<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- --------------------------------------------------------------------------------
The fiscal year ended August 31, 1994 began on a positive note, with the
high-yield bond market benefiting from both lower interest rates and the
continuing improvement in corporate credit quality. This credit quality
improvement, driven by the economic recovery, as well as corporate refinancing
and deleveraging activity, helped to boost the underlying values of most
high-yield issues.
In sharp contrast, the second half of the Fund's fiscal year proved
disappointing for the fixed-income markets in general, including the high-yield
market. Questions concerning the strength of the economy, inflation prospects,
interest rate levels and Federal Reserve Board policy created an uncomfortable
level of uncertainty. High-yield investors, worried about rising interest rates
and possible further tightening moves by the Federal Reserve Board, were not
immune to the fixed-income market's volatility.
The high-yield market's weakness thus far in 1994 was reflected in Dean
Witter High Yield Securities' total return for the six-month period ended August
31, 1994 of -9.69 percent, based on a net asset value (NAV) of $6.83 per share
at the close of the period. For the fiscal year ended August 31, 1994, the
Fund's total return was 0.93 percent. As of August 31, 1994, the Fund's net
assets exceeded $477 million. Over the past 12 months, the Fund paid income
dividends totaling $0.86 per share, including an extra income dividend of $0.20
per share paid on December 23, 1993. The accompanying chart illustrates the
growth of a $10,000 investment in the Fund for the 10-year period ended August
31, 1994, versus a similar investment in the Lehman Brothers Corporate/High
Yield Index. (The Fund commenced operations September 26, 1979.)
INVESTMENT STRATEGY
As 1994 began, the Fund moved to a relatively defensive position. Rising
Treasury yields had begun to reduce the relative attractiveness of high-yield
bonds, as the yield advantage between Treasury securities and high-yield issues
narrowed. In addition, given the strength of the high-yield market earlier in
the fiscal year, finding attractively priced discounted issues for investment
became difficult. In light of this, the Fund positioned itself with close to
half of its assets in very defensive, high-coupon/short-duration securities,
which helped to cushion the Fund during the market's first quarter decline.
[GRAPH]
<PAGE>
The Fund became a buyer during the early part of the second quarter, as the
market's correction pushed prices back to more attractive levels. Despite the
fact that corporate credit quality in most cases remained strong, B-rated issues
could now be purchased at 12-13 percent yield levels versus the 10 percent
levels that existed earlier in the year, and at significant discounts to par.
Despite more attractive levels, the high-yield market remained weak through the
end of this reporting period, as a general nervousness continues to pervade all
of the financial markets.
MARKET OUTLOOK
Over the near-term, we expect continued volatility in the financial markets,
as investors attempt to assess the economy's strength, the direction of interest
rates and the likelihood of further Federal Reserve Board actions. Despite
possible short-term weakness, we view today's depressed price levels in the
high-yield market as offering an attractive long-term opportunity for investors.
Today's issues provide an exceptionally large yield advantage over Treasuries,
with the opportunity for substantial capital appreciation if the high-yield
market rebounds.
We thank you for your continued support of Dean Witter High Yield Securities
and look forward to continuing to serve your investment needs.
