<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 22, 1999
REGISTRATION NOS.: 333-01995
811-7575
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 6 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
AMENDMENT NO. 7 [X]
----------------
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
FORMERLY NAMED DEAN WITTER INCOME BUILDER FUND
(A MASSACHUSETTS BUSINESS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600
BARRY FINK, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)
Copy to:
STUART M. STRAUSS, ESQ.
MAYER, BROWN & PLATT
1675 BROADWAY
NEW YORK, NEW YORK 10019
----------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after this Post-Effective Amendment becomes effective.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on November 23, 1999 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on (date) pursuant to paragraph (a) of rule 485.
----------------
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
================================================================================
<PAGE>
PROSPECTUS - NOVEMBER 23, 1999
Morgan Stanley Dean Witter
----------------------------------------------------------------
INCOME BUILDER FUND
[GRAPHIC OMITTED]
A MUTUAL FUND WHOSE PRIMARY INVESTMENT OBJECTIVE
IS TO SEEK REASONABLE INCOME; AS A SECONDARY
OBJECTIVE, THE FUND SEEKS GROWTH OF CAPITAL
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus.
Any representation to the contrary is a criminal offense.
<PAGE>
CONTENTS
The Fund Investment Objectives.............................1
Principal Investment Strategies...................1
Principal Risks...................................2
Past Performance..................................4
Fees and Expenses.................................5
Additional Investment Strategy Information........6
Additional Risk Information.......................7
Fund Management...................................8
Shareholder Information Pricing Fund Shares..............................10
How to Buy Shares................................10
How to Exchange Shares...........................12
How to Sell Shares...............................14
Distributions....................................16
Tax Consequences.................................16
Share Class Arrangements.........................17
Financial Highlights ................................................26
Our Family of Funds ................................ Inside Back Cover
This Prospectus contains important information about
the Fund. Please read it carefully and keep it for
future reference.
<PAGE>
THE FUND
[GRAPHIC OMITTED]
INVESTMENT OBJECTIVES
- ---------------------
Morgan Stanley Dean Witter Income Builder Fund seeks reasonable income as a
primary investment objective. As a secondary objective, the Fund seeks growth of
capital.
[GRAPHIC OMITTED]
PRINCIPAL INVESTMENT STRATEGIES
- -------------------------------
(side bar)
INCOME & GROWTH
An investment objective having the goal of selecting securities with the
potential to pay out income and rise in price.
(end side bar)
The Fund will normally invest at least 65% of its total assets in
income-producing equity securities, including common stock, preferred stock and
convertible securities. The "Investment Manager," Morgan Stanley Dean Witter
Advisors Inc., uses a value-oriented style in the selection of securities.
Investments are normally made primarily in (i) common stocks of large
capitalization companies with a record of paying dividends and which, in the
opinion of the Investment Manager, have the potential for maintaining dividends,
(ii) preferred stock and (iii) securities convertible into common stocks of
small- and mid-cap companies -- including synthetic and enhanced convertibles.
The Fund's investments also include "Rule 144A" securities, which are subject to
resale restrictions.
The Investment Manager follows a "bottom-up" approach in the selection of
convertible securities for the Fund. Beginning with a universe of about 500
companies, the Investment Manager narrows the focus to small- and mid-cap
companies and reviews the issues to determine if the convertible security is
trading with the underlying equity security. The yield of the underlying equity
security is evaluated and company fundamentals are studied to evaluate cash
flow, risk/reward balance, valuation and the prospects for growth.
The Fund may invest up to 25% of its total assets in "enhanced" convertible
securities. Enhanced convertible securities offer holders the opportunity to
obtain higher current income than would be available from a traditional equity
security issued by the same company, in return for reduced participation or a
cap on appreciation in the underlying common stock of the issuer which the
holder can realize. In addition, in many cases, enhanced convertible securities
are convertible into the underlying common stock of the issuer automatically at
maturity, unlike traditional convertible securities which are convertible only
at the option of the security holder.
The Fund may invest up to 10% of its total assets in "synthetic" convertible
securities. Unlike traditional convertible securities whose conversion values
are based on the common stock of the issuer of the convertible security,
"synthetic" convertible securities are preferred stocks or debt obligations of
an issuer which are combined with an equity component whose conversion value is
based on the value of the common stock of a different issuer or a particular
benchmark (which may include a foreign issuer or basket of foreign stocks, or a
company whose stock is not yet publicly traded). In many cases, "synthetic"
convertible securities are not convertible prior to maturity, at which time the
value of the security is paid in cash by the issuer.
1
<PAGE>
In addition, the Fund may invest in fixed-income securities (including zero
coupon securities), common stocks that do not pay a regular dividend, real
estate investment trusts (commonly known as "REITs") and foreign securities
(including depository receipts).
The Fund also may invest up to 20% of its assets in fixed-income securities
rated lower than investment grade by Standard & Poor's or Moody's (but not below
B) or, if unrated, of comparable quality as determined by the Investment Manager
(commonly known as "junk bonds"). The 20% limitation is not applicable to
convertible securities.
Common stock is a share ownership or equity interest in a corporation. It may or
may not pay dividends, as some companies reinvest all of their profits back into
their businesses, while others pay out some of their profits to shareholders as
dividends. Preferred stock pays dividends at a specified rate and has preference
over common stock in the payment of dividends. A convertible security is a bond,
preferred stock or other security that may be converted into a prescribed amount
of common stock at a prestated price. A depository receipt is generally issued
by a bank or financial institution and represents an ownership interest in the
common stock or other equity securities of a foreign company.
In pursuing the Fund's investment objectives, the Investment Manager has
considerable leeway in deciding which investments it buys, holds or sells on a
day-to-day basis -- and which trading strategies it uses. For example, the
Investment Manager in its discretion may determine to use some permitted trading
strategies while not using others.
[GRAPHIC OMITTED]
PRINCIPAL RISKS
- ---------------
There is no assurance that the Fund will achieve its investment objectives. The
Fund's share price will fluctuate with changes in the market value of its
portfolio securities. When you sell Fund shares, they may be worth less than
what you paid for them and, accordingly, you can lose money investing in this
Fund.
Common and Preferred Stock. A principal risk of investing in the Fund is
associated with its investment in stocks. In particular, the prices of stocks
can fluctuate widely in response to activities specific to the issuer as well as
general market, economic and political conditions.
Fixed-Income Securities. Principal risks of investing in the Fund are associated
with its fixed-income investments (including zero coupon securities). All
fixed-income securities are subject to two types of risk: credit risk and
interest rate risk. Credit risk refers to the possibility that the issuer of a
security will be unable to make interest payments and/or repay the principal on
its debt.
Interest rate risk refers to fluctuations in the value of a fixed-income
security resulting from changes in the general level of interest rates. When the
general level of interest rates goes up, the prices of most fixed-income
securities go down. When the general
2
<PAGE>
level of interest rates goes down, the prices of most fixed-income securities go
up. (Zero coupon securities are typically subject to greater price fluctuations
than comparable securities that pay interest.)
Convertible Securities. The Fund is also subject to the risks of investing in
convertible securities. These securities may carry risks associated with both
common stock and fixed-income securities. In addition, because the convertible
securities in which the Fund invests are convertible into the common stocks of
small- and mid-cap companies, the Fund is subject to the specific risks
associated with investing in small- and mid-cap companies.
There are also special risks associated with the Fund's investments in
"enhanced" and "synthetic" convertible securities. These securities may be more
volatile and less liquid than traditional convertible securities.
Small & Medium Capitalization Companies. The Fund's investments in smaller and
medium-sized companies carry more risk than investments in larger companies.
While some of the Fund's holdings in these companies may be listed on a national
securities exchange, such securities are more likely to be traded in the
over-the-counter market. The low market liquidity of these securities may have
an adverse impact on the Fund's ability to sell certain securities at favorable
prices and may also make it difficult for the Fund to obtain market quotations
based on actual trades for purposes of valuing the Fund's securities. Investing
in lesser-known, smaller and medium capitalization companies involves greater
risk of volatility of the Fund's net asset value than is customarily associated
with larger, more established companies. Often smaller and medium capitalization
companies and the industries in which they are focused are still evolving and,
while this may offer better growth potential than larger, more established
companies, it also may make them more sensitive to changing market conditions.
Junk Bonds. The Fund's investments in fixed-income securities rated lower than
investment grade, or if unrated, of comparable quality as determined by the
Investment Manager (commonly known as "junk bonds") pose significant risks. The
prices of junk bonds are likely to be more sensitive to adverse economic changes
or individual corporate developments than higher rated securities. During an
economic downturn or substantial period of rising interest rates, junk bond
issuers and, in particular, highly leveraged issuers may experience financial
stress that would adversely affect their ability to service their principal and
interest payment obligations, to meet their projected business goals or to
obtain additional financing. In the event of a default, the Fund may incur
additional expenses to seek recovery. The secondary market for junk bonds may be
less liquid than the market for higher quality securities and, as such, may have
an adverse effect on the market prices of certain securities. Many junk bonds
are issued as Rule 144A securities. Rule 144A securities could have the effect
of increasing the level of Fund illiquidity to the extent the Fund may be unable
to find qualified institutional buyers interested in purchasing the securities.
The illiquidity of the market may also adversely affect the ability of the
Fund's Trustees to arrive at a fair value for certain junk bonds at certain
times and could make it difficult for the Fund to sell
3
<PAGE>
certain securities. In addition, periods of economic uncertainty and change
probably would result in an increased volatility of market prices of high yield
securities and a corresponding volatility in the Fund's net asset value.
Other Risks. The performance of the Fund also will depend on whether the
Investment Manager is successful in pursuing the Fund's investment strategy. The
Fund is also subject to other risks from its permissible investments, including
the risks associated with its investments in real estate investment trusts
(commonly known as "REITs") and foreign securities (including depository
receipts). For more information about these risks, see the "Additional Risk
Information" section.
Shares of the Fund are not bank deposits and are not guaranteed or insured by
the FDIC or any other government agency.
[GRAPHIC OMITTED]
PAST PERFORMANCE
- ----------------
The bar chart and table below provide some indication of the risks of investing
in the Fund. The Fund's past performance does not indicate how the Fund will
perform in the future.
(side bar)
ANNUAL TOTAL RETURNS
This chart shows how the performance of the Fund's Class B shares has varied
from year to year over the past 2 calendar years.
(end side bar)
ANNUAL TOTAL RETURNS -- CALENDAR YEARS
23.97 1.73
- ------- -------
1997 '98
The bar chart reflects the performance of Class B shares; the performance of the
other Classes will differ because the Classes have different ongoing fees. The
performance information in the bar chart does not reflect the deduction of sales
charges; if these amounts were reflected, returns would be less than shown.
Year-to-date total return as of September 30, 1999 was -0.49%.
During the periods shown in the bar chart, the highest return for a calendar
quarter was 9.88% (quarter ended September 30, 1997) and the lowest return for a
calendar quarter was -11.33% (quarter ended September 30, 1998).
4
<PAGE>
(side bar)
AVERAGE ANNUAL TOTAL RETURNS
This table compares the Fund's average annual returns with those of a broad
measure of market performance over time, as well as with an index of funds with
similar investment objectives. The Fund's returns include the maximum
applicable sales charge for each Class and assume you sold your shares at the
end of each period.
(end side bar)
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (AS OF DECEMBER 31, 1998)
- --------------------------------------------------------------------------------
LIFE OF THE FUND
PAST 1 YEAR (SINCE 6/26/96)
- --------------------------------------------------------------------------------
Class A(1) -2.88% --
- --------------------------------------------------------------------------------
Class B -2.86% 13.10%
- --------------------------------------------------------------------------------
Class C(1) 0.80% --
- --------------------------------------------------------------------------------
Class D(1) 2.66% --
- --------------------------------------------------------------------------------
S&P 500 Index(2) 28.58% 30.08%
- --------------------------------------------------------------------------------
Lipper Equity Income Fund Index(3) 11.78% 20.00%
- --------------------------------------------------------------------------------
1 Classes A, C and D commenced operations on July 28, 1997.
2 The Standard & Poor's (Registered Trademark) 500 Composite Stock Price
Index is a broad-based index, the performance of which is based on the
average performance of 500 widely held common stocks. The performance of
the Index does not include any expenses, fees or charges. The Index is
unmanaged and should not be considered an investment.
3 The Lipper Equity Income Fund Index is an equally-weighted performance
index of the largest qualifying funds (based on net assets) in the Lipper
Equity Funds objective. 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 in this Index.
[GRAPHIC OMITTED]
FEES AND EXPENSES
- -----------------
The table below briefly describes the fees and expenses that you may pay if you
buy and hold shares of the Fund. The Fund offers four Classes of shares: Classes
A, B, C and D. Each Class has a different combination of fees, expenses and
other features. The Fund does not charge account or exchange fees. See the
"Share Class Arrangements" section for further fee and expense information.
(side bar)
SHAREHOLDER FEES
These fees are paid directly from your investment.
ANNUAL FUND
OPERATING EXPENSES
These expenses are deducted from the Fund's assets and are based on expenses
paid for the fiscal year ended September 30, 1999.
(end side bar)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER FEES
- -------------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on
purchases (as a percentage of offering price) 5.25%(1) None None None
- -------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) (as a
percentage based on the lesser of the offering
price or net asset value at redemption) None(2) 5.00%(3) 1.00%(4) None
- -------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- -------------------------------------------------------------------------------------------------
Management fee 0.75% 0.75% 0.75% 0.75%
- -------------------------------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.24% 0.97% 0.97% None
- -------------------------------------------------------------------------------------------------
Other expenses 0.18% 0.18% 0.18% 0.18%
- -------------------------------------------------------------------------------------------------
Total annual Fund operating expenses 1.17% 1.90% 1.90% 0.93%
- -------------------------------------------------------------------------------------------------
</TABLE>
1 Reduced for purchases of $25,000 and over.
2 Investments that are not subject to any sales charge at the time of
purchase are subject to a contingent deferred sales charge ("CDSC") of
1.00% that will be imposed if you sell your shares within one year after
purchase, except for certain specific circumstances.
3 The CDSC is scaled down to 1.00% during the sixth year, reaching zero
thereafter. See "Share Class Arrangements" for a complete discussion of the
CDSC.
4 Only applicable if you sell your shares within one year after purchase.
5
<PAGE>
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund, your investment has a
5% return each year, and the Fund's operating expenses remain the same. Although
your actual costs may be higher or lower, the tables below show your costs at
the end of each period based on these assumptions depending upon whether or not
you sell (redeem) your shares at the end of each period.
<TABLE>
<CAPTION>
IF YOU SOLD YOUR SHARES IF YOU HELD YOUR SHARES
- -------------------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------- -----------------------------------------
CLASS A $638 $877 $1,135 $1,871 $638 $877 $1,135 $1,871
- -------------------------------------------------- -----------------------------------------
CLASS B $693 $897 $1,226 $2,222 $193 $597 $1,026 $2,222
- -------------------------------------------------- -----------------------------------------
CLASS C $293 $597 $1,026 $2,222 $193 $597 $1,026 $2,222
- -------------------------------------------------- -----------------------------------------
CLASS D $95 $296 $515 $1,143 $95 $296 $515 $1,143
- -------------------------------------------------- -----------------------------------------
</TABLE>
Long-term shareholders of Class B and Class C may pay more in sales charges,
including distribution fees, than the economic equivalent of the maximum
front-end sales charges permitted by the NASD.
[GRAPHIC OMITTED]
ADDITIONAL INVESTMENT STRATEGY INFORMATION
- ------------------------------------------
This section provides additional information relating to the Fund's principal
investment strategies.
Other Securities and Real Estate Investment Trusts. Up to 35% of the Fund's
total assets may be invested in U.S. government securities issued or guaranteed
as to principal and interest by the U.S. government, its agencies or
instrumentalities and investment grade fixed-income securities (including zero
coupon securities), common stocks that do not pay a regular dividend and real
estate investment trusts (commonly known as "REITs").
Foreign Securities. The Fund may invest up to 25% of its total assets in foreign
securities (including depository receipts). This percentage limitation, however,
does not apply to securities of foreign companies that are listed in the U.S. on
a national securities exchange.
Defensive Investing. The Fund may take temporary "defensive" positions in
attempting to respond to adverse market conditions. The Fund may invest any
amount of its assets in cash or money market instruments in a defensive posture
when the Investment Manager believes it is advisable to do so. Although taking a
defensive posture is designed to protect the Fund from an anticipated market
downturn, it could have the effect of
6
<PAGE>
reducing the benefit from any upswing in the market. When the Fund takes a
defensive position, it may not achieve its investment objective.
The percentage limitations relating to the composition of the Fund's portfolio
apply at the time the Fund acquires an investment and refer to the Fund's net
assets, unless otherwise noted. Subsequent percentage changes that result from
market fluctuations will not require the Fund to sell any portfolio security.
The Fund may change its principal investment strategies without shareholder
approval; however, you would be notified of any changes.
[GRAPHIC OMITTED]
ADDITIONAL RISK INFORMATION
- ---------------------------
This section provides additional information relating to the principal risks of
investing in the Fund.
Real Estate Investment Trusts ("REITs"). REITs pool investors' funds for
investments primarily in commercial real estate properties. Like mutual funds,
REITs have expenses, including advisory and administration fees that are paid by
its shareholders. As a result, you will absorb duplicate levels of fees when the
Fund invests in REITs. The performance of any Fund REIT holdings ultimately
depends on the types of real property in which the REITs invest and how well the
property is managed. A general downturn in real estate values also can hurt REIT
performance.
Foreign Securities. Foreign securities (including depository receipts) involve
risks in addition to the risks associated with domestic securities. One
additional risk is currency risk. While the price of Fund shares is quoted in
U.S. dollars, the Fund generally converts U.S. dollars to a foreign market's
local currency to purchase a security in that market. If the value of that local
currency falls relative to the U.S. dollar, the U.S. dollar value of the foreign
security will decrease. This is true even if the foreign security's local price
remains unchanged.
Foreign securities also have risks related to economic and political
developments abroad, including effects of foreign social, economic or political
instability. Foreign companies, in general, are not subject to the regulatory
requirements of U.S. companies and, as such, there may be less publicly
available information about these companies. Moreover, foreign accounting,
auditing and financial reporting standards generally are different from those
applicable to U.S. companies. Finally, in the event of a default of any foreign
debt obligations, it may be more difficult for the Fund to obtain or enforce a
judgment against the issuers of the securities.
Securities of foreign issuers may be less liquid than comparable securities of
U.S. issuers and, as such, their price changes may be more volatile.
Furthermore, foreign exchanges and broker-dealers are generally subject to less
government and exchange scrutiny and regulation than their U.S. counterparts.
7
<PAGE>
Many European countries have adopted or are in the process of adopting a single
European currency, referred to as the "euro." The long-term consequences of the
euro conversion for foreign exchange rates, interest rates and the value of
European securities the Fund may purchase are unclear. The consequences may
adversely affect the value and/or increase the volatility of securities held by
the Fund.
Year 2000. The Fund could be adversely affected if the computer systems
necessary for the efficient operation of the Investment Manager, the Fund's
other service providers and the markets and corporate and governmental issuers
in which the Fund invests do not properly process and calculate date-related
information from and after January 1, 2000. While year 2000-related computer
problems could have a negative effect on the Fund, the Investment Manager and
its affiliates are working hard to avoid any problems and to obtain assurances
from their service providers that they are taking similar steps.
In addition, it is possible that the markets for securities in which the Fund
invests may be detrimentally affected by computer failures throughout the
financial services industry beginning January 1, 2000. Improperly functioning
trading systems may result in settlement problems and liquidity issues.
Corporate and governmental data processing errors also may result in production
problems for individual companies and overall economic uncertainties. Earnings
of individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected.
[GRAPHIC OMITTED]
FUND MANAGEMENT
- ---------------
(side bar)
MORGAN STANLEY DEAN WITTER ADVISORS INC.
The Investment Manager is widely recognized as a leader in the mutual fund
industry and together with Morgan Stanley Dean Witter Services Company Inc.,
its wholly-owned subsidiary, had more than $138 billion in assets under
management or administration as of October 31, 1999.
(end side bar)
The Fund has retained the Investment Manager -- Morgan Stanley Dean Witter
Advisors Inc. -- to provide administrative services, manage its business affairs
and invest its assets, including the placing of orders for the purchase and sale
of portfolio securities. The Investment Manager is a wholly-owned subsidiary of
Morgan Stanley Dean Witter & Co., a preeminent global financial services firm
that maintains leading market positions in each of its three primary businesses:
securities, asset management and credit services. Its main business office is
located at Two World Trade Center, New York, NY 10048.
The Fund's portfolio is managed within the Investment Manager's Growth and
Income Group. Paul D. Vance, Senior Vice President of the Investment Manager and
Director of the Growth and Income Group of the Investment Manager, Peter M.
Avelar, Senior Vice President of the Investment Manager and Director of the High
Yield Group of the Investment Manager, and Catherine Maniscalco, a Vice
8
<PAGE>
President of the Investment Manager, have been the primary portfolio co-managers
of the Fund since its inception in June 1996, January 1998 and July 1999,
respectively. Messrs. Vance and Avelar have been portfolio managers with the
Investment Manager for over five years. Prior to joining the Investment Manager
in March 1995, Ms. Maniscalco was a portfolio management software product
specialist at National Investor Data Services (April 1994 -March 1995).
The Fund pays the Investment Manager a monthly management fee as full
compensation for the services and facilities furnished to the Fund, and for Fund
expenses assumed by the Investment Manager. The fee is based on the Fund's
average daily net assets. For the fiscal year ended September 30, 1999, the Fund
accrued total compensation to the Investment Manager amounting to 0.75% of the
Fund's average daily net assets.
9
<PAGE>
SHAREHOLDER INFORMATION
[GRAPHIC OMITTED]
PRICING FUND SHARES
- -------------------
The price of Fund shares (excluding sales charges), called "net asset value," is
based on the value of the Fund's portfolio securities. While the assets of each
Class are invested in a single portfolio of securities, the net asset value of
each Class will differ because the Classes have different ongoing distribution
fees.
The net asset value per share of the Fund is determined once daily at 4:00 p.m.
Eastern time on each day that the New York Stock Exchange is open (or, on days
when the New York Stock Exchange closes prior to 4:00 p.m., at such earlier
time). Shares will not be priced on days that the New York Stock Exchange is
closed.
The value of the Fund's portfolio securities is based on the securities' market
price when available. When a market price is not readily available, including
circumstances under which the Investment Manager determines that a security's
market price is not accurate, a portfolio security is valued at its fair value,
as determined under procedures established by the Fund's Board of Trustees. In
these cases, the Fund's net asset value will reflect certain portfolio
securities' fair value rather than their market price. Due to the Fund's
holdings of securities that are primarily listed on foreign exchanges, the value
of the Fund's portfolio securities may change on days when you will not be able
to purchase or sell your shares.
An exception to the Fund's general policy of using market prices concerns its
short-term debt portfolio securities. Debt securities with remaining maturities
of sixty days or less at the time of purchase may be valued at amortized cost.
However, if the cost does not reflect the securities' market value, these
securities will be valued at their fair value.
[GRAPHIC OMITTED]
HOW TO BUY SHARES
- -----------------
(side bar)
CONTACTING A FINANCIAL ADVISOR
If you are new to the Morgan Stanley Dean Witter Family of Funds and would like
to contact a Financial Advisor, call (877) 937-MSDW (toll-free) for the
telephone number of the Morgan Stanley Dean Witter office nearest you. You may
also access our office locator on our Internet site at:
www.msdw.com/individual/funds
(end side bar)
You may open a new account to buy Fund shares or buy additional Fund shares for
an existing account by contacting your Morgan Stanley Dean Witter Financial
Advisor. Your Financial Advisor or other authorized financial representative
will assist you, step-by-step, with the procedures to invest in the Fund. You
may also purchase shares directly by calling the Fund's transfer agent and
requesting an application.
Because every investor has different immediate financial needs and long-term
investment goals, the Fund offers investors four Classes of shares: Classes A,
B, C and D. Class D shares are only offered to a limited group of investors.
Each Class of shares offers a distinct structure of sales charges, distribution
and service fees, and other features that are designed to address a variety of
needs. Your
10
<PAGE>
Financial Advisor or other authorized financial representative can help you
decide which Class may be most appropriate for you. When purchasing Fund shares,
you must specify which Class of shares you wish to purchase.
When you buy Fund shares, the shares are purchased at the next share price
calculated (less any applicable front-end sales charge for Class A shares) after
we receive your purchase order. Your payment is due on the third business day
after you place your purchase order. We reserve the right to reject any order
for the purchase of Fund shares.
(side bar)
EASYINVEST(SM)
A purchase plan that allows you to transfer money automatically from your
checking or savings account or from a Money Market Fund on a semi-monthly,
monthly or quarterly basis. Contact your Morgan Stanley Dean Witter Financial
Advisor for further information about this service.
(end side bar)
MINIMUM INVESTMENT AMOUNTS
- --------------------------------------------------------------------------------
MINIMUM INVESTMENT
--------------------------
INVESTMENT OPTIONS INITIAL ADDITIONAL
- --------------------------------------------------------------------------------
Regular Accounts $1,000 $100
- --------------------------------------------------------------------------------
Individual Retirement Accounts: Regular IRAs $1,000 $100
Education IRAs $500 $100
- --------------------------------------------------------------------------------
EasyInvest(SM)
(Automatically from your
checking or savings account
or Money Market Fund) $100* 100*
- --------------------------------------------------------------------------------
* Provided your schedule of investments totals $1,000 in twelve months.
There is no minimum investment amount if you purchase Fund shares through: (1)
the Investment Manager's mutual fund asset allocation plan, (2) a program,
approved by the Fund's distributor, in which you pay an asset-based fee for
advisory, administrative and/or brokerage services, or (3) employer-sponsored
employee benefit plan accounts.
Investment Options for Certain Institutional and Other Investors/Class D Shares.
To be eligible to purchase Class D shares, you must qualify under one of the
investor categories specified in the "Share Class Arrangements" section of this
Prospectus.
Subsequent Investments Sent Directly to the Fund. In addition to buying
additional Fund shares for an existing account by contacting your Morgan Stanley
Dean Witter Financial Advisor, you may send a check directly to the Fund. To buy
additional shares in this manner:
o Write a "letter of instruction" to the Fund specifying the name(s) on the
account, the account number, the social security or tax identification
number, the Class of shares you wish to purchase and the investment amount
(which would include any applicable front-end sales charge). The letter
must be signed by the account owner(s).
o Make out a check for the total amount payable to: Morgan Stanley Dean
Witter Income Builder Fund.
11
<PAGE>
o Mail the letter and check to Morgan Stanley Dean Witter Trust FSB at P.O.
Box 1040, Jersey City, NJ 07303.
[GRAPHIC OMITTED]
HOW TO EXCHANGE SHARES
- ----------------------
Permissible Fund Exchanges. You may exchange shares of any Class of the Fund for
the same Class of any other continuously offered Multi-Class Fund, or for shares
of a No-Load Fund, a Money Market Fund, North American Government Income Trust
or Short-Term U.S. Treasury Trust, without the imposition of an exchange fee.
See the inside back cover of this Prospectus for each Morgan Stanley Dean Witter
Fund's designation as a Multi-Class Fund, No-Load Fund or Money Market Fund. If
a Morgan Stanley Dean Witter Fund is not listed, consult the inside back cover
of that Fund's Prospectus for its designation. For purposes of exchanges, shares
of FSC Funds (subject to a front-end sales charge) are treated as Class A shares
of a Multi-Class Fund.
Exchanges may be made after shares of the Fund acquired by purchase have been
held for thirty days. There is no waiting period for exchanges of shares
acquired by exchange or dividend reinvestment. The current Prospectus for each
fund describes its investment objective(s), policies and investment minimums,
and should be read before investment. Since exchanges are available only into
continuously offered Morgan Stanley Dean Witter Funds, exchanges are not
available into any new Morgan Stanley Dean Witter Fund during its initial
offering period, or when shares of a particular Morgan Stanley Dean Witter Fund
are not being offered for purchase.
Exchange Procedures. You can process an exchange by contacting your Morgan
Stanley Dean Witter Financial Advisor or other authorized financial
representative. Otherwise, you must forward an exchange privilege authorization
form to the Fund's transfer agent -- Morgan Stanley Dean Witter Trust FSB -- and
then write the transfer agent or call (800) 869-NEWS to place an exchange order.
You can obtain an exchange privilege authorization form by contacting your
Financial Advisor or other authorized financial representative, or by calling
(800) 869-NEWS. If you hold share certificates, no exchanges may be processed
until we have received all applicable share certificates.
An exchange to any Morgan Stanley Dean Witter Fund (except a Money Market Fund)
is made on the basis of the next calculated net asset values of the Funds
involved after the exchange instructions are accepted. When exchanging into a
Money Market Fund, the Fund's shares are sold at their next calculated net asset
value and the Money Market Fund's shares are purchased at their net asset value
on the following business day.
The Fund may terminate or revise the exchange privilege upon required notice.
The check writing privilege is not available for Money Market Fund shares you
acquire in an exchange.
12
<PAGE>
Telephone Exchanges. For your protection when calling Morgan Stanley Dean Witter
Trust FSB, we will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. These procedures may
include requiring various forms of personal identification such as name, mailing
address, social security or other tax identification number. Telephone
instructions also may be recorded.
Telephone instructions will be accepted if received by the Fund's transfer agent
between 9:00 a.m. and 4:00 p.m. Eastern time on any day the New York Stock
Exchange is open for business. During periods of drastic economic or market
changes, it is possible that the telephone exchange procedures may be difficult
to implement, although this has not been the case with the Fund in the past.
Margin Accounts. If you have pledged your Fund shares in a margin account,
contact your Morgan Stanley Dean Witter Financial Advisor or other authorized
financial representative regarding restrictions on the exchange of such shares.
Tax Considerations of Exchanges. If you exchange shares of the Fund for shares
of another Morgan Stanley Dean Witter Fund there are important tax
considerations. For tax purposes, the exchange out of the Fund is considered a
sale of Fund shares -- and the exchange into the other Fund is considered a
purchase. As a result, you may realize a capital gain or loss.
You should review the "Tax Consequences" section and consult your own tax
professional about the tax consequences of an exchange.
Limitations on Exchanges. Certain patterns of exchanges may result in the Fund
limiting or prohibiting, at its discretion, additional purchases and/or
exchanges. Determinations in this regard may be made based on the frequency or
dollar amount of previous exchanges. The Fund will notify you in advance of
limiting your exchange privileges.
CDSC Calculations on Exchanges. See the "Share Class Arrangements" section of
this Prospectus for a further discussion of how applicable contingent deferred
sales charges (CDSCs) are calculated for shares of one Morgan Stanley Dean
Witter Fund that are exchanged for shares of another.
For further information regarding exchange privileges, you should contact your
Morgan Stanley Dean Witter Financial Advisor or call (800) 869-NEWS.
13
<PAGE>
[GRAPHIC OMITTED]
HOW TO SELL SHARES
- ------------------
You can sell some or all of your Fund shares at any time. If you sell Class A,
Class B or Class C shares, your net sale proceeds are reduced by the amount of
any applicable CDSC. Your shares will be sold at the next price calculated after
we receive your order to sell as described below.
<TABLE>
<CAPTION>
OPTIONS PROCEDURES
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
Contact Your To sell your shares, simply call your Morgan Stanley Dean Witter Financial Advisor or
Financial Advisor other authorized financial representative.
--------------------------------------------------------------------------------------------
[GRAPHIC OMITTED] Payment will be sent to the address to which the account is registered or deposited in
your brokerage account.
- ------------------------------------------------------------------------------------------------------------------
By Letter You can also sell your shares by writing a "letter of instruction" that includes:
o your account number;
[GRAPHIC OMITTED] o the dollar amount or the number of shares you wish to sell;
o the Class of shares you wish to sell; and
o the signature of each owner as it appears on the account.
--------------------------------------------------------------------------------------------
If you are requesting payment to anyone other than the registered owner(s) or that
payment be sent to any address other than the address of the registered owner(s) or
pre-designated bank account, you will need a signature guarantee. You can obtain a
signature guarantee from an eligible guarantor acceptable to Morgan Stanley Dean
Witter Trust FSB. (You should contact Morgan Stanley Dean Witter Trust FSB at (800)
869-NEWS for a determination as to whether a particular institution is an eligible
guarantor.) A notary public cannot provide a signature guarantee. Additional
documentation may be required for shares held by a corporation, partnership, trustee
or executor.
--------------------------------------------------------------------------------------------
Mail the letter to Morgan Stanley Dean Witter Trust FSB at P.O. Box 983, Jersey City, NJ
07303. If you hold share certificates, you must return the certificates, along with the
letter and any required additional documentation.
--------------------------------------------------------------------------------------------
A check will be mailed to the name(s) and address in which the account is registered, or
otherwise according to your instructions.
- ------------------------------------------------------------------------------------------------------------------
Systematic If your investment in all of the Morgan Stanley Dean Witter Family of Funds has a total
Withdrawal Plan market value of at least $10,000, you may elect to withdraw amounts of $25 or more,
or in any whole percentage of a Fund's balance (provided the amount is at least $25), on
[GRAPHIC OMITTED] a monthly, quarterly, semi-annual or annual basis, from any Fund with a balance of at least
$1,000. Each time you add a Fund to the plan, you must meet the plan requirements.
--------------------------------------------------------------------------------------------
Amounts withdrawn are subject to any applicable CDSC. A CDSC may be waived
under certain circumstances. See the Class B waiver categories listed in the "Share Class
Arrangements" section of this Prospectus.
--------------------------------------------------------------------------------------------
To sign up for the Systematic Withdrawal Plan, contact your Morgan Stanley Dean
Witter Financial Advisor or call (800) 869-NEWS. You may terminate or suspend your
plan at any time. Please remember that withdrawals from the plan are sales of shares,
not Fund "distributions," and ultimately may exhaust your account balance. The Fund
may terminate or revise the plan at any time.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
Payment for Sold Shares. After we receive your complete instructions to sell as
described above, a check will be mailed to you within seven days, although we
will attempt to make payment within one business day. Payment may also be sent
to your brokerage account.
Payment may be postponed or the right to sell your shares suspended under
unusual circumstances. If you request to sell shares that were recently
purchased by check, your sale will not be effected until it has been verified
that the check has been honored.
Tax Considerations. Normally, your sale of Fund shares is subject to federal and
state income tax. You should review the "Tax Consequences" section of this
Prospectus and consult your own tax professional about the tax consequences of a
sale.
Reinstatement Privilege. If you sell Fund shares and have not previously
exercised the reinstatement privilege, you may, within 35 days after the date of
sale, invest any portion of the proceeds in the same Class of Fund shares at
their net asset value and receive a pro rata credit for any CDSC paid in
connection with the sale.
Involuntary Sales. The Fund reserves the right, on sixty days' notice, to sell
the shares of any shareholder (other than shares held in an IRA or 403(b)
Custodial Account) whose shares, due to sales by the shareholder, have a value
below $100, or in the case of an account opened through EasyInvest(SM), if after
12 months the shareholder has invested less than $1,000 in the account.
However, before the Fund sells your shares in this manner, we will notify you
and allow you sixty days to make an additional investment in an amount that will
increase the value of your account to at least the required amount before the
sale is processed. No CDSC will be imposed on any involuntary sale.
Margin Accounts. If you have pledged your Fund shares in a margin account,
contact your Morgan Stanley Dean Witter Financial Advisor or other authorized
financial representative regarding restrictions on the sale of such shares.
15
<PAGE>
[GRAPHIC OMITTED]
DISTRIBUTIONS
- -------------
The Fund passes substantially all of its earnings from income and capital gains
along to its investors as "distributions." The Fund earns interest from
fixed-income investments and income from stocks. These amounts are passed along
to Fund shareholders as "income dividend distributions." The Fund realizes
capital gains whenever it sells securities for a higher price than it paid for
them. These amounts may be passed along as "capital gain distributions."
(side bar)
TARGETED DIVIDENDS(SM)
You may select to have your Fund distributions automatically invested in other
Classes of Fund shares or Classes of another Morgan Stanley Dean Witter Fund
that you own. Contact your Morgan Stanley Dean Witter Financial Advisor for
further information about this service.
(end side bar)
The Fund declares income dividends separately for each Class. Distributions paid
on Class A and Class D shares usually will be higher than for Class B and Class
C because distribution fees that Class B and Class C pay are higher. Normally,
income dividends are distributed to shareholders quarterly. Capital gains, if
any, are usually distributed in December. The Fund, however, may retain and
reinvest any long-term capital gains. The Fund may at times make payments from
sources other than income or capital gains that represent a return of a portion
of your investment.
Distributions are reinvested automatically in additional shares of the same
Class and automatically credited to your account, unless you request in writing
that all distributions be paid in cash. If you elect the cash option, the Fund
will mail a check to you no later than seven business days after the
distribution is declared. No interest will accrue on uncashed checks. If you
wish to change how your distributions are paid, your request should be received
by the Fund's transfer agent, Morgan Stanley Dean Witter Trust FSB, at least
five business days prior to the record date of the distributions.
[GRAPHIC OMITTED]
TAX CONSEQUENCES
- ----------------
As with any investment, you should consider how your Fund investment will be
taxed. The tax information in this Prospectus is provided as general
information. You should consult your own tax professional about the tax
consequences of an investment in the Fund.
Unless your investment in the Fund is through a tax-deferred retirement account,
such as a 401(k) plan or IRA, you need to be aware of the possible tax
consequences when:
o The Fund makes distributions; and
o You sell Fund shares, including an exchange to another Morgan Stanley Dean
Witter Fund.
16
<PAGE>
Taxes on Distributions. Your distributions are normally subject to federal and
state income tax when they are paid, whether you take them in cash or reinvest
them in Fund shares. A distribution also may be subject to local income tax. Any
income dividend distributions and any short-term capital gain distributions are
taxable to you as ordinary income. Any long-term capital gain distributions are
taxable as long-term capital gains no matter how long you have owned shares in
the Fund.
Every January, you will be sent a statement (IRS Form 1099-DIV) showing the
taxable distributions paid to you in the previous year. The statement provides
full information on your dividends and capital gains for tax purposes.
Taxes on Sales. Your sale of Fund shares normally is subject to federal and
state income tax and may result in a taxable gain or loss to you. A sale also
may be subject to local income tax. Your exchange of Fund shares for shares of
another Morgan Stanley Dean Witter Fund is treated for tax purposes like a sale
of your original shares and a purchase of your new shares. Thus, the exchange
may, like a sale, result in a taxable gain or loss to you and will give you a
new tax basis for your new shares.
When you open your Fund account, you should provide your social security or tax
identification number on your investment application. By providing this
information, you will avoid being subject to a federal backup withholding tax of
31% on taxable distributions and redemption proceeds. Any withheld amount would
be sent to the IRS as an advance tax payment.
[GRAPHIC OMITTED]
SHARE CLASS ARRANGEMENTS
- ------------------------
The Fund offers several Classes of shares having different distribution
arrangements designed to provide you with different purchase options according
to your investment needs. Your Morgan Stanley Dean Witter Financial Advisor or
other authorized financial representative can help you decide which Class may be
appropriate for you.
The general public is offered three Classes: Class A shares, Class B shares and
Class C shares, which differ principally in terms of sales charges and ongoing
expenses. A fourth Class, Class D shares, is offered only to a limited category
of investors. Shares that you acquire through reinvested distributions will not
be subject to any front-end sales charge or CDSC -- contingent deferred sales
charge. Sales personnel may receive different compensation for selling each
Class of shares. The sales charges applicable to each Class provide for the
distribution financing of shares of that Class.
17
<PAGE>
The chart below compares the sales charge and maximum annual 12b-1 fee
applicable to each Class:
<TABLE>
<CAPTION>
MAXIMUM
CLASS SALES CHARGE ANNUAL 12B-1FEE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
A Maximum 5.25% initial sales charge reduced for purchase of $25,000 or more;
shares sold without an initial sales charge are generally subject to a 1.0% CDSC
during the first year 0.25%
- ------------------------------------------------------------------------------------------------------------------
B Maximum 5.0% CDSC during the first year decreasing to 0% after six years 1.00%
- ------------------------------------------------------------------------------------------------------------------
C 1.0% CDSC during the first year 1.00%
- ------------------------------------------------------------------------------------------------------------------
D None None
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
CLASS A SHARES Class A shares are sold at net asset value plus an initial sales
charge of up to 5.25%. The initial sales charge is reduced for purchases of
$25,000 or more according to the schedule below. Investments of $1 million or
more are not subject to an initial sales charge, but are generally subject to a
contingent deferred sales charge, or CDSC, of 1.0% on sales made within one year
after the last day of the month of purchase. The CDSC will be assessed in the
same manner and with the same CDSC waivers as with Class B shares. Class A
shares are also subject to a distribution (12b-1) fee of up to 0.25% of the
average daily net assets of the Class.
The offering price of Class A shares includes a sales charge (expressed as a
percentage of the offering price) on a single transaction as shown in the
following table:
(side bar)
FRONT-END SALES CHARGE OR FSC
An initial sales charge you pay when purchasing Class A shares that is based on
a percentage of the offering price. The percentage declines based upon the
dollar value of Class A shares you purchase. We offer three ways to reduce your
Class A sales charges -- the Combined Purchase Privilege, Right of Accumulation
and Letter of Intent.
(end side bar)
<TABLE>
<CAPTION>
FRONT-END SALES CHARGE
------------------------------------------------
AMOUNT OF PERCENTAGE OF PUBLIC APPROXIMATE PERCENTAGE
SINGLE TRANSACTION OFFERING PRICE OF NET AMOUNT INVESTED
- -------------------------------------------------------------------------------------
<S> <C> <C>
Less than $25,000 5.25% 5.54%
- -------------------------------------------------------------------------------------
$25,000 but less than $50,000 4.75% 4.99%
- -------------------------------------------------------------------------------------
$50,000 but less than $100,000 4.00% 4.17%
- -------------------------------------------------------------------------------------
$100,000 but less than $250,000 3.00% 3.09%
- -------------------------------------------------------------------------------------
$250,000 but less than $1 million 2.00% 2.04%
- -------------------------------------------------------------------------------------
$1 million and over 0 0
- -------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
The reduced sales charge schedule is applicable to purchases of Class A shares
in a single transaction by:
o A single account (including an individual, trust or fiduciary account).
o Family member accounts (limited to husband, wife and children under the age
of 21).
o Pension, profit sharing or other employee benefit plans of companies and
their affiliates.
o Tax-exempt organizations.
o Groups organized for a purpose other than to buy mutual fund shares.
Combined Purchase Privilege. You also will have the benefit of reduced sales
charges by combining purchases of Class A shares of the Fund in a single
transaction with purchases of Class A shares of other Multi-Class Funds and
shares of FSC Funds.
Right of Accumulation. You also may benefit from a reduction of sales charges if
the cumulative net asset value of Class A shares of the Fund purchased in a
single transaction, together with shares of other Funds you currently own which
were previously purchased at a price including a front-end sales charge
(including shares acquired through reinvestment of distributions), amounts to
$25,000 or more. Also, if you have a cumulative net asset value of all your
Class A and Class D shares equal to at least $5 million (or $25 million for
certain employee benefit plans), you are eligible to purchase Class D shares of
any Fund subject to the Fund's minimum initial investment requirement.
You must notify your Morgan Stanley Dean Witter Financial Advisor or other
authorized financial representative (or Morgan Stanley Dean Witter Trust FSB if
you purchase directly through the Fund), at the time a purchase order is placed,
that the purchase qualifies for the reduced charge under the Right of
Accumulation. Similar notification must be made in writing when an order is
placed by mail. The reduced sales charge will not be granted if: (i)
notification is not furnished at the time of the order; or (ii) a review of the
records of Dean Witter Reynolds or other authorized dealer of Fund shares or the
Fund's transfer agent does not confirm your represented holdings.
Letter of Intent. The schedule of reduced sales charges for larger purchases
also will be available to you if you enter into a written "letter of intent." A
letter of intent provides for the purchase of Class A shares of the Fund or
other Multi-Class Funds or shares of FSC Funds within a thirteen-month period.
The initial purchase under a letter of intent must be at least 5% of the stated
investment goal. To determine the applicable sales charge reduction, you may
also include: (1) the cost of shares of other Morgan Stanley Dean Witter Funds
which were previously purchased at a price including a front-end sales charge
during the 90-day period prior to the distributor receiving the letter of
intent, and (2) the cost of shares of other Funds you currently own acquired in
19
<PAGE>
exchange for shares of Funds purchased during that period at a price including a
front-end sales charge. You can obtain a letter of intent by contacting your
Morgan Stanley Dean Witter Financial Advisor or other authorized financial
representative, or by calling (800) 869-NEWS. If you do not achieve the stated
investment goal within the thirteen-month period, you are required to pay the
difference between the sales charges otherwise applicable and sales charges
actually paid, which may be deducted from your investment.
Other Sales Charge Waivers. In addition to investments of $1 million or more,
your purchase of Class A shares is not subject to a front-end sales charge (or a
CDSC upon sale) if your account qualifies under one of the following categories:
o A trust for which Morgan Stanley Dean Witter Trust FSB provides
discretionary trustee services.
o Persons participating in a fee-based investment program (subject to all of
its terms and conditions, including termination fees, mandatory sale or
transfer restrictions on termination) approved by the Fund's distributor
pursuant to which they pay an asset-based fee for investment advisory,
administrative and/or brokerage services.
o Employer-sponsored employee benefit plans, whether or not qualified under
the Internal Revenue Code, for which Morgan Stanley Dean Witter Trust FSB
serves as trustee or Dean Witter Reynolds' Retirement Plan Services serves
as recordkeeper under a written Recordkeeping Services Agreement ("MSDW
Eligible Plans") which have at least 200 eligible employees.
o An MSDW Eligible Plan whose Class B shares have converted to Class A
shares, regardless of the plan's asset size or number of eligible
employees.
o A client of a Morgan Stanley Dean Witter Financial Advisor who joined us
from another investment firm within six months prior to the date of
purchase of Fund shares, and you used the proceeds from the sale of shares
of a proprietary mutual fund of that Financial Advisor's previous firm that
imposed either a front-end or deferred sales charge to purchase Class A
shares, provided that: (1) you sold the shares not more than 60 days prior
to the purchase of fund shares, and (2) the sale proceeds were maintained
in the interim in cash or a money market fund.
o Current or retired Directors/Trustees of the Morgan Stanley Dean Witter
Funds, such persons' spouses and children under the age of 21, and trust
accounts for which any of such persons is a beneficiary.
o Current or retired directors, officers and employees of Morgan Stanley Dean
Witter & Co. and any of its subsidiaries, such persons' spouses and
children under the age of 21, and trust accounts for which any of such
persons is a beneficiary.
20
<PAGE>
CLASS B SHARES Class B shares are offered at net asset value with no initial
sales charge but are subject to a contingent deferred sales charge, or CDSC, as
set forth in the table below. For the purpose of calculating the CDSC, shares
are deemed to have been purchased on the last day of the month during which they
were purchased.
(side bar)
CONTINGENT DEFERRED SALES CHARGE OR CDSC
A fee you pay when you sell shares of certain Morgan Stanley Dean Witter Funds
purchased without an initial sales charge. This fee declines the longer you hold
your shares as set forth in the table.
(end side bar)
CDSC AS A PERCENTAGE
YEAR SINCE PURCHASE PAYMENT MADE OF AMOUNT REDEEMED
- -----------------------------------------------------------------
First 5.0%
- -----------------------------------------------------------------
Second 4.0%
- -----------------------------------------------------------------
Third 3.0%
- -----------------------------------------------------------------
Fourth 2.0%
- -----------------------------------------------------------------
Fifth 2.0%
- -----------------------------------------------------------------
Sixth 1.0%
- -----------------------------------------------------------------
Seventh and thereafter None
- -----------------------------------------------------------------
Each time you place an order to sell or exchange shares, shares with no CDSC
will be sold or exchanged first, then shares with the lowest CDSC will be sold
or exchanged next. For any shares subject to a CDSC, the CDSC will be assessed
on an amount equal to the lesser of the current market value or the cost of the
shares being sold.
CDSC Waivers. A CDSC, if otherwise applicable, will be waived in the case of:
o Sales of shares held at the time you die or become disabled (within the
definition in Section 72(m)(7) of the Internal Revenue Code which relates
to the ability to engage in gainful employment), if the shares are: (i)
registered either in your name (not a trust) or in the names of you and
your spouse as joint tenants with right of survivorship; or (ii) held in a
qualified corporate or self-employed retirement plan, IRA or 403(b)
Custodial Account, provided in either case that the sale is requested
within one year of your death or initial determination of disability.
o Sales in connection with the following retirement plan "distributions": (i)
lump-sum or other distributions from a qualified corporate or self-employed
retirement plan following retirement (or, in the case of a "key employee"
of a "top heavy" plan, following attainment of age 59 1/2); (ii)
distributions from an IRA or 403(b) Custodial Account following attainment
of age 59 1/2; or (iii) a tax-free return of an excess IRA contribution (a
"distribution" does not include a direct transfer of IRA, 403(b) Custodial
Account or retirement plan assets to a successor custodian or trustee).
o Sales of shares held for you as a participant in an MSDW Eligible Plan.
o Sales of shares in connection with the Systematic Withdrawal Plan of up to
12% annually of the value of each Fund from which plan sales are made. The
percentage is determined on the date you establish the Systematic
Withdrawal Plan and based on
21
<PAGE>
the next calculated share price. You may have this CDSC waiver applied in
amounts up to 1% per month, 3% per quarter, 6% semi-annually or 12% annually.
Shares with no CDSC will be sold first, followed by those with the lowest CDSC.
As such, the waiver benefit will be reduced by the amount of your shares that
are not subject to a CDSC. If you suspend your participation in the plan, you
may later resume plan payments without requiring a new determination of the
account value for the 12% CDSC waiver.
o Sales of shares if you simultaneously invest the proceeds in the Investment
Manager's mutual fund asset allocation program, pursuant to which investors
pay an asset-based fee. Any shares you acquire in connection with the
Investment Manager's mutual fund asset allocation program are subject to
all of the terms and conditions of that program, including termination
fees, mandatory sale or transfer restrictions on termination.
All waivers will be granted only following the Fund's distributor receiving
confirmation of your entitlement. If you believe you are eligible for a CDSC
waiver, please contact your Financial Advisor or call (800) 869-NEWS.
Distribution Fee. Class B shares are also subject to an annual 12b-1 fee of 1.0%
of the lesser of: (a) the average daily aggregate gross purchases by all
shareholders of the Fund's Class B shares since the inception of the Fund (not
including reinvestments of dividends or capital gains distributions), less the
average daily aggregate net asset value of the Fund's Class B shares sold by all
shareholders since the Fund's inception upon which a CDSC has been imposed or
waived, or (b) the average daily net assets of Class B.
Conversion Feature. After ten (10) years, Class B shares will convert
automatically to Class A shares of the Fund with no initial sales charge. The
ten year period runs from the last day of the month in which the shares were
purchased or, in the case of Class B shares acquired through an exchange, from
the last day of the month in which the original Class B shares were purchased;
the shares will convert to Class A shares based on their relative net asset
values in the month following the ten year period. At the same time, an equal
proportion of Class B shares acquired through automatically reinvested
distributions will convert to Class A shares on the same basis. (Class B shares
held before May 1, 1997, however, will convert to Class A shares in May 2007.)
In the case of Class B shares held in an MSDW Eligible Plan, the plan is treated
as a single investor and all Class B shares will convert to Class A shares on
the conversion date of the Class B shares of a Morgan Stanley Dean Witter Fund
purchased by that plan.
Currently, the Class B share conversion is not a taxable event; the conversion
feature may be cancelled if it is deemed a taxable event in the future by the
Internal Revenue Service.
22
<PAGE>
If you exchange your Class B shares for shares of a Money Market Fund, a No-Load
Fund, North American Government Income Trust or Short-Term U.S. Treasury Trust,
the holding period for conversion is frozen as of the last day of the month of
the exchange and resumes on the last day of the month you exchange back into
Class B shares.
Exchanging Shares Subject to a CDSC. There are special considerations when you
exchange Fund shares that are subject to a CDSC. When determining the length of
time you held the shares and the corresponding CDSC rate, any period (starting
at the end of the month) during which you held shares of a fund that does not
charge a CDSC will not be counted. Thus, in effect the "holding period" for
purposes of calculating the CDSC is frozen upon exchanging into a fund that does
not charge a CDSC.
For example, if you held Class B shares of the Fund for one year, exchanged to
Class B of another Morgan Stanley Dean Witter Multi-Class Fund for another year,
then sold your shares, a CDSC rate of 4% would be imposed on the shares based on
a two year holding period -- one year for each Fund. However, if you had
exchanged the shares of the Fund for a Money Market Fund (which does not charge
a CDSC) instead of the Multi-Class Fund, then sold your shares, a CDSC rate of
5% would be imposed on the shares based on a one year holding period. The one
year in the Money Market Fund would not be counted. Nevertheless, if shares
subject to a CDSC are exchanged for a Fund that does not charge a CDSC, you will
receive a credit when you sell the shares equal to the distribution (12b-1)
fees, if any, you paid on those shares while in that Fund up to the amount of
any applicable CDSC.
In addition, shares that are exchanged into or from a Morgan Stanley Dean Witter
Fund subject to a higher CDSC rate will be subject to the higher rate, even if
the shares are re-exchanged into a Fund with a lower CDSC rate.
CLASS C SHARES Class C shares are sold at net asset value with no initial sales
charge but are subject to a CDSC of 1.0% on sales made within one year after the
last day of the month of purchase. The CDSC will be assessed in the same manner
and with the same CDSC waivers as with Class B shares.
Distribution Fee. Class C shares are subject to an annual distribution (12b-1)
fee of up to 1.0% of the average daily net assets of that Class. The Class C
shares' distribution fee may cause that Class to have higher expenses and pay
lower dividends than Class A or Class D shares. Unlike Class B shares, Class C
shares have no conversion feature and, accordingly, an investor that purchases
Class C shares may be subject to distribution (12b-1) fees applicable to Class C
shares for an indefinite period.
23
<PAGE>
CLASS D SHARES Class D shares are offered without any sales charge on purchases
or sales and without any distribution (12b-1) fee. Class D shares are offered
only to investors meeting an initial investment minimum of $5 million ($25
million for certain MSDW Eligible Plans) and the following investor categories:
o Investors participating in the Investment Manager's mutual fund asset
allocation program (subject to all of its terms and conditions, including
termination fees, mandatory sale or transfer restrictions on termination)
pursuant to which they pay an asset-based fee.
o Persons participating in a fee-based investment program (subject to all of
its terms and conditions, including termination fees, mandatory sale or
transfer restrictions on termination) approved by the Fund's distributor
pursuant to which they pay an asset-based fee for investment advisory,
administrative and/or brokerage services.
o Employee benefit plans maintained by Morgan Stanley Dean Witter & Co. or
any of its subsidiaries for the benefit of certain employees of Morgan
Stanley Dean Witter & Co. and its subsidiaries.
o Certain unit investment trusts sponsored by Dean Witter Reynolds.
o Certain other open-end investment companies whose shares are distributed by
the Fund's distributor.
o Investors who were shareholders of the Dean Witter Retirement Series on
September 11, 1998 for additional purchases for their former Dean Witter
Retirement Series accounts.
Meeting Class D Eligibility Minimums. To meet the $5 million ($25 million for
MSDW Eligible Plans) initial investment to qualify to purchase Class D shares,
you may combine: (1) purchases in a single transaction of Class D shares of the
Fund and other Morgan Stanley Dean Witter Multi-Class Funds and/or (2) previous
purchases of Class A and Class D shares of Multi-Class Funds and shares of FSC
Funds you currently own, along with shares of Morgan Stanley Dean Witter Funds
you currently own that you acquired in exchange for those shares.
24
<PAGE>
NO SALES CHARGES FOR REINVESTED CASH DISTRIBUTIONS If you receive a cash
payment representing an income dividend or capital gain and you reinvest that
amount in the applicable Class of shares by returning the check within 30 days
of the payment date, the purchased shares would not be subject to an initial
sales charge or CDSC.
PLAN OF DISTRIBUTION (RULE 12B-1 FEES) The Fund has adopted a Plan of
Distribution in accordance with Rule 12b-1 under the Investment Company Act of
1940 with respect to the distribution of Class A, Class B and Class C shares.
The Plan allows the Fund to pay distribution fees for the sale and distribution
of these shares. It also allows the Fund to pay for services to shareholders of
Class A, Class B and Class C shares. Because these fees are paid out of the
Fund's assets on an ongoing basis, over time these fees will increase the cost
of your investment in these Classes and may cost you more than paying other
types of sales charges.
25
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance during the life of the Fund. Certain information reflects
financial results for a single Fund share throughout each year. The total
returns in the table represent the rate an investor would have earned or lost
on an investment in the Fund (assuming reinvestment of all dividends and
distributions).
This information has been audited by PricewaterhouseCoopers LLP, independent
accountants, whose report, along with the Fund's financial statements, is
included in the annual report, which is available upon request.
<TABLE>
<CAPTION>
For the period
June 26, 1996*
For the year ended September 30, through
---------------------------------------- September 30,
1999++ 1998++ 1997**++ 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS B SHARES
- -------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
- -------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.18 $ 12.81 $ 10.23 $ 10.00
- -------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.50 0.50 0.46 0.08
Net realized and unrealized gain (loss) 0.53 (1.11) 2.54 0.23
-------- -------- -------- -----------
Total income (loss) from investment operations 1.03 (0.61) 3.00 0.31
- -------------------------------------------------------------------------------------------------------------------
Less dividends and distributions from:
Net investment income (0.53) (0.43) (0.41) (0.08)
Net realized gain (0.70) (0.59) (0.01) --
-------- -------- -------- -----------
Total dividends and distributions (1.23) (1.02) (0.42) (0.08)
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.98 $ 11.18 $ 12.81 $ 10.23
- -------------------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 9.31% (5.29)% 29.83% 3.10%(1)
- -------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- -------------------------------------------------------------------------------------------------------------------
Expenses 1.90%(3) 1.80%(3) 1.85% 2.25%(2)
- -------------------------------------------------------------------------------------------------------------------
Net investment income 4.29%(3) 3.98%(3) 4.16% 3.60%(2)
- -------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $348,070 $416,909 $358,973 $148,142
- -------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 36% 58% 74% 7%(1)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of operations.
** Prior to July 28, 1997 the Fund issued one class of shares. All shares of
the Fund held prior to that date have been designated Class B shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
26
<PAGE>
<TABLE>
<CAPTION>
For the period
July 28, 1997*
For the year ended September 30, through
--------------------------------- September 30,
1999 1998 1997
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A SHARES++
- ------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
- ------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.18 $ 12.81 $ 12.20
- ------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.58 0.59 0.12
Net realized and unrealized gain (loss) 0.54 (1.12) 0.61
-------- -------- ---------
Total income (loss) from investment operations 1.12 (0.53) 0.73
- ------------------------------------------------------------------------------------------------------
Less dividends and distributions from:
Net investment income (0.62) (0.51) (0.12)
Net realized gain (0.70) (0.59) --
-------- -------- ---------
Total dividends and distributions (1.32) (1.10) (0.12)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.98 $ 11.18 $ 12.81
- ------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 10.15% (4.67)% 5.95%(1)
- ------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- ------------------------------------------------------------------------------------------------------
Expenses 1.17%(3) 1.17%(3) 1.28%(2)
- ------------------------------------------------------------------------------------------------------
Net investment income 5.02%(3) 4.61%(3) 5.77%(2)
- ------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $12,541 $10,073 $1,047
- ------------------------------------------------------------------------------------------------------
Portfolio turnover rate 36% 58% 74%
- ------------------------------------------------------------------------------------------------------
</TABLE>
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
27
<PAGE>
<TABLE>
<CAPTION>
For the period
July 28, 1997*
For the year ended September 30, through
----------------------------------- September 30,
1999 1998 1997
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS C SHARES++
- ------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
- ------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.16 $ 12.80 $ 12.20
- ------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.48 0.50 0.10
Net realized and unrealized gain (loss) 0.55 (1.12) 0.61
-------- --------- ---------
Total income (loss) from investment operations 1.03 (0.62) 0.71
- ------------------------------------------------------------------------------------------------------
Less dividends and distributions from:
Net investment income (0.53) (0.43) (0.11)
Net realized gain (0.70) (0.59) --
-------- --------- ---------
Total dividends and distributions (1.23) (1.02) (0.11)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.96 $ 11.16 $ 12.80
- ------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 9.38% (5.38)% 5.79%(1)
- ------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- ------------------------------------------------------------------------------------------------------
Expenses 1.90%(3) 1.92%(3) 1.98%(2)
- ------------------------------------------------------------------------------------------------------
Net investment income 4.29%(3) 3.86%(3) 4.61%(2)
- ------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $40,859 $5,630 $ 987
- ------------------------------------------------------------------------------------------------------
Portfolio turnover rate 36% 58% 74%
- ------------------------------------------------------------------------------------------------------
</TABLE>
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
28
<PAGE>
<TABLE>
<CAPTION>
For the period
July 28, 1997*
For the year ended September 30, through
--------------------------------- September 30,
1999 1998 1997
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS D SHARES++
- ------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
- ------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.18 $ 12.82 $ 12.20
- ------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.60 0.64 0.12
Net realized and unrealized gain (loss) 0.55 (1.15) 0.62
--------- --------- ---------
Total income (loss) from investment operations 1.15 (0.51) 0.74
- ------------------------------------------------------------------------------------------------------
Less dividends and distributions from:
Net investment income (0.64) (0.54) (0.12)
Net realized gain (0.70) (0.59) --
--------- --------- ---------
Total dividends and distributions (1.34) (1.13) (0.12)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.99 $ 11.18 $ 12.82
- ------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 10.51% (4.46)% 5.98%(1)
- ------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- ------------------------------------------------------------------------------------------------------
Expenses 0.93%(3) 0.92%(3) 0.96%(2)
- ------------------------------------------------------------------------------------------------------
Net investment income 5.26%(3) 4.86%(3) 5.41%(2)
- ------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $ 740 $ 618 $ 21
- ------------------------------------------------------------------------------------------------------
Portfolio turnover rate 36% 58% 74%
- ------------------------------------------------------------------------------------------------------
</TABLE>
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Calculated based on the net asset value as of the last business day of
the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
29
<PAGE>
MORGAN STANLEY DEAN WITTER
FAMILY OF FUNDS
The Morgan Stanley Dean Witter Family of Funds offers
investors a wide range of investment choices. Come on
in and meet the family!
- --------------------------------------------------------------------------------
GROWTH FUNDS
GROWTH FUNDS
Aggressive Equity Fund
American Opportunities Fund
Capital Growth Securities
Developing Growth Securities
Growth Fund
Market Leader Trust
Mid-Cap Equity Trust
Next Generation Trust
Small Cap Growth Fund
Special Value Fund
THEME FUNDS
Financial Services Trust
Health Sciences Trust
Information Fund
Natural Resource Development Securities
Precious Metals and Minerals Trust
GLOBAL/INTERNATIONAL FUNDS
Competitive Edge Fund - "Best Ideas" Portfolio
European Growth Fund
Fund of Funds - International Portfolio
International Fund
International SmallCap Fund
Japan Fund
Latin American Growth Fund
Pacific Growth Fund
- --------------------------------------------------------------------------------
GROWTH & INCOME FUNDS
Balanced Growth Fund
Balanced Income Fund
Convertible Securities Trust
Dividend Growth Securities
Equity Fund
Fund of Funds - Domestic Portfolio
Income Builder Fund
Mid-Cap Dividend Growth Securities
S&P 500 Index Fund
S&P 500 Select Fund
Strategist Fund
Total Market Index Fund
Total Return Trust
Value Fund
Value-Added Market Series/Equity Portfolio
THEME FUNDS
Global Utilities Fund
Real Estate Fund
Utilities Fund
GLOBAL FUNDS
Global Dividend Growth Securities
- --------------------------------------------------------------------------------
INCOME FUNDS
GOVERNMENT INCOME FUNDS
Federal Securities Trust
Short-Term U.S. Treasury Trust
U.S. Government Securities Trust
DIVERSIFIED INCOME FUNDS
Diversified Income Trust
CORPORATE INCOME FUNDS
High Yield Securities
Intermediate Income Securities
Short-Term Bond Fund(NL)
GLOBAL INCOME FUNDS
North American Government Income Trust
World Wide Income Trust
TAX-FREE INCOME FUNDS
California Tax-Free Income Fund
Hawaii Municipal Trust(FSC)
Limited Term Municipal Trust(NL)
Multi-State Municipal Series Trust(FSC)
New York Tax-Free Income Fund
Tax-Exempt Securities Trust
- --------------------------------------------------------------------------------
MONEY MARKET FUNDS
TAXABLE MONEY MARKET FUNDS
Liquid Asset Fund(MM)
U.S. Government Money Market Trust(MM)
TAX-FREE MONEY MARKET FUNDS
California Tax-Free Daily Income Trust(MM)
New York Municipal Money Market Trust(MM)
Tax-Free Daily Income Trust(MM)
There may be Funds created after this Prospectus was published. Please consult
the inside back cover of a new Fund's Prospectus for its designation, e.g.,
Multi-Class Fund or Money Market Fund.
Unless otherwise noted, each listed Morgan Stanley Dean Witter Fund, except for
North American Government Income Trust and Short-Term U.S. Treasury Trust, is a
Multi-Class Fund. A Multi-Class Fund is a mutual fund offering multiple Classes
of shares. The other types of Funds are: NL -- No-Load (Mutual) Fund; MM --
Money Market Fund; FSC -- A mutual fund sold with a front-end sales charge and
a distribution (12b-1) fee.
<PAGE>
PROSPECTUS - NOVEMBER 23, 1999
Additional information about the Fund's investments is available in the Fund's
Annual and Semi-Annual Reports to Shareholders. In the Fund's Annual Report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year. The
Fund's Statement of Additional Information also provides additional information
about the Fund. The Statement of Additional Information is incorporated herein
by reference (legally is part of this Prospectus). For a free copy of any of
these documents, to request other information about the Fund, or to make
shareholder inquiries, please call:
(800) 869-NEWS
You also may obtain information about the Fund by calling your Morgan Stanley
Dean Witter Financial Advisor or by visiting our Internet site at:
WWW.MSDW.COM/INDIVIDUAL/FUNDS
Information about the Fund (including the Statement of Additional Information)
can be viewed and copied at the Securities and Exchange Commission's Public
Reference Room in Washington, DC. Information about the Reference Room's
operations may be obtained by calling the SEC at (800) SEC-0330. Reports and
other information about the Fund are available on the SEC's Internet site
(www.sec.gov), and copies of this information may be obtained, upon payment of
a duplicating fee, by writing the Public Reference Section of the SEC,
Washington, DC 20549-6009.
TICKER SYMBOLS:
Class A: INBAX
- -------------------------------
Class B: INBBX
- -------------------------------
Class C: INBCX
- -------------------------------
Class D: INBDX
- -------------------------------
(THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-7575)
Morgan Stanley Dean Witter
----------------------------------------------------------------
INCOME BUILDER FUND
[GRAPHIC OMITTED]
A MUTUAL FUND WHOSE PRIMARY INVESTMENT OBJECTIVE
IS TO SEEK REASONABLE INCOME; AS A SECONDARY
OBJECTIVE, THE FUND SEEKS GROWTH OF CAPITAL
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION MORGAN STANLEY DEAN WITTER
INCOME BUILDER FUND
NOVEMBER 23, 1999
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a Prospectus. The
Prospectus (dated November 23, 1999) for Morgan Stanley Dean Witter Income
Builder Fund may be obtained without charge from the Fund at its address or
telephone number listed below or from Dean Witter Reynolds at any of its branch
offices.
Morgan Stanley Dean Witter Income Builder Fund
Two World Trade Center
New York, New York 10048
(800) 869-NEWS
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
I. Fund History .........................................................4
II. Description of the Fund and Its Investments and Risks ................4
A. Classification ..................................................4
B. Investment Strategies and Risks .................................4
C. Fund Policies/Investment Restrictions ...........................7
III. Management of the Fund ...............................................9
A. Board of Trustees ...............................................9
B. Management Information ..........................................9
C. Compensation ...................................................13
IV. Control Persons and Principal Holders of Securities .................15
V. Investment Management and Other Services ............................15
A. Investment Manager .............................................15
B. Principal Underwriter ..........................................15
C. Services Provided by the Investment Manager ....................16
D. Dealer Reallowances ............................................17
E. Rule 12b-1 Plan ................................................17
F. Other Service Providers ........................................21
VI. Brokerage Allocation and Other Practices ............................21
A. Brokerage Transactions .........................................21
B. Commissions ....................................................22
C. Brokerage Selection ............................................22
D. Directed Brokerage .............................................23
E. Regular Broker-Dealers .........................................23
VII. Capital Stock and Other Securities ..................................23
VIII. Purchase, Redemption and Pricing of Shares ..........................24
A. Purchase/Redemption of Shares ..................................24
B. Offering Price .................................................25
IX. Taxation of the Fund and Shareholders ...............................26
X. Underwriters ........................................................27
XI. Calculation of Performance Data .....................................27
XII. Financial Statements ................................................29
2
<PAGE>
GLOSSARY OF SELECTED DEFINED TERMS
The terms defined in this glossary are frequently used in this Statement of
Additional Information (other terms used occasionally are defined in the text of
the document).
"Custodian" -- The Bank of New York.
"Dean Witter Reynolds" -- Dean Witter Reynolds Inc., a wholly-owned
broker-dealer subsidiary of MSDW.
"Distributor" -- Morgan Stanley Dean Witter Distributors Inc., a
wholly-owned broker-dealer subsidiary of MSDW.
"Financial Advisors" -- Morgan Stanley Dean Witter authorized financial
services representatives.
"Fund" -- Morgan Stanley Dean Witter Income Builder Fund, a registered
open-end investment company.
"Independent Trustees" -- Trustees who are not "interested persons" (as
defined by the Investment Company Act) of the Fund.
"Investment Manager" -- Morgan Stanley Dean Witter Advisors Inc., a
wholly-owned investment advisor subsidiary of MSDW.
"Morgan Stanley & Co." -- Morgan Stanley & Co. Incorporated, a wholly-owned
broker-dealer subsidiary of MSDW.
"Morgan Stanley Dean Witter Funds" -- Registered investment companies (i)
for which the Investment Manager serves as the investment advisor and (ii) that
hold themselves out to investors as related companies for investment and
investor services.
"MSDW" -- Morgan Stanley Dean Witter & Co., a preeminent global financial
services firm.
"MSDW Services Company" -- Morgan Stanley Dean Witter Services Company
Inc., a wholly-owned fund services subsidiary of the Investment Manager.
"Transfer Agent" -- Morgan Stanley Dean Witter Trust FSB, a wholly-owned
transfer agent subsidiary of MSDW.
"Trustees" -- The Board of Trustees of the Fund.
3
<PAGE>
I. FUND HISTORY
- --------------------------------------------------------------------------------
The Fund was organized as a Massachusetts business trust, under a
Declaration of Trust, on March 21, 1996, with the name Dean Witter Income
Builder Fund. On June 22, 1998, the Fund's name was changed to Morgan Stanley
Dean Witter Income Builder Fund.
II. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
- --------------------------------------------------------------------------------
A. CLASSIFICATION
The Fund is an open-end, diversified management investment company whose
primary investment objective is to seek reasonable income. As a secondary
objective, the Fund seeks growth of capital.
B. INVESTMENT STRATEGIES AND RISKS
The following discussion of the Fund's investment strategies and risks
should be read with the sections of the Fund's Prospectus titled "Principal
Investment Strategies," "Principal Risks," "Additional Investment Strategy
Information," and "Additional Risk Information."
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Fund may enter into
forward foreign currency exchange contracts ("forward contracts") to "lock in"
the price of a security in U.S. dollars or some other foreign currency which the
Fund is holding in its portfolio. By entering into a forward contract for the
purchase or sale, for a fixed amount of dollars or other currency, of the amount
of foreign currency involved in the underlying security transactions, the Fund
may be able to protect itself against a possible loss resulting from an adverse
change in the relationship between the U.S. dollar or other currency which is
being used for the security purchase and the foreign currency in which the
security is denominated during the period between the date on which the security
is purchased or sold and the date on which payment is made or received. A
forward contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
These contracts are traded in the interbank market conducted directly between
currency traders (usually large, commercial and investment banks) and their
customers. Forward contracts only will be entered into with United States banks
and their foreign branches, insurance companies and other dealers or foreign
banks whose assets total $1 billion or more. A forward contract generally has no
deposit requirement, and no commissions are charged at any stage for trades.
Although the Fund values its assets daily in terms of U.S. dollars, it does
not intend to convert its holdings of foreign currencies into U.S. dollars on a
daily basis. It will, however, do so from time to time, and investors should be
aware of the costs of currency conversion. Although foreign exchange dealers do
not charge a fee for conversion, they do realize a profit based on the spread
between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the Fund at one rate,
while offering a lesser rate of exchange should the Fund desire to resell that
currency to the dealer.
The Fund may be limited in its ability to enter into hedging transactions
involving forward contracts by the Internal Revenue Code requirements relating
to qualification as a regulated investment company.
Forward currency contracts may limit gains on portfolio securities that
could otherwise be realized had they not been utilized and could result in
losses.
MONEY MARKET SECURITIES. The Fund may invest in various money market
securities for cash management purposes, which among others may include
commercial paper, bank acceptances, bank obligations, corporate debt securities,
certificates of deposit, U.S. Government securities, obligations of savings
institutions and repurchase agreements. Such securities include:
U.S. or Foreign Government Securities. Obligations issued or guaranteed as
to principal and interest by the United States or its agencies (such as the
Export-Import Bank of the United States, Federal Housing Administration and
Government National Mortgage Association) or its instrumentalities (such as the
Federal Home Loan Bank), including Treasury bills, notes and bonds;
4
<PAGE>
Bank Obligations. Obligations (including certificates of deposit, time
deposits and bankers' acceptances) of banks subject to regulation by the U.S.
Government and having total assets of $1 billion or more, and instruments
secured by such obligations, not including obligations of foreign branches of
domestic banks except to the extent below;
Eurodollar Certificates of Deposit. Eurodollar certificates of deposit
issued by foreign branches of domestic banks having total assets of $1 billion
or more;
Obligations of Savings Institutions. Certificates of deposit of savings
banks and savings and loan associations, having total assets of $1 billion or
more;
Fully Insured Certificates of Deposit. Certificates of deposit of banks and
savings institutions, having total assets of less than $1 billion, if the
principal amount of the obligation is federally insured by the Bank Insurance
Fund or the Savings Association Insurance Fund (each of which is administered by
the FDIC), limited to $100,000 principal amount per certificate and to 10% or
less of the Fund's total assets in all such obligations and in all illiquid
assets, in the aggregate;
Commercial Paper. Commercial paper rated within the two highest grades by
Standard & Poor's Corporation ("S&P") or the two highest grades by Moody's
Investors Service, Inc. ("Moody's") or, if not rated, issued by a company having
an outstanding debt issue rated at least AA by S&P or Aa by Moody's; and
Repurchase Agreements. The Fund may invest in repurchase agreements. When
cash may be available for only a few days, it may be invested by the Fund in
repurchase agreements until such time as it may otherwise be invested or used
for payments of obligations of the Fund. These agreements, which may be viewed
as a type of secured lending by the Fund, typically involve the acquisition by
the Fund of debt securities from a selling financial institution such as a bank,
savings and loan association or broker-dealer. The agreement provides that the
Fund will sell back to the institution, and that the institution will
repurchase, the underlying security serving as collateral at a specified price
and at a fixed time in the future, usually not more than seven days from the
date of purchase. The collateral will be marked-to-market daily to determine
that the value of the collateral, as specified in the agreement, does not
decrease below the purchase price plus accrued interest. If such decrease
occurs, additional collateral will be requested and, when received, added to the
account to maintain full collateralization. The Fund will accrue interest from
the institution until the time when the repurchase is to occur. Although this
date is deemed by the Fund to be the maturity date of a repurchase agreement,
the maturities of securities subject to repurchase agreements are not subject to
any limits.
While repurchase agreements involve certain risks not associated with
direct investments in debt securities, the Fund follows procedures designed to
minimize such risks. These procedures include effecting repurchase transactions
only with large, well-capitalized and well-established financial institutions
whose financial condition will be continually monitored by the Investment
Manager subject to procedures established by the Trustees. In addition, as
described above, the value of the collateral underlying the repurchase agreement
will be at least equal to the repurchase price, including any accrued interest
earned on the repurchase agreement. In the event of a default or bankruptcy by a
selling financial institution, the Fund will seek to liquidate such collateral.
However, the exercising of the Fund's right to liquidate such collateral could
involve certain costs or delays and, to the extent that proceeds from any sale
upon a default of the obligation to repurchase were less than the repurchase
price, the Fund could suffer a loss.
ZERO COUPON SECURITIES. A portion of the fixed-income securities purchased
by the Fund may be zero coupon securities. Such securities are purchased at a
discount from their face amount, giving the purchaser the right to receive their
full value at maturity. The interest earned on such securities is, implicitly,
automatically compounded and paid out at maturity. While such compounding at a
constant rate eliminates the risk of receiving lower yields upon reinvestment of
interest if prevailing interest rates decline, the owner of a zero coupon
security will be unable to participate in higher yields upon reinvestment of
interest received on interest-paying securities if prevailing interest rates
rise.
5
<PAGE>
A zero coupon security pays no interest to its holder during its life.
Therefore, to the extent the Fund invests in zero coupon securities, it will not
receive current cash available for distribution to shareholders. In addition,
zero coupon securities are subject to substantially greater price fluctuations
during periods of changing prevailing interest rates than are comparable
securities which pay interest on a current basis. Current federal tax law
requires that a holder (such as the Fund) of a zero coupon security accrue a
portion of the discount at which the security was purchased as income each year
even though the Fund receives no interest payments in cash on the security
during the year.
LENDING PORTFOLIO SECURITIES. The Fund may lend its portfolio securities to
brokers, dealers and other financial institutions, provided that the loans are
callable at any time by the Fund, and are at all times secured by cash or cash
equivalents, which are maintained in a segregated account pursuant to applicable
regulations and that are equal to at least 100% of the market value, determined
daily, of the loaned securities. The advantage of these loans is that the Fund
continues to receive the income on the loaned securities while at the same time
earning interest on the cash amounts deposited as collateral, which will be
invested in short-term obligations. The Fund will not lend more than 25% of the
value of its total assets.
As with any extensions of credit, there are risks of delay in recovery and,
in some cases, even loss of rights in the collateral should the borrower of the
securities fail financially. However, these loans of portfolio securities will
only be made to firms deemed by the Fund's management to be creditworthy and
when the income which can be earned from such loans justifies the attendant
risks. Upon termination of the loan, the borrower is required to return the
securities to the Fund. Any gain or loss in the market price during the loan
period would inure to the Fund.
When voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loaned securities, to
be delivered within one day after notice, to permit the exercise of the rights
if the matters involved would have a material effect on the Fund's investment in
the loaned securities. The Fund will pay reasonable finder's, administrative and
custodial fees in connection with a loan of its securities.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. From
time to time the Fund may purchase securities on a when-issued or delayed
delivery basis or may purchase or sell securities on a forward commitment basis.
When these transactions are negotiated, the price is fixed at the time of the
commitment, but delivery and payment can take place a month or more after the
date of commitment. While the Fund will only purchase securities on a
when-issued, delayed delivery or forward commitment basis with the intention of
acquiring the securities, the Fund may sell the securities before the settlement
date, if it is deemed advisable. The securities so purchased or sold are subject
to market fluctuation and no interest or dividends accrue to the purchaser prior
to the settlement date.
At the time the Fund makes the commitment to purchase or sell securities on
a when-issued, delayed delivery or forward commitment basis, it will record the
transaction and thereafter reflect the value, each day, of such security
purchased, or if a sale, the proceeds to be received, in determining its net
asset value. At the time of delivery of the securities, their value may be more
or less than the purchase or sale price. An increase in the percentage of the
Fund's assets committed to the purchase of securities on a when-issued, delayed
delivery or forward commitment basis may increase the volatility of its net
asset value. The Fund will also establish a segregated account on the Fund's
books in which it will continually maintain cash or cash equivalents or other
liquid portfolio securities equal in value to commitments to purchase securities
on a when-issued, delayed delivery or forward commitment basis.
WHEN, AS AND IF ISSUED SECURITIES. The Fund may purchase securities on a
"when, as and if issued" basis under which the issuance of the security depends
upon the occurrence of a subsequent event, such as approval of a merger,
corporate reorganization or debt restructuring. The commitment for the purchase
of any such security will not be recognized in the portfolio of the Fund until
the Investment Manager determines that issuance of the security is probable. At
that time, the Fund will record the transaction and, in determining its net
asset value, will reflect the value of the security daily. At that time, the
Fund will also establish a segregated account on the Fund's books in which it
will maintain cash or cash equivalents or other liquid portfolio securities
equal in value to recognized commitments for such securities.
6
<PAGE>
The value of the Fund's commitments to purchase the securities of any one
issuer, together with the value of all securities of such issuer owned by the
Fund, may not exceed 5% of the value of the Fund's total assets at the time the
initial commitment to purchase such securities is made. An increase in the
percentage of the Fund's assets committed to the purchase of securities on a
"when, as and if issued" basis may increase the volatility of its net asset
value. The Fund may also sell securities on a "when, as and if issued" basis
provided that the issuance of the security will result automatically from the
exchange or conversion of a security owned by the Fund at the time of sale.
YEAR 2000. The investment management services provided to the Fund by the
Investment Manager and the services provided to shareholders by the Distributor
and the Transfer Agent depend on the smooth functioning of their computer
systems. Many computer software systems in use today cannot recognize the year
2000, but revert to 1900 or some other date, due to the manner in which dates
were encoded and calculated. That failure could have a negative impact on the
handling of securities trades, pricing and account services. The Investment
Manager, the Distributor and the Transfer Agent have been actively working on
necessary changes to their own computer systems to prepare for the year 2000 and
expect that their systems will be adapted before that date, but there can be no
assurance that they will be successful, or that interaction with other
non-complying computer systems will not impair their services at that time.
In addition, it is possible that the markets for securities in which the
Fund invests may be detrimentally affected by computer failures throughout the
financial services industry beginning January 1, 2000. Improperly functioning
trading systems may result in settlement problems and liquidity issues.
Corporate and governmental data processing errors also may result in production
problems for individual companies and overall economic uncertainties. Earnings
of individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected.
C. FUND POLICIES/INVESTMENT RESTRICTIONS
The investment objectives, policies and restrictions listed below have been
adopted by the Fund as fundamental policies. Under the Investment Company Act of
1940 (the "Investment Company Act"), a fundamental policy may not be changed
without the vote of a majority of the outstanding voting securities of the Fund.
The Investment Company Act defines a majority as the lesser of (a) 67% or more
of the shares present at a meeting of shareholders, if the holders of 50% of the
outstanding shares of the Fund are present or represented by proxy; or (b) more
than 50% of the outstanding shares of the Fund. For purposes of the following
restrictions: (i) all percentage limitations apply immediately after a purchase
or initial investment (unless otherwise noted); and (ii) any subsequent change
in any applicable percentage resulting from market fluctuations or other changes
in total or net assets does not require elimination of any security from the
portfolio.
The Fund will:
1. As a primary objective, seek reasonable income.
2. As a secondary objective, seek growth of capital.
The Fund may not:
1. Invest more than 5% of the value of its total assets in the securities
of any one issuer (other than obligations issued, or guaranteed by, the
United States Government, its agencies or instrumentalities).
2. Purchase more than 10% of all outstanding voting securities or any
class of securities of any one issuer.
3. Invest 25% or more of the value of its total assets in securities of
issuers in any one industry. This restriction does not apply to
obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities.
7
<PAGE>
4. Invest more than 5% of the value of its total assets in securities of
issuers having a record, together with predecessors, of less than three
years of continuous operation. This restriction shall not apply to any
obligation of the United States Government, its agencies or
instrumentalities.
5. Invest in securities of any issuer if in the exercise of reasonable
diligence, the Fund has determined that any officer or trustee/director
of the Fund or of the Investment Manager owns more than 1/2 of 1% of
the outstanding securities of such issuer, and such officers and
trustees/directors who own more than 1/2 of 1% own in the aggregate
more than 5% of the outstanding securities of such issuer.
6. Purchase or sell real estate or interests therein (including limited
partnership interests), although the Fund may purchase securities of
issuers which engage in real estate operations and securities secured
by real estate or interests therein.
7. Purchase or sell commodities.
8. Purchase oil, gas or other mineral leases, rights or royalty contracts
or exploration or development programs, except that the Fund may invest
in the securities of companies which operate, invest in, or sponsor
such programs.
9. Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of assets.
10. Borrow money, except that the Fund may borrow from a bank for temporary
or emergency purposes in amounts not exceeding 5% (taken at the lower
of cost or current value) of its total assets (not including the amount
borrowed).
11. Pledge its assets or assign or otherwise encumber them except to secure
permitted borrowings.
12. Issue senior securities as defined in the Investment Company Act except
insofar as the Fund may be deemed to have issued a senior security by
reason of: (a) entering into any repurchase agreement; (b) borrowing
money; (c) purchasing any securities on a when-issued or delayed
delivery basis; or (d) lending portfolio securities.
13. Make loans of money or securities, except by: (a) the purchase of debt
obligations in which the Fund may invest consistent with its investment
objective and policies; (b) investment in repurchase agreements; or (c)
lending its portfolio securities.
14. Make short sales of securities.
15. Purchase securities on margin, except for such short-term loans as are
necessary for the clearance of portfolio securities.
16. Engage in the underwriting of securities, except insofar as the Fund
may be deemed an underwriter under the Securities Act of 1933 in
disposing of a portfolio security.
17. Invest for the purpose of exercising control or management of any other
issuer.
In addition, as non-fundamental policies, the Fund will not invest in
options or futures contracts or in more than 5% of the value of its net assets
in warrants, including not more than 2% of such assets in warrants not listed on
the New York or American Stock Exchange. However, the acquisition of warrants
attached to other securities is not subject to this restriction.
Notwithstanding any other investment policy or restriction, the Fund may
seek to achieve its investment objectives by investing all or substantially all
of its assets in another investment company having substantially the same
investment objectives and policies as the Fund.
8
<PAGE>
III. MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
A. BOARD OF TRUSTEES
The Board of Trustees of the Fund oversees the management of the Fund but
does not itself manage the Fund. The Trustees review various services provided
by or under the direction of the Investment Manager to ensure that the Fund's
general investment policies and programs are properly carried out. The Trustees
also conduct their review to ensure that administrative services are provided to
the Fund in a satisfactory manner.
Under state law, the duties of the Trustees are generally characterized as
a duty of loyalty and a duty of care. The duty of loyalty requires a Trustee to
exercise his or her powers in the interest of the Fund and not the Trustee's own
interest or the interest of another person or organization. A Trustee satisfies
his or her duty of care by acting in good faith with the care of an ordinarily
prudent person and in a manner the Trustee reasonably believes to be in the best
interest of the Fund and its shareholders.
B. MANAGEMENT INFORMATION
TRUSTEES AND OFFICERS. The Board of the Fund consists of eight (8)
Trustees. These same individuals also serve as directors or trustees for all of
the Morgan Stanley Dean Witter Funds. Six Trustees (75% of the total number)
have no affiliation or business connection with the Investment Manager or any of
its affiliated persons and do not own any stock or other securities issued by
the Investment Manager's parent company, MSDW. These are the "non-interested" or
"independent" Trustees. The other two Trustees (the "management Trustees") are
affiliated with the Investment Manager.
The Trustees and executive officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with the
Investment Manager, and with the 92 Morgan Stanley Dean Witter Funds, are shown
below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------- ----------------------------------------------------
<S> <C>
Michael Bozic (58) ........................ Vice Chairman of Kmart Corporation (since
Trustee December 1998); Director or Trustee of the Morgan
c/o Kmart Corporation Stanley Dean Witter Funds; formerly Chairman
3100 West Big Beaver Road and Chief Executive Officer of Levitz Furniture
Troy, Michigan 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
and Co.; Director of Eaglemark Financial Services,
Inc. and Weirton Steel Corporation.
Charles A. Fiumefreddo* (66) .............. Chairman, Director or Trustee and Chief Executive
Chairman of the Board Officer of the Morgan Stanley Dean Witter Funds;
Chief Executive Officer and Trustee formerly Chairman, Chief Executive Officer and
Two World Trade Center Director of the Investment Manager, the Distributor
New York, New York and MSDW Services Company; Executive Vice
President and Director of Dean Witter Reynolds;
Chairman and Director of the Transfer Agent;
formerly Director and/or officer of various MSDW
subsidiaries (until June 1998).
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------- ----------------------------------------------------
<S> <C>
Edwin J. Garn (67) ........................ Director or Trustee of the Morgan Stanley Dean
Trustee Witter Funds; formerly United States Senator (R-
c/o Huntsman Corporation Utah) (1974-1992) and Chairman, Senate Banking
500 Huntsman Way Committee (1980-1986); formerly Mayor of Salt
Salt Lake City, Utah Lake City, Utah (1971-1974); formerly Astronaut,
Space Shuttle Discovery (April 12-19, 1985); Vice
Chairman, Huntsman Corporation (chemical
company); Director of Franklin Covey (time
management systems), BMW Bank of North
America, Inc. (industrial loan corporation), United
Space Alliance (joint venture between Lockheed
Martin and the Boeing Company) and Nuskin Asia
Pacific (multilevel marketing); member of the board
of various civic and charitable organizations.
Wayne E. Hedien (65) ...................... Retired; Director or Trustee of the Morgan Stanley
Trustee Dean Witter Funds; Director of The PMI Group,
c/o Mayer, Brown & Platt Inc. (private mortgage insurance); Trustee and
Counsel to the Independent Trustees Vice Chairman of The Field Museum of Natural
1675 Broadway History; formerly associated with the Allstate
New York, New York Companies (1966-1994), most recently as
Chairman of The Allstate Corporation (March
1993-December 1994) and Chairman and Chief
Executive Officer of its wholly-owned subsidiary,
Allstate Insurance Company (July 1989-December
1994); director of various other business and
charitable organizations.
Dr. Manuel H. Johnson (50) ................ Senior Partner, Johnson Smick International, Inc.,
Trustee a consulting firm; Co-Chairman and a founder of
c/o Johnson Smick International, Inc. the Group of Seven Council (G7C), an international
1133 Connecticut Avenue, N.W. economic commission; Chairman of the Audit
Washington, D.C. Committee and Director or Trustee of the Morgan
Stanley Dean Witter Funds; Director of Greenwich
Capital Markets, Inc. (broker-dealer) and NVR, Inc.
(home construction); Chairman and Trustee of the
Financial Accounting Foundation (oversight
organization of the Financial Accounting Standards
Board); formerly Vice Chairman of the Board of
Governors of the Federal Reserve System (1986-
1990) and Assistant Secretary of the U.S. Treasury.
Michael E. Nugent (63) .................... General Partner, Triumph Capital, L.P., a private
Trustee investment partnership; Chairman of the Insurance
c/o Triumph Capital, L.P. Committee and Director or Trustee of the Morgan
237 Park Avenue Stanley Dean Witter Funds; formerly Vice
New York, New York President, Bankers Trust Company and BT Capital
Corporation (1984-1988); director of various
business organizations.
Philip J. Purcell* (56) ................... Chairman of the Board of Directors and Chief
Trustee Executive Officer of MSDW, Dean Witter Reynolds
1585 Broadway and Novus Credit Services Inc.; Director of the
New York, New York Distributor; Director or Trustee of the Morgan
Stanley Dean Witter Funds; Director and/or officer
of various MSDW subsidiaries.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------- -----------------------------------------------------
<S> <C>
John L. Schroeder (69) .................... Retired; Chairman of the Derivatives Committee
Trustee and Director or Trustee of the Morgan Stanley
c/o Mayer, Brown & Platt Dean Witter Funds; Director of Citizens Utilities
Counsel to the Independent Trustees Company (telecommunications, gas, electric and
1675 Broadway water utilities company); formerly Executive Vice
New York, New York President and Chief Investment Officer of the
Home Insurance Company (August 1991-
September 1995).
Mitchell M. Merin (46) .................... President and Chief Operating Officer of Asset
President Management of MSDW (since December 1998);
Two World Trade Center President and Director (since April 1997) and Chief
New York, New York Executive Officer (since June 1998) of the
Investment Manager and MSDW Services
Company; Chairman, Chief Executive Officer and
Director of the Distributor (since June 1998);
Chairman and Chief Executive Officer (since June
1998) and Director (since January 1998) of the
Transfer Agent; Director of various MSDW
subsidiaries; President of the Morgan Stanley Dean
Witter Funds (since May 1999); previously Chief
Strategic Officer of the Investment Manager and
MSDW Services Company and Executive Vice
President of the Distributor (April 1997-June 1998),
Vice President of the Morgan Stanley Dean Witter
Funds (May 1997-April 1999), and Executive Vice
President of Dean Witter, Discover & Co.
Barry Fink (44) ........................... Senior Vice President (since March 1997) and
Vice President, Secretary and General Counsel (since February
Secretary and General Counsel 1997) and Director (since July 1998) of the
Two World Trade Center Investment Manager and MSDW Services
New York, New York Company; Senior Vice President (since March
1997) and Assistant Secretary and Assistant
General Counsel (since February 1997) of the
Distributor; Assistant Secretary of Dean Witter
Reynolds (since August 1996); Vice President,
Secretary and General Counsel of the Morgan
Stanley Dean Witter Funds (since February
1997); previously First Vice President (June 1993-
February 1997), Vice President and Assistant
Secretary and Assistant General Counsel of the
Investment Manager and MSDW Services
Company and Assistant Secretary of the Morgan
Stanley Dean Witter Funds.
Paul D. Vance (63) ........................ Senior Vice President of the Investment Manager
Vice President and Director of the Growth and Income Group of
Two World Trade Center the Investment Manager; and Vice President of
New York, New York various Morgan Stanley Dean Witter Funds.
Peter M. Avelar (41) ...................... Senior Vice President of the Investment Manager
Vice President and Director of the High Yield Group of the
Two World Trade Center Investment Manager; and Vice President of various
New York, New York Morgan Stanley Dean Witter Funds.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------- -----------------------------------------------------
<S> <C>
Catherine Maniscalco (36) ................. Vice President (since June 1997) and a portfolio
Vice President manager (since March 1995) of the Investment
Two World Trade Center Manager; formerly a portfolio management product
New York, New York specialist at National Investor Data Services (April
1994-March 1995).
Thomas F. Caloia (53) ..................... First Vice President and Assistant Treasurer of the
Treasurer Investment Manager, the Distributor and MSDW
Two World Trade Center Services Company; Treasurer of the Morgan
New York, New York Stanley Dean Witter Funds.
</TABLE>
- ----------
* Denotes Trustees who are "interested persons" of the Fund as defined by the
Investment Company Act.
In addition, Ronald E. Robison, Executive Vice President, Chief
Administrative Officer and Director of the Investment Manager and MSDW Services
Company, Robert S. Giambrone, Senior Vice President of the Investment Manager,
MSDW Services Company, the Distributor and the Transfer Agent and Director of
the Transfer Agent, and Joseph J. McAlinden, Executive Vice President and Chief
Investment Officer of the Investment Manager and Director of the Transfer Agent
are Vice Presidents of the Fund.
In addition, Marilyn K. Cranney, Lou Anne D. McInnis, Carsten Otto and Ruth
Rossi, First Vice Presidents and Assistant General Counsels of the Investment
Manager and MSDW Services Company, Todd Lebo, Vice President and Assistant
General Counsel of the Investment Manager and MSDW Services Company, and Natasha
Kassian, a Staff Attorney with the Investment Manager, are Assistant Secretaries
of the Fund.
INDEPENDENT DIRECTORS/TRUSTEES AND THE COMMITTEES. Law and regulation
establish both general guidelines and specific duties for the independent
directors/trustees. The Morgan Stanley Dean Witter Funds seek as independent
directors/trustees individuals of distinction and experience in business and
finance, government service or academia; these are people whose advice and
counsel are in demand by others and for whom there is often competition. To
accept a position on the Funds' boards, such individuals may reject other
attractive assignments because the Funds make substantial demands on their time.
All of the independent directors/trustees serve as members of the Audit
Committee. In addition, three of the directors/trustees, including two
independent directors/trustees, serve as members of the Derivatives Committee
and the Insurance Committee.
The independent directors/trustees are charged with recommending to the
full board approval of management, advisory and administration contracts, Rule
12b-1 plans and distribution and underwriting agreements; continually reviewing
Fund performance; checking on the pricing of portfolio securities, brokerage
commissions, transfer agent costs and performance, and trading among Funds in
the same complex; and approving fidelity bond and related insurance coverage and
allocations, as well as other matters that arise from time to time. The
independent directors/trustees are required to select and nominate individuals
to fill any independent directors/trustees vacancy on the board of any Fund that
has a Rule 12b-1 plan of distribution. Most of the Morgan Stanley Dean Witter
Funds have a Rule 12b-1 plan.
The Audit Committee is charged with recommending to the full board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing engagement;
approving professional services provided by the independent accountants and
other accounting firms prior to the performance of the services; reviewing the
independence of the independent accountants; considering the range of audit and
non-audit fees; reviewing the adequacy of the Fund's system of internal
controls; and preparing and submitting Committee meeting minutes to the full
board.
The board of each Fund has a Derivatives Committee to approve parameters
for and monitor the activities of the Fund with respect to derivative
investments, if any, made by the Fund.
12
<PAGE>
Finally, the board of each Fund has formed an Insurance Committee to
review and monitor the insurance coverage maintained by the Fund.
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT DIRECTORS/TRUSTEES
FOR ALL MORGAN STANLEY DEAN WITTER FUNDS. The independent directors/trustees
and the Funds' management believe that having the same independent
directors/trustees for each of the Morgan Stanley Dean Witter Funds avoids the
duplication of effort that would arise from having different groups of
individuals serving as independent directors/trustees for each of the Funds or
even of sub-groups of Funds. They believe that having the same individuals
serve as independent directors/trustees of all the Funds tends to increase
their knowledge and expertise regarding matters which affect the Fund complex
generally and enhances their ability to negotiate on behalf of each Fund with
the Fund's service providers. This arrangement also precludes the possibility
of separate groups of independent directors/trustees arriving at conflicting
decisions regarding operations and management of the Funds and avoids the cost
and confusion that would likely ensue. Finally, having the same independent
directors/trustees serve on all Fund boards enhances the ability of each Fund
to obtain, at modest cost to each separate Fund, the services of independent
directors/trustees, of the caliber, experience and business acumen of the
individuals who serve as independent directors/trustees of the Morgan Stanley
Dean Witter Funds.
TRUSTEE AND OFFICER INDEMNIFICATION. The Fund's Declaration of Trust
provides that no Trustee, officer, employee or agent of the Fund is liable to
the Fund or to a shareholder, nor is any Trustee, officer, employee or agent
liable to any third persons in connection with the affairs of the Fund, except
as such liability may arise from his/her or its own bad faith, willful
misfeasance, gross negligence or reckless disregard of his/her or its duties.
It also provides that all third persons shall look solely to the Fund property
for satisfaction of claims arising in connection with the affairs of the Fund.
With the exceptions stated, the Declaration of Trust provides that a Trustee,
officer, employee or agent is entitled to be indemnified against all liability
in connection with the affairs of the Fund.
C. COMPENSATION
The Fund pays each Independent Trustee an annual fee of $800 plus a per
meeting fee of $50 for meetings of the Board of Trustees, the Independent
Trustees or Committees of the Board of Trustees attended by the Trustee (the
Fund pays the Chairman of the Audit Committee an additional annual fee of $750,
and the Chairmen of the Derivatives and Insurance Committees additional annual
fees of $500). If a Board meeting and a meeting of the Independent Trustees or
a Committee meeting, or a meeting of the Independent Trustees and/or more than
one Committee meeting, take place on a single day, the Trustees are paid a
single meeting fee by the Fund. The Fund also reimburses such Trustees for
travel and other out-of-pocket expenses incurred by them in connection with
attending such meetings. Trustees and officers of the Fund who are or have been
employed by the Investment Manager or an affiliated company receive no
compensation or expense reimbursement from the Fund for their services as
Trustee.
The following table illustrates the compensation that the Fund paid to its
Independent Trustees for the fiscal year ended September 30, 1999.
FUND COMPENSATION
AGGREGAT0
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- ------------------------------- --------------
Michael Bozic .............................................. $1,550
Edwin J. Garn .............................................. 1,600
Wayne E. Hedien ............................................ 1,650
Dr. Manuel H. Johnson ...................................... 2,100
Michael E. Nugent .......................................... 1,933
John L. Schroeder .......................................... 1,933
13
<PAGE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1998 for services
to the 90 Morgan Stanley Dean Witter Funds that were in operation at December
31, 1998.
CASH COMPENSATION FROM MORGAN STANLEY DEAN WITTER FUNDS
TOTAL CASH
COMPENSATION
FOR SERVICES TO
90 MORGAN
NAME OF STANLEY DEAN
INDEPENDENT TRUSTEE WITTER FUNDS
- ------------------------------- ----------------
Michael Bozic ........................................ $120,150
Edwin J. Garn ........................................ 132,450
Wayne E. Hedien ...................................... 132,350
Dr. Manuel H. Johnson ................................ 155,681
Michael E. Nugent .................................... 159,731
John L. Schroeder .................................... 160,731
As of the date of this Statement of Additional Information, 55 of the
Morgan Stanley Dean Witter Funds, not including the Fund, have adopted a
retirement program under which an independent director/trustee who retires after
serving for at least five years (or such lesser period as may be determined by
the Board) as an independent director/trustee of any Morgan Stanley Dean Witter
Fund that has adopted the retirement program (each such Fund referred to as an
"Adopting Fund" and each such Trustee referred to as an "Eligible Trustee") is
entitled to retirement payments upon reaching the eligible retirement age
(normally, after attaining age 72). Annual payments are based upon length of
service.
Currently, upon retirement, each Eligible Trustee is entitled to receive
from the Adopting Fund, commencing as of his or her retirement date and
continuing for the remainder of his or her life, an annual retirement benefit
(the "Regular Benefit") equal to 30.22% of his or her Eligible Compensation plus
0.5036667% of such Eligible Compensation for each full month of service as an
Independent Director/Trustee of any Adopting Fund in excess of five years up to
a maximum of 60.44% after ten years of service. The foregoing percentages may be
changed by the Board.(1) "Eligible Compensation" is one-fifth of the total
compensation earned by such Eligible Trustee for service to the Adopting Fund in
the five year period prior to the date of the Eligible Trustee's retirement.
Benefits under the retirement program are accrued as expenses on the books of
the Adopting Funds. Such benefits are not secured or funded by the Adopting
Funds.
The following table illustrates the retirement benefits accrued to the
Fund's Independent Trustees by the 55 Morgan Stanley Dean Witter Funds (not
including the Fund) for the year ended December 31, 1998, and the estimated
retirement benefits for the Independent Trustees, to commence upon their
retirement, from the 55 Morgan Stanley Dean Witter Funds as of December 31,
1998.
- ----------
(1) An Eligible Trustee may elect alternative payments of his or her
retirement benefits based upon the combined life expectancy of the
Eligible Trustee and his or her spouse on the date of such Eligible
Trustee's retirement. In addition, the Eligible Trustee may elect that
the surviving spouse's periodic payment of benefits will be equal to a
lower percentage of the periodic amount when both spouses were alive. The
amount estimated to be payable under this method, through the remainder
of the later of the lives of the Eligible Trustee and spouse, will be the
actuarial equivalent of the Regular Benefit.
14
<PAGE>
RETIREMENT BENEFITS FROM THE FUND AND ALL MORGAN STANLEY DEAN WITTER FUNDS
<TABLE>
<CAPTION>
FOR ALL ADOPTING FUNDS
------------------------------- RETIREMENT ESTIMATED
ESTIMATED BENEFITS ANNUAL
CREDITED ACCRUED AS BENEFITS UPON
YEARS OF ESTIMATED EXPENSES RETIREMENT
SERVICE AT PERCENTAGE BY ALL FROM ALL
NAME OF RETIREMENT OF ELIGIBLE ADOPTING ADOPTING
INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION FUNDS FUNDS(2)
- ------------------------------- -------------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
Michael Bozic ................. 10 60.44% $22,377 $52,250
Edwin J. Garn ................. 10 60.44 35,225 52,250
Wayne E. Hedien ............... 9 51.37 41,979 44,413
Dr. Manuel H. Johnson ......... 10 60.44 14,047 52,250
Michael E. Nugent ............. 10 60.44 25,336 52,250
John L. Schroeder ............. 8 50.37 45,117 44,343
</TABLE>
- ----------
(2) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (1) on
page 14.
IV. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
- --------------------------------------------------------------------------------
The following person owned 5% or more of the outstanding Class D shares of
the Fund as of November 8, 1999: Morgan Stanley Dean Witter Trust FSB, Agent
for American Baptist Homes Foundation of the West Inc., Trustee FBO Gift
Annuity, P.O. Box 503, Jersey City, NJ 07311 -- 57.285%.
As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's
officers and Trustees as a group was less than 1% of the Fund's shares of
beneficial interest outstanding.
V. INVESTMENT MANAGEMENT AND OTHER SERVICES
- --------------------------------------------------------------------------------
A. INVESTMENT MANAGER
The Investment Manager to the Fund is Morgan Stanley Dean Witter Advisors
Inc., a Delaware corporation, whose address is Two World Trade Center, New
York, NY 10048. The Investment Manager is a wholly-owned subsidiary of MSDW, a
Delaware corporation. MSDW is a preeminent global financial services firm that
maintains leading market positions in each of its three primary businesses:
securities, asset management and credit services.
Pursuant to an Investment Management Agreement (the "Management
Agreement") with the Investment Manager, the Fund has retained the Investment
Manager to provide administrative services and manage the investment of the
Fund's assets, including the placing of orders for the purchase and sale of
portfolio securities. The Fund pays the Investment Manager monthly compensation
calculated daily by applying the following annual rates to the net assets of
the Fund determined as of the close of each business day: 0.75% to the portion
of daily net assets not exceeding $500 million; and 0.725% to the portion of
daily net assets exceeding $500 million. The management fee is allocated among
the Classes pro rata based on the net assets of the Fund attributable to each
Class. For the fiscal years ended September 30, 1997, 1998 and 1999, the
Investment Manager accrued total compensation under the Management Agreement in
the amounts of $1,868,871, $3,387,158 and $3,213,769, respectively.
The Investment Manager has retained its wholly-owned subsidiary, MSDW
Services Company, to perform administrative services for the Fund.
B. PRINCIPAL UNDERWRITER
The Fund's principal underwriter is the Distributor (which has the same
address as the Investment Manager). In this capacity, the Fund's shares are
distributed by the Distributor. The Distributor has entered into a selected
dealer agreement with Dean Witter Reynolds, which through its own sales
15
<PAGE>
organization sells shares of the Fund. In addition, the Distributor may enter
into similar agreements with other selected broker-dealers. The Distributor, a
Delaware corporation, is a wholly-owned subsidiary of MSDW.
The Distributor bears all expenses it may incur in providing services
under the Distribution Agreement. These expenses include the payment of
commissions for sales of the Fund's shares and incentive compensation to
Financial Advisors, which may include educational and/or business-related
trips, and reimbursement of educational and/or promotional and business-related
expenses. The Distributor also pays certain expenses in connection with the
distribution of the Fund's shares, including the costs of preparing, printing
and distributing advertising or promotional materials, and the costs of
printing and distributing prospectuses and supplements thereto used in
connection with the offering and sale of the Fund's shares. The Fund bears the
costs of initial typesetting, printing and distribution of prospectuses and
supplements thereto to shareholders. The Fund also bears the costs of
registering the Fund and its shares under federal and state securities laws and
pays filing fees in accordance with state securities laws.
The Fund and the Distributor have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act. Under the
Distribution Agreement, the Distributor uses its best efforts in rendering
services to the Fund, but in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations, the Distributor is
not liable to the Fund or any of its shareholders for any error of judgment or
mistake of law or for any act or omission or for any losses sustained by the
Fund or its shareholders.
C. SERVICES PROVIDED BY THE INVESTMENT MANAGER
The Investment Manager manages the investment of the Fund's assets,
including the placing of orders for the purchase and sale of portfolio
securities. The Investment Manager obtains and evaluates the information and
advice relating to the economy, securities markets, and specific securities as
it considers necessary or useful to continuously manage the assets of the Fund
in a manner consistent with its investment objective.
Under the terms of the Management 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, the office space,
facilities, equipment, clerical help, bookkeeping and certain legal services as
the Fund may reasonably require in the conduct of its business, including the
preparation of prospectuses, proxy statements and reports required to be filed
with federal and state securities commissions (except insofar as the
participation or assistance of independent accountants and attorneys is, in the
opinion of the Investment Manager, necessary or desirable). In addition, the
Investment Manager 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 service, heat, light, power and other
utilities provided to the Fund.
Expenses not expressly assumed by the Investment Manager under the
Management Agreement or by the Distributor, will be paid by the Fund. These
expenses will be allocated among the four Classes of shares pro rata based on
the net assets of the Fund attributable to each Class, except as described
below. Such expenses include, but are not limited to: expenses of the Plan of
Distribution pursuant to Rule 12b-1; charges and expenses of any registrar,
custodian, stock transfer and dividend disbursing agent; brokerage commissions;
taxes; engraving and printing share certificates; registration costs of the
Fund and its shares under federal and state securities laws; the cost and
expense of printing, including typesetting, and distributing prospectuses of
the Fund and supplements thereto to the Fund's shareholders; all expenses of
shareholders' and Trustees' meetings and of preparing, printing and mailing of
proxy statements and reports to shareholders; fees and travel expenses of
Trustees or members of any advisory board or committee who are not employees of
the Investment Manager or any corporate affiliate of the Investment Manager;
all expenses incident to any dividend, withdrawal or redemption options;
charges and expenses of any outside service used for pricing of the Fund's
shares; fees and expenses of legal counsel, including counsel to the Trustees
who are not interested persons of the Fund or of the Investment Manager (not
including compensation or expenses of attorneys who are
16
<PAGE>
employees of the Investment Manager); fees and expenses of the Fund's
independent accountants; membership dues of industry associations; interest on
Fund borrowings; postage; insurance premiums on property or personnel
(including officers and Trustees) of the Fund which inure to its benefit;
extraordinary expenses (including, but not limited to, legal claims and
liabilities and litigation costs and any indemnification relating thereto); and
all other costs of the Fund's operation. The 12b-1 fees relating to a
particular Class will be allocated directly to that Class. In addition, other
expenses associated with a particular Class (except advisory or custodial fees)
may be allocated directly to that Class, provided that such expenses are
reasonably identified as specifically attributable to that Class and the direct
allocation to that Class is approved by the Trustees.
The Management Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the Investment Manager is not liable to the Fund or any
of its investors for any act or omission by the Investment Manager or for any
losses sustained by the Fund or its investors.
The Management Agreement will remain in effect from year to year, provided
continuance of the Management Agreement is approved at least annually by the
vote of the holders of a majority, as defined in the Investment Company Act, of
the outstanding shares of the Fund, or by the Trustees; provided that in either
event such continuance is approved annually by the vote of a majority of the
Trustees, including a majority of the Independent Trustees.
D. DEALER REALLOWANCES
Upon notice to selected broker-dealers, the Distributor may reallow up to
the full applicable front-end sales charge during periods specified in such
notice. During periods when 90% or more of the sales charge is reallowed, such
selected broker-dealers may be deemed to be underwriters as that term is
defined in the Securities Act.
E. RULE 12B-1 PLAN
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under
the Investment Company Act (the "Plan") pursuant to which each Class, other
than Class D, pays the Distributor compensation accrued daily and payable
monthly at the following annual rates: 0.25% and 1.0% of the average daily net
assets of Class A and Class C, respectively, and, with respect to Class B, 1.0%
of the lesser of: (a) the average daily aggregate gross sales of the Fund's
Class B shares since the inception of the Fund (not including reinvestment of
dividends or capital gains distributions), less the average daily aggregate net
asset value of the Fund's Class B 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 average daily net assets of Class B.
The Distributor also receives the proceeds of front-end sales charges
("FSCs") and of contingent deferred sales charges ("CDSCs") imposed on certain
redemptions of shares, which are separate and apart from payments made pursuant
to the Plan. The Distributor has informed the Fund that it and/or Dean Witter
Reynolds received the proceeds of CDSCs and FSCs, for the last three fiscal
years ended September 30, in approximate amounts as provided in the table below
(the Distributor did not retain any of these amounts).
<TABLE>
<CAPTION>
1999 1998 1997
--------------------- -------------------- -------------------
<S> <C> <C> <C>
Class A ........... FSCs:(1) $ 15,164 FSCs: $ 99,718 FSCs: $ 14,418
CDSCs: $ 0 CDSCs: $ 0 CDSCs: $ 0
Class B ........... CDSCs: $1,174,157 CDSCs: $1,076,184 CDSCs: $ 618,040
Class C. .......... CDSCs: $ 4,337 CDSCs: $ 4,960 CDSCs: $ 12
</TABLE>
- ----------
(1) FSCs apply to Class A only.
17
<PAGE>
The Distributor has informed the Fund that the entire fee payable by Class
A and a portion of the fees payable by each of Class B and Class C each year
pursuant to the Plan equal to 0.25% of such Class' average daily net assets are
currently each characterized as a "service fee" under the Rules of the National
Association of Securities Dealers, Inc. (of which the Distributor is a member).
The "service fee" is a payment made for personal service and/or the maintenance
of shareholder accounts. The remaining portion of the Plan fees payable by a
Class, if any, is characterized as an "asset-based sales charge" as such is
defined by the Rules of the Association.
Under the Plan and as required by Rule 12b-1, the Trustees receive and
review promptly after the end of each calendar quarter a written report
provided by the Distributor of the amounts expended under the Plan and the
purpose for which such expenditures were made. Class B shares of the Fund
accrued amounts payable to the Distributor under the Plan, during the fiscal
year ended September 30, 1999, of $3,875,763. This amount is equal to 0.97% of
the average daily net assets of Class B for the fiscal year and was calculated
pursuant to clause (a) of the compensation formula under the Plan. For the
fiscal year ended September 30, 1999, Class A and Class C shares of the Fund
accrued payments under the Plan amounting to $29,103 and $155,763,
respectively, which amounts are equal to 0.24% and 0.97% of the average daily
net assets of Class A and Class C, respectively, for the fiscal year.
The Plan was adopted in order to permit the implementation of the Fund's
method of distribution. Under this distribution method the Fund offers four
Classes, each with a different distribution arrangement.
With respect to Class A shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from proceeds of the FSC, commissions for
the sale of Class A shares, currently a gross sales credit of up to 5.0% of the
amount sold (except as provided in the following sentence) and an annual
residual commission, currently a residual of up to 0.25% of the current value
of the respective accounts for which they are the Financial Advisors or dealers
of record in all cases. On orders of $1 million or more (for which no sales
charge was paid) or net asset value purchases by employer-sponsored employee
benefit plans, whether or not qualified under the Internal Revenue Code, for
which the Transfer Agent serves as Trustee or Dean Witter Reynolds Retirement
Plan Services serves as recordkeeper pursuant to a written Recordkeeping
Services Agreement ("MSDW Eligible Plans"), the Investment Manager compensates
Financial Advisors by paying them, from its own funds, a gross sales credit of
1.0% of the amount sold.
With respect to Class B shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from its own funds, commissions for the sale
of Class B shares, currently a gross sales credit of up to 5.0% of the amount
sold (except as provided in the following sentence) and an annual residual
commission, currently a residual of up to 0.25% of the current value (not
including reinvested dividends or distributions) of the amount sold in all
cases. In the case of Class B shares purchased by MSDW Eligible Plans, Dean
Witter Reynolds compensates its Financial Advisors by paying them, from its own
funds, a gross sales credit of 3.0% of the amount sold.
With respect to Class C shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from its own funds, commissions for the sale
of Class C shares, currently a gross sales credit of up to 1.0% of the amount
sold and an annual residual commission, currently up to 1.0% of the current
value of the respective accounts for which they are the Financial Advisors of
record.
With respect to Class D shares other than shares held by participants in
the Investment Manager's mutual fund asset allocation program, the Investment
Manager compensates Dean Witter Reynolds's Financial Advisors by paying them,
from its own funds, commissions for the sale of Class D shares, currently a
gross sales credit of up to 1.0% of the amount sold. There is a chargeback of
100% of the amount paid if the Class D shares are redeemed in the first year
and a chargeback of 50% of the amount paid if the Class D shares are redeemed
in the second year after purchase. The Investment Manager also compensates Dean
Witter Reynolds's Financial Advisors by paying them, from its own funds, an
annual residual commission, currently up to 0.10% of the current value of the
respective accounts for which they are the Financial Advisors of record (not
including accounts of participants in the Investment Manager's mutual fund
asset allocation program).
18
<PAGE>
The gross sales credit is a charge which reflects commissions paid by Dean
Witter Reynolds to its Financial Advisors and Dean Witter Reynolds's
Fund-associated distribution-related expenses, including sales compensation,
and overhead and other branch office distribution-related expenses including
(a) the expenses of operating Dean Witter Reynolds's branch offices in
connection with the sale of Fund shares, including lease costs, the salaries
and employee benefits of operations and sales support personnel, utility costs,
communications costs and the costs of stationery and supplies, (b) the costs of
client sales seminars, (c) travel expenses of mutual fund sales coordinators to
promote the sale of Fund shares and (d) other expenses relating to branch
promotion of Fund sales.
The distribution fee that the Distributor receives from the Fund under the
Plan, in effect, offsets distribution expenses incurred under the Plan on
behalf of the Fund and, in the case of Class B shares, opportunity costs, such
as the gross sales credit and an assumed interest charge thereon ("carrying
charge"). These expenses may include compensation in the form of special sales
incentives for Financial Advisors such as receipt of educational and/or
business-related trips or reimbursement of educational and/or promotional and
business-related expenses. In the Distributor's reporting of the distribution
expenses to the Fund, in the case of Class B shares, such assumed interest
(computed at the "broker's call rate") has been calculated on the gross credit
as it is reduced by amounts received by the Distributor under the Plan and any
contingent deferred sales charges received by the Distributor upon redemption
of shares of the Fund. No other interest charge is included as a distribution
expense in the Distributor's calculation of its distribution costs for this
purpose. The broker's call rate is the interest rate charged to securities
brokers on loans secured by exchange-listed securities.
The Fund is authorized to reimburse expenses incurred or to be incurred in
promoting the distribution of the Fund's Class A and Class C shares and in
servicing shareholder accounts. Reimbursement will be made through payments at
the end of each month. The amount of each monthly payment may in no event
exceed an amount equal to a payment at the annual rate of 0.25%, in the case of
Class A, and 1.0%, in the case of Class C, of the average net assets of the
respective Class during the month. No interest or other financing charges, if
any, incurred on any distribution expenses on behalf of Class A and Class C
will be reimbursable under the Plan. With respect to Class A, in the case of
all expenses other than expenses representing the service fee, and, with
respect to Class C, in the case of all expenses other than expenses
representing a gross sales credit or a residual to Financial Advisors and other
authorized financial representatives, such amounts shall be determined at the
beginning of each calendar quarter by the Trustees, including, a majority of
the Independent Trustees. Expenses representing the service fee (for Class A)
or a gross sales credit or a residual to Financial Advisors and other
authorized financial representatives (for Class C) may be reimbursed without
prior determination. In the event that the Distributor proposes that monies
shall be reimbursed for other than such expenses, then in making quarterly
determinations of the amounts that may be reimbursed by the Fund, the
Distributor will provide and the Trustees will review a quarterly budget of
projected distribution expenses to be incurred on behalf of the Fund, together
with a report explaining the purposes and anticipated benefits of incurring
such expenses. The Trustees will determine which particular expenses, and the
portions thereof, that may be borne by the Fund, and in making such a
determination shall consider the scope of the Distributor's commitment to
promoting the distribution of the Fund's Class A and Class C shares.
Each Class paid 100% of the amounts accrued under the Plan with respect to
that Class for the fiscal year ended September 30, 1999 to the Distributor. The
Distributor and Dean Witter Reynolds estimate that they have spent, pursuant to
the Plan, $30,430,851 on behalf of Class B since the inception of the Plan. It
is estimated that this amount was spent in approximately the following ways:
(i) 9.20% ($2,799,230)--advertising and promotional expenses; (ii) 0.85%
($259,115)--printing of prospectuses for distribution to other than current
shareholders; and (iii) 89.95% ($27,372,506)--other expenses, including the
gross sales credit and the carrying charge, of which 7.62% ($2,087,803)
represents carrying charges, 37.88% ($10,369,730) represents commission credits
to Dean Witter Reynolds branch offices and other selected broker-dealers for
payments of commissions to Financial Advisors and other authorized financial
representatives, 53.63% ($14,677,926) represents overhead and other branch
office distribution-related expenses and 0.87% ($237,047) represents excess
distribution expenses of
19
<PAGE>
TCW/DW Income and Growth Fund, the net assets of which were combined with those
of the Fund on June 28, 1999, pursuant to an Agreement and Plan of
Reorganization. The amounts accrued by Class A and a portion of the amounts
accrued by Class C under the Plan during the fiscal year ended September 30,
1999 were service fees. The remainder of the amounts accrued by Class C were
for expenses which relate to compensation of sales personnel and associated
overhead expenses.
In the case of Class B shares, at any given time, the expenses of
distributing shares of the Fund may be more or less than the total of (i) the
payments made by the Fund pursuant to the Plan; and (ii) the proceeds of CDSCs
paid by investors upon redemption of shares. For example, if $1 million in
expenses in distributing Class B shares of the Fund had been incurred and
$750,000 had been received as described in (i) and (ii) above, the excess
expense would amount to $250,000. The Distributor has advised the Fund that in
the case of Class B shares the excess distribution expenses, including the
carrying charge designed to approximate the opportunity costs incurred by Dean
Witter Reynolds which arise from it having advanced monies without having
received the amount of any sales charges imposed at the time of sale of the
Fund's Class B shares, totaled $17,141,308 as of September 30, 1999 (the end of
the Fund's fiscal year), which was equal to 4.92% of the net assets of Class B
on such date. Because there is no requirement under the Plan that the
Distributor be reimbursed for all distribution expenses with respect to Class B
shares or any requirement that the Plan be continued from year to year, this
excess amount does not constitute a liability of the Fund. 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 CDSCs paid by
investors upon redemption of shares, if for any reason the Plan is terminated,
the Trustees will consider at that time the manner in which to treat such
expenses. Any cumulative expenses incurred, but not yet recovered through
distribution fees or CDSCs, may or may not be recovered through future
distribution fees or CDSCs.
In the case of Class A and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% 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 commission credited to Morgan Stanley Dean Witter Financial
Advisors and other authorized financial representatives at the time of sale may
be reimbursed in the subsequent calendar year. The Distributor has advised the
Fund that unreimbursed expenses representing a gross sales commission credited
to Morgan Stanley Dean Witter Financial Advisors and other authorized financial
representatives at the time of sale totaled $6,253 in the case of Class C at
December 31, 1998 (end of the calendar year), which amount was equal to 0.10%
of the net assets of Class C on such date, and that there were no such expenses
that may be reimbursed in the subsequent year in the case of Class A on such
date. No interest or other financing charges will be incurred on any Class A or
Class C distribution expenses incurred by the Distributor under the Plan or on
any unreimbursed expenses due to the Distributor pursuant to the Plan.
No interested person of the Fund nor any Independent Trustee has any
direct financial interest in the operation of the Plan except to the extent
that the Distributor, the Investment Manager, Dean Witter Reynolds, MSDW
Services Company or certain of their employees may be deemed to have such an
interest as a result of benefits derived from the successful operation of the
Plan or as a result of receiving a portion of the amounts expended thereunder
by the Fund.
On an annual basis the Trustees, including a majority of the Independent
Trustees, consider whether the Plan should be continued. Prior to approving the
last continuation of the Plan, the Trustees requested and received from the
Distributor and reviewed all the information which they deemed necessary to
arrive at an informed determination. In making their determination to continue
the Plan, the Trustees considered: (1) the Fund's experience under the Plan and
whether such experience indicates that the Plan is operating as anticipated;
(2) the benefits the Fund had obtained, was obtaining and would be likely to
obtain under the Plan, including that: (a) the Plan is essential in order to
give Fund investors a choice of alternatives for payment of distribution and
service charges and to enable the Fund to continue to grow and avoid a pattern
of net redemptions which, in turn, are essential for effective investment
management; and (b) without the compensation to individual brokers and the
reimbursement of distribution and account maintenance expenses of Dean Witter
Reynolds's branch offices made possible
20
<PAGE>
by the 12b-1 fees, Dean Witter Reynolds could not establish and maintain an
effective system for distribution, servicing of Fund shareholders and
maintenance of shareholder accounts; and (3) what services had been provided
and were continuing to be provided under the Plan to the Fund and its
shareholders. Based upon their review, the Trustees, including each of the
Independent Trustees, determined that continuation of the Plan would be in the
best interest of the Fund and would have a reasonable likelihood of continuing
to benefit the Fund and its shareholders. In the Trustees' quarterly review of
the Plan, they will consider its continued appropriateness and the level of
compensation provided therein.
The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval by the shareholders of the
affected Class or Classes of the Fund, and all material amendments to the Plan
must also be approved by the Trustees in the manner described above. The Plan
may be terminated at any time, without payment of any penalty, by vote of a
majority of the Independent Trustees or by a vote of a majority of the
outstanding voting securities of the Fund (as defined in the Investment Company
Act) on not more than thirty days' written notice to any other party to the
Plan. So long as the Plan is in effect, the election and nomination of
Independent Trustees shall be committed to the discretion of the Independent
Trustees.
F. OTHER SERVICE PROVIDERS
(1) TRANSFER AGENT/DIVIDEND-PAYING AGENT
Morgan Stanley Dean Witter Trust FSB is the transfer agent for the Fund's
shares and the Dividend Disbursing Agent for payment of dividends and
distributions on Fund shares and Agent for shareholders under various
investment plans. The principal business address of the Transfer Agent is
Harborside Financial Center, Plaza Two, Jersey City, NJ 07311.
(2) CUSTODIAN AND INDEPENDENT ACCOUNTANTS
The Bank of New York, 100 Church Street, New York, NY 10007 is the
Custodian of the Fund's assets. Any of the Fund's cash balances with either
Custodian in excess of $100,000 are unprotected by federal deposit insurance.
These balances may, at times, be substantial.
PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, NY
10036, serves as the independent accountants of the Fund. The independent
accountants are responsible for auditing the annual financial statements of the
Fund.
(3) AFFILIATED PERSONS
The Transfer Agent is an affiliate of the Investment Manager, and of the
Distributor. As Transfer Agent and Dividend Disbursing Agent, the Transfer
Agent's responsibilities include maintaining shareholder accounts, disbursing
cash dividends and reinvesting dividends, processing account registration
changes, handling purchase and redemption transactions, mailing prospectuses
and reports, mailing and tabulating proxies, processing share certificate
transactions, and maintaining shareholder records and lists. For these
services, the Transfer Agent receives a per shareholder account fee from the
Fund and is reimbursed for its out-of-pocket expenses in connection with such
services.
VI. BROKERAGE ALLOCATION AND OTHER PRACTICES
- --------------------------------------------------------------------------------
A. BROKERAGE TRANSACTIONS
Subject to the general supervision of the Board of Trustees, the
Investment Manager is responsible for decisions to buy and sell securities for
the Fund, the selection of brokers and dealers to effect the transactions, and
the negotiation of brokerage commissions, if any. Purchases and sales of
securities on a stock exchange are effected through brokers who charge a
commission for their services. In the over-the-counter market, securities are
generally traded on a "net" basis with dealers acting as principal for their
own accounts without a stated commission, although the price of the security
usually includes a profit to the dealer. The Fund expects that securities will
be purchased at times in underwritten offerings
21
<PAGE>
where the price includes a fixed amount of compensation, generally referred to
as the underwriter's concession or discount. Options and futures transactions
will usually be effected through a broker and a commission will be charged. On
occasion, the Fund may also purchase certain money market instruments directly
from an issuer, in which case no commissions or discounts are paid.
For the fiscal years ended September 30, 1997, 1998 and 1999, the Fund
paid a total of $224,501, $314,715 and $355,292, respectively, in brokerage
commissions.
B. COMMISSIONS
Pursuant to an order of the SEC, the Fund may effect principal
transactions in certain money market instruments with Dean Witter Reynolds. The
Fund will limit its transactions with Dean Witter Reynolds to U.S. Government
and government agency securities, bank money instruments (i.e., certificates of
deposit and bankers' acceptances) and commercial paper. The transactions will
be effected with Dean Witter Reynolds only when the price available from Dean
Witter Reynolds is better than that available from other dealers.
During the fiscal years ended September 30, 1997, 1998 and 1999, the Fund
did not effect any principal transactions with Dean Witter Reynolds.
Brokerage transactions in securities listed on exchanges or admitted to
unlisted trading privileges may be effected through Dean Witter Reynolds,
Morgan Stanley & Co. and other affiliated brokers and dealers. In order for an
affiliated broker or dealer to effect any portfolio transactions on an exchange
for the Fund, the commissions, fees or other remuneration received by the
affiliated broker or dealer must be reasonable and fair compared to the
commissions, fees or other remuneration paid to other brokers in connection
with comparable transactions involving similar securities being purchased or
sold on an exchange during a comparable period of time. This standard would
allow the affiliated broker or dealer to receive no more than the remuneration
which would be expected to be received by an unaffiliated broker in a
commensurate arm's-length transaction. Furthermore, the Trustees, including the
Independent Trustees, have adopted procedures which are reasonably designed to
provide that any commissions, fees or other remuneration paid to an affiliated
broker or dealer are consistent with the foregoing standard. The Fund does not
reduce the management fee it pays to the Investment Manager by any amount of
the brokerage commissions it may pay to an affiliated broker or dealer.
During the fiscal years ended September 30, 1997, 1998 and 1999, the Fund
paid a total of $82,810, $141,296 and $131,414, respectively, in brokerage
commissions to Dean Witter Reynolds. During the fiscal year ended September 30,
1999, the brokerage commissions paid to Dean Witter Reynolds represented
approximately 36.99% of the total commissions paid by the Fund during the year
and were paid on account of transactions having an aggregate dollar value equal
to approximately 48.92% of the aggregate dollar value of all portfolio
transactions of the Fund during the year for which commissions were paid.
During the period June 1 through September 30, 1997 and during the fiscal
years ended September 30, 1998 and 1999, the Fund paid a total of $0, $6,600
and $0, respectively, in brokerage commissions to Morgan Stanley & Co., which
broker-dealer became an affiliate of the Investment Manager on May 31, 1997
upon consummation of the merger of Dean Witter, Discover & Co. with Morgan
Stanley Group Inc.
C. BROKERAGE SELECTION
The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions. Consistent with this
policy, when securities transactions are effected on a stock exchange, the
Fund's policy is to pay commissions which are considered fair and reasonable
without necessarily determining that the lowest possible commissions are paid
in all circumstances. The Fund believes that a requirement always to seek the
lowest possible commission cost could impede effective portfolio management and
preclude the Fund and the Investment Manager from obtaining a high quality of
22
<PAGE>
brokerage and research services. In seeking to determine the reasonableness of
brokerage commissions paid in any transaction, the Investment Manager relies
upon its experience and knowledge regarding commissions generally charged by
various brokers and on its judgment in evaluating the brokerage and research
services received from the broker effecting the transaction. These
determinations are necessarily subjective and imprecise, as in most cases an
exact dollar value for those services is not ascertainable.
The Fund anticipates that certain of its transactions involving foreign
securities will be effected on securities exchanges. Fixed commissions on such
transactions are generally higher than negotiated commissions on domestic
transactions. There is also generally less government supervision and
regulation of foreign securities exchanges and brokers than in the United
States.
In seeking to implement the Fund's policies, the Investment Manager
effects transactions with those brokers and dealers who the Investment Manager
believes provide the most favorable prices and are capable of providing
efficient executions. If the Investment Manager believes the prices and
executions are obtainable from more than one broker or dealer, it may give
consideration to placing portfolio transactions with those brokers and dealers
who also furnish research and other services to the Fund or the Investment
Manager. The services may include, but are not limited to, any one or more of
the following: information as to the availability of securities for purchase or
sale; statistical or factual information or opinions pertaining to investment;
wire services; and appraisals or evaluations of portfolio securities. The
information and services received by the Investment Manager from brokers and
dealers may be of benefit to the Investment Manager in the management of
accounts of some of its other clients and may not in all cases benefit the Fund
directly.
The Investment Manager currently serves as investment manager to a number
of clients, including other investment companies, and may in the future act as
investment manager or advisor to others. It is the practice of the Investment
Manager to cause purchase and sale transactions to be allocated among the Fund
and others whose assets it manages in such manner as it deems equitable. In
making such allocations among the Fund and other client accounts, various
factors may be considered, including the respective investment objectives, the
relative size of portfolio holdings of the same or comparable securities, the
availability of cash for investment, the size of investment commitments
generally held and the opinions of the persons responsible for managing the
portfolios of the Fund and other client accounts. In the case of certain
initial and secondary public offerings, the Investment Manager utilizes a pro
rata allocation process based on the size of the Morgan Stanley Dean Witter
Funds involved and the number of shares available from the public offering.
D. DIRECTED BROKERAGE
During the fiscal year ended September 30, 1999, the Fund paid $210,329 in
brokerage commissions in connection with transactions in the aggregate amount
of $98,710,505 to brokers because of research services provided.
E. REGULAR BROKER-DEALERS
During the fiscal year ended September 30, 1999, the Fund purchased
preferred stock issued by Merrill Lynch & Co., Inc., which issuer was among the
ten brokers or ten dealers that executed transactions for or with the Fund in
the largest dollar amounts during the year. At September 30, 1999, the Fund
held preferred stock from Merrill Lynch & Co., Inc. in the following amount;
$1,869,812.00.
VII. CAPITAL STOCK AND OTHER SECURITIES
- --------------------------------------------------------------------------------
The shareholders of the Fund are entitled to a full vote for each full
share of beneficial interest held. The Fund is authorized to issue an unlimited
number of shares of beneficial interest. All shares of beneficial interest of
the Fund are of $0.01 par value and are equal as to earnings, assets and voting
privileges except that each Class will have exclusive voting privileges with
respect to matters relating to distribution expenses borne solely by such Class
or any other matter in which the interests of one Class differ from the
interests of any other Class. In addition, Class B shareholders will have the
right to vote
23
<PAGE>
on any proposed material increase in Class A's expenses, if such proposal is
submitted separately to Class A shareholders. Also, Class A, Class B and Class
C bear expenses related to the distribution of their respective shares.
The Fund's Declaration of Trust permits the Trustees to authorize the
creation of additional series of shares (the proceeds of which would be
invested in separate, independently managed portfolios) and additional Classes
of shares within any series. The Trustees have not presently authorized any
such additional series or Classes of shares other than as set forth in the
Prospectus.
The Fund is not required to hold annual meetings of shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call special meetings of shareholders for action by shareholder
vote as may be required by the Investment Company Act or the Declaration of
Trust. Under certain circumstances, the Trustees may be removed by action of
the Trustees. In addition, under certain circumstances, the shareholders may
call a meeting to remove Trustees and the Fund is required to provide
assistance in communicating with shareholders about such a meeting. The voting
rights of shareholders are not cumulative, so that holders of more than 50
percent of the shares voting can, if they choose, elect all Trustees being
selected, while the holders of the remaining shares would be unable to elect
any Trustees.
Under Massachusetts law, shareholders of a business trust may, under
certain limited circumstances, be held personally liable as partners for the
obligations of the Fund. However, the Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Fund,
requires that notice of such Fund obligations include such disclaimer, and
provides for indemnification out of the Fund's property for any shareholder
held personally liable for the obligations of the Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations. Given the above limitations on shareholder personal liability, and
the nature of the Fund's assets and operations, the possibility of the Fund
being unable to meet its obligations is remote and thus, in the opinion of
Massachusetts counsel to the Fund, the risk to Fund shareholders of personal
liability is remote.
All of the Trustees have been elected by the shareholders of the Fund,
most recently at a Special Meeting of Shareholders held on May 21, 1997. The
Trustees themselves have the power to alter the number and the terms of office
of the Trustees (as provided for in the Declaration of Trust), and they may at
any time lengthen or shorten their own terms or make their terms of unlimited
duration and appoint their own successors, provided that always at least a
majority of the Trustees has been elected by the shareholders of the Fund.
VIII. PURCHASE, REDEMPTION AND PRICING OF SHARES
- --------------------------------------------------------------------------------
A. PURCHASE/REDEMPTION OF SHARES
Information concerning how Fund shares are offered to the public (and how
they are redeemed and exchanged) is provided in the Fund's Prospectus.
TRANSFER AGENT AS AGENT. With respect to the redemption or repurchase of
Fund shares, the application of proceeds to the purchase of new shares in the
Fund or any other Morgan Stanley Dean Witter Funds and the general
administration of the exchange privilege, the Transfer Agent acts as agent for
the Distributor and for the shareholder's authorized broker-dealer, if any, in
the performance of such functions. With respect to exchanges, redemptions or
repurchases, the Transfer Agent shall be liable for its own negligence and not
for the default or negligence of its correspondents or for losses in transit.
The Fund shall not be liable for any default or negligence of the Transfer
Agent, the Distributor or any authorized broker-dealer.
24
<PAGE>
The Distributor and any authorized broker-dealer have appointed the
Transfer Agent to act as their agent in connection with the application of
proceeds of any redemption of Fund shares to the purchase of shares of any
other Morgan Stanley Dean Witter Fund and the general administration of the
exchange privilege. No commission or discounts will be paid to the Distributor
or any authorized broker-dealer for any transaction pursuant to the exchange
privilege.
TRANSFERS OF SHARES. In the event a shareholder requests a transfer of
Fund shares to a new registration, the shares will be transferred without sales
charge at the time of transfer. With regard to the status of shares which are
either subject to the CDSC or free of such charge (and with regard to the
length of time shares subject to the charge have been held), any transfer
involving less than all of the shares in an account will be made on a pro rata
basis (that is, by transferring shares in the same proportion that the
transferred shares bear to the total shares in the account immediately prior to
the transfer). The transferred shares will continue to be subject to any
applicable CDSC as if they had not been so transferred.
B. OFFERING PRICE
The Fund's Class B, Class C and Class D shares are offered at net asset
value per share and the Class A shares are offered at net asset value per share
plus any applicable FSC which is distributed among the Fund's Distributor, Dean
Witter Reynolds and other authorized dealers as described in Section "V.
Investment Management and Other Services--E. Rule 12b-1 Plan."
The price of Fund shares, called "net asset value," is based on the value
of the Fund's portfolio securities. Net asset value per share of each Class is
calculated by dividing the value of the portion of the Fund's securities and
other assets attributable to that Class, less the liabilities attributable to
that Class, by the number of shares of that Class outstanding. The assets of
each Class of shares are invested in a single portfolio. The net asset value of
each Class, however, will differ because the Classes have different ongoing
fees.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
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 a security is 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); and (2) all
other portfolio securities for which over-the-counter market quotations are
readily available are valued at the latest bid price. 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 Fund's Trustees. For valuation purposes, quotations of
foreign portfolio securities, other assets and liabilities and forward
contracts stated in foreign currency are translated into U.S. dollar
equivalents at the prevailing market rates prior to the close of the New York
Stock Exchange.
Short-term debt securities with remaining maturities of sixty days or less
at the time of purchase are valued at amortized cost, unless the Trustees
determine such does not reflect the securities' market value, in which case
these securities will be valued at their fair value as determined by the
Trustees.
Generally, trading in foreign securities, as well as corporate bonds, U.S.
Government securities and money market instruments, is substantially completed
each day at various times prior to the close of the New York Stock Exchange.
The values of such securities used in computing the net asset value of the
Fund's shares are determined as of such times. Foreign currency exchange rates
are also generally determined prior to the close of the New York Stock
Exchange. Occasionally, events which may affect the values of such securities
and such exchange rates may occur between the times at which they are
determined and the close of the New York Stock Exchange and will therefore not
be reflected in the computation of the Fund's net asset value. If events that
may affect the value of such securities occur during such period, then these
securities may be valued at their fair value as determined in good faith under
procedures established by and under the supervision of the Trustees.
25
<PAGE>
IX. TAXATION OF THE FUND AND SHAREHOLDERS
- --------------------------------------------------------------------------------
The Fund generally will make two basic types of distributions: ordinary
dividends and long-term capital gain distributions. These two types of
distributions are reported differently on a shareholder's income tax return and
they are also subject to different rates of tax. The tax treatment of the
investment activities of the Fund will affect the amount and timing and
character of the distributions made by the Fund. Tax issues relating to the
Fund are not generally a consideration for shareholders such as tax exempt
entities and tax-advantaged retirement vehicles such as an IRA or 401(k) plan.
Shareholders are urged to consult their own tax professionals regarding
specific questions as to federal, state or local taxes.
INVESTMENT COMPANY TAXATION. The Fund intends to remain qualified as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986. As such, the Fund will not be subject to federal income tax on its net
investment income and capital gains, if any, to the extent that it distributes
such income and capital gains to its shareholders.
The Fund generally intends to distribute sufficient income and gains so
that the Fund will not pay corporate income tax on its earnings. The Fund also
generally intends to distribute to its shareholders in each calendar year a
sufficient amount of ordinary income and capital gains to avoid the imposition
of a 4% excise tax. However, the Fund may instead determine to retain all or
part of any net long-term capital gains in any year for reinvestment. In such
event, the Fund will pay federal income tax (and possibly excise tax) on such
retained gains.
Gains or losses on sales of securities by the Fund will be long-term
capital gains or losses if the securities have a tax holding period of more
than one year. Gains or losses on the sale of securities with a tax holding
period of one year or less will be short-term gains or losses.
Gains or losses on the Fund's transactions in listed non-equity options,
futures and options on futures generally are treated as 60% long-term and 40%
short-term. When the Fund engages in options and futures transactions, various
tax rules may accelerate or defer recognition of certain gains and losses,
change the character of certain gains or losses, or alter the holding period of
other investments held by the Fund. The application of these rules would
therefore also affect the amount, timing and character of distributions made by
the Fund.
Under certain tax rules, the Fund may be required to accrue a portion of
any discount at which certain securities are purchased as income each year even
though the Fund receives no payments in cash on the security during the year.
To the extent that the Fund invests in such securities, it would be required to
pay out such accrued discount as an income distribution in each year in order
to avoid taxation at the Fund level. Such distributions will be made from the
available cash of the Fund or by liquidation of portfolio securities if
necessary. If a distribution of cash necessitates the liquidation of portfolio
securities, the Investment Manager will select which securities to sell. The
Fund may realize a gain or loss from such sales. In the event the Fund realizes
net capital gains from such transactions, its shareholders may receive a larger
capital gain distribution, if any, than they would in the absence of such
transactions.
TAXATION OF DIVIDENDS AND DISTRIBUTIONS. Shareholders normally will have
to pay federal income taxes, and any state and/or local income taxes, on the
dividends and other distributions they receive from the Fund. Such dividends
and distributions, to the extent that they are derived from net investment
income or short-term capital gains, are taxable to the shareholder as ordinary
income regardless of whether the shareholder receives such payments in
additional shares or in cash.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder
has held the Fund's shares and regardless of whether the distribution is
received in additional shares or in cash. The maximum tax on long-term capital
gains applicable to individuals is 20%.
Shareholders are generally taxed on any ordinary dividend or capital gain
distributions from the Fund in the year they are actually distributed. However,
if any such dividends or distributions are declared in October, November or
December and paid in January then such amounts will be treated for tax purposes
as received by the shareholders on December 31, to shareholders of record of
such month.
26
<PAGE>
Shareholders who are not citizens or residents of the United States and
certain foreign entities may be subject to withholding of United States tax on
distributions made by the Fund of investment income and short term capital
gains.
After the end of each calendar year, shareholders will be sent full
information on their dividends and capital gain distributions for tax purposes,
including the portion taxable as ordinary income and the portion taxable as
long-term capital gains.
PURCHASES AND REDEMPTIONS AND EXCHANGES OF FUND SHARES. Any dividend or
capital gains distribution received by a shareholder from any investment
company will have the effect of reducing the net asset value of the
shareholder's stock in that company by the exact amount of the dividend or
capital gains distribution. Furthermore, such dividends and capital gains
distributions are subject to federal income taxes. If the net asset value of
the shares should be reduced below a shareholder's cost as a result of the
payment of dividends or the distribution of realized long-term capital gains,
such payment or distribution would be in part a return of the shareholder's
investment but nonetheless would be taxable to the shareholder. Therefore, an
investor should consider the tax implications of purchasing Fund shares
immediately prior to a distribution record date.
In general, a sale of shares results in capital gain or loss, and for
individual shareholders, is taxable at a federal rate dependent upon the length
of time the shares were held. A redemption of a shareholder's Fund shares is
normally treated as a sale for tax purposes. Fund shares held for a period of
one year or less will, for tax purposes, generally result in short-term gains
or losses and those held for more than one year generally result in long-term
gain or loss. Under current law, the maximum tax on long-term capital gains is
20%. Any loss realized by shareholders upon a sale or redemption of shares
within six months of the date of their purchase will be treated as a long-term
capital loss to the extent of any distributions of net long-term capital gains
with respect to such shares during the six-month period.
Gain or loss on the sale or redemption of shares in the Fund is measured
by the difference between the amount received and the tax basis of the shares.
Shareholders should keep records of investments made (including shares acquired
through reinvestment of dividends and distributions) so they can compute the
tax basis of their shares. Under certain circumstances a shareholder may
compute and use an average cost basis in determining the gain or loss on the
sale or redemption of shares.
Exchanges of Fund shares for shares of another fund, including shares of
other Morgan Stanley Dean Witter Funds, are also subject to similar tax
treatment. Such an exchange is treated for tax purposes as a sale of the
original shares in the first fund, followed by the purchase of shares in the
second fund.
If a shareholder realizes a loss on the redemption or exchange of a fund's
shares and reinvests in that fund's shares within 30 days before or after the
redemption or exchange, the transactions may be subject to the "wash sale"
rules, resulting in a postponement of the recognition of such loss for tax
purposes.
X. UNDERWRITERS
- --------------------------------------------------------------------------------
The Fund's shares are offered to the public on a continuous basis. The
Distributor, as the principal underwriter of the shares, has certain
obligations under the Distribution Agreement concerning the distribution of the
shares. These obligations and the compensation the Distributor receives are
described above in the sections titled "Principal Underwriter" and "Rule 12b-1
Plans."
XI. CALCULATION OF PERFORMANCE DATA
- --------------------------------------------------------------------------------
From time to time the Fund may quote its "total return" in advertisements
and sales literature. These figures are computed separately for Class A, Class
B, Class C and Class D shares. The Fund's "average annual total return"
represents an annualization of the Fund's total return over a particular period
and is computed by finding the annual percentage rate which will result in the
ending redeemable value of a hypothetical $1,000 investment made at the
beginning of a one, five or ten year period, or for the period
27
<PAGE>
from the date of commencement of operations, if shorter than any of the
foregoing. The ending redeemable value is reduced by any contingent deferred
sales charge ("CDSC") at the end of the one, five, ten year or other period.
For the purpose of this calculation, it is assumed that all dividends and
distributions are reinvested. The formula for computing the average annual
total return involves a percentage obtained by dividing the ending redeemable
value by the amount of the initial investment (which in the case of Class A
shares is reduced by the Class A initial sales charge), taking a root of the
quotient (where the root is equivalent to the number of years in the period)
and subtracting 1 from the result. Based on this calculation, the average
annual total returns for Class B for the one year period ended September 30,
1999 and for the period June 26, 1996 (commencement of operations) through
September 30, 1999 were 4.40% and 10.03%, respectively. The average annual
total returns of Class A for the fiscal year ended September 30, 1999 and for
the period July 28, 1997 (inception of the Class) through September 30, 1999
were 4.37% and 2.46%, respectively. The average annual total returns of Class C
for the fiscal year ended September 30, 1999 and for the period July 28, 1997
(inception of the Class) through September 30, 1999 were 8.40% and 4.26%,
respectively. The average annual total returns of Class D for the fiscal year
ended September 30, 1999 and for the period July 28, 1997 (inception of the
Class) through September 30, 1999 were 10.51% and 5.30%, respectively.
In addition, the Fund may advertise its total return for each Class over
different periods of time by means of aggregate, average, year-by-year or other
types of total return figures. These calculations may or may not reflect the
imposition of the maximum front-end sales charge for Class A or the deduction
of the CDSC for each of Class B and Class C which, if reflected, would reduce
the performance quoted. For example, the average annual total return of the
Fund may be calculated in the manner described above, but without deduction for
any applicable sales charge. Based on this calculation, the average annual
total returns of Class B for the one year period ended September 30, 1999 and
for the period June 26, 1996 (commencement of operations) through September 30,
1999 were 9.31% and 10.52%, respectively. The average annual total returns of
Class A for the fiscal year ended September 30, 1999 and for the period July
28, 1997 through September 30, 1999 were 10.15% and 5.03%, respectively. The
average annual total returns of Class C for the fiscal year ended September 30,
1999 and for the period July 28, 1997 through September 30, 1999 were 9.38% and
4.26%, respectively. The average annual total returns of Class D for the fiscal
year ended September 30, 1999 and for the period July 28, 1997 through
September 30, 1999 were 10.51% and 5.30%, respectively.
In addition, the Fund may compute its aggregate total return for each
Class for specified periods by determining the aggregate percentage rate which
will result in the ending value of a hypothetical $1,000 investment made at the
beginning of the period. For the purpose of this calculation, it is assumed
that all dividends and distributions are reinvested. The formula for computing
aggregate total return involves a percentage obtained by dividing the ending
value (without reduction for any sales charge) by the initial $1,000 investment
and subtracting 1 from the result. Based on this calculation, the total returns
for Class B for the one year period ended September 30, 1999 and for the period
June 26, 1996 (commencement of operations) through September 30, 1999 were
9.31% and 38.58%, respectively. The total returns of Class A for the fiscal
year ended September 30, 1999 and for the period July 28, 1997 through
September 30, 1999 were 10.15% and 11.26%, respectively. The total returns of
Class C for the fiscal year ended September 30, 1999 and for the period July
28, 1997 through September 30, 1999 were 9.38% and 9.49%, respectively. The
total returns of Class D for the fiscal year ended September 30, 1999 and for
the period July 28, 1997 through September 30, 1999 were 10.51% and 11.89%,
respectively.
The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in each Class of shares of the Fund by adding 1
to the Fund's aggregate total return to date (expressed as a decimal and
without taking into account the effect of any applicable CDSC) and multiplying
by $9,475, $48,000 and $97,000 in the case of Class A (investments of $10,000,
$50,000 and $100,000 adjusted for the initial sales charge) or by $10,000,
$50,000 and $100,000 in the case of each
28
<PAGE>
of Class B, Class C and Class D, as the case may be. Investments of $10,000,
$50,000 and $100,000 in each Class at inception of the Class would have grown
to the following amounts at September 30, 1999:
INVESTMENT AT INCEPTION OF:
-----------------------------------
INCEPTION
CLASS DATE: $10,000 $50,000 $100,000
- ----------------- ---------- --------- --------- -----------
Class A ......... 07/28/97 $10,542 $53,405 $107,922
Class B ......... 06/26/96 13,858 69,290 138,580
Class C ......... 07/28/97 10,949 54,745 109,490
Class D ......... 07/28/97 11,189 55,945 111,890
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by recognized organizations.
XII. FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
EXPERTS. The financial statements of the Fund for the fiscal year ended
September 30, 1999 included in this Statement of Additional Information and
incorporated by reference in the Prospectus have been so included and
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
* * * * *
This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the SEC. The complete Registration Statement may be obtained from
the SEC.
29
<PAGE>
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 1999
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- ---------------
<S> <C> <C>
COMMON STOCKS (45.4%)
Accident & Health Insurance (0.8%)
118,000 Torchmark Corp. ................................... $ 3,053,250
------------
Apparel (0.8%)
150,000 Kellwood Co. ..................................... 3,300,000
------------
Auto Parts: O.E.M. (2.3%)
85,000 Dana Corp. ........................................ 3,155,625
182,000 Delphi Automotive Systems Corp. ................... 2,923,375
51,000 Johnson Controls, Inc. ............................ 3,381,938
------------
9,460,938
------------
Building Materials (0.8%)
84,500 Vulcan Materials Co. ............................. 3,094,812
------------
Building Products (0.8%)
69,000 Armstrong World Industries, Inc. .................. 3,100,687
------------
Casino/Gambling (0.0%)
4,685 Fitzgerald Gaming Corp. (a) ....................... --
------------
Clothing/Shoe/Accessory Stores (0.8%)
87,500 Limited (The), Inc. ............................... 3,346,875
------------
Consumer Electronics/Appliances (0.8%)
48,500 Whirlpool Corp. .................................. 3,167,656
------------
Containers/Packaging (0.8%)
131,000 Crown Cork & Seal Co., Inc. ...................... 3,176,750
------------
Electric Utilities (2.5%)
87,000 Public Service Enterprise Group, Inc. ............. 3,360,375
121,000 Reliant Energy, Inc. .............................. 3,274,562
160,000 TECO Energy, Inc. ................................ 3,380,000
------------
10,014,937
------------
Electronic Data Processing (0.6%)
49,632 Unisys Corp. ..................................... 2,239,644
------------
Engineering & Construction (0.8%)
82,300 Fluor Corp. ...................................... 3,312,575
------------
Finance Companies (2.5%)
93,000 Associates First Capital Corp. (Class A) .......... 3,348,000
53,500 Fannie Mae ........................................ 3,353,781
78,000 SLM Holding Corp. ................................ 3,354,000
------------
10,055,781
------------
Food Distributors (0.8%)
155,000 Supervalu, Inc. .................................. 3,380,937
------------
Home Building (0.8%)
160,000 Fleetwood Enterprises, Inc. ....................... 3,230,000
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
30
<PAGE>
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 1999, continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- ---------------
<S> <C> <C>
Life Insurance (2.4%)
158,000 Conseco, Inc. ............................ $ 3,051,375
51,500 Jefferson-Pilot Corp. .................... 3,254,156
85,000 Lincoln National Corp. .................. 3,192,812
------------
9,498,343
------------
Major Chemicals (2.4%)
29,500 Dow Chemical Co. ......................... 3,351,937
106,000 Hercules, Inc. .......................... 3,034,250
88,000 Rohm & Haas Co. ......................... 3,179,000
------------
9,565,187
------------
Major Pharmaceuticals (0.7%)
69,500 Schering-Plough Corp. ................... 3,031,937
------------
Major U.S. Telecommunications (2.5%)
72,000 AT&T Corp. ............................... 3,132,000
52,000 Bell Atlantic Corp. ...................... 3,500,250
46,500 GTE Corp. ................................ 3,574,688
------------
10,206,938
------------
Marine Transportation (0.7%)
118,000 Tidewater, Inc. ......................... 3,009,000
------------
Meat/Poultry/Fish (1.6%)
131,000 ConAgra, Inc. ............................ 2,955,688
82,000 Hormel Foods Corp. ....................... 3,387,625
------------
6,343,313
------------
Motor Vehicles (2.5%)
44,000 DaimlerChrysler AG (Germany) ............ 3,055,250
68,000 Ford Motor Co. ........................... 3,412,750
54,000 General Motors Corp. ..................... 3,398,625
------------
9,866,625
------------
Multi-Sector Companies (0.8%)
190,500 Tenneco, Inc. ........................... 3,238,500
------------
Natural Gas (0.8%)
54,000 Consolidated Natural Gas Co. ............. 3,368,250
------------
Office Equipment/Supplies (0.8%)
73,000 Xerox Corp. ............................. 3,061,438
------------
Oil Refining/Marketing (1.6%)
90,000 Ashland, Inc. ........................... 3,026,250
135,000 Ultramar Diamond Shamrock Corp. .......... 3,442,500
------------
6,468,750
------------
Paints/Coatings (0.8%)
55,000 PPG Industries, Inc. ..................... 3,300,000
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
31
<PAGE>
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 1999, continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- --------------
<S> <C> <C>
Real Estate Investment Trusts (6.2%)
33,700 Boykin Lodging Co. ....................................... $ 446,525
50,000 Camden Property Trust ................................... 1,343,750
100,000 Duke Realty Investments, Inc. ........................... 1,950,000
120,000 Equity One, Inc. ........................................ 1,282,500
40,000 Equity Residential Properties Trust ...................... 1,695,000
80,000 First Industrial Realty Trust, Inc. ...................... 1,980,000
25,000 Glimcher Realty Trust ................................... 367,188
84,250 Healthcare Realty Trust, Inc. ............................ 1,574,422
56,400 JDN Realty Corp. ......................................... 1,156,200
92,377 MeriStar Hospitality Corp. ............................... 1,408,749
190,000 Mid-Atlantic Realty Trust ................................ 1,983,125
145,000 Reckson Associates Realty Corp. ......................... 3,017,813
283,800 Sunstone Hotel Investors, Inc. .......................... 2,483,250
83,800 Tanger Factory Outlet Centers, Inc. ...................... 1,911,688
95,000 TriNet Corporate Reality Trust, Inc. .................... 2,262,188
-----------
24,862,398
-----------
Rental/Leasing Companies (0.8%)
152,500 Ryder System, Inc. ....................................... 3,107,188
-----------
Savings & Loan Associations (2.5%)
119,000 TCF Financial Corp. ..................................... 3,398,938
145,000 Washington Federal, Inc. ................................. 3,362,188
109,500 Washington Mutual, Inc. .................................. 3,202,875
-----------
9,964,001
-----------
Steel/Iron Ore (0.8%)
129,000 USX-U.S. Steel Group ..................................... 3,321,750
-----------
Tobacco (1.6%)
93,000 Philip Morris Companies, Inc. ........................... 3,179,438
110,000 UST, Inc. ................................................ 3,320,625
-----------
6,500,063
-----------
TOTAL COMMON STOCKS
(Identified Cost $190,024,990) ........................... 182,648,523
-----------
CONVERTIBLE PREFERRED STOCKS (19.1%)
Apparel (0.2%)
30,500 Warnaco Group, Inc. $3.00 ................................ 945,500
-----------
Auto Parts: O.E.M. (0.0%)
94,000 BTI Capital Trust $3.25 - 144A* .......................... 47,000
-----------
Books/Magazines (1.0%)
139,100 Reader's Digest Association, Inc $1.93 ................... 3,929,575
-----------
Cable Television (1.6%)
16,925 EchoStar Communications Corp. (Series C) $3.38 .......... 6,313,025
-----------
Computer Software (0.8%)
34,000 Microsoft Corp. (Series A) $2.20 ......................... 3,423,375
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
32
<PAGE>
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 1999, continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- ---------------
<S> <C> <C>
Containers/Packaging (0.1%)
4,900 Sealed Air Corp. (Series A) $2.00 ................................. $ 248,675
------------
Discount Chains (0.1%)
13,000 Dollar General Strypes Trust $3.35 ................................ 562,250
------------
Electric Utilities (0.3%)
10,000 Houston Industries, Inc. $3.29 (exchangeable into Time Warner
common stock) ..................................................... 1,020,000
------------
Home Furnishings (0.7%)
67,200 Newell Financial Trust I $2.63 .................................... 2,782,147
------------
Industrial Machinery/Components (0.8%)
117,000 Ingersoll-Rand Co. $1.688 ........................................ 3,071,250
------------
International Banks (1.9%)
155,900 National Australia Bank, Ltd. $1.97 (Australia) (Units)++ ......... 4,267,762
120,700 WBK Strypes Trust $3.14 ........................................... 3,560,650
------------
7,828,412
------------
Investment Bankers/Brokers/Services (0.5%)
90,000 Merrill Lynch & Co., Inc. $2.39
(exchangeable into IMC Global, Inc. common stock) ............... 1,569,375
25,300 Merrill Lynch & Co., Inc. $5.75 (STRIDES) ......................... 300,437
------------
1,869,812
------------
Life Insurance (0.4%)
68,000 AmerUs Life Holdings, Inc. $2.21 .................................. 1,564,000
------------
Military/Gov't/Technical (1.2%)
44,100 Loral Space & Communications Ltd. $3.00 - 144A* (Bermuda) ......... 2,138,850
54,600 Loral Space & Communications Ltd. (Series C) $3.00 (Bermuda) ...... 2,648,100
------------
4,786,950
------------
Movies/Entertainment (0.7%)
50,000 Premier Parks, Inc. $4.05 ......................................... 2,700,000
------------
Oil Refining/Marketing (1.2%)
200,000 Tesoro Petroleum Corp. $1.16 ...................................... 3,137,500
165,000 USX Corp. $1.44 .................................................. 1,660,395
------------
4,797,895
------------
Other Consumer Services (0.9%)
3,700 Cendant Corp. $0.65 ............................................... 92,500
122,300 Cendant Corp. $3.75 ............................................... 3,554,344
------------
3,646,844
------------
Package Goods/Cosmetics (1.3%)
72,000 Estee Lauder Co. $3.80 ............................................ 5,040,000
------------
Railroads (0.6%)
56,200 Union Pacific Capital Trust $3.13 ................................. 2,533,833
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
33
<PAGE>
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 1999, continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- ---------------
<S> <C> <C>
Real Estate Investment Trusts (2.1%)
50,000 Apartment Investment & Management Co. (Series K) $2.00 .......... $ 1,200,000
113,000 Equity Residential Properties Trust (Series J) $2.15 ............. 3,036,875
66,548 FelCor Lodging Trust, Inc. (Series A) $1.95 ...................... 1,106,361
140,000 SL Green Realty Corp. $2.00 ..................................... 3,141,250
------------
8,484,486
------------
Rental/Leasing Companies (0.1%)
10,900 United Rentals Trust I $3.25 - 144A* ............................. 402,962
------------
Services to the Health Industry (0.1%)
6,600 Laboratory Corp. of America (Series A) $4.25 ..................... 369,600
------------
Smaller Banks (1.1%)
156,500 CNB Capital Trust I $1.50 ........................................ 4,577,625
------------
Tools/Hardware (0.7%)
109,700 Metromedia International Group, Inc. $3.63 ....................... 2,701,363
------------
Unregulated Power Generation (0.7%)
70,000 CalEnergy Capital Trust III $3.25 ................................ 2,940,000
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Identified Cost $84,967,862) .................................... 76,586,579
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE
- ----------- ------------ -----------
<S> <C> <C> <C> <C>
CONVERTIBLE BONDS (12.3%)
Assisted Living Services (0.7%)
$ 580 Alternative Living Services, Inc. .......... 5.25 % 12/15/02 387,046
1,010 American Retirement Corp. ................. 5.75 10/01/02 729,200
350 Assisted Living Concepts, Inc. ............ 6.00 11/01/02 196,805
2,470 Emeritus Corp. - 144A* ..................... 6.25 01/01/06 1,407,900
185 Sunrise Assisted Living, Inc. ............. 5.50 06/15/02 177,469
105 Sunrise Assisted Living, Inc. - 144A* ...... 5.50 06/15/02 100,725
-------------
2,999,145
-------------
Auto Parts: O.E.M. (1.6%)
4,000 Magna International, Inc. (Canada) ......... 4.875 02/15/05 3,624,640
300 Magna International, Inc. (Canada) -
144A* .................................... 4.875 02/15/05 271,848
3,000 MascoTech, Inc. ............................ 4.50 12/15/03 2,403,750
-------------
6,300,238
-------------
Biotechnology (0.5%)
810 Athena Neurosciences, Inc. - 144A* ......... 4.75 11/15/04 908,844
165 Centocor, Inc. ............................ 4.75 02/15/05 215,959
180 Centocor, Inc. - 144A* ..................... 4.75 02/15/05 235,591
890 Elan Finance Corp - 144A* .................. 0.00 12/14/18 501,737
-------------
1,862,131
-------------
Broadcasting (0.5%)
1,400 Clear Channel Communications, Inc. ........ 2.625 04/01/03 1,952,174
-------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
34
<PAGE>
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 1999, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Cellular Telephone (1.0%)
$ 5,850 U.S. Cellular Corp. ......................... 0.00 % 06/15/15 $ 3,829,644
------------
Clothing/Shoe/Accessory Stores (0.8%)
3,660 Genesco Inc. ................................. 5.50 04/15/05 3,182,333
------------
Computer Software (0.1%)
350 Hyperion Solutions Corp. ..................... 4.50 03/15/05 260,715
260 Network Associates, Inc. ..................... 0.00 02/13/18 83,702
745 Network Associates, Inc. - 144A* ............. 0.00 02/13/18 239,838
------------
584,255
------------
Contract Drilling (0.1%)
440 Diamond Offshore Drilling, Inc. .............. 3.75 02/15/07 464,442
------------
Discount Chains (0.1%)
680 Costco Companies, Inc. - 144A* ............... 0.00 08/19/17 589,914
------------
Diversified Commercial Services (0.1%)
345 Interim Services Inc. ........................ 4.50 06/01/05 274,102
370 Metamor Worldwide, Inc. ...................... 2.94 08/15/04 249,987
------------
524,089
------------
Electronic Components (0.3%)
1,925 Solectron Corp. - 144A* ...................... 0.00 01/27/19 1,183,779
------------
Hospital/Nursing Management (0.1%)
1,500 ARV Assisted Living, Inc. .................... 6.75 04/01/06 390,000
------------
Industrial Machinery/Components (0.5%)
2,300 Thermo Fibertek, Inc. - 144A* ................ 4.50 07/15/04 1,901,341
------------
Major U.S. Telecommunications (1.9%)
3,700 Bell Atlantic Financial Service - 144A* 4.25 09/15/05 3,877,600
3,700 Bell Atlantic Financial Service - 144A*
(exchangeable into Telecom
Corporation of New Zealand
common stock) .............................. 5.75 04/01/03 3,710,434
------------
7,588,034
------------
Media Conglomerates (0.1%)
895 News America Holdings, Inc. .................. 0.00 03/11/13 546,594
------------
Metals Fabrications (0.1%)
225 Hexcel Corp. ................................. 7.00 08/01/03 168,750
300 Tower Automotive, Inc. - 144A* ............... 5.00 08/01/04 276,915
------------
445,665
------------
Movies/Entertainment (0.1%)
255 Speedway Motorsports, Inc. ................... 5.75 09/30/03 393,271
------------
Multi-Line Insurance (0.1%)
285 American International Group, Inc. .......... 2.25 07/30/04 370,651
------------
Other Telecommunications (0.0%)
750 SA Telecommunications, Inc. -
144A* (b) .................................. 10.00 08/15/06 22,500
------------
Precision Instruments (0.3%)
1,100 Thermo Optek Corp. - 144A* ................... 5.00 10/15/00 1,063,865
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
35
<PAGE>
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 1999, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- ---------- ------------ ---------------
<S> <C> <C> <C> <C>
Property - Casualty Insurers (0.3%)
$ 640 Berkshire Hathaway, Inc. ..................... 1.00% 12/02/01 $ 1,263,539
------------
Real Estate Investment Trusts (1.4%)
2,360 Capstar Hotel Corp. ......................... 4.75 10/15/04 1,746,400
4,425 Healthcare Realty Trust (New) ............... 6.55 03/14/02 3,894,708
------------
5,641,108
------------
Rental/Leasing Companies (0.9%)
4,000 Financial Federal Corp. ...................... 4.50 05/01/05 3,493,600
------------
Semiconductors (0.4%)
480 Level One Communications, Inc. ............... 4.00 09/01/04 1,174,358
310 STMicroelectronics NV (Netherlands) .......... 0.00 06/10/08 434,763
------------
1,609,121
------------
Services to the Health Industry (0.1%)
200 Quadramed Corp. .............................. 5.25 05/01/05 102,490
50 Quadramed Corp. - 144A* ...................... 5.25 05/01/05 25,622
265 Quintiles Transnational Corp. ................ 4.25 05/31/00 255,394
160 Quintiles Transnational Corp. - 144A* 4.25 05/31/00 154,200
------------
537,706
------------
Telecommunications Equipment (0.2%)
380 Comverse Technology, Inc. - 144A* ............ 4.50 07/01/05 865,002
------------
TOTAL CONVERTIBLE BONDS
(Identified Cost $50,870,772) .......................................... 49,604,141
------------
CORPORATE BONDS (21.2%)
Advertising (0.1%)
500 Adams Outdoor Advertising L.P. .............. 10.75 03/15/06 510,000
------------
Aerospace (0.1%)
140 BE Aerospace, Inc. (Series B) ................ 8.00 03/01/08 126,350
75 Wyman-Gordon Co. ............................ 8.00 12/15/07 81,375
------------
207,725
------------
Aluminum (0.0%)
100 Golden Northwest Aluminum .................... 12.00 12/15/06 103,000
------------
Auto Parts: O.E.M. (0.1%)
175 Hayes Lemmerz International, Inc. ............ 8.25 12/15/08 154,000
100 Hayes Wheels International, Inc.
(Series B) ................................. 9.125 07/15/07 97,500
------------
251,500
------------
Beverages - Non-Alcoholic (0.1%)
165 Cott Corp. (Canada) .......................... 9.375 07/01/05 159,637
350 Packaged Ice Inc. (Series B) ................. 9.75 02/01/05 316,750
------------
476,387
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
36
<PAGE>
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 1999, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- ---------- ------------ ---------------
<S> <C> <C> <C> <C>
Books/Magazines (0.1%)
$ 50 Primedia, Inc. ............................. 7.625% 04/01/08 $ 46,750
250 Von Hoffman Press, Inc. - 144A* ............. 10.375 05/15/07 245,000
------------
291,750
------------
Broadcasting (3.0%)
100 Chancellor Media AFM ........................ 9.00 10/01/08 101,500
150 Emmis Communications Corp.
(Series B) ............................... 8.125 03/15/09 142,500
2,900 EZ Communications, Inc. ..................... 9.75 12/01/05 3,122,952
3,000 JCAC Inc. ................................... 10.125 06/15/06 3,180,000
145 Lamar Media Corp. .......................... 9.25 08/15/07 143,550
200 STC Broadcasting, Inc. ...................... 11.00 03/15/07 199,000
5,060 Young Broadcasting Corp. .................... 11.75 11/15/04 5,300,350
------------
12,189,852
------------
Building Materials (0.8%)
125 Panolam Industries International -
144A* ..................................... 11.50 02/15/09 126,875
2,850 USG Corp. (Series B) ........................ 9.25 09/15/01 2,965,339
------------
3,092,214
------------
Cable Television (0.7%)
175 Echostar DBS Corp. - 144A* .................. 9.375 02/01/09 172,812
225 RCN Corp. .................................. 0.00 10/15/07 146,250
2,000 Tele-Communications, Inc. ................... 9.25 04/15/02 2,120,660
275 TV Guide Inc. ............................... 8.125 03/01/09 259,875
------------
2,699,597
------------
Casino/Gambling (0.1%)
200 Boyed Gaming Corp. ......................... 9.25 10/01/03 199,000
75 Station Casinos, Inc. ....................... 10.125 03/15/06 77,062
175 Station Casinos, Inc. ....................... 9.75 04/15/07 177,625
------------
453,687
------------
Cellular Telephone (0.9%)
3,250 Sprint Spectrum L.P. ....................... 11.00 08/15/06 3,610,945
------------
Clothing/Shoe/Accessory Stores (0.5%)
1,950 Thrifty PayLess Holdings, Inc. .............. 12.25 04/15/04 2,052,375
------------
Coal Mining (0.0%)
175 P&L Coal Holdings Corp. (Series B) .......... 8.875 05/15/08 170,187
------------
Consumer Specialties (0.1%)
95 Boyds Collection Ltd. - 144A* ............... 9.00 05/15/08 92,625
300 Home Interiors & Gifts ...................... 10.125 06/01/08 262,500
100 Scotts Co. - 144A* .......................... 8.625 01/15/09 95,500
------------
450,625
------------
Consumer/Business Services (0.0%)
100 American Business Information, Inc. -
144A* ..................................... 9.50 06/15/08 80,000
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
37
<PAGE>
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 1999, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- ---------- ------------ ---------------
<S> <C> <C> <C> <C>
Containers/Packaging (0.2%)
$ 225 Ball Corp. - 144A* ......................... 7.75% 08/01/06 $ 217,969
125 Ball Corp. - 144A* ......................... 8.25 08/01/08 120,781
100 Consumers Packaging, Inc. - 144A* .......... 9.75 02/01/07 90,000
225 Riverwood International Corp. ............. 10.625 08/01/07 225,563
225 U.S. Can Corp. ............................. 10.125 10/15/06 228,375
------------
882,688
------------
Diversified Commercial Services (0.1%)
75 Coinmach Corp. (Series D) .................. 11.75 11/15/05 78,750
250 Iron Mountain, Inc. ........................ 10.125 10/01/06 253,750
75 Iron Mountain, Inc. ........................ 8.75 09/30/09 70,500
75 Pierce Leahy Command Co. ................... 8.125 05/15/08 69,375
------------
472,375
------------
Diversified Financial Services (0.0%)
75 GS Escrow Corp. ............................ 7.125 08/01/05 71,276
------------
Diversified Manufacturing (0.1%)
200 Ametek Inc. ................................ 7.20 07/15/08 183,372
155 Insilco Corp. (Units)++ - 144A* ............ 12.00 08/15/07 151,900
100 Mark IV Industries Inc. .................... 7.75 04/01/06 96,000
------------
431,272
------------
Electric Utilities (0.1%)
100 CMS Energy Corp. ........................... 7.50 01/15/09 91,595
113 Niagara Mohawk Power (Series F) ............ 7.625 10/01/05 114,368
175 Niagara Mohawk Power (Series G) ............ 7.75 10/01/08 177,669
125 Niagara Mohawk Power (Series H) ............ 0.00 07/01/10 93,024
------------
476,656
------------
Electrical Products (0.1%)
335 Communications & Power Industries,
Inc. (Series B) .......................... 12.00 08/01/05 284,750
------------
Electronic Components (0.0%)
175 Viasystems, Inc. ........................... 9.75 06/01/07 150,938
------------
Electronic Data Processing (2.0%)
7,250 Unisys Corp. (Series B) .................... 12.00 04/15/03 7,839,063
------------
Engineering & Construction (0.1%)
225 Mastec Inc. (Series B) ..................... 7.75 02/01/08 210,375
------------
Environmental Services (0.1%)
350 Safety-Kleen Services ...................... 9.25 06/01/08 350,000
------------
Food Distributors (0.0%)
100 Di Giorgio Corp. .......................... 10.00 06/15/07 94,000
------------
Home Building (0.1%)
75 D.R. Horton Inc. ........................... 8.00 02/01/09 67,875
50 Standard Pacific Corp. (Series A) .......... 8.00 02/15/08 43,750
290 Williams Scotsman, Inc. .................... 9.875 06/01/07 279,850
------------
391,475
------------
Home Furnishings (0.0%)
200 Westpoint Stevens, Inc. .................... 7.875 06/15/08 180,000
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
38
<PAGE>
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 1999, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- ---------- ------------ ---------------
<S> <C> <C> <C> <C>
Hotels/Resorts (0.1%)
$ 400 ITT Corp. (New) .......................... 7.375% 11/15/15 $ 331,028
------------
Industrial Specialties (0.1%)
200 International Wire Group (Series B) ...... 11.75 06/01/05 204,500
------------
International Banks (0.1%)
430 UBS AG Stamford .......................... 0.00 12/11/03 417,100
------------
Internet Services (0.2%)
825 Verio Inc. ............................... 10.375 04/01/05 816,750
------------
Media Conglomerates (0.5%)
2,000 Time Warner Entertainment Co. ............ 9.625 05/01/02 2,128,340
------------
Medical/Nursing Services (1.2%)
4,800 Healthsouth Corp. ....................... 9.50 04/01/01 4,704,000
225 Prime Medical Services Inc. .............. 8.75 04/01/08 211,500
------------
4,915,500
------------
Metals Fabrications (0.8%)
2,900 Ivaco, Inc. (Canada) ..................... 11.50 09/15/05 3,161,000
100 Neenah Corp. (Series F) .................. 11.125 05/01/07 92,000
------------
3,253,000
------------
Motor Vehicles (0.1%)
250 Blue Bird Body Co. (Series B) ............ 10.75 11/15/06 275,000
------------
Newspapers (0.3%)
275 Garden State Newspapers (Series B) ....... 8.75 10/01/09 255,750
1,000 Hollinger International Publishing, Inc. 9.25 02/01/06 992,500
------------
1,248,250
------------
Oil & Gas Production (0.1%)
275 Magnum Hunter Resources .................. 10.00 06/01/07 261,250
------------
Other Consumer Services (0.0%)
100 Protection One, Inc. .................... 7.375 08/15/05 83,627
------------
Other Metals/Minerals (2.8%)
10,500 Cyprus Amax Minerals Inc. ................ 10.125 04/01/02 11,147,220
------------
Other Specialty Stores (0.1%)
175 Michaels Stores, Inc. .................... 10.875 06/15/06 183,750
100 Mrs Fields Original Cookies - 144A* ...... 10.125 12/01/04 86,000
175 Zale Corp. (Series B) .................... 8.50 10/01/07 171,500
------------
441,250
------------
Other Telecommunications (0.1%)
125 Intermedia Communication, Inc.
(Series B) ............................ 8.50 01/15/08 107,500
150 Intermedia Communication, Inc.
(Series B) ............................ 9.50 03/01/09 136,125
------------
243,625
------------
Packaged Foods (0.1%)
475 International Home Foods, Inc. ........... 10.375 11/01/06 483,313
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
39
<PAGE>
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 1999, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- ---------- ------------ ---------------
<S> <C> <C> <C> <C>
Paper (1.2%)
$ 125 Fibermark Inc. ............................. 9.375% 10/15/06 $ 123,125
125 Paperboard Industrial International
Inc. ..................................... 8.375 09/15/07 113,750
4,200 SD Warren Co. (Series B) .................... 12.00 12/15/04 4,431,000
------------
4,667,875
------------
Printing/Forms (0.5%)
2,200 Big Flower Press, Inc. ...................... 8.875 07/01/07 2,156,000
------------
Real Estate (0.1%)
300 Forest City Enterprises ..................... 8.50 03/15/08 282,000
------------
Recreational Products/Toys (0.1%)
125 CSC Holdings, Inc. .......................... 7.625 07/15/18 115,546
75 Mohegan Tribal Gaming ....................... 8.75 01/01/09 73,500
------------
189,046
------------
Rental/Leasing Companies (0.0%)
25 Anthony Crane Rentals - 144A* ............... 10.375 08/01/08 22,500
------------
Smaller Banks (0.0%)
50 Chevy Chase Savings Bank ................... 9.25 12/01/05 50,000
100 Chevy Chase Savings Bank, F.S.B. ............ 9.25 12/01/08 99,750
------------
149,750
------------
Specialty Chemicals (1.8%)
6,960 Huntsman Polymers Corp. ..................... 11.75 12/01/04 7,238,400
175 Texas Petrochemicals Corp. .................. 11.125 07/01/06 147,000
------------
7,385,400
------------
Steel/Iron Ore (0.0%)
150 Ak Steel Corp. ............................. 7.875 02/15/09 138,000
------------
Telecommunications (0.3%)
405 Jordan Telecom Products (Series B) .......... 9.875 08/01/07 388,800
150 Jordan Telecom Products (Series B) .......... 0.00 08/01/07 126,750
325 Level 3 Communications, Inc. ................ 9.125 05/01/08 294,125
115 NEXTLINK Communications, Inc. ............... 9.625 10/01/07 110,400
150 NEXTLINK Communications, Inc. -
144A* ..................................... 10.75 11/15/08 150,375
------------
1,070,450
------------
Textiles (1.1%)
4,300 Dan River, Inc. ............................ 10.125 12/15/03 4,364,500
100 Polymer Group Inc. (Series B) ............... 8.75 03/01/08 93,750
------------
4,458,250
------------
Unregulated Power Generation (0.0%)
50 CalEnergy Co., Inc. ......................... 7.63 10/15/07 49,664
------------
Wireless Communications (0.0%)
60 Paging Network, Inc. ....................... 10.125 08/01/07 16,800
------------
TOTAL CORPORATE BONDS
(Identified Cost $88,339,657) ......................................... 85,310,200
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
40
<PAGE>
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 1999, continued
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION
SHARES DATE VALUE
- ---------- ----------- --------------
<S> <C> <C> <C>
WARRANTS (0.0%)
Diversified Manufacturing (0.0%)
155 Insilco Corp. (a) ............. 8/15/07 $ --
------------
TOTAL INVESTMENTS
(Identified Cost $414,203,281) (c) 98.0% 394,149,443
OTHER ASSETS IN EXCESS OF 2.0 8,060,838
------- ------------
LIABILITIES
NET ASSETS ..................... 100.0% $402,210,281
======= ============
</TABLE>
- ---------------------
STRIDES Stock return income debt securities.
* Resale is restricted to qualified institutional investors.
++ Consists of one or more classes of securities traded together as a
unit; stocks with attached warrants.
(a) Non-income producing security.
(b) Non-income producing security; bond in default.
(c) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$29,075,401 and the aggregate gross unrealized depreciation is
$49,129,239, resulting in net unrealized depreciation of
$20,053,838.
SEE NOTES TO FINANCIAL STATEMENTS
41
<PAGE>
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1999
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (identified cost $414,203,281)........ $ 394,149,443
Receivable for:
Investments sold ...................................................... 7,005,463
Interest .............................................................. 3,607,686
Dividends ............................................................. 735,696
Shares of beneficial interest sold .................................... 267,120
Deferred organizational expenses ......................................... 56,826
Prepaid expenses and other assets ........................................ 58,561
-------------
TOTAL ASSETS .......................................................... 405,880,795
-------------
LIABILITIES:
Payable for:
Investments purchased ................................................. 903,933
Plan of distribution fee .............................................. 330,575
Investment management fee ............................................. 257,437
Shares of beneficial interest repurchased ............................. 129,119
Payable to bank .......................................................... 1,971,474
Accrued expenses and other payables ...................................... 77,976
-------------
TOTAL LIABILITIES ..................................................... 3,670,514
-------------
NET ASSETS ............................................................ $ 402,210,281
=============
COMPOSITION OF NET ASSETS:
Paid-in-capital .......................................................... $ 408,550,366
Net unrealized depreciation .............................................. (20,053,838)
Accumulated undistributed net investment income .......................... 2,449,140
Accumulated undistributed net realized gain .............................. 11,264,613
-------------
NET ASSETS ............................................................ $ 402,210,281
=============
CLASS A SHARES:
Net Assets ............................................................... $ 12,541,482
Shares Outstanding (unlimited authorized, $.01 par value)................. 1,142,532
NET ASSET VALUE PER SHARE ............................................. $ 10.98
=============
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value) ..................... $ 11.59
=============
CLASS B SHARES:
Net Assets ............................................................... $ 348,069,732
Shares Outstanding (unlimited authorized, $.01 par value) ................ 31,690,765
NET ASSET VALUE PER SHARE ............................................. $ 10.98
=============
CLASS C SHARES:
Net Assets ............................................................... $ 40,859,446
Shares Outstanding (unlimited authorized, $.01 par value) ................ 3,727,881
NET ASSET VALUE PER SHARE ............................................. $ 10.96
=============
CLASS D SHARES:
Net Assets ............................................................... $ 739,621
Shares Outstanding (unlimited authorized, $.01 par value) ................ 67,296
NET ASSET VALUE PER SHARE ............................................. $ 10.99
=============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
42
<PAGE>
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the year ended September 30, 1999
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $9,151 foreign withholding tax)......... $13,724,891
Interest ................................................. 12,794,450
-----------
TOTAL INCOME .......................................... 26,519,341
-----------
EXPENSES
Plan of distribution fee (Class A shares) ................ 29,103
Plan of distribution fee (Class B shares) ................ 3,875,763
Plan of distribution fee (Class C shares) ................ 155,763
Investment management fee ................................ 3,213,769
Transfer agent fees and expenses ......................... 391,654
Registration fees ........................................ 105,040
Professional fees ........................................ 87,892
Shareholder reports and notices .......................... 80,591
Custodian fees ........................................... 41,055
Organizational expenses .................................. 32,710
Trustees' fees and expenses .............................. 12,536
Other .................................................... 12,664
-----------
TOTAL EXPENSES ........................................ 8,038,540
-----------
NET INVESTMENT INCOME ................................. 18,480,801
-----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain ........................................ 15,975,924
Net change in unrealized depreciation .................... 3,774,240
-----------
NET GAIN .............................................. 19,750,164
-----------
NET INCREASE ............................................. $38,230,965
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
43
<PAGE>
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
-------------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................ $ 18,480,801 $ 17,990,954
Net realized gain .................................... 15,975,924 21,800,391
Net change in unrealized depreciation ................ 3,774,240 (68,902,232)
------------- -------------
NET INCREASE (DECREASE) ........................... 38,230,965 (29,110,887)
------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A shares .................................... (646,373) (344,600)
Class B shares .................................... (17,881,658) (15,186,529)
Class C shares .................................... (604,652) (153,463)
Class D shares .................................... (76,726) (16,323)
Net realized gain
Class A shares .................................... (671,285) (264,926)
Class B shares .................................... (24,998,743) (18,061,378)
Class C shares .................................... (346,036) (92,820)
Class D shares .................................... (40,395) (1,956)
------------- -------------
TOTAL DIVIDENDS AND DISTRIBUTIONS ................. (45,265,868) (34,121,995)
------------- -------------
Net increase (decrease) from transactions in shares of
beneficial interest ................................ (23,984,846) 135,434,833
------------- -------------
NET INCREASE (DECREASE) ........................... (31,019,749) 72,201,951
NET ASSETS:
Beginning of period .................................. 433,230,030 361,028,079
------------- -------------
END OF PERIOD
(Including undistributed net investment income of
$2,449,140 and $3,454,171, respectively)........... $ 402,210,281 $ 433,230,030
============= =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
44
<PAGE>
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
NOTES TO FINANCIAL STATEMENTS September 30, 1999
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley 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 commenced operations on June 26, 1996. On
July 28, 1997, the Fund converted to a multiple class structure.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year,
six years and one year, respectively. Class D shares are not subject to a sales
charge. Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American or other domestic or foreign stock exchange is valued at its
latest sale price on that exchange prior to the time when assets are valued; if
there were no sales that day, the security is valued at the latest bid price
(in cases where securities are traded on more than one exchange, the 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 Morgan Stanley Dean Witter Advisors Inc. (the "Investment
Manager") that sale or bid prices are not reflective of a security's market
value, portfolio securities are valued at their fair value as determined in
good faith under procedures established by and under the general supervision of
the 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
45
<PAGE>
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
NOTES TO FINANCIAL STATEMENTS September 30, 1999, continued
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 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. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date
such items are recognized. Distribution fees are charged directly to the
respective class.
D. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to its shareholders on the 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.
46
<PAGE>
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
NOTES TO FINANCIAL STATEMENTS September 30, 1999, continued
F. 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
following annual rates to the net assets of the Fund determined at the close of
each business day: 0.75% to the portion of daily net assets not exceeding $500
million and 0.725% to the portion of daily net assets in excess of $500
million.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services,
heat, light, power and other utilities provided to the Fund.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Morgan Stanley Dean Witter Distributors
Inc. (the "Distributor"), an affiliate of the Investment Manager. The Fund has
adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the
Act. The Plan provides that the Fund 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 -- 1.0% of
the lesser of: (a) the average daily aggregate gross sales of the Class B
shares since the inception of the Fund (not including reinvestment of dividend
or capital gain distributions) less the average daily aggregate net asset value
of the Class B shares redeemed since the Fund's inception upon which a
contingent deferred sales charge has been imposed or waived; or (b) the average
daily net assets of Class B; and (iii) Class C -- up to 1.0% of the average
daily net assets of Class C. In the case of Class A shares, amounts paid under
the Plan are paid to the Distributor for services provided. In the case of
Class B and Class C shares, amounts paid under the Plan are paid to the
Distributor for (1) services provided and the expenses borne by it and others
in the distribution of the shares of these Classes, including the payment of
commissions for sales of these Classes and incentive compensation to, and
expenses of, Morgan Stanley Dean Witter Financial Advisors and others who
engage in or support distribution of the shares or who service shareholder
accounts, including overhead and
47
<PAGE>
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
NOTES TO FINANCIAL STATEMENTS September 30, 1999, continued
telephone expenses; (2) printing and distribution of prospectuses and reports
used in connection with the offering of these shares to other than current
shareholders; and (3) preparation, printing and distribution of sales
literature and advertising materials. In addition, the Distributor may utilize
fees paid pursuant to the Plan, in the case of Class B shares, to compensate
Dean Witter Reynolds Inc. ("DWR"), an affiliate of the Investment Manager and
Distributor, and other selected broker-dealers for their opportunity costs in
advancing such amounts, which compensation would be in the form of a carrying
charge on any unreimbursed expenses.
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees 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 Trustees will consider at that time the manner in which to treat such
expenses. The Distributor has advised the Fund that such excess amounts,
including carrying charges, totaled $17,141,308 at September 30, 1999.
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Dean Witter Financial Advisors or other
selected broker-dealer representatives may be reimbursed in the subsequent
calendar year. For the year ended September 30, 1999, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.24% and
0.97%, respectively.
The Distributor has informed the Fund that for the year ended September 30,
1999, it received contingent deferred sales charges from certain redemptions of
the Fund's Class B shares and Class C shares of $1,174,157 and $4,337,
respectively and received $15,164 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 September 30, 1999
aggregated $149,965,342 and $248,758,198, respectively.
48
<PAGE>
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
NOTES TO FINANCIAL STATEMENTS September 30, 1999, continued
For the year ended September 30, 1999, the Fund incurred $131,414 in brokerage
commissions with DWR for portfolio transactions executed on behalf of the Fund.
At September 30, 1999, the Fund's receivable for investments sold and payable
for investments purchased included unsettled trades with DWR of $1,037,217 and
$903,933, respectively.
For the year ended September 30, 1999, the Fund incurred $7,410 in brokerage
commissions with Morgan Stanley & Co., Inc., an affiliate of the Investment
Manager and Distributor, for portfolio transactions executed on behalf of the
Fund.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager
and Distributor, is the Fund's transfer agent.
5. FEDERAL INCOME TAX STATUS
As of September 30, 1999, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales and permanent book/tax
differences attributable to tax adjustments on real estate investment trusts
held by the Fund. To reflect reclassifications arising from the permanent
differences, accumulated undistributed net investment income was charged
$276,423, paid-in-capital was charged $32,710 and accumulated net realized gain
was credited $309,133.
6. ACQUISITION OF TCW/DW INCOME AND GROWTH FUND
On June 28, 1999, the Fund acquired all the net assets of TCW/DW Income and
Growth Fund ("Income and Growth") based on the respective valuations as of the
close of business June 25, 1999, pursuant to a plan of reorganization approved
by the shareholders of Income and Growth on June 8, 1999. The acquisition was
accomplished by a tax-free exchange of 8,607 Class A shares of the Fund at a
net asset value of $11.79 per share for 9,404 Class A shares of Income and
Growth; 723,832 Class B shares of the Fund at a net asset value of $11.80 per
share for 791,586 Class B shares of Income and Growth; and 3,554,666 Class C
shares of the Fund at a net assets value of $11.77 per share for 3,873,928
Class C shares of Income and Growth. The net assets of the Fund and Income and
Growth immediately before the acquisition were $402,078,443 and $50,615,496,
respectively, including unrealized appreciation of $2,147,861 for Income and
Growth. Immediately after the acquisition, the combined assets of the Fund
amounted to $452,693,939.
49
<PAGE>
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
NOTES TO FINANCIAL STATEMENTS September 30, 1999, continued
7. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
------------------------------------ ---------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------- ----------------- -------------- ----------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold ................................................ 373,161 $ 4,311,270 887,465 $ 11,197,972
Reinvestment of dividends and distributions ......... 72,926 807,614 26,670 324,319
Shares issued in connection with the acquisition of
TCW/DW Income and Growth Fund ...................... 8,607 101,458 -- --
Redeemed ............................................ (213,154) (2,454,803) (94,880) (1,168,724)
-------- -------------- ------- -------------
Net increase -- Class A ............................. 241,540 2,765,539 819,255 10,353,567
-------- -------------- ------- -------------
CLASS B SHARES
Sold ................................................ 3,043,825 35,162,596 14,488,236 183,541,957
Reinvestment of dividends and distributions ......... 3,152,355 34,981,362 2,214,603 27,031,378
Shares issued in connection with the acquisition of
TCW/DW Income and Growth Fund ...................... 723,832 8,541,094 -- --
Redeemed ............................................ (12,509,897) (143,652,130) (7,439,745) (91,648,973)
----------- -------------- ---------- -------------
Net increase (decrease) -- Class B .................. (5,589,885) (64,967,078) 9,263,094 118,924,362
----------- -------------- ---------- -------------
CLASS C SHARES
Sold ................................................ 114,511 1,316,245 513,124 6,515,096
Reinvestment of dividends and distributions ......... 72,635 801,880 17,520 213,338
Shares issued in connection with the acquisition of
TCW/DW Income and Growth Fund ...................... 3,554,666 41,847,822 -- --
Redeemed ............................................ (518,349) (5,997,769) (103,278) (1,268,428)
----------- -------------- ---------- -------------
Net increase -- Class C ............................. 3,223,463 37,968,178 427,366 5,460,006
----------- -------------- ---------- -------------
CLASS D SHARES
Sold ................................................ 449,722 5,167,272 57,284 742,379
Reinvestment of dividends and distributions ......... 4,118 45,524 492 6,014
Redeemed ............................................ (441,802) (4,964,281) (4,166) (51,495)
----------- -------------- ---------- -------------
Net increase -- Class D ............................. 12,038 248,515 53,610 696,898
----------- -------------- ---------- -------------
Net increase (decrease) in Fund ..................... (2,112,844) $ (23,984,846) 10,563,325 $ 135,434,833
=========== ============== ========== =============
</TABLE>
50
<PAGE>
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Morgan Stanley Dean Witter Income
Builder Fund (the "Fund") at September 30, 1999, 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
periods presented, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit 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, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at September 30, 1999 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
November 9, 1999
1999 FEDERAL TAX NOTICE (unaudited)
During the year ended September 30, 1999, the Fund paid to its
shareholders $0.64 per share from long-term capital gains. For such
period, 66.59% of the income dividends paid qualified for the dividends
received deduction available to corporations.
51
<PAGE>
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
PART C OTHER INFORMATION
Item 23. Exhibits
1(a). Declaration of Trust of the Registrant, dated March 20, 1996, is
incorporated by reference to Exhibit 1 of the Initial Registration
Statement on Form N-1A, filed on March 27, 1996.
1(b). Instrument Establishing and Designating Additional Classes, dated July
28, 1997, is incorporated by reference to Exhibit 1 of Post-Effective
Amendment No. 2 to the Registration Statement on Form N-1A, filed on
July 23, 1997.
1(c). Amendment to the Declaration of Trust of the Registrant, dated June 22,
1998, is incorporated by reference to Exhibit 1 of Post-Effective
Amendment No. 4 to the Registration Statement on Form N-1A, filed on
November 25, 1998.
2. Amended and Restated By-Laws of the Registrant, dated May 1, 1999, is
incorporated by reference to Exhibit 2 to the Registration Statement on
Form N-1A, filed on September 24, 1999.
3. Not Applicable.
4. Amended Investment Management Agreement between the Registrant and
Morgan Stanley Dean Witter Advisors Inc., dated May 1, 1998, is
incorporated by reference to Exhibit 5 of Post-Effective Amendment No.
4 to the Registration Statement on Form N-1A, filed on November 25,
1998.
5(a). Amended Distribution Agreement, dated June 22, 1998, is incorporated by
reference to Exhibit 6(a) of Post-Effective Amendment No. 4 to the
Registration Statement on Form N-1A, filed on November 25, 1998.
5(b). Selected Dealer Agreement between Morgan Stanley Dean Witter
Distributors Inc. and Dean Witter Reynolds Inc., is incorporated by
reference to Exhibit 6(b) of Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1A, filed on April 29, 1996.
5(c). Omnibus Selected Dealer Agreement between Morgan Stanley Dean Witter
Distributors Inc. and National Financial Services Corporation, dated
October 17, 1998, is incorporated by reference to Exhibit 6(b) of
Post-Effective Amendment No. 4 to the Registration Statement on Form
N-1A, filed on November 25, 1998.
6. Not Applicable.
7. Custody Agreement between The Bank of New York and the Registrant is
incorporated by reference to Exhibit 9 of Pre-Effective Amendment No. 1
to the Registration Statement on Form N-1A, filed on April 29, 1996.
1
<PAGE>
8(a). Amended and Restated Transfer Agency and Service Agreement, dated June
22, 1998, is incorporated by reference to Exhibit 8 of Post-Effective
Amendment No. 4 to the Registration Statement on Form N-1A, filed on
November 25, 1998.
8(b). Amended Services Agreement, dated June 22, 1998, is incorporated by
reference to Exhibit 9 of Post-Effective Amendment No. 4 to the
Registration Statement on Form N-1A, filed on November 25, 1998.
9(a). Opinion of Sheldon Curtis, Esq., dated April 22, 1996, is incorporated
by reference to Exhibit 10(a) of Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1A, filed on April 29, 1996.
9(b). Opinion of Lane, Altman & Owens LLP, Massachusetts Counsel, dated April
22, 1996, is incorporated by reference to Exhibit 10(b) of
Pre-Effective Amendment No. 1 to the Registration Statement on Form
N-1A, filed on April 29, 1996.
10. Consent of Independent Accountants, filed herein.
11. Not Applicable.
12. Not Applicable.
13. Amended and Restated Plan of Distribution pursuant to Rule 12b-1, dated
July 28, 1997, is incorporated by reference to Exhibit 15 of
Post-Effective Amendment No. 2 to the Registration Statement on Form
N-1A, filed on July 23, 1997.
14. Amended Multi-Class Plan pursuant to Rule 18f-3, dated June 22, 1998,
is incorporated by reference to Exhibit 18 of Post-Effective Amendment
No. 4 to the Registration Statement on Form N-1A, filed on November 25,
1998.
Other Powers of Attorney are incorporated by reference to Exhibit (Other) of
Pre-Effective Amendment No. 1 to the Registration Statement on Form
N-1A, filed on April 29, 1996, and in the case of Wayne E. Hedien, is
incorporated by reference to Exhibit (Other) of Post-Effective
Amendment No. 3 to the Registration Statement on Form N-1A, filed on
November 25, 1997.
Item 24. Persons Controlled by or Under Common Control with the Fund.
None
Item 25. Indemnification.
Pursuant to Section 5.3 of the Registrant's Declaration of Trust and
under Section 4.8 of the Registrant's By-Laws, the indemnification of the
Registrant's trustees, officers, employees and agents is permitted if it is
determined that they acted under the belief that their actions were in or not
opposed to the best interest of the Registrant, and, with respect to any
criminal proceeding, they had reasonable cause to believe their conduct was not
unlawful. In addition, indemnification is permitted only if it is determined
that the actions in question did not render them liable by reason of willful
misfeasance, bad faith or gross negligence in the performance of their duties or
by reason of reckless disregard of their obligations and duties to the
Registrant. Trustees, officers, employees and agents will be indemnified for the
expense of litigation if it is
2
<PAGE>
determined that they are entitled to indemnification against any liability
established in such litigation. The Registrant may also advance money for these
expenses provided that they give their undertakings to repay the Registrant
unless their conduct is later determined to permit indemnification.
Pursuant to Section 5.2 of the Registrant's Declaration of Trust and
paragraph 8 of the Registrant's Investment Management Agreement, neither the
Investment Manager nor any trustee, officer, employee or agent of the Registrant
shall be liable for any action or failure to act, except in the case of bad
faith, willful misfeasance, gross negligence or reckless disregard of duties to
the Registrant.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer, or controlling person of the Registrant
in connection with the successful defense of any action, suit or proceeding) is
asserted against the Registrant by such trustee, officer or controlling person
in connection with the shares being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act, and will
be governed by the final adjudication of such issue.
The Registrant hereby undertakes that it will apply the indemnification
provision of its by-laws in a manner consistent with Release 11330 of the
Securities and Exchange Commission under the Investment Company Act of 1940, so
long as the interpretation of Sections 17(h) and 17(i) of such Act remains in
effect.
Registrant, in conjunction with the Investment Manager, Registrant's
Trustees, and other registered investment management companies managed by the
Investment Manager, maintains insurance on behalf of any person who is or was a
Trustee, officer, employee, or agent of Registrant, or who is or was serving at
the request of Registrant as a trustee, director, officer, employee or agent of
another trust or corporation, against any liability asserted against him and
incurred by him or arising out of his position. However, in no event will
Registrant maintain insurance to indemnify any such person for any act for which
Registrant itself is not permitted to indemnify him.
Item 26. Business and Other Connections of Investment Advisor
See "The Fund and Its Management" in the Prospectus regarding the
business of the investment advisor. The following information is given regarding
officers of Morgan Stanley Dean Witter Advisors Inc. ("MSDW Advisors"). MSDW
Advisors is a wholly-owned subsidiary of Morgan Stanley Dean Witter & Co.
The term "Morgan Stanley Dean Witter Funds" refers to the following
registered investment companies:
Closed-End Investment Companies
- -------------------------------
(1) Morgan Stanley Dean Witter California Insured Municipal Income Trust
3
<PAGE>
(2) Morgan Stanley Dean Witter California Quality Municipal Securities
(3) Morgan Stanley Dean Witter Government Income Trust
(4) Morgan Stanley Dean Witter High Income Advantage Trust
(5) Morgan Stanley Dean Witter High Income Advantage Trust II
(6) Morgan Stanley Dean Witter High Income Advantage Trust III
(7) Morgan Stanley Dean Witter Income Securities Inc.
(8) Morgan Stanley Dean Witter Insured California Municipal Securities
(9) Morgan Stanley Dean Witter Insured Municipal Bond Trust
(10) Morgan Stanley Dean Witter Insured Municipal Income Trust
(11) Morgan Stanley Dean Witter Insured Municipal Securities
(12) Morgan Stanley Dean Witter Insured Municipal Trust
(13) Morgan Stanley Dean Witter Municipal Income Opportunities Trust
(14) Morgan Stanley Dean Witter Municipal Income Opportunities Trust II
(15) Morgan Stanley Dean Witter Municipal Income Opportunities Trust III
(16) Morgan Stanley Dean Witter Municipal Income Trust
(17) Morgan Stanley Dean Witter Municipal Income Trust II
(18) Morgan Stanley Dean Witter Municipal Income Trust III
(19) Morgan Stanley Dean Witter Municipal Premium Income Trust
(20) Morgan Stanley Dean Witter New York Quality Municipal Securities
(21) Morgan Stanley Dean Witter Prime Income Trust
(22) Morgan Stanley Dean Witter Quality Municipal Income Trust
(23) Morgan Stanley Dean Witter Quality Municipal Investment Trust
(24) Morgan Stanley Dean Witter Quality Municipal Securities
Open-end Investment Companies
- -----------------------------
(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Money Trust
(4) Active Assets Tax-Free Trust
(5) Morgan Stanley Dean Witter Aggressive Equity Fund
(6) Morgan Stanley Dean Witter American Opportunities Fund
(7) Morgan Stanley Dean Witter Balanced Growth Fund
(8) Morgan Stanley Dean Witter Balanced Income Fund
(9) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(10) Morgan Stanley Dean Witter California Tax-Free Income Fund
(11) Morgan Stanley Dean Witter Capital Growth Securities
(12) Morgan Stanley Dean Witter Competitive Edge Fund, "Best Ideas Portfolio"
(13) Morgan Stanley Dean Witter Convertible Securities Trust
(14) Morgan Stanley Dean Witter Developing Growth Securities Trust
(15) Morgan Stanley Dean Witter Diversified Income Trust
(16) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
(17) Morgan Stanley Dean Witter Equity Fund
(18) Morgan Stanley Dean Witter European Growth Fund Inc.
(19) Morgan Stanley Dean Witter Federal Securities Trust
(20) Morgan Stanley Dean Witter Financial Services Trust
(21) Morgan Stanley Dean Witter Fund of Funds
(22) Morgan Stanley Dean Witter Global Dividend Growth Securities
(23) Morgan Stanley Dean Witter Global Utilities Fund
(24) Morgan Stanley Dean Witter Growth Fund
(25) Morgan Stanley Dean Witter Hawaii Municipal Trust
(26) Morgan Stanley Dean Witter Health Sciences Trust
4
<PAGE>
(27) Morgan Stanley Dean Witter High Yield Securities Inc.
(28) Morgan Stanley Dean Witter Income Builder Fund
(29) Morgan Stanley Dean Witter Information Fund
(30) Morgan Stanley Dean Witter Intermediate Income Securities
(31) Morgan Stanley Dean Witter International Fund
(32) Morgan Stanley Dean Witter International SmallCap Fund
(33) Morgan Stanley Dean Witter Japan Fund
(34) Morgan Stanley Dean Witter Latin American Growth Fund
(35) Morgan Stanley Dean Witter Limited Term Municipal Trust
(36) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(37) Morgan Stanley Dean Witter Market Leader Trust
(38) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
(39) Morgan Stanley Dean Witter Mid-Cap Equity Trust
(40) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(41) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(42) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(43) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(44) Morgan Stanley Dean Witter Next Generation Trust
(45) Morgan Stanley Dean Witter North American Government Income Trust
(46) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(47) Morgan Stanley Dean Witter Precious Metals and Minerals Trust
(48) Morgan Stanley Dean Witter Real Estate Fund
(49) Morgan Stanley Dean Witter S&P 500 Index Fund
(50) Morgan Stanley Dean Witter S&P 500 Select Fund
(51) Morgan Stanley Dean Witter Select Dimensions Investment Series
(52) Morgan Stanley Dean Witter Select Municipal Reinvestment Fund
(53) Morgan Stanley Dean Witter Short-Term Bond Fund
(54) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(55) Morgan Stanley Dean Witter Small Cap Growth Fund
(56) Morgan Stanley Dean Witter Special Value Fund
(57) Morgan Stanley Dean Witter Strategist Fund
(58) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(59) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(60) Morgan Stanley Dean Witter Total Market Index Fund
(61) Morgan Stanley Dean Witter Total Return Trust
(62) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(63) Morgan Stanley Dean Witter U.S. Government Securities Trust
(64) Morgan Stanley Dean Witter Utilities Fund
(65) Morgan Stanley Dean Witter Value-Added Market Series
(66) Morgan Stanley Dean Witter Value Fund
(67) Morgan Stanley Dean Witter Variable Investment Series
(68) Morgan Stanley Dean Witter World Wide Income Trust
5
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ---------------------------------------------------
<S> <C>
Mitchell M. Merin President and Chief Operating Officer of Asset
President, Chief Management of Morgan Stanley Dean Witter & Co.
Executive Officer and ("MSDW); Chairman, Chief Executive Officer and
Director Director of Morgan Stanley Dean Witter Distributors
Inc. ("MSDW Distributors") and Morgan Stanley Dean
Witter Trust FSB ("MSDW Trust"); President, Chief
Executive Officer and Director of Morgan Stanley
Dean Witter Services Company Inc. ("MSDW Services");
President of the Morgan Stanley Dean Witter Funds;
Executive Vice President and Director of Dean Witter
Reynolds Inc. ("DWR"); Director of various MSDW
subsidiaries.
Joseph J. McAlinden Vice President of the Morgan Stanley Dean Witter Funds;
Executive Vice President Director of MSDW Trust.
and Chief Investment
Officer
Ronald E. Robison President MSDW Trust; Executive Vice President, Chief
Executive Vice President, Administrative Officer and Director of MSDW Services;
Chief Administrative Vice President of the Morgan Stanley Dean Witter Funds.
Officer and Director
Edward C. Oelsner, III
Executive Vice President
Barry Fink Assistant Secretary of DWR; Senior Vice President,
Senior Vice President, Secretary, General Counsel and Director of MSDW
Secretary, General Services; Senior Vice President, Assistant Secretary and
Counsel and Director Assistant General Counsel of MSDW Distributors; Vice
President, Secretary and General Counsel of the
Morgan Stanley Dean Witter Funds.
Peter M. Avelar Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of the High
Yield Group
Mark Bavoso Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Douglas Brown
Senior Vice President
Rosalie Clough
Senior Vice President
and Director of Marketing
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ---------------------------------------------------
<S> <C>
Richard Felegy
Senior Vice President
Edward F. Gaylor Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Robert S. Giambrone Senior Vice President of MSDW Services, MSDW
Senior Vice President Distributors and MSDW Trust and Director of MSDW Trust;
Vice President of the Morgan Stanley Dean Witter Funds.
Rajesh K. Gupta Vice President of various Morgan Stanley Dean Witter
Senior Vice President, Funds.
Director of the Taxable
Fixed Income Group and
Chief Administrative Officer-
Investments
Kenton J. Hinchliffe Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Kevin Hurley Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Jenny Beth Jones Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Michelle Kaufman Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
John B. Kemp, III President of MSDW Distributors.
Senior Vice President
Anita H. Kolleeny Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of Sector
Rotation
Ira N. Ross Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Guy G. Rutherfurd, Jr. Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of the Growth
Group
Rochelle G. Siegel Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ---------------------------------------------------
<S> <C>
James Solloway
Senior Vice President
Paul D. Vance Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of the Growth
and Income Group
Elizabeth A. Vetell
Senior Vice President
and Director of Shareholder
Communication
James F. Willison Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of the
Tax-Exempt Fixed
Income Group
Thomas F. Caloia First Vice President and Assistant Treasurer of
First Vice President MSDW Services; Assistant Treasurer of MSDW
and Assistant Distributors; Treasurer and Chief Financial and Accounting
Treasurer Officer of the Morgan Stanley Dean Witter Funds.
Thomas Chronert
First Vice President
Marilyn K. Cranney Assistant Secretary of DWR; First Vice President and
First Vice President Assistant Secretary of MSDW Services; Assistant
and Assistant Secretary Secretary of MSDW Distributors and the Morgan Stanley
Dean Witter Funds.
Salvatore DeSteno First Vice President of MSDW Services.
First Vice President
Peter W. Gurman
First Vice President
Michael Interrante First Vice President and Controller of MSDW Services;
First Vice President Assistant Treasurer of MSDW Distributors; First Vice
and Controller President and Treasurer of MSDW Trust.
David Johnson
First Vice President
Stanley Kapica
First Vice President
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ---------------------------------------------------
<S> <C>
Lou Anne D. McInnis First Vice President and Assistant Secretary of MSDW
First Vice President and Services; Assistant Secretary of MSDW Distributors and
Assistant Secretary the Morgan Stanley Dean Witter Funds.
Carsten Otto First Vice President and Assistant Secretary of MSDW
First Vice President Services; Assistant Secretary of MSDW Distributors and
and Assistant Secretary the Morgan Stanley Dean Witter Funds.
Ruth Rossi First Vice President and Assistant Secretary of MSDW
First Vice President and Services; Assistant Secretary of MSDW Distributors and
Assistant Secretary the Morgan Stanley Dean Witter Funds.
James P. Wallin
First Vice President
Robert Abreu
Vice President
Dale Albright
Vice President
Joan G. Allman
Vice President
Andrew Arbenz
Vice President
Joseph Arcieri Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Armon Bar-Tur Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Raymond Basile
Vice President
Nancy Belza
Vice President
Maurice Bendrihem
Vice President and
Assistant Controller
Dale Boettcher
Vice President
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ---------------------------------------------------
<S> <C>
Ronald Caldwell
Vice President
Joseph Cardwell
Vice President
Liam Carroll
Vice President
Philip Casparius
Vice President
Aaron Clark
Vice President
William Connerly
Vice President
David Dineen
Vice President
Sheila Finnerty Vice President of Morgan Stanley Dean Witter Prime
Vice President Income Trust.
Jeffrey D. Geffen
Vice President
Sandra Gelpieryn
Vice President
Charmaine George
Vice President
Michael Geringer
Vice President
Gail Gerrity
Vice President
Ellen Gold
Vice President
Stephen Greenhut
Vice President
Trey Hancock
Vice President
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ---------------------------------------------------
<S> <C>
Matthew Haynes Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Peter Hermann Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
David T. Hoffman
Vice President
Kevin Jung Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Carol Espejo-Kane
Vice President
Nancy Karole-Kennedy
Vice President
Doug Ketterer
Vice President
Paula LaCosta Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Kimberly LaHart
Vice President
Thomas Lawlor
Vice President
Todd Lebo Vice President and Assistant Secretary of MSDW
Vice President and Services; Assistant Secretary of MSDW Distributors and Assistant
Secretary the Morgan Stanley Dean Witter Funds.
Gerard J. Lian Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Nancy Login
Vice President
Sharon Loguercio
Vice President
Steven MacNamara
Vice President
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ---------------------------------------------------
<S> <C>
Catherine Maniscalco Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Albert McGarity
Vice President
Teresa McRoberts Vice President of Morgan Stanley Dean Witter S&P 500
Vice President Select Fund.
Mark Mitchell
Vice President
Julie Morrone Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Mary Beth Mueller
Vice President
David Myers Vice President of Morgan Stanley Dean Witter Natural
Vice President Resource Development Securities Inc.
James Nash
Vice President
Richard Norris
Vice President
Anne Pickrell
Vice President
Dawn Rorke
Vice President
John Roscoe Vice President of Morgan Stanley Dean Witter
Vice President Real Estate Fund.
Hugh Rose
Vice President
Robert Rossetti Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Carl F. Sadler
Vice President
Deborah Santaniello
Vice President
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ---------------------------------------------------
<S> <C>
Patrice Saunders
Vice President
Howard A. Schloss Vice President of Morgan Stanley Dean Witter Federal
Vice President Securities Trust.
Peter J. Seeley Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Robert Stearns
Vice President
Naomi Stein
Vice President
Michael Strayhorn
Vice President
Kathleen H. Stromberg Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Marybeth Swisher
Vice President
Michael Thayer
Vice President
Robert Vanden Assem
Vice President
David Walsh
Vice President
Alice Weiss Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
John Wong
Vice President
</TABLE>
The principal address of MSDW Advisors, MSDW Services, MSDW
Distributors, DWR, and the Morgan Stanley Dean Witter Funds is Two World Trade
Center, New York, New York 10048. The principal address of MSDW is 1585
Broadway, New York, New York 10036. The principal address of MSDW Trust is 2
Harborside Financial Center, Jersey City, New Jersey 07311.
13
<PAGE>
Item 27. Principal Underwriters
(a) Morgan Stanley Dean Witter Distributors Inc. ("MSDW Distributors"), a
Delaware corporation, is the principal underwriter of the Registrant. MSDW
Distributors is also the principal underwriter of the following investment
companies:
(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Money Trust
(4) Active Assets Tax-Free Trust
(5) Morgan Stanley Dean Witter Aggressive Equity Fund
(6) Morgan Stanley Dean Witter American Opportunities Fund
(7) Morgan Stanley Dean Witter Balanced Growth Fund
(8) Morgan Stanley Dean Witter Balanced Income Fund
(9) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(10) Morgan Stanley Dean Witter California Tax-Free Income Fund
(11) Morgan Stanley Dean Witter Capital Growth Securities
(12) Morgan Stanley Dean Witter Competitive Edge Fund, "Best Ideas Portfolio"
(13) Morgan Stanley Dean Witter Convertible Securities Trust
(14) Morgan Stanley Dean Witter Developing Growth Securities Trust
(15) Morgan Stanley Dean Witter Diversified Income Trust
(16) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
(17) Morgan Stanley Dean Witter Equity Fund
(18) Morgan Stanley Dean Witter European Growth Fund Inc.
(19) Morgan Stanley Dean Witter Federal Securities Trust
(20) Morgan Stanley Dean Witter Financial Services Trust
(21) Morgan Stanley Dean Witter Fund of Funds
(22) Morgan Stanley Dean Witter Global Dividend Growth Securities
(23) Morgan Stanley Dean Witter Global Utilities Fund
(24) Morgan Stanley Dean Witter Growth Fund
(25) Morgan Stanley Dean Witter Hawaii Municipal Trust
(26) Morgan Stanley Dean Witter Health Sciences Trust
(27) Morgan Stanley Dean Witter High Yield Securities Inc.
(28) Morgan Stanley Dean Witter Income Builder Fund
(29) Morgan Stanley Dean Witter Information Fund
(30) Morgan Stanley Dean Witter Intermediate Income Securities
(31) Morgan Stanley Dean Witter International Fund
(32) Morgan Stanley Dean Witter International SmallCap Fund
(33) Morgan Stanley Dean Witter Japan Fund
(34) Morgan Stanley Dean Witter Latin American Growth Fund
(35) Morgan Stanley Dean Witter Limited Term Municipal Trust
(36) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(37) Morgan Stanley Dean Witter Market Leader Trust
(38) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
(39) Morgan Stanley Dean Witter Mid-Cap Equity Trust
(40) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(41) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(42) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(43) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(44) Morgan Stanley Dean Witter Next Generation Trust
(45) Morgan Stanley Dean Witter North American Government Income Trust
14
<PAGE>
(46) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(47) Morgan Stanley Dean Witter Precious Metals and Minerals Trust
(48) Morgan Stanley Dean Witter Prime Income Trust
(49) Morgan Stanley Dean Witter Real Estate Fund
(50) Morgan Stanley Dean Witter S&P 500 Index Fund
(51) Morgan Stanley Dean Witter S&P 500 Select Fund
(52) Morgan Stanley Dean Witter Short-Term Bond Fund
(53) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(54) Morgan Stanley Dean Witter Small Cap Growth Fund
(55) Morgan Stanley Dean Witter Special Value Fund
(56) Morgan Stanley Dean Witter Strategist Fund
(57) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(58) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(59) Morgan Stanley Dean Witter Total Market Index Fund
(60) Morgan Stanley Dean Witter Total Return Trust
(61) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(62) Morgan Stanley Dean Witter U.S. Government Securities Trust
(63) Morgan Stanley Dean Witter Utilities Fund
(64) Morgan Stanley Dean Witter Value-Added Market Series
(65) Morgan Stanley Dean Witter Value Fund
(66) Morgan Stanley Dean Witter Variable Investment Series
(67) Morgan Stanley Dean Witter World Wide Income Trust
(b) The following information is given regarding directors and officers of MSDW
Distributors not listed in Item 26 above. The principal address of MSDW
Distributors is Two World Trade Center, New York, New York 10048. Other than Mr.
Purcell, who is a Trustee of the Registrant, none of the following persons has
any position or office with the Registrant.
Name Positions and Office with MSDW Distributors
- ---- -------------------------------------------
Michael T. Gregg Vice President and Assistant Secretary.
James F. Higgins Director
Fredrick K. Kubler Senior Vice President, Assistant Secretary and Chief
Compliance Officer.
Philip J. Purcell Director
John Schaeffer Director
Charles Vadala Senior Vice President and Financial Principal.
Item 28. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained by the Investment Manager at its offices, except records relating to
holders of shares issued by the Registrant, which are maintained by the
Registrant's Transfer Agent, at its place of business as shown in the
prospectus.
15
<PAGE>
Item 29. Management Services
Registrant is not a party to any such management-related service
contract.
Item 30. Undertakings
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York on the 22nd day of November, 1999.
MORGAN STANLEY DEAN WITTER
INCOME BUILDER FUND
By: /s/ Barry Fink
--------------------------------
Barry Fink
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 6 has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
(1) Principal Executive Officer Chairman, Chief Executive Officer
and Trustee
By: /s/ Charles A. Fiumefreddo 11/22/99
---------------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By: /s/ Thomas F. Caloia 11/22/99
---------------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By: /s/ Barry Fink 11/22/99
---------------------------------
Barry Fink
Attorney-in-Fact
Michael Bozic Manuel H. Johnson
Edwin J. Garn Michael E. Nugent
Wayne E. Hedien John L. Schroeder
By: /s/ David M. Butowsky 11/22/99
---------------------------------
David M. Butowsky
Attorney-in-Fact
</TABLE>
<PAGE>
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
EXHIBIT INDEX
10. Consent of Independent Accountants.
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 6 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
November 9, 1999, relating to the financial statements and financial highlights
of Morgan Stanley Dean Witter Income Builder Fund, which appears in such
Statement of Additional Information, and to the incorporation by reference of
our report into the Prospectus which constitutes part of this Registration
Statement. We also consent to the references to us under the headings
"Custodian and Independent Accountants" and "Experts" in such Statement of
Additional Information and to the reference to us under the heading "Financial
Highlights" in such Prospectus.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
November 19, 1999
