<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
LETTER TO THE SHAREHOLDERS February 29, 1996
Two World Trade Center, New York, New York 10048
DEAR SHAREHOLDER:
The fixed-income markets continued their rebound during the second half of
1995, as economic growth slowed and inflation fears subsided. However, the
high-yield market, which recorded a strong 1995 first half, calmed down
somewhat during second half of the year. As is typical in a decelerating
economic environment, high-yield bonds lagged the rally in U.S. Treasuries a
bit, as concerns over the severity of the economic slowdown offset some of
the benefit of lower interest rates.
For the six month period ended February 29, 1996, the Fund's total return
(excluding the applicable sales charge) was 5.93 percent, based on its net
asset value (NAV) of $6.72 per share on February 29, 1996. At the end of the
period under review, the Fund had net assets in excess of $455 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 $.437 per share, including an extra income
dividend of $.107 per share paid on December 29, 1995.
INVESTMENT STRATEGY
The Fund's investment strategy throughout 1995 was to capitalize on the
opportunity created by the 1994 market correction by positioning the Fund for
an eventual rebound in the market. Despite the fact that corporate credit
quality remained strong, the 1994 market correction pushed yields on many
B-rated issues 300-400 basis points higher (to the 13-14 percent range) and
caused bond prices in some cases to decline by as much as 15-20 percent. In
light of this correction, the Fund increased its emphasis on discounted
issues during the second half of 1994, which helped to provide more capital
appreciation potential for the Fund. While the Fund's portfolio is still
positioned for further upside in the high-yield market, it continues to
maintain a sizable position in various defensive securities, in order to
provide the flexibility needed to take advantage of any interim opportunities
that may arise.
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
LETTER TO THE SHAREHOLDERS, continued
MARKET OUTLOOK
Given our outlook for continued, albeit slower economic growth, we find that
many of today's B-rated issues, which are still yielding more than 500 basis
points (five percent) above U.S. Treasury securities and trading at
significant discounts, offer excellent long-term return potential. Over the
near term, we except continued volatility in the financial markets as
investors assess the economy's strength, possible Federal Reserve Board
actions and ongoing budget negotiations in Washington. However, despite any
potential short-term weakness, we consider today's high-yield market to be an
attractive long-term opportunity for investors. Currently, many high-yield
issues provide an attractive yield advantage over U.S. Treasuries, with the
opportunity for substantial capital appreciation if the high-yield market
continues its recovery.
We thank you for your continued support of Dean Witter High Yield Securities
Inc. and look forward to continuing to serve your investment needs.
Very truly yours,
/s/ Charles A. Fiumefreddo
- - -----------------------------------
CHARLES A. FIUMEFREDDO
Chairman of the Board
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS February 29, 1996 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- - -----------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE BONDS (88.2%)
Aerospace (1.8%)
$ 9,000 Sabreliner Corp. (Series B) .................................... 12.50 % 04/15/03 $ 8,415,000
--------------
Airlines (0.2%)
1,050 GPA Delaware, Inc. ............................................. 8.75 12/15/98 1,042,125
--------------
Automotive (3.8%)
5,000 APS, Inc. - 144A* .............................................. 11.875 01/15/06 5,200,000
15,323 Envirotest Systems, Inc. ....................................... 9.625 04/01/03 12,030,259
--------------
17,230,259
--------------
Broadcast Media (2.0%)
5,000 Paxson Communications .......................................... 11.625 10/01/02 5,250,000
4,000 Spanish Broadcasting System, Inc. .............................. 7.50 06/15/02 4,000,000
--------------
9,250,000
--------------
Cable & Telecommunications (8.2%)
8,764 Adelphia Communications Corp. (Series B) ....................... 9.50+ 02/15/04 7,712,038
12,000 AT&T Capital Corp. ............................................. 15.00 05/05/97 13,232,160
3,693 Falcon Holdings Group L.P. ..................................... 11.00+ 09/15/03 3,526,337
28,500 In-Flight Phone Corp. (Series B) ............................... 14.00++ 05/15/02 9,120,000
4,050 Peoples Telephone Co., Inc. .................................... 12.25 07/15/02 3,766,500
--------------
37,357,035
--------------
Computer Equipment (6.1%)
17,000 IBM Credit Corp. ............................................... 15.00 06/13/96 17,423,300
9,800 Unisys Corp. ................................................... 13.50 07/01/97 10,290,000
