<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 28, 2000
FILE NOS.: 2-97963
811-4310
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 /X/
POST-EFFECTIVE AMENDMENT NO. 18 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 /X/
AMENDMENT NO. 19 /X/
-------------------
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
(A MASSACHUSETTS BUSINESS TRUST)
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600
BARRY FINK, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)
------------------------
COPY TO:
STUART M. STRAUSS, ESQ.
MAYER, BROWN & PLATT
1675 BROADWAY
NEW YORK, NEW YORK 10019
----------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after this Post-Effective Amendment becomes effective.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
___ immediately upon filing pursuant to paragraph (b)
_X_ on November 30, 2000 pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)
___ on (date) pursuant to paragraph (a) of rule 485.
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
PROSPECTUS - NOVEMBER 30, 2000
Morgan Stanley Dean Witter
CONVERTIBLE SECURITIES TRUST
[COVER PHOTO]
A MUTUAL FUND THAT SEEKS A HIGH LEVEL OF
TOTAL RETURN ON ITS ASSETS THROUGH A COMBINATION
OF CURRENT INCOME AND CAPITAL APPRECIATION
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this PROSPECTUS. Any representation to
the contrary is a criminal offense.
<PAGE>
CONTENTS
<TABLE>
<S> <C> <C>
The Fund Investment Objective......... 1
Principal Investment
Strategies................... 1
Principal Risks.............. 2
Past Performance............. 4
Fees and Expenses............ 5
Additional Investment
Strategy Information......... 6
Additional Risk
Information.................. 7
Fund Management.............. 8
Shareholder Information Pricing Fund Shares.......... 9
How to Buy Shares............ 9
How to Exchange Shares....... 11
How to Sell Shares........... 12
Distributions................ 14
Tax Consequences............. 15
Share Class Arrangements..... 15
Financial Highlights ............................. 23
Our Family of Funds ............................. Inside Back Cover
THIS PROSPECTUS CONTAINS IMPORTANT INFORMATION
ABOUT THE FUND.
PLEASE READ IT CAREFULLY AND KEEP IT FOR FUTURE
REFERENCE.
</TABLE>
<PAGE>
[Sidebar]
TOTAL RETURN
AN INVESTMENT OBJECTIVE HAVING THE GOAL OF SELECTING SECURITIES WITH THE
POTENTIAL TO RISE IN PRICE AND PAY OUT INCOME.
[End Sidebar]
THE FUND
[ICON] INVESTMENT OBJECTIVE
--------------------------------------------------------------------------------
Morgan Stanley Dean Witter Convertible Securities Trust (the "Fund")
seeks a high level of total return on its assets through a
combination of current income and capital appreciation.
[ICON] PRINCIPAL INVESTMENT STRATEGIES
--------------------------------------------------------------------------------
The Fund will normally invest at least 65% of its assets in
convertible securities. A convertible security is a bond, preferred
stock or other security that may be converted into a prescribed
amount of common stock at a prestated price. The Fund's "Investment
Manager," Morgan Stanley Dean Witter Advisors Inc., may retain that
common stock to permit its orderly sale or to establish long-term
holding periods for tax purposes. The Fund is not required to sell
the stock to assure that the required percentage of its assets is
invested in convertible securities. The Fund's convertible securities
may include lower rated fixed-income securities commonly known as
"junk bonds." The convertible securities also may include "enhanced"
and "synthetic" convertible securities. In deciding which securities
to buy, hold or sell, the Fund's Investment Manager considers market,
economic and political conditions.
Bonds are fixed-income debt securities. The issuer of a debt security
borrows money from the investor who buys the security. Most debt
securities pay either fixed or adjustable rates of interest at
regular intervals until they mature, at which point investors get
their principal back. Preferred stock pays dividends at a specified
rate and has preference over common stock in the payment of
dividends. Common stock is a share ownership or equity interest in a
corporation. It may or may not pay dividends as some companies
reinvest all of their profits back into their businesses while others
pay out some of their profits to shareholders as dividends.
The Fund may invest up to 25% of its assets in "enhanced" convertible
securities. Enhanced convertible securities offer holders the
opportunity to obtain higher current income than would be available
from a traditional equity security issued by the same company in
return for reduced participation or a cap on appreciation in the
underlying common stock of the issuer which the holder can realize.
In addition, in many cases, enhanced convertible securities are
convertible into the underlying common stock of the issuer
automatically at maturity, unlike traditional convertible securities
which are convertible only at the option of the security holder.
The Fund may invest up to 10% of its assets in "synthetic"
convertible securities. Unlike traditional convertible securities
whose conversion values are based on the common stock of the issuer
of the convertible security, "synthetic" convertible securities are
preferred stocks or debt obligations of an issuer which are combined
with an equity component whose conversion value is based on the value
of the common stock of a different issuer or a particular benchmark
(which may include a foreign issuer or
1
<PAGE>
basket of foreign stocks, or a company whose stock is not yet
publicly traded). In many cases, "synthetic" convertible securities
are not convertible prior to maturity, at which time the value of the
security is paid in cash by the issuer.
In addition, the Fund may invest in common stocks directly,
non-convertible preferred stock, non-convertible fixed-income
securities, and foreign securities (including depository receipts). A
depository receipt is generally issued by a bank or financial
institution and represents an ownership interest in the common stock
or other equity securities of a foreign company. The Fund's
fixed-income investments may include zero coupon securities, which
are purchased at a discount and either (i) pay no interest, or (ii)
accrue interest, but make no payment until maturity.
In pursuing the Fund's investment objective, the Investment Manager
has considerable leeway in deciding which investments it buys, holds
or sells on a day-to-day basis -- and which trading strategies it
uses. For example, the Investment Manager in its discretion may
determine to use some permitted trading strategies while not using
others.
[ICON] PRINCIPAL RISKS
--------------------------------------------------------------------------------
There is no assurance that the Fund will achieve its investment
objective. The Fund's share price and yield will fluctuate with
changes in the market value of the Fund's portfolio securities. When
you sell Fund shares, they may be worth less than what you paid for
them and, accordingly, you can lose money investing in this Fund.
CONVERTIBLE SECURITIES. The Fund's investments in convertible
securities subject the Fund to the risks associated with both
fixed-income securities and common stocks. To the extent that a
convertible security's investment value is greater than its
conversion value, its price will be likely to increase when interest
rates fall and decrease when interest rates rise, as with a
fixed-income security. If the conversion value exceeds the investment
value, the price of the convertible security will tend to fluctuate
directly with the price of the underlying equity security.
There are also special risks associated with the Fund's investments
in "enhanced" and "synthetic" convertible securities. These
securities may be more volatile and less liquid than traditional
convertible securities.
FIXED-INCOME SECURITIES. Principal risks of investing in the Fund are
associated with its fixed-income investments. All fixed-income
securities, such as corporate bonds, are subject to two types of
risk: credit risk and interest rate risk. Credit risk refers to the
possibility that the issuer of a security will be unable to make
interest payments and/or repay the principal on its debt.
Interest rate risk refers to fluctuations in the value of a
fixed-income security resulting from changes in the general level of
interest rates. When the general level of interest rates goes up, the
prices of most fixed-income securities go down. When the general
level of interest rates goes down, the prices of most fixed-income
securities go up.
2
<PAGE>
Accordingly, a rise in the general level of interest rates may cause
the price of the Fund's fixed-income securities to fall
substantially. (Zero coupon securities are typically subject to
greater price fluctuations than comparable securities that pay
current interest.) As merely illustrative of the relationship between
fixed-income securities and interest rates, the following table shows
how interest rates affect bond prices.
HOW INTEREST RATES AFFECT BOND PRICES
<TABLE>
<CAPTION>
PRICE PER $1,000 OF A BOND IF INTEREST RATES:
---------------------------------------------------
INCREASE DECREASE
--------------------- ---------------------
BOND MATURITY COUPON 1% 2% 1% 2%
<S> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------
1 Year N/A $1,000 $1,000 $1,000 $1,000
---------------------------------------------------------------------------------------------------------
5 Years 5.875% $951 $920 $1,018 $1,054
---------------------------------------------------------------------------------------------------------
10 Years 6.00% $910 $853 $1,038 $1,110
---------------------------------------------------------------------------------------------------------
30 Years 6.125% $841 $748 $1,093 $1,264
---------------------------------------------------------------------------------------------------------
</TABLE>
Coupons reflect yields on Treasury securities as of December 31,
1999. The table is not representative of price changes of high yield
securities. In addition, the table is an illustration and does not
represent expected yields or share price changes of any Morgan
Stanley Dean Witter mutual fund.
The Fund is not limited as to the maturities of the fixed-income
securities in which it may invest. Thus, a rise in the general level
of interest rates may cause the price of the Fund's portfolio
securities to fall substantially.
COMMON STOCKS. In general, stock values fluctuate in response to
activities specific to the company as well as general market,
economic and political conditions. These prices can fluctuate widely
in response to these factors.
JUNK BONDS. Junk bonds are subject to greater risk of loss of income
and principal than higher-rated securities. The prices of junk bonds
are likely to be more sensitive to adverse economic changes or
individual corporate developments than higher-rated securities.
During an economic downturn or substantial period of rising interest
rates, junk bond issuers and, in particular, highly leveraged issuers
may experience financial stress that would adversely affect their
ability to service their principal and interest payment obligations,
to meet their projected business goals or to obtain additional
financing. In the event of a default, the Fund may incur additional
expenses to seek recovery. The secondary market for junk bonds may be
less liquid than the markets for higher quality securities and, as
such, may have an adverse effect on the market prices of certain
securities. Many junk bonds are issued as Rule 144A securities.
Rule 144A securities could have the effect of increasing the level of
Fund illiquidity to the extent the Fund may be unable to find
qualified institutional buyers interested in purchasing the
securities. The illiquidity of the market may also adversely affect
the ability of the Fund's Trustees to arrive at a fair value for
certain junk bonds at certain times and could make it difficult for
the Fund to sell certain securities. In addition, periods of economic
uncertainty and change probably would result in an increased
volatility of market prices of high yield securities and a
corresponding volatility in the Fund's net asset value.
3
<PAGE>
[Sidebar]
ANNUAL TOTAL RETURNS
THIS CHART SHOWS HOW THE PERFORMANCE OF THE FUND'S CLASS B SHARES HAS VARIED
FROM YEAR TO YEAR OVER THE PAST 10 CALENDAR YEARS.
AVERAGE ANNUAL
TOTAL RETURNS
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS WITH THOSE OF A
BROAD MEASURE OF MARKET PERFORMANCE OVER TIME. THE FUND'S RETURNS INCLUDE THE
MAXIMUM APPLICABLE SALES CHARGE FOR EACH CLASS AND ASSUME YOU SOLD YOUR SHARES
AT THE END OF EACH PERIOD.
[End Sidebar]
OTHER RISKS. The performance of the Fund also will depend on whether
the Investment Manager is successful in pursuing the Fund's
investment strategy. The Fund is also subject to other risks from its
permissible investments including the risks associated with foreign
securities. For more information about these risks, see the
"Additional Risk Information" section.
Shares of the Fund are not bank deposits and are not guaranteed or
insured by the FDIC or any other government agency.
[ICON] PAST PERFORMANCE
--------------------------------------------------------------------------------
The bar chart and table below provide some indication of the risks of
investing in the Fund. The Fund's past performance does not indicate
how the Fund will perform in the future.
ANNUAL TOTAL RETURNS - CALENDAR YEARS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1990 -11.68%
'91 25.00%
'92 8.23%
'93 15.70%
'94 -2.87%
'95 20.58%
'96 16.96%
'97 16.41%
'98 -4.85%
'99 27.44%
</TABLE>
The bar chart reflects the performance of Class B shares; the performance of the
other Classes will differ because the Classes have different ongoing fees. The
performance information in the bar chart does not reflect the deduction of sales
charges; if these amounts were reflected, returns would be less than shown. Year
to date total return as of September 30, 2000 was 10.01%.
During the periods shown in the bar chart, the highest return for a
calendar quarter was 20.20% (quarter ended December 31, 1999) and
the lowest return for a calendar quarter was -15.29% (quarter ended
September 30, 1998).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF DECEMBER 31, 1999)
-------------------------------------------------------------------------------------
PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
<S> <C> <C> <C>
-------------------------------------------------------------------------------------
Class A(1) 21.83% -- --
-------------------------------------------------------------------------------------
Class B 22.44% 14.53% 10.33%
-------------------------------------------------------------------------------------
Class C(1) 26.73% -- --
-------------------------------------------------------------------------------------
Class D(1) 28.84% -- --
-------------------------------------------------------------------------------------
Goldman Sachs Convertible 100
Index(2) 20.57% 17.61% 12.95%
-------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
1 Classes A, C and D commenced operations on July 28, 1997.
2 The Goldman Sachs Convertible 100 Index tracks the
performance of 100 equally weighted convertible issues, each
with a market capitalization 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.
</TABLE>
4
<PAGE>
[Sidebar]
SHAREHOLDER FEES
THESE FEES ARE PAID DIRECTLY FROM YOUR INVESTMENT.
ANNUAL FUND
OPERATING EXPENSES
THESE EXPENSES ARE DEDUCTED FROM THE FUND'S ASSETS AND ARE BASED ON EXPENSES
PAID FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2000.
[End Sidebar]
[ICON] FEES AND EXPENSES
--------------------------------------------------------------------------------
The table below briefly describes the fees and expenses that you may
pay if you buy and hold shares of the Fund. The Fund offers four
Classes of shares: Classes A, B, C and D. Each Class has a different
combination of fees, expenses and other features. The Fund does not
charge account or exchange fees. See the "Share Class Arrangements"
section for further fee and expense information.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------
SHAREHOLDER FEES
-----------------------------------------------------------------------------
Maximum sales charge (load)
imposed on purchases (as a
percentage of offering price) 5.25%(1) None None None
-----------------------------------------------------------------------------
Maximum deferred sales charge
(load) (as a percentage based
on the lesser of the offering
price or net asset value at
redemption) None(2) 5.00%(3) 1.00%(4) None
-----------------------------------------------------------------------------
ANNUAL FUND OPERATING
EXPENSES
-----------------------------------------------------------------------------
Management fee 0.60% 0.60% 0.60% 0.60%
-----------------------------------------------------------------------------
Distribution and service
(12b-1) fees 0.24% 1.00% 1.00% None
-----------------------------------------------------------------------------
Other expenses 0.20% 0.20% 0.20% 0.20%
-----------------------------------------------------------------------------
Total annual Fund operating
expenses 1.04% 1.80% 1.80% 0.80%
-----------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
1 Reduced for purchases of $25,000 and over.
2 Investments that are not subject to any sales charge at the
time of purchase are subject to a contingent deferred sales
charge ("CDSC") of 1.00% that will be imposed if you sell
your shares within one year after purchase, except for
certain specific circumstances.
3 The CDSC is scaled down to 1.00% during the sixth year,
reaching zero thereafter. See "Share Class Arrangements" for
a complete discussion of the CDSC.
4 Only applicable if you sell your shares within one year
after purchase.
</TABLE>
5
<PAGE>
EXAMPLE
This example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds.
This example shows what expenses you could pay over time. The example
assumes that you invest $10,000 in the Fund, your investment has a 5%
return each year, and the Fund's operating expenses remain the same.
Although your actual costs may be higher or lower, the tables below
show your costs at the end of each period based on these assumptions
depending upon whether or not you sell your shares at the end of each
period.
<TABLE>
<CAPTION>
IF YOU SOLD YOUR SHARES: IF YOU HELD YOUR SHARES:
----------------------------------------- -----------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------ -----------------------------------------
CLASS A $625 $839 $1,069 $1,729 $625 $839 $1,069 $1,729
------------------------------------------------------------------ -----------------------------------------
CLASS B $683 $866 $1,175 $2,116 $183 $566 $ 975 $2,116
------------------------------------------------------------------ -----------------------------------------
CLASS C $283 $566 $ 975 $2,116 $183 $566 $ 975 $2,116
------------------------------------------------------------------ -----------------------------------------
CLASS D $ 82 $255 $ 444 $ 990 $ 82 $255 $ 444 $ 990
------------------------------------------------------------------ -----------------------------------------
</TABLE>
Long-term shareholders of Class B and Class C may pay more in sales
charges, including distribution fees, than the economic equivalent of
the maximum front-end sales charges permitted by the NASD.
[ICON] ADDITIONAL INVESTMENT STRATEGY INFORMATION
--------------------------------------------------------------------------------
This section provides additional information relating to the Fund's
principal investment strategies.
FOREIGN SECURITIES. The Fund may invest up to 10% of its total assets
in foreign securities (including depository receipts). This
percentage limitation, however, does not apply to securities of
foreign companies that are listed in the U.S. on a national
securities exchange.
PORTFOLIO TURNOVER. The Fund may engage in active and frequent
trading of its portfolio securities. The Financial Highlights Table
at the end of this PROSPECTUS shows the Fund's portfolio turnover
rates during recent fiscal years. A portfolio turnover rate of 200%,
for example, is equivalent to the Fund buying and selling all of its
securities two times during the course of the year. A high portfolio
turnover rate (over 100%) could result in high brokerage costs and an
increase in taxable capital gains distributions to the Fund's
shareholders. See the sections on "Distributions" and "Tax
Consequences."
DEFENSIVE INVESTING. The Fund may take temporary "defensive"
positions in attempting to respond to adverse market conditions. The
Fund may invest any amount of its assets in cash or money market
instruments in a defensive posture when the Investment Manager
believes it is advisable to do so. Although taking a defensive
posture is
6
<PAGE>
designed to protect the Fund from an anticipated market downturn, it
could have the effect of reducing the benefit from any upswing in the
market. When the Fund takes a defensive position, it may not achieve
its investment objective.
The percentage limitations relating to the composition of the Fund's
portfolio apply at the time the Fund acquires an investment.
Subsequent percentage changes that result from market fluctuations
will not require the Fund to sell any portfolio security. The Fund
may change its principal investment strategies without shareholder
approval; however, you would be notified of any changes.
[ICON] ADDITIONAL RISK INFORMATION
--------------------------------------------------------------------------------
This section provides additional information relating to the
principal risks of investing in the Fund.
FOREIGN SECURITIES. The Fund's investments in foreign securities
involve risks that are in addition to the risks associated with
domestic securities. One additional risk is currency risk. While the
price of Fund shares is quoted in U.S. dollars, the Fund generally
converts U.S. dollars to a foreign market's local currency to
purchase a security in that market. If the value of that local
currency falls relative to the U.S. dollar, the U.S. dollar value of
the foreign security will decrease. This is true even if the foreign
security's local price remains unchanged.
Foreign securities (including depository receipts) also have risks
related to economic and political developments abroad, including
expropriations, confiscatory taxation, exchange control regulation,
limitations on the use or transfer of Fund assets and any effects of
foreign social, economic or political instability. In particular,
adverse political or economic developments in a geographic region or
a particular country in which the Fund invests could cause a
substantial decline in value of the portfolio. Foreign companies, in
general, are not subject to the regulatory requirements of U.S.
companies and, as such, there may be less publicly available
information about these companies. Moreover, foreign accounting,
auditing and financial reporting standards generally are different
from those applicable to U.S. companies. Finally, in the event of a
default of any foreign debt obligations, it may be more difficult for
the Fund to obtain or enforce a judgment against the issuers of the
securities.
Securities of foreign issuers may be less liquid than comparable
securities of U.S. issuers and, as such, their price changes may be
more volatile. Furthermore, foreign exchanges and broker-dealers are
generally subject to less government and exchange scrutiny and
regulation than their U.S. counterparts. In addition, differences in
clearance and settlement procedures in foreign markets may occasion
delays in settlements of the Fund's trades effected in those markets
and could result in losses to the Fund due to subsequent declines in
the value of the securities subject to the trades.
7
<PAGE>
[Sidebar]
MORGAN STANLEY DEAN WITTER ADVISORS INC.
THE INVESTMENT MANAGER IS WIDELY RECOGNIZED AS A LEADER IN THE MUTUAL FUND
INDUSTRY AND TOGETHER WITH MORGAN STANLEY DEAN WITTER SERVICES COMPANY INC., ITS
WHOLLY-OWNED SUBSIDIARY, HAD APPROXIMATELY $155 BILLION IN ASSETS UNDER
MANAGEMENT AS OF OCTOBER 31, 2000.
[End Sidebar]
[ICON] FUND MANAGEMENT
--------------------------------------------------------------------------------
The Fund has retained the Investment Manager -- Morgan Stanley Dean
Witter Advisors Inc. -- to provide administrative services, manage
its business affairs and invest its assets, including the placing of
orders for the purchase and sale of portfolio securities. The
Investment Manager is a wholly-owned subsidiary of Morgan Stanley
Dean Witter & Co., a preeminent global financial services firm that
maintains leading market positions in each of its three primary
businesses: securities, asset management and credit services. Its
main business office is located at Two World Trade Center, New York,
NY 10048.
The Fund's portfolio is managed within the Investment Manager's
Growth and Income Group. Peter M. Avelar, a Senior Vice President and
Director of the High Yield Group of the Investment Manager, has been
the primary portfolio manager of the Fund since January 1998, and has
been assisted by Ellen Gold since November 1998. Mr. Avelar has been
a portfolio manager with the Investment Manager for over five years.
Ms. Gold has been a Vice President of the Investment Manager since
May 1998 and prior thereto was an Assistant Vice President and Junior
Portfolio Manager with the Investment Manager.
The Fund pays the Investment Manager a monthly management fee as full
compensation for the services and facilities furnished to the Fund,
and for Fund expenses assumed by the Investment Manager. The fee is
based on the Fund's average daily net assets. For the fiscal year
ended September 30, 2000, the Fund accrued total compensation to the
Investment Manager amounting to 0.60% of the Fund's average daily net
assets.
8
<PAGE>
[Sidebar]
CONTACTING A
FINANCIAL ADVISOR
IF YOU ARE NEW TO THE MORGAN STANLEY DEAN WITTER FAMILY OF FUNDS AND WOULD LIKE
TO CONTACT A FINANCIAL ADVISOR, CALL (877) 937-MSDW (TOLL-FREE) FOR THE
TELEPHONE NUMBER OF THE MORGAN STANLEY DEAN WITTER OFFICE NEAREST YOU. YOU MAY
ALSO ACCESS OUR OFFICE LOCATOR ON OUR INTERNET SITE AT: www.msdwadvice.com/funds
[End Sidebar]
SHAREHOLDER INFORMATION
[ICON] PRICING FUND SHARES
--------------------------------------------------------------------------------
The price of Fund shares (excluding sales charges), called "net asset
value," is based on the value of the Fund's portfolio securities.
While the assets of each Class are invested in a single portfolio of
securities, the net asset value of each Class will differ because the
Classes have different ongoing distribution fees.
The net asset value per share of the Fund is determined once daily at
4:00 p.m. Eastern time on each day that the New York Stock Exchange
is open (or, on days when the New York Stock Exchange closes prior to
4:00 p.m., at such earlier time). Shares will not be priced on days
that the New York Stock Exchange is closed.
The value of the Fund's portfolio securities is based on the
securities' market price when available. When a market price is not
readily available, including circumstances under which the Investment
Manager determines that a security's market price is not accurate, a
portfolio security is valued at its fair value, as determined under
procedures established by the Fund's Board of Trustees. In these
cases, the Fund's net asset value will reflect certain portfolio
securities' fair value rather than their market price. With respect
to securities that are primarily listed on foreign exchanges, the
value of the Fund's portfolio securities may change on days when you
will not be able to purchase or sell your shares.
An exception to the Fund's general policy of using market prices
concerns its short-term debt portfolio securities. Debt securities
with remaining maturities of sixty days or less at the time of
purchase are valued at amortized cost. However, if the cost does not
reflect the securities' market value, these securities will be valued
at their fair value.
[ICON] HOW TO BUY SHARES
--------------------------------------------------------------------------------
You may open a new account to buy Fund shares or buy additional Fund
shares for an existing account by contacting your Morgan Stanley Dean
Witter Financial Advisor or other authorized financial
representative. Your Financial Advisor will assist you, step-
by-step, with the procedures to invest in the Fund. You may also
purchase shares directly by calling the Fund's transfer agent and
requesting an application.
Because every investor has different immediate financial needs and
long-term investment goals, the Fund offers investors four Classes of
shares: Classes A, B, C and D. Class D shares are only offered to a
limited group of investors. Each Class of shares offers a distinct
structure of sales charges, distribution and service fees, and other
features that are designed to address a variety of needs. Your
Financial Advisor or other authorized financial representative can
9
<PAGE>
[Sidebar]
EASYINVEST-SM-
A PURCHASE PLAN THAT ALLOWS YOU TO TRANSFER MONEY AUTOMATICALLY FROM YOUR
CHECKING OR SAVINGS ACCOUNT OR FROM A MONEY MARKET FUND ON A SEMI-MONTHLY,
MONTHLY OR QUARTERLY BASIS. CONTACT YOUR MORGAN STANLEY DEAN WITTER FINANCIAL
ADVISOR FOR FURTHER INFORMATION ABOUT THIS SERVICE.
[End Sidebar]
help you decide which Class may be most appropriate for you. When
purchasing Fund shares, you must specify which Class of shares you
wish to purchase.
When you buy Fund shares, the shares are purchased at the next share
price calculated (less any applicable front-end sales charge for
Class A shares) after we receive your purchase order. Your payment is
due on the third business day after you place your purchase order. We
reserve the right to reject any order for the purchase of Fund
shares.
<TABLE>
<CAPTION>
MINIMUM INVESTMENT AMOUNTS
--------------------------------------------------------------------------------
MINIMUM INVESTMENT
------------------------
INVESTMENT OPTIONS INITIAL ADDITIONAL
<S> <C> <C> <C>
--------------------------------------------------------------------------------
Regular Accounts $1,000 $100
--------------------------------------------------------------------------------
Individual Retirement
Accounts: Regular IRAs $1,000 $100
Education IRAs $ 500 $100
--------------------------------------------------------------------------------
EASYINVEST-SM-
(Automatically from your
checking or savings
account or Money Market
Fund) $ 100* $100*
--------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Provided your schedule of investments totals $1,000 in
twelve months.
</TABLE>
There is no minimum investment amount if you purchase Fund shares
through: (1) the Investment Manager's mutual fund asset allocation
plan, (2) a program, approved by the Fund's distributor, in which you
pay an asset-based fee for advisory, administrative and/ or brokerage
services, (3) the following programs approved by the Fund's
distributor: (i) qualified state tuition plans described in Section
529 of the Internal Revenue Code and (ii) certain other investment
programs that do not charge an asset-based fee, or
(4) employer-sponsored employee benefit plan accounts.
INVESTMENT OPTIONS FOR CERTAIN INSTITUTIONAL AND OTHER
INVESTORS/CLASS D SHARES. To be eligible to purchase Class D shares,
you must qualify under one of the investor categories specified in
the "Share Class Arrangements" section of this Prospectus.
SUBSEQUENT INVESTMENTS SENT DIRECTLY TO THE FUND. In addition to
buying additional Fund shares for an existing account by contacting
your Morgan Stanley Dean Witter Financial Advisor, you may send a
check directly to the Fund. To buy additional shares in this manner:
- Write a "letter of instruction" to the Fund specifying the name(s)
on the account, the account number, the social security or tax
identification number, the Class of shares you wish to purchase and
the investment amount (which would include any applicable front-end
sales charge). The letter must be signed by the account owner(s).
- Make out a check for the total amount payable to: Morgan Stanley
Dean Witter Convertible Securities Trust.
- Mail the letter and check to Morgan Stanley Dean Witter Trust FSB
at P.O. Box 1040, Jersey City, NJ 07303.
10
<PAGE>
[ICON] HOW TO EXCHANGE SHARES
--------------------------------------------------------------------------------
PERMISSIBLE FUND EXCHANGES. You may exchange shares of any Class of
the Fund for the same Class of any other continuously offered
Multi-Class Fund, or for shares of a No-Load Fund, a Money Market
Fund, North American Government Income Trust or Short-Term U.S.
Treasury Trust, without the imposition of an exchange fee. In
addition, Class A shares of the Fund may be exchanged for shares of
an FSC Fund (funds subject to a front-end sales charge). See the
inside back cover of this PROSPECTUS for each Morgan Stanley Dean
Witter Fund's designation as a Multi-Class Fund, No-Load Fund, Money
Market Fund or FSC Fund. If a Morgan Stanley Dean Witter Fund is not
listed, consult the inside back cover of that fund's prospectus for
its designation.
Exchanges may be made after shares of the fund acquired by purchase
have been held for thirty days. There is no waiting period for
exchanges of shares acquired by exchange or dividend reinvestment.
The current prospectus for each fund describes its investment
objective(s), policies and investment minimums, and should be read
before investment. Since exchanges are available only into
continuously offered Morgan Stanley Dean Witter Funds, exchanges are
not available into any new Morgan Stanley Dean Witter Fund during its
initial offering period, or when shares of a particular Morgan
Stanley Dean Witter Fund are not being offered for purchase.
EXCHANGE PROCEDURES. You can process an exchange by contacting your
Morgan Stanley Dean Witter Financial Advisor or other authorized
financial representative. Otherwise, you must forward an exchange
privilege authorization form to the Fund's transfer agent -- Morgan
Stanley Dean Witter Trust FSB -- and then write the transfer agent or
call (800) 869-NEWS to place an exchange order. You can obtain an
exchange privilege authorization form by contacting your Financial
Advisor or other authorized financial representative or by calling
(800) 869-NEWS. If you hold share certificates, no exchanges may be
processed until we have received all applicable share certificates.
An exchange to any Morgan Stanley Dean Witter Fund (except a Money
Market Fund) is made on the basis of the next calculated net asset
values of the funds involved after the exchange instructions are
accepted. When exchanging into a Money Market Fund, the Fund's shares
are sold at their next calculated net asset value and the Money
Market Fund's shares are purchased at their net asset value on the
following business day.
The Fund may terminate or revise the exchange privilege upon required
notice. The check writing privilege is not available for Money Market
Fund shares you acquire in an exchange.
