<PAGE> 1
MORGAN STANLEY DEAN WITTER DIVIDEND GROWTH SECURITIES INC. Two World Trade
Center
LETTER TO THE SHAREHOLDERS August 31, 1998 New York, New York 10048
DEAR SHAREHOLDER:
The six-month period ended August 31, 1998, has proven to be very volatile in
the markets, both domestically and abroad. After a peak in the domestic markets
in the middle of July, stock prices gave way to concerns about the impact that
problems in foreign economies might have on the United States. At the same time,
however, interest rates continued their decline, inflation remained in check and
the dollar strengthened further.
For the six-month period under review Morgan Stanley Dean Witter Dividend Growth
Securities' Class B shares returned -8.82 percent, compared with -12.18 percent
for the Lipper Growth and Income Funds Index and -8.08 percent for the Standard
& Poor's 500 Composite Stock Price Index (S&P 500). During the same period, the
Fund's Class A, C and D shares posted total returns of -8.62 percent, -8.98
percent and -8.50 percent, respectively. THE PERFORMANCE OF THE FUND'S FOUR
SHARE CLASSES VARIES, BECAUSE EACH CLASS HAS DIFFERENT EXPENSES.
MARKET COMMENTARY
The stock market became increasingly volatile -- particularly in the last six
weeks of the Fund's reporting period -- and corrected sharply from its highs
earlier in the year. Even during this period of heightened volatility, your Fund
again demonstrated its ability to weather market retreats better than the
average fund. Morgan Stanley Dean Witter Dividend Growth Securities handily
outperformed its peers and generally kept pace with the S&P 500 during the past
six months, a period that saw the market decline 18 percent from its mid-July
peak to the end of the Fund's reporting period on August 31. The market's
downturn has been blamed on high valuation levels, the "Asian flu" and financial
problems in Russia, though we believe that Russia's problems pose little danger
to the U.S. economy.
<PAGE> 2
MORGAN STANLEY DEAN WITTER DIVIDEND GROWTH SECURITIES INC.
LETTER TO THE SHAREHOLDERS August 31, 1998, continued
PORTFOLIO STRUCTURE
Several portfolio shifts occurred during the recent six-month period. We sold
our holdings in Beneficial Corp. and reduced dramatically the Fund's exposure to
long-term U.S. Treasury bonds, which were sold during various periods of
significant bond price strength. We added positions in Armstrong World
Industries, Associates First Capital, B. F. Goodrich, Hercules Inc.,
Kimberly-Clark, Ryder and Winn-Dixie Stores.
LOOKING AHEAD
We believe that the stock market's correction will be short-lived and that the
market will go on to new highs. The reason is that the Goldilocks economy -- a
financial environment that is neither too hot nor too cold, allowing for
economic expansion with vanishing inflation -- remains in place and is expected
to continue throughout the next decade.
In addition, we are convinced that the continued use of our stringent screening
process that seeks out high-quality, overlooked stocks as well as monitoring the
progress of current investments will be key to the Fund's strong long-term
performance. The Fund's strength can be attributed in part to its strategy of
investing in dividend-paying common stocks. Stocks that pay dividends offer the
potential for growth of both investment capital and dividend income, the two
components of total return. Historically, investors have been willing to pay for
that dividend flow, making dividend-paying stocks particularly attractive during
periods of market weakness. By investing in these stocks, the Fund offers
investors the opportunity to enjoy upside potential during strong markets and
some downside support during weak ones, a strategy that has served long-term
investors well.
We appreciate your ongoing support of Morgan Stanley Dean Witter Dividend Growth
Securities and look forward to continuing to serve your investment needs in the
future.
Very truly yours,
/s/ CHARLES A. FIUMEFREDDO
CHARLES A. FIUMEFREDDO
Chairman of the Board
2
<PAGE> 3
MORGAN STANLEY DEAN WITTER DIVIDEND GROWTH SECURITIES INC.
PORTFOLIO OF INVESTMENTS August 31, 1998 (unaudited)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (89.1%)
Aerospace (2.4%)
1,800,000 Lockheed Martin Corp. .... $ 157,387,500
3,100,000 United Technologies
Corp. ................... 224,943,750
---------------
382,331,250
---------------
Aluminum (1.4%)
3,500,000 Alcan Aluminum Ltd.
