<PAGE>
DEAN WITTER INCOME BUILDER FUND Two World Trade Center, New York,
LETTER TO THE SHAREHOLDERS March 31, 1997 New York 10048
DEAR SHAREHOLDER:
The six-month period ended March 31, 1997, saw exceptional gains in the stock
market with the major indices breaking record high after record high.
However, at the end of the period, concerns over rising interest rates and
dollar-related earnings shortfalls caused equities to retreat. These issues
affected the bond market as well, producing increased volatility, especially
as the period closed.
PERFORMANCE AND PORTFOLIO
For the six-month period ended March 31, 1997, Dean Witter Income Builder
Fund provided a total return of 7.89 percent versus 11.26 percent for the
Standard & Poor's 500 Composite Stock Index (S&P 500) and 9.78 percent for
the Lipper Equity Income Funds Index. Since its inception on June 26, 1996,
Dean Witter Income Builder Fund has provided a total return of 11.23 percent.
From its initial offering, the Fund has maintained its target asset mix of 40
percent large-capitalization stocks, 30 percent convertible securities, 10
percent high-yield bonds, 10 percent real estate investment trusts and 10
percent investment-grade bonds.
The large-capitalization segment of the Fund has remained relatively fully
invested. At the end of the six-month period under review, this segment was
well diversified, with 54 common stock holdings spread across 28 different
industries.
The convertible portion of the Fund performed well but lagged equities for
much of the period. This occurred because the convertible universe consists
of many small-cap companies that, as a group, advanced less rapidly than the
large caps. The Fund's bias toward yield, however, provided significant
downside support as the overall market retreated in the latter half of the
first quarter of 1997. We expect that convertibles will perform well over the
long run, offering superior returns in modestly increasing, stable or
declining equity markets but lagging equities during
<PAGE>
DEAN WITTER INCOME BUILDER FUND
LETTER TO THE SHAREHOLDERS March 31, 1997, continued
periods of very strong markets. We continue to focus on small-and
mid-capitalization issues in the convertible portion of the Fund.
The real estate investment trust (REIT) segment of the Fund moved
substantially higher during the period. Strong fundamentals and renewed
interest in the sector drove many of these stocks to new highs. Our exposure
in this sector is split between REIT stocks and REIT convertible securities.
The Fund's fixed-income portfolio demonstrated fairly low sensitivity to
interest-rate fluctuations, as desired and anticipated. This portion of the
Fund is structured to provide maximum current income with low exposure to
interest-rate movements. This strategy helped reduce volatility in the Fund
during the period.
GOING FORWARD
We believe that Dean Witter Income Builder Fund, which is well diversified
among various asset classes, will continue to provide one of the best ways to
seek reasonable income along with the potential for capital appreciation. We
appreciate your support of Dean Witter Income Builder Fund and look forward
to continuing to serve your investment needs in the future.
Very truly yours,
/s/ Charles A. Fiumefreddo
CHARLES A. FIUMEFREDDO
Chairman of the Board
<PAGE>
DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS March 31, 1997 (unaudited)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (45.2%)
Apparel (0.8%)
83,000 Kellwood Co. .................................................... $ 2,075,000
--------------
Auto Parts (0.9%)
68,000 Dana Corp. ...................................................... 2,235,500
--------------
Automotive (2.6%)
72,000 Chrysler Corp. .................................................. 2,160,000
68,000 Ford Motor Co. .................................................. 2,133,500
38,000 General Motors Corp. ............................................ 2,104,250
--------------
6,397,750
--------------
Banks (4.9%)
44,000 Corestates Financial Corp. ...................................... 2,090,000
61,000 First Security Corp. ............................................ 1,959,625
48,000 First Tennessee National Corp. .................................. 2,028,000
42,500 KeyCorp ......................................................... 2,071,875
84,000 Washington Federal, Inc. ........................................ 1,911,000
48,000 Wilmington Trust Corp. ......................................... 2,040,000
--------------
12,100,500
--------------
Banks - Thrift Institutions (0.9%)
