WITTER DEAN HIGH YIELD SECURITIES INC, 497, 1994-11-03

WITTER DEAN HIGH YIELD SECURITIES INC
497, 1994-11-03

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<TABLE>
<S> <C>
PROSPECTUS TABLE OF CONTENTS
OCTOBER 28, 1994 Prospectus Summary/2
Dean Witter High Yield Summary of Fund Expenses/3
Securities Inc. (the "Fund") is an open-end Financial Highlights/3
diversified management investment company The Fund and its Management/4
whose primary investment objective is to Investment Objectives and Policies/4
earn a high level of current income. As a Special Risk Considerations/5
secondary objective, the Fund will seek Investment Restrictions/9
capital appreciation, but only when Purchase of Fund Shares/9
consistent with its primary objective. The Shareholder Services/12
Fund seeks high current income by investing Redemptions and Repurchases/14
principally in fixed-income securities which Dividends, Distributions and Taxes/16
are rated in the lower categories by Performance Information/17
established rating services (Baa or lower by Additional Information/17
Moody's Investors Service, Inc. or BBB or Appendix/18
lower by Standard & Poor's Corporation) or SHARES OF THE FUND ARE NOT DEPOSITS OR
are non-rated securities of comparable OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
quality. BY, ANY BANK, AND THE SHARES ARE NOT
INVESTORS SHOULD CAREFULLY FEDERALLY INSURED BY THE FEDERAL DEPOSIT
CONSIDER THE RELATIVE RISKS, INCLUDING THE INSURANCE CORPORATION, THE FEDERAL RESERVE
RISK OF DEFAULT, OF INVESTING IN HIGH YIELD BOARD, OR ANY OTHER AGENCY.
SECURITIES, WHICH ARE COMMONLY KNOWN AS JUNK THESE SECURITIES HAVE NOT BEEN APPROVED OR
BONDS. BONDS OF THIS TYPE ARE CONSIDERED TO DISAPPROVED BY THE SECURITIES AND EXCHANGE
BE SPECULATIVE WITH REGARD TO THE PAYMENT OF COMMISSION OR ANY STATE SECURITIES
INTEREST AND RETURN OF PRINCIPAL. INVESTORS COMMISSION NOR HAS THE COMMISSION OR ANY
SHOULD ALSO BE COGNIZANT OF THE FACT THAT STATE SECURITIES COMMISSION PASSED UPON THE
SUCH SECURITIES ARE NOT GENERALLY MEANT FOR ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
SHORT-TERM INVESTING AND SHOULD ASSESS THE REPRESENTATION TO THE CONTRARY IS A CRIMINAL
RISKS ASSOCIATED WITH AN INVESTMENT IN THE OFFENSE.
FUND. (See "Investment Objectives and DEAN WITTER DISTRIBUTORS INC.
Policies.") The Fund has suspended DISTRIBUTOR
indefinitely the offering of its shares to
new investors. The Fund continues to offer
its shares to current shareholders.
This Prospectus sets forth
concisely the information you should know
before investing in the Fund. It should be
read and retained for future reference.
Additional information about the Fund is
contained in the Statement of Additional
Information, dated October 28, 1994, which
has been filed with the Securities and
Exchange Commission, and which is available
at no charge upon request of the Fund at the
address or telephone numbers listed below.
The Statement of Additional Information is
incorporated herein by reference.
Dean Witter
High Yield Securities Inc.
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 526-3143
</TABLE>
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<TABLE>
<S> <C>
PROSPECTUS SUMMARY
The Fund An open-end diversified management investment company investing principally in
lower-rated fixed-income securities (see page 4).
Shares Offered Common stock of $0.01 par value (see page 17).
Offering The price of the shares offered by this prospectus varies with the changes in the
Price value of the Fund's investments. The offering price, determined once daily as of
4:00 P.M., New York time, on each day that the New York Stock Exchange is open,
is equal to the net asset value plus a sales charge of 5.5% of the offering
price, scaled down on purchases of $25,000 or over (see page 9). The Fund has
suspended indefinitely the offering of its shares to new investors. The Fund
continues to offer its shares to current shareholders. Automatic dividends and
distributions and other existing shareholder services are not affected.
Minimum Minimum initial investment, $1,000; minimum subsequent investment, $100 (see page
Purchase 9).
Investment A high level of current income primarily; capital appreciation is secondary (see
Objectives page 4).
Investment High yield fixed-income securities, principally rated Baa/BBB or lower, and
Policies non-rated securities of comparable quality. However, the Fund may also invest in
municipal securities, futures
and options and common stock under certain circumstances (see pages 4 through 8).
Investment Dean Witter InterCapital Inc., the Investment Manager of the Fund, and its
Manager wholly-owned subsidiary, Dean Witter Services Company, Inc., serve in various
investment management, advisory, management and administrative capacities to
ninety investment companies and other portfolios, with assets of approximately
$71.3 billion at August 31, 1994 (see page 4).
Management The monthly fee is at an annual rate of 1/2 of 1% of average daily net assets,
Fee scaled down on assets over $500 million (see page 4).
Dividends and Income dividends are declared and paid monthly; capital gains, if any, may be
Capital Gains distributed at least annually. Dividends and distributions are automatically
Distributions reinvested in additional shares at net asset value (without sales charge), unless
the shareholder elects to receive cash (see page 16).
Distributor Dean Witter Distributors Inc. (see page 9).
Sales 5.5% of offering price (5.82% of amount invested); reduced charges on purchases
Charge of $25,000 or more (see page 10).
Redemption Shares are redeemable by the shareholder at net asset value. An account may be
involuntarily redeemed if the shares owned have a value of less than $100 (see
page 14).
Risks Compared with higher rated, lower yielding fixed-income securities, portfolio
securities of the Fund may be subject to greater risk of loss of income and
principal and greater risk of increases and decreases in net asset value due to
market fluctuations. The Fund may purchase foreign securities, when-issued and
delayed delivery and when, as and if issued securities and other securities
subject to repurchase agreements which involve certain special risks. The Fund
may purchase common stock which is exchangeable for fixed-income securities in
circumstances involving takeovers or recapitalizations. The Fund may also invest
in futures and options which may be considered speculative in nature and may
involve greater risks than those customarily assumed by certain other investment
companies which do not invest in such instruments. Investors should review the
investment objectives and policies of the Fund carefully and consider their
ability to assume the risks involved in purchasing shares of the Fund (see pages
4 through 8).
THE ABOVE IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING
ELSEWHERE IN THE PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION.
</TABLE>

2
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SUMMARY OF FUND EXPENSES
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The following table illustrates all expenses and fees that a shareholder of the
Fund will incur. The expenses and fees set forth in the table are for the fiscal
year ended August 31, 1994.

<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
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<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)................................... 5.50%
Maximum Sales Charge Imposed on Reinvested Dividends............................................................ None
Deferred Sales Charge........................................................................................... None
Redemption Fees................................................................................................. None
Exchange Fees................................................................................................... None
</TABLE>

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
Management Fees................................................................................................. .49%
Other Expenses.................................................................................................. .20%
Total Fund Operating Expenses................................................................................... .69%
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS
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<S> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual
return and (2) redemption at the end of each time period:...................... $ 61 $ 75 $ 90

<CAPTION>
EXAMPLE 10 YEARS
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<S> <C>
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual
return and (2) redemption at the end of each time period:...................... $ 134
</TABLE>

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND MAY BE GREATER OR
LESS THAN THOSE SHOWN.

The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management" and "Purchase of Fund Shares" in this Prospectus.
There are reduced sales charges on purchases of $25,000 or more (see "Purchase
of Fund Shares" in this Prospectus).

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

The following ratios and per share data for a share of capital stock outstanding
throughout each year have been audited by Price Waterhouse LLP, independent
accountants. The financial highlights should be read in conjunction with the
financial statements, notes thereto and the unqualified report of independent
accountants which are contained in the Statement of Additional Information.
Further information about the performance of the Fund is contained in the Fund's
Annual Report to Stockholders, which may be obtained without charge upon request
to the Fund.

<TABLE>
<CAPTION>
FOR THE YEAR ENDED AUGUST 31,
------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
------- ------- ------- ------- ------- --------- --------- --------- --------- -------
<S> <C> <C> <C> <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 $ 14.16 $ 13.40 $ 12.71
------- ------- ------- ------- ------- --------- --------- --------- --------- -------
Investment
income--net.......... .79 .89 .95 .94 1.48 1.67 1.84 1.82 1.80 1.75
Realized and
unrealized gain
(loss) on
investments--net..... (.68) .54 1.04 (.86) (3.78) (1.48) (1.77) (.46) .76 .74
------- ------- ------- ------- ------- --------- --------- --------- --------- -------
Total from investment
operations............. .11 1.43 1.99 .08 (2.30) .19 .07 1.36 2.56 2.49
------- ------- ------- ------- ------- --------- --------- --------- --------- -------
Less dividends and
distributions:
Dividends from net
investment income.... (.86) (1.08) (.68) (.94) (1.32) (1.75) (1.80) (1.80) (1.80) (1.80)
Distributions to
shareholders from net
realized gains on
investments.......... -0- -0- -0- -0- -0- -0- -0- -0- -0- -0-
Distributions to
shareholders from
paid-in capital...... -0- -0- -0- -0- -0- (.03) -0- -0- -0- -0-
------- ------- ------- ------- ------- --------- --------- --------- --------- -------
Total dividends and
distributions.......... (.86) (1.08) (.68) (.94) (1.32) (1.78) (1.80) (1.80) (1.80) (1.80)
------- ------- ------- ------- ------- --------- --------- --------- --------- -------
Net asset value, end of
period................. $ 6.83 $ 7.58 $ 7.23 $ 5.92 $ 6.78 $ 10.40 $ 11.99 $ 13.72 $ 14.16 $ 13.40
------- ------- ------- ------- ------- --------- --------- --------- --------- -------
------- ------- ------- ------- ------- --------- --------- --------- --------- -------
TOTAL INVESTMENT
RETURN+.................. .93% 22.29% 35.46% 4.67% (23.28%) 1.39% .97% 10.07% 20.19% 20.67%
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 $2,034,352 $1,292,233 $584,182
Ratio of expenses to
average net assets... .69% .67% .77% .87% .60% .49% .49% .51% .60% .66%
Ratio of net
investment income to
average net assets... 10.40% 12.14% 13.96% 16.47% 17.67% 14.61% 14.79% 12.83% 12.80% 13.32%
Portfolio turnover
rate................. 127% 173% 113% 93% 21% 55% 107% 176% 95% 126%
<FN>
- ----------------------------------------
+ Does not reflect the deduction of sales load.
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

3
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THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------

Dean Witter High Yield Securities Inc. (the "Fund") is an open-end
diversified management investment company incorporated in Maryland on June 14,
1979.

Dean Witter InterCapital Inc. ("InterCapital" or the "Investment Manager"),
whose address is Two World Trade Center, New York, New York 10048, is the Fund's
Investment Manager. The Investment Manager, which was incorporated in July,
1992, is a wholly-owned subsidiary of Dean Witter, Discover & Co. ("DWDC"), a
balanced financial services organization providing a broad range of nationally
marketed credit and investment products.

InterCapital and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to ninety investment companies, thirty of which are
listed on the New York Stock Exchange, with combined total assets of
approximately $69.3 billion as of August 31, 1994. The Investment Manager also
manages, and advises managers of, common stock portfolios of pension plans,
other institutions and individuals which aggregated approximately $2 billion at
such date.

The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs and manage the investment of the Fund's
assets, including the placing of orders for the purchase and sale of portfolio
securities. InterCapital has retained Dean Witter Services Company Inc. to
perform the aforementioned administrative services for the Fund.

The Fund's Board of Directors reviews the various services provided by or
under the direction of the Investment Manager to ensure that the Fund's general
investment policies and programs are being properly carried out and that
administrative services are being provided to the Fund in a satisfactory manner.

INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------

The primary investment objective of the Fund is to earn a high level of
current income. As a secondary objective, the Fund will seek capital
appreciation, but only when consistent with its primary objective. Capital
appreciation may result, for example, from an improvement in the credit standing
of an issuer whose securities are held in the Fund's portfolio or from a general
decline in interest rates, or a combination of both. Conversely, capital
depreciation may result, for example, from a lowered credit standing or a
general rise in interest rates, or a combination of both. There is no assurance
that the objectives will be achieved.

The higher yields sought by the Fund are generally obtainable from
securities rated in the lower cate-
gories by recognized rating services. The Fund seeks high current income by
investing principally in fixed-income securities rated Baa or lower by Moody's
Investors Service, Inc. ("Moody's"), or BBB or lower by Standard & Poor's
Corporation ("Standard & Poor's"). Fixed-income securities rated Baa by Moody's
or BBB by Standard & Poor's have speculative characteristics greater than those
of more highly rated bonds, while fixed-income securities rated Ba or BB or
lower by Moody's and Standard & Poor's, respectively, are considered to be
speculative investments. Furthermore, the Fund does not have any minimum quality
rating standard for its investments. As such, the Fund may invest in securities
rated as low as Caa, Ca or C by Moody's or CCC, CC, C or C1 by Standard &
Poor's. Fixed-income securities rated Caa or Ca by Moody's may already be in
default on payment of interest or principal, while bonds rated C

4
<PAGE>
by Moody's, their lowest bond rating, can be regarded as having extremely poor
prospects of ever attaining any real investment standing. Bonds rated C1 by
Standard & Poor's, their lowest bond rating, are no longer making interest
payments. For a further discussion of the characteristics and risks associated
with high yield securities, see "Special Investment Considerations" below. A
description of corporate bond ratings is contained in the Appendix.

Non-rated securities will also be considered for investment by the Fund when
the Investment Manager believes that the financial condition of the issuers of
such securities, or the protection afforded by the terms of the securities
themselves, makes them appropriate investments for the Fund.

In circumstances where the Investment Manager determines that investment in
municipal obligations would facilitate the Fund's ability to accomplish its
investment objectives, it may invest up to 10% of its total assets in such
obligations, including municipal bonds issued at a discount.

All fixed-income securities are subject to two types of risks: the credit
risk and the interest rate risk. The credit risk relates to the ability of the
issuer to meet interest or principal payments or both as they come due.
Generally, higher yielding bonds are subject to a credit risk to a greater
extent than higher quality bonds. The interest rate risk refers to the
fluctuations in net asset value of any portfolio of fixed-income securities
resulting solely from the inverse relationship between price and yield of
fixed-income securities; that is, when the general level of interest rates
rises, the prices of outstanding fixed-income securities generally decline, and
when interest rates fall, prices generally rise.

The ratings of fixed-income securities by Moody's and Standard & Poor's are
a generally accepted barometer of credit risk. However, as the creditworthiness
of issuers of lower-rated fixed-income securities is more problematical than
that of issuers of higher-rated fixed-income securities, the achievement of the
Fund's investment objective will be more dependent upon the Investment Manager's
own credit analysis than would be the case with a mutual fund investing
primarily in higher quality bonds. The Investment Manager will utilize a
security's credit rating as simply one indication of an issuer's
creditworthiness and will principally rely upon its own analysis of any security
currently held by the Fund or potentially purchasable by the Fund for its
portfolio.

In determining which securities to purchase or hold for the Fund's portfolio
and in seeking to reduce credit and interest rate risks, the Investment Manager
will rely on information from various sources, including: the rating of the
security; research, analysis and appraisals of brokers and dealers, including
DWR; the views of the Fund's directors and others regarding economic
developments and interest rate trends; and the Investment Manager's own analysis
of factors it deems relevant. The extent to which the Investment Manager is
successful in reducing depreciation or losses arising from either interest rate
or credit risks depends in part on the Investment Manager's portfolio management
skills and judgment in evaluating the factors affecting the value of securities.
No assurance can be given regarding the degree of success that will be achieved.

SPECIAL RISK CONSIDERATIONS

Because of the special nature of the Fund's investment in high yield
securities, commonly known as junk bonds, the Investment Manager must take
account of certain special considerations in assessing the risks associated with
such investments. Although the growth of the high yield securities market in the
1980s had paralleled a long economic expansion, recently many issuers have been
affected by adverse economic and market conditions. It should be recognized that
an economic downturn or increase in interest rates is likely to have a negative
effect on the high yield bond market and on the value of the high yield
securities held by the Fund, as well as on the ability of the securities'
issuers to repay principal and interest on their borrowings.

The prices of high yield securities have been found to be less sensitive to
changes in prevailing interest rates than higher-rated investments, but are
likely to be more sensitive to adverse economic changes or individual corporate
developments. During an economic downturn or substantial period of rising
interest rates, highly leveraged issuers may experience financial stress which
would adversely affect their ability to service their principal and interest
payment obligations, to meet their projected business goals or to obtain
additional financing. If the issuer of a fixed-income security owned by the Fund
defaults, the Fund may incur additional expenses to seek recovery. In addition,
periods of economic uncertainty and change can be expected to result in an
increased volatility of market prices of high yield securities and a concomitant
volatility in the net asset value of a share of the Fund.

5
<PAGE>
Moreover, the market prices of certain of the Fund's portfolio securities which
are structured as zero coupon and payment-in-kind securities are affected to a
greater extent by interest rate changes and thereby tend to be more volatile
than securities which pay interest periodically and in cash (see "Dividends,
Distributions and Taxes" for a discussion of the tax ramifications of
investments in such securities).

The secondary market for high yield securities may be less liquid than the
markets for higher quality securities and, as such, may have an adverse effect
on the market prices of certain securities. The limited liquidity of the market
may also adversely affect the ability of the Fund's Directors to arrive at a
fair value for certain high yield securities at certain times and could make it
difficult for the Fund to sell certain securities. In addition, new laws and
potential new laws may have an adverse effect upon the value of high yield
securities and a concomitant negative impact upon the net asset value of a share
of the Fund.

During the fiscal year ended August 31, 1994, the monthly dollar weighted
average ratings of the debt obligations held by the Fund, expressed as a
percentage of the Fund's total investments, were as follows:

<TABLE>
<CAPTION>
PERCENTAGE OF
RATINGS TOTAL INVESTMENTS
-------------------- ----------------------
<S> <C>
AAA/Aaa 4.0%
AA/Aa 0.0%
A/A 0.0%
BBB/Baa 0.0%
BB/Ba 7.6%
B/B 60.9%
CCC/Caa 17.1%
CC/Ca 1.6%
C/C 0.0%
D 0.0%
Unrated 8.8%
</TABLE>

Consistent with its primary investment objective, the Fund anticipates that,
under normal conditions, at least 65% of the value of its total assets will be
invested in the lower-rated and non-rated fixed-income securities previously
described. However, when the difference between yields derived from such
securities and those derived from higher rated issues are relatively narrow, the
Fund may invest in the higher rated issues since they may provide similar yields
with somewhat less risk. Fixed-income securities appropriate for the Fund may
include both convertible and nonconvertible debt securities and preferred stock.

