<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING Two World Trade Center,
GROWTH SECURITIES TRUST New York, New York 10048
LETTER TO THE SHAREHOLDERS March 31, 1999
DEAR SHAREHOLDER:
The six-month period ended March 31, 1999, saw the U.S. equity markets soar to
record highs. The market's stunning rise began in the fourth quarter of 1998 as
broad-based equities regained losses and built momentum after the large
third-quarter sell-off brought on by concerns of an impending credit crunch.
The second week of October saw large- and small-cap stocks begin to lift when
the Federal Reserve Board cut the overnight lending rate by 25 basis points, to
5 percent. Momentum back into equities continued when rates were reduced
another 25 basis points on November 17, 1998. From September 30, 1998 through
December 31, 1998, the Dow Jones Industrial Average was up 17.58 percent, the
S&P 500 Index 21.28 percent, the NASDAQ Index 29.45 percent and the Russell
2000 Index 16.31 percent.
While the large caps continued to perform well during the first calendar
quarter of 1999, small-cap stocks were once again being pressured. Investors
once more poured money into larger issues, at the expense of smaller ones. The
Dow was up another 7.04 percent for the three months ended March 31, 1999,
compared to a 5.42 percent loss for the Russell 2000 Index.
PERFORMANCE AND PORTFOLIO STRATEGY
For the six-month period ended March 31, 1999, Morgan Stanley Dean Witter
Developing Growth Securities Class B shares produced a total return of 30.72
percent, compared to returns of 10.00 percent and 12.90 percent for the Russell
2000 Index and the Lipper Small Cap Funds Index, respectively. For the same
period, the Fund's Class A, C and D shares returned 31.22 percent, 30.92
percent and 31.38 percent, respectively. Performance of the Fund's four share
classes varies because of differing expenses.
The Fund's outperformance of its benchmarks can be attributed to its
overweighting in the technology and consumer sectors. On March 31, 1999, the
Fund had 35 percent of assets in technology and 28 percent in
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
LETTER TO THE SHAREHOLDERS March 31, 1999, continued
consumer issues, compared to 15 percent and 22 percent for the Russell 2000
Index. According to Lipper Analytical Services, Inc., Morgan Stanley Dean
Witter Developing Growth Securities Class B was ranked 84 of 664 small-cap
funds (top 13 percent) for the 12-month period ended March 31, 1999, 32 of 230
funds (top 14 percent) for the trailing five years and 21 of 72 funds (top 29
percent) for the trailing 10 years. Lipper rankings are based on total returns
exclusive of sales charges.
Both the technology and consumer sectors, which have been overall market
leaders, continue to be the leaders for the small-cap growth market. However,
because of the narrowness of small caps, the importance of quality and
leadership has become an underlying theme in the current market environment.
The largest growth sector in the near term has been technology, as investors
continued to favor nearly any company with a ".com" in its name or those with
revenue potential pegged to the growth of the Internet. In this arena, the Fund
has benefited by owning positions in such high-technology companies as InterVU,
PSINet, Excite and Verisign.
Consumer companies continued to benefit from low interest rates, low
unemployment and low inflation. These factors have kept most consumer companies
on an upward trend of record sales and earnings. In this sector, the Fund's
overall performance benefited from its position in Pacific Sunwear, which was
initiated in early January. The company's stock was oversold in the fourth
quarter of 1998, when the company experienced a downturn in November sales due
to a poorly timed fashion transition. However, since the beginning of January
the stock has nearly doubled.
Given the current strength of the U.S. economy, we anticipate continuing our
current strategy of overweighting the technology sector and focusing on
companies with good visibility and higher earnings growth. We caution, however,
that we will be keeping a watchful eye out for indicators that might suggest
that the economy is turning. The Fund's portfolio would be adjusted
accordingly.
LOOKING AHEAD
At the close of the period under review, small-cap stocks continued to be out
of favor, while investors continued to push large caps to record highs. We
believe that this large disparity in valuations cannot continue unabated and
that small-cap growth stocks should ultimately reflect their premium growth
potential. In addition, three years of underperformance has created valuation
levels for many small caps that are very compelling. Although we do not know
when the small caps may begin to outperform the large caps, we will continue to
favor companies that have excellent visibility and unique products and
services.
On May 1, 1999, Mitchell M. Merin was named President of the Morgan Stanley
Dean Witter Funds. Mr. Merin is also the President and Chief Operating Officer
of Asset Management of Morgan Stanley
2
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
LETTER TO THE SHAREHOLDERS March 31, 1999, continued
Dean Witter & Co., and President, Chief Executive Officer and Director of
Morgan Stanley Dean Witter Advisors Inc., the Fund's Investment Manager. He
also serves as Chairman, Chief Executive Officer and Director of the Fund's
distributor and transfer agent.
