UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
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 29, 2004
Date of reporting period: August 31, 2003
Item 1 - Report to Shareholders
Welcome, Shareholder:
In this report, you'll learn about how your investment in Morgan Stanley
Dividend Growth Securities 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 the market
values of securities owned by the Fund will decline and, therefore, the value of
the Fund shares may be less than what you paid for them. Accordingly, you can
lose money investing in this Fund.
FUND REPORT
For the six-month period ended August 31, 2003
TOTAL RETURN FOR THE SIX MONTHS ENDED AUGUST 31, 2003
<Table>
<Caption>
LIPPER
S&P LARGE-CAP
500 VALUE
CLASS A CLASS B CLASS C CLASS D INDEX(1) FUNDS INDEX(2)
20.99% 20.54% 20.53% 21.12% 20.88% 19.97%
</Table>
The performance of the Fund's four share classes varies because each has
different expenses. The Fund's total return figures assume the reinvestment of
all distributions, but do not reflect the deduction of any applicable sales
charges. Such costs would lower performance. Past performance is no guarantee of
future results. See Performance Summary for standardized performance
information.
MARKET CONDITIONS
The six-month period ended August 31, 2003, was one of sharp contrast. Just
prior to its start, in late February, a consumer confidence report recorded the
lowest monthly reading since October 1993. Crude oil and natural gas prices were
surging due to Iraq-centered geopolitical tensions and unusually cold weather
across the United States. And fears of a double-dip recession persisted, defying
evidence of a nascent recovery in the domestic economy. Responding to these
negative developments, the market challenged its October 2002 low in mid-March.
Following the rapid conclusion of the military campaign in Iraq, however,
consumer confidence soared and investors returned to the market. Reports of
first-quarter corporate revenues and profits exceeded expectations, further
buoying equities. And declines in oil prices and corporate bond yields added to
the positive tone of the market as well.
Economic activity continued to show signs of recovery through the spring and
summer months, as data revealed gains in retail sales, industrial production,
housing sales and capital goods orders. The major threat to a cyclical recovery
continued to be the soft labor market, where unemployment reports remained high.
Recent reports of declines in initial jobless claims have helped moderate this
continued threat to a more comprehensive recovery.
At the end of the six-month period, the S&P 500 Index stood 30 percent above its
October 2002 low. Stocks sensitive to the economy benefited disproportionately
during this recovery, as did smaller-capitalization stocks. Leaders among large
caps included retail, industrials, materials, consumer services and durables.
Laggards included health care, consumer staples, telecom and energy.
PERFORMANCE ANALYSIS
The Fund performed in line with the market during the period. Underperformance
was narrowly concentrated in the portfolio's technology allocation. The Fund's
underweighting and stock selection in that sector, one of the market's leaders
during the rally, detracted from relative performance.
The Fund's largest overweightings relative to the S&P 500 were basic resources,
heavy industry/transportation and consumer durables. All three of these
economically sensitive sector allocations contributed to relative performance.
Underweightings in health care and financials, both of which suffered from
earnings disappointments and concerns about rising interest rates, also helped
relative performance.
2
Stock selection within most sectors positively impacted relative performance,
especially in financial services, where our selectivity among banks and
investment companies was rewarded. In addition, the Fund's exposure to
manufacturers and diversified industrials contributed significantly. We also
gained from stock selection within consumer spending-related sectors such as
retail and consumer staples, where discounters, specialty stores, and food and
tobacco producers and distributors did particularly well.
<Table>
<Caption>
TOP 10 HOLDINGS
United Technologies Corp. 3.4%
Target Corp. 3.0
Deere & Co. 2.9
Wyeth 2.8
Johnson Controls, Inc. 2.7
3M Co. 2.5
Alcoa Inc. 2.4
Home Depot, Inc. (The) 2.4
Bank America Corp. 2.4
Int'l Business Machines Corp. 2.3
</Table>
<Table>
<Caption>
TOP FIVE INDUSTRIES
Industrial Conglomerates 9.4%
Pharmaceuticals: Major 9.0
Integrated Oil 4.9
Major Banks 4.7
Trucks/Construction/Farm Machinery 4.3
</Table>
Subject to change daily. All percentages are as a percentage of net assets.
Provided for informational purposes only and should not be deemed as a
recommendation to buy 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
1. THE INVESTMENT MANAGER INITIALLY EMPLOYS A QUANTITATIVE SCREENING PROCESS IN
AN ATTEMPT TO IDENTIFY A NUMBER OF COMMON STOCKS WHICH ARE UNDERVALUED AND
WHICH HAVE A RECORD OF PAYING DIVIDENDS.