Very truly yours,
Charles A. Fiumefreddo
CHAIRMAN OF THE BOARD
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ------------ ----------- ---------- --------------
<C> <S> <C> <C> <C>
CORPORATE BONDS (79.8%)
AEROSPACE (1.8%)
$ 9,000 Sabreliner Corp. (Series B)................................. 12.50 % 4/15/03 $ 8,415,000
--------------
AIRLINES (3.5%)
20,250 GPA Delaware, Inc........................................... 8.75 12/15/98 16,807,500
1 Trans World Airlines, Inc................................... 8.00 + 11/ 3/00 140
--------------
16,807,640
--------------
AUTOMOTIVE (2.2%)
6,000 Envirotest Systems Corp..................................... 9.625 4/ 1/03 5,550,000
5,000 Harvard Industries, Inc..................................... 12.00 7/15/04 5,037,500
--------------
10,587,500
--------------
CABLE & TELECOMMUNICATIONS (1.1%)
10,000 Marcus Cable Co............................................. 13.50 ++ 8/ 1/04 5,230,000
--------------
COMPUTER EQUIPMENT (2.3%)
9,900 Unisys Corp................................................. 13.50 7/ 1/97 10,778,625
--------------
CONSUMER PRODUCTS (3.3%)
5,500 J.B. Williams Holdings, Inc. - 144A**....................... 12.50 * 3/ 1/04 5,348,750
15,000 Revlon Worldwide Corp. (Series B)........................... 0.00 3/15/98 6,337,500
4,000 Thermoscan, Inc. (Units)+++ - 144A**........................ 11.50 * 8/15/01 4,040,000
--------------
15,726,250
--------------
CONTAINERS (1.1%)
10,750 Ivex Holdings Corp. (Series B).............................. 13.25 ++ 3/15/05 5,267,500
--------------
ELECTRICAL & ALARM SYSTEMS (1.3%)
10,000 Mosler, Inc................................................. 11.00 4/15/03 6,350,000
--------------
ENTERTAINMENT, GAMING & LODGING (12.2%)
3,000 Fitzgeralds Gaming Corp. - 144A**........................... 13.00 * 3/15/96 2,400,000
12,000 Hollywood Casino Corp....................................... 14.00 4/ 1/98 12,600,000
7,500 Motels of America, Inc. - 144A**............................ 12.00 4/15/04 7,237,500
17,931 Spectravision, Inc.......................................... 11.65 + 12/ 1/02 10,220,670
10,000 Treasure Bay Gaming & Resort, Inc. - 144A**................. 12.25 11/15/00 3,800,000
12,380 Trump Castle Funding, Inc................................... 11.75 11/15/03 7,489,900
21,109 Trump Plaza Holding Assoc................................... 12.50 + 6/15/03 14,356,248
--------------
58,104,318
--------------
FOOD & BEVERAGES (3.7%)
9,797 Envirodyne Industries, Inc.................................. 10.25 12/ 1/01 7,592,675
28,250 Specialty Foods Acquisition Corp. (Series B)................ 13.00 ++ 8/15/05 9,887,500
--------------
17,480,175
--------------
MANUFACTURING (6.7%)
10,000 Berry Plastics Corp. (Units)+++............................. 12.25 4/15/04 10,100,000
18,000 MS Essex Holdings, Inc...................................... 16.00 ++ 5/15/04 16,740,000
5,500 Uniroyal Technology Corp.................................... 11.75 6/ 1/03 5,280,000
--------------
32,120,000
--------------
MANUFACTURING - DIVERSIFIED (4.1%)
10,200 Interlake Corp.............................................. 12.125 3/ 1/02 9,664,500
5,000 J.B. Poindexter, Inc........................................ 12.50 5/15/04 4,900,000
3,420 Jordan Industries, Inc...................................... 11.75 ++ 8/ 1/05 1,949,400
5,500 Talley Industries, Inc...................................... 12.25 ++ 10/15/05 3,135,000
--------------
19,648,900
--------------
</TABLE>
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1994 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ------------ OIL & GAS (6.7%) ----------- ---------- --------------
<C> <S> <C> <C> <C>
$ 5,000 Deeptech International, Inc................................. 12.00 % 12/15/00 $ 4,875,000
10,000 Empire Gas Corp. (Units)+++................................. 7.00 ++ 7/15/04 7,650,000
19,500 Presidio Oil Co. (Series B)................................. 14.125*** 7/15/02 19,500,000
--------------
32,025,000
--------------
PAPER & FOREST PRODUCTS (2.1%)