TELEPHONE EXCHANGES. For your protection when calling Morgan Stanley
Dean Witter Trust FSB, we will employ reasonable procedures to
confirm that exchange instructions communicated over the telephone
are genuine. These procedures may include requiring various forms of
personal identification such as name, mailing address, social
security or other tax identification number. Telephone instructions
also may be recorded.
11
<PAGE>
Telephone instructions will be accepted if received by the Fund's
transfer agent between 9:00 a.m. and 4:00 p.m. Eastern time on any
day the New York Stock Exchange is open for business. During periods
of drastic economic or market changes, it is possible that the
telephone exchange procedures may be difficult to implement, although
this has not been the case with the Fund in the past.
MARGIN ACCOUNTS. If you have pledged your Fund shares in a margin
account, contact your Morgan Stanley Dean Witter Financial Advisor or
other authorized financial representative regarding restrictions on
the exchange of such shares.
TAX CONSIDERATIONS OF EXCHANGES. If you exchange shares of the Fund
for shares of another Morgan Stanley Dean Witter Fund there are
important tax considerations. For tax purposes, the exchange out of
the Fund is considered a sale of Fund shares -- and the exchange into
the other fund is considered a purchase. As a result, you may realize
a capital gain or loss.
You should review the "Tax Consequences" section and consult your own
tax professional about the tax consequences of an exchange.
LIMITATIONS ON EXCHANGES. Certain patterns of past exchanges and/or
purchase or sale transactions involving the Fund or other Morgan
Stanley Dean Witter Funds may result in the Fund limiting or
prohibiting, at its discretion, additional purchases and/or
exchanges. Determinations in this regard may be made based on the
frequency or dollar amount of the previous exchanges or purchase or
sale transactions. You will be notified in advance of limitations on
your exchange privileges.
CDSC CALCULATIONS ON EXCHANGES. See the "Share Class Arrangements"
section of this PROSPECTUS for a discussion of how applicable
contingent deferred sales charges (CDSCs) are calculated for shares
of one Morgan Stanley Dean Witter Fund that are exchanged for shares
of another.
For further information regarding exchange privileges, you should
contact your Morgan Stanley Dean Witter Financial Advisor or call
(800) 869-NEWS.
[ICON] HOW TO SELL SHARES
--------------------------------------------------------------------------------
You can sell some or all of your Fund shares at any time. If you sell
Class A, Class B or Class C shares, your net sale proceeds are
reduced by the amount of any applicable CDSC. Your shares will be
sold at the next share price calculated after we receive your order
to sell as described below.
<TABLE>
<CAPTION>
OPTIONS PROCEDURES
<S> <C>
------------------------------------------------------------------------------------
Contact your To sell your shares, simply call your Morgan Stanley Dean
Financial Advisor Witter Financial Advisor or other authorized financial
representative.
[ICON]
------------------------------------------------------------
Payment will be sent to the address to which the account is
registered or deposited in your brokerage account.
------------------------------------------------------------------------------------
By Letter You can also sell your shares by writing a "letter of
instruction" that includes:
[ICON]
- your account number;
- the dollar amount or the number of shares you wish to
sell;
- the Class of shares you wish to sell; and
- the signature of each owner as it appears on the account.
------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
OPTIONS PROCEDURES
------------------------------------------------------------------------------------
<S> <C>
By Letter, If you are requesting payment to anyone other than the
continued registered owner(s) or that payment be sent to any address
other than the address of the registered owner(s) or
pre-designated bank account, you will need a signature
guarantee. You can obtain a signature guarantee from an
eligible guarantor acceptable to Morgan Stanley Dean Witter
Trust FSB. (You should contact Morgan Stanley Dean Witter
Trust FSB at (800) 869-NEWS for a determination as to
whether a particular institution is an eligible guarantor.)
A notary public CANNOT provide a signature guarantee.
Additional documentation may be required for shares held by
a corporation, partnership, trustee or executor.
------------------------------------------------------------
Mail the letter to Morgan Stanley Dean Witter Trust FSB at
P.O. Box 983, Jersey City, NJ 07303. If you hold share
certificates, you must return the certificates, along with
the letter and any required additional documentation.
------------------------------------------------------------
A check will be mailed to the name(s) and address in which
the account is registered, or otherwise according to your
instructions.
------------------------------------------------------------------------------------
Systematic If your investment in all of the Morgan Stanley Dean Witter
Withdrawal Plan Family of Funds has a total market value of at least
[ICON] $10,000, you may elect to withdraw amounts of $25 or more,
or in any whole percentage of a fund's balance (provided the
amount is at least $25), on a monthly, quarterly,
semi-annual or annual basis, from any fund with a balance of
at least $1,000. Each time you add a fund to the plan, you
must meet the plan requirements.
------------------------------------------------------------
Amounts withdrawn are subject to any applicable CDSC. A CDSC
may be waived under certain circumstances. See the Class B
waiver categories listed in the "Share Class Arrangements"
section of this PROSPECTUS.
------------------------------------------------------------
To sign up for the Systematic Withdrawal Plan, contact your
Morgan Stanley Dean Witter Financial Advisor or call
(800) 869-NEWS. You may terminate or suspend your plan at
any time. Please remember that withdrawals from the plan are
sales of shares, not Fund "distributions," and ultimately
may exhaust your account balance. The Fund may terminate or
revise the plan at any time.
------------------------------------------------------------------------------------
</TABLE>
PAYMENT FOR SOLD SHARES. After we receive your complete instructions
to sell, as described above, a check will be mailed to you within
seven days, although we will attempt to make payment within one
business day. Payment may also be sent to your brokerage account.
Payment may be postponed or the right to sell your shares suspended
under unusual circumstances. If you request to sell shares that were
recently purchased by check, your sale will not be effected until it
has been verified that the check has been honored.
TAX CONSIDERATIONS. Normally, your sale of Fund shares is subject to
federal and state income tax. You should review the "Tax
Consequences" section of this PROSPECTUS and consult your own tax
professional about the tax consequences of a sale.
REINSTATEMENT PRIVILEGE. If you sell Fund shares and have not
previously exercised the reinstatement privilege, you may, within 35
days after the date of sale, invest any portion of the proceeds in
the same Class of Fund shares at their net asset value and receive a
pro rata credit for any CDSC paid in connection with the sale.
13
<PAGE>
[Sidebar]
TARGETED DIVIDENDS-SM-
YOU MAY SELECT TO HAVE YOUR FUND DISTRIBUTIONS AUTOMATICALLY INVESTED IN OTHER
CLASSES OF FUND SHARES OR CLASSES OF ANOTHER MORGAN STANLEY DEAN WITTER FUND
THAT YOU OWN. CONTACT YOUR MORGAN STANLEY DEAN WITTER FINANCIAL ADVISOR FOR
FURTHER INFORMATION ABOUT THIS SERVICE.
[End Sidebar]
INVOLUNTARY SALES. The Fund reserves the right, on sixty days'
notice, to sell the shares of any shareholder (other than shares held
in an IRA or 403(b) Custodial Account) whose shares, due to sales by
the shareholder, have a value below $100, or in the case of an
account opened through EASYINVEST -SM-, if after 12 months the
shareholder has invested less than $1,000 in the account.
However, before the Fund sells your shares in this manner, we will
notify you and allow you sixty days to make an additional investment
in an amount that will increase the value of your account to at least
the required amount before the sale is processed. No CDSC will be
imposed on any involuntary sale.
MARGIN ACCOUNTS. If you have pledged your Fund shares in a margin
account, contact your Morgan Stanley Dean Witter Financial Advisor or
other authorized financial representative regarding restrictions on
the sale of such shares.
[ICON] DISTRIBUTIONS
--------------------------------------------------------------------------------
The Fund passes substantially all of its earnings from income and
capital gains along to its investors as "distributions." The Fund
earns income from stocks and interest from fixed-income investments.
These amounts are passed along to Fund shareholders as "income
dividend distributions." The Fund realizes capital gains whenever it
sells securities for a higher price than it paid for them. These
amounts may be passed along as "capital gain distributions."
The Fund declares income dividends separately for each Class.
Distributions paid on Class A and Class D shares will usually be
higher than for Class B and Class C because distribution fees that
Class B and Class C pay are higher. Normally, income dividends are
distributed to shareholders quarterly. Capital gains, if any, are
usually distributed in December. The Fund, however, may retain and
reinvest any long-term capital gains. The Fund may at times make
payments from sources other than income or capital gains that
represent a return of a portion of your investment.
Distributions are reinvested automatically in additional shares of
the same Class and automatically credited to your account, unless you
request in writing that all distributions be paid in cash. If you
elect the cash option, the Fund will mail a check to you no later
than seven business days after the distribution is declared. However,
if you purchase Fund shares through a Financial Advisor within three
business days prior to the record date for the distribution, the
distribution will automatically be paid to you in cash, even if you
did not request to receive all distributions in cash. No interest
will accrue on uncashed checks. If you wish to change how your
distributions are paid, your request should be received by the Fund's
transfer agent, Morgan Stanley Dean Witter Trust FSB, at least five
business days prior to the record date of the distributions.
14
<PAGE>
[ICON] TAX CONSEQUENCES
--------------------------------------------------------------------------------
As with any investment, you should consider how your Fund investment
will be taxed. The tax information in this PROSPECTUS is provided as
general information. You should consult your own tax professional
about the tax consequences of an investment in the Fund.
Unless your investment in the Fund is through a tax-deferred
retirement account, such as a 401(k) plan or IRA, you need to be
aware of the possible tax consequences when:
- The Fund makes distributions; and
- You sell Fund shares, including an exchange to another Morgan
Stanley Dean Witter Fund.
TAXES ON DISTRIBUTIONS. Your distributions are normally subject to
federal and state income tax when they are paid, whether you take
them in cash or reinvest them in Fund shares. A distribution also may
be subject to local income tax. Any income dividend distributions and
any short-term capital gain distributions are taxable to you as
ordinary income. Any long-term capital gain distributions are taxable
as long-term capital gains, no matter how long you have owned shares
in the Fund.
Every January, you will be sent a statement (IRS Form 1099-DIV)
showing the taxable distributions paid to you in the previous year.
The statement provides information on your dividends and capital
gains for tax purposes.
TAXES ON SALES. Your sale of Fund shares normally is subject to
federal and state income tax and may result in a taxable gain or loss
to you. A sale also may be subject to local income tax. Your exchange
of Fund shares for shares of another Morgan Stanley Dean Witter Fund
is treated for tax purposes like a sale of your original shares and a
purchase of your new shares. Thus, the exchange may, like a sale,
result in a taxable gain or loss to you and will give you a new tax
basis for your new shares.
When you open your Fund account, you should provide your social
security or tax identification number on your investment application.
By providing this information, you will avoid being subject to a
federal backup withholding tax of 31% on taxable distributions and
redemption proceeds. Any withheld amount would be sent to the IRS as
an advance tax payment.
[ICON] SHARE CLASS ARRANGEMENTS
--------------------------------------------------------------------------------
The Fund offers several Classes of shares having different
distribution arrangements designed to provide you with different
purchase options according to your investment needs. Your Morgan
Stanley Dean Witter Financial Advisor or other authorized financial
representative can help you decide which Class may be appropriate for
you.
The general public is offered three Classes: Class A shares, Class B
shares and Class C shares, which differ principally in terms of sales
charges and ongoing expenses. A fourth Class, Class D shares, is
offered only to a limited category of investors. Shares that you
acquire through reinvested distributions will not be subject to any
front-end sales charge or CDSC -- contingent deferred sales charge.
15
<PAGE>
[Sidebar]
FRONT-END SALES
CHARGE OR FSC
AN INITIAL SALES CHARGE YOU PAY WHEN PURCHASING CLASS A SHARES THAT IS BASED ON
A PERCENTAGE OF THE OFFERING PRICE. THE PERCENTAGE DECLINES BASED UPON THE
DOLLAR VALUE OF CLASS A SHARES YOU PURCHASE. WE OFFER THREE WAYS TO REDUCE YOUR
CLASS A SALES CHARGES - THE COMBINED PURCHASE PRIVILEGE, RIGHT OF ACCUMULATION
AND LETTER OF INTENT.
[End Sidebar]
Sales personnel may receive different compensation for selling each
Class of shares. The sales charges applicable to each Class provide
for the distribution financing of shares of that Class.
The chart below compares the sales charge and annual 12b-1 fee
applicable to each Class:
<TABLE>
<CAPTION>
CLASS SALES CHARGE MAXIMUM ANNUAL 12B-1 FEE
<S> <C> <C>
---------------------------------------------------------------------------------------------------------------
A Maximum 5.25% initial sales charge reduced for
purchase of $25,000 or more; shares sold without an
initial sales charge are generally subject to a 1.0%
CDSC during the first year 0.25%
---------------------------------------------------------------------------------------------------------------
B Maximum 5.0% CDSC during the first year decreasing to
0% after six years 1.00%
---------------------------------------------------------------------------------------------------------------
C 1.0% CDSC during the first year 1.00%
---------------------------------------------------------------------------------------------------------------
D None None
---------------------------------------------------------------------------------------------------------------
</TABLE>
CLASS A SHARES Class A shares are sold at net asset value plus an
initial sales charge of up to 5.25%. The initial sales charge is
reduced for purchases of $25,000 or more according to the schedule
below. Investments of $1 million or more are not subject to an initial
sales charge, but are generally subject to a contingent deferred sales
charge, or CDSC, of 1.0% on sales made within one year after the last
day of the month of purchase. The CDSC will be assessed in the same
manner and with the same CDSC waivers as with Class B shares. Class A
shares are also subject to a distribution (12b-1) fee of up to 0.25% of
the average daily net assets of the Class.
The offering price of Class A shares includes a sales charge
(expressed as a percentage of the offering price) on a single
transaction as shown in the following table:
<TABLE>
<CAPTION>
FRONT-END SALES CHARGE
-------------------------------------------------
AMOUNT OF PERCENTAGE OF APPROXIMATE PERCENTAGE OF
SINGLE TRANSACTION PUBLIC OFFERING PRICE NET AMOUNT INVESTED
<S> <C> <C>
---------------------------------------------------------------------------------
Less than $25,000 5.25% 5.54%
---------------------------------------------------------------------------------
$25,000 but less than $50,000 4.75% 4.99%
---------------------------------------------------------------------------------
$50,000 but less than $100,000 4.00% 4.17%
---------------------------------------------------------------------------------
$100,000 but less than
$250,000 3.00% 3.09%
---------------------------------------------------------------------------------
$250,000 but less than
$1 million 2.00% 2.04%
---------------------------------------------------------------------------------
$1 million and over 0 0
---------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
The reduced sales charge schedule is applicable to purchases of
Class A shares in a single transaction by:
- A single account (including an individual, trust or fiduciary
account).
- Family member accounts (limited to husband, wife and children under
the age of 21).
- Pension, profit sharing or other employee benefit plans of
companies and their affiliates.
- Tax-exempt organizations.
- Groups organized for a purpose other than to buy mutual fund
shares.
COMBINED PURCHASE PRIVILEGE. You also will have the benefit of
reduced sales charges by combining purchases of Class A shares of the
Fund in a single transaction with purchases of Class A shares of
other Multi-Class Funds and shares of FSC Funds.
RIGHT OF ACCUMULATION. You also may benefit from a reduction of sales
charges if the cumulative net asset value of Class A shares of the
Fund purchased in a single transaction, together with shares of other
funds you currently own which were previously purchased at a price
including a front-end sales charge (including shares acquired through
reinvestment of distributions), amounts to $25,000 or more. Also, if
you have a cumulative net asset value of all your Class A and
Class D shares equal to at least $5 million (or $25 million for
certain employee benefit plans), you are eligible to purchase
Class D shares of any fund subject to the fund's minimum initial
investment requirement.
You must notify your Morgan Stanley Dean Witter Financial Advisor or
other authorized financial representative (or Morgan Stanley Dean
Witter Trust FSB if you purchase directly through the Fund), at the
time a purchase order is placed, that the purchase qualifies for the
reduced sales charge under the Right of Accumulation. Similar
notification must be made in writing when an order is placed by mail.
The reduced sales charge will not be granted if: (i) notification is
not furnished at the time of the order; or (ii) a review of the
records of Dean Witter Reynolds or other authorized dealer of Fund
shares or the Fund's transfer agent does not confirm your represented
holdings.
LETTER OF INTENT. The schedule of reduced sales charges for larger
purchases also will be available to you if you enter into a written
"letter of intent." A letter of intent provides for the purchase of
Class A shares of the Fund or other Multi-Class Funds or shares of
FSC Funds within a thirteen-month period. The initial purchase under
a letter of intent must be at least 5% of the stated investment goal.
To determine the applicable sales charge reduction, you may also
include: (1) the cost of shares of other Morgan Stanley Dean Witter
Funds which were previously purchased at a price including a
front-end sales charge during the 90-day period prior to the
distributor receiving the letter of intent, and (2) the cost of
shares of other funds you currently own acquired in exchange for
shares of funds purchased during that period at a price including a
front-end sales
17
<PAGE>
charge. You can obtain a letter of intent by contacting your Morgan
Stanley Dean Witter Financial Advisor or other authorized financial
representative or by calling (800) 869-NEWS. If you do not achieve
the stated investment goal within the thirteen-month period, you are
required to pay the difference between the sales charges otherwise
applicable and sales charges actually paid, which may be deducted
from your investment.
OTHER SALES CHARGE WAIVERS. In addition to investments of $1 million
or more, your purchase of Class A shares is not subject to a
front-end sales charge (or CDSC upon sale) if your account qualifies
under one of the following categories:
- A trust for which Morgan Stanley Dean Witter Trust FSB provides
discretionary trustee services.
- Persons participating in a fee-based investment program (subject to
all of its terms and conditions, including termination fees,
mandatory sale or transfer restrictions on termination) approved by
the Fund's distributor pursuant to which they pay an asset-based
fee for investment advisory, administrative and/or brokerage
services.
- Qualified state tuition plans described in Section 529 of the
Internal Revenue Code (subject to all applicable terms and
conditions) and certain other investment programs that do not
charge an asset-based fee and have been approved by the Fund's
distributor.
- Employer-sponsored employee benefit plans, whether or not qualified
under the Internal Revenue Code, for which Morgan Stanley Dean
Witter Trust FSB serves as trustee or Morgan Stanley Dean Witter's
Retirement Plan Services serves as recordkeeper under a written
Recordkeeping Services Agreement ("MSDW Eligible Plans") which have
at least 200 eligible employees.
- A MSDW Eligible Plan whose Class B shares have converted to
Class A shares, regardless of the plan's asset size or number of
eligible employees.
- A client of a Morgan Stanley Dean Witter Financial Advisor who
joined us from another investment firm within six months prior to
the date of purchase of Fund shares, and you used the proceeds from
the sale of shares of a proprietary mutual fund of that Financial
Advisor's previous firm that imposed either a front-end or deferred
sales charge to purchase Class A shares, provided that: (1) you
sold the shares not more than 60 days prior to the purchase of Fund
shares, and (2) the sale proceeds were maintained in the interim in
cash or a money market fund.
- Current or retired Directors/Trustees of the Morgan Stanley Dean
Witter Funds, such persons' spouses and children under the age of
21, and trust accounts for which any of such persons is a
beneficiary.
- Current or retired directors, officers and employees of Morgan
Stanley Dean Witter & Co. and any of its subsidiaries, such
persons' spouses and children under the age of 21, and trust
accounts for which any of such persons is a beneficiary.
18
<PAGE>
[Sidebar]
CONTINGENT DEFERRED SALES
CHARGE OR CDSC
A FEE YOU PAY WHEN YOU SELL SHARES OF CERTAIN MORGAN STANLEY DEAN WITTER FUNDS
PURCHASED WITHOUT AN INITIAL SALES CHARGE. THIS FEE DECLINES THE LONGER YOU HOLD
YOUR SHARES AS SET FORTH IN THE TABLE.
[End Sidebar]
CLASS B SHARES Class B shares are offered at net asset value with no
initial sales charge but are subject to a contingent deferred sales
charge, or CDSC, as set forth in the table below. For the purpose of
calculating the CDSC, shares are deemed to have been purchased on the
last day of the month during which they were purchased.
<TABLE>
<CAPTION>
CDSC AS A PERCENTAGE
YEAR SINCE PURCHASE PAYMENT MADE OF AMOUNT REDEEMED
<S> <C>
----------------------------------------------------------------------------
First 5.0%
----------------------------------------------------------------------------
Second 4.0%
----------------------------------------------------------------------------
Third 3.0%
----------------------------------------------------------------------------
Fourth 2.0%
----------------------------------------------------------------------------
Fifth 2.0%
----------------------------------------------------------------------------
Sixth 1.0%
----------------------------------------------------------------------------
Seventh and thereafter None
----------------------------------------------------------------------------
</TABLE>
Each time you place an order to sell or exchange shares, shares with
no CDSC will be sold or exchanged first, then shares with the lowest
CDSC will be sold or exchanged next. For any shares subject to a
CDSC, the CDSC will be assessed on an amount equal to the lesser of
the current market value or the cost of the shares being sold.
CDSC WAIVERS. A CDSC, if otherwise applicable, will be waived in the
case of:
- Sales of shares held at the time you die or become disabled (within
the definition in Section 72(m)(7) of the Internal Revenue Code
which relates to the ability to engage in gainful employment), if
the shares are: (i) registered either in your name (not a trust) or
in the names of you and your spouse as joint tenants with right of
survivorship; or (ii) held in a qualified corporate or
self-employed retirement plan, IRA or 403(b) Custodial Account,
provided in either case that the sale is requested within one year
of your death or initial determination of disability.
- Sales in connection with the following retirement plan
"distributions:" (i) lump-sum or other distributions from a
qualified corporate or self-employed retirement plan following
retirement (or, in the case of a "key employee" of a "top heavy"
plan, following attainment of age 59 1/2); (ii) distributions from
an IRA or 403(b) Custodial Account following attainment of age
59 1/2; or (iii) a tax-free return of an excess IRA contribution (a
"distribution" does not include a direct transfer of IRA, 403(b)
Custodial Account or retirement plan assets to a successor
custodian or trustee).
- Sales of shares held for you as a participant in a MSDW Eligible
Plan.
- Sales of shares in connection with the Systematic Withdrawal Plan
of up to 12% annually of the value of each fund from which plan
sales are made. The percentage is determined on the date you
establish the Systematic Withdrawal Plan and based on the next
calculated share price. You may have this CDSC waiver applied in
amounts up to 1% per month, 3% per quarter, 6% semi-annually or 12%
annually. Shares with no
19
<PAGE>
CDSC will be sold first, followed by those with the lowest CDSC. As
such, the waiver benefit will be reduced by the amount of your
shares that are not subject to a CDSC. If you suspend your
participation in the plan, you may later resume plan payments
without requiring a new determination of the account value for the
12% CDSC waiver.
- Sales of shares that are attributable to reinvested distributions
from or the proceeds of, certain unit investment trusts sponsored
by Dean Witter Reynolds.
- Sales of shares if you simultaneously invest the proceeds in the
Investment Manager's mutual fund asset allocation program, pursuant
to which investors pay an asset-based fee. Any shares you acquire
in connection with the Investment Manager's mutual fund asset
allocation program are subject to all of the terms and conditions
of that program, including termination fees, mandatory sale or
transfer restrictions on termination.
All waivers will be granted only following the Fund's distributor
receiving confirmation of your entitlement. If you believe you are
eligible for a CDSC waiver, please contact your Financial Advisor or
call (800) 869-NEWS.
DISTRIBUTION FEE. Class B shares are subject to an annual 12b-1 fee
of 1.0% of the lesser of: (a) the average daily aggregate gross
purchases by all shareholders of the Fund's Class B shares since the
inception of the Fund (not including reinvestments of dividends or
capital gains distributions), less the average daily aggregate net
asset value of the Fund's Class B shares sold by all shareholders
since the Fund's inception upon which a CDSC has been imposed or
waived, or (b) the average daily net assets of Class B.
CONVERSION FEATURE. After ten (10) years, Class B shares will convert
automatically to Class A shares of the Fund with no initial sales
charge. The ten year period runs from the last day of the month in
which the shares were purchased, or in the case of Class B shares
acquired through an exchange, from the last day of the month in which
the original Class B shares were purchased; the shares will convert
to Class A shares based on their relative net asset values in the
month following the ten year period. At the same time, an equal
proportion of Class B shares acquired through automatically
reinvested distributions will convert to Class A shares on the same
basis. (Class B shares held before May 1, 1997, however, will convert
to Class A shares in May 2007.)
In the case of Class B shares held in a MSDW Eligible Plan, the plan
is treated as a single investor and all Class B shares will convert
to Class A shares on the conversion date of the Class B shares of a
Morgan Stanley Dean Witter Fund purchased by that plan.
Currently, the Class B share conversion is not a taxable event; the
conversion feature may be cancelled if it is deemed a taxable event
in the future by the Internal Revenue Service.
If you exchange your Class B shares for shares of a Money Market
Fund, a No-Load Fund, North American Government Income Trust or
Short-Term U.S. Treasury Trust, the holding period for conversion is
frozen as of the last day of the month of the exchange and resumes on
the last day of the month you exchange back into Class B shares.
20
<PAGE>
EXCHANGING SHARES SUBJECT TO A CDSC. There are special considerations
when you exchange Fund shares that are subject to a CDSC. When
determining the length of time you held the shares and the
corresponding CDSC rate, any period (starting at the end of the
month) during which you held shares of a fund that does NOT charge a
CDSC WILL NOT BE COUNTED. Thus, in effect the "holding period" for
purposes of calculating the CDSC is frozen upon exchanging into a
fund that does not charge a CDSC.
For example, if you held Class B shares of the Fund for one year,
exchanged to Class B shares of another Morgan Stanley Dean Witter
Multi-Class Fund for another year, then sold your shares, a CDSC rate
of 4% would be imposed on the shares based on a two year holding
period -- one year for each fund. However, if you had exchanged the
shares of the Fund for a Money Market Fund (which does not charge a
CDSC) instead of the Multi-Class Fund, then sold your shares, a CDSC
rate of 5% would be imposed on the shares based on a one year holding
period. The one year in the Money Market Fund would not be counted.
Nevertheless, if shares subject to a CDSC are exchanged for a Fund
that does not charge a CDSC, you will receive a credit when you sell
the shares equal to the distribution (12b-1) fees, if any, you paid
on those shares while in that fund up to the amount of any applicable
CDSC.
In addition, shares that are exchanged into or from a Morgan Stanley
Dean Witter Fund subject to a higher CDSC rate will be subject to the
higher rate, even if the shares are re-exchanged into a fund with a
lower CDSC rate.
CLASS C SHARES Class C shares are sold at net asset value with no
initial sales charge but are subject to a CDSC of 1.0% on sales made
within one year after the last day of the month of purchase. The CDSC
will be assessed in the same manner and with the same CDSC waivers as
with Class B shares.
DISTRIBUTION FEE. Class C shares are subject to an annual
distribution (12b-1) fee of up to 1.0% of the average daily net
assets of that Class. The Class C shares' distribution fee may cause
that Class to have higher expenses and pay lower dividends than
Class A or Class D shares. Unlike Class B shares, Class C shares have
no conversion feature and, accordingly, an investor that purchases
Class C shares may be subject to distribution (12b-1) fees applicable
to Class C shares for an indefinite period.
CLASS D SHARES Class D shares are offered without any sales charge on
purchases or sales and without any distribution (12b-1) fee. Class D
shares are offered only to investors meeting an initial investment
minimum of $5 million ($25 million for MSDW Eligible Plans) and the
following investor categories:
- Investors participating in the Investment Manager's mutual fund
asset allocation program (subject to all of its terms and
conditions, including termination fees, mandatory sale or transfer
restrictions on termination) pursuant to which they pay an
asset-based fee.
21
<PAGE>
- Persons participating in a fee-based investment program (subject to
all of its terms and conditions, including termination fees,
mandatory sale or transfer restrictions on termination) approved by
the Fund's distributor pursuant to which they pay an asset-based
fee for investment advisory, administrative and/or brokerage
services.
- Certain investment programs that do not charge an asset-based fee
and have been approved by the Fund's distributor. However, Class D
shares are not offered for investments made through Section 529
plans (regardless of the size of the investment).
- Employee benefit plans maintained by Morgan Stanley Dean Witter &
Co. or any of its subsidiaries for the benefit of certain employees
of Morgan Stanley Dean Witter & Co. and its subsidiaries.
- Certain unit investment trusts sponsored by Dean Witter Reynolds.
- Certain other open-end investment companies whose shares are
distributed by the Fund's distributor.
- Investors who were shareholders of the Dean Witter Retirement
Series on September 11, 1998 for additional purchases for their
former Dean Witter Retirement Series accounts.
MEETING CLASS D ELIGIBILITY MINIMUMS. To meet the $5 million
($25 million for certain MSDW Eligible Plans) initial investment to
qualify to purchase Class D shares you may combine: (1) purchases in
a single transaction of Class D shares of the Fund and other Morgan
Stanley Dean Witter Multi-Class Funds; and/or (2) previous purchases
of Class A and Class D shares of Multi-Class Funds and shares of FSC
Funds you currently own, along with shares of Morgan Stanley Dean
Witter Funds you currently own that you acquired in exchange for
those shares.
NO SALES CHARGES FOR REINVESTED CASH DISTRIBUTIONS If you receive a
cash payment representing an income dividend or capital gain and you
reinvest that amount in the applicable Class of shares by returning the
check within 30 days of the payment date, the purchased shares would
not be subject to an initial sales charge or CDSC.
PLAN OF DISTRIBUTION (RULE 12B-1 FEES) The Fund has adopted a Plan of
Distribution in accordance with Rule 12b-1 under the Investment Company
Act of 1940 with respect to the distribution of Class A, Class B and
Class C shares. The Plan allows the Fund to pay distribution fees for
the sale and distribution of these shares. It also allows the Fund to
pay for services to shareholders of Class A, Class B and Class C
shares. Because these fees are paid out of the Fund's assets on an
ongoing basis, over time these fees will increase the cost of your
investment in these Classes and may cost you more than paying other
types of sales charges.
