<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP DIVIDEND GROWTH SECURITIES
LETTER TO THE SHAREHOLDERS February 29, 2000
Two World Trade Center,
New York, New York 10048
DEAR SHAREHOLDER:
During the 12-month period ended February 29, 2000, financial markets around
the world continued to experience volatility. After a peak in the domestic
markets in the middle of July, stock prices pulled back in the fall on concerns
that the U.S. economy was growing too fast. The 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. These actions were subsequently followed by
two additional moves which raised rates by another 50 basis points by the end
of February. All of this occurred in an economic background where inflation
remained low while the economy continued to grow.
PERFORMANCE AND PORTFOLIO
For the twelve-month period ended February 29, 2000, Morgan Stanley Dean Witter
Mid-Cap Dividend Growth Securities' Class B shares posted a total return of
- -17.26 percent versus 30.98 percent for the Standard & Poor's 400 Midcap Index
(S&P 400 Midcap). For the same period, the Fund's Class A, C and D shares
posted total returns of -16.60 percent, -17.52 percent, and -16.48 percent,
respectively. The performance of the Fund's four share classes varies because
of differing expenses. The total return figures given assume the reinvestment
of all distributions and do not reflect the deduction of any applicable sales
charges. The accompanying chart compares the Fund's performance to that of the
S&P 400.
We believe that the Fund's underperformance of the S&P 400 Midcap Index over
this period was largely due to the Fund's lack of exposure to the handful of
richly valued growth stocks responsible for over 60 percent of the index's
performance for the period. This concentration of performance in just a handful
of securities is unprecedented. Under the Fund's current investment strategy of
investing exclusively in securities
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP DIVIDEND GROWTH SECURITIES
LETTER TO THE SHAREHOLDERS February 29, 2000, continued
that meet the parameters of our screening process, stocks that do not possess
value characteristics have not been eligible for purchase. Our investment
process also emphasizes dividends, and fast-growing smaller- to medium-sized
companies often do not pay cash dividends.
On February 29, 2000, the Fund held 39 common stocks spread among 30 different
industry groups. To determine which investments to make and hold in the
portfolio, we employ an analytical screening process that blends quantitative
and qualitative factors. At fiscal year-end, the portfolio was well diversified
across 10 major market sectors and was essentially fully invested.
On January 26, 2000, the Board of Trustees of Morgan Stanley Dean Witter
Mid-Cap Dividend Growth Securities voted to recommend to shareholders a
reorganization plan whereby the Fund would be merged into Morgan Stanley Dean
Witter Mid-Cap Equity Trust. If approved, the Fund's assets would be combined
with the assets of Morgan Stanley Dean Witter Mid-Cap Equity Trust.
Shareholders of Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
would become shareholders of Morgan Stanley Dean Witter Mid-Cap Equity Trust,
receiving shares of that fund equal to the value of their holdings in Morgan
Stanley Dean Witter Mid-Cap Dividend Growth Securities. Each shareholder of
Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities would receive the
same class of shares of Morgan Stanley Dean Witter Mid-Cap Equity Trust
currently held by that shareholder in the Fund. Proxy statements formally
detailing this proposal, including reasons for the Trustees' action, and
information on Morgan Stanley Dean Witter Mid-Cap Equity Trust have been mailed
to shareholders.
We appreciate your support of Morgan Stanley Dean Witter Mid-Cap Dividend
Growth Securities and look forward to continuing to serve your investment
objectives.
Very truly yours,
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
2
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP DIVIDEND GROWTH SECURITIES
FUND PERFORMANCE February 29, 2000
GROWTH OF $10,000
($ in Thousands)
Date Class A Class B Class C Class D S&P 400
- --------------------------------------------------------------------------------
May 27, 1998 9,475 10,000 10,000 10,000 10,000
February 28, 1999 7,473 7,841 7,839 7,899 10,140
February 29, 2000 6,233 (3) 6,228 (3) 6,466 (3) 6,598 (3) 13,282
--- Class A --- Class B --- Class C --- Class D --- S&P 400 (4)
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. PERFORMANCE FOR CLASS A,
CLASS B, CLASS C, AND CLASS D SHARES WILL VARY DUE TO DIFFERENCES IN SALES
CHARGES AND EXPENSES.