We appreciate your ongoing support of Morgan Stanley Dean Witter Developing
Growth Securities and look forward to continuing to serve your investment
needs.
Very truly yours,
/s/ Charles A. Fiumefreddo /s/ Mitchell M. Merin
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
3
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
PORTFOLIO OF INVESTMENTS March 31, 1999 (unaudited)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- ------------
<S> <C> <C>
COMMON STOCKS (93.0%)
Advertising (2.7%)
46,000 DoubleClick Inc.* .......................... $ 8,374,875
104,000 Lamar Advertising Co. (Class A)* ........... 3,529,500
92,400 Netgravity, Inc.* .......................... 3,805,725
105,000 Outdoor Systems, Inc.* ..................... 3,150,000
------------
18,860,100
------------
Air Freight/Delivery Services (1.3%)
200,000 C.H. Robinson Worldwide, Inc. .............. 5,062,500
65,000 Expeditors International of
Washington, Inc. ........................... 3,510,000
------------
8,572,500
------------
Airlines (1.3%)
100,000 Alaska Air Group, Inc.* .................... 4,750,000
120,000 Midwest Express Holdings, Inc.* ............ 3,525,000
------------
8,275,000
------------
Apparel (0.7%)
100,000 Quiksilver, Inc.* .......................... 4,225,000
------------
Auto Parts: O.E.M. (0.5%)
170,000 Gentex Corp.* .............................. 3,655,000
------------
Biotechnology (2.3%)
87,100 Abgenix, Inc.* ............................. 1,317,387
150,000 Alkermes, Inc.* ............................ 4,031,250
70,000 Incyte Pharmaceuticals, Inc.* .............. 1,400,000
250,000 Medco Research, Inc.* ...................... 6,500,000
70,000 Millennium Pharmaceuticals, Inc.* .......... 2,165,625
80,000 SangStat Medical Corp.* .................... 985,000
------------
16,399,262
------------
Books/Magazines (1.1%)
143,000 CMP Media Inc. (Class A)* .................. 4,397,250
120,000 Ziff-Davis Inc. (ZD)* ...................... 2,580,000
12,600 Ziff-Davis Inc. (ZDNet)* ................... 453,600
------------
7,430,850
------------
Broadcasting (1.6%)
37,000 Entercom Communications Corp.* ............. 1,308,875
130,000 Jacor Communications, Inc.* ................ 9,871,875
------------
11,180,750
------------
Building Materials (0.6%)
105,000 Eagle Hardware & Garden, Inc.* ............. 4,009,687
------------
Cable Television (0.2%)
62,600 Pegasus Communications Corp.* .............. 1,744,975
------------
Cellular Telephone (0.4%)
110,000 Vanguard Cellular Systems, Inc.
(Class A) .................................. 2,990,625
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- ------------
<S> <C> <C>
Computer Communications (0.5%)
125,000 Proxim, Inc.* .............................. $ 3,578,125
------------
Computer Hardware (0.5%)
200,000 Silicon Graphics, Inc.* .................... 3,337,500
------------
Computer Software & Services (1.9%)
100,000 Avant! Corp.* .............................. 1,768,750
163,000 Check Point Software Technologies
Ltd. (Israel)* ............................. 6,998,812
358,000 Vantive Corp. (The)* ....................... 4,340,750
------------
13,108,312
------------
Computers Software (10.2%)
170,000 AXENT Technologies, Inc.* .................. 4,101,250
335,000 CBT Group PLC (ADR) (Ireland)* ............. 3,831,562
180,000 Citrix Systems, Inc.* ...................... 6,840,000
310,000 Comdisco, Inc. ............................. 5,541,250
90,000 Entrust Technologies Inc.* ................. 3,031,875
115,000 GeoTel Communications Corp.* ............... 5,203,750
90,000 Intuit Inc.* ............................... 9,151,875
89,200 IONA Technologies PLC (ADR)
(Ireland)* ................................. 2,687,150
182,000 Mercury Interactive Corp.* ................. 6,483,750
205,000 Micromuse Inc.* ............................ 9,430,000
80,000 New Era of Networks, Inc.* ................. 5,420,000
300,000 Rogue Wave Software, Inc.* ................. 2,306,250
120,000 Siebel Systems, Inc.* ...................... 5,670,000
30,500 Veritas Software Corp.* .................... 2,451,437
------------
72,150,149
------------
Consumer Sundries (0.3%)
400,000 Packaged Ice, Inc.* ........................ 2,475,000
------------
Consumer/Business Services (0.2%)
67,100 Corporate Executive Board Co.
