MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND, 485BPOS, 2000-11-29

MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
485BPOS, 2000-11-29

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 29, 2000

REGISTRATION NOS.: 333-01995
811-7575
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
----------------
FORM N-1A

REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 7 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
AMENDMENT NO. 8 [X]
----------------

MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND

(A MASSACHUSETTS BUSINESS TRUST)

(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600

BARRY FINK, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048

(NAME AND ADDRESS OF AGENT FOR SERVICE)
Copy to:

STUART M. STRAUSS, ESQ.
MAYER, BROWN & PLATT
1675 BROADWAY
NEW YORK, NEW YORK 10019
----------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:

As soon as practicable after this Post-Effective Amendment becomes effective.

IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)

immediately upon filing pursuant to paragraph (b)
----
X on November 30, 2000 pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)
----
on (date) pursuant to paragraph (a) of rule 485.
----

----------------

AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

<PAGE>

PROSPECTUS - NOVEMBER 30, 2000

MORGAN STANLEY DEAN WITTER

----------------------------------------------------------------

INCOME BUILDER FUND

[GRAPHIC OMITTED]

A MUTUAL FUND WHOSE PRIMARY INVESTMENT OBJECTIVE
IS TO SEEK REASONABLE INCOME; AS A SECONDARY
OBJECTIVE, THE FUND SEEKS GROWTH OF CAPITAL

The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.

<PAGE>

CONTENTS

<TABLE>
<S> <C>
The Fund Investment Objectives .............................1
Principal Investment Strategies ...................1
Principal Risks ...................................2
Past Performance ..................................4
Fees and Expenses .................................5
Additional Investment Strategy Information ........6
Additional Risk Information .......................7
Fund Management ...................................8

Shareholder Information Pricing Fund Shares ...............................9
How to Buy Shares .................................9
How to Exchange Shares ...........................11
How to Sell Shares ...............................13
Distributions ....................................15
Tax Consequences .................................15
Share Class Arrangements .........................16

Financial Highlights .................................................25
Our Family of Funds ................................. Inside Back Cover
</TABLE>

This Prospectus contains important information about
the Fund. Please read it carefully and keep it for
future reference.

<PAGE>

THE FUND

[GRAPHIC OMITTED]

INVESTMENT OBJECTIVES
---------------------

Morgan Stanley Dean Witter Income Builder Fund seeks reasonable
income as a primary investment objective. As a secondary objective,
the Fund seeks growth of capital.

[GRAPHIC OMITTED]

PRINCIPAL INVESTMENT STRATEGIES
-------------------------------

The Fund will normally invest at least 65% of its assets in
income-producing equity securities, including common stock, preferred
stock and convertible securities. The "Investment Manager," Morgan
Stanley Dean Witter Advisors Inc., uses a value-oriented style in the
selection of securities. Investments are normally made primarily in
(i) common stocks (including depository receipts) of large
capitalization companies with a record of paying dividends and which,
in the opinion of the Investment Manager, have the potential for
maintaining dividends, (ii) preferred stock and (iii) securities
convertible into common stocks of small- and mid-cap companies --
including synthetic and enhanced convertibles. The Fund's investments
also include "Rule 144A" securities, which are subject to resale
restrictions.

(sidebar)
INCOME & GROWTH
An investment objective having the goal of selecting securities with the
potential to pay out income and rise in price.
(end sidebar)

The Investment Manager follows a "bottom-up" approach in the
selection of convertible securities for the Fund. Beginning with a
universe of about 500 companies, the Investment Manager narrows the
focus to small- and mid-cap companies and reviews the issues to
determine if the convertible security is trading with the underlying
equity security. The yield of the underlying equity security is
evaluated and company fundamentals are studied to evaluate cash flow,
risk/reward balance, valuation and the prospects for growth.

The Fund may invest up to 25% of its assets in "enhanced" convertible
securities. Enhanced convertible securities offer holders the
opportunity to obtain higher current income than would be available
from a traditional equity security issued by the same company, in
return for reduced participation or a cap on appreciation in the
underlying common stock of the issuer which the holder can realize.
In addition, in many cases, enhanced convertible securities are
convertible into the underlying common stock of the issuer
automatically at maturity, unlike traditional convertible securities
which are convertible only at the option of the security holder.

The Fund may invest up to 10% of its assets in "synthetic"
convertible securities. Unlike traditional convertible securities
whose conversion values are based on the common stock of the issuer
of the convertible security, "synthetic" convertible securities are
preferred stocks or debt obligations of an issuer which are combined
with an equity component whose conversion value is based on the value
of the common stock of a different issuer or a particular benchmark
(which may include a foreign issuer or basket of foreign stocks, or a
company whose stock is not yet publicly traded). In many cases,
"synthetic" convertible securities are not convertible prior to
maturity, at which time the value of the security is paid in cash by
the issuer.

<PAGE>

In addition, the Fund may invest in fixed-income securities
(including zero coupon securities), common stocks that do not pay a
regular dividend, real estate investment trusts (commonly known as
"REITs") and foreign securities (including depository receipts).

The Fund also may invest up to 20% of its net assets in fixed-income
securities rated lower than investment grade by Standard & Poor's or
Moody's (but not below B) or, if unrated, of comparable quality as
determined by the Investment Manager (commonly known as "junk
bonds"). The 20% limitation is not applicable to convertible
securities.

Common stock is a share ownership or equity interest in a
corporation. It may or may not pay dividends, as some companies
reinvest all of their profits back into their businesses, while
others pay out some of their profits to shareholders as dividends.
Preferred stock pays dividends at a specified rate and has preference
over common stock in the payment of dividends. A convertible security
is a bond, preferred stock or other security that may be converted
into a prescribed amount of common stock at a prestated price. A
depository receipt is generally issued by a bank or financial
institution and represents an ownership interest in the common stock
or other equity securities of a foreign company.

In pursuing the Fund's investment objectives, the Investment Manager
has considerable leeway in deciding which investments it buys, holds
or sells on a day-to-day basis -- and which trading strategies it
uses. For example, the Investment Manager in its discretion may
determine to use some permitted trading strategies while not using
others.

[GRAPHIC OMITTED]

PRINCIPAL RISKS
---------------
There is no assurance that the Fund will achieve its investment
objectives. The Fund's share price will fluctuate with changes in the
market value of its portfolio securities. When you sell Fund shares,
they may be worth less than what you paid for them and, accordingly,
you can lose money investing in this Fund.

Common and Preferred Stock. A principal risk of investing in the Fund
is associated with its investment in stocks. In general, stock values
fluctuate in response to activities specific to the issuer as well as
general market, economic and political conditions. Stock prices can
fluctuate widely in response to these factors.

Fixed-Income Securities. Principal risks of investing in the Fund are
associated with its fixed-income investments (including zero coupon
securities). All fixed-income securities are subject to two types of
risk: credit risk and interest rate risk. Credit risk refers to the
possibility that the issuer of a security will be unable to make
interest payments and/or repay the principal on its debt.

Interest rate risk refers to fluctuations in the value of a
fixed-income security resulting from changes in the general level of
interest rates. When the general level of interest rates goes up, the
prices of most fixed-income securities go down. When the general

<PAGE>

level of interest rates goes down, the prices of most fixed-income
securities go up. Accordingly, a rise in the general level of
interest rates may cause the price of the Fund's fixed-income
securities to fall substantially. (Zero coupon securities are
typically subject to greater price fluctuations than comparable
securities that pay interest.)

Convertible Securities. The Fund is also subject to the risks of
investing in convertible securities. These securities may carry risks
associated with both common stock and fixed-income securities. In
addition, because the convertible securities in which the Fund
invests are convertible into the common stocks of small- and mid-cap
companies, the Fund is subject to the specific risks associated with
investing in small- and mid-cap companies.

There are also special risks associated with the Fund's investments
in "enhanced" and "synthetic" convertible securities. These
securities may be more volatile and less liquid than traditional
convertible securities.

Small & Medium Capitalization Companies. The Fund's investments in
smaller and -medium-sized companies carry more risk than investments
in larger companies. While some of the Fund's holdings in these
companies may be listed on a national securities exchange, such
securities are more likely to be traded in the over-the-counter
market. The low market liquidity of these securities may have an
adverse impact on the Fund's ability to sell certain securities at
favorable prices and may also make it difficult for the Fund to
obtain market quotations based on actual trades for purposes of
valuing the Fund's securities. Investing in lesser-known, smaller and
medium capitalization companies involves greater risk of volatility
of the Fund's net asset value than is customarily associated with
larger, more established companies. Often smaller and medium
capitalization companies and the industries in which they are focused
are still evolving and, while this may offer better growth potential
than larger, more established companies, it also may make them more
sensitive to changing market conditions.

Junk Bonds. The Fund's investments in fixed-income securities rated
lower than investment grade, or if unrated, of comparable quality as
determined by the Investment Manager (commonly known as "junk bonds")
pose significant risks. The prices of junk bonds are likely to be
more sensitive to adverse economic changes or individual corporate
developments than higher rated securities. During an economic
downturn or substantial period of rising interest rates, junk bond
issuers and, in particular, highly leveraged issuers may experience
financial stress that would adversely affect their ability to service
their principal and interest payment obligations, to meet their
projected business goals or to obtain additional financing. In the
event of a default, the Fund may incur additional expenses to seek
recovery. The secondary market for junk bonds may be less liquid than
the market for higher quality securities and, as such, may have an
adverse effect on the market prices of certain securities. Many junk
bonds are issued as Rule 144A securities. Rule 144A securities could
have the effect of increasing the level of Fund illiquidity to the
extent the Fund may be unable to find qualified

<PAGE>

institutional buyers interested in purchasing the securities. The
illiquidity of the market may also adversely affect the ability of
the Fund's Trustees to arrive at a fair value for certain junk bonds
at certain times and could make it difficult for the Fund to sell
certain securities. In addition, periods of economic uncertainty and
change probably would result in an increased volatility of market
prices of high yield securities and a corresponding volatility in the
Fund's net asset value.

Other Risks. The performance of the Fund also will depend on whether
the Investment Manager is successful in pursuing the Fund's
investment strategy. The Fund is also subject to other risks from its
permissible investments, including the risks associated with its
investments in real estate investment trusts (commonly known as
"REITs") and foreign securities (including depository receipts). For
more information about these risks, see the "Additional Risk
Information" section.

Shares of the Fund are not bank deposits and are not guaranteed or
insured by the FDIC or any other government agency.

[GRAPHIC OMITTED]

PAST PERFORMANCE
----------------

The bar chart and table below provide some indication of the risks of
investing in the Fund. The Fund's past performance does not indicate
how the Fund will perform in the future.

(sidebar)
ANNUAL TOTAL RETURNS
This chart shows how the performance of the Fund's Class B shares has varied
from year to year over the past 3 calendar years.
(end sidebar)

[GRAPHIC OMITTED]

ANNUAL TOTAL RETURNS -- CALENDAR YEARS

Year 1997 1998 1999
Percentage 23.97% 1.73% 1.72%

The bar chart reflects the performance of Class B shares; the
performance of the other Classes will differ because the Classes have
different ongoing fees. The performance information in the bar chart
does not reflect the deduction of sales charges; if these amounts were
reflected, returns would be less than shown. Year-to-date total return
as of September 30, 2000 was -0.22%.

During the periods shown in the bar chart, the highest return for a
calendar quarter was 9.88% (quarter ended September 30, 1997) and the
lowest return for a calendar quarter was -11.33% (quarter ended
September 30, 1998).

<PAGE>

(sidebar)
AVERAGE ANNUAL TOTAL RETURNS
This table compares the Fund's average annual total returns with those of a
broad measure of market performance over time. The Fund's returns include the
maximum applicable sales charge for each Class and assume you sold your shares
at the end of each period.
(end sidebar)

AVERAGE ANNUAL TOTAL RETURNS (AS OF DECEMBER 31, 1999)
--------------------------------------------------------------------
LIFE OF THE FUND
PAST 1 YEAR (SINCE 6/26/96)
--------------------------------------------------------------------
Class A(1) -2.95% --
--------------------------------------------------------------------
Class B -3.00% 9.98%
--------------------------------------------------------------------
Class C(1) 0.85% --
--------------------------------------------------------------------
Class D(1) 2.76% --
--------------------------------------------------------------------
S&P 500 Index(2) 21.04% 27.44%
--------------------------------------------------------------------

(1) Classes A, C and D commenced operations on July 28, 1997.

