<PAGE>
DEAN WITTER DIVIDEND GROWTH SECURITIES INC. TWO WORLD TRADE CENTER, NEW YORK,
NEW YORK 10048
LETTER TO THE SHAREHOLDERS FEBRUARY 28, 1997
DEAR SHAREHOLDER:
During the past twelve months, interest rates advanced in a generally volatile
manner, inflation remained low and reasonable, corporate profits continued to
increase and the dollar continued to strengthen against other major currencies.
These factors combined to provide an environment for common stock prices to
advance.
PERFORMANCE AND PORTFOLIO
For the fiscal year ended February 28, 1997, Dean Witter Dividend Growth
Securities Inc. posted a total return of 21.37 percent versus 21.78 percent for
the Lipper Growth and Income Funds Index and 26.18 percent for the Standard &
Poor's 500 Composite Stock Price Index (S&P 500). The accompanying chart
illustrates the performance of the Fund versus that of similar hypothetical
investments in the Lipper Growth and Income Funds Index and the S&P 500.
While the Fund's performance was competitive among its peers, the Fund did
underperform the S&P 500. We believe that this is largely because of the impact
of rising rates on interest-rate sensitive issues held by the Fund such as U.S.
government bonds and electric utility common stocks. However, these securities
are instrumental in meeting one of the Fund's primary investment objectives,
that of providing reasonable current income, and we remain strongly committed to
this important goal.
During the Fund's fiscal year we sold five portfolio holdings: Grace (W.R.) &
Co., Conrail, Inc., 360 DEG. Communications (a spin-off of Sprint Corp.),
Payless Shoesource Inc. (a spin-off of May Department Stores Co.) and Imation (a
spin-off of Minnesota Mining & Manufacturing Co.). Following a series of
corporate restructuring steps, W.R. Grace shares appeared fully valued and were
therefore sold. Merger proposals made to Conrail Inc. resulted in a sharp price
advance in its shares whereupon we sold the shares at a significant profit. We
sold the latter three issues, which were received as spin-offs, because they
failed to meet the Fund's screening criteria.
<PAGE>
DEAN WITTER DIVIDEND GROWTH SECURITIES INC.
LETTER TO THE SHAREHOLDERS FEBRUARY 28, 1997, CONTINUED
We initiated nine new portfolio positions because they were attractive based on
the Fund's screening criteria. These new holdings are USX - Marathon Group,
International Paper Co., GPU, Inc., Dana Corp., Johnson Controls, Inc., Chrysler
Corp., Kerr - McGee Corp., UST, Inc. and PPG Industries, Inc.. Additionally,
spin-offs by Tenneco, Inc. resulted in the portfolio receiving shares of El Paso
Natural Gas Co. and Newport News Shipbuilding Inc.
LOOKING AHEAD
[GRAPHIC]
We believe that the outlook for the
economy
continues to be favorable. In fact, we
have been convinced for some months
that the economy has been stronger than
many experts have believed and that the
outlook for quality common stocks over
time is very positive. Consequently, we
remain confident and relatively fully
invested. We believe that our continued
use of stringent screening processes to
select securities for the Fund, as well
as to monitor the progress of current
investments, will be crucial in helping
the Fund outperform the market over the
long term.
[GRAPHIC]
We appreciate your support of Dean
Witter Dividend Growth Securities Inc.
and look forward to continuing to serve
your investment needs in the future.
Very truly yours,
[SIGNATURE]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
<PAGE>
DEAN WITTER DIVIDEND GROWTH SECURITIES INC.
