<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC. TWO WORLD TRADE CENTER, NEW YORK, NEW
YORK 10048
LETTER TO THE SHAREHOLDERS AUGUST 31, 1996
DEAR SHAREHOLDER:
The fixed-income markets rebounded sharply during the second half of 1995, as
economic growth slowed and inflation fears subsided. This trend reversed itself
in the first half of 1996, as signs of an economic recovery caused the U.S.
Treasury market to retreat. The high-yield market, which performed nicely during
1995's market rally, held up relatively well during the first eight months of
1996, even as interest rates moved up sharply. While signs of an economic
recovery have led to a sharp increase in interest rates, this recovery also
bodes well for the future prospects of many corporate issuers in the high-yield
marketplace and helps erase some of the recession fears that plagued the
high-yield market in late 1995.
Against this backdrop, Dean Witter High Yield Securities Inc. produced a total
return of 11.07 percent for the twelve-month period ended August 31, 1996. Over
the past twelve months, the Fund continued to distribute regular income
dividends at a rate of $0.055 per share per month. For the full fiscal year, the
Fund's distributions totaled $0.767 per share, including an extra income
dividend of $0.107 per share paid on December 29, 1995. On August 31, 1996, the
Fund's net assets exceeded $460 million. The accompanying chart illustrates the
growth of a $10,000 investment in the Fund for the ten-year period ended August
31, 1996 versus the performance of the Lehman Brothers Mutual Fund
Corporate/High Yield Index. (The Fund commenced operations on September 26,
1979.)
INVESTMENT STRATEGY
The Fund's investment strategy remained essentially unchanged over the past
year, with a continued emphasis on discontinued B-rated issues. In today's
market, many of these issues can be purchased below par providing significant
future appreciation potential and an attractive yield versus comparable
Treasuries (in the 11 percent to 12 percent range). In light of the rebounding
economy, we feel quite comfortable
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
LETTER TO THE SHAREHOLDERS AUGUST 31, 1996, CONTINUED
with the earnings outlook for most of our B-rated issuers. Recognizing that the
economy may slow somewhat during the remainder of 1996, we have tried to limit
the portfolio's volatility by
[GRAPHIC]
focusing primarily on growth type,
recession resistant industry sectors
such as cable, media, foods and
beverages and telecommunications.
MARKET OUTLOOK
Given our outlook for continued, albeit
moderate economic growth, we find that
many of today's B-rated issues offer
excellent long-term return potential.
Over the near term, there could be
continued volatility in the financial
markets as investors assess the
economy's strength, possible Federal
Reserve Board actions and the upcoming
Presidential election. However, despite
any potential short-term weakness, we
consider today's high-yield market to
be an attractive long-term opportunity
for investors.
We appreciate your support of Dean
Witter High Yield Securities Inc. and
look forward to continuing to serve
your investment needs and objectives.
Very truly yours,
[SIGNATURE]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE BONDS (87.6%)
AEROSPACE (1.6%)
$ 9,000 Sabreliner Corp. (Series B)................. 12.50 % 04/15/03 $ 7,515,000
---------------
AUTOMOTIVE (3.5%)
4,000 APS, Inc.................................... 11.875 01/15/06 4,260,000
7,700 Envirotest Systems, Inc..................... 9.125 03/15/01 6,930,000
6,018 Envirotest Systems, Inc..................... 9.625 04/01/03 4,694,040
---------------
15,884,040
---------------
BROADCAST MEDIA (2.9%)
4,000 Adams Outdoor Advertising................... 10.75 03/15/06 4,090,000
4,000 Paxson Communications Corp.................. 11.625 10/01/02 4,190,000
5,000 Spanish Broadcasting System, Inc............ 7.50 06/15/02 5,150,000
---------------
13,430,000
---------------
BUSINESS SERVICES (4.1%)
4,072 Anacomp, Inc................................ 13.00+ 06/04/02 4,010,920
2,000 Pierce Leahy Corp. - 144A*.................. 11.125 07/15/06 2,085,000
12,000 Xerox Corp.................................. 15.00 06/10/97 12,788,280
---------------
18,884,200
---------------
CABLE & TELECOMMUNICATIONS (13.0%)
9,180 Adelphia Communications Corp. (Series B).... 9.50+ 02/15/04 7,561,987
5,000 American Communications Services, Inc....... 12.75++ 04/01/06 2,600,000
12,000 AT&T Capital Corp........................... 15.00 05/05/97 12,680,640
5,000 Charter Communication South East L.P.