Pending investment of proceeds from the sale of shares of the Fund or of its
portfolio securities or at other times when market conditions dictate a more
"defensive" investment strategy, the Fund may invest without limit in money
market instruments, including commercial paper of corporations organized under
the laws of any state or political subdivision of the United States,
certificates of deposit, bankers' acceptances and other obligations of domestic
banks or domestic branches of foreign banks, or foreign branches of domestic
banks, in each case having total assets of at least $500 million, and
obligations issued or guaranteed by the United States Government, or foreign
governments or their respective instrumentalities or agencies. The yield on
these securities will generally tend to be lower than the yield on other
securities to be purchased by the Fund. To the extent the Fund purchases
Eurodollar certificates of deposit issued by foreign branches of domestic United
States banks, consideration will be given to their domestic marketability, the
lower reserve requirements normally mandated for overseas banking operations,
the possible impact of interruptions in the flow of international currency
transactions and economic developments which might adversely affect the payment
of principal or interest.

PUBLIC UTILITIES. The Fund's investments in public utilities, if any, may
be subject to certain risks incurred by the Fund due to Federal, State or
municipal regulatory changes, insufficient rate increases or cost overruns.

REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements, which
may be viewed as a type of secured lending by the Fund, and which typically
involve the acquisition by the Fund of debt securities, from a selling financial
institution such as a bank, savings and loan association or broker-dealer. The
agreement provides that the Fund will sell back to the institution, and that the
institution will repurchase, the underlying security ("collateral") at a
specified price and at a fixed time in the future, usually not more than seven
days from the date of purchase. While

6
<PAGE>
repurchase agreements involve certain risks not associated with direct
investments in debt securities, the Fund follows procedures designed to minimize
such risks.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Fund may purchase
securities on a when-issued or delayed delivery basis; I.E., delivery and
payment can take place a month or more after the date of the transaction. These
securities are subject to market fluctuation and no interest accrues to the
purchaser prior to settlement. At the time the Fund makes the commitment to
purchase such securities, it will re-cord the transaction and thereafter reflect
the value, each day, of such security in determining its net asset value. An
increase in the percentage of the Fund's assets committed to the purchase of
securities on a when-issued or delayed delivery basis may increase the
volatility of the Fund's net asset value.

WHEN, AS AND IF ISSUED SECURITIES. The Fund may purchase securities on a
"when, as and if issued" basis under which the issuance of the security depends
upon the occurrence of a subsequent event, such as approval of a merger,
corporate reorganization, leveraged buyout or debt restructuring. If the
anticipated event does not occur and the securities are not issued, the Fund
will have lost an investment opportunity. There is no overall limit on the
percentage of the Fund's assets which may be committed to the purchase of
securities on a "when, as and if issued" basis. An increase in the percentage of
the Fund's assets committed to the purchase of securities on a "when, as and if
issued" basis may increase the volatility of its net asset value.

FOREIGN SECURITIES. The Fund may invest up to 20% of its total assets in
fixed-income securities issued by foreign governments and other foreign issuers
and in foreign currency issues of domestic issuers, but not more than 10% of its
total assets in such securities, whether issued by a foreign or domestic issuer,
which are denominated in foreign currency. Foreign securities investments may be
affected by changes in currency rates or exchange control regulations, changes
in governmental administration or economic or monetary policy (in the United
States and abroad) or changed circumstances in dealings between nations. Costs
will be incurred in connection with conversions between various currencies held
by the Fund.

Investments in foreign securities will also occasion risks relating to
political and economic developments abroad, including the possibility of
expropriations or confiscatory taxation, limitations on the use or transfer of
Fund assets and any effects of foreign social, economic or political
instability. Foreign companies are not subject to the regulatory requirements of
U.S. companies and, as such, there may be less publicly available information
about such companies. Moreover, foreign companies are not subject to uniform
accounting, auditing and financial reporting standards and requirements
comparable to those applicable to U.S. companies. Finally, in the event of a
default of any foreign debt obligations, it may be more difficult for the Fund
to obtain or enforce a judgment against the issuers of such securities.

Securities of foreign issuers may be less liquid than comparable securities
of U.S. issuers and, as such, their price changes may be more volatile.
Furthermore, foreign exchanges and broker-dealers are generally subject to less
government and exchange scrutiny and regulation than their American
counterparts. Brokerage commissions, dealer concessions and other transaction
costs may be higher on foreign markets than in the U.S. In addition, differences
in clearance and settlement procedures on foreign markets may occasion delays in
settlements of the Fund's trades effected in such markets. As such, the
inability to dispose of portfolio securities due to settlement delays could
result in losses to the Fund due to subsequent declines in value of such
securities and the inability of the Fund to make intended security purchases due
to settlement problems could result in a failure of the Fund to make potentially
advantageous investments.

COMMON STOCKS. The Fund may invest in common stocks in an amount up to 20%
of its total assets in the circumstances described below when consistent with
the Fund's investment objectives. First, the Fund may purchase common stock
which is included in a unit with fixed-income securities purchased by the Fund.
Second, the Fund may acquire common stock when fixed-income securities owned by
the Fund are converted by the issuer into common stock. Third, the Fund may
exercise warrants attached to fixed-income securities purchased by the Fund.
Finally, the Fund may purchase the common stock of companies involved in
takeovers or recapitalizations where the issuer or a stockholder has offered, or
pursuant to a

7
<PAGE>
"going private" transaction is effecting, a transaction involving the issuance
of newly issued fixed-income securities to the holders of such common stock.

FUTURES CONTRACTS AND OPTIONS ON FUTURES. The Fund may invest in financial
futures contracts ("futures contracts") and related options thereon. The Fund
may sell a futures contract or a call option thereon or purchase a put option on
such futures contract, if the Investment Manager anticipates interest rates to
rise, as a hedge against a decrease in the value of the Fund's portfolio
securities. If the Investment Manager anticipates that interest rates will
decline, the Fund may purchase a futures contract or a call option thereon or
sell a put option on such futures contract to protect against an increase in the
price of the securities the Fund intends to purchase. These futures contracts
and related options thereon will be used only as a hedge against anticipated
interest rate changes.

The Fund may not enter into futures contracts or purchase related options
thereon if immediately thereafter the amount committed to margin plus the amount
paid for premiums for unexpired options on futures contracts exceeds 5% of the
value of the Fund's total assets. The Fund may not purchase or sell futures
contracts or related options thereon if, immediately thereafter, more than
one-third of its net assets would be hedged.

OPTIONS. The Fund may purchase or sell (write) listed options on debt
securities as a means of achieving additional return or of hedging the value of
the Fund's portfolio. The Fund may only write covered options which are listed
on national securities exchanges. The Fund may not write covered options in an
amount exceeding 20% of the value of its total assets. The Fund may only buy
options which are listed on national securities exchanges. The Fund will not
purchase options if, as a result, the aggregate cost of all outstanding options
exceeds 10% of the Fund's total assets.

For a discussion of futures and options, including the risks of such
transactions, see the Statement of Additional Information.

PRIVATE PLACEMENTS. The Fund may invest up to 5% of its total assets in
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or which are otherwise not readily marketable. (See "Investment
Restrictions" in the Statement of Additional Information.) These securities are
generally referred to as private placements or restricted securities.
Limitations on the resale of such securities may have an adverse effect on their
marketability, and may prevent the Fund from disposing of them promptly at
reasonable prices. The Fund may have to bear the expense of registering such
securities for resale and the risk of substantial delays in effecting such
registration.

The Securities and Exchange Commission has adopted Rule 144A under the
Securities Act, which permits the Fund to sell restricted securities to
qualified institutional buyers without limitation. The Investment Manager,
pursuant to procedures adopted by the Board of Directors of the Fund, will make
a determination as to the liquidity of each restricted security purchased by the
Fund. If a restricted security is determined to be "liquid", such security will
not be considered to be "restricted" for purposes of the above-disclosed 5%
limitation and will not be included within the category "illiquid securities",
which under current policy may not exceed 15% of the Fund's total assets.

PORTFOLIO MANAGEMENT

The Fund is actively managed by the Investment Manager with a view to
achieving the Fund's investment objective. The Fund is managed within
InterCapital's High Yield Bond Group, which managed approximately $1.2 billion
in assets at August 31, 1994. Peter M. Avelar is a Senior Vice President of
InterCapital and a member of InterCapital's High Yield Bond Group. Mr. Avelar
has been the primary portfolio manager of the Fund since January, 1991. He was
Vice President of InterCapital from December, 1990-- March, 1992, First Vice
President of PaineWebber Asset Management from March, 1989--December, 1990 and
Vice President of Delaware Investment Advisors from June, 1987--March, 1989. He
has been managing fixed portfolios consisting of fixed-income and equity
securities for over five years.

Securities purchased by the Fund are, generally, sold by dealers acting as
principal for their own accounts. Pursuant to an order issued by the Securities
and Exchange Commission, the Fund may effect principal transactions in certain
money market instruments with Dean Witter Reynolds Inc. ("DWR"), a

8
<PAGE>
broker-dealer affiliate of InterCapital. In addition, the Fund may incur
brokerage commissions on transactions conducted through DWR.

Although the Fund does not intend to engage in substantial short-term
trading, it may sell portfolio securities without regard to the length of time
that they have been held, in order to take advantage of new investment
opportunities or yield differentials, or because the Fund desires to preserve
gains or limit losses due to changing economic conditions, interest rate trends,
or the financial condition of the issuer. The Fund's portfolio turnover rate for
the fiscal year ended August 31, 1994 was 127%. The Fund will incur underwriting
discount costs (on underwritten securities) and brokerage costs commensurate
with its portfolio turnover rate. Short term gains and losses may result from
such portfolio transactions. See "Dividends, Distributions and Taxes" for a
discussion of the tax implications of the Fund's trading policy.

Except as otherwise noted, all investment policies and practices discussed
above are not fundamental policies of the Fund and, as such may be changed
without shareholder approval.

INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------

The investment restrictions listed below are among the restrictions that
have been adopted by the Fund as fundamental policies. Under the Investment
Company Act of 1940, as amended (the "Act"), a fundamental policy may not be
changed without the vote of a majority of the outstanding voting securities of
the Fund, as defined in the Act.

The Fund may not:

1. Acquire common stocks in excess of 20% of its total assets.

2. Invest more than 5% of its total assets in the securities of any one
issuer (other than obligations of, or guaranteed by, the United States
Government, its agencies or instrumentalities).

3. Purchase more than 10% of the voting securities, or more than 10% of
any class of securities, of any issuer. For purposes of this restriction,
all outstanding debt securities of an issuer are considered as one class and
all preferred stocks of an issuer are considered as one class.

4. Invest more than 25% of its total assets in securities of issuers in
any one industry. For purposes of this restriction, gas, electric, water and
telephone utilities will each be treated as being a separate industry. This
restriction does not apply to obligations issued or guaranteed by the United
States Government or its agencies or instrumentalities.

5. Invest more than 5% of its total assets in securities of companies
having a record, together with predecessors, of less than three years of
continuous operation. This restriction shall not apply to any obligation of
the United States Government, its agencies or instrumentalities.

PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------

The Fund offers its shares for sale to the public on a continuous basis.
Pursuant to a Distribution Agreement between the Fund and Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager,
shares of the Fund are distributed by the Distributor and offered by DWR and
other dealers who have entered into agreements with the Distributor ("Selected
Broker-Dealers"). The principal executive office of the Distributor is located
at Two World Trade Center, New York, New York 10048. The Fund has suspended
indefinitely the offering of its shares to new investors. Current shareholders
continue to be able to purchase additional Fund shares. Automatic reinvestment
of dividends and distributions and other existing shareholder services such as
the Systematic Withdrawal Plan, EasyInvest-SM- and the Exchange Privilege are
not affected.

The minimum initial purchase is $1,000. Subsequent purchases of $100 or more
may be made by sending a check, payable to Dean Witter High Yield Securities
Inc., directly to Dean Witter Trust Company (the "Transfer Agent") at P.O. Box
1040, Jersey City, N.J. 07303 (see Investment Application at the back of this
Prospectus), or by contacting a DWR or other Selected Broker-Dealer account
executive.

9
<PAGE>
In the case of purchases made pursuant to Systematic Payroll Deduction plans
(including Individual Retirement plans), the Fund, in its discretion, may accept
such Purchases without regard to any minimum amounts which would otherwise be
required if the Fund has reason to believe that additional purchases will
increase the amount of the purchase of shares in all accounts under such plans
to at least $1,000. Certificates for shares purchased will not be issued unless
a request is made by the shareholder in writing to the Transfer Agent. The
offering price will be the net asset value per share next determined following
receipt of an order (see "Determination of Net Asset Value" below), plus a sales
charge (expressed as a percentage of the offering price) on a single transaction
as shown in the following table:

<TABLE>
<CAPTION>
SALES CHARGE
----------------------------------------
PERCENTAGE APPROXIMATE
AMOUNT OF OF PUBLIC PERCENTAGE OF
SINGLE TRANSACTION OFFERING PRICE AMOUNT INVESTED
------------------------------ ------------------ -------------------
<S> <C> <C>
Less than $25,000............. 5.50% 5.82%
$25,000 but less than
$50,000...................... 5.00 5.26
$50,000 but less than
$100,000..................... 4.25 4.44
$100,000 but less than
$250,000..................... 3.25 3.36
$250,000 but less than
$500,000..................... 2.50 2.56
$500,000 but less than
$1,000,000................... 1.75 1.78
$1,000,000 and over........... 0.50 0.50
</TABLE>

Upon notice to all Selected Broker-Dealers, the Distributor may reallow up
to the full applicable sales charge as shown in the above schedule during
periods specified in such notice. During periods when substantially the entire
sales charge is reallowed, such Selected Broker-Dealers may be deemed to be
underwriters as that term is defined in the Securities Act.

The above schedule of sales charges is applicable to purchases in a single
transaction by, among others: (a) an individual; (b) an individual, his or her
spouse and their children under the age of 21 purchasing shares for his or her
own accounts; (c) a trustee or other fiduciary purchasing shares for a single
trust estate or a single fiduciary account; (d) a pension, profit-sharing or
other employee benefit plan qualified or non-qualified under Section 401 of the
Internal Revenue Code; (e) tax-exempt organizations enumerated in Section 501
(c) (3) or (13) of the Internal Revenue Code; (f) employee benefit plans
qualified under Section 401 of the Internal Revenue Code of a single employer or
of employers who are "affiliated persons" of each other within the meaning of
Section 2(a) (3) (c) of the Act; and for investments in Individual Retirement
Accounts of employees of a single employer through Systematic Payroll Deduction
plans; or (g) any other organized group of persons, whether incorporated or not,
provided the organization has been in existence for at least six months and has
some purpose other than the purchase of redeemable securities of a registered
investment company at a discount. Shares of the Fund may be sold at their net
asset value, without the imposition of a sales charge, to the employee benefit
plans established by DWR and SPS Transaction Services, Inc. (an affiliate of
DWR) for their employees as qualified under Section 401(k) of the Internal
Revenue Code.

Sales personnel are compensated for selling shares of the Fund at the time
of their sale by the Distributor and/or Selected Broker-Dealer. In addition,
some sales personnel of the Selected Broker-Dealer will receive various types of
non-cash compensation such as special sales incentives, including trips,
educational and/or business seminars and merchandise.

Shares are sold through the Distributor on a normal five business day
settlement basis; that is, payment is due on the fifth business day (settlement
date) after the order is placed with the Distributor. Shares of the Fund
purchased through the Distributor are entitled to dividends beginning on the
next business day following settlement date. Since DWR and other Selected
Broker-Dealers forward investors' funds on settlement date, they will benefit
from the temporary use of the funds if payment is made prior thereto. As noted
above, orders placed directly with the Transfer Agent must be accompanied by
payment. Investors will be entitled to receive dividends and capital gains
distributions if their order is received by the close of business on the day
prior to the record date for such distributions. The Fund and the Distributor
reserve the right to reject any purchase order.

REDUCED SALES CHARGES
COMBINED PURCHASE PRIVILEGE. Investors may have the benefit of reduced
sales charges in accordance with the above schedule by combining

10
<PAGE>
purchases of shares of the Fund in single transactions with the purchase of
shares of Dean Witter Tax-Exempt Securities Trust and of Dean Witter Funds which
are sold with a contingent deferred sales charge ("CDSC funds"). The sales
charge payable on the purchase of shares of the Fund and Dean Witter Tax-Exempt
Securities Trust will be at their respective rates applicable to the total
amount of the combined concurrent purchases of shares of the Fund, Dean Witter
Tax-Exempt Securities Trust and the CDSC funds.

RIGHT OF ACCUMULATION. The above persons and entities may also benefit from
a reduction of the sales charges in accordance with the above schedule if the
cumulative net asset value of shares purchased in a single transaction, together
with shares previously purchased (including shares of Dean Witter Tax-Exempt
Securities Trust and CDSC funds, and of certain other Dean Witter funds acquired
in exchange for shares of such funds) which are held at the time of such
transaction, amounts to $25,000 or more.

The Distributor must be notified by DWR or other Selected Broker-Dealer or
the shareholder at the time a purchase order is placed that the purchase
qualifies for the reduced charge under the Right of Accumulation. Similar
notification must be made in writing by the dealer or shareholder when such an
order is placed by mail. The reduced sales charge will not be granted if: (a)
such notification is not furnished at the time of the order; or (b) a review of
the records of the Selected Broker-Dealer or the Transfer Agent fails to confirm
the investor's represented holdings.

LETTER OF INTENT. The foregoing schedule of reduced sales charges will also
be available to investors who enter into a written Letter of Intent providing
for the purchase, within a thirteen-month period, of shares of the Fund from DWR
or other Selected Broker-Dealer. The cost of shares of the Fund or shares of
Dean Witter Tax-Exempt Securities Trust which were previously purchased at a
price including a front-end sales charge during the 90-day period prior to the
date of receipt by the Distributor of the Letter of Intent, or of shares of
other Dean Witter funds acquired in exchange for shares of such funds acquired
during such period at a price including a front-end sales charge, which are
still owned by the shareholder, may also be included in determining the
applicable reduction.

For further information concerning purchases of the Fund's shares, contact
DWR or other Selected Broker-Dealer or consult the Statement of Additional
Information.

DETERMINATION OF NET ASSET VALUE

The net asset value per share of the Fund is determined once daily at 4:00
p.m., New York time on each day that the New York Stock Exchange is open by
taking the value of all assets of the Fund, subtracting all its liabilities,
dividing by the number of shares outstanding and adjusting to the nearest cent.
The net asset value per share will not be determined on Good Friday and on such
other federal and non-federal holidays as are observed by the New York Stock
Exchange.

In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange is valued
at its latest sale price on that exchange; if there were no sales that day, the
security is valued at the latest bid 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 by the Directors), and (2) all other portfolio securities for
which over-the-counter market quotations are readily available are valued at the
latest bid price. When market quotations are not readily available, including
circumstances under which it is determined by the Investment Manager that sale
or bid prices are not reflective of a security's market value, portfolio
securities are valued at their fair value as determined in good faith under
procedures established by and under the general supervision of the Fund's Board
of Directors (valuation of 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).

Certain of the Fund's portfolio securities may be valued by an outside
pricing service approved by the Fund's Directors. The pricing service utilizes a
matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research 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 valued by such pricing
service.

11
<PAGE>
Municipal securities will be valued for the Fund by an outside computer
matrix pricing service approved by the Board of Directors. Periodically, the
Investment Manager and the Board of Directors review the continued
appropriateness of the prices obtained through the service.

