<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC. TWO WORLD TRADE CENTER, NEW YORK, NEW
YORK 10048
LETTER TO THE SHAREHOLDERS
DEAR SHAREHOLDER:
The six-month period ended February 28, 1995 has produced somewhat mixed
performance results. The final four months of 1994 proved to be disappointing
for all fixed-income markets. Questions concerning the strength of the economy,
inflation prospects, interest rate levels and possible Federal Reserve Board
moves created a great deal of uncertainty for the financial markets in 1994.
High-yield investors, concerned about rising interest rates and possible further
tightening actions by the Federal Reserve Board, remained nervous throughout
1994, leading to a significant correction in bond prices. In addition, a rather
large amount of new issue supply, coming in a period of weak demand, helped
contribute to 1994's market weakness.
As we enter 1995, however, the high-yield bond market has begun to bounce back,
along with most other fixed-income markets. As overall interest rates decline,
the yield advantage provided by high-yield issues increases, attracting more
investors to the market and creating more value for shareholders. Also providing
fundamental support to the market is the fact that credit quality in the
marketplace remains solid, reflecting the strong economy, improved corporate
earnings picture and the spruced up balance sheets of many high-yield issuers.
The high-yield bond market's mixed results over the past six months was
reflected in the performance of Dean Witter High Yield Securities. For the
six-month period ended February 28, 1995, the Fund's total return was 2.33
percent. As of February 28, 1995, the Fund's net assets exceeded $438 million.
Over the past six months, the Fund continued to distribute regular income
dividends at a rate of $.055 per share per month. For the full six-month period,
income dividends totaled approximately $.472 per share, including an extra
income dividend of $.142 per share paid on December 31, 1994.
INVESTMENT STRATEGY
As reported in the Fund's annual report on August 31, 1994, the Fund began the
year positioned quite defensively. However, the Fund became a buyer during the
second quarter, as a correction in the market pushed
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
LETTER TO THE SHAREHOLDERS, CONTINUED
bond prices back to more attractive levels. Despite the fact that corporate
credit quality in most cases remained strong, B-rated issues could be purchased
at 13 percent yield levels versus the 10 percent levels that existed earlier in
1994 and at significant discounts to par (face) value.
The Fund continued this buying activity during the second half of 1994,
increasing its emphasis on discounted issues, which possess more upside
opportunity for the Fund when the high-yield bond market rebounds. While the
Fund overall is positioned for a recovery in the market, it still retains a
sizeable holding in various defense securities. These securities should provide
the portfolio flexibility needed to take advantage of any opportunities that may
arise in the high-yield marketplace.
During the high-yield bond market's recent rally, the Fund took profits in
several issues and reinvested the proceeds back into other issues which still
represent good value in today's market. Among the issues added to the portfolio
are Affiliated Newspapers, Envirodyne, Flagstar, Ivex Holdings and Jordan
Industries, all of which are currently posting strong earnings, yet still trade
at deep discounts in the marketplace.
MARKET OUTLOOK
Given our outlook for slower, but continued growth in the economy, we find
today's B-rated issues (now yielding more than 600 basis points or six
percentage points over U.S. Treasury securities and trading at steep discounts
to par) offer excellent long-term return potential. Over the near term, we
expect continued volatility in the financial markets as investors attempt to
assess the economy's strength, the level of interest rates and possible Federal
Reserve Board actions. However, despite any possible short-term weakness, we
consider today's high-yield market to be an attractive long-term opportunity for
investors. Current high-yield issues provide an attractive yield advantage over
U.S. Treasury securities with the opportunity for substantial capital
appreciation if the high-yield market continues to rebound.
We thank you for your continued support of Dean Witter High Yield Securities and
look forward to continuing to serve your investment needs.
