WITTER DEAN HIGH YIELD SECURITIES INC, 497, 1997-07-31

WITTER DEAN HIGH YIELD SECURITIES INC
497, 1997-07-31

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<PAGE>
PROSPECTUS
JULY 28, 1997

Dean Witter High Yield
Securities Inc. (the "Fund") is an open-end diversified management investment
company whose primary investment objective is to earn a high level of current
income. As a secondary objective, the Fund will seek capital appreciation, but
only when consistent with its primary objective. The Fund seeks high current
income by investing principally in fixed-income securities which are rated in
the lower categories by established rating services (Baa or lower by Moody's
Investors Service, Inc. or BBB or lower by Standard & Poor's Corporation) or are
non-rated securities of comparable quality.
INVESTORS SHOULD CAREFULLY CONSIDER THE RELATIVE RISKS, INCLUDING
THE RISK OF DEFAULT, OF INVESTING IN HIGH YIELD SECURITIES, WHICH ARE COMMONLY
KNOWN AS JUNK BONDS. BONDS OF THIS TYPE ARE CONSIDERED TO BE SPECULATIVE WITH
REGARD TO THE PAYMENT OF INTEREST AND RETURN OF PRINCIPAL. INVESTORS SHOULD ALSO
BE COGNIZANT OF THE FACT THAT SUCH SECURITIES ARE NOT GENERALLY MEANT FOR SHORT-
TERM INVESTING AND SHOULD ASSESS THE RISKS ASSOCIATED WITH AN INVESTMENT IN THE
FUND. (See "Investment Objectives and Policies.")

The Fund offers four classes of shares (each, a "Class"), each
with a different combination of sales charges, ongoing fees and other features.
The different distribution arrangements permit an investor to choose the method
of purchasing shares that the investor believes is most beneficial given the
amount of the purchase, the length of time the investor expects to hold the
shares and other relevant circumstances. Shares of the Fund held prior to July
28, 1997 have been designated Class D shares. (See "Purchase of Fund
Shares--Alternative Purchase Arrangements.")

This Prospectus sets forth concisely the information you should
know before investing in the Fund. It should be read and retained for future
reference. Additional information about the Fund is contained in the Statement
of Additional Information, dated July 28, 1997, which has been filed with the
Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at the address or telephone numbers listed on this page. The
Statement of Additional Information is incorporated herein by reference.

DEAN WITTER DISTRIBUTORS INC.
DISTRIBUTOR

TABLE OF CONTENTS

Prospectus Summary/2
Summary of Fund Expenses/4
Financial Highlights/6
The Fund and its Management/7
Investment Objectives and Policies/7
Special Risk Considerations/8
Investment Restrictions/13
Purchase of Fund Shares/14
Shareholder Services/25
Redemptions and Repurchases/28
Dividends, Distributions and Taxes/29
Performance Information/30
Additional Information/31
Appendix/32

SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Dean Witter
High Yield Securities Inc.
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)
<PAGE>
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
The Fund An open-end diversified management investment company investing principally in lower-rated
fixed-income securities (see page 7).
- ----------------------------------------------------------------------------------------------------------------------
Shares Offered Common stock of $0.01 par value (see page 31). The Fund offers four Classes of shares, each with a
different combination of sales charges, ongoing fees and other features (see pages 14-24).
- ----------------------------------------------------------------------------------------------------------------------
Minimum The minimum initial investment for each Class is $1,000 ($100 if the account is opened through
Purchase EasyInvest-SM-). Class D shares are only available to persons investing $5 million or more and to
certain other limited categories of investors. For the purpose of meeting the minimum $5 million
investment for Class D shares, and subject to the $1,000 minimum initial investment for each Class
of the Fund, an investor's existing holdings of Class A shares and shares of funds for which Dean
Witter InterCapital Inc. serves as investment manager ("Dean Witter Funds") that are sold with a
front-end sales charge, and concurrent investments in Class D shares of the Fund and other Dean
Witter Funds that are multiple class funds, will be aggregated. The minimum subsequent investment is
$100 (see page 14).
- ----------------------------------------------------------------------------------------------------------------------
Investment A high level of current income primarily; capital appreciation is secondary (see page 7).
Objectives
- ----------------------------------------------------------------------------------------------------------------------
Investment High yield fixed-income securities, principally rated Baa/BBB or lower, and non-rated securities of
Policies comparable quality. However, the Fund may also invest in municipal securities, futures
and options and common stock (see pages 7-14).
- ----------------------------------------------------------------------------------------------------------------------
Investment Dean Witter InterCapital Inc., the Investment Manager of the Fund, and its wholly-owned subsidiary,
Manager Dean Witter Services Company, Inc., serve in various investment management, advisory, management and
administrative capacities to 100 investment companies and other portfolios, with assets of
approximately $96.6 billion at June 30, 1997 (see page 7).
- ----------------------------------------------------------------------------------------------------------------------
Management The monthly fee is at an annual rate of 1/2 of 1% of average daily net assets, scaled down on assets
Fee over $500 million (see page 7).
- ----------------------------------------------------------------------------------------------------------------------
Distributor Dean Witter Distributors Inc. (the "Distributor"). The Fund has adopted a distribution plan pursuant
and to Rule 12b-1 under the Investment Company Act (the "12b-1 Plan") with respect to the distribution
Distribution fees paid by the Class A, Class B and Class C shares of the Fund to the Distributor. The entire
Fee 12b-1 fee payable by Class A and a portion of the 12b-1 fee payable by each of Class B and Class C
equal to 0.20% of the average daily net assets of Class B and 0.25% of the average daily net assets
of Class C are currently each characterized as a service fee within the meaning of the National
Association of Securities Dealers, Inc. guidelines. The remaining portion of the 12b-1 fee, if any,
is characterized as an asset-based sales charge
(see pages 14 and 23).
- ----------------------------------------------------------------------------------------------------------------------
Alternative Four classes of shares are offered:
Purchase
Arrangements - Class A shares are offered with a front-end sales charge, starting at 4.25% and reduced for larger
purchases. Investments of $1 million or more (and investments by certain other limited categories of
investors) are not subject to any sales charge at the time of purchase but a contingent deferred
sales charge ("CDSC") of 1.0% may be imposed on redemptions within one year of purchase. The Fund is
authorized to reimburse the Distributor for specific expenses incurred in promoting the distribution
of the Fund's Class A shares and servicing shareholder accounts pursuant to the Fund's 12b-1 Plan.
Reimbursement may in no event exceed an amount equal to payments at an annual rate of 0.25% of
average daily net assets of the Class (see pages 14, 17 and 23).
</TABLE>

2
<PAGE>

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

<TABLE>
<S> <C>
- Class B shares are offered without a front-end sales charge, but will in most cases be subject to
a CDSC (scaled down from 5.0% to 1.0%) if redeemed within six years after purchase. The CDSC will be
imposed on any redemption of shares if after such redemption the aggregate current value of a Class
B account with the Fund falls below the aggregate amount of the investor's purchase payments made
during the six years preceding the redemption. A different CDSC schedule applies to investments by
certain qualified plans. Class B shares are also subject to a 12b-1 fee assessed at the annual rate
of 0.75% of the average daily net assets of Class B. Class B shares convert to Class A shares
approximately ten years after the date of the original purchase (see pages 14, 20 and 23).
- Class C shares are offered without a front-end sales charge, but will in most cases be subject to
a CDSC of 1.0% if redeemed within one year after purchase. The Fund is authorized to reimburse the
Distributor for specific expenses incurred in promoting the distribution of the Fund's Class C
shares and servicing shareholder accounts pursuant to the Fund's 12b-1 Plan. Reimbursement may in no
event exceed an amount equal to payments at an annual rate of 0.85% of average daily net assets of
the Class (see pages 14, 22 and 23).
- Class D shares are offered only to investors meeting an initial investment minimum of $5 million
and to certain other limited categories of investors. Class D shares are offered without a front-end
sales charge or CDSC and are not subject to any 12b-1 fee (see pages 14, 22 and 23). All shares of
the Fund held prior to July 28, 1997 have been designated Class D shares. Additional investments in
Class D shares by shareholders holding such shares may only be made if those shareholders are
otherwise eligible to purchase Class D shares. However, shareholders holding such shares will
receive the benefit of the value of such shares towards reduced sales charges on purchases of Class
A shares pursuant to the Fund's "Right of Accumulation" (see page 18).
- ----------------------------------------------------------------------------------------------------------------------
Dividends Dividends from net investment income are declared and paid monthly; distributions from net capital
and gains, if any, are paid at least annually. The Fund may, however, determine to retain all or part of
Capital Gains any net long-term capital gains in any year for reinvestment. Dividends and capital gains
Distributions distributions paid on shares of a Class are automatically reinvested in additional shares of the
same Class at net asset value unless the shareholder elects to receive cash. Shares acquired by
dividend and distribution reinvestment will not be subject to any sales charge or CDSC (see pages 25
and 29).
- ----------------------------------------------------------------------------------------------------------------------
Redemption Shares are redeemable by the shareholder at net asset value less any applicable CDSC on Class A,
Class B or Class C shares. An account may be involuntarily redeemed if the total value of the
account is less than $100 or, if the account was opened through EasyInvest-SM-, if after twelve
months the shareholder has invested less than $1,000 in the account (see page 28).
- ----------------------------------------------------------------------------------------------------------------------
Risks The net asset value of the Fund's shares will fluctuate with changes in the market value of its
portfolio securities. The Fund's yield will also vary based on the yield of the Fund's portfolio
securities. Compared with higher rated, lower yielding fixed-income securities, portfolio securities
of the Fund may be subject to greater risk of loss of income and principal, including the risk of
default, and greater risk of increases and decreases in net asset value due to market fluctuations.
The Fund may purchase foreign securities, when-issued and delayed delivery and when, as and if
issued securities and other securities subject to repurchase agreements which involve certain
special risks. The Fund may purchase common stock which is exchangeable for fixed-income securities
in circumstances involving takeovers or recapitalizations. The Fund may also invest in futures and
options which may be considered speculative in nature and may involve greater risks than those
customarily assumed by certain other investment companies which do not invest in such instruments.
Investors should review the investment objectives and policies of the Fund carefully and consider
their ability to assume the risks involved in purchasing shares of the Fund (see pages 7-14).
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>

THE ABOVE IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING
ELSEWHERE IN THE
PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION.

3
<PAGE>
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------

The following table illustrates all expenses and fees that a shareholder of the
Fund will incur. The expenses and fees set forth in the table are based on the
expenses and fees for the fiscal year ended August 31, 1996.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
- ------------------------------------------------
Maximum Sales Charge Imposed on Purchases (as a
percentage of offering price)................. 4.25%(1) None None None
Sales Charge Imposed on Dividend Reinvestments.. None None None None
Maximum Contingent Deferred Sales Charge (as a
percentage of original purchase price or
redemption proceeds).......................... None(2) 5.00%(3) 1.00%(4) None
Redemption Fees................................. None None None None
Exchange Fee.................................... None None None None
</TABLE>

ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE
OF AVERAGE NET ASSETS)

<TABLE>
<S> <C> <C> <C> <C>
Management Fees................................. 0.50% 0.50% 0.50% 0.50%
12b-1 Fees (5) (6).............................. 0.25% 0.75% 0.85% None
Other Expenses.................................. 0.16% 0.16% 0.16% 0.16%
Total Fund Operating Expenses (7)............... 0.91% 1.41% 1.51% 0.66%
</TABLE>

- ------------
(1) REDUCED FOR PURCHASES OF $25,000 AND OVER (SEE "PURCHASE OF FUND
SHARES--INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES").

(2) INVESTMENTS THAT ARE NOT SUBJECT TO ANY SALES CHARGE AT THE TIME OF PURCHASE
ARE SUBJECT TO A CDSC OF 1.00% THAT WILL BE IMPOSED ON REDEMPTIONS MADE
WITHIN ONE YEAR AFTER PURCHASE, EXCEPT FOR CERTAIN SPECIFIC CIRCUMSTANCES
(SEE "PURCHASE OF FUND SHARES--INITIAL SALES CHARGE ALTERNATIVE--CLASS A
SHARES").

(3) THE CDSC IS SCALED DOWN TO 1.00% DURING THE SIXTH YEAR, REACHING ZERO
THEREAFTER.

(4) ONLY APPLICABLE TO REDEMPTIONS MADE WITHIN ONE YEAR AFTER PURCHASE (SEE
"PURCHASE OF FUND SHARES-- LEVEL LOAD ALTERNATIVE--CLASS C SHARES").

(5) THE 12B-1 FEE IS ACCRUED DAILY AND PAYABLE MONTHLY. THE ENTIRE 12B-1 FEE
PAYABLE BY CLASS A AND A PORTION OF THE 12B-1 FEE PAYABLE BY EACH OF CLASS B
AND CLASS C EQUAL TO 0.20% OF THE AVERAGE DAILY NET ASSETS OF CLASS B AND
0.25% OF THE AVERAGE DAILY NET ASSETS OF CLASS C ARE CURRENTLY EACH
CHARACTERIZED AS A SERVICE FEE WITHIN THE MEANING OF NATIONAL ASSOCIATION OF
SECURITIES DEALERS, INC. ("NASD") GUIDELINES AND ARE PAYMENTS MADE FOR
PERSONAL SERVICE AND/OR MAINTENANCE OF SHAREHOLDER ACCOUNTS. THE REMAINDER
OF THE 12B-1 FEE, IF ANY, IS AN ASSET-BASED SALES CHARGE, AND IS A
DISTRIBUTION FEE PAID TO THE DISTRIBUTOR TO COMPENSATE IT FOR THE SERVICES
PROVIDED AND THE EXPENSES BORNE BY THE DISTRIBUTOR AND OTHERS IN THE
DISTRIBUTION OF THE FUND'S SHARES (SEE "PURCHASE OF FUND SHARES--PLAN OF
DISTRIBUTION").

(6) UPON CONVERSION OF CLASS B SHARES TO CLASS A SHARES, SUCH SHARES WILL BE
SUBJECT TO THE LOWER 12B-1 FEE APPLICABLE TO CLASS A SHARES. NO SALES CHARGE
IS IMPOSED AT THE TIME OF CONVERSION OF CLASS B SHARES TO CLASS A SHARES.
CLASS C SHARES DO NOT HAVE A CONVERSION FEATURE AND, THEREFORE, ARE SUBJECT
TO AN ONGOING 0.85% DISTRIBUTION FEE (SEE "PURCHASE OF FUND
SHARES--ALTERNATIVE PURCHASE ARRANGEMENTS").

(7) THERE WERE NO OUTSTANDING SHARES OF CLASS A, CLASS B OR CLASS C PRIOR TO THE
DATE OF THIS PROSPECTUS. ACCORDINGLY, "TOTAL FUND OPERATING EXPENSES," AS
SHOWN ABOVE WITH RESPECT TO THOSE CLASSES, ARE BASED UPON THE SUM OF 12B-1
FEES, MANAGEMENT FEES AND ESTIMATED "OTHER EXPENSES."

4
<PAGE>
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
EXAMPLES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment
assuming (1) a 5% annual return and (2) redemption at the
end
of each time period:
Class A.................................................. $ 51 $ 70 $ 91 $ 150
Class B.................................................. $ 64 $ 75 $ 97 $ 169
Class C.................................................. $ 25 $ 48 $ 82 $ 180
Class D.................................................. $ 7 $ 21 $ 37 $ 82

You would pay the following expenses on the same $1,000
investment assuming no redemption at the end of the period:
Class A.................................................. $ 51 $ 70 $ 90 $ 150
Class B.................................................. $ 14 $ 45 $ 77 $ 169
Class C.................................................. $ 15 $ 48 $ 82 $ 180
Class D.................................................. $ 7 $ 21 $ 37 $ 82
</TABLE>

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

The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management," "Purchase of Fund Shares--Plan of Distribution"
and "Redemptions and Repurchases."

Long-term shareholders of Class B and Class C may pay more in sales charges,
including distribution fees, than the economic equivalent of the maximum
front-end sales charges permitted by the NASD.

5
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

The following ratios and per share data for a share of capital stock
outstanding throughout each of the periods through August 31, 1996 have been
audited by Price Waterhouse LLP, independent accountants. The information for
the six-month period ended February 28, 1997 is unaudited. The financial
highlights should be read in conjunction with the financial statements, the
notes thereto and the unqualified report of independent accountants which are
contained in the Statement of Additional Information. Further information about
the performance of the Fund is contained in the Fund's Annual Report to
Stockholders, which may be obtained without charge upon request to the Fund. All
shares of the Fund held prior to July 28, 1997 have been designated Class D
shares.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED AUGUST 31
--------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988
FOR THE ---------- -------- -------- -------- -------- -------- ---------- -------- --------
SIX
MONTHS
ENDED
FEBRUARY
28, 1997
--------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period.... $6.71 $ 6.77 $ 6.83 $ 7.58 $ 7.23 $ 5.92 $ 6.78 $ 10.40 $ 11.99 $ 13.72
-------- ---------- -------- -------- -------- -------- -------- ---------- -------- --------
Net investment income... 0.38 0.83 0.80 0.79 0.89 0.95 0.94 1.48 1.67 1.84
Net realized and
unrealized gain
(loss)................. 0.07 (0.12) (0.06) (0.68) 0.54 1.04 (0.86) (3.78) (1.48) (1.77)
-------- ---------- -------- -------- -------- -------- -------- ---------- -------- --------
Total from investment
operations............. 0.45 0.71 0.74 0.11 1.43 1.99 0.08 (2.30) 0.19 0.07
-------- ---------- -------- -------- -------- -------- -------- ---------- -------- --------
Less dividends and
distributions from:
Net investment
income............... (0.50 ) (0.77) (0.80) (0.86) (1.08) (0.68) (0.94) (1.32) (1.75) (1.80)
Paid-in-capital....... -- -- -- -- -- -- -- -- (0.03) --
-------- ---------- -------- -------- -------- -------- -------- ---------- -------- --------
Total dividends and
distributions.......... (0.50 ) (0.77) (0.80) (0.86) (1.08) (0.68) (0.94) (1.32) (1.78) (1.80)
-------- ---------- -------- -------- -------- -------- -------- ---------- -------- --------
Net asset value, end of
period................. $6.66 $ 6.71 $ 6.77 $ 6.83 $ 7.58 $ 7.23 $ 5.92 $ 6.78 $ 10.40 $ 11.99
-------- ---------- -------- -------- -------- -------- -------- ---------- -------- --------
-------- ---------- -------- -------- -------- -------- -------- ---------- -------- --------
TOTAL INVESTMENT
RETURN+.................. 6.92% (1) 11.07% 11.98% 0.93% 22.29% 35.46% 4.67% (23.28)% 1.39% 0.97%
RATIOS TO AVERAGE NET
ASSETS:
Expenses................ 0.67% (2) 0.66% 0.79% 0.69% 0.67% 0.77% 0.87% 0.60% 0.49% 0.49%
Net investment income... 11.34% (2) 12.27% 12.06% 10.40% 12.14% 13.96% 16.47% 17.67% 14.61% 14.79%
SUPPLEMENTAL DATA:
Net assets, end of
period, in millions.... $473 $460 $455 $478 $540 $512 $436 $690 $1,794 $2,140
Portfolio turnover
rate................... 50% (1) 49% 74% 127% 173% 113% 93% 21% 55% 107%
- -----------------
+ DOES NOT REFLECT THE DEDUCTION OF SALES LOAD. CALCULATED BASED ON THE NET ASSET VALUE OF THE LAST BUSINESS DAY OF THE PERIOD.
(1) NOT ANNUALIZED
(2) ANNUALIZED

<CAPTION>
1987
--------
<S> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period.... $ 14.16
--------
Net investment income... 1.82
Net realized and
unrealized gain
(loss)................. (0.46)
--------
Total from investment
operations............. 1.36
--------
Less dividends and
distributions from:
Net investment
income............... (1.80)
Paid-in-capital....... --
--------
Total dividends and
distributions.......... (1.80)
--------
Net asset value, end of
period................. $ 13.72
--------
--------
TOTAL INVESTMENT
RETURN+.................. 10.07%
RATIOS TO AVERAGE NET
ASSETS:
Expenses................ 0.51%
Net investment income... 12.83%
SUPPLEMENTAL DATA:
Net assets, end of
period, in millions.... $2,034
Portfolio turnover
rate................... 176%
- -----------------
+ DOES NOT REFLECT THE D
(1) NOT ANNUALIZED
(2) ANNUALIZED
</TABLE>

6
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------

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

Dean Witter InterCapital Inc. ("InterCapital" or the "Investment Manager"),
whose address is Two World Trade Center, New York, New York 10048, is the Fund's
Investment Manager. The Investment Manager, which was incorporated in July,
1992, is a wholly-owned subsidiary of Morgan Stanley, Dean Witter, Discover &
Co., a preeminent global financial services firm that maintains leading market
positions in each of its three primary businesses--securities, asset management
and credit services.

InterCapital and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to 100 investment companies, thirty of which are
listed on the New York Stock Exchange, with combined total assets of
approximately $93.1 billion as of June 30, 1997. The Investment Manager also
manages, and advises managers of, common stock portfolios of pension plans,
other institutions and individuals which aggregated approximately $3.5 billion
at such date.

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

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

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

The primary investment objective of the Fund is to earn a high level of
current income. As a secondary objective, the Fund will seek capital
appreciation, but only when consistent with its primary objective. Capital
appreciation may result, for example, from an improvement in the credit standing
of an issuer whose securities are held in the Fund's portfolio or from a general
decline in interest rates, or a combination of both. Conversely, capital
depreciation may result, for example, from a lowered credit standing or a
general rise in interest rates, or a combination of both. There is no assurance
that the objectives will be achieved.
The higher yields sought by the Fund are generally obtainable from
securities rated in the lower categories by recognized rating services. The Fund
seeks high current income by investing principally in fixed-income securities
rated Baa or lower by Moody's Investors Service, Inc. ("Moody's"), or BBB or
lower by Standard & Poor's Corporation ("Standard & Poor's"). Fixed-income
securities rated Baa by Moody's or BBB by Standard & Poor's

7
<PAGE>
have speculative characteristics greater than those of more highly rated bonds,
while fixed-income securities rated Ba or BB or lower by Moody's and Standard &
Poor's, respectively, are considered to be speculative investments. Furthermore,
the Fund does not have any minimum quality rating standard for its investments.
As such, the Fund may invest in securities rated as low as Caa, Ca or C by
Moody's or CCC, CC, C or C1 by Standard & Poor's. Fixed-income securities rated
Caa or Ca by Moody's may already be in default on payment of interest or
principal, while bonds rated C by Moody's, their lowest bond rating, can be
regarded as having extremely poor prospects of ever attaining any real
investment standing. Bonds rated C1 by Standard & Poor's, their lowest bond
rating, are no longer making interest payments. For a further discussion of the
characteristics and risks associated with high yield securities, see "Special
Investment Considerations" below. A description of corporate bond ratings is
contained in the Appendix.

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

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

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

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

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

SPECIAL RISK CONSIDERATIONS

The net asset value of the Fund's shares will fluctuate with changes in the
market value of its portfolio securities. The Fund's yield will also vary based
on the yield of the Fund's portfolio securities.

8
<PAGE>
Because of the special nature of the Fund's investment in high yield
securities, commonly known as junk bonds, the Investment Manager must take
account of certain special considerations in assessing the risks associated with
such investments. Although the growth of the high yield securities market in the
1980s had paralleled a long economic expansion, recently many issuers have been
affected by adverse economic and market conditions. It should be recognized that
an economic downturn or increase in interest rates is likely to have a negative
effect on the high yield bond market and on the value of the high yield
securities held by the Fund, as well as on the ability of the securities'
issuers to repay principal and interest on their borrowings.