--------------
27,713,300
--------------
Consumer Products (1.7%)
2,000 Doane Products Co. ............................................. 10.625 03/01/06 2,030,000
5,500 J.B. Williams Holdings, Inc. ................................... 12.00 03/01/04 5,541,250
--------------
7,571,250
--------------
Containers (2.9%)
14,600 Ivex Holdings Corp. (Series B) ................................. 13.25++ 03/15/05 9,052,000
4,000 Mail-Well Corp. ................................................ 10.50 02/15/04 3,920,000
--------------
12,972,000
--------------
Electrical & Alarm Systems (1.9%)
11,000 Mosler, Inc. ................................................... 11.00 04/15/03 8,800,000
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS February 29, 1996 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- - -----------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Entertainment/Gaming & Lodging (7.7%)
$ 9,000 Fitzgeralds Gaming Corp. (Units)+++ ............................. 13.00 % 12/31/02 $ 8,415,000
7,870 Motels of America, Inc. (Series B) ............................. 12.00 04/15/04 7,791,300
5,000 Plitt Theaters, Inc. ........................................... 10.875 06/15/04 5,087,500
41,950 Spectravision, Inc. (c) ........................................ 11.65 12/01/02 4,423,528
9,000 Trump Taj Mahal (Series A) ..................................... 11.35+ 11/15/99 9,281,250
--------------
34,998,578
--------------
Foods & Beverages (14.8%)
23,771 Envirodyne Industries, Inc. .................................... 10.25 12/01/01 18,897,995
17,000 PepsiCo Inc. ................................................... 15.00 06/14/96 17,434,860
4,000 SC International Services, Inc. ................................ 13.00 10/01/05 4,360,000
12,373 Seven Up/RC Bottling Co. Southern California, Inc. (d) ......... 11.50 08/01/99 7,754,950
38,150 Specialty Foods Acquisition Corp. (Series B) ................... 13.00++ 08/15/05 18,502,750
--------------
66,950,555
--------------
Manufacturing (6.7%)
9,000 Alpine Group, Inc. ............................................. 12.25 07/15/03 8,820,000
5,000 Berry Plastics Corp. ........................................... 12.25 04/15/04 5,475,000
4,000 Cabot Safety Corp. ............................................. 12.50 07/15/05 4,420,000
5,000 International Wire Group ....................................... 11.75 06/01/05 4,925,000
7,000 Uniroyal Technology Corp. ...................................... 11.75 06/01/03 6,720,000
--------------
30,360,000
--------------
Manufacturing - Diversified (7.6%)
8,390 Foamex L.P. .................................................... 11.875 10/01/04 7,802,700
9,500 Interlake Corp. ................................................ 12.125 03/01/02 8,787,500
5,000 J.B. Poindexter & Co., Inc. .................................... 12.50 05/15/04 4,250,000
6,030 Jordan Industries, Inc. ........................................ 10.375 08/01/03 5,427,000
13,420 Jordan Industries, Inc. ........................................ 11.75++ 08/01/05 8,454,600
5,000 Starcraft Industrial Corp. (c) ................................. 16.50 01/15/98 --
--------------
34,721,800
--------------
Oil & Gas (2.2%)
11,000 Empire Gas Corp. ............................................... 7.00 07/15/04 10,010,000
--------------
Publishing (3.9%)
15,000 Affiliated Newspapers Investments, Inc. ........................ 13.25++ 07/01/06 10,125,000
8,600 United States Banknote Corp. ................................... 10.375 06/01/02 6,192,000
3,150 United States Banknote Corp. ................................... 11.625 08/01/02 1,575,000
--------------
17,892,000
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS February 29, 1996 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- - -----------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Restaurants (7.9%)
$26,057 American Restaurant Group Holdings, Inc. ....................... 14.00++% 12/15/05 $ 12,051,363
5,000 Carrols Corp. .................................................. 11.50 08/15/03 5,225,000
27,500 Flagstar Corp. ................................................. 11.25 11/01/04 18,803,125
--------------
36,079,488
--------------
Retail (3.6%)
4,997 Cort Furniture Rental Corp. .................................... 12.00 09/01/00 5,346,790
5,000 County Seat Stores Co. ......................................... 12.00 10/01/02 3,600,000
7,000 Thrifty Payless Holdings, Inc. ................................. 11.625+ 04/15/06 7,210,000
--------------
16,156,790
--------------
Retail - Food Chains (1.7%)
3,000 Jitney-Jungle Stores ........................................... 12.00 03/01/06 3,030,000
5,000 Ralphs Grocery Co. ............................................. 10.45 06/15/04 4,875,000
--------------
7,905,000
--------------
Textiles (0.0%)
1,638 Farley Inc. (Conv.) ............................................ 0.00 01/01/12 161,376