22
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance for the periods indicated. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate an investor would have earned or lost on an investment in the
Fund (assuming reinvestment of all dividends and distributions).
The information for the fiscal year ended September 30, 2000 has been audited by
Deloitte & Touche LLP, independent auditors, whose report, along with the Fund's
financial statements, is included in the annual report, which is available upon
request. The financial highlights for the fiscal year ended September 30, 1999
and all periods presented prior thereto have been audited by other independent
accountants.
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED SEPTEMBER 30, JULY 28, 1997*
-------------------------------- THROUGH
2000 1999 1998 SEPTEMBER 30, 1997
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------
CLASS A SHARES++
-------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
-------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $13.57 $12.45 $15.07 $14.31
-------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.65 0.72 0.75 0.13
Net realized and unrealized gain (loss) 3.83 1.18 (2.68) 0.78
------ ------ ------ ------
Total income (loss) from investment operations 4.48 1.90 (1.93) 0.91
-------------------------------------------------------------------------------------------------------------------
Less dividends from net investment income (0.82) (0.78) (0.69) (0.15)
-------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $17.23 $13.57 $12.45 $15.07
-------------------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 33.32% 15.64% (13.38)% 6.40%(1)
-------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
-------------------------------------------------------------------------------------------------------------------
Expenses 1.04%(3) 1.06%(3) 1.05%(3) 1.15%(2)
-------------------------------------------------------------------------------------------------------------------
Net investment income 3.91%(3) 5.31%(3) 5.16%(3) 5.03%(2)
-------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
-------------------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $2,538 $1,124 $963 $50
-------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 160% 87% 95% 182%
-------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* 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.
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30, 2000++ 1999++ 1998++ 1997++ 1996
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.57 $ 12.45 $ 15.07 $ 12.72 $ 11.67
------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.52 0.61 0.65 0.60 0.55
Net realized and unrealized gain (loss) 3.82 1.18 (2.70) 2.31 1.12
-------- -------- -------- -------- --------
Total income (loss) from investment
operations 4.34 1.79 (2.05) 2.91 1.67
------------------------------------------------------------------------------------------------------------------
Less dividends from net investment income (0.69) (0.67) (0.57) (0.56) (0.62)
------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 17.22 $ 13.57 $ 12.45 $ 15.07 $ 12.72
------------------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 32.23% 14.62% (14.01)% 23.38% 14.70%
------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
------------------------------------------------------------------------------------------------------------------
Expenses 1.80%(1) 1.85%(1) 1.81%(1) 1.84% 1.89%
------------------------------------------------------------------------------------------------------------------
Net investment income 3.15%(1) 4.52%(1) 4.40%(1) 4.45% 4.78%
------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
------------------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $297,821 $231,510 $263,443 $316,633 $234,334
------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 160% 87% 95% 182% 171%
------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* 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.
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED SEPTEMBER 30, JULY 28, 1997*
-------------------------------- THROUGH
2000 1999 1998 SEPTEMBER 30, 1997
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------
CLASS C SHARES++
-------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
-------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $13.54 $12.43 $15.06 $14.31
-------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.53 0.63 0.64 0.12
Net realized and unrealized gain (loss) 3.80 1.17 (2.68) 0.77
------ ------ ------ ------
Total income (loss) from investment operations 4.33 1.80 (2.04) 0.89
-------------------------------------------------------------------------------------------------------------------
Less dividends from net investment income (0.70) (0.69) (0.59) (0.14)
-------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $17.17 $13.54 $12.43 $15.06
-------------------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 32.26% 14.83% (14.07)% 6.26%(1)
-------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
-------------------------------------------------------------------------------------------------------------------
Expenses 1.80%(3) 1.73%(3) 1.81%(3) 1.92%(2)
-------------------------------------------------------------------------------------------------------------------
Net investment income 3.15%(3) 4.64%(3) 4.40%(3) 4.52%(2)
-------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
-------------------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $5,455 $2,869 $2,390 $ 620
-------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 160% 87% 95% 182%
-------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* 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.
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED SEPTEMBER 30, JULY 28, 1997*
-------------------------------------- THROUGH
2000 1999 1998 SEPTEMBER 30, 1997
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------------
CLASS D SHARES++
-----------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.57 $ 12.44 $ 15.08 $14.31
-----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.74 0.79 0.79 0.13
Net realized and unrealized gain (loss) 3.77 1.15 (2.71) 0.80
------- ------- ------- ------
Total income (loss) from investment operations 4.51 1.94 (1.92) 0.93
-----------------------------------------------------------------------------------------------------------------------------
Less dividends from net investment income (0.85) (0.81) (0.72) (0.16)
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 17.23 $ 13.57 $ 12.44 $15.08
-----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 33.68% 15.81% (13.19)% 6.42%(1)
-----------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
-----------------------------------------------------------------------------------------------------------------------------
Expenses 0.80%(3) 0.85%(3) 0.81%(3) 0.89%(2)
-----------------------------------------------------------------------------------------------------------------------------
Net investment income 4.15%(3) 5.52%(3) 5.40%(3) 4.94%(2)
-----------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
-----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $ 3,121 $ 18 $ 1,696 $ 21
-----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 160% 87% 95% 182%
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* 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.
</TABLE>
26
<PAGE>
NOTES
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27
<PAGE>
NOTES
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28
<PAGE>
MORGAN STANLEY DEAN WITTER
FAMILY OF FUNDS
The Morgan Stanley Dean Witter Family of Funds offers investors a wide
range of investment choices. Come on in and meet the family!
--------------------------------------------------------------------------------
GROWTH FUNDS
---------------------------------
GROWTH FUNDS
Aggressive Equity Fund
American Opportunities Fund
Capital Growth Securities
Developing Growth Securities
Growth Fund
Market Leader Trust
Mid-Cap Equity Trust
New Discoveries Fund
Next Generation Trust
Small Cap Growth Fund
Special Value Fund
Tax-Managed Growth Fund
21st Century Trend Fund
THEME FUNDS
Financial Services Trust
Health Sciences Trust
Information Fund
Natural Resource Development Securities
Technology Fund
GLOBAL/INTERNATIONAL FUNDS
Competitive Edge Fund - "Best Ideas"
Portfolio
European Growth Fund
Fund of Funds - International Portfolio
International Fund
International SmallCap Fund
Japan Fund
Latin American Growth Fund
Pacific Growth Fund
--------------------------------------------------------------------------------
GROWTH & INCOME FUNDS
---------------------------------
Balanced Growth Fund
Balanced Income Fund
Convertible Securities Trust
Dividend Growth Securities
Equity Fund
Fund of Funds - Domestic Portfolio
Income Builder Fund
S&P 500 Index Fund
S&P 500 Select Fund
Strategist Fund
Total Market Index Fund
Total Return Trust
Value Fund
Value-Added Market Series/Equity Portfolio
THEME FUNDS
Real Estate Fund
Utilities Fund
GLOBAL FUNDS
Global Dividend Growth Securities
Global Utilities Fund
--------------------------------------------------------------------------------
INCOME FUNDS
---------------------------------
GOVERNMENT INCOME FUNDS
Federal Securities Trust
Short-Term U.S. Treasury Trust
U.S. Government Securities Trust
DIVERSIFIED INCOME FUNDS
Diversified Income Trust
CORPORATE INCOME FUNDS
High Yield Securities
Intermediate Income Securities
Short-Term Bond Fund (NL)
GLOBAL INCOME FUNDS
North American Government Income Trust
World Wide Income Trust
TAX-FREE INCOME FUNDS
California Tax-Free Income Fund
Hawaii Municipal Trust (FSC)
Limited Term Municipal Trust (NL)
Multi-State Municipal Series Trust (FSC)
New York Tax-Free Income Fund
Tax-Exempt Securities Trust
--------------------------------------------------------------------------------
MONEY MARKET FUNDS
---------------------------------
TAXABLE MONEY MARKET FUNDS
Liquid Asset Fund (MM)
U.S. Government Money Market Trust (MM)
TAX-FREE MONEY MARKET FUNDS
California Tax-Free Daily Income Trust (MM)
New York Municipal Money Market Trust (MM)
Tax-Free Daily Income Trust (MM)
There may be funds created after this PROSPECTUS was published. Please consult
the inside back cover of a new fund's prospectus for its designation, e.g.,
Multi-Class Fund or Money Market Fund.
Unless otherwise noted, each listed Morgan Stanley Dean Witter Fund, except for
North American Government Income Trust and Short-Term U.S. Treasury Trust, is a
Multi-Class Fund. A Multi-Class Fund is a mutual fund offering multiple Classes
of shares. The other types of funds are: NL - No-Load (Mutual) Fund; MM - Money
Market Fund; FSC - A mutual fund sold with a front-end sales charge and a
distribution (12b-1) fee.
<PAGE>
PROSPECTUS / / NOVEMBER 30, 2000
Additional information about the Fund's
investments is available in the Fund's ANNUAL
AND SEMI-ANNUAL REPORTS TO SHAREHOLDERS.
In the Fund's ANNUAL REPORT, you will find a
discussion of the market conditions and
investment strategies that significantly
affected the Fund's performance during its
last fiscal year. The Fund's STATEMENT OF
ADDITIONAL INFORMATION also provides additional information about the Fund. The
STATEMENT OF ADDITIONAL INFORMATION is
incorporated herein by reference (legally is part of this PROSPECTUS). For a
free copy of
any of these documents, to request other
information about the Fund, or to make shareholder inquiries, please call:
(800) 869-NEWS
You also may obtain information about the Fund by calling your Morgan Stanley
Dean Witter Financial Advisor or by visiting our Internet site at:
www.msdwadvice.com/funds
Information about the Fund (including the
STATEMENT OF ADDITIONAL INFORMATION) can be
viewed and copied at the Securities and Exchange Commission's Public Reference
Room in Washington, DC. Information about
the Reference Room's operations may be
obtained by calling the SEC at (202)942-8090.
Reports and other information about the Fund
are available on the EDGAR Database on the
SEC's Internet site (www.sec.gov), and copies of
this information may be obtained, after paying a
duplicating fee, by electronic request at the
following E-mail address:[email protected],
or by writing the Public Reference Section of the
SEC, Washington, DC 20549-0102.
TICKER SYMBOLS:
<TABLE>
<S> <C>
CLASS A: CNSAX CLASS C: CNSCX
--------------------- ---------------------
CLASS B: CNSBX CLASS D: CNSDX
--------------------- ---------------------
</TABLE>
(THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-4310)
Morgan Stanley Dean Witter
CONVERTIBLE SECURITIES TRUST
[BACK COVER PHOTO]
A MUTUAL FUND THAT SEEKS A
HIGH LEVEL OF TOTAL RETURN ON
ITS ASSETS THROUGH A COMBINATION
OF CURRENT INCOME AND CAPITAL
APPRECIATION
<PAGE>
<TABLE>
<S> <C>
STATEMENT OF ADDITIONAL INFORMATION MORGAN STANLEY
NOVEMBER 30, 2000 DEAN WITTER
CONVERTIBLE SECURITIES
TRUST
</TABLE>
----------------------------------------------------------------------
This STATEMENT OF ADDITIONAL INFORMATION is not a PROSPECTUS. The PROSPECTUS
(dated November 30, 2000) for the Morgan Stanley Dean Witter Convertible
Securities Trust (the "Fund") may be obtained without charge from the Fund at
its address or telephone number listed below or from Dean Witter Reynolds at any
of its branch offices.
Morgan Stanley Dean Witter
Convertible Securities Trust
Two World Trade Center
New York, NY 10048
(800) 869-NEWS
<PAGE>
TABLE OF CONTENTS
--------------------------------------------------------------------------------
<TABLE>
<C> <S> <C>
I. Fund History................................................ 4
II. Description of the Fund and Its Investments and Risks....... 4
A. Classification........................................... 4
B. Investment Strategies and Risks.......................... 4
C. Fund Policies/Investment Restrictions.................... 11
III. Management of the Fund...................................... 13
A. Board of Trustees........................................ 13
B. Management Information................................... 13
C. Compensation............................................. 18
IV. Control Persons and Principal Holders of Securities......... 20
V. Investment Management and Other Services.................... 20
A. Investment Manager....................................... 20
B. Principal Underwriter.................................... 20
C. Services Provided by the Investment Manager.............. 21
D. Dealer Reallowances...................................... 22
E. Rule 12b-1 Plan.......................................... 22
F. Other Service Providers.................................. 26
G. Codes of Ethics.......................................... 26
VI. Brokerage Allocation and Other Practices.................... 27
A. Brokerage Transactions................................... 27
B. Commissions.............................................. 27
C. Brokerage Selection...................................... 28
D. Directed Brokerage....................................... 28
E. Regular Broker-Dealers................................... 28
VII. Capital Stock and Other Securities.......................... 29
VIII. Purchase/Redemption and Pricing of Shares................... 29
A. Purchase of Shares....................................... 29
B. Offering Price........................................... 30
IX. Taxation of the Fund and Shareholders....................... 31
X. Underwriters................................................ 33
XI. Calculation of Performance Data............................. 33
XII. Financial Statements........................................ 35
</TABLE>
2
<PAGE>
GLOSSARY OF SELECTED DEFINED TERMS
--------------------------------------------------------------------------------
The terms defined in this glossary are frequently used in this STATEMENT OF
ADDITIONAL INFORMATION (other terms used occasionally are defined in the text of
the document).
"CUSTODIAN"--The Bank of New York.
"DEAN WITTER REYNOLDS"--Dean Witter Reynolds Inc., a wholly-owned broker-dealer
subsidiary of MSDW.
"DISTRIBUTOR"--Morgan Stanley Dean Witter Distributors Inc., a wholly-owned
broker-dealer subsidiary of MSDW.
"FINANCIAL ADVISORS"--Morgan Stanley Dean Witter authorized financial services
representatives.
"FUND"--Morgan Stanley Dean Witter Convertible Securities Trust, a registered
open-end investment company.
"INDEPENDENT TRUSTEES"--Trustees who are not "interested persons" (as defined by
the Investment Company Act) of the Fund.
"INVESTMENT MANAGER"--Morgan Stanley Dean Witter Advisors Inc., a wholly-owned
investment advisor subsidiary of MSDW.
"MORGAN STANLEY & CO."--Morgan Stanley & Co. Incorporated, a wholly-owned
broker-dealer subsidiary of MSDW.
"MORGAN STANLEY DEAN WITTER FUNDS"--Registered investment companies (i) for
which the Investment Manager serves as the investment advisor and (ii) that hold
themselves out to investors as related companies for investment and investor
services.
"MSDW"--Morgan Stanley Dean Witter & Co., a preeminent global financial services
firm.
"MSDW SERVICES COMPANY"--Morgan Stanley Dean Witter Services Company Inc., a
wholly-owned fund services subsidiary of the Investment Manager.
"TRANSFER AGENT"--Morgan Stanley Dean Witter Trust FSB, a wholly-owned transfer
agent subsidiary of MSDW.
"TRUSTEES"--The Board of Trustees of the Fund.
3
<PAGE>
I. FUND HISTORY
--------------------------------------------------------------------------------
The Fund was organized as a Massachusetts business trust under a Declaration
of Trust on May 21, 1985 under the name Dean Witter Convertible Securities
Trust. Effective June 22, 1998, the Fund's name was changed to Morgan Stanley
Dean Witter Convertible Securities Trust.
II. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
--------------------------------------------------------------------------------
A. CLASSIFICATION
The Fund is an open-end diversified management investment company whose
investment objective is to seek a high level of total return on its assets
through a combination of current income and capital appreciation.
B. INVESTMENT STRATEGIES AND RISKS
The following discussion of the Fund's investment strategies and risks
should be read with the sections of the Fund's PROSPECTUS titled "Principal
Investment Strategies," "Principal Risks," "Additional Investment Strategy
Information" and "Additional Risk Information."
OPTION AND FUTURES TRANSACTIONS. The Fund may engage in transactions in
listed and OTC options. Listed options are issued or guaranteed by the exchange
on which they are traded or by a clearing corporation such as the Options
Clearing Corporation ("OCC"). Ownership of a listed call option gives the Fund
the right to buy from the OCC (in the U.S.) or other clearing corporation or
exchange, the underlying security covered by the option at the stated exercise
price (the price per unit of the underlying security) by filing an exercise
notice prior to the expiration date of the option. The writer (seller) of the
option would then have the obligation to sell to the OCC (in the U.S.) or other
clearing corporation or exchange, the underlying security at that exercise price
prior to the expiration date of the option, regardless of its then current
market price. Ownership of a listed put option would give the Fund the right to
sell the underlying security to the OCC (in the U.S.) or other clearing
corporation or exchange, at the stated exercise price. Upon notice of exercise
of the put option, the writer of the put would have the obligation to purchase
the underlying security or currency from the OCC (in the U.S.) or other clearing
corporation or exchange, at the exercise price.
COVERED CALL WRITING. The Fund is permitted to write covered call options
on portfolio securities in an amount not exceeding 20% of its total assets. The
Fund will receive from the purchaser, in return for a call it has written, a
"premium;" i.e., the price of the option. Receipt of these premiums may better
enable the Fund to earn a higher level of current income than it would earn from
holding the underlying securities alone. Moreover, the premium received will
offset a portion of the potential loss incurred by the Fund if the securities
underlying the option decline in value.
The Fund may be required, at any time during the option period, to deliver
the underlying security against payment of the exercise price on any calls it
has written. This obligation is terminated upon the expiration of the option
period or at such earlier time when the writer effects a closing purchase
transaction. A closing purchase transaction is accomplished by purchasing an
option of the same series as the option previously written. However, once the
Fund has been assigned an exercise notice, the Fund will be unable to effect a
closing purchase transaction.
A call option is "covered" if the Fund owns the underlying security subject
to the option or has an absolute and immediate right to acquire that security
without additional cash consideration (or for additional consideration (in cash,
Treasury bills or other liquid portfolio securities) held in a segregated
account on the Fund's books) upon conversion or exchange of other securities
held in its portfolio. A call option is also covered if the Fund holds a call on
the same security as the call written where the exercise price of the call held
is (i) equal to or less than the exercise price of the call written or (ii)
greater than the exercise price of the call written if the difference is
maintained by the Fund in cash, Treasury bills or other liquid portfolio
securities in a segregated account on the Fund's books.
4
<PAGE>
Options written by the Fund normally have expiration dates of from up to
eighteen months from the date written. The exercise price of a call option may
be below, equal to or above the current market value of the underlying security
at the time the option is written.
COVERED PUT WRITING. A writer of a covered put option incurs an obligation
to buy the security underlying the option from the purchaser of the put, at the
option's exercise price at any time during the option period, at the purchaser's
election. Through the writing of a put option, the Fund would receive income
from the premium paid by purchasers. The potential gain on a covered put option
is limited to the premium received on the option (less the commissions paid on
the transaction). During the option period, the Fund may be required, at any
time, to make payment of the exercise price against delivery of the underlying
security. A put option is "covered" if the Fund maintains cash, Treasury bills
or other liquid portfolio securities with a value equal to the exercise price in
a segregated account on the Fund's books, or holds a put on the same security as
the put written where the exercise price of the put held is equal to or greater
than the exercise price of the put written. The operation of and limitations on
covered put options in other respects are substantially identical to those of
call options.
PURCHASING CALL AND PUT OPTIONS. The Fund may purchase listed and OTC call
and put options in amounts equaling up to 10% of its total assets. The purchase
of a call option would enable the Fund, in return for the premium paid to lock
in a purchase price for a security or currency during the term of the option.
The purchase of a put option would enable the Fund, in return for a premium
paid, to lock in a price at which it may sell a security or currency during the
term of the option.
OTC OPTIONS. OTC options are purchased from or sold (written) to dealers or
financial institutions which have entered into direct agreements with the Fund.
With OTC options, such variables as expiration date, exercise price and premium
will be agreed upon between the Fund and the transacting dealer, without the
intermediation of a third party such as the OCC. The Fund will engage in OTC
option transactions only with member banks of the Federal Reserve Bank System or
primary dealers in U.S. Government securities or with affiliates of such banks
or dealers.
RISKS OF OPTIONS TRANSACTIONS. The successful use of options depends on the
ability of the Investment Manager to forecast correctly interest rates and/or
market movements. If the market value of the portfolio securities upon which
call options have been written increases, the Fund may receive a lower total
return from the portion of its portfolio upon which calls have been written than
it would have had such calls not been written. During the option period, the
covered call writer has, in return for the premium on the option, given up the
opportunity for capital appreciation above the exercise price should the market
price of the underlying security increase, but has retained the risk of loss
should the price of the underlying security decline. The covered put writer also
retains the risk of loss should the market value of the underlying security
decline below the exercise price of the option less the premium received on the
sale of the option. In both cases, the writer has no control over the time when
it may be required to fulfill its obligation as a writer of the option. Prior to
exercise or expiration, an option position can only be terminated by entering
into a closing purchase or sale transaction. Once an option writer has received
an exercise notice, it cannot effect a closing purchase transaction in order to
terminate its obligation under the option and must deliver or receive the
underlying securities at the exercise price.
The Fund's ability to close out its position as a writer of an option is
dependent upon the existence of a liquid secondary market on option exchanges.
There is no assurance that such a market will exist, particularly in the case of
OTC options.
In the event of the bankruptcy of a broker through which the Fund engages in
transactions in options, the Fund could experience delays and/or losses in
liquidating open positions purchased or sold through the broker and/or incur a
loss of all or part of its margin deposits with the broker. In the case of OTC
options, if the transacting dealer fails to make or take delivery of the
securities underlying an option it has written, in accordance with the terms of
that option, due to insolvency or otherwise, the Fund would lose the premium
paid for the option as well as any anticipated benefit of the transaction.
Each of the exchanges has established limitations governing the maximum
number of call or put options on the same underlying security which may be
written by a single investor, whether acting alone
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or in concert with others (regardless of whether such options are written on the
same or different exchanges or are held or written on one or more accounts or
through one or more brokers). An exchange may order the liquidation of positions
found to be in violation of these limits and it may impose other sanctions or
restrictions. These position limits may restrict the number of listed options
which the Fund may write.
The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the option markets
close before the markets for the underlying securities, significant price and
rate movements can take place in the underlying markets that cannot be reflected
in the option markets.
FUTURES CONTRACTS. The Fund may purchase and sell interest rate and index
futures contracts that are traded on U.S. commodity exchanges on such underlying
securities as U.S. Treasury bonds, notes, and bills.
A futures contract purchaser incurs an obligation to take delivery of a
specified amount of the obligation underlying the contract at a specified time
in the future for a specified price. A seller of a futures contract incurs an
obligation to deliver the specified amount of the underlying obligation at a
specified time in return for an agreed upon price. The purchase of a futures
contract enables the Fund, during the term of the contract, to lock in a price
at which it may purchase a security and protect against a rise in prices pending
purchase of portfolio securities. The sale of a futures contract enables the
Fund to lock in a price at which it may sell a security and protect against
declines in the value of portfolio securities.
Although most futures contracts call for actual delivery or acceptance of
securities, the contracts usually are closed out before the settlement date
without the making or taking of delivery. Index futures contracts provide for
the delivery of an amount of cash equal to a specified dollar amount times the
difference between the index value at the open or close of the last trading day
of the contract and the futures contract price. A futures contract sale is
closed out by effecting a futures contract purchase for the same aggregate
amount of the specific type of security and the same delivery date. If the sale
price exceeds the offsetting purchase price, the seller would be paid the
difference and would realize a gain. If the offsetting purchase price exceeds
the sale price, the seller would pay the difference and would realize a loss.
Similarly, a futures contract purchase is closed out by effecting a futures
contract sale for the same aggregate amount of the specific type of security and
the same delivery date. If the offsetting sale price exceeds the purchase price,
the purchaser would realize a gain, whereas if the purchase price exceeds the
offsetting sale price, the purchaser would realize a loss. There is no assurance
that the Fund will be able to enter into a closing transaction.
MARGIN. If the Fund enters into a futures contract, it is initially
required to deposit an "initial margin" of cash or U.S. Government securities or
other liquid portfolio securities ranging from approximately 3% to 10% of the
contract amount. Initial margin requirements are established by the exchanges on
which futures contracts trade and may, from time to time, change. In addition,
brokers may establish margin deposit requirements in excess of those required by
the exchanges.
Initial margin in futures transactions is different from margin in
securities transactions in that initial margin does not involve the borrowing of
funds by a broker's client but is, rather, a good faith deposit on the futures
contract which will be returned to the Fund upon the proper termination of the
futures contract. The margin deposits made are marked to market daily and the
Fund may be required to make subsequent deposits of cash or U.S. Government
securities, called "variation margin," which are reflective of price
fluctuations in the futures contract.
OPTIONS ON FUTURES CONTRACTS. The Fund may purchase and write call and put
options on futures contracts and enter into closing transactions with respect to
such options to terminate an existing position. An option on a futures contract
gives the purchaser the right (in return for the premium paid), and the writer
the obligation, to assume a position in a futures contract (a long position if
the option is a call and a short position if the option is a put) at a specified
exercise price at any time during the term of the option. Upon exercise of the
option, the delivery of the futures position by the writer of the option to
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the holder of the option is accompanied by delivery of the accumulated balance
in the writer's futures margin account, which represents the amount by which the
market price of the futures contract at the time of exercise exceeds, in the
case of a call, or is less than, in the case of a put, the exercise price of the
option on the futures contract.
The writer of an option on a futures contract is required to deposit initial
and variation margin pursuant to requirements similar to those applicable to
futures contracts. Premiums received from the writing of an option on a futures
contract are included in initial margin deposits.
LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS ON FUTURES. The Fund may not
enter into futures contracts or purchase related options thereon if, immediately
thereafter, the amount committed to margin plus the amount paid for premiums for
unexpired options on futures contracts exceeds 5% of the value of the Fund's
total assets, after taking into account unrealized gains and unrealized losses
on such contracts it has entered into, provided, however, that in the case of an
option that is in-the-money (the exercise price of the call (put) option is less
(more) than the market price of the underlying security) at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%.
However, there is no overall limitation on the percentage of the Fund's net
assets which may be subject to a hedge position.
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS. The prices
of securities and indexes subject to futures contracts (and thereby the futures
contract prices) may correlate imperfectly with the behavior of the cash prices
of the Fund's portfolio securities. Also, prices of futures contracts may not
move in tandem with the changes in prevailing interest rates and/or market
movements against which the Fund seeks a hedge. A correlation may also be
distorted (a) temporarily, by short-term traders' seeking to profit from the
difference between a contract or security price objective and their cost of
borrowed funds; (b) by investors in futures contracts electing to close out
their contracts through offsetting transactions rather than meet margin deposit
requirements; (c) by investors in futures contracts opting to make or take
delivery of underlying securities rather than engage in closing transactions,
thereby reducing liquidity of the futures market; and (d) temporarily, by
speculators who view the deposit requirements in the futures markets as less
onerous than margin requirements in the cash market. Due to the possibility of
price distortion in the futures market and because of the possible imperfect
correlation between movements in the prices of securities and movements in the
prices of futures contracts, a correct forecast of interest rate, currency
exchange rate and/or market movement trends by the Investment Manager may still
not result in a successful hedging transaction.
There is no assurance that a liquid secondary market will exist for futures
contracts and related options in which the Fund may invest. In the event a
liquid market does not exist, it may not be possible to close out a futures
position and, in the event of adverse price movements, the Fund would continue
to be required to make daily cash payments of variation margin. The absence of a
liquid market in futures contracts might cause the Fund to make or take delivery
of the underlying securities at a time when it may be disadvantageous to do so.
Exchanges also limit the amount by which the price of a futures contract may
move on any day. If the price moves equal the daily limit on successive days,
then it may prove impossible to liquidate a futures position until the daily
limit moves have ceased. In the event of adverse price movements, the Fund would
continue to be required to make daily cash payments of variation margin on open
futures positions. In these situations, if the Fund has insufficient cash, it
may have to sell portfolio securities to meet daily variation margin
requirements at a time when it may be disadvantageous to do so. In addition, the
Fund may be required to take or make delivery of the instruments underlying
interest rate futures contracts it holds at a time when it is disadvantageous to
do so. The inability to close out options and futures positions could also have
an adverse impact on the Fund's ability to effectively hedge its portfolio.
Futures contracts and options thereon which are purchased or sold on foreign
commodities exchanges may have greater price volatility than their U.S.
counterparts. Furthermore, foreign commodities exchanges may be less regulated
and under less governmental scrutiny than U.S. exchanges. Brokerage commissions,
clearing costs and other transaction costs may be higher on foreign
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exchanges. Greater margin requirements may limit the Fund's ability to enter
into certain commodity transactions on foreign exchanges. Moreover, differences
in clearance and delivery requirements on foreign exchanges may occasion delays
in the settlement of the Fund's transactions effected on foreign exchanges.
In the event of the bankruptcy of a broker through which the Fund engages in
transactions in futures or options thereon, the Fund could experience delays
and/or losses in liquidating open positions purchased or sold through the broker
and/or incur a loss of all or part of its margin deposits with the broker.
If the Fund maintains a short position in a futures contract or has sold a
call option in a futures contract, it will cover this position by holding, in a
segregated account maintained on the books of the Fund, cash, U.S. government
securities or other liquid portfolio securities equal in value (when added to
any initial or variation margin on deposit) to the market value of the
securities underlying the futures contract or the exercise price of the option.
Such a position may also be covered by owning the securities underlying the
futures contract (in the case of a stock index futures contract a portfolio of
securities substantially replicating the relevant index), or by holding a call
option permitting the Fund to purchase the same contract at a price no higher
than the price at which the short position was established.
In addition, if the Fund holds a long position in a futures contract or has
sold a put option on a futures contract, it will hold cash, U.S. government
securities or other liquid portfolio securities equal to the purchase price of
the contract or the exercise price of the put option (less the amount of initial
or variation margin on deposit) in a segregated account maintained on the books
of the Fund. Alternatively, the Fund could cover its long position by purchasing
a put option on the same futures contract with an exercise price as high or
higher than the price of the contract held by the Fund.