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (86.0%)
AEROSPACE (4.2%)
1,800,000 Lockheed Martin Corp............ $ 159,300,000
3,050,000 Raytheon Co..................... 143,731,250
3,100,000 United Technologies Corp........ 233,275,000
-------------------
536,306,250
-------------------
ALUMINUM (2.1%)
2,250,000 Alcan Aluminium Ltd. (Canada)... 80,718,750
2,670,000 Aluminum Co. of America......... 190,237,500
-------------------
270,956,250
-------------------
APPAREL (0.6%)
1,100,000 VF Corp......................... 76,450,000
-------------------
AUTO PARTS (1.4%)
2,000,000 Dana Corp....................... 62,000,000
2,300,000 TRW, Inc........................ 120,462,500
-------------------
182,462,500
-------------------
AUTOMOTIVE (3.0%)
3,600,000 Chrysler Corp................... 121,950,000
3,850,000 Ford Motor Co................... 126,568,750
2,400,000 General Motors Corp............. 138,900,000
-------------------
387,418,750
-------------------
BANKS (5.9%)
2,000,000 BankAmerica Corp................ 227,500,000
2,600,000 KeyCorp......................... 139,100,000
1,500,000 Morgan (J.P.) & Co., Inc........ 157,687,500
3,850,000 NationsBank Corp................ 230,518,750
-------------------
754,806,250
-------------------
BEVERAGES - SOFT DRINKS (3.1%)
3,900,000 Coca Cola Co.................... 237,900,000
5,000,000 PepsiCo Inc..................... 164,375,000
-------------------
402,275,000
-------------------
CHEMICALS (5.0%)
1,575,000 Dow Chemical Co................. 127,575,000
1,950,000 Du Pont (E.I.) de Nemours & Co.,
Inc........................... 209,137,500
5,300,000 Monsanto Co..................... 192,787,500
2,000,000 PPG Industries, Inc............. 112,000,000
-------------------
641,500,000
-------------------
COAL (0.2%)
1,000,000 MAPCO Inc....................... 31,750,000
-------------------
COMPUTERS (1.6%)
1,400,000 International Business Machines
Corp.......................... 201,250,000
-------------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
CONGLOMERATES (2.2%)
1,950,000 Minnesota Mining & Manufacturing
Co............................ $ 179,400,000
480,000 Newport News Shipbuilding
Inc........................... 7,440,000
2,600,000 Tenneco, Inc.................... 102,375,000
-------------------
289,215,000
-------------------
COSMETICS (3.7%)
3,000,000 Avon Products, Inc.............. 174,750,000
2,900,000 Gillette Co..................... 229,462,500
1,675,000 International Flavors &
Fragrances Inc................ 77,678,125
-------------------
481,890,625
-------------------
DRUGS (8.0%)
3,300,000 Abbott Laboratories............. 185,625,000
3,200,000 American Home Products Corp..... 204,800,000
1,675,000 Bristol-Myers Squibb Co......... 218,587,500
2,775,000 Schering-Plough Corp............ 212,634,375
2,800,000 Smithkline Beecham PLC
(ADR) (United Kingdom)........ 207,900,000
-------------------
1,029,546,875
-------------------
ELECTRIC - MAJOR (2.2%)
1,900,000 General Electric Co............. 195,462,500
5,400,000 Westinghouse Electric Corp...... 93,150,000
-------------------
288,612,500
-------------------
ENERGY (0.6%)
1,200,000 Kerr-McGee Corp................. 75,150,000
-------------------
FINANCE (1.6%)
1,000,000 Beneficial Corp................. 69,125,000
1,360,000 Household International, Inc.... 131,750,000
-------------------
200,875,000
-------------------
FINANCIAL - MISCELLANEOUS (1.2%)
3,800,400 Federal National Mortgage
Assoc......................... 152,016,000
-------------------
FOODS (0.8%)
3,000,000 Quaker Oats Company (The)....... 107,625,000
-------------------
HOUSEHOLD APPLIANCES (0.6%)
1,600,000 Whirlpool Corp.................. 80,800,000
-------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER DIVIDEND GROWTH SECURITIES INC.