2. THE INVESTMENT MANAGER THEN APPLIES QUALITATIVE ANALYSIS TO DETERMINE WHICH
STOCKS IT BELIEVES HAVE 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.
PROXY VOTING POLICIES AND PROCEDURES
A DESCRIPTION OF THE FUND'S POLICIES AND PROCEDURES WITH RESPECT TO THE VOTING
OF PROXIES RELATING TO THE FUND'S PORTFOLIO SECURITIES IS AVAILABLE WITHOUT
CHARGE, UPON REQUEST, BY CALLING (800) 869-NEWS. THIS INFORMATION IS ALSO
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEBSITE AT
HTTP://WWW.SEC.GOV.
3
PERFORMANCE SUMMARY
AVERAGE ANNUAL TOTAL RETURNS -- PERIOD ENDED AUGUST 31, 2003
<Table>
<Caption>
CLASS A SHARES* CLASS B SHARES** CLASS C SHARES(+) CLASS D SHARES(++)
07/28/97 03/30/81 07/28/97 07/28/97
SYMBOL DIVAX DIVBX DIVCX DIVDX
1 YEAR 7.34%(3) 6.52%(3) 6.50%(3) 7.58%(3)
1.70(4) 1.52(4) 5.50(4)
5 YEARS 1.64(3) 0.97(3) 0.90(3) 1.88(3)
0.55(4) 0.67(4) 0.90(4)
10 YEARS 7.42(3)
7.42(4)
SINCE INCEPTION 1.61(3) 11.69(3) 0.86(3) 1.84(3)
0.71(4) 11.69(4) 0.86(4)
</Table>
Past performance is not predictive of future returns. Investment return and
principal value will fluctuate. When you sell fund shares, they may be worth
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.
- --------------------------------------------------------------------------------
Notes on Performance
(1) The Standard and 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 Value Funds Index is an equally weighted performance
index of the largest qualifying funds (based on net assets) in the Lipper
Large-Cap Value 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.
* 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% for shares
redeemed within one year of purchase.
++ Class D has no sales charge.
4
Morgan Stanley Dividend Growth Securities Inc.
PORTFOLIO OF INVESTMENTS - AUGUST 31, 2003 (UNAUDITED)
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------
Common Stocks (99.8%)
Aerospace & Defense
(0.6%)
487,000 Northrop Grumman
Corp. ................ $ 46,498,760
--------------
Aluminum (4.1%)
3,267,500 Alcan Aluminum Ltd.
(Canada).............. 118,838,975
6,324,300 Alcoa, Inc. ........... 180,622,008
--------------
299,460,983
--------------
Apparel/Footwear (1.3%)
2,392,500 VF Corp. .............. 95,939,250
--------------
Auto Parts: O.E.M.
(3.1%)
3,126,100 Delphi Corp. .......... 28,322,466
2,009,700 Johnson Controls,
Inc. ................. 198,960,300
--------------
227,282,766
--------------
Beverages: Non-
Alcoholic (2.1%)
3,493,000 Coca-Cola Co. (The).... 152,015,360
--------------
Chemicals: Major
Diversified (4.2%)
4,378,100 Dow Chemical Co.
(The)................. 151,175,793
3,485,700 Du Pont (E.I.) de
Nemours & Co.,
Inc. ................. 155,950,218
--------------
307,126,011
--------------
Computer Processing
Hardware (1.5%)
5,579,200 Hewlett-Packard Co. ... 111,137,664
--------------
Discount Stores (3.0%)
5,420,200 Target Corp. .......... 220,060,120
--------------
Drugstore Chains (0.9%)
1,964,500 CVS Corp. ............. 64,042,700
--------------
Electric Utilities
(4.0%)
1,981,000 Exelon Corp. .......... 116,680,900
2,571,100 FirstEnergy Corp. ..... 75,230,386
1,647,100 FPL Group, Inc. ....... 101,889,606
--------------
293,800,892
--------------
</Table>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------
Electronics/
Appliances(1.6%)
1,691,100 Whirlpool Corp. ....... $ 117,666,738
--------------
Finance/Rental/
Leasing(3.7%)
1,538,200 Fannie Mae............. 99,659,978
1,400,800 Freddie Mac............ 74,452,520
4,154,000 MBNA Corp. ............ 96,954,360
--------------
271,066,858
--------------
Financial Conglomerates
(3.2%)
2,632,000 Citigroup Inc. ........ 114,097,200
3,629,700 J.P. Morgan Chase &
Co. .................. 124,208,334
--------------
238,305,534
--------------
Food Distributors
(1.0%)
2,453,800 SYSCO Corp. ........... 77,196,548
--------------
Food: Major Diversified
(2.6%)
3,675,200 PepsiCo, Inc. ......... 163,693,408
557,100 Unilever N.V. (ADR) (NY
Registered Shares)
(Netherlands)......... 31,186,458
--------------
194,879,866
--------------
Forest Products (2.0%)
2,488,200 Weyerhaeuser Co. ...... 148,047,900
--------------
Home Improvement Chains
(2.4%)
5,589,800 Home Depot, Inc.
