<Page> UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-02932 Morgan Stanley High Yield Securities Inc. (Exact name of registrant as specified in charter) 1221 Avenue of the Americas, New York, New York 10020 (Address of principal executive offices) (Zip code) Ronald E. Robison 1221 Avenue of the Americas, New York, New York 10020 (Name and address of agent for service) Registrant's telephone number, including area code: 212-762-4000 Date of fiscal year end: August 31, 2005 Date of reporting period: August 31, 2005 Item 1 - Report to Shareholders <Page> WELCOME, SHAREHOLDER: IN THIS REPORT, YOU'LL LEARN ABOUT HOW YOUR INVESTMENT IN MORGAN STANLEY HIGH YIELD SECURITIES INC. PERFORMED DURING THE ANNUAL PERIOD. WE WILL PROVIDE AN OVERVIEW OF THE MARKET CONDITIONS, AND DISCUSS SOME OF THE FACTORS THAT AFFECTED PERFORMANCE DURING THE REPORTING PERIOD. IN ADDITION, THIS REPORT INCLUDES THE FUND'S FINANCIAL STATEMENTS AND A LIST OF FUND INVESTMENTS. THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS FOR THE FUND BEING OFFERED. MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO PASS. THERE IS NO ASSURANCE THAT THE FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE. THE FUND IS SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY THAT MARKET VALUES OF SECURITIES OWNED BY THE FUND WILL DECLINE AND, THEREFORE, THE VALUE OF THE FUND'S SHARES MAY BE LESS THAN WHAT YOU PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THIS FUND. PLEASE SEE THE PROSPECTUS FOR MORE COMPLETE INFORMATION ON INVESTMENT RISKS. <Page> FUND REPORT For the year ended August 31, 2005 TOTAL RETURN FOR THE 12 MONTHS ENDED AUGUST 31, 2005 <Table> <Caption> LEHMAN LIPPER HIGH CSFB BROTHERS CURRENT HIGH U.S. CORP YIELD YIELD HIGH YIELD BOND FUNDS CLASS A CLASS B CLASS C CLASS D INDEX(1) INDEX(2) INDEX(3) 6.84% 5.68% 5.58% 7.04% 8.98% 9.35% 9.04% </Table> The performance of the Fund's four share classes varies because each has different expenses. The Fund's total returns assume the reinvestment of all distributions but do not reflect the deduction of any applicable sales charges. Such costs would lower performance. See Performance Summary for standardized performance and benchmark information. MARKET CONDITIONS Good economic growth and corporate earnings, strong underlying company fundamentals, low default rates and improving credit qualities were among the factors supporting the high yield market during the 12-month reporting period. As long-term rates generally declined, investors also rewarded high yield bonds for their enhanced income potential. Yet, the period was also defined by significant volatility. After enjoying particularly robust performance in the final months of 2004, the market retreated markedly during the first months of 2005. In January, heavy new issuance contributed to concerns that supply could outpace demand. More importantly, however, was General Motors' mid-March announcement of production cuts and poor earnings for the next quarter. The struggles of this bellwether company exacerbated the woes of the auto industry and called into question the strength of corporations overall. High yield markets were unsettled by the prospect that General Motors would move from the high grade to the high yield universe. Such a move, it was feared, could trigger a sell-off of other high yield bonds, as investors moved to purchase General Motors debt. Amid these pressures, the market declined through mid-May. The reporting period finished with considerably more strength, however. The market came to terms with inclusion of General Motors and Ford Motor in the high yield arena, and the pace of new issuance slowed. Investors refocused on favorable economic data, the overall strength of corporate earnings and company fundamentals, and the continued low default rate of the high-yield universe overall. That said, the final months were not entirely upbeat, as continued high oil prices cast doubt on the pace of economic growth and consumer confidence. The final days of the reporting period brought heightened apprehension as Hurricane Katrina unleashed catastrophic devastation to the Gulf Coast. While the long-term economic impact remained immeasurable, the immediate economic impact was most evident in the energy sector, as gasoline and natural gas prices soared. From an industry perspective, wireless communications, telecommunications and utilities fared the best during the 12-month period, while transportation, airlines and forest products lagged most significantly. 2 <Page> PERFORMANCE ANALYSIS Morgan Stanley High Yield Securities Inc. underperformed the CSFB High Yield Index, the Lehman Brothers U.S. Corporate High Yield Index and the Lipper High Current Yield Bond Funds Index for the 12 months ended August 31, 2005, assuming no deduction of applicable sales charges. Led by precipitous declines in the beleaguered auto and airline industries, a cloud of negative sentiment cloaked the transportation sector as a whole. In this environment, the fund's relative performance benefited from underweighting in transportation versus the CSFB benchmark. In particular, the fund was well served by the decision to de-emphasize auto, auto-related and airline issues, which experienced the brunt of investor disfavor. The fund's wireless communications securities also contributed positively. Strong fundamentals combined with broadly favorable trends to support solid gains. In contrast, the fund's pace was slowed by housing securities. Amid concerns of declines in new home construction, building product securities slipped. These companies are often highly leveraged, and could be particularly susceptible to a downturn in the real estate market. Forest product securities lagged due to company specific reasons. Telecommunications and media securities also clipped performance. During the final months of the reporting period, we sought opportunities to position the portfolio more conservatively by reducing exposures that we believe to be more risky, such as building products. As a result of individual security decisions, chemicals, housing, energy and manufacturing issues are among the more prominent themes in the portfolio. At the close of the reporting period, the portfolio's average credit quality was B, in-line with the CSFB benchmark, while a lower average yield to maturity reflects our efforts to reduce relative risk. We believe that many of the fundamental trends that benefited the high yield market during the annual period remain intact, and will likely continue to provide support to the market in upcoming months. This optimism is balanced by our view that the market has already "priced-in" these fundamentals. (In other words, most securities are already trading at prices that reflect these positives.) Consequently, we would not be surprised if the returns of high yield securities were driven primarily by income, rather than price appreciation, in the months to come. THERE IS NO GUARANTEE THAT ANY SECTORS MENTIONED WILL CONTINUE TO PERFORM WELL OR THAT SECURITIES IN SUCH SECTORS WILL BE HELD BY THE FUND IN THE FUTURE. 3 <Page> TOP FIVE INDUSTRIES <Table> Chemicals: Specialty 6.8% Electric Utilities 5.9 Cable/Satellite TV 5.0 Specialty Communications 4.5 Casino/Gaming 3.4 </Table> LONG-TERM CREDIT ANALYSIS <Table> A/A+ 2.1% Baa/BBB+ 1.6 Ba/BB- 18.8 B/B 52.1 Caa/CCC 23.9 NR/NA 1.5 </Table> DATA AS OF AUGUST 31, 2005. SUBJECT TO CHANGE DAILY. ALL PERCENTAGES FOR THE TOP FIVE INDUSTRIES ARE AS A PERCENTAGE OF NET ASSETS AND ALL PERCENTAGES FOR LONG-TERM CREDIT ANALYSIS ARE AS A PERCENTAGE OF TOTAL LONG-TERM INVESTMENTS. THESE DATA ARE PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE DEEMED A RECOMMENDATION TO BUY OR SELL THE SECURITIES MENTIONED. MORGAN STANLEY IS A FULL-SERVICE SECURITIES FIRM ENGAGED IN SECURITIES TRADING AND BROKERAGE ACTIVITIES, INVESTMENT BANKING, RESEARCH AND ANALYSIS, FINANCING AND FINANCIAL ADVISORY SERVICES. INVESTMENT STRATEGY THE FUND WILL NORMALLY INVEST AT LEAST 80 PERCENT OF ITS ASSETS IN FIXED-INCOME SECURITIES (INCLUDING ZERO COUPON SECURITIES) RATED BELOW BAA BY MOODY'S INVESTORS SERVICE ("MOODY'S") OR BELOW BBB BY STANDARD & POOR'S CORPORATION ("S&P") OR IN NON-RATED SECURITIES CONSIDERED BY THE FUND'S INVESTMENT ADVISER TO BE APPROPRIATE INVESTMENTS FOR THE FUND. SUCH SECURITIES MAY ALSO INCLUDE "RULE 144A" SECURITIES, WHICH ARE SUBJECT TO RESALE RESTRICTIONS. SHAREHOLDERS OF THE FUND WILL RECEIVE AT LEAST 60 DAYS PRIOR NOTICE OF ANY CHANGES IN THIS POLICY. SECURITIES RATED BELOW BAA OR BBB ARE COMMONLY KNOWN AS "JUNK BONDS." THERE ARE NO MINIMUM QUALITY RATINGS FOR INVESTMENTS, AND AS SUCH THE FUND MAY INVEST IN SECURITIES WHICH NO LONGER MAKE PAYMENTS OF INTEREST OR PRINCIPAL. FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS EACH MORGAN STANLEY FUND PROVIDES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS IN ITS SEMIANNUAL AND ANNUAL REPORTS WITHIN 60 DAYS OF THE END OF THE FUND'S SECOND AND FOURTH FISCAL QUARTERS BY FILING THE SCHEDULE ELECTRONICALLY WITH THE SECURITIES AND EXCHANGE COMMISSION (SEC). THE SEMIANNUAL REPORTS ARE FILED ON FORM N-CSRS AND THE ANNUAL REPORTS ARE FILED ON FORM N-CSR. MORGAN STANLEY ALSO DELIVERS THE SEMIANNUAL AND ANNUAL REPORTS TO FUND SHAREHOLDERS AND MAKES THESE REPORTS AVAILABLE ON ITS PUBLIC WEB SITE, www.morganstanley.com. EACH MORGAN STANLEY FUND ALSO FILES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE SEC FOR THE FUND'S FIRST AND THIRD FISCAL QUARTERS ON FORM N-Q. MORGAN STANLEY DOES NOT DELIVER THE REPORTS FOR THE FIRST AND THIRD FISCAL QUARTERS TO SHAREHOLDERS, NOR ARE THE REPORTS POSTED TO THE MORGAN STANLEY PUBLIC WEB SITE. YOU MAY, HOWEVER, OBTAIN THE FORM N-Q FILINGS 4 <Page> (AS WELL AS THE FORM N-CSR AND N-CSRS FILINGS) BY ACCESSING THE SEC'S WEB SITE, http://www.sec.gov. YOU MAY ALSO REVIEW AND COPY THEM AT THE SEC'S PUBLIC REFERENCE ROOM IN WASHINGTON, DC. INFORMATION ON THE OPERATION OF THE SEC'S PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING THE SEC AT (800) SEC-0330. YOU CAN ALSO REQUEST COPIES OF THESE MATERIALS, UPON PAYMENT OF A DUPLICATING FEE, BY ELECTRONIC REQUEST AT THE SEC'S E-MAIL ADDRESS (publicinfo@sec.gov) OR BY WRITING THE PUBLIC REFERENCE SECTION OF THE SEC, WASHINGTON, DC 20549-0102. PROXY VOTING POLICY AND PROCEDURES AND PROXY VOTING RECORD YOU MAY OBTAIN A COPY OF THE FUND'S PROXY VOTING POLICY AND PROCEDURES WITHOUT CHARGE, UPON REQUEST, BY CALLING TOLL FREE (800) 869-NEWS OR BY VISITING THE MUTUAL FUND CENTER ON OUR WEB SITE AT www.morganstanley.com. IT IS ALSO AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT http://www.sec.gov. YOU MAY OBTAIN INFORMATION REGARDING HOW THE FUND VOTED PROXIES RELATING TO PORTFOLIO SECURITIES DURING THE MOST RECENT TWELVE-MONTH PERIOD ENDED JUNE 30 BY VISITING THE MUTUAL FUND CENTER ON OUR WEB SITE AT www.morganstanley.com. THIS INFORMATION IS ALSO AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT http://www.sec.gov. HOUSEHOLDING NOTICE TO REDUCE PRINTING AND MAILING COSTS, THE FUND ATTEMPTS TO ELIMINATE DUPLICATE MAILINGS TO THE SAME ADDRESS. THE FUND DELIVERS A SINGLE COPY OF CERTAIN SHAREHOLDER DOCUMENTS, INCLUDING SHAREHOLDER REPORTS, PROSPECTUSES AND PROXY MATERIALS, TO INVESTORS WITH THE SAME LAST NAME WHO RESIDE AT THE SAME ADDRESS. YOUR PARTICIPATION IN THIS PROGRAM WILL CONTINUE FOR AN UNLIMITED PERIOD OF TIME UNLESS YOU INSTRUCT US OTHERWISE. YOU CAN REQUEST MULTIPLE COPIES OF THESE DOCUMENTS BY CALLING (800) 350-6414, 8:00 A.M. TO 8:00 P.M., ET. ONCE OUR CUSTOMER SERVICE CENTER HAS RECEIVED YOUR INSTRUCTIONS, WE WILL BEGIN SENDING INDIVIDUAL COPIES FOR EACH ACCOUNT WITHIN 30 DAYS. 5 <Page> PERFORMANCE SUMMARY [CHART] PERFORMANCE OF $10,000 INVESTMENT--CLASS A AND CLASS D ($ IN THOUSANDS) <Table> <Caption> CSFB LEHMAN BROTHERS U.S. LIPPER HIGH CURRENT CLASS A++ CLASS D++ HIGH YIELD INDEX(1) CORPORATE HIGH YIELD INDEX(2) YIELD BOND FUNDS INDEX(3) Aug-1995 $ 9,575 $ 10,000 $ 10,000 $ 10,000 $ 10,000 Aug-1996 $ 10,608 $ 11,107 $ 11,015 $ 10,965 $ 11,062 Aug-1997 $ 12,171 $ 12,774 $ 12,714 $ 12,629 $ 12,784 Aug-1998 $ 12,220 $ 12,855 $ 12,899 $ 13,012 $ 12,954 Aug-1999 $ 12,400 $ 13,069 $ 13,511 $ 13,546 $ 13,659 Aug-2000 $ 11,299 $ 11,934 $ 13,791 $ 13,699 $ 13,747 Aug-2001 $ 7,113 $ 7,524 $ 13,865 $ 13,730 $ 12,712 Aug-2002 $ 5,569 $ 5,910 $ 13,528 $ 12,680 $ 11,597 Aug-2003 $ 6,676 $ 7,140 $ 16,653 $ 15,832 $ 14,124 Aug-2004 $ 7,705 $ 8,206 $ 19,096 $ 18,045 $ 15,927 Aug-2005 $ 8,232 $ 8,783 $ 20,812 $ 19,731 $ 17,367 </Table> 6 <Page> AVERAGE ANNUAL TOTAL RETURNS--PERIOD ENDED AUGUST 31, 2005 <Table> <Caption> CLASS A SHARES* CLASS B SHARES** CLASS C SHARES+ CLASS D SHARES^ (SINCE 09/26/79) (SINCE 07/28/97) (SINCE 07/28/97) (SINCE 09/26/79) SYMBOL HYLAX HYLBX HYLCX HYLDX 1 YEAR 6.84%(4) 5.68%(4) 5.58%(4) 7.04%(4) 2.30(5) 0.74(5) 4.59(5) -- 5 YEARS (6.14)(4) (6.78)(4) (6.78)(4) (5.95)(4) (6.95)(5) (6.99)(5) (6.78)(5) -- 10 YEARS (1.50)(4) -- -- (1.29)(4) (1.93)(5) -- -- -- SINCE INCEPTION 5.03(4) (5.25)(4) (5.29)(4) 5.28(4) 4.86(5) (5.25)(5) (5.29)(5) -- </Table> Performance data quoted represents past performance, which is no guarantee of future results and current performance may be lower or higher than the figures shown. For most recent month-end performance figures, please visit www.morganstanley.com or speak with your Financial Advisor. Investment returns and principal value will fluctuate and fund shares, when redeemed, may be worth more or less than their original cost. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Performance for Class A, Class B, Class C, and Class D shares will vary due to differences in sales charges and expenses. PRIOR TO JULY 28, 1997 THE FUND OFFERED ONLY ONE CLASS OF SHARES. BECAUSE THE DISTRIBUTION ARRANGEMENT FOR CLASS A MOST CLOSELY RESEMBLED THE DISTRIBUTION ARRANGEMENT APPLICABLE PRIOR TO THE IMPLEMENTATION OF MULTIPLE CLASSES (I.E., CLASS A IS SOLD WITH A FRONT-END SALES CHARGE), HISTORICAL PERFORMANCE INFORMATION HAS BEEN RESTATED TO REFLECT THE ACTUAL MAXIMUM SALES CHARGE APPLICABLE TO CLASS A (I.E., 4.25%) AS COMPARED TO THE 5.50% SALES CHARGE IN EFFECT PRIOR TO JULY 28, 1997. IN ADDITION, CLASS A SHARES ARE NOW SUBJECT TO AN ONGOING 12b-1 FEE WHICH IS REFLECTED IN THE RESTATED PERFORMANCE FOR THAT CLASS. BECAUSE ALL SHARES OF THE FUND HELD PRIOR TO JULY 28, 1997 WERE DESIGNATED CLASS D SHARES, THE FUND'S HISTORICAL PERFORMANCE HAS BEEN RESTATED TO REFLECT THE ABSENCE OF ANY SALES CHARGE. * THE MAXIMUM FRONT-END SALES CHARGE FOR CLASS A IS 4.25%. ** THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE (CDSC) FOR CLASS B IS 5.0%. THE CDSC DECLINES TO 0% AFTER SIX YEARS. + THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS C IS 1% FOR SHARES REDEEMED WITHIN ONE YEAR OF PURCHASE. ++ CLASS D HAS NO SALES CHARGE. (1) THE CSFB HIGH YIELD INDEX IS DESIGNED TO MIRROR THE INVESTIBLE UNIVERSE OF THE US DOLLAR DENOMINATED HIGH YIELD DEBT MARKET. INDEXES ARE UNMANAGED AND THEIR RETURNS DO NOT INCLUDE ANY SALES CHARGES OR FEES. SUCH COSTS WOULD LOWER PERFORMANCE. IT IS NOT POSSIBLE TO INVEST DIRECTLY IN AN INDEX. THE FUND'S BENCHMARK IS BEING CHANGED FROM THE LEHMAN BROTHERS U.S. CORPORATE HIGH YIELD INDEX TO THE CSFB HIGH YIELD INDEX TO MORE ACCURATELY REFLECT THE FUND'S INVESTIBLE UNIVERSE. (2) THE LEHMAN BROTHERS U.S. CORPORATE HIGH YIELD INDEX TRACKS THE PERFORMANCE OF ALL BELOW INVESTMENT-GRADE SECURITIES WHICH HAVE AT LEAST $100 MILLION IN OUTSTANDING ISSUANCE, A MATURITY GREATER THAN ONE YEAR, AND ARE ISSUED IN FIXED-RATE U.S. DOLLAR DENOMINATIONS. INDEXES ARE UNMANAGED AND THEIR RETURNS DO NOT INCLUDE ANY SALES CHARGES OR FEES. SUCH COSTS WOULD LOWER PERFORMANCE. IT IS NOT POSSIBLE TO INVEST DIRECTLY IN AN INDEX. (3) THE LIPPER HIGH CURRENT YIELD BOND FUNDS INDEX IS AN EQUALLY WEIGHTED PERFORMANCE INDEX OF THE LARGEST QUALIFYING FUNDS (BASED ON NET ASSETS) IN THE LIPPER HIGH CURRENT YIELD BOND FUNDS CLASSIFICATION. THE INDEX, WHICH IS ADJUSTED FOR CAPITAL GAINS DISTRIBUTIONS AND INCOME DIVIDENDS, IS UNMANAGED AND SHOULD NOT BE CONSIDERED AN INVESTMENT. THERE ARE CURRENTLY 30 FUNDS REPRESENTED IN THIS INDEX. (4) FIGURE SHOWN ASSUMES REINVESTMENT OF ALL DISTRIBUTIONS AND DOES NOT REFLECT THE DEDUCTION OF ANY SALES CHARGES. (5) FIGURE SHOWN ASSUMES REINVESTMENT OF ALL DISTRIBUTIONS AND THE DEDUCTION OF THE MAXIMUM APPLICABLE SALES CHARGE. SEE THE FUND'S CURRENT PROSPECTUS FOR COMPLETE DETAILS ON FEES AND SALES CHARGES. ^ ENDING VALUE ASSUMING A COMPLETE REDEMPTION ON AUGUST 31, 2005. 7 <Page> EXPENSE EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption fees; and (2) ongoing costs, including advisory fees; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period 03/01/05 - 08/31/05. ACTUAL EXPENSES The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing cost of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) and redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs, and will not help you determine the relative total cost of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. <Table> <Caption> BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD * ------------- ------------- --------------- 03/01/05 - 03/01/05 08/31/05 08/31/05 ------------- ------------- --------------- CLASS A Actual (0.75% return) $ 1,000.00 $ 1,007.50 $ 5.62 Hypothetical (5% annual return before expenses) $ 1,000.00 $ 1,019.61 $ 5.65 CLASS B Actual (-0.13% return) $ 1,000.00 $ 998.70 $ 8.36 Hypothetical (5% annual return before expenses) $ 1,000.00 $ 1,016.84 $ 8.44 CLASS C Actual (0.39% return) $ 1,000.00 $ 1,003.90 $ 8.74 Hypothetical (5% annual return before expenses) $ 1,000.00 $ 1,016.48 $ 8.79 CLASS D Actual (0.81% return) $ 1,000.00 $ 1,008.10 $ 4.61 Hypothetical (5% annual return before expenses) $ 1,000.00 $ 1,020.62 $ 4.63 </Table> - ---------- * EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 1.11%, 1.66%, 1.73% AND 0.91% FOR CLASS A, CLASS B, CLASS C AND CLASS D SHARES, RESPECTIVELY, MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 184/365 (TO REFLECT THE ONE-HALF YEAR PERIOD). 8 <Page> INVESTMENT ADVISORY AGREEMENT APPROVAL NATURE, EXTENT AND QUALITY OF SERVICES The Board reviewed and considered the nature and extent of the investment advisory services provided by the Investment Adviser under the Advisory Agreement, including portfolio management, investment research and fixed income securities trading. The Board also reviewed and considered the nature and extent of the non-advisory, administrative services provided by the Fund's Administrator under the Administration Agreement, including accounting, clerical, bookkeeping, compliance, business management and planning, and the provision of supplies, office space and utilities. (The Investment Adviser and the Administrator together are referred to as the "Adviser" and the Advisory and Administration Agreements together are referred to as the "Management Agreement.") The Board also compared the nature of the services provided by the Adviser with similar services provided by non-affiliated advisers as reported to the Board by Lipper Inc. ("Lipper"). The Board reviewed and considered the qualifications of the portfolio managers, the senior administrative managers and other key personnel of the Adviser who provide the administrative and investment advisory services to the Fund. The Board determined that the Adviser's portfolio managers and key personnel are well qualified by education and/or training and experience to perform the services in an efficient and professional manner. The Board concluded that the nature and extent of the advisory and administrative services provided were necessary and appropriate for the conduct of the business and investment activities of the Fund. The Board also concluded that the overall quality of the advisory and administrative services was satisfactory. PERFORMANCE RELATIVE TO COMPARABLE FUNDS MANAGED BY OTHER ADVISERS The Board reviewed the Fund's performance for the one-, three- and five-year periods ended November 30, 2004, as shown in reports provided by Lipper (the "Lipper Reports"), compared to the performance of comparable funds selected by Lipper (the "performance peer group"), and noted that the Fund's performance was lower than its performance peer group average for all three periods. The Board discussed with the Adviser possible steps to improve performance. The Adviser informed the Board that, in an effort to try to improve performance, the Adviser appointed a new co-head of the Fund's investment team in early 2004, has tightened the investment process and implemented additional risk controls. The Board considered that relative performance had improved in the most recent one-year period and concluded that the actions taken by the Adviser were reasonably designed to improve performance. FEES RELATIVE TO OTHER FUNDS MANAGED BY THE ADVISER WITH COMPARABLE INVESTMENT STRATEGIES The Board reviewed the advisory and administrative fees (together, the "management fee") paid by the Fund under the Management Agreement. The Board noted that the rate was comparable to the management fee rates charged by the Adviser to any other funds it manages with investment strategies comparable to those of the Fund. 9 <Page> FEES AND EXPENSES RELATIVE TO COMPARABLE FUNDS MANAGED BY OTHER ADVISERS The Board reviewed the advisory and administrative fees (together, the "management fee") paid by the Fund under the Management Agreement and the total expense ratio of the Fund. The Board noted that: (i) the Fund's management fee rate was lower than the average management fee rate for funds, selected by Lipper (the "expense peer group"), managed by other advisers with investment strategies comparable to those of the Fund, as shown in the Lipper Report for the Fund; and (ii) the Fund's total expense ratio was also lower than the average total expense ratio of the funds included in the Fund's expense peer group. The Board concluded that the Fund's management fee and total expense ratio were competitive with its expense peer group. BREAKPOINTS AND ECONOMIES OF SCALE The Board reviewed the structure of the Fund's management fee schedule under the Management Agreement and noted that it includes breakpoints. The Board also reviewed the level of the Fund's management fee and noted that the fee, as a percentage of the Fund's net assets, would decrease as net assets increase because the management fee includes breakpoints. The Board concluded that the Fund's management fee would reflect economies of scale as assets increase. PROFITABILITY OF ADVISER AND AFFILIATES The Board considered and reviewed information concerning the costs incurred and profits realized by the Adviser and its affiliates during the last two years from their relationship with the Fund and the Morgan Stanley Fund Complex and reviewed with the Controller of the Adviser the cost allocation methodology used to determine the Adviser's profitability. Based on their review of the information they received, the Board concluded that the profits earned by the Adviser and its affiliates were not excessive in light of the advisory, administrative and other services provided to the Fund. FALL-OUT BENEFITS The Board considered so-called "fall-out benefits" derived by the Adviser and its affiliates from their relationship with the Fund and the Morgan Stanley Fund Complex, such as "float" benefits derived from handling of checks for purchases and redemptions of Fund shares through a broker-dealer affiliate of the Adviser. The Board also considered that a broker-dealer affiliate of the Adviser receives from the Fund 12b-1 fees for distribution and shareholder services. The Board concluded that the float benefits were relatively small and that the 12b-1 fees were competitive with those of other broker-dealer affiliates of investment advisers. 10 <Page> SOFT DOLLAR BENEFITS The Board considered whether the Adviser realizes any benefits from commissions paid to brokers who execute securities transactions for the Fund ("soft dollars"). The Board noted that the Fund invests only in fixed income securities, which do not generate soft dollars. ADVISER FINANCIALLY SOUND AND FINANCIALLY CAPABLE OF MEETING THE FUND'S NEEDS The Board considered whether the Adviser is financially sound and has the resources necessary to perform its obligations under the Management Agreement. The Board noted that the Adviser's operations remain profitable, although increased expenses in recent years have reduced the Adviser's profitability. The Board concluded that the Adviser has the financial resources necessary to fulfill its obligations under the Management Agreement. HISTORICAL RELATIONSHIP BETWEEN THE FUND AND THE ADVISER The Board also reviewed and considered the historical relationship between the Fund and the Adviser, including the organizational structure of the Adviser, the policies and procedures formulated and adopted by the Adviser for managing the Fund's operations and the Board's confidence in the competence and integrity of the senior managers and key personnel of the Adviser. The Board concluded that it is beneficial for the Fund to continue its relationship with the Adviser. OTHER FACTORS AND CURRENT TRENDS The Board considered the controls and procedures adopted and implemented by the Adviser and monitored by the Fund's Chief Compliance Officer and concluded that the conduct of business by the Adviser indicates a good faith effort on its part to adhere to high ethical standards in the conduct of the Fund's business. GENERAL CONCLUSION After considering and weighing all of the above factors, the Board concluded it would be in the best interest of the Fund and its shareholders to approve renewal of the Management Agreement for another year. 11 <Page> MORGAN STANLEY HIGH YIELD SECURITIES INC. PORTFOLIO OF INVESTMENTS - AUGUST 31, 2005 <Table> <Caption> PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ---------------------------------------------------------------------------------------------------------- CORPORATE BONDS (94.5%) AEROSPACE & DEFENSE (1.0%) $ 4,070 K&F Acquisition Inc. 7.75% 11/15/14 $ 4,181,925 ------------- ALTERNATIVE POWER GENERATION (0.8%) 3,558 Ormat Funding Corp. 8.25 12/30/20 3,611,714 ------------- ALUMINUM (1.0%) 4,175 Novelis, Inc. - 144A* 7.25 02/15/15 4,206,313 ------------- APPAREL/FOOTWEAR (2.0%) 1,970 Brown Shoe Co., Inc. 8.75 05/01/12 2,112,825 4,730 Levi Strauss & Co. 8.254** 04/01/12 4,777,300 1,650 Oxford Industries, Inc. 8.875 06/01/11 1,777,875 ------------- 8,668,000 ------------- AUTO PARTS: O.E.M. (1.9%) 1,020 ArvinMeritor, Inc. 8.75 03/01/12 1,063,350 1,730 Lear Corp. (Series B) 8.11 05/15/09 1,804,399 1,270 Meritor Automotive Inc. 6.80 02/15/09 1,257,300 3,540 TRW Automotive, Inc. 9.375 02/15/13 3,947,100 ------------- 8,072,149 ------------- BROADCASTING (1.1%) 4,391 Canwest Media Inc. 8.00 09/15/12 4,631,985 ------------- BUILDING PRODUCTS (2.1%) 865 Interface Inc. 7.30 04/01/08 886,625 3,575 Interface Inc. 9.50 02/01/14 3,664,375 4,050 Nortek Inc. 8.50 09/01/14 3,958,875 550 PLY Gem Industries, Inc. 9.00 02/15/12 495,000 ------------- 9,004,875 ------------- CABLE/SATELLITE TV (5.0%) 3,415 Cablevision Systems Corp. (Series B) 7.89** 04/01/09 3,543,062 1,740 Charter Communications Holdings LLC 10.75 10/01/09 1,487,700 1,445 Charter Communications Holdings/Charter Capital 11.75~~ 05/15/11 986,212 1,340 Charter Communications Holdings/Charter Capital 13.50~~ 01/15/11 1,065,300 285 Intelsat Bermuda Ltd. - 144A* 8.25 01/15/13 291,412 2,760 Intelsat Bermuda Ltd. - 144A* 8.625 01/15/15 2,877,300 2,065 Intelsat Bermuda Ltd. - 144A* 8.695** 01/15/12 2,111,462 4,515 Kabel Deutschland - 144A* (Germany) 10.625 07/01/14 5,068,088 1,780 Renaissance Media Group LLC 10.00 04/15/08 1,773,325 3,045 Telenet Group Holding NV - 144A* (Belgium) 11.50~~ 06/15/14 2,474,063 ------------- 21,677,924 ------------- </Table> SEE NOTES TO FINANCIAL STATEMENTS 12 <Page> <Table> <Caption> PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ---------------------------------------------------------------------------------------------------------- CASINO/GAMING (3.4%) $ 27,175 Aladdin Gaming Holdings/Capital Corp. LLC (Series B) (b) (f) 13.50% 03/01/10 $ 0 3,755 Isle of Capri Casinos 7.00 03/01/14 3,708,062 2,085 Las Vegas Sands Corp. 6.375 02/15/15 2,022,450 5,255 MGM Mirage Inc. 6.00 10/01/09 5,261,569 