<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
LETTER TO THE SHAREHOLDERS September 30, 1999
Two World Trade Center,
New York, New York 10048
DEAR SHAREHOLDER:
The twelve-month period ended September 30, 1999 saw the U.S. equity market
rally to record highs as the domestic economy continued to maintain its strength
and foreign stock markets soared on improving economic conditions overseas,
especially in Southeast Asia and Japan. After a peak in the domestic markets in
the middle of July, stock prices pulled back toward the end of the period amid
concerns that the U.S. economy might be growing too fast. This concern was
manifested in two Federal Reserve Board moves, in June and August, that raised
the federal-funds rate a total of 50 basis points while inflation remained low
and the economy continued to grow.
PERFORMANCE
For the twelve-month period ended September 30, 1999, Morgan Stanley Dean Witter
Developing Growth Securities' Class B shares produced a total return of 55.59
percent compared to 19.07 percent for the Russell 2000 Index and 26.79 percent
for the Lipper Small Cap Funds Index. For the same period, the Fund's Class A, C
and D shares returned 56.81 percent, 55.84 percent and 57.14 percent,
respectively. (Total return figures assume the reinvestment of all distributions
and do not reflect the deduction of any applicable sales charges. Performance of
the Fund's four share classes varies because of differing expenses.) The
accompanying chart illustrates the performance of the Fund versus the Russell
and Lipper indexes.
The Fund outperformed its benchmark indexes because of its overweighted
positions in the technology and consumer discretionary sectors, which performed
very well during the fiscal year.
PORTFOLIO STRATEGY
As of September 30, 1999, the Fund held 34 percent of its assets in technology,
compared to a 16 percent weighting in technology for the Russell 2000 Index and
22 percent for the Russell 2000 Growth Index. Consumer spending, which has been
bolstered by record low
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
LETTER TO THE SHAREHOLDERS September 30, 1999, continued
unemployment and low interest rates, continues to remain at record highs. Top
performers within the sector included small-cap companies in the specialty
retail/apparel and advertising/marketing industries. As of September 30, 1999,
the Fund's weighting in consumer companies was 25 percent, which was slightly
higher than that of the Russell 2000 Index and in line with that of the Russell
2000 Growth Index.
In selecting stocks for the Fund we look for companies that have a sound
business model and that we believe are able to grow earnings. We also focus on
companies with strong management teams and unique products or services, and
favor those where insiders have been buying stock. The Fund also seeks out
strong risk/reward situations where we believe a company has the prospect of
better-than-expected earnings or is a misunderstood growth story. Finally, we
expect that the Fund will continue to invest heavily in initial public
offerings: nearly two-thirds of the Fund is invested in companies that have come
to market within the last five years.
We expect to continue the Fund's strategy of overweighting the technology and
consumer sectors, where growth momentum remains strong. The Internet and
electronic commerce are two areas of key importance. We anticipate a resurgence
in the energy sector, with a continued stabilization of oil and natural gas
prices, and a few other cyclical areas. As advances in drug discovery and
genetic engineering create new opportunities for biotechnology companies, we
will be seeking out companies on the leading edge of this wave and may increase
our exposure to the health-care sector. The Fund will continue to underweight
the financial sector as long as we perceive the interest-rate environment
remaining volatile with an upward bias.
LOOKING FORWARD
Although small-cap stocks rebounded sharply in April, this rally was
short-lived, with the markets returning to a focus on large-company growth
stocks. Going forward, however, we believe that small caps will resume their
historical pattern of outperformance as investors increasingly concentrate on
the valuation disparity between small- and large-cap stocks. Further, we believe
that declining growth prospects for many large companies will not only lead more
investors to turn to smaller companies for growth but will also prompt large
caps to look for acquisition opportunities among smaller companies.
2
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
LETTER TO THE SHAREHOLDERS September 30, 1999, continued
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
FUND PERFORMANCE September 30, 1999
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
GROWTH OF $10,000 CLASS B
Date TOTAL RUSSELL 2000 LIPPER
- ---- ----- ------------ ------
September 30, 1989 $10,000 $10,000 $10,000
September 30, 1990 $ 7,913 $ 7,287 $ 7,791
September 30, 1991 $12,464 $10,574 $11,274
September 30, 1992 $10,823 $11,518 $11,903
September 30, 1993 $18,177 $15,341 $15,746
September 30, 1994 $16,562 $15,742 $16,115
September 30, 1995 $24,325 $19,426 $20,892
September 30, 1996 $28,589 $21,978 $24,456
September 30, 1997 $33,272 $29,272 $29,587
September 30, 1998 $26,990 $23,705 $23,312
September 30, 1999 $41,995(3) $28,226 $29,556
- ---- Fund ---- Russell 2000 (4) ---- Lipper (5)
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. PERFORMANCE FOR CLASS A,
CLASS C, AND CLASS D SHARES WILL VARY FROM THE PERFORMANCE OF CLASS B SHARES
SHOWN ABOVE DUE TO DIFFERENCES IN SALES CHARGES AND EXPENSES.
