<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST Two World Trade Center, New
LETTER TO THE SHAREHOLDERS March 31, 1997 York, New York 10048
DEAR SHAREHOLDER:
The six-month period ended March 31, 1997, was a difficult one for
small-capitalization growth stocks in general and Dean Witter Developing
Growth Securities in particular. During this period, small-cap growth stocks
experienced an unprecedented multiple contraction. This was due in part to
investor fears of rising interest rates and a shift toward more-liquid,
large-capitalization growth stocks. In this environment, many money managers
sold out of small stocks, regardless of the quality of the company, in order
to have greater liquidity in their portfolios. The final blow to small-cap
stocks during the period was related to earnings expectations. Despite many
small companies reporting excellent earnings gains over the last six months,
Wall Street continued its sell-off. Companies that did not meet the market's
expectations, by even 1 or 2 cents, saw their stocks plummet 30 to 70
percent. This trend has continued into the second quarter of 1997, with many
small-cap stocks down 20 percent or more.
PERFORMANCE AND PORTFOLIO
Against this difficult environment, Dean Witter Developing Growth Securities
declined 16.43 percent during the six-month period ended March 31, 1997. This
compares to returns of minus 10.28 percent for the Lipper Small Cap Fund
Index and minus 0.24 percent for the Russell 2000 Index. The Fund's
underperformance relative to the Russell 2000 can be attributed to the heavy
weighting that index applies to such value areas as finance and energy.
During the period, we have lowered the Fund's technology holdings to under 25
percent of net assets and increased our financial services holdings to 9.74
percent. We have also increased the Fund's cash position to more than 8
percent, to increase liquidity and be able to buy attractively priced
companies when opportunities arise.
On March 31, 1997, the Fund's largest holdings included United Waste Systems,
Inc. (a provider of residential, commercial and industrial waste
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
LETTER TO THE SHAREHOLDERS March 31, 1997, continued
management services), Dura Pharmaceuticals, Inc. (developer and marketer of
prescription pharmaceutical products), Reynolds & Reynolds Co. (provider of
integrated information management systems), Sterling Commerce, Inc. (a global
provider of electronic commerce software products and network services) and
Read-Rite Corp. (manufacturer of computer memory devices).
LOOKING AHEAD
From where we are today, the small-cap end of the market appears very
attractive, from both a relative and an absolute valuation perspective.
Factors that could make this sector of the market even more attractive would
be: 1) a strong dollar forcing multinationals to report lower-than-expected
earnings; 2) a general belief that interest rates will no longer rise; and 3)
attractive valuations on small companies that make them seem attractive
acquisition opportunities compared to larger companies.
The underperformance of small-cap growth stocks is, nevertheless, likely to
continue until investors realize that paying substantially higher valuations
for large-cap stocks is no longer profitable. Until then, the Fund will
continue to stay invested in high-quality small-, medium-and micro-cap
companies.
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
PORTFOLIO OF INVESTMENTS March 31, 1997 (unaudited)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (90.5%)
Advertising (1.4%)
126,000 Eagle River Interactive, Inc.* .................................. $ 1,323,000
100,000 HA-LO Industries, Inc.* ......................................... 1,500,000
111,500 Lamar Advertising Co. (Class A)* ................................ 2,202,125
180,000 Sitel Corp.* .................................................... 2,407,500
66,300 Universal Outdoor Holdings, Inc.* ............................... 1,922,700
--------------
9,355,325
--------------
Aerospace & Defense (1.4%)
112,100 Aviation Sales Co.* ............................................. 2,816,512
51,500 DONCASTERS PLC (ADR)* (United Kingdom) ......................... 997,812
185,000 Hexcel Corp.* ................................................... 3,260,625
150,000 Orbital Sciences Corp.* ......................................... 2,062,500
--------------
9,137,449
--------------
Air Freight (1.6%)
130,000 Air Express International Corp. ................................. 4,111,250
100,000 Hub Group, Inc. (Class A)* ...................................... 2,450,000
210,000 Offshore Logistics, Inc.* ....................................... 3,333,750
