UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-03128

Morgan Stanley Dividend Growth Securities Inc.
(Exact name of registrant as specified in charter)

1221 Avenue of the Americas, New York, New York 10020
(Address of principal executive offices) (Zip code)

Ronald E. Robison
1221 Avenue of the Americas, New York, New York 10020
(Name and address of agent for service)

Registrant's telephone number, including area code: 212-762-4000

Date of fiscal year end: February 28, 2007

Date of reporting period: August 31, 2006

Item 1 - Report to Shareholders

Welcome, Shareholder:

In this report, you'll learn about how your investment in Morgan Stanley
Dividend Growth Securities Inc. performed during the semiannual period. We will
provide an overview of the market conditions, and discuss some of the factors
that affected performance during the reporting period. In addition, this report
includes the Fund's financial statements and a list of Fund investments.

THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS FOR THE FUND BEING
OFFERED.

MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO PASS. THERE
IS NO ASSURANCE THAT THE FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE. THE FUND IS
SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY THAT MARKET VALUES OF
SECURITIES OWNED BY THE FUND WILL DECLINE AND, THEREFORE, THE VALUE OF THE
FUND'S SHARES MAY BE LESS THAN WHAT YOU PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE
MONEY INVESTING IN THIS FUND. PLEASE SEE THE PROSPECTUS FOR MORE COMPLETE
INFORMATION ON INVESTMENT RISKS.

FUND REPORT

For the six months ended August 31, 2006

TOTAL RETURN FOR THE SIX MONTHS ENDED AUGUST 31, 2006

<Table>
<Caption>
LIPPER
S&P LARGE-CAP
500(R) CORE FUNDS
CLASS A CLASS B CLASS C CLASS D INDEX(1) INDEX(2)

1.59% 1.64% 1.18% 1.72% 2.79% 1.96%
</Table>

The performance of the Fund's four share classes varies because each has
different expenses. The Fund's total returns assume the reinvestment of all
distributions but do not reflect the deduction of any applicable sales charges.
Such costs would lower performance. See Performance Summary for standardized
performance and benchmark information.

Because Class B shares incurred lower expenses under the 12b-1 Plan than did
Class A shares for the six months ended August 31, 2006, the total operating
expense ratio for Class B shares was lower and, as a result, the performance of
Class B shares was higher than that of the Class A shares. There can be no
assurance that this will continue to occur in the future as the maximum fees
payable by Class B shares under the 12b-1 Plan are higher than those payable by
Class A shares.

MARKET CONDITIONS

The stock market's overall performance for the six-month period ended August 31,
2006, was fairly lackluster, as concerns about a slowing economy caused
considerable volatility. In the early months of the period, the mood was
somewhat brighter as investors felt comfortable with commentary from new Federal
Reserve Board Chairman Ben Bernanke and were able to look past disappointing
fourth quarter gross domestic product (GDP) data. In March and April, tame
inflation data and expectations for a recovery in GDP growth bolstered
investors' confidence, as did favorable employment, durable goods orders and
consumer confidence data.

However, against a backdrop of sharply rising commodity prices and an uptick in
long-term interest rates, inflation concerns intensified in May. Moreover, the
April and May Consumer Price Index reports did little to soothe these anxieties.
As the Federal Open Market Committee (the "Fed") moved the target rate up for
the 16th consecutive time and left the door open for additional increases, the
market soured. Sentiment continued to decline in June, although stocks rallied
significantly in the final days of the month. The Fed raised rates again at the
June 29th meeting, but its language suggested that additional rate increases
might become unnecessary. Although investors became more convinced that the Fed
would pause its monetary tightening, negative influences affected the market in
July. The price of oil soared to a new high, geopolitical conflicts escalated
and second quarter GDP growth came in lower than expected. Additionally, a
number of bellwether technology companies announced earnings disappointments,
and retail sales and housing data declined.

The period ended on a more positive note, though. After 17 consecutive
increases, the Fed did leave the federal funds rate unchanged in its August
meeting. Decent headline inflation data gave investors hope that the pause could
be longer lasting, and retail sales numbers also beat expectations. Oil prices
edged lower from their recent record highs as the Israeli-Hezbollah conflict
reached a peaceful accord and the

U.S. hurricane season appeared to be relatively quiet. Gasoline prices also
eased, providing some relief to consumers. However, housing trends continued to
show weakness, and the increasing rate of decline surprised investors.

Given this backdrop, large-capitalization stocks began to outperform small- and
mid-cap stocks after seven years of relative underperformance. Value again
outperformed growth during the period, as investors refocused on defensive areas
of the market; that is, those seen as less likely to be affected by a slower
economy. For example, the consumer staples and utilities sectors performed
well -- consumers need groceries and power in both good and bad economic
environments. Energy continued to place among the best performing sectors as oil
prices remained high. Rounding out the broad market's top performers for the
period was the telecommunication services sector, which benefited from industry
consolidation. In contrast, the market's weakest sectors tended to be those
perceived to be negatively affected by an economic slowdown. The industrials
sector retreated, after performing very well in 2005 and early 2006 amid
moderately strong economic growth. Housing-related industries also suffered,
including household durables, homebuilders and home improvement specialty
retailers. Technology was another area of weakness, hampered by seasonal trends
and continued negative fallout related to stock options backdating.

PERFORMANCE ANALYSIS

Morgan Stanley Dividend Growth Securities Inc. underperformed the S&P 500(R)
Index and the Lipper Large-Cap Core Funds Index for the six months ended August
31, 2006, assuming no deduction of applicable sales charges.

The Fund's underperformance relative to the S&P 500 Index during the period was
largely attributable to stock selection in the energy, technology and
telecommunication services sectors. Although the Fund's energy holdings
delivered a positive return on an absolute basis, some of its larger positions
trailed the S&P 500 Index's energy sector during the period, dampening relative
results. Within the technology sector, computer and peripherals stocks detracted
from gains made in the Fund's other technology holdings. Relative weakness in
the Fund's telecommunication services exposure derived from a combination of
negative performance in the Fund's holdings and not owning the telecom stocks
that benefited most from industry consolidation trends.

However, other investments did contribute positively. An overweight in energy
added to relative performance, despite the negative influence of stock
selection. The materials sector was another source of gains, due to our stock
selection in the chemicals and metals and mining industries. Consumer staples,
one of the market's stronger performing sectors during the period, also boosted
the Fund's performance. Here, the Fund was well served by both an overweight in
the sector and strong stock selection, notably in the beverages, food and
staples retailing, and tobacco industries.

There is no guarantee that any sectors mentioned will continue to perform as
discussed herein or that securities in such sectors will be held by the Fund in
the future.

<Table>
<Caption>
TOP 10 HOLDINGS

PepsiCo, Inc. 4.2%
United Technologies Corp. 4.0
Procter & Gamble Co. (The) 2.7
Altria Group, Inc. 2.6
Exxon Mobil Corp. 2.5
American Express Co. 2.5
Citigroup, Inc. 2.4
Wyeth 2.2
JPMorgan Chase & Co. 2.2
Mellon Financial Corp. 2.2
</Table>

<Table>
<Caption>
TOP FIVE INDUSTRIES

Financial Conglomerates 9.0%
Industrial Conglomerates 7.0
Pharmaceuticals: Major 5.6
Beverages: Non-Alcoholic 4.2
Medical Specialties 3.8
</Table>

Data as of August 31, 2006. Subject to change daily. All percentages for top 10
holdings and top five industries are as a percentage of net assets. These data
are provided for informational purposes only and should not be deemed a
recommendation to buy or sell the securities mentioned. Morgan Stanley is a
full-service securities firm engaged in securities trading and brokerage
activities, investment banking, research and analysis, financing and financial
advisory services.

INVESTMENT STRATEGY

THE FUND WILL NORMALLY INVEST AT LEAST 80 PERCENT OF ITS ASSETS IN COMMON STOCKS
OF COMPANIES WITH A RECORD OF PAYING DIVIDENDS AND THE POTENTIAL FOR INCREASING
DIVIDENDS. THE FUND'S "INVESTMENT ADVISER," MORGAN STANLEY INVESTMENT ADVISORS
INC., INITIALLY EMPLOYS A QUANTITATIVE SCREENING PROCESS IN AN ATTEMPT TO
IDENTIFY A NUMBER OF COMMON STOCKS WHICH ARE REASONABLY VALUED AND WHICH HAVE A
RECORD OF PAYING DIVIDENDS. THE INVESTMENT ADVISER ALSO CONSIDERS OTHER FACTORS,
SUCH AS A COMPANY'S RETURN ON INVESTED CAPITAL AND LEVELS OF FREE CASH FLOW. THE
INVESTMENT ADVISER THEN APPLIES QUALITATIVE ANALYSIS TO DETERMINE WHICH STOCKS
IT BELIEVES HAVE ATTRACTIVE FUTURE GROWTH PROSPECTS AND THE POTENTIAL TO
INCREASE DIVIDENDS AND, FINALLY, TO DETERMINE WHETHER ANY OF THE STOCKS SHOULD
BE ADDED TO OR SOLD FROM THE FUND'S PORTFOLIO.