(Canada)................. 66,500,000
2,670,000 Aluminum Co. of America... 159,866,250
---------------
226,366,250
---------------
Apparel (0.5%)
2,225,000 VF Corp. ................. 84,271,875
---------------
Auto Parts - Original Equipment (1.1%)
2,150,000 Dana Corp. ............... 84,253,125
2,100,000 Johnson Controls, Inc. ... 89,906,250
---------------
174,159,375
---------------
Automotive Aftermarket (0.7%)
2,300,000 Goodyear Tire & Rubber
Co. ..................... 112,700,000
---------------
Building Products (0.4%)
1,225,000 Armstrong World
Industries, Inc. ........ 58,800,000
---------------
Construction Ag Equipment/Trucks (1.5%)
2,300,000 Caterpillar Inc. ......... 97,031,250
4,200,000 Deere & Co. .............. 138,337,500
---------------
235,368,750
---------------
Consumer Electric/Appliances (0.6%)
1,800,000 Whirlpool Corp. .......... 89,325,000
---------------
Containers/Packaging (0.5%)
2,450,000 Crown Cork & Seal
Co., Inc. ............... 80,237,500
---------------
Department Stores (1.6%)
2,550,000 May Department Stores
Co. ..................... 143,437,500
2,500,000 Sears, Roebuck & Co. ..... 113,593,750
---------------
257,031,250
---------------
Discount Chains (2.0%)
8,700,000 Dayton-Hudson Corp. ...... 313,200,000
---------------
Diversified Financial Services (0.7%)
1,825,000 Providian Financial
Corp. ................... 117,142,188
---------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
Diversified Manufacturing (3.6%)
3,800,000 General Electric Co. ..... $ 304,000,000
2,250,000 Honeywell, Inc. .......... 140,625,000
1,950,000 Minnesota Mining &
Manufacturing Co. ....... 133,575,000
---------------
578,200,000
---------------
Electric Utilities: Central (1.0%)
4,450,000 Unicom Corp. ............. 158,531,250
---------------
Electric Utilities: East (0.8%)
3,250,000 GPU, Inc. ................ 122,078,125
---------------
Electric Utilities: South (1.9%)
2,425,000 FPL Group, Inc. .......... 161,414,063
4,750,000 Houston Industries,
Inc. .................... 136,859,375
---------------
298,273,438
---------------
Electric Utilities: West (0.7%)
3,600,000 PG & E Corp. ............. 115,650,000
---------------
Electronic Components (0.7%)
3,050,000 AMP, Inc. ................ 108,846,875
---------------
Electronic Data Processing (2.0%)
2,800,000 International Business
Machines Corp. .......... 315,350,000
---------------
Finance Companies (2.9%)
1,550,000 Associates First Capital
Corp. (Class A).......... 91,643,750
3,800,400 Federal National Mortgage
Assoc. .................. 215,910,225
4,080,000 Household
International, Inc. ..... 150,705,000
---------------
458,258,975
---------------
Food Chains (1.4%)
2,850,000 Albertson's Inc. ......... 144,103,125
2,300,000 Winn-Dixie Stores,
Inc. .................... 85,675,000
---------------
229,778,125
---------------
Food Distributors (0.5%)
3,600,000 Supervalu, Inc. .......... 73,125,000
---------------
Forest Products (0.6%)
2,650,000 Weyerhaeuser Co. ......... 99,540,625
---------------
Integrated Oil Companies (5.5%)
3,500,000 Amoco Corp. .............. 158,593,750
2,000,000 Atlantic Richfield Co. ... 116,000,000
3,350,000 Exxon Corp. .............. 219,215,625
1,575,000 Kerr-McGee Corp. ......... 60,834,375
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
3
<PAGE> 4
MORGAN STANLEY DEAN WITTER DIVIDEND GROWTH SECURITIES INC.
PORTFOLIO OF INVESTMENTS August 31, 1998 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
2,600,000 Mobil Corp. .............. $ 179,725,000
3,900,000 Royal Dutch Petroleum Co.
