<PAGE> 1
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND Two World Trade Center
LETTER TO THE SHAREHOLDERS March 31, 1999 New York, New York 10048
DEAR SHAREHOLDER:
The six-month period ended March 31, 1999, saw U.S. equity markets rally to
record highs amid continued global economic uncertainty. During this period the
Standard & Poor's 500 Composite Stock Price Index (S&P 500) gained 27.32
percent, led by surging growth and technology stocks. Solid corporate earnings
results, combined with low inflation, unemployment and interest rates, bolstered
investor confidence and helped the market rebound from its late-summer
correction.
PERFORMANCE
For the six-month period ended March 31, 1999, Morgan Stanley Dean Witter Income
Builder Fund's Class B shares produced a total return of 8.01 percent, compared
to 13.33 percent for the Lipper Equity Income Funds Index and 27.32 percent for
the S&P 500. During the same period, the Fund's Class A, C and D shares posted
total returns of 8.43 percent, 8.01 percent and 8.55 percent, respectively. The
performance of the Fund's four share classes varies because each class has
different expenses.
We believe that the Fund's underperformance relative to the Lipper Equity Income
Funds Index was largely due to its lack of exposure to high-technology stocks,
an underweighting in the financial sector and its exposure to convertible
securities and real estate investment trusts (REITs). High-technology stocks
generally pay little if any dividends and therefore are not included in the
portfolio. The Fund's primary investment objective is to provide reasonable
current income. While the Fund's tilt toward yield may have dampened its
relative performance, this same emphasis on income provided significant
stability during the volatile markets of the past year.
The Fund's fixed-income portion is structured to provide maximum current income
while minimizing exposure to interest-rate movements. This portion of the Fund
performed as expected and helped reduce volatility during the year. The Fund's
convertible portion underperformed
<PAGE> 2
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
LETTER TO THE SHAREHOLDERS March 31, 1999, continued
the broader equity market during the period primarily due to its focus on the
issues of small- and mid-cap companies, which lagged large caps. The Fund's
focus on income-producing convertible securities also played a role in its
relative underperformance as equity-sensitive convertibles outperformed
yield-oriented issues. Credit concerns abated somewhat during the period as
spreads remained stable, but a lack of liquidity continued to plague small-cap
convertibles. However, the strong performance of several individual issues,
boosted by increasing merger and acquisition activity, helped mitigate these
weaknesses.
Real estate investment trusts (REITs) continued their poor performance during
the period under review, due to persistent concerns over industry fundamentals
and investors' continued preference for growth and technology stocks. We
believe, however, that high dividend yields and stock prices that are depressed
below underlying real estate values make the REIT market attractively valued.
The Fund dedicates 10 percent of its net assets to REITs, split between common
stocks and convertible securities.
On March 31, 1999, the Fund's large-capitalization stock segment was relatively
fully invested, as it has been since the Fund's inception. Portfolio
transactions during the period included the sale of Aegon N.V., Cyprus Amax
Minerals, New England Electric Systems and Providian Financial, and the
purchases of Conseco, Consolidated Natural Gas and Tidewater. At the end of the
fiscal year the Fund was invested in 48 common stocks spread among 23 industry
groups.
The target asset mix of the portfolio is 40 percent large-capitalization common
stocks, 30 percent convertible securities, 10 percent investment-grade fixed
income, 10 percent high-yield bonds, and 10 percent REITs.
LOOKING AHEAD
Going forward, we believe that the outlook for the financial markets and the
economy is favorable. We believe the small-cap convertible market remains highly
attractive from a risk/reward perspective and that the Fund is well positioned
to take part in the appreciation of the underlying equities. We continue to
focus on this sector going forward and remain positive on the prospects for
small-cap convertibles over the long term.
On May 1, 1999, Mitchell M. Merin was named President of the Morgan Stanley Dean
Witter Funds. Mr. Merin is also the President and Chief Operating Officer of
Asset Management of Morgan Stanley Dean Witter & Co., and President, Chief
Executive Officer and Director of Morgan Stanley Dean Witter Advisors Inc., the
Fund's Investment Manager. He also serves as Chairman, Chief Executive Officer
and Director of the Fund's distributor and transfer agent.
2
<PAGE> 3
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
LETTER TO THE SHAREHOLDERS March 31, 1999, continued
We appreciate your ongoing support of Morgan Stanley Dean Witter Income Builder
Fund and look forward to continuing to serve your investment needs in the
future.