44,000 Washington Mutual, Inc. ......................................... 2,123,000
--------------
Building Materials (0.9%)
33,000 Vulcan Materials Co. ............................................ 2,140,875
--------------
Chemicals (2.6%)
26,500 Dow Chemical Co. ................................................ 2,120,000
38,000 PPG Industries, Inc. ............................................ 2,052,000
29,000 Rohm & Haas Co. ................................................ 2,171,375
--------------
6,343,375
--------------
Conglomerates (0.9%)
54,000 Tenneco, Inc. ................................................... 2,106,000
--------------
Financial (0.8%)
51,000 TCF Financial Corp. ............................................. 2,020,875
--------------
Financial - Miscellaneous (1.7%)
55,000 Fannie Mae ...................................................... 1,986,875
22,000 Student Loan Marketing Assoc. .................................. 2,095,500
--------------
4,082,375
--------------
Food Processing (0.8%)
82,000 Hormel Foods Corp. .............................................. 2,101,250
--------------
Healthcare - Drugs (0.8%)
28,500 Schering-Plough Corp. .......................................... 2,073,375
--------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS March 31, 1997 (unaudited) continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
Insurance (3.4%)
38,000 Jefferson-Pilot Corp. ........................................... $ 2,066,250
39,000 Lincoln National Corp. ......................................... 2,086,500
39,000 Providian Corp. ................................................. 2,086,500
38,000 Torchmark Corp. ................................................. 2,104,250
--------------
8,343,500
--------------
Machinery - Diversified (0.9%)
27,000 Johnson Controls, Inc. .......................................... 2,173,500
--------------
Manufacturing - Consumer & Industrial Products (0.8%)
43,000 Whirlpool Corp. ................................................. 2,047,875
--------------
Miscellaneous (0.9%)
69,000 American Greetings Corp. (Class A) .............................. 2,190,750
--------------
Mobil Home & Recreation (0.9%)
87,000 Fleetwood Enterprises, Inc. ..................................... 2,175,000
--------------
Oil & Gas (0.9%)
53,500 Ashland Inc. .................................................... 2,153,375
--------------
Real Estate Investment Trust (5.8%)
99,000 American General Hospitality Corp. ............................. 2,697,750
42,916 Camden Property Trust ........................................... 1,169,461
62,100 Excel Realty Trust, Inc. ....................................... 1,568,025
119,000 Glenborough Realty Trust Inc. ................................... 2,380,000
59,250 Healthcare Realty Trust, Inc. ................................... 1,621,969
85,000 Liberty Property Trust .......................................... 2,082,500
50,000 LTC Properties, Inc. ............................................ 831,250
42,000 Reckson Associates Realty Corp. ................................. 1,937,250
--------------
14,288,205
--------------
Restaurants (0.9%)
79,000 Sbarro, Inc. .................................................... 2,231,750
--------------
Retail - Specialty Apparel (0.9%)
116,000 Limited (The), Inc. ............................................. 2,131,500
--------------
Steel (0.9%)
40,000 Timken Co. ...................................................... 2,140,000
--------------
Telecommunications (1.7%)
34,000 Bell Atlantic Corp. ............................................. 2,069,750
61,000 U.S. West Communications Group, Inc. ............................ 2,074,000
--------------
4,143,750
--------------
Telephones (1.7%)
59,600 AT&T Corp. ...................................................... 2,071,100
40,000 SBC Communications, Inc. ........................................ 2,105,000
--------------
4,176,100
--------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS March 31, 1997 (unaudited) continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
Tobacco (1.7%)
18,000 Philip Morris Companies, Inc. .................................. $ 2,054,250
75,000 UST, Inc. ....................................................... 2,090,625
--------------
4,144,875
--------------
Utilities - Electric (3.5%)
71,000 Consolidated Edison Company of New York, Inc. ................... 2,130,000
65,000 New England Electric System ..................................... 2,234,375
105,500 Peco Energy Co. ................................................ 2,149,562
80,500 Public Service Enterprise Group, Inc. ........................... 2,113,125
--------------
8,627,062
--------------
Utilities - Telephone (0.9%)
47,000 GTE Corp. ....................................................... 2,191,375
--------------
Wholesale Distributor (0.8%)
69,000 Supervalu, Inc. ................................................ 2,052,750
--------------
TOTAL COMMON STOCKS
(Identified Cost $102,630,867) .................................. 111,011,242
--------------
CONVERTIBLE PREFERRED STOCKS (17.8%)
Auto Parts (1.5%)
85,000 Mascotech, Inc. $1.20 ........................................... 1,572,500
83,500 Walbro Capital Trust $2.00 ..................................... 2,171,000
--------------
3,743,500
--------------
Banks (1.4%)
135,000 National Australia Bank, Ltd. $1.969 (Australia)(Units)++ ...... 3,375,000
--------------
Broadcast Media (2.3%)
70,000 Chancellor Broadcasting Co. $3.50 -144A* ........................ 3,561,250
22,000 SFX Broadcasting, Inc. (Series D) $3.25 ........................ 943,250
145,000 Triathlon Broadcasting Co. $0.945 ............................... 1,196,250
--------------
5,700,750
--------------
Chemicals (1.4%)
151,600 Atlantic Richfield Co. $2.228 ................................... 3,335,200
--------------
Computer Software (0.6%)
18,000 Microsoft Corp. (Series A) $2.196 ............................... 1,458,000
--------------
Finance (2.1%)
75,000 Insignia Financing, Inc. $3.25 -144A* ........................... 3,379,725
50,000 Merrill Lynch & Co., Inc. (STRYPES) $2.39 (1) ................... 1,887,500
--------------
5,267,225
--------------
Metals & Mining (1.1%)
50,000 Cyprus Amax Minerals Co. (Series A) $4.00 ....................... 2,725,000
--------------
Paper Products (0.1%)
7,000 James River Corp. of Virginia (Series K) $3.375 ................. 341,250
--------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS March 31, 1997 (unaudited) continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
Publishing (0.8%)
195,200 Hollinger International, Inc. $0.951 ............................ $ 1,952,000
--------------
Real Estate (0.7%)
36,600 Rouse Co. (Series B) $3.00 ...................................... 1,793,400
--------------
Real Estate Investment Trust (3.0%)
56,700 FelCor Suite Hotels, Inc. (Series A) $1.95 ...................... 1,615,950
150,000 Merry Land & Investment Co., Inc. (Series C) $2.15 .............. 3,937,500
71,200 Oasis Residential, Inc. (Series A) $2.25 ........................ 1,913,500
--------------
7,466,950
--------------
Steel (0.4%)
24,000 WHX Corp. (Series A) $3.25 ...................................... 864,000
--------------
Telecommunications (2.4%)
50,000 General Datacomm Industries, Inc. $2.25 -144A* .................. 984,400
48,000 Globalstar Telecommunications, Ltd. $3.25 ...................... 2,484,000
49,000 Loral Space & Communications Ltd. $3.00 -144A* .................. 2,388,750
--------------
5,857,150
--------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Identified Cost $44,033,748) ................................... 43,879,425
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE
- ----------- -------- ---------- ------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (36.2%)
CONVERTIBLE BONDS (16.1%)
Cable/Cellular (1.2%)
$9,350 U.S. Cellular Corp. ............................................ 0.00% 06/15/15 3,060,255
------------
Healthcare (4.7%)
1,500 ARV Assisted Living, Inc. -144A* ................................ 6.75 04/01/06 1,254,375
500 Beverly Enterprises, Inc. ....................................... 5.50 08/01/18 559,400
3,000 Emeritus Corp. -144A* ........................................... 6.25 01/01/06 2,443,140
2,400 Integrated Health Services, Inc. ................................ 6.00 01/01/03 2,530,296
3,500 Phymatrix Corp. ................................................. 6.75 06/15/03 2,957,010
1,925 Physicians Resource Group, Inc. - 144A* ......................... 6.00 12/01/01 1,712,287
------------
11,456,508
------------
Healthcare - Miscellaneous (0.9%)
2,730 Pharmaceutical Marketing Services, Inc. ......................... 6.25 02/01/03 2,139,637
------------
Heating & Air Conditioning (0.8%)
1,850 American Residential Holdings Corp. - 144A* ..................... 7.25 04/15/04 1,826,875
------------
Hotels/Motels (0.4%)
1,165 Signature Resorts, Inc. ........................................ 5.75 01/15/07 968,406
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS March 31, 1997 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Office Equipment & Supplies (1.9%)
$5,630 U.S. Office Products Co. ........................................ 5.50 % 05/15/03 $4,708,088
Oil Related (0.8%)
2,000 Offshore Logistics, Inc. -144A* ................................. 6.00 12/15/03 1,916,260
--------------
Real Estate Investment Trust (1.4%)
3,825 Capstone Capital Corp. ......................................... 6.55 03/14/02 3,495,056
--------------
Shoes (0.8%)
2,000 Nine West Group, Inc. -144A* .................................... 5.50 07/15/03 1,947,360
--------------
Steel (0.9%)
2,250 USX Corp. ...................................................... 7.00 06/15/17 2,266,875
--------------
Technology (1.2%)
2,000 Eidos PLC -144A* (United Kingdom) ............................... 6.25 07/31/02 1,950,000
1,000 Lernout & Hauspie Speech Products NV -144A* (Belgium) ........... 8.00 11/15/01 1,017,200
--------------
2,967,200
--------------
Telecommunications (1.1%)
2,425 Midcom Communications Inc. -144A* ............................... 8.25 08/15/03 2,097,625
750 SA Telecommunications Inc. -144A* ............................... 10.00 08/15/06 660,000
--------------
2,757,625
--------------
TOTAL CONVERTIBLE BONDS
(Identified Cost $40,631,741) ................................... 39,510,145
--------------
NON-CONVERTIBLE BONDS (20.1%)
Auto Parts (1.6%)
4,000 Lear Seating Corp. .............................................. 11.25 07/15/00 4,040,000
--------------
Broadcast Media (2.9%)
3,000 JCAC Inc. ....................................................... 10.125 06/15/06 3,105,000
3,805 Outlet Broadcasting, Inc. ....................................... 10.875 07/15/03 4,152,168
--------------
7,257,168
--------------
Cable/Cellular (2.2%)
3,000 Continental Cablevision, Inc. ................................... 11.00 06/01/07 3,348,570
2,000 Tele-Communications, Inc. ....................................... 9.25 04/15/02 2,097,700
--------------
5,446,270
--------------
Entertainment (0.9%)
2,000 Time Warner, Inc. .............................................. 9.625 05/01/02 2,186,060
--------------
Entertainment/Gaming (0.9%)
2,000 Casino America, Inc. ............................................ 11.50 11/15/01 2,135,000
--------------
Healthcare (4.0%)
1,000 Healthsouth Rehabilition Corp. .................................. 9.50 04/01/01 1,045,000
2,000 Manor Care, Inc. ............................................... 9.50 11/15/02 2,090,000
3,000 OrNda Healthcorp ............................................... 12.25 05/15/02 3,180,000
3,250 Quorum Health Group, Inc. ...................................... 11.875 12/15/02 3,526,250
--------------
9,841,250
--------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS March 31, 1997 (unaudited) continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------------
Industrials (1.2%)
$2,835 American Standard, Inc. ........................................ 11.375% 05/15/04 $3,005,100
--------------
Machinery (1.1%)
2,460 Joy Technologies Inc. .......................................... 10.25 09/01/03 2,681,548
--------------
Oil & Gas (0.3%)
600 Global Marine, Inc. ............................................. 12.75 12/15/99 634,500
--------------
Publishing (1.7%)
1,000 Hollinger International Publishing, Inc. ........................ 9.25 02/01/06 972,500
3,000 K-III Communications Corp. ...................................... 10.625 05/01/02 3,120,000
--------------
4,092,500
--------------
Retail (2.0%)
2,600 Hook-SupeRX, Inc. ............................................... 10.125 06/01/02 2,744,300
1,950 Thrifty PayLess Holdings, Inc. .................................. 12.25 04/15/04 2,253,303
--------------
4,997,603
--------------
Supermarkets (1.3%)
3,000 Purity Supreme, Inc. (Series B) ................................. 11.75 08/01/99 3,139,380
--------------
TOTAL NON-CONVERTIBLE BONDS
(Identified Cost $50,006,911) ................................... 49,456,379
--------------
TOTAL CORPORATE BONDS
(Identified Cost $90,638,652) ................................... 88,966,524
--------------
SHORT-TERM INVESTMENT (1.9%)
REPURCHASE AGREEMENT
4,590 The Bank of New York (dated 03/31/97; proceeds $4,590,666;
collateralized by $4,713,390 Federal Home Loan Banks 6.04% due
08/13/98 valued at $4,681,780)(Identified Cost $4,589,981) ..... 5.375 04/01/97 4,589,981
--------------
TOTAL INVESTMENTS
(Identified Cost $241,893,248)(a) ......................................... 101.1% 248,447,172
LIABILITIES IN EXCESS OF OTHER ASSETS .................................... (1.1) (2,688,851)
------- --------------
NET ASSETS ............................................................... 100.0% $245,758,321
======= ==============
</TABLE>
- ------------
STRYPES Structured yield product exchangeable for stock.
* Resale is restricted to qualified institutional investors.
++ Consists of one or more class of securities traded together as a
unit; stocks with attached warrants.
(1) Convertible into IMC Global Inc. common stock.
(a) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$11,831,895 and the aggregate gross unrealized depreciation is
$5,277,971, resulting in net unrealized appreciation of
$6,553,924.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER INCOME BUILDER FUND
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1997 (unaudited)
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $241,893,248) ......... $248,447,172
Receivable for:
Interest............................... 2,152,526
Shares of beneficial interest sold ... 1,506,556
Dividends ............................. 380,138
Deferred organizational expenses ....... 138,653
Prepaid expenses ........................ 38,247
------------
TOTAL ASSETS .......................... 252,663,292
------------
LIABILITIES:
Payable for:
Investments purchased.................. 6,147,733
Shares of beneficial interest
repurchased........................... 250,377
Plan of distribution fee............... 192,574
Investment management fee.............. 155,354
Dividends to shareholders.............. 58,378
Accrued expenses and other payables .... 100,555
------------
TOTAL LIABILITIES ..................... 6,904,971
------------
NET ASSETS:
Paid-in-capital.......................... 234,651,696
Net unrealized appreciation ............. 6,553,924
Accumulated undistributed net investment
income.................................. 60,347
Accumulated undistributed net realized
gain.................................... 4,492,354
------------
NET ASSETS............................. $245,758,321
============
NET ASSET VALUE PER SHARE,
22,705,553 shares outstanding
(unlimited shares authorized of $.01
par value).............................. $ 10.82
============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended March 31, 1997 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Interest.............................. $ 3,271,171
Dividends............................. 2,724,918
-----------
TOTAL INCOME........................ 5,996,089
-----------
EXPENSES
Plan of distribution fee.............. 923,856
Investment management fee............. 741,259
Transfer agent fees and expenses ..... 79,604
Registration fees .................... 35,745
Professional fees .................... 32,231
Shareholder reports and notices ..... 18,747
Organizational expenses .............. 16,313
Custodian fees ....................... 13,249
Trustees' fees and expenses........... 5,524
Other................................. 3,204
-----------
TOTAL EXPENSES ..................... 1,869,732
-----------
NET INVESTMENT INCOME............... 4,126,357
-----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain..................... 4,575,600
Net change in unrealized
appreciation......................... 3,362,112
-----------
NET GAIN............................ 7,937,712
-----------
NET INCREASE.......................... $12,064,069
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER INCOME BUILDER FUND
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX JUNE 26, 1996*
MONTHS ENDED THROUGH
MARCH 31, 1997 SEPTEMBER 30, 1996
- ------------------------------------------------------ -------------- ------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................. $ 4,126,357 $ 1,162,846
Net realized gain...................................... 4,575,600 73,945
Net change in unrealized appreciation ................. 3,362,112 3,191,812
-------------- ------------------
NET INCREASE ........................................ 12,064,069 4,428,603
-------------- ------------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income ................................. (4,113,589) (1,123,961)
Net realized gain...................................... (157,191) --
-------------- ------------------
TOTAL................................................ (4,270,780) (1,123,961)
-------------- ------------------
Net increase from transactions in shares of beneficial
interest.............................................. 89,823,118 144,737,272
-------------- ------------------
NET INCREASE......................................... 97,616,407 148,041,914
NET ASSETS:
Beginning of period.................................... 148,141,914 100,000
-------------- ------------------
END OF PERIOD
(Including undistributed net investment income of
$60,347 and $47,579, respectively)................... $245,758,321 $148,141,914
============== ==================
</TABLE>
- ------------
* Commencement of operations.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER INCOME BUILDER FUND
NOTES TO FINANCIAL STATEMENTS March 31, 1997 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Income Builder Fund (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 primary investment
objective is to seek reasonable income and, as a secondary objective, growth
of capital. The Fund seeks to achieve its objective by investing primarily in
income-producing equity securities, including common and preferred stocks as
well as convertible securities. The Fund was organized as a Massachusetts
business trust on March 21, 1996 and had no operations other than those
relating to organizational matters and the issuance of 10,000 shares of
beneficial interest for $100,000 to Dean Witter InterCapital Inc. (the
"Investment Manager") to effect the Fund's initial capitalization. The Fund
commenced operations on June 26, 1996.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American or other domestic or foreign stock exchange is valued at
its latest sale price on that exchange prior to the time when assets are
valued; if there were no sales that day, the security is valued at the latest
bid price (in cases where securities are traded on more than one exchange,
the security is valued on the exchange designated as the primary market
pursuant to procedures adopted by the Trustees); (2) all other portfolio
securities for which over-the-counter market quotations are readily available
are valued at the latest available bid price prior to the time of valuation;
(3) when market quotations are not readily available, including circumstances
under which it is determined by the Investment Manager that sale or bid
prices are not reflective of a security's market value, portfolio securities
are valued at their fair value as determined in good faith under procedures
established by and under the general supervision of the Trustees (valuation
of debt securities for which market quotations are not readily available may
be based upon current market prices of securities which are comparable in
coupon, rating and maturity or an appropriate matrix utilizing similar
factors); (4) certain portfolio securities may be valued by an outside
pricing service approved by the Trustees. The pricing service may utilize a
matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research and evaluations by its staff,
including review of broker-dealer market price quotations, if available, in
determining what it believes is the fair valuation of the securities valued
by such pricing service; and (5) short-term debt securities having a maturity
date of more than sixty days at time of purchase are valued on a
<PAGE>
DEAN WITTER INCOME BUILDER FUND
NOTES TO FINANCIAL STATEMENTS March 31, 1997 (unaudited) continued
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 except for certain dividends on foreign securities which are
recorded as soon as the Fund is informed after the ex-dividend date.
Discounts are accreted over the life of the respective securities. Interest
income is accrued daily.
C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to its shareholders on the ex-dividend date. The amounts of
dividends and distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends
and distributions which exceed net investment income and net realized capital
gains for financial reporting purposes but not for tax purposes are reported
as dividends in excess of net investment income or distributions in excess of
net realized capital gains. To the extent they exceed net investment income
and net realized capital gains for tax purposes, they are reported as
distributions of paid-in-capital.
E. ORGANIZATIONAL EXPENSES -- The Investment Manager paid the organizational
expenses of the Fund in the amount of approximately $164,000 which have been
reimbursed for the full amount thereof. Such expenses have been deferred and
are being amortized on the straight-line method over a period not to exceed
five years from the commencement of operations.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management fee, accrued daily and payable monthly, by applying the
annual rate of 0.75% to the net assets of the Fund determined as of the close
of each business day.
<PAGE>
DEAN WITTER INCOME BUILDER FUND
NOTES TO FINANCIAL STATEMENTS March 31, 1997 (unaudited) continued
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities,
equipment, clerical, bookkeeping and certain legal services and pays the
salaries of all personnel, including officers of the Fund who are employees
of the Investment Manager. The Investment Manager also bears the cost of
telephone services, heat, light, power and other utilities provided to the
Fund.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted
a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act
pursuant to which the Fund pays the Distributor compensation, accrued daily
and payable monthly, at an annual rate of 1.0% of the lesser of: (a) the
average daily aggregate gross sales of the Fund's shares since the Fund's
inception (not including reinvestment of dividend or capital gain
distributions) less the average daily aggregate net asset value of the Fund's
shares redeemed since the Fund's inception upon which a contingent deferred
sales charge has been imposed or upon which such charge has been waived; or
(b) the Fund's average daily net assets. Amounts paid under the Plan are paid
to the Distributor to compensate it for the services provided and the
expenses borne by it and others in the distribution of the Fund's shares,
including the payment of commissions for sales of the Fund's shares and
incentive compensation to, and expenses of, the account executives of Dean
Witter Reynolds Inc. ("DWR"), an affiliate of the Investment Manager and
Distributor, and other employees or selected broker-dealers who engage in or
support distribution of the Fund's shares or who service shareholder
accounts, including overhead and telephone expenses, printing and
distribution of prospectuses and reports used in connection with the offering
of the Fund's shares to other than current shareholders and preparation,
printing and distribution of sales literature and advertising materials. In
addition, the Distributor may be compensated under the Plan for its
opportunity costs in advancing such amounts, which compensation would be in
the form of a carrying charge on any unreimbursed expenses incurred by the
Distributor.
Provided that the Plan continues in effect, any cumulative expenses incurred
but not yet recovered, may be recovered through future distribution fees from
the Fund and contingent deferred sales charges from the Fund's shareholders.
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 Trustees will consider
at that
<PAGE>
DEAN WITTER INCOME BUILDER FUND
NOTES TO FINANCIAL STATEMENTS March 31, 1997 (unaudited) continued
time the manner in which to treat such expenses. The Distributor has advised
the Fund that such excess amounts, including carrying charges, totaled
$11,223,298 at March 31, 1997.
The Distributor has informed the Fund that for the six months ended March 31,
1997, it received approximately $280,000 in contingent deferred sales charges
from certain redemptions of the Fund's shares.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the six months ended March 31, 1997
aggregated $157,259,341 and $66,734,051, respectively.
For the six months ended March 31, 1997, the Fund incurred $43,330 in
brokerage commissions with DWR for portfolio transactions executed on behalf
of the Fund. At March 31, 1997, the Fund's payable for investments purchased
included unsettled trades with DWR of $1,531,275.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At March 31, 1997, the Fund had
transfer agent fees and expenses payable of approximately $42,000.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX JUNE 26, 1996*
MONTHS ENDED THROUGH
MARCH 31, 1997 SEPTEMBER 30, 1996
---------------------------- ---------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
------------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
Sold ........................................ 9,345,474 $102,171,088 14,654,263 $146,538,451
Reinvestment of dividends and distributions 299,333 3,260,387 83,927 855,216
------------- -------------- ------------ --------------
9,644,807 105,431,475 14,738,190 147,393,667
Repurchased ................................. (1,422,872) (15,608,357) (264,572) (2,656,395)
------------- -------------- ------------ --------------
Net increase ................................ 8,221,935 $ 89,823,118 14,473,618 $144,737,272
============= ============== ============ ==============
</TABLE>
- ------------
* Commencement of operations.
<PAGE>
DEAN WITTER INCOME BUILDER FUND
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX JUNE 26, 1996*
MONTHS ENDED THROUGH
MARCH 31, 1997 SEPTEMBER 30, 1996
- ---------------------------------------- -------------- ------------------
(unaudited)
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ... $10.23 $10.00
------ ------
Net investment income ................... 0.21 0.08
Net realized and unrealized gain ....... 0.60 0.23
------ ------
Total from investment operations ....... 0.81 0.31
------ ------
Less dividends and distributions from:
Net investment income .................. (0.21) (0.08)
Net realized gain ...................... (0.01) --
------ ------
Total dividends and distributions ...... (0.22) (0.08)
------ ------
Net asset value, end of period .......... $10.82 $10.23
====== ======
TOTAL INVESTMENT RETURN+ ............... 7.89%(1) 3.10%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................ 1.89%(2) 2.25%(2)
Net investment income ................... 4.18%(2) 3.60%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $245,758 $148,142
Portfolio turnover rate ................. 34%(1) 7%(1)
Average commission rate paid ............ $0.0559 $0.0558
</TABLE>
- ------------
* Commencement of operations.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and General Counsel
Paul D. Vance
Vice President
Michael G. Knox
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center -- Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
The financial statements included herein have been taken from the records of
the Fund without examination by the independent accountants and accordingly
they do no express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its offices and trustees,
fees, expenses and other pertinent information, please see the prospectus of
the Fund.
This report is not authorized for distribution to prospective investors in
the Fund unless preceded or accompanied by an effective prospectus.
DEAN WITTER
INCOME BUIDER
FUND
SEMIANNUAL REPORT
MARCH 31, 1997