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
CLASS A SHARES*
- ---------------------------------------------------------------------
PERIOD ENDED 2/29/00
- ---------------------------
1 Year (16.60)%(1) (20.98)%(2)
Since Inception (5/27/98) (21.17)%(1) (23.55)%(2)
CLASS C SHARES+
- ---------------------------------------------------------------------
PERIOD ENDED 2/29/00
- ---------------------------
1 Year (17.52)%(1) (18.34)%(2)
Since Inception (5/27/98) (21.94)%(1) (21.94)%(2)
CLASS B SHARES**
- ---------------------------------------------------------------------
PERIOD ENDED 2/29/00
- ---------------------------
1 Year (17.26)%(1) (21.40)%(2)
Since Inception (5/27/98) (21.79)%(1) (23.58)%(2)
CLASS D SHARES++
- ---------------------------------------------------------------------
PERIOD ENDED 2/29/00
- ---------------------------
1 Year (16.48)%(1)
Since Inception (5/27/98) (21.04)%(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 February 29, 2000.
(4) The S&P Midcap 400 Index is a market-value weighted index, the
performance of which is based on the average performance of 400 domestic
stocks chosen for market size, liquidity, and industry group
representation. 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.
3
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP DIVIDEND GROWTH SECURITIES
PORTFOLIO OF INVESTMENTS February 29, 2000
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------
COMMON STOCKS (96.0%)
Agricultural Chemicals (2.3%)
250,000 IMC Global Inc. ........................ $ 3,375,000
------------
Broadcasting (2.2%)
400,000 Granite Broadcasting Corp.* ............ 3,200,000
------------
Casino/Gambling (3.1%)
410,000 Park Place Entertainment Corp.* ........ 4,638,125
------------
Clothing/Shoe/Accessory Stores (2.8%)
235,000 Claire's Stores, Inc. .................. 4,097,813
------------
Computer Software (2.7%)
180,000 Compuware Corp.* ....................... 3,982,500
------------
Construction/Agricultural
Equipment/Trucks (4.0%)
406,900 AGCO Corp. ............................. 4,475,900
40,000 Deere & Co. ............................ 1,430,000
------------
5,905,900
------------
Contract Drilling (3.7%)
140,000 Transocean Sedco Forex Inc. ............ 5,521,250
------------
E.D.P. Services (4.3%)
60,000 Computer Sciences Corp.* ............... 4,728,750
25,000 Electronic Data Systems Corp. .......... 1,618,750
------------
6,347,500
------------
Electric Utilities (4.8%)
35,000 AES Corp. (The)* ....................... 2,933,437
155,000 Edison International ................... 4,078,437
------------
7,011,874
------------
Electronic Data Processing (1.0%)
50,000 Unisys Corp.* .......................... 1,496,875
------------
Engineering & Construction (4.5%)
268,300 Granite Construction Inc.* ............. 6,690,731
------------
Finance Companies (5.1%)
75,000 Fannie Mae ............................. 3,975,000
125,000 FINOVA Group, Inc. ..................... 3,578,125
------------
7,553,125
------------
Financial Publishing/Services (4.9%)
240,000 SunGard Data Systems Inc.* ............. 7,200,000
------------
Home Furnishings (2.6%)
235,000 Furniture Brands International, Inc.* .. 3,774,688
------------
Insurance Brokers/Services (2.6%)
