<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE TWO WORLD TRADE CENTER,
SECURITIES TRUST NEW YORK, NEW YORK 10048
LETTER TO THE SHAREHOLDERS SEPTEMBER 30, 1998
DEAR SHAREHOLDER:
The twelve-month period ended September 30, 1998, was a volatile one for
financial markets around the globe. Increasing concerns regarding the stability
of emerging markets and a slowdown in U.S. corporate profit growth resulted in
an extreme aversion to risk in financial markets worldwide. Convertible
securities were not immune to the resulting sell-off, making the period a
particularly difficult one for the Fund and the market.
PERFORMANCE
In this environment, Morgan Stanley Dean Witter Convertible Securities Trust
Class A shares returned -13.38 percent, Class B returned -14.01 percent, Class C
returned -14.07 percent and Class D returned -13.19 percent for the fiscal year
ended September 30, 1998. The performance of the Fund's four share classes
varies because each class has different expenses. During the same period, the
Goldman Sachs Convertible 100 Index returned -7.45 percent and the Lipper
Convertible Securities Funds Average returned -7.24 percent. The accompanying
chart illustrates the growth of a hypothetical $10,000 investment in the Fund's
Class B shares from September 30, 1988, through September 30, 1998, versus
similar investments in the issues that comprise the Goldman Sachs Index and the
Lipper Average.
The Fund underperformed its peer group primarily because of its emphasis on
small-cap convertibles, which significantly lagged their large-cap counterparts
for most of the period. The convertible securities of smaller companies tend to
be less liquid than those of larger ones and are therefore very sensitive to
overall market pressure. The Fund's tilt toward yield also hurt relative
performance as credit spreads for lower-quality, higher-yielding issues widened
dramatically during the period, pushing the prices of these securities
significantly lower. This same prejudice toward yield, however, provided
significant stability in the volatile environments of the first and third fiscal
quarters.
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
LETTER TO THE SHAREHOLDERS SEPTEMBER 30, 1998, CONTINUED
INVESTMENT STRATEGY
The Fund looks for companies and industries with strong underlying fundamentals
that have the potential to provide a high level of total return. The Fund
currently focuses on small- and medium-capitalization companies that issue
convertible securities that we believe offer excellent participation in a rising
equity market and downside protection in a declining market. It also searches
for convertible securities with good risk/reward characteristics, including a
relatively high yield to support the convertible if the underlying stock
declines, and an attractive conversion premium to ensure participation in any
appreciation of the underlying stock. In an attempt to reduce volatility, the
Fund generally concentrates on issues with shorter maturities while diversifying
across a wide range of industries. As of September 30, 1998, the Fund had
exposure to a broad range of industries, including managed health care (7.7
percent of net assets), real estate investment trusts (7.0 percent), major U.S.
telecommunication companies (4.0 percent), auto parts (4.5 percent) and clothing
retail stores (4.0 percent).
LOOKING AHEAD
We believe that the recent market environment has created attractive valuations,
both from a fixed-income and an equity appreciation perspective, in the
convertible market overall and the small-cap convertible market in particular.
We expect that convertibles will perform well over the long run, offering
potentially superior returns in modestly increasing, stable or declining equity
markets, although they may lag equities during periods of very strong stock
market performance.
We appreciate your ongoing support of Morgan Stanley Dean Witter Convertible
Securities Trust and look forward to continuing to serve your investment needs.
Very truly yours,
[SIGNATURE]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
2
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE
SECURITIES TRUST
FUND PERFORMANCE SEPTEMBER 30, 1998
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GROWTH OF $10,000--CLASS B
($ in Thousands)
FUND GOLDMAN SACHS(4) LIPPER(5)
<S> <C> <C> <C>
Sep-88 $10,000 $10,000 $10,000
Sep-89 $12,020 $11,214 $11,820
Sep-90 $9,985 $9,517 $10,580
Sep-91 $11,875 $11,961 $13,522
Sep-92 $12,551 $14,114 $15,374
Sep-93 $15,465 $16,719 $18,554
Sep-94 $16,241 $17,150 $18,530
Sep-95 $18,463 $20,380 $21,425
Sep-96 $21,178 $23,234 $24,287
Sep-97 $26,130 $28,992 $30,235
Sep-98 $22,468(3) $26,833 $28,046
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. PERFORMANCE FOR CLASS
A, CLASS C AND CLASS D SHARES WILL VARY FROM THE PERFORMANCE OF CLASS B
SHARES SHOWN ABOVE DUE TO DIFFERENCES IN SALES CHARGES AND EXPENSES.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS*
- -------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES** CLASS A SHARES+
- ---------------------------------------------------------- ---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year (14.01)%(1) (18.14)%(2) 1 Year (13.38)%(1) (17.93)%(2)
5 Years 7.76 (1) 7.46 (2) Since Inception (7/28/97) (6.72) (1) (10.90) (2)
10 Years 8.43 (1) 8.43 (2)
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES++ CLASS D SHARES++
- ---------------------------------------------------------- ---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year (14.07)%(1) (14.89)%(2) 1 Year (13.19)%(1)
Since Inception (7/28/97) (7.45) (1) (7.45) (2) Since Inception (7/28/97) (6.52) (1)
</TABLE>
- ------------------------
(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.
