+ 6.0%
</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 FUND OPERATING EXPENSES. FOR
EXAMPLE, THE FUND EARNED A BOOK YIELD OF 6.5% ON THE 12% OF THE BONDS IN THE
LONG-TERM PORTFOLIO THAT ARE CALLABLE IN 2001.
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
5
<PAGE> 6
MORGAN STANLEY DEAN WITTER TAX-EXEMPT SECURITIES TRUST
FUND PERFORMANCE June 30, 2000
AVERAGE ANNUAL TOTAL RETURNS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A SHARES*
----------------------------------------------
<S> <C> <C>
PERIOD ENDED 6/30/00
-------------------------
1 Year 2.39%(1) -1.96%(2)
5 Years 5.22%(1) 4.31%(2)
10 Years 6.42%(1) 5.96%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES**
----------------------------------------------
<S> <C> <C>
PERIOD ENDED 6/30/00
-------------------------
1 Year 1.93%(1) -2.93%(2)
Since Inception (7/28/97) 3.24%(1) 2.33%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES+
----------------------------------------------
<S> <C> <C>
PERIOD ENDED 6/30/00
-------------------------
1 Year 1.82%(1) 0.85%(2)
Since Inception (7/28/97) 3.05%(1) 3.05%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS D SHARES++
----------------------------------------------
<S> <C> <C>
PERIOD ENDED 6/30/00
-------------------------
1 Year 2.53%(1)
5 Years 5.44%(1)
10 Years 6.67%(1)
</TABLE>
Prior to July 28, 1997 the Fund offered only one class of shares. Because the
distribution arrangements for Class A most closely resembled the distribution
arrangement applicable prior to the implementation of multiple classes (i.e.,
Class A is sold with a front-end sales charge), historical performance
information has been restated to reflect the actual maximum sales charge
applicable to Class A (i.e., 4.25%) as compared to the 4.00% sales charge in
effect prior to July 28, 1997. In addition, Class A shares are now subject to an
ongoing 12b-1 fee which is reflected in the restated performance for that class.
Because all shares of the Fund held prior to July 28, 1997 were designated Class
D shares, the Fund's historical performance has been restated to reflect the
absence of any sales charge.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE. WHEN YOU SELL FUND SHARES, THEY MAY BE WORTH
MORE OR LESS THAN THEIR ORIGINAL COST.
---------------------
<TABLE>
<S> <C>
(1) Figure shown assumes reinvestment of all distributions and
does not reflect the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and
the deduction of the maximum applicable sales charge. See
the Fund's current prospectus for complete details on fees
and sales charges.
* The maximum front-end sales charge for Class A is 4.25%.
** The maximum contingent deferred sales charge (CDSC) for
Class B is 5.0%. The CDSC declines to 0% after six years.
+ The maximum CDSC for Class C shares is 1% for shares
redeemed within one year of purchase.
++ Class D shares have no sales charge.
</TABLE>
6
<PAGE> 7
MORGAN STANLEY DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS June 30, 2000 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TAX-EXEMPT MUNICIPAL BONDS (90.6%)
General Obligation (16.0%)
North Slope Borough, Alaska,
$ 3,000 Ser 1992 A Conv (MBIA)..................................... 5.90% 06/30/03 $ 3,091,200
15,000 Ser 1994 B (FSA)........................................... 0.00 06/30/05 11,587,350
15,000 Ser 1995 A (MBIA).......................................... 0.00 06/30/06 10,972,200
10,000 Ser 1996 B (MBIA).......................................... 0.00 06/30/06 7,314,800
10,000 Ser 1996 B (MBIA).......................................... 0.00 06/30/07 6,919,700
9,500 Ser 1999 A (MBIA).......................................... 0.00 06/30/10 5,521,875
4,000 Connecticut, College Savings 1989 Ser A..................... 0.00 07/01/08 2,640,040
Florida Board of Education,
5,000 Capital Outlay Refg Ser 1999 B (MBIA)...................... 4.50 06/01/24 4,108,600
5,000 Capital Outlay Ser 1998 A.................................. 4.75 06/01/28 4,221,000
Massachusetts,
20,000 Refg 1996 Ser A (AMBAC).................................... 6.00 11/01/10 21,547,199
10,000 2000 Ser B................................................. 6.00 06/01/16 10,432,200
3,000 Clark County, Nevada, Transportation Ser 1992 A (AMBAC)..... 6.50 06/01/17 3,330,990
New York City, New York,
1,500 1995 Ser D (MBIA).......................................... 6.20 02/01/07 1,605,945
1,925 1990 Ser D................................................. 6.00 08/01/07 1,927,118
1,545 1990 Ser D................................................. 6.00 08/01/08 1,546,699
North Carolina,
10,000 1997 Ser A................................................. 5.20 03/01/16 9,728,800
8,000 Public School Building Ser 1999............................ 4.60 04/01/17 7,037,120
10,000 South-Western City School District, Ohio, Ser 1999
(AMBAC).................................................... 4.75 12/01/19 8,722,400
10,000 Pennsylvania, First Ser 1995 (FGIC)......................... 5.50 05/01/12 10,171,000
4,000 Shelby County, Tennessee, Refg 1995 Ser A................... 5.625 04/01/14 4,043,640
18,000 King County, Washington, Ltd Tax 1995 (MBIA)................ 6.00 01/01/23 18,135,000
2,000 Washington, Ser 1994 A...................................... 5.80 09/01/08 2,059,240
---------- -----------
176,470 156,664,116
---------- -----------
Educational Facilities Revenue (4.0%)
10,000 Indiana University, Student Fee Ser K (MBIA)................ 5.875 08/01/20 10,025,200
3,000 Maryland State Health & Educational Facilities Authority,
The Johns Hopkins University Refg Ser 1998................. 5.125 07/01/20 2,813,370
7,000 Massachusetts Health & Educational Facilities Authority,