Very truly yours,
[LOGO]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE BONDS (81.9%)
AEROSPACE (1.8%)
$ 9,000 Sabreliner Corp. (Series B)................ 12.50 % 04/15/03 $ 8,055,000
---------------
AIRLINES (3.6%)
20,250 GPA Delaware, Inc.......................... 8.75 12/15/98 15,896,250
---------------
AUTOMOTIVE (1.8%)
10,500 Envirotest Systems, Inc.................... 9.625 04/01/03 7,980,000
---------------
CHEMICALS (1.2%)
5,000 Georgia Gulf Corp.......................... 15.00 04/15/00 5,050,000
---------------
COMPUTER EQUIPMENT (3.2%)
12,900 Unisys Corp................................ 13.50 07/01/97 14,190,000
---------------
CONSUMER PRODUCTS (2.1%)
5,500 J.B Williams Holdings, Inc................. 12.50* 03/01/04 5,280,000
4,000 Thermoscan, Inc. (Units)+++ - 144A**....... 13.438* 08/15/01 3,960,000
---------------
9,240,000
---------------
CONTAINERS (1.5%)
14,100 Ivex Holdings Corp. (Series B)............. 13.25++ 03/15/05 6,380,250
---------------
ELECTRICAL & ALARM SYSTEMS (1.9%)
11,000 Mosler, Inc................................ 11.00 04/15/03 8,470,000
---------------
ENTERTAINMENT/GAMING & LODGING (10.7%)
3,000 Fitzgeralds Gaming Corp. - 144A**.......... 13.50* 03/15/96 1,650,000
7,870 Motels of America, Inc. (Series B)......... 12.00 04/15/04 8,027,400
39,485 Spectravision, Inc......................... 11.65+ 12/01/02 5,133,050
12,380 Trump Castle Funding, Inc.................. 11.75 11/15/03 7,737,500
26,959 Trump Plaza Holding Assoc.................. 12.50+ 06/15/03 24,263,465
---------------
46,811,415
---------------
FOODS & BEVERAGES (6.4%)
13,952 Envirodyne Industries, Inc................. 10.25 12/01/01 11,370,880
33,250 Specialty Foods Acquisition Corp. (Series
B)......................................... 13.00++ 08/15/05 16,791,250
---------------
28,162,130
---------------
FOREST & PAPER PRODUCTS (2.4%)
10,250 Fort Howard Corp........................... 14.125 11/01/04 10,314,063
---------------
INDUSTRIALS (0.3%)
1,500 Data Documents, Inc. (Units)+++............ 13.50 07/15/02 1,500,000
5,000 Starcraft Corp. (c)........................ 16.50 01/15/98 --
---------------
1,500,000
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1995 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MANUFACTURING (5.6%)
$ 10,000 Berry Plastics Corp........................ 12.25 % 04/15/04 $ 9,800,000
9,500 MS Essex Holdings Inc...................... 16.00++ 05/15/04 9,357,500
6,500 Uniroyal Technology Corp................... 11.75 06/01/03 5,460,000
---------------
24,617,500
---------------
MANUFACTURING - DIVERSIFIED (5.2%)
9,500 Interlake Corp............................. 12.125 03/01/02 9,321,875
5,000 J.B. Poindexter & Co., Inc................. 12.50 05/15/04 4,775,000
5,735 Jordan Industries, Inc..................... 10.375 08/01/03 5,333,600
5,920 Jordan Industries, Inc..................... 11.75++ 08/01/05 3,315,200
---------------
22,745,675
---------------
OIL & GAS (6.1%)
5,000 Deeptech International, Inc................ 12.00 12/15/00 4,450,000
10,000 Empire Gas Corp. (Units)+++................ 7.00 07/15/04 7,000,000
19,500 Presidio Oil Co. (Series B)................ 13.30*** 07/15/02 15,307,500
1,000 TGX Corp. (c).............................. 12.67 04/01/94 --
---------------
26,757,500
---------------
PUBLISHING (7.3%)
15,000 Affiliated Newspapers Inv., Inc............ 13.25++ 07/01/06 7,425,000
16,343 BFP Holdings, Inc. (Series B).............. 13.50++ 04/15/04 9,969,240
5,000 Garden State Newspapers, Inc............... 12.00 07/01/04 4,881,250
6,600 United States Banknote Corp................ 10.375 06/01/02 5,544,000
5,150 United States Banknote Corp................ 11.625 08/01/02 4,377,500
---------------
32,196,990
---------------
RESTAURANTS (8.4%)
20,057 American Restaurant Group Holdings, Inc.... 14.00++ 12/15/05 9,627,360
10,000 Carrols Corp............................... 11.50 08/15/03 9,250,000
21,000 Flagstar Corp.............................. 11.25 11/01/04 17,797,500
---------------
36,674,860
---------------
RETAIL (4.4%)