(The)* ..................................... 1,752,987
------------
Contract Drilling (0.5%)
200,000 Santa Fe International Corp. ............... 3,737,500
------------
Discount Chains (0.9%)
240,000 BJ's Wholesale Club, Inc.* ................. 6,345,000
------------
Diversified Commercial Services (5.3%)
90,000 Abacus Direct Corp.* ....................... 7,380,000
70,000 CheckFree Holdings Corp.* .................. 2,979,375
33,000 Concord EFS, Inc.* ......................... 905,437
150,000 Dendrite International, Inc.* .............. 3,346,875
239,000 Hagler Bailly, Inc.* ....................... 1,912,000
260,000 Iron Mountain, Inc.* ....................... 8,108,750
140,000 Lason, Inc.* ............................... 7,866,250
200,000 Nielsen Media Research, Inc. ............... 4,937,500
------------
37,436,187
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
PORTFOLIO OF INVESTMENTS March 31, 1999 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- ------------
<S> <C> <C>
E.D.P. Peripherals (1.7%)
300,000 Mylex Corp.* ............................. $ 1,931,250
185,000 National Computer Systems, Inc. .......... 4,520,937
120,500 Pinnacle Systems, Inc.* .................. 5,482,750
------------
11,934,937
------------
E.D.P. Services (4.4%)
350,000 4Front Technologies, Inc.* ............... 3,696,875
292,500 Alternative Resources Corp.* ............. 1,864,688
140,000 American Management Systems,
Inc.* .................................... 4,777,500
100,000 Bisys Group, Inc. (The)* ................. 5,625,000
200,000 Gartner Group, Inc. (Class A)* ........... 4,512,500
60,000 National Data Corp. ...................... 2,520,000
210,000 Pegasus Systems, Inc.* ................... 8,373,750
------------
31,370,313
------------
Education (2.2%)
212,400 Apollo Group, Inc. (Class A)* ............ 6,345,450
300,000 Education Management Corp.* .............. 9,187,500
------------
15,532,950
------------
Electrical Products (0.2%)
50,500 AFC Cable Systems, Inc.* ................. 1,502,375
------------
Electronic Components (1.9%)
80,000 Hutchinson Technology Inc.* .............. 1,980,000
150,000 Power Integrations, Inc* ................. 4,743,750
200,000 Sawtek Inc.* ............................. 6,675,000
------------
13,398,750
------------
Electronic Distributors (0.8%)
79,000 Safeguard Scientifics, Inc.* ............. 5,357,188
------------
Electronic Production Equipment (1.4%)
190,000 ATMI, Inc.* .............................. 3,788,125
165,000 Lam Research Corp.* ...................... 4,785,000
89,400 MKS Instruments, Inc.* ................... 1,195,725
------------
9,768,850
------------
Engineering & Construction (1.9%)
102,500 Dycom Industries, Inc.* .................. 4,458,750
180,000 Metromedia Fiber Network, Inc.
(Class A)* ............................... 9,326,250
------------
13,785,000
------------
Finance Companies (0.4%)
60,000 FINOVA Group, Inc. ....................... 3,112,500
------------
Financial Publishing/Services (0.1%)
16,500 Multex.com Inc.* ......................... 1,029,188
------------
Generic Drugs (0.2%)
50,000 Barr Laboratories, Inc.* ................. 1,525,000
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- ------------
<S> <C> <C>
Home Building (0.5%)
200,000 D.R. Horton, Inc. ........................ $ 3,350,000
------------
Hospital/Nursing Management (0.6%)
200,000 Res-Care, Inc.* .......................... 4,500,000
------------
Industrial Specialties (0.5%)
130,000 Pittway Corp. (Class A) .................. 3,445,000
------------
Internet Services (7.5%)
60,000 BroadVision, Inc.* ....................... 3,592,500
120,000 Concentric Network Corp.* ................ 8,985,000
40,000 Excite, Inc.* ............................ 5,595,000
202,000 InterVu Inc.* ............................ 8,951,125
9,200 OneMain.com, Inc.* ....................... 333,500
220,000 PSINet, Inc.* ............................ 9,350,000
100,000 SoftNet Systems, Inc.* ................... 3,662,500
100,000 THINK New Ideas, Inc.* ................... 1,537,500
