<PAGE> 1
DEAN WITTER CONVERTIBLE SECURITIES TRUST Two World Trade Center, New York, New
York 10048
LETTER TO THE SHAREHOLDERS March 31, 1998
DEAR SHAREHOLDER:
Equities in the United States, as represented by the Standard & Poor's 500
Composite Stock Price Index (S&P 500), continued their upward moves during the
six months ended March 31, 1998, to close the period at an all-time high.
Concerns over economic troubles in Asia, which caused considerable volatility in
the last quarter of 1997, have almost entirely abated and the market has focused
on the strong domestic economy with its low-inflation, low-interest-rate
environment. The convertible market -- particularly the new issue market, which
has seen a record number of offerings since the start of the year -- has also
been strong over the last several months.
PERFORMANCE
For the six months ended March 31, 1998, Dean Witter Convertible Securities
Trust's Class B shares posted a total return of 3.40 percent versus 5.97 percent
for the Goldman Sachs Convertible 100 Index and 5.37 percent for the Lipper
Convertible Securities Funds Index. For the same period, the Fund's Class A, C
and D shares had total returns of 3.82 percent, 3.42 percent and 3.92 percent,
respectively. Performance of the Fund's four share classes varies because of
differing charges and expenses. The Fund's Class B shares paid total dividends
of approximately $0.29 per share, including an extra income dividend of
approximately $0.02 per share paid on December 31, 1997.
The Fund's slight underperformance relative to its peer group was due primarily
to its exposure to small-cap companies which in general lagged the large-caps
for much of the first half of the fiscal year. The Fund's tilt toward yield also
served to dampen its relative performance in the strong equity market. This same
bias toward yield, however, provided significant stability in the volatile
environment last fall.
INVESTMENT STRATEGY
The Fund uses a value-oriented, bottom-up approach to evaluate companies and
their investment merits and emphasizes companies and
<PAGE> 2
DEAN WITTER CONVERTIBLE SECURITIES TRUST
LETTER TO THE SHAREHOLDERS March 31, 1998, continued
industries with strong underlying fundamentals and solid long-term growth
potential. The Fund focuses on the convertible securities of small- and
medium-capitalization companies that are believed to offer excellent
participation in a rising equity market and downside protection in a declining
market. In an attempt to lower volatility, the Fund generally concentrates on
issues with short maturities while diversifying across a wide range of
industries. The Fund 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 a reasonable conversion
premium to ensure participation in any appreciation of the underlying stock.
As of March 31, 1998, the Fund had exposure to a broad range of industries,
including health care (such as Healthsouth and Tenet Healthcare),
telecommunications (such as Winstar, Gilat Satellite and Bell Atlantic) and real
estate investment trusts (such as Health Care Properties, Macerich and FelCor
Suites). The Fund has recently increased its investment in technology-related
companies (such as Hutchinson Technology, Xilinx and National Semiconductor), to
attain sector exposure that more closely mirrors the convertible indexes. While
technology will remain a small part of the Fund's industry mix, new investment
opportunities will be considered more frequently from this group going forward.
As of March 31, 1998, the Fund was 89.8 percent invested in convertible
securities (including convertible bonds and preferred stocks), 5.6 percent in
equities and 4.6 percent in cash equivalents.
LOOKING AHEAD
We believe that convertibles will continue to perform well over the long run,
offering attractive returns in modestly increasing, stable or declining equity
markets, but lagging equity markets during very strong periods.
We appreciate your support of Dean Witter Convertible Securities Trust and look
forward to continuing to serve your investment needs and objectives.