(3) Closing value assuming a complete redemption on September 30, 1998.
(4) The Goldman Sachs Convertible 100 Index tracks the performance of 100
equally weighted convertible issues with market capitalizations of at least
$100 million. The Index does not include any expenses, fees or charges. The
Index is unmanaged and should not be considered an investment.
(5) The Lipper Convertible Securities Funds Average tracks the performance of
the funds which primarily invest in convertible bonds and convertible
preferred shares of common stock as reported by Lipper Analytical Services.
* For periods of less than one year, the Fund quotes its total return on a
non-annualized basis.
** The maximum contingent deferred sales charge (CDSC) for Class B shares is
5.0%. The CDSC declines to 0% after six years.
+ The maximum front-end sales charge for Class A shares is 5.25%.
++ The maximum CDSC for Class C shares is 1% for shares redeemed within one year
of purchase.
++ Class D shares have no sales charge.
3
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CONVERTIBLE BONDS (54.8%)
AEROSPACE (1.3%)
$ 4,000 Spacehab, Inc. - 144A**........................................................ 8.00% 10/15/07 $ 3,580,920
------------
ASSISTED LIVING SERVICES (2.3%)
2,500 ARV Assisted Living, Inc....................................................... 6.75 04/01/06 1,447,500
3,000 Assisted Living Concepts, Inc. - 144A**........................................ 5.625 05/01/03 2,460,000
3,100 Emeritus Corp. - 144A**........................................................ 6.25 01/01/06 2,169,442
------------
6,076,942
------------
AUTO PARTS (3.6%)
2,000 Magna International, Inc. (Canada) - 144A**.................................... 4.875 02/15/05 2,007,500
3,450 Mark IV Industries, Inc. - 144A**.............................................. 4.75 11/01/04 2,868,882
5,750 MascoTech, Inc................................................................. 4.50 12/15/03 4,894,688
------------
9,771,070
------------
BIOTECHNOLOGY (0.7%)
2,000 Chiron Corp.................................................................... 1.90 11/17/00 1,879,440
------------
BOOKS/MAGAZINE (1.0%)
2,835 Nelson (Thomas), Inc........................................................... 5.75 11/30/99 2,814,361
------------
BROADCASTING (1.8%)
5,000 Scandinavian Broadcasting System SA (Luxembourg) - 144A**...................... 7.00 12/01/04 4,889,400
------------
BUSINESS SERVICES (0.8%)
2,000 Data Processing Resource Corp. - 144A**........................................ 5.25 04/01/05 2,027,500
------------
CABLE/CELLULAR (3.6%)
6,500 Tele-Communications International, Inc......................................... 4.50 02/15/06 6,266,000
8,770 U.S. Cellular Corp............................................................. 0.00 06/15/15 3,332,775
------------
9,598,775
------------
CLOTHING/SHOE/ACCESSORY CHAINS (4.0%)
3,600 Genesco Inc. - 144A**.......................................................... 5.50 04/15/05 2,085,948
6,500 Saks Holdings, Inc............................................................. 5.50 09/15/06 6,435,000
3,000 The Sports Authority, Inc...................................................... 5.25 09/15/01 2,250,240
------------
10,771,188
------------
COMPUTER SOFTWARE (0.2%)
1,000 Tecnomatix Technologies Ltd. (Israel) - 144A**................................. 5.25 08/15/04 588,750
------------
CONTRACT DRILLING (0.8%)
9,000 Pride International, Inc....................................................... 0.00 04/24/18 2,230,740
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
DIVERSIFIED FINANCIAL SERVICES (0.0%)
$ 1,000 Cityscape Financial Corp. (a).................................................. 6.00% 05/01/06 $ 10,000
1,000 Cityscape Financial Corp. (Eurobond) (a)....................................... 6.00 05/01/06 20,000
2,500 Cityscape Financial Corp. - 144A** (a)......................................... 6.00 05/01/06 25,000
------------
55,000
------------
E.D.P. SERVICES (2.6%)
2,250 Affiliated Computer Services - 144A**.......................................... 4.00 03/15/05 2,131,088
3,500 May & Speh, Inc................................................................ 5.25 04/01/03 4,898,985
------------
7,030,073
------------
ELECTRONIC DISTRIBUTORS (0.9%)
4,000 Reptron Electronics, Inc....................................................... 6.75 08/01/04 2,400,000
------------
ENGINEERING & CONSTRUCTION (1.2%)
4,000 Emcor Group, Inc............................................................... 5.75 04/01/05 3,302,480
------------
FINANCE (1.0%)
3,000 Financial Federal Corp. - 144A**............................................... 4.50 05/01/05 2,748,750
------------
FUNERAL SERVICES (1.2%)
3,000 Equity Corporation International - 144A**...................................... 4.50 12/31/04 3,320,040
------------
HEALTH CARE MISCELLANEOUS (0.8%)
2,175 Pharmaceutical Marketing Services, Inc......................................... 6.25 02/01/03 1,898,166
150 Pharmaceutical Marketing Services, Inc. (Eurobond)............................. 6.25 02/01/03 131,250
------------
2,029,416
------------
HOME BUILDING (0.7%)
4,300 Lennar Corp.................................................................... 0.00 07/29/18 1,827,371
------------
HOTELS/RESORTS (1.1%)
5,150 Sholodge, Inc.................................................................. 7.50 05/01/04 2,974,125
------------
MAJOR U.S. TELECOMMUNICATIONS (2.8%)
2,500 Bell Atlantic Financial Service - 144A**
(exchangeable into Cable & Wireless Communications common stock)............. 4.25 09/15/05 2,425,775