(The)................. 179,767,968
--------------
Household/Personal Care
(4.0%)
2,439,300 Avon Products, Inc. ... 156,359,130
1,602,300 Procter & Gamble Co.
(The)................. 139,864,767
--------------
296,223,897
--------------
</Table>
See Notes to Financial Statements
5
Morgan Stanley Dividend Growth Securities Inc.
PORTFOLIO OF INVESTMENTS - AUGUST 31, 2003 (UNAUDITED) continued
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------
Industrial
Conglomerates (9.4%)
1,275,600 3M Co. ................ $ 181,734,732
4,880,400 General Electric
Co. .................. 144,313,428
4,004,300 Honeywell
International,
Inc. ................. 116,084,657
3,158,100 United Technologies
Corp. ................ 253,437,525
--------------
695,570,342
--------------
Industrial Specialties
(0.8%)
1,064,100 PPG Industries,
Inc. ................. 58,429,731
--------------
Information Technology
Services (2.3%)
2,105,200 International Business
Machines Corp. ....... 172,647,452
--------------
Integrated Oil (4.9%)
3,048,400 BP PLC (ADR) (United
Kingdom).............. 127,179,248
3,999,700 Exxon Mobil Corp. ..... 150,788,690
1,849,000 Royal Dutch Petroleum
Co. (NY Registered
Shares)
(Netherlands)......... 82,964,630
--------------
360,932,568
--------------
Investment Banks/
Brokers (2.0%)
644,600 Goldman Sachs Group,
Inc. (The)............ 57,040,654
159,100 Lehman Brothers
Holdings, Inc. ....... 10,457,643
1,542,300 Merrill Lynch & Co.,
Inc. ................. 82,944,894
--------------
150,443,191
--------------
Investment Managers
(0.9%)
2,140,800 Mellon Financial
Corp. ................ 67,114,080
--------------
</Table>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------
Life/Health Insurance
(2.1%)
77,100 Jefferson-Pilot
Corp. ................ $ 3,413,217
4,306,500 Lincoln National
Corp. ................ 152,536,230
--------------
155,949,447
--------------
Major Banks (4.7%)
2,237,200 Bank of America
Corp. ................ 177,298,100
1,619,200 Comerica, Inc. ........ 79,891,328
2,684,400 KeyCorp................ 73,096,212
338,600 PNC Financial Services
Group................. 16,117,360
--------------
346,403,000
--------------
Major
Telecommunications
(2.3%)
4,880,400 Verizon Communications
Inc. ................. 172,375,728
--------------
Motor Vehicles (1.0%)
865,600 DaimlerChrysler AG
(Germany)............. 33,091,888
1,024,300 General Motors
Corp. ................ 42,098,730
--------------
75,190,618
--------------
Multi-Line Insurance
(0.8%)
380,400 American International
Group, Inc. .......... 22,660,428
635,500 Hartford Financial
Services Group, Inc.
(The)................. 33,821,310
--------------
56,481,738
--------------
Office Equipment/
Supplies (2.3%)
4,402,000 Pitney Bowes, Inc. .... 171,678,000
--------------
Packaged Software
(0.5%)
1,429,500 Microsoft Corp. ....... 37,910,340
--------------
</Table>
See Notes to Financial Statements
6
Morgan Stanley Dividend Growth Securities Inc.
PORTFOLIO OF INVESTMENTS - AUGUST 31, 2003 (UNAUDITED) continued
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------
Pharmaceuticals: Major
(9.0%)
5,292,400 Bristol-Myers Squibb
Co. .................. $ 134,268,188
2,442,400 Merck & Co., Inc. ..... 122,901,580
5,253,500 Pfizer Inc. ........... 157,184,720
2,925,400 Schering-Plough
Corp. ................ 44,436,826
4,879,400 Wyeth.................. 209,082,290
--------------
667,873,592
--------------
Property - Casualty
Insurers (0.9%)
3,976,400 Travelers Property
Casualty Corp. (Class
A).................... 61,196,796
233,600 Travelers Property
Casualty Corp. (Class
B).................... 3,618,464
--------------
64,815,260
--------------
Pulp & Paper (1.5%)
1,774,900 International Paper
Co. .................. 71,972,195
1,457,300 Meadwestvaco Corp. .... 36,942,555
--------------
108,914,750
--------------
Railroads (2.6%)
4,354,300 Burlington Northern
Santa Fe Corp. ....... 123,444,405
2,232,300 CSX Corp. ............. 72,058,644
--------------
195,503,049
--------------
</Table>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------
Tobacco (2.2%)
3,912,400 Altria Group, Inc. .... $ 161,269,128
--------------
Trucks/Construction/Farm
Machinery (4.3%)
1,436,700 Caterpillar Inc. ...... 103,198,161
3,768,800 Deere & Co. ........... 212,974,888
--------------
316,173,049
--------------
</Table>
<Table>
Total Investments
(Cost $3,463,800,101)
(a)....................... 99.8% 7,376,194,890
Other Assets In Excess Of
Liabilities............... 0.2 16,881,416
----- --------------
Net Assets................ 100.0% $7,393,076,306
===== ==============
</Table>
- ---------------------------------------------------
<Table>
ADR American Depository Receipt.