10,250 Fort Howard Corp............................................ 14.125++ 11/ 1/04 10,070,625
--------------
PUBLISHING (6.2%)
12,000 Affiliated Newspapers Inv., Inc............................. 13.25 ++ 7/ 1/06 6,300,000
16,343 BFP Holdings, Inc. - 144A**................................. 13.50 ++ 4/15/04 8,253,215
5,000 Garden State Newspapers, Inc................................ 12.00 7/ 1/04 4,975,000
11,000 United States Banknote Corp. - 144A**....................... 11.625 8/ 1/02 9,900,000
--------------
29,428,215
--------------
RESTAURANTS (7.2%)
19,500 American Restaurant Group Holdings, Inc..................... 14.00 ++ 12/15/05 9,360,000
10,000 Carrols Corp................................................ 11.50 8/15/03 9,400,000
18,000 Flagstar Corp............................................... 11.25 11/ 1/04 15,615,000
--------------
34,375,000
--------------
RETAIL (6.6%)
10,000 Cort Furniture Rental Corp.................................. 12.00 9/ 1/00 9,750,000
10,000 County Seat Stores Co....................................... 12.00 10/ 1/01 9,850,000
12,000 Thrifty Payless Holdings, Inc............................... 12.25 4/15/04 11,880,000
--------------
31,480,000
--------------
RETAIL - FOOD CHAINS (4.5%)
6,000 Food 4 Less Holdings, Inc................................... 15.25 ++ 12/15/04 4,080,000
117,220 Grand Union Capital Corp. (Series A)........................ 0.00 1/15/07 7,912,350
10,500 Purity Supreme, Inc. (Series B)............................. 11.75 8/ 1/99 9,712,500
--------------
21,704,850
--------------
TEXTILES (0.0%)
1,638 Farley, Inc. (Conv.)........................................ 0.00 1/ 1/12 157,330
--------------
TEXTILES - APPAREL MANUFACTURER (3.2%)
18,750 JPS Textiles Group, Inc..................................... 10.85 6/ 1/99 15,375,000
--------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $429,040,357).................................. 381,131,928
--------------
U.S. GOVERNMENT OBLIGATION (5.3%)
25,000 U.S. Treasury Note (Identified Cost $25,445,312)............ 11.625 11/15/94 25,332,031
--------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES
- ---------------
<C> <S> <C>
COMMON STOCKS (A)(6.3%)
AUTOMOTIVE (0.6%)
214,400 Harvard Industries, Inc. (Class B)................................................. 2,787,200
--------------
BUILDING & CONSTRUCTION (2.6%)
542,928 USG Corp. (c)...................................................................... 12,215,880
--------------
COMPUTER EQUIPMENT (0.2%)
477,769 Memorex Telex Corp. (ADR) (c)...................................................... 1,164,562
--------------
</TABLE>
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1994 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------- ENTERTAINMENT, GAMING & LODGING (0.2%) --------------
<C> <S> <C>
7,500 Motels of America, Inc. - 144A**................................................... $ 525,000
223,504 Spectravision, Inc. (Class B)...................................................... 530,822
--------------
1,055,822
--------------
FOOD & BEVERAGE (0.0%)
198,750 Specialty Foods Acquisition Corp. - 144A**......................................... 198,750
--------------
MANUFACTURING - DIVERSIFIED (2.1%)
851,263 Thermadyne Holdings Corp. (c)...................................................... 10,002,340
--------------
PUBLISHING (0.3%)
12,000 Affiliated Newspapers Inv., Inc.................................................... 300,000
130,744 BFP Holdings, Inc. - 144A**........................................................ 1,111,324
--------------
1,411,324
--------------
RESTAURANT (0.1%)
19,500 American Restaurant Group Holdings, Inc. - 144A**.................................. 429,000
--------------
RETAIL (0.1%)
228,000 Thrifty Payless Holdings, Inc. (Class C)........................................... 684,000
--------------
TEXTILES - APPAREL MANUFACTURERS (0.1%)
12,000 JPS Textiles Group, Inc............................................................ 504,000
--------------
TOTAL COMMON STOCKS (IDENTIFIED COST $134,142,160)................................. 30,452,878