Very truly yours,
/s/ CHARLES A. FIUMEFREDDO
CHARLES A. FIUMEFREDDO
Chairman of the Board
2
<PAGE> 3
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS March 31, 1998 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CONVERTIBLE BONDS (56.1%)
Aerospace (1.2%)
$ 4,000 Spacehab, Inc. - 144A**.............. 8.00 % 10/15/07 $ 4,240,000
------------
Auto Parts (3.5%)
2,000 Magna International, Inc.(Canada) -
144A**.............................. 4.875 02/15/05 2,346,260
3,450 Mark IV Industries, Inc. - 144A**.... 4.75 11/01/04 3,265,632
6,750 MascoTech, Inc....................... 4.50 12/15/03 6,252,188
------------
11,864,080
------------
Broadcast Media (2.5%)
2,065 Scandinavian Broadcasting System SA
(Luxembourg)........................ 7.25 08/01/05 2,428,956
5,000 Scandinavian Broadcasting System SA
(Luxembourg) - 144A**............... 7.00 12/01/04 6,156,250
------------
8,585,206
------------
Business Services (0.6%)
2,000 Data Processing Resource Corp. -
144A**.............................. 5.25 04/01/05 2,155,480
------------
Cable/Cellular (2.8%)
6,500 Tele-Communications International,
Inc. ............................... 4.50 02/15/06 5,825,625
10,270 U.S. Cellular Corp................... 0.00 06/15/15 3,943,577
------------
9,769,202
------------
Computer Services (1.8%)
2,250 Affiliated Computer Services - 144A** 4.00 03/15/05 2,237,355
3,500 May & Speh, Inc. .................... 5.25 04/01/03 3,852,905
------------
6,090,260
------------
Computer Software (1.0%)
3,000 Tecnomatix Technologies Ltd.
(Israel) - 144A**................... 5.25 08/15/04 3,265,200
------------
Construction (0.7%)
2,500 Emcor Group, Inc..................... 5.75 04/01/05 2,509,375
------------
Electronics (0.9%)
4,000 Reptron Electronics, Inc. ........... 6.75 08/01/04 3,200,000
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
3
<PAGE> 4
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS March 31, 1998 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Financial Services (0.1%)
$ 1,000 Cityscape Financial Corp. (Eurobond). 6.00% 05/01/06 $ 58,750
1,000 Cityscape Financial Corp............. 6.00 05/01/06 68,750
2,500 Cityscape Financial Corp. - 144A**... 6.00 05/01/06 171,875
------------
299,375
------------
Funeral Services (0.9%)
3,000 Equity Corporation International -
144A**.............................. 4.50 12/31/04 3,197,160
------------
Healthcare (9.3%)
2,500 ARV Assisted Living, Inc............. 6.75 04/01/06 2,387,500
4,000 Continucare Corp. - 144A**........... 8.00 10/31/02 3,880,000
3,100 Emeritus Corp. - 144A**.............. 6.25 01/01/06 2,460,067
2,000 Greenery Rehabilitation Group, Inc... 8.75 04/01/15 1,800,000
2,500 Healthsouth Corp. - 144A**........... 3.25 04/01/03 2,489,550
1,200 Integrated Health Services, Inc...... 5.75 01/01/01 1,453,092
7,960 Phymatrix Corp....................... 6.75 06/15/03 6,654,878
5,660 Quantum Health Resources, Inc........ 4.75 10/01/00 5,320,400
6,000 Tenet Healthcare, Inc................ 6.00 12/01/05 5,538,720
------------
31,984,207
------------
Healthcare - Miscellaneous (1.1%)
3,750 Pharmaceutical Marketing Services,
Inc................................. 6.25 02/01/03 3,733,125
150 Pharmaceutical Marketing Services,
Inc. (Eurobond)..................... 6.25 02/01/03 146,625
------------
3,879,750
------------
Hotels/Motels (2.8%)
5,640 Capstar Hotel Corp................... 4.75 10/15/04 5,285,413
5,150 Sholodge, Inc........................ 7.50 05/01/04 4,480,500
------------
9,765,913
------------
Manufacturing (0.9%)
2,800 Thermo Instrument Systems, Inc.