170,000 USWeb Corp.* ............................. 6,991,250
27,000 VeriSign, Inc.* .......................... 4,158,000
------------
53,156,375
------------
Investment Bankers/Brokers/Services (1.7%)
234,000 Hambrecht & Quist Group* ................. 8,116,875
85,000 Jefferies Group, Inc. .................... 4,032,188
------------
12,149,063
------------
Managed Health Care (1.5%)
515,000 MedPartners, Inc.* ....................... 2,446,250
690,100 Mid Atlantic Medical Services,
Inc.* .................................... 6,901,000
100,000 Oxford Health Plans, Inc.* ............... 1,556,250
------------
10,903,500
------------
Medical Specialties (4.7%)
320,000 Aurora Biosciences Corp.* ................ 2,000,000
80,000 Bard (C.R.), Inc. ........................ 4,035,000
375,300 Orthofix International N.V.* ............. 5,535,675
116,000 ResMed Inc.* ............................. 3,262,500
70,000 Safeskin Corp.* .......................... 516,250
215,000 STERIS Corp.* ............................ 5,724,375
254,250 Xomed Surgical Products, Inc.* ........... 9,947,531
91,300 Zonagen, Inc.* ........................... 1,917,300
------------
32,938,631
------------
Medical/Dental Distributors (0.3%)
50,000 Priority Healthcare Corp. (Class B)*...... 2,250,000
------------
Medical/Nursing Services (0.7%)
425,000 Apria Healthcare Group, Inc.* ............ 5,046,875
------------
Metals Fabrications (0.7%)
250,000 CommScope, Inc.* ......................... 5,234,375
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
PORTFOLIO OF INVESTMENTS March 31, 1999 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- ------------
<S> <C> <C>
Military/Gov't/Technical (1.1%)
193,500 Aeroflex Inc.* ........................... $ 2,757,375
250,000 Nichols Research Corp.* .................. 4,718,750
------------
7,476,125
------------
Motor Vehicles (0.1%)
34,000 Ducati Motor Holding SpA (ADR)
(Italy)* ................................. 969,000
------------
Movies/Entertainment (2.0%)
183,500 CINAR Films Inc. (Class B)
(Canada)* ................................ 4,128,750
490,000 Metromedia International Group,
Inc.* .................................... 2,388,750
260,000 Westwood One, Inc.* ...................... 7,410,000
------------
13,927,500
------------
Multi-Line Insurance (0.6%)
87,500 American Bankers Insurance
Group, Inc. .............................. 4,550,000
------------
Oilfield Services/Equipment (0.8%)
250,000 BJ Services Co.* ......................... 5,859,375
------------
Other Consumer Services (0.9%)
8,900 Autobytel.com Inc.* ...................... 371,575
189,300 Steiner Leisure Ltd.* .................... 5,785,481
------------
6,157,056
------------
Other Pharmaceuticals (1.1%)
25,000 Sepracor, Inc.* .......................... 2,803,125
230,000 Shire Pharmaceuticals Group PLC
(ADR) (United Kingdom)* .................. 5,232,500
------------
8,035,625
------------
Other Telecommunications (3.7%)
150,000 Intermedia Communications Inc.* .......... 3,993,750
250,000 ITC DeltaCom, Inc.* ...................... 5,437,500
100,000 MetroNet Communications Corp.
(Class B) (Canada)* ...................... 5,475,000
141,000 NEXTLINK Communications, Inc.
(Class A)* ............................... 7,896,000
67,100 Pinnacle Holdings Inc.* .................. 1,006,500
38,500 United Pan-Europe Communications
NV (ADR) (Netherlands)* .................. 1,472,625
46,000 US LEC Corp. (Class A)* .................. 787,750
------------
26,069,125
------------
Precious Metals (0.2%)
200,000 Ashanti Goldfield Co., Ltd. (GDR)
(Ghana) .................................. 1,750,000
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- ------------
<S> <C> <C>
Precision Instruments (0.7%)
200,000 Mettler-Toledo International Inc.* ....... $ 4,950,000
------------
Printing/Forms (1.1%)
90,000 Consolidated Graphics, Inc.* ............. 5,197,500
120,000 Getty Images, Inc.* ...................... 2,512,500
------------
7,710,000
------------
Real Estate Investment Trusts (0.7%)
69,600 Golf Trust of America, Inc. .............. 1,557,300