MONEY MARKET SECURITIES. In addition to the short-term fixed-income
securities in which the Fund may otherwise invest, the Fund may invest in
various money market securities which among others may include commercial paper,
bank acceptances, bank obligations, corporate debt securities certificates of
deposit, U.S. Government securities and obligations of savings institutions.
Such securities are limited to:
U.S. GOVERNMENT SECURITIES. Obligations issued or guaranteed as to
principal and interest by the United States or its agencies (such as the
Export-Import Bank of the United States, Federal Housing Administration and
Government National Mortgage Association) or its instrumentalities (such as the
Federal Home Loan Bank), including Treasury bills, notes and bonds;
BANK OBLIGATIONS. Obligations (including certificates of deposit, time
deposits and bankers' acceptances) of banks subject to regulation by the U.S.
Government and having total assets of $1 billion or more, and instruments
secured by such obligations, not including obligations of foreign branches of
domestic banks except to the extent below;
EURODOLLAR CERTIFICATES OF DEPOSIT. Eurodollar certificates of deposit
issued by foreign branches of domestic banks having total assets of $1 billion
or more;
OBLIGATIONS OF SAVINGS INSTITUTIONS. Certificates of deposit of savings
banks and savings and loan associations, having total assets of $1 billion or
more;
FULLY INSURED CERTIFICATES OF DEPOSIT. Certificates of deposit of banks and
savings institutions, having total assets of less than $1 billion. If the
principal amount of the obligation is federally insured by the Bank Insurance
Fund or the Savings Association Insurance Fund (each of which is administered by
the FDIC), limited to $100,000 principal amount per certificate and to 10% or
less of the Fund's total assets in all such obligations and in all illiquid
assets, in the aggregate;
COMMERCIAL PAPER. Commercial paper rated within the two highest grades by
Standard & Poor's Corporation ("S&P") or the two highest grades by Moody's
Investors Service, Inc. ("Moody's") or, if not
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rated, issued by a company having an outstanding debt issue rated at least AA by
S&P or Aa by Moody's; and
REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements. When
cash may be available for only a few days, it may be invested by the Fund in
repurchase agreements until such time as it may otherwise be invested or used
for payments of obligations of the Fund. These agreements, which may be viewed
as a type of secured lending by the Fund, typically involve the acquisition by
the Fund of debt securities from a selling financial institution such as a bank,
savings and loan association or broker-dealer. The agreement provides that the
Fund will sell back to the institution, and that the institution will
repurchase, the underlying security serving as collateral at a specified price
and at a fixed time in the future, usually not more than seven days from the
date of purchase. The collateral will be marked-to-market daily to determine
that the value of the collateral, as specified in the agreement, does not
decrease below the purchase price plus accrued interest. If such decrease
occurs, additional collateral will be requested and, when received, added to the
account to maintain full collateralization. The Fund will accrue interest from
the institution until the time when the repurchase is to occur. Although this
date is deemed by the Fund to be the maturity date of a repurchase agreement,
the maturities of securities subject to repurchase agreements are not subject to
any limits.
While repurchase agreements involve certain risks not associated with direct
investments in debt securities, the Fund follows procedures designed to minimize
such risks. These procedures include effecting repurchase transactions only with
large, well-capitalized and well-established financial institutions whose
financial condition will be continually monitored by the Investment Manager
subject to procedures established by the Trustees. In addition, as described
above, the value of the collateral underlying the repurchase agreement will be
at least equal to the repurchase price, including any accrued interest earned on
the repurchase agreement. In the event of a default or bankruptcy by a selling
financial institution, the Fund will seek to liquidate such collateral. However,
the exercising of the Fund's right to liquidate such collateral could involve
certain costs or delays and, to the extent that proceeds from any sale upon a
default of the obligation to repurchase were less than the repurchase price, the
Fund could suffer a loss.
ZERO COUPON SECURITIES. A portion of the securities purchased by the Fund
may be zero coupon securities. Such securities are purchased at a discount from
their face amount, giving the purchaser the right to receive their full value at
maturity. The interest earned on such securities is, implicitly, automatically
compounded and paid out at maturity. While such compounding at a constant rate
eliminates the risk of receiving lower yields upon reinvestment of interest if
prevailing interest rates decline, the owner of a zero coupon security will be
unable to participate in higher yields upon reinvestment of interest received on
interest-paying securities if prevailing interest rates rise.
A zero coupon security pays no interest to its holder during its life.
Therefore, to the extent the Fund invests in zero coupon securities, it will not
receive current cash available for distribution to shareholders. In addition,
zero coupon securities are subject to substantially greater price fluctuations
during periods of changing prevailing interest rates than are comparable
securities which pay interest on a current basis. Current federal tax law
requires that a holder (such as the Fund) of a zero coupon security accrue a
portion of the discount at which the security was purchased as income each year
even though the Fund receives no interest payments in cash on the security
during the year.
LENDING PORTFOLIO SECURITIES. The Fund may lend its portfolio securities to
brokers, dealers and other financial institutions, provided that the loans are
callable at any time by the Fund, and are at all times secured by cash or cash
equivalents, which are maintained in a segregated account pursuant to applicable
regulations and that are equal to at least 100% of the market value, determined
daily, of the loaned securities. The advantage of these loans is that the Fund
continues to receive the income on the loaned securities while at the same time
earning interest on the cash amounts deposited as collateral, which will be
invested in short-term obligations. The Fund will not lend more than 25% of the
value of its total assets.
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As with any extensions of credit, there are risks of delay in recovery and,
in some cases, even loss of rights in the collateral should the borrower of the
securities fail financially. However, these loans of portfolio securities will
only be made to firms deemed by the Fund's management to be creditworthy and
when the income which can be earned from such loans justifies the attendant
risks. Upon termination of the loan, the borrower is required to return the
securities to the Fund. Any gain or loss in the market price during the loan
period would inure to the Fund.
When voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loaned securities, to
be delivered within one day after notice, to permit the exercise of the rights
if the matters involved would have a material effect on the Fund's investment in
the loaned securities. The Fund will pay reasonable finder's, administrative and
custodial fees in connection with a loan of its securities.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. The
Fund may purchase securities on a when-issued or delayed delivery basis or may
purchase or sell securities on a forward commitment basis. When these
transactions are negotiated, the price is fixed at the time of the commitment,
but delivery and payment can take place a month or more after the date of
commitment. While the Fund will only purchase securities on a when-issued,
delayed delivery or forward commitment basis with the intention of acquiring the
securities, the Fund may sell the securities before the settlement date, if it
is deemed advisable. The securities so purchased or sold are subject to market
fluctuation and no interest or dividends accrue to the purchaser prior to the
settlement date.
At the time the Fund makes the commitment to purchase or sell securities on
a when-issued, delayed delivery or forward commitment basis, it will record the
transaction and thereafter reflect the value, each day, of such security
purchased, or if a sale, the proceeds to be received, in determining its net
asset value. At the time of delivery of the securities, their value may be more
or less than the purchase or sale price. An increase in the percentage of the
Fund's assets committed to the purchase of securities on a when-issued, delayed
delivery or forward commitment basis may increase the volatility of its net
asset value. The Fund will also establish a segregated account on the Fund's
books in which it will continually maintain cash or cash equivalents or other
liquid portfolio securities equal in value to commitments to purchase securities
on a when-issued, delayed delivery or forward commitment basis.
WHEN, AS AND IF ISSUED SECURITIES. The Fund may purchase securities on a
"when, as and if issued" basis under which the issuance of the security depends
upon the occurrence of a subsequent event, such as approval of a merger,
corporate reorganization or debt restructuring. The commitment for the purchase
of any such security will not be recognized in the portfolio of the Fund until
the Investment Manager determines that issuance of the security is probable. At
that time, the Fund will record the transaction and, in determining its net
asset value, will reflect the value of the security daily. At that time, the
Fund will also establish a segregated account on the Fund's books in which it
will maintain cash or cash equivalents or other liquid portfolio securities
equal in value to recognized commitments for such securities.
The value of the Fund's commitments to purchase the securities of any one
issuer, together with the value of all securities of such issuer owned by the
Fund, may not exceed 5% of the value of the Fund's total assets at the time the
initial commitment to purchase such securities is made. An increase in the
percentage of the Fund's assets committed to the purchase of securities on a
"when, as and if issued" basis may increase the volatility of its net asset
value. The Fund may also sell securities on a "when, as and if issued" basis
provided that the issuance of the security will result automatically from the
exchange or conversion of a security owned by the Fund at the time of sale.
PRIVATE PLACEMENTS. The Fund may invest up to 15% of its net assets in
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933 (the "Securities Act"), or
which are otherwise not readily marketable. (Securities eligible for resale
pursuant to Rule 144A under the Securities Act, and determined to be liquid
pursuant to the procedures discussed in the following paragraph, are not subject
to the foregoing restriction.) These securities are generally referred to as
private placements or restricted securities. Limitations on the resale of these
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securities may have an adverse effect on their marketability, and may prevent
the Fund from disposing of them promptly at reasonable prices. The Fund may have
to bear the expense of registering the securities for resale and the risk of
substantial delays in effecting the registration.
Rule 144A permits the Fund to sell restricted securities to qualified
institutional buyers without limitation. The Investment Manager, pursuant to
procedures adopted by the Trustees, will make a determination as to the
liquidity of each restricted security purchased by the Fund. If a restricted
security is determined to be "liquid," the security will not be included within
the category "illiquid securities," which may not exceed 15% of the Fund's net
assets.
WARRANTS. The Fund may invest up to 5% of its net assets in warrants, but
not more than 2% of such assets in warrants not listed on either the New York or
American Stock Exchange. However, the acquisition of warrants attached to other
securities is not subject to this limitation. A warrant is, in effect, an option
to purchase equity securities at a specific price, generally valid for a
specific period of time, and has no voting rights, pays no dividends and has no
rights with respect to the corporation issuing it. Warrants attached to
portfolio securities are not subject to the foregoing limitations.
INVESTMENT IN REAL ESTATE INVESTMENT TRUSTS. The Fund may invest in real
estate investment trusts, which pool investors' funds for investments primarily
in commercial real estate properties. Investment in real estate investment
trusts may be the most practical available means for the Fund to invest in the
real estate industry (the Fund is prohibited from investing in real estate
directly). As a shareholder in a real estate investment trust, the Fund would
bear its ratable share of the real estate investment trust's expenses, including
its advisory and administration fees. At the same time the Fund would continue
to pay its own management fees, investment advisory fees and other expenses, as
a result of which the Fund and its shareholders in effect will be absorbing
duplicate levels of fees with respect to investments in real estate investment
trusts.
C. FUND POLICIES/INVESTMENT RESTRICTIONS
The investment objective, policies and restrictions listed below have been
adopted by the Fund as fundamental policies. Under the Investment Company Act of
1940, as amended, (the "Investment Company Act"), a fundamental policy may not
be changed without the vote of a majority of the outstanding voting securities
of the Fund. The Investment Company Act defines a majority as the lesser of
(a) 67% or more of the shares present at a meeting of shareholders, if the
holders of 50% of the outstanding shares of the Fund are present or represented
by proxy; or (b) more than 50% of the outstanding shares of the Fund. For
purposes of the following restrictions: (i) all percentage limitations apply
immediately after a purchase or initial investment; and (ii) any subsequent
change in any applicable percentage resulting from market fluctuations or other
changes in total or net assets does not require elimination of any security from
the portfolio.
The Fund will:
1. Seek a high level of total return on its assets through a combination of
current income and capital appreciation.
The Fund may not:
1. Invest more than 5% of the value of its total assets in the securities
of any one issuer (other than obligations issued or guaranteed by the United
States government, its agencies or instrumentalities).
2. Purchase more than 10% of all outstanding voting securities or any class
of securities of any one issuer. For purposes of compliance with this
restriction, the Fund will not invest in the convertible securities of any one
issuer if, upon conversion of such securities, the Fund would hold more than 10%
of the outstanding voting securities of that issuer.
3. Invest more than 25% of the value of its total assets in securities of
issuers in any one industry. This restriction does not apply to obligations
issued or guaranteed by the United States government or its agencies or
instrumentalities.
4. Invest more than 5% of the value of its total assets in securities of
issuers having a record, together with predecessors, of less than three years of
continuous operation. This restriction shall not apply to any obligation of the
United States government, its agencies or instrumentalities.
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5. Borrow money, except that the Fund may borrow from a bank for temporary
or emergency purposes in amounts not exceeding 5% (taken at the lower of cost or
current value) of the value of its total assets (not including the amount
borrowed).
6. Invest more than 5% of the value of its total assets in warrants,
including not more than 2% of such assets in warrants not listed on either the
New York or American Stock Exchange. However, the acquisition of warrants
attached to other securities is not subject to this restriction.
7. Invest in securities of any issuer if, to the knowledge of the Fund, any
officer, or trustee/director of the Fund or of the Investment Manager owns more
than 1/2 of 1% of the outstanding securities of such issuer, and such officers
and trustees/directors who own more than 1/2 of 1% own in the aggregate more
than 5% of the outstanding securities of such issuer.
8. Purchase or sell real estate or interests therein, although the Fund may
purchase securities of issuers which engage in real estate operations and
securities secured by real estate or interests therein.
9. Purchase or sell commodities except that the Fund may purchase financial
futures contracts and related options thereon.
10. Purchase oil, gas or other mineral leases, rights or royalty contracts,
or exploration or development programs, except that the Fund may invest in the
securities of companies which operate, invest in, or sponsor such programs.
11. Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of assets.
12. Pledge its assets or assign or otherwise encumber them except to secure
permitted borrowings. (For the purpose of this restriction, collateral
arrangements with respect to the writing of options and collateral arrangements
with respect to initial and variation margin for futures are not deemed to be
pledges of assets and such arrangements are not deemed to be the issuance of a
senior security.)
13. Issue senior securities as defined in the Investment Company Act except
insofar as the Fund may be deemed to have issued a senior security by reason of:
(a) entering into any repurchase agreement; (b) borrowing money in accordance
with the above restrictions; (c) purchasing any securities on a when-issued or
delayed delivery basis; or (d) lending portfolio securities.
14. Make loans of money or securities, except by: (a) the purchase of debt
obligations; (b) investment in repurchase agreements; or (c) lending its
portfolio securities.
15. Make short sales of securities or maintain a short position, unless at
all times when a short position is open it either owns an equal amount of such
securities or owns securities which, without payment of any further
consideration, are convertible into or exchangeable for securities of the same
issue as, and equal in amount to, the securities sold short.
16. Purchase securities on margin, except for such short-term loans as are
necessary for the clearance of portfolio securities. The deposit or payment by
the Fund of initial or variation margin in connection with futures contacts or
related options thereon is not considered the purchase of a security on margin.
17. Engage in the underwriting of securities, except insofar as the Fund may
be deemed an underwriter under the Securities Act in disposing of a portfolio
security.
18. Invest for the purpose of exercising control or management of any other
issuer.
Notwithstanding any other investment policy or restriction, the Fund may
seek to achieve its investment objective by investing all or substantially all
of its assets in another investment company having substantially the same
investment objective and policies as the Fund.
For the fiscal years ended 1999 and 2000, the Fund's portfolio turnover
rates were 87% and 160%, respectively. This variation resulted from the
portfolio manager's response to varying market conditions during these periods.
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III. MANAGEMENT OF THE FUND
--------------------------------------------------------------------------------
A. BOARD OF TRUSTEES
The Board of Trustees of the Fund oversees the management of the Fund but
does not itself manage the Fund. The Trustees review various services provided
by or under the direction of the Investment Manager to ensure that the Fund's
general investment policies and programs are properly carried out. The Trustees
also conduct their review to ensure that administrative services are provided to
the Fund in a satisfactory manner.
Under state law, the duties of the Trustees are generally characterized as a
duty of loyalty and a duty of care. The duty of loyalty requires a Trustee to
exercise his or her powers in the interest of the Fund and not the Trustee's own
interest or the interest of another person or organization. A Trustee satisfies
his or her duty of care by acting in good faith with the care of an ordinarily
prudent person and in a manner the Trustee reasonably believes to be in the best
interest of the Fund and its shareholders.
B. MANAGEMENT INFORMATION
TRUSTEES AND OFFICERS. The Board of the Fund consists of nine (9) Trustees.
These same individuals also serve as directors or trustees for all of the Morgan
Stanley Dean Witter Funds. Six Trustees (67% of the total number) have no
affiliation or business connection with the Investment Manager or any of its
affiliated persons and do not own any stock or other securities issued by the
Investment Manager's parent company, MSDW. These are the "non-interested" or
"independent" Trustees. The other three Trustees (the "management Trustees") are
affiliated with the Investment Manager.
The Trustees and executive officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with the
Investment Manager, and with the Morgan Stanley Dean Witter Funds (there were 93
such funds as of the calendar year ended December 31,1999), are shown below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
--------------------------------------------- -----------------------------------------------
<S> <C>
Michael Bozic (59) .......................... Retired; Director or Trustee of the Morgan
Trustee Stanley Dean Witter Funds; formerly Vice
c/o Mayer, Brown & Platt Chairman of Kmart Corporation (December
Counsel to the Independent Trustees 1998-October 2000), Chairman and Chief
1675 Broadway Executive Officer of Levitz Furniture
New York, New York Corporation (November 1995-November 1998) and
President and Chief Executive Officer of Hills
Department Stores (May 1991-July 1995);
formerly variously Chairman, Chief Executive
Officer, President and Chief Operating Officer
(1987-1991) of the Sears Merchandise Group of
Sears, Roebuck and Co.; Director of Weirton
Steel Corporation.
Charles A. Fiumefreddo* (67) ................ Chairman, Director or Trustee and Chief
Chairman of the Board, Executive Officer of the Morgan Stanley Dean
Chief Executive Officer and Trustee Witter Funds; formerly Chairman, Chief
Two World Trade Center Executive Officer and Director of the
New York, New York Investment Manager, the Distributor and MSDW
Services Company; Executive Vice President and
Director of Dean Witter Reynolds; Chairman and
Director of the Transfer Agent; formerly
Director and/or officer of various MSDW
subsidiaries (until June, 1998).
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
--------------------------------------------- -----------------------------------------------
<S> <C>
Edwin J. Garn (68) .......................... Director or Trustee of the Morgan Stanley Dean
Trustee Witter Funds; formerly United States Senator
c/o Summit Ventures LLC (R- Utah)(1974-1992) and Chairman, Senate
1 Utah Center Banking Committee (1980-1986); formerly Mayor
201 S. Main Street of Salt Lake City, Utah (1971-1974); formerly
Salt Lake City, Utah Astronaut, Space Shuttle Discovery
(April 12-19, 1985); Vice Chairman, Huntsman
Corporation (chemical company); Director of
Franklin Covey (time management systems), BMW
Bank of North America, Inc. (industrial loan
corporation), United Space Alliance (joint
venture between Lockheed Martin and the Boeing
Company) and Nuskin Asia Pacific (multilevel
marketing); member of the Utah Regional
Advisory Board of Pacific Corp.; member of the
board of various civic and charitable organi-
zations.
Wayne E. Hedien (66) ........................ Retired; Director or Trustee of the Morgan
Trustee Stanley Dean Witter Funds; Director of The PMI
c/o Mayer, Brown & Platt Group, Inc. (private mortgage insurance);
Counsel to the Independent Trustees Trustee and Vice Chairman of The Field Museum
1675 Broadway of Natural History; formerly associated with
New York, New York the Allstate Companies (1966-1994), most
recently as Chairman of The Allstate
Corporation (March 1993-December 1994) and
Chairman and Chief Executive Officer of its
wholly-owned subsidiary, Allstate Insurance
Company (July 1989-December 1994); director of
various other business and charitable
organizations.
James F. Higgins* (52) Chairman of the Private Client Group of MSDW
Trustee (since August 2000); Director of the Transfer
Two World Trade Center Agent and Dean Witter Realty Inc.; Director or
New York, New York Trustee of the Morgan Stanley Dean Witter Funds
(since June 2000); previously President and
Chief Operating Officer of the Private Client
Group of MSDW (May 1999-August 2000), President
and Chief Operating Officer of Individual
Securities of MSDW (Feb-
ruary 1997-May 1999), President and Chief
Operating Officer of Dean Witter Securities of
MSDW (1995-February 1997), and President and
Chief Operating Officer of Dean Witter
Financial (1989-1995) and Director (1985-1997)
of Dean Witter Reynolds.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
--------------------------------------------- -----------------------------------------------
<S> <C>
Dr. Manuel H. Johnson (51) .................. Senior Partner, Johnson Smick
Trustee International, Inc., a consulting firm;
c/o Johnson Smick International, Inc. Co-Chairman and a founder of the Group of Seven
1133 Connecticut Avenue, N.W. Council (G7C), an international economic
Washington, D.C. commission; Chairman of the Audit Committee and
Director or Trustee of the Morgan Stanley Dean
Witter Funds; Director of Greenwich Capital
Markets, Inc. (broker-dealer), Independence
Standards Board (private sector organization
governing independence of auditors) and
NVR, Inc. (home construction); Chairman and
Trustee of the Financial Accounting Foundation
(oversight organization of the Financial
Accounting Standards Board); formerly Vice
Chairman of the Board of Governors of the
Federal Reserve System and Assistant Secretary
of the U.S. Treasury.
Michael E. Nugent (64) ...................... General Partner, Triumph Capital, L.P., a
Trustee private investment partnership; Chairman of the
c/o Triumph Capital, L.P. Insurance Committee and Director or Trustee of
237 Park Avenue the Morgan Stanley Dean Witter Funds; formerly
New York, New York Vice President, Bankers Trust Company and BT
Capital Corporation; director of various
business organizations.
Philip J. Purcell* (57) ..................... Chairman of the Board of Directors and Chief
Trustee Executive Officer of MSDW, Dean Witter Reynolds
1585 Broadway and Novus Credit Services Inc.; Director of the
New York, New York Distributor; Director or Trustee of the Morgan
Stanley Dean Witter Funds; Director of American
Airlines, Inc. and its parent company, AMR
Corporation; Director and/or officer of various
MSDW subsidiaries.
John L. Schroeder (70) ...................... Retired; Chairman of the Derivatives Committee
Trustee and Director or Trustee of the Morgan Stanley
c/o Mayer, Brown & Platt Dean Witter Funds; Director of Citizens
Counsel to the Independent Trustees Communications Company (telecommunications
1675 Broadway company); formerly Executive Vice President and
New York, New York Chief Investment Officer of the Home Insurance
Company (August 1991-September 1995).
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
--------------------------------------------- -----------------------------------------------
<S> <C>
Mitchell M. Merin (47) ...................... President and Chief Operating Officer of Asset
President Management of MSDW (since December 1998);
Two World Trade Center President and Director (since April 1997) and
New York, New York Chief Executive Officer (since June 1998) of
the Investment Manager and MSDW Services
Company; Chairman, Chief Executive Officer and
Director of the Distributor (since June 1998);
Chairman and Chief Executive Officer (since
June 1998) and Director (since January 1998) of
the Transfer Agent; Director of various MSDW
subsidiaries; President of the Morgan Stanley
Dean Witter Funds (since May 1999); Trustee of
various Van Kampen investment companies (since
December 1999); previously Chief Strategic
Officer of the Investment Manager and MSDW
Services Company and Executive Vice President
of the Distributor (April 1997-June 1998), Vice
President of the Morgan Stanley Dean Witter
Funds (May 1997-April 1999), and Executive Vice
President of Dean Witter, Discover & Co.
Barry Fink (45) ............................. General Counsel of Asset Management of MSDW
Vice President, (since May 2000); Executive Vice President
Secretary and General Counsel (since December 1999) and Secretary and General
Two World Trade Center Counsel (since February 1997) and Director
New York, New York (since July 1998) of the Investment Manager and
MSDW Services Company; Vice President,
Secretary and General Counsel of the Morgan
Stanley Dean Witter Funds (since
February 1997); Vice President and Secretary of
the Distributor; previously, Senior Vice
President (March 1997-December 1999), First
Vice President, Assistant Secretary and
Assistant General Counsel of the Investment
Manager and MSDW Services Company.
Peter M. Avelar (42) ........................ Senior Vice President of the Investment Manager
Vice President and Director of the High Yield Group of the
Two World Trade Center Investment Manager; Vice President of various
New York, New York Morgan Stanley Dean Witter Funds.
Ellen Gold (36) ............................. Vice President of the Investment Manager (since
Assistant Vice President May 1998); previously an Assistant Vice
Two World Trade Center President and Junior Portfolio Manager of the
New York, New York Investment Manager.
Thomas F. Caloia (54) ....................... First Vice President and Assistant Treasurer of
Treasurer the Investment Manager, the Distributor and
Two World Trade Center MSDW Services Company; Treasurer of the Morgan
New York, New York Stanley Dean Witter Funds.
</TABLE>
------------------------
* Denotes Trustees who are "interested persons" of the Fund as defined in the
Investment Company Act.
In addition, RONALD E. ROBISON, Executive Vice President, Chief
Administrative Officer and Director of the Investment Manager and MSDW Services
Company, ROBERT S. GIAMBRONE, Senior Vice President of the Investment Manager,
MSDW Services Company, the Distributor and the Transfer Agent and Director of
the Transfer Agent, JOSEPH J. MCALINDEN, Executive Vice President and Chief
Investment Officer of the
16
<PAGE>
Investment Manager and Director of the Transfer Agent, and IRA N. ROSS, Senior
Vice President of the Investment Manager and PAUL D. VANCE, Senior Vice
President of the Investment Manager and Director of the Growth and Income Group
of the Investment Manager, are Vice Presidents of the Fund.
In addition, MARILYN K. CRANNEY, TODD LEBO, LOU ANNE D. MCINNIS, CARSTEN
OTTO and RUTH ROSSI, First Vice Presidents and Assistant General Counsels of the
Investment Manager and MSDW Services Company, and NATASHA KASSIAN, Assistant
Vice President and Assistant General Counsel of the Investment Manager and MSDW
Services Company, are Assistant Secretaries of the Fund.
INDEPENDENT DIRECTORS/TRUSTEES AND THE COMMITTEES. Law and regulation
establish both general guidelines and specific duties for the independent
directors/trustees. The Morgan Stanley Dean Witter Funds seek as independent
directors/trustees individuals of distinction and experience in business and
finance, government service or academia; these are people whose advice and
counsel are in demand by others and for whom there is often competition. To
accept a position on the Funds' boards, such individuals may reject other
attractive assignments because the Funds make substantial demands on their time.
All of the independent directors/trustees serve as members of the Audit
Committee. In addition, three of the directors/trustees, including two
independent directors/trustees, serve as members of the Derivatives Committee
and the Insurance Committee.
The independent directors/trustees are charged with recommending to the full
board approval of management, advisory and administration contracts, Rule 12b-1
plans and distribution and underwriting agreements; continually reviewing Fund
performance; checking on the pricing of portfolio securities, brokerage
commissions, transfer agent costs and performance, and trading among Funds in
the same complex; and approving fidelity bond and related insurance coverage and
allocations, as well as other matters that arise from time to time. The
independent directors/trustees are required to select and nominate individuals
to fill any independent director/trustee vacancy on the board of any Fund that
has a Rule 12b-1 plan of distribution. Most of the Morgan Stanley Dean Witter
Funds have a Rule 12b-1 plan.
The Audit Committee is charged with recommending to the full board the
engagement or discharge of the Fund's independent auditors; directing
investigations into matters within the scope of the independent auditors'
duties, including the power to retain outside specialists; reviewing with the
independent auditors the audit plan and results of the auditing engagement;
approving professional services provided by the independent auditors and other
accounting firms prior to the performance of the services; reviewing the
independence of the independent auditors; considering the range of audit and
non-audit fees; reviewing the adequacy of the Fund's system of internal
controls; and preparing and submitting Committee meeting minutes to the full
board.
The board of each Fund has a Derivatives Committee to approve parameters for
and monitor the activities of the Fund with respect to derivative investments,
if any, made by the Fund.
Finally, the board of each Fund has formed an Insurance Committee to review
and monitor the insurance coverage maintained by the Fund.
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT DIRECTORS/TRUSTEES FOR
ALL MORGAN STANLEY DEAN WITTER FUNDS. The independent directors/trustees and
the Funds' management believe that having the same independent
directors/trustees for each of the Morgan Stanley Dean Witter Funds avoids the
duplication of effort that would arise from having different groups of
individuals serving as independent directors/trustees for each of the Funds or
even of sub-groups of Funds. They believe that having the same individuals serve
as independent directors/trustees of all the Funds tends to increase their
knowledge and expertise regarding matters which affect the Fund complex
generally and enhances their ability to negotiate on behalf of each Fund with
the Fund's service providers. This arrangement also precludes the possibility of
separate groups of independent directors/trustees arriving at conflicting
decisions regarding operations and management of the Funds and avoids the cost
and confusion that would likely ensue. Finally, having the same independent
directors/trustees serve on all Fund boards
17
<PAGE>
enhances the ability of each Fund to obtain, at modest cost to each separate
Fund, the services of independent directors/trustees, of the caliber, experience
and business acumen of the individuals who serve as independent
directors/trustees of the Morgan Stanley Dean Witter Funds.
TRUSTEE AND OFFICER INDEMNIFICATION. The Fund's Declaration of Trust
provides that no Trustee, officer, employee or agent of the Fund is liable to
the Fund or to a shareholder, nor is any Trustee, officer, employee or agent
liable to any third persons in connection with the affairs of the Fund, except
as such liability may arise from his/her or its own bad faith, willful
misfeasance, gross negligence or reckless disregard of his/her or its duties. It
also provides that all third persons shall look solely to the Fund property for
satisfaction of claims arising in connection with the affairs of the Fund. With
the exceptions stated, the Declaration of Trust provides that a Trustee,
officer, employee or agent is entitled to be indemnified against all liability
in connection with the affairs of the Fund.