50,000 Marsh & McLennan Companies, Inc. ....... 3,868,750
------------
Internet Services (2.6%)
35,000 At Home Corp. (Series A)* .............. $ 1,198,750
25,000 Internet Capital Group, Inc.* .......... 2,642,188
------------
3,840,938
------------
Life Insurance (2.3%)
120,000 ReliaStar Financial Corp. .............. 3,352,500
------------
Medical/Dental Distributors (2.9%)
105,000 Cardinal Health, Inc. .................. 4,331,250
------------
Medical/Nursing Services (1.2%)
75,000 Lincare Holdings, Inc.* ................ 1,757,813
------------
Oil Refining/Marketing (8.4%)
170,000 Tosco Corp. ............................ 4,547,500
190,000 Ultramar Diamond Shamrock Corp. ........ 4,120,625
175,000 USX-Marathon Group ..................... 3,784,375
------------
12,452,500
------------
Other Specialty Stores (2.6%)
672,300 Friedman's, Inc. (Class A) ............. 3,886,734
------------
Package Goods/Cosmetics (2.8%)
150,000 Avon Products, Inc. .................... 4,059,375
------------
Paints/Coatings (3.0%)
445,000 RPM, Inc. .............................. 4,450,000
------------
Property - Casualty Insurers (1.6%)
130,000 Ace, Ltd. (Bermuda) .................... 2,323,750
------------
Real Estate Investment Trusts (6.9%)
305,000 Crescent Real Estate Equities Co. ...... 5,204,063
144,700 Kimco Realty Corp. ..................... 4,983,106
------------
10,187,169
------------
Semiconductors (0.8%)
10,000 Intel Corp. ............................ 1,130,000
------------
Specialty Insurers (4.9%)
283,700 Enhance Financial Services Group Inc. .. 3,333,475
100,000 MBIA, Inc. ............................. 3,837,500
------------
7,170,975
------------
Steel/Iron Ore (1.7%)
300,000 AK Steel Holding Corp. ................. 2,493,750
------------
Telecommunication Equipment (1.4%)
35,000 Lucent Technologies Inc. ............... 2,082,500
------------
Tools/Hardware (2.3%)
105,000 Black & Decker Corp. ................... 3,458,438
------------
TOTAL COMMON STOCKS
(Identified Cost $160,568,583) ......... 141,641,823
------------
See Notes to Financial Statements
4
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP DIVIDEND GROWTH SECURITIES
PORTFOLIO OF INVESTMENTS February 29, 2000, continued
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- --------------------------------------------------------------------
SHORT-TERM INVESTMENT (4.4%)
REPURCHASE AGREEMENT
6,472 The Bank of New York 5.688%
due 03/01/00 (dated 02/29/00;
proceeds $6,472,596) (a)
(Identified Cost $6,471,573) .......... $ 6,471,573
------------
TOTAL INVESTMENTS
(Identified Cost $167,040,156) (b) ..... 100.4% 148,113,396
LIABILITIES IN EXCESS OF OTHER
ASSETS ................................. (0.4) (520,485)
---- ------------
NET ASSETS ............................. 100.0% $147,592,911
===== ============
- --------------------------------
* Non-income producing security.
(a) Collateralized by $1,022,763 U.S. Treasury Bond 6.50% due 11/15/26 valued
at $1,058,902 and $5,622,067 U.S. Treasury Note 5.50% due 08/31/01 valued
at $5,542,127.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $8,921,260 and the
aggregate gross unrealized depreciation is $27,848,020, resulting in net
unrealized depreciation of $18,926,760.