(2) The Standard and Poor's 500 Index (S&P 500 (Registered Tracemark)) is a
broad-based index, the performance of which is based on the performance of
500 widely-held common stocks chosen for market size, liquidity and industry
group representation. The Index does not include any expenses, fees or
charges. The Index is unmanaged and should not be considered an investment.

(sidebar)
SHAREHOLDER FEES
These fees are paid directly from your investment.
(end sidebar)

(sidebar)
ANNUAL FUND
OPERATING EXPENSES
These expenses are deducted from the Fund's assets and are based on expenses
paid for the fiscal year ended September 30, 2000.
(end sidebar)

[GRAPHIC OMITTED]

FEES AND EXPENSES
-----------------
The table below briefly describes the fees and expenses that you may pay if you
buy and hold shares of the Fund. The Fund offers four Classes of shares: Classes
A, B, C and D. Each Class has a different combination of fees, expenses and
other features. The Fund does not charge account or exchange fees. See the
"Share Class Arrangements" section for further fee and expense information.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER FEES
------------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on
purchases (as a percentage of offering price) 5.25%(1) None None None
------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) (as a
percentage based on the lesser of the offering
price or net asset value at redemption) None(2) 5.00%(3) 1.00%(4) None
------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------------------------------------
Management fee 0.75% 0.75% 0.75% 0.75%
------------------------------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.24% 1.00% 0.99% None
------------------------------------------------------------------------------------------------
Other expenses 0.22% 0.22% 0.22% 0.22%
------------------------------------------------------------------------------------------------
Total annual Fund operating expenses 1.21% 1.97% 1.96% 0.97%
------------------------------------------------------------------------------------------------
</TABLE>

(1) Reduced for purchases of $25,000 and over.

(2) Investments that are not subject to any sales charge at the time of purchase
are subject to a contingent deferred sales charge ("CDSC") of 1.00% that
will be imposed if you sell your shares within one year after purchase,
except for certain specific circumstances.

<PAGE>
(3) The CDSC is scaled down to 1.00% during the sixth year, reaching zero
thereafter. See "Share Class Arrangements" for a complete discussion of the
CDSC.

(4) Only applicable if you sell your shares within one year after purchase.

5
<PAGE>

EXAMPLE

This example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the Fund, your
investment has a 5% return each year, and the Fund's operating
expenses remain the same. Although your actual costs may be higher or
lower, the tables below show your costs at the end of each period
based on these assumptions depending upon whether or not you sell
(redeem) your shares at the end of each period.

<TABLE>
<CAPTION>
IF YOU SOLD YOUR SHARES IF YOU HELD YOUR SHARES
--------------------------------------------------- ---------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A $641 $888 $1,153 $1,909 $641 $888 $1,153 $1,909
--------------------------------------------------- ---------------------------------------
CLASS B $700 $918 $1,262 $2,295 $200 $618 $1,062 $2,295
--------------------------------------------------- ---------------------------------------
CLASS C $299 $616 $1,058 $2,286 $199 $616 $1,058 $2,286
--------------------------------------------------- ---------------------------------------
CLASS D $ 99 $309 $ 536 $1,189 $ 99 $309 $ 536 $1,189
--------------------------------------------------- ---------------------------------------
</TABLE>

Long-term shareholders of Class B and Class C may pay more in sales
charges, including distribution fees, than the economic equivalent of
the maximum front-end sales charges permitted by the NASD.

[GRAPHIC OMITTED]

ADDITIONAL INVESTMENT STRATEGY INFORMATION
------------------------------------------

This section provides additional information relating to the Fund's
principal investment strategies.

Other Securities and Real Estate Investment Trusts. Up to 35% of the
Fund's assets may be invested in U.S. government securities issued or
guaranteed as to principal and interest by the U.S. government, its
agencies or instrumentalities and investment grade fixed-income
securities (including zero coupon securities), common stocks that do
not pay a regular dividend and real estate investment trusts
(commonly known as "REITs").

Zero coupon securities are purchased at a discount and either (i) pay
no interest, or (ii) accrue interest, but make no payment until
maturity.

Foreign Securities. The Fund may invest up to 25% of its assets in
foreign securities (including depository receipts). This percentage
limitation, however, does not apply to securities of foreign
companies that are listed in the U.S. on a national securities
exchange.

<PAGE>

Defensive Investing. The Fund may take temporary "defensive"
positions in attempting to respond to adverse market conditions. The
Fund may invest any amount of its assets in cash or money market
instruments in a defensive posture when the Investment Manager
believes it is advisable to do so. Although taking a defensive
posture is designed to protect the Fund from an anticipated market
downturn, it could have the effect of reducing the benefit from any
upswing in the market. When the Fund takes a defensive position, it
may not achieve its investment objectives.

The percentage limitations relating to the composition of the Fund's
portfolio apply at the time the Fund acquires an investment.
Subsequent percentage changes that result from market fluctuations
will not require the Fund to sell any portfolio security. The Fund
may change its principal investment strategies without shareholder
approval; however, you would be notified of any changes.

[GRAPHIC OMITTED]

ADDITIONAL RISK INFORMATION
---------------------------

This section provides additional information relating to the
principal risks of investing in the Fund.

Real Estate Investment Trusts ("REITs"). REITs pool investors' funds
for investments primarily in commercial real estate properties. Like
mutual funds, REITs have expenses, including advisory and
administration fees that are paid by its shareholders. As a result,
you will absorb duplicate levels of fees when the Fund invests in
REITs. The performance of any Fund REIT holdings ultimately depends
on the types of real property in which the REITs invest and how well
the property is managed. A general downturn in real estate values
also can hurt REIT performance.

Foreign Securities. Foreign securities involve risks in addition to
the risks associated with domestic securities. One additional risk is
currency risk. While the price of Fund shares is quoted in U.S.
dollars, the Fund generally converts U.S. dollars to a foreign
market's local currency to purchase a security in that market. If the
value of that local currency falls relative to the U.S. dollar, the
U.S. dollar value of the foreign security will decrease. This is true
even if the foreign security's local price remains unchanged.

Foreign securities (including depository receipts) also have risks
related to economic and political developments abroad, including
effects of foreign social, economic or political instability. Foreign
companies, in general, are not subject to the regulatory requirements
of U.S. companies and, as such, there may be less publicly available
information about these companies. Moreover, foreign accounting,
auditing and financial reporting standards generally are different
from those applicable to U.S. companies. Finally, in the event of a
default of any foreign debt obligations, it may be more difficult for
the Fund to obtain or enforce a judgment against the issuers of the
securities.

<PAGE>

Securities of foreign issuers may be less liquid than comparable
securities of U.S. issuers and, as such, their price changes may be
more volatile. Furthermore, foreign exchanges and broker-dealers are
generally subject to less government and exchange scrutiny and
regulation than their U.S. counterparts. In addition, differences in
clearance and settlement procedures in foreign markets may occasion
delays in settlements of the Fund's trades effected in those markets
and could result in losses to the Fund due to subsequent declines in
the value of the securities subject to the trades.

[GRAPHIC OMITTED]

FUND MANAGEMENT
---------------

(sidebar)
MORGAN STANLEY DEAN WITTER ADVISORS INC.
The Investment Manager is widely recognized as a leader in the mutual fund
industry and together with Morgan Stanley Dean Witter Services Company Inc.,
its wholly-owned subsidiary, had approximately $155 billion in assets under
management as of October 31, 2000.
(end sidebar)

The Fund has retained the Investment Manager -- Morgan Stanley Dean
Witter Advisors Inc. -- to provide administrative services, manage its
business affairs and invest its assets, including the placing of
orders for the purchase and sale of portfolio securities. The
Investment Manager is a wholly-owned subsidiary of Morgan Stanley Dean
Witter & Co., a preeminent global financial services firm that
maintains leading market positions in each of its three primary
businesses: securities, asset management and credit services. Its main
business office is located at Two World Trade Center, New York, NY
10048.

The Fund's portfolio is managed within the Investment Manager's Growth
and Income Group. Paul D. Vance, Senior Vice President and Director of
the Growth and Income Group of the Investment Manager, Peter M.
Avelar, Senior Vice President and Director of the High Yield Group of
the Investment Manager, and Catherine Maniscalco, a Vice President of
the Investment Manager, have been the primary portfolio co-managers of
the Fund since June 1996 (the Fund's inception), January 1998 and July
1999, respectively, and each has been a portfolio manager with the
Investment Manager for over five years.

The Fund pays the Investment Manager a monthly management fee as full
compensation for the services and facilities furnished to the Fund,
and for Fund expenses assumed by the Investment Manager. The fee is
based on the Fund's average daily net assets. For the fiscal year
ended September 30, 2000, the Fund accrued total compensation to the
Investment Manager amounting to 0.75% of the Fund's average daily net
assets.

<PAGE>

SHAREHOLDER INFORMATION

[GRAPHIC OMITTED]

PRICING FUND SHARES
-------------------

The price of Fund shares (excluding sales charges), called "net asset
value," is based on the value of the Fund's portfolio securities.
While the assets of each Class are invested in a single portfolio of
securities, the net asset value of each Class will differ because the
Classes have different ongoing distribution fees.

The net asset value per share of the Fund is determined once daily at
4:00 p.m. Eastern time on each day that the New York Stock Exchange
is open (or, on days when the New York Stock Exchange closes prior to
4:00 p.m., at such earlier time). Shares will not be priced on days
that the New York Stock Exchange is closed.

The value of the Fund's portfolio securities is based on the
securities' market price when available. When a market price is not
readily available, including circumstances under which the Investment
Manager determines that a security's market price is not accurate, a
portfolio security is valued at its fair value, as determined under
procedures established by the Fund's Board of Trustees. In these
cases, the Fund's net asset value will reflect certain portfolio
securities' fair value rather than their market price. With respect
to securities that are primarily listed on foreign exchanges, the
value of the Fund's portfolio securities may change on days when you
will not be able to purchase or sell your shares.

An exception to the Fund's general policy of using market prices
concerns its short-term debt portfolio securities. Debt securities
with remaining maturities of sixty days or less at the time of
purchase may be valued at amortized cost. However, if the cost does
not reflect the securities' market value, these securities will be
valued at their fair value.

[GRAPHIC OMITTED]

HOW TO BUY SHARES
-----------------

(sidebar)
CONTACTING A FINANCIAL ADVISOR
If you are new to the Morgan Stanley Dean Witter Family of Funds and would like
to contact a Financial Advisor, call (877) 937-MSDW (toll-free) for the
telephone number of the Morgan Stanley Dean Witter office nearest you. You may
also access our office locator on our Internet site at:
www.msdwadvice.com/funds
(end sidebar)

You may open a new account to buy Fund shares or buy additional Fund
shares for an existing account by contacting your Morgan Stanley Dean
Witter Financial Advisor. Your Financial Advisor or other authorized
financial representative will assist you, step-by-step, with the
procedures to invest in the Fund. You may also purchase shares
directly by calling the Fund's transfer agent and requesting an
application.

Because every investor has different immediate financial needs and
long-term investment goals, the Fund offers investors four Classes of
shares: Classes A, B, C and D. Class D shares are only offered to a
limited group of investors. Each Class of shares offers a distinct
structure of sales charges, distribution and service fees, and other
features that are designed to address a variety of needs. Your

<PAGE>

Financial Advisor or other authorized financial representative can
help you decide which Class may be most appropriate for you. When
purchasing Fund shares, you must specify which Class of shares you
wish to purchase.

When you buy Fund shares, the shares are purchased at the next share
price calculated (less any applicable front-end sales charge for
Class A shares) after we receive your purchase order. Your payment is
due on the third business day after you place your purchase order. We
reserve the right to reject any order for the purchase of Fund
shares.

(sidebar)
EASYINVEST(SM)
A purchase plan that allows you to transfer money automatically from your
checking or savings account or from a Money Market Fund on a semi-monthly,
monthly or quarterly basis. Contact your Morgan Stanley Dean Witter Financial
Advisor for further information about this service.
(end sidebar)

MINIMUM INVESTMENT AMOUNTS
--------------------------------------------------------------------------------
MINIMUM INVESTMENT
--------------------------
INVESTMENT OPTIONS INITIAL ADDITIONAL
--------------------------------------------------------------------------------
Regular Accounts $1,000 $100
--------------------------------------------------------------------------------
Individual Retirement Accounts: Regular IRAs $1,000 $100
Education IRAs $ 500 $100
--------------------------------------------------------------------------------
EasyInvest(SM)
(Automatically from your
checking or savings account
or Money Market Fund) $ 100* $ 100*
--------------------------------------------------------------------------------

* Provided your schedule of investments totals $1,000 in twelve months.