27,634 Resort At Summerlin LP/Ras Co. (Series B)(a)(b)(f) 13.00 12/15/07 0 3,695 Station Casinos, Inc. 6.00 04/01/12 3,741,188 265 Station Casinos, Inc. - 144A* 6.875 03/01/16 273,613 ------------- 15,006,882 ------------- CHEMICALS: MAJOR DIVERSIFIED (0.4%) 1,575 Huntsman Advanced Materials Corp. 11.00 07/15/10 1,795,500 ------------- CHEMICALS: SPECIALTY (6.8%) 3,000 Equistar Chemical Funding 10.125 09/01/08 3,300,000 2,400 Innophos Inc. - 144A* 8.875 08/15/14 2,481,000 1,253 Innophos Inc. - 144A* 11.79~** 02/15/15 1,196,377 945 ISP Chemco 10.25 07/01/11 1,024,144 3,030 ISP Holdings Inc. (Series B) 10.625 12/15/09 3,226,950 1,135 Koppers Industry Inc. 9.875 10/15/13 1,265,525 775 Millennium America, Inc. 7.00 11/15/06 797,281 2,425 Millennium America, Inc. 9.25 06/15/08 2,625,063 1,140 Nalco Co. 7.75 11/15/11 1,199,850 4,235 Nalco Co. 8.875 11/15/13 4,579,094 3,855 Rhodia SA (France) 8.875 06/01/11 3,777,900 3,815 Rockwood Specialties, Inc. 10.625 05/15/11 4,215,575 ------------- 29,688,759 ------------- COAL (0.2%) 930 Foundation PA Coal Co. 7.25 08/01/14 982,312 ------------- CONSTRUCTION MATERIALS (0.3%) 1,485 RMCC Acquisition Co. - 144A* 9.50 11/01/12 1,507,275 ------------- CONSUMER SUNDRIES (0.4%) 1,985 Amscan Holdings, Inc. 8.75 05/01/14 1,900,637 ------------- CONTAINERS/PACKAGING (3.4%) 2,185 Graham Packaging Company Inc. 8.50 10/15/12 2,261,475 2,255 Graham Packaging Company Inc. 9.875 10/15/14 2,345,200 3,200 Graphic Packaging International Corp. 9.50 08/15/13 3,296,000 850 Owens-Brockway Glass Containers Corp. 8.75 11/15/12 930,750 1,765 Owens-Illinois Inc. 7.35 05/15/08 1,831,188 2,105 Owens-Illinois Inc. 7.50 05/15/10 2,189,200 </Table> SEE NOTES TO FINANCIAL STATEMENTS 13 <Page> <Table> <Caption> PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ---------------------------------------------------------------------------------------------------------- $ 1,155 Pliant Corp. (Issued 04/10/02) 13.00% 06/01/10 $ 837,375 1,530 Pliant Corp. (Issued 05/31/00) 13.00 06/01/10 1,109,250 ------------- 14,800,438 ------------- DATA PROCESSING SERVICES (0.5%) 185 Sungard Data Systems Inc. - 144A* 8.525** 08/15/13 192,400 1,965 Sungard Data Systems Inc. - 144A* 9.125 08/15/13 2,073,075 ------------- 2,265,475 ------------- DRUGSTORE CHAINS (0.9%) 1,005 Jean Coutu Group PJC Inc. (Canada) 7.625 08/01/12 1,052,737 1,310 Jean Coutu Group PJC Inc. (Canada) 8.50 08/01/14 1,349,300 1,615 Rite Aid Corp. 8.125 05/01/10 1,651,338 ------------- 4,053,375 ------------- ELECTRIC UTILITIES (5.9%) 1,330 AES Corp. (The) 7.75 03/01/14 1,451,362 377 AES Corp. (The) 8.875 02/15/11 419,412 537 AES Corp. (The) 9.375 09/15/10 605,467 1,100 AES Corp. (The) - 144A* 9.00 05/15/15 1,221,000 3,385 CMS Energy Corp. 7.50 01/15/09 3,588,100 1,040 IPALCO Enterprises, Inc. 8.625** 11/14/11 1,175,200 3,160 Monongahela Power Co. 5.00 10/01/06 3,185,776 3,235 MSW Energy Holdings/Finance 7.375 09/01/10 3,380,575 695 MSW Energy Holdings/Finance 8.50 09/01/10 750,600 1,940 Nevada Power Co. 8.25 06/01/11 2,197,050 2,044 Nevada Power Co. 9.00 08/15/13 2,304,610 3,320 PSEG Energy Holdings Inc. 8.625 02/15/08 3,519,200 2,005 Reliant Energy, Inc. 6.75 12/15/14 1,984,950 ------------- 25,783,302 ------------- ELECTRICAL PRODUCTS (1.0%) 3,485 Rayovac Corp. 8.50 10/01/13 3,606,975 860 Spectrum Brands, Inc. 7.375 02/01/15 832,050 ------------- 4,439,025 ------------- ELECTRONIC COMPONENTS (0.7%) 3,025 Sanmina-SCI Corp. 6.75 03/01/13 2,904,000 ------------- ENVIRONMENTAL SERVICES (1.1%) 1,515 Allied Waste North America, Inc. 6.375 04/15/11 1,467,656 1,515 Allied Waste North America, Inc. 6.50 11/15/10 1,496,062 1,546 Allied Waste North America, Inc. 9.25 09/01/12 1,696,735 ------------- 4,660,453 ------------- </Table> SEE NOTES TO FINANCIAL STATEMENTS 14 <Page> <Table> <Caption> PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ---------------------------------------------------------------------------------------------------------- FINANCE/RENTAL/LEASING (1.5%) $ 2,250 Ford Motor Credit Corp. 5.625% 10/01/08 $ 2,165,366 2,360 Ford Motor Credit Corp. 5.80 01/12/09 2,260,139 575 Hertz Corp. 7.40 03/01/11 569,657 1,715 Hertz Corp. 7.625 06/01/12 1,702,059 ------------- 6,697,221 ------------- FINANCIAL CONGLOMERATES (1.0%) 2,535 General Motors Acceptance Corp. 4.375 12/10/07 2,412,169 1,535 General Motors Acceptance Corp. 6.875 09/15/11 1,455,367 515 General Motors Acceptance Corp. 6.875 08/28/12 484,789 ------------- 4,352,325 ------------- FOOD RETAIL (0.4%) 1,389 CA FM Lease Trust - 144A* 8.50 07/15/17 1,572,699 ------------- FOOD: MEAT/FISH/DAIRY (2.6%) 1,995 Michael Foods Inc. (Series B) 8.00 11/15/13 2,059,838 1,770 Pilgrim's Pride Corp. 9.25 11/15/13 1,964,700 2,730 Pilgrim's Pride Corp. 9.625 09/15/11 2,968,875 4,375 Smithfield Foods Inc. 7.00 08/01/11 4,528,125 ------------- 11,521,538 ------------- FOREST PRODUCTS (0.6%) 695 Tembec Industries Inc. (Canada) 7.75 03/15/12 517,775 2,500 Tembec Industries Inc. (Canada) 8.50 02/01/11 1,931,250 ------------- 2,449,025 ------------- GAS DISTRIBUTORS (0.9%) 850 Dynegy Holdings, Inc. 6.875 04/01/11 845,750 2,190 Dynegy Holdings, Inc. - 144A* 9.875 07/15/10 2,398,050 730 Northwest Pipeline Corp. 8.125 03/01/10 786,575 ------------- 4,030,375 ------------- HOME BUILDING (1.0%) 290 Tech Olympic USA, Inc. 7.50 01/15/15 270,425 1,850 Tech Olympic USA, Inc. 9.00 07/01/10 1,935,563 2,100 Tech Olympic USA, Inc. 10.375 07/01/12 2,252,250 ------------- 4,458,238 ------------- HOME FURNISHINGS (0.3%) 1,235 Tempur-Pedic Inc. 10.25 08/15/10 1,380,113 ------------- HOSPITAL/NURSING MANAGEMENT (1.9%) 2,055 Community Health System Inc. 6.50 12/15/12 2,088,394 880 HCA, Inc. 6.30 10/01/12 903,086 </Table> SEE NOTES TO FINANCIAL STATEMENTS 15 <Page> <Table> <Caption> PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ---------------------------------------------------------------------------------------------------------- $ 80 HCA, Inc. 8.75% 09/01/10 $ 90,624 2,680 Medcath Holdings Corp. 9.875 07/15/12 2,988,200 800 Tenet Healthcare Corp. 7.375 02/01/13 784,000 1,150 Tenet Healthcare Corp. 9.875 07/01/14 1,230,500 ------------- 8,084,804 ------------- HOTELS/RESORTS/CRUISELINES (0.3%) 1,140 Starwood Hotels & Resorts Worldwide, Inc. 7.875 05/01/12 1,268,250 ------------- INDUSTRIAL MACHINERY (1.3%) 1,111 Flowserve Corp. 12.25 08/15/10 1,187,259 875 Goodman Global Holding Company, Inc. - 144A* 6.41** 06/15/12 875,000 3,585 Goodman Global Holding Company, Inc. - 144A* 7.875 12/15/12 3,405,750 ------------- 5,468,009 ------------- INDUSTRIAL SPECIALTIES (1.7%) 4,010 Johnsondiversy, Inc. 9.625 05/15/12 4,120,275 3,070 UCAR Finance, Inc. 10.25 02/15/12 3,300,250 ------------- 7,420,525 ------------- INVESTMENT BANKS/BROKERS (1.1%) 4,535 Refco Finance Holdings 9.00 08/01/12 4,965,825 ------------- INVESTMENT MANAGERS (0.4%) 1,845 JSG Funding PLC (Ireland) 9.625 10/01/12 1,895,738 ------------- MEDICAL DISTRIBUTORS (0.6%) 220 AmerisourceBergen Corp. 7.25 11/15/12 255,750 2,185 AmerisourceBergen Corp. 8.125 09/01/08 2,403,500 ------------- 2,659,250 ------------- MEDICAL SPECIALTIES (0.5%) 715 Fisher Scientific International, Inc. 6.75 08/15/14 748,962 1,235 Fisher Scientific International, Inc. - 144A* 6.125 07/01/15 1,241,175 ------------- 1,990,137 ------------- MEDICAL/NURSING SERVICES (1.6%) 2,020 DaVita Inc. - 144A* 6.625 03/15/13 2,060,400 4,000 Fresenius Medical Care Capital Trust 7.875 06/15/11 4,300,000 665 National Nephrology Assoc. Inc. - 144A* 9.00 11/01/11 744,800 ------------- 7,105,200 ------------- </Table> SEE NOTES TO FINANCIAL STATEMENTS 16 <Page> <Table> <Caption> PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ---------------------------------------------------------------------------------------------------------- METAL FABRICATIONS (1.4%) $ 1,680 General Cable Corp. 9.50% 11/15/10 $ 1,789,200 2,385 Hexcell Corp. 6.75 02/01/15 2,402,887 2,400 Trimas Corp. 9.875 06/15/12 2,064,000 ------------- 6,256,087 ------------- MISCELLANEOUS COMMERCIAL SERVICES (1.5%) 875 Advanstar Communications, Inc. 10.75 08/15/10 994,219 2,471 Iron Mountain Inc. 7.75 01/15/15 2,542,041 2,800 Iron Mountain Inc. 8.625 04/01/13 2,957,500 ------------- 6,493,760 ------------- MISCELLANEOUS MANUFACTURING (1.4%) 6,910 Associated Materials Inc. 11.25~~ 03/01/14 4,076,900 2,120 Propex Fabrics Inc. 10.00 12/01/12 2,056,400 ------------- 6,133,300 ------------- MOVIES/ENTERTAINMENT (0.4%) 1,800 AMC Entertainment Inc. 8.04** 08/15/10 1,869,750 ------------- OIL & GAS PIPELINES (3.0%) 4,275 El Paso Production Holdings 7.75 06/01/13 4,542,187 2,525 Pacific Energy Partners/Finance 7.125 06/15/14 2,657,563 1,435 Southern Natural Gas 8.875 03/15/10 1,572,697 3,815 Williams Companies, Inc. (The) 7.875 09/01/21 4,320,488 ------------- 13,092,935 ------------- OIL & GAS PRODUCTION (2.8%) 3,560 Chesapeake Energy Corp. 7.50 09/15/13 3,844,800 3,710 Hilcorp Energy/Finance - 144A* 10.50 09/01/10 4,136,650 1,400 Magnum Hunter Resources, Inc. 9.60 03/15/12 1,547,000 2,400 Vintage Petroleum, Inc. 7.875 05/15/11 2,520,000 ------------- 12,048,450 ------------- OIL REFINING/MARKETING (2.0%) 3,455 CITGO Petroleum Corp. 6.00 10/15/11 3,472,275 3,000 Husky Oil Ltd. 8.90 08/15/28 3,302,544 1,815 Tesoro Petroleum Corp. 9.625 04/01/12 2,019,188 ------------- 8,794,007 ------------- OILFIELD SERVICES/EQUIPMENT (1.4%) 1,040 CIE Generale de Geophysique SA - 144A* 7.50 05/15/15 1,102,400 625 Hanover Compressor Co. 8.625 12/15/10 675,000 </Table> SEE NOTES TO FINANCIAL STATEMENTS 17 <Page> <Table> <Caption> PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ---------------------------------------------------------------------------------------------------------- $ 575 Hanover Compressor Co. 9.00% 06/01/14 $ 636,812 1,715 Hanover Equipment Trust 2001 A (Series A) 8.50 09/01/08 1,796,462 1,655 Hanover Equipment Trust 2001 B (Series B) 8.75 09/01/11 1,783,262 ------------- 5,993,936 ------------- OTHER METALS/MINERALS (0.0%) 3,750 Murrin Holdings Property Ltd. (Australia) (b) (f) 9.375 08/31/07 0 ------------- OTHER TRANSPORTATION (1.0%) 2,695 CHC Helicopter Corp. 7.375 05/01/14 2,752,269 1,670 CHC Helicopter Corp. - 144A* 7.375 05/01/14 1,705,487 ------------- 4,457,756 ------------- PHARMACEUTICALS: MAJOR (1.2%) 1,850 VWR International Inc. 6.875 04/15/12 1,854,625 920 VWR International Inc. 8.00 04/15/14 917,700 2,525 Warner Chilcott Corp. - 144A* 8.75 02/01/15 2,512,375 ------------- 5,284,700 ------------- PUBLISHING: BOOKS/MAGAZINES (2.9%) 1,756 Dex Media East/Finance 12.125 11/15/12 2,085,250 2,741 Dex Media West/Finance 9.875 08/15/13 3,114,461 1,065 Houghton Mifflin Co. 8.25 02/01/11 1,116,919 2,540 Houghton Mifflin Co. 9.875 02/01/13 2,755,900 3,355 PRIMEDIA, Inc. 8.875 05/15/11 3,531,138 ------------- 12,603,668 ------------- PULP & PAPER (1.6%) 3,255 Abitibi-Consolidated Inc. (Canada) 6.00 06/20/13 2,937,637 3,550 Georgia-Pacific Corp. 8.875 02/01/10 3,993,750 ------------- 6,931,387 ------------- REAL ESTATE INVESTMENT TRUSTS (0.9%) 380 HMH Properties, Inc. (Series B) 7.875 08/01/08 387,125 3,345 Host Marriott LP 6.375 03/15/15 3,332,456 ------------- 3,719,581 ------------- SPECIALTY STORES (1.9%) 2,075 General Nutrition Centers Inc. 8.50 12/01/10 1,846,750 2,620 Petro Stopping Centers LP/Petro Financial Corp. 9.00 02/15/12 2,685,500 3,515 Sonic Automotive, Inc. 8.625 08/15/13 3,638,025 ------------- 8,170,275 ------------- </Table> SEE NOTES TO FINANCIAL STATEMENTS 18 <Page> <Table> <Caption> PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ---------------------------------------------------------------------------------------------------------- SPECIALTY TELECOMMUNICATIONS (4.5%) $ 2,070 American Tower Corp. 7.125% 10/15/12 $ 2,178,675 2,070 American Tower Corp. 7.50 05/01/12 2,199,375 467 Panamsat Corp. 9.00 08/15/14 493,853 4,690 Panamsat Holding Corp. 10.375~~ 11/01/14 3,247,825 3,250 Qwest Communications International 7.29** 02/15/09 3,250,000 5,900 Qwest Services Corp. 13.50** 12/15/10 6,829,250 820 Qwest Services Corp. 14.00** 12/15/14 1,008,600 400 U.S. West Communications Corp. 5.625 11/15/08 397,000 ------------- 19,604,578 ------------- STEEL (0.9%) 3,570 Amsted Industries Inc. - 144A* 10.25 10/15/11 3,944,850 ------------- TELECOMMUNICATION EQUIPMENT (0.5%) 2,170 Nortel Networks Ltd. 6.125 02/15/06 2,186,275 ------------- TELECOMMUNICATIONS (0.9%) 3,440 Axtel SA (Mexico) 11.00 12/15/13 3,818,400 6,501 Exodus Communications, Inc. (a) (b) (f) 11.625 07/15/10 0 28,549 Rhythms Netconnections, Inc. (a) (b) (f) 12.75 04/15/09 0 4,309 Rhythms Netconnections, Inc. (a) (b) (f) 14.00 02/15/10 0 13,439 Rhythms Netconnections, Inc. (Series B) (a) (b) (f) 13.50 05/15/08 0 ------------- 3,818,400 ------------- TOBACCO (0.3%) 1,100 RJ Reynolds Tobacco Holdings - 144A* 6.50 07/15/10 1,105,500 ------------- TRUCKS/CONSTRUCTION/FARM MACHINERY (1.6%) 2,939 Manitowoc Inc. (The) 10.50 08/01/12 3,335,765 3,370 NMHG Holding Co. 10.00 05/15/09 3,622,750 ------------- 6,958,515 ------------- WHOLESALE DISTRIBUTORS (1.7%) 3,450 Buhrmann US, Inc. 8.25 07/01/14 3,562,125 995 Buhrmann US, Inc. - 144A* 7.875 03/01/15 1,012,412 3,070 Nebraska Book Company, Inc. 8.625 03/15/12 2,970,225 ------------- 7,544,762 ------------- WIRELESS TELECOMMUNICATIONS (3.1%) 1,850 Rogers Wireless Communications Inc. 7.50 03/15/15 2,032,688 1,920 Rural Cellular Corp. 7.91** 03/15/10 1,996,800 1,315 Rural Cellular Corp. 9.625 05/15/08 1,328,150 </Table> SEE NOTES TO FINANCIAL STATEMENTS 19 <Page> <Table> <Caption> PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ---------------------------------------------------------------------------------------------------------- $ 2,015 SBA Communications Corp. 8.50% 12/01/12 $ 2,208,944 3,013 SBA Communications Corp. 9.75~~ 12/15/11 2,779,493 2,710 Ubiquitel Operating Co. 9.875 03/01/11 3,035,200 ------------- 13,381,275 ------------- TOTAL CORPORATE BONDS (COST $502,337,275) 411,555,337 ------------- CONVERTIBLE BONDS (0.6%) TELECOMMUNICATION EQUIPMENT 2,815 Nortel Networks Corp. (Canada) (COST $2,676,325) 4.25 09/01/08 2,688,325 ------------- <Caption> NUMBER OF SHARES - --------- COMMON STOCKS (D) (0.7%) CASINO/GAMING (0.0%) 212,312 Fitzgeralds Gaming Corp. + (f) 0 ------------- FOOD: SPECIALTY/CANDY (0.0%) 2,447 SFFB New Holdings Inc. (c) (f) 0 13,317 SFAC New Holdings Inc. ++ (c) (f) 0 1,069,725 Specialty Foods Acquisition Corp. - 144A* (f) 0 ------------- 0 ------------- MEDICAL/NURSING SERVICES (0.0%) 1,754,896 Raintree Healthcare Corp. (c) (f) 0 ------------- RESTAURANTS (0.7%) 64,807 American Restaurant Group Holdings, Inc. - 144A* (f) 0 111,558 American Restaurant Group Holdings, Inc. (c) (f) 0 13,107 American Restaurant Group Holdings, Inc. (c) (f) 0 787,160 Catalina Restaurant Group (c) (f) (Note 4) 2,802,290 ------------- 2,802,290 ------------- SPECIALTY TELECOMMUNICATIONS (0.0%) 34,159 Birch Telecom Inc. +++ (c) (f) 341 1,448,200 PFB Telecom NV (Series B) (c) (f) 0 ------------- 341 ------------- TELECOMMUNICATIONS (0.0%) 49,597 Viatel Holdings Bermuda Ltd. (c) 2,480 ------------- TEXTILES (0.0%) 2,389,334 U.S. Leather, Inc. (c) (f) 0 ------------- </Table> SEE NOTES TO FINANCIAL STATEMENTS 20 <Page> <Table> <Caption> NUMBEROF SHARES VALUE - ---------------------------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATIONS (0.0%) 5,199 USA Mobility, Inc. (c) $ 146,456 315,021 Vast Solutions, Inc. (Class B1) (c) (f) 0 315,021 Vast Solutions, Inc. (Class B2) (c) (f) 0 315,021 Vast Solutions, Inc. (Class B3) (c) (f) 0 ------------- 146,456 ------------- TOTAL COMMON STOCKS (COST $246,849,514) 2,951,567 ------------- NON-CONVERTIBLE PREFERRED STOCKS (0.5%) BROADCASTING (0.2%) 89 Paxson Communications Corp.