C. COMPENSATION
The Fund pays each Independent Trustee an annual fee of $800 plus a per
meeting fee of $50 for meetings of the Board of Trustees, the Independent
Trustees or Committees of the Board of Trustees attended by the Trustee (the
Fund pays the Chairman of the Audit Committee an additional annual fee of $750,
and the Chairmen of the Derivatives and Insurance Committees additional annual
fees of $500). If a Board meeting and a meeting of the Independent Trustees or a
Committee meeting, or a meeting of the Independent Trustees and/or more than one
Committee meeting, take place on a single day, the Trustees are paid a single
meeting fee by the Fund. The Fund also reimburses such Trustees for travel and
other out-of-pocket expenses incurred by them in connection with attending such
meetings. Trustees and officers of the Fund who are or have been employed by the
Investment Manager or an affiliated company receive no compensation or expense
reimbursement from the Fund for their services as Trustee.
The following table illustrates the compensation that the Fund paid to its
Independent Trustees for the fiscal year ended September 30, 2000.
FUND COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
--------------------------- -------------
<S> <C>
Michael Bozic............................................... $1,500
Edwin J. Garn............................................... 1,550
Wayne E. Hedien............................................. 1,550
Dr. Manuel H. Johnson....................................... 2,300
Michael E. Nugent........................................... 2,050
John L. Schroeder........................................... 2,000
</TABLE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1999 for services
to the 93 Morgan Stanley Dean Witter Funds that were in operation at
December 31, 1999.
CASH COMPENSATION FROM MORGAN STANLEY DEAN WITTER FUNDS
<TABLE>
<CAPTION>
TOTAL CASH
COMPENSATION
FOR SERVICES TO
93 MORGAN
STANLEY DEAN
NAME OF INDEPENDENT TRUSTEE WITTER FUNDS
--------------------------- ---------------
<S> <C>
Michael Bozic............................................... $134,600
Edwin J. Garn............................................... 138,700
Wayne E. Hedien............................................. 138,700
Dr. Manuel H. Johnson....................................... 208,638
Michael E. Nugent........................................... 193,324
John L. Schroeder........................................... 193,324
</TABLE>
18
<PAGE>
As of the date of this STATEMENT OF ADDITIONAL INFORMATION, 55 of the Morgan
Stanley Dean Witter Funds, including the Fund, have adopted a retirement program
under which an independent director/trustee who retires after serving for at
least five years (or such lesser period as may be determined by the Board) as an
independent director/trustee of any Morgan Stanley Dean Witter Fund that has
adopted the retirement program (each such Fund referred to as an "ADOPTING FUND"
and each such director/trustee referred to as an "ELIGIBLE TRUSTEE") is entitled
to retirement payments upon reaching the eligible retirement age (normally,
after attaining age 72). Annual payments are based upon length of service.
Currently, upon retirement, each Eligible Trustee is entitled to receive
from the Adopting Fund, commencing as of his or her retirement date and
continuing for the remainder of his or her life, an annual retirement benefit
(the "REGULAR BENEFIT") equal to 30.22% of his or her Eligible Compensation plus
0.5036667% of such Eligible Compensation for each full month of service as an
independent director/ trustee of any Adopting Fund in excess of five years up to
a maximum of 60.44% after ten years of service. The foregoing percentages may be
changed by the Board.(1) "Eligible Compensation" is one-fifth of the total
compensation earned by such Eligible Trustee for service to the Adopting Fund in
the five year period prior to the date of the Eligible Trustee's retirement.
Benefits under the retirement program are accrued as expenses by the Adopting
Funds. Such benefits are not secured or funded by the Adopting Funds.
The following table illustrates the retirement benefits accrued to the
Fund's Independent Trustees by the Fund for the fiscal year ended September 30,
2000 and by the 55 Morgan Stanley Dean Witter Funds (including the Fund) for the
calendar year ended December 31, 1999, and the estimated retirement benefits for
the Independent Trustees, to commence upon their retirement, from the Fund as of
its fiscal year ended September 30, 2000 and from the 55 Morgan Stanley Dean
Witter Funds as of the calendar year ended December 31, 1999.
RETIREMENT BENEFITS FROM THE FUND AND
ALL MORGAN STANLEY DEAN WITTER FUNDS
<TABLE>
<CAPTION>
RETIREMENT BENEFITS ESTIMATED ANNUAL
FOR ALL ADOPTING FUNDS ACCRUED AS BENEFITS
------------------------------- EXPENSES UPON RETIREMENT
ESTIMATED BY ALL FROM ALL
CREDITED ADOPTING FUNDS ADOPTING FUNDS(2)
YEARS OF ESTIMATED ---------------------- ----------------------
SERVICE AT PERCENTAGE OF BY ALL FROM FROM ALL
RETIREMENT ELIGIBLE BY THE ADOPTING THE ADOPTING
NAME OF INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION FUND FUNDS FUND FUNDS
--------------------------- ------------ ------------ ---- ----- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Michael Bozic............... 10 60.44% $ 359 $20,933 $ 907 $50,588
Edwin J. Garn............... 10 60.44 493 31,737 909 50,675
Wayne E. Hedien............. 9 51.37 682 39,566 771 43,000
Dr. Manuel H. Johnson....... 10 60.44 336 13,129 1,360 75,520
Michael E. Nugent........... 10 60.44 559 23,175 1,209 67,209
John L. Schroeder........... 8 50.37 1,060 41,558 960 52,994
</TABLE>
------------------------
1 An Eligible Trustee may elect alternative payments of his or her retirement
benefits based upon the combined life expectancy of the Eligible Trustee and
his or her spouse on the date of such Eligible Trustee's retirement. The
amount estimated to be payable under this method, through the remainder of
the later of the lives of the Eligible Trustee and spouse, will be the
actuarial equivalent of the Regular Benefit. In addition, the Eligible
Trustee may elect that the surviving spouse's periodic payment of benefits
will be equal to either 50% or 100% of the previous periodic amount, an
election that, respectively, increases or decreases the previous periodic
amounts so that the resulting payments will be the actuarial equivalent of
the Regular Benefit.
2 Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote 1 above.
19
<PAGE>
IV. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
--------------------------------------------------------------------------------
The following owned 5% or more of the outstanding Class A shares of the Fund
as of November 9, 2000: Morgan Stanley Dean Witter Trust FSB, Trustee, William
J. Holm Revocable Living Trust dated 10-15-98, discretionary A / C, P.O. Box
503, Jersey City, NJ 07311 - 29.536%; Jackie Dyer, 25 Waterway Island, Isle of
Palms, SC 29451-2728 - 5.736% and Dean Witter Reynolds, custodian for David W.
O'Neill, IRA Standard, dated 10-10-96, 745 Pointe Drive, Port Huron, MI
48060-4465 - 5.123%. The following owned 5% or more of the outstanding Class D
shares of the Fund as of November 9, 2000: Hare & Co.,
c/o The Bank of New York, P.O. Box 11203, New York, NY 10286-1203 - 99.300%.
As of the date of this STATEMENT OF ADDITIONAL INFORMATION, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's officers
and Trustees as a group was less than 1% of the Fund's shares of beneficial
interest outstanding.
V. INVESTMENT MANAGEMENT AND OTHER SERVICES
--------------------------------------------------------------------------------
A. INVESTMENT MANAGER
The Investment Manager to the Fund is Morgan Stanley Dean Witter Advisors
Inc., a Delaware corporation, whose address is Two World Trade Center, New York,
NY 10048. The Investment Manager is a wholly-owned subsidiary of MSDW, a
Delaware corporation. MSDW is a preeminent global financial services firm that
maintains leading market positions in each of its three primary businesses:
securities, asset management and credit services.
Pursuant to an Investment Management Agreement (the "Management Agreement")
with the Investment Manager, the Fund has retained the Investment Manager to
provide administrative services and manage the investment of the Fund's assets,
including the placing of orders for the purchase and sale of portfolio
securities. The Fund pays the Investment Manager monthly compensation calculated
daily by applying the following annual rates to the net assets of the Fund
determined as of the close of each business day: 0.60% of the portion of the
daily net assets of the Fund not exceeding $750 million and 0.55% of the portion
of the daily net assets exceeding $750 million but not exceeding $1 billion;
0.50% of the portion of the daily net assets of the Fund exceeding $1 billion
but not exceeding $1.5 billion; 0.475% of the portion of the Fund's daily net
assets exceeding $1.5 billion but not exceeding $2 billion; 0.45% of the portion
of the Fund's daily net assets exceeding $2 billion but not exceeding $3
billion; and 0.425% of the portion of the Fund's daily net assets exceeding
$3 billion. The management fee is allocated among the Classes pro rata based on
the net assets of the Fund attributable to each Class. The Fund accrued total
compensation to the Investment Manager of $1,953,489, $1,543,719, and $1,727,075
during the fiscal years ended September 30, 1998, 1999, and 2000, respectively.
The Investment Manager has retained its wholly-owned subsidiary, MSDW
Services Company, to perform administrative services for the Fund.
B. PRINCIPAL UNDERWRITER
The Fund's principal underwriter is the Distributor (which has the same
address as the Investment Manager). In this capacity, the Fund's shares are
distributed by the Distributor. The Distributor has entered into a selected
dealer agreement with Dean Witter Reynolds, which through its own sales
organization sells shares of the Fund. In addition, the Distributor may enter
into similar agreements with other selected broker-dealers. The Distributor, a
Delaware corporation, is a wholly-owned subsidiary of MSDW.
The Distributor bears all expenses it may incur in providing services under
the Distribution Agreement. These expenses include the payment of commissions
for sales of the Fund's shares and incentive compensation to Financial Advisors,
the cost of educational and/or business-related trips, and educational and/or
promotional and business-related expenses. The Distributor also pays certain
expenses in connection with the distribution of the Fund's shares, including the
costs of preparing, printing and distributing advertising or promotional
materials, and the costs of printing and distributing prospectuses
20
<PAGE>
and supplements thereto used in connection with the offering and sale of the
Fund's shares. The Fund bears the costs of initial typesetting, printing and
distribution of prospectuses and supplements thereto to shareholders. The Fund
also bears the costs of registering the Fund and its shares under federal and
state securities laws and pays filing fees in accordance with state securities
laws.
The Fund and the Distributor have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act. Under the
Distribution Agreement, the Distributor uses its best efforts in rendering
services to the Fund, but in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations, the Distributor is
not liable to the Fund or any of its shareholders for any error of judgment or
mistake of law or for any act or omission or for any losses sustained by the
Fund or its shareholders.
C. SERVICES PROVIDED BY THE INVESTMENT MANAGER
The Investment Manager manages the investment of the Fund's assets,
including the placing of orders for the purchase and sale of portfolio
securities. The Investment Manager obtains and evaluates the information and
advice relating to the economy, securities markets, and specific securities as
it considers necessary or useful to continuously manage the assets of the Fund
in a manner consistent with its investment objectives.
Under the terms of the Management Agreement, the Investment Manager also
maintains certain of the Fund's books and records and furnishes, at its own
expense, the office space, facilities, equipment, clerical help, bookkeeping and
certain legal services as the Fund may reasonably require in the conduct of its
business, including the preparation of prospectuses, proxy statements and
reports required to be filed with federal and state securities commissions
(except insofar as the participation or assistance of independent auditors and
attorneys is, in the opinion of the Investment Manager, necessary or desirable).
In addition, the Investment Manager 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 service, heat, light, power
and other utilities provided to the Fund.
Expenses not expressly assumed by the Investment Manager under the
Management Agreement or by the Distributor, will be paid by the Fund. These
expenses will be allocated among the four Classes of shares pro rata based on
the net assets of the Fund attributable to each Class, except as described
below. Such expenses include, but are not limited to: expenses of the Plan of
Distribution pursuant to Rule 12b-1; charges and expenses of any registrar,
custodian, stock transfer and dividend disbursing agent; brokerage commissions;
taxes; engraving and printing share certificates; registration costs of the Fund
and its shares under federal and state securities laws; the cost and expense of
printing, including typesetting, and distributing prospectuses of the Fund and
supplements thereto to the Fund's shareholders; all expenses of shareholders'
and Trustees' meetings and of preparing, printing and mailing of proxy
statements and reports to shareholders; fees and travel expenses of Trustees or
members of any advisory board or committee who are not employees of the
Investment Manager or any corporate affiliate of the Investment Manager; all
expenses incident to any dividend, withdrawal or redemption options; charges and
expenses of any outside service used for pricing of the Fund's shares; fees and
expenses of legal counsel, including counsel to the Trustees who are not
interested persons of the Fund or of the Investment Manager (not including
compensation or expenses of attorneys who are employees of the Investment
Manager); fees and expenses of the Fund's independent auditors; membership dues
of industry associations; interest on Fund borrowings; postage; insurance
premiums on property or personnel (including officers and Trustees) of the Fund
which inure to its benefit; extraordinary expenses (including, but not limited
to, legal claims and liabilities and litigation costs and any indemnification
relating thereto); and all other costs of the Fund's operation. The 12b-1 fees
relating to a particular Class will be allocated directly to that Class. In
addition, other expenses associated with a particular Class (except advisory or
custodial fees) may be allocated directly to that Class, provided that such
expenses are reasonably identified as specifically attributable to that Class
and the direct allocation to that Class is approved by the Trustees.
21
<PAGE>
The Management Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the Investment Manager is not liable to the Fund or any
of its investors for any act or omission by the Investment Manager or for any
losses sustained by the Fund or its investors.
The Management Agreement will remain in effect from year to year provided
continuance of the Management Agreement is approved at least annually by the
vote of the holders of a majority, as defined in the Investment Company Act, of
the outstanding shares of the Fund, or by the Trustees; provided that in either
event such continuance is approved annually by the vote of a majority of the
Trustees, including a majority of the Independent Trustees.
D. DEALER REALLOWANCES
Upon notice to selected broker-dealers, the Distributor may reallow up to
the full applicable front-end sales charge during periods specified in such
notice. During periods when 90% or more of the sales charge is reallowed, such
selected broker-dealers may be deemed to be underwriters as that term is defined
in the Securities Act.
E. RULE 12b-1 PLAN
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the
Investment Company Act (the "Plan") pursuant to which each Class, other than
Class D, pays the Distributor compensation accrued daily and payable monthly at
the following annual rates: 0.25% and 1.0% of the average daily net assets of
Class A and Class C, respectively, and, with respect to Class B, 1.0% of the
lesser of: (a) the average daily aggregate gross sales of the Fund's Class B
shares since the inception of the Fund (not including reinvestment of dividends
or capital gains distributions), less the average daily aggregate net asset
value of the Fund's Class B shares redeemed since the Fund's inception upon
which a contingent deferred sales charge has been imposed or upon which such
charge has been waived, or (b) the average daily net assets of Class B.
The Distributor also receives the proceeds of front-end sales charges
("FSCs") and of contingent deferred sales charges (" CDSCs") imposed on certain
redemptions of shares, which are separate and apart from payments made pursuant
to the Plan. The Distributor has informed the Fund that it and/or Dean Witter
Reynolds received the proceeds of CDSCs and FSCs, for the last three fiscal
years ended September 30, in approximate amounts as provided in the table below
(the Distributor did not retain any of these amounts).
<TABLE>
<CAPTION>
2000 1999 1998
--------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Class A....................... FSCs:(1) $ 17,393 FSCs:(1) $ 5,550 FSCs:(1) $ 27,570
CDSCs: $ 0 CDSCs: $ 101 CDSCs: $ 0
Class B....................... CDSCs: $ 241,487 CDSCs: $367,482 CDSCs: $379,822
Class C....................... CDSCs: $ 1,721 CDSCs: $ 898 CDSCs: $ 2,747
</TABLE>
------------------------------
1 FSCs apply to Class A only.
The Distributor has informed the Fund that the entire fee payable by Class A
and a portion of the fees payable by each of Class B and Class C each year
pursuant to the Plan equal to 0.25% of such Class' average daily net assets are
currently each characterized as a "service fee" under the Rules of the National
Association of Securities Dealers, Inc. (of which the Distributor is a member).
The "service fee" is a payment made for personal service and/or the maintenance
of shareholder accounts. The remaining portion of the Plan fees payable by a
Class, if any, is characterized as an "asset-based sales charge" as such is
defined by the Rules of the Association.
Under the Plan and as required by Rule 12b-1, the Trustees receive and
review promptly after the end of each calendar quarter a written report provided
by the Distributor of the amounts expended under the Plan and the purpose for
which such expenditures were made. Class B shares of the Fund accrued amounts
payable to the Distributor under the Plan, during the fiscal year ended
September 30, 2000, of $2,796,256. This amount is equal to 1.00% of the average
daily net assets of Class B and was calculated pursuant to clause (b) of the
compensation formula of the Plan. For the fiscal year ended September 30,
22
<PAGE>
2000, Class A and Class C shares of the Fund accrued payments under the Plan
amounting to $5,448 and $41,437, respectively, which amounts are equal to 0.24%
and 1.00% of the average daily net assets of Class A and Class C, respectively,
for the fiscal year.
The Plan was adopted in order to permit the implementation of the Fund's
method of distribution. Under this distribution method the Fund offers four
Classes, each with a different distribution arrangement.
With respect to Class A shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from proceeds of the FSC, commissions for the
sale of Class A shares, currently a gross sales credit of up to 5.0% of the
amount sold (except as provided in the following sentence) and an annual
residual commission, currently a residual of up to 0.25% of the current value of
the respective accounts for which they are the Financial Advisors or dealers of
record in all cases. On orders of $1 million or more (for which no sales charge
was paid) or net asset value purchases by employer-sponsored employee benefit
plans, whether or not qualified under the Internal Revenue Code, for which the
Transfer Agent serves as Trustee or MSDW's Retirement Plan Services serves as
recordkeeper pursuant to a written Recordkeeping Services Agreement ("MSDW
Eligible Plans"), the Investment Manager compensates Financial Advisors by
paying them, from its own funds, a gross sales credit of 1.0% of the amount
sold.
With respect to Class B shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from its own funds, commissions for the sale
of Class B shares, currently a gross sales credit of up to 5.0% of the amount
sold (except as provided in the following sentence) and an annual residual
commission, currently a residual of up to 0.25% of the current value (not
including reinvested dividends or distributions) of the amount sold in all
cases. In the case of Class B shares purchased by MSDW Eligible Plans, Dean
Witter Reynolds compensates its Financial Advisors by paying them, from its own
funds, a gross sales credit of 3.0% of the amount sold.
With respect to Class C shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from its own funds, commissions for the sale
of Class C shares, currently a gross sales credit of up to 1.0% of the amount
sold and an annual residual commission, currently up to 1.0% of the current
value of the respective accounts for which they are the Financial Advisors of
record.
With respect to Class D shares other than shares held by participants in the
Investment Manager's mutual fund asset allocation program, the Investment
Manager compensates Dean Witter Reynolds' Financial Advisors by paying them,
from its own funds, commissions for the sale of Class D shares, currently a
gross sales credit of up to 1.0% of the amount sold. There is a chargeback of
100% of the amount paid if the Class D shares are redeemed in the first year and
a chargeback of 50% of the amount paid if the Class D shares are redeemed in the
second year after purchase. The Investment Manager also compensates Dean Witter
Reynolds' Financial Advisors by paying them, from its own funds, an annual
residual commission, currently up to 0.10% of the current value of the
respective accounts for which they are the Financial Advisors of record (not
including accounts of participants in the Investment Manager's mutual fund asset
allocation program).
The gross sales credit is a charge which reflects commissions paid by Dean
Witter Reynolds to its Financial Advisors and Dean Witter Reynolds'
Fund-associated distribution-related expenses, including sales compensation, and
overhead and other branch office distribution-related expenses including
(a) the expenses of operating Dean Witter Reynolds' branch offices in connection
with the sale of Fund shares, including lease costs, the salaries and employee
benefits of operations and sales support personnel, utility costs,
communications costs and the costs of stationery and supplies; (b) the costs of
client sales seminars; (c) travel expenses of mutual fund sales coordinators to
promote the sale of Fund shares; and (d) other expenses relating to branch
promotion of Fund sales.
The Investment Manager pays a retention fee to Financial Advisors at an
annual rate of 0.05% of the value of shares of the Fund sold after January 1,
2000 and held for at least one year. Shares purchased through the reinvestment
of dividends will be eligible for a retention fee, provided that such dividends
23
<PAGE>
were earned on shares otherwise eligible for a retention fee payment. Shares
owned in variable annuities, closed-end fund shares and shares held in 401(k)
plans where the Transfer Agent or MSDW's Retirement Plan Services is either
recordkeeper or trustee are not eligible for a retention fee.
For the first year only, the retention fee is paid on any shares of the Fund
sold after January 1, 2000 and held by shareholders on December 31, 2000.
The retention fees are paid by the Investment Manager from its own assets,
which may include profits from investment management fees payable under the
Management Agreement, as well as from borrowed funds.
The distribution fee that the Distributor receives from the Fund under the
Plan, in effect, offsets distribution expenses incurred under the Plan on behalf
of the Fund and, in the case of Class B shares, opportunity costs, such as the
gross sales credit and an assumed interest charge thereon ("carrying charge").
These expenses may include the cost of Fund-related educational and/or
business-related trips or payment of Fund-related educational and/or promotional
expenses of Financial Advisors. For example, the Distributor has implemented a
compensation program available only to Financial Advisors meeting specified
criteria under which certain marketing and/or promotional expenses of those
Financial Advisors are paid by the Distributor out of compensation it receives
under the Plan. In the Distributor's reporting of the distribution expenses to
the Fund, in the case of Class B shares, such assumed interest (computed at the
" broker's call rate") has been calculated on the gross credit as it is reduced
by amounts received by the Distributor under the Plan and any contingent
deferred sales charges received by the Distributor upon redemption of shares of
the Fund. No other interest charge is included as a distribution expense in the
Distributor's calculation of its distribution costs for this purpose. The
broker's call rate is the interest rate charged to securities brokers on loans
secured by exchange-listed securities.
The Fund is authorized to reimburse expenses incurred or to be incurred in
promoting the distribution of the Fund's Class A and Class C shares and in
servicing shareholder accounts. Reimbursement will be made through payments at
the end of each month. The amount of each monthly payment may in no event exceed
an amount equal to a payment at the annual rate of 0.25%, in the case of
Class A, and 1.0%, in the case of Class C, of the average net assets of the
respective Class during the month. No interest or other financing charges, if
any, incurred on any distribution expenses on behalf of Class A and Class C will
be reimbursable under the Plan. With respect to Class A, in the case of all
expenses other than expenses representing the service fee, and, with respect to
Class C, in the case of all expenses other than expenses representing a gross
sales credit or a residual to Financial Advisors and other authorized financial
representatives, such amounts shall be determined at the beginning of each
calendar quarter by the Trustees, including, a majority of the Independent
Trustees. Expenses representing the service fee (for Class A) or a gross sales
credit or a residual to Financial Advisors and other authorized financial
representatives (for Class C) may be reimbursed without prior determination. In
the event that the Distributor proposes that monies shall be reimbursed for
other than such expenses, then in making quarterly determinations of the amounts
that may be reimbursed by the Fund, the Distributor will provide and the
Trustees will review a quarterly budget of projected distribution expenses to be
incurred on behalf of the Fund, together with a report explaining the purposes
and anticipated benefits of incurring such expenses. The Trustees will determine
which particular expenses, and the portions thereof, that may be borne by the
Fund, and in making such a determination shall consider the scope of the
Distributor's commitment to promoting the distribution of the Fund's Class A and
Class C shares.
Each Class paid 100% of the amounts accrued under the Plan with respect to
that Class for the fiscal year ended September 30, 2000 to the Distributor. The
Distributor and Dean Witter Reynolds estimate that they have spent, pursuant to
the Plan, $194,262,859 on behalf of Class B since the inception of the Fund. It
is estimated that this amount was spent in approximately the following ways: (i)
2.54% ($4,938,123)--advertising and promotional expenses; (ii) 0.33%
($633,671)--printing of prospectuses for distribution to other than current
shareholders; and (iii) 97.13% ($188,691,065)--other expenses, including the
gross sales credit and the carrying charge, of which 31.35% ($59,163,126)
represents carrying charges, 28.10% ($53,015,197) represents commission credits
to Dean Witter Reynolds branch
24
<PAGE>
offices and other selected broker-dealers for payments of commissions to
Financial Advisors and other selected broker-dealer representatives, and 39.76%
($75,040,834) represents overhead and other branch office distribution-related
expenses, and 0.78%, ($1,471,908) represents excess distribution expenses of
TCW/DW Global Convertible Trust, the net assets of which were combined with
those of the Fund on December 31, 1995 pursuant to an Agreement and Plan of
Reorganization. The amounts accrued by Class A and a portion of the amounts
accrued by Class C under the Plan during the fiscal year ended September 30,
2000 were service fees. The remainder of the amounts accrued by Class C were for
expenses which relate to compensation of sales personnel and associated overhead
expenses.
In the case of Class B shares, at any given time, the expenses of
distributing shares of the Fund may be more or less than the total of (i) the
payments made by the Fund pursuant to the Plan; and (ii) the proceeds of CDSCs
paid by investors upon redemption of shares. For example, if $1 million in
expenses in distributing Class B shares of the Fund had been incurred and
$750,000 had been received as described in (i) and (ii) above, the excess
expense would amount to $250,000. The Distributor has advised the Fund that in
the case of Class B shares the excess distribution expenses, including the
carrying charge designed to approximate the opportunity costs incurred by Dean
Witter Reynolds which arise from it having advanced monies without having
received the amount of any sales charges imposed at the time of sale of the
Fund's Class B shares, totaled $88,272,111 as of September 30, 2000 (the end of
the Fund's fiscal year), which was equal to 29.64% of the net assets of Class B
on such date. Because there is no requirement under the Plan that the
Distributor be reimbursed for all distribution expenses with respect to Class B
shares or any requirement that the Plan be continued from year to year, this
excess amount does not constitute a liability of the Fund. 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 CDSCs 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. Any cumulative expenses incurred, but not yet recovered through
distribution fees or CDSCs, may or may not be recovered through future
distribution fees or CDSCs.
In the case of Class A 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 commission credited to Morgan Stanley Dean Witter Financial Advisors
and other authorized broker-dealer representatives at the time of sale may be
reimbursed in the subsequent calendar year. The Distributor has advised the Fund
that there were no such expenses that may be reimbursed in the subsequent year
in the case of Class A or Class C at December 31, 1999 (end of the calendar
year). No interest or other financing charges will be incurred on any Class A or
Class C distribution expenses incurred by the Distributor under the Plan or on
any unreimbursed expenses due to the Distributor pursuant to the Plan.
No interested person of the Fund nor any Independent Trustee has any direct
financial interest in the operation of the Plan except to the extent that the
Distributor, the Investment Manager, Dean Witter Reynolds, MSDW Services Company
or certain of their employees may be deemed to have such an interest as a result
of benefits derived from the successful operation of the Plan or as a result of
receiving a portion of the amounts expended thereunder by the Fund.
On an annual basis, the Trustees, including a majority of the Independent
Trustees, consider whether the Plan should be continued. Prior to approving the
last continuation of the Plan, the Trustees requested and received from the
Distributor and reviewed all the information which they deemed necessary to
arrive at an informed determination. In making their determination to continue
the Plan, the Trustees considered: (1) the Fund's experience under the Plan and
whether such experience indicates that the Plan is operating as anticipated;
(2) the benefits the Fund had obtained, was obtaining and would be likely to
obtain under the Plan, including that: (a) the Plan is essential in order to
give Fund investors a choice of alternatives for payment of distribution and
service charges and to enable the Fund to continue to grow and avoid a pattern
of net redemptions which, in turn, are essential for effective
25
<PAGE>
investment management; and (b) without the compensation to individual brokers
and the reimbursement of distribution and account maintenance expenses of Dean
Witter Reynolds' branch offices made possible by the 12b-1 fees, Dean Witter
Reynolds could not establish and maintain an effective system for distribution,
servicing of Fund shareholders and maintenance of shareholder accounts; and (3)
what services had been provided and were continuing to be provided under the
Plan to the Fund and its shareholders. Based upon their review, the Trustees,
including each of the Independent Trustees, determined that continuation of the
Plan would be in the best interest of the Fund and would have a reasonable
likelihood of continuing to benefit the Fund and its shareholders. In the
Trustees' quarterly review of the Plan, they will consider its continued
appropriateness and the level of compensation provided therein.
The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval by the shareholders of the
affected Class or Classes of the Fund, and all material amendments to the Plan
must also be approved by the Trustees in the manner described above. The Plan
may be terminated at any time, without payment of any penalty, by vote of a
majority of the Independent Trustees or by a vote of a majority of the
outstanding voting securities of the Fund (as defined in the Investment Company
Act) on not more than thirty days' written notice to any other party to the
Plan. So long as the Plan is in effect, the election and nomination of
Independent Trustees shall be committed to the discretion of the Independent
Trustees.
F. OTHER SERVICE PROVIDERS
(1) TRANSFER AGENT/DIVIDEND-PAYING AGENT
Morgan Stanley Dean Witter Trust FSB is the Transfer Agent for the Fund's
shares and the Dividend Disbursing Agent for payment of dividends and
distributions on Fund shares and Agent for shareholders under various investment
plans. The principal business address of the Transfer Agent is Harborside
Financial Center, Plaza Two, Jersey City, NJ 07311.
(2) CUSTODIAN AND INDEPENDENT AUDITORS
The Bank of New York, 100 Church Street, New York, NY 10007 is the Custodian
of the Fund's assets. Any of the Fund's cash balances with the Custodian in
excess of $100,000 are unprotected by federal deposit insurance. These balances
may, at times, be substantial.
Deloitte & Touche LLP, Two World Financial Center, New York, NY 10281,
serves as the independent auditors of the Fund. The independent auditors are
responsible for auditing the annual financial statements of the Fund.
(3) AFFILIATED PERSONS
The Transfer Agent is an affiliate of the Investment Manager, and of the
Distributor. As Transfer Agent and Dividend Disbursing Agent, the Transfer
Agent's responsibilities include maintaining shareholder accounts, disbursing
cash dividends and reinvesting dividends, processing account registration
changes, handling purchase and redemption transactions, mailing prospectuses and
reports, mailing and tabulating proxies, processing share certificate
transactions, and maintaining shareholder records and lists. For these services,
the Transfer Agent receives a per shareholder account fee from the Fund and is
reimbursed for its out-of-pocket expenses in connection with such services.