(ADR) (Netherlands)...... 155,025,000
---------------
889,393,750
---------------
Leasing (0.3%)
2,250,000 Ryder System, Inc. ....... 53,015,625
---------------
Life Insurance (1.7%)
1,563,900 Aegon N.V. (ARS)
(Netherlands)............ 133,713,450
2,550,000 Jefferson-Pilot Corp. .... 144,712,500
---------------
278,425,950
---------------
Major Banks (4.7%)
4,000,000 BankAmerica Corp. ........ 256,250,000
5,200,000 KeyCorp................... 132,600,000
1,500,000 Morgan (J.P.) & Co.,
Inc. .................... 139,500,000
3,850,000 NationsBank Corp. ........ 219,450,000
---------------
747,800,000
---------------
Major Chemicals (4.2%)
1,575,000 Dow Chemical Co. ......... 122,850,000
4,000,000 Du Pont (E.I.) De Nemours
& Co., Inc. ............. 230,750,000
2,250,000 Hercules, Inc. ........... 57,515,625
4,650,000 Monsanto Co. ............. 254,296,875
---------------
665,412,500
---------------
Major Pharmaceuticals (10.3%)
6,600,000 Abbott Laboratories....... 254,100,000
6,450,000 American Home Products
Corp. ................... 323,306,250
3,350,000 Bristol-Myers Squibb
Co. ..................... 327,881,250
5,100,000 Schering-Plough Corp. .... 438,599,999
5,600,000 Smithkline Beecham PLC
(ADR) (United Kingdom)... 318,500,000
---------------
1,662,387,499
---------------
Major Telecommunications (4.7%)
3,600,000 Bell Atlantic Corp. ...... 158,850,000
3,100,000 GTE Corp. ................ 155,000,000
3,700,000 Sprint Corp. ............. 248,131,250
3,550,000 U.S. West, Inc. .......... 184,600,000
---------------
746,581,250
---------------
Major Vehicles (2.9%)
3,600,000 Chrysler Corp. ........... 160,650,000
3,850,000 Ford Motor Co. ........... 169,400,000
2,400,000 General Motors Corp. ..... 138,600,000
---------------
468,650,000
---------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
Managed Health Care (0.7%)
1,850,000 Aetna Inc. ............... $ 111,346,875
---------------
Military/Government/Technical (0.9%)
3,050,000 Raytheon Co. (Class B).... 139,156,250
---------------
Multi-Line Insurance (1.3%)
2,350,000 Lincoln National Corp. ... 202,100,000
---------------
Multi-Sector Companies (0.6%)
3,050,000 Tenneco, Inc. ............ 96,646,875
---------------
Natural Gas - Distribution (0.6%)
2,100,000 Consolidated Natural Gas
Co.... 92,006,250
---------------
Office Equipment & Supplies (3.2%)
4,800,000 Pitney Bowes, Inc. ....... 238,200,000
3,100,000 Xerox Corp. .............. 272,218,750
---------------
510,418,750
---------------
Oil/Gas Transmission (1.7%)
2,700,000 El Paso Energy Co. ....... 66,993,750
3,200,000 Enron Corp. .............. 135,400,000
2,800,000 Sonat, Inc. .............. 75,775,000
---------------
278,168,750
---------------
Oil & Gas Production (0.6%)
3,050,000 Burlington Resources,
Inc. .................... 90,165,625
---------------
Oil Refining/Marketing (0.8%)
5,100,000 USX-Marathon Group........ 132,600,000
---------------
Other Metals/Minerals (0.5%)
1,825,000 Phelps Dodge Corp. ....... 81,668,750
---------------
Packaged Foods (1.6%)
3,000,000 Quaker Oats Company
(The).................... 159,375,000
2,300,000 TRW Inc. ................. 98,612,500
---------------
257,987,500
---------------
Packaged Goods/Cosmetics (5.3%)
3,000,000 Avon Products, Inc. ...... 188,625,000
5,800,000 Gillette Co. ............. 238,525,000
1,750,000 International Flavors &
Fragrances, Inc. ........ 67,812,500
2,550,000 Kimberly-Clark Corp. ..... 97,218,750
3,650,000 Procter & Gamble Co. ..... 279,225,000
---------------
871,406,250
---------------
Paints/Coatings (0.7%)
2,125,000 PPG Industries, Inc. ..... 107,976,563
---------------
Paper (0.6%)
2,750,000 International Paper
Co. ..................... 101,750,000
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE> 5
MORGAN STANLEY DEAN WITTER DIVIDEND GROWTH SECURITIES INC.
PORTFOLIO OF INVESTMENTS August 31, 1998 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
Photographic Products (1.1%)
2,250,000 Eastman Kodak Co. ........ $ 175,781,250
---------------
Railroads (1.5%)
1,600,000 Burlington Northern Santa
Fe Corp. ................ 148,900,000
2,550,000 CSX Corp. ................ 96,262,500
---------------
245,162,500
---------------
Soft Drinks (2.5%)
3,900,000 Coca Cola Co. ............ 253,987,500
5,000,000 PepsiCo Inc. ............. 138,437,500
---------------
392,425,000
---------------
Specialty Chemicals (0.4%)
2,150,000 Goodrich (B.F.) Co.