130,000 Public Storage, Inc. ..................... 3,250,000
------------
4,807,300
------------
Recreational Products/Toys (1.3%)
373,000 Callaway Golf Co. ........................ 3,799,938
270,000 THQ, Inc.* ............................... 5,501,250
------------
9,301,188
------------
Retail -- Specialty (3.8%)
225,000 Cost Plus, Inc.* ......................... 6,609,375
123,000 CSK Auto Corp.* .......................... 3,682,313
200,000 Guitar Center, Inc.* ..................... 4,050,000
200,000 Gymboree Corp. (The)* .................... 1,787,500
90,000 Linens 'N Things, Inc.* .................. 4,083,750
200,000 Pacific Sunwear of California, Inc.*...... 6,925,000
------------
27,137,938
------------
Semiconductors (3.6%)
255,000 ANADIGICS, Inc.* ......................... 4,478,438
70,000 Analog Devices, Inc.* .................... 2,082,500
35,800 Hi/Fn, Inc.* ............................. 1,324,600
150,000 MIPS Technologies, Inc.* ................. 9,131,250
165,000 Vitesse Semiconductor Corp.* ............. 8,342,813
------------
25,359,601
------------
Services to the Health Industry (0.6%)
135,000 Pharmaceutical Product
Development, Inc.* ....................... 4,522,500
------------
Shoe Manufacturing (0.4%)
340,000 Madden (Steven) Ltd.* .................... 2,805,000
------------
Smaller Banks (0.3%)
139,900 Imperial Bancorp* ........................ 2,395,788
------------
Telecommunications Equipment (1.7%)
148,000 Advanced Fibre Communications,
Inc.* .................................... 1,415,250
300,000 ANTEC Corp.* ............................. 6,487,500
100,000 California Microwave, Inc.* .............. 1,056,250
190,500 Inter-Tel, Inc.* ......................... 2,952,750
------------
11,911,750
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
PORTFOLIO OF INVESTMENTS March 31, 1999 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- ------------
<S> <C> <C>
Wholesale Distributors (0.5%)
165,000 School Speciality, Inc.* ............... $ 3,217,500
5,000 Valley Media, Inc.* .................... 113,124
------------
3,330,624
------------
Wireless Communications (0.9%)
100,000 SkyTel Communications, Inc.* ........... 1,662,500
125,000 WinStar Communications, Inc.* .......... 4,539,063
------------
6,201,563
------------
TOTAL COMMON STOCKS
(Identified Cost $480,131,175).......... 657,782,437
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- -----------
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS (4.3%)
$ 5,000 U.S. Treasury Note
5.25% due 08/15/03 .................... 5,006,100
24,400 U.S. Treasury Note
5.625% due 5/15/08 .................... 24,831,148
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Identified Cost $31,421,046).......... 29,837,248
------------
SHORT-TERM INVESTMENTS (4.0%)
U.S. GOVERNMENT AGENCY (a) (3.8%)
27,000 Federal Home Loan Mortgage Corp.
4.82% due 04/01/99
(Amortized Cost $27,000,000)........... 27,000,000
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------- ------------
<S> <C> <C>
REPURCHASE AGREEMENT (0.2%)
$ 1,566 The Bank of New York 4.875%
due 04/01/99 (dated 03/31/99;
proceeds $1,566,119) (b)
(Identified Cost $1,565,907)........... $ 1,565,907
------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $28,565,907).......... 28,565,907
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $540,118,128) (c)......... 101.3 % 716,185,592
LIABILITIES IN EXCESS OF OTHER
ASSETS .................................... (1.3) (8,906,523)
------- ------------
NET ASSETS ................................ 100.0 % $707,279,069
======= ============
</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 $662,000 U.S. Treasury Note 6.375% due 04/30/99 valued at
$680,431; $493,353 U.S. Treasury Note 6.50% due 05/31/02 valued at $522,976
and $380,836 U.S. Treasury Note 6.00% due 10/15/99 valued at $393,818.
(c) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $206,644,094 and the
aggregate gross unrealized depreciation is $30,576,630, resulting in net
unrealized appreciation of $176,067,464.
