<PAGE>
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND Two World Trade Center,
LETTER TO THE SHAREHOLDERS September 30, 1999 New York, New York 10048
DEAR SHAREHOLDER:
The twelve-month period ended September 30, 1999, saw the U.S. equity market
rally to record highs as the U.S. economy continued its strength and
international stock markets soared on improving economic conditions overseas,
especially in southeast Asia and Japan. After a peak in the domestic markets in
the middle of July, stock prices pulled back toward the end of the period amid
concerns that the U.S. economy might be growing too fast. This concern was
manifested in two Federal Reserve Board moves, in June and August, that raised
the federal-funds rate a total of 50 basis points while inflation remained low
and the economy continued to grow.
PERFORMANCE AND PORTFOLIO STRATEGY
During the twelve-month period ended September 30, 1999, Morgan Stanley Dean
Witter Income Builder Fund's Class B shares produced a total return of 9.31
percent, compared with 13.36 percent for the Lipper Equity Income Funds Index
and 27.79 percent for the S&P 500 Composite Stock Price Index (S&P 500). For
the same period, the Fund's Class A, C and D shares posted total returns of
10.15 percent, 9.38 percent and 10.51 percent, respectively. The performance of
the Fund's four share classes varies because of differing expenses. (The total
return figures shown assume the reinvestment of all distributions and do not
reflect the deduction of any applicable sales charges.) The accompanying chart
illustrates the performance of the Fund versus the S&P 500 and Lipper indexes.
The Fund's underperformance relative to its benchmark indexes can be attributed
largely to its lack of exposure to technology stocks, which generally pay
little if any dividends. Because the Fund's primary objective is providing
reasonable current income, these stocks are not included in the portfolio. The
Fund's value-oriented style of stock selection has also hindered its relative
performance versus the S&P 500. In recent years the S&P 500, the benchmark
against which most equity funds are compared,
<PAGE>
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
LETTER TO THE SHAREHOLDERS September 30, 1999, continued
has reflected a bias toward growth, with companies like Microsoft, Intel, Dell
and Cisco being heavily weighted in the index.
On September 30, 1999, the Fund's large-cap stock segment was relatively fully
invested, as it has been since the Fund's inception. Portfolio transactions
during the fiscal year included the sale of Edison International, New England
Electric System, Aegon N.V., Providian Financial Corp., Cyprus Amax Minerals
Company, First Security Corp., Keycorp, American Greetings, U.S. West and
Wilmington Trust. Purchases included Armstrong World Industries, Teco Energy,
Conseco, Tidewater, Ryder, Fluor, Ultramar Diamond Shamrock and Xerox.
Real estate investment trusts (REITs) continued their poor performance during
the fiscal year. While growth rates have slowed from their peaks in the mid
1990s, industry fundamentals have stabilized and are beginning to improve.
Dividends are increasing as companies are forced to pay out more of their
operating income as a result of their REIT structure, and many companies have
stock buyback plans in place. We believe the REIT market is attractively valued
currently and have committed 10 percent of the Fund's net assets to this
sector.
LOOKING AHEAD
We believe that the long-term outlook for the financial markets is positive. In
the year ahead we believe growth in earnings will continue to help drive stocks
upward. However, this may occur against a backdrop of rising interest rates,
resulting in higher market volatility. We believe the Fund is well positioned
to take advantage of the positive aspects of this financial climate, because of
its value-oriented style and its emphasis on higher-yielding securities.
We appreciate your ongoing support of Morgan Stanley Dean Witter Income Builder
Fund and look forward to continuing to serve your investment needs.
Very truly yours,
/s/ Charles A. Fiumefreddo /s/ Mitchell M. Merin
- -------------------------- ----------------------------
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
2
<PAGE>
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
FUND PERFORMANCE September 30, 1999
GROWTH OF $10,000 -- CLASS B SHARES
DATE TOTAL S&P 500 LIPPER
---- ----- ------- ------
June 26, 1996 $10,000 $10,000 $10,000
September 30, 1996 $10,310 $10,426 $10,342
September 30, 1997 $13,386 $14,641 $13,780
September 30, 1998 $12,678 $15,967 $13,958
September 30, 1999 $13,658(3) $20,404 $15,823
---- Fund ---- S&P 500 (4) ---- Lipper (5)
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. PERFORMANCE FOR CLASS A,
CLASS C, AND CLASS D SHARES WILL VARY FROM THE PERFORMANCE OF CLASS B SHARES
SHOWN ABOVE DUE TO DIFFERENCES IN SALES CHARGES AND EXPENSES.
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B SHARES*
- -----------------------------------------------------------
PERIOD ENDED 9/30/99
- ---------------------------
<S> <C> <C>
1 year 9.31%(1) 4.40%(2)
Since Inception (6/26/96) 10.52%(1) 10.03%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES++
- -----------------------------------------------------------
PERIOD ENDED 9/30/99
- ---------------------------
<S> <C> <C>
1 year 9.38%(1) 8.40%(2)
Since Inception (7/28/97) 4.26%(1) 4.26%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS A SHARES+
- -----------------------------------------------------------
PERIOD ENDED 9/30/99
- ---------------------------
<S> <C> <C>
1 year 10.15%(1) 4.37%(2)
Since Inception (7/28/97) 5.03%(1) 2.46%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS D SHARES++
- ---------------------------------------------
PERIOD ENDED 9/30/99
- ---------------------------
<S> <C>
1 year 10.51%(1)
Since Inception (7/28/97) 5.30%(1)
</TABLE>
- ---------------
(1) Figure shown assumes reinvestment of all distributions and does not reflect
the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and the deduction of
the maximum applicable sales charge. See the Fund's current prospectus for
complete details on fees and sales charges.
(3) Closing value after the deduction of a 2% contingent deferred sales charge
(CDSC), assuming a complete redemption on September 30, 1999.
(4) The Standard and Poor's 500 Stock Index (S&P 500) 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.
(5) 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 Income 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.
* The maximum (CDSC) for Class B is 5.0%. The CDSC declines to 0% after six
years.
+ The maximum front-end sales charge for Class A is 5.25%.
++ The maximum CDSC for Class C shares is 1% for shares redeemed within one
year of purchase.
++ Class D shares have no sales charge.
3
<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
4
<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
5
<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
6
<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
7
<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
8
<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
9
<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
10
<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
11
<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
12
<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
13
<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
14
<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 LIABILITIES 2.0 8,060,838
------- ------------
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
15
<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
16
<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
17
<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
18
<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
19
<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.
20
<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
21
<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.
22
<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.
23
<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>
24
<PAGE>
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 YEAR FOR THE YEAR JULY 28, 1997*
ENDED ENDED THROUGH
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 SEPTEMBER 30, 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.
SEE NOTES TO FINANCIAL STATEMENTS
25
<PAGE>
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED SEPTEMBER 30, JUNE 26, 1996*
----------------------------------------- THROUGH
1999++ 1998++ 1997**++ SEPTEMBER 30, 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.
SEE NOTES TO FINANCIAL STATEMENTS
26
<PAGE>
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR JULY 28, 1997*
ENDED ENDED THROUGH
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 SEPTEMBER 30, 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.
SEE NOTES TO FINANCIAL STATEMENTS
27
<PAGE>
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR JULY 28, 1997*
ENDED ENDED THROUGH
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 SEPTEMBER 30, 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.
SEE NOTES TO FINANCIAL STATEMENTS
28
<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.
29
<PAGE>
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
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.
Read the prospectus carefully before investing.
MORGAN STANLEY
DEAN WITTER
INCOME BUILDER
FUND
[GRAPHIC OMITTED]
ANNUAL REPORT
SEPTEMBER 30, 1999