(a) The aggregate cost for federal income tax purposes
approximates the aggregate cost for book purposes.
The aggregate gross unrealized appreciation is
$3,963,701,456 and the aggregate gross unrealized
depreciation is $51,306,667, resulting in net
unrealized appreciation of $3,912,394,789.
</Table>
See Notes to Financial Statements
7
Morgan Stanley Dividend Growth Securities Inc.
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
August 31, 2003 (unaudited)
<Table>
Assets:
Investments in securities, at value
(cost $3,463,800,101)............... $7,376,194,890
Receivable for:
Investments sold................. 23,975,853
Dividends........................ 19,811,369
Capital stock sold............... 4,324,838
Prepaid expenses and other assets.... 300,903
--------------
Total Assets..................... 7,424,607,853
--------------
Liabilities:
Payable for:
Capital stock redeemed........... 6,166,051
Distribution fee................. 5,736,570
Investment management fee........ 2,646,438
Payable to bank...................... 16,559,771
Accrued expenses and other
payables............................ 422,717
--------------
Total Liabilities................ 31,531,547
--------------
Net Assets....................... $7,393,076,306
==============
Composition of Net Assets:
Paid-in-capital...................... 3,024,080,544
Net unrealized appreciation.......... 3,912,394,789
Accumulated undistributed net
investment income................... 26,218,940
Accumulated undistributed net
realized gain....................... 430,382,033
--------------
Net Assets....................... $7,393,076,306
==============
Class A Shares:
Net Assets........................... $122,392,026
Shares Outstanding (500,000,000
shares authorized, $.01 par
value).............................. 3,072,231
Net Asset Value Per Share........ $39.84
==============
Maximum Offering Price Per Share,
(net asset value plus 5.54% of
net asset value)................ $42.05
==============
Class B Shares:
Net Assets........................... $6,687,636,821
Shares Outstanding (500,000,000
shares authorized, $.01 par
value).............................. 167,680,159
Net Asset Value Per Share........ $39.88
==============
Class C Shares:
Net Assets........................... $99,532,543
Shares Outstanding (500,000,000
shares authorized, $.01 par
value).............................. 2,504,902
Net Asset Value Per Share........ $39.74
==============
Class D Shares:
Net Assets........................... $483,514,916
Shares Outstanding (500,000,000
shares authorized, $.01 par
value).............................. 12,127,824
Net Asset Value Per Share........ $39.87
==============
</Table>
Statement of Operations
For the six months ended August 31, 2003 (unaudited)
<Table>
Net Investment Income:
Income
Dividends (net of $1,280,369
foreign withholding tax)........ $ 92,982,120
Interest.......................... 178,204
--------------
Total Income.................. 93,160,324
--------------
Expenses
Distribution fee (Class A
shares)......................... 143,934
Distribution fee (Class B
shares)......................... 32,375,839
Distribution fee (Class C
shares)......................... 459,555
Investment management fee......... 15,251,246
Transfer agent fees and
expenses........................ 4,356,577
Custodian fees.................... 214,556
Shareholder reports and notices... 206,061
Registration fees................. 59,005
Taxes............................. 38,889
Professional fees................. 28,286
Directors' fees and expenses...... 18,937
Other............................. 61,308
--------------
Total Expenses................ 53,214,193
--------------
Net Investment Income......... 39,946,131
--------------
Net Realized and Unrealized Gain:
Net realized gain................. 430,382,084
Net change in unrealized
appreciation.................... 835,783,214
--------------
Net Gain...................... 1,266,165,298
--------------
Net Increase...................... $1,306,111,429
==============
</Table>
See Notes to Financial Statements
8
Morgan Stanley Dividend Growth Securities Inc.