(Series RG)......................... 4.00 01/15/05 3,087,000
------------
Medical Equipment (1.6%)
5,700 ThermoTrex Corp...................... 3.25 11/01/07 5,495,997
------------
Metals & Mining (0.3%)
1,250 Crown Resources Corp. (Eurobond)..... 5.75 08/27/01 981,250
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE> 5
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS March 31, 1998 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Office Equipment & Supplies (3.5%)
$ 5,200 Danka Business Systems, PLC (United
Kingdom)............................ 6.75% 04/01/02 $ 4,966,000
8,275 U.S. Office Products Co.............. 5.50 05/15/03 7,047,404
------------
12,013,404
------------
Oil & Gas (1.2%)
1,900 Halter Marine Group, Inc. - 144A**... 4.50 09/15/04 1,617,850
3,000 Key Energy Group, Inc. - 144A**...... 5.00 09/15/04 2,444,910
------------
4,062,760
------------
Publishing (2.8%)
13,000 Hollinger, Inc. (Canada)............. 0.00 10/05/13 5,289,440
4,445 Nelson (Thomas), Inc................. 5.75 11/30/99 4,431,132
------------
9,720,572
------------
Real Estate Investment Trust (3.5%)
2,850 Alexander Haagen Properties, Inc.
(Series A).......................... 7.50 01/15/01 2,818,251
5,000 Health Care Properties, Inc. - 144A** 6.00 11/08/00 5,068,750
4,000 Macerich Company (Eurobond).......... 7.25 12/15/02 4,085,000
------------
11,972,001
------------
Restaurants (2.3%)
4,600 Boston Chicken, Inc.................. 4.50 02/01/04 2,315,778
16,700 Boston Chicken, Inc.................. 0.00 06/01/15 1,983,125
3,000 Hometown Buffet, Inc................. 7.00 12/01/02 3,763,140
------------
8,062,043
------------
Retail (3.7%)
3,000 Petsmart, Inc. - 144A**.............. 6.75 11/01/04 4,177,500
6,500 Saks Holdings, Inc................... 5.50 09/15/06 5,896,735
3,000 The Sports Authority, Inc............ 5.25 09/15/01 2,689,680
------------
12,763,915
------------
Semiconductors (1.1%)
3,000 National Semiconductor Corp. - 144A** 6.50 10/01/02 2,907,120
1,000 Xilinx, Inc.......................... 5.25 11/01/02 990,950
------------
3,898,070
------------
Shoes (2.2%)
2,075 Nine West Group, Inc................. 5.50 07/15/03 1,662,262
7,500 Nine West Group, Inc. - 144A**....... 5.50 07/15/03 6,008,175
------------
7,670,437
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE> 6
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS March 31, 1998 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Technology (1.4%)
$ 2,500 Hutchinson Technology, Inc. - 144A**. 6.00% 03/15/05 $ 2,907,825
2,000 Integrated Process Equipment Corp. -
144A**.............................. 6.25 09/15/04 1,795,000
------------
4,702,825
------------
Telecommunications (2.4%)
5,000 Bell Atlantic Financial Service -
144A**.............................. 5.75 04/01/03 5,328,750
3,500 Brightpoint, Inc. - 144A**........... 0.00 03/11/18 1,505,560
1,000 Gilat Satellite Networks, Ltd.