Boston University 1991 Ser K & L (MBIA).................... 6.66 10/01/31 7,261,590
5,000 Missouri Health & Educational Facilities Authority,
Washington University Ser 1998 A........................... 4.75 11/15/37 4,029,300
2,000 New Jersey Economic Development Authority, The Seeing Eye
Inc 1991................................................... 7.30 04/01/11 2,034,720
8,000 New Jersey Educational Facilities Authority, Princeton
University Ser 1999 A...................................... 4.75 07/01/25 6,907,920
5,000 New York State Dormitory Authority, State University Ser
1989 B..................................................... 0.00 05/15/02 4,561,150
2,000 Ohio State University, General Receipts Ser 1999 A.......... 5.80 12/01/29 1,994,840
---------- -----------
42,000 39,628,090
---------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
MORGAN STANLEY DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS June 30, 2000 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Electric Revenue (12.9%)
$ 25,000 Salt River Project Agricultural Improvement & Power
District, Arizona, Refg 1993 Ser C (Secondary MBIA)........ 5.50% 01/01/10 $25,898,000
10,000 Sacramento Municipal Utility District, California, Refg 1994
Ser I (MBIA)............................................... 5.75 01/01/15 10,236,300
10,000 Municipal Electric Authority of Georgia, Ser Y (Secondary
MBIA)...................................................... 6.50 01/01/17 11,098,600
Long Island Power Authority, New York,
15,000 Ser 2000 A (FSA)........................................... 0.00 06/01/17 5,776,800
5,000 Ser 1998 A (FSA)........................................... 5.125 12/01/22 4,544,400
Puerto Rico Electric Power Authority,
1,500 Power Ser X................................................ 6.00 07/01/15 1,558,095
15,000 Power Ser O................................................ 0.00 07/01/17 5,636,700
5,000 Power Ser EE (MBIA)........................................ 4.50 07/01/18 4,309,800
15,000 South Carolina Public Service Authority, 1995 Refg Ser A
(AMBAC).................................................... 6.25 01/01/22 15,516,450
710 Austin, Texas, Combined Utilities Refg Ser 1994 (FGIC)...... 6.25 05/15/16 748,113
San Antonio, Texas,
13,000 Electric & Gas Refg Ser 1994 C............................. 4.70 02/01/06 12,873,770
5,000 Electric & Gas Refg Ser 1998 A............................. 4.50 02/01/21 4,156,100
10,000 Intermountain Power Agency, Utah, Refg 1997 Ser B (MBIA).... 5.75 07/01/19 10,000,000
13,500 Washington Public Supply Power System, Proj #2 Refg Ser 1994
A (Secondary MBIA)......................................... 6.00 07/01/07 14,256,810
---------- -----------
143,710 126,609,938
---------- -----------
Hospital Revenue (4.4%)
Rochester, Minnesota,
5,000 Mayo Foundation/Medical Center Ser 1992 I.................. 5.75 11/15/21 4,963,150
6,200 Mayo Foundation/Medical Center Ser 1992 F.................. 6.25 11/15/21 6,298,766
10,000 Missouri Health & Educational Facilities Authority,
Barnes-Jewish Inc/Christian Health Services Ser 1993 A..... 5.25 05/15/14 9,774,100
1,300 New Hampshire Higher Educational & Health Facilities
Authority, St Joseph Hospital Ser 1994 (Connie Lee)........ 6.35 01/01/07 1,375,543
6,000 New York State Medical Care Facilities Finance Agency,
Presbyterian Hospital - FHA Insured Mtge Ser 1994 A........ 5.25 08/15/14 5,795,580
5,000 North Central Texas Health Facilities Development
Corporation, University Medical Center Inc Ser 1997
(FSA)...................................................... 5.45 04/01/15 4,905,250
10,000 Fredericksburg Industrial Development Authority, Virginia,
Medicorp Health Refg Ser 1996 (AMBAC)...................... 5.25 06/15/16 9,492,100
---------- -----------
43,500 42,604,489
---------- -----------
Industrial Development/Pollution Control Revenue (4.4%)
1,500 Hawaii Department of Budget & Finance, Hawaiian Electric Co
Ser 1995 A (AMT) (MBIA).................................... 6.60 01/01/25 1,582,905
10,000 Clark County, Nevada, Nevada Power Co Ser 1992 A (AMT)
(FGIC)..................................................... 6.70 06/01/22 10,466,300
5,000 Washoe County, Nevada, Sierra Pacific Power Co Ser 1987
(AMBAC).................................................... 6.30 12/01/14 5,184,900
5,000 Alliance Airport Authority, Texas, AMR Corp Ser 1990
(AMT)...................................................... 7.50 12/01/29 5,056,550
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 9
MORGAN STANLEY DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS June 30, 2000 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 10,000 Dallas-Fort Worth International Airport Facility Improvement
Corporation, Texas, American Airlines Inc Ser 1995......... 6.00% 11/01/14 $ 9,546,100
10,000 Weston, Wisconsin, Wisconsin Public Service Co Refg Ser 1993
A.......................................................... 6.90 02/01/13 10,725,500
---------- -----------
41,500 42,562,255
---------- -----------
Mortgage Revenue - Multi-Family (2.5%)
880 Massachusetts Housing Finance Agency, Rental 1994 Ser A
(AMT) (AMBAC).............................................. 6.65 07/01/19 903,584
5,560 Michigan Housing Development Authority, Rental 1992 Ser A
(Bifurcated FSA)........................................... 6.50 04/01/23 5,733,750
9,000 New Jersey Housing & Mortgage Finance Agency, 1995 Ser A
(AMBAC).................................................... 6.05 11/01/20 9,069,120
New York City Housing Development Corporation, New York,
4,212 Ruppert Proj - FHA Ins Sec 223F............................ 6.50 11/15/18 4,252,818
