<PAGE>
<TABLE>
<S> <C>
PROSPECTUS TABLE OF CONTENTS
MAY 18, 1994 Prospectus Summary/2
Dean Witter High Income Summary of Fund Expenses/3
Securities (the "Fund") is an open-end The Fund and its Management/4
diversified management investment company Investment Objectives and Policies/4
whose primary investment objective is to earn Risk Considerations/6
a high level of current income. As a secondary Investment Restrictions/7
objective, the Fund will seek capital Purchase of Fund Shares/7
appreciation, but only when consistent with Shareholder Services/9
its primary objective. The Fund seeks high Redemptions and Repurchases/11
current income by investing principally in Dividends, Distributions and Taxes/13
fixed-income securities which are rated in the Performance Information/13
lower categories by established rating Additional Information/14
services (Ba or lower by Moody's Investors Appendix/15
Service, Inc. or BB or lower by Standard & This Prospectus sets forth
Poor's Corporation) or are non-rated concisely the information you should know
securities of comparable quality. before investing in the Fund. It should be
THE FUND INVESTS PREDOMINANTLY read
IN LOWER-RATED FIXED-INCOME SECURITIES and retained for future reference. Additional
COMMONLY KNOWN AS JUNK BONDS AND INVESTORS information about the Fund is contained in the
SHOULD CAREFULLY CONSIDER THE RISKS THEY Statement of Additional Information, dated
PRESENT, INCLUDING THE RISK OF DEFAULT. BONDS May 18, 1994, which has been filed with the
OF THIS TYPE ARE SUBJECT TO GREATER RISKS THAN Securities and Exchange Commission, and
HIGHER-RATED SECURITIES AND ARE CONSIDERED TO which is available at no charge upon request
BE SPECULATIVE WITH REGARD TO THE PAYMENT OF of
INTEREST AND RETURN OF PRINCIPAL. INVESTORS the Fund at the address or telephone numbers
SHOULD ALSO BE COGNIZANT OF THE FACT THAT SUCH listed below. The Statement of Additional
SECURITIES ARE NOT GENERALLY MEANT FOR Information is incorporated herein by
SHORT-TERM INVESTING AND SHOULD ASSESS THE reference.
RISKS ASSOCIATED WITH AN INVESTMENT IN THE SHARES OF THE FUND ARE NOT DEPOSITS OR
FUND. (SEE "INVESTMENT OBJECTIVES AND OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY,
POLICIES.") ANY
Shares of the Fund are BANK, AND THE SHARES ARE NOT FEDERALLY INSURED
continuously offered at net asset value. BY
However, redemptions and/or repurchases are THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
subject in most cases to a contingent deferred FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
sales charge, scaled down from 4% to 1% of the THESE SECURITIES HAVE NOT BEEN
amount redeemed, if made within five years of APPROVED OR DISAPPROVED BY THE
purchase, which charge will be paid to the SECURITIES AND EXCHANGE COMMISSION
Fund's Distributor, Dean Witter Distributors OR ANY STATE SECURITIES COMMISSION
Inc. (See "Redemptions and NOR HAS THE COMMISSION OR ANY STATE
Repurchases--Contingent Deferred Sales SECURITIES COMMISSION PASSED UPON THE
Charge.") In addition, the Fund pays the ACCURACY OR ADEQUACY OF THIS
Distributor a distribution fee pursuant to a PROSPECTUS. ANY REPRESENTATION TO
Rule 12b-1 Plan of Distribution at the annual THE CONTRARY IS A CRIMINAL OFFENSE.
rate of 0.80% of the lesser of the (i) average DEAN WITTER DISTRIBUTORS INC.
daily aggregate net sales or (ii) average DISTRIBUTOR
daily net assets of the Fund. (See "Purchase
of Fund Shares--Plan of Distribution.")
Dean Witter
High Income Securities
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 526-3143
</TABLE>
<PAGE>
<TABLE>
<S> <C>
PROSPECTUS SUMMARY
The The Fund is organized as a Trust, commonly known as a Massachusetts business
Fund trust, and is an open-end diversified management investment company investing
principally in lower-rated fixed-income securities (see page 4).
Shares Offered Shares of beneficial interest with $0.01 par value (see page 14).
Offering At net asset value without sales charge (see page 7). Shares redeemed within
Price five years of purchase are subject to a contingent deferred sales charge under
most circumstances (see page 11).
Minimum Minimum initial investment, $1,000; minimum subsequent investment, $100 (see
Purchase page 7).
Investment A high level of current income primarily; capital appreciation is secondary.
Objective (see page 4).
Investment Dean Witter InterCapital Inc., the Investment Manager of the Fund, and its
Manager wholly-owned subsidiary, Dean Witter Services Company Inc., serve in various
investment management, advisory, management and administrative capacities to
eighty-five investment companies and other portfolios with assets of
approximately $70.8 billion at April 30, 1994 (see page 4).
Management Fee The Investment Manager receives a monthly fee at the annual rate of 0.50% of
average daily net assets. The fee should not be compared with fees paid by other
investment companies without also considering applicable sales loads and
distribution fees, including those noted below (see page 4).
Dividends and Income dividends are declared and paid monthly; capital gains, if any, may be
Capital Gains distributed at least annually. Dividends and distributions are automatically
Distributions reinvested in additional shares at net asset value (without sales charge),
unless the shareholder elects to receive cash (see page 13).
Distributor and Dean Witter Distributors Inc. (the "Distributor"). The Distributor receives from
Distribution the Fund, pursuant to a Rule 12b-1 Plan of Distribution, a distribution fee
Fee accrued daily and payable monthly at the rate of 0.80% per annum of the lesser
of (i) the Fund's average daily aggregate net sales or (ii) the Fund's average
daily net assets. This fee compensates the Distributor for the services provided
in distributing shares of the Fund and for its sales-related expenses. The
Distributor also receives the proceeds of any contingent deferred sales charges
(see pages 7-13).
Redemption-- At net asset value; redeemable involuntarily if total value of the account is
Contingent less than $100. Although no commission or sales charge is imposed upon the
Deferred Sales purchase of shares, a contingent deferred sales charge (scaled down from 4% to
Charge 1%) is imposed on any redemption of shares if after such redemption the
aggregate current value of an account with the Fund falls below the aggregate
amount of the investor's purchase payments made during the five years preceding
the redemption. However, there is no charge imposed on redemption of shares
purchased through reinvestment of dividends or distributions (see pages 11-13).
Risks Compared with higher rated, lower yielding fixed-income securities, portfolio
securities of the Fund may be subject to greater risk of loss of income and
principal and greater risk of increases and decreases in net asset value due to
market fluctuations. The Fund may also purchase when-issued and delayed
delivery, when, as and if issued securities and other securities subject to
repurchase agreements, all of which involve certain special risks. Investors
should review the investment objectives and policies of the Fund carefully and
consider their ability to assume the risks involved in purchasing shares of the
Fund (see pages 4 through 7).
THE ABOVE IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING ELSEWHERE IN THE
PROSPECTUS
AND IN THE STATEMENT OF ADDITIONAL INFORMATION.
</TABLE>
2
<PAGE>
SUMMARY OF FUND EXPENSES
--------------------------------------------------------------------------------
The following table illustrates all expenses and fees that a shareholder of
the Fund will incur.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
--------------------------------------------------
<S> <C>
Maximum Sales Charge Imposed on Purchases......... None
Maximum Sales Charge Imposed on Reinvested
Dividends........................................ None
Contingent Deferred Sales Charge
(as a percentage of the lesser of original
purchase price or redemption proceeds)........... 4.0%
A contingent deferred sales charge is imposed at
the following declining rates:
</TABLE>
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE
PAYMENT MADE PERCENTAGE
-------------------------------------------------- ----------------
<S> <C>
First............................................. 4.0%
Second............................................ 3.0%
Third............................................. 2.0%
Fourth............................................ 2.0%
Fifth............................................. 1.0%
Sixth and thereafter.............................. None
</TABLE>
<TABLE>
<S> <C>
Redemption Fees................................... None
Exchange Fees..................................... None
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
---------------------------------------------------------------------------------------------------------------
<S> <C>
Management Fees+................................................................................... 0.50%
12b-1 Fees*+....................................................................................... 0.80%
Other Expenses+.................................................................................... 0.23%
Total Fund Operating Expenses**+................................................................... 1.53%
</TABLE>
"Fund Operating Expenses," as shown above, are based upon estimated amounts
of expenses of the Fund for the fiscal period ending March 31, 1995.
--------------------------
* The 12b-1 fee is accrued daily and payable monthly, at an annual rate of
0.80% of the lesser of: (a) the average daily aggregate gross sales of the
Fund's shares since the inception of the Fund (not including reinvestments of
dividends or distributions), less the average daily aggregate net asset value
of the Fund's shares redeemed since the Fund's inception upon which a
contingent deferred sales charge has been imposed or waived, or (b) the
Fund's average daily net assets. A portion of the 12b-1 fee equal to 0.20% of
the Fund's average daily net assets is characterized as a service fee within
the meaning of National Association of Securities Dealers, Inc. ("NASD")
guidelines.
** "Total Fund Operating Expenses," as shown above, is based upon the sum of the
12b-1 Fees, Management Fees and estimated "Other Expenses," which may be
incurred by the Fund.
+ The Investment Manager has undertaken to assume all operating expenses
(except for any 12b-1 and/or brokerage fees) and to waive the compensation
provided for in its Management Agreement until such time as the Fund has $50
million of net assets or until six months from the date of commencement of
the Fund's operations, whichever occurs first. The fees and expenses
disclosed above do not reflect the assumption of any expenses or the waiver
of any compensation by the Investment Manager.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
--------------------------------------- ------ -------
<S> <C> <C>
You would pay the following expenses on
a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at
the end of each time period:.......... $ 56 $ 68
You would pay the following expenses on
the same investment, assuming no
redemption:........................... $ 16 $ 48
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND MAY BE GREATER OR
LESS THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management," "Plan of Distribution" and "Redemption and
Repurchases."
Long-term shareholders of the Fund may pay more in sales charges and
distribution fees than the economic equivalent of the maximum front-end sales
charges permitted by the NASD.
3
<PAGE>
THE FUND AND ITS MANAGEMENT
--------------------------------------------------------------------------------
Dean Witter High Income Securities (the "Fund") is an open-end diversified
management investment company. The Fund is a trust of the type commonly known as
a "Massachusetts business trust" and was organized under the laws of The
Commonwealth of Massachusetts on March 23, 1994.
Dean Witter InterCapital Inc. ("InterCapital" or the "Investment Manager"),
whose address is Two World Trade Center, New York, New York 10048, is the Fund's
Investment Manager. The Investment Manager, which was incorporated in July,
1992, is a wholly-owned subsidiary of Dean Witter, Discover & Co. ("DWDC"), a
balanced financial services organization providing a broad range of nationally
marketed credit and investment products.
InterCapital and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to eighty-five investment companies (the "Dean Witter
Funds"), thirty of which are listed on the New York Stock Exchange, with
combined assets of approximately $68.8 billion at April 30, 1994. The Investment
Manager also manages portfolios of pension plans, other institutions and
individuals which aggregated approximately $2.0 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 Trustees reviews the various services provided by 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.
As full compensation for the services and facilities furnished to the Fund
and for expenses of the Fund assumed by the Investment Manager, the Fund pays
the Investment Manager monthly compensation calculated daily by applying the
annual rate of 0.50% to the Fund's net assets determined as of the close of each
business day.
The Fund's expenses include: the fee of the Investment Manager; the fee
pursuant to the Plan of Distribution (see "Purchase of Fund Shares"); taxes;
certain legal, transfer agent, custodian and auditing fees; and printing and
other expenses relating to the Fund's operations which are not expressly assumed
by the Investment Manager under its Investment Management Agreement with the
Fund. The Investment Manager has undertaken to assume all operating expenses
(except for the Plan of Distribution Fee and any brokerage fees) and waive the
compensation provided for in its Investment Management Agreement until such time
as the Fund has $50 million of net assets or until six months from the date of
commencement of the Fund's operations, whichever occurs first.
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 objectives are fundamental policies of
the Fund and may not be changed without the approval of the Fund's shareholders.
The following policies may be changed by the Fund's Trustees, without
shareholder approval.
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 (at least 65% of its total
assets) in fixed-income securities rated Ba or lower by Moody's Investors
Service, Inc. ("Moody's"), or BB or lower by Standard & Poor's Corporation
("Standard & Poor's"). 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, C or D by Moody's or CCC, CC, C, CI or D by Standard &
Poor's. Fixed-income securities rated Caa or Ca by Moody's may already be in
default on payment of interest or
princi-
4
<PAGE>
pal, 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 (the Fund may purchase securities which are in default and which,
thereby, are not paying its fixed-income security holders principal and/or
interest). Bonds rated D by Standard & Poor's, their lowest bond rating, are in
payment default. For a further discussion of the characteristics and risks
associated with high yield securities, see "Risk 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. Under normal
circumstances, the dollar-weighted average maturity of the Fund's portfolio will
be between five and ten years.
Up to 35% of the Fund's total assets may, under normal conditions, be
invested in common stocks; fixed-income securities convertible into common
stocks; warrants to purchase common stocks; investment grade fixed-income
securities; U.S. Government securities; mortgage-backed securities, financial
futures contracts and options thereon; index options; options on debt and equity
securities; private placements; repurchase agreements; and reverse repurchase
agreements. In addition, any or all of the above 35% of total assets portion of
the Fund's portfolio may be comprised of securities issued by foreign issuers.
Pending investment of proceeds from the sale of shares of the Fund or of its
portfolio securities or at other times when market conditions dictate a more
"defensive" investment strategy, the Fund may invest without limit in money
market instruments, including commercial paper of corporations organized under
the laws of any state or political subdivision of the United States,
certificates of deposit, bankers' acceptances and other obligations of domestic
banks or domestic branches of foreign banks, or foreign branches of domestic
banks, in each case having total assets of at least $500 million, and
obligations issued or guaranteed by the United States Government, or foreign
governments or their respective instrumentalities or agencies. The yield on
these securities will generally tend to be lower than the yield on other
securities to be purchased by the Fund. To the extent the Fund purchases
Eurodollar certificates of deposit issued by foreign branches of domestic United
States banks, consideration will be given to their domestic marketability, the
lower reserve requirements normally mandated for overseas banking operations,
the possible impact of interruptions in the flow of international currency
transactions and economic developments which might adversely affect the payment
of principal or interest.
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 objectives will be more dependent upon the Investment
Manager's own credit analysis than would be the case with a mutual fund
investing primarily in higher quality bonds. The Investment Manager will utilize
a security's credit rating as simply one indication of an issuer's
creditworthiness and will principally rely upon its own analysis of any security
currently held by the Fund or potentially purchasable by the Fund for its
portfolio.
In determining which securities to purchase or hold for the Fund's portfolio
and in seeking to reduce credit and interest rate risks, the Investment Manager
will rely on information from various sources, including: the rating of the
security; research, analysis and appraisals of brokers and dealers, including
DWR; the views of the Fund's Trustees and others regarding economic developments
and interest rate trends; and the Investment Manager's own analysis of factors
it deems relevant. The extent to which the Investment Manager is successful in
reducing depreciation or losses arising from either interest rate or credit
risks depends in part on the Investment Manager's portfolio management skills
and judgment in evaluating the factors affecting the value of securities. No
assurance can be given regarding the degree of success that will be achieved.
5
<PAGE>
RISK CONSIDERATIONS
Because of the special nature of the Fund's investment in high income
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 income 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 income bond market and on the value of the high
income 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 income 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 income 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 income 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 Trustees to arrive at a fair
value for certain high income securities at certain times and could make it
difficult for the Fund to sell certain securities.
New laws and proposed new laws may have a potentially negative impact on the
market for high income bonds. For example, legislation requires
federally-insured savings and loan associations to divest their investments in
high yield bonds. This legislation and other proposed legislation may have an
adverse effect upon the value of high income securities and a concomitant
negative impact upon the net asset value of a share of the Fund.
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, the Fund follows procedures 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 record the transaction and thereafter reflect
the value, each day, of such security in determining its net asset value. An
increase in the percentage of the Fund's assets committed to the purchase of
securities on a when-issued or delayed delivery basis may increase the
volatility of the Fund's net asset value.
WHEN, AS AND IF ISSUED SECURITIES. The Fund may purchase securities on a
"when, as and if issued" basis under which the issuance of the security depends
upon the occurrence of a subsequent event, such as approval of a merger,
corporate reorganization, leveraged buyout or debt restructuring. If the
anticipated event does not occur and the securities are not issued, the Fund
will have lost an investment opportunity. There is no overall limit on the
percentage of the Fund's assets which may be committed to the purchase of
securities on a "when, as and if issued" basis. An increase in the percentage of
the Fund's assets committed to the purchase of
securi-
6
<PAGE>
ties on a "when, as and if issued" basis may increase the volatility of its net
asset value.
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by its Investment Manager with a
view to achieving the Fund's investment objective. In determining which
securities to purchase for the Fund or hold in the Fund's portfolio, the
Investment Manager will rely on information from various sources, including
research, analysis and appraisals of brokers and dealers, including Dean Witter
Reynolds Inc. ("DWR"), a broker-dealer affiliate of InterCapital, the views of
Trustees of the Fund and others regarding economic developments and interest
rate trends, and the Investment Manager's own analysis of factors it deems
relevant.
The Fund is managed within InterCapital's High Yield Bond Group, which
manages six funds and fund portfolios, with approximately $1.2 billion in assets
at April 30, 1994. Peter M. Avelar, Senior Vice President of InterCapital and a
member of InterCapital's High Yield Bond Group, has been designated as the
primary portfolio manager of the Fund. Mr. Avelar was Vice President of
InterCapital from December, 1990-- March, 1992 and First Vice President of
PaineWebber Asset Management from March, 1989--December, 1990. He has been
managing portfolios consisting of fixed-income and equity securities for over
five years.
Although the Fund does not engage in substantial short-term trading as a
means of achieving its investment objective, it may sell portfolio securities
without regard to the length of time they have been held, in accordance with the
investment policies described earlier. Pursuant to an order of 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. Under normal circumstances,
it is not anticipated that the portfolio trading will result in the Fund's
portfolio turnover rate exceeding 200% in any one year. 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.
INVESTMENT RESTRICTIONS
--------------------------------------------------------------------------------
The investment restrictions listed below are among the restrictions which
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. For purposes of the following limitations: (i)
all percentage limitations apply immediately after a purchase or initial
investment, and (ii) any subsequent change in any applicable percentage
resulting from market fluctuations or other changes in total or net assets does
not require elimination of any security from the portfolio.
The Fund may not:
1. As to 75% of its total assets, invest more than 5% of the value of
its total assets in the securities of any one issuer (other than obligations
issued or guaranteed by the United States Government, its agencies or
instrumentalities).
2. Invest 25% or more of the value of its total assets in securities of
issuers in any one industry. This restriction does not apply to obligations
issued or guaranteed by the United States Government, its agencies or
instrumentalities.
3. Invest more than 5% of the value of its total assets in securities
of issuers having a record, together with predecessors, of less than three
years of continuous operation. This restriction shall not apply to any
obligation issued or guaranteed by the United States Government, its
agencies or instrumentalities.
4. As to 75% of its total assets, purchase more than 10% of the voting
securities of any issuer.
PURCHASE OF FUND SHARES
--------------------------------------------------------------------------------
The Fund offers its shares for sale to the public on a continuous basis.
Pursuant to a Distribution Agreement between the Fund and Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager,
shares of the Fund are distributed by the Distributor and offered by DWR and
other brokers and 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.
7
<PAGE>
The minimum initial purchase is $1,000. Minimum subsequent purchases of $100
or more may be made by sending a check, payable to Dean Witter High Income
Securities, directly to Dean Witter Trust Company (the "Transfer Agent") at P.O.
Box 1040, Jersey City, NJ 07303 or by contacting an account executive of DWR or
other Selected Broker-Dealer. In the case of investments pursuant to Systematic
Payroll Deduction Plans (including Individual Retirement Plans), the Fund, in
its discretion, may accept investments without regard to any minimum amounts
which would otherwise be required if the Fund has reason to believe that
additional investments will increase the investment in all accounts under such
Plans to at least $1,000. Certificates for shares purchased will not be issued
unless a request is made by the shareholder in writing to the Transfer Agent.
The offering price will be the net asset value per share next determined
following receipt of an order (see "Determination of Net Asset Value").
Shares of the Fund are sold through the Distributor on a normal five
business day settlement basis; that is, payment is due on the fifth business day
(settlement date) after the order is placed with the Distributor. Shares of the
Fund purchased through the Distributor are entitled to any dividends declared
beginning on the next business day following settlement date. Since DWR and
other Selected Broker-Dealers forward investors' funds on settlement date, they
will benefit from the temporary use of the funds if payment is made prior
thereto. Shares purchased through the Transfer Agent are entitled to any
dividends declared beginning on the next business day following receipt of an
order. As noted above, orders placed directly with the Transfer Agent must be
accompanied by payment. While no sales charge is imposed at the time shares are
purchased, a contingent deferred sales charge may be imposed at the time of
redemption (see "Redemptions and Repurchases"). Sales personnel are compensated
for selling shares of the Fund at the time of their sale by the Distributor
and/or Selected Broker-Dealer. In addition, some sales personnel of the Selected
Broker-Dealer will receive non-cash compensation in the form of trips to
educational and/or business seminars and merchandise as special sales
incentives. The Fund and the Distributor reserve the right to reject any
purchase orders.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the
Act (the "Plan"), under which the Fund pays the Distributor a fee, which is
accrued daily and payable monthly, at an annual rate of 0.80% of the lesser of:
(a) the average daily aggregate gross sales of the Fund's shares since the
inception of the Fund (not including reinvestments of dividends or capital gains
distributions), less the average daily aggregate net asset value of the Fund's
shares redeemed since the Fund's inception upon which a contingent deferred
sales charge has been imposed or waived; or (b) the Fund's average daily net
assets. This fee is treated by the Fund as an expense in the year it is accrued.
A portion of the fee payable pursuant to the Plan, equal to 0.20% of the Fund's
average daily net assets, is characterized as a service fee within the meaning
of NASD guidelines.
Amounts paid under the Plan are paid to the Distributor for services
provided and the expenses borne by the Distributor and others in the
distribution of the Fund's shares, including the payment of commissions for
sales of the Fund's shares 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 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.
At any given time, the expenses in distributing 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 contingent deferred sales charges paid by investors
upon the redemption of shares (see "Redemptions and Repurchases--Contingent
Deferred Sales Charge"). For example, if $1 million in expenses in distributing
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, if any, 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 Trustees will
consider at that time the manner in which to treat such expenses. Any cumulative
expenses incurred, but not yet recovered through
8
<PAGE>
distribution fees or contingent deferred sales charges, may or may not be
recovered through future distribution fees or contingent deferred sales charges.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined once daily at 4:00
p.m., New York time, on each day that the New York Stock Exchange is open by
taking the value of all assets of the Fund, subtracting all its liabilities,
dividing by the number of shares outstanding and adjusting to the nearest cent.
The net asset value per share will not be determined on Good Friday and on such
other federal and non-federal holidays as are observed by the New York Stock
Exchange.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange is valued
at its latest sale price on that exchange; if there were no sales that day, the
security is valued at the latest bid price (in cases where a security is traded
on more than one exchange, the security is valued on the exchange designated as
the primary market by the Trustees); 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
and 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 Board of
Trustees.
Short-term debt securities with remaining maturities of sixty days or less
at the time of purchase are valued at amortized cost, unless the Trustees
determine such does not reflect the securities' fair value, in which case these
securities will be valued at their fair value as determined by the Trustees.
Certain of the Fund's portfolio securities may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service utilizes a
matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research evaluations by its staff, including
review of broker-dealer market price quotations, in determining what it believes
is the fair valuation of the portfolio securities valued by such pricing
service.
SHAREHOLDER SERVICES
--------------------------------------------------------------------------------
AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. All income dividends
and capital gains distributions are automatically paid in full and fractional
shares of the Fund (or, if specified by the shareholder, any other open-end
investment company for which InterCapital serves as investment manager
(collectively, with the Fund, the "Dean Witter Funds")), unless the shareholder
requests that they be paid in cash. Shares as acquired are not subject to the
imposition of a contingent deferred sales charge upon their redemption (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 at the net asset value per share 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 not subject to the imposition of a contingent deferred sales charge upon
their redemption (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, on a semi-monthly,
monthly or quarterly basis, to the Transfer Agent for investment in shares of
the Fund.
SYSTEMATIC WITHDRAWAL PLAN. 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 net asset value.
The Withdrawal Plan provides for monthly or quarterly (March, June, September
and December) checks in any dollar amount, not less than $25, or in any whole
percentage of the account balance, on an annualized basis. Any applicable
contingent deferred sales charge will be imposed on shares redeemed under the
Withdrawal Plan (see "Redemptions and Repurchases--Contingent Deferred Sales
Charge"). 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 contingent
9
<PAGE>
deferred sales charge) to the shareholder will be the designated monthly or
quarterly amount.
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 for use by
corporations, the self-employed, Individual Retirement Accounts and Custodial
Accounts under Section 403(b)(7) of the Internal Revenue Code. Adoption of such
plans should be on advice of legal counsel or tax adviser.
For further information regarding plan administration, custodial fees and
other details, investors should contact their DWR or other Selected Broker-
Dealer account executive or the Transfer Agent.
EXCHANGE PRIVILEGE. The Fund makes available to its shareholders an
"Exchange Privilege" allowing the exchange of shares of the Fund for shares of
other Dean Witter Funds sold with a contingent deferred sales charge ("CDSC
funds"), and for shares of Dean Witter Short-Term U.S. Treasury Trust, Dean
Witter Short-Term Bond Fund, Dean Witter Limited Term Municipal Trust and five
Dean Witter Funds which are money market funds (the foregoing eight non-CDSC
funds are hereinafter collectively referred to as the "Exchange Funds").
Exchanges may be made after the shares of the Fund acquired by purchase (not by
exchange or dividend reinvestment) have been held for thirty days. There is no
waiting period for exchanges of shares acquired by exchange or dividend
reinvestment.
An exchange to another CDSC fund or to 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 CDSC funds can be effected on the same basis.
No contingent deferred sales charge ("CDSC") is imposed at the time of any
exchange, although any applicable CDSC will be imposed upon ultimate redemption.
Shares of the Fund which are exchanged for shares of another CDSC fund having a
higher CDSC schedule than the Fund will be subject to the CDSC schedule of the
other CDSC fund, even if shares are subsequently re-exchanged for shares of the
Fund prior to redemption. Concomitantly, shares of the Fund acquired in exchange
for shares of another CDSC fund having a lower CDSC schedule than that of this
Fund will be subject to the CDSC schedule of this Fund, even if such shares are
subsequently re-exchanged for shares of the CDSC fund originally purchased.
During the period of time the shareholder remains in the 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 reexchanged for 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 CDSC fund are
reacquired. Thus, the CDSC is based upon the time (calculated as described
above) the shareholder was invested in a CDSC fund (see "Redemptions and
Repurchases--Contingent Deferred Sales Charge"). However, in the case of shares
exchanged into an Exchange Fund, 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.)
In addition, shares of the Fund may be acquired in exchange for shares of
Dean Witter Funds sold with a front-end sales charge ("front-end sales charge
funds"), but shares of the Fund, however acquired, may not be exchanged for
shares of front-end sales charge funds. Shares of a CDSC fund acquired in
exchange for shares of a front-end sales charge fund (or in exchange for shares
of other Dean Witter Funds for which shares of a front-end sales charge fund
have been exchanged) are not subject to any CDSC upon their redemption.
Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by the Investment Manager to be
abusive and contrary to the best interests of the Fund's other shareholders and,
at the Investment Manager's discretion, may be limited by the Fund's refusal to
accept additional purchases and/or exchanges from the investor. Although the
Fund does not have any specific definition of what constitutes a pattern of
frequent exchanges, and will consider all relevant factors in determining
whether a particular
10
<PAGE>
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 of 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 one and examine it carefully before
investing. Exchanges are subject to the minimum investment requirement and any
other conditions imposed by each fund. In the case of any shareholder holding a
share certificate or certificates, no exchanges may be made until the share
certificate(s) 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 of 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 account executive (no Exchange Privilege
Authorization Form is required). Other shareholders (and those shareholders who
are clients of DWR or other Selected Broker-Dealers but who wish to make
exchanges directly by writing or telephoning the Transfer Agent) must complete
and forward to the Transfer Agent an Exchange Privilege Authorization Form,
copies of which may be obtained from the Transfer Agent, to initiate an
exchange. If the Authorization Form is used, exchanges may be made in writing or
by contacting the Transfer Agent at (800) 526-3143 (toll free). The Fund will
employ reasonable procedures to confirm that exchange instructions communicated
over the telephone are genuine. Such procedures may include requiring various
forms of personal identification such as name, mailing address, social security
or other tax identification number and DWR or other Selected Broker-Dealer
account number (if any). Telephone instructions may also be recorded. If such
procedures are not employed, the Fund may be liable for any losses due to
unauthorized or fraudulent instructions.
Telephone exchange instructions will be accepted if received by the Transfer
Agent between 9:00 a.m. and 4:00 p.m., New York time, on any day the New York
Stock Exchange is open. Any shareholder wishing to make an exchange who has
previously filed an Exchange Privilege Authorization 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 with the Dean
Witter Funds in the past.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about the
Exchange Privilege.
REDEMPTIONS AND REPURCHASES
--------------------------------------------------------------------------------
REDEMPTION. Shares of the Fund can be redeemed for cash at any time at the
net asset value per share next determined; however, such redemption proceeds may
be reduced by the amount of any applicable contingent deferred sales charges
(see below). 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(s), the shares may be redeemed by surrendering the certificates with
a written request for redemption, along with any additional information required
by the Transfer Agent.
CONTINGENT DEFERRED SALES CHARGE. Shares of the Fund which are held for
five years or more after purchase (calculated from the last day of the month in
11
<PAGE>
which the shares were purchased) will not be subject to any charge upon
redemption. Shares redeemed sooner than five years after purchase may, however,
be subject to a charge upon redemption. This charge is called a "contingent
deferred sales charge" ("CDSC"), and it 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 table below:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
YEAR SINCE SALES CHARGE
PURCHASE AS A PERCENTAGE OF
PAYMENT MADE AMOUNT REDEEMED
---------------------------------- -----------------------
<S> <C>
First............................. 4.0%
Second............................ 3.0%
Third............................. 2.0%
Fourth............................ 2.0%
Fifth............................. 1.0%
Sixth and thereafter.............. None
</TABLE>
A CDSC will not be imposed on: (i) any amount which represents an increase
in value of shares purchased within the five years preceding the redemption;
(ii) the current net asset value of shares purchased more than five 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 Dean Witter Funds sold with a front-end sales charge 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: (i) 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 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 or Custodial Account under Section 403(b)(7) of the Internal Revenue
Code, provided in either case that the redemption is requested within one year
of the death or initial determination of disability, and (ii) 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 Individual
Retirement Account or Custodial Account under Section 403(b)(7) of the Internal
Revenue Code following attainment of age 59 1/2); and (c) a tax-free return of
an excess contribution to an IRA. 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. All waivers will be granted only following receipt by the
Distributor of confirmation of the shareholder's entitlement.
REPURCHASE. 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 (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 either the Fund, the
Distributor or DWR or other Selected Broker-Dealer. The offer by DWR and other
Selected Broker-Dealers to repurchase shares may be suspended without notice by
the Distributor 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 under unusual
circumstances. 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 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.
REINSTATEMENT PRIVILEGE. A shareholder who has had his or her shares
redeemed or repurchased and has not previously exercised this reinstatement
privilege may, within thirty days after the date of the
12
<PAGE>
redemption or repurchase, reinstate any portion or all of the proceeds of such
redemption or repurchase in shares of the Fund at their net asset value next
determined after a reinstatement 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 redemption or repurchase.
INVOLUNTARY REDEMPTION. The Fund reserves the right to redeem, on sixty
days' notice and at 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 Trustees. However, before the Fund redeems such shares and sends
the proceeds to the shareholder, it will notify the shareholder that the value
of the shares is less than $100 and allow him or her sixty days to make an
additional investment in an amount which will increase the value of his or her
account to $100 or more before the redemption is processed. No CDSC will be
imposed on any involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
--------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. The Fund intends to declare and pay monthly
income dividends and to distribute net short-term and net long-term capital
gains, if any, at least once each year. The Fund may, however, determine either
to distribute or to retain all or part of any long-term capital gains in any
year for reinvestment.
All dividends and capital gains distributions will be paid in additional
Fund shares (without sales charge) and automatically credited to the
shareholder's account without issuance of a share certificate unless the
shareholder requests in writing that all dividends be paid in cash and such
request is received by the close of business on the day prior to the record date
for such distributions. (See "Shareholder Services--Automatic Investment of
Dividends and Distributions".)
TAXES. Because the Fund intends to distribute all of its net investment
income and net capital gains to shareholders and otherwise 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 comply with Subchapter M of the Internal Revenue Code and
be able to forego payment of Federal income tax on its income and capital gains,
the Fund must distribute all of its net investment income, including income
accrued from zero coupon and payment-in-kind bonds. As such, the Fund may be
required to dispose of some of its portfolio securities under disadvantageous
circumstances to generate the cash required for distribution.
Shareholders will normally have to pay Federal income taxes, and any
applicable state and/or local income taxes, on the dividends and distributions
they receive from the Fund. Such dividends and distributions, to the extent they
are derived from net investment income or net short-term capital gains, are
taxable to the shareholder as ordinary dividend income regardless of whether the
shareholder receives such distributions in additional shares or in cash. Any
dividends declared in the last calendar quarter of any year to shareholders of
record for that period which are paid in the following year prior to February 1
will be deemed received by the shareholder in the prior year. Since the Fund's
income is expected to be derived primarily from interest rather than dividends,
only a small portion, if any, of such dividends and distributions is expected to
be eligible for the Federal dividends received deduction available to
corporations.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder has
held the Fund's shares and regardless of whether the distribution is received in
additional shares or in cash. Capital gains distributions are not eligible for
the dividends received deduction. Capital gains may be generated by transactions
in options and futures contracts engaged in by the Fund.
The Fund may at times make payments from sources other than income or net
capital gains. Payments from such sources will, in effect, represent a return of
a portion of each shareholder's investment. All, or a portion, of such payments
will not be taxable to shareholders.
After the end of the calendar year, shareholders will receive a statement of
their dividends and capital gains distributions for tax purposes, including
information as to the portion taxable as ordinary income and the portion taxable
as capital gains.
13
<PAGE>
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. Both the yield and the total return of
the Fund are based on historical earnings and are not intended to indicate
future performance. The yield of the Fund is computed by dividing the Fund's net
investment income over a 30-day period by an average value (using the average
number of shares entitled to receive dividends and the net asset value per share
at the end of the period), all in accordance with applicable regulatory
requirements. Such amount is compounded for six months and then annualized for a
twelve-month period to derive the Fund's yield.
The "average annual total return" of the Fund refers to a figure reflecting
the average annualized percentage increase (or decrease) in the value of an
initial investment in the Fund of $1,000 over the life of the Fund. Average
annual total return reflects all income earned by the Fund, any appreciation or
depreciation of the Fund's assets, all expenses incurred by the Fund and all
sales charges incurred by shareholders, for the stated period. It also assumes
reinvestment of all dividends and distributions paid by the Fund.
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, and year-by-year or
other types of total return figures. The Fund may also advertise the growth of
hypothetical investments of $10,000, $50,000 and $100,000 in shares of the Fund.
Such calculations may or may not reflect the deduction of the contingent
deferred sales charge which, if reflected, would reduce the performance quoted.
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.
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
VOTING RIGHTS. All shares of beneficial interest of the Fund are of $0.01
par value and are equal as to earnings, assets and voting privileges.
The Fund is not required to hold Annual Meetings of Shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. Under certain
circumstances the Trustees may be removed by action of the Trustees or by the
shareholders.
Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for obligations of the
Fund. However, the Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Fund, requires that Fund
obligations include such disclaimer, and provides for indemnification and
reimbursement of expenses out of the Fund's property for any shareholder held
personally liable for the obligations of the Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations. Given the above limitations on shareholder personal liability, and
the nature of the Fund's assets and operations, in the opinion of Massachusetts
counsel to the Fund, the risk to shareholders of personal liability is remote.
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.
The Investment Manager provided the initial capital for the Fund by
purchasing 10,000 shares of the Fund for $100,000 on May 9, 1994. As of the date
of this Prospectus, the Investment Manager owned 100% of the outstanding shares
of the Fund. The Investment Manager may be deemed to control the Fund until such
time as it owns less than 25% of the outstanding shares of the Fund.
14
<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>
15
<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.
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.
</TABLE>
16
<PAGE>
<TABLE>
<S> <C>
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.
D Debt rated "D" is in payment default. The "D" rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The "D" rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
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>
17
<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>
18
<PAGE>
THE DEAN WITTER FAMILY OF FUNDS
MONEY MARKET FUNDS DEAN WITTER RETIREMENT SERIES
Dean Witter Liquid Asset Fund Inc. Liquid Asset Series
Dean Witter Tax-Free Daily Income Trust U.S. Government Money Market Series
Dean Witter New York Municipal Money U.S. Government Securities Series
Market Trust Intermediate Income Securities Series
Dean Witter California Tax-Free Daily American Value Series
Income Trust Capital Growth Series
Dean Witter U.S. Government Money Dividend Growth Series
Market Trust Stategist Series
EQUITY FUNDS Utilities Series
Dean Witter American Value Fund Value-Added Market Series
Dean Witter Natural Resource Global Equity Series
Development Securities Inc. ASSET ALLOCATION FUNDS
Dean Witter Dividend Growth Securities Dean Witter Managed Assets Trust
Inc. Dean Witter Strategist Fund
Dean Witter Developing Growth ACTIVE ASSETS ACCOUNT PROGRAM
Securities Trust Active Assets Money Trust
Dean Witter World Wide Investment Trust Active Assets Tax-Free Trust
Dean Witter Value-Added Market Series Active Assets California Tax-Free Trust
Dean Witter Utilities Fund Active Assets Government Securities
Dean Witter Precious Metals and Trust
Minerals Trust
Dean Witter Capital Growth Securities
Dean Witter European Growth Fund Inc.
Dean Witter Pacific Growth Fund Inc.
Dean Witter Health Sciences Trust
Dean Witter Global Dividend Growth
Securities
Dean Witter Global Utilities Fund
FIXED-INCOME FUNDS
Dean Witter High Yield Securities Inc.
Dean Witter Tax-Exempt Securities Trust
Dean Witter U.S. Government Securities
Trust
Dean Witter California Tax-Free Income
Fund
Dean Witter New York Tax-Free Income
Fund
Dean Witter Convertible Securities
Trust
Dean Witter Federal Securities Trust
Dean Witter World Wide Income Trust
Dean Witter Intermediate Income
Securities
Dean Witter Global Short-Term Income
Fund Inc.
Dean Witter Multi-State Municipal
Series Trust
Dean Witter Premier Income Trust
Dean Witter Short-Term U.S. Treasury
Trust
Dean Witter Diversified Income Trust
Dean Witter Limited Term Municipal
Trust
Dean Witter Short-Term Bond Fund
Dean Witter High Income Securities
Dean Witter National Municipal Trust
<PAGE>
Dean Witter
High Income Securities
Two World Trade Center
New York, New York 10048
TRUSTEES
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. John E. Jeuck
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
Edward R. Telling
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
Peter M. Avelar
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
110 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
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
PROSPECTUS -- MAY 18, 1994
5/18/94