G. CODES OF ETHICS
The Fund, the Investment Manager and the Distributor have each adopted a
Code of Ethics pursuant to Rule 17j-1 under the Investment Company Act. The
Codes of Ethics are designed to detect and prevent improper personal trading.
The Codes of Ethics permit personnel subject to the Codes to invest in
securities, including securities that may be purchased, sold or held by the
Fund, subject to a number of restrictions and controls including prohibitions
against purchases of securities in an Initial Public Offering and a preclearance
requirement with respect to personal securities transactions.
26
<PAGE>
VI. BROKERAGE ALLOCATION AND OTHER PRACTICES
--------------------------------------------------------------------------------
A. BROKERAGE TRANSACTIONS
Subject to the general supervision of the Trustees, the Investment Manager
is responsible for decisions to buy and sell securities for the Fund, the
selection of brokers and dealers to effect the transactions, and the negotiation
of brokerage commissions, if any. Purchases and sales of securities on a stock
exchange are effected through brokers who charge a commission for their
services. In the over-the-counter market, securities are generally traded on a
"net" basis with non-affiliated dealers acting as principal for their own
accounts without a stated commission, although the price of the security usually
includes a profit to the dealer. Options and futures transactions will usually
be effected through a broker and a commission will be charged.
For the fiscal years ended September 30, 1998, 1999, and 2000, the Fund paid
a total of $140,951, $90,045, and $95,985, respectively, in brokerage
commissions.
B. COMMISSIONS
Pursuant to an order of the SEC, the Fund may effect principal transactions
in certain money market instruments with Dean Witter Reynolds. The Fund will
limit its transactions with Dean Witter Reynolds to U.S. Government and
government agency securities, bank money instruments (i.e., certificates of
deposit and bankers' acceptances) and commercial paper. The transactions will be
effected with Dean Witter Reynolds only when the price available from Dean
Witter Reynolds is better than that available from other dealers.
During the fiscal years ended September 30, 1998, 1999, and 2000, the Fund
did not effect any principal transactions with Dean Witter Reynolds.
Brokerage transactions in securities listed on exchanges or admitted to
unlisted trading privileges may be effected through Dean Witter Reynolds, Morgan
Stanley & Co. and other affiliated brokers and dealers. In order for an
affiliated broker or dealer to effect any portfolio transactions on an exchange
for the Fund, the commissions, fees or other remuneration received by the
affiliated broker or dealer must be reasonable and fair compared to the
commissions, fees or other remuneration paid to other brokers in connection with
comparable transactions involving similar securities being purchased or sold on
an exchange during a comparable period of time. This standard would allow the
affiliated broker or dealer to receive no more than the remuneration which would
be expected to be received by an unaffiliated broker in a commensurate
arm's-length transaction. Furthermore, the Trustees, including the Independent
Trustees, have adopted procedures which are reasonably designed to provide that
any commissions, fees or other remuneration paid to an affiliated broker or
dealer are consistent with the foregoing standard. The Fund does not reduce the
management fee it pays to the Investment Manager by any amount of the brokerage
commissions it may pay to an affiliated broker or dealer.
During the fiscal years ended September 30, 1998, 1999, and 2000, the Fund
paid a total of $1,750, $4,557, and $500, respectively, in brokerage commissions
to Dean Witter Reynolds. During the fiscal year ended September 30, 2000, the
brokerage commissions paid to Dean Witter Reynolds represented approximately
0.52% of the total brokerage commissions paid by the Fund during the year and
were paid on account of transactions having an aggregate dollar value equal to
approximately 0.69% of the aggregate dollar value of all portfolio transactions
of the Fund during the year for which commissions were paid.
During the fiscal years ended September 30, 1998, 1999, and 2000, the Fund
paid a total of $2,500, $1,500, and $3,160, respectively, in brokerage
commissions to Morgan Stanley & Co. During the fiscal year ended September 30,
2000, the brokerage commissions paid to Morgan Stanley & Co. represented
approximately 3.29% of the total brokerage commissions paid by the Fund during
the year and were paid on account of transactions having an aggregate dollar
value equal to approximately 5.48% of the aggregate dollar value of all
portfolio transactions of the Fund during the year for which commissions were
paid.
27
<PAGE>
C. BROKERAGE SELECTION
The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions. Consistent with this
policy, when securities transactions are effected on a stock exchange, the
Fund's policy is to pay commissions which are considered fair and reasonable
without necessarily determining that the lowest possible commissions are paid in
all circumstances. The Fund believes that a requirement always to seek the
lowest possible commission cost could impede effective portfolio management and
preclude the Fund and the Investment Manager from obtaining a high quality of
brokerage and research services. In seeking to determine the reasonableness of
brokerage commissions paid in any transaction, the Investment Manager relies
upon its experience and knowledge regarding commissions generally charged by
various brokers and on its judgment in evaluating the brokerage and research
services received from the broker effecting the transaction. These
determinations are necessarily subjective and imprecise, as in most cases an
exact dollar value for those services is not ascertainable.
The Fund anticipates that certain of its transactions involving foreign
securities will be effected on foreign securities exchanges. Fixed commissions
on such transactions are generally higher than negotiated commissions on
domestic transactions. There is also generally less government supervision and
regulation of foreign securities exchanges and brokers than in the United
States.
In seeking to implement the Fund's policies, the Investment Manager effects
transactions with those brokers and dealers who the Investment Manager believes
provide the most favorable prices and are capable of providing efficient
executions. If the Investment Manager believes the prices and executions are
obtainable from more than one broker or dealer, it may give consideration to
placing portfolio transactions with those brokers and dealers who also furnish
research and other services to the Fund or the Investment Manager. The services
may include, but are not limited to, any one or more of the following:
information as to the availability of securities for purchase or sale;
statistical or factual information or opinions pertaining to investment; wire
services; and appraisals or evaluations of portfolio securities. The information
and services received by the Investment Manager from brokers and dealers may be
of benefit to the Investment Manager in the management of accounts of some of
its other clients and may not in all cases benefit the Fund directly.
The Investment Manager currently serve as advisors to a number of clients,
including other investment companies, and may in the future act as investment
manager or advisor to others. It is the practice of the Investment Manager to
cause purchase and sale transactions to be allocated among the Fund and others
whose assets it manages in such manner as it deems equitable. In making such
allocations among the Fund and other client accounts, various factors may be
considered, including the respective investment objectives, the relative size of
portfolio holdings of the same or comparable securities, the availability of
cash for investment, the size of investment commitments generally held and the
opinions of the persons responsible for managing the portfolios of the Fund and
other client accounts. In the case of certain initial and secondary public
offerings, the Investment Manager utilizes a pro rata allocation process based
on the size of the relevant funds and/or client accounts involved and the number
of shares available from the public offering.
D. DIRECTED BROKERAGE
During the fiscal year ended September 30, 2000, the Fund paid $90,492 in
brokerage commissions in connection with transactions in the aggregate amount of
$64,646,634 to brokers because of research services provided.
E. REGULAR BROKER-DEALERS
At September 30, 2000, the Fund had not purchased securities issued by
brokers or dealers that were among the ten brokers or the ten dealers that
executed transactions for or with the Fund in the largest dollar amounts during
the year. As of September 30, 2000, the Fund did not own any securities issued
by any such issuers.
28
<PAGE>
VII. CAPITAL STOCK AND OTHER SECURITIES
--------------------------------------------------------------------------------
The shareholders of the Fund are entitled to a full vote for each full share
of beneficial interest held. The Fund is authorized to issue an unlimited number
of shares of beneficial interest. All shares of beneficial interest of the Fund
are of $0.01 par value and are equal as to earnings, assets and voting
privileges except that each Class will have exclusive voting privileges with
respect to matters relating to distribution expenses borne solely by such Class
or any other matter in which the interests of one Class differ from the
interests of any other Class. In addition, Class B shareholders will have the
right to vote on any proposed material increase in Class A's expenses, if such
proposal is submitted separately to Class A shareholders. Also, Class A, Class B
and Class C bear expenses related to the distribution of their respective
shares.
The Fund's Declaration of Trust permits the Trustees to authorize the
creation of additional series of shares (the proceeds of which would be invested
in separate, independently managed portfolios) and additional Classes of shares
within any series. The Trustees have not presently authorized any such
additional series or Classes of shares other than as set forth in the
Prospectus.
The Fund is not required to hold annual meetings of shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call special meetings of shareholders for action by shareholder
vote as may be required by the Investment Company Act or the Declaration of
Trust. Under certain circumstances the Trustees may be removed by action of the
Trustees. In addition, under certain circumstances the shareholders may call a
meeting to remove Trustees and the Fund is required to provide assistance in
communicating with shareholders about such a meeting. The voting rights of
shareholders are not cumulative, so that holders of more than 50 percent of the
shares voting can, if they choose, elect all Trustees being selected, while the
holders of the remaining shares would be unable to elect any Trustees.
Under Massachusetts law, shareholders of a business trust may, under certain
limited circumstances, be held personally liable as partners for the obligations
of the Fund. However, the Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Fund, requires that notice
of such Fund obligations include such disclaimer, and provides for
indemnification out of the Fund's property for any shareholder held personally
liable for the obligations of the Fund. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself would be unable to meet its obligations.
Given the above limitations on shareholder personal liability, and the nature of
the Fund's assets and operations, the possibility of the Fund being unable to
meet its obligations is remote and thus, in the opinion of Massachusetts counsel
to the Fund, the risk to Fund shareholders of personal liability is remote.
All of the Trustees, except for James F. Higgins, have been elected by the
shareholders of the Fund, most recently at a Special Meeting of Shareholders
held on May 21, 1997. The Trustees themselves have the power to alter the number
and the terms of office of the Trustees (as provided for in the Declaration of
Trust), and they may at any time lengthen or shorten their own terms or make
their terms of unlimited duration and appoint their own successors, provided
that always at least a majority of the Trustees has been elected by the
shareholders of the Fund.
VIII. PURCHASE, REDEMPTION AND PRICING OF SHARES
--------------------------------------------------------------------------------
A. PURCHASE/REDEMPTION OF SHARES
Information concerning how Fund shares are offered to the public (and how
they are redeemed and exchanged) is provided in the Fund's PROSPECTUS.
TRANSFER AGENT AS AGENT. With respect to the redemption or repurchase of
Fund shares, the application of proceeds to the purchase of new shares in the
Fund or any other Morgan Stanley Dean Witter Funds and the general
administration of the exchange privilege, the Transfer Agent acts as agent for
the Distributor and for the shareholder's authorized broker-dealer, if any, in
the performance of such
29
<PAGE>
functions. With respect to exchanges, redemptions or repurchases, the Transfer
Agent shall be liable for its own negligence and not for the default or
negligence of its correspondents or for losses in transit. The Fund shall not be
liable for any default or negligence of the Transfer Agent, the Distributor or
any authorized broker-dealer.
The Distributor and any authorized broker-dealer have appointed the Transfer
Agent to act as their agent in connection with the application of proceeds of
any redemption of Fund shares to the purchase of shares of any other Morgan
Stanley Dean Witter Fund and the general administration of the exchange
privilege. No commission or discounts will be paid to the Distributor or any
authorized broker-dealer for any transaction pursuant to the exchange privilege.
TRANSFERS OF SHARES. In the event a shareholder requests a transfer of Fund
shares to a new registration, the shares will be transferred without sales
charge at the time of transfer. With regard to the status of shares which are
either subject to the CDSC or free of such charge (and with regard to the length
of time shares subject to the charge have been held), any transfer involving
less than all of the shares in an account will be made on a pro rata basis (that
is, by transferring shares in the same proportion that the transferred shares
bear to the total shares in the account immediately prior to the transfer). The
transferred shares will continue to be subject to any applicable CDSC as if they
had not been so transferred.
OUTSIDE BROKERAGE ACCOUNTS. If a shareholder wishes to maintain his or her
fund account through a brokerage company other than Dean Witter Reynolds, he or
she may do so only if the Distributor has entered into a selected dealer
agreement with that brokerage company. Accounts maintained through a brokerage
company other than Dean Witter Reynolds may be subject to certain restrictions
on subsequent purchases and exchanges. Please contact your brokerage company or
the Transfer Agent for more information.
B. OFFERING PRICE
The Fund's Class B, Class C and Class D shares are offered at net asset
value per share and the Class A shares are offered at net asset value per share
plus any applicable FSC which is distributed among the Fund's Distributor, Dean
Witter Reynolds, and other authorized dealers as described in Section "V.
Investment Management and Other Services -- E. Rule 12b-1 Plan."
The price of Fund shares, called "net asset value," is based on the value of
the Fund's portfolio securities. Net asset value per share of each Class is
calculated by dividing the value of the portion of the Fund's securities and
other assets attributable to that Class, less the liabilities attributable to
that Class, by the number of shares of that Class outstanding. The assets of
each Class of shares are invested in a single portfolio. The net asset value of
each Class, however, will differ because the Classes have different ongoing
fees.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange, NASDAQ, or
other exchange is valued at its latest sale price, 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; and (2) all other portfolio securities
for which over-the-counter market quotations are readily available are valued at
the latest bid price. When market quotations are not readily available,
including circumstances under which it is determined by the Investment Manager
that sale or 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 Fund's
Trustees. For valuation purposes, quotations of foreign portfolio securities,
other assets and liabilities and forward contracts stated in foreign currency
are translated into U.S. dollar equivalents at the prevailing market rates prior
to the close of the New York Stock Exchange.
30
<PAGE>
Short-term debt securities with remaining maturities of sixty days or less
at the time of purchase are valued at amortized cost, unless the Trustees
determine such does not reflect the securities' market value, in which case
these securities will be valued at their fair value as determined by the
Trustees.
Certain of the Fund's portfolio securities may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service may utilize
a matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research evaluations by its staff, including
review of broker-dealer market price quotations in determining what it believes
is the fair valuation of the portfolio securities valued by such pricing
service.
Listed options on debt securities are valued at the latest sale price on the
exchange on which they are listed unless no sales of such options have taken
place that day, in which case they will be valued at the mean between their
latest bid and asked prices. Unlisted options on debt securities and all options
on equity securities are valued at the mean between their latest bid and asked
prices. Futures are valued at the latest sale price on the commodities exchange
on which they trade unless the Trustees determine such price does not reflect
their market value, in which case they will be valued at their fair value as
determined in good faith under procedures established by and under the
supervision of the Trustees.
Generally, trading in foreign securities, as well as corporate bonds, U.S.
Government securities and money market instruments, is substantially completed
each day at various times prior to the close of the New York Stock Exchange. The
values of such securities used in computing the net asset value of the Fund's
shares are determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the New York Stock Exchange.
Occasionally, events which may affect the values of such securities and such
exchange rates may occur between the times at which they are determined and the
close of the New York Stock Exchange and will therefore not be reflected in the
computation of the Fund's net asset value. If events that may affect the value
of such securities occur during such period, then these securities may be valued
at their fair value as determined in good faith under procedures established by
and under the supervision of the Trustees.
IX. TAXATION OF THE FUND AND SHAREHOLDERS
--------------------------------------------------------------------------------
The Fund generally will make two basic types of distributions: ordinary
dividends and long-term capital gain distributions. These two types of
distributions are reported differently on a shareholder's income tax return and
they are also subject to different rates of tax. The tax treatment of the
investment activities of the Fund will affect the amount and timing and
character of the distributions made by the Fund. Tax issues relating to the Fund
are not generally a consideration for shareholders such as tax-exempt entities
and tax-advantaged retirement vehicles such as an IRA or 401(k) plan.
Shareholders are urged to consult their own tax professionals regarding specific
questions as to federal, state or local taxes.
INVESTMENT COMPANY TAXATION. The Fund intends to remain qualified as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986. As such, the Fund will not be subject to federal income tax on its net
investment income and capital gains, if any, to the extent that it distributes
such income and capital gains to its shareholders.
The Fund generally intends to distribute sufficient income and gains so that
the Fund will not pay corporate income tax on its earnings. The Fund also
generally intends to distribute to its shareholders in each calendar year a
sufficient amount of ordinary income and capital gains to avoid the imposition
of a 4% excise tax. However, the Fund may instead determine to retain all or
part of any net long-term capital gains in any year for reinvestment. In such
event, the Fund will pay federal income tax (and possibly excise tax) on such
retained gains.
Gains or losses on sales of securities by the Fund will be long-term capital
gains or losses if the securities have a tax holding period of more than one
year. Gains or losses on the sale of securities with a tax holding period of one
year or less will be short-term gains or losses.
31
<PAGE>
Gains or losses on the Fund's transactions in listed non-equity options,
futures and options on futures generally are treated as 60% long-term and 40%
short-term. When the Fund engages in options and futures transactions, various
tax rules may accelerate or defer recognition of certain gains and losses,
change the character of certain gains or losses, or alter the holding period of
other investments held by the Fund. The application of these rules would
therefore also affect the amount, timing and character of distributions made by
the Fund.
Under certain tax rules, the Fund may be required to accrue a portion of any
discount at which certain securities are purchased as income each year even
though the Fund receives no payments in cash on the security during the year. In
addition, if the Fund invests in an equity security of a non-U.S. corporation
classified as a "passive foreign investment company" for U.S. tax purposes, the
application of certain technical tax provisions applying to investments in such
companies may result in the Fund being required to accrue income in respect of
the security without any receipt of cash attributable to such income. To the
extent that the Fund invests in such securities, it would be required to pay out
such income as an income distribution in each year in order to avoid taxation at
the Fund level. Such distributions will be made from the available cash of the
Fund or by liquidation of portfolio securities if necessary. If a distribution
of cash necessitates the liquidation of portfolio securities, the Investment
Manager will select which securities to sell. The Fund may realize a gain or
loss from such sales. In the event the Fund realizes net capital gains from such
transactions, its shareholders may receive a larger capital gain distribution,
if any, than they would in the absence of such transactions.
TAXATION OF DIVIDENDS AND DISTRIBUTIONS. Shareholders normally will have to
pay federal income taxes, and any state and/or local income taxes, on the
dividends and other distributions they receive from the Fund. Such dividends and
distributions, to the extent that they are derived from net investment income or
short-term capital gains, are taxable to the shareholder as ordinary income
regardless of whether the shareholder receives such payments in additional
shares or in cash.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder has
held the Fund's shares and regardless of whether the distribution is received in
additional shares or in cash. The maximum tax rate on long-term capital gains
realized by non-corporate shareholders is 20%.
Shareholders are generally taxed on any ordinary dividend or capital gain
distributions from the Fund in the year they are actually distributed. However,
if any such dividends or distributions are declared in October, November or
December and paid in January then such amounts will be treated for tax purposes
as received by the shareholders on December 31, to shareholders of record of
such month.
Shareholders who are not citizens or residents of the United States and
certain foreign entities may be subject to withholding of United States tax on
distributions made by the Fund of investment income and short-term capital
gains.
After the end of each calendar year, shareholders will be sent information
on their dividends and capital gain distributions for tax purposes, including
the portion taxable as ordinary income, the portion taxable as long-term capital
gains and the amount of any dividends eligible for the federal dividends
received deduction for corporations.
PURCHASES AND REDEMPTIONS AND EXCHANGES OF FUND SHARES. Any dividend or
capital gains distribution received by a shareholder from any investment company
will have the effect of reducing the net asset value of the shareholder's stock
in that company by the exact amount of the dividend or capital gains
distribution. Furthermore, such dividends and capital gains distributions are
subject to federal income taxes. If the net asset value of the shares should be
reduced below a shareholder's cost as a result of the payment of dividends or
the distribution of realized long-term capital gains, such payment or
distribution would be in part a return of the shareholder's investment but
nonetheless would be taxable to the shareholder. Therefore, an investor should
consider the tax implications of purchasing Fund shares immediately prior to a
distribution record date.
32
<PAGE>
In general, a sale of shares results in capital gain or loss, and for
individual shareholders, is taxable at a federal rate dependent upon the length
of time the shares were held. A redemption of a shareholder's Fund shares is
normally treated as a sale for tax purposes. Fund shares held for a period of
one year or less will, for tax purposes, generally result in short-term gains or
losses and those held for more than one year generally result in long-term gain
or loss. Under current law, the maximum tax rate on long-term capital gains
realized by non-corporate shareholders is 20%. Any loss realized by shareholders
upon a sale or redemption of shares within six months of the date of their
purchase will be treated as a long-term capital loss to the extent of any
distributions of net long-term capital gains with respect to such shares during
the six-month period.
Gain or loss on the sale or redemption of shares in the Fund is measured by
the difference between the amount received and the tax basis of the shares.
Shareholders should keep records of investments made (including shares acquired
through reinvestment of dividends and distributions) so they can compute the tax
basis of their shares. Under certain circumstances a shareholder may compute and
use an average cost basis in determining the gain or loss on the sale or
redemption of shares.
Exchanges of Fund shares for shares of another fund, including shares of
other Morgan Stanley Dean Witter Funds, are also subject to similar tax
treatment. Such an exchange is treated for tax purposes as a sale of the
original shares in the first fund, followed by the purchase of shares in the
second fund.
If a shareholder realizes a loss on the redemption or exchange of a fund's
shares and reinvests in that fund's shares within 30 days before or after the
redemption or exchange, the transactions may be subject to the "wash sale"
rules, resulting in a postponement of the recognition of such loss for tax
purposes.
X. UNDERWRITERS
--------------------------------------------------------------------------------
The Fund's shares are offered to the public on a continuous basis. The
Distributor, as the principal underwriter of the shares, has certain obligations
under the Distribution Agreement concerning the distribution of the shares.
These obligations and the compensation the Distributor receives are described
above in the sections titled "Principal Underwriter" and "Rule 12b-1 Plan."
XI. CALCULATION OF PERFORMANCE DATA
--------------------------------------------------------------------------------
From time to time, the Fund may quote its "yield" and/or its "total return"
in advertisements and sales literature. These figures are computed separately
for Class A, Class B, Class C and Class D shares. Yield is calculated for any
30-day period as follows: the amount of interest income for each security in the
Fund's portfolio is determined in accordance with regulatory requirements; the
total for the entire portfolio constitutes the Fund's gross income for the
period. Expenses accrued during the period are subtracted to arrive at "net
investment income" of each Class. The resulting amount is divided by the product
of the maximum offering price per share on the last day of the period multiplied
by the average number of shares of the applicable Class outstanding during the
period that were entitled to dividends. This amount is added to 1 and raised to
the sixth power. 1 is then subtracted from the result and the difference is
multiplied by 2 to arrive at the annualized yield. The yields for the 30-day
period ended September 30, 2000, calculated pursuant to this formula, were 4.83%
for Class A, 4.33% for Class B, 4.33% for Class C and 5.36% Class D.
The Fund's "average annual total return" represents an annualization of the
Fund's total return over a particular period and is computed by finding the
annual percentage rate which will result in the ending redeemable value of a
hypothetical $1,000 investment made at the beginning of a one, five or ten year
period, or for the period from the date of commencement of operations, if
shorter than any of the foregoing. The ending redeemable value is reduced by any
contingent deferred sales charge ("CDSC") at the end of the one, five, ten year
or other period. For the purpose of this calculation, it is assumed that
33
<PAGE>
all dividends and distributions are reinvested. The formula for computing the
average annual total return involves a percentage obtained by dividing the
ending redeemable value by the amount of the initial investment (which in the
case of Class A shares is reduced by the Class A initial sales charge), taking a
root of the quotient (where the root is equivalent to the number of years in the
period) and subtracting 1 from the result. Based on this calculation, the
average annual total returns for Class B for the one year, five year and ten
year periods ended September 30, 2000 were 27.23%, 12.78% and 13.05%,
respectively. The average annual total returns of Class A for the fiscal year
ended September 30, 2000 and for the period July 28, 1997 (inception of the
Class) through September 30, 2000 were 26.32% and 9.81%, respectively. The
average annual total returns of Class C for the fiscal year ended September 30,
2000 and for the period July 28, 1997 (inception of the Class) through
September 30, 2000 were 31.26% and 10.84%, respectively. The average annual
total returns of Class D for the fiscal year ended September 30, 2000 and for
the period July 28, 1997 (inception of the Class) through September 30, 2000
were 33.68 % and 11.93%, respectively.
In addition, the Fund may advertise its total return for each Class over
different periods of time by means of aggregate, average, year-by-year or other
types of total return figures. These calculations may or may not reflect the
imposition of the maximum front-end sales charge for Class A or the deduction of
the CDSC for each of Class B and Class C which, if reflected, would reduce the
performance quoted. For example, the average annual total return of the Fund may
be calculated in the manner described above, but without deduction for any
applicable sales charge. Based on this calculation, the average annual total
returns for Class B for the one year, five year and ten year periods ended
September 30, 2000 were 32.23%, 13.02% and 13.05%, respectively. The average
annual total returns of Class A for the fiscal year ended September 30, 2000 and
for the period July 28, 1997 through September 30, 2000 were 33.32% and 11.69%,
respectively. The average annual total returns of Class C for the fiscal year
ended September 30, 2000 and for the period July 28, 1997 through September 30,
2000 were 32.26% and 10.84%, respectively. The average annual total returns of
Class D for the fiscal year ended September 30, 2000 and for the period
July 28, 1997 through September 30, 2000 were 33.68% and 11.93%, respectively.
In addition, the Fund may compute its aggregate total return for each Class
for specified periods by determining the aggregate percentage rate which will
result in the ending value of a hypothetical $1,000 investment made at the
beginning of the period. For the purpose of this calculation, it is assumed that
all dividends and distributions are reinvested. The formula for computing
aggregate total return involves a percentage obtained by dividing the ending
value (without reduction for any sales charge) by the initial $1,000 investment
and subtracting 1 from the result. Based on this calculation, the total returns
for Class B for the one year, five year and ten year periods ended September 30,
2000 were 32.23%, 84.44% and 241.02%, respectively. The total returns of Class A
for the fiscal year ended September 30, 2000 and for the period July 28, 1997
through September 30, 2000 were 33.32% and 42.08%, respectively. The total
returns of Class C for the fiscal year ended September 30, 2000 and for the
period July 28, 1997 through September 30, 2000 were 32.26% and 38.68%,
respectively. The total returns of Class D for the fiscal year ended September
30, 2000 and for the period July 28, 1997 through September 30, 2000 were 33.68%
and 43.03%, respectively.
The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in each Class of shares of the Fund by adding 1 to
the Fund's aggregate total return to date (expressed as a decimal and without
taking into account the effect of any applicable CDSC) and multiplying by
$9,475, $48,000 and $97,000 in the case of Class A (investments of $10,000,
$50,000 and
34
<PAGE>
$100,000 adjusted for the initial sales charge) or by $10,000, $50,000 and
$100,000 in the case of each of Class B, Class C and Class D, as the case may
be. Investments of $10,000, $50,000 and $100,000 in each Class at inception of
the Class would have grown to the following amounts at September 30, 2000:
<TABLE>
<CAPTION>
INVESTMENT AT INCEPTION OF:
INCEPTION --------------------------------
CLASS DATE: $10,000 $50,000 $100,000
----- --------- ------- ------- --------
<S> <C> <C> <C> <C>
Class A........................................... 7/28/97 $13,462 $ 68,198 $137,818
Class B........................................... 10/31/85 39,044 195,220 390,440
Class C........................................... 7/28/97 13,868 69,340 138,680
Class D........................................... 7/28/97 14,303 71,515 143,030
</TABLE>
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by recognized organizations.
XII. FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
EXPERTS. The financial statements of the Fund for the fiscal year ended
September 30, 2000 included in this STATEMENT OF ADDITIONAL INFORMATION and
incorporated by reference in the PROSPECTUS have been so included and
incorporated in reliance on the report of Deloitte & Touche LLP, independent
auditors, and on the authority of that firm as experts in auditing and
accounting.
*****
This STATEMENT OF ADDITIONAL INFORMATION and the PROSPECTUS do not contain
all of the information set forth in the REGISTRATION STATEMENT the Fund has
filed with the SEC. The complete REGISTRATION STATEMENT may be obtained from the
SEC.