4,065 Stevenson Commons Proj - FHA Ins Sec 223F.................. 6.50 05/15/18 4,103,625
---------- -----------
23,717 24,062,897
---------- -----------
Mortgage Revenue - Single Family (7.8%)
7,000 Alaska Housing Finance Corporation, Governmental 1995 Ser A
(MBIA)..................................................... 5.875 12/01/24 6,905,850
2,440 California Housing Finance Agency, Home 1983 Ser B.......... 0.00 08/01/15 522,575
Colorado Housing & Finance Authority,
2,000 1998 Ser A-2 (AMT)......................................... 6.60 05/01/28 2,075,040
2,500 1997 Ser C-2 (AMT)......................................... 6.875 11/01/28 2,614,675
11,700 Illinois Housing Development Authority, Residential 1991 Ser
C (AMT).................................................... 6.875 02/01/18 11,998,584
Missouri Housing Development Commission, Homeownership
2,820 GNMA/FNMA Collateralized 1996 Ser C (AMT).................. 7.45 09/01/27 2,995,799
3,910 GNMA/FNMA Collateralized 1997 Ser C-1...................... 6.55 09/01/28 4,097,563
2,000 Loan Program, Ser 2000 B-1 (AMT)........................... 7.45 09/01/31 2,203,680
2,500 Nebraska Investment Finance Authority, GNMA-Backed 1990
(AMT)...................................................... 7.631 09/10/30 2,557,000
5,000 New Hampshire Housing Finance Authority, Mortgage
Acquisition 2000 Ser B (AMT)............................... 6.70 07/01/29 5,233,700
3,350 Ohio Housing Finance Agency, GNMA-Backed 1991 Ser A 1 & 2
(AMT)...................................................... 6.903 03/01/31 3,430,903
4,000 Oregon Housing & Community Service Department, Ser 2000 F
(AMT)...................................................... 6.25 07/01/28 4,034,160
10,000 Pennsylvania Housing Finance Agency, Ser 1991-31 C (AMT).... 7.00 10/01/23 10,320,600
Tennessee Housing Development Agency,
3,955 Mortgage Finance 1993 Ser A................................ 5.90 07/01/18 3,956,345
1,000 Mortgage Finance 1994 Ser B (AMT).......................... 6.55 07/01/19 1,009,360
9,785 Mortgage Finance 1993 Ser A................................ 5.95 07/01/28 9,674,527
240 Utah Housing Finance Agency, Fed Ins/Gtd Loans 1994 Issue E
(AMT)...................................................... 6.50 07/01/26 241,049
2,800 Wisconsin Housing & Economic Development Authority, Home
Ownership 1991 Ser (AMT)................................... 7.097 10/25/22 2,883,356
---------- -----------
77,000 76,754,766
---------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE> 10
MORGAN STANLEY DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS June 30, 2000 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Public Facilities Revenue (0.8%)
$ 2,000 North City West School Facilities Authority, California,
Community Dist #1 Special Tax Ser 1995 B (FSA)............. 6.00% 09/01/19 $ 2,067,580
5,000 Ohio Building Authority, 1985 Ser C......................... 9.75 10/01/05 6,010,800
---------- -----------
7,000 8,078,380
---------- -----------
Recreational Facilities Revenue (1.0%)
3,500 Denver, Colorado, Excise Tax Ser 1985 A (Secondary FSA)..... 5.00 11/01/08 3,499,650
Metropolitan Football Stadium District, Colorado,
4,000 Sales Tax Ser 1999 A (MBIA)................................ 0.00 01/01/10 2,397,440
2,000 Sales Tax Ser 1999 A (MBIA)................................ 0.00 01/01/12 1,059,560
3,000 Houston, Texas, Sr Lien Hotel Occupancy Tax Refg Ser 1995
(FSA)...................................................... 5.50 07/01/11 3,035,100
---------- -----------
12,500 9,991,750
---------- -----------
Resource Recovery Revenue (1.8%)
7,000 Savannah Resource Recovery Development Authority, Georgia,
Savannah Energy Systems Co Ser 1992........................ 6.30 12/01/06 7,189,560
10,000 Northeast Maryland Waste Disposal Authority, Montgomery
County Ser 1993 A (AMT).................................... 6.30 07/01/16 10,175,400
---------- -----------
17,000 17,364,960
---------- -----------
Transportation Facilities Revenue (14.9%)
5,000 San Francisco Bay Area Rapid Transit District, California,
Sales Tax Ser 1998 (AMBAC)................................. 4.75 07/01/23 4,354,950
13,000 San Joaquin Hills Transportation Corridor Agency,
California, Toll Road Refg Ser 1997 A (MBIA)............... 0.00 01/15/26 2,886,260
3,000 Colorado Department of Transportation, Ser 2000 (AMBAC)..... 6.00 06/15/15 3,155,430
5,000 E-470 Public Highway Authority, Colorado, Ser 1997 B
(MBIA)..................................................... 0.00 09/01/16 1,958,900
Mid-Bay Bridge Authority, Florida,
8,965 Ser 1993 A (AMBAC)......................................... 5.85 10/01/13 9,250,087
3,000 Ser 1997 A (AMBAC)......................................... 0.00 10/01/21 826,290
5,000 Atlanta, Georgia, Airport Ser 2000 (FGIC)................... 5.875 01/01/17 5,136,800
5,000 Hawaii, Airports Second Ser 1991 (AMT)...................... 7.00 07/01/18 5,174,850
Kentucky Turnpike Authority,
9,000 Economic Development Road Refg Ser 1995 (AMBAC)............ 6.50 07/01/08 9,887,670
30,000 Resource Recovery Road 1987 Ser A.......................... 5.00 07/01/08 29,688,600
8,700 Massachusetts Turnpike Authority, Western 1997 Ser A
(MBIA)..................................................... 5.55 01/01/17 8,700,000
7,700 Minneapolis - St Paul Metropolitan Airports Commission,
Minnesota, Ser 1998 A (AMBAC).............................. 5.00 01/01/30 6,785,317
New Jersey Highway Authority,
9,560 Sr Parkway Refg 1992 Ser................................... 6.25 01/01/14 9,928,251
7,000 Sr Parkway 1999 Ser........................................ 5.625 01/01/30 6,895,910
6,595 Albuquerque, New Mexico, Airport Refg Ser 1997 (AMT)