FOR MORE INFORMATION
ABOUT PORTFOLIO HOLDINGS

EACH MORGAN STANLEY FUND PROVIDES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS IN
ITS SEMIANNUAL AND ANNUAL REPORTS WITHIN 60 DAYS OF THE END OF THE FUND'S SECOND
AND FOURTH FISCAL QUARTERS. THE SEMIANNUAL REPORTS AND THE ANNUAL REPORTS ARE
FILED ELECTRONICALLY WITH THE SECURITIES AND EXCHANGE COMMISSION (SEC) ON FORM
N-CSRS AND FORM N-CSR, RESPECTIVELY. MORGAN STANLEY ALSO DELIVERS THE SEMIANNUAL
AND ANNUAL REPORTS TO FUND SHAREHOLDERS AND MAKES THESE REPORTS AVAILABLE ON ITS
PUBLIC WEB SITE, WWW.MORGANSTANLEY.COM. EACH MORGAN STANLEY FUND ALSO FILES A
COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE SEC FOR THE FUND'S FIRST AND
THIRD FISCAL QUARTERS ON FORM N-Q. MORGAN STANLEY DOES NOT DELIVER THE REPORTS
FOR THE FIRST AND THIRD FISCAL QUARTERS TO SHAREHOLDERS, NOR ARE THE REPORTS
POSTED TO THE MORGAN STANLEY PUBLIC WEB SITE. YOU MAY, HOWEVER, OBTAIN THE FORM
N-Q FILINGS (AS

WELL AS THE FORM N-CSR AND N-CSRS FILINGS) BY ACCESSING THE SEC'S WEB SITE,
HTTP://WWW.SEC.GOV. YOU MAY ALSO REVIEW AND COPY THEM AT THE SEC'S PUBLIC
REFERENCE ROOM IN WASHINGTON, DC. INFORMATION ON THE OPERATION OF THE SEC'S
PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING THE SEC AT (800) SEC-0330. YOU
CAN ALSO REQUEST COPIES OF THESE MATERIALS, UPON PAYMENT OF A DUPLICATING FEE,
BY ELECTRONIC REQUEST AT THE SEC'S E-MAIL ADDRESS (PUBLICINFO@SEC.GOV) OR BY
WRITING THE PUBLIC REFERENCE SECTION OF THE SEC, WASHINGTON, DC 20549-0102.

PROXY VOTING POLICY AND PROCEDURES AND PROXY VOTING RECORD

YOU MAY OBTAIN A COPY OF THE FUND'S PROXY VOTING POLICY AND PROCEDURES WITHOUT
CHARGE, UPON REQUEST, BY CALLING TOLL FREE (800) 869-NEWS OR BY VISITING THE
MUTUAL FUND CENTER ON OUR WEB SITE AT WWW.MORGANSTANLEY.COM. IT IS ALSO
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.

YOU MAY OBTAIN INFORMATION REGARDING HOW THE FUND VOTED PROXIES RELATING TO
PORTFOLIO SECURITIES DURING THE MOST RECENT TWELVE-MONTH PERIOD ENDED JUNE 30
WITHOUT CHARGE BY VISITING THE MUTUAL FUND CENTER ON OUR WEB SITE AT
WWW.MORGANSTANLEY.COM. THIS INFORMATION IS ALSO AVAILABLE ON THE SECURITIES AND
EXCHANGE COMMISSION'S WEB SITE AT HTTP://WWW.SEC.GOV.

HOUSEHOLDING NOTICE

TO REDUCE PRINTING AND MAILING COSTS, THE FUND ATTEMPTS TO ELIMINATE DUPLICATE
MAILINGS TO THE SAME ADDRESS. THE FUND DELIVERS A SINGLE COPY OF CERTAIN
SHAREHOLDER DOCUMENTS, INCLUDING SHAREHOLDER REPORTS, PROSPECTUSES AND PROXY
MATERIALS, TO INVESTORS WITH THE SAME LAST NAME WHO RESIDE AT THE SAME ADDRESS.
YOUR PARTICIPATION IN THIS PROGRAM WILL CONTINUE FOR AN UNLIMITED PERIOD OF TIME
UNLESS YOU INSTRUCT US OTHERWISE. YOU CAN REQUEST MULTIPLE COPIES OF THESE
DOCUMENTS BY CALLING (800) 350-6414, 8:00 A.M. TO 8:00 P.M., ET. ONCE OUR
CUSTOMER SERVICE CENTER HAS RECEIVED YOUR INSTRUCTIONS, WE WILL BEGIN SENDING
INDIVIDUAL COPIES FOR EACH ACCOUNT WITHIN 30 DAYS.

PERFORMANCE SUMMARY

AVERAGE ANNUAL TOTAL RETURNS -- PERIOD ENDED AUGUST 31, 2006

<Table>
<Caption>
CLASS A SHARES* CLASS B SHARES** CLASS C SHARES(+) CLASS D SHARES(++)
(since 07/28/97) (since 03/30/81) (since 07/28/97) (since 07/28/97)
SYMBOL DIVAX DIVBX DIVCX DIVDX

1 YEAR 7.32%(3) 7.46%(3) 6.51%(3) 7.59%(3)
1.69(4) 3.41(4) 5.70(4) --
5 YEARS 3.47(3) 3.17(3) 2.69(3) 3.72(3)
2.36(4) 2.96(4) 2.69(4) --
10 YEARS -- 6.57(3) -- --
-- 6.57(4) -- --
SINCE INCEPTION 4.09(3) 11.41(3) 3.32(3) 4.33(3)
3.47(4) 11.41(4) 3.32(4) --
</Table>

Performance data quoted represents past performance, which is no guarantee of
future results and current performance may be lower or higher than the figures
shown. For most recent month-end performance figures, please visit
www.morganstanley.com or speak with your Financial Advisor. Investment returns
and principal value will fluctuate and fund shares, when redeemed, may be worth
more or less than their original cost. The table does not reflect the deduction
of taxes that a shareholder would pay on fund distributions or the redemption of
fund shares. Performance for Class A, Class B, Class C, and Class D shares will
vary due to differences in sales charges and expenses.

* 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 is 1.0% for shares
redeemed within one year of purchase.

++ Class D has no sales charge.

(1) The Standard & Poor's 500 Index (S&P 500(R)) is a broad-based index, the
performance of which is based on the performance of 500 widely-held common
stocks chosen for market size, liquidity and industry group representation.
Indexes are unmanaged and their returns do not include any sales charges or
fees. Such costs would lower performance. It is not possible to invest
directly in an index.

(2) The Lipper Large-Cap Core Funds Index is an equally weighted performance
index of the largest qualifying funds (based on net assets) in the Lipper
Large-Cap Core Funds classification. The Index, which is adjusted for
capital gains distributions and income dividends, is unmanaged and should
not be considered an investment. There are currently 30 funds represented
in this Index.

(3) Figure shown assumes reinvestment of all distributions and does not reflect
the deduction of any sales charges.

(4) 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.

EXPENSE EXAMPLE

As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments and redemption fees;
and (2) ongoing costs, including advisory fees; distribution and service (12b-1)
fees; and other Fund expenses. This example is intended to help you understand
your ongoing costs (in dollars) of investing in the Fund and to compare these
costs with the ongoing costs of investing in other mutual funds.

The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period 03/01/06 - 08/31/06.

ACTUAL EXPENSES

The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.

HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES

The second line of the table below provides information about hypothetical
expenses based on the Fund's actual expense ratio and an assumed rate of return
of 5% per year before expenses, which is not the Fund's actual return. The
hypothetical account values and expenses may not be used to estimate the actual
ending account balance or expenses you paid for the period. You may use this
information to compare the ongoing cost of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) and redemption fees. Therefore, the second line of the table is
useful in comparing ongoing costs, and will not help you determine the relative
total cost of owning different funds. In addition, if these transactional costs
were included, your costs would have been higher.

<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD *
------------- ------------- ---------------
03/01/06 -
03/01/06 08/31/06 08/31/06
------------- ------------- ---------------

CLASS A
Actual (1.59% return)....................................... $1,000.00 $1,015.90 $4.42
Hypothetical (5% annual return before expenses)............. $1,000.00 $1,020.82 $4.43
CLASS B
Actual (1.64% return)....................................... $1,000.00 $1,016.40 $3.76
Hypothetical (5% annual return before expenses)............. $1,000.00 $1,021.48 $3.77
CLASS C
Actual (1.18% return)....................................... $1,000.00 $1,011.80 $8.21
Hypothetical (5% annual return before expenses)............. $1,000.00 $1,017.04 $8.24
CLASS D
Actual (1.72% return)....................................... $1,000.00 $1,017.20 $3.15
Hypothetical (5% annual return before expenses)............. $1,000.00 $1,022.08 $3.16
</Table>

- ------------------
* Expenses are equal to the Fund's annualized expense ratios of 0.87%, 0.74%,
1.62% and 0.62% for Class A, Class B, Class C and Class D shares,
respectively, multiplied by the average account value over the period,
multiplied by 184/365 (to reflect the one-half year period).