The prices of high yield securities have been found to be less sensitive to
changes in prevailing interest rates than higher-rated investments, but are
likely to be more sensitive to adverse economic changes or individual corporate
developments. During an economic downturn or substantial period of rising
interest rates, highly leveraged issuers may experience financial stress which
would adversely affect their ability to service their principal and interest
payment obligations, to meet their projected business goals or to obtain
additional financing. If the issuer of a fixed-income security owned by the Fund
defaults, the Fund may incur additional expenses to seek recovery. In addition,
periods of economic uncertainty and change can be expected to result in an
increased volatility of market prices of high yield securities and a concomitant
volatility in the net asset value of a share of the Fund. Moreover, the market
prices of certain of the Fund's portfolio securities which are structured as
zero coupon and payment-in-kind securities are affected to a greater extent by
interest rate changes and thereby tend to be more volatile than securities which
pay interest periodically and in cash (see "Dividends, Distributions and Taxes"
for a discussion of the tax ramifications of investments in such securities).

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

During the fiscal year ended August 31, 1996, the monthly dollar weighted
average ratings of the debt obligations held by the Fund, expressed as a
percentage of the Fund's total investments, were as follows:

<TABLE>
<CAPTION>
PERCENTAGE OF
RATINGS TOTAL INVESTMENTS
-------------------- ----------------------
<S> <C>
AAA/Aaa 0.1%
AA/Aa 0.0%
A/A 6.2%
BBB/Baa 0.0%
BB/Ba 6.2%
B/B 74.9%
CCC/Caa 6.6%
CC/Ca 0.0%
C/C 0.0%
D 0.0%
Unrated 6.0%
</TABLE>

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

Pending investment of proceeds from the sale of shares of the Fund or of its
portfolio securities or

9
<PAGE>
at other times when market conditions dictate a more "defensive" investment
strategy, the Fund may invest without limit in money market instruments,
including commercial paper of corporations organized under the laws of any state
or political subdivision of the United States, certificates of deposit, bankers'
acceptances and other obligations of domestic banks or domestic branches of
foreign banks, or foreign branches of domestic banks, in each case having total
assets of at least $500 million, and obligations issued or guaranteed by the
United States Government (including zero coupon securities), or foreign
governments or their respective instrumentalities or agencies. The yield on
these securities will generally tend to be lower than the yield on other
securities to be purchased by the Fund. To the extent the Fund purchases
Eurodollar certificates of deposit issued by foreign branches of domestic United
States banks, consideration will be given to their domestic marketability, the
lower reserve requirements normally mandated for overseas banking operations,
the possible impact of interruptions in the flow of international currency
transactions and economic developments which might adversely affect the payment
of principal or interest.

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

REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements, which
may be viewed as a type of secured lending by the Fund, and which typically
involve the acquisition by the Fund of debt securities, from a selling financial
institution such as a bank, savings and loan association or broker-dealer. The
agreement provides that the Fund will sell back to the institution, and that the
institution will repurchase, the underlying security at a specified price and at
a fixed time in the future, usually not more than seven days from the date of
purchase. While repurchase agreements involve certain risks not associated with
direct investments in debt securities, including the risk of default or
bankruptcy of the selling institution, the Fund follows procedures designed to
minimize such risks.

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

FOREIGN SECURITIES. The Fund may invest up to 20% of its total assets in
fixed-income securities issued by foreign governments and other foreign issuers
and in foreign currency issues of domestic issuers, but not more than 10% of its
total assets in such securities, whether issued by a foreign or domestic issuer,
which are denominated in foreign currency. Foreign securities investments may be
affected by changes in currency rates or exchange

10
<PAGE>
control regulations, changes in governmental administration or economic or
monetary policy (in the United States and abroad) or changed circumstances in
dealings between nations. Costs will be incurred in connection with conversions
between various currencies held by the Fund.

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

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

COMMON STOCKS. The Fund may invest in common stocks in an amount up to 20%
of its total assets. The Fund may directly purchase common stocks on the open
market. In addition, the Fund may acquire common stocks when they are included
in a unit with fixed-income securities purchased by the Fund; when fixed-income
securities held by the Fund are converted to equity issues; when the Fund
exercises a warrant; and when the Fund purchases the common stock of companies
involved in takeovers or recapitalizations, where the issuer or a stockholder
has offered, or pursuant to a "going private" transaction is effecting, a
transaction involving the issuance of newly issued fixed-income securities to
the holders of such common stock.

The prices of common stock are generally more volatile than those of
fixed-income securities. Moreover, not all common stock pay dividends and those
that do generally pay lower amounts than most fixed-income securities. The Fund
will only purchase common stocks directly when the Investment Manager believes
that their purchase will assist the Fund in meeting its investment objectives.

ZERO COUPON SECURITIES. A portion of the fixed-income securities purchased
by the Fund may be zero coupon securities. Such securities are purchased at a
discount from their face amount, giving the purchaser the right to receive their
full value at maturity. The interest earned on such securities is, implicitly,
automatically compounded and paid out at maturity. While such compounding at a
constant rate eliminates the risk of receiving lower yields upon reinvestment of
interest if prevailing interest rates decline, the owner of a zero coupon
security will be unable to participate in higher yields upon reinvestment of
interest received on interest-paying securities if prevailing interest rates
rise.

A zero coupon security pays no interest to its holder during its life.
Therefore, to the extent the Fund invests in zero coupon securities, it will not
receive current cash available for distribution to shareholders. In addition,
zero coupon securities

11
<PAGE>
are subject to substantially greater price fluctuations during periods of
changing prevailing interest rates than are comparable securities which pay
interest on a current basis. Current federal tax law requires that a holder
(such as the Fund) of a zero coupon security accrue a portion of the discount at
which the security was purchased as income each year even though the Fund
receives no interest payments in cash on the security during the year.

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

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

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

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

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

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

12
<PAGE>
PORTFOLIO MANAGEMENT

The Fund is actively managed by the Investment Manager with a view to
achieving the Fund's investment objective. The Fund is managed within
InterCapital's Taxable Income Group, which managed approximately $12.8 billion
in assets at June 30, 1997. Peter M. Avelar, Senior Vice President of
InterCapital and a member of InterCapital's Taxable Fixed-Income Group, has been
the primary portfolio manager of the Fund since January, 1991 and has been
managing fixed portfolios consisting of fixed-income and equity securities at
InterCapital for over five years.

Securities purchased by the Fund are, generally, sold by dealers acting as
principal for their own accounts. Pursuant to an order issued by the Securities
and Exchange Commission, the Fund may effect principal transactions in certain
money market instruments with DWR. In addition, the Fund may incur brokerage
commissions on transactions conducted through DWR and other brokers and dealers
that are affiliates of InterCapital.

Although the Fund does not intend to engage in substantial short-term
trading, it may sell portfolio securities without regard to the length of time
that they have been held, in order to take advantage of new investment
opportunities or yield differentials, or because the Fund desires to preserve
gains or limit losses due to changing economic conditions, interest rate trends,
or the financial condition of the issuer. The Fund's portfolio turnover rate for
the fiscal year ended August 31, 1996 was 49%. The Fund will incur underwriting
discount costs (on underwritten securities) and brokerage costs commensurate
with its portfolio turnover rate. Short term gains and losses may result from
such portfolio transactions. See "Dividends, Distributions and Taxes" for a
discussion of the tax implications of the Fund's trading policy.

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

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

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

The Fund may not:

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

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

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

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

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

Notwithstanding any other investment policy or restriction, the Fund may
seek to achieve its
invest-

13
<PAGE>
ment objectives by investing all or substantially all of its assets in another
investment company having substantially the same investment objectives and
policies as the Fund.

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

GENERAL

The Fund offers each class of its shares for sale to the public on a
continuous basis. Pursuant to a Distribution Agreement between the Fund and Dean
Witter Distributors Inc. (the "Distributor"), an affiliate of the Investment
Manager, shares of the Fund are distributed by the Distributor and offered by
DWR and other dealers who have entered into agreements with the Distributor
("Selected Broker-Dealers"). The principal executive office of the Distributor
is located at Two World Trade Center, New York, New York 10048.

The Fund offers four classes of shares (each, a "Class"). Class A shares are
sold to investors with an initial sales charge that declines to zero for larger
purchases; however, Class A shares sold without an initial sales charge are
subject to a contingent deferred sales charge ("CDSC") of 1.0% if redeemed
within one year of purchase, except for certain specific circumstances. Class B
shares are sold without an initial sales charge but are subject to a CDSC
(scaled down from 5.0% to 1.0%) payable upon most redemptions within six years
after purchase. (Class B shares purchased by certain qualified
employer-sponsored benefit plans are subject to a CDSC scaled down from 2.0% to
1.0% if redeemed within three years after purchase.) Class C shares are sold
without an initial sales charge but are subject to a CDSC of 1.0% on most
redemptions made within one year after purchase. Class D shares are sold without
an initial sales charge or CDSC and are available only to investors meeting an
initial investment minimum of $5 million, and to certain other limited
categories of investors. At the discretion of the Board of Directors of the
Fund, Class A shares may be sold to categories of investors in addition to those
set forth in this prospectus at net asset value without a front-end sales
charge, and Class D shares may be sold to certain other categories of investors,
in each case as may be described in the then current prospectus of the Fund. See
"Alternative Purchase Arrangements-- Selecting a Particular Class" for a
discussion of factors to consider in selecting which Class of shares to
purchase.

The minimum initial purchase is $1,000 for each Class of shares, although
Class D shares are only available to persons investing $5 million or more and to
certain other limited categories of investors. For the purpose of meeting the
minimum $5 million initial investment for Class D shares, and subject to the
$1,000 minimum initial investment for each Class of the Fund, an investor's
existing holdings of Class A shares of the Fund and other Dean Witter Funds that
are multiple class funds ("Dean Witter Multi-Class Funds") and shares of Dean
Witter Funds sold with a front-end sales charge ("FSC Funds") and concurrent
investments in Class D shares of the Fund and other Dean Witter Multi-Class
Funds will be aggregated. Subsequent purchases of $100 or more may be made by
sending a check, payable to Dean Witter High Yield Securities Inc., directly to
Dean Witter Trust Company (the "Transfer Agent") at P.O. Box 1040, Jersey City,
N.J. 07303 or by contacting an account executive of DWR or other Selected
Broker-Dealer. When purchasing shares of the Fund, investors must specify
whether the purchase is for Class A, Class B, Class C or Class D shares. If no
Class is specified, the Transfer Agent will not process the transaction until
the proper Class is identified. The minimum initial purchase in the case of
investments through EasyInvest-SM-, an automatic purchase plan (see "Shareholder
Services"), is $100, provided that the schedule of automatic investments will
result in investments totalling at least $1,000 within the first twelve months.
In the case of purchases made pursuant to Systematic Payroll Deduction plans
(including Individual Retirement plans), the

14
<PAGE>
Fund, in its discretion, may accept such Purchases without regard to any minimum
amounts which would otherwise be required if the Fund has reason to believe that
additional purchases will increase the amount of the purchase of shares in all
accounts under such plans to at least $1,000. Certificates for shares purchased
will not be issued unless a request is made by the shareholder in writing to the
Transfer Agent.

Shares are sold through the Distributor on a normal three business day
settlement basis; that is, payment is due on the third business day (settlement
date) after the order is placed with the Distributor. Since DWR and other
Selected Broker-Dealers forward investors' funds on settlement date, they will
benefit from the temporary use of the funds if payment is made prior thereto. As
noted above, orders placed directly with the Transfer Agent must be accompanied
by payment. Investors will be entitled to receive income dividends and capital
gains distributions if their order is received by the close of business on the
day prior to the record date for such dividends and distributions. Sales
personnel of a Selected Broker-Dealer are compensated for selling shares of the
Fund by the Distributor or any of its affiliates and/or the Selected
Broker-Dealer. In addition, some sales personnel of the Selected Broker-Dealer
will receive various types of non-cash compensation as special sales incentives,
including trips, educational and/or business seminars and merchandise. The Fund
and the Distributor reserve the right to reject any purchase order.

ANALOGOUS DEAN WITTER FUNDS. The Distributor and the Investment Manager
serve in the same capacities for Dean Witter High Income Securities, an open-end
investment company with investment objectives and policies similar to those of
the Fund. Shares of Dean Witter High Income Securities are offered to the public
at net asset value, with a CDSC assessed upon redemptions within five years of
purchase, as well as an annual Rule 12b-1 distribution fee. The Classes of the
Fund and Dean Witter High Income Securities have differing fees and expenses,
which will affect performance. Investors who would like to receive a prospectus
for Dean Witter High Income Securities should call the telephone numbers listed
on the front cover of this Prospectus, or may call their account executive for
additional information.

The Board of Directors of the Fund and the Board of Trustees of Dean Witter
High Income Securities have approved a reorganization plan whereby Dean Witter
High Income Securities would be merged into the Fund. This plan is subject to
the consent of the Dean Witter High Income Securities shareholders. If approved,
the Funds' assets would be combined and Dean Witter High Income Securities
shareholders would become shareholders of the Fund, receiving Class B shares of
the Fund equal to the value of their holdings in Dean Witter High Income
Securities. A proxy statement formally detailing the proposal will be
distributed to Dean Witter High Income Securities shareholders in August 1997.

ALTERNATIVE PURCHASE ARRANGEMENTS

The Fund offers several Classes of shares to investors designed to provide
them with the flexibility of selecting an investment best suited to their needs.
The general public is offered three Classes of shares: Class A shares, Class B
shares and Class C shares, which differ principally in terms of sales charges
and rate of expenses to which they are subject. A fourth Class of shares, Class
D shares, is offered only to limited categories of investors (see "No Load
Alternative--Class D Shares" below).

Each Class A, Class B, Class C or Class D share of the Fund represents an
identical interest in the investment portfolio of the Fund except that Class A,
Class B and Class C shares bear the expenses of the ongoing shareholder service
fees, Class B and Class C shares bear the expenses of the ongoing distribution
fees and Class A, Class B

15
<PAGE>
and Class C shares which are redeemed subject to a CDSC bear the expense of the
additional incremental distribution costs resulting from the CDSC applicable to
shares of those Classes. The ongoing distribution fees that are imposed on Class
A, Class B and Class C shares will be imposed directly against those Classes and
not against all assets of the Fund and, accordingly, such charges against one
Class will not affect the net asset value of any other Class or have any impact
on investors choosing another sales charge option. See "Plan of Distribution"
and "Redemptions and Repurchases."

Set forth below is a summary of the differences between the Classes and the
factors an investor should consider when selecting a particular Class. This
summary is qualified in its entirety by detailed discussion of each Class that
follows this summary.

CLASS A SHARES. Class A shares are sold at net asset value plus an initial
sales charge of up to 4.25%. The initial sales charge is reduced for certain
purchases. Investments of $1 million or more (and investments by certain other
limited categories of investors) are not subject to any sales charges at the
time of purchase but are subject to a CDSC of 1.0% on redemptions made within
one year after purchase, except for certain specific circumstances. Class A
shares are also subject to a 12b-1 fee of up to 0.25% of the average daily net
assets of the Class. See "Initial Sales Charge Alternative--Class A Shares."

CLASS B SHARES. Class B shares are offered at net asset value with no
initial sales charge but are subject to a CDSC (scaled down from 5.0% to 1.0%)
if redeemed within six years of purchase. (Class B shares purchased by certain
qualified employer-sponsored benefit plans are subject to a CDSC scaled down
from 2.0% to 1.0% if redeemed within three years after purchase.) This CDSC may
be waived for certain redemptions. Class B shares are also subject to an annual
12b-1 fee of 0.75% of the

average daily net assets of Class B. The Class B shares' distribution fee will
cause that Class to have higher expenses and pay lower dividends than Class A or
Class D shares.

After approximately ten (10) years, Class B shares will convert
automatically to Class A shares of the Fund, based on the relative net asset
values of the shares of the two Classes on the conversion date. In addition, a
certain portion of Class B shares that have been acquired through the
reinvestment of dividends and distributions will be converted at that time. See
"Contingent Deferred Sales Charge Alternative--Class B Shares."

CLASS C SHARES. Class C shares are sold at net asset value with no initial
sales charge but are subject to a CDSC of 1.0% on redemptions made within one
year after purchase. This CDSC may be waived for certain redemptions. They are
subject to an annual 12b-1 fee of up to 0.85% of the average daily net assets of
the Class C shares. The Class C shares' distribution fee may cause that Class to
have higher expenses and pay lower dividends than Class A or Class D shares. See
"Level Load Alternative--Class C Shares."

CLASS D SHARES. Class D shares are available only to limited categories of
investors (see "No Load Alternative--Class D Shares" below). Class D shares are
sold at net asset value with no initial sales charge or CDSC. They are not
subject to any 12b-1 fees. See "No Load Alternative--Class D Shares."

SELECTING A PARTICULAR CLASS. In deciding which Class of Fund shares to
purchase, investors should consider the following factors, as well as any other
relevant facts and circumstances:

The decision as to which Class of shares is more beneficial to an investor
depends on the amount and intended length of his or her investment. Investors
who prefer an initial sales charge alternative may elect to purchase Class A
shares. Investors qualifying for significantly reduced or, in

16
<PAGE>
the case of purchases of $1 million or more, no initial sales charges may find
Class A shares particularly attractive because similar sales charge reductions
are not available with respect to Class B or Class C shares. Moreover, Class A
shares are subject to lower ongoing expenses than are Class B or Class C shares
over the term of the investment. As an alternative, Class B and Class C shares
are sold without any initial sales charge so the entire purchase price is
immediately invested in the Fund. Any investment return on these additional
investment amounts may partially or wholly offset the higher annual expenses of
these Classes. Because the Fund's future return cannot be predicted, however,
there can be no assurance that this would be the case.

Finally, investors should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of their own investment time
frame. For example, although Class C shares are subject to a significantly lower
CDSC upon redemptions, they do not, unlike Class B shares, convert into Class A
shares after approximately ten years, and, therefore, are subject to an ongoing
12b-1 fee of 0.85% (rather than the 0.25% fee applicable to Class A shares) for
an indefinite period of time. Thus, Class B shares may be more attractive than
Class C shares to investors with longer term investment outlooks. Other
investors, however, may elect to purchase Class C shares if, for example, they
determine that they do not wish to be subject to a front-end sales charge and
they are uncertain as to the length of time they intend to hold their shares.

For the purpose of meeting the $5 million minimum investment amount for
Class D shares, holdings of Class A shares in all Dean Witter Multi-Class Funds,
shares of FSC Funds and shares of Dean Witter Funds for which such shares have
been exchanged will be included together with the current investment amount.

Sales personnel may receive different compensation for selling each Class of
shares. Investors should understand that the purpose of a CDSC is the same as
that of the initial sales charge in that the sales charges applicable to each
Class provide for the financing of the distribution of shares of that Class.

Set forth below is a chart comparing the sales charge, 12b-1 fees and
conversion options applicable to each Class of shares:

<TABLE>
<CAPTION>
<C> <S> <C> <C>
CONVERSION
CLASS SALES CHARGE 12B-1 FEE FEATURE
A Maximum 4.25% 0.25% No
initial sales
charge reduced
for purchases of
$25,000 and
over; shares
sold without an
initial sales
charge generally
subject to a
1.0% CDSC during
first year.
B Maximum 5.0% 0.75% B shares
CDSC during the convert to
first year A shares
decreasing to 0 automatically
after six years after
approximately
ten years
C 1.0% CDSC during 0.85% No
first year
D None None No
</TABLE>

See "Purchase of Fund Shares" and "The Fund and its Management" for a
complete description of the sales charges and service and distribution fees for
each Class of shares and "Determination of Net Asset Value," "Dividends,
Distributions and Taxes" and "Shareholder Services--Exchange Privilege" for
other differences between the Classes of shares.

INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES

Class A shares are sold at net asset value plus an initial sales charge. In
some cases, reduced sales charges may be available, as described below.
Investments of $1 million or more (and investments by certain other limited
categories of investors) are not subject to any sales charges at

17
<PAGE>
the time of purchase but are subject to a CDSC of 1.0% on redemptions made
within one year after purchase (calculated from the last day of the month in
which the shares were purchased), except for certain specific circumstances. The
CDSC will be assessed on an amount equal to the lesser of the current market
value or the cost of the shares being redeemed. The CDSC will not be imposed (i)
in the circumstances set forth below in the section "Contingent Deferred Sales
Charge Alternative--Class B Shares--CDSC Waivers," except that the references to
six years in the first paragraph of that section shall mean one year in the case
of Class A shares, and (ii) in the circumstances identified in the section
"Additional Net Asset Value Purchase Options" below. Class A shares are also
subject to an annual 12b-1 fee of up to 0.25% of the average daily net assets of
the Class.

The offering price of Class A shares will be the net asset value per share
next determined following receipt of an order (see "Determination of Net Asset
Value" below), plus a sales charge (expressed as a percentage of the offering
price) on a single transaction as shown in the following table:

<TABLE>
<CAPTION>
SALES CHARGE
------------------------------------------
PERCENTAGE OF APPROXIMATE
AMOUNT OF SINGLE PUBLIC OFFERING PERCENTAGE OF AMOUNT
TRANSACTION PRICE INVESTED
- -------------------------- ------------------- ---------------------
<S> <C> <C>
Less than $25,000......... 4.25% 4.44%
$25,000 but less
than $50,000......... 4.00% 4.17%
$50,000 but less
than $100,000........ 3.50% 3.63%
$100,000 but less
than $250,000........ 2.75% 2.83%
$250,000 but less
than $1 million...... 1.75% 1.78%
$1 million and over....... 0 0
</TABLE>

Upon notice to all Selected Broker-Dealers, the Distributor may reallow up
to the full applicable sales charge as shown in the above schedule during
periods specified in such notice. During periods when 90% or more of the sales
charge is reallowed, such Selected Broker-Dealers may be deemed to be
underwriters as that term is defined in the Securities Act of 1933.

The above schedule of sales charges is applicable to purchases in a single
transaction by, among others: (a) an individual; (b) an individual, his or her
spouse and their children under the age of 21 purchasing shares for his, her or
their own accounts; (c) a trustee or other fiduciary purchasing shares for a
single trust estate or a single fiduciary account; (d) a pension, profit-sharing
or other employee benefit plan qualified or non-qualified under Section 401 of
the Internal Revenue Code; (e) tax-exempt organizations enumerated in Section
501(c)(3) or (13) of the Internal Revenue Code; (f) employee benefit plans
qualified under Section 401 of the Internal Revenue Code of a single employer or
of employers who are "affiliated persons" of each other within the meaning of
Section 2(a)(3)(c) of the Act; and for investments in Individual Retirement
Accounts of employees of a single employer through Systematic Payroll Deduction
plans; or (g) any other organized group of persons, whether incorporated or not,
provided the organization has been in existence for at least six months and has
some purpose other than the purchase of redeemable securities of a registered
investment company at a discount.

COMBINED PURCHASE PRIVILEGE. Investors may have the benefit of reduced
sales charges in accordance with the above schedule by combining purchases of
Class A shares of the Fund in single transactions with the purchase of Class A
shares of other Dean Witter Multi-Class Funds and shares of FSC Funds. The sales
charge payable on the purchase of the Class A shares of the Fund, the Class A
shares of the other Dean Witter Multi-Class Funds and the shares of the FSC
Funds will be at their respective rates applicable to the total amount of the
combined concurrent purchases of such shares.

RIGHT OF ACCUMULATION. The above persons and entities may benefit from a
reduction of the sales charges in accordance with the above schedule if the
cumulative net asset value of Class A shares purchased in a single transaction,
together with shares of the Fund and other Dean Witter Funds previously
purchased at a price including a

18
<PAGE>
front-end sales charge (including shares of the Fund and other Dean Witter Funds
acquired in exchange for those shares, and including in each case shares
acquired through reinvestment of dividends and distributions), which are held at
the time of such transaction, amounts to $25,000 or more. If such investor has a
cumulative net asset value of shares of FSC Funds and Class A and Class D shares
equal to at least $5 million, such investor is eligible to purchase Class D
shares subject to the $1,000 minimum initial investment requirement of that
Class of the Fund. See "No Load Alternative-- Class D Shares" below.