(AMBAC).................................................... 6.375 07/01/15 6,962,078
5,000 Ohio Turnpike Commission, Ser 1998 B (FGIC)................. 4.50 02/15/24 4,097,100
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE> 11
MORGAN STANLEY DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS June 30, 2000 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Pennsylvania Turnpike Commission,
$ 5,000 Ser L of 1991 (MBIA)....................................... 6.00% 06/01/15 $ 5,079,750
5,000 Ser A 1998 (AMBAC)......................................... 4.75 12/01/27 4,214,750
8,000 Puerto Rico Highway & Transportation Authority, Refg Ser
X.......................................................... 5.50 07/01/15 8,122,720
10,000 South Carolina Transportation Infrastructure Bank, Ser 1999
A (AMBAC).................................................. 5.50 10/01/16 9,988,400
3,000 Virginia Transportation Board, US Route 58 Corridor Ser 1993
B.......................................................... 5.625 05/15/13 3,037,350
---------- -----------
162,520 146,131,463
---------- -----------
Water & Sewer Revenue (9.6%)
10,000 Phoenix Civic Improvement Corporation, Arizona, Jr Lien
Water Ser 1994............................................. 5.45 07/01/19 9,768,800
10,000 California Department of Water Resources, Central Valley Ser
L.......................................................... 5.50 12/01/23 9,767,900
10,000 Los Angeles, California, Wastewater Ser 1994-A (MBIA)....... 5.875 06/01/24 10,091,300
5,000 Fulton County, Georgia, Water & Sewerage Ser 1998 (FGIC).... 4.75 01/01/28 4,234,300
2,700 Kansas Development Finance Authority, Public Water Supply
Ser 2000-2 (AMBAC)......................................... 5.75 04/01/17 2,741,526
10,000 Louisville & Jefferson County Metropolitan Sewer District,
Kentucky, Ser 1998 A (FGIC)................................ 4.75 05/15/28 8,434,400
5,000 Massachusetts Water Resources Authority, Refg 1992 Ser B.... 5.50 11/01/15 4,984,200
Detroit, Michigan,
3,320 Sewage Refg Ser 1993 A (FGIC).............................. 5.70 07/01/13 3,372,157
10,000 Water Supply 1997 Ser A (MBIA)............................. 5.00 07/01/21 9,013,300
10,000 Cleveland, Ohio, Waterworks Impr & Refg 1998 Ser I (FSA).... 5.00 01/01/23 8,955,500
5,000 Spartanburg, South Carolina, Jr Lien Water Ser 1998
(FGIC)..................................................... 5.25 06/01/28 4,601,650
11,000 Metropolitan Government of Nashville & Davidson County,
Tennessee,
Refg Ser 1998 A (FGIC)..................................... 4.75 01/01/22 9,470,010
10,000 Dallas, Texas, Waterworks & Sewer Refg Ser 1998 (FSA)....... 5.00 10/01/29 8,764,600
---------- -----------
102,020 94,199,643
---------- -----------
Other Revenue (0.5%)
5,000 New York Local Government Assistance Corporation, Ser 1993
C.......................................................... 5.50 04/01/17 5,015,850
---------- -----------
Refunded (10.0%)
9,000 Los Angeles Convention & Exhibition Center Authority,
California,
Ser 1985 COPs.............................................. 9.00 12/01/05+ 10,981,260
2,500 Mid-Bay Bridge Authority, Florida, Ser 1991 A (ETM)......... 6.875 10/01/22 2,858,225
2,500 Massachusetts Health & Educational Facilities Authority,
Malden Hospital - FHA Ins Mtge Ser A (ETM)................. 5.00 08/01/16 2,393,275
10,000 Massachusetts Water Resources Authority, 1996 Ser A
(FGIC)..................................................... 5.50 11/01/06+ 10,429,600
13,750 New York State Dormitory Authority, Suffolk County Judicial
Ser 1986 (ETM)............................................. 7.375 07/01/16 15,984,100
7,000 San Antonio, Texas, Electric & Gas Refg Ser 1994 C (ETM).... 4.70 02/01/06 6,858,390
25,000 Intermountain Power Agency, Utah, Refg 1985 Ser H (GAINS)... 0.00# 07/01/03+ 28,767,500
5,000 Salt Lake City, Utah, IHC Hospital Inc Ser 1983 (ETM)....... 5.00 06/01/15 4,805,600
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE> 12
MORGAN STANLEY DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS June 30, 2000 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 14,000 Fairfax County Industrial Development Authority, Virginia,
Fairfax Hospital/Inova Health Ser 1991..................... 8.927%++ 08/29/01+ $15,190,000
---------- -----------
88,750 98,267,950
---------- -----------
942,687 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $860,412,943)................. 887,936,547
---------- -----------
SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (8.0%)
12,500 Maricopa County, Arizona Public Service Co Ser 1994 C
(Demand 07/03/00).......................................... 4.50* 05/01/29 12,500,000
18,500 Collier County Health Facilities Authority, Florida,
Cleveland Clinic Health Ser 1999 (Demand 07/03/00)......... 4.50* 01/01/33 18,500,000
10,000 Atlanta, Georgia, Airport Ser 1990 (AMT).................... 6.25 01/01/01+ 10,289,700
17,000 Philadelphia Hospital & Higher Education Facilities
Authority, Children's Hospital of Philadelphia Ser 1992
(Demand 07/03/00).......................................... 4.50* 03/01/27 17,000,000
20,500 Harris County Health Facilities Development Corporation,
Texas, Methodist Hospital Ser 1994 (Demand 07/03/00)....... 4.55* 12/01/25 20,500,000
---------- -----------
78,500 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS
---------- (Identified Cost $77,317,702)...................................... 78,789,700
-----------
$1,021,187 TOTAL INVESTMENTS (Identified Cost $937,730,645) (a)................ 98.6% 966,726,247
==========
OTHER ASSETS IN EXCESS OF LIABILITIES .................................