Because Class B shares incurred lower expenses under the 12b-1 Plan than did
Class A shares for the six months ended August 31, 2006, the total operating
expense ratio for Class B shares was lower and, as a result, the performance
of Class B shares was higher than that of the Class A shares. There can be no
assurance that this will continue to occur in the future as the maximum fees
payable by Class B shares under the 12b-1 Plan are higher than those payable
by Class A shares.

INVESTMENT ADVISORY AGREEMENT APPROVAL

NATURE, EXTENT AND QUALITY OF SERVICES

The Board reviewed and considered the nature and extent of the investment
advisory services provided by the Investment Adviser under the Advisory
Agreement, including portfolio management, investment research and equity and
fixed income securities trading. The Board also reviewed and considered the
nature and extent of the non-advisory, administrative services provided by the
Fund's Administrator under the Administration Agreement, including accounting,
clerical, bookkeeping, compliance, business management and planning, and the
provision of supplies, office space and utilities at the Investment Adviser's
expense. (The Investment Adviser and the Administrator together are referred to
as the "Adviser" and the Advisory and Administration Agreements together are
referred to as the "Management Agreement.") The Board also compared the nature
of the services provided by the Adviser with similar services provided by
non-affiliated advisers as reported to the Board by Lipper Inc. ("Lipper").

The Board reviewed and considered the qualifications of the portfolio managers,
the senior administrative managers and other key personnel of the Adviser who
provide the advisory and administrative services to the Fund. The Board
determined that the Adviser's portfolio managers and key personnel are well
qualified by education and/or training and experience to perform the services in
an efficient and professional manner. The Board concluded that the nature and
extent of the advisory and administrative services provided were necessary and
appropriate for the conduct of the business and investment activities of the
Fund. The Board also concluded that the overall quality of the advisory and
administrative services was satisfactory.

PERFORMANCE RELATIVE TO COMPARABLE FUNDS MANAGED BY OTHER ADVISERS

On a regular basis, the Board reviews the performance of all funds in the Morgan
Stanley Fund Complex, including the Fund, compared to their peers, paying
specific attention to the underperforming funds. In addition, the Board
specifically reviewed the Fund's performance for the one-, three- and five-year
periods ended November 30, 2005, as shown in a report provided by Lipper (the
"Lipper Report"), compared to the performance of comparable funds selected by
Lipper (the "performance peer group"). The Board considered the impact on
performance of the Fund's principal investment strategy. The Board discussed
with the Adviser the performance goals and the actual results achieved in
managing the Fund and concluded that the performance of the Fund was acceptable.

FEES RELATIVE TO OTHER PROPRIETARY FUNDS MANAGED BY THE ADVISER WITH COMPARABLE
INVESTMENT STRATEGIES

The Board reviewed the advisory and administrative fee (together, the
"management fee") rate paid by the Fund under the Management Agreement. The
Board noted that the management fee rate was comparable to the management fee
rates charged by the Adviser to other proprietary funds it manages with
investment strategies comparable to those of the Fund.

FEES AND EXPENSES RELATIVE TO COMPARABLE FUNDS MANAGED BY OTHER ADVISERS

The Board reviewed the management fee rate and total expense ratio of the Fund
as compared to the average management fee rate and average total expense ratio
for funds, selected by Lipper (the "expense peer group"), managed by other
advisers with investment strategies comparable to those of the Fund, as shown in
the Lipper Report. The Board concluded that the Fund's management fee rate and
total expense ratio were competitive with those of its expense peer group.

BREAKPOINTS AND ECONOMIES OF SCALE

The Board reviewed the structure of the Fund's management fee schedule under the
Management Agreement and noted that it includes breakpoints. The Board also
reviewed the level of the Fund's management fee and noted that the fee, as a
percentage of the Fund's net assets, would decrease as net assets increase
because the management fee includes breakpoints. The Board concluded that the
Fund's management fee would reflect economies of scale as assets increase.

PROFITABILITY OF THE ADVISER AND AFFILIATES

The Board considered information concerning the costs incurred and profits
realized by the Adviser and affiliates during the last year from their
relationship with the Fund and during the last two years from their relationship
with the Morgan Stanley Fund Complex and reviewed with the Adviser the cost
allocation methodology used to determine the profitability of the Adviser and
affiliates. Based on its review of the information it received, the Board
concluded that the profits earned by the Adviser and affiliates were not
excessive in light of the advisory, administrative and other services provided
to the Fund.

FALL-OUT BENEFITS

The Board considered so-called "fall-out benefits" derived by the Adviser and
affiliates from their relationship with the Fund and the Morgan Stanley Fund
Complex, such as sales charges on sales of Class A shares and "float" benefits
derived from handling of checks for purchases and sales of Fund shares, through
a broker-dealer affiliate of the Adviser and "soft dollar" benefits (discussed
in the next section). The Board also considered that a broker-dealer affiliate
of the Adviser receives from the Fund 12b-1 fees for distribution and
shareholder services. The Board also considered that an affiliate of the Adviser
sold a joint venture that owned an electronic trading system network ("ECN"),
which may be used by the Adviser for trading on behalf of the Fund. As part of
the sale of the joint venture, the affiliate receives a 10-year payout based on
the revenue stream from trading on the ECN. Although the affiliate disgorges the
portion of the payout that is comprised of commissions received from trades
executed by the Adviser on the ECN to a charitable organization, the Board
considered the fact that trades by the Adviser would increase order flow, and,
thus, result in a potential fall-out benefit to the affiliate. The Board
concluded that the float benefits were relatively small, the sales charges and

12b-1 fees were competitive with those of other broker-dealers, the affiliate
disgorged revenues in connection with the ECN-related revenue and the potential
fall-out benefit from increased order flow was relatively small.

SOFT DOLLAR BENEFITS

The Board considered whether the Adviser realizes any benefits as a result of
brokerage transactions executed through "soft dollar" arrangements. Under such
arrangements, brokerage commissions paid by the Fund and/or other funds managed
by the Adviser would be used to pay for research that a securities broker
obtains from third parties, or to pay for both research and execution services
from securities brokers who effect transactions for the Fund. The Adviser
informed the Board that it does not use Fund commissions to pay for third party
research. It does use commissions to pay for research which is bundled with
execution services. The Board recognized that the receipt of such research from
brokers may reduce the Adviser's costs but concluded that the receipt of such
research strengthens the investment management resources of the Adviser, which
may ultimately benefit the Fund and other funds in the Morgan Stanley Fund
Complex.

ADVISER FINANCIALLY SOUND AND FINANCIALLY CAPABLE OF MEETING THE FUND'S NEEDS

The Board considered whether the Adviser is financially sound and has the
resources necessary to perform its obligations under the Management Agreement.
The Board noted that the Adviser's operations remain profitable, although
increased expenses in recent years have reduced the Adviser's profitability. The
Board concluded that the Adviser has the financial resources necessary to
fulfill its obligations under the Management Agreement.

HISTORICAL RELATIONSHIP BETWEEN THE FUND AND THE ADVISER

The Board also reviewed and considered the historical relationship between the
Fund and the Adviser, including the organizational structure of the Adviser, the
policies and procedures formulated and adopted by the Adviser for managing the
Fund's operations and the Board's confidence in the competence and integrity of
the senior managers and key personnel of the Adviser. The Board concluded that
it is beneficial for the Fund to continue its relationship with the Adviser.

OTHER FACTORS AND CURRENT TRENDS

The Board considered the controls and procedures adopted and implemented by the
Adviser and monitored by the Fund's Chief Compliance Officer and concluded that
the conduct of business by the Adviser indicates a good faith effort on its part
to adhere to high ethical standards in the conduct of the Fund's business.

GENERAL CONCLUSION

After considering and weighing all of the above factors, the Board concluded
that it would be in the best interest of the Fund and its shareholders to
approve renewal of the Management Agreement for another year.