(The).................... 58,184,375
---------------
Tobacco (0.7%)
4,100,000 UST, Inc. ................ 107,112,500
---------------
TOTAL COMMON STOCKS
(Identified Cost
$7,418,216,038)........... 14,252,296,488
---------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ---------
<C> <S> <C>
U.S. GOVERNMENT OBLIGATIONS (7.2%)
$250,000 U.S. Treasury Bond
6.00% due 02/15/26....... 271,385,000
250,000 U.S. Treasury Bond
6.25% due 08/15/23....... 277,965,000
100,000 U.S. Treasury Note
5.50% due 02/29/00....... 100,732,000
500,000 U.S. Treasury Note
5.625% due 04/30/00...... 505,415,000
---------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Identified Cost
$1,085,486,343).......... 1,155,497,000
---------------
SHORT-TERM INVESTMENTS (3.6%)
COMMERCIAL PAPER (a) (1.7%)
Automotive - Finance (1.2%)
50,000 Ford Motor Credit Co.
5.51% due 09/16/98....... 49,885,208
150,000 General Motors Acceptance
Corp. 5.54% due
09/08/98................. 149,838,417
---------------
199,723,625
---------------
Office Equipment (0.5%)
$ 75,000 Pitney Bowes Credit Co.
5.51% due 09/16/98....... 74,827,813
---------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -------------------------------------------------------
<C> <S> <C>
TOTAL COMMERCIAL PAPER
(Amortized Cost
$274,551,438)............. $ 274,551,438
---------------
U.S. GOVERNMENT AGENCIES (a) (1.9%)
306,000 Federal Home Loan Mortgage
Corp. 5.40-5.70% due
09/01/98-09/03/98
(Amortized Cost
$305,969,666)............ 305,969,666
---------------
1,171 REPURCHASE AGREEMENT (0.0%)
The Bank of New York
5.75% due 09/01/98
(dated 08/31/98; proceeds
$1,171,462) (b) (Identified
Cost $1,171,275)......... 1,171,275
---------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost
$581,692,379)............ 581,692,379
---------------
15,989,485,867
TOTAL INVESTMENTS
(Identified Cost $9,085,394,760) (c)
99.9%
OTHER ASSETS IN EXCESS OF
LIABILITIES..................... 0.1 17,797,147
---- ---------------
NET ASSETS................... 100.0% $16,007,283,014
====== ===============
</TABLE>
- ---------------------
<TABLE>
<C> <S>
ADR American Depository Receipt.
ARS American Registered Share.
(a) Securities were purchased on a discount basis.
The interest rates shown have been adjusted to
reflect a money market equivalent yield.
(b) Collateralized by $584,234 U.S. Treasury Bond
9.125% due 05/15/98 valued at $854,108 and
$319,977 U.S. Treasury Note 5.875% due 11/15/05
valued at $340,593.
(c) The aggregate cost for federal income tax
purposes approximates identified cost. The
aggregate gross unrealized appreciation is
$7,367,599,472 and the aggregate gross unrealized
depreciation is $463,508,365, resulting in net
unrealized appreciation of $6,904,091,107.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE> 6
MORGAN STANLEY DEAN WITTER DIVIDEND GROWTH SECURITIES INC.
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1998 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $9,085,394,760)........................... $15,989,485,867
Receivable for:
Dividends............................................... 43,772,265
Capital stock sold...................................... 22,487,808
Interest................................................ 10,907,024
Prepaid expenses and other assets........................... 656,105
---------------
TOTAL ASSETS............................................ 16,067,309,069
---------------
LIABILITIES:
Payable for:
Capital stock repurchased............................... 42,099,042
Plan of distribution fee................................ 10,312,920
Investment management fee............................... 5,296,773
Investments purchased................................... 1,978,000
Accrued expenses and other payables......................... 339,320
---------------
TOTAL LIABILITIES....................................... 60,026,055
---------------
NET ASSETS.............................................. $16,007,283,014
===============
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................. $ 8,803,057,138
Net unrealized appreciation................................. 6,904,091,107
Accumulated undistributed net investment income............. 85,370,403
Accumulated undistributed net realized gain................. 214,764,366
---------------
NET ASSETS.............................................. $16,007,283,014
===============
CLASS A SHARES:
Net Assets.................................................. $131,307,433
Shares Outstanding (500,000,000 shares authorized, $.01 par
value)..................................................... 2,503,969
NET ASSET VALUE PER SHARE............................... $52.44
======
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value)........ $55.35
======
CLASS B SHARES:
Net Assets.................................................. $15,446,466,992
Shares Outstanding (500,000,000 shares authorized, $.01 par
value)..................................................... 294,674,455
NET ASSET VALUE PER SHARE............................... $52.42
======
CLASS C SHARES:
Net Assets.................................................. $93,909,276
Shares Outstanding (500,000,000 shares authorized, $.01 par
value)..................................................... 1,795,784
NET ASSET VALUE PER SHARE............................... $52.29
======
CLASS D SHARES:
Net Assets.................................................. $335,599,313
Shares Outstanding (500,000,000 shares authorized, $.01 par
value)..................................................... 6,393,970
NET ASSET VALUE PER SHARE............................... $52.49
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 7
MORGAN STANLEY DEAN WITTER DIVIDEND GROWTH SECURITIES INC.
