MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC, 485BPOS, 1998-10-29

MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC
485BPOS, 1998-10-29

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 29, 1998

REGISTRATION NOS.: 2-64782
811-2932
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------

FORM N-1A
REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933
/X/
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 23
/X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
/X/
AMENDMENT NO. 24
/X/
-------------------

MORGAN STANLEY DEAN WITTER

HIGH YIELD SECURITIES INC.
(FORMERLY NAMED DEAN WITTER HIGH YIELD SECURITIES INC.)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600

BARRY FINK, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)

COPY TO:
DAVID M. BUTOWSKY, ESQ.
GORDON ALTMAN BUTOWSKY
WELTZEN SHALOV & WEIN
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036
-------------------

APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after this Post-Effective Amendment becomes effective.

IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
_X_ immediately upon filing pursuant to paragraph (b)
___ on (date) pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)
___ on (date) pursuant to paragraph (a) of rule 485.

AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS

-------------------------------------------------------
-------------------------------------------------------
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.

CROSS-REFERENCE SHEET

FORM N-1A

<TABLE>
<S> <C>
ITEM CAPTION
- ---------------------------------------------- ---------------------------------------------------------------------
PART A PROSPECTUS
1. ......................................... Cover Page
2. ......................................... Prospectus Summary; Summary of Fund Expenses
3. ......................................... Financial Highlights; Performance Information
4. ......................................... Prospectus Summary; Investment Objective and Policies; The Fund and
its Management; Cover Page; Investment Restrictions; Appendix
5. ......................................... The Fund and Its Management; Back Cover; Investment Objectives and
Policies
6. ......................................... Dividends, Distributions and Taxes; Additional Information
7. ......................................... Purchase of Fund Shares; Shareholder Services
8. ......................................... Purchase of Fund Shares; Redemptions and Repurchases; Shareholder
Services
9. ......................................... Not Applicable

PART B STATEMENT OF ADDITIONAL INFORMATION
10. ......................................... Cover Page
11. ......................................... Table of Contents
12. ......................................... The Fund and Its Management
13. ......................................... Investment Practices and Policies; Investment Restrictions; Portfolio
Transactions and Brokerage
14. ......................................... Directors and Officers
15. ......................................... The Fund and Its Management; Directors and Officers
16. ......................................... The Fund and Its Management; The Distributor; Custodian and Transfer
Agent; Independent Accountants; Shareholder Services
17. ......................................... Portfolio Transactions and Brokerage
18. ......................................... Shares of the Fund
19. ......................................... The Distributor; Purchase of Fund Shares; Redemptions and
Repurchases; Financial Statements; Shareholder Services
20. ......................................... Dividends, Distributions and Taxes
21. ......................................... Not applicable
22. ......................................... Performance Information
23. ......................................... Experts; Financial Statements
</TABLE>

PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>

PROSPECTUS
OCTOBER 29, 1998

Morgan Stanley Dean Witter High Yield Securities Inc. (the "Fund")
is an open-end diversified management investment company whose primary
investment objective is to earn a high level of current income. As a secondary
objective, the Fund will seek capital appreciation, but only when consistent
with its primary objective. The Fund seeks high current income by investing
principally in fixed-income securities which are rated in the lower categories
by established rating services (Baa or lower by Moody's Investors Service, Inc.
or BBB or lower by Standard & Poor's Corporation) or are non-rated securities of
comparable quality.
INVESTORS SHOULD CAREFULLY CONSIDER THE RELATIVE RISKS,
INCLUDING THE RISK OF DEFAULT, OF INVESTING IN HIGH YIELD SECURITIES, WHICH ARE
COMMONLY KNOWN AS JUNK BONDS. BONDS OF THIS TYPE ARE CONSIDERED TO BE
SPECULATIVE WITH REGARD TO THE PAYMENT OF INTEREST AND RETURN OF PRINCIPAL.
INVESTORS SHOULD ALSO BE COGNIZANT OF THE FACT THAT SUCH SECURITIES ARE NOT
GENERALLY MEANT FOR SHORT-TERM INVESTING AND SHOULD ASSESS THE RISKS ASSOCIATED
WITH AN INVESTMENT IN THE FUND. (See "Investment Objectives and Policies.")
The Fund offers four classes of shares (each, a "Class"), each
with a different combination of sales charges, ongoing fees and other features.
The different distribution arrangements permit an investor to choose the method
of purchasing shares that the investor believes is most beneficial given the
amount of the purchase, the length of time the investor expects to hold the
shares and other relevant circumstances. (See "Purchase of Fund
Shares--Alternative Purchase Arrangements.")

This Prospectus sets forth concisely the information you should
know before investing in the Fund. It should be read and retained for future
reference. Additional information about the Fund is contained in the Statement
of Additional Information, dated October 29, 1997, which has been filed with the
Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at the address or telephone numbers listed on this page. The
Statement of Additional Information is incorporated herein by reference.

MORGAN STANLEY DEAN WITTER
DISTRIBUTORS INC.
DISTRIBUTOR

TABLE OF CONTENTS

Prospectus Summary/2
Summary of Fund Expenses/4
Financial Highlights/6
The Fund and its Management/9
Investment Objectives and Policies/9
Special Risk Considerations/11
Investment Restrictions/16
Purchase of Fund Shares/16
Shareholder Services/28
Redemptions and Repurchases/32
Dividends, Distributions and Taxes/33
Performance Information/34
Additional Information/35
Appendix/37

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

Morgan Stanley Dean Witter
High Yield Securities Inc.
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)
<PAGE>
PROSPECTUS SUMMARY
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<TABLE>
<S> <C>
The An open-end diversified management investment company investing principally in lower-rated fixed- income
Fund securities (see page 9).
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Offered Common stock of $0.01 par value (see page 35). The Fund offers four Classes of shares, each with a different
combination of sales charges, ongoing fees and other features (see pages 16-26).
- ------------------------------------------------------------------------------------------------------------------------------------
Minimum The minimum initial investment for each Class is $1,000 ($100 if the account is opened through EasyInvest-SM-).
Purchase Class D shares are only available to persons investing $5 million ($25 million for certain qualified plans) or
more and to certain other limited categories of investors. For the purpose of meeting the minimum $5 million (or
$25 million) investment for Class D shares, and subject to the $1,000 minimum initial investment for each Class
of the Fund, an investor's existing holdings of Class A shares and shares of funds for which Morgan Stanley Dean
Witter Advisors Inc. serves as investment manager ("Morgan Stanley Dean Witter Funds") that are sold with a
front-end sales charge, and concurrent investments in Class D shares of the Fund and other Morgan Stanley Dean
Witter Funds that are multiple class funds, will be aggregated. The minimum subsequent investment is $100 (see
page 17).
- ------------------------------------------------------------------------------------------------------------------------------------
Investment A high level of current income primarily; capital appreciation is secondary (see page 9).
Objectives
- ------------------------------------------------------------------------------------------------------------------------------------
Investment High yield fixed-income securities, principally rated Baa/BBB or lower, and non-rated securities of comparable
Policies quality. However, the Fund may also invest in municipal securities, futures
and options and common stock (see pages 9-15).
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Morgan Stanley Dean Witter Advisors Inc., the Investment Manager of the Fund, and its wholly-owned subsidiary,
Manager Morgan Stanley Dean Witter Services Company, Inc., serve in various investment management, advisory, management
and administrative capacities to 100 investment companies and other portfolios, with assets of approximately
$113.6 billion at September 30, 1998 (see page 9).
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Management The monthly fee is at an annual rate of 1/2 of 1% of average daily net assets, scaled down on assets over $500
Fee million (see page 9).
- ------------------------------------------------------------------------------------------------------------------------------------
Distributor and Morgan Stanley Dean Witter Distributors Inc. (the "Distributor") is the Distributor of the Fund's shares. The
Distribution Fee Fund has adopted a distribution plan pursuant to Rule 12b-1 under the Investment Company Act (the "12b-1 Plan")
with respect to the distribution fees paid by the Class A, Class B and Class C shares of the Fund to the
Distributor. The entire 12b-1 fee payable by Class A and a portion of the 12b-1 fee payable by each of Class B
and Class C equal to 0.20% of the average daily net assets of Class B and 0.25% of the average daily net assets
of Class C are currently each characterized as a service fee within the meaning of the National Association of
Securities Dealers, Inc. guidelines. The remaining portion of the 12b-1 fee, if any, is characterized as an
asset-based sales charge (see pages 16 and 26).
- ------------------------------------------------------------------------------------------------------------------------------------
Alternative Four classes of shares are offered:
Purchase
Arrangements - Class A shares are offered with a front-end sales charge, starting at 4.25% and reduced for larger purchases.
Investments of $1 million or more (and investments by certain other limited categories of investors) are not
subject to any sales charge at the time of purchase but a contingent deferred sales charge ("CDSC") of 1.0% may
be imposed on redemptions within one year of purchase. The Fund is authorized to reimburse the Distributor for
specific expenses incurred in promoting the distribution of the Fund's Class A shares and servicing shareholder
accounts pursuant to the Fund's 12b-1 Plan. Reimbursement may in no event exceed an amount equal to payments at
an annual rate of 0.25% of average daily net assets of the Class (see pages 16, 20 and 26).
</TABLE>

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2
<PAGE>
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
- Class B shares are offered without a front-end sales charge, but will in most cases be subject to a CDSC
(scaled down from 5.0% to 1.0%) if redeemed within six years after purchase. The CDSC will be imposed on any
redemption of shares if after such redemption the aggregate current value of a Class B account with the Fund
falls below the aggregate amount of the investor's purchase payments made during the six years preceding the
redemption. A different CDSC schedule applies to investments by certain qualified plans. Class B shares are also
subject to a 12b-1 fee assessed at the annual rate of 0.75% of the average daily net assets of Class B. Class B
shares convert to Class A shares approximately ten years after the date of the original purchase (see pages 16,
22 and 26).
- Class C shares are offered without a front-end sales charge, but will in most cases be subject to a CDSC of
1.0% if redeemed within one year after purchase. The Fund is authorized to reimburse the Distributor for
specific expenses incurred in promoting the distribution of the Fund's Class C shares and servicing shareholder
accounts pursuant to the Fund's 12b-1 Plan. Reimbursement may in no event exceed an amount equal to payments at
an annual rate of 0.85% of average daily net assets of the Class (see pages 16, 25 and 26).
- Class D shares are offered only to investors meeting an initial investment minimum of $5 million ($25 million
for certain qualified plans) and to certain other limited categories of investors. Class D shares are offered
without a front-end sales charge or CDSC and are not subject to any 12b-1 fee (see pages 16, 24 and 25). All
shares of the Fund held prior to July 28, 1997 have been designated Class D shares. Additional investments in
Class D shares by shareholders holding such shares may only be made if those shareholders are otherwise eligible
to purchase Class D shares. However, shareholders holding such shares will receive the benefit of the value of
such shares towards reduced sales charges on purchases of Class A shares pursuant to the Fund's "Right of
Accumulation" (see pages 16, 25 and 26).
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends Dividends from net investment income are declared and paid monthly; distributions from net capital gains, if
and any, are paid at least annually. The Fund may, however, determine to retain all or part of any net mid-term and
Capital Gains net long-term capital gains in any year for reinvestment. Dividends and capital gains distributions paid on
Distributions shares of a Class are automatically reinvested in additional shares of the same Class at net asset value unless
the shareholder elects to receive cash. Shares acquired by dividend and distribution reinvestment will not be
subject to any sales charge or CDSC (see pages 28 and 33).
- ------------------------------------------------------------------------------------------------------------------------------------
Redemption Shares are redeemable by the shareholder at net asset value less any applicable CDSC on Class A, Class B or
Class C shares. An account may be involuntarily redeemed if the total value of the account is less than $100 or,
if the account was opened through EasyInvest-SM-, if after twelve months the shareholder has invested less than
$1,000 in the account (see page 32).
- ------------------------------------------------------------------------------------------------------------------------------------
Risks The net asset value of the Fund's shares will fluctuate with changes in the market value of its portfolio
securities. The Fund's yield will also vary based on the yield of the Fund's portfolio securities. Compared with
higher rated, lower yielding fixed-income securities, portfolio securities of the Fund may be subject to greater
risk of loss of income and principal, including the risk of default, and greater risk of increases and decreases
in net asset value due to market fluctuations. The Fund may purchase foreign securities, when-issued and delayed
delivery and when, as and if issued securities and other securities subject to repurchase agreements which
involve certain special risks. The Fund may purchase common stock which is exchangeable for fixed-income
securities in circumstances involving takeovers or recapitalizations. The Fund may also invest in futures and
options which may be considered speculative in nature and may involve greater risks than those customarily
assumed by certain other investment companies which do not invest in such instruments. Investors should review
the investment objectives and policies of the Fund carefully and consider their ability to assume the risks
involved in purchasing shares of the Fund (see pages 11-15).
</TABLE>

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

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

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

The following table illustrates all expenses and fees that a shareholder of the
Fund will incur. The expenses and fees set forth in the table are based on the
expenses and fees for the fiscal year ended August 31, 1998.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
--------- ------- --------- -------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
- --------------------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)... 4.25%(1) None None None
Sales Charge Imposed on Dividend Reinvestments.................................. None None None None
Maximum Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds)................................................. None(2) 5.00%(3) 1.00%(4) None
Redemption Fees................................................................. None None None None
Exchange Fee.................................................................... None None None None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
- --------------------------------------------------------------------------------
Management Fees (5)............................................................. 0.40% 0.40% 0.40% 0.40%
12b-1 Fees (6) (7).............................................................. 0.24% 0.74% 0.85% None
Other Expenses (5).............................................................. 0.11% 0.11% 0.11% 0.11%
Total Fund Operating Expenses................................................... 0.75% 1.25% 1.36% 0.51%
</TABLE>

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

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

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

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

(5) MANAGEMENT FEES AND OTHER EXPENSES ARE BASED ON THE FUND'S ACTUAL AGGREGATE
EXPENSES.

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

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

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

<TABLE>
<CAPTION>
EXAMPLES 1 Year 3 Years 5 Years
- ---------------------------------------------------------------------------- ----------- ------------- -------------
<S> <C> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1) a
5% annual return and (2) redemption at the end of each time period:
Class A................................................................. $ 50 $ 65 $ 82
Class B................................................................. $ 63 $ 70 $ 88
Class C................................................................. $ 24 $ 43 $ 74
Class D................................................................. $ 5 $ 16 $ 28

You would pay the following expenses on the same $1,000
investment assuming no redemption at the end of the period:
Class A................................................................. $ 50 $ 65 $ 82
Class B................................................................. $ 13 $ 40 $ 68
Class C................................................................. $ 14 $ 43 $ 74
Class D................................................................. $ 5 $ 16 $ 28

<CAPTION>
EXAMPLES 10 Years
- ---------------------------------------------------------------------------- -------------
<S> <C>
You would pay the following expenses on a $1,000 investment assuming (1) a
5% annual return and (2) redemption at the end of each time period:
Class A................................................................. $ 131
Class B................................................................. $ 151
Class C................................................................. $ 163
Class D................................................................. $ 64
You would pay the following expenses on the same $1,000
investment assuming no redemption at the end of the period:
Class A................................................................. $ 131
Class B................................................................. $ 151
Class C................................................................. $ 163
Class D................................................................. $ 64
</TABLE>

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

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

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

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

The following ratios and per share data for a share of capital stock
outstanding throughout each period have been audited by PricewaterhouseCoopers
LLP, independent accountants. The financial highlights should be read in
conjunction with the financial statements, the notes thereto and the unqualified
report of independent accountants which are contained in the Statement of
Additional Information. Further information about the performance of the Fund is
contained in the Fund's Annual Report to Stockholders, which may be obtained
without charge upon request to the Fund.

<TABLE>
<CAPTION>
FOR THE YEAR ENDED AUGUST 31,
------------------------------------------------------------------------------------------------------
CLASS D SHARES 1998++ 1997* 1996 1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE
OPERATING
PERFORMANCE:
Net asset value,
beginning of
period.......... $ 6.82 $ 6.71 $ 6.77 $ 6.83 $ 7.58 $ 7.23 $ 5.92 $ 6.78
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net investment
income.......... 0.78 0.79 0.83 0.80 0.79 0.89 0.95 0.94
Net realized and
unrealized gain
(loss).......... (0.71) 0.15 (0.12) (0.06) (0.68) 0.54 1.04 (0.86)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Total from
investment
operations...... 0.07 0.94 0.71 0.74 0.11 1.43 1.99 0.08
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Less dividends
and
distributions
from:
Net investment
income........ (0.73) (0.83) (0.77) (0.80) (0.86) (1.08) (0.68) (0.94)
Paid-in-capital... -- -- -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Total dividends
and
distributions... (0.73) (0.83) (0.77) (0.80) (0.86) (1.08) (0.68) (0.94)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net asset value,
end of period... $ 6.16 $ 6.82 $ 6.71 $ 6.77 $ 6.83 $ 7.58 $ 7.23 $ 5.92
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------

TOTAL INVESTMENT
RETURN+......... 0.63% 15.01% 11.07% 11.98% 0.93% 22.29% 35.46% 4.67%

RATIOS TO AVERAGE
NET ASSETS:
Expenses......... 0.51%(1) 0.68% 0.66% 0.79% 0.69% 0.67% 0.77% 0.87%
Net investment
income........... 11.54%(1) 11.78% 12.27% 12.06% 10.40% 12.14% 13.96% 16.47%

SUPPLEMENTAL
DATA:
Net assets, end
of period, in
millions........ $401 $479 $460 $455 $478 $540 $512 $436
Portfolio
turnover rate.... 66% 113% 49% 74% 127% 173% 113% 93%

CLASS D SHARES 1990 1989
----------- -----------
<S> <C> <C>
PER SHARE
OPERATING
PERFORMANCE:
Net asset value,
beginning of
period.......... $ 10.40 $ 11.99
----------- -----------
Net investment
income.......... 1.48 1.67
Net realized and
unrealized gain
(loss).......... (3.78) (1.48)
----------- -----------
Total from
investment
operations...... (2.30) 0.19
----------- -----------
Less dividends
and
distributions
from:
Net investment
income........ (1.32) (1.75)

Paid-in-capita -- (0.03)
----------- -----------
Total dividends
and
distributions... (1.32) (1.78)
----------- -----------
Net asset value,
end of period... $ 6.78 $ 10.40
----------- -----------
----------- -----------
TOTAL INVESTMENT
RETURN+......... (23.28)% 1.39%
RATIOS TO AVERAGE
NET ASSETS:
Expenses......... 0.60% 0.49%
Net investment
income........... 17.67% 14.61%
SUPPLEMENTAL
DATA:
Net assets, end
of period, in
millions........ $690 $1,794
Portfolio
turnover rate.... 21% 55%
</TABLE>

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

* PRIOR TO JULY 28, 1997, THE FUND ISSUED ONE CLASS OF SHARES. ALL SHARES OF
THE FUND HELD PRIOR TO THAT DATE HAVE BEEN DESIGNATED CLASS D SHARES.

++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD.

+ CALCULATED BASED ON THE NET ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE
PERIOD.

(1) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC
EXPENSES.

6
<PAGE>
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR JULY 28, 1997*
ENDED THROUGH
CLASS A SHARES AUGUST 31, 1998++ AUGUST 31, 1997++
----------------- -----------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 6.82 $ 6.83
------ ------
Net investment income................................................. 0.76 0.07
Net realized and unrealized loss...................................... (0.71) (0.03)
------ ------
Total from investment operations...................................... 0.05 0.04
------ ------
Less dividends from net investment income............................. (0.71) (0.05)
------ ------
Net asset value, end of period........................................ $ 6.16 $ 6.82
------ ------
------ ------
TOTAL INVESTMENT RETURN+.............................................. 0.40% 0.65%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 0.75%(3) 0.93%(2)
Net investment income................................................. 11.30%(3) 11.80%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $30,678 $1,996
Portfolio turnover rate............................................... 66% 113%

CLASS B SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 6.82 $ 6.83
------ ------
Net investment income................................................. 0.73 0.07
Net realized and unrealized loss...................................... (0.72) (0.03)
------ ------
Total from investment operations...................................... 0.01 0.04
------ ------
Less dividends from net investment income............................. (0.68) (0.05)
------ ------
Net asset value, end of period........................................ $ 6.15 $ 6.82
------ ------
------ ------
TOTAL INVESTMENT RETURN+.............................................. (0.23)% 0.62%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 1.25%(3) 1.42%(2)
Net investment income................................................. 10.80%(3) 11.28%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $1,761,147 $15,828
Portfolio turnover rate............................................... 66% 113%
</TABLE>

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

* THE DATE SHARES WERE FIRST ISSUED.

++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD.

+ 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) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC
EXPENSES.

7
<PAGE>
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR JULY 28, 1997*
ENDED THROUGH
CLASS C SHARES AUGUST 31, 1998++ AUGUST 31, 1998++
----------------- -----------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 6.82 $ 6.83
------ ------
Net investment income................................................. 0.72 0.07
Net realized and unrealized loss...................................... (0.72) (0.03)
------ ------
Total from investment operations...................................... 0.00 0.04
------ ------
Less dividends from net investment income............................. (0.67) (0.05)
------ ------
Net asset value, end of period........................................ $ 6.15 $ 6.82
------ ------
------ ------
TOTAL INVESTMENT RETURN+.............................................. (0.34)% 0.62%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 1.36%(3) 1.52%(2)
Net investment income................................................. 10.69%(3) 11.18%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $56,626 $5,225
Portfolio turnover rate............................................... 66% 113%
</TABLE>

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

* THE DATE SHARES WERE FIRST ISSUED.

++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD.

+ 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) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC
EXPENSES.

8
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------

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

Morgan Stanley Dean Witter Advisors Inc. ("MSDW Advisors" 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 is a wholly-owned
subsidiary of Morgan Stanley Dean Witter & Co., a preeminent global financial
services firm that maintains leading market positions in each of its three
primary businesses--securities, asset management and credit services. The
Investment Manager, which was incorporated in July, 1992 under the name Dean
Witter InterCapital Inc., changed its name to Morgan Stanley Dean Witter
Advisors Inc. on June 22, 1998.

MSDW Advisors and its wholly-owned subsidiary, Morgan Stanley Dean Witter
Services Company Inc. ("MSDW Services"), serve in various investment management,
advisory, management and administrative capacities to 100 investment companies,
28 of which are listed on the New York Stock Exchange, with combined total
assets of approximately $109.5 billion as of September 30, 1998. The Investment
Manager also manages, and advises managers of, common stock portfolios of
pension plans, other institutions and individuals which aggregated approximately
$4.1 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. MSDW Advisors has retained MSDW Services to perform the
aforementioned administrative services for the Fund.

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

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

The primary investment objective of the Fund is to earn a high level of
current income. As a secondary objective, the Fund will seek capital
appreciation, but only when consistent with its primary objective. Capital
appreciation may result, for example, from an improvement in the credit standing
of an issuer whose securities are held in the Fund's portfolio or from a general
decline in interest rates, or a combination of both. Conversely, capital
depreciation may result, for example, from a lowered credit standing or a
general rise in interest rates, or a combination of both. There is no assurance
that the objectives will be achieved.

The higher yields sought by the Fund are generally obtainable from
securities rated in the lower categories by recognized rating services. The Fund
seeks high current income by investing principally

9
<PAGE>
in fixed-income securities rated Baa or lower by Moody's Investors Service, Inc.
("Moody's"), or BBB or lower by Standard & Poor's Corporation ("Standard &
Poor's"). Fixed-income securities rated Baa by Moody's or BBB by Standard &
Poor's have speculative characteristics greater than those of more highly rated
bonds, while fixed-income securities rated Ba or BB or lower by Moody's and
Standard & Poor's, respectively, are considered to be speculative investments.
Furthermore, the Fund does not have any minimum quality rating standard for its
investments. As such, the Fund may invest in securities rated as low as Caa, Ca
or C by Moody's or CCC, CC, C or C1 by Standard & Poor's. Fixed-income
securities rated Caa or Ca by Moody's may already be in default on payment of
interest or principal, while bonds rated C by Moody's, their lowest bond rating,
can be regarded as having extremely poor prospects of ever attaining any real
investment standing. Bonds rated C1 by Standard & Poor's, their lowest bond
rating, are no longer making interest payments. For a further discussion of the
characteristics and risks associated with high yield securities, see "Special
Investment Considerations" below. A description of corporate bond ratings is
contained in the Appendix.

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

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

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

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

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

10
<PAGE>
SPECIAL RISK CONSIDERATIONS

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

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

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

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

During the fiscal year ended August 31, 1998, 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.................. 4.3%
AA/Aa.................... 0.0%
A/A...................... 15.4%
BBB/Baa.................. 0.5%
BB/Ba.................... 4.4%
B/B...................... 60.4%
CCC/Caa.................. 3.2%
CC/Ca.................... 0.5%
C/C...................... 0.2%
D........................ 0.2%
Unrated.................. 10.9%
</TABLE>

Consistent with its primary investment objective, the Fund anticipates that,
under normal conditions, at least 65% of the value of its total assets will be
invested in the lower-rated and non-rated fixed-income securities previously
described. However, when the difference between yields derived from such
securities and those derived from higher rated issues are relatively narrow, the
Fund may invest in

11
<PAGE>
the higher rated issues since they may provide similar yields with somewhat less
risk. Fixed-income securities appropriate for the Fund may include both
convertible and nonconvertible debt securities and preferred stock.

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

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

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

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

12
<PAGE>
FOREIGN SECURITIES. The Fund may invest up to 20% of its total assets in
fixed-income securities issued by foreign governments and other foreign issuers
and in foreign currency issues of domestic issuers, but not more than 10% of its
total assets in such securities, whether issued by a foreign or domestic issuer,
which are denominated in foreign currency. Foreign securities investments may be
affected by changes in currency rates or exchange control regulations, changes
in governmental administration or economic or monetary policy (in the United
States and abroad) or changed circumstances in dealings between nations. Costs
will be incurred in connection with conversions between various currencies held
by the Fund. When purchasing foreign securities, the Fund will generally enter
into foreign currency exchange transactions or forward foreign exchange
contracts to facilitate settlement. The Fund will utilize forward foreign
exchange contracts in these instances as an attempt to limit the effect of
changes in the relationship between the U.S. dollar and the foreign currency
during the period between the trade date and settlement date for the
transaction.

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

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

Many European countries are about to adopt a single European currency, the
euro (the "Euro Conversion"). The consequences of the Euro Conversion for
foreign exchange rates, interest rates and the value of European securities
eligible for purchase by the Fund are presently unclear. Such consequences may
adversely affect the value and/or increase the volatility of securities held by
the Fund.

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

The prices of common stock are generally more volatile than those of
fixed-income securities. Moreover, not all common stock pay dividends and

13
<PAGE>
those that do generally pay lower amounts than most fixed-income securities. The
Fund will only purchase common stocks directly when the Investment Manager
believes that their purchase will assist the Fund in meeting its investment
objectives.

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

A zero coupon security pays no interest to its holder during its life.
Therefore, to the extent the Fund invests in zero coupon securities, it will not
receive current cash available for distribution to shareholders. In addition,
zero coupon securities are subject to substantially greater price fluctuations
during periods of changing prevailing interest rates than are comparable
securities which pay interest on a current basis. Current federal tax law
requires that a holder (such as the Fund) of a zero coupon security accrue a
portion of the discount at which the security was purchased as income each year
even though the Fund receives no interest payments in cash on the security
during the year.

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

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

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

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

PRIVATE PLACEMENTS. The Fund may invest up to 5% of its total assets in
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or which are otherwise not readily marketable. 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.

14
<PAGE>
The Securities and Exchange Commission has adopted Rule 144A under the
Securities Act, which permits the Fund to sell restricted securities to
qualified institutional buyers without limitation. The Investment Manager,
pursuant to procedures adopted by the Board of Directors of the Fund, will make
a determination as to the liquidity of each restricted security purchased by the
Fund. If a restricted security is determined to be "liquid," such security will
not be considered to be "restricted" for purposes of the above-disclosed 5%
limitation and will not be included within the category "illiquid securities,"
which under current policy may not exceed 15% of the Fund's total assets.
However, investing in Rule 144A securities could have the effect of increasing
the level of Fund illiquidity to the extent the Fund, at a particular point of
time, may be unable to find qualified institutional buyers interested in
purchasing such securities.

YEAR 2000. The investment management services provided to the Fund by the
Investment Manager and the services provided to shareholders by the Distributor
and the Transfer Agent depend on the smooth functioning of their computer
systems. Many computer software systems in use today cannot recognize the year
2000, but revert to 1900 or some other date, due to the manner in which dates
were encoded and calculated. That failure could have a negative impact on the
handling of securities trades, pricing and account services. The Investment
Manager, the Distributor and the Transfer Agent have been actively working on
necessary changes to their own computer systems to prepare for the year 2000 and
expect that their systems will be adapted before that date, but there can be no
assurance that they will be successful, or that interaction with other
non-complying computer systems will not impair their services at that time.

In addition, it is possible that the markets for securities in which the
Fund invests may be detrimentally affected by computer failures throughout the
financial services industry beginning January 1, 2000. Improperly functioning
trading systems may result in settlement problems and liquidity issues. In
addition, corporate and governmental data processing errors may result in
production problems for individual companies and overall economic uncertainties.
Earnings of individual issuers will be affected by remediation costs, which may
be substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected.

PORTFOLIO MANAGEMENT

The Fund is actively managed by the Investment Manager with a view to
achieving the Fund's investment objective. The Fund is managed within MSDW
Advisors' Taxable Income Group, which manages 21 funds and fund portfolios with
approximately $14 billion in assets at September 30, 1998. Peter M. Avelar,
Senior Vice President of MSDW Advisors and a member of MSDW Advisors' Taxable
Fixed-Income Group, has been the primary portfolio manager of the Fund since
January, 1991 and has been managing portfolios consisting of fixed-income and
equity securities at MSDW Advisors for over five years.

Securities purchased by the Fund are, generally, sold by dealers acting as
principal for their own accounts. Pursuant to an order issued by the Securities
and Exchange Commission, the Fund may effect principal transactions in certain
money market instruments with Dean Witter Reynolds Inc. In addition, the Fund
may incur brokerage commissions on transactions conducted through Dean Witter
Reynolds Inc., Morgan Stanley & Co. Incorporated and other brokers and dealers
that are affiliates of MSDW Advisors.

Although the Fund does not intend to engage in substantial short-term
trading, it may sell portfolio securities without regard to the length of time
that they have been held, in order to take advantage of new investment
opportunities or yield differentials, or because the Fund desires to preserve
gains or limit losses due to changing economic conditions, interest rate trends,
or the financial condition of the issuer. The Fund's portfolio turnover rate for
the fiscal year ended August 31, 1998 was 66.26%. The Fund will incur
underwriting discount costs (on

15
<PAGE>
underwritten securities) and brokerage costs commensurate with its portfolio
turnover rate. See "Dividends, Distributions and Taxes" for a discussion of the
tax implications of the Fund's trading policy.

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

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

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

The Fund may not:

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

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

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

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

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

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

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

GENERAL

The Fund offers each class of its shares for sale to the public on a
continuous basis. Pursuant to a Distribution Agreement between the Fund and
Morgan Stanley Dean Witter Distributors Inc. ("MSDW Distributors" or the
"Distributor"), an affiliate of the Investment Manager, shares of the Fund are
distributed by the Distributor and offered by Dean Witter Reynolds Inc. ("DWR"),
a selected dealer and subsidiary of Morgan Stanley Dean Witter & Co. and other
dealers who have entered into selected dealer agreements with the Distributor
("Selected Broker-Dealers"). It is anticipated that DWR will undergo a change of
corporate name which is expected to incorporate the brand name of "Morgan
Stanley Dean Witter," pending approval of various regulatory authorities. The
principal executive office of the Distributor is located at Two World Trade
Center, New York, New York 10048.

The Fund offers four classes of shares (each, a "Class"). Class A shares are
sold to investors with an initial sales charge that declines to zero for larger
purchases; however, Class A shares sold without an initial sales charge are
subject to a contingent deferred sales charge ("CDSC") of 1.0% if redeemed
within one year of purchase, except for

16
<PAGE>
certain specific circumstances. Class B shares are sold without an initial sales
charge but are subject to a CDSC (scaled down from 5.0% to 1.0%) payable upon
most redemptions within six years after purchase. (Class B shares purchased by
certain qualified plans are subject to a CDSC scaled down from 2.0% to 1.0% if
redeemed within three years after purchase.) Class C shares are sold without an
initial sales charge but are subject to a CDSC of 1.0% on most redemptions made
within one year after purchase. Class D shares are sold without an initial sales
charge or CDSC and are available only to investors meeting an initial investment
minimum of $5 million ($25 million for certain qualified plans), and to certain
other limited categories of investors. At the discretion of the Board of
Directors of the Fund, Class A shares may be sold to categories of investors in
addition to those set forth in this prospectus at net asset value without a
front-end sales charge, and Class D shares may be sold to certain other
categories of investors, in each case as may be described in the then current
prospectus of the Fund. See "Alternative Purchase Arrangements-- Selecting a
Particular Class" for a discussion of factors to consider in selecting which
Class of shares to purchase.

The minimum initial purchase is $1,000 for each Class of shares, although
Class D shares are only available to persons investing $5 million ($25 million
for certain qualified plans) or more and to certain other limited categories of
investors. For the purpose of meeting the minimum $5 million (or $25 million)
initial investment for Class D shares, and subject to the $1,000 minimum initial
investment for each Class of the Fund, an investor's existing holdings of Class
A shares of the Fund and other Morgan Stanley Dean Witter Funds that are
multiple class funds ("Morgan Stanley Dean Witter Multi-Class Funds") and shares
of Morgan Stanley Dean Witter Funds sold with a front-end sales charge ("FSC
Funds") and concurrent investments in Class D shares of the Fund and other
Morgan Stanley Dean Witter Multi-Class Funds will be aggregated. Subsequent
purchases of $100 or more may be made by sending a check, payable to Morgan
Stanley Dean Witter High Yield Securities Inc., directly to Morgan Stanley Dean
Witter Trust FSB (the "Transfer Agent" or "MSDW Trust") at P.O. Box 1040, Jersey
City, N.J. 07303 or by contacting a Morgan Stanley Dean Witter Financial Advisor
or other Selected Broker-Dealer representative. When purchasing shares of the
Fund, investors must specify whether the purchase is for Class A, Class B, Class
C or Class D shares. If no Class is specified, the Transfer Agent will not
process the transaction until the proper Class is identified. The minimum
initial purchase in the case of investments through EasyInvest-SM-, an automatic
purchase plan (see "Shareholder Services"), is $100, provided that the schedule
of automatic investments will result in investments totalling at least $1,000
within the first twelve months. The minimum initial purchase in the case of an
"Education IRA" is $500, if the Distributor has reason to believe that
additional investments will increase the investment in the account to $1,000
within three years. In the case of investments pursuant to (i) Systematic
Payroll Deduction plans (including Individual Retirement plans), (ii) the MSDW
Advisors mutual fund asset allocation program and (iii) fee-based programs
approved by the Distributor, pursuant to which participants pay an asset based
fee for services, in the nature of investment advisory, administrative and/or
brokerage services, the Fund, in its discretion, may accept investments without
regard to any minimum amounts which would otherwise be required provided, in the
case of Systematic Payroll Deduction Plans, that if the Distributor has reason
to believe that additional purchases will increase the amount of the purchase of
shares in all accounts under such plans to at least $1,000. Certificates for
shares purchased will not be issued unless a request is made by the shareholder
in writing to the Transfer Agent.

Shares are sold through the Distributor on a normal three business day
settlement basis; that is, payment is due on the third business day (settlement
date) after the order is placed with the Distributor. Since DWR and other
Selected Broker-Dealers

17
<PAGE>
forward investors' funds on settlement date, they will benefit from the
temporary use of the funds if payment is made prior thereto. As noted above,
orders placed directly with the Transfer Agent must be accompanied by payment.
Investors will be entitled to receive income dividends and capital gains
distributions if their order is received by the close of business on the day
prior to the record date for such dividends and distributions. Sales personnel
of a Selected Broker-Dealer are compensated for selling shares of the Fund by
the Distributor or any of its affiliates and/or the Selected Broker-Dealer. In
addition, some sales personnel of the Selected Broker-Dealer will receive
various types of non-cash compensation as special sales incentives, including
trips, educational and/or business seminars and merchandise. The Fund and the
Distributor reserve the right to reject any purchase order.

ALTERNATIVE PURCHASE ARRANGEMENTS

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

Each Class A, Class B, Class C or Class D share of the Fund represents an
identical interest in the investment portfolio of the Fund except that Class A,
Class B and Class C shares bear the expenses of the ongoing shareholder service
fees, Class B and Class C shares bear the expenses of the ongoing distribution
fees and Class A, Class B and Class C shares which are redeemed subject to a
CDSC bear the expense of the additional incremental distribution costs resulting
from the CDSC applicable to shares of those Classes. The ongoing distribution
fees that are imposed on Class A, Class B and Class C shares will be imposed
directly against those Classes and not against all assets of the Fund and,
accordingly, such charges against one Class will not affect the net asset value
of any other Class or have any impact on investors choosing another sales charge
option. See "Plan of Distribution" and "Redemptions and Repurchases."

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

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

CLASS B SHARES. Class B shares are offered at net asset value with no
initial sales charge but are subject to a CDSC (scaled down from 5.0% to 1.0%)
if redeemed within six years of purchase. (Class B shares purchased by certain
qualified plans are subject to a CDSC scaled down from 2.0% to 1.0% if redeemed
within three years after purchase.) This CDSC may be waived for certain
redemptions. Class B shares are also subject to an annual 12b-1 fee of 0.75% of
the average daily net assets of Class B. The Class B shares' distribution fee
will cause that Class to have higher expenses and pay lower dividends than Class
A or Class D shares.

After approximately ten (10) years, Class B shares will convert
automatically to Class A shares of the Fund, based on the relative net asset
values of

18
<PAGE>
the shares of the two Classes on the conversion date. In addition, a certain
portion of Class B shares that have been acquired through the reinvestment of
dividends and distributions will be converted at that time. See "Contingent
Deferred Sales Charge Alternative--Class B Shares."

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

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

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

The decision as to which Class of shares is more beneficial to an investor
depends on the amount and intended length of his or her investment. Investors
who prefer an initial sales charge alternative may elect to purchase Class A
shares. Investors qualifying for significantly reduced or, in the case of
purchases of $1 million or more, no initial sales charges may find Class A
shares particularly attractive because similar sales charge reductions are not
available with respect to Class B or Class C shares. Moreover, Class A shares
are subject to lower ongoing expenses than are Class B or Class C shares over
the term of the investment. As an alternative, Class B and Class C shares are
sold without any initial sales charge so the entire purchase price is
immediately invested in the Fund. Any investment return on these additional
investment amounts may partially or wholly offset the higher annual expenses of
these Classes. Because the Fund's future return cannot be predicted, however,
there can be no assurance that this would be the case.

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

For the purpose of meeting the $5 million (or $25 million) minimum
investment amount for Class D shares, holdings of Class A shares in all Morgan
Stanley Dean Witter Multi-Class Funds, shares of FSC Funds and shares of Morgan
Stanley Dean Witter Funds for which such shares have been exchanged will be
included together with the current investment amount.

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

19
<PAGE>
Set forth below is a chart comparing the sales charge, 12b-1 fees and
conversion options applicable to each Class of shares:

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

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

INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES

Class A shares are sold at net asset value plus an initial sales charge. In
some cases, reduced sales charges may be available, as described below.
Investments of $1 million or more (and investments by certain other limited
categories of investors) are not subject to any sales charges at the time of
purchase but are subject to a CDSC of 1.0% on redemptions made within one year
after purchase (calculated from the last day of the month in which the shares
were purchased), except for certain specific circumstances. The CDSC will be
assessed on an amount equal to the lesser of the current market value or the
cost of the shares being redeemed. The CDSC will not be imposed (i) in the
circumstances set forth below in the section "Contingent Deferred Sales Charge
Alternative--Class B Shares--CDSC Waivers," except that the references to six
years in the first paragraph of that section shall mean one year in the case of
Class A shares, and (ii) in the circumstances identified in the section
"Additional Net Asset Value Purchase Options" below. Class A shares are also
subject to an annual 12b-1 fee of up to 0.25% of the average daily net assets of
the Class.

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

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

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

The above schedule of sales charges is applicable to purchases in a single
transaction by,

20
<PAGE>
among others: (a) an individual; (b) an individual, his or her spouse and their
children under the age of 21 purchasing shares for his, her or their own
accounts; (c) a trustee or other fiduciary purchasing shares for a single trust
estate or a single fiduciary account; (d) a pension, profit-sharing or other
employee benefit plan qualified or non-qualified under Section 401 of the
Internal Revenue Code; (e) tax-exempt organizations enumerated in Section
501(c)(3) or (13) of the Internal Revenue Code; (f) employee benefit plans
qualified under Section 401 of the Internal Revenue Code of a single employer or
of employers who are "affiliated persons" of each other within the meaning of
Section 2(a)(3)(c) of the Act; and for investments in Individual Retirement
Accounts of employees of a single employer through Systematic Payroll Deduction
plans; or (g) any other organized group of persons, whether incorporated or not,
provided the organization has been in existence for at least six months and has
some purpose other than the purchase of redeemable securities of a registered
investment company at a discount.

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

RIGHT OF ACCUMULATION. The above persons and entities may benefit from a
reduction of the sales charges in accordance with the above schedule if the
cumulative net asset value of Class A shares purchased in a single transaction,
together with shares of the Fund and other Morgan Stanley Dean Witter Funds
previously purchased at a price including a front-end sales charge (including
shares of the Fund and other Morgan Stanley Dean Witter Funds acquired in
exchange for those shares, and including in each case shares acquired through
reinvestment of dividends and distributions), which are held at the time of such
transaction, amounts to $25,000 or more. If such investor has a cumulative net
asset value of shares of FSC Funds and Class A and Class D shares that, together
with the current investment amount, is equal to at least $5 million ($25 million
for certain qualified plans), such investor is eligible to purchase Class D
shares subject to the $1,000 minimum initial investment requirement of that
Class of the Fund. See "No Load Alternative--Class D Shares" below.

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

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

21
<PAGE>
ADDITIONAL NET ASSET VALUE PURCHASE OPTIONS. In addition to investments of
$1 million or more, Class A shares also may be purchased at net asset value by
the following:

(1) trusts for which MSDW Trust (which is an affiliate of the Investment
Manager) provides discretionary trustee services;

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

(3) employer-sponsored 401(k) and other plans qualified under Section 401(a)
of the Internal Revenue Code ("Qualified Retirement Plans") with at least 200
eligible employees and for which MSDW Trust serves as Trustee or DWR's
Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement;

(4) Qualified Retirement Plans for which MSDW Trust serves as Trustee or
DWR's Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement whose Class B shares have converted to Class A
shares, regardless of the plan's asset size or number of eligible employees;

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

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

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

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

CONTINGENT DEFERRED SALES CHARGE
ALTERNATIVE--CLASS B SHARES

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

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

22
<PAGE>
will depend upon how long the shares have been held, as set forth in the
following table:

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

In the case of Class B shares of the Fund purchased on or after July 28,
1997 by Qualified Retirement Plans for which MSDW Trust serves as Trustee or
DWR's Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement, shares held for three years or more after
purchase (calculated as described in the paragraph above) will not be subject to
any CDSC upon redemption. However, shares redeemed earlier than three years
after purchase may be subject to a CDSC (calculated as described in the
paragraph above), the percentage of which will depend on how long the shares
have been held, as set forth in the following table:

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

Class B shares of the Fund issued in exchange for shares of Dean Witter High
Income Securities ("High Income Securities") in connection with the
Reorganization of High Income Securities with the Fund on November 10, 1997,
that were subject to the lower CDSC schedule of High Income Securities (as
described below), will continue to be subject to that lower CDSC schedule unless
(i) such shares are subsequently exchanged for shares of a fund with a higher
CDSC schedule or (ii) having been exchanged for shares of Morgan Stanley Dean
Witter Global Short-Term Income Fund Inc. ("Global Short-Term") or an Exchange
Fund (as defined below in "Shareholder Services--Exchange Privilege") are
re-exchanged back into the Fund. Under such circumstances, the CDSC schedule
applicable to shares of the fund with the higher CDSC schedule acquired in the
exchange will apply to redemptions of such fund's shares or, in the case of
shares of Global Short-Term or any of the Exchange Funds acquired in an exchange
and then subsequently re-exchanged back into the Fund, the CDSC schedule set
forth in the above table will apply to redemptions of any of such shares. The
CDSC schedule applicable to High Income Securities was as follows: Shares held
for five years or more after purchase (calculated as described in the paragraph
above) are not subject to any CDSC upon redemption. However, shares redeemed
earlier than five years after purchase may be subject to a CDSC (calculated as
described in the paragraph above), the percentage of which depends on how long
the shares have been held, as set forth in the following table:

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

CDSC WAIVERS. A CDSC will not be imposed on: (i) any amount which
represents an increase in value of shares purchased within the six years (or, in
the case of shares held by certain Qualified Retirement Plans, three years)
preceding the redemption; (ii) the current net asset value of shares purchased
more than six years (or, in the case of shares held by certain Qualified
Retirement Plans, three years) prior to the redemption; and (iii) the current
net asset value of shares purchased through reinvestment of dividends or
distributions and/or shares acquired in exchange for shares of FSC Funds or of
other Morgan Stanley Dean Witter Funds acquired

23
<PAGE>
in exchange for such shares. Moreover, in determining whether a CDSC is
applicable it will be assumed that amounts described in (i), (ii) and (iii)
above (in that order) are redeemed first.

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

(1) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are: (a) registered either in the name of an
individual shareholder (not a trust), or in the names of such shareholder and
his or her spouse as joint tenants with right of survivorship; or (b) held in a
qualified corporate or self-employed retirement plan, Individual Retirement
Account ("IRA") or Custodial Account under Section 403(b)(7) of the Internal
Revenue Code ("403(b) Custodial Account"), provided in either case that the
redemption is requested within one year of the death or initial determination of
disability;

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

(3) all redemptions of shares held for the benefit of a participant in a
Qualified Retirement Plan, which offers investment companies managed by the
Investment Manager or its subsidiary, MSDW Services, as self-directed investment
alternatives and for which MSDW Trust serves as Trustee or DWR's Retirement Plan
Services serves as recordkeeper pursuant to a written Recordkeeping Services
Agreement ("Eligible Plan"), provided that either: (a) the plan continues to be
an Eligible Plan after the redemption; or (b) the redemption is in connection
with the complete termination of the plan involving the distribution of all plan
assets to participants; and

(4) certain redemptions pursuant to the Fund's Systematic Withdrawal Plan
(see "Shareholder Services--Systematic Withdrawal Plan").

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

CONVERSION TO CLASS A SHARES. Class B shares will convert automatically to
Class A shares, based on the relative net asset values of the shares of the two
Classes on the conversion date, which will be approximately ten (10) years after
the date of the original purchase. The ten year period is calculated from the
last day of the month in which the shares were purchased or, in the case of
Class B shares acquired through an exchange or a series of exchanges, from the
last day of the month in which the original Class B shares were purchased. The
conversion of shares will take place in the month following the tenth
anniversary of the purchase. There will also be converted at that time such
proportion of Class B shares acquired through automatic reinvestment of
dividends and distributions owned by the shareholder as the total number of his
or her Class B shares converting at the time bears to the total number of
outstanding Class B shares purchased and owned by the shareholder. In the case
of Class B shares held by a Qualified Retirement Plan for which MSDW Trust
serves as Trustee or DWR's Retirement Plan Services serves as recordkeeper
pursuant to a written Recordkeeping Services Agreement, the plan is treated as a
single investor and all Class B shares will convert to Class A shares on the
conversion date of the first shares of a Morgan Stanley Dean Witter Multi-Class
Fund purchased by that plan. In the case of Class B shares previously exchanged
for shares of an

24
<PAGE>
"Exchange Fund" (see "Shareholder Services-- Exchange Privilege"), the period of
time the shares were held in the Exchange Fund (calculated from the last day of
the month in which the Exchange Fund shares were acquired) is excluded from the
holding period for conversion. If those shares are subsequently re-exchanged for
Class B shares of a Morgan Stanley Dean Witter Multi-Class Fund, the holding
period resumes on the last day of the month in which Class B shares are
reacquired.

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

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

LEVEL LOAD ALTERNATIVE--CLASS C SHARES

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

NO LOAD ALTERNATIVE--CLASS D SHARES

Class D shares are offered without any sales charge on purchase or
redemption and without any 12b-1 fee. Class D shares are offered only to
investors meeting an initial investment minimum of $5 million ($25 million for
Qualified Retirement Plans for which MSDW Trust serves as Trustee and DWR's
Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement) and the following categories of investors: (i)
investors participating in the MSDW Advisors mutual fund asset allocation
program pursuant to which such persons pay an asset based fee; (ii) persons
participating in a fee-based program approved by the Distributor, pursuant to
which such persons pay an asset based fee for services in the nature of
investment advisory, administrative and/or brokerage services (subject to all of
the terms and conditions of such programs referred to in (i) and (ii) above,
which may include termination fees, mandatory redemption upon termination and
such other circumstances as specified in the programs' agreements, and
restrictions on transferability of Fund shares); (iii) employee benefit plans
maintained by Morgan Stanley Dean Witter & Co. or any of its subsidiaries for
the benefit of certain employees of Morgan Stanley Dean Witter & Co. and its
subsidiaries; (iv) certain Unit Investment Trusts sponsored by DWR; (v) certain
other open-end investment companies whose shares are distributed by the
Distributor; (vi) investors who were shareholders of Dean

25
<PAGE>

Witter Retirement Series on September 11, 1998 (with respect to additional
purchases for their former Dean Witter Retirement Series accounts); and (vii)
other categories of investors, at the discretion of the Board, as disclosed in
the then current prospectus of the Fund. All shares of the Fund held prior to
July 28, 1997 have been designated Class D shares. Additional investments in
Class D shares by shareholders holding such shares may only be made if those
shareholders are otherwise eligible to purchase Class D shares. However,
shareholders holding such shares will receive the benefit of the value of such
shares towards reduced sales charges on purchases of Class A shares pursuant to
the Fund's "Right of Accumulation" (see "Initial Sales Charge Alternative--Class
A Shares--Right of Accumulation"). Investors who require a $5 million (or $25
million) minimum initial investment to qualify to purchase Class D shares may
satisfy that requirement by investing that amount in a single transaction in
Class D shares of the Fund and other Morgan Stanley Dean Witter Multi-Class
Funds, subject to the $1,000 minimum initial investment required for that Class
of the Fund. In addition, for the purpose of meeting the $5 million (or $25
million) minimum investment amount, holdings of Class A shares in all Morgan
Stanley Dean Witter Multi-Class Funds, shares of FSC Funds and shares of Morgan
Stanley Dean Witter Funds for which such shares have been exchanged will be
included together with the current investment amount. If a shareholder redeems
Class A shares and purchases Class D shares, such redemption may be a taxable
event.

PLAN OF DISTRIBUTION

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

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

For the fiscal year ended August 31, 1998, Class B shares of the Fund
accrued payments

26
<PAGE>

under the Plan amounting to $10,737,221 which amount is equal to 0.74% of the
average daily net assets of Class B for the fiscal year. For the fiscal year
ended August 31, 1998, Class A and Class C shares of the Fund accrued payments
under the Plan amounting to $51,000 and $281,533, respectively, which amounts
are equal to 0.24% and 0.85% of the average daily net assets of Class A and
Class C, respectively for such fiscal year.

In the case of Class B shares, at any given time, the expenses in
distributing Class B shares of the Fund may be in excess of the total of (i) the
payments made by the Fund pursuant to the Plan, and (ii) the proceeds of CDSCs
paid by investors upon the redemption of Class B shares. For example, if $1
million in expenses in distributing Class B shares of the Fund had been incurred
and $750,000 had been received as described in (i) and (ii) above, the excess
expense would amount to $250,000. The Distributor has advised the Fund that such
excess amounts including the carrying charge described above totalled
$50,323,518 at August 31, 1998, which was equal to 2.86% of the net assets of
Class B on such date. Of this amount, $36,793,648 represents excess distribution
expenses of Dean Witter High Income Securities, the net assets of which were
combined with those of the Fund on November 10, 1997 pursuant to an Agreement
and Plan of Reorganization. Because there is no requirement under the Plan that
the Distributor be reimbursed for all distribution expenses or any requirement
that the Plan be continued from year to year, such excess amount does not
constitute a liability of the Fund. Although there is no legal obligation for
the Fund to pay expenses incurred in excess of payments made to the Distributor
under the Plan, and the proceeds of CDSCs paid by investors upon redemption of
shares, if for any reason the Plan is terminated the Directors will consider at
that time the manner in which to treat such expenses. Any cumulative expenses
incurred, but not yet recovered through distribution fees or CDSCs, may or may
not be recovered through future distribution fees or CDSCs.

In the case of Class A and Class C shares, expenses incurred pursuant to the
Plan in any calendar year in excess of 0.25% or 0.85% of the average daily net
assets of Class A or Class C, respectively, will not be reimbursed by the Fund
through payments in any subsequent year, except that expenses representing a
gross sales commission credited to Morgan Stanley Dean Witter Financial Advisors
and other Selected Broker-Dealer representatives at the time of sale may be
reimbursed in the subsequent calendar year. The Distributor has advised the Fund
that unreimbursed expenses representing a gross sales commission credited to
Morgan Stanley Dean Witter Financial Advisors and other Selected Broker-Dealer
representatives at the time of sale totalled $175,137 in the case of Class C at
December 31, 1997, which was equal to 0.70% of the net assets of Class C on such
date, and that there were no such expenses which may be reimbursed in the
subsequent year in the case of Class A on such date. No interest or other
financing charges will be incurred on any Class A or Class C distribution
expenses incurred by the Distributor under the Plan or on any unreimbursed
expenses due to the Distributor pursuant to the Plan.

DETERMINATION OF NET ASSET VALUE

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

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

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

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

Short-term debt securities with remaining maturities of 60 days or less at
the time of purchase are valued at amortized cost, unless the Board determines
such does not reflect the securities' fair value, in which case these securities
will be valued at their fair market value as determined by the Board of
Directors. Other short-term debt securities will be valued on a marked-to-market
basis until such time as they reach a maturity of 60 days, whereupon they will
be valued at amortized cost using their value on the 61st day unless the
Directors determine such does not reflect the securities' market value, in which
case these securities will be valued at their fair market value as determined by
the Board of Directors. Listed options on debt securities are valued at the
latest sale price on the exchange on which they are listed unless no sales of
such options have taken place that day, in which case, they will be valued at
the mean between their closing bid and asked prices. Unlisted options on debt
securities and all options on equity securities are valued at the mean between
their latest bid and asked price. Futures are valued at the latest sale price on
the commodities exchange on which they trade unless the Directors determine that
such price does not reflect their market value, in which case they will be
valued at their fair value as determined by the Board of Directors. All other
securities and other assets are valued at their fair value as determined in good
faith under procedures established by and under the supervision of the Board of
Directors.

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

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

28
<PAGE>
INVESTMENT OF DISTRIBUTIONS RECEIVED IN CASH. Any shareholder who receives a
cash payment representing a dividend or capital gains distribution may invest
such dividend or distribution in shares of the applicable Class at the net asset
value next determined after receipt by the Transfer Agent, by returning the
check or the proceeds to the Transfer Agent within thirty days after the payment
date. Shares so acquired are acquired at net asset value and are not subject to
the imposition of a front-end sales charge or a CDSC (see "Redemptions and
Repurchases").

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

SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders whose shares of Morgan Stanley Dean Witter
Funds have an aggregate value of $10,000 or more. Shares of any Fund from which
redemptions will be made pursuant to the Plan must have a value of $1,000 or
more (referred to as a "SWP Fund"). The required share values are determined on
the date the shareholder establishes the Withdrawal Plan. The Withdrawal Plan
provides for monthly, quarterly, semi-annual or annual payments in any amount
not less than $25, or in any whole percentage of the value of the SWP Funds'
shares, on an annualized basis. Any applicable CDSC will be imposed on shares
redeemed under the Withdrawal Plan (see "Purchase of Fund Shares"), except that
the CDSC, if any, will be waived on redemptions under the Withdrawal Plan of up
to 12% annually of the value of each SWP Fund account based on the share values
next determined after the shareholder establishes the Withdrawal Plan.
Redemptions for which this CDSC waiver policy applies may be in amounts up to 1%
per month, 3% per quarter, 6% semi-annually or 12% annually. Under this CDSC
waiver policy, amounts withdrawn each period will be paid by first redeeming
shares not subject to a CDSC because the shares were purchased by the
reinvestment of dividends or capital gains distributions, the CDSC period has
elapsed or some other waiver of the CDSC applies. If shares subject to a CDSC
must be redeemed, shares held for the longest period of time will be redeemed
first and continuing with shares held the next longest period of time until
shares held the shortest period of time are redeemed. Any shareholder
participating in the Withdrawal Plan will have sufficient shares redeemed from
his or her account so that the proceeds (net of any applicable CDSC) to the
shareholder will be the designated monthly, quarterly, semi-annual or annual
amount.

A shareholder may suspend or terminate participation in the Withdrawal Plan
at any time. A shareholder who has suspended participation may resume payments
under the Withdrawal Plan, without requiring a new determination of the account
value for the 12% CDSC waiver. The Withdrawal Plan may be terminated or revised
at any time by the Fund.

Prior to adding an additional SWP Fund to an existing Withdrawal Plan, the
required $10,000/$1,000 share values must be met, to be calculated on the date
the shareholder adds the additional SWP Fund. However, the addition of a new SWP
Fund will not change the account value for the 12% CDSC waiver for the SWP Funds
already participating in the Withdrawal Plan.

Withdrawal Plan payments should not be considered dividends, yields or
income. If periodic Withdrawal Plan payments continuously exceed net investment
income and net capital gains, the shareholder's original investment will be
correspondingly reduced and ultimately exhausted. Each withdrawal constitutes a
redemption of shares and any gain or

29
<PAGE>

loss realized must be recognized for federal income tax purposes.

Shareholders should contact their Morgan Stanley Dean Witter Financial
Advisor or other Selected Broker-Dealer representative or the Transfer Agent for
further information about any of the above services.

TAX-SHELTERED RETIREMENT PLANS. Retirement plans are available through the
Investment Manager for use by corporations, the self-employed, Individual
Retirement Accounts and Custodial Accounts under Section 403(b)(7) of the
Internal Revenue Code. Adoption of such plans should be on advice of legal
counsel or tax advisor.

For further information regarding plan administration, custodial fees and
other details, investors should contact their Morgan Stanley Dean Witter
Financial Advisor or other Selected Broker-Dealer representative or the Transfer
Agent.

EXCHANGE PRIVILEGE

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

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

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

30
<PAGE>

that date which are attributable to those shares. (Exchange Fund 12b-1
distribution fees are described in the prospectuses for those funds.) Class B
shares of the Fund acquired in exchange for Class B shares of another Morgan
Stanley Dean Witter Multi-Class Fund having a different CDSC schedule than that
of this Fund will be subject to the higher CDSC schedule, even if such shares
are subsequently re-exchanged for shares of the fund with the lower CDSC
schedule. Class B shares of the Fund issued in exchange for shares of High
Income Securities in connection with the Reorganization that were subject to the
lower CDSC schedule of High Income Securities (as described above) will continue
to be subject to that lower CDSC schedule unless (i) such shares are
subsequently exchanged for shares of a fund with a higher CDSC schedule or (ii)
having been exchanged for shares of Global Short-Term or an Exchange Fund are
re-exchanged back into the Fund. Under such circumstances, the CDSC schedule
applicable to shares of the fund with the higher CDSC schedule acquired in the
exchange will apply to redemptions of such fund's shares or, in the case of
shares of Global Short-Term or any of the Exchange Funds acquired in an exchange
and then subsequently re-exchanged back into the Fund, the Fund's CDSC schedule
will apply to redemptions of any of such shares.

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

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

If DWR or another Selected Broker-Dealer is the current dealer of record and
its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the Morgan
Stanley Dean Witter Funds (for which the Exchange Privilege is available)
pursuant

31
<PAGE>
to this Exchange Privilege by contacting their Morgan Stanley Dean Witter
Financial Advisor or other Selected Broker-Dealer representative (no Exchange
Privilege Authorization Form is required). Other shareholders (and those
shareholders who are clients of DWR or other Selected Broker-Dealer but who wish
to make exchanges directly by telephoning the Transfer Agent) must complete and
forward to the Transfer Agent an Exchange Privilege Authorization form, copies
of which may be obtained from the Transfer Agent, to initiate an exchange. If
the Authorization Form is used, exchanges may be made in writing or by
contacting the Transfer Agent at (800) 869-NEWS (toll-free).

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

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

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

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

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

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

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

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

INVOLUNTARY REDEMPTION. The Fund reserves the right, on sixty days' notice,
to redeem, at their net asset value, the shares of any shareholder (other than
shares held in an Individual Retirement Account or custodial account under
Section 403(b)(7) of the Internal Revenue Code) whose shares due to redemptions
by the shareholder have a value of less than $100, or such lesser amount as may
be fixed by the Board of Directors or, in the case of an account opened through
EasyInvest-SM-, if after twelve months the shareholder has invested less than
$1,000 in the account. However, before the Fund redeems such shares and sends
the proceeds to the shareholder, it will notify the shareholder that the value
of the shares is less than the applicable amount and allow the shareholder sixty
days in which to make an additional investment in an amount which will increase
the value of the account to at least the applicable amount or more before the
redemption is processed. No CDSC will be imposed on any involuntary redemption.

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

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

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

TAXES. Because the Fund intends to distribute all of its net investment
income and net capital gains to shareholders and otherwise continue to qualify
as

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<PAGE>
a regulated investment company under Subchapter M of the Internal Revenue Code,
it is not expected that the Fund will be required to pay any Federal income tax
on such income and capital gains.

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

Shareholders will normally have to pay Federal income taxes, and any
applicable state and/or local income taxes, on the dividends and distributions
they receive from the Fund. Such dividends and distributions, to the extent they
are derived from net investment income or net short-term capital gains, are
taxable to the shareholder as ordinary dividend income regardless of whether the
shareholder receives such distributions in additional shares or in cash. Any
dividends declared in the last calendar quarter of any year to shareholders of
record for that 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 Taxpayer Relief Act
reduces the maximum tax on long-term capital gains from 28% to 20%. The lower
rates do not apply to collectibles and certain other assets. Additionally, the
maximum capital gain rate for assets that are held more than 5 years and that
are acquired after December 31, 2000 is 18%.

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

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

From time to time the Fund may quote its "yield" and/or its "total return"
in advertisements and sales literature. These figures are computed separately
for Class A, Class B, Class C and Class D shares. Both the yield and the total
return of the Fund are based on historical earnings and are not intended to
indicate future performance. The yield

34
<PAGE>
of each Class of the Fund will be computed by dividing the Class's net
investment income over a 30-day period by an average value (using the average
number of shares entitled to receive dividends and the maximum offering price
per share at the end of the period), all in accordance with applicable
regulatory requirements. Such amount will be compounded for six months and then
annualized for a twelve-month period to derive the Fund's yield for each Class.

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

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

Prior to July 28, 1997, the Fund offered only one Class of shares. Because
the distribution arrangement for Class A most closely resembles the distribution
arrangement applicable prior to the implementation of multiple classes,
historical performance information may be restated to reflect the current
maximum sales charge applicable to Class A as well as the imposition of an
ongoing 12b-1 fee. In addition, because all shares of the Fund held prior to
July 28, 1997 have been designated Class D shares, the Fund's historical
performance may also be restated to reflect the absence of any sales charge in
the case of Class D shares.

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

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

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

35
<PAGE>
CODE OF ETHICS. Directors, officers and employees of MSDW Advisors, MSDW
Services and MSDW Distributors are subject to a strict Code of Ethics adopted by
those companies. The Code of Ethics is intended to ensure that the interests of
shareholders and other clients are placed ahead of any personal interest, that
no undue personal benefit is obtained from a person's employment activities and
that actual and potential conflicts of interest are avoided. To achieve these
goals and comply with regulatory requirements, the Code of Ethics requires,
among other things, that personal securities transactions by employees of the
companies be subject to an advance clearance process to monitor that no Morgan
Stanley Dean Witter Fund is engaged at the same time in a purchase or sale of
the same security. The Code of Ethics bans the purchase of securities in an
initial public offering, and also prohibits engaging in futures and options
transactions and profiting on short-term trading (that is, a purchase within 60
days of a sale or a sale within 60 days of a purchase) of a security. In
addition, investment personnel may not purchase or sell a security for their
personal account within 30 days before or after any transaction in any Morgan
Stanley Dean Witter Fund managed by them. Any violations of the Code of Ethics
are subject to sanctions, including reprimand, demotion or suspension or
termination of employment. The Code of Ethics comports with regulatory
requirements and the recommendations in the 1994 report by the Investment
Company Institute Advisory Group on Personal Investing.

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

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

36
<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

37
<PAGE>
under construction, (b) earnings of projects unseasoned in operation experience,
(c) rentals which begin when facilities are completed, or (d) payments to which
some other limiting condition attaches. Parenthetical rating denotes probable
credit stature upon completion of construction or elimination of basis of
condition.

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

COMMERCIAL PAPER RATINGS

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

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

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

BOND RATINGS

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

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

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

<TABLE>
<S> <C>
AAA Debt rated AAA has the highest rating assigned by Standard & Poor's. Capacity to pay
interest and repay principal is extremely strong.
AA Debt rated AA has a very strong capacity to pay interest and repay principal and differs
from the highest-rated issues only in small degree.
A Debt rated A has a strong capacity to pay interest and repay principal although they are
somewhat more susceptible to the adverse effects of changes in circumstances and economic
conditions than debt in higher-rated categories.
</TABLE>

38
<PAGE>
<TABLE>
<S> <C>
BBB Debt rated BBB is regarded as having an adequate capacity to pay interest and repay
principal. Whereas it normally exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened capacity to
pay interest and repay principal for debt in this category than for debt in higher-rated
categories.
Bonds rated AAA, AA, A and BBB are considered investment grade bonds.

BB Debt rated BB has less near-term vulnerability to default than other speculative grade
debt. However, it faces major ongoing uncertainties or exposure to adverse business,
financial or economic conditions which could lead to inadequate capacity to meet timely
interest and principal payment.
B Debt rated B has a greater vulnerability to default but presently has the capacity to
meet interest payments and principal repayments. Adverse business, financial or economic
conditions would likely impair capacity or willingness to pay interest and repay
principal.
CCC Debt rated CCC has a current identifiable vulnerability to default, and is dependent upon
favorable business, financial and economic conditions to meet timely payments of interest
and repayments of principal. In the event of adverse business, financial or economic
conditions, it is not likely to have the capacity to pay interest and repay principal.
CC The rating CC is typically applied to debt subordinated to senior debt which is assigned
an actual or implied CCC rating.
C The rating C is typically applied to debt subordinated to senior debt which is assigned
an actual or implied CCC- debt rating.
CI The rating CI is reserved for income bonds on which no interest is being paid.
NR Indicates that no rating has been requested, that there is insufficient information on
which to base a rating or that Standard & Poor's does not rate a particular type of
obligation as a matter of policy.
Bonds rated BB, B, CCC, CC and C are regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates the least degree of speculation and C the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
Plus (+) or minus (-): The ratings from AA to CCC may be modified by the addition of a
plus or minus sign to show relative standing within the major ratings categories.
In the case of municipal bonds, the foregoing ratings are sometimes followed by a "p"
which indicates that the rating is provisional. A provisional rating assumes the
successful completion of the project being financed by the bonds being rated and
indicates that payment of debt service requirements is largely or entirely dependent upon
the successful and timely completion of the project. This rating, however, while
addressing credit quality subsequent to completion of the project, makes no comment on
the likelihood or risk of default upon failure of such completion.
</TABLE>

39
<PAGE>
COMMERCIAL PAPER RATINGS

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

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

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

40
<PAGE>
Morgan Stanley Dean Witter
High Yield Securities Inc.
Two World Trade Center
New York, New York 10048

BOARD OF DIRECTORS

Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
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

CUSTODIAN

The Bank of New York
90 Washington Street
New York, New York 10286

TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT

Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311

INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036

INVESTMENT MANAGER

Morgan Stanley Dean Witter Advisors Inc.

MORGAN STANLEY
DEAN WITTER
HIGH YIELD
SECURITIES

[PHOTO]
PROSPECTUS -- OCTOBER 29, 1998

<PAGE>
STATEMENT OF ADDITIONAL INFORMATION

MORGAN STANLEY
OCTOBER 29, 1998

DEAN WITTER
HIGH YIELD
SECURITIES INC.

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

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

A Prospectus for the Fund, dated October 29, 1998, which provides the basic
information you should know before investing in the Fund, may be obtained
without charge by request of the Fund at its address or telephone numbers listed
below or from the Fund's Distributor, Morgan Stanley Dean Witter Distributors
Inc., or from Dean Witter Reynolds Inc. at any of its branch offices. This
Statement of Additional Information is not a Prospectus. It contains information
in addition to and more detailed than that set forth in the Prospectus. It is
intended to provide additional information regarding the activities and
operations of the Fund, and should be read in conjunction with the Prospectus.

Morgan Stanley Dean Witter High Yield Securities Inc.
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)

<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
The Fund and its Management....................... 3
Directors and Officers............................ 7
Investment Practices and Policies................. 13
Investment Restrictions........................... 19
Portfolio Transactions and Brokerage.............. 20
The Distributor................................... 21
Determination of Net Asset Value.................. 25
Purchase of Fund Shares........................... 25
Shareholder Services.............................. 28
Redemptions and Repurchases....................... 33
Dividends, Distributions and Taxes................ 34
Performance Information........................... 35
Description of Common Stock....................... 37
Custodian and Transfer Agent...................... 37
Independent Accountants........................... 37
Reports to Shareholders........................... 37
Legal Counsel..................................... 37
Experts........................................... 38
Registration Statement............................ 38
Financial Statements -- August 31, 1998........... 39
Report of Independent Accountants................. 58
</TABLE>

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

THE FUND

The Fund was incorporated under Maryland law on June 14, 1979, under the
name InterCapital High Yield Securities Inc. and changed its name to Dean Witter
High Yield Securities Inc. on March 21, 1983. On June 22, 1998, the Directors of
the Fund adopted an Amendment to the Fund's Articles of Incorporation changing
the name of the Fund to Morgan Stanley Dean Witter High Yield Securities Inc.

THE INVESTMENT MANAGER

Morgan Stanley Dean Witter Advisors Inc. (the "Investment Manager" or "MSDW
Advisors"), a Delaware corporation, whose address is Two World Trade Center, New
York, New York 10048, is the Fund's Investment Manager. MSDW Advisors is a
wholly-owned subsidiary of Morgan Stanley Dean Witter & Co. ("MSDW"), a Delaware
corporation. The daily management of the Fund and research relating to the
Fund's portfolio are conducted by or under the direction of officers of the Fund
and of the Investment Manager, subject to review by the Fund's Board of
Directors. Information as to these Directors and officers is contained under the
caption "Directors and Officers."

MSDW Advisors is the investment manager or investment advisor of the
following investment companies, which are collectively referred to as the
"Morgan Stanley Dean Witter Funds":

<TABLE>
<CAPTION>
OPEN-END FUNDS

<C> <S>
1 Active Assets California Tax-Free Trust
2 Active Assets Government Securities Trust
3 Active Assets Money Trust
4 Active Assets Tax-Free Trust
5 Morgan Stanley Dean Witter American Value Fund
6 Morgan Stanley Dean Witter Balanced Growth Fund
7 Morgan Stanley Dean Witter Balanced Income Fund
8 Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
9 Morgan Stanley Dean Witter California Tax-Free Income Fund
10 Morgan Stanley Dean Witter Capital Appreciation Fund
11 Morgan Stanley Dean Witter Capital Growth Securities
12 Morgan Stanley Dean Witter Competitive Edge Fund, "BEST IDEAS" Portfolio
13 Morgan Stanley Dean Witter Convertible Securities Trust
14 Morgan Stanley Dean Witter Developing Growth Securities Trust
15 Morgan Stanley Dean Witter Diversified Income Trust
16 Morgan Stanley Dean Witter Dividend Growth Securities Inc.
17 Morgan Stanley Dean Witter Equity Fund
18 Morgan Stanley Dean Witter European Growth Fund Inc.
19 Morgan Stanley Dean Witter Federal Securities Trust
20 Morgan Stanley Dean Witter Financial Services Trust
21 Morgan Stanley Dean Witter Fund of Funds
22 Morgan Stanley Dean Witter Global Dividend Growth Securities
23 Morgan Stanley Dean Witter Global Short-Term Income Fund Inc.
24 Morgan Stanley Dean Witter Global Utilities Fund
25 Morgan Stanley Dean Witter Growth Fund
26 Morgan Stanley Dean Witter Hawaii Municipal Trust
27 Morgan Stanley Dean Witter Health Sciences Trust
28 Morgan Stanley Dean Witter High Yield Securities Inc.
29 Morgan Stanley Dean Witter Income Builder Fund
30 Morgan Stanley Dean Witter Information Fund
31 Morgan Stanley Dean Witter Intermediate Income Securities
32 Morgan Stanley Dean Witter International SmallCap Fund
</TABLE>

3
<PAGE>

<TABLE>
<C> <S>
33 Morgan Stanley Dean Witter Japan Fund
34 Morgan Stanley Dean Witter Limited Term Municipal Trust
35 Morgan Stanley Dean Witter Liquid Asset Fund Inc.
36 Morgan Stanley Dean Witter Market Leader Trust
37 Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
38 Morgan Stanley Dean Witter Mid-Cap Growth Fund
39 Morgan Stanley Dean Witter Multi-State Municipal Series Trust
40 Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
41 Morgan Stanley Dean Witter New York Municipal Money Market Trust
42 Morgan Stanley Dean Witter New York Tax-Free Income Fund
43 Morgan Stanley Dean Witter Pacific Growth Fund Inc.
44 Morgan Stanley Dean Witter Precious Metals and Minerals Trust
45 Morgan Stanley Dean Witter Select Dimensions Investment Series
46 Morgan Stanley Dean Witter Select Municipal Reinvestment Fund
47 Morgan Stanley Dean Witter Short-Term Bond Fund
48 Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
49 Morgan Stanley Dean Witter Special Value Fund
50 Morgan Stanley Dean Witter S&P 500 Index Fund
51 Morgan Stanley Dean Witter S&P 500 Select Fund
52 Morgan Stanley Dean Witter Strategist Fund
53 Morgan Stanley Dean Witter Tax-Exempt Securities Trust
54 Morgan Stanley Dean Witter Tax-Free Daily Income Trust
55 Morgan Stanley Dean Witter U.S. Government Money Market Trust
56 Morgan Stanley Dean Witter U.S. Government Securities Trust
57 Morgan Stanley Dean Witter Utilities Fund
58 Morgan Stanley Dean Witter Value-Added Market Series
59 Morgan Stanley Dean Witter Value Fund
60 Morgan Stanley Dean Witter Variable Investment Series
61 Morgan Stanley Dean Witter World Wide Income Trust
<CAPTION>

CLOSED-END FUNDS
<C> <S>

1 InterCapital California Insured Municipal Income Trust
2 InterCapital California Quality Municipal Securities
3 Dean Witter Government Income Trust
4 High Income Advantage Trust
5 High Income Advantage Trust II
6 High Income Advantage Trust III
7 InterCapital Income Securities Inc.
8 InterCapital Insured California Municipal Securities
9 InterCapital Insured Municipal Bond Trust
10 InterCapital Insured Municipal Income Trust
11 InterCapital Insured Municipal Securities
12 InterCapital Insured Municipal Trust
13 Municipal Income Opportunities Trust
14 Municipal Income Opportunities Trust II
15 Municipal Income Opportunities Trust III
16 Municipal Income Trust
17 Municipal Income Trust II
18 Municipal Income Trust III
19 Municipal Premium Income Trust
20 InterCapital New York Quality Municipal Securities
21 Morgan Stanley Dean Witter Prime Income Trust
22 InterCapital Quality Municipal Income Trust
</TABLE>

4
<PAGE>

<TABLE>
<C> <S>
23 InterCapital Quality Municipal Investment Trust
24 InterCapital Quality Municipal Securities
</TABLE>

In addition, Morgan Stanley Dean Witter Services Company Inc. ("MSDW
Services"), a wholly-owned subsidiary of MSDW Advisors, serves as manager for
the following investment companies for which TCW Funds Management, Inc. is the
investment advisor (the "TCW/DW Funds"):

<TABLE>
<CAPTION>
OPEN-END FUNDS

<C> <S>
1 TCW/DW Emerging Markets Opportunities Trust
2 TCW/DW Global Telecom Trust
3 TCW/DW Income and Growth Fund
4 TCW/DW Latin American Growth Fund
5 TCW/DW Mid-Cap Equity Trust
6 TCW/DW North American Government Income Trust
7 TCW/DW Small Cap Growth Fund
8 TCW/DW Total Return Trust

CLOSED-END FUNDS
<C> <S>

1 TCW/DW Term Trust 2000
2 TCW/DW Term Trust 2002
3 TCW/DW Term Trust 2003
</TABLE>

MSDW Advisors also serves as: (i) administrator of The BlackRock Strategic
Term Trust Inc., a closed-end investment company; (ii) sub-administrator of
Templeton Global Governments Income Trust, a closed-end investment company; and
(iii) investment advisor of Offshore Dividend Growth Fund and Offshore Money
Market Fund, mutual funds established under the laws of the Cayman Islands and
available only to investors who are participants in the International Active
Assets Account program and are neither citizens nor residents of the United
States.

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

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

Expenses not expressly assumed by the Investment Manager under the Agreement
or by the Distributor of the Fund's shares, Morgan Stanley Dean Witter
Distributors Inc. ("MSDW Distributors" or the "Distributor") (see "The
Distributor"), will be paid by the Fund. These expenses will be allocated among
the four classes of shares of the Fund (each, a "Class") pro rata based on the
assets of the Fund attributable to each Class, except as described below. Such
expenses include, but are not limited to: expenses of the Plan of Distribution
pursuant to Rule 12b-1 (the "12b-1 fee") (see "The Distributor");

5
<PAGE>
charges and expenses of any registrar, custodian, stock transfer and dividend
disbursing agent; brokerage commissions; taxes; engraving and printing of stock
certificates; registration costs of the Fund and its shares under federal and
state securities laws; the cost and expense of printing, including typesetting,
and distributing prospectuses of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and directors' meetings and of
preparing, printing and mailing of proxy statements and reports to shareholders;
fees and travel expenses of directors or members of any advisory board or
committee who are not employees of the Investment Manager or any corporate
affiliate of the Investment Manager; all expenses incident to any dividend,
distribution, withdrawal or redemption options; charges and expenses of any
outside service used for pricing of the Fund's shares; fees and expenses of
legal counsel, including counsel to directors who are not interested persons of
the Fund or of the Investment Manager (not including compensation or expenses of
attorneys who are employees of the Investment Manager) and independent
accountants; membership dues of industry associations; interest on Fund
borrowings; postage; insurance premiums on property or personnel (including
officers and directors) of the Fund which inure to its benefit; extraordinary
expenses (including, but not limited to, legal claims and liabilities and
litigation costs and any indemnification relating thereto); and all other costs
of the Fund's operation. The 12b-1 fees relating to a particular Class will be
allocated directly to that Class. In addition, other expenses associated with a
particular Class (except advisory or custodial fees) may be allocated directly
to that Class, provided that such expenses are reasonably identified as
specifically attributable to that Class and the direct allocation to that Class
is approved by the Directors.

As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Investment Manager, the Fund pays the
Investment Manager monthly compensation calculated daily by applying the
following annual rates to the net assets of the Fund determined as of the close
of each business day: 0.50% of the portion of the daily net assets not exceeding
$500 million; 0.425% of the portion of the daily net assets exceeding $500
million but not exceeding $750 million; 0.375% of the portion of the daily net
assets exceeding $750 million but not exceeding $1 billion; 0.35% of the portion
of the daily net assets exceeding $1 billion but not exceeding $2 billion;
0.325% of the portion of daily net assets exceeding $2 billion but not exceeding
$3 billion; and 0.30% of the portion of daily net assets exceeding $3 billion.
Total compensation accrued to the Investment Manager for the Fund's fiscal years
ended August 31, 1996, 1997 and 1998 amounted to $2,271,578, $2,356,223 and
$7,756,546, respectively. The investment management fee is allocated among the
Classes pro rata based on the net assets of the Fund attributable to each Class.

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

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

Under its terms, the Agreement has an initial term ending April 30, 1999,
and will remain in effect from year to year thereafter, provided continuation of
the Agreement is approved at least annually by the vote of the holders of a
majority, as defined in the Act, of the outstanding shares of the Fund, or by
the Board of Directors of the Fund; provided that in either event such
continuance is approved annually by

6
<PAGE>
the vote of a majority of the Directors of the Fund who are not parties to the
Agreement or "interested persons" (as defined in the Act) of any such party (the
"Independent Directors"), which vote must be cast in person at a meeting called
for the purpose of voting on such approval.

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

The following were known to own 5% or more of the outstanding shares of
Class A of the Fund on October 12, 1998: Harriet Pillsbury Foundation, c/o JS
Pillsbury, 10702 Manchester Suite 10, Saint Louis, MO 63122-1321--5.965%; Ed & H
Pillsbury Foundation, c/o JS Pillsbury, 10702 Manchester Suite 10, Saint Louis,
MO 63122-1321--5.965%; First Professional Bank N.A., FBO Molina Sibling Trust
DTD 4-28-9 Attn: Loan Administration, 606 Broadway, Santa Monica, CA 90401. The
following was known to own 5% or more of the outstanding Class D shares of the
Fund on October 12, 1998: Pace & Co. A/C DWR#8523542, FBO DWR Employee Ret.
Invest., c/o Mellon Bank N.A., Mutual Funds Operations, P.O. Box 3198,
Pittsburgh, PA 15230-3198, as trustee of the Morgan Stanley Dean Witter START
Plan and the SPS Transaction Services, Inc. START Plan, employee benefit plans
established by certain subsidiaries of MSDW for their employees as qualified
under Sections 401(a) and 401(k) of the Internal Revenue Code--6.414%.

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

The Directors and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with MSDW
Advisors, and with the 85 Dean Witter Funds and the 11 TCW/DW Funds are shown
below.

7
<PAGE>

<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------- ---------------------------------------------------------------------
<S> <C>
Edwin J. Garn (65) Director or Trustee of the Morgan Stanley Dean Witter Funds; formerly
Director United States Senator (R-Utah) (1974-1992) and Chairman, Senate
c/o Huntsman Corporation Banking Committee (1980-1986); formerly Mayor of Salt Lake City, Utah
500 Huntsman Way (1972-1974); formerly Astronaut, Space Shuttle Discovery (April
Salt Lake City, Utah 12-19, 1985); Vice Chairman, Huntsman Corporation (since January
1993); Director of Franklin Covey (time management systems), John
Alden Financial Corp. (health insurance); United Space Alliance
(joint venture between Lockheed Martin and Boeing Company) and Nuskin
Asia Pacific (multilevel marketing); member of the board of various
civic and charitable organizations.
John R. Haire (73) Chairman of the Audit Committee and Director or Trustee of the Morgan
Director Stanley Dean Witter Funds; Chairman of the Audit Committee and
Two World Trade Center Trustee of the TCW/DW Funds; formerly Chairman of the Independent
New York, New York Directors or Trustees of the Morgan Stanley Dean Witter Funds and the
TCW/DW Funds (until June, 1998); formerly President, Council for Aid
to Education (since 1978-1989) and Chairman and Chief Executive
Officer of Anchor Corporation, an Investment Adviser (1964-1978).
Wayne E. Hedien (64) Retired; Director or Trustee of the Morgan Stanley Dean Witter Funds;
Director Director of The PMI Group, Inc. (private mortgage insurance); Trustee
c/o Gordon Altman Butowsky and Vice Chairman of The Field Museum of Natural History; formerly
Weitzen Shalov & Wein associated with the Allstate Companies (1966-1994), most recently as
Counsel to the Independent Trustees Chairman of The Allstate Corporation (March, 1993-December, 1994) and
114 West 47th Street Chairman and Chief Executive Officer of its wholly-owned subsidiary,
New York, New York Allstate Insurance Company (July, 1989-December, 1994); director of
various other business and charitable organizations.
Manuel H. Johnson (49) Senior Partner, Johnson Smick International, Inc., a consulting firm;
Director Co-Chairman and a founder of the Group of Seven Council (G7C), an
c/o Johnson Smick International, Inc. international economic commission; Director or Trustee of the Morgan
1133 Connecticut Avenue, N.W. Stanley Dean Witter Funds; Trustee of the TCW/DW Funds; Director of
Washington, D.C. Greenwich Capital Markets, Inc. (broker-dealer); Director of NASDAQ
(since June, 1995) and NVR, Inc. (home construction); Trustee of the
Financial Accounting Foundation (oversight organization for the
Financial Accounting Standards Board); formerly Vice Chairman of the
Board of Governors of the Federal Reserve System (1986-1990) and
Assistant Secretary of the U.S. Treasury.
Michael E. Nugent (62) General Partner, Triumph Capital, L.P., a private investment
Director partnership; Director or Trustee of the Morgan Stanley Dean Witter
c/o Triumph Capital, L.P. Funds; Trustee of the TCW/DW Funds; formerly Vice President, Bankers
237 Park Avenue Trust Company and BT Capital Corporation (1984-1988); Director of
New York, New York various business organizations.
Philip J. Purcell* (55) Chairman of the Board of Directors and Chief Executive Officer of
Director MSDW, DWR and Novus Credit Services Inc.; Director of MSDW
1585 Broadway Distributors; Director or Trustee of the Morgan Stanley Dean Witter
New York, New York Funds; Director and/or officer of various MSDW subsidiaries.
</TABLE>

8
<PAGE>

- ------------------------
*Denotes Directors who are "interested persons" of the Fund, as defined in the
Act.

In addition, Mitchell M. Merin, President, Chief Executive Officer and
Director of MSDW Advisors and MSDW Services, Chairman and Director of MSDW
Distributors and MSDW Trust, Executive Vice President and Director of DWR, and
Director of various other MSDW subsidiaries, Robert M. Scanlan, President, Chief
Operating Officer and Director of MSDW Advisors and MSDW Services, Executive
Vice President of MSDW Distributors and MSDW Trust and Director of MSDW Trust,
Ronald E. Robinson, Executive Vice President and Chief Administrative Officer of
MSDW Advisors and MSDW Services, Robert S. Giambrone, Senior Vice President of
MSDW Advisors, MSDW Services, MSDW Distributors and MSDW Trust and Director of
MSDW Trust, and Joseph J. McAlinden, Executive Vice President and Chief
Investment Officer of MSDW Advisors and Director of MSDW Trust, and Jonathan R.
Page and James F. Willison, Senior Vice Presidents of MSDW Advisors, are also
Vice Presidents of the Fund and Marilyn K. Cranney and Carsten Otto, First Vice
Presidents and Assistant General Counsels of MSDW Advisors and MSDW Services and
Frank Bruttomesso, Lou Anne D. McInnis, and Ruth Rossi, Vice Presidents and
Assistant General Counsels of InterCapital and DWSC, and Todd Lebo, a staff
attorney with MSDW Advisors, are also Assistant Secretaries of the Fund.

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

The Board of Directors currently consists of nine (9) Directors. These same
individuals also serve as directors or trustees for all of the Dean Witter
Funds, and are referred to in this section as Directors. As of the date of this
Statement of Additional Information, there are a total of 85 Dean Witter Funds,
comprised of 121 portfolios. As of September 30, 1998, the Dean Witter Funds had
total net assets of approximately $105.3 billion and more than six million
shareholders.

9
<PAGE>

Seven Directors (77% of the total number) have no affiliation or business
connection with MSDW Advisors or any of its affiliated persons and do not own
any stock or other securities issued by MSDW Advisors parent company, MSDW.
These are the "disinterested" or "independent" Directors. Four of the seven
independent Directors are also Independent Trustees of the TCW/DW Funds.

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

All of the Independent Directors serve as members of the Audit Committee.
Three of them also serve as members of the Derivatives Committee. In addition,
three of the Directors, including two Independent Directors, serve as members of
the Insurance Committee. During the calendar year ended December 31, 1997, the
Audit Committee, the Derivatives Committee and the Independent Trustees held a
combined total of seventeen meetings.

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

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

The Board of each Fund has formed a Derivatives Committee to approve
parameters for and monitor the activities of the Fund with respect to derivative
investments, if any, made by the Fund. Finally, the Board of each Fund has
formed an Insurance Committee to review and monitor the insurance coverage
maintained by the Fund.

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

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

10
<PAGE>

separate Fund, the services of Independent Directors, and a Chairman of their
Committees, of the caliber, experience and business acumen of the individuals
who serve as Independent Directors of the Morgan Stanley Dean Witter Funds.

COMPENSATION OF INDEPENDENT DIRECTORS

The Fund pays each Independent Director an annual fee of $800 plus a per
meeting fee of $50 for meetings of the Board of Directors, the Independent
Directors or Committees of the Board of Directors attended by the Director (the
Fund pays the Chairman of the Audit Committee an annual fee of $750). If a Board
meeting and a meeting of the Independent Directors and/or more than one
Committee meeting, take place on a single day, the Directors are paid a single
meeting fee by the Fund. The Fund also reimburses such Directors for travel and
other out-of-pocket expenses incurred by them in connection with attending such
meetings. Directors and officers of the Fund who are or have been employed by
the Investment Manager or an affiliated company receive no compensation or
expense reimbursement from the Fund for their services as Director. Mr. Haire
currently serves as Chairman of the Audit Committee. Prior to June 1, 1998, Mr.
Haire also served as Chairman of the Independent Directors, for which services
the Fund paid him an additional annual fee of $1,200.

The following table illustrates the compensation paid to the Fund's
Independent Directors by the Fund for the fiscal year ended August 31, 1998.

FUND COMPENSATION

<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT DIRECTOR FROM THE FUND
- -------------------------------------------------------------- -----------------
<S> <C>
Michael Bozic................................................. $ 1,650
Edwin J. Garn................................................. 1,700
John R. Haire................................................. 3,250
Wayne E. Hedien............................................... 1,732
Dr. Manuel H. Johnson......................................... 1,650
Michael E. Nugent............................................. 1,700
John L. Schroeder............................................. 1,700
</TABLE>

The following table illustrates the compensation paid to the Fund's
Independent Directors for the calendar year ended December 31, 1996 for services
to the 84 Morgan Stanley Dean Witter Funds and, in the case of Messrs. Haire,
Johnson, Nugent and Schroeder, the 14 TCW/DW Funds that were in operation at
December 31, 1997. Mr. Haire serves as Chairman of the Audit Committee of each
Morgan Stanley Dean Witter Fund and each TCW/DW Fund and, prior to June 1, 1998,
also served as Chairman of the Independent Directors or Trustees of those Funds.
With respect to Messrs. Haire, Johnson, Nugent and Schroeder, the TCW/DW Funds
are included solely because of a limited exchange privilege between those Funds
and five Morgan Stanley Dean Witter Money Market Funds. Mr. Hedien's term as
Director or Trustee of each Morgan Stanley Dean Witter Fund commenced on
September 1, 1997.

CASH COMPENSATION FROM MORGAN STANLEY DEAN WITTER FUNDS AND TCW/DW FUNDS

<TABLE>
<CAPTION>
FOR SERVICE AS TOTAL CASH
CHAIRMAN OF FOR SERVICE COMPENSATION
FOR SERVICE INDEPENDENT AS FOR
AS DIRECTOR OR DIRECTORS/TRUSTEES CHAIRMAN OF SERVICES TO
TRUSTEE AND AND AUDIT INDEPENDENT 84
COMMITTEE FOR SERVICE AS COMMITTEES OF TRUSTEES MORGAN
MEMBER OF 84 TRUSTEE AND 84 AND AUDIT STANLEY
MORGAN STANLEY COMMITTEE MORGAN STANLEY COMMITTEES OF DEAN WITTER
NAME OF DEAN WITTER MEMBER OF 14 DEAN WITTER 14 FUNDS AND 14
INDEPENDENT DIRECTOR FUNDS TCW/DW FUNDS FUNDS TCW/DW FUNDS TCW/DW FUNDS
- --------------------------- ---------------- ---------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Michael Bozic.............. $133,602 -- -- -- $133,602
Edwin J. Garn.............. 149,702 -- -- -- 149,702
John R. Haire.............. 149,702 $73,725 $157,463 $ 25,350 406,240
Wayne E. Hedien............ 39,010 -- -- -- 39,010
Dr. Manuel H. Johnson...... 145,702 71,125 -- -- 216,827
Michael E. Nugent.......... 149,702 73,725 -- -- 223,427
John L. Schroeder.......... 149,702 73,725 -- -- 223,427
</TABLE>

11
<PAGE>

As of the date of this Statement of Additional Information, 57 of the Morgan
Stanley Dean Witter Funds, including the Fund, have adopted a retirement program
under which an Independent Trustee who retires after serving for at least five
years (or such lesser period as may be determined by the Board) as an
Independent Director or Trustee of any Morgan Stanley Dean Witter Fund that has
adopted the retirement program (each such Fund referred to as an "Adopting Fund"
and each such Trustee referred to as an "Eligible Trustee") is entitled to
retirement payments upon reaching the eligible retirement age (normally, after
attaining age 72). Annual payments are based upon length of service. Currently,
upon retirement, each Eligible Trustee is entitled to receive from the Adopting
Fund, commencing as of his or her retirement date and continuing for the
remainder of his or her life, an annual retirement benefit (the "Regular
Benefit") equal to 29.41% of his or her Eligible Compensation plus 0.4901667% of
such Eligible Compensation for each full month of service as an Independent
Director or Trustee of any Adopting Fund in excess of five years up to a maximum
of 58.82% after ten years of service. The foregoing percentages may be changed
by the Board.(1) "Eligible Compensation" is one-fifth of the total compensation
earned by such Eligible Trustee for service to the Adopting Fund in the five
year period prior to the date of the Eligible Trustee's retirement. Benefits
under the retirement program are not secured or funded by the Adopting Funds.

The following table illustrates the retirement benefits accrued to the
Fund's Independent Trustees by the Fund for the fiscal year ended August 31,
1998 and by the 57 Morgan Stanley Dean Witter Funds (including the Fund) for the
year ended December 31, 1997, and the estimated retirement benefits for the
Fund's Independent Trustees, to commence upon their retirement, from the Fund as
of August 31, 1998 and from the 57 Morgan Stanley Dean Witter Funds as of
December 31, 1997.

RETIREMENT BENEFITS FROM THE FUND AND ALL MORGAN STANLEY DEAN WITTER FUNDS

<TABLE>
<CAPTION>
FOR ALL ADOPTING FUNDS RETIREMENT BENEFITS ESTIMATED ANNUAL
------------------------------------ ACCRUED AS EXPENSES BENEFITS
ESTIMATED UPON RETIREMENT(2)
CREDITED YEARS ESTIMATED -------------------- ----------------------
OF SERVICE AT PERCENTAGE OF BY ALL FROM FROM ALL
RETIREMENT ELIGIBLE BY THE ADOPTING THE ADOPTING
NAME OF INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION FUND FUNDS FUND FUNDS
- ----------------------------------- ------------------- --------------- -------------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Michael Bozic...................... 10 58.82% $ 403 $ 20,499 $ 1,029 $ 55,026
Edwin J. Garn...................... 10 58.82 604 30,878 1,029 55,026
John R. Haire...................... 10 58.82 (157 ) (19,823)(3) 2,418 132,002
Wayne E. Hedien.................... 9 50.00 524 0 875 46,772
Dr. Manuel H. Johnson.............. 10 58.82 246 12,832 1,029 55,026
Michael E. Nugent.................. 10 58.82 429 22,546 1,029 55,026
John L. Schroeder.................. 8 49.02 804 39,350 861 46,123
</TABLE>

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

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

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

(3) This number reflects the effect of the extension of Mr. Haire's term as
Director or Trustee until May 1, 1999.

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

12
<PAGE>
INVESTMENT PRACTICES AND POLICIES
- --------------------------------------------------------------------------------

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

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

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

PORTFOLIO CHARACTERISTICS

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

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

13
<PAGE>

When voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loaned securities, in
whole or in part as may be appropriate, to be delivered within one day after
notice, to permit the exercise of such rights if the matters involved would have
a material effect on the Fund's investment in such loaned securities. The Fund
will pay reasonable finder's, administrative and custodial fees in connection
with a loan of its securities. The Fund did not lend any of its portfolio
securities during its fiscal year ended August 31, 1998.

REPURCHASE AGREEMENTS. When cash may be available for only a few days, it
may be invested by the Fund in repurchase agreements until such time as it may
otherwise be invested or used for payments of obligations of the Fund. These
agreements, which may be viewed as a type of secured lending by the Fund,
typically involve the acquisition by the Fund of debt securities from a selling
financial institution such as a bank, savings and loan association or
broker-dealer. The agreement provides that the Fund will sell back to the
institution, and that the institution will repurchase, the underlying security
("collateral"), which is held by the Fund's Custodian, at a specified price and
at a fixed time in the future, usually not more than seven days from the date of
purchase. The Fund will accrue interest from the institution until the time when
the repurchase is to occur. Although such date is deemed by the Fund to be the
maturity date of a repurchase agreement, the maturities of securities subject to
repurchase agreements are not subject to any limits and may exceed one year.
While repurchase agreements involve certain risks not associated with direct
investments in debt securities, the Fund follows procedures designed to minimize
such risks. These procedures include effecting repurchase transactions only with
large, well-capitalized and well-established financial institutions, whose
financial condition will be continually monitored by the Investment Manager
subject to procedures established by the Board of Directors of the Fund. In
addition, the value of the collateral underlying the repurchase agreement will
always be at least equal to the repurchase price, including any accrued interest
earned on the repurchase agreement. In the event of a default or bankruptcy by a
selling financial institution, the Fund will seek to liquidate such collateral.
However, the exercising of the Fund's right to liquidate such collateral could
involve certain costs or delays and, to the extent that proceeds from any sale
upon a default of the obligation to repurchase were less than the repurchase
price, the Fund could suffer a loss. It is the current policy of the Fund not to
invest in repurchase agreements that do not mature within seven days if any such
investment, together with any other illiquid assets held by the Fund, amounts to
more than 10% of its total assets. The Fund's investments in repurchase
agreements may at times be substantial when, in the view of the Investment
Manager, liquidity or other considerations warrant. During the fiscal year ended
August 31, 1998, the Fund's investments in repurchase agreements did not exceed
5% of its total net assets.

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

Foreign investments involve certain risks, including the political or
economic instability of the issuer or of the country of issue, the difficulty of
predicting international trade patterns and the possibility of imposition of
exchange controls. Such securities may also be subject to greater fluctuations
in price than securities of United States corporations or of the United States
Government. In addition, there may be less publicly available information about
a foreign company than about a domestic company. Foreign companies generally are
not subject to uniform accounting, auditing and financial reporting standards
comparable to those applicable to domestic companies. There is generally less
government regulation of stock exchanges, brokers and listed companies abroad
than in the United States, and with respect to certain foreign countries, there
is a possibility of expropriation or confiscatory taxation, or diplomatic

14
<PAGE>
developments which could affect investment in those countries. Finally, in the
event of a default of any such foreign debt obligations, it may be more
difficult for the Fund to obtain or to enforce a judgment against the issuers of
such securities. In addition to the above-mentioned risks, securities
denominated in foreign currency, whether issued by a foreign or a domestic
issuer, may be affected favorably or unfavorably by changes in currency rates
and in exchange control regulations, and costs may be incurred in connection
with conversions between various currencies. It may not be possible to hedge
against the risks of currency fluctuation.

PUBLIC UTILITIES. As stated in the Prospectus, the Fund's investments in
public utilities, if any, may be subject to certain risks. Such utilities may
have difficulty meeting environmental standards and obtaining satisfactory fuel
supplies at reasonable costs. During an inflationary period, public utilities
also face increasing fuel, construction and other costs and may have difficulty
realizing an adequate return on invested capital. There is no assurance that
regulatory authorities will grant sufficient rate increases to cover expenses
associated with the foregoing difficulties as well as debt service requirements.
In addition, with respect to utilities engaged in nuclear power generation,
there is the possibility that Federal, State or municipal governmental
authorities may from time to time impose additional regulations or take other
governmental action which might cause delays in the licensing, construction, or
operation of nuclear power plants, or suspension of operation of such plants
which have been or are being financed by proceeds of the fixed income securities
in the Fund's portfolio.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. As discussed in the
Prospectus, from time to time, in the ordinary course of business, the Fund may
purchase securities on a when-issued or delayed delivery basis, I.E., delivery
and payment can take place a month or more after the date of the transactions.
The securities so purchased are subject to market fluctuation and no interest
accrues to the purchaser during this period. At the time the Fund makes the
commitment to purchase securities on a when-issued, delayed delivery basis or
forward commitment basis with the intention of acquiring the securities, it will
record the transaction and thereafter reflect the value, each day, of such
security in determining the net asset value of the Fund. At the time of delivery
of the securities, the value may be more or less than the purchase price. The
Fund will also establish a segregated account with its custodian bank in which
it will maintain cash or U.S. Government Securities or other liquid portfolio
securities equal in value to commitments for such when-issued or delayed
delivery securities; subject to this requirement, the Fund may purchase
securities on such basis without limit. An increase in the percentage of the
Fund's assets committed to the purchase of securities on a when-issued or
delayed delivery basis may increase the volatility of the Fund's net asset
value. The Fund may sell securities on a when-issued or delayed delivery basis
provided that the Fund owns the security at the time of the sale. During the
fiscal year ended August 31, 1998, the Fund did not purchase any when-issued and
delayed delivery securities.

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

15
<PAGE>

value. The Fund may also sell securities on a "when, as and if issued" basis
provided that the issuance of the security will result automatically from the
exchange or conversion of a security owned by the Fund at the time of the sale.
During the fiscal year ended August 31, 1998, the Fund did not purchase
securities on a when, as and if issued basis.

FUTURES CONTRACTS AND OPTIONS ON FUTURES. As discussed in the Prospectus,
the Fund may invest in financial futures contracts ("futures contracts") and
related options thereon. These futures contracts and related options thereon
will be used only as a hedge against anticipated interest rate changes. A
futures contract sale creates an obligation by the Fund, as seller, to deliver
the specific type of instrument called for in the contract at a specified future
time for a specified price. A futures contract purchase would create an
obligation by the Fund, as purchaser, to take delivery of the specific type of
financial instrument at a specified future time at a specified price. The
specific securities delivered or taken, respectively, at settlement date, would
not be determined until or near that date. The determination would be in
accordance with the rules of the exchange on which the futures contract sale or
purchase was effected.

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

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

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

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

16
<PAGE>
Currently, futures contracts can be purchased on debt securities such as
U.S. Treasury Bills and Bonds, U.S. Treasury Notes with maturities between 6 1/2
and 10 years, Certificates of the Government National Mortgage Association and
Bank Certificates of Deposit. The Fund may invest in interest rate futures
contracts covering these types of financial instruments as well as in new types
of such contracts that become available in the future.

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

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

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

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

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

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

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

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

A call option is a contract that gives the holder of the option the right to
buy from the writer (seller) of the call option, in return for a premium, the
security underlying the option at a specified exercise price at any time during
the term of the option. The writer of the call option has the obligation upon
exercise of the option to deliver the underlying security upon payment of the
exercise price during the option period. A put option is a contract that gives
the holder of the option the right to sell to the writer, in return for a

17
<PAGE>
premium, the underlying security at a specified price during the term of the
option. The writer of the put has the obligation to buy the underlying security
upon exercise, at the exercise price during the option period. The Fund did not
enter into any options transactions during its fiscal year ended August 31,
1996, and it has no intention of doing so during the forseeable future.

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

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

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

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

The Fund now qualifies and intends to remain qualified as a "regulated
investment company" under the Internal Revenue Code (see "Dividends,
Distributions and Taxes").

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

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

The Fund may not:

1. Make short sales of securities;

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

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

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

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

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

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

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

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

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

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

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

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

19
<PAGE>
As regards the above investment restrictions and those disclosed in the
Prospectus, if a percentage restriction is addressed at the time of investment,
a later increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of total or net assets will not be considered a
violation of any of the foregoing restrictions.

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

Subject to the general supervision by the Board of Directors, the Investment
Manager is responsible for decisions to buy and sell securities and futures
contracts for the Fund, the selection of brokers and dealers to effect the
transactions, and the negotiation of brokerage commissions, if any. Purchases
and sales of securities on a stock exchange are effected through brokers who
charge a commission for their services. The Fund expects that the primary market
for the securities in which it intends to invest will generally be the
over-the-counter market. Securities are generally traded in the over-the-counter
market on a "net" basis with dealers acting as principal for their own accounts
without charging a stated commission, although the price of the security usually
includes a profit to the dealer. Options and futures transactions will usually
be effected through a broker and a commission will be charged. The Fund also
expects that securities will be purchased at times in underwritten offerings
where the price includes a fixed amount of compensation, generally referred to
as the underwriter's concession or discount. On occasion, the Fund may also
purchase certain money market instruments directly from an issuer, in which case
no commissions or discounts are paid. The Fund paid $301,392 in brokerage
commissions during the fiscal year ended August 31, 1996. During the fiscal
years ended August 31, 1997 and August 31, 1998, the Fund paid $0 and $4,956
respectively, in brokerage commissions.

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

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

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

20
<PAGE>
the Investment Manager and thus reduce its expenses, it is of indeterminable
value and the management fee paid to the Investment Manager is not reduced by
any amount that may be attributable to the value of such services.

Pursuant to an order of the Securities and Exchange Commission, the Fund may
effect principal transactions in certain money market instruments with DWR. The
Fund will limit its transactions with DWR to U.S. Government and Government
Agency Securities, Bank Money Instruments (I.E., Certificates of Deposit and
Bankers' Acceptances) and Commercial Paper (not including Tax-Exempt Municipal
Paper). Such transactions will be effected with DWR only when the price
available from DWR is better than that available from other dealers. During the
fiscal years ended August 31, 1996, 1997 and 1998, the Fund did not effect any
principal transactions with DWR.

Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may be
effected through DWR, Morgan Stanley & Co. Incorporated ("MS&Co.") and other
affiliated brokers and dealers. In order for an affiliated broker or dealer to
effect portfolio transactions for the Fund, the commissions, fees or other
remuneration received by the affiliated broker or dealer must be reasonable and
fair compared to the commissions, fees or other remuneration paid to other
brokers in connection with comparable transactions involving similar securities
being purchased or sold on an exchange during a comparable period of time. This
standard would allow the affiliated broker or dealer to receive no more than the
remuneration which would be expected to be received by an unaffiliated broker in
a commensurate arm's-length transaction. Furthermore, the Directors of the Fund,
including a majority of the Directors who are not "interested" Directors, have
adopted procedures which are reasonably designed to provide that any
commissions, fees or other remuneration paid to an affiliated broker or dealer
are consistent with the foregoing standard. The Fund does not reduce the
management fee it pays to the Investment Manager by the amount of the brokerage
commissions it may pay to an affiliated broker or dealer. During the fiscal
years ended August 31, 1996, 1997 and 1998, the Fund paid no brokerage
commissions to any affiliated brokers or dealers.

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

As discussed in the Prospectus, shares of the Fund are distributed by Morgan
Stanley Dean Witter Distributors Inc. (the "Distributor"). The Distributor has
entered into a selected dealer agreement with DWR, which through its own sales
organization sells shares of the Fund. In addition, the Distributor may enter
into agreements with other selected broker-dealer representatives. The
Distributor, a Delaware corporation, is a wholly-owned subsidiary of MSDW. The
Directors of the Fund, including a majority of the Directors who are not, and
were not at the time they voted, interested persons of the Fund, as defined in
the Act (the "Independent Directors"), approved, at their meeting held on June
30, 1997, the current Distribution Agreement appointing the Distributor
exclusive distributor of the Fund's shares and providing for the Distributor to
bear distribution expenses not borne by the Fund. By its terms, the Distribution
Agreement had an initial term ending April 30, 1998 and will remain in effect
from year to year thereafter if approved by the Board. At their meeting held on
April 30, 1998, the Directors of the Fund, including a majority of the
Independent Directors, approved the continuation of the Distribution Agreement
until April 30, 1999.

The Distributor bears all expenses it may incur in providing services under
the Distribution Agreement. Such expenses include the payment of commissions for
sales of the Fund's shares and incentive compensation to Morgan Stanley Dean
Witter Financial Advisors and other selected broker-dealers. The Distributor
also pays certain expenses in connection with the distribution of the Fund's
shares, including the costs of preparing, printing and distributing advertising
or promotional materials, and the costs of printing and distributing
prospectuses and supplements thereto used in connection with the offering and
sale of the Fund's shares. The Fund bears the costs of initial typesetting,
printing and distribution of prospectuses and supplements thereto to
shareholders. The Fund also bears the costs of registering the Fund and its
shares under federal securities laws and pays filing fees in accordance with
state securities

21
<PAGE>
laws. The Fund and the Distributor have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended. Under the Distribution Agreement, the Distributor uses its best efforts
in rendering services to the Fund, but in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations, the
Distributor is not liable to the Fund or any of its shareholders for any error
of judgment or mistake of law or for any act or omission or for losses sustained
by the Fund or its shareholders.

PLAN OF DISTRIBUTION

The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the
Act (the "Plan") pursuant to which each Class, other than Class D, pays the
Distributor compensation accrued daily and payable monthly at the following
annual rates: 0.25%, 0.75% and 0.85% of the average daily net assets of Class A,
Class B and Class C, respectively. The Distributor also receives the proceeds of
front-end sales charges and of contingent deferred sales charges imposed on
certain redemptions of shares, which are separate and apart from payments made
pursuant to the Plan (see "Purchase of Fund Shares" in the Prospectus). The
Distributor has informed the Fund that it and/or DWR received (a) approximately
$1,594,948 and $1,582,304 in front-end sales charges for the fiscal year ended
August 31, 1996 and for the period September 1, 1996 to July 28, 1997,
respectively, (b) approximately $58,000 and $542,700 respectively in front-end
sales charges from Class A for the fiscal period July 28, 1997 through August
31, 1997 and for the fiscal year ended August 31, 1998, (c) approximately $295
and $2,485,044 respectively in contingent deferred sales charges from Class B
for the fiscal period July 28, 1997 through August 31, 1997 and for the fiscal
year ended August 31, 1998, (d) approximately $0 and $4,765, respectively from
Class A for the fiscal period July 28, 1997 through August 31, 1997 and for the
fiscal year ended August 31, 1998, and (e) approximately $0 and $62,533
respectively from Class C for the fiscal period July 28, 1997 through August 31,
1997, and for the fiscal year ended August 31, 1998, none of which was retained
by the Distributor.

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

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

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

Under the Plan and as required by Rule 12b-1, the Directors receive and
review promptly after the end of each calendar quarter a written report provided
by the Distributor of the amounts expended under the Plan and the purpose for
which such expenditures were made. During the fiscal year ended August 31, 1998,
Class A, Class B and Class C shares of the Fund accrued payments under the Plan
of $51,000, $10,737,221 and $281,533, respectively, which amounts are equal to
0.24%, 0.74% and 0.85%, respectively, for such fiscal year.

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

22
<PAGE>

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

With respect to Class B shares, DWR compensates its Financial Advisors by
paying them, from its own funds, commissions for the sale of Class B shares,
currently a gross sales credit of up to 4.0% of the amount sold (except as
provided in the following sentence) and an annual residual commission, currently
a residual of up to 0.20% of the current value of the respective accounts for
which they are the Financial Advisors of record in all cases. In the case of
Class B shares purchased on or after July 28, 1997 by Qualified Retirement Plans
for which MSDW Trust serves as Trustee or DWR's Retirement Plan Services serves
as recordkeeper pursuant to a written Recordkeeping Services Agreement, DWR
compensates its Financial Advisors by paying them, from its own funds, a gross
sales credit of 3.0% of the amount sold.

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

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

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

23
<PAGE>

Each Class paid 100% of the amounts accrued under the Plan with respect to
that Class for the fiscal year ended August 31, 1998 to the Distributor. The
Distributor and DWR estimate that they have spent, pursuant to the Plan,
$63,569,021 on behalf of Class B since the inception of the Fund. It is
estimated that this amount was spent in approximately the following ways: (i)
1.80% ($1,144,671)--advertising and promotional expenses; (ii) 0.02%
($10,805)--printing of prospectuses for distribution to other than current
shareholders; and (iii) 98.18% ($62,413,545)--other expenses, including the
gross sales credit and the carrying charge, of which 0.43% ($269,673) represents
carrying charges, 16.61% ($10,368,242) represents commission credits to DWR
branch offices for payments of commissions to Morgan Stanley Dean Witter
Financial Advisors and other selected broker-dealer representatives; 24.01%
($14,981,982) represents overhead and other branch office distribution-related
expenses and 58.95% ($36,793,648) represents excess distribution expenses of
Dean Witter High Income Securities, the net assets of which were combined with
those of the Fund on November 10, 1997 pursuant to an Agreement and Plan of
Reorganization. The amounts accrued by Class A and Class C for distribution
during the fiscal year ended August 31, 1998 were for expenses which relate to
compensation of sales personnel and associated overhead expenses.

The Fund is authorized to reimburse expenses incurred or to be incurred in
promoting the distribution of the Fund's Class A and Class C shares and in
servicing shareholder accounts. Reimbursement will be made through payments at
the end of each month. The amount of each monthly payment may in no event exceed
an amount equal to a payment at the annual rate of 0.25%, in the case of Class
A, and 0.85%, in the case of Class C, of the average net assets of the
respective Class during the month. No interest or other financing charges, if
any, incurred on any distribution expenses on behalf of Class A and Class C will
be reimbursable under the Plan. With respect to Class A, in the case of all
expenses other than expenses representing the service fee, and, with respect to
Class C, in the case of all expenses other than expenses representing a gross
sales credit or a residual to Morgan Stanley Dean Witter Financial Advisors and
other selected broker-dealer representatives, such amounts shall be determined
at the beginning of each calendar quarter by the Directors, including a majority
of the Independent 12b-1 Directors. Expenses representing the service fee (for
Class A) or a gross sales credit or a residual to Morgan Stanley Dean Witter
Financial Advisors and other selected broker-dealer representatives (for Class
C) may be reimbursed without prior determination. In the event that the
Distributor proposes that monies shall be reimbursed for other than such
expenses, then in making quarterly determinations of the amounts that may be
reimbursed by the Fund, the Distributor will provide and the Directors will
review a quarterly budget of projected distribution expenses to be incurred on
behalf of the Fund, together with a report explaining the purposes and
anticipated benefits of incurring such expenses. The Directors will determine
which particular expenses, and the portions thereof, that may be borne by the
Fund, and in making such a determination shall consider the scope of the
Distributor's commitment to promoting the distribution of the Fund's Class A and
Class C shares.

In the case of Class B shares, at any given time, the expenses of
distributing shares of the Fund may be more or less than the total of (i) the
payments made by the Fund pursuant to the Plan and (ii) the proceeds of
contingent deferred sales charges paid by investors upon redemption of shares.
The Distributor has advised the Fund that in the case of Class B shares the
excess distribution expenses, including the carrying charge designed to
approximate the opportunity costs incurred by DWR which arise from it having
advanced monies without having received the amount of any sales charges imposed
at the time of sale of the Fund's Class B shares, totalled $50,323,518 as of
August 31, 1998. Because there is no requirement under the Plan that the
Distributor be reimbursed for all distribution expenses with respect to Class B
shares or any requirement that the Plan be continued from year to year, this
excess amount does not constitute a liability of the Fund. Although there is no
legal obligation for the Fund to pay expenses incurred in excess of payments
made to the Distributor under the Plan and the proceeds of contingent deferred
sales charges paid by investors upon redemption of shares, if for any reason the
Plan is terminated, the Directors will consider at that time the manner in which
to treat such expenses. Any cumulative expenses incurred, but not yet recovered
through distribution fees or contingent deferred sales charges, may or may not
be recovered through future distribution fees or contingent deferred sales
charges.

24
<PAGE>

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

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

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

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

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

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

INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES

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

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

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

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

25
<PAGE>
A Letter of Intent permits an investor to establish a total investment goal
to be achieved by any number of purchases over a thirteen-month period. Each
purchase of Class A shares made during the period will receive the reduced sales
commission applicable to the amount represented by the goal, as if it were a
single purchase. A number of shares equal in value to 5% of the dollar amount of
the Letter of Intent will be held in escrow by the Transfer Agent, in the name
of the shareholder. The initial purchase under a Letter of Intent must be equal
to at least 5% of the stated investment goal.

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

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

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

CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES

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

26
<PAGE>

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

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

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

The following table sets forth the rates of the CDSC applicable to Class B
shares of the Fund purchased on or after July 28, 1997 by Qualified Retirement
Plans which MSDW Trust serves as Trustee or DWR's Retirement Plan Services
serves as recordkeeper pursuant to a written Recordkeeping Agreement:

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

LEVEL LOAD ALTERNATIVE--CLASS C SHARES

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

27
<PAGE>
NO LOAD ALTERNATIVE--CLASS D SHARES

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

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

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

AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. As stated in the
Prospectus, all income dividends and capital gains distributions are
automatically paid in full and fractional shares of the applicable Class of the
Fund, unless the shareholder requests that they be paid in cash. Each purchase
of shares of the Fund is made upon the condition that the Transfer Agent is
thereby automatically appointed as agent of the investor to receive all
dividends and capital gains distributions on shares owned by the investor. Such
dividends and distributions will be paid, at the net asset value per share, in
shares of the applicable Class of the Fund (or in cash if the shareholder so
requests) as of the close of business on the record date. At any time an
investor may request the Transfer Agent, in writing, to have subsequent
dividends and/or capital gains distributions paid to him or her in cash rather
than shares. To assure sufficient time to process the change, such request
should be received by the Transfer Agent at least five business days prior to
the record date of the dividend or distribution. In the case of recently
purchased shares for which registration instructions have not been received on
the record date, cash payments will be made to DWR or other selected
broker-dealer, and will be forwarded to the shareholder, upon the receipt of
proper instructions. It has been and remains the Fund's policy and practice
that, if checks for dividends and distributions paid in cash remain uncashed, no
interest will accrue on amounts represented by such uncashed checks.

TARGETED DIVIDENDS.-SM- In states where it is legally permissible,
shareholders may also have all income dividends and capital gains distributions
automatically invested in shares of any Class of an open-end Morgan Stanley Dean
Witter Fund other than Morgan Stanley Dean Witter High Yield Securities Inc. or
in another Class of Morgan Stanley Dean Witter High Yield Securities Inc. Such
investment will be made as described above for automatic investment in shares of
the applicable Class of the Fund, at the net asset value per share of the
selected Morgan Stanley Dean Witter Fund as of the close of business on the
payment date of the dividend or distribution and will begin to earn dividends,
if any, in the selected Morgan Stanley Dean Witter Fund the next business day.
To participate in the Targeted Dividends program, shareholders should contact
their Morgan Stanley Dean Witter Financial Advisor or other selected
broker-dealer representative or the Transfer Agent. Shareholders of the Fund
must be shareholders of the selected Class of the Morgan Stanley Dean Witter
Fund targeted to receive investments from dividends at the time they enter the
Targeted Dividends program. Investors should review the prospectus of the
targeted Morgan Stanley Dean Witter Fund before entering the program.

EASYINVEST.-SM- Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account or following
redemption of shares of a Morgan Stanley Dean Witter money market fund, on a
semi-monthly, monthly or quarterly basis, to the Transfer Agent for investment
in shares of the Fund. Shares purchased through EasyInvest will be added to the
shareholder's existing account at the net asset value calculated the same
business day the transfer of funds is effected (subject to any applicable sales
charges). Shares of Morgan Stanley Dean Witter money market funds redeemed in
connection

28
<PAGE>

with EasyInvest are redeemed on the business day preceding the transfer of
funds. For further information or to subscribe to EasyInvest, shareholders
should contact their Morgan Stanley Dean Witter Financial Advisor or other
selected broker-dealer representative or the Transfer Agent.

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

SYSTEMATIC WITHDRAWAL PLAN. As discussed in the Prospectus, a systematic
withdrawal plan (the "Withdrawal Plan") is available for shareholders whose
shares of Morgan Stanley Dean Witter Funds have an aggregate value of $10,000 or
more. Shares of any Fund from which redemptions will be made pursuant to the
Plan must have a value of $1,000 or more (referred to as a "SWP Fund"). The
required share values are determined on the date the shareholder establishes the
Withdrawal Plan. The Withdrawal Plan provides for monthly, quarterly,
semi-annual or annual payments in any amount not less than $25, or in any whole
percentage of the value of the SWP Funds' shares, on an annualized basis. Any
applicable Contingent Deferred Sales Charge ("CDSC") will be imposed on shares
redeemed under the Withdrawal Plan (see "Purchase of Fund Shares"), except that
the CDSC, if any, will be waived on redemptions under the Withdrawal Plan of up
to 12% annually of the value of each SWP Fund account, based on the share values
next determined after the shareholder establishes the Withdrawal Plan.
Redemptions for which this CDSC waiver policy applies may be in amounts up to 1%
per month, 3% per quarter, 6% semi-annually or 12% annually. Under this CDSC
waiver policy, amounts withdrawn each period will be paid by first redeeming
shares not subject to a CDSC because the shares were purchased by the
reinvestment of dividends or capital gains distributions, the CDSC period has
elapsed or some other waiver of the CDSC applies. If shares subject to a CDSC
must be redeemed, shares held for the longest period of time will be redeemed
first and continuing with shares held the next longest period of time until
shares held the shortest period of time are redeemed. Any shareholder
participating in the Withdrawal Plan will have sufficient shares redeemed from
his or her account so that the proceeds (net of any applicable CDSC) to the
shareholder will be the designated monthly, quarterly, semi-annual or annual
amount.

The Transfer Agent acts as agent for the shareholder in tendering to the
Fund for redemption sufficient full and fractional shares to provide the amount
of the periodic withdrawal payment designated in the application. The shares
will be redeemed at their net asset value determined, at the shareholder's
option, on the tenth or twenty-fifth day (or next following business day) of the
relevant month, quarter, or semi-annual or annual period and normally a check
for the proceeds will be mailed by the Transfer Agent, or amounts credited to a
shareholder's Dean Witter Reynolds Inc. or other selected broker-dealer
brokerage account, or amounts deposited electronically into the shareholder's
bank account via the Automated Clearing House, within five business days after
the date of redemption.

29
<PAGE>
Withdrawal Plan payments should not be considered as dividends, yields or
income. If periodic withdrawal plan payments continuously exceed net investment
income and net capital gains, the shareholder's original investment will be
correspondingly reduced and ultimately exhausted.

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

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

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

EXCHANGE PRIVILEGE

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

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

30
<PAGE>
Any shares held in certificate form cannot be exchanged but must be
forwarded to the Transfer Agent and deposited into the shareholder's account
before being eligible for exchange. (Certificates mailed in for deposit should
not be endorsed.)

As described below, and in the Prospectus under the caption "Purchase of
Fund Shares," a CDSC may be imposed upon a redemption, depending on a number of
factors, including the number of years from the time of purchase until the time
of redemption or exchange ("holding period"). When shares of a Morgan Stanley
Dean Witter Multi-Class Fund are exchanged for shares of an Exchange Fund, the
exchange is executed at no charge to the shareholder, without the imposition of
the CDSC at the time of the exchange. During the period of time the shareholder
remains in the Exchange Fund (calculated from the last day of the month in which
the Exchange Fund shares were acquired), the holding period or "year since
purchase payment made" is frozen. When shares are redeemed out of the Exchange
Fund, they will be subject to a CDSC which would be based upon the period of
time the shareholder held shares in a Morgan Stanley Dean Witter Multi-Class
Fund. However, in the case of shares exchanged into an Exchange Fund on or after
April 23, 1990, upon a redemption of shares which results in a CDSC being
imposed, a credit (not to exceed the amount of the CDSC) will be given in an
amount equal to the Exchange Fund 12b-1 distribution fees incurred on or after
that date which are attributable to those shares. Shareholders acquiring shares
of an Exchange Fund pursuant to this exchange privilege may exchange those
shares back into a Morgan Stanley Dean Witter Multi-Class Fund from the Exchange
Fund, with no CDSC being imposed on such exchange. The holding period previously
frozen when shares were first exchanged for shares of the Exchange Fund resumes
on the last day of the month in which shares of a Morgan Stanley Dean Witter
Multi-Class Fund are reacquired. A CDSC is imposed only upon an ultimate
redemption, based upon the time (calculated as described above) the shareholder
was invested in a Morgan Stanley Dean Witter Multi-Class Fund. In the case of
exchanges of Class A shares which are subject to a CDSC, the holding period also
includes the time (calculated as described above) the shareholder was invested
in a FSC Fund.

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

31
<PAGE>
those exchanged non-Free Shares. Based upon the procedures described in the
Prospectus under the caption "Purchase of Fund Shares," any applicable CDSC will
be imposed upon the ultimate redemption of shares of any fund, regardless of the
number of exchanges since those shares were originally purchased.

With respect to the redemption or repurchase of shares of the Fund, the
application of proceeds to the purchase of new shares in the Fund or any other
of the funds and the general administration of the Exchange Privilege, the
Transfer Agent acts as agent for the Distributor and for the shareholder's
selected broker-dealer, if any, in the performance of such functions. With
respect to exchanges, redemptions or repurchases, the Transfer Agent shall be
liable for its own negligence and not for the default or negligence of its
correspondents or for losses in transit. The Fund shall not be liable for any
default or negligence of the Transfer Agent, the Distributor or any selected
broker-dealer.

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

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

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

For further information regarding the Exchange Privilege, shareholders
should contact their Morgan Stanley Dean Witter Financial Advisor or other
selected broker-dealer representative or the Transfer Agent.

32
<PAGE>
REDEMPTIONS AND REPURCHASES
- --------------------------------------------------------------------------------

REDEMPTION. As stated in the Prospectus, shares of each Class of the Fund
can be redeemed for cash at any time at the net asset value per share next
determined; however, such redemption proceeds will be reduced by the amount of
any applicable CDSC. If shares are held in a shareholder's account without a
share certificate, a written request for redemption to the Fund's Transfer Agent
at P.O. Box 983, Jersey City, NJ 07303 is required. If certificates are held by
the shareholder, the shares may be redeemed by surrendering the certificates
with a written request for redemption. The share certificate, or an accompanying
stock power, and the request for redemption, must be signed by the shareholder
or shareholders exactly as the shares are registered. Each request for
redemption, whether or not accompanied by a share certificate, must be sent to
the Fund's Transfer Agent, which will redeem the shares at their net asset value
next computed (see "Purchase of Fund Shares" in the Prospectus) after it
receives the request, and certificate, if any, in good order. Any redemption
request received after such computation will be redeemed at the next determined
net asset value. The term "good order" means that the share certificate, if any,
and request for redemption are properly signed, accompanied by any documentation
required by the Transfer Agent, and bear signature guarantees when required by
the Fund or the Transfer Agent. If redemption is requested by a corporation,
partnership, trust or fiduciary, the Transfer Agent may require that written
evidence of authority acceptable to the Transfer Agent be submitted before such
request is accepted.

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

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

PAYMENT FOR SHARES REDEEMED OR REPURCHASED. As discussed in the Prospectus,
payment for shares of any Class presented for repurchase or redemption will be
made by check within seven days after receipt by the Transfer Agent of the
certificate and/or written request in good order. Such payment may be postponed
or the right of redemption suspended at times (a) when the New York Stock
Exchange is closed for other than customary weekends and holidays, (b) when
trading on that Exchange is restricted, (c) when an emergency exists as a result
of which disposal by the Fund of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Fund fairly to determine
the value of its net assets, or (d) during any other period when the Securities
and Exchange Commission by order so permits; provided that applicable rules and
regulations of the Securities and Exchange Commission shall govern as to whether
the conditions prescribed in (b) or (c) exist. If the shares to be redeemed have
recently been purchased by check (including a certificate or bank cashier's
check), payment of redemption proceeds may be delayed for the minimum time
needed to verify that the check used for investment has been honored (not more
than fifteen days from the time of receipt of the check by the Transfer Agent).
It has been and remains the Fund's policy and practice that, if checks for
redemption proceeds remain uncashed, no interest will accrue on amounts
represented by such uncashed checks. Shareholders maintaining margin accounts
with DWR or another selected broker-

33
<PAGE>

dealer are referred to their Morgan Stanley Dean Witter Financial Advisor or
other selected broker-dealer representative regarding restrictions on redemption
of shares of the Fund pledged in the margin account.

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

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

Exercise of the reinstatement privilege will not affect the federal income
tax treatment of any gain or loss realized upon the redemption or repurchase,
except that if the redemption or repurchase resulted in a loss and reinstatement
is made in shares of the Fund, some or all of the loss, depending on the amount
reinstated, will not be allowed as a deduction for federal income tax purposes
but will be applied to adjust the cost basis of the shares acquired upon
reinstatement.

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

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

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

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

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. The Taxpayer Relief Act reduces the maximum tax
rate on long-term capital gains from 28% to 20%. The lower rates do not apply to
collectibles and certain other assets. Additionally, the maximum capital gain
rate for assets that are held more than five years and that are acquired after
December 31, 2000 is 18%.

34
<PAGE>
Any dividend or capital gains distribution received by a shareholder from an
investment company will have the effect of reducing the net asset value of the
shareholder's stock in that company by the exact amount of the dividend or
capital gains distribution. Furthermore, capital gains distributions and some
portion of the dividends are subject to federal income taxes. If the net asset
value of the shares should be reduced below a shareholder's cost as a result of
the payment of dividends or realized capital gains, such payment would be in
part a return of the shareholder's investment to the extent of such reduction
below the shareholder's cost, but nonetheless would be taxable to the
shareholder. Therefore, an investor should consider the tax implications of
purchasing Fund shares immediately prior to a distribution record date.

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

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

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

Prior to July 28, 1997, the Fund offered only one Class of shares subject to
a maximum sales charge of 5.5% and no 12b-1 fee. Because the distribution
arrangement for Class A most closely resembles the distribution arrangement
applicable prior to the implementation of multiple classes (i.e., Class A is
sold with a front-end sales charge), historical performance information has been
restated to reflect (i) the actual maximum sales charge applicable to Class A
(i.e., 4.25%) and (ii) the ongoing 12b-1 fee applicable to Class A Shares.
Furthermore, because all shares of the Fund held prior to July 28, 1997 have
been designated Class D shares, the Fund's historical performance has also been
restated to reflect the absence of any sales charge in the case of Class D
shares. Also set forth below is the actual performance of Class A, Class B and
Class C as of their last fiscal year.

Yield is calculated for any 30-day period as follows: the amount of interest
and/or dividend income for each security in the Fund's portfolio is determined
in accordance with regulatory requirements; the total for the entire portfolio
constitutes the Fund's gross income for the period. Expenses accrued during the
period are subtracted to arrive at "net investment income" of each Class. The
resulting amount is divided by the product of the maximum offering price per
share on the last day of the period multiplied by the average number of shares
of the applicable Class outstanding during the period that were entitled to
dividends. This amount is added to 1 and raised to the sixth power. 1 is then
subtracted from the result and the difference is multiplied by 2 to arrive at
the annualized yield. For the 30-day period ended August 31, 1998, the Fund's
yield for the Class A, Class B, Class C and Class D shares, calculated pursuant
to this formula was 10.38%, 10.29%, 10.22% and 11.20%, respectively.

The Fund's "average annual total return" represents an annualization of the
Fund's total return over a particular period and is computed by finding the
annual percentage rate which will result in the ending redeemable value of a
hypothetical $1,000 investment made at the beginning of a one, five or ten year
period, or for the period from the date of commencement of the Fund's
operations, if shorter than any of the foregoing. The ending redeemable value
for Class A reflects the imposition of the maximum front-end sales charge for
Class A. The ending redeemable value for Class B and Class C is reduced by any
CDSC at the end of the one, five or ten year or other period. For the purpose of
this calculation, it is assumed that all dividends and distributions are
reinvested. The formula for computing the average annual total return involves a
percentage obtained by dividing the ending redeemable value by the amount of the
initial investment, taking a root of the quotient (where the root is equivalent
to the number of years in the period) and subtracting 1 from the result. The
restated average annual total returns of the Class A and Class D shares of the
Fund for the year ended August 31, 1998 were -3.87% and 0.63%, respectively; for
the five years ended August 31, 1998 were 6.57% and 7.76%, respectively; and for
the ten years ended August 31, 1998 were 6.23% and 6.96%, respectively. The
average annual total returns of Class B for the fiscal year ended August 31,
1998 and for the period July 28, 1997 (inception of the

35
<PAGE>

Class) through August 31, 1998 were -4.73% and -2.94%, respectively. The average
annual total returns of Class C for the fiscal year ended August 31, 1998 and
for the period July 28, 1997 (inception of the Class) through August 31, 1998
were -1.24% and 0.25%, respectively.

In addition to the foregoing, the Fund may advertise its total return for
each Class over different periods of time by means of aggregate, average,
year-by-year or other types of total return figures. Such calculation may or may
not reflect the imposition of the maximum front end sales charge for Class A or
the deduction of the CDSC for each of Class B and Class C which, if reflected,
would reduce the performance quoted. For example, the average annual total
return of the Fund may be calculated in the manner described in the preceding
paragraph, but without the deduction for any applicable sales charge. Based on
the foregoing calculation, the Fund's total return for Class A shares for the
year ended August 31, 1998 was 0.40%, the total return for the five years ended
August 31, 1998 was 7.49% and the total return for the ten years ended August
31, 1998 was 6.69%. Because the Class D shares are not subject to any sales
charge, the Fund would only advertise average annual total returns as calculated
in the previous paragraph. Based on this calculation, the average annual total
returns of Class B for the fiscal year ended August 31, 1998 and for the period
July 28, 1997 through August 31, 1998 were -0.23% and 0.36%, respectively, the
average annual total returns of Class C for the fiscal year ended August 31,
1998 and for the period July 28, 1997 through August 31, 1998 were -0.34% and
0.25%, respectively.

In addition, the Fund may compute its aggregate total return for each Class
for specified periods by determining the aggregate percentage rate which will
result in the ending value of a hypothetical $1,000 investment made at the
beginning of the period. For the purpose of this calculation, it is assumed that
all dividends and distributions are reinvested. The formula for computing
aggregate total return involves a percentage obtained by dividing the ending
value (without reduction for any applicable sales charge) by the initial $1,000
investment and subtracting 1 from the result. Based on the foregoing
calculation, the Fund's restated total return for both Class A and Class D
shares for the year ended August 31, 1998 was 0.40% and 0.63%, respectively; the
restated total return for the five years ended August 31, 1998 was 43.53% and
45.28%, respectively; and the restated total return for the ten years ended
August 31, 1998 was 91.18% and 95.94%, respectively. Based on the foregoing
calculations, the total returns for Class B for the fiscal year ended August 31,
1998 and for the period July 28, 1997 through August 31, 1998 were -0.23% and
0.40%, respectively, the total returns of Class C for the fiscal year ended
August 31, 1998 and for the period July 28, 1997 through August 31, 1998 were
- -0.34% and 0.27%, respectively.

The Fund may advertise the growth of hypothetical investments of $10,000,
$50,000 and $100,000 in each Class of shares of the Fund by adding 1 to the
Fund's aggregate total return to date (expressed as a decimal and without taking
into account the effect of any applicable CDSC) and multiplying by $9,575,
$48,250 and $97,250 in the case of Class A (investments of $10,000, $50,000 and
$100,000 adjusted for the initial sales charge) or by $10,000, $50,000 and
$100,000 in the case of each of Class B, Class C and Class D, as the case may
be. Investments of $10,000, $50,000 and $100,000 in each Class at inception of
the Class would have grown to the following amounts at August 31, 1998:

<TABLE>
<CAPTION>
INVESTMENT AT INCEPTION OF:
INCEPTION -----------------------------------
CLASS DATE: $10,000 $50,000 $100,000
- ------------------------- ---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Class A.................. 9/26/79 $ 50,765 $ 255,812 $ 515,600
Class B.................. 7/28/97 10,040 50,200 100,400
Class C.................. 7/28/97 10,027 50,135 100,270
Class D.................. 9/26/79 55,552 277,760 555,520
</TABLE>

For purposes of restating the performance of Class A, the inception date set
forth in the above table is the inception date of the Fund. However, Class A did
not actually commence operation until July 28, 1997.

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

36
<PAGE>
DESCRIPTION OF COMMON STOCK
- --------------------------------------------------------------------------------

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

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

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

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

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

INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------

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

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

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

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

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

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

37
<PAGE>
EXPERTS
- --------------------------------------------------------------------------------

The financial statements of the Fund for the year ended August 31, 1998
included in this Statement of Additional Information and incorporated by
reference in the Prospectus have been so included and incorporated in reliance
on the report of PricewaterhouseCoopers LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.

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

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

38
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1998

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE BONDS (95.7%)
AEROSPACE (0.5%)
$ 12,500 Sabreliner Corp. - 144A*.................................................... 11.00% 06/15/08 $ 12,062,500
--------------
BROADCAST MEDIA (4.2%)
15,000 Capstar Broadcasting Partners............................................... 12.75++ 02/01/09 11,250,000
6,000 Cumulus Media Inc........................................................... 10.375 07/01/08 5,880,000
10,000 Interep National Radio Sales - 144A*........................................ 10.00 07/01/08 9,650,000
20,500 Paxson Communications Corp.................................................. 11.625 10/01/02 20,090,000
20,749 Spanish Broadcasting System, Inc............................................ 12.50 06/15/02 22,823,900
14,000 STC Broadcasting, Inc....................................................... 11.00 03/15/07 14,420,000
10,000 Tri-State Outdoor Media Group, Inc. - 144A*................................. 11.00 05/15/08 9,700,000
--------------
93,813,900
--------------
BUSINESS SERVICES (3.4%)
28,000 Anacomp, Inc. (Series B).................................................... 10.875 04/01/04 28,280,000
5,900 Anacomp, Inc. (Series C) - 144A*............................................ 10.875 04/01/04 5,959,000
7,000 CEX Holdings Inc. - 144A*................................................... 9.625 06/01/08 6,405,000
13,000 Comforce Operating, Inc..................................................... 12.00 12/01/07 13,260,000
10,000 Entex Information Services, Inc. - 144A*.................................... 12.50 08/01/06 9,700,000
11,700 Xerox Credit Corp........................................................... 15.00 10/07/98 11,798,631
--------------
75,402,631
--------------
CABLE/CELLULAR (7.9%)
28,000 American Cellular Corp. - 144A*............................................. 10.50 05/15/08 25,760,000
33,500 Australis Holdings Ltd. (Australia) (a)..................................... 15.00++ 11/01/02 2,680,000
4,404 Australis Media Ltd. - 144A* (Australia) (a)................................ 0.00 11/01/00 3,203,919
14,750 Charter Communication South East L.P. (Series B)............................ 11.25 03/15/06 15,635,000
3,000 Classic Cable Inc. - 144A*.................................................. 9.875 08/01/08 2,955,000
30,031 Clearnet Communications Inc. (Canada)....................................... 14.75++ 12/15/05 23,649,412
19,000 FrontierVision Operating Partners, L.P...................................... 11.00 10/15/06 20,520,000
10,000 James Cable Partners L.P. (Series B)........................................ 10.75 08/15/04 10,300,000
20,000 Nextel Communications, Inc.................................................. 10.65++ 09/15/07 12,000,000
35,000 Price Communication Cellular Holdings....................................... 11.25+ 08/15/08 31,500,000
16,000 Rifkin Acquisition Partners L.P............................................. 11.125 01/15/06 16,960,000
24,800 Triton Communications LLC - 144A*........................................... 11.00++ 05/01/08 11,656,000
--------------
176,819,331
--------------
CHEMICALS (0.3%)
6,000 Octel Developments PLC - 144A* (United Kingdom)............................. 10.00 05/01/06 5,880,000
--------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
39
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1998, CONTINUED

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COMPUTERS - EQUIPMENT (4.8%)
$ 11,500 Advanced Micro Devices, Inc................................................. 11.00% 08/01/03 $ 11,270,000
20,000 CHS Electronics, Inc........................................................ 9.875 04/15/05 18,600,000
46,700 IBM Credit Corp............................................................. 15.00 02/02/99 48,507,290
8,175 Unisys Corp................................................................. 11.75 10/15/04 9,278,625
18,000 Unisys Corp. (Series B)..................................................... 12.00 04/15/03 20,070,000
--------------
107,725,915
--------------
CONSUMER PRODUCTS (1.5%)
11,000 J.B. Williams Holdings, Inc................................................. 12.00 03/01/04 11,000,000
29,500 Samsonite Corp. - 144A*..................................................... 10.75 06/15/08 22,125,000
1,000 Windmere-Durable Holdings, Inc.............................................. 10.00 07/31/08 960,000
--------------
34,085,000
--------------
CONTAINERS (1.6%)
8,000 Impac Group Inc. - 144A*.................................................... 10.125 03/15/08 7,680,000
12,500 Mail-Well Corp.............................................................. 10.50 02/15/04 13,000,000
14,725 Packaging Resources, Inc.................................................... 11.625 05/01/03 14,356,875
--------------
35,036,875
--------------
DRUG STORE CHAIN (0.4%)
10,000 Community Distributors...................................................... 10.25 10/15/04 9,150,000
--------------
ELECTRICAL & ALARM SYSTEMS (0.9%)
22,000 Mosler, Inc................................................................. 11.00 04/15/03 19,360,000
--------------
ENTERTAINMENT/GAMING & LODGING (8.3%)
22,000 Aladdin Gaming Holdings/Capital Corp. LLC................................... 13.50++ 03/01/10 7,920,000
20,850 AMF Bowling Worldwide Inc. (Series B)....................................... 10.875 03/15/06 19,807,500
20,075 Argosy Gaming Co. LLC....................................................... 13.25 06/01/04 21,480,250
13,000 Epic Resorts LLC - 144A*.................................................... 13.00 06/15/05 12,959,440
20,500 Fitzgeralds Gaming Corp. (Series B)......................................... 12.25 12/15/04 14,350,000
25,500 Lady Luck Gaming Finance Corp............................................... 11.875 03/01/01 25,755,000
16,000 Motels of America, Inc. (Series B).......................................... 12.00 04/15/04 14,400,000
13,250 Premier Cruises Ltd. - 144A*................................................ 11.00 03/15/08 9,076,250
21,192 Resort At Summerlin......................................................... 13.00+ 12/15/07 21,933,368
12,300 Riviera Holdings Corp....................................................... 10.00 08/15/04 10,824,000
12,906 Stuart Entertainment, Inc. (Series B)....................................... 12.50 11/15/04 6,969,240
21,300 Walt Disney Co.............................................................. 15.00 12/14/98 21,880,851
--------------
187,355,899
--------------
FINANCE (2.3%)
50,750 General Electric Capital Corp............................................... 15.00 01/21/99 52,596,285
--------------
FOODS & BEVERAGES (8.8%)
27,081 Envirodyne Industries, Inc.................................................. 10.25 12/01/01 25,997,760
15,221 Fleming Companies, Inc...................................................... 10.625 12/15/01 15,373,210
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
40
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1998, CONTINUED

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 3,500 Fleming Companies, Inc...................................................... 10.50% 12/01/04 $ 3,535,000
3,500 Fleming Companies, Inc...................................................... 10.625 07/31/07 3,570,000
51,500 General Mills, Inc.......................................................... 15.00 01/29/99 53,517,770
50,000 Pepsico, Inc................................................................ 15.00 08/06/99 54,535,000
10,000 Sparkling Spring Water (Canada)............................................. 11.50 11/15/07 9,700,000
109,075 Specialty Foods Acquisition Corp. (Series B)................................ 13.00++ 08/15/05 32,722,500
--------------
198,951,240
--------------
HEALTHCARE (2.8%)
5,000 Mediq /PRN Life Support Services, Inc. - 144A*.............................. 11.00 06/01/08 4,800,000
7,500 Pediatric Services of America, Inc. (Series A).............................. 10.00 04/15/08 4,575,000
16,975 Unilab Corp................................................................. 11.00 04/01/06 17,484,250
16,500 Unison Healthcare Corp. - 144A* (b)......................................... 12.25 11/01/06 8,208,750
7,000 Universal Hospital Services, Inc. - 144A*................................... 10.25 03/01/08 6,755,000
30,000 Vencor, Inc................................................................. 9.875 05/01/05 21,300,000
--------------
63,123,000
--------------
MANUFACTURING (3.1%)
11,900 Berry Plastics Corp......................................................... 12.25 04/15/04 12,316,500
9,075 Cabot Safety Corp........................................................... 12.50 07/15/05 9,982,500
5,000 Indesco International Inc. - 144A*.......................................... 9.75 04/15/08 4,450,000
71,930 International Semi-Tech Microelectronics, Inc. (Canada)..................... 11.50++ 08/15/03 15,824,600
15,500 International Wire Group, Inc............................................... 11.75 06/01/05 16,120,000
10,500 Outsourcing Services Group, Inc. - 144A*.................................... 10.875 03/01/06 10,290,000
--------------
68,983,600
--------------
MANUFACTURING - DIVERSIFIED INDUSTRIES (5.8%)
7,500 Eagle-Picher Industries, Inc................................................ 9.375 03/01/08 7,125,000
11,250 High Voltage Engineering, Inc............................................... 10.50 08/15/04 10,912,500
15,870 Interlake Corp.............................................................. 12.00 11/15/01 16,504,800
18,400 Interlake Corp.............................................................. 12.125 03/01/02 18,975,000
13,350 J.B. Poindexter & Co., Inc.................................................. 12.50 05/15/04 12,282,000
20,000 Jordan Industries, Inc. (Series B).......................................... 10.375 08/01/07 19,800,000
57,338 Jordan Industries, Inc. (Series B).......................................... 11.75++ 04/01/09 36,696,320
8,000 Telecommunication Techniques LLC - 144A*.................................... 9.75 05/15/08 7,280,000
--------------
129,575,620
--------------
OIL & GAS (5.1%)
17,000 Northern Offshore ASA - 144A*............................................... 10.00 05/15/05 14,535,000
16,000 Petro Stopping Centers L.P.................................................. 10.50 02/01/07 16,320,000
39,700 Texaco Capital LLC.......................................................... 15.00 01/13/99 41,016,452
23,800 Transamerican Refining Corp. (Series A) (Units) ++ - 144A*.................. 16.00 06/30/03 23,800,000
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
41
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1998, CONTINUED

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 20,000 Transamerican Refining Corp. (Series C) (Units) ++ - 144A*.................. 16.00% 06/30/03 $ 20,000,000
--------------
115,671,452
--------------
PUBLISHING (2.2%)
14,950 American Media Operations, Inc.............................................. 11.625 11/15/04 15,249,000
7,500 MDC Communications Corp..................................................... 10.50 12/01/06 7,500,000
7,500 Perry Judds................................................................. 10.625 12/15/07 7,500,000
21,000 United States Banknote Corp................................................. 10.375 06/01/02 19,950,000
--------------
50,199,000
--------------
RESTAURANTS (5.5%)
141,992 American Restaurant Group Holdings, Inc. - 144A* (c)........................ 0.00 12/15/05 35,852,980
6,000 Ameriking, Inc.............................................................. 10.75 12/01/06 5,970,000
11,621 Carrols Corp................................................................ 11.50 08/15/03 12,143,945
34,207 FRD Acquisition Corp. (Series B)............................................ 12.50 07/15/04 34,035,965
15,500 Friendly Ice Cream Corp..................................................... 10.50 12/01/07 13,640,000
5,000 Perkins Family Restaurants, L.P............................................. 10.125 12/15/07 5,175,000
25,000 Planet Hollywood International, Inc......................................... 12.00 04/01/05 17,375,000
--------------
124,192,890
--------------
RETAIL - FOOD CHAINS (2.6%)
9,185 Eagle Food Centers, Inc..................................................... 8.625 04/15/00 8,542,050
9,000 Mrs. Fields Holdings Co. (Units) ++ - 144A*................................. 14.00++ 12/01/05 5,130,000
10,000 Mrs. Fields Original........................................................ 10.125 12/01/04 9,800,000
14,125 Pantry, Inc................................................................. 10.25 10/15/07 13,701,250
14,500 Pueblo Xtra International, Inc.............................................. 9.50 08/01/03 13,811,250
8,748 Pueblo Xtra International, Inc. (Series C).................................. 9.50 08/01/03 8,332,470
--------------
59,317,020
--------------
TELECOMMUNICATION EQUIPMENT (0.3%)
10,500 FWT, Inc.................................................................... 9.875 11/15/07 6,720,000
--------------
TELECOMMUNICATIONS (19.0%)
30,500 21st Century Telecom Group, Inc............................................. 12.25++ 02/15/08 14,640,000
13,500 Advanced Radio Telecommunication............................................ 14.00 02/15/07 14,175,000
9,000 Arch Communications Group, Inc. - 144A*..................................... 12.75 07/01/07 8,910,000
11,500 Birch Telecom Inc. - 144A* (Units) ++....................................... 14.00 06/15/08 11,155,000
12,000 CapRock Communications Corp. - 144A*........................................ 12.00 07/15/08 11,400,000
50,300 CellNet Data Systems Inc.................................................... 14.00++ 10/01/07 21,629,000
32,625 e. Spire Communications, Inc................................................ 13.75 07/15/07 32,951,250
17,750 Esprit Telecom Group PLC - 144A* (United Kingdom)........................... 10.875 06/15/08 16,685,000
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
42
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1998, CONTINUED

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 30,000 Facilicom International (Series B).......................................... 10.50% 01/15/08 $ 27,000,000
47,000 Firstworld Communications, Inc. (Units) ++ - 144A*.......................... 13.00++ 04/15/08 15,040,000
20,000 Focal Communications - 144A*................................................ 12.125++ 02/15/08 10,800,000
20,400 GST Equipment Funding, Inc.................................................. 13.25 05/01/07 22,032,000
13,800 Hyperion Telecommunication, Inc. (Series A)................................. 13.00++ 04/15/03 9,108,000
23,000 Hyperion Telecommunication, Inc. (Series B)................................. 12.25 09/01/04 22,080,000
56,800 In-Flight Phone Corp. (Series B) (d)........................................ 14.00 05/15/02 5,964,000
30,000 Level 3 Communications, Inc................................................. 9.125 05/01/08 26,925,000
8,500 NextLink Communications, Inc................................................ 12.50 04/15/06 9,095,000
15,000 Optel, Inc. - 144A*......................................................... 11.50 07/01/08 13,350,000
19,750 Paging Network, Inc......................................................... 10.125 08/01/07 19,058,750
5,000 Paging Network, Inc......................................................... 10.00 10/15/08 4,800,000
15,050 Peoples Telephone Co., Inc.................................................. 12.25 07/15/02 17,476,813
18,000 Primus Telecommunication Group, Inc. (Series B)............................. 9.875 05/15/08 16,200,000
11,000 Talton Holdings, Inc (Series B)............................................. 11.00 06/30/07 11,000,000
20,230 USA Mobile Communications Holdings, Inc..................................... 9.50 02/01/04 18,207,000
18,800 USA Mobile Communications Holdings, Inc..................................... 14.00 11/01/04 20,116,000
12,000 Versatel Telecom - 144A* (Netherlands)...................................... 13.25 05/15/08 11,760,000
22,000 Winstar Communications, Inc................................................. 14.00++ 10/15/05 16,830,000
--------------
428,387,813
--------------
TRANSPORTATION (0.7%)
17,500 Alpha Shipping PLC (United Kingdom)......................................... 9.50 02/15/08 14,875,000
--------------
WIRELESS COMMUNICATION (3.7%)
19,950 Echostar DBS Corp........................................................... 12.50 07/01/02 21,246,750
6,500 Globalstar L.P./Capital Corp................................................ 11.50 06/01/05 5,005,000
11,875 Globalstar L.P./Capital Corp................................................ 11.375 02/15/04 9,618,750
1,585 Globalstar L.P./Capital Corp................................................ 11.25 06/15/04 1,283,850
20,800 Globalstar L.P./Capital Corp................................................ 10.75 11/01/04 16,224,000
47,465 TCI Satellite Entertainment Corp............................................ 12.25++ 02/15/07 29,665,625
--------------
83,043,975
--------------

TOTAL CORPORATE BONDS
(IDENTIFIED COST $2,371,594,227)............................................................... 2,152,328,946
--------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
43
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1998, CONTINUED

<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COMMON STOCKS (e) (1.1%)
AUTOMOTIVE (0.0%)
709 Northern Holdings Industrial Corp. (c)*........................................... $ --
--------------
ENTERTAINMENT/GAMING & LODGING (0.0%)
7,500 Motels of America, Inc. - 144A*................................................... 412,500
781,421 Vagabond Inns, Inc. (Class D) (d)................................................. 781
--------------
413,281
--------------
FOODS & BEVERAGES (0.0%)
574,725 Specialty Foods Acquisition Corp. - 144A*......................................... 574,725
--------------
HEALTHCARE (0.1%)
1,606,000 Unilab Corp....................................................................... 2,810,500
--------------
RESTAURANTS (0.0%)
38,057 American Restaurant Group Holdings, Inc. - 144A*.................................. 381
--------------
RETAIL (0.6%)
2,779,700 County Seat Stores, Inc. (c) (f).................................................. 12,297,393
--------------
TEXTILES (0.4%)
1,754,730 U.S. Leather, Inc. (c)............................................................ 8,982,463
--------------

TOTAL COMMON STOCKS
(IDENTIFIED COST $99,876,695)..................................................... 25,078,743
--------------

PREFERRED STOCK (0.2%)
RESTAURANTS (0.2%)
3,500 American Restaurant Group Holdings, Inc. - 144A* (IDENTIFIED COST $3,499,965)..... 3,605,000
--------------
</TABLE>

<TABLE>
<CAPTION>
NUMBER OF EXPIRATION
WARRANTS DATE
- ------------ ----------
<C> <S> <C> <C>
WARRANTS (e) (0.1%)
AEROSPACE (0.0%)
9,000 Sabreliner Corp. - 144A*.............................................. 04/15/03 450,000
--------------
ENTERTAINMENT/GAMING & LODGING (0.1%)
220,000 Aladdin Gaming Enterprises, Inc. - 144A*.............................. 03/01/10 2,200
13,000 Epic Resorts LLC - 144A*.............................................. 06/15/05 130
207,312 Fitzgeralds Gaming Corp............................................... 12/19/98 933,009
7,000 Fitzgeralds South Inc. - 144A*........................................ 03/15/99 --
20,000 Resort At Summerlin - 144A*........................................... 12/15/07 200
--------------
935,539
--------------
RESTAURANTS (0.0%)
3,500 American Restaurant Group Holdings, Inc. - 144A*...................... 08/15/00 --
--------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
44
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1998, CONTINUED

<TABLE>
<CAPTION>
NUMBER OF EXPIRATION
WARRANTS DATE VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
TELECOMMUNICATIONS (0.0%)
12,000 Versatel Telecom - 144A* (Netherlands)................................ 05/15/08 $ 120,000
--------------

TOTAL WARRANTS
(IDENTIFIED COST $1,194,037)...................................................... 1,505,539
--------------
</TABLE>

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE
- ------------ ------ --------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENT (0.2%)
REPURCHASE AGREEMENT
$ 5,318 The Bank of New York
(dated 08/31/98;
proceeds $5,318,474) (g)
(IDENTIFED COST $5,318,474)............................................. 5.75% 09/01/98 5,318,474
--------------
</TABLE>

<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $2,481,483,398) (h).................................................... 97.3 % 2,187,836,702

OTHER ASSETS IN EXCESS OF LIABILITIES................................................... 2.7 61,197,599
------ ---------------

NET ASSETS.............................................................................. 100.0 % $ 2,249,034,301
------ ---------------
------ ---------------
</TABLE>

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

* 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 classes of securities traded together as a unit;
bonds with attached warrants.
(a) Issuer in bankruptcy.
(b) Non-income producing security; bond in default.
(c) Acquired through exchange offer.
(d) Non-income producing security; issuer in bankruptcy.
(e) Non-income producing securities.
(f) Includes 997,289 shares which are due from the issuer pursuant to a
reorganization.
(g) Collateralized by $4,462,625 Federal National Mortgage Assoc. 6.59% due
09/17/07 valued at $4,941,936 and $483,647 U.S. Treasury Note 3.375% due
01/15/07 valued at $482,907.
(h) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $35,185,627 and the
aggregate gross unrealized depreciation is $328,832,323, resulting in net
unrealized depreciation of $293,646,696.

SEE NOTES TO FINANCIAL STATEMENTS
45
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1998

<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $2,481,483,398).......................................................... $2,187,836,702
Receivable for:
Interest................................................................................ 56,175,500
Investments sold........................................................................ 36,690,422
Capital stock sold...................................................................... 4,917,055
Prepaid expenses and other assets........................................................... 105,696
--------------
TOTAL ASSETS........................................................................... 2,285,725,375
--------------
LIABILITIES:
Payable for:
Capital stock repurchased............................................................... 21,635,406
Investments purchased................................................................... 9,296,418
Dividends and distributions to shareholders............................................. 3,370,887
Plan of distribution fee................................................................ 1,260,397
Investment management fee............................................................... 795,601
Accrued expenses and other payables......................................................... 332,365
--------------
TOTAL LIABILITIES...................................................................... 36,691,074
--------------
NET ASSETS............................................................................. $2,249,034,301
--------------
--------------
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................................................. $3,376,133,454
Net unrealized depreciation................................................................. (293,646,696)
Accumulated undistributed net investment income............................................. 15,318,425
Accumulated net realized loss............................................................... (848,770,882)
--------------
NET ASSETS............................................................................. $2,249,034,301
--------------
--------------
CLASS A SHARES:
Net Assets.................................................................................. $ 30,678,260
Shares Outstanding (500,000,000 AUTHORIZED, $.01 PAR VALUE)................................. 4,982,846
NET ASSET VALUE PER SHARE.............................................................. $6.16
--------------
--------------
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 5.54% OF NET
ASSET VALUE).......................................................................... $6.50
--------------
--------------
CLASS B SHARES:
Net Assets.................................................................................. $1,761,147,361
Shares Outstanding (500,000,000 AUTHORIZED, $.01 PAR VALUE)................................. 286,563,788
NET ASSET VALUE PER SHARE.............................................................. $6.15
--------------
--------------
CLASS C SHARES:
Net Assets.................................................................................. $ 56,626,183
Shares Outstanding (500,000,000 AUTHORIZED, $.01 PAR VALUE)................................. 9,204,176
NET ASSET VALUE PER SHARE.............................................................. $6.15
--------------
--------------
CLASS D SHARES:
Net Assets.................................................................................. $ 400,582,497
Shares Outstanding (500,000,000 AUTHORIZED, $.01 PAR VALUE)................................. 65,061,856
NET ASSET VALUE PER SHARE.............................................................. $6.16
--------------
--------------
</TABLE>

STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1998

<TABLE>
<S> <C>
NET INVESTMENT INCOME:

INCOME
Interest..................................................................................... $ 235,784,092
Dividends.................................................................................... 40,625
-------------

TOTAL INCOME............................................................................ 235,824,717
-------------

EXPENSES
Plan of distribution fee (Class A shares).................................................... 51,000
Plan of distribution fee (Class B shares).................................................... 10,737,221
Plan of distribution fee (Class C shares).................................................... 281,533
Investment management fee.................................................................... 7,756,546
Transfer agent fees and expenses............................................................. 1,467,047
Registration fees............................................................................ 320,679
Shareholder reports and notices.............................................................. 120,895
Custodian fees............................................................................... 119,918
Professional fees............................................................................ 71,645
Directors' fees and expenses................................................................. 18,793
Other........................................................................................ 26,762
-------------

TOTAL EXPENSES.......................................................................... 20,972,039
-------------

NET INVESTMENT INCOME................................................................... 214,852,678
-------------

NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss............................................................................ (27,425,899)
Net change in unrealized appreciation........................................................ (230,215,151)
-------------

NET LOSS................................................................................ (257,641,050)
-------------

NET DECREASE................................................................................. $ (42,788,372)
-------------
-------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
46
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
FINANCIAL STATEMENTS, CONTINUED

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
AUGUST 31, 1998 AUGUST 31, 1997*
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>

INCREASE (DECREASE) IN NET ASSETS:

OPERATIONS:
Net investment income................................................ $ 214,852,678 $ 55,526,474
Net realized loss.................................................... (27,425,899) (39,986,189)
Net change in unrealized appreciation................................ (230,215,151) 50,139,683
--------------- --------------------

NET INCREASE (DECREASE)......................................... (42,788,372) 65,679,968
--------------- --------------------

DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A shares....................................................... (2,263,130) (12,761)
Class B shares....................................................... (152,306,144) (95,764)
Class C shares....................................................... (3,375,190) (32,881)
Class D shares....................................................... (49,344,880) (57,967,266)
--------------- --------------------

TOTAL DIVIDENDS................................................. (207,289,344) (58,108,672)
--------------- --------------------
Net increase from capital stock transactions......................... 1,997,043,217 34,294,665
--------------- --------------------

NET INCREASE.................................................... 1,746,965,501 41,865,961

NET ASSETS:
Beginning of period.................................................. 502,068,800 460,202,839
--------------- --------------------

END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $15,318,425 AND
$7,755,090, RESPECTIVELY)........................................ $ 2,249,034,301 $ 502,068,800
--------------- --------------------
--------------- --------------------
</TABLE>

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

* Class A, Class B and Class C shares were issued July 28, 1997.

SEE NOTES TO FINANCIAL STATEMENTS
47
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1998

1. ORGANIZATION AND ACCOUNTING POLICIES

Morgan Stanley Dean Witter High Yield Securities Inc. (the "Fund"), formerly
Dean Witter High Yield Securities Inc., is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The Fund's primary investment objective is to earn a high
level of current income and, as a secondary objective, capital appreciation, but
only when consistent with its primary objective. The Fund was incorporated in
Maryland on June 14, 1979 and commenced operations on September 26, 1979. On
July 28, 1997, the Fund commenced offering three additional classes of shares,
with the then current shares designated as Class D shares.

The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year, six
years and one year, respectively. Class D shares are not subject to a sales
charge. Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.

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 securities are traded on more than one exchange, the securities are
valued on the exchange designated as the primary market pursuant to procedures
adopted by the Directors); (2) all other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest available bid price prior to the time of valuation; (3) when market
quotations are not readily available, including circumstances under which it is
determined by Morgan Stanley Dean Witter Advisors Inc. (the "Investment
Manager"), formerly Dean Witter InterCapital Inc., that sale or bid prices are
not reflective of a security's market value, portfolio securities are valued at
their fair value as determined in good faith under procedures established by and
under the general supervision of the Directors (valuation of debt securities for
which market quotations are not readily available may be based upon current
market prices of securities which are comparable in coupon, rating and

48
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1998, CONTINUED

maturity or an appropriate matrix utilizing similar factors); (4) certain
portfolio securities may be valued by an outside pricing service approved by the
Directors. The pricing service may utilize a matrix system incorporating
security quality, maturity and coupon as the evaluation model parameters, and/or
research and evaluations by its staff, including review of broker-dealer market
price quotations, if available, in determining what it believes is the fair
valuation of the portfolio securities valued by such pricing service; and (5)
short-term debt securities having a maturity date of more than sixty days at
time of purchase are valued on a mark-to-market basis until sixty days prior to
maturity and thereafter at amortized cost based on their value on the 61st day.
Short-term debt securities having a maturity date of sixty days or less at the
time of purchase are valued at amortized cost.

B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and other distributions are recorded on the ex-dividend date.
Discounts are accreted over the life of the respective securities. Interest
income is accrued daily except where collection is not expected.

C. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date such
items are recognized. Distribution fees are charged directly to the respective
class.

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

49
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1998, CONTINUED

income or distributions in excess of net realized capital gains. To the extent
they exceed net investment income and net realized capital gains for tax
purposes, they are reported as distributions of paid-in-capital.

2. INVESTMENT MANAGEMENT AGREEMENT

Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management fee, calculated daily and payable monthly, by applying the
following annual rates to the net assets of the Fund determined as of the close
of each business day: 0.50% to the portion of daily net assets not exceeding
$500 million; 0.425% to the portion of daily net assets exceeding $500 million
but not exceeding $750 million; 0.375% to the portion of daily net assets
exceeding $750 million but not exceeding $1 billion; 0.35% to the portion of
daily net assets exceeding $1 billion but not exceeding $2 billion; 0.325% to
the portion of daily net assets exceeding $2 billion but not exceeding $3
billion; and 0.30% to the portion of daily net assets exceeding $3 billion.

3. PLAN OF DISTRIBUTION

Shares of the Fund are distributed by Morgan Stanley 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. The Plan provides that the Fund pay the Distributor a fee which is accrued
daily and paid monthly at the following annual rates: (i) Class A -- up to 0.25%
of the average daily net assets of Class A; (ii) Class B -- 0.75% of the average
daily net assets of Class B; and (iii) Class C -- up to 0.85% of the average
daily net assets of Class C. In the case of Class A shares, amounts paid under
the Plan are paid to the Distributor for services provided. In the case of Class
B and Class C shares, amounts paid under the Plan are paid to the Distributor
for services provided and the expenses borne by it and others in the
distribution of the shares of these Classes, including the payment of
commissions for sales of theses Classes and incentive compensation to, and
expenses of, Morgan Stanley Dean Witter Financial Advisors and others who engage
in or support distribution of the shares or who service shareholder accounts,

50
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1998, CONTINUED

including overhead and telephone expenses; printing and distribution of
prospectuses and reports used in connection with the offering of these shares to
other than current shareholders; and preparation, printing and distribution of
sales literature and advertising materials. In addition, the Distributor may
utilize fees paid pursuant to the Plan, in the case of Class B shares, to
compensate Dean Witter Reynolds Inc. ("DWR"), an affiliate of the Investment
Manager and Distributor, and other selected broker-dealers for their opportunity
costs in advancing such amounts, which compensation would be in the form of a
carrying charge on any unreimbursed expenses.

In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon
redemption of Class B shares. Although there is no legal obligation for the Fund
to pay expenses incurred in excess of payments made to the Distributor under the
Plan and the proceeds of contingent deferred sales charges paid by investors
upon redemption of shares, if for any reason the Plan is terminated, the
Directors will consider at that time the manner in which to treat such expenses.
The Distributor has advised the Fund that such excess amounts, including
carrying charges, totaled $50,323,518 at August 31, 1998.

In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 0.85% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Dean Witter Financial Advisors or other
selected broker-dealer representatives may be reimbursed in the subsequent
calendar year. For the year ended August 31, 1998, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.24% and
0.85%, respectively.

The Distributor has informed the Fund that for the year ended August 31, 1998,
it received contingent deferred sales charges from certain redemptions of the
Fund's Class A shares, Class B shares and Class C shares of $4,765, $2,485,044
and $62,533, respectively and received $542,700 in front-end sales charges from
sales of the Fund's Class A shares. The respective shareholders pay such charges
which are not an expense of the Fund.

51
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1998, 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 year ended August 31, 1998, aggregated
$1,766,431,143 and $1,187,859,454, respectively.

Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager, is
the Fund's transfer agent. At August 31, 1998, the Fund had transfer agent fees
and expenses payable of approximately $20,000.

The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Directors of the Fund who will have served as independent
Directors for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the year ended August 31, 1998 included
in Directors' fees and expenses in the Statement of Operations amounted to
$5,160. At August 31, 1998, the Fund had an accrued pension liability of $50,924
which is included in accrued expenses in the Statement of Assets and
Liabilities.

5. FEDERAL INCOME TAX STATUS

At August 31, 1998, the Fund had a net capital loss carryover of approximately
$812,887,000, which may be used to offset future capital gains to the extent
provided by regulations, which is available through August 31 of the following
years:

<TABLE>
<CAPTION>
AMOUNTS IN THOUSANDS
- ------------------------------------------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004 2005 2006
- ------------- ------------- ----------- ------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 293,125 $ 182,201 $ 45,084 $ 166,660 $ 50,599 $ 23,296 $ 39,319 $ 12,603
</TABLE>

Due to the Fund's acquisition of Dean Witter High Income Securities, utilization
of this carryover is subject to limitations imposed by the Internal Revenue Code
and Treasury Regulations, significantly reducing the total carryover available.

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 $24,854,000 during fiscal 1998.

At August 31, 1998, the Fund had temporary book/tax differences primarily
attributable to post-October losses and capital loss deferrals on wash sales and
permanent book/tax differences primarily attributable to an expired capital loss
carryover. To reflect reclassifications arising from the

52
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1998, CONTINUED

permanent differences, paid-in-capital was charged $83,011,249, accumulated net
realized loss was credited $82,382,928 and accumulated undistributed net
investment net investment income was credited $628,321.

6. CAPITAL STOCK

Transactions in capital stock were as follows:

<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
AUGUST 31, 1998 AUGUST 31, 1997*
---------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
------------ -------------- ----------- ------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold............................................................. 6,202,135 $ 41,894,662 292,513 $ 1,999,324
Reinvestment of dividends........................................ 157,371 1,048,292 553 3,764
Redeemed......................................................... (1,669,303) (10,859,033) (423) (2,907)
------------ -------------- ----------- ------------
Net increase - Class A........................................... 4,690,203 32,083,921 292,643 2,000,181
------------ -------------- ----------- ------------

CLASS B SHARES
Sold............................................................. 138,948,772 936,076,158 2,516,637 17,204,073
Reinvestment of dividends........................................ 8,546,591 57,074,799 6,503 44,221
Shares issued in connection with the acquisition of Dean Witter
High Income Securities.......................................... 214,915,122 1,469,485,599 -- --
Redeemed......................................................... (78,167,748) (520,016,664) (202,089) (1,383,116)
------------ -------------- ----------- ------------
Net increase - Class B........................................... 284,242,737 1,942,619,892 2,321,051 15,865,178
------------ -------------- ----------- ------------

CLASS C SHARES
Sold............................................................. 11,809,001 79,632,646 766,860 5,242,777
Reinvestment of dividends........................................ 275,586 1,835,966 2,742 18,649
Redeemed......................................................... (3,646,560) (24,328,636) (3,453) (23,617)
------------ -------------- ----------- ------------
Net increase - Class C........................................... 8,438,027 57,139,976 766,149 5,237,809
------------ -------------- ----------- ------------

CLASS D SHARES
Sold............................................................. 2,051,764 13,876,135 7,619,881 51,079,158
Reinvestment of dividends........................................ 3,963,509 26,652,063 4,584,033 30,556,953
Redeemed......................................................... (11,183,022) (75,328,770) (10,516,313) (70,444,614)
------------ -------------- ----------- ------------
Net increase (decrease) - Class D................................ (5,167,749) (34,800,572) 1,687,601 11,191,497
------------ -------------- ----------- ------------
Net increase in Fund............................................. 292,203,218 $1,997,043,217 5,067,444 $ 34,294,665
------------ -------------- ----------- ------------
------------ -------------- ----------- ------------
</TABLE>

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

* For Class A, B and C shares, for the period July 28 (issue date) through
August 31, 1997.

53
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1998, CONTINUED

7. ACQUISITION OF DEAN WITTER HIGH INCOME SECURITIES

As of the close of business on November 7, 1997, the Fund acquired all the net
assets of Dean Witter High Income Securities ("High Income") pursuant to a plan
of reorganization approved by the shareholders of High Income on October 24,
1997. The acquisition was accomplished by a tax-free exchange of 214,915,122
Class B shares of the Fund at a net asset value of $6.84 per share for
147,149,092 shares of High Income. The net assets immediately before the
acquisition were $552,658,205 for the Fund and $1,469,485,599 for High Income,
including unrealized appreciation of $43,052,745. Immediately after the
acquisition, the combined net assets of the Fund amounted to $2,022,143,804.

54
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
FINANCIAL HIGHLIGHTS

Selected ratios and per share data for a share of capital stock outstanding
throughout each period:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED AUGUST 31
----------------------------------------------------------------------------------------------
1998++ 1997* 1996 1995 1994 1993 1992 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS D SHARES

PER SHARE
OPERATING
PERFORMANCE:

Net asset value,
beginning of
period.......... $ 6.82 $ 6.71 $ 6.77 $ 6.83 $ 7.58 $ 7.23 $ 5.92 $ 6.78 $ 10.40 $11.99
--------- ------ ------ ------ ------ ------ ------ ------ ------- ------

Net investment
income.......... 0.78 0.79 0.83 0.80 0.79 0.89 0.95 0.94 1.48 1.67
Net realized and
unrealized gain
(loss).......... (0.71) 0.15 (0.12) (0.06) (0.68) 0.54 1.04 (0.86) (3.78) (1.48)
--------- ------ ------ ------ ------ ------ ------ ------ ------- ------

Total from
investment
operations...... 0.07 0.94 0.71 0.74 0.11 1.43 1.99 0.08 (2.30) 0.19
--------- ------ ------ ------ ------ ------ ------ ------ ------- ------

Less dividends
and
distributions
from:
Net investment
income........ (0.73) (0.83) (0.77) (0.80) (0.86) (1.08) (0.68) (0.94) (1.32) (1.75)
Paid-in-capital... -- -- -- -- -- -- -- -- -- (0.03)
--------- ------ ------ ------ ------ ------ ------ ------ ------- ------

Total dividends
and
distributions... (0.73) (0.83) (0.77) (0.80) (0.86) (1.08) (0.68) (0.94) (1.32) (1.78)
--------- ------ ------ ------ ------ ------ ------ ------ ------- ------

Net asset value,
end of period... $ 6.16 $ 6.82 $ 6.71 $ 6.77 $ 6.83 $ 7.58 $ 7.23 $ 5.92 $ 6.78 $10.40
--------- ------ ------ ------ ------ ------ ------ ------ ------- ------
--------- ------ ------ ------ ------ ------ ------ ------ ------- ------

TOTAL INVESTMENT
RETURN+.......... 0.63% 15.01% 11.07% 11.98% 0.93% 22.29% 35.46% 4.67% (23.28)% 1.39%

RATIOS TO AVERAGE
NET ASSETS:
Expenses......... 0.51%(1) 0.68% 0.66% 0.79% 0.69% 0.67% 0.77% 0.87% 0.60% 0.49%

Net investment
income.......... 11.54%(1) 11.78% 12.27% 12.06% 10.40% 12.14% 13.96% 16.47% 17.67% 14.61%

SUPPLEMENTAL DATA:
Net assets, end
of period, in
millions........ $401 $479 $460 $455 $478 $540 $512 $436 $690 $1,794

Portfolio
turnover rate... % 66 113% 49% 74% 127% 173% 113% 93% 21% 55%
</TABLE>

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

* Prior to July 28, 1997, the Fund issued one class of shares. All shares of
the Fund held prior to that date have been designated Class D shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Calculated based on the net asset value as of the last business day of the
period.
(1) Reflects overall Fund ratios for investment income and non-class specific
expenses.

SEE NOTES TO FINANCIAL STATEMENTS
55
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
FINANCIAL HIGHLIGHTS, CONTINUED

<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR JULY 28, 1997*
ENDED THROUGH
AUGUST 31, AUGUST 31,
1998++ 1997++
- -------------------------------------------------------------------------------------
<S> <C> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.............. $ 6.82 $ 6.83
------ ------
Net investment income............................. 0.76 0.07
Net realized and unrealized loss.................. (0.71) (0.03)
------ ------
Total from investment operations.................. 0.05 0.04
------ ------
Less dividends from net investment income......... (0.71) (0.05)
------ ------
Net asset value, end of period.................... $ 6.16 $ 6.82
------ ------
------ ------
TOTAL INVESTMENT RETURN+.......................... 0.40% 0.65%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.......................................... 0.75%(3) 0.93%(2)
Net investment income............................. 11.30%(3) 11.80%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands........... $30,678 $1,996
Portfolio turnover rate........................... 66% 113%

CLASS B SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.............. $ 6.82 $ 6.83
------ ------
Net investment income............................. 0.73 0.07
Net realized and unrealized loss.................. (0.72) (0.03)
------ ------
Total from investment operations.................. 0.01 0.04
------ ------
Less dividends from net investment income......... (0.68) (0.05)
------ ------
Net asset value, end of period.................... $ 6.15 $ 6.82
------ ------
------ ------
TOTAL INVESTMENT RETURN+.......................... (0.23)% 0.62%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.......................................... 1.25%(3) 1.42%(2)
Net investment income............................. 10.80%(3) 11.28%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands........... $1,761,147 $15,828
Portfolio turnover rate........................... 66% 113%
</TABLE>

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

* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ 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) Reflects overall Fund ratios for investment income and non-class specific
expenses.

SEE NOTES TO FINANCIAL STATEMENTS
56
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
FINANCIAL HIGHLIGHTS, CONTINUED

<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR JULY 28, 1997*
ENDED THROUGH
AUGUST 31, AUGUST 31,
1998++ 1998++
- -------------------------------------------------------------------------------------

<S> <C> <C>
CLASS C SHARES

PER SHARE OPERATING PERFORMANCE:

Net asset value, beginning of period.............. $ 6.82 $ 6.83
------ ------

Net investment income............................. 0.72 0.07
Net realized and unrealized loss.................. (0.72) (0.03)
------ ------

Total from investment operations.................. 0.00 0.04
------ ------

Less dividends from net investment income......... (0.67) (0.05)
------ ------

Net asset value, end of period.................... $ 6.15 $ 6.82
------ ------
------ ------

TOTAL INVESTMENT RETURN+.......................... (0.34)% 0.62%(1)

RATIOS TO AVERAGE NET ASSETS:
Expenses.......................................... 1.36%(3) 1.52%(2)

Net investment income............................. 10.69%(3) 11.18%(2)

SUPPLEMENTAL DATA:
Net assets, end of period, in thousands........... $56,626 $5,225

Portfolio turnover rate........................... 66% 113%
</TABLE>

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

SEE NOTES TO FINANCIAL STATEMENTS
57
<PAGE>

MORGAN STANLEY DEAN WITTER HIGH YIELD SECU-
RITIES INC.
REPORT OF INDEPENDENT ACCOUNTANTS

TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
OF MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.

In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Morgan Stanley Dean Witter High
Yield Securities Inc. (the "Fund"), formerly Dean Witter High Yield Securities
Inc., at August 31, 1998, 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 periods presented, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at August 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.

PricewaterhouseCoopers LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
OCTOBER 9, 1998

58
<PAGE>

MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.

PART C OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) FINANCIAL STATEMENTS

(1) Financial statements and schedules, included in
Prospectus (Part A):

PAGE IN
PROSPECTUS
Financial Highlights for the years August 31, 1989,
1990, 1991, 1992, 1993, 1994, 1995, 1996, 1997 and
1998 (Class D). . . . . . . . . . . . . . . . . . . . . 6

Financial Highlights for the period July 28, 1997
through August 31, 1997 and the year ended
August 31, 1998 (Classes A, B and C). . . . . . . . . . 7

PAGE IN
SAI
(1) Financial statements included in the Statement of
Additional Information Part B:

Portfolio of Investments at August 31, 1998 . . . . . . 39

Statement of Assets and Liabilities at
August 31, 1998 . . . . . . . . . . . . . . . . . . . . 46

Statements of Operations for the year ended
August 31, 1998 . . . . . . . . . . . . . . . . . . . . 46

Statement of Changes in Net Assets for the years ended
August 31, 1997 and August 31, 1998 . . . . . . . . . . 47

Notes to Financial Statements at August 31, 1998. . . . 48

Financial Highlights for the years August 31, 1989,
1990, 1991, 1992, 1993, 1994, 1995, 1996, 1997 and
1998 (Class D). . . . . . . . . . . . . . . . . . . . . 55

Financial Highlights for the period July 28, 1997
through August 31, 1997 and the year ended
August 31, 1998 (Classes A, B and C). . . . . . . . . . 56

(3) Financial statements included in Part C:

None

(b) EXHIBITS:

1. Form of Articles of Amendment of the Registrant.

5. Form of Amended Investment Management Agreement between
the Registrant and Morgan Stanley Dean Witter Advisors Inc.

<PAGE>

6. Form of Amended Distribution Agreement between Registrant and
Morgan Stanley Dean Witter Distributors, Inc.

8. Form of Amended and Restated Transfer Agency and Service
Agreement.

9. Form of Amended Services Agreement between Morgan Stanley Dean
Witter Advisors Inc. and Morgan Stanley Dean Witter Services
Company Inc.

11. Consent of Independent Accountants.

16. Schedules for Computation of Performance Quotations.

18. Amended Multiple-Class Plan pursuant to Rule 18f-3.

27. Financial Data Schedules.

All other exhibits were previously filed via EDGAR and are hereby incorporated
by reference.

Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.

None

Item 26. NUMBER OF HOLDERS OF SECURITIES.

(1) (2)
NUMBER OF RECORD HOLDERS
TITLE OF CLASS AT SEPTEMBER 30, 1998
Class A 1,173
Class B 73,035
Class C 2,600
Class D 28,203

Item 27. INDEMNIFICATION

Reference is made to Section 3.15 of the Registrant's By-Laws and Section
2-418 of the Maryland General Corporation Law.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in connection with the successful defense of any action, suit, or proceeding) is
asserted against the Registrant by

2
<PAGE>

such director, officer or controlling person in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act, and will be governed by the final adjudication
of such issue.

The Registrant hereby undertakes that it will apply the indemnification
provision of its by-laws in a manner consistent with Release 11330 of the
Securities and Exchange Commission under the Investment Company Act of 1940, so
long as the interpretation of Sections 17(h) and 17(i) of such Acts remains in
effect.

Registrant, in conjunction with the Investment Manager, Registrant's
Directors, and other registered investment management companies managed by the
Investment Manager, maintains insurance on behalf of any person who is or was a
Director, officer, employee or agent of Registrant, or who is or was serving at
the request of Registrant as a trustee, director, officer, employee or agent of
another trust or corporation, against any liability asserted against him and
incurred by him or arising out of his position. However, in no event will
Registrant maintain insurance to indemnify any such person for any act for which
Registrant itself is not permitted to indemnify him.

Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR

See "The Fund and Its Management" in the Prospectus regarding the business
of the investment advisor. The following information is given regarding
officers of Morgan Stanley Dean Witter Advisors Inc. ("MSDW Advisors"). MSDW
Advisors is a wholly-owned subsidiary of Morgan Stanley Dean Witter & Co. The
principal address of the Morgan Stanley Dean Witter Funds is Two World Trade
Center, New York, New York 10048.

The term "Morgan Stanley Dean Witter Funds" refers to the following
registered investment companies:

CLOSED-END INVESTMENT COMPANIES
(1) Dean Witter Government Income Trust
(2) High Income Advantage Trust
(3) High Income Advantage Trust II
(4) High Income Advantage Trust III
(5) InterCapital California Insured Municipal Income Trust
(6) InterCapital California Quality Municipal Securities
(7) InterCapital Income Securities Inc.
(8) InterCapital Insured California Municipal Securities
(9) InterCapital Insured Municipal Bond Trust
(10) InterCapital Insured Municipal Income Trust
(11) InterCapital Insured Municipal Securities
(12) InterCapital Insured Municipal Trust
(13) InterCapital New York Quality Municipal Securities
(14) InterCapital Quality Municipal Income Trust
(15) InterCapital Quality Municipal Investment Trust
(16) InterCapital Quality Municipal Securities
(17) Municipal Income Opportunities Trust
(18) Municipal Income Opportunities Trust II
(19) Municipal Income Opportunities Trust III

3
<PAGE>

(20) Municipal Income Trust
(21) Municipal Income Trust II
(22) Municipal Income Trust III
(23) Municipal Premium Income Trust
(24) Morgan Stanley Dean Witter Prime Income Trust

OPEN-END INVESTMENT COMPANIES
(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Money Trust
(4) Active Assets Tax-Free Trust
(5) Morgan Stanley Dean Witter American Value Fund
(6) Morgan Stanley Dean Witter Balanced Growth Fund
(7) Morgan Stanley Dean Witter Balanced Income Fund
(8) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(9) Morgan Stanley Dean Witter California Tax-Free Income Fund
(10) Morgan Stanley Dean Witter Capital Appreciation Fund
(11) Morgan Stanley Dean Witter Capital Growth Securities
(12) Morgan Stanley Dean Witter Competitive Edge Fund, "BEST IDEAS PORTFOLIO"
(13) Morgan Stanley Dean Witter Convertible Securities Trust
(14) Morgan Stanley Dean Witter Developing Growth Securities Trust
(15) Morgan Stanley Dean Witter Diversified Income Trust
(16) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
(17) Morgan Stanley Dean Witter Equity Fund
(18) Morgan Stanley Dean Witter European Growth Fund Inc.
(19) Morgan Stanley Dean Witter Federal Securities Trust
(20) Morgan Stanley Dean Witter Financial Services Trust
(21) Morgan Stanley Dean Witter Fund of Funds
(22) Morgan Stanley Dean Witter Global Dividend Growth Securities
(23) Morgan Stanley Dean Witter Global Short-Term Income Fund Inc.
(24) Morgan Stanley Dean Witter Global Utilities Fund
(25) Morgan Stanley Dean Witter Growth Fund
(26) Morgan Stanley Dean Witter Hawaii Municipal Trust
(27) Morgan Stanley Dean Witter Health Sciences Trust
(28) Morgan Stanley Dean Witter High Yield Securities Inc.
(29) Morgan Stanley Dean Witter Income Builder Fund
(30) Morgan Stanley Dean Witter Information Fund
(31) Morgan Stanley Dean Witter Intermediate Income Securities
(32) Morgan Stanley Dean Witter International SmallCap Fund
(33) Morgan Stanley Dean Witter Japan Fund
(34) Morgan Stanley Dean Witter Limited Term Municipal Trust
(35) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(36) Morgan Stanley Dean Witter Market Leader Trust
(37) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
(38) Morgan Stanley Dean Witter Mid-Cap Growth Fund
(39) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(40) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(41) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(42) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(43) Morgan Stanley Dean Witter Pacific Growth Fund

4
<PAGE>

(44) Morgan Stanley Dean Witter Precious Metals and Minerals Trust
(45) Morgan Stanley Dean Witter S&P 500 Index Fund
(46) Morgan Stanley Dean Witter S&P 500 Select Fund
(47) Morgan Stanley Dean Witter Select Dimensions Investment Series
(48) Morgan Stanley Dean Witter Select Municipal Reinvestment Fund
(49) Morgan Stanley Dean Witter Short-Term Bond Fund
(50) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(51) Morgan Stanley Dean Witter Special Value Fund
(52) Morgan Stanley Dean Witter Strategist Fund
(53) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(54) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(55) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(56) Morgan Stanley Dean Witter U.S. Government Securities Trust
(57) Morgan Stanley Dean Witter Utilities Fund
(58) Morgan Stanley Dean Witter Value Fund
(59) Morgan Stanley Dean Witter Value-Added Market Series
(60) Morgan Stanley Dean Witter Variable Investment Series
(61) Morgan Stanley Dean Witter World Wide Income Trust

The term "TCW/DW Funds" refers to the following registered investment
companies:

OPEN-END INVESTMENT COMPANIES
(1) TCW/DW Emerging Markets Opportunities Trust
(2) TCW/DW Global Telecom Trust
(3) TCW/DW Income and Growth Fund
(4) TCW/DW Latin American Growth Fund
(5) TCW/DW Mid-Cap Equity Trust
(6) TCW/DW North American Government Income Trust
(7) TCW/DW Small Cap Growth Fund
(8) TCW/DW Total Return Trust

CLOSED-END INVESTMENT COMPANIES
(1) TCW/DW Term Trust 2000
(2) TCW/DW Term Trust 2002
(3) TCW/DW Term Trust 2003

NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN WITH OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL
WITTER ADVISORS INC. ADDRESS AND NATURE OF CONNECTION

Mitchell M. Merin Chairman and Director of Morgan Stanley Dean
President, Chief Witter Distributors Inc. ("MSDW Distributors") and
Executive Officer and Morgan Stanley Dean Witter Trust FSB ("MSDW
Director Trust"); President, Chief Executive Officer and
Director of Morgan Stanley Dean Witter Services
Company Inc. ("MSDW Services"); Executive Vice
President and Director of Dean Witter Reynolds
Inc. ("DWR"); Director of SPS Transaction
Services, Inc. and various other Morgan Stanley
Dean Witter & Co. ("MSDW") subsidiaries.

5
<PAGE>

NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN WITH OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL
WITTER ADVISORS INC. ADDRESS AND NATURE OF CONNECTION

Thomas C. Schneider Executive Vice President and Chief Strategic and
Executive Vice Administrative Officer of MSDW; Executive Vice
President and Chief President and Chief Financial Officer of MSDW
Financial Officer Services; Director of DWR and MSDW.

Robert M. Scanlan President, Chief Operating Officer and Director of
President, Chief MSDW Services, Executive Vice President of MSDW
Operating Officer Distributors; Executive Vice President and and
Director Director of MSDW Trust; Vice President of the
Morgan Stanley Dean Witter Funds and the TCW/DW
Funds.

Joseph J. McAlinden Vice President of the Morgan Stanley Dean Witter
Executive Vice President Funds and Director of MSDW Trust.
and Chief Investment
Officer

Ronald E. Robison Vice President of the Morgan Stanley Dean Witter
Executive Vice President Funds and the TCW/DW Funds.
And Chief Administrative
Officer

Edward C. Oelsner, III
Executive Vice President

Barry Fink Assistant Secretary of DWR; Senior Vice President,
Senior Vice President, Secretary, General Counsel and Director of MSDW
Secretary, General Services; Senior Vice President, Assistant
Counsel and Director Secretary and Assistant General Counsel of MSDW
Distributors; Vice President, Secretary and
General Counsel of the Morgan Stanley Dean Witter
Funds and the TCW/DW Funds.

Peter M. Avelar Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.

Mark Bavoso Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.

Richard Felegy
Senior Vice President

Edward F. Gaylor Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.

6
<PAGE>

NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN WITH OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL
WITTER ADVISORS INC. ADDRESS AND NATURE OF CONNECTION

Robert S. Giambrone Senior Vice President of MSDW Services, MSDW enior
Vice President Distributors and MSDW Trust and Director of MSDW
Trust; Vice President of the Morgan Stanley Dean
Witter Funds and the TCW/DW Funds.

Rajesh Gupta Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.

Kenton J. Hinchliffe Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.

Kevin Hurley Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.

Margaret Iannuzzi
Senior Vice President

Jenny Beth Jones Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.

John B. Kemp, III President of MSDW Distributors.
Senior Vice President

Anita H. Kolleeny Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.

Jonathan R. Page Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.

Ira N. Ross Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.

Guy G. Rutherfurd, Jr. Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.

Rochelle G. Siegel Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.

Jayne M. Stevlingson Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.

Paul D. Vance Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.

Elizabeth A. Vetell
Senior Vice President

7
<PAGE>

NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN WITH OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL
WITTER ADVISORS INC. ADDRESS AND NATURE OF CONNECTION

James F. Willison Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.

Ronald J. Worobel Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.

Douglas Brown
First Vice President

Thomas F. Caloia First Vice President and Assistant Treasurer of
First Vice President MSDW Services; Assistant Treasurer of MSDW
and Assistant Distributors; Treasurer and Chief Financial
Treasurer Officer of the Morgan Stanley Dean Witter Funds
and the TCW/DW Funds.

Thomas Chronert
First Vice President

Rosalie Clough
First Vice President

Marilyn K. Cranney Assistant Secretary of DWR; First Vice President
First Vice President and Assistant Secretary of MSDW Services; and
Assistant Secretary Assistant Secretary of the Morgan Stanley Dean
Witter Funds and the TCW/DW Funds.

Salvatore DeSteno Vice President of MSDW Services.
First Vice President

Michael Interrante First Vice President and Controller of MSDW
First Vice President Services; Assistant Treasurer of MSDW
and Controller Distributors; First Vice President and Treasurer
of MSDW Trust.

David Johnson
First Vice President

Stanley Kapica
First Vice President

Carsten Otto First Vice President and Assistant Secretary of
First Vice President MSDW Services; Assistant Secretary of the
and Assistant Secretary Morgan Stanley Dean Witter Funds and the TCW/DW
Funds.

Robert Zimmerman
First Vice President

8
<PAGE>

NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN WITH OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL
WITTER ADVISORS INC. ADDRESS AND NATURE OF CONNECTION

Dale Albright
Vice President

Joan G. Allman
Vice President

Andrew Arbenz
Vice President

Joseph Arcieri Vice President of various Morgan Stanley Dean Vice
President Witter Funds.

Nancy Belza
Vice President

Maurice Bendrihem
Vice President and
Assistant Controller

Frank Bruttomesso Vice President and Assistant Secretary of MSDW
Vice President and Services; Assistant Secretary of the Morgan
Assistant Secretary Stanley Dean Witter Funds and the TCW/DW Funds.

Ronald Caldwell
Vice President

Joseph Cardwell
Vice President

Philip Casparius
Vice President

David Dineen Vice President of Dean Witter Global Asset Vice
Vice President President Allocation Fund.

Bruce Dunn
Vice President

Michael Durbin
Vice President

Sheila Finnerty
Vice President

Jeffrey D. Geffen
Vice President

9
<PAGE>

NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN WITH OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL
WITTER ADVISORS INC. ADDRESS AND NATURE OF CONNECTION

Michael Geringer
Vice President

Ellen Gold
Vice President

Stephen Greenhut
Vice President

Sandra Grossman
Vice President

Peter W. Gurman
Vice President

Matthew Haynes Vice President of various Morgan Stanley Dean Vice
Vice President President WitterFunds.

Peter Hermann Vice President of various Morgan Stanley Dean Vice
Vice President President Witter Funds.

Elizabeth Hinchman
Vice President

David Hoffman
Vice President

Christopher Jones
Vice President

Kevin Jung
Vice President

Carol Espejo Kane
Vice President

Michelle Kaufman Vice President of various Morgan Stanley Dean Vice
Vice President President Witter Funds.

Paula LaCosta Vice President of various Morgan Stanley Dean Vice
Vice President President Witter Funds.

Thomas Lawlor
Vice President

10
<PAGE>

NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN WITH OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL
WITTER ADVISORS INC. ADDRESS AND NATURE OF CONNECTION

Gerard J. Lian Vice President of various Morgan Stanley Dean
Vice President Witter Funds.

Nancy Login
Vice President

Steven MacNamara
Vice President

Catherine Maniscalco Vice President of Morgan Stanley Dean Witter
Vice President Natural Resource Development Securities Inc.

Albert McGarity
Vice President

LouAnne D. McInnis Vice President and Assistant Secretary of MSDW
Vice President and Services; Assistant Secretary of the Morgan
Assistant Secretary Stanley Dean Witter Funds and the TCW/DW Funds.

Sharon K. Milligan
Vice President

Julie Morrone
Vice President

Mary Beth Mueller
Vice President

David Myers Vice President of Morgan Stanley Dean Witter
Vice President Natural Resource Development Securities Inc.

Richard Norris
Vice President

George Paoletti
Vice President

Anne Pickrell Vice President of various Morgan Stanley Dean
Vice President Witter Funds.

Michael Roan
Vice President

John Roscoe
Vice President

11
<PAGE>

NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN WITH OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL
WITTER ADVISORS INC. ADDRESS AND NATURE OF CONNECTION

Hugh Rose
Vice President

Robert Rossetti Vice President of various Morgan Stanley Dean
Vice President Witter Funds.

Ruth Rossi Vice President and Assistant Secretary of MSDW
Vice President and Services; Assistant Secretary of the Morgan
Assistant Secretary Stanley Dean Witter Funds and the TCW/DW Funds.

Carl F. Sadler
Vice President

Deborah Santaniello
Vice President

Peter J. Seeley Vice President of various Morgan Stanley Dean Vice
Vice President President Witter Funds.

Robert Stearns
Vice President

Naomi Stein
Vice President

Kathleen H. Stromberg Vice President of various Morgan Stanley Dean Vice
Vice President President Witter Funds.

Marybeth Swisher
Vice President

Robert Vanden Assem
Vice President

James P. Wallin
Vice President

Alice Weiss Vice President of various Morgan Stanley Dean
Vice President Witter Funds.

John Wong
Vice President

12
<PAGE>

Item 29. PRINCIPAL UNDERWRITERS

(a)Morgan Stanley Dean Witter Distributors Inc. ("MSDW Distributors"), a
Delaware corporation, is the principal underwriter of the Registrant. MSDW
Distributors is also the principal underwriter of the following investment
companies:

(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Money Trust
(4) Active Assets Tax-Free Trust
(5) Morgan Stanley Dean Witter American Value Fund
(6) Morgan Stanley Dean Witter Balanced Growth Fund
(7) Morgan Stanley Dean Witter Balanced Income Fund
(8) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(9) Morgan Stanley Dean Witter California Tax-Free Income Fund
(10) Morgan Stanley Dean Witter Capital Appreciation Fund
(11) Morgan Stanley Dean Witter Capital Growth Securities
(12) Morgan Stanley Dean Witter Competitive Edge Fund, "BEST IDEAS PORTFOLIO"
(13) Morgan Stanley Dean Witter Convertible Securities Trust
(14) Morgan Stanley Dean Witter Developing Growth Securities Trust
(15) Morgan Stanley Dean Witter Diversified Income Trust
(16) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
(17) Morgan Stanley Dean Witter Equity Fund
(18) Morgan Stanley Dean Witter European Growth Fund Inc.
(19) Morgan Stanley Dean Witter Federal Securities Trust
(20) Morgan Stanley Dean Witter Financial Services Trust
(21) Morgan Stanley Dean Witter Fund of Funds
(22) Morgan Stanley Dean Witter Global Dividend Growth Securities
(23) Morgan Stanley Dean Witter Global Short-Term Income Fund Inc.
(24) Morgan Stanley Dean Witter Global Utilities Fund
(25) Morgan Stanley Dean Witter Growth Fund
(26) Morgan Stanley Dean Witter Hawaii Municipal Trust
(27) Morgan Stanley Dean Witter Health Sciences Trust
(28) Morgan Stanley Dean Witter High Yield Securities Inc.
(29) Morgan Stanley Dean Witter Income Builder Fund
(30) Morgan Stanley Dean Witter Information Fund
(31) Morgan Stanley Dean Witter Intermediate Income Securities
(32) Morgan Stanley Dean Witter International SmallCap Fund
(33) Morgan Stanley Dean Witter Japan Fund
(34) Morgan Stanley Dean Witter Limited Term Municipal Trust
(35) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(36) Morgan Stanley Dean Witter Market Leader Trust
(37) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
(38) Morgan Stanley Dean Witter Mid-Cap Growth Fund
(39) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(40) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(41) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(42) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(43) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(44) Morgan Stanley Dean Witter Precious Metals and Minerals Trust

13
<PAGE>

(45) Morgan Stanley Dean Witter Prime Income Trust
(46) Morgan Stanley Dean Witter S&P 500 Index Fund
(47) Morgan Stanley Dean Witter S&P 500 Select Fund
(48) Morgan Stanley Dean Witter Short-Term Bond Fund
(49) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(50) Morgan Stanley Dean Witter Special Value Fund
(51) Morgan Stanley Dean Witter Strategist Fund
(52) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(53) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(54) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(55) Morgan Stanley Dean Witter U.S. Government Securities Trust
(56) Morgan Stanley Dean Witter Utilities Fund
(57) Morgan Stanley Dean Witter Value-Added Market Series
(58) Morgan Stanley Dean Witter Value Fund
(59) Morgan Stanley Dean Witter Variable Investment Series
(60) Morgan Stanley Dean Witter World Wide Income Trust
(1) TCW/DW Emerging Markets Opportunities Trust
(2) TCW/DW Global Telecom Trust
(3) TCW/DW Income and Growth
(4) TCW/DW Latin American Growth Fund
(5) TCW/DW Mid-Cap Equity Trust
(6) TCW/DW North American Government Income Trust
(7) TCW/DW Small Cap Growth Fund
(8) TCW/DW Total Return Trust

(b) The following information is given regarding directors and officers of MSDW
Distributors not listed in Item 28 above. The principal address of MSDW
Distributors is Two World Trade Center, New York, New York 10048. None of
the following persons has any position or office with the Registrant.

NAME POSITIONS AND OFFICE WITH MSDW DISTRIBUTORS

Richard M. DeMartini Director

Christine Edwards Executive Vice President, Secretary, Director and
Chief Legal Officer.

Michael T. Gregg Vice President and Assistant Secretary.

James F. Higgins Director

Fredrick K. Kubler Senior Vice President, Assistant Secretary and
Chief Compliance Officer.

Philip J. Purcell Director

John Schaeffer Director

Charles Vidala Senior Vice President and Financial Principal

14
<PAGE>

Item 30. LOCATION OF ACCOUNTS AND RECORDS

All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained by the Investment Manager at its offices, except records relating to
holders of shares issued by the Registrant, which are maintained by the
Registrant's Transfer Agent, at its place of business as shown in the
prospectus.

Item 31. MANAGEMENT SERVICES

Registrant is not a party to any such management-related service contract.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York on the 29th day of October, 1998.

MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.

By /s/ Barry Fink
-----------------------------------
Barry Fink
Vice President and Secretary

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 23 has been signed below by the following persons
in the capacities and on the dates indicated.

Signatures Title Date
---------- ----- ----

<S> <C> <C>
(1) Principal Executive Officer President, Chief
Executive Officer,
Director and Chairman

By /s/Charles A. Fiumefreddo 10/29/98
-------------------------------
Charles A. Fiumefreddo

(2) Principal Financial Officer Treasurer and Principal
Accounting Officer

By /s/Thomas F. Caloia 10/29/98
-------------------------------
Thomas F. Caloia

(3) Majority of the Directors

Charles A. Fiumefreddo (Chairman)
Philip J. Purcell

By /s/Barry Fink 10/29/98
-------------------------------
Barry Fink
Attorney-in-Fact

Michael Bozic Manuel H. Johnson
Edwin J. Garn Michael E. Nugent
John R. Haire John L. Schroeder
Wayne E. Hedien

By /s/David M. Butowsky 10/29/98
-------------------------------
David M. Butowsky
Attorney-in-Fact
</TABLE>

<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.

EXHIBIT INDEX

1. Form of Articles of Amendment of the Registrant.

5. Form of Amended Investment Management Agreement between
the Registrant and Morgan Stanley Dean Witter Advisors Inc.

6. Form of Amended Distribution Agreement between Registrant and Morgan
Stanley Dean Witter Distributors, Inc.

8. Form of Amended and Restated Transfer Agency and Service Agreement.

9. Form of Amended Services Agreement between Morgan Stanley Dean Witter
Advisors Inc. and Morgan Stanley Dean Witter Services Company Inc.

11. Consent of Independent Accountants.

16. Schedules for Computation of Performance Quotations.

18. Amended Multiple-Class Plan pursuant to Rule 18f-3.

27. Financial Data Schedules.

<PAGE>

DEAN WITTER HIGH YIELD SECURITIES INC.

ARTICLES OF AMENDMENT
CHANGING NAME OF CORPORATION
PURSUANT TO MGCL SECTION 2-605 (a)(4)

Dean Witter High Yield Securities Inc., a Maryland corporation, having its
principal office in Baltimore City, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:

FIRST: The Charter of the Corporation is hereby amended by striking out
ARTICLE II of the Articles of Incorporation and inserting in lieu thereof the
following:

"ARTICLE II
The name of the Corporation is Morgan Stanley Dean Witter High Yield
Securities Inc."

SECOND: The foregoing amendment to the Charter of the Corporation has
been approved by the Board of Directors and is limited to a change expressly
permitted by Section 2-605 of the Maryland General Corporation Law.

THIRD: The Corporation is registered as an open-end management
investment company under the Investment Company Act of 1940.

FOURTH: These Articles of Amendment shall become effective at 9:00 a.m.,
Eastern Time, on June 22, 1998.

<PAGE>

IN WITNESS WHEROF, the Corporation has caused these presents to be signed
in its name and on its behalf by its President and attested by its Secretary on
this 19th day of June 1998.

DEAN WITTER HIGH YIELD
SECURITIES INC.

By:
------------------------------
Name: Charles A. Fiumefreddo
Title: President

ATTEST:

- -------------------------
Name: Barry Fink
Title: Secretary

THE UNDERSIGNED, the President of Dean Witter High Yield Securities Inc.
who executed on behalf of the Corporation the foregoing Articles of Amendment of
which this certificate is made a part, hereby acknowledges in the name and on
behalf of the Corporation the foregoing Articles of Amendment to be the
corporate act of the Corporation and hereby certifies that to the best of his
knowledge, information and belief the matters and facts set forth therein with
respect to the authorization and approval thereof are true in all material
respects under the penalties of perjury.

-------------------------------
Name: Charles A. Fiumefreddo
Title: President

<PAGE>
INVESTMENT MANAGEMENT AGREEMENT

AGREEMENT made as of the 31st day of May, 1997, and amended as of April 30,
1998, by and between Dean Witter High Yield Securities Inc., a Maryland
corporation (hereinafter called the "Fund"), and Dean Witter InterCapital Inc.,
a Delaware corporation (hereinafter called the "Investment Manager"):

WHEREAS, The Fund is engaged in business as an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended (the "Act"); and

WHEREAS, The Investment Manager is registered as an investment adviser under
the Investment Advisers Act of 1940, and engages in the business of acting as
investment adviser; and

WHEREAS, The Fund desires to retain the Investment Manager to render
management and investment advisory services in the manner and on the terms and
conditions hereinafter set forth; and

WHEREAS, The Investment Manager desires to be retained to perform services
on said terms and conditions:

Now, Therefore, this Agreement

W I T N E S S E T H:

that in consideration of the premises and the mutual covenants hereinafter
contained, the Fund and the Investment Manager agree as follows:

1. The Fund hereby retains the Investment Manager to act as
investment manager of the Fund and, subject to the supervision of the
Directors, to supervise the investment activities of the Fund as hereinafter
set forth. Without limiting the generality of the foregoing, the Investment
Manager shall obtain and evaluate such information and advice relating to the
economy, securities and commodities markets and securities and commodities as
it deems necessary or useful to discharge its duties hereunder; shall
continuously manage the assets of the Fund in a manner consistent with the
investment objectives and policies of the Fund; shall determine the
securities and commodities to be purchased, sold or otherwise disposed of by
the Fund and the timing of such purchases, sales and dispositions; and shall
take such further action, including the placing of purchase and sale orders
on behalf of the Fund, as the Investment Manager shall deem necessary or
appropriate. The Investment Manager shall also furnish to or place at the
disposal of the Fund such of the information, evaluations, analyses and
opinions formulated or obtained by the Investment Manager in the discharge of
its duties as the Fund may, from time to time, reasonably request.

2. The Investment Manager shall, at its own expense, maintain such
staff and employ or retain such personnel and consult with such other persons
as it shall from time to time determine to be necessary or useful to the
performance of its obligations under this Agreement. Without limiting the
generality of the foregoing, the staff and personnel of the Investment
Manager shall be deemed to include persons employed or otherwise retained by
the Investment Manager to furnish statistical and other factual data, advice
regarding economic factors and trends, information with respect to technical
and scientific developments, and such other information, advice and
assistance as the Investment Manager may desire. The Investment Manager
shall, as agent for the Fund, maintain the Fund's records and books of
account (other than those maintained by the Fund's transfer agent, registrar,
custodian and other agencies). All such books and records so maintained shall
be the property of the Fund and, upon request therefor, the Investment
Manager shall surrender to the Fund such of the books and records so
requested.

3. The Fund will, from time to time, furnish or otherwise make
available to the Investment Manager such financial reports, proxy statements
and other information relating to the business and affairs of the Fund as the
Investment Manager may reasonably require in order to discharge its duties
and obligations hereunder.

4. The Investment Manager shall bear the cost of rendering the
investment management and supervisory services to be performed by it under
this Agreement, and shall, at its own expense, pay the compensation of the
officers and employees, if any, of the Fund who are also directors, officers
or employees of the Investment Manager, and provide such office space,
facilities and equipment and such clerical help and bookkeeping services as
the Fund shall reasonably require in the conduct of its business, except
insofar as the <PAGE>participation or assistance of independent accountants
and attorneys is, in the opinion of the Investment Manager, necessary or
desirable). The Investment Manager shall also bear the cost of telephone
service, heat, light, power and other utilities provided to the Fund.

5. The Fund assumes and shall pay or cause to be paid all other
expenses of the Fund, including without limitation: fees pursuant to any plan
of distribution that the Fund may adopt; the charges and expenses of any
registrar, any custodian or depository appointed by the Fund for the
safekeeping of its cash, portfolio securities or commodities and other
property, and any stock transfer or dividend agent or agents appointed by the
Fund; brokers' commissions chargeable to the Fund in connection with
portfolio transactions to which the Fund is a party; all taxes, including
securities or commodities issuance and transfer taxes, and fees payable by
the Fund to federal, state or other governmental agencies; the cost and
expense of engraving or printing certificates representing shares of the
Fund; all costs and expenses in connection with the registration and
maintenance of registration of the Fund and its shares with the Securities
and Exchange Commission and various states and other jurisdictions (including
filing fees and legal fees and disbursements of counsel); the cost and
expense of printing, including typesetting, and distributing prospectuses and
statements of additional information of the Fund and supplements thereto to
the Fund's shareholders; all expenses of shareholders' and Directors'
meetings and of preparing, printing and mailing proxy statements and reports
to shareholders; fees and travel expenses of Directors or members of any
advisory board or committee who are not employees of the Investment Manager
or any corporate affiliate of the Investment Manager; all expenses incident
to the payment of any dividend, distribution, withdrawal or redemption,
whether in shares or in cash; charges and expenses of any outside service
used for pricing of the Fund's shares; charges and expenses of legal counsel,
including counsel to the Directors of the Fund who are not interested persons
(as defined in the Act) of the Fund or the Investment Manager, and of
independent accountants, in connection with any matter relating to the Fund;
membership dues of industry associations; interest payable on Fund
borrowings; postage; insurance premiums on property or personnel (including
officers and Directors) of the Fund which inure to its benefit; extraordinary
expenses (including but not limited to legal claims and liabilities and
litigation costs and any indemnification related thereto); and all other
charges and costs of the Fund's operation unless otherwise explicitly
provided herein.

6. For the services to be rendered, the facilities furnished, and the
expenses assumed by the Investment Manager, the Fund shall pay to the
Investment Manager monthly compensation determined by applying the following
annual rates to the Fund's daily net assets: 0.50% of daily net assets up to
$500 million; 0.425% of the next $250 million; 0.375% of the next $250
million; 0.35% of the next $1 billion; 0.325% of the next $1 billion; and
0.30% of daily net assets over $3 billion. Except as hereinafter set forth,
compensation under this Agreement shall be calculated and accrued daily and
the amounts of the daily accruals shall be paid monthly. Such calculations
shall be made by applying 1/365ths of the annual rates to the Fund's net
assets each day determined as of the close of business on that day or the
last previous business day. If this Agreement becomes effective subsequent to
the first day of a month or shall terminate before the last day of a month,
compensation for that part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fees as set forth
above.

Subject to the provisions of paragraph 7 hereof, payment of the Investment
Manager's compensation for the preceding month shall be made as promptly as
possible after completion of the computations contemplated by paragraph 7
hereof.

7. In the event the operating expenses of the Fund, including amounts
payable to the Investment Manager pursuant to paragraph 6 hereof, for any
fiscal year ending on a date on which this Agreement is in effect, exceed the
expense limitations applicable to the Fund imposed by state securities laws
or regulations thereunder, as such limitations may be raised or lowered from
time to time, the Investment Manager shall reduce its management fee to the
extent of such excess and, if required, pursuant to any such laws or
regulations, will reimburse the Fund for annual operating expenses in excess
of any expense limitation that may be applicable; provided, however, there
shall be excluded from such expenses the amount of any interest, taxes,
brokerage commissions and extraordinary expenses (including but not limited
to legal claims and liabilities and litigation costs and any indemnification
related thereto) paid or payable by the Fund. Such reduction, if any, shall
be computed and accrued daily, shall be settled on a monthly basis, and shall
be based

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<PAGE>
upon the expense limitation applicable to the Fund as at the end of the last
business day of the month. Should two or more such expense limitations be
applicable as at the end of the last business day of the month, that expense
limitation which results in the largest reduction in the Investment Manager's
fee shall be applicable.

For purposes of this provision, should any applicable expense limitation be
based upon the gross income of the Fund, such gross income shall include, but
not be limited to, interest on debt securities in the Fund's portfolio accrued
to and including the last day of the Fund's fiscal year, and dividends declared
on equity securities in the Fund's portfolio, the record dates for which fall on
or prior to the last day of such fiscal year, but shall not include gains from
the sale of securities.

8. The Investment Manager will use its best efforts in the supervision
and management of the investment activities of the Fund, but in the absence
of willful misfeasance, bad faith, gross negligence or reckless disregard of
its obligations hereunder, the Investment Manager shall not be liable to the
Fund or any of its investors for any error of judgment or mistake of law or
for any act or omission by the Investment Manager or for any losses sustained
by the Fund or its investors.

9. Nothing contained in this Agreement shall prevent the Investment
Manager or any affiliated person of the Investment Manager from acting as
investment adviser or manager for any other person, firm or corporation and
shall not in any way bind or restrict the Investment Manager or any such
affiliated person from buying, selling or trading any securities or
commodities for their own accounts or for the account of others for whom they
may be acting. Nothing in this Agreement shall limit or restrict the right of
any Director, officer or employee of the Investment Manager to engage in any
other business or to devote his or her time and attention in part to the
management or other aspects of any other business whether of a similar or
dissimilar nature.

10. This Agreement shall remain in effect until April 30, 1999 and from
year to year thereafter provided such continuance is approved at least
annually by the vote of holders of a majority, as defined in the Investment
Company Act (the "Act"), of the outstanding voting securities of the Fund or
by the Directors of the Fund; provided that in either event such continuance
is also approved annually by the vote of a majority of the Directors of the
Fund who are not parties to this Agreement or "interested persons" (as
defined in the Act) of any such party, which vote must be cast in person at a
meeting called for the purpose of voting on such approval; provided, however,
that (a) the Fund may, at any time and without the payment of any penalty,
terminate this Agreement upon thirty days' written notice to the Investment
Manager, either by majority vote of the Directors of the Fund or by the vote
of a majority of the outstanding voting securities of the Fund; (b) this
Agreement shall immediately terminate in the event of its assignment (to the
extent required by the Act and the rules thereunder) unless such automatic
terminations shall be prevented by an exemptive order of the Securities and
Exchange Commission; and (c) the Investment Manager may terminate this
Agreement without payment of penalty on thirty days' written notice to the
Fund. Any notice under this Agreement shall be given in writing, addressed
and delivered, or mailed post-paid, to the other party at the principal
office of such party.

11. This Agreement may be amended by the parties without the vote or
consent of the shareholders of the Fund to supply any omission, to cure,
correct or supplement any ambiguous, defective or inconsistent provision
hereof, or if they deem it necessary to conform this Agreement to the
requirements of applicable federal laws or regulations, but neither the Fund
nor the Investment Manager shall be liable for failing to do so.

12. This Agreement shall be construed in accordance with the laws of
the State of New York and the applicable provisions of the Act. To the extent
the applicable law of the State of New York, or any of the provisions herein,
conflicts with the applicable provisions of the Act, the latter shall control.

13. The Investment Manager and the Fund each agree that the name "Dean
Witter," which comprises a component of the Fund's name, is a property right
of Dean Witter Reynolds Inc. The Fund agrees and consents that (i) it will
only use the name "Dean Witter" as a component of its name and for no other
purpose, (ii) it will not purport to grant to any third party the right to
use the name "Dean Witter" for any

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<PAGE>
purpose, (iii) the Investment Manager or its parent, Morgan Stanley Dean Witter
& Co., or any corporate affiliate of the Investment Manager's parent, may use or
grant to others the right to use the name "Dean Witter," or any combination or
abbreviation thereof, as all or a portion of a corporate or business name or for
any commercial purpose, including a grant of such right to any other investment
company, (iv) at the request of the Investment Manager or its parent, the Fund
will take such action as may be required to provide its consent to the use of
the name "Dean Witter," or any combination or abbreviation thereof, by the
Investment Manager or its parent or any corporate affiliate of the Investment
Manager's parent, or by any person to whom the Investment Manager or its parent
or any corporate affiliate of the Investment Manager's parent shall have granted
the right to such use, and (v) upon the termination of any investment advisory
agreement into which the Investment Manager and the Fund may enter, or upon
termination of affiliation of the Investment Manager with its parent, the Fund
shall, upon request by the Investment Manager or its parent, cease to use the
name "Dean Witter" as a component of its name, and shall not use the name, or
any combination or abbreviation thereof, as a part of its name or for any other
commercial purpose, and shall cause its officers, Directors and shareholders to
take any and all actions which the Investment Manager or its parent may request
to effect the foregoing and to reconvey to the Investment Manager or its parent
any and all rights to such name.

IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement, as amended, on April 30, 1998 in New York, New York.

<TABLE>
<S> <C>
DEAN WITTER HIGH YIELD SECURITIES INC.

By: /s/ BARRY FINK
..............................................

Attest:

/s/ FRANK BRUTTOMESSO
.............................................

DEAN WITTER INTERCAPITAL INC.

By: /s/ CHARLES A. FIUMEFREDDO
..............................................

Attest:

/s/ MARILYN K. CRANNEY
.............................................
</TABLE>

<PAGE>
MORGAN STANLEY DEAN WITTER FUNDS

DISTRIBUTION AGREEMENT

AGREEMENT made as of this 28th day of July, 1997, and amended as of June 22,
1998, between each of the open-end investment companies to which Morgan Stanley
Dean Witter Advisors Inc. acts as investment manager, that are listed on
Schedule A, as may be amended from time to time (each, a "Fund" and
collectively, the "Funds"), and Morgan Stanley Dean Witter Distributors Inc., a
Delaware corporation (the "Distributor").

W I T N E S S E T H:

WHEREAS, each Fund is registered as an open-end investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), and it is in the
interest of each Fund to offer its shares for sale continuously, and

WHEREAS, each Fund and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of each Fund's transferable
shares, of $0.01 par value (the "Shares"), to commence on the date listed above,
in order to promote the growth of each Fund and facilitate the distribution of
its shares.

NOW, THEREFORE, the parties agree as follows:

SECTION 1. APPOINTMENT OF THE DISTRIBUTOR.

(a) Each Fund hereby appoints the Distributor as the principal underwriter
and distributor of the Fund to sell Shares to the public on the terms set forth
in this Agreement and that Fund's prospectus and the Distributor hereby accepts
such appointment and agrees to act hereunder. Each Fund, during the term of this
Agreement, shall sell Shares to the Distributor upon the terms and conditions
set forth herein.

(b) The Distributor agrees to purchase Shares, as principal for its own
account, from each Fund and to sell Shares as principal to investors, and
securities dealers, including Dean Witter Reynolds Inc. ("DWR"), an affiliate of
the Distributor, upon the terms described herein and in that Fund's prospectus
(the "Prospectus") and statement of additional information included in the
Fund's registration statement (the "Registration Statement") most recently filed
from time to time with the Securities and Exchange Commission (the "SEC") and
effective under the Securities Act of 1933, as amended (the "1933 Act"), and the
1940 Act or as the Prospectus may be otherwise amended or supplemented and filed
with the SEC pursuant to Rule 497 under the 1933 Act.

SECTION 2. EXCLUSIVE NATURE OF DUTIES. The Distributor shall be the
exclusive principal underwriter and distributor of each Fund, except that the
exclusive rights granted to the Distributor to sell the Shares shall not apply
to Shares issued by each Fund: (i) in connection with the merger or
consolidation of any other investment company or personal holding company with
the Fund or the acquisition by purchase or otherwise of all (or substantially
all) the assets or the outstanding shares of any such company by the Fund; (ii)
pursuant to reinvestment of dividends or capital gains distributions; or (iii)
pursuant to the reinstatement privilege afforded redeeming shareholders.

SECTION 3. PURCHASE OF SHARES FROM EACH FUND. The Shares are offered in
four classes (each, a "Class"), as described in the Prospectus, as amended or
supplemented from time to time.

(a) The Distributor shall have the right to buy from each Fund the Shares of
the particular class needed, but not more than the Shares needed (except for
clerical errors in transmission), to fill unconditional orders for Shares of the
applicable class placed with the Distributor by investors or securities dealers.
The price which the Distributor shall pay for the Shares so purchased from the
Fund shall be the net asset value, determined as set forth in the Prospectus,
used in determining the public offering price on which such orders were based.

(b) The Shares are to be resold by the Distributor at the public offering
price of Shares of the applicable class as set forth in the Prospectus, to
investors or to securities dealers, including DWR, who

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<PAGE>
have entered into selected dealer agreements with the Distributor upon the terms
and conditions set forth in Section 7 hereof ("Selected Dealers").

(c) Each Fund shall have the right to suspend the sale of the Shares at
times when redemption is suspended pursuant to the conditions set forth in
Section 4(f) hereof. Each Fund shall also have the right to suspend the sale of
the Shares if trading on the New York Stock Exchange shall have been suspended,
if a banking moratorium shall have been declared by federal or New York
authorities, or if there shall have been some other extraordinary event which,
in the judgment of a Fund, makes it impracticable to sell its Shares.

(d) Each Fund, or any agent of a Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Shares received by the
Distributor. Any order may be rejected by a Fund; provided, however, that a Fund
will not arbitrarily or without reasonable cause refuse to accept orders for the
purchase of Shares. The Distributor will confirm orders upon their receipt, and
each Fund (or its agent) upon receipt of payment therefor and instructions will
deliver share certificates for such Shares or a statement confirming the
issuance of Shares. Payment shall be made to the Fund in New York Clearing House
funds. The Distributor agrees to cause such payment and such instructions to be
delivered promptly to the Fund (or its agent).

(e) With respect to Shares sold by any Selected Dealer, the Distributor is
authorized to direct each Fund's transfer agent to receive instructions directly
from the Selected Dealer on behalf of the Distributor as to registration of
Shares in the names of investors and to confirm issuance of the Shares to such
investors. The Distributor is also authorized to instruct the transfer agent to
receive payment directly from the Selected Dealer on behalf of the Distributor,
for prompt transmittal to each Fund's custodian, of the purchase price of the
Shares. In such event the Distributor shall obtain from the Selected Dealer and
maintain a record of such registration instructions and payments.

SECTION 4. REPURCHASE OR REDEMPTION OF SHARES.

(a) Any of the outstanding Shares of a Fund may be tendered for redemption
at any time, and each Fund agrees to redeem its Shares so tendered in accordance
with the applicable provisions set forth in its Prospectus. The price to be paid
to redeem the Shares shall be equal to the net asset value determined as set
forth in the Prospectus less any applicable contingent deferred sales charge
("CDSC"). Upon any redemption of Shares the Fund shall pay the total amount of
the redemption price in New York Clearing House funds in accordance with
applicable provisions of the Prospectus.

(b) The redemption by a Fund of any of its Class A Shares purchased by or
through the Distributor will not affect the applicable front-end sales charge
secured by the Distributor or any Selected Dealer in the course of the original
sale, except that if any Class A Shares are tendered for redemption within seven
business days after the date of the confirmation of the original purchase, the
right to the applicable front-end sales charge shall be forfeited by the
Distributor and the Selected Dealer which sold such Shares.

(c) The proceeds of any redemption of Class A, Class B or Class C Shares
shall be paid by each Fund as follows: (i) any applicable CDSC shall be paid to
the Distributor or to the Selected Dealer, or, when applicable, pursuant to the
Rules of the Association of the National Association of Securities Dealers, Inc.
("NASD"), retained by the Fund and (ii) the balance shall be paid to the
redeeming shareholders, in each case in accordance with applicable provisions of
its Prospectus in New York Clearing House funds. The Distributor is authorized
to direct a Fund to pay directly to the Selected Dealer any CDSC payable by a
Fund to the Distributor in respect of Class A, Class B, or Class C Shares sold
by the Selected Dealer to the redeeming shareholders.

(d) The Distributor is authorized, as agent for the Fund, to repurchase
Shares, represented by a share certificate which is delivered to any office of
the Distributor in accordance with applicable provisions set forth in each
Fund's Prospectus. The Distributor shall promptly transmit to the transfer agent
of the Fund for redemption all Shares so delivered. The Distributor shall be
responsible for the accuracy of instructions transmitted to the Fund's transfer
agent in connection with all such repurchases.

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<PAGE>
(e) The Distributor is authorized, as agent for each Fund, to repurchase
Shares held in a shareholder's account with a Fund for which no share
certificate has been issued, upon the telephonic request of the shareholders, or
at the discretion of the Distributor. The Distributor shall promptly transmit to
the transfer agent of the Fund, for redemption, all such orders for repurchase
of Shares. Payment for Shares repurchased may be made by a Fund to the
Distributor for the account of the shareholder. The Distributor shall be
responsible for the accuracy of instructions transmitted to the Fund's transfer
agent in connection with all such repurchases.

(f) Redemption of its Shares or payment by a Fund may be suspended at times
when the New York Stock Exchange is closed, when trading on said Exchange is
restricted, when an emergency exists as a result of which disposal by a Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for a Fund fairly to determine the value of its net assets, or
during any other period when the SEC, by order, so permits.

(g) With respect to its Shares tendered for redemption or repurchase by any
Selected Dealer on behalf of its customers, the Distributor is authorized to
instruct the transfer agent of a Fund to accept orders for redemption or
repurchase directly from the Selected Dealer on behalf of the Distributor and to
instruct the Fund to transmit payments for such redemptions and repurchases
directly to the Selected Dealer on behalf of the Distributor for the account of
the shareholder. The Distributor shall obtain from the Selected Dealer, and
shall maintain, a record of such orders. The Distributor is further authorized
to obtain from the Fund, and shall maintain, a record of payment made directly
to the Selected Dealer on behalf of the Distributor.

SECTION 5. DUTIES OF THE FUND.

(a) Each Fund shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of its Shares, including one
certified copy, upon request by the Distributor, of all financial statements
prepared by the Fund and examined by independent accountants. Each Fund shall,
at the expense of the Distributor, make available to the Distributor such number
of copies of its Prospectus as the Distributor shall reasonably request.

(b) Each Fund shall take, from time to time, but subject to the necessary
approval of its shareholders, all necessary action to fix the number of its
authorized Shares and to register Shares under the 1933 Act, to the end that
there will be available for sale such number of Shares as investors may
reasonably be expected to purchase.

(c) Each Fund shall use its best efforts to pay the filing fees for an
appropriate number of its Shares to be sold under the securities laws of such
states as the Distributor and the Fund may approve. Any qualification to sell
its Shares in a state may be withheld, terminated or withdrawn by a Fund at any
time in its discretion. As provided in Section 8(c) hereof, such filing fees
shall be paid by the Fund. The Distributor shall furnish any information and
other material relating to its affairs and activities as may be required by a
Fund in connection with the sale of its Shares in any state.

(d) Each Fund shall, at the expense of the Distributor, furnish, in
reasonable quantities upon request by the Distributor, copies of its annual and
interim reports.

SECTION 6. DUTIES OF THE DISTRIBUTOR.

(a) The Distributor shall sell shares of each Fund through DWR and may sell
shares through other securities dealers and its own Financial Advisors, and
shall devote reasonable time and effort to promote sales of the Shares, but
shall not be obligated to sell any specific number of Shares. The services of
the Distributor hereunder are not exclusive and it is understood that the
Distributor may act as principal underwriter for other registered investment
companies, so long as the performance of its obligations hereunder is not
impaired thereby. It is also understood that Selected Dealers, including DWR,
may also sell shares for other registered investment companies.

3
<PAGE>
(b) Neither the Distributor nor any Selected Dealer shall give any
information or make any representations, other than those contained in the
Registration Statement or related Prospectus and any sales literature
specifically approved by the appropriate Fund.

(c) The Distributor agrees that it will at all times comply with the
applicable terms and limitations of the Rules of the Association of the NASD.

SECTION 7. SELECTED DEALERS AGREEMENTS.

(a) The Distributor shall have the right to enter into selected dealer
agreements with Selected Dealers for the sale of Shares. In making agreements
with Selected Dealers, the Distributor shall act only as principal and not as
agent for a Fund. Shares sold to Selected Dealers shall be for resale by such
dealers only at the public offering price set forth in the Prospectus. With
respect to Class A Shares, in such agreement the Distributor shall have the
right to fix the portion of the applicable front-end sales charge which may be
allocated to the Selected Dealers.

(b) Within the United States, the Distributor shall offer and sell Shares
only to Selected Dealers that are members in good standing of the NASD.

(c) The Distributor shall adopt and follow procedures, as approved by each
Fund, for the confirmation of sales of its Shares to investors and Selected
Dealers, the collection of amounts payable by investors and Selected Dealers on
such sales, and the cancellation of unsettled transactions, as may be necessary
to comply with the requirements of the NASD, as such requirements may from time
to time exist.

SECTION 8. PAYMENT OF EXPENSES.

(a) Each Fund shall bear all costs and expenses of the Fund, including fees
and disbursements of legal counsel including counsel to the Directors/Trustees
of each Fund who are not interested persons (as defined in the 1940 Act) of the
Fund or the Distributor, and independent accountants, in connection with the
preparation and filing of any required Registration Statements and Prospectuses
and all amendments and supplements thereto, and the expense of preparing,
printing, mailing and otherwise distributing prospectuses and statements of
additional information, annual or interim reports or proxy materials to
shareholders.

(b) The Distributor shall bear all expenses incurred by it in connection
with its duties and activities under this Agreement including the payment to
Selected Dealers of any sales commissions, service fees and other expenses for
sales of a Fund's Shares (except such expenses as are specifically undertaken
herein by a Fund) incurred or paid by Selected Dealers, including DWR. The
Distributor shall bear the costs and expenses of preparing, printing and
distributing any supplementary sales literature used by the Distributor or
furnished by it for use by Selected Dealers in connection with the offering of
the Shares for sale. Any expenses of advertising incurred in connection with
such offering will also be the obligation of the Distributor. It is understood
and agreed that, so long as a Fund's Plan of Distribution pursuant to Rule 12b-1
under the 1940 Act ("Rule 12b-1 Plan") continues in effect, any expenses
incurred by the Distributor hereunder may be paid in accordance with the terms
of such Rule 12b-1 Plan.

(c) Each Fund shall pay the filing fees, and, if necessary or advisable in
connection therewith, bear the cost and expense of qualifying each Fund as a
broker or dealer, in such states of the United States or other jurisdictions as
shall be selected by the Fund and the Distributor pursuant to Section 5(c)
hereof and the cost and expenses payable to each such state for continuing to
offer Shares therein until the Fund decides to discontinue selling Shares
pursuant to Section 5(c) hereof.

SECTION 9. INDEMNIFICATION.

(a) Each Fund shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith) arising by reason of any person acquiring
any Shares, which may be based upon the 1933 Act, or on any other statute or at
common law, on the ground that the Registration Statement or related Prospectus
and Statement of Additional Information, as from time to time amended

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<PAGE>
and supplemented, or the annual or interim reports to shareholders of a Fund,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading, unless such statement or omission was made in reliance
upon, and in conformity with, information furnished to the Fund in connection
therewith by or on behalf of the Distributor; provided, however, that in no case
(i) is the indemnity of a Fund in favor of the Distributor and any such
controlling persons to be deemed to protect the Distributor or any such
controlling persons thereof against any liability to a Fund or its security
holders to which the Distributor or any such controlling persons would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties or by reason of reckless disregard of its
obligations and duties under this Agreement; or (ii) is a Fund to be liable
under its indemnity agreement contained in this paragraph with respect to any
claim made against the Distributor or any such controlling persons, unless the
Distributor or any such controlling persons, as the case may be, shall have
notified the Fund in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall have
been served upon the Distributor or uch controlling persons (or after the
Distributor or such controlling persons shall have received notice of such
service on any designated agent), but failure to notify the Fund of any such
claim shall not relieve it from any liability which it may have to the person
against whom such action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. Each Fund will be entitled to participate
at its own expense in the defense, or, if it so elects, to assume the defense,
of any such suit brought to enforce any such liability, but if a Fund elects to
assume the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Distributor or such controlling person or persons, defendant
or defendants in the suit. In the event the Fund elects to assume the defense of
any such suit and retain such counsel, the Distributor or such controlling
person or persons, defendant or defendants in the suit, shall bear the fees and
expenses of any additional counsel retained by them, but, in case the Fund does
not elect to assume the defense of any such suit, it will reimburse the
Distributor or such controlling person or persons, defendant or defendants in
the suit, for the reasonable fees and expenses of any counsel retained by them.
Each Fund shall promptly notify the Distributor of the commencement of any
litigation or proceedings against it or any of its officers or
Directors/Trustees in connection with the issuance or sale of the Shares.

(b) (i) The Distributor shall indemnify and hold harmless each Fund and each
of its Directors/ Trustees and officers and each person, if any, who controls
the Fund against any loss, liability, claim, damage, or expense described in the
indemnity contained in subsection (a) of this Section, but only with respect to
statements or omissions made in reliance upon, and in conformity with,
information furnished to a Fund in writing by or on behalf of the Distributor
for use in connection with the Registration Statement or related Prospectus and
Statement of Additional Information, as from time to time amended, or the annual
or interim reports to shareholders.

(ii) The Distributor shall indemnify and hold harmless each Fund and
each Fund's transfer agent, individually and in its capacity as the Fund's
transfer agent, from and against any claims, damages and liabilities which arise
as a result of actions taken pursuant to instructions from, or on behalf of, the
Distributor to: (1) redeem all or a part of shareholder accounts in the Fund
pursuant to Section 4(g) hereof and pay the proceeds to, or as directed by, the
Distributor for the account of each shareholder whose Shares are so redeemed;
and (2) register Shares in the names of investors, confirm the issuance thereof
and receive payment therefor pursuant to Section 3(e) hereof.

(iii) In case any action shall be brought against a Fund or any person
so indemnified by this Section 9(b) in respect of which indemnity may be sought
against the Distributor, the Distributor shall have the rights and duties given
to a Fund, and the Fund and each person so indemnified shall have the rights and
duties given to the Distributor, by the provisions of subsection (a) of this
Section 9.

(c) If the indemnification provided for in this Section 9 is unavailable or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above in respect of any losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to herein, then each indemnifiying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) in such proportion as is appropriate to reflect the relative
benefits received by a Fund on the one hand and the Distributor on the other
from the

5
<PAGE>
offering of the Shares. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law, then each indemnifying
party shall contribute to such amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of a Fund on the one hand and the Distributor on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by a Fund on the one hand and the Distributor on the other
shall be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Fund bear to the total
compensation received by the Distributor, in each case as set forth in the
Prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by a Fund or the Distributor and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. Each Fund and the Distributor agree that it would not be
just and equitable ifcontribution were determined by pro rata allocation or by
any other method of allocation which does not take into account the equitable
considerations referred to above. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to above shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such claim. Notwithstanding the
provisions of this subsection (c), the Distributor shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Shares distributed by it to the public were offered to the public exceeds
the amount of any damages which it has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.

SECTION 10. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement
shall remain in force until April 30, 1999, and thereafter, but only so long as
such continuance is specifically approved at least annually by (i) the Board of
Directors/Trustees of each Fund, or by the vote of a majority of the outstanding
voting securities of the Fund, cast in person or by proxy, and (ii) a majority
of those Directors/ Trustees who are not parties to this Agreement or interested
persons of any such party and who have no direct or indirect financial interest
in this Agreement or in the operation of the Fund's Rule 12b-1 Plan or in any
agreement related thereto, cast in person at a meeting called for the purpose of
voting upon such approval.

This Agreement may be terminated at any time without the payment of any
penalty, by the Directors/ Trustees of a Fund, by a majority of the
Directors/Trustees of a Fund who are not interested persons of the Fund and who
have no direct or indirect financial interest in this Agreement, or by vote of a
majority of the outstanding voting securities of a Fund, or by the Distributor,
on sixty days' written notice to the other party. This Agreement shall
automatically terminate in the event of its assignment.

The terms "vote of a majority of the outstanding voting securities,"
"assignment" and "interested person," when used in this Agreement, shall have
the respective meanings specified in the 1940 Act.

SECTION 11. AMENDMENTS OF THIS AGREEMENT. This Agreement may be amended by
the parties only if such amendment is specifically approved by (i) the
Directors/Trustees of a Fund, or by the vote of a majority of outstanding voting
securities of a Fund, and (ii) a majority of those Directors/Trustees of a Fund
who are not parties to this Agreement or interested persons of any such party
and who have no direct or indirect financial interest in this Agreement or in
any Agreement related to the Fund's Rule 12b-1 Plan, cast in person at a meeting
called for the purpose of voting on such approval.

SECTION 12. ADDITIONAL FUNDS. If at any time another Fund desires to
appoint the Distributor as its principal underwriter and distributor under this
Agreement, it shall notify the Distributor in writing. If the Distributor is
willing to serve as the Fund's principal underwriter and distributor under this
Agreement, it shall notify the Fund in writing, whereupon such other Fund shall
become a Fund hereunder.

SECTION 13. GOVERNING LAW. This Agreement shall be construed in accordance
with the law of the State of New York and the applicable provisions of the 1940
Act. To the extent the applicable law of the

6
<PAGE>
State of New York, or any of the provisions herein, conflicts with the
applicable provisions of the 1940 Act, the latter shall control.

SECTION 14. PERSONAL LIABILITY. With respect to any Fund that is organized
as an unincorporated business trust under the laws of the Commonwealth of
Massachusetts, its Declaration of the Trust (each, a "Declaration") is on file
in the office of the Secretary of the Commonwealth of Massachusetts. Each
Declaration provides that the name of the Fund refers to the Trustees under the
Declaration collectively as Trustees, but not as individuals or personally; and
no Trustee, shareholder, officer, employee or agent of any Fund shall be held to
any personal liability, nor shall resort be had to their private property for
the satisfaction of any obligation or claim or otherwise, in connection with the
affairs of any Fund, but the Trust Estate only shall be liable.

IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement, as amended, on June 22, 1998 in New York, New York.

ON BEHALF OF THE FUNDS SET FORTH ON
SCHEDULE A, ATTACHED HERETO

By: ..................................

MORGAN STANLEY DEAN WITTER
DISTRIBUTORS INC.

By: ..................................

7
<PAGE>
MORGAN STANLEY DEAN WITTER FUNDS
DISTRIBUTION AGREEMENT

SCHEDULE A
AT JULY 22, 1998

<TABLE>
<S> <C>
1) Morgan Stanley Dean Witter American Value Fund
2) Morgan Stanley Dean Witter Balanced Growth Fund
3) Morgan Stanley Dean Witter Balanced Income Fund
4) Morgan Stanley Dean Witter California Tax-Free Income Fund
5) Morgan Stanley Dean Witter Capital Appreciation Fund
6) Morgan Stanley Dean Witter Capital Growth Securities
7) Morgan Stanley Dean Witter Competitive Edge Fund
8) Morgan Stanley Dean Witter Convertible Securities Trust
9) Morgan Stanley Dean Witter Developing Growth Securities Trust
10) Morgan Stanley Dean Witter Diversified Income Trust
11) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
12) Morgan Stanley Dean Witter Equity Fund
13) Morgan Stanley Dean Witter European Growth Fund Inc.
14) Morgan Stanley Dean Witter Federal Securities Trust
15) Morgan Stanley Dean Witter Financial Services Trust
16) Morgan Stanley Dean Witter Fund of Funds
17) Dean Witter Global Asset Allocation Fund
18) Morgan Stanley Dean Witter Global Dividend Growth Securities
19) Morgan Stanley Dean Witter Global Utilities Fund
20) Morgan Stanley Dean Witter Growth Fund
21) Morgan Stanley Dean Witter Health Sciences Trust
22) Morgan Stanley Dean Witter High Yield Securities Inc.
23) Morgan Stanley Dean Witter Income Builder Fund
24) Morgan Stanley Dean Witter Information Fund
25) Morgan Stanley Dean Witter Intermediate Income Securities
26) Morgan Stanley Dean Witter International SmallCap Fund
27) Morgan Stanley Dean Witter Japan Fund
28) Morgan Stanley Dean Witter Market Leader Trust
29) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
30) Morgan Stanley Dean Witter Mid-Cap Growth Fund
31) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
32) Morgan Stanley Dean Witter New York Tax-Free Income Fund
33) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
34) Morgan Stanley Dean Witter Precious Metals and Minerals Trust
35) Morgan Stanley Dean Witter Research Fund
36) Morgan Stanley Dean Witter Special Value Fund
37) Morgan Stanley Dean Witter S&P 500 Index Fund
38) Morgan Stanley Dean Witter S&P 500 Select Fund
39) Morgan Stanley Dean Witter Strategist Fund
40) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
41) Morgan Stanley Dean Witter U.S. Government Securities Trust
42) Morgan Stanley Dean Witter Utilities Fund
43) Morgan Stanley Dean Witter Value-Added Market Series
44) Morgan Stanley Dean Witter Value Fund
45) Morgan Stanley Dean Witter Worldwide High Income Fund
46) Morgan Stanley Dean Witter World Wide Income Trust
</TABLE>

<PAGE>

AMENDED AND RESTATED
TRANSFER AGENCY AND SERVICE AGREEMENT

with

MORGAN STANLEY DEAN WITTER TRUST FSB

[open-end funds]

<PAGE>

TABLE OF CONTENTS

Page
----

Article 1 Terms of Appointment. . . . . . . . . . . . . . . . . . . . .1

Article 2 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . .5

Article 3 Representations and Warranties of MSDW TRUST. . . . . . . . .6

Article 4 Representations and Warranties of the Fund. . . . . . . . . .7

Article 5 Duty of Care and Indemnification. . . . . . . . . . . . . . .7

Article 6 Documents and Covenants of the Fund and MSDW TRUST. . . . . .10

Article 7 Duration and Termination of Agreement . . . . . . . . . . . .13

Article 8 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . .14

Article 9 Affiliations. . . . . . . . . . . . . . . . . . . . . . . . .14

Article 10 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . .15

Article 11 Applicable Law. . . . . . . . . . . . . . . . . . . . . . . .15

Article 12 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . .15

Article 13 Merger of Agreement . . . . . . . . . . . . . . . . . . . . .17

Article 14 Personal Liability. . . . . . . . . . . . . . . . . . . . . .17

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<PAGE>

AMENDED AND RESTATED TRANSFER AGENCY AND SERVICE AGREEMENT

AMENDED AND RESTATED AGREEMENT made as of the 22nd day of June, 1998
by and between each of the Funds listed on the signature pages hereof, each of
such Funds acting severally on its own behalf and not jointly with any of such
other Funds (each such Fund hereinafter referred to as the "Fund"), each such
Fund having its principal office and place of business at Two World Trade
Center, New York, New York, 10048, and MORGAN STANLEY DEAN WITTER TRUST FSB
("MSDW TRUST"), a federally chartered savings bank, having its principal office
and place of business at Harborside Financial Center, Plaza Two, Jersey City,
New Jersey 07311.

WHEREAS, the Fund desires to appoint MSDW TRUST as its transfer agent,
dividend disbursing agent and shareholder servicing agent and MSDW TRUST desires
to accept such appointment;

NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:

Article 1 TERMS OF APPOINTMENT; DUTIES OF MSDW TRUST

1.1 Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints MSDW TRUST to act as, and MSDW
TRUST agrees to act as, the transfer agent for each series and class of shares
of the Fund, whether now or hereafter authorized or issued ("Shares"), dividend
disbursing agent and shareholder servicing agent in

-1-
<PAGE>

connection with any accumulation, open-account or similar plans provided to the
holders of such Shares ("Shareholders") and set out in the currently effective
prospectus and statement of additional information ("prospectus") of the Fund,
including without limitation any periodic investment plan or periodic withdrawal
program.

1.2 MSDW TRUST agrees that it will perform the following
services:

(a) In accordance with procedures established from time to time
by agreement between the Fund and MSDW TRUST, MSDW TRUST shall:

(i) Receive for acceptance, orders for the purchase of Shares,
and promptly deliver payment and appropriate documentation therefor to the
custodian of the assets of the Fund (the "Custodian");

(ii) Pursuant to purchase orders, issue the appropriate number of
Shares and issue certificates therefor or hold such Shares in book form in the
appropriate Shareholder account;

(iii) Receive for acceptance redemption requests and
redemption directions and deliver the appropriate documentation therefor to the
Custodian;

(iv) At the appropriate time as and when it receives monies paid
to it by the Custodian with respect to any redemption, pay over or cause to be
paid over in the appropriate manner such monies as instructed by the redeeming
Shareholders;

-2-
<PAGE>

(v) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;

(vi) Prepare and transmit payments for dividends and
distributions declared by the Fund;

(vii) Calculate any sales charges payable by a Shareholder on
purchases and/or redemptions of Shares of the Fund as such charges may be
reflected in the prospectus;

(viii) Maintain records of account for and advise the Fund and
its Shareholders as to the foregoing; and

(ix) Record the issuance of Shares of the Fund and maintain
pursuant to Rule 17Ad-10(e) under the Securities Exchange Act of 1934 ("1934
Act") a record of the total number of Shares of the Fund which are authorized,
based upon data provided to it by the Fund, and issued and outstanding. MSDW
TRUST shall also provide to the Fund on a regular basis the total number of
Shares that are authorized, issued and outstanding and shall notify the Fund in
case any proposed issue of Shares by the Fund would result in an overissue. In
case any issue of Shares would result in an overissue, MSDW TRUST shall refuse
to issue such Shares and shall not countersign and issue any certificates
requested for such Shares. When recording the issuance of Shares, MSDW TRUST
shall have no obligation to take cognizance of any Blue Sky laws relating to the
issue of sale of such Shares, which functions shall be the sole responsibility
of the Fund.

(b) In addition to and not in lieu of the services set forth in
the above paragraph (a), MSDW TRUST shall:

-3-
<PAGE>

(i) perform all of the customary services of a transfer agent,
dividend disbursing agent and, as relevant, shareholder servicing agent in
connection with dividend reinvestment, accumulation, open-account or similar
plans (including without limitation any periodic investment plan or periodic
withdrawal program), including but not limited to, maintaining all Shareholder
accounts, preparing Shareholder meeting lists, mailing proxies, receiving and
tabulating proxies, mailing shareholder reports and prospectuses to current
Shareholders, withholding taxes on U.S. resident and non-resident alien
accounts, preparing and filing appropriate forms required with respect to
dividends and distributions by federal tax authorities for all Shareholders,
preparing and mailing confirmation forms and statements of account to
Shareholders for all purchases and redemptions of Shares and other confirmable
transactions in Shareholder accounts, preparing and mailing activity statements
for Shareholders and providing Shareholder account information;

(ii) open any and all bank accounts which may be necessary or
appropriate in order to provide the foregoing services; and

(iii) provide a system that will enable the Fund to monitor
the total number of Shares sold in each State or other jurisdiction.

(i) identify to MSDW TRUST in writing those transactions and
assets to be treated as exempt from Blue Sky reporting for each State; and

-4-
<PAGE>

(ii) verify the inclusion on the system prior to activation of
each State in which Fund shares may be sold and thereafter monitor the daily
purchases and sales for shareholders in each State. The responsibility of MSDW
TRUST for the Fund's status under the securities laws of any State or other
jurisdiction is limited to the inclusion on the system of each State as to which
the Fund has informed MSDW TRUST that shares may be sold in compliance with
state securities laws and the reporting of purchases and sales in each such
State to the Fund as provided above and as agreed from time to time by the Fund
and MSDW TRUST.

(d) MSDW TRUST shall provide such additional services and
functions not specifically described herein as may be mutually agreed between
MSDW TRUST and the Fund. Procedures applicable to such services may be
established from time to time by agreement between the Fund and MSDW TRUST.

Article 2 FEES AND EXPENSES

2.1 For performance by MSDW TRUST pursuant to this Agreement,
each Fund agrees to pay MSDW TRUST an annual maintenance fee for each
Shareholder account and certain transactional fees, if applicable, as set out in
the respective fee schedule attached hereto as Schedule A. Such fees and
out-of-pocket expenses and advances identified under Section 2.2 below may be
changed from time to time subject to mutual written agreement between the Fund
and MSDW TRUST.

2.2 In addition to the fees paid under Section 2.1 above, the
Fund agrees to reimburse MSDW TRUST for out of pocket expenses in connection
with the services rendered

-5-
<PAGE>

by MSDW TRUST hereunder. In addition, any other expenses incurred by MSDW TRUST
at the request or with the consent of the Fund will be reimbursed by the Fund.

2.3 The Fund agrees to pay all fees and reimbursable expenses
within a reasonable period of time following the mailing of the respective
billing notice. Postage for mailing of dividends, proxies, Fund reports and
other mailings to all Shareholder accounts shall be advanced to MSDW TRUST by
the Fund upon request prior to the mailing date of such materials.

Article 3 REPRESENTATIONS AND WARRANTIES OF MSDW TRUST

MSDW TRUST represents and warrants to the Fund that:

3.1 It is a federally chartered savings bank whose principal
office is in New Jersey.

3.2 It is and will remain registered with the U.S. Securities
and Exchange Commission ("SEC") as a Transfer Agent pursuant to the requirements
of Section 17A of the 1934 Act.

3.3 It is empowered under applicable laws and by its charter and
By-Laws to enter into and perform this Agreement.

3.4 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.

3.5 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.

-6-
<PAGE>

Article 4 REPRESENTATIONS AND WARRANTIES OF THE FUND

The Fund represents and warrants to MSDW TRUST that:

4.1 It is a corporation duly organized and existing and in good
standing under the laws of Delaware or Maryland or a trust duly organized and
existing and in good standing under the laws of Massachusetts, as the case may
be.

4.2 It is empowered under applicable laws and by its Articles of
Incorporation or Declaration of Trust, as the case may be, and under its By-Laws
to enter into and perform this Agreement.

4.3 All corporate proceedings necessary to authorize it to enter
into and perform this Agreement have been taken.

4.4 It is an investment company registered with the SEC under
the Investment Company Act of 1940, as amended (the "1940 Act").

4.5 A registration statement under the Securities Act of 1933
(the "1933 Act") is currently effective and will remain effective, and
appropriate state securities law filings have been made and will continue to be
made, with respect to all Shares of the Fund being offered for sale.

Article 5 DUTY OF CARE AND INDEMNIFICATION

5.1 MSDW TRUST shall not be responsible for, and the Fund shall
indemnify and hold MSDW TRUST harmless from and against, any and all losses,
damages, costs,

-7-
<PAGE>

charges, counsel fees, payments, expenses and liability arising out of or
attributable to:

(a) All actions of MSDW TRUST or its agents or subcontractors
required to be taken pursuant to this Agreement, provided that such actions are
taken in good faith and without negligence or willful misconduct.

(b) The Fund's refusal or failure to comply with the terms of
this Agreement, or which arise out of the Fund's lack of good faith, negligence
or willful misconduct or which arise out of breach of any representation or
warranty of the Fund hereunder.

(c) The reliance on or use by MSDW TRUST or its agents or
subcontractors of information, records and documents which (i) are received by
MSDW TRUST or its agents or subcontractors and furnished to it by or on behalf
of the Fund, and (ii) have been prepared and/or maintained by the Fund or any
other person or firm on behalf of the Fund.

(d) The reliance on, or the carrying out by MSDW TRUST or its
agents or subcontractors of, any instructions or requests of the Fund.

(e) The offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations or the securities or Blue Sky
laws of any State or other jurisdiction that notice of offering of such Shares
in such State or other jurisdiction or in violation of any stop order or other
determination or ruling by any federal agency or any State or other jurisdiction
with respect to the offer or sale of such Shares in such State or other
jurisdiction.

-8-
<PAGE>

5.2 MSDW TRUST shall indemnify and hold the Fund harmless from
or against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributable to any action or failure
or omission to act by MSDW TRUST as a result of the lack of good faith,
negligence or willful misconduct of MSDW TRUST, its officers, employees or
agents.

5.3 At any time, MSDW TRUST may apply to any officer of the Fund
for instructions, and may consult with legal counsel to the Fund, with respect
to any matter arising in connection with the services to be performed by MSDW
TRUST under this Agreement, and MSDW TRUST and its agents or subcontractors
shall not be liable and shall be indemnified by the Fund for any action taken or
omitted by it in reliance upon such instructions or upon the opinion of such
counsel. MSDW TRUST, its agents and subcontractors shall be protected and
indemnified in acting upon any paper or document furnished by or on behalf of
the Fund, reasonably believed to be genuine and to have been signed by the
proper person or persons, or upon any instruction, information, data, records or
documents provided to MSDW TRUST or its agents or subcontractors by machine
readable input, telex, CRT data entry or other similar means authorized by the
Fund, and shall not be held to have notice of any change of authority of any
person, until receipt of written notice thereof from the Fund. MSDW TRUST, its
agents and subcontractors shall also be protected and indemnified in recognizing
stock certificates which are reasonably believed to bear the proper manual or
facsimile signature of the officers of the Fund, and the proper countersignature
of any former transfer agent or registrar, or of a co-transfer agent or
co-registrar.

-9-
<PAGE>

5.4 In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God, strikes,
equipment or transmission failure or damage reasonably beyond its control, or
other causes reasonably beyond its control, such party shall not be liable for
damages to the other for any damages resulting from such failure to perform or
otherwise from such causes.

5.5 Neither party to this Agreement shall be liable to the other
party for consequential damages under any provision of this Agreement or for any
act or failure to act hereunder.

5.6 In order that the indemnification provisions contained in
this Article 5 shall apply, upon the assertion of a claim for which either party
may be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.

Article 6 DOCUMENTS AND COVENANTS OF THE FUND AND MSDW TRUST

6.1 The Fund shall promptly furnish to MSDW TRUST the following,
unless previously furnished to Dean Witter Trust Company, the prior transfer
agent of the Fund:

-10-
<PAGE>

(a) If a corporation:

(i) A certified copy of the resolution of the Board of Directors
of the Fund authorizing the appointment of MSDW TRUST and the execution and
delivery of this Agreement;

(ii) A certified copy of the Articles of Incorporation and
By-Laws of the Fund and all amendments thereto;

(iii) Certified copies of each vote of the Board of Directors
designating persons authorized to give instructions on behalf of the Fund and
signature cards bearing the signature of any officer of the Fund or any other
person authorized to sign written instructions on behalf of the Fund;

(iv) A specimen of the certificate for Shares of the Fund in the
form approved by the Board of Directors, with a certificate of the Secretary of
the Fund as to such approval;

(b) If a business trust:

(i) A certified copy of the resolution of the Board of Trustees
of the Fund authorizing the appointment of MSDW TRUST and the execution and
delivery of this Agreement;

(ii) A certified copy of the Declaration of Trust and By-Laws of
the Fund and all amendments thereto;

-11-
<PAGE>

(iii) Certified copies of each vote of the Board of Trustees
designating persons authorized to give instructions on behalf of the Fund and
signature cards bearing the signature of any officer of the Fund or any other
person authorized to sign written instructions on behalf of the Fund;

(iv) A specimen of the certificate for Shares of the Fund in the
form approved by the Board of Trustees, with a certificate of the Secretary of
the Fund as to such approval;

(c) The current registration statements and any amendments and
supplements thereto filed with the SEC pursuant to the requirements of the 1933
Act or the 1940 Act;

(d) All account application forms or other documents relating to
Shareholder accounts and/or relating to any plan, program or service offered or
to be offered by the Fund; and

(e) Such other certificates, documents or opinions as MSDW TRUST
deems to be appropriate or necessary for the proper performance of its duties.

6.2 MSDW TRUST hereby agrees to establish and maintain
facilities and procedures reasonably acceptable to the Fund for safekeeping of
Share certificates, check forms and facsimile signature imprinting devices, if
any; and for the preparation or use, and for keeping account of, such
certificates, forms and devices.

-12-
<PAGE>

6.3 MSDW TRUST shall prepare and keep records relating to the
services to be performed hereunder, in the form and manner as it may deem
advisable and as required by applicable laws and regulations. To the extent
required by Section 31 of the 1940 Act, and the rules and regulations
thereunder, MSDW TRUST agrees that all such records prepared or maintained by
MSDW TRUST relating to the services performed by MSDW TRUST hereunder are the
property of the Fund and will be preserved, maintained and made available in
accordance with such Section 31 of the 1940 Act, and the rules and regulations
thereunder, and will be surrendered promptly to the Fund on and in accordance
with its request.

6.4 MSDW TRUST and the Fund agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential and shall not be voluntarily disclosed to
any other person except as may be required by law or with the prior consent of
MSDW TRUST and the Fund.

6.5 In case of any request or demands for the inspection of the
Shareholder records of the Fund, MSDW TRUST will endeavor to notify the Fund and
to secure instructions from an authorized officer of the Fund as to such
inspection. MSDW TRUST reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be held
liable for the failure to exhibit the Shareholder records to such person.

Article 7 DURATION AND TERMINATION OF AGREEMENT

7.1 This Agreement shall remain in full force and effect until
August 1,

-13-
<PAGE>

2000 and from year-to-year thereafter unless terminated by either party as
provided in Section 7.2 hereof.

7.2 This Agreement may be terminated by the Fund on 60 days
written notice, and by MSDW TRUST on 90 days written notice, to the other party
without payment of any penalty.

7.3 Should the Fund exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records and other
materials will be borne by the Fund. Additionally, MSDW TRUST reserves the
right to charge for any other reasonable fees and expenses associated with such
termination.

Article 8 ASSIGNMENT

8.1 Except as provided in Section 8.3 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by either
party without the written consent of the other party.

8.2 This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and assigns.

8.3 MSDW TRUST may, in its sole discretion and without further
consent by the Fund, subcontract, in whole or in part, for the performance of
its obligations and duties hereunder with any person or entity including but not
limited to companies which are affiliated with MSDW TRUST; PROVIDED, HOWEVER,
that such person or entity has and maintains the qualifications, if any,
required to perform such obligations and duties, and that MSDW TRUST

-14-
<PAGE>

shall be as fully responsible to the Fund for the acts and omissions of any
agent or subcontractor as it is for its own acts or omissions under this
Agreement.

Article 9 AFFILIATIONS

9.1 MSDW TRUST may now or hereafter, without the consent of or
notice to the Fund, function as transfer agent and/or shareholder servicing
agent for any other investment company registered with the SEC under the 1940
Act and for any other issuer, including without limitation any investment
company whose adviser, administrator, sponsor or principal underwriter is or may
become affiliated with Morgan Stanley Dean Witter & Co. or any of its direct or
indirect subsidiaries or affiliates.

9.2 It is understood and agreed that the Directors or Trustees
(as the case may be), officers, employees, agents and shareholders of the Fund,
and the directors, officers, employees, agents and shareholders of the Fund's
investment adviser and/or distributor, are or may be interested in MSDW TRUST as
directors, officers, employees, agents and shareholders or otherwise, and that
the directors, officers, employees, agents and shareholders of MSDW TRUST may be
interested in the Fund as Directors or Trustees (as the case may be), officers,
employees, agents and shareholders or otherwise, or in the investment adviser
and/or distributor as directors, officers, employees, agents, shareholders or
otherwise.

Article 10 AMENDMENT

10.1 This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a resolution of
the Board of Directors or the Board of Trustees (as the case may be) of the
Fund.

-15-
<PAGE>

Article 11 APPLICABLE LAW

11.1 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the State of New York.

Article 12 MISCELLANEOUS

12.1 In the event that one or more additional investment
companies managed or administered by Morgan Stanley Dean Witter Advisors Inc. or
any of its affiliates ("Additional Funds") desires to retain MSDW TRUST to act
as transfer agent, dividend disbursing agent and/or shareholder servicing agent,
and MSDW TRUST desires to render such services, such services shall be provided
pursuant to a letter agreement, substantially in the form of Exhibit A hereto,
between MSDW TRUST and each Additional Fund.

12.2 In the event of an alleged loss or destruction of any Share
certificate, no new certificate shall be issued in lieu thereof, unless there
shall first be furnished to MSDW TRUST an affidavit of loss or non-receipt by
the holder of Shares with respect to which a certificate has been lost or
destroyed, supported by an appropriate bond satisfactory to MSDW TRUST and the
Fund issued by a surety company satisfactory to MSDW TRUST, except that MSDW
TRUST may accept an affidavit of loss and indemnity agreement executed by the
registered holder (or legal representative) without surety in such form as MSDW
TRUST deems appropriate indemnifying MSDW TRUST and the Fund for the issuance of
a replacement certificate, in cases where the alleged loss is in the amount of
$1,000 or less.

12.3 In the event that any check or other order for payment of
money on the

-16-
<PAGE>

account of any Shareholder or new investor is returned unpaid for any reason,
MSDW TRUST will (a) give prompt notification to the Fund's distributor
("Distributor") (or to the Fund if the Fund acts as its own distributor) of such
non-payment; and (b) take such other action, including imposition of a
reasonable processing or handling fee, as MSDW TRUST may, in its sole
discretion, deem appropriate or as the Fund and, if applicable, the Distributor
may instruct MSDW TRUST.

12.4 Any notice or other instrument authorized or required by
this Agreement to be given in writing to the Fund or to MSDW TRUST shall be
sufficiently given if addressed to that party and received by it at its office
set forth below or at such other place as it may from time to time designate in
writing.

To the Fund:

[Name of Fund]
Two World Trade Center
New York, New York 10048

Attention: General Counsel

To MSDW TRUST:

Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311

Attention: President

Article 13 MERGER OF AGREEMENT

13.1 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.

-17-
<PAGE>

Article 14 PERSONAL LIABILITY

14.1 In the case of a Fund organized as a Massachusetts business
trust, a copy of the Declaration of Trust of the Fund is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed on behalf of the Board of Trustees of the Fund as
Trustees and not individually and that the obligations of this instrument are
not binding upon any of the Trustees or shareholders individually but are
binding only upon the assets and property of the Fund; provided, however, that
the Declaration of Trust of the Fund provides that the assets of a particular
Series of the Fund shall under no circumstances be charged with liabilities
attributable to any other Series of the Fund and that all persons extending
credit to, or contracting with or having any claim against, a particular Series
of the Fund shall look only to the assets of that particular Series for payment
of such credit, contract or claim.

IN WITNESS WHEREOF, the parties hereto have caused this Amended
and Restated Agreement to be executed in their names and on their behalf by and
through their duly authorized officers, as of the day and year first above
written.

MORGAN STANLEY DEAN WITTER FUNDS

MONEY MARKET FUNDS

1. Morgan Stanley Dean Witter Liquid Asset Fund Inc.
2. Active Assets Money Trust
3. Morgan Stanley Dean Witter U.S. Government Money Market Trust
4. Active Assets Government Securities Trust
5. Morgan Stanley Dean Witter Tax-Free Daily Income Trust
6. Active Assets Tax-Free Trust
7. Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
8. Morgan Stanley Dean Witter New York Municipal Money Market Trust
9. Active Assets California Tax-Free Trust

-18-
<PAGE>

EQUITY FUNDS

10. Morgan Stanley Dean Witter American Value Fund
11. Morgan Stanley Dean Witter Mid-Cap Growth Fund
12. Morgan Stanley Dean Witter Dividend Growth Securities Inc.
13. Morgan Stanley Dean Witter Capital Growth Securities
14. Morgan Stanley Dean Witter Global Dividend Growth Securities
15. Morgan Stanley Dean Witter Income Builder Fund
16. Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
17. Morgan Stanley Dean Witter Precious Metals and Minerals Trust
18. Morgan Stanley Dean Witter Developing Growth Securities Trust
19. Morgan Stanley Dean Witter Health Sciences Trust
20. Morgan Stanley Dean Witter Capital Appreciation Fund
21. Morgan Stanley Dean Witter Information Fund
22. Morgan Stanley Dean Witter Value-Added Market Series
23. Morgan Stanley Dean Witter European Growth Fund Inc.
24. Morgan Stanley Dean Witter Pacific Growth Fund Inc.
25. Morgan Stanley Dean Witter International SmallCap Fund
26. Morgan Stanley Dean Witter Japan Fund
27. Morgan Stanley Dean Witter Utilities Fund
28. Morgan Stanley Dean Witter Global Utilities Fund
29. Morgan Stanley Dean Witter Special Value Fund
30. Morgan Stanley Dean Witter Financial Services Trust
31. Morgan Stanley Dean Witter Market Leader Trust
32. Morgan Stanley Dean Witter Fund of Funds
33. Morgan Stanley Dean Witter S&P 500 Index Fund
34. Morgan Stanley Dean Witter Competitive Edge Fund
35. Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
36. Morgan Stanley Dean Witter Equity Fund
37. Morgan Stanley Dean Witter Growth Fund

BALANCED FUNDS

38. Morgan Stanley Dean Witter Balanced Growth Fund
39. Morgan Stanley Dean Witter Balanced Income Trust

ASSET ALLOCATION FUNDS

40. Morgan Stanley Dean Witter Strategist Fund
41. Dean Witter Global Asset Allocation Fund

-19-
<PAGE>

FIXED INCOME FUNDS

42. Morgan Stanley Dean Witter High Yield Securities Inc.
43. Morgan Stanley Dean Witter High Income Securities
44. Morgan Stanley Dean Witter Convertible Securities Trust
45. Morgan Stanley Dean Witter Intermediate Income Securities
46. Morgan Stanley Dean Witter Short-Term Bond Fund
47. Morgan Stanley Dean Witter World Wide Income Trust
48. Morgan Stanley Dean Witter Global Short-Term Income Fund Inc.
49. Morgan Stanley Dean Witter Diversified Income Trust
50. Morgan Stanley Dean Witter U.S. Government Securities Trust
51. Morgan Stanley Dean Witter Federal Securities Trust
52. Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
53. Morgan Stanley Dean Witter Intermediate Term U.S. Treasury Trust
54. Morgan Stanley Dean Witter Tax-Exempt Securities Trust
55. Morgan Stanley Dean Witter Limited Term Municipal Trust
56. Morgan Stanley Dean Witter California Tax-Free Income Fund
57. Morgan Stanley Dean Witter New York Tax-Free Income Fund
58. Morgan Stanley Dean Witter Hawaii Municipal Trust
59. Morgan Stanley Dean Witter Multi-State Municipal Series Trust
60. Morgan Stanley Dean Witter Select Municipal Reinvestment Fund

SPECIAL PURPOSE FUNDS

61. Dean Witter Retirement Series
62. Morgan Stanley Dean Witter Variable Investment Series
63. Morgan Stanley Dean Witter Select Dimensions Investment Series

TCW/DW FUNDS

64. TCW/DW North American Government Income Trust
65. TCW/DW Latin American Growth Fund
66. TCW/DW Income and Growth Fund
67. TCW/DW Small Cap Growth Fund
68. TCW/DW Total Return Trust

-20-
<PAGE>

69. TCW/DW Global Telecom Trust
70. TCW/DW Mid-Cap Equity Trust
71. TCW/DW Emerging Markets Opportunities Trust

By:
----------------------------------
Barry Fink
Vice President and General Counsel

ATTEST:

- --------------------------
Assistant Secretary

MORGAN STANLEY DEAN WITTER TRUST FSB

By:
---------------------------------
John Van Heuvelen
President

ATTEST:

- --------------------------
Executive Vice President

-21-
<PAGE>

EXHIBIT A

Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, NJ 07311

Gentlemen:

The undersigned, (INSET NAME OF INVESTMENT COMPANY) a (Massachusetts
business trust/Maryland corporation) (the "Fund"), desires to employ and appoint
Morgan Stanley Dean Witter Trust FSB ("MSDW TRUST") to act as transfer agent for
each series and class of shares of the Fund, whether now or hereafter authorized
or issued ("Shares"), dividend disbursing agent and shareholder servicing agent,
registrar and agent in connection with any accumulation, open-account or similar
plan provided to the holders of Shares, including without limitation any
periodic investment plan or periodic withdrawal plan.

The Fund hereby agrees that, in consideration for the payment by the
Fund to MSDW TRUST of fees as set out in the fee schedule attached hereto as
Schedule A, MSDW TRUST shall provide such services to the Fund pursuant to the
terms and conditions set forth in the Transfer Agency and Service Agreement
annexed hereto, as if the Fund was a signatory thereto.

-22-
<PAGE>

Please indicate MSDW TRUST's acceptance of employment and appointment
by the Fund in the capacities set forth above by so indicating in the space
provided below.

Very truly yours,

(name of fund)

By:
----------------------------------
Barry Fink
Vice President and General Counsel

ACCEPTED AND AGREED TO:

MORGAN STANLEY DEAN WITTER TRUST FSB

By:
---------------------
Its:
--------------------
Date:
-------------------

-23-
<PAGE>

SCHEDULE A

Fund: Morgan Stanley Dean Witter High Yield Securities Inc.

Fees: (1) Annual maintenance fee of $13.20 per shareholder account,
payable monthly.

(2) A fee equal to 1/12 of the fee set forth in (1) above, for
providing Forms 1099 for accounts closed during the year, payable
following the end of the calendar year.

(3) Out-of-pocket expenses in accordance with Section 2.2 of the
Agreement.

(4) Fees for additional services not set forth in this Agreement
shall be as negotiated between the parties.

-24-

<PAGE>
SERVICES AGREEMENT

AGREEMENT made as of the 17th day of April, 1995, and amended as of June 22,
1998, by and between Morgan Stanley Dean Witter Advisors Inc., a Delaware
corporation (herein referred to as "MSDW Advisors"), and Morgan Stanley Dean
Witter Services Company Inc., a Delaware corporation (herein referred to as
"MSDW Services").

WHEREAS, MSDW Advisors has entered into separate agreements (each such
agreement being herein referred to as an "Investment Management Agreement") with
certain investment companies as set forth on Schedule A (each such investment
company being herein referred to as a "Fund" and, collectively, as the "Funds")
pursuant to which MSDW Advisors is to perform, or supervise the performance of,
among other services, administrative services for the Funds (and, in the case of
Funds with multiple portfolios, the Series or Portfolios of the Funds (such
Series and Portfolio being herein individually referred to as "a Series" and,
collectively, as "the Series"));

WHEREAS, MSDW Advisors desires to retain MSDW Services to perform the
administrative services as described below; and

WHEREAS, MSDW Services desires to be retained by MSDW Advisors to perform
such administrative services:

Now, therefore, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:

1. MSDW Services agrees to provide administrative services to each Fund as
hereinafter set forth. Without limiting the generality of the foregoing, MSDW
Services shall (i) administer the Fund's business affairs and supervise the
overall day-to-day operations of the Fund (other than rendering investment
advice); (ii) provide the Fund with full administrative services, including the
maintenance of certain books and records, such as journals, ledger accounts and
other records required under the Investment Company Act of 1940, as amended (the
"Act"), the notification to the Fund and MSDW Advisors of available funds for
investment, the reconciliation of account information and balances among the
Fund's custodian, transfer agent and dividend disbursing agent and MSDW
Advisors, and the calculation of the net asset value of the Fund's shares; (iii)
provide the Fund with the services of persons competent to perform such
supervisory, administrative and clerical functions as are necessary to provide
effective operation of the Fund; (iv) oversee the performance of administrative
and professional services rendered to the Fund by others, including its
custodian, transfer agent and dividend disbursing agent, as well as accounting,
auditing and other services; (v) provide the Fund with adequate general office
space and facilities; (vi) assist in the preparation and the printing of the
periodic updating of the Fund's registration statement and prospectus (and, in
the case of an open-end Fund, the statement of additional information), tax
returns, proxy statements, and reports to its shareholders and the Securities
and Exchange Commission; and (vii) monitor the compliance of the Fund's
investment policies and restrictions.

In the event that MSDW Advisors enters into an Investment Management
Agreement with another investment company, and wishes to retain MSDW Services to
perform administrative services hereunder, it shall notify MSDW Services in
writing. If MSDW Services is willing to render such services, it shall notify
MSDW Advisors in writing, whereupon such other Fund shall become a Fund as
defined herein.

2. MSDW Services shall, at its own expense, maintain such staff and employ
or retain such personnel and consult with such other persons as it shall from
time to time determine to be necessary or useful to the performance of its
obligations under this Agreement. Without limiting the generality of the
foregoing, the staff and personnel of MSDW Services shall be deemed to include
officers of MSDW Services and persons employed or otherwise retained by MSDW
Services (including officers and employees of MSDW Advisors, with the consent of
MSDW Advisors) to furnish services, statistical and other factual data,
information with respect to technical and scientific developments, and such
other information, advice and assistance as MSDW Services may desire. MSDW
Services shall maintain each Fund's records and books of account

98NYC8262
<PAGE>
(other than those maintained by the Fund's transfer agent, registrar, custodian
and other agencies). All such books and records so maintained shall be the
property of the Fund and, upon request therefor, MSDW Services shall surrender
to MSDW Advisors or to the Fund such of the books and records so requested.

3. MSDW Advisors will, from time to time, furnish or otherwise make
available to MSDW Services such financial reports, proxy statements and other
information relating to the business and affairs of the Fund as MSDW Services
may reasonably require in order to discharge its duties and obligations to the
Fund under this Agreement or to comply with any applicable law and regulation or
request of the Board of Directors/Trustees of the Fund.

4. For the services to be rendered, the facilities furnished, and the
expenses assumed by MSDW Services, MSDW Advisors shall pay to MSDW Services
monthly compensation calculated daily (in the case of an open-end Fund) or
weekly (in the case of a closed-end Fund) by applying the annual rate or rates
set forth on Schedule B to the net assets of each Fund. Except as hereinafter
set forth, (i) in the case of an open-end Fund, compensation under this
Agreement shall be calculated by applying 1/365th of the annual rate or rates to
the Fund's or the Series' daily net assets determined as of the close of
business on that day or the last previous business day and (ii) in the case of a
closed-end Fund, compensation under this Agreement shall be calculated by
applying the annual rate or rates to the Fund's average weekly net assets
determined as of the close of the last business day of each week. If this
Agreement becomes effective subsequent to the first day of a month or shall
terminate before the last day of a month, compensation for that part of the
month this Agreement is in effect shall be prorated in a manner consistent with
the calculation of the fees as set forth on Schedule B. Subject to the
provisions of paragraph 5 hereof, payment of MSDW Services' compensation for the
preceding month shall be made as promptly as possible after completion of the
computations contemplated by paragraph 5 hereof.

5. In the event the operating expenses of any open-end Fund and/or any
Series thereof, or of InterCapital Income Securities Inc., including amounts
payable to MSDW Advisors pursuant to the Investment Management Agreement, for
any fiscal year ending on a date on which this Agreement is in effect, exceed
the expense limitations applicable to the Fund and/or any Series thereof imposed
by state securities laws or regulations thereunder, as such limitations may be
raised or lowered from time to time, or, in the case of InterCapital Income
Securities Inc. or Morgan Stanley Dean Witter Variable Investment Series or any
Series thereof, the expense limitation specified in the Fund's Investment
Management Agreement, the fee payable hereunder shall be reduced on a pro rata
basis in the same proportion as the fee payable by the Fund under the Investment
Management Agreement is reduced.

6. MSDW Services shall bear the cost of rendering the administrative
services to be performed by it under this Agreement, and shall, at its own
expense, pay the compensation of the officers and employees, if any, of the Fund
employed by MSDW Services, and such clerical help and bookkeeping services as
MSDW Services shall reasonably require in performing its duties hereunder.

7. MSDW Services will use its best efforts in the performance of
administrative activitives on behalf of each Fund, but in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations hereunder, MSDW Services shall not be liable to the Fund or any of
its investors for any error of judgment or mistake of law or for any act or
omission by MSDW Services or for any losses sustained by the Fund or its
investors. It is understood that, subject to the terms and conditions of the
Investment Management Agreement between each Fund and MSDW Advisors, MSDW
Advisors shall retain ultimate responsibility for all services to be performed
hereunder by MSDW Services. MSDW Services shall indemnify MSDW Advisors and hold
it harmless from any liability that MSDW Advisors may incur arising out of any
act or failure to act by MSDW Services in carrying out its responsibilities
hereunder.

8. It is understood that any of the shareholders, Directors/Trustees,
officers and employees of the Fund may be a shareholder, director, officer or
employee of, or be otherwise interested in, MSDW Services, and in any person
controlling, controlled by or under common control with MSDW Services, and that
MSDW Services and any person controlling, controlled by or under common control
with MSDW

2
<PAGE>
Services may have an interest in the Fund. It is also understood that MSDW
Services and any affiliated persons thereof or any persons controlling,
controlled by or under common control with MSDW Services have and may have
advisory, management, administration service or other contracts with other
organizations and persons, and may have other interests and businesses, and
further may purchase, sell or trade any securities or commodities for their own
accounts or for the account of others for whom they may be acting.

9. This Agreement shall continue until April 30, 1999, and thereafter shall
continue automatically for successive periods of one year unless terminated by
either party by written notice delivered to the other party within 30 days of
the expiration of the then-existing period. Notwithstanding the foregoing, this
Agreement may be terminated at any time, by either party on 30 days' written
notice delivered to the other party. In the event that the Investment Management
Agreement between any Fund and MSDW Advisors is terminated, this Agreement will
automatically terminate with respect to such Fund.

10. This Agreement may be amended or modified by the parties in any manner
by written agreement executed by each of the parties hereto.

11. This Agreement may be assigned by either party with the written consent
of the other party.

12. This Agreement shall be construed and interpreted in accordance with the
laws of the State of New York.

IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement, as amended, on June 22, 1998 in New York, New York.

<TABLE>
<S> <C>
MORGAN STANLEY DEAN WITTER ADVISORS INC.

By: -----------------------------------------

Attest:
- ---------------------------------------------

MORGAN STANLEY DEAN WITTER SERVICES COMPANY
INC.

By: -----------------------------------------

Attest:
- ---------------------------------------------
</TABLE>

3
<PAGE>
SCHEDULE A
MORGAN STANLEY DEAN WITTER FUNDS
AS AMENDED AS OF JULY 22, 1998

OPEN-END FUNDS

<TABLE>
<C> <S>
1. Active Assets California Tax-Free Trust
2. Active Assets Government Securities Trust
3. Active Assets Money Trust
4. Active Assets Tax-Free Trust
5. Dean Witter Retirement Series
6. Morgan Stanley Dean Witter American Value Fund
7. Morgan Stanley Dean Witter Balanced Growth Fund
8. Morgan Stanley Dean Witter Balanced Income Fund
9. Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
10. Morgan Stanley Dean Witter California Tax-Free Income Fund
11. Morgan Stanley Dean Witter Capital Appreciation Fund
12. Morgan Stanley Dean Witter Capital Growth Securities
13. Morgan Stanley Dean Witter Competitive Edge Fund, "BEST IDEAS" Portfolio
14. Morgan Stanley Dean Witter Convertible Securities Trust
15. Morgan Stanley Dean Witter Developing Growth Securities Trust
16. Morgan Stanley Dean Witter Diversified Income Trust
17. Morgan Stanley Dean Witter Dividend Growth Securities Inc.
18. Morgan Stanley Dean Witter Equity Fund
19. Morgan Stanley Dean Witter European Growth Fund Inc.
20. Morgan Stanley Dean Witter Federal Securities Trust
21. Morgan Stanley Dean Witter Financial Services Trust
22. Morgan Stanley Dean Witter Fund of Funds
(i) Domestic Portfolio
(ii) International Portfolio
23. Morgan Stanley Dean Witter Global Dividend Growth Securities
24. Morgan Stanley Dean Witter Global Short-Term Income Fund Inc.
25. Morgan Stanley Dean Witter Global Utilities Fund
26. Morgan Stanley Dean Witter Growth Fund
27. Morgan Stanley Dean Witter Hawaii Municipal Trust
28. Morgan Stanley Dean Witter Health Sciences Trust
29. Morgan Stanley Dean Witter High Yield Securities Inc.
30. Morgan Stanley Dean Witter Income Builder Fund
31. Morgan Stanley Dean Witter Information Fund
32. Morgan Stanley Dean Witter Intermediate Income Securities
33. Morgan Stanley Dean Witter Intermediate Term U.S. Treasury Trust
34. Morgan Stanley Dean Witter International SmallCap Fund
35. Morgan Stanley Dean Witter Japan Fund
36. Morgan Stanley Dean Witter Limited Term Municipal Trust
37. Morgan Stanley Dean Witter Liquid Asset Fund Inc.
38. Morgan Stanley Dean Witter Market Leader Trust
39. Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
40. Morgan Stanley Dean Witter Mid-Cap Growth Fund
41. Morgan Stanley Dean Witter Multi-State Municipal Series Trust
42. Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
43. Morgan Stanley Dean Witter New York Municipal Money Market Trust
</TABLE>

A-1
<PAGE>
<TABLE>
<C> <S>
44. Morgan Stanley Dean Witter New York Tax-Free Income Fund
45. Morgan Stanley Dean Witter Pacific Growth Fund Inc.
46. Morgan Stanley Dean Witter Precious Metals and Minerals Trust
47. Morgan Stanley Dean Witter Select Dimensions Investment Series
(i) American Value Portfolio
(ii) Balanced Growth Portfolio
(iii) Developing Growth Portfolio
(iv) Diversified Income Portfolio
(v) Dividend Growth Portfolio
(vi) Emerging Markets Portfolio
(vii) Global Equity Portfolio
(viii) Growth Portfolio
(ix) Mid-Cap Growth Portfolio
(x) Money Market Portfolio
(xi) North American Government Securities Portfolio
(xii) Utilities Portfolio
(xiii) Value-Added Market Portfolio
48. Morgan Stanley Dean Witter Select Municipal Reinvestment Fund
49. Morgan Stanley Dean Witter U.S. Government Money Market Trust
50. Morgan Stanley Dean Witter Utilities Fund
51. Morgan Stanley Dean Witter Short-Term Bond Fund
52. Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
53. Morgan Stanley Dean Witter Special Value Fund
54. Morgan Stanley Dean Witter Strategist Fund
55. Morgan Stanley Dean Witter S&P 500 Index Fund
56. Morgan Stanley Dean Witter S&P 500 Select Fund
57. Morgan Stanley Dean Witter Tax-Exempt Securities Trust
58. Morgan Stanley Dean Witter Tax-Free Daily Income Trust
59. Morgan Stanley Dean Witter U.S. Government Securities Trust
60. Morgan Stanley Dean Witter Value Fund
61. Morgan Stanley Dean Witter Value-Added Market Series
62. Morgan Stanley Dean Witter Variable Investment Series
(i) Capital Appreciation Portfolio
(ii) Capital Growth Portfolio
(iii) Competitive Edge "Best Ideas" Portfolio
(iv) Dividend Growth Portfolio
(v) Equity Portfolio
(vi) European Growth Portfolio
(vii) Global Dividend Growth Portfolio
(viii) High Yield Portfolio
(ix) Income Builder Portfolio
(x) Money Market Portfolio
(xi) Quality Income Plus Portfolio
(xii) Pacific Growth Portfolio
(xiii) S&P 500 Index Portfolio
(xiv) Strategist Portfolio
(xv) Utilities Portfolio
63. Morgan Stanley Dean Witter World Wide Income Trust
64. Morgan Stanley Dean Witter Worldwide High Income Fund
65. Dean Witter Global Asset Allocation Fund
</TABLE>

A-2
<PAGE>
<TABLE>
<CAPTION>
CLOSED-END FUNDS
<C> <S>
66. High Income Advantage Trust
67. High Income Advantage Trust II
68. High Income Advantage Trust III
69. InterCapital Income Securities Inc.
70. Dean Witter Government Income Trust
71. InterCapital Insured Municipal Bond Trust
72. InterCapital Insured Municipal Trust
73. InterCapital Insured Municipal Income Trust
74. InterCapital California Insured Municipal Income Trust
75. InterCapital Insured Municipal Securities
76. InterCapital Insured California Municipal Securities
77. InterCapital Quality Municipal Investment Trust
78. InterCapital Quality Municipal Income Trust
79. InterCapital Quality Municipal Securities
80. InterCapital California Quality Municipal Securities
81. InterCapital New York Quality Municipal Securities
</TABLE>

A-3
<PAGE>
SCHEDULE B

MORGAN STANLEY DEAN WITTER SERVICES COMPANY INC.
SCHEDULE OF ADMINISTRATIVE FEES
AS AMENDED AS OF JUNE 22, 1998

Monthly compensation calculated daily by applying the following annual rates
to a fund's daily net assets:

<TABLE>
<S> <C>
FIXED INCOME FUNDS

Morgan Stanley Dean Witter Balanced Income Fund 0.060% of the daily net assets.

Morgan Stanley Dean Witter California Tax-Free Income Fund 0.055% of the portion of the daily net assets not exceeding $500
million; 0.0525% of the portion of the daily net assets exceeding
$500 million but not exceeding $750 million; 0.050% of the
portion of the daily net assets exceeding $750 million but not
exceeding $1 billion; 0.0475% of the portion of the daily net
assets exceeding $1 billion but not exceeding $1.25 billion; and
0.045% of the portion of the daily net assets exceeding $1.25
billion.

Morgan Stanley Dean Witter Convertible Securities Trust 0.060% of the portion of the daily net assets not exceeding $750
million; 0.055% of the portion of the daily net assets exceeding
$750 million but not exceeding $1 billion; 0.050% of the portion
of the daily net assets of the exceeding $1 billion but not
exceeding $1.5 billion; 0.0475% of the portion of the daily net
assets exceeding $1.5 billion but not exceeding $2 billion;
0.045% of the portion of the daily net assets exceeding $2
billion but not exceeding $3 billion; and 0.0425% of the portion
of the daily net assets exceeding $3 billion.

Morgan Stanley Dean Witter Diversified Income Trust 0.040% of the daily net assets.

Morgan Stanley Dean Witter Federal Securities Trust 0.055% of the portion of the daily net assets not exceeding $1
billion; 0.0525% of the portion of the daily net assets exceeding
$1 billion but not exceeding $1.5 billion; 0.050% of the portion
of the daily net assets exceeding $1.5 billion but not exceeding
$2 billion; 0.0475% of the portion of the daily net assets
exceeding $2 billion but not exceeding $2.5 billion; 0.045% of
the portion of the daily net assets exceeding $2.5 billion but
not exceeding $5 billion; 0.0425% of the portion of the daily net
assets exceeding $5 billion but not exceeding $7.5 billion;
0.040% of the portion of the daily net assets exceeding $7.5
billion but not exceeding $10 billion; 0.0375% of the portion of
the daily net assets exceeding $10 billion but not exceeding
$12.5 billion; and 0.035% of the portion of the daily net assets
exceeding $12.5 billion.

Morgan Stanley Dean Witter Global Short-Term Income Fund Inc. 0.055% of the portion of the daily net assets not exceeding $500
million; and 0.050% of the portion of the daily net assets
exceeding $500 million.
</TABLE>

B-1
<PAGE>
<TABLE>
<S> <C>
Morgan Stanley Dean Witter Hawaii Municipal Trust 0.035% of the daily net assets.

Morgan Stanley Dean Witter High Yield Securities Inc. 0.050% of the portion of the daily net assets not exceeding $500
million; 0.0425% of the portion of the daily net assets exceeding
$500 million but not exceeding $750 million; 0.0375% of the
portion of the daily net assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion of the daily net
assets exceeding $1 billion but not exceeding $2 billion; 0.0325%
of the portion of the daily net assets exceeding $2 billion but
not exceeding $3 billion; and 0.030% of the portion of daily net
assets exceeding $3 billion.

Morgan Stanley Dean Witter Intermediate Income Securities 0.060% of the portion of the daily net assets not exceeding $500
million; 0.050% of the portion of the daily net assets exceeding
$500 million but not exceeding $750 million; 0.040% of the
portion of the daily net assets exceeding $750 million but not
exceeding $1 billion; and 0.030% of the portion of the daily net
assets exceeding $1 billion.

Morgan Stanley Dean Witter Intermediate Term U.S. Treasury Trust 0.035% of the daily net assets.

Morgan Stanley Dean Witter Limited Term Municipal Trust 0.050% of the daily net assets.

Morgan Stanley Dean Witter Multi-State Municipal Series Trust (10 0.035% of the daily net assets.
Series)

Morgan Stanley Dean Witter New York Tax-Free Income Fund 0.055% of the portion of the daily net assets not exceeding $500
million; and 0.0525% of the portion of the daily net assets
exceeding $500 million.

Morgan Stanley Dean Witter Retirement Series--Intermediate Income 0.065% of the daily net assets.
Securities Series
U.S. Government Securities Series 0.065% of the daily net assets.

Morgan Stanley Dean Witter Select Dimensions Investment Series-- 0.039% of the daily net assets.
North American Government Securities Portfolio

Morgan Stanley Dean Witter Select Municipal Reinvestment Fund 0.050% of the daily net assets.

Morgan Stanley Dean Witter Short-Term Bond Fund 0.070% of the daily net assets.

Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust 0.035% of the daily net assets.
</TABLE>

B-2
<PAGE>
<TABLE>
<S> <C>
Morgan Stanley Dean Witter Tax-Exempt Securities Trust 0.050% of the portion of the daily net assets not exceeding $500
million; 0.0425% of the portion of the daily net assets exceeding
$500 million but not exceeding $750 million; 0.0375% of the
portion of the daily net assets exceeding $750 million but not
exceeding $1 billion; and 0.035% of the portion of the daily net
assets exceeding $1 billion but not exceeding $1.25 billion;
.0325% of the portion of the daily net assets exceeding $1.25
billion.

Morgan Stanley Dean Witter U.S. Government Securities Trust 0.050% of the portion of the daily net assets not exceeding $1
billion; 0.0475% of the portion of the daily net assets exceeding
$1 billion but not exceeding $1.5 billion; 0.045% of the portion
of the daily net assets exceeding $1.5 billion but not exceeding
$2 billion; 0.0425% of the portion of the daily net assets
exceeding $2 billion but not exceeding $2.5 billion; 0.040% of
the portion of the daily net assets exceeding $2.5 billion but
not exceeding $5 billion; 0.0375% of the portion of the daily net
assets exceeding $5 billion but not exceeding $7.5 billion;
0.035% of the portion of the daily net assets exceeding $7.5
billion but not exceeding $10 billion; 0.0325% of the portion of
the daily net assets exceeding $10 billion but not exceeding
$12.5 billion; and 0.030% of the portion of the daily net assets
exceeding $12.5 billion.

Morgan Stanley Dean Witter Variable Investment Series--High Yield 0.050% of the portion of the daily net assets not exceeding $500
Portfolio million; and 0.0425% of the daily net assets exceeding $500
million.
Quality Income Plus Portfolio 0.050% of the portion of the daily the net assets up to $500
million; and 0.045% of the portion of the daily net assets
exceeds $500 million.

Morgan Stanley Dean Witter World Wide Income Trust 0.075% of the portion of the daily net assets up to $250 million;
0.060% of the portion of the daily net assets exceeding $250
million but not exceeding $500 million; 0.050% of the portion of
the daily net assets of the exceeding $500 million but not
exceeding $750 million; 0.040% of the portion of the daily net
assets exceeding $750 million but not exceeding $1 billion; and
0.030% of the portion of the daily net assets exceeding $1
billion.

Morgan Stanley Dean Witter Worldwide High Income Fund 0.060% of the daily net assets.

EQUITY FUNDS

Morgan Stanley Dean Witter American Value Fund 0.0625% of the portion of the daily net assets not exceeding $250
million; 0.050% of the portion of the daily net assets exceeding
$250 million but not exceeding $2.25 billion; 0.0475% of the
portion of the daily net assets exceeding $2.25 billion but not
exceeding $3.5 billion; 0.0450% of the portion of the daily net
assets exceeding $3.5 billion but not exceeding $4.5 billion; and
0.0425% of the portion of the daily net assets exceeding $4.5
billion.
</TABLE>

B-3
<PAGE>
<TABLE>
<S> <C>
Morgan Stanley Dean Witter Balanced Growth Fund 0.060% of the daily net assets.

Morgan Stanley Dean Witter Capital Appreciation Fund 0.075% of the portion of the daily net assets not exceeding $500
million; and 0.0725% of the portion of the daily net assets
exceeding $500 million.

Morgan Stanley Dean Witter Capital Growth Securities 0.065% of the portion of the daily net assets not exceeding $500
million; 0.055% of the portion exceeding $500 million but not
exceeding $1 billion; 0.050% of the portion of the daily net
assets exceeding $1 billion but not exceeding $1.5 billion; and
0.0475% of the portion of the daily net assets exceeding $1.5
billion.

Morgan Stanley Dean Witter Competitive Edge Fund, "BEST IDEAS" 0.065% of the portion of the daily net assets not exceeding $1.5
Portfolio billion; and 0.0625% of the portion of the daily net assets
exceeding $1.5 billion.

Morgan Stanley Dean Witter Developing Growth Securities Trust 0.050% of the portion of the daily net assets not exceeding $500
million; and 0.0475% of the portion of the daily net assets
exceeding $500 million.

Morgan Stanley Dean Witter Dividend Growth Securities Inc. 0.0625% of the portion of the daily net assets not exceeding $250
million; 0.050% of the portion of the daily net assets exceeding
$250 million but not exceeding $1 billion; 0.0475% of the portion
of the daily net assets exceeding $1 billion but not exceeding $2
billion; 0.045% of the portion of the daily net assets exceeding
$2 billion but not exceeding $3 billion; 0.0425% of the portion
of the daily net assets exceeding $3 billion but not exceeding $4
billion; 0.040% of the portion of the daily net assets exceeding
$4 billion but not exceeding $5 billion; 0.0375% of the portion
of the daily net assets exceeding $5 billion but not exceeding $6
billion; 0.035% of the portion of the daily net assets exceeding
$6 billion but not exceeding $8 billion; 0.0325% of the portion
of the daily net assets exceeding $8 billion but not exceeding
$10 billion; 0.030% of the portion of the daily net assets
exceeding $10 billion but not exceeding $15 billion; and 0.0275%
of the portion of the daily net assets exceeding $15 billion.

Morgan Stanley Dean Witter Equity Fund 0.051% of the daily net assets.

Morgan Stanley Dean Witter European Growth Fund Inc. 0.060% of the portion of the daily net assets not exceeding $500
million; 0.057% of the portion of the daily net assets exceeding
$500 million but not exceeding $2 billion; and 0.054% of the
portion of the daily net assets exceeding $2 billion.

Morgan Stanley Dean Witter Financial Services Trust 0.075% of the daily net assets.

Morgan Stanley Dean Witter Fund of Funds-
Domestic Portfolio None
International Portfolio None
</TABLE>

B-4
<PAGE>
<TABLE>
<S> <C>
Dean Witter Global Asset Allocation Fund 0.070% of the daily net assets.

Morgan Stanley Dean Witter Global Dividend Growth Securities 0.075% of the portion of the daily net assets not exceeding $1
billion; 0.0725% of the portion of the daily net assets exceeding
$1 billion but not exceeding $1.5 billion; 0.070% of the portion
of the daily net assets exceeding $1.5 billion but not exceeding
$2.5 billion; 0.0675% of the portion of the daily net assets
exceeding $2.5 billion but not exceeding $3.5 billion; 0.0650% of
the portion of the daily net assets exceeding $3.5 billion but
not exceeding $4.5 billion; and 0.0625% of the portion of the
daily net assets exceeding $4.5 billion.

Morgan Stanley Dean Witter Global Utilities Fund 0.065% of the portion of the daily net assets not exceeding $500
million; and 0.0625% of the portion of the daily net assets
exceeding $500 million.

Morgan Stanley Dean Witter Growth Fund 0.048% of the portion of daily net assets not exceeding $750
million; 0.045% of the portion of daily net assets exceeding $750
million but not exceeding $1.5 billion; and 0.042% of the portion
of daily net assets exceeding $1.5 billion.

Morgan Stanley Dean Witter Health Sciences Trust 0.10% of the portion of daily net assets not exceeding $500
million; and 0.095% of the portion of daily net assets exceeding
$500 million.

Morgan Stanley Dean Witter Income Builder Fund 0.075% of the portion of the net assets not exceeding $500
million; and 0.0725% of the portion of daily net assets exceeding
$500 million.

Morgan Stanley Dean Witter Information Fund 0.075% of the portion of the daily net assets not exceeding $500
million; and 0.0725% of the portion of the daily net assets
exceeding $500 million.

Morgan Stanley Dean Witter International SmallCap Fund 0.075% of the daily net assets.

Morgan Stanley Dean Witter Japan Fund 0.060% of the daily net assets.

Morgan Stanley Dean Witter Market Leader Trust 0.075% of the daily net assets.

Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities 0.075 of the daily net assets.

Morgan Stanley Dean Witter Mid-Cap Growth Fund 0.075% of the portion of the daily net assets not exceeding $500
million; and 0.0725% of the portion of the daily net assets
exceeding $500 million.

Morgan Stanley Dean Witter Natural Resource Development 0.0625% of the portion of the daily net assets not exceeding $250
Securities Inc. million and 0.050% of the portion of the daily net assets
exceeding $250 million.
</TABLE>

B-5
<PAGE>
<TABLE>
<S> <C>
Morgan Stanley Dean Witter Pacific Growth Fund Inc. 0.060% of the portion of the daily net assets not exceeding $1
billion; 0.057% of the portion of the daily net assets exceeding
$1 billion but not exceeding $2 billion; and 0.054% of the
portion of the daily net assets exceeding $2 billion.

Morgan Stanley Dean Witter Precious Metals and Minerals Trust 0.080% of the daily net assets.

Dean Witter Retirement Series--
American Value Series 0.085% of the daily net assets.
Capital Growth Series 0.085% of the daily net assets.
Dividend Growth Series 0.075% of the daily net assets.
Global Equity Series 0.10% of the daily net assets.
Strategist Series 0.085% of the daily net assets.
Utilities Series 0.075% of the daily net assets.
Value Added Market Series 0.050% of the daily net assets.

Morgan Stanley Dean Witter Select Dimensions Investment Series--
American Value Portfolio 0.0625% of the daily net assets.
Balanced Growth Portfolio 0.065% of the daily net assets.
Developing Growth Portfolio 0.050% of the daily net assets.
Diversified Income Portfolio 0.040% of the daily net assets.
Dividend Growth Portfolio 0.0625% of the portion of the daily net assets not exceeding $500
million; and 0.050% of the portion of the daily net assets
exceeding $500 million.
Emerging Markets Portfolio 0.075% of the daily net assets.
Global Equity Portfolio 0.10% of the daily net assets.
Growth Portfolio 0.048% of the daily net assets.
Mid-Cap Growth Portfolio 0.075% of the daily net assets
Utilities Portfolio 0.065% of the daily net assets.
Value-Added Market Portfolio 0.050% of the daily net assets.

Morgan Stanley Dean Witter Special Value Fund 0.075% of the daily net assets.

Morgan Stanley Dean Witter Strategist Fund 0.060% of the portion of the daily net assets not exceeding $500
million; 0.055% of the portion of the daily net assets exceeding
$500 million but not exceeding $1 billion; 0.050% of the portion
of the daily net assets exceeding $1 billion but not exceeding
$1.5 billion; 0.0475% of the portion of the daily net assets
exceeding $1.5 billion but not exceeding $2.0 billion; and 0.045%
of the portion of the daily net assets exceeding $2.0 billion.

Morgan Stanley Dean Witter S&P 500 Index Fund 0.040% of the daily net assets.

Morgan Stanley Dean Witter S&P 500 Select Fund 0.060% of the daily net assets.
</TABLE>

B-6
<PAGE>
<TABLE>
<S> <C>
Morgan Stanley Dean Witter Utilities Fund 0.065% of the portion of the daily net assets not exceeding $500
million; 0.055% of the portion of the daily net assets exceeding
$500 million but not exceeding $1 billion; 0.0525% of the portion
of the daily net assets exceeding $1 billion but not exceeding
$1.5 billion; 0.050% of the portion of the daily net assets
exceeding $1.5 billion but not exceeding $2.5 billion; 0.0475% of
the portion of the daily net assets exceeding $2.5 billion but
not exceeding $3.5 billion; 0.045% of the portion of the daily
net assets exceeding $3.5 but not exceeding $5 billion; and
0.0425% of the daily net assets exceeding $5 billion.

Morgan Stanley Dean Witter Value Fund 0.10% of the daily net assets.

Morgan Stanley Dean Witter Value-Added Market Series 0.050% of the portion of the daily net assets not exceeding $500
million; 0.45% of the portion of the daily net assets exceeding
$500 million but not exceeding $1 billion; 0.0425% of the portion
of the daily net assets exceeding $1.0 billion but not exceeding
$2.0 billion; and 0.040% of the portion of the daily net assets
exceeding $2 billion.

Morgan Stanley Dean Witter Variable Investment Series--
Capital Appreciation Portfolio 0.075% of the daily net assets.
Capital Growth Portfolio 0.065% of the daily net assets.
Competitive Edge "Best Ideas" Portfolio 0.065% of the daily net assets.
Dividend Growth Portfolio 0.0625% of the portion of the daily net assets not exceeding $500
million; and 0.050% of the portion of the daily net assets
exceeding $500 million but not exceeding $1 billion; 0.0475% of
the portion of the daily net assets exceeding $1.0 billion but
not exceeding $2.0 billion; and 0.045% of the portion of the
daily net assets exceeding $2 billion.
Equity Portfolio 0.050% of the portion of the daily net assets not exceeding $1
billion; and 0.0475% of the portion of the daily net assets
exceeding $1 billion.
European Growth Portfolio 0.060% of the portion of the daily net assets not exceeding $500
million; and 0.057% of the portion of the daily net assets
exceeding $500 million.
Income Builder Portfolio 0.075% of the daily net assets.
S&P 500 Index Portfolio 0.040% of the daily net assets.
Strategist Portfolio 0.050% of the daily net assets.
Utilities Portfolio 0.065% of the portion of the daily net assets not exceeding $500
million and 0.055% of the portion of the daily net assets
exceeding $500 million.
</TABLE>

B-7
<PAGE>
<TABLE>
<S> <C>
MONEY MARKET FUNDS

Active Assets Trusts: 0.050% of the portion of the daily net assets not exceeding $500
(1) Active Assets Money Trust million; 0.0425% of the portion of the daily net assets exceeding
(2) Active Assets Tax-Free Trust $500 million but not exceeding $750 million; 0.0375% of the
(3) Active Assets California Tax-Free Trust portion of the daily net assets exceeding $750 million but not
(4) Active Assets Government Securities Trust exceeding $1 billion; 0.035% of the portion of the daily net
assets exceeding $1 billion but not exceeding $1.5 billion;
0.0325% of the portion of the daily net assets exceeding $1.5
billion but not exceeding $2 billion; 0.030% of the portion of
the daily net assets exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily net assets exceeding
$2.5 billion but not exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3 billion.

Morgan Stanley Dean Witter California Tax-Free Daily 0.050% of the portion of the daily net assets not exceeding $500
Income Trust million; 0.0425% of the portion of the daily net assets exceeding
$500 million but not exceeding $750 million; 0.0375% of the
portion of the daily net assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion of the daily net
assets exceeding $1 billion but not exceeding $1.5 billion;
0.0325% of the portion of the daily net assets exceeding $1.5
billion but not exceeding $2 billion; 0.030% of the portion of
the daily net assets exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily net assets exceeding
$2.5 billion but not exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3 billion.

Morgan Stanley Dean Witter Liquid Asset Fund Inc. 0.050% of the portion of the daily net assets not exceeding $500
million; 0.0425% of the portion of the daily net assets exceeding
$500 million but not exceeding $750 million; 0.0375% of the
portion of the daily net assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion of the daily net
assets exceeding $1 billion but not exceeding $1.35 billion;
0.0325% of the portion of the daily net assets exceeding $1.35
billion but not exceeding $1.75 billion; 0.030% of the portion of
the daily net assets exceeding $1.75 billion but not exceeding
$2.15 billion; 0.0275% of the portion of the daily net assets
exceeding $2.15 billion but not exceeding $2.5 billion; 0.025% of
the portion of the daily net assets exceeding $2.5 billion but
not exceeding $15 billion; 0.0249% of the portion of the daily
net assets exceeding $15 billion but not exceeding $17.5 billion;
and 0.0248% of the portion of the daily net assets exceeding
$17.5 billion.
</TABLE>

B-8
<PAGE>
<TABLE>
<S> <C>
Morgan Stanley Dean Witter New York Municipal Money Market Trust 0.050% of the portion of the daily net assets not exceeding $500
million; 0.0425% of the portion of the daily net assets exceeding
$500 million but not exceeding $750 million; 0.0375% of the
portion of the daily net assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion of the daily net
assets exceeding $1 billion but not exceeding $1.5 billion;
0.0325% of the portion of the daily net assets exceeding $1.5
billion but not exceeding $2 billion; 0.030% of the portion of
the daily net assets exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily net assets exceeding
$2.5 billion but not exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3 billion.

Dean Witter Retirement Series--
Liquid Asset Series 0.050% of the daily net assets.
U.S. Government Money Market Series 0.050% of the daily net assets.

Morgan Stanley Dean Witter Select Dimensions Investment Series--
Money Market Portfolio 0.050% of the daily net assets.

Morgan Stanley Dean Witter Tax-Free Daily Income Trust 0.050% of the portion of the daily net assets not exceeding $500
million; 0.0425% of the portion of the daily net assets exceeding
$500 million but not exceeding $750 million; 0.0375% of the
portion of the daily net assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion of the daily net
assets exceeding $1 billion but not exceeding $1.5 billion;
0.0325% of the portion of the daily net assets exceeding $1.5
billion but not exceeding $2 billion; 0.030% of the portion of
the daily net assets exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily net assets exceeding
$2.5 billion but not exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3 billion.

Morgan Stanley Dean Witter U.S. Government Money Market Trust 0.050% of the portion of the daily net assets not exceeding $500
million; 0.0425% of the portion of the daily net assets exceeding
$500 million but not exceeding $750 million; 0.0375% of the
portion of the daily net assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion of the daily net
assets exceeding $1 billion but not exceeding $1.5 billion;
0.0325% of the portion of the daily net assets exceeding $1.5
billion but not exceeding $2 billion; 0.030% of the portion of
the daily net assets exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily net assets exceeding
$2.5 billion but not exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3 billion.

Morgan Stanley Dean Witter Variable Investment Series-- Money 0.050% of the daily net assets.
Market Portfolio
</TABLE>

B-9
<PAGE>
Monthly compensation calculated weekly by applying the following annual
rates to a fund's weekly net assets:

<TABLE>
<S> <C>
CLOSED-END FUNDS

Dean Witter Government Income Trust 0.060% of the average weekly net assets.

High Income Advantage Trust 0.075% of the portion of the average weekly net assets not
exceeding $250 million; 0.060% of the portion of average
weekly net assets exceeding $250 million and not exceeding
$500 million; 0.050% of the portion of average weekly net
assets exceeding $500 million and not exceeding $750
million; 0.040% of the portion of average weekly net assets
exceeding $750 million and not exceeding $1 billion; and
0.030% of the portion of average weekly net assets exceeding
$1 billion.

High Income Advantage Trust II 0.075% of the portion of the average weekly net assets not
exceeding $250 million; 0.060% of the portion of average
weekly net assets exceeding $250 million and not exceeding
$500 million; 0.050% of the portion of average weekly net
assets exceeding $500 million and not exceeding $750
million; 0.040% of the portion of average weekly net assets
exceeding $750 million and not exceeding $1 billion; and
0.030% of the portion of average weekly net assets exceeding
$1 billion.

High Income Advantage Trust III 0.075% of the portion of the average weekly net assets not
exceeding $250 million; 0.060% of the portion of average
weekly net assets exceeding $250 million and not exceeding
$500 million; 0.050% of the portion of average weekly net
assets exceeding $500 million and not exceeding $750
million; 0.040% of the portion of the average weekly net
assets exceeding $750 million and not exceeding $1 billion;
and 0.030% of the portion of average weekly net assets
exceeding $1 billion.

InterCapital Income Securities Inc. 0.050% of the average weekly net assets.

InterCapital Insured Municipal Bond Trust 0.035% of the average weekly net assets.

InterCapital Insured Municipal Trust 0.035% of the average weekly net assets.

InterCapital Insured Municipal Income Trust 0.035% of the average weekly net assets.

InterCapital California Insured Municipal 0.035% of the average weekly net assets.
Income Trust

InterCapital Quality Municipal Investment 0.035% of the average weekly net assets.
Trust

InterCapital New York Quality Municipal 0.035% of the average weekly net assets.
Securities

InterCapital Quality Municipal Income Trust 0.035% of the average weekly net assets.
</TABLE>

B-10
<PAGE>
<TABLE>
<S> <C>
InterCapital Quality Municipal Securities 0.035% of the average weekly net assets.

InterCapital California Quality Municipal 0.035% of the average weekly net assets.
Securities

InterCapital Insured Municipal Securities 0.035% of the average weekly net assets.

InterCapital Insured California Municipal 0.035% of the average weekly net assets.
Securities
</TABLE>

B-11

<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 23 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
October 9, 1998, relating to the financial statements and financial highlights
of Morgan Stanley Dean Witter High Yield Securities Inc., formerly Dean Witter
High Yield Securities Inc., which appears in such Statement of Additional
Information, and to the incorporation by reference of our report into the
Prospectus which constitutes part of this Registration Statement. We also
consent to the references to us under the headings "Independent Accountants" and
"Experts" in such Statement of Additional Information and to the reference to us
under the heading "Financial Highlights" in such Prospectus.

PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
October 27, 1998

<PAGE>

SCHEDULE OF COMPUTATION OF YIELD QUOTATION
MSDW HIGH YIELD SECURITIES
30 day Yield as of 8/31/98
CLASS A

6
YIELD = 2{ [ ((a-b)/c * d) + 1] -1}

WHERE: a = Dividends and interest earned during the period

b = Expenses accrued for the period

c = The average daily number of shares outstanding
during the period that were entitled to receive
dividends

d = The maximum offering price per share on the last
day of the period

6
YIELD = 2{ [(( 318,175.73-21,613.07)/5,462,732.574*6.40912)+1]-1}

= 10.38%

<PAGE>

SCHEDULE OF COMPUTATION OF YIELD QUOTATION
MSDW HIGH YIELD SECURITIES
30 day Yield as of 8/31/98
CLASS B

6
YIELD = 2{ [ ((a-b)/c * d) + 1] -1}

WHERE: a = Dividends and interest earned during the period

b = Expenses accrued for the period

c = The average daily number of shares outstanding
during the period that were entitled to receive
dividends

d = The maximum offering price per share on the last
day of the period

6
YIELD = 2{ [(( 17,074,142.89-1,938,396.41)/293,519,991.354*6.13889)+1]-1}

= 10.29%

<PAGE>

SCHEDULE OF COMPUTATION OF YIELD QUOTATION
MSDW HIGH YIELD SECURITIES
30 day Yield as of 8/31/98
CLASS C

6
YIELD = 2{ [ ((a-b)/c * d) + 1] -1}

WHERE: a = Dividends and interest earned during the period

b = Expenses accrued for the period

c = The average daily number of shares outstanding
during the period that were entitled to receive
dividends

d = The maximum offering price per share on the last
day of the period

6
YIELD = 2{ [(( 531,834.73-65,197.36)/9,132,092.690*6.12852)+1]-1}

= 10.22%

<PAGE>

SCHEDULE OF COMPUTATION OF YIELD QUOTATION
MSDW HIGH YIELD SECURITIES
30 day Yield as of 8/31/98
CLASS D

6
YIELD = 2{ [ ((a-b)/c * d) + 1] -1}

WHERE: a = Dividends and interest earned during the period

b = Expenses accrued for the period

c = The average daily number of shares outstanding
during the period that were entitled to receive
dividends

d = The maximum offering price per share on the last
day of the period

6
YIELD = 2{ [(( 3,829,825.60-172,288.16)/65,711,907.142*6.10107)+1]-1}

= 11.20%
<PAGE>

SCHEDULE FOR RESTATED COMPUTATIONS OF PERFORMANCE QUOTATIONS
RESTATED FOR 12b-1 FEE
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES - CLASS A

(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)

_ _
| ______________________ |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|

T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT

(A)
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Aug-98 TOTAL RETURN YEARS - n COMPOUND RETURN - T
- ------------ ---------- -------------- ---------- ---------------
<S> <C> <C> <C> <C>
31-Aug-97 $961.30 -3.87% 1 -3.87%

31-Aug-93 $1,374.30 37.43% 5 6.57%

31-Aug-88 $1,830.50 83.05% 10 6.23%
</TABLE>

(B) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE
SALES CHARGE (NON STANDARD COMPUTATIONS)

_ _
| ______________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|

EV
TR = ---------- - 1
P

t = AVERAGE ANNUAL COMPOUND RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)

(C) (B)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Aug-98 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------ ---------- ----------- ---------------- -------------------
<S> <C> <C> <C> <C>
31-Aug-97 $1,004.00 0.40% 1 0.40%

31-Aug-93 $1,435.30 43.53% 5 7.49%

31-Aug-88 $1,911.80 91.18% 10 6.69%
</TABLE>

(E) GROWTH OF $10,000*
(F) GROWTH OF $50,000*
(G) GROWTH OF $100,000*

FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION

TOTAL GROWTH OF GROWTH OF GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT - E $50,000 INVESTMENT - F $100,000 INVESTMENT - G
- ----------- ----------- ---------------------- ---------------------- -----------------------
<S> <C> <C> <C> <C>
26-Sep-79 430.18 $50,765 $255,812 $515,600
</TABLE>

*SINCE INCEPTION : ORIGINAL VALUE $9,575,$48,250 & $97,250 ADJUSTED FOR
4.25%,3.50% AND 2.75% SALES CHARGES, RESPECTIVELY.

<PAGE>

SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES (B)

(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)

_ _
| ______________________ |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|

T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>

(A)
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Aug-98 TOTAL RETURN YEARS - n COMPOUND RETURN - T
- ------------ ---------- -------------- ---------- -------------------
<S> <C> <C> <C> <C>
31-Aug-97 $952.70 -4.73% 1.00 -4.73%

28-Jul-97 $967.90 -3.21% 1.09 -2.94%
</TABLE>

(B) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE
SALES CHARGE (NON STANDARD COMPUTATIONS)

_ _
| ______________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|

EV
TR = ---------- - 1
P

(C) (B)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Aug-98 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------ ---------- ----------- ----------- -------------------
<S> <C> <C> <C> <C>
31-Aug-97 $997.70 -0.23% 1 -0.23%

28-Jul-97 $1,004.00 0.40% 1.09 0.36%
</TABLE>

(E) GROWTH OF $10,000
(F) GROWTH OF $50,000
(G) GROWTH OF $100,000

FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION

<PAGE>

SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES (C)

(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)

_ _
| ______________________ |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|

T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT

(A)
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Aug-98 TOTAL RETURN YEARS - n COMPOUND RETURN - T
- ------------ ---------- ------------ ----------- ---------------
<S> <C> <C> <C> <C>
31-Aug-97 $987.60 -1.24% 1.00 -1.24%

28-Jul-97 $1,002.70 0.27% 1.09 0.25%
</TABLE>

(B) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE
SALES CHARGE (NON STANDARD COMPUTATIONS)

_ _
| ______________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|

EV
TR = ---------- - 1
P

28-Jul-97 $1,002.70 0.27% 1.09 0.25%
</TABLE>

(E) GROWTH OF $10,000
(F) GROWTH OF $50,000
(G) GROWTH OF $100,000

FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION

TOTAL GROWTH OF GROWTH OF GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT - E $50,000 INVESTMENT - F $100,000 INVESTMENT - G
- ------------ ----------- ---------------------- ---------------------- -----------------------
<S> <C> <C> <C> <C>
28-Jul-97 0.27 $10,027 $50,135 $100,270
</TABLE>

<PAGE>

FINAL DATE: 31-Aug-98

SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES - CLASS D

(A) AVERAGE ANNUAL TOTAL RETURNS (NO LOAD FUND)

(B) TOTAL RETURN(NO LOAD FUND

_ _
| ______________________ |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|

T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT

(B) (A)
$1,000 ERV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Aug-98 RETURN - TR YEARS - n COMPOUND RETURN - T
- ---------------- -------------- -------------- ----------- -------------------
<S> <C> <C> <C> <C>
31-Aug-97 $1,006.30 0.63% 1 0.63%

31-Aug-93 $1,452.80 45.28% 5 7.76%

31-Aug-88 $1,959.40 95.94% 10 6.96%
</TABLE>

FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION

TOTAL (C) GROWTH OF (D) GROWTH OF (E) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT -G $50,000 INVESTMENT - G $100,000 INVESTMENT - G
- -------------- -------------- --------------------- ---------------------- -----------------------
<S> <C> <C> <C> <C>
26-Sep-79 455.52 $55,552 $277,760 $555,520
</TABLE>

<PAGE>
MORGAN STANLEY DEAN WITTER FUNDS
MULTIPLE CLASS PLAN
PURSUANT TO RULE 18f-3

INTRODUCTION

This plan (the "Plan") is adopted pursuant to Rule 18f-3(d) of the
Investment Company Act of 1940, as amended (the "1940 Act"), effective as of
July 28, 1997, and amended as of June 22, 1998. The Plan relates to shares of
the open-end investment companies to which Morgan Stanley Dean Witter Advisors
Inc. acts as investment manager, that are listed on Schedule A, as may be
amended from time to time (each, a "Fund" and collectively, the "Funds"). The
Funds are distributed pursuant to a system (the "Multiple Class System") in
which each class of shares (each, a "Class" and collectively, the "Classes") of
a Fund represents a pro rata interest in the same portfolio of investments of
the Fund and differs only to the extent outlined below.

I. DISTRIBUTION ARRANGEMENTS

One or more Classes of shares of the Funds are offered for purchase by
investors with the sales load structures described below. In addition, pursuant
to Rule 12b-1 under the 1940 Act, the Funds have each adopted a Plan of
Distribution (the "12b-1 Plan") under which shares of certain Classes are
subject to the service and/or distribution fees ("12b-1 fees") described below.

1. CLASS A SHARES

Class A shares are offered with a front-end sales load ("FESL"). The
schedule of sales charges applicable to a Fund and the circumstances under which
the sales charges are subject to reduction are set forth in each Fund's current
prospectus. As stated in each Fund's current prospectus, Class A shares may be
purchased at net asset value (without a FESL): (i) in the case of certain large
purchases of such shares; and (ii) by certain limited categories of investors,
in each case, under the circumstances and conditions set forth in each Fund's
current prospectus. Class A shares purchased at net asset value may be subject
to a contingent deferred sales charge ("CDSC") on redemptions made within one
year of purchase. Further information relating to the CDSC, including the manner
in which it is calculated, is set forth in paragraph 6 below. Class A shares are
also subject to payments under each Fund's 12b-1 Plan to reimburse Morgan
Stanley Dean Witter Distributors Inc., Dean Witter Reynolds Inc. ("DWR"), its
affiliates and other broker-dealers for distribution expenses incurred by them
specifically on behalf of the Class, assessed at an annual rate of up to 0.25%
of average daily net assets. The entire amount of the 12b-1 fee represents a
service fee within the meaning of National Association of Securities Dealers,
Inc. ("NASD") guidelines.

2. CLASS B SHARES

Class B shares are offered without a FESL, but will in most cases be subject
to a six-year declining CDSC which is calculated in the manner set forth in
paragraph 6 below. Class B shares purchased by certain qualified
employer-sponsored benefit plans are subject to a three-year declining CDSC
which is calculated in the manner set forth in paragraph 6 below. The schedule
of CDSC charges applicable to each Fund is set forth in each Fund's current
prospectus. With the exception of certain of the Funds which have a different
formula described below (Morgan Stanley Dean Witter American Value Fund, Morgan
Stanley Dean Witter Natural Resource Development Securities Inc., Morgan Stanley
Dean Witter Strategist Fund and Morgan

1
<PAGE>
Stanley Dean Witter Dividend Growth Securities Inc.)(1), Class B shares are also
subject to a fee under each Fund's respective 12b-1 Plan, assessed at the annual
rate of up to 1.0% of either: (a) the lesser of (i) the average daily aggregate
gross sales of the Fund's Class B shares since the inception of the Fund (not
including reinvestment of dividends or capital gains distributions), less the
average daily aggregate net asset value of the Fund's Class B shares redeemed
since the Fund's inception upon which a CDSC has been imposed or waived, or (ii)
the average daily net assets of Class B; or (b) the average daily net assets of
Class B. A portion of the 12b-1 fee equal to up to 0.25% of the Fund's average
daily net assets is characterized as a service fee within the meaning of the
NASD guidelines and the remaining portion of the 12b-1 fee, if any, is
characterized as an asset-based sales charge. Also, Class B shares have a
conversion feature ("Conversion Feature") under which such shares convert to
Class A shares after a certain holding period. Details of the Conversion Feature
are set forth in Section IV below.

3. CLASS C SHARES

Class C shares are offered without imposition of a FESL, but will in most
cases be subject to a CDSC of 1.0% on redemptions made within one year after
purchase. Further information relating to the CDSC is set forth in paragraph 6
below. In addition, Class C shares, under each Fund's 12b-1 Plan, are subject to
12b-1 payments to reimburse Morgan Stanley Dean Witter Distributors Inc., DWR,
its affiliates and other broker-dealers for distribution expenses incurred by
them specifically on behalf of the Class, assessed at the annual rate of up to
1.0% of the average daily net assets of the Class. A portion of the 12b-1 fee
equal to up to 0.25% of the Fund's average daily net assets is characterized as
a service fee within the meaning of NASD guidelines. Unlike Class B shares,
Class C shares do not have the Conversion Feature.

4. CLASS D SHARES

Class D shares are offered without imposition of a FESL, CDSC or a 12b-1 fee
for purchases of Fund shares by (i) investors meeting an initial minimum
investment requirement and (ii) certain other limited categories of investors,
in each case, as may be approved by the Boards of Directors/Trustees of the
Funds and as disclosed in each Fund's current prospectus.

5. ADDITIONAL CLASSES OF SHARES

The Boards of Directors/Trustees of the Funds have the authority to create
additional Classes, or change existing Classes, from time to time, in accordance
with Rule 18f-3 under the 1940 Act.

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

(1)The payments under the 12b-1 Plan for each of Morgan Stanley Dean Witter
American Value Fund, Morgan Stanley Dean Witter Natural Resource Development
Securities Inc. and Morgan Stanley Dean Witter Dividend Growth Securities Inc.
are assessed at the annual rate of 1.0% of the lesser of: (a) the average daily
aggregate gross sales of the Fund's Class B shares since the inception of the
Fund's Plan (not including reinvestment of dividends or capital gains
distributions), less the average daily aggregate net asset value of the Fund's
Class B shares redeemed since the Plan's inception upon which a contingent
deferred sales charge has been imposed or waived, or (b) the average daily net
assets of Class B attributable to shares issued, net of related shares redeemed,
since inception of the Plan. The payments under the 12b-1 Plan for the Morgan
Stanley Dean Witter Strategist Fund are assessed at the annual rate of: (i) 1%
of the lesser of (a) the average daily aggregate gross sales of the Fund's Class
B shares since the effectiveness of the first amendment of the Plan on November
8, 1989 (not including reinvestment of dividends or capital gains
distributions), less the average daily aggregate net asset value of the Fund's
Class B shares redeemed since the effectiveness of the first amended Plan, upon
which a contingent deferred sales charge has been imposed or waived, or (b) the
average daily net assets of Class B attributable to shares issued, net of
related shares redeemed, since the effectiveness of the first amended Plan; plus
(ii) 0.25% of the average daily net assets of Class B attributable to shares
issued, net of related shares redeemed, prior to effectiveness of the first
amended Plan.

2
<PAGE>
6. CALCULATION OF THE CDSC

Any applicable CDSC is calculated based upon the lesser of net asset value
of the shares at the time of purchase or at the time of redemption. The CDSC
does not apply to amounts representing an increase in share value due to capital
appreciation and shares acquired through the reinvestment of dividends or
capital gains distributions. The CDSC schedule applicable to a Fund and the
circumstances in which the CDSC is subject to waiver are set forth in each
Fund's prospectus.

II. EXPENSE ALLOCATIONS

Expenses incurred by a Fund are allocated among the various Classes of
shares pro rata based on the net assets of the Fund attributable to each Class,
except that 12b-1 fees relating to a particular Class are allocated directly to
that Class. In addition, other expenses associated with a particular Class
(except advisory or custodial fees), may be allocated directly to that Class,
provided that such expenses are reasonably identified as specifically
attributable to that Class and the direct allocation to that Class is approved
by the Fund's Board of Directors/Trustees.

III. CLASS DESIGNATION

All shares of the Funds held prior to July 28, 1997 (other than the shares
held by certain employee benefit plans established by DWR and its affiliate, SPS
Transaction Services, Inc., shares of Funds offered with a FESL, and shares of
Morgan Stanley Dean Witter Balanced Growth Fund and Morgan Stanley Dean Witter
Balanced Income Fund) have been designated Class B shares. Shares held prior to
July 28, 1997 by such employee benefit plans have been designated Class D
shares. Shares held prior to July 28, 1997 of Funds offered with a FESL have
been designated Class D shares. In addition, shares of Morgan Stanley Dean
Witter American Value Fund purchased prior to April 30, 1984, shares of Morgan
Stanley Dean Witter Strategist Fund purchased prior to November 8, 1989 and
shares of Morgan Stanley Dean Witter Natural Resource Development Securities
Inc. and Morgan Stanley Dean Witter Dividend Growth Securities Inc. purchased
prior to July 2, 1984 (with respect to such shares of each Fund, including such
proportion of shares acquired through reinvestment of dividends and capital
gains distributions as the total number of shares acquired prior to each of the
preceding dates in this sentence bears to the total number of shares purchased
and owned by the shareholder of that Fund) have been designated Class D shares.
Shares of Morgan Stanley Dean Witter Balanced Growth Fund and Morgan Stanley
Dean Witter Balanced Income Fund held prior to July 28, 1997 have been
designated Class C shares except that shares of Morgan Stanley Dean Witter
Balanced Growth Fund and Morgan Stanley Dean Witter Balanced Income Fund held
prior to July 28, 1997 that were acquired in exchange for shares of an
investment company offered with a CDSC have been designated Class B shares and
those that were acquired in exchange for shares of an investment company offered
with a FESL have been designated Class A shares.

IV. THE CONVERSION FEATURE

Class B shares held before May 1, 1997 will convert to Class A shares in
May, 2007, except that Class B shares which were purchased before July 28, 1997
by trusts for which Morgan Stanley Dean Witter Trust FSB ("MSDW Trust") provides
discretionary trustee services converted to Class A shares on August 29, 1997
(the CDSC was not applicable to such shares upon the conversion). In all other
instances, Class B shares of each Fund will automatically convert to Class A
shares, based on the relative net asset values of the shares of the two Classes
on the conversion date, which will be approximately ten (10) years after the
date of the original purchase. Conversions will be effected once a month. The 10
year period will be calculated from the last day of the month in which the
shares were purchased or, in the case of Class B shares acquired through an
exchange or a series of exchanges, from the last day of the month in which the
original Class B shares were purchased, provided that shares originally
purchased before May 1, 1997 will convert to Class A shares in May, 2007. Except
as set forth below, the conversion of shares purchased on or after May 1, 1997
will take place in the month following the tenth anniversary of the purchase.
There will also be converted at that time such proportion of Class B shares
acquired through automatic reinvestment of dividends owned by the shareholder as
the total number of his or her Class B shares converting at the time bears to
the total number of outstanding Class B shares purchased and owned by the
shareholder. In the case of Class B shares held by a 401(k) plan or other plan
qualified under Section 401(a) of the Internal Revenue Code (the "Code") and

3
<PAGE>
for which MSDW Trust serves as Trustee or DWR's Retirement Plan Services serves
as recordkeeper pursuant to a written Recordkeeping Services Agreement, all
Class B shares will convert to Class A shares on the conversion date of the
first shares of a Fund purchased by that plan. In the case of Class B shares
previously exchanged for shares of an "Exchange Fund" (as such term is defined
in the prospectus of each Fund), the period of time the shares were held in the
Exchange Fund (calculated from the last day of the month in which the Exchange
Fund shares were acquired) is excluded from the holding period for conversion.
If those shares are subsequently re-exchanged for Class B shares of a Fund, the
holding period resumes on the last day of the month in which Class B shares are
reacquired.

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

V. EXCHANGE PRIVILEGES

Shares of each Class may be exchanged for shares of the same Class of the
other Funds and for shares of certain other investment companies without the
imposition of an exchange fee as described in the prospectuses and statements of
additional information of the Funds. The exchange privilege of each Fund may be
terminated or revised at any time by the Fund upon such notice as may be
required by applicable regulatory agencies as described in each Fund's
prospectus.

VI. VOTING

Each Class shall have exclusive voting rights on any matter that relates
solely to its 12b-1 Plan, except that Class B shareholders will have the right
to vote on any proposed material increase in Class A's expenses, including
payments under the Class A 12b-1 Plan, if such proposal is submitted separately
to Class A shareholders. If the amount of expenses, including payments under the
Class A 12b-1 Plan, is increased materially without the approval of Class B
shareholders, the Fund will establish a new Class A for Class B shareholders
whose shares automatically convert on the same terms as applied to Class A
before the increase. In addition, each Class shall have separate voting rights
on any matter submitted to shareholders in which the interests of one Class
differ from the interests of any other Class.

4
<PAGE>
MORGAN STANLEY DEAN WITTER FUNDS
MULTIPLE CLASS PLAN PURSUANT TO RULE 18f-3
SCHEDULE A
AT JULY 22, 1998

<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> HIGH YIELD SECURITIES-CLASS A

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> AUG-31-1998
<INVESTMENTS-AT-COST> 2,481,483,398
<INVESTMENTS-AT-VALUE> 2,187,836,702
<RECEIVABLES> 97,782,977
<ASSETS-OTHER> 105,696
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,285,725,375
<PAYABLE-FOR-SECURITIES> 9,296,418
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 27,394,656
<TOTAL-LIABILITIES> 36,691,074
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,376,133,454
<SHARES-COMMON-STOCK> 4,982,846
<SHARES-COMMON-PRIOR> 292,643
<ACCUMULATED-NII-CURRENT> 15,318,425
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (848,770,882)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (293,646,696)
<NET-ASSETS> 30,678,260
<DIVIDEND-INCOME> 40,625
<INTEREST-INCOME> 235,784,092
<OTHER-INCOME> 0
<EXPENSES-NET> 20,972,039
<NET-INVESTMENT-INCOME> 214,852,678
<REALIZED-GAINS-CURRENT> (27,425,899)
<APPREC-INCREASE-CURRENT> (230,215,151)
<NET-CHANGE-FROM-OPS> (42,788,372)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,263,130)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,202,135
<NUMBER-OF-SHARES-REDEEMED> (1,669,303)
<SHARES-REINVESTED> 157,371
<NET-CHANGE-IN-ASSETS> 1,746,965,501
<ACCUMULATED-NII-PRIOR> 7,755,090
<ACCUMULATED-GAINS-PRIOR> (878,464,135)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7,756,546
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 20,972,039
<AVERAGE-NET-ASSETS> 20,847,090
<PER-SHARE-NAV-BEGIN> 6.82
<PER-SHARE-NII> .76
<PER-SHARE-GAIN-APPREC> (.71)
<PER-SHARE-DIVIDEND> (.71)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> .0
<PER-SHARE-NAV-END> 6.16
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> HIGH YIELD SECURITIES-CLASS B

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> AUG-31-1998
<INVESTMENTS-AT-COST> 2,481,483,398
<INVESTMENTS-AT-VALUE> 2,187,836,702
<RECEIVABLES> 97,782,977
<ASSETS-OTHER> 105,696
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,285,725,375
<PAYABLE-FOR-SECURITIES> 9,296,418
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 27,394,656
<TOTAL-LIABILITIES> 36,691,074
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,376,133,454
<SHARES-COMMON-STOCK> 286,563,788
<SHARES-COMMON-PRIOR> 2,321,051
<ACCUMULATED-NII-CURRENT> 15,318,425
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (848,770,882)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (293,646,696)
<NET-ASSETS> 1,761,147,361
<DIVIDEND-INCOME> 40,625
<INTEREST-INCOME> 235,784,092
<OTHER-INCOME> 0
<EXPENSES-NET> 20,972,039
<NET-INVESTMENT-INCOME> 214,852,678
<REALIZED-GAINS-CURRENT> (27,425,899)
<APPREC-INCREASE-CURRENT> (230,215,151)
<NET-CHANGE-FROM-OPS> (42,788,372)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (152,306,144)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 138,948,772
<NUMBER-OF-SHARES-REDEEMED> (78,167,748)
<SHARES-REINVESTED> 8,546,591
<NET-CHANGE-IN-ASSETS> 1,746,965,501
<ACCUMULATED-NII-PRIOR> 7,755,090
<ACCUMULATED-GAINS-PRIOR> (898,464,135)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7,756,546
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 20,972,039
<AVERAGE-NET-ASSETS> 1,443,713,474
<PER-SHARE-NAV-BEGIN> 6.82
<PER-SHARE-NII> .73
<PER-SHARE-GAIN-APPREC> (.72)
<PER-SHARE-DIVIDEND> (.68)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 6.15
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> HIGH YIELD SECURITIES-CLASS C

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> AUG-31-1998
<INVESTMENTS-AT-COST> 2,481,483,398
<INVESTMENTS-AT-VALUE> 2,187,836,702
<RECEIVABLES> 97,782,977
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<PAGE>
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<NAME> HIGH YIELD SECURITIES-CLASS D

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