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

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

ADDITIONAL NET ASSET VALUE PURCHASE OPTIONS. In addition to investments of
$1 million or more, Class A shares also may be purchased at net asset value by
the following:

(1) trusts for which Dean Witter Trust Company ("DWTC") or Dean Witter Trust
FSB ("DWTFSB") (each of which is an affiliate of the Investment Manager)
provides discretionary trustee services;

(2) persons participating in a fee-based program approved by the Distributor,
pursuant to which such persons pay an asset based fee for services in the nature
of investment advisory or administrative services (such investments are subject
to all of the terms and conditions of such programs, which may include
termination fees and restrictions on transferability of Fund shares);

(3) retirement plans qualified under Section 401(k) of the Internal Revenue
Code ("401(k) plans") and other employer-sponsored plans qualified under Section
401(a) of the Internal Revenue Code with at least 200 eligible employees and for
which DWTC or DWTFSB serves as Trustee or the 401(k) Support Services Group of
DWR serves as recordkeeper;

(4) 401(k) plans and other employer-sponsored plans qualified under Section
401(a) of the Internal Revenue Code for which DWTC or DWTFSB serves as Trustee
or the 401(k) Support Services Group of DWR serves as recordkeeper whose Class B
shares have converted to Class A shares, regardless of the plan's asset size or
number of eligible employees;

(5) investors who are clients of a Dean Witter account executive who joined
Dean Witter from another investment firm within six months prior to the date of
purchase of Fund shares by such investors, if the shares are being purchased
with the proceeds from a redemption of shares of an open-end proprietary mutual
fund of the account executive's previous firm which imposed either a front-end
or deferred sales charge, provided such purchase was made within sixty days
after the redemption and the proceeds of the redemption had been maintained in
the interim in cash or a money market fund; and

(6) other categories of investors, at the discretion of the Board, as
disclosed in the then current prospectus of the Fund.

19
<PAGE>
No CDSC will be imposed on redemptions of shares purchased pursuant to
paragraphs (1), (2) or (5), above.

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

CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES

Class B shares are sold at net asset value next determined without an
initial sales charge so that the full amount of an investor's purchase payment
may be immediately invested in the Fund. A CDSC, however, will be imposed on
most Class B shares redeemed within six years after purchase. The CDSC will be
imposed on any redemption of shares if after such redemption the aggregate
current value of a Class B account with the Fund falls below the aggregate
amount of the investor's purchase payments for Class B shares made during the
six years (or, in the case of shares held by certain employer-sponsored benefit
plans, three years) preceding the redemption. In addition, Class B shares are
subject to an annual 12b-1 fee of 0.75% of the the average daily net assets of
Class B.

Except as noted below, Class B shares of the Fund which are held for six
years or more after purchase (calculated from the last day of the month in which
the shares were purchased) will not be subject to any CDSC upon redemption.
Shares redeemed earlier than six years after purchase may, however, be subject
to a CDSC which will be a percentage of the dollar amount of shares redeemed and
will be assessed on an amount equal to the lesser of the current market value or
the cost of the shares being redeemed. The size of this percentage will depend
upon how long the shares have been held, as set forth in the following table:

<TABLE>
<CAPTION>
YEAR SINCE CDSC AS A
PURCHASE PERCENTAGE OF
PAYMENT MADE AMOUNT REDEEMED
- --------------------------------- -----------------------
<S> <C>
First............................ 5.0%
Second........................... 4.0%
Third............................ 3.0%
Fourth........................... 2.0%
Fifth............................ 2.0%
Sixth............................ 1.0%
Seventh and thereafter........... None
</TABLE>

In the case of Class B shares of the Fund held by 401(k) plans or other
employer-sponsored plans qualified under Section 401(a) of the Internal Revenue
Code for which DWTC or DWTFSB serves as Trustee or the 401(k) Support Services
Group of DWR serves as recordkeeper and whose accounts are opened on or after
July 28, 1997, shares held for three years or more after purchase (calculated as
described in the paragraph above) will not be subject to any CDSC upon
redemption. However, shares redeemed earlier than three years after purchase may
be subject to a CDSC (calculated as described in the paragraph above), the
percentage of which will depend on how long the shares have been held, as set
forth in the following table:

<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE OF
PAYMENT MADE AMOUNT REDEEMED
- --------------------------------- -----------------------
<S> <C>
First............................ 2.0%
Second........................... 2.0%
Third............................ 1.0%
Fourth and thereafter............ None
</TABLE>

CDSC WAIVERS. A CDSC will not be imposed on: (i) any amount which
represents an increase in value of shares purchased within the six years (or, in
the case of shares held by certain employer-sponsored benefit plans, three
years) preceding the redemption; (ii) the current net asset value of shares
purchased more than six years (or, in the case of shares held by certain
employer-sponsored benefit plans, three years) prior to the redemption; and
(iii) the current net asset value of shares purchased through reinvestment of
dividends or distributions and/or shares acquired in exchange for shares of FSC
Funds or of other Dean Witter Funds acquired in exchange for such shares.
Moreover, in determining whether a CDSC is applicable it will be assumed that
amounts described in (i), (ii) and (iii) above (in that order) are redeemed
first.

In addition, the CDSC, if otherwise applicable, will be waived in the case
of:

(1) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are: (A) registered either in the name of an
individual shareholder (not a trust), or in the names

20
<PAGE>
of such shareholder and his or her spouse as joint tenants with right of
survivorship; or (B) held in a qualified corporate or self-employed retirement
plan, Individual Retirement Account ("IRA") or Custodial Account under Section
403(b)(7) of the Internal Revenue Code ("403(b) Custodial Account"), provided in
either case that the redemption is requested within one year of the death or
initial determination of disability;

(2) redemptions in connection with the following retirement plan
distributions: (A) lump-sum or other distributions from a qualified corporate
or self-employed retirement plan following retirement (or, in the case of a "key
employee" of a "top heavy" plan, following attainment of age 59 1/2); (B)
distributions from an IRA or 403(b) Custodial Account following attainment of
age 59 1/2; or (C) a tax-free return of an excess contribution to an IRA; and

(3) all redemptions of shares held for the benefit of a participant in a
401(k) plan or other employer-sponsored plan qualified under Section 401(a) of
the Internal Revenue Code which offers investment companies managed by the
Investment Manager or
its subsidiary, Dean Witter Services Company Inc., as self-directed investment
alternatives and for which DWTC or DWTFSB serves as Trustee or the 401(k)
Support Services Group of DWR serves as recordkeeper ("Eligible Plan"), provided
that either: (a) the plan continues to be an Eligible Plan after the
redemption; or (b) the redemption is in connection with the complete
termination of the plan involving the distribution of all plan assets to
participants.

With reference to (1) above, for the purpose of determining disability, the
Distributor utilizes the definition of disability contained in Section 72(m)(7)
of the Internal Revenue Code, which relates to the inability to engage in
gainful employment. With reference to (2) above, the term "distribution" does
not encompass a direct transfer of IRA, 403(b) Custodial Account or retirement
plan assets to a successor custodian or trustee. All waivers will be granted
only following receipt by the Distributor of confirmation of the shareholder's
entitlement.

CONVERSION TO CLASS A SHARES. Class B shares will convert automatically to
Class A shares, based on the relative net asset values of the shares of the two
Classes on the conversion date, which will be approximately ten (10) years after
the date of the original purchase. The ten year period is calculated from the
last day of the month in which the shares were purchased or, in the case of
Class B shares acquired through an exchange or a series of exchanges, from the
last day of the month in which the original Class B shares were purchased. The
conversion of shares will take place in the month following the tenth
anniversary of the purchase. There will also be converted at that time such
proportion of Class B shares acquired through automatic reinvestment of
dividends and distributions owned by the shareholder as the total number of his
or her Class B shares converting at the time bears to the total number of
outstanding Class B shares purchased and owned by the shareholder. In the case
of Class B shares held by a 401(k) plan or other employer-sponsored plan
qualified under Section 401(a) of the Internal Revenue Code and for which DWTC
or DWTFSB serves as Trustee or the 401(k) Support Services Group of DWR serves
as recordkeeper, the plan is treated as a single investor and all Class B shares
will convert to Class A shares on the conversion date of the first shares of a
Dean Witter Multi-Class Fund purchased by that plan. In the case of Class B
shares previously exchanged for shares of an "Exchange Fund" (see "Shareholder
Services--Exchange Privilege"), the period of time the shares were held in the
Exchange Fund (calculated from the last day of the month in which the Exchange
Fund shares were acquired) is excluded from the holding period for conversion.
If those shares are subsequently re-exchanged for Class B shares of a Dean
Witter Multi-Class Fund, the holding period resumes on the last day of the month
in which Class B shares are reacquired.

21
<PAGE>
If a shareholder has received share certificates for Class B shares, such
certificates must be delivered to the Transfer Agent at least one week prior to
the date for conversion. Class B shares evidenced by share certificates that are
not received by the Transfer Agent at least one week prior to any conversion
date will be converted into Class A shares on the next scheduled conversion date
after such certificates are received.

Effectiveness of the conversion feature is subject to the continuing
availability of a ruling of the Internal Revenue Service or an opinion of
counsel that (i) the conversion of shares does not constitute a taxable event
under the Internal Revenue Code, (ii) Class A shares received on conversion will
have a basis equal to the shareholder's basis in the converted Class B shares
immediately prior to the conversion, and (iii) Class A shares received on
conversion will have a holding period that includes the holding period of the
converted Class B shares. The conversion feature may be suspended if the ruling
or opinion is no longer available. In such event, Class B shares would continue
to be subject to Class B 12b-1 fees.

LEVEL LOAD ALTERNATIVE--CLASS C SHARES

Class C shares are sold at net asset value next determined without an
initial sales charge but are subject to a CDSC of 1.0% on most redemptions made
within one year after purchase (calculated from the last day of the month in
which the shares were purchased). The CDSC will be assessed on an amount equal
to the lesser of the current market value or the cost of the shares being
redeemed. The CDSC will not be imposed in the circumstances set forth above in
the section "Contingent Deferred Sales Charge Alternative--Class B Shares--CDSC
Waivers," except that the references to six years in the first paragraph of that
section shall mean one year in the case of Class C shares. Class C shares are
subject to an annual 12b-1 fee of up to 0.85% of the average daily net assets of
the Class. Unlike Class B shares, Class C shares have no conversion feature and,
accordingly, an investor that purchases Class C shares will be subject to 12b-1
fees applicable to Class C shares for an indefinite period subject to annual
approval by the Fund's Board of Directors and regulatory limitations.

NO LOAD ALTERNATIVE--CLASS D SHARES

Class D shares are offered without any sales charge on purchase or
redemption and without any 12b-1 fee. Class D shares are offered only to
investors meeting an initial investment minimum of $5 million and the following
categories of investors: (i) investors participating in the InterCapital mutual
fund asset allocation program pursuant to which such persons pay an asset based
fee; (ii) persons participating in a fee-based program approved by the
Distributor, pursuant to which such persons pay an asset based fee for services
in the nature of investment advisory or administrative services (subject to all
of the terms and conditions of such programs, which may include termination fees
and restrictions on transferability of Fund shares); (iii) 401(k) plans
established by DWR and SPS Transaction Services, Inc. (an affiliate of DWR) for
their employees; (iv) certain Unit Investment Trusts sponsored by DWR; (v)
certain other open-end investment companies whose shares are distributed by the
Distributor; and (vi) other categories of investors, at the discretion of the
Board, as disclosed in the then current prospectus of the Fund. All shares of
the Fund held prior to July 28, 1997 have been designated Class D shares.
Additional investments in Class D shares by shareholders holding such shares may
only be made if those shareholders are otherwise eligible to purchase Class D
shares. However, shareholders holding such shares will receive the benefit of
the value of such shares towards reduced sales charges on purchases of Class A
shares pursuant to the Fund's "Right of Accumulation" (see "Initial Sales Charge
Alternative--Class A Shares--Right of Accumulation"). Investors who require a $5
million minimum initial investment to qualify to purchase Class D shares may
satisfy that requirement by investing that amount in a single transaction in
Class D shares of the Fund and other Dean Witter Multi-Class

22
<PAGE>
Funds, subject to the $1,000 minimum initial investment required for that Class
of the Fund. In addition, for the purpose of meeting the $5 million minimum
investment amount, holdings of Class A shares in all Dean Witter Multi-Class
Funds, shares of FSC Funds and shares of Dean Witter Funds for which such shares
have been exchanged will be included together with the current investment
amount. If a shareholder redeems Class A shares and purchases Class D shares,
such redemption may be a taxable event.

PLAN OF DISTRIBUTION

Effective July 28, 1997, the Fund has adopted a Plan of Distribution
pursuant to Rule 12b-1 under the Act with respect to the distribution of Class
A, Class B and Class C shares of the Fund. In the case of Class A and Class C
shares, the Plan provides that the Fund will reimburse the Distributor and
others for the expenses of certain activities and services incurred by them
specifically on behalf of those shares. Reimbursements for these expenses will
be made in monthly payments by the Fund to the Distributor, which will in no
event exceed amounts equal to payments at the annual rates of 0.25% and 0.85% of
the average daily net assets of Class A and Class C, respectively. In the case
of Class B shares, the Plan provides that the Fund will pay the Distributor a
fee, which is accrued daily and paid monthly, at the annual rate of 0.75% of the
average daily net assets of Class B. The fee is treated by the Fund as an
expense in the year it is accrued. In the case of Class A shares, the entire
amount of the fee currently represents a service fee within the meaning of the
NASD guidelines. In the case of Class B and Class C shares, a portion of the fee
payable pursuant to the Plan, equal to 0.20% and 0.25% of the average daily net
assets of each of these Classes, respectively, is currently characterized as a
service fee. A service fee is a payment made for personal service and/or the
maintenance of shareholder accounts.

Additional amounts paid under the Plan in the case of Class B and Class C
shares are paid to the Distributor for services provided and the expenses borne
by the Distributor and others in the distribution of the shares of those
Classes, including the payment of commissions for sales of the shares of those
Classes and incentive compensation to and expenses of DWR's account executives
and others who engage in or support distribution of shares or who service
shareholder accounts, including overhead and telephone expenses; printing and
distribution of prospectuses and reports used in connection with the offering of
the Fund's shares to other than current shareholders; and preparation, printing
and distribution of sales literature and advertising materials. In addition, the
Distributor may utilize fees paid pursuant to the Plan in the case of Class B
shares to compensate DWR and other Selected Broker-Dealers for their opportunity
costs in advancing such amounts, which compensation would be in the form of a
carrying charge on any unreimbursed expenses.

In the case of Class B shares, at any given time, the expenses in
distributing Class B shares of the Fund may be in excess of the total of (i) the
payments made by the Fund pursuant to the Plan, and (ii) the proceeds of CDSCs
paid by investors upon the redemption of Class B shares. For example, if $1
million in expenses in distributing Class B shares of the Fund had been incurred
and $750,000 had been received as described in (i) and (ii) above, the excess
expense would amount to $250,000. Because there is no requirement under the Plan
that the Distributor be reimbursed for all distribution expenses or any
requirement that the Plan be continued from year to year, such excess amount
does not constitute a liability of the Fund. Although there is no legal
obligation for the Fund to pay expenses incurred in excess of payments made to
the Distributor under the Plan, and the proceeds of CDSCs paid by investors upon
redemption of shares, if for any reason the Plan is terminated the Directors
will consider at that time the manner in which to treat such expenses. Any
cumulative expenses incurred, but not yet recovered through distribution fees or

23
<PAGE>
CDSCs, may or may not be recovered through future distribution fees or CDSCs.

In the case of Class A and Class C shares, expenses incurred pursuant to the
Plan in any calendar year in excess of 0.25% or 0.85% of the average daily net
assets of Class A or Class C, respectively, will not be reimbursed by the Fund
through payments in any subsequent year, except that expenses representing a
gross sales commission credited to account executives at the time of sale may be
reimbursed in the subsequent calendar year. No interest or other financing
charges will be incurred on any Class A or Class C distribution expenses
incurred by the Distributor under the Plan or on any unreimbursed expenses due
to the Distributor pursuant to the Plan.

DETERMINATION OF NET ASSET VALUE

The net asset value per share is determined once daily at 4:00 p.m., New
York time on each day that the New York Stock Exchange is open (or, on days when
the New York Stock Exchange closes prior to 4:00 p.m., at such earlier time), by
taking the net assets of the Fund, dividing by the number of shares outstanding
and adjusting to the nearest cent. The assets belonging to the Class A, Class B,
Class C and Class D shares will be invested together in a single portfolio. The
net asset value of each Class, however, will be determined separately by
subtracting each Class's accrued expenses and liabilities. The net asset value
per share will not be determined on Good Friday and on such other federal and
non-federal holidays as are observed by the New York Stock Exchange.

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

Certain of the Fund's portfolio securities may be valued by an outside
pricing service approved by the Fund's Directors. The pricing service may
utilize a matrix system incorporating security quality, maturity and coupon as
the evaluation model parameters, and/or research evaluations by its staff,
including review of broker-dealer market price quotations, in determining what
it believes is the fair valuation of the portfolio securities valued by such
pricing service.

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

Short-term debt securities with remaining maturities of 60 days or less at
the time of purchase are valued at amortized cost, unless the Board determines
such does not reflect the securities' fair value, in which case these securities
will be valued at their fair market value as determined by the Board of
Directors. Other short-term debt securities will be valued on a marked-to-market
basis until such time as they reach a maturity of 60 days, whereupon they will
be valued at amortized cost using their value on the 61st day unless the
Directors determine such does not reflect the securities' market value, in which
case these securities will be valued at their fair market value as determined by
the Board of Directors. Listed options on debt securities are
val-

24
<PAGE>
ued at the latest sale price on the exchange on which they are listed unless no
sales of such options have taken place that day, in which case, they will be
valued at the mean between their closing bid and asked prices. Unlisted options
on debt securities and all options on equity securities are valued at the mean
between their latest bid and asked price. Futures are valued at the latest sale
price on the commodities exchange on which they trade unless the Directors
determine that such price does not reflect their market value, in which case
they will be valued at their fair value as determined by the Board of Directors.
All other securities and other assets are valued at their fair value as
determined in good faith under procedures established by and under the
supervision of the Board of Directors.

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

AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. All income dividends
and capital gains distributions are automatically paid in full and fractional
shares of the applicable Class of the Fund (or, if specified by the shareholder,
in shares of any other open-end Dean Witter Fund), unless the shareholder
requests that they be paid in cash. Shares so acquired are acquired at net asset
value and are not subject to the imposition of a front-end sales charge or a
CDSC (see "Redemptions and Repurchases").

INVESTMENT OF DISTRIBUTIONS RECEIVED IN CASH. Any shareholder who receives a
cash payment representing a dividend or capital gains distribution may invest
such dividend or distribution in shares of the applicable Class at the net asset
value next determined after receipt by the Transfer Agent, by returning the
check or the proceeds to the Transfer Agent within thirty days after the payment
date. Shares so acquired are acquired at net asset value and are not subject to
the imposition of a front-end sales charge or a CDSC (see "Redemptions and
Repurchases").

EASYINVEST-SM-. Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account or following
redemption of shares of a Dean Witter money market fund, on a semi-monthly,
monthly or quarterly basis, to the Fund's Transfer Agent for investment in
shares of the Fund (see "Purchase of Fund Shares" and "Redemptions and
Repurchases--Involuntary Redemption").

SYSTEMATIC WITHDRAWAL PLAN. A withdrawal plan (the "Withdrawal Plan") is
available for shareholders who own or purchase shares of the Fund having a
minimum value of $10,000 based upon the then current net asset value. The plan
provides for monthly or quarterly (March, June, September, December) checks in
any amount, not less than $25, or in any whole percentage of the account
balance, on an annualized basis. Any applicable CDSC will be imposed on shares
redeemed under the Withdrawal Plan (see "Purchase of Fund Shares"). Therefore,
any shareholder participating in the Withdrawal Plan will have sufficient shares
redeemed from his or her account so that the proceeds (net of any applicable
CDSC) to the shareholder will be the designated monthly or quarterly amount.
Withdrawal plan payments should not be considered as dividends, yields or
income. If periodic withdrawal plan payments continuously exceed net investment
income and net capital gains, the shareholder's original investment will be
correspondingly reduced and ultimately exhausted. Each withdrawal constitutes a
redemption of shares and any gain or loss realized must be recognized for
federal income tax purposes.

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

TAX-SHELTERED RETIREMENT PLANS. Retirement plans are available through the
Investment Manager for use by corporations, the self-employed, Individual
Retirement Accounts and Custodial Accounts

25
<PAGE>
under Section 403(b)(7) of the Internal Revenue Code. Adoption of such plans
should be on advice of legal counsel or tax adviser.

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

EXCHANGE PRIVILEGE

Shares of each Class may be exchanged for shares of the same Class of any
other Dean Witter Multi-Class Fund without the imposition of any exchange fee.
Shares may also be exchanged for shares of the following funds: Dean Witter
Short-Term U.S. Treasury Trust, Dean Witter Limited Term Municipal Trust, Dean
Witter Short-Term Bond Fund, Dean Witter Intermediate Term U.S. Treasury Trust
and five Dean Witter funds which are money market funds (the "Exchange Funds").
Class A shares may also be exchanged for shares of Dean Witter Multi-State
Municipal Series Trust and Dean Witter Hawaii Municipal Trust, which are Dean
Witter Funds sold with a front-end sales charge ("FSC Funds"). Class B shares
may also be exchanged for shares of Dean Witter Global Short-Term Income Fund
Inc., Dean Witter High Income Securities and Dean Witter National Municipal
Trust, which are Dean Witter Funds offered with a CDSC ("CDSC Funds"). Exchanges
may be made after the shares of the Fund acquired by purchase (not by exchange
or dividend reinvestment) have been held for thirty days. There is no holding
period for exchanges of shares acquired by exchange or dividend reinvestment.

An exchange to another Dean Witter Multi-Class Fund, any FSC Fund, any CDSC
Fund or any Exchange Fund that is not a money market fund is on the basis of the
next calculated net asset value per share of each fund after the exchange order
is received. When exchanging into a money market fund from the Fund, shares of
the Fund are redeemed out of the Fund at their next calculated net asset value
and the proceeds of the redemption are used to purchase shares of the money
market fund at their net asset value determined the following business day.
Subsequent exchanges between any of the money market funds and any of the Dean
Witter Multi-Class Funds, FSC Funds or CDSC Funds or any Exchange Fund that is
not a money market fund can be effected on the same basis.

No CDSC is imposed at the time of any exchange of shares, although any
applicable CDSC will be imposed upon ultimate redemption. During the period of
time the shareholder remains in an Exchange Fund (calculated from the last day
of the month in which the Exchange Fund shares were acquired), the holding
period (for the purpose of determining the rate of the CDSC) is frozen. If those
shares are subsequently re-exchanged for shares of a Dean Witter Multi-Class
Fund or shares of a CDSC Fund, the holding period previously frozen when the
first exchange was made resumes on the last day of the month in which shares of
a Dean Witter Multi-Class Fund or shares of a CDSC Fund are reacquired. Thus,
the CDSC is based upon the time (calculated as described above) the shareholder
was invested in shares of a Dean Witter Multi-Class Fund or in shares of a CDSC
Fund (see "Purchase of Fund Shares"). In the case of exchanges of Class A shares
which are subject to a CDSC, the holding period also includes the time
(calculated as described above) the shareholder was invested in shares of a FSC
Fund. However, in the case of shares exchanged into an Exchange Fund on or after
April 23, 1990, upon a redemption of shares which results in a CDSC being
imposed, a credit (not to exceed the amount of the CDSC) will be given in an
amount equal to the Exchange Fund 12b-1 distribution fees incurred on or after
that date which are attributable to those shares. (Exchange Fund 12b-1
distribution fees are described in the prospectuses for those funds.) Class B
shares of the Fund acquired in exchange for Class B shares of another Dean
Witter Multi-Class Fund or shares of a CDSC Fund having a different CDSC
schedule than that of this Fund will be subject to the higher CDSC

26
<PAGE>
schedule, even if such shares are subsequently re-exchanged for shares of the
fund with the lower CDSC schedule.