Very truly yours,
/S/ CHARLES A. FIUMEFREDDO /S/ MITCHELL M. MERIN
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
3
<PAGE> 4
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS March 31, 1999 (unaudited)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (45.4%)
Accident & Health Insurance (0.8%)
104,000 Torchmark Corp. .......................................... $ 3,289,000
-----------
Apparel (0.7%)
137,000 Kellwood Co. ............................................. 3,022,562
-----------
Auto Parts: O.E.M. (1.7%)
89,500 Dana Corp. ............................................... 3,401,000
54,500 Johnson Controls, Inc. ................................... 3,399,437
-----------
6,800,437
-----------
Building Materials (0.8%)
77,400 Vulcan Materials Co. ..................................... 3,197,587
-----------
Building Products (0.8%)
69,500 Armstrong World Industries, Inc. ......................... 3,140,531
-----------
Clothing/Shoe/Accessory Stores (0.9%)
92,500 Limited (The), Inc. ...................................... 3,665,312
-----------
Consumer Electronics/Appliances (0.9%)
67,500 Whirlpool Corp. .......................................... 3,670,312
-----------
Consumer Sundries (0.9%)
138,000 American Greetings Corp. (Class A)........................ 3,501,750
-----------
Containers/Packaging (0.9%)
121,000 Crown Cork & Seal Co., Inc. .............................. 3,456,062
-----------
Electric Utilities (2.5%)
92,000 Public Service Enterprise Group, Inc. .................... 3,513,250
122,000 Reliant Energy, Inc. ..................................... 3,179,625
155,000 TECO Energy, Inc. ........................................ 3,080,625
-----------
9,773,500
-----------
Electronic Data Processing (0.1%)
7,816 Unisys Corp............................................... 216,405
-----------
Finance Companies (2.5%)
75,000 Associates First Capital Corp. (Class A).................. 3,375,000
48,500 Fannie Mae................................................ 3,358,625
78,000 SLM Holding Corp. ........................................ 3,256,500
-----------
9,990,125
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE> 5
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS March 31, 1999 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------
<C> <S> <C>
Food Distributors (0.8%)
148,000 Supervalu, Inc. .......................................... $ 3,052,500
-----------
Home Building (0.8%)
113,000 Fleetwood Enterprises, Inc. .............................. 3,234,625
-----------
Investment Managers (0.1%)
5,121 Waddell & Reed Financial, Inc. (Class A).................. 104,980
22,041 Waddell & Reed Financial, Inc. (Class B).................. 438,065
-----------
543,045
-----------
Life Insurance (1.6%)
97,000 Conseco, Inc. ............................................ 2,994,875
47,500 Jefferson-Pilot Corp. .................................... 3,218,125
-----------
6,213,000
-----------
Major Banks (0.8%)
106,500 KeyCorp................................................... 3,228,281
-----------
Major Chemicals (2.5%)
36,000 Dow Chemical Co. ......................................... 3,354,750
126,000 Hercules, Inc. ........................................... 3,181,500
101,500 Rohm & Haas Co. .......................................... 3,406,594
-----------
9,942,844
-----------
Major Pharmaceuticals (0.8%)
60,500 Schering-Plough Corp. .................................... 3,346,406
-----------
Major U.S. Telecommunications (3.3%)
41,500 AT&T Corp. ............................................... 3,312,219
62,000 Bell Atlantic Corp. ...................................... 3,204,625
55,000 GTE Corp. ................................................ 3,327,500
60,000 U.S. West, Inc. .......................................... 3,303,750
-----------
13,148,094
-----------
Marine Transportation (0.9%)
135,000 Tidewater, Inc. .......................................... 3,493,125
-----------
Meat/Poultry/Fish (0.8%)
95,000 Hormel Foods Corp. ....................................... 3,384,375
-----------
Mid-Sized Banks (1.7%)
175,000 First Security Corp. ..................................... 3,368,750
88,500 First Tennessee National Corp. ........................... 3,241,312
-----------
6,610,062
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE> 6
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS March 31, 1999 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------