There is no minimum investment amount if you purchase Fund shares
through: (1) the Investment Manager's mutual fund asset allocation
plan, (2) a program, approved by the Fund's distributor, in which you
pay an asset-based fee for advisory, administrative and/or brokerage
services, (3) the following programs approved by the Fund's
distributor; (i) qualified state tuition plans described in Section
529 of the Internal Revenue Code and (ii) certain other investment
programs that do not charge an asset-based fee, or (4)
employer-sponsored employee benefit plan accounts.

Investment Options for Certain Institutional and Other
Investors/Class D Shares. To be eligible to purchase Class D shares,
you must qualify under one of the investor categories specified in
the "Share Class Arrangements" section of this Prospectus.

Subsequent Investments Sent Directly to the Fund. In addition to
buying additional Fund shares for an existing account by contacting
your Morgan Stanley Dean Witter Financial Advisor, you may send a
check directly to the Fund. To buy additional shares in this manner:

o Write a "letter of instruction" to the Fund specifying the
name(s) on the account, the account number, the social security or
tax identification number, the Class of shares you wish to purchase
and the investment amount (which would include any applicable
front-end sales charge). The letter must be signed by the account
owner(s).

<PAGE>

o Make out a check for the total amount payable to: Morgan Stanley
Dean Witter Income Builder Fund.

o Mail the letter and check to Morgan Stanley Dean Witter Trust FSB
at P.O. Box 1040, Jersey City, NJ 07303.

[GRAPHIC OMITTED]

HOW TO EXCHANGE SHARES
----------------------

Permissible Fund Exchanges. You may exchange shares of any Class of
the Fund for the same Class of any other continuously offered
Multi-Class Fund, or for shares of a No-Load Fund, a Money Market
Fund, North American Government Income Trust or Short-Term U.S.
Treasury Trust, without the imposition of an exchange fee. In
addition, Class A shares of the Fund may be exchanged for shares of
an FSC Fund (funds subject to a front-end sales charge). See the
inside back cover of this Prospectus for each Morgan Stanley Dean
Witter Fund's designation as a Multi-Class Fund, No-Load Fund, Money
Market Fund or FSC Fund. If a Morgan Stanley Dean Witter Fund is not
listed, consult the inside back cover of that fund's prospectus for
its designation.

Exchanges may be made after shares of the fund acquired by purchase
have been held for thirty days. There is no waiting period for
exchanges of shares acquired by exchange or dividend reinvestment.
The current prospectus for each fund describes its investment
objective(s), policies and investment minimums, and should be read
before investment. Since exchanges are available only into
continuously offered Morgan Stanley Dean Witter Funds, exchanges are
not available into any new Morgan Stanley Dean Witter Fund during its
initial offering period, or when shares of a particular Morgan
Stanley Dean Witter Fund are not being offered for purchase.

Exchange Procedures. You can process an exchange by contacting your
Morgan Stanley Dean Witter Financial Advisor or other authorized
financial representative. Otherwise, you must forward an exchange
privilege authorization form to the Fund's transfer agent -- Morgan
Stanley Dean Witter Trust FSB -- and then write the transfer agent or
call (800) 869-NEWS to place an exchange order. You can obtain an
exchange privilege authorization form by contacting your Financial
Advisor or other authorized financial representative, or by calling
(800) 869-NEWS. If you hold share certificates, no exchanges may be
processed until we have received all applicable share certificates.

An exchange to any Morgan Stanley Dean Witter Fund (except a Money
Market Fund) is made on the basis of the next calculated net asset
values of the funds involved after the exchange instructions are
accepted. When exchanging into a Money Market Fund, the Fund's shares
are sold at their next calculated net asset value and the Money
Market Fund's shares are purchased at their net asset value on the
following business day.

<PAGE>

The Fund may terminate or revise the exchange privilege upon required
notice. The check writing privilege is not available for Money Market
Fund shares you acquire in an exchange.

Telephone Exchanges. For your protection when calling Morgan Stanley
Dean Witter Trust FSB, we will employ reasonable procedures to
confirm that exchange instructions communicated over the telephone
are genuine. These procedures may include requiring various forms of
personal identification such as name, mailing address, social
security or other tax identification number. Telephone instructions
also may be recorded.

Telephone instructions will be accepted if received by the Fund's
transfer agent between 9:00 a.m. and 4:00 p.m. Eastern time on any
day the New York Stock Exchange is open for business. During periods
of drastic economic or market changes, it is possible that the
telephone exchange procedures may be difficult to implement, although
this has not been the case with the Fund in the past.

Margin Accounts. If you have pledged your Fund shares in a margin
account, contact your Morgan Stanley Dean Witter Financial Advisor or
other authorized financial representative regarding restrictions on
the exchange of such shares.

Tax Considerations of Exchanges. If you exchange shares of the Fund
for shares of another Morgan Stanley Dean Witter Fund there are
important tax considerations. For tax purposes, the exchange out of
the Fund is considered a sale of Fund shares -- and the exchange into
the other fund is considered a purchase. As a result, you may realize
a capital gain or loss.

You should review the "Tax Consequences" section and consult your own
tax professional about the tax consequences of an exchange.

Limitations on Exchanges. Certain patterns of past exchanges and/or
purchase or sale transactions involving the Fund or other Morgan
Stanley Dean Witter Funds may result in the Fund limiting or
prohibiting, at its discretion, additional purchases and/or
exchanges. Determinations in this regard may be made based on the
frequency or dollar amount of previous exchanges or purchase or sale
transactions. You will be notified in advance of limitations on your
exchange privileges.

CDSC Calculations on Exchanges. See the "Share Class Arrangements"
section of this Prospectus for a further discussion of how applicable
contingent deferred sales charges (CDSCs) are calculated for shares
of one Morgan Stanley Dean Witter Fund that are exchanged for shares
of another.

For further information regarding exchange privileges, you should
contact your Morgan Stanley Dean Witter Financial Advisor or call
(800) 869-NEWS.

<PAGE>

[GRAPHIC OMITTED]

HOW TO SELL SHARES
------------------

You can sell some or all of your Fund shares at any time. If you sell
Class A, Class B or Class C shares, your net sale proceeds are
reduced by the amount of any applicable CDSC. Your shares will be
sold at the next price calculated after we receive your order to sell
as described below.

<TABLE>
<CAPTION>
OPTIONS PROCEDURES
---------------------------------------------------------------------------------------------------------------------
<S> <C>
Contact Your To sell your shares, simply call your Morgan Stanley Dean Witter Financial Advisor or other
Financial Advisor authorized financial representative.
-----------------------------------------------------------------------------------------------
[GRAPHIC OMITTED] Payment will be sent to the address to which the account is registered or deposited in your
brokerage account.
---------------------------------------------------------------------------------------------------------------------
By Letter You can also sell your shares by writing a "letter of instruction" that includes:
[GRAPHIC OMITTED] o your account number;
o the dollar amount or the number of shares you wish to sell;
o the Class of shares you wish to sell; and
o the signature of each owner as it appears on the account.
-----------------------------------------------------------------------------------------------
If you are requesting payment to anyone other than the registered owner(s) or that payment
be sent to any address other than the address of the registered owner(s) or pre-designated
bank account, you will need a signature guarantee. You can obtain a signature guarantee from
an eligible guarantor acceptable to Morgan Stanley Dean Witter Trust FSB. (You should
contact Morgan Stanley Dean Witter Trust FSB at (800) 869-NEWS for a determination as to
whether a particular institution is an eligible guarantor.) A notary public cannot provide a
signature guarantee. Additional documentation may be required for shares held by a
corporation, partnership, trustee or executor.
-----------------------------------------------------------------------------------------------
Mail the letter to Morgan Stanley Dean Witter Trust FSB at P.O. Box 983, Jersey City, NJ
07303. If you hold share certificates, you must return the certificates, along with the letter
and any required additional documentation.
-----------------------------------------------------------------------------------------------
A check will be mailed to the name(s) and address in which the account is registered, or
otherwise according to your instructions.
---------------------------------------------------------------------------------------------------------------------
Systematic If your investment in all of the Morgan Stanley Dean Witter Family of Funds has a total
Withdrawal Plan market value of at least $10,000, you may elect to withdraw amounts of $25 or more, or in
[GRAPHIC OMITTED] any whole percentage of a fund's balance (provided the amount is at least $25), on a monthly,
quarterly, semi-annual or annual basis, from any fund with a balance of at least $1,000. Each
time you add a fund to the plan, you must meet the plan requirements.
-----------------------------------------------------------------------------------------------
Amounts withdrawn are subject to any applicable CDSC. A CDSC may be waived under
certain circumstances. See the Class B waiver categories listed in the "Share Class
Arrangements" section of this Prospectus.
-----------------------------------------------------------------------------------------------
To sign up for the Systematic Withdrawal Plan, contact your Morgan Stanley Dean Witter
Financial Advisor or call (800) 869-NEWS. You may terminate or suspend your plan at any
time. Please remember that withdrawals from the plan are sales of shares, not Fund
"distributions," and ultimately may exhaust your account balance. The Fund may terminate or
revise the plan at any time.
---------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

Payment for Sold Shares. After we receive your complete instructions
to sell as described above, a check will be mailed to you within seven
days, although we will attempt to make payment within one business
day. Payment may also be sent to your brokerage account.

Payment may be postponed or the right to sell your shares suspended
under unusual circumstances. If you request to sell shares that were
recently purchased by check, your sale will not be effected until it
has been verified that the check has been honored.

Tax Considerations. Normally, your sale of Fund shares is subject to
federal and state income tax. You should review the "Tax
Consequences" section of this Prospectus and consult your own tax
professional about the tax consequences of a sale.

Reinstatement Privilege. If you sell Fund shares and have not
previously exercised the reinstatement privilege, you may, within 35
days after the date of sale, invest any portion of the proceeds in
the same Class of Fund shares at their net asset value and receive a
pro rata credit for any CDSC paid in connection with the sale.

Involuntary Sales. The Fund reserves the right, on sixty days'
notice, to sell the shares of any shareholder (other than shares held
in an IRA or 403(b) Custodial Account) whose shares, due to sales by
the shareholder, have a value below $100, or in the case of an
account opened through EasyInvestSM, if after 12 months the
shareholder has invested less than $1,000 in the account.

However, before the Fund sells your shares in this manner, we will
notify you and allow you sixty days to make an additional investment
in an amount that will increase the value of your account to at least
the required amount before the sale is processed. No CDSC will be
imposed on any involuntary sale.

<PAGE>

[GRAPHIC OMITTED]

DISTRIBUTIONS
-------------

The Fund passes substantially all of its earnings from income and
capital gains along to its investors as "distributions." The Fund
earns interest from fixed-income investments and income from stocks.
These amounts are passed along to Fund shareholders as "income
dividend distributions." The Fund realizes capital gains whenever it
sells securities for a higher price than it paid for them. These
amounts may be passed along as "capital gain distributions."

(sidebar)
TARGETED DIVIDENDSSM
You may select to have your Fund distributions automatically invested in other
Classes of Fund shares or Classes of another Morgan Stanley Dean Witter Fund
that you own. Contact your Morgan Stanley Dean Witter Financial Advisor for
further information about this service.
(end sidebar)

The Fund declares income dividends separately for each Class.
Distributions paid on Class A and Class D shares usually will be
higher than for Class B and Class C because distribution fees that
Class B and Class C pay are higher. Normally, income dividends are
distributed to shareholders quarterly. Capital gains, if any, are
usually distributed in December. The Fund, however, may retain and
reinvest any long-term capital gains. The Fund may at times make
payments from sources other than income or capital gains that
represent a return of a portion of your investment.

Distributions are reinvested automatically in additional shares of the
same Class and automatically credited to your account, unless you
request in writing that all distributions be paid in cash. If you
elect the cash option, the Fund will mail a check to you no later than
seven business days after the distribution is declared. However, if
you purchase Fund shares through a Financial Advisor within three
business days prior to the record date for the distribution, the
distribution will automatically be paid to you in cash, even if you
did not request to receive all distributions in cash. No interest will
accrue on uncashed checks. If you wish to change how your
distributions are paid, your request should be received by the Fund's
transfer agent, Morgan Stanley Dean Witter Trust FSB, at least five
business days prior to the record date of the distributions.

[GRAPHIC OMITTED]

TAX CONSEQUENCES
----------------

As with any investment, you should consider how your Fund investment
will be taxed. The tax information in this Prospectus is provided as
general information. You should consult your own tax professional
about the tax consequences of an investment in the Fund.

Unless your investment in the Fund is through a tax-deferred
retirement account, such as a 401(k) plan or IRA, you need to be
aware of the possible tax consequences when:

o The Fund makes distributions; and

o You sell Fund shares, including an exchange to another Morgan
Stanley Dean Witter Fund.