Short-term debt securities with remaining maturities of 60 days or less at
the time of purchase are valued at amortized cost, unless the Board determines
such does not reflect the securities' fair value, in which case these securities
will be valued at their fair market value as determined by the Board of
Directors. Other short-term debt securities will be valued on a marked-to-market
basis until such time as they reach a maturity of 60 days, whereupon they will
be valued at amortized cost using their value on the 61st day unless the
Directors determine such does not reflect the securities' fair value, in which
case these securities will be valued at their fair market value as determined by
the Board of Directors. Listed options on debt securities are valued at the
latest sale price on the exchange on which they are listed unless no sales of
such options have taken place that day, in which case, they will be valued at
the mean between their closing bid and asked prices. Unlisted options on debt
securities and all options on equity securities are valued at the mean between
their latest bid and asked price. Futures are valued at the latest sale price on
the commodities exchange on which they trade unless the Directors determine that
such price does not reflect their market value, in which case they will be
valued at their fair value as determined by the Board of Directors. 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 Board of
Directors.

SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------

AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. All income dividends
and capital gains distributions are automatically paid in full and fractional
shares of the Fund (or, if specified by the shareholder, any other open-end
investment company for which InterCapital serves as investment manager
(collectively with the Fund, the "Dean Witter Funds")), unless the shareholder
requests that they be paid in cash. Each purchase of shares of the Fund is made
upon the condition that the Transfer Agent is thereby automatically appointed as
agent of the investor to receive all dividends and capital gains distributions
on shares owned by the investor. Such dividends and distributions will be paid
in shares of the Fund (or in cash if the shareholder so requests), at the net
asset value per share (without sales charge), as of the close of business on the
record date. At any time an investor may request the Transfer Agent in writing
to have subsequent dividends and/or capital gains distributions paid to him or
her in cash rather than shares. To assure sufficient time to process the
changes, such request should be received by the Transfer Agent at least five
business days prior to the record date of the dividend or distribution. In the
case of recently purchased shares for which registration instructions have not
been received on the record date, cash payments will be made to DWR or other
Selected Broker-Dealer through whom shares were purchased and will be forwarded
to the shareholder upon receipt of proper instructions.

INVESTMENT OF DISTRIBUTIONS RECEIVED IN CASH. Any shareholder who receives a
cash payment representing a dividend or capital gains distribution may invest
such dividend or distribution at the net asset value (without sales charge) next
determined after receipt by the Transfer Agent by returning the check or the
proceeds to the Transfer Agent within 30 days after the payment date.

EASYINVEST-SM-. Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account, on a semi-monthly,
monthly or quarterly basis, to the Fund's Transfer Agent for investment in
shares of the Fund.

SYSTEMATIC WITHDRAWAL PLAN. A withdrawal plan is available for shareholders
who own or purchase shares of the Fund having a minimum value of $10,000 based
upon the then current offering price. The plan provides for monthly or quarterly
(March, June, September, December) checks in any amount, not less than $25, or
in any whole percentage of the account balance, on an annualized basis.

12
<PAGE>
Withdrawal plan payments should not be considered as dividends, yields or
income. If periodic withdrawal plan payments continuously exceed net investment
income and net capital gains, the shareholder's original investment will be
correspondingly reduced and ultimately exhausted.

Each withdrawal constitutes a redemption of shares and any gain or loss
realized must be recognized for federal income tax purposes. Although the
shareholder may make additional investments of $2,500 or more under the
Systematic Withdrawal Plan, withdrawals made concurrently with purchases of
additional shares are inadvisable because of the sales charges applicable to the
purchase of additional shares.

Shareholders should contact their DWR or other Selected Broker-Dealer,
account executive or the Transfer Agent for further information about any of the
above services.

TAX-SHELTERED RETIREMENT PLANS. Retirement plans are available through the
Investment Manager for use by the self-employed, eligible Individual Retirement
Accounts and Custodial Accounts under Section 403(b)(7) of the Internal Revenue
Code. Adoption of such plans should be on advice of legal counsel or tax
adviser.

For further information regarding plan administration, custodial fees and
other details, investors should contact the Fund.

SYSTEMATIC PAYROLL DEDUCTION PLAN. There is also available to employers a
Systematic Payroll Deduction Plan by which their employees may invest in the
Fund. For further information please contact the Fund.

EXCHANGE PRIVILEGE

The Fund makes available to its shareholders an "Exchange Privilege"
allowing the exchange of shares of the Fund for shares of other Dean Witter
Funds sold with a front-end (at time of purchase) sales-charge ("FESC funds"),
Dean Witter Funds sold with a contingent deferred sales charge ("CDSC funds"),
five Dean Witter Funds which are money market funds and Dean Witter Short-Term
Bond Fund, Dean Witter Limited Term Municipal Trust and Dean Witter Short-Term
U.S. Treasury Trust (the foregoing eight non-FESC and non-CDSC funds are
hereinafter referred to as the "Exchange Funds"). Exchanges may be made after
the shares of the Fund acquired by purchase (not by exchange or dividend
reinvestment) have been held for thirty days. There is no holding period for
exchanges of shares acquired by exchange or dividend reinvestment. However,
shares of CDSC funds, including shares acquired in exchange for shares of FESC
funds, may not be exchanged for shares of FESC funds. Thus, shareholders who
exchange their Fund shares for shares of CDSC funds may subsequently exchange
those shares for shares of other CDSC funds or Exchange Funds but may not
reacquire FESC fund shares by exchange.

An exchange to another FESC fund, to a CDSC fund, or to a non-money market
fund Exchange Fund is on the basis of the next calculated net asset value per
share of each fund after the exchange order is received. When exchanging into a
money market fund from the Fund, shares of the Fund are redeemed out of the Fund
at their next calculated net asset value and the proceeds of the redemption are
used to purchase shares of the money market fund at their net asset value
determined the following business day. Subsequent exchanges between any of the
Exchange Funds, FESC funds and CDSC funds can be effected on the same basis
(except that CDSC fund shares may not be exchanged for shares of FESC funds).
Shares of a CDSC fund acquired in exchange for shares of an FESC fund (or in
exchange for shares of other Dean Witter Funds for which shares of an FESC fund
have been exchanged) are not subject to any contingent deferred sales charge
upon their redemption.

Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by the Investment Manager to be
abusive and contrary to the best interests of the Fund's other shareholders and,
at the Investment Manager's discretion, may be limited by the Fund's refusal to
accept additional purchases and/or exchanges from the investor. Although the
Fund does not have any specific definition of what constitutes a pattern of
frequent exchanges, and will consider all relevant factors in determining
whether a particular situation is abusive and contrary to the best interests of
the Fund and its other shareholders, investors should be aware that the Fund and
each of the other Dean Witter Funds may in their discretion limit or otherwise
restrict the number of times this Exchange Privilege may be exercised by any
investor. Any such

13
<PAGE>
restriction will be made by the Fund on a prospective basis only, upon notice to
the shareholder not later than ten days following such shareholder's most recent
exchange.

The Exchange Privilege may be terminated or revised at any time by the Fund
and/or any of such Dean Witter Funds for which shares of the Fund may be
exchanged, upon such notice as may be required by applicable regulatory
agencies. Shareholders maintaining margin accounts with DWR or another Selected
Broker-Dealer are referred to their account executive regarding restrictions on
exchange of shares of the Fund pledged in the margin account.

The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain a copy and examine it carefully
before investing. Exchanges are subject to the minimum investment requirement
and any other conditions imposed by each fund. An exchange will be treated for
federal income tax purposes the same as a repurchase or redemption of shares, on
which the shareholder may realize a capital gain or loss. However, the ability
to deduct capital losses on an exchange may be limited in situations where there
is an exchange of shares within ninety days after the shares are purchased. The
Exchange Privilege is only available in states where an exchange may legally be
made.

If DWR or another Selected Broker-Dealer is the current dealer of record and
its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the Dean Witter
Funds (for which the Exchange Privilege is available) pursuant to this Exchange
Privilege by contacting their DWR or other Selected Broker-Dealer account
executive (no Exchange Privilege Authorization Form is required). Other
shareholders (and those shareholders who are clients of DWR or other Selected
Broker-Dealer but who wish to make exchanges directly by telephoning the
Transfer Agent) must complete and forward to the Transfer Agent an Exchange
Privilege Authorization form, copies of which may be obtained from the Transfer
Agent, to initiate an exchange. If the Authorization Form is used, exchanges may
be made in writing or by contacting the Transfer Agent at (800) 526-3143 (toll
free). The Fund will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. Such procedures may
include requiring various forms of personal identification such as name, mailing
address, social security or other tax identification number and DWR or other
Selected Broker-Dealer account number (if any). Telephone instructions may also
be recorded. If such procedures are not employed, the Fund may be liable for any
losses due to unauthorized or fraudulent instructions.

Telephone exchange instructions will be accepted if received by the Transfer
Agent between 9:00 a.m. and 4:00 p.m. New York time, on any day the New York
Stock Exchange is open. Any shareholder wishing to make an exchange who has
previously filed an Exchange Privilege Form and who is unable to reach the Fund
by telephone should contact his or her DWR or other Selected Broker-Dealer
account executive, if appropriate, or make a written exchange request.
Shareholders are advised that during periods of drastic economic or market
changes, it is possible that the telephone exchange procedures may be difficult
to implement, although this has not been the experience of the Dean Witter Funds
in the past.

Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about the
Exchange Privilege.

REDEMPTIONS AND REPURCHASES
- --------------------------------------------------------------------------------

REDEMPTION. Shares of the Fund can be redeemed for cash at any time at the
current net asset value per share next determined (without any redemption or
other charge). If shares are held in a shareholder's account without a stock
certificate, a written request for redemption is required. If certificates are
held by the shareholder(s), the shares may be redeemed by surrendering the
certificate(s) with a written request for redemption along with any additional
information requested by the Transfer Agent. The stock certificate, or an
accompanying stock power, and the request for redemption, must be signed by the
shareholder(s) exactly as the shares are registered. Each request for
redemption, whether or not accompanied by a stock certificate, must be sent to
the Fund's Transfer Agent at P.O. Box 983, Jersey

14
<PAGE>
City, N.J. 07303, who will redeem the shares at their net asset value next
determined (see "Purchase of Fund Shares--Determination of Net Asset Value")
after it receives the request, and certificate, if any, in good order. Any
redemption request received after such determination will be redeemed at the
price next determined.

REPURCHASE. DWR and other Selected Broker-Dealers are authorized to
repurchase, as agent for the Fund, shares represented by a stock certificate
which is delivered to any of their offices. Shares held in a shareholder's
account without a stock certificate may also be repurchased by DWR and other
Selected Broker-Dealers upon the telephonic request of the shareholder. The
repurchase price is the net asset value next determined (see "Purchase of Fund
Shares -- Determination of Net Asset Value") after such repurchase order is
received by DWR or other Selected Broker-Dealer. Repurchase orders received by
DWR and other Selected Broker-Dealers prior to 4:00 p.m. New York time on any
business day will be priced at the net asset value per share that is based on
that day's close provided that, if presented by a DWR or other Selected
Broker-Dealer, they are time-stamped by DWR or other Selected Broker-Dealer no
later than 4:00 p.m. New York time on such day. It is the responsibility of DWR
and other Selected Broker-Dealers to transmit orders received by them to the
Distributor prior to 4:00 p.m. New York time on such day. If the DWR or other
Selected Broker-Dealer should fail to do so, the shareholder's entitlement to
that day's closing price must be settled between the shareholder and the
Selected Broker-Dealer. Repurchase orders received by DWR and other Selected
Broker-Dealers after 4:00 p.m. New York time, will be priced on the basis of the
next business day's close. Selected Broker-Dealers may charge for their services
in connection with the repurchase, but neither the Fund nor the Distributor or
DWR charges a fee. Payment for shares repurchased may be made by the Fund to the
Distributor for the account of the shareholder. The offer by DWR and other
Selected Broker-Dealers to repurchase shares from shareholders may be suspended
by them at any time. In that event shareholders may redeem their shares through
the Fund's Transfer Agent as set forth above under "Redemption".

PAYMENT FOR SHARES REDEEMED OR REPURCHASED. Payment for shares presented for
repurchase or redemption will be made by check within seven days after receipt
by the Transfer Agent of the certificate and/or written request in good order.
Such payment may be postponed or the right of redemption suspended at times when
normal trading is not taking place on the New York Stock Exchange. If the shares
to be redeemed have recently been purchased by check, payment of the redemption
proceeds may be delayed for the minimum time needed to verify that the check
used for investment has been honored (not more than fifteen days from the time
of investment of the check by the Transfer Agent). Shareholders maintaining
Margin Accounts with DWR and other Selected Broker Dealers are referred to their
account executive regarding restrictions on redemption of shares of the Fund
pledged in the Margin Account.

REINSTATEMENT PRIVILEGE. A shareholder who has had his or her shares
redeemed or repurchased and has not previously exercised this reinstatement
privilege may, within thirty days after the date of the redemption or
repurchase, reinstate any portion or all of the proceeds of such redemption or
repurchase in shares of the Fund at net asset value (without a sales charge)
next determined after a reinstatement request, together with the proceeds, is
received by the Transfer Agent.

INVOLUNTARY REDEMPTION. The Fund reserves the right, on sixty days' notice,
to redeem at their net asset value the shares of any shareholder whose shares
have a value of less than $100 as a result of redemptions or repurchases, or
such lesser amount as may be fixed by the Board of Directors. However, before
the Fund redeems such shares and sends the proceeds to the shareholder, it will
notify the shareholder that the value of the shares is less than $100 and allow
the shareholder sixty days in which to make an additional investment in an
amount which will increase the value of the account to $100 or more before the
redemption is processed.

15
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------

DIVIDENDS AND DISTRIBUTIONS. The Fund intends to declare and pay monthly
income dividends and to distribute net short-term and net long-term capital
gains, if any, at least once each year. The Fund may, however, determine either
to distribute or to retain all or part of any long-term capital gains in any
year for reinvestment.

All dividends and capital gains distributions will be paid in additional
Fund shares (without sales charge) and automatically credited to the
shareholder's account without issuance of a stock certificate unless the
shareholder requests in writing that all dividends be paid in cash and such
request is received by the close of business on the day prior to the record date
for such distributions. (See "Shareholder Services--Automatic Investment of
Dividends and Distributions".)

TAXES. Because the Fund intends to distribute all of its net investment
income and net capital gains to shareholders and otherwise continue to qualify
as a regulated investment company under Subchapter M of the Internal Revenue
Code, it is not expected that the Fund will be required to pay any Federal
income tax on such income and capital gains.

With respect to the Fund's investments in zero coupon and payment-in-kind
bonds, the Fund accrues income prior to any actual cash payments by their
issuers. In order to continue to comply with Subchapter M of the Internal
Revenue Code and remain able to forego payment of Federal income tax on its
income and capital gains, the Fund must distribute all of its net investment
income, including income accrued from zero coupon and payment-in-kind bonds. As
such, the Fund may be required to dispose of some of its portfolio securities
under disadvantageous circumstances to generate the cash required for
distribution.

Shareholders will normally have to pay Federal income taxes, and any
applicable state and/or local income taxes, on the dividends and distributions
they receive from the Fund. Such dividends and distributions, to the extent they
are derived from net investment income or net short-term capital gains, are
taxable to the shareholder as ordinary dividend income regardless of whether the
shareholder receives such distributions in additional shares or in cash. Any
dividends declared in the last calendar quarter of any year to shareholders of
record for that period which are paid in the following year prior to February 1
will be deemed received by the shareholder in the prior year. Since the Fund's
income is expected to be derived primarily from interest rather than dividends,
only a small portion, if any, of such dividends and distributions is expected to
be eligible for the Federal dividends received deduction available to
corporations.

Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder has
held the Fund's shares and regardless of whether the distribution is received in
additional shares or in cash. Capital gains distributions are not eligible for
the dividends received deduction. Capital gains may be generated by transactions
in options and futures contracts engaged in by the Fund.

The Fund may at times make payments from sources other than income or net
capital gains. Payments from such sources will, in effect, represent a
return of a portion of each shareholder's investment. All, or a portion, of such
payments will not be taxable to shareholders.

After the end of the calendar year, shareholders will receive a statement of
their dividends and capital gains distributions for tax purposes, including
information as to the portion taxable as ordinary income and the portion taxable
as capital gains.

To avoid being subject to a 31% Federal backup withholding tax on taxable
dividends, capital gains distributions and the proceeds of redemptions and
repurchases, shareholders' taxpayer identification numbers must be furnished and
certified as to their accuracy.

Shareholders should consult their tax advisers regarding specific questions
as to state or local taxes and as to the applicability of the foregoing to their
current federal tax situation.

16
<PAGE>
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------

From time to time the Fund may quote its "yield" and/or its "total return"
in advertisements and sales literature. Both the yield and the total return of
the Fund are based on historical earnings and are not intended to indicate
future performance. The yield of the Fund will be computed by dividing the
Fund's net investment income over a 30-day period by an average value (using the
average number of shares
entitled to receive dividends and the maximum offering price per share at the
end of the period), all in accordance with applicable regulatory requirements.
Such amount will be compounded for six months and then annualized for a
twelve-month period to derive the Fund's yield.

The "average annual total return" of the Fund refers to a figure reflecting
the average annualized percentage increase (or decrease) in the value of an
initial investment in the Fund of $1,000 over periods of one, five and ten
years. Average annual total return reflects all income earned by the Fund, any
appreciation or depreciation of the Fund's assets, all expenses incurred by the
Fund and all sales charges incurred by shareholders, for the stated periods. It
also assumes reinvestment of all dividends and distributions paid by the Fund.

In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, year-by-year or other
types of total return figures. Such calculations may or may not reflect the
imposition of the front-end sales charge which, if reflected, would reduce the
performance quoted. The Fund may advertise the growth of hypothetical
investments of $10,000, $50,000 or $100,000 in shares of the Fund by adding 1 to
the Fund's aggregate total return to date and multiplying by $9,450, $47,875 or
$96,750 ($10,000, $50,000 or $100,000 adjusted for 5.5%, 4.25% and 3.25% sales
charges, respectively). The Fund from time to time may also advertise its
performance relative to certain performance rankings and indexes compiled by
independent organizations.

ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------

VOTING RIGHTS. All shares of the Fund are of common stock of $0.01 par
value and are equal as to earnings, assets and voting privileges. There are no
conversion, pre-emptive or other subscription rights. In the event of
liquidation, each share of common stock of the Fund is entitled to its portion
of all of the Fund's assets after all debts and expenses have been paid. The
shares do not have cumulative voting rights.

Under ordinary circumstances, the Fund is not required, nor does it intend,
to hold Annual Meetings of Stockholders. The Directors may call Special Meetings
of Stockholders for action by stockholder vote as may be required by the Act or
the Fund's By-Laws.

SHAREHOLDER INQUIRIES. All inquiries regarding the Fund should be directed
to the Fund at the telephone numbers or address set forth on the front cover of
this Prospectus.

17
<PAGE>
APPENDIX -- RATINGS OF INVESTMENTS
- --------------------------------------------------------------------------------

MOODY'S INVESTORS SERVICE INC. ("MOODY'S")
BOND RATINGS

<TABLE>
<S> <C>
Aaa Bonds which are rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa Bonds which are rated Baa are considered as medium grade obligations; i.e., they
are neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Bonds rated Aaa, Aa, A and Baa are considered investment grade bonds.

