<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST Two World Trade Center,
LETTER TO THE SHAREHOLDERS September 30, 1997 New York, New York 10048
DEAR SHAREHOLDER:
The first half of the fiscal year ended September 30, 1997, was very
challenging for small-capitalization stocks. During this period, small-cap
stocks experienced an unprecedented multiple contraction. This was due in
part to investor fears of rising interest rates, poor earnings reports for
small-cap companies and a shift toward more liquid, large-capitalization
growth stocks. By the end of March, relative valuations between large and
small companies hit their highest level in several years.
This valuation disparity did not go unnoticed by investors as many large-cap
companies started to see some weakness in their premium valuations and
earnings. In late April and May, small-cap stocks began to show some signs of
breaking out of their slump, as they rebounded sharply off their early April
lows. This was largely attributable to the valuation disparity that existed
between large and small companies, as well as to the fact that the Federal
Reserve Board did not raise short-term interest rates at its May meeting.
PERFORMANCE
On July 28, 1997, Dean Witter Developing Growth Securities began offering
four classes of shares -- A, B, C and D -each with its own sales charge and
distribution fee structure. A revised prospectus, which includes complete
details regarding the Fund's conversion to multiple classes of shares, was
mailed to shareholders in mid-summer.
The Fund's Class B shares produced a return of 16.38 percent during the
12-month period ended September 30, 1997. This compares to returns of 21.04
percent for the Lipper Small Cap Fund Index (Lipper Index) and 33.19 percent
for the Russell 2000 Index and 40.44 percent for the Standard & Poor's 500
Composite Stock Price Index (S&P 500 Index). The Fund underperformed the
Russell 2000 Index during the first half of the fiscal year primarily due to
the heavier weighting that index applies to the financial, real estate and
energy sectors, all of which performed strongly during this period. During the
second half of the fiscal year, the Fund recovered sharply from its April lows
- -outperforming the Russell 2000
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
LETTER TO THE SHAREHOLDERS September 30, 1997, continued
Index -as investors moved into small-cap stocks. The accompanying chart
illustrates the growth of a hypothetical $10,000 investment in the Fund's
Class B shares from September 30, 1987, through September 30, 1997, versus a
similar investment in the issues that comprise the Lipper Index, the Russell
2000 Index and the S&P 500 Index. The Fund's inception date was April 29,
1983.
PORTFOLIO STRATEGY
During the period, the Fund's exposure to the technology sector remained
steady at 27 percent of net assets, while exposure to the energy sector
increased to over 9 percent. The Fund's cash position was reduced to 4
percent to take advantage of positive market conditions.
The Fund sold its holdings in PeopleSoft, Inc. (designer/distributor of human
resource and financial administration client/server software), ASM
Lithography Holding NV (developer/manufacturer of advanced lithography
systems for the semiconductor industry) and HFS, Inc. (leading franchiser of
hotel properties and residential real estate brokerage offices). These
companies were eliminated from the portfolio because they no longer met the
Fund's capitalization requirements. Added to the portfolio were Mail-Well,
Inc. (manufacturer/printer of envelopes, advertising literature, high-end
catalogs and annual reports), Steris Corp. (maker of infection prevention
systems for the health care market) and HA-LO Industries, Inc. (leading
distributor of specialty promotional products and a leading provider of
telemarketing services). These companies offer the potential for strong
growth at attractive valuations.
LOOKING AHEAD
Even after their strong recovery over the second half of the Fund's fiscal
year, many small-cap stocks remain attractively priced when compared to their
large-cap counterparts. Given their relative attractive valuations, we believe
that small-cap stocks will once again attain market dominance and offer the
greatest potential for long-term capital appreciation. As we enter the new
fiscal year, the Fund remains fully invested in high-quality small-,
medium-and micro-cap companies and is well positioned to take advantage of any
market opportunities.
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE PURPOSE OF EDGAR
FILING.]
DEAN WITTER DEVELOPING GROWTH Class B
GROWTH OF $10,000
Date Fund S & P 500(4) Lipper(6) Russell 2000(6)
---- ---- ------------ --------- --------------
September 30, 1987 $10,000 $10,000 $10,000 $10,000
September 30, 1988 $8,823 $6,762 $9,158 $8,928
September 30, 1989 $10,336 $11,647 $11,472 $10,848
September 30, 1990 $8,180 $10,571 $8,938 $7,903
September 30, 1991 $12,885 $13,861 $12,933 $11,469
September 30, 1992 $11,188 $15,390 $13,654 $12,492
September 30, 1993 $18,790 $17,388 $18,063 $16,639
September 30, 1994 $17,122 $18,029 $18,456 $17,074
September 30, 1995 $25,146 $23,365 $23,966 $21,070
September 30, 1996 $29,555 $28,139 $28,055 $23,837
September 30, 1997 $34,395(3) $39,517 $33,959 $31,749
Average Annual Total Returns
1 Year 5 Years 10 Years
------ ------- --------
16.38(1) 25.18(1) 13.15(1)
11.42(2) 25.02(2) 13.15(2)
Past performance is not predictive of future returns.
(1) Figure show assumes reinvestment of all distributions and does not
reflect the deduction of any sales charges.
(2) Figure show assumes reinvestment of all distributions and the deduction
of the maximum applicable contingent deferred sales charge (CDSC)
(1 year-5%, 5 years-2%, 10 years-0%). See the Fund's current prospectus
for complete details on fees and sales charges.
(3) Closing Value assuming a complete redemption on September 30, 1997.
(4) The Standard and Poor's 500 Composite Stock Price Index (S & P 500) is
a broad-based index, the performance of which is based on the average
performance of 500 widely held common stocks. The index does not
include any expenses, fees or charges. The index is unmanaged and
should not be considered an investment.
(5) The Lipper Small Cap Fund Index is an equally weighted performance index
of the largest qualifying funds (based on net assets) in the Lipper Small
Cap Funds objective. The Index, which is adjusted for capital gains
distributions and income dividends, is unmanaged and should not be
considered an investment. There are currently 30 funds represented in this
index.
(6) The Russell 2000 Index is a capitalization weighted index which is
comprised of 2000 of the smallest stocks (on the basis of capitalization)
in the Russell 3000 Index. The index does not include any expenses, fees
or charges. The index is unmanaged and should not be considered an
investment.
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
LETTER TO THE SHAREHOLDERS September 30, 1997, continued
We appreciate your support of Dean Witter Developing Growth Securities and
look forward to continuing to serve your investment needs and objectives.
Very truly yours,
/s/ Charles A. Fiumefreddo
CHARLES A. FIUMEFREDDO
Chairman of the Board
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
RESULTS OF SPECIAL MEETING (unaudited)
On May 21, 1997, a special meeting of the Fund's shareholders was held for
the purpose of voting on four separate matters, the results of which are as
follows:
(1) APPROVAL OF A NEW INVESTMENT MANAGEMENT AGREEMENT BETWEEN THE FUND AND
DEAN WITTER INTERCAPITAL INC. IN CONNECTION WITH THE MERGER OF MORGAN
STANLEY GROUP INC. WITH DEAN WITTER, DISCOVER & CO.:
<TABLE>
<CAPTION>
<S> <C>
For ....... 15,870,553
Against .. 503,437
Abstain .. 1,513,617
</TABLE>
(2) ELECTION OF TRUSTEES:
<TABLE>
<CAPTION>
<S> <C>
Michael Bozic
For ................... 16,654,526
Withheld .............. 1,233,081
Charles A. Fiumefreddo
For ................... 16,673,344
Withheld .............. 1,214,263
Edwin J. Garn
For ................... 16,675,178
Withheld .............. 1,212,429
John R. Haire
For ................... 16,634,415
Withheld .............. 1,253,192
Wayne E. Hedien
For ................... 16,673,480
Withheld .............. 1,214,127
Dr. Manuel H. Johnson
For ................... 16,690,408
Withheld .............. 1,197,199
Michael E. Nugent
For ................... 16,693,972
Withheld .............. 1,193,635
Philip J. Purcell
For ................... 16,701,091
Withheld .............. 1,186,516
John L. Schroeder
For ................... 16,671,708
Withheld .............. 1,215,899
</TABLE>
(3) APPROVAL OF A NEW INVESTMENT POLICY WITH RESPECT TO INVESTMENTS IN
CERTAIN OTHER INVESTMENT COMPANIES:
<TABLE>
<CAPTION>
<S> <C>
For ...... 15,113,122
Against . 995,704
Abstain . 1,778,781
</TABLE>
(4) RATIFICATION OF THE SELECTION OF PRICE WATERHOUSE LLP AS THE FUND'S
INDEPENDENT ACCOUNTANTS:
<TABLE>
<CAPTION>
<S> <C>
For ...... 16,216,949
Against . 333,862
Abstain . 1,336,796
</TABLE>
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
PORTFOLIO OF INVESTMENTS September 30, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (95.8%)
Advertising (2.9%)
100,000 CKS Group, Inc.* ................................................ $ 3,700,000
230,000 HA-LO Industries, Inc.* ......................................... 6,555,000
232,500 Outdoor Systems, Inc.* .......................................... 6,103,125
142,100 Universal Outdoor Holdings, Inc.* ............................... 5,257,700
130,000 Valassis Communications, Inc.* .................................. 4,143,750
--------------
25,759,575
--------------
Aerospace (1.1%)
150,000 Aviation Sales Co.* ............................................. 4,537,500
93,000 BE Aerospace, Inc.* ............................................. 3,348,000
45,600 Triumph Group, Inc.* ............................................ 1,521,900
--------------
9,407,400
--------------
Air Freight (1.3%)
202,500 Air Express International Corp. ................................. 7,365,937
115,000 Hub Group, Inc. (Class A)* ...................................... 4,240,625
--------------
11,606,562
--------------
Airlines (0.4%)
120,000 Midwest Express Holdings, Inc.* ................................. 3,847,500
--------------
Apparel (0.5%)
30,100 Big Dog Holdings, Inc.* ......................................... 421,400
90,000 Quiksilver, Inc.* ............................................... 3,285,000
41,500 Tefron Ltd* ..................................................... 830,000
--------------
4,536,400
--------------
Auto Parts -Equipment (0.6%)
48,000 Citation Corp.* ................................................. 930,000
70,000 Hayes Wheels International, Inc.* ............................... 2,371,250
50,000 Tower Automotive, Inc.* ......................................... 2,250,000
--------------
5,551,250
--------------
Automotive (0.6%)
65,100 Avis Rent-A-Car, Inc.* .......................................... 1,554,262
104,600 Budget Group, Inc. (Class A)* ................................... 3,451,800
--------------
5,006,062
--------------
Biotechnology (3.7%)
90,000 BioChem Pharma, Inc. (Canada)* .................................. 2,835,000
79,600 Dekalb Genetics Corp. (Class B) ................................. 3,532,250
100,000 Gilead Sciences, Inc.* .......................................... 4,437,500
100,000 IDEC Pharmaceuticals Corp.* ..................................... 4,175,000
50,000 Miravant Medical Technologies Inc.* ............................. 2,750,000
120,000 PathoGenesis Corp.* ............................................. 4,245,000
60,000 Protein Design Labs, Inc.* ...................................... 2,295,000
138,000 SangStat Medical Corp.* ......................................... 4,226,250
100,000 Vertex Pharmaceuticals, Inc.* ................................... 3,775,000
--------------
32,271,000
--------------
Broadcast Media (0.7%)
135,000 Jacor Communications, Inc.* ..................................... 5,956,875
--------------
Business Services (2.7%)
65,000 Billing Information Concepts Corp.* ............................. 2,258,750
147,100 Hagler Bailly, Inc.* ............................................ 3,732,662
136,000 Metzler Group, Inc.* ............................................ 5,338,000
18,300 ProBusiness Services, Inc.* ..................................... 347,700
140,000 Saville Systems Ireland PLC (ADR)(Ireland)* ..................... 9,800,000
140,000 Transaction Network Services, Inc.* ............................. 2,485,000
--------------
23,962,112
--------------
Commercial Services (3.9%)
46,200 Action Performance Companies, Inc.* ............................. 1,334,025
165,000 Checkfree Corp.* ................................................ 3,475,312
160,000 Coinmach Laundry Corp.* ......................................... 3,820,000
66,800 Galileo International, Inc. ..................................... 1,866,225
45,000 International Total Services, Inc.* ............................. 686,250
180,000 Iron Mountain, Inc.* ............................................ 6,300,000
164,000 Lason Holdings, Inc.* ........................................... 4,510,000
69,100 Pierce Leahy Corp.* ............................................. 1,874,337
65,000 Pittway Corp. (Class A) ......................................... 4,225,000
140,000 U.S. Rentals, Inc.* ............................................. 3,683,750
150,000 Vestcom International, Inc.* .................................... 2,850,000
--------------
34,624,899
--------------
Computer Hardware (1.1%)
53,900 Box Hill Systems Corp.* ......................................... 943,250
105,000 Creative Technology Ltd. (Singapore)* ........................... 2,684,062
200,000 Intergraph Corp.* ............................................... 2,162,500
150,000 Telxon Corp ..................................................... 3,618,750
--------------
9,408,562
--------------
Computer Services (3.1%)
190,000 Affiliated Computer Services, Inc. (Class A)* ................... 4,702,500
100,000 Computer Task Group, Inc. ....................................... 4,193,750
162,500 Information Management Resources, Inc.* ......................... 4,509,375
126,000 Keane, Inc.* .................................................... 4,000,500
150,000 ONTRACK Data International, Inc.* ............................... 3,431,250
60,600 Pomeroy Computer Resources, Inc.* ............................... 2,575,500
150,000 Safeguard Scientifics, Inc.* .................................... 4,387,500
--------------
27,800,375
--------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
PORTFOLIO OF INVESTMENTS September 30, 1997, continued
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------
Computer Software (4.5%)
85,000 Arbor Software Corp.* ........................................... $ 3,931,250
100,000 Aspect Development, Inc.* ....................................... 4,075,000
200,000 BEA Systems, Inc.* .............................................. 3,575,000
116,000 Cognos, Inc. (Canada)* .......................................... 2,747,750
130,000 Credit Management Solutions, Inc.* .............................. 2,307,500
120,000 CyberMedia, Inc.* ............................................... 3,202,500
120,000 Harbinger Corp.* ................................................ 4,365,000
200,000 Intersolv, Inc.* ................................................ 3,087,500
24,800 Pervasive Software Inc.* ........................................ 279,000
68,000 Quickturn Design System, Inc.* .................................. 994,500
100,000 Rational Software Corp.* ........................................ 1,593,750
100,000 System Software Associates, Inc.* ............................... 1,462,500
90,000 Viasoft, Inc.* .................................................. 4,443,750
90,000 Wind River Systems, Inc.* ....................................... 3,690,000
--------------
39,755,000
--------------
Computer Software & Services (2.1%)
22,900 Best Software, Inc.* ............................................ 334,912
85,000 Computer Management Sciences, Inc.* ............................. 1,944,375
50,000 Documentum, Inc.* ............................................... 1,650,000
150,000 Indus International, Inc.* ...................................... 2,325,000
55,300 Information Management Associates, Inc.* ........................ 677,425
11,500 J.D. Edwards & Co.* ............................................. 385,250
150,000 MAPICS, Inc.* ................................................... 1,912,500
220,000 Simulation Sciences, Inc.* ...................................... 4,331,250
115,000 Transaction Systems Architects, Inc. (Class A)* ................. 4,657,500
--------------
18,218,212
--------------
Consumer Products (0.8%)
150,000 Chattem, Inc.* .................................................. 2,625,000
100,000 Samsonite Corp.* ................................................ 4,375,000
--------------
7,000,000
--------------
Distributors (1.2%)
65,000 Black Box Corp.* ................................................ 2,811,250
88,100 JLK Direct Distribution Inc. (Class A)* ......................... 2,637,494
180,000 MicroAge, Inc.* ................................................. 5,175,000
--------------
10,623,744
--------------
Drugs (2.9%)
143,000 Alpharma Inc. (Class A) ......................................... 3,199,625
145,000 Dura Pharmaceuticals, Inc.* ..................................... 6,325,625
330,000 Ivax Corp.* ..................................................... 3,877,500
130,000 Jones Medical Industries, Inc. .................................. 4,095,000
110,000 Medicis Pharmaceutical Corp. (Class A)* ......................... 5,005,000
165,000 Twinlab Corp.* .................................................. 3,341,250
--------------
25,844,000
--------------
Education (0.5%)
140,000 Education Management Corp.* ..................................... 3,640,000
34,700 EduTrek International, Inc. (Class A)* .......................... 910,875
--------------
4,550,875
--------------
Electrical Equipment (1.3%)
41,000 AFC Cable Systems, Inc.* ........................................ 1,445,250
220,000 MagneTek, Inc.* ................................................. 4,922,500
120,000 Technitrol, Inc. ................................................ 4,777,500
--------------
11,145,250
--------------
Electronics (0.4%)
37,800 FARO Technologies, Inc.* ........................................ 618,975
53,000 Flextronics International, Ltd.* ................................ 2,510,875
--------------
3,129,850
--------------
Electronics -Instrumentation (1.4%)
65,000 Applied Power, Inc. (Class A) .................................. 4,090,937
117,000 Datum, Inc.* .................................................... 5,338,125
54,000 National Instruments Corp.* ..................................... 2,477,250
--------------
11,906,312
--------------
Entertainment (0.7%)
70,000 Cinar Films, Inc. (Class B)(Canada)* ............................ 2,668,750
135,000 Gemstar International Group Ltd.* ............................... 3,375,000
--------------
6,043,750
--------------
Environmental (3.5%)
290,000 Allied Waste Industries, Inc.* .................................. 5,546,250
100,000 Memtec Ltd. (ADR)(Australia)* ................................... 3,437,500
190,000 Newpark Resources, Inc.* ........................................ 7,469,375
260,000 Philip Services Corp. (Canada)* ................................. 4,745,020
243,190 Tetra Technologies, Inc.* ....................................... 5,203,307
100,000 U.S. Filter Corp.* .............................................. 4,306,250
--------------
30,707,702
--------------
Finance & Brokerage (2.1%)
133,333 Legg Mason, Inc. ............................................... 7,033,333
260,000 McDonald & Co. Investments, Inc. ................................ 7,572,500
215,250 Morgan Keegan, Inc. ............................................. 4,264,641
--------------
18,870,474
--------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
PORTFOLIO OF INVESTMENTS September 30, 1997, continued
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------
Financial (1.2%)
300,000 Cadiz Land Company, Inc.* ....................................... $ 2,118,750
50,000 Finova Group Inc. ............................................... 4,731,250
125,000 HealthCare Financial Partners, Inc.* ............................ 3,796,875
--------------
10,646,875
--------------
Food Distribution (0.3%)
140,000 Ralcorp Holdings, Inc.* ......................................... 2,616,250
--------------
Food Processing (0.4%)
110,000 Smithfield Foods, Inc.* ......................................... 3,300,000
--------------
Health Services (3.7%)
250,000 Assisted Living Concepts, Inc.* ................................. 4,000,000
100,000 Complete Management, Inc.* ...................................... 1,893,750
2,600 HealthPlan Services Corp. ....................................... 54,925
165,000 HPR Inc.* ....................................................... 3,619,687
117,000 Magellan Health Services, Inc.* ................................. 3,714,750
340,000 NovaCare, Inc.* ................................................. 5,865,000
65,000 Rehabcare Group, Inc.* .......................................... 2,307,500
70,000 Total Renal Care Holdings, Inc.* ................................ 3,500,000
200,000 Trigon Healthcare, Inc.* ........................................ 4,962,500
100,000 United Wisconsin Services, Inc. ................................. 2,962,500
--------------
32,880,612
--------------
Home Building (0.6%)
100,000 Continental Homes Holding Corp. ................................. 2,931,250
100,000 Crossmann Communities, Inc.* .................................... 2,225,000
--------------
5,156,250
--------------
Hotels/Motels (0.9%)
110,000 Bristol Hotel Co.* .............................................. 3,073,125
160,000 Prime Hospitality Corp.* ........................................ 3,610,000
155,000 U.S. Franchise Systems, Inc. (Class A)* ......................... 1,104,375
--------------
7,787,500
--------------
Insurance (2.2%)
118,000 CMAC Investment Corp. ........................................... 6,327,750
100,000 Delphi Financial Group, Inc. (Class A)* ......................... 4,293,750
100,000 Fremont General Corp. ........................................... 4,775,000
17,800 Philadelphia Consolidated Holding Corp.* ........................ 770,962
165,000 Presidential Life Corp. ......................................... 3,279,375
--------------
19,446,837
--------------
Internet (0.4%)
19,000 DBT Online, Inc.* ............................................... 1,189,875
60,000 Lycos, Inc.* .................................................... 2,032,500
6,700 Network Solutions, Inc. (Class A)* .............................. 142,375
--------------
3,364,750
--------------
Leisure Time (1.0%)
170,000 Fairfield Communities, Inc.* .................................... 6,385,625
75,000 Steiner Leisure Ltd.* ........................................... 2,765,625
--------------
9,151,250
--------------
Manufacturing -Diversified (1.0%)
120,000 Buckeye Cellulose Corp.* ........................................ 4,837,500
80,000 Mueller Industries, Inc.* ....................................... 3,635,000
--------------
8,472,500
--------------
Medical Products & Supplies (3.8%)
210,000 Ballard Medical Products ........................................ 5,066,250
55,000 Closure Medical Corp.* .......................................... 1,897,500
100,000 Coventry Corp.* ................................................. 1,643,750
59,500 Orthofix International N.V.* .................................... 736,313
95,000 Sabratek Corp.* ................................................. 3,420,000
165,000 Safeskin Corp.* ................................................. 7,280,625
60,000 Schick Technologies, Inc.* ...................................... 1,110,000
60,000 Sofamor Danek Group, Inc.* ...................................... 3,427,500
200,000 Steris Corp.* ................................................... 8,212,500
20,000 Techne Corp.* ................................................... 705,000
--------------
33,499,438
--------------
Medical Services (1.6%)
41,100 Coast Dental Services, Inc.* .................................... 1,222,725
110,000 ESC Medical Systems Ltd. (Israel)* .............................. 4,138,750
75,000 Lincare Holdings, Inc.* ......................................... 3,768,750
97,000 Mentor Corp. .................................................... 3,067,625
169,000 Vision Twenty-One, Inc.* ........................................ 2,281,500
--------------
14,479,350
--------------
<PAGE>
Medical Supplies (1.0%)
166,250 Cyberonics Inc.* ................................................ 2,670,391
65,900 Gulf South Medical Supply, Inc.* ................................ 1,754,588
115,000 Schein (Henry), Inc.* ........................................... 4,082,500
--------------
8,507,479
--------------
Metals & Mining (0.4%)
23,500 AMCOL International Corp. ...................................... 487,625
165,000 National Steel Corp. (Class B)* ................................. 2,949,375
--------------
3,437,000
--------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
PORTFOLIO OF INVESTMENTS September 30, 1997, continued
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------
Office Equipment & Supplies (2.1%)
80,000 American Pad & Paper Co.* ....................................... $ 995,000
105,000 Consolidated Graphics, Inc.* .................................... 5,223,750
100,000 Danka Business Systems PLC (ADR)(United Kingdom) ................ 4,437,500
255,000 Mail-Well, Inc.* ................................................ 6,916,875
50,000 Viking Office Products, Inc.* ................................... 1,087,500
--------------
18,660,625
--------------
Oil & Gas Drilling (3.8%)
110,000 Cliffs Drilling Co.* ............................................ 7,658,750
110,000 ENSCO International, Inc. ....................................... 4,338,125
77,000 Helmerich & Payne, Inc. ......................................... 6,160,000
210,000 Marine Drilling Company, Inc.* .................................. 6,510,000
155,000 Noble Drilling Corp.* ........................................... 4,998,750
105,000 Rowan Companies, Inc.* .......................................... 3,740,625
--------------
33,406,250
--------------
Oil & Gas -Equipment & Services (4.5%)
30,000 BJ Services Co.* ................................................ 2,227,500
82,000 Carbo Ceramics, Inc. ............................................ 2,706,000
50,000 Cooper Cameron Corp.* ........................................... 3,590,625
215,000 Global Industries Ltd.* ......................................... 8,573,125
100,000 Key Energy Group, Inc.* ......................................... 3,256,250
130,000 Lone Star Technologies, Inc.* ................................... 6,784,375
95,000 Smith International, Inc.* ...................................... 7,380,313
110,000 Veritas DGC Inc.* ............................................... 4,681,875
--------------
39,200,063
--------------
Oil & Gas Exploration (0.7%)
89,100 Gulf Indonesia Resources Ltd. (Indonesia)* ...................... 1,982,475
110,000 Lomak Petroleum, Inc. ........................................... 2,124,375
70,000 Petsec Energy Ltd (ADR)(Australia)* ............................. 1,802,500
--------------
5,909,350
--------------
Real Estate Investment Trust (0.3%)
90,000 Golf Trust of America, Inc. .................................... 2,435,625
--------------
Restaurants (0.3%)
105,000 Cheesecake Factory (The)* ....................................... 2,887,500
--------------
Retail (1.5%)
26,820 99 Cents Only Stores* ........................................... 880,031
175,000 Ames Department Stores Inc.* .................................... 2,581,250
80,000 Fred Meyer, Inc.* ............................................... 4,260,000
100,000 Fred's, Inc. .................................................... 2,062,500
100,000 Neiman-Marcus Group, Inc.* ...................................... 3,200,000
--------------
12,983,781
--------------
Savings & Loan (1.3%)
86,000 Astoria Financial Corp. ........................................ 4,321,500
113,000 Bank United Corp. (Class A) ..................................... 4,993,188
80,000 PennFed Financial Services, Inc. ................................ 2,510,000
--------------
11,824,688
--------------
Semiconductor Capital Equipment (4.9%)
132,000 Advanced Energy Industries, Inc.* ............................... 3,729,000
190,000 Asyst Technologies, Inc.* ....................................... 8,383,750
180,800 BE Semiconductor Industries N.V. (Netherlands)* ................. 3,322,200
100,000 Brooks Automation, Inc.* ........................................ 3,812,500
25,000 Cerprobe Corp.* ................................................. 628,125
190,000 GaSonics International Corp.* ................................... 3,918,750
45,000 Helix Technology Corp. .......................................... 2,784,375
5,000 Intest Corp.* ................................................... 83,750
45,700 Powerone Inc.* .................................................. 639,800
50,000 PRI Automation, Inc.* ........................................... 2,925,000
85,000 Quad Systems Corp.* ............................................. 695,938
90,000 Semtech Corp.* .................................................. 6,187,500
60,000 Teradyne, Inc.* ................................................. 3,228,750
74,100 Watkins-Johnson Co. ............................................ 2,482,350
--------------
42,821,788
--------------
<PAGE>
Semiconductors (3.2%)
50,000 Integrated Device Technology, Inc.* ............................. 600,000
60,000 Maxim Integrated Products, Inc.* ................................ 4,267,500
250,000 Oak Technology, Inc.* ........................................... 3,000,000
160,100 RF Micro Devices, Inc.* ......................................... 2,981,863
150,000 Supertex, Inc.* ................................................. 2,456,250
153,000 Trident Microsystems, Inc.* ..................................... 2,677,500
135,000 TriQuint Semiconductor, Inc.* ................................... 4,919,063
45,000 Uniphase Corp.* ................................................. 3,577,500
75,000 Vitesse Semiconductor Corp.* .................................... 3,712,500
--------------
28,192,176
--------------
Shipbuilding (1.0%)
190,000 Halter Marine Group, Inc.* ...................................... 9,191,250
--------------
Specialty -Retail (2.7%)
180,000 Borders Group, Inc.* ............................................ 4,950,000
80,000 Braun's Fashions Corp.* ......................................... 1,120,000
100,000 Claire's Stores, Inc. .......................................... 2,237,500
90,000 Cole National Corp. (Class A)* .................................. 3,740,625
175,000 CompUSA, Inc.* .................................................. 6,125,000
122,000 Guitar Center Inc.* ............................................. 3,004,250
100,000 Talbot's, Inc. (The) ............................................ 2,856,250
--------------
24,033,625
--------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
PORTFOLIO OF INVESTMENTS September 30, 1997, continued
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------
Telecommunications (1.0%)
80,000 ACC Corp.* ...................................................... $ 2,600,000
64,400 Bell Canada International Inc.* ................................. 1,215,550
66,700 NEXTLINK Communications, Inc. (Class A)* ........................ 1,600,800
100,000 Star Telecommunications, Inc.* .................................. 2,300,000
--------------
7,716,350
--------------
Telecommunications Equipment (4.5%)
100,000 ACE*COMM Corp.* ................................................. 2,162,500
80,000 Adtran, Inc.* ................................................... 3,360,000
326,000 Boston Communications Group, Inc.* .............................. 4,767,750
60,000 Comverse Technology, Inc.* ...................................... 3,165,000
120,000 Davox Corp.* .................................................... 4,020,000
150,000 Digital Microwave Corp.* ........................................ 6,712,500
75,000 GeoTel Communications Corp.* .................................... 1,406,250
110,600 Melita International Corp.* ..................................... 1,244,250
63,500 Omtool, Ltd.* ................................................... 841,375
100,000 Ortel Corp.* .................................................... 2,200,000
85,000 Positron Fiber Systems Corp. (Canada)* .......................... 871,250
175,000 Premisys Communications, Inc.* .................................. 4,451,563
124,900 REMEC, Inc.* .................................................... 4,543,238
--------------
39,745,676
--------------
Trucking (0.4%)
110,000 U S Freightways Corp.* .......................................... 3,657,500
--------------
Wireless Communication (1.1%)
200,000 Clearnet Communications Inc. (Class A)(Canada)* ................. 3,450,000
300,000 Metrocall, Inc.* ................................................ 2,212,500
120,000 Powertel, Inc.* ................................................. 2,250,000
101,200 Vanguard Cellular Systems, Inc. (Class A)* ...................... 1,581,250
--------------
9,493,750
--------------
TOTAL COMMON STOCKS
(Identified Cost $602,240,531) .................................. 842,439,829
--------------
RIGHTS (0.0%)
Pharmaceuticals
16,334 Alpharma Inc. (due 11/15/97)* ................................... 91,879
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- --------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (4.3%)
<S> <C> <C>
U.S. GOVERNMENT AGENCY (a)(4.0%)
$35,000 Federal Home Loan Mortgage Corp. 6.05% due 10/01/97 (Amortized
Cost $35,000,000) .............................................. 35,000,000
--------------
REPURCHASE AGREEMENT (0.3%)
3,364 The Bank of New York
5.25% due 10/01/97
(dated 09/30/97; proceeds
$3,364,284)(b)
(Identified Cost $3,363,793) .................................... 3,363,793
--------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $38,363,793) ................................... 38,363,793
--------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $640,604,324)(c).................................. 100.1% 880,895,501
LIABILITIES IN EXCESS OF
OTHER ASSETS....................................................... (0.1) (1,290,379)
-------- -------------
NET ASSETS......................................................... 100.0% $879,605,122
======== =============
</TABLE>
- ------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Security was purchased on a discount basis. The interest rate shown
has been adjusted to reflect a money market equivalent yield.
(b) Collateralized by $868,518 U.S. Treasury Note 5.875% due 08/31/99
valued at $873,100 and $2,567,598 U.S. Treasury Note 5.00% due
02/15/99 valued at $2,557,969.
(c) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$245,477,328 and the aggregate gross unrealized depreciation is
$5,186,151, resulting in net unrealized appreciation of $240,291,177.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1997
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $640,604,324).......................... $880,895,501
Receivable for:
Investments sold....................................... 18,762,884
Shares of beneficial interest sold..................... 1,299,288
Dividends.............................................. 78,071
Prepaid expenses and other assets........................ 88,829
--------------
TOTAL ASSETS........................................... 901,124,573
--------------
LIABILITIES:
Payable for:
Investments purchased.................................. 19,532,833
Shares of beneficial interest repurchased.............. 739,122
Plan of distribution fee............................... 738,687
Investment management fee.............................. 362,104
Accrued expenses and other payables...................... 146,705
--------------
TOTAL LIABILITIES...................................... 21,519,451
--------------
NET ASSETS............................................. $879,605,122
==============
COMPOSITION OF NET ASSETS:
Paid-in-capital.......................................... $598,375,588
Net unrealized appreciation.............................. 240,291,177
Accumulated net investment loss.......................... (41,190)
Accumulated undistributed net realized gain.............. 40,979,547
--------------
NET ASSETS............................................. $879,605,122
==============
CLASS A SHARES:
Net Assets............................................... $ 978,205
Shares Outstanding (unlimited authorized, $.01 par
value).................................................. 35,575
NET ASSET VALUE PER SHARE.............................. $ 27.50
==============
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value) ...... $ 29.02
==============
CLASS B SHARES:
Net Assets............................................... $877,539,283
Shares Outstanding (unlimited authorized, $.01 par
value).................................................. 31,953,536
NET ASSET VALUE PER SHARE.............................. $ 27.46
==============
CLASS C SHARES:
Net Assets............................................... $ 1,066,008
Shares Outstanding (unlimited authorized, $.01 par
value).................................................. 38,816
NET ASSET VALUE PER SHARE.............................. $ 27.46
==============
CLASS D SHARES:
Net Assets............................................... $ 21,626
Shares Outstanding (unlimited authorized, $.01 par
value).................................................. 786
NET ASSET VALUE PER SHARE.............................. $ 27.51
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the year ended September 30, 1997*
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Interest.......................................... $ 2,417,432
Dividends (net of $5,252 foreign withholding tax). 1,169,809
-------------
TOTAL INCOME.................................... 3,587,241
-------------
EXPENSES
Plan of distribution fee (Class B shares) ........ 7,587,412
Investment management fee......................... 3,729,759
Transfer agent fees and expenses.................. 1,097,536
Shareholder reports and notices................... 93,785
Registration fees................................. 88,998
Custodian fees.................................... 74,208
Professional fees................................. 60,094
Trustees' fees and expenses....................... 18,538
Other............................................. 12,817
-------------
TOTAL EXPENSES.................................. 12,763,147
-------------
NET INVESTMENT LOSS............................. (9,175,906)
-------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain................................. 42,865,706
Net change in unrealized appreciation............. 84,974,039
-------------
NET GAIN ....................................... 127,839,745
-------------
NET INCREASE...................................... $118,663,839
=============
</TABLE>
- ------------
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
SEPTEMBER 30, 1997* SEPTEMBER 30, 1996
------------------- ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss................................... $ (9,175,906) $ (6,629,594)
Net realized gain..................................... 42,865,706 132,830,087
Net change in unrealized appreciation................. 84,974,039 (16,804,216)
------------------- ------------------
NET INCREASE........................................ 118,663,839 109,396,277
------------------- ------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED GAIN
Class B shares....................................... (113,569,438) (42,760,549)
------------------- ------------------
Net increase from transactions in shares of
beneficial interest.................................. 75,310,217 197,696,272
------------------- ------------------
NET INCREASE........................................ 80,404,618 264,332,000
NET ASSETS:
Beginning of period................................... 799,200,504 534,868,504
------------------- ------------------
END OF PERIOD
(Including accumulated net investment losses of
$41,190 and $39,118, respectively).................. $ 879,605,122 $799,200,504
=================== ==================
</TABLE>
- ------------
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
Notes to Financial Statements September 30, 1997
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Developing Growth 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 long-term capital growth. The Fund was organized as a
Massachusetts business trust on December 28, 1982 and commenced operations on
April 29, 1983. On July 28, 1997, the Fund commenced offering three
additional classes of shares, with the then current shares designated as
Class B shares.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase, some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year,
six years and one year, respectively. Class D shares are not subject to a
sales charge. Additionally, Class A shares, Class B shares and Class
C shares incur distribution expenses.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American or other domestic or foreign stock exchange is valued at
its latest sale price on that exchange prior to the time when assets are
valued; if there were no sales that day, the security is valued at the latest
bid price; (2) all other portfolio securities for which over-the-counter
market quotations are readily available are valued at the latest available
bid price prior to the time of valuation; (3) when market quotations are not
readily available, including circumstances under which it is determined by
Dean Witter InterCapital Inc. (the "Investment Manager") that sale 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 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); and (4) 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.
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS September 30, 1997, continued
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). Realized gains
and losses on security transactions are determined by the identified cost
method. Dividend income and other distributions are recorded on the
ex-dividend date. Discounts are accreted over the life of the respective
securities. Interest income is accrued daily.
C. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are
allocated to each class of shares based upon the relative net asset value on
the date such items are recognized. Distribution fees are charged directly to
the respective class.
D. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to its shareholders on the record date. The amount of
dividends and distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends
and distributions which exceed net investment income and net realized capital
gains for financial reporting purposes but not for tax purposes are reported
as dividends in excess of net investment income or distributions in excess of
net realized capital gains. To the extent they exceed net investment income
and net realized capital gains for tax purposes, they are reported as
distributions of paid-in-capital.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management fee, accrued daily and payable monthly, by applying the
following annual rates to the net assets of the Fund determined as of the
close of each business day: 0.50% to the portion of the daily
net assets not exceeding $500 million and 0.475% to the portion of the daily
net assets exceeding
$500 million.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities,
equipment, clerical, bookkeeping and certain legal services and pays the
salaries of all
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS September 30, 1997, continued
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services,
heat, light, power and other utilities provided to the Fund.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted
a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act. The
Plan provides that the Fund will pay the Distributor a fee which is accrued
daily and paid monthly at the following annual rates: (i) Class A--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 -1.0% of the average daily net assets
of Class C. In the case of Class A shares, amounts paid under the Plan are
paid to the Distributor for services provided. In the case of Class B and
Class C shares, amounts paid under the Plan are paid to the Distributor for
services provided and the expenses borne by it and others in the distribution
of the shares of these Classes, including the payment of commissions for sales
of these Classes and incentive compensation to, and expenses of, the account
executives of Dean Witter Reynolds Inc. ("DWR"), an affiliate of the Investment
Manager and Distributor, and others who engage in or support distribution of
the shares or who service shareholder accounts, including overhead and
telephone expenses; printing and distribution of prospectuses and reports used
in connection with the offering of these shares to other than current
shareholders; and preparation, printing and distribution of sales literature
and advertising materials. In addition, the Distributor may utilize fees paid
pursuant to the Plan, in the case of Class B shares, to compensate DWR and
other selected broker-dealers for their opportunity costs in advancing such
amounts, which compensation would be in the form of a carrying charge on any
unreimbursed expenses.
In the case of Class B shares, provided that the Plan continues in effect,
any cumulative expenses incurred by the Distributor but not yet recovered may
be recovered through the payment of future distribution fees from the Fund
pursuant to the Plan and contingent deferred sales charges paid by investors
upon redemption of Class B shares. Although there is no legal obligation for
the Fund to pay expenses incurred in excess of payments made to the
Distributor under the Plan and the proceeds of contingent deferred sales
charges paid by investors upon redemption of shares, if for any reason the
Plan is terminated, the
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS September 30, 1997, continued
Trustees will consider at that time the manner in which to treat such
expenses. The Distributor has advised the Fund that such excess amounts,
including carrying charges, totaled $28,020,948 at September 30, 1997.
In the case of Class A shares and Class C shares, expenses incurred pursuant
to the Plan in any calendar year in excess of 0.25% or 1.0% of the average
daily net assets of Class A or Class C, respectively, will not be reimbursed
by the Fund through payments in any subsequent year, except that expenses
representing a gross sales credit to account executives may be reimbursed in
the subsequent calendar year. For the period ended September 30, 1997, the
distribution fee was accrued for Class A shares and Class C shares at the
annual rate of 0.25% and 1.0%, respectively.
The Distributor has informed the Fund that for the year ended September 30,
1997, it received contingent deferred sales charges from certain redemptions
of the Fund's Class B shares of $1,278,394 and received $4,827 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, 1997
aggregated $1,115,116,536 and $1,199,929,321, respectively.
For the year ended September 30, 1997, the Fund incurred $39,264 in brokerage
commissions with DWR for portfolio transactions executed on behalf of the
Fund.
For the period May 31, 1997 through September 30, 1997, the Fund incurred
brokerage commissions of $23,533 with Morgan Stanley & Co., Inc., an
affiliate of the Investment Manager since May 31, 1997, for portfolio
transactions executed on behalf of the Fund.
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, 1997 included in Trustees' fees and expenses in the
Statement of Operations amounted to $5,232. At September 30, 1997, the Fund
had an accrued pension liability of $41,194 which is included in accrued
expenses in the Statement of Assets and Liabilities.
Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At September 30, 1997, the Fund
had transfer agent fees and expenses payable of approximately $9,600.
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS September 30, 1997, continued
5. 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, 1997 SEPTEMBER 30, 1996
------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
CLASS A SHARES*
Sold.......................... 35,616 $ 899,495 -- --
Redeemed...................... (41) (1,100) -- --
-------------- --------------- -------------- ---------------
Net increase--Class A ........ 35,575 898,395 -- --
-------------- --------------- -------------- ---------------
CLASS B SHARES
Sold.......................... 14,447,649 343,330,085 20,988,017 $ 532,804,011
Reinvestment of distributions. 4,819,692 107,527,322 1,750,437 40,382,573
Redeemed...................... (16,152,387) (377,477,428) (14,839,539) (375,490,312)
-------------- --------------- -------------- ---------------
Net increase--Class B......... 3,114,954 73,379,979 7,898,915 197,696,272
-------------- --------------- -------------- ---------------
CLASS C SHARES*
Sold.......................... 38,996 1,016,199 -- --
Redeemed...................... (180) (4,719) -- --
-------------- --------------- -------------- ---------------
Net increase--Class C......... 38,816 1,011,480 -- --
-------------- --------------- -------------- ---------------
CLASS D SHARES*
Sold.......................... 786 20,363 -- --
-------------- --------------- -------------- ---------------
Net increase in Fund.......... 3,190,131 $ 75,310,217 7,898,915 $ 197,696,272
============== =============== ============== ===============
</TABLE>
- ------------
* For the period July 28, 1997 (issue date) through September 30, 1997.
6. FEDERAL INCOME TAX STATUS
As of September 30, 1997, the Fund had temporary book/tax differences
primarily attributable to capital loss deferrals on wash sales and permanent
book/tax differences attributable to a net operating loss. To reflect
reclassifications arising from the permanent differences, paid-in-capital was
charged and accumulated net investment loss was credited $9,173,834.
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
- ----------------------------------------------------------------------------------------------------------------------------------
1997*++ 1996 1995 1994 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period.............................. $27.71 $25.54 $17.55 $20.50 $12.20 $14.05 $8.92 $11.33
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net investment income (loss)......... (0.28) (0.23) (0.19) -- (0.12) (0.12) (0.07) (0.15)
Net realized and unrealized gain
(loss).............................. 3.92 4.32 8.34 (1.82) 8.42 (1.73) 5.20 (2.21)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations .... 3.64 4.09 8.15 (1.82) 8.30 (1.85) 5.13 (2.36)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Less dividends and distributions
from:
Net investment income............... -- -- -- -- -- -- -- (0.05)
Net realized gain................... (3.89) (1.92) (0.16) (1.13) -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total dividends and distributions ... (3.89) (1.92) (0.16) (1.13) -- -- -- (0.05)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period ...... $27.46 $27.71 $25.54 $17.55 $20.50 $12.20 $14.05 $8.92
========== ========== ========== ========== ========== ========== ========== ==========
TOTAL INVESTMENT RETURN+............. 16.38% 17.53% 46.87% (8.88)% 67.95% (13.17)% 57.51% (20.87)%
RATIOS TO AVERAGE NET ASSETS:
Expenses............................. 1.68% 1.69% 1.77% 1.78% 1.84% 1.86% 1.92% 2.02%
Net investment income (loss)......... (1.21)% (1.03)% (1.04)% (1.32)% (1.52)% (1.14)% (0.73)% (1.32)%
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands........................... $877,539 $799,201 $534,869 $340,169 $240,389 $112,982 $115,337 $67,604
Portfolio turnover rate.............. 154% 149% 114% 160% 203% 153% 88% 53%
Average commission rate paid......... $0.0572 $0.0571 -- -- -- -- -- --
</TABLE>
(RESTUBBED TABLE FROM ABOVE)
<TABLE>
<CAPTION>
- -------------------------------------------------------------
1989 1988
- -------------------------------------------------------------
<S> <C> <C>
CLASS B SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period.............................. $9.67 $10.96
--------- ----------
Net investment income (loss)......... 0.04 (0.03)
Net realized and unrealized gain
(loss).............................. 1.62 (1.26)
--------- ----------
Total from investment operations .... 1.66 (1.29)
--------- ----------
Less dividends and distributions
from:
Net investment income............... -- --
Net realized gain................... -- --
--------- ----------
Total dividends and distributions ... -- --
--------- ----------
Net asset value, end of period ...... $11.33 $9.67
========= ==========
TOTAL INVESTMENT RETURN+............. 17.17% (11.77)%
RATIOS TO AVERAGE NET ASSETS:
Expenses............................. 1.89% 1.90%
Net investment income (loss)......... 0.59% (0.28)%
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands........................... $89,236 $108,411
Portfolio turnover rate.............. 84% 70%
Average commission rate paid......... -- --
</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.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
SEPTEMBER 30,
1997++
- ---------------------------------------- -------------------
<S> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ... $ 24.62
-------------------
Net investment loss ..................... (0.02)
Net realized and unrealized gain ....... 2.90
-------------------
Total from investment operations ....... 2.88
-------------------
Net asset value, end of period .......... $ 27.50
===================
TOTAL INVESTMENT RETURN+ ................ 11.70% (1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................ 0.99% (2)
Net investment loss ..................... (0.46)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $ 978
Portfolio turnover rate ................. 154%
Average commission rate paid ............ $0.0572
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ... $ 24.62
-------------------
Net investment loss ..................... (0.05)
Net realized and unrealized gain ....... 2.89
-------------------
Total from investment operations ....... 2.84
-------------------
Net asset value, end of period .......... $ 27.46
===================
TOTAL INVESTMENT RETURN+ ................ $ 11.54% (1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................ 1.71% (2)
Net investment loss ..................... (1.19)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $ 1,066
Portfolio turnover rate ................. 154%
Average commission rate paid ............ $0.0572
</TABLE>
- ------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
SEPTEMBER 30,
1997++
- ---------------------------------------- -------------------
<S> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ... $ 24.62
-------------------
Net investment loss ..................... (0.01)
Net realized and unrealized gain (loss) 2.90
-------------------
Total from investment operations ....... 2.89
-------------------
Net asset value, end of period .......... $ 27.51
===================
TOTAL INVESTMENT RETURN+ ................ 11.74 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................ 0.70 %(2)
Net investment loss ..................... (0.20)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $ 22
Portfolio turnover rate ................. 154 %
Average commission rate paid ............ $0.0572
</TABLE>
- ------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Calculated based on the net asset value as of the last business day of
the period.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Dean Witter
Developing Growth Securities Trust (the "Fund") at September 30, 1997, the
results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended and the financial
highlights for each of the periods presented, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at September 30, 1997
by correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
November 4, 1997
1997 FEDERAL TAX NOTICE (unaudited)
During the year ended September 30, 1997, the Fund paid to shareholders
$3.32 per share from long-term capital gains.
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
Dr. Manual H. Johnson
Michael E. Nugent
Philip J.Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President. Secretary and General Counsel
Jayne Stevlingson
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust FSB
Harborside Financial Center -- Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
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.
DEAN WITTER
DEVELOPING
GROWTH SECURITIES
[GRAPHIC OF DEAN WITTER DEVELOPING GROWTH SECURITITES]
ANNUAL REPORT
SEPTEMBER 30, 1997
