<PAGE>
Morgan Stanley Dean Witter High Yield Securities Inc. Two World Trade Center,
Letter to the Shareholders February 29, 2000 New York, New York 10048
DEAR SHAREHOLDER:
The six-month period ended February 29, 2000, was a difficult one for
high-yield-bond investors. For much of the period, the high-yield market
struggled to recover from the woes that had plagued it in late 1998. At that
time, concerns about the effects of foreign-market crises on the U.S. economy
sparked fears of a possible recession. These concerns led investors to seek the
relative safety of U.S. government securities over more economically sensitive
investments such as equities and high-yield bonds, resulting in a sharp
correction in the high-yield marketplace.
The weak market conditions continued into and throughout much of calendar 1999
as investor concerns over the foreign-market crises and a possible recession
were replaced with worries about sharply rising interest rates,
credit-tightening actions by the Federal Reserve Board, the looming threat of
inflation and uncertainty about the Y2K bug's potential effects on corporate
earnings and the financial markets. These fears adversely affected all of the
fixed-income markets during 1999, with Treasuries and municipal bonds also
suffering significant losses.
On a more positive note, as a result of the weakness in the market over the past
year and a half, yields on lower-rated corporate bonds are approaching their
highest levels in nearly a decade. Today, high-yield bonds are providing an
unusually large yield advantage over Treasuries. Historically, abnormally high
yield advantages have signaled a turning point in the high-yield market,
resulting in strong total returns as bond prices recover.
PERFORMANCE
For the six-month period ended February 29, 2000, Morgan Stanley Dean Witter
High Yield Securities' Class A and D shares produced returns of 3.32 percent and
3.40 percent, respectively. The Fund outperformed the Credit Suisse First Boston
High Yield Index, which returned 1.89 percent. For the same period, the Fund's
Class B and C shares had total returns of 3.02 percent and 2.97 percent,
respectively. The performance of the Fund's
<PAGE>
Morgan Stanley Dean Witter High Yield Securities Inc.
Letter to the Shareholders February 29, 2000, continued
four share classes varies because of differing expenses. The total return
figures given assume the reinvestment of all distributions and do not reflect
the deduction of any applicable sales charges.
PORTFOLIO STRATEGY
As discussed, the past year and a half has been an extremely difficult period
for the high-yield market, particularly for B-rated securities, the market's
largest sector. The result has been prolonged weakness in the high-yield market,
causing high-yield bond prices to decline sharply and yields to rise
dramatically. Although the Fund's position in the more defensive, higher quality
end of the high-yield market held up relatively well during the turbulent market
environment, its long-term core position in the B-rated sector was adversely
affected. However, with yields on B-rated issues at or near 10-year highs, and
with many issues trading at significant discounts to their stated maturity
value, we view the B-rated sector as extremely undervalued. In light of this
positive long-term outlook, we are maintaining our focus on this large sector of
the market, which we believe offers the Fund strong long-term total-return
potential.
We presently view the telecommunications sector as being an excellent investment
opportunity, given the overwhelming trend toward providing expanded worldwide
telecommunications services, including voice, video and data services over a
combination of hardline and wireless networks. The combination of very strong
growth prospects for this industry, along with an incentive to form strategic
partnerships with other major players, provides the fundamental backdrop for
higher profitability and future significant credit improvement. Included among
the Fund's current holdings are a number of telecom companies that have recently
either announced important strategic partnerships or raised equity capital to
fuel future growth and profits. These holdings include Advanced Radio Telecom,
American Mobile Satellite, Arch Communications, Caprock Communications, Covad
Communications, Dobson Communications, Level 3 Communications, NextLink
Communications, Primus Telecommunications, Versatel Telecommunications, Viatel
and Winstar Communications.
LOOKING AHEAD
In light of today's substantially higher yields and significantly discounted
bond prices, we view the high-yield market as an excellent long-term investment
opportunity, particularly given the favorable economic outlook. Assuming a soft
landing in the economy, with growth continuing into the second half of the year,
we would expect the high-yield market to recover and high-yield bond prices to
rebound from their currently depressed levels. Although the B-rated segment of
the market has not proven itself a good investment performer over the past year
and a half, we remain confident that it offers attractive yield and appreciation
potential for long-term investors.
2
<PAGE>
Morgan Stanley Dean Witter High Yield Securities Inc.
Letter to the Shareholders February 29, 2000, continued
We appreciate your ongoing support of Morgan Stanley Dean Witter High Yield
Securities and look forward to serving your investment needs.
Very truly yours,
/s/ CHARLES A. FIUMEFREDDO /s/ MITCHELL M. MERIN
- -------------------------- ---------------------
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
3
<PAGE>
Morgan Stanley Dean Witter High Yield Securities Inc.
Fund Performance February 29, 2000
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
CLASS A SHARES*
- -------------------------------------------------------
PERIOD ENDED 2/29/00
- --------------------
1 Year 4.76%(1) 0.30%(2)
5 Years 7.90%(1) 6.97%(2)
10 Years 9.38%(1) 8.91%(2)
CLASS C SHARES+
- -------------------------------------------------------
PERIOD ENDED 2/29/00
- --------------------
1 Year 4.26%(1) 3.34%(2)
Since Inception (7/28/97) 1.63%(1) 1.63 %(2)
CLASS B SHARES**
- -------------------------------------------------------
PERIOD ENDED 2/29/00
- --------------------
1 Year 4.18%(1) (0.41)%(2)
Since Inception (7/28/97) 1.67%(1) 0.79 %(2)
CLASS D SHARES++
- -------------------------------------------------------
PERIOD ENDED 2/29/00
- --------------------
1 Year 4.96%(1)
5 Years 8.14%(1)
10 Years 9.64%(1)
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS.
PRIOR TO JULY 28, 1997 THE FUND OFFERED ONLY ONE CLASS OF SHARES. BECAUSE THE
DISTRIBUTION ARRANGEMENT FOR CLASS A MOST CLOSELY RESEMBLED 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 THE ACTUAL MAXIMUM SALES CHARGE
APPLICABLE TO CLASS A (I.E., 4.25%) AS COMPARED TO THE 5.50% SALES CHARGE IN
EFFECT PRIOR TO JULY 28, 1997. IN ADDITION, CLASS A SHARES ARE NOW SUBJECT TO AN
ONGOING 12B-1 FEE WHICH IS REFLECTED IN THE RESTATED PERFORMANCE FOR THAT CLASS.
BECAUSE ALL SHARES OF THE FUND HELD PRIOR TO JULY 28, 1997 WERE DESIGNATED CLASS
D SHARES, THE FUND'S HISTORICAL PERFORMANCE HAS BEEN RESTATED TO REFLECT THE
ABSENCE OF ANY SALES CHARGE.
- ---------------
(1) Figure shown assumes reinvestment of all distributions and does not reflect
the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and the deduction of
the maximum applicable sales charge. See the Fund's current prospectus for
complete details on fees and sales charges.
* The maximum front-end sales charge for Class A is 4.25%.
** The maximum contingent deferred sales charge (CDSC) for Class B is 5.0%.
The CDSC declines to 0% after six years.
+ The maximum CDSC for Class C shares is 1% for shares redeemed within one
year of purchase.
++ Class D shares have no sales charge.
4
<PAGE>
Morgan Stanley Dean Witter High Yield Securities Inc.
Portfolio of Investments February 29, 2000 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (94.4%)
Advertising (0.4%)
$ 10,000 Interep National Radio Sales Inc. .......... 10.00 % 07/01/08 $ 9,250,000
--------------
Aerospace (0.5%)
12,500 Sabreliner Corp. - 144A* ................... 11.00 06/15/08 10,375,000
--------------
Beverages - Non-Alcoholic (0.4%)
10,000 Sparkling Spring Water (Canada) ............ 11.50 11/15/07 8,100,000
--------------
Books/Magazine (0.7%)
4,500 American Media Operations, Inc. ............ 10.25 05/01/09 4,432,500
10,500 Perry-Judds, Inc. .......................... 10.625 12/15/07 8,793,750
3,000 Phoenix Color Corp. ........................ 10.375 02/01/09 2,887,500
--------------
16,113,750
--------------
Broadcast Media (0.7%)
5,000 Jones International Networks Ltd. .......... 11.75 07/01/05 5,150,000
10,000 Tri-State Outdoor Mediagroup, Inc. ......... 11.00 05/15/08 9,650,000
--------------
14,800,000
--------------
Broadcasting (1.5%)
15,000 Capstar Broadcasting Partners, Inc. ........ 12.75++ 02/01/09 13,500,000
6,000 Cumulus Media Inc. ......................... 10.375 07/01/08 6,150,000
14,000 STC Broadcasting, Inc. ..................... 11.00 03/15/07 13,860,000
--------------
33,510,000
--------------
Cable Television (5.6%)
30,500 21st Century Telecom Group, Inc. ........... 12.25++ 02/15/08 21,083,125
50,687 Australis Holdings Property Ltd.
(Australia) (a) .......................... 15.00++ 11/01/02 506,870
4,404 Australis Media Ltd. - 144A*
(Australia) (a) .......................... 0.00 11/01/00 555,478
3,000 Classic Cable Inc. - 144A* ................. 10.50 03/01/10 3,000,000
16,000 Diva Systems Corp. (Series B) .............. 12.625++ 03/01/08 8,640,000
13,955 FrontierVision Operating Partners, L.P. 11.00 10/15/06 14,513,200
10,000 James Cable Partners L.P. (Series B) ....... 10.75 08/15/04 9,975,000
23,800 Knology Holdings, Inc. ..................... 11.875++ 10/15/07 15,470,000
15,000 Ono Finance PLC (United Kingdom) ........... 13.00 05/01/09 15,675,000
42,500 Optel, Inc. (Series B) (a) (b) ............. 11.50 07/01/08 36,975,000
--------------
126,393,673
--------------
Casino/Gambling (1.5%)
22,000 Aladdin Gaming Capital Corp.
(Series B) ............................... 13.50++ 03/01/10 11,165,000
20,500 Fitzgeralds Gaming Corp.
(Series B) (b) ........................... 12.25 12/15/04 10,865,000
12,300 Riviera Holdings Corp. ..................... 10.00 08/15/04 11,070,000
--------------
33,100,000
--------------
Cellular Telephone (6.0%)
6,000 Centennial Cellular ........................ 10.75 12/15/08 6,120,000
15,531 Clearnet Communications, Inc. (Canada) 14.75++ 12/15/05 15,608,655
15,500 Dobson/Sygnet Communications ............... 12.25 12/15/08 16,585,000
28,300 Dolphin Telecom PLC
(United Kingdom) (Series B) .............. 14.00++ 05/15/09 11,603,000
</TABLE>
See Notes to Financial Statements
5
<PAGE>
Morgan Stanley Dean Witter High Yield Securities Inc.
Portfolio of Investments February 29, 2000 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 20,130 Dolphin Telecom PLC
(United Kingdom) ........................ 11.50++% 06/01/08 $ 9,259,800
20,000 Nextel Communications, Inc. ............... 10.65++ 09/15/07 15,300,000
17,000 Nextel Partners, Inc. ..................... 14.00++ 02/01/09 11,390,000
8,000 Omnipoint Corp. - 144A* ................... 11.50 09/15/09 8,720,000
24,700 Tritel PCS Inc. ........................... 12.75 05/15/09 16,055,000
20,099 Triton PCS, Inc. .......................... 11.00++ 05/01/08 14,370,785
10,000 Voicestream Wireless Corp. - 144A* ........ 10.375 11/15/09 10,300,000
--------------
135,312,240
--------------
Construction/Agricultural
Equipment/Trucks (0.6%)
13,350 J.B. Poindexter & Co., Inc. ............... 12.50 05/15/04 12,816,000
--------------
Consumer Electronic/Appliances (1.2%)
84,930 International Semi-Tech
Microelectronics, Inc. (Canada) (a) ..... 11.50++ 08/15/03 4,246,500
10,000 Salton Inc. ............................... 10.75 12/15/05 10,125,000
13,000 Windmere-Durable Holdings, Inc. ........... 10.00 07/31/08 12,707,500
--------------
27,079,000
--------------
Consumer Specialties (1.3%)
35,000 Samsonite Corp. ........................... 10.75 06/15/08 29,750,000
--------------
Consumer/Business Services (4.1%)
28,000 Anacomp, Inc. (Series B) .................. 10.875 04/01/04 27,160,000
5,900 Anacomp, Inc. (Series D) .................. 10.875 04/01/04 5,723,000
11,000 Buhrmann U.S. Inc. - 144A* ................ 12.25 11/01/09 11,302,500
13,000 Comforce Operating, Inc. .................. 12.00 12/01/07 7,800,000
10,000 Entex Information Services, Inc. .......... 12.50 08/01/06 3,500,000
23,500 MDC Communications Corp. (Canada) ......... 10.50 12/01/06 22,560,000
15,200 Muzak LLC ................................. 9.875 03/15/09 14,516,000
--------------
92,561,500
--------------
Containers/Packaging (3.1%)
11,900 Berry Plastics Corp. ...................... 12.25 04/15/04 12,019,000
13,250 Berry Plastics Corp. - 144A* .............. 11.00 07/15/07 12,985,000
27,081 Envirodyne Industries, Inc. ............... 10.25 12/01/01 13,811,310
9,500 Impac Group Inc. (Series B) ............... 10.125 03/15/08 8,075,000
10,000 LLS Corp. ................................. 11.625 08/01/09 9,675,000
14,715 Packaging Resources, Inc. ................. 11.625 05/01/03 11,919,150
--------------
68,484,460
--------------
Contract Drilling (0.9%)
34,000 Northern Offshore ASA (Series B)
(Norway) ................................ 10.00 05/15/05 20,740,000
--------------
Diversified Electronic Products (0.9%)
15,450 High Voltage Engineering, Inc. ............ 10.75 08/15/04 12,746,250
8,000 Telecommunication Techniques Co. .......... 9.75 05/15/08 7,300,000
--------------
20,046,250
--------------
Diversified Manufacturing (3.6%)
19,650 Eagle-Picher Industries, Inc. ............. 9.375 03/01/08 16,702,500
20,000 Jordan Industries, Inc. (Series B) ........ 10.375 08/01/07 19,600,000
</TABLE>
See Notes to Financial Statements
6
<PAGE>
Morgan Stanley Dean Witter High Yield Securities Inc.
Portfolio of Investments February 29, 2000 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 57,338 Jordan Industries, Inc. (Series B) ......... 11.75++% 04/01/09 $ 38,989,840
6,200 Jordan Industries, Inc. (Series D) ......... 10.375 08/01/07 6,076,000
--------------
81,368,340
--------------
Drugstore Chains (0.5%)
10,000 Community Distributors, Inc. (Series B)..... 10.25 10/15/04 8,150,000
5,500 Rite Aid Corp. ............................. 7.70 02/15/27 3,080,000
--------------
11,230,000
--------------
Electronic Distributors (0.1%)
20,000 CHS Electronics, Inc. ...................... 9.875 04/15/05 1,600,000
--------------
Engineering & Construction (0.7%)
5,000 Metromedia Fiber Network ................... 10.00 12/15/09 4,962,500
10,000 Metromedia Fiber Network (Series B) ........ 10.00 11/15/08 9,887,500
--------------
14,850,000
--------------
Entertainment & Leisure (0.2%)
10,850 AMF Bowling Worldwide, Inc.
(Series B) ................................. 10.875 03/15/06 4,665,500
--------------
Environmental Services (0.5%)
13,500 Allied Waste North America Inc. ............ 10.00 08/01/09 11,306,250
--------------
Food Chains (0.7%)
9,185 Eagle Food Centers Inc. (a) ................ 8.625 04/15/00 3,674,000
16,500 Pueblo Xtra International, Inc. ............ 9.50 08/01/03 7,920,000
9,748 Pueblo Xtra International, Inc.
(Series C) ................................. 9.50 08/01/03 4,679,040
--------------
16,273,040
--------------
Food Distributors (2.0%)
9,965 Fleming Companies, Inc. (Series B) ......... 10.50 12/01/04 9,242,538
28,275 Fleming Companies, Inc. (Series B) ......... 10.625 07/31/07 25,518,187
10,000 Volume Services America, Inc. .............. 11.25 03/01/09 9,775,000
--------------
44,535,725
--------------
Hotels/Resorts (1.1%)
13,000 Epic Resorts LLC (Series B) ................ 13.00 06/15/05 9,490,000
24,035 Resort At Summerlin (Series B) ............. 13.00 12/15/07 15,622,698
--------------
25,112,698
--------------
Industrial Specialties (2.1%)
10,000 Cabot Safety Corp. ......................... 12.50 07/15/05 10,100,000
14,500 Indesco International, Inc. ................ 9.75 04/15/08 4,930,000
21,963 International Wire Group, Inc. ............. 11.75 06/01/05 22,402,260
10,500 Outsourcing Services Group, Inc.
(Series B) ................................. 10.875 03/01/06 9,030,000
--------------
46,462,260
--------------
Internet Services (2.6%)
13,300 Cybernet Internet Services Inc. ............ 14.00 07/01/09 11,039,000
15,600 Globix Corp. - 144A* ....................... 12.50 02/01/10 15,756,000
8,000 Psinet Inc. ................................ 11.00 08/01/09 7,920,000
7,000 Psinet Inc. - 144A* ........................ 10.50 12/01/06 6,895,000
3,120 Verio Inc. ................................. 10.375 04/01/05 3,088,800
</TABLE>
See Notes to Financial Statements
7
<PAGE>
Morgan Stanley Dean Witter High Yield Securities Inc.
Portfolio of Investments February 29, 2000 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 8,000 Verio Inc. ............................ 11.25 % 12/01/08 $ 8,200,000
5,000 Verio Inc. - 144A* .................... 10.625 11/15/09 4,987,500
--------------
57,886,300
--------------
Medical Specialties (0.5%)
26,500 MEDIQ/PRN Life Support Services, Inc. 11.00 06/01/08 3,975,000
10,000 Universal Hospital Services, Inc.
(issued 02/25/98) ................... 10.25 03/01/08 6,500,000
3,000 Universal Hospital Services, Inc.
(issued 01/26/99) ................... 10.25 03/01/08 1,860,000
--------------
12,335,000
--------------
Medical/Nursing Services (0.7%)
7,500 Pediatric Services of America, Inc.
(Series A) .......................... 10.00 04/15/08 3,750,000
12,000 Unilab Finance Corp. .................. 12.75 10/01/09 12,180,000
--------------
15,930,000
--------------
Military/Gov't/Technical (0.6%)
15,000 Loral Space & Communications Ltd. ..... 9.50 01/15/06 12,975,000
--------------
Movies/Entertainment (0.5%)
15,250 Regal Cinemas Inc. .................... 9.50 06/01/08 10,217,500
--------------
Office Equipment & Supplies (0.6%)
22,000 Mosler, Inc. .......................... 11.00 04/15/03 14,300,000
--------------
Oil Refining/Marketing (0.0%)
53,800 Transamerican Refining Corp.
(Series B) (a) (b) .................. 16.00 06/30/03 672,500
--------------
Other Consumer Services (0.3%)
10,000 Source Media Inc. ..................... 12.00 11/01/04 7,000,000
--------------
Other Telecommunications (12.5%)
11,500 Birch Telecom Inc. .................... 14.00 06/15/08 11,500,000
23,950 DTI Holdings, Inc. (Series B) ......... 12.50++ 03/01/08 11,735,500
12,585 Espirit Telecom Group PLC
(United Kingdom) .................... 11.50 12/15/07 12,144,525
19,250 Esprit Telecom Group PLC
(United Kingdom) .................... 10.875 06/15/08 18,383,750
47,000 Firstworld Communications, Inc. ....... 13.00++ 04/15/08 23,970,000
20,750 Globenet Comm Group Ltd. - 144A*
(Bermuda) ........................... 13.00 07/15/07 19,920,000
15,000 Pac-West Telecomm Inc. (Series B) ..... 13.50 02/01/09 15,900,000
3,000 Primus Telecomm Group ................. 11.75 08/01/04 2,970,000
7,000 Primus Telecomm Group ................. 11.25 01/15/09 6,685,000
32,900 Primus Telecommunication Group, Inc.
(Series B) .......................... 9.875 05/15/08 29,610,000
2,000 RSL Communications PLC
(United Kingdom) .................... 9.125 03/01/08 1,630,000
9,000 RSL Communications PLC
(United Kingdom) .................... 10.50 11/15/08 7,830,000
3,000 RSL Communications PLC
(United Kingdom) .................... 9.875 11/15/09 2,505,000
</TABLE>
See Notes to Financial Statements
8
<PAGE>
Morgan Stanley Dean Witter High Yield Securities Inc.
Portfolio of Investments February 29, 2000 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 15,000 Tele1 Europe BV (Netherlands) ......... 13.00 % 05/15/09 $ 15,750,000
12,000 Versatel Telecom BV (Netherlands)
(issued 05/27/98) ................... 13.25 05/15/08 13,080,000
24,500 Versatel Telecom BV (Netherlands)
(issued 12/03/98) ................... 13.25 05/15/08 26,705,000
14,195 Viatel Inc. ........................... 11.25 04/15/08 13,414,275
4,500 Viatel Inc. ........................... 11.50 03/15/09 4,297,500
35,100 World Access, Inc. .................... 13.25 01/15/08 31,677,750
11,500 Worldwide Fiber Inc. - 144A* .......... 12.00 08/01/09 11,845,000
--------------
281,553,300
--------------
Packaged Goods/Cosmetics (0.5%)
11,000 J.B. Williams Holdings, Inc. .......... 12.00 03/01/04 11,220,000
--------------
Printing/Forms (0.3%)
13,000 Premier Graphics Inc. ................. 11.50 12/01/05 5,850,000
--------------
Rental/Leasing Companies (0.4%)
9,000 Neff Corp. ............................ 10.25 06/01/08 8,730,000
--------------
Restaurants (3.3%)
141,992 American Restaurant Group Holdings,
Inc. - 144A* (c) ...................... 0.00 12/15/05 44,017,520
34,207 FRD Acquisition Corp. (Series B) ...... 12.50 07/15/04 14,366,940
20,000 Friendly Ice Cream Corp. .............. 10.50 12/01/07 15,800,000
--------------
74,184,460
--------------
Retail - Specialty (1.7%)
9,000 Mrs. Fields Holdings Co. - 144A*
(Units) ............................ 14.00++ 12/01/05 5,040,000
1,000 National Wine & Spirits ............... 10.125 01/15/09 975,000
18,225 Pantry, Inc. .......................... 10.25 10/15/07 17,313,750
17,500 Petro Stopping Centers L.P. ........... 10.50 02/01/07 15,575,000
--------------
38,903,750
--------------
Specialty Chemicals (0.9%)
15,000 Lyondell Chemical Co. (Series B) ...... 9.875 05/01/07 14,400,000
6,000 Octel Developments PLC
(United Kingdom) .................... 10.00 05/01/06 5,880,000
--------------
20,280,000
--------------
Specialty Foods/Candy (1.3%)
200,598 SFAC New Holdings Inc. (c) ............ 13.00++ 06/15/09 30,089,648
--------------
Telecommunication Equipment (1.2%)
17,100 SBA Communications Corp. .............. 12.00++ 03/01/08 12,012,750
18,500 Spectrasite Holdings, Inc. ............ 12.00++ 07/15/08 12,210,000
3,500 Spectrasite Holdings, Inc. ............ 11.25++ 04/15/09 2,047,500
--------------
26,270,250
--------------
Telecommunications (14.5%)
15,000 Caprock Communications Corp. .......... 11.50 05/01/09 15,300,000
16,000 Caprock Communications Corp.
(Series B) .......................... 12.00 07/15/08 16,480,000
20,000 Covad Communications Group, Inc ....... 12.50 02/15/09 20,300,000
54,375 e. Spire Communications, Inc. ......... 13.75 07/15/07 45,131,250
</TABLE>
See Notes to Financial Statements
9
<PAGE>
Morgan Stanley Dean Witter High Yield Securities Inc.
Portfolio of Investments February 29, 2000 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 26,700 Focal Communications Corp. (Series B) ..... 12.125% 02/15/08 $ 18,156,000
28,250 GST Equipment Funding, Inc. ............... 13.25 05/01/07 25,990,000
23,750 GST Telecommunications, Inc. .............. 10.50++ 05/01/08 11,756,250
23,000 Hyperion Telecommunication, Inc.
(Series B) .............................. 12.25 09/01/04 24,495,000
26,500 Level 3 Communications, Inc. .............. 9.125 05/01/08 23,850,000
2,000 MGC Communications Inc. (Series B) ........ 13.00 10/01/04 2,025,000
8,500 NEXTLINK Communications, Inc. ............. 12.50 04/15/06 8,925,000
17,500 NEXTLINK Communications, Inc. ............. 9.00 03/15/08 16,275,000
12,500 NEXTLINK Communications, Inc. ............. 10.75 11/15/08 12,500,000
9,000 NEXTLINK Communications, Inc. ............. 10.75 06/01/09 9,045,000
56,800 Normex Technologies Corp.
(Series B) (a) (b) ...................... 14.00++ 05/15/02 6,248,000
27,850 Rhythms Netconnections .................... 12.75 04/15/09 26,457,500
14,965 Rhythms Netconnections (Series B) ......... 13.50++ 05/15/08 8,155,925
13,850 Startec Global Communications Corp. ....... 12.00 05/15/08 11,564,750
11,300 Talton Holdings, Inc. (Series B) .......... 11.00 06/30/07 10,283,000
12,000 Williams Communications Group Inc. ........ 10.875 10/01/09 12,180,000
--------------
325,117,675
--------------
Wireless Communications (11.1%)
13,500 Advanced Radio Telecom Corp. .............. 14.00 02/15/07 12,690,000
17,150 AMSC Aquisition Co. Inc. (Series B) ....... 12.25 04/01/08 13,720,000
9,000 Arch Communications, Inc. ................. 12.75 07/01/07 7,470,000
7,200 Arch Escrow Corp. ......................... 13.75 04/15/08 6,336,000
2,220 CellNet Data Systems, Inc. (a) ............ 15.00 05/15/00 2,220,000
65,300 CellNet Data Systems, Inc. (a) ............ 14.00++ 10/01/07 6,530,000
5,625 Globalstar LP/Capital Corp. ............... 11.375 02/15/04 3,375,000
1,085 Globalstar LP/Capital Corp. ............... 11.25 06/15/04 651,000
24,610 Globalstar LP/Capital Corp. ............... 10.75 11/01/04 14,027,700
10,000 Metricom, Inc. ............................ 13.00 02/15/10 8,300,000
16,739 Orbcomm Global LP/Capital Corp.
(Series B) .............................. 14.00 08/15/04 15,902,050
13,610 Paging Network, Inc. ...................... 8.875 02/01/06 10,071,400
42,580 Paging Network, Inc. ...................... 10.125 08/01/07 31,509,200
25,196 Paging Network, Inc. ...................... 10.00 10/15/08 18,645,040
20,230 USA Mobile Communications Holdings,
Inc. .................................... 9.50 02/01/04 16,993,200
18,800 USA Mobile Communications Holdings,
Inc. .................................... 14.00 11/01/04 17,672,000
61,500 WinStar Communications, Inc. .............. 14.00++ 10/15/05 62,115,000
1,500 Winstar Equipment Corp. ................... 12.50 03/15/04 1,620,000
--------------
249,847,590
--------------
TOTAL CORPORATE BONDS
(Identified Cost $2,606,107,625)........................................ 2,119,198,659
--------------
CONVERTIBLE BOND (0.1%)
Entertainment & Leisure
1,626 Premier Cruises Ltd. - 144A*
(Identified Cost $1,626,000)............. 10.00 08/15/05 1,593,480
--------------
</TABLE>
See Notes to Financial Statements
10
<PAGE>
Morgan Stanley Dean Witter High Yield Securities Inc.
Portfolio of Investments February 29, 2000 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (d) (0.2%)
Casino/Gambling (0.0%)
207,312 Fitzgeralds Gaming Corp. ......................... $ 207
--------------
Clothing/Shoe/Accessory Stores (0.0%)
2,621,192 County Seat Stores, Inc. (c) ..................... 23,591
--------------
Hotels/Resorts (0.1%)
7,500 Motels of America, Inc. - 144A* .................. 1,875
981,277 Premier Holdings Inc. (c) ........................ 3,189,150
781,421 Vagabond Inns, Inc. (Class D) .................... 782
--------------
3,191,807
--------------
Medical/Nursing Services (0.0%)
1,151,324 Raintree Healthcare Corp. (c) .................... 10,362
--------------
Motor Vehicles (0.0%)
709 Northern Holdings Industrial Corp. (c) ........... -
--------------
Other Telecommunications (0.1%)
94,263 World Access, Inc. ............................... 1,790,997
--------------
Restaurants (0.0%)
38,057 American Restaurant Group Holdings, Inc. - 144A* . 9,514
--------------
Specialty Foods/Candy (0.0%)
10,908 SFAC New Holdings Inc. (c) ....................... 2,727
574,725 Specialty Foods Acquisition Corp. - 144A* ........ 143,681
--------------
146,408
--------------
Telecommunication Equipment (0.0%)
196,000 FWT, Inc. (Class A) (c) .......................... 1,960
--------------
Textiles (0.0%)
1,754,730 United States Leather, Inc. (c) .................. 15,793
--------------
TOTAL COMMON STOCKS (Identified Cost $130,705,323) 5,190,639
--------------
PREFERRED STOCKS (0.2%)
Oil Refining/Marketing (0.0%)
94,432 Transamerica Refining Corp. (Conv.) (Class B)* ... 944
51,938 Transamerica Refining Corp. (Conv.) (Class C)* ... 519
136,926 Transamerica Refining Corp. (Conv.) (Class D)* ... 1,369
283,295 Transamerica Refining Corp. (Conv.) (Class E)* ... 2,834
--------------
5,666
--------------
Restaurants (0.1%)
4,155 American Restaurant Group Holdings, Inc. (Series B) 3,074,700
--------------
Telecommunication Equipment (0.1%)
1,960,000 FWT, Inc. (Series A) (c) ......................... 980,000
--------------
TOTAL PREFERRED STOCKS (Identified Cost $14,269,813) 4,060,366
--------------
</TABLE>
See Notes to Financial Statements
11
<PAGE>
Morgan Stanley Dean Witter High Yield Securities Inc.
Portfolio of Investments February 29, 2000 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION
WARRANTS DATE VALUE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
WARRANTS (d) (2.4%)
Aerospace (0.0%)
9,000 Sabreliner Corp. - 144A* ................. 04/15/03 $ 90,000
---------------
Cable Television (0.1%)
48,000 Diva Systems Corp. - 144A* ............... 03/01/08 576,000
15,000 Ono Finance PLC - 144A* (United Kingdom) . 05/31/09 2,250,000
---------------
2,826,000
---------------
Casino/Gambling (0.0%)
220,000 Aladdin Gaming Enterprises, Inc. - 144A* . 03/01/10 2,200
---------------
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
---------------
Internet Services (0.1%)
13,300 Cybernet Internet Services Inc. - 144A* .. 07/01/09 2,261,000
---------------
Oil Refining/Marketing (0.0%)
20,000 Transamerican Refining Corp. - 144A* ..... 06/30/03 20
33,800 Transamerican Refining Corp. - 144A* ..... 06/30/03 34
---------------
54
---------------
Other Telecommunications (2.0%)
11,500 Birch Telecom Inc. - 144A* ............... 06/15/08 632,500
119,750 DTI Holdings Inc. - 144A* ................ 03/01/08 1,198
47,000 Firstworld Communications, Inc. - 144A* .. 04/15/08 9,400,000
15,000 Tele1 Europe BV - 144A* (Netherlands) .... 05/15/09 4,800,000
36,500 Versatel Telecom BV - 144A* (Netherlands) 05/15/08 30,294,999
---------------
45,128,697
---------------
Restaurants (0.0%)
3,500 American Restaurant Group Holdings, Inc. -
144A* .................................. 08/15/08 35
---------------
Telecommunications (0.0%)
11,850 Startec Global Communications Corp. - 144A* 02/15/10 213,300
---------------
Wireless Communications (0.2%)
15,250 American Mobile Satellite Corp. - 144A* .. 04/01/08 1,448,750
10,000 Metricom, Inc. ........................... 02/15/10 1,800,000
---------------
3,248,750
---------------
TOTAL WARRANTS (Identified Cost $7,885,409).............. 53,770,366
---------------
</TABLE>
See Notes to Financial Statements
12
<PAGE>
Morgan Stanley Dean Witter High Yield Securities Inc.
Portfolio of Investments February 29, 2000 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENT (e) (0.4%)
U.S. GOVERNMENT AGENCY
$ 9,100 Federal Home Loan Mortgage Corp.
(Amortized Cost $9,100,000).......... 5.72% 03/01/00 $ 9,100,000
--------------
TOTAL INVESTMENTS
(Identified Cost $2,769,694,170) (f) ........ 97.7% 2,192,913,510
OTHER ASSETS IN EXCESS OF LIABILITIES ....... 2.3 52,731,259
----- --------------
NET ASSETS .................................. 100.0% $2,245,644,769
===== ==============
</TABLE>
- ---------------------
* Resale is restricted to qualified institutional investors.
++ 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 securities.
(e) Purchased on a discount basis. The interest rate shown has been adjusted to
reflect a money market equivalent yield.
(f) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $98,279,258 and the
aggregate gross unrealized depreciation is $675,059,918, resulting in net
unrealized depreciation of $576,780,660.
See Notes to Financial Statements
13
<PAGE>
Morgan Stanley Dean Witter High Yield Securities Inc.
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
February 29, 2000 (unaudited)
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments in securities, at value
(identified cost $2,769,694,170) .................................. $2,192,913,510
Cash ................................................................ 47,168
Receivable for:
Interest ......................................................... 55,467,959
Capital stock sold ............................................... 4,136,054
Prepaid expenses and other assets ................................... 172,892
--------------
TOTAL ASSETS ..................................................... 2,252,737,583
--------------
LIABILITIES:
Payable for:
Capital stock repurchased ........................................ 5,043,994
Plan of distribution fee ......................................... 1,130,917
Investment management fee ........................................ 697,720
Accrued expenses and other payables ................................. 220,183
--------------
TOTAL LIABILITIES ................................................ 7,092,814
--------------
NET ASSETS ....................................................... $2,245,644,769
==============
COMPOSITION OF NET ASSETS:
Paid-in-capital ..................................................... $3,435,751,627
Net unrealized depreciation ......................................... (576,780,660)
Accumulated undistributed net investment income ..................... 441,493
Accumulated net realized loss ....................................... (613,767,691)
--------------
NET ASSETS ....................................................... $2,245,644,769
==============
CLASS A SHARES:
Net Assets .......................................................... $72,185,293
Shares Outstanding (500,000,000 authorized, $.01 par value).......... 13,608,773
NET ASSET VALUE PER SHARE ........................................ $5.30
=====
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value) .................. $5.54
=====
CLASS B SHARES:
Net Assets .......................................................... $1,760,447,345
Shares Outstanding (500,000,000 authorized, $.01 par value) ......... 332,640,982
NET ASSET VALUE PER SHARE ........................................ $5.29
=====
CLASS C SHARES:
Net Assets .......................................................... $103,091,407
Shares Outstanding (500,000,000 authorized, $.01 par value) ......... 19,456,211
NET ASSET VALUE PER SHARE ........................................ $5.30
=====
CLASS D SHARES:
Net Assets .......................................................... $309,920,724
Shares Outstanding (500,000,000 authorized, $.01 par value) ......... 58,427,516
NET ASSET VALUE PER SHARE ........................................ $5.30
=====
</TABLE>
See Notes to Financial Statements
14
<PAGE>
Morgan Stanley Dean Witter High Yield Securities Inc.
Financial Statements, continued
STATEMENT OF OPERATIONS
For the six months ended February 29, 2000 (unaudited)
<TABLE>
<CAPTION>
NET INVESTMENT INCOME:
<S> <C>
INTEREST INCOME ................................... $161,729,353
------------
EXPENSES
Plan of distribution fee (Class A shares) ......... 55,025
Plan of distribution fee (Class B shares) ......... 6,731,048
Plan of distribution fee (Class C shares) ......... 447,376
Investment management fee ......................... 4,459,953
Transfer agent fees and expenses .................. 914,026
Registration fees ................................. 67,262
Custodian fees .................................... 48,124
Shareholder reports and notices ................... 48,063
Professional fees ................................. 36,228
Directors' fees and expenses ...................... 8,845
Other ............................................. 14,525
------------
TOTAL EXPENSES ................................. 12,830,475
------------
NET INVESTMENT INCOME .......................... 148,898,878
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain ................................. 7,426,686
Net change in unrealized depreciation ............. (89,570,077)
------------
NET LOSS ....................................... (82,143,391)
------------
NET INCREASE ...................................... $66,755,487
===========
</TABLE>
See Notes to Financial Statements
15
<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 29, 2000 AUGUST 31, 1999
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(unaudited)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ........................................... $ 148,898,878 $ 289,651,675
Net realized gain (loss) ........................................ 7,426,686 (65,548,410)
Net change in unrealized depreciation ........................... (89,570,077) (193,563,887)
-------------- --------------
NET INCREASE ................................................. 66,755,487 30,539,378
-------------- --------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT
INCOME:
Class A shares .................................................. (5,176,657) (7,768,308)
Class B shares .................................................. (123,486,442) (229,484,007)
Class C shares .................................................. (7,183,975) (10,585,900)
Class D shares .................................................. (22,701,673) (47,045,091)
-------------- --------------
TOTAL DIVIDENDS .............................................. (158,548,747) (294,883,306)
-------------- --------------
Net increase (decrease) from capital stock transactions ......... (101,271,636) 454,019,292
-------------- --------------
NET INCREASE (DECREASE) ...................................... (193,064,896) 189,675,364
NET ASSETS:
Beginning of period ............................................. 2,438,709,665 2,249,034,301
-------------- --------------
END OF PERIOD
(Including undistributed net investment income of
$441,493 and $10,091,362, respectively)....................... $2,245,644,769 $2,438,709,665
============== ==============
</TABLE>
See Notes to Financial Statements
16
<PAGE>
Morgan Stanley Dean Witter High Yield Securities Inc.
Notes to Financial Statements February 29, 2000 (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 it 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
17
<PAGE>
Morgan Stanley Dean Witter High Yield Securities Inc.
Notes to Financial Statements February 29, 2000 (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.
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
18
<PAGE>
Morgan Stanley Dean Witter High Yield Securities Inc.
Notes to Financial Statements February 29, 2000 (unaudited) continued
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 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,
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 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
19
<PAGE>
Morgan Stanley Dean Witter High Yield Securities Inc.
Notes to Financial Statements February 29, 2000 (unaudited) continued
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 $55,526,435 at February 29, 2000.
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 29, 2000, the distribution fee
was accrued for Class A shares and Class C shares at the annual rate of 0.15%
and 0.85%, respectively.
The Distributor has informed the Fund that for the six months ended February 29,
2000, it received contingent deferred sales charges from certain redemptions of
the Fund's Class A shares, Class B shares and Class C shares of $3,908,
$2,631,315 and $59,432, respectively and received $89,808 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 29, 2000, aggregated
$209,271,104 and $374,723,936, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At February 29, 2000, the Fund had
transfer agent fees and expenses payable of approximately $2,000.
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 six months ended February 29, 2000
included in Directors' fees and expenses in the Statement of Operations amounted
to $2,907. At February 29, 2000, the Fund had an accrued pension liability of
$53,677 which is included in accrued expenses in the Statement of Assets and
Liabilities.
20
<PAGE>
Morgan Stanley Dean Witter High Yield Securities Inc.
Notes to Financial Statements February 29, 2000 (unaudited) continued
5. FEDERAL INCOME TAX STATUS
At August 31, 1999, the Fund had a net capital loss carryover of approximately
$544,681,000, 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
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2000 2001 2002 2003 2004 2005 2006 2007
- --------- ------- -------- ------- ------- ------- ------- -------
$ 182,201 $45,084 $166,660 $50,599 $23,296 $39,319 $12,603 $24,919
========= ======= ======== ======= ======= ======= ======= =======
</TABLE>
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"). Due to the Fund's
acquisition of High Income, 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 $64,990,000 during fiscal 1999.
At August 31, 1999, the Fund had temporary book/tax differences primarily
attributable to post-October losses and capital loss deferrals on wash sales and
interest on bonds in default.
21
<PAGE>
Morgan Stanley Dean Witter High Yield Securities Inc.
Notes to Financial Statements February 29, 2000 (unaudited) continued
6. CAPITAL STOCK
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
FEBRUARY 29, 2000 AUGUST 31, 1999
- ------------------------------------------------------------------------------------------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
----------- ------- ------- -------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold ................................. 10,426,968 $ 55,427,783 14,286,295 $ 83,691,711
Reinvestment of dividends ............ 493,181 2,606,425 663,857 3,835,707
Redeemed ............................. (9,768,740) (51,686,278) (7,475,634) (43,226,489)
------------- -------------- ---------- --------------
Net increase - Class A ............... 1,151,409 6,347,930 7,474,518 44,300,929
------------- -------------- ---------- --------------
CLASS B SHARES
Sold ................................. 44,018,288 233,724,541 158,254,779 925,430,936
Reinvestment of dividends ............ 8,651,608 45,643,806 14,916,788 86,253,971
Redeemed ............................. (70,406,848) (373,704,279) (109,357,421) (637,513,069)
------------- -------------- ------------ --------------
Net increase (decrease) - Class B .... (17,736,952) (94,335,932) 63,814,146 374,171,838
------------- -------------- ------------ --------------
CLASS C SHARES
Sold ................................. 5,802,783 30,958,857 20,141,052 117,563,491
Reinvestment of dividends ............ 713,830 3,768,883 965,180 5,575,865
Redeemed ............................. (6,881,079) (36,595,689) (10,489,731) (60,989,647)
------------- -------------- ------------ --------------
Net increase (decrease) - Class C .... (364,466) (1,867,949) 10,616,501 62,149,709
------------- -------------- ------------ --------------
CLASS D SHARES
Sold ................................. 5,516,218 29,222,384 13,701,316 80,018,104
Reinvestment of dividends ............ 2,460,180 13,002,873 4,485,925 26,008,989
Redeemed ............................. (10,093,232) (53,640,942) (22,704,747) (132,630,277)
------------- -------------- ------------ --------------
Net decrease - Class D ............... (2,116,834) (11,415,685) (4,517,506) (26,603,184)
------------- -------------- ------------ --------------
Net increase (decrease) in Fund ...... (19,066,843) $ (101,271,636) 77,387,659 $ 454,019,292
============= ============== ============ ==============
</TABLE>
22
<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 PERIOD
FOR THE SIX FOR THE YEAR FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED ENDED THROUGH
FEBRUARY 29, 2000 AUGUST 31, 1999 AUGUST 31, 1998 AUGUST 31, 1997
- -----------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period .............. $5.51 $6.16 $6.82 $6.83
----- ----- ----- -----
Income (loss) from investment operations:
Net investment income ............................ 0.36 0.72 0.76 0.07
Net realized and unrealized loss ................. (0.19) (0.63) (0.71) (0.03)
----- ----- ----- -----
Total income from investment operations ........... 0.17 0.09 0.05 0.04
----- ----- ----- -----
Less dividends from net investment income ......... (0.38) (0.74) (0.71) (0.05)
----- ----- ----- -----
Net asset value, end of period .................... $5.30 $5.51 $6.16 $6.82
===== ===== ===== =====
TOTAL RETURN + .................................... 3.32%(1) 1.47% 0.40% 0.65%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses .......................................... 0.64%(2)(3) 0.68%(3) 0.75%(3) 0.93%(2)
Net investment income ............................. 13.47%(2)(3) 12.42%(3) 11.30%(3) 11.80%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ........... $72,185 $68,667 $30,678 $1,996
Portfolio turnover rate ........................... 9% 36% 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>
Morgan Stanley Dean Witter High Yield Securities Inc.
Financial Highlights, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED ENDED THROUGH
FEBRUARY 29, 2000 AUGUST 31, 1999 AUGUST 31, 1998 AUGUST 31, 1997
- ---------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
CLASS B SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period ....... $5.50 $6.15 $6.82 $6.83
----- ----- ----- -----
Income (loss) from investment operations:
Net investment income ..................... 0.34 0.69 0.73 0.07
Net realized and unrealized loss .......... (0.19) (0.64) (0.72) (0.03)
----- ----- ----- -----
Total income from investment operations .... 0.15 0.05 0.01 0.04
----- ----- ----- -----
Less dividends from net investment income .. (0.36) (0.70) (0.68) (0.05)
----- ----- ----- -----
Net asset value, end of period ............. $5.29 $5.50 $6.15 $6.82
===== ===== ===== =====
TOTAL RETURN + ............................. 3.02%(1) 0.92% (0.23)% 0.62%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................... 1.24%(2)(3) 1.24%(3) 1.25 %(3) 1.42%(2)
Net investment income ...................... 12.87%(2)(3) 11.86%(3) 10.80 %(3) 11.28%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands .... $1,760,447 $1,927,186 $1,761,147 $15,828
Portfolio turnover rate .................... 9% 36% 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
24
<PAGE>
Morgan Stanley Dean Witter High Yield Securities Inc.
Financial Highlights, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED ENDED THROUGH
FEBRUARY 29, 2000 AUGUST 31, 1999 AUGUST 31, 1998 AUGUST 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
CLASS C SHARES ++
SELECTED PER SHARE DATA:
Net asset value, beginning of period .............. $5.51 $6.15 $6.82 $6.83
----- ----- ----- -----
Income (loss) from investment operations:
Net investment income ............................ 0.34 0.68 0.72 0.07
Net realized and unrealized loss ................. (0.19) (0.62) (0.72) (0.03)
----- ----- ----- -----
Total income from investment operations ........... 0.15 0.06 - 0.04
----- ----- ----- -----
Less dividends from net investment income ......... (0.36) (0.70) (0.67) (0.05)
----- ----- ----- -----
Net asset value, end of period .................... $5.30 $5.51 $6.15 $6.82
===== ===== ===== =====
TOTAL RETURN + .................................... 2.97%(1) 0.99% (0.34)% 0.62%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses .......................................... 1.34%(2)(3) 1.34%(3) 1.36 %(3) 1.52%(2)
Net investment income ............................. 12.77%(2)(3) 11.76%(3) 10.69 %(3) 11.18%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ........... $103,091 $109,142 $56,626 $5,225
Portfolio turnover rate ........................... 9% 36% 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
25
<PAGE>
Morgan Stanley Dean Witter High Yield Securities Inc.
Financial Highlights, continued
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
FEBRUARY 29, 2000++
- ----------------------------------------------------------------------
<S> <C>
(unaudited)
CLASS D SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period ......... $5.51
-----
Income (loss) from investment operations:
Net investment income ....................... 0.36
Net realized and unrealized gain (loss) ..... (0.19)
-----
Total income from investment operations ...... 0.17
-----
Less dividends from net investment
income ...................................... (0.38)
-----
Net asset value, end of period ............... $5.30
=====
TOTAL RETURN + ............................... 3.40%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ..................................... 0.49%(2)(3)
Net investment income ........................ 13.62%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ...... $309,921
Portfolio turnover rate ...................... 9%
<CAPTION>
FOR THE YEAR ENDED AUGUST 31,
--------------------------------------------------------------------------
1999++ 1998++ 1997* 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <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
----- ----- ----- ----- -----
Income (loss) from investment operations:
Net investment income ....................... 0.74 0.78 0.79 0.83 0.80
Net realized and unrealized gain (loss) ..... (0.64) (0.71) 0.15 (0.12) (0.06)
----- ----- ----- ----- -----
Total income from investment operations ...... 0.10 0.07 0.94 0.71 0.74
----- ----- ----- ----- -----
Less dividends from net investment
income ...................................... (0.75) (0.73) (0.83) (0.77) (0.80)
----- ----- ----- ----- -----
Net asset value, end of period ............... $5.51 $6.16 $6.82 $6.71 $6.77
===== ===== ===== ===== =====
TOTAL RETURN + ............................... 1.67% 0.63% 15.01% 11.07% 11.98%
RATIOS TO AVERAGE NET ASSETS:
Expenses ..................................... 0.49%(1) 0.51% 0.68% 0.66% 0.79%
Net investment income ........................ 12.61%(1) 11.54% 11.78% 12.27% 12.06%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ...... $333,714 $400,582 $479,020 $460,203 $455,445
Portfolio turnover rate ...................... 36% 66% 113% 49% 74%
</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
26
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
DIRECTORS
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Mitchell M. Merin
President
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.
Read the prospectus carefully before investing.
MORGAN STANLEY
DEAN WITTER
HIGH YIELD
SECURITIES
[GRAPHIC OMITTED]
SEMIANNUAL REPORT
February 29, 2000