~ 605,200 ------------- RESTAURANTS (0.3%) 1,589 Catalina Restaurant Group (Units)^ ++++ (f) (Note 4) 1,430,002 ------------- TOTAL NON-CONVERTIBLE PREFERRED STOCKS (COST $2,478,891) 2,035,202 ------------- <Caption> NUMBER OF EXPIRATION WARRANTS DATE - --------- ---------- WARRANTS (d) (0.0%) CASINO/GAMING (0.0%) 319,500 Aladdin Gaming Enterprises, Inc. - 144A* (f) 03/01/10 0 23,000 Resort At Summerlin LP - 144A* (f) 12/15/07 0 ------------- 0 ------------- ELECTRIC UTILITIES (0.0%) 1,850 TNP Enterprises, Inc. - 144A* 04/01/11 44,400 ------------- RESTAURANTS (0.0%) 4,500 American Restaurant Group Holdings, Inc. - 144A* (f) 08/15/08 0 334,250 Catalina Restaurant Group (c) (f) (Note 4) 07/10/12 0 ------------- 0 ------------- TOTAL WARRANTS (COST $58,970) 44,400 ------------- </Table> SEE NOTES TO FINANCIAL STATEMENTS 21 <Page> <Table> <Caption> PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ---------------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENT (1.2%) REPURCHASE AGREEMENT $ 5,297 Joint repurchase agreement account (dated 08/31/05; proceeds $5,297,526) (e) (COST $5,297,000) 3.575% 09/01/05 $ 5,297,000 ------------- TOTAL INVESTMENTS (COST $759,697,975) (g) 97.5% 424,571,831 OTHER ASSETS IN EXCESS OF LIABILITIES 2.5 10,962,433 ----- ------------- NET ASSETS 100.0% $ 435,534,264 ===== ============= </Table> - ---------- * RESALE IS RESTRICTED TO QUALIFIED INSTITUTIONAL INVESTORS. + RESALE IS RESTRICTED, ACQUIRED 12/22/98 AT A COST BASIS OF $957,527. ++ RESALE IS RESTRICTED, ACQUIRED 06/10/99 AT A COST BASIS OF $133. +++ RESALE IS RESTRICTED, ACQUIRED (BETWEEN 06/18/98 AND 05/11/99) AT A COST BASIS OF $17,257,340. ++++ RESALE IS RESTRICTED, ACQUIRED (BETWEEN 05/30/02 AND 04/13/05) AT A COST BASIS OF $1,588,891. ** FLOATING RATE SECURITY. RATE SHOWN IS THE RATE IN EFFECT AT AUGUST 31, 2005. ~ PAYMENT-IN-KIND SECURITY. ~~ CURRENTLY A ZERO COUPON BOND AND IS SCHEDULED TO PAY INTEREST AT THE RATE SHOWN AT A FUTURE SPECIFIED DATE. ^ CONSISTS OF ONE OR MORE CLASS OF SECURITIES TRADED TOGETHER AS A UNIT; PREFERRED STOCKS WITH ATTACHED WARRANTS. (a) ISSUER IN BANKRUPTCY. (b) NON-INCOME PRODUCING SECURITY; BOND IN DEFAULT. (c) ACQUIRED THROUGH EXCHANGE OFFER. (d) NON-INCOME PRODUCING SECURITIES. (e) COLLATERALIZED BY FEDERAL AGENCY AND U.S. TREASURY OBLIGATIONS. (f) SECURITIES WITH TOTAL MARKET VALUE EQUAL TO $4,232,633 HAVE BEEN VALUED AT THEIR FAIR VALUE AS DETERMINED IN GOOD FAITH UNDER PROCEDURES ESTABLISHED BY AND UNDER THE GENERAL SUPERVISION OF THE FUND'S DIRECTORS. (g) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS $757,763,079. THE AGGREGATE GROSS UNREALIZED APPRECIATION IS $16,361,579 AND THE AGGREGATE GROSS UNREALIZED DEPRECIATION IS $349,552,827, RESULTING IN NET UNREALIZED DEPRECIATION OF $333,191,248. SEE NOTES TO FINANCIAL STATEMENTS 22 <Page> MORGAN STANLEY HIGH YIELD SECURITIES INC. FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 2005 <Table> ASSETS: Investments in securities, at value (cost $754,960,444) $ 420,339,539 Investments in affiliates, at value (cost $4,737,531) 4,232,292 Receivable for: Interest 8,528,199 Investments sold 4,165,802 Capital stock sold 83,170 Prepaid expenses and other assets 49,618 --------------- TOTAL ASSETS 437,398,620 --------------- LIABILITIES: Payable for: Capital stock redeemed 656,475 Investments purchased 398,254 Distribution fee 181,266 Investment advisory fee 167,430 Transfer agent fee 75,396 Administration fee 31,892 Accrued expenses and other payables 353,643 --------------- TOTAL LIABILITIES 1,864,356 --------------- NET ASSETS $ 435,534,264 =============== COMPOSITION OF NET ASSETS: Paid-in-capital $ 2,764,611,314 Net unrealized depreciation (335,126,144) Accumulated undistributed net investment income 3,469,714 Accumulated net realized loss (1,997,420,620) --------------- NET ASSETS $ 435,534,264 =============== CLASS A SHARES: Net Assets $ 77,860,817 Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 43,547,825 NET ASSET VALUE PER SHARE $ 1.79 =============== MAXIMUM OFFERING PRICE PER SHARE, (NET ASSET VALUE PLUS 4.44% OF NET ASSET VALUE) $ 1.87 =============== CLASS B SHARES: Net Assets $ 205,739,126 Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 116,009,912 NET ASSET VALUE PER SHARE $ 1.77 =============== CLASS C SHARES: Net Assets $ 27,377,961 Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 15,389,420 NET ASSET VALUE PER SHARE $ 1.78 =============== CLASS D SHARES: Net Assets $ 124,556,360 Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 69,759,027 NET ASSET VALUE PER SHARE $ 1.79 =============== </Table> SEE NOTES TO FINANCIAL STATEMENTS 23 <Page> STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 2005 <Table> NET INVESTMENT INCOME: INCOME Interest $ 42,107,219 Dividends 683,500 Dividends from affiliates 251,891 ------------- TOTAL INCOME 43,042,610 ------------- EXPENSES Distribution fee (Class A shares) 86,331 Distribution fee (Class B shares) 2,246,442 Distribution fee (Class C shares) 283,065 Investment advisory fee 2,213,754 Transfer agent fees and expenses 1,366,121 Professional fees 429,720 Administration fee 335,300 Shareholder reports and notices 130,897 Registration fees 84,347 Custodian fees 34,029 Directors' fees and expenses 23,298 Other 57,480 ------------- TOTAL EXPENSES 7,290,784 ------------- NET INVESTMENT INCOME 35,751,826 ------------- NET REALIZED AND UNREALIZED GAIN (LOSS): NET REALIZED GAIN (LOSS) ON: Investments (42,354,767) Foreign exchange transactions 7,458 ------------- NET REALIZED LOSS (42,347,309) ------------- Net change in unrealized appreciation/depreciation 37,567,982 ------------- NET LOSS (4,779,327) ------------- NET INCREASE $ 30,972,499 ============= </Table> SEE NOTES TO FINANCIAL STATEMENTS 24 <Page> STATEMENT OF CHANGES IN NET ASSETS <Table> <Caption> FOR THE YEAR FOR THE YEAR ENDED ENDED AUGUST 31, 2005 AUGUST 31, 2004 --------------- --------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income $ 35,751,826 $ 56,764,871 Net realized loss (42,347,309) (197,600,458) Net change in unrealized depreciation 37,567,982 231,685,708 --------------- --------------- NET INCREASE 30,972,499 90,850,121 --------------- --------------- DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME: Class A shares (2,711,458) (2,072,654) Class B shares (20,033,058) (25,815,474) Class C shares (2,208,231) (2,708,149) Class D shares (10,309,554) (11,764,739) --------------- --------------- TOTAL DIVIDENDS (35,262,301) (42,361,016) --------------- --------------- Net decrease from capital stock transactions (134,830,856) (154,957,959) --------------- --------------- NET DECREASE (139,120,658) (106,468,854) NET ASSETS: Beginning of period 574,654,922 681,123,776 --------------- --------------- END OF PERIOD (INCLUDING ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME OF $3,469,714 AND $3,374,549, RESPECTIVELY) $ 435,534,264 $ 574,654,922 =============== =============== </Table> SEE NOTES TO FINANCIAL STATEMENTS 25 <Page> MORGAN STANLEY HIGH YIELD SECURITIES INC. NOTES TO FINANCIAL STATEMENTS - AUGUST 31, 2005 1. ORGANIZATION AND ACCOUNTING POLICIES Morgan Stanley High Yield Securities Inc. (the "Fund") is registered under the Investment Company Act of 1940, as amended, (the "Act") as a diversified, open-end management investment company. The Fund's investment objective is to earn a high level of current income. The Fund was incorporated in Maryland on June 14, 1979 and commenced operations on September 26, 1979. On July 28, 1997, the Fund converted to a multiple class share structure. The Fund offers Class A shares, Class B shares, Class C shares and Class D shares. The four classes are substantially the same except that most Class A shares are subject to a sales charge imposed at the time of purchase and some Class A shares, and most Class B shares and Class C shares are subject to a contingent deferred sales charge imposed on shares redeemed within eighteen months, six years and one year, respectively. Class D shares are not subject to a sales charge. Additionally, Class A shares, Class B shares and Class C shares incur distribution expenses. Effective August 29, 2005, the Board of Directors of the Fund approved the implementation of a 2% redemption fee on Class A shares, Class B shares, Class C shares, and Class D shares, which is paid directly to the Fund, for shares redeemed within thirty days of purchase. The redemption fee is designed to protect the Fund and its remaining shareholders from the effects of short-term trading. The following is a summary of significant accounting policies: A. VALUATION OF INVESTMENTS -- (1) an equity portfolio security listed or traded on the New York Stock Exchange ("NYSE") or American Stock Exchange or other exchange is valued at its latest sale price prior to the time when assets are valued; if there were no sales that day, the security is valued at the mean between the last reported bid and asked price; (2) an equity portfolio security listed or traded on the Nasdaq is valued at the Nasdaq Official Closing Price; if there were no sales that day, the security is valued at the mean between the last reported bid and asked price; (3) all other portfolio securities for which over-the-counter market quotations are readily available are valued at the mean between the last reported bid and asked price. In cases where a security is traded on more than one exchange, the security is valued on the exchange designated as the primary market; (4) for equity securities traded on foreign exchanges, the last reported sale price or the latest bid price may be used if there were no sales on a particular day; (5) when market quotations are not readily available or Morgan Stanley Investment Advisors Inc. (the "Investment Adviser") determines that the latest sale price, the bid price or the mean between the last reported bid and asked price do not reflect a security's market value, portfolio securities are valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Fund's Directors. Occasionally, developments affecting the closing prices of securities and other assets may occur between the times at which valuations of such securities are determined (that is, close of the foreign market on which the securities trade) and the close of business on the NYSE. If developments occur during such periods that are 26 <Page> expected to materially affect the value of such securities, such valuations may be adjusted to reflect the estimated fair value of such securities as of the close of the NYSE, as determined in good faith by the Fund's Directors or by the Investment Adviser using a pricing service and/or procedures approved by the Directors of the Fund; (6) certain portfolio securities may be valued by an outside pricing service approved by the Fund's Directors; and (7) short-term debt securities having a maturity date of more than sixty days at time of purchase are valued on a mark-to-market basis until sixty days prior to maturity and thereafter at amortized cost based on their value on the 61st day. Short-term debt securities having a maturity date of sixty days or less at the time of purchase are valued at amortized cost. B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses on security transactions are determined by the identified cost method. Dividend income and other distributions are recorded on the ex-dividend date. Discounts are accreted and premiums are amortized over the life of the respective securities. Interest income is accrued daily except where collection is not expected. C. REPURCHASE AGREEMENTS -- Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other affiliated entities managed by the Investment Adviser, may transfer uninvested cash balances into one or more joint repurchase agreement accounts. These balances are invested in one or more repurchase agreements and are collateralized by cash, U.S. Treasury or federal agency obligations. The Fund may also invest directly with institutions in repurchase agreements. The Fund's custodian receives the collateral, which is marked-to-market daily to determine that the value of the collateral does not decrease below the repurchase price plus accrued interest. D. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than distribution fees), and realized and unrealized gains and losses are allocated to each class of shares based upon the relative net asset value on the date such items are recognized. Distribution fees are charged directly to the respective class. E. FOREIGN CURRENCY TRANSLATION AND FORWARD FOREIGN CURRENCY CONTRACTS -- The books and records of the Fund are maintained in U.S. dollars as follows: (1) the foreign currency market value of investment securities, other assets and liabilities and forward foreign currency contracts ("forward contracts") are translated at the exchange rates prevailing at the end of the period; and (2) purchases, sales, income and expenses are translated at the exchange rates prevailing on the respective dates of such transactions. The resultant exchange gains and losses are recorded as realized and unrealized gain/loss on foreign exchange transactions. Pursuant to U.S. federal income tax regulations, certain foreign exchange gains/losses included in realized and unrealized gain/loss are included in or are a reduction of ordinary income for federal income tax purposes. The Fund does not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the changes in the market prices of the securities. Forward contracts are valued daily at the appropriate exchange rates. The resultant unrealized exchange gains and losses are recorded as unrealized foreign currency gain or 27 <Page> loss. The Fund records realized gains or losses on delivery of the currency or at the time the forward contract is extinguished (compensated) by entering into a closing transaction prior to delivery. F. FEDERAL INCOME TAX POLICY -- It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required. G. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends and distributions to shareholders are recorded on the ex-dividend date. H. USE OF ESTIMATES -- The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. 2. INVESTMENT ADVISORY/ADMINISTRATION AGREEMENTS Effective November 1, 2004, pursuant to an Investment Advisory Agreement, the Fund pays the Investment Adviser an advisory fee, accrued daily and payable monthly, by applying the following annual rates to the net assets of the Fund determined at the close of each business day: 0.42% to the portion of the daily net assets not exceeding $500 million; 0.345% to the portion of the daily net assets exceeding $500 million but not exceeding $750 million; 0.295% to the portion of the daily net assets exceeding $750 million but not exceeding $1 billion; 0.27% to the portion of the daily net assets exceeding $1 billion but not exceeding $2 billion; 0.245% to the portion of the daily net assets exceeding $2 billion but not exceeding $3 billion; and 0.22% to the portion of the daily net assets in excess of $3 billion. Effective November 1, 2004 pursuant to an Administration Agreement with Morgan Stanley Services Company Inc. (the "Administrator"), an affiliate of the Investment Adviser, the Fund pays an administration fee, accrued daily and payable monthly, by applying the annual rate of 0.08% to the Fund's daily net assets. Prior to November 1, 2004, the Fund had retained the Investment Adviser to provide administrative services and to manage the investment of the Fund's assets pursuant to an investment management agreement pursuant to which the Fund paid the Investment Adviser a monthly management fee accrued daily and payable monthly, by applying the following annual rates to the net assets of the Fund determined as of the close of each business day: 0.50% to the portion of the daily net assets not exceeding $500 million; 0.425% to the portion of the daily net assets exceeding $500 million but not exceeding $750 million; 0.375% to the portion of the daily net assets exceeding $750 million but not exceeding $1 billion; 0.35% to the portion of the daily net assets exceeding $1 billion but not exceeding $2 billion; 0.325% to the portion of the daily net assets exceeding $2 billion but not exceeding $3 billion; and 0.30% to the portion of the daily net assets in excess of $3 billion. 28 <Page> 3. PLAN OF DISTRIBUTION Shares of the Fund are distributed by Morgan Stanley Distributors Inc. (the "Distributor"), an affiliate of the Investment Adviser and Administrator. The Fund has adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act. The Plan provides that the Fund will pay the Distributor a fee which is accrued daily and paid monthly at the following annual rates: (i) Class A -- up to 0.25% of the average daily net assets of Class A; (ii) Class B -- up to 0.75% of the average daily net assets of Class B; and (iii) Class C -- up to 0.85% of the average daily net assets of Class C. In the case of Class B shares, provided that the Plan continues in effect, any cumulative expenses incurred by the Distributor but not yet recovered may be recovered through the payment of future distribution fees from the Fund pursuant to the Plan and contingent deferred sales charges paid by investors upon redemption of Class B shares. Although there is no legal obligation for the Fund to pay expenses incurred in excess of payments made to the Distributor under the Plan and the proceeds of contingent deferred sales charges paid by investors upon redemption of shares, if for any reason the Plan is terminated, the Directors will consider at that time the manner in which to treat such expenses. The Distributor has advised the Fund that such excess amounts totaled $57,923,631 at August 31, 2005. In the case of Class A shares and Class C shares, expenses incurred pursuant to the Plan in any calendar year in excess of 0.25% or 0.85% of the average daily net assets of Class A or Class C, respectively, will not be reimbursed by the Fund through payments in any subsequent year, except that expenses representing a gross sales credit to Morgan Stanley Financial Advisors or other selected broker-dealer representatives may be reimbursed in the subsequent calendar year. For the year ended August 31, 2005, the distribution fee was accrued for Class A shares and Class C shares at the annual rate of 0.21% and 0.83%, respectively. The Distributor has informed the Fund that for the year ended August 31, 2005, it received contingent deferred sales charges from certain redemptions of the Fund's Class A shares, Class B shares and Class C shares of $8,704, $690,872 and $6,698, respectively and received $43,239 in front-end sales charges from sales of the Fund's Class A shares. The respective shareholders pay such charges which are not an expense of the Fund. 4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES The cost of purchases and proceeds from sales of portfolio securities, excluding short-term investments, for the year ended August 31, 2005, aggregated $214,862,128 and $340,635,436, respectively. Morgan Stanley Trust, an affiliate of the Investment Adviser, Administrator and Distributor, is the Funds transfer agent. 29 <Page> The Fund has an unfunded noncontributory defined benefit pension plan covering certain independent Directors of the Fund who will have served as independent Directors for at least five years at the time of retirement. Benefits under this plan are based on factors which include years of service and compensation. The Directors voted to close the plan to new participants and eliminate the future benefits growth due to increases to compensation after July 31, 2003. Aggregate pension costs for the year ended August 31, 2005, included in Directors' fees and expenses in the Statement of Operations amounted to $16,458. At August 31, 2005, the Fund had an accrued pension liability of $130,556 which is included in accrued expenses in the Statement of Assets and Liabilities. The Fund has an unfunded Deferred Compensation Plan (the "Compensation Plan") which allows each independent Director to defer payment of all, or a portion, of the fees he receives for serving on the Board of Directors. Each eligible Director generally may elect to have the deferred amounts credited with a return equal to the total return on one or more of the Morgan Stanley funds that are offered as investment options under the Compensation Plan. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the net asset value of the Fund. An affiliated company is a company in which the Fund has ownership of at least 5% of the voting securities. Transactions with such companies during the year ended August 31, 2005 were as follows: <Table> <Caption> REALIZED ISSUER PURCHASES SALES GAIN INCOME VALUE - ------ --------- -------- -------- ---------- ----------- Catalina Restaurant Group (Common Stock) -- -- -- -- $ 2,802,290 Catalina Restaurant Group (Preferred Stock) -- -- -- $ 251,891 1,430,002 Catalina Restaurant Group (Warrants) -- -- -- -- 0 </Table> 5. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS The Fund may enter into forward contracts to facilitate settlement of foreign currency denominated portfolio transactions or to manage foreign currency exposure associated with foreign currency denominated securities. Forward contracts involve elements of market risk in excess of the amount reflected in the Statement of Assets and Liabilities. The Fund bears the risk of an unfavorable change in the foreign exchange rates underlying the forward contracts. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts. 30 <Page> 6. CAPITAL STOCK Transactions in capital stock were as follows: <Table> <Caption> FOR THE YEAR FOR THE YEAR ENDED ENDED AUGUST 31, 2005 AUGUST 31, 2004 ---------------------------------- ---------------------------------- SHARES AMOUNT SHARES AMOUNT --------------- --------------- --------------- --------------- CLASS A SHARES Sold 2,420,086 $ 4,384,430 13,165,136 $ 23,468,524 Conversion from Class B 39,485,771 69,553,274 -- -- Reinvestment of dividends 650,643 1,160,278 551,791 979,557 Redeemed (10,998,888) (19,613,632) (24,480,351) (43,554,741) --------------- --------------- --------------- --------------- Net increase (decrease) -- Class A 31,557,612 55,484,350 (10,763,424) (19,106,660) --------------- --------------- --------------- --------------- CLASS B SHARES Sold 12,758,363 23,071,062 23,754,798 41,770,580 Conversion to Class A (39,731,082) (69,553,274) -- -- Reinvestment of dividends 4,583,006 8,219,932 6,066,686 10,706,332 Redeemed (62,941,319) (112,821,636) (81,860,251) (144,576,386) --------------- --------------- --------------- --------------- Net decrease -- Class B (85,331,032) (151,083,916) (52,038,767) (92,099,474) --------------- --------------- --------------- --------------- CLASS C SHARES Sold 1,927,189 3,489,545 4,446,414 7,876,921 Reinvestment of dividends 553,599 993,637 718,053 1,269,771 Redeemed (8,208,423) (14,684,654) (11,044,600) (19,548,258) --------------- --------------- --------------- --------------- Net decrease -- Class C (5,727,635) (10,201,472) (5,880,133) (10,401,566) --------------- --------------- --------------- --------------- CLASS D SHARES Sold 1,933,695 3,515,756 5,564,553 9,841,550 Reinvestment of dividends 3,348,157 6,024,152 3,657,711 6,488,162 Redeemed (21,377,185) (38,569,726) (28,019,698) (49,679,971) --------------- --------------- --------------- --------------- Net decrease -- Class D (16,095,333) (29,029,818) (18,797,434) (33,350,259) --------------- --------------- --------------- --------------- Net decrease in Fund (75,596,388) $ (134,830,856) (87,479,758) $ (154,957,959) =============== =============== =============== =============== </Table> 7. FEDERAL INCOME TAX STATUS The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification. Dividends and distributions which exceed net investment income and net realized capital gains for tax purposes are reported as distributions of paid-in-capital. 31 <Page> The tax character of distributions paid was as follows: <Table> <Caption> FOR THE YEAR FOR THE YEAR ENDED ENDED AUGUST 31, 2005 AUGUST 31, 2004 --------------- ---------------- Ordinary Income $ 35,262,301 $ 42,361,016 =============== ================ </Table> As of August 31, 2005, the tax-basis components of accumulated losses were as follows: <Table> Undistributed ordinary income $ 2,546,174 Undistributed long-term gains -- ---------------- Net accumulated earnings 2,546,174 Capital loss carryforward* (1,953,052,602) Post-October losses (44,210,274) Temporary differences (1,169,100) Net unrealized depreciation (333,191,248) ---------------- Total accumulated losses $ (2,329,077,050) ================ </Table> *As of August 31, 2005, the Fund had a net capital loss carryforward of $1,953,052,602 of which $12,603,314 will expire on August 31, 2006, $24,919,181 will expire on August 31, 2007, $69,856,779 will expire on August 31, 2008, $89,299,249 will expire on August 31, 2009, $245,944,739 will expire on August 31, 2010, $568,502,378 will expire on August 31, 2011, $758,434,573 will expire on August 31, 2012 and $183,492,389 will expire on August 31, 2013 to offset future capital gains to the extent provided by regulations. As of August 31, 2005, the Fund had temporary book/tax differences primarily attributable to post-October losses (capital losses incurred after October 31 within the taxable year which are deemed to arise on the first business day of the Fund's next taxable year), interest on bonds in default and book amortization of discounts on debt securities and permanent book/tax differences primarily attributable to tax adjustments on debt securities sold by the Fund and an expired capital loss carryforward. To reflect reclassifications arising from the permanent differences, paid-in-capital was charged $39,319,363, accumulated undistributed net investment income was charged $394,360 and accumulated net realized loss was credited $39,713,723. 