FINANCIAL STATEMENTS continued
Statement of Changes in Net Assets
<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
AUGUST 31, 2003 FEBRUARY 28, 2003
--------------- -----------------
(unaudited)
Increase (Decrease) in Net Assets:
Operations:
Net investment income....................................... $ 39,946,131 $ 83,384,383
Net realized gain........................................... 430,382,084 168,461,681
Net change in unrealized appreciation....................... 835,783,214 (2,624,203,210)
--------------- ---------------
Net Increase (Decrease)................................. 1,306,111,429 (2,372,357,146)
--------------- ---------------
Dividends and Distributions to Shareholders from:
Net investment income
Class A shares.......................................... (1,016,906) (2,241,425)
Class B shares.......................................... (32,519,554) (77,556,153)
Class C shares.......................................... (464,550) (1,055,263)
Class D shares.......................................... (4,199,213) (8,637,871)
Net realized gain
Class A shares.......................................... (2,729,900) (2,997,124)
Class B shares.......................................... (153,089,614) (197,956,757)
Class C shares.......................................... (2,198,511) (2,584,634)
Class D shares.......................................... (10,422,997) (10,202,124)
--------------- ---------------
Total Dividends and Distributions....................... (206,641,245) (303,231,351)
--------------- ---------------
Net decrease from capital stock transactions................ (289,897,606) (1,356,525,019)
--------------- ---------------
Net Increase (Decrease)................................. 809,572,578 (4,032,113,516)
Net Assets:
Beginning of period......................................... 6,583,503,728 10,615,617,244
--------------- ---------------
End of Period
(Including accumulated undistributed net investment income
of $26,218,940 and $24,473,032, respectively)............... $7,393,076,306 $ 6,583,503,728
=============== ===============
</Table>
See Notes to Financial Statements
9
Morgan Stanley Dividend Growth Securities Inc.
NOTES TO FINANCIAL STATEMENTS - AUGUST 31, 2003 (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 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 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 one year, six
year 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 following is a summary of significant accounting policies:
A. Valuation of Investments -- (1) an equity portfolio security listed or traded
on the New York 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 equity 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 or Morgan
Stanley Investment Advisors Inc. (the "Investment Manager") 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 general supervision of the Fund's Directors; (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
10
Morgan Stanley Dividend Growth Securities Inc.
NOTES TO FINANCIAL STATEMENTS - AUGUST 31, 2003 (UNAUDITED) continued
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 Manager, 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. 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.
F. Dividends and Distributions to Shareholders -- Dividends and distributions to
shareholders are recorded on the ex-dividend date.
G. 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 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
11
Morgan Stanley Dividend Growth Securities Inc.
NOTES TO FINANCIAL STATEMENTS - AUGUST 31, 2003 (UNAUDITED) continued
$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.
3. Plan of Distribution
Shares of the Fund are distributed by Morgan Stanley 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% 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
Trustees will consider at that time the manner in which to treat such expenses.
The Distributor has advised the Fund that there were no excess expenses as of
August 31, 2003.
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
12
Morgan Stanley Dividend Growth Securities Inc.
NOTES TO FINANCIAL STATEMENTS - AUGUST 31, 2003 (UNAUDITED) continued
that expenses representing a gross sales credit to Morgan Stanley Financial
Advisors or other selected broker-dealer representatives may be reimbursed in
the subsequent calendar year. For the six months ended August 31, 2003, 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,
2003, it received contingent deferred sales charges from certain redemptions of
the Fund's Class A shares, Class B shares and Class C shares of $1,380,
$2,147,766 and $6,975, respectively and received $229,650 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, 2003
aggregated $824,027,310 and $1,258,303,712, respectively.
For the six months ended August 31, 2003, the Fund incurred brokerage
commissions of $256,133 with Morgan Stanley & Co., Inc., an affiliate of the
Investment Manager and Distributor, 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, 2003
included in Directors' fees and expenses in the Statement of Operations amounted
to $3,644. At August 31, 2003, the Fund had an accrued pension liability of
$60,921, which is included in accrued expenses in the Statement of Assets and
Liabilities.
Morgan Stanley Trust, an affiliate of the Investment Manager and Distributor, is
the Fund's transfer agent. At August 31, 2003, the Fund had transfer agent fees
and expenses payable of approximately $97,000.
5. 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 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
13
Morgan Stanley Dividend Growth Securities Inc.
NOTES TO FINANCIAL STATEMENTS - AUGUST 31, 2003 (UNAUDITED) continued
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, 2003, the Fund had temporary book/tax differences
attributable to a non-deductible expense.
