<PAGE>
DEAN WITTER HIGH INCOME SECURITIES TWO WORLD TRADE CENTER, NEW YORK, NEW YORK
10048
LETTER TO THE SHAREHOLDERS MARCH 31, 1997
DEAR SHAREHOLDER:
The high-yield market posted solid returns during the past twelve months and
outperformed most of the other fixed-income markets. With the economy rebounding
from its late 1995 weakness and with corporate earnings holding up well during
the year, the market was able to offset what was a relatively weak fixed-income
environment.
In early 1996, investors were anticipating a recession, due to concern over a
then-weakening economy. U.S. Treasury yields were lower than today's levels,
with yields in the high-yield market higher. As the year played out, we saw the
economy bounce back, corporate earnings hold up, the equity markets reach
all-time highs and recession fears ease. The result was a somewhat weak and
volatile U.S. Treasury market, while the high-yield market held up well, given
the stronger than expected economy. Although yield spreads narrowed during the
year, many B-rated issues still provide an attractive yield advantage (nearly
400 basis points) over U.S. Treasuries and trade at or below par.
As Dean Witter High Income Securities begins its new fiscal year, a correction
is under way across most of the financial markets, including the high-yield bond
sector. On the heels of a credit tightening by the Federal Reserve Board in late
March, considerable nervousness has been evident in both the equity and
fixed-income markets. Speculation as to the timing and impact of any further
increases in interest rates has created uncertainty on the part of many
investors. The high-yield market also has felt this weakness, as investors
attempt to discount the possibility of slowing in the economy within the context
of any further tightening by the Federal Reserve Board.
PERFORMANCE AND PORTFOLIO STRATEGY
Against this backdrop, Dean Witter High Income Securities produced a total
return of 10.71 percent for the twelve-month period ended March 31, 1997, based
on its net asset value (NAV) of $9.80 per share plus reinvestment of dividends
and capital gains distributions. This compares to returns of 10.64 percent for
the Lehman High Yield Index
<PAGE>
DEAN WITTER HIGH INCOME SECURITIES
LETTER TO THE SHAREHOLDERS MARCH 31, 1997, CONTINUED
and a return of 10.30 percent for the Lipper High Yield Bond Fund Index during
the same period. Over the past twelve months, the Fund continued to distribute
regular income dividends at a rate of $0.08 per share per month. For the full
twelve-month period, the Fund's distributions totaled approximately $1.14 per
share, including an extra income dividend of $0.068 per share and capital gain
distributions of $0.106011 per share. On March 31, 1997, the Fund's net assets
exceeded $1.1 billion. The accompanying chart illustrates the growth of a
$10,000 investment in the Fund since inception (June 2, 1994) through the fiscal
year ended March 31, 1997, compared to a similar investment in the issues that
comprise the Lehman Brothers Mutual Fund Corporate/High Yield Index, the Lehman
Brothers High Yield Index and the Lipper High Yield Bond Funds Index.
(Note: We will be changing the
benchmark that we measure the Fund's
performance against from the Lehman
Brothers Mutual Fund Corporate/High
Yield Index to the Lehman Brothers High
Yield Index, which represents the
Fund's portfolio composition more
accurately.)
As the economy has continued to expand
over the past few years, we have tended
to concentrate on B-rated issues. In a
growing economy one can find
undervalued "upgrade" candidates in
this sector of the market that provide
attractive yields as well as
appreciation potential. We therefore
continue to feel that many of these
issues are very attractive long-term
investments. However, given today's
higher interest rate environment and a
potentially slowing economy down the
road, we have recently taken some
defensive steps with the portfolio.
Over the past six to nine months, we
have upgraded the portfolio by
increasing our allocation to the
higher-quality end of the market
(BB-rated issues or higher) from 10
percent to 25 percent. We also sold
many of our heavily cyclical positions
and are now focused mainly on the more
predictable recession-resistant or
growth sectors of the economy. These
are areas which would tend to hold up
well in an
<PAGE>
DEAN WITTER HIGH INCOME SECURITIES
LETTER TO THE SHAREHOLDERS MARCH 31, 1997, CONTINUED
economic slowdown. In certain of these sectors, such as media and
telecommunications, we expect to see continued consolidation, which should bode
well for most industry participants, including many of the portfolio's current
holdings.
LOOKING AHEAD
Overall, we continue our primary focus on discounted B-rated investments
yielding 10 percent or higher, which we feel possess appreciation potential as
well as an attractive yield. In addition, while we are not expecting a recession
in 1997, we have begun to take a more defensive approach in case of any economic
slowing down the road as a result of today's higher interest rate environment.
We thank you for your continued support of Dean Witter High Income Securities
and look forward to continuing to serve your investment needs.
Very truly yours,
[SIGNATURE]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
<PAGE>
DEAN WITTER HIGH INCOME SECURITIES
PORTFOLIO OF INVESTMENTS MARCH 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE BONDS (93.2%)
AEROSPACE (0.8%)
$ 9,000 Sabreliner Corp. (Series B).............. 12.50 % 04/15/03 $ 8,685,000
-----------------
AUTOMOTIVE (6.9%)
8,950 APS, Inc................................. 11.875 01/15/06 9,039,500
13,505 Envirotest Systems, Inc.................. 9.125 03/15/01 12,694,700
30,000 General Motors Acceptance Corp........... 15.00 03/17/98 32,346,000
23,000 Toyota Motor Credit Corp................. 15.00 09/26/97 23,990,150
-----------------
78,070,350
-----------------
BROADCAST MEDIA (3.9%)
9,350 Adams Outdoor Advertising L.P............ 10.75 03/15/06 9,887,625
9,750 Capstar Broadcasting Partners - 144A*.... 12.75++ 02/01/09 5,167,500
11,500 Paxson Communications Corp............... 11.625 10/01/02 12,132,500
9,749 Spanish Broadcasting System, Inc......... 7.50 06/15/02 10,480,175
7,000 STC Broadcasting, Inc. - 144A*........... 11.00 03/15/07 6,930,000
-----------------
44,597,800
-----------------
BUSINESS SERVICES (5.2%)
21,365 Anacomp, Inc............................. 13.00+ 06/04/02 22,219,553
20,000 Anacomp, Inc. - 144A*.................... 10.875 04/01/04 19,794,000
16,000 Xerox Credit Corp........................ 15.00 06/10/97 16,273,920
-----------------
58,287,473
-----------------
CABLE & TELECOMMUNICATIONS (15.5%)
10,828 Adelphia Communications Corp. (Series
B)..................................... 9.50+ 02/15/04 9,284,766
10,500 Adelphia Communications, Inc. - 144A*.... 9.875 03/01/07 9,843,750
11,050 American Communications Services, Inc.... 13.00++ 11/01/05 6,685,250
10,050 American Communications Services, Inc.... 12.75++ 04/01/06 5,678,250
14,000 AT&T Capital Corp........................ 15.00 05/05/97 14,112,980
13,500 Cablevision Systems Corp................. 10.50 05/15/16 13,601,250
4,599 Cablevision Systems Corp................. 9.875 04/01/23 4,392,045
10,750 Charter Communication South East L.P.
(Series B)............................. 11.25 03/15/06 11,180,000
22,306 Falcon Holdings Group L.P. (Series B).... 11.00+ 09/15/03 20,409,950
10,000 FrontierVision Operating Partners,
L.P.................................... 11.00 10/15/06 9,975,000
24,800 Hyperion Telecommunication, Inc. (Series
B)..................................... 13.00++ 04/15/03 13,516,000
20,400 In-Flight Phone Corp. (Series B) (b)..... 14.00++ 05/15/02 1,734,000
10,000 IXC Communications, Inc. (Series B)...... 12.50 10/01/05 10,900,000
10,750 Paging Network, Inc...................... 10.125 08/01/07 9,701,875
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH INCOME SECURITIES
PORTFOLIO OF INVESTMENTS MARCH 31, 1997, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 5,000 Paging Network, Inc...................... 10.00 % 10/15/08 $ 4,437,500
10,000 Peoples Telephone Co., Inc............... 12.25 07/15/02 10,625,000
10,000 Rifkin Acquisition Partners L.P.......... 11.125 01/15/06 10,050,000
10,500 Shared Technology/Fairchild, Inc......... 12.25++ 03/01/06 8,610,000
-----------------
174,737,616
-----------------
COMPUTER EQUIPMENT (6.8%)
14,000 Advanced Micro Devices, Inc.............. 11.00 08/01/03 15,330,000
31,500 IBM Credit Corp.......................... 15.00 03/04/98 33,936,840
7,000 Unisys Corp.............................. 15.00 07/01/97 7,157,500
17,500 Unisys Corp. (Conv.)..................... 8.25 03/15/06 20,017,550
-----------------
76,441,890
-----------------
CONSUMER PRODUCTS (1.3%)
5,500 J.B. Williams Holdings, Inc.............. 12.00 03/01/04 5,678,750
8,750 Renaissance Cosmetics, Inc. - 144A*...... 11.75 02/15/04 8,837,500
-----------------
14,516,250
-----------------
CONTAINERS (2.8%)
7,500 Mail-Well Corp........................... 10.50 02/15/04 7,725,000
9,475 Packaging Resources, Inc................. 11.625 05/01/03 9,759,250
13,500 Silgan Corp.............................. 11.75 06/15/02 14,360,625
-----------------
31,844,875
-----------------
ELECTRICAL & ALARM SYSTEMS (0.9%)
11,000 Mosler, Inc.............................. 11.00 04/15/03 10,340,000
-----------------
ENTERTAINMENT/GAMING & LODGING (9.5%)
9,850 AMF Group Inc. (Series B)................ 10.875 03/15/06 10,268,625
12,000 Fitzgeralds Gaming Corp. (Units)++....... 13.00 12/31/02 10,230,000
14,250 Lady Luck Gaming Finance Corp............ 11.875 03/01/01 13,929,375
6,377 MGM Grand Hotels Corp. (Series A)........ 11.75 05/01/99 6,528,454
19,730 MGM Grand Hotels Corp.................... 12.00 05/01/02 20,889,137
8,000 Motels of America, Inc. (Series B)....... 12.00 04/15/04 6,960,000
9,925 Players International, Inc............... 10.875 04/15/05 10,272,375
9,900 Plitt Theaters, Inc. (Canada)............ 10.875 06/15/04 10,098,000
10,100 Station Casinos, Inc. (Series B)......... 9.625 06/01/03 9,595,000
8,750 Stuart Entertainment, Inc. - 144A*....... 12.50 11/15/04 8,050,000
-----------------
106,820,966
-----------------
FINANCIAL (4.8%)
29,000 General Electric Capital Corp............ 13.50 01/20/98 30,654,160
23,000 Household Finance Corp................... 15.00 09/25/97 23,988,540
-----------------
54,642,700
-----------------
FOODS & BEVERAGES (8.1%)
21,961 Envirodyne Industries, Inc............... 10.25 12/01/01 21,741,390
11,221 Fleming Companies, Inc................... 10.625 12/15/01 11,249,052
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH INCOME SECURITIES
PORTFOLIO OF INVESTMENTS MARCH 31, 1997, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 23,750 General Mills, Inc....................... 13.50 % 01/21/98 $ 25,078,813
72,425 Specialty Foods Acquisition Corp. (Series
B)..................................... 13.00++ 08/15/05 33,315,500
-----------------
91,384,755
-----------------
HEALTHCARE (1.5%)
11,975 Unilab Corp.............................. 11.00 04/01/06 9,101,000
10,000 Unison Healthcare Corp. - 144A*.......... 12.25 11/01/06 8,100,000
-----------------
17,201,000
-----------------
MANUFACTURING (7.2%)
7,900 Berry Plastics Corp...................... 12.25 04/15/04 8,690,000
9,075 Cabot Safety Corp........................ 12.50 07/15/05 9,755,625
11,000 Exide Electronics Group, Inc. (Series
B)..................................... 11.50 03/15/06 11,742,500
11,500 International Wire Group, Inc............ 11.75 06/01/05 12,161,250
30,000 John Deere Capital Corp.................. 15.00 02/24/98 32,264,400
7,230 Uniroyal Technology Corp................. 11.75 06/01/03 7,230,000
-----------------
81,843,775
-----------------
MANUFACTURING - DIVERSIFIED (5.0%)
9,650 Foamex L.P............................... 11.875 10/01/04 10,397,875
10,000 Interlake Corp........................... 12.125 03/01/02 10,450,000
8,350 J.B. Poindexter & Co., Inc............... 12.50 05/15/04 8,527,438
7,000 Jordan Industries, Inc................... 10.375 08/01/03 6,965,000
35,500 Jordan Industries, Inc. - 144A*.......... 11.75++ 04/01/09 20,103,650
-----------------
56,443,963
-----------------
OIL & GAS (1.9%)
3,000 Petro Stopping Centers L.P. - 144A*...... 10.50 02/01/07 3,030,000
17,000 TransTexas Gas Corp...................... 11.50 06/15/02 18,742,500
-----------------
21,772,500
-----------------
PUBLISHING (3.4%)
11,175 Affiliated Newspapers Investments,
Inc.................................... 13.25++ 07/01/06 9,219,375
8,200 American Media Operations, Inc........... 11.625 11/15/04 8,856,000
4,500 MDC Communications Corp.................. 10.50 12/01/06 4,657,500
5,000 Petersen Publishing, Inc. (Series B)..... 11.125 11/15/06 5,350,000
10,100 United States Banknote Corp.............. 10.375 06/01/02 10,074,750
-----------------
38,157,625
-----------------
RESTAURANTS (3.1%)
12,000 American Restaurant Group Holdings,
Inc.................................... 14.00++ 12/15/05 5,250,000
17,000 American Restaurant Group Holdings, Inc.
- 144A*................................ 14.00++ 12/15/05 7,437,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH INCOME SECURITIES
PORTFOLIO OF INVESTMENTS MARCH 31, 1997, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 3,000 Ameriking, Inc........................... 10.75 % 12/01/06 $ 3,105,000
10,437 Carrols Corp............................. 11.50 08/15/03 10,958,850
7,647 FRD Acquisition Corp. (Series B)......... 12.50 07/15/04 7,991,115
-----------------
34,742,465
-----------------
RETAIL (0.4%)
10,450 County Seat Stores Co. (a)............... 12.00 10/01/02 4,754,750
-----------------
RETAIL - FOOD CHAINS (2.1%)
9,000 Jitney-Jungle Stores of America, Inc..... 12.00 03/01/06 9,540,000
14,200 Pathmark Stores, Inc..................... 9.625 05/01/03 13,383,500
1,000 Ralphs Grocery Co........................ 10.45 06/15/04 1,030,000
-----------------
23,953,500
-----------------
TEXTILES (1.9%)
10,030 Reeves Industries, Inc................... 11.00 07/15/02 9,403,125
13,400 U.S. Leather, Inc........................ 10.25 07/31/03 11,524,000
-----------------
20,927,125
-----------------
TRANSPORTATION (0.2%)
1,750 Atlantic Express - 144A*................. 10.75 02/01/04 1,789,375
-----------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $1,065,113,290).................................. 1,051,955,753
-----------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES
- -----------
<C> <S> <C>
COMMON STOCKS (c) (2.6%)
FOODS & BEVERAGES (0.5%)
490,000 Seven-Up/RC Bottling Co. Southern California, Inc (d)................ 5,787,880
300,975 Specialty Foods Acquisition Corp. - 144A*............................ 300,975
-----------------
6,088,855
-----------------
HEALTHCARE (0.1%)
1,358,200 Unilab Corp.......................................................... 933,763
-----------------
MANUFACTURING - DIVERSIFIED (2.0%)
835,689 Thermadyne Holdings Corp. (d)........................................ 22,668,064
-----------------
RESTAURANTS (0.0%)
12,000 American Restaurant Group Holdings, Inc. - 144A*..................... 12,000
-----------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $21,786,775)........................................ 29,702,682
-----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH INCOME SECURITIES
PORTFOLIO OF INVESTMENTS MARCH 31, 1997, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------------------
<C> <S> <C>
PREFERRED STOCK (0.2%)
ENTERTAINMENT/GAMING & LODGING
80,000 Fitzgeralds Gaming Corp. (Units) ++
(Identified Cost $2,000,000)....................................... $ 1,840,000
-----------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION
WARRANTS DATE
- ----------- -----------
<C> <S> <C> <C>
WARRANTS (c) (0.1%)
CABLE & TELECOMMUNICATIONS (0.1%)
17,000 Hyperion Telecommunication, Inc. (Series B) - 144A*... 04/01/01 510,000
-----------------
ENTERTAINMENT/GAMING & LODGING (0.0%)
9,000 Fitzgeralds Gaming Corp............................... 12/19/98 9,035
3,500 Fitzgeralds South Inc. - 144A*........................ 03/15/99 --
-----------------
9,035
-----------------
MANUFACTURING (0.0%)
6,000 Exide Electronics Group, Inc. - 144A*................. 03/15/06 240,000
20,000 Uniroyal Technology Corp.............................. 06/01/03 20,000
-----------------
260,000
-----------------
TOTAL WARRANTS
(IDENTIFIED COST $626,644)......................................... 779,035
-----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE
- ----------- ----------- ----------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENTS (2.3%)
U.S. GOVERNMENT AGENCY (e) (0.7%)
$ 8,000 Federal Home Loan Banks (Amortized Cost
$7,998,800)............................ 5.40 % 04/02/97 7,998,800
-----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH INCOME SECURITIES
PORTFOLIO OF INVESTMENTS MARCH 31, 1997, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENT (1.6%)
$ 18,084 The Bank of New York (dated 03/31/97;
proceeds $18,086,441; collateralized by
$18,811,006 U.S. Treasury Note 6.25%
due 02/15/03 valued at $18,445,416)
(Identified Cost $18,083,741).......... 5.375 % 04/01/97 $ 18,083,741
-----------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $26,082,541)..................................... 26,082,541
-----------------
TOTAL INVESTMENTS
(IDENTIFIED COST $1,115,609,250) (F)...................... 98.4% 1,110,360,011
OTHER ASSETS IN EXCESS OF LIABILITIES..................... 1.6 18,720,866
------ ----------------
NET ASSETS................................................ 100.0% $ 1,129,080,877
------ ----------------
------ ----------------
<FN>
- ---------------------
* Resale is restricted to qualified institutional investors.
+ Payment-in-kind security.
++ Currently a zero coupon bond and will pay interest at the rate shown at a
future specified date.
++ Consists of one or more class of securities traded together as a unit;
bonds or preferred stocks with attached warrants.
(a) Non-income producing security; bond in default.
(b) Non-income producing security; issuer in bankruptcy.
(c) Non-income producing securities.
(d) Acquired through exchange offer.
(e) Security was purchased on a discount basis. The interest rate shown has
been adjusted to reflect a money market equivalent yield.
(f) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $35,594,566 and the
aggregate gross unrealized depreciation is $40,843,805, resulting in net
unrealized depreciation of $5,249,239.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH INCOME SECURITIES
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $1,115,609,250).......................... $1,110,360,011
Receivable for:
Interest................................................ 22,160,555
Investments sold........................................ 20,135,679
Shares of beneficial interest sold...................... 6,622,760
Deferred organizational expenses............................ 70,539
Prepaid expenses............................................ 26,377
--------------
TOTAL ASSETS........................................... 1,159,375,921
--------------
LIABILITIES:
Payable for:
Investments purchased................................... 25,503,561
Shares of beneficial interest repurchased............... 1,785,316
Dividends to shareholders............................... 1,505,306
Plan of distribution fee................................ 752,441
Investment management fee............................... 431,584
Accrued expenses............................................ 316,836
--------------
TOTAL LIABILITIES...................................... 30,295,044
--------------
NET ASSETS:
Paid-in-capital............................................. 1,144,188,118
Net unrealized depreciation................................. (5,249,239)
Accumulated undistributed net investment income............. 1,795,238
Accumulated net realized loss............................... (11,653,240)
--------------
NET ASSETS............................................. $1,129,080,877
--------------
--------------
NET ASSET VALUE PER SHARE,
115,231,451 SHARES OUTSTANDING (UNLIMITED SHARES
AUTHORIZED OF $.01 PAR VALUE).............................
$9.80
--------------
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH INCOME SECURITIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1997
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $ 92,540,476
------------
EXPENSES
Plan of distribution fee.................................... 6,228,452
Investment management fee................................... 3,685,133
Transfer agent fees and expenses............................ 406,387
Registration fees........................................... 286,221
Professional fees........................................... 56,237
Shareholder reports and notices............................. 54,942
Custodian fees.............................................. 45,434
Organizational expenses..................................... 32,000
Trustees' fees and expenses................................. 14,811
Other....................................................... 13,809
------------
TOTAL EXPENSES......................................... 10,823,426
------------
NET INVESTMENT INCOME.................................. 81,717,050
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss........................................... (10,135,805)
Net change in unrealized depreciation....................... 1,728,943
------------
NET LOSS............................................... (8,406,862)
------------
NET INCREASE................................................ $ 73,310,188
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH INCOME SECURITIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED FOR THE YEAR
MARCH 31, ENDED
1997 MARCH 31, 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................... $ 81,717,050 $ 37,030,684
Net realized gain (loss).................................... (10,135,805) 8,183,189
Net change in unrealized depreciation....................... 1,728,943 (6,754,811)
------------- --------------
NET INCREASE........................................... 73,310,188 38,459,062
------------- --------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income....................................... (82,972,651) (34,585,105)
Net realized gain........................................... (6,935,617) (1,424,003)
------------- --------------
TOTAL.................................................. (89,908,268) (36,009,108)
------------- --------------
Net increase from transactions in shares of beneficial
interest.................................................. 640,188,381 334,159,446
------------- --------------
NET INCREASE........................................... 623,590,301 336,609,400
NET ASSETS:
Beginning of period......................................... 505,490,576 168,881,176
------------- --------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$1,795,238 AND $3,050,651, RESPECTIVELY)................ $1,129,080,877 $ 505,490,576
------------- --------------
------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS MARCH 31, 1997
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, American or other domestic or foreign stock exchange is valued at its
latest sale price on that exchange prior to the time when assets are valued, if
there were no sales that day, the security is valued at the latest bid price (in
cases where a security is traded on more than one exchange, the security is
valued on the exchange designated as the primary market pursuant to procedures
adopted 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 Dean Witter InterCapital Inc. (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
(valuation of debt securities for which market quotations are not readily
available may be based upon current market prices of securities which are
comparable in coupon, rating and maturity or an appropriate matrix utilizing
similar factors); (4) certain portfolio securities may be valued by an outside
pricing service approved by the Trustees. The pricing service may utilize a
matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research and evaluations by its staff,
including review of broker-dealer market price quotations, if available, in
determining what it believes is the fair valuation of the portfolio securities
valued by such pricing service; and (5) short-term debt securities having a
maturity date of more than sixty days at time of purchase are valued
<PAGE>
DEAN WITTER HIGH INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS MARCH 31, 1997, CONTINUED
on a mark-to-market basis until sixty days prior to maturity and thereafter at
amortized cost based on their value on the 61st day. Short-term debt securities
having a maturity date of sixty days or less at the time of purchase are valued
at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
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 -- The Investment Manager paid the organizational
expenses of the Fund in the amount of approximately $154,000 which haven 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 was reduced to 0.425%
for net assets in excess of $500 million.
<PAGE>
DEAN WITTER HIGH INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS MARCH 31, 1997, CONTINUED
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
3. 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
<PAGE>
DEAN WITTER HIGH INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS MARCH 31, 1997, CONTINUED
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 $28,870,822 at March 31, 1997.
The Distributor has informed the Fund that for the year ended March 31, 1997, it
received approximately $1,408,000 in contingent deferred sales charges from
certain redemptions of the Fund's shares.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended March 31, 1997 aggregated
$882,695,717 and $301,847,787, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and the
Distributor, is the Fund's transfer agent. At March 31, 1997, the Fund had
transfer agent fees and expenses payable of approximately $66,000.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
MARCH 31, 1997 MARCH 31, 1996
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Sold............................................................. 92,034,373 $915,772,428 41,085,242 $408,356,512
Reinvestment of dividends and distributions...................... 3,505,097 34,682,684 1,336,198 13,186,801
----------- ------------ ----------- ------------
95,539,470 950,455,112 42,421,440 421,543,313
Repurchased...................................................... (31,220,883) (310,266,731) (8,797,583) (87,383,867)
----------- ------------ ----------- ------------
Net increase..................................................... 64,318,587 $640,188,381 33,623,857 $334,159,446
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
</TABLE>
6. FEDERAL INCOME TAX STATUS
Capital losses incurred after October 31 ("post-October" losses) within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. The Fund incurred and will elect to defer net capital losses of
approximately $6,272,000 during fiscal 1997.
As of March 31, 1997, the Fund had temporary book/tax differences attributable
to post-October losses and capital loss deferrals on wash sales.
<PAGE>
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 PERIOD
FOR THE FOR THE JUNE 2, 1994*
YEAR ENDED YEAR ENDED THROUGH
MARCH 31, 1997 MARCH 31, 1996 MARCH 31, 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period............................ $ 9.93 $ 9.77 $ 10.00
----- ------ ------
Net investment income.............. 0.99 1.03 0.75
Net realized and unrealized gain
(loss)............................ 0.02 0.18 (0.26)
----- ------ ------
Total from investment operations... 1.01 1.21 0.49
----- ------ ------
Less dividends and distributions
from:
Net investment income........... (1.03) (1.01) (0.72)
Net realized gain............... (0.11) (0.04) --
----- ------ ------
Total dividends and
distributions..................... (1.14) (1.05) (0.72)
----- ------ ------
Net asset value, end of period..... $ 9.80 $ 9.93 $ 9.77
----- ------ ------
----- ------ ------
TOTAL INVESTMENT RETURN+........... 10.71% 12.85% 5.19%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses........................... 1.39% 1.49% 1.55%(2)(3)
Net investment income.............. 10.50% 11.22% 10.85%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in
millions.......................... $ 1,129 $ 505 $ 169
Portfolio turnover rate............ 42% 69% 53%(1)
<FN>
- ---------------------
* 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 annualized expense and net investment ratios
would have been 1.65% and 10.75%, respectively.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HIGH INCOME SECURITIES
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF DEAN WITTER HIGH INCOME SECURITIES
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Dean Witter High Income Securities
(the "Fund") at March 31, 1997, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the two years in the period
then ended and for the period June 2, 1994 (commencement of operations) through
March 31, 1995, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at March
31, 1997 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
MAY 9, 1997
1997 FEDERAL TAX NOTICE (UNAUDITED)
During the year ended March 31, 1997, the Fund paid to its
shareholders $0.01 per share from long-term capital gains.
<PAGE>
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
Barry Fink
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
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
[GRAPHIC]
ANNUAL REPORT
MARCH 31, 1997
<PAGE>
DEAN WITTER HIGH INCOME SECURITIES
GROWTH OF $10,000
LEHMAN MF
CORP/HIGH LEHMAN HIGH
DATE TOTAL YLD IX YLD IX LIPPER
June 2, 1994 $10000 $10000 $10000 $10000
March 31, 1995 $10519 $10718 $10730 $10349
March 31, 1996 $11871 $12091 $12282 $11879
March 31, 1997 $12947 (3) $12821 $13466 $13102
AVERAGE ANNUAL TOTAL RETURNS
ONE YEAR LIFE OF FUND
10.71 (1) 10.14 (1)
6.76 (2) 9.56 (2)
___ Fund ___ Lehman MF (4) ___ Lehman IX(5) ___ Lipper (6)
Past performance is not predictive of future returns.
________________________________________
(1) Figure shown assumes reinvestment of all distributions and does not
reflect the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and the deduction
of the maximum applicable contingent deferred sales charge (CDSC) (one
year-4%, since inception-2%). See the Fund's current prospectus for
complete details on fees and sales charges.
(3) Closing value after the deduction of a 2% CDSC, assuming a complete
redemption on March 31, 1997.
(4) The Lehman Brothers Mutual Fund Corporate/ High Yield Index is an index
measuring all investment and noninvestment grade corporate debt
securities. The Index is unmanaged and should not be considered an
investment.
(5) The Lehman Brothers High Yield Index tracks the performance of all below
investment-grade securities which have at least $100 million in
outstanding issuance, are greater than one year to maturity and are
issued in fixed rate U.S. dollar denominations. The Index does not
include any expenses, fees or charges. The Index is unmanaged and
should not be considered an investment.
(6) The Lipper High Yield Bond Funds Index is an equally-weighted
performance index of the largest qualifying funds (based on net
assets) in the Lipper High Current Yield Funds objective. The
Index, which is adjusted for capital gains distributions and
income dividends, is unmanaged and should not be considered an
investment. There are currently 30 funds represented in this index.