1.4 13,795,816
----- -----------
NET ASSETS........................................................... 100.0% $980,522,063
===== ===========
</TABLE>
---------------------
<TABLE>
<C> <S>
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
ETM Escrowed to maturity.
GAINS Growth and Income Security.
+ Prerefunded to call date shown.
++ Current coupon rate for residual interest bond. This rate
resets periodically as the auction rate on the related
short-term securities fluctuates.
# Currently a zero coupon bond; will convert to 10.00% coupon
on July 1, 2000.
* 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 $40,729,455 and the aggregate gross
unrealized depreciation is $11,733,853, resulting in net
unrealized appreciation of $28,995,602.
Bond Insurance:
------------------------------------------------------------------------
AMBAC AMBAC Assurance Corporation.
Connie Lee Connie Lee Insurance Company.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE> 13
MORGAN STANLEY DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS June 30, 2000 (unaudited) continued
Geographic Summary of Investments
Based on Market Value as a Percent of Net Assets
<TABLE>
<S> <C>
Alaska...................... 5.3%
Arizona..................... 4.9
California.................. 5.2
Colorado.................... 1.7
Connecticut................. 0.3
Florida..................... 2.2
Georgia..................... 3.9
Hawaii...................... 0.7
Illinois.................... 1.2
Indiana..................... 1.0
Kansas...................... 0.3
Kentucky.................... 4.9
Maryland.................... 1.3
Massachusetts............... 6.8
Michigan.................... 1.8
Minnesota................... 1.8
Missouri.................... 2.4
Nebraska.................... 0.3
Nevada...................... 1.9
New Hampshire............... 0.7
New Jersey.................. 3.5
New Mexico.................. 0.7
New York.................... 5.6
North Carolina.............. 1.7
Ohio........................ 5.3
Oregon...................... 0.4
Pennsylvania................ 4.8
Puerto Rico................. 2.0
South Carolina.............. 3.1
Tennessee................... 2.9
Texas....................... 7.8
Utah........................ 4.5
Virginia.................... 2.8
Washington.................. 3.5
Wisconsin................... 1.4
----
Total....................... 98.6%
====
</TABLE>
---------------------
Portfolio structure is subject to change.
13
<PAGE> 14
MORGAN STANLEY DEAN WITTER TAX-EXEMPT SECURITIES TRUST
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2000 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $937,730,645)............................. $966,726,247
Cash........................................................ 365,660
Receivable for:
Interest................................................ 14,280,414
Investments sold........................................ 305,497
Shares of beneficial interest sold...................... 284,992
Prepaid expenses and other assets........................... 68,023
------------
TOTAL ASSETS............................................ 982,030,833
------------
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased............... 682,781
Investment management fee............................... 361,902
Dividends to shareholders............................... 283,336
Plan of distribution fee................................ 77,157
Accrued expenses............................................ 103,594
------------
TOTAL LIABILITIES....................................... 1,508,770
------------
NET ASSETS.............................................. $980,522,063
============
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................. $954,985,240
Net unrealized appreciation................................. 28,995,602
Accumulated undistributed net investment income............. 20,278
Accumulated net realized loss............................... (3,479,057)
------------
NET ASSETS.............................................. $980,522,063
============
CLASS A SHARES:
Net Assets.................................................. $18,105,378
Shares Outstanding (unlimited authorized, $.01 par value)... 1,610,844
NET ASSET VALUE PER SHARE............................... $11.24
============
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 4.44% of net asset value)........ $11.74
============
CLASS B SHARES:
Net Assets.................................................. $138,624,776
Shares Outstanding (unlimited authorized, $.01 par value)... 12,283,479
NET ASSET VALUE PER SHARE............................... $11.29
============
CLASS C SHARES:
Net Assets.................................................. $9,606,889
Shares Outstanding (unlimited authorized, $.01 par value)... 853,009
NET ASSET VALUE PER SHARE............................... $11.26
============
CLASS D SHARES:
Net Assets.................................................. $814,185,020
Shares Outstanding (unlimited authorized, $.01 par value)... 72,495,571
NET ASSET VALUE PER SHARE............................... $11.23
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE> 15
MORGAN STANLEY DEAN WITTER TAX-EXEMPT SECURITIES TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the six months ended June 30, 2000 (unaudited)
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $29,292,803
-----------
EXPENSES
Investment management fee................................... 2,221,234
Plan of distribution fee (Class A shares)................... 14,965
Plan of distribution fee (Class B shares)................... 410,915
Plan of distribution fee (Class C shares)................... 33,740
Transfer agent fees and expenses............................ 160,898
Shareholder reports and notices............................. 47,785
Registration fees........................................... 37,489
Professional fees........................................... 33,081
Custodian fees.............................................. 20,335
Trustees' fees and expenses................................. 9,018
Other....................................................... 16,976
-----------
TOTAL EXPENSES.......................................... 3,006,436
Less: expense offset........................................ (20,303)
-----------
NET EXPENSES............................................ 2,986,133
-----------
NET INVESTMENT INCOME................................... 26,306,670
-----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain........................................... 1,189,548
Net change in unrealized appreciation....................... 12,724,864
-----------
NET GAIN................................................ 13,914,412
-----------
NET INCREASE................................................ $40,221,082
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE> 16
MORGAN STANLEY DEAN WITTER TAX-EXEMPT SECURITIES TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JUNE 30, 2000 DECEMBER 31, 1999
---------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income.............................. $ 26,306,670 $ 56,178,651
Net realized gain (loss)........................... 1,189,548 (4,668,605)
Net change in unrealized appreciation.............. 12,724,864 (82,789,197)
-------------- --------------
NET INCREASE (DECREASE)........................ 40,221,082 (31,279,151)
-------------- --------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A shares................................. (451,266) (929,080)
Class B shares................................. (3,303,490) (6,430,720)
Class C shares................................. (227,757) (422,770)
Class D shares................................. (22,324,157) (48,394,252)
Net realized gain
Class A shares................................. -- (52,982)
Class B shares................................. -- (400,237)
Class C shares................................. -- (27,144)
Class D shares................................. -- (2,638,565)
-------------- --------------
TOTAL DIVIDENDS AND DISTRIBUTIONS.............. (26,306,670) (59,295,750)
-------------- --------------
Net decrease from transactions in shares of
beneficial interest............................... (53,617,636) (67,388,661)
-------------- --------------
NET DECREASE................................... (39,703,224) (157,963,562)
NET ASSETS:
Beginning of period................................ 1,020,225,287 1,178,188,849
-------------- --------------
END OF PERIOD
(Including undistributed net investment income
of $20,278 and $20,278, respectively).......... $ 980,522,063 $1,020,225,287
============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
16
<PAGE> 17
MORGAN STANLEY DEAN WITTER TAX-EXEMPT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 2000 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Tax-Exempt Securities Trust (the "Fund") is
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. The Fund's investment
objective is to provide a high level of current income which is exempt from
federal income tax, consistent with the preservation of capital. The Fund was
incorporated in Maryland in 1979, commenced operations on March 27, 1980 and
reorganized as a Massachusetts business trust on April 30, 1987. On July 28,
1997, the Fund converted to a multiple class share structure.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year, six
years and one year, respectively. Class D shares are not subject to a sales
charge. Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
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 Fund by
an outside independent pricing service approved by the Trustees. The pricing
service has informed the Fund that in valuing the Fund's 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
Fund's 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.