6. Capital Stock
Transactions in capital stock were as follows:
<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
AUGUST 31, 2003 FEBRUARY 28, 2003
--------------------------- -----------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- ---------------
CLASS A SHARES
Sold........................................... 357,755 $ 13,339,480 807,118 $ 31,752,569
Reinvestment of dividends and distributions.... 84,012 3,221,676 106,190 4,371,930
Redeemed....................................... (439,673) (16,246,319) (970,871) (38,277,429)
----------- ------------- ----------- ---------------
Net increase (decrease) - Class A.............. 2,094 314,837 (57,563) (2,152,930)
----------- ------------- ----------- ---------------
CLASS B SHARES
Sold........................................... 4,992,185 189,260,552 9,619,119 386,653,422
Reinvestment of dividends and distributions.... 4,341,948 167,239,326 6,030,065 248,999,928
Redeemed....................................... (18,514,219) (690,915,612) (51,108,510) (2,008,751,524)
----------- ------------- ----------- ---------------
Net decrease - Class B......................... (9,180,086) (334,415,734) (35,459,326) (1,373,098,174)
----------- ------------- ----------- ---------------
CLASS C SHARES
Sold........................................... 277,268 10,535,393 492,590 19,786,226
Reinvestment of dividends and distributions.... 65,393 2,509,762 84,072 3,456,704
Redeemed....................................... (271,318) (10,067,195) (841,485) (33,132,034)
----------- ------------- ----------- ---------------
Net increase (decrease) - Class C.............. 71,343 2,977,960 (264,823) (9,889,104)
----------- ------------- ----------- ---------------
CLASS D SHARES
Sold........................................... 1,729,880 65,574,417 3,402,262 136,185,393
Reinvestment of dividends and distributions.... 360,138 13,758,299 433,093 17,658,220
Redeemed....................................... (1,021,486) (38,107,385) (3,110,440) (125,228,424)
----------- ------------- ----------- ---------------
Net increase - Class D......................... 1,068,532 41,225,331 724,915 28,615,189
----------- ------------- ----------- ---------------
Net decrease in Fund........................... (8,038,117) $(289,897,606) (35,056,797) $(1,356,525,019)
=========== ============= =========== ===============
</Table>
14
Morgan Stanley Dividend Growth Securities Inc.
NOTES TO FINANCIAL STATEMENTS - AUGUST 31, 2003 (UNAUDITED) continued
7. Fund Merger
On July 31, 2003, the Trustees of Morgan Stanley Equity Fund ("Equity") and the
Directors of the Fund approved a Plan of Reorganization whereby Equity would be
merged into the Fund. The Plan of Reorganization is subject to the consent of
Equity's shareholders at a special meeting scheduled to be held on December 16,
2003. If approved, the assets of the Fund would be combined with the assets of
Equity and shareholders of Equity would become shareholders of the Fund,
receiving shares of the corresponding class of the Fund equal to the value of
their holdings in Equity.
15
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, 2003 2003 2002 2001 2000* 1999
--------------- -------- -------- -------- -------- --------
(unaudited)
Class A Shares
Selected Per Share Data:
Net asset value, beginning of period..... $34.01 $ 46.44 $52.54 $50.11 $60.22 $58.39
------ ------- ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income++.............. 0.34 0.68 0.71 0.84 0.94 1.05
Net realized and unrealized gain
(loss)............................... 6.74 (11.41) (3.51) 8.35 (7.75) 3.58
------ ------- ------ ------ ------ ------
Total income (loss) from investment
operations.............................. 7.08 (10.73) (2.80) 9.19 (6.81) 4.63
------ ------- ------ ------ ------ ------
Less dividends and distributions from:
Net investment income................ (0.34) (0.72) (0.70) (0.92) (0.99) (1.02)
Net realized gain.................... (0.91) (0.98) (2.60) (5.84) (2.31) (1.78)
------ ------- ------ ------ ------ ------
Total dividends and distributions........ (1.25) (1.70) (3.30) (6.76) (3.30) (2.80)
------ ------- ------ ------ ------ ------
Net asset value, end of period........... $39.84 $ 34.01 $46.44 $52.54 $50.11 $60.22
====== ======= ====== ====== ====== ======
Total Return+............................ 20.99%(1) (23.66)% (5.35)% 19.31% (12.07)% 8.10%
Ratios to Average Net Assets:(3)
Expenses................................. 0.82%(2) 0.77% 0.73% 0.73% 0.67% 0.64%
Net investment income.................... 1.79%(2) 1.69% 1.46% 1.57% 1.52% 1.76%
Supplemental Data:
Net assets, end of period, in
thousands............................... $122,392 $104,419 $145,257 $223,106 $214,669 $227,457
Portfolio turnover rate.................. 12%(1) 7% 0% 1% 4% 13%
</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
16
Morgan Stanley Dividend Growth Securities Inc.