(Israel) - 144A**................... 6.50 06/03/04 1,083,940
1,750 SA Telecommunications, Inc. - 144A**
(a)................................. 10.00 08/15/06 262,500
------------
8,180,750
------------
TOTAL CONVERTIBLE BONDS
(Identified Cost $194,749,521)........................... 193,416,232
------------
NUMBER OF
SHARES
- --------
CONVERTIBLE PREFERRED STOCKS (33.7%)
Apparel (1.4%)
111,000 Warnaco Group, Inc. $3.00................................ 4,828,500
------------
Auto Parts (1.9%)
120,000 BTI Capital Trust $3.25 - 144A**......................... 6,615,000
------------
Banks - International (0.9%)
110,000 National Australia Bank, Ltd. $1.969 (Australia)
(Units) ++.............................................. 3,190,000
------------
Biotechnology (0.5%)
63,500 Gensia Sicor, Inc. $3.75................................. 1,547,813
------------
Broadcast Media (4.6%)
111,000 Metromedia International Group, Inc. $3.625.............. 6,562,875
97,000 Sinclair Broadcasting Group, Inc. $3.00.................. 6,705,125
242,000 Triathlon Broadcasting Co. $0.945........................ 2,420,000
------------
15,688,000
------------
Cable & Telecommunications (1.1%)
70,000 EchoStar Communications Corp. (Series C) $3.375.......... 3,920,000
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 7
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS March 31, 1998 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------
<C> <S> <C>
Commercial Services (1.6%)
80,000 Cendant Corp $3.75....................................... $ 4,170,000
50,000 Central Parking Fin Trust $1.313 - 144A**................ 1,296,900
------------
5,466,900
------------
Computer Software (1.4%)
51,000 Microsoft Corp. (Series A) $2.196........................ 4,717,500
------------
Electronics (0.7%)
50,000 Pioneer Standard Electronics, Inc. $3.375 - 144A**....... 2,512,500
------------
Finance (4.5%)
125,000 Insignia Financing, Inc. $3.25........................... 6,226,625
50,000 Merrill Lynch & Co., Inc. (STRYPES) $2.39 (1)............ 1,900,000
100,000 Merrill Lynch & Co., Inc. (STRYPES) $4.087 (2)........... 7,250,000
------------
15,376,625
------------
Foods (0.7%)
50,000 Suiza Capital Trust II $2.75 - 144A**.................... 2,509,400
------------
Healthcare (1.5%)
191,400 Kapson Senior Quarters $2.00 - 144A**.................... 5,191,725
------------
Industrials (0.9%)
75,000 Elsag Bailey Process Automation $2.75 (Netherlands)...... 2,953,125
------------
Manufactured Housing (0.8%)
50,000 Fleetwood Capital Trust $3.00 - 144A**................... 2,912,500
------------
Oil & Gas (0.7%)
100,000 Belco Oil & Gas Corp $1.625.............................. 2,550,000
------------
Publishing (0.8%)
182,100 Hollinger International, Inc. $0.95...................... 2,606,306
------------
Real Estate Investment Trust (3.8%)
80,000 Equity Office Properties Trust (Series B) $2.625 - 144A** 3,910,000
98,000 Equity Residential Properties Trust (Series E) $1.75..... 2,719,500
161,600 FelCor Suite Hotels, Inc. (Series A) $1.95............... 4,686,400
36,600 Rouse Co. (Series B) $3.00............................... 1,765,950
------------
13,081,850
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS March 31, 1998 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------
<C> <S> <C>
Telecommunications (5.0%)
121,400 Loral Space & Communications Ltd. (Series C) $3.00
(Bermuda)............................................... $ 9,142,998
80,000 NEXTLINK Communications, Inc. $3.25 - 144A**............. 3,880,000
80,000 Winstar Communications, Inc.(Series D) $3.50 - 144A**.... 4,320,000
------------
17,342,998
------------
Transportation (0.9%)
60,000 Union Pacific Capital Trust $3.125 - 144A**.............. 3,183,750
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Identified Cost $102,543,768)........................... 116,194,492
------------
COMMON STOCKS (5.6%)
Aerospace (0.5%)
145,000 AVTEAM, Inc. (Class A)*.................................. 1,658,437
------------
Apparel (1.2%)
305,000 Tropical Sportswear International, Corp.*................ 4,231,875
------------
Broadcast Media (0.1%)
20,000 Metromedia International Group, Inc.*.................... 303,750
------------
Entertainment/Gaming (1.1%)
706,328 Alliance Gaming Corp.*................................... 3,840,659
------------
Healthcare (0.4%)
14,000 ARV Assisted Living, Inc.*............................... 196,000
90,000 Emeritus Corp.*.......................................... 1,170,000
------------
1,366,000
------------
Hotels/Motels (0.4%)
54,100 Florida Panthers Holdings, Inc.*......................... 1,203,725
------------
Real Estate Investment Trust (1.9%)
90,100 American General Hospitality Corp........................ 2,494,644
299,047 Mid-Atlantic Realty Trust................................ 4,074,515
------------
6,569,159
------------
TOTAL COMMON STOCKS
(Identified Cost $14,665,725)............................ 19,173,605
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 9