See Notes to Financial Statements
5
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP DIVIDEND GROWTH SECURITIES
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
February 29, 2000
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments in securities, at value
(identified cost $167,040,156)................................... $ 148,113,396
Receivable for:
Dividends ...................................................... 152,044
Shares of beneficial interest sold ............................. 113,481
Deferred organizational expenses .................................. 47,333
Prepaid expenses and other assets ................................. 46,133
--------------
TOTAL ASSETS ................................................... 148,472,387
--------------
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased ...................... 603,140
Plan of distribution fee ....................................... 122,791
Investment management fee ...................................... 94,051
Accrued expenses and other payables ............................... 59,494
--------------
TOTAL LIABILITIES .............................................. 879,476
--------------
NET ASSETS ..................................................... $ 147,592,911
==============
COMPOSITION OF NET ASSETS:
Paid-in-capital ................................................... $ 275,294,242
Net unrealized depreciation ....................................... (18,926,760)
Accumulated undistributed net investment income ................... 296,938
Accumulated net realized loss ..................................... (109,071,509)
--------------
NET ASSETS ..................................................... $ 147,592,911
==============
CLASS A SHARES:
Net Assets ........................................................ $3,762,439
Shares Outstanding (unlimited authorized, $.01 par value).......... 576,315
NET ASSET VALUE PER SHARE ...................................... $6.53
=====
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value) ................ $6.89
=====
CLASS B SHARES:
Net Assets ........................................................ $135,970,416
Shares Outstanding (unlimited authorized, $.01 par value) ......... 21,004,812
NET ASSET VALUE PER SHARE ...................................... $6.47
=====
CLASS C SHARES:
Net Assets ........................................................ $7,623,863
Shares Outstanding (unlimited authorized, $.01 par value).......... 1,182,774
NET ASSET VALUE PER SHARE ...................................... $6.45
=====
CLASS D SHARES:
Net Assets ........................................................ $236,193
Shares Outstanding (unlimited authorized, $.01 par value).......... 36,136
NET ASSET VALUE PER SHARE ...................................... $6.54
=====
</TABLE>
See Notes to Financial Statements
6
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP DIVIDEND GROWTH SECURITIES
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the year ended February 29, 2000
NET INVESTMENT INCOME:
INCOME
Dividends ......................................... $ 4,800,345
Interest .......................................... 646,177
-------------
TOTAL INCOME ................................... 5,446,522
-------------
EXPENSES
Plan of distribution fee (Class A shares) ......... 17,723
Plan of distribution fee (Class B shares) ......... 2,283,134
Plan of distribution fee (Class C shares) ......... 141,544
Investment management fee ......................... 1,878,641
Transfer agent fees and expenses .................. 528,276
Registration fees ................................. 138,379
Professional fees ................................. 60,398
Shareholder reports and notices ................... 52,681
Custodian fees .................................... 26,027
Organizational expenses ........................... 14,644
Trustees' fees and expenses ....................... 14,056
Other ............................................. 8,725
-------------
TOTAL EXPENSES ................................. 5,164,228
-------------
NET INVESTMENT INCOME .......................... 282,294
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss ................................. (74,683,476)
Net change in unrealized depreciation ............. 40,326,001
-------------
NET LOSS ....................................... (34,357,475)
-------------
NET DECREASE ...................................... $ (34,075,181)
==============
See Notes to Financial Statements
7
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP DIVIDEND GROWTH SECURITIES
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR MAY 27, 1998*
ENDED THROUGH
FEBRUARY 29, 2000 FEBRUARY 28, 1999
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................ $ 282,294 $ 572,688
Net realized loss .................................... (74,683,476) (34,556,351)
Net change in unrealized depreciation ................ 40,326,001 (59,252,761)
-------------- -------------
NET INCREASE (DECREASE) ........................... (34,075,181) (93,236,424)
-------------- -------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A shares ....................................... - (78,008)
Class B shares ....................................... - (866,259)
Class C shares ....................................... - (52,602)
Class D shares ....................................... - (3,143)
-------------- -------------
TOTAL DIVIDENDS ................................... - (1,000,012)
-------------- -------------
Net increase (decrease) from transactions in shares of
beneficial interest ................................ (131,207,575) 407,012,103
-------------- -------------
NET INCREASE (DECREASE) ........................... (165,282,756) 312,775,667
NET ASSETS:
Beginning of period .................................. 312,875,667 100,000
-------------- -------------
END OF PERIOD
(Including undistributed net investment income of
$296,938 and $0, respectively)..................... $ 147,592,911 $ 312,875,667
============== =============
</TABLE>
- ---------------------
* Commencement of operations.