--------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION
WARRANTS DATE
- --------------- -------------
<C> <S> <C> <C>
WARRANTS (A)(1.1%)
AEROSPACE (0.0%)
9,000 Sabreliner Corp. (c).............................................. 4/15/03 135,000
--------------
BUILDING & CONSTRUCTION (0.6%)
253,460 USG Corp. (c)..................................................... 5/ 5/98 2,978,155
--------------
CONTAINERS (0.1%)
10,000 Crown Packaging Holdings, Ltd. - 144A**........................... 10/15/03 440,000
--------------
ENTERTAINMENT, GAMING & LODGING (0.3%)
5,000 Boomtown, Inc. - 144A**........................................... 11/ 1/98 130,000
13,052 Casino America, Inc............................................... 11/15/96 13,052
3,000 Fitzgeralds Gaming Corp. - 144A**................................. 3/15/99 150,000
50,000 Treasure Bay Gaming & Resorts, Inc. - 144A**...................... 11/15/98 250,000
1,000 Trump Plaza Holding Assoc......................................... 6/18/96 670,000
--------------
1,213,052
--------------
MANUFACTURING (0.0%)
55,000 Uniroyal Technology Corp.......................................... 6/ 1/03 68,750
--------------
MANUFACTURING - DIVERSIFIED (0.0%)
4,048 Reliance Group Holdings........................................... 1/28/97 7,590
--------------
RETAIL (0.1%)
10,000 County Seat Holdings Co........................................... 10/15/98 150,000
330,000 New Cort Holdings Corp............................................ 9/ 1/98 495,000
--------------
645,000
--------------
RETAIL - FOOD CHAINS (0.0%)
36,387 Purity Supreme, Inc. - 144A**..................................... 8/ 6/97 1,819
--------------
TOTAL WARRANTS (IDENTIFIED COST $3,321,394)....................................... 5,489,366
--------------
</TABLE>
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1994 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN
THOUSANDS) VALUE
- ------------ --------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (6.0%)
COMMERCIAL PAPER (D)(1.7%)
AUTOMOTIVE FINANCE (1.7%)
$ 8,000 Ford Motor Credit Corp. 4.71% due 9/1/94 (Amortized Cost $8,000,000).................. $ 8,000,000
--------------
U.S. GOVERNMENT AGENCY (D)(1.0%)
4,500 Federal National Mortgage Association 4.59% due 9/1/94 (Amortized Cost $4,500,000).... 4,500,000
--------------
REPURCHASE AGREEMENT (3.3%)
15,981 The Bank of New York 4.625% due 9/1/94 (dated 8/31/94; proceeds $15,985,372;
collaterized by $2,435,135 U.S.Treasury Note 5.125% due 3/31/96 valued at $2,457,661
and $13,644,094 U.S.Treasury Note 6.75% due 5/31/99 valued at $13,843,230)
(Identified Cost $15,981,266)....................................................... 15,981,266
--------------
TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $28,481,266)............................ 28,481,266
--------------
TOTAL INVESTMENTS (IDENTIFIED COST $620,430,489)(E)......................................... 98.5% 470,887,469
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES.............................................. 1.5 6,975,278
------- --------------
NET ASSETS.................................................................................. 100.0% $ 477,862,747
------- --------------
------- --------------
<FN>
- ------------------
ADR AMERICAN DEPOSITORY RECEIPT.
* ADJUSTABLE RATE. RATE SHOWN IS THE RATE EFFECTIVE AT AUGUST 31, 1994.
** RESALE IS RESTRICTED TO QUALIFIED INSTITUTIONAL INVESTORS.
*** BASE INTEREST RATE IS 13.25%, ADDITIONAL INTEREST IF ANY, IS LINKED TO THE
GAS INDEX. RATE SHOWN IS THE RATE IN EFFECT AT AUGUST 31, 1994.
+++ CONSISTS OF MORE THAN ONE CLASS OF SECURITIES TRADED TOGETHER AS A UNIT;
GENERALLY BONDS WITH ATTACHED STOCKS/WARRANTS.
+ PAYMENT-IN-KIND SECURITY.
++ CURRENTLY ZERO COUPON UNDER TERMS OF THE INITIAL OFFERING.
(A) NON-INCOME PRODUCING.
(B) NON-INCOME PRODUCING, BOND IN DEFAULT.
(C) ACQUIRED THROUGH EXCHANGE OFFER.
(D) SECURITIES WERE PURCHASED ON A DISCOUNT BASIS. THE INTEREST RATE SHOWN HAS
BEEN ADJUSTED TO REFLECT A BOND EQUIVALENT YIELD.