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1999 (unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $540,118,128)................................. $716,185,592
Receivable for:
Investments sold .............................................. 10,436,389
Interest ...................................................... 552,270
Shares of beneficial interest sold ............................ 226,118
Dividends ..................................................... 65,129
Prepaid expenses and other assets ................................ 125,109
------------
TOTAL ASSETS .................................................. 727,590,607
------------
LIABILITIES:
Payable for:
Investments purchased ......................................... 12,240,167
Shares of beneficial interest repurchased ..................... 7,006,296
Plan of distribution fee ...................................... 619,759
Investment management fee ..................................... 311,313
Accrued expenses and other payables .............................. 134,003
------------
TOTAL LIABILITIES ............................................. 20,311,538
------------
NET ASSETS .................................................... $707,279,069
============
COMPOSITION OF NET ASSETS:
Paid-in-capital .................................................. $479,630,605
Net unrealized appreciation ...................................... 176,067,464
Accumulated net investment loss .................................. (3,471,187)
Accumulated undistributed net realized gain ...................... 55,052,187
------------
NET ASSETS .................................................... $707,279,069
============
CLASS A SHARES:
Net Assets ....................................................... $ 11,037,262
Shares Outstanding (unlimited authorized, $.01 par value)......... 419,493
NET ASSET VALUE PER SHARE ..................................... $ 26.31
============
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value) ............. $ 27.77
============
CLASS B SHARES:
Net Assets ....................................................... $687,866,577
Shares Outstanding (unlimited authorized, $.01 par value)......... 26,494,563
NET ASSET VALUE PER SHARE ..................................... $ 25.96
============
CLASS C SHARES:
Net Assets ....................................................... $ 3,426,735
Shares Outstanding (unlimited authorized, $.01 par value)......... 131,787
NET ASSET VALUE PER SHARE ..................................... $ 26.00
============
CLASS D SHARES:
Net Assets ....................................................... $ 4,948,495
Shares Outstanding (unlimited authorized, $.01 par value)......... 187,335
NET ASSET VALUE PER SHARE ..................................... $ 26.42
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the six months ended March 31, 1999 (unaudited)
<TABLE>
<S> <C>
NET INVESTMENT LOSS:
INCOME
Interest .......................................... $ 1,771,510
Dividends ......................................... 548,543
------------
TOTAL INCOME ................................... 2,320,053
------------
EXPENSES
Plan of distribution fee (Class A shares) ......... 6,418
Plan of distribution fee (Class B shares) ......... 3,296,704
Plan of distribution fee (Class C shares) ......... 11,101
Investment management fee ......................... 1,668,803
Transfer agent fees and expenses .................. 576,706
Registration fees ................................. 71,508
Shareholder reports and notices ................... 43,594
Professional fees ................................. 29,941
Custodian fees .................................... 29,503
Trustees' fees and expenses ....................... 9,497
Other ............................................. 4,109
------------
TOTAL EXPENSES ................................. 5,747,884
------------
NET INVESTMENT LOSS ............................ (3,427,831)
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain ................................. 58,817,382
Net change in unrealized appreciation ............. 125,011,424
------------
NET GAIN ....................................... 183,828,806
------------
NET INCREASE ...................................... $180,400,975
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
MORGAN STANLEY 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, 1999 SEPTEMBER 30, 1998
---------------- -------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS :
Net investment loss .................................. $ (3,427,831) $ (7,787,563)
Net realized gain .................................... 58,817,382 47,579,070
Net change in unrealized appreciation ................ 125,011,424 (189,235,137)
------------- --------------
NET INCREASE (DECREASE) ........................... 180,400,975 (149,443,630)
------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET
REALIZED GAIN:
Class A shares ....................................... (124,327) (101,495)
Class B shares ....................................... (10,501,815) (73,505,455)
Class C shares ....................................... (44,486) (175,858)
Class D shares ....................................... (62,639) (22,340)
------------- --------------
TOTAL DISTRIBUTIONS ............................... (10,733,267) (73,805,148)
------------- --------------
Net decrease from transactions in shares of beneficial
interest ........................................... (70,519,899) (48,225,084)
------------- --------------
NET INCREASE (DECREASE) ........................... 99,147,809 (271,473,862)
NET ASSETS:
Beginning of period .................................. 608,131,260 879,605,122
------------- --------------
END OF PERIOD
(Including accumulated net investment losses of
$3,471,187 and $43,356, respectively).............. $ 707,279,069 $ 608,131,260
============= ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 1999 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley 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 converted to a multiple class share
structure.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year,
six years and one year, respectively. Class D shares are not subject to a sales
charge. Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity 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 Morgan Stanley Dean
Witter Advisors 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.
11
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 1999 (unaudited) 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
12
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 1999 (unaudited) 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 Morgan Stanley Dean Witter Distributors
Inc. (the "Distributor"), an affiliate of the Investment Manager. The Fund has
adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the
Act. The Plan provides that the Fund will pay the Distributor a fee which is
accrued daily and paid monthly at the following annual rates: (i) Class A -- up
to 0.25% of the average daily net assets of Class A; (ii) Class B -- 1.0% of
the lesser of: (a) the average daily aggregate gross sales of the Class B
shares since the inception of the Fund (not including reinvestment of dividend
or capital gain distributions) less the average daily aggregate net asset value
of the Class B shares redeemed since the Fund's inception upon which a
contingent deferred sales charge has been imposed or waived; or (b) the average
daily net assets of Class B; and (iii) Class C -- up to 1.0% of the average
daily net assets of Class C. In the case of Class 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 (1) 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, Morgan Stanley Dean Witter Financial Advisors and others who
engage in or support distribution of the shares or who service shareholder
accounts, including overhead and telephone expenses; (2) printing and
distribution of prospectuses and reports used in connection with the offering
of these shares to other than current shareholders; and (3) 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 Dean Witter Reynolds Inc. ("DWR"), an
affiliate of the Investment Manager and Distributor, 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
13
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 1999 (unaudited) 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 $22,868,362 at
March 31, 1999.