40,700 OMI Corp.* ...................................................... 396,825
--------------
10,291,825
--------------
Airlines (1.2%)
140,000 Alaska Air Group, Inc.* ......................................... 3,587,500
110,000 Midwest Express Holdings, Inc.* ................................. 4,166,250
--------------
7,753,750
--------------
Auto Parts (0.7%)
210,000 Miller Industries, Inc.* ........................................ 2,520,000
50,000 Tower Automotive, Inc.* ......................................... 1,950,000
--------------
4,470,000
--------------
Biotechnology (5.6%)
83,300 ArQule, Inc.* ................................................... 1,239,088
101,000 Biochem Pharma, Inc.* ........................................... 4,305,125
58,500 Cytyc Corp.* .................................................... 1,096,875
24,800 Dekalb Genetics Corp. (Class B) ................................. 1,308,200
200,000 DUSA Pharmaceuticals, Inc.* ..................................... 1,275,000
115,000 IDEC Pharmaceuticals Corp.* ..................................... 2,731,250
200,000 Ligand Pharmaceuticals, Inc. (Class B)* ......................... 2,225,000
175,000 Liposome Co., Inc.* ............................................. 3,543,750
140,000 MiniMed, Inc.* .................................................. 3,605,000
100,000 Mycogen Corp.* .................................................. 2,325,000
100,000 Neurocrine Biosciences, Inc.* ................................... 862,500
100,000 PathoGenesis Corp.* ............................................. 2,475,000
138,000 SangStat Medical Corp.* ......................................... 3,743,250
100,000 Sonus Pharmaceuticals, Inc.* .................................... 2,625,000
83,000 Vertex Pharmaceuticals, Inc.* ................................... 3,340,750
--------------
36,700,788
--------------
Building Materials (0.5%)
160,000 Cameron Ashley Building Products, Inc.* ......................... 2,140,000
74,000 Diamond Home Services, Inc.* .................................... 1,295,000
--------------
3,435,000
--------------
Business Services (5.9%)
200,000 Affiliated Computer Services, Inc. (Class A)* ................... 4,575,000
115,000 CFI Proservices, Inc.* .......................................... 1,868,750
65,000 Globalstar Telecommunications Ltd.* (Bermuda) .................. 3,380,000
90,000 Metzler Group, Inc.* ............................................ 1,946,250
215,000 Reynolds & Reynolds Co. (Class A) .............................. 5,133,125
145,000 Saville Systems Ireland PLC (ADR)* (Ireland) ................... 4,096,250
75,000 SCI Systems, Inc.* .............................................. 3,796,875
177,000 Sterling Commerce, Inc.* ........................................ 5,133,000
50,000 Sungard Data Systems, Inc.* ..................................... 2,175,000
38,400 Sykes Enterprises, Inc.* ........................................ 1,214,400
66,000 The Registry, Inc.* ............................................. 2,310,000
115,000 Transaction Systems Architects, Inc. (Class A)* ................. 3,119,375
--------------
38,748,025
--------------
Commercial Services (2.2%)
132,900 Coinmach Laundry Corp.* ......................................... 2,076,562
22,600 International Telecommunication Data Systems, Inc.* ............. 367,250
180,000 Iron Mountain, Inc.* ............................................ 4,455,000
65,000 Pittway Corp. (Class A) ......................................... 3,152,500
93,400 Precision Response Corp.* ....................................... 2,206,575
121,000 U.S. Rentals, Inc.* ............................................. 2,193,125
--------------
14,451,012
--------------
Computer Software (5.3%)
70,000 Aspect Development, Inc.* ....................................... $ 1,575,000
83,500 Cotelligent Group, Inc.* ........................................ 751,500
58,000 Hyperion Software Corp.* ........................................ 928,000
81,450 IA Corporation I* ............................................... 437,794
150,000 Infinity Financial Technology, Inc.* ............................ 2,587,500
91,600 Information Management Resources, Inc.* ......................... 1,396,900
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
PORTFOLIO OF INVESTMENTS March 31, 1997 (unaudited) continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
52,400 IONA Technologies PLC (ADR)* (United Kingdom) .................. $ 930,100
90,000 ISG International Software Group Ltd.* (Israel) ................ 866,250
125,000 Legato Systems, Inc.* ........................................... 2,093,750