(Series B).................................. 11.25 03/15/06 4,975,000
5,373 Falcon Holdings Group L.P. (Series B)....... 11.00+ 09/15/03 4,875,624
5,000 Hyperion Communication - 144A*.............. 13.00++ 04/15/03 2,775,000
28,500 In-Flight Phone Corp. (Series B)............ 14.00++ 05/15/02 10,687,500
4,000 IXC Communications Inc. (Series B).......... 12.50 10/01/05 4,120,000
5,050 Peoples Telephone Co., Inc.................. 12.25 07/15/02 5,087,875
4,000 Rifkin Acquisition Partners L.P............. 11.125 01/15/06 4,015,000
---------------
59,378,626
---------------
COMPUTER EQUIPMENT (3.9%)
4,000 Advanced Micro Devices...................... 11.00 08/01/03 4,070,000
5,000 Unisys Corp................................. 15.00 07/01/97 5,300,000
7,900 Unisys Corp. (Conv.)........................ 8.25 03/15/06 8,770,738
---------------
18,140,738
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1996, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CONSUMER PRODUCTS (1.2%)
$ 5,500 J.B Williams Holdings, Inc.................. 12.00 % 03/01/04 $ 5,527,500
---------------
CONTAINERS (3.3%)
8,000 Ivex Holdings Corp. (Series B).............. 13.25++ 03/15/05 5,040,000
5,000 Mail-Well Corp.............................. 10.50 02/15/04 4,900,000
5,000 Packaging Resources Inc. - 144A*............ 11.625 05/01/03 5,075,000
---------------
15,015,000
---------------
ELECTRICAL & ALARM SYSTEMS (2.0%)
11,000 Mosler, Inc................................. 11.00 04/15/03 9,295,000
---------------
ENTERTAINMENT/GAMING & LODGING (8.5%)
4,000 AMF Group Inc. - 144A*...................... 10.875 03/15/06 4,000,000
9,000 Fitzgeralds Gaming Corp. (Units)+++......... 13.00 12/31/02 6,750,000
5,000 Lady Luck Gaming Finance Corp............... 11.875 03/01/01 4,925,000
8,000 Motels of America, Inc. (Series B).......... 12.00 04/15/04 7,200,000
4,000 Players International, Inc.................. 10.875 04/15/05 3,940,000
4,000 Plitt Theaters, Inc. (Canada)............... 10.875 06/15/04 4,040,000
41,950 Spectravision, Inc. (a)..................... 11.65 12/01/02 4,213,778
4,000 Station Casinos, Inc........................ 9.625 06/01/03 3,820,000
---------------
38,888,778
---------------
FOODS & BEVERAGES (8.1%)
21,271 Envirodyne Industries, Inc.................. 10.25 12/01/01 18,931,190
42,650 Specialty Foods Acquisition Corp. (Series
B).......................................... 13.00++ 08/15/05 18,339,550
---------------
37,270,740
---------------
HEALTHCARE (1.4%)
8,250 Unilab Corp................................. 11.00 04/01/06 6,517,500
---------------
MANUFACTURING (5.5%)
4,150 Alpine Group, Inc........................... 12.25 07/15/03 4,305,625
5,000 Berry Plastics Corp......................... 12.25 04/15/04 5,350,000
4,000 Exide Electronics Group, Inc. (Series B).... 11.50 03/15/06 4,040,000
5,000 International Wire Group, Inc............... 11.75 06/01/05 5,118,750
7,000 Uniroyal Technology Corp.................... 11.75 06/01/03 6,650,000
---------------
25,464,375
---------------
MANUFACTURING - DIVERSIFIED (6.5%)
4,000 Foamex L.P.................................. 11.875 10/01/04 4,200,000
5,000 Interlake Corp.............................. 12.125 03/01/02 5,112,500
5,000 J.B. Poindexter & Co., Inc.................. 12.50 05/15/04 4,775,000
6,030 Jordan Industries, Inc...................... 10.375 08/01/03 5,834,025
13,420 Jordan Industries, Inc...................... 11.75++ 08/01/05 9,930,800
5,000 Starcraft Industrial Corp. (a).............. 16.50 01/15/98 --
---------------
29,852,325