AVERAGE ANNUAL TOTAL RETURNS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B SHARES*
- ----------------------------------------------------------------
PERIOD ENDED 9/30/99
- --------------------
<S> <C> <C>
1 Year 55.59%(1) 50.59%(2)
5 Years 20.45%(1) 20.26%(2)
10 Years 15.43%(1) 15.43%(2)
CLASS C SHARES++
- ---------------------------------------------------------------
PERIOD ENDED 9/30/99
<S> <C> <C>
- -------------------------
1 Year 55.84%(1) 54.84%(2)
Since Inception (7/28/97) 17.13%(1) 17.13%(2)
CLASS A SHARES+
- ---------------------------------------------------------------
PERIOD ENDED 9/30/99
<S> <C> <C>
- -------------------------
1 Year 56.81%(1) 48.58%(2)
Since Inception (7/28/97) 17.95%(1) 15.06%(2)
CLASS D SHARES++
- ---------------------------------------------------------------
PERIOD ENDED 9/30/99
<S> <C> <C>
- -------------------------
1 Year 57.14%(1)
Since Inception (7/28/97) 18.22%(1)
</TABLE>
(1) Figure shown assumes reinvestment of all distributions and does not
reflect the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and the
deduction of the maximum applicable sales charge. See the Fund's
current prospectus for complete details on fees and sales charges.
(3) Closing value assuming a complete redemption on September 30, 1999.
(4) The Russell 2000 Index is a capitalization weighted index which is
comprised of 2000 of the smallest stocks (on the basis of
capitalization) in the Russell 3000 Index. The Index does not include
any expenses, fees or charges. The Index is unmanaged and should not be
considered an investment.
(5) The Lipper Small Cap Fund Index is an equally weighted performance
index of the largest qualifying funds (based on net assets) in the
Lipper Small Cap Funds objective. The Index, which is adjusted for
capital gains distributions and income dividends, is unmanaged and
should not be considered an investment. There are currently 30 funds
represented in this index.
* The maximum contingent deferred sales charge (CDSC) for Class B shares is
5.0%. The CDSC declines to 0% after six years.
+ The maximum front-end sales charge for Class A is 5.25%.
++ The maximum CDSC for Class C shares is 1% for shares redeemed within one
year of purchase.
++ Class D shares have no sales charge.
4
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
PORTFOLIO OF INVESTMENTS September 30, 1999
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- -------------------
<S> <C> <C>
COMMON STOCKS (90.8%)
Advertising (2.2%)
100,000 24/7 Media, Inc.* ..................... $ 3,781,250
70,000 FreeShop.com, Inc.* ................... 805,000
453,300 Getty Images, Inc.* ................... 10,879,200
100,000 R.H. Donnelley Corp.* ................. 1,862,500
------------
17,327,950
------------
Air Freight/Delivery Services (1.4%)
200,000 C.H. Robinson Worldwide, Inc. ......... 6,737,500
130,000 Expeditors International of
Washington, Inc. ...................... 4,168,125
------------
10,905,625
------------
Airlines (0.2%)
50,000 Midwest Express Holdings, Inc.*........ 1,309,375
------------
Apparel (0.3%)
120,000 Quiksilver, Inc.* ..................... 2,190,000
------------
Auto Parts: O.E.M. (0.3%)
105,500 Gentex Corp.* ......................... 2,175,937
------------
Biotechnology (2.9%)
150,000 Alkermes, Inc.* ....................... 4,303,125
350,000 Cephalon, Inc.* ....................... 6,278,125
137,000 Enzon, Inc.* .......................... 4,169,937
40,000 Incyte Pharmaceuticals, Inc.* ......... 922,500
200,000 Medco Research, Inc.* ................. 4,987,500
40,000 Millennium Pharmaceuticals,
Inc.* ................................. 2,585,000
------------
23,246,187
------------
Broadcasting (0.8%)
157,000 Citadel Communications Corp.* ......... 5,357,625
34,900 Salem Communications Corp.* ........... 889,950
------------
6,247,575
------------
Cable Television (0.9%)
60,900 Insight Communications Co., Inc.*...... 1,747,069
123,400 Pegasus Communications Corp.* ......... 5,553,000
------------
7,300,069
------------
Catalog/Specialty Distribution (0.2%)
33,200 Ashford.com, Inc.* .................... 303,987
84,200 ShopNow.com Inc.* ..................... 978,825
------------
1,282,812
------------
Cellular Telephone (1.6%)
42,500 AirGate PCS, Inc.* .................... 1,057,187
215,000 Powertel, Inc.* ....................... 11,825,000
------------
12,882,187
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- -------------------
<S> <C> <C>
Clothing/Shoe/Accessory Stores (0.4%)
120,000 Pacific Sunwear of California,
Inc.* ................................. $ 3,360,000
------------
Computer Communications (0.5%)
49,400 Emulex Corp.* ......................... 4,229,875
------------
Computer Software (10.5%)
50,000 BackWeb Technologies Ltd.