FINANCIAL HIGHLIGHTS continued
<Table>
<Caption>
FOR THE SIX FOR THE YEAR ENDED FEBRUARY 28,
MONTHS ENDED -----------------------------------------------------------------
AUGUST 31, 2003 2003 2002 2001 2000* 1999
--------------- ---------- ---------- ----------- ----------- -----------
(unaudited)
Class B Shares
Selected Per Share Data:
Net asset value, beginning of
period......................... $34.04 $ 46.46 $52.54 $50.10 $60.18 $58.36
------ ------- ------ ------ ------ ------
Income (loss) from investment
operations:
Net investment income++..... 0.20 0.37 0.34 0.47 0.64 0.77
Net realized and unrealized
gain (loss)................. 6.74 (11.41) (3.50) 8.35 (7.73) 3.58
------ ------- ------ ------ ------ ------
Total income (loss) from
investment operations.......... 6.94 (11.04) (3.16) 8.82 (7.09) 4.35
------ ------- ------ ------ ------ ------
Less dividends and distributions
from:
Net investment income....... (0.19) (0.40) (0.32) (0.54) (0.68) (0.75)
Net realized gain........... (0.91) (0.98) (2.60) (5.84) (2.31) (1.78)
------ ------- ------ ------ ------ ------
Total dividends and
distributions.................. (1.10) (1.38) (2.92) (6.38) (2.99) (2.53)
------ ------- ------ ------ ------ ------
Net asset value, end of
period......................... $39.88 $ 34.04 $46.46 $52.54 $50.10 $60.18
====== ======= ====== ====== ====== ======
Total Return+................... 20.54%(1) (24.27)% (6.06)% 18.48% (12.49)% 7.59%
Ratios to Average Net Assets
(3):
Expenses........................ 1.57%(2) 1.54% 1.49% 1.42% 1.15% 1.11%
Net investment income........... 1.05%(2) 0.92% 0.70% 0.88% 1.04% 1.29%
Supplemental Data:
Net assets, end of period, in
millions....................... $6,688 $6,020 $9,865 $11,819 $12,869 $18,061
Portfolio turnover rate......... 12%(1) 7% 0% 1% 4% 13%
</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
17
Morgan Stanley Dividend Growth Securities Inc.
FINANCIAL HIGHLIGHTS continued
<Table>
<Caption>
FOR THE SIX FOR THE YEAR ENDED FEBRUARY 28,
MONTHS ENDED ---------------------------------------------------
AUGUST 31, 2003 2003 2002 2001 2000* 1999
--------------- ------- -------- -------- -------- --------
(unaudited)
Class C Shares
Selected Per Share Data:
Net asset value, beginning of period...... $33.92 $ 46.32 $52.44 $49.96 $60.02 $58.28
------ ------- ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income++............... 0.20 0.37 0.35 0.50 0.47 0.59
Net realized and unrealized gain
(loss)................................ 6.72 (11.38) (3.49) 8.32 (7.70) 3.56
------ ------- ------ ------ ------ ------
Total income (loss) from investment
operations............................... 6.92 (11.01) (3.14) 8.82 (7.23) 4.15
------ ------- ------ ------ ------ ------
Less dividends and distributions from:
Net investment income................. (0.19) (0.41) (0.38) (0.50) (0.52) (0.63)
Net realized gain..................... (0.91) (0.98) (2.60) (5.84) (2.31) (1.78)
------ ------- ------ ------ ------ ------
Total dividends and distributions......... (1.10) (1.39) (2.98) (6.34) (2.83) (2.41)
------ ------- ------ ------ ------ ------
Net asset value, end of period............ $39.74 $ 33.92 $46.32 $52.44 $49.96 $60.02
====== ======= ====== ====== ====== ======
Total Return+............................. 20.53%(1) (24.26)% (6.05)% 18.54% (12.73)% 7.26%
Ratios to Average Net Assets (3):
Expenses.................................. 1.57%(2) 1.54% 1.48% 1.37% 1.43% 1.43%
Net investment income..................... 1.05%(2) 0.92% 0.71% 0.93% 0.76% 0.97%
Supplemental Data:
Net assets, end of period, in thousands... $99,533 $82,544 $124,976 $139,320 $135,496 $144,425
Portfolio turnover rate................... 12%(1) 7% 0% 1% 4% 13%
</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
18
Morgan Stanley Dividend Growth Securities Inc.