17
<PAGE> 18
MORGAN STANLEY DEAN WITTER TAX-EXEMPT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 2000 (unaudited) continued
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 Fund amortizes premiums and accretes discounts over the life of the
respective securities. Interest income is accrued daily.
C. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date such
items are recognized. Distribution fees are charged directly to the respective
class.
D. FEDERAL INCOME TAX STATUS -- It is the Fund'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.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the record date. The amount of dividends
and distributions from net investment income and net realized capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification. Dividends and distributions which
exceed net investment income and net realized capital gains for financial
reporting purposes but not for tax purposes are reported as dividends in excess
of net investment income or distributions in excess of net realized capital
gains. To the extent they exceed net investment income and net realized capital
gains for tax purposes, they are reported as distributions of paid-in-capital.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with Morgan Stanley Dean Witter
Advisors Inc. (the "Investment Manager"), the Fund pays the Investment Manager a
management fee, accrued daily and payable monthly, by applying the following
annual rates to the Fund's net assets determined as of the close of each
business day: 0.50% to the portion of daily net assets not exceeding $500
million; 0.425% to the portion of daily net assets exceeding $500 million but
not exceeding $750 million; 0.375% to the portion of daily net assets exceeding
$750 million but not exceeding $1 billion; 0.35% to the
18
<PAGE> 19
MORGAN STANLEY DEAN WITTER TAX-EXEMPT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 2000 (unaudited) continued
portion of daily net assets exceeding $1 billion but not exceeding $1.25
billion; and 0.325% to the portion of daily net assets exceeding $1.25 billion.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Morgan Stanley Dean Witter Distributors
Inc. (the "Distributor"), an affiliate of the Investment Manager. The Fund has
adopted a Plan of Distribution (the "Plan"), pursuant to Rule 12b-1 under the
Act. The Plan provides that the Fund will pay the Distributor a fee which is
accrued daily and paid monthly at the following annual rates: (i) Class A -- up
to 0.25% of the average daily net assets of Class A; (ii) Class B -- 0.60% of
the average daily net assets of Class B; and (iii) Class C -- up to 0.70% of the
average daily net assets of Class C.
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon
redemption of Class B shares. Although there is no legal obligation for the Fund
to pay expenses incurred in excess of payments made to the Distributor under the
Plan and the proceeds of contingent deferred sales charges paid by investors
upon redemption of shares, if for any reason the Plan is terminated, the
Trustees will consider at that time the manner in which to treat such expenses.
The Distributor has advised the Fund that such excess amounts totaled $5,318,401
at June 30, 2000.
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 0.70% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Dean Witter Financial Advisors or other
selected broker-dealer representatives may be reimbursed in the subsequent
calendar year. For the six months ended June 30, 2000, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.17% and
0.70%, respectively.
The Distributor has informed the Fund that for the six months ended June 30,
2000, it received contingent deferred sales charges from certain redemptions of
the Fund's Class B shares and Class C shares of $159,315 and $959, respectively
and received $42,011 in front-end sales charges from sales of the Fund's Class A
shares. The respective shareholders pay such charges which are not an expense of
the Fund.
19
<PAGE> 20
MORGAN STANLEY DEAN WITTER TAX-EXEMPT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 2000 (unaudited) continued
4. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JUNE 30, 2000 DECEMBER 31, 1999
--------------------------- ----------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold..................................................... 2,046,856 $ 22,764,791 1,023,382 $ 11,894,433
Reinvestment of dividends and distributions.............. 17,126 190,365 35,276 407,295
Redeemed................................................. (2,005,510) (22,300,508) (757,512) (8,588,318)
----------- ------------- ------------ -------------
Net increase - Class A................................... 58,472 654,648 301,146 3,713,410
----------- ------------- ------------ -------------
CLASS B SHARES
Sold..................................................... 4,238,409 47,228,433 5,634,037 65,447,290
Reinvestment of dividends and distributions.............. 142,132 1,586,291 304,367 3,532,880
Redeemed................................................. (4,661,711) (51,930,451) (4,333,128) (49,694,515)
----------- ------------- ------------ -------------
Net increase (decrease) - Class B........................ (281,170) (3,115,727) 1,605,276 19,285,655
----------- ------------- ------------ -------------
CLASS C SHARES
Sold..................................................... 54,325 604,568 843,726 9,755,515
Reinvestment of dividends and distributions.............. 14,498 161,488 26,647 307,538
Redeemed................................................. (118,772) (1,321,670) (598,459) (6,828,777)
----------- ------------- ------------ -------------
Net increase (decrease) - Class C........................ (49,949) (555,614) 271,914 3,234,276
----------- ------------- ------------ -------------
CLASS D SHARES
Sold..................................................... 314,419 3,498,195 1,880,172 21,134,542
Reinvestment of dividends and distributions.............. 1,066,894 11,851,294 2,424,240 28,046,032
Redeemed................................................. (5,954,016) (65,950,432) (12,402,477) (142,802,576)
----------- ------------- ------------ -------------
Net decrease - Class D................................... (4,572,703) (50,600,943) (8,098,065) (93,622,002)
----------- ------------- ------------ -------------
Net decrease in Fund..................................... (4,845,350) $ (53,617,636) (5,919,729) $ (67,388,661)
=========== ============= ============ =============
</TABLE>
5. 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 June 30, 2000 aggregated
$54,115,718 and $98,721,121, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At June 30, 2000, the Fund had
transfer agent fees and expenses payable of approximately $2,500.