35
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
--------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CONVERTIBLE BONDS (62.8%)
ADVERTISING/MARKETING SERVICES (0.6%)
$ 2,000 Young & Rubicam, Inc. - 144A**................................................. 3.00% 01/15/05 $ 1,917,400
------------
AEROSPACE & DEFENSE (0.9%)
4,000 Spacehab, Inc. - 144A**........................................................ 8.00 10/15/07 2,807,520
------------
AIR FREIGHT/COURIERS (1.0%)
3,000 United Parcel Service of America............................................... 1.75 09/27/07 3,082,500
------------
APPAREL/FOOTWEAR RETAIL (0.9%)
2,800 Genesco Inc.................................................................... 5.50 04/15/05 2,706,368
------------
AUTO PARTS: O.E.M. (0.6%)
2,600 MascoTech, Inc................................................................. 4.50 12/15/03 1,768,000
------------
BIOTECHNOLOGY (4.3%)
1,750 Alkermes, Inc.................................................................. 3.75 02/15/07 1,319,255
1,000 CV Therapeutics, Inc. - 144A**................................................. 4.75 03/07/07 1,340,880
1,000 Human Genome Sciences, Inc..................................................... 3.75 03/15/07 972,020
1,500 ImClone Systems Inc. - 144A**.................................................. 5.50 03/01/05 1,831,815
1,500 Invitrogen Corp. - 144A**...................................................... 5.50 03/01/07 1,542,825
4,925 Johnson & Johnson.............................................................. 4.75 02/15/05 6,290,604
------------
13,297,399
------------
BROADCASTING (2.3%)
4,000 Clear Channel Communications, Inc.............................................. 1.50 12/01/02 3,724,520
2,500 Scandinavian Broadcasting System SA (Luxembourg)............................... 7.00 12/01/04 3,509,050
------------
7,233,570
------------
CABLE/SATELLITE TV (0.9%)
2,030 EchoStar Communications Corp................................................... 4.875 01/01/07 2,701,666
------------
COMPUTER COMMUNICATIONS (0.9%)
1,850 Juniper Networks, Inc.......................................................... 4.75 03/15/07 2,875,788
------------
CONTRACT DRILLING (1.7%)
6,000 Diamond Offshore Drilling, Inc. - 144A**....................................... 0.00 06/06/20 3,000,287
3,500 Transocean Sedco Forex Inc..................................................... 0.00 05/24/20 2,182,087
------------
5,182,374
------------
DATA PROCESSING SERVICES (0.4%)
1,500 National Data Corp............................................................. 5.00 11/01/03 1,328,010
------------
ELECTRICAL PRODUCTS (1.2%)
600 Corning Inc.................................................................... 4.875 03/01/08 3,841,350
------------
ELECTRONIC COMPONENTS (1.7%)
6,600 Sanmina Corp. - 144A**......................................................... 0.00 09/12/20 2,727,447
3,500 Solectron, Inc................................................................. 0.00 01/27/19 2,587,657
------------
5,315,104
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
36
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2000, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
--------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
ELECTRONIC EQUIPMENT/INSTRUMENTS (1.2%)
$ 3,500 SCI Systems, Inc............................................................... 3.00% 03/15/07 $ 3,560,480
------------
ELECTRONIC PRODUCTION EQUIPMENT (2.4%)
1,000 Advanced Energy Industries, Inc................................................ 5.25 11/15/06 915,970
2,000 ASM Lithography Holding N.V. (Netherlands) - 144A**............................ 4.25 11/30/04 2,205,000
5,500 Celestica, Inc. (Canada)....................................................... 0.00 08/01/20 2,681,490
2,500 Integrated Process Equipment Corp.............................................. 6.25 09/15/04 1,685,400
------------
7,487,860
------------
ELECTRONICS/APPLIANCES (1.2%)
3,000 Semtech Corp. - 144A**......................................................... 4.50 02/01/07 3,578,010
------------
ENGINEERING & CONSTRUCTION (1.6%)
4,000 Emcor Group, Inc............................................................... 5.75 04/01/05 4,140,880
1,000 Quanta Services, Inc........................................................... 4.00 07/01/07 802,960
------------
4,943,840
------------
FINANCE/RENTAL/LEASING (0.2%)
500 Providian Financial Corp....................................................... 3.25 08/15/05 560,625
------------
FINANCIAL PUBLISHING/SERVICES (0.7%)
3,000 Aether Systems, Inc............................................................ 6.00 03/22/05 2,304,750
------------
HOSPITAL/NURSING MANAGEMENT (1.2%)
1,340 Emeritus Corp. - 144A**........................................................ 6.25 01/01/06 508,383
4,500 Health Management Associates, Inc. - 144A**.................................... 0.25 08/16/20 3,265,450
------------
3,773,833
------------
INDUSTRIAL CONGLOMERATES (0.7%)
2,000 Hutchison Whampoa International - 144A**....................................... 2.875 09/15/03 2,013,750
------------
INTERNET SOFTWARE/SERVICES (5.0%)
3,800 America Online, Inc............................................................ 0.00 12/06/19 1,936,729
4,500 At Home Corp................................................................... 4.75 12/15/06 3,037,230
1,250 BEA Systems, Inc............................................................... 4.00 12/15/06 2,957,775
3,000 Critical Path, Inc............................................................. 5.75 04/01/05 2,661,390
3,000 Digital Island, Inc............................................................ 6.00 02/15/05 1,762,290
2,000 Exodus Communications, Inc..................................................... 4.75 07/15/08 3,085,300
------------
15,440,714
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
37
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2000, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
--------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MAJOR TELECOMMUNICATIONS (2.9%)
$ 2,500 Bell Atlantic Financial Service - 144A** (exchangeable into Cable & Wireless
Communications common stock)................................................. 4.25% 09/15/05 $ 2,765,625
5,000 Bell Atlantic Financial Service - 144A** (exchangeable into Telecom Corporation
of New Zealand common stock)................................................. 5.75 04/01/03 4,831,250
3,000 Primus Telecommunications Group, Inc........................................... 5.75 02/15/07 1,258,680
------------
8,855,555
------------
MANAGED HEALTH CARE (0.8%)
3,000 Wellpoint Health Networks, Inc................................................. 0.00 07/02/19 2,326,402
------------
MEDICAL/NURSING SERVICES (1.5%)
488 Continucare Corp. - 144A**..................................................... 7.00 10/31/02 487,805
1,660 Greenery Rehabilitation Group, Inc............................................. 8.75 04/01/15 1,231,512
5,500 Universal Health Services, Inc. - 144A**....................................... 0.426 06/23/20 3,029,205
------------
4,748,522
------------
MISCELLANEOUS COMMERCIAL SERVICES (2.1%)
2,000 CheckFree Holdings Corp........................................................ 6.50 12/01/06 1,791,160
750 CheckFree Holdings Corp. - 144A**.............................................. 6.50 12/01/06 671,685
4,000 JMH Finance Ltd. - 144A**...................................................... 4.75 09/06/07 4,087,500
------------
6,550,345
------------
MULTI-LINE INSURANCE (1.1%)
3,000 American International Group, Inc.............................................. 0.50 05/15/07 3,453,150
------------
OIL & GAS PRODUCTION (2.4%)
4,500 Anadarko Petroleum Corp........................................................ 0.00 03/07/20 3,714,410
3,000 Kerr-McGee Corp................................................................ 5.25 02/15/10 3,746,430
------------
7,460,840
------------
OILFIELD SERVICES/EQUIPMENT (1.4%)
2,000 Baker Hughes, Inc.............................................................. 0.00 05/05/08 1,592,006
5,000 Weatherford International, Inc. - 144A**....................................... 0.00 06/30/20 2,841,103
------------
4,433,109
------------
PACKAGED SOFTWARE (3.6%)
2,000 Mercury Interactive Corp. - 144A**............................................. 4.75 07/01/07 3,114,760
8,000 Network Associates, Inc........................................................ 0.00 02/13/18 3,099,571
1,750 Rational Software Corp. - 144A**............................................... 5.00 02/01/07 3,626,385
250 Siebel Systems, Inc............................................................ 5.50 09/15/06 1,203,270
------------
11,043,986
------------
PHARMACEUTICALS: GENERIC DRUGS (0.8%)
1,250 Alpharma Inc................................................................... 3.00 06/01/06 2,443,563
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
38
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2000, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
--------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
PHARMACEUTICALS: OTHER (2.1%)
$ 5,000 Alza Corp. - 144A**............................................................ 0.00% 07/28/20 $ 3,449,065
2,000 Sepracor, Inc. - 144A**........................................................ 5.00 02/15/07 3,000,000
------------
6,449,065
------------
PROPERTY - CASUALTY INSURERS (0.5%)
500 Berkshire Hathaway, Inc........................................................ 1.00 12/02/01 1,600,050
------------
REAL ESTATE INVESTMENT TRUSTS (2.0%)
2,650 Center Trust Inc. (Series A)................................................... 7.50 01/15/01 2,583,750
4,000 Macerich Co. (Eurobond)........................................................ 7.25 12/15/02 3,505,000
------------
6,088,750
------------
SEMICONDUCTORS (5.5%)
1,000 Cirrus Logic, Inc.............................................................. 6.00 12/15/03 1,669,500
1,000 Conexant Systems, Inc.......................................................... 4.00 02/01/07 723,970
2,000 Conexant Systems, Inc. - 144A**................................................ 4.00 02/01/07 1,447,940
4,150 Cypress Semiconductor Corp..................................................... 3.75 07/01/05 3,939,139
3,000 LSI Logic Corp................................................................. 4.00 02/15/05 2,422,170
2,000 Texas Instruments, Inc. - 144A**............................................... 4.25 02/15/07 2,493,220
1,000 TranSwitch Corp. - 144A**...................................................... 4.50 09/12/05 1,228,450
3,000 Vitesse Semiconductor Corp. - 144A**........................................... 4.00 03/15/05 3,100,530
------------
17,024,919
------------
SPECIALTY TELECOMMUNICATIONS (2.3%)
5,500 Efficient Networks, Inc........................................................ 5.00 03/15/05 3,601,400
4,000 Level 3 Communications, Inc.................................................... 6.00 03/15/10 3,430,040
1,750 SA Telecommunications, Inc. - 144A** (a)....................................... 10.00 08/15/06 52,500
------------
7,083,940
------------
TELECOMMUNICATION EQUIPMENT (1.0%)
1,000 Cyras Systems, Inc. - 144A**................................................... 4.50 08/15/05 1,200,000
2,500 Gilat Satellite Networks Ltd. (Israel) - 144A**................................ 4.25 03/15/05 1,874,000
------------
3,074,000
------------
WIRELESS COMMUNICATIONS (1.2%)
4,000 Nextel Communications, Inc. - 144A**........................................... 5.25 01/15/10 3,753,280
------------
TOTAL CONVERTIBLE BONDS
(COST $187,686,472).............................................................................. 194,110,387
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
39
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2000, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
CONVERTIBLE PREFERRED STOCKS (27.4%)
AEROSPACE & DEFENSE (0.5%)
50,000 Titan Capital Trust - 144A** $2.875.................................................... $ 1,450,000
------------
ALTERNATIVE POWER GENERATION (2.8%)
50,000 AES Trust III $3.375................................................................... 5,175,000
50,000 Calpine Capital Trust III - 144A** $2.50............................................... 3,409,375
------------
8,584,375
------------
AUTO PARTS: O.E.M. (0.0%)
120,000 BTI Capital Trust - 144A** $3.25 *..................................................... 15,000
------------
BIOTECHNOLOGY (0.5%)
63,500 Sicor Inc. - 144A** $3.75.............................................................. 1,643,062
------------
BROADCASTING (0.1%)
750 Radio One, Inc. - 144A** $65.00........................................................ 433,125
------------
CABLE/SATELLITE TV (1.3%)
60,000 Cox Communications, Inc. $3.50......................................................... 3,210,000
25,000 UnitedGlobalCom, Inc. (Series D) $3.50................................................. 820,312
------------
4,030,312
------------
DATA PROCESSING SERVICES (0.7%)
38,000 Amdocs Automatic Common Exchange Securities $1.515..................................... 2,068,625
------------
ELECTRIC UTILITIES (0.8%)
32,500 Alliant Energy Resources, Inc. $4.912.................................................. 1,820,000
10,000 SEI Trust I $3.125..................................................................... 663,125
------------
2,483,125
------------
HOUSEHOLD/PERSONAL CARE (0.8%)
35,000 Estee Lauder Automatic Common Exchange Security Trust $5.406........................... 2,476,250
------------
INDUSTRIAL CONGLOMERATES (0.6%)
41,800 DECS Trust VI $2.465................................................................... 1,881,000
------------
INDUSTRIAL SPECIALTIES (0.9%)
72,000 International Paper Capital Trust $2.625............................................... 2,801,232
------------
INTERNET SOFTWARE/SERVICES (0.3%)
65,000 PSINet, Inc. (Series C) - 144A** $3.50................................................. 1,064,375
------------
LIFE/HEALTH INSURANCE (1.7%)
60,000 MetLife Capital Trust I $4.00.......................................................... 5,100,000
------------
MAJOR BANKS (0.9%)
110,000 National Australia Bank, Ltd. $1.969 (Australia) (Units)+.............................. 2,784,375
------------
MAJOR TELECOMMUNICATIONS (0.7%)
45,600 BroadWing, Inc. (Series B) $3.375...................................................... 2,126,100
------------
MEDICAL DISTRIBUTORS (1.0%)
65,000 McKesson Financing Trust $2.50......................................................... 3,126,094
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
40
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2000, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
MISCELLANEOUS MANUFACTURING (1.0%)
64,000 Coltec Capital Trust $2.625............................................................ $ 3,108,000
------------
MOVIES/ENTERTAINMENT (0.3%)
33,000 Six Flags, Inc. $4.05.................................................................. 1,039,500
------------
OIL & GAS PIPELINES (1.0%)
75,000 Coastal Corp. $1.656................................................................... 3,121,875
------------
OIL & GAS PRODUCTION (3.0%)
62,000 Apache Corp. $2.015.................................................................... 3,181,375
55,400 Kerr-McGee Corp. $1.825................................................................ 2,956,975
45,000 Newfield Financial Trust I $3.25....................................................... 3,150,000
------------
9,288,350
------------
PHARMACEUTICALS: OTHER (1.2%)
50,000 Biovail Corp. $3.375 (Canada).......................................................... 3,750,000
------------
PROPERTY - CASUALTY INSURERS (1.2%)
45,000 ACE Ltd. $4.125........................................................................ 3,630,938
------------
PUBLISHING: NEWSPAPERS (0.9%)
21,700 Tribune Co. $3.14...................................................................... 2,614,850
------------
RAILROADS (1.7%)
65,000 Canadian National Railway Co. $2.625 (Canada).......................................... 2,900,625
60,400 Union Pacific Capital Trust $3.125..................................................... 2,448,314
------------
5,348,939
------------
REGIONAL BANKS (0.9%)
75,000 CNB Capital Trust I $1.50.............................................................. 2,859,375
------------
SPECIALTY TELECOMMUNICATIONS (1.8%)
10,000 Global Crossing Ltd. $16.875 (Bermuda)................................................. 2,503,125
127,500 Intermedia Communications, Inc. $1.75.................................................. 2,956,406
------------
5,459,531
------------
TOOLS/HARDWARE (0.8%)
109,000 Metromedia International Group, Inc. $3.625............................................ 2,479,750
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(COST $87,692,633)..................................................................... 84,768,158
------------
COMMON STOCKS (0.8%)
COMPUTER PERIPHERALS (0.6%)
20,000 EMC Corp.*............................................................................. 1,982,500
------------
MEDICAL/NURSING SERVICES (0.2%)
756,097 Continuecare Corp...................................................................... 425,305
------------
TOTAL COMMON STOCKS
(COST $2,420,828)...................................................................... 2,407,805
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
41
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2000, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
--------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENTS (7.9%)
U.S. GOVERNMENT AGENCIES (b) (7.5%)
$ 15,200 Federal Home Loan Banks........................................................ 6.28% 10/02/00 $ 15,197,349
7,843 Federal Home Loan Mortgage Corp................................................ 6.40 10/03/00 7,840,211
------------
TOTAL U.S. GOVERNMENT AGENCIES
(COST $23,037,560)............................................................................... 23,037,560
------------
REPURCHASE AGREEMENT (0.4%)
1,304 The Bank of New York (dated 09/29/00; proceeds $1,304,176) (c)
(COST $1,303,497)............................................................ 6.25 10/02/00 1,303,497
------------
TOTAL SHORT-TERM INVESTMENTS
(COST $24,341,057)............................................................................... 24,341,057
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(COST $302,140,990) (d)................................................................... 98.9% 305,627,407
OTHER ASSETS IN EXCESS OF LIABILITIES..................................................... 1.1 3,307,199
----- -------------
NET ASSETS................................................................................ 100.0% $ 308,934,606
----- -------------
----- -------------
</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) Purchased on a discount basis. The interest rate shown has been adjusted to
reflect a money market equivalent yield.
(c) Collateralized by $1,298,098 U.S. Treasury Note 6.75% due 05/15/05 valued
at $1,329,568.
(d) The aggregate cost for federal income tax purposes approximates the
aggregate cost for book purposes. The aggregate gross unrealized
appreciation is $36,557,162 and the aggregate gross unrealized depreciation
is $33,070,745, resulting in net unrealized appreciation of $3,486,417.
SEE NOTES TO FINANCIAL STATEMENTS
42
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (cost $302,140,990)....................................... $305,627,407
Receivable for:
Investments sold.......................................................................... 10,324,584
Interest.................................................................................. 1,650,178
Dividends................................................................................. 503,341
Shares of beneficial interest sold........................................................ 331,971
Prepaid expenses and other assets............................................................. 46,742
------------
TOTAL ASSETS............................................................................. 318,484,223
------------
LIABILITIES:
Payable for:
Investments purchased..................................................................... 8,894,998
Plan of distribution fee.................................................................. 251,826
Investment management fee................................................................. 153,584
Shares of beneficial interest repurchased................................................. 135,898
Accrued expenses and other payables........................................................... 113,311
------------
TOTAL LIABILITIES........................................................................ 9,549,617
------------
NET ASSETS............................................................................... $308,934,606
============
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................................................... $305,078,878
Net unrealized appreciation................................................................... 3,486,417
Accumulated undistributed net investment income............................................... 3,299,297
Accumulated net realized loss................................................................. (2,929,986)
------------
NET ASSETS............................................................................... $308,934,606
============
CLASS A SHARES:
Net Assets.................................................................................... $2,537,509
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)..................................... 147,305
NET ASSET VALUE PER SHARE................................................................ $17.23
============
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 5.54% OF NET ASSET VALUE)........................................ $18.18
============
CLASS B SHARES:
Net Assets.................................................................................... $297,821,102
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)..................................... 17,290,722
NET ASSET VALUE PER SHARE................................................................ $17.22
============
CLASS C SHARES:
Net Assets.................................................................................... $5,454,964
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)..................................... 317,678
NET ASSET VALUE PER SHARE................................................................ $17.17
============
CLASS D SHARES:
Net Assets.................................................................................... $3,121,031
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)..................................... 181,148
NET ASSET VALUE PER SHARE................................................................ $17.23
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
43
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2000
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Interest....................................................................................... $ 9,487,805
Dividends...................................................................................... 4,771,001
-----------
TOTAL INCOME.............................................................................. 14,258,806
-----------
EXPENSES
Plan of distribution fee (Class A shares)...................................................... 5,448
Plan of distribution fee (Class B shares)...................................................... 2,796,056
Plan of distribution fee (Class C shares)...................................................... 41,437
Investment management fee...................................................................... 1,727,075
Transfer agent fees and expenses............................................................... 318,919
Registration fees.............................................................................. 71,488
Shareholder reports and notices................................................................ 65,085
Professional fees.............................................................................. 64,196
Custodian fees................................................................................. 22,041
Trustees' fees and expenses.................................................................... 17,940
Other.......................................................................................... 13,840
-----------
TOTAL EXPENSES............................................................................ 5,143,525
-----------
NET INVESTMENT INCOME..................................................................... 9,115,281
-----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain.............................................................................. 48,588,509
Net change in unrealized appreciation.......................................................... 16,994,467
-----------
NET GAIN.................................................................................. 65,582,976
-----------
NET INCREASE................................................................................... $74,698,257
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
44
<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, 2000 SEPTEMBER 30, 1999
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income............................................... $ 9,115,281 $ 11,642,268
Net realized gain (loss)............................................ 48,588,509 (8,530,348)
Net change in unrealized appreciation............................... 16,994,467 32,992,426
------------ ------------
NET INCREASE................................................... 74,698,257 36,104,346
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A shares...................................................... (173,194) (66,995)
Class B shares...................................................... (11,567,746) (12,469,366)
Class C shares...................................................... (177,330) (147,630)
Class D shares...................................................... (90,430) (64,653)
------------ ------------
TOTAL DIVIDENDS................................................ (12,008,700) (12,748,644)
------------ ------------
Net increase (decrease) from transactions in shares of beneficial
interest.......................................................... 10,723,520 (56,326,246)
------------ ------------
NET INCREASE (DECREASE)........................................ 73,413,077 (32,970,544)
NET ASSETS:
Beginning of period................................................. 235,521,529 268,492,073
------------ ------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $3,299,297 AND
$6,220,842, RESPECTIVELY)....................................... $308,934,606 $235,521,529
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
45
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley 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 converted to a multiple class share
structure.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year, six
years and one year, respectively. Class D shares are not subject to a sales
charge. Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity portfolio security listed or traded
on the New York or American Stock Exchange, NASDAQ, or other exchange is valued
at its latest sale price, 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; (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") 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); (4) certain portfolio
securities may be valued by an outside pricing service approved
46
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000, CONTINUED
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 tax purposes are
reported as distributions of paid-in-capital.
47
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000, 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.
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 B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon
redemption of Class B shares. Although there is no legal obligation for the Fund
to pay expenses incurred in excess of payments made to the Distributor under the
Plan and the proceeds of contingent deferred sales charges paid by investors
upon redemption of shares, if for any reason the Plan is terminated, the
Trustees will consider at that time the manner in which to treat such expenses.
The Distributor has advised the Fund that such excess amounts totaled
$88,272,111 at September 30, 2000.
48
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000, CONTINUED
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, 2000, 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,
2000, it received contingent deferred sales charges from certain redemptions of
the Fund's Class B shares and Class C shares of $241,987 and $1,721,
respectively and received $17,393 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, 2000 aggregated
$420,332,938 and $417,008,261, respectively.
For the year ended September 30, 2000, the Fund incurred brokerage commissions
of $500 with Dean Witter Reynolds Inc., an affiliate of the Investment Manager
and Distributor, for portfolio transactions executed on behalf of the Fund.
For the year ended September 30, 2000, the Fund incurred brokerage commissions
of $3,160 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, 2000, the Fund had
transfer agent fees and expenses payable of approximately $700.
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, 2000
49
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000, CONTINUED
included in Trustees' fees and expenses in the Statement of Operations amounted
to $5,845. At September 30, 2000, the Fund had an accrued pension liability of
$53,832 which is included in accrued expenses in the Statement of Assets and
Liabilities.
5. FEDERAL INCOME TAX STATUS
During the year ended September 30, 2000, the Fund utilized approximately
$41,727,000 of its net capital loss carryover. At September 30, 2000, the Fund
had a net capital loss carryover of approximately $2,581,000 which will be
available through September 30, 2007 to offset future capital gains to the
extent provided by regulations.
As of September 30, 2000, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales 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 $21,003,692, accumulated undistributed net
investment income was charged $28,126 and accumulated net realized loss was
credited $21,031,818.
50
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000, CONTINUED
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, 2000 SEPTEMBER 30, 1999
--------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold............................................................. 2,234,888 $ 36,412,837 1,099,363 $ 15,391,161
Reinvestment of dividends........................................ 4,414 74,271 4,081 54,460
Redeemed......................................................... (2,174,807) (35,353,349) (1,097,990) (15,399,963)
---------- ------------- ---------- ------------
Net increase - Class A........................................... 64,495 1,133,759 5,454 45,658
---------- ------------- ---------- ------------
CLASS B SHARES
Sold............................................................. 5,143,466 87,901,083 2,569,889 35,097,104
Reinvestment of dividends........................................ 560,459 9,322,906 751,728 9,953,748
Redeemed......................................................... (5,467,632) (92,276,914) (7,420,340) (99,844,911)
---------- ------------- ---------- ------------
Net increase (decrease) - Class B................................ 236,293 4,947,075 (4,098,723) (54,794,059)
---------- ------------- ---------- ------------
CLASS C SHARES
Sold............................................................. 151,647 2,577,327 95,253 1,240,659
Reinvestment of dividends........................................ 8,511 141,837 8,572 113,534
Redeemed......................................................... (54,353) (901,245) (84,273) (1,108,464)
---------- ------------- ---------- ------------
Net increase - Class C........................................... 105,805 1,817,919 19,552 245,729
---------- ------------- ---------- ------------
CLASS D SHARES
Sold............................................................. 883,984 14,249,821 88,216 1,145,065
Reinvestment of dividends........................................ 77 1,288 90 1,192
Redeemed......................................................... (704,267) (11,426,342) (223,273) (2,969,831)
---------- ------------- ---------- ------------
Net increase (decrease) - Class D................................ 179,794 2,824,767 (134,967) (1,823,574)
---------- ------------- ---------- ------------
Net increase (decrease) in Fund.................................. 586,387 $ 10,723,520 (4,208,684) $(56,326,246)
========== ============= ========== ============
</TABLE>
51
<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 PERIOD
FOR THE YEAR ENDED SEPTEMBER 30, JULY 28, 1997*
------------------------------------ THROUGH
2000 1999 1998 SEPTEMBER 30, 1997
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $13.57 $12.45 $15.07 $14.31
------ ------ ------ ------
Income (loss) from investment operations:
Net investment income.................................... 0.65 0.72 0.75 0.13
Net realized and unrealized gain (loss).................. 3.83 1.18 (2.68) 0.78
------ ------ ------ ------
Total income (loss) from investment operations.............. 4.48 1.90 (1.93) 0.91
------ ------ ------ ------
Less dividends from net investment income................... (0.82) (0.78) (0.69) (0.15)
------ ------ ------ ------
Net asset value, end of period.............................. $17.23 $13.57 $12.45 $15.07
====== ====== ====== ======
TOTAL RETURN+............................................... 33.32% 15.64% (13.38)% 6.40%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.04%(3) 1.06%(3) 1.05 %(3) 1.15%(2)
Net investment income....................................... 3.91%(3) 5.31%(3) 5.16 %(3) 5.03%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $2,538 $1,124 $963 $50
Portfolio turnover rate..................................... 160% 87% 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
52
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------
2000++ 1999++ 1998++ 1997*++ 1996
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $13.57 $12.45 $15.07 $12.72 $11.67
-------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income.................................... 0.52 0.61 0.65 0.60 0.55
Net realized and unrealized gain (loss).................. 3.82 1.18 (2.70) 2.31 1.12
-------- -------- -------- -------- --------
Total income (loss) from investment operations.............. 4.34 1.79 (2.05) 2.91 1.67
-------- -------- -------- -------- --------
Less dividends from net investment income................... (0.69) (0.67) (0.57) (0.56) (0.62)
-------- -------- -------- -------- --------
Net asset value, end of period.............................. $17.22 $13.57 $12.45 $15.07 $12.72
======== ======== ======== ======== ========
TOTAL RETURN+............................................... 32.23% 14.62% (14.01)% 23.38% 14.70%
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.80%(1) 1.85%(1) 1.81 %(1) 1.84% 1.89%
Net investment income....................................... 3.15%(1) 4.52%(1) 4.40 %(1) 4.45% 4.78%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $297,821 $231,510 $263,443 $316,633 $234,334
Portfolio turnover rate..................................... 160% 87% 95 % 182% 171%
</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
53
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED SEPTEMBER 30, JULY 28, 1997*
-------------------------------- THROUGH
2000 1999 1998 SEPTEMBER 30, 1997
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS C SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period.................................. $13.54 $12.43 $15.06 $14.31
------- ------- -------- ------
Income (loss) from investment operations:
Net investment income.............................................. 0.53 0.63 0.64 0.12
Net realized and unrealized gain (loss)............................ 3.80 1.17 (2.68) 0.77
------- ------- -------- ------
Total income (loss) from investment operations........................ 4.33 1.80 (2.04) 0.89
------- ------- -------- ------
Less dividends from net investment income............................. (0.70) (0.69) (0.59) (0.14)
------- ------- -------- ------
Net asset value, end of period........................................ $17.17 $13.54 $12.43 $15.06
======= ======= ======== ======
TOTAL RETURN+......................................................... 32.26% 14.83% (14.07)% 6.26%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 1.80%(3) 1.73%(3) 1.81 %(3) 1.92%(2)
Net investment income................................................. 3.15%(3) 4.64%(3) 4.40 %(3) 4.52%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $5,455 $2,869 $2,390 $620
Portfolio turnover rate............................................... 160% 87% 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
54
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED SEPTEMBER 30, JULY 28, 1997*
-------------------------------- THROUGH
2000 1999 1998 SEPTEMBER 30, 1997
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS D SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period.................................. $13.57 $12.44 $15.08 $14.31
------- ------- -------- ------
Income (loss) from investment operations:
Net investment income.............................................. 0.74 0.79 0.79 0.13
Net realized and unrealized gain (loss)............................ 3.77 1.15 (2.71) 0.80
------- ------- -------- ------
Total income (loss) from investment operations........................ 4.51 1.94 (1.92) 0.93
------- ------- -------- ------
Less dividends from net investment income............................. (0.85) (0.81) (0.72) (0.16)
------- ------- -------- ------
Net asset value, end of period........................................ $17.23 $13.57 $12.44 $15.08
======= ======= ======== ======
TOTAL RETURN+......................................................... 33.68% 15.81% (13.19)% 6.42%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 0.80%(3) 0.85%(3) 0.81 %(3) 0.89%(2)
Net investment income................................................. 4.15%(3) 5.52%(3) 5.40 %(3) 4.94%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $3,121 $18 $1,696 $21
Portfolio turnover rate............................................... 160% 87% 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
55
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
OF MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST:
We have audited the accompanying statement of assets and liabilities of Morgan
Stanley Dean Witter Convertible Securities Trust (the "Fund"), including the
portfolio of investments, as of September 30, 2000, and the related statements
of operations and changes in net assets, and the financial highlights for the
year then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit. The statement of changes in net assets for the year ended September 30,
1999 and the financial highlights for each of the respective stated periods
ended September 30, 1999 were audited by other independent accountants whose
report, dated November 10, 1999, expressed an unqualified opinion on that
statement and the financial highlights.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of September 30, 2000, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Morgan
Stanley Dean Witter Convertible Securities Trust as of September 30, 2000, the
results of its operations, the changes in its net assets, and the financial
highlights for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.
Deloitte & Touche LLP
NEW YORK, NEW YORK
NOVEMBER 10, 2000
2000 FEDERAL TAX NOTICE (UNAUDITED)
During the fiscal year ended September 30, 2000, 48.52% of the
income dividends paid by the Fund qualified for the dividends
received deduction available to corporations.
Of the Fund's ordinary income dividends paid during the fiscal
year, 2.19% was attributable to qualifying Federal obligations.
Please consult your tax advisor to determine if any portion of the
dividends you received is exempt from state income tax.
56
<PAGE>
MORGAN STANLEY CONVERTIBLE SECURITIES TRUST
CHANGE IN INDEPENDENT ACCOUNTANTS
On July 1, 2000 PricewaterhouseCoopers LLP resigned as independent accountants
of the Fund.
The reports of PricewaterhouseCoopers LLP on the financial statements of the
Fund for the past two fiscal years contained no adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principle.
In connection with its audits for the two most recent fiscal years and through
July 1, 2000, there have been no disagreements with PricewaterhouseCoopers LLP
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of PricewaterhouseCoopers LLP would have caused them to make
reference thereto in their report on the financial statements for such years.
The Fund, with the approval of its Board of Trustees and its Audit Committee,
engaged Deloitte & Touche LLP as its new independent accountants as of July 1,
2000.