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1996, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
OIL & GAS (1.0%)
$ 5,500 Empire Gas Corp............................. 7.00 % 07/15/04 $ 4,785,000
---------------
PUBLISHING (4.4%)
8,000 Affiliated Newspapers Investments, Inc...... 13.25++ 07/01/06 5,920,000
4,000 American Media Operations, Inc.............. 11.625 11/15/04 4,160,000
10,600 United States Banknote Corp................. 10.375 06/01/02 10,070,000
---------------
20,150,000
---------------
RESTAURANTS (8.3%)
26,057 American Restaurant Group Holdings, Inc..... 14.00++ 12/15/05 9,575,948
5,000 Boston Chicken Inc. (Conv.)................. 4.50 02/01/04 6,350,000
4,000 Carrols Corp................................ 11.50 08/15/03 4,140,000
27,500 Flagstar Corp............................... 11.25 11/01/04 18,081,250
---------------
38,147,198
---------------
RETAIL (2.3%)
4,997 Cort Furniture Rental Corp.................. 12.00 09/01/00 5,196,880
10,450 County Seat Stores Co....................... 12.00 10/01/02 5,538,500
---------------
10,735,380
---------------
RETAIL - FOOD CHAINS (2.8%)
4,000 Jitney-Jungle Stores........................ 12.00 03/01/06 4,170,000
4,000 Pathmark Stores, Inc........................ 9.625 05/01/03 3,790,000
5,000 Ralphs Grocery Co........................... 11.00 06/15/05 4,862,500
---------------
12,822,500
---------------
TEXTILES (3.3%)
1,638 Farley Inc. (Conv.)......................... 0.00 01/01/12 173,988
14,219 JPS Textile Group, Inc...................... 10.85 06/01/99 8,815,780
7,950 U.S. Leather, Inc........................... 10.25 07/31/03 6,399,750
---------------
15,389,518
---------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $459,074,347)....................................... 403,093,418
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1996, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (b) (4.4%)
AUTOMOTIVE (0.0%)
709 Northern Holdings Industrial Corp. (Restricted) (c)..................... $ --
---------------
COMPUTER EQUIPMENT (0.1%)
477,769 Memorex Telex NV (ADR) (Netherlands) (c)................................ 582,281
---------------
ENTERTAINMENT/GAMING & LODGING (0.1%)
7,500 Motels of America, Inc. - 144A*......................................... 525,000
781,421 Vagabond Inns, Inc. (Class D) (a)....................................... --
---------------
525,000
---------------
FOODS & BEVERAGES (1.0%)
489,055 Seven-Up/RC Bottling Co. Southern California, Inc. (c).................. 4,156,969
273,750 Specialty Foods Acquisition Corp. - 144A*............................... 410,625
---------------
4,567,594
---------------
MANUFACTURING - DIVERSIFIED (3.0%)
671,263 Thermadyne Holdings Corp. (c)........................................... 14,013,516
---------------
PUBLISHING (0.1%)
15,000 Affiliated Newspapers Investments, Inc. (Class B)....................... 525,000
---------------
RESTAURANTS (0.1%)
26,057 American Restaurant Group Holdings, Inc. - 144A*........................ 260,570
---------------
TEXTILES (0.0%)
12,000 JPS Textile Group, Inc. (Class A)....................................... --
---------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $85,779,555)........................................... 20,473,961
---------------
PREFERRED STOCKS (b) (0.4%)
ENTERTAINMENT/GAMING & LODGING (0.4%)
80,000 Fitzgeralds Gaming Corp. (Units)+++..................................... 1,620,000
---------------
OIL & GAS PRODUCTS (0.0%)
113,955 TGX Corp. (Series A) (c)................................................ 1,139