FINANCIAL HIGHLIGHTS continued
<Table>
<Caption>
FOR THE SIX FOR THE YEAR ENDED FEBRUARY 28,
MONTHS ENDED ----------------------------------------------------
AUGUST 31, 2003 2003 2002 2001 2000* 1999
--------------- -------- -------- -------- -------- --------
(unaudited)
Class D Shares
Selected Per Share Data:
Net asset value, beginning of period..... $34.03 $ 46.47 $52.59 $50.16 $60.26 $58.43
------ ------- ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income++.............. 0.39 0.77 0.83 0.97 1.09 1.17
Net realized and unrealized gain
(loss)............................... 6.73 (11.41) (3.53) 8.35 (7.76) 3.59
------ ------- ------ ------ ------ ------
Total income (loss) from investment
operations.............................. 7.12 (10.64) (2.70) 9.32 (6.67) 4.76
------ ------- ------ ------ ------ ------
Less dividends and distributions from:
Net investment income................ (0.37) (0.82) (0.82) (1.05) (1.12) (1.15)
Net realized gain.................... (0.91) (0.98) (2.60) (5.84) (2.31) (1.78)
------ ------- ------ ------ ------ ------
Total dividends and distributions........ (1.28) (1.80) (3.42) (6.89) (3.43) (2.93)
------ ------- ------ ------ ------ ------
Net asset value, end of period........... $39.87 $ 34.03 $46.47 $52.59 $50.16 $60.26
====== ======= ====== ====== ====== ======
Total Return+............................ 21.12%(1) (23.50)% (5.10)% 19.60% (11.85)% 8.33%
Ratios to Average Net Assets (3):
Expenses................................. 0.57%(2) 0.54% 0.49% 0.48% 0.43% 0.43%
Net investment income.................... 2.04%(2) 1.92% 1.70% 1.82% 1.76% 1.97%
Supplemental Data:
Net assets, end of period, in
thousands............................... $483,515 $376,299 $480,234 $423,519 $405,246 $488,987
Portfolio turnover rate.................. 12%(1) 7% 0% 1% 4% 13%
</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
19
DIRECTORS
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
James F. Higgins
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael E. Nugent
Philip J. Purcell
Fergus Reid
OFFICERS
Charles A. Fiumefreddo
Chairman of the Board
Mitchell M. Merin
President
Ronald E. Robison
Executive Vice President and Principal Executive Officer
Barry Fink
Vice President and General Counsel
Joseph McAlinden
Vice President
Stefanie V. Chang
Vice President
Francis Smith
Treasurer and Chief Financial Officer
Thomas F. Caloia
Vice President
Mary E. Mullin
Secretary
TRANSFER AGENT
Morgan Stanley Trust
Harborside Financial Center, Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT AUDITORS
Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281
INVESTMENT MANAGER
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 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.
(c) 2003 Morgan Stanley
[MORGAN STANLEY LOGO]
MORGAN STANLEY FUNDS
Morgan Stanley
Dividend Growth
Securities
Semiannual Report
August 31, 2003
[MORGAN STANLEY LOGO]
37910RPT-12329I03-AP-9/03
Item 2. Code of Ethics.
(a) The Fund has adopted a code of ethics (the "Code of Ethics") that
applies to its principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the Fund or a
third party.
(b) No information need be disclosed pursuant to this paragraph.
(c) The Fund has amended its Code of Ethics during the period covered by
the shareholder report presented in Item 1 hereto
(d) The Fund has granted a waiver or an implicit waiver from a provision of
its Code of Ethics.
(e) Not applicable.
(f)
(1) The Fund's Code of Ethics is attached hereto as Exhibit A.
(2) Not applicable.
(3) Not applicable.
Item 3. Audit Committee Financial Expert.
The Fund's Board of Directors has determined that it has two "audit committee
financial experts" serving on its audit committee, each of whom are
"independent" Directors: Dr. Manuel H. Johnson and Joseph J. Kearns. Under
applicable securities laws, a person who is determined to be an audit committee
financial expert will not be deemed an "expert" for any purpose, including
without limitation for the purposes of Section 11 of the Securities Act of 1933,
as a result of being designated or identified as an audit committee financial
expert. The designation or identification of a person as an audit committee
financial expert does not impose on such person any duties, obligations, or
liabilities that are greater than the duties, obligations, and liabilities
imposed on such person as a member of the audit committee and Board of Directors
in the absence of such designation or identification.
Item 9 - 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.
There were no significant changes or corrective actions with regard to
significant deficiencies or material weaknesses in the Fund's internal controls
or in other factors that could significantly affect the Fund's internal controls
subsequent to the date of their evaluation.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
2
Item 10 Exhibits
(a) The Code of Ethics for Principal Executive and Senior Financial Officers is
attached hereto.
(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.
Items 4 - 8 are not applicable
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.
Ronald E. Robison
Principal Executive Officer
October 20, 2003
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.
Ronald E. Robison
Principal Executive Officer
October 20, 2003
Francis Smith
Principal Financial Officer
October 20, 2003
3