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1997, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
INSURANCE (2.1%)
1,700,000 Aetna Inc....................... $ 140,887,500
2,350,000 Lincoln National Corp........... 136,593,750
-------------------
277,481,250
-------------------
MACHINERY - AGRICULTURAL (1.4%)
4,150,000 Deere & Co...................... 176,893,750
-------------------
MACHINERY - DIVERSIFIED (0.5%)
800,000 Johnson Controls, Inc........... 67,400,000
-------------------
MANUFACTURING - DIVERSIFIED (1.2%)
2,250,000 Honeywell, Inc.................. 160,031,250
-------------------
METALS & MINING (0.9%)
1,700,000 Phelps Dodge Corp............... 121,550,000
-------------------
NATURAL GAS (2.2%)
2,300,000 Burlington Resources, Inc....... 100,912,500
950,000 El Paso Natural Gas Co.......... 50,943,750
3,050,000 ENRON Corp...................... 121,618,750
800,000 NorAm Energy Corp............... 12,000,000
-------------------
285,475,000
-------------------
OFFICE EQUIPMENT (2.7%)
2,400,000 Pitney Bowes, Inc............... 149,100,000
3,100,000 Xerox Corp...................... 193,750,000
-------------------
342,850,000
-------------------
OIL - DOMESTIC (3.2%)
1,750,000 Amoco Corp...................... 147,875,000
1,000,000 Atlantic Richfield Co........... 125,000,000
5,100,000 USX-Marathon Group.............. 135,787,500
-------------------
408,662,500
-------------------
OIL INTEGRATED - INTERNATIONAL (3.8%)
1,675,000 Exxon Corp...................... 167,290,625
1,300,000 Mobil Corp...................... 159,575,000
975,000 Royal Dutch Petroleum Co. (ADR)
(Netherlands)................. 168,675,000
-------------------
495,540,625
-------------------
PAPER & FOREST PRODUCTS (1.8%)
2,750,000 International Paper Co.......... 114,812,500
2,500,000 Weyerhaeuser Co................. 115,625,000
-------------------
230,437,500
-------------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
PHOTOGRAPHY (1.5%)
2,175,000 Eastman Kodak Co................ $ 194,934,375
-------------------
RAILROADS (1.9%)
1,575,000 Burlington Northern Santa Fe
Corp.......................... 131,118,750
2,500,000 CSX Corp........................ 115,312,500
-------------------
246,431,250
-------------------
RETAIL (1.4%)
4,350,000 Dayton-Hudson Corp.............. 182,700,000
-------------------
RETAIL - DEPARTMENT STORES (0.9%)
2,550,000 May Department Stores Co........ 118,893,750
-------------------
SOAP & HOUSEHOLD PRODUCTS (1.7%)
1,850,000 Procter & Gamble Co............. 222,231,250
-------------------
TELECOMMUNICATIONS (1.0%)
3,550,000 U.S. West, Inc.................. 127,800,000
-------------------
TELEPHONES (3.4%)
1,800,000 Bell Atlantic Corp.............. 124,425,000
3,000,000 GTE Corp........................ 140,250,000
3,700,000 Sprint Corp..................... 168,350,000
-------------------
433,025,000
-------------------
TIRE & RUBBER GOODS (0.9%)
2,300,000 Goodyear Tire & Rubber Co....... 121,325,000
-------------------
TOBACCO (0.9%)
3,600,000 UST, Inc........................ 111,150,000
-------------------
UTILITIES - ELECTRIC (3.9%)
2,425,000 FPL Group, Inc.................. 110,337,500
3,200,000 GPU, Inc........................ 112,000,000
4,500,000 Houston Industries, Inc......... 104,625,000
3,450,000 PG & E Corp..................... 79,350,000
4,100,000 Unicom Corp..................... 91,225,000
-------------------
497,537,500
-------------------
UTILITIES - NATURAL GAS (0.7%)
2,150,000 PanEnergy Corp.................. 91,643,751
-------------------
TOTAL COMMON STOCKS
(IDENTIFIED COST
$5,607,105,045)................. 11,104,899,751
-------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER DIVIDEND GROWTH SECURITIES INC.
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1997, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------------------
<C> <S> <C>
U.S. GOVERNMENT OBLIGATIONS (10.1%)
$ 50,000 U.S. Treasury Bond
8.125% due 08/15/19........... $ 56,751,000
90,000 U.S. Treasury Bond
8.00% due 11/15/21............ 101,232,900
50,000 U.S. Treasury Bond
7.125% due 02/15/23........... 51,160,500
725,000 U.S. Treasury Bond
6.25% due 08/15/23............ 666,253,250
450,000 U.S. Treasury Bond
6.00% due 02/15/26............ 399,879,000
25,000 U.S. Treasury Note
8.00% due 05/15/01............ 26,504,250
-------------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS
(IDENTIFIED COST
$1,356,560,375)................. 1,301,780,900
-------------------
SHORT-TERM INVESTMENTS (3.6%)
COMMERCIAL PAPER (a) (2.0%)
AUTOMOTIVE - FINANCE (0.4%)
48,000 Ford Motor Credit Co. 5.30% due
03/05/97...................... 47,971,733
-------------------
BANKS - COMMERCIAL (1.1%)
60,000 Canadian Imperial Holdings
5.27% due 03/10/97............ 59,920,950
25,000 International Netherland (U.S.)