Morgan Stanley Dividend Growth Securities Inc.
PORTFOLIO OF INVESTMENTS - AUGUST 31, 2006 (UNAUDITED)

<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------

Common Stocks (95.6%)
Aerospace & Defense (2.4%)
570,400 Boeing Co. ............ $ 42,722,960
958,100 Northrop Grumman
Corp. ................ 64,010,661
--------------
106,733,621
--------------
Apparel/Footwear (1.8%)
1,153,000 V.F. Corp. ............ 80,583,170
--------------
Apparel/Footwear Retail
(0.5%)
624,600 Nordstrom, Inc. ....... 23,328,810
--------------
Beverages: Alcoholic
(1.7%)
1,021,300 Diageo PLC (ADR)
(United Kingdom)...... 73,022,950
--------------
Beverages: Non-
Alcoholic (4.2%)
2,866,200 PepsiCo, Inc. ......... 187,105,536
--------------
Biotechnology (1.6%)
335,100 Genentech, Inc.*....... 27,652,452
330,400 Genzyme Corp.*......... 21,882,392
343,800 Gilead Sciences,
Inc.*................. 21,796,920
--------------
71,331,764
--------------
Chemicals: Agricultural
(1.8%)
1,645,600 Monsanto Co. .......... 78,067,264
--------------
Computer Communications
(2.1%)
4,309,800 Cisco Systems, Inc.*... 94,772,502
--------------
Computer Processing
Hardware (1.2%)
347,400 Apple Computer,
Inc.*................. 23,571,090
1,339,100 Dell Inc.*............. 30,196,705
--------------
53,767,795
--------------
</Table>

<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------

Data Processing
Services (1.6%)
1,459,000 Automatic Data
Processing, Inc. ..... $ 68,864,800
--------------
Discount Stores (2.4%)
164,400 Sears Holdings
Corp.*................ 23,691,684
1,674,200 Target Corp. .......... 81,014,538
--------------
104,706,222
--------------
Drugstore Chains (2.0%)
1,965,000 CVS Corp. ............. 65,925,750
468,000 Walgreen Co. .......... 23,147,280
--------------
89,073,030
--------------
Electric Utilities
(1.6%)
1,129,000 Exelon Corp. .......... 68,846,420
--------------
Electronics/Appliance
Stores (0.3%)
282,500 Best Buy Co., Inc. .... 13,277,500
--------------
Financial Conglomerates
(9.0%)
2,084,400 American Express
Co. .................. 109,514,376
2,177,400 Citigroup, Inc. ....... 107,454,690
2,163,000 JPMorgan Chase &
Co. .................. 98,762,580
1,454,000 UBS AG (Switzerland)... 82,543,580
--------------
398,275,226
--------------
Financial Publishing/
Services (1.9%)
1,467,100 McGraw-Hill Companies,
Inc. (The)............ 82,025,561
--------------
Food: Specialty/ Candy
(0.5%)
414,900 Hershey Foods Co.
(The)................. 22,388,004
--------------
Hotels/Resorts/
Cruiselines (1.6%)
1,340,300 Starwood Hotels &
Resorts Worldwide,
Inc. ................. 71,384,378
--------------
</Table>

See Notes to Financial Statements
11

Morgan Stanley Dividend Growth Securities Inc.
PORTFOLIO OF INVESTMENTS - AUGUST 31, 2006 (UNAUDITED) continued

<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------

Household/Personal Care
(2.7%)
1,918,200 Procter & Gamble Co.
(The)................. $ 118,736,580
--------------
Industrial
Conglomerates (7.0%)
779,800 3M Co. ................ 55,911,660
2,341,500 General Electric
Co. .................. 79,751,490
2,792,630 United Technologies
Corp. ................ 175,125,827
--------------
310,788,977
--------------
Insurance Brokers/
Services (0.3%)
497,600 Marsh & McLennan
Companies, Inc. ...... 13,017,216
--------------
Integrated Oil (2.5%)
1,659,500 Exxon Mobil Corp. ..... 112,298,365
--------------
Internet Software/
Services (1.6%)
81,200 Google, Inc. (Class
A)*................... 30,736,636
1,377,400 Yahoo!, Inc.*.......... 39,696,668
--------------
70,433,304
--------------
Investment Banks/
Brokers (2.2%)
369,800 Goldman Sachs Group,
Inc. (The)............ 54,970,770
596,800 Merrill Lynch & Co.,
Inc. ................. 43,882,704
--------------
98,853,474
--------------
Investment Managers
(2.9%)
293,300 Franklin Resources,
Inc. ................. 28,863,653
2,607,200 Mellon Financial
Corp. ................ 97,066,056
--------------
125,929,709
--------------
Life/Health Insurance
(2.8%)
779,600 Lincoln National
Corp. ................ 47,321,720
1,353,400 MetLife, Inc. ......... 74,477,602
--------------
121,799,322
--------------
</Table>

<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------

Major Banks (2.0%)
924,200 Bank of America
Corp. ................ $ 47,568,574
783,800 Wachovia Corp. ........ 42,818,994
--------------
90,387,568
--------------
Major
Telecommunications
(0.7%)
540,300 ALLTEL Corp. .......... 29,289,663
--------------
Managed Health Care (2.4%)
1,051,100 Caremark Rx, Inc. ..... 60,900,734
847,400 UnitedHealth Group
Inc. ................. 44,022,430
--------------
104,923,164
--------------
Medical Specialties
(3.8%)
335,300 Alcon, Inc.
(Switzerland)......... 39,494,987
1,234,900 Baxter International,
Inc. ................. 54,804,862
718,500 Fisher Scientific
International,
Inc.*................. 56,208,255
415,400 Medtronic, Inc. ....... 19,482,260
--------------
169,990,364
--------------
Multi-Line Insurance
(0.6%)
442,700 American International
Group, Inc. .......... 28,253,114
--------------
Office Equipment/
Supplies (1.8%)
1,798,500 Pitney Bowes, Inc. .... 78,396,615
--------------
Oil & Gas Production (1.3%)
1,288,333 XTO Energy Inc. ....... 58,967,002
--------------
Oil Refining/ Marketing
(0.7%)
559,600 Valero Energy Corp. ... 32,121,040
--------------
Oilfield Services/
Equipment (3.3%)
2,262,000 Halliburton Co. ....... 73,786,440
198,800 National OilwellVarco,
Inc.*................. 12,981,640
961,700 Schlumberger Ltd.
(Netherlands
Antilles)............. 58,952,210
--------------
145,720,290
--------------
</Table>

See Notes to Financial Statements
12

Morgan Stanley Dividend Growth Securities Inc.
PORTFOLIO OF INVESTMENTS - AUGUST 31, 2006 (UNAUDITED) continued

<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------

Other Consumer Services
(0.9%)
1,363,900 eBay Inc.*............. $ 37,998,254
--------------
Other Metals/ Minerals
(0.5%)
105,600 Rio Tinto PLC (ADR)
(United Kingdom)...... 21,273,120
--------------
Packaged Software
(2.1%)
946,900 Adobe Systems, Inc.*... 30,717,436
4,025,200 Oracle Corp.*.......... 62,994,380
--------------
93,711,816
--------------
Pharmaceuticals: Major
(5.6%)
465,000 Abbott Laboratories.... 22,645,500
872,400 Johnson & Johnson...... 56,409,384
2,458,700 Pfizer, Inc. .......... 67,761,772
2,032,300 Wyeth.................. 98,973,010
--------------
245,789,666
--------------
Precious Metals (0.8%)
994,000 Barrick Gold Corp.
(Canada).............. 33,279,120
--------------
Property -- Casualty
Insurers (0.6%)
381,400 XL Capital Ltd. (Class
A) (Cayman Islands)... 25,035,096
--------------
</Table>

<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------

Regional Banks (0.8%)
899,600 Fifth Third Bancorp.... $ 35,390,264
--------------
Semiconductors (3.3%)
1,950,400 Intel Corp. ........... 38,110,816
825,600 Microchip Technology
Inc. ................. 28,202,496
2,430,900 Texas Instruments
Inc. ................. 79,223,031
--------------
145,536,343
--------------
Telecommunication
Equipment (1.6%)
823,100 Nokia Corp. (ADR)
(Finland)............. 17,186,328
1,419,900 QUALCOMM, Inc. ........ 53,487,633
--------------
70,673,961
--------------
Tobacco (2.6%)
1,383,200 Altria Group, Inc. .... 115,538,696
--------------
Total Common Stocks
(Cost
$2,626,604,747)........ 4,221,686,656
--------------
<Caption>
NUMBER OF
WARRANTS
- -----------

Warrant (0.0%)
Aerospace & Defense
3,938 Raytheon Co* (06/16/11)
(Cost $48,044)........ 54,935
--------------
</Table>

See Notes to Financial Statements
13

Morgan Stanley Dividend Growth Securities Inc.
PORTFOLIO OF INVESTMENTS - AUGUST 31, 2006 (UNAUDITED) continued

<Table>
<Caption>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------

Short-Term Investment (3.7%)
Repurchase Agreement
$ 163,120 Joint repurchase
agreement account
5.27% due 09/01/06
(dated 08/31/06;
proceeds $163,143,879)
(a)
(Cost $163,120,000)... $ 163,120,000
--------------
</Table>

<Table>

Total Investments
(Cost $2,789,772,791)
(b)....................... 99.3% 4,384,861,591
Other Assets in Excess of
Liabilities............... 0.7 28,787,875
----- --------------
Net Assets................ 100.0% $4,413,649,466
===== ==============
</Table>

- ------------------

<Table>

ADR American Depositary Receipt.
* Non-income producing security.
(a) Collateralized by federal agency and U.S. Treasury
obligations.
(b) The aggregate cost for federal income tax purposes
approximates the aggregate cost for book purposes.
The aggregate gross unrealized appreciation is
$1,619,618,138 and the aggregate gross unrealized
depreciation is $24,529,338, resulting in net
unrealized appreciation of $1,595,088,800.
</Table>