5,000 Bell Atlantic Financial Service - 144A**
(exchangeable into Telecom Corporation of New Zealand common stock).......... 5.75 04/01/03 5,080,350
1,750 SA Telecommunications, Inc. - 144A** (a)....................................... 10.00 08/15/06 52,500
------------
7,558,625
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MANAGED HEALTH CARE (7.5%)
$ 3,000 Concentra Managed Care, Inc. - 144A**.......................................... 4.50% 03/15/03 $ 1,925,640
4,000 Continucare Corp. - 144A**..................................................... 8.00 10/31/02 2,020,000
2,000 Greenery Rehabilitation Group, Inc............................................. 8.75 04/01/15 2,035,000
3,500 Healthsouth Corp. - 144A**..................................................... 3.25 04/01/03 2,660,000
7,960 Phymatrix Corp................................................................. 6.75 06/15/03 3,024,800
4,660 Quantum Health Resources, Inc.................................................. 4.75 10/01/00 4,189,992
5,000 Tenet Healthcare, Inc.......................................................... 6.00 12/01/05 4,179,700
------------
20,035,132
------------
MEDICAL ELECTRONICS (1.0%)
3,600 ThermoTrex Corp................................................................ 3.25 11/01/07 2,611,728
------------
MEDICAL SPECIALTIES (0.7%)
2,500 Fuisz Technologies Ltd......................................................... 7.00 10/15/04 1,864,850
------------
NEWSPAPERS (1.0%)
6,500 Hollinger, Inc. (Canada)....................................................... 0.00 10/05/13 2,652,845
------------
OFFICE EQUIPMENT & SUPPLIES (1.1%)
4,700 Danka Business Systems, PLC (United Kingdom)................................... 6.75 04/01/02 3,057,961
------------
OILFIELD SERVICES/EQUIPMENT (1.2%)
1,900 Halter Marine Group, Inc. - 144A**............................................. 4.50 09/15/04 1,391,750
3,000 Key Energy Group, Inc. - 144A**................................................ 5.00 09/15/04 1,871,520
------------
3,263,270
------------
OTHER CONSUMER SERVICES (0.5%)
1,500 Interim Services Inc........................................................... 4.50 06/01/05 1,290,600
------------
OTHER METALS/MINERALS (0.4%)
1,250 Crown Resources Corp. (Eurobond)............................................... 5.75 08/27/01 950,000
------------
REAL ESTATE INVESTMENT TRUST (3.2%)
3,640 Capstar Hotel Corp............................................................. 4.75 10/15/04 2,432,503
2,650 Centertrust Retail Properties (Series A)....................................... 7.50 01/15/01 2,492,656
4,000 Macerich Company (Eurobond).................................................... 7.25 12/15/02 3,750,000
------------
8,675,159
------------
RESTAURANTS (1.0%)
2,500 Hometown Buffet, Inc........................................................... 7.00 12/01/02 2,568,275
------------
SCIENTIFIC INSTRUMENTS (0.8%)
2,500 Thermo Instrument Systems, Inc. - 144A**....................................... 4.50 10/15/03 2,083,600
------------
SEMICONDUCTOR EQUIPMENT (0.5%)
2,000 Integrated Process Equipment Corp. - 144A**.................................... 6.25 09/15/04 1,242,500
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHOE MANUFACTURING (2.0%)
$ 625 Nine West Group, Inc........................................................... 5.50% 07/15/03 $ 413,181
7,500 Nine West Group, Inc. - 144A**................................................. 5.50 07/15/03 4,958,175
------------
5,371,356
------------
TELECOMMUNICATIONS (1.2%)
4,000 Global Telesystems Group, Inc.................................................. 5.75 07/01/10 3,134,240
------------
WIRELESS COMMUNICATION (0.3%)
1,500 Cellstar Corp.................................................................. 5.00 10/15/02 778,020
------------
TOTAL CONVERTIBLE BONDS
(IDENTIFIED COST $175,039,563).................................................................... 147,054,502
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES
- ---------
<C> <S> <C>
CONVERTIBLE PREFERRED STOCKS (32.3%)
APPAREL (1.7%)
111,000 Warnaco Group, Inc. $3.00.............................................................. 4,440,000
------------
AUTO PARTS (0.9%)
120,000 BTI Capital Trust $3.25 - 144A**....................................................... 2,400,000
------------
AUTOMOBILE - RENTALS (0.7%)
40,000 Budget Group Capital Trust $3.125 - 144A**............................................. 1,832,520
------------
BIOTECHNOLOGY (0.7%)
63,500 Gensia Sicor, Inc. $3.75............................................................... 1,841,500
------------
BROADCASTING (3.5%)
111,000 Metromedia International Group, Inc. $3.625............................................ 2,525,250
97,000 Sinclair Broadcasting Group, Inc. $3.00................................................ 4,656,000
242,000 Triathlon Broadcasting Co. $0.945...................................................... 2,299,000
------------
9,480,250
------------
CABLE/CELLULAR (0.7%)
35,000 MediaOne Group, Inc. $3.63
(exchangeable into AirTouch Communications, Inc. common stock)....................... 1,955,625
------------
COMPUTER SOFTWARE (1.8%)
51,000 Microsoft Corp. (Series A) $2.196...................................................... 4,915,125
------------
CONTAINERS/PACKAGING (0.5%)
33,100 Owens-Illinois, Inc. $2.375............................................................ 1,183,325
------------
DRUG STORE CHAIN (1.2%)
40,000 CVS Automatic Common Exchange Security Trust $4.23..................................... 3,260,000