(Israel)* ............................. 846,875
300,000 CBT Group PLC (ADR) (Ireland)*......... 7,387,500
200,000 Citrix Systems, Inc.* ................. 12,375,000
5,400 E.piphany, Inc.* ...................... 263,250
11,500 Excalibur Technologies Corp.* ......... 92,000
400,000 FileNET Corp.* ........................ 4,275,000
117,000 Inet Technologies, Inc.* .............. 4,665,375
100,000 Marimba, Inc.* ........................ 2,975,000
180,000 Mercury Interactive Corp.* ............ 11,610,000
170,000 Micromuse Inc.* ....................... 10,922,500
11,100 Mission Critical Software, Inc.* ...... 493,950
33,700 NetIQ Corp.* .......................... 998,362
100,000 Packeteer, Inc.* ...................... 3,412,500
200,000 Peregine Systems, Inc.* ............... 8,150,000
290,000 Project Software & Development,
Inc.* ................................. 15,515,000
------------
83,982,312
------------
Computer/Video Chains (0.3%)
75,000 REX Stores Corp.* ..................... 2,325,000
------------
Containers/Packaging (0.4%)
400,000 Gaylord Container Corp.
(Series A)* ........................... 2,850,000
------------
Contract Drilling (1.8%)
400,000 R & B Falcon Corp.* ................... 5,250,000
430,000 Santa Fe International Corp. .......... 9,271,875
------------
14,521,875
------------
Discount Chains (0.4%)
100,000 BJ's Wholesale Club, Inc.* ............ 2,956,250
------------
Diversified Commercial Services (4.2%)
90,000 Abacus Direct Corp.* .................. 10,968,750
110,000 Dendrite International, Inc.* ......... 5,190,625
240,000 Iron Mountain, Inc.* .................. 8,130,000
16,000 Loislaw.com, Inc.* .................... 232,000
250,000 Nielsen Media Research, Inc.* ......... 9,296,875
------------
33,818,250
------------
Diversified Electronic Products (0.2%)
150,000 Sensormatic Electronics Corp.* ........ 1,903,125
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
PORTFOLIO OF INVESTMENTS September 30, 1999, continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- ------------
<S> <C> <C>
E.D.P. Peripherals (0.9%)
180,000 DSP Group, Inc.* ...................... $ 7,132,500
------------
E.D.P. Services (1.9%)
90,000 Concord Communications, Inc.* ......... 3,566,250
46,600 Netsolve Inc.* ........................ 827,150
200,000 Pegasus Systems, Inc.* ................ 7,487,500
140,000 U.S. Interactive, Inc.* ............... 3,062,500
------------
14,943,400
------------
Electrical Products (0.1%)
51,400 Belden Inc. ........................... 1,053,700
------------
Electronic Components (1.8%)
50,000 Flextronics International, Ltd.* ...... 2,909,375
170,000 Power Integrations, Inc.* ............. 11,676,875
------------
14,586,250
------------
Electronic Distributors (2.1%)
200,000 Intraware, Inc.* ...................... 5,212,500
150,000 Marshall Industries* .................. 5,475,000
90,000 Safeguard Scientifics, Inc.* .......... 6,120,000
------------
16,807,500
------------
Electronic Production Equipment (3.4%)
276,600 Advanced Energy Industries,
Inc.* ................................. 8,522,738
220,000 ATMI, Inc.* ........................... 8,167,500
250,000 EMCORE Corp.* ......................... 3,453,125
350,000 MEMC Electronic Materials, Inc.*....... 4,812,500
79,400 MKS Instruments, Inc.* ................ 1,756,725
------------
26,712,588
------------
Engineering & Construction (0.2%)
75,200 EMCOR Group, Inc.* .................... 1,447,600
------------
Finance Companies (0.7%)
153,000 Advanta Corp. (Class A) ............... 2,237,625
130,000 NextCard, Inc.* ....................... 3,176,875
------------
5,414,500
------------
Forest Products (0.7%)
140,000 Rayonier, Inc. ........................ 5,880,000
------------
Industrial Specialties (0.5%)
130,000 Pittway Corp. (Class A) ............... 4,095,000
------------
Integrated Oil Companies (1.0%)
150,000 Murphy Oil Corp. ...................... 8,109,375
------------
Internet Services (9.3%)
6,200 Agile Software Co.* ................... 396,800
230,000 AppNet Systems, Inc.* ................. 6,267,500
200,000 Art Technology Group, Inc.* ........... 7,600,000
18,600 Bluestone Software, Inc.* ............. 430,125
11,600 Broadbase Software, Inc.* ............. 184,150
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- ------------
<S> <C> <C>