See Notes to Financial Statements
14

Morgan Stanley Dividend Growth Securities Inc.
SUMMARY OF INVESTMENTS - AUGUST 31, 2006 (UNAUDITED)

<Table>
<Caption>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- ---------------------------------------------------------

Financial Conglomerates.... $ 398,275,226 9.0%
Industrial Conglomerates... 310,788,977 7.0
Pharmaceuticals: Major..... 245,789,666 5.6
Beverages: Non-Alcoholic... 187,105,536 4.2
Medical Specialties........ 169,990,364 3.8
Repurchase Agreement....... 163,120,000 3.7
Oilfield
Services/Equipment........ 145,720,290 3.3
Semiconductors............. 145,536,343 3.3
Investment Managers........ 125,929,709 2.9
Life/Health Insurance...... 121,799,322 2.8
Household/Personal Care.... 118,736,580 2.7
Tobacco.................... 115,538,696 2.6
Integrated Oil............. 112,298,365 2.5
Aerospace & Defense........ 106,788,556 2.4
Managed Health Care........ 104,923,164 2.4
Discount Stores............ 104,706,222 2.4
Investment Banks/Brokers... 98,853,474 2.2
Computer Communications.... 94,772,502 2.1
Packaged Software.......... 93,711,816 2.1
Major Banks................ 90,387,568 2.0
Drugstore Chains........... 89,073,030 2.0
Financial
Publishing/Services....... 82,025,561 1.9
Apparel/Footwear........... 80,583,170 1.8
Office
Equipment/Supplies........ 78,396,615 1.8
Chemicals: Agricultural.... 78,067,264 1.8
</Table>

<Table>
<Caption>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- ---------------------------------------------------------

Beverages: Alcoholic....... 73,022,950 1.7
Hotels/Resorts/Cruiselines... 71,384,378 1.6
Biotechnology.............. 71,331,764 1.6
Telecommunication
Equipment................. 70,673,961 1.6
Internet
Software/Services......... 70,433,304 1.6
Data Processing Services... 68,864,800 1.6
Electric Utilities......... 68,846,420 1.6
Oil & Gas Production....... 58,967,002 1.3
Computer Processing
Hardware.................. 53,767,795 1.2
Other Consumer Services.... 37,998,254 0.9
Regional Banks............. 35,390,264 0.8
Precious Metals............ 33,279,120 0.8
Oil Refining/Marketing..... 32,121,040 0.7
Major Telecommunications... 29,289,663 0.7
Multi-Line Insurance....... 28,253,114 0.6
Property - Casualty
Insurers.................. 25,035,096 0.6
Apparel/Footwear Retail.... 23,328,810 0.5
Food: Specialty/Candy...... 22,388,004 0.5
Other Metals/Minerals...... 21,273,120 0.5
Electronics/Appliance
Stores.................... 13,277,500 0.3
Insurance
Brokers/Services.......... 13,017,216 0.3
-------------- ----
$4,384,861,591 99.3%
============== ====
</Table>

See Notes to Financial Statements
15

Morgan Stanley Dividend Growth Securities Inc.
FINANCIAL STATEMENTS

Statement of Assets and Liabilities
August 31, 2006 (unaudited)

<Table>

Assets:
Investments in securities, at value
(cost $2,789,772,791)..................................... $ 4,384,861,591
Cash........................................................ 851
Receivable for:
Investments sold........................................ 60,458,621
Dividends............................................... 7,640,312
Foreign withholding taxes reclaimed..................... 721,707
Capital stock sold...................................... 526,419
Interest................................................ 23,879
Prepaid expenses and other assets........................... 113,968
Receivable from affiliate................................... 758,752
---------------
Total Assets............................................ 4,455,106,100
---------------
Liabilities:
Payable for:
Investments purchased................................... 29,841,708
Capital stock redeemed.................................. 7,853,269
Distribution fee........................................ 1,582,308
Investment advisory fee................................. 1,441,172
Administration fee...................................... 300,575
Transfer agent fee...................................... 246,106
Accrued expenses and other payables......................... 191,496
---------------
Total Liabilities....................................... 41,456,634
---------------
Net Assets.............................................. $ 4,413,649,466
===============
Composition of Net Assets:
Paid-in-capital............................................. $ 1,796,778,882
Net unrealized appreciation................................. 1,595,088,800
Accumulated undistributed net investment income............. 18,221,416
Accumulated undistributed net realized gain................. 1,003,560,368
---------------
Net Assets.............................................. $ 4,413,649,466
===============
Class A Shares:
Net Assets.................................................. $3,043,160,141
Shares Outstanding (500,000,000 authorized, $.01 par
value).................................................... 106,709,527
Net Asset Value Per Share............................... $28.52
===============
Maximum Offering Price Per Share,
(net asset value plus 5.54% of net asset value)......... $30.10
===============
Class B Shares:
Net Assets.................................................. $1,026,937,679
Shares Outstanding (500,000,000 authorized, $.01 par
value).................................................... 35,832,726
Net Asset Value Per Share............................... $28.66
===============
Class C Shares:
Net Assets.................................................. $71,003,960
Shares Outstanding (500,000,000 authorized, $.01 par
value).................................................... 2,497,070
Net Asset Value Per Share............................... $28.43
===============
Class D Shares:
Net Assets.................................................. $272,547,686
Shares Outstanding (500,000,000 authorized, $.01 par
value).................................................... 9,546,242
Net Asset Value Per Share............................... $28.55
===============
</Table>

See Notes to Financial Statements
16

Morgan Stanley Dividend Growth Securities Inc.
FINANCIAL STATEMENTS continued

Statement of Operations
For the six months ended August 31, 2006 (unaudited)

<Table>

Net Investment Income:
Income
Dividends (net of $453,733 foreign withholding tax)......... $ 46,340,975
Interest.................................................... 3,046,857
---------------
Total Income............................................ 49,387,832
---------------
Expenses
Investment advisory fee..................................... 9,283,785
Distribution fee (Class A shares)........................... 4,058,195
Distribution fee (Class B shares)........................... 726,337
Distribution fee (Class C shares)........................... 378,019
Transfer agent fees and expenses............................ 3,239,499
Administration fee.......................................... 1,969,658
Shareholder reports and notices............................. 327,328
Custodian fees.............................................. 109,159
Registration fees........................................... 55,863
Directors' fees and expenses................................ 36,865
Professional fees........................................... 34,516
Other....................................................... 174,734
---------------
Total Expenses.......................................... 20,393,958
Less: expense offset........................................ (21,509)
---------------
Net Expenses............................................ 20,372,449
---------------
Net Investment Income................................... 29,015,383
---------------
Net Realized and Unrealized Gain (Loss):
Net Realized Gain (Loss) on:
Investments................................................. 1,034,709,343
Foreign exchange transactions............................... (188,953)
---------------
Net Realized Gain....................................... 1,034,520,390
---------------
Net change in unrealized appreciation/depreciation.......... (1,005,327,722)
---------------
Net Gain................................................ 29,192,668
---------------
Net Increase................................................ $ 58,208,051
===============
</Table>

See Notes to Financial Statements
17

Morgan Stanley Dividend Growth Securities Inc.
FINANCIAL STATEMENTS continued

Statements of Changes in Net Assets

<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
AUGUST 31, 2006 FEBRUARY 28, 2006
--------------- -----------------
(unaudited)

Increase (Decrease) in Net Assets:
Operations:
Net investment income....................................... $ 29,015,383 $ 64,945,963
Net realized gain........................................... 1,034,520,390 1,298,066,592
Net change in unrealized depreciation....................... (1,005,327,722) (1,039,974,690)
--------------- ---------------
Net Increase............................................ 58,208,051 323,037,865
--------------- ---------------
Dividends and Distributions to Shareholders from:
Net investment income
Class A shares.......................................... (20,716,181) (35,588,295)
Class B shares.......................................... (8,240,676) (34,828,667)
Class C shares.......................................... (195,614) (492,249)
Class D shares.......................................... (3,690,500) (8,333,401)
Net realized gain
Class A shares.......................................... (482,217,132) (510,609,043)
Class B shares.......................................... (167,143,403) (231,506,952)
Class C shares.......................................... (11,169,835) (12,645,093)
Class D shares.......................................... (71,116,259) (77,988,935)
--------------- ---------------
Total Dividends and Distributions....................... (764,489,600) (911,992,635)
--------------- ---------------
Net decrease from capital stock transactions................ (203,769,085) (752,156,534)
--------------- ---------------
Net Decrease............................................ (910,050,634) (1,341,111,304)
Net Assets:
Beginning of period......................................... 5,323,700,100 6,664,811,404
--------------- ---------------
End of Period
(Including accumulated undistributed net investment income
of $18,221,416 and $22,049,004, respectively)............... $4,413,649,466 $ 5,323,700,100
=============== ===============
</Table>

See Notes to Financial Statements
18

Morgan Stanley Dividend Growth Securities Inc.
NOTES TO FINANCIAL STATEMENTS - AUGUST 31, 2006 (UNAUDITED)

1. Organization and Accounting Policies

Morgan Stanley Dividend Growth Securities Inc. (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
provide reasonable current income and long-term growth of income and capital.
The Fund was incorporated in Maryland on December 22, 1980 and commenced
operations on March 30, 1981. 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 eighteen
months, 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 Fund will assess a 2% redemption fee on Class A shares, Class B shares,
Class C shares and Class D shares, which is paid directly to the Fund, for
shares redeemed within seven days of purchase, subject to certain exceptions.
The redemption fee is designed to protect the Fund and its remaining
shareholders from the effects of short-term trading.