See Notes to Financial Statements
8
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP DIVIDEND GROWTH SECURITIES
NOTES TO FINANCIAL STATEMENTS February 29, 2000
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
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 securities are traded on more than one exchange, the securities
are 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 Trustees (valuation of debt securities for which
market quotations are not readily available may be based
9
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP DIVIDEND GROWTH SECURITIES
NOTES TO FINANCIAL STATEMENTS February 29, 2000, continued
upon current market prices of securities which are comparable in coupon, rating
and maturity or an appropriate matrix utilizing similar factors); and (4)
short-term debt securities having a maturity date of more than sixty days at
time of purchase are valued on a mark-to-market basis until sixty days prior to
maturity and thereafter at amortized cost based on their value on the 61st day.
Short-term debt securities having a maturity date of sixty days or less at the
time of purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS - Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and other distributions are recorded on the ex-dividend date.
Discounts are accreted over the life of the respective securities. Interest
income is accrued daily.
C. 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 and was 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.
10
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP DIVIDEND GROWTH SECURITIES
NOTES TO FINANCIAL STATEMENTS February 29, 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
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 (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
11
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP DIVIDEND GROWTH SECURITIES
NOTES TO FINANCIAL STATEMENTS February 29, 2000, continued
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, including carrying charges, totaled $20,969,468 at February 29, 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 February 29, 2000, 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 year ended February 29, 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 $2,388, $1,302,769
and $14,374, respectively and received $27,106 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 February 29, 2000 aggregated
$437,808,777 and $570,969,848, respectively.
For the year ended February 29, 2000, the Fund incurred $123,190 in brokerage
commissions with DWR for portfolio transactions executed on behalf of the Fund.
For the year ended February 29, 2000, the Fund incurred $108,270 in brokerage
commissions 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, and affiliate of the Investment Manager
and Distributor, is the Fund's transfer agent. At February 29, 2000, the Fund
had transfer agent fees and expenses payable of approximately $1,100.
12
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP DIVIDEND GROWTH SECURITIES
NOTES TO FINANCIAL STATEMENTS February 29, 2000, continued
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR MAY 27, 1998*
ENDED THROUGH
FEBRUARY 29, 2000 FEBRUARY 28, 1999
------------------------------ ---------------------------
SHARES AMOUNT SHARES AMOUNT
------------- --------------- ------------ --------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold ................................. 162,665 $ 1,278,355 1,553,857 $ 14,971,777
Reinvestment of dividends ............ - - 8,612 71,827
Redeemed ............................. (804,939) (6,230,158) (346,380) (2,873,074)
----------- ------------- ---------- ------------
Net increase (decrease) - Class A .... (642,274) (4,951,803) 1,216,089 12,170,530
----------- ------------- ---------- ------------
CLASS B SHARES
Sold ................................. 3,585,187 28,102,735 46,157,509 451,064,311
Reinvestment of dividends ............ - - 97,339 811,803
Redeemed ............................. (18,879,965) (144,377,236) (9,957,758) (82,556,557)
----------- ------------- ---------- ------------
Net increase (decrease) - Class B .... (15,294,778) (116,274,501) 36,297,090 369,319,557
----------- ------------- ---------- ------------
CLASS C SHARES
Sold ................................. 141,886 1,119,347 3,086,861 30,246,228
Reinvestment of dividends ............ - - 5,944 49,573
Redeemed ............................. (1,270,830) (9,806,789) (783,587) (6,546,367)
----------- ------------- ---------- ------------
Net increase (decrease) - Class C .... (1,128,944) (8,687,442) 2,309,218 23,749,434
----------- ------------- ---------- ------------
CLASS D SHARES
Sold ................................. 1,746,537 14,081,229 323,389 2,934,148
Reinvestment of dividends ............ - - 159 1,329
Redeemed ............................. (1,900,091) (15,375,058) (136,358) (1,162,895)
----------- ------------- ---------- ------------
Net increase (decrease) - Class D .... (153,554) (1,293,829) 187,190 1,772,582
----------- ------------- ---------- ------------
Net increase (decrease) in Fund ...... (17,219,550) $(131,207,575) 40,009,587 $407,012,103
=========== ============= ========== ============
</TABLE>
- ------------
* Commencement of operations.