10,000 Cort Furniture Rental Corp................. 12.00 09/01/00 9,500,000
5,000 County Seat Stores Co...................... 12.00 10/01/01 4,950,000
5,000 Thrifty Payless, Inc....................... 12.25 04/15/04 5,037,500
---------------
19,487,500
---------------
RETAIL - FOOD CHAINS (4.9%)
10,648 Food 4 Less Holdings, Inc. (Series A)...... 15.25++ 12/15/04 8,358,680
58,415 Grand Union Capital Corp. (Series A) (c)... 15.00++ 07/15/04 876,225
123,220 Grand Union Capital Corp. (Series A) (c)... 0.00 01/15/07 616,100
13,500 Purity Supreme, Inc. (Series B)............ 11.75 08/01/99 11,610,000
---------------
21,461,005
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1995 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TEXTILES (2.6%)
$ 1,638 Farley Inc. (Conv.)........................ 0.00 % 01/31/12 $ 168,206
14,669 JPS Textile Group, Inc..................... 10.85 06/01/99 11,148,440
---------------
11,316,646
---------------
TRANSPORTATION (0.5%)
4,000 Transtar Holdings L.P. (Series B).......... 13.375++ 12/15/03 2,200,000
---------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $420,926,007)...................................... 359,506,784
---------------
U.S. GOVERNMENT OBLIGATIONS (6.8%)
23,500 U.S. Treasury Note......................... 12.625 05/15/95 23,812,109
6,000 U.S. Treasury Note......................... 11.50 11/15/95 6,206,250
---------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $30,608,359)....................................... 30,018,359
---------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (a) (7.5%)
BUILDING & CONSTRUCTION (3.0%)
542,928 USG Corp. (b).......................................................... 13,030,272
---------------
COMPUTER EQUIPMENT (0.1%)
477,769 Memorex Telex Corp. (ADR) (b) (Netherlands)............................ 433,002
---------------
ENTERTAINMENT/GAMING & LODGING (0.2%)
7,500 Motels of America, Inc. - 144A**....................................... 712,500
---------------
FOODS & BEVERAGES (0.1%)
273,750 Specialty Foods Acquisition Corp. - 144A**............................. 615,938
---------------
HOTELS/MOTELS (0.3%)
709 Northern Holdings Industrial Corp. (c)**............................... --
781,421 Vagabond Inns, Inc. (Class D) (c)...................................... 1,172,132
---------------
1,172,132
---------------
MANUFACTURING - DIVERSIFIED INDUSTRIES (2.8%)
851,263 Thermadyne Holdings Corp. (b).......................................... 12,343,314
---------------
PUBLISHING (0.6%)
15,000 Affiliated Newspapers Inv., Inc. (Class B)............................. 375,000
130,744 BFP Holdings, Inc. - 144A** (Class D).................................. 2,091,904
---------------
2,466,904
---------------
RESTAURANTS (0.1%)
20,057 American Restaurant Group Holdings, Inc. - 144A**...................... 441,253
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1995 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------------------
<C> <S> <C>
RETAIL (0.3%)
228,000 Thrifty Payless Holdings, Inc. (Class C)............................... $ 1,140,000
---------------
TEXTILES (0.0%)
12,000 JPS Textile Group, Inc................................................. 132,000
---------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $134,544,755)......................................... 32,487,315
---------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION
WARRANTS DATE VALUE
- ----------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
WARRANTS (a) (0.9%)
AEROSPACE (0.0%)
9,000 Sabreliner Corp. (b)..................................... 04/15/03 90,000
---------------
BUILDING & CONSTRUCTION (0.3%)
105,280 USG Corp. (b)............................................ 05/06/98 1,144,920
---------------
CONTAINERS (0.1%)
10,000 Crown Packaging Holdings, Ltd. - 144A** (Canada)......... 10/15/03 550,000
---------------
ENTERTAINMENT/GAMING & LODGING (0.2%)
5,000 Boomtown, Inc. - 144A**.................................. 11/01/98 55,000
13,052 Casino America, Inc...................................... 11/15/96 8,158