ADDITIONAL INFORMATION REGARDING EXCHANGES. Purchases and exchanges should
be made for investment purposes only. A pattern of frequent exchanges may be
deemed by the Investment Manager to be abusive and contrary to the best
interests of the Fund's other shareholders and, at the Investment Manager's
discretion, may be limited by the Fund's refusal to accept additional purchases
and/ or exchanges from the investor. Although the Fund does not have any
specific definition of what constitutes a pattern of frequent exchanges, and
will consider all relevant factors in determining whether a particular situation
is abusive and contrary to the best interests of the Fund and its other
shareholders, investors should be aware that the Fund and each of the other Dean
Witter Funds may in their discretion limit or otherwise restrict the number of
times this Exchange Privilege may be exercised by any investor. Any such
restriction will be made by the Fund on a prospective basis only, upon notice to
the shareholder not later than ten days following such shareholder's most recent
exchange. Also, the Exchange Privilege may be terminated or revised at any time
by the Fund and/or any of such Dean Witter Funds for which shares of the Fund
have been exchanged, upon such notice as may be required by applicable
regulatory agencies. Shareholders maintaining margin accounts with DWR or
another Selected Broker-Dealer are referred to their account executive regarding
restrictions on exchange of shares of the Fund pledged in the margin account.

The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain a copy and examine it carefully
before investing. Exchanges are subject to the minimum investment requirement of
each Class of shares and any other conditions imposed by each fund. In the case
of a shareholder holding a share certificate or certificates, no exchanges may
be made until all applicable share certificates have been received by the
Transfer Agent and deposited in the shareholder's account. An exchange will be
treated for federal income tax purposes the same as a repurchase or redemption
of shares, on which the shareholder may realize a capital gain or loss. However,
the ability to deduct capital losses on an exchange may be limited in situations
where there is an exchange of shares within ninety days after the shares are
purchased. The Exchange Privilege is only available in states where an exchange
may legally be made.

If DWR or another Selected Broker-Dealer is the current dealer of record and
its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the Dean Witter
Funds (for which the Exchange Privilege is available) pursuant to this Exchange
Privilege by contacting their DWR or other Selected Broker-Dealer account
executive (no Exchange Privilege Authorization Form is required). Other
shareholders (and those shareholders who are clients of DWR or other Selected
Broker-Dealer but who wish to make exchanges directly by telephoning the
Transfer Agent) must complete and forward to the Transfer Agent an Exchange
Privilege Authorization form, copies of which may be obtained from the Transfer
Agent, to initiate an exchange. If the Authorization Form is used, exchanges may
be made in writing or by contacting the Transfer Agent at (800) 869-NEWS
(toll-free).

The Fund will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. Such procedures may
include requiring various forms of personal identification such as name, mailing
address, social security or other tax identification number and DWR or other
Selected Broker-Dealer account number (if any). Telephone instructions may also
be recorded. If such procedures are not employed, the Fund may be liable for any
losses due to unauthorized or fraudulent instructions.

27
<PAGE>
Telephone exchange instructions will be accepted if received by the Transfer
Agent between 9:00 a.m. and 4:00 p.m. New York time, on any day the New York
Stock Exchange is open. Any shareholder wishing to make an exchange who has
previously filed an Exchange Privilege Form and who is unable to reach the Fund
by telephone should contact his or her DWR or other Selected Broker-Dealer
account executive, if appropriate, or make a written exchange request.
Shareholders are advised that during periods of drastic economic or market
changes, it is possible that the telephone exchange procedures may be difficult
to implement, although this has not been the experience of the Dean Witter Funds
in the past.

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

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

REDEMPTION. Shares of each Class of the Fund can be redeemed for cash at
any time at the current net asset value per share next determined less the
amount of any applicable CDSC in the case of Class A, Class B or Class C shares
(see "Purchase of Fund Shares"). If shares are held in a shareholder's account
without a stock certificate, a written request for redemption is required. If
certificates are held by the shareholder, the shares may be redeemed by
surrendering the certificates with a written request for redemption along with
any additional information requested by the Transfer Agent.

REPURCHASE. DWR and other Selected Broker-Dealers are authorized to
repurchase, as agent for the Fund, shares represented by a stock certificate
which is delivered to any of their offices. Shares held in a shareholder's
account without a stock certificate may also be repurchased by DWR and other
Selected Broker-Dealers upon the telephonic request of the shareholder. The
repurchase price is the net asset value next determined (see "Purchase of Fund
Shares") after such repurchase order is received by DWR or other Selected
Broker-Dealer reduced by any applicable CDSC.

The CDSC, if any, will be the only fee imposed by the Fund, the Distributor,
DWR or other Selected Broker-Dealers. The offer by DWR and other Selected
Broker-Dealers to repurchase shares may be suspended without notice by them at
any time. In that event, shareholders may redeem their shares through the Fund's
Transfer Agent as set forth above under "Redemption."

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

REINSTATEMENT PRIVILEGE. A shareholder who has had his or her shares
redeemed or repurchased and has not previously exercised this reinstatement
privilege may, within 35 days after the date of the redemption or repurchase,
reinstate any portion or all of the proceeds of such redemption or repurchase in
shares of the Fund in the same Class from which such shares were redeemed or
repurchased, at their net asset value next determined after a
rein-

28
<PAGE>
statement request, together with the proceeds, is received by the Transfer Agent
and receive a pro rata credit for any CDSC paid in connection with such
repurchase or redemption.

INVOLUNTARY REDEMPTION. The Fund reserves the right, on sixty days' notice,
to redeem, at their net asset value, the shares of any shareholder (other than
shares held in an Individual Retirement Account or custodial account under
Section 403(b)(7) of the Internal Revenue Code) whose shares due to redemptions
by the shareholder have a value of less than $100, or such lesser amount as

may be fixed by the Board of Directors or, in the case of an account opened
through EasyInvest, if after twelve months the shareholder has invested less
than $1,000 in the account. However, before the Fund redeems such shares and
sends the proceeds to the shareholder, it will notify the shareholder that the
value of the shares is less than the applicable amount and allow the shareholder
sixty days in which to make an additional investment in an amount which will
increase the value of the account to at least the applicable amount or more
before the redemption is processed. No CDSC will be imposed on any involuntary
redemption.

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

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

All dividends and capital gains distributions will be paid in additional
shares of the same Class and automatically credited to the shareholder's account
without issuance of a stock certificate unless the shareholder requests in
writing that all dividends be paid in cash. Shares acquired by dividend and
distribution reinvestments will not be subject to any front-end sales charge or
CDSC. Class B shares acquired through dividend and distribution reinvestments
will become eligible for conversion to Class A shares on a pro rata basis.
Distributions paid on Class A and Class D shares will be higher than for Class B
and Class C shares because distribution fees paid by Class B and Class C shares
are higher. (See "Shareholder Services--Automatic Investment of Dividends and
Distributions.")

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

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

Shareholders will normally have to pay Federal income taxes, and any
applicable state and/or local income taxes, on the dividends and distributions
they receive from the Fund. Such dividends and distributions, to the extent they
are derived from net investment income or net short-term capital gains, are
taxable to the shareholder as ordinary dividend income regardless of whether the
shareholder receives such distributions in additional shares or in cash. Any
dividends declared in the last calendar quarter of any year to shareholders of
record for that

29
<PAGE>
period which are paid in the following year prior to February 1 will be deemed
received by the shareholder in the prior year. Since the Fund's income is
expected to be derived primarily from interest rather than dividends, only a
small portion, if any, of such dividends and distributions is expected to be
eligible for the Federal dividends received deduction available to corporations.

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

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

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

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

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

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

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

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

In addition to the foregoing, the Fund may advertise its total return for
each Class over different periods of time by means of aggregate, average,
year-by-year or other types of total return figures. Such calculations may or
may not reflect the deduction of any sales charge which, if reflected, would
reduce the performance quoted. The Fund may advertise the growth of hypothetical
investments of $10,000, $50,000 or $100,000 in each Class of shares of the Fund
. The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent organizations,
such as mutual fund performance rankings of Lipper Analytical Services, Inc.

30
<PAGE>

Prior to July 28, 1997, the Fund offered only one Class of shares. Because
the distribution arrangement for Class A most closely resembles the distribution
arrangement applicable prior to the implementation of multiple classes,
historical performance information may be restated to reflect the current
maximum sales charge applicable to Class A. In addition, because all shares of
the Fund held prior to July 28, 1997 have been designated Class D shares, the
Fund's historical performance may also be restated to reflect the absence of any
sales charge in the case of Class D shares.

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

VOTING RIGHTS. All shares of the Fund are of common stock of $0.01 par
value and are equal as to earnings, assets and voting privileges except that
each Class will have exclusive voting privileges with respect to matters
relating to distribution expenses borne solely by such Class or any other matter
in which the interests of one Class differ from the interests of any other
Class. In addition, Class B shareholders will have the right to vote on any
proposed material increase in Class A's expenses, if such proposal is submitted
separately to Class A shareholders. Also, as discussed herein, Class A, Class B
and Class C bear the expenses related to the distribution of their respective
shares.

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

CODE OF ETHICS. Directors, officers and employees of InterCapital, Dean
Witter Services Company Inc. and the Distributor are subject to a strict Code of
Ethics adopted by those companies. The Code of Ethics is intended to ensure that
the interests of shareholders and other clients are placed ahead of any personal
interest, that no undue personal benefit is obtained from a person's employment
activities and that actual and potential conflicts of interest are avoided. To
achieve these goals and comply with regulatory requirements, the Code of Ethics
requires, among other things, that personal securities transactions by employees
of the companies be subject to an advance clearance process to monitor that no
Dean Witter Fund is engaged at the same time in a purchase or sale of the same
security. The Code of Ethics bans the purchase of securities in an initial
public offering, and also prohibits engaging in futures and options transactions
and profiting on short-term trading (that is, a purchase within 60 days of a
sale or a sale within 60 days of a purchase) of a security. In addition,
investment personnel may not purchase or sell a security for their personal
account within 30 days before or after any transaction in any Dean Witter Fund
managed by them. Any violations of the Code of Ethics are subject to sanctions,
including reprimand, demotion or suspension or termination of employment. The
Code of Ethics comports with regulatory requirements and the recommendations in
the 1994 report by the Investment Company Institute Advisory Group on Personal
Investing.

MASTER/FEEDER CONVERSION. The Fund reserves the right to seek to achieve
its investment objectives by investing all of its investable assets in a
diversified, open-end management investment company having the same investment
objectives and policies and substantially the same investment restrictions as
those applicable to the Fund.

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

this Prospectus.

31
<PAGE>
APPENDIX -- RATINGS OF INVESTMENTS
- --------------------------------------------------------------------------------

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

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

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

32
<PAGE>
CONDITIONAL RATING: Municipal bonds for which the security depends
upon the completion of some act or the fulfillment of some condition are
rated conditionally. These are bonds secured by (a) earnings of projects
under construction, (b) earnings of projects unseasoned in operation
experience, (c) rentals which begin when facilities are completed, or
(d) payments to which some other limiting condition attaches.
Parenthetical rating denotes probable credit stature upon completion of
construction or elimination of basis of condition.

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

COMMERCIAL PAPER RATINGS

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

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

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

BOND RATINGS

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

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

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

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

33
<PAGE>
<TABLE>
<S> <C>
A Debt rated A has a strong capacity to pay interest and repay principal although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
BBB Debt rated BBB is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than for debt in higher-rated categories.
Bonds rated AAA, AA, A and BBB are considered investment grade bonds.

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

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

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

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

34
<PAGE>
COMMERCIAL PAPER RATINGS

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

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

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

35
<PAGE>

Dean Witter
High Yield Securities Inc.
Two World Trade Center
New York, New York 10048
BOARD OF DIRECTORS
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell Dean Witter
John L. Schroeder High Yield
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive
Officer
Barry Fink
Vice President, Secretary and Securities
General Counsel
Peter M. Avelar
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
PROSPECTUS -- JULY 28, 1997
Dean Witter InterCapital Inc.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
DEAN WITTER
JULY 28, 1997
HIGH YIELD
SECURITIES INC.

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

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

A Prospectus for the Fund, dated July 28, 1997, which provides the basic
information you should know before investing in the Fund, may be obtained
without charge by request of the Fund at its address or telephone numbers listed
below or from the Fund's Distributor, Dean Witter Distributors Inc., or from
Dean Witter Reynolds Inc. at any of its branch offices. This Statement of
Additional Information is not a Prospectus. It contains information in addition
to and more detailed than that set forth in the Prospectus. It is intended to
provide additional information regarding the activities and operations of the
Fund, and should be read in conjunction with the Prospectus.

Dean Witter High Yield Securities Inc.
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
The Fund and its Management....................... 3
Directors and Officers............................ 6
Investment Practices and Policies................. 11
Investment Restrictions........................... 18
Portfolio Transactions and Brokerage.............. 19
The Distributor................................... 20
Determination of Net Asset Value.................. 23
Purchase of Fund Shares........................... 23
Shareholder Services.............................. 26
Redemptions and Repurchases....................... 30
Dividends, Distributions and Taxes................ 32
Performance Information........................... 32
Description of Common Stock....................... 34
Custodian and Transfer Agent...................... 34
Independent Accountants........................... 35
Reports to Shareholders........................... 35
Legal Counsel..................................... 35
Experts........................................... 35
Registration Statement............................ 35
Financial Statements -- August 31, 1996........... 36
Report of Independent Accountants................. 50
Financial Statements -- February 28, 1997
(unaudited)...................................... 51
</TABLE>

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

THE FUND

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

THE INVESTMENT MANAGER

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

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

3
<PAGE>
Trust, Municipal Income Opportunities Trust II, Municipal Income Opportunities
Trust III, Municipal Premium Income Trust and Prime Income Trust. The foregoing
investment companies, together with the Fund, are collectively referred to as
the Dean Witter Funds.

In addition, Dean Witter Services Company Inc. ("DWSC"), a wholly-owned
subsidiary of InterCapital, serves as manager for the following investment
companies for which TCW Funds Management, Inc. is the investment adviser: TCW/DW
Core Equity Trust, TCW/DW North American Government Income Trust, TCW/DW Latin
American Growth Fund, TCW/DW Income and Growth Fund, TCW/DW Small Cap Growth
Fund, TCW/DW Balanced Fund, TCW/DW Total Return Trust, TCW/DW Mid-Cap Equity
Trust, TCW/DW Global Telecom Trust, TCW/DW Strategic Income Trust, TCW/DW
Emerging Markets Opportunites Trust, TCW/DW Term Trust 2000, TCW/DW Term Trust
2002 and TCW/DW Term Trust 2003 (the "TCW/DW Funds"). InterCapital also serves
as: (i) administrator of The BlackRock Strategic Term Trust Inc., a closed-end
investment company; and (ii) sub-administrator of MassMutual Participation
Investors and Templeton Global Governments Income Trust, closed-end investment
companies.

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

Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, such office space, facilities,
equipment, clerical help and bookkeeping and certain legal services as the Fund
may reasonably require in the conduct of its business, including the preparation
of prospectuses, statements of additional information, proxy statements and
reports required to be filed with federal and state securities commissions
(except insofar as the participation or assistance of independent accountants
and attorneys is, in the opinion of the Investment Manager, necessary or
desirable). In addition, the Investment Manager pays the salaries of all
personnel, including officers of the Fund, who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone service, heat,
light, power and other utilities provided to the Fund.

Effective December 31, 1993, pursuant to a Services Agreement between
InterCapital and DWSC, DWSC began to provide the administrative services to the
Fund which were previously performed directly by InterCapital. On April 17,
1995, DWSC was reorganized in the State of Delaware, necessitating the entry
into a new Services Agreement by InterCapital and DWSC on that date. The
foregoing internal reorganization did not result in any change in the nature or
scope of the administrative services being provided to the Fund or any of the
fees being paid by the Fund for the overall services being performed under the
terms of the existing Agreement.

Expenses not expressly assumed by the Investment Manager under the Agreement
or by the Distributor of the Fund's shares, Dean Witter Distributors Inc.
("Distributors" or the "Distributor") (see "The Distributor"), will be paid by
the Fund. These expenses will be allocated among the four classes of shares of
the Fund (each, a "Class") pro rata based on the assets of the Fund attributable
to each Class, except as described below. The expenses borne by the Fund
include, but are not limited to: expenses of the Plan of Distribution pursuant
to Rule 12b-1 (the "12b-1 fee") (see "The Distributor"); charges and expenses of
any registrar, custodian, stock transfer and dividend disbursing agent;
brokerage commissions; taxes; engraving and printing of stock certificates;
registration costs of the Fund and its shares under federal and state securities
laws; the cost and expense of printing, including typesetting, and distributing
prospectuses of the Fund and supplements thereto to the Fund's shareholders; all
expenses of shareholders' and directors' meetings and of preparing, printing and
mailing of proxy statements and reports to shareholders; fees and travel
expenses of directors or members of any advisory board or committee who are not
employees of the Investment Manager or any corporate affiliate of the Investment

4
<PAGE>
Manager; all expenses incident to any dividend, distribution, withdrawal or
redemption options; charges and expenses of any outside service used for pricing
of the Fund's shares; fees and expenses of legal counsel, including counsel to
directors who are not interested persons of the Fund or of the Investment
Manager (not including compensation or expenses of attorneys who are employees
of the Investment Manager) and independent accountants; membership dues of
industry associations; interest on Fund borrowings; postage; insurance premiums
on property or personnel (including officers and directors) of the Fund which
inure to its benefit; extraordinary expenses (including, but not limited to,
legal claims and liabilities and litigation costs and any indemnification
relating thereto); and all other costs of the Fund's operation. The 12b-1 fees
relating to a particular Class will be allocated directly to that Class. In
addition, other expenses associated with a particular Class (except advisory or
custodial fees) may be allocated directly to that Class, provided that such
expenses are reasonably identified as specifically attributable to that Class
and the direct allocation to that Class is approved by the Directors.

As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Investment Manager, the Fund pays the
Investment Manager monthly compensation calculated daily by applying the
following annual rates to the net assets of the Fund determined as of the close
of each business day: 0.50% of the portion of the daily net assets not exceeding
$500 million; 0.425% of the portion of the daily net assets exceeding $500
million but not exceeding $750 million; 0.375% of the portion of the daily net
assets exceeding $750 million but not exceeding $1 billion; 0.35% of the portion
of the daily net assets exceeding $1 billion but not exceeding $2 billion;
0.325% of the portion of daily net assets exceeding $2 billion but not exceeding
$3 billion; and 0.30% of the portion of daily net assets exceeding $3 billion.
Total compensation accrued to the Investment Manager for the Fund's fiscal years
ended August 31, 1994, 1995 and 1996 amounted to $2,690,898, $2,241,952 and
$2,271,578, respectively.

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

The Agreement was initially approved by the Directors on February 21, 1997
and by the shareholders of the Fund at a Special Meeting of Shareholders held on
May 21, 1997. The Agreement is substantially identical to a prior investment
management agreement which was initially approved by the Board of Directors on
October 30, 1992 and by the shareholders of the Fund at a Special Meeting of
Shareholders held on January 12, 1993. The Agreement took effect on May 31, 1997
upon the consummation of the merger of Dean Witter, Discover & Co. with Morgan
Stanley Group Inc. The Agreement may be terminated at any time, without penalty,
on thirty days' notice, by the Board of Directors of the Fund, by the holders of
a majority, as defined in the Investment Company Act of 1940, as amended (the
"Act"), of the outstanding shares of the Fund, or by the Investment Manager. The
Agreement will automatically terminate in the event of its assignment (as
defined in the Act).

Under its terms, the Agreement has an initial term ending April 30, 1999,
and will remain in effect from year to year thereafter, provided continuation of
the Agreement is approved at least annually by the vote of the holders of a
majority, as defined in the Act, of the outstanding shares of the Fund, or by
the Board of Directors of the Fund; provided that in either event such
continuance is approved annually by the vote of a majority of the Directors of
the Fund who are not parties to the Agreement or "interested persons" (as
defined in the Act) of any such party (the "Independent Directors"), which vote
must be cast in person at a meeting called for the purpose of voting on such
approval.

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

5
<PAGE>
Mellon Bank, N.A., Mutual Funds, P.O. Box 320, Pittsburgh, Pennsylvania
15230-0320, as trustee of the Dean Witter START Plan and the SPS Transaction
Services, Inc. START Plan, employee benefit plans established by DWR and SPS
Transaction Services, Inc. (an affiliate of DWR) for their employees as
qualified under Section 401(k) of the Internal Revenue Code, owned approximately
6.5% of the outstanding shares of the Fund on June 30, 1997.

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

The Directors and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with
InterCapital, and with the 83 Dean Witter Funds and the 14 TCW/DW Funds are
shown below.