---------------
TOTAL PREFERRED STOCKS
(IDENTIFIED COST $2,830,000)............................................ 1,621,139
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1996, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION
WARRANTS DATE VALUE
- ----------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
WARRANTS (b) (0.2%)
AEROSPACE (0.0%)
9,000 Sabreliner Corp. - 144A*................................. 04/15/03 $ 90,000
---------------
CABLE & TELECOMMUNICATIONS (0.1%)
5,000 Hyperion Communication - 144A*........................... 04/01/01 50,000
27,600 In-Flight Phone Corp. - 144A*............................ 08/31/02 276,281
---------------
326,281
---------------
CONTAINERS (0.0%)
10,000 Crown Packaging Holdings, Ltd. (Canada) - 144A*.......... 11/01/03 --
---------------
ENTERTAINMENT/GAMING & LODGING (0.0%)
5,000 Boomtown, Inc. - 144A*................................... 11/01/98 --
13,052 Casino America, Inc...................................... 11/15/96 --
8,312 Fitzgeralds Gaming Corp.................................. 12/19/98 37,407
3,500 Fitzgeralds South Inc. - 144A*........................... 03/15/99 --
---------------
37,407
---------------
MANUFACTURING (0.1%)
4,000 Exide Electronics Group, Inc. - 144A*.................... 03/15/06 80,000
70,000 Uniroyal Technology Corp................................. 06/01/03 96,250
---------------
176,250
---------------
OIL & GAS (0.0%)
15,180 Empire Gas Corp.......................................... 07/15/04 151,800
---------------
RETAIL (0.0%)
10,000 County Seat Holdings Co.................................. 10/15/98 100,000
---------------
TOTAL WARRANTS
(IDENTIFIED COST $2,992,791).......................................... 881,738
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1996, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENTS (5.2%)
U.S. GOVERNMENT AGENCIES (d) (5.0%)
$ 12,900 Federal Home Loan Banks..................... 5.16 % 09/03/96 $ 12,896,302
10,000 Federal National Mortgage Assoc............. 5.20 09/06/96 9,992,778
---------------
TOTAL U.S. GOVERNMENT AGENCIES
(AMORTIZED COST $22,889,080)......................................... 22,889,080
---------------
REPURCHASE AGREEMENT (0.2%)
999 The Bank of New York (dated 08/30/96;
proceeds $999,231; collateralized by
$1,134,189 Federal National Mortgage Assoc.
6.50% due 03/25/23 valued at $1,018,635)
(Identified Cost $998,662).................. 5.125 09/03/96 998,662
---------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $23,887,742)........................................ 23,887,742
---------------
TOTAL INVESTMENTS
(IDENTIFIED COST $574,564,435) (E)........... 97.8% 449,957,998
OTHER ASSETS IN EXCESS OF LIABILITIES........ 2.2 10,244,841
----- ------------
NET ASSETS................................... 100.0% $460,202,839
----- ------------
----- ------------
<FN>
- ---------------------
ADR American Depository Receipt.
* Resale is restricted to qualified institutional investors.
+++ Consists of one or more class of securities traded together as a unit;
generally bonds with attached stocks/warrants.
+ Payment-in-kind security.
++ Currently a zero coupon bond and will pay interest at the rate shown at a
future specified date.
(a) Non-income producing security; issuer in bankruptcy.
(b) Non-income producing securities.
(c) Acquired through exchange offer.
(d) Securities were purchased on a discount basis. The interest rates shown
have been adjusted to reflect a money market equivalent yield.