Funding Corp. 5.25% due
03/27/97...................... 24,905,208
50,000 National Australia Funding (DE)
Inc. 5.25% due 03/13/97....... 49,912,500
-------------------
134,738,658
-------------------
FINANCE - DIVERSIFIED (0.5%)
64,900 General Electric Capital Corp.
5.24% due 03/18/97 to
03/20/97...................... 64,727,793
-------------------
TOTAL COMMERCIAL PAPER
(AMORTIZED COST $247,438,184)... 247,438,184
-------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------------------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES (a) (1.6%)
$ 166,750 Federal Home Loan Banks 5.20% to
5.30% due 03/03/97 to
03/06/97...................... $ 166,668,818
45,000 Federal Home Loan Mortgage Corp.
5.17% due 03/04/97............ 44,980,613
-------------------
TOTAL U.S. GOVERNMENT AGENCIES
(AMORTIZED COST $211,649,431)... 211,649,431
-------------------
REPURCHASE AGREEMENT (0.0%)
174 The Bank of New York 5.25% due
03/03/97 (dated 02/28/97;
proceeds $173,706;
collateralized by $180,735
U.S. Treasury Note 6.25% due
02/15/07 valued at $177,103)
(Identified Cost $173,630).... 173,630
-------------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST
$459,261,245)(B)................ 459,261,245
-------------------
TOTAL INVESTMENTS
(IDENTIFIED COST
$7,422,926,665)........... 99.7% 12,865,941,896
OTHER ASSETS IN EXCESS OF
LIABILITIES............... 0.3 40,836,839
----- --------------
NET ASSETS................ 100.0% $12,906,778,735
----- --------------
----- --------------
<FN>
- ---------------------
ADR American Depository Receipt.
(a) Securities were purchased on a discount basis. The interest rates shown
have been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $5,560,462,329 and
the aggregate gross unrealized depreciation is $117,447,098, resulting in
net unrealized appreciation of $5,443,015,231.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER DIVIDEND GROWTH SECURITIES INC.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1997
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $7,422,926,665).......................... $12,865,941,896
Receivable for:
Dividends............................................... 39,023,358
Capital stock sold...................................... 22,887,818
Interest................................................ 5,785,454
Prepaid expenses and other assets........................... 298,800
---------------
TOTAL ASSETS........................................... 12,933,937,326
---------------
LIABILITIES:
Payable for:
Capital stock repurchased............................... 8,265,352
Plan of distribution fee................................ 6,979,049
Investments purchased................................... 6,795,390
Investment management fee............................... 3,740,373
Accrued expenses............................................ 1,378,427
---------------
TOTAL LIABILITIES...................................... 27,158,591
---------------
NET ASSETS:
Paid-in-capital............................................. 7,274,485,939
Net unrealized appreciation................................. 5,443,015,231
Accumulated undistributed net investment income............. 48,981,789
Accumulated undistributed net realized gain................. 140,295,776
---------------
NET ASSETS............................................. $12,906,778,735
---------------
---------------
NET ASSET VALUE PER SHARE,
276,991,826 SHARES OUTSTANDING (500,000,000 SHARES
AUTHORIZED OF $.01 PAR VALUE).............................
$46.60
---------------
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER DIVIDEND GROWTH SECURITIES INC.
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED FEBRUARY 28, 1997
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $1,375,521 foreign withholding tax)....... $ 258,871,991
Interest.................................................... 93,505,631
--------------
TOTAL INCOME........................................... 352,377,622
--------------
EXPENSES
Plan of distribution fee.................................... 81,976,079
Investment management fee................................... 43,410,540
Transfer agent fees and expenses............................ 8,533,374
Registration fees........................................... 505,137
Custodian fees.............................................. 474,288
Shareholder reports and notices............................. 401,497
Professional fees........................................... 66,155
Directors' fees and expenses................................ 21,426
Other....................................................... 75,592
--------------
TOTAL EXPENSES......................................... 135,464,088
--------------
NET INVESTMENT INCOME.................................. 216,913,534
--------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain........................................... 263,776,646
Net change in unrealized appreciation....................... 1,713,084,128
--------------
NET GAIN............................................... 1,976,860,774
--------------
NET INCREASE................................................ $2,193,774,308
--------------
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER DIVIDEND GROWTH SECURITIES INC.