<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------- ---------------------------------------------------------------------
<S> <C>
Michael Bozic (56) Chairman and Chief Executive Officer of Levitz Furniture Corporation
Director (since November, 1995); Director or Trustee of the Dean Witter Funds;
c/o Levitz Furniture Corporation formerly President and Chief Executive Officer of Hills Department
6111 Broken Sound Parkway N.W. Stores (May, 1991-July, 1995); formerly variously Chairman, Chief
Boca Raton, Florida Executive Officer, President and Chief Operating Officer (1987-1991)
of the Sears Merchandise Group of Sears, Roebuck and Co.; Director of
Eaglemark Financial Services, Inc., the United Negro College Fund and
Weirton Steel Corporation.
Charles A. Fiumefreddo* (64) Chairman and Chief Executive Officer and Director of InterCapital,
Chairman of the Board, DWSC and Distributors; Executive Vice President and Director of DWR;
President and Chief Executive Chairman, Director or Trustee, President and Chief Executive Officer
Officer and Director of the Dean Witter Funds; Chairman, Chief Executive Officer and
Two World Trade Center Trustee of the TCW/DW Funds; Chairman and Director of Dean Witter
New York, New York Trust Company ("DWTC"); Director and/or officer of various MSDWD
subsidiaries; formerly Executive Vice President and Director of Dean
Witter, Discover & Co. (until February, 1993).
Edwin J. Garn (64) Director or Trustee of the Dean Witter Funds; formerly United States
Director Senator (R-Utah) (1974-1992) and Chairman, Senate Banking Committee
c/o Huntsman Corporation (1980-1986); formerly Mayor of Salt Lake City, Utah (1972-1974);
500 Huntsman Way formerly Astronaut, Space Shuttle Discovery (April 12-19, 1985); Vice
Salt Lake City, Utah Chairman, Huntsman Corporation (since January 1993); Director of
Franklin Quest (time management systems) and John Alden Financial
Corp. (health insurance); member of the board of various civic and
charitable organizations.
John R. Haire (72) Chairman of the Audit Committee and Chairman of the Committee of the
Director Independent Directors or Trustees and Director or Trustee of the Dean
Two World Trade Center Witter Funds; Chairman of the Audit Committee and Chairman of the
New York, New York Committee of the Independent Trustees and Trustee of the TCW/DW
Funds; formerly President, Council for Aid to Education (since
1978-1989) and Chairman and Chief Executive Officer of Anchor
Corporation, an Investment Adviser (1964-1978); Director of
Washington National Corporation (insurance).
</TABLE>

6
<PAGE>

<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ---------------------------------- --------------------------------------------------------
<S> <C> <C>
Wayne E. Hedien** (63) Retired, Director or Trustee of the Dean Witter Funds
Director (commencing on September 1, 1997); Director of The PMI
c/o Gordon Altman Butowsky Group, Inc. (private mortgage insurance); Trustee and
Weitzen Shalov & Wein Vice Chairman of The Field Museum of Natural History;
Counsel to the Independent formerly associated with the Allstate Companies
Trustees (1966-1994), most recently as Chairman of The Allstate
114 West 47th Street Corporation (March, 1993-December, 1994) and Chairman
New York, New York and Chief Executive Officer of its wholly-owned
subsidiary, Allstate Insurance Company (July,
1989-December, 1994); director of various other business
and charitable organizations.
Manuel H. Johnson (48) Senior Partner, Johnson Smick International, Inc., a
Director consulting firm; Co-Chairman and a founder of the Group
c/o Johnson Smick International, of Seven Council (G7C), an international economic
Inc. commission; Director or Trustee of the Dean Witter
1133 Connecticut Avenue, N.W. Funds; Trustee of the TCW/DW Funds; Director of
Washington, D.C. Greenwich Capital Markets, Inc. (broker-dealer);
Director of NASDAQ (since June, 1995); Trustee of the
Financial Accounting Foundation (oversight organization
for the Financial Accounting Standards Board); formerly
Vice Chairman of the Board of Governors of the Federal
Reserve System (1986-1990) and Assistant Secretary of
the U.S. Treasury.
Michael E. Nugent (61) General Partner, Triumph Capital, L.P., a private
Director investment partnership; Director or Trustee of the Dean
c/o Triumph Capital, L.P. Witter Funds; Trustee of the TCW/DW Funds; formerly Vice
237 Park Avenue President, Bankers Trust Company and BT Capital
New York, New York Corporation (1984-1988); Director of various business
organizations.
Philip J. Purcell* (53) Chairman of the Board of Directors and Chief Executive
Director Officer of MSDWD, DWR and Novus Credit Services Inc.;
1585 Broadway Director of InterCapital, DWSC and Distributors;
New York, New York Director or Trustee of the Dean Witter Funds; Director
and/or officer of various MSDWD subsidiaries.
John L. Schroeder (66) Retired; Director or Trustee of the Dean Witter Funds;
Director Trustee of the TCW/DW Funds; Director of Citizens
c/o Gordon Altman Butowsky Utilities Company; formerly Executive Vice President and
Weitzen Shalov & Wein Chief Investment Officer of the Home Insurance Company
Counsel to the Independent (August, 1991-September, 1995).
Trustees
114 West 47th Street
New York, New York
Barry Fink (42) Senior Vice President (since March, 1997) and Secretary
Vice President, Secretary and General Counsel (since February, 1997) of
and General Counsel InterCapital and DWSC; Senior Vice President (since
Two World Trade Center March, 1997) and Assistant Secretary and Assistant
New York, New York General Counsel (since February, 1997) of Distributors;
Assistant Secretary of DWR (since August, 1996); Vice
President, Secretary and General Counsel of the Dean
Witter Funds and the TCW/DW Funds (since February,
1997); previously First Vice President (June,
1993-February, 1997), Vice President (until June, 1993)
and Assistant Secretary and Assistant General Counsel of
InterCapital and DWSC and Assistant Secretary of the
Dean Witter Funds and the TCW/DW Funds.
Peter M. Avelar (38) Senior Vice President of InterCapital; Vice President of
Vice President various Dean Witter Funds.
Two World Trade Center
New York, New York
</TABLE>

7
<PAGE>

<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ---------------------------------- --------------------------------------------------------
<S> <C> <C>
Thomas F. Caloia (51) First Vice President and Assistant Treasurer of
Treasurer InterCapital and DWSC; Treasurer of the Dean Witter
Two World Trade Center Funds and the TCW/DW Funds.
New York, New York
</TABLE>

- ------------------------
*Denotes Directors who are "interested persons" of the Fund, as defined in the
Act.
**Mr. Hedien's term as Director will commence on September 1, 1997.

In addition, Robert M. Scanlan, President and Chief Operating Officer of
InterCapital and DWSC, Executive Vice President of Distributors and DWTC and
Director of DWTC, Mitchell M. Merin, President and Chief Strategic Officer of
InterCapital and DWSC, Executive Vice President of Distributors and DWTC and
Director of DWTC, Executive Vice President and Director of DWR, and Director of
SPS Transaction Services, Inc. and various other MSDWD subsidiaries, Joseph J.
McAlinden, Executive Vice President and Chief Investment Officer of InterCapital
and Director of DWTC, and Robert S. Giambrone, Senior Vice President of
InterCapital, DWSC, Distributors and DWTC and Director of DWTC, and Jonathan R.
Page and James F. Willison, Senior Vice Presidents of InterCapital, are also
Vice Presidents of the Fund and Marilyn K. Cranney, First Vice President and
Assistant General Counsel of InterCapital and DWSC, and Lou Anne D. McInnis,
Carsten Otto and Ruth Rossi, Vice Presidents and Assistant General Counsels of
InterCapital and DWSC, and Frank Bruttomesso, a staff attorney with
InterCapital, are also Assistant Secretaries of the Fund.

THE BOARD OF DIRECTORS, THE INDEPENDENT DIRECTORS, AND THE COMMITTEES

The Board of Directors currently consists of eight (8) directors; as noted
above, Mr. Hedien's term will commence on September 1, 1997. These same
individuals also serve as directors or trustees for all of the Dean Witter
Funds, and are referred to in this section as Directors. As of the date of this
Statement of Additional Information, there are a total of 83 Dean Witter Funds,
comprised of 126 portfolios. As of June 30, 1997, the Dean Witter Funds had
total net assets of approximately $87.9 billion and more than six million
shareholders.

Six Directors and Mr. Hedien (77% of the total number) have no affiliation
or business connection with InterCapital or any of its affiliated persons and do
not own any stock or other securities issued by InterCapital's parent company,
MSDWD. These are the "disinterested" or "independent" Directors. The other two
Directors (the "management Directors") are affiliated with InterCapital. Four of
the six independent Directors are also Independent Trustees of the TCW/DW Funds.

Law and regulation establish both general guidelines and specific duties for
the Independent Directors. The Dean Witter Funds seek as Independent Directors
or Trustees individuals of distinction and experience in business and finance,
government service or academia; these are people whose advice and counsel are in
demand by others and for whom there is often competition. To accept a position
on the Funds' Boards, such individuals may reject other attractive assignments
because the Funds make substantial demands on their time. Indeed, by serving on
the Funds' Boards, certain Directors or Trustees who would otherwise be
qualified and in demand to serve on bank boards would be prohibited by law from
doing so.

All of the current Independent Directors serve as members of the Audit
Committee and the Committee of the Independent Directors. Three of them also
serve as members of the Derivatives Committee. During the calendar year ended
December 31, 1996, the three Committees held a combined total of sixteen
meetings. The Committees hold some meetings at InterCapital's offices and some
outside InterCapital. Management Directors or officers do not attend these
meetings unless they are invited for purposes of furnishing information or
making a report.

The Committee of the Independent Directors is charged with recommending to
the full Board approval of management, advisory and administration contracts,
Rule 12b-1 plans and distribution and

8
<PAGE>
underwriting agreements; continually reviewing Fund performance; checking on the
pricing of portfolio securities, brokerage commissions, transfer agent costs and
performance, and trading among Funds in the same complex; and approving fidelity
bond and related insurance coverage and allocations, as well as other matters
that arise from time to time. The Independent Directors are required to select
and nominate individuals to fill any Independent Director vacancy on the Board
of any Fund that has a Rule 12b-1 plan of distribution. Most of the Dean Witter
Funds have such a plan.

The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing engagement;
approving professional services provided by the independent accountants and
other accounting firms prior to the performance of such services; reviewing the
independence of the independent accountants; considering the range of audit and
non-audit fees; reviewing the adequacy of the Fund's system of internal
controls; and preparing and submitting Committee meeting minutes to the full
Board.

Finally, the Board of each Fund has formed a Derivatives Committee to
establish parameters for and oversee the activities of the Fund with respect to
derivative investments, if any, made by the Fund.

DUTIES OF CHAIRMAN OF COMMITTEE OF THE INDEPENDENT DIRECTORS AND AUDIT COMMITTEE

The Chairman of the Committee of the Independent Directors and the Audit
Committee maintains an office at the Funds' headquarters in New York. He is
responsible for keeping abreast of regulatory and industry developments and the
Funds' operations and management. He screens and/or prepares written materials
and identifies critical issues for the Independent Directors to consider,
develops agendas for Committee meetings, determines the type and amount of
information that the Committees will need to form a judgment on various issues,
and arranges to have that information furnished to Committee members. He also
arranges for the services of independent experts and consults with them in
advance of meetings to help refine reports and to focus on critical issues.
Members of the Committees believe that the person who serves as Chairman of both
Committees and guides their efforts is pivotal to the effective functioning of
the Committees.

The Chairman of the Committees also maintains continuous contact with the
Funds' management, with independent counsel to the Independent Directors and
with the Funds' independent auditors. He arranges for a series of special
meetings involving the annual review of investment advisory, management and
other operating contracts of the Funds and, on behalf of the Committees,
conducts negotiations with the Investment Manager and other service providers.
In effect, the Chairman of the Committees serves as a combination of chief
executive and support staff of the Independent Directors.

The Chairman of the Committee of the Independent Directors and the Audit
Committee is not employed by any other organization and devotes his time
primarily to the services he performs as Committee Chairman and Independent
Director of the Dean Witter Funds and as an Independent Director and, since July
1, 1996, as Chairman of the Committee of the Independent Trustees and the Audit
Committee of the TCW/DW Funds. The current Committee Chairman has had more than
35 years experience as a senior executive in the investment company industry.

ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT DIRECTORS FOR ALL DEAN
WITTER FUNDS

The Independent Directors and the Funds' management believe that having the
same Independent Directors for each of the Dean Witter Funds avoids the
duplication of effort that would arise from having different groups of
individuals serving as Independent Directors for each of the Funds or even of
sub-groups of Funds. They believe that having the same individuals serve as
Independent Directors of all the Funds tends to increase their knowledge and
expertise regarding matters which affect the Fund complex generally and enhances
their ability to negotiate on behalf of each Fund with the Fund's service
providers. This arrangement also precludes the possibility of separate groups of
Independent Directors arriving at conflicting decisions regarding operations and
management of the Funds and avoids the cost and confusion that would likely
ensue. Finally, having the same Independent Directors serve on all Fund

9
<PAGE>
Boards enhances the ability of each Fund to obtain, at modest cost to each
separate Fund, the services of Independent Directors, and a Chairman of their
Committees, of the caliber, experience and business acumen of the individuals
who serve as Independent Directors of the Dean Witter Funds.

COMPENSATION OF INDEPENDENT DIRECTORS

The Fund pays each Independent Director an annual fee of $1,000 plus a per
meeting fee of $50 for meetings of the Board of Directors or committees of the
Board of Directors attended by the Director (the Fund pays the Chairman of the
Audit Committee an annual fee of $750 and pays the Chairman of the Committee of
the Independent Directors an additional annual fee of $1,200). The Fund also
reimburses such Directors for travel and other out-of-pocket expenses incurred
by them in connection with attending such meetings. Directors and officers of
the Fund who are or have been employed by the Investment Manager or an
affiliated company receive no compensation or expense reimbursement from the
Fund.

The following table illustrates the compensation paid to the Fund's
Independent Directors by the Fund for the fiscal year ended August 31, 1996.

FUND COMPENSATION

<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT DIRECTOR FROM THE FUND
- -------------------------------------------------------------- ---------------
<S> <C>
Michael Bozic................................................. $1,750
Edwin J. Garn................................................. 1,850
John R. Haire................................................. 3,963
Dr. Manuel H. Johnson......................................... 1,800
Michael E. Nugent............................................. 1,750
John L. Schroeder............................................. 1,800
</TABLE>

The following table illustrates the compensation paid to the Fund's
Independent Directors for the calendar year ended December 31, 1996 for services
to the 82 Dean Witter Funds and, in the case of Messrs. Haire, Johnson, Nugent
and Schroeder, the 14 TCW/DW Funds that were in operation at December 31, 1995.
With respect to Messrs. Haire, Johnson, Nugent and Schroeder, the TCW/DW Funds
are included solely because of a limited exchange privilege between those Funds
and five Dean Witter Money Market Funds.

CASH COMPENSATION FROM DEAN WITTER FUNDS AND TCW/DW FUNDS

<TABLE>
<CAPTION>
FOR SERVICE AS FOR SERVICE
CHAIRMAN OF AS TOTAL CASH
COMMITTEES OF CHAIRMAN OF COMPENSATION
FOR SERVICE INDEPENDENT COMMITTEES OF FOR SERVICES
AS DIRECTOR OR DIRECTORS/ INDEPENDENT TO
TRUSTEE AND FOR SERVICE AS TRUSTEES AND TRUSTEES AND 82 DEAN
COMMITTEE MEMBER TRUSTEE AND AUDIT AUDIT WITTER
OF 82 DEAN COMMITTEE MEMBER COMMITTEES OF COMMITTEES OF FUNDS AND
NAME OF WITTER OF 14 TCW/DW 82 DEAN WITTER 14 TCW/DW 14 TCW/DW
INDEPENDENT DIRECTOR FUNDS FUNDS FUNDS FUNDS FUNDS
- --------------------------- ---------------- ---------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Michael Bozic.............. $138,850 -- -- -- $138,850
Edwin J. Garn.............. 140,900 -- -- -- 140,900
John R. Haire.............. 106,400 $64,283 $195,450 $ 12,187 378,320
Dr. Manuel H. Johnson...... 137,100 66,483 -- -- 203,583
Michael E. Nugent.......... 138,850 64,283 -- -- 203,133
John L. Schroeder.......... 137,150 69,083 -- -- 206,233
</TABLE>

As of the date of this Statement of Additional Information, 57 of the Dean
Witter Funds, including the Fund, have adopted a retirement program under which
an Independent Director who retires after serving for at least five years (or
such lesser period as may be determined by the Board) as an Independent Director
or Trustee of any Dean Witter Fund that has adopted the retirement program (each
such Fund referred to as an "Adopting Fund" and each such Director referred to
as an "Eligible Director") is entitled to retirement payments upon reaching the
eligible retirement age (normally, after attaining age 72). Annual payments are
based upon length of service. Currently, upon retirement, each Eligible Director
is entitled to receive from the Adopting Fund, commencing as of his or her
retirement date and continuing

10
<PAGE>
for the remainder of his or her life, an annual retirement benefit (the "Regular
Benefit") equal to 25.0% of his or her Eligible Compensation plus 0.4166666% of
such Eligible Compensation for each full month of service as an Independent
Director or Trustee of any Adopting Fund in excess of five years up to a maximum
of 50.0% after ten years of service. The foregoing percentages may be changed by
the Board.(1) "Eligible Compensation" is one-fifth of the total compensation
earned by such Eligible Director for service to the Adopting Fund in the five
year period prior to the date of the Eligible Director's retirement. Benefits
under the retirement program are not secured or funded by the Adopting Funds.

The following table illustrates the retirement benefits accrued to the
Fund's Independent Directors by the Fund for the fiscal year ended August 31,
1996 and by the 57 Dean Witter Funds (including the Fund) as of December 31,
1996, and the estimated retirement benefits for the Fund's Independent
Directors, to commence upon their retirement, from the Fund as of August 31,
1996 and from the 57 Dean Witter Funds as of December 31, 1996.

RETIREMENT BENEFITS FROM THE FUND AND ALL DEAN WITTER FUNDS

<TABLE>
<CAPTION>
FOR ALL ADOPTING FUNDS ESTIMATED ANNUAL
-------------------------------------- RETIREMENT BENEFITS BENEFITS
ESTIMATED ACCRUED AS EXPENSES UPON RETIREMENT(2)
CREDITED YEARS ESTIMATED ---------------------- ----------------------
OF SERVICE AT PERCENTAGE OF BY ALL FROM FROM ALL
RETIREMENT ELIGIBLE BY THE ADOPTING THE ADOPTING
NAME OF INDEPENDENT DIRECTOR (MAXIMUM 10) COMPENSATION FUND FUNDS FUND FUNDS
- --------------------------------- ------------------- ----------------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Michael Bozic.................... 10 50.0% $ 405 $ 20,147 $ 950 $ 51,325
Edwin J. Garn.................... 10 50.0 601 27,772 950 51,325
John R. Haire.................... 10 50.0 1,026 46,952 2,343 129,550
Dr. Manuel H. Johnson............ 10 50.0 248 10,926 950 51,325
Michael E. Nugent................ 10 50.0 430 19,217 950 51,325
John L. Schroeder................ 8 41.7 789 38,700 792 42,771
</TABLE>

- ------------------------
(1) An Eligible Director may elect alternate payments of his or her retirement
benefits based upon the combined life expectancy of such Eligible Director
and his or her spouse on the date of such Eligible Director's retirement.
The amount estimated to be payable under this method, through the remainder
of the later of the lives of such Eligible Director and spouse, will be the
actuarial equivalent of the Regular Benefit. In addition, the Eligible
Director may elect that the surviving spouse's periodic payment of benefits
will be equal to either 50% or 100% of the previous periodic amount, an
election that, respectively, increases or decreases the previous periodic
amount so that the resulting payments will be the actuarial equivalent of
the Regular Benefit.

(2) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Director's elections described in Footnote (1)
above.

As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's officers
and Directors as a group was less than 1 percent of the Fund's shares of
beneficial interest outstanding.

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

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

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

11
<PAGE>
While the ratings provide a generally useful guide to credit risks, they do
not, nor do they purport to, offer any criteria for evaluating the interest rate
risk. Changes in the general level of interest rates cause fluctuations in the
prices of fixed-income securities already outstanding and will therefore result
in fluctuation in net asset value of the Fund's shares. The extent of the
fluctuation is determined by a complex interaction of a number of factors. The
Investment Manager will evaluate those factors it considers relevant and will
make portfolio changes when it deems it appropriate in seeking to reduce the
risk of depreciation in the value of the Fund's portfolio. However, in seeking
to achieve the Fund's primary objective, there will be times, such as during
periods of rising interest rates, when depreciation and realization of capital
losses on securities in the portfolio will be unavoidable. Moreover, medium and
lower-rated securities and non-rated securities of comparable quality tend to be
subject to wider fluctuations in yield and market values than higher rated
securities. Such fluctuations after a security is acquired do not affect the
cash income received from that security but are reflected in the net asset value
of the Fund's portfolio.

PORTFOLIO CHARACTERISTICS

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

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

When voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loaned securities, in
whole or in part as may be appropriate, to be delivered within one day after
notice, to permit the exercise of such rights if the matters involved would have
a material effect on the Fund's investment in such loaned securities. The Fund
will pay reasonable finder's, administrative and custodial fees in connection
with a loan of its securities. The Fund did not lend any of its portfolio
securities during its fiscal year ended August 31, 1996.

REPURCHASE AGREEMENTS. When cash may be available for only a few days, it
may be invested by the Fund in repurchase agreements until such time as it may
otherwise be invested or used for payments of obligations of the Fund. These
agreements, which may be viewed as a type of secured lending by the Fund,
typically involve the acquisition by the Fund of debt securities from a selling
financial institution such as a bank, savings and loan association or
broker-dealer. The agreement provides that the Fund will sell back to the
institution, and that the institution will repurchase, the underlying security
("collateral"), which is held by the Fund's Custodian, at a specified price and
at a fixed time in the future, usually not more than seven days from the date of
purchase. The Fund will accrue interest from the institution until the time when
the repurchase is to occur. Although such date is deemed by the Fund to be the

12
<PAGE>
maturity date of a repurchase agreement, the maturities of securities subject to
repurchase agreements are not subject to any limits and may exceed one year.
While repurchase agreements involve certain risks not associated with direct
investments in debt securities, the Fund follows procedures designed to minimize
such risks. These procedures include effecting repurchase transactions only with
large, well-capitalized and well-established financial institutions, whose
financial condition will be continually monitored by the Investment Manager
subject to procedures established by the Board of Directors of the Fund. In
addition, the value of the collateral underlying the repurchase agreement will
always be at least equal to the repurchase price, including any accrued interest
earned on the repurchase agreement. In the event of a default or bankruptcy by a
selling financial institution, the Fund will seek to liquidate such collateral.
However, the exercising of the Fund's right to liquidate such collateral could
involve certain costs or delays and, to the extent that proceeds from any sale
upon a default of the obligation to repurchase were less than the repurchase
price, the Fund could suffer a loss. It is the current policy of the Fund not to
invest in repurchase agreements that do not mature within seven days if any such
investment, together with any other illiquid assets held by the Fund, amounts to
more than 10% of its total assets. The Fund's investments in repurchase
agreements may at times be substantial when, in the view of the Investment
Manager, liquidity or other considerations warrant. During the fiscal year ended
August 31, 1996, the Fund's investments in repurchase agreements did not exceed
5% of its total net assets.

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

Foreign investments involve certain risks, including the political or
economic instability of the issuer or of the country of issue, the difficulty of
predicting international trade patterns and the possibility of imposition of
exchange controls. Such securities may also be subject to greater fluctuations
in price than securities of United States corporations or of the United States
Government. In addition, there may be less publicly available information about
a foreign company than about a domestic company. Foreign companies generally are
not subject to uniform accounting, auditing and financial reporting standards
comparable to those applicable to domestic companies. There is generally less
government regulation of stock exchanges, brokers and listed companies abroad
than in the United States, and with respect to certain foreign countries, there
is a possibility of expropriation or confiscatory taxation, or diplomatic
developments which could affect investment in those countries. Finally, in the
event of a default of any such foreign debt obligations, it may be more
difficult for the Fund to obtain or to enforce a judgment against the issuers of
such securities. In addition to the above-mentioned risks, securities
denominated in foreign currency, whether issued by a foreign or a domestic
issuer, may be affected favorably or unfavorably by changes in currency rates
and in exchange control regulations, and costs may be incurred in connection
with conversions between various currencies. It may not be possible to hedge
against the risks of currency fluctuation.

PUBLIC UTILITIES. As stated in the Prospectus, the Fund's investments in
public utilities, if any, may be subject to certain risks. Such utilities may
have difficulty meeting environmental standards and obtaining satisfactory fuel
supplies at reasonable costs. During an inflationary period, public utilities
also face increasing fuel, construction and other costs and may have difficulty
realizing an adequate return on invested capital. There is no assurance that
regulatory authorities will grant sufficient rate increases to cover expenses
associated with the foregoing difficulties as well as debt service requirements.
In addition, with respect to utilities engaged in nuclear power generation,
there is the possibility that

13
<PAGE>
Federal, State or municipal governmental authorities may from time to time
impose additional regulations or take other governmental action which might
cause delays in the licensing, construction, or operation of nuclear power
plants, or suspension of operation of such plants which have been or are being
financed by proceeds of the fixed income securities in the Fund's portfolio.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. As discussed in the
Prospectus, from time to time, in the ordinary course of business, the Fund may
purchase securities on a when-issued or delayed delivery basis, I.E., delivery
and payment can take place a month or more after the date of the transactions.
The securities so purchased are subject to market fluctuation and no interest
accrues to the purchaser during this period. At the time the Fund makes the
commitment to purchase securities on a when-issued, delayed delivery basis or
forward commitment basis with the intention of acquiring the securities, it will
record the transaction and thereafter reflect the value, each day, of such
security in determining the net asset value of the Fund. At the time of delivery
of the securities, the value may be more or less than the purchase price. The
Fund will also establish a segregated account with its custodian bank in which
it will maintain cash or U.S. Government Securities or other liquid portfolio
securities equal in value to commitments for such when-issued or delayed
delivery securities; subject to this requirement, the Fund may purchase
securities on such basis without limit. An increase in the percentage of the
Fund's assets committed to the purchase of securities on a when-issued or
delayed delivery basis may increase the volatility of the Fund's net asset
value. The Investment Manager and the Board of Directors do not believe that the
Fund's net asset value or income will be adversely affected by its purchase of
securities on such basis. The Fund may sell securities on a when-issued or
delayed delivery basis provided that the Fund owns the security at the time of
the sale. During the fiscal year ended August 31, 1996, the Fund did not
purchase any when-issued and delayed delivery securities.