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
ELECTRONIC DISTRIBUTORS (0.6%)
50,000 Pioneer Standard Electronics, Inc. $3.375 - 144A**..................................... $ 1,700,000
------------
FINANCE (1.1%)
33,400 Insignia Financing, Inc. $3.25......................................................... 1,275,479
50,000 United Rentals Trust I $3.25 - 144A**.................................................. 1,787,500
------------
3,062,979
------------
HEALTHCARE PRODUCTS & SERVICES (0.9%)
60,000 Owens & Minor Trust I $2.687 - 144A**.................................................. 2,268,780
------------
HOME BUILDING (0.9%)
300,000 Kaufman & Broad Home Corp. $0.825...................................................... 2,512,500
------------
INVESTMENT BANKERS/BROKERS/SERVICES (3.1%)
50,000 Merrill Lynch & Co., Inc. $2.39
(exchangeable into IMC Global, Inc. common stock).................................... 1,106,250
100,000 Merrill Lynch & Co., Inc. $4.087
(exchangeable into SunAmerica, Inc. common stock).................................... 7,312,500
------------
8,418,750
------------
MAJOR U.S. TELECOMMUNICATIONS (1.2%)
73,400 Loral Space & Communications Ltd. (Series C) $3.00 (Bermuda)........................... 3,312,175
------------
MANAGED HEALTH CARE (0.2%)
50,000 Sun Financing I $1.75 - 144A**......................................................... 606,250
------------
MOBILE HOME & RECREATION (0.8%)
50,000 Fleetwood Capital Trust $3.00 - 144A**................................................. 2,162,500
------------
NEWSPAPERS (0.7%)
80,000 Tribune Co. $1.75
(exchangeable into The Learning Company, Inc. common stock).......................... 1,730,000
------------
NON - U.S. BANKS (1.1%)
110,000 National Australia Bank, Ltd. $1.969 (Australia) (Units) ++............................ 2,928,750
------------
OIL & GAS PRODUCTION (1.2%)
100,000 Belco Oil & Gas Corp $1.625............................................................ 1,650,000
100,000 Chesapeake Energy Corp. $3.50 - 144A**................................................. 1,600,000
------------
3,250,000
------------
OTHER CONSUMER SERVICES (0.8%)
80,000 Cendant Corp. $3.75.................................................................... 2,000,000
------------
RAILROADS (1.0%)
60,000 Union Pacific Capital Trust $3.125 - 144A**............................................ 2,700,000
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
REAL ESTATE INVESTMENT TRUST (3.8%)
80,000 Equity Office Properties Trust (Series B) $2.625 - 144A**.............................. $ 3,265,040
161,600 FelCor Lodging Trust, Inc. (Series A) $1.95............................................ 3,474,400
85,000 Reckson Associates Reality Corp. (Series A) $1.906..................................... 1,859,375
36,600 Rouse Co. (Series B) $3.00............................................................. 1,647,000
------------
10,245,815
------------
TELECOMMUNICATIONS (3.2%)
52,800 EchoStar Communications Corp. (Series C) $3.375........................................ 2,838,000
80,000 NEXTLINK Communications, Inc. $3.25 - 144A**........................................... 2,920,000
80,000 Winstar Communications, Inc. (Series D) $3.50.......................................... 2,840,000
------------
8,598,000
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(IDENTIFIED COST $106,379,162)......................................................... 86,804,844
------------
COMMON STOCKS (3.8%)
APPAREL (1.9%)
285,000 Tropical Sportswear International Corp.*............................................... 5,236,875
------------
ASSISTED LIVING SERVICES (0.4%)
90,000 Emeritus Corp.*........................................................................ 973,125
------------
CASINO/GAMBLING (0.7%)
690,000 Alliance Gaming Corp.*................................................................. 1,746,562
------------
NEWSPAPERS (0.7%)
126,132 Hollinger International, Inc. (Class A)................................................ 1,813,148
------------
WHOLESALE DISTRIBUTOR (0.1%)
55,000 AVTEAM, Inc. (Class A)*................................................................ 309,375
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $9,020,182)........................................................... 10,079,085
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE
- --------- --------- -----------------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENTS (7.5%)
U.S. GOVERNMENT AGENCIES (b) (7.4%)
$ 19,900 Federal Home Loan Mortgage Corp. (AMORTIZED COST
$19,897,133)........................................... 5.16-5.46% 10/01/98-10/05/98 19,897,133
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENT (0.1%)
$ 355 The Bank of New York (dated 09/30/98; proceeds $354,687)
(c) (IDENTIFIED COST $354,638)......................... 5.00% 10/01/98 $ 354,638
------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $20,251,771)........................................................... 20,251,771
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $310,690,678) (D)........................................................ 98.4 % 264,190,202
OTHER ASSETS IN EXCESS OF LIABILITIES..................................................... 1.6 4,301,871
------ -------------
NET ASSETS................................................................................ 100.0 % $ 268,492,073
------ -------------
------ -------------
</TABLE>
- ---------------------
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
++ Consists of more than one class of securities traded together as a unit;
stocks with attached warrants.