6. FEDERAL INCOME TAX STATUS
At February 29, 2000, the Fund had a net capital loss carryover of approximately
$95,979,000 of which $26,164,000 will be available through February 28, 2007 and
$69,815,000 will be available through February 29, 2008 to offset future capital
gains to the extent provided by regulations.
Capital losses incurred after October 31 ("post-October losses") within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. The Fund incurred and will elect to defer net capital losses of
approximately $6,440,000 during fiscal 2000.
13
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP DIVIDEND GROWTH SECURITIES
NOTES TO FINANCIAL STATEMENTS February 29, 2000, continued
As of February 29, 2000, the Fund had temporary book/tax differences
attributable to post-October losses and capital loss deferrals on wash sales
and permanent book/tax differences primarily attributable to nondeductible
expenses and tax adjustments on real estate investment trusts sold by the Fund.
To reflect reclassifications arising from the permanent differences,
paid-in-capital was charged $182,962, undistributed net investment income was
credited $14,644, and accumulated net realized loss was credited $168,318.
7. FUND MERGER
On January 26, 2000, the Trustees of the Fund and of Morgan Stanley Dean Witter
Mid-Cap Equity Trust ("Mid-Cap Equity") approved a reorganization plan ("the
Plan") whereby the Fund would be merged into Mid-Cap Equity. The Plan is subject
to the consent of the Fund's shareholders. If approved, the assets of the Fund
will be combined with the assets of Mid-Cap Equity and shareholders of the Fund
will become shareholders of Mid-Cap Equity, receiving shares of the
corresponding class of Mid-Cap Equity equal to the value of their holdings in
the Fund. The merger is expected to close on or about June 23, 2000.
14
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP DIVIDEND GROWTH SECURITIES
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 MAY 27, 1998*
ENDED THROUGH
FEBRUARY 29, 2000 FEBRUARY 28, 1999
- -------------------------------------------------------------------------------------------
<S> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period .............. $ 7.83 $ 10.00
------- -------
Income (loss) from investment operations:
Net investment income ............................ 0.03 0.06
Net realized and unrealized loss ................. (1.33) (2.17)
------- -------
Total loss from investment operations ............. (1.30) (2.11)
------- -------
Less dividends from net investment income ......... - (0.06)
------- -------
Net asset value, end of period .................... $ 6.53 $ 7.83
======= =======
TOTAL RETURN+ ..................................... (16.60)% (21.13)%(1)
RATIOS TO AVERAGE NET ASSETS(3):
Expenses .......................................... 1.34 % 1.30 %(2)
Net investment income ............................. 0.83 % 0.93 %(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ........... $3,762 $9,536
Portfolio turnover rate ........................... 187 % 124 %(1)
</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
15
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP DIVIDEND GROWTH SECURITIES
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR MAY 27, 1998*
ENDED THROUGH
FEBRUARY 29, 2000 FEBRUARY 28, 1999
- --------------------------------------------------------------------------------------------
<S> <C> <C>
CLASS B SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period .............. $ 7.82 $ 10.00
------- -------
Income (loss) from investment operations:
Net investment income ............................ - 0.01
Net realized and unrealized loss ................. (1.35) (2.17)
------- -------
Total loss from investment operations ............. (1.35) (2.16)
------- -------
Less dividends from net investment income ......... - (0.02)
------- -------
Net asset value, end of period .................... $ 6.47 $ 7.82
======= =======
TOTAL RETURN+ ..................................... (17.26)% (21.59)%(1)
RATIOS TO AVERAGE NET ASSETS(3):
Expenses .......................................... 2.09 % 2.05 %(2)
Net investment income ............................. 0.08 % 0.18 %(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ........... $135,970 $283,779
Portfolio turnover rate ........................... 187 % 124 %(1)
</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