WHEN, AS AND IF ISSUED SECURITIES. The Fund may purchase securities on a
"when, as and if issued" basis under which the issuance of the security depends
upon the occurrence of a subsequent event, such as approval of a merger,
corporate reorganization, leveraged buy-out or debt restructuring. The
commitment for the purchase of any such security will not be recognized in the
portfolio of the Fund until the Investment Manager determines that issuance of
the security is probable. At such time, the Fund will record the transaction
and, in determining its net asset value, will reflect the value of the security
daily. At such time, the Fund will also establish a segregated account with its
custodian bank in which it will maintain cash or U.S. Government Securities or
other liquid portfolio securities equal in value to recognized commitments for
such securities. Once a segregated account has been established, if the
anticipated event does not occur and the securities are not issued the Fund will
have lost an investment opportunity. The value of the Fund's commitments to
purchase the securities of any one issuer, together with the value of all
securities of such issuer owned by the Fund, may not exceed 5% of the value of
the Fund's total assets at the time the initial commitment to purchase such
securities is made (see "Investment Restrictions" in the Prospectus). Subject to
the foregoing restrictions, the Fund may purchase securities on such basis
without limit. An increase in the percentage of the Fund's assets committed to
the purchase of securities on a "when, as and if issued" basis may increase the
volatility of its net asset value. The Investment Manager and the Board of
Directors do not believe that the net asset value of the Fund will be adversely
affected by its purchase of securities on such basis. The Fund may also sell
securities on a "when, as and if issued" basis provided that the issuance of the
security will result automatically from the exchange or conversion of a security
owned by the Fund at the time of the sale. During the fiscal year ended August
31, 1996, the Fund did not purchase securities on a when, as and if issued basis
in an amount which exceeded 5% of its total net assets.

FUTURES CONTRACTS AND OPTIONS ON FUTURES. As discussed in the Prospectus,
the Fund may invest in financial futures contracts ("futures contracts") and
related options thereon. These futures contracts and related options thereon
will be used only as a hedge against anticipated interest rate changes. A
futures contract sale creates an obligation by the Fund, as seller, to deliver
the specific type of instrument called for in the contract at a specified future
time for a specified price. A futures contract purchase would create an
obligation by the Fund, as purchaser, to take delivery of the specific type of
financial instrument

14
<PAGE>
at a specified future time at a specified price. The specific securities
delivered or taken, respectively, at settlement date, would not be determined
until or near that date. The determination would be in accordance with the rules
of the exchange on which the futures contract sale or purchase was effected.

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

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

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

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

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

15
<PAGE>
Financial futures contracts are traded in an auction environment on the
floors of several Exchanges -- principally, the Chicago Board of Trade, the
Chicago Mercantile Exchange and the New York Futures Exchange. Each Exchange
guarantees performance under contract provisions through a clearing corporation,
a nonprofit organization managed by the Exchange membership which is also
responsible for handling daily accounting of deposits or withdrawals of margin.

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

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

Put and call options on financial futures have similar characteristics as
Exchange traded options. For a further description of options, see below and
page 12 of the Prospectus.

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

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

The Fund may not enter into futures contracts or related options thereon if,
immediately thereafter, the amount committed to margin plus the amount paid for
option premiums exceeds 5% of the value of the Fund's total assets. In instances
involving the purchase of futures contracts by the Fund, an amount equal to the
market value of the futures contract will be deposited in a segregated account
of cash and cash equivalents to collateralize the position and thereby ensure
that the use of such futures contract is unleveraged. The Fund may not purchase
or sell futures contracts or related options if, immediately thereafter, more
than one-third of its net assets would be hedged.

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

A call option is a contract that gives the holder of the option the right to
buy from the writer (seller) of the call option, in return for a premium, the
security underlying the option at a specified exercise price at any time during
the term of the option. The writer of the call option has the obligation upon
exercise of the option to deliver the underlying security upon payment of the
exercise price during the option period. A put option is a contract that gives
the holder of the option the right to sell to the writer, in return for a
premium, the underlying security at a specified price during the term of the
option. The writer of the put has the obligation to buy the underlying security
upon exercise, at the exercise price during the option period. The Fund did not
enter into any options transactions during its fiscal year ended August 31,
1996, and it has no intention of doing so during the forseeable future.

16
<PAGE>
The Fund will only write covered call or covered put options. The Fund may
only write covered options which are listed on national securities exchanges.
The Fund may not write covered options in an amount exceeding 20% of the value
of its total assets. A call option is "covered" if the Fund owns the underlying
security covered by the call or has an absolute and immediate right to acquire
that security without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon conversion or
exchange of other securities held in its portfolio. A call option is also
covered if the Fund holds, on a share-for-share basis, a call on the same
security as the call written where the exercise price of the call held is (i)
equal to or less than the exercise price of the call written or (ii) greater
than the exercise price of the call written if the difference is maintained by
the Fund in cash, Treasury bills or other liquid portfolio securities in a
segregated account with its custodian. A put option is "covered" if the Fund
maintains cash, Treasury bills or other liquid portfolio securities with a value
equal to the exercise price in a segregated account with its custodian, or else
holds, on a share-for-share basis, a put on the same security as the put written
where the exercise price of the put held is equal to or greater than the
exercise price of the put written.

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

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

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

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

17
<PAGE>
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------

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

The Fund may not:

1. Make short sales of securities;

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

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

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

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

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

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

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

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

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

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

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

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

18
<PAGE>
As regards the above investment restrictions and those disclosed in the
Prospectus, if a percentage restriction is addressed at the time of investment,
a later increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of total or net assets will not be considered a
violation of any of the foregoing restrictions.

Notwithstanding any other investment policy or restriction, the Fund may
seek to achieve its investment objectives by investing all or substantially all
of its assets in another investment company having substantially the same
investment objectives and policies as the Fund.

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

Subject to the general supervision by the Board of Directors, the Investment
Manager is responsible for decisions to buy and sell securities and futures
contracts for the Fund, the selection of brokers and dealers to effect the
transactions, and the negotiation of brokerage commissions, if any. Purchases
and sales of securities on a stock exchange are effected through brokers who
charge a commission for their services. The Fund expects that the primary market
for the securities in which it intends to invest will generally be the
over-the-counter market. Securities are generally traded in the over-the-counter
market on a "net" basis with dealers acting as principal for their own accounts
without charging a stated commission, although the price of the security usually
includes a profit to the dealer. Options and futures transactions will usually
be effected through a broker and a commission will be charged. The Fund also
expects that securities will be purchased at times in underwritten offerings
where the price includes a fixed amount of compensation, generally referred to
as the underwriter's concession or discount. On occasion, the Fund may also
purchase certain money market instruments directly from an issuer, in which case
no commissions or discounts are paid. The Fund paid $95,014, $179,154 and
$301,392 in brokerage commissions during the fiscal years ended August 31, 1994,
1995 and 1996, respectively.

The Investment Manager currently serves as investment manager to a number of
clients, including other investment companies, and may in the future act as
investment manager or adviser to others. It is the practice of the Investment
Manager to cause purchase and sale transactions to be allocated among the Fund
and others whose assets it manages in such manner as it deems equitable. In
making such allocations among the Fund and other client accounts, various
factors may be considered, including the respective investment objectives, the
relative size of portfolio holdings of the same or comparable securities, the
availability of cash for investment, the size of investment commitments
generally held and the opinions of the persons responsible for managing the
portfolios of the Fund and other client accounts. In the case of certain initial
and secondary public offerings, the Investment Manager may utilize a pro rata
allocation process based on the size of the Dean Witter Funds involved and the
number of shares available from the public offering.

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

The information and services received by the Investment Manager from brokers
and dealers may be of benefit to the Investment Manager in the management of
accounts of some of its other clients and may not in all cases benefit the Fund
directly. While the receipt of such information and services is useful in
varying degrees and would generally reduce the amount of research or services
otherwise performed by

19
<PAGE>
the Investment Manager and thus reduce its expenses, it is of indeterminable
value and the management fee paid to the Investment Manager is not reduced by
any amount that may be attributable to the value of such services.

Pursuant to an order of the Securities and Exchange Commission, the Fund may
effect principal transactions in certain money market instruments with DWR. The
Fund will limit its transactions with DWR to U.S. Government and Government
Agency Securities, Bank Money Instruments (I.E., Certificates of Deposit and
Bankers' Acceptances) and Commercial Paper (not including Tax-Exempt Municipal
Paper). Such transactions will be effected with DWR only when the price
available from DWR is better than that available from other dealers. During the
fiscal years ended August 31, 1994, 1995 and 1996, the Fund did not effect any
principal transactions with DWR.

Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may be
effected through DWR and other affiliated brokers and dealers. In order for an
affiliated broker or dealer to effect portfolio transactions for the Fund, the
commissions, fees or other remuneration received by the affiliated broker or
dealer must be reasonable and fair compared to the commissions, fees or other
remuneration paid to other brokers in connection with comparable transactions
involving similar securities being purchased or sold on an exchange during a
comparable period of time. This standard would allow the affiliated broker or
dealer to receive no more than the remuneration which would be expected to be
received by an unaffiliated broker in a commensurate arm's-length transaction.
Furthermore, the Directors of the Fund, including a majority of the Directors
who are not "interested" Directors, have adopted procedures which are reasonably
designed to provide that any commissions, fees or other remuneration paid to an
affiliated broker or dealer are consistent with the foregoing standard. The Fund
does not reduce the management fee it pays to the Investment Manager by the
amount of the brokerage commissions it may pay to an affiliated broker or
dealer. During the fiscal years ended August 31, 1994, 1995 and 1996, the Fund
paid no brokerage commissions to any affiliated brokers or dealers.

THE DISTRIBUTOR
- --------------------------------------------------------------------------------

As discussed in the Prospectus, shares of the Fund are distributed by Dean
Witter Distributors Inc. (the "Distributor"). The Distributor has entered into a
selected dealer agreement with DWR, which through its own sales organization
sells shares of the Fund. In addition, the Distributor may enter into agreements
with other selected broker-dealers. The Distributor, a Delaware corporation, is
a wholly-owned subsidiary of MSDWD. The Directors of the Fund, including a
majority of the Directors who are not, and were not at the time they voted,
interested persons of the Fund, as defined in the Act (the "Independent
Directors"), approved, at their meeting held on June 30, 1997, the current
Distribution Agreement appointing the Distributor exclusive distributor of the
Fund's shares and providing for the Distributor to bear distribution expenses
not borne by the Fund. By its terms, the Distribution Agreement has an initial
term ending April 30, 1998 and will remain in effect from year to year
thereafter if approved by the Board.

The Distributor bears all expenses it may incur in providing services under
the Distribution Agreement. Such expenses include the payment of commissions for
sales of the Fund's shares and incentive compensation to account executives. The
Distributor also pays certain expenses in connection with the distribution of
the Fund's shares, including the costs of preparing, printing and distributing
advertising or promotional materials, and the costs of printing and distributing
prospectuses and supplements thereto used in connection with the offering and
sale of the Fund's shares. The Fund bears the costs of initial typesetting,
printing and distribution of prospectuses and supplements thereto to
shareholders. The Fund also bears the costs of registering the Fund and its
shares under federal securities laws and pays filing fees in accordance with
state securities laws. The Fund and the Distributor have agreed to indemnify
each other against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. Under the Distribution Agreement, the
Distributor uses its best efforts in rendering services to

20
<PAGE>
the Fund, but in the absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of its obligations, the Distributor is not liable to the
Fund or any of its shareholders for any error of judgment or mistake of law or
for any act or omission or for losses sustained by the Fund or its shareholders.

PLAN OF DISTRIBUTION

Effective July 28, 1997, the Fund has adopted a Plan of Distribution
pursuant to Rule 12b-1 under the Act (the "Plan") pursuant to which each Class,
other than Class D, pays the Distributor compensation accrued daily and payable
monthly at the following annual rates: 0.25%, 0.75% and 0.85% of the average
daily net assets of Class A, Class B and Class C, respectively. The Distributor
also receives the proceeds of front-end sales charges and of contingent deferred
sales charges imposed on certain redemptions of shares, which are separate and
apart from payments made pursuant to the Plan (see "Purchase of Fund Shares" in
the Prospectus). The Distributor has informed the Fund that it and/or DWR
received approximately $2,208,000, $611,000 and $1,594,948 in front-end sales
charges for the fiscal years ended August 31, 1994, 1995 and 1996, respectively.

The Distributor has informed the Fund that the entire fee payable by Class A
and a portion of the fees payable by each of Class B and Class C each year
pursuant to the Plan equal to 0.20% of the average daily net assets of Class B
and 0.25% of the average daily net assets of Class C are currently each
characterized as a "service fee" under the Rules of the Association of the
National Association of Securities Dealers, Inc. (of which the Distributor is a
member). The "service fee" is a payment made for personal service and/or the
maintenance of shareholder accounts. The remaining portion of the Plan fees
payable by a Class, if any, is characterized as an "asset-based sales charge" as
such is defined by the aforementioned Rules of the Association.

The Plan was adopted by a majority vote of the Board of Directors, including
all of the Directors of the Fund who are not "interested persons" of the Fund
(as defined in the Act) and who have no direct or indirect financial interest in
the operation of the Plan (the "Independent 12b-1 Directors"), cast in person at
a meeting called for the purpose of voting on the Plan, on June 30, 1997.

Under its terms, the Plan has an initial term ending April 30, 1998 and will
continue from year to year thereafter, provided such continuance is approved
annually by a vote of the Directors in the manner described above.

Under the Plan and as required by Rule 12b-1, the Directors receive and
review promptly after the end of each calendar quarter a written report provided
by the Distributor of the amounts expended under the Plan and the purpose for
which such expenditures were made.

The Plan was adopted in order to permit the implementation of the Fund's
method of distribution. Under this distribution method the Fund offers four
Classes of shares, each with a different distribution arrangement as set forth
in the Prospectus.

With respect to Class A shares, DWR compensates its account executives by
paying them, from proceeds of the front-end sales charge, commissions for the
sale of Class A shares, currently a gross sales credit of up to 4.0% of the
amount sold (except as provided in the following sentence) and an annual
residual commission, currently a residual of up to 0.20% of the current value of
the respective accounts for which they are the account executives or dealers of
record in all cases. On orders of $1 million or more (for which no sales charge
was paid) or net asset value purchases by 401(k) plans or other
employer-sponsored plans qualified under Section 401(a) of the Internal Revenue
Code for which Dean Witter Trust Company ("DWTC") or Dean Witter Trust FSB
("DWTFSB") serves as Trustee or the 401(k) Support Services Group of DWR serves
as recordkeeper, the Investment Manager compensates DWR's account executives by
paying them, from its own funds, a gross sales credit of 1.0% of the amount
sold.

With respect to Class B shares, DWR compensates its account executives by
paying them, from its own funds, commissions for the sale of Class B shares,
currently a gross sales credit of up to 4.0% of the amount sold (except as
provided in the following sentence) and an annual residual commission,

21
<PAGE>
currently a residual of up to 0.20% of the current value of the respective
accounts for which they are the account executives of record in all cases. In
the case of retirement plans qualified under Section 401(k) of the Internal
Revenue Code and other employer-sponsored plans qualified under Section 401(a)
of the Internal Revenue Code for which DWTC or DWTFSB serves as Trustee or the
401(k) Support Services Group of DWR serves as recordkeeper, and which plans are
opened on or after July 28, 1997, DWR compensates its account executives by
paying them, from its own funds, a gross sales credit of 3.0% of the amount
sold.

With respect to Class C shares, DWR compensates its account executives by
paying them, from its own funds, commissions for the sale of Class C shares,
currently a gross sales credit of up to 1.0% of the amount sold and an annual
residual commission, currently a residual of up to 0.85% of the current value of
the respective accounts for which they are the account executives of record.

With respect to Class D shares other than shares held by participants in
InterCapital's mutual fund asset allocation program, the Investment Manager
compensates DWR's account executives by paying them, from its own funds,
commissions for the sale of Class D shares, currently a gross sales credit of up
to 1.0% of the amount sold. There is a chargeback of 100% of the amount paid if
the Class D shares are redeemed in the first year and a chargeback of 50% of the
amount paid if the Class D shares are redeemed in the second year after
purchase. The Investment Manager also compensates DWR's account executives by
paying them, from its own funds, an annual residual commission, currently a
residual of up to 0.10% of the current value of the respective accounts for
which they are the account executives of record (not including accounts of
participants in the InterCapital mutual fund asset allocation program).

The gross sales credit is a charge which reflects commissions paid by DWR to
its account executives and DWR's Fund-associated distribution-related expenses,
including sales compensation, and overhead and other branch office
distribution-related expenses including (a) the expenses of operating DWR's
branch offices in connection with the sale of Fund shares, including lease
costs, the salaries and employee benefits of operations and sales support
personnel, utility costs, communications costs and the costs of stationery and
supplies, (b) the costs of client sales seminars, (c) travel expenses of mutual
fund sales coordinators to promote the sale of Fund shares and (d) other
expenses relating to branch promotion of Fund sales. The distribution fee that
the Distributor receives from the Fund under the Plan, in effect, offsets
distribution expenses incurred under the Plan on behalf of the Fund and, in the
case of Class B shares, opportunity costs, such as the gross sales credit and an
assumed interest charge thereon ("carrying charge"). In the Distributor's
reporting of the distribution expenses to the Fund, in the case of Class B
shares, such assumed interest (computed at the "broker's call rate") has been
calculated on the gross credit as it is reduced by amounts received by the
Distributor under the Plan and any contingent deferred sales charges received by
the Distributor upon redemption of shares of the Fund. No other interest charge
is included as a distribution expense in the Distributor's calculation of its
distribution costs for this purpose. The broker's call rate is the interest rate
charged to securities brokers on loans secured by exchange-listed securities.

The Fund is authorized to reimburse expenses incurred or to be incurred in
promoting the distribution of the Fund's Class A and Class C shares and in
servicing shareholder accounts. Reimbursement will be made through payments at
the end of each month. The amount of each monthly payment may in no event exceed
an amount equal to a payment at the annual rate of 0.25%, in the case of Class
A, and 0.85%, in the case of Class C, of the average net assets of the
respective Class during the month. No interest or other financing charges, if
any, incurred on any distribution expenses on behalf of Class A and Class C will
be reimbursable under the Plan. With respect to Class A, in the case of all
expenses other than expenses representing the service fee, and, with respect to
Class C, in the case of all expenses other than expenses representing a gross
sales credit or a residual to account executives, such amounts shall be
determined at the beginning of each calendar quarter by the Directors, including
a majority of the Independent 12b-1 Directors. Expenses representing the service
fee (for Class A) or a gross sales credit or a residual to account executives
(for Class C) may be reimbursed without prior determination. In the event that
the Distributor proposes that monies shall be reimbursed for other than such
expenses,

22
<PAGE>
then in making quarterly determinations of the amounts that may be reimbursed by
the Fund, the Distributor will provide and the Directors will review a quarterly
budget of projected distribution expenses to be incurred on behalf of the Fund,
together with a report explaining the purposes and anticipated benefits of
incurring such expenses. The Directors will determine which particular expenses,
and the portions thereof, that may be borne by the Fund, and in making such a
determination shall consider the scope of the Distributor's commitment to
promoting the distribution of the Fund's Class A and Class C shares.

At any given time, the expenses of distributing shares of the Fund may be
more or less than the total of (i) the payments made by the Fund pursuant to the
Plan and (ii) the proceeds of contingent deferred sales charges paid by
investors upon redemption of shares. Because there is no requirement under the
Plan that the Distributor be reimbursed for all distribution expenses with
respect to Class B shares or any requirement that the Plan be continued from
year to year, this excess amount does not constitute a liability of the Fund.
Although there is no legal obligation for the Fund to pay expenses incurred in
excess of payments made to the Distributor under the Plan and the proceeds of
contingent deferred sales charges paid by investors upon redemption of shares,
if for any reason the Plan is terminated, the Directors will consider at that
time the manner in which to treat such expenses. Any cumulative expenses
incurred, but not yet recovered through distribution fees or contingent deferred
sales charges, may or may not be recovered through future distribution fees or
contingent deferred sales charges.

No interested person of the Fund nor any Director of the Fund who is not an
interested person of the Fund, as defined in the Act, has any direct financial
interest in the operation of the Plan except to the extent that the Distributor,
InterCapital, DWR, DWSC or certain of their employees may be deemed to have such
an interest as a result of benefits derived from the successful operation of the
Plan or as a result of receiving a portion of the amounts expended thereunder by
the Fund.

The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval by the shareholders of the
affected Class or Classes of the Fund, and all material amendments to the Plan
must also be approved by the Directors in the manner described above. The Plan
may be terminated at any time, without payment of any penalty, by vote of a
majority of the Independent 12b-1 Directors or by a vote of a majority of the
outstanding voting securities of the Fund (as defined in the Act) on not more
than thirty days' written notice to any other party to the Plan. So long as the
Plan is in effect, the election and nomination of Independent 12b-1 Directors
shall be committed to the discretion of the Independent 12b-1 Directors.

DETERMINATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------

As discussed in the Prospectus, the net asset value per share for each Class
of shares of the Fund is determined once daily at 4:00 p.m., New York time (or,
on days when the New York Stock Exchange closes prior to 4:00 p.m., at such
earlier time) on each day that the New York Stock Exchange is open. The New York
Stock Exchange currently observes the following holidays: New Year's Day;
President's Day; Good Friday; Memorial Day; Independence Day; Labor Day;
Thanksgiving Day; and Christmas Day.

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

As discussed in the Prospectus, the Fund offers four Classes of shares as
follows:

INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES

Class A shares are sold to investors with an initial sales charge that
declines to zero for larger purchases; however, Class A shares sold without an
initial sales charge are subject to a contingent deferred sales charge ("CDSC")
of 1.0% if redeemed within one year of purchase, except in the circumstances
discussed in the Prospectus.

23
<PAGE>
RIGHT OF ACCUMULATION. As discussed in the Prospectus, investors may
combine the current value of shares purchased in separate transactions for
purposes of benefitting from the reduced sales charges available for purchases
of shares of the Fund totalling at least $25,000 in net asset value. For
example, if any person or entity who qualifies for this privilege holds Class A
shares of the Fund and/or other Dean Witter Funds that are multiple class funds
("Dean Witter Multi-Class Funds") or shares of other Dean Witter Funds sold with
a front-end sales charge purchased at a price including a front-end sales charge
having a current value of $5,000, and purchases $20,000 of additional shares of
the Fund, the sales charge applicable to the $20,000 purchase would be 4.0% of
the offering price.

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

LETTER OF INTENT. As discussed in the Prospectus, reduced sales charges are
available to investors who enter into a written Letter of Intent providing for
the purchase, within a thirteen-month period, of Class A shares of the Fund from
the Distributor or from a single Selected Broker-Dealer.

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

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

If the goal is exceeded and purchases pass the next sales charge level, the
sales charge on the entire amount of the purchase that results in passing that
level and on subsequent purchases will be subject to further reduced sales
charges in the same manner as set forth above under "Right of Accumulation," but
there will be no retroactive reduction of sales charges on previous purchases.
For the purpose of determining whether the investor is entitled to a further
reduced sales charge applicable to purchases at or above a sales charge level
which exceeds the stated goal of a Letter of Intent, the cumulative current net
asset value of any shares owned by the investor in any other Dean Witter Funds
held by the shareholder which were previously purchased at a price including a
front-end sales charge (including shares of the Fund and other Dean Witter Funds
acquired in exchange for those shares, and including in each case shares
acquired through reinvestment of dividends and distributions) will be added to
the cost or net asset value of shares of the Fund owned by the investor.
However, shares of "Exchange Funds" (see "Shareholder Services--Exchange
Privilege") and the purchase of shares of other Dean Witter Funds will not be
included in determining whether the stated goal of a Letter of Intent has been
reached.