(E) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS $621,955,087; THE
AGGREGATE GROSS UNREALIZED APPRECIATION IS $9,399,327 AND THE AGGREGATE
GROSS UNREALIZED DEPRECIATION IS $160,466,945; RESULTING IN NET UNREALIZED
DEPRECIATION OF $151,067,618.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $620,430,489) (Note
1)..................................... $ 470,887,469
Cash..................................... 721
Receivable for:
Interest............................... 9,540,687
Investments sold....................... 4,517,354
Capital stock sold..................... 200,796
Prepaid expenses and other assets........ 42,906
--------------
TOTAL ASSETS..................... 485,189,933
--------------
LIABILITIES:
Payable for:
Investments purchased.................. 5,332,500
Dividends to shareholders.............. 1,112,315
Capital stock repurchased.............. 465,434
Investment management fee (Note 2)..... 221,668
Accrued expenses and other payables (Note
3)..................................... 195,269
--------------
TOTAL LIABILITIES................ 7,327,186
--------------
NET ASSETS:
Paid-in-capital.......................... 1,578,635,593
Accumulated undistributed net investment
income................................. 6,101,935
Accumulated net realized loss on
investments............................ (957,331,761)
Net unrealized depreciation on
investments............................ (149,543,020)
--------------
NET ASSETS....................... $ 477,862,747
--------------
--------------
NET ASSET VALUE PER SHARE, 69,916,628
shares outstanding (400,000,000 shares
authorized of $.01 par value)..........
$6.83
--------------
--------------
MAXIMUM OFFERING PRICE PER SHARE (net
asset value plus 5.82% of net asset
value)*................................
$7.23
--------------
--------------
<FN>
- ------------------
*ON SALES OF $25,000 OR MORE THE OFFERING PRICE IS REDUCED
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1994
<TABLE>
<S> <C>
INVESTMENT INCOME:
INTEREST INCOME......................... $ 60,460,427
-------------
EXPENSES
Investment management fee (Note 2).... 2,690,898
Transfer agent fees and expenses (Note
3).................................. 651,905
Professional fees..................... 159,247
Custodian fees........................ 94,832
Shareholder reports and notices (Note
3).................................. 73,969
Directors' fees and expenses (Note
3).................................. 32,063
Registration fees..................... 31,940
Other................................. 17,795
-------------
TOTAL EXPENSES.................... 3,752,649
-------------
NET INVESTMENT INCOME........... 56,707,778
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (Note 1):
Net realized loss on investments...... (76,848,632)
Net change in unrealized depreciation
on investments...................... 28,298,582
-------------
NET LOSS ON INVESTMENTS........... (48,550,050)
-------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS..... $ 8,157,728
-------------
-------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
AUGUST 31, 1994 AUGUST 31, 1993
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income................................................. $ 56,707,778 $ 60,703,249
Net realized loss on investments...................................... (76,848,632) (153,452,598)
Net change in unrealized depreciation on investments.................. 28,298,582 192,543,541
------------------ ------------------
Net increase in net assets resulting from operations.............. 8,157,728 99,794,192
Dividends to shareholders from net investment income.................... (61,815,632) (74,108,041)
Net increase (decrease) from transactions in capital stock (Note 4)..... (8,060,726) 1,938,805
------------------ ------------------
Total increase (decrease)......................................... (61,718,630) 27,624,956
NET ASSETS:
Beginning of period..................................................... 539,581,377 511,956,421
------------------ ------------------
END OF PERIOD (including undistributed net investment income of
$6,101,935 and $11,209,789, respectively).............................. $ 477,862,747 $ 539,581,377
------------------ ------------------
------------------ ------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES--Dean Witter High Yield Securities Inc.
(the "Fund") is registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end management investment company. The Fund was
incorporated in Maryland on June 14, 1979.