(e) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation was $16,754,848 and the
aggregate gross unrealized depreciation was $141,361,285, resulting in net
unrealized depreciation of $124,606,437.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $574,564,435)............................ $ 449,957,998
Receivable for:
Interest................................................ 11,041,222
Capital stock sold...................................... 609,887
Prepaid expenses and other assets........................... 30,020
--------------
TOTAL ASSETS........................................... 461,639,127
--------------
LIABILITIES:
Payable for:
Dividends to shareholders............................... 926,442
Investment management fee............................... 194,706
Capital stock repurchased............................... 145,004
Accrued expenses and other payables......................... 170,136
--------------
TOTAL LIABILITIES...................................... 1,436,288
--------------
NET ASSETS:
Paid-in-capital............................................. 1,528,089,659
Net unrealized depreciation................................. (124,606,437)
Accumulated undistributed net investment income............. 10,337,288
Accumulated net realized loss............................... (953,617,671)
--------------
NET ASSETS............................................. $ 460,202,839
--------------
--------------
NET ASSET VALUE PER SHARE,
68,542,004 SHARES OUTSTANDING (400,000,000 SHARES
AUTHORIZED OF $.01 PAR VALUE).............................
$6.71
--------------
--------------
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 5.82% OF NET ASSET VALUE)*..........
$7.10
--------------
--------------
<FN>
- ---------------------
* 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 YEAR ENDED AUGUST 31, 1996
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $ 58,749,969
------------
EXPENSES
Investment management fee................................... 2,271,578
Transfer agent fees and expenses............................ 539,994
Custodian fees.............................................. 59,401
Shareholder reports and notices............................. 57,480
Professional fees........................................... 35,218
Registration fees........................................... 34,963
Directors' fees and expenses................................ 16,072
Other....................................................... 13,132
------------
TOTAL EXPENSES......................................... 3,027,838
------------
NET INVESTMENT INCOME.................................. 55,722,131
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss........................................... (17,329,860)
Net change in unrealized depreciation....................... 9,730,771
------------
NET LOSS............................................... (7,599,089)
------------
NET INCREASE................................................ $ 48,123,042
------------
------------
</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 YEAR FOR THE YEAR
ENDED ENDED
AUGUST 31, 1996 AUGUST 31, 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................... $ 55,722,131 $ 54,062,648
Net realized loss........................................... (17,329,860) (20,016,987)
Net change in unrealized depreciation....................... 9,730,771 15,205,812
--------------- ---------------
NET INCREASE........................................... 48,123,042 49,251,473
Dividends from net investment income........................ (51,517,938) (54,031,376)
Net increase (decrease) from capital stock transactions..... 8,152,392 (17,637,501)
--------------- ---------------
TOTAL INCREASE (DECREASE).............................. 4,757,496 (22,417,404)
NET ASSETS:
Beginning of period......................................... 455,445,343 477,862,747
--------------- ---------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$10,337,288 AND $6,133,095, RESPECTIVELY)............... $ 460,202,839 $ 455,445,343
--------------- ---------------
--------------- ---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1996
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's primary investment objective is to
earn a high level of current income and, as a secondary objective, capital
appreciation, but only when consistent with its primary objective. The Fund was
incorporated in Maryland on June 14, 1979.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates. The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York or American 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 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
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1996, CONTINUED
by the identified cost method. Dividend income and other distributions are
recorded on the ex-dividend date. Discounts are accreted over the life of the
respective securities. Interest income is accrued daily 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.
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 the 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
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1996, CONTINUED
all personnel, including officers of the Fund who are employees of the
Investment Manager. The Investment Manager also bears the cost of telephone
services, heat, light, power and other utilities provided to the Fund.
3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended August 31, 1996, aggregated
$393,514,207 and $415,856,430, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the Fund's
transfer agent. At August 31, 1996, the Fund had transfer agent fees and
expenses payable of approximately $57,000.