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

24
<PAGE>
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES

Class B shares are sold without an initial sales charge but are subject to a
CDSC payable upon most redemptions within six years after purchase. As stated in
the Prospectus, a CDSC will be imposed on any redemption by an investor if after
such redemption the current value of the investor's Class B shares of the Fund
is less than the dollar amount of all payments by the shareholder for the
purchase of Class B shares during the preceding six years (or, in the case of
shares held by certain employer-sponsored benefit plans, three years). However,
no CDSC will be imposed to the extent that the net asset value of the shares
redeemed does not exceed: (a) the current net asset value of shares purchased
more than six years (or, in the case of shares held by certain
employer-sponsored benefit plans, three years) prior to the redemption, plus (b)
the current net asset value of shares purchased through reinvestment of
dividends or distributions of the Fund or another Dean Witter Fund (see
"Shareholder Services-- Targeted Dividends"), plus (c) the current net asset
value of shares acquired in exchange for (i) shares of Dean Witter front-end
sales charge funds, or (ii) shares of other Dean Witter Funds for which shares
of front-end sales charge funds have been exchanged (see "Shareholder
Services--Exchange Privilege"), plus (d) increases in the net asset value of the
investor's shares above the total amount of payments for the purchase of Fund
shares made during the preceding six (three) years. The CDSC will be paid to the
Distributor.

In determining the applicability of the CDSC to each redemption, the amount
which represents an increase in the net asset value of the investor's shares
above the amount of the total payments for the purchase of shares within the
last six years (or, in the case of shares held by certain employer-sponsored
benefit plans, three years) will be redeemed first. In the event the redemption
amount exceeds such increase in value, the next portion of the amount redeemed
will be the amount which represents the net asset value of the investor's shares
purchased more than six (three) years prior to the redemption and/or shares
purchased through reinvestment of dividends or distributions and/or shares
acquired in exchange for shares of Dean Witter front-end sales charge funds, or
for shares of other Dean Witter funds for which shares of front-end sales charge
funds have been exchanged. A portion of the amount redeemed which exceeds an
amount which represents both such increase in value and the value of shares
purchased more than six years (or, in the case of shares held by certain
employer-sponsored benefit plans, three years) prior to the redemption and/or
shares purchased through reinvestment of dividends or distributions and/or
shares acquired in the above-described exchanges will be subject to a CDSC.

The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of Class B shares of the Fund until
the time of redemption of such shares. For purposes of determining the number of
years from the time of any payment for the purchase of shares, all payments made
during a month will be aggregated and deemed to have been made on the last day
of the month. The following table sets forth the rates of the CDSC applicable to
most Class B shares of the Fund:

<TABLE>
<CAPTION>
CDSC AS A PERCENTAGE OF
YEAR SINCE PURCHASE PAYMENT MADE AMOUNT REDEEMED
- ------------------------------------------------------------------------------------------ --------------------------
<S> <C>
First..................................................................................... 5.0%
Second.................................................................................... 4.0%
Third..................................................................................... 3.0%
Fourth.................................................................................... 2.0%
Fifth..................................................................................... 2.0%
Sixth..................................................................................... 1.0%
Seventh and thereafter.................................................................... None
</TABLE>

25
<PAGE>
The following table sets forth the rates of the CDSC applicable to Class B
shares of the Fund held by 401(k) plans or other employer-sponsored plans
qualified under Section 401(a) of the Internal Revenue Code for which DWTC or
DWTFSB serves as Trustee or the 401(k) Support Services Group of DWR serves as
recordkeeper and whose accounts are opened on or after July 28, 1997:

In determining the rate of the CDSC, it will be assumed that a redemption is
made of shares held by the investor for the longest period of time within the
applicable six-year or three-year period. This will result in any such CDSC
being imposed at the lowest possible rate. The CDSC will be imposed, in
accordance with the table shown above, on any redemptions within six years (or,
in the case of shares held by certain employer-sponsored benefit plans, three
years) of purchase which are in excess of these amounts and which redemptions do
not qualify for waiver of the CDSC, as described in the Prospectus.

LEVEL LOAD ALTERNATIVE--CLASS C SHARES

Class C shares are sold without a sales charge but are subject to a CDSC of
1.0% on most redemptions made within one year after purchase, except in the
circumstances discussed in the Prospectus.

NO LOAD ALTERNATIVE--CLASS D SHARES

Class D shares are offered without any sales charge on purchase or
redemption. Class D shares are offered only to those persons meeting the
qualifications set forth in the Prospectus.

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

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

AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. As stated in the
Prospectus, all income dividends and capital gains distributions are
automatically paid in full and fractional shares of the applicable Class of the
Fund, unless the shareholder requests that they be paid in cash. Each purchase
of shares of the Fund is made upon the condition that the Transfer Agent is
thereby automatically appointed as agent of the investor to receive all
dividends and capital gains distributions on shares owned by the investor. Such
dividends and distributions will be paid, at the net asset value per share, in
shares of the applicable Class of the Fund (or in cash if the shareholder so
requests) as of the close of business on the record date. At any time an
investor may request the Transfer Agent, in writing, to have subsequent
dividends and/or capital gains distributions paid to him or her in cash rather
than shares. To assure sufficient time to process the change, such request
should be received by the Transfer Agent at least five business days prior to
the record date of the dividend or distribution. In the case of recently
purchased shares for which registration instructions have not been received on
the record date, cash payments will be made to DWR or other selected
broker-dealer, and will be forwarded to the shareholder, upon the receipt of
proper instructions.

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

26
<PAGE>
open-end Dean Witter Fund other than Dean Witter High Yield Securities Inc. or
in another Class of Dean Witter High Yield Securities Inc. Such investment will
be made as described above for automatic investment in shares of the applicable
Class of the Fund, at the net asset value per share of the selected Dean Witter
Fund as of the close of business on the payment date of the dividend or
distribution and will begin to earn dividends, if any, in the selected Dean
Witter Fund the next business day. To participate in the Targeted Dividends
program, shareholders should contact their DWR or other selected broker-dealer
account executive or the Transfer Agent. Shareholders of the Fund must be
shareholders of the selected Class of the Dean Witter Fund targeted to receive
investments from dividends at the time they enter the Targeted Dividends
program. Investors should review the prospectus of the targeted Dean Witter Fund
before entering the program.

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

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

SYSTEMATIC WITHDRAWAL PLAN. As discussed in the Prospectus, a systematic
withdrawal plan (the "Withdrawal Plan") is available for shareholders who own or
purchase shares of the Fund having a minimum value of $10,000 based upon the
then current offering price. The plan provides for monthly or quarterly (March,
June, September and December) checks in any amount, not less than $25, or in any
whole percentage of the account balance, on an annualized basis. Any applicable
CDSC will be imposed on shares redeemed under the Withdrawal Plan (see "Purchase
of Fund Shares"). Therefore, any shareholder participating in the Withdrawal
Plan will have sufficient shares redeemed from his or her account so that the
proceeds (net of any applicable CDSC) to the shareholder will be the designated
monthly or quarterly amount.

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

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

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

27
<PAGE>
Any shareholder who wishes to have payments under the Withdrawal Plan made
to a third party or sent to an address other than the one listed on the account
must send complete written instructions to the Transfer Agent to enroll in the
Withdrawal Plan. The shareholder's signature on such instructions must be
guaranteed by an eligible guarantor acceptable to the Transfer Agent
(shareholders should contact the Transfer Agent for a determination as to
whether a particular institution is an eligible guarantor). A shareholder may,
at any time, change the amount and interval of withdrawal payments through his
or her account executive or by written notification to the Transfer Agent. In
addition, the party and/or the address to which checks are mailed may be changed
by written notification to the Transfer Agent, with signature guarantees
required in the manner described above. The shareholder may also terminate the
Withdrawal Plan at any time by written notice to the Transfer Agent. In the
event of such termination, the account will be continued as a regular
shareholder investment account. The shareholder may also redeem all or part of
the shares held in the Withdrawal Plan account (see "Redemptions and
Repurchases" in the Prospectus) at any time.

DIRECT INVESTMENTS THROUGH TRANSFER AGENT. As discussed in the Prospectus,
shareholders may make additional investments in any Class of shares of the Fund
for which they qualify at any time by sending a check in any amount, not less
than $100, payable to Dean Witter High Yield Securities Inc., and indicating the
selected Class, directly to the Fund's Transfer Agent. In the case of Class A
shares, after deduction of any applicable sales charge, the balance will be
applied to the purchase of Fund shares, and, in the case of shares of the other
Classes, the entire amount will be applied to the purchase of Fund shares, at
the net asset value per share next computed after receipt of the check or
purchase payment by the Transfer Agent. The shares so purchased will be credited
to the investor's account.

EXCHANGE PRIVILEGE

As discussed in the Prospectus, the Fund makes available to its shareholders
an Exchange Privilege whereby shareholders of each Class of shares of the Fund
may exchange their shares for shares of the same Class of shares of any other
Dean Witter Multi-Class Fund without the imposition of any exchange fee. Shares
may also be exchanged for shares of any of the following funds: Dean Witter
Short-Term U.S. Treasury Trust, Dean Witter Limited Term Municipal Trust, Dean
Witter Short-Term Bond Fund, Dean Witter Intermediate Term U.S. Treasury Trust
and five Dean Witter Funds which are money market funds (the foregoing nine
funds are hereinafter referred to as the "Exchange Funds"). Class A shares may
also be exchanged for shares of Dean Witter Multi-State Municipal Series Trust
and Dean Witter Hawaii Municipal Trust, which are Dean Witter Funds sold with a
front-end sales charge ("FSC Funds"). Class B shares may also be exchanged for
shares of Dean Witter Global Short-Term Income Fund Inc., Dean Witter High
Income Securities and Dean Witter National Municipal Trust, which are Dean
Witter Funds offered with a CDSC ("CDSC Funds"). Exchanges may be made after the
shares of the Fund acquired by purchase (not by exchange or dividend
reinvestment) have been held for thirty days. There is no waiting period for
exchanges of shares acquired by exchange or dividend reinvestment. An exchange
will be treated for federal income tax purposes the same as a repurchase or
redemption of shares, on which the shareholder may realize a capital gain or
loss.

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

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

As described below, and in the Prospectus under the caption "Purchase of
Fund Shares," a CDSC may be imposed upon a redemption, depending on a number of
factors, including the number of years from the time of purchase until the time
of redemption or exchange ("holding period"). When shares of a Dean Witter
Multi-Class Fund or any CDSC Fund are exchanged for shares of an Exchange Fund,
the exchange is executed at no charge to the shareholder, without the imposition
of the CDSC at the time of the exchange. During the period of time the
shareholder remains in the Exchange Fund (calculated from

28
<PAGE>
the last day of the month in which the Exchange Fund shares were acquired), the
holding period or "year since purchase payment made" is frozen. When shares are
redeemed out of the Exchange Fund, they will be subject to a CDSC which would be
based upon the period of time the shareholder held shares in a Dean Witter
Multi-Class Fund or in a CDSC Fund. However, in the case of shares exchanged
into an Exchange Fund on or after April 23, 1990, upon a redemption of shares
which results in a CDSC being imposed, a credit (not to exceed the amount of the
CDSC) will be given in an amount equal to the Exchange Fund 12b-1 distribution
fees incurred on or after that date which are attributable to those shares.
Shareholders acquiring shares of an Exchange Fund pursuant to this exchange
privilege may exchange those shares back into a Dean Witter Multi-Class Fund or
a CDSC Fund from the Exchange Fund, with no CDSC being imposed on such exchange.
The holding period previously frozen when shares were first exchanged for shares
of the Exchange Fund resumes on the last day of the month in which shares of a
Dean Witter Multi-Class Fund or of a CDSC Fund are reacquired. A CDSC is imposed
only upon an ultimate redemption, based upon the time (calculated as described
above) the shareholder was invested in a Dean Witter Multi-Class Fund or in a
CDSC Fund. In the case of exchanges of Class A shares which are subject to a
CDSC, the holding period also includes the time (calculated as described above)
the shareholder was invested in a FSC Fund.

When shares initially purchased in a Dean Witter Multi-Class Fund or in a
CDSC Fund are exchanged for shares of a Dean Witter Multi-Class Fund, shares of
a CDSC Fund, shares of a FSC Fund, or shares of an Exchange Fund, the date of
purchase of the shares of the fund exchanged into, for purposes of the CDSC upon
redemption, will be the last day of the month in which the shares being
exchanged were originally purchased. In allocating the purchase payments between
funds for purposes of the CDSC, the amount which represents the current net
asset value of shares at the time of the exchange which were (i) purchased more
than one, three or six years (depending on the CDSC schedule applicable to the
shares) prior to the exchange, (ii) originally acquired through reinvestment of
dividends or distributions and (iii) acquired in exchange for shares of FSC
Funds, or for shares of other Dean Witter Funds for which shares of FSC Funds
have been exchanged (all such shares called "Free Shares"), will be exchanged
first. After an exchange, all dividends earned on shares in an Exchange Fund
will be considered Free Shares. If the exchanged amount exceeds the value of
such Free Shares, an exchange is made, on a block-by-block basis, of non-Free
Shares held for the longest period of time (except that, with respect to Class B
shares, if shares held for identical periods of time but subject to different
CDSC schedules are held in the same Exchange Privilege account, the shares of
that block that are subject to a lower CDSC rate will be exchanged prior to the
shares of that block that are subject to a higher CDSC rate). Shares equal to
any appreciation in the value of non-Free Shares exchanged will be treated as
Free Shares, and the amount of the purchase payments for the non-Free Shares of
the fund exchanged into will be equal to the lesser of (a) the purchase payments
for, or (b) the current net asset value of, the exchanged non-Free Shares. If an
exchange between funds would result in exchange of only part of a particular
block of non-Free Shares, then shares equal to any appreciation in the value of
the block (up to the amount of the exchange) will be treated as Free Shares and
exchanged first, and the purchase payment for that block will be allocated on a
pro rata basis between the non-Free Shares of that block to be retained and the
non-Free Shares to be exchanged. The prorated amount of such purchase payment
attributable to the retained non-Free Shares will remain as the purchase payment
for such shares, and the amount of purchase payment for the exchanged non-Free
Shares will be equal to the lesser of (a) the prorated amount of the purchase
payment for, or (b) the current net asset value of, those exchanged non-Free
Shares. Based upon the procedures described in the Prospectus under the caption
"Purchase of Fund Shares," any applicable CDSC will be imposed upon the ultimate
redemption of shares of any fund, regardless of the number of exchanges since
those shares were originally purchased.

With respect to the redemption or repurchase of shares of the Fund, the
application of proceeds to the purchase of new shares in the Fund or any other
of the funds and the general administration of the Exchange Privilege, the
Transfer Agent acts as agent for the Distributor and for the shareholder's

29
<PAGE>
selected broker-dealer, if any, in the performance of such functions. With
respect to exchanges, redemptions or repurchases, the Transfer Agent shall be
liable for its own negligence and not for the default or negligence of its
correspondents or for losses in transit. The Fund shall not be liable for any
default or negligence of the Transfer Agent, the Distributor or any selected
broker-dealer.

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

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

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

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

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

REDEMPTION. As stated in the Prospectus, shares of each Class of the Fund
can be redeemed for cash at any time at the net asset value per share next
determined; however, such redemption proceeds will be reduced by the amount of
any applicable CDSC. If shares are held in a shareholder's account without a
share certificate, a written request for redemption to the Fund's Transfer Agent
at P.O. Box 983, Jersey City, NJ 07303 is required. If certificates are held by
the shareholder, the shares may be redeemed by surrendering the certificates
with a written request for redemption. The share certificate, or an accompanying
stock power, and the request for redemption, must be signed by the shareholder
or shareholders exactly as the shares are registered. Each request for
redemption, whether or not accompanied by a share certificate, must be sent to
the Fund's Transfer Agent, which will redeem the shares at

30
<PAGE>
their net asset value next computed (see "Purchase of Fund Shares" in the
Prospectus) after it receives the request, and certificate, if any, in good
order. Any redemption request received after such computation will be redeemed
at the next determined net asset value.

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

REPURCHASE. As stated in the Prospectus, DWR and other selected
broker-dealers are authorized to repurchase shares represented by a share
certificate which is delivered to any of their offices. Shares held in a
shareholder's account without a share certificate may also be repurchased by DWR
and other selected broker-dealers upon the telephonic request of the
shareholder. The repurchase price is the net asset value next computed after
such purchase order is received by DWR or other selected broker-dealer reduced
by any applicable CDSC.

PAYMENT FOR SHARES REDEEMED OR REPURCHASED. As discussed in the Prospectus,
payment for shares of any Class presented for repurchase or redemption will be
made by check within seven days after receipt by the Transfer Agent of the
certificate and/or written request in good order. The term good order means that
the share certificate, if any, and request for redemption are properly signed,
accompanied by any documentation required by the Transfer Agent, and bear
signature guarantees when required by the Fund or the Transfer Agent. Such
payment may be postponed or the right of redemption suspended at times (a) when
the New York Stock Exchange is closed for other than customary weekends and
holidays, (b) when trading on that Exchange is restricted, (c) when an emergency
exists as a result of which disposal by the Fund of securities owned by it is
not reasonably practicable or it is not reasonably practicable for the Fund
fairly to determine the value of its net assets, or (d) during any other period
when the Securities and Exchange Commission by order so permits; provided that
applicable rules and regulations of the Securities and Exchange Commission shall
govern as to whether the conditions prescribed in (b) or (c) exist. If the
shares to be redeemed have recently been purchased by check (including a
certificate or bank cashier's check), payment of redemption proceeds may be
delayed for the minimum time needed to verify that the check used for investment
has been honored (not more than fifteen days from the time of receipt of the
check by the Transfer Agent). Shareholders maintaining margin accounts with DWR
or another selected broker-dealer are referred to their account executive
regarding restrictions on redemption of shares of the Fund pledged in the margin
account.

TRANSFERS OF SHARES. In the event a shareholder requests a transfer of any
shares to a new registration, such shares will be transferred without sales
charge at the time of transfer. With regard to the status of shares which are
either subject to the CDSC or free of such charge (and with regard to the length
of time shares subject to the charge have been held), any transfer involving
less than all the shares in an account will be made on a pro rata basis (that
is, by transferring shares in the same proportion that the transferred shares
bear to the total shares in the account immediately prior to the transfer). The
transferred shares will continue to be subject to any applicable CDSC as if they
had not been so transferred.

REINSTATEMENT PRIVILEGE. As described in the Prospectus, a shareholder who
has had his or her shares redeemed or repurchased and has not previously
exercised this reinstatement privilege may, within 35 days after the date of the
redemption or repurchase, reinstate any portion or all of the proceeds of such
redemption or repurchase in shares of the Fund in the same Class at the net
asset value next determined after a reinstatement request, together with such
proceeds, is received by the Transfer Agent.

Exercise of the reinstatement privilege will not affect the federal income
tax treatment of any gain or loss realized upon the redemption or repurchase,
except that if the redemption or repurchase resulted in

31
<PAGE>
a loss and reinstatement is made in shares of the Fund, some or all of the loss,
depending on the amount reinstated, will not be allowed as a deduction for
federal income tax purposes but will be applied to adjust the cost basis of the
shares acquired upon reinstatement.

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

As discussed in the Prospectus, the Fund will determine either to distribute
or to retain all or part of any net long-term capital gains in any year for
reinvestment. If any such gains are retained, the Fund will pay federal income
tax thereon, and will notify shareholders that following an election by the
Fund, the shareholders will be required to include such undistributed gains in
determining their taxable income and may claim their share of the tax paid by
the Fund as a credit against their individual federal income tax.

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

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

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

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

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

As discussed in the Prospectus, from time to time the Fund may quote its
"yield" and/or its "total return" in advertisements and sales literature. These
figures are computed separately for Class A, Class B, Class C and Class D
shares.

Prior to July 28, 1997, the Fund offered only one Class of shares. Because
the distribution arrangement for Class A most closely resembles the distribution
arrangement applicable prior to the implementation of multiple classes (i.e.,
Class A is sold with a front-end sales charge), historical performance
information has been restated to reflect the actual maximum sales charge
applicable to Class A (i.e., 4.25%) as compared to the 5.5% sales charge in
effect prior to July 28, 1997. In addition, because all shares of the Fund held
prior to July 28, 1997 have been designated Class D shares, the Fund's
historical performance has also been restated to reflect the absence of any
sales charge in the case of Class D shares. In addition, Class A shares are now
subject to an ongoing 12b-1 fee which is not reflected in the restated
performance for that Class and would reduce the performance quoted below.

32
<PAGE>
Following the restated performance information is the actual performance of the
Fund as of its last fiscal year (prior to the implementation of multiple
classes) without taking into effect the new fee and sales charge structure.

Yield is calculated for any 30-day period as follows: the amount of interest
and/or dividend income for each security in the Fund's portfolio is determined
in accordance with regulatory requirements; the total for the entire portfolio
constitutes the Fund's gross income for the period. Expenses accrued during the
period are subtracted to arrive at "net investment income" of each Class. The
resulting amount is divided by the product of the maximum offering price per
share on the last day of the period multiplied by the average number of shares
of the applicable Class outstanding during the period that were entitled to
dividends. This amount is added to 1 and raised to the sixth power. 1 is then
subtracted from the result and the difference is multiplied by 2 to arrive at
the annualized yield. For the 30-day period ended August 31, 1996, the Fund's
restated yield for the Class A and Class D shares, calculated pursuant to this
formula was 11.88% and 12.43%, respectively.

The Fund's "average annual total return" represents an annualization of the
Fund's total return over a particular period and is computed by finding the
annual percentage rate which will result in the ending redeemable value of a
hypothetical $1,000 investment made at the beginning of a one, five or ten year
period, or for the period from the date of commencement of the Fund's
operations, if shorter than any of the foregoing. The ending redeemable value is
reduced by any CDSC at the end of the one, five or ten year or other period. For
the purpose of this calculation, it is assumed that all dividends and
distributions are reinvested. The formula for computing the average annual total
return involves a percentage obtained by dividing the ending redeemable value by
the amount of the initial investment, taking a root of the quotient (where the
root is equivalent to the number of years in the period) and subtracting 1 from
the result. The restated average annual total returns of the Class A and Class D
shares of the Fund for the year ended August 31, 1996 were 6.35% and 11.07%,
respectively; for the five years ended August 31, 1996 were 14.77% and 15.77%,
respectively; and for the ten years ended August 31, 1996 were 6.06% and 6.53%,
respectively.

In addition to the foregoing, the Fund may advertise its total return for
each Class over different periods of time by means of aggregate, average,
year-by-year or other types of total return figures. Such calculation may or may
not reflect the imposition of the maximum front end sales charge for Class A or
the deduction of the CDSC for each of Class B and Class C which, if reflected,
would reduce the performance quoted. For example, the average annual total
return of the Fund in the manner described in the preceding paragraph, but
without the deduction for any applicable sales charge. Based on the foregoing
calculation, the Fund's total return for Class A shares for the year ended
August 31, 1996 was 11.07%, the total return for the five years ended August 31,
1996 was 15.77% and the total return for the ten years ended August 31, 1996 was
6.53%. Because the Class D shares are not subject to any sales charge, the Fund
would only advertise average annual total returns as calculated in the previous
paragraph.

