<PAGE>
DEAN WITTER
HIGH INCOME SECURITIES
PROSPECTUS--NOVEMBER 18, 1994
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DEAN WITTER HIGH INCOME SECURITIES (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 (BA OR LOWER BY MOODY'S INVESTORS SERVICE, INC. OR BB OR LOWER BY
STANDARD & POOR'S CORPORATION) OR ARE NON-RATED SECURITIES OF COMPARABLE
QUALITY.
The Fund invests predominantly in lower-rated fixed-income securities commonly
known as junk bonds and investors should carefully consider the risks they
present, including the risk of default. Bonds of this type are subject to
greater risks than higher-rated securities and 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 "Risk Considerations.")
Shares of the Fund are continuously offered at net asset value. However,
redemptions and/or repurchases are subject in most cases to a contingent
deferred sales charge, scaled down from 4% to 1% of the amount redeemed, if made
within five years of purchase, which charge will be paid to the Fund's
Distributor, Dean Witter Distributors Inc. (See "Redemptions and
Repurchases--Contingent Deferred Sales Charge.") In addition, the Fund pays the
Distributor a distribution fee pursuant to a Rule 12b-1 Plan of Distribution at
the annual rate of 0.80% of the lesser of the (i) average daily aggregate net
sales or (ii) average daily net assets of the Fund. (See "Purchase of Fund
Shares-- Plan of Distribution.")
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 November 18, 1994, 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.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Prospectus Summary................................ 2
Summary of Fund Expenses.......................... 3
Financial Highlights.............................. 4
The Fund and its Management....................... 5
Investment Objectives and Policies................ 5
Risk Considerations............................. 6
Investment Restrictions........................... 10
Purchase of Fund Shares........................... 10
Shareholder Services.............................. 12
Redemptions and Repurchases....................... 14
Dividends, Distributions and Taxes................ 15
Performance Information........................... 16
Additional Information............................ 17
Financial Statements--September 30, 1994.......... 18
Appendix.......................................... 23
</TABLE>
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.
DEAN WITTER
HIGH INCOME SECURITIES
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 392-2550 or (800) 526-3143
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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 DISTRIBUTORS INC., DISTRIBUTOR
<PAGE>
PROSPECTUS SUMMARY
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<TABLE>
<S> <C>
THE FUND The Fund is organized as a Trust, commonly known as a Massachusetts business trust, and
is an open-end diversified management investment company investing principally in
lower-rated fixed-income securities (see page 5).
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SHARES OFFERED Shares of beneficial interest with $0.01 par value (see page 17).
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OFFERING At net asset value without sales charge (see page 10). Shares redeemed within five years
PRICE of purchase are subject to a contingent deferred sales charge under most circumstances
(see page 14).
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MINIMUM Minimum initial investment, $1,000; minimum subsequent investment, $100 (see page 11).
PURCHASE
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INVESTMENT A high level of current income primarily; capital appreciation is secondary (see page
OBJECTIVE 5).
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INVESTMENT Dean Witter InterCapital Inc., the Investment Manager of the Fund, and its wholly-owned
MANAGER subsidiary, Dean Witter Services Company Inc., serve in various investment management,
advisory, management and administrative capacities to ninety investment companies and
other portfolios with assets of approximately $69.5 billion at October 31, 1994 (see
page 5).
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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 5).
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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 reinvested
DISTRIBUTIONS in additional shares at net asset value (without sales charge), unless the shareholder
elects to receive cash (see pages 15-16).
- -------------------------------------------------------------------------------------------------------
DISTRIBUTOR Dean Witter Distributors Inc. (the "Distributor"). The Distributor receives from the
AND Fund, pursuant to a Rule 12b-1 Plan of Distribution, a distribution fee accrued daily
DISTRIBUTION and payable monthly at the rate of 0.80% per annum of the lesser of (i) the Fund's
FEE 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 11-15).
- -------------------------------------------------------------------------------------------------------
REDEMPTION-- At net asset value; redeemable involuntarily if total value of the account is less than
CONTINGENT $100. Although no commission or sales charge is imposed upon the purchase of shares, a
DEFERRED SALES contingent deferred sales charge (scaled down from 4% to 1%) is imposed on any
CHARGE 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 14-15).
- -------------------------------------------------------------------------------------------------------
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,
restricted securities, and zero coupon securities, rights and warrants, convertible
securities, foreign securities, common stock and adjustable rate mortgages and enter
into repurchase agreements, reverse repurchase agreements and dollar rolls, options and
futures transactions and forward foreign currency exchange contracts, 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 6-10).
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</TABLE>
THE ABOVE IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING
ELSEWHERE IN THE PROSPECTUS
AND IN THE STATEMENT OF ADDITIONAL INFORMATION.
2
<PAGE>
SUMMARY OF FUND EXPENSES
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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 estimated for
the fiscal year ending March 31, 1995.
<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%
</TABLE>
A contingent deferred sales charge is imposed at the following declining rates:
<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
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF
AVERAGE NET ASSETS)
Management Fees+.................................. 0.50%
12b-1 Fees*+...................................... 0.80%
Other Expenses+................................... 0.23%
Total Fund Operating Expenses**+.................. 1.53%
"Fund Operating Expenses," as shown above, are based upon
estimated amounts of expenses of the Fund for the fiscal
period ending March 31, 1995.
<FN>
- ------------------------
* 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 fees and expenses disclosed above do not reflect the assumption of any
expenses or the waiver of any compensation by the Investment Manager.
</TABLE>
<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>
FINANCIAL HIGHLIGHTS
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The following ratios and per share data for a share of beneficial interest
outstanding throughout the period has been taken from the records of the Fund
without examination by independent accountants. The financial highlights should
be read in conjunction with the financial statements and notes thereto. The
related unaudited financial statements are contained in this Prospectus
commencing on page 18.
<TABLE>
<CAPTION>
FOR THE PERIOD
JUNE 2, 1994*
THROUGH
SEPTEMBER 30, 1994
------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $ 10.00
-------
Net investment income..................................... 0.26
Net realized and unrealized loss on investments........... (0.22)
-------
Total from investment operations.......................... 0.04
Dividends to shareholders from net investment income...... (0.25)
-------
Net asset value, end of period............................ $ 9.79
-------
-------
TOTAL INVESTMENT RETURN+.................................... 0.36%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).................. $82,194
Ratios to average net assets:
Expenses.................................................. 1.41%(2)(3)
Net investment income..................................... 9.82%(2)(3)
Portfolio turnover rate................................... 11%
<FN>
- ------------------------
* COMMENCEMENT OF OPERATIONS.
+ DOES NOT REFLECT THE DEDUCTION OF SALES LOAD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
(3) IF THE FUND HAD BORNE ALL THE EXPENSES THAT WERE ASSUMED OR WAIVED BY THE
INVESTMENT MANAGER, THE ABOVE EXPENSE RATIO WOULD HAVE BEEN 1.88% AND THE
ABOVE NET INVESTMENT INCOME RATIO WOULD HAVE BEEN 9.36%.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<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 ninety investment companies (the "Dean Witter
Funds"), thirty of which are listed on the New York Stock Exchange, with
combined assets of approximately $67.5 billion at October 31, 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 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.
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.
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 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 (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
5
<PAGE>
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.
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 "Divi-
6
<PAGE>
dends, 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. In addition, new laws and
proposed new laws 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.
During the fiscal period ended September 30, 1994, 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.................................. 50.3%
AA/Aa.................................... 0.0%
A/A...................................... 0.0%
BBB/Baa.................................. 0.0%
BB/Ba.................................... 5.9%
B/B...................................... 36.7%
CCC/Caa.................................. 6.3%
CC/Ca.................................... 0.0%
C/C...................................... 0.0%
Unrated.................................. 0.8%
</TABLE>
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 risks of default or
bankruptcy of the selling financial institution, the Fund follows procedures to
minimize such risks. These procedures include effecting repurchase transactions
only with large, well-capitalized and well-established financial institutions
and maintaining adequate collateralization.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. From time
to time, in the ordinary course of business, the Fund may purchase securities on
a when-issued or delayed delivery basis or may purchase or sell securities on a
forward commitment basis. When such transactions are negotiated, the price is
fixed at the time of the commitment, but delivery and payment can take place a
month or more after the date of the commitment. While the Fund will only
purchase securities on a when-issued, delayed delivery or forward commitment
basis with the intention of acquiring the securities, the Fund may sell the
securities before the settlement date, if it is deemed advisable. The securities
so purchased or sold are subject to market fluctuation and no interest accrues
to the purchaser during this period. An increase in the percentage of the Fund's
assets committed to the purchase of securities on a when-issued, delayed
delivery or forward commitment 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 securities on a "when, as and if issued" basis may
increase the volatility of its net asset value.
PRIVATE PLACEMENTS. The Fund may invest up to 10% 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. (Securities eligible for
resale pursuant to Rule 144A under the Securities Act, and determined to be
liquid pursuant to the procedures discussed in the following paragraph, are not
subject to the foregoing restriction.) 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 Trustees 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 included within the category "illiquid securities", which under current
policy may not exceed 15% of the Fund's net assets.
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS. The Fund may also use reverse
repurchase agreements and dollar rolls as part of its investment strategy.
Reverse repurchase agreements involve sales by the Fund of portfolio assets
concurrently with an agreement by the Fund to repurchase the same assets at a
later date at a fixed price. The Fund may enter into dollar rolls in which the
Fund sells
7
<PAGE>
securities and simultaneously contracts to repurchase substantially similar
(same type and coupon) securities on a specified future date. Reverse repurchase
agreements and dollar rolls involve the risk that the market value of the
securities the Fund is obligated to repurchase under the agreement may decline
below the repurchase price. In the event the buyer of securities under a reverse
repurchase agreement or dollar roll files for bankruptcy or becomes insolvent,
the Fund's use of proceeds of the agreement may be restricted pending a
determination by the other party, or its trustee or receiver, whether to enforce
the Fund's obligation to repurchase the securities. Reverse repurchase
agreements and dollar rolls are speculative techniques involving leverage, and
are considered borrowings by the Fund.
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. For this reason, zero coupon securities are subject to substantially
greater price fluctuations during periods of changing prevailing interest rates
than are comparable securities which pay interest currently. The Fund may have
to sell a portion of its holdings of zero coupon securities to enable it to meet
a certain level of distributions.
RIGHTS AND WARRANTS. The Fund may acquire rights and/or warrants which are
attached to other securities in its portfolio, or which are issued as a
distribution by the issuer of a security held in its portfolio. Rights and/or
warrants are, in effect, options to purchase equity securities at a specific
price, generally valid for a specific period of time, and have no voting rights,
pay no dividends and have no rights with respect to the corporation issuing
them.
CONVERTIBLE SECURITIES. Among the fixed-income securities in which the Fund may
invest are "convertible" securities. A convertible security is a bond,
debenture, note, preferred stock or other security that may be converted into or
exchanged for a prescribed amount of common stock of the same or a different
issuer within a particular period of time at a specified price or formula.
Convertible securities rank senior to common stocks in a corporation's capital
structure and, therefore, entail less risk than the corporation's common stock.
The value of a convertible security is a function of its "investment value" (its
value as if it did not have a conversion privilege), and its "conversion value"
(the security's worth if it were to be exchanged for the underlying security, at
market value, pursuant to its conversion privilege). Fluctuations in the prices
of an underlying security will affect the conversion value and cause a
concomitant fluctuation in the price of the convertible security.
FOREIGN SECURITIES. The Fund may invest in securities of foreign companies.
Foreign securities investments may be affected by changes in currency rates or
exchange control regulations, change 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.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Fund may enter into forward
foreign currency exchange contracts ("forward contracts") as a hedge against
fluctuations in future foreign exchange rates. The Fund will conduct its foreign
currency exchange transactions either on a spot (i.e., cash) basis at the spot
rate prevailing in the foreign currency exchange market, or through entering
into forward contracts to purchase or sell foreign currencies. A forward
contract involves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days from the date of the contract
agreed upon by the parties, at a price set at the time of the contract. Should
forward prices decline during the period between the Fund's entering into a
forward contract for the sale of a foreign currency and the date it enters into
an offsetting contract for the purchase of the foreign currency, the Fund will
realize a gain to the extent the price of the currency it has agreed to sell
exceeds the price of the currency it has agreed to purchase. Should forward
prices increase, the Fund will suffer a loss to the extent the price of the
currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell.
COMMON STOCKS. 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 recapitalization, 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.
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ADJUSTABLE RATE MORTGAGE SECURITIES. The Fund may also invest in adjustable
rate mortgage securities ("ARMs"), which are pass-through mortgage securities
collateralized by mortgages with adjustable rather than fixed rates. ARMs
eligible for inclusion in a mortgage pool generally provide for a fixed initial
mortgage interest rate for either the first three, six, twelve or thirteen
scheduled monthly payments. Thereafter, the interest rates are subject to
periodic adjustment based on changes to a designated benchmark index.
ARMs contain maximum and minimum rates beyond which the mortgage interest
rate may not vary over the lifetime of the security. In addition, certain ARMs
provide for additional limitations on the maximum amount by which the mortgage
interest rate may adjust for any single adjustment period. Alternatively,
certain ARMs contain limitations on changes in the required monthly payment. In
the event that a monthly payment is not sufficient to pay the interest accruing
on an ARM, any such excess interest is added to the principal balance of the
mortgage loan, which is repaid through future monthly payments. If the monthly
payment for such an instrument exceeds the sum of the interest accrued at the
applicable mortgage interest rate and the principal payment required at such
point to amortize the outstanding principal balance over the remaining term of
the loan, the excess is utilized to reduce the then outstanding principal
balance of the ARM.
OPTIONS AND FUTURES TRANSACTIONS. The Fund may purchase and sell (write) call
and put options on portfolio securities which are denominated in either U.S.
dollars or foreign currencies and on the U.S. dollar and foreign currencies,
which are or may in the future be listed on several U.S. and foreign securities
exchanges or are written in over-the-counter transactions ("OTC options"). OTC
options are purchased from or sold (written) to dealers or financial
institutions which have entered into direct agreements with the Fund.
The Fund is permitted to write covered call options on portfolio securities
and the U.S. dollar and foreign currencies, without limit, in order to hedge
against the decline in the value of a security or currency in which such
security is denominated, to earn additional income and to close out long call
option positions. The Fund may write covered put options, under which the Fund
incurs an obligation to buy the security (or currency) underlying the option
from the purchaser of the put at the option's exercise price at any time during
the option period, at the purchaser's election.
The Fund may purchase listed and OTC call and put options in amounts
equalling up to 5% of its total assets. The Fund may purchase call options to
close out a covered call position or to protect against an increase in the price
of a security it anticipates purchasing or, in the case of call options on a
foreign currency, to hedge against an adverse exchange rate change of the
currency in which the security it anticipates purchasing is denominated
vis-a-vis the currency in which the exercise price is denominated. The Fund may
purchase put options on securities which it holds in its portfolio to protect
itself against a decline in the value of the security and to close out written
put positions in a manner similar to call option closing purchase transactions.
There are no other limits on the Fund's ability to purchase call and put
options.
The Fund may purchase and sell futures contracts that are currently traded,
or may in the future be traded, on U.S. and foreign commodity exchanges on
underlying portfolio securities, on any currency ("currency" futures), on U.S.
and foreign fixed-income securities ("interest rate" futures) and on such
indexes of U.S. or foreign equity or fixed-income securities as may exist or
come into being ("index" futures). The Fund may purchase or sell interest rate
futures contracts for the purpose of hedging some or all of the value of its
portfolio securities (or anticipated portfolio securities) against changes in
prevailing interest rates. The Fund may purchase or sell index futures contracts
for the purpose of hedging some or all of its portfolio (or anticipated
portfolio) securities against changes in their prices (or the currency in which
they are denominated). As a futures contract purchaser, the Fund incurs an
obligation to take delivery of a specified amount of the obligation underlying
the contract at a specified time in the future for a specified price. As a
seller of a futures contract, the Fund incurs an obligation to deliver the
specified amount of the underlying obligation at a specified time in return for
an agreed upon price.
The Fund also may purchase and write call and put options on futures
contracts which are traded on an exchange and enter into closing transactions
with respect to such options to terminate an existing position.
New futures contracts, options and other financial products and various
combinations thereof continue to be developed. The Fund may invest in any such
futures, options or products as may be developed, to the extent consistent with
its investment objective and applicable regulatory requirements.
RISKS OF OPTIONS AND FUTURES TRANSACTIONS. The Fund may close out its position
as writer of an option, or as a buyer or seller of a futures contract, only if a
liquid secondary market exists for options or futures contracts of that series.
There is no assurance that such a market will exist, particularly in the case of
OTC options, as such options may generally only be closed out by entering into a
closing purchase transaction with the purchasing dealer. Also, exchanges may
limit the amount by which the price of many futures contracts may move on any
day. If the price moves equal the daily limit on successive days, then it may
prove impossible to liquidate a futures position until the daily limit moves
have ceased.
While the futures contracts and options transactions to be engaged in by the
Fund for the purpose of hedging the Fund's portfolio securities are not
speculative in nature, there are risks inherent in the use of such instruments.
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One such risk is that the Investment Manager could be incorrect in its
expectations as to the direction or extent of various interest rate or price
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 of the
futures contract. Another risk which will arise in employing futures contracts
to protect against the price volatility of portfolio securities is that the
prices of securities, currencies and indexes subject to futures contracts (and
thereby the futures contract prices) may correlate imperfectly with the behavior
of the U.S. dollar cash prices of the Fund's portfolio securities and their
denominated currencies. See the Statement of Additional Information for a
further discussion of risks.
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 five funds and fund portfolios, with approximately $1.01 billion in
assets at October 31, 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
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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
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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
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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.
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 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 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.
For the period ended September 30, 1994, the Fund accrued payments under the
Plan amounting to $123,320, which amount is equal to 0.80% of the Fund's average
daily net assets for the period. The payments accrued under the Plan were
calculated pursuant to clause (b) of the compensation formula under the Plan.
At any given time the expenses of 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. The
Distributor has advised the Fund that such excess amounts including the carrying
charge described above, totalled $2,544,722 at September 30, 1994, which was
equal to 3.10% of the Fund's net assets on such date.
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
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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 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 or other
domestic or foreign 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
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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 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,
Indi-
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vidual 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 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
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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 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.
14
<PAGE>
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
or telegraphic 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 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
15
<PAGE>
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.
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 one year and 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.
16
<PAGE>
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.
17
<PAGE>
DEAN WITTER HIGH INCOME SECURITIES
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1994 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- -------------- --------- -------- -----------
<C> <S> <C> <C> <C>
CORPORATE BONDS (40.8%)
AIRLINES (1.0%)
$ 1,000 GPA Delaware, Inc........................................... 8.75% 12/15/98 $ 840,000
-----------
AUTOMOTIVE (2.4%)
1,000 Envirotest Systems Corp..................................... 9.625 4/1/03 920,000
1,000 Harvard Industries, Inc..................................... 12.00 7/15/04 1,020,000
-----------
1,940,000
-----------
CABLE & TELECOMMUNICATIONS (0.7%)
1,000 Marcus Cable Co............................................. 13.50++ 8/1/04 550,000
-----------
CHEMICALS (3.8%)
1,000 General Chemical Corp....................................... 14.00 11/1/98 1,060,000
2,000 Georgia Gulf Corp........................................... 15.00 4/15/00 2,080,000
-----------
3,140,000
-----------
COMPUTER EQUIPMENT (1.3%)
1,000 Unisys Corp................................................. 13.50 7/1/97 1,100,000
-----------
CONSUMER PRODUCTS (4.0%)
1,000 J.B. Williams Holdings, Inc. - 144A**....................... 12.50* 3/1/04 980,000
1,000 Playtex Family Products Corp................................ 9.00 12/15/03 860,000
1,000 Revlon Worldwide Corp. (Series B)........................... 0.00 3/15/98 465,000
1,000 Thermoscan, Inc. (Units)++ - 144A**......................... 11.50* 8/15/01 1,010,000
-----------
3,315,000
-----------
CONTAINERS (0.5%)
1,000 Ivex Holdings Corp. (Series B).............................. 13.25++ 3/15/05 455,000
-----------
ELECTRICAL & ALARM SYSTEMS (0.8%)
1,000 Mosler, Inc................................................. 11.00 4/15/03 620,000
-----------
ENTERTAINMENT, GAMING & LODGING (2.1%)
500 Motels of America, Inc...................................... 12.00 4/15/04 560,000
1,000 Spectravision, Inc.......................................... 11.65+ 12/1/02 517,500
1,000 Trump Plaza Holding Assoc................................... 12.50+ 6/15/03 650,000
-----------
1,727,500
-----------
FOOD & BEVERAGES (1.4%)
1,000 Envirodyne Industries, Inc.................................. 10.25 12/1/01 805,000
1,000 Specialty Foods Acquisition Corp. (Series B)................ 13.00++ 8/15/05 365,000
-----------
1,170,000
-----------
HEALTHCARE PRODUCTS (1.4%)
1,090 Alco Health Services Corp. - 144A**......................... 14.50 9/15/99 1,159,488
-----------
MANUFACTURING (2.4%)
1,000 Berry Plastics Corp. (Units)++.............................. 12.25 4/15/04 990,000
1,000 MS Essex Holdings, Inc...................................... 16.00++ 5/15/04 950,000
-----------
1,940,000
-----------
MANUFACTURING - DIVERSIFIED (3.0%)
1,000 Interlake Corp.............................................. 12.125 3/1/02 912,500
1,000 J.B. Poindexter, Inc........................................ 12.50 5/15/04 982,500
1,000 Jordan Industries, Inc...................................... 11.75++ 8/1/05 565,000
-----------
2,460,000
-----------
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- -------------- --------- -------- -----------
<C> <S> <C> <C> <C>
OIL & GAS (3.3%)
$ 1,000 Deeptech International, Inc................................. 12.00% 12/15/00 $ 950,000
1,000 Empire Gas Corp. (Units)++.................................. 7.00++ 7/15/04 770,000
1,000 Presidio Oil Co. (Series B)................................. 13.90*** 7/15/02 1,000,000
-----------
2,720,000
-----------
PAPER & FOREST PRODUCTS (2.5%)
1,000 Container Corp.............................................. 14.00 12/1/01 1,080,000
1,000 Fort Howard Corp............................................ 14.125++ 11/1/04 997,500
-----------
2,077,500
-----------
PUBLISHING (1.1%)
1,000 United States Bancorp....................................... 10.375 6/1/02 865,000
-----------
RESTAURANTS (2.8%)
1,000 American Restaurant Group Holdings, Inc..................... 14.00++ 12/15/05 480,000
1,000 Carrols Corp................................................ 11.50 8/15/03 940,000
1,000 Flagstar Corp............................................... 11.25 11/1/04 860,000
-----------
2,280,000
-----------
RETAIL (2.4%)
1,000 Cort Furniture Rental Corp.................................. 12.00 9/1/00 980,000
1,000 Thrifty Payless Holdings, Inc............................... 12.25 4/15/04 980,000
-----------
1,960,000
-----------
RETAIL - FOOD CHAINS (3.1%)
1,000 Food 4 Less Holdings, Inc................................... 15.25++ 12/15/04 700,000
1,000 Grand Union Capital Corp. (Series A)........................ 0.00 1/15/07 48,750
1,000 Pathmark Stores, Inc........................................ 9.625 5/1/03 902,500
1,000 Purity Supreme, Inc. (Series B)............................. 11.75 8/1/99 892,500
-----------
2,543,750
-----------
TEXTILES (0.8%)
839 JPS Textiles Group, Inc..................................... 10.85 6/1/99 648,127
-----------
TOTAL CORPORATE BONDS (IDENTIFIED COST $34,152,236)....................
33,511,365
-----------
U.S. GOVERNMENT OBLIGATIONS (55.2%)
29,500 U.S. Treasury Note.......................................... 11.625 11/15/94 29,716,641
15,000 U.S. Treasury Note.......................................... 12.625 5/15/95 15,653,906
-----------
TOTAL U.S. GOVERNMENT OBLIGATIONS (IDENTIFIED COST $45,756,718)........
45,370,547
-----------
</TABLE>
18
<PAGE>
DEAN WITTER HIGH INCOME SECURITIES
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1994 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------- -----------
<C> <S> <C>
COMMON STOCKS (A) (0.0%)
FOOD & BEVERAGE (0.0%)
15,000 Specialty Foods Acquisition Corp. - 144A**........ $ 15,000
-----------
RESTAURANT (0.0%)
American Restaurant Group Holdings, Inc. -
1,000 144A**........................................... 22,000
-----------
TOTAL COMMON STOCKS (IDENTIFIED COST $37,000)..... 37,000
-----------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION
WARRANTS DATE
- -------------- ----------
<C> <S> <C> <C>
WARRANTS (A) (0.1%)
RETAIL (0.1%)
New Cort Holdings Corp. (Identified
33,000 Cost $33,000)........................ 9/1/98 49,500
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN
THOUSANDS)
- --------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (2.2%)
U.S. GOVERNMENT AGENCY (B) (1.4%)
$ 1,150 Student Loan Market Association 4.902%
due 10/03/94 (Amortized Cost
$1,149,687)............................. 1,149,687
-----------
REPURCHASE AGREEMENT (0.8%)
698 The Bank of New York 5.00% due 10/03/94
(dated 9/30/94; proceeds $697,931;
collateralized by $729,955 U.S. Treasury
Bonds 7.50% due 11/15/16 valued at
$711,791) (Identified Cost $697,834).... 697,834
-----------
TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED
COST $1,847,521)........................ 1,847,521
-----------
</TABLE>
<TABLE>
<C> <S> <C> <C>
TOTAL INVESTMENTS (IDENTIFIED
COST $81,826,475) (C)......................... 98.3% 80,815,933
OTHER ASSETS IN EXCESS OF
LIABILITIES................................... 1.7 1,378,371
------ -----------
NET ASSETS..................................... 100.0 % $82,194,304
------ -----------
------ -----------
<FN>
- ----------------------------------
* ADJUSTABLE RATE. RATE SHOWN IS THE RATE IN EFFECT AT SEPTEMBER 30,
1994.
** RESALE IS RESTRICTED TO QUALIFIED INSTITUTIONAL INVESTORS.
*** BASE INTEREST RATE IS 13.25%, ADDITIONAL INTEREST IF ANY, IS LINKED TO
THE GAS INDEX. RATE SHOWN IS THE RATE IN EFFECT AT SEPTEMBER 30, 1994.
+ CONSISTS OF MORE THAN ONE CLASS OF SECURITIES TRADED TOGETHER AS A
UNIT; GENERALLY BONDS WITH ATTACHED STOCKS/WARRANTS.
++ PAYMENT-IN-KIND SECURITIES.
+++ CURRENTLY ZERO COUPON BOND AND WILL PAY INTEREST AT THE RATE SHOWN AT
A FUTURE SPECIFIED DATE.
(A) NON-INCOME PRODUCING SECURITY.
(B) U.S. GOVERNMENT AGENCY WAS PURCHASED ON A DISCOUNT BASIS. THE INTEREST
RATE SHOWN HAS BEEN ADJUSTED TO REFLECT A BOND EQUIVALENT YIELD.
(C) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS $81,826,475; THE
AGGREGATE GROSS UNREALIZED APPRECIATION IS $281,622 AND THE AGGREGATE
GROSS UNREALIZED DEPRECIATION IS $1,292,164, RESULTING IN NET
UNREALIZED DEPRECIATION OF $1,010,542.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE>
DEAN WITTER HIGH INCOME SECURITIES
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1994 (UNAUDITED)
- -------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (identified
cost $81,826,475) (Note 1).................... $ 80,815,933
Receivable for:
Interest..................................... 2,985,740
Shares of beneficial interest sold........... 2,035,845
Deferred organizational expenses (Note 1)...... 149,480
Prepaid expenses............................... 195
------------
TOTAL ASSETS........................... 85,987,193
------------
LIABILITIES:
Payable for:
Investments purchased........................ 3,307,135
Dividends to shareholders.................... 148,120
Shares of beneficial interest repurchased.... 70,619
Plan of distribution fee (Note 3)............ 47,375
Investment management fee (Note 2)........... 30,373
Accrued expenses and other payables (Note 4)... 34,615
Organizational expenses (Note 1)............... 154,652
------------
TOTAL LIABILITIES...................... 3,792,889
------------
NET ASSETS:
Paid-in-capital................................ 83,420,271
Undistributed net investment income............ 58,220
Net realized loss on investments............... (273,645)
Net unrealized depreciation on investments..... (1,010,542)
------------
NET ASSETS............................. $ 82,194,304
------------
------------
NET ASSET VALUE PER SHARE, 8,393,600 shares
outstanding (unlimited shares authorized of
$.01 par value)............................... $9.79
------------
------------
</TABLE>
STATEMENT OF OPERATIONS FOR THE PERIOD
JUNE 2, 1994 THROUGH SEPTEMBER 30, 1994 (NOTE 1) (UNAUDITED)
- -------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
INTEREST INCOME.............................. $ 1,751,237
-----------
EXPENSES
Plan of distribution fee (Note 3).......... 123,320
Investment management fee (Note 2)......... 77,921
Registration fees.......................... 28,524
Professional fees.......................... 22,560
Transfer agent fees and expenses (Note
4)........................................ 15,240
Organizational expenses.................... 10,520
Trustees´ fees and expenses.......... 6,600
Custodian fees............................. 4,920
Shareholder reports and notices............ 3,249
-----------
TOTAL EXPENSES BEFORE FEES
WAIVED/ASSUMED........................ 292,854
-----------
Less: Expenses Waived/Assumed by Investment
Manager (Note 2).......................... (72,477)
-----------
TOTAL EXPENSES AFTER FEES
WAIVED/ASSUMED........................ 220,377
-----------
NET INVESTMENT INCOME.............. 1,530,860
-----------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS (Note 1):
Net realized loss on investments........... (273,645)
Unrealized depreciation on investments..... (1,010,542)
-----------
NET LOSS ON INVESTMENTS................ (1,284,187)
-----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS......... $ 246,673
-----------
-----------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JUNE 2, 1994
THROUGH
SEPTEMBER 30, 1994
(NOTE 1)
------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income......................................................... $ 1,530,860
Net realized loss on investments.............................................. (273,645)
Unrealized depreciation on investments........................................ (1,010,542)
------------------
Net increase in net assets resulting from operations........................ 246,673
Dividends to shareholders from net investment income.............................. (1,472,640)
Net increase from transactions in shares of beneficial interest (Note 5).......... 83,320,271
------------------
Total increase.............................................................. 82,094,304
NET ASSETS:
Beginning of period............................................................... 100,000
------------------
END OF PERIOD (including undistributed net investment income of $58,220).......... $ 82,194,304
------------------
------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE>
DEAN WITTER HIGH INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES--Dean Witter High Income Securities
(the "Fund") is registered under the Investment Company Act of 1940, as amended
(the "Act"), as a diversified, open-end management investment company. The Fund
was organized as a Massachusetts business trust on March 23, 1994 and had no
operations other than those relating to organizational matters and the issuance
of 10,000 shares of beneficial interest for $100,000 to Dean Witter InterCapital
Inc. (the "Investment Manager"). The Fund commenced operations on June 2, 1994.
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 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 a security is traded on
more than one exchange, the security is valued on the exchange designated as
the primary market by the Trustees); (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 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 Trustees; (4)
certain of the Fund's portfolio securities may be valued by an outside
pricing service approved by the Trustees. 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, in determining
what it believes is the fair valuation of the portfolio securities valued by
such pricing service; (5) short-term debt securities having a maturity date
of more than sixty days are valued on a mark-to-market basis, that is, at
prices based on market quotations for securities of a similar type, yield,
quality and maturity, 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; and (6) 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 Trustees.
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 on the identified cost
method. Discounts on securities purchased are amortized over the life of the
respective securities. The Fund does not amortize premiums on securities
purchased. Interest income is accrued daily except where collection is not
expected.
C. REPURCHASE AGREEMENTS--The Fund's custodian takes possession on behalf of
the Fund of the collateral pledged for investments in repurchase agreements.
It is the policy of the Fund to value the underlying collateral daily on a
mark-to-market basis to determine that the value, including accrued
interest, is at least equal to the repurchase price plus accrued interest.
In the event of default of the obligation to repurchase, the Fund has the
right to liquidate the collateral and apply the proceeds in satisfaction of
the obligation.
D. 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.
E. 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.
F. ORGANIZATIONAL EXPENSES--The Investment Manager paid the organizational
expenses of the Fund in the amount of approximately $160,000 exclusive of
approximately $5,300 assumed by the Investment Manager. The Fund will
reimburse the Investment Manager for such expenses which have been deferred
and are being amortized by the Fund on the straight-line method over a
period not to exceed five years from the commencement of operations.
21
<PAGE>
DEAN WITTER HIGH INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
2. INVESTMENT MANAGEMENT AGREEMENT--Pursuant to an Investment Management
Agreement, the Fund pays its Investment Manager a management fee, calculated
daily and payable monthly, by applying the annual rate of 0.50% to the net
assets of the Fund determined as of the close of each business day.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
The Investment Manager has undertaken to assume all expenses (except for the
Plan of Distribution fee and brokerage fees) and waive the compensation provided
for in the Agreement until such time as the Fund reached $50 million of net
assets which occurred on August 3, 1994.
3. PLAN OF DISTRIBUTION--Shares of the Fund are distributed by Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager.
The Fund has adopted a Plan of Distribution (the "Plan"), pursuant to Rule 12b-1
under the Act pursuant to which the Fund pays the Distributor compensation
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
Fund's inception (not including reinvestment of dividend or capital gain
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 upon which such charge has been waived; or (b)
the Fund's average daily net assets. Amounts paid under the Plan are paid to the
Distributor to compensate it for the services provided and the expenses borne by
it 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, the account executives of Dean Witter Reynolds Inc., an affiliate
of the Investment Manager and Distributor, and other employees or selected
dealers who engage in or support distribution of the Fund's 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 be compensated under the Plan for
its opportunity costs in advancing such amounts, which compensation would be in
the form of a carrying charge on any unreimbursed expenses incurred by the
Distributor.
Provided that the Plan continues in effect, any cumulative expenses incurred
but not yet recovered may be recovered through future distribution fees from the
Fund and contingent deferred sales charges from the Fund's shareholders.
The Distributor has informed the Fund that for the period ended September
30, 1994, it received approximately $12,700 in contingent deferred sales charges
from certain redemptions of the Fund's shares. The Fund's shareholders pay such
charges which are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES--The cost of
purchases and proceeds from sales of portfolio securities, excluding short-term
investments, for the period ended September 30, 1994 aggregated $38,622,944 and
$4,560,375, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and the
Distributor, is the Fund's transfer agent. At September 30, 1994, the Fund had
transfer agent fees and expenses payable of approximately $7,500.
5. SHARES OF BENEFICIAL INTEREST--Transactions in shares of beneficial interest
were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD JUNE 2, 1994*
THROUGH SEPTEMBER 30, 1994
--------------------------------
SHARES AMOUNT
--------- -----------
<S> <C> <C>
Sold........................................................................ 8,692,950 $86,374,565
Reinvestment of dividends................................................... 61,149 601,303
--------- -----------
8,754,099 86,975,868
Repurchased................................................................. (370,499) (3,655,597)
--------- -----------
Net increase................................................................ 8,383,600 $83,320,271
--------- -----------
--------- -----------
<FN>
- ------------------------
* Commencement of Operations.
</TABLE>
6. SELECTED PER SHARE DATA AND RATIOS--See the "Financial Highlights" table on
page 4 of this Prospectus.
22
<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>
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
23
<PAGE>
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.
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.
</TABLE>
24
<PAGE>
<TABLE>
<S> <C>
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>
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>
25
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26
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27
<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
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
Dean Witter InterCapital Inc.
