<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING Two World Trade Center,
GROWTH SECURITIES TRUST New York, New York 10048
LETTER TO THE SHAREHOLDERS September 30, 2000
DEAR SHAREHOLDER:
During the fiscal year ended September 30, 2000, the U.S. equity market
experienced extreme volatility, with technology and telecommunications stocks
leading the market on the way up and on the decline. Concerns over potentially
higher inflation caused by an overheating of the U.S. economy prompted the
Federal Reserve Board to continue instituting gradual rate hikes into the second
quarter of 2000. Leadership of the market changed hands frequently in the second
and third quarters of 2000, and the end of September found both the Dow and
Nasdaq in negative territory.
The volatility seen early in the year was caused largely by speculation
surrounding the Fed's inflationary-biased monetary policy. However, as the
summer went on and inflation fears died down, continuing turmoil in the market
was spurred by negative earnings reports across all sectors. A rotation out of
technology stocks benefited sectors such as health care, aided by an improving
legislative environment and stronger fundamentals, and energy, with commodity
prices near 10-year highs and surging technology driven demand.
PERFORMANCE AND PORTFOLIO STRATEGY
For the 12-month period ended September 30, 2000, Morgan Stanley Dean Witter
Developing Growth Securities' Class B shares posted a total return of 39.12
percent versus 23.39 percent for the Russell 2000 Index. For the same period,
the Fund's Class A, C and D shares returned 40.16 percent, 39.09 percent and
40.53 percent, respectively. Performance of the Fund's four share classes varies
because each has different expenses. The total return figures given assume the
reinvestment of all distributions but do not reflect the deduction of any
applicable sales charges. The accompanying chart compares the Fund's performance
to that of the Russell 2000 Index.
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
LETTER TO THE SHAREHOLDERS September 30, 2000, continued
The Fund outperformed the Russell 2000 Index largely because of its
overweightings in health care and technology. Biotechnology stocks reached new
highs in March. Unlike the technology-driven Nasdaq, however, the biotech index
exceeded its March highs in the fall. Among other factors benefiting the
health-care sector, a new type of biotechnology investment opportunity came of
age this year in the form of the genomics-based companies, which have generated
a great deal of investor interest. Finally, an increasing number of small
biotechnology companies have products in the later stages of clinical trials.
While many of these efforts may ultimately fail, we believe that larger biotech
and pharmaceuticals companies will be looking among this universe of companies
for ways to grow their own pipelines, via outright acquisitions or licensing
deals. While the valuations of these stocks will remain a concern, we continue
to be favorably inclined towards this sector.
The Fund plans to continue investing in small growth companies, which have been
predominantly found in the technology and health-care sectors. Although the
market has been volatile over the last few months, the Fund will continue to
maintain a strong presence in these sectors. However, based upon our concerns
about valuations, the annual tax-loss selling by institutions in October and the
possibility of slowing growth, the Fund began to build its cash position in
September, increasing it to 24 percent of net assets by month end. The Fund will
closely monitor the small-cap market for opportunities to take advantage of
discounted valuations and lower multiples, as we expect the market's current
downtrend to create buying opportunities in the future.
The Fund's top holdings on September 30 were Cytyc, Exar, Manhattan Associates,
Zoll Medical, Cross Timbers Oil, Emcore, Laboratory CRP of America, Oak
Technology, Inet Technologies and DSP Group.
LOOKING AHEAD
The market's near-term performance will be driven by many factors, including the
presidential and congressional elections, events in the Middle East, the price
of crude oil and the rate at which the U.S. and world economies grow. Until
there is more clarity on these developments, the Fund anticipates maintaining
its current defensive posture and cash level. During the third-quarter earnings
season that has just begun it will be very important for companies, particularly
in the area of technology, to provide favorable forecasts for future earnings in
addition to meeting or exceeding analyst expectations. If at the end of the
reporting season the overall impression of the third quarter is unfavorable, we
believe the stock market will likely be headed for a period of consolidation and
decline. Conversely, if the third quarter is perceived favorably, we expect the
market will rise from its current depressed level.
2
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
LETTER TO THE SHAREHOLDERS September 30, 2000, 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, 2000
[GRAPHIC OMITTED]
Past performance is not predictive of future returns. Investment return and
principal value will fluctuate. When you sell fund shares, they may be worth
less than their original cost. Performance for Class A, Class C, and Class D
shares will vary from the performance of Class B shares shown above due to
differences in sales charges and expenses.
Average Annual Total Returns
--------------------------------------------------------------------------------
Class A Shares*
---------------------------------------------------------------
Period Ended 9/30/00
---------------------------
1 Year 40.16%(1) 32.80%(2)
Since Inception (7/28/97) 24.52%(1) 22.42%(2)
Class B Shares**
---------------------------------------------------------------
Period Ended 9/30/00
---------------------------
1 Year 39.12%(1) 34.12%(2)
5 Years 19.15%(1) 18.96%(2)
10 Years 22.13%(1) 22.13%(2)
Class C Shares+
---------------------------------------------------------------
Period Ended 9/30/00
---------------------------
1 Year 39.09%(1) 38.09%(2)
Since Inception (7/28/97) 23.63%(1) 23.63%(2)
Class D Shares++
---------------------------------------------------------------
Period Ended 9/30/00
---------------------------
1 Year 40.53%(1)
Since Inception (7/28/97) 24.82%(1)
---------------
(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, 2000.
(4) The Russell 2000 Index is a capitalization-weighted index, which is
comprised of 2000 of the smallest stocks included 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.
* The maximum front-end sales charge for Class A is 5.25%.
** The maximum contingent deferred sales charge (CDSC) for Class B is 5.0%.
The CDSC declines to 0% after six years.
+ The maximum contingent deferred sales charge for Class C shares is 1% for
shares redeemed within one year of purchase.
++ Class D shares have no sales charge. Class B Shares**
4
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
PORTFOLIO OF INVESTMENTS September 30, 2000
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
----------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (74.2%)
Advertising/Marketing
Services (1.2%)
100,000 ADVO, Inc.* ........................... $ 3,300,000
355,200 Getty Images, Inc.* ................... 10,811,400
--------------
14,111,400
--------------
Aerospace & Defense (3.3%)
385,200 Innovative Solutions & Support,
Inc.* ............................... 6,596,550
172,000 L-3 Communications Holdings,
Inc.* ............................... 9,718,000
136,300 Litton Industries, Inc.* .............. 6,090,906
324,000 Teledyne Technologies Inc.* ........... 9,436,500
464,500 Titan Corp. (The)* .................... 7,664,250
--------------
39,506,206
--------------
Air Freight/Couriers (1.6%)
241,300 C.H. Robinson Worldwide, Inc. ......... 13,599,517
113,600 Expeditors International of
Washington, Inc. ...................... 5,119,100
--------------
18,718,617
--------------
Airlines (0.3%)
72,000 SkyWest, Inc. ......................... 3,690,000
--------------
Apparel/Footwear (0.3%)
91,000 Kenneth Cole Productions, Inc.
(Class A)* .......................... 3,213,437
--------------
Auto Parts: O.E.M. (1.0%)
485,900 Gentex Corp.* ......................... 12,147,500
--------------
Biotechnology (5.1%)
77,300 BioTransplant, Inc.* .................. 1,318,931
97,300 Celgene Corp.* ........................ 5,789,350
250,000 Dendreon Corp.* ....................... 5,894,531
131,700 ImmunoGen, Inc.* ...................... 4,502,494
143,000 Intermune Pharmaceuticals, Inc.*....... 7,757,750
120,000 Myriad Genetics, Inc.* ................ 10,320,000
100,000 NeoPharm, Inc.* ....................... 3,950,000
113,600 Neurocrine Biosciences, Inc.* ......... 5,112,000
113,700 Onyx Pharmaceuticals, Inc.* ........... 2,799,862
54,800 Progenics Pharmaceuticals, Inc.* ...... 1,503,575
40,600 Regeneration Technologies, Inc.* ...... 334,950
137,400 Titan Pharmaceuticals, Inc.* .......... 8,931,000
140,400 Vion Pharmaceuticals, Inc.* ........... 2,509,650
--------------
60,724,093
--------------
<CAPTION>
NUMBER OF
SHARES VALUE
----------------------------------------------------------------------------
<S> <C> <C>
Broadcasting (0.5%)
295,300 Westwood One, Inc.* ................... $ 6,330,494
--------------
Building Products (0.1%)
72,800 Lamson & Sessions Co. (The)* .......... 864,462
--------------
Cable/Satellite TV (0.8%)
190,700 Pegasus Communications Corp.* ......... 9,213,194
--------------
Chemicals: Agricultural (0.1%)
52,400 Eden Bioscience Corp.* ................ 1,729,200
--------------
Computer Communications (0.9%)
204,500 Computer Network Technology
Corp.* .............................. 7,029,687
71,000 Elastic Networks Inc.* ................ 989,562
63,600 MRV Communications, Inc.* ............. 2,881,875
--------------
10,901,124
--------------
Computer Peripherals (3.3%)
391,000 DSP Group, Inc.* ...................... 14,613,625
227,500 Electronics for Imaging, Inc.* ........ 5,744,375
345,400 M-Systems Flash Disk Pioneers
Ltd. (Israel)* ...................... 13,189,962
545,200 Maxtor Corp.* ......................... 5,724,600
--------------
39,272,562
--------------
Contract Drilling (0.4%)
48,600 R&B Falcon Corp.* ..................... 1,354,725
87,900 Santa Fe International Corp. .......... 3,960,994
--------------
5,315,719
--------------
Data Processing Services (0.2%)
150,000 Pegasus Solutions, Inc.* .............. 2,934,375
--------------
Discount Stores (0.3%)
110,000 BJ's Wholesale Club, Inc.* ............ 3,753,750
--------------
Electrical Products (0.1%)
27,500 Proton Energy Systems, Inc.* .......... 787,187
--------------
Electronic Components (2.8%)
208,600 APW Ltd. .............................. 10,169,250
133,700 Blue Wave Systems Inc.* ............... 672,678
81,700 M-Wave, Inc.* ......................... 2,129,306
500,000 MEMC Electronic Materials, Inc.*....... 6,437,500
113,800 Methode Electronics, Inc.
(Class A) ........................... 5,042,762
</TABLE>
See Notes to Financial Statements
5
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
PORTFOLIO OF INVESTMENTS September 30, 2000, continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
-----------------------------------------------------------------------------
<S> <C> <C>
250,000 Parthus Technologies PLC
(Ireland)* ........................... $ 994,545
136,400 Spectrum Control, Inc.* ................ 2,190,925
47,800 Stratos Lightwave, Inc.* ............... 1,541,550
27,300 Three-Five Systems, Inc.* .............. 798,525
112,500 TTM Technologies, Inc.* ................ 2,643,750
--------------
32,620,791
--------------
Electronic Equipment/
Instruments (1.4%)
193,300 Lexar Media, Inc.* ..................... 2,247,112
158,000 Zygo Corp.* ............................ 13,746,000
--------------
15,993,112
--------------
Electronic Production
Equipment (4.4%)
213,600 Advanced Energy Industries, Inc.* 7,048,800
169,100 Asyst Technologies, Inc.* .............. 3,424,275
181,800 ATMI, Inc.* ............................ 4,249,575
495,000 EMCORE Corp.* .......................... 20,581,172
350,000 inSilicon Corp.* ....................... 5,075,000
45,400 Keithley Instruments, Inc. ............. 3,178,000
320,000 MKS Instruments, Inc.* ................. 8,760,000
--------------
52,316,822
--------------
Engineering &
Construction (0.4%)
227,100 SpectraSite Holdings, Inc.* ............ 4,215,544
--------------
Finance/Rental/Leasing (0.4%)
186,400 Comdisco, Inc. ......................... 3,553,250
22,700 Metris Companies, Inc. ................. 896,650
--------------
4,449,900
--------------
Household/Personal Care (0.3%)
154,500 Carter-Wallace, Inc. ................... 3,775,594
--------------
Industrial Machinery (0.3%)
90,500 Actuant Corp. (Class A) ................ 356,344
75,000 Singulus Technologies AG
(Germany) ............................ 3,525,395
--------------
3,881,739
--------------
Information Technology
Services (2.1%)
381,900 Manhattan Associates, Inc.* ............ 23,391,375
91,000 Mediagrif Interactive
Technologies (Canada)* ................. 808,499
--------------
24,199,874
--------------
Internet Software/Services (1.6%)
53,400 Art Technology Group, Inc.* ............ 5,059,650
197,500 Digex, Inc.* ........................... 9,257,812
<CAPTION>
NUMBER OF
SHARES VALUE
-----------------------------------------------------------------------------
<S> <C> <C>
24,500 Quest Software, Inc.* .................. $ 1,521,680
90,500 WebEx Communications, Inc.* ............ 3,337,187
--------------
19,176,329
--------------
Investment Banks/Brokers (0.6%)
127,400 AmeriTrade Holding Corp.
(Class A)* ........................... 2,261,350
60,500 eSPEED, Inc (Class A)* ................. 1,720,469
104,600 LaBranche & Co., Inc.* ................. 3,491,045
--------------
7,472,864
--------------
Medical Distributors (0.6%)
86,300 Priority Healthcare Corp.
(Class B)* ........................... 6,580,375
--------------
Medical Specialties (9.9%)
209,100 ABIOMED, Inc.* ......................... 14,244,937
459,000 ArthroCare Corp.* ...................... 8,921,813
192,100 Coherent, Inc.* ........................ 13,062,800
852,200 Cytyc Corp.* ........................... 36,751,125
36,400 EPIX Medical, Inc.* .................... 509,600
206,800 PharmaNetics, Inc.* .................... 3,929,200
348,500 ResMed, Inc.* .......................... 10,890,625
352,200 SonoSite, Inc.* ........................ 6,581,738
452,500 Zoll Medical Corp.* .................... 22,059,375
--------------
116,951,213
--------------
Metal Fabrications (1.9%)
286,700 Maverick Tube Corp.* ................... 7,722,981
190,800 Precision Castparts Corp. .............. 7,321,950
104,500 Shaw Group Inc. (The)* ................. 7,367,250
--------------
22,412,181
--------------
Miscellaneous
Manufacturing (1.1%)
300,000 Mettler-Toledo International Inc.*...... 13,200,000
--------------
Movies/Entertainment (0.6%)
204,400 Pixar, Inc.* ........................... 6,566,350
--------------
Oil & Gas Production (2.5%)
199,700 Cabot Oil & Gas Corp. (Class A) ........ 4,068,888
1,110,850 Cross Timbers Royalty Trust ............ 21,314,434
200,000 Forest Oil Corp.* ...................... 3,237,500
54,600 St. Mary Land & Exploration Co.......... 1,259,213
--------------
29,880,035
--------------
Oilfield Services/Equipment (0.5%)
27,300 BJ Services Co.* ....................... 1,668,713
196,750 Grant Prideco, Inc.* ................... 4,316,203
--------------
5,984,916
--------------
</TABLE>
See Notes to Financial Statements
6
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
PORTFOLIO OF INVESTMENTS September 30, 2000, continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
-----------------------------------------------------------------------------
<S> <C> <C>
Packaged Software (4.6%)
554,300 Inet Technologies, Inc.* ............... $ 16,213,275
123,500 NetIQ Corp.* ........................... 8,112,406
300,000 Peregine Systems, Inc.* ................ 5,681,250
916,200 Project Software & Development,
Inc.* ................................ 14,244,047
212,800 SmartForce PLC (ADR) (Ireland)*......... 10,081,400
--------------
54,332,378
--------------
Pharmaceuticals: Generic Drugs (0.2%)
61,875 Galen Holdings ADR (United
Kingdom) ............................. 2,815,313
--------------
Pharmaceuticals: Other (1.3%)
429,500 Connetics Corp.* ....................... 10,361,688
109,100 Dura Pharmaceuticals, Inc.* ............ 3,859,413
40,900 Matrix Pharmaceutical, Inc.* ........... 636,506
--------------
14,857,607
--------------
Precious Metals (0.8%)
338,200 Stillwater Mining Co.* ................. 9,155,074
--------------
Property - Casualty Insurers (0.4%)
86,200 Everest Re Group, Ltd. (Bermuda)........ 4,266,900
--------------
Publishing: Newspapers (0.1%)
100,000 Metro International S.A. (Class B)
(Sweden)* ............................ 1,244,555
--------------
Recreational Products (0.6%)
299,900 Concord Camera Corp.* .................. 7,684,938
--------------
Regional Banks (0.8%)
159,600 Silicon Valley Bancshares* ............. 9,294,206
--------------
Semiconductors (5.5%)
131,500 C-Cube Semiconductor Inc.* ............. 2,695,750
288,300 Exar Corp.* ............................ 34,884,300
8,500 Micronas Semiconductor Holding
AG (Switzerland)* ...................... 4,528,083
693,000 Oak Technology, Inc.* .................. 18,970,875
236,300 Tvia, Inc.* ............................ 4,238,631
--------------
65,317,639
--------------
Services to the Health Industry (3.3%)
90,900 Cerner Corp.* .......................... 4,221,169
183,300 IMPATH Inc.* ........................... 11,570,813
161,200 Laboratory Corp. of America
Holdings* .............................. 19,303,700
200,000 MDS Inc. (Canada) ...................... 4,192,733
--------------
39,288,415
--------------
Specialty Stores (0.5%)
205,900 Cost Plus, Inc.* ....................... 6,202,738
--------------
<CAPTION>
NUMBER OF
SHARES VALUE
-----------------------------------------------------------------------------
<S> <C> <C>
Specialty Telecommunications (0.8%)
405,000 Evoke Communications Inc.* ............. $ 2,657,813
277,800 Pinnacle Holdings Inc.* ................ 7,396,425
--------------
10,054,238
--------------
Telecommunication Equipment (3.2%)
168,300 BreezeCom Ltd. (Israel)* ............... 5,543,381
327,000 CommScope, Inc.* ....................... 8,011,500
326,100 DDi Corp.* ............................. 14,429,925
70,100 MCK Communications, Inc.* .............. 1,586,013
72,700 Plantronics, Inc.* ..................... 2,762,600
50,000 Tandberg ASA (Norway)* ................. 1,472,693
135,000 Vyyo Inc.* ............................. 4,050,000
--------------
37,856,112
--------------
Trucking (0.2%)
59,000 Landstar Systems, Inc.* ................ 2,632,875
--------------
Wireless Communications (1.0%)
50,000 Clearnet Communications Inc.
(Class A) (Canada)* .................. 2,215,625
127,200 Leap Wireless International, Inc.*...... 7,957,950
8,493 RTX Telecom A/S (Denmark) * ............ 394,569
29,600 Tritel, Inc.* .......................... 423,650
--------------
10,991,794
--------------
TOTAL COMMON STOCKS
(Cost $649,758,103) .................... 878,885,741
--------------
PRINCIPAL
AMOUNT IN
THOUSANDS
-----------
<S> <C> <C>
CONVERTIBLE BONDS (0.5%)
Pharmaceuticals: Other (0.4%)
$ 5,010 Dura Pharmaceuticals, Inc.
3.50% due 07/15/02 ......................... 4,759,500
-------------
Telecommunication
Equipment (0.1%)
1,260 Cyras Systems, Inc. - 144A**
4.50% due 08/15/05 ......................... 1,512,000
-------------
TOTAL CONVERTIBLE BONDS
(Cost $5,779,125) .............. 6,271,500
-------------
SHORT-TERM INVESTMENT (a) (23.8%)
U.S. GOVERNMENT AGENCY
281,100 Federal National Mortgage Assoc.
6.32% due 10/02/00
(Cost $281,050,651) ........................ 281,050,651
-------------
</TABLE>
See Notes to Financial Statements
7
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
PORTFOLIO OF INVESTMENTS September 30, 2000, continued
<TABLE>
<CAPTION>
VALUE
-----------------------------------------------------------------
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $936,587,879) (b) ......... 98.5% 1,166,207,892
OTHER ASSETS IN EXCESS OF
LIABILITIES ..................... 1.5 17,619,492
----- -------------
NET ASSETS ...................... 100.0% $1,183,827,384
===== ==============
</TABLE>
--------------------------------
ADR American Depository Receipt.
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
(a) 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 the
aggregate cost for book purposes. The aggregate gross unrealized
appreciation is $247,809,978 and the aggregate gross unrealized
depreciation is $18,189,965, resulting in net unrealized appreciation of
$229,620,013.
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT
SEPTEMBER 30, 2000:
<TABLE>
<CAPTION>
CONTRACTS TO IN DELIVERY UNREALIZED
DELIVER EXCHANGE FOR DATE DEPRECIATION
------------------------------------------------------------------
<S> <C> <C> <C>
$ 730,142 CAD 1,092,000 10/03/00 $ (3,401)
CAD 3,540,696 $ 2,348,876 10/03/00 (7,503)
DKK 1,440,235 $ 169,739 10/04/00 (496)
THB 44,625,570 $ 1,057,227 10/04/00 (1,254)
GBP 942,611 $ 1,380,265 10/06/00 (8,578)
--------
Total unrealized depreciation ................. $(21,232)
========
</TABLE>
Currency Abbreviations:
-----------------------
CAD Canadian Dollar.
DKK Danish Krone.
THB Thai Bat.
GBP British Pound.
See Notes to Financial Statements
8
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2000
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments in securities, at value
(cost $936,587,879) .................................................... $1,166,207,892
Cash ..................................................................... 50,585
Receivable for:
Investments sold ...................................................... 48,838,230
Shares of beneficial interest sold .................................... 775,846
Interest .............................................................. 43,783
Dividends ............................................................. 41,498
Prepaid expenses and other assets ........................................ 74,647
--------------
TOTAL ASSETS .......................................................... 1,216,032,481
--------------
LIABILITIES:
Unrealized depreciation on open forward foreign currency contracts ....... 21,232
Payable for:
Investments purchased ................................................. 26,772,006
Shares of beneficial interest repurchased ............................. 3,827,939
Plan of distribution fee .............................................. 931,252
Investment management fee ............................................. 491,923
Accrued expenses and other payables ...................................... 160,745
--------------
TOTAL LIABILITIES ..................................................... 32,205,097
--------------
NET ASSETS ............................................................ $1,183,827,384
==============
COMPOSITION OF NET ASSETS:
Paid-in-capital .......................................................... $ 705,278,212
Net unrealized appreciation .............................................. 229,619,960
Accumulated net investment loss .......................................... (147,357)
Accumulated undistributed net realized gain .............................. 249,076,569
--------------
NET ASSETS ............................................................ $1,183,827,384
==============
CLASS A SHARES:
Net Assets ............................................................... $44,007,923
Shares Outstanding (unlimited authorized, $.01 par value) ................ 1,166,103
NET ASSET VALUE PER SHARE ............................................. $37.74
======
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value) ....................... $39.83
======
CLASS B SHARES:
Net Assets ............................................................... $1,056,116,384
Shares Outstanding (unlimited authorized, $.01 par value) ................ 28,778,738
NET ASSET VALUE PER SHARE ............................................. $36.70
======
CLASS C SHARES:
Net Assets ............................................................... $17,006,981
Shares Outstanding (unlimited authorized, $.01 par value) ................ 462,691
NET ASSET VALUE PER SHARE ............................................. $36.76
======
CLASS D SHARES:
Net Assets ............................................................... $66,696,096
Shares Outstanding (unlimited authorized, $.01 par value) ................ 1,751,874
NET ASSET VALUE PER SHARE ............................................. $38.07
======
</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, 2000
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT LOSS:
INCOME
Interest .................................................. $ 5,468,202
Dividends (net of $3,638 foreign withholding tax) ......... 706,096
------------
TOTAL INCOME ........................................... 6,174,298
------------
EXPENSES
Plan of distribution fee (Class A shares) ................. 82,464
Plan of distribution fee (Class B shares) ................. 11,379,057
Plan of distribution fee (Class C shares) ................. 134,820
Investment management fee ................................. 5,906,875
Transfer agent fees and expenses .......................... 1,126,508
Registration fees ......................................... 141,879
Shareholder reports and notices ........................... 117,237
Custodian fees ............................................ 86,818
Professional fees ......................................... 66,501
Trustees' fees and expenses ............................... 17,751
Other ..................................................... 13,675
------------
TOTAL EXPENSES ......................................... 19,073,585
------------
NET INVESTMENT LOSS .................................... (12,899,287)
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain ......................................... 287,755,083
Net change in unrealized appreciation ..................... 13,083,650
------------
NET GAIN ............................................... 300,838,733
------------
NET INCREASE .............................................. $287,939,446
============
</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, 2000 SEPTEMBER 30, 1999
---------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss .................................. $ (12,899,287) $ (7,356,974)
Net realized gain .................................... 287,755,083 153,313,817
Net change in unrealized appreciation ................ 13,083,650 165,480,270
-------------- --------------
NET INCREASE ...................................... 287,939,446 311,437,113
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED GAIN:
Class A shares ....................................... (3,654,596) (124,327)
Class B shares ....................................... (161,645,400) (10,501,816)
Class C shares ....................................... (1,263,910) (44,486)
Class D shares ....................................... (1,510,969) (62,639)
-------------- --------------
TOTAL DISTRIBUTIONS ............................... (168,074,875) (10,733,268)
-------------- --------------
Net increase (decrease) from transactions in shares of
beneficial interest ................................ 266,972,801 (111,845,093)
-------------- --------------
NET INCREASE ...................................... 386,837,372 188,858,752
NET ASSETS:
Beginning of period .................................. 796,990,012 608,131,260
-------------- --------------
END OF PERIOD
(Including accumulated net investment losses of
$147,357 and $45,483, respectively) ............... $1,183,827,384 $ 796,990,012
============== ==============
</TABLE>
See Notes to Financial Statements
11
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS September 30, 2000
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 portfolio security listed or traded
on the New York or American Stock Exchange, NASDAQ, or other exchange is valued
at its latest sale price, prior to the time when assets are valued; if there
were no sales that day, the security is valued at the latest bid price; (2) all
other portfolio securities for which over-the-counter market quotations are
readily available are valued at the latest available bid price; (3) when market
quotations are not readily available, including circumstances under which it is
determined by Morgan Stanley Dean Witter Advisors Inc. (the "Investment
Manager") that sale 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, 2000, 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. FOREIGN CURRENCY TRANSLATION - The books and records of the Fund are
maintained in U.S. dollars as follows: (1) the foreign currency market value of
investment securities, other assets and liabilities and forward foreign currency
contracts ("forward contracts") are translated at the exchange rates prevailing
at the end of the period; and (2) purchases, sales, income and expenses are
translated at the exchange rates prevailing on the respective dates of such
transactions. The resultant exchange gains and losses are included in the
Statement of Operations. Pursuant to U.S. Federal income tax regulations,
certain foreign exchange gains/losses included in realized and unrealized
gain/loss are included in or are a reduction of ordinary income for federal
income tax purposes. The Fund does not isolate that portion of the results of
operations arising as a result of changes in the foreign exchange rates from the
changes in the market prices of the securities.
E. FORWARD FOREIGN CURRENCY CONTRACTS - The Fund may enter into forward
contracts which are valued daily at the appropriate exchange rates. The
resultant unrealized exchange gains and losses are included in the Statement of
Operations. The Fund records realized gains or losses on delivery of the
currency or at the time the forward contract is extinguished (compensated) by
entering into a closing transaction prior to delivery.
F. 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.
G. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - The Fund records dividends and
distributions to its shareholders on the record date. The amount of dividends
and distributions from net investment income and net realized capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification. Dividends and distributions which
exceed net investment income and net realized capital gains for tax purposes are
reported as distributions of paid-in-capital.
13
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS September 30, 2000, continued
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.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Morgan Stanley Dean Witter Distributors
Inc. (the "Distributor"), an affiliate of the Investment Manager. The Fund has
adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the
Act. The Plan provides that the Fund will pay the Distributor a fee which is
accrued daily and paid monthly at the following annual rates: (i) Class A - up
to 0.25% of the average daily net assets of Class A; (ii) Class B - 1.0% of the
lesser of: (a) the average daily aggregate gross sales of the Class B shares
since the inception of the Fund (not including reinvestment of dividend or
capital gain distributions) less the average daily aggregate net asset value of
the Class B shares redeemed since the Fund's inception upon which a contingent
deferred sales charge has been imposed or waived; or (b) the average daily net
assets of Class B; and (iii) Class C - up to 1.0% of the average daily net
assets of Class C.
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon
redemption of Class B shares. Although there is no legal obligation for the Fund
to pay expenses incurred in excess of payments made to the Distributor under the
Plan and the proceeds of contingent deferred sales charges paid by investors
upon redemption of shares, if for any reason the Plan is terminated, the
Trustees will consider at that time the manner in which to treat such expenses.
The Distributor has advised the Fund that such excess amounts totaled
$18,337,042 at September 30, 2000.
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Dean Witter Financial Advisors or other
selected broker-dealer representatives may be reimbursed in the subsequent
calendar year. For the year ended September 30, 2000, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.24% and
1.0%, respectively.
14
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS September 30, 2000, continued
The Distributor has informed the Fund that for the year ended September 30,
2000, it received contingent deferred sales charges from certain redemptions of
the Fund's Class A shares, Class B shares and Class C shares of $51, $642,814
and $11,297, respectively, and received $93,205, in front-end sales charges from
sales of the Fund's Class A shares. The respective shareholders pay such charges
which are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended September 30, 2000 aggregated
$2,004,444,132, and $2,143,558,930, respectively.
For the year ended September 30, 2000, the Fund incurred $55,512 in brokerage
commissions with Dean Witter Reynolds Inc., an affiliate of the Investment
Manager and Distributor, for portfolio transactions executed on behalf of the
Fund.
For the year ended September 30, 2000, the Fund incurred brokerage commissions
of $48,964 with Morgan Stanley & Co., Inc., an affiliate of the Investment
Manager and Distributor, for portfolio transactions executed on behalf of the
Fund.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At September 30, 2000, the Fund had
transfer agent fees and expenses payable of approximately $1,200.
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 years
of service. Aggregate pension costs for the year ended September 30, 2000
included in Trustees' fees and expenses in the Statement of Operations amounted
to $5,937. At September 30, 2000, the Fund had an accrued pension liability of
$46,422 which is included in accrued expenses in the Statement of Assets and
Liabilities.
5. FEDERAL INCOME TAX STATUS
As of September 30, 2000, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales and permanent book/tax
differences primarily attributable to 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 $12,797,413.
15
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS September 30, 2000, continued
6. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
-------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- ---------------- --------------- ------------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold .................................. 1,994,457 $ 85,863,075 1,795,565 $ 45,961,645
Reinvestment of distributions ......... 94,160 3,633,635 5,508 123,765
Redeemed .............................. (1,407,453) (61,472,121) (1,601,819) (41,473,827)
---------- -------------- ---------- --------------
Net increase - Class A ................ 681,164 28,024,589 199,254 4,611,583
---------- -------------- ---------- --------------
CLASS B SHARES
Sold .................................. 9,500,562 402,163,034 19,364,899 501,039,654
Reinvestment of distributions ......... 4,024,083 151,909,148 444,464 9,880,417
Redeemed .............................. (9,675,480) (389,502,655) (24,437,018) (628,930,869)
---------- -------------- ----------- --------------
Net increase (decrease) - Class B ..... 3,849,165 164,569,527 (4,627,655) (118,010,798)
---------- -------------- ----------- --------------
CLASS C SHARES
Sold .................................. 418,525 18,422,696 1,377,267 36,318,739
Reinvestment of distributions ......... 31,863 1,204,735 1,953 43,445
Redeemed .............................. (140,469) (5,783,453) (1,334,660) (35,381,357)
---------- -------------- ----------- --------------
Net increase - Class C ................ 309,919 13,843,978 44,560 980,827
---------- -------------- ----------- --------------
CLASS D SHARES
Sold .................................. 2,740,754 112,718,938 2,267,493 57,727,289
Reinvestment of distributions ......... 33,389 1,297,173 1,883 42,446
Redeemed .............................. (1,231,883) (53,481,404) (2,220,762) (57,196,440)
---------- -------------- ----------- --------------
Net increase - Class D ................ 1,542,260 60,534,707 48,614 573,295
---------- -------------- ----------- --------------
Net increase (decrease) in Fund ....... 6,382,508 $ 266,972,801 (4,335,227) $ (111,845,093)
========= ============== ========== ==============
</TABLE>
16
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS September 30, 2000, continued
7. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS
The Fund may enter into forward contracts to facilitate settlement of foreign
currency denominated portfolio transactions or to manage foreign currency
exposure associated with foreign currency denominated securities.
Forward contracts involve elements of market risk in excess of the amount
reflected in the Statement of Assets and Liabilities. The Fund bears the risk of
an unfavorable change in the foreign exchange rates underlying the forward
contracts. Risks may also arise upon entering into these contracts from the
potential inability of the counterparties to meet the terms of their contracts.
At September 30, 2000, there were outstanding forward contracts.
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 ENDED SEPTEMBER 30, JULY 28, 1997*
------------------------------------------------------ THROUGH
2000 1999 1998 SEPTEMBER 30, 1997
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period ................... $31.44 $20.38 $27.50 $24.62
------ ------ ------ ------
Income (loss) from investment operations:
Net investment loss ................................... (0.12) (0.07) (0.06) (0.02)
Net realized and unrealized gain (loss) ............... 12.89 11.50 (4.75) 2.90
------ ------ ------ ------
Total income (loss) from investment operations ......... 12.77 11.43 (4.81) 2.88
------ ------ ------ ------
Less distributions from net realized gain .............. (6.47) (0.37) (2.31) -
------ ------ ------ ------
Net asset value, end of period ......................... $37.74 $31.44 $20.38 $27.50
====== ====== ====== ======
TOTAL RETURN+ ......................................... 40.16% 56.81 % (18.26)% 11.70 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................... 0.85%(3) 0.90 %(3) 0.94 %(3) 0.99 %(2)
Net investment loss .................................... (0.35)%(3) (0.25)%(3) (0.23)%(3) (0.46)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $44,008 $15,246 $5,822 $978
Portfolio turnover rate ................................ 184% 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,
-----------------------------------------------------------------------
2000++ 1999++ 1998++ 1997*++ 1996
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period ................... $30.90 $20.19 $27.46 $27.71 $25.54
------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment loss ................................... (0.44) (0.27) (0.20) (0.28) (0.23)
Net realized and unrealized gain (loss) ............... 12.71 11.35 (4.76) 3.92 4.32
------ ------ ------ ------ ------
Total income (loss) from investment operations ......... 12.27 11.08 (4.96) 3.64 4.09
------ ------ ------ ------ ------
Less distributions from net realized gain .............. (6.47) (0.37) (2.31) (3.89) (1.92)
Net asset value, end of period ......................... $36.70 $30.90 $20.19 $27.46 $27.71
====== ====== ====== ====== ======
TOTAL RETURN+ .......................................... 39.12 % 55.59 % (18.88)% 16.38 % 17.53 %
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................... 1.61 %(1) 1.70 %(1) 1.69 %(1) 1.68 % 1.69 %
Net investment loss .................................... (1.11)%(1) (1.05)%(1) (0.98)%(1) (1.21)% (1.03)%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $1,056,116 $770,392 $596,834 $877,539 $799,201
Portfolio turnover rate ................................ 184 % 172 % 178 % 154 % 149 %
</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 ENDED SEPTEMBER 30, JULY 28, 1997*
------------------------------------------- THROUGH
2000 1999 1998 SEPTEMBER 30, 1997
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS C SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period ................... $30.95 $20.19 $27.46 $24.62
------ ------ ------ ------
Income (loss) from investment operations:
Net investment loss ................................... (0.42) (0.25) (0.23) (0.05)
Net realized and unrealized gain (loss) ............... 12.70 11.38 (4.73) 2.89
------ ------ ------ ------
Total income (loss) from investment operations ......... 12.28 11.13 (4.96) 2.84
------ ------ ------ ------
Less distributions from net realized gain .............. (6.47) (0.37) (2.31) -
------ ------ ------ ------
Net asset value, end of period ......................... $36.76 $30.95 $20.19 $27.46
====== ====== ====== ======
TOTAL RETURN+ .......................................... 39.09 % 55.84 % (18.88)% 11.54 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................... 1.61 %(3) 1.58 %(3) 1.69 %(3) 1.71 %(2)
Net investment loss .................................... (1.11)%(3) (0.93)%(3) (0.98)%(3) (1.19)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $17,007 $4,728 $2,185 $1,066
Portfolio turnover rate ................................ 184 % 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
20
<PAGE>
MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED SEPTEMBER 30, JULY 28, 1997*
---------------------------------------------- THROUGH
2000 1999 1998 SEPTEMBER 30, 1997
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS D SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period ................... $31.60 $20.44 $27.51 $24.62
------ ------ ------ ------
Income (loss) from investment operations:
Net investment income (loss) .......................... 0.03 (0.01) 0.01 (0.01)
Net realized and unrealized gain (loss) ............... 12.91 11.54 (4.77) 2.90
------ ------ ------ ------
Total income (loss) from investment operations ......... 12.94 11.53 (4.76) 2.89
------ ------ ------ ------
Less distributions from net realized gain .............. (6.47) (0.37) (2.31) -
------ ------ ------ ------
Net asset value, end of period ......................... $38.07 $31.60 $20.44 $27.51
====== ====== ====== ======
TOTAL RETURN+ .......................................... 40.53 % 57.14 % (18.05)% 11.74 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................... 0.61 %(3) 0.70 %(3) 0.69 %(3) 0.70 %(2)
Net investment income (loss) ........................... (0.11)%(3) (0.05)%(3) 0.02 %(3) (0.20)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $66,696 $6,625 $3,291 $22
Portfolio turnover rate ................................ 184 % 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
Independent Auditors' Report
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
OF MORGAN STANLEY DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST:
We have audited the accompanying statement of assets and liabilities of Morgan
Stanley Dean Witter Developing Growth Securities Trust (the "Fund"), including
the portfolio of investments, as of September 30, 2000, and the related
statements of operations and changes in net assets, and the financial highlights
for the year then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit. The statement of changes in net assets for the year ended September 30,
1999 and the financial highlights for each of the respective stated periods
ended September 30, 1999 were audited by other independent accountants whose
report, dated November 8, 1999, expressed an unqualified opinion on that
statement and financial highlights.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of September 30, 2000, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Morgan
Stanley Dean Witter Developing Growth Securities Trust as of September 30, 2000,
the results of its operations, the changes in its net assets, and the financial
highlights for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.
Deloitte & Touche LLP
New York, New York
November 9, 2000
2000 FEDERAL TAX NOTICE (unaudited)
During the fiscal year ended September 30, 2000, the Fund paid to its
shareholders $3.62 per share from long-term capital gains.
22
<PAGE>
Morgan Stanley Dean Witter Developing Growth Securities Trust
Change in Independent Accountants
On July 1, 2000 PricewaterhouseCoopers LLP resigned as independent accountants
of the Fund.
The reports of PricewaterhouseCoopers LLP on the financial statements of the
Fund for the past two fiscal years contained no adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principle.
In connection with its audits for the two most recent fiscal years and through
July 1, 2000, there have been no disagreements with PricewaterhouseCoopers LLP
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of PricewaterhouseCoopers LLP would have caused them to make
reference thereto in their report on the financial statements for such years.
The Fund, with the approval of its Board of Trustees and its Audit Committee,
engaged Deloitte & Touche LLP as its new independent accountants as of July 1,
2000.
23
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
James F. Higgins
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Mitchell M. Merin
President
Barry Fink
Vice President, Secretary and General Counsel
Armon Bar-Tur
Vice President
John Roscoe
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281
INVESTMENT MANAGER
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
This report is submitted for the general information of shareholders
of the Fund. For more detailed information about the Fund, its officers
and trustees, fees, expenses and other pertinent information, please see
the prospectus of the Fund.
This report is not authorized for distribution to prospective investors
in the Fund unless preceded or accompanied by an effective prospectus.
Read the prospectus carefully before investing.
Morgan Stanley Dean Witter Distributors Inc., member NASD.
MORGAN STANLEY
DEAN WITTER
DEVELOPING GROWTH
SECURITIES TRUST
[GRAPHIC OMITTED]
ANNUAL REPORT
September 30, 2000