16
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP DIVIDEND GROWTH SECURITIES
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR MAY 27, 1998*
ENDED THROUGH
FEBRUARY 29, 2000 FEBRUARY 28, 1999
- ------------------------------------------------------------------------------------------
<S> <C> <C>
CLASS C SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period .............. $ 7.82 $ 10.00
------- -------
Income (loss) from investment operations:
Net investment income ............................ - 0.01
Net realized and unrealized loss ................. (1.37) (2.17)
------- -------
Total loss from investment operations ............. (1.37) (2.16)
------- -------
Less dividends from net investment income ......... - (0.02)
------- -------
Net asset value, end of period .................... $ 6.45 $ 7.82
======= =======
TOTAL RETURN+ ..................................... (17.52)% (21.61)%(1)
RATIOS TO AVERAGE NET ASSETS(3):
Expenses .......................................... 2.09 % 2.05 %(2)
Net investment income ............................. 0.08 % 0.18 %(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ........... $7,624 $18,075
Portfolio turnover rate ........................... 187 % 124 %(1)
</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
17
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP DIVIDEND GROWTH SECURITIES
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR MAY 27, 1998*
ENDED THROUGH
FEBRUARY 29, 2000 FEBRUARY 28, 1999
- ------------------------------------------------------------------------------------------
<S> <C> <C>
CLASS D SHARES++
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .............. $ 7.83 $ 10.00
------- -------
Income (loss) from investment operations:
Net investment income ............................ 0.04 0.06
Net realized and unrealized loss ................. (1.33) (2.16)
------- -------
Total loss from investment operations ............. (1.29) (2.10)
------- -------
Less dividends from net investment income ......... - (0.07)
------- -------
Net asset value, end of period .................... $ 6.54 $ 7.83
======= =======
TOTAL RETURN+ ..................................... (16.48)% (21.01)%(1)
RATIOS TO AVERAGE NET ASSETS(3):
Expenses .......................................... 1.09 % 1.05 %(2)
Net investment income ............................. 1.08 % 1.18 %(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ........... $236 $1,485
Portfolio turnover rate ........................... 187 % 124 %(1)
</TABLE>
- --------------
* Commencement of operations.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Calculated based on the net asset value as of the last business day of the
period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
See Notes to Financial Statements
18
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP DIVIDEND GROWTH SECURITIES
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER MID-CAP DIVIDEND GROWTH SECURITIES
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 Mid-Cap
Dividend Growth Securities (the "Fund") at February 29, 2000, the results of its
operations for the year then ended, and the changes in its net assets and the
financial highlights for the year then ended and for the period May 27, 1998
(commencement of operations) through February 28, 1999, in conformity with
accounting principles generally accepted in the United States. 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 auditing
standards generally accepted in the United States, 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
February 29, 2000 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
As described in Note 7 to the financial statements, the Fund's Trustees have
approved a reorganization plan whereby the Fund would be merged into Morgan
Stanley Dean Witter Mid-Cap Equity Trust. The Plan is subject to the consent of
the Fund's shareholders.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
April 17, 2000
19
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn MORGAN STANLEY
Wayne E. Hedien DEAN WITTER
Dr. Manuel H. Johnson MID-CAP DIVIDEND
Michael E. Nugent GROWTH SECURITIES
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Mitchell M. Merin [GRAPHIC OMITTED]
President
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 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.
ANNUAL REPORT
FEBRUARY 29, 2000
