<PAGE>
As filed with the Securities and Exchange Commission on August 23, 1999
Securities Act File No. 333-82863
Investment Company Act File No. 811-08044
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-2
Registration Statement Under The Securities Act of 1933
Pre-Effective Amendment No. 1
Post-Effective Amendment No. __
and/or
Registration Statement Under The Investment Company Act of 1940
Amendment No. 4
(check appropriate box or boxes)
Morgan Stanley Dean Witter
High Yield Fund, Inc.
(formerly The Morgan Stanley High Yield Fund, Inc.)
(Exact Name of Registrant as Specified in Charter)
1221 Avenue of the Americas
New York, New York 10020
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (212) 762-4000
--------------
HAROLD J. SCHAAFF, JR., ESQ.
Morgan Stanley Dean Witter High Yield Fund, Inc.
c/o Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
(Name and Address of Agent for Service)
--------------
With copies to:
LEONARD B. MACKEY, JR., ESQ.
Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
(212) 878-8000
--------------
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Registration Statement.
If any securities being registered on this form will be offered on a delayed
or continuous basis in reliance on Rule 415 under the Securities Act of 1933,
other than securities offered in connection with a dividend reinvestment plan,
check the following box. [x]
--------------
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
Proposed Amount Of
Amount Proposed Maximum Registration Fee
Title of Securities Being Maximum Aggregate
Being Registered Registered Offering Price Per Share(1) Offering Price(1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock $.01 Par Value......... 3,700,000 Shares $15.6875 $58,043,750 $16,136(2)
(1) Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(c) under the Securities Act of
1933. Based on the average of the high and low sales prices reported on the New York Stock Exchange on July 12, 1999.
(2) Previously paid.
</TABLE>
--------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter
<PAGE>
become effective in accordance with Section 8(a) of the Securities Act of 1933
or until this Registration Statement shall become effective on such date as the
Securities and Exchange Commission, acting pursuant to said Section 8(a), may
determine.
===============================================================================
<PAGE>
CROSS-REFERENCE SHEET
Parts A and B of the Prospectus*
<TABLE>
<CAPTION>
Items in Parts A and B of Form N-2 Location in Prospectus
---------------------------------- ----------------------
<S> <C> <C>
1. Outside Front Cover........................... Front Cover Page
2. Inside Front and Outside Back Cover Page...... Front Cover Page; Inside Front Cover Page; Outside Back
Cover Page
3. Fee Table and Synopsis........................ Prospectus Summary; Fee Table
4. Financial Highlights.......................... Financial Highlights
5. Plan of Distribution.......................... Cover Page; Prospectus Summary; The Offer
6. Selling Stockholders.......................... Not Applicable
7. Use of Proceeds............................... Use of Proceeds
8. General Description of the Registrant......... Cover Page; Prospectus Summary; The Fund; Investment
Restrictions; Investment Objectives and Policies; Risk
Factors and Special Considerations; Description of
Capital Stock
9. Management.................................... Prospectus Summary; Management of the Fund; Portfolio
Transactions and Brokerage; Custodians; Dividend Paying
Agent, Transfer Agent and Registrar; Description of
Capital Stock
10. Capital Stock, Long-Term Debt, and Other
Securities.................................... Description of Capital Stock; Dividends and
Distributions; Dividend Reinvestment and Cash Purchase
Plan; Taxation
11. Defaults and Arrears on Senior Securities..... Not Applicable
12. Legal Proceedings............................. Not Applicable
13. Table of Contents of the Statement of
Additional Information........................ Not Applicable
14. Cover Page.................................... Not Applicable
15. Table of Contents............................. Not Applicable
16. General Information and History............... Prospectus Summary; The Fund
17. Investment Objective and Policies............. Prospectus Summary; Investment Objectives and Policies;
Investment Restrictions
18. Management.................................... Prospectus Summary; Management of the Fund
19. Control Persons and Principal Holders of
Securities.................................... Not Applicable
20. Investment Advisory and Other Services........ Prospectus Summary; Management of the Fund; Custodians;
Transfer Agent and Registrar; Dividend Paying Agent;
Experts
21. Brokerage Allocation and Other Practices...... Portfolio Transactions and Brokerage
22. Tax Status.................................... Taxation
23. Financial Statements.......................... Incorporated by reference
- -------
</TABLE>
* Pursuant to Part B: Statement of Additional Information, all information
required to be set forth in Part B: Statement of Additional Information has been
included in Part A: The Prospectus.
<PAGE>
PROSPECTUS
Morgan Stanley Dean Witter High Yield Fund, Inc.
(formerly The Morgan Stanley High Yield Fund, Inc.)
--------------
2,960,000 Shares of Common Stock
Issuable Upon Exercise of
Rights to Subscribe for Such Shares
--------------
Morgan Stanley Dean Witter High Yield Fund, Inc. is issuing non-
transferable rights to its stockholders. You will receive one right for each
share of common stock you own on the record date, which is August 23, 1999.
These rights entitle you to subscribe for shares of the Fund's common stock.
You may purchase one new share of common stock for every three rights you
receive. Record date stockholders who receive less than three rights will be
entitled to purchase one share. Record date stockholders who exercise all their
rights may purchase the shares not acquired by other record date stockholders in
this rights offering, subject to the limitations as discussed in this
Prospectus. The Fund may increase the number of shares that may be subscribed
for in this offer by up to 25% of the primary subscription (as defined in this
Prospectus) or an additional 740,000 shares, to honor record date stockholder
requests to purchase more shares.
The rights are non-transferable and, therefore, may not be purchased or
sold. The rights will not be admitted for trading on the New York Stock
Exchange or any other securities exchange. The Fund's shares of common stock
are listed and the shares issued in this offer will be listed on the New York
Stock Exchange under the symbol "MSY," subject to notice of issuance. On August
20, 1999, the last reported net asset value per share of the Fund's common stock
was $13.03 and the last reported sales price of a share on the New York Stock
Exchange was $13.88.
The subscription price per share will be 95% of the average of the last
reported sales price per share of the Fund's common stock on the New York Stock
Exchange for the five trading days ending with the expiration date. You will
not know the actual subscription price per share at the time of exercise. You
therefore will be required initially to pay for the shares at the estimated
subscription price of $13.25 per share (based on approximately 95% of the last
reported sales price on August 20, 1999). This offer will expire at 5:00 P.M.,
New York City time, on September 24, 1999 unless the Fund extends the offering
as described in this Prospectus.
-------------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Estimated Subscription Price...... $13.25 $39,220,000
Sales Load........................ $ 0.23 $ 686,350
Proceeds to Fund*................. $13.02 $38,533,650
</TABLE>
The proceeds to the Fund assumes all 2,960,000 shares are purchased at
this estimated subscription price. If the Fund increases the number of
shares subject to subscription by up to 740,000 shares, as described
above, the proceeds to the Fund would be $48,167,062.
*Before deduction of expenses incurred by the Fund related to the offering
estimated at $360,000.
-------------
The Fund is a non-diversified, closed-end management investment company.
The Fund seeks a high level of current income as its primary investment
objective and capital appreciation as a secondary objective. In seeking to
achieve these objectives, the Fund invests primarily in a portfolio of high
yield securities. There can be no assurance that the Fund will achieve its
investment objectives. Morgan Stanley Dean Witter Investment Management Inc.
(formerly Morgan Stanley Asset Management Inc.) has served as the Fund's
investment manager since the Fund's inception in 1993.
The Fund's investments in high yield, high risk securities and its
leveraged capital structure involve special risks. See the "Risk Factors and
Special Considerations" section on page 22 of this Prospectus for a more
comprehensive discussion of risks.
Stockholders who do not exercise their rights should expect that they will,
at the completion of this offer, own a smaller proportional interest in the Fund
than would otherwise be the case. Also, stockholders should note that because
the subscription price per share may be less than the net asset value per share
on the expiration date and because the Fund will incur expenses related to the
offering, record date stockholders may experience an immediate dilution, which
could be substantial, of the aggregate net asset value of their shares of common
stock as a result of this offer. The Fund cannot state precisely the extent of
this dilution at this time because the Fund does not know what the net asset
value per share will be at the expiration of this offer, or what the
subscription price will be, or what proportion of the shares will be
subscribed.
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing. Investors are advised to
read and retain it for future reference.
--------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this Prospectus. Any representation to the contrary is
a criminal offense.
The date of this Prospectus is August 23, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PROSPECTUS SUMMARY.......................................................... 3
FEE TABLE................................................................... 10
FINANCIAL HIGHLIGHTS........................................................ 11
CAPITALIZATION AT JUNE 30, 1999............................................. 12
TRADING AND NET ASSET VALUE INFORMATION..................................... 12
THE FUND.................................................................... 13
THE OFFER................................................................... 13
USE OF PROCEEDS............................................................. 22
RISK FACTORS AND SPECIAL CONSIDERATIONS..................................... 22
INVESTMENT OBJECTIVES AND POLICIES.......................................... 28
INVESTMENT RESTRICTIONS..................................................... 35
MANAGEMENT OF THE FUND...................................................... 36
PORTFOLIO TRANSACTIONS AND BROKERAGE........................................ 43
NET ASSET VALUE............................................................. 44
DIVIDENDS AND DISTRIBUTIONS; DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN... 45
TAXATION.................................................................... 46
DESCRIPTION OF CAPITAL STOCK................................................ 51
DIVIDEND PAYING AGENT, TRANSFER AGENT AND REGISTRAR......................... 55
CUSTODIANS.................................................................. 55
EXPERTS..................................................................... 56
LEGAL MATTERS............................................................... 56
ADDITIONAL INFORMATION...................................................... 56
APPENDIX A.................................................................. A-1
APPENDIX B.................................................................. B-1
</TABLE>
2
<PAGE>
PROSPECTUS SUMMARY
This summary highlights some information from this Prospectus. It may not
contain all of the information that is important to you. To understand the offer
fully, you should read the entire Prospectus carefully, including the risk
factors.
Purpose of the Offer The Board of Directors of the Fund
has determined that it would be in
the best interests of the Fund and
its stockholders to increase the
assets of the Fund so the Fund may
be in a better position to take
advantage of investment
opportunities. The Fund's
investment manager believes, as a
result of recent events in the
financial markets, that there are
a number of attractive investment
opportunities in the high-yield,
high risk bond market.
The Board also believes that the
Fund's expense ratio may be
reduced as a result of this offer.
This is because the Fund's fixed
costs can be spread over a larger
asset base. The issuance of
additional shares also may enhance
the liquidity of the Fund's shares
on the New York Stock Exchange.
The Board also considered that
this rights offering would give
record date stockholders the
opportunity to purchase shares at
a price below market price and/or
net asset value, and might
increase the level of market
interest in the Fund. The Board
considered the proposed terms of
the offer, the expenses of the
offer, and its dilutive effect on
exercising and non-exercising
record date stockholders.
The Board of Directors has
considered the impact of the offer
on its ability to maintain,
subject to market conditions, the
Fund's current level of
distributions. Based on current
market conditions and available
leverage opportunities, the Board
believes that the offer will not
result in a change in the Fund's
current level of dividends for the
foreseeable future.
Important Terms of the Offer
Aggregate number of shares offered 2,960,000 (not including up to
740,000 additional shares the Fund
may issue to cover over-
subscription requests).
Number of non-transferable rights issued One right for each whole share
to each stockholder owned on the record date.
Subscription ratio One share for every three rights
(1-for-3)
Estimated Subscription
Price Per Share $13.25
Subscription Price per share 95% of the average of the last
reported sales price per share of
the Fund's common stock on the New
York Stock Exchange for the five
trading days ending with the
expiration date.
<TABLE>
<S> <C> <C>
Important Dates to Remember Event Date
Record Date............................ August 23, 1999
Subscription Period.................... August 23, 1999 to
September 24, 1999 *
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
Expiration Date........................ September 24, 1999 *
Subscription Certificates and Payment
for Shares Due +....................... September 24, 1999 *
Notice of Guaranteed Delivery Due +.... September 24, 1999 *
Payments and Subscription Certificates
for Guarantees of Delivery Due......... September 29, 1999 *
Confirmation Mailed to Participants.... October 6, 1999 *
-------------------------------------
* Unless the offer is extended.
+ A stockholder exercising rights
must deliver either (i) a
subscription certificate and
payment for shares or (ii) a
notice of guaranteed delivery by
September 24, 1999, unless the
offer is extended.
The first regular monthly dividend
to be paid on shares acquired upon
exercise of rights will be the
first monthly dividend, the record
date for which occurs after the
issuance of the shares. It is the
Fund's present policy to pay
dividends on the 15th day of each
month to stockholders of record on
the last day of the previous
month. Assuming the subscription
period is not extended, it is
expected that the first dividend
received by stockholders acquiring
shares in the offer will be paid
on the 15th day of November, 1999.
Over-Subscription Privilege Record date stockholders who fully
exercise all of the rights issued
to them are entitled to subscribe
for those shares that were not
subscribed for by other record
date stockholders. If these
requests for shares exceed the
shares available, the Fund may
determine after the expiration of
the offer, in the discretion of
the Board of Directors, to issue
up to an additional 25% of the
shares available pursuant to the
offer (up to an additional 740,000
shares), in order to cover these
requests. Regardless of whether
the Fund issues such additional
shares, to the extent shares are
not available to honor all
requests, the available shares
will be allocated pro rata among
those record date stockholders who
over-subscribe based on the number
of rights originally issued to
them by the Fund.
</TABLE>
4
<PAGE>
Method for Exercising Rights If you wish to exercise your
rights, you may do so in the
following ways:
(1) Complete and sign the
subscription certificate. Mail it
in the envelope provided or
deliver the completed and signed
subscription certificate with
payment in full to American Stock
Transfer & Trust Company at the
address indicated on the
subscription certificate. Your
completed and signed subscription
certificate and payment must be
received by 5:00 P.M., New York
City time, on September 24, 1999,
unless the offer is extended.
(2) Contact your broker,
banker or trust company, which can
arrange, on your behalf, to
guarantee delivery of payment and
delivery of a properly completed
and executed subscription
certificate pursuant to a notice
of guaranteed delivery by the
close of business on the third
business day after the expiration
date of the offer. A fee may be
charged for this service. The
notice of guaranteed delivery must
be received by 5:00 P.M., New York
City time, on the expiration date
of the offer.
Fractional shares will not be
issued. After the exercise of
rights, record date stockholders
who have remaining less than three
rights will not be able to
exercise those rights and purchase
a share. Rather, those rights will
expire without any residual value.
Record date stockholders who
receive less than three rights,
however, may purchase one share at
the subscription price. Record
date stockholders may request
additional shares under the over-
subscription privilege.
Non-Transferability of Rights The rights are non-transferable
and, therefore, may not be
purchased or sold. The rights will
not be listed for trading on the
New York Stock Exchange or any
other securities exchange.
However, the shares to be issued
pursuant to the offer will be
listed for trading on the New York
Stock Exchange, subject to notice
of issuance.
Offering Fees and Expenses The Fund has agreed to pay broker-
dealers that have executed and
delivered a soliciting dealer
agreement and have solicited the
exercise of rights, solicitation
fees equal to 1.75% of the
subscription price per share for
each share issued pursuant to the
exercise of rights as a result of
their soliciting efforts. Other
offering expenses incurred by the
Fund are estimated at
$360,000.
Foreign Restrictions Subscription certificates will not
be mailed to record date
stockholders whose record
addresses are outside the United
States. Foreign record date
stockholders will receive written
notice of the offer. The rights to
which such subscription
certificates relate will be held
by the subscription agent for such
foreign record date stockholders'
accounts until instructions are
received to exercise the rights.
Upon request, the subscription
agent will send a copy of the
Prospectus to such foreign record
date stockholders. If no
instructions have been received by
the expiration date, the rights of
those foreign record date
stockholders will expire.
5
<PAGE>
Use of Proceeds The estimated net proceeds of the
offer are approximately
$38,173,650. This figure is based
on the estimated subscription
price of $13.25 per share and
assumes all 2,960,000 shares
offered in the primary
subscription are sold and that
offering expenses estimated at
approximately $360,000 are paid.
If, as described above, the Fund
increases the number of shares
subject to subscription by 25% in
order to satisfy over-subscription
requests, the additional net
proceeds will be approximately
$9,633,412 (for total estimated
net proceeds of approximately
$47,807,062).
The Fund's investment manager
anticipates that the Fund will
take up to 30 days (but in no
event longer than six months) to
invest or employ these proceeds in
accordance with the Fund's
investment objectives and policies
under current market conditions.
The proceeds of the offer will be
held in U.S. Government securities
and other high-quality, short-term
money market instruments until
they are invested. While the
proceeds are invested in U.S.
Government securities and other
high-quality, short-term money
market instruments, the proceeds
will not be invested in securities
consistent with the Fund's primary
objective of high current
income.
Information Agent Please direct all questions or
inquiries relating to the offer to
the Fund's information agent as
follows:
Shareholder Communications
Corporation
17 State Street
New York, NY 10005
Stockholders may call toll
free: (800) 603-1720
In addition, Banks and Brokers may
call: (212) 805-7113
Stockholders may also contact
their brokers or nominees for
information with respect to the
offer.
The Fund The Fund is a non-diversified,
closed-end management investment
company designed for investors
desiring to invest a portion of
their assets in high yield
securities.
Investment Objectives
and Policies The Fund's primary investment
objective is to seek a high level
of current income. As a secondary
objective, the Fund seeks capital
appreciation. Under normal market
conditions, at least 65% of the
Fund's total assets will be
invested in high yield securities
issued by U.S. corporations. In
addition, the Fund may invest up
to 35% of its total assets in high
yield securities issued by non-
U.S. corporations and by
government and government-related
issuers located in developing
countries, provided that no more
than 20% of the Fund's total
assets may be invested in high
yield securities issued by
government or government-related
issuers in developing
countries.
6
<PAGE>
The high yield securities in which
the Fund will invest include debt
obligations (e.g., bonds,
debentures, notes, equipment lease
certificates, equipment trust
certificates, conditional sales
contracts and commercial paper)
and preferred stock. Such
securities generally will be
rated, at the time of investment,
below investment grade (that is,
rated "Ba" or lower by Moody's
Investors Service, Inc. or "BB" or
lower by Standard & Poor's Ratings
Group) or, if not rated,
determined by the investment
manager to be of comparable
quality. There is no minimum
rating requirement for the
securities in which the Fund
invests. However, the Fund
anticipates that under normal
market conditions, no more than
25% of the Fund's total assets
will be rated, at the time of
investment, below "B" by Moody's
or S&P, or will be unrated and of
comparable quality. Yields on
these securities generally, at the
time of investment exceed yields
on higher-rated securities. A
description of the ratings used by
Moody's and S&P is set forth in
Appendix A to this Prospectus.
The Fund is authorized to borrow
or issue shares of preferred stock
or short-term debt securities in
an amount up to 33 1/3% of the
Fund's total assets (including the
amount obtained from leverage) for
investment purposes to increase
the opportunity for greater
returns. Leverage involves
additional risks as discussed on
pages 8 and 25 of this
Prospectus.
Investment Manager Morgan Stanley Dean Witter
Investment Management Inc.
(formerly Morgan Stanley Asset
Management Inc.), a wholly owned
subsidiary of Morgan Stanley Dean
Witter & Co., has served as
investment manager to the Fund
since its inception pursuant to an
investment advisory and management
agreement with the Fund. As of
June 30, 1999, the investment
manager and its institutional
investment management affiliates
had approximately $175.3 billion
of combined assets under
management (including assets under
fiduciary advisory control), of
which approximately $3.5 billion
was invested in high yield
securities. The investment manager
is a registered investment advisor
under the U.S. Investment Advisers
Act of 1940.
The Fund pays the investment
manager a fee, computed weekly and
payable monthly, at the annual
rate of 0.70% of the Fund's
average weekly net assets. The
Fund's investment manager will
benefit from an increase in the
Fund's assets resulting from the
offer.
7
<PAGE>
Risk Factors and
Special Considerations The following summarizes some of
the matters that you should
consider before investing in the
Fund in connection with this
offer.
Dilution. Stockholders who do not
fully exercise their rights in the
primary subscription should expect
that they will, at the completion
of the offer, own a smaller
proportional interest in the Fund
than would otherwise be the case.
Furthermore, the subscription
price per share for the offer may
be lower than the Fund's net asset
value per share. Any rights
offering priced at a discount to
the Fund's net asset value per
share and involving payment of
expenses by the Fund entails some
dilution in net asset value. The
offer may result in a dilution of
net asset value for all
stockholders, which will
disproportionately affect
stockholders who do not exercise
their rights. In addition, there
also may be substantial dilution
in net asset value and share
ownership, and therefore voting
power, to the extent that the Fund
increases the number of shares
subject to subscription by up to
25% in order to satisfy over-
subscription requests. The Fund
cannot state precisely the extent
of this dilution at this time
because the Fund does not know
what the net asset value per share
will be at the expiration of the
offer or what the subscription
price will be or what proportion
of the shares will be
subscribed.
8
<PAGE>
High Yield, High Risk Investments.
At any one time, a substantial
portion of the Fund's assets will
be invested in securities that are
rated below investment grade as
determined by recognized rating
services, such as Moody's and S&P,
or if unrated, of comparable
quality, as determined by the
investment manager. Debt or fixed
income securities rated below
investment grade (e.g., rated "Ba"
or lower by Moody's or "BB" or
lower by S&P) are commonly
referred to as "junk bonds" and
are considered to be speculative.
Investment in securities rated
below investment grade typically
involves risks not associated with
higher rated securities, including
overall greater risk of timely and
ultimate payment of interest and
principal, potentially greater
sensitivity to general economic
conditions and changes in interest
rates, greater market price
volatility and limited secondary
market trading. Certain of the
Fund's investments may be
considered to have extremely poor
prospects of ever attaining any
real investment standing, to have
a current identifiable
vulnerability to default and to be
unlikely to have the capacity to
pay interest and repay principal
when due in the event of adverse
business, financial or economic
conditions, or may be in default
or not current in the payment of
interest or principal. In
addition, the secondary market for
high yield securities, may not be
as liquid as the secondary market
for more highly rated securities
because it is concentrated in
relatively few market makers.
Considerations relating to
Investments in Non-U.S. Issuers.
Investing in securities of non-
U.S. issuers involves certain
considerations not typically
associated with investing in the
securities of U.S. issuers. For
example, investments may be
restricted or controlled to
varying degrees. Governmental
approval may be required for the
repatriation of investment income,
capital or the proceeds of sales
of securities of non-U.S. issuers.
No established secondary markets
may exist for many of the non-U.S.
high yield securities in which the
Fund will invest. In addition,
non-U.S. issuers are not generally
subject to accounting, auditing
and financial reporting standards,
practices and disclosure
requirements comparable to those
applicable to U.S. issuers. In
addition, laws in foreign
countries governing business
organizations, bankruptcy and
insolvency may provide less
protection to security holders
such as the Fund than that
provided by U.S. laws. The
economies of foreign countries may
differ favorably or unfavorably
from the U.S. economy in such
respects as growth of gross
domestic product, rate of
inflation, currency depreciation,
capital reinvestment, resource
self-sufficiency and balance of
payments position. Certain
developing countries have
historically experienced, and may
continue to experience, high rates
of inflation, high interest rates,
exchange rate fluctuations, large
amounts of external debt, balance
of payments and trade difficulties
and extreme poverty and
unemployment. Also, there is a
possibility of nationalization,
expropriation or confiscatory
taxation, political changes,
government regulation, social
instability or diplomatic
developments (including war) which
could affect adversely the
economies of such countries or the
value of the Fund's investments in
those countries. With respect to
the Fund's investments in
developing country government debt
securities, the issuer or
governmental authority that
controls the repayment of a
developing country's debt may not
be able or willing to repay the
principal or interest when due in
accordance with the terms of such
debt.
Foreign Currency Considerations.
Since the Fund may invest in
securities denominated or quoted
in currencies other than the U.S.
dollar, changes in foreign
currency exchange rates could
affect the value of securities in
the Fund's portfolio and the
unrealized appreciation or
depreciation of investments.
Furthermore, the Fund may incur
costs in connection with
conversions between various
currencies. To the extent
available, the Fund may seek to
protect the value of some portion
or all of its non-U.S. dollar-
denominated portfolio holdings
against currency risks by engaging
in hedging transactions as set
forth in this Prospectus.
9
<PAGE>
Risk of Leverage. The Fund's use
of leverage poses certain risks
for holders of common stock,
including the possibility of
higher volatility of both the net
asset value and market value of
the common stock and the risk that
fluctuations in interest rates on
borrowings or in the dividend
rates on any preferred stock may
affect the yield to holders of
common stock. There can be no
assurance that the Fund will be
able to realize a higher return on
its investment portfolio through
the use of leverage.
Discount from Net Asset Value.
Shares of closed-end funds
frequently trade at a market price
that is less than the value of the
net assets attributable to those
shares. The Fund's shares have
traded in the market above, at,
and below net asset value since
the commencement of the Fund's
operations. Since March 1999, the
Fund's shares have consistently
traded above net asset value.
Dividends and Distributions. Based
on information provided by Fund's
investment manager on current
market conditions in the high
yield bond market, the Board of
Directors believes that the offer
will not result in a change in the
Fund's current level of dividends
per share for the foreseeable
future. However, there can be no
assurance that the Fund will be
able to maintain its current level
of dividends per share, and the
Board of Directors may, in its
sole discretion, change the Fund's
current dividend policy or its
current level of dividend per
share in response to market or
other conditions.
Year 2000. The investment
advisory services provided to the
Fund by the investment manager
depend on the smooth operation of
its computer systems. Many
computer and software systems in
use today cannot recognize the
year 2000, but revert to 1900 or
some other date, due to the manner
in which dates were encoded and
calculated. That failure could
have a negative impact on the
handling of securities trades,
pricing and account services. The
investment manager has been
actively working on necessary
changes to its own computer
systems to deal with the year 2000
problem and expects that its
systems will be adapted before
that date. There can be no
assurance, however, that the
investment manager will be
successful. In addition, other
unaffiliated service providers may
be faced with similar problems.
The investment manager is
monitoring their remedial efforts,
but there can be no assurance that
they and the services they provide
will not be adversely affected.
In addition, it is possible that
the markets for securities in
which the Fund invests may be
detrimentally affected by computer
failures throughout the financial
services industry beginning
January 1, 2000. Improperly
functioning trading systems may
result in settlement problems and
liquidity issues. In addition,
corporate and governmental data
processing errors may result in
production problems for individual
companies and overall economic
uncertainties. Earnings of
individual issuers will be
affected by remediation costs,
which may be substantial and may
be reported inconsistently in U.S.
and foreign financial statements.
Accordingly, the Fund's
investments may be adversely
affected.
You should carefully consider your
ability to assume the foregoing
risks before making an investment
in the Fund. An investment in
shares of the Fund is not
appropriate for all investors.
10
<PAGE>
FEE TABLE
<TABLE>
<S> <C>
Stockholder Transaction Expenses:
Sales Load (as a percentage of offering price)(1).................... 1.75%
Annual Expenses (as a percentage of net assets):
Management Fees...................................................... 0.70%
Interest Payments on Borrowed Funds(2)............................... 1.62%
Other Expenses(2).................................................... 0.33%
Total Annual Expenses................................................ 2.65%
</TABLE>
(1) The Fund has agreed to pay broker-dealers who have executed and delivered
a soliciting dealer agreement and have solicited the exercise of rights,
solicitation fees equal to 1.75% of the subscription price per share for
each share issued pursuant to the exercise of rights as a result of their
soliciting efforts.
(2) Amounts are based on estimated amounts for the Fund's current fiscal year
after giving effect to the anticipated net proceeds of the offer,
assuming that all of the rights are exercised.
Example:
<TABLE>
<CAPTION>
Cumulative Expenses Paid for the
Period of:
------------------------------------------------------
1 year 3 years 5 years 10 years
----------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000
investment, assuming a 5% annual return throughout the
periods indicated............................................ $44 $98 $156 $311
</TABLE>
The foregoing fee table and example are intended to assist investors in
understanding the costs and expenses that an investor in the Fund will bear
directly or indirectly.
The Example set forth above assumes payment by an investor of the 1.75%
sales load, reinvestment of all dividends and distributions at net asset value
and an annual expense ratio of 2.65%. The tables above and the assumption in
the Example of a 5% annual return are required by Securities and Exchange
Commission regulations applicable to all investment companies. The Example
should not be considered as a representation of past or future expenses or
annual rates of return. Actual expenses or annual rates of return may be more
or less than those assumed for purposes of the Example. In addition, while the
Example assumes reinvestment of all dividends and distributions at net asset
value, participants in the Fund's Dividend Reinvestment and Cash Purchase Plan
may receive shares purchased or issued at a price or value different from net
asset value. See "Dividends and Distributions; Dividend Reinvestment and Cash
Purchase Plan."
11
<PAGE>
FINANCIAL HIGHLIGHTS
(For a share of common stock of the Fund outstanding throughout each period)
The table below sets forth certain specified information for a share of
common stock of the Fund outstanding throughout each period presented. The
financial highlights for each of the five years ended December 31, 1998 have
been audited by PricewaterhouseCoopers LLP, the Fund's independent accountants,
whose report thereon was unqualified. The information should be read in
conjunction with the financial statements and notes thereto, which are
incorporated herein by reference, in the Fund's Annual Report as of December 31,
1998 and the Fund's Semi-Annual Report (unaudited) as of June 30, 1999, which
are available without charge by contacting the Fund's dividend paying agent,
transfer agent and registrar, American Stock Transfer & Trust Company, 40 Wall
Street, New York, New York 10005, toll free (800) 937-5449.
<TABLE>
<CAPTION>
Six Months
Ended
June 30,
1999 Year Ended December 31, Nov. 30, 1993*
SELECTED PER SHARE DATA ----------- ------------------------------------------------------------- to
AND RATIOS: (Unaudited) 1998 1997 1996 1995 1994 Dec. 31, 1993
- ----------------------------------------------- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period......................... $ 15.19 $ 14.45 $ 13.63 $ 11.96 $ 14.10 $ 14.10
$ 13.62
- ---------------------------------------------------------------------------------------------------------------------------------
Offering Costs.................. -- -- -- -- -- (0.01) (0.05)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Investment Income........... 0.65 1.34 1.37 1.35 1.34 1.32 0.04
Net Realized and Unrealized Gain
(Loss) on Investments........... (0.21) (0.66) 1.21 0.89 1.60 (2.08) 0.01
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.44 0.68 2.58 2.24 2.94 (0.76) 0.05
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income.......... (1.40) (1.36) (1.42) (1.27) (1.36) --
In Excess of Net Investment (0.69)
Income.......................... (0.02) -- -- -- (0.01) --
Net Realized Gain.............. -- (0.76) (0.48) -- -- -- --
In Excess of net Realized Gain -- (0.07) -- -- -- -- --
--
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions............ (0.69) (2.25) (1.84) (1.42) (1.27) (1.37) --
- ---------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period.. $ 13.37 $ 13.62 $ 15.19 $ 14.45 $ 13.63 $ 11.96 $ 14.10
=================================================================================================================================
Per Share Market Value, End of
Period......................... $ 15.38 $ 16.06 $ 14.63 $ 12.88 $ 11.38 $ 14.75
$ 15.75
=================================================================================================================================
TOTAL INVESTMENT
RETURN:
Market Value................... 11.15% 23.79% 25.92% 25.21% (14.11)% 4.61%
Net Asset Value (1)............ 7.33% 4.12% 18.48% 17.52% 26.07% (5.53)% 0.00%
2.85%
=================================================================================================================================
RATIOS, SUPPLEMENTAL
DATA:
- ---------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period $119,940 $133,050 $126,330 $118,863 $104,260 $122,781
(Thousands)..................... $118,220
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses Before Interest
Expense to Average Net Assets. 1.10% 1.10% 1.06% 1.12% 1.11% 1.12% 1.46%**
Ratio of Expenses After Interest
Expense to Average Net Assets. 2.72% 2.23% 2.76% 2.46% 2.79% 2.78% 1.46%**
Ratio of Net Investment Income
to Average Net Assets......... 9.61% 9.00% 8.98% 9.82% 10.29% 10.18% 3.76%**
Portfolio Turnover Rate......... 26% 78% 94% 136% 84% 32% 0%
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of operations.
** Annualized.
12
<PAGE>
(1) Total investment return based on net asset value per share reflects the
effects of changes in net asset value on the performance of the Fund during
each period, and assumes dividends and distributions, if any, were
reinvested. This percentage is not an indication of the performance of a
shareholder's investment in the Fund based on market value due to
differences between the market price of the stock and the net asset value
per share of the Fund.
13
<PAGE>
CAPITALIZATION AT JUNE 30, 1999
<TABLE>
<CAPTION>
Amount Outstanding Amount Held
Exclusive of Amount by the Fund
Held by the Fund or for
Title of Class Amount Authorized or for its Account its Account
- ----------------------------------- ------------------ ------------------- -------------
<S> <C> <C> <C>
Common Stock, $0.01 par value 100,000,000 shares 8,841,981 shares - 0 - shares
</TABLE>
TRADING AND NET ASSET VALUE INFORMATION
In the past, the Fund's shares have traded both at a premium and at a
discount in relation to net asset value. Although the Fund's shares recently
have been trading at a premium above net asset value, there can be no assurance
that this premium will continue after the offer or that the shares will not
again trade at a discount. Shares of other closed-end investment companies
frequently trade at a discount from net asset value. See "Risk Factors and
Special Considerations."
The following table shows the high and low sales prices of the Fund's common
stock on the New York Stock Exchange Composite Tape, quarterly trading volume on
the Exchange, the high and low net asset value per share and the high and low
premium or discount at which the Fund's shares were trading for each fiscal
quarter during the two most recent fiscal years and since the beginning of the
current fiscal year.
<TABLE>
<CAPTION>
Premium (Discount)
Market Price Quarterly Trading Net Asset Value to Net Asset Value(%)
-------------- Volume (Hundreds --------------- ----------------------
Quarter Ended High Low of High Low High Low
- ----------------------- ------- ------- Shares) ------ ------ --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
March 31, 1997......... 15.1250 14.2500 14,601 15.04 14.34 3.59 (0.70)
June 30, 1997.......... 15.3750 13.7500 11,595 15.32 14.10 1.71 (2.85)
September 30, 1997..... 15.9375 15.0625 9,764 15.80 15.28 0.79 (1.04)
December 31, 1997...... 16.3125 15.0625 10,490 15.96 15.56 3.17 (3.42)
March 31, 1998......... 16.6250 15.8125 8,397 15.64 15.23 5.91 2.63
June 30, 1998.......... 16.3750 15.0625 8,520 15.74 15.24 4.43 (1.59)
September 30, 1998..... 15.6875 12.1875 12,577 15.42 13.59 2.19 (11.48)
December 31, 1998...... 16.0625 12.5625 11,901 14.67 13.36 9.76 (5.03)
March 31, 1999......... 15.7500 14.9375 10,780 13.85 13.49 13.64 10.29
June 30, 1999.......... 15.8125 15.5000 7,822 14.19 13.36 17.57 10.45
</TABLE>
The net asset value per share of the Fund's common stock at the close of
business on July 9, 1999 (the last trading date on which the Fund publicly
reported its net asset value prior to the announcement of the offer) and on
August 20, 1999 (the last trading date on which the Fund publicly reported its
net asset value prior to the date of this Prospectus) was $13.47 and $13.03,
respectively, and the last reported sales price of a share of the Fund's common
stock on the New York Stock Exchange on those dates was $15.75 and $13.88,
respectively.
14
<PAGE>
THE FUND
Morgan Stanley Dean Witter High Yield Fund, Inc. (the "Fund"), incorporated
in Maryland on September 23, 1993 under the name The Morgan Stanley High Yield
Fund, Inc., is a non-diversified, closed-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"). The Fund seeks a high level of current income as its primary investment
objective and capital appreciation as a secondary objective. In seeking to
achieve these objectives, the Fund invests primarily in a portfolio of high
yield securities. No assurance can be given that the Fund's investment
objectives will be realized. Due to the risks inherent in high yield securities
generally, the Fund should be considered as a vehicle for investing a portion of
an investor's assets in the high yield securities markets and not as a complete
investment program. The stockholders of the Fund approved the change in the
Fund's name to Morgan Stanley Dean Witter High Yield Fund, Inc. at the Annual
Meeting of stockholders on June 21, 1999.
At all times, except during periods when a temporary defensive investment
strategy is appropriate, as determined by the Fund's Investment Manager (as
defined below under "Investment Manager") the Fund will invest at least 65% of
its total assets in high yield securities issued by U.S. corporations. In
addition, the Fund may invest up to 35% of its total assets in high yield
securities issued by non-U.S. corporations and by government and government-
related issuers located in developing countries, provided that no more than 20%
of the Fund's total assets may be invested in high yield securities issued by
government or government-related issuers in developing countries. The high
yield securities in which the Fund invests include debt obligations and
preferred stock. Such securities generally will be rated, at the time of
investment, below investment grade (that is, rated "Ba" or lower by Moody's
Investors Service, Inc. ("Moody's") or "BB" or lower by Standard & Poor's
("S&P") or, if not rated, determined by the Investment Manager to be of
comparable quality. There is no minimum rating requirement for the securities
in which the Fund invests. However, the Fund anticipates that under normal
market conditions no more than 25% of the Fund's total assets will be rated, at
the time of investment, below "B" by Moody's or S&P, or will be unrated and of
comparable quality. Yields on these securities will, generally, at the time of
investment exceed yields on higher-rated securities. A description of the
ratings used by Moody's and S&P is set forth in Appendix A to this Prospectus.
The Fund commenced operations on November 30, 1993 following the issuance
of 7,093 shares of common stock of the Fund, par value $0.01 per share ("Common
Stock") to the Investment Manager on November 17, 1993, for $100,000 and the
initial public offering and over-allotment on November 23, 1993 and December 23,
1993 of 8,700,356 shares to the public resulting in aggregate net proceeds to
the Fund of approximately $122,220,020. At August 20, 1999, the Fund had
8,848,421 shares of Common Stock outstanding, which are listed and traded on the
New York Stock Exchange ("NYSE") under the symbol "MSY". As of August 20, 1999,
the net assets of the Fund were $115,277,198.
THE OFFER
Purpose of the Offer
The Board of Directors of the Fund has determined that it would be in the
best interests of the Fund and its stockholders to increase the assets of the
Fund available for investment so that the Fund will be in a better position to
take advantage of available investment opportunities. The Investment Manager
believes, as a result of recent events in the financial markets, that there are
a number of attractive investment opportunities in the high-yield, high risk
bond market.
In addition, the Board of Directors believes that increasing the size of
the Fund may lower the Fund's expenses as a proportion of average net assets
because the Fund's fixed costs can be spread over a larger asset base. In
addition, the issuance of additional shares may enhance the liquidity of the
Fund's shares on the NYSE.
15
<PAGE>
The Board also considered that this rights offering would give record date
stockholders the opportunity to purchase shares at a price below market price
and/or net asset value ("NAV") and might increase the level of market interest
in the Fund.
The Board of Directors considered the impact of the offer on its ability to
maintain, subject to market conditions, the Fund's current level of
distributions. Based on information provided by the Investment Manager on
current market conditions in the bond markets and available leverage
opportunities, the Board of Directors believes the offer will not result in a
change in the Fund's current level of dividends per share for the foreseeable
future. There can be no assurance the Fund will maintain its current level of
dividends per share. The Board of Directors may, in its sole discretion, change
the Fund's level of dividends per share at any time. For a further discussion
of the anticipated impact of the offer of the Fund's dividends, please refer to
"Risk Factors and Special Considerations--Dividends and Distributions."
In determining that the offer was in the best interests of the Fund and its
stockholders, the Board of Directors considered, among other things, using a
fixed price or a price based on a percentage of the Fund's NAV or market price
at the expiration of the offer (variable pricing), the benefits and drawbacks of
conducting a non-transferable versus a transferable rights offering and the
effect on the Fund if the offer is undersubscribed.
The Investment Manager will benefit from the offer because the Investment
Manager's fee is based on the average weekly net assets of the Fund.
The Fund may, in the future and at its discretion, choose to make
additional rights offerings from time to time for a number of shares and on
terms which may or may not be similar to the offer. Any such future rights
offering will be made in accordance with the 1940 Act.
Terms of the Offer
The Fund is issuing to its stockholders of record ("Record Date
Stockholders"), as of the close of business on August 23, 1999 (the "Record
Date"), non-transferable rights ("Rights") entitling the holders thereof to
subscribe for an aggregate of 2,960,000 shares (the "Shares") of the Fund's
Common Stock (the "Offer"). Each such Record Date Stockholder is being issued
one Right for each whole share of Common Stock owned on the Record Date. Only
Record Date Stockholders will be issued Rights and will be entitled to
participate in the Offer. The Rights entitle the holders thereof to subscribe
for one Share for every three Rights held (1-for-3) (the "Primary
Subscription"). Record Date Stockholders issued fewer than three Rights are
entitled to subscribe for one Share pursuant to the Primary Subscription.
Record Date Stockholders purchasing Shares in the Primary Subscription and
Record Date Stockholders who purchase Shares pursuant to the Over-Subscription
Privilege (as defined below) are hereinafter referred to as "Exercising Rights
Holders."
Rights may be exercised at any time during the subscription period (the
"Subscription Period"), which commences on August 23, 1999 and ends at 5:00
P.M., New York City time, on September 24, 1999 unless extended by the Fund (the
"Expiration Date"). The Rights are evidenced by Subscription Certificates
("Subscription Certificates") that will be mailed to Record Date Stockholders,
except as discussed below under "Foreign Stockholders."
Shares not subscribed for in the Primary Subscription will be offered, by
means of the over-subscription privilege (the "Over-Subscription Privilege"), to
those Record Date Stockholders who have exercised all Rights issued to them
(other than those Rights which cannot be exercised because they represent the
right to acquire less than one share) and who wish to acquire more than the
number of Shares they are entitled to purchase pursuant to the exercise of their
Rights. Shares acquired pursuant to the Over-Subscription Privilege are subject
to allotment, as more fully discussed below under "Over-Subscription Privilege."
For purposes of determining the maximum number of Shares a stockholder may
acquire pursuant to the Offer, stockholders whose shares are held of record by
Cede & Co. ("Cede"), as nominee for The Depository Trust Company ("DTC"), or by
any other depository or nominee will be deemed to be the holders of the Rights
that are issued to Cede or such other depository or nominee on their behalf.
16
<PAGE>
The first regular monthly dividend to be paid on Shares acquired upon
exercise of Rights will be the first monthly dividend, the record date for which
occurs after the issuance of the Shares. It is the Fund's present policy to pay
dividends on the 15th day of each month to stockholders of record on the last
day of the previous month. Assuming the Subscription Period is not extended, it
is expected that the first dividend received by stockholders acquiring Shares in
the Offer will be paid on the 15th day of November, 1999.
Fractional Shares will not be issued. After the exercise of Rights, Record
Date Stockholders who have remaining less than three Rights will not be able to
exercise those rights and purchase a share. Rather, those rights will expire
without any residual value. Record Date Stockholders who receive less than
three Rights, however, may purchase one share at the Subscription Price. Record
Date Stockholders may request additional Shares under the Over-Subscription
Privilege.
There is no minimum number of Rights which must be exercised in order for
the Offer to close.
Over-Subscription Privilege
Shares not subscribed for by Record Date Stockholders (the "Excess Shares")
will be offered, by means of the Over-Subscription Privilege, to Record Date
Stockholders who have exercised all exercisable Rights issued to them (other
than those Rights which cannot be exercised because they represent the right to
acquire less than one Share) and who wish to acquire more than the number of
Shares for which the Rights issued to them are exercisable. If sufficient
shares remain after completion of the Primary Subscription, all over-
subscription requests will be honored in full. If sufficient shares are not
available after completion of the Primary Subscription to honor all over-
subscription requests, the Fund may determine after the expiration of the Offer,
in the discretion of the Board of Directors, to issue up to an additional 25% of
the shares available pursuant to the Offer (up to an additional 740,000 shares)
in order to cover the over-subscription requests. Regardless of whether the
Fund issues such additional shares, and to the extent Shares are not available
to honor all over-subscription requests, the available Shares will be allocated
among those who over-subscribe so that the number of shares issued to
participating Record Date Stockholders will generally be in proportion to the
number of shares owned by such stockholders on the record date. The allocation
process involves a series of allocations in order to assure that the total
number of shares available for over-subscription is distributed on a pro rata
basis. Record Date Stockholders should indicate, on the Subscription
Certificate which they submit with respect to the exercise of the Rights issued
to them, how many Excess Shares they are willing to acquire pursuant to the
Over-Subscription Privilege.
Banks, brokers, trustees and other nominee holders of Rights will be
required to certify to the Subscription Agent (as defined herein), before any
Over-Subscription Privilege may be exercised with respect to any particular
beneficial owner, as to the aggregate number of Rights exercised pursuant to the
Primary Subscription and the number of Shares subscribed for pursuant to the
Over-Subscription Privilege by such beneficial owner and that such beneficial
owner's Primary Subscription was exercised in full. Nominee Holder Over-
Subscription Forms and Beneficial Owner Certification Forms will be distributed
to banks, brokers, trustees and other nominee holders with the Subscription
Certificates.
The Fund will not offer or sell in connection with the Offer any Shares
that are not subscribed for pursuant to the Primary Subscription or the Over-
Subscription Privilege.
Subscription Price
The subscription price for the Shares to be issued pursuant to the Offer
will be 95% of the average of the last reported sales price per share of the
Fund's Common Stock on the NYSE for the five trading days ending with the
Expiration Date (the "Subscription Price").
Exercising Rights Holders will not know the actual Subscription Price at
the time of exercise and will be required to pay for the Shares at the Estimated
Subscription Price of $13.25 per Share (based on approximately 95% of the last
reported sales price on August 20, 1999). The actual Subscription Price may be
more than the Estimated Subscription Price.
17
<PAGE>
The Fund announced the Offer after the close of trading on the NYSE on July
14, 1999. The NAV per share of Common Stock at the close of business on July 9,
1999 (the last trading date on which the Fund publicly reported its NAV prior to
the announcement) and on August 20, 1999 was $13.47 and $13.03, respectively,
and the last reported sales price of a share of the Fund's Common Stock on the
NYSE on those dates was $15.75 and $13.88, respectively.
Non-Transferability of Rights
The Rights are non-transferable and, therefore, may not be purchased or
sold. Rights not exercised will expire without residual value when the Offer
expires. The Rights will not be listed for trading on the NYSE or any other
securities exchange. However, the Shares to be issued pursuant to the Offer
will be listed for trading on the NYSE, subject to notice of issuance.
Expiration of the Offer
The Offer will expire at 5:00 P.M., New York City time, on September 24,
1999 unless extended by the Fund. The Rights will expire on the Expiration Date
and thereafter may not be exercised. Any extension of the Offer will be
followed as promptly as practicable by announcement thereof. Such announcement
will be issued no later than 9:00 A.M., New York City time, on the next Business
Day following the previously scheduled Expiration Date. Stockholders may
contact the Fund's Information Agent, Shareholder Communications Corp. (at the
telephone number listed below) after the Expiration Date to inquire as to
whether the Offer has been extended. Without limiting the manner in which the
Fund may choose to make such announcement, the Fund will not, unless otherwise
required by law, have any obligation to publish, advertise or otherwise
communicate any such announcement other than by making a release to the Dow
Jones News Service or such other means of announcement as the Fund deems
appropriate.
Subscription Agent
The subscription agent is American Stock Transfer & Trust Company (the
"Subscription Agent"). The Subscription Agent will receive for its
administrative, processing, invoicing and other services as subscription agent,
a fee estimated to be approximately $25,500 which includes reimbursement for
estimated out-of-pocket expenses related to the Offer. The Subscription Agent
is also the Fund's transfer agent, dividend-paying agent and registrar for the
Common Stock. Questions regarding the Subscription Certificates should be
directed to American Stock Transfer & Trust Company, 40 Wall Street, New York,
New York 10005, U.S.A.; stockholders may also consult their brokers or nominees.
Completed Subscription Certificates must be sent together with proper
payment of the Estimated Subscription Price for all Shares subscribed for in the
Primary Subscription and the Over-Subscription Privilege to American Stock
Transfer & Trust Company by one of the methods described below. Alternatively,
Notices of Guaranteed Delivery may be sent by facsimile to (718) 234-5001 to be
received by the Subscription Agent prior to 5:00 P.M., New York City time, on
the Expiration Date. Facsimiles should be confirmed by telephone at (718) 921-
8200 or toll free at (800) 937-5449. The Fund will accept only properly
completed and executed Subscription Certificates actually received at any of the
addresses listed below, prior to 5:00 P.M., New York City time, on the
Expiration Date or by the close of business on the third Business Day after the
Expiration Date following timely receipt of a Notice of Guaranteed Delivery.
See "Payment for Shares" below.
(1) BY FIRST CLASS MAIL:
American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, New York 10005
U.S.A.
18
<PAGE>
(2) BY OVERNIGHT COURIER:
American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, New York 10005
U.S.A.
(3) BY HAND:
American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, New York 10005
U.S.A.
Delivery to an address other than one of the addresses listed above will not
constitute valid delivery.
Method for Exercising Rights
Rights are evidenced by Subscription Certificates that, except as described
below under "Foreign Restrictions," will be mailed to Record Date Stockholders
or, if a stockholder's shares of Common Stock are held by Cede or any other
depository or nominee on their behalf, to Cede or such depository or nominee.
Rights may be exercised by completing and signing the Subscription Certificate
that accompanies this Prospectus and mailing it in the envelope provided, or
otherwise delivering the completed and signed Subscription Certificate to the
Subscription Agent, together with payment in full for the Shares at the
Estimated Subscription Price by the Expiration Date. Rights may also be
exercised by contacting your broker, banker or trust company. They can arrange
on your behalf to guarantee delivery of payment and delivery of a properly
completed and executed Subscription Certificate pursuant to a Notice of
Guaranteed Delivery. The Notice of Guaranteed Delivery must be received by the
Subscription Agent by the Expiration Date as set forth below. The Subscription
Agent will not honor a Notice of Guaranteed Delivery unless a properly completed
and executed Subscription Certificate and full payment for the Shares is
received by the Subscription Agent by the close of business on September 29,
1999, the third Business Day after the Expiration Date. A fee may be charged
for this service. Fractional shares will not be issued upon the exercise of
Rights. Record Date Stockholders issued fewer than three Rights are entitled to
subscribe for one Share pursuant to the Primary Subscription. Completed
Subscription Certificates must be received by the Subscription Agent prior to
5:00 P.M., New York City time, on the Expiration Date at one of the addresses
set forth above (unless the guaranteed delivery procedures are complied with as
described below under "Payment for Shares", in which case Notices of Guaranteed
Delivery are due on the Expiration Date).
Stockholders Who Are Record Owners. Stockholders who are record owners can
choose between either option to exercise their Rights as described below under
"Payment for Shares." If time is of the essence, option (2) under "Payment for
Shares" below will permit delivery of the Subscription Certificate and payment
after the Expiration Date.
Stockholders Whose Shares Are Held by a Nominee. Stockholders whose shares
are held by a nominee, such as a bank, broker or trustee, must contact that
nominee to exercise their Rights. In such case, the nominee will complete the
Subscription Certificate on behalf of the stockholder and arrange for proper
payment by one of the methods described below under "Payment for Shares."
Nominees. Nominees who hold shares of Common Stock for the account of
others should notify the beneficial owners of such shares as soon as possible to
ascertain such beneficial owners' intentions and to obtain instructions with
respect to the Rights. If the beneficial owner so instructs, the nominee should
complete the Subscription Certificate and submit it to the Subscription Agent
with the proper payment as described below under "Payment for Shares."
Information Agent
Any questions or requests for assistance concerning the method of
subscribing for Shares or for additional copies of this Prospectus or
Subscription Certificates or Notices of Guaranteed Delivery may be directed to
the Information Agent at its telephone number and address listed below:
19
<PAGE>
Shareholder Communications Corp.
17 State Street
New York, NY 10005
Stockholders call toll free: (800) 603-1720
Banks and Brokers call: (212) 805-7113
Stockholders may also contact their brokers or nominees for information
with respect to the Offer. The Information Agent will receive a fee estimated
to be $100,000, plus reimbursement for its reasonable out-of-pocket expenses
related to the Offer.
Payment for Shares
Stockholders who wish to acquire Shares pursuant to the Offer may choose
between the following methods of payment:
(1) A Record Date Stockholder may send the Subscription Certificate
together with payment for the Shares acquired in the Primary Subscription
and any additional Shares subscribed for pursuant to the Over-Subscription
Privilege to the Subscription Agent based on the Estimated Subscription
Price of $13.25 per share. A subscription will be accepted when payment,
together with a properly completed and executed Subscription Certificate,
is received by the Subscription Agent's office at one of the addresses set
forth above no later than 5:00 P.M., New York City time, on the Expiration
Date. The Subscription Agent will deposit all checks and money orders
received by it for the purchase of Shares into a segregated interest-
bearing account (the interest from which will accrue to the benefit of the
Fund) pending proration and distribution of Shares. A PAYMENT PURSUANT TO
THIS METHOD MUST BE IN U.S. DOLLARS BY MONEY ORDER OR CHECK DRAWN ON A BANK
OR BRANCH LOCATED IN THE UNITED STATES, MUST BE PAYABLE TO MORGAN STANLEY
DEAN WITTER HIGH YIELD FUND, INC. AND MUST ACCOMPANY A PROPERLY COMPLETED
AND EXECUTED SUBSCRIPTION CERTIFICATE FOR SUCH SUBSCRIPTION CERTIFICATE TO
BE ACCEPTED. EXERCISE BY THIS METHOD IS SUBJECT TO ACTUAL COLLECTION OF
CHECKS BY 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. BECAUSE
UNCERTIFIED PERSONAL CHECKS MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR,
SHAREHOLDERS ARE STRONGLY URGED TO PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF
A CERTIFIED OR CASHIER'S CHECK OR MONEY ORDER.
(2) Alternatively, a Record Date Stockholder may acquire shares, and
a subscription will be accepted by the Subscription Agent if, prior to 5:00
P.M., New York City time, on the Expiration Date, the Subscription Agent
has received a Notice of Guaranteed Delivery by facsimile (telecopy) or
otherwise from a bank, a trust company or a NYSE member guaranteeing
delivery of (i) payment of the Estimated Subscription Price of $13.25 per
share for the Shares subscribed for in the Primary Subscription and any
additional Shares subscribed for pursuant to the Over-Subscription
Privilege, and (ii) a properly completed and executed Subscription
Certificate. The Subscription Agent will not honor a Notice of Guaranteed
Delivery unless a properly completed and executed Subscription Certificate
and full payment for the Shares is received by the Subscription Agent by
the close of business on September 29, 1999, the third Business Day after
the Expiration Date.
On a date within eight Business Days following the Expiration Date (the
"Confirmation Date"), the Subscription Agent will send to each Exercising Rights
Holder (or, if shares are held by Cede or any other depository or nominee, to
Cede or such other depository or nominee) a confirmation showing (i) the number
of Shares purchased pursuant to the Primary Subscription, (ii) the number of
Shares, if any, acquired pursuant to the Over-Subscription
20
<PAGE>
Privilege, (iii) the Subscription Price per Share and total purchase price of
the shares, and (iv) any additional amount payable by such Record date
Stockholder to the Fund or any excess to be refunded by the Fund to such
Stockholder, in each case based on the Subscription Price. If any Record Date
Stockholder exercises his or her right to acquire shares pursuant to the Over-
Subscription Privilege, any such excess payment that would otherwise be refunded
to the Record Date Stockholder will be applied by the Fund toward payment for
shares acquired pursuant to the exercise of the Over-Subscription Privilege. Any
additional payment required from a Record Date Stockholder must be received by
the Subscription Agent within ten business days after the Confirmation Date. Any
excess payment to be refunded by the Fund to a Record Date Stockholder will be
mailed by the Subscription Agent to such Record Date Stockholder as promptly as
possible. All payments by an Exercising Rights Holder must be in U.S. dollars by
money order or check drawn on a bank or branch located in the United States and
payable to MORGAN STANLEY DEAN WITTER HIGH YIELD FUND, INC.
If a Record Date Stockholder who acquires Shares pursuant to the Primary
Subscription or the Over-Subscription Privilege does not make payment of any
additional amounts due by the tenth business day after the Confirmation Date,
the Fund reserves the right to take any or all of the following actions: (i)
sell such subscribed and unpaid-for shares to other Record Date Stockholders,
(ii) apply any payment actually received toward the purchase of the greatest
whole number of shares that could be acquired by such Record Date Stockholder
upon the exercise of the Primary Subscription and/or Over-Subscription
Privilege, and/or (iii) exercise any and all other rights or remedies to which
the Fund may be entitled.
THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND PAYMENT OF THE
SUBSCRIPTION PRICE TO THE FUND WILL BE AT THE ELECTION AND RISK OF THE
EXERCISING RIGHTS HOLDERS, BUT IF SENT BY MAIL IT IS RECOMMENDED THAT SUCH
CERTIFICATES AND PAYMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO
ENSURE DELIVERY TO THE SUBSCRIPTION AGENT AND CLEARANCE OF PAYMENT PRIOR TO 5:00
P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. BECAUSE UNCERTIFIED PERSONAL
CHECKS MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR, YOU ARE STRONGLY URGED TO
PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF CERTIFIED OR CASHIER'S CHECK OR MONEY
ORDER.
All questions concerning the timeliness, validity, form and eligibility of
any exercise of Rights will be determined by the Fund, whose determinations will
be final and binding. The Fund, in its sole discretion, may waive any defect or
irregularity, or permit a defect or irregularity to be corrected, within such
time as it may determine, or reject the purported exercise of any Right.
Subscriptions will not be deemed to have been received or accepted until all
irregularities have been waived or cured within such time as the Fund determines
in its sole discretion. The Subscription Agent will not be under any duty to
give notification of any defect or irregularity in connection with the
submission of Subscription Certificates or incur any liability for failure to
give such notification.
Exercising Rights Holders will have no right to rescind their subscription
after receipt of their payment for Shares by the Subscription Agent, except as
provided below under "Notice of Net Asset Value Decline."
Delivery of Share Certificates
Certificates representing Shares acquired in the Primary Subscription will
be mailed promptly after the expiration of the Offer once full payment for such
Shares has been received and cleared. Certificates representing Shares acquired
pursuant to the Over-Subscription Privilege will be mailed as soon as
practicable after full payment for such Shares has been received and cleared and
all allocations have been completed. Participants in the Fund's Dividend
Reinvestment and Cash Purchase Plan (the "Plan") will have any Shares acquired
in the Primary Subscription and pursuant to the Over-Subscription Privilege
credited to their stockholder dividend reinvestment accounts in the Plan.
Participants in the Plan wishing to exercise Rights for the shares of Common
Stock held in their accounts in the Plan must exercise such Rights in accordance
with the procedures set forth above. Stockholders whose shares of Common Stock
are held of record by Cede or by any other depository or nominee on their behalf
or their broker-dealer's behalf will have any Shares acquired in the Primary
Subscription credited to the account of Cede or such other depository or
nominee. Shares acquired pursuant to the Over-Subscription Privilege will be
certificated and
21
<PAGE>
certificates representing such Shares will be sent directly to Cede or such
other depository or nominee. Stock certificates will not be issued for Shares
credited to Plan accounts.
Foreign Restrictions
Subscription Certificates will not be mailed to Record Date Stockholders
whose record addresses are outside the United States (the term "United States"
includes the states, the District of Columbia, and the territories and
possessions of the United States). Foreign Record Date Stockholders will
receive written notice of the Offer. The Rights to which such Subscription
Certificates relate will be held by the Subscription Agent for such Foreign
Record Date Stockholders' accounts until instructions are received to exercise
the Rights. Upon request, the Subscription Agent will send a copy of the
Prospectus to such Foreign Record Date Stockholders. If no instructions have
been received by 5:00 P.M., New York City time, on the Expiration Date, the
Rights of those Foreign Record Date Stockholders will expire.
Federal Income Tax Consequences of the Offer
The U.S. federal income tax consequences to holders of Common Stock with
respect to the Offer will be as follows:
1. The distribution of Rights to Record Date Stockholders will not
result in taxable income to such holders nor will such holders realize
taxable income as a result of the exercise of the Rights. No loss will be
realized if the Rights expire without exercise.
2. The basis of a Right will be (a) to a holder of Common Stock to
whom it is issued and who exercises the Right (i) if the fair market value
of the Right immediately after issuance is less than 15% of the fair market
value of the Common Stock with regard to which it is issued, zero (unless
the holder elects, by filing a statement with his timely filed federal
income tax return for the year in which the Rights are received, to
allocate the basis of the Common Stock between the Right and the Common
Stock based on their respective fair market values immediately after the
Right is issued), and (ii) if the fair market value of the Right
immediately after issuance is 15% or more of the fair market value of the
Common Stock with regard to which it is issued, a portion of the basis in
the Common Stock based upon their respective fair market values immediately
after the Right is issued, and (b) to a holder of Common Stock to whom it
is issued and who allows the Right to expire, zero.
3. The holding period of a Right received by a Record Date
Stockholder includes the holding period of the Common Stock with regard to
which the Right is issued. If the Right is exercised, the holding period of
the Common Stock acquired begins on the date the Right is exercised.
4. A Record Date Stockholder's basis for determining gain or loss
upon the sale of a Share acquired upon the exercise of a Right will be
equal to the sum of the Record Date Stockholder's basis in the Right, if
any, and the Subscription Price per Share. A Record Date Stockholder's gain
or loss recognized upon a sale of a Share acquired upon the exercise of a
Right will be capital gain or loss if the Share was held at the time of
sale as a capital asset and will be long-term capital gain or loss if the
Share is held for more than one year. See "Taxation--U.S. Federal Income
Taxes" for a summary of the capital gains rates applicable to capital gains
or losses recognized upon the sale of Shares.
The foregoing is a general summary of the material U.S. federal income tax
consequences of the Offer under the provisions of the U.S. Internal Revenue Code
of 1986, as amended (the "Internal Revenue Code"), and Treasury regulations
presently in effect that are generally applicable to Record Date Stockholders
that are United States persons within the meaning of the Internal Revenue Code,
and does not cover foreign, state or local taxes. The Internal Revenue Code and
such regulations are subject to change by legislative or administrative action,
which may be retroactive. Exercising Rights Holders should consult their tax
advisers regarding specific questions as to foreign, federal, state or local
taxes. See "Taxation."
22
<PAGE>
Notice of Net Asset Value Decline
The Fund has, as required by the Securities and Exchange Commission's
("SEC") registration form, undertaken to suspend the Offer until it amends this
Prospectus if, subsequent to the effective date of the Fund's Registration
Statement, the Fund's NAV declines more than 10% from its NAV as of that date.
Accordingly, the Expiration Date would be extended and the Fund would notify
Record Date Stockholders of any such decline and permit Exercising Rights
Holders to cancel their exercise of Rights.
Employee Plan Considerations
Stockholders that are employee benefit plans subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") (including
corporate savings and 401(k) plans), plans of self-employed individuals and
individual retirement accounts (collectively, "Retirement Plans") should be
aware that additional contributions of cash to the Retirement Plan (other than
rollover contributions or trustee-to-trustee transfers from other Retirement
Plans) in order to exercise Rights would be treated as contributions to the
Retirement Plan and, when taken together with contributions previously made, may
result in, among other things, excise taxes for excess or nondeductible
contributions. In the case of Retirement Plans qualified under Section 401(a)
of the Internal Revenue Code and certain other Retirement Plans, additional cash
contributions could cause the maximum contribution limitations of Section 415 of
the Internal Revenue Code or other qualification rules to be violated.
Retirement Plans and other tax exempt entities, including governmental
plans, should also be aware that if they borrow in order to finance their
exercise of Rights, they may become subject to the tax on unrelated business
taxable income ("UBTI") under Section 511 of the Internal Revenue Code. If any
portion of an Individual Retirement Account ("IRA") is used as security for a
loan, the portion so used will be treated as distributed to the IRA depositor.
ERISA contains fiduciary responsibility requirements, and ERISA and the
Internal Revenue Code contain prohibited transaction rules that may impact the
exercise of Rights. Due to the complexity of these rules and the penalties for
noncompliance, Retirement Plans should consult with their counsel and other
advisers regarding the consequences of their exercise of Rights under ERISA and
the Internal Revenue Code.
Important Dates to Remember
<TABLE>
<CAPTION>
Event Date
- ----- ----
<S> <C>
Record Date........................................................... August 23, 1999
Subscription Period................................................... August 23, 1999 to
September 24, 1999*
Expiration Date....................................................... September 24, 1999*
Subscription Certificates and Payment for Shares Due+................. September 24, 1999*
Notice of Guaranteed Delivery Due+.................................... September 24, 1999*
Payments and Subscription Certificates for Guarantees
of Delivery Due....................................................... September 29, 1999*
Confirmation to Participants.......................................... October 6, 1999*
</TABLE>
23
<PAGE>
- -----------------
* Unless the Offer is extended.
+ A stockholder exercising Rights must deliver either (i) a Subscription
Certificate and payment for Shares or (ii) a Notice of Guaranteed Delivery by
September 24, 1999, unless the Offer is extended.
USE OF PROCEEDS
If all the Rights are exercised in full at the Estimated Subscription Price
of $13.25 per Share, the net proceeds of the Offer to the Fund assuming all
2,960,000 shares offered hereby are sold are estimated to be approximately
$38,173,650 after deducting offering expenses payable by the Fund estimated at
approximately $360,000. The Investment Manager anticipates that the Fund will
take up to 30 days from its receipt of the net proceeds of the Offer to invest
or otherwise employ such proceeds (for example, to reduce leverage), but in no
event will any such use take longer than six months. Pending the use of the
proceeds of the Offer, the proceeds will be held in U.S. Government securities
(which term includes obligations of the United States Government, its agencies
or instrumentalities) and other high-quality short-term money market
instruments. While the proceeds are invested in U.S. Government securities and
other high-quality, short-term money market instruments, the proceeds will not
be invested in securities consistent with the Fund's primary objective of high
current income.
RISK FACTORS AND SPECIAL CONSIDERATIONS
An investment in the Fund is subject to a number of risks and special
considerations, including the following:
Dilution
Record Date Stockholders who do not fully exercise their Rights in the
Primary Subscription should expect that they will, at the completion of the
Offer, own a smaller proportional interest in the Fund than would otherwise be
the case. The Fund cannot state precisely the amount of any such dilution in
share ownership, and therefore voting power, because the Fund does not know at
this time what proportion of the Shares will be subscribed.
Furthermore, the Subscription Price per share for the Offer may be lower
than the Fund's NAV per share. Any rights offering priced at a discount to the
Fund's NAV per share and involving payment of expenses by the Fund entails some
dilution in the NAV per share. Dilution is the decrease in NAV per share that
results from the Fund's issuance of new shares at a discount to current NAV per
share when the rights are exercised and from the Fund's payment of the expenses
of the Offer. The Offer may result in a dilution of NAV for all stockholders,
which will disproportionately affect stockholders who do not exercise their
Rights. In addition, there also may be substantial dilution to the extent that
the Fund increases the number of shares subject to subscription by up to 25% in
order to satisfy over-subscription requests. Although it is not possible to
state precisely the amount of any decrease in NAV because it is not known at the
date of this Prospectus how many shares will be subscribed for, or what the
Subscription Price will be, the dilution could be substantial.
For example, assuming that all Rights are exercised at the Estimated
Subscription Price of $13.25, the NAV per share at the Expiration Date was
$13.50, the Fund issues an additional 25% of Shares to satisfy over-subscription
requests, and assuming the deduction of all expenses related to the issuance of
the Shares, the Fund's NAV per share would be reduced by approximately $0.17 per
share or 1.26%.
High Yield Investments
At any one time, substantially all of the Fund's assets may be invested in
obligations or securities that are rated below investment grade by recognized
rating services such as Moody's and S&P, or if unrated, are determined to be of
comparable quality by the Investment Manager. Non-investment grade securities
(that is, rated "Ba" or lower by Moody's or "BB" or lower by S&P) are commonly
referred to as "junk bonds" and
24
<PAGE>
are regarded as predominantly speculative and involve major risk exposure to
adverse conditions. Some of the high yield securities held by the Fund, which
may not be paying interest currently or may be in payment default, may be
comparable to securities rated as low as "C" by Moody's or "CCC" or lower by
S&P. These securities are considered to have extremely poor prospects of ever
attaining any real investment standing, to have a current identifiable
vulnerability to default, to be unlikely to have the capacity to pay interest
and repay principal when due in the event of adverse business, financial or
economic conditions or to be in default or not current in the payment of
interest or principal.
Securities rated below investment grade and unrated securities generally
offer a higher current yield than that available from higher grade issues, but
typically involve greater risk. Securities rated below investment grade and
unrated securities are especially subject to adverse changes in general economic
conditions, to changes in the financial condition of their issuers and to price
fluctuation in response to changes in interest rates. During periods of
economic downturn or rising interest rates, issuers of securities rated below
investment grade and unrated instruments may experience financial stress that
could adversely affect their ability to make payments of principal and interest
and increase the possibility of default. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may also decrease the
values and liquidity of securities rated below investment grade and unrated
securities especially in a market characterized by a low volume of trading.
The value of the high yield securities held by the Fund, and thus the net
asset value of the Common Stock, generally will fluctuate with (i) changes in
the perceived creditworthiness of the issuers of those securities and (ii)
movements in interest rates. The extent of the fluctuation of the Fund's NAV
will depend on various other factors, such as the average maturity of the Fund's
investments, the extent to which the Fund engages in borrowing and other
leveraging transactions, and the extent to which the Fund hedges its interest
rate and currency exchange rate risks. The Investment Manager will make
independent evaluations as to the creditworthiness of issuers of debt securities
that may differ from those of the recognized rating services. The Fund's
success in attaining its investment objectives will depend largely on the
Investment Manager's evaluation of the creditworthiness of issuers.
The market for high-yield, high risk securities has expanded rapidly in
recent years. An economic downturn or an increase in interest rates could have
a negative effect on the high-yield, high risk securities market and on the
market value of the high-yield, high risk securities held by the Fund, as well
as on the ability of the issuers of such securities to repay principal and
interest on their borrowings. In addition, the secondary market for high yield
securities, which is concentrated in relatively few market makers, may not be as
liquid as the secondary market for more highly rated securities. As a result,
the Investment Manager could find it more difficult to sell these securities or
may be able to sell the securities only at prices lower than if such securities
were widely traded. Prices realized upon the sale of such lower rated or
unrated securities, under these circumstances, may be less than the prices used
in calculating the Fund's net asset value.
Prices for high yield securities may be affected by legislative and
regulatory developments. Changes in law could adversely affect the Fund's net
asset value and investment practices, the secondary market for high yield
securities, the financial condition of issuers of high yield securities and the
value of outstanding high yield securities.
Lower rated or unrated securities also present risks based on payment
expectations. If an issuer calls the obligations for redemption, the Fund may
have to replace the security with a lower yielding security, potentially
resulting in a decreased return for investors.
Considerations Relating to Investments in Non-U.S. Issuers
Investing in securities of non-U.S. issuers involves certain considerations
not typically associated with investing in the securities of U.S. issuers. For
example, investments may be restricted or controlled to varying degrees. These
restrictions or controls may at times limit or preclude investment in the
securities of certain non-U.S. issuers and increase the costs and expenses of
such investments to the Fund. In addition,
25
<PAGE>
governmental approval may be required for the repatriation of investment income,
capital or the proceeds of sales of securities of non-U.S. issuers. The Fund
could be adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation of capital, as well as by the application
to the Fund of any restrictions on investments.
No established secondary markets may exist for many of the non-U.S. high
yield securities in which the Fund will invest. This may have an adverse effect
on market price and the Fund's ability to dispose of particular instruments when
necessary to meet its liquidity requirements or in response to specific economic
events such as a deterioration in the creditworthiness of the issuer. In
addition, non-U.S. issuers are not generally subject to accounting, auditing and
financial reporting standards, practices and disclosure requirements comparable
to those applicable to U.S. issuers. Consequently, there may be less publicly
available information about a non-U.S. issuer than about a U.S. issuer.
Furthermore, there is generally less government supervision and regulation of
foreign securities markets, brokers and securities issuers than in the United
States. In addition, laws in foreign countries governing business
organizations, bankruptcy and insolvency may provide less protection to security
holders such as the Fund than that provided by U.S. laws. The Fund is also
subject to currency risk which is the risk that fluctuations in the exchange
rates between the U.S. dollar and foreign currencies may negatively affect the
value of the Fund's investments.
The economies of foreign countries may differ favorably or unfavorably from
the U.S. economy in such respects as growth of gross domestic product, rate of
inflation, currency depreciation, capital reinvestment, resource self-
sufficiency and balance of payments position. Certain developing countries have
historically experienced, and may continue to experience, high rates of
inflation, high interest rates, exchange rate fluctuations, large amounts of
external debt, balance of payments and trade difficulties and extreme poverty
and unemployment. Also, there is a possibility of nationalization,
expropriation or confiscatory taxation, political changes, government
regulation, social instability or diplomatic developments (including war) which
could affect adversely the economies of such countries or the value of the
Fund's investments in those countries.
With respect to the Fund's investments in developing country government
debt securities, the issuer or governmental authority that controls the
repayment of a developing country's debt may not be able or willing to repay the
principal or interest when due in accordance with the terms of such debt. A
debtor's willingness or ability to repay principal and interest due in a timely
manner may be affected by its cash flow situation and, in the case of a
government debtor, the extent of its foreign reserves, the availability of
sufficient foreign exchange on the date a payment is due, the relative size of
the debt service burden to the economy as a whole and the political constraints
to which a government debtor may be subject. Government debtors may default on
their debt and may also be dependent on expected disbursements from foreign
governments, multilateral agencies and others abroad to reduce principal and
interest arrearages on their debt. The commitment on the part of these
governments, agencies and others to make such disbursements may be conditioned
on a debtor's implementation of economic reforms or economic performance and the
timely service of such debtor's obligations. Failure to implement such reforms,
achieve such levels of economic performance or repay principal or interest when
due may result in the cancellation of such third parties' commitments to lend
funds to the government debtor, which may further impair such debtor's ability
or willingness to timely service its debts. Holders of government debt,
including the Fund, may be requested to participate in the rescheduling of such
debt and to extend further loans to government debtors. If a government obligor
defaults on its obligations, the Fund may have limited legal recourse against
the issuer or guarantor. In some cases, remedies must be pursued in the courts
of the defaulting party itself, and the ability of the holder of foreign
government debt securities to obtain recourse may be subject to the political
climate in the relevant country.
Government obligors in developing countries are among the world's largest
debtors to commercial banks, other governments, international financial
organizations and other financial institutions. The issuers of the government
debt securities in which the Fund may invest have in the past experienced
substantial difficulties in servicing their external debt obligations, which led
to defaults on certain obligations and the restructuring of certain
indebtedness. Restructuring arrangements have included reducing and
rescheduling interest and principal payments by negotiating new or amended
credit agreements or converting outstanding
26
<PAGE>
principal and unpaid interest to Brady Bonds, and obtaining new credit to
finance interest payments. Holders of certain foreign government debt securities
may be requested to participate in the restructuring of such obligations and to
extend further loans to their issuers. There can be no assurance that the
foreign government debt securities in which the Fund may invest will not be
subject to restructuring arrangements or to requests for new credit which may
adversely affect the Fund's holdings. Furthermore, certain participants in the
secondary market for such debt may be directly involved in negotiating the terms
of these arrangements and may therefore have access to information not available
to other market participants.
Risk of Leverage
The Fund is authorized to borrow money from banks and other entities, and
to issue shares of preferred stock or short-term debt securities, in an amount
equal to up to 33 1/3% of the Fund's total assets (including the amount obtained
from leverage) less all liabilities and indebtedness other than the leverage,
and may use the proceeds from the leveraging for investment purposes. For a
description of the various leverage techniques the Fund intends to use, see
"Investment Objectives and Policies -- Leverage" on page 31 of this Prospectus.
Since its inception, the Fund has generally been leveraged, as of each month end
date, in the range of approximately 0% of its assets to 27% of its assets
through the use of reverse repurchase agreements. Utilization of leverage is a
speculative investment technique and involves certain risks to the holders of
Common Stock. These include the possibility of higher volatility of the NAV of
the Common Stock and potentially more volatility in the market value of the
Common Stock. So long as the Fund is able to realize a higher net return on its
investment portfolio than the then current interest or dividend rate of any
leverage together with other related expenses, the effect of the leverage will
be to cause holders of Common Stock to realize a higher current net investment
income than if the Fund were not so leveraged. On the other hand, to the extent
that the then current interest or dividend rate on any leverage together with
other related expenses, approaches the net return on the Fund's investment
portfolio, the benefit of leverage to holders of Common Stock will be reduced,
and if the then current interest or dividend rate on any leverage were to exceed
the net return on the Fund's Portfolio, the Fund's leveraged capital structure
would result in a lower rate of return to holders of Common Stock than if the
Fund were not so leveraged. Similarly, since any decline in the NAV of the
Fund's investments will be borne entirely by holders of the Common Stock, the
effect of leverage in a declining market would be a greater decrease in NAV
applicable to the Common Stock than if the Fund were not leveraged. Any such
decrease would likely be reflected in a decline in the market price of the
Common Stock. If the Fund's current investment income were not sufficient to
meet interest or dividend requirements on any leverage (or if any decrease in
the NAV of the Fund's investments would violate the 1940 Act asset coverage
requirements) it could be necessary for the Fund to liquidate certain of its
investments sooner than would otherwise have been the case, thereby reducing the
NAV attributable to the Common Stock.
The Fund's use of leverage will be subject to the provisions of the 1940
Act, including asset coverage requirements and restrictions on the declaration
of dividends and distributions to holders of Common Stock or purchases of Common
Stock in the event such asset coverage requirements are not met. The 1940 Act
also requires that holders of preferred stock, and in certain circumstances
holders of debt securities, have certain voting rights as set forth in the
"Description of Capital Stock" section of this Prospectus on page 51.
Foreign Currency Considerations
Since the Fund may invest in securities denominated or quoted in currencies
other than the U.S. dollar, changes in foreign currency exchange rates could
affect the value of securities in the Fund's portfolio and the unrealized
appreciation or depreciation of investments. Furthermore, the Fund may incur
costs in connection with conversions between various currencies. Foreign
exchange dealers realize a profit based on the difference between the prices at
which they are buying and selling various currencies. Thus, a dealer normally
will offer to sell a foreign currency to the Fund at one rate, while offering a
lesser rate of exchange should the Fund desire immediately to resell that
currency to the dealer. The Fund will conduct its foreign currency exchange
transactions either at the spot rate prevailing in the foreign currency exchange
market, or through entering into forward, futures or options contracts to
purchase or sell foreign currencies. To the extent available, the Fund may seek
to protect the value of some portion or all of its non-U.S. dollar-
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denominated portfolio holdings against currency risks by engaging in hedging
transactions as set forth in this Prospectus. There can be no guarantee that
instruments suitable for hedging currency will be available at the time when the
Fund wishes to use them. For a description of such hedging strategies and
certain considerations relating to them, see "Investment Objectives and Policies
- -- Hedging" and Appendix B.
Net Asset Value Discount; Nondiversification
The Fund is a closed-end investment company. Shares of closed-end
investment companies frequently trade at a discount from NAV. This
characteristic of shares of a closed-end fund is a risk separate and distinct
from the risk that a fund's net asset value will decrease. It should be noted,
however, that shares of some closed-end funds that invest principally in high
yield securities have traded at premiums to NAV. The Fund cannot predict
whether its own shares will trade at, below or above NAV. The risk of
purchasing shares of a closed-end investment company which might trade at a
discount from NAV is more pronounced for investors who wish to sell their shares
in a relatively short period of time. The Fund is intended primarily for long-
term investors and should not be considered as a vehicle for trading purposes.
The Fund is classified as a non-diversified investment company under the
1940 Act, which means that the Fund is not limited by the 1940 Act in the
proportion of its assets that may be invested in the obligations of a single
issuer. Thus, the Fund may invest a greater proportion of its assets in the
securities of a smaller number of issuers and, as a result, will be subject to
greater risk of loss with respect to its portfolio securities. The Fund,
however, intends to comply with the diversification requirements imposed by the
Internal Revenue Code for qualification as a regulated investment company.
Dividends and Distributions
Subject to market conditions, the Fund seeks to provide holders of its
Common Stock with a relatively stable level of dividends per share. However,
the Fund cannot give any assurance that it will be able to maintain its current
level of dividends per share. The Board of Directors may, in its sole
discretion, change the Fund's current level of dividends per share in response
to market or other conditions. The Fund's ability to maintain a stable level of
dividends is a function of the yield generated by the Fund's investments, which
depends on market conditions at the time those investments are made and on the
performance of those investments.
Based on information provided by the Investment Manager on current market
conditions in the high yield bond market and available leverage opportunities,
the Board of Directors believes that the offer will not result in a change in
the Fund's current level of dividends per share for the foreseeable future.
The Fund will not be permitted to declare dividends or other distributions
with respect to the Common Stock or any series of preferred shares or purchase
shares of Common Stock or any series of preferred shares unless at the time
thereof the Fund meets certain asset coverage requirements applicable to any
debt or preferred shares the Fund may have outstanding, including those imposed
by the 1940 Act. Further, the Fund will not be permitted to pay any dividends
or other distributions with respect to the Common Stock or any series of
preferred shares if a default or an event of default has occurred and is
continuing under any credit or other agreements applicable to any debt or
preferred shares the Fund may have outstanding or if such payment of dividend or
distribution would result in a default or an event of default under any such
agreements. Failure to pay dividends or other distributions could result in the
Fund ceasing to qualify as a regulated investment company under the Internal
Revenue Code.
In the event the Fund fails to satisfy certain asset coverage requirements,
the Fund may be required to immediately pay any loans (together with interest
accrued thereon) outstanding. Repayment of any loans would reduce the Fund's
leverage and could negatively affect potential returns with respect to the
Common Stock.
Year 2000
The investment advisory services provided to the Fund by the Investment
Manager depend on the smooth operation of its computer systems. Many computer
and software systems in use today cannot
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recognize the year 2000, but revert to 1900 or some other date, due to the
manner in which dates were encoded and calculated. That failure could have a
negative impact on the handling of securities trades, pricing and account
services. The Investment Manager has been actively working on necessary changes
to its own computer systems to deal with the year 2000 problem and expects that
its systems will be adapted before that date. There can be no assurance,
however, that the Investment Manager will be successful. In addition, other
unaffiliated service providers may be faced with similar problems. The
Investment Manager is monitoring their remedial efforts, but there can be no
assurance that they and the services they provide will not be adversely
affected.
In addition, it is possible that the markets for securities in which the
Fund invests may be detrimentally affected by computer failures throughout the
financial services industry beginning January 1, 2000. Improperly functioning
trading systems may result in settlement problems and liquidity issues. In
addition, corporate and governmental data processing errors may result in
production problems for individual companies and overall economic uncertainties.
Earnings of individual issuers will be affected by remediation costs, which may
be substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected.
You should carefully consider your ability to assume the foregoing risks
before making an investment in the Fund. An investment in shares of the Fund is
not appropriate for all investors.
INVESTMENT OBJECTIVES AND POLICIES
The primary investment objective of the Fund is to seek a high level of
current income. As a secondary objective, the Fund seeks capital appreciation.
Under normal market conditions, at least 65% of the Fund's total assets will be
invested in high yield securities issued by U.S. corporations. In addition, the
Fund may invest up to 35% of its total assets in high yield securities issued by
non-U.S. corporations and by government and government-related issuers located
in developing countries, provided that no more than 20% of the Fund's total
assets may be invested in high yield securities issued by government or
government-related issuers in developing countries. The high yield securities
in which the Fund invests include debt obligations and preferred stock. Such
securities generally will be rated, at the time of investment, below investment
grade (that is, rated "Ba" or lower by Moody's or "BB" or lower by S&P) or, if
not rated, determined by the Investment Manager to be of comparable quality.
Debt securities rated by both Moody's or the S&P need only satisfy the foregoing
ratings standards with respect to either the Moody's or the S&P rating. There
is no minimum rating requirement for the securities in which the Fund invests.
However, the Fund anticipates that under normal market conditions no more than
25% of the Fund's total assets will be rated, at the time of investment, below
"B" by Moody's or S&P, or will be unrated and of comparable quality. Yields on
these securities generally, at the time of investment exceed yields on higher-
rated securities.
The Fund's investment objectives are fundamental policies which may not be
changed without the approval of a majority of the Fund's outstanding voting
securities. As used herein, a "majority of the Fund's outstanding voting
securities" means the lesser of (i) 67% of the shares represented at a meeting
at which more than 50% of the outstanding shares are represented, and (ii) more
than 50% of the outstanding shares. There is no assurance the Fund will be able
to achieve its investment objectives.
The Fund may acquire high yield securities including debt obligations
(e.g., bonds, debentures, notes, equipment lease certificates, equipment trust
certificates, conditional sales contracts and commercial paper) and preferred
stock. The Fund's high yield investments may have equity features, such as
conversion rights or warrants and the Fund may invest up to 10% of its total
assets in equity securities other than preferred stock (common stocks, warrants
and rights and limited partnership interests). The Fund also may invest up to
20% of its total assets in fixed income securities that are investment grade
(e.g., rated in one of
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the top four categories or of comparable quality as determined by the Investment
Manager) and have maturities of one year or less. The Fund may invest in or own
securities of companies in various stages of financial restructuring, bankruptcy
or reorganization which are not currently paying interest or dividends to the
extent that the total value, at time of purchase, of all such securities will
not exceed 10% of the value of the Fund's total assets.
The Fund's investments in government and government-related debt securities
may consist of (i) debt securities or obligations issued or guaranteed by
governments, governmental agencies or instrumentalities and political
subdivisions located in developing countries, (ii) debt securities or
obligations issued by government owned, controlled or sponsored entities located
in developing countries, and (iii) interests in issuers organized and operated
for the purpose of restructuring the investment characteristics of instruments
issued by any of the entities described above. The Fund also may invest in
certain debt obligations customarily referred to as "Brady Bonds," which are
created through the exchange of existing commercial bank loans to foreign
entities for new obligations in connection with debt restructurings. Brady
Bonds may be collateralized or uncollateralized and issued in various currencies
(although most are U.S. dollar-denominated), and they are actively traded in the
over-the-counter secondary market. The Fund may purchase Brady Bonds either in
the primary or secondary markets.
Selection of Investments
The Fund invests substantially all of its assets in obligations or
securities that are, at the time of investment, rated below investment grade
(that is, rated "Ba" or lower by Moody's or "BB" or lower by S&P) or, if not
rated, determined by the Investment Manager to be of comparable quality.
Ratings of S&P and Moody's represent their opinions of the quality of the
securities they undertake to rate at the time of issuance. However, ratings are
not absolute standards of quality and may not reflect changes in an issuer's
creditworthiness. Accordingly, while the Investment Manager considers ratings,
it performs its own analysis and does not rely principally on ratings. The
Investment Manager considers, among other things, the price of the security, and
the financial history and condition, the prospects and the management of an
issuer in selecting securities for the Fund. The Fund may buy unrated
securities that the Investment Manager believes are comparable to rated
securities that are consistent with the Fund's objective and policies. The
Investment Manager may vary the average maturity of the securities in the Fund
without limit and there is no restriction on the maturity of any individual
security.
A description of the ratings used by Moody's and S&P is set forth in
Appendix A to this Prospectus.
Temporary Investments
During periods in which the Investment Manager believes changes in
economic, financial or political conditions make it advisable, the Fund may, for
temporary defensive purposes, reduce its holdings in high yield securities and
invest part or all of its total assets in cash or in certain other short-term
(less than twelve months to maturity) debt securities, including certificates of
deposit, commercial paper, notes, obligations issued or guaranteed by the United
States government or any of its agencies or instrumentalities and repurchase
agreements involving such government securities. While the Fund conducts such a
defensive strategy, the Fund's assets will not be invested in securities
consistent with the Fund's primary objective of high current income.
Other Investments
Private Placements and Restricted Securities. The Fund may invest in
privately placed securities, including securities that are not registered under
the Securities Act of 1933, as amended (the "Securities Act"), but that can be
offered and sold to qualified, institutional buyers under Rule 144A under the
Securities Act. Investors should note that these investments may be considered
a speculative activity and may involve greater risk and expense to the Fund.
Convertible Securities. A convertible security is a bond, debenture, note,
preferred stock or other security that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issuer within a
particular period of time at a specified price or formula. A convertible
security
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<PAGE>
entitles the holder to receive interest generally paid or accrued on debt or the
dividend paid on preferred stock until the convertible security matures or is
redeemed, converted or exchanged. Convertible securities have several unique
investment characteristics such as (1) higher yields than common stocks, but
lower yields than comparable nonconvertible securities, (2) a lesser degree of
fluctuation in value than the underlying stock since they have fixed income
characteristics, and (3) the potential for capital appreciation if the market
price of the underlying common stock increases.
The Fund may invest up to 10% of its total assets in convertible
securities; however, it has no current intention of converting any convertible
securities it may own into equity securities or holding them as an equity
investment upon conversion. A convertible security might be subject to
redemption at the option of the issuer at a price established in the convertible
security's governing instrument. If a convertible security held by the Fund is
called for redemption, the Fund may be required to permit the issuer to redeem
the security, convert it into the underlying common stock or sell it to a third
party.
Warrants. The Fund may invest up to 10% of its total assets in warrants,
which are securities permitting, but not obligating, their holder to subscribe
for other securities. The Fund may invest in warrants for equity securities
that are acquired as units with debt instruments and warrants for debt
securities. Warrants do not carry with them the right to dividends or voting
rights with respect to the securities that they entitle their holder to
purchase, and they do not represent any rights in the assets of the issuer. As
a result, an investment in warrants may be considered more speculative than
certain other types of investments. In addition, the value of a warrant does
not necessarily change with the value of the underlying securities and a warrant
ceases to have value if it is not exercised prior to its expiration date. The
Fund does not intend to retain in its portfolio any common stock received upon
the exercise of a warrant and will sell the common stock as promptly as
practicable and in a manner that it believes will reduce its risk of a loss in
connection with the sale.
Zero Coupon, Pay-in-Kind and Deferred Payment Securities. The Fund may
also invest in zero coupon, pay-in-kind or deferred payment securities. Zero
coupon securities are securities that are sold at a discount to par value and on
which interest payments are not made during the life of the security. Upon
maturity, the holder is entitled to receive the par value of the security.
While interest payments are not made on such securities, holders of such
securities are deemed to have received annually "phantom income." Because the
Fund will distribute its "phantom income" to stockholders, to the extent that
stockholders elect to receive dividends in cash rather than reinvesting such
dividends in additional shares, the Fund will have fewer assets with which to
purchase income producing securities. The Fund accrues income with respect to
these securities prior to the receipt of cash payments. Pay-in-kind securities
are securities that have interest payable by delivery of additional securities.
Upon maturity, the holder is entitled to receive the aggregate par value of the
securities. Deferred payment securities are securities that remain zero coupon
securities until a predetermined date, at which time the stated coupon rate
becomes effective and interest becomes payable at regular intervals. Zero
coupon, pay-in-kind and deferred payment securities are subject to greater
fluctuation in value and may have lesser liquidity in the event of adverse
market conditions than comparably rated securities paying cash interest at
regular interest payment periods.
Loan Participations and Assignments. The Fund may invest in fixed and
floating rate loans ("Loans") arranged through private negotiations between an
issuer of debt obligations and one or more financial institutions ("Lenders").
The Fund's investments in Loans are expected in most instances to be in the form
of participations in Loans ("Participations") and assignments of all or a
portion of Loans ("Assignments") from third parties. In a typical
Participation, the Fund will have a contractual relationship only with the
Lender and not with the borrower; and consequently, the Fund will not have the
right to enforce the Loan against the borrower. The Fund will have the right to
receive payments of principal, interest and any fees to which it is entitled
only from the Lender selling the Participation and only upon receipt by the
Lender of the payments from the borrower. As a result, the Fund may be subject
to the credit risk of both the borrower and the Lender that is selling the
Participation. Certain Participations may be structured in a manner designed to
avoid purchasers of Participations being subject to the credit risk of the
Lender with respect to the Participation, but even under such a structure, in
the event of the Lender's insolvency, the Lender's servicing of the
Participation may be delayed and the assignability of the
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Participation impaired. The Fund will acquire Participations only if the Lender
interpositioned between the Fund and the borrower is determined by the
Investment Manager to be creditworthy.
When the Fund purchases Assignments from Lenders it will acquire direct
rights against the borrower on the Loan although the rights and obligations
acquired by the Fund as the purchaser of an Assignment may differ from, and be
more limited than, those held by the assigning Lender. The Fund may have
difficulty disposing of Assignments and Participations because to do so it will
have to assign such interests to a third party. Because there is no liquid
market for such interests, the Fund anticipates that such interests could be
sold only to a limited number of institutional investors. The lack of a liquid
secondary market may have an adverse impact on the value of such interests and
the Fund's ability to dispose of particular Assignments or Participations when
necessary to meet the Fund's liquidity needs or in response to a specific
economic event such as a deterioration in the creditworthiness of the borrower.
The lack of a liquid secondary market for Assignments and Participations also
may make it more difficult for the Fund to assign a value to these interests for
purposes of valuing the Fund's portfolio and calculating its NAV.
Leverage
The Fund is authorized to borrow money from banks and other entities, and
to issue shares of preferred stock or short-term debt securities, in an amount
equal to up to 33 1/3% of the Fund's total assets including the amount obtained
from leverage and may use the proceeds from the leveraging for investment
purposes. It is anticipated that the interest payments on any borrowing or
short-term debt securities or the dividends on any preferred stock will reflect
short-term rates, and that the net return on the Fund's portfolio, including the
proceeds of any leverage, will exceed the interest or dividend rate applicable
to the leverage. Whether to leverage through bank borrowings or the issuance of
preferred stock or short-term debt securities, and the terms of and the timing
of such leverage, will be determined by the Fund's Board of Directors. The
extent to which the Fund is leveraged from time to time will vary depending on
the judgment of the Board of Directors, in consultation with the Investment
Manager, regarding market conditions. Through these leveraging techniques, the
Fund will seek to obtain a higher return for holders of Common Stock than if the
Fund were not leveraged. Since its inception, the Fund generally has been
leveraged, as of each month end date, in the range of approximately 0% of its
assets to 27% of its assets through the use of reverse repurchase agreements.
Utilization of leverage is a speculative investment technique and involves
certain risks to the holders of Common Stock. See "Risk Factors and Special
Considerations -- Risk of Leverage."
In addition, the Fund may apply for a rating from Moody's and/or S&P on any
preferred stock or short-term debt which it issues; however, no minimum rating
is required for the issuance of preferred stock or short-term debt by the Fund.
The Fund believes that obtaining one or both of such rating for its preferred
stock or short-term debt securities will enhance the marketability of the
preferred stock or short-term debt securities and thereby reduce the dividend
rate on the preferred stock or interest requirements of such short-term debt
securities from that which the Fund would be required to pay if the preferred
stock or short-term debt securities were not so rated. The rating agencies for
any preferred stock or short-term debt securities may require asset coverage
maintenance ratios in addition to those imposed by the 1940 Act. The ability of
the Fund to comply with such asset coverage maintenance ratios may be subject to
circumstances beyond the control of the Fund such as market conditions for its
portfolio securities. The Fund expects that the terms of any preferred stock or
short-term debt securities will provide for mandatory redemption of the
preferred stock or repayment of short-term debt in the event the Fund fails to
meet such asset coverage maintenance ratios. In such circumstances, the Fund
may have to liquidate portfolio securities in order to meet redemption or
repayment requirements. This would have the effect of reducing the NAV to
holders of the Common Stock and could reduce the Fund's net income in the
future.
The use of leverage may entail certain costs and expenses such as
underwriting discounts or placement fees, fees associated with the registration
with the SEC, filing under state securities law, rating agency fees, legal and
accounting fees, printing costs and certain other ongoing expenses such as
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administrative and accounting fees. These costs and expenses will be borne by
the Fund and will reduce net assets available to holders of the Common Stock.
The Fund expects that all of its borrowing will be made on a secured basis.
The Fund's custodian will either segregate the assets securing the Fund's
borrowing for the benefit of the Fund's lenders or arrangements will be made
with a suitable sub-custodian, as determined by the Fund's Board of Directors,
which may include a lender. If the assets used to secure the borrowing decrease
in value, the Fund may be required to pledge additional collateral to the lender
in the form of cash or securities to avoid liquidation of those assets. The
rights of any lenders to the Fund to receive payments of interest on and
repayments of principal of borrowings will be senior to the rights of the Fund's
stockholders, and the terms of the Fund's borrowings may contain provisions that
limit certain activities of the Fund and could result in precluding the purchase
of instruments that the Fund would otherwise purchase.
If the Fund leverages through preferred stock, under the requirements of
the 1940 Act, the value of the Fund's total assets, less all liabilities and
indebtedness of the Fund not represented by senior securities, as defined in the
1940 Act, must be equal, immediately after any such issuance of preferred stock,
to at least 200% of the aggregate amount of senior securities representing
indebtedness plus the aggregate liquidation preference of any outstanding
preferred stock. Such percentage must also be met any time the Fund pays a
dividend or makes any other distribution on Common Stock (other than a
distribution in Common Stock) or any time the Fund repurchases Common Stock, in
each case after giving effect to such dividend, distribution or repurchase. The
liquidation value of preferred stock is expected to equal the aggregate original
purchase price plus any accrued and unpaid dividends thereon (whether or not
earned or declared). See "Description of Capital Stock."
If the Fund leverages through borrowing or issuing short-term debt
securities, under the requirements of the 1940 Act, the value of the Fund's
total assets, less all liabilities and indebtedness of the Fund not represented
by senior securities, as defined in the 1940 Act, must at least be equal,
immediately after the issuance of senior securities consisting of debt, to 300%
of the aggregate principal amount of all outstanding senior securities of the
Fund which are debt. If the Fund leverages through the issuance of senior
securities consisting of debt, the 300% asset coverage maintenance ratio
referred to above must also be met any time the Fund declares a dividend or
other distribution on Common Stock (other than a distribution in Common Stock)
or any time the Fund repurchases Common Stock, in each case after giving effect
to such dividend, distribution or repurchase.
The Fund may enter into reverse repurchase agreements with any member bank
of the Federal Reserve System and any broker-dealer or any foreign bank that has
been determined by the Investment Manager to be creditworthy. Under a reverse
repurchase agreement, the Fund would sell securities and agree to repurchase
them at a mutually agreed date and price. At the time the Fund enters into a
reverse repurchase agreement, it will either earmark cash or liquid securities
or establish and maintain a segregated account with its custodian or a
designated sub-custodian, containing cash, securities issued or guaranteed by
the U.S. Government or its agencies and instrumentalities ("U.S. Government
Securities") or other liquid, high grade debt obligations, in each instance
having a value not less than the repurchase price (including accrued interest).
Reverse repurchase agreements involve the risk that the market value of the
securities purchased with the proceeds of the sale of securities received by the
Fund may decline below the price of the securities the Fund is obligated to
repurchase. In the event the buyer of securities under a reverse repurchase
agreement files for bankruptcy or becomes insolvent, the buyer or its trustee or
receiver may receive an extension of time to determine whether to enforce the
Fund's obligations to repurchase the securities, and the Fund's use of proceeds
of the reverse repurchase agreement may effectively be restricted pending the
decision. Reverse repurchase agreements will be treated as borrowings for
purposes of calculating the Fund's borrowing limitation to the extent that the
Fund does not either earmark cash or liquid securities or establish and maintain
a segregated account (as described above).
The Fund may, in addition to engaging in the transactions described above,
borrow money from banks for temporary or emergency purposes (including, for
example, clearance of transactions, share repurchases or payments of dividends
to stockholders) in an amount not exceeding 5% of the value of the Fund's total
assets (including the amount borrowed).
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Hedging
The Fund is authorized to use various hedging and investment strategies
described below to hedge various market risks (such as movements in interest and
currency exchange rates and fluctuations in the securities markets), to manage
the effective maturity or duration of debt instruments held by the Fund or to
seek to increase the Fund's income or gain. The Fund will use such strategies
to the extent deemed appropriate by the Investment Manager, in its discretion.
Limitations on the portion of the Fund's assets that may be used in connection
with the investment strategies described below are set out in Appendix B to this
Prospectus.
As part of its hedging strategies, the Fund may purchase and sell financial
futures contracts, purchase and sell (or write) exchange listed and over-the-
counter put and call options on securities, financial futures contracts and
fixed income indices and other financial instruments and enter into interest
rate transactions and currency transactions (collectively, these transactions
are referred to in this Prospectus as "Hedging"). The Fund's interest rate
transactions may take the form of swaps, caps, floors and collars, and the
Fund's currency transactions may take the form of currency forward contracts,
currency futures contracts, currency swaps and options on currency or currency
futures contracts.
Hedging may be used to attempt to protect against possible changes in the
market value of securities held in or to be purchased for the Fund's portfolio
resulting from securities market or currency exchange rate fluctuations, to
protect the Fund's unrealized gains in the value of its portfolio securities, to
facilitate the sale of those securities for investment purposes, to manage the
effective maturity or duration of the Fund's portfolio, or to establish a
position in the derivatives markets as a temporary substitute for purchasing or
selling particular securities. The ability of the Fund to utilize Hedging
successfully will depend on the Investment Manager's ability to predict
pertinent market movements, which cannot be assured. These skills are different
from those needed to select portfolio securities. The Fund is not a "commodity
pool" and Hedging involving financial futures and options on financial futures
will be purchased, sold or entered into only for bona fide hedging, risk
management or other appropriate portfolio management purposes and not for
speculative purposes. The use of Hedging in certain circumstances will require
that the Fund segregate cash, liquid high grade debt obligations or other assets
to the extent the Fund's obligations are not otherwise "covered" through
ownership of the underlying security, financial instrument or currency.
A detailed discussion of Hedging, including applicable requirements of the
Commodity Futures Trading Commission, the requirement to segregate assets with
respect to these transactions and special risks associated with such strategies,
appears as Appendix B to this Prospectus.
The degree of the Fund's use of Hedging may be limited by certain
provisions of the Internal Revenue Code. See "Taxation."
When-Issued and Delayed Delivery Securities
The Fund may purchase securities on a when-issued or delayed delivery
basis. Securities purchased on a when-issued or delayed delivery basis are
purchased for delivery beyond the normal settlement date at a stated price and
yield. No income accrues to the purchaser of a security on a when-issued or
delayed delivery basis prior to delivery. Such securities are recorded as an
asset and are subject to changes in value based upon changes in the general
level of interest rates. Purchasing a security on a when-issued or delayed
delivery basis can involve a risk that the market price at the time of delivery
may be lower than the agreed-upon purchase price, in which case there could be
an unrealized loss at the time of delivery. The Fund will only make commitments
to purchase securities on a when-issued or delayed delivery basis with the
intention of actually acquiring the securities but may sell them before the
settlement date if it is deemed advisable. Except under circumstances where a
segregated account is not required under the 1940 Act or the rules adopted
thereunder, the Fund will earmark cash or liquid securities or place them in a
segregated account in each instance in an amount at least equal in value to the
Fund's commitments to purchase securities on a when-issued or delayed delivery
basis. If the value of these assets declines, the Fund will place additional
liquid assets in the account on a daily basis so that the value of the assets in
the account is equal to the amount of such commitments. It is a current policy
of the Fund not to enter into when-issued commitments
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exceeding in the aggregate 15% of the market value of the Fund's total assets
less liabilities, other than the obligations created by these commitments.
Repurchase Agreements
The Fund may enter into repurchase agreements with brokers, dealers or
banks that meet the credit guidelines adopted by the Fund's Directors. In a
repurchase agreement, the Fund buys a security from a seller that has agreed to
repurchase it at a mutually agreed upon date and price, reflecting the interest
rate effective for the term of the agreement. The term of these agreements is
usually from overnight to one week and never exceeds one year. Repurchase
agreements may be viewed as a fully collateralized loan of money by the Fund to
the seller. The Fund always receives securities as collateral with a market
value at least equal to the purchase price, including accrued interest, and this
value is maintained during the term of the agreement. If the seller defaults
and the collateral value declines, the Fund might incur a loss. If bankruptcy
proceedings are commenced with respect to the seller, the Fund's realization
upon the collateral may be delayed or limited.
Loans of Portfolio Securities
The Fund may attempt to increase its income through lending portfolio
securities to third parties and receiving interest on such loans. In the event
of the bankruptcy of the other party to a securities loan, the Fund could
experience delays in recovering the securities it loaned. To the extent that,
in the meantime, the value of the securities the Fund has loaned decreases, the
Fund could experience a loss.
The Fund may lend securities from its portfolio if liquid assets in an
amount at least equal to the current market value of the securities loaned
(including accrued interest thereon) plus the interest payable to the Fund with
respect to the loan is earmarked by the Fund or maintained by the Fund in a
segregated account. Any securities that the Fund may receive as collateral will
not become a part of its portfolio at the time of the loan and, in the event of
a default by the borrower, the Fund will, if permitted by law, dispose of such
collateral except for such part thereof that is a security in which the Fund is
permitted to invest. During the time securities are on loan, the borrower will
pay the Fund any accrued income on those securities, and the Fund may invest the
cash collateral and earn additional income or receive an agreed-upon fee from a
borrower that has delivered cash equivalent collateral. Cash collateral
received by the Fund will be invested in securities in which the Fund is
permitted to invest. The value of securities loaned will be marked to market
daily. Portfolio securities purchased with cash collateral are subject to
possible depreciation. Loans of securities by the Fund will be subject to
termination at the Fund's or the borrower's option. The Fund may pay reasonable
negotiated fees in connection with loaned securities. The Fund does not
currently intend to make loans of portfolio securities with a value in excess of
33 1/3% of the value of its total assets.
Short Sales
The Fund may from time to time sell securities short without limitation. A
short sale is a transaction in which the Fund sells securities it does not own
(but has borrowed) in anticipation of a decline in the market price of the
securities. When the Fund makes a short sale, the proceeds it receives from the
sale will be held on behalf of a broker until the Fund replaces the borrowed
securities. To deliver the securities to the buyer, the Fund will need to
arrange through a broker to borrow the securities and, in so doing, the Fund
will become obligated to replace the securities borrowed at their market price
at the time of replacement, whatever that price may be. The Fund may have to pay
a premium to borrow the securities and must pay any dividends or interest
payable on the securities until they are replaced.
The Fund's obligation to replace the securities borrowed in connection with
a short sale will be secured by collateral deposited with the broker that
consists of cash, U.S. Government Securities or other liquid, high grade debt
obligations. In addition, the Fund will earmark cash or liquid securities or
place them in a segregated account with its custodian, or designated sub-
custodian, in each instance in an amount equal to the difference, if any,
between (1) the market value of the securities sold at the time they were sold
short and (2) any cash, U.S. Government Securities or other liquid high grade
debt obligations deposited as collateral with the broker in connection with the
short sale (not including the proceeds of the short sale). Until it replaces the
borrowed securities, the Fund will maintain as earmarked or in the segregated
account
35
<PAGE>
sufficient amounts so that (1) the amount deposited in the account plus the
amount deposited with the broker (not including the proceeds from the short
sale) will equal the current market value of the securities sold short and (2)
the amount deposited in the account plus the amount deposited with the broker
(not including the proceeds from the short sale) will not be less than the
market value of the securities at the time they were sold short.
Possible losses from short sales differ from losses that could be incurred
from a purchase of a security, because losses from short sales may be unlimited,
whereas losses from purchases can equal only the total amount invested.
INVESTMENT RESTRICTIONS
The following restrictions are fundamental policies of the Fund that may
not be changed without the approval of the holders of a majority of the Fund's
outstanding voting securities (as defined under "Investment Objectives and
Policies"). If a percentage restriction on investment or use of assets set forth
below is adhered to at the time a transaction is effected, later changes will
not be considered a violation of the restriction. Also, if the Fund receives
from an issuer of securities held by the Fund subscription rights to purchase
securities of that issuer, and if the Fund exercises such subscription rights at
a time when the Fund's portfolio holdings of securities of that issuer would
otherwise exceed the limits set forth below, it will not constitute a violation
if, prior to receipt of securities upon exercise of such rights, and after
announcement of such rights, the Fund has sold at least as many securities of
the same class and value as it would receive on exercise of such rights.
As a matter of fundamental policy:
1. The Fund may not purchase any security (other than obligations of the
U.S. government or its agencies or instrumentalities) if as a result
more than 25% of the Fund's total assets would be invested in a
particular industry; provided, however, that the foregoing restriction
will not be deemed to prohibit the Fund from purchasing the securities
of any issuer pursuant to the exercise of rights distributed to the
Fund by the issuer.
2. The Fund may not make any investment for the purpose of exercising
control or management.
3. The Fund may not buy or sell commodities or commodity contracts or
real estate or interests in real estate, except that it may purchase
and sell futures contracts on stock indices and foreign currencies,
securities which are secured by real estate or commodities, and
securities of companies which invest or deal in real estate or
commodities.
4. The Fund may not make loans, except that the Fund may (i) buy and hold
debt instruments in accordance with its investment objectives and
policies, (ii) enter into repurchase agreements to the extent
permitted under applicable law, and (iii) make loans of portfolio
securities.
5. The Fund may not act as an underwriter except to the extent that, in
connection with the disposition of portfolio securities, it may be
deemed to be an underwriter under applicable securities laws.
6. The Fund may not issue senior securities or borrow money, except for
(a) preferred stock and other senior securities (including borrowing
money, including on margin if margin securities are owned, entering
into reverse repurchase agreements and entering into similar
transactions) not in excess of 33 1/3% of its total assets, and (b)
borrowings up to 5% of its total assets (including the amount
borrowed) for temporary or emergency purposes (including for clearance
of transactions, repurchase of its shares or payment of dividends),
without regard to the amount of senior securities outstanding under
clause (a) above; provided, however, that the Fund's obligations under
when-issued and delayed delivery
36
<PAGE>
transactions and similar transactions and reverse repurchase
agreements are not treated as senior securities if covering assets are
appropriately segregated, and the use of hedging transactions shall
not be deemed to involve the issuance of a "senior security" or a
"borrowing"; for purposes of clauses (a) and (b) above, the term
"total assets" shall be calculated after giving effect to the net
proceeds of senior securities issued by the Fund reduced by any
liabilities and indebtedness not constituting senior securities except
for such liabilities and indebtedness as are excluded from treatment
as senior securities by this item (6). The Fund's obligations under
interest rate swaps are not treated as senior securities.
As a matter of operating policy, which may be changed by the Fund's Board
of Directors without stockholder vote, the Fund will not purchase securities on
margin, except such short-term credits as may be necessary for clearance of
transactions and the maintenance of margin with respect to futures contracts.
The investment restrictions set forth in items 1 to 6 above and the Fund's
investment objectives are the Fund's only fundamental policies -- i.e., policies
that cannot be changed without the approval of a majority of the Fund's
outstanding voting securities (as defined under "Investment Objectives and
Policies" above). All other policies and restrictions described in this
Prospectus are operating policies. Unlike fundamental policies, operating
policies of the Fund may be changed by the directors of the Fund, without a vote
of the Fund's stockholders, if the directors determine such action is warranted.
The Fund will notify its stockholders of any change in any of the operating
policies set forth above. Such notice will also include a discussion of the
increased risks of investment in the Fund, if any, associated with such a
change.
MANAGEMENT OF THE FUND
The Investment Manager
The Fund employs Morgan Stanley Dean Witter Investment Management Inc. (the
"Investment Manager"), a wholly owned subsidiary of Morgan Stanley Dean Witter &
Co., pursuant to an Investment Advisory and Management Agreement, dated as of
March 13, 1997 (the "Management Agreement"), to manage the investment and
reinvestment of the assets of the Fund, subject to the supervision of the Fund's
Directors. The Investment Manager's principal business address is 1221 Avenue of
the Americas, New York, New York 10020.
The Investment Manager provides portfolio management and named fiduciary
services to various closed-end and open-end investment companies, taxable and
nontaxable institutions, international organizations and individuals investing
in United States and international equity and fixed income securities. As of
June 30, 1999, the Investment Manager and its institutional investment
management affiliates had approximately $175.3 billion of combined assets under
management as investment managers or as fiduciary advisors, of which
approximately $3.5 billion was invested in high yield securities.
Robert. E. Angevine is the senior portfolio manager for the Fund. He is a
Principal of the Investment Manager and the portfolio manager for high yield
investments. Prior to joining the Investment Manager in October 1988, Mr.
Angevine spent eight years at Prudential Insurance where he was responsible for
one of the largest open-end high yield mutual funds in the country. His other
experiences include international treasury operations at a major U.S.
pharmaceutical company and commercial banking. He received a B.A. in Economics
from Lafayette College, and an MBA from Fairleigh Dickinson University. He
served two years as a Lieutenant in the U.S. Army. Stephen F. Esser, who joined
the Investment Manager in 1996, is a Managing Director of Morgan Stanley & Co.
Incorporated, and has been a portfolio manager with Miller Anderson & Sherrerd,
LLP, an affiliate of the Investment Manager, since 1988. Gordon W. Loery, a
Principal of the Investment Manager, joined the Investment Manager as a Fixed
Income Analyst in 1990. Mr. Angevine has had primary responsibility for
managing the Fund's assets since its inception. Mr. Esser and Mr. Loery have
shared primary responsibility with Mr. Angevine for managing the Fund's assets
since April 1996 and April 1999, respectively.
37
<PAGE>
Management Agreement
Under the terms of the Management Agreement, the Investment Manager makes
investment decisions, prepares and makes available research and statistical
data, and supervises the purchase and sale of securities on behalf of the Fund,
including the selection of brokers and dealers to carry out the transactions,
all in accordance with the Fund's investment objectives and policies, under the
direction and control of the Fund's Board of Directors. The Investment Manager
also is responsible for maintaining records and furnishing or causing to be
furnished all required records or other information of the Fund to the extent
such records, reports and other information are not maintained or furnished by
the Fund's administrators, custodians or other agents. The Investment Manager
pays the salaries and expenses of the Fund's officers and employees, as well as
the fees and expenses of the Fund's Directors, who are directors, officers or
employees of the Investment Manager or any of its affiliates, except that the
Fund bears travel expenses or an appropriate fraction thereof of officers and
Directors of the Fund who are directors, officers or employees of the Investment
Manager or its affiliates to the extent that such expenses relate to attendance
at meetings of the Fund's Board of Directors or any committee thereof.
The Fund pays all of its other expenses, including, among others,
organization expenses (but not the overhead or employee costs of the Investment
Manager); legal fees and expenses of counsel to the Fund; auditing and
accounting expenses; taxes and governmental fees; listing fees; dues and
expenses incurred in connection with membership in investment company
organizations; fees and expenses of the Fund's custodians, subcustodians,
transfer agents and registrars; fees and expenses with respect to
administration, except as may be provided otherwise pursuant to administration
agreements; expenses for portfolio pricing services by a pricing agent, if any;
expenses of preparing share certificates and other expenses in connection with
the issuance, offering and underwriting of shares issued by the Fund; expenses
relating to investor and public relations; expenses of registering or qualifying
securities of the Fund for public sale; freight, insurance and other charges in
connection with the shipment of the Fund's portfolio securities; brokerage
commissions and other costs of acquiring or disposing of any portfolio holding
of the Fund; expenses of preparation and distribution of reports, notices and
dividends to stockholders; expenses of the dividend reinvestment and cash
purchase plan (except for brokerage expenses paid by participants in such plan);
costs of stationery; any litigation expenses; and costs of stockholders' and
other meetings.
For services under the Management Agreement, the Investment Manager
receives a fee, computed weekly and payable monthly, at an annual rate of 0.70%
of the Fund's average weekly net assets. For the fiscal years ended December
31, 1996, 1997 and 1998, the advisory fees earned by the Investment Manager
aggregated approximately $842,000, $929,000, and $920,000, respectively. The
Investment Manager will benefit from the Offer because the Investment Manager's
fee is based on the average weekly net assets of the Fund. It is not possible
to state precisely the amount of additional compensation the Investment Manager
will receive as a result of the Offer because it is not known how many shares
will be subscribed for and because the proceeds of the Offer will be invested in
additional portfolio securities which will fluctuate in value. However, based
on the estimated proceeds from the Offer, assuming all the rights are exercised
in full at the Estimated Subscription Price of $13.25 per share, assuming the
Fund issues an additional 25% of shares to satisfy over-subscription requests
and after payment of expenses the Investment Manager would receive additional
annual advisory fees of approximately $334,649 as a result of the increase in
assets under management over the Fund's current assets under management.
Under the Management Agreement, the Investment Manager is permitted to
provide investment advisory services to other clients, including clients who may
invest in high yield securities. Conversely, information furnished by others to
the Investment Manager in the course of providing services to clients other than
the Fund may be useful to the Investment Manager in providing services to the
Fund.
The Management Agreement continues in effect from year to year provided
such continuance is specifically approved at least annually by (i) a vote of a
majority of those members of the Board of Directors who are not "interested
persons" of the Investment Manager, or the Fund, cast in person at a meeting
called for the purpose of voting on such approval, and (ii) by a majority vote
of either the Fund's Board of Directors
38
<PAGE>
or the Fund's outstanding voting securities. At a meeting held on June 21, 1999,
the Board of Directors (including all Directors who are not "interested persons"
of the Investment Manager, or the Fund) unanimously approved the renewal of the
Management Agreement for a one year term expiring in June 2000. The Management
Agreement may be terminated at any time, without payment of penalty, by the
Fund's Board of Directors, by the vote of a majority of the Fund's outstanding
voting securities, or by the Investment Manager upon 60 days' written notice.
The Management Agreement will automatically terminate in the event of its
assignment, as defined under the 1940 Act.
The Management Agreement provides that the Investment Manager will not be
liable for any act or omission, error of judgment or mistake of law, or for any
loss suffered by the Fund in connection with matters to which the Management
Agreement relates, except for a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Investment Manager in the
performance of its duties, or from reckless disregard by it of its obligations
and duties under the Management Agreement.
Directors and Officers of the Fund
The Directors and officers of the Fund are listed below together with their
respective positions, ages and a brief statement of their principal occupations
during the past five years and, in the case of Directors, their positions with
certain international organizations and publicly held companies.
<TABLE>
<CAPTION>
Name, Address and Principal Occupations
Date of Birth Position with Fund During Past Five Years
- ----------------------------- ------------------------ ---------------------------------------------------
<C> <S> <C>
Barton M. Biggs* Director and Chairman, Director and Managing Director of Morgan
1221 Avenue of the Americas Chairman of the Stanley Dean Witter Investment Management Inc. and
New York, New York 10020 Board since 1995 Chairman and Director of Morgan Stanley Dean
11/26/32 Witter Investment Management Limited; Managing
Director of Morgan Stanley & Co. Incorporated;
Member of the Yale Development Board; Director and
Chairman of the Board of various U.S. registered
investment companies managed by Morgan Stanley
Dean Witter Investment Management Inc.
Michael F. Klein* Director and Principal of Morgan Stanley & Co. Incorporated and
1221 Avenue of the Americas President since 1997 Morgan Stanley Dean Witter Investment Management
New York, New York 10020 Inc. and previously a Vice President thereof;
12/12/58 Director and President of various U.S. registered
investment companies managed by Morgan Stanley
Dean Witter Investment Management Inc.; Previously
practiced law with the New York law firm of Rogers
& Wells.
Peter J. Chase Director since 1995 Chairman and Chief Financial Officer, High Mesa
1441 Paseo De Peralta Technologies, Inc.; Director of various U.S.
Santa Fe, New Mexico 87501 registered investment companies managed by Morgan
10/12/32 Stanley Dean Witter Investment Management Inc.
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
Name, Address and Principal Occupations
Date of Birth Position with Fund During Past Five Years
- ----------------------------- ------------------------ ---------------------------------------------------
<C> <S> <C>
John W. Croghan Director since 1995 President of Lincoln Partners, a partnership of
200 South Wacker Drive Lincoln Capital Management Company; Director of
Chicago, Illinois 60606 St. Paul Bancorp, Inc., Lindsay Manufacturing Co.
6/8/30 and Republic Services; Director of various U.S.
registered investment companies managed by Morgan
Stanley Dean Witter Investment Management Inc.;
Previously Director of Blockbuster Entertainment
Corporation.
David B. Gill Director since 1995 Director of various U.S. registered investment
26210 Ingleton Circle companies managed by Morgan Stanley Dean Witter
Easton, Maryland 21601 Investment Management Inc.; Director of the
7/6/26 Mauritius Fund Limited; Director of Moneda Chile
Fund Limited; Director of First NIS Regional Fund
SIAC; Director of Commonwealth Africa Investment
Fund Ltd.; Chairman of the Advisory Board of
Advent Latin American Private Equity Fund;
Chairman and Director of Norinvest Bank; Director
of Surinvest International Limited; Director of
National Registry Company; Director of South Asia
Regional Fund Ltd.; Director of Creditanstalt
Ukraine; Previously Director of Capital Markets
Department of the International Finance
Corporation; Trustee, Batterymarch Finance
Management; Chairman and Director of Equity Fund
of Latin America S.A.; Director of Commonwealth
Equity Fund Limited; and Director of Global
Securities, Inc.
Graham E. Jones Director since 1995 Senior Vice President of BGK Properties; Trustee
300 Garfield Street, Suite 200 of various investment companies managed by Weiss,
Santa Fe, New Mexico 87501 Peck & Greer; Trustee of various investment
1/31/33 companies managed by Morgan Grenfell Capital
Management Incorporated; Director of various U.S.
registered investment companies managed by Morgan
Stanley Dean Witter Investment Management Inc.;
Trustee of various investment companies managed by
Sun Capitol Advisers, Inc.; Previously Chief
Financial Officer of Practice Management Systems,
Inc.
John A. Levin Director since 1995 Chairman and Chief Executive Officer of John A.
One Rockefeller Plaza Levin & Co., Inc.; Director of various U.S.
New York, New York 10020 registered investment companies managed by Morgan
8/20/38 Stanley Dean Witter Investment Management Inc.;
Director, President and Chief Executive Officer of
Baker Fentress & Company.
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
Name, Address and Principal Occupations
Date of Birth Position with Fund During Past Five Years
- ----------------------------- ------------------------ ---------------------------------------------------
<C> <S> <C>
William G. Morton, Jr. Director since 1995 Chairman and Chief Executive Officer of Boston
100 Franklin Street Stock Exchange; Director of Tandy Corporation;
Boston, Massachusetts 02110 Director of various U.S. registered investment
3/13/37 companies managed by Morgan Stanley Dean Witter
Investment Management Inc.
Harold J. Schaaff, Jr.* Vice President since Principal of Morgan Stanley & Co. Incorporated and
1221 Avenue of the Americas 1993 Morgan Stanley Dean Witter Investment Management
New York, New York 10020 Inc.; General Counsel and Secretary of Morgan
6/10/60 Stanley Dean Witter Investment Management Inc.;
Officer of various U.S. registered investment
companies managed by Morgan Stanley Dean Witter
Investment Management Inc.
Joseph P. Stadler* Vice President since Principal of Morgan Stanley & Co. Incorporated and
1221 Avenue of the Americas 1993 Morgan Stanley Dean Witter Investment Management
New York, New York 10020 Inc.; Officer of various U.S. registered
6/7/54 investment companies managed by Morgan Stanley
Dean Witter Investment Management Inc.; Previously
with Price Waterhouse LLP.
Stefanie V. Chang* Vice President since Vice President of Morgan Stanley & Co.
1221 Avenue of the Americas 1997 Incorporated and Morgan Stanley Dean Witter
New York, New York 10020 Investment Management Inc.; Officer of various
11/30/66 U.S. registered investment companies managed by
Morgan Stanley Dean Witter Investment Management
Inc.; Previously practiced law with the New York
law firm of Rogers & Wells.
Mary E. Mullin* Secretary since 1999 Vice President of Morgan Stanley & Co.
1221 Avenue of the Americas Incorporated and Morgan Stanley Dean Witter
New York, New York 10020 Investment Management Inc.; Officer of various
3/22/67 U.S. registered investment companies managed by
Morgan Stanley Dean Witter Investment Management
Inc.; Previously practiced law with the New York
law firms of McDermott, Will & Emery and Skadden,
Arps, Slate, Meagher & Flom LLP.
Belinda Brady Assistant Treasurer Manager, Fund Administration, Chase Global Funds
73 Tremont Street since 1996 Services Company; Officer of various U.S.
Boston, Massachusetts 02108 registered investment companies managed by Morgan
1/23/68 Stanley Dean Witter Investment Management Inc.;
Previously with Price Waterhouse LLP.
</TABLE>
____________________________________
* "Interested person" within the meaning of the 1940 Act. Mr. Biggs is
chairman, director and managing director of the Investment Manager, and Messrs.
Klein, Schaaff and Stadler and Ms. Chang and Ms. Mullin are officers of the
Investment Manager.
41
<PAGE>
Pursuant to the Fund's By-Laws, the terms of office of the Directors are
staggered. The Board of Directors is divided into three classes, designated
Class I, Class II and Class III, with each class having a term of three years.
Each year the term of one class expires. Class I currently consists of Peter J.
Chase, David B. Gill and Michael F. Klein. Class II currently consists of John
W. Croghan and Graham E. Jones. Class III currently consists of Barton M.
Biggs, John A. Levin and William G. Morton, Jr.
Pursuant to the Fund's By-Laws, each Director holds office until (i) the
expiration of his term and until his successor has been elected and qualified,
(ii) his death, (iii) his resignation, (iv) December 31 of the year in which he
reaches seventy-three years of age, or (v) his removal as provided by statute or
the Articles of Incorporation.
The Board of Directors has an Audit Committee. The Audit Committee makes
recommendations to the full Board of Directors with respect to the engagement of
independent accountants and reviews with the independent accountants the plan
and results of the audit engagement and matters having a material effect on the
Fund's financial operations. The members of the Audit Committee are currently
Peter J. Chase, David B. Gill and Graham E. Jones, none of whom is an
"interested person," as defined under the 1940 Act. The Chairman of the Audit
Committee is Mr. Jones. The Board of Directors does not have nominating or
compensation committees or other committees performing similar functions.
The Fund pays each of its Directors who is not a director, officer or
employee of the Investment Manager or its affiliates an annual fee of $4,795,
plus out-of-pocket expenses. Each of the members of the Fund's Audit Committee,
which consists of the Fund's Directors who are not "interested persons" of the
Fund as defined in the 1940 Act, will receive an additional fee of $787 for
serving on such committee.
Each of the Directors who is not an "affiliated person" of the Investment
Manager within the meaning of the 1940 Act may enter into a deferred fee
arrangement (the "Fee Arrangement") with the Fund, pursuant to which such
Director may defer to a later date the receipt of his Director's fees. The
deferred fees owed by the Fund are credited to a bookkeeping account maintained
by the Fund on behalf of such Director and accrue income from and after the date
of credit in an amount equal to the amount that would have been earned had such
fees (and all income earned thereon) been invested and reinvested either (i) in
shares of the Fund or (ii) at a rate equal to the prevailing rate applicable to
90-day United States Treasury Bills at the beginning of each calendar quarter
for which this rate is in effect, whichever method is elected by the Director.
Under the Fee Arrangement, deferred Director's fees (including the return
accrued thereon) will become payable in cash upon such Director's resignation
from the Board of Directors in generally equal annual installments over a period
of five years (unless the Fund has agreed to a longer or shorter payment period)
beginning on the first day of the year following the year in which such
Director's resignation occurred. In the event of a Director's death, remaining
amounts payable to him under the Fee Arrangement will thereafter be payable to
his designated beneficiary; in all other events, a Director's right to receive
payments is non-transferable. Under the Fee Arrangement, the Board of Directors
of the Fund, in its sole discretion, has reserved the right, at the request of a
Director or otherwise, to accelerate or extend the payment of amounts in the
deferred fee account at any time after the termination of such Director's
service as a director. In addition, in the event of liquidation, dissolution or
winding up of the Fund or the distribution of all or substantially all of the
Fund's assets and property to its stockholders (other than in connection with a
reorganization or merger into another fund advised by the Investment Manager),
all unpaid amounts in the deferred fee account maintained by the Fund will be
paid in a lump sum to the Directors participating in the Fee Arrangement on the
effective date thereof.
Set forth below is a table showing the aggregate compensation paid by the
Fund to each of its Directors, as well as the total compensation paid to each
Director of the Fund by the Fund and by other U.S. registered investment
companies advised by the Investment Manager or its affiliates (collectively, the
"Fund Complex") for their services as Directors of such investment companies for
the fiscal year ended December 31, 1998.
42
<PAGE>
<TABLE>
<CAPTION>
Pension or
Retirement Number of
Benefits Total Funds in Fund
Accrued as Compensation Complex for
Aggregate Part of the From Fund Which
Compensation From Fund's Complex Paid to Director
Name of Directors Fund(2)(3) Expenses Directors(2)(4) Serves(5)
- ------------------------------------ ----------------- ----------------- ------------------- -----------------
<S> <C> <C> <C> <C>
Barton M. Biggs(1).................. $ 0 None $ 0 16
Michael F. Klein(1)................. 0 None 0 16
Peter J. Chase...................... 5,582 None 75,753 12
John W. Croghan..................... 4,795 None 64,997 12
David B. Gill....................... 5,582 None 75,753 12
Graham E. Jones..................... 5,582 None 75,753 12
John A. Levin....................... 4,795 None 72,097 13
William G. Morton, Jr............... 4,795 None 64,997 12
</TABLE>
- ------------------------------------
(1) "Interested person" of the Fund within the meaning of the 1940 Act.
(2) The amounts reflected in this table include amounts payable by the Fund
Complex for services rendered during the fiscal year ended December 31,
1998, regardless of whether such amounts were actually received by the
Directors during such fiscal year.
(3) Of the amounts shown in this column, Mr. Croghan, Mr. Gill and Mr. Levin
deferred all of their aggregate compensation pursuant to the Fee
Arrangement described above. Payments under the Fee Arrangement to a
Director will be based on the number of share equivalents a Director holds.
(4) Of the amounts shown in this column, Mr. Croghan, Mr. Gill and Mr. Levin
deferred all or a portion of their total compensation pursuant to the Fee
Arrangement described above.
(5) Indicates the total number of boards of directors of investment companies
in the Fund Complex, including the Fund, on which the Director served at
any time during the fiscal year ended December 31, 1998.
The Articles of Incorporation of the Fund contain a provision permitted
under the Maryland General Corporation Law (the "MGCL") which by its terms
eliminates the personal liability of the Fund's directors to the Fund or its
stockholders for monetary damages for breach of fiduciary duty as a director,
subject to the requirements of the 1940 Act and certain qualifications described
below. The Articles of Incorporation and the By-Laws of the Fund provide that
the Fund will indemnify directors and officers of the Fund to the fullest extent
permitted by the MGCL, subject to the requirements of the 1940 Act. Under
Maryland law, a corporation may indemnify any director or officer made a party
to any proceeding by reason of service in that capacity unless it is established
that (1) the act or omission of the director or officer was material to the
matter giving rise to the proceeding and (A) was committed in bad faith or (B)
was the result of active and deliberate dishonesty; (2) the director or officer
actually received an improper personal benefit in money, property or services;
or (3) in the case of any criminal proceeding, the director or officer had
reasonable cause to believe that the act or omission was unlawful. The Articles
of Incorporation further provide that to the fullest extent permitted by the
MGCL, and subject to the requirements of the 1940 Act, no director or officer
will be liable to the Fund or its stockholders for money damages. Under Maryland
law, a corporation may restrict or limit the liability of directors or officers
to the corporation or its stockholders for money damages, except to the extent
that (1) it is proved that the person actually received an improper benefit or
profit in money, property, or services, or (2) a judgment or other final
adjudication adverse to the person is entered in a proceeding based on a finding
in the proceeding that the person's action, or failure to act, was the result of
active and deliberate dishonesty and was material to the cause of action
adjudicated in the proceeding. Nothing in the Articles of Incorporation or the
By-Laws of the Fund protects or indemnifies a director, officer, employee or
agent against any liability to which he would otherwise be subject by reason of
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, or protects or indemnifies a director or officer of
the Fund against any liability to the Fund or its stockholders to
43
<PAGE>
which he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office.
Holdings of Common Stock
As far as is known to the Fund, no person owned beneficially five percent
or more of the outstanding shares of Common Stock of the Fund at August 20,
1999. DTC holds of record 92.6% of the outstanding shares of Common Stock at
August 20, 1999. As far as is known to the Fund, no person other than DTC owned
of record or beneficially shares of the Fund representing more than five percent
of the voting power of the Fund's outstanding shares. The Investment Manager
beneficially owned 7,093 shares of Common Stock at August 20, 1999.
As of August 20, 1999, all Directors and officers of the Fund, owned in the
aggregate less than 1% of the Common Stock.
Administration
Under an Administration Agreement (the "Administration Agreement") between
the Fund and The Chase Manhattan Bank, it was agreed that Chase Global Funds
Services Company (the "Administrator"), an affiliate of The Chase Manhattan
Bank, will provide administrative services to the Fund. Such administrative
services include maintenance of the Fund's books and records, calculations of
NAV, preparation and filing of reports with respect to certain of the Fund's
U.S. reporting requirements, monitoring of custody arrangements with the Fund's
custodians and other accounting and general administrative services. The
Directors of the Fund will supervise and monitor the administrative services
provided by the Administrator.
The Chase Manhattan Bank, a New York State-chartered bank and trust
company, provides corporate management and administrative services to investment
companies which at December 31, 1998 had more than $176 billion of assets under
administration. The Administrator's principal business address is 73 Tremont
Street, Boston, Massachusetts 02108.
Under the Administration Agreement, the Fund will pay to the Administrator
an annual administration fee of $65,000 plus .08% of the average weekly net
assets of the Fund, computed weekly and payable monthly. For the fiscal years
ended December 31, 1996, 1997 and 1998, the administration fee earned by the
Administrator aggregated approximately $176,000, $177,000 and $176,000,
respectively.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Management Agreement authorizes the Investment Manager to select the
brokers or dealers that will execute the purchases and sales of investment
securities for the Fund and directs the Investment Manager to seek to obtain for
the Fund the most favorable net results as determined by the Fund's Board of
Directors. The Fund has authorized the Investment Manager to pay higher
commissions in recognition of brokerage services which, in the opinion of the
Investment Manager, are necessary for the achievement of better execution,
provided the Investment Manager believes this to be in the best interest of the
Fund.
In purchasing and selling securities for the Fund, it is the Fund's policy
to seek to obtain quality executions at the most favorable prices, through
responsible broker-dealers. In selecting broker-dealers to execute the
securities transactions, consideration will be given to such factors as the
price of the security, the rate of the commission, the size and difficulty of
the order, the reliability, integrity, financial condition, general execution
and operational capabilities of competing broker-dealers, and the brokerage and
research services which they provide to the Fund. Some securities considered for
investment by the Fund may also be appropriate for other clients served by the
Investment Manager. If purchase or sale of securities consistent with the
investment policies of the Fund and one or more of these other clients served by
the Investment Manager is considered at or about the same time, transactions in
such securities will be allocated among the Fund and clients in a manner deemed
fair and reasonable by the Investment Manager. Although there is no specified
formula for allocating such transactions, the various allocation methods used by
the Investment Manager, and the results of such allocations, are subject to
periodic review by the Fund's Directors.
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The Investment Manager on behalf of the Fund may place brokerage
transactions through brokers, including Morgan Stanley & Co. Incorporated, who
provide it with investment research services, including market and statistical
information and quotations for the Fund's portfolio valuation purposes. The
terms "investment research" and "market and statistical information and
quotations" include advice as to the value of securities, the advisability of
investing in, purchasing or selling securities, and the availability of
securities and potential buyers or sellers of securities, as well as the
furnishing of analyses and reports concerning issuers, industries, securities,
economic factors and trends, and portfolio strategy, each and all as consistent
with those services mentioned in Section 28(e) of the Securities Exchange Act of
1934, as amended (the "1934 Act").
Research provided to the Investment Manager in advising the Fund will be in
addition to and not in lieu of the services required to be performed by the
Investment Manager itself, and the Investment Manager's fees will not be reduced
as a result of the receipt of such supplemental information. It is the opinion
of the management of the Fund that such information is only supplementary to the
Investment Manager's own research efforts, since the information must still be
analyzed, weighed and reviewed by the Investment Manager's staff. Such
information may be useful to the Investment Manager in providing services to
clients other than the Fund, and not all such information is necessarily used by
the Investment Manager in connection with the Fund. Conversely, information
provided to the Investment Manager by brokers and dealers through whom other
clients of the Investment Manager effect securities transactions may prove
useful to the Investment Manager in providing services to the Fund.
The Fund's Board of Directors will review at least annually the commissions
allocated by the Investment Manager on behalf of the Fund to determine if such
allocations were reasonable in relation to the benefits inuring to the Fund.
For the fiscal years ended December 31, 1996, 1997 and 1998, the Fund paid
brokerage commissions for the execution of portfolio transactions of $0, $0 and
$100, respectively. The rate of portfolio turnover for the fiscal years ended
December 31, 1996, 1997 and 1998 was 136%, 94% and 78%, respectively.
NET ASSET VALUE
The Fund determines its NAV no less frequently than weekly, on the last
business day of each week and at such other times as the Board of Directors may
determine, by dividing the value of the net assets of the Fund (the value of its
assets less its liabilities, exclusive of capital stock and surplus, less the
liquidation value of any outstanding shares of preferred stock, which is
expected to equal the original purchase price per share plus any accrued and
unpaid dividends thereon, whether or not earned or declared) by the total number
of shares of Common Stock outstanding. In valuing the Fund's assets, all
securities for which market quotations are readily available are valued (i) at
the last sale price prior to the time of determination if there was a sale on
the date of determination, (ii) at the mean between the last current bid and
asked prices if there was no sales price on such date and bid and asked
quotations are available, and (iii) at the bid price if there was no sales price
on such date and only bid quotations are available. Publicly traded government
debt securities are typically traded on the over-the-counter market, and will be
valued at the mean between the last current bid and the asked price as of the
close of business on that market. In instances where a price determined above is
deemed not to represent fair market value, the value is determined in such
manner as the Board of Directors may prescribe. Bonds and other fixed income
securities may be valued on the basis of prices provided by independent pricing
services when such prices are believed to reflect the fair market value of such
securities. The prices determined by independent pricing services are determined
without regard to bid or last sales prices but take into account institutional
size trading in similar groups of securities and any developments related to the
specific securities. Short-term investments having a maturity of 60 days or less
are valued at amortized cost, unless the Board of Directors determines that such
valuation does not constitute fair value. Securities for which reliable
quotations or pricing services are not readily available and all other
securities and assets are valued at fair value as determined in good faith by,
or under procedures established by, the Board of Directors.
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DIVIDENDS AND DISTRIBUTIONS;
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
It is the Fund's present policy, which may be changed by the Board of
Directors, to distribute to stockholders, at least monthly, dividends of its net
investment income and also to distribute any net realized capital gains
annually. Pursuant to the Fund's Dividend Reinvestment and Cash Purchase Plan
(the "Plan"), each stockholder may elect, by written instruction to American
Stock Transfer & Trust Company (the "Plan Agent"), to have all distributions
automatically reinvested by the Plan Agent in Fund shares pursuant to the Plan.
Stockholders who do not participate in the Plan will receive all distributions
in cash paid by check in U.S. dollars mailed directly to the stockholder by
American Stock Transfer & Trust Company, as paying agent. Copies of dividend
reinvestment forms may be obtained from the Plan Agent at P.O. Box 922, Wall
Street Station, New York, New York 10269-0560.
The Plan Agent serves as agent for the stockholders in administering the
Plan. After the Fund declares an income dividend or capital gains distribution
payable either in Common Stock or in cash, as stockholders may have elected,
nonparticipants in the Plan will receive cash and participants in the Plan will
receive Common Stock to be issued by the Fund or to be purchased in the open
market by the Plan Agent. If the market price per share on the valuation date
equals or exceeds NAV per share on that date, the Fund will issue new shares to
participants at NAV or, if the NAV is less than 95% of the market price on the
valuation date, then at 95% of the market price. The valuation date will be the
dividend or distribution payment date or, if that date is not a trading day on
the exchange on which the Common Stock is then listed, the next preceding
trading day. If NAV exceeds the market price of the Common Stock on such
valuation date, or if the Fund should declare a dividend or distribution payable
only in cash, the Plan Agent will, as agent for the participants, buy the Common
Stock in the open market with the cash in respect of such dividend or
distribution, for the participants' account on, or shortly after, the payment
date.
Participants in the Plan have the option of making additional cash payments
to the Plan Agent, monthly in any amount from $100 to $3,000, for investment in
the Common Stock. The Plan Agent will use all funds received from participants
(as well as any dividends and distributions received in cash) to purchase Fund
shares in the open market on or about the payment date for each monthly dividend
or distribution (which is expected to be approximately the 15th day of each
month). No participant will have any authority to direct the time or price at
which the Plan Agent may purchase the Common Stock on its behalf. To avoid
unnecessary cash accumulations, and also to allow ample time for receipt and
processing by the Plan Agent, it is suggested that participants send in
voluntary cash payments to be received by the Plan Agent approximately ten days
before the 15th day of each month. Any voluntary cash payments received more
than ten days prior to any such date will be returned by the Plan Agent, and
interest will not be paid on any uninvested cash payments. A participant may
withdraw a voluntary cash payment by written notice, if the notice is received
by the Plan Agent not less than forty-eight hours before such payment is to be
invested. All voluntary cash payments should be made by check drawn on a U.S.
bank (or a non-U.S. bank, if the U.S. currency is imprinted on the check)
payable in U.S. dollars and should be mailed to the Plan Agent for Morgan
Stanley Dean Witter High Yield Fund, Inc., along with a properly executed cash
remittance form (copies of which will be provided by the Plan Agent to the
participants), at 40 Wall Street, New York, New York 10005.
The Plan Agent will maintain all stockholder accounts in the Plan and will
furnish written confirmations of all transactions in the account, including
information needed by stockholders for personal and tax records. Shares in the
account of each Plan participant will be held by the Plan Agent in non-
certificated form in the name of the participant, and each stockholder's proxy
will include those shares purchased pursuant to the Plan.
In the case of stockholders, such as banks, brokers or nominees, which hold
shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by the
stockholder as representing the total amount registered in the stockholder's
name and held for the account of beneficial owners who are participating in the
Plan.
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There is no charge to participants for reinvesting dividends or capital
gains distributions. The Plan Agent's fees for the handling of the reinvestment
of dividends and distributions will be paid by the Fund. However, each
participant's account will be charged a pro rata share of brokerage commissions
incurred with respect to the Plan Agent's open market purchases in connection
with the reinvestment of dividends or distributions. A participant will also pay
brokerage commissions incurred in purchases from voluntary cash payments made by
the participant. Brokerage charges for purchasing small amounts of stock for
individual accounts through the Plan are expected to be less than the usual
brokerage charges for such transactions, because the Plan Agent will be
purchasing stock for all participants in blocks and prorating the lower
commission thus attainable.
The automatic reinvestment of dividends and distributions will not relieve
participants of any income tax which may be payable on such dividends and
distributions.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate the Plan as
applied to any voluntary cash payment made and any dividend or distribution paid
subsequent to notice of the change sent to all stockholders at least 90 days
before the record date for such dividend or distribution. The Plan also may be
amended or terminated by the Plan Agent by at least 90 days' written notice to
all stockholders. All correspondence concerning the Plan should be directed to
the Plan Agent for Morgan Stanley Dean Witter High Yield Fund, Inc. at 40 Wall
Street, New York, New York 10005.
TAXATION
U.S. Federal Income Taxes
The Fund has elected and qualified and intends to continue to qualify to be
treated as a regulated investment company under the Internal Revenue Code. To so
qualify, the Fund must, among other things: (a) derive at least 90% of its gross
income from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stock or securities and gains from
the sale or other disposition of foreign currencies, or other income (including
gains from options, futures contracts and forward contracts) derived with
respect to the Fund's business of investing in stocks, securities or currencies;
and (b) diversify its holdings so that, at the end of each quarter, (i) at least
50% of the value of the Fund's total assets is represented by cash and cash
items, U.S. Government securities, securities of other regulated investment
companies, and other securities, with such other securities limited in respect
of any one issuer to an amount not greater in value than 5% of the Fund's total
assets and to not more than 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of the Fund's total assets is
invested in the securities (other than U.S. Government securities or securities
of other regulated investment companies) of any one issuer or of any two or more
issuers that the Fund controls and that are determined to be engaged in the same
business or similar or related businesses. The Fund expects that all of its
foreign currency gains will be directly related to its principal business of
investing in stock and securities.
As a regulated investment company, the Fund will not be subject to U.S.
federal income tax on its investment company taxable income that it distributes
to its stockholders, provided that at least 90% of its investment company
taxable income for the taxable year is distributed to its stockholders; however,
the Fund will be subject to tax on its income and gains, to the extent that it
does not distribute to its stockholders an amount equal to such income and
gains. Investment company taxable income includes dividends, interest and net
short-term capital gains in excess of net long-term capital losses, but does not
include net long-term capital gains in excess of net short-term capital losses.
The Fund intends to distribute annually to its stockholders substantially all of
its investment company taxable income. If necessary, the Fund intends to borrow
money or liquidate assets to make such distributions. Dividend distributions of
investment company taxable income are taxable to a U.S. stockholder as ordinary
income to the extent of the Fund's current and accumulated earnings and profits,
whether paid in cash or in shares. In general, corporate stockholders of the
Fund will be entitled to a deduction for dividends received by corporations to
the extent of the Fund's dividend income, if any, derived from its investment in
the stock of domestic corporations. The Fund will notify stockholders annually
of the amount of dividend income received from the Fund that is eligible for the
deduction for dividends received by corporations. If the Fund fails to satisfy
the 90% distribution
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requirement or fails to qualify as a regulated investment company in any taxable
year, it will be subject to tax in such year on all of its taxable income,
whether or not the Fund makes any distributions to its stockholders.
As a regulated investment company, the Fund also will not be subject to
U.S. federal income tax on its net long-term capital gains in excess of net
short-term capital losses and capital loss carryovers from the prior eight
years, if any, that it distributes to its stockholders. If the Fund retains for
reinvestment or otherwise an amount of such net long-term capital gains, it will
be subject to a tax of 35% of the amount retained. The Board of Directors of the
Fund will determine at least once a year whether to distribute any net long-term
capital gains in excess of net short-term capital losses and capital loss
carryovers from prior years. Although the Fund currently expects to distribute
any net realized capital gains at least annually, if it determines to retain any
net realized capital gains, it will designate such amounts retained as
undistributed capital gains in a notice to its stockholders who, if subject to
U.S. federal income taxation on long-term capital gains, (a) will be required to
include in income for U.S. federal income tax purposes, as long-term capital
gains, their proportionate shares of the undistributed amount, and (b) will be
entitled to credit against their U.S. federal income tax liabilities their
proportionate shares of the tax paid by the Fund on the undistributed amount and
to claim refunds to the extent that their credits exceed their liabilities. For
U.S. federal income tax purposes, the basis of shares owned by a stockholder of
the Fund will be increased by an amount equal to 65% of the amount of
undistributed capital gains included in the stockholder's income. Distributions
of net long-term capital gains, if any, by the Fund are taxable to its
stockholders as long-term capital gains whether paid in cash or in shares and
regardless of how long the stockholder has held the Fund's shares. Such
distributions of net long-term capital gains are not eligible for the dividends
received deduction. Under the Internal Revenue Code, net long-term capital gains
will be taxed at a rate no greater than 20% for individuals and 35% for
corporations. Stockholders will be notified annually as to the U.S. federal
income tax status of their dividends and distributions.
Stockholders receiving dividends or distributions in the form of additional
shares pursuant to the Plan should be treated for U.S. federal income tax
purposes as receiving a distribution in an amount equal to the amount of money
that the stockholders receiving cash dividends or distributions will receive,
and should have a cost basis in the shares equal to such amount.
If the NAV of shares is reduced below a stockholder's cost as a result of a
distribution by the Fund, the distribution will be taxable even though it, in
effect, represents a return of invested capital. Investors considering buying
shares just prior to a dividend or capital gain distribution payment date should
be aware that, although the price of shares purchased at that time may reflect
the amount of the forthcoming distribution, those who purchase just prior to the
record date for a distribution will receive a distribution which will be taxable
to them. The amount of capital gains realized and distributed (which from an
investment standpoint may represent a partial return of capital rather than
income) in any given year will be the result of action taken for the best
investment of the principal of the Fund, and may therefore vary from year to
year.
Under the Internal Revenue Code, the Fund may be subject to a 4% excise tax
on a portion of its undistributed income. To avoid the tax, the Fund must
distribute annually at least 98% of its ordinary income (not taking into account
any capital gains or losses) for the calendar year and at least 98% of its
capital gain net income for the 12-month period ending, as a general rule, on
October 31 of the calendar year. For this purpose, any income or gain retained
by the Fund that is subject to corporate income tax will be treated as having
been distributed at year-end. In addition, the minimum amounts that must be
distributed in any year to avoid the excise tax will be increased or decreased
to reflect any under distribution or over distribution, as the case may be, in
the previous year. For a distribution to qualify under the foregoing test, the
distribution generally must be declared and paid during the year. Any dividend
declared by the Fund in October, November or December of any year and payable to
stockholders of record on a specified date in such a month shall be deemed to
have been received by each stockholder on December 31 of such year and to have
been paid by the Fund not later than December 31 of such year, provided that
such dividend is actually paid by the Fund during January of the following year.
The Internal Revenue Service ("IRS") has taken the position in a revenue
ruling that a regulated investment company that has two or more classes of
shares must designate distributions made to each class in
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any year as consisting of no more than such class's proportionate share of each
type of income for each tax year based on the total dividends distributed to
each class for such year, including income qualifying for the corporate
dividends-received deductions and net capital gains. Consequently, when both
Common Stock and preferred stock are outstanding, the Fund intends to allocate,
to the fullest extent practicable, income distributed to the classes as
consisting of particular types of income in accordance with the class's
proportionate Shares of such income. Thus, the Fund will designate dividends
qualifying for the corporate dividends-received deduction, income not qualifying
for the dividends-received deduction and net capital gain income in a manner
that allocates such income between the holders of Common Stock and preferred
stock in proportion to the total distributions made to each class during the
taxable year, or otherwise as required by applicable law.
If at any time when leverage is outstanding, the Fund does not meet the
asset coverage requirements of the 1940 Act or of any rating agency that has
rated such leverage, the Fund will be required to suspend distributions to
holders of Common Stock until the asset coverage is restored. See "Investment
Objectives and Policies -- Leverage." This may prevent the Fund from
distributing at least 90% of its investment company taxable income, and may
therefore jeopardize the Fund's qualification for taxation as a regulated
investment company or cause the Fund to incur a tax liability or a non-
deductible 4% excise tax on the undistributed taxable income (including gain),
or both. Upon any failure to meet the asset coverage requirements of the 1940
Act, or imposed by a rating agency, the Fund may, in its sole discretion,
purchase or redeem any preferred stock or short-term debt securities in order to
maintain or restore the requisite asset coverage and avoid the adverse
consequences to the Fund and its stockholders of failing to qualify as a
regulated investment company or of incurring a tax liability or a non-deductible
4% excise tax. There can be no assurance, however, that any such redemption
would achieve such objectives.
The Fund is likely to make investments that produce income that is not
matched by a corresponding cash distribution to the Fund, such as investments in
certain obligations having original issue discount (e.g., an amount equal to the
excess of the stated redemption price of the security at maturity over its issue
price) or market discount (e.g., an amount equal to the excess of the stated
redemption price of the security over the basis of such bond immediately after
it was acquired) if the Fund elects to accrue market discount on a current
basis. The Fund has elected to accrue market discount on a current basis. In
addition, income may continue to accrue for federal income tax purposes with
respect to a non-performing investment. Any such income would be treated as
income earned by the Fund and therefore would be subject to the distribution
requirements of the Internal Revenue Code. Because such income may not be
matched by a corresponding cash distribution to the Fund, the Fund may be
required to borrow money or dispose of other securities to be able to make
distributions to its investors.
The Fund will maintain accounts and calculate income by reference to the
U.S. dollar for U.S. federal income tax purposes. Certain investments may be
maintained in, and income therefrom calculated by reference to, non-U.S.
currencies, and such calculations will not necessarily correspond to the Fund's
distributable income and capital gains for U.S. federal income tax purposes as a
result of fluctuations in currency exchange rates. Furthermore, exchange control
regulations may restrict the ability of the Fund to repatriate investment income
or the proceeds of sales of securities. These restrictions and limitations may
limit the Fund's ability to make sufficient distributions to satisfy the 90%
distribution requirement and to avoid the 4% excise tax.
The Fund's transactions in foreign currencies, forward contracts, options
and futures contracts (including options and futures contracts on foreign
currencies) will be subject to special provisions of the Internal Revenue Code
that, among other things, may affect the character of gains and losses realized
by the Fund (i.e., may affect whether gains or losses are ordinary or capital),
accelerate recognition of income to the Fund, defer Fund losses, and affect the
determination of whether capital gains and losses are characterized as long-term
or short-term capital gains or losses. These rules could therefore affect the
character, amount and timing of distributions to stockholders. These provisions
also may require the Fund to mark-to-market certain types of the positions in
its portfolio (i.e., treat them as if they were closed out) which may cause the
Fund to recognize income without receiving cash with which to make distributions
in amounts necessary to satisfy the 90% and 98% distribution requirements for
avoiding income and excise taxes. The Fund will monitor its
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transactions, will make the appropriate tax elections, and will make the
appropriate entries in its books and records when it acquires any foreign
currency, option, futures contract, forward contract, or hedged investment in
order to mitigate the effect of these rules and prevent disqualification of the
Fund as a regulated investment company and minimize the imposition of income and
excise taxes.
For backup withholding purposes, the Fund may be required to withhold 31%
of reportable payments (which may include dividends, capital gain distributions,
and redemptions) to certain non-corporate stockholders. A stockholder, however,
may avoid becoming subject to this requirement by filing an appropriate form
certifying under penalty of perjury that such stockholder's taxpayer
identification number is correct and that such stockholder is not subject to
backup withholding, or is exempt from backup withholding.
Upon the sale or exchange of its shares, a stockholder will realize a
taxable gain or loss depending upon the amount realized and the stockholder's
basis in the shares. Such gain or loss will be treated as capital gain or loss
if the shares are capital assets in the stockholder's hands, and will be long-
term if the stockholder's holding period for the shares is more than 12 months
and otherwise will be short-term. Any loss realized on a sale or exchange will
be disallowed to the extent that the shares disposed of are replaced (including
replacement through the reinvesting of dividends and capital gains distributions
in the Fund) within a period of 61 days beginning 30 days before and ending 30
days after the disposition of the shares. In such a case, the basis of the
shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized by a stockholder on the sale of Fund shares held by the stockholder for
six months or less will be treated for federal income tax purposes as a long-
term capital loss to the extent of any distributions of long-term capital gains
received by the stockholder with respect to such shares.
An amount received by a stockholder from the Fund in exchange for shares of
the Fund (pursuant to a repurchase of shares in a tender offer or otherwise)
generally will be treated as a payment in exchange for the shares tendered,
which may result in taxable gain or loss as described above. However, if the
amount received by a stockholder exceeds the fair market value of the shares
tendered, or if a stockholder does not tender all of the shares of the Fund
owned or deemed to be owned by the stockholder, all or a portion of the amount
received may be treated as a dividend taxable as ordinary income or as a return
of capital. In addition, if a tender offer is made, any stockholders who do not
tender their shares could be deemed, under certain circumstances, to have
received a taxable distribution as a result of their increased proportionate
interest in the Fund.
Foreign Stockholders
Taxation of a stockholder who, as to the United States, is a non-resident
alien individual, foreign trust or estate, foreign corporation or foreign
partnership ("foreign stockholder") depends, in part, on whether the
stockholder's income from the Fund is "effectively connected" with a U.S. trade
or business carried on by the stockholder. If a stockholder is a resident alien
or if dividends or distributions from the Fund are effectively connected with a
U.S. trade or business carried on by a foreign stockholder, then dividends of
net investment income, distributions of net capital gains and gain realized upon
the sale of shares of the Fund will be subject to U.S. income tax at the rates
applicable to U.S. citizens or domestic corporations. If the income from an
investment in shares of the Fund is effectively connected with a U.S. trade or
business carried on by a foreign stockholder that is a corporation, then such
stockholder also may be subject to the 30% branch profits tax.
If the income from the Fund is not effectively connected with a U.S. trade
or business carried on by the foreign stockholder, (i) dividends of net
investment income will be subject to a 30% (or lower treaty rate) U.S. federal
withholding tax, and (ii) distributions of net capital gains and gains realized
upon the sale of shares of the Fund will not be subject to U.S. federal tax as
long as such foreign stockholder is not a non-resident alien individual who was
physically present in the United States for more than 182 days during the
taxable year and certain other conditions are satisfied. However, certain
foreign stockholders may nonetheless be subject to 31% backup withholding on
distributions of net capital gains and gross proceeds paid to them upon the sale
of their shares of the Fund. See "Taxation-U.S. Federal Income Taxes."
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The tax consequences to a foreign stockholder entitled to claim the
benefits of an applicable tax treaty may be different from those described in
this section. Stockholders may be required to provide appropriate documentation
to establish their entitlement to the benefits of such a treaty. Foreign
investors are advised to consult their own tax advisers with respect to (a)
whether their income from the Fund is or is not effectively connected with a
United States trade or business carried on by them, (b) whether they may claim
the benefits of an applicable tax treaty and (c) any other tax consequences to
them of an investment in the Fund.
Notices
Stockholders will be notified annually by the Fund as to the United States
federal income tax status of the dividends, distributions and deemed
distributions made by the Fund to its stockholders. Furthermore, stockholders
will be sent, if appropriate, various written notices after the close of the
Fund's taxable year as to the United States federal income tax status of certain
dividends, distributions and deemed distributions that were paid (or that were
treated as having been paid) by the Fund to its stockholders during the
preceding taxable year.
Other Taxation
Distributions also may be subject to state, local and foreign taxes
depending on each stockholder's particular position.
THE U.S. FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS A SUMMARY
INCLUDED FOR GENERAL INFORMATION PURPOSES ONLY. IN VIEW OF THE INDIVIDUAL
NATURE OF TAX CONSEQUENCES, EACH SHAREHOLDER IS ADVISED TO CONSULT HIS OWN TAX
ADVISER WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO HIM OF PARTICIPATION IN
THE FUND, INCLUDING THE EFFECT AND APPLICABILITY OF STATE LOCAL, FOREIGN, AND
OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
DESCRIPTION OF CAPITAL STOCK
Common Stock
The authorized capital stock of the Fund is 100,000,000 shares of Common
Stock ($0.01 par value). As of the date of this Prospectus, 8,848,421 shares of
Common Stock are outstanding. Shares of the Fund, when issued, will be fully
paid and nonassessable and will have no conversion, preemptive or other
subscription rights. Holders of Common Stock are entitled to one vote per share
on all matters to be voted upon by stockholders and are not able to cumulate
their votes in the election of Directors. Thus, holders of more than 50% of the
shares voting for the election of directors have the power to elect 100% of the
directors.
All shares of Common Stock are equal as to assets, earnings and the receipt
of dividends, if any, as may be declared by the Board of Directors out of funds
available therefor, however, the Fund's Board of Directors has the authority to
classify and reclassify any authorized but unissued shares of capital stock and
to establish the rights and preferences of any such reclassified shares. See
"Description of Capital Stock -- Preferred Stock." In the event of liquidation,
dissolution or winding up of the Fund, each share of Common Stock is entitled to
receive its proportion of the Fund's assets remaining after payment of all debts
and expenses, including any preferential liquidating distribution to holders of
any preferred stock issued by the Fund.
The Fund commenced operations on November 30, 1993 following the issuance
of 7,093 shares of Common Stock to the Investment Manager on November 17, 1993
for $100,000 and the initial public offering and over-allotment on November 23,
1993 and December 23, 1993 of 8,700,356 shares to the public resulting in
aggregate net proceeds to the Fund of approximately $122,220,020. As of August
20, 1999, the net assets of the Fund were $115,277,198.
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Following the expiration of the Offer, depending upon market conditions,
the Fund may offer additional shares of Common Stock in a secondary offering at
prices not less than the NAV of the Fund's shares at the time of such offer.
Furthermore, additional shares may be issued under the Plan. Other offerings of
the Fund's shares will require approval of the Fund's Board of Directors and may
require stockholder approval. Any such additional offerings would also be
subject to the requirements of the 1940 Act, including the requirement that
shares may not be sold at a price below the then current NAV (exclusive of
underwriting discounts and commissions) except in connection with an offering to
existing stockholders or with the consent of a majority of the Fund's shares.
The Fund is a closed-end investment company and as such its stockholders do
not have the right to cause the Fund to redeem their shares of Common Stock. The
Fund, however, may repurchase shares of Common Stock from time to time in the
open market or in private transactions when it can do so at prices at or below
the current NAV per share on terms that represent a favorable investment
opportunity. Subject to its investment limitations, the Fund may borrow to
finance the repurchase of shares. However, the payment of interest on such
borrowings will increase the Fund's expenses and consequently reduce net income.
In addition, the Fund is required under the 1940 Act to maintain "asset
coverage" of not less than 300% of its "senior securities representing
indebtedness" as such terms are defined in the 1940 Act.
The Fund's shares of Common Stock will trade in the open market at a price
which is a function of several factors, including their NAV and yield. The
shares of closed-end investment companies frequently sell at a discount from,
but sometimes at a premium over, their NAVs. See "Risk Factors and Special
Considerations." There can be no assurance that it will be possible for
investors to resell shares of the Fund at or above the price at which shares are
offered by this Prospectus or that the market price of the Fund's shares will
equal or exceed NAV. Since the Fund may repurchase its shares at prices below
their NAV or make a tender offer for its shares, the NAV of those shares that
remain outstanding will be increased, but the effect of such repurchases on the
market price of the remaining shares cannot be predicted.
Any offer by the Fund to repurchase shares will be made at a price based
upon the NAV of the shares at the close of business on or within 14 days after
the last date of the offer. Each offer will be made and stockholders notified in
accordance with the requirements of the 1934 Act and the 1940 Act, either by
publication or mailing or both. Each offering document will contain such
information as is prescribed by such laws and the rules and regulations
promulgated thereunder. When a repurchase offer is authorized by the Fund's
Board of Directors, a stockholder wishing to accept the offer may be required to
offer to sell all (but not less than all) of the shares owned by such
stockholder (or attributed to him for federal income tax purposes under Section
318 of the Internal Revenue Code). The Fund will purchase all shares tendered
in accordance with the terms of the offer unless it determines to accept none of
them (based upon one of the conditions set forth below). Persons tendering
shares may be required to pay a service charge to help defray certain costs of
the transfer agent. Any such service charges will not be deducted from the
consideration paid for the tendered shares. During the period of a repurchase
offer, the Fund's stockholders will be able to determine the Fund's current net
asset value (which will be calculated weekly) by use of a toll-free telephone
number.
The Fund's Articles of Incorporation and By-Laws include provisions that
could limit the ability of others to acquire control of the Fund, to modify the
structure of the Fund or to cause it to engage in certain transactions. These
provisions, described below, also could have the effect of depriving
stockholders of an opportunity to sell their shares at a premium over prevailing
market prices by discouraging third parties from seeking to obtain control of
the Fund in a tender offer or similar transaction. In the opinion of the Fund,
however, these provisions offer several possible advantages. They potentially
require persons seeking control of the Fund to negotiate with its management
regarding the price to be paid for the shares required to obtain such control,
they promote continuity and stability and they enhance the Fund's ability to
pursue long-term strategies that are consistent with its investment objective.
The Fund's Articles of Incorporation provide that the Fund's Board of
Directors have the sole power to adopt, alter or repeal the Fund's By-Laws. In
addition, the Directors are divided into three classes, each having a term of
three years, with the term of one class expiring each year. In addition, a
Director may be removed from office only with cause and only by a majority of
the Fund's stockholders. The affirmative vote
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of 75% or more of the Fund's outstanding shares is required to amend, alter or
repeal the provisions in the Fund's Articles of Incorporation relating to
amendments to the Fund's By-Laws and to removal of Directors. See "Management of
the Fund -- Directors and Officers of the Fund." These provisions could, among
other things, delay the replacement of a majority of the Directors and have the
effect of making changes in the Board of Directors more difficult than if such
provisions were not in place.
The affirmative vote of the holders of 75% or more of the outstanding
shares is required to (1) convert the Fund from a closed-end to an open-end
investment company, (2) merge or consolidate with any other entity or enter into
a share exchange transaction in which the Fund is not the successor corporation,
(3) dissolve or liquidate the Fund, (4) sell all or substantially all of its
assets, (5) cease to be an investment company registered under the 1940 Act, (6)
issue to any person securities in exchange for property worth $1,000,000 or
more, exclusive of sales of securities in connection with a public offering,
issuance of securities pursuant to a dividend reinvestment plan or other stock
dividend or issuance of securities upon the exercise of any stock subscription
rights, or (7) amend, alter or repeal the above provisions in the Fund's
Articles of Incorporation. However, if such action has been approved or
authorized by the affirmative vote of at least 70% of the entire Board of
Directors, the affirmative vote of only a majority of the outstanding shares
would be required for approval, except in the case of the issuance of
securities, in which no stockholder vote would be required unless otherwise
required by applicable law. The principal purpose of the above provisions is to
increase the Fund's ability to resist takeover attempts and attempts to change
the fundamental nature of the business of the Fund that are not supported by
either the Board of Directors or a large majority of the stockholders. These
provisions make it more difficult to liquidate, take over or open-end the Fund
and thereby are intended to discourage investors from purchasing its shares with
the hope of making a quick profit by forcing the Fund to change its structure.
These provisions, however, would apply to all actions proposed by anyone,
including management, and would make changes in the Fund's structure
accomplished through a transaction covered by the provisions more difficult to
achieve. The foregoing provisions also could impede or prevent transactions in
which holders of shares of Common Stock might obtain prices for their shares in
excess of the market prices at which the Fund's shares were then trading.
Although these provisions could have the effect of depriving stockholders of an
opportunity to sell their shares at a premium over prevailing market prices by
discouraging a third party from seeking to obtain control of the Fund, the Fund
believes the conversion of the Fund from a closed-end to an open-end investment
company to eliminate the discount may not be desired by stockholders, who
purchased their Common Stock in preference to stock of the many mutual funds
available.
The Fund is required by the rules of the NYSE to hold annual meetings of
stockholders. The most recent annual meeting of stockholders was held on June
21, 1999. The next annual meeting of stockholders is scheduled for June 2000.
Under Maryland law and the Fund's By-Laws, the Fund will call a special meeting
of its stockholders upon the written request of stockholders entitled to cast at
least 25% of all the votes at such meeting. Such request for such a special
meeting must state the purpose of the meeting and the matters proposed to be
acted on at it. The secretary of the Fund shall (i) inform the stockholders who
make the request of the reasonably estimated cost of preparing and mailing a
notice of the meeting, and (ii) on payment of these costs to the Fund notify
each stockholder entitled to notice of the meeting. Notwithstanding the above,
under Maryland law and the Fund's By-Laws, unless requested by stockholders
entitled to cast a majority of all the votes entitled to be cast at the meeting,
a special meeting need not be called to consider any matter which is
substantially the same as a matter voted on at any special meeting of the
stockholders held during the preceding 12 months.
Preferred Stock
The Fund's Articles of Incorporation provide that the Board of Directors
may classify or reclassify any unissued shares of capital stock into one or more
additional or other classes or series, with rights as determined by the Board of
Directors, by action by the Board of Directors without the approval of the
holders of Common Stock. Holders of Common Stock have no preemptive right to
purchase any shares of preferred stock that might be issued.
Although the terms of any preferred stock, including its dividend rate,
liquidation preference and redemption provisions will be determined by the Board
of Directors (subject to applicable law and the Fund's
53
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Articles of Incorporation), it is likely that the preferred stock will be
structured to carry a relatively short-term dividend rate reflecting interest
rates on short-term debt securities, by providing for the periodic
redetermination of the dividend rate at relatively short intervals through an
auction, remarketing or other procedure. Although no shares of preferred stock
are currently authorized, the Fund believes that it is likely that the
liquidation preference, voting rights and redemption provisions of the preferred
stock will be similar to those stated below.
Liquidation Preference. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Fund, the holders of preferred
stock will be entitled to receive a preferential liquidating distribution
(expected to equal the original purchase price per share plus accrued and unpaid
dividends, whether or not declared) before any distribution of assets is made to
holders of Common Stock. After payment of the full amount of the liquidating
distribution to which they are entitled, the preferred stockholders will not be
entitled to any further participation in any distribution of assets by the Fund.
A consolidation or merger of the Fund with or into any corporation or
corporations, a share exchange transaction or a sale of all or substantially all
other assets of the Fund will not be deemed to be a liquidation, dissolution or
winding up of the Fund.
Voting Rights. The 1940 Act requires that the holders of any preferred
stock, voting separately as a single class, have the right to elect at least two
directors at all times and, subject to the prior rights, if any, of the holders
of any other class of senior securities outstanding, to elect a majority of the
directors at any time two years' dividends on any preferred shares are unpaid.
The 1940 Act also requires that, in addition to any approval by stockholders
that might otherwise be required, the approval of the holders of a majority of
any outstanding preferred shares, voting separately as a class, would be
required to (a) adopt any plan of reorganization that would adversely affect the
preferred shares and (b) take any action requiring a vote of security holders
pursuant to Section 13(a) of the 1940 Act, including, among other things,
changes in the Fund's classification as a closed-end investment company or
changes in its fundamental investment restrictions. See "Common Stock" above
concerning voting requirements for conversion of the Fund to an open-end
investment company and other matters. In addition, in the discretion of the
Board of Directors, subject to the 1940 Act, the terms of any preferred stock
may also require the affirmative vote of up to 75% of the preferred stock,
voting separately as a class, for approval of certain transactions involving a
merger or sale of assets or conversion of the Fund to open-end status and other
matters. The Board of Directors presently intends that, except for the matters
discussed in the previous sentence and except as otherwise indicated in this
Prospectus and as otherwise required by applicable law, holders of shares of
preferred stock will have equal voting rights with holders of Common Stock (one
vote per share, unless otherwise required by the 1940 Act), and will vote
together with holders of Common Stock as a single class.
It is presently intended that with respect to the election of the Fund's
directors, on and after issuance of any preferred stock the holders of all
outstanding shares of preferred stock, voting as a separate class, would be,
entitled to elect two directors of the Fund, and the remaining directors would
be elected by holders of Common Stock and preferred stock, voting together as a
single class. The Fund's By-laws currently provide that the Board of Directors
will consist of not more than 14 directors and not less than such number of
directors as permitted under Maryland law, as may be determined from time to
time by vote of a majority of directors then in office.
It is presently intended that the affirmative vote of the holders of a
majority of the outstanding shares of preferred stock, voting as a separate
class, will be required to amend, alter or repeal any of the preferences, rights
or powers of holders of shares of preferred stock so as to affect materially and
adversely such preferences, rights, or powers, or increase or decrease the
number of shares of preferred stock. The class vote of holders of preferred
stock described above will in each case be in addition to any other vote
required to authorize the action in question.
Redemption, Purchase and Sale of Preferred Stock by the Fund. It is
currently contemplated that the terms of any preferred stock that is issued will
provide that it is redeemable by the Fund in whole or in part at the original
purchase price per share plus accrued dividends per share, that the Fund may
tender for or purchase shares of preferred stock and that the Fund may
subsequently resell any shares so tendered or repurchased. Any redemption or
purchase of shares of preferred stock by the Fund will reduce the leverage
54
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applicable to shares of Common Stock, while any resale of preferred stock by the
Fund will increase such leverage. See "Investment Objectives and Policies --
Leverage."
DIVIDEND PAYING AGENT, TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company acts as the Fund's dividend paying
agent, transfer agent and the registrar for the Fund's Common Stock. The
principal business address of American Stock Transfer & Trust Company is 40 Wall
Street, New York, New York 10005.
CUSTODIANS
The Chase Manhattan Bank (the "U.S. Custodian") acts as the custodian for
the Fund's assets held in the United States. The principal business address of
the U.S. Custodian is 3 Chase Metrotech Center, Brooklyn, New York 11245.
Under a custody agreement between United States Trust Company of New York
(succeeded to by the U.S. Custodian) and the Fund (the "Domestic Custody
Agreement"), the U.S. Custodian has agreed to hold all property of the Fund,
delivered to it, in safekeeping in a segregated account (except that the U.S.
Custodian may commingle such property with other assets held by the U.S.
Custodian in a fiduciary or custodian capacity), make payments of cash from the
Fund's accounts for the purchase of securities for the Fund, endorse and collect
all checks, drafts or other orders for payment of money received as custodian
for the Fund, daily furnish the Fund with confirmations and a summary of all
transfers to or from the account, collect and receive for the account of the
Fund all income and other payments and distributions, and prepare and maintain
the books and records of the Fund as required by the 1940 Act, other applicable
federal or state laws, rules or regulations, or any federal or state regulatory
body.
For its services the U.S. Custodian receives a fee calculated based on the
average daily net assets of the Fund, computed and payable monthly, plus an
amount for each transaction effected in the Fund's account. In addition, the
U.S. Custodian will be reimbursed by the Fund for any out-of-pocket expenses
incurred by it in connection with the performance of its duties under the
Domestic Custody Agreement.
The Chase Manhattan Bank (which succeeded Morgan Stanley Trust Company)
also acts as the custodian for the Fund's assets held outside the United States
(the "International Custodian").
Under a custody agreement between the International Custodian and the Fund
(the "International Custody Agreement"), the International Custodian has agreed
to hold all property of the Fund, delivered to it, in safekeeping in a
segregated account, receive and collect all income and transaction proceeds with
respect to such property, accept and deliver securities on the purchase, sale,
redemption, exchange or conversion thereof, pay from the Fund's account the
purchase price of any securities acquired by the Fund, as well as any taxes and
other expenses payable in connection with securities transactions, maintain all
necessary books and records with respect to the property of the Fund held by it,
provide the Fund with periodic reports regarding the Fund's account and, in
general, attend to all nondiscretionary details in connection with the sale,
purchase, transfer and other dealings with the securities and other property of
the Fund held by the International Custodian.
For its services the International Custodian receives a fee calculated as a
percentage of Fund assets in its custody, plus an amount for each transaction
effected in the Fund's account. In addition, the International Custodian will be
reimbursed by the Fund for any out-of-pocket expenses incurred by it in
connection with the performance of its duties under the International Custody
Agreement.
The International Custodian may employ one or more sub-custodians outside
the United States that are approved by the Board of Directors in accordance with
regulations under the 1940 Act. The fees and expenses of any such sub-custodian
will be paid by the International Custodian.
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EXPERTS
The December 31, 1998 financial statements of the Fund have been
incorporated by reference herein in reliance upon the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting. The business address of
PricewaterhouseCoopers LLP is 1177 Avenue of the Americas, New York, New York
10036.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed on for the
Fund by Rogers & Wells LLP, New York, New York, and by its special Maryland
counsel, Piper & Marbury L.L.P., Baltimore, Maryland.
ADDITIONAL INFORMATION
On occasion, the Fund may compare its performance to performance or market
data published or compiled by Lipper Analytical Services, Inc., Morningstar
Publications, Inc., Donaldson, Lufkin & Jenrette Securities Corporation, CS
First Boston or other industry publications. As with other performance data,
performance comparisons should not be considered indicative of the Fund's
relative performance for any future period. In connection with the Offer, the
Fund provides current information as to performance, distributions, yields,
current strategy and market outlook, industry allocation, credit quality
distribution, asset allocation and the Fund's top ten holdings through its toll
free number at 1-800-221-6726.
The Fund has filed with the SEC in Washington, D.C. a registration
statement under the Securities Act, relating to the Shares offered by this
Prospectus. Further information concerning these Shares and the Fund may be
found in that registration statement on file with the SEC, of which this
Prospectus constitutes a part. The Fund also files reports and other
information with the SEC. The registration statements and these reports and
other information can be inspected, without charge, and copied, for a fee, at
the public reference facilities maintained by the SEC at 450 5th Street, N.W.,
Washington, D.C. 20549. The Fund's filings are also available to the public on
the SEC's internet site (http://www.sec.gov). The reports and other information
concerning the Fund may also be inspected at the offices of the NYSE.
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APPENDIX A
RATINGS
A description of the rating policies of Moody's and S&P with respect to
bonds and debentures appears below.
Moody's Investors Service's Corporate Bond Ratings
Aaa - Bonds which are rated Aaa are judged to be of the best quality and
carry the smallest degree of investment risk. Interest payments are protected by
a large or by an exceptionally stable margin, and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment qualities and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade obligations,
e.g., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance and
other terms of the contract over any long period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca - Bonds which are rated Ca represent obligations which are speculative
in high degree. Such issues are often in default or have other marked
shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Moody's applies numerical modifiers "1", "2" and "3" to certain of its
rating classifications. The modifier "1" indicates that the security ranks in
the higher end of its generic rating category; the modifier "2" indicates a mid-
range ranking; and the modifier "3" indicates that the issue ranks in the lower
end of its generic rating category.
A-1
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Standard & Poor's Corporate Bond Ratings
AAA - This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to repay principal and pay
interest.
AA - Bonds rated AA also qualify as high quality debt obligations. Capacity
to pay principal and interest is very strong, and differ from AAA issues only in
small degree.
A - Bonds rated A have a strong capacity to repay principal and pay
interest, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to repay
principal and pay interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead a weakened capacity to repay principal and pay interest for bonds
in this category than for higher rated categories.
BB-B-CCC-CC-C - Bonds rated BB, B, CCC, CC and C are regarded, on balance,
as predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the obligations. BB
indicates the lowest degree of speculation and C the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
D - Bonds rated D are in default. The D category is used when interest
payments or principal payments are not made on the date due even if the
applicable grace period has not expired unless S&P believes that such payments
will be made during such grace period. The D rating is also used upon the filing
of a bankruptcy petition if debt service payments are jeopardized.
The ratings set forth above may be modified by the addition of a plus or
minus to show relative standing within the major rating categories.
Moody's Investors Service's Commercial Paper Ratings
Prime-1 - Issuers (or related supporting institutions) rated Prime-1 have a
superior ability for repayment of senior short-term debt obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries, high
rates of return on funds employed, conservative capitalization structures with
moderate reliance on debt and ample asset protection, broad margins in earnings
coverage of fixed financial charges and high internal cash generation, and well-
established access to a range of financial markets and assured sources of
alternate liquidity.
Prime-2 - Issuers (or related supporting institutions) rated Prime-2 have a
strong ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternative liquidity is
maintained.
Prime-3 - Issuers (or related supporting institutions) rated Prime-3 have
an acceptable ability for repayment of senior short-term obligations. The effect
of industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained.
Not Prime - Issuers rated Not Prime do not fall within any of the Prime
rating categories.
A-2
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Standard & Poor's Commercial Paper Ratings
A S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded into several categories, ranging from "A-l" for the highest
quality obligations to "D" for the lowest. The four categories are as follows:
A-1 - This highest category indicates that the degree of safety regarding
timely payments is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus (+) sign designation.
A-2 - Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-l".
A-3 - Issues carrying this designation have adequate capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
B - Issues rated "B" are regarded as having only speculative capacity for
timely payment.
C - This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D - Debt rated "D" is in payment default. The "D" rating category is used
when interest payments or principal payments are not made on the date due, even
if the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period.
A-3
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APPENDIX B
DESCRIPTION OF VARIOUS FOREIGN CURRENCY HEDGES
AND STOCK OPTIONS AND FUTURES CONTRACTS
Foreign Currency Hedging Transactions
Forward Foreign Currency Exchange Contract. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
These contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks).
Foreign Currency Futures Contracts. A foreign currency futures contract is
a standardized contract for the future delivery of a specified amount of a
foreign currency at a future date at a price set at the time of the contract.
Foreign currency futures contracts traded in the United States are traded on
regulated exchanges. Parties to a futures contract must make initial "margin"
deposits, which generally range from 2% to 5% of the contract price, to secure
performance of the contract. There also are requirements to make 'variation'
margin deposits as the value of the futures contract fluctuates. The Fund may
not enter into foreign currency futures contracts if the aggregate amount of
initial margin deposits on the Fund's futures positions, including stock index
futures contracts (which are discussed below), would exceed 5% of the value of
the Fund's total assets. The Fund also will be required to segregate assets to
cover its futures contracts obligations.
At the maturity of a forward of futures contract, the Fund may either
accept or make delivery of the currency specified in the contract or, prior to
maturity, enter into a closing purchase transaction involving the purchase or
sale of an offsetting contract. Closing purchase transactions with respect to
forward contracts are usually effected with the currency trader who is a party
to the original forward contract. Closing purchase transactions with respect to
futures contracts are effected on an exchange. The Fund will only enter into
such a forward or futures contract if it is expected that there will be a liquid
market in which to close out such contract. There can, however, be no assurance
that such a liquid market will exist in which to close a forward or futures
contract, in which case the Fund may suffer a loss.
Currency Hedging Strategies. The Fund may enter into forward foreign
currency exchange contracts and foreign currency futures contracts in several
circumstances. For example, when the Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when the
Fund anticipates the receipt in a foreign currency of dividends or interest
payments on such a security which it holds, the Fund may desire to "lock in" the
dollar price of the security or the dollar equivalent of such dividend or
interest payment, as the case may be. In addition, when the Investment Manager
believes that the currency of a particular foreign country may suffer a
substantial decline against the dollar, it may enter into a forward or futures
contract to sell, for a fixed amount of dollars, the amount of foreign currency
approximating the value of some or all of the Fund's portfolio securities
denominated in such foreign currency.
The Fund does not intend to enter into such forward or futures contracts to
protect the value of its portfolio securities on a regular basis, and will not
do so if, as a result, the Fund will have more than 20% of the value of its
total assets committed to the consummation of such contracts. The Fund also will
not enter into such forward or futures contracts or maintain a net exposure to
such contracts where the consummation of the contracts would obligate the Fund
to deliver an amount of foreign currency in excess of the value of the Fund's
portfolio securities or other assets denominated in that currency. Further, the
Fund generally will not enter into a forward or futures contract with a term of
greater than one year.
Options on Currencies. The Fund may attempt to accomplish objectives
similar to those described above with respect to forward and futures contracts
for currency by means of purchasing put or call options on foreign currencies on
exchanges. A put option gives the Fund the right to sell a currency at the
exercise
B-1
<PAGE>
price until the expiration of the option. A call option gives the Fund the right
to purchase a currency at the exercise price until the expiration of the option.
While the Fund may enter into forward, futures and options contracts to
reduce currency exchange rate risks, changes in currency prices may result in a
poorer overall performance for the Fund than if it had not engaged in any such
transaction. Moreover, there may be an imperfect correlation between the Fund's
portfolio holdings of securities denominated in a particular currency and
forward, futures or options contracts entered into by the Fund. Such imperfect
correlation may prevent the Fund from achieving the intended hedge or expose the
Fund to risk of foreign exchange loss.
Certain provisions of the Internal Revenue Code may limit the extent to
which the Fund may enter into forward or futures contracts or engage in options
transactions. These transactions may also affect the character and timing of
income and the amount of gain or loss recognized by the Fund and its
stockholders for U.S. federal income tax purposes. See "Taxation -- U.S.
Federal Income Taxes."
Options on Securities and Securities Index Futures Contracts
Options on Securities. In order to hedge against market shifts, the Fund
may purchase put and call options on securities. In addition, the Fund may seek
to increase its income or may hedge a portion of its portfolio investments
through writing (e.g., selling) covered call options. A put option gives the
holder the right to sell to the writer of the option an underlying security at a
specified price at any time during or at the end of the option period. In
contrast, a call option gives the purchaser the right to buy the underlying
security covered by the option from the writer of the option at the stated
exercise price. A "covered" call option means that so long as the Fund is
obligated as the writer of the option, it will own (i) the underlying securities
subject to the option, or (ii) securities convertible or exchangeable without
the payment of any consideration in to the securities subject to the option.
The Fund will receive a premium from writing call options, which increases
the Fund's return on the underlying security in the event the option expires
unexercised or is closed out at a profit. By writing a call, the Fund will limit
its opportunity to profit from an increase in the market value of the underlying
security above the exercise price of the option for as long as the Fund's
obligation as writer of the option continues. Thus, in some periods the Fund
will receive less total return and in other periods greater total return from
writing covered call options than it would have received from its underlying
securities had it not written call options.
The Fund may purchase options on securities that are listed on securities
exchanges or traded over the counter. The staff of the SEC considers over the
counter options and assets used to cover such options generally illiquid. In
purchasing a put option, the Fund will seek to benefit from a decline in the
market price of the underlying security, while in purchasing a call option, the
Fund will seek to benefit from an increase in the market price of the underlying
security. If an option purchased is not sold or exercised when it has remaining
value, or if the market price of the underlying security remains equal to or
greater than the exercise price, in the case of a put, or remains equal to or
below the exercise price, in the case of a call, during the life of the option,
the Fund will lose its investment in the option. For the purchase of an option
to be profitable, the market price of the underlying security must decline
sufficiently below the exercise price, in the case of a put, and must increase
sufficiently above the exercise price, in the case of a call, to cover the
premium and transaction costs. Because premiums paid by the Fund on options are
small in relation to the market value of the investments underlying the options,
buying options can result in large amounts of leverage. The leverage offered by
trading in options could cause the Fund's net asset value to be subject to more
frequent and wider fluctuation than would be the case if the Fund did not invest
in options.
Securities Index Futures Contracts. The Fund may purchase and sell indexed
financial futures contracts. An index futures contract is an agreement to take
or make delivery of an amount of cash equal to the difference between the value
of the index at the beginning and at the end of the contract period. Successful
use of index futures will be subject to the Investment Manager's ability to
predict correctly movements in the direction of the relevant debt market. No
assurance can be given that the Investment Manager's judgment in this respect
will be correct.
B-2
<PAGE>
The Fund may sell indexed financial futures contracts in anticipation of or
during a market decline to attempt to offset the decrease in market value of
equity securities in its portfolio that might otherwise result. When the Fund
is not fully invested in high yield securities and anticipates a significant
market advance, it may purchase index futures in order to gain rapid market
exposure that may in part or entirely offset increases in the cost of securities
that it intends to purchase. In a substantial majority of these transactions,
the Fund will purchase such securities upon termination of a futures position,
but, under unusual market conditions, a futures position may be terminated
without the corresponding purchase of debt securities.
B-3
<PAGE>
Morgan Stanley Dean Witter High Yield Fund, Inc.
<PAGE>
PART C -- OTHER INFORMATION
<TABLE>
<CAPTION>
Item 24. Financial Statements and Exhibits
<S> <C>
(1) Financial Statements
-- Report of Independent Accountants
-- Included in Part A: Financial Highlights and Financial
Statements incorporated by reference
Statements, schedules and historical information other than
those listed above have been omitted since they are either not
applicable or not required or the required information is shown
in the financial statements or notes thereto.
(2) Exhibits
(a) -- Amended and Restated Articles of Incorporation, as
amended*
(b) -- Amended and Restated By-Laws*
(c) -- Not applicable
(d) (1) -- Specimen certificate for Common Stock, par value
$.01 per share*
(2) -- Form of Subscription Certificate and Instructions
(3) -- Form of Notice of Guaranteed Delivery
(4) -- Form of DTC/Nominee Over-Subscription Exercise Form
(5) -- Subscription Agent Agreement, dated August 23, 1999,
between the Registrant and American Stock Transfer
and Trust Company
(6) -- Information Agent Agreement, dated August 23, 1999,
between the Registrant and Shareholder
Communications Corp.
(e) -- Dividend Reinvestment and Cash Purchase Plan,
adopted by the Fund, administered by American Stock
Transfer & Trust Company as plan agent*
(f) -- Not applicable
(g) -- Investment Advisory and Management Agreement, dated
as of March 13, 1997, between the Fund and the
Investment Manager*
(h) -- Not applicable
(i) -- Not applicable
(j) (1) -- Domestic Custody Agreement, dated as of November 30,
1993, between the Fund and United States Trust
Company of New York (succeeded to by The Chase
Manhattan Bank)*
(2) -- International Custody Agreement, dated as of
November 22, 1993, between the Fund and Morgan
Stanley Trust Company (succeeded to by The Chase
Manhattan Bank)*
(k) (1) -- Agreement for Stock Transfer Services, dated as of
November 22, 1993, between the Fund and American
Stock Transfer & Trust Company*
(2) -- Fund Administration Agreement, dated November 22,
1993, between the Fund and United States Trust
Company of New York (succeeded to by The Chase
Manhattan Bank)*
(l) (1) -- Opinion and consent of Rogers & Wells LLP
(2) -- Opinion and consent of Piper & Marbury L.L.P.
</TABLE>
C-1
<PAGE>
(m) -- Not applicable
(n) -- Consent of PricewaterhouseCoopers LLP
(o) -- Not applicable
(p) -- Investment Letter, dated November 17, 1993, from the
Investment Manager to the Fund*
(q) -- Not applicable
(r) -- Not applicable
______________
* Previously filed as an Exhibit to the Registrant's Registration Statement
(File No. 333-82863).
Item 25. Marketing Arrangements
See Exhibit 2(h) to this Registration Statement.
Item 26. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses to be incurred in
connection with the offering described in this Registration Statement.
<TABLE>
<S> <C>
SEC Registration fees................................................................ $ 16,136
Printing (other than stock certificates)............................................. 50,000
Auditing and accounting fees......................................................... 20,000
Legal fees and expenses.............................................................. 100,000
NASD fee............................................................................. 6,304
New York Stock Exchange listing fees................................................. 1,500
Subscription Agent fees and expenses................................................. 25,500
Information Agent fees and expenses.................................................. 130,000
Miscellaneous........................................................................ 10,560
Total........................................................................ $360,000
========
</TABLE>
Item 27. Persons Controlled by or Under Common Control with Registrant
Not applicable
Item 28. Number of Holders of Securities
As of the effective date of the Registration Statement:
C-2
<PAGE>
<TABLE>
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
Common Stock, $.01 par value.................... 573
</TABLE>
Item 29. Indemnification
Section 2-418 of the General Corporation Law of the State of Maryland,
Article SEVENTH of the Fund's Articles of Incorporation, Article VII of the
Fund's By-Laws and the Investment Advisory and Management Agreement each provide
for indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers and controlling persons of the Fund, pursuant to the foregoing
provisions or otherwise, the Fund has been advised that in the opinion of the
Securities and Exchange Commission (the "SEC") such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Fund of expenses incurred or paid by
a director, officer or controlling person of the Fund in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the Fund
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
Item 30. Business and Other Connections of Investment Manager
The description of the business of Morgan Stanley Dean Witter Investment
Management Inc. is set forth under the caption "Management of the Fund" in the
Prospectus forming part of this Registration Statement. The information as to
the directors and officers of Morgan Stanley Dean Witter Investment Management
Inc. set forth in Morgan Stanley Dean Witter Investment Management Inc.'s Form
ADV filed with the SEC on December 15, 1981 (File No. 801-15757) and as amended
through the date hereof is incorporated herein by reference.
Item 31. Location of Accounts and Records
Morgan Stanley Dean Witter High Yield Fund, Inc.
c/o Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
(Fund's Articles of Incorporation and By-Laws)
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
(with respect to its services as Investment Manager)
The Chase Manhattan Bank
73 Tremont Street
Boston, Massachusetts 02108
(with respect to its services as Administrator)
The Chase Manhattan Bank
3 Chase Metrotech Center
Brooklyn, New York 11245
(with respect to its services as Custodian for the Fund's U.S. assets)
The Chase Manhattan Bank
C-3
<PAGE>
3 Chase Metrotech Center
Brooklyn, New York 11245
(with respect to its services as Custodian for the Fund's foreign assets)
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
(with respect to its services as Transfer Agent)
Item 32. Management Services
Not applicable
Item 33. Undertakings
(a) The Fund undertakes to suspend offering its shares until it amends its
Prospectus contained herein if (1) subsequent to the effective date of its
Registration Statement, the net asset value per share declines more than 10
percent from its net asset value per share as of the effective date of this
Registration Statement or (2) the net asset value increases to an amount greater
than its net proceeds as stated in the Prospectus.
(b) The Fund hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
Rule 497 (h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, the Registrant has duly caused
this Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on the 23rd day of August, 1999.
MORGAN STANLEY DEAN WITTER
HIGH YIELD FUND, INC.
By: /s/ MICHAEL F. KLEIN
-----------------------------------
Michael F. Klein
President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
* Director and Chairman
- ---------------------------------------
Barton M. Biggs
/s/ MICHAEL F. KLEIN Director and President August 23, 1999
- --------------------------------------- (Principal Executive Officer)
Michael F. Klein
* Director
- ---------------------------------------
Peter J. Chase
* Director
- ---------------------------------------
John W. Croghan
* Director
- ---------------------------------------
David B. Gill
* Director
- ---------------------------------------
Graham E. Jones
* Director
- ---------------------------------------
John A. Levin
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
* Director
- ---------------------------------------
William G. Morton, Jr.
* Assistant Treasurer
- --------------------------------------- (Principal Financial Officer and
Belinda Brady Principal Accounting Officer)
* By /s/ MICHAEL F. KLEIN August 23, 1999
- ---------------------------------------
Michael F. Klein
Attorney-in-fact
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Description of Exhibit Numbered Page
------ ---------------------- -------------
<S> <C> <C>
(2) (a) - Amended and Restated Articles of Incorporation, as amended*
(2) (b) - Amended and Restated By-Laws*
(2) (c) - Not applicable
(2) (d) (1) - Specimen certificate for Common Stock, par value $.01 per share*
(2) - Form of Subscription Certificate and Instructions
(3) - Form of Notice of Guaranteed Delivery
(4) - Form of DTC/Nominee Over-Subscription Exercise Form
(5) - Subscription Agent Agreement, dated August 23, 1999, between the Registrant
and American Stock Transfer & Trust Company
(6) - Information Agent Agreement, dated August 23, 1999, between the Registrant
and Shareholder Communications Corp.
(2) (e) - Dividend Reinvestment and Cash Purchase Plan, adopted by the Fund,
administered by American Stock Transfer & Trust Company as plan agent*
(2) (f) - Not applicable
(2) (g) - Investment Advisory and Management Agreement, dated as of March 13, 1997,
between the Fund and the Investment Manager*
(2) (h) - Not applicable
(2) (i) - Not applicable
(2) (j) (1) - Domestic Custody Agreement, dated as of November 30, 1993, between the Fund
and United States Trust Company of New York (succeeded to by The Chase
Manhattan Bank)*
(2) - International Custody Agreement, dated as of November 22, 1993, between the
Fund and Morgan Stanley Trust Company (succeeded to by The Chase Manhattan
Bank)*
(2) (k) (1) - Agreement for Stock Transfer Services, dated as of November 22, 1993, between
the Fund and American Stock Transfer & Trust Company*
(2) - Fund Administration Agreement, dated November 22, 1993, between the Fund and
United States Trust Company of New York (succeeded to by The Chase Manhattan
Bank)*
(2) (l) (1) - Opinion and consent of Rogers & Wells LLP
(2) - Opinion and consent of Piper & Marbury L.L.P.
(2) (m) - Not applicable
(2) (n) - Consent of PricewaterhouseCoopers LLP
(2) (o) - Not applicable
(2) (p) - Investment Letter, dated November 17, 1993, from the Investment Manager to
the Fund*
(2) (q) - Not applicable
(2) (r) - Not applicable
</TABLE>
_________________
* Previously filed as an Exhibit to the Registrant's Registration Statement
(File No. 333-82863).
<PAGE>
Exhibit (2)(d)(2)
Control No._________ Maximum Primary Subscription Shares Available_________
THE OFFER EXPIRES AT 5:00 P.M., NEW YORK CITY TIME, ON SEPTEMBER 24, 1999*
MORGAN STANLEY DEAN WITTER HIGH YIELD FUND, INC.
(formerly The Morgan Stanley High Yield Fund, Inc.)
RIGHTS FOR COMMON STOCK
Subscription Certificate
Morgan Stanley Dean Witter High Yield Fund, Inc. (the "Fund") issued to its
stockholders of record ("Record Date Stockholders"), as of the close of business
on August 23, 1999 (the "Record Date"), non-transferable rights ("Rights")
entitling the holders thereof to subscribe for shares ("Shares") of the Fund's
common stock, par value $0.01 per share (the "Common Stock") at a rate of one
Share for every three Rights held (1-for-3). The terms and conditions of the
rights offer (the "Offer") are set forth in the Fund's August 23, 1999
Prospectus (the "Prospectus") incorporated herein by reference. Capitalized
terms not defined herein have the meanings attributed to them in the Prospectus.
The owner of this Subscription Certificate is entitled to the number of Rights
shown on this Subscription Certificate and is entitled to subscribe for the
number of Shares shown on this Subscription Certificate. Record Date
Stockholders issued fewer than three Rights are entitled to subscribe for one
Share pursuant to the Primary Subscription. Record Date Stockholders who have
fully exercised their Rights pursuant to the Primary Subscription (other than
those Rights which cannot be exercised because they represent the right to
subscribe for less than one Share) are entitled to subscribe for additional
Shares pursuant to the Over-Subscription Privilege, subject to certain
limitations and allotment, as described in the Prospectus. If sufficient Shares
remain after completion of the Primary Subscription, all over-subscriptions will
be honored in full. If sufficient Shares are not available after completion of
the Primary Subscription to honor all over-subscriptions, the Fund may, at the
discretion of the Board of Directors, issue shares of Common Stock up to an
additional 25% of the Shares available pursuant to the Offer in order to cover
such over-subscription requests. The Fund will not offer or sell in connection
with the Offer any Shares which are not subscribed for pursuant to the Primary
Subscription or the Over-Subscription Privilege.
SAMPLE CALCULATION
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Primary Subscription Entitlement (1-For-3)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
No. of shares owned on the Record Date 300 divided by 3 = 100 new shares
-------------------- ---------- ---------------
(equal no. of Rights issued) (ignore fractions)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THESE RIGHTS ARE NON-TRANSFERABLE
-----------------
METHOD OF EXERCISE OF RIGHTS
-----------------
IN ORDER TO EXERCISE YOUR RIGHTS, YOU MUST EITHER (i) COMPLETE AND SIGN THIS
SUBSCRIPTION CERTIFICATE ON THE BACK AND RETURN IT TOGETHER WITH PAYMENT OF THE
SUBSCRIPTION PRICE FOR THE SHARES SUBSCRIBED, OR (ii) PRESENT A PROPERLY
COMPLETED NOTICE OF GUARANTEED DELIVERY, IN EITHER CASE TO THE SUBSCRIPTION
AGENT, AMERICAN STOCK TRANSFER & TRUST COMPANY, BEFORE 5:00 P.M., NEW YORK CITY
TIME, ON SEPTEMBER 24, 1999 (THE "EXPIRATION DATE")*.
Full payment of the Estimated Subscription Price per share for all shares
subscribed for pursuant to both the Primary Subscription and the Over-
Subscription Privilege must accompany this Subscription Certificate and must be
made payable in United States dollars by money order or check drawn on a bank
located in the United States payable to Morgan Stanley Dean Witter High Yield
Fund, Inc. Because uncertified personal checks may take at least five business
days to clear, we recommend you pay, or arrange for payment, by means of
certified or cashier's check or money order. Alternatively, if a Notice of
Guaranteed Delivery is used, a properly completed and executed Subscription
Certificate, and full payment, as described in such notice, must be received by
the Subscription Agent no later than the close of business on the third business
day (September 29, 1999*) after the Expiration Date (September 24, 1999*). For
additional information, see the Prospectus.
Certificates for the Shares acquired pursuant to the Primary Subscription will
be mailed promptly after the expiration of the Offer and full payment for the
Shares subscribed for has been received and cleared. Certificates representing
Shares acquired pursuant to the Over-Subscription Privilege will be mailed as
soon as practicable after full payment has been received and cleared and all
allocations have been effected. Any excess payment to be refunded by the Fund
to a stockholder will be mailed by the Subscription Agent to such stockholder as
promptly as possible.
Account #:_____________
Control #:_____________
<PAGE>
<TABLE>
<S> <C> <C>
BY FIRST CLASS MAIL: BY FACSIMILE: BY HAND OR OVERNIGHT COURIER:
American Stock Transfer & Trust Company (TELECOPIES) American Stock Transfer & Trust Company
40 Wall Street, 46th Floor (718) 234-5001 40 Wall Street, 46th Floor
New York, New York 10005 Confirm by telephone to: New York, New York 10005
U.S.A. (800) 937-5449 U.S.A.
</TABLE>
Delivery to an address other than one of the addresses listed above will not
constitute valid delivery.
SUBSCRIPTION PRICE
The Estimated Subscription Price per Share is $13.25. The Subscription Price
will be determined on September 24, 1999, the Expiration Date of the Offer. The
Subscription Price will be 95% of the average of the last reported sales price
per share of the Fund's Common Stock on the NYSE for the five trading days
ending with the Expiration Date. The Subscription Price per Share may be higher
or lower than the Estimated Subscription Price depending on the changes in the
market price of the Common Stock.
<TABLE>
<CAPTION>
PLEASE PRINT ALL INFORMATION CLEARLY AND LEGIBLY
- ------------------------------------------------------------------------------------------------------------------------------------
SECTION 1: OFFERING INSTRUCTIONS (check the appropriate boxes)
---------------------
<S> <C> <C> <C>
IF YOU WISH TO SUBSCRIBE FOR YOUR FULL ENTITLEMENT:
[_] I apply for ALL of my entitlement of new Shares pursuant to the Primary Subscription. ____________x $13.25 = $________
(no. of new shares)
[_] I apply for new Shares pursuant to the Over-Subscription Privilege.** __________________x $13.25 = $________
(no. of additional shares)
IF YOU DO NOT WISH TO APPLY FOR YOUR FULL ENTITLEMENT:
[_] I apply for ________________________________________________________________________________________x $13.25 = $________
(no. of new shares)
Amount of payment enclosed $___________________
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
SECTION 2: SUBSCRIPTION AUTHORIZATION
--------------------------
I acknowledge that I have received the Prospectus for this Offer and I
hereby irrevocably subscribe for the number of Shares indicated above on the
terms and conditions specified in the Prospectus relating to the Primary
Subscription and the Over-Subscription Privilege. I understand and agree that I
will be obligated to pay any additional amount to the Fund if the Subscription
Price as determined on the Expiration Date is in excess of the $13.25
Estimated Subscription Price per Share.
I hereby agree that if I fail to pay in full for the Shares for which I
have subscribed, the Fund may exercise any of the remedies set forth in the
Prospectus.
Signature of subscriber(s) ______________________________________________
______________________________________________
______________________________________________
Telephone (including area code) ( )____________________________________
If you wish to have your Shares and refund check (if any) delivered to an
address other than that listed on this Subscription Certificate you must have
your signature guaranteed by a member of the New York Stock Exchange or a bank
or trust company. Please provide the delivery address below and note if it is a
permanent change.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
SECTION 3: DESIGNATION OF BROKER-DEALER
-----------------------------
The following broker-dealer is hereby designated as having been instrumental in the exercise of the Rights hereby exercised:
FIRM:_________________________________________________________________________________________________________________________
REPRESENTATIVE NAME:__________________________________________________________________________________________________________
REPRESENTATIVE NUMBER:________________________________________________________________________________________________________
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
________________________________
* Unless the Offer is extended.
** You can only participate in the Over-Subscription Privilege if you have
subscribed for your full entitlement of new Shares pursuant to the Primary
Subscription.
Any questions regarding this Subscription Certificate and the Offer may be
directed to the Information Agent, Shareholder Communications Corp., toll-free
at (800) 603-1720.
--------------
<PAGE>
Exhibit (2)(d)(3)
NOTICE OF GUARANTEED DELIVERY FOR SHARES OF
COMMON STOCK OF MORGAN STANLEY DEAN WITTER HIGH YIELD FUND, INC.
SUBSCRIBED FOR PURSUANT TO THE PRIMARY SUBSCRIPTION
AND THE OVER-SUBSCRIPTION PRIVILEGE
Morgan Stanley Dean Witter High Yield Fund, Inc. Rights Offering
As set forth in the Fund's Prospectus dated August 23, 1999 (the
"Prospectus") under "The Offer Payment for Shares," this form or one
substantially equivalent hereto may be used as a means of effecting subscription
and payment for all Shares of Morgan Stanley Dean Witter High Yield Fund, Inc.
Common Stock subscribed for by exercise of Rights pursuant to the Primary
Subscription and the Over-Subscription Privilege. Such form may be delivered by
hand or sent by facsimile transmission, overnight courier or mail to the
Subscription Agent and must be received prior to 5:00 p.m., New York City time,
on September 24, 1999 (the "Expiration Date").* The terms and conditions of the
Offer set forth in the Prospectus are incorporated by reference herein.
Capitalized terms not defined herein have the meanings attributed to them in the
Prospectus.
The Subscription Agent is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
<TABLE>
<S> <C> <C>
BY FIRST CLASS MAIL: BY FACSIMILE: BY HAND OR OVERNIGHT COURIER:
American Stock Transfer & Trust Company (TELECOPIES) American Stock Transfer & Trust Company
40 Wall Street, 46/th/ Floor (718) 234-5001 40 Wall Street, 46/th/ Floor
New York, New York 10005 Confirm by telephone to: New York, New York 10005
U.S.A. (800) 937-5449 U.S.A.
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA A TELECOPY OR FACSIMILE NUMBER, OTHER THAN
AS SET FORTH ABOVE, DOES NOT CONSTITUTE A VALID DELIVERY.
The New York Stock Exchange member firm or bank or trust company which
completes this form must communicate the guarantee and the number of Shares
subscribed for under both the Primary Subscription and the Over-Subscription
Privilege to the Subscription Agent and must deliver this Notice of Guaranteed
Delivery prior to 5:00 p.m., New York City time, on the Expiration Date,*
guaranteeing delivery of (i) payment in full of the Estimated Subscription Price
for all subscribed Shares and (ii) a properly completed and executed
Subscription Certificate to the Subscription Agent. The Subscription
Certificate and full payment must then be delivered by the close of business on
the third business day (September 29, 1999*) after the Expiration Date
(September 24, 1999*) to the Subscription Agent. Failure to do so will result
in a forfeiture of the Rights.
(continued on other side)
*Unless extended by the Fund.
<PAGE>
GUARANTEE
The undersigned, a bank or trust company having an office or correspondent
in the United States, or a New York Stock Exchange member firm, hereby
guarantees delivery to the Subscription Agent of (a) by 5:00 p.m., New York City
time, on the third business day after the Expiration Date (i) a properly
completed and executed Subscription Certificate and (ii) payment of the full
Estimated Subscription Price for Shares subscribed for pursuant to the Primary
Subscription and, if applicable, the Over-Subscription Privilege, as such
subscription for Shares is indicated herein and in the Subscription Certificate
and (b) by no later than 5:00 p.m., New York City time, on October 20, 1999 (the
tenth business day after the Confirmation Date of October 6, 1999), unless the
Offer is extended, any additional amount required to be paid if the Subscription
Price as determined on the Expiration Date is in excess of the Estimated
Subscription Price.
<TABLE>
<S> <C> <C> <C>
1. Primary Subscription Number of Rights Number of Primary Payment to be made in
to be exercised Shares requested for connection with Primary
_________ Rights which you are Shares
guaranteeing delivery
of Rights and Payment
______________ Shares
(Rights (divided by) by 3 $ ____________________________
- ---------------------------------------------------------------------------------------------------------------------------------
2. Over-Subscription Number of Over- Payment to be made in
Subscription Shares connection with Over-
requested for which Subscription Shares
you are guaranteeing
payment
______________ Shares $ ____________________________
- ---------------------------------------------------------------------------------------------------------------------------------
3. Totals Total Number of
Rights to be Delivered $
_________ Rights ============================
Total payment
- ---------------------------------------------------------------------------------------------------------------------------------
Method of Delivery of Rights (circle one) A. Through The Depository Trust Company ("DTC")
B. Direct to the Subscription Agent
- --------------------------------------------------------------------- -------------------------------------------------------
Name of Firm Authorized Signature
- --------------------------------------------------------------------- -------------------------------------------------------
Address Title
- --------------------------------------------------------------------- -------------------------------------------------------
Zip Code Name (Please Type or Print)
- ---------------------------------------------------------------------
Name of Registered Holder (If Applicable)
- --------------------------------------------------------------------- -------------------------------------------------------
Telephone Number Date
</TABLE>
- ----------------------------
* IF THE RIGHTS ARE TO BE DELIVERED THROUGH DTC, CALL THE SUBSCRIPTION AGENT
TO OBTAIN A PROTECT IDENTIFICATION NUMBER, WHICH NEEDS TO BE COMMUNICATED
BY YOU TO DTC.
2
<PAGE>
Exhibit (2)(d)(4)
DTC PARTICIPANT OVER-SUBSCRIPTION EXERCISE FORM
NOMINEE HOLDER OVER-SUBSCRIPTION EXERCISE FORM
Morgan Stanley Dean Witter High Yield Fund, Inc.
Rights Offering For Common Stock
This form is to be used only by nominee holders or by the Depository Trust
Company ("DTC") participants to exercise the Over-Subscription Privilege in
respect of Rights with respect to which the Primary Subscription was exercised
in full and delivered through the facilities of a common depository or DTC. All
other exercises of Over-Subscription Privileges must be effected by the delivery
of the Subscription Certificate.
The terms and conditions of the Rights Offering are set forth in the Fund's
Prospectus dated August 23, 1999 (the "Prospectus") and are incorporated herein
by reference. Copies of the Prospectus are available upon request from the
Information Agent.
PLEASE COMPLETE ALL APPLICABLE INFORMATION
Void unless received by the Subscription Agent with payment in full or with
a properly completed Notice of Guaranteed Delivery before 5:00 p.m., New York
City time, on September 24, 1999 (the "Expiration Date"), unless extended by the
Fund.
<TABLE>
<S> <C> <C>
BY FIRST CLASS MAIL: BY FACSIMILE: BY HAND OR OVERNIGHT COURIER:
American Stock Transfer & Trust Company (TELECOPIES) American Stock Transfer & Trust Company
40 Wall Street, 46th Floor (718) 234-5001 40 Wall Street, 46th Floor
New York, New York 10005 Confirm by telephone to: New York, New York 10005
U.S.A. (800) 937-5449 U.S.A.
</TABLE>
1. The undersigned hereby certifies to the Subscription Agent that it is a
participant in ____________________________________________________________
[Name of Depository] (the "Depository") and that it has either (i) exercised the
Primary Subscription in respect of the Rights and delivered such exercised
Rights to the Subscription Agent by means of transfer to the Depository Account
of the Fund or (ii) delivered to the Subscription Agent a Notice of Guaranteed
Delivery in respect of the exercise of the Primary Subscription and will deliver
the Subscription Certificate called for in such Notice of Guaranteed Delivery to
the Subscription Agent.
2. The undersigned hereby exercises the Over-Subscription Privilege to
purchase, to the extent available, ______________________________ shares of
Common Stock and certifies to the Subscription Agent that such Over-Subscription
Privilege is being exercised for the account or accounts of persons (which may
include the undersigned) on whose behalf all Primary Subscription Rights have
been exercised.
(continued on other side)
<PAGE>
3. The undersigned understands that payment of the Estimated Subscription
Price of $13.25 per Share for each share of Common Stock subscribed for pursuant
to the Over-Subscription Privilege must be received by the Subscription Agent
before 5:00 p.m., New York City time, on the Expiration Date, unless a Notice of
Guaranteed Delivery is used, in which case, payment in full must be received by
the Subscription Agent not later than the close of business on the third
business day after the Expiration Date. The undersigned represents that such
payment, in the aggregate amount of $ ______________, either
(check appropriate box):
[_] has been or is being delivered to the Subscription Agent pursuant to the
Notice of Guaranteed Delivery referred to above
or
[_] is being delivered to the Subscription Agent herewith
or
[_] has been delivered separately to the Subscription Agent
<TABLE>
<S> <C>
- ------------------------------------------------------------ --------------------------------------------------------------
Primary Subscription Confirmation Number Name of Nominee Holder
- ------------------------------------------------------------ --------------------------------------------------------------
Depository Participant Number Address
Contact Name _______________________________________________ --------------------------------------------------------------
City State Zip Code
Phone Number _______________________________________________ By: __________________________________________________________
Dated: ________________________, 1999 Name: ________________________________________________________
Title: _______________________________________________________
</TABLE>
PLEASE ATTACH A BENEFICIAL OWNER LISTING CONTAINING THE RECORD DATE POSITION OF
RIGHTS OWNED, THE NUMBER OF PRIMARY SHARES SUBSCRIBED AND THE NUMBER OF OVER-
SUBSCRIPTION SHARES, IF APPLICABLE, REQUESTED BY EACH SUCH OWNER.
PLEASE NOTE: THIS FORM WILL NOT BE ACCEPTED AS VALID UNLESS THE FOLLOWING
INFORMATION IS PROVIDED FOR THE ALLOCATION OF OVER-SUBSCRIPTION SHARES.
The positions below pertain to those persons on whose behalf the Over-
Subscription Privilege is being exercised:
<TABLE>
<S> <C>
- ------------------------------------------------------------ Total number of Record Date Shares
- ------------------------------------------------------------ Total number of Primary Rights exercised
</TABLE>
<PAGE>
Exhibit (2)(d)(5)
SUBSCRIPTION AGENT AGREEMENT
----------------------------
This Subscription Agent Agreement (the "Agreement") is made as of the 23rd
day of August, 1999, by and between Morgan Stanley Dean Witter High Yield Fund,
Inc., a Maryland corporation (the "Fund"), and American Stock Transfer & Trust
Company, as subscription agent (the "Agent"). All terms not defined herein
shall have the meanings given in the prospectus (the "Prospectus") included in
the Registration Statement on Form N-2, File No. 333-82863, filed by the Fund
with the Securities and Exchange Commission (the "Commission") on July 14, 1999,
as amended by any amendment filed with respect thereto (collectively the
"Registration Statement").
RECITALS
--------
WHEREAS, the Fund has caused the Registration Statement to be filed with
the Commission relating to a proposed distribution by the Fund of non-
transferable rights (the "Rights") to purchase shares of the Fund's common
stock, par value $.01 per share ("Common Stock"), upon the exercise of such
Rights (the distribution of the Rights and the sale of shares of Common Stock
upon the exercise thereof as contemplated by the Registration Statement is
referred to herein as the "Offering");
WHEREAS, the Rights will be distributed on or about August 23, 1999 to
holders of record of shares of Common Stock (the "Record Date Stockholders") as
of the close of business on August 23, 1999 (the "Record Date") at a rate of one
Right for each share of Common Stock held on the Record Date;
WHEREAS, the Fund has authorized the issuance in connection with the
Offering of an aggregate of 2,960,000 shares (the "Shares") of Common Stock (the
"Offer");
WHEREAS, the "Subscription Price" is 95% of the average of the last
reported sales price per share of the Fund's Common Stock on the New York Stock
Exchange ("NYSE") for the five trading days ending on September 24, 1999, unless
the Fund extends the Offering as described in the Prospectus (the "Expiration
Date"). Record Date Stockholders will be entitled to subscribe to purchase at a
per share price one Share for each three Rights held (the "Primary
Subscription"), which right to subscribe for such Shares pursuant to the Primary
Subscription is not transferable;
WHEREAS, Record Date Stockholders will also be entitled to subscribe to
purchase any Shares that are not subscribed for in the Primary Subscription,
subject to proration by the Fund, if necessary (the "Over-Subscription
Privilege"), which right to subscribe for such Shares pursuant to the Over-
Subscription Privilege is not transferable;
WHEREAS, if sufficient shares are not available after completion of the
Primary Subscription to honor all over-subscription requests, the Fund may
determine after the expiration of the Offer to issue up to an additional 25% of
the shares available pursuant to the Offer in order to cover over-subscription
requests; and
WHEREAS, the Fund wishes the Agent to perform certain acts on behalf of the
Fund, and the Agent is willing to so act, in connection with the Offering as set
forth herein, all upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
agreements set forth herein, the parties agree as follows:
ARTICLE 1: APPOINTMENT OF AGENT
<PAGE>
1.1. The Fund hereby appoints the Agent to act as agent for the Fund in
accordance with the instructions set forth in this Agreement, and the Agent
hereby accepts such appointment and agrees to so act.
ARTICLE 2: ISSUANCE OF SECURITIES
2.1. The Fund has authorized the issuance of the Rights and, following
the Record Date and the effectiveness of the Registration Statement, promptly
will issue such Rights to the Record Date Stockholders as contemplated by the
Registration Statement. The Fund will promptly notify the Agent upon the
effectiveness of the Registration Statement. As transfer agent and registrar for
the shares of Common Stock, the Agent shall provide such assistance as the Fund
may require in order to effect the distribution of the Rights to Record Date
Stockholders, including assistance in determining the number of Rights to be
distributed to each such Record Date Stockholder and assistance in distributing
the Subscription Documents (as defined in Section 5.2 hereof) evidencing the
Rights and all other ancillary documents and issuance of the Shares.
2.2. The Fund has authorized the issuance of and will hold in reserve
the Shares, and upon the valid exercise of Rights, the Fund will issue Shares to
validly exercising Record Date Stockholders as set forth in the Prospectus.
ARTICLE 3: RIGHTS AND ISSUANCE OF
SUBSCRIPTION DOCUMENTS
3.1. Each set of Subscription Documents (as defined in Section 5.2
hereof) shall contain a certificate or other evidence of Rights, in the form
designated by the Fund ("Subscription Certificate") which shall be non-
transferable. The Agent shall, in its capacity as transfer agent and registrar
of the Fund, maintain a register of Subscription Certificates and the Record
Date Stockholders thereof. Each Subscription Certificate shall, subject to the
provisions thereof, entitle the Record Date Stockholder in whose name it is
recorded to the following:
(a) With respect to Record Date Stockholders only, the right to
subscribe for prior to the Expiration Date at the Subscription Price a number of
shares of Common Stock equal to one share of Common Stock for every three rights
held by each Record Date Stockholder on the Record Date, except that Record Date
Stockholders who receive less than three rights may purchase one share at the
Subscription Price; and
(b) With respect to Record Date Stockholders only, the right to
subscribe for additional shares of Common Stock, subject to the availability of
such shares and to the allotment of such shares as may be available among Record
Date Stockholders who exercise their Over-Subscription Privilege on the basis
specified in the Prospectus; provided, however, that each such Record Date
-------- -------
Stockholder has exercised all exercisable Rights held by such Record Date
Stockholder (other than those Rights which cannot be exercised because they
represent the right to acquire less than one Share).
ARTICLE 4: FRACTIONAL RIGHTS AND SHARES
4.1. The Fund shall not issue fractions of Rights nor shall the Agent
distribute Subscription Certificates which evidence fractional Rights. The
number of Rights issued to each Record Date Stockholder will be rounded down to
the nearest whole number. All questions as to the validity and eligibility of
any rounding of fractional Rights shall be determined by the Fund in its sole
discretion, and its determination shall be final and binding. The Fund shall
not issue fractional shares of Common Stock to exercising Record Date
Stockholders upon exercise of Rights.
2
<PAGE>
ARTICLE 5: FORM AND EXECUTION OF SUBSCRIPTION DOCUMENTS
5.1. Each Subscription Certificate shall evidence the Rights of the
Record Date Stockholder therein named to purchase Common Stock upon the terms
and conditions set forth in the Subscription Documents.
5.2. Upon the written advice of the Fund, signed by any of its duly
authorized officers, as to the Record Date, the Agent shall, from a list of the
Fund's stockholders as of the Record Date to be prepared by the Agent in its
capacity as transfer agent of the Fund, prepare and record Subscription
Certificates in the names of the Record Date Stockholders, setting forth the
number of Rights to subscribe for the Fund's Common Stock calculated on the
basis of one Right for each share of Common Stock recorded on the books in the
name of each such Record Date Stockholder. Each Subscription Certificate shall
be dated as of the Record Date and shall be executed manually or by facsimile
signature of a duly authorized officer of the Agent. Upon the written advice,
signed as aforesaid, as to the effective date of the Registration Statement, the
Agent shall promptly countersign and deliver the Subscription Certificate,
together with a copy of the Prospectus, instruction letter and any other
document as the Fund deems necessary or appropriate (collectively the
"Subscription Documents"), to all Record Date Stockholders with record addresses
in the United States (the term "United States" includes the states, the District
of Columbia, and the territories and possessions of the United States). No
Subscription Certificate shall be valid for any purpose unless so executed.
Delivery shall be by first class mail (without registration or insurance).
5.3. Subscription Certificates will not be mailed to Record Date
Stockholders having a registered address outside the United States, or to those
Record Date Stockholders having APO or FPO addresses ("Foreign Record Date
Stockholders"). The Agent will provide written notice of the Offer to Foreign
Record Date Stockholders as provided for in the Prospectus. The Rights to which
such Subscription Certificates relate will be held by the Agent for such Foreign
Record Date Stockholders, accounts until instructions are received to exercise
the Rights. Upon request, the Agent will send a copy of the Prospectus to such
Foreign Record Date Stockholders.
ARTICLE 6: EXERCISE OF RIGHTS;
EXERCISE PRICE; EXPIRATION DATE
6.1. Each Record Date Stockholder may exercise some or all of the
Rights evidenced by the Subscription Certificate by delivering to the Agent, on
or prior to 5:00 P.M., New York City time, on the Expiration Date, properly
completed and executed Subscription Documents evidencing such Rights (with
signatures guaranteed, if required by Section 6.9 hereof, by a financial
institution (including commercial banks, savings and loan associations and
brokerage houses) that is a member of a recognized signature guarantee or
medallion program within the meaning of Rule 17AD-15 under the Securities
Exchange Act of 1934, as amended (each, an "Eligible Institution")), together
with payment of the estimated subscription price of $13.25 per share (based on
approximately 95% of the last reported sales price on the NYSE on August 20,
1999) ("Estimated Subscription Price") for each Share subscribed for pursuant to
the Primary Subscription and the Over-Subscription Privilege, as the case may
be.
6.2. In the case of Record Date Stockholders whose Rights are held of
record by Cede & Co. ("Cede"), as nominee for The Depository Trust Company
("DTC"), the exercise of Rights pursuant to the Primary Subscription may be
effected by instructing DTC to transfer Rights from the DTC account of such
Record Date Stockholder to the DTC account of the Agent, together with payment
of the Estimated Subscription Price for each Share subscribed for pursuant to
the Primary Subscription and the Over-Subscription Privilege. Alternatively, a
Record Date Stockholder may exercise the Rights evidenced by the Subscription
Certificate by effecting compliance with the procedures for guaranteed delivery
set forth in Section 6.3 below.
3
<PAGE>
6.3. If a Record Date Stockholder wishes to exercise Rights, but time
will not permit such Record Date Stockholder to cause the Subscription
Certificate evidencing such Rights to reach the Agent on or prior to the
Expiration Date, such Rights may nevertheless be exercised if all of the
following conditions are met:
(a) the Agent receives, on or prior to 5:00 P.M., New York City time,
on the Expiration Date, a guarantee notice (a "Notice of Guaranteed Delivery")
by facsimile (telecopy) or otherwise from a bank, a trust company or a NYSE
member guaranteeing the delivery of (i) payment of the Estimated Subscription
Price for the Shares subscribed for pursuant to the Primary Subscription and any
additional Shares subscribed for pursuant to the Over-Subscription Privilege,
and (ii) a properly completed and executed Subscription Certificate; and
(b) the properly completed and executed Subscription Certificate(s)
evidencing the Rights being exercised, with any required signatures guaranteed,
and full payment for the Shares are received by the Agent, or such Rights are
transferred into the DTC account of the Agent, at or prior to the close of
business New York City time on the third Business Day after the Expiration Date.
The Notice of Guaranteed Delivery may be delivered to the Agent in the same
manner as Subscription Certificates at the addresses set forth above, or may be
transmitted to the Agent by telegram or facsimile transmission (facsimile: (718)
236-5001).
6.4. The Rights shall expire at 5:00 p.m., New York City time, on the
Expiration Date and thereafter may not be exercised.
6.5. If an exercising Record Date Stockholder has not indicated the
number of Rights being exercised, or if the Estimated Subscription Price payment
forwarded by such Record Date Stockholder to the Agent is not sufficient to
purchase the number of shares subscribed for, the Record Date Stockholder will
be deemed to have exercised, pursuant to the Primary Subscription, the maximum
number of whole Rights which may be exercised for the Estimated Subscription
Price delivered to the Agent and, to the extent that the Estimated Subscription
Price payment delivered by such Record Date Stockholder exceeds the Estimated
Subscription Price multiplied by the maximum number of whole Rights which may be
exercised (such excess being the "Estimated Subscription Price Excess"), the
Record Date Stockholder will have been deemed to exercise its Over-Subscription
Privilege to purchase, to the extent available, that number of whole shares of
Common Stock equal to the quotient obtained by dividing the Estimated
Subscription Price Excess by the Estimated Subscription Price, up to the maximum
number of shares purchasable by such Record Date Stockholder. The Agent, as soon
as practicable after the exercise of the Rights, shall mail to such Record Date
Stockholders any portion of the Estimated Subscription Price Excess not applied
to the purchase of Common Stock pursuant to the Over-Subscription Privilege,
without interest or deduction.
6.6. The Agent shall hold all proceeds of the Offering in a segregated
interest bearing bank account (the "Bank Account") (the interest of which shall
be paid to the Fund). The Agent shall and is hereby directed to withdraw from
the Bank Account in which the proceeds of the Offering have been held and pay
to, credit to the account of, or otherwise transfer to, the Fund all such
proceeds (including all interest earned thereon), as promptly as practicable,
after the Expiration Date. At the request of the Fund, any portion of the Shares
shall be issued and the corresponding proceeds shall be remitted to the Fund.
Proceeds held in respect of excess payments over the Subscription Price made by
Record Date Shareholders exercising Rights shall be segregated in a separate
bank account from other proceeds of the Offering and refunded to Record Date
Shareholders entitled to such a refund as promptly as possible after the
Expiration Date.
4
<PAGE>
6.7. The Agent is authorized to accept only Subscription Certificates
(other than Subscription Certificates delivered in accordance with the procedure
for guaranteed delivery set forth in Section 6.3, or transfers of Rights to its
account at DTC), received prior to 5:00 p.m., New York City time, on the
Expiration Date.
6.8. Once a Record Date Stockholder has exercised a Right, such
exercise may not be revoked.
6.9. If a Record Date Stockholder requests that the certificate
representing the Common Stock to be issued in a name other than the name of the
Record Date Stockholder or such certificate is to be sent to an address other
than the address shown on such Record Date Stockholder's Subscription
Certificate, the signatures on such Subscription Certificate must be guaranteed
by an Eligible Institution.
ARTICLE 7: VALIDITY OF SUBSCRIPTIONS
7.1. Irregular subscriptions and improperly executed Subscription
Documents not otherwise covered by specific instructions herein shall be
submitted to an appropriate officer of the Fund and handled in accordance with
his or her instructions. Such instructions will be documented by the Agent
indicating the instruction officer and the date thereof.
ARTICLE 8: OVERSUBSCRIPTION; REFUND OF EXCESS PAYMENT
8.1. General. To the extent Record Date Stockholders do not exercise
-------
all of the Rights issued to them pursuant to the Primary Subscription, any
Shares represented by such Rights will be offered by means of the Over-
Subscription Privilege to the Record Date Stockholders who have exercised all of
the Rights issued to them pursuant to the Primary Subscription and who wish to
acquire more than the number of Shares to which they are entitled. Only Record
Date Stockholders who exercise all the Rights issued to them pursuant to the
Primary Subscription (other than those rights which cannot be exercised because
they represent the right to acquire less than on Share) may indicate, on the
Subscription Certificate that they submit with respect to the exercise of the
Rights issued to them, how many Shares they desire to purchase pursuant to the
Over-Subscription Privilege. If sufficient Shares remain after completion of the
Primary Subscription, all over-subscription requests will be honored in full. If
sufficient Shares are not available to honor all over-subscription requests, the
Fund may determine after the expiration of the Offer, in the discretion of the
Board of Directors, to issue up to an additional 25% of the shares available
pursuant to the Offer in order to cover the over-subscription requests.
Regardless of whether the Fund issues such additional shares, and to the extent
shares are not available to honor all over-subscription requests, the available
shares will be allocated pro rata among Record Date Stockholders who exercise
the Over-Subscription Privilege in proportion to the number of shares owned by
such stockholders on the Record Date; provided, however, that if such pro rata
-------- -------
allocation results in any Record Date Stockholder being allocated a greater
number of shares than such Record Date Stockholder subscribed for pursuant to
the exercise of such Record Date Stockholder's Over-Subscription Privilege, then
such Record Date Stockholder will be allocated only such number of shares as
such Record Date Stockholder subscribed for and the remaining shares will be
allocated among all other Record Date Stockholders exercising the Over-
Subscription Privilege.
8.2. As soon as practicable after the Expiration Date and the
allocation of shares subscribed for pursuant to the Over-Subscription Privilege,
the Agent shall refund to each Record Date Stockholder any amount paid by such
Record Date Stockholder and not applied toward the purchase of Shares pursuant
to such Record Date Stockholder's exercise pursuant to the Primary Subscription
and its Over-Subscription Privilege.
ARTICLE 9: DELIVERY OF STOCK CERTIFICATES
5
<PAGE>
9.1. As soon as practicable after the Expiration Date, the Agent shall
deliver to each Record Date Shareholder exercising Rights certificates
representing the shares of Common Stock purchased pursuant to the Primary
Subscription and the Over-Subscription Privilege, if any.
ARTICLE 10: REPORTS
10.1. The Agent shall notify both the Fund and its designated
representatives by telephone as requested during the period commencing with the
mailing of Subscription Documents and ending on the Expiration Date (and in the
case of guaranteed deliveries pursuant to Section 6.3 the period ending on the
third Business Day after the Expiration Date), which notice shall thereafter be
confirmed in writing, of (i) the number of Rights exercised on the day of such
request, (ii) the number of Shares subscribed for pursuant to the Primary
Subscription and the Over-Subscription Privilege, if any, and the number of such
Rights for which payment has been received, (iii) the number of Rights subject
to guaranteed delivery pursuant to Section 6.3 on such day, (iv) the number of
Rights for which defective exercises have been received on such day and (v)
cumulative totals derived from the information set forth in clauses (i) through
(iv) above. At or before 6:00 p.m., New York City time, on the Expiration Date,
the Agent shall certify in writing to the Fund the cumulative totals through the
Expiration Date derived from the information set forth in clauses (i) through
(iv) above. The Agent shall also maintain and update a listing of Record Date
Stockholders who have fully or partially exercised their Rights and Record Date
Stockholders who have not exercised their Rights. The Agent shall provide the
Fund or its designated representatives with the information compiled pursuant to
this Section 10.1 as any of them shall request. The Agent hereby represents,
warrants and agrees that the information contained in each notification referred
to in this Section 10.1 shall be accurate in all material respects.
10.2 On a date within eight Business Days following the Expiration Date
(the "Confirmation Date"), the Agent will send to each Record Date Stockholder
exercising Rights (or, if shares are held by Cede or any other depository or
nominee, to Cede or such other depository or nominee) a confirmation showing (i)
the number of Shares purchased pursuant to the Primary Subscription, (ii) the
number of Shares, if any, acquired pursuant to the Over-Subscription Privilege,
(iii) the Subscription Price per Share and total purchase price of the shares,
and (iv) any additional amount payable by such Record Date Stockholder to the
Fund or any excess to be refunded by the Fund to such Record Date Stockholder,
in each case based on the Subscription Price.
ARTICLE 11: LOSS OR MUTILATION
11.1. Upon receipt by the Fund and the Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a
Subscription Certificate, and, in case of loss, theft or destruction, of
indemnity and/or security satisfactory to them, which may be in the form of an
open penalty bond, and reimbursement to the Fund and the Agent of all reasonable
expenses incidental thereto, and upon surrender and cancellation of the
Subscription Certificate if mutilated, the Fund will make and deliver a new
Subscription Certificate of like tenor to the Agent for delivery to the
registered owner in lieu of the Subscription Certificate so lost, stolen,
destroyed or mutilated. If required by the Fund or the Agent an indemnity bond
must be sufficient in the judgment of both to protect the Fund, the Agent or any
agent thereof from any loss which any of them may suffer if a Subscription
Certificate is replaced.
ARTICLE 12: COMPENSATION FOR SERVICES
12.1. The Fund agrees to pay to the Agent a fee in the amount of Twenty
Five Thousand dollars ($25,000) as compensation for its services in acting as
Agent, plus postage fees incurred in the performance of Agent's duties
hereunder.
6
<PAGE>
ARTICLE 13: INSTRUCTIONS AND INDEMNIFICATION
13.1. The Agent undertakes the duties and obligations imposed by this
Agreement upon the following terms and conditions:
(a) Whenever in the performance of its duties under this Agreement
the Agent shall deem it necessary or desirable that any fact or matter be proved
or established, prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof is herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by the Chairman of the Board or President or a Vice President
or the Secretary or Assistant Secretary or the Treasurer of the Fund delivered
to the Agent, and such certificate shall be full authorization to the Agent for
any action taken or suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
(b) The Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
officer or assistant officer of the Fund and to apply to any such officer of the
Fund for advice or instructions in connection with its duties, and subject to
the other requirements of this agreement which the Agent reasonably believes to
be genuine and shall set forth above, shall be indemnified and not be liable for
any delays, errors or loss of data occurring by reason of circumstances beyond
the Agent's control.
(c) The Fund also agrees to indemnify and hold the Agent harmless
against any losses, claims, actions, damages, liabilities, costs or expenses
(including reasonable fees and disbursements of legal counsel) (collectively,
"Claims") that the Agent may incur or become subject to, arising from or out of
any claim or liability resulting from actions taken as Agent pursuant to this
Agreement; provided, however, that such covenant and agreement does not extend
-------- -------
to, and the Agent shall not be indemnified or held harmless with respect to,
such Claims incurred or suffered by the Agent as a result, or arising out, of
the Agent's negligence, misconduct, bad faith or breach of this Agreement. In
connection therewith, and without limiting any other provision in this Section
13.1: (i) in no case shall the Fund be liable with respect to any Claim against
the Agent unless the Agent shall have notified the Fund in writing of the
assertion of a Claim against it promptly after the Agent shall have notice of a
Claim or shall have been served with the summons or other legal process giving
information as to the nature and basis of the Claim; (ii) the Fund shall be
entitled to control the defense of any suit brought to enforce any such Claim;
and (iii) the Agent agrees not to settle or compromise any Claim or threatened
litigation or proceeding without providing the Fund adequate notice of any such
settlement or compromise and, without the prior written consent of the Fund. In
no event shall the Fund be liable for the fees and expenses of any additional
counsel that the Agent may retain.
(d) The Agent shall be protected and shall incur no liability for or
in respect of any action taken, suffered or omitted by it without negligence and
in good faith in connection with its administration of this Agreement in
reliance upon any Subscription Certificate, or written power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement or other paper or document reasonably believed by it to be genuine and
to be signed, executed and, where necessary, verified or acknowledged by the
proper person or persons.
ARTICLE 14: INTERPRETATION
14.1. All questions as to the timeliness, validity, form and
eligibility of any exercise of Rights will be determined by the Fund whose
determination shall be final and binding. The Fund in its sole discretion may
waive any defect or irregularity, permit a defect or irregularity to be
corrected within such time as it may determine or reject the purported exercise
of any Right. Subscriptions will not be deemed to have been received or accepted
until all irregularities have been waived or cured within such time as the
7
<PAGE>
Fund determines in its sole discretion. Neither the Fund nor the Agent shall be
under any duty to give notification of any defect or irregularity in connection
with the submission of Subscription Documents or incur any liability for failure
to give such notification.
ARTICLE 15: CANCELLATION AND DESTRUCTION OF
SUBSCRIPTION CERTIFICATES
15.1. All Subscription Certificates surrendered for the purpose of
exercise, exchange, or substitution shall be canceled by the Agent, and no
Subscription Certificates shall be issued in lieu thereof except as expressly
permitted by provisions of this Agreement. The Fund shall deliver to the Agent
for cancellation and retirement, and the Agent shall so cancel and return, any
other Subscription Certificate purchased or acquired by the Fund otherwise than
upon the exercise thereof. The Agent shall deliver all canceled Subscription
Certificates to the Fund, or shall, at the written request of the Fund, destroy
such canceled Subscription Certificates, and in such case shall deliver a
certificate of destruction thereof to the Fund.
ARTICLE 16: CHANGES IN SUBSCRIPTION CERTIFICATE
The Agent will notify the Fund if it shall have been advised by counsel
(who may be counsel for the Fund) that any changes or corrections in a
Subscription Certificate are appropriate to cure any ambiguity or to correct any
defective or inconsistent provision or clerical omission or mistake or manifest
error therein or herein contained, and which shall not be inconsistent with the
provison of the Subscription Certificate except insofar as any such change may
confer additional rights upon the Record Date Stockholders. After such
notification, the Agent and the Fund may thereafter agree, by supplemental
agreement or otherwise, to make any such changes or corrections in a
Subscription Certificate. The Agent is not required to receive the consent or
concurrence for any such changes or corrections in a Subscription Certificate of
the Record Date Stockholders in whose names Subscription Certificates are
registered.
ARTICLE 17: ASSIGNMENT AND DELEGATION
17.1. Neither this Agreement nor any rights or obligations hereunder
may be assigned or delegated by either party without the prior written consent
of the other party.
17.2. This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and assigns. Nothing in
this Agreement is intended or shall be construed to confer upon any other person
any right, remedy or claim or to impose upon any other person any duty,
liability or obligation.
17.3. Any corporation into which the Agent may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Agent shall be a party, or any
corporation succeeding to the corporate trust business of the Agent, shall be
the successor to the Agent hereunder without the execution or filing of any of
the parties hereto, provided that such corporation would be eligible for
appointment as a successor Agent. In case at the time such successor to the
Agent shall succeed to the agency created by this Agreement, any of the
Subscription Certificates shall have been countersigned but not delivered, any
such successor to the Agent may adopt the countersignature of the original Agent
and deliver such Subscription Certificates so countersigned, and in case at that
time the Subscription Certificates shall not have been countersigned, any
successor to the Agent may countersign such Subscription Certificates either in
the name of the predecessor Agent or in the name of the successor Agent, and in
all such cases such Subscription Certificates shall have the full force provided
in the Subscription Certificates and in this Agreement.
ARTICLE 18: NOTICES TO THE FUND, RECORD DATE STOCKHOLDERS AND AGENT.
8
<PAGE>
18.1. All notices and other communications provided for or permitted
hereunder shall be made by hand delivery, prepaid certified first-class mail
(return receipt requested), or telecopier (with written confirmation of
receipt):
(a) if to the Fund, to
Morgan Stanley Dean Witter High Yield Fund, Inc.
c/o Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
Attention: Stefanie V. Chang
Telephone: (212) 762-7236
Facsimile: (212) 762-7326
(b) if to the Agent, to:
American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, NY 10005
Attention: Exchange Department
Telephone: (718) 921-8200
Facsimile: (718) 234-5001
(c) if to a Record Date Stockholder, at the address shown on the
registry books of the Fund.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; when by certified mail,
two Business Days after being deposited in the mail, postage prepaid, if mailed
as aforesaid; and when receipt is acknowledged, if telecopied.
ARTICLE 19: MISCELLANEOUS PROVISIONS
19.1. Securities Act of 1933. Upon written advice to the Agent that
----------------------
the Commission shall have issued or threatened to have issued any order
preventing or suspending the use of the Prospectus, or if for any reason it
shall be necessary to amend or supplement the Prospectus in order to comply with
the Securities Act of 1933, as amended (the "Act"), the Agent shall cease acting
hereunder until receipt of written instructions from the Fund and such
assurances as it may reasonably request that it may comply with such instruction
without violation of the Act.
19.2. Governing Law. The validity, interpretation and performance
-------------
of this Agreement shall be governed by the laws of the State of New York,
without regard to its principles of conflicts of law. The parties agree that
with respect to all unresolved disputes arising out of this Agreement they shall
submit to the jurisdiction of any state or federal court sitting in New York,
New York.
19.3. Severability. The parties hereto agree that if any of the
------------
provisions contained in this Agreement shall be determined invalid, unlawful of
unenforceable to any extent, such provisions shall be deemed modified to the
extent necessary to render such provisions enforceable. The parties hereto
further agree that this Agreement shall be deemed severable, and the invalidity,
unlawfulness or enforceability of any term or provision thereof shall not affect
the validity, legality or enforceability of this Agreement or of any term or
provision hereof.
9
<PAGE>
19.4. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
19.5. Captions. The captions and descriptive headings herein are for
--------
the convenience of the parties only. They do not in any way modify,
amplify, alter or give full notice of the provisions hereof.
19.6. Facsimile Signatures. Any facsimile signature of any party
--------------------
hereto shall constitute a legal, valid and binding execution hereof by such
party.
19.7. Further Actions. Each party agrees to perform such further acts
---------------
and execute such further documents as are necessary to effect the purpose of
this Agreement.
[SIGNATURES ON FOLLOWING PAGE]
10
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals, as
of the day and year first above written.
MORGAN STANLEY DEAN WITTER HIGH YIELD
FUND, INC.
/s/ Michael F. Klein
By:__________________________________
Name: Michael F. Klein
Title: President
AMERICAN STOCK TRANSFER & TRUST COMPANY
/s/ Carolyn O'Neill
By:_________________________________
Name: Carolyn O'Neill
Title: Vice President
11
<PAGE>
Exhibit (2)(d)(6)
Shareholder
-----------
Communications Corporation
OFFERING COORDINATOR/INFORMATION AGENT AGREEMENT
------------------------------------------------
This document will constitute the agreement between MORGAN STANLEY DEAN
WITTER HIGH YIELD FUND, INC. ("the FUND"), with its principal executive offices
at 1221 Avenue of the Americas, New York, NY 10021 and SHAREHOLDER
COMMUNICATIONS CORPORATION ("SCC"), with its principal executive offices at 17
State Street, New York, NY 10005, relating to a rights offering (the "OFFER")of
the Fund.
The services to be provided by SCC will be as follows:
1. OFFERING COORDINATOR
--------------------
As the "offering coordinator", SCC will provide several services to
the FUND in connection with the OFFER, which will include without
limitation:
A. Coordinating and maintaining contact with those registered
broker/dealers who will directly solicit those shareholders who
are their customers and serve as the intermediary between the
issuer and each such broker/dealer.
B. Distributing relevant offering materials, including prospectuses
and solicitation agreements, to all reorganization departments of
such broker/dealers.
C. Offering input as to the feasibility of the OFFER's general
structure including pricing, market timing, transferability,
oversubscription allotments, offering extensions and solicitation
payouts.
D. Assisting in drafting all documents including letters to
shareholders, warning letters, exercise forms, solicitation
agreements and any broker related soliciting summaries for
marketing the OFFER.
E. Providing extensive reporting beginning one week prior to
expiration or any extensions thereafter, which will measure
shareholder participation and the OFFER's general progress. This
reporting will be based solely on previously established contacts
with the reorganization departments of participating
broker/dealers. Other gauges of interest will be provided on a
periodic basis throughout the duration of the OFFER.
II. INFORMATION AGENT
-----------------
A. INDIVIDUAL HOLDERS OF RECORD AND BENEFICIAL OWNERS
--------------------------------------------------
1. Target Group - SCC estimates that it will call between
------------
2,890 and 4,200 of the approximately 7,500 outstanding
beneficial and record shareholders of the FUND. The estimate
number is subject to adjustment and SCC will call more or
less shareholders if directed by the Fund or Morgan Stanley
Dean Witter Investment Management Inc., the FUND's
investment manager (the
<PAGE>
Shareholder
-----------
Communications Corporation
"INVESTMENT MANAGER"), and will call more shareholders if SCC determines
that such additional calls are necessary based on the response to the
OFFER.
2. Telephone Number Lookups. SCC will obtain the needed telephone
-----------------------
numbers from various types of telephone directories.
3. Initial Telephone Calls to Provide Information. SCC will begin
----------------------------------------------
telephone calls to the target group as soon as practical but no later
than 14 days after the commencement of the OFFER. Most calls will be
made during 10:00 A.M. to 9:00 P.M. on business days and only during
10:00 A.M. to 5:00 P.M. on Saturdays. No calls will be received by any
----------------------------
shareholder after 9:00 P.M. on any day, in any time zone, unless
------------------------------ ------- -----------------
specifically requested by the shareholder. SCC will maintain "800"
-----------------------------------------
lines for shareholders to call with questions about the OFFER. The "800"
lines will be staffed Monday through Friday between 9:00 a.m. and 9:00
p.m.
4. Re-mails. SCC will coordinate re-mails of offering materials to the
--------
shareholders who advise us that they have discarded or misplaced the
originally mailed materials
5. Reminder/Extension Mailing. SCC will coordinate any remainder mailing
--------------------------
at the request of the FUND or the INVESTMENT MANAGER. SCC will only mail
materials supplied by the FUND or the INVESTMENT MANAGER, or if drafted
by SCC or another party, approved by the FUND or the INVESTMENT MANAGER
in advance in writing.
B. BANK/BROKER SERVICING
---------------------
SCC will contact all banks, brokers and other nominee shareholders
("intermediaries") holding stock, as shown on appropriate portions of
the shareholder lists to ascertain quantities of offering materials
needed for forwarding to beneficial owners.
SCC will deliver offering materials by messenger to New York City based
intermediaries and by Federal Express or other means to non-New York
City based intermediaries. SCC will also follow-up by telephone with
each intermediary to ensure receipt of the offering materials and to
confirm timely re-mailing of materials to the beneficial owners.
SCC will maintain frequent contact with intermediaries to monitor
shareholder response and to ensure that all liaison procedures are
proceeding satisfactorily.
SCC will, daily or more frequently as practicable, report to the Fund as
to the response from intermediaries with respect to the OFFER.
<PAGE>
Shareholder
-----------
Communications Corporation
III. PROJECT FEES
------------
In consideration for acting as Offering Coordinator, SCC will receive a
flat project fee of $85,000 which is not tied in any way to the
performance of the OFFER, except in the case where the negligence, willful
misconduct, bad faith or reckless disregard on the part of SCC impacts the
performance of the OFFER. In consideration for acting as Information
Agent, SCC will receive a project fee of $15,000. The fees are payable by
the FUND as set forth in Section VII of this agreement.
IV. ESTIMATED EXPENSES
------------------
SCC will be reimbursed by the FUND for its reasonable out-of-pocket
expenses incurred provided that SCC submits to the FUND an expense report,
itemizing such expenses and providing copies of all supporting bills in
respect of such expenses.
SCC's expenses are estimated as set forth below and the estimates are
based largely on data provided to SCC by the FUND. In the course of the
OFFER, the expenses and expense categories may change due to changes in
the OFFER schedule or due to events beyond SCC's control, such as delays
in receiving offering materials and related items. In the event of
significant change or new expenses not originally contemplated, SCC will
notify the FUND by phone and/or by letter for approval of such expenses.
<TABLE>
<CAPTION>
ESTIMATED EXPENSES Low Range High Range
- ------------------ --------- ----------
<S> <C> <C>
Data Handling and Preparation
Telephone # Lookup - Account Consolidation,
Computer Match and Information Operators (blended rate)
5,250 @ $.60........................................................... $ 3,150 $ 3,150
Inbound/Outbound Information Campaign
Outbound Telephone Calls
2,890 to 4,200 @ $3.75 (registered & NOBO holders)..................... 10,837 15,750
720 to 1,260 @ $4.00 (Reorganization Calls)............................ 2,880 5,040
Inbound "800" Telephone Calls
(Shareholders, Banks, Brokers and Financial Advisors)
650 to 825 @ $3.75..................................................... 2,437 3,093
Mailing & Distribution
Bank/Broker Distribution (freight, messenger and FedEx)................ 3,500 6,000
Miscellaneous expenses - FedEx,
postage, search and related items...................................... 750 1,500
-------- --------
TOTAL ESTIMATED EXPENSES.......................................... $ 23,554 $ 34,533
</TABLE>
<PAGE>
Shareholder
-----------
Communications Corporation
V. PERFORMANCE
-----------
SCC will use its best efforts to achieve the goals of the OFFER but SCC
is not guaranteeing a minimum success rate.
SCC's strategies revolve around a telephone and mail information
campaign. The purpose of the telephone and mail information campaign is
to raise the overall awareness among shareholders of the OFFER and help
shareholders better understand the transaction. This in turn may result
in a higher overall response.
VI. COMPLIANCE
----------
SCC will be responsible for compliance with all applicable rules and
regulations of the Securities and Exchange Commission, National
Association of Securities Dealers or any other applicable federal or
state agencies.
In rendering the services contemplated by this Agreement, SCC agrees not
to make any written representations to any shareholders or prospective
shareholders of the FUND or any broker/dealer, or to make any oral
representations to any such person, that are not contained in the FUND's
Prospectus, unless previously authorized to do so in writing by the
FUND.
Further, in the role of "offering coordinator", SCC will not undertake
any broker/dealer activities including, but not limited to, executing
securities transactions, soliciting shareholders to exercise rights, or
offer advice to shareholders regarding their decisions to exercise or
reject rights.
VII. PAYMENT
-------
Payment for one half the project fees ($50,000) will be made at the
signing of this contract. The Fund will pay the balance of project fees
and will reimburse SCC for its reasonable out-of-pocket expenses in
connection with the OFFER, as set forth in Section IV of this agreement,
within thirty days after SCC sends its final invoice in connection with
the OFFER to the FUND.
VIII. MISCELLANEOUS
-------------
SCC agrees to preserve the confidentiality of all non-public information
provided by the FUND, the INVESTMENT MANAGER, or any of their agents, or
from broker/dealers or the Fund's stockholders, for use in providing
services under this Agreement and in connection with the OFFER
generally, or information developed by SCC based upon such non-public
information.
<PAGE>
Shareholder
-----------
Communications Corporation
In the event the project is cancelled for an indefinite period of time after
the signing of this contract and before the expiration of the OFFER, SCC will
be reimbursed by the FUND for its reasonable out-of-pocket expenses incurred
in connection with the OFFER and a pro rata portion of the project fees as
calculated based upon the number of days lapsed from the signing of this
agreement through the expiration of the OFFER, currently scheduled for
September 24, 1999. To the extent that the pro rata cancellation fees are
less than $50,000 paid at the signing of this contract, pursuant to section
VII of this Agreement, SCC will reimburse the Fund the difference between the
$50,000 and the pro rata cancellation fees.
The FUND agrees to indemnify, hold harmless, reimburse and defend SCC, and
its officers, agents and employees, against all claims or threatened claims,
costs, expenses, liabilities, obligations, losses or damages (including
reasonable legal fees and expenses) of any nature, incurred by or imposed
upon SCC, or any of its officers, agents or employees, which results, arises
out of or is based upon services rendered to the FUND in accordance with the
provisions of to this AGREEMENT, provided that such services are rendered to
the FUND without any negligence, willful misconduct, bad faith or reckless
disregard on the part of SCC, or its officers, agents or employees. SCC
agrees to advise the FUND of any claim or liability promptly after receipt of
any notice thereof. The FUND shall not be liable for any settlement without
its written consent. At its election, the FUND may assume the defense of any
such action.
SCC agrees to indemnify, hold harmless, reimburse and defend the FUND and its
officers, agents, and employees, against all claims or threatened claims,
costs, liabilities, obligations, losses or damages (including reasonable
legal fees and expenses) of any nature, incurred by or imposed upon the Fund
or any of its officers, agents or employees which results, arises out of or
is based upon services rendered to the Fund by SCC provided that such
services are rendered to the Fund with negligence, willful misconduct, bad
faith or reckless disregard on the part of SCC or its officers, agents or
employees.
This agreement will be governed by and construed in accordance with the laws
of the State of New York. This AGREEMENT sets forth the entire AGREEMENT
between SCC and the FUND with respect to the agreement herein and cannot be
modified except in writing by both parties.
IN WITNESS WHEREOF, the parties have signed this AGREEMENT this 23rd day of
August 1999.
MORGAN STANLEY DEAN WITTER SHAREHOLDER COMMUNICATIONS
HIGH YIELD FUND, INC. CORPORATION
By /s/ Michael F. Klein By /s/ Robert S. Brennan
------------------------------- --------------------------------
Michael F. Klein Robert S. Brennan
President Senior Vice President
<PAGE>
Exhibit (2)(1)(1)
[LETTERHEAD OF ROGERS & WELLS]
August 23, 1999
Morgan Stanley Dean Witter High Yield Fund, Inc.
1221 Avenue of the Americas
New York, New York 10020
Ladies and Gentlemen:
We have acted as special counsel for Morgan Stanley Dean Witter High Yield Fund,
Inc., a Maryland corporation (the "Fund"), in connection with the preparation
and filing with the Securities and Exchange Commission under the Securities Act
of 1933, as amended, and the Investment Company Act of 1940, as amended, of a
Registration Statement on Form N-2, including all amendments or supplements
thereto (File Nos. 333-82863 and 811-08044) (the "Registration Statement"),
relating to the Fund's issuance of non-transferable rights (the "Rights") to
subscribe for up to 3,700,000 shares of Common Stock of the Fund, par value
$0.01 per share (the "Shares").
In so acting, we have examined and relied upon originals or copies, certified or
otherwise identified to our satisfaction, of such corporate records, documents,
certificates and other instruments as in our judgment are necessary or
appropriate to enable us to render the opinions expressed below. Based upon the
foregoing, and on such examination of law as we have deemed necessary, we are of
the opinion that:
1. The Fund has been duly incorporated and is validly existing as a corporation
under the laws of the State of Maryland.
2. The issuance of the Rights and the sale of the Shares have been duly
authorized; when issued as contemplated in the Registration Statement, the
Rights will be legally issued; when issued and paid for upon exercise of the
Rights as contemplated in the Registration Statement, the Shares will be legally
issued, fully paid and nonassessable.
3. The conclusions of U.S. tax law expressed under the headings "The Offer --
Federal Income Tax Consequences of the Offer" and "Taxation" in the Prospectus
contained in the Registration Statement are true and correct in all material
respects.
As to certain matters governed by the laws of the State of Maryland, we have
relied on the opinion of Piper & Marbury, L.L.P., a copy of which is attached
hereto, and this opinion is subject to the same qualifications, exceptions and
limitations set forth therein.
We consent to the filing of this opinion with the Securities and Exchange
Commission as an Exhibit to the Registration Statement and to the reference to
this firm under the heading "Legal Matters" in the Prospectus included in such
Registration Statement. In giving this consent, we do not admit that we are
within the category of persons whose consent is required under Section 7 of the
Securities Act of
<PAGE>
Morgan Stanley Dean Witter High Yield Fund, Inc. Page 2
August 19, 1999
1933, as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
/s/ Rogers & Wells LLP
<PAGE>
Exhibit (2)(1)(2)
[LETTERHEAD OF PIPER & MARBURY L.L.P.]
August 23, 1999
Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
Re: Morgan Stanley Dean Witter High Yield Fund, Inc.
------------------------------------------------
Ladies and Gentlemen:
We have acted as special Maryland counsel to Morgan Stanley Dean Witter
High Yield Fund, Inc., a Maryland corporation (the "Company"), in connection
with the Company's Registration Statement on Form N-2, including all amendments
or supplements thereto, filed with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), and the
Investment Company Act of 1940, as amended (File Nos. 333-82863 and 811-08044)
and the issuance of transferable rights (the "Rights") entitling holders to
subscribe for up to 3,700,000 shares of the Company's Common Stock, par value of
$0.01 per share (the "Shares"), pursuant to the Registration Statement.
In this capacity, we have examined the Company's Charter and By-Laws, the
proceedings of the Board of Directors of the Company relating to the issuance of
the Shares and such other statutes, certificates, instruments and documents
relating to the Company and matters of law as we have deemed necessary to the
issuance of this opinion. In such examination, we have assumed the genuineness
of all signatures, the legal capacity of all individuals who have executed any
of the aforesaid documents, the conformity of final documents in all material
respects to the versions thereof submitted to us in draft form, the authenticity
of all documents submitted to us as originals, the conformity with originals of
all documents submitted to us as copies and the due authorization, validity and
binding effect of all such documents (other than the authorization, execution
and delivery of the documents by the Company).
Based upon the foregoing, and limited in all respects to applicable
Maryland law, we are of the opinion and advise you that:
<PAGE>
Rogers & Wells LLP
August 19, 1999
Page 2
1. The Company has been duly incorporated and is validly existing as a
corporation under the laws of the State of Maryland.
2. The issuance of the Rights and the sale of the Shares have been duly
authorized; when issued as contemplated in the Registration Statement, the
Rights will be validly and legally issued; when issued and paid for upon
exercise of the Rights as contemplated in the Registration Statement, the Shares
will be validly and legally issued, fully paid and nonassessable.
You may rely upon this opinion in rendering your opinion to the Company
which is to be filed as an exhibit to the Registration Statement. We hereby
consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to our firm under the heading "Legal Matters" in
the Prospectus included in the Registration Statement.
Very truly yours,
/s/ Piper & Marbury L.L.P.
<PAGE>
EXHIBIT (2)(n)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the constituting part of
this Pre-Effective Amendment No. 1 and Amendment No. 4 to the registration
statement (Securities Act of 1933 No. 333-82863 and Investment Company Act of
1940 No. 811-08044, respectively) on Form N-2 (the "Registration Statement") of
our report dated February 8, 1999, relating to the financial statements and
financial highlights appearing in the December 31, 1998 Annual Report of Morgan
Stanley Dean Witter High Yield Fund, Inc. (formerly The Morgan Stanley High
Yield Fund, Inc.) which are incorporated by reference into the Registration
Statement. We also consent to the references to us under the headings "Financial
Highlights" and "Experts" in such Registration Statement.
PricewaterhouseCoopers LLP
New York, New York
August 23, 1999