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the six months ended August 31, 1998 (unaudited)
NET INVESTMENT INCOME:
INCOME
Dividends (net of $865,199 foreign withholding tax)......... $ 164,820,842
Interest.................................................... 60,086,418
---------------
TOTAL INCOME............................................ 224,907,260
---------------
EXPENSES
Plan of distribution fee (Class A shares)................... 151,033
Plan of distribution fee (Class B shares)................... 58,816,453
Plan of distribution fee (Class C shares)................... 418,898
Investment management fee................................... 32,399,988
Transfer agent fees and expenses............................ 5,917,560
Custodian fees.............................................. 326,960
Shareholder reports and notices............................. 244,650
Registration fees........................................... 231,266
Professional fees........................................... 24,684
Directors' fees and expenses................................ 6,901
Other....................................................... 77,134
---------------
TOTAL EXPENSES.......................................... 98,615,527
---------------
NET INVESTMENT INCOME................................... 126,291,733
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain........................................... 214,764,526
Net change in unrealized appreciation....................... (1,897,616,438)
---------------
NET LOSS................................................ (1,682,851,912)
---------------
NET DECREASE................................................ $(1,556,560,179)
===============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
MORGAN STANLEY DEAN WITTER DIVIDEND GROWTH SECURITIES INC.
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
AUGUST 31, 1998 FEBRUARY 28, 1998*
- ----------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income............................. $ 126,291,733 $ 242,721,488
Net realized gain................................. 214,764,526 262,042,293
Net change in unrealized appreciation............. (1,897,616,438) 3,358,692,314
--------------- ---------------
NET INCREASE (DECREASE)....................... (1,556,560,179) 3,863,456,095
--------------- ---------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A shares................................ (775,729) (589,361)
Class B shares................................ (87,606,370) (235,858,916)
Class C shares................................ (307,802) (262,929)
Class D shares................................ (3,092,210) (4,131,290)
Net realized gain
Class A shares................................ (1,250,178) (252,349)
Class B shares................................ (182,210,316) (212,169,081)
Class C shares................................ (921,272) (142,422)
Class D shares................................ (3,923,082) (1,469,529)
--------------- ---------------
TOTAL DIVIDENDS AND DISTRIBUTIONS............. (280,086,959) (454,875,877)
--------------- ---------------
Net increase from capital stock transactions...... 353,650,191 1,174,921,008
--------------- ---------------
NET INCREASE (DECREASE)....................... (1,482,996,947) 4,583,501,226
NET ASSETS:
Beginning of period............................... 17,490,279,961 12,906,778,735
--------------- ---------------
END OF PERIOD
(Including undistributed net investment income
of $85,370,403 and $50,860,781,
respectively)................................. $16,007,283,014 $17,490,279,961
=============== ===============
</TABLE>
- ---------------------
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 9
MORGAN STANLEY DEAN WITTER DIVIDEND GROWTH SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS August 31, 1998 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Dividend Growth Securities Inc. (the "Fund"),
formerly Dean Witter Dividend Growth Securities Inc., 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. On July 28, 1997, the Fund commenced
offering three additional classes of shares, with the then current shares, other
than shares which were purchased prior to July 2, 1984 (and with respect to such
shares, certain shares acquired through reinvestment of dividends and capital
gains distributions (collectively the "Old Shares")) and shares held by certain
employee benefit plans established by Dean Witter Reynolds Inc. and its
affiliate, SPS Transaction Services, Inc., designated as Class B shares. The Old
Shares and shares held by those employee benefit plans prior to July 28, 1997
have been designated Class D shares.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year, six
years and one year, respectively. Class D shares are not subject to a sales
charge. Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York or 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 Morgan Stanley Dean
Witter Advisors Inc. (the "Investment Manager"), formerly Dean Witter
InterCapital Inc., that sale or
9
<PAGE> 10
MORGAN STANLEY DEAN WITTER DIVIDEND GROWTH SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS August 31, 1998 (unaudited) continued
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 by the identified cost method.
Dividend income and other distributions are recorded on the ex-dividend date.
Discounts are accreted over the life of the respective securities. Interest
income is accrued daily.
C. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date such
items are recognized. Distribution fees are charged directly to the respective
class.
D. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.
10
<PAGE> 11
MORGAN STANLEY DEAN WITTER DIVIDEND GROWTH SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS August 31, 1998 (unaudited) continued
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with the Investment Manager, the
Fund pays 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; 0.30% to the portion of daily net assets
exceeding $10 billion but not exceeding $15 billion; and 0.275% to the portion
of daily net assets exceeding $15 billion.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Morgan Stanley Dean Witter Distributors
Inc. (the "Distributor"), an affiliate of the Investment Manager. The Fund has
adopted a Plan of Distribution (the "Plan"), pursuant to Rule 12b-1 under the
Act. The Plan provides that the Fund will pay the Distributor a fee which is
accrued daily and paid monthly at the following annual rates: (i) Class A -- up
to 0.25% of the average daily net assets of Class A; (ii) Class B -- 1.0% of the
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%
11
<PAGE> 12
MORGAN STANLEY DEAN WITTER DIVIDEND GROWTH SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS August 31, 1998 (unaudited) continued
of the average daily net assets of Class C. In the case of Class A shares,
amounts paid under the Plan are paid to the Distributor for services provided.
In the case of Class B and Class C shares, amounts paid under the Plan are paid
to the Distributor for services provided and the expenses borne by it and others
in the distribution of the shares of these Classes, including the payment of
commissions for sales of these Classes and incentive compensation to, and
expenses of, Morgan Stanley Dean Witter Financial Advisors, and others who
engage in or support distribution of the shares or who service shareholder
accounts, including overhead and telephone expenses; printing and distribution
of prospectuses and reports used in connection with the offering of these shares
to other than current shareholders; and preparation, printing and distribution
of sales literature and advertising materials. In addition, the Distributor may
utilize fees paid pursuant to the Plan, in the case of Class B shares, to
compensate Dean Witter Reynolds Inc. ("DWR"), an affiliate of the Investment
Manager and Distributor, and other selected broker-dealers for their opportunity
costs in advancing such amounts, which compensation would be in the form of a
carrying charge on any unreimbursed expenses.
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon
redemption of Class B shares. Although there is no legal obligation for the Fund
to pay expenses incurred in excess of payments made to the Distributor under the
Plan and the proceeds of contingent deferred sales charges paid by investors
upon redemption of shares, if for any reason the Plan is terminated, the
Trustees will consider at that time the manner in which to treat such expenses.
The Distributor has advised the Fund that such excess amounts, including
carrying charges, totaled $263,422,466 at August 31, 1998.
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent calendar year, except that the expenses
representing a gross sales credit to account executives may be reimbursed in the
subsequent year. For the six months ended August 31, 1998, the distribution fee
was accrued for Class A shares and Class C shares at the annual rate of 0.25%
and 1.00%, respectively.
The Distributor has informed the Fund that for the six months ended August 31,
1998, it received contingent deferred sales charges from certain redemptions of
the Fund's Class B shares and Class C shares of $7,056,049 and $52,103,
respectively and received $838,825 in front-end sales charges
12
<PAGE> 13
MORGAN STANLEY DEAN WITTER DIVIDEND GROWTH SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS August 31, 1998 (unaudited) continued
from sales of the Fund's Class A shares. The respective shareholders pay such
charges which are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the six months ended August 31, 1998 aggregated
$1,434,058,215 and $991,402,928, respectively. Included in the aforementioned
are sales of U.S. Government securities in the amount of $827,792,188.
For the six months ended August 31, 1998, the Fund incurred $108,840 in
brokerage commissions with DWR for portfolio transactions executed on behalf of
the Fund.
For the six months ended August 31, 1998, the Fund incurred brokerage
commissions of $76,874 with Morgan Stanley & Co., Inc., an affiliate of the
Investment Manager, for portfolio transactions executed on behalf of the Fund.
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 six months ended August 31, 1998
included in Directors' fees and expenses in the Statement of Operations amounted
to $3,351. At August 31, 1998, the Fund had an accrued pension liability of
$50,926 which is included in accrued expenses in the Statement of Assets and
Liabilities.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent.