(a) Non-income producing security; bond in default.
(b) Securities were purchased on a discount basis. The interest rates shown
have been adjusted to reflect a money market equivalent yield.
(c) Collateralized by $53,202 U.S. Treasury Bond 7.25% due 05/15/16 valued at
$67,332 and $229,690 U.S. Treasury Bond 7.25% due 08/15/22 valued at
$294,398.
(d) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $10,687,190 and the
aggregate gross unrealized depreciation is $57,187,666, resulting in net
unrealized depreciation of $46,500,476.
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1998
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $310,690,678)............................................................. $ 264,190,202
Receivable for:
Interest................................................................................. 3,134,097
Investments sold......................................................................... 1,755,307
Dividends................................................................................ 162,178
Shares of beneficial interest sold....................................................... 135,771
Prepaid expenses and other assets............................................................ 57,958
-------------
TOTAL ASSETS............................................................................ 269,435,513
-------------
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased................................................ 344,704
Plan of distribution fee................................................................. 224,685
Investment management fee................................................................ 136,426
Dividends and distributions to shareholders.............................................. 113,379
Accrued expenses and other payables.......................................................... 124,246
-------------
TOTAL LIABILITIES....................................................................... 943,440
-------------
NET ASSETS.............................................................................. $ 268,492,073
-------------
-------------
COMPOSITION OF NET ASSETS:
Paid-in-capital.............................................................................. $ 417,814,399
Net unrealized depreciation.................................................................. (46,500,476)
Accumulated undistributed net investment income.............................................. 7,406,854
Accumulated net realized loss................................................................ (110,228,704)
-------------
NET ASSETS.............................................................................. $ 268,492,073
-------------
-------------
CLASS A SHARES:
Net Assets................................................................................... $962,774
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE).................................... 77,356
NET ASSET VALUE PER SHARE............................................................... $12.45
-------------
-------------
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 5.54% OF NET ASSET VALUE)....................................... $13.14
-------------
-------------
CLASS B SHARES:
Net Assets................................................................................... $263,442,796
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE).................................... 21,153,152
NET ASSET VALUE PER SHARE............................................................... $12.45
-------------
-------------
CLASS C SHARES:
Net Assets................................................................................... $2,390,061
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE).................................... 192,321
NET ASSET VALUE PER SHARE............................................................... $12.43
-------------
-------------
CLASS D SHARES:
Net Assets................................................................................... $1,696,442
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE).................................... 136,321
NET ASSET VALUE PER SHARE............................................................... $12.44
-------------
-------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1998
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Interest...................................................................................... $ 13,785,021
Dividends..................................................................................... 6,422,146
------------
TOTAL INCOME............................................................................. 20,207,167
------------
EXPENSES
Plan of distribution fee (Class A shares)..................................................... 1,753
Plan of distribution fee (Class B shares)..................................................... 3,206,390
Plan of distribution fee (Class C shares)..................................................... 20,751
Investment management fee..................................................................... 1,953,489
Transfer agent fees and expenses.............................................................. 415,843
Registration fees............................................................................. 92,766
Shareholder reports and notices............................................................... 75,540
Professional fees............................................................................. 52,102
Custodian fees................................................................................ 30,770
Trustees' fees and expenses................................................................... 18,968
Other......................................................................................... 12,912
------------
TOTAL EXPENSES........................................................................... 5,881,284
------------
NET INVESTMENT INCOME.................................................................... 14,325,883
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain............................................................................. 7,466,716
Net change in unrealized appreciation......................................................... (67,299,872)
------------
NET LOSS................................................................................. (59,833,156)
------------
NET DECREASE.................................................................................. $(45,507,273)
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997*
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income.............................................. $ 14,325,883 $ 11,712,892
Net realized gain.................................................. 7,466,716 28,783,111
Net change in unrealized appreciation.............................. (67,299,872 ) 17,490,793