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR
FOR THE YEAR ENDED
ENDED FEBRUARY 29,
FEBRUARY 28, 1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................... $ 216,913,534 $ 180,277,811
Net realized gain........................................... 263,776,646 17,186,743
Net change in unrealized appreciation....................... 1,713,084,128 1,976,893,191
----------------- ----------------
NET INCREASE........................................... 2,193,774,308 2,174,357,745
----------------- ----------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income....................................... (229,873,261) (158,425,268)
Net realized gain........................................... (140,667,573) (21,206,038)
----------------- ----------------
TOTAL.................................................. (370,540,834) (179,631,306)
----------------- ----------------
Net increase from capital stock transactions................ 1,301,439,284 686,811,213
----------------- ----------------
NET INCREASE........................................... 3,124,672,758 2,681,537,652
NET ASSETS:
Beginning of period......................................... 9,782,105,977 7,100,568,325
----------------- ----------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$48,981,789 AND $61,941,516, RESPECTIVELY).............. $ 12,906,778,735 $ 9,782,105,977
----------------- ----------------
----------------- ----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER DIVIDEND GROWTH SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1997
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter 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 seeks to achieve its objective by investing primarily in common stock
of companies with a record of paying dividends and the potential for increasing
dividends. The Fund was incorporated in Maryland on December 22, 1980 and
commenced operations on March 30, 1981.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American or other domestic or foreign stock exchange is valued at its
latest sale price on that exchange prior to the time when assets are valued; if
there were no sales that day, the security is valued at the latest bid price;
(2) all other portfolio securities for which over-the-counter market quotations
are readily available are valued at the latest available bid price prior to the
time of valuation; (3) when market quotations are not readily available,
including circumstances under which it is determined by Dean Witter InterCapital
Inc. (the "Investment Manager") that sale or bid prices are not reflective of a
security's market value, portfolio securities are valued at their fair value as
determined in good faith under procedures established by and under the general
supervision of the Directors (valuation of debt securities for which market
quotations are not readily available may be based upon current market prices of
securities which are comparable in coupon, rating and maturity or an appropriate
matrix utilizing similar factors); and (4) short-term debt securities having a
maturity date of more than sixty days at time of purchase are valued on a
mark-to-market basis until sixty days prior to maturity and thereafter at
amortized cost based on their value on the 61st day. Short-term debt securities
having a maturity date of sixty days or less at the time of purchase are valued
at amortized cost.
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
<PAGE>
DEAN WITTER DIVIDEND GROWTH SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1997, CONTINUED
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. 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.
D. 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.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management fee, accrued daily and payable monthly, by applying the
following annual rates to the net assets of the Fund determined at the close of
each business day: 0.625% to the portion of daily net assets not exceeding $250
million; 0.50% to the portion of daily net assets exceeding $250 million but not
exceeding $1 billion; 0.475% to the portion of daily net assets exceeding $1
billion but not exceeding $2 billion; 0.45% to the portion of daily net assets
exceeding $2 billion but not exceeding $3 billion; 0.425% to the portion of
daily net assets exceeding $3 billion but not exceeding $4 billion; 0.40% to the
portion of daily net assets exceeding $4 billion but not exceeding $5 billion;
0.375% to the portion of daily net assets exceeding $5 billion but not exceeding
$6 billion; 0.35% to the portion of daily net assets exceeding $6 billion but
not exceeding $8 billion; 0.325% to the portion of daily net assets exceeding $8
billion but not exceeding $10 billion. Effective May 31, 1996, the Agreement was
amended to reduce the annual fee to 0.30% to the portion of daily net assets
exceeding $10 billion.
<PAGE>
DEAN WITTER DIVIDEND GROWTH SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1997, CONTINUED
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 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 pursuant
to which the Fund pays the Distributor compensation, accrued daily and payable
monthly, at an annual rate of 1.0% of the lesser of: (a) the average daily
aggregate gross sales of the Fund's shares since the implementation 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 Fund's
shares redeemed since the Fund's implementation of the Plan upon which a
contingent deferred sales charge has been imposed or upon which such charge has
been waived; or (b) the Fund's average daily net assets attributable to shares
issued, net of related shares redeemed, since implementation of the Plan.