--------------
Textiles - Apparel Manufacturers (3.5%)
16,669 JPS Textile Group, Inc. ........................................ 10.85 06/01/99 12,751,785
4,500 U.S. Leather, Inc. ............................................. 10.25 07/31/03 3,228,750
--------------
15,980,535
--------------
TOTAL CORPORATE BONDS
(Identified Cost $450,362,058) ...................................................... 401,567,091
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS February 29, 1996 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- - ----------- ---------------------------------------------------------------- -------------
<C> <S> <C>
COMMON STOCKS (a) (4.7%)
Automotive (0.0%)
$
709 Northern Holdings Industrial Corp. (Restricted) (b) ............ --
-------------
Computer Equipment (0.1%)
477,769 Memorex Telex NV (ADR) (Netherlands) (b) ....................... 418,049
-------------
Entertainment/Gaming & Lodging (0.4%)
7,500 Motels of America, Inc. - 144A* ................................ 637,500
781,421 Vagabond Inns, Inc. (Class D) (c) .............................. 1,367,487
-------------
2,004,987
-------------
Foods & Beverages (0.2%)
273,750 Specialty Foods Acquisition Corp. (Restricted) - 144A* ......... 752,812
-------------
Manufacturing - Diversified (3.5%)
851,263 Thermadyne Holdings Corp. (b) .................................. 15,748,365
-------------
Publishing (0.1%)
15,000 Affiliated Newspapers Investments, Inc. (Class B) .............. 450,000
-------------
Restaurants (0.1%)
26,057 American Restaurant Group Holdings, Inc. - 144A* ............... 390,855
-------------
Retail (0.3%)
228,000 Thrifty Payless Holdings, Inc. (Class C) ....................... 1,282,500
-------------
Textiles - Apparel Manufacturers (0.0%)
12,000 JPS Textile Group, Inc. (Restricted) ........................... 144,000
-------------
TOTAL COMMON STOCKS (Identified Cost $85,652,470) .............. 21,191,568
-------------
PREFERRED STOCKS (0.4%)
Entertainment/Gaming & Lodging (0.4%)
80,000 Fitzgeralds Gaming Corp. (Units)+++ $3.75 ...................... 2,020,000
-------------
Utilities - Electric (0.0%)
100,000 TGX Corp. (Series A) (a) (b) ................................... 12,500
-------------
TOTAL PREFERRED STOCKS (Identified Cost $2,830,000) ............ 2,032,500
-------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS February 29, 1996 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION
WARRANTS DATE VALUE
- - ----------- ---------------------------------------------------------------- ------------ --------------
<C> <S> <C> <C>
WARRANTS (a) (0.7%)
Aerospace (0.0%)
9,000 Sabreliner Corp. (Restricted) - 144A* .......................... 04/15/03 $ 90,000
--------------
Cable & Telecommunications (0.1%)
27,600 In-Flight Phone Corp. - 144A* .................................. 08/31/02 276,000
--------------
Containers (0.1%)
10,000 Crown Packaging Holdings, Ltd. (Canada) - 144A* ................ 11/01/03 550,000
--------------
Entertainment/Gaming & Lodging (0.0%)
5,000 Boomtown, Inc. - 144A* ......................................... 11/01/98 --
13,052 Casino America, Inc. ........................................... 11/15/96 --
--------------
--
--------------
Manufacturing (0.1%)
10,000 BPC Holdings Corp. ............................................. 04/15/04 125,000
70,000 Uniroyal Technology Corp. ...................................... 06/01/03 105,000
--------------
230,000
--------------
Oil & Gas (0.0%)
15,180 Empire Gas Corp. ............................................... 07/15/04 151,800
--------------
Retail (0.4%)
330,000 Cort Business Services Corp. ................................... 09/07/98 1,402,500
10,000 County Seat Holdings Co. ....................................... 10/15/98 200,000
--------------
1,602,500
--------------
Retail - Food Chains (0.0%)
50,797 Grand Union Co. (Series 1) (b) ................................. 06/16/00 --
101,594 Grand Union Co. (Series 2) (b) ................................. 06/16/00 --
--------------
--
--------------
TOTAL WARRANTS
(Identified Cost $2,987,941) ................................... 2,900,300
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS February 29, 1996 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- - -----------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENTS (6.0%)
U.S. GOVERNMENT AGENCY (e) (5.7%)
$26,000 Federal Home Loan Mortgage Corp. ............................... 5.30% 03/01/96 $ 26,000,000
--------------
REPURCHASE AGREEMENT (0.3%)
1,512 The Bank of New York (dated 02/29/96; proceeds $1,512,415;
collateralized by $1,817,280 U.S. Treasury Principal Strip due
02/15/99 valued at $1,542,416) (Identified Cost $1,512,173) ... 5.75 03/01/96 1,512,173
--------------
TOTAL SHORT-TERM INVESTMENTS (Identified Cost $27,512,173) ..... 27,512,173
--------------
TOTAL INVESTMENTS
(Identified Cost $569,344,642) (f) ....................................... 100.0% 455,203,632