100,000 MetaTools, Inc.* ................................................ 1,000,000
100,000 ONTRACK Data International, Inc.* ............................... 1,462,500
80,000 Peoplesoft, Inc.* ............................................... 3,200,000
150,000 Platinum Technology, Inc.* ...................................... 1,743,750
145,000 Raptor Systems, Inc.* ........................................... 1,866,875
90,000 Remedy Corp.* ................................................... 3,442,500
150,000 Segue Software, Inc.* ........................................... 1,443,750
107,500 Simulation Sciences, Inc.* ...................................... 1,075,000
235,000 TriTeal Corp.* .................................................. 2,673,125
115,000 Viasoft, Inc.* .................................................. 3,737,500
7,500 Visigenic Software, Inc.* ....................................... 66,562
64,000 Wind River Systems, Inc.* ....................................... 1,488,000
--------------
34,766,356
--------------
Computers -Peripheral Equipment (2.0%)
175,000 Creative Technology Ltd.* (Singapore) .......................... 1,596,875
125,000 Lexmark International Group, Inc. (Class A)* .................... 3,031,250
80,000 Network Appliance, Inc.* ........................................ 2,520,000
195,000 Read Rite Corp.* ................................................ 4,923,750
82,500 Sync Research, Inc.* ............................................ 250,078
45,000 VideoServer, Inc.* .............................................. 1,063,125
--------------
13,385,078
--------------
Consumer Products (2.1%)
70,000 Blyth Industries, Inc.* ......................................... 2,528,750
190,000 Gemstar International Group Ltd.* ............................... 2,232,500
81,000 General Cigar Holdings, Inc. (Class A)* ......................... 1,802,250
165,000 NBTY, Inc.* ..................................................... 2,495,625
45,000 Northland Cranberries, Inc. (Class A) .......................... 810,000
170,000 USA Detergents, Inc.* ........................................... 3,910,000
--------------
13,779,125
--------------
Education (1.1%)
70,000 Education Management Corp.* ..................................... 1,592,500
249,000 National Education Corp.* ....................................... 3,143,625
104,500 Sylvan Learning Systems, Inc.* .................................. 2,534,125
--------------
7,270,250
--------------
Electronics (1.3%)
100,000 Kent Electronics Corp.* ......................................... 2,300,000
215,000 MagneTek, Inc.* ................................................. 3,466,875
200,000 Supertex, Inc.* ................................................. 2,350,000
--------------
8,116,875
--------------
Entertainment/Gaming & Lodging (1.1%)
87,200 Cinar Films, Inc. (Class B)* (Canada) .......................... 2,114,600
94,000 Fairfield Communities, Inc.* .................................... 2,350,000
183,100 U.S. Franchise Systems, Inc. (Class A)* ......................... 1,396,137
52,500 Vail Resorts, Inc.* ............................................. 1,023,750
--------------
6,884,487
--------------
Finance & Brokerage (2.2%)
75,000 Alex. Brown, Inc. ............................................... 3,187,500
100,000 Legg Mason, Inc. ............................................... 4,225,000
130,000 McDonald & Co. Investments, Inc. ................................ 4,712,500
143,500 Morgan Keegan, Inc. ............................................. 2,367,750
--------------
14,492,750
--------------
Finance -Diversified (1.5%)
145,600 Amresco, Inc.* .................................................. 2,402,400
50,000 Finova Group Inc. ............................................... 3,381,250
40,900 Nationwide Financial Services, Inc. (Class A)* .................. 1,053,175
85,000 SunAmerica, Inc. ............................................... 3,198,125
--------------
10,034,950
--------------
<PAGE>
Healthcare (3.2%)
130,000 EmCare Holdings, Inc.* .......................................... $ 3,493,750
60,000 HCIA, Inc.* ..................................................... 982,500
150,000 Healthsouth Corp.* .............................................. 2,868,750
340,000 Novacare, Inc.* ................................................. 4,122,500
36,000 Pediatric Services of America, Inc.* ............................ 670,500
130,000 PhyCor, Inc.* ................................................... 3,526,250
2,500 Schein (Henry), Inc.* ........................................... 72,187
61,000 Total Renal Care Holdings, Inc.* ................................ 1,852,875