3,000 Fitzgeralds Gaming Corp. - 144A**........................ 03/15/99 60,000
1,000 Trump Plaza Holding Assoc................................ 06/18/96 710,000
---------------
833,158
---------------
MANUFACTURING (0.1%)
10,000 BPC Holdings Corp........................................ 04/15/04 125,000
65,000 Uniroyal Technology Corp................................. 06/01/03 97,500
---------------
222,500
---------------
OIL & GAS (0.0%)
13,800 Empire Gas Corp.......................................... 07/15/04 138,000
---------------
RETAIL (0.2%)
10,000 County Seat Holdings Co.................................. 10/15/98 250,000
330,000 New Cort Holdings Corp................................... 09/01/98 825,000
---------------
1,075,000
---------------
RETAIL - FOOD CHAINS (0.0%)
36,387 Purity Supreme, Inc.**................................... 08/06/97 1,819
---------------
TOTAL WARRANTS
(IDENTIFIED COST $2,076,909).......................................... 4,055,397
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1995 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENT (1.1%)
REPURCHASE AGREEMENT
$ 4,678 The Bank of New York (dated 02/28/95;
proceeds $4,678,881; collateralized by
$5,306,085 FNMA Discount Note 7.00% due
10/01/24 valued at $4,968,143) (Identified
Cost $4,678,101)........................... 6.00% 03/01/95 $4,678,101
---------------
TOTAL INVESTMENTS
(IDENTIFIED COST $592,834,131) (D).......... 98.2 % 430,745,956
OTHER ASSETS IN EXCESS OF LIABILITIES....... 1.8 8,023,533
----- ------------
NET ASSETS.................................. 100.0 % $438,769,489
----- ------------
----- ------------
<FN>
- ---------------------
ADR American Depository Receipt.
* Adjustable rate. Rate shown is the rate in effect at February 28, 1995.
** Resale is restricted to qualified institutional investors.
*** Base interest rate is 13.30%, additional investment, if any, is linked to
the Gas Index. Rate shown is the rate in effect at February 28, 1995.
+++ Consist of more than one class of securities traded together as a unit;
generally bonds with attached stock/warrants.
+ Payment-in-kind securities.
++ Currently a zero coupon bond and will pay interest at the rate shown at a
future specified date.
(a) Non-income producing security.
(b) Acquired through exchange offer.
(c) Non-income producing, issuer in bankruptcy.
(d) The aggregate cost for federal income tax purposes is $594,358,729; the
aggregate gross unrealized appreciation is $7,969,232 and the aggregate
gross unrealized depreciation is $171,582,005, resulting in net unrealized
depreciation of $163,612,773.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $592,834,131)............................ $ 430,745,956
Receivable for:
Investments sold........................................ 19,478,569
Interest................................................ 9,627,095
Capital stock sold...................................... 468,074
Prepaid expenses and other assets........................... 72,234
--------------
TOTAL ASSETS........................................... 460,391,928
--------------
LIABILITIES:
Payable for:
Investments purchased................................... 19,988,053
Dividends to shareholders............................... 1,051,836
Capital stock repurchased............................... 208,502
Investment management fee............................... 167,113
Accrued expenses and other payables......................... 206,935
--------------
TOTAL LIABILITIES...................................... 21,622,439
--------------
NET ASSETS:
Paid-in-capital............................................. 1,561,984,242
Net unrealized depreciation................................. (162,088,175)
Accumulated undistributed net investment income............. 1,658,236
Accumulated net realized loss............................... (962,784,814)
--------------
NET ASSETS............................................. $ 438,769,489
--------------
--------------
NET ASSET VALUE PER SHARE,
67,452,412 SHARES OUTSTANDING (400,000,000 SHARES
AUTHORIZED OF $.01 PAR VALUE).............................