Amounts paid under the Plan are paid to the Distributor to compensate it for the
services provided and the expenses borne by it and others in the distribution of
the Fund's shares, including the payment of commissions for sales of the Fund's
shares and incentive compensation to, and expenses of, the account executives of
Dean Witter Reynolds Inc. ("DWR"), an affiliate of the Investment Manager and
Distributor, and other employees and selected broker-dealers who engage in or
support distribution of the Fund's shares or who service shareholder accounts,
including overhead and telephone expenses, printing and distribution of
prospectuses and reports used in connection with the offering of the Fund's
shares to other than current shareholders and preparation, printing and
distribution of sales literature and advertising materials. In addition, the
Distributor may be compensated under the Plan for its opportunity costs in
advancing such amounts, which compensation would be in the form of a carrying
charge on any unreimbursed expenses incurred by the Distributor.
Provided that the Plan continues in effect, any cumulative expenses incurred but
not yet recovered, may be recovered through future distribution fees from the
Fund and contingent deferred sales charges from the Fund's shareholders.
<PAGE>
DEAN WITTER DIVIDEND GROWTH SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1997, CONTINUED
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 $221,826,761
at February 28, 1997.
The Distributor has informed the Fund that for the year ended February 28, 1997,
it received approximately $9,636,000 in contingent deferred sales charges from
certain redemptions of the Fund's shares.
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 28, 1997 aggregated
$1,202,576,556 and $398,476,816, respectively. Included in the aforementioned
are purchases of U.S. Government securities in the amount of $189,179,688.
For the year ended February 28, 1997, the Fund incurred brokerage commissions of
$460,302 with DWR for portfolio transactions executed on behalf of the Fund.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At February 28, 1997, the Fund had
transfer agent fees and expenses payable of approximately $732,000.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all 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 years of service and compensation during the last five years
of service. Aggregate pension costs for the year ended February 28, 1997,
included in Directors' fees and expenses in the Statement of Operations amounted
to $1,286. At February 28, 1997, the Fund had an accrued pension liability of
$55,719 which is included in accrued expenses in the Statement of Assets and
Liabilities.
<PAGE>
DEAN WITTER DIVIDEND GROWTH SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1997, CONTINUED
5. CAPITAL STOCK
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
FEBRUARY 28, 1997 FEBRUARY 29, 1996
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Sold......................................... 57,912,895 $ 2,481,578,268 50,150,972 $ 1,797,441,027
Reinvestment of dividends and
distributions............................... 7,903,656 344,605,406 4,681,316 166,381,580
------------ --------------- ------------ ---------------
65,816,551 2,826,183,674 54,832,288 1,963,822,607
Repurchased.................................. (35,552,864) (1,524,744,390) (35,988,870) (1,277,011,394)
------------ --------------- ------------ ---------------
Net increase................................. 30,263,687 $ 1,301,439,284 18,843,418 $ 686,811,213
------------ --------------- ------------ ---------------
------------ --------------- ------------ ---------------
</TABLE>
<PAGE>
DEAN WITTER 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 YEAR ENDED FEBRUARY 28
------------------------------------------------------------------------------------------
1997 1996* 1995 1994 1993 1992* 1991 1990 1989 1988*
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of
period............. $ 39.65 $ 31.16 $30.86 $28.70 $27.01 $23.50 $22.47 $20.32 $19.28 $20.63
-------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Net investment
income............. 0.81 0.75 0.72 0.68 0.70 0.71 0.79 0.72 0.68 0.67
Net realized and
unrealized gain
(loss)............. 7.55 8.50 0.24 2.16 1.72 3.63 1.04 2.83 1.78 (0.99)
-------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Total from
investment
operations......... 8.36 9.25 0.96 2.84 2.42 4.34 1.83 3.55 2.46 (0.32)
-------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Less dividends and