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 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,
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); (4) certain of the Fund's portfolio securities
may be valued by an outside pricing service approved by the Directors. The
pricing service utilizes a matrix system incorporating security quality,
maturity and coupon as the evaluation model parameters, and/or research and
evaluations by its staff, including review of broker-dealer market price
quotations, in determining what it believes is the fair valuation of the
portfolio securities value by such pricing service; (5) short-term debt
securities having a maturity date of more than sixty days are valued on a
mark-to-market basis, that is, at prices based on market quotations for
securities of a similar type, yield, quality and maturity, until sixty days
prior to maturity and thereafter at amortized cost using 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; and (6) all other
securities and other assets are valued at their fair value as determined in
good faith under procedures established by and under the supervision of the
Directors.
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 on the identified cost
method. Dividend income is recognized on the ex-dividend date. Interest
income is recognized on an accrual basis. Discounts on securities purchased
are amortized over the life of the respective securities. The Fund does not
amortize premiums on securities purchased.
C. REPURCHASE AGREEMENTS -- The Fund's custodian takes possession on behalf
of the Fund of the collateral pledged for investments in repurchase
agreements. It is the policy of the Fund to value the underlying collateral
daily on a mark-to-market basis to determine that the value, including
accrued interest, is at least equal to the repurchase price plus accrued
interest. In the event of default of the obligation to repurchase, the Fund
has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation.
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 record date. The
amount of dividends and distributions from net investment
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
income and net realized capital gains are determined in accordance with
federal income tax regulations which may differ from generally accepted
accounting principles. These "book/tax" differences are either considered
temporary or permanent in nature. To the extent these differences are
permanent in nature, such amounts are reclassified within the capital
accounts based on their federal tax-basis treatment; temporary differences
do not require reclassification. Dividends and distributions which exceed
net investment income and net realized capital gains for financial reporting
purposes but not for tax purposes are reported as dividends in excess of net
investment income or distributions in excess of net realized capital gains.
To the extent they exceed net investment income and net realized capital
gains for tax purposes, they are reported as distributions of
paid-in-capital.
2. INVESTMENT MANAGEMENT AGREEMENT--Pursuant to an Investment Management
Agreement with Dean Witter InterCapital Inc. (the "Investment Manager"), the
Fund pays its Investment Manager a monthly management fee, calculated and
accrued daily, by applying the following annual rates to the net assets of the
Fund determined as of the close of each business day: 0.50% of the portion of
daily net assets not exceeding $500 million; 0.425% to the portion of daily net
assets exceeding $500 million but not exceeding $750 million; 0.375% to the
portion of daily net assets exceeding $750 million but not exceeding $1 billion;
0.35% to the portion of daily net assets exceeding $1 billion but not exceeding
$2 billion; 0.325% to the portion of daily net assets exceeding $2 billion but
not exceeding $3 billion; and 0.30% to the portion of daily net assets exceeding
$3 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. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES--The cost of
purchases and proceeds from sales of portfolio securities, excluding short-term
investments, for the year ended August 31, 1994, aggregated $652,983,010 and
$691,941,145, respectively, including purchases and sales of U.S. Government
securities of $67,340,111 and $45,550,898, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At August 31, 1994, the Fund had
transfer agent fees and expenses payable of approximately $72,000.
On April 1, 1991, the Fund established an unfunded noncontributory defined
benefit pension plan covering all independent Directors of the Fund who will
have served as an independent Director for at least five years at the time of
retirement. Benefits under this plan are based on years of service and
compensation during the last five years of service. Aggregate pension costs for
the year ended August 31, 1994, included in Directors' fees and expenses in the
Statement of Operations, amounted to $9,519. At August 31, 1994, the Fund had an
accrued pension liability of $44,454 which is included in accrued expenses in
the Statement of Assets and Liabilities.
Bowne & Co., Inc. is an affiliate of the Fund by virtue of a common Fund
Director and Director of Bowne & Co., Inc. During the year ended August 31,
1994, the Fund paid Bowne & Co., Inc. $10,095 for printing of shareholder
reports.
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
Shares of the Fund are distributed by Dean Witter Distributors Inc., (the
"Distributor"), an affiliate of the Investment Manager. The Distributor has
informed the Fund that during the year ended August 31, 1994, it received
approximately $2,208,000 in such commissions from the sale of shares of the
Fund's capital stock. Such commission are deducted from the proceeds of the
capital stock shares and are not an expense of the Fund.