8. LEGAL MATTERS The Investment Adviser, certain affiliates of the Investment Adviser, certain officers of such affiliates and certain investment companies advised by the Investment Adviser or its affiliates, including the Fund, are named as defendants in a consolidated class action. This consolidated action also names as defendants certain individual Trustees and Directors of the Morgan Stanley funds. The consolidated 32 <Page> amended complaint, filed in the United States District Court Southern District of New York on April 16, 2004, generally alleges that defendants, including the Fund, violated their statutory disclosure obligations and fiduciary duties by failing properly to disclose (i) that the Investment Adviser and certain affiliates of the Investment Adviser allegedly offered economic incentives to brokers and others to recommend the funds advised by the Investment Adviser or its affiliates to investors rather than funds managed by other companies, and (ii) that the funds advised by the Investment Adviser or its affiliates, including the Fund, allegedly paid excessive commissions to brokers in return for their efforts to recommend these funds to investors. The complaint seeks, among other things, unspecified compensatory damages, rescissionary damages, fees and costs. The defendants have moved to dismiss the action and intend to otherwise vigorously defend it. On March 9, 2005, Plaintiffs sought leave to supplement their complaint to assert claims on behalf of other investors. While the Fund and Adviser believe that each has meritorious defenses, the ultimate outcome of this matter is not presently determinable at this early stage of the litigation, and no provision has been made in the Fund's financial statements for the effect, if any, of this matter. 33 <Page> MORGAN STANLEY HIGH YIELD SECURITIES INC. FINANCIAL HIGHLIGHTS Selected ratios and per share data for a share of capital stock outstanding throughout each period: <Table> <Caption> FOR THE YEAR ENDED AUGUST 31, ---------------------------------------------------------------------- 2005 2004 2003 2002 2001 ---------- ---------- ---------- ---------- ---------- CLASS A SHARES SELECTED PER SHARE DATA: Net asset value, beginning of period $ 1.80 $ 1.67 $ 1.55 $ 2.32 $ 4.35 ---------- ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income++ 0.13 0.16 0.19 0.26 0.47 Net realized and unrealized gain (loss) (0.01) 0.09 0.10 (0.73) (1.99) ---------- ---------- ---------- ---------- ---------- Total income (loss) from investment operations 0.12 0.25 0.29 (0.47) (1.52) ---------- ---------- ---------- ---------- ---------- Less dividends and distributions from: Net investment income (0.13) (0.12) (0.17) (0.27) (0.51) Paid-in-capital - - - (0.03) - ---------- ---------- ---------- ---------- ---------- Total dividends and distributions (0.13) (0.12) (0.17) (0.30) (0.51) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 1.79 $ 1.80 $ 1.67 $ 1.55 $ 2.32 ========== ========== ========== ========== ========== TOTAL RETURN+ 6.84% 15.40% 19.88% (21.70)% (37.05)% RATIOS TO AVERAGE NET ASSETS(1): Expenses 1.12% 1.03% 1.06% 0.99% 0.77% Net investment income 7.24% 8.98% 11.96% 13.76% 15.17% SUPPLEMENTAL DATA: Net assets, end of period, in thousands $ 77,861 $ 21,595 $ 38,072 $ 23,879 $ 36,762 Portfolio turnover rate 43% 51% 66% 39% 49% </Table> - ---------- ++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES OUTSTANDING DURING THE PERIOD. + DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE. CALCULATED BASED ON THE NET ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD. (1) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC EXPENSES. SEE NOTES TO FINANCIAL STATEMENTS 34 <Page> <Table> <Caption> FOR THE YEAR ENDED AUGUST 31, ---------------------------------------------------------------------- 2005 2004 2003 2002 2001 ---------- ---------- ---------- ---------- ---------- CLASS B SHARES SELECTED PER SHARE DATA: Net asset value, beginning of period $ 1.79 $ 1.67 $ 1.55 $ 2.32 $ 4.34 ---------- ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income++ 0.12 0.15 0.18 0.25 0.46 Net realized and unrealized gain (loss) (0.02) 0.08 0.10 (0.73) (1.99) ---------- ---------- ---------- ---------- ---------- Total income (loss) from investment operations 0.10 0.23 0.28 (0.48) (1.53) ---------- ---------- ---------- ---------- ---------- Less dividends and distributions from: Net investment income (0.12) (0.11) (0.16) (0.26) (0.49) Paid-in-capital - - - (0.03) - ---------- ---------- ---------- ---------- ---------- Total dividends and distributions (0.12) (0.11) (0.16) (0.29) (0.49) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 1.77 $ 1.79 $ 1.67 $ 1.55 $ 2.32 ========== ========== ========== ========== ========== TOTAL RETURN+ 5.68% 14.15% 19.27% (22.00)% (37.27)% RATIOS TO AVERAGE NET ASSETS(1): Expenses 1.66% 1.60% 1.61% 1.56% 1.37% Net investment income 6.70% 8.41% 11.41% 13.19% 14.57% SUPPLEMENTAL DATA: Net assets, end of period, in thousands $ 205,739 $ 360,513 $ 422,468 $ 371,399 $ 664,706 Portfolio turnover rate 43% 51% 66% 39% 49% </Table> - ---------- ++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES OUTSTANDING DURING THE PERIOD. + DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE. CALCULATED BASED ON THE NET ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD. (1) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC EXPENSES. SEE NOTES TO FINANCIAL STATEMENTS 35 <Page> <Table> <Caption> FOR THE YEAR ENDED AUGUST 31, ---------------------------------------------------------------------- 2005 2004 2003 2002 2001 ---------- ---------- ---------- ---------- ---------- CLASS C SHARES SELECTED PER SHARE DATA: Net asset value, beginning of period $ 1.80 $ 1.67 $ 1.55 $ 2.32 $ 4.34 ---------- ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income++ 0.12 0.15 0.18 0.25 0.45 Net realized and unrealized gain (loss) (0.02) 0.09 0.10 (0.73) (1.98) ---------- ---------- ---------- ---------- ---------- Total income (loss) from investment operations 0.10 0.24 0.28 (0.48) (1.53) ---------- ---------- ---------- ---------- ---------- Less dividends and distributions from: Net investment income (0.12) (0.11) (0.16) (0.26) (0.49) Paid-in-capital - - - (0.03) - ---------- ---------- ---------- ---------- ---------- Total dividends and distributions (0.12) (0.11) (0.16) (0.29) (0.49) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 1.78 $ 1.80 $ 1.67 $ 1.55 $ 2.32 ========== ========== ========== ========== ========== TOTAL RETURN+ 5.58% 14.65% 19.14% (22.11)% (37.24)% RATIOS TO AVERAGE NET ASSETS(1): Expenses 1.74% 1.70% 1.71% 1.66% 1.47% Net investment income 6.62% 8.31% 11.31% 13.09% 14.47% SUPPLEMENTAL DATA: Net assets, end of period, in thousands $ 27,378 $ 37,907 $ 45,114 $ 33,978 $ 49,818 Portfolio turnover rate 43% 51% 66% 39% 49% </Table> - ---------- ++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES OUTSTANDING DURING THE PERIOD. + DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE. CALCULATED BASED ON THE NET ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD. (1) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC EXPENSES. SEE NOTES TO FINANCIAL STATEMENTS 36 <Page> <Table> <Caption> FOR THE YEAR ENDED AUGUST 31, ---------------------------------------------------------------------- 2005 2004 2003 2002 2001 ---------- ---------- ---------- ---------- ---------- CLASS D SHARES SELECTED PER SHARE DATA: Net asset value, beginning of period $ 1.80 $ 1.68 $ 1.55 $ 2.32 $ 4.35 ---------- ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income++ 0.13 0.16 0.19 0.26 0.48 Net realized and unrealized gain (loss) (0.01) 0.08 0.11 (0.73) (1.99) ---------- ---------- ---------- ---------- ---------- Total income (loss) from investment operations 0.12 0.24 0.30 (0.47) (1.51) ---------- ---------- ---------- ---------- ---------- Less dividends and distributions from: Net investment income (0.13) (0.12) (0.17) (0.27) (0.52) Paid-in-capital - - - (0.03) - ---------- ---------- ---------- ---------- ---------- Total dividends and distributions (0.13) (0.12) (0.17) (0.30) (0.52) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 1.79 $ 1.80 $ 1.68 $ 1.55 $ 2.32 ========== ========== ========== ========== ========== Total Return+ 7.04% 14.93% 20.82% (21.45)% (36.95)% Ratios to Average Net Assets(1): Expenses 0.91% 0.85% 0.86% 0.81% 0.62% Net investment income 7.45% 9.16% 12.16% 13.94% 15.32% Supplemental Data: Net assets, end of period, in thousands $ 124,556 $ 154,639 $ 175,471 $ 86,436 $ 137,319 Portfolio turnover rate 43% 51% 66% 39% 49% </Table> - ---------- ++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES OUTSTANDING DURING THE PERIOD. + CALCULATED BASED ON THE NET ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD. (1) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC EXPENSES. SEE NOTES TO FINANCIAL STATEMENTS 37 <Page> MORGAN STANLEY HIGH YIELD SECURITIES INC. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF MORGAN STANLEY HIGH YIELD SECURITIES INC.: We have audited the accompanying statement of assets and liabilities of Morgan Stanley High Yield Securities Inc. (the "Fund"), including the portfolio of investments, as of August 31, 2005, and the related statements of operations for the year then ended and changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of August 31, 2005, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Morgan Stanley High Yield Securities Inc. as of August 31, 2005, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. Deloitte & Touche LLP NEW YORK, NEW YORK OCTOBER 17, 2005 38 <Page> MORGAN STANLEY HIGH YIELD SECURITIES INC. DIRECTOR AND OFFICER INFORMATION INDEPENDENT DIRECTORS: <Table> <Caption> NUMBER OF PORTFOLIOS IN FUND TERM OF COMPLEX POSITION(S) OFFICE AND OVERSEEN NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) DURING BY OTHER DIRECTORSHIPS INDEPENDENT DIRECTOR REGISTRANT TIME SERVED* PAST 5 YEARS** DIRECTOR*** HELD BY DIRECTOR - --------------------------------------- ------------ ------------ ------------------------------- ----------- ---------------------- Michael Bozic (64) Director Since Private Investor; Director or 197 Director of various c/o Kramer Levin Naftalis & Frankel LLP April 1994 Trustee of the Retail Funds business Counsel to the Independent Directors (since April 1994) and the organizations. 1177 Avenue of the Americas Institutional Funds (since July New York, NY 10036 2003); formerly Vice Chairman of Kmart Corporation (December 1998-October 2000), Chairman and Chief Executive Officer of Levitz Furniture Corporation (November 1995-November 1998) and President and Chief Executive Officer of Hills Department Stores (May 1991- July 1995); formerly variously Chairman, Chief Executive Officer, President and Chief Operating Officer (1987-1991) of the Sears Merchandise Group of Sears, Roebuck & Co. Edwin J. Garn (72) Director Since Consultant; Director or Trustee 197 Director of Franklin 1031 N. Chartwell Court January 1993 of the Retail Funds (since Covey (time management Salt Lake City, UT 84103 January 1993) and the systems), BMW Bank of Institutional Funds (since July North America, Inc. 2003); member of the Utah (industrial loan Regional Advisory Board of corporation), Escrow Pacific Corp. (utility Bank USA (industrial company); formerly Managing loan corporation), Director of Summit Ventures LLC United Space Alliance (lobbying and consulting firm) (joint venture between (2000-2004); United States Lockheed Martin and Senator (R-Utah) (1974-1992) the Boeing Company) and Chairman, Senate Banking and Nuskin Asia Committee (1980-1986), Mayor of Pacific (multilevel Salt Lake City, Utah marketing); member of (1971-1974), Astronaut, Space the board of various Shuttle Discovery (April 12-19, civic and charitable 1985), and Vice Chairman, organizations. Huntsman Corporation (chemical company). Wayne E. Hedien (71) Director Since Retired; Director or Trustee of 197 Director of The PMI c/o Kramer Levin Naftalis & Frankel LLP September the Retail Funds (since Group Inc. (private Counsel to the Independent Directors 1997 September 1997) and the mortgage insurance); 1177 Avenue of the Americas Institutional Funds (since July Trustee and Vice New York, NY 10036 2003); formerly associated with Chairman of The Field the Allstate Companies Museum of Natural (1966-1994), most recently as History; director of Chairman of The Allstate various other business Corporation (March 1993- and charitable December 1994) and Chairman and organizations. Chief Executive Officer of its wholly-owned subsidiary, Allstate Insurance Company (July 1989-December 1994). </Table> 39 <Page> <Table> <Caption> NUMBER OF PORTFOLIOS IN FUND TERM OF COMPLEX POSITION(S) OFFICE AND OVERSEEN NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) DURING BY OTHER DIRECTORSHIPS INDEPENDENT DIRECTOR REGISTRANT TIME SERVED* PAST 5 YEARS** DIRECTOR*** HELD BY DIRECTOR - --------------------------------------- ------------ ------------ ------------------------------- ----------- ---------------------- Dr. Manuel H. Johnson (56) Director Since Senior Partner, Johnson Smick 197 Director of NVR, Inc. c/o Johnson Smick Group, Inc. July 1991 International, Inc., a (home construction); 888 16th Street, NW consulting firm; Chairman of Director of KFX Suite 740 the Audit Committee and Energy; Director of Washington, D.C. 20006 Director or Trustee of the RBS Greenwich Capital Retail Funds (since July 1991) Holdings (financial and the Institutional Funds holding company). (since July 2003); Co-Chairman and a founder of the Group of Seven Council (G7C), an international economic commission; formerly Vice Chairman of the Board of Governors of the Federal Reserve System and Assistant Secretary of the U.S. Treasury. Joseph J. Kearns (63) Director Since President, Kearns & Associates 198 Director of Electro c/o Kearns & Associates LLC July 2003 LLC (investment consulting); Rent Corporation PMB754 Deputy Chairman of the Audit (equipment leasing), 23852 Pacific Coast Highway Committee and Director or The Ford Family Malibu, CA 90265 Trustee of the Retail Funds Foundation, and the (since July 2003) and the UCLA Foundation. Institutional Funds (since August 1994); previously Chairman of the Audit Committee of the Institutional Funds (October 2001-July 2003); formerly CFO of the J. Paul Getty Trust. Michael E. Nugent (69) Director Since General Partner of Triumph 197 Director of various c/o Triumph Capital, L.P. July 1991 Capital, L.P., a private business 445 Park Avenue investment partnership; organizations. New York, NY 10022 Chairman of the Insurance Committee and Director or Trustee of the Retail Funds (since July 1991) and the Institutional Funds (since July 2001); formerly Vice President, Bankers Trust Company and BT Capital Corporation (1984-1988). Fergus Reid (73) Director Since Chairman of Lumelite Plastics 198 Trustee and Director c/o Lumelite Plastics Corporation July 2003 Corporation; Chairman of the