<C> <S> <C>
Motor Vehicles (2.5%)
37,000 DaimlerChrysler AG (Germany).............................. $ 3,175,063
60,000 Ford Motor Co. ........................................... 3,405,000
39,300 General Motors Corp. ..................................... 3,414,188
-----------
9,994,251
-----------
Multi-Line Insurance (0.9%)
35,500 Lincoln National Corp. ................................... 3,510,063
-----------
Multi-Sector Companies (0.8%)
114,000 Tenneco, Inc. ............................................ 3,184,875
-----------
Newspapers (0.5%)
136,344 Hollinger International, Inc. (Class A)................... 1,849,166
-----------
Oil Refining/Marketing (0.8%)
77,000 Ashland, Inc. ............................................ 3,152,188
-----------
Paints/Coatings (0.8%)
62,000 PPG Industries, Inc. ..................................... 3,177,500
-----------
Real Estate Investment Trusts (5.0%)
3,700 Boykin Lodging Co. ....................................... 44,400
50,000 Camden Property Trust..................................... 1,237,500
120,000 Equity One, Inc. ......................................... 1,042,500
50,000 First Industrial Realty Trust, Inc. ...................... 1,196,875
84,250 Healthcare Realty Trust, Inc. ............................ 1,600,750
91,500 LTC Properties, Inc....................................... 1,120,875
75,000 Meditrust Corp. .......................................... 932,813
92,377 MeriStar Hospitality Corp. ............................... 1,680,107
200,000 Mid-Atlantic Realty Trust................................. 2,050,000
145,000 Reckson Associates Realty Corp. .......................... 2,981,563
283,800 Sunstone Hotel Investors, Inc. ........................... 2,039,813
93,800 Tanger Factory Outlet Centers, Inc. ...................... 1,793,925
85,000 TriNet Corporate Reality Trust, Inc. ..................... 2,156,875
-----------
19,877,996
-----------
Savings & Loan Associations (2.5%)
132,500 TCF Financial Corp. ...................................... 3,445,000
152,900 Washington Federal, Inc. ................................. 3,210,900
79,000 Washington Mutual, Inc. .................................. 3,229,125
-----------
9,885,025
-----------
Services to the Health Industry (0.0%)
9,150 LTC Healthcare, Inc. ..................................... 18,872
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 7
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS March 31, 1999 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------
<C> <S> <C>
Smaller Banks (0.8%)
59,000 Wilmington Trust Corp. ................................... $ 3,370,375
-----------
Steel/Iron Ore (0.8%)
140,000 USX-U.S. Steel Group...................................... 3,290,000
-----------
Telecommunications Equipment (0.8%)
64,500 Consolidated Natural Gas Co. ............................. 3,140,344
-----------
Tobacco (1.6%)
89,500 Philip Morris Companies, Inc. ............................ 3,149,281
122,000 UST, Inc. ................................................ 3,187,250
-----------
6,336,531
-----------
TOTAL COMMON STOCKS
(Identified Cost $178,883,452)............................ 180,707,126
-----------
CONVERTIBLE PREFERRED STOCKS (21.6%)
Apparel (0.3%)
30,500 Warnaco Group, Inc. $3.00................................. 1,090,375
-----------
Auto Parts: O.E.M. (0.5%)
94,000 BTI Capital Trust $3.25 - 144A*........................... 834,250
68,500 Walbro Capital Trust $2.00................................ 1,215,875
-----------
2,050,125
-----------
Books/Magazines (1.0%)
130,000 Reader's Digest Association, Inc $1.93.................... 3,916,250
-----------
Broadcasting (1.1%)
109,700 Metromedia International Group, Inc. $3.63................ 2,934,475
145,000 Triathlon Broadcasting Co. $0.95.......................... 1,522,500
-----------
4,456,975
-----------
Cable Television (1.4%)
32,800 EchoStar Communications Corp. (Series C) $3.38............ 5,477,600
-----------
Computers Software (1.0%)
42,000 Microsoft Corp. (Series A) $2.196......................... 4,131,750
-----------
Electronic Data Processing (0.7%)
52,268 Unisys Corp. (Series A) $3.75............................. 2,711,402
-----------
Home Furnishings (1.0%)
67,200 Newell Financial Trust I $2.63............................ 3,801,370
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS March 31, 1999 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------
<C> <S> <C>
International Banks (2.1%)
144,300 National Australia Bank, Ltd. $1.97 (Australia)
(Units)++................................................. $ 4,518,394
111,500 WBK Strypes Trust $3.14................................... 3,804,937
-----------
8,323,331
-----------
Investment Bankers/Brokers/Services (0.8%)
90,000 Merrill Lynch & Co., Inc. $2.39 (exchangeable into IMC
Global, Inc. common stock)............................. 2,025,000
15,800 Merrill Lynch & Co., Inc. $4.087 (exchangeable into
SunAmerica, Inc. common stock)......................... 1,169,200
-----------
3,194,200
-----------
Life Insurance (0.4%)
68,000 AmerUs Life Holdings, Inc. $2.21.......................... 1,640,500
-----------
Machinery (0.7%)
117,000 Ingersoll-Rand Co. $1.688................................. 2,954,250
-----------
Movies/Entertainment (0.9%)
50,000 Premier Parks, Inc. $4.05................................. 3,475,000
-----------
Oil Refining/Marketing (1.0%)
200,000 Tesoro Petroleum Corp. $1.16.............................. 2,387,500
165,000 USX Corp. $1.44........................................... 1,681,020
-----------
4,068,520
-----------
Other Consumer Services (0.7%)
100,000 Cendant Corp. $3.75....................................... 2,881,250
-----------
Package Goods/Cosmetics (1.5%)
72,000 Estee Lauder Co. $3.80.................................... 6,012,000
-----------
Property - Casualty Insurers (0.5%)
210,000 Philadelphia Consolidated Holding Co. $0.70............... 1,837,500
-----------
Railroads (1.0%)
75,000 Union Pacific Capital Trust $3.13 - 144A*................. 3,807,450
-----------
Real Estate Investment Trusts (2.3%)
50,000 Apartment Investment & Management Co. $2.00............... 1,200,000
113,000 Equity Residential Properties Trust (Series J) $2.15...... 2,938,000
101,090 FelCor Lodging Trust, Inc. (Series A) $1.95............... 2,135,526
140,000 SL Green Realty Corp. $2.00............................... 2,870,000
-----------
9,143,526
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 9
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS March 31, 1999 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------
<C> <S> <C>
Smaller Banks (0.9%)
145,000 CNB Capital Trust I $1.50................................. $ 3,733,750
-----------
Telecommunications Equipment (1.0%)
44,100 Loral Space & Communications Ltd. $3.00 - 144A*
(Bermuda)................................................. 1,990,013
47,000 Loral Space & Communications Ltd. (Series C) $3.00
(Bermuda)................................................. 2,120,875
-----------
4,110,888
-----------
Unregulated Power Generation (0.8%)
70,000 CalEnergy Capital Trust III $3.25......................... 3,132,500
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Identified Cost $92,515,146)............................. 85,950,512
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE
- --------- ------- ---------
<C> <S> <C> <C> <C>
CORPORATE BONDS (32.2%)
CONVERTIBLE BONDS (10.4%)
Assisted Living Services (1.0%)
$ 2,820 American Retirement Corp. ........... 5.75% 10/01/02 2,354,700
2,470 Emeritus Corp. - 144A*............... 6.25 01/01/06 1,701,212
-----------
4,055,912
-----------
Auto Parts (0.6%)
3,000 MascoTech, Inc. ..................... 4.50 12/15/03 2,340,000
-----------
Cellular Telephone (0.9%)
7,850 U.S. Cellular Corp. ................. 0.00 06/15/15 3,588,392
-----------
Clothing/Shoe/Accessory Stores (0.7%)
3,660 Genesco Inc. ........................ 5.50 04/15/05 2,779,513
-----------
Hospital/Nursing Management (0.1%)
1,500 ARV Assisted Living, Inc. ........... 6.75 04/01/06 570,000
-----------
Industrial Machinery/Components
(0.5%)
2,300 Thermo Fibertek, Inc. - 144A*........ 4.50 07/15/04 1,909,000
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE> 10
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS March 31, 1999 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Major U.S. Telecommunications (2.0%)
$ 3,700 Bell Atlantic Financial
Service - 144A*
(exchangeable into Cable & Wireless
Communications common stock)........ 4.25% 09/15/05 $ 4,039,475
3,700 Bell Atlantic Financial
Service - 144A*
(exchangeable into Telecom
Corporation of New Zealand common
stock).............................. 5.75 04/01/03 3,926,625
-----------
7,966,100
-----------
Managed Health Care (1.0%)
4,400 Concentra Managed Care, Inc. ........ 4.50 03/15/03 4,133,492
-----------
Medical Equipment & Supplies (0.3%)
1,540 ThermoTrex Corp. .................... 3.25 11/01/07 1,019,326
-----------
Other Telecommunications (0.0%)
750 SA Telecommunications, Inc. - 144A*
(a).................................. 10.00 08/15/06 22,500
-----------
Real Estate Investment Trusts (1.5%)
2,360 Capstar Hotel Corp. ................. 4.75 10/15/04 1,771,652
4,425 Healthcare Realty Trust (New)........ 6.55 03/14/02 3,938,339
-----------
5,709,991
-----------
Rental/Leasing Companies (0.9%)
4,000 Financial Federal Corp. ............. 4.50 05/01/05 3,470,160
-----------
Shoe Manufacturing (0.9%)
3,890 Nine West Group, Inc. ............... 5.50 07/15/03 3,656,600
-----------
TOTAL CONVERTIBLE BONDS
(Identified Cost $45,389,344)............................. 41,220,986
-----------
NON-CONVERTIBLE BONDS (21.8%)
Broadcasting (2.2%)
3,000 JCAC Inc. ........................... 10.125 06/15/06 3,300,000
5,060 Young Broadcasting Corp. ............ 11.75 11/15/04 5,426,850
-----------
8,726,850
-----------
Building Materials (0.8%)
2,850 USG Corp. (Series B)................. 9.25 09/15/01 3,021,513
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE> 11
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS March 31, 1999 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Cable Television (7.8%)
$12,950 Continental Cablevision, Inc. ....... 11.00% 06/01/07 $13,756,008
14,060 Groupe Videotron Ltee (Canada)....... 10.625 02/15/05 14,977,696
2,000 Tele-Communications, Inc. ........... 9.25 04/15/02 2,189,740
-----------
30,923,444
-----------
Cellular Telephone (0.4%)
1,300 Sprint Spectrum L.P.................. 11.00 08/15/06 1,497,119
-----------
Clothing/Shoe/Accessory Stores (0.5%)
1,950 Thrifty PayLess Holdings, Inc. ...... 12.25 04/15/04 2,068,229
-----------
Entertainment & Leisure (0.6%)
2,000 Time Warner Entertainment Co. ....... 9.625 05/01/02 2,205,340
-----------
Food Chains (1.1%)
4,000 Carr-Gottstein Foods Corp. .......... 12.00 11/15/05 4,560,000
-----------
Managed Health Care (1.2%)
4,800 Healthsouth Corp. ................... 9.50 04/01/01 4,896,000
-----------
Metals Fabrications (0.7%)
2,900 Ivaco, Inc. (Canada)................. 11.50 09/15/05 2,958,000
-----------
Newspapers (1.1%)
3,000 Garden State Newspapers, Inc. ....... 12.00 07/01/04 3,266,250
1,000 Hollinger International Publishing,
Inc. ................................ 9.25 02/01/06 1,045,000
-----------
4,311,250
-----------
Paper (1.1%)
4,200 SD Warren Co. (Series B)............. 12.00 12/15/04 4,541,250
-----------
Printing/Forms (0.6%)
2,200 Big Flower Press, Inc. .............. 8.875 07/01/07 2,233,000
-----------
Specialty Chemicals (1.8%)
6,960 Huntsman Polymers Corp. ............. 11.75 12/01/04 7,308,000
-----------
Steel/Iron Ore (0.8%)
3,000 AK Steel Corp. ...................... 10.75 04/01/04 3,120,930
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE> 12
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS March 31, 1999 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Textiles (1.1%)
$ 4,300 Dan River, Inc. ..................... 10.125% 12/15/03 $ 4,423,625
------------
TOTAL NON-CONVERTIBLE BONDS
(Identified Cost $89,355,488)............................. 86,794,550
------------
TOTAL CORPORATE BONDS
(Identified Cost $134,744,832)............................ 128,015,536
------------
SHORT-TERM INVESTMENT (0.0%)
REPURCHASE AGREEMENT
183 The Bank of New York (dated 03/31/98;
proceeds $182,910) (b)
(Identified Cost $182,886)........... 4.875 04/01/99 182,886
------------
TOTAL INVESTMENTS
(Identified Cost $406,326,316) (c)................. 99.2% 394,856,060
OTHER ASSETS IN EXCESS OF LIABILITIES.............. 0.8 3,001,623
----- ------------
NET ASSETS........................................ 100.0% $397,857,683
===== ============
</TABLE>
- ---------------------
<TABLE>
<C> <S>
ADR American Depository Receipt.
* 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; bond in default.
(b) Collateralized by $24,000 U.S. Treasury Note 8.125% due
08/15/21 valued at $30,653; $38,000 U.S. Treasury Note
6.625% due 04/30/02 valued at $40,624; $31,000 U.S. Treasury
Note 4.50% due 09/30/00 valued at $30,772; $35,000 U.S.
Treasury Note 6.375% due 08/15/02 valued at $36,545; $9,898
U.S. Treasury Note 7.75% due 12/31/99 valued at $10,299 and
$36,168 U.S. Treasury Note 8.50% due 02/15/00 valued at
$37,649.
(c) The aggregate cost for federal income tax purposes
approximates identified cost. The aggregate gross unrealized
appreciation is $32,951,278 and the aggregate gross
unrealized depreciation is $44,421,534, resulting in net
unrealized depreciation of $11,470,256.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE> 13
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1999 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $406,326,316).......... $394,856,060
Receivable for:
Interest............................. 3,221,394
Dividends............................ 645,031
Investments sold..................... 366,682
Shares of beneficial interest sold... 288,119
Deferred organizational expenses......... 73,224
Prepaid expenses and other assets........ 101,297
------------
TOTAL ASSETS......................... 399,551,807
------------
LIABILITIES:
Payable for:
Shares of beneficial interest
repurchased......................... 748,471
Plan of distribution fee............. 356,718
Investment management fee............ 276,754
Investments purchased................ 156,381
Dividends and distributions to
shareholders........................ 89,920
Accrued expenses and other payables...... 65,880
------------
TOTAL LIABILITIES.................... 1,694,124
------------
NET ASSETS........................... $397,857,683
============
COMPOSITION OF NET ASSETS:
Paid-in-capital.......................... $402,389,768
Net unrealized depreciation.............. (11,470,256)
Accumulated undistributed net investment
income.................................. 1,770,719
Accumulated undistributed net realized
gain.................................... 5,167,452
------------
NET ASSETS........................... $397,857,683
============
CLASS A SHARES:
Net Assets............................... $ 11,931,333
Shares Outstanding (unlimited authorized,
$.01 par value)......................... 1,078,941
NET ASSET VALUE PER SHARE............ $11.06
============
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net
asset value)........................ $11.67
============
CLASS B SHARES:
Net Assets............................... $379,851,596
Shares Outstanding (unlimited authorized,
$.01 par value)......................... 34,336,400
NET ASSET VALUE PER SHARE............ $11.06
============
CLASS C SHARES:
Net Assets............................... $5,314,627
Shares Outstanding (unlimited authorized,
$.01 par value)......................... 481,396
NET ASSET VALUE PER SHARE............ $11.04
============
CLASS D SHARES:
Net Assets............................... $760,127
Shares Outstanding (unlimited authorized,
$.01 par value)......................... 68,726
NET ASSET VALUE PER SHARE............ $11.06
============
</TABLE>
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the six months ended March 31, 1999 (unaudited)
NET INVESTMENT INCOME:
INCOME
Dividends................................ $ 7,338,666
Interest................................. 6,433,220
------------
TOTAL INCOME......................... 13,771,886
------------
EXPENSES
Plan of distribution fee (Class A
shares)................................. 13,117
Plan of distribution fee (Class B
shares)................................. 2,024,135
Plan of distribution fee (Class C
shares)................................. 28,849
Investment management fee................ 1,624,652
Transfer agent fees and expenses......... 209,447
Registration fees........................ 50,745
Shareholder reports and notices.......... 40,495
Custodian fees........................... 27,880
Professional fees........................ 22,395
Organizational expenses.................. 16,312
Trustees' fees and expenses.............. 6,247
Other.................................... 10,136
------------
TOTAL EXPENSES....................... 4,074,410
------------
NET INVESTMENT INCOME................ 9,697,476
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain........................ 10,186,218
Net change in unrealized depreciation.... 14,507,362
------------
NET GAIN............................. 24,693,580
------------
NET INCREASE............................. $ 34,391,056
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE> 14
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX
MONTHS ENDED FOR THE YEAR
MARCH 31, ENDED
1999 SEPTEMBER 30, 1998
- -----------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................ $ 9,697,476 $ 17,990,954
Net realized gain.................................... 10,186,218 21,800,391
Net change in unrealized appreciation/depreciation... 14,507,362 (68,902,232)
------------ ------------
NET INCREASE (DECREASE).......................... 34,391,056 (29,110,887)
------------ ------------
DIVIDENDS AND DISTRIBUTION TO SHAREHOLDERS FROM:
Net investment income
Class A shares................................... (351,040) (344,600)
Class B shares................................... (10,858,067) (15,186,529)
Class C shares................................... (150,061) (153,463)
Class D shares................................... (21,760) (16,323)
Net realized gain
Class A shares................................... (671,285) (264,926)
Class B shares................................... (24,998,744) (18,061,378)
Class C shares................................... (346,036) (92,820)
Class D shares................................... (40,395) (1,956)
------------ ------------
TOTAL DIVIDENDS AND DISTRIBUTIONS................ (37,437,388) (34,121,995)
------------ ------------
Net increase (decrease) from transactions in shares
of beneficial interest.............................. (32,326,015) 135,434,833
------------ ------------
NET INCREASE (DECREASE).......................... (35,372,347) 72,201,951
NET ASSETS:
Beginning of period.................................. 433,230,030 361,028,079
------------ ------------
END OF PERIOD
(Including undistributed net investment income of
$1,770,719 and $3,454,171, respectively)......... $397,857,683 $433,230,030
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE> 15
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
NOTES TO FINANCIAL STATEMENTS March 31, 1999 (unaudited)
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
15
<PAGE> 16
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
NOTES TO FINANCIAL STATEMENTS March 31, 1999 (unaudited) continued
prices of securities which are comparable in coupon, rating and maturity or an
appropriate matrix utilizing similar factors); (4) certain portfolio securities
may be valued by an outside pricing service approved by the Trustees. The
pricing service may utilize a matrix system incorporating security quality,
maturity and coupon as the evaluation model parameters, and/or research and
evaluations by its staff, including review of broker-dealer market price
quotations, if available, in determining what it believes is the fair valuation
of the securities valued by such pricing service; and (5) short-term debt
securities having a maturity date of more than sixty days at time of purchase
are valued on a 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
16
<PAGE> 17
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
NOTES TO FINANCIAL STATEMENTS March 31, 1999 (unaudited) continued
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.
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 daily net assets not exceeding $500
million and 0.725% of the portion of daily net assets in excees 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
17
<PAGE> 18
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
NOTES TO FINANCIAL STATEMENTS March 31, 1999 (unaudited) continued
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
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 $17,711,799 at March 31, 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 six months ended March 31, 1999, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.23% and
1.0%, respectively.
The Distributor has informed the Fund that for the six months ended March 31,
1999, it received contingent deferred sales charges from certain redemptions of
the Fund's Class B and Class C shares of $642,460 and $3,383, respectively and
received $7,524 in front-end sales charges from sales of the
18
<PAGE> 19
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
NOTES TO FINANCIAL STATEMENTS March 31, 1999 (unaudited) continued
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 six months ended March 31, 1999 aggregated
$68,334,626 and $123,748,895, respectively.
For the six months ended March 31, 1999, the Fund incurred $71,158 in brokerage
commissions with DWR for portfolio transactions executed on behalf of the Fund.
At March 31, 1999, the Fund's receivable for investments sold included unsettled
trades with DWR of $366,682.
For the six months ended March 31, 1999, the Fund incurred $2,175 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. At March 31, 1999, the Fund's payable for investment purchased included an
unsettled trade with Morgan Stanley & Co. $156,381.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At March 31, 1999, the Fund had
transfer agent fees and expenses payable of approximately $8,450.
5. FEDERAL INCOME TAX STATUS
As of September 30, 1998, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales.
6. ACQUISITION OF TCW/DW INCOME AND GROWTH FUND
On February 25, 1999, the Trustees of the Fund and of TCW/DW Income and Growth
Fund ("Income and Growth") approved a reorganization plan ("the Plan") whereby
Income and Growth would be merged into the Fund. The Plan is subject to the
consent of Income and Growth's shareholders. If approved, the assets of Income
and Growth would be combined with the assets of the Fund and shareholders of
Income and Growth would become shareholders of the Fund, receiving shares of the
corresponding class of the Fund equal to the value of their holdings in Income
and Growth.
19
<PAGE> 20
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
NOTES TO FINANCIAL STATEMENTS March 31, 1999 (unaudited) continued
7. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
MARCH 31, 1999 SEPTEMBER 30, 1998
------------------------- --------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold........................................................ 215,152 $ 2,453,934 887,465 $ 11,197,972
Reinvestment of dividends and distributions................. 66,320 732,245 26,670 324,319
Redeemed.................................................... (103,523) (1,178,559) (94,880) (1,168,724)
---------- ------------ ----------- ------------
Net increase - Class A...................................... 177,949 2,007,620 819,255 10,353,567
---------- ------------ ----------- ------------
CLASS B SHARES
Sold........................................................ 1,792,274 20,521,575 14,488,236 183,541,957
Reinvestment of dividends and distributions................. 2,678,797 29,578,736 2,214,603 27,031,378
Redeemed.................................................... (7,415,321) (84,310,076) (7,439,745) (91,648,973)
---------- ------------ ----------- ------------
Net increase (decrease) - Class B........................... (2,944,250) (34,209,765) 9,263,094 118,924,362
---------- ------------ ----------- ------------
CLASS C SHARES
Sold........................................................ 58,295 660,928 513,124 6,515,096
Reinvestment of dividends and distributions................. 39,651 437,022 17,520 213,338
Redeemed.................................................... (120,968) (1,373,802) (103,278) (1,268,428)
---------- ------------ ----------- ------------
Net increase (decrease) - Class C........................... (23,022) (275,852) 427,366 5,460,006
---------- ------------ ----------- ------------
CLASS D SHARES
Sold........................................................ 10,443 118,923 57,284 742,379
Reinvestment of dividends and distributions................. 3,947 43,578 492 6,014
Redeemed.................................................... (922) (10,519) (4,166) (51,495)
---------- ------------ ----------- ------------
Net increase - Class D...................................... 13,468 151,982 53,610 696,898
---------- ------------ ----------- ------------
Net increase (decrease) in Fund............................. (2,775,855) $(32,326,015) 10,563,325 $135,434,833
========== ============ =========== ============
</TABLE>
20
<PAGE> 21
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR FOR THE YEAR JUNE 26, 1996*
MONTHS ENDED ENDED ENDED THROUGH
MARCH 31, 1999++ SEPTEMBER 30, 1998++ SEPTEMBER 30, 1997**++ SEPTEMBER 30, 1996
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
(unaudited)
<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.................... 0.25 0.50 0.46 0.08
Net realized and unrealized gain
(loss)................................. 0.64 (1.11) 2.54 0.23
-------- -------- -------- --------
Total income (loss) from investment
operations............................... 0.89 (0.61) 3.00 0.31
-------- -------- -------- --------
Less dividends and distributions from:
Net investment income.................... (0.31) (0.43) (0.41) (0.08)
Net realized gain........................ (0.70) (0.59) (0.01) --
-------- -------- -------- --------
Total dividends and distributions......... (1.01) (1.02) (0.42) (0.08)
-------- -------- -------- --------
Net asset value, end of period............ $ 11.06 $ 11.18 $ 12.81 $ 10.23
======== ======== ======== ========
TOTAL INVESTMENT RETURN+.................. 8.01%(1) (5.29)% 29.83% 3.10%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................. 1.90%(2)(3) 1.80%(3) 1.85% 2.25%(2)
Net investment income..................... 4.46%(2)(3) 3.98%(3) 4.16% 3.60%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands... $379,852 $416,909 $358,973 $148,142
Portfolio turnover rate................... 16%(1) 58% 74% 7%(1)
</TABLE>
- ---------------------
* Commencement of operations.