20
<PAGE> 21
MORGAN STANLEY DEAN WITTER TAX-EXEMPT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 2000 (unaudited) continued
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the six months ended June 30, 2000
included in Trustees' fees and expenses in the Statement of Operations amounted
to $2,972. At June 30, 2000, the Fund had an accrued pension liability of
$51,912 which is included in accrued expenses in the Statement of Assets and
Liabilities.
6. FEDERAL INCOME TAX STATUS
At December 31, 1999, the Fund had a net capital loss carryover of approximately
$4,670,000 which will be available through December 31, 2007 to offset future
capital gains to the extent provided by regulations.
7. SUBSEQUENT EVENT -- MERGERS
On July 24, 2000, the Fund acquired all the net assets of Morgan Stanley Dean
Witter Multi-State Municipal Series Trust -- Massachusetts Series
("Massachusetts Series"), Michigan Series ("Michigan Series"), Minnesota Series
("Minnesota Series") and Ohio Series ("Ohio Series") based on the respective
valuations as of the close of business on July 21, 2000, pursuant to four
reorganization plans approved by the shareholders of Massachusetts Series,
Michigan Series, Minnesota Series and the Ohio Series on June 22, 2000. The
acquisition was accomplished by a tax-free exchange of 792,540 Class D shares of
the Fund at a net asset value of $11.31 per share for 852,866 shares of
Massachusetts Series; 1,059,251 Class D of the Fund at a net asset value of
$11.31 per share for 1,182,639 shares of Michigan Series; 453,481 Class D of the
Fund at a net asset value of $11.31 per share for 513,915 shares of Minnesota
Series; and 1,079,835 Class D of the Fund at a net asset value of $11.31 per
share for 1,175,451 shares of the Ohio Series. The net assets of the Fund and
Massachusetts Series, Michigan Series, Minnesota Series and the Ohio Series
immediately before the acquisition were $982,320,805, $8,984,072, $11,975,503,
$5,126,864 and $12,211,414, respectively, including unrealized appreciation of
$282,180, $102,725, $26,335, $39,899 for Massachusetts Series, Michigan Series,
Minnesota Series and the Ohio Series, respectively. Immediately after the
acquisition, the combined net assets of the Fund amounted to $1,020,618,658.
21
<PAGE> 22
MORGAN STANLEY DEAN WITTER TAX-EXEMPT SECURITIES TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED ENDED THROUGH
JUNE 30, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
-------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
CLASS A SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period................ $11.08 $12.02 $12.09 $12.00
------ ------ ------ ------
Income (loss) from investment operations:
Net investment income.............................. 0.29 0.58 0.59 0.25
Net realized and unrealized gain (loss)............ 0.16 (0.91) 0.10 0.14
------ ------ ------ ------
Total income (loss) from investment operations...... 0.45 (0.33) 0.69 0.39
------ ------ ------ ------
Less dividends and distributions from:
Net investment income.............................. (0.29) (0.58) (0.59) (0.25)
Net realized gain.................................. -- (0.03) (0.17) (0.05)
------ ------ ------ ------
Total dividends and distributions................... (0.29) (0.61) (0.76) (0.30)
------ ------ ------ ------
Net asset value, end of period...................... $11.24 $11.08 $12.02 $12.09
====== ====== ====== ======
TOTAL RETURN+....................................... 4.09%(1) (2.82)% 5.86% 3.31%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses............................................ 0.69%(2)(5) 0.64 %(4)(5) 0.74%(4)(5) 0.76%(2)(3)
Net investment income............................... 5.25%(2)(5) 4.98 %(5) 4.88%(5) 4.96%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............. $18,105 $17,198 $15,041 $3,857
Portfolio turnover rate............................. 6%(1) 13 % 15% 16%
</TABLE>
---------------------
* The date shares were first issued.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Does not reflect the effect of expense offset of 0.02%.
(4) Does not reflect the effect of expense offset of 0.01%.
(5) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
22
<PAGE> 23
MORGAN STANLEY DEAN WITTER TAX-EXEMPT SECURITIES TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED ENDED THROUGH
JUNE 30, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
-------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period................ $11.13 $12.07 $12.14 $12.00
------ ------ ------ -------
Income (loss) from investment operations:
Net investment income.............................. 0.27 0.53 0.55 0.23
Net realized and unrealized gain (loss)............ 0.16 (0.91) 0.10 0.19
------ ------ ------ -------
Total income (loss) from investment operations...... 0.43 (0.38) 0.65 0.42
------ ------ ------ -------
Less dividends and distributions from:
Net investment income.............................. (0.27) (0.53) (0.55) (0.23)
Net realized gain.................................. -- (0.03) (0.17) (0.05)
------ ------ ------ -------
Total dividends and distributions................... (0.27) (0.56) (0.72) (0.28)
------ ------ ------ -------
Net asset value, end of period...................... $11.29 $11.13 $12.07 $12.14
====== ====== ====== =======
TOTAL RETURN+....................................... 3.87%(1) (3.25)% 5.47% 3.57%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses............................................ 1.12%(2)(4)(5) 1.11 %(4)(5) 1.10%(4)(5) 1.14%(2)(3)
Net investment income............................... 4.82%(2)(5) 4.51 %(5) 4.52%(5) 4.87%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............. $138,625 $139,786 $132,303 $95,573
Portfolio turnover rate............................. 6%(1) 13 % 15% 16%
</TABLE>
---------------------
* The date shares were first issued.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Does not reflect the effect of expense offset of 0.02%.