The Fund has 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 year ended August 31,
1996 included in Directors' fees and expenses in the Statement of Operations
amounted to $1,274. At August 31, 1996, the Fund had an accrued pension
liability of $49,856 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 for the year ended August 31, 1996, it received
approximately $1,595,000 in commissions from the sale of shares of the Fund's
capital stock. Such commissions are deducted from the proceeds of the capital
stock shares and are not an expense of the Fund.
4. CAPITAL STOCK
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
AUGUST 31, 1996 AUGUST 31, 1995
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Sold............................................................. 7,479,221 $ 50,396,628 4,185,702 $ 27,764,909
Reinvestment of dividends........................................ 3,993,442 26,742,126 4,187,296 27,351,637
----------- -------------- ----------- ------------
11,472,663 77,138,754 8,372,998 55,116,546
Repurchased...................................................... (10,236,571) (68,986,362) (10,983,714) (72,754,047)
----------- -------------- ----------- ------------
Net increase (decrease).......................................... 1,236,092 $ 8,152,392 (2,610,716) $(17,637,501)
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
</TABLE>
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1996, CONTINUED
5. FEDERAL INCOME TAX STATUS
At August 31, 1996, the Fund had an approximate net capital loss carryover, to
offset future capital gains to the extent provided by regulations, which is
available through August 31 in the following years:
<TABLE>
<CAPTION>
AMOUNTS IN THOUSANDS
- ---------------------------------------------------------------------------------------------------------------------------
1997 1998 1999 2000 2001 2002 2003 2004 TOTAL
- ----------- ----------- ------------- ------------- ----------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 94,246 $ 82,210 $ 292,752 $ 182,732 $ 45,208 $ 166,406 $ 50,598 $ 23,294 $ 937,446
- ----------- ----------- ------------- ------------- ----------- ------------- ----------- ----------- -------------
- ----------- ----------- ------------- ------------- ----------- ------------- ----------- ----------- -------------
</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 $13,146,000 during fiscal 1996.
At August 31, 1996, the Fund had temporary book/tax differences primarily
attributable to post-October losses, capital loss deferrals on wash sales and
dividend payable and permanent book/tax differences primarily attributable to an
expired capital loss carryover. To reflect reclassifications arising from
permanent book/tax differences for the year ended August 31, 1996,
paid-in-capital was charged and accumulated net realized loss was credited
$37,795,049.
<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
-----------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE
OPERATING PERFORMANCE:
Net asset value,
beginning of
period.......... $ 6.77 $ 6.83 $ 7.58 $ 7.23 $ 5.92 $ 6.78 $ 10.40 $ 11.99 $ 13.72 $ 14.16
---------- --------- --------- ---------- --------- --------- ---------- --------- ---------- ----------
Net investment
income.......... 0.83 0.80 0.79 0.89 0.95 0.94 1.48 1.67 1.84 1.82
Net realized and
unrealized gain
(loss).......... (0.12) (0.06) (0.68) 0.54 1.04 (0.86) (3.78) (1.48) (1.77) (0.46)
---------- --------- --------- ---------- --------- --------- ---------- --------- ---------- ----------
Total from
investment
operations...... 0.71 0.74 0.11 1.43 1.99 0.08 (2.30) 0.19 0.07 1.36
---------- --------- --------- ---------- --------- --------- ---------- --------- ---------- ----------
Less dividends
and
distributions
from:
Net investment
income........ (0.77) (0.80) (0.86) (1.08) (0.68) (0.94) (1.32) (1.75) (1.80) (1.80)
Paid-in-capital... -- -- -- -- -- -- -- (0.03) -- --
---------- --------- --------- ---------- --------- --------- ---------- --------- ---------- ----------
Total dividends
and
distributions... (0.77) (0.80) (0.86) (1.08) (0.68) (0.94) (1.32) (1.78) (1.80) (1.80)
---------- --------- --------- ---------- --------- --------- ---------- --------- ---------- ----------
Net asset value,
end of period... $ 6.71 $ 6.77 $ 6.83 $ 7.58 $ 7.23 $ 5.92 $ 6.78 $ 10.40 $ 11.99 $ 13.72