4. CAPITAL STOCK--Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
AUGUST 31, 1994 AUGUST 31, 1993
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold....................................... 8,570,571 $ 65,945,121 8,921,262 $ 63,424,552
Reinvestment of dividends.................. 4,091,370 30,921,535 5,197,329 36,747,862
----------- ------------- ----------- -------------
12,661,941 96,866,656 14,118,591 100,172,414
Repurchased................................ (13,897,033) (104,927,382) (13,736,837) (98,233,609)
----------- ------------- ----------- -------------
Net increase (decrease).................... (1,235,092) $ (8,060,726) 381,754 $ 1,938,805
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
5. FEDERAL INCOME TAX STATUS--At August 31, 1994, the Fund had net capital loss
carryovers of approximately $890,107,000 of which $3,119,000 will be available
through August 31, 1995, $37,795,000 will be available through August 31, 1996,
$94,246,000 will be available through August 31, 1997, $82,210,000 will be
available through August 31, 1998, $292,752,000 will be available through August
31, 1999, $182,732,000 will be available through August 31, 2000, $30,847,000
will be available through August 31, 2001 and $166,406,000 will be available
through August 31, 2002 to offset future capital gains to the extent provided by
regulations. Any net capital losses incurred after October 31 ("post-October
losses") within the taxable year are deemed to arise on the first business day
of the Fund's next taxable year. The Fund incurred and will elect to defer such
net capital losses of approximately $65,553,000 during such period in fiscal
1994. To the extent that these carryover losses are used to offset future
capital gains, it is probable that the gains so offset will not be distributed
to shareholders.
At August 31, 1994, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales and post-October losses and
permanent book/tax differences primarily attributable to expired capital loss
carryovers and dividend redesignations. To reflect cumulative reclassifications
arising from permanent book/tax differences as of August 31, 1993
paid-in-capital was charged $5,176,186, accumulated undistributed net investment
income was charged $6,032,880 and accumulated net realized loss on investments
was credited $11,209,066.
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected ratios and per share data for a share of capital stock outstanding
throughout each period:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED AUGUST 31,
-------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988
-------- -------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period..................... $ 7.58 $ 7.23 $ 5.92 $ 6.78 $ 10.40 $ 11.99 $ 13.72
-------- -------- -------- -------- -------- ---------- ----------
Net investment income...... .79 .89 .95 .94 1.48 1.67 1.84
Net realized and unrealized
gain (loss) on
investments............... (.68) .54 1.04 (.86) (3.78) (1.48) (1.77)
-------- -------- -------- -------- -------- ---------- ----------
Total from investment
operations................. .11 1.43 1.99 .08 (2.30) .19 .07
-------- -------- -------- -------- -------- ---------- ----------
Less dividends and
distributions:
Dividends from net
investment income......... (.86) (1.08) (.68) (.94) (1.32) (1.75) (1.80)
Distributions to
shareholders from paid-in
capital................... -0- -0- -0- -0- -0- (.03) -0-
-------- -------- -------- -------- -------- ---------- ----------
Total dividends and
distributions.............. (.86) (1.08) (.68) (.94) (1.32) (1.78) (1.80)
-------- -------- -------- -------- -------- ---------- ----------
Net asset value, end of
period..................... $ 6.83 $ 7.58 $ 7.23 $ 5.92 $ 6.78 $ 10.40 $ 11.99
-------- -------- -------- -------- -------- ---------- ----------
-------- -------- -------- -------- -------- ---------- ----------
TOTAL INVESTMENT RETURN+..... .93% 22.29% 35.46% 4.67% (23.28)% 1.39% .97%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)................. $477,863 $539,581 $511,956 $436,354 $690,357 $1,793,520 $2,140,212
Ratio of expenses to average
net assets................. .69% .67% .77% .87% .60% .49% .49%
Ratio of net investment
income to average net
assets..................... 10.40% 12.14% 13.96% 16.47% 17.67% 14.61% 14.79%
Portfolio turnover rate...... 127% 173% 113% 93% 21% 55% 107%
<CAPTION>
1987 1986 1985
---------- ---------- ----------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMAN
Net asset value, beginning of
period..................... $ 14.16 $ 13.40 $ 12.71
---------- ---------- ----------
Net investment income...... 1.82 1.80 1.75
Net realized and unrealized
gain (loss) on