(4) Does not reflect the effect of expense offset of 0.01%.
(5) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
23
<PAGE> 24
MORGAN STANLEY DEAN WITTER TAX-EXEMPT SECURITIES TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED ENDED THROUGH
JUNE 30, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
CLASS C SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period......... $11.10 $12.04 $12.11 $12.00
------ ------ ------ ------
Income (loss) from investment operations:
Net investment income....................... 0.26 0.51 0.53 0.23
Net realized and unrealized gain (loss)..... 0.16 (0.91) 0.10 0.16
------ ------ ------ ------
Total income (loss) from investment
operations.................................. 0.42 (0.40) 0.63 0.39
------ ------ ------ ------
Less dividends and distributions from:
Net investment income....................... (0.26) (0.51) (0.53) (0.23)
Net realized gain........................... -- (0.03) (0.17) (0.05)
------ ------ ------ ------
Total dividends and distributions............ (0.26) (0.54) (0.70) (0.28)
------ ------ ------ ------
Net asset value, end of period............... $11.26 $11.10 $12.04 $12.11
====== ====== ====== ======
TOTAL RETURN+................................ 3.82%(1) (3.37)% 5.36% 3.28%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses..................................... 1.22%(2)(5) 1.21 %(4)(5) 1.20%(4)(5) 1.20%(2)(3)
Net investment income........................ 4.72%(2)(5) 4.41 %(5) 4.34%(5) 4.41%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands...... $9,607 $10,025 $7,599 $2,953
Portfolio turnover rate...................... 6%(1) 13 % 15% 16%
</TABLE>
---------------------
* The date shares were first issued.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Does not reflect the effect of expense offset of 0.02%.
(4) Does not reflect the effect of expense offset of 0.01%.
(5) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
24
<PAGE> 25
MORGAN STANLEY DEAN WITTER TAX-EXEMPT SECURITIES TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR ENDED DECEMBER 31,
MONTHS ENDED ----------------------------------------------------------------------
JUNE 30, 2000 1999 1998 1997* 1996 1995
----------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
CLASS D SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of
period.............................. $11.07 $12.01 $12.08 $11.77 $12.09 $11.01
------ ------ ------ ------ ------ ------
Income (loss) from investment
operations:
Net investment income............... 0.30 0.59 0.62 0.63 0.65 0.67
Net realized and unrealized gain
(loss)............................ 0.16 (0.91) 0.10 0.36 (0.24) 1.19
------ ------ ------ ------ ------ ------
Total income (loss) from investment
operations.......................... 0.46 (0.32) 0.72 0.99 0.41 1.86
------ ------ ------ ------ ------ ------
Less dividends and distributions
from:
Net investment income............... (0.30) (0.59) (0.62) (0.63) (0.65) (0.67)
Net realized gain................... -- (0.03) (0.17) (0.05) (0.08) (0.11)
------ ------ ------ ------ ------ ------
Total dividends and distributions.... (0.30) (0.62) (0.79) (0.68) (0.73) (0.78)
------ ------ ------ ------ ------ ------
Net asset value, end of period....... $11.23 $11.07 $12.01 $12.08 $11.77 $12.09
====== ====== ====== ====== ====== ======
TOTAL RETURN+........................ 4.18%(1) (2.71)% 6.11% 8.73% 3.61% 17.37%
RATIOS TO AVERAGE NET ASSETS:
Expenses............................. 0.52%(2)(4) 0.51%(3)(4) 0.50%(3)(4) 0.49% 0.48% 0.48%
Net investment income................ 5.42%(2)(4) 5.11%(4) 5.12%(4) 5.34% 5.52% 5.76%
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands........................... $814,185 $853,216 $1,023,246 $1,096,998 $1,190,034 $1,325,308
Portfolio turnover rate.............. 6%(1) 13% 15% 16% 18% 21%
</TABLE>
---------------------
* Prior to July 28, 1997, the Fund issued one class of shares. All shares of
the Fund held prior to that date have been designated Class D shares.
+ Calculated based on the net asset value as of the last business day of the
period.
(1) Not annualized.
(2) Annualized.
(3) Does not reflect the effect of expense offset of 0.01%.
(4) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
25
<PAGE> 26
MORGAN STANLEY DEAN WITTER TAX-EXEMPT SECURITIES TRUST
CHANGE IN INDEPENDENT ACCOUNTANTS
On July 1, 2000 PricewaterhouseCoopers LLP resigned as independent accountants
of the Fund.
The reports of PricewaterhouseCoopers LLP on the financial statements of the
Fund for the past two fiscal years contained no adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principle.
In connection with its audits for the two most recent fiscal years and through
July 1, 2000, there have been no disagreements with PricewaterhouseCoopers LLP
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of PricewaterhouseCoopers LLP would have caused them to make
reference thereto in their report on the financial statements for such years.
The Fund, with the approval of its Board of Trustees and its Audit Committee,
engaged Deloitte & Touche LLP as its new independent accountants as of July 1,
2000.
26
<PAGE> 27
(This Page Intentionally Left Blank)
<PAGE> 28
TRUSTEES
----------------------------------
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
James F. Higgins
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
Joseph R. Arcieri
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
----------------------------------
Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281
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
Fund without examination by the independent accountants and accordingly they
do not express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus of
the Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus. Read the
prospectus carefully before investing.
Morgan Stanley Dean Witter Distributors Inc., member NASD.
MORGAN STANLEY
DEAN WITTER
TAX-EXEMPT
SECURITIES TRUST
Semiannual Report
June 30, 2000