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Dean Witter Financial Advisors or other
selected broker-dealer representatives may be reimbursed in the subsequent
calendar year. For the six months ended March 31, 1999, the distribution fee
was accrued for Class A shares and Class C shares at the annual rate of 0.14%
and 0.72%, respectively.
The Distributor has informed the Fund that for the six months ended March 31,
1999, it received contingent deferred sales charges from certain redemptions of
the Fund's Class A shares, Class B shares and Class C shares of $144, $548,744
and $969, respectively, and received $7,536, in front-end sales charges from
sales of the Fund's Class A shares. The respective shareholders pay such
charges which are not an expense of the Fund.
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, 1999
aggregated $530,403,852, and $533,416,247, respectively.
For the six months ended March 31, 1999, the Fund incurred $58,101 in brokerage
commissions with DWR for portfolio transactions executed on behalf of the Fund.
For the six months ended March 31, 1999, the Fund incurred brokerage
commissions of $19,500 with Morgan Stanley & Co., Inc., an affiliate of the
Investment Manager and Distributor, for portfolio transactions executed on
behalf of the Fund.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager
and Distributor, is the Fund's transfer agent. At March 31, 1999, the Fund had
transfer agent fees and expenses payable of approximately $25,300.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the six months ended March 31, 1999
included in Trustees'
14
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 1999 (unaudited) continued
fees and expenses in the Statement of Operations amounted to $2,992. At March
31, 1999, the Fund had an accrued pension liability of $44,772 which is
included in accrued expenses in the Statement of Assets and Liabilities.
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, 1999 SEPTEMBER 30, 1998
----------------------------------- ------------------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold .................................. 1,009,252 $ 23,620,596 491,103 $ 11,960,980
Reinvestment of distributions ......... 5,508 123,765 4,011 90,052
Redeemed .............................. (880,952) (20,796,766) (245,004) (6,003,020)
--------- -------------- -------- --------------
Net increase -- Class A ............... 133,808 2,947,595 250,110 6,048,012
--------- -------------- -------- --------------
CLASS B SHARES
Sold .................................. 9,242,587 211,962,562 12,935,890 316,348,092
Reinvestment of distributions ......... 444,463 9,880,417 3,114,684 69,706,625
Redeemed .............................. (12,749,715) (296,031,056) (18,446,882) (445,847,648)
----------- -------------- ----------- --------------
Net decrease -- Class B ............... (3,062,665) (74,188,077) (2,396,308) (59,792,931)
----------- -------------- ----------- --------------
CLASS C SHARES
Sold .................................. 597,618 13,931,512 479,462 11,866,963
Reinvestment of distributions ......... 1,953 43,445 7,586 169,775
Redeemed .............................. (575,996) (13,505,916) (417,652) (10,331,269)
----------- -------------- ----------- --------------
Net increase -- Class C ............... 23,575 469,041 69,396 1,705,469
----------- -------------- ----------- --------------
CLASS D SHARES
Sold .................................. 1,352,738 31,487,631 254,323 6,071,021
Reinvestment of distributions ......... 1,882 42,446 925 20,790
Redeemed .............................. (1,328,285) (31,278,535) (95,034) (2,277,445)
----------- -------------- ----------- --------------
Net increase -- Class D ............... 26,335 251,542 160,214 3,814,366
----------- -------------- ----------- --------------
Net decrease in Fund .................. (2,878,947) $ (70,519,899) (1,916,588) $ (48,225,084)
=========== ============== =========== ==============
</TABLE>
6. FEDERAL INCOME TAX STATUS
At September 30, 1998, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales.
15
<PAGE>
MORGAN STANLEY 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, 1999++ 1998++ 1997*++ 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(unaudited)
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period ....... $ 20.19 $ 27.46 $ 27.71 $ 25.54 $ 17.55 $ 20.50
--------- --------- --------- --------- --------- ---------
Income (loss) from investment operations:
Net investment loss ....................... (0.12) (0.20) (0.28) (0.23) (0.19) --
Net realized and unrealized gain (loss) ... 6.26 (4.76) 3.92 4.32 8.34 (1.82)
--------- --------- --------- --------- --------- ---------
Total income (loss) from investment
operations ................................ 6.14 (4.96) 3.64 4.09 8.15 (1.82)
--------- --------- --------- --------- --------- ---------
Less distributions from net realized gain .. (0.37) (2.31) (3.89) (1.92) (0.16) (1.13)
--------- --------- --------- --------- --------- ---------
Net asset value, end of period ............. $ 25.96 $ 20.19 $ 27.46 $ 27.71 $ 25.54 $ 17.55
========= ========= ========= ========= ========= =========
TOTAL RETURN+ .............................. 30.72 %(1) (18.88) 16.38 % 17.53 % 46.87 % (8.88)%
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................... 1.72 %(2)(3) 1.69 %(3) 1.68 % 1.69 % 1.77 % 1.78 %
Net investment loss ........................ (1.03)%(2)(3) (0.98)%(3) (1.21)% (1.03)% (1.04)% (1.32)%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands .... $ 687,867 $ 596,834 $ 877,539 $ 799,201 $ 534,869 $340,169
Portfolio turnover rate .................... 82 % 178 % 154 % 149 % 114 % 160 %
</TABLE>
- -------------
* Prior to July 28, 1997, the Fund issued one class of shares. All shares
of the Fund held prior to that date have been designated Class B shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class
specific expenses.