$6.50
--------------
--------------
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 5.82% OF NET ASSET VALUE)*..........
$6.88
--------------
--------------
- ---------------------
*On sales of $25,000 or more, the offering price is reduced
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1995 (UNAUDITED)
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $ 29,026,047
------------
EXPENSES
Investment management fee................................... 1,110,277
Transfer agent fees and expenses............................ 308,861
Custodian fees.............................................. 42,365
Professional fees........................................... 37,983
Registration fees........................................... 30,993
Shareholder reports and notices............................. 27,647
Directors' fees and expenses................................ 14,088
Other....................................................... 9,710
------------
TOTAL EXPENSES......................................... 1,581,924
------------
NET INVESTMENT INCOME.................................. 27,444,123
------------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss........................................... (5,453,053)
Net change in unrealized depreciation....................... (12,545,155)
------------
NET LOSS............................................... (17,998,208)
------------
NET INCREASE................................................ $ 9,445,915
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1995 AUGUST 31,
(UNAUDITED) 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................... $ 27,444,123 $56,707,778
Net realized loss........................................... (5,453,053) (76,848,632)
Net change in unrealized depreciation....................... (12,545,155) 28,298,582
----------------- -----------
NET INCREASE........................................... 9,445,915 8,157,728
----------------- -----------
Dividends to shareholders from net investment income........ (31,887,822) (61,815,632)
Net decrease from capital stock transactions................ (16,651,351) (8,060,726)
----------------- -----------
TOTAL DECREASE......................................... (39,093,258) (61,718,630)
NET ASSETS:
Beginning of period......................................... 477,862,747 539,581,377
----------------- -----------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$1,658,236 AND $6,101,935, RESPECTIVELY)................ $438,769,489 $477,862,747
----------------- -----------
----------------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1995 (UNAUDITED)
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, if available, in determining what it
believes is the fair valuation of the portfolio securities valued by such
pricing service; and (5) short-term debt securities having a maturity date of
more than sixty days at time of purchase are valued on a mark-to-market basis
until sixty days prior to maturity and thereafter at amortized cost based on
their value on the 61st day. Short-term debt securities having a maturity date
of sixty days or less at the time of purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Discounts on securities purchased are amortized over the life of the respective
securities. The Fund does not amortize premiums on securities. Dividend income
is recognized on the ex-dividend date. Interest income is accrued daily except
where collection is not expected.
C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1995 (UNAUDITED) CONTINUED
D. 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 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
management fee, calculated daily and payable monthly, by applying the following
annual rates to the net assets of the Fund determined as of the close of each
business day: 0.50% to the portion of daily net assets not exceeding $500
million; 0.425% to the portion of daily net assets exceeding $500 million but
not exceeding $750 million; 0.375% to the portion of daily net assets exceeding
$750 million but not exceeding $1 billion; 0.35% to the portion of daily net
assets exceeding $1 billion but not exceeding $2 billion; 0.325% to the portion
of daily net assets exceeding $2 billion but not exceeding $3 billion; and 0.30%
to the portion of daily net assets exceeding $3 billion.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the six months ended February 28, 1995, aggregated
$98,869,747 and $113,042,487, respectively.
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1995 (UNAUDITED) CONTINUED
Dean Witter Trust Company, an affiliate of the Investment Manager, is the Fund's
transfer agent. At February 28, 1995, the Fund had transfer agent fees and
expenses payable of approximately $97,000.
The Fund established an unfunded noncontributory defined benefit pension plan
covering all independent Directors of the Fund who will have served as
independent Directors/Trustees for at least five years at the time of
retirement. Benefits under this plan are based on years of service and
compensation during the last five years of service. Aggregate pension costs for
the six months ended February 28, 1995, included in Directors' fees and expenses
in the Statement of Operations, amounted to $3,857. At February 28, 1995, the
Fund had an accrued pension liability of $47,765 which is included in accrued
expenses in the Statement of Assets and Liabilities.