57
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
OF MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
In our opinion, the statement of changes in net assets and the financial
highlights of Morgan Stanley Dean Witter Convertible Securities Trust (the
"Fund") (not presented separately herein) present fairly, in all material
respects, the changes in its net assets for the year ended September 30, 1999
and the financial highlights for each of the years in the period ended
September 30, 1999, in conformity with generally accepted accounting principles.
This financial statement 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 provide a reasonable basis for the opinion expressed
above. We have not audited the financial statements or financial highlights of
the Fund for any period subsequent to September 30, 1999.
PricewaterhouseCoopers LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
NOVEMBER 10, 1999
58
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
PART C OTHER INFORMATION
ITEM 23. EXHIBITS
1 (a). Declaration of Trust of the Registrant, dated May 21, 1985, is
incorporated by reference to Exhibit 1 of the Initial Registration
Statement on Form N-14, filed on August 28, 1995.
1 (b). Instrument Establishing and Designating Additional Classes dated
July 28, 1997, is incorporated by reference to Exhibit 1 of
Post-Effective Amendment No. 13 to the Registration Statement on Form
N-1A filed on July 17, 1997.
1 (c). Amendment, dated June 22, 1998, to the Declaration of Trust of the
Registrant is incorporated by reference to Exhibit 1 of Post-Effective
Amendment No. 15 to the Registration Statement on Form N-1A, filed on
November 24, 1998.
2. Amended and Restated By-Laws of the Registrant dated May 1, 1999, is
incorporated by reference to Exhibit 2 of Post-Effective Amendment No.
16 to the Registration Statement on Form N-1A, filed on
September 28, 1999.
3. Not applicable.
4. Amended Investment Management Agreement between the Registrant and
Morgan Stanley Dean Witter Advisors Inc., dated April 30, 1998, is
incorporated by reference to Exhibit 5 of Post-Effective Amendment No.
15 to the Registration Statement on Form N-1A, filed on
November 24, 1998.
5 (a). Amended Multi-Class Distribution Agreement between the Registrant and
Morgan Stanley Dean Witter Distributors Inc., dated June 22, 1998, is
incorporated by reference to Exhibit 5(a) of Post-Effective Amendment
No. 16 to the Registration Statement on Form N-1A, filed on
September 28, 1999.
5 (b). Selected Dealer Agreement between Morgan Stanley Dean Witter
Distributors Inc. and Dean Witter Reynolds Inc., dated
January 4, 1993, is incorporated by reference to Exhibit 6(b) of
Post-Effective Amendment No. 10 to the Registration Statement on Form
N-1A, filed on November 22, 1994.
5 (c). Omnibus Selected Dealer Agreement between Morgan Stanley Dean Witter
Distributors Inc. and National Financial Services Corporation, dated
October 17, 1998, is incorporated by reference to Exhibit 6 of
Post-Effective Amendment No. 15 to the Registration Statement of Form
N-1A, filed on November 24, 1998.
6. Amended and Restated Retirement Plan for Non-Interested Trustees or
Directors, dated May 8, 1997, is incorporated by reference to Exhibit
6 of Post-Effective Amendment No. 16 to the Registration Statement on
Form N-1A, filed on September 28, 1999.
7 (a). Custodian Agreement between The Bank of New York and the Registrant,
dated September 20, 1991, is incorporated by reference to Exhibit 9(a)
of the Initial Registration Statement on Form N-1A, filed on
August 28, 1995.
<PAGE>
7 (b). Amendment to the Custody Agreement dated April 17, 1996 is
incorporated by reference to Exhibit 8 of Post-Effective Amendment No.
12 to the Registration Statement on Form N-1A, filed on
November 25, 1996.
8 (a). Amended and Restated Transfer Agency Agreement between the Registrant
and Morgan Stanley Dean Witter Trust FSB, dated September 1, 2000,
filed herein.
8 (b). Amended Services Agreement between Morgan Stanley Dean Witter Advisors
Inc. and Morgan Stanley Dean Witter Services Company Inc., dated
June 22, 1998, is incorporated by reference to Exhibit 9 of
Post-Effective Amendment No. 15 to the Registration Statement on Form
N-1A, filed on November 24, 1998.
9. Opinion of Sheldon Curtis, Esq., dated August 8, 1985, is incorporated
by reference to Exhibit 9 of Post-Effective Amendment No. 16 to the
Registration Statement on Form N-1A, filed on September 28, 1999.
10 (a). Consent of Independent Auditors, filed herein.
10 (b). Consent of PricewaterhouseCoopers LLP, filed herein
11. Not applicable.
12. Not applicable.
13. Amended and Restated Plan of Distribution pursuant to Rule 12b-1
between the Registrant and Morgan Stanley Dean Witter Distributors
Inc., dated July 28, 1997, is incorporated by reference to Exhibit 15
of Post-Effective Amendment No. 13 to the Registration Statement on
Form N-1A, filed on July 17, 1997.
14. Amended Multiple Class Plan pursuant to Rule 18f-3, dated
August 15, 2000, filed herein.
16 (a). Code of Ethics of Morgan Stanley Dean Witter Advisors Inc., Morgan
Stanley Dean Witter Services Company Inc. and Morgan Stanley Dean
Witter Distributors Inc., filed herein.
16 (b). Code of Ethics of the Morgan Stanley Dean Witter Funds, filed herein.
Other. Powers of Attorney of Trustees are incorporated by reference to
Exhibit (Other) of Post-Effective Amendment No. 10 to the Registration
Statement on Form N-1A, filed on November 22, 1994 and Exhibit (Other)
of Post-Effective Amendment No. 14 to the Registration Statement on
Form N-1A, filed on November 26, 1997. The Power of Attorney for James
F. Higgins is filed herein.
Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND.
None
<PAGE>
Item 25. INDEMNIFICATION.
Pursuant to Section 5.3 of the Registrant's Declaration of Trust and under
Section 4.8 of the Registrant's By-Laws, the indemnification of the Registrant's
trustees, officers, employees and agents is permitted if it is determined that
they acted under the belief that their actions were in or not opposed to the
best interest of the Registrant, and, with respect to any criminal proceeding,
they had reasonable cause to believe their conduct was not unlawful. In
addition, indemnification is permitted only if it is determined that the actions
in question did not render them liable by reason of willful misfeasance, bad
faith or gross negligence in the performance of their duties or by reason of
reckless disregard of their obligations and duties to the Registrant. Trustees,
officers, employees and agents will be indemnified for the expense of litigation
if it is determined that they are entitled to indemnification against any
liability established in such litigation. The Registrant may also advance money
for these expenses provided that they give their undertakings to repay the
Registrant unless their conduct is later determined to permit indemnification.
Pursuant to Section 5.2 of the Registrant's Declaration of Trust and
paragraph 8 of the Registrant's Investment Management Agreement, neither the
Investment Manager nor any trustee, officer, employee or agent of the Registrant
shall be liable for any action or failure to act, except in the case of bad
faith, willful misfeasance, gross negligence or reckless disregard of duties to
the Registrant.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer, or controlling person of the Registrant
in connection with the successful defense of any action, suit or proceeding) is
asserted against the Registrant by such trustee, officer or controlling person
in connection with the shares being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act, and will
be governed by the final adjudication of such issue.
The Registrant hereby undertakes that it will apply the indemnification
provision of its by-laws in a manner consistent with Release 11330 of the
Securities and Exchange Commission under the Investment Company Act of 1940, so
long as the interpretation of Sections 17(h) and 17(i) of such Act remains in
effect.
Registrant, in conjunction with the Investment Manager, Registrant's
Trustees, and other registered investment management companies managed by the
Investment Manager, maintains insurance on behalf of any person who is or was a
Trustee, officer, employee, or agent of Registrant, or who is or was serving at
the request of Registrant as a trustee, director, officer, employee or agent of
another trust or corporation, against any liability asserted against him and
incurred by him or arising out of his position. However, in no event will
Registrant maintain insurance to indemnify any such person for any act for which
Registrant itself is not permitted to indemnify him.
<PAGE>
Item 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR
See "The Fund and Its Management" in the Prospectus regarding the business
of the investment advisor. The following information is given regarding officers
of Morgan Stanley Dean Witter Advisors Inc. ("MSDW Advisors"). MSDW Advisors is
a wholly-owned subsidiary of Morgan Stanley Dean Witter & Co.
The term "Morgan Stanley Dean Witter Funds" refers to the following
registered investment companies:
CLOSED-END INVESTMENT COMPANIES
(1) Morgan Stanley Dean Witter California Insured Municipal Income Trust
(2) Morgan Stanley Dean Witter California Quality Municipal Securities
(3) Morgan Stanley Dean Witter Government Income Trust
(4) Morgan Stanley Dean Witter High Income Advantage Trust
(5) Morgan Stanley Dean Witter High Income Advantage Trust II
(6) Morgan Stanley Dean Witter High Income Advantage Trust III
(7) Morgan Stanley Dean Witter Income Securities Inc.
(8) Morgan Stanley Dean Witter Insured California Municipal Securities
(9) Morgan Stanley Dean Witter Insured Municipal Bond Trust
(10) Morgan Stanley Dean Witter Insured Municipal Income Trust
(11) Morgan Stanley Dean Witter Insured Municipal Securities
(12) Morgan Stanley Dean Witter Insured Municipal Trust
(13) Morgan Stanley Dean Witter Municipal Income Opportunities Trust
(14) Morgan Stanley Dean Witter Municipal Income Opportunities Trust II
(15) Morgan Stanley Dean Witter Municipal Income Opportunities Trust III
(16) Morgan Stanley Dean Witter Municipal Income Trust
(17) Morgan Stanley Dean Witter Municipal Income Trust II
(18) Morgan Stanley Dean Witter Municipal Income Trust III
(19) Morgan Stanley Dean Witter Municipal Premium Income Trust
(20) Morgan Stanley Dean Witter New York Quality Municipal Securities
(21) Morgan Stanley Dean Witter Prime Income Trust
(22) Morgan Stanley Dean Witter Quality Municipal Income Trust
(23) Morgan Stanley Dean Witter Quality Municipal Investment Trust
(24) Morgan Stanley Dean Witter Quality Municipal Securities
OPEN-END INVESTMENT COMPANIES
(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Institutional Money Trust
(4) Active Assets Money Trust
(5) Active Assets Premier Money Trust
(6) Active Assets Tax-Free Trust
(7) Morgan Stanley Dean Witter 21st Century Trend Fund
(8) Morgan Stanley Dean Witter Aggressive Equity Fund
(9) Morgan Stanley Dean Witter American Opportunities Fund
(10) Morgan Stanley Dean Witter Balanced Growth Fund
(11) Morgan Stanley Dean Witter Balanced Income Fund
(12) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
<PAGE>
(13) Morgan Stanley Dean Witter California Tax-Free Income Fund
(14) Morgan Stanley Dean Witter Capital Growth Securities
(15) Morgan Stanley Dean Witter Competitive Edge Fund, "BEST IDEAS PORTFOLIO"
(16) Morgan Stanley Dean Witter Convertible Securities Trust
(17) Morgan Stanley Dean Witter Developing Growth Securities Trust
(18) Morgan Stanley Dean Witter Diversified Income Trust
(19) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
(20) Morgan Stanley Dean Witter Equity Fund
(21) Morgan Stanley Dean Witter European Growth Fund Inc.
(22) Morgan Stanley Dean Witter Federal Securities Trust
(23) Morgan Stanley Dean Witter Financial Services Trust
(24) Morgan Stanley Dean Witter Fund of Funds
(25) Morgan Stanley Dean Witter Global Dividend Growth Securities
(26) Morgan Stanley Dean Witter Global Utilities Fund
(27) Morgan Stanley Dean Witter Growth Fund
(28) Morgan Stanley Dean Witter Hawaii Municipal Trust
(29) Morgan Stanley Dean Witter Health Sciences Trust
(30) Morgan Stanley Dean Witter High Yield Securities Inc.
(31) Morgan Stanley Dean Witter Income Builder Fund
(32) Morgan Stanley Dean Witter Information Fund
(33) Morgan Stanley Dean Witter Intermediate Income Securities
(34) Morgan Stanley Dean Witter International Fund
(35) Morgan Stanley Dean Witter International SmallCap Fund
(36) Morgan Stanley Dean Witter Japan Fund
(37) Morgan Stanley Dean Witter Latin American Growth Fund
(38) Morgan Stanley Dean Witter Limited Term Municipal Trust
(39) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(40) Morgan Stanley Dean Witter Market Leader Trust
(41) Morgan Stanley Dean Witter Mid-Cap Equity Trust
(42) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(43) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(44) Morgan Stanley Dean Witter New Discoveries Fund
(45) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(46) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(47) Morgan Stanley Dean Witter Next Generation Trust
(48) Morgan Stanley Dean Witter North American Government Income Trust
(49) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(50) Morgan Stanley Dean Witter Real Estate Fund
(51) Morgan Stanley Dean Witter S&P 500 Index Fund
(52) Morgan Stanley Dean Witter S&P 500 Select Fund
(53) Morgan Stanley Dean Witter Select Dimensions Investment Series
(54) Morgan Stanley Dean Witter Select Municipal Reinvestment Fund
(55) Morgan Stanley Dean Witter Short-Term Bond Fund
(56) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(57) Morgan Stanley Dean Witter Small Cap Growth Fund
(58) Morgan Stanley Dean Witter Special Value Fund
(59) Morgan Stanley Dean Witter Strategist Fund
(60) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(61) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(62) Morgan Stanley Dean Witter Tax-Managed Growth Fund
(63) Morgan Stanley Dean Witter Technology Fund
<PAGE>
(64) Morgan Stanley Dean Witter Total Market Index Fund
(65) Morgan Stanley Dean Witter Total Return Trust
(66) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(67) Morgan Stanley Dean Witter U.S. Government Securities Trust
(68) Morgan Stanley Dean Witter Utilities Fund
(69) Morgan Stanley Dean Witter Value-Added Market Series
(70) Morgan Stanley Dean Witter Value Fund
(71) Morgan Stanley Dean Witter Variable Investment Series
(72) Morgan Stanley Dean Witter World Wide Income Trust
<TABLE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
---------------------- ------------------------------------------------
<S> <C>
Mitchell M. Merin President and Chief Operating Officer of Asset
President, Chief Management of Morgan Stanley Dean Witter & Co.
Executive Officer and ("MSDW); Chairman, Chief Executive Officer and Director
Director of Morgan Stanley Dean Witter Distributors Inc. ("MSDW
Distributors") and Morgan Stanley Dean Witter Trust FSB
("MSDW Trust"); President, Chief Executive Officer and
Director of Morgan Stanley Dean Witter Services Company
Inc. ("MSDW Services"); President of the Morgan Stanley
Dean Witter Funds; Executive Vice President and Director
of Dean Witter Reynolds Inc. ("DWR"); Director of various
MSDW subsidiaries; Trustee of various Van Kampen
investment companies.
Barry Fink General Counsel of Asset Management of MSDW;
Executive Vice President, Executive Vice President, Secretary, General Counsel
Secretary, General Counsel and Director of MSDW Services; Vice President and
and Director Secretary of MSDW Distributors; Vice President, Secretary
and General Counsel of the Morgan Stanley Dean Witter
Funds.
Joseph J. McAlinden Vice President of the Morgan Stanley Dean Witter Funds;
Executive Vice President Director of MSDW Trust.
and Chief Investment
Officer
Ronald E. Robison Executive Vice President, Chief Administrative Officer
Executive Vice President, and Director of MSDW Services; Vice President of the
Chief Administrative Morgan Stanley Dean Witter Funds.
Officer and Director
Edward C. Oelsner, III
Executive Vice President
Joseph R. Arcieri Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC AND NATURE OF CONNECTION
---------------------- ------------------------------------------------
<S> <C>
Peter M. Avelar Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of the High
Yield Group
Mark Bavoso Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Douglas Brown
Senior Vice President
Rosalie Clough
Senior Vice President
and Director of Marketing
Richard G. DeSalvo
Senior Vice President
and Director of Investment
Management Services
Richard Felegy
Senior Vice President
Sheila A. Finnerty Vice President of Morgan Stanley Dean Witter Prime
Senior Vice President Income Trust.
Edward F. Gaylor Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Director of the Research
Group
Robert S. Giambrone Senior Vice President of MSDW Services, MSDW
Senior Vice President Distributors and MSDW Trust and Director of MSDW Trust;
Vice President of the Morgan Stanley Dean Witter Funds.
Rajesh K. Gupta Vice President of various Morgan Stanley Dean Witter
Senior Vice President, Funds.
Director of the Taxable
Fixed Income Group and
Chief Administrative Officer -
Investments
Kenton J. Hinchliffe Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Kevin Hurley Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
---------------------- ------------------------------------------------
<S> <C>
Jenny Beth Jones Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Michelle Kaufman Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
John B. Kemp, III President of MSDW Distributors.
Senior Vice President
Anita H. Kolleeny Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of Sector
Rotation
Jonathan R. Page Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of the Money
Market Group
Ira N. Ross Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Guy G. Rutherfurd, Jr. Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of the Growth
Group
Rochelle G. Siegel Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
James Solloway Jr.
Senior Vice President
Katherine H. Stromberg Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Paul D. Vance Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of the Growth
and Income Group
Elizabeth A. Vetell
Senior Vice President
and Director of Shareholder
Communication
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
---------------------- ------------------------------------------------
<S> <C>
James F. Willison Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of the
Tax-Exempt Fixed
Income Group
Raymond A. Basile
First Vice President
Thomas F. Caloia First Vice President and Assistant Treasurer of
First Vice President MSDW Services; Assistant Treasurer of MSDW
and Assistant Distributors; Treasurer and Chief Financial and Accounting
Treasurer Officer of the Morgan Stanley Dean Witter Funds.
Thomas Chronert
First Vice President
Richard Colville First Vice President and Controller of MSDW Services;
First Vice President Assistant Treasurer of MSDW Distributors; First Vice
and Controller President and Treasurer of MSDW Trust.
Marilyn K. Cranney Assistant Secretary of DWR; First Vice President and
First Vice President Assistant Secretary of MSDW Services; Assistant
and Assistant Secretary Secretary of MSDW Distributors and the Morgan Stanley
Dean Witter Funds.
Salvatore DeSteno First Vice President of MSDW Services.
First Vice President
Peter W. Gurman
First Vice President
David Johnson
First Vice President
Stanley Kapica
First Vice President
Douglas J. Ketterer
First Vice President
Todd Lebo First Vice President and Assistant Secretary of MSDW
First Vice President and Services; Assistant Secretary of MSDW Distributors and
Assistant Secretary the Morgan Stanley Dean Witter Funds.
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
---------------------- ------------------------------------------------
<S> <C>
Lou Anne D. McInnis First Vice President and Assistant Secretary of MSDW
First Vice President and Services; Assistant Secretary of MSDW Distributors and
Assistant Secretary the Morgan Stanley Dean Witter Funds.
Carsten Otto First Vice President and Assistant Secretary of MSDW
First Vice President Services; Assistant Secretary of MSDW Distributors and
Assistant Secretary the Morgan Stanley Dean Witter Funds.
Carl F. Sadler
First Vice President
Ruth Rossi First Vice President and Assistant Secretary of MSDW
First Vice President and Services; Assistant Secretary of MSDW Distributors and
Assistant Secretary the Morgan Stanley Dean Witter Funds.
James P. Wallin
First Vice President
Robert Abreu
Vice President
Dale Albright
Vice President
Joan G. Allman
Vice President
Andrew Arbenz Vice President of Morgan Stanley Dean Witter Global
Vice President Utilities Fund.
Sean Aurigemma
Vice President
Armon Bar-Tur Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Thomas A. Bergeron
Vice President
Philip Bernstein
Vice President
Dale Boettcher
Vice President
Michelina Calandrella
Vice President
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
---------------------- ------------------------------------------------
<S> <C>
Ronald Caldwell
Vice President
Joseph Cardwell
Vice President
Christie Carr-Waldron
Vice President
Liam Carroll
Vice President
Philip Casparius
Vice President
Annette Celenza
Vice President
Aaron Clark Vice President of Morgan Stanley Dean Witter Market
Vice President Leader Trust
William Connerly
Vice President
Virginia Connors
Vice President
Michael J. Davey
Vice President
David Dineen Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
June Ewers
Vice President
Jeffrey D. Geffen Vice President of Morgan Stanley Dean Witter U.S.
Vice President Government Securities Trust
Sandra Gelpieryn
Vice President
Charmaine George
Vice President
Michael Geringer
Vice President
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
---------------------- ------------------------------------------------
<S> <C>
Gail Gerrity Burke
Vice President
Peter Gewirtz
Vice President
Mina Gitsevich
Vice President
Ellen Gold
Vice President
Amy Golub
Vice President
Stephen Greenhut
Vice President
Joan Hamilton
Vice President
Trey Hancock
Vice President
Matthew T. Haynes Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Peter Hermann Jr. Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
David T. Hoffman
Vice President
Thomas G. Hudson II
Vice President
Linda Jones
Vice President
Norman Jones
Vice President
Kevin Jung Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Carol Espejo-Kane
Vice President
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
---------------------- ------------------------------------------------
<S> <C>
Nancy Karole Kennedy
Vice President
Paula LaCosta Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Kimberly LaHart
Vice President
Thomas Lawlor
Vice President
Lester Lay
Vice President
Phuong Le
Vice President
Gerard J. Lian Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Cameron J. Livingstone
Vice President
Nancy Login Cole
Vice President
Sharon Loguercio
Vice President
Stephanie Lovinger
Vice President
Steven MacNamara
Vice President
Catherine Maniscalco Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Peter R. McDowell
Vice President
Albert McGarity
Vice President
Teresa McRoberts Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
---------------------- ------------------------------------------------
<S> <C>
Mark Mitchell
Vice President
Thomas Moore
Vice President
Julie Morrone Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Mary Beth Mueller
Vice President
David Myers Vice President of Morgan Stanley Dean Witter Natural
Vice President Resource Development Securities Inc.
James Nash
Vice President
Daniel Niland
Vice President
Richard Norris
Vice President
Hilary A. O'Neill
Vice President
Steven Orlov
Vice President
Mori Paulsen
Vice President
Anne Pickrell
Vice President
Reginald Rigaud
Vice President
Frances Roman
Vice President
Dawn Rorke
Vice President
John Roscoe Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
---------------------- ------------------------------------------------
<S> <C>
Hugh Rose
Vice President
Robert Rossetti Vice President of Morgan Stanley Dean Witter Competitive
Vice President Edge Fund.
Sally Sancimino Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Deborah Santaniello
Vice President
Patrice Saunders
Vice President
Donna Savoca
Vice President
Howard A. Schloss Vice President of Morgan Stanley Dean Witter Federal
Vice President Securities Trust.
Alison M. Sharkey
Vice President
Peter J. Seeley Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Ronald B. Silvestri Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Herbert Simon
Vice President
Martha Slezak
Vice President
Frank Smith
Vice President
Otha Smith
Vice President
Stuart Smith
Vice President
Robert Stearns
Vice President
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
---------------------- ------------------------------------------------
<S> <C>
Naomi Stein
Vice President
William Stevens
Vice President
Michael Strayhorn
Vice President
Marybeth Swisher
Vice President
Michael Thayer
Vice President
Bradford Thomas
Vice President
Barbara Toich
Vice President
Robert Vanden Assem
Vice President
Frank Vindigni
Vice President
David Walsh
Vice President
Alice Weiss Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
John Wong
Vice President
</TABLE>
The principal address of MSDW Advisors, MSDW Services, MSDW Distributors,
DWR, and the Morgan Stanley Dean Witter Funds is Two World Trade Center, New
York, New York 10048. The principal address of MSDW is 1585 Broadway, New York,
New York 10036. The principal address of MSDW Trust is 2 Harborside Financial
Center, Jersey City, New Jersey 07311.
<PAGE>
Item 27. PRINCIPAL UNDERWRITERS
(a) Morgan Stanley Dean Witter Distributors Inc. ("MSDW Distributors"), a
Delaware corporation, is the principal underwriter of the Registrant. MSDW
Distributors is also the principal underwriter of the following investment
companies:
(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Institutional Money Trust
(4) Active Assets Money Trust
(5) Active Assets Premier Money Trust
(6) Active Assets Tax-Free Trust
(7) Morgan Stanley Dean Witter 21st Century Trend Fund
(8) Morgan Stanley Dean Witter Aggressive Equity Fund
(9) Morgan Stanley Dean Witter American Opportunities Fund
(10) Morgan Stanley Dean Witter Balanced Growth Fund
(11) Morgan Stanley Dean Witter Balanced Income Fund
(12) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(13) Morgan Stanley Dean Witter California Tax-Free Income Fund
(14) Morgan Stanley Dean Witter Capital Growth Securities
(15) Morgan Stanley Dean Witter Competitive Edge Fund, "BEST IDEAS PORTFOLIO"
(16) Morgan Stanley Dean Witter Convertible Securities Trust
(17) Morgan Stanley Dean Witter Developing Growth Securities Trust
(18) Morgan Stanley Dean Witter Diversified Income Trust
(19) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
(20) Morgan Stanley Dean Witter Equity Fund
(21) Morgan Stanley Dean Witter European Growth Fund Inc.
(22) Morgan Stanley Dean Witter Federal Securities Trust
(23) Morgan Stanley Dean Witter Financial Services Trust
(24) Morgan Stanley Dean Witter Fund of Funds
(25) Morgan Stanley Dean Witter Global Dividend Growth Securities
(26) Morgan Stanley Dean Witter Global Utilities Fund
(27) Morgan Stanley Dean Witter Growth Fund
(28) Morgan Stanley Dean Witter Hawaii Municipal Trust
(29) Morgan Stanley Dean Witter Health Sciences Trust
(30) Morgan Stanley Dean Witter High Yield Securities Inc.
(31) Morgan Stanley Dean Witter Income Builder Fund
(32) Morgan Stanley Dean Witter Information Fund
(33) Morgan Stanley Dean Witter Intermediate Income Securities
(34) Morgan Stanley Dean Witter International Fund
(35) Morgan Stanley Dean Witter International SmallCap Fund
(36) Morgan Stanley Dean Witter Japan Fund
(37) Morgan Stanley Dean Witter Latin American Growth Fund
(38) Morgan Stanley Dean Witter Limited Term Municipal Trust
(39) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(40) Morgan Stanley Dean Witter Market Leader Trust
(41) Morgan Stanley Dean Witter Mid-Cap Equity Trust
(42) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(43) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(44) Morgan Stanley Dean Witter New Discoveries Fund
(45) Morgan Stanley Dean Witter New York Municipal Money Market Trust
<PAGE>
(46) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(47) Morgan Stanley Dean Witter Next Generation Trust
(48) Morgan Stanley Dean Witter North American Government Income Trust
(49) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(50) Morgan Stanley Dean Witter Prime Income Trust
(51) Morgan Stanley Dean Witter Real Estate Fund
(52) Morgan Stanley Dean Witter S&P 500 Index Fund
(53) Morgan Stanley Dean Witter S&P 500 Select Fund
(54) Morgan Stanley Dean Witter Short-Term Bond Fund
(55) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(56) Morgan Stanley Dean Witter Small Cap Growth Fund
(57) Morgan Stanley Dean Witter Special Value Fund
(58) Morgan Stanley Dean Witter Strategist Fund
(59) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(60) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(61) Morgan Stanley Dean Witter Tax-Managed Growth Fund
(62) Morgan Stanley Dean Witter Technology Fund
(63) Morgan Stanley Dean Witter Total Market Index Fund
(64) Morgan Stanley Dean Witter Total Return Trust
(65) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(66) Morgan Stanley Dean Witter U.S. Government Securities Trust
(67) Morgan Stanley Dean Witter Utilities Fund
(68) Morgan Stanley Dean Witter Value-Added Market Series
(69) Morgan Stanley Dean Witter Value Fund
(70) Morgan Stanley Dean Witter Variable Investment Series
(71) Morgan Stanley Dean Witter World Wide Income Trust
(b) The following information is given regarding directors and officers of MSDW
Distributors not listed in Item 26 above. The principal address of MSDW
Distributors is Two World Trade Center, New York, New York 10048. Other than
Messrs. Higgins and Purcell, who are Trustees of the Registrant, none of the
following persons has any position or office with the Registrant.
NAME POSITIONS AND OFFICE WITH MSDW DISTRIBUTORS
James F. Higgins Director
Philip J. Purcell Director
John Schaeffer Director
Charles Vadala Senior Vice President and Financial Principal.
Item 28. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained by the Investment Manager at its offices, except records relating to
holders of shares issued by the Registrant, which are maintained by the
Registrant's Transfer Agent, at its place of business as shown in the
prospectus.
<PAGE>
Item 29. MANAGEMENT SERVICES
Registrant is not a party to any such management-related service contract.
Item 30. UNDERTAKINGS
Registrant hereby undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York on the 28th day of November, 2000.
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
By /s/ Barry Fink
-----------------------------------
Barry Fink
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 18 has been signed below by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
<S> <C> <C>
(1) Principal Executive Officer Chief Executive Officer,
Trustee and Chairman
By /s/Charles A. Fiumefreddo 11/28/00
---------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/Thomas F. Caloia 11/28/00
---------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
James F. Higgins
By /s/Barry Fink 11/28/00
---------------------------
Barry Fink
Attorney-in-Fact
Michael Bozic Manuel H. Johnson
Edwin J. Garn Michael E. Nugent
Wayne E. Hedien John L. Schroeder
By /s/David M. Butowsky 11/28/00
---------------------------
David M. Butowsky
Attorney-in-Fact
</TABLE>
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
EXHIBIT INDEX
8. Amended and Restated Transfer Agency and Service Agreement
between the Registrant and Morgan Stanley Dean Witter Trust FSB
10 (a). Consent of Independent Auditors
10 (b). Consent of PricewaterhouseCoopers LLP
14. Amended Multi-Class Plan pursuant to Rule 18f-3
16 (a). Codes of Ethics of Morgan Stanley Dean Witter Advisors Inc.,
Morgan Stanley Dean Witter Services Company Inc. and Morgan
Stanley Dean Witter Distributors Inc.
16 (b). Code of Ethics of the Morgan Stanley Dean Witter Funds
Other Power of Attorney of James F. Higgins