125,000 Vivra, Inc.* .................................................... 3,375,000
--------------
20,964,312
--------------
Healthcare -Drugs (1.4%)
150,000 Dura-Pharmaceuticals, Inc.* ..................................... 5,343,750
160,000 Jones Medical Industries, Inc. ................................. 3,800,000
--------------
9,143,750
--------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
PORTFOLIO OF INVESTMENTS March 31, 1997 (unaudited) continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
Heating & Air Conditioning (1.0%)
40,000 American Precision Industries, Inc. ............................ $ 680,000
70,000 American Standard Companies, Inc.* .............................. 3,150,000
100,000 Watsco, Inc. .................................................... 2,550,000
--------------
6,380,000
--------------
Hotels/Motels (0.3%)
30,000 HFS, Inc.* ...................................................... 1,766,250
--------------
Housing & Home Furnishings (2.0%)
60,000 Ethan Allen Interiors, Inc. .................................... 2,610,000
230,000 Furniture Brands International, Inc.* ........................... 3,450,000
48,000 HON INDUSTRIES, Inc. ........................................... 1,776,000
190,000 O'Sullivan Industries Holdings, Inc.* ........................... 2,398,750
69,300 Samsonite Corp.* ................................................ 2,997,225
--------------
13,231,975
--------------
Insurance (2.8%)
118,000 CMAC Investment Corp. ........................................... 3,938,250
80,000 Conseco, Inc. .................................................. 2,850,000
140,000 Delphi Financial Group, Inc. (Class A)* ......................... 4,655,000
130,000 Fremont General Corp. ........................................... 3,656,250
125,000 HCC Insurance Holdings, Inc. ................................... 3,062,500
--------------
18,162,000
--------------
Internet (1.3%)
95,000 America Online, Inc.* ........................................... 4,025,625
44,900 AmeriTrade Holding Corp. (Class A)* ............................. 701,563
198,000 E*TRADE Group, Inc.* ............................................ 3,564,000
--------------
8,291,188
--------------
Leasing (0.6%)
50,000 Leasing Solutions, Inc.* ........................................ 912,500
58,600 Prime Service, Inc.* ............................................ 1,113,400
104,600 Team Rental Group, Inc.* ........................................ 2,144,300
--------------
4,170,200
--------------
Machinery -Diversified (0.3%)
70,000 DT Industries, Inc. ............................................ 1,785,000
--------------
Manufacturing -Diversified (2.1%)
125,000 Buckeye Cellulose Corp.* ........................................ 3,718,750
130,000 Memtec Ltd. (ADR)(Australia) .................................... 3,298,750
100,100 Mueller Industries, Inc.* ....................................... 3,916,413
79,500 U.S. Filter Corp.* .............................................. 2,454,563
--------------
13,388,476
--------------
Medical Products & Supplies (5.0%)
100,000 ADAC Laboratories ............................................... 2,062,500
67,800 Ballard Medical Products ........................................ 1,415,325
147,000 Biopsys Medical, Inc.* .......................................... 3,601,500
145,000 Endovascular Technologies, Inc.* ................................ 1,993,750
105,000 ESC Medical Systems Ltd.* (Israel) ............................. 2,638,125
105,000 Lunar Corp.* .................................................... 3,517,500
69,700 Molecular Dynamics, Inc.* ....................................... 1,001,938
140,000 Neoprobe Corp.* ................................................. 1,872,500
126,000 Safeskin Corp.* ................................................. 2,220,750
120,000 Sofamor Danek Group, Inc.* ...................................... 4,335,000
80,000 Sterile Recoveries, Inc.* ....................................... 1,400,000
170,000 Steris Corp.* ................................................... 4,143,750
60,000 Vivus, Inc.* .................................................... 2,392,500
--------------
32,595,138
--------------
Miscellaneous (0.0%)
1,300 Assisted Living Concepts, Inc.* ................................. 27,300
--------------
Office Equipment & Supplies (3.6%)
220,500 American Pad & Paper Co.* ....................................... 3,307,500
35,000 Consolidated Graphics, Inc.* .................................... 1,001,875
100,000 Danka Business Systems PLC (ADR)(United Kingdom) ................ 3,137,500
