<PAGE> 1
DEAN WITTER HIGH INCOME SECURITIES Two World Trade Center, New York, New York
10048
LETTER TO THE SHAREHOLDERS September 30, 1996
DEAR SHAREHOLDER:
After rebounding sharply during 1995, the U.S. Treasury market retreated during
the first nine months of 1996, as signs of an economic recovery fanned inflation
fears. The high-yield market, which performed nicely during 1995's market rally,
held up relatively well during the first nine months of 1996, even as interest
rates moved up sharply. While signs of an economic recovery has led to a sharp
increase in interest rates, this recovery also bodes well for the future
prospects of many corporate issuers in the high-yield marketplace and helps
erase some of the recession fears that had plagued the high-yield market in late
1995.
Against this backdrop, Dean Witter High Income Securities produced a total
return of 6.23 percent for the six-month period ended September 30, 1996, based
on its net asset value (NAV) of $9.95 per share. Over the past six months, the
Fund continued to distribute regular income dividends at a rate of $0.08 per
share per month. On September 30, 1996, the Fund's net assets exceeded $753
million.
INVESTMENT STRATEGY
The Fund's investment strategy remained essentially unchanged over the past
year, with a continued emphasis on discounted B-rated issues. In today's market,
many of these issues can be purchased below par providing significant future
appreciation potential and an attractive yield versus comparable U.S. Treasuries
(in the 11 percent to 12 percent range). In light of the rebounding economy, we
feel quite comfortable with the earnings outlook for most of our B-rated
issuers. Recognizing that the economy may slow somewhat during the remainder of
1996, we have tried to limit the portfolio's volatility by focusing primarily on
growth type, recession resistant industry sectors such as cable, media, food and
beverage and telecommunications.
LOOKING AHEAD
Given our outlook for continued, albeit moderate economic growth, we find that
many of today's B-rated issues offer excellent long-term return
<PAGE> 2
DEAN WITTER HIGH INCOME SECURITIES
LETTER TO THE SHAREHOLDERS September 30, 1996, continued
potential. Over the near term, there could be continued volatility in the
financial markets as investors assess the economy's strength, possible Federal
Reserve Board actions and the upcoming Presidential election. However, despite
any potential short-term weakness, we consider today's high-yield market to be
an attractive long-term opportunity for investors.
We appreciate your support of Dean Witter High Income Securities and look
forward to continuing to serve your investment needs.
Very truly yours,
/s/ CHARLES A. FIUMEFREDDO
CHARLES A. FIUMEFREDDO
Chairman of the Board
<PAGE> 3
DEAN WITTER HIGH INCOME SECURITIES
PORTFOLIO OF INVESTMENTS September 30, 1996 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE BONDS (89.5%)
Aerospace (1.1%)
$ 9,000 Sabreliner Corp. (Series B)......... 12.50 % 04/15/03 $ 7,920,000
----------
Automotive (5.7%)
5,000 APS, Inc. .......................... 11.875 01/15/06 5,462,500
13,505 Envirotest Systems, Inc. ........... 9.125 03/15/01 12,424,600
500 Envirotest Systems, Inc. ........... 9.625 04/01/03 405,000
23,000 Toyota Motor Credit Corp. .......... 15.00 09/26/97 25,018,020
----------
43,310,120
----------
Broadcast Media (3.8%)
9,350 Adams Outdoor Advertising........... 10.75 03/15/06 9,770,750
8,000 Paxson Communications Corp. ........ 11.625 10/01/02 8,420,000
9,749 Spanish Broadcasting System,
Inc. ............................... 7.50 06/15/02 10,187,705
----------
28,378,455
----------
Business Services (5.3%)
19,879 Anacomp, Inc. ...................... 13.00+ 06/04/02 20,475,370
2,500 Pierce Leahy Corp. - 144A*.......... 11.125 07/15/06 2,668,750
16,000 Xerox Credit Corp. ................. 15.00 06/10/97 16,981,120
----------
40,125,240
----------
Cable & Telecommunications (14.7%)
16,783 Adelphia Communications Corp.
(Series B).......................... 9.50+ 02/15/04 15,104,720
4,050 American Communications
Services, Inc. ..................... 13.00++ 11/01/05 2,308,500
10,050 American Communications
Services, Inc. ..................... 12.75++ 04/01/06 5,326,500
14,000 AT&T Capital Corp. ................. 15.00 05/05/97 14,727,859
8,750 Charter Communication South East
L.P. (Series B)..................... 11.25 03/15/06 8,957,813
14,643 Falcon Holdings Group L.P. (Series
B).................................. 11.00+ 09/15/03 13,508,249
14,800 Hyperion Communication (Series B)... 13.00++ 04/15/03 9,028,000
28,500 In-Flight Phone Corp. (Series B).... 14.00++ 05/15/02 11,400,000
10,000 IXC Communications Inc. (Series
B).................................. 12.50 10/01/05 10,550,000
10,000 Peoples Telephone Co., Inc. ........ 12.25 07/15/02 10,400,000
9,000 Rifkin Acquisition Partners L.P. ... 11.125 01/15/06 9,315,000
----------
110,626,641
----------
Computer Equipment (5.0%)
14,000 Advanced Micro Devices.............. 11.00 08/01/03 14,490,000
7,000 Unisys Corp. ....................... 15.00 07/01/97 7,367,500
14,000 Unisys Corp. (Conv.)................ 8.25 03/15/06 15,610,000
----------
37,467,500
----------
Consumer Products (0.7%)
5,500 J.B. Williams Holdings, Inc. ....... 12.00 03/01/04 5,568,750
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 4
DEAN WITTER HIGH INCOME SECURITIES
PORTFOLIO OF INVESTMENTS September 30, 1996 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Containers (2.6%)
$ 10,000 Ivex Holdings Corp. (Series B)...... 13.25++ % 03/15/05 $ 6,800,000
7,500 Mail-Well Corp. .................... 10.50 02/15/04 7,425,000
5,000 Packaging Resources Inc. ........... 11.625 05/01/03 5,175,000
----------
19,400,000
----------
Electrical & Alarm Systems (1.3%)
11,000 Mosler, Inc. ....................... 11.00 04/15/03 9,900,000
----------
Entertainment/Gaming & Lodging (9.3%)
9,850 AMF Group Inc. (Series B)........... 10.875 03/15/06 10,096,250
12,000 Fitzgeralds Gaming Corp.
(Units)+++.......................... 13.00 12/31/02 9,600,000
10,250 Lady Luck Gaming Finance Corp. ..... 11.875 03/01/01 10,147,499
8,000 Motels of America, Inc. (Series
B).................................. 12.00 04/15/04 6,920,000
9,925 Players International, Inc. ........ 10.875 04/15/05 9,875,375
9,900 Plitt Theaters, Inc. (Canada)....... 10.875 06/15/04 10,048,500
27,250 Spectravision, Inc. (a)............. 11.65 12/01/02 3,320,267
10,100 Station Casinos, Inc. .............. 9.625 06/01/03 9,797,000
----------
69,804,891
----------
Financial (3.3%)
23,000 Household Finance Corp. ............ 15.00 09/25/97 25,012,270
----------
Foods & Beverages (7.5%)
27,961 Envirodyne Industries, Inc. ........ 10.25 12/01/01 25,794,023
4,763 Fleming Companies, Inc. ............ 10.625 12/15/01 4,667,740
62,425 Specialty Foods Acquisition Corp.
(Series B).......................... 13.00++ 08/15/05 26,218,500
----------
56,680,263
----------
Healthcare (1.1%)
10,575 Unilab Corp. ....................... 11.00 04/01/06 8,301,375
----------
Manufacturing (7.2%)
11,450 Alpine Group, Inc................... 12.25 07/15/03 11,908,000
7,900 Berry Plastics Corp. ............... 12.25 04/15/04 8,571,500
7,075 Cabot Safety Corp. ................. 12.50 07/15/05 7,817,875
6,000 Exide Electronics Group, Inc.
(Series B).......................... 11.50 03/15/06 6,330,000
11,500 International Wire Group, Inc. ..... 11.75 06/01/05 12,247,500
7,230 Uniroyal Technology Corp. .......... 11.75 06/01/03 7,013,100
----------
53,887,975
----------
Manufacturing - Diversified (5.8%)
8,000 Foamex L.P. ........................ 11.875 10/01/04 8,480,000
10,000 Interlake Corp. .................... 12.125 03/01/02 10,450,000
8,350 J.B. Poindexter & Co., Inc. ........ 12.50 05/15/04 8,183,000
7,000 Jordan Industries, Inc. ............ 10.375 08/01/03 6,790,000
12,150 Jordan Industries, Inc. ............ 11.75++ 08/01/05 9,477,000
----------
43,380,000
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 5
DEAN WITTER HIGH INCOME SECURITIES
PORTFOLIO OF INVESTMENTS September 30, 1996 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Oil & Gas (1.1%)
$ 9,900 Empire Gas Corp. ................... 7.00 % 07/15/04 $ 8,687,250
----------
Publishing (3.1%)
9,175 Affiliated Newspapers Investments,
Inc. ............................... 13.25++ 07/01/06 7,018,875
7,200 American Media Operations, Inc. .... 11.625 11/15/04 7,560,000
10,100 United States Banknote Corp. ....... 10.375 06/01/02 9,595,000
----------
24,173,875
----------
Restaurants (6.0%)
12,000 American Restaurant Group Holdings,
Inc. ............................... 14.00++ 12/15/05 4,380,000
17,000 American Restaurant Group Holdings,
Inc. - 144A*........................ 14.00++ 12/15/05 6,205,000
7,000 Boston Chicken Inc. (Conv.)......... 4.50 02/01/04 8,968,750
10,437 Carrols Corp. ...................... 11.50 08/15/03 10,919,711
1,050 Flagstar Corp....................... 10.875 12/01/02 931,875
22,450 Flagstar Corp. ..................... 11.25 11/01/04 13,470,000
----------
44,875,336
----------
Retail (1.0%)
4,983 Cort Furniture Rental Corp. ........ 12.00 09/01/00 5,244,608
10,450 County Seat Stores Co. ............. 12.00 10/01/02 2,612,500
----------
7,857,108
----------
Retail - Food Chains (2.9%)
7,000 Jitney-Jungle Stores................ 12.00 03/01/06 7,455,000
7,200 Pathmark Stores, Inc. .............. 9.625 05/01/03 7,056,000
7,000 Ralphs Grocery Co. ................. 10.45 06/15/04 7,087,500
----------
21,598,500
----------
Textiles (1.0%)
8,950 U.S. Leather, Inc. ................. 10.25 07/31/03 7,518,000
----------
TOTAL CORPORATE BONDS
(Identified Cost $680,037,249)................................ 674,473,549
----------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (b) (3.2%)
Foods & Beverages (0.7%)
490,000 Seven-Up/RC Bottling Co. Southern California, Inc. (c)........ 5,145,000
300,975 Specialty Foods Acquisition Corp. - 144A*..................... 451,463
----------
5,596,463
----------
Healthcare (0.1%)
1,048,200 Unilab Corp. ................................................. 720,638
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 6
DEAN WITTER HIGH INCOME SECURITIES
PORTFOLIO OF INVESTMENTS September 30, 1996 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------
<C> <S> <C>
Manufacturing - Diversified (2.3%)
835,689 Thermadyne Holdings Corp. (c)................................. $ 17,340,546
----------
Publishing (0.1%)
12,500 Affiliated Newspapers Investments, Inc. (Class B)............. 500,000
----------
Restaurants (0.0%)
12,000 American Restaurant Group Holdings, Inc. - 144A*.............. 96,000
----------
TOTAL COMMON STOCKS
(Identified Cost $21,950,066)................................. 24,253,647
----------
PREFERRED STOCK (b) (0.2%)
Entertainment/Gaming & Lodging
80,000 Fitzgeralds Gaming Corp. (Units)+++(Identified Cost
$2,000,000)................................................... 1,760,000
----------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION
WARRANTS DATE VALUE
- ------------------------------------------------------------------------------------------
<C> <S> <C> <C>
WARRANTS (b) (0.1%)
Cable & Telecommunications (0.1%)
12,000 Hyperion Communication - 144A*................ 04/01/01 480,000
22,850 In-Flight Phone Corp. - 144A*................. 08/31/02 182,800
----------
662,800
----------
Entertainment/Gaming & Lodging (0.0%)
9,000 Fitzgeralds Gaming Corp....................... 12/19/98 40,504
3,500 Fitzgeralds South Inc. - 144A*................ 03/15/99 --
----------
40,504
----------
Manufacturing (0.0%)
6,000 Exide Electronics Group, Inc. - 144A*......... 03/15/06 210,000
20,000 Uniroyal Technology Corp...................... 06/01/03 27,500
----------
237,500
----------
Oil & Gas (0.0%)
5,520 Empire Gas Corp............................... 07/15/04 55,200
----------
TOTAL WARRANTS
(Identified Cost $1,612,936)............................... 996,004
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 7
DEAN WITTER HIGH INCOME SECURITIES
PORTFOLIO OF INVESTMENTS September 30, 1996 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENTS (d) (6.7%)
COMMERCIAL PAPER (4.0%)
Foods & Beverages (2.0%)
$ 15,000 PepsiCo Inc. ........................ 5.35 % 10/02/96 $ 14,997,771
----------
Office Equipment (2.0%)
15,000 IBM Credit Corp. .................... 5.325 10/01/96 15,000,000
----------
TOTAL COMMERCIAL PAPER
(Amortized Cost $29,997,771).................................. 29,997,771
----------
U.S. GOVERNMENT AGENCY (2.7%)
20,000 Federal Home Loan Banks
(Amortized Cost $20,000,000)......... 5.55 10/01/96 20,000,000
----------
TOTAL SHORT-TERM INVESTMENTS
(Amortized Cost $49,997,771).................................. 49,997,771
----------
TOTAL INVESTMENTS
(Identified Cost $755,598,022) (e).................... 99.7% 751,480,971
OTHER ASSETS IN EXCESS OF LIABILITIES................... 0.3 2,048,476
---- -----------
NET ASSETS............................................ 100.0% $753,529,447
===== ===========
</TABLE>
- ---------------------
* Resale is restricted to qualified institutional investors.
+++ Consists of one or more class of securities traded together as a unit;
generally bonds with attached stocks/warrants.
+ Payment-in-kind security.
++ Currently a zero coupon bond and will pay interest at the rate shown at a
future specified date.
(a) Non-income producing security; issuer in bankruptcy.
(b) Non-income producing securities.
(c) Acquired through exchange offer.
(d) Securities were purchased on a discount basis. The interest rates shown
have been adjusted to reflect a money market equivalent yield.
(e) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation was $29,112,662 and the
aggregate gross unrealized depreciation was $33,229,713, resulting in net
unrealized depreciation of $4,117,051.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 8
DEAN WITTER HIGH INCOME SECURITIES
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1996 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $755,598,022)....................................... $751,480,971
Receivable for:
Interest.......................................................... 15,316,366
Investments sold.................................................. 7,838,938
Shares of beneficial interest sold................................ 5,921,706
Deferred organizational expenses...................................... 86,495
Prepaid expenses...................................................... 82,844
----------
TOTAL ASSETS...................................................... 780,727,320
----------
LIABILITIES:
Payable for:
Investments purchased............................................. 19,756,203
Shares of beneficial interest repurchased......................... 4,069,614
Dividends to shareholders......................................... 1,089,936
Plan of distribution fee.......................................... 488,796
Investment management fee......................................... 291,522
Payable to bank....................................................... 1,342,586
Accrued expenses...................................................... 159,216
----------
TOTAL LIABILITIES................................................. 27,197,873
----------
NET ASSETS:
Paid-in-capital....................................................... 750,643,532
Net unrealized depreciation........................................... (4,117,051)
Accumulated undistributed net investment income....................... 6,162,496
Accumulated undistributed net realized gain........................... 840,470
----------
NET ASSETS........................................................ $753,529,447
==========
NET ASSET VALUE PER SHARE,
75,700,231 shares outstanding
(unlimited shares authorized of $.01 par value)...................... $9.95
====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 9
DEAN WITTER HIGH INCOME SECURITIES
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the six months ended September 30, 1996 (unaudited)
NET INVESTMENT INCOME:
INTEREST INCOME........................................................ $37,796,274
---------
EXPENSES
Plan of distribution fee............................................... 2,471,098
Investment management fee.............................................. 1,502,089
Transfer agent fees and expenses....................................... 154,716
Registration fees...................................................... 118,282
Shareholder reports and notices........................................ 39,189
Custodian fees......................................................... 27,716
Professional fees...................................................... 27,593
Organizational expenses................................................ 16,044
Trustees' fees and expenses............................................ 8,328
Other.................................................................. 5,558
---------
TOTAL EXPENSES..................................................... 4,370,613
---------
NET INVESTMENT INCOME.............................................. 33,425,661
---------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain...................................................... 1,017,963
Net change in unrealized appreciation.................................. 2,861,131
---------
NET GAIN........................................................... 3,879,094
---------
NET INCREASE........................................................... $37,304,755
=========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 10
DEAN WITTER HIGH INCOME SECURITIES
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
SEPTEMBER 30, MARCH 31,
1996 1996
- --------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income............................. $ 33,425,661 $ 37,030,684
Net realized gain................................. 1,017,963 8,183,189
Net change in unrealized depreciation............. 2,861,131 (6,754,811)
----------- -----------
NET INCREASE.................................. 37,304,755 38,459,062
----------- -----------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income............................. (30,313,816) (34,585,105)
Net realized gain................................. (5,595,675) (1,424,003)
----------- -----------
TOTAL......................................... (35,909,491) (36,009,108)
----------- -----------
Net increase from transactions in shares of
beneficial interest.............................. 246,643,607 334,159,446
----------- -----------
TOTAL INCREASE................................ 248,038,871 336,609,400
NET ASSETS:
Beginning of period............................... 505,490,576 168,881,176
----------- -----------
END OF PERIOD
(Including undistributed net investment income
of $6,162,496 and $3,050,651, respectively)... $ 753,529,447 $505,490,576
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 11
DEAN WITTER HIGH INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS September 30, 1996 (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's primary investment objective
is to earn a high level of current income and, as a secondary objective, capital
appreciation, but only when consistent with its primary objective. The Fund
seeks to achieve its objective by investing primarily in lower-rated fixed
income securities. The Fund was organized as a Massachusetts business trust on
March 23, 1994 and commenced operations on June 2, 1994.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates. The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York or American Stock Exchange is valued at its latest sale price on that
exchange prior to the time when assets are valued, if there were no sales that
day, the security is valued at the latest bid price (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 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, if available, in determining what it believes is the fair valuation
of the portfolio securities valued by such pricing service; and (5) short-term
debt securities having a maturity date of more than sixty days at time of
purchase are valued on a mark-to-market basis until sixty days prior to maturity
and thereafter at amortized cost based on their value on the 61st day.
Short-term debt securities having a maturity date of sixty days or less at the
time of purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by
<PAGE> 12
DEAN WITTER HIGH INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS September 30, 1996 (unaudited) continued
the identified cost method. Discounts are accreted over the life of the
respective securities. Interest income is accrued daily except where collection
is not expected.
C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the ex-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.
E. ORGANIZATIONAL EXPENSES -- Dean Witter InterCapital Inc. (the "Investment
Manager") paid the organizational expenses of the Fund in the amount of
approximately $154,000 which have been reimbursed for the full amount thereof.
Such expenses have been deferred and are being amortized on the straight-line
method over a period not to exceed five years from the commencement of
operations.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management fee, calculated daily and payable monthly, by applying the
annual rate of 0.50% to the net assets of the Fund determined as of the close of
each business day. Effective May 1, 1996, the annual rate will be reduced to
0.425% of net assets in excess of $500 million.
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.
<PAGE> 13
DEAN WITTER HIGH INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS September 30, 1996 (unaudited) continued
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 broker-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.
Although there is no legal obligation for the Fund to pay expenses incurred in
excess of payments made to the Distributor under the Plan and the proceeds of
contingent deferred sales charges paid by investors upon redemption of shares,
if for any reason the Plan is terminated, the Trustees will consider at that
time the manner in which to treat such expenses. The Distributor has advised the
Fund that such excess amounts, including carrying charges, totaled $18,911,139
at September 30, 1996.
The Distributor has informed the Fund that for the six months ended September
30, 1996, it received approximately $654,000 in contingent deferred sales
charges from certain redemptions of the Fund's shares.
<PAGE> 14
DEAN WITTER HIGH INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS September 30, 1996 (unaudited) continued
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the six months ended September 30, 1996 aggregated
$370,193,573 and $170,135,684, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and the
Distributor, is the Fund's transfer agent. At September 30, 1996, the Fund had
transfer agent fees and expenses payable of approximately $11,000.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
SEPTEMBER 30, 1996 MARCH 31, 1996
----------------------------- ---------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Sold........................................................ 36,649,428 $ 364,388,595 41,085,242 $408,356,512
Reinvestment of dividends and distributions................. 1,123,595 11,124,337 1,336,198 13,186,801
--------- ----------- -------- ----------
37,773,023 375,512,932 42,421,440 421,543,313
Repurchased................................................. (12,985,656) (128,869,325) (8,797,583) (87,383,867)
--------- ----------- -------- ----------
Net increase................................................ 24,787,367 $ 246,643,607 33,623,857 $334,159,446
========= =========== ======== ==========
</TABLE>
<PAGE> 15
DEAN WITTER HIGH INCOME SECURITIES
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE PERIOD
MONTHS ENDED FOR THE YEAR JUNE 2, 1994*
SEPTEMBER 30, ENDED THROUGH
1996 MARCH 31, 1996 MARCH 31, 1995
- --------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 9.93 $ 9.77 $10.00
-------- -------- --------
Net investment income................................................. 0.50 1.03 0.75
Net realized and unrealized gain (loss)............................... 0.04 0.18 (0.26)
-------- -------- --------
Total from investment operations...................................... 0.54 1.21 0.49
-------- -------- --------
Less dividends and distributions from:
Net investment income.............................................. (0.48) (1.01) (0.72)
Net realized gain.................................................. (0.04) (0.04) --
-------- -------- --------
Total dividends and distributions..................................... (0.52) (1.05) (0.72)
-------- -------- --------
Net asset value, end of period........................................ $ 9.95 $ 9.93 $ 9.77
======== ======== ========
TOTAL INVESTMENT RETURN+.............................................. 6.23%(1) 12.85% 5.19%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 1.41%(2) 1.49% 1.55%(2)(3)
Net investment income................................................. 10.82%(2) 11.22% 10.85%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $753,529 $505,491 $168,881
Portfolio turnover rate............................................... 30%(1) 69% 53%(1)
</TABLE>
- ---------------------
* Commencement of operations.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had borne all the expenses that were reimbursed or waived by
the Investment Manager, the above annualized expense and net investment
ratios would have been 1.65% and 10.75%, respectively.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 16
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
Peter M. Avelar
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
The financial statements included herein have been taken from the records of
the Fund without examination by the independent accountants and accordingly
they do not express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus of
the Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus.
DEAN WITTER
HIGH INCOME
SECURITIES
[PHOTO]
SEMIANNUAL REPORT
SEPTEMBER 30, 1996