180,000 CNet Inc.* ............................ $ 10,068,750
100,000 Digex, Inc.* .......................... 2,368,750
17,800 Digital Insight Corp.* ................ 267,000
7,800 eGain Communications Corp.* ........... 143,813
140,000 Exodus Communications, Inc.* .......... 10,088,750
100,000 InterVu Inc.* ......................... 3,712,500
44,300 ITXC Corp.* ........................... 1,409,294
18,600 Kana Communications, Inc.* ............ 927,675
6,200 Keynote Systems, Inc.* ................ 155,000
25,000 Luminant Worldwide Corp.* ............. 768,750
180,000 National Information Consortium,
Inc.* ................................. 4,443,750
100,000 Network Solutions, Inc.* .............. 9,175,000
19,700 Netzero Inc.* ......................... 510,969
148,000 PSINet, Inc.* ......................... 5,318,750
130,000 Quest Software, Inc.* ................. 6,045,000
75,000 Radware Ltd.* ......................... 2,062,500
72,000 Tumbleweed Communications
Corp.* ................................ 1,899,000
5,400 Vitria Technology, Inc.* .............. 197,438
------------
74,441,264
------------
Investment Bankers/Brokers/Services (1.8%)
220,000 Hambrecht & Quist Group* .............. 10,766,250
64,900 Investment Technology Group,
Inc. .................................. 1,492,700
85,000 Jefferies Group, Inc. ................. 1,774,375
------------
14,033,325
------------
Managed Health Care (0.2%)
340,000 Caremark Rx, Inc.* .................... 1,912,500
------------
Medical Specialties (3.5%)
183,000 Aurora Biosciences Corp.* ............. 2,447,625
375,300 Orthofix International N.V.* .......... 4,972,725
64,600 Perclose, Inc.* ....................... 3,003,900
100,000 SonoSite, Inc.* ....................... 2,587,500
200,000 Wesley Jessen VisionCare, Inc.* ....... 6,287,500
150,000 Xomed Surgical Products, Inc.* ........ 8,531,250
------------
27,830,500
------------
Medical/Dental Distributors (0.3%)
75,000 Priority Healthcare Corp.
(Class B)* ............................ 2,315,625
------------
Medical/Nursing Services (0.7%)
300,000 InfoCure Corp.* ....................... 5,662,500
------------
Metals Fabrications (1.6%)
240,000 CommScope, Inc.* ...................... 7,800,000
284,500 Maverick Tube Corp.* .................. 4,712,031
------------
12,512,031
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
PORTFOLIO OF INVESTMENTS September 30, 1999, continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- ------------
<S> <C> <C>
Military/Gov't/Technical (1.7%)
242,700 Aeroflex Inc.* ......................... $ 2,957,906
230,000 Nichols Research Corp.* ................ 6,066,250
300,000 Titan Corp. (The)* ..................... 4,312,500
------------
13,336,656
------------
Movies/Entertainment (1.8%)
183,500 CINAR Films Inc.
(Class B) (Canada)* .................... 5,505,000
200,000 Westwood One, Inc.* .................... 9,025,000
------------
14,530,000
------------
Multi-Line Insurance (0.4%)
136,000 Horace Mann Educators Corp. ............ 3,510,500
------------
Office/Plant Automation (0.4%)
80,000 Kronos, Inc.* .......................... 2,930,000
------------
Oil & Gas Production (1.5%)
100,000 Devon Energy Corp. ..................... 4,143,750
300,000 Nuevo Energy Co.* ...................... 5,175,000
250,000 Santa Fe Snyder Corp.* ................. 2,250,000
------------
11,568,750
------------
Oilfield Services/Equipment (2.0%)
320,000 BJ Services Co.* ....................... 10,180,000
300,000 Veritas DGC Inc.* ...................... 5,775,000
------------
15,955,000
------------
Other Consumer Services (0.8%)
45,000 garden.com, Inc.* ...................... 849,375
20,000 InsWeb Corp.* .......................... 390,000
210,000 Steiner Leisure Ltd.* .................. 5,197,500
------------
6,436,875
------------
Other Pharmaceuticals (0.4%)
100,000 Shire Pharmaceuticals Group PLC
(ADR) (United Kingdom)* ................ 2,875,000
------------
Other Specialty Stores (1.7%)
200,000 Bombay Co., Inc. (The)* ................ 1,012,500
150,000 Cost Plus, Inc.* ....................... 7,265,625
80,000 Linens 'N Things, Inc.* ................ 2,700,000
132,100 Urban Outfitters, Inc.* ................ 2,939,225
------------
13,917,350
------------
Other Telecommunications (4.8%)
120,000 Clarent Corp.* ......................... 6,112,500
420,000 Clearnet Communications Inc.
(Class A)* ............................. 7,560,000
22,200 Efficient Networks, Inc.* .............. 804,750
48,000 Focal Communications Corp.* ............ 1,227,000
250,000 ITC DeltaCom, Inc.* .................... 6,875,000
240,000 Pinnacle Holdings Inc.* ................ 6,240,000
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- ------------
<S> <C> <C>
231,000 Primus Telecommunications
Group, Inc.* ........................... $ 4,836,563
125,000 WinStar Communications, Inc. ........... 4,906,250
------------
38,562,063
------------
Paper (0.6%)
50,000 Sappi Ltd. (ADR) (South Africa) ........ 4,787,500
------------
Precious Metals (1.2%)
174,000 Newmont Mining Corp .................... 4,502,250
333,000 Placer Dome Inc. (Canada) .............. 4,953,375
------------
9,455,625
------------
Precision Instruments (0.9%)
250,000 Mettler-Toledo International Inc.*...... 7,406,250
------------
Real Estate Investment Trusts (0.4%)
130,000 Public Storage, Inc. ................... 3,274,375
------------
Recreational Products/Toys (1.8%)
300,000 Callaway Golf Co. ...................... 3,656,250
250,000 THQ, Inc.* ............................. 10,781,250
------------
14,437,500
------------
Rental/Leasing Companies (0.6%)
250,000 Comdisco, Inc. ......................... 4,828,125
------------
Restaurants (0.4%)
113,600 Foodmaker, Inc.* ....................... 2,832,900
------------
Semiconductors (4.0%)
140,000 Conexant Systems, Inc.* ................ 10,167,500
212,500 Exar Corp.* ............................ 7,955,469
150,000 Fairchild Semiconductor Corp.
(Class A)* ............................. 3,525,000
210,000 Integrated Device Technology,
Inc.* .................................. 3,871,875
220,000 National Semiconductor Corp.* .......... 6,710,000
------------
32,229,844
------------
Services to the Health Industry (0.8%)
150,000 Quest Diagnostics Inc.* ................ 3,900,000
123,200 United Payors & United
Providers, Inc.* ....................... 2,094,400
------------
5,994,400
------------
Shoe Manufacturing (0.5%)
300,000 Madden (Steven), Ltd.* ................. 3,862,500
------------
Smaller Banks (0.0%)
20,000 First Charter Corp. .................... 346,250
------------
Specialty Chemicals (0.8%)
115,000 Celgene Corp.* ......................... 3,112,188
200,000 Georgia Gulf Corp. ..................... 3,525,000
------------
6,637,188
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
PORTFOLIO OF INVESTMENTS September 30, 1999, continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------ ---------------
<S> <C> <C>
Specialty Foods/Candy (0.7%)
150,000 Earthgrains Co. ........................ $ 3,318,750
100,000 Universal Foods Corp.* ................. 2,293,750
------------
5,612,500
------------
Telecommunications Equipment (2.0%)
300,000 Antec Corp.* ........................... 15,918,750
------------
Trucking (0.4%)
50,000 American Freightways Corp.* ............ 909,375
40,000 USFreightways Corp. .................... 1,895,000
------------
2,804,375
------------
TOTAL COMMON STOCKS
(Identified Cost $507,218,528).......... 723,754,838
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- -------------
<S> <C> <C>
SHORT-TERM INVESTMENT (a) (6.6%)
U.S. GOVERNMENT AGENCY
$ 52,400 Federal Home Loan Mortgage
Corp. 5.20% due 10/01/99
(Amortized Cost $52,400,000)...... 52,400,000
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $559,618,528) (b)......... 97.4% 776,154,838
CASH AND OTHER ASSETS IN EXCESS
OF LIABILITIES ............................ 2.6 20,835,174
----- -----------
NET ASSETS ................................ 100.0% $796,990,012
===== ============
</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) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$225,114,997 and the aggregate gross unrealized depreciation is
$8,578,687, resulting in net unrealized appreciation of $216,536,310.
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1999
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $559,618,528).................................. $776,154,838
Cash ............................................................. 20,790
Receivable for:
Investments sold .............................................. 31,440,495
Shares of beneficial interest sold ............................ 3,816,323
Dividends ..................................................... 80,058
Prepaid expenses and other assets ................................ 87,769
------------
TOTAL ASSETS .................................................. 811,600,273
------------
LIABILITIES:
Payable for:
Investments purchased ......................................... 12,405,592
Shares of beneficial interest repurchased ..................... 1,114,559
Plan of distribution fee ...................................... 639,164
Investment management fee ..................................... 320,902
Accrued expenses and other payables .............................. 130,044
------------
TOTAL LIABILITIES ............................................. 14,610,261
------------
NET ASSETS .................................................... $796,990,012
============
COMPOSITION OF NET ASSETS:
Paid-in-capital .................................................. $438,305,411
Net unrealized appreciation ...................................... 216,536,310
Accumulated net investment loss .................................. (45,483)
Accumulated undistributed net realized gain ...................... 142,193,774
------------
NET ASSETS .................................................... $796,990,012
============
CLASS A SHARES:
Net Assets ....................................................... $ 15,246,012
Shares Outstanding (unlimited authorized, $.01 par value)......... 484,939
NET ASSET VALUE PER SHARE ..................................... $ 31.44
============
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value) ............... $ 33.18
============
CLASS B SHARES:
Net Assets ....................................................... $770,391,609
Shares Outstanding (unlimited authorized, $.01 par value)......... 24,929,573
NET ASSET VALUE PER SHARE ..................................... $ 30.90
============
CLASS C SHARES:
Net Assets ....................................................... $ 4,727,652
Shares Outstanding (unlimited authorized, $.01 par value)......... 152,772
NET ASSET VALUE PER SHARE ..................................... $ 30.95
============
CLASS D SHARES:
Net Assets ....................................................... $ 6,624,739
Shares Outstanding (unlimited authorized, $.01 par value)......... 209,614
NET ASSET VALUE PER SHARE ..................................... $ 31.60
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the year ended September 30, 1999
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT LOSS:
INCOME
Interest ................................................. $ 3,143,666
Dividends (net of $2,000 foreign withholding tax)......... 1,480,050
------------
TOTAL INCOME .......................................... 4,623,716
------------
EXPENSES
Plan of distribution fee (Class A shares) ................ 22,495
Plan of distribution fee (Class B shares) ................ 6,931,091
Plan of distribution fee (Class C shares) ................ 32,218
Investment management fee ................................ 3,515,654
Transfer agent fees and expenses ......................... 1,092,495
Registration fees ........................................ 114,232
Shareholder reports and notices .......................... 105,562
Professional fees ........................................ 77,751
Custodian fees ........................................... 62,220
Trustees' fees and expenses .............................. 19,074
Other .................................................... 7,898
------------
TOTAL EXPENSES ........................................ 11,980,690
------------
NET INVESTMENT LOSS ................................... (7,356,974)
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain ........................................ 153,313,817
Net change in unrealized appreciation .................... 165,480,270
------------
NET GAIN .............................................. 318,794,087
------------
NET INCREASE ............................................. $311,437,113
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
-------------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss .................................. $ (7,356,974) $ (7,787,563)
Net realized gain .................................... 153,313,817 47,579,070
Net change in unrealized appreciation ................ 165,480,270 (189,235,137)
-------------- --------------
NET INCREASE (DECREASE) ........................... 311,437,113 (149,443,630)
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET
REALIZED GAIN:
Class A shares ....................................... (124,327) (101,495)
Class B shares ....................................... (10,501,816) (73,505,455)
Class C shares ....................................... (44,486) (175,858)
Class D shares ....................................... (62,639) (22,340)
-------------- --------------
TOTAL DISTRIBUTIONS ............................... (10,733,268) (73,805,148)
-------------- --------------
Net decrease from transactions in shares of beneficial
interest ........................................... (111,845,093) (48,225,084)
-------------- --------------
NET INCREASE (DECREASE) ........................... 188,858,752 (271,473,862)
NET ASSETS:
Beginning of period .................................. 608,131,260 879,605,122
-------------- --------------
END OF PERIOD
(Including accumulated net investment losses of
$45,483 and $43,356, respectively)................. $ 796,990,012 $ 608,131,260
============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS September 30, 1999
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.
12
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS September 30, 1999, 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
13
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS September 30, 1999, 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
14
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS September 30, 1999, 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 $20,790,171 at September 30, 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 year ended September 30, 1999, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.20% and
0.88%, respectively.
