<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST TWO WORLD TRADE CENTER,
LETTER TO THE SHAREHOLDERS SEPTEMBER 30, 2000 NEW YORK, NEW YORK 10048
DEAR SHAREHOLDER:
During the fiscal year ended September 30, 2000, the U.S. equity market
experienced extreme volatility, with technology and telecommunications stocks
leading the market both on the way up and on the decline. With many of these
stocks trading significantly below their early-March peaks, investor's focal
points shifted away from the potential market for technology products and what
proved to be a short-lived belief in virtually unlimited growth potential for
the Internet. Concerns over profitability and valuations became more prominent
as a considerable number of these companies faced near-term liquidity crises and
problems with the long-term viability of their business plans. However, a
rotation out of technology stocks has been a major positive for sectors such as
health care, because of an improving legislative environment and stronger
fundamentals, as well as energy, with commodity prices near 10-year highs and
surging technology-driven demand.
Despite an anemic high-yield bond market and a greatly reduced initial public
offering calendar during the latter half of the period, the convertible market
remained an attractive financing alternative that companies continued to tap
into throughout the fiscal year.
PERFORMANCE
For the 12-month period ended September 30, 2000, Morgan Stanley Dean Witter
Convertible Securities Trust's Class B shares posted a total return of 32.23
percent compared to 27.24 percent for the Goldman Sachs Convertible 100 Index.
For the same period, the Fund's Class A, C and D shares returned 33.32 percent,
32.26 percent and 33.68 percent, respectively. The performance of the Fund's
four share classes varies because each has different expenses. The total return
figures given assume the reinvestment of all distributions but do not reflect
the deduction of any applicable sales charges. The accompanying chart compares
the Fund's performance to that of the Goldman Sachs Convertible 100 Index.
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
LETTER TO THE SHAREHOLDERS SEPTEMBER 30, 2000, CONTINUED
Despite the recent market downturn, core positions in Internet infrastructure
and semiconductors helped the Fund outperform its benchmark during the period.
Overweighted positions in the energy and biotechnology sectors also benefited
the Fund, in the sense that gains in these sectors helped to offset the steep
Nasdaq decline. An upgrade in overall credit quality, partly through
participation in the primary market, provided the Fund with greater downside
protection during the market selloff. In addition, the proliferation of
high-credit-quality convertibles with attractively valued underlying equities
helped convertibles outperform the broader equity markets during the period.
PORTFOLIO STRATEGY
The Fund uses a growth-oriented, bottom-up approach to evaluate companies and
determine their investment merits, seeking thus to identify companies and
sectors with strong underlying fundamentals and solid long-term growth
potential. Over the past year, the Fund repositioned its sector weightings to
better reflect the composition of the convertible universe, maintaining
overweighted or underweighted positions based on the outlooks for various
industries. The addition of high-quality large-cap issues has also improved the
Fund's credit profile while offering substantial equity participation. As of
September 30, 2000, the Fund had exposure to 53 different industries and a
weighting of approximately 28 percent in equities.
In attempting to control volatility, the Fund generally concentrates on issues
with shorter maturities while diversifying its assets across a wide range of
industries. The Fund also searches for convertible securities with good
risk/reward characteristics. These traits include a relatively high yield, to
support the convertible if the underlying stock declines, and reasonable
conversion premiums, to ensure participation in any appreciation of the
underlying stock.
LOOKING AHEAD
Despite the significant gains made by convertibles during the fiscal year, we
believe the market remains highly attractive from a risk/reward perspective. The
recent improvement in the credit profile of the convertible universe and the
more reasonable underlying equity valuations that have resulted from this year's
market decline substantiate this view. The Fund's increased exposure to
larger-capitalization names may benefit the Fund in difficult credit
environments and provide broader participation in equity markets. It is our
expectation that convertibles can perform well over the long run, offering
potentially competitive returns in modestly increasing, stable or declining
equity markets, though they may tend to lag equities during very strong periods.
2
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
LETTER TO THE SHAREHOLDERS SEPTEMBER 30, 2000, CONTINUED
We appreciate your ongoing support of Morgan Stanley Dean Witter Convertible
Securities Trust and look forward to continuing to serve your investment needs.
Very truly yours,
/s/ Charles A. Fiumefreddo /s/ Mitchell M. Merin
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
CHAIRMAN OF THE BOARD PRESIDENT
3
<PAGE>
MORGAN STANLEY DEAN WITTER CONVERTIBLE SECURITIES TRUST
FUND PERFORMANCE SEPTEMBER 30, 2000
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
GROWTH OF $10,000 -- CLASS B SHARES
($ in Thousands)
<TABLE>
<CAPTION>
FUND GOLDMAN SACHS (4)
<S> <C> <C> <C>
September 1990 $10,000 $10,000
September 1991 $11,893 $12,568
September 1992 $12,569 $14,830
September 1993 $15,488 $17,565
September 1994 $16,265 $18,012
September 1995 $18,490 $21,404
September 1996 $21,209 $24,403
September 1997 $26,168 $30,449
September 1998 $22,501 $28,183
September 1999 $25,790 $34,203
September 2000 $34,102 (3) $43,519
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE. WHEN YOU SELL FUND SHARES, THEY MAY BE WORTH
LESS THAN THEIR ORIGINAL COST. PERFORMANCE FOR CLASS A, CLASS C, AND CLASS D
SHARES WILL VARY FROM THE PERFORMANCE OF CLASS B SHARES SHOWN ABOVE DUE TO
DIFFERENCES IN SALES CHARGES AND EXPENSES.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
----------------------------------------------------------------------------------------------------------------
CLASS A SHARES* CLASS B SHARES**
----------------------------------------------------- -----------------------------------------------------
PERIOD ENDED 9/30/00 PERIOD ENDED 9/30/00
------------------------- -------------------------
<S> <C> <C> <C> <C> <C>
1 Year 33.32%(1) 26.32%(2) 1 Year 32.23%(1) 27.23%(2)
Since Inception (7/28/97) 11.69%(1) 9.81%(2) 5 Years 13.02%(1) 12.78%(2)
10 Years 13.05%(1) 13.05%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES+ CLASS D SHARES#
----------------------------------------------------- -----------------------------------------------------
PERIOD ENDED 9/30/00 PERIOD ENDED 9/30/00
------------------------- -------------------------
<S> <C> <C> <C> <C> <C>
1 Year 32.26%(1) 31.26%(2) 1 Year 33.68%(1)
Since Inception (7/28/97) 10.84%(1) 10.84%(2) Since Inception (7/28/97) 11.93%(1)
</TABLE>
------------------------
(1) Figure shown assumes reinvestment of all distributions and the deduction of
the maximum applicable sales charge.
(2) Figure shown assumes reinvestment of all distributions and the deduction of
the maximum applicable sales charge. See the Fund's current prospectus for
complete details on fees and sales charges.
(3) Closing value assuming a complete redemption on September 30, 2000.
(4) The Goldman Sachs Convertible 100 Index tracks the performance of 100
equally weighted convertible issues with 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.
* The maximum front-end sales charge for Class A is 5.25%.
** The maximum contingent deferred sales charge (CDSC) for Class B is 5.0%.
The CDSC declines to 0% after six years.
+ The maximum contingent deferred sales charge for Class C shares is 1% for
shares redeemed within one year of purchase.
# Class D shares have no sales charge.
4
<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
5
<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
6
<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
7
<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
8
<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
9
<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
10
<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%)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
11
<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
12
<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
13
<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
14
<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
15
<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.
16
<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.
17
<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
18
<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.
19
<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>
20
<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
21
<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
22
<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
23
<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
24
<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.
------------------------------------------------------------------
25
<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.
26
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
James F. Higgins
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Mitchell M. Merin
President
Barry Fink
Vice President, Secretary and General Counsel
Peter M. Avelar
Vice President
Ellen Gold
Assistant Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281
INVESTMENT MANAGER
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus of
the Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus. Read the
prospectus carefully before investing.
Morgan Stanley Dean Witter Distributors Inc., member NASD.
--------------------------
MORGAN STANLEY
DEAN WITTER
CONVERTIBLE
SECURITIES TRUST
[GRAPHIC]
ANNUAL REPORT
SEPTEMBER 30, 2000