13
<PAGE> 14
MORGAN STANLEY DEAN WITTER DIVIDEND GROWTH SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS August 31, 1998 (unaudited) continued
5. CAPITAL STOCK
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
AUGUST 31, 1998 FEBRUARY 28, 1998+*
----------------------------- -----------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold................................................... 1,324,574 $ 80,235,593 1,531,951 $ 82,190,159
Reinvestment of dividends and distributions............ 27,982 1,689,904 10,089 547,397
Redeemed............................................... (304,074) (18,284,789) (86,553) (4,728,188)
----------- --------------- ----------- ---------------
Net increase - Class A................................. 1,048,482 63,640,708 1,455,487 78,009,368
----------- --------------- ----------- ---------------
CLASS B SHARES
Sold................................................... 21,044,456 1,272,531,185 51,834,503 2,670,318,255
Reinvestment of dividends and distributions............ 4,150,690 250,866,726 7,994,489 416,521,197
Redeemed............................................... (21,613,848) (1,298,125,799) (39,948,415) (2,062,805,412)
----------- --------------- ----------- ---------------
Net increase - Class B................................. 3,581,298 225,272,112 19,880,577 1,024,034,040
----------- --------------- ----------- ---------------
CLASS C SHARES
Sold................................................... 1,080,638 65,279,325 930,792 50,207,370
Reinvestment of dividends and distributions............ 19,401 1,169,381 6,914 374,891
Redeemed............................................... (175,506) (10,438,991) (66,455) (3,610,402)
----------- --------------- ----------- ---------------
Net increase - Class C................................. 924,533 56,009,715 871,251 46,971,859
----------- --------------- ----------- ---------------
CLASS D SHARES
Sold................................................... 561,682 34,038,149 841,753 45,989,589
Reinvestment of dividends and distributions............ 112,654 6,816,146 101,638 5,504,556
Redeemed............................................... (528,287) (32,126,639) (474,716) (25,588,404)
----------- --------------- ----------- ---------------
Net increase - Class D................................. 146,049 8,727,656 468,675 25,905,741
----------- --------------- ----------- ---------------
Net increase in Fund................................... 5,700,362 $ 353,650,191 22,675,990 $ 1,174,921,008
=========== =============== =========== ===============
</TABLE>
- ---------------------
+ On July 28, 1997, 5,779,246 shares representing $308,785,103 were transferred
to Class D.
* For Class A, C and D shares, for the period July 28, 1997 (issue date) through
February 28, 1998.
6. SUBSEQUENT EVENT
As of the close of business on September 11, 1998, the Fund acquired all the net
assets of Dean Witter Retirement Series - Dividend Growth Securities Series
("Retirement Dividend Growth") pursuant to a plan of reorganization (the "Plan")
approved by shareholders of Retirement Dividend Growth on August 19, 1998. The
acquisition was accomplished by a tax-free exchange of 1,765,858 Class D shares
of the Fund at a net asset value of $54.47 per share for 6,727,519 shares of
Retirement Dividend Growth. The net assets of the Fund and Retirement Dividend
Growth immediately before the acquisition were $16,582,111,142 and $95,256,790,
respectively, including unrealized appreciation of $8,813,294 for Retirement
Dividend Growth. Immediately after the acquisition, the combined net assets of
the Fund amounted to $16,677,367,932.
14
<PAGE> 15
MORGAN STANLEY 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 SIX FOR THE YEAR ENDED FEBRUARY 28,
MONTHS ENDED --------------------------------------------
AUGUST 31, 1998++ 1998*++ 1997 1996** 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $58.36 $46.60 $39.65 $31.16 $30.86 $28.70
------ ------ ------ ------ ------ ------
Net investment income....................................... 0.41 0.84 0.81 0.75 0.72 0.68
Net realized and unrealized gain (loss)..................... (5.43) 12.50 7.55 8.50 0.24 2.16
------ ------ ------ ------ ------ ------
Total from investment operations............................ (5.02) 13.34 8.36 9.25 0.96 2.84
------ ------ ------ ------ ------ ------
Less dividends and distributions from:
Net investment income...................................... (0.30) (0.83) (0.88) (0.67) (0.66) (0.68)
Net realized gain.......................................... (0.62) (0.75) (0.53) (0.09) -- --
------ ------ ------ ------ ------ ------
Total dividends and distributions........................... (0.92) (1.58) (1.41) (0.76) (0.66) (0.68)
------ ------ ------ ------ ------ ------
Net asset value, end of period.............................. $52.42 $58.36 $46.60 $39.65 $31.16 $30.86
====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN+.................................... (8.82)%(1) 29.10% 21.37% 30.01% 3.25% 9.98%
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.08%(2)(3) 1.14% 1.22% 1.31% 1.42% 1.37%
Net investment income....................................... 1.35%(2)(3) 1.61% 1.95% 2.14% 2.42% 2.31%
SUPPLEMENTAL DATA:
Net assets, end of period, in millions...................... $15,446 $16,989 $12,907 $9,782 $7,101 $6,712
Portfolio turnover rate..................................... 6%(1) 4% 4% 10% 6% 13%
</TABLE>
- ---------------------
<TABLE>
<C> <S>
* Prior to July 28, 1997, the Fund issued one class of shares.