investments............... (.46) .76 .74
---------- ---------- ----------
Total from investment
operations................. 1.36 2.56 2.49
---------- ---------- ----------
Less dividends and
distributions:
Dividends from net
investment income......... (1.80) (1.80) (1.80)
Distributions to
shareholders from paid-in
capital................... -0- -0- -0-
---------- ---------- ----------
Total dividends and
distributions.............. (1.80) (1.80) (1.80)
---------- ---------- ----------
Net asset value, end of
period..................... $ 13.72 $ 14.16 $ 13.40
---------- ---------- ----------
---------- ---------- ----------
TOTAL INVESTMENT RETURN+..... 10.07% 20.19% 20.67%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)................. $2,034,352 $1,292,233 $ 584,182
Ratio of expenses to average
net assets................. .51% .60% .66%
Ratio of net investment
income to average net
assets..................... 12.83% 12.80% 13.32%
Portfolio turnover rate...... 176% 95% 126%
<FN>
- --------------------
+ Does not reflect the deduction of sales load.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of Dean Witter High Yield Securities
Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Dean Witter High Yield Securities
Inc. (the "Fund") at August 31, 1994, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the ten years in the
period then ended, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities owned at
August 31, 1994 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
October 12, 1994
<PAGE>
DEAN WITTER
HIGH YIELD
SECURITIES
[Photo]
ANNUAL REPORT
AUGUST 31, 1994
BOARD OF DIRECTORS
Jack Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. John E. Jeuck
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
Edward R. Telling
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
Peter M. Avelar
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
LEGAL COUNSEL
Sheldon Curtis
Two World Trade Center
New York, New York 10048
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
The report is submitted for the general information of shareholders of the Fund.
For more detailed information about the Fund, its officers and trustees, fees,
expenses and other pertinent information, please see the prospectus of the Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus.
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES
GROWTH OF $10,000
($ IN THOUSANDS)
<TABLE>
<CAPTION>
DATE TOTAL LEHMAN MF CORP/HIGH YLD INDEX
- ---------------------------------------------------------------------
<S> <C> <C>
August 31, 1984 $ 9,450 $10,000
- ---------------------------------------------------------------------
August 31, 1985 $11,404 $12,722
- ---------------------------------------------------------------------
August 31, 1986 $13,706 $15,523
- ---------------------------------------------------------------------
August 31, 1987 $15,087 $16,065
- ---------------------------------------------------------------------
August 31, 1988 $15,233 $17,538
- ---------------------------------------------------------------------
August 31, 1989 $15,444 $19,834
- ---------------------------------------------------------------------
August 31, 1990 $11,849 $20,827
- ---------------------------------------------------------------------
August 31, 1991 $12,402 $24,150
- ---------------------------------------------------------------------
August 31, 1992 $16,800 $27,947
- ---------------------------------------------------------------------
August 31, 1993 $20,544 $31,792
- ---------------------------------------------------------------------
August 31, 1994 $20,735(3) $31,280
- ---------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
1 YEAR 5 YEARS 10 YEARS
- ----------------------------------------------------------------
<S> <C> <C> <C>
Non-Standard 0.93(1) 6.07(1) 8.18(1)
- ----------------------------------------------------------------
Standard (-FESC) -4.62(2) 4.88(2) 7.57(2)
- ----------------------------------------------------------------
-----------------------------------
_______Fund _______LEHMAN(4)
-----------------------------------
Past performance is not predictive of future returns.
<FN>
________________________________________
(1) Figure shown assumes reinvestment of all distributions and does not reflect
the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and the deduction of
the maximum applicable front-end sales charge (5.5%). See the Fund's
current prospectus for complete details on sales charges.
(3) Closing value assuming a complete redemption on August 31, 1994.
(4) The Lehman Brothers Mutual Fund Corporate/ High Yield Index is an index
measuring all investment and noninvestment grade corporate debt securities.
</TABLE>