<PAGE>

Taxes on Distributions. Your distributions are normally subject to
federal and state income tax when they are paid, whether you take
them in cash or reinvest them in Fund shares. A distribution also may
be subject to local income tax. Any income dividend distributions and
any short-term capital gain distributions are taxable to you as
ordinary income. Any long-term capital gain distributions are taxable
as long-term capital gains no matter how long you have owned shares
in the Fund.

Every January, you will be sent a statement (IRS Form 1099-DIV)
showing the taxable distributions paid to you in the previous year.
The statement provides information on your dividends and capital
gains for tax purposes.

Taxes on Sales. Your sale of Fund shares normally is subject to
federal and state income tax and may result in a taxable gain or loss
to you. A sale also may be subject to local income tax. Your exchange
of Fund shares for shares of another Morgan Stanley Dean Witter Fund
is treated for tax purposes like a sale of your original shares and a
purchase of your new shares. Thus, the exchange may, like a sale,
result in a taxable gain or loss to you and will give you a new tax
basis for your new shares.

When you open your Fund account, you should provide your social
security or tax identification number on your investment application.
By providing this information, you will avoid being subject to a
federal backup withholding tax of 31% on taxable distributions and
redemption proceeds. Any withheld amount would be sent to the IRS as
an advance tax payment.

[GRAPHIC OMITTED]

SHARE CLASS ARRANGEMENTS
------------------------

The Fund offers several Classes of shares having different
distribution arrangements designed to provide you with different
purchase options according to your investment needs. Your Morgan
Stanley Dean Witter Financial Advisor or other authorized financial
representative can help you decide which Class may be appropriate for
you.

The general public is offered three Classes: Class A shares, Class B
shares and Class C shares, which differ principally in terms of sales
charges and ongoing expenses. A fourth Class, Class D shares, is
offered only to a limited category of investors. Shares that you
acquire through reinvested distributions will not be subject to any
front-end sales charge or CDSC -- contingent deferred sales charge.
Sales personnel may receive different compensation for selling each
Class of shares. The sales charges applicable to each Class provide
for the distribution financing of shares of that Class.

<PAGE>

The chart below compares the sales charge and annual 12b-1 fee
applicable to each Class:

<TABLE>
<CAPTION>
MAXIMUM
CLASS SALES CHARGE ANNUAL 12B-1FEE
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
A Maximum 5.25% initial sales charge reduced for purchase of $25,000 or more;
shares sold without an initial sales charge are generally subject to a 1.0% CDSC
during the first year 0.25%
---------------------------------------------------------------------------------------------------------------
B Maximum 5.0% CDSC during the first year decreasing to 0% after six years 1.00%
---------------------------------------------------------------------------------------------------------------
C 1.0% CDSC during the first year 1.00%
---------------------------------------------------------------------------------------------------------------
D None None
---------------------------------------------------------------------------------------------------------------
</TABLE>

CLASS A SHARES Class A shares are sold at net asset value plus an
initial sales charge of up to 5.25%. The initial sales charge is
reduced for purchases of $25,000 or more according to the schedule
below. Investments of $1 million or more are not subject to an initial
sales charge, but are generally subject to a contingent deferred sales
charge, or CDSC, of 1.0% on sales made within one year after the last
day of the month of purchase. The CDSC will be assessed in the same
manner and with the same CDSC waivers as with Class B shares. Class A
shares are also subject to a distribution (12b-1) fee of up to 0.25%
of the average daily net assets of the Class.

The offering price of Class A shares includes a sales charge
(expressed as a percentage of the offering price) on a single
transaction as shown in the following table:

(sidebar)
FRONT-END SALES CHARGE OR FSC
An initial sales charge you pay when purchasing Class A shares that is based on
a percentage of the offering price. The percentage declines based upon the
dollar value of Class A shares you purchase. We offer three ways to reduce your
Class A sales charges -- the Combined Purchase Privilege, Right of Accumulation
and Letter of Intent.
(end sidebar)

<TABLE>
<CAPTION>
FRONT-END SALES CHARGE
-----------------------------------------------
AMOUNT OF PERCENTAGE OF PUBLIC APPROXIMATE PERCENTAGE
SINGLE TRANSACTION OFFERING PRICE OF NET AMOUNT INVESTED
-------------------------------------------------------------------------------------------
<S> <C> <C>
Less than $25,000 5.25% 5.54%
-------------------------------------------------------------------------------------------
$25,000 but less than $50,000 4.75% 4.99%
-------------------------------------------------------------------------------------------
$50,000 but less than $100,000 4.00% 4.17%
-------------------------------------------------------------------------------------------
$100,000 but less than $250,000 3.00% 3.09%
-------------------------------------------------------------------------------------------
$250,000 but less than $1 million 2.00% 2.04%
-------------------------------------------------------------------------------------------
$1 million and over 0 0
-------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

The reduced sales charge schedule is applicable to purchases of Class
A shares in a single transaction by:

o A single account (including an individual, trust or fiduciary
account).

o Family member accounts (limited to husband, wife and children
under the age of 21).

o Pension, profit sharing or other employee benefit plans of
companies and their affiliates.

o Tax-exempt organizations.

o Groups organized for a purpose other than to buy mutual fund
shares.

Combined Purchase Privilege. You also will have the benefit of
reduced sales charges by combining purchases of Class A shares of the
Fund in a single transaction with purchases of Class A shares of
other Multi-Class Funds and shares of FSC Funds.

Right of Accumulation. You also may benefit from a reduction of sales
charges if the cumulative net asset value of Class A shares of the
Fund purchased in a single transaction, together with shares of other
funds you currently own which were previously purchased at a price
including a front-end sales charge (including shares acquired through
reinvestment of distributions), amounts to $25,000 or more. Also, if
you have a cumulative net asset value of all your Class A and Class D
shares equal to at least $5 million (or $25 million for certain
employee benefit plans), you are eligible to purchase Class D shares
of any fund subject to the Fund's minimum initial investment
requirement.

You must notify your Morgan Stanley Dean Witter Financial Advisor or
other authorized financial representative (or Morgan Stanley Dean
Witter Trust FSB if you purchase directly through the Fund), at the
time a purchase order is placed, that the purchase qualifies for the
reduced sales charge under the Right of Accumulation. Similar
notification must be made in writing when an order is placed by mail.
The reduced sales charge will not be granted if: (i) notification is
not furnished at the time of the order; or (ii) a review of the
records of Dean Witter Reynolds or other authorized dealer of Fund
shares or the Fund's transfer agent does not confirm your represented
holdings.

Letter of Intent. The schedule of reduced sales charges for larger
purchases also will be available to you if you enter into a written
"letter of intent." A letter of intent provides for the purchase of
Class A shares of the Fund or other Multi-Class Funds or shares of
FSC Funds within a thirteen-month period. The initial purchase under
a letter of intent must be at least 5% of the stated investment goal.
To determine the applicable sales charge reduction, you may also
include: (1) the cost of shares of other Morgan Stanley Dean Witter
Funds which were previously purchased at a price including a
front-end sales charge during the 90-day period prior to the
distributor receiving the letter of intent, and (2) the cost of
shares of other funds you currently own acquired in exchange for
shares of funds purchased during that period at a price including a
front-end sales

<PAGE>

charge. You can obtain a letter of intent by contacting your Morgan
Stanley Dean Witter Financial Advisor or other authorized financial
representative, or by calling (800) 869-NEWS. If you do not achieve
the stated investment goal within the thirteen-month period, you are
required to pay the difference between the sales charges otherwise
applicable and sales charges actually paid, which may be deducted
from your investment.

Other Sales Charge Waivers. In addition to investments of $1 million
or more, your purchase of Class A shares is not subject to a
front-end sales charge (or a CDSC upon sale) if your account
qualifies under one of the following categories:

o A trust for which Morgan Stanley Dean Witter Trust FSB provides
discretionary trustee services.

o Persons participating in a fee-based investment program (subject
to all of its terms and conditions, including termination fees,
mandatory sale or transfer restrictions on termination) approved by
the Fund's distributor pursuant to which they pay an asset-based
fee for investment advisory, administrative and/or brokerage
services.

o Qualified state tuition plans described in Section 529 of the
Internal Revenue Code (subject to all applicable terms and
conditions) and certain other investment programs that do not
charge an asset-based fee and have been approved by the Fund's
distributor.

o Employer-sponsored employee benefit plans, whether or not
qualified under the Internal Revenue Code, for which Morgan Stanley
Dean Witter Trust FSB serves as trustee or Morgan Stanley Dean
Witter's Retirement Plan Services serves as recordkeeper under a
written Recordkeeping Services Agreement ("MSDW Eligible Plans")
which have at least 200 eligible employees.

o An MSDW Eligible Plan whose Class B shares have converted to
Class A shares, regardless of the plan's asset size or number of
eligible employees.

o A client of a Morgan Stanley Dean Witter Financial Advisor who
joined us from another investment firm within six months prior to
the date of purchase of Fund shares, and you used the proceeds from
the sale of shares of a proprietary mutual fund of that Financial
Advisor's previous firm that imposed either a front-end or deferred
sales charge to purchase Class A shares, provided that: (1) you
sold the shares not more than 60 days prior to the purchase of fund
shares, and (2) the sale proceeds were maintained in the interim in
cash or a money market fund.

o Current or retired Directors/Trustees of the Morgan Stanley Dean
Witter Funds, such persons' spouses and children under the age of
21, and trust accounts for which any of such persons is a
beneficiary.

<PAGE>

o Current or retired directors, officers and employees of Morgan
Stanley Dean Witter & Co. and any of its subsidiaries, such
persons' spouses and children under the age of 21, and trust
accounts for which any of such persons is a beneficiary.

CLASS B SHARES Class B shares are offered at net asset value with
no initial sales charge but are subject to a contingent deferred sales
charge, or CDSC, as set forth in the table below. For the purpose of
calculating the CDSC, shares are deemed to have been purchased on the
last day of the month during which they were purchased.

(sidebar)
CONTINGENT DEFERRED
SALES CHARGE OR CDSC
A fee you pay when you sell shares of certain Morgan Stanley Dean Witter Funds
purchased without an initial sales charge. This fee declines the longer you hold
your shares as set forth in the table.
(end sidebar)

CDSC AS A PERCENTAGE
YEAR SINCE PURCHASE PAYMENT MADE OF AMOUNT REDEEMED
----------------------------------------------------------------------
First 5.0%
----------------------------------------------------------------------
Second 4.0%
----------------------------------------------------------------------
Third 3.0%
----------------------------------------------------------------------
Fourth 2.0%
----------------------------------------------------------------------
Fifth 2.0%
----------------------------------------------------------------------
Sixth 1.0%
----------------------------------------------------------------------
Seventh and thereafter None
----------------------------------------------------------------------

Each time you place an order to sell or exchange shares, shares with
no CDSC will be sold or exchanged first, then shares with the lowest
CDSC will be sold or exchanged next. For any shares subject to a
CDSC, the CDSC will be assessed on an amount equal to the lesser of
the current market value or the cost of the shares being sold.

CDSC Waivers. A CDSC, if otherwise applicable, will be waived in the
case of:

o Sales of shares held at the time you die or become disabled
(within the definition in Section 72(m)(7) of the Internal Revenue
Code which relates to the ability to engage in gainful employment),
if the shares are: (i) registered either in your name (not a trust)
or in the names of you and your spouse as joint tenants with right
of survivorship; or (ii) held in a qualified corporate or
self-employed retirement plan, IRA or 403(b) Custodial Account,
provided in either case that the sale is requested within one year
of your death or initial determination of disability.

o Sales in connection with the following retirement plan
"distributions:" (i) lump-sum or other distributions from a
qualified corporate or self-employed retirement plan following
retirement (or, in the case of a "key employee" of a "top heavy"
plan, following attainment of age 59 1/2); (ii) distributions from
an IRA or 403(b) Custodial Account following attainment of age
59 1/2; or (iii) a tax-free return

<PAGE>

of an excess IRA contribution (a "distribution" does not include a
direct transfer of IRA, 403(b) Custodial Account or retirement plan
assets to a successor custodian or trustee).

o Sales of shares held for you as a participant in an MSDW Eligible
Plan.

o Sales of shares in connection with the Systematic Withdrawal Plan
of up to 12% annually of the value of each fund from which plan
sales are made. The percentage is determined on the date you
establish the Systematic Withdrawal Plan and based on the next
calculated share price. You may have this CDSC waiver applied in
amounts up to 1% per month, 3% per quarter, 6% semi-annually or 12%
annually. Shares with no CDSC will be sold first, followed by those
with the lowest CDSC. As such, the waiver benefit will be reduced
by the amount of your shares that are not subject to a CDSC. If you
suspend your participation in the plan, you may later resume plan
payments without requiring a new determination of the account value
for the 12% CDSC waiver.

o Sales of shares if you simultaneously invest the proceeds in the
Investment Manager's mutual fund asset allocation program, pursuant
to which investors pay an asset-based fee. Any shares you acquire
in connection with the Investment Manager's mutual fund asset
allocation program are subject to all of the terms and conditions
of that program, including termination fees, mandatory sale or
transfer restrictions on termination.