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS March 31, 1998 (unaudited) continued
<TABLE>
<CAPTION>
PRINICIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENTS (3.7%)
U.S. GOVERNMENT AGENCIES (b) (2.0%)
$ 4,000 Federal Home Loan Banks.............. 5.50% 04/01/98 $ 4,000,000
3,000 Federal National Mortgage Assoc...... 5.65 04/02/98 2,999,529
------------
TOTAL U.S. GOVERNMENT AGENCIES
(Amortized Cost $6,999,529).............................. 6,999,529
------------
REPURCHASE AGREEMENT (1.7%)
5,939 The Bank of New York (dated 03/31/98;
proceeds $5,939,896) (c) (Identified
cost $5,939,009).................... 5.375 04/01/98 5,939,009
------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $12,938,538)............................ 12,938,538
------------
TOTAL INVESTMENTS
(Identified Cost $324,897,552) (d).............. 99.1% 341,722,867
OTHER ASSETS IN EXCESS OF LIABILITIES............. 0.9 3,100,970
----- ------------
NET ASSETS....................................... 100.0% $344,823,837
===== ============
</TABLE>
- ---------------------
STRYPES Structured yield product exchangeable for stock.
* 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.
(1) Exchangeable for IMC Global, Inc. common stock.
(2) Exchangeable for SunAmerica, Inc. common stock.
(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 $6,047,931 U.S. Treasury Note 5.50% due 01/31/03
valued at $6,057,789.
(d) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$28,963,165 and the aggregate gross unrealized depreciation is
$12,137,850, resulting in net unrealized appreciation of $16,825,315.
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE> 10
DEAN WITTER CONVERTIBLE SECURITIES TRUST
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1998 (unaudited)
<S> <C>
ASSETS:
Investments in securities, at value (identified cost
$324,897,552).............................................. $341,722,867
Receivable for:
Investments sold........................................ 4,381,500
Interest................................................ 3,114,478
Shares of beneficial interest sold...................... 855,212
Dividends............................................... 100,211
Prepaid expenses and other assets........................... 86,774
------------
TOTAL ASSETS............................................ 350,261,042
------------
LIABILITIES:
Payable for:
Investments purchased................................... 4,620,000
Plan of distribution fee................................ 294,428
Investment management fee............................... 178,365
Shares of beneficial interest repurchased............... 126,174
Dividends and distributions to shareholders............. 111,001
Accrued expenses and other payables......................... 107,237
------------
TOTAL LIABILITIES....................................... 5,437,205
------------
NET ASSETS.............................................. $344,823,837
============
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................. $458,543,717
Net unrealized appreciation................................. 16,825,315
Accumulated undistributed net investment income............. 6,661,925
Accumulated net realized loss............................... (137,207,120)
------------
NET ASSETS.............................................. $344,823,837
============
CLASS A SHARES:
Net Assets.................................................. $870,782
Shares Outstanding (unlimited authorized, $.01 par value)... 56,995
NET ASSET VALUE PER SHARE............................... $15.28
MAXIMUM OFFERING PRICE PER SHARE
(net asset value plus 5.54% of net asset value)........ $16.13
======
CLASS B SHARES:
Net Assets.................................................. $338,897,303
Shares Outstanding (unlimited authorized, $.01 par value)... 22,173,877
NET ASSET VALUE PER SHARE............................... $15.28
======
CLASS C SHARES:
Net Assets.................................................. $2,169,423
Shares Outstanding (unlimited authorized, $.01 par value)... 142,196
NET ASSET VALUE PER SHARE............................... $15.26
======
CLASS D SHARES:
Net Assets.................................................. $2,886,329
Shares Outstanding (unlimited authorized, $.01 par value)... 188,927
NET ASSET VALUE PER SHARE............................... $15.28
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE> 11
DEAN WITTER CONVERTIBLE SECURITIES TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the six months ended March 31, 1998 (unaudited)
<S> <C>
NET INVESTMENT INCOME:
INCOME
Interest.................................................... $ 7,193,754
Dividends................................................... 3,107,882
-----------
TOTAL INCOME............................................ 10,301,636
-----------
EXPENSES
Plan of distribution fee (Class A shares)................... 474
Plan of distribution fee (Class B shares)................... 1,606,191
Plan of distribution fee (Class C shares)................... 7,340
Investment management fee................................... 973,481
Transfer agent fees and expenses............................ 201,128
Registration fees........................................... 51,581
Shareholder reports and notices............................. 36,262
Professional fees........................................... 29,938
Custodian fees.............................................. 15,852
Trustees' fees and expenses................................. 8,873
Other....................................................... 4,859
-----------
TOTAL EXPENSES.......................................... 2,935,979
-----------
NET INVESTMENT INCOME................................... 7,365,657
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain........................................... 8,068,547
Net change in unrealized appreciation....................... (3,974,081)
-----------
NET GAIN................................................ 4,094,466
-----------
NET INCREASE................................................ $11,460,123
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE> 12
DEAN WITTER CONVERTIBLE SECURITIES TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
MARCH 31, 1998 SEPTEMBER 30, 1997*
- ------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income.............................. $ 7,365,657 $ 11,712,892
Net realized gain.................................. 8,068,547 28,783,111
Net change in unrealized appreciation.............. (3,974,081) 17,490,793
------------ ------------
NET INCREASE................................... 11,460,123 57,986,796
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT
INCOME:
Class A shares..................................... (11,235) (423)
Class B shares..................................... (6,321,650) (10,913,049)
Class C shares..................................... (34,367) (5,412)
Class D shares..................................... (44,606) (216)
------------ ------------
TOTAL DIVIDENDS................................ (6,411,858) (10,919,100)
------------ ------------
Net increase from transactions in shares of
beneficial interest............................... 22,451,799 35,921,871
------------ ------------
NET INCREASE................................... 27,500,064 82,989,567
NET ASSETS:
Beginning of period................................ 317,323,773 234,334,206
------------ ------------
END OF PERIOD
(Including undistributed net investment income
of $6,661,925 and $5,708,126, respectively).... $344,823,837 $317,323,773
============ ============
</TABLE>
- ---------------------
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE> 13
DEAN WITTER CONVERTIBLE SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 1998 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Convertible Securities Trust (the "Fund") 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, 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 Dean Witter InterCapital Inc. (the "Investment Manager") 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, rating and maturity or an appropriate matrix utilizing
similar factors);
13
<PAGE> 14
DEAN WITTER CONVERTIBLE SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 1998 (unaudited) continued
(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 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.
14
<PAGE> 15
DEAN WITTER CONVERTIBLE SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 1998 (unaudited) continued
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 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 case of Class B and Class C
shares, amounts paid under the Plan are paid to the Distributor for 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, the account executives
of Dean Witter Reynolds Inc. ("DWR"), an affiliate of the Investment Manager and
Distributor, and others who engage
15
<PAGE> 16
DEAN WITTER CONVERTIBLE SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 1998 (unaudited) continued
in or support distribution of the shares or who service shareholder accounts,
including overhead and telephone expenses; printing and distribution of
prospectuses and reports used in connection with the offering of these shares to
other than current shareholders; and 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 DWR 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 $78,951,994 at March 31, 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 account executives may be reimbursed in the subsequent
calendar year. For the six months ended March 31, 1998, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.23% and
1.0%, respectively.
The Distributor has informed the Fund that for the six months ended March 31,
1998, it received contingent deferred sales charges from certain redemptions of
the Fund's Class B shares and Class C shares of $160,036 and $1,065 respectively
and received $17,536 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.
16
<PAGE> 17
DEAN WITTER CONVERTIBLE SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 1998 (unaudited) continued
4. 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 March 31, 1998 aggregated
$209,433,320 and $155,490,491, respectively.
For the same period, the Fund incurred brokerage commissions of $750 with DWR
for portfolio transactions executed on behalf of the Fund.
For the six months ended March 31, 1998, the Fund incurred brokerage commissions
of $2,500 with Morgan Stanley & Co., Inc., an affiliate of the Investment
Manager, 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 March 31, 1998, the Fund had
transfer agent fees and expenses payable of approximately $3,000.
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 six months ended March 31, 1998
included in Trustees' fees and expenses in the Statement of Operations amounted
to $1,942. At March 31, 1998, the Fund had an accrued pension liability of
$48,756 which is included in accrued expenses in the Statement of Assets and
Liabilities.
5. FEDERAL INCOME TAX STATUS
At September 30, 1997, the Fund had a net capital loss carryover of
approximately $145,215,000, to offset future capital gains to the extent
provided by regulations, which is available through September 30 of the
following years:
<TABLE>
<CAPTION>
AMOUNT IN THOUSANDS
-------------------------
1998 1999 2000
------- ------- -------
<S> <C> <C> <C>
$36,349 $46,135 $62,731
======= ======= =======
</TABLE>
As of September 30, 1997, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales.
17
<PAGE> 18
DEAN WITTER CONVERTIBLE SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 1998 (unaudited) continued
6. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
MARCH 31, 1998 SEPTEMBER 30, 1997*
------------------------ ------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold........................................................ 57,484 $ 844,990 3,315 $ 48,759
Reinvestment of dividends................................... 649 9,740 14 215
Redeemed.................................................... (4,467) (64,767) -- --
---------- ----------- ---------- -----------
Net increase - Class A...................................... 53,666 789,963 3,329 48,974
---------- ----------- ---------- -----------
CLASS B SHARES
Sold........................................................ 3,152,873 46,853,360 8,039,107 107,873,505
Reinvestment of dividends................................... 346,306 5,115,686 650,270 8,859,176
Redeemed.................................................... (2,329,393) (34,542,400) (6,107,632) (81,482,825)
---------- ----------- ---------- -----------
Net increase - Class B...................................... 1,169,786 17,426,646 2,581,745 35,249,856
---------- ----------- ---------- -----------
CLASS C SHARES
Sold........................................................ 112,121 1,655,817 41,818 612,076
Reinvestment of dividends................................... 1,762 26,103 303 4,520
Redeemed.................................................... (12,871) (192,518) (937) (13,788)
---------- ----------- ---------- -----------
Net increase - Class C...................................... 101,012 1,489,402 41,184 602,808
---------- ----------- ---------- -----------
CLASS D SHARES
Sold........................................................ 187,499 2,745,069 1,366 20,017
Reinvestments of dividends.................................. 48 719 14 216
---------- ----------- ---------- -----------
Net increase - Class D...................................... 187,547 2,745,788 1,380 20,233
---------- ----------- ---------- -----------
Net increase in Fund........................................ 1,512,011 $22,451,799 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.
18
<PAGE> 19
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 SIX FOR THE YEAR ENDED SEPTEMBER 30
MONTHS ENDED ----------------------------------------------------
MARCH 31, 1998++ 1997*++ 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <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
------ ------ ------ ------ ------ ------
Net investment income................................... 0.34 0.60 0.55 0.60 0.42 0.37
Net realized and unrealized gain........................ 0.16 2.31 1.12 0.82 0.11 1.67
------ ------ ------ ------ ------ ------
Total from investment operations........................ 0.50 2.91 1.67 1.42 0.53 2.04
------ ------ ------ ------ ------ ------
Less dividends from net investment income............... (0.29) (0.56) (0.62) (0.50) (0.40) (0.34)
------ ------ ------ ------ ------ ------
Net asset value, end of period.......................... $15.28 $ 15.07 $ 12.72 $11.67 $10.75 $10.62
====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN+................................ 3.40%(1) 23.38% 14.70% 13.68% 5.02% 23.22%
RATIOS TO AVERAGE NET ASSETS:
Expenses................................................ 1.81%(2) 1.84% 1.89% 1.96% 1.93% 1.93%
Net investment income................................... 4.53%(2) 4.45% 4.78% 5.24% 3.68% 3.44%
SUPPLEMENTAL DATA:
Net assets, end of period, in millions.................. $339 $ 317 $ 234 $185 $190 $208
Portfolio turnover rate................................. 54%(1) 182% 171% 138% 184% 221%
Average commission rate paid............................ $0.0593 $0.0510 $0.0581 -- -- --
</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) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE> 20
DEAN WITTER CONVERTIBLE SECURITIES TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX JULY 28, 1997*
MONTHS ENDED THROUGH
MARCH 31,1998++ SEPTEMBER 30, 1997++
- ----------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $15.07 $14.31
------ ------
Net investment income....................................... 0.40 0.13
Net realized and unrealized gain............................ 0.16 0.78
------ ------
Total from investment operations............................ 0.56 0.91
------ ------
Less dividends from net investment income................... (0.35) (0.15)
------ ------
Net asset value, end of period.............................. $ 15.28 $ 15.07
====== ======
TOTAL INVESTMENT RETURN+.................................... 3.82%(1) 6.40%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.05%(2) 1.15%(2)
Net investment income....................................... 5.40%(2) 5.03%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $ 871 $ 50
Portfolio turnover rate..................................... 54%(1) 182%
Average commission rate paid................................ $0.0593 $0.0510
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $ 15.06 $ 14.31
------ ------
Net investment income....................................... 0.34 0.12
Net realized and unrealized gain............................ 0.16 0.77
------ ------
Total from investment operations............................ 0.50 0.89
------ ------
Less dividends from net investment income................... (0.30) (0.14)
------ ------
Net asset value, end of period.............................. $ 15.26 $ 15.06
====== ======
TOTAL INVESTMENT RETURN+.................................... 3.42%(1) 6.26%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.82%(2) 1.92%(2)
Net investment income....................................... 4.61%(2) 4.52%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $ 2,169 $ 620
Portfolio turnover rate..................................... 54%(1) 182%
Average commission rate paid................................ $0.0593 $0.0510
</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.
SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE> 21
DEAN WITTER CONVERTIBLE SECURITIES TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX JULY 28, 1997*
MONTHS ENDED THROUGH
MARCH 31,1998++ SEPTEMBER 30, 1997++
- ----------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $ 15.08 $ 14.31
------ ------
Net investment income....................................... 0.42 0.13
Net realized and unrealized gain............................ 0.14 0.80
------ ------
Total from investment operations............................ 0.56 0.93
------ ------
Less dividends from net investment income................... (0.36) (0.16)
------ ------
Net asset value, end of period.............................. $ 15.28 $ 15.08
====== ======
TOTAL INVESTMENT RETURN+.................................... 3.92%(1) 6.42%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 0.82%(2) 0.89%(2)
Net investment income....................................... 5.67%(2) 4.94%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $ 2,886 $ 21
Portfolio turnover rate..................................... 54%(1) 182%
Average commission rate paid................................ $0.0593 $0.0510
</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.
SEE NOTES TO FINANCIAL STATEMENTS
21
<PAGE> 22
(This Page Intentionally Left Blank)
<PAGE> 23
(This Page Intentionally Left Blank)
<PAGE> 24
TRUSTEES
- -------------------------------------------------
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
- -------------------------------------------------
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and General Counsel
Peter M. Avelar
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
- -------------------------------------------------
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
- -------------------------------------------------
Dean Witter InterCapital 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 provided or accompanied by an effective prospectus.
DEAN WITTER
CONVERTIBLE
SECURITIES TRUST
[PHOTO]
Semiannual Report
March 31, 1998