Ba Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate, and therefore not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of desirable investments.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
Ca Bonds which are rated Ca present obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
</TABLE>

18
<PAGE>
CONDITIONAL RATING: Municipal bonds for which the security depends
upon the completion of some act or the fulfillment of some condition are
rated conditionally. These are bonds secured by (a) earnings of projects
under construction, (b) earnings of projects unseasoned in operation
experience, (c) rentals which begin when facilities are completed, or
(d) payments to which some other limiting condition attaches.
Parenthetical rating denotes probable credit stature upon completion of
construction or elimination of basis of condition.

RATING REFINEMENTS: Moody's may apply numerical modifiers, 1, 2 and
3 in each generic rating classification from Aa through B in its
corporate and municipal bond rating system. The modifier 1 indicates
that the security ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and a modifier 3
indicates that the issue ranks in the lower end of its generic rating
category.

COMMERCIAL PAPER RATINGS

Moody's Commercial Paper ratings are opinions of the ability to
repay punctually promissory obligations not having an original maturity
in excess of nine months. Moody's employs the following three
designations, all judged to be investment grade, to indicate the
relative repayment capacity of rated issuers: Prime-1, Prime-2, Prime-3.

Issuers rated Prime-1 have a superior capacity for repayment of
short-term promissory obligations. Issuers rated Prime-2 have a strong
capacity for repayment of short-term promissory obligations; and Issuers
rated Prime-3 have an acceptable capacity for repayment of short-term
promissory obligations. Issuers rated Not Prime do not fall within any
of the Prime rating categories.

STANDARD & POOR'S CORPORATION ("STANDARD & POOR'S")

BOND RATINGS

A Standard & Poor's bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation.
This assessment may take into consideration obligors such as guarantors,
insurers, or lessees.

The ratings are based on current information furnished by the issuer
or obtained by Standard & Poor's from other sources it considers
reliable. The ratings are based, in varying degrees, on the following
considerations: (1) likelihood of default-capacity and willingness of
the obligor as to the timely payment of interest and repayment of
principal in accordance with the terms of the obligation; (2) nature of
and provisions of the obligation; and (3) protection afforded by, and
relative position of, the obligation in the event of bankruptcy,
reorganization or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.

Standard & Poor's does not perform an audit in connection with any
rating and may, on occasion, rely on unaudited financial information.
The ratings may be changed, suspended or withdrawn as a result of
changes in, or unavailability of, such information, or for other
reasons.

<TABLE>
<S> <C>
AAA Debt rated AAA has the highest rating assigned by Standard & Poor's. Capacity to
pay interest and repay principal is extremely strong.
AA Debt rated AA has a very strong capacity to pay interest and repay principal and
differs from the highest-rated issues only in small degree.
</TABLE>

19
<PAGE>
<TABLE>
<S> <C>
A Debt rated A has a strong capacity to pay interest and repay principal although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
BBB Debt rated BBB is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than for debt in higher-rated categories.
Bonds rated AAA, AA, A and BBB are considered investment grade bonds.

BB Debt rated BB has less near-term vulnerability to default than other speculative
grade debt. However, it faces major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to inadequate
capacity to meet timely interest and principal payment.
B Debt rated B has a greater vulnerability to default but presently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial or economic conditions would likely impair capacity or willingness to
pay interest and repay principal.
CCC Debt rated CCC has a current identifiable vulnerability to default, and is
dependent upon favorable business, financial and economic conditions to meet
timely payments of interest and repayments of principal. In the event of adverse
business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal.
CC The rating CC is typically applied to debt subordinated to senior debt which is
assigned an actual or implied CCC rating.
C The rating C is typically applied to debt subordinated to senior debt which is
assigned an actual or implied CCC- debt rating.
CI The rating CI is reserved for income bonds on which no interest is being paid.
NR Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that Standard & Poor's does not rate a
particular type of obligation as a matter of policy.

Bonds rated BB, B, CCC, CC and C are regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest degree
of speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.

Plus (+) or minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
ratings categories.

In the case of municipal bonds, the foregoing ratings are sometimes followed by
a "p" which indicates that the rating is provisional. A provisional rating
assumes the successful completion of the project being financed by the bonds
being rated and indicates that payment of debt service requirements is largely
or entirely dependent upon the successful and timely completion of the project.
This rating, however, while addressing credit quality subsequent to completion
of the project, makes no comment on the likelihood or risk of default upon
failure of such completion.
</TABLE>

20
<PAGE>
COMMERCIAL PAPER RATINGS

Standard and Poor's commercial paper rating is a current assessment
of the likelihood of timely payment of debt having an original maturity
of no more than 365 days. The commercial paper rating is not a
recommendation to purchase or sell a security. The ratings are based
upon current information furnished by the issuer or obtained by S&P from
other sources it considers reliable. The ratings may be changed,
suspended, or withdrawn as a result of changes in or unavailability of
such information. Ratings are graded into group categories, ranging from
"A" for the highest quality obligations to "D" for the lowest. Ratings
are applicable to both taxable and tax-exempt commercial paper. The
categories are as follows:

Issues assigned A ratings are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined
with the designation 1, 2 and 3 to indicate the relative degree of
safety.

<TABLE>
<S> <C>
A-1 indicates that the degree of safety regarding timely payment is very strong.
A-2 indicates capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as overwhelming as for issues
designated "A-1".
A-3 indicates a satisfactory capacity for timely payment. Obligations carrying this
designation are, however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
</TABLE>

21
<PAGE>
THE DEAN WITTER FAMILY OF FUNDS

MONEY MARKET FUNDS
Dean Witter Liquid Asset Fund Inc.
Dean Witter Tax-Free Daily Income Trust
Dean Witter New York Municipal Money Market Trust
Dean Witter California Tax-Free Daily Income Trust
Dean Witter U.S. Government Money Market Trust

EQUITY FUNDS
Dean Witter American Value Fund
Dean Witter Natural Resource Development Securities Inc.
Dean Witter Dividend Growth Securities Inc.
Dean Witter Developing Growth Securities Trust
Dean Witter World Wide Investment Trust
Dean Witter Value-Added Market Series
Dean Witter Utilities Fund
Dean Witter Capital Growth Securities
Dean Witter European Growth Fund Inc.
Dean Witter Pacific Growth Fund Inc.
Dean Witter Precious Metals and Minerals Trust
Dean Witter Health Sciences Trust
Dean Witter Global Dividend Growth Securities
Dean Witter Global Utilities Fund
Dean Witter International SmallCap Fund
Dean Witter MidCap Growth Fund

FIXED-INCOME FUNDS
Dean Witter High Yield Securities Inc.
Dean Witter Tax-Exempt Securities Trust
Dean Witter U.S. Government Securities Trust
Dean Witter California Tax-Free Income Fund
Dean Witter New York Tax-Free Income Fund
Dean Witter Convertible Securities Trust
Dean Witter Federal Securities Trust
Dean Witter World Wide Income Trust
Dean Witter Intermediate Income Securities
Dean Witter Global Short-Term Income Fund Inc.
Dean Witter Multi-State Municipal Series Trust
Dean Witter Premier Income Trust
Dean Witter Short-Term U.S. Treasury Trust
Dean Witter Diversified Income Trust
Dean Witter Limited Term Municipal Trust
Dean Witter Short-Term Bond Fund
Dean Witter National Municipal Trust
Dean Witter High Income Securities

ASSET ALLOCATION FUNDS
Dean Witter Managed Assets Trust
Dean Witter Strategist Fund

ACTIVE ASSETS ACCOUNT PROGRAM
Active Assets Money Trust
Active Assets Tax-Free Trust
Active Assets Government Securities Trust
Active Assets California Tax-Free Trust

DEAN WITTER RETIREMENT SERIES
Liquid Asset Series
U.S. Government Money Market Series
U.S. Government Securities Series
Intermediate Income Securities Series
American Value Series
Capital Growth Series
Dividend Growth Series
Strategist Series
Utilities Series
Value-Added Market Series
Global Equity Series
<PAGE>

<TABLE>
<S> <C> <C>
Dean Witter
High Yield Securities Inc.
Two World Trade Center
New York, New York 10048
BOARD OF DIRECTORS
Jack F. 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
Edward R. Telling Dean Witter
Philip J. Purcell High Yield
John L. Schroeder Securities

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
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
PROSPECTUS -- OCTOBER 28, 1994
Dean Witter InterCapital Inc.
</TABLE>
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
DEAN WITTER
OCTOBER 28, 1994
HIGH YIELD
SECURITIES INC.

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

Dean Witter High Yield Securities Inc. (the "Fund") is an open-end
diversified management investment company whose investment objective is to earn
a high level of current income. As a secondary objective, the Fund will seek
capital appreciation, but only when consistent with its primary objective. The
Fund seeks high current income by investing principally in fixed-income
securities which are rated in the lower categories by established rating
services (Baa or lower by Moody's Investors Service, Inc. or BBB or lower by
Standard & Poor's Corporation) or are non-rated securities of comparable
quality. Such securities are commonly known as junk bonds. (See "Investment
Practices and Policies".)

A Prospectus for the Fund, dated October 28, 1994, which provides the basic
information you should know before investing in the Fund, may be obtained
without charge by request of the Fund at its address or telephone number listed
below or from the Fund's Distributor, Dean Witter Distributors Inc., or from
Dean Witter Reynolds Inc. at any of its branch offices. This Statement of
Additional Information is not a Prospectus. It contains information in addition
to and more detailed than that set forth in the Prospectus. It is intended to
provide additional information regarding the activities and operations of the
Fund, and should be read in conjunction with the Prospectus.

Dean Witter High Yield Securities Inc.
Two World Trade Center
New York, New York 10048
(212) 392-2550
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
The Fund and its Management....................... 3
Directors and Officers............................ 6
Investment Practices and Policies................. 9
Investment Restrictions........................... 15
Portfolio Transactions and Brokerage.............. 16
Purchase of Fund Shares........................... 17
Shareholder Services.............................. 19
Redemptions and Repurchases....................... 22
Dividends, Distributions and Taxes................ 23
Performance Information........................... 24
Description of Common Stock....................... 25
Custodian and Transfer Agent...................... 26
Independent Accountants........................... 26
Reports to Shareholders........................... 26
Legal Counsel..................................... 26
Experts........................................... 26
Registration Statement............................ 26
Financial Statements -- August 31, 1994........... 27
Report of Independent Accountants................. 36
</TABLE>

2
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------

THE FUND

The Fund was incorporated under Maryland law on June 14, 1979, under the
name InterCapital High Yield Securities Inc. On March 16, 1983, the Fund's
shareholders approved a change in the Fund's name, effective March 21, 1983, to
Dean Witter High Yield Securities Inc.

As of August 31, 1994 no shareholder was known to own beneficially or of
record as much as 5% of the outstanding shares of the Fund. The percentage
ownership of shares of the Fund changes from time to time depending on purchases
and redemptions by shareholders and the total number of shares outstanding.

THE INVESTMENT MANAGER

Dean Witter InterCapital Inc. (the "Investment Manager" or "InterCapital"),
a Delaware corporation, whose address is Two World Trade Center, New York, New
York 10048, is the Fund's Investment Manager. InterCapital is a wholly-owned
subsidiary of Dean Witter, Discover & Co., a Delaware corporation. In an
internal reorganization which took place in January, 1993, InterCapital assumed
the investment advisory, administrative and management activities previously
performed by the InterCapital Division of Dean Witter Reynolds Inc. ("DWR"), a
broker-dealer affiliate of InterCapital. (As hereinafter used in this Statement
of Additional Information, the terms "InterCapital" and "Investment Manager"
refer to DWR's InterCapital Division prior to the internal reorganization and to
Dean Witter InterCapital Inc. thereafter.) The daily management of the Fund and
research relating to the Fund's portfolio are conducted by or under the
direction of officers of the Fund and of the Investment Manager, subject to
review by the Fund's Board of Directors. In addition, Directors of the Fund
provide guidance on economic factors and interest rate trends. Information as to
these Directors and officers is contained under the caption "Directors and
Officers".

InterCapital is also the investment manager or investment adviser of the
following management investment companies: Active Assets Money Trust, Active
Assets Tax-Free Trust, Active Assets California Tax-Free Trust, Active Assets
Government Securities Trust, Dean Witter Liquid Asset Fund Inc., InterCapital
Income Securities Inc., Dean Witter Strategist Fund, Dean Witter Tax-Free Daily
Income Trust, Dean Witter Developing Growth Securities Trust, Dean Witter
Tax-Exempt Securities Trust, Dean Witter Natural Resource Development Securities
Inc., Dean Witter Dividend Growth Securities Inc., Dean Witter American Value
Fund, Dean Witter U.S. Government Money Market Trust, Dean Witter Variable
Investment Series, Dean Witter World Wide Investment Trust, Dean Witter Select
Municipal Reinvestment Fund, Dean Witter U.S. Government Securities Trust, Dean
Witter California Tax-Free Income Fund, Dean Witter New York Tax-Free Income
Fund, Dean Witter Convertible Securities Trust, Dean Witter Federal Securities
Trust, Dean Witter Value-Added Market Series, High Income Advantage Trust, High
Income Advantage Trust II, Dean Witter Government Income Trust, Dean Witter
Utilities Fund, Dean Witter Managed Assets Trust, Dean Witter California
Tax-Free Daily Income Trust, Dean Witter World Wide Income Trust, Dean Witter
Intermediate Income Securities, High Income Advantage Trust III, Dean Witter
Capital Growth Securities, Dean Witter European Growth Fund Inc., Dean Witter
Precious Metals and Minerals Trust, Dean Witter New York Municipal Money Market
Trust, Dean Witter Global Short-Term Income Fund Inc., Dean Witter Multi-State
Municipal Series Trust, Dean Witter Premier Income Trust, Dean Witter Short-Term
U.S. Treasury Trust, Dean Witter Diversified Income Trust, InterCapital Quality
Municipal Investment Trust, InterCapital Insured Municipal Bond Trust, Dean
Witter Pacific Growth Fund Inc., Dean Witter Health Sciences Trust, Dean Witter
Retirement Series, InterCapital Insured Municipal Trust, InterCapital California
Quality Municipal Securities, InterCapital California Insured Municipal Income
Trust, InterCapital Quality Municipal Income Trust, InterCapital Quality
Municipal Securities, InterCapital New York Quality Municipal Securities,
InterCapital Insured Municipal Securities, InterCapital Insured California
Municipal Securities, Dean Witter Global Dividend Growth Securities, Dean Witter
Limited Term Municipal Trust, Dean Witter Short-Term Bond Fund, Dean Witter
Global Utilities Fund, Dean Witter National Municipal Trust, Dean Witter High
Income Securities, Dean Witter International SmallCap Fund, Dean Witter Mid-Cap
Growth Fund, Dean Witter Select Dimensions Series, InterCapital

3
<PAGE>
Insured Municipal Income Trust, Municipal Income Trust, Municipal Income Trust
II, Municipal Income Trust III, Municipal Income Opportunities Trust, Municipal
Income Opportunities Trust II, Municipal Income Opportunities Trust III,
Municipal Premium Income Trust and Prime Income Trust. The foregoing investment
companies, together with the Fund, are collectively referred to as the Dean
Witter Funds. In addition, Dean Witter Services Company Inc. ("DWSC"), a
wholly-owned subsidiary of InterCapital, serves as manager for the following
investment companies for which TCW Funds Management, Inc. is the investment
adviser: TCW/DW Core Equity Trust, TCW/DW North American Government Income
Trust, TCW/DW Latin American Growth Fund, TCW/DW Income and Growth Fund, TCW/DW
Small Cap Growth Fund, TCW/DW Balanced Fund, TCW/DW North American Intermediate
Income Trust, TCW/DW Global Convertible Trust, TCW/DW Total Return Trust, TCW/DW
Emerging Markets Opportunites Trust, TCW/DW Term Trust 2000, TCW/DW Term Trust
2002 and TCW/DW Term Trust 2003 (the "TCW/DW Funds"). InterCapital also serves
as: (i) sub-adviser to Templeton Global Opportunities Trust, an open-end
investment company; (ii) administrator of The BlackRock Strategic Term Trust
Inc., a closed-end investment company; and (iii) sub-administrator of MassMutual
Participation Investors and Templeton Global Governments Income Trust,
closed-end investment companies.

The Investment Manager also serves as an investment adviser for Dean Witter
World Wide Investment Fund, an investment company organized under the laws of
Luxembourg, shares of which may not be offered in the United States or purchased
by American citizens outside of the United States.

Pursuant to an Investment Management Agreement (the "Agreement") with the
Investment Manager, the Fund has retained the Investment Manager to manage the
investment of the Fund's assets, including the placing of orders for the
purchase and sale of portfolio securities. The Investment Manager obtains and
evaluates such information and advice relating to the economy, securities
markets, and specific securities as it considers necessary or useful to
continuously manage the assets of the Fund in a manner consistent with its
investment objectives and policies.

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, such office space, facilities,
equipment, clerical help and bookkeeping and certain legal services as the Fund
may reasonably require in the conduct of its business, including the preparation
of prospectuses, statements of additional information, proxy statements and
reports required to be filed with federal and state securities commissions
(except insofar as the participation or assistance of independent accountants
and attorneys is, in the opinion of the Investment Manager, necessary or
desirable). In addition, the Investment Manager 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 service, heat,
light, power and other utilities provided to the Fund.

Effective December 31, 1993, pursuant to a Services Agreement between
InterCapital and DWSC, DWSC began to provide the administrative services to the
Fund which were previously performed directly by InterCapital. The foregoing
internal reorganization did not result in any change in the nature or scope of
the administrative services being provided to the Fund or any of the fees being
paid by the Fund for the overall services being performed under the terms of the
existing Agreement.

Expenses not expressly assumed by the Investment Manager under the Agreement
or by the Distributor of the Fund's shares (Dean Witter Distributors Inc.
("Distributors" or the "Distributor") see "Purchase of Fund Shares") will be
paid by the Fund. The expenses borne by the Fund include, but are not limited
to: charges and expenses of any registrar, custodian, stock transfer and
dividend disbursing agent; brokerage commissions; taxes; engraving and printing
of stock certificates; registration costs of the Fund and its shares under
federal and state securities laws; the cost and expense of printing, including
typesetting, and distributing prospectuses of the Fund and supplements thereto
to the Fund's shareholders; all expenses of shareholders' and directors'
meetings and of preparing, printing and mailing of proxy statements and reports
to shareholders; fees and travel expenses of directors or members of any
advisory board or committee who are not employees of the Investment Manager or
any

4
<PAGE>
corporate affiliate of the Investment Manager; all expenses incident to any
dividend, distribution, withdrawal or redemption options; charges and expenses
of any outside service used for pricing of the Fund's shares; fees and expenses
of legal counsel, including counsel to directors who are not interested persons
of the Fund or of the Investment Manager (not including compensation or expenses
of attorneys who are employees of the Investment Manager) and independent
accountants; membership dues of industry associations; interest on Fund
borrowings; postage; insurance premiums on property or personnel (including
officers and directors) of the Fund which inure to its benefit; extraordinary
expenses (including, but not limited to, legal claims and liabilities and
litigation costs and any indemnification relating thereto); and all other costs
of the Fund's operation.

