<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
Two World Trade Center, New York, New York 10048
LETTER TO THE SHAREHOLDERS February 28, 1999
DEAR SHAREHOLDER:
The six-month period ended February 28, 1999, was a difficult one for the
high-yield bond market, primarily because of a dramatic "flight to quality"
in the second half of 1998. In response to concerns about sharply declining
overseas markets and the potential for a worldwide economic slowdown,
investors sought the relative safety of U.S. government securities over
riskier investments such as equities and high-yield bonds. While equities
rebounded during the fourth quarter, at the end of the period the high-yield
market still remained near its recent lows as investors continued to be very
risk averse, apparently awaiting further evidence of continued economic
growth in 1999.
HIGH-YIELD MARKET OVERVIEW
During the latter half of 1998, serious concerns began to emerge over the
rapidly escalating foreign market crisis, raising questions about the extent
of the impact on the U.S. economy and corporate earnings. This trend resulted
in a sharp correction in the high-yield bond market during the second half,
causing high-yield bond prices to decline as much as 15 percent in many cases
and driving up yields from their first-half range of 9 percent to the 12
percent area. The high-yield market itself witnessed a flight to quality as
well, with the middle tier of the market (B-rated issues) significantly
underperforming the upper tier (BB-rated issues), again attributable to
investors' severe risk aversion. As a result, high-yield market yields began
1999 near their highest level in relation to Treasuries in nearly 10 years.
PERFORMANCE AND PORTFOLIO STRATEGY
During the six-month period ended February 28, 1999, Morgan Stanley Dean
Witter High Yield Securities' Class A and D shares produced returns of 0.08
percent and 0.16 percent, respectively. The Fund underperformed the Lipper
High Yield Bond Funds Index and the Credit Suisse First Boston High Yield
Index, which returned 3.96 percent and 3.48 percent, respectively. For the
same period, the Fund's Class B and C shares had
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
LETTER TO THE SHAREHOLDERS February 28, 1999, continued
total returns of -0.20 percent and -0.25 percent, respectively. The
performance of the Fund's four share classes varies because of differing
expenses.
During 1998, the Fund maintained a substantial position in the more
defensive, higher-quality end of the fixed-income market, which held up well
during the extremely volatile environment. Despite these defensive holdings,
however, the Fund's more significant, long-term core position in the B-rated
sector of the market was sharply affected by the market's second-half
correction, as described above.
In an effort to minimize the risks of an economic slowdown, we continue to
concentrate on sectors that have historically proven to be more predictable,
recession resistant and growth oriented, such as cellular communications,
foods and beverages, telecommunications, media and cable television. We
believe that these industry groups are poised to perform well over the next
year, despite slowing in many of the world's markets. In addition, we expect
to see continued consolidation and merger activity within these industries,
which should lead to improved credit quality for many of the industry
participants. We continue to focus primarily on domestic companies, given the
outlook for continued growth in the U.S. economy, and are avoiding the
emerging foreign high-yield markets, because of the higher degree of
uncertainty associated with many of these markets.
LOOKING AHEAD
Despite the high-yield market's recent weakness, we consider today's
substantially higher, more attractive yields and significantly discounted
bond prices an investment opportunity, especially in view of the still
relatively low interest-rate environment. Given a soft landing in the
economy, with growth continuing into 1999, we expect the high-yield market to
follow the lead of the equity markets and rebound to more normal levels
relative to U.S. Treasury securities. Should this scenario materialize and
high-yield bond prices recover, the Fund stands to participate not only in
today's exceptionally high income levels but could potentially provide a
degree of capital appreciation as well. Although the B-rated segment of the
market was not a good investment performer in 1998, we are confident that its
attractive yield and appreciation potential remains intact for long-term
high-yield investors.
We appreciate your ongoing support of Morgan Stanley Dean Witter High Yield
Securities Inc. and look forward to continuing to serve your investment
needs.
Very truly yours,
/s/ Charles A. Fiumefreddo
CHARLES A. FIUMEFREDDO
Chairman of the Board
2
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS February 28, 1999 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (95.1%)
Advertising (0.4%)
$10,000 Interep National Radio Sales -144A* ............................. 10.00% 07/01/08 $ 10,500,000
--------------
Aerospace (0.5%)
12,500 Sabreliner Corp. -144A* ......................................... 11.00 06/15/08 11,000,000
--------------
Alcoholic Beverages (0.0%)
1,000 National Wine & Spirits -144A* .................................. 10.125 01/15/09 1,012,500
--------------
Beverages -Non-Alcoholic (2.4%)
50,000 Pepsico, Inc. ................................................... 15.00 08/06/99 52,148,000
10,000 Sparkling Spring Water (Canada) ................................. 11.50 11/15/07 7,400,000
--------------
59,548,000
--------------
Books/Magazines (1.1%)
14,950 American Media Operations, Inc. ................................. 11.625 11/15/04 15,996,500
7,500 Perry Judds ..................................................... 10.625 12/15/07 7,800,000
2,000 Phoenix Color Corp. -144A* ...................................... 10.375 02/01/09 2,020,000
--------------
25,816,500
--------------
Broadcast/Media (1.0%)
14,000 STC Broadcasting, Inc. .......................................... 11.00 03/15/07 14,630,000
10,000 Tri-State Outdoor Media Group ................................... 11.00 05/15/08 10,300,000
--------------
24,930,000
--------------
Broadcasting (2.6%)
15,000 Capstar Broadcasting Partners ................................... 12.75++ 02/01/09 12,656,250
6,000 Cumulus Media Inc. .............................................. 10.375 07/01/08 6,510,000
20,500 Paxson Communications Corp. ..................................... 11.625 10/01/02 20,807,500
20,749 Spanish Broadcasting System, Inc. ............................... 12.50 06/15/02 23,394,497
--------------
63,368,247
--------------
Cable Television (2.1%)
50,687 Australis Holdings Ltd. (Australia)(a) .......................... 15.00++ 11/01/02 2,534,350
4,404 Australis Media Ltd. -144A* (Australia) (a) ..................... 0.00 11/01/00 976,017
3,000 Classic Cable Inc. -144A* ....................................... 9.875 08/01/08 3,210,000
7,000 Diva Systems Corp. -144A* ....................................... 12.625++ 03/01/08 2,240,000
12,400 FrontierVision Operating Partners, L.P. ......................... 11.00 10/15/06 14,012,000
10,000 James Cable Partners L.P. (Series B) ............................ 10.75 08/15/04 10,600,000
16,000 Rifkin Acquisition Partners L.P. ................................ 11.125 01/15/06 17,880,000
--------------
51,452,367
--------------
Casino/Gambling (3.1%)
22,000 Aladdin Gaming Capital Corp. (Series B) ......................... 13.50++ 03/01/10 8,360,000
20,075 Argosy Gaming Co. LLC ........................................... 13.25 06/01/04 22,534,187
SEE NOTES TO FINANCIAL STATEMENTS
3
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS February 28, 1999 (unaudited) continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
$20,500 Fitzgeralds Gaming Corp. (Series B) ............................. 12.25% 12/15/04 $ 9,635,000
20,100 Lady Luck Gaming Finance Corp. .................................. 11.875 03/01/01 20,376,375
12,300 Riviera Holdings Corp. .......................................... 10.00 08/15/04 10,916,250
12,906 Stuart Entertainment, Inc. (Series B) ........................... 12.50 11/15/04 3,291,030
--------------
75,112,842
--------------
Cellular Telephone (6.0%)
28,000 American Cellular Corp. -144A* .................................. 10.50 05/15/08 29,190,000
6,000 Centennial Cellular -144A* ...................................... 10.75 12/15/08 6,465,000
14,500 Dobson/Sygnet Communications -144A* ............................. 12.25 12/15/08 15,841,250
20,130 Dolphin Telecom PLC (United Kingdom) ............................ 11.50++ 06/01/08 9,058,500
20,000 Nextel Communications, Inc. ..................................... 10.65++ 09/15/07 13,750,000
17,000 Nextel Partners, Inc. -144A* .................................... 14.00++ 02/01/09 8,988,750
37,133 Price Communication Cellular Holdings ........................... 11.25+ 08/15/08 35,647,500
50,999 Triton PCS, Inc. ................................................ 11.00++ 05/01/08 28,431,942
--------------
147,372,942
--------------
Construction/Agricultural Equipment/Trucks (0.5%)
13,350 J.B. Poindexter & Co., Inc. ..................................... 12.50 05/15/04 12,949,500
--------------
Consumer Electronics/Appliances (1.4%)
84,930 International Semi-Tech Microelectronics, Inc. (Canada) ........ 11.50++ 08/15/03 11,465,550
10,000 Salton Inc. -144A* .............................................. 10.75 12/15/05 10,212,500
13,000 Windmere-Durable Holdings, Inc. ................................. 10.00 07/31/08 11,895,000
--------------
33,573,050
--------------
Consumer Specialties (1.1%)
35,000 Samsonite Corp. ................................................. 10.75 06/15/08 26,600,000
--------------
Consumer/Business Services (5.0%)
28,000 Anacomp, Inc. (Series B) ........................................ 10.875 04/01/04 29,330,000
5,900 Anacomp, Inc. (Series D) ........................................ 10.875 04/01/04 6,180,250
39,250 CEX Holdings, Inc. (Series B) ................................... 9.625 06/01/08 36,993,125
13,000 Comforce Operating, Inc. ........................................ 12.00 12/01/07 12,935,000
10,000 Entex Information Services, Inc. -144A* ......................... 12.50 08/01/06 7,150,000
23,500 MDC Communications Corp. (Canada) ............................... 10.50 12/01/06 23,970,000
7,283 United States Banknote Corp. .................................... 10.375 06/01/02 6,190,550
--------------
122,748,925
--------------
Containers/Packaging (2.4%)
11,900 Berry Plastics Corp. ............................................ 12.25 04/15/04 12,539,625
27,081 Envirodyne Industries, Inc. ..................................... 10.25 12/01/01 21,664,800
8,000 Impac Group, Inc. (Series B) .................................... 10.125 03/15/08 8,020,000
14,725 Packaging Resources, Inc. ....................................... 11.625 05/01/03 15,424,437
--------------
57,648,862
--------------
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS February 28, 1999 (unaudited) continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
Contract Drilling (0.6%)
$34,000 Northern Offshore ASA -144A* (Norway) ........................... 10.00% 05/15/05 $ 15,640,000
--------------
Diversified Electronic Products (0.9%)
15,450 High Voltage Engineering, Inc. .................................. 10.50 08/15/04 14,677,500
8,000 Telecommunication Techniques Co. ................................ 9.75 05/15/08 8,040,000
--------------
22,717,500
--------------
Diversified Manufacturing (4.4%)
14,500 Eagle-Picher Industries, Inc. ................................... 9.375 03/01/08 14,065,000
15,870 Interlake Corp. ................................................. 12.00 11/15/01 16,881,713
18,400 Interlake Corp. ................................................. 12.125 03/01/02 18,630,000
20,000 Jordan Industries, Inc. (Series B) .............................. 10.375 08/01/07 20,475,000
57,338 Jordan Industries, Inc. (Series B) .............................. 11.75++ 04/01/09 36,122,940
--------------
106,174,653
--------------
Drugstore Chains (0.4%)
10,000 Community Distributors .......................................... 10.25 10/15/04 9,125,000
--------------
Electronic Data Processing (1.0%)
5,875 Unisys Corp. .................................................... 11.75 10/15/04 6,704,844
15,000 Unisys Corp. (Series B) ......................................... 12.00 04/15/03 16,650,000
--------------
23,354,844
--------------
Electronic Distributors (0.8%)
20,000 CHS Electronics, Inc. ........................................... 9.875 04/15/05 19,000,000
--------------
Engineering & Construction (0.4%)
10,000 Metromedia Fiber Network -144A* ................................. 10.00 11/15/08 10,400,000
--------------
Entertainment & Leisure (0.7%)
20,850 AMF Bowling Worldwide Inc. (Series B) ........................... 10.875 03/15/06 16,471,500
--------------
Food Chains (1.4%)
9,185 Eagle Food Centers, Inc. ........................................ 8.625 04/15/00 8,909,450
16,500 Pueblo Xtra International, Inc. ................................. 9.50 08/01/03 15,840,000
9,748 Pueblo Xtra International, Inc. (Series C) ...................... 9.50 08/01/03 9,358,080
--------------
34,107,530
--------------
Food Distributors (1.8%)
15,221 Fleming Companies, Inc. ......................................... 10.625 12/15/01 15,601,525
3,500 Fleming Companies, Inc. ......................................... 10.50 12/01/04 3,246,250
27,975 Fleming Companies, Inc. ......................................... 10.625 07/31/07 25,667,063
--------------
44,514,838
--------------
Hotels/Resorts (2.0%)
13,000 Epic Resorts LLC (Series B) ..................................... 13.00 06/15/05 12,740,000
16,000 Motels of America, Inc. (Series B) .............................. 12.00 04/15/04 11,760,000
13,250 Premier Cruises Ltd. -144A* ..................................... 11.00 03/15/08 3,511,250
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS February 28, 1999 (unaudited) continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
$22,568 Resort At Summerlin (Series B) .................................. 13.00+% 12/15/07 $21,439,994
--------------
49,451,244
--------------
Industrial Specialties (2.2%)
9,075 Cabot Safety Corp. .............................................. 12.50 07/15/05 9,732,938
13,500 Indesco International ........................................... 9.75 04/15/08 11,880,000
21,963 International Wire Group, Inc. .................................. 11.75 06/01/05 23,390,595
10,500 Outsourcing Services Group, Inc. -144A* ......................... 10.875 03/01/06 10,106,250
--------------
55,109,783
--------------
Internet Services (0.5%)
3,120 Verio Inc. ...................................................... 10.375 04/01/05 3,221,400
8,000 Verio Inc. -144A* ............................................... 11.25 12/01/08 8,660,000
--------------
11,881,400
--------------
Media Conglomerates (2.4%)
55,000 Walt Disney Co. ................................................. 13.50 03/10/00 59,586,450
--------------
Medical Specialties (1.4%)
25,715 MEDIQ Inc./PRN Life Support ..................................... 11.00 06/01/08 23,143,500
10,000 Universal Hospital Services, Inc. ............................... 10.25 03/01/08 9,025,000
3,000 Universal Hospital Services, Inc. -144A* ........................ 10.25 03/01/08 2,587,500
--------------
34,756,000
--------------
Medical/Nursing Services (0.8%)
7,500 Pediatric Services of America, Inc. (Series A) .................. 10.00 04/15/08 5,100,000
16,500 Unison Healthcare Corp. -144A* (b) .............................. 12.25 11/01/06 5,775,000
20,000 Vencor Operating, Inc. .......................................... 9.875 05/01/05 8,800,000
--------------
19,675,000
--------------
Military/Gov't/Technical (0.6%)
15,000 Loral Space & Communications, Ltd. -144A* ....................... 9.50 01/15/06 14,550,000
--------------
Office Equipment/Supplies (0.7%)
22,000 Mosler, Inc. .................................................... 11.00 04/15/03 18,040,000
--------------
Oil/Gas Transmission (0.7%)
16,000 Petro Stopping Centers L.P. ..................................... 10.50 02/01/07 16,880,000
--------------
Oil Refining/Marketing (1.7%)
53,800 Transamerican Refining Corp. ................................... 16.00 06/30/03 37,391,000
5,000 Transamerican Refining Corp. -144A* ............................. 15.00+ 12/01/03 4,950,000
--------------
42,341,000
--------------
Other Consumer Services (0.4%)
10,000 Volume Services America -144A* .................................. 11.25 03/01/09 10,088,000
--------------
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS February 28, 1999 (unaudited) continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
Other Telecommunications (4.9%)
$ 20,000 Covad Communications Group, Inc. -144A* ......................... 12.50% 02/15/09 $ 19,300,000
8,085 Esprit Telecom Group PLC (United Kingdom) ....................... 11.50 12/15/07 8,570,100
17,750 Esprit Telecom Group PLC (United Kingdom) ....................... 10.875 06/15/08 18,460,000
30,000 Level 3 Communications -144A* ................................... 10.50++ 12/01/08 17,175,000
20,000 Level 3 Communications, Inc. .................................... 9.125 05/01/08 19,450,000
12,000 Versatel Telecom BV (Netherlands) ............................... 13.25 05/15/08 12,360,000
24,500 Versatel Telecom BV -144A* (Netherlands) ........................ 13.25 05/15/08 25,235,000
--------------
120,550,100
--------------
Package Goods/Cosmetics (0.5%)
11,000 J.B. Williams Holdings, Inc. .................................... 12.00 03/01/04 11,385,000
--------------
Printing/Forms (0.5%)
13,000 Premier Graphics Inc. -144A* .................................... 11.50 12/01/05 12,577,500
--------------
Rental/Leasing Companies (0.4%)
9,000 Neff Corp. -144A* ............................................... 10.25 06/01/08 8,797,500
--------------
Restaurants (4.2%)
141,992 American Restaurant Group Holdings, Inc. -144A* (c) ............ 0.00 12/15/05 42,597,600
34,207 FRD Acquisition Corp. (Series B) ................................ 12.50 07/15/04 36,045,626
20,000 Friendly Ice Cream Corp. ........................................ 10.50 12/01/07 17,200,000
25,000 Planet Hollywood International, Inc. ............................ 12.00 04/01/05 7,375,000
--------------
103,218,226
--------------
Retail -Specialty (1.2%)
9,000 Mrs. Fields Holdings Co. -144A* (Units)++ ....................... 14.00++ 12/01/05 4,500,000
10,000 Mrs. Fields Original ............................................ 10.125 12/01/04 9,500,000
14,125 Pantry, Inc. .................................................... 10.25 10/15/07 14,690,000
--------------
28,690,000
--------------
Semiconductors (0.3%)
8,000 Advanced Micro Devices, Inc. .................................... 11.00 08/01/03 8,460,000
--------------
Services to the Health Industry (0.7%)
16,975 Unilab Corp. ................................................... 11.00 04/01/06 17,993,500
--------------
Specialty Chemicals (0.3%)
6,000 Octel Developments PLC (United Kingdom) ......................... 10.00 05/01/06 6,255,000
--------------
Specialty Foods/Candy (0.8%)
Specialty Foods Acquisition Corp.
109,075 (Series B) ...................................................... 13.00++ 08/15/05 19,088,125
--------------
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS February 28, 1999 (unaudited) continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
Telecommunications (15.6%)
$30,500 21st Century Telecom Group, Inc. ................................ 12.25++% 02/15/08 $ 9,150,000
11,500 Birch Telecom Inc. -144A* (Units)++ ............................. 14.00 06/15/08 10,522,500
15,000 Caprock Communications Corp. (Series B) ......................... 12.00 07/15/08 15,262,500
50,875 e. Spire Communications, Inc. ................................... 13.75 07/15/07 44,770,000
30,000 Facilicom International (Series B) .............................. 10.50 01/15/08 23,100,000
47,000 Firstworld Communications, Inc. ................................. 13.00++ 04/15/08 17,625,000
26,700 Focal Communications Corp. (Series B) ........................... 12.125++ 02/15/08 14,151,000
28,250 GST Equipment Funding, Inc. ..................................... 13.25 05/01/07 28,956,250
18,100 GST Telecommunications, Inc. -144A* ............................. 10.50++ 05/01/08 8,326,000
5,000 GST Telecommunications, Inc. -144A* (Conv.) ..................... 13.875++ 12/15/05 4,125,000
Hyperion Telecommunication, Inc.
23,800 (Series A) ...................................................... 13.00++ 04/15/03 18,326,000
Hyperion Telecommunication, Inc.
23,000 (Series B) ...................................................... 12.25 09/01/04 24,495,000
56,800 In-Flight Phone Corp. (Series B)(d) ............................. 14.00 05/15/02 8,236,000
8,500 NextLink Communications, Inc. ................................... 12.50 04/15/06 9,158,750
17,500 NextLink Communications, Inc. ................................... 9.00 03/15/08 16,581,250
12,500 NextLink Communications, Inc. -144A* ............................ 10.75 11/15/08 12,968,750
31,250 Optel Inc. (Series B) ........................................... 11.50 07/01/08 30,781,250
15,000 Pac-West Telecomm Inc. -144A* ................................... 13.50 02/01/09 15,000,000
3,000 Primus Telecomm Group ........................................... 11.75 08/01/04 3,060,000
7,000 Primus Telecomm Group -144A* .................................... 11.25 01/15/09 7,070,000
32,900 Primus Telecommunication Group, Inc. (Series B) ................ 9.875 05/15/08 30,926,000
17,465 Rhythms Netconnections (Series B) ............................... 13.50++ 05/15/08 8,732,500
9,000 RSL Communications PLC -144A* (United Kingdom) .................. 10.50 11/15/08 9,112,500
11,000 Talton Holdings, Inc (Series B) ................................. 11.00 06/30/07 10,010,000
--------------
380,446,250
--------------
Telecommunications Equipment (0.9%)
10,500 FWT, Inc. ....................................................... 9.875 11/15/07 3,150,000
17,100 SBA Communications Corp. ........................................ 12.00++ 03/01/08 10,602,000
14,000 Spectrasite Holdings, Inc. -144A* ............................... 12.00++ 07/15/08 8,540,000
--------------
22,292,000
--------------
Wireless Communications (9.4%)
13,500 Advanced Radio Telecommunication ................................ 14.00 02/15/07 9,855,000
10,650 AMSC Acquisition Co., Inc. (Series B) ........................... 12.25 04/01/08 5,218,500
9,000 Arch Communications, Inc. ....................................... 12.75 07/01/07 8,640,000
65,300 CellNet Data Systems Inc. ....................................... 14.00++ 10/01/07 20,896,000
30,031 Clearnet Communications Inc. (Canada) ........................... 14.75++ 12/15/05 27,102,979
11,875 Globalstar LP/Capital Corp. ..................................... 11.375 02/15/04 7,481,250
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS February 28, 1999 (unaudited) continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
$ 1,585 Globalstar LP/Capital Corp. ..................................... 11.25% 06/15/04 $ 1,077,800
24,610 Globalstar LP/Capital Corp. ..................................... 10.75 11/01/04 16,119,550
7,500 Globalstar LP/Capital Corp. ..................................... 11.50 06/01/05 5,137,500
3,610 Paging Network, Inc. ............................................ 8.875 02/01/06 2,960,200
19,750 Paging Network, Inc. ............................................ 10.125 08/01/07 17,083,750
25,300 Paging Network, Inc. ............................................ 10.00 10/15/08 21,694,750
20,230 USA Mobile Communications Holdings, Inc. ........................ 9.50 02/01/04 17,600,100
18,800 USA Mobile Communications Holdings, Inc. ........................ 14.00 11/01/04 19,176,000
68,000 Winstar Communications, Inc. .................................... 14.00++ 10/15/05 48,960,000
--------------
229,003,379
--------------
TOTAL CORPORATE BONDS
(Identified Cost $2,635,003,458) ........................................................ 2,326,255,057
--------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES
- -------------
COMMON STOCKS (e)(0.4%)
<S> <C> <C>
Casino/Gambling (0.0%)
207,312 Fitzgeralds Gaming Corp. ........................................ 103,656
------------------
Clothing/Shoe/Accessory Stores (0.1%)
2,621,192 County Seat, Inc. (c) ........................................... 1,769,305
------------------
Hotels/Resorts (0.0%)
7,500 Motels of America, Inc. -144A* .................................. 7,500
781,421 Vagabond Inns, Inc. (Class D)(d) ................................ 781
------------------
8,281
------------------
Motor Vehicles (0.0%)
709 Northern Holdings Industrial Corp. (c)* ......................... --
------------------
Restaurants (0.0%)
38,057 American Restaurant Group Holdings, Inc. -144A* ................ 381
------------------
Services to the Health Industry (0.2%)
1,692,700 Unilab Corp. .................................................... 4,549,131
------------------
Specialty Foods/Candy (0.0%)
574,725 Specialty Foods Acquisition Corp. -144A* ........................ 574,726
------------------
Textiles (0.1%)
1,754,730 U.S. Leather, Inc. (c) .......................................... 2,368,885
------------------
TOTAL COMMON STOCKS
(Identified Cost $100,890,617) .................................. 9,374,365
------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS February 28, 1999 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS (0.1%)
Oil Refining/Marketing (0.0%)
200,000 Transcontinental Refining Corp.* (Conv.) ....................... $ 136,000
194,432 Transcontinental Refining Corp.* (Conv.)(Class B) .............. 11,666
106,938 Transcontinental Refining Corp.* (Conv.)(Class C) .............. 6,416
281,926 Transcontinental Refining Corp.* (Conv.)(Class D) .............. 16,915
583,295 Transcontinental Refining Corp.* (Conv.)(Class E) .............. 34,998
--------------
205,995
--------------
Restaurants (0.1%)
3,699 American Restaurant Group Holdings, Inc. (Series B) ............ 3,699,000
--------------
TOTAL PREFERRED STOCKS
(Identified Cost $3,904,909) .................................... 3,904,995
--------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION
WARRANTS DATE
- ------------ ---------------------------------------------------------------- ------------ --------------
<S> <C> <C> <C>
WARRANTS (e)(0.1%)
Aerospace (0.0%)
9,000 Sabreliner Corp. -144A* ......................................... 04/15/03 90,000
--------------
Cable Television (0.0%)
21,000 Diva Systems Corp. -144A* ....................................... 03/01/08 2,765
--------------
Casino/Gambling (0.0%)
220,000 Aladdin Gaming, Inc. -144A* ..................................... 03/01/10 2,270
7,000 Fitzgeralds South Inc. -144A* ................................... 03/15/99 --
--------------
2,270
--------------
Hotels/Resorts (0.0%)
13,000 Epic Resorts LLC -144A* ......................................... 06/15/05 130
20,000 Resort At Summerlin -144A* ...................................... 12/15/07 200
--------------
330
--------------
Oil Refining/Marketing (0.0%)
53,800 Transamerican Refining Corp. .................................... 06/30/03 538
--------------
Other Telecommunications (0.1%)
36,500 Versatel Telecom -144A* (Netherlands) ........................... 05/15/08 1,460,000
--------------
Restaurants (0.0%)
3,500 American Restaurant Group Holdings, Inc. -144A* ................ 08/15/00 --
--------------
Telecommunications (0.0%)
47,000 Firstworld Communications, Inc. -144A* .......................... 04/15/08 470
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
PORTFOLIO OF INVESTMENTS February 28, 1999 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION
WARRANTS DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Wireless Communications (0.0%)
8,750 American Mobile Satellite Corp. -144A* .......................... 04/01/08 $ 21,875
--------------
TOTAL WARRANTS
(Identified Cost $507,438).................................................... 1,578,248
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE
- ----------- ---------------------------------------------------------------- -------- ---------- --------------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS (4.5%)
U.S. GOVERNMENT AGENCIES (f)(4.1%)
$19,400 Federal Home Loan Banks ........................................ 4.73% 03/01/99 19,400,000
51,600 Federal Home Loan Mortgage Corp. ............................... 4.70 03/01/99 51,600,000
30,000 Federal Home Loan Mortgage Corp. ............................... 4.73 03/05/99 29,984,233
--------------
TOTAL U.S. GOVERNMENT AGENCIES
(Amortized Cost $100,984,233) ........................................... 100,984,233
--------------
REPURCHASE AGREEMENT (0.4%)
9,683 The Bank of New York (dated 02/26/99
proceeds $9,686,526)(g)
(Identified Cost $9,682,693) .................................. 4.75 03/01/99 9,682,693
--------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $110,666,926) .......................................... 110,666,926
--------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $2,850,973,348)(h) ..................................... 100.2% 2,451,779,591
LIABILITIES IN EXCESS OF OTHER ASSETS ................................... (0.2) (5,524,895)
-------- ---------------
NET ASSETS .............................................................. 100.0% $2,446,254,696
======== ===============
</TABLE>
- ------------
* Resale is restricted to qualified institutional investors.
+ Payment-in-kind security.
++ Currently a zero coupon bond that 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) Securities were purchased on a discount basis. The interest rates
shown have been adjusted to reflect a money market equivalent yield.
(g) Collateralized by $9,470,064 U.S. Treasury Note 6.50% due 05/31/01
valued at $9,876,347.
(h) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$50,511,974 and the aggregate gross unrealized depreciation is
$449,705,731, resulting in net unrealized depreciation of
$399,193,757.
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1999 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $2,850,973,348).......................... $2,451,779,591
Receivable for:
Interest................................................. 53,980,309
Capital stock sold....................................... 4,708,731
Prepaid expenses and other assets.......................... 161,253
--------------
TOTAL ASSETS ............................................ 2,510,629,884
--------------
LIABILITIES:
Payable for:
Investments purchased.................................... 53,520,208
Dividends to shareholders................................ 3,473,521
Capital stock repurchased................................ 3,356,793
Plan of distribution fee................................. 1,271,529
Investment management fee................................ 782,355
Payable to bank............................................ 1,723,209
Accrued expenses and other payables........................ 247,573
--------------
TOTAL LIABILITIES ....................................... 64,375,188
--------------
NET ASSETS .............................................. $2,446,254,696
==============
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................ $3,722,182,264
Net unrealized depreciation................................ (399,193,757)
Accumulated undistributed net investment income ........... 5,330,029
Accumulated net realized loss.............................. (882,063,840)
--------------
NET ASSETS .............................................. $2,446,254,696
==============
CLASS A SHARES:
Net Assets................................................. $ 67,527,875
Shares Outstanding (500,000,000 authorized, $.01 par
value).................................................... 11,701,421
NET ASSET VALUE PER SHARE ............................... $ 5.77
==============
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value) ........ $ 6.09
==============
CLASS B SHARES:
Net Assets................................................. $1,921,626,920
Shares Outstanding (500,000,000 authorized, $.01 par
value).................................................... 333,655,711
NET ASSET VALUE PER SHARE ............................... $ 5.76
==============
CLASS C SHARES:
Net Assets................................................. $ 91,249,805
Shares Outstanding (500,000,000 authorized, $.01 par
value).................................................... 15,827,493
NET ASSET VALUE PER SHARE ............................... $ 5.77
==============
CLASS D SHARES:
Net Assets................................................. $ 365,850,096
Shares Outstanding (500,000,000 authorized, $.01 par
value).................................................... 63,395,829
NET ASSET VALUE PER SHARE ............................... $ 5.77
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the six months ended February 28, 1999 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME .......................... $ 152,588,818
---------------
EXPENSES
Plan of distribution fee (Class A
shares).................................. 33,908
Plan of distribution fee (Class B
shares).................................. 6,799,974
Plan of distribution fee (Class C
shares).................................. 303,185
Investment management fee................. 4,495,504
Transfer agent fees and expenses.......... 863,399
Registration fees......................... 182,143
Shareholder reports and notices........... 58,293
Custodian fees............................ 53,755
Professional fees......................... 30,763
Directors' fees and expenses.............. 9,889
Other..................................... 18,511
---------------
TOTAL EXPENSES ......................... 12,849,324
---------------
NET INVESTMENT INCOME .................. 139,739,494
---------------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss......................... (33,292,958)
Net change in unrealized depreciation ... (105,547,061)
---------------
NET LOSS ............................... (138,840,019)
---------------
NET INCREASE ............................. $ 899,475
===============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
FEBRUARY 28, 1999 AUGUST 31, 1998
- -------------------------------------------------- ----------------- ---------------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income.............................. $ 139,739,494 $ 214,852,678
Net realized loss.................................. (33,292,958) (27,425,899)
Net change in unrealized depreciation.............. (105,547,061) (230,215,151)
----------------- ---------------
NET INCREASE (DECREASE).......................... 899,475 (42,788,372)
----------------- ---------------
DIVIDENDS FROM NET INVESTMENT INCOME:
Class A shares..................................... (3,323,157) (2,263,130)
Class B shares..................................... (116,456,932) (152,306,144)
Class C shares..................................... (4,630,342) (3,375,190)
Class D shares..................................... (25,317,459) (49,344,880)
----------------- ---------------
TOTAL DIVIDENDS ................................. (149,727,890) (207,289,344)
----------------- ---------------
Net increase from capital stock transactions ..... 346,048,810 1,997,043,217
----------------- ---------------
NET INCREASE .................................... 197,220,395 1,746,965,501
NET ASSETS:
Beginning of period................................ 2,249,034,301 502,068,800
----------------- ---------------
END OF PERIOD
(Including undistributed net investment income
of $5,330,029 and $15,318,425, respectively) .... $2,446,254,696 $2,249,034,301
================= ===============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS February 28, 1999 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter High Yield Securities Inc. (the "Fund") 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
converted to a multiple class share structure.
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 is determined by Morgan Stanley Dean Witter Advisors Inc. (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 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 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
15
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS February 28, 1999 (unaudited) continued
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 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.
16
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS February 28, 1999 (unaudited) continued
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.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities,
equipment, clerical, bookkeeping and certain legal services and pays the
salaries of all personnel, including officers of the Fund who are employees
of the Investment Manager. The Investment Manager also bears the cost of
telephone services, heat, light, power and other utilities provided to the
Fund.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by 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 (1) 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 these 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, including overhead and telephone
expenses; (2) printing and distribution of prospectuses and reports used in
connection with the offering of these shares to other than current
shareholders; and (3) 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
17
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS February 28, 1999 (unaudited) continued
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 $56,413,131 at February
28, 1999.
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 six months ended February 28, 1999, the
distribution fee was accrued for Class A shares and Class C shares at the
annual rate of 0.14% and 0.85%, respectively.
The Distributor has informed the Fund that for the six months ended February
28, 1999, it received contingent deferred sales charges from certain
redemptions of the Fund's Class A shares, Class B shares and Class C shares
of $14,309, $1,842,255 and $38,576, respectively and received $285,866 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.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the six months ended February 28, 1999,
aggregated $684,515,238 and $423,925,879, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager
and Distributor, is the Fund's transfer agent. At February 28, 1999, the Fund
had transfer agent fees and expenses payable of approximately $3,700.
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
18
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS February 28, 1999 (unaudited) continued
years of service. Aggregate pension costs for the six months ended February
28, 1999 included in Directors' fees and expenses in the Statement of
Operations amounted to $3,055. At February 28, 1999, the Fund had an accrued
pension liability of $52,399 which is included in accrued expenses in the
Statement of Assets and Liabilities.
5. CAPITAL STOCK
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
FEBRUARY 28, 1999 AUGUST 31, 1998
------------------------------- -------------------------------
(UNAUDITED)
SHARES AMOUNT SHARES AMOUNT
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold................................................ 9,107,430 $ 53,717,581 6,202,135 $ 41,894,662
Reinvestment of dividends .......................... 268,062 1,572,366 157,371 1,048,292
Redeemed ........................................... (2,656,917) (15,630,454) (1,669,303) (10,859,033)
-------------- --------------- -------------- ---------------
Net increase - Class A ............................. 6,718,575 39,659,493 4,690,203 32,083,921
-------------- --------------- -------------- ---------------
CLASS B SHARES
Sold ............................................... 97,153,792 574,212,844 138,948,772 936,076,158
Reinvestment of dividends .......................... 7,466,036 43,766,252 8,546,591 57,074,799
Shares issued in connection with the acquisition of
Dean Witter High Income Securities ................ -- -- 214,915,122 1,469,485,599
Redeemed ........................................... (57,527,905) (340,441,776) (78,167,748) (520,016,664)
-------------- --------------- -------------- ---------------
Net increase - Class B ............................. 47,091,923 277,537,320 284,242,737 1,942,619,892
-------------- --------------- -------------- ---------------
CLASS C SHARES
Sold ............................................... 10,683,068 63,106,832 11,809,001 79,632,646
Reinvestment of dividends .......................... 420,711 2,467,955 275,586 1,835,966
Redeemed ........................................... (4,480,462) (26,499,957) (3,646,560) (24,328,636)
-------------- --------------- -------------- ---------------
Net increase - Class C ............................. 6,623,317 39,074,830 8,438,027 57,139,976
-------------- --------------- -------------- ---------------
CLASS D SHARES
Sold ............................................... 6,306,883 37,319,793 2,051,764 13,876,135
Reinvestment of dividends 2,348,593 13,796,312 3,963,509 26,652,063
Redeemed ........................................... (10,321,503) (61,338,938) (11,183,022) (75,328,770)
-------------- --------------- -------------- ---------------
Net decrease - Class D ............................. (1,666,027) (10,222,833) (5,167,749) (34,800,572)
-------------- --------------- -------------- ---------------
Net increase in Fund ............................... 58,767,788 $ 346,048,810 292,203,218 $1,997,043,217
============== =============== ============== ===============
</TABLE>
19
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS February 28, 1999 (unaudited) continued
6. 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
in the following years:
<TABLE>
<CAPTION>
AMOUNT 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.
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.
20
<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 SIX
MONTHS ENDED FOR THE YEAR ENDED AUGUST 31
FEBRUARY 28, -----------------------------------------------
1999++ 1998++ 1997* 1996 1995 1994
- ------------------------------------------ ------------------ -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CLASS D SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period ...... $ 6.16 $ 6.82 $ 6.71 $ 6.77 $ 6.83 $ 7.58
------------------ -------- -------- -------- -------- --------
Income from investment operations:
Net investment income ................... 0.37 0.78 0.79 0.83 0.80 0.79
Net realized and unrealized gain (loss) (0.36) (0.71) 0.15 (0.12) (0.06) (0.68)
------------------ -------- -------- -------- -------- --------
Total income from investment operations .. 0.01 0.07 0.94 0.71 0.74 0.11
------------------ -------- -------- -------- -------- --------
Less dividends from net investment income (0.40) (0.73) (0.83) (0.77) (0.80) (0.86)
------------------ -------- -------- -------- -------- --------
Net asset value, end of period ............ $ 5.77 $ 6.16 $ 6.82 $ 6.71 $ 6.77 $ 6.83
================== ======== ======== ======== ======== ========
TOTAL RETURN+ ............................. 0.16%(1) 0.63% 15.01% 11.07% 11.98% 0.93%
RATIOS TO AVERAGE NET ASSETS:
Expenses .................................. 0.49%(2)(3) 0.51% 0.68% 0.66% 0.79% 0.69%
Net investment income ..................... 12.73%(2)(3) 11.54% 11.78% 12.27% 12.06% 10.40%
SUPPLEMENTAL DATA:
Net assets, end of period, in millions ... $ 366 $ 401 $ 479 $ 460 $ 455 $ 478
Portfolio turnover rate ................... 19%(1) 66% 113% 49% 74% 127%
</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) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class
specific expenses.
SEE NOTES TO FINANCIAL STATEMENTS
21
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED THROUGH
FEBRUARY 28, 1999 AUGUST 31, 1998 AUGUST 31, 1997
- ----------------------------------------------- ----------------- --------------- ---------------
(UNAUDITED)
<S> <C> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period ........... $ 6.16 $ 6.82 $ 6.83
----------------- --------------- ---------------
Income from investment operations:
Net investment income ........................ 0.37 0.76 0.07
Net realized and unrealized loss ............. (0.37) (0.71) (0.03)
----------------- --------------- ---------------
Total income from investment operations ....... -- 0.05 0.04
----------------- --------------- ---------------
Less dividends from net investment income ..... (0.39) (0.71) (0.05)
----------------- --------------- ---------------
Net asset value, end of period ................. $ 5.77 $ 6.16 $ 6.82
================= =============== ===============
TOTAL RETURN+ .................................. 0.08%(1) 0.40% 0.65%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ....................................... 0.63%(2)(3) 0.75% 0.93%(2)
Net investment income .......................... 12.59%(2)(3) 11.30% 11.80%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in millions ........ $68 $31 $2
Portfolio turnover rate ........................ 19%(1) 66% 113%
CLASS B SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period ........... $ 6.15 $ 6.82 $ 6.83
----------------- --------------- ---------------
Income (loss) from investment operations:
Net investment income ........................ 0.35 0.73 0.07
Net realized and unrealized loss ............. (0.37) (0.72) (0.03)
----------------- --------------- ---------------
Total income (loss) from investment operations (0.02) 0.01 0.04
----------------- --------------- ---------------
Less dividends from net investment income ..... (0.37) (0.68) (0.05)
----------------- --------------- ---------------
Net asset value, end of period ................. $ 5.76 $ 6.15 $ 6.82
================= =============== ===============
TOTAL RETURN+ .................................. (0.20)%(1) (0.23)% 0.62%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ....................................... 1.24%(2)(3) 1.25 % 1.42%(2)
Net investment income .......................... 11.98%(2)(3) 10.80 % 11.28%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in millions ........ $1,922 $1,761 $16
Portfolio turnover rate ........................ 19%(1) 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
22
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD SECURITIES INC.
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED THROUGH
FEBRUARY 28, 1999 AUGUST 31, 1998 AUGUST 31, 1997
- ----------------------------------------------- ----------------- --------------- ---------------
(UNAUDITED)
<S> <C> <C> <C>
CLASS C SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period ........... $ 6.15 $ 6.82 $ 6.83
----------------- --------------- ---------------
Income (loss) from investment operations:
Net investment income......................... 0.35 0.72 0.07
Net realized and unrealized loss ............. (0.36) (0.72) (0.03)
----------------- --------------- ---------------
Total income (loss) from investment operations (0.01) -- 0.04
----------------- --------------- ---------------
Less dividends from net investment income ..... (0.37) (0.67) (0.05)
----------------- --------------- ---------------
Net asset value, end of period ................. $ 5.77 $ 6.15 $ 6.82
================= =============== ===============
TOTAL RETURN+ .................................. (0.25)%(1) (0.34)% 0.62%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ....................................... 1.34%(2)(3) 1.36 % 1.52%(2)
Net investment income .......................... 11.88%(2)(3) 10.69 % 11.18%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in millions ........ $91 $57 $5
Portfolio turnover rate ........................ 19%(1) 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
23
<PAGE>
BOARD OF DIRECTORS
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn MORGAN STANLEY
John R. Haire DEAN WITTER
Wayne E. Hedien HIGH YIELD
Dr. Manuel H. Johnson SECURITIES
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and General Counsel
Peter M. Avelar
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
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.
Two World Trade Center
New York, New York 10048
The financial statements included herein have been taken from the records of
the Fund without examination by the independent accountants and accordingly
they do not express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and directors,
fees, expenses and other pertinent information, please see the prospectus
of the Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus.
SEMIANNUAL REPORT
FEBRUARY 28, 1999