of certain investment 85 Charles Colman Blvd. Governance Committee and companies in the Pawling, NY 12564 Director or Trustee of the JPMorgan Funds complex Retail Funds (since July 2003) managed by J.P. Morgan and the Institutional Funds Investment Management (since June 1992). Inc. </Table> 40 <Page> INTERESTED DIRECTORS: <Table> <Caption> NUMBER OF PORTFOLIOS IN FUND TERM OF COMPLEX POSITION(S) OFFICE AND OVERSEEN NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) DURING BY OTHER DIRECTORSHIPS INTERESTED DIRECTOR REGISTRANT TIME SERVED* PAST 5 YEARS** DIRECTOR*** HELD BY DIRECTOR - --------------------------------------- ------------ ------------ ------------------------------- ----------- ---------------------- Charles A. Fiumefreddo (72) Chairman of Since Chairman and Director or 197 None. c/o Morgan Stanley Trust the Board July 1991 Trustee of the Retail Funds Harborside Financial Center, and Director (since July 1991) and the Plaza Two, Institutional Funds (since July Jersey City, NJ 07311 2003); formerly Chief Executive Officer of the Retail Funds (until September 2002). James F. Higgins (57) Director Since Director or Trustee of the 197 Director of AXA c/o Morgan Stanley Trust June 2000 Retail Funds (since June 2000) Financial, Inc. and Harborside Financial Center, and the Institutional Funds The Equitable Life Plaza Two, (since July 2003); Senior Assurance Society of Jersey City, NJ 07311 Advisor of Morgan Stanley the United States (since August 2000); Director (financial services). of the Distributor and Dean Witter Realty Inc.; previously President and Chief Operating Officer of the Private Client Group of Morgan Stanley (May 1999-August 2000), and President and Chief Operating Officer of Individual Securities of Morgan Stanley (February 1997-May 1999). </Table> - ---------- * THIS IS THE EARLIEST DATE THE DIRECTOR BEGAN SERVING THE FUNDS ADVISED BY MORGAN STANLEY INVESTMENT ADVISORS INC. (THE "INVESTMENT ADVISER") (THE "RETAIL FUNDS"). ** THE DATES REFERENCED BELOW INDICATING COMMENCEMENT OF SERVICES AS DIRECTOR/TRUSTEE FOR THE RETAIL FUNDS AND THE FUNDS ADVISED BY MORGAN STANLEY INVESTMENT MANAGEMENT INC. AND MORGAN STANLEY AIP GP LP (THE "INSTITUTIONAL FUNDS") REFLECT THE EARLIEST DATE THE DIRECTOR/TRUSTEE BEGAN SERVING THE RETAIL OR INSTITUTIONAL FUNDS, AS APPLICABLE. *** THE FUND COMPLEX INCLUDES ALL OPEN-END AND CLOSED-END FUNDS (INCLUDING ALL OF THEIR PORTFOLIOS) ADVISED BY THE INVESTMENT ADVISER AND ANY FUNDS THAT HAVE AN INVESTMENT ADVISER THAT IS AN AFFILIATED PERSON OF THE INVESTMENT ADVISER (INCLUDING, BUT NOT LIMITED TO, MORGAN STANLEY INVESTMENT MANAGEMENT INC.). 41 <Page> OFFICERS: <Table> <Caption> TERM OF POSITION(S) OFFICE AND NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF EXECUTIVE OFFICER REGISTRANT TIME SERVED* PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS** - --------------------------------------- --------------- --------------- ----------------------------------------------------------- Ronald E. Robison (66) President and Since May 2003 President (since September 2005) and Principal Executive 1221 Avenue of the Americas Principal Officer of funds in the Fund Complex (since May 2003); New York, NY 10020 Executive Managing Director of Morgan Stanley & Co. Incorporated and Officer Morgan Stanley; Managing Director and Director of Morgan Stanley Investment Management Inc., Morgan Stanley Distribution Inc. and Morgan Stanley Distributors Inc.; Managing Director, Chief Administrative Officer and Director of Morgan Stanley Investment Advisors Inc. and Morgan Stanley Services Company Inc.; Chief Executive Officer and Director of Morgan Stanley Trust; Director of Morgan Stanley SICAV (since May 2004); President (since September 2005) and Principal Executive Officer (since May 2003) of the Van Kampen Funds; previously, Executive Vice President (July 2003-September 2005) of funds in the Fund Complex and the Van Kampen Funds. He was also previously President and Director of the Institutional Funds (March 2001-July 2003), Chief Global Operations Officer of Morgan Stanley Investment Management Inc. and Chief Executive Officer and Chairman of Van Kampen Investor Services. Joseph J. McAlinden (62) Vice President Since July 1995 Managing Director and Chief Investment Officer of the 1221 Avenue of the Americas Investment Adviser and Morgan Stanley Investment Management New York, NY 10020 Inc.; Chief Investment Officer of the Van Kampen Funds; Vice President of the Institutional Funds (since July 2003) and the Retail Funds (since July 1995). Barry Fink (50) Vice President Since General Counsel (since May 2000) and Managing Director 1221 Avenue of the Americas February 1997 (since December 2000) of Morgan Stanley Investment New York, NY 10020 Management; Managing Director (since December 2000), Secretary (since February 1997) and Director of the Investment Adviser and the Administrator; Vice President of the Retail Funds; Assistant Secretary of Morgan Stanley DW; Vice President of the Institutional Funds (since July 2003); Managing Director, Secretary and Director of the Distributor; previously Secretary (February 1997-July 2003) and General Counsel (February 1997-April 2004) of the Retail Funds; Vice President and Assistant General Counsel of the Investment Adviser and the Administrator (February 1997-December 2001). Amy R. Doberman (43) Vice President Since July 2004 Managing Director and General Counsel, U.S. Investment 1221 Avenue of the Americas Management; Managing Director of Morgan Stanley Investment New York, NY 10020 Management Inc. and the Investment Adviser, Vice President of the Institutional and Retail Funds (since July 2004); Vice President of the Van Kampen Funds (since August 2004); previously, Managing Director and General Counsel - Americas, UBS Global Asset Management (July 2000-July 2004) and General Counsel, Aeltus Investment Management, Inc. (January 1997-July 2000). Carsten Otto (41) Chief Since October Executive Director and U.S. Director of Compliance for 1221 Avenue of the Americas Compliance 2004 Morgan Stanley Investment Management (since October 2004); New York, NY 10020 Officer Executive Director of the Investment Adviser and Morgan Stanley Investment Management Inc.; formerly Assistant Secretary and Assistant General Counsel of the Morgan Stanley Retail Funds. </Table> 42 <Page> <Table> <Caption> TERM OF POSITION(S) OFFICE AND NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF EXECUTIVE OFFICER REGISTRANT TIME SERVED* PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS** - --------------------------------------- --------------- --------------- ----------------------------------------------------------- Stefanie V. Chang (38) Vice President Since July 2003 Executive Director of Morgan Stanley & Co. Incorporated, 1221 Avenue of the Americas Morgan Stanley Investment Management Inc. and the New York, NY 10020 Investment Adviser; Vice President of the Institutional Funds (since December 1997) and the Retail Funds (since July 2003); formerly practiced law with the New York law firm of Rogers & Wells (now Clifford Chance US LLP). Francis J. Smith (40) Treasurer and Treasurer since Executive Director of the Investment Adviser and the c/o Morgan Stanley Trust Chief Financial July 2003 and Administration (since December 2001); previously, Vice Harborside Financial Center, Officer Chief Financial President of the Retail Funds (September 2002-July 2003); Plaza Two, Officer since Vice President of the Investment Adviser and the Jersey City, NJ 07311 September 2002 Administrator (August 2000-November 2001) and Senior Manager at PricewaterhouseCoopers LLP (January 1998-August 2000). Thomas F. Caloia (59) Vice President Since July 2003 Executive Director (since December 2002) and Assistant c/o Morgan Stanley Trust Treasurer of the Investment Adviser, the Distributor and Harborside Financial Center, the Administrator; previously Treasurer of the Retail Funds Plaza Two, (April 1989-July 2003); formerly First Vice President of Jersey City, NJ 07311 the Investment Adviser, the Distributor and the Administrator. Mary E. Mullin (38) Secretary Since July 2003 Executive Director of Morgan Stanley & Co. Incorporated, 1221 Avenue of the Americas Morgan Stanley Investment Management Inc. and the New York, NY 10020 Investment Adviser; Secretary of the Institutional Funds (since June 1999) and the Retail Funds (since July 2003); formerly practiced law with the New York law firms of McDermott, Will & Emery and Skadden, Arps, Slate, Meagher & Flom LLP. </Table> - ---------- * THIS IS THE EARLIEST DATE THE OFFICER BEGAN SERVING THE RETAIL FUNDS. EACH OFFICER SERVES AN INDEFINITE TERM, UNTIL HIS OR HER SUCCESSOR IS ELECTED. ** THE DATES REFERENCED BELOW INDICATING COMMENCEMENT OF SERVICE AS AN OFFICER FOR THE RETAIL AND INSTITUTIONAL FUNDS REFLECT THE EARLIEST DATE THE OFFICER BEGAN SERVING THE RETAIL OR INSTITUTIONAL FUNDS, AS APPLICABLE. 2005 FEDERAL TAX NOTICE (UNAUDITED) During the fiscal year ended August 31, 2005, 2.46% of the ordinary dividends paid by the Fund qualified for the dividends received deduction available to corporations. Additionally, please note that 2.65% of the Fund's ordinary dividends paid during the fiscal year ended August 31, 2005 qualified for the lower income tax rate available to individuals under the Jobs and Growth Tax Relief Reconciliation Act of 2003. 43 <Page> DIRECTORS Michael Bozic Charles A. Fiumefreddo Edwin J. Garn Wayne E. Hedien James F. Higgins Dr. Manuel H. Johnson Joseph J. Kearns Michael E. Nugent Fergus Reid OFFICERS Charles A. Fiumefreddo CHAIRMAN OF THE BOARD Ronald E. Robison PRESIDENT and PRINCIPAL EXECUTIVE OFFICER Joseph J. McAlinden VICE PRESIDENT Barry Fink VICE PRESIDENT Amy R. Doberman VICE PRESIDENT Carsten Otto CHIEF COMPLIANCE OFFICER Stefanie V. Chang VICE PRESIDENT Francis J. Smith TREASURER and CHIEF FINANCIAL OFFICER Thomas F. Caloia VICE PRESIDENT Mary E. Mullin SECRETARY TRANSFER AGENT Morgan Stanley Trust Harborside Financial Center, Plaza Two Jersey City, New Jersey 07311 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Deloitte & Touche LLP Two World Financial Center New York, New York 10281 INVESTMENT ADVISER Morgan Stanley Investment Advisors Inc. 1221 Avenue of the Americas New York, New York 10020 This report is submitted for the general information of the shareholders of the Fund. For more detailed information about the Fund, its fees and expenses and other pertinent information, please read its Prospectus. The Fund's Statement of Additional Information contains additional information about the Fund, including its directors. It is available, without charge, by calling (800) 869-NEWS. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus. Read the Prospectus carefully before investing. Investments and services offered through Morgan Stanley DW Inc., member SIPC. Morgan Stanley Distributors Inc., member NASD (C) 2005 Morgan Stanley [MORGAN STANLEY LOGO] 37915RPT-RA05-00859P-Y08/05 [GRAPHIC] MORGAN STANLEY FUNDS MORGAN STANLEY HIGH YIELD SECURITIES ANNUAL REPORT AUGUST 31, 2005 [MORGAN STANLEY LOGO] <Page> Item 2. Code of Ethics. (a) The Fund has adopted a code of ethics (the "Code of Ethics") that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the Fund or a third party. (b) No information need be disclosed pursuant to this paragraph. (c) The Fund has amended its Code of Ethics during the period covered by the shareholder report presented in Item 1 hereto to delete from the end of the following paragraph on page 2 of the Code the phrase "to the detriment of the Fund.": "Each Covered Officer must not use his personal influence or personal relationship improperly to influence investment decisions or financial reporting by the Fund whereby the Covered Officer would benefit personally (directly or indirectly)." Additionally, Exhibit B was amended to remove Mitchell M. Merin as a covered officer. (d) Not applicable. (e) Not applicable. (f) (1) The Fund's Code of Ethics is attached hereto as Exhibit A. (2) Not applicable. (3) Not applicable. Item 3. Audit Committee Financial Expert. The Fund's Board of Directors has determined that it has two "audit committee financial experts" serving on its audit committee, each of whom are "independent" Directors: Dr. Manuel H. Johnson and Joseph J. Kearns. Under applicable securities laws, a person who is determined to be an audit committee financial expert will not be deemed an "expert" for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities that are greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and Board of Directors in the absence of such designation or identification. <Page> Item 4. Principal Accountant Fees and Services. (a)(b)(c)(d) and (g). Based on fees billed for the periods shown: 2005 <Table> <Caption> REGISTRANT COVERED ENTITIES(1) AUDIT FEES $ 46,106 N/A NON-AUDIT FEES AUDIT-RELATED FEES $ 540 (2) $ (2) TAX FEES $ 5,368 (3) $ (4) ALL OTHER FEES $ - $ - TOTAL NON-AUDIT FEES $ 5,908 $ TOTAL $ 52,014 $ </Table> 2004 <Table> <Caption> REGISTRANT COVERED ENTITIES(1) AUDIT FEES $ 44,630 N/A NON-AUDIT FEES AUDIT-RELATED FEES $ 452 (2) $ 5,067,400 (2) TAX FEES $ 5,313 (3) $ 545,053 (4) ALL OTHER FEES $ - $ - (5) TOTAL NON-AUDIT FEES $ 5,765 $ 5,612,453 TOTAL $ 50,395 $ 5,612,453 </Table> N/A- Not applicable, as not required by Item 4. (1) Covered Entities include the Adviser (excluding sub-advisors) and any entity controlling, controlled by or under common control with the Adviser that provides ongoing services to the Registrant. (2) Audit-Related Fees represent assurance and related services provided that are reasonably related to the performance of the audit of the financial statements of the Covered Entities' and funds advised by the Adviser or its affiliates, specifically data verification and agreed-upon procedures related to asset securitizations and agreed-upon procedures engagements. (3) Tax Fees represent tax compliance, tax planning and tax advice services provided in connection with the preparation and review of the Registrant's tax returns. (4) Tax Fees represent tax compliance, tax planning and tax advice services provided in