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 Stock Exchange ("NYSE") or American Stock Exchange 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 mean
between the last reported bid and asked price; (2) an equity portfolio security
listed or traded on the Nasdaq is valued at the Nasdaq Official Closing Price;
if there were no sales that day, the security is valued at the mean between the
last reported bid and asked price; (3) all other portfolio securities for which
over-the-counter market quotations are readily available are valued at the mean
between the last reported bid and asked 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; (4) for equity securities traded on foreign
exchanges, the last reported sale price or the latest bid price may be used if
there were no sales on a particular day; (5) when market quotations are not
readily available including circumstances under which Morgan Stanley Investment
Advisors Inc. (the "Investment Adviser") determines that the latest sale price,
the bid price or the mean between the last reported bid and asked price do not
reflect 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

Morgan Stanley Dividend Growth Securities Inc.
NOTES TO FINANCIAL STATEMENTS - AUGUST 31, 2006 (UNAUDITED) continued

general supervision of the Fund's Directors. Occasionally, developments
affecting the closing prices of securities and other assets may occur between
the times at which valuations of such securities are determined (that is, close
of the foreign market on which the securities trade) and the close of business
on the NYSE. If developments occur during such periods that are expected to
materially affect the value of such securities, such valuations may be adjusted
to reflect the estimated fair value of such securities as of the close of the
NYSE, as determined in good faith by the Fund's Directors or by the Investment
Adviser using a pricing service and/or procedures approved by the Directors of
the Fund; (6) certain portfolio securities may be valued by an outside pricing
service approved by the Fund's Directors; and (7) 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 and premiums are amortized over the life of the
respective securities. Interest income is accrued daily.

C. Repurchase Agreements -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated
entities managed by the Investment Adviser, may transfer uninvested cash
balances into one or more joint repurchase agreement accounts. These balances
are invested in one or more repurchase agreements and are collateralized by
cash, U.S. Treasury or federal agency obligations. The Fund may also invest
directly with institutions in repurchase agreements. The Fund's custodian
receives the collateral, which is marked-to-market daily to determine that the
value of the collateral does not decrease below the repurchase price plus
accrued interest.

D. 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.

E. Foreign Currency Translation and Forward Foreign Currency Contracts -- 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

Morgan Stanley Dividend Growth Securities Inc.
NOTES TO FINANCIAL STATEMENTS - AUGUST 31, 2006 (UNAUDITED) continued

(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 recorded as realized and unrealized gain/loss on foreign
exchange transactions. 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. Forward contracts are valued daily at the
appropriate exchange rates. The resultant unrealized exchange gains and losses
are recorded as unrealized foreign currency gain or loss. 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 Policy -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Accordingly, no federal income tax provision is required.

G. Dividends and Distributions to Shareholders -- Dividends and distributions to
shareholders are recorded on the ex-dividend date.

H. Use of Estimates -- 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.

2. Investment Advisory/Administration Agreements

Pursuant to an Investment Advisory Agreement, the Fund pays the Investment
Adviser an advisory fee, accrued daily and payable monthly, by applying the
following annual rates to the net assets of the Fund determined at the close of
each business day: 0.545% to the portion of the daily net assets not exceeding
$250 million; 0.42% to the portion of the daily net assets exceeding $250
million but not exceeding $1 billion; 0.395% to the portion of the daily net
assets exceeding $1 billion but not exceeding $2 billion; 0.37% to the portion
of the daily net assets exceeding $2 billion but not exceeding $3 billion;
0.345% to the portion of the daily net assets exceeding $3 billion but not
exceeding $4 billion; 0.32% to the portion of the daily net assets exceeding $4
billion but not exceeding $5 billion; 0.295% to the portion of the daily net
assets exceeding $5 billion but not exceeding $6 billion; 0.27% to the portion
of the daily net assets exceeding $6 billion but not exceeding $8 billion;
0.245% to the portion of the daily net assets exceeding $8 billion but not
exceeding $10 billion; 0.22% to the portion of the daily net assets exceeding

Morgan Stanley Dividend Growth Securities Inc.
NOTES TO FINANCIAL STATEMENTS - AUGUST 31, 2006 (UNAUDITED) continued

$10 billion but not exceeding $15 billion; and 0.195% to the portion of the
daily net assets exceeding $15 billion.

Pursuant to an Administration Agreement with Morgan Stanley Services Company
Inc. (the "Administrator"), an affiliate of the Investment Adviser, the Fund
pays an administration fee, accrued daily and payable monthly, by applying the
annual rate of 0.08% to the Fund's daily net assets.

3. Plan of Distribution

Shares of the Fund are distributed by Morgan Stanley Distributors Inc. (the
"Distributor"), an affiliate of the Investment Adviser and Administrator. 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 -- up
to 1.0% of the lesser of: (a) the average daily aggregate gross sales of the
Class B shares since the inception of the Plan on July 2, 1984 (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 Plan's
inception upon which a contingent deferred sales charge has been imposed or
waived; or (b) the average daily net assets of Class B attributable to shares
issued, net of related shares redeemed, since the Plan's inception; 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
Directors will consider at that time the manner in which to treat such expenses.
The Distributor has advised the Fund that there were no such expenses as of
August 31, 2006.

For the six months ended August 31, 2006, the distribution fee was accrued for
Class B shares at an annual rate of 0.12%. At August 31, 2006, included in the
Statement of Assets and Liabilities is a receivable from an affiliate, which
represents payments due from the Distributor to the Fund.

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 Financial Advisors and other

Morgan Stanley Dividend Growth Securities Inc.
NOTES TO FINANCIAL STATEMENTS - AUGUST 31, 2006 (UNAUDITED) continued

authorized financial representatives at the time of sale may be reimbursed in
the subsequent calendar year. For the six months ended August 31, 2006, 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 six months ended August 31,
2006, it received contingent deferred sales charges from certain redemptions of
the Fund's Class A shares, Class B shares and Class C shares of $1,798, $930,588
and $3,212, respectively and received $150,971 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 the proceeds from sales of portfolio securities,
excluding short-term investments, for the six months ended August 31, 2006
aggregated $2,456,209,698 and $3,539,654,263, respectively. Included in the
aforementioned transactions are purchases and sales with other Morgan Stanley
funds of $7,642,909 and $1,268,224, respectively, including net realized losses
of $331,776.

For the six months ended August 31, 2006, the Fund incurred brokerage
commissions of $1,040,616, with Morgan Stanley & Co., Inc. an affiliate of the
Investment Adviser, Administrator and Distributor, for portfolio transactions
executed on behalf the Fund.

At August 31, 2006, the Fund's receivable for investments sold included
unsettled trades with Morgan Stanley & Co., Inc. in the amount of $23,180,694.

Morgan Stanley Trust, an affiliate of the Investment Adviser, Administrator and
Distributor, is the Fund's transfer agent.

The Fund has an unfunded noncontributory defined benefit pension plan covering
certain independent Directors of the Fund who will have served as independent
Directors for at least five years at the time of retirement. Benefits under this
plan are based on factors which include years of service and compensation. The
Directors voted to close the plan to new participants and eliminate the future
benefits growth due to increases to compensation after July 31, 2003. Aggregate
pension costs for the six months ended August 31, 2006 included in Directors'
fees and expenses in the Statement of Operations amounted to $3,652. At August
31, 2006, the Fund had an accrued pension liability of $64,698 which is included
in accrued expenses in the Statement of Assets and Liabilities.

The Fund has an unfunded Deferred Compensation Plan (the "Compensation Plan")
which allows each independent Director to defer payment of all, or a portion, of
the fees they receive for serving on the Board of Directors. Each eligible
Director generally may elect to have their deferred amounts

Morgan Stanley Dividend Growth Securities Inc.
NOTES TO FINANCIAL STATEMENTS - AUGUST 31, 2006 (UNAUDITED) continued

credited with a return equal to the total return on one or more of the Morgan
Stanley funds that are offered as investment options under the Compensation
Plan. Appreciation/depreciation and distributions received from these
investments are recorded with an offsetting increase/decrease in the deferred
compensation obligation and do not affect the net asset value of the Fund.