All waivers will be granted only following the Fund's distributor
receiving confirmation of your entitlement. If you believe you are
eligible for a CDSC waiver, please contact your Financial Advisor or
call (800) 869-NEWS.

Distribution Fee. Class B shares are also subject to an annual 12b-1
fee of 1.0% of the lesser of: (a) the average daily aggregate gross
purchases by all shareholders of the Fund's Class B shares since the
inception of the Fund (not including reinvestments of dividends or
capital gains distributions), less the average daily aggregate net
asset value of the Fund's Class B shares sold by all shareholders
since the Fund's inception upon which a CDSC has been imposed or
waived, or (b) the average daily net assets of Class B.

Conversion Feature. After ten (10) years, Class B shares will convert
automatically to Class A shares of the Fund with no initial sales
charge. The ten year period runs from the last day of the month in
which the shares were purchased or, in the case of Class B shares
acquired through an exchange, from the last day of the month in which
the original Class B shares were purchased; the shares will convert
to Class A shares based on their relative net asset values in the
month following the ten year period. At the same time, an equal
proportion of Class B shares acquired through automatically
reinvested distributions will convert to Class A shares on the same
basis. (Class B shares held before May 1, 1997, however, will convert
to Class A shares in May 2007.)

<PAGE>

In the case of Class B shares held in an MSDW Eligible Plan, the plan
is treated as a single investor and all Class B shares will convert
to Class A shares on the conversion date of the Class B shares of a
Morgan Stanley Dean Witter Fund purchased by that plan.

Currently, the Class B share conversion is not a taxable event; the
conversion feature may be cancelled if it is deemed a taxable event
in the future by the Internal Revenue Service.

If you exchange your Class B shares for shares of a Money Market
Fund, a No-Load Fund, North American Government Income Trust or
Short-Term U.S. Treasury Trust, the holding period for conversion is
frozen as of the last day of the month of the exchange and resumes on
the last day of the month you exchange back into Class B shares.

Exchanging Shares Subject to a CDSC. There are special considerations
when you exchange Fund shares that are subject to a CDSC. When
determining the length of time you held the shares and the
corresponding CDSC rate, any period (starting at the end of the
month) during which you held shares of a fund that does not charge a
CDSC will not be counted. Thus, in effect the "holding period" for
purposes of calculating the CDSC is frozen upon exchanging into a
fund that does not charge a CDSC.

For example, if you held Class B shares of the Fund for one year,
exchanged to Class B of another Morgan Stanley Dean Witter
Multi-Class Fund for another year, then sold your shares, a CDSC rate
of 4% would be imposed on the shares based on a two year holding
period -- one year for each fund. However, if you had exchanged the
shares of the Fund for a Money Market Fund (which does not charge a
CDSC) instead of the Multi-Class Fund, then sold your shares, a CDSC
rate of 5% would be imposed on the shares based on a one year holding
period. The one year in the Money Market Fund would not be counted.
Nevertheless, if shares subject to a CDSC are exchanged for a Fund
that does not charge a CDSC, you will receive a credit when you sell
the shares equal to the distribution (12b-1) fees, if any, you paid
on those shares while in that fund up to the amount of any applicable
CDSC.

In addition, shares that are exchanged into or from a Morgan Stanley
Dean Witter Fund subject to a higher CDSC rate will be subject to the
higher rate, even if the shares are re-exchanged into a fund with a
lower CDSC rate.

CLASS C SHARES Class C shares are sold at net asset value with no
initial sales charge but are subject to a CDSC of 1.0% on sales made
within one year after the last day of the month of purchase. The CDSC
will be assessed in the same manner and with the same CDSC waivers as
with Class B shares.

<PAGE>

Distribution Fee. Class C shares are subject to an annual
distribution (12b-1) fee of up to 1.0% of the average daily net
assets of that Class. The Class C shares' distribution fee may cause
that Class to have higher expenses and pay lower dividends than Class
A or Class D shares. Unlike Class B shares, Class C shares have no
conversion feature and, accordingly, an investor that purchases Class
C shares may be subject to distribution (12b-1) fees applicable to
Class C shares for an indefinite period.

CLASS D SHARES Class D shares are offered without any sales charge on
purchases or sales and without any distribution (12b-1) fee. Class D
shares are offered only to investors meeting an initial investment
minimum of $5 million ($25 million for certain MSDW Eligible Plans)
and the following investor categories:

o Investors participating in the Investment Manager's mutual fund
asset allocation program (subject to all of its terms and
conditions, including termination fees, mandatory sale or transfer
restrictions on termination) pursuant to which they pay an
asset-based fee.

o Certain investment programs that do not charge an asset-based fee
and have been approved by the Fund's distributor. However, Class D
shares are not offered for investments made through Section 529
plans (regardless of the size of the investment).

o Employee benefit plans maintained by Morgan Stanley Dean Witter &
Co. or any of its subsidiaries for the benefit of certain employees
of Morgan Stanley Dean Witter & Co. and its subsidiaries.

o Certain unit investment trusts sponsored by Dean Witter Reynolds.

o Certain other open-end investment companies whose shares are
distributed by the Fund's distributor.

o Investors who were shareholders of the Dean Witter Retirement
Series on September 11, 1998 for additional purchases for their
former Dean Witter Retirement Series accounts.

Meeting Class D Eligibility Minimums. To meet the $5 million ($25
million for MSDW Eligible Plans) initial investment to qualify to
purchase Class D shares, you may combine: (1) purchases in a single
transaction of Class D shares of the Fund and other Morgan Stanley
Dean Witter Multi-Class Funds; and/or (2) previous purchases of Class
A and Class D shares of Multi-Class Funds and shares of FSC Funds you
currently own, along with shares of Morgan Stanley Dean Witter Funds
you currently own that you acquired in exchange for those shares.

<PAGE>

NO SALES CHARGES FOR REINVESTED CASH DISTRIBUTIONS If you receive a
cash payment representing an income dividend or capital gain and you
reinvest that amount in the applicable Class of shares by returning
the check within 30 days of the payment date, the purchased shares
would not be subject to an initial sales charge or CDSC.

PLAN OF DISTRIBUTION (RULE 12B-1 FEES) The Fund has adopted a Plan of
Distribution in accordance with Rule 12b-1 under the Investment
Company Act of 1940 with respect to the distribution of Class A, Class
B and Class C shares. The Plan allows the Fund to pay distribution
fees for the sale and distribution of these shares. It also allows the
Fund to pay for services to shareholders of Class A, Class B and Class
C shares. Because these fees are paid out of the Fund's assets on an
ongoing basis, over time these fees will increase the cost of your
investment in these Classes and may cost you more than paying other
types of sales charges.

<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the Fund's
financial performance for the periods indicated. Certain information reflects
financial results for a single Fund share throughout each period. The total
returns in the table represent the rate an investor would have earned or lost
on an investment in the Fund (assuming reinvestment of all dividends and
distributions).

The information for the fiscal year ended September 30, 2000 has been audited
by Deloitte & Touche LLP, independent auditors, whose report, along with the
Fund's financial statements, is included in the annual report, which is
available upon request. The financial highlights for the fiscal year ended
September 30, 1999 and all periods presented prior thereto have been audited by
other independent accountants.

<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED SEPTEMBER 30, JULY 28, 1997*
------------------------------------------------- THROUGH
2000 1999 1998 SEPTEMBER 30, 1997
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period $10.98 $11.18 $12.81 $12.20
-----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.53 0.58 0.59 0.12
Net realized and unrealized gain (loss) (0.26) 0.54 (1.12) 0.61
------ ------ ------ ------
Total income (loss) from investment operations 0.27 1.12 (0.53) 0.73
-----------------------------------------------------------------------------------------------------------------------------------
Less dividends and distributions from:
Net investment income (0.51) (0.62) (0.51) (0.12)
Net realized gain (0.38) (0.70) (0.59) --
------ ------ ------ ------
Total dividends and distributions (0.89) (1.32) (1.10) (0.12)
-----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.36 $10.98 $11.18 $12.81
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 2.71% 10.15% (4.67)% 5.95%(1)
-----------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
-----------------------------------------------------------------------------------------------------------------------------------
Expenses 1.21%(3) 1.17%(3) 1.17%(3) 1.28%(2)
-----------------------------------------------------------------------------------------------------------------------------------
Net investment income 4.92%(3) 5.02%(3) 4.61%(3) 5.77%(2)
-----------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
-----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $2,872 $12,541 $10,073 $1,047
-----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 38% 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.

<PAGE>

<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------
2000++ 1999++ 1998++ 1997**++
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period $10.98 $11.18 $12.81 $10.23
----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.44 0.50 0.50 0.46
Net realized and unrealized gain (loss) (0.23) 0.53 (1.11) 2.54
------ ------ ------ ------
Total income (loss) from investment operations 0.21 1.03 (0.61) 3.00
----------------------------------------------------------------------------------------------------------------
Less dividends and distributions from:
Net investment income (0.44) (0.53) (0.43) (0.41)
Net realized gain (0.38) (0.70) (0.59) (0.01)
------ ------ ------ ------
Total dividends and distributions (0.82) (1.23) (1.02) (0.42)
----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.37 $10.98 $11.18 $12.81
----------------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 2.00% 9.31% (5.29)% 29.83%
----------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
----------------------------------------------------------------------------------------------------------------
Expenses 1.97%(3) 1.90%(3) 1.80%(3) 1.85%
----------------------------------------------------------------------------------------------------------------
Net investment income 4.16%(3) 4.29%(3) 3.98%(3) 4.16%
----------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
----------------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $223,413 $348,070 $416,909 $358,973
----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 38% 36% 58% 74%
----------------------------------------------------------------------------------------------------------------

<CAPTION>
FOR THE PERIOD
JUNE 26, 1996*
THROUGH
SEPTEMBER 30, 1996
<S> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period $10.00
----------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.08
Net realized and unrealized gain (loss) 0.23
------
Total income (loss) from investment operations 0.31
----------------------------------------------------------------
Less dividends and distributions from:
Net investment income (0.08)
Net realized gain --
-----
Total dividends and distributions (0.08)
----------------------------------------------------------------
Net asset value, end of period $10.23
----------------------------------------------------------------
TOTAL RETURN+ 3.10%(1)
----------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
----------------------------------------------------------------
Expenses 2.25%(2)
----------------------------------------------------------------
Net investment income 3.60%(2)
----------------------------------------------------------------
SUPPLEMENTAL DATA:
----------------------------------------------------------------
Net assets, end of period, in thousands $148,142
----------------------------------------------------------------
Portfolio turnover rate 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.

<PAGE>
(1) Not annualized.

(2) Annualized.

(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.

<PAGE>

<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED SEPTEMBER 30, JULY 28, 1997*
--------------------------------------------- THROUGH
2000 1999 1998 SEPTEMBER 30, 1997
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS C SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period $10.96 $11.16 $12.80 $12.20
-----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.44 0.48 0.50 0.10
Net realized and unrealized gain (loss) (0.24) 0.55 (1.12) 0.61
------ ------ ------ -----
Total income (loss) from investment operations 0.20 1.03 (0.62) 0.71
-----------------------------------------------------------------------------------------------------------------------------------
Less dividends and distributions from:
Net investment income (0.44) (0.53) (0.43) (0.11)
Net realized gain (0.38) (0.70) (0.59) --
------ ------ ------ ------
Total dividends and distributions (0.82) (1.23) (1.02) (0.11)
-----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.34 $10.96 $11.16 $12.80
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 2.01% 9.38% (5.38)% 5.79%(1)
-----------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
-----------------------------------------------------------------------------------------------------------------------------------
Expenses 1.96%(3) 1.90%(3) 1.92%(3) 1.98%(2)
-----------------------------------------------------------------------------------------------------------------------------------
Net investment income 4.17%(3) 4.29%(3) 3.86%(3) 4.61%(2)
-----------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
-----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $25,594 $40,859 $5,630 $987
-----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 38% 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.

<PAGE>

<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED SEPTEMBER 30, JULY 28, 1997*
--------------------------------------------- THROUGH
2000 1999 1998 SEPTEMBER 30, 1997
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS D SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period $10.99 $11.18 $12.82 $12.20
-----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.54 0.60 0.64 0.12
Net realized and unrealized gain (loss) (0.24) 0.55 (1.15) 0.62
------ ------ --------- ---------
Total income (loss) from investment operations 0.30 1.15 (0.51) 0.74
-----------------------------------------------------------------------------------------------------------------------------------
Less dividends and distributions from:
Net investment income (0.55) (0.64) (0.54) (0.12)
Net realized gain (0.38) (0.70) (0.59) --
------ ------ ------ ---------
Total dividends and distributions (0.93) (1.34) (1.13) (0.12)
-----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.36 $10.99 $11.18 $12.82
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 2.98% 10.51% (4.46)% 5.98%(1)
-----------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
-----------------------------------------------------------------------------------------------------------------------------------
Expenses 0.97%(3) 0.93%(3) 0.92%(3) 0.96%(2)
-----------------------------------------------------------------------------------------------------------------------------------
Net investment income 5.16%(3) 5.26%(3) 4.86%(3) 5.41%(2)
-----------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
-----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $712 $740 $618 $21
-----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 38% 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.

<PAGE>

MORGAN STANLEY DEAN WITTER
FAMILY OF FUNDS

The Morgan Stanley Dean Witter Family of Funds offers investors a wide
range of investment choices. Come on in and meet the family!

<TABLE>
<CAPTION>
<S> <C> <C>
--------------------------------------------------------------------------------------------------------------
GROWTH FUNDS GROWTH FUNDS THEME FUNDS
Aggressive Equity Fund Financial Services Trust
American Opportunities Fund Health Sciences Trust
Capital Growth Securities Information Fund
Developing Growth Securities Natural Resource Development Securities
Growth Fund Technology Fund
Market Leader Trust
Mid-Cap Equity Trust GLOBAL/INTERNATIONAL FUNDS
New Discoveries Fund Competitive Edge Fund - "Best Ideas" Portfolio
Next Generation Trust European Growth Fund
Small Cap Growth Fund Fund of Funds - International Portfolio
Special Value Fund International Fund
Tax-Managed Growth Fund International SmallCap Fund
21st Century Trend Fund Japan Fund
Latin American Growth Fund
Pacific Growth Fund
--------------------------------------------------------------------------------------------------------------
GROWTH & INCOME FUND Balanced Growth Fund Total Market Index Fund
Balanced Income Fund Total Return Trust
Convertible Securities Trust Value Fund
Dividend Growth Securities Value-Added Market Series/Equity Portfolio
Equity Fund
Fund of Funds - Domestic Portfolio THEME FUNDS
Income Builder Fund Real Estate Fund
S&P 500 Index Fund Utilities Fund
S&P 500 Select Fund
Strategist Fund GLOBAL FUNDS
Global Dividend Growth Securities
Global Utilities Fund
--------------------------------------------------------------------------------------------------------------
INCOME FUNDS GOVERNMENT INCOME FUNDS GLOBAL INCOME FUNDS
Federal Securities Trust North American Government Income Trust
Short-Term U.S. Treasury Trust World Wide Income Trust
U.S. Government Securities Trust
DIVERSIFIED INCOME FUNDS TAX-FREE INCOME FUNDS
Diversified Income Trust California Tax-Free Income Fund
Hawaii Municipal Trust(FSC)
CORPORATE INCOME FUNDS Limited Term Municipal Trust(NL)
High Yield Securities Multi-State Municipal Series Trust(FSC)
Intermediate Income Securities New York Tax-Free Income Fund
Short-Term Bond Fund(NL) Tax-Exempt Securities Trust
--------------------------------------------------------------------------------------------------------------
MONEY MARKET FUNDS TAXABLE MONEY MARKET FUNDS TAX-FREE MONEY MARKET FUNDS
Liquid Asset Fund(MM) California Tax-Free Daily Income Trust(MM)
U.S. Government Money Market Trust(MM) New York Municipal Money Market Trust(MM)
Tax-Free Daily Income Trust(MM)
</TABLE>

There may be funds created after this Prospectus was published. Please consult
the inside back cover of a new fund's prospectus for its designation, e.g.,
Multi-Class Fund or Money Market Fund.

Unless otherwise noted, each listed Morgan Stanley Dean Witter Fund, except for
North American Government Income Trust and Short-Term U.S. Treasury Trust, is a
Multi-Class Fund. A Multi-Class Fund is a mutual fund offering multiple Classes
of shares. The other types of funds are: NL -- No-Load (Mutual) Fund; MM --
Money Market Fund; FSC -- A mutual fund sold with a front-end sales charge and
a distribution (12b-1) fee.

<PAGE>

PROSPECTUS - NOVEMBER 30, 2000

Additional information about the Fund's investments is available in the Fund's
Annual and Semi-Annual Reports to Shareholders. In the Fund's Annual Report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year. The
Fund's Statement of Additional Information also provides additional information
about the Fund. The Statement of Additional Information is incorporated herein
by reference (legally is part of this Prospectus). For a free copy of any of
these documents, to request other information about the Fund, or to make
shareholder inquiries, please call:

(800) 869-NEWS

You also may obtain information about the Fund by calling your Morgan Stanley
Dean Witter Financial Advisor or by visiting our Internet site at:

WWW.MSDWADVICE.COM/FUNDS

Information about the Fund (including the Statement of Additional Information)
can be viewed and copied at the Securities and Exchange Commission's Public
Reference Room in Washington, DC. Information about the Reference Room's
operations may be obtained by calling the SEC at (202) 942-8090. Reports and
other information about the Fund are available on the EDGAR Database on the
SEC's Internet site (www.sec.gov), and copies of this information may be
obtained, after paying a duplicating fee, by electronic request at the
following E-mail address: [email protected], or by writing the Public
Reference Section of the SEC, Washington, DC 20549-0102.

TICKER SYMBOLS:

Class A: INBAX Class C: INBCX
------------------- --------------------
Class B: INBBX Class D: INBDX
------------------- --------------------

(THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-7575)

MORGAN STANLEY DEAN WITTER

INCOME BUILDER FUND

[GRAPHIC OMITTED]

A MUTUAL FUND WHOSE PRIMARY
INVESTMENT OBJECTIVE IS TO SEEK
REASONABLE INCOME; AS A
SECONDARY OBJECTIVE, THE FUND
SEEKS GROWTH OF CAPITAL

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION MORGAN STANLEY DEAN WITTER
INCOME BUILDER FUND

November 30, 2000
--------------------------------------------------------------------------------
This Statement of Additional Information is not a Prospectus. The
Prospectus (dated November 30, 2000) for Morgan Stanley Dean Witter Income
Builder Fund may be obtained without charge from the Fund at its address or
telephone number listed below or from Dean Witter Reynolds at any of its branch
offices.

Morgan Stanley Dean Witter Income Builder Fund
Two World Trade Center
New York, New York 10048
(800) 869-NEWS

<PAGE>

TABLE OF CONTENTS
--------------------------------------------------------------------------------

I. Fund History ..................................................... 4
II. Description of the Fund and Its Investments and Risks ............ 4
II. Description of the Fund and Its Investments and Risks ............ 4
A. Classification .............................................. 4
B. Investment Strategies and Risks ............................. 4
C. Fund Policies/Investment Restrictions ....................... 7
III. Management of the Fund ........................................... 8
A. Board of Trustees ........................................... 8
B. Management Information ...................................... 8
C. Compensation ................................................ 13
IV. Control Persons and Principal Holders of Securities .............. 15
V. Investment Management and Other Services ......................... 15
A. Investment Manager .......................................... 15
B. Principal Underwriter ....................................... 16
C. Services Provided by the Investment Manager ................. 16
D. Dealer Reallowances ......................................... 17
E. Rule 12b-1 Plan ............................................. 17
F. Other Service Providers ................................... 21
G. Codes of Ethics ............................................ 22
VI. Brokerage Allocation and Other Practices ......................... 22
A. Brokerage Transactions ...................................... 22
B. Commissions ................................................. 22
C. Brokerage Selection ......................................... 23
D. Directed Brokerage .......................................... 24
E. Regular Broker-Dealers ...................................... 24
VII. Capital Stock and Other Securities ............................... 24
VIII. Purchase, Redemption and Pricing of Shares ....................... 25
A. Purchase/Redemption of Shares ............................... 25
B. Offering Price .............................................. 25
IX. Taxation of the Fund and Shareholders ............................ 26
X. Underwriters ..................................................... 28
XI. Calculation of Performance Data .................................. 28
XII. Financial Statements ............................................. 30

2
<PAGE>

GLOSSARY OF SELECTED DEFINED TERMS

The terms defined in this glossary are frequently used in this Statement
of Additional Information (other terms used occasionally are defined in the
text of the document).

"Custodian" - The Bank of New York.

"Dean Witter Reynolds" - Dean Witter Reynolds Inc., a wholly-owned
broker-dealer subsidiary of MSDW.

"Distributor" - Morgan Stanley Dean Witter Distributors Inc., a
wholly-owned broker-dealer subsidiary of MSDW.

"Financial Advisors" - Morgan Stanley Dean Witter authorized financial
services representatives.

"Fund" - Morgan Stanley Dean Witter Income Builder Fund, a registered
open-end investment company.

"Independent Trustees" - Trustees who are not "interested persons" (as
defined by the Investment Company Act) of the Fund.

"Investment Manager" - Morgan Stanley Dean Witter Advisors Inc., a
wholly-owned investment advisor subsidiary of MSDW.

"Morgan Stanley & Co." - Morgan Stanley & Co. Incorporated, a wholly-owned
broker-dealer subsidiary of MSDW.

"Morgan Stanley Dean Witter Funds" - Registered investment companies (i)
for which the Investment Manager serves as the investment advisor and (ii) that
hold themselves out to investors as related companies for investment and
investor services.

"MSDW" - Morgan Stanley Dean Witter & Co., a preeminent global financial
services firm.

"MSDW Services Company" - Morgan Stanley Dean Witter Services Company
Inc., a wholly-owned fund services subsidiary of the Investment Manager.

"Transfer Agent" - Morgan Stanley Dean Witter Trust FSB, a wholly-owned
transfer agent subsidiary of MSDW.

"Trustees" - The Board of Trustees of the Fund.

<PAGE>

I. FUND HISTORY
--------------------------------------------------------------------------------
The Fund was organized as a Massachusetts business trust, under a
Declaration of Trust, on March 21, 1996, with the name Dean Witter Income
Builder Fund. On June 22, 1998, the Fund's name was changed to Morgan Stanley
Dean Witter Income Builder Fund.

II. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
--------------------------------------------------------------------------------

A. CLASSIFICATION

The Fund is an open-end, diversified management investment company whose
primary investment objective is to seek reasonable income. As a secondary
objective, the Fund seeks growth of capital.

B. INVESTMENT STRATEGIES AND RISKS

The following discussion of the Fund's investment strategies and risks
should be read with the sections of the Fund's Prospectus titled "Principal
Investment Strategies," "Principal Risks," "Additional Investment Strategy
Information," and "Additional Risk Information."

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Fund may enter into
forward foreign currency exchange contracts ("forward contracts") to "lock in"
the price of a security in U.S. dollars or some other foreign currency which
the Fund is holding in its portfolio. By entering into a forward contract for
the purchase or sale, for a fixed amount of dollars or other currency, of the
amount of foreign currency involved in the underlying security transactions,
the Fund may be able to protect itself against a possible loss resulting from
an adverse change in the relationship between the U.S. dollar or other currency
which is being used for the security purchase and the foreign currency in which
the security is denominated during the period between the date on which the
security is purchased or sold and the date on which payment is made or
received. A forward contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. These contracts are traded in the interbank market conducted
directly between currency traders (usually large, commercial and investment
banks) and their customers. Forward contracts only will be entered into with
United States banks and their foreign branches, insurance companies and other
dealers or foreign banks whose assets total $1 billion or more. A forward
contract generally has no deposit requirement, and no commissions are charged
at any stage for trades.

Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. It will, however, do so from time to time, and investors
should be aware of the costs of currency conversion. Although foreign exchange
dealers do not charge a fee for conversion, they do realize a profit based on
the spread between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at
one rate, while offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer.

The Fund may be limited in its ability to enter into hedging transactions
involving forward contracts by the Internal Revenue Code requirements relating
to qualification as a regulated investment company.