All shares of the Fund held prior to that date, other than
shares which were purchased prior to July 2, 1984 (and with
respect to such shares, certain shares acquired through
reinvestment of dividends and capital gains distributions
(collectively the "Old Shares")) and shares held by certain
employee benefit plans established by Dean Witter Reynolds
Inc. and its affiliate, SPS Transaction Services, Inc., have
been designated Class B shares. The Old Shares and shares
held by those employee benefit plans prior to July 28, 1997
have been designated Class D shares.
** Year ended February 29.
++ The per share amounts were computed using an average number
of shares outstanding.
+ 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
15
<PAGE> 16
MORGAN STANLEY DEAN WITTER DIVIDEND GROWTH SECURITIES INC.
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX JULY 28, 1997*
MONTHS ENDED THROUGH
AUGUST 31, 1998++ FEBRUARY 28, 1998++
- --------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $58.39 $53.43
------ ------
Net investment income....................................... 0.54 0.66
Net realized and unrealized gain (loss)..................... (5.44) 5.22
------ ------
Total from investment operations............................ (4.90) 5.88
------ ------
Less dividends and distributions from:
Net investment income...................................... (0.43) (0.67)
Net realized gain.......................................... (0.62) (0.25)
------ ------
Total dividends and distributions........................... (1.05) (0.92)
------ ------
Net asset value, end of period.............................. $52.44 $58.39
====== ======
TOTAL INVESTMENT RETURN+.................................... (8.62)%(1) 11.15%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 0.67%(2)(3) 0.70%(2)
Net investment income....................................... 1.78%(2)(3) 2.09%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in millions...................... $131 $85
Portfolio turnover rate..................................... 6%(1) 4%(1)
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $58.28 $53.43
------ ------
Net investment income....................................... 0.32 0.43
Net realized and unrealized gain (loss)..................... (5.44) 5.21
------ ------
Total from investment operations............................ (5.12) 5.64
------ ------
Less dividends and distributions from:
Net investment income...................................... (0.25) (0.54)
Net realized gain.......................................... (0.62) (0.25)
------ ------
Total dividends and distributions........................... (0.87) (0.79)
------ ------
Net asset value, end of period.............................. $52.29 $58.28
====== ======
TOTAL INVESTMENT RETURN+.................................... (8.98)%(1) 10.68%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.42%(2)(3) 1.45%(2)
Net investment income....................................... 1.05%(2)(3) 1.37%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in millions...................... $94 $51
Portfolio turnover rate..................................... 6%(1) 4%(1)
</TABLE>
- ---------------------
<TABLE>
<C> <S>
* The date shares were first issued.
++ The per share amounts were computed using an average number
of shares outstanding.
+ 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
16
<PAGE> 17
MORGAN STANLEY DEAN WITTER DIVIDEND GROWTH SECURITIES INC.
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX JULY 28, 1997*
MONTHS ENDED THROUGH
AUGUST 31, 1998++ FEBRUARY 28, 1998++
- --------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $58.43 $53.43
------ ------
Net investment income....................................... 0.61 0.76
Net realized and unrealized gain (loss)..................... (5.44) 5.20
------ ------
Total from investment operations............................ (4.83) 5.96
------ ------
Less dividends and distributions from:
Net investment income...................................... (0.49) (0.71)
Net realized gain.......................................... (0.62) (0.25)
------ ------
Total dividends and distributions........................... (1.11) (0.96)
------ ------
Net asset value, end of period.............................. $52.49 $58.43
====== ======
TOTAL INVESTMENT RETURN+.................................... (8.50)%(1) 11.31%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 0.42%(2)(3) 0.45%(2)
Net investment income....................................... 2.01%(2)(3) 2.39%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in millions...................... $336 $365
Portfolio turnover rate..................................... 6%(1) 4%(1)
</TABLE>
- ---------------------
<TABLE>
<C> <S>
* The date shares were first issued.
++ The per share amounts were computed using an average number
of shares outstanding.
+ 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
17
<PAGE> 18
(This Page Intentionally Left Blank)
<PAGE> 19
(This Page Intentionally Left Blank)
<PAGE> 20
BOARD OF DIRECTORS
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and General Counsel
Paul D. Vance
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
The financial statements included herein have been taken from the records of
the Fund without examination by the independent accountants and accordingly
they do not express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and
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.
MORGAN STANLEY
DEAN WITTER
DIVIDEND GROWTH
SECURITIES
[PHOTO]
SEMIANNUAL REPORT
AUGUST 31, 1998