------------------ -------------------
NET INCREASE (DECREASE)....................................... (45,507,273 ) 57,986,796
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A shares..................................................... (35,198 ) (423 )
Class B shares..................................................... (12,386,068 ) (10,913,049 )
Class C shares..................................................... (89,566 ) (5,412 )
Class D shares..................................................... (116,323 ) (216 )
------------------ -------------------
TOTAL DIVIDENDS............................................... (12,627,155 ) (10,919,100 )
------------------ -------------------
Net increase from transactions in shares of beneficial interest.... 9,302,728 35,921,871
------------------ -------------------
NET INCREASE (DECREASE)....................................... (48,831,700 ) 82,989,567
NET ASSETS:
Beginning of period................................................ 317,323,773 234,334,206
------------------ -------------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $7,406,854
AND $5,708,126, RESPECTIVELY).................................. $ 268,492,073 $ 317,323,773
------------------ -------------------
------------------ -------------------
</TABLE>
- ---------------------
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1998
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Convertible Securities Trust (the "Fund"), formerly
Dean Witter Convertible Securities Trust, is registered under the Investment
Company Act of 1940, as amended (the "Act"), as a diversified, open-end
management investment company. The Fund's investment objective is to seek a high
level of total return on its assets through a combination of current income and
capital appreciation. The Fund was organized as a Massachusetts business trust
on May 21, 1985 and commenced operations on October 31, 1985. On July 28, 1997,
the Fund commenced offering three additional classes of shares, with the then
current shares designated as Class B shares.
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 -- (1) an equity security listed or traded on the
New York, American or other domestic or foreign stock exchange is valued at its
latest sale price on that exchange prior to the time when assets are valued; if
there were no sales that day, the security is valued at the latest bid price (in
cases where a security is traded on more than one exchange, the security is
valued on the exchange designated as the primary market pursuant to procedures
adopted by the Trustees); (2) all other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest available bid price prior to the time of valuation; (3) when market
quotations are not readily available, including circumstances under which it is
determined by Morgan Stanley Dean Witter Advisors Inc. (the "Investment
Manager"), formerly Dean Witter InterCapital Inc., that sale and bid prices are
not reflective of a security's market value, portfolio securities are valued at
their fair value as determined in good faith under procedures established by and
under the general supervision of the Trustees (valuation of debt securities for
which market quotations are not readily available may be based upon current
market prices of securities which are comparable in coupon,
14
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1998, CONTINUED
rating and maturity or an appropriate matrix utilizing similar factors); (4)
certain portfolio securities may be valued by an outside pricing service
approved by the Trustees. The pricing service may utilize a matrix system
incorporating security quality, maturity and coupon as the evaluation model
parameters, and/or research and evaluations by its staff, including review of
broker-dealer market price quotations, if available, in determining what it
believes is the fair valuation of the portfolio securities valued by such
pricing service; and (5) 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.
Dividend income and other distributions are recorded on the ex-dividend date.
Discounts are accreted 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 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
15
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1998, CONTINUED
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 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: 0.60% to the portion of the
daily net assets not exceeding $750 million; 0.55% to the portion of the daily
net assets exceeding $750 million but not exceeding $1 billion; 0.50% to the
portion of daily net assets exceeding $1 billion but not exceeding $1.5 billion;
0.475% to the portion of daily net assets exceeding $1.5 billion but not
exceeding $2 billion; 0.45% to the portion of daily net assets exceeding $2
billion but not exceeding $3 billion; and 0.425% to the portion of daily net
assets exceeding $3 billion.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
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 -- 1.0% of the
lesser of: (a) the average daily aggregate gross sales of the Class B shares
since the inception of the Fund (not including reinvestment of dividend or
capital gain distributions) less the average daily aggregate net asset value of
the Class B shares redeemed since the Fund's inception upon which a contingent
deferred sales charge has been imposed or waived; or (b) the average daily net
assets of Class B; and (iii) Class C -- up to 1.0% of the average daily net
assets of Class C. In the case of Class A shares, amounts paid under the Plan
are paid to the Distributor for services provided. In the
16
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1998, CONTINUED
case of Class B and Class C shares, amounts paid under the Plan are paid to the
Distributor for (1) services provided and the expenses borne by it and others in
the distribution of the shares of these Classes, including the payment of
commissions for sales of these Classes and incentive compensation to, and
expenses of, Morgan Stanley Dean Witter Financial Advisors and others who engage
in or support distribution of the shares or who service shareholder accounts,
including overhead and telephone expenses; (2) printing and distribution of
prospectuses and reports used in connection with the offering of these shares to
other than current shareholders; and (3) preparation, printing and distribution
of sales literature and advertising materials. In addition, the Distributor may
utilize fees paid pursuant to the Plan, in the case of Class B shares, to
compensate Dean Witter Reynolds Inc. ("DWR"), an affiliate of the Investment
Manager and Distributor, and other selected broker-dealers for their opportunity
costs in advancing such amounts, which compensation would be in the form of a
carrying charge on any unreimbursed expenses.