Forward currency contracts may limit gains on portfolio securities that
could otherwise be realized had they not been utilized and could result in
losses.

MONEY MARKET SECURITIES. The Fund may invest in various money market
securities for cash management purposes, which among others may include
commercial paper, bank acceptances, bank obligations, corporate debt
securities, certificates of deposit, U.S. Government securities, obligations of
savings institutions and repurchase agreements. Such securities include:

U.S. or Foreign Government Securities. Obligations issued or guaranteed as
to principal and interest by the United States or its agencies (such as the
Export-Import Bank of the United States, Federal Housing Administration and
Government National Mortgage Association) or its instrumentalities (such as the
Federal Home Loan Bank), including Treasury bills, notes and bonds;

<PAGE>

Bank Obligations. Obligations (including certificates of deposit, time
deposits and bankers' acceptances) of banks subject to regulation by the U.S.
Government and having total assets of $1 billion or more, and instruments
secured by such obligations, not including obligations of foreign branches of
domestic banks except to the extent below;

Eurodollar Certificates of Deposit. Eurodollar certificates of deposit
issued by foreign branches of domestic banks having total assets of $1 billion
or more;

Obligations of Savings Institutions. Certificates of deposit of savings
banks and savings and loan associations, having total assets of $1 billion or
more;

Fully Insured Certificates of Deposit. Certificates of deposit of banks
and savings institutions, having total assets of less than $1 billion, if the
principal amount of the obligation is federally insured by the Bank Insurance
Fund or the Savings Association Insurance Fund (each of which is administered
by the FDIC), limited to $100,000 principal amount per certificate and to 10%
or less of the Fund's total assets in all such obligations and in all illiquid
assets, in the aggregate;

Commercial Paper. Commercial paper rated within the two highest grades by
Standard & Poor's Corporation ("S&P") or the two highest grades by Moody's
Investors Service, Inc. ("Moody's") or, if not rated, issued by a company
having an outstanding debt issue rated at least AA by S&P or Aa by Moody's; and

Repurchase Agreements. The Fund may invest in repurchase agreements. When
cash may be available for only a few days, it may be invested by the Fund in
repurchase agreements until such time as it may otherwise be invested or used
for payments of obligations of the Fund. These agreements, which may be viewed
as a type of secured lending by the Fund, typically involve the acquisition by
the Fund of debt securities from a selling financial institution such as a
bank, savings and loan association or broker-dealer. The agreement provides
that the Fund will sell back to the institution, and that the institution will
repurchase, the underlying security serving as collateral at a specified price
and at a fixed time in the future, usually not more than seven days from the
date of purchase. The collateral will be marked-to-market daily to determine
that the value of the collateral, as specified in the agreement, does not
decrease below the purchase price plus accrued interest. If such decrease
occurs, additional collateral will be requested and, when received, added to
the account to maintain full collateralization. The Fund will accrue interest
from the institution until the time when the repurchase is to occur. Although
this date is deemed by the Fund to be the maturity date of a repurchase
agreement, the maturities of securities subject to repurchase agreements are
not subject to any limits.

While repurchase agreements involve certain risks not associated with
direct investments in debt securities, the Fund follows procedures designed to
minimize such risks. These procedures include effecting repurchase transactions
only with large, well-capitalized and well-established financial institutions
whose financial condition will be continually monitored by the Investment
Manager subject to procedures established by the Trustees. In addition, as
described above, the value of the collateral underlying the repurchase
agreement will be at least equal to the repurchase price, including any accrued
interest earned on the repurchase agreement. In the event of a default or
bankruptcy by a selling financial institution, the Fund will seek to liquidate
such collateral. However, the exercising of the Fund's right to liquidate such
collateral could involve certain costs or delays and, to the extent that
proceeds from any sale upon a default of the obligation to repurchase were less
than the repurchase price, the Fund could suffer a loss.

ZERO COUPON SECURITIES. A portion of the fixed-income securities purchased
by the Fund may be zero coupon securities. Such securities are purchased at a
discount from their face amount, giving the purchaser the right to receive
their full value at maturity. The interest earned on such securities is,
implicitly, automatically compounded and paid out at maturity. While such
compounding at a constant rate eliminates the risk of receiving lower yields
upon reinvestment of interest if prevailing interest rates decline, the owner
of a zero coupon security will be unable to participate in higher yields upon
reinvestment of interest received on interest-paying securities if prevailing
interest rates rise.

<PAGE>

A zero coupon security pays no interest to its holder during its life.
Therefore, to the extent the Fund invests in zero coupon securities, it will
not receive current cash available for distribution to shareholders. In
addition, zero coupon securities are subject to substantially greater price
fluctuations during periods of changing prevailing interest rates than are
comparable securities which pay interest on a current basis. Current federal
tax law requires that a holder (such as the Fund) of a zero coupon security
accrue a portion of the discount at which the security was purchased as income
each year even though the Fund receives no interest payments in cash on the
security during the year.

LENDING PORTFOLIO SECURITIES. The Fund may lend its portfolio securities
to brokers, dealers and other financial institutions, provided that the loans
are callable at any time by the Fund, and are at all times secured by cash or
cash equivalents, which are maintained in a segregated account pursuant to
applicable regulations and that are equal to at least 100% of the market value,
determined daily, of the loaned securities. The advantage of these loans is
that the Fund continues to receive the income on the loaned securities while at
the same time earning interest on the cash amounts deposited as collateral,
which will be invested in short-term obligations. The Fund will not lend more
than 25% of the value of its total assets.

As with any extensions of credit, there are risks of delay in recovery
and, in some cases, even loss of rights in the collateral should the borrower
of the securities fail financially. However, these loans of portfolio
securities will only be made to firms deemed by the Fund's management to be
creditworthy and when the income which can be earned from such loans justifies
the attendant risks. Upon termination of the loan, the borrower is required to
return the securities to the Fund. Any gain or loss in the market price during
the loan period would inure to the Fund.

When voting or consent rights which accompany loaned securities pass to
the borrower, the Fund will follow the policy of calling the loaned securities,
to be delivered within one day after notice, to permit the exercise of the
rights if the matters involved would have a material effect on the Fund's
investment in the loaned securities. The Fund will pay reasonable finder's,
administrative and custodial fees in connection with a loan of its securities.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. From
time to time the Fund may purchase securities on a when-issued or delayed
delivery basis or may purchase or sell securities on a forward commitment
basis. When these transactions are negotiated, the price is fixed at the time
of the commitment, but delivery and payment can take place a month or more
after the date of commitment. While the Fund will only purchase securities on a
when-issued, delayed delivery or forward commitment basis with the intention of
acquiring the securities, the Fund may sell the securities before the
settlement date, if it is deemed advisable. The securities so purchased or sold
are subject to market fluctuation and no interest or dividends accrue to the
purchaser prior to the settlement date.

At the time the Fund makes the commitment to purchase or sell securities
on a when-issued, delayed delivery or forward commitment basis, it will record
the transaction and thereafter reflect the value, each day, of such security
purchased, or if a sale, the proceeds to be received, in determining its net
asset value. At the time of delivery of the securities, their value may be more
or less than the purchase or sale price. An increase in the percentage of the
Fund's assets committed to the purchase of securities on a when-issued, delayed
delivery or forward commitment basis may increase the volatility of its net
asset value. The Fund will also establish a segregated account on the Fund's
books in which it will continually maintain cash or cash equivalents or other
liquid portfolio securities equal in value to commitments to purchase
securities on a when-issued, delayed delivery or forward commitment basis.

WHEN, AS AND IF ISSUED SECURITIES. The Fund may purchase securities on a
"when, as and if issued" basis under which the issuance of the security depends
upon the occurrence of a subsequent event, such as approval of a merger,
corporate reorganization or debt restructuring. The commitment for the purchase
of any such security will not be recognized in the portfolio of the Fund until
the Investment Manager determines that issuance of the security is probable. At
that time, the Fund will record the transaction and, in determining its net
asset value, will reflect the value of the security daily. At that time, the
Fund will also establish a segregated account on the Fund's books in which it
will maintain cash or cash equivalents or other liquid portfolio securities
equal in value to recognized commitments for such securities.

<PAGE>

The value of the Fund's commitments to purchase the securities of any one
issuer, together with the value of all securities of such issuer owned by the
Fund, may not exceed 5% of the value of the Fund's total assets at the time the
initial commitment to purchase such securities is made. An increase in the
percentage of the Fund's assets committed to the purchase of securities on a
"when, as and if issued" basis may increase the volatility of its net asset
value. The Fund may also sell securities on a "when, as and if issued" basis
provided that the issuance of the security will result automatically from the
exchange or conversion of a security owned by the Fund at the time of sale.

C. FUND POLICIES/INVESTMENT RESTRICTIONS

The investment objectives, policies and restrictions listed below have
been adopted by the Fund as fundamental policies. Under the Investment Company
Act of 1940, as amended (the "Investment Company Act"), a fundamental policy
may not be changed without the vote of a majority of the outstanding voting
securities of the Fund. The Investment Company Act defines a majority as the
lesser of (a) 67% or more of the shares present at a meeting of shareholders,
if the holders of 50% of the outstanding shares of the Fund are present or
represented by proxy; or (b) more than 50% of the outstanding shares of the
Fund. For purposes of the following restrictions: (i) all percentage
limitations apply immediately after a purchase or initial investment (unless
otherwise noted); and (ii) any subsequent change in any applicable percentage
resulting from market fluctuations or other changes in total or net assets does
not require elimination of any security from the portfolio.

The Fund will:

1. As a primary objective, seek reasonable income.

2. As a secondary objective, seek growth of capital.

The Fund may not:

1. Invest more than 5% of the value of its total assets in the securities
of any one issuer (other than obligations issued, or guaranteed by, the
United States Government, its agencies or instrumentalities).

2. Purchase more than 10% of all outstanding voting securities or any
class of securities of any one issuer.

3. Invest 25% or more of the value of its total assets in securities of
issuers in any one industry. This restriction does not apply to
obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities.

4. Invest more than 5% of the value of its total assets in securities of
issuers having a record, together with predecessors, of less than three
years of continuous operation. This restriction shall not apply to any
obligation of the United States Government, its agencies or
instrumentalities.

5. Invest in securities of any issuer if in the exercise of reasonable
diligence, the Fund has determined that any officer or trustee/director
of the Fund or of the Investment Manager owns more than 1/2 of 1% of
the outstanding securities of such issuer, and such officers and
trustees/directors who own more than 1/2 of 1% own in the aggregate
more than 5% of the outstanding securities of such issuer.

6. Purchase or sell real estate or interests therein (including limited
partnership interests), although the Fund may purchase securities of
issuers which engage in real estate operations and securities secured by
real estate or interests therein.

7. Purchase or sell commodities.

8. Purchase oil, gas or other mineral leases, rights or royalty contracts
or exploration or development programs, except that the Fund may invest
in the securities of companies which operate, invest in, or sponsor such
programs.

<PAGE>

9. Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of assets.

10. Borrow money, except that the Fund may borrow from a bank for temporary
or emergency purposes in amounts not exceeding 5% (taken at the lower of
cost or current value) of its total assets (not including the amount
borrowed).

11. Pledge its assets or assign or otherwise encumber them except to
secure permitted borrowings.

12. Issue senior securities as defined in the Investment Company Act except
insofar as the Fund may be deemed to have issued a senior security by
reason of: (a) entering into any repurchase agreement; (b) borrowing
money; (c) purchasing any securities on a when-issued or delayed
delivery basis; or (d) lending portfolio securities.

13. Make loans of money or securities, except by: (a) the purchase of debt
obligations in which the Fund may invest consistent with its investment
objective and policies; (b) investment in repurchase agreements; or (c)
lending its portfolio securities.

14. Make short sales of securities.

15. Purchase securities on margin, except for such short-term loans as are
necessary for the clearance of portfolio securities.

16. Engage in the underwriting of securities, except insofar as the Fund
may be deemed an underwriter under the Securities Act of 1933 in
disposing of a portfolio security.

17. Invest for the purpose of exercising control or management of any
other issuer.

In addition, as non-fundamental policies, the Fund will not invest in
options or futures contracts or in more than 5% of the value of its net assets
in warrants, including not more than 2% of such assets in warrants not listed
on the New York or American Stock Exchange. However, the acquisition of
warrants attached to other securities is not subject to this restriction.

Notwithstanding any other investment policy or restriction, the Fund may
seek to achieve its investment objectives by investing all or substantially all
of its assets in another investment company having substantially the same
investment objectives and policies as the Fund.

III. MANAGEMENT OF THE FUND
--------------------------------------------------------------------------------

A. BOARD OF TRUSTEES

The Board of Trustees of the Fund oversees the management of the Fund but
does not itself manage the Fund. The Trustees review various services provided
by or under the direction of the Investment Manager to ensure that the Fund's
general investment policies and programs are properly carried out. The Trustees
also conduct their review to ensure that administrative services are provided
to the Fund in a satisfactory manner.

Under state law, the duties of the Trustees are generally characterized as
a duty of loyalty and a duty of care. The duty of loyalty requires a Trustee to
exercise his or her powers in the interest of the Fund and not the Trustee's
own interest or the interest of another person or organization. A Trustee
satisfies his or her duty of care by acting in good faith with the care of an
ordinarily prudent person and in a manner the Trustee reasonably believes to be
in the best interest of the Fund and its shareholders.

B. MANAGEMENT INFORMATION

Trustees and Officers. The Board of the Fund consists of nine (9)
Trustees. These same individuals also serve as directors or trustees for all of
the Morgan Stanley Dean Witter Funds. Six Trustees (67% of the total number)
have no affiliation or business connection with the Investment Manager or any
of its affiliated persons and do not own any stock or other securities issued
by the

<PAGE>

Investment Manager's parent company, MSDW. These are the "non-interested" or
"independent" Trustees. The other three Trustees (the "management Trustees")
are affiliated with the Investment Manager.

The Trustees and executive officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with the
Investment Manager, and with the Morgan Stanley Dean Witter Funds (there were
93 such Funds as of the calendar year ended December 31, 1999), are shown
below.

<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
------------------------------------------- ----------------------------------------------------
<S> <C>
Michael Bozic (59) ........................ Retired; Director or Trustee of the Morgan Stanley
Trustee Dean Witter Funds; formerly Vice Chairman of
c/o Mayer, Brown & Platt Kmart Corporation (December 1998-October
Counsel to the Independent Trustees 2000), Chairman and Chief Executive Officer of
1675 Broadway Levitz Furniture Corporation (November 1995-
New York, New York November 1998) and President and Chief
Executive Officer of Hills Department Stores (May
1991-July 1995); formerly variously Chairman,
Chief Executive Officer, President and Chief
Operating Officer (1987-1991) of the Sears
Merchandise Group of Sears, Roebuck and Co.;
Director of Weirton Steel Corporation.

Charles A. Fiumefreddo* (67) .............. Chairman, Director or Trustee and Chief Executive
Chairman of the Board, Officer of the Morgan Stanley Dean Witter Funds;
Chief Executive Officer and Trustee formerly Chairman, Chief Executive Officer and
Two World Trade Center Director of the Investment Manager, the Distributor
New York, New York and MSDW Services Company; Executive Vice
President and Director of Dean Witter Reynolds;
Chairman and Director of the Transfer Agent;
formerly Director and/or officer of various MSDW
subsidiaries (until June 1998).

Edwin J. Garn (68) ........................ Director or Trustee of the Morgan Stanley Dean
Trustee Witter Funds; formerly United States Senator (R-
c/o Summit Ventures LLC Utah) (1974-1992) and Chairman, Senate Banking
1 Utah Center Committee (1980-1986); formerly Mayor of Salt
201 S. Main Street Lake City, Utah (1971-1974); formerly Astronaut,
Salt Lake City, Utah Space Shuttle Discovery (April 12-19, 1985); Vice
Chairman, Huntsman Corporation (chemical
company); Director of Franklin Covey (time
management systems), BMW Bank of North
America, Inc. (industrial loan corporation), United
Space Alliance (joint venture between Lockheed
Martin and the Boeing Company) and Nuskin Asia
Pacific (multilevel marketing); member of the Utah
Regional Advisory Board of Pacific Corp.; member
of the board of various civic and charitable
organizations.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
------------------------------------------- ----------------------------------------------------
<S> <C>
Wayne E. Hedien (66) ...................... Retired; Director or Trustee of the Morgan Stanley
Trustee Dean Witter Funds; Director of The PMI Group,
c/o Mayer, Brown & Platt Inc. (private mortgage insurance); Trustee and
Counsel to the Independent Trustees Vice Chairman of The Field Museum of Natural
1675 Broadway History; formerly associated with the Allstate
New York, New York Companies (1966-1994), most recently as
Chairman of The Allstate Corporation (March
1993-December 1994) and Chairman and Chief
Executive Officer of its wholly-owned subsidiary,
Allstate Insurance Company (July 1989-December
1994); director of various other business and
charitable organizations.

James F. Higgins* (52) .................... Chairman of the Private Client Group of MSDW
Trustee (since August 2000); Director of the Transfer Agent
Two World Trade Center and Dean Witter Realty Inc.; Director or Trustee of
New York, New York the Morgan Stanley Dean Witter Funds (since
June 2000); previously President and Chief
Operating Officer of the Private Client Group of
MSDW (May 1999-August 2000), President and
Chief Operating Officer of Individual Securities of
MSDW (February 1997-May 1999), President and
Chief Operating Officer of Dean Witter Financial
(1989-1995) and Director (1985-1997) of Dean
Witter Reynolds.

Dr. Manuel H. Johnson (51) ................ Senior Partner, Johnson Smick International, Inc.,
Trustee a consulting firm; Co-Chairman and a founder of
c/o Johnson Smick International, Inc. the Group of Seven Council (G7C), an international
1133 Connecticut Avenue, N.W. economic commission; Chairman of the Audit
Washington, D.C. Committee and Director or Trustee of the Morgan
Stanley Dean Witter Funds; Director of Greenwich
Capital Markets, Inc. (broker-dealer), Independence
Standards Board (private sector organization
governing independence of auditors) and NVR,
Inc. (home construction); Chairman and Trustee of
the Financial Accounting Foundation (oversight
organization of the Financial Accounting Standards
Board); formerly Vice Chairman of the Board of
Governors of the Federal Reserve System and
Assistant Secretary of the U.S. Treasury.

Michael E. Nugent (64) .................... General Partner, Triumph Capital, L.P., a private
Trustee investment partnership; Chairman of the Insurance
c/o Triumph Capital, L.P. Committee and Director or Trustee of the Morgan
237 Park Avenue Stanley Dean Witter Funds; formerly Vice
New York, New York President, Bankers Trust Company and BT Capital
Corporation; director of various business
organizations.

Philip J. Purcell* (57) ................... Chairman of the Board of Directors and Chief
Trustee Executive Officer of MSDW, Dean Witter Reynolds
1585 Broadway and Novus Credit Services Inc.; Director of the
New York, New York Distributor; Director or Trustee of the Morgan
Stanley Dean Witter Funds; Director of American
Airlines, Inc. and its parent company, AMR
Corporation; Director and/or officer of various
MSDW subsidiaries.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
------------------------------------------- -----------------------------------------------------
<S> <C>
John L. Schroeder (70) .................... Retired; Chairman of the Derivatives Committee
Trustee and Director or Trustee of the Morgan Stanley
c/o Mayer, Brown & Platt Dean Witter Funds; Director of Citizens
Counsel to the Independent Trustees Communications Company (telecommunications
1675 Broadway company); formerly Executive Vice President and
New York, New York Chief Investment Officer of the Home Insurance
Company (August 1991-September 1995).

Mitchell M. Merin (47) .................... President and Chief Operating Officer of Asset
President Management of MSDW (since December 1998);
Two World Trade Center President and Director (since April 1997) and Chief
New York, New York Executive Officer (since June 1998) of the
Investment Manager and MSDW Services
Company; Chairman, Chief Executive Officer and
Director of the Distributor (since June 1998);
Chairman and Chief Executive Officer (since June
1998) and Director (since January 1998) of the
Transfer Agent; Director of various MSDW
subsidiaries; President of the Morgan Stanley Dean
Witter Funds (since May 1999), Trustee of various
Van Kampen investment companies (since
December 1999); previously Chief Strategic Officer
of the Investment Manager and MSDW Services
Company and Executive Vice President of the
Distributor (April 1997-June 1998), Vice President
of the Morgan Stanley Dean Witter Funds (May
1997-April 1999), and Executive Vice President of
Dean Witter, Discover & Co.

Barry Fink (45) ........................... General Counsel of Asset Management of MSDW
Vice President, (since May 2000); Executive Vice President (since
Secretary and General Counsel December 1999) and Secretary and General
Two World Trade Center Counsel (since February 1997) and Director (since
New York, New York July 1998) of the Investment Manager and MSDW
Services Company; Vice President, Secretary and
General Counsel of the Morgan Stanley Dean
Witter Funds (since February 1997); Vice President
and Secretary of the Distributor; previously, Senior
Vice President (March 1997-December 1999), First
Vice President, Assistant Secretary and Assistant
General Counsel of the Investment Manager and
MSDW Services Company.

Paul D. Vance (64) ........................ Senior Vice President and Director of the Growth
Vice President and Income Group of the Investment Manager;
Two World Trade Center Vice President of various Morgan Stanley Dean
New York, New York Witter Funds.

Peter M. Avelar (42) ...................... Senior Vice President and Director of the High
Vice President Yield Group of the Investment Manager; Vice
Two World Trade Center President of various Morgan Stanley Dean Witter
New York, New York Funds.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
------------------------------------------- ----------------------------------------------------
<S> <C>
Catherine Maniscalco (37) ................. Vice President (since June 1997) and a portfolio
Vice President manager with the Investment Manager for over five
Two World Trade Center years.
New York, New York

Thomas F. Caloia (54) ..................... First Vice President and Assistant Treasurer of the
Treasurer Investment Manager, the Distributor and MSDW
Two World Trade Center Services Company; Treasurer of the Morgan
New York, New York Stanley Dean Witter Funds.
</TABLE>

----------
* Denotes Trustees who are "interested persons" of the Fund as defined by the
Investment Company Act.

In addition, Ronald E. Robison, Executive Vice President, Chief
Administrative Officer and Director of the Investment Manager and MSDW Services
Company, Robert S. Giambrone, Senior Vice President of the Investment Manager,
MSDW Services Company, the Distributor and the Transfer Agent and Director of
the Transfer Agent, and Joseph J. McAlinden, Executive Vice President and Chief
Investment Officer of the Investment Manager and Director of the Transfer
Agent, are Vice Presidents of the Fund.

In addition, Marilyn K. Cranney, Todd Lebo, Lou Anne D. McInnis, Carsten
Otto and Ruth Rossi, First Vice Presidents and Assistant General Counsels of
the Investment Manager and MSDW Services Company, and Natasha Kassian,
Assistant Vice President and Assistant General Counsel of the Investment
Manager and MSDW Services Company, are Assistant Secretaries of the Fund.

INDEPENDENT DIRECTORS/TRUSTEES AND THE COMMITTEES. Law and regulation
establish both general guidelines and specific duties for the independent
directors/trustees. The Morgan Stanley Dean Witter Funds seek as independent
directors/trustees individuals of distinction and experience in business and
finance, government service or academia; these are people whose advice and
counsel are in demand by others and for whom there is often competition. To
accept a position on the Funds' boards, such individuals may reject other
attractive assignments because the Funds make substantial demands on their
time. All of the independent directors/trustees serve as members of the Audit
Committee. In addition, three of the directors/trustees, including two
independent directors/trustees, serve as members of the Derivatives Committee
and the Insurance Committee.

The independent directors/trustees are charged with recommending to the
full board approval of management, advisory and administration contracts, Rule
12b-1 plans and distribution and underwriting agreements; continually reviewing
Fund performance; checking on the pricing of portfolio securities, brokerage
commissions, transfer agent costs and performance, and trading among Funds in
the same complex; and approving fidelity bond and related insurance coverage
and allocations, as well as other matters that arise from time to time. The
independent directors/trustees are required to select and nominate individuals
to fill any independent director/trustee vacancy on the board of any Fund that
has a Rule 12b-1 plan of distribution. Most of the Morgan Stanley Dean Witter
Funds have a Rule 12b-1 plan.

The Audit Committee is charged with recommending to the full board the
engagement or discharge of the Fund's independent auditors; directing
investigations into matters within the scope of the independent auditors'
duties, including the power to retain outside specialists; reviewing with the
independent auditors the audit plan and results of the auditing engagement;
approving professional services provided by the independent auditors and other
accounting firms prior to the performance of the services; reviewing the
independence of the independent auditors; considering the range of audit and
non-audit fees; reviewing the adequacy of the Fund's system of internal
controls; and preparing and submitting Committee meeting minutes to the full
board.

The board of each Fund has a Derivatives Committee to approve parameters
for and monitor the activities of the Fund with respect to derivative
investments, if any, made by the Fund.

Finally, the