** Prior to July 28, 1997 the Fund issued one class of shares. All shares 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.
SEE NOTES TO FINANCIAL STATEMENTS
21
<PAGE> 22
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED THROUGH
MARCH 31, 1999 SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
- ----------------------------------------------------------------------------------------------------------------------
(unaudited)
<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...................................... 0.30 0.59 0.12
Net realized and unrealized gain (loss).................... 0.63 (1.12) 0.61
------- ------- ------
Total income (loss) from investment operations.............. 0.93 (0.53) 0.73
------- ------- ------
Less dividends and distributions from:
Net investment income...................................... (0.35) (0.51) (0.12)
Net realized gain.......................................... (0.70) (0.59) --
------- ------- ------
Total dividends and distributions........................... (1.05) (1.10) (0.12)
------- ------- ------
Net asset value, end of period.............................. $ 11.06 $ 11.18 $12.81
======= ======= ======
TOTAL RETURN+............................................... 8.43%(1) (4.67)% 5.95%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.16%(2)(3) 1.17%(3) 1.28%(2)
Net investment income....................................... 5.20%(2)(3) 4.61%(3) 5.77%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $11,931 $10,073 $1,047
Portfolio turnover rate..................................... 16%(1) 58% 74%
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...................................... 0.25 0.50 0.10
Net realized and unrealized gain (loss).................... 0.64 (1.12) 0.61
------- ------- ------
Total income (loss) from investment operations.............. 0.89 (0.62) 0.71
------- ------- ------
Less dividends and distributions from:
Net investment income...................................... (0.31) (0.43) (0.11)
Net realized gain.......................................... (0.70) (0.59) --
------- ------- ------
Total dividends and distributions........................... (1.01) (1.02) (0.11)
------- ------- ------
Net asset value, end of period.............................. $ 11.04 $ 11.16 $12.80
======= ======= ======
TOTAL RETURN+............................................... 8.01%(1) (5.38)% 5.79%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.93%(2)(3) 1.92%(3) 1.98%(2)
Net investment income....................................... 4.43%(2)(3) 3.86%(3) 4.61%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $ 5,315 $ 5,630 $ 987
Portfolio turnover rate..................................... 16%(1) 58% 74%
</TABLE>
- ---------------------
* The date share were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
22
<PAGE> 23
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED THROUGH
MARCH 31, 1999 SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
- ----------------------------------------------------------------------------------------------------------------------
(unaudited)
<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...................................... 0.31 0.64 0.12
Net realized and unrealized gain (loss).................... 0.63 (1.15) 0.62
------ ------ ------
Total income (loss) from investment operations.............. 0.94 (0.51) 0.74
------ ------ ------
Less dividends and distributions from:
Net investment income...................................... (0.36) (0.54) (0.12)
Net realized gain.......................................... (0.70) (0.59) --
------ ------ ------
Total dividends and distributions........................... (1.06) (1.13) (0.12)
------ ------ ------
Net asset value, end of period.............................. $11.06 $11.18 $12.82
====== ====== ======
TOTAL RETURN+............................................... 8.55%(1) (4.46)% 5.98%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 0.93%(2)(3) 0.92%(3) 0.96%(2)
Net investment income....................................... 5.43%(2)(3) 4.86%(3) 5.41%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $760 $618 $21
Portfolio turnover rate..................................... 16%(1) 58% 74%
</TABLE>
- ---------------------
* The date share 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.
SEE NOTES TO FINANCIAL STATEMENTS
23
<PAGE> 24
TRUSTEES
- ----------------------------------
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
- ----------------------------------
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Mitchell M. Merin
President
Barry Fink
Vice President, Secretary and General Counsel
Paul D. Vance
Vice President
Peter M. Avelar
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
- ----------------------------------
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center -- Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
- ----------------------------------
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
- ----------------------------------
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
The financial statements included herein have been taken
from the records of the Fund without examination by the
independent accountants and accordingly they do not express
an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus of
the Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus.
MORGAN STANLEY
DEAN WITTER
INCOME BUILDER FUND
SEMIANNUAL REPORT
MARCH 31, 1999