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, including
carrying charges, totaled $80,592,295 at September 30, 1998.
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 1.0% 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 year ended September 30, 1998, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.24% and
1.0%, respectively.
The Distributor has informed the Fund that for the year ended September 30,
1998, it received contingent deferred sales charges from certain redemptions of
the Fund's Class B shares and Class C
17
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1998, CONTINUED
shares of $379,822 and $2,747, respectively and received $27,570 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.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended September 30, 1998 aggregated
$309,447,939 and $276,502,691, respectively.
For the year ended September 30, 1998, the Fund incurred brokerage commissions
of $1,750 with DWR for portfolio transactions executed on behalf of the Fund.
For the year ended September 30, 1998, the Fund incurred brokerage commissions
of $2,500 with Morgan Stanley & Co., Inc., an affiliate of the Investment
Manager and Distributor, for portfolio transactions executed on behalf of the
Fund.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At September 30, 1998, the Fund had
transfer agent fees and expenses payable of approximately $5,000.
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 year ended September 30, 1998
included in Trustees' fees and expenses in the Statement of Operations amounted
to $5,407. At September 30, 1998, the Fund had an accrued pension liability of
$50,640 which is included in accrued expenses in the Statement of Assets and
Liabilities.
5. FEDERAL INCOME TAX STATUS
During the year ended September 30, 1998, the Fund utilized approximately
$8,751,000 of its net capital loss carryover. At September 30, 1998, the Fund
had a net capital loss carryover of approximately $108,866,000 of which
$46,135,000 will be available through September 30, 1999 and $62,731,000 will be
available through September 30, 2000 to offset future capital gains to the
extent provided by regulations.
18
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1998, CONTINUED
Capital losses incurred after October 31 ("post-October" losses) within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. The Fund incurred and will elect to defer net capital losses of
approximately $1,307,000 during fiscal 1998.
As of September 30, 1998, the Fund had temporary book/tax differences primarily
attributable to post-October losses and permanent book/tax differences primarily
attributable to an expired capital loss carryover. To reflect reclassifications
arising from the permanent differences, paid-in-capital was charged and
accumulated net realized loss was credited $27,580,247.
6. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997*
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold............................................................. 92,001 $ 1,349,947 3,315 $ 48,759
Reinvestment of dividends........................................ 2,116 29,640 14 215
Redeemed......................................................... (20,090) (277,904) -- --
----------- -------------- ----------- ------------
Net increase -- Class A.......................................... 74,027 1,101,683 3,329 48,974
----------- -------------- ----------- ------------
CLASS B SHARES
Sold............................................................. 4,637,313 68,850,146 8,039,107 107,873,505
Reinvestment of dividends........................................ 701,336 9,971,800 650,270 8,859,176
Redeemed......................................................... (5,189,588) (75,033,986) (6,107,632) (81,482,825)
----------- -------------- ----------- ------------
Net increase -- Class B.......................................... 149,061 3,787,960 2,581,745 35,249,856
----------- -------------- ----------- ------------
CLASS C SHARES
Sold............................................................. 213,545 3,143,678 41,818 612,076
Reinvestment of dividends........................................ 4,574 64,248 303 4,520
Redeemed......................................................... (66,982) (917,694) (937) (13,788)
----------- -------------- ----------- ------------
Net increase -- Class C.......................................... 151,137 2,290,232 41,184 602,808
----------- -------------- ----------- ------------
CLASS D SHARES
Sold............................................................. 201,768 2,963,943 1,366 20,017
Reinvestment of dividends........................................ 103 1,480 14 216
Redeemed......................................................... (66,930) (842,570) -- --
----------- -------------- ----------- ------------
Net increase -- Class D.......................................... 134,941 2,122,853 1,380 20,233
----------- -------------- ----------- ------------
Net increase in Fund............................................. 509,166 $ 9,302,728 2,627,638 $ 35,921,871
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
</TABLE>
- ---------------------
* For Class A, C and D, for the period July 28, 1997 (issue date) through
September 30, 1997.