As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Investment Manager, the Fund pays the
Investment Manager monthly compensation calculated 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 the daily net assets not exceeding
$500 million; 0.425% of the portion of the daily net assets exceeding $500
million but not exceeding $750 million; 0.375% of the portion of the daily net
assets exceeding $750 million but not exceeding $1 billion; 0.35% of the portion
of the daily net assets exceeding $1 billion but not exceeding $2 billion;
0.325% of the portion of daily net assets exceeding $2 billion but not exceeding
$3 billion; and 0.30% of the portion of daily net assets exceeding $3 billion.
Total compensation accrued to the Investment Manager for the Fund's fiscal years
ended August 31, 1992, 1993 and 1994, amounted to $2,415,354, $2,493,074 and
$2,690,898, respectively.

Pursuant to the Agreement, total operating expenses of the Fund are subject
to applicable limitations under rules and regulations of states where the Fund
is authorized to sell its shares. Therefore, operating expenses are effectively
subject to the most restrictive of such limitations as the same may be amended
from time to time. Presently, the most restrictive limitation is as follows: If,
in any fiscal year, the Fund's total operating expenses, including the
investment management fee but exclusive of taxes, interest, brokerage fees and
extraordinary expenses (to the extent permitted by applicable state securities
laws and regulations), exceeds 2 1/2% of the first $30,000,000 of average daily
net assets, 2% of the next $70,000,000 and 1 1/2% of any excess over
$100,000,000, the Investment Manager will reimburse the Fund for the amount of
such excess. Such amount, if any, will be calculated daily and credited on a
monthly basis. During the fiscal years ended August 31, 1992, 1993 and 1994, the
Fund's expenses did not exceed either the limitation noted above or the then
most restrictive limitation.

The Agreement provides that in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations thereunder, the
Investment Manager is not liable to the Fund or any of its investors for any act
or omission by the Investment Manager or for any losses sustained by the Fund or
its investors. The Agreement in no way restricts the Investment Manager from
acting as investment manager or adviser to others.

The Agreement was initially approved by the Directors on October 30, 1992
and by the shareholders on January 12, 1993. The Agreement is substantially
identical to a prior investment management agreement which was initially
approved by the Fund's Directors on January 16, 1983 and subsequently by the
Fund's stockholders on March 16, 1983. The Agreement took effect on June 30,
1993, upon the spin-off by Sears, Roebuck and Co. of its remaining shares of
DWDC. The Agreement may be terminated at any time, without penalty, on thirty
days' notice, by the Board of Directors of the Fund, by the holders of a
majority, as defined in the Investment Company Act of 1940, as amended (the
"Act"), of the outstanding shares of the Fund, or by the Investment Manager. The
Agreement will automatically terminate in the event of its assignment (as
defined in the Act).

Under its terms, the Agreement continues in effect until April 30, 1996, and
will continue in effect from year to year thereafter, provided continuation of
the Agreement is approved at least annually by the vote of the holders of a
majority, as defined in the Act, of the outstanding shares of the Fund, or by
the Board of Directors of the Fund; provided that in either event such
continuance is approved annually by

5
<PAGE>
the vote of a majority of the Directors of the Fund who are not parties to the
Agreement or "interested persons" (as defined in the Act) of any such party (the
"Independent Directors"), which vote must be cast in person at a meeting called
for the purpose of voting on such approval.

The Fund has acknowledged that the name "Dean Witter" is a property right of
DWR. The Fund has agreed that DWR or its parent company may use or, at any time,
permit others to use, the name "Dean Witter". The Fund has also agreed that in
the event the investment management contract between the Investment Manager and
the Fund is terminated, or if the affiliation between InterCapital and its
parent company is terminated, the Fund will eliminate the name "Dean Witter"
from its name if DWR or its parent shall so request.

DIRECTORS AND OFFICERS
- --------------------------------------------------------------------------------

The Directors and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with
InterCapital, and with the Dean Witter Funds and the TCW/DW Funds are shown
below.

Michael Bozic President and Chief Executive Officer of Hills Department Stores (since
Trustee May, 1991); formerly Chairman and Chief Executive Officer (January,
c/o Hills Stores Inc. 1987-August, 1990) and President and Chief Operating Officer (August,
15 Dan Road 1990-February, 1991) of the Sears Merchandise Group of Sears, Roebuck
Canton, Massachusetts and Co.; Director or Trustee of the Dean Witter Funds; Director of
Harley Davidson Credit Inc., the United Negro College Fund and Domain
Inc. (home decor retailer).

Charles A. Fiumefreddo* Chairman and Chief Executive Officer and Director of InterCapital, DWSC
Chairman of the Board, and Distributors; Executive Vice President and Director of DWR;
President and Chief Executive Chairman, Director or Trustee, President and Chief Executive Officer of
Officer and Director the Dean Witter Funds; Chairman, Chief Executive Officer and Trustee of
Two World Trade Center the TCW/DW Funds; formerly Executive Vice President and Director of
New York, New York DWDC (until February, 1993); Chairman and Director of Dean Witter Trust
Company ("DWTC"); Director and/or officer of various DWDC subsidiaries.

Edwin J. Garn Director or Trustee of the Dean Witter Funds; formerly United States
Director Senator (R-Utah) (1974-1992) and Chairman, Senate Banking Committee
2000 Eagle Gate Tower (1980-1986); formerly Mayor of Salt Lake City, Utah (1972-1974);
Salt Lake City, Utah formerly Astronaut, Space Shuttle Discovery (April 12-19, 1985); Vice
Chairman, Huntsman Chemical Corporation (since January 1993); Member of
the board of various civic and charitable organizations.
</TABLE>

6
<PAGE>

<TABLE>
<CAPTION>
NAME, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ----------------------------------------- -----------------------------------------------------------------------
<S> <C>
John R. Haire Chairman of the Audit Committee and Chairman of the Committee of
Director Independent Directors or Trustees and Director or Trustee of the Dean
439 East 51st Street Witter Funds; Trustee of the TCW/DW Funds; formerly President, Council
New York, New York for Aid to Education (since 1978-October, 1989) and Chairman and Chief
Executive Officer of Anchor Corporation, an Investment Adviser
(1964-1978); Director of Washington National Corporation (insurance)
and Bowne & Co., Inc. (printing).
Dr. John E. Jeuck Retired; Director or Trustee of the Dean Witter Funds; formerly Robert
Director Law Professor of Business Administration, Graduate School of Business,
70 East Cedar Street University of Chicago (until July, 1989); Business consultant.
Chicago, Illinois
Dr. Manuel H. Johnson Senior Partner, Johnson Smick International, Inc., a consulting firm;
Director Koch Professor of International Economics and Director of the Center
7521 Old Dominion Drive for Global Market Studies at George Mason University (since September,
Maclean, Virginia 1990); Co-Chairman and a founder of the Group of Seven Council (G7C),
an international economic commission (since September, 1990); Director
or Trustee of the Dean Witter Funds; Trustee of the TCW/DW Funds;
Director of Greenwich Capital Markets, Inc. (broker-dealer); formerly
Vice Chairman of the Board of Governors of the Federal Reserve System
(February, 1986-August, 1990) and Assistant Secretary of the U.S.
Treasury (1982-1986).
Paul Kolton Director or Trustee of the Dean Witter Funds; Chairman of the Audit
Director Committee and Committee of Independent Trustees and Trustee of the
9 Hunting Ridge Road TCW/DW Funds; formerly Chairman of the Financial Accounting Standards
Stamford, Connecticut Advisory Council; formerly Chairman and Chief Executive Officer of the
American Stock Exchange; Director of UCC Investors Holding Inc.
(Uniroyal Chemical Company, Inc.); director or trustee of various
not-for-profit organizations.
Michael E. Nugent General Partner, Triumph Capital, L.P., a private investment
Director partnership (since 1988); Director or Trustee of the Dean Witter Funds;
237 Park Avenue Trustee of the TCW/DW Funds; formerly Vice President, Bankers Trust
New York, New York Company and BT Capital Corporation; Director of various business
organizations.
Philip J. Purcell* Chairman of the Board of Directors and Chief Executive Officer of DWDC,
Trustee DWR and Novus Credit Services Inc.; Director of InterCapital, DWSC and
Two World Trade Center Distributors; Director or Trustee of the Dean Witter Funds; Director
New York, New York and/or officer of various DWDC subsidiaries.
John L. Schroeder Executive Vice President and Chief Investment Officer of the Home
Trustee Insurance Company (since August, 1991); Director or Trustee of the Dean
Northgate 3A Witter Funds; Director of Citizens Utilities Company; formerly Chairman
Alger Court and Chief Investment Officer of Axe-Houghton Management and the
Bronxville, New York Axe-Houghton Funds (April, 1983-June, 1991) and President of USF&G
Financial Services, Inc. (June, 1990-June, 1991).
</TABLE>

7
<PAGE>

<S> <C>
Edward R. Telling* Retired; Director or Trustee of the Dean Witter Funds; formerly
Director Chairman of the Board of Directors and Chief Executive Officer (until
Sears Tower December 31, 1985) and President (from January, 1981-March, 1982 and
Chicago, Illinois from February, 1984-August, 1984) of Sears, Roebuck and Co.; formerly
Director of Sears, Roebuck and Co.

Sheldon Curtis Senior Vice President, Secretary and General Counsel of InterCapital
Vice President, Secretary and DWSC; Senior Vice President, Assistant Secretary and Assistant
and General Counsel General Counsel of Distributors; Senior Vice President and Secretary of
Two World Trade Center DWTC; Assistant Secretary of DWDC and DWR and Vice President, Secretary
New York, New York and General Counsel of the Dean Witter Funds and the TCW/DW Funds.

Peter M. Avelar Senior Vice President of InterCapital (since April 1992); prior thereto
Vice President he was Vice President of InterCapital (since December, 1990), First
Two World Trade Center Vice President of PaineWebber Asset Management (March, 1989-December,
New York, New York 1990) and Vice President of Delaware Investment Advisors (June,
1987-March, 1989).

Thomas F. Caloia First Vice President (since May, 1991) and Assistant Treasurer of
Treasurer InterCapital and Treasurer of the Dean Witter Funds.
Two World Trade Center
New York, New York
<FN>
- ------------------------
*Denotes Directors who are "interested persons" of the Fund, as defined in the
Act.
</TABLE>

In addition, Robert M. Scanlan, President and Chief Operating Officer of
InterCapital and DWSC, Executive Vice President of Distributors and DWTC and
Director of DWTC, David A. Hughey, Executive Vice President and Chief
Administrative Officer of InterCapital, DWSC, Distributors and DWTC and Director
of DWTC, and Edmund C. Puckhaber, Executive Vice President of InterCapital, and
Jonathan R. Page and James F. Willison, Senior Vice Presidents of InterCapital,
are also Vice Presidents of the Fund and Barry Fink and Marilyn K. Cranney,
First Vice Presidents and Assistant General Counsels of InterCapital and DWSC,
and Lawrence S. Lafer, Lou Anne D. McInnis and Ruth Rossi, Vice Presidents and
Assistant General Counsels of InterCapital and DWSC, are also Assistant
Secretaries of the Fund.

The Fund pays each Director who is not an employee or retired employee of
the Investment Manager or an affiliated company an annual fee of $1,200 plus $50
for each meeting of the Board of Directors or of any committee of the Board of
Directors attended by the Director in person (the Fund pays the Chairman of the
Audit Committee an additional annual fee of $1,000 and pays the Chairman of the
Committee of the Independent Directors an additional annual fee of $2,400, in
each case inclusive of the Committee meeting fees). The Fund also reimburses
such Directors for travel and other out-of-pocket expenses incurred by them in
connection with attending such meetings. Directors and officers of the Fund who
are or have been employed by the Investment Manager or an affiliated company
receive no compensation or expense reimbursement from the Fund. The Fund has
adopted a retirement program under which an Independent Director who retires
after a minimum required period of service would be entitled to retirement
payments upon reaching the eligible retirement age (normally, after attaining
age 72) based upon length of service and computed as a percentage of one-fifth
of the total compensation earned by such Director for service to the Fund in the
five-year period prior to the date of the Director's retirement. As of the date
of this Statement of Additional Information, the aggregate shares of common

8
<PAGE>
stock of the Fund owned by the Fund's officers and Directors as a group was less
than 1 percent of the Fund's shares outstanding. For the fiscal year ended
August 31, 1994, the Fund accrued a total of $32,063 for Directors' fees,
expenses, and benefits under the above-described retirement program.

INVESTMENT PRACTICES AND POLICIES
- --------------------------------------------------------------------------------

As discussed in the Prospectus, the Fund will invest principally in
fixed-income securities rated Baa or lower by Moody's Investor's Service Inc.
("Moody's"), or BBB or lower by Standard & Poor's Corporation ("Standard &
Poor's"). The ratings of fixed-income securities by Moody's and Standard &
Poor's are a generally accepted barometer of credit risk. They are, however,
subject to certain limitations from an investor's standpoint.

Such limitations include the following: the rating of an issuer is heavily
weighted by past developments and does not necessarily reflect probable future
conditions; there is frequently a lag between the time a rating is assigned and
the time it is updated; and there may be varying degrees of difference in credit
risk of securities in each rating category. The Investment Manager will attempt
to reduce the overall portfolio credit risk through diversification and
selection of portfolio securities based on considerations mentioned below.

While the ratings provide a generally useful guide to credit risks, they do
not, nor do they purport to, offer any criteria for evaluating the interest rate
risk. Changes in the general level of interest rates cause fluctuations in the
prices of fixed-income securities already outstanding and will therefore result
in fluctuation in net asset value of the Fund's shares. The extent of the
fluctuation is determined by a complex interaction of a number of factors. The
Investment Manager will evaluate those factors it considers relevant and will
make portfolio changes when it deems it appropriate in seeking to reduce the
risk of depreciation in the value of the Fund's portfolio. However, in seeking
to achieve the Fund's primary objective, there will be times, such as during
periods of rising interest rates, when depreciation and realization of capital
losses on securities in the portfolio will be unavoidable. Moreover, medium and
lower-rated securities and non-rated securities of comparable quality tend to be
subject to wider fluctuations in yield and market values than higher rated
securities. Such fluctuations after a security is acquired do not affect the
cash income received from that security but are reflected in the net asset value
of the Fund's portfolio.

PORTFOLIO CHARACTERISTICS

LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements and subject to Investment Restriction 8 below, the Fund may lend
its portfolio securities to brokers, dealers and other financial institutions,
provided that such loans are callable at any time by the Fund (subject to notice
provisions described below), and are at all times secured by cash or cash
equivalents, which are maintained in a segregated account pursuant to applicable
regulations and that are equal to at least the market value, determined daily,
of the loaned securities. The advantage of such loans is that the Fund continues
to receive the income on the loaned securities while at the same time earning
interest on the cash amounts deposited as collateral, which will be invested in
short-term obligations. The Fund will not lend its portfolio securities if such
loans are not permitted by the laws or regulations of any state in which its
shares are qualified for sale and will not lend more than 25% of the value of
its total assets.

A loan may be terminated by the borrower on one business day's notice, or by
the Fund on four business days' notice. If the borrower fails to deliver the
loaned securities within four days after receipt of notice, the Fund could use
the collateral to replace the securities while holding the borrower liable for
any excess of replacement cost over the value of the collateral. As with any
extensions of credit, there are risks of delay in recovery and, in some cases,
even loss of rights in the collateral should the borrower of the securities fail
financially. However, these loans of portfolio securities will only be made to
firms deemed by the Fund's management to be creditworthy and when the income
which can be earned from such loans justifies the attendant risks. Upon
termination of the loan, the borrower is required to return the securities to
the Fund. Any gain or loss in the market price during the loan period would
inure to the

9
<PAGE>
Fund. The creditworthiness of firms to which the Fund lends its portfolio
securities will be monitored on an ongoing basis by the Investment Manager
pursuant to procedures adopted and reviewed, on an ongoing basis, by the Board
of Directors of the Fund.

When voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loaned securities, in
whole or in part as may be appropriate, to be delivered within one day after
notice, to permit the exercise of such rights if the matters involved would have
a material effect on the Fund's investment in such loaned securities. The Fund
will pay reasonable finder's, administrative and custodial fees in connection
with a loan of its securities. The Fund did not lend any of its portfolio
securities during its fiscal year ended August 31, 1994.

REPURCHASE AGREEMENTS. When cash may be available for only a few days, it
may be invested by the Fund in repurchase agreements until such time as it may
otherwise be invested or used for payments of obligations of the Fund. These
agreements, which may be viewed as a type of secured lending by the Fund,
typically involve the acquisition by the Fund of debt securities from a selling
financial institution such as a bank, savings and loan association or
broker-dealer. The agreement provides that the Fund will sell back to the
institution, and that the institution will repurchase, the underlying security
("collateral"), which is held by the Fund's Custodian, at a specified price and
at a fixed time in the future, usually not more than seven days from the date of
purchase. The Fund will accrue interest from the institution until the time when
the repurchase is to occur. Although such date is deemed by the Fund to be the
maturity date of a repurchase agreement, the maturities of securities subject to
repurchase agreements are not subject to any limits and may exceed one year.
While repurchase agreements involve certain risks not associated with direct
investments in debt securities, the Fund follows procedures designed to minimize
such risks. These procedures include effecting repurchase transactions only with
large, well-capitalized and well-established financial institutions, whose
financial condition will be continually monitored by the Investment Manager
subject to procedures established by the Board of Directors of the Fund. In
addition, the value of the collateral underlying the repurchase agreement will
always be at least equal to the repurchase price, including any accrued interest
earned on the repurchase agreement. In the event of a default or bankruptcy by a
selling financial institution, the Fund will seek to liquidate such collateral.
However, the exercising of the Fund's right to liquidate such collateral could
involve certain costs or delays and, to the extent that proceeds from any sale
upon a default of the obligation to repurchase were less than the repurchase
price, the Fund could suffer a loss. It is the current policy of the Fund not to
invest in repurchase agreements that do not mature within seven days if any such
investment, together with any other illiquid assets held by the Fund, amounts to
more than 10% of its total assets. The Fund's investments in repurchase
agreements may at times be substantial when, in the view of the Investment
Manager, liquidity or other considerations warrant.

SECURITIES OF FOREIGN ISSUERS. The Fund may invest up to 20% of its total
assets in fixed-income securities issued by foreign governments and other
foreign issuers and in foreign currency issues of domestic issuers, but not more
than 10% of its total assets in such securities, whether issued by a foreign or
domestic issuer, which are denominated in foreign currency. The Fund believes
that in many instances such foreign fixed-income securities may provide higher
yields than similar securities of domestic issuers. With the expiration of the
Interest Equalization Tax in 1974, many of these investments currently enjoy
increased liquidity, although such securities are generally less liquid than the
securities of United States corporations, and are certainly less liquid than
securities issued by the United States Government or its agencies.