OTHER ASSETS IN EXCESS OF LIABILITIES ..................................... 0.0 181,631
--------------
NET ASSETS ................................................................ 100.0% $455,385,263
========== ==============
</TABLE>
- - ------------
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.
(b) Acquired through exchange offer.
(c) Non-income producing security, issuer in bankruptcy.
(d) Non-income producing security, bond in default.
(e) Security was purchased on a discount basis. The interest rate shown
has been adjusted to reflect a money market equivalent yield.
(f) The aggregate cost for federal income tax purposes is $571,963,955;
the aggregate gross unrealized appreciation is $16,095,751 and the
aggregate gross unrealized depreciation is $132,856,074, resulting
in net unrealized depreciation of $116,760,323.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 29, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $569,344,642) ........................ $ 455,203,632
Receivable for:
Interest ............................................. 9,860,764
Investments sold ..................................... 4,855,347
Capital stock sold ................................... 1,009,334
Prepaid expenses ....................................... 54,651
---------------
TOTAL ASSETS ......................................... 470,983,728
---------------
LIABILITIES:
Payable for:
Investments purchased ................................ 14,021,389
Dividends to shareholders ............................ 959,353
Capital stock repurchased ............................ 204,851
Investment management fee ............................ 179,719
Accrued expenses and other payables .................... 233,153
---------------
TOTAL LIABILITIES .................................... 15,598,465
---------------
NET ASSETS:
Paid-in-capital ........................................ 1,560,870,796
Net unrealized depreciation ............................ (114,141,010)
Accumulated undistributed net investment income ....... 4,819,011
Accumulated net realized loss .......................... (996,163,534)
---------------
NET ASSETS ........................................... $ 455,385,263
===============
NET ASSET VALUE PER SHARE, 67,794,799 shares
outstanding
(400,000,000 shares authorized of $.01 par value) .... $ 6.72
===============
MAXIMUM OFFERING PRICE PER SHARE,
(Net asset value plus 5.82% of net asset value)* ..... $ 7.11
===============
</TABLE>
- - ------------
* On sales of $25,000 or more, the offering price is reduced.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 29, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME .......................... $ 29,424,983
--------------
EXPENSES
Investment management fee ................ 1,123,644
Transfer agent fees and expenses ........ 281,206
Shareholder reports and notices .......... 35,376
Professional fees ........................ 30,455
Custodian fees ........................... 28,827
Registration fees ........................ 14,617
Directors' fees and expenses ............. 10,639
Other .................................... 6,362
--------------
TOTAL EXPENSES ......................... 1,531,126
--------------
NET INVESTMENT INCOME .................. 27,893,857
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss ........................ (22,080,674)
Net change in unrealized depreciation ... 20,196,198
--------------
NET LOSS ............................... (1,884,476)
--------------
NET INCREASE ............................. $ 26,009,381
==============
</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 MONTHS FOR THE YEAR
ENDED FEBRUARY 29, ENDED AUGUST
1996 31, 1995
- - ------------------------------------------------------- ------------------ ---------------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income .................................. $ 27,893,857 $ 54,062,648
Net realized loss ...................................... (22,080,674) (20,016,987)
Net change in unrealized depreciation .................. 20,196,198 15,205,812
------------------ ---------------
NET INCREASE ......................................... 26,009,381 49,251,473
Dividends from net investment income ................... (29,207,941) (54,031,376)
Net increase (decrease) from capital stock transactions 3,138,480 (17,637,501)
------------------ ---------------
TOTAL DECREASE ....................................... (60,080) (22,417,404)
NET ASSETS:
Beginning of period .................................... 455,445,343 477,862,747
------------------ ---------------
END OF PERIOD
(Including undistributed net investment income of
$4,819,011 and $6,133,095, respectively) ............. $455,385,263 $455,445,343
================== ===============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS February 29, 1996 (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 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. 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.