In addition, the Fund may compute its aggregate total return for each Class
for specified periods by determining the aggregate percentage rate which will
result in the ending value of a hypothetical $1,000 investment made at the
beginning of the period. For the purpose of this calculation, it is assumed that
all dividends and distributions are reinvested. The formula for computing
aggregate total return involves a percentage obtained by dividing the ending
value (without reduction for any sales charge) by the initial $1,000 investment
and subtracting 1 from the result. Based on the foregoing calculation, the
Fund's restated total return for both Class A and Class D shares for the year
ended August 31, 1996 was 11.07%; the restated total return for the five years
ended August 31, 1996 was 107.95%; and the restated total return for the ten
years ended August 31, 1996 was 88.16%.

The Fund may advertise the growth of hypothetical investments of $10,000,
$50,000 and $100,000 in each Class of shares of the Fund by adding 1 to the
Fund's aggregate total return to date (expressed as a decimal and without taking
into account the effect of any applicable CDSC) and multiplying by $9,575,
$48,250 and $97,250 in the case of Class A (investments of $10,000, $50,000 and
$100,000 adjusted for the initial sales charge) or by $10,000, $50,000 and
$100,000 in the case of each of Class B,

33
<PAGE>
Class C and Class D, as the case may be. Investments of $10,000, $50,000 and
$100,000 in the Fund at inception would have grown to $45,959, $231,595 and
$466,790, respectively, in the case of Class A, and $47,999, $239,995 and
$479,990, respectively, in the case of Class D, at August 31, 1996.

For the 30-day period ended August 31, 1996, the Fund's actual yield,
calculated pursuant to the formula described above, was 11.73%. The average
annual total returns of the Fund, calculated pursuant to the formula described
above, for the year ended August 31, 1996, for the five years ended August 31,
1996, and for the ten years ended August 31, 1996, were 4.96%, 14.47% and 5.92%,
respectively. The average annual total returns of the Fund calculated without
the deduction for any applicable sales charge for the year ended August 31,
1996, for the five years ended August 31, 1996, and for the ten years ended
August 31, 1996, were 11.07%, 15.77% and 6.53%, respectively. The Fund's
aggregate total return, calculated pursuant to the formula described above, for
the year ended August 31, 1996 was 11.07%, the total return for the five years
ended August 31, 1996 was 107.95% and the total return for the ten years ended
August 31, 1996 was 88.16%. Investments of $10,000, $50,000 and $100,000,
adjusted for the sales charges in effect at such time (5.5%, 4.25% or 3.25%,
respectively), in the Fund at inception would have grown to $45,359, $229,795
and $464,390, respectively, at August 31, 1996.

The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent organizations.

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

The Fund is authorized to issue 2 billion shares of common stock of $0.01
par value (500 million shares for each Class). Shares of the Fund, when issued,
are fully paid, non-assessable, fully transferable and redeemable at the option
of the holder. There are no conversion, preemptive or other subscription rights.
In the event of liquidation, each share of common stock of the Fund is entitled
to its portion of all of the Fund's assets after all debts and expenses have
been paid. Except for agreements entered into by the Fund in its ordinary course
of business within the limitations of the Fund's fundamental investment policies
(which may be modified only by shareholder vote), the Fund will not issue any
securities other than common stock.

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

CUSTODIAN AND TRANSFER AGENT
- --------------------------------------------------------------------------------

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

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

34
<PAGE>
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------

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

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

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

The Fund's fiscal year ends on August 31. The financial statements of the
Fund must be audited at least once a year by independent accountants whose
selection is made annually by the Fund's Board of Directors.

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

Barry Fink, Esq., who is an officer and the General Counsel of the
Investment Manager, is an officer and the General Counsel of the Fund.

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

The financial statements of the Fund for the year ended August 31, 1996
included in this Statement of Additional Information and incorporated by
reference in the Prospectus have been so included and incorporated in reliance
on the report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.

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

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

35
<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
36
<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
37
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1996, CONTINUED

TOTAL CORPORATE BONDS
(IDENTIFIED COST $459,074,347)....................................... 403,093,418
---------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
38
<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
39
<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
40
<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
41
<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
42
<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
43
<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
44
<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 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.

45
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1996, CONTINUED

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.

46
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1996, CONTINUED

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>

47
<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.

48
<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

49
<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

50
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1997 (UNAUDITED)

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE BONDS (92.5%)
AEROSPACE (1.6%)
$ 8,000 Sabreliner Corp. (Series B)...................... 12.50 % 04/15/03 $ 7,760,000
---------------
AUTOMOTIVE (4.5%)
4,000 APS, Inc......................................... 11.875 01/15/06 4,280,000
6,800 Envirotest Systems, Inc.......................... 9.125 03/15/01 6,417,500
10,000 Toyota Motor Credit Corp......................... 15.00 09/26/97 10,505,500
---------------
21,203,000
---------------
BROADCAST MEDIA (4.0%)
4,000 Adams Outdoor Advertising L.P.................... 10.75 03/15/06 4,300,000
7,000 Capstar Broadcasting Partners - 144A*............ 12.75++ 02/01/09 4,060,000
4,000 Paxson Communications Corp....................... 11.625 10/01/02 4,290,000
6,000 Spanish Broadcasting System, Inc................. 7.50 06/15/02 6,360,000
---------------
19,010,000
---------------
BUSINESS SERVICES (4.6%)
9,052 Anacomp, Inc..................................... 13.00+ 06/04/02 9,458,863
12,000 Xerox Credit Corp................................ 15.00 06/10/97 12,292,320
---------------
21,751,183
---------------
CABLE & TELECOMMUNICATIONS (15.8%)
7,116 Adelphia Communications Corp. (Series B)......... 9.50+ 02/15/04 6,439,981
3,500 Adelphia Communications, Inc. - 144A*............ 9.875 03/01/07 3,408,125
5,000 American Communications Services, Inc............ 13.00++ 11/01/05 3,287,500
5,000 American Communications Services, Inc............ 12.75++ 04/01/06 3,087,500
12,000 AT&T Capital Corp................................ 15.00 05/05/97 12,184,920
4,000 Cablevision Systems Corp......................... 10.50 05/15/16 4,210,000
5,000 Charter Communication South East L.P. (Series
B)............................................. 11.25 03/15/06 5,375,000
10,627 Falcon Holdings Group L.P. (Series B)............ 11.00+ 09/15/03 9,617,054
5,000 Frontiervision, Inc.............................. 11.00 10/15/06 5,225,000
11,000 Hyperion Telecommunication, Inc. (Series B)...... 13.00++ 04/15/03 6,407,500
13,400 In-Flight Phone Corp. (Series B)(a).............. 14.00++ 05/15/02 1,005,000
4,000 IXC Communications, Inc. (Series B).............. 12.50 10/01/05 4,530,000
5,050 Peoples Telephone Co., Inc....................... 12.25 07/15/02 5,390,875
4,000 Rifkin Acquisition Partners L.P.................. 11.125 01/15/06 4,235,000
---------------
74,403,455
---------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
51
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1997 (UNAUDITED) CONTINUED

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COMPUTER EQUIPMENT (3.1%)
$ 5,000 Unisys Corp...................................... 15.00 % 07/01/97 $ 5,231,250
8,000 Unisys Corp. (Conv.)............................. 8.25 03/15/06 9,620,000
---------------
14,851,250
---------------
CONSUMER PRODUCTS (2.2%)
5,500 J.B. Williams Holdings, Inc...................... 12.00 03/01/04 5,692,500
4,500 Renaissance Cosmetics, Inc. - 144A*.............. 11.75 02/15/04 4,640,625
---------------
10,333,125
---------------
CONTAINERS (2.2%)
5,000 Mail-Well Corp................................... 10.50 02/15/04 5,150,000
5,000 Packaging Resources, Inc......................... 11.625 05/01/03 5,318,750
---------------
10,468,750
---------------
ELECTRICAL & ALARM SYSTEMS (2.2%)
11,000 Mosler, Inc...................................... 11.00 04/15/03 10,505,000
---------------
ENTERTAINMENT/GAMING & LODGING (9.3%)
4,000 AMF Group Inc. (Series B)........................ 10.875 03/15/06 4,365,000
9,750 Fitzgeralds Gaming Corp. (Units)++............... 13.00 12/31/02 8,531,250
8,000 Lady Luck Gaming Finance Corp.................... 11.875 03/01/01 7,870,000
8,000 Motels of America, Inc. (Series B)............... 12.00 04/15/04 6,960,000
4,000 Players International, Inc....................... 10.875 04/15/05 4,200,000
4,000 Plitt Theaters, Inc. (Canada).................... 10.875 06/15/04 4,100,000
4,000 Station Casinos, Inc............................. 9.625 06/01/03 4,060,000
4,000 Stuart Entertainment, Inc. - 144A*............... 12.50 11/15/04 4,070,000
---------------
44,156,250
---------------
FINANCIAL (4.4%)
9,500 General Electric Capital Corp.................... 13.50 01/20/98 10,113,795
10,000 Household Finance Corp........................... 15.00 09/25/97 10,505,400
---------------
20,619,195
---------------
FOODS & BEVERAGES (7.4%)
9,621 Envirodyne Industries, Inc....................... 10.25 12/01/01 9,621,000
4,000 Fleming Companies Inc............................ 10.625 12/15/01 4,225,000
4,000 General Mills, Inc............................... 13.50 01/21/98 4,253,680
42,650 Specialty Foods Acquisition Corp. (Series B)..... 13.00++ 08/15/05 17,060,000
---------------
35,159,680
---------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
52
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1997 (UNAUDITED) CONTINUED

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
HEALTHCARE (2.9%)
$ 11,750 Unilab Corp...................................... 11.00 % 04/01/06 $ 8,401,250
5,000 Unison Healthcare Corp. - 144A*.................. 12.25 11/01/06 5,362,500
---------------
13,763,750
---------------
MANUFACTURING (4.3%)
5,000 Berry Plastics Corp.............................. 12.25 04/15/04 5,556,250
4,000 Exide Electronics Group, Inc. (Series B)......... 11.50 03/15/06 4,345,000
5,000 International Wire Group, Inc.................... 11.75 06/01/05 5,425,000
5,000 Uniroyal Technology Corp......................... 11.75 06/01/03 5,037,500
---------------
20,363,750
---------------
MANUFACTURING - DIVERSIFIED (6.5%)
4,000 Foamex L.P....................................... 11.875 10/01/04 4,320,000
5,000 Interlake Corp................................... 12.125 03/01/02 5,250,000
5,000 J.B. Poindexter & Co., Inc....................... 12.50 05/15/04 5,100,000
6,030 Jordan Industries, Inc........................... 10.375 08/01/03 6,060,150
11,420 Jordan Industries, Inc........................... 11.75++ 08/01/05 9,906,900
5,000 Starcraft Industrial Corp. (a)................... 16.50 01/15/98 --
---------------
30,637,050
---------------
OIL & GAS (2.1%)
4,000 Petro Stopping Centers L.P. - 144A*.............. 10.50 02/01/07 4,220,000
5,000 TransTexas Gas Corp.............................. 11.50 06/15/02 5,562,500
---------------
9,782,500
---------------
PUBLISHING (4.2%)
5,000 Affiliated Newspapers Investments, Inc........... 13.25++ 07/01/06 4,250,000
4,000 American Media Operations, Inc................... 11.625 11/15/04 4,350,000
3,000 MDC Communications Corp.......................... 10.50 12/01/06 3,172,500
3,000 Petersen Publishing, Inc. - 144A*................ 11.125 11/15/06 3,262,500
5,000 United States Banknote Corp...................... 10.375 06/01/02 5,018,750
---------------
20,053,750
---------------
RESTAURANTS (4.9%)
25,072 American Restaurant Group
Holdings, Inc.................................. 14.00++ 12/15/05 11,470,440
3,000 Ameriking, Inc................................... 10.75 12/01/06 3,127,500
4,000 Carrols Corp..................................... 11.50 08/15/03 4,280,000
4,000 FRD Acquisition Corp. (Series B)................. 12.50 07/15/04 4,185,000
---------------
23,062,940
---------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
53
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1997 (UNAUDITED) CONTINUED

TOTAL CORPORATE BONDS
(IDENTIFIED COST $454,451,511)............................................ 437,227,348
---------------
</TABLE>

<TABLE>
<CAPTION>
NUMBER OF
SHARES
- -----------
<C> <S> <C>
COMMON STOCKS (c)(3.7%)
AUTOMOTIVE (0.0%)
709 Northern Holdings Industrial Corp. (d).................................. --
---------------
ENTERTAINMENT/GAMING & LODGING (0.1%)
7,500 Motels of America, Inc. - 144A*......................................... 262,500
781,421 Vagabond Inns, Inc. (Class D)(a)........................................ 781
---------------
263,281
---------------
FOODS & BEVERAGES (1.0%)
408,055 Seven-Up/RC Bottling Co. Southern California, Inc. (d).................. 4,539,612
273,750 Specialty Foods Acquisition Corp. - 144A*............................... 273,750
---------------
4,813,362
---------------
MANUFACTURING - DIVERSIFIED (2.6%)
451,613 Thermadyne Holdings Corp. (d)........................................... 12,419,359
---------------
RESTAURANTS (0.0%)
26,057 American Restaurant Group Holdings, Inc. - 144A*........................ 26,057
---------------
TEXTILES (0.0%)
12,000 JPS Textile Group, Inc. (Class A)....................................... 120
---------------

TOTAL COMMON STOCKS
(IDENTIFIED COST $69,873,804)........................................... 17,522,179
---------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
54
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1997 (UNAUDITED) CONTINUED

<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------------------
<C> <S> <C>
PREFERRED STOCKS (0.4%)
ENTERTAINMENT/GAMING & LODGING (0.4%)
80,000 Fitzgeralds Gaming Corp. (Units)++...................................... $ 1,830,000
---------------
OIL & GAS PRODUCTS (0.0%)
113,955 TGX Corp. (Series A) (c) (d)............................................ 1,140
---------------

TOTAL PREFERRED STOCKS
(IDENTIFIED COST $2,830,000)............................................ 1,831,140
---------------
</TABLE>

<TABLE>
<CAPTION>
NUMBER OF EXPIRATION
WARRANTS DATE
- ----------- -----------
<C> <S> <C> <C>
WARRANTS (c) (0.1%)
AEROSPACE (0.0%)
9,000 Sabreliner Corp. - 144A*................................. 04/15/03 90,000
---------------
CABLE & TELECOMMUNICATIONS (0.0%)
8,000 Hyperion Telecommunication, Inc. (Series B) - 144A*...... 04/01/01 240,000
---------------
CONTAINERS (0.0%)
10,000 Crown Packaging Holdings, Ltd. - 144A*................... 11/01/03 100
---------------
ENTERTAINMENT/GAMING & LODGING (0.0%)
5,000 Boomtown, Inc. - 144A*................................... 11/01/98 --
8,312 Fitzgeralds Gaming Corp.................................. 12/19/98 8,397
3,500 Fitzgeralds South Inc. - 144A*........................... 03/15/99 --
---------------
8,397
---------------
MANUFACTURING (0.1%)
4,000 Exide Electronics Group, Inc. - 144A*.................... 03/15/06 191,000
70,000 Uniroyal Technology Corp................................. 06/01/03 70,000
---------------
261,000
---------------
RETAIL (0.0%)
10,000 County Seat Holdings Co.................................. 10/15/98 100
---------------

TOTAL WARRANTS
(IDENTIFIED COST $1,383,529).......................................... 599,597
---------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
55
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1997 (UNAUDITED) CONTINUED

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
SHORT-TERM INVESTMENTS (2.9%)
U.S. GOVERNMENT AGENCY (e) (2.4%)
$ 11,000 Federal Home Loan Banks (Amortized Cost
$10,996,761).............................. 5.30 % 03/03/97 $ 10,996,761
---------------

REPURCHASE AGREEMENT (0.5%)
2,474 The Bank of New York (dated 02/28/97;
proceeds $2,475,352; collateralized by
$461,122 Federal National Mortgage Assoc.
7.36% due 02/07/07 valued at $464,063 and
$1,646,467 U.S. Treasury Bond 9.25% due
02/15/16 valued at $2,059,693) (Identified
Cost $2,474,270).......................... 5.25 03/03/97 2,474,270bs

TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $13,471,031)........................................ 13,471,031
---------------

TOTAL INVESTMENTS
(IDENTIFIED COST $542,009,875) (F)........... 99.6 470,651,295

OTHER ASSETS IN EXCESS OF LIABILITIES........ 0.4 1,916,313
----- ------------

NET ASSETS................................... 100.0% $472,567,608
----- ------------
----- ------------

<FN>
- ---------------------
* Resale is restricted to qualified institutional investors.
++ Consists of one or more classes of securities traded together as a unit;
bonds or preferred stocks with attached 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; issuer in bankruptcy.
(b) Non-income producing security; bond in default.
(c) Non-income producing securities.
(d) Acquired through exchange offer.
(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 approximates identified
cost. The aggregate gross unrealized appreciation is $28,233,135 and the
aggregate gross unrealized depreciation is $99,591,715, resulting in net
unrealized depreciation of $71,358,580.
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
56
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1997 (UNAUDITED)

<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $542,009,875)............................ $ 470,651,295
Receivable for:
Interest................................................ 10,960,585
Investments sold........................................ 3,176,250
Capital stock sold...................................... 514,802
Prepaid expenses and other assets........................... 66,220
---------------

TOTAL ASSETS........................................... 485,369,152
---------------

LIABILITIES:
Payable for:
Investments purchased................................... 11,341,083
Dividends to shareholders............................... 908,454
Capital stock repurchased............................... 220,229
Investment management fee............................... 180,368
Accrued expenses and other payables......................... 151,410
---------------

TOTAL LIABILITIES...................................... 12,801,544
---------------

NET ASSETS:
Paid-in-capital............................................. 1,543,860,051
Net unrealized depreciation................................. (71,358,580)
Accumulated undistributed net investment income............. 1,931,583
Accumulated net realized loss............................... (1,001,865,446)
---------------
NET ASSETS............................................. $ 472,567,608
---------------
---------------

NET ASSET VALUE PER SHARE,
70,909,927 SHARES OUTSTANDING (400,000,000 SHARES
AUTHORIZED OF $.01 PAR VALUE).............................
$6.66
---------------
---------------

MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 5.82% OF NET ASSET VALUE)*..........
$7.05
---------------
---------------
</TABLE>

<TABLE>
<C> <S>
<FN>
- ---------------------
* On sales of $25,000 or more, the offering price is reduced.
</TABLE>

STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1997 (UNAUDITED)

<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $ 27,883,411
------------

EXPENSES
Investment management fee................................... 1,160,316
Transfer agent fees and expenses............................ 266,965
Professional fees........................................... 47,250
Shareholder reports and notices............................. 32,044
Custodian fees.............................................. 23,006
Registration fees........................................... 18,338
Directors' fees and expenses................................ 6,202
Other....................................................... 4,590
------------

TOTAL EXPENSES......................................... 1,558,711
------------

NET INVESTMENT INCOME.................................. 26,324,700
------------

NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss........................................... (48,247,775)
Net change in unrealized depreciation....................... 53,247,857
------------

NET GAIN............................................... 5,000,082
------------

NET INCREASE................................................ $ 31,324,782
------------
------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
57
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
FINANCIAL STATEMENTS, CONTINUED

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
FOR THE
YEAR
FOR THE SIX ENDED
MONTHS ENDED AUGUST 31,
FEBRUARY 28, 1997 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
(UNAUDITED)

INCREASE (DECREASE) IN NET ASSETS:

OPERATIONS:
Net investment income....................................... $ 26,324,700 $55,722,131
Net realized loss........................................... (48,247,775) (17,329,860)
Net change in unrealized depreciation....................... 53,247,857 9,730,771
----------------- -----------

NET INCREASE........................................... 31,324,782 48,123,042

Dividends from net investment income........................ (34,730,405) (51,517,938)
Net increase from capital stock transactions................ 15,770,392 8,152,392
----------------- -----------

NET INCREASE........................................... 12,364,769 4,757,496

NET ASSETS:
Beginning of period......................................... 460,202,839 455,445,343
----------------- -----------

END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$1,931,583 AND $10,337,288, RESPECTIVELY)............... $472,567,608 $460,202,839
----------------- -----------
----------------- -----------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
58
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1997 (UNAUDITED)

1. ORGANIZATION AND ACCOUNTING POLICIES

The following is a summary of significant accounting policies:

A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American or other domestic or foreign 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 (in
cases where securities are traded on more than one exchange, the securities are
valued on the exchange designated as the primary market pursuant to procedures
adopted by the Directors); (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, including circumstances under which it is
determined by Dean Witter InterCapital Inc. (the "Investment Manager") that sale
or bid prices are not reflective of a security's market value, portfolio
securities are valued at their fair value as determined in good faith under
procedures established by and under the general supervision of the 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 may utilize 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.

59
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1997 (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, 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.

60
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1997 (UNAUDITED) 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 six months ended February 28, 1997, aggregated
$237,747,854 and $220,427,940, respectively.

Dean Witter Trust Company, an affiliate of the Investment Manager, is the Fund's
transfer agent. At February 28, 1997, the Fund had transfer agent fees and
expenses payable of approximately $56,000.

The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Directors of the Fund who will have served as independent
Directors 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, 1997
included in Directors' fees and expenses in the Statement of Operations amounted
to $635. At February 28, 1997, the Fund had an accrued pension liability of
$48,911 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 28, 1997, it received
approximately $963,000 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 SIX
MONTHS ENDED
FEBRUARY 28, 1997 FOR THE YEAR
---------------------------- ENDED
AUGUST 31, 1996
(UNAUDITED) --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Sold............................................................. 4,443,983 $ 29,891,249 7,479,221 $ 50,396,628
Reinvestment of dividends........................................ 2,738,144 18,229,841 3,993,442 26,742,126
----------- -------------- ----------- ------------
7,182,127 48,121,090 11,472,663 77,138,754
Repurchased...................................................... (4,814,204) (32,350,698) (10,236,571) (68,986,362)
----------- -------------- ----------- ------------
Net increase..................................................... 2,367,923 $ 15,770,392 1,236,092 $ 8,152,392
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
</TABLE>

61
<PAGE>
DEAN WITTER HIGH YIELD SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1997 (UNAUDITED) CONTINUED

5. FEDERAL INCOME TAX STATUS

At August 31, 1996, the Fund had an approximate net capital loss carryover,
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:

At August 31, 1996, the Fund had temporary book/tax differences primarily
attributable to post-October losses, capital loss deferrals on wash sales and
dividends payable.

62
<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, 1997 -----------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:

Net asset value, beginning of
period............................ $ 6.71 $ 6.77 $ 6.83 $ 7.58 $ 7.23 $ 5.92
---------- --------- --------- --------- --------- ---------

Net investment income.............. 0.38 0.83 0.80 0.79 0.89 0.95
Net realized and unrealized gain
(loss)............................ 0.07 (0.12) (0.06) (0.68) 0.54 1.04
---------- --------- --------- --------- --------- ---------

Total from investment operations... 0.45 0.71 0.74 0.11 1.43 1.99
---------- --------- --------- --------- --------- ---------

Less dividends from net investment
income............................ (0.50) (0.77) (0.80) (0.86) (1.08) (0.68)
---------- --------- --------- --------- --------- ---------

Net asset value, end of period..... $ 6.66 $ 6.71 $ 6.77 $ 6.83 $ 7.58 $ 7.23
---------- --------- --------- --------- --------- ---------
---------- --------- --------- --------- --------- ---------

TOTAL INVESTMENT RETURN+........... 6.92%(1) 11.07% 11.98% 0.93% 22.29% 35.46%

RATIOS TO AVERAGE NET ASSETS:
Expenses........................... 0.67%(2) 0.66% 0.79% 0.69% 0.67% 0.77%

Net investment income.............. 11.34%(2) 12.27% 12.06% 10.40% 12.14% 13.96%

SUPPLEMENTAL DATA:
Net assets, end of period, in
millions.......................... $473 $460 $455 $478 $540 $512

Portfolio turnover rate............ 50%(1) 49% 74% 127% 173% 113%
<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.
(1) Not annualized
(2) Annualized
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS