<PAGE>
MORGAN STANLEY DEAN WITTER
MID-CAP DIVIDEND GROWTH SECURITIES Two World Trade Center,
LETTER TO THE SHAREHOLDERS August 31, 1998 New York, New York 10048
DEAR SHAREHOLDER:
During the period under review (May 27, 1998 through August 31, 1998) the stock
market became increasingly volatile and corrected sharply from its highs
earlier in the year. The downturn has been blamed on valuation levels, the
Asian flu and financial problems in Russia, even though Russia's problems pose
little danger to the U.S. economy.
PERFORMANCE & PORTFOLIO
The mid-cap stocks that the Fund invests in were particularly hard hit by the
overall market uncertainty. In April 1998, the Standard & Poor's Mid-Cap 400
Index (S&P 400) peaked, but then began heading down as a result of domestic and
international economic concerns. For the period under review (May 27, 1998
through August 31, 1998), the S&P 400 returned --20.57 percent while the Lipper
MidCap Funds Index returned --21.06 percent. This environment of course proved
to be a difficult start-up period for Morgan Stanley Dean Witter Mid-Cap
Dividend Growth Securities. During this time, Class A shares produced a total
return of --25.10 percent, Class B produced --25.30 percent, Class C produced
- --25.30 percent and Class D produced --25.10 percent. THE PERFORMANCE OF THE
FUND'S FOUR SHARE CLASSES VARIES BECAUSE OF DIFFERING EXPENSES. The broader
market, as measured by the Standard & Poor's 500 Composite Stock Price Index
(S&P 500) fared better but was still down by 11.88 percent during the same
period.
It is important to remember that the period currently under review covers only
three months, an extremely short period of time during a particularly volatile
market. The Fund's underperformance relative to the S&P 500 is the result of a
choppy market environment that favored larger, blue-chip companies. The Fund's
underperformance relative to the S&P 400 and to the Fund's Lipper universe is
the result of the Fund's focus on value stocks which, during the period,
underperformed their growth counterparts. However, we believe that investors,
after a period of focusing on growth-oriented issues, will return to a more
fundamentally driven approach, which should favor value stocks.
Assets under management in the Fund at the end of May were approximately $400
million and cash flow into the Fund has been positive
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP DIVIDEND GROWTH SECURITIES
LETTER TO THE SHAREHOLDERS August 31, 1998, continued
since that time. Initially, we purchased 51 stocks for the portfolio and
currently own 55 issues. All of these currently fall within the capitalization
ranges bounded by the S&P 400 and all are domestic issues.
LOOKING AHEAD
We believe that the financial markets will continue to be volatile over the
near term. However, we are strongly convinced that our process, which seeks out
quality, overlooked stocks in the mid-cap range, will be key to the Fund's
potential for strong performance over the long term. We intend to continue to
search for uncommon, under-recognized value. We also believe that the general
outlook for the economy remains favorable.
We appreciate your support of Morgan Stanley Dean Witter Mid-Cap Dividend
Growth Securities and look forward to continuing to serve your investment
needs.
Very truly yours,
/s/ Charles A. Fiumefreddo
- --------------------------
CHARLES A. FIUMEFREDDO
Chairman of the Board
2
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP DIVIDEND GROWTH SECURITIES
PORTFOLIO OF INVESTMENTS August 31, 1998 (unaudited)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (99.0%)
Auto Parts - Original Equipment (3.6%)
157,300 Borg-Warner Automotive, Inc. ........ $ 6,370,650
133,000 Johnson Controls, Inc. .............. 5,694,062
------------
12,064,712
------------
Clothing/Shoe/Accessory Chains (1.7%)
160,000 Ross Stores, Inc. ................... 5,820,000
------------
Computer Software (1.6%)
270,000 Oracle Corp.* ....................... 5,383,125
------------
Construction/Ag Equip/Trucks (3.4%)
684,000 AGCO Corp. .......................... 5,899,500
201,000 Case Corp. .......................... 5,427,000
------------
11,326,500
------------
Containers/Packaging (1.7%)
175,000 Crown Cork & Seal Co., Inc. ......... 5,731,250
------------
Diversified Electronic Products (1.8%)
172,000 Varian Associates, Inc. ............. 5,858,750
------------
Diversified Manufacturing (1.9%)
308,200 Federal Signal Corp. ................ 6,279,575
------------
E.D.P. Services (3.5%)
228,800 GTECH Holdings Corp.* ............... 6,006,000
445,000 Reynolds & Reynolds Co. (Class A) ... 5,618,125
------------
11,624,125
------------
Electric Utilities: East (4.1%)
191,400 DQE, Inc. ........................... 6,830,587
285,200 PP&L Resources, Inc. ................ 6,720,025
------------
13,550,612
------------
Electric Utilities: South (4.1%)
161,000 Dominion Resources, Inc. ............ 6,711,687
255,000 Teco Energy, Inc. ................... 6,773,437
------------
13,485,124
------------
Electronic Components (1.6%)
506,595 Vishay Intertechnology, Inc.* ....... 5,319,247
------------
Engineering & Construction (1.9%)
159,000 Fluor Corp. ......................... 6,290,437
------------
Food Chains (2.0%)
130,000 Albertson's, Inc. ................... 6,573,125
------------
Food Distributors (1.8%)
298,000 Supervalu, Inc. ..................... 6,053,125
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------
<S> <C> <C>
Hospital/Nursing Management (1.7%)
215,000 Health Care & Retirement Corp.*...... $ 5,482,500
------------
Industrial Machinery/Components (1.8%)
315,000 Cincinnati Milacron, Inc. ........... 6,103,125
------------
Major Chemicals (1.6%)
209,000 Hercules, Inc. ...................... 5,342,562
------------
Managed Health Care (3.6%)
294,000 First Health Group Corp.* ........... 5,935,125
457,000 Humana, Inc.* ....................... 5,941,000
------------
11,876,125
------------
Medical Electronics (1.9%)
293,000 DENTSPLY International, Inc. ........ 6,244,563
------------
Medical Specialties (1.8%)
186,000 Bard (C.R.), Inc. ................... 6,091,500
------------
Mid-Sized Banks (1.7%)
138,000 Union Planters Corp. ................ 5,554,500
------------
Multi-Line Insurance (2.0%)
115,500 Unitrin, Inc. ....................... 6,511,313
------------
Natural Gas - Distribution (1.9%)
141,000 Consolidated Natural Gas Co. ........ 6,177,563
------------
Other Metals/Minerals (0.8%)
220,300 AMCOL International Corp. ........... 2,588,525
------------
Other Specialty Stores (1.5%)
365,000 General Nutrition Companies, Inc.* .. 4,859,063
------------
Printing Forms (1.8%)
211,300 Deluxe Corp. ........................ 6,127,700
------------
Property - Casualty Insurance (1.8%)
430,000 TIG Holdings, Inc. .................. 5,939,375
------------
Real Estate Investment Trust (6.0%)
425,000 HRPT Properties Trust ............... 6,640,625
184,700 Kimco Realty Corp. .................. 6,556,850
575,000 United Dominion Realty Trust, Inc. .. 6,684,375
------------
19,881,850
------------
Recreational Products/Toys (3.5%)
370,000 Brunswick Corp. ..................... 5,526,875
186,500 Mattel, Inc. ........................ 6,037,938
------------
11,564,813
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
3
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP DIVIDEND GROWTH SECURITIES
PORTFOLIO OF INVESTMENTS August 31, 1998 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
Rental/Leasing Companies (1.8%)
255,000 Ryder System, Inc. ..................... $ 6,008,438
------------
Restaurants (1.8%)
196,000 Outback Steakhouse, Inc.* .............. 5,880,000
------------
Savings & Loan Associations (1.7%)
250,000 TCF Financial Corp. .................... 5,515,625
------------
Semiconductors (1.7%)
212,000 Dallas Semiconductor Corp. ............. 5,737,250
------------
Specialty Chemicals (7.1%)
425,000 Grace (W. R.) & Co.* ................... 5,471,875
175,000 Great Lakes Chemical Corp. ............. 6,846,875
257,000 Lubrizol Corp. (The) ................... 5,878,875
154,000 Praxair, Inc. .......................... 5,524,750
------------
23,722,375
------------
Specialty Insurers (1.8%)
106,000 MBIA, Inc. ............................. 5,949,250
------------
Specialty Steel (1.9%)
171,900 Nucor Corp. ............................ 6,177,656
------------
Steel/Iron Ore (1.8%)
285,000 USX-U.S. Steel Group, Inc. ............. 5,967,188
------------
Telecommunication Equipment (1.9%)
420,000 Andrew Corp.* .......................... 6,221,250
------------
Textiles - Apparel (1.6%)
257,800 Unifi, Inc. ............................ 5,736,050
------------
Tobacco (5.9%)
300,000 RJR Nabisco Holdings Corp. ............. 6,506,250
203,700 Universal Corp. ........................ 6,416,550
259,000 UST, Inc. .............................. 6,766,375
------------
19,689,175
------------
Tools/Hardware (1.9%)
175,000 Briggs & Stratton Corp. ................ $ 6,442,188
------------
TOTAL COMMON STOCKS
(Identified Cost $438,203,221).......... 328,751,229
------------
PRINCIPAL
AMOUNT IN
THOUSANDS
- ---------
SHORT-TERM INVESTMENT (1.3%)
REPURCHASE AGREEMENT
$ 4,157 The Bank of New York 5.75%
due 09/01/98 (dated 08/31/98,
proceeds $4,157,747) (a)
(Identified Cost $4,157,083) ........... 4,157,083
------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $442,360,304) (b)..... 100.3% 332,908,312
LIABILITIES IN EXCESS OF OTHER
ASSETS ................................ ( 0.3) (916,965)
----- -----------
NET ASSETS ............................ 100.0% $331,991,347
===== ============
</TABLE>
- --------------------------------
* Non-income producing security.
(a) Collateralized by $4,203,308 Student Loan Mortgage Assoc. 5.53% due
07/16/99 valued at $4,240,225.
(b) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$1,988,864 and the aggregate gross unrealized depreciation is
$111,440,856, resulting in net unrealized depreciation of $109,451,992.
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP DIVIDEND GROWTH SECURITIES
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1998 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS :
Investments in securities, at value
(identified cost $442,360,304).............................. $332,908,312
Receivable for:
Investments sold .......................................... 2,339,347
Shares of beneficial interest sold ........................ 838,636
Dividends ................................................. 730,315
Deferred organizational expenses ............................. 68,224
Prepaid expenses ............................................. 129,310
------------
TOTAL ASSETS .............................................. 337,014,144
------------
LIABILITIES :
Payable for:
Investments purchased ...................................... 3,177,627
Shares of beneficial interest repurchased .................. 1,182,056
Plan of distribution fee ................................... 309,919
Investment management fee .................................. 238,363
Accrued expenses ............................................. 114,832
------------
TOTAL LIABILITIES ......................................... 5,022,797
------------
NET ASSETS ................................................ $331,991,347
============
COMPOSITION OF NET ASSETS :
Paid-in-capital .............................................. $443,003,005
Net unrealized depreciation .................................. (109,451,992)
Undistributed net investment income .......................... 576,266
Undistributed net realized loss .............................. (2,135,932)
------------
NET ASSETS ................................................ $331,991,347
============
CLASS A SHARES :
Net Assets ................................................... $9,074,644
Shares Outstanding (unlimited authorized, $.01 par value) .... 1,211,898
NET ASSET VALUE PER SHARE ................................. $7.49
=====
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value) ......... $7.90
=====
CLASS B SHARES :
Net Assets ................................................... $301,668,287
Shares Outstanding (unlimited authorized, $.01 par value) .... 40,366,305
NET ASSET VALUE PER SHARE ................................. $7.47
=====
CLASS C SHARES :
Net Assets ................................................... $19,919,798
Shares Outstanding (unlimited authorized, $.01 par value) .... 2,665,494
NET ASSET VALUE PER SHARE ................................. $7.47
=====
CLASS D SHARES :
Net Assets ................................................... $1,328,618
Shares Outstanding (unlimited authorized, $.01 par value) .... 177,359
NET ASSET VALUE PER SHARE ................................. $7.49
=====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP DIVIDEND GROWTH SECURITIES
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the period May 27, 1998* through August 31, 1998 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME :
INCOME
Dividends ......................................... $ 2,210,093
Interest .......................................... 490,868
--------------
TOTAL INCOME ................................... 2,700,961
--------------
EXPENSES
Plan of distribution fee (Class A shares) ......... 7,352
Plan of distribution fee (Class B shares) ......... 952,049
Plan of distribution fee (Class C shares) ......... 64,169
Investment management fee ......................... 786,316
Transfer agent fees and expenses .................. 191,936
Registration fees ................................. 83,902
Professional fees ................................. 20,098
Custodian fees .................................... 5,847
Trustees' fees and expenses ....................... 4,661
Shareholder reports and notices ................... 4,450
Organizational expenses ........................... 3,025
Other ............................................. 890
--------------
TOTAL EXPENSES ................................. 2,124,695
--------------
NET INVESTMENT INCOME .......................... 576,266
--------------
NET REALIZED AND UNREALIZED LOSS :
Net realized loss ................................. (2,135,932)
Net unrealized depreciation ....................... (109,451,992)
--------------
NET LOSS ....................................... (111,587,924)
--------------
NET DECREASE ...................................... $ (111,011,658)
==============
</TABLE>
- -----------------
* Commencement of operations.
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP DIVIDEND GROWTH SECURITIES
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 27, 1998*
THROUGH
AUGUST 31, 1998
- ------------------------------------------------------------------------------------------
(unaudited)
<S> <C>
INCREASE (DECREASE) IN NET ASSETS :
OPERATIONS :
Net investment income ................................................... $ 576,266
Net realized loss ....................................................... (2,135,932)
Net unrealized depreciation ............................................. (109,451,992)
--------------
NET DECREASE ......................................................... (111,011,658)
Net increase from transactions in shares of beneficial interest ......... 442,903,005
--------------
NET INCREASE ......................................................... 331,891,347
NET ASSETS :
Beginning of period ..................................................... 100,000
--------------
END OF PERIOD
(Including undistributed net investment income of $576,266)............ $ 331,991,347
==============
</TABLE>
- -----------------
* Commencement of operations.
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP DIVIDEND GROWTH SECURITIES
NOTES TO FINANCIAL STATEMENTS August 31, 1998 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities (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 to seek total return. The Fund seeks to achieve its objective by
investing primarily in domestic and foreign equity securities of companies
whose market capitalization falls within the capitalization range of the
companies comprising the Standard and Poor's Mid-Cap 400 Index and that
currently pay dividends and that have the potential for increasing dividends.
The Fund was organized as a Massachusetts business trust on December 23, 1997
and had no other operations other than those relating to organizational matters
and the issuance of 2,500 shares of beneficial interest by each class for
$25,000 of each class to Morgan Stanley Dean Witter Advisors Inc. (the
"Investment Manager") to effect the Fund's initial capitalization. The Fund
commenced operations on May 27, 1998.
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
(in cases where a security is traded on more than one exchange, the security is
valued on the exchange designated as the primary market pursuant to procedures
adopted by the Trustees); (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 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
8
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP DIVIDEND GROWTH SECURITIES
NOTES TO FINANCIAL STATEMENTS August 31, 1998 (unaudited) continued
Trustees; and (4) short-term debt securities having a maturity date of more
than sixty days at time of purchase are valued on a market-to-market basis
until sixty days prior to maturity and thereafter at amortized cost based on
their value on the 61st day. Short-term debt securities having a maturity date
of sixty days or less at the time of purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and other distributions are recorded on the ex-dividend date.
Discounts are accreted over the respective life of the 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 ex-dividend 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.
F. ORGANIZATIONAL EXPENSES -- The Investment Manager incurred the
organizational expenses of the Fund in the amount of approximately $72,000
which will be reimbursed for the full amount thereof. Such expenses have been
deferred and are being amortized on the straight-line method over a period not
to exceed five years from the commencement of operations.
9
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP DIVIDEND GROWTH SECURITIES
NOTES TO FINANCIAL STATEMENTS August 31, 1998 (unaudited) 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
annual rate of 0.75% to the net assets of the Fund determined as of the close
of each business day.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of
all personnel, including officers of the Fund who are employees of the
Investment Manager. The Investment Manager also bears the cost of telephone
services, heat, light, power and other utilities provided to the Fund.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by 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 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 services provided and the expenses borne by it and others in
the distribution of the shares of these Classes, including the payment of
commissions for sales of these Classes and incentive compensation to, and
expenses of, the 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; printing and distribution
of prospectuses and reports used in connection with the offering of these
shares to other than current shareholders; and preparation, printing and
distribution of sales literature and advertising materials. In addition, the
Distributor may utilize fees paid pursuant to the Plan, in the case of Class B
shares, to compensate 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
10
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP DIVIDEND GROWTH SECURITIES
NOTES TO FINANCIAL STATEMENTS August 31, 1998 (unaudited) continued
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,
including carrying charges, totaled $21,185,551 at August 31, 1998.
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 period ended August 31, 1998, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.25% and
1.0%, respectively.
The Distributor has informed the Fund that for the period ended August 31,
1998, it received contingent deferred sales charges from certain redemptions of
the Fund's Class B shares and Class C shares of $146,073 and $6,633,
respectively and received $50,335 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 period ended August 31, 1998
aggregated $493,513,262 and $53,174,109, respectively.
For the period ended August 31, 1998, the Fund incurred $77,220 in brokerage
commissions with DWR for portfolio transactions executed on behalf of the Fund.
At August 31, 1998, the Fund's receivable for investments sold and payable for
investments purchased included unsettled trades with DWR of $1,360,042 and
$839,593, respectively.
For the period ended August 31, 1998, the Fund incurred $10,450 in brokerage
commissions with Morgan Stanley & Co., Inc., an affiliate of the Investment
Manager, for portfolio transactions executed on behalf of the Fund.
Morgan Stanley Dean Witter Trust FSB, and affiliate of the Investment Manager
and Distributor, is the Fund's transfer agent. At August 31, 1998, the Fund had
transfer agent fees and expenses payable of approximately $39,000.
11
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP DIVIDEND GROWTH SECURITIES
NOTES TO FINANCIAL STATEMENTS August 31, 1998 (unaudited) continued
5. SHARES OF BENEFICIAL INTERESTS
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 27, 1998*
THROUGH
AUGUST 31, 1998
---------------------------
(unaudited)
SHARES AMOUNT
---------- ------------
<S> <C> <C>
CLASS A
Sold ............................ 1,309,526 $ 12,998,532
Redeemed ........................ (100,128) (859,950)
---------- ------------
Net increase -- Class A ......... 1,209,398 12,138,582
---------- ------------
CLASS B
Sold ............................ 42,200,493 418,571,040
Redeemed ........................ (1,836,688) (16,126,426)
---------- ------------
Net increase -- Class B ......... 40,363,805 402,444,614
---------- ------------
CLASS C
Sold ............................ 2,848,233 28,290,051
Redeemed ........................ (185,239) (1,663,357)
---------- ------------
Net increase -- Class C ......... 2,662,994 26,626,694
---------- ------------
CLASS D
Sold ............................ 174,859 1,693,115
---------- ------------
Net increase in Fund ............ 44,411,056 $442,903,005
========== ============
</TABLE>
- ---------------
* Commencement of operations.
12
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP DIVIDEND GROWTH SECURITIES
FINANCIAL HIGHLIGHTS (unaudited)
Selected ratios and per share data for a share of beneficial interest
outstanding throughout the period:
<TABLE>
<CAPTION>
FOR THE PERIOD MAY 27, 1998* THROUGH AUGUST 31, 1998**
----------------------------------------------------------
CLASS A CLASS B CLASS C CLASS D
SHARES SHARES SHARES SHARES
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ............ $10.00 $10.00 $10.00 $10.00
------ ------ ------ ------
Net investment income ........................... 0.03 0.01 0.01 0.03
Net realized and unrealized loss ................ (2.54) (2.54) (2.54) (2.54)
------ ------- ------ ------
Total from investment operations ................ (2.51) (2.53) (2.53) (2.51)
------ ------- ------ ------
Net asset value, end of period .................. $7.49 $7.47 $7.47 $7.49
====== ======= ====== ======
TOTAL INVESTMENT RETURN+(1) ..................... (25.10)% (25.30)% (25.30)% (25.10)%
RATIOS TO AVERAGE NET ASSETS (2)(3):
Expenses ........................................ 1.30% 2.05% 2.05% 1.05%
Net investment income ........................... 1.28% 0.53% 0.53% 1.53%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $9,075 $301,668 $19,920 $1,329
Portfolio turnover rate (1) ..................... 15% 15% 15% 15%
</TABLE>
- -------------
* Commencement of operations.
** 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
13
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
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
Barry Fink
Vice President, Secretary and General Counsel
Paul D. Vance
Vice President
Steven M. MacNamara
Assistant Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
This financial statements included hrein have been taken from the records of
the Fund without examination by the independent accountants and accordingly
they do not express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus of
the Fund.
This report is not authorized for distribution to prospective investors in
the Fund unless preceded or accompanied by an effective prospectus.
MORGAN STANLEY
DEAN WITTER
MID-CAP DIVIDEND
GROWTH SECURITIES
SEMIANNUAL REPORT
AUGUST 31, 1998