connection with the review of Covered Entities' tax returns. (5) All other fees represent project management for future business applications and improving business and operational processes. <Page> (e)(1) The audit committee's pre-approval policies and procedures are as follows: APPENDIX A AUDIT COMMITTEE AUDIT AND NON-AUDIT SERVICES PRE-APPROVAL POLICY AND PROCEDURES OF THE MORGAN STANLEY RETAIL AND INSTITUTIONAL FUNDS AS ADOPTED AND AMENDED JULY 23, 2004,(1) 1. STATEMENT OF PRINCIPLES The Audit Committee of the Board is required to review and, in its sole discretion, pre-approve all Covered Services to be provided by the Independent Auditors to the Fund and Covered Entities in order to assure that services performed by the Independent Auditors do not impair the auditor's independence from the Fund. The SEC has issued rules specifying the types of services that an independent auditor may not provide to its audit client, as well as the audit committee's administration of the engagement of the independent auditor. The SEC's rules establish two different approaches to pre-approving services, which the SEC considers to be equally valid. Proposed services either: may be pre-approved without consideration of specific case-by-case services by the Audit Committee ("GENERAL PRE-APPROVAL"); or require the specific pre-approval of the Audit Committee or its delegate ("SPECIFIC PRE-APPROVAL"). The Audit Committee believes that the combination of these two approaches in this Policy will result in an effective and efficient procedure to pre-approve services performed by the Independent Auditors. As set forth in this Policy, unless a type of service has received general pre-approval, it will require specific pre-approval by the Audit Committee (or by any member of the Audit Committee to which pre-approval authority has been delegated) if it is to be provided by the Independent Auditors. Any proposed services exceeding pre-approved cost levels or budgeted amounts will also require specific pre-approval by the Audit Committee. The appendices to this Policy describe the Audit, Audit-related, Tax and All Other services that have the general pre-approval of the Audit Committee. The term of any general pre-approval is 12 months from the date of pre-approval, unless the Audit Committee considers and provides a different period and states otherwise. The Audit Committee will annually review and pre-approve the services that may be provided by the Independent Auditors without obtaining specific pre-approval from the Audit Committee. The Audit Committee will add to or subtract from the list of general pre-approved services from time to time, based on subsequent determinations. - ---------- (1) This Audit Committee Audit and Non-Audit Services Pre-Approval Policy and Procedures (the "POLICY"), adopted as of the date above, supersedes and replaces all prior versions that may have been adopted from time to time. <Page> The purpose of this Policy is to set forth the policy and procedures by which the Audit Committee intends to fulfill its responsibilities. It does not delegate the Audit Committee's responsibilities to pre-approve services performed by the Independent Auditors to management. The Fund's Independent Auditors have reviewed this Policy and believes that implementation of the Policy will not adversely affect the Independent Auditors' independence. 2. DELEGATION As provided in the Act and the SEC's rules, the Audit Committee may delegate either type of pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting. 3. AUDIT SERVICES The annual Audit services engagement terms and fees are subject to the specific pre-approval of the Audit Committee. Audit services include the annual financial statement audit and other procedures required to be performed by the Independent Auditors to be able to form an opinion on the Fund's financial statements. These other procedures include information systems and procedural reviews and testing performed in order to understand and place reliance on the systems of internal control, and consultations relating to the audit. The Audit Committee will approve, if necessary, any changes in terms, conditions and fees resulting from changes in audit scope, Fund structure or other items. In addition to the annual Audit services engagement approved by the Audit Committee, the Audit Committee may grant general pre-approval to other Audit services, which are those services that only the Independent Auditors reasonably can provide. Other Audit services may include statutory audits and services associated with SEC registration statements (on Forms N-1A, N-2, N-3, N-4, etc.), periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings. The Audit Committee has pre-approved the Audit services in Appendix B.1. All other Audit services not listed in Appendix B.1 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated). 4. AUDIT-RELATED SERVICES Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of the Fund's financial statements and, to the extent they are Covered Services, the Covered Entities or that are traditionally performed by the Independent Auditors. Because the Audit Committee believes that the provision of Audit-related services does not impair the independence of the auditor and is consistent with the SEC's rules on auditor independence, the Audit Committee may grant general pre-approval to Audit-related services. Audit-related services include, among others, accounting consultations related to accounting, financial reporting or disclosure matters <Page> not classified as "Audit services"; assistance with understanding and implementing new accounting and financial reporting guidance from rulemaking authorities; agreed-upon or expanded audit procedures related to accounting and/or billing records required to respond to or comply with financial, accounting or regulatory reporting matters; and assistance with internal control reporting requirements under Forms N-SAR and/or N-CSR. The Audit Committee has pre-approved the Audit-related services in Appendix B.2. All other Audit-related services not listed in Appendix B.2 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated). 5. TAX SERVICES The Audit Committee believes that the Independent Auditors can provide Tax services to the Fund and, to the extent they are Covered Services, the Covered Entities, such as tax compliance, tax planning and tax advice without impairing the auditor's independence, and the SEC has stated that the Independent Auditors may provide such services. Pursuant to the preceding paragraph, the Audit Committee has pre-approved the Tax Services in Appendix B.3. All Tax services in Appendix B.3 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated). 6. ALL OTHER SERVICES The Audit Committee believes, based on the SEC's rules prohibiting the Independent Auditors from providing specific non-audit services, that other types of non-audit services are permitted. Accordingly, the Audit Committee believes it may grant general pre-approval to those permissible non-audit services classified as All Other services that it believes are routine and recurring services, would not impair the independence of the auditor and are consistent with the SEC's rules on auditor independence. The Audit Committee has pre-approved the All Other services in Appendix B.4. Permissible All Other services not listed in Appendix B.4 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated). 7. PRE-APPROVAL FEE LEVELS OR BUDGETED AMOUNTS Pre-approval fee levels or budgeted amounts for all services to be provided by the Independent Auditors will be established annually by the Audit Committee. Any proposed services exceeding these levels or amounts will require specific pre-approval by the Audit Committee. The Audit Committee is mindful of the overall relationship of fees for audit and non-audit services in determining whether to pre-approve any such services. 8. PROCEDURES All requests or applications for services to be provided by the Independent Auditors that do not require specific approval by the Audit Committee will be submitted to the Fund's Chief Financial Officer and must include a detailed description of the services to be <Page> rendered. The Fund's Chief Financial Officer will determine whether such services are included within the list of services that have received the general pre-approval of the Audit Committee. The Audit Committee will be informed on a timely basis of any such services rendered by the Independent Auditors. Requests or applications to provide services that require specific approval by the Audit Committee will be submitted to the Audit Committee by both the Independent Auditors and the Fund's Chief Financial Officer, and must include a joint statement as to whether, in their view, the request or application is consistent with the SEC's rules on auditor independence. The Audit Committee has designated the Fund's Chief Financial Officer to monitor the performance of all services provided by the Independent Auditors and to determine whether such services are in compliance with this Policy. The Fund's Chief Financial Officer will report to the Audit Committee on a periodic basis on the results of its monitoring. Both the Fund's Chief Financial Officer and management will immediately report to the chairman of the Audit Committee any breach of this Policy that comes to the attention of the Fund's Chief Financial Officer or any member of management. 9. ADDITIONAL REQUIREMENTS The Audit Committee has determined to take additional measures on an annual basis to meet its responsibility to oversee the work of the Independent Auditors and to assure the auditor's independence from the Fund, such as reviewing a formal written statement from the Independent Auditors delineating all relationships between the Independent Auditors and the Fund, consistent with Independence Standards Board No. 1, and discussing with the Independent Auditors its methods and procedures for ensuring independence. 10. COVERED ENTITIES Covered Entities include the Fund's investment adviser(s) and any entity controlling, controlled by or under common control with the Fund's investment adviser(s) that provides ongoing services to the Fund(s). Beginning with non-audit service contracts entered into on or after May 6, 2003, the Fund's audit committee must pre-approve non-audit services provided not only to the Fund but also to the Covered Entities if the engagements relate directly to the operations and financial reporting of the Fund. This list of Covered Entities would include: MORGAN STANLEY RETAIL FUNDS Morgan Stanley Investment Advisors Inc. Morgan Stanley & Co. Incorporated Morgan Stanley DW Inc. Morgan Stanley Investment Management Inc. Morgan Stanley Investment Management Limited Morgan Stanley Investment Management Private Limited Morgan Stanley Asset & Investment Trust Management Co., Limited Morgan Stanley Investment Management Company Van Kampen Asset Management Morgan Stanley Services Company, Inc. Morgan Stanley Distributors Inc. Morgan Stanley Trust FSB <Page> MORGAN STANLEY INSTITUTIONAL FUNDS Morgan Stanley Investment Management Inc. Morgan Stanley Investment Advisors Inc. Morgan Stanley Investment Management Limited Morgan Stanley Investment Management Private Limited Morgan Stanley Asset & Investment Trust Management Co., Limited Morgan Stanley Investment Management Company Morgan Stanley & Co. Incorporated Morgan Stanley Distribution, Inc. Morgan Stanley AIP GP LP Morgan Stanley Alternative Investment Partners LP (e)(2) Beginning with non-audit service contracts entered into on or after May 6, 2003, the audit committee also is required to pre-approve services to Covered Entities to the extent that the services are determined to have a direct impact on the operations or financial reporting of the Registrant. 100% of such services were pre-approved by the audit committee pursuant to the Audit Committee's pre-approval policies and procedures (attached hereto). (f) Not applicable. (g) See table above. (h) The audit committee of the Board of Directors has considered whether the provision of services other than audit services performed by the auditors to the Registrant and Covered Entities is compatible with maintaining the auditors' independence in performing audit services. Item 5. Audit Committee of Listed Registrants. (a) The Fund has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act whose members are: Michael Bozic, Edwin J. Garn, Wayne E. Hedien, Manual H. Johnson, Joseph J. Kearns, Michael Nugent and Fergus Reid. (b) Not applicable. Item 6. Schedule of Investments Refer to Item 1. <Page> Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Applicable only to reports filed by closed-end funds. Item 8. Portfolio Managers of Closed-End Management Investment Companies Applicable only to reports filed by closed-end funds. Item 9. Closed-End Fund Repurchases Applicable only to reports filed by closed-end funds. Item 10. Submission of Matters to a Vote of Security Holders Not applicable. Item 11. Controls and Procedures (a) The Fund's principal executive officer and principal financial officer have concluded that the Fund's disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Fund in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, based upon such officers' evaluation of these controls and procedures as of a date within 90 days of the filing date of the report. (b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. Exhibits (a) The Code of Ethics for Principal Executive and Senior Financial Officers is attached hereto. (b) A separate certification for each principal executive officer and principal financial officer of the registrant are attached hereto as part of EX-99.CERT. <Page> SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Morgan Stanley High Yield Securities Inc. /s/ Ronald E. Robison Ronald E. Robison Principal Executive Officer October 20, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Ronald E. Robison Ronald E. Robison Principal Executive Officer October 20, 2005 /s/ Francis Smith Francis Smith Principal Financial Officer October 20, 2005