distributions from:
Net investment
income........... (0.88) (0.67) (0.66) (0.68) (0.69) (0.76) (0.80) (0.76) (0.62) (0.73)
Net realized
gain............. (0.53) (0.09) -- -- (0.04) (0.07) -- (0.64) (0.80) (0.30)
-------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Total dividends and
distributions...... (1.41) (0.76) (0.66) (0.68) (0.73) (0.83) (0.80) (1.40) (1.42) (1.03)
-------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end
of period.......... $ 46.60 $ 39.65 $31.16 $30.86 $28.70 $27.01 $23.50 $22.47 $20.32 $19.28
-------- ------- ------ ------ ------ ------ ------ ------ ------ ------
-------- ------- ------ ------ ------ ------ ------ ------ ------ ------
TOTAL INVESTMENT
RETURN+............. 21.37% 30.01% 3.25% 9.98% 9.13% 18.82% 8.51% 17.85% 13.26% (1.40)%
RATIOS TO AVERAGE
NET ASSETS:
Expenses............ 1.22% 1.31% 1.42% 1.37% 1.40% 1.42% 1.51% 1.41% 1.55% 1.55%
Net investment
income............. 1.95% 2.14% 2.42% 2.31% 2.67% 2.91% 3.62% 3.46% 3.44% 3.47%
SUPPLEMENTAL DATA:
Net assets, end of
period, in
millions........... $ 12,907 $ 9,782 $7,101 $6,712 $5,386 $4,071 $3,015 $2,760 $1,860 $1,824
Portfolio turnover
rate............... 4% 10% 6% 13% 8% 5% 5% 3% 8% 7%
Average commission
rate paid.......... $ 0.0541 -- -- -- -- -- -- -- -- --
<FN>
- ---------------------
* Year ended February 29.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER DIVIDEND GROWTH SECURITIES INC.
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
OF DEAN WITTER DIVIDEND GROWTH SECURITIES INC.
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 Dean Witter Dividend Growth
Securities Inc. (the "Fund") at February 28, 1997, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended and the financial highlights for each of the ten years
in the period then ended, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at February 28, 1997 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
APRIL 11, 1997
1997 FEDERAL TAX NOTICE (UNAUDITED)
During the year ended February 28, 1997, the Fund paid to its
shareholders $0.50 per share from long-term capital gains. For
such period, 100% of the income paid qualified for the dividends
received deduction available to corporations.
<PAGE>
BOARD OF DIRECTORS
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L .Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and General Counsel
Paul D. Vance
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center -- Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital 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
directors, 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.
DEAN WITTER
DIVIDEND GROWTH
SECURITIES
ANNUAL REPORT
FEBRUARY 28, 1997
<PAGE>
DEAN WITTER DIVIDEND GROWTH SECURITIES
GROWTH OF $10,000
<TABLE>
<CAPTION>
DATE TOTAL S&P 500 LIPPER
<S> <C> <C> <C>
February 28, 1987 $10,000 $10,000 $10,000
February 29, 1988 $ 9,860 $ 9,728 $ 9,765
February 28, 1989 $11,167 $10,879 $11,032
February 28, 1990 $13,160 $12,929 $12,473
February 28, 1991 $14,281 $14,825 $13,733
February 29, 1992 $16,968 $17,200 $15,930
February 28, 1993 $18,518 $19,032 $17,689
February 28, 1994 $20,367 $20,612 $19,831
February 28, 1995 $21,029 $22,129 $20,642
February 29, 1996 $27,340 $29,799 $26,825
February 28, 1997 $33,182(3) $37,601 $32,665
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
<S> <C> <C>
21.37(1) 14.35(1) 12.74(1)
16.37(2) 14.12(2) 12.74(2)
</TABLE>
___ Fund ___ S&P 500(4) ___ LIPPER(5)
Past performance is not predictive of future returns.
- ----------
(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 contingent deferred sales charge (CDSC) (1 year-5%,
5 years-2%, 10 years-0). See the Fund's current prospectus for complete
details on fees and sales charges.
(3) Closing value assuming a complete redemption on February 28, 1997.
(4) The Standard & Poor's 500 Composite Stock Price Index (S&P 500) is a broad-
based index, the performance of which is based on the average performance
of 500 widely held common stocks. The performance of the index does not
include any expenses, fees or charges. The Index is unmanaged and should
not be considered an investment.
(5) The Lipper Growth and Income Funds Index is an equally-weighted performance
index of the largest qualifying funds (based on net assets) in the Lipper
Growth and Income Funds objective. The Index, which is adjusted for
capital gains distributions and income dividends, is unmanaged and should
not be considered an investment. There are currently 30 funds represented
in this index.