85,000 Ikon Office Solutions, Inc. ..................................... 2,847,500
155,000 Mail-Well, Inc.* ................................................ 3,061,250
116,500 Mecklermedia Corp.* ............................................. 2,708,625
170,000 Valassis Communications, Inc.* .................................. 3,803,750
175,000 Viking Office Products, Inc.* ................................... 3,390,625
--------------
23,258,625
--------------
<PAGE>
Oil & Gas Drilling (6.2%)
70,000 ENSCO International, Inc.* ...................................... $ 3,447,500
150,000 Forest Oil Corp.* ............................................... 1,987,500
220,000 Global Industries Ltd.* ......................................... 4,675,000
130,000 Global Marine, Inc.* ............................................ 2,795,000
77,000 Helmerich & Payne, Inc. ........................................ 3,561,250
170,000 Marine Drilling Company, Inc.* .................................. 2,996,250
100,000 Newpark Resources, Inc.* ........................................ 4,375,000
155,000 Noble Drilling Corp.* ........................................... 2,673,750
160,000 Reading & Bates Corp.* .......................................... 3,620,000
190,000 Rowan Companies, Inc.* .......................................... 4,298,750
100,000 Smith International, Inc.* ...................................... 4,562,500
90,000 Veritas DGC, Inc.* .............................................. 1,777,500
--------------
40,770,000
--------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
PORTFOLIO OF INVESTMENTS March 31, 1997 (unaudited) continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
Oil -Exploration & Production (1.8%)
82,500 Basic Petroleum International, Ltd.* ............................ $ 2,722,500
130,000 Belden & Blake Corp.* ........................................... 3,315,000
145,000 Comstock Resources Inc.* ........................................ 1,250,625
70,000 Stone Energy Corp.* ............................................. 1,680,000
80,000 Triton Energy Ltd.* ............................................. 3,100,000
--------------
12,068,125
--------------
Retail -General Merchandise (2.1%)
20,600 99 Cents Only Stores* ........................................... 414,575
100,000 Consolidated Stores Corp.* ...................................... 3,525,000
60,000 Dollar Tree Stores, Inc.* ....................................... 2,212,500
80,000 Fred Meyer, Inc.* ............................................... 3,300,000
180,000 Loehmann's, Inc.* ............................................... 3,150,000
32,000 Saks Holdings, Inc.* ............................................ 920,000
--------------
13,522,075
--------------
Retail -Specialty (1.9%)
200,000 Borders Group, Inc.* ............................................ 3,775,000
150,000 Central Garden & Pet Co.* ....................................... 2,681,250
170,000 Hollywood Entertainment Corp.* .................................. 4,143,750
100,000 PetSmart, Inc.* ................................................. 2,012,500
--------------
12,612,500
--------------
Retail -Specialty Apparel (1.7%)
145,000 Finish Line, Inc. (Class A)* .................................... 3,190,000
98,000 Kenneth Cole Productions, Inc. (Class A)* ....................... 2,058,000
100,000 Men's Wearhouse, Inc. (The)* .................................... 2,750,000
85,000 Wolverine World Wide, Inc. ..................................... 3,102,500
--------------
11,100,500
--------------
Savings & Loan Associations (2.6%)
86,000 Astoria Financial Corp. ........................................ 3,085,250
102,900 Bank United Corp. (Class A) ..................................... 2,919,788
81,000 First Federal Savings Bank of Colorado .......................... 1,336,500
90,000 GreenPoint Financial Corp. ...................................... 4,635,000
80,000 PennFed Financial Services, Inc. ............................... 1,880,000
90,000 People's Bank ................................................... 2,857,500
--------------
16,714,038
--------------
Semiconductor Capital Equipment (3.1%)
95,000 Applied Magnetics Corp.* ........................................ 2,683,750
45,000 ASM Lithography Holding NV* (Netherlands) ...................... 3,369,375
150,000 Cyberoptics Corp.* .............................................. 2,456,250
118,000 Fusion Systems Corp.* ........................................... 2,802,500
80,000 PRI Automation, Inc.* ........................................... 3,760,000
80,000 Tencor Instruments* ............................................. 2,880,000