5. Capital Stock

Transactions in capital stock were as follows:

<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
AUGUST 31, 2006 FEBRUARY 28, 2006
--------------------------- ------------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ------------ ---------------

CLASS A SHARES
Sold...................................... 285,315 $ 9,062,325 566,468 $ 19,981,846
Conversion from Class B................... 3,291,256 105,886,505 107,440,399 3,807,280,355
Reinvestment of dividends and
distributions........................... 16,878,579 457,978,710 14,538,329 495,299,467
Redeemed.................................. (15,571,272) (483,491,187) (23,311,113) (821,863,955)
----------- ------------- ------------ ---------------
Net increase - Class A.................... 4,883,878 89,436,353 99,234,083 3,500,697,713
----------- ------------- ------------ ---------------
CLASS B SHARES
Sold...................................... 323,434 10,208,397 1,467,494 52,607,838
Conversion to Class A..................... (3,277,154) (105,886,505) (107,074,066) (3,807,280,355)
Reinvestment of dividends and
distributions........................... 5,893,457 160,803,449 7,061,689 242,807,508
Redeemed.................................. (6,346,654) (199,020,269) (19,621,838) (704,136,337)
----------- ------------- ------------ ---------------
Net decrease - Class B.................... (3,406,917) (133,894,928) (118,166,721) (4,216,001,346)
----------- ------------- ------------ ---------------
CLASS C SHARES
Sold...................................... 61,474 1,948,903 140,678 4,992,089
Reinvestment of dividends and
distributions........................... 403,499 10,906,548 366,693 12,483,307
Redeemed.................................. (372,791) (11,642,217) (872,348) (30,924,586)
----------- ------------- ------------ ---------------
Net increase (decrease) - Class C......... 92,182 1,213,234 (364,977) (13,449,190)
----------- ------------- ------------ ---------------
CLASS D SHARES
Sold...................................... 521,029 17,006,869 1,857,720 66,131,435
Reinvestment of dividends and
distributions........................... 2,564,054 69,687,035 2,322,525 79,311,068
Redeemed.................................. (8,766,083) (247,217,648) (4,763,607) (168,846,214)
----------- ------------- ------------ ---------------
Net decrease - Class D.................... (5,681,000) (160,523,744) (583,362) (23,403,711)
----------- ------------- ------------ ---------------
Net decrease in Fund...................... (4,111,857) $(203,769,085) (19,880,977) $ (752,156,534)
=========== ============= ============ ===============
</Table>

6. Federal Income Tax Status

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

Morgan Stanley Dividend Growth Securities Inc.
NOTES TO FINANCIAL STATEMENTS - AUGUST 31, 2006 (UNAUDITED) continued

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.

As of February 28, 2006, the Fund had a net capital loss carryforward of
$29,608,600 of which $24,792,661 will expire on February 28, 2010 and $4,815,939
will expire on February 28, 2011 to offset future capital gains to the extent
provided by regulations.

As part of the Fund's acquisition of the assets of Morgan Stanley Equity Fund
("Equity"), the Fund obtained a net capital loss carryforward of $120,845,930
from Equity. Utilization of this carryforward is subject to limitations imposed
by the Internal Revenue Code and Treasury Regulations, reducing the total
carryforward available.

As of February 28, 2006, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales.

7. Expense Offset

The expense offset represents a reduction of the transfer agent fees and
expenses for earnings on cash balances maintained by the Fund.

8. Purposes of and Risks Relating to Certain Financial Instruments

The Fund may enter into forward contracts for many purposes, including 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.

9. Legal Matters

The Investment Adviser, certain affiliates of the Investment Adviser, certain
officers of such affiliates and certain investment companies advised by the
Investment Adviser or its affiliates, including the Fund, were named as
defendants in a consolidated class action. This consolidated action also named
as defendants certain individual Trustees and Directors of the Morgan Stanley
funds. The consolidated amended complaint, filed in the United States District
Court for the Southern District of New York on April 16, 2004, generally alleged
that defendants, including the Fund, violated their

Morgan Stanley Dividend Growth Securities Inc.
NOTES TO FINANCIAL STATEMENTS - AUGUST 31, 2006 (UNAUDITED) continued

statutory disclosure obligations and fiduciary duties by failing properly to
disclose (i) that the Investment Adviser and certain affiliates of the
Investment Adviser allegedly offered economic incentives to brokers and others
to recommend the funds advised by the Investment Adviser or its affiliates to
investors rather than funds managed by other companies, and (ii) that the funds
advised by the Investment Adviser or its affiliates, including the Fund,
allegedly paid excessive commissions to brokers in return for their alleged
efforts to recommend these funds to investors. The complaint sought, among other
things, unspecified compensatory damages, rescissionary damages, fees and costs.
On July 2, 2004, defendants moved to dismiss the action. On March 9, 2005,
plaintiffs filed a Motion for Leave to File a Supplemental Pleading that would,
among other things, expand the allegations and alleged class. On April 14, 2006,
the Court granted defendants' motion to dismiss in its entirety, with prejudice.
Additionally, plaintiffs' Motion for Leave to File a Supplemental Pleading was
denied. The time for plaintiffs to appeal the orders granting defendants' motion
to dismiss and denying plaintiffs' motion for supplemental pleading has expired.
This case is now concluded.

10. New Accounting Pronouncements

In July 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation 48, Accounting for Uncertainty in Income Taxes -- an
interpretation of FASB Statement 109 (FIN 48). FIN 48 clarifies the accounting
for income taxes by prescribing the minimum recognition threshold a tax position
must meet before being recognized in the financial statements. FIN 48 is
effective for fiscal years beginning after December 15, 2006. The Fund will
adopt FIN 48 during 2007 and the impact to the Fund's financial statements, if
any, is currently being assessed.

In addition, in September 2006, Statement of Financial Accounting Standards No.
157, Fair Value Measurements (SFAS 157), was issued and is effective for fiscal
years beginning after November 15, 2007. SFAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. Management is currently evaluating the impact the
adoption of SFAS 157 will have on the Fund's financial statement disclosures.

Morgan Stanley Dividend Growth Securities Inc.
FINANCIAL HIGHLIGHTS

Selected ratios and per share data for a share of capital stock outstanding
throughout each period:

<Table>
<Caption>
FOR THE SIX FOR THE YEAR ENDED FEBRUARY 28,
MONTHS ENDED -------------------------------------------
AUGUST 31, 2006 2006 2005 2004* 2003 2002
--------------- ------ ------ ------ ------- ------
(unaudited)

Class A Shares:
Selected Per Share Data:

Net asset value, beginning of period................ $33.51 $37.21 $42.01 $34.01 $ 46.44 $52.54
------ ------ ------ ------ ------- ------

Income (loss) from investment operations:
Net investment income++......................... 0.18 0.39 0.54 0.61 0.68 0.71
Net realized and unrealized gain (loss)......... 0.07 1.69 2.08 11.62 (11.41) (3.51)
------ ------ ------ ------ ------- ------

Total income (loss) from investment operations...... 0.25 2.08 2.62 12.23 (10.73) (2.80)
------ ------ ------ ------ ------- ------

Less dividends and distributions from:
Net investment income........................... (0.21) (0.47) (0.52) (0.65) (0.72) (0.70)
Net realized gain............................... (5.03) (5.31) (6.90) (3.58) (0.98) (2.60)
------ ------ ------ ------ ------- ------

Total dividends and distributions................... (5.24) (5.78) (7.42) (4.23) (1.70) (3.30)
------ ------ ------ ------ ------- ------

Net asset value, end of period...................... $28.52 $33.51 $37.21 $42.01 $ 34.01 $46.44
====== ====== ====== ====== ======= ======

Total Return+....................................... 1.59%(1) 5.94% 6.98% 37.26% (23.66)% (5.35)%

Ratios to Average Net Assets(3):
Total expenses (before expense offset).............. 0.87%(2) 0.85% 0.80% 0.80% 0.77% 0.73%

Net investment income............................... 1.14%(2) 1.05% 1.41% 1.56% 1.69% 1.46%

Supplemental Data:
Net assets, end of period, in millions.............. $3,043 $3,412 $96 $126 $104 $145

Portfolio turnover rate............................. 51%(1) 44% 38% 34% 7% 0%
</Table>

- ---------------------

<Table>

* Year ended February 29.
++ 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.
</Table>

See Notes to Financial Statements
27

Morgan Stanley Dividend Growth Securities Inc.
FINANCIAL HIGHLIGHTS continued

Class B Shares:
Selected Per Share Data:
Net asset value, beginning of period................ $33.65 $37.34 $42.08 $34.04 $ 46.46 $52.54
------ ------ ------ ------ ------- ------
Income (loss) from investment operations:
Net investment income++......................... 0.20 0.39 0.57 0.43 0.37 0.34
Net realized and unrealized gain (loss)......... 0.07 1.72 2.09 11.64 (11.41) (3.50)
------ ------ ------ ------ ------- ------
Total income (loss) from investment operations...... 0.27 2.11 2.66 12.07 (11.04) (3.16)
------ ------ ------ ------ ------- ------
Less dividends and distributions from:
Net investment income........................... (0.23) (0.49) (0.50) (0.45) (0.40) (0.32)
Net realized gain............................... (5.03) (5.31) (6.90) (3.58) (0.98) (2.60)
------ ------ ------ ------ ------- ------
Total dividends and distributions................... (5.26) (5.80) (7.40) (4.03) (1.38) (2.92)
------ ------ ------ ------ ------- ------
Net asset value, end of period...................... $28.66 $33.65 $37.34 $42.08 $ 34.04 $46.46
====== ====== ====== ====== ======= ======
Total Return+....................................... 1.64%(1) 6.03% 7.03% 36.62% (24.27)% (6.06)%
Ratios to Average Net Assets(3):
Total expenses (before expense offset).............. 0.74%(2) 0.75% 0.75%(4) 1.28%(4) 1.54% 1.49%
Net investment income............................... 1.27%(2) 1.15% 1.47%(4) 1.08%(4) 0.92% 0.70%
Supplemental Data:
Net assets, end of period, in millions.............. $1,027 $1,320 $5,877 $7,040 $6,020 $9,865
Portfolio turnover rate............................. 51%(1) 44% 38% 34% 7% 0%
</Table>