19
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30
--------------------------------------------------------------------------------------------
1998++ 1997*++ 1996 1995 1994 1993 1992 1991 1990 1989
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period....................... $ 15.07 $12.72 $11.67 $10.75 $10.62 $ 8.92 $ 8.67 $ 7.65 $ 9.68 $ 8.63
------- ------ ------ ------ ------ ------ ------ ------ ------- -------
Net investment income......... 0.65 0.60 0.55 0.60 0.42 0.37 0.34 0.37 0.46 0.48
Net realized and unrealized
gain (loss).................. (2.70) 2.31 1.12 0.82 0.11 1.67 0.15 1.05 (2.06) 1.20
------- ------ ------ ------ ------ ------ ------ ------ ------- -------
Total from investment
operations................... (2.05) 2.91 1.67 1.42 0.53 2.04 0.49 1.42 (1.60) 1.68
------- ------ ------ ------ ------ ------ ------ ------ ------- -------
Less dividends from net
investment income............ (0.57) (0.56) (0.62) (0.50) (0.40) (0.34) (0.24) (0.40) (0.43) (0.63)
------- ------ ------ ------ ------ ------ ------ ------ ------- -------
Net asset value, end of
period....................... $ 12.45 $15.07 $12.72 $11.67 $10.75 $10.62 $ 8.92 $ 8.67 $ 7.65 $ 9.68
------- ------ ------ ------ ------ ------ ------ ------ ------- -------
------- ------ ------ ------ ------ ------ ------ ------ ------- -------
TOTAL INVESTMENT RETURN+...... (14.01)% 23.38% 14.70% 13.68% 5.02% 23.22% 5.69% 18.93% (16.93)% 20.20%
RATIOS TO AVERAGE NET ASSETS:
Expenses...................... 1.81%(1) 1.84% 1.89% 1.96% 1.93% 1.93% 1.92% 1.92% 1.88% 1.76%
Net investment income......... 4.40%(1) 4.45% 4.78% 5.24% 3.68% 3.44% 3.43% 4.34% 4.96% 4.93%
SUPPLEMENTAL DATA:
Net assets, end of period, in
millions..................... $263 $317 $234 $185 $190 $208 $218 $297 $413 $822
Portfolio turnover rate....... 95% 182% 171% 138% 184% 221% 145% 133% 92% 167%
</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 B shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ 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) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
<S> <C> <C>
FOR THE PERIOD
FOR THE YEAR JULY 28, 1997*
ENDED THROUGH
SEPTEMBER 30, SEPTEMBER 30,
1998++ 1997++
- -------------------------------------------------------------------------------------------------
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $ 15.07 $ 14.31
------ ------
Net investment income....................................... 0.75 0.13
Net realized and unrealized gain (loss)..................... (2.68) 0.78
------ ------
Total from investment operations............................ (1.93) 0.91
------ ------
Less dividends from net investment income................... (0.69) (0.15)
------ ------
Net asset value, end of period.............................. $ 12.45 $ 15.07
------ ------
------ ------
TOTAL INVESTMENT RETURN+.................................... (13.38)% 6.40%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.05%(3) 1.15%(2)
Net investment income....................................... 5.16%(3) 5.03%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $963 $50
Portfolio turnover rate..................................... 95% 182%
</TABLE>
<TABLE>
<S> <C> <C>
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $ 15.06 $ 14.31
------ ------
Net investment income....................................... 0.64 0.12
Net realized and unrealized gain (loss)..................... (2.68) 0.77
------ ------
Total from investment operations............................ (2.04) 0.89
------ ------
Less dividends from net investment income................... (0.59) (0.14)
------ ------
Net asset value, end of period.............................. $ 12.43 $ 15.06
------ ------
------ ------
TOTAL INVESTMENT RETURN+.................................... (14.07)% 6.26%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.81%(3) 1.92%(2)
Net investment income....................................... 4.40%(3) 4.52%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $2,390 $620
Portfolio turnover rate..................................... 95% 182%
</TABLE>
- ---------------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ 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) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
21
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
<S> <C> <C>
FOR THE PERIOD
FOR THE YEAR JULY 28, 1997*
ENDED THROUGH
SEPTEMBER 30, SEPTEMBER 30,
1998++ 1997++
- -------------------------------------------------------------------------------------------------
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $ 15.08 $ 14.31
------ ------
Net investment income....................................... 0.79 0.13
Net realized and unrealized gain (loss)..................... (2.71) 0.80
------ ------
Total from investment operations............................ (1.92) 0.93
------ ------
Less dividends from net investment income................... (0.72) (0.16)
------ ------
Net asset value, end of period.............................. $ 12.44 $ 15.08
------ ------
------ ------
TOTAL INVESTMENT RETURN+.................................... (13.19)% 6.42%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 0.81%(3) 0.89%(2)
Net investment income....................................... 5.40%(3) 4.94%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $1,696 $21
Portfolio turnover rate..................................... 95% 182%
</TABLE>
- ---------------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Calculated based on the net asset value as of the last business day of the
period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
22
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE
SECURITIES TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Morgan Stanley Dean Witter
Convertible Securities Trust (the "Fund"), formerly Dean Witter Convertible
Securities Trust, at September 30, 1998, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the periods
presented, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
September 30, 1998 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
NOVEMBER 9, 1998
1998 FEDERAL TAX NOTICE (UNAUDITED)
During the fiscal year ended September 30, 1998, 40.38% of the
income dividends qualified for the dividends received deduction
available to corporations.
23
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn MORGAN STANLEY
John R. Haire DEAN WITTER
Wayne E. Hedien CONVERTIBLE
Dr. Manuel H. Johnson SECURITIES TRUST
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and General Counsel
Peter m. Avelar
Vice President
Thomas F. Caloia
Treasureer
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
PHOTO
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.
ANNUAL REPORT
SEPTEMBER 30, 1998