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 six months ended February 28, 1995, it
received approximately $127,000 in commissions from the sale of shares of the
Fund's capital stock. Such commissions are deducted from the proceeds of the
capital stock and are not an expense of the Fund.
4. CAPITAL STOCK
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED
FEBRUARY 28, 1995 AUGUST 31, 1994
------------------------ ----------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Sold........................................................... 1,585,828 $10,358,176 8,570,571 $ 65,945,121
Reinvestment of dividends...................................... 2,478,145 15,988,957 4,091,370 30,921,535
---------- ----------- ------------ -------------
4,063,973 26,347,133 12,661,941 96,866,656
Repurchased.................................................... (6,528,189) (42,998,484) (13,897,033) (104,927,382)
---------- ----------- ------------ -------------
Net decrease................................................... (2,464,216) $(16,651,351) (1,235,092) $ (8,060,726)
---------- ----------- ------------ -------------
---------- ----------- ------------ -------------
</TABLE>
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1995 (UNAUDITED) CONTINUED
5. FEDERAL INCOME TAX STATUS
At August 31, 1994, the Fund had approximate net capital loss carryovers which
may be used to offset future capital gains to the extent provided by regulations
which are available through August 31 in the following years:
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)
- -------------------------------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 2002 Total
- --------- ----------- ----------- ----------- ------------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 3,119 $ 37,795 $ 94,246 $ 82,210 $ 292,752 $ 182,732 $ 30,847 $ 166,406 $ 890,107
</TABLE>
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 net capital losses of
approximately $65,553,000 during fiscal 1994.
At August 31, 1994, the Fund had temporary book/tax differences primarily
attributable to post-October losses and permanent book/tax differences primarily
attributable to expired capital loss carryovers and dividend redesignations.
<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
SIX MONTHS
ENDED
FEBRUARY FOR THE YEAR ENDED AUGUST 31
28, 1995 -----------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value,
beginning of period............... $ 6.83 $ 7.58 $ 7.23 $ 5.92 $ 6.78 $ 10.40
---------- --------- --------- --------- --------- ---------
Net investment income.............. 0.41 0.79 0.89 0.95 0.94 1.48
Net realized and unrealized gain
(loss)............................ (0.27) (0.68) 0.54 1.04 (0.86) (3.78)
---------- --------- --------- --------- --------- ---------
Total from investment operations... 0.14 0.11 1.43 1.99 0.08 (2.30)
---------- --------- --------- --------- --------- ---------
Less dividends to shareholders from
net investment income............. (0.47) (0.86) (1.08) (0.68) (0.94) (1.32)
---------- --------- --------- --------- --------- ---------
Net asset value, end of period..... $ 6.50 $ 6.83 $ 7.58 $ 7.23 $ 5.92 $ 6.78
---------- --------- --------- --------- --------- ---------
---------- --------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN+........... 2.33%(1) 0.93% 22.29% 35.46% 4.67% (23.28)%
RATIOS TO AVERAGE NET ASSETS:
Expenses........................... 0.71%(2) 0.69% 0.67% 0.77% 0.87% 0.60%
Net investment income.............. 12.36%(2) 10.40% 12.14% 13.96% 16.47% 17.67%
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands......................... $438,769 $477,863 $539,581 $511,956 $436,354 $690,357
Portfolio turnover rate............ 25%(1) 127% 173% 113% 93% 21%
<FN>
- ---------------------
+ Does not reflect the deduction of sales load.
(1) Not annualized.
(2) Annualized.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
BOARD OF DIRECTORS
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
Peter M. Avelar
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center -- Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
The financial statements included herein have been taken from the records of the
Fund without examination by the independent accountants and accordingly they do
not express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus of the
Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus.
DEAN WITTER HIGH YIELD SECURITIES
SEMIANNUAL REPORT
FEBRUARY 28, 1995