SEE NOTES TO FINANCIAL STATEMENTS
16
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED THROUGH
MARCH 31, 1999 SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(unaudited)
CLASS A SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period ................... $ 20.38 $ 27.50 $ 24.62
------- ------- -------
Income (loss) from investment operations:
Net investment loss ................................... (0.02) (0.06) (0.02)
Net realized and unrealized gain (loss) ............... 6.32 (4.75) 2.90
------- ------- -------
Total income (loss) from investment operations ......... 6.30 (4.81) 2.88
------- ------- -------
Less distributions from net realized gain .............. (0.37) (2.31) --
------- ------- -------
Net asset value, end of period ......................... $ 26.31 $ 20.38 $ 27.50
======= ======= =======
TOTAL RETURN+ .......................................... 31.22 %(1) (18.26)% 11.70 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................... 0.86 %(2)(3) 0.94 %(3) 0.99 %(2)
Net investment loss .................................... (0.17)%(2)(3) (0.23)%(3) (0.46)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $11,037 $ 5,822 $ 978
Portfolio turnover rate ................................ 82 % 178 % 154 %
CLASS C SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period ................... $ 20.19 $ 27.46 $ 24.62
------- --------- --------
Income (loss) from investment operations:
Net investment loss ................................... (0.09) (0.23) (0.05)
Net realized and unrealized gain (loss) ............... 6.27 (4.73) 2.89
------- --------- --------
Total income (loss) from investment operations ......... 6.18 (4.96) 2.84
------- --------- --------
Less distributions from net realized gain .............. (0.37) (2.31) --
------- --------- --------
Net asset value, end of period ......................... $ 26.00 $ 20.19 $ 27.46
======= ========= ========
TOTAL RETURN+ .......................................... 30.92 %(1) (18.88)% 11.54 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................... 1.44 %(2)(3) 1.69 %(3) 1.71 %(2)
Net investment loss .................................... (0.75)%(2)(3) (0.98)%(3) (1.19)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $ 3,427 $ 2,185 $ 1,066
Portfolio turnover rate ................................ 82 % 178 % 154%
</TABLE>
- --------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class
specific expenses.
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED THROUGH
MARCH 31, 1999 SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C>
CLASS D SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period ................... $20.44 $ 27.51 $ 24.62
------ ------- -------
Income (loss) from investment operations:
Net investment income (loss) .......................... -- 0.01 ( 0.01)
Net realized and unrealized gain (loss) ............... 6.35 (4.77) 2.90
------ ------- -------
Total income (loss) from investment operations ......... 6.35 (4.76) 2.89
------ ------- -------
Less distributions form net realized gain .............. (0.37) (2.31) --
------ ------- -------
Net asset value, end of period ......................... $26.42 $ 20.44 $ 27.51
====== ======= =======
TOTAL RETURN+ .......................................... 31.38 %(1) (18.05)% 11.74 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................... 0.72 %(2)(3) 0.69 %(3) 0.70 %(2)
Net investment income (loss) ........................... (0.03)%(2)(3) 0.02 %(3) (0.20)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $4,948 $ 3,291 $ 22
Portfolio turnover rate ................................ 82 % 178 % 154 %
</TABLE>
- --------------
* The date shares were first issued.
++ The per share amount were computed using an average number of shares
outstanding during the period.
+ Calculated based on the net asset value as of the last business day of
the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class
specific expenses.
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Mitchell M. Merin
President
Barry Fink
Vice President, Secretary and General Counsel
Jayne Stevlingson
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Morgan Stanley Dean Witter Advisors 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.
MORGAN STANLEY
DEAN WITTER
DEVELOPING
GROWTH SECURITIES
[Graphic]
SEMIANNUAL REPORT
MARCH 31, 1999