The Distributor has informed the Fund that for the year ended September 30,
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 $186, $940,162
and $1,578, respectively, and received $34,070, in front-end sales charges from
sales of the Fund's Class A shares. The respective shareholders pay such charges
which are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended September 30, 1999 aggregated
$1,154,040,162, and $1,255,512,287, respectively.
For the year ended September 30, 1999, the Fund incurred $103,031 in brokerage
commissions with DWR for portfolio transactions executed on behalf of the Fund.
At September 30, 1999, the Funds receivable for investments sold included
unsettled trades with DWR of $1,061,885.
For the year ended September 30, 1999, the Fund incurred brokerage commissions
of $59,825 with Morgan Stanley & Co., Inc., an affiliate of the Investment
Manager and Distributor, for portfolio transactions executed on behalf of the
Fund.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At September 30, 1999, the Fund had
transfer agent fees and expenses payable of approximately $9,200.
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
15
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS September 30, 1999, continued
years of service. Aggregate pension costs for the year ended September 30, 1999
included in Trustees' fees and expenses in the Statement of Operations amounted
to $6,516. At September 30, 1999, the Fund had an accrued pension liability of
$45,487 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 YEAR FOR THE YEAR
ENDED ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
------------------------------------ ------------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- ------------------ ---------------- -----------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold .................................. 1,795,565 $ 45,961,645 491,103 $ 11,960,980
Reinvestment of distributions ......... 5,508 123,765 4,011 90,052
Redeemed .............................. (1,601,819) (41,473,827) (245,004) (6,003,020)
---------- -------------- -------- --------------
Net increase - Class A ................ 199,254 4,611,583 250,110 6,048,012
---------- -------------- -------- --------------
CLASS B SHARES
Sold .................................. 19,364,899 501,039,654 12,935,890 316,348,092
Reinvestment of distributions ......... 444,464 9,880,417 3,114,684 69,706,625
Redeemed .............................. (24,437,018) (628,930,869) (18,446,882) (445,847,648)
----------- -------------- ----------- --------------
Net decrease - Class B ................ (4,627,655) (118,010,798) (2,396,308) (59,792,931)
----------- -------------- ----------- --------------
CLASS C SHARES
Sold .................................. 1,377,267 36,318,739 479,462 11,866,963
Reinvestment of distributions ......... 1,953 43,445 7,586 169,775
Redeemed .............................. (1,334,660) (35,381,357) (417,652) (10,331,269)
----------- -------------- ----------- --------------
Net increase - Class C ................ 44,560 980,827 69,396 1,705,469
----------- -------------- ----------- --------------
CLASS D SHARES
Sold .................................. 2,267,493 57,727,289 254,323 6,071,021
Reinvestment of distributions ......... 1,883 42,446 925 20,790
Redeemed .............................. (2,220,762) (57,196,440) (95,034) (2,277,445)
----------- -------------- ----------- --------------
Net increase - Class D ................ 48,614 573,295 160,214 3,814,366
----------- -------------- ----------- --------------
Net decrease in Fund .................. (4,335,227) $ (111,845,093) (1,916,588) $ (48,225,084)
=========== ============== =========== ==============
</TABLE>
16
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS September 30, 1999, continued
6. FEDERAL INCOME TAX STATUS
As of September 30, 1999, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales and permanent book/tax
differences primarily attributable to a net operating loss. To reflect
reclassifications arising from the permanent differences, accumulated
undistributed net realized gain was charged and accumulated net investment loss
was credited $7,354,847.