- ---------------------

<Table>

<Table>
<Caption>
EXPENSE NET INVESTMENT
PERIOD ENDED RATIO INCOME RATIO
------------ ------- --------------

February 28, 2005 0.85% 1.37%
February 29, 2004 1.56 0.80
</Table>

See Notes to Financial Statements
28

Morgan Stanley Dividend Growth Securities Inc.
FINANCIAL HIGHLIGHTS continued

Class C Shares:
Selected Per Share Data:

Net asset value, beginning of period................ $33.42 $37.11 $41.89 $33.92 $ 46.32 $52.44
------ ------ ------ ------ ------- ------

Income (loss) from investment operations:
Net investment income++......................... 0.06 0.11 0.27 0.31 0.37 0.35
Net realized and unrealized gain (loss)......... 0.07 1.71 2.07 11.60 (11.38) (3.49)
------ ------ ------ ------ ------- ------

Total income (loss) from investment operations...... 0.13 1.82 2.34 11.91 (11.01) (3.14)
------ ------ ------ ------ ------- ------

Less dividends and distributions from:
Net investment income........................... (0.09) (0.20) (0.22) (0.36) (0.41) (0.38)
Net realized gain............................... (5.03) (5.31) (6.90) (3.58) (0.98) (2.60)
------ ------ ------ ------ ------- ------

Total dividends and distributions................... (5.12) (5.51) (7.12) (3.94) (1.39) (2.98)
------ ------ ------ ------ ------- ------

Net asset value, end of period...................... $28.43 $33.42 $37.11 $41.89 $ 33.92 $46.32
====== ====== ====== ====== ======= ======

Total Return+....................................... 1.18%(1) 5.21% 6.15% 36.25% (24.26)% (6.05)%

Ratios to Average Net Assets(3):
Total expenses (before expense offset).............. 1.62%(2) 1.59% 1.52% 1.56% 1.54% 1.48%

Net investment income............................... 0.39%(2) 0.31% 0.70% 0.80% 0.92% 0.71%

Supplemental Data:
Net assets, end of period, in millions.............. $71 $80 $103 $118 $83 $125

Portfolio turnover rate............................. 51%(1) 44% 38% 34% 7% 0%
</Table>

- ---------------------

<Table>

See Notes to Financial Statements
29

Morgan Stanley Dividend Growth Securities Inc.
FINANCIAL HIGHLIGHTS continued

Class D Shares:
Selected Per Share Data:

Net asset value, beginning of period................ $33.54 $37.23 $42.04 $34.03 $ 46.47 $52.59
------ ------ ------ ------ ------- ------

Income (loss) from investment operations:
Net investment income++......................... 0.22 0.46 0.65 0.70 0.77 0.83
Net realized and unrealized gain (loss)......... 0.07 1.71 2.06 11.63 (11.41) (3.53)
------ ------ ------ ------ ------- ------

Total income (loss) from investment operations...... 0.29 2.17 2.71 12.33 (10.64) (2.70)
------ ------ ------ ------ ------- ------

Less dividends and distributions from:
Net investment income........................... (0.25) (0.55) (0.62) (0.74) (0.82) (0.82)
Net realized gain............................... (5.03) (5.31) (6.90) (3.58) (0.98) (2.60)
------ ------ ------ ------ ------- ------

Total dividends and distributions................... (5.28) (5.86) (7.52) (4.32) (1.80) (3.42)
------ ------ ------ ------ ------- ------

Net asset value, end of period...................... $28.55 $33.54 $37.23 $42.04 $ 34.03 $46.47
====== ====== ====== ====== ======= ======

Total Return+....................................... 1.72%(1) 6.22% 7.22% 37.58% (23.50)% (5.10)%

Ratios to Average Net Assets(3):
Total expenses (before expense offset).............. 0.62%(2) 0.60% 0.56% 0.56% 0.54% 0.49%

Net investment income............................... 1.39%(2) 1.30% 1.66% 1.80% 1.92% 1.70%

Supplemental Data:
Net assets, end of period, in millions.............. $273 $511 $589 $588 $376 $480

Portfolio turnover rate............................. 51%(1) 44% 38% 34% 7% 0%
</Table>

- ---------------------

<Table>

* Year ended February 29.
++ 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.
</Table>

See Notes to Financial Statements
30

Morgan Stanley Dividend Growth Securities Inc.
RESULTS OF SPECIAL SHAREHOLDER MEETING

On August 1, 2006, a Special Meeting of Shareholders of the Fund was scheduled
in order to vote on the following proposals: (i) to elect Directors; (ii) to
eliminate certain fundamental investment restrictions; (iii) to modify certain
fundamental investment restrictions; and (iv) to reclassify certain fundamental
policies as non-fundamental policies. The proposals failed to obtain the quorum
necessary in order to hold the meeting, and, therefore, the meeting was
adjourned until August 23, 2006 and later adjourned to September 27, 2006, to
permit further solicitation of proxies.

DIRECTORS

Frank L. Bowman
Michael Bozic
Kathleen A. Dennis
Edwin J. Garn
Wayne E. Hedien
James F. Higgins
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael F. Klein
Michael E. Nugent
W. Allen Reed
Fergus Reid

OFFICERS

Michael E. Nugent
Chairman of the Board

Ronald E. Robison
President and Principal Executive Officer

J. David Germany
Vice President

Dennis F. Shea
Vice President

Barry Fink
Vice President

Amy R. Doberman
Vice President

Carsten Otto
Chief Compliance Officer

Stefanie V. Chang Yu
Vice President

Francis J. Smith
Treasurer and Chief Financial Officer

Mary E. Mullin
Secretary

TRANSFER AGENT

Morgan Stanley Trust
Harborside Financial Center, Plaza Two
Jersey City, New Jersey 07311

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281

INVESTMENT ADVISER

Morgan Stanley Investment Advisors Inc.
1221 Avenue of the Americas
New York, New York 10020

The financial statements included herein have been taken from the records of the
Fund without examination by the independent auditors and accordingly they do not
express an opinion thereon.

This report is submitted for the general information of the shareholders of the
Fund. For more detailed information about the Fund, its fees and expenses and
other pertinent information, please read its Prospectus. The Fund's Statement of
Additional Information contains additional information about the Fund, including
its directors. It is available, without charge, by calling (800) 869-NEWS.

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.

Investments and services offered through Morgan Stanley DW Inc., member SIPC.
Morgan Stanley Distributors Inc., member NASD.

[MORGAN STANLEY LOGO]

MORGAN STANLEY FUNDS

Morgan Stanley
Dividend Growth Securities

Semiannual Report
August 31, 2006

[MORGAN STANLEY LOGO]

DIVSAR 37910RPT RA06-00927P-408/06

Item 2. Code of Ethics.

Not applicable for semiannual reports.

Item 3. Audit Committee Financial Expert.

Not applicable for semiannual reports.

Item 4. Principal Accountant Fees and Services

Not applicable for semiannual reports.

Item 5. Audit Committee of Listed Registrants.

Not applicable for semiannual reports.

Item 6.

Refer to Item 1.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.

Not applicable for semiannual reports.

Item 8. Portfolio Managers of Closed-End Management Investment Companies

Applicable only to reports filed by closed-end funds.

Item 9. Closed-End Fund Repurchases

Applicable to reports filed by closed-end funds.

Item 10. Submission of Matters to a Vote of Security Holders

Not applicable.

Item 11. Controls and Procedures

(a) The Fund's principal executive officer and principal financial officer have
concluded that the Fund's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Fund in this Form N-CSR
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.

(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the second fiscal quarter of the period covered
by this report that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting.

Item 12. Exhibits

(a) Code of Ethics - Not applicable for semiannual reports.

(b) A separate certification for each principal executive officer and principal
financial officer of the registrant are attached hereto as part of EX-99.CERT.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

Morgan Stanley Dividend Growth
Securities Inc.

/s/ Ronald E. Robison
- -------------------------------------
Ronald E. Robison
Principal Executive Officer
October 19, 2006

Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.

/s/ Ronald E. Robison
- -------------------------------------
Ronald E. Robison
Principal Executive Officer
October 19, 2006

/s/ Francis Smith
- -------------------------------------
Francis Smith
Principal Financial Officer
October 19, 2006