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS February 29, 1996 (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 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 29, 1996,
aggregated $155,980,896 and $174,771,113, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Fund's transfer agent. At February 29, 1996, the Fund had transfer agent fees
and expenses payable of approximately $73,000.
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS February 29, 1996 (unaudited) continued
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 six months ended February 29, 1996 included in Directors' fees and
expenses in the Statement of Operations amounted to $1,689. At February 29,
1996, the Fund had an accrued pension liability of $51,768 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 six months ended February 29, 1996, it
received approximately $703,000 in commissions from the sale of shares of the
Fund's capital stock.
4. CAPITAL STOCK
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED
FEBRUARY 29, 1996 AUGUST 31, 1995
----------------------------- -------------------------------
(UNAUDITED)
SHARES AMOUNT SHARES AMOUNT
------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Sold ...................... 3,583,494 $ 24,113,671 4,185,702 $ 27,764,909
Reinvestment of dividends 2,269,206 15,147,151 4,187,296 27,351,637
------------- -------------- -------------- ---------------
5,852,700 39,260,822 8,372,998 55,116,546
Repurchased ............... (5,363,813) (36,122,342) (10,983,714) (72,754,047)
------------- -------------- -------------- ---------------
Net increase (decrease) .. 488,887 $ 3,138,480 (2,610,716) $(17,637,501)
============= ============== ============== ===============
</TABLE>
5. FEDERAL INCOME TAX STATUS
At August 31, 1995, the Fund had a net capital loss carryover of
approximately $951,975,000, which may be used 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
- - -----------------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001 2002 2003 TOTAL
- - --------- --------- --------- ---------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$37,795 $94,246 $82,210 $292,752 $182,732 $45,208 $166,406 $50,626 $951,975
========= ========= ========= ========== ========== ========= ========== ========= ==========
</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 $19,448,000 during fiscal 1995.
At August 31, 1995, 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.
<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 FOR THE YEAR ENDED AUGUST 31
MONTHS ENDED ------------------------------------------------
FEBRUARY 29, 1996 1995 1994 1993 1992 1991
----------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
(unaudited)
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ..... $ 6.77 $ 6.83 $ 7.58 $ 7.23 $ 5.92 $ 6.78
--------- -------- -------- -------- -------- --------
Net investment income ..................... 0.42 0.80 0.79 0.89 0.95 0.94
Net realized and unrealized gain (loss) .. (0.03) (0.06) (0.68) 0.54 1.04 (0.86)
--------- -------- -------- -------- -------- --------
Total from investment operations .......... 0.39 0.74 0.11 1.43 1.99 0.08
--------- -------- -------- -------- -------- --------
Less dividends from net investment income (0.44) (0.80) (0.86) (1.08) (0.68) (0.94)
--------- -------- -------- -------- -------- --------
Net asset value, end of period ............ $ 6.72 $ 6.77 $ 6.83 $ 7.58 $ 7.23 $ 5.92
========= ======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN+ .................. 5.93%(1) 11.98% 0.93% 22.29% 35.46% 4.67%
RATIOS TO AVERAGE NET ASSETS:
Expenses .................................. 0.68%(2) 0.79% 0.69% 0.67% 0.77% 0.87%
Net investment income ..................... 12.38%(2) 12.06% 10.40% 12.14% 13.96% 16.47%
SUPPLEMENTAL DATA:
Net assets, end of period, in millions ... $455 $455 $478 $540 $512 $436
Portfolio turnover rate ................... 14%(1) 74% 127% 173% 113% 93%
</TABLE>
- - ------------
+ Does not reflect the deduction of sales load.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
BOARD OF DIRECTORS
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 29, 1996