17
<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 PERIOD
FOR THE YEAR FOR THE YEAR JULY 28, 1997*
ENDED ENDED THROUGH
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
-------------------- -------------------- -------------------
<S> <C> <C> <C>
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 ................................... (0.07) (0.06) (0.02)
Net realized and unrealized gain (loss) ............... 11.50 (4.75) 2.90
-------- ------- -------
Total income (loss) from investment operations ......... 11.43 (4.81) 2.88
-------- ------- -------
Less distributions from net realized gain .............. (0.37) (2.31) -
-------- ------- -------
Net asset value, end of period ......................... $ 31.44 $20.38 $27.50
======== ======= =======
TOTAL RETURN+ ......................................... 56.81 % (18.26)% 11.70 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................... 0.90 %(3) 0.94 %(3) 0.99 %(2)
Net investment loss .................................... ( 0.25)%(3) (0.23)%(3) ( 0.46)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $15,246 $ 5,822 $ 978
Portfolio turnover rate ................................ 172 % 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
18
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
--------------------------------------
1999++ 1998++
------------------ -------------------
<S> <C> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period ................... $ 20.19 $ 27.46
---------- ----------
Income (loss) from investment operations:
Net investment loss ................................... (0.27) (0.20)
Net realized and unrealized gain (loss) ............... 11.35 (4.76)
---------- ----------
Total income (loss) from investment operations ......... 11.08 (4.96)
---------- ----------
Less distributions from net realized gain .............. (0.37) (2.31)
---------- ----------
Net asset value, end of period ......................... $ 30.90 $ 20.19
========== ==========
TOTAL RETURN+ ......................................... 55.59 % (18.88)%
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................... 1.70 %(1) 1.69 %(1)
Net investment loss .................................... (1.05)%(1) (0.98)%(1)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $770,392 $596,834
Portfolio turnover rate ................................ 172 % 178 %
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
------------------------------------------------
1997*++ 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period ................... $ 27.71 $ 25.54 $ 17.55
---------- ---------- ----------
Income (loss) from investment operations:
Net investment loss ................................... (0.28) (0.23) (0.19)
Net realized and unrealized gain (loss) ............... 3.92 4.32 8.34
---------- ---------- ----------
Total income (loss) from investment operations ......... 3.64 4.09 8.15
---------- ---------- ----------
Less distributions from net realized gain .............. (3.89) (1.92) (0.16)
---------- ---------- ----------
Net asset value, end of period ......................... $ 27.46 $ 27.71 $ 25.54
========== ========== ==========
TOTAL RETURN+ ......................................... 16.38 % 17.53 % 46.87 %
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................... 1.68 % 1.69 % 1.77 %
Net investment loss .................................... (1.21)% (1.03)% (1.04)%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $877,539 $799,201 $534,869
Portfolio turnover rate ................................ 154 % 149 % 114 %
</TABLE>
- --------------
* Prior to July 28, 1997, the Fund issued one class of shares. All shares
of the Fund held prior to that date have been designated Class B shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR JULY 28, 1997*
ENDED ENDED THROUGH
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
-------------------- -------------------- -------------------
<S> <C> <C> <C>
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 ................................... (0.25) (0.23) (0.05)
Net realized and unrealized gain (loss) ............... 11.38 (4.73) 2.89
------- ------- -------
Total income (loss) from investment operations ......... 11.13 (4.96) (2.84)
------- ------- -------
Less distributions from net realized gain .............. (0.37) (2.31) -
------- ------- -------
Net asset value, end of period ......................... $30.95 $ 20.19 $ 27.46
======= ======= =======
TOTAL RETURN+ ......................................... 55.84 % (18.88)% 11.54 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................... 1.58 %(3) 1.69 %(3) 1.71 %(2)
Net investment loss .................................... (0.93)%(3) (0.98)%(3) (1.19)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $4,728 $ 2,185 $1,066
Portfolio turnover rate ................................ 172 % 178 % 154 %
</TABLE>
- --------------
* The date shares were first issued.
++ PThe 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
20
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR JULY 28, 1997*
ENDED ENDED THROUGH
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
-------------------- -------------------- -------------------
<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 (0.01)
Net realized and unrealized gain (loss) ............... 11.54 (4.77) 2.90
------- ------- -------
Total income (loss) from investment operations ......... 11.53 (4.76) 2.89
------- ------- -------
Less distributions form net realized gain .............. (0.37) (2.31) -
------- ------- -------
Net asset value, end of period ......................... $31.60 $20.44 $27.51
======= ======= =======
TOTAL RETURN+ ......................................... 57.14 % (18.05)% 11.74 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................... 0.70 %(3) 0.69 %(3) 0.70 %(2)
Net investment income (loss) ........................... (0.05)%(3) 0.02 %(3) (0.20)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $6,625 $ 3,291 $ 22
Portfolio turnover rate ................................ 172 % 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
21
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Morgan Stanley Dean Witter
Developing Growth Securities Trust (the "Fund") at September 30, 1999, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended and the financial highlights
for each of the periods presented, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at September 30, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
November 8, 1999
1999 FEDERAL TAX NOTICE (unaudited)
During the year ended September 30, 1999, the Fund paid to shareholders
$0.37 per share from long-term capital gains.
22
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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
Armon Bar-Tur
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 Stanely Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
This report is submitted for the general information of shareholders
of the Fund. For more detailed information about the Fund, its officers
and trustees, fees, expenses and other pertinent information, please see
the prospectus of the Fund.
This report is not authorized for distribution to prospective investors
in the Fund unless preceded or accompanied by an effective prospectus.
Read the prospectus carefully before investing.
MORGAN STANLEY
DEAN WITTER
DEVELOPING
GROWTH SECURITIES
ANNUAL REPORT
SEPTEMBER 30, 1999