---------- --------- --------- ---------- --------- --------- ---------- --------- ---------- ----------
---------- --------- --------- ---------- --------- --------- ---------- --------- ---------- ----------
TOTAL INVESTMENT
RETURN+.......... 11.07% 11.98% 0.93% 22.29% 35.46% 4.67% (23.28)% 1.39% 0.97% 10.07%
RATIOS TO
AVERAGE NET
ASSETS:
Expenses......... 0.66% 0.79% 0.69% 0.67% 0.77% 0.87% 0.60% 0.49% 0.49% 0.51%
Net investment
income.......... 12.27% 12.06% 10.40% 12.14% 13.96% 16.47% 17.67% 14.61% 14.79% 12.83%
SUPPLEMENTAL DATA:
Net assets, end
of period, in
millions........ $460 $455 $478 $540 $512 $436 $690 $1,794 $2,140 $2,034
Portfolio
turnover rate... 49% 74% 127% 173% 113% 93% 21% 55% 107% 176%
<FN>
- ---------------------
+ Does not reflect the deduction of sales load. Calculated based on the net
asset value as of the last business day of the period.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
OF DEAN WITTER HIGH YIELD SECURITIES INC.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Dean Witter High Yield Securities
Inc. (the "Fund") at August 31, 1996, 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 at August
31, 1996 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
OCTOBER 11, 1996
<PAGE>
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<PAGE>
(This page has been left blank intentionally.)
<PAGE>
BOARD OF DIRECTORS
Michael Bozic
Charles A. Fiumefreddo DEAN WITTER
Edwin J. Garn HIGH YIELD
John R. Haire SECURITIES
Dr. Manuel H. Johnson
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
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and directors,
fees, expenses and other pertinent information, please see the prospectus of
the Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus.
[GRAPHIC]
ANNUAL REPORT
AUGUST 31, 1996
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES
GROWTH OF $10,000
- -------------------------------------------------------------------------------
DATE TOTAL LEHMAN MF CORP/HIGH YLD INDEX
- -------------------------------------------------------------------------------
August 31, 1986 $9,450 $10,000
- -------------------------------------------------------------------------------
August 31, 1987 $10,402 $10,350
- -------------------------------------------------------------------------------
August 31, 1988 $10,503 $11,298
- -------------------------------------------------------------------------------
August 31, 1989 $10,648 $12,777
- -------------------------------------------------------------------------------
August 31, 1990 $8,170 $13,417
- -------------------------------------------------------------------------------
August 31, 1991 $8,551 $15,558
- -------------------------------------------------------------------------------
August 31, 1992 $11,583 $18,004
- -------------------------------------------------------------------------------
August 31, 1993 $14,165 $20,481
- -------------------------------------------------------------------------------
August 31, 1994 $14,297 $20,156
- -------------------------------------------------------------------------------
August 31, 1995 $16,009 $22,886
- -------------------------------------------------------------------------------
August 31, 1996 $17,781 (3) $23,994
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
---------------------------------------
1 YEAR 5 YEARS 10 YEARS
---------------------------------------
11.07 (1) 15.77 (1) 6.53 (1)
---------------------------------------
4.96 (2) 14.47 (2) 5.92 (2)
---------------------------------------
___ Fund ___ LEHMAN (4)
------------------------------
Past performance is not predictive of future returns.
- -------------------
(1) Figure shown assumes reinvestment of all distributions and does not reflect
the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and the deduction of
the maximum applicable front-end sales charge (5.5%). See the Fund's
current prospectus for complete details on sales charges.
(3) Closing value assuming a complete redemption on August 31, 1996.
(4) The Lehman Brothers Mutual Fund Corporate/ High Yield Index measures the
performance of all investment and noninvestment grade corporate debt
securities. The index does not include any expenses, fees or charges. The
Index is unmanaged and should not be considered an investment.