80,000 Teradyne, Inc.* ................................................. 2,310,000
--------------
20,261,875
--------------
Semiconductors (4.0%)
85,000 Altera Corp.* ................................................... 3,655,000
120,000 Analog Devices, Inc.* ........................................... 2,700,000
150,000 Cyrix Corp.* .................................................... 2,793,750
80,000 Linear Technology Corp. ........................................ 3,540,000
100,000 Maxim Integrated Products, Inc.* ................................ 4,837,500
85,000 Microchip Technology, Inc.* ..................................... 2,539,375
100,000 Quad Systems Corp.* ............................................. 1,050,000
108,000 Technitrol, Inc. ................................................ 2,025,000
30,000 Triquint Semiconductor, Inc.* ................................... 701,250
75,000 Vitesse Semiconductor Corp.* .................................... 2,071,875
--------------
25,913,750
--------------
Steel (0.1%)
28,000 Steel Dynamics, Inc.* ........................................... 490,000
--------------
Telecommunications Equipment (3.3%)
85,000 Comverse Technology, Inc.* ...................................... 3,336,250
60,000 Davox Corp.* .................................................... 1,785,000
60,000 DSP Communications, Inc.* ....................................... 570,000
92,500 Dynatech Corp.* ................................................. 2,775,000
100,000 Interlink Computer Sciences, Inc.* .............................. 1,075,000
140,000 Network General Corp.* .......................................... 3,010,000
98,000 Ortel Corp.* .................................................... 1,237,250
90,000 PairGain Technologies, Inc.* .................................... 2,666,250
160,000 SDL, Inc.* ...................................................... 2,680,000
78,190 Uniphase Corp.* ................................................. 2,220,000
--------------
21,354,750
--------------
Textiles -Apparel (0.7%)
90,000 Jones Apparel Group, Inc.* ...................................... 3,341,250
50,000 Nautica Enterprises, Inc.* ...................................... 1,250,000
--------------
4,591,250
--------------
Waste Management (2.3%)
250,000 Allied Waste Industries, Inc.* .................................. $ 2,031,250
270,000 Philip Environmental, Inc.* (Canada) ........................... 4,083,750
18,000 Superior Services, Inc.* ........................................ 400,500
130,000 Tetra Technologies, Inc.* ....................................... 2,827,500
160,000 United Waste Systems, Inc.* ..................................... 5,960,000
--------------
15,303,000
--------------
TOTAL COMMON STOCKS
(Identified Cost $562,767,629) .................................. 590,939,122
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
PORTFOLIO OF INVESTMENTS March 31, 1997 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -------------------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (10.3%)
COMMERCIAL PAPER (a)(6.2%)
Automotive -Finance (3.1%)
$20,000 Ford Motor Credit Co. 5.33% due 04/03/97 ........................ $19,994,078
--------------
Electric -Major (3.1%)
20,000 General Electric Capital Corp. 5.65% due 04/07/97 ............... 19,981,166
--------------
TOTAL COMMERCIAL PAPER
(Amortized Cost $39,975,244) .................................... 39,975,244
--------------
U.S. GOVERNMENT AGENCY (a) (3.9%)
25,700 Federal Home Loan Mortgage Corp. 6.50% due 04/01/97
(Amortized Cost $25,700,000) .................................... 25,700,000
--------------
REPURCHASE AGREEMENT (0.2%)
1,496 The Bank of New York 5.375% due 04/01/97 (dated 03/31/97;
proceeds $1,496,238; collateralized by $260,386 U.S. Treasury
Note 6.25% due 08/31/00 valued at $258,583 and $1,194,498 U.S.
Treasury Note 7.875% due 11/15/99 valued at $1,267,352)
(Identified Cost $1,496,015) .................................... 1,496,015
--------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $67,171,259) .................................. 67,171,259
--------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
- ---------------------------------- -------- --------------
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $629,938,888)(b) . 100.8% $658,110,381
LIABILITIES IN EXCESS OF
CASH AND OTHER ASSETS............. (0.8) (5,227,529)
-------- --------------
NET ASSETS......................... 100.0% $652,882,852
======== ==============
</TABLE>
- ------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Securities were purchased on a discount basis. The
interest rates shown have been adjusted to reflect a money market
equivalent yield.