Foreign investments involve certain risks, including the political or
economic instability of the issuer or of the country of issue, the difficulty of
predicting international trade patterns and the possibility of imposition of
exchange controls. Such securities may also be subject to greater fluctuations
in price than securities of United States corporations or of the United States
Government. In addition, there may be less publicly available information about
a foreign company than about a domestic company. Foreign companies generally are
not subject to uniform accounting, auditing and financial reporting standards
comparable to those applicable to domestic companies. There is generally less
government regulation of stock exchanges, brokers and listed companies abroad
than in the United States, and with respect to

10
<PAGE>
certain foreign countries, there is a possibility of expropriation or
confiscatory taxation, or diplomatic developments which could affect investment
in those countries. Finally, in the event of a default of any such foreign debt
obligations, it may be more difficult for the Fund to obtain or to enforce a
judgment against the issuers of such securities. In addition to the
above-mentioned risks, securities denominated in foreign currency, whether
issued by a foreign or a domestic issuer, may be affected favorably or
unfavorably by changes in currency rates and in exchange control regulations,
and costs may be incurred in connection with conversions between various
currencies. It may not be possible to hedge against the risks of currency
fluctuation.

COMMON STOCKS. As stated in the Prospectus, consistent with the Fund's
investment objectives, the Fund will invest in common stocks only in certain
circumstances. First, the Fund may purchase common stock which is included in a
unit with fixed-income securities purchased by the Fund. Second, the Fund may
acquire common stock when fixed-income securities owned by the Fund are
converted by the issuer into common stock. Third, the Fund may exercise warrants
attached to fixed-income securities purchased by the Fund. Finally, the Fund may
purchase the common stock of companies involved in takeovers or
recapitalizations where the issuer or a controlling stockholder has offered, or
pursuant to a "going private" transaction is effecting, a transaction involving
the issuance of newly issued fixed-income securities to holders of such common
stock. Purchasing the common stock directly in the last circumstance enables the
Fund to acquire the fixed-income securities directly from the issuer at face
value, thereby eliminating the payment of a third-party dealer mark-up. The
maximum percentage of the Fund's total assets which may be invested in common
stocks at any one time is 20%.

PUBLIC UTILITIES. As stated in the Prospectus, the Fund's investments in
public utilities, if any, may be subject to certain risks. Such utilities may
have difficulty meeting environmental standards and obtaining satisfactory fuel
supplies at reasonable costs. During an inflationary period, public utilities
also face increasing fuel, construction and other costs and may have difficulty
realizing an adequate return on invested capital. There is no assurance that
regulatory authorities will grant sufficient rate increases to cover expenses
associated with the foregoing difficulties as well as debt service requirements.
In addition, with respect to utilities engaged in nuclear power generation,
there is the possibility that Federal, State or municipal governmental
authorities may from time to time impose additional regulations or take other
governmental action which might cause delays in the licensing, construction, or
operation of nuclear power plants, or suspension of operation of such plants
which have been or are being financed by proceeds of the fixed income securities
in the Fund's portfolio.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. As discussed in the
Prospectus, from time to time, in the ordinary course of business, the Fund may
purchase securities on a when-issued or delayed delivery basis -- I.E., delivery
and payment can take place a month or more after the date of the transactions.
The securities so purchased are subject to market fluctuation and no interest
accrues to the purchaser during this period. At the time the Fund makes the
commitment to purchase securities on a when-issued, delayed delivery basis or
forward commitment basis with the intention of acquiring the securities, it will
record the transaction and thereafter reflect the value, each day, of such
security in determining the net asset value of the Fund. At the time of delivery
of the securities, the value may be more or less than the purchase price. The
Fund will also establish a segregated account with its custodian bank in which
it will maintain cash or U.S. Government Securities or other high grade debt
portfolio securities equal in value to commitments for such when-issued or
delayed delivery securities; subject to this requirement, the Fund may purchase
securities on such basis without limit. An increase in the percentage of the
Fund's assets committed to the purchase of securities on a when-issued or
delayed delivery basis may increase the volatility of the Fund's net asset
value. The Investment Manager and the Board of Directors do not believe that the
Fund's net asset value or income will be adversely affected by its purchase of
securities on such basis. The Fund may sell securities on a when-issued or
delayed delivery basis provided that the Fund owns the security at the time of
the sale.

11
<PAGE>
The commitment for the purchase of any such security will not be recognized in
the portfolio of the Fund until the Investment Manager determines that issuance
of the security is probable. At such time, the Fund will record the transaction
and, in determining its net asset value, will reflect the value of the security
daily. At such time, the Fund will also establish a segregated account with its
custodian bank in which it will maintain cash or U.S. Government Securities or
other high grade debt portfolio securities equal in value to recognized
commitments for such securities. Once a segregated account has been established,
if the anticipated event does not occur and the securities are not issued the
Fund will have lost an investment opportunity. The value of the Fund's
commitments to purchase the securities of any one issuer, together with the
value of all securities of such issuer owned by the Fund, may not exceed 5% of
the value of the Fund's total assets at the time the initial commitment to
purchase such securities is made (see "Investment Restrictions" in the
Prospectus). Subject to the foregoing restrictions, the Fund may purchase
securities on such basis without limit. An increase in the percentage of the
Fund's assets committed to the purchase of securities on a "when, as and if
issued" basis may increase the volatility of its net asset value. The Investment
Manager and the Board of Directors do not believe that the net asset value of
the Fund will be adversely affected by its purchase of securities on such basis.
The Fund may also sell securities on a "when, as and if issued" basis provided
that the issuance of the security will result automatically from the exchange or
conversion of a security owned by the Fund at the time of the sale.

FUTURES CONTRACTS AND OPTIONS ON FUTURES. As discussed in the Prospectus,
the Fund may invest in financial futures contracts ("futures contracts") and
related options thereon. These futures contracts and related options thereon
will be used only as a hedge against anticipated interest rate changes. A
futures contract sale creates an obligation by the Fund, as seller, to deliver
the specific type of instrument called for in the contract at a specified future
time for a specified price. A futures contract purchase would create an
obligation by the Fund, as purchaser, to take delivery of the specific type of
financial instrument at a specified future time at a specified price. The
specific securities delivered or taken, respectively, at settlement date, would
not be determined until or near that date. The determination would be in
accordance with the rules of the exchange on which the futures contract sale or
purchase was effected.

The Fund may sell a futures contract or a call option thereon or purchase a
put option on such futures contract, if the Investment Manager anticipates
interest rates to rise, as a hedge against a decrease in the value of the Fund's
portfolio securities. If the Investment Manager anticipates that interest rates
will decline, the Fund may purchase a futures contract or a call option thereon
or sell a put option on such futures contract to protect against an increase in
the price of the securities the Fund intends to purchase. These futures
contracts and related options thereon will be used only as a hedge against
anticipated interest rate changes.

Although the terms of futures contracts specify actual delivery or receipt
of securities, in most instances the contracts are closed out before the
settlement date without the making or taking of delivery of the securities.
Closing out of a futures contract is usually effected by entering into an
offsetting transaction. An offsetting transaction for a futures contract sale is
effected by the Fund entering into a futures contract purchase for the same
aggregate amount of the specific type of financial instrument and same delivery
date. If the price in the sale exceeds the price in the offsetting purchase, the
Fund is immediately paid the difference and thus realizes a gain. If the
offsetting purchase price exceeds the sale price, the Fund pays the difference
and realizes a loss. Similarly, the closing out of a futures contract purchase
is effected by the Fund entering into a futures contract sale. If the offsetting
sale price exceeds the purchase price, the Fund realizes a gain, and if the
offsetting sale price is less than the purchase price, the Fund realizes a loss.

12
<PAGE>
Unlike a futures contract, which requires the parties to buy and sell a
security on a set date, an option on a futures contract entitles its holder to
decide on or before a future date whether to enter into such a contract. If the
holder decides not to enter into the contract, the premium paid for the contract
is lost. Since the price of the option is fixed at the point of sale, there are
no daily payments of cash to reflect the change in the value of the underlying
contract, as discussed below for futures contracts. The value of the option does
change and is reflected in the net asset value of the Fund.

The Fund is required to maintain margin deposits with brokerage firms
through which it effects futures contracts and options thereon. The initial
margin requirements vary according to the type of the underlying security. In
addition, due to current industry practice, daily variations in gains and losses
on open contracts are required to be reflected in cash in the form of variation
margin payments. The Fund may be required to make additional margin payments
during the term of the contract.

Currently, futures contracts can be purchased on debt securities such as
U.S. Treasury Bills and Bonds, U.S. Treasury Notes with maturities between 6 1/2
and 10 years, Certificates of the Government National Mortgage Association and
Bank Certificates of Deposit. The Fund may invest in interest rate futures
contracts covering these types of financial instruments as well as in new types
of such contracts that become available in the future.

Financial futures contracts are traded in an auction environment on the
floors of several Exchanges -- principally, the Chicago Board of Trade, the
Chicago Mercantile Exchange and the New York Futures Exchange. Each Exchange
guarantees performance under contract provisions through a clearing corporation,
a nonprofit organization managed by the Exchange membership which is also
responsible for handling daily accounting of deposits or withdrawals of margin.

A risk in employing futures contracts to protect against the price
volatility of portfolio securities is that the prices of securities subject to
futures contracts may correlate imperfectly with the behavior of the cash prices
of the Fund's portfolio securities. The correlation may be distorted by the fact
that the futures market is dominated by short-term traders seeking to profit
from the difference between a contract or security price objective and their
cost of borrowed funds. This would reduce their value for hedging purposes over
a short time period. Such distortions are generally minor and would diminish as
the contract approached maturity.

Another risk is that the Fund's manager could be incorrect in its
expectations as to the direction or extent of various interest rate movements or
the time span within which the movements take place. For example, if the Fund
sold futures contracts for the sale of securities in anticipation of an increase
in interest rates, and then interest rates went down instead, causing bond
prices to rise, the Fund would lose money on the sale.

Put and call options on financial futures have similar characteristics as
Exchange traded options. For a further description of options, see below and
pages 7 and 8 of the Prospectus.

In addition to the risks associated in investing in options on securities,
there are particular risks associated with investing in options on futures. In
particular, the ability to establish and close out positions on such options
will be subject to the development and maintenance of a liquid secondary market.
It is not certain that this market will develop.

A substantial majority (i.e., approximately 75%) of all anticipatory hedge
transactions (transactions in which the Fund does not own at the time of the
transaction, but expects to acquire, the securities underlying the relevant
futures contract) involving the purchase of futures contracts, call options or
written put options thereon will be completed by the purchase of securities
which are the subject of the hedge.

The Fund may not enter into futures contracts or related options thereon if,
immediately thereafter, the amount committed to margin plus the amount paid for
option premiums exceeds 5% of the value of the Fund's total assets. In instances
involving the purchase of futures contracts by the Fund, an amount equal to the
market value of the futures contract will be deposited in a segregated account
of cash and

13
<PAGE>
cash equivalents to collateralize the position and thereby ensure that the use
of such futures contract is unleveraged. The Fund may not purchase or sell
futures contracts or related options if, immediately thereafter, more than
one-third of its net assets would be hedged.

OPTIONS. As discussed in the Prospectus, the Fund may purchase or sell
options on debt securities. The Fund would only buy options listed on national
securities exchanges, except for agreements, sometimes called cash puts, which
may accompany the purchase of a new issue of bonds from a dealer.

A call option is a contract that gives the holder of the option the right to
buy from the writer (seller) of the call option, in return for a premium, the
security underlying the option at a specified exercise price at any time during
the term of the option. The writer of the call option has the obligation upon
exercise of the option to deliver the underlying security upon payment of the
exercise price during the option period. A put option is a contract that gives
the holder of the option the right to sell to the writer, in return for a
premium, the underlying security at a specified price during the term of the
option. The writer of the put has the obligation to buy the underlying security
upon exercise, at the exercise price during the option period. The Fund did not
enter into any options transactions during its fiscal year ended August 31,
1993, and it has no intention of doing so during the forseeable future.

The Fund will only write covered call or covered put options. The Fund may
only write covered options which are listed on national securities exchanges.
The Fund may not write covered options in an amount exceeding 20% of the value
of its total assets. A call option is "covered" if the Fund owns the underlying
security covered by the call or has an absolute and immediate right to acquire
that security without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon conversion or
exchange of other securities held in its portfolio. A call option is also
covered if the Fund holds, on a share-for-share basis, a call on the same
security as the call written where the exercise price of the call held is (i)
equal to or less than the exercise price of the call written or (ii) greater
than the exercise price of the call written if the difference is maintained by
the Fund in cash, Treasury bills or other high grade short-term obligations in a
segregated account with its custodian. A put option is "covered" if the Fund
maintains cash, Treasury bills or other high grade short-term obligations with a
value equal to the exercise price in a segregated account with its custodian, or
else holds, on a share-for-share basis, a put on the same security as the put
written where the exercise price of the put held is equal to or greater than the
exercise price of the put written.

If the Fund has written an option, it may terminate its obligation by
effecting a closing purchase transaction. This is accomplished by purchasing an
option of the same series as the option previously written. However, once the
Fund has been assigned an exercise notice, the Fund will be unable to effect a
closing purchase transaction. Similarly, if the Fund is the holder of an option
it may liquidate its position by effecting a closing sale transaction. This is
accomplished by selling an option of the same series as the option previously
purchased. There can be no assurance that either a closing purchase or sale
transaction can be effected when the Fund so desires. The Fund may only buy
options which are listed on national securities exchanges. The Fund will not
purchase options if, as a result, the aggregate cost of all outstanding options
exceeds 10% of the Fund's total assets.

The Fund will realize a profit from a closing transaction if the price of
the transaction is less than the premium received from writing the option or is
more than the premium paid to purchase the option; the Fund will realize a loss
from a closing transaction if the price of the transaction is more than the
premium received from writing the option or is less than the premium paid to
purchase the option. Since call option prices generally reflect increases in the
price of the underlying security, any loss resulting from the repurchase of a
call option may also be wholly or partially offset by unrealized appreciation of
the underlying security. If a put option written by the Fund is exercised, the
Fund may incur a loss equal to the difference between the exercise price of the
option and the sum of the sale price of the underlying security plus the premium
received from the sale of the option. Other principal factors affecting the
market value of a put or a call option include supply and demand, interest
rates, the current market price and price volatility of the underlying security
and the time remaining until the expiration date.

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<PAGE>
An option position may be closed out only on an exchange which provides a
secondary market for an option of the same series. Although the Fund will
generally purchase or write only those options for which there appears to be an
active secondary market, there is no assurance that a liquid secondary market on
an exchange will exist for any particular option. In such event, it might not be
possible to effect closing transactions in particular options, so that the Fund
would have to exercise its options in order to realize any profit and would
incur brokerage commissions upon the exercise of call options and upon the
subsequent disposition of underlying securities for the exercise of put options.
If the Fund as a covered call option writer is unable to effect a closing
purchase transaction in a secondary market, it will not be able to sell the
underlying security until the option expires or it delivers the underlying
security upon exercise.

The Fund now qualifies and intends to remain qualified as a "regulated
investment company" under the Internal Revenue Code (see "Dividends,
Distributions and Taxes"). One requirement for such qualification is that less
than 30% of the Fund's gross income must be derived from the gains from the sale
or other disposition of securities held for less than three months. Therefore,
the Fund may be limited in its ability to engage in futures and options
transactions.

INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------

In addition to the investment restrictions enumerated in the Prospectus, the
investment restrictions listed below have been adopted by the Fund as
fundamental policies, which may not be changed without the vote of a majority of
the outstanding voting securities of the Fund, as defined in the Act. Such a
majority is defined as the lesser of (a) 67% of the shares present at a meeting
of shareholders, if the holders of more than 50% of the outstanding shares of
the Fund are present or represented by proxy, or (b) more than 50% of the
outstanding shares of the Fund.

The Fund may not:

1. Make short sales of securities;

2. Purchase securities on margin, except for such short-term loans as
are necessary for the clearance of purchases of portfolio securities;

3. Pledge its assets or assign or otherwise encumber them in excess of
4.5% of its net assets (taken at market value at the time of
pledging) and then only to secure borrowings effected within the limitations
set forth in Restriction 14. For the purpose of this restriction, collateral
arrangements with respect to the writing of options and collateral
arrangements with respect to initial margin for futures are not deemed to be
pledges of assets;

4. Engage in the underwriting of securities except insofar as the Fund
may be deemed an underwriter under the Securities Act of 1933 in
disposing of a portfolio security;

5. Purchase or sell real estate or interests therein, although it may
purchase securities of issuers which engage in real estate operations
and securities which are secured by real estate or interests therein;

6. Purchase or sell commodities except that the Fund may purchase
financial futures contracts and related options;

7. Make loans of money or securities, except (a) by the purchase of debt
obligations in which the Fund may invest consistent with its
investment objectives and policies; (b) by investment in repurchase
agreements (see "Portfolio Characteristics -- Repurchase Agreements"); or
(c) by lending its portfolio securities, subject to limitations described
elsewhere in this Statement of Additional Information. See "Portfolio
Characteristics -- Lending of Portfolio Securities";

8. Purchase oil, gas or other mineral leases, rights or royalty
contracts or exploration or development programs, except that the
Fund may invest in the securities of companies which invest in or sponsor
such programs;

15
<PAGE>
9. Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or
acquisition of assets;

10. Invest for the purpose of exercising control or management of another
company;

11. Invest in securities of any company if, to the knowledge of the Fund,
any officer or director of the Fund or of the Investment Manager owns
more than 1/2 of 1% of the outstanding securities of such company, and such
officers and directors who own more than 1/2 of 1% own in the aggregate more
than 5% of the outstanding securities of such company; and

12. Write, purchase or sell puts, calls, or combinations thereof except
options on futures contracts or options on debt securities.

13. Borrow money, except that the Fund may borrow for temporary purposes
in amounts not exceeding 5% (taken at the lower of cost or current
value) of its total assets (not including the amount borrowed).

As regards the above investment restrictions and those disclosed in the
Prospectus, if a percentage restriction is addressed at the time of investment,
a later increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of total or net assets will not be considered a
violation of any of the foregoing restrictions.

PORTFOLIO TRANSACTIONS AND BROKERAGE
- --------------------------------------------------------------------------------

Subject to the general supervision by the Board of Directors, the Investment
Manager is responsible for decisions to buy and sell securities and futures
contracts for the Fund, the selection of brokers and dealers to effect the
transactions, and the negotiation of brokerage commissions, if any. Purchases
and sales of securities on a stock exchange are effected through brokers who
charge a commission for their services. The Fund expects that the primary market
for the securities in which it intends to invest will generally be the
over-the-counter market. Securities are generally traded in the over-the-counter
market on a "net" basis with dealers acting as principal for their own accounts
without charging a stated commission, although the price of the security usually
includes a profit to the dealer. Options and futures transactions will usually
be effected through a broker and a commission will be charged. The Fund also
expects that securities will be purchased at times in underwritten offerings
where the price includes a fixed amount of compensation, generally referred to
as the underwriter's concession or discount. On occasion, the Fund may also
purchase certain money market instruments directly from an issuer, in which case
no commissions or discounts are paid. The Fund paid $3,220, $61,204 and $95,014,
in brokerage commissions during the fiscal years ended August 31, 1992, 1993 and
1994, respectively.

The Investment Manager currently serves as investment manager to a number of
clients, including other investment companies, and may in the future act as
investment manager or adviser to others. It is the practice of the Investment
Manager to cause purchase and sale transactions to be allocated among the Fund
and others whose assets it manages in such manner as it deems equitable. In
making such allocations among the Fund and other client accounts, the main
factors considered are the respective investment objectives, the relative size
of portfolio holdings of the same or comparable securities, the availability of
cash for investment, the size of investment commitments generally held and the
opinions of the persons responsible for managing the portfolios of the Fund and
other client accounts.

The policy of the Fund regarding purchases and sales of securities and
futures contracts for its portfolio is that primary consideration will be given
to obtaining the most favorable prices and efficient executions of transactions.
In seeking to implement the Fund's policies, the Investment Manager effects
transactions with those brokers and dealers who the Investment Manager believes
provide the most favorable prices and who are capable of providing efficient
executions. If the Investment Manager believes such prices and executions are
obtainable from more than one broker or dealer, it may give consideration to
placing portfolio transactions with those brokers and dealers who also furnish
research and other services to the Fund or the Investment Manager. Such services
may include, but are not limited

16
<PAGE>
to, any one or more of the following: information as to the availability of
securities for purchase or sale; statistical or factual information or opinions
pertaining to investment; wire services; and appraisals or evaluations of
portfolio securities.

The information and services received by the Investment Manager from brokers
and dealers may be of benefit to the Investment Manager in the management of
accounts of some of its other clients and may not in all cases benefit the Fund
directly. While the receipt of such information and services is useful in
varying degrees and would generally reduce the amount of research or services
otherwise performed by the Investment Manager and thus reduce its expenses, it
is of indeterminable value and the management fee paid to the Investment Manager
is not reduced by any amount that may be attributable to the value of such
services.

Pursuant to an order of the Securities and Exchange Commission, the Fund may
effect principal transactions in certain money market instruments with DWR. The
Fund will limit its transactions with DWR to U.S. Government and Government
Agency Securities, Bank Money Instruments (I.E., Certificates of Deposit and
Bankers' Acceptances) and Commercial Paper (not including Tax-Exempt Municipal
Paper). Such transactions will be effected with DWR only when the price
available from DWR is better than that available from other dealers.

Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may be
effected through DWR. In order for DWR to effect portfolio transactions for the
Fund, the commissions, fees or other remuneration received by DWR must be
reasonable and fair compared to the commissions, fees or other remuneration paid
to other brokers in connection with comparable transactions involving similar
securities being purchased or sold on an exchange during a comparable period of
time. This standard would allow DWR to receive no more than the remuneration
which would be expected to be received by an unaffiliated broker in a
commensurate arm's-length transaction. Furthermore, the Directors of the Fund,
including a majority of the Directors who are not "interested" Directors, have
adopted procedures which are reasonably designed to provide that any
commissions, fees or other remuneration paid to DWR are consistent with the
foregoing standard. During the fiscal year ended August 31, 1994, the Fund paid
no brokerage commissions to DWR.

PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------

As discussed in the Prospectus, shares of the Fund are distributed by Dean
Witter Distributors Inc. (the "Distributor"). The Distributor has entered into a
selected dealer agreement with DWR, which through its own sales organization
sells shares of the Fund. In addition, the Distributor may enter into agreements
with other selected broker-dealers. The Distributor, a Delaware corporation, is
a wholly-owned subsidiary of DWDC. The Directors of the Fund, including a
majority of the Directors who are not, and were not at the time they voted,
interested persons of the Fund, as defined in the Act (the "Independent
Directors"), approved, at their meeting held on October 30, 1992, the current
Distribution Agreement appointing the Distributor exclusive distributor of the
Fund's shares and providing for the Distributor to bear distribution expenses
not borne by the Fund. The Distribution Agreement took effect on June 30, 1993
upon the spin-off by Sears, Roebuck and Co. of its remaining shares of DWDC. By
its terms, the Distribution Agreement will continue in effect until April 30,
1994, and from year to year thereafter if approved by the Directors. At their
meeting held on April 8, 1994, the Directors, including all of the Independent
Directors, approved the continuance of the Distribution Agreement until April
30, 1995. The "Statement of Assets and Liabilities" set forth in the Financial
Statements contained within this Statement of Additional Information illustrates
the computation of the offering price for a share of the Fund on August 31, 1994
and is incorporated herein by reference.

The Distributor has agreed to pay certain expenses of the offering of the
Fund's shares, including the costs of printing and distributing prospectuses and
supplements thereto used in connection with the offering and sale of the Fund's
shares. The Fund will bear the costs of initial typesetting, printing and
distribution to shareholders. The Fund and the Distributor have agreed to
indemnify each other against

17
<PAGE>
certain liabilities, including liabilities under the Securities Act of 1933, as
amended. Under the Distribution Agreement, the Distributor uses its best efforts
in rendering services to the Fund, but in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations, the
Distributor is not liable to the Fund or any of its shareholders for any error
of judgment or mistake of law or for any act or omission or for any losses
sustained by the Fund or its shareholders.

The Distributor has informed the Fund that it received sales charges on
sales of the Fund's shares in the approximate amounts of $1,503,000, $1,912,000
and $2,208,000, during the fiscal years ended August 31, 1992, 1993 and 1994,
respectively.

REDUCED SALES CHARGES

RIGHT OF ACCUMULATION. As discussed in the Prospectus, investors may
combine the current value of shares purchased in separate transactions for
purposes of benefitting from the reduced sales charges available for purchases
of shares of the Fund totalling at least $25,000 in net asset value. For
example, if any person or entity who qualifies for this privilege holds shares
of the Fund having a current value of $5,000, and purchases $20,000 of
additional shares of the Fund, the sales charge applicable to the $20,000
purchase would be 5% of the offering price.

For the purposes of this Right of Accumulation, the cumulative current net
asset value of any shares of Dean Witter Liquid Asset Fund Inc., Dean Witter
Tax-Free Daily Income Trust, Dean Witter New York Municipal Money Market Trust,
Dean Witter California Tax-Free Daily Income Trust, Dean Witter Short-Term U.S.
Treasury Trust, Dean Witter Short-Term Bond Fund, Dean Witter Limited Term
Municipal Trust or Dean Witter U.S. Government Money Market Trust originally
purchased with the proceeds of shares of the Fund or Dean Witter Tax-Exempt
Securities Trust or with the proceeds of shares of a Dean Witter Fund sold with
a contingent deferred sales charge ("CDSC fund") and held in an Exchange
Privilege Account of that fund in the name of a shareholder of the Fund (see
"Shareholder Services -- Exchange Privilege") and shares of Dean Witter
Tax-Exempt Securities Trust or any CDSC fund held by the shareholder will be
added to the value of shares of the Fund owned by the shareholder in determining
the sales charge applicable to any new purchases of Fund shares.

The Distributor must be notified by the selected broker-dealer or the
shareholder at the time a purchase order is placed that the purchase qualifies
for the reduced charge under the Right of Accumulation. Similar notification
must be made in writing by the selected broker-dealer or shareholder when such
an order is placed by mail. The reduced sales charge will not be granted if: (a)
such notification is not furnished at the time of the order; or (b) a review of
the records of the Distributor or Dean Witter Trust Company (the "Transfer
Agent") fails to confirm the investor's represented holdings.

LETTER OF INTENT. As discussed in the prospectus under the caption "Reduced
Sales Charges," reduced sales charges are available to investors who enter into
a written Letter of Intent providing for the purchase, within a thirteen-month
period, of shares of the Fund from the Distributor or from a single selected
broker-dealer which has entered into an agreement with the Distributor.

A Letter of Intent permits an investor to establish a total investment goal
to be achieved by any number of purchases over a thirteen-month period. Each
purchase made during the period will receive the reduced sales commission
applicable to the amount represented by the goal, as if it were a single
purchase. A number of shares equal in value to 5% of the dollar amount of the
Letter of Intent will be held in escrow by the Transfer Agent, in the name of
the shareholder. The initial purchase under a Letter of Intent must be equal to
at least 5% of the stated investment goal.

The Letter of Intent does not obligate the investor to purchase, nor the
Fund to sell, the indicated amount. In the event the Letter of Intent goal is
not achieved within the thirteen-month period, the investor is required to pay
the difference between the sales charge otherwise applicable to the purchases
made during this period and sales charges actually paid. Such payment may be
made directly to the Distributor or, if not paid, the Distributor is authorized
by the shareholder to liquidate a sufficient number of his or her escrowed
shares to obtain such difference.

18
<PAGE>
If the goal is exceeded and purchases pass the next sales charge level, the
sales charge on the entire amount of the purchase that results in passing that
level and on subsequent purchases will be subject to further reduced sales
charges in the same manner as set forth above under RIGHT OF ACCUMULATION, but
there will be no retroactive reduction of sales charges on previous purchases.
For the purpose of determining whether the investor is entitled to a further
reduced sales charge applicable to purchases at or above a sales charge level
which exceeds the stated goal of a Letter of Intent, the cumulative current net
asset value of any shares owned by the investor in an Exchange Privilege Account
with Dean Witter Liquid Asset Fund Inc., Dean Witter Tax-Free Daily Income
Trust, Dean Witter New York Municipal Money Market Trust, Dean Witter California
Tax-Free Daily Income Trust, Dean Witter U.S. Government Money Market Trust,
Dean Witter Limited Term Municipal Trust, Dean Witter Short-Term Bond Fund or
Dean Witter Short-Term U.S. Treasury Trust, if such shares were originally
purchased with the proceeds of shares of the Fund or Dean Witter Tax-Exempt
Securities Trust or a CDSC fund, held by the shareholder will be added to the
cost or net asset value of shares of the Fund owned by the investor. (See
"Shareholder Services -- Exchange Privilege.") However, shares of Dean Witter
Liquid Asset Fund Inc., Dean Witter Tax-Free Daily Income Trust, Dean Witter New
York Municipal Money Market Trust, Dean Witter California Tax-Free Daily Income
Trust, Dean Witter Short-Term U.S. Treasury Trust, Dean Witter Limited Term
Municipal Trust, Dean Witter Short-Term Bond Fund or Dean Witter U.S. Government
Money Market Trust held in an Exchange Privilege Account and the purchase of
shares of any other Dean Witter Funds will not be included in determining
whether the stated goal of a Letter of Intent has been reached.

At any time while a Letter of Intent is in effect, a shareholder may, by
written notice to the Distributor, increase the amount of the stated goal. In
that event, only shares purchased during the previous 90-day period and still
owned by the shareholder will be included in the new sales charge reduction. The
5% escrow and minimum purchase requirements will be applicable to the new stated
goal. Investors electing to purchase shares of the Fund pursuant to a Letter of
Intent should carefully read such Letter of Intent.

ACQUISITION OF CERTAIN INVESTMENT COMPANIES. The public offering price of a
share of the Fund may be reduced to the net asset value per share in connection
with the acquisition of the assets of, or merger or consolidation with, a
personal holding company or a public or private investment company. The value of
the assets or company acquired in a tax-free transaction may, in appropriate
cases, be adjusted to reduce possible adverse tax consequences to the Fund which
might result from an acquisition of assets having net unrealized appreciation
which is disproportionately higher at the time of acquisition than the realized
or unrealized appreciation of the Fund.

DETERMINATION OF NET ASSET VALUE

As discussed in the Prospectus, the net asset value of a share of the Fund
is determined once daily at 4:00 p.m., New York time on each day that the New
York Stock Exchange is open. The New York Stock Exchange currently observes the
following holidays: New Year's Day; President's Day; Good Friday; Memorial Day;
Independence Day; Labor Day; Thanksgiving Day; and Christmas Day.

SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------

Upon the purchase of shares of the Fund, a Shareholder Investment Account is
opened for the investor on the books of the Fund, maintained by the Transfer
Agent. This is an open account in which shares owned by the investor are
credited by the Transfer Agent in lieu of issuance of a stock certificate. If a
stock certificate is desired, it must be requested in writing for each
transaction. Certificates are issued only for full shares and may be redeposited
in the account at any time. There is no charge to the investor for issuance of a
certificate. Whenever a shareholder instituted transaction takes place in the
Shareholder Investment Account, the shareholder will be mailed a confirmation of
the transaction from the Fund or from DWR or other selected broker-dealer.

TARGETED DIVIDENDS.-SM- In states where it is legally permissible,
shareholders may also have all income dividends and capital gains distributions
automatically invested in shares of an open-end

19
<PAGE>
Dean Witter Fund other than Dean Witter High Yield Securities Inc. Such
investment will be made as described above for automatic investment in shares of
the Fund, at the net asset value per share (without sales charge) of the
selected Dean Witter Fund as of the close of business on the monthly payment
date and will begin to earn dividends, if any, in the selected Dean Witter Fund
the next business day. To participate in the Targeted Dividends program,
shareholders should contact their DWR or other selected broker-dealer account
executive or the Transfer Agent. Shareholders of the Fund must be shareholders
of the Dean Witter Fund targeted to receive investments from dividends at the
time they enter the Targeted Dividends program. Investors should review the
prospectus of the targeted Dean Witter Fund before entering the program.

EASYINVEST.-SM- Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account, on a semi-monthly,
monthly or quarterly basis, to the Transfer Agent for investment in shares of
the Fund. Shares purchased through EasyInvest will be added to the shareholder's
existing account at the net asset value calculated the same business day the
transfer of funds is effected. For further information or to subscribe to
EasyInvest, shareholders should contact their DWR or other selected
broker-dealer account executive or the Transfer Agent.

INVESTMENT OF DISTRIBUTIONS RECEIVED IN CASH. As discussed in the
Prospectus, any shareholder who receives a cash payment representing a dividend
or capital gains distribution may invest such dividend or distribution at the
net asset value (without sales charge) next determined by returning the check or
the proceeds to the Transfer Agent within 30 days after the payment date. If the
shareholder returns the proceeds of a dividend or distribution, such funds must
be accompanied by a signed statement indicating that the proceeds constitute a
dividend or distribution to be invested. Such investment will be made at the net
asset value per share (without sales charge) next determined after receipt of
the proceeds by the Transfer Agent.

DIRECT INVESTMENTS THROUGH TRANSFER AGENT. A shareholder may make
additional investments in Fund shares at any time through the Shareholder
Investment Account by sending a check in any amount, not less than $100, payable
to Dean Witter High Yield Securities Inc., directly to the Fund's Transfer
Agent. After deduction of the applicable sales charge, the balance will be
applied to the purchase of Fund shares at the net asset value per share next
determined after receipt of the check or purchase payment by the Transfer Agent.
The shares so purchased will be credited to the investment account.

SYSTEMATIC WITHDRAWAL PLAN. As discussed in the Prospectus, a withdrawal
plan is available for shareholders who own or purchase shares of the Fund having
a minimum value of $10,000 based upon the then current offering price. The plan
provides for monthly or quarterly (March, June, September and December) checks
in any amount, not less than $25, or in any whole percentage of the account
balance, on an annualized basis.

Dividends and capital gains distributions on shares held under the
Systematic Withdrawal Plan will be invested in additional full and fractional
shares at net asset value (without a sales charge). Shares will be credited to
an open account for the investor by the Transfer Agent; no stock certificates
will be issued. A shareholder is entitled to a stock certificate upon written
request to the Transfer Agent, but in that event the shareholder's Systematic
Withdrawal Plan will be terminated.

The Transfer Agent acts as agent for the shareholder in tendering to the
Fund for redemption sufficient full and fractional shares to provide the amount
of the periodic withdrawal payment designated in the application. The shares
will be redeemed at their net asset value determined, at the shareholder's
option, on the tenth or twenty-fifth day (or next following business day) of the
relevant month or quarter and normally a check for the proceeds will be mailed
by the Transfer Agent within five business days after the date of redemption.
The Systematic Withdrawal Plan may be terminated at any time by the Transfer
Agent.

20
<PAGE>
Any shareholder who wishes to have payments under the Withdrawal Plan made
to a third party or sent to an address other than the one listed on the account
must send complete written instructions to the Transfer Agent to enroll in the
Withdrawal Plan. The shareholder's signature on such instructions must be
guaranteed by an eligible guarantor acceptable to the Transfer Agent
(shareholders should contact the Transfer Agent for a determination as to
whether a particular institution is an eligible guarantor). A shareholder may,
at any time, change the amount and interval of withdrawal payments through his
or her Account Executive or by written notification to the Transfer Agent. In
addition, the party and/or the address to which checks are mailed may be changed
by written notification to the Transfer Agent, with signature guarantees
required in the manner described above. The shareholder may also terminate the
Withdrawal Plan at any time by written notice to the Transfer Agent. In the
event of such termination, the account will be continued as a regular
shareholder investment account. The shareholder may also redeem all or part of
the shares held in the Withdrawal Plan account (see "Redemptions and
Repurchases" in the Prospectus) at any time.

EXCHANGE PRIVILEGE

As discussed in the Prospectus, the Fund makes available to its shareholders
an Exchange Privilege whereby shareholders of the Fund may exchange their shares
for shares of other Dean Witter Funds sold with a front-end (at time of
purchase) sales charge ("FESC funds"), for shares of Dean Witter Funds sold with
a contingent deferred sales charge ("CDSC funds"), for shares of five Dean
Witter Funds which are money market funds, and for shares of Dean Witter Limited
Term Municipal Trust, Dean Witter Short-Term Bond Fund and Dean Witter
Short-Term U.S. Treasury Trust. Exchanges (hereinafter, the foregoing eight
non-CDSC funds and referred to as the "Exchange Funds") may be made after the
shares of the CDSC fund or FESC fund acquired by purchase (not by exchange or
dividend reinvestment) have been held for 30 days. There is no holding period
for exchanges of shares acquired by exchange or dividend reinvestment. However,
shares of CDSC funds, including shares acquired in exchange for shares of FESC
funds, may not be exchanged for shares of FESC funds. Thus, shareholders who
exchange their Fund shares for shares of CDSC funds may subsequently exchange
those shares for other CDSC funds, or Exchange Funds but may not reacquire FESC
fund shares by exchange. An exchange will be treated for federal income tax
purposes the same as a repurchase or redemption of shares, on which the
shareholder may realize a capital gain or loss.

Any new account established through the Exchange Privilege will have the
same registration and cash dividend or dividend reinvestment plan as the present
account, unless the Transfer Agent receives written notification to the
contrary. For telephone exchanges, the exact registration of the existing
account and the account number must be provided.

Any shares held in certificate form cannot be exchanged but must be
forwarded to the Transfer Agent and deposited into the shareholder's account
before being eligible for exchange. (Certificates mailed in for deposit should
not be endorsed.)

The Transfer Agent acts as agent for shareholders of the Fund in effecting
redemptions of Fund shares and in applying the proceeds to the purchase of other
fund shares. In the absence of negligence on its part, neither the Transfer
Agent nor the Fund shall be liable for any redemption of Fund shares caused by
unauthorized telephone or telegraph instructions. Accordingly, in such an event
the investor shall bear the risk of loss. The staff of the Securities and
Exchange Commission is currently considering the propriety of such a policy.

With respect to exchanges, redemptions or repurchases, the Transfer Agent
shall be liable only for its own negligence and not for default or negligence of
its correspondents or for losses in transit. The Fund shall not be liable for
any default or negligence of the Transfer Agent. With respect to the redemption
or repurchase of shares of the Fund, the application of proceeds to the purchase
of new shares in the Fund or any other of the funds and the general
administration of the Exchange Privilege, the Transfer Agent acts as agent for
the Distributor and for the shareholder's Selected Broker-Dealer, if any,

21
<PAGE>
in the performance of such functions. The Transfer Agent shall be liable for its
own negligence and not for the default or negligence of its correspondents or
for losses in transit. The Fund shall not be liable for any default or
negligence of the Transfer Agent, the Distributor or any Selected Broker-Dealer.

The Distributor and any selected broker-dealer have authorized and appointed
the Transfer Agent to act as their agent in connection with the application of
proceeds of any redemption of Fund shares to the purchase of shares of any other
fund and the general administration of the Exchange Privilege. No commission or
discounts will be paid to the Distributor or any Dealer for any transactions
pursuant to this Exchange Privilege.

Exchanges are subject to the minimum investment requirement and any other
conditions imposed by each fund. (The minimum initial investment is $5,000 for
Dean Witter Liquid Asset Fund Inc., Dean Witter Tax-Free Daily Income Trust,
Dean Witter New York Municipal Money Market Trust and Dean Witter California
Tax-Free Daily Income Trust although those funds may, at their discretion,
accept initial investments of as low as $1,000. The minimum initial investment
for Dean Witter Short-Term U.S. Treasury Trust is $10,000 although that fund
may, at its discretion, accept initial investments of as low as $5,000. The
minimum initial investment for all other Dean Witter Funds for which the
Exchange Privilege is available is $1,000.) Upon exchange into an Exchange Fund
the shares of that fund will be held in a special Exchange Privilege Account
separately from accounts of those shareholders who have acquired their shares
directly from that fund. As a result, certain services normally available to
shareholders of Exchange Funds, including the check writing feature, will not be
available for funds held in that account.

The Fund and each of the other Dean Witter Funds may limit the number of
times this Exchange Privilege may be exercised by any investor within a
specified period of time. Also, the Exchange Privilege may be terminated or
revised at any time by the Fund and/or any of the Dean Witter Funds for which
shares of the Fund have been exchanged, upon such notice as may be required by
applicable regulatory authorities (presently sixty days' prior written notice
for termination or material revision), provided that six months' prior written
notice of termination will be given to the shareholders who hold shares of
Exchange Funds, pursuant to this Exchange Privilege, and provided further that
the Exchange Privilege may be terminated or materially revised without notice at
times (a) when the New York Stock Exchange is closed for other than customary
weekends and holidays, (b) when trading on that Exchange is restricted, (c) when
an emergency exists as a result of which disposal by the Fund of securities
owned by it is not reasonably practicable or it is not reasonably practicable
for the Fund fairly to determine the value of its net assets, (d) during any
other period when the Securities and Exchange Commission by order so permits
(provided that applicable rules and regulations of the Securities and Exchange
Commission shall govern as to whether the conditions prescribed in (b) or (c)
exist), or (e) if the Fund would be unable to invest amounts effectively in
accordance with its investment objective(s), policies and restrictions.

For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other selected broker-dealer or the Transfer Agent.

REDEMPTIONS AND REPURCHASES
- --------------------------------------------------------------------------------

REDEMPTION. As stated in the Prospectus, shares of the Fund can be redeemed
for cash at any time at the net asset value per share next determined. If shares
are held in a shareholder's account without a share certificate, a written
request for redemption to the Fund's Transfer Agent at P.O. Box 983, Jersey
City, NJ 07303 is required. If certificates are held by the shareholder, the
shares may be redeemed by surrendering the certificates with a written request
for redemption. The share certificate, or an accompanying stock power, and the
request for redemption, must be signed by the shareholder or shareholders
exactly as the shares are registered. Each request for redemption, whether or
not accompanied by a share certificate, must be sent to the Fund's Transfer
Agent, which will redeem the shares at their net asset value next computed (see
"Purchase of Fund Shares" in the Prospectus) after it receives the request, and
certificate, if any, in good order. Any redemption request received after such
computation will be redeemed at the next determined net asset value. The term
"good order" means that the

22
<PAGE>
share certificate, if any, and request for redemption are properly signed,
accompanied by any documentation required by the Transfer Agent, and bear
signature guarantees when required by the Fund or the Transfer Agent. If
redemption is requested by a corporation, partnership, trust or fiduciary, the
Transfer Agent may require that written evidence of authority acceptable to the
Transfer Agent be submitted before such request is accepted.

Whether certificates are held by the shareholder or shares are held in a
shareholder's account, if the proceeds are to be paid to any person other than
the record owner, or if the proceeds are to be paid to a corporation (other than
the Distributor or a selected broker-dealer for the account of the shareholder),
partnership, trust or fiduciary, or sent to the shareholder at an address other
than the registered address, signatures must be guaranteed by an eligible
guarantor acceptable to the Transfer Agent (shareholders should contact the
Transfer Agent for a determination as to whether a particular Institution is
such an eligible guarantor). A stock power may be obtained from any dealer or
commercial bank. The Fund may change the signature guarantee requirements from
time to time upon notice to shareholders, which may be by means of a revised
prospectus.

PAYMENT FOR SHARES REDEEMED OR REPURCHASED. As discussed in the Prospectus,
payment for shares presented for repurchase or redemption will be made by check
within seven days after receipt by the Transfer Agent of the certificate and/or
written request in good order. The term good order means that the Share
certificate, if any, and request for redemption are properly signed, accompanied
by any documentation required by the Transfer Agent, and bear signature
guarantees when required by the Fund or the Transfer Agent. Such payment may be
postponed or the right of redemption suspended at times (a) when the New York
Stock Exchange is closed for other than customary weekends and holidays, (b)
when trading on that Exchange is restricted, (c) when an emergency exists as a
result of which disposal by the Fund of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Fund fairly to determine
the value of its net assets, or (d) during any other period when the Securities
and Exchange Commission by order so permits; provided that applicable rules and
regulations of the Securities and Exchange Commission shall govern as to whether
the conditions prescribed in (b) or (c) exist.

REINSTATEMENT PRIVILEGE. As described in the Prospectus, a shareholder who
has had his or her shares redeemed or repurchased and has not previously
exercised this reinstatement privilege may, within 30 days after the date of the
redemption or repurchase, reinstate any portion or all of the proceeds of such
redemption or repurchase in shares of the Fund at net asset value (without sales
charge) next determined after a reinstatement request, together with the
proceeds, is received by the Transfer Agent.

Exercise of the reinstatement privilege will not affect the federal income
tax treatment of any gain or loss realized upon the redemption or repurchase,
except that if the redemption or repurchase resulted in a loss and reinstatement
is made in shares of the Fund, some or all of the loss, depending on the amount
reinstated, will not be allowed as a deduction for federal income tax purposes
but will be applied to adjust the cost basis of the shares acquired upon
reinstatement.

INVOLUNTARY REDEMPTION. As described in the Prospectus, due to the
relatively high cost of handling small investments, the Fund reserves the right
to redeem, at net asset value, the shares of any shareholder whose shares have a
value of less than $100, or such lesser amount as may be fixed by the Board of
Directors. However, before the Fund redeems such shares and sends the proceeds
to the shareholder, it will notify the shareholder that the value of the shares
is less than $100 and allow him or her 60 days to make an additional investment
in an amount which will increase the value of his or her account to $100 or more
before the redemption is processed.

DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------

As discussed in the Prospectus, the Fund will determine either to distribute
or to retain all or part of any net long-term capital gains in any year for
reinvestment. If any such gains are retained, the Fund will pay federal income
tax thereon, and will notify shareholders that following an election by the
Fund, the

23
<PAGE>
shareholders will be required to include such undistributed gains in determining
their taxable income and may claim their share of the tax paid by the Fund as a
credit against their individual federal income tax.

In computing net investment income, the Fund will not amortize premiums or
accrue discounts on fixed-income securities in the portfolio, except those
original issue discounts for which amortization is required for federal income
tax purposes. Additionally, with respect to market discounts on bonds issued
after July 18, 1984, and all bonds purchased after April 30, 1993, a portion of
any capital gain realized upon disposition may be re-characterized as taxable
ordinary income in accordance with the provisions of the Internal Revenue Code.
Realized gains and losses on security transactions are determined on the
identified cost method. Dividend income is recorded on the ex-dividend date.

Gains or losses on the sales of securities by the Fund will be long-term
capital gains or losses if the securities have been held by the Fund for more
than twelve months. Gains or losses on the sale of securities held for twelve
months or less will be short-term capital gains or losses. In determining
amounts to be distributed, capital gains will be offset by any capital loss
carryovers incurred in prior years.

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 dividend or capital gains distribution received by a shareholder from an
investment company will have the effect of reducing the net asset value of the
shareholder's stock in that company by the exact amount of the dividend or
capital gains distribution. Furthermore, capital gains distributions and some
portion of the dividends are subject to federal income taxes. If the net asset
value of the shares should be reduced below a shareholder's cost as a result of
the payment of dividends or realized long-term capital gains, such payment would
be in part a return of the shareholder's investment to the extent of such
reduction below the shareholder's cost, but nonetheless would be taxable to the
shareholder. Therefore, an investor should consider the tax implications of
purchasing Fund shares immediately prior to a distribution record date.

Shareholders should consult their attorneys or tax advisers regarding
specific questions as to state or local taxes and as to the applicability of the
foregoing to their current federal tax situation.

PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------

As discussed in the Prospectus, from time to time the Fund may quote its
"yield" and/or its "total return" in advertisements and sales literature. Yield
is calculated for any 30-day period as follows: the amount of interest and/or
dividend income for each security in the Fund's portfolio is determined in
accordance with regulatory requirements; the total for the entire portfolio
constitutes the Fund's gross income for the period. Expenses accrued during the
period are subtracted to arrive at "net investment income". The resulting amount
is divided by the product of the maximum offering price per share on the last
day of the period multiplied by the average number of Fund shares outstanding
during the period that were entitled to dividends. This amount is added to 1 and
raised to the sixth power. 1 is then subtracted from the result and the
difference is multiplied by 2 to arrive at the annualized yield. For the 30-day
period ended August 31, 1994, the Fund's yield, calculated pursuant to this
formula was 12.27%.

The Fund's "average annual total return" represents an annualization of the
Fund's total return over a particular period and is computed by finding the
annual percentage rate which will result in the ending redeemable value of a
hypothetical $1,000 investment made at the beginning of a one, five or ten year
period, or for the period from the date of commencement of the Fund's
operations, if shorter than any of

24
<PAGE>
the foregoing. For the purpose of this calculation, it is assumed that all
dividends and distributions are reinvested. The formula for computing the
average annual total return involves a percentage obtained by dividing the
ending redeemable value by the amount of the initial investment, taking a root
of the quotient (where the root is equivalent to the number of years in the
period) and subtracting 1 from the result. The average annual total returns of
the Fund for the year ended August 31, 1993, for the five years ended August 31,
1994, and for the ten years ended August 31, 1994, were -4.62%, 4.88% and 7.57%,
respectively.

In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, year-by-year or other
types of total return figures. Such calculation may or may not reflect the
imposition of the maximum front end sales charge which, if reflected, would
reduce the performance quoted. For example, the average annual total return of
the Fund in the manner described in the preceding paragraph, but without the
deduction for any applicable sales charge. Based on the foregoing calculation,
the Fund's total return for year ended August 31, 1994 was -0.93%, the total
return for the five years ended August 31, 1994 was 6.07% and the total return
for the ten years ended August 31, 1994 was 8.18%.

In addition, the Fund may compute its aggregate total return for specified
periods by determining the aggregate percentage rate which will result in the
ending value of a hypothetical $1,000 investment made at the beginning of the
period. For the purpose of this calculation, it is assumed that all dividends
and distributions are reinvested. The formula for computing aggregate total
return involves a percentage obtained by dividing the ending value (without
reduction for any sales charge) by the initial $1,000 investment and subtracting
1 from the result. Based on the foregoing calculation, the Fund's total return
for the year ended August 31, 1994 was 0.93%, the total return for the five-year
period ended August 31, 1994 was 34.26%, and the total return for the ten years
ended August 31, 1994 was 119.42%.

The Fund may advertise the growth of a hypothetical investment of $10,000,
$50,000 or $100,000 in shares of the Fund by adding 1 to the Fund's aggregate
total return to date and multiplying by $9,450, $47,875 or $96,750 ($10,000,
$50,000 or $100,000 adjusted for a 5.5%, 4.25% or 3.25% sales charge). An
investment of $10,000, adjusted for the 5.5% sales charge, in the Fund at
inception would have grown to $36,471 at August 31, 1994. An investment of
$50,000, adjusted for a 4.25% sales charge would have grown to $184,764 at
August 31, 1994. An investment of $100,000, adjusted for a 3.25% sales charge,
would have grown to $373,387 at August 31, 1994. The Fund from time to time may
also advertise its performance relative to certain performance rankings and
indexes compiled by independent organizations.

DESCRIPTION OF COMMON STOCK
- --------------------------------------------------------------------------------

The Fund is authorized to issue 400,000,000 shares of common stock of $0.01
par value. Shares of the Fund, when issued, are fully paid, non-assessable,
fully transferable and redeemable at the option of the holder. All shares are
equal as to earnings, assets and voting privileges. There are no conversion,
preemptive or other subscription rights. In the event of liquidation, each share
of common stock of the Fund is entitled to its portion of all of the Fund's
assets after all debts and expenses have been paid. Except for agreements
entered into by the Fund in its ordinary course of business within the
limitations of the Fund's fundamental investment policies (which may be modified
only by shareholder vote), the Fund will not issue any securities other than
common stock.

The shares of the Fund do not have cumulative voting rights, which means
that the holders of more than 50% of the shares voting for the election of
directors can elect 100% of the directors if they choose to do so, and in such
event, the holders of the remaining less than 50% of the shares voting for the
election of directors will not be able to elect any person or persons to the
Board of Directors.

25
<PAGE>
CUSTODIAN AND TRANSFER AGENT
- --------------------------------------------------------------------------------

The Bank of New York, 90 Washington Street, New York, New York 10286 is the
Custodian of the Fund's assets. Any of the Fund's cash balances with the
Custodian in excess of $100,000 are unprotected by federal deposit insurance.
Such balances may, at times, be substantial.

The Chase Manhattan Bank, One Chase Plaza, New York, New York 10005 acts as
Sub-Custodian for portfolio securities held outside the United States, if any,
and has contracted with various foreign banks and depositories to hold such
portfolio securities on behalf of the Fund.

Dean Witter Trust Company, Harborside Financial Center, Plaza Two, Jersey
City, New Jersey 07311 is the Transfer Agent of the Fund's shares and Dividend
Disbursing Agent for payment of dividends and distributions on Fund shares and
Agent for shareholders under various investment plans described herein. Dean
Witter Trust Company is an affiliate of Dean Witter InterCapital Inc., the
Fund's Investment Manager and of Dean Witter Distributors Inc, the Fund's
Distributor. As Transfer Agent and Dividend Disbursing Agent, Dean Witter Trust
Company's responsibilities include maintaining shareholder accounts; disbursing
cash dividends and reinvesting dividends; processing account registration
changes; handling purchase and redemption transactions; mailing prospectuses and
reports; mailing and tabulating proxies; processing share certificate
transactions; and maintaining shareholder records and lists. For these services
Dean Witter Trust Company receives a per shareholder account fee.

INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------

Price Waterhouse LLP serves as the independent accountants of the Fund. The
independent accountants are responsible for auditing the annual financial
statements of the Fund.

REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------

The Fund will send to shareholders, at least semi-annually, reports showing
the Fund's portfolio and other information. An annual report, containing
financial statements, together with a report by its independent accountants,
will be sent to shareholders each year.

The Fund's fiscal year runs from September 1st to August 31st of the ensuing
year. The financial statements of the Fund must be audited at least once a year
by independent accountants whose selection is made annually by the Fund's Board
of Directors.

LEGAL COUNSEL
- --------------------------------------------------------------------------------

Sheldon Curtis, Esq., who is an officer and the General Counsel of the
Investment Manager, is an officer and the General Counsel of the Fund.

EXPERTS
- --------------------------------------------------------------------------------

The financial statements of the Fund included in this Statement of
Additional Information and incorporated by reference in the Prospectus have been
so included and incorporated in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.

REGISTRATION STATEMENT
- --------------------------------------------------------------------------------

This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the rules and regulations of the Commission.

26
<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>

27
<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
- ----------- ------------ --------- -------------
<C> <S> <C> <C> <C>
OIL & GAS (6.7%)
$ 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>

28
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1994 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- -------------
<C> <S> <C>
ENTERTAINMENT, GAMING & LODGING (0.2%)
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>

29
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1994 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN
THOUSANDS)
- -----------
SHORT-TERM INVESTMENTS (6.0%)
<C> <S> <C> <C>
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

30
<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

31
<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

32
<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.

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.

33
<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.

34
<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 1987 1986 1985
------- ------- ------- ------- ------- --------- --------- --------- --------- -------
<S> <C> <C> <C> <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 $ 14.16 $ 13.40 $ 12.71
------- ------- ------- ------- ------- --------- --------- --------- --------- -------
Net investment income... .79 .89 .95 .94 1.48 1.67 1.84 1.82 1.80 1.75
Net realized and
unrealized gain (loss)
on investments......... (.68) .54 1.04 (.86) (3.78) (1.48) (1.77) (.46) .76 .74
------- ------- ------- ------- ------- --------- --------- --------- --------- -------
Total from investment
operations.............. .11 1.43 1.99 .08 (2.30) .19 .07 1.36 2.56 2.49
------- ------- ------- ------- ------- --------- --------- --------- --------- -------
Less dividends and
distributions:
Dividends from net
investment income...... (.86) (1.08) (.68) (.94) (1.32) (1.75) (1.80) (1.80) (1.80) (1.80)
Distributions to
shareholders from
paid-in capital........ -0- -0- -0- -0- -0- (.03) -0- -0- -0- -0-
------- ------- ------- ------- ------- --------- --------- --------- --------- -------
Total dividends and
distributions........... (.86) (1.08) (.68) (.94) (1.32) (1.78) (1.80) (1.80) (1.80) (1.80)
------- ------- ------- ------- ------- --------- --------- --------- --------- -------
Net asset value, end of
period.................. $ 6.83 $ 7.58 $ 7.23 $ 5.92 $ 6.78 $ 10.40 $ 11.99 $ 13.72 $ 14.16 $ 13.40
------- ------- ------- ------- ------- --------- --------- --------- --------- -------
------- ------- ------- ------- ------- --------- --------- --------- --------- -------
TOTAL INVESTMENT
RETURN+.................. .93% 22.29% 35.46% 4.67% (23.28)% 1.39% .97% 10.07% 20.19% 20.67%
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 $2,034,352 $1,292,233 $584,182
Ratio of expenses to
average net assets...... .69% .67% .77% .87% .60% .49% .49% .51% .60% .66%
Ratio of net investment
income to average net
assets.................. 10.40% 12.14% 13.96% 16.47% 17.67% 14.61% 14.79% 12.83% 12.80% 13.32%
Portfolio turnover rate... 127% 173% 113% 93% 21% 55% 107% 176% 95% 126%
<FN>
- --------------------
+ Does not reflect the deduction of sales load.
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

35
<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