(b) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$78,479,265 and the aggregate gross unrealized depreciation is
$50,307,772, resulting in net unrealized appreciation of $28,171,493.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1997 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $629,938,888)....................................... $658,110,381
Cash.................................................................. 950,929
Receivable for:
Investments sold.................................................... 28,631,873
Shares of beneficial interest sold.................................. 795,486
Dividends........................................................... 100,507
Prepaid expenses and other assets..................................... 87,259
------------
TOTAL ASSETS ....................................................... 688,676,435
------------
LIABILITIES:
Payable for:
Investments purchased............................................... 32,249,143
Shares of beneficial interest repurchased........................... 2,359,848
Plan of distribution fee............................................ 599,686
Investment management fee........................................... 295,467
Accrued expenses and other payables................................... 289,439
------------
TOTAL LIABILITIES .................................................. 35,793,583
------------
NET ASSETS:
Paid-in-capital....................................................... 630,152,530
Net unrealized appreciation........................................... 28,171,493
Accumulated net investment loss....................................... (4,818,504)
Accumulated net realized loss......................................... (622,667)
------------
NET ASSETS.......................................................... $652,882,852
============
NET ASSET VALUE PER SHARE,
33,099,992 shares outstanding (unlimited shares authorized of $.01
par value)........................................................... $ 19.72
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the six months ended March 31, 1997 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Interest ......................................... $ 1,068,060
Dividends (net of $3,437 foreign withholding
tax)............................................. 580,810
-------------
TOTAL INCOME ................................... 1,648,870
-------------
EXPENSES
Plan of distribution fee.......................... 3,845,964
Investment management fee......................... 1,889,163
Transfer agent fees and expenses.................. 511,085
Registration fees ................................ 56,568
Custodian fees.................................... 44,214
Shareholder reports and notices .................. 38,367
Professional fees ................................ 26,610
Trustees' fees and expenses....................... 10,256
Other............................................. 6,029
-------------
TOTAL EXPENSES ................................. 6,428,256
-------------
NET INVESTMENT LOSS ............................ (4,779,386)
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain................................. 1,263,492
Net change in unrealized appreciation............. (127,145,645)
-------------
NET LOSS ....................................... (125,882,153)
-------------
NET DECREASE ..................................... $(130,661,539)
=============
</TABLE>
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 SIX FOR THE YEAR
MONTHS ENDED ENDED
MARCH 31, 1997 SEPTEMBER 30, 1996
- ------------------------------------------------------ -------------- ------------------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss.................................... $ (4,779,386) $ (6,629,594)
Net realized gain...................................... 1,263,492 132,830,087
Net change in unrealized appreciation.................. (127,145,645) (16,804,216)
-------------- ------------------
NET INCREASE (DECREASE).............................. (130,661,539) 109,396,277
Distributions from net realized gain................... (113,569,438) (42,760,549)
Net increase from transactions in shares of beneficial
interest.............................................. 97,913,325 197,696,272
-------------- ------------------
NET INCREASE (DECREASE).............................. (146,317,652) 264,332,000
NET ASSETS:
Beginning of period.................................... 799,200,504 534,868,504
-------------- ------------------
END OF PERIOD
(Including accumulated net investment losses of
$4,818,504 and $39,118, respectively)................ $ 652,882,852 $799,200,504
============== ==================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 1997 (unaudited)
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.
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.
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. 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.
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 1997 (unaudited) continued
D. 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 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
pursuant to which the Fund pays the Distributor compensation, accrued daily
and payable monthly, at an annual rate of 1.0% of the lesser of: (a) the
average daily aggregate gross sales of the Fund's shares since the Fund's
inception (not including reinvestment of dividend or capital gain
distributions) less the average daily aggregate net asset value of the Fund's
shares redeemed since the Fund's inception upon which a contingent deferred
sales charge has been imposed or upon which such
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 1997 (unaudited) continued
charge has been waived; or (b) the Fund's average daily net assets. Amounts
paid under the Plan are paid to the Distributor to compensate it for the
services provided and the expenses borne by it and others in the distribution
of the Fund's shares, including the payment of commissions for sales of the
Fund's shares 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 other employees or selected
broker-dealers who engage in or support distribution of the Fund's 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 the Fund's shares to other than current shareholders and
preparation, printing and distribution of sales literature and advertising
materials. In addition, the Distributor may be compensated under the Plan for
its opportunity costs in advancing such amounts, which compensation would be
in the form of a carrying charge on any unreimbursed expenses incurred by the
Distributor.
Provided that the Plan continues in effect, any cumulative expenses incurred
by the Distributor but not yet recovered may be recovered through future
distribution fees from the Fund and contingent deferred sales charges from
the Fund's shareholders.
Although there is no legal obligation for the Fund to pay expenses incurred
in excess of payments made to the Distributor under the Plan and the proceeds
of contingent deferred sales charges paid by investors upon redemption of
shares, if for any reason the Plan is terminated, the Trustees will consider
at that time the manner in which to treat such expenses. The Distributor has
advised the Fund that such excess amounts, including carrying charges,
totaled $28,825,782 at March 31, 1997.
The Distributor has informed the Fund that for the six months ended March 31,
1997, it received approximately $638,000 in contingent deferred sales charges
from certain redemptions of the Fund's shares.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the six months ended March 31, 1997
aggregated $551,762,905 and $634,925,811, respectively.
For the six months ended March 31, 1997, the Fund incurred $28,599 in
brokerage commissions with DWR for portfolio transactions executed on behalf
of the Fund. At March 31, 1997, the Fund's receivable for investments sold
included unsettled trades with DWR of $1,298,375.
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
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 1997 (unaudited) continued
years of service. Aggregate pension costs for the six months ended March 31,
1997 included in Trustees' fees and expenses in the Statement of Operations
amounted to $2,892. At March 31, 1997, the Fund had an accrued pension
liability of $40,434 which is included in accrued expenses in the Statement
of Assets and Liabilities.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At March 31, 1997, the Fund had
transfer agent fees and expenses payable of approximately $158,000.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
MARCH 31, 1997 SEPTEMBER 30, 1996
----------------------------- ------------------------------
(UNAUDITED)
SHARES AMOUNT SHARES AMOUNT
------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Sold .......................... 6,335,170 $ 155,929,705 20,988,017 $ 532,804,011
Reinvestment of distributions 4,819,691 107,527,322 1,750,437 40,382,573
------------- --------------- -------------- ---------------
11,154,861 263,457,027 22,738,454 573,186,584
Repurchased ................... (6,893,451) (165,543,702) (14,839,539) (375,490,312)
------------- --------------- -------------- ---------------
Net increase .................. 4,261,410 $ 97,913,325 7,898,915 $ 197,696,272
============= =============== ============== ===============
</TABLE>
6. FEDERAL INCOME TAX STATUS
At September 30, 1996, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales.
<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 SIX FOR THE YEAR ENDED SEPTEMBER 30
MONTHS ENDED ---------------------------------------------------
MARCH 31, 1997 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ..... $ 27.71 $25.54 $17.55 $20.50 $12.20 $ 14.05
-------------- ---------- ---------- ---------- ---------- ----------
Net investment loss ....................... (0.15) (0.23) (0.19) -- (0.12) (0.12)
Net realized and unrealized gain (loss) .. (3.95) 4.32 8.34 (1.82) 8.42 (1.73)
-------------- ---------- ---------- ---------- ---------- ----------
Total from investment operations .......... (4.10) 4.09 8.15 (1.82) 8.30 (1.85)
-------------- ---------- ---------- ---------- ---------- ----------
Less distributions from net realized gain (3.89) (1.92) (0.16) (1.13) -- --
-------------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period ............ $ 19.72 $27.71 $25.54 $17.55 $20.50 $ 12.20
============== ========== ========== ========== ========== ==========
TOTAL INVESTMENT RETURN+ .................. (16.43)%(1) 17.53% 46.87% (8.88)% 67.95% (13.17)%
RATIOS TO AVERAGE NET ASSETS:
Expenses .................................. 1.67%(2) 1.69% 1.77% 1.78% 1.84% 1.86%
Net investment loss ....................... (1.24)%(2) (1.03)% (1.04)% (1.32)% (1.52)% (1.14)%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands .. $652,883 $799,201 $534,869 $340,169 $240,389 $112,982
Portfolio turnover rate ................... 77%(1) 149% 114% 160% 203% 153%
Average commission rate paid .............. $0.0573 $0.0571 -- -- -- --
</TABLE>
- ------------
+ 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>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and General Counsel
Jayne Stevlingson
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center -- Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
The financial statements included herein have been taken from the records of
the Fund without examination by the independent accountants and accordingly
they do not express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus of
the Fund.
This report is not authorized for distribution to prospective investors in
the Fund unless preceded or accompanied by an effective prospectus.
DEAN WITTER
DEVELOPING
GROWTH
SECURITIES
[Graphic Omitted]
SEMIANNUAL REPORT
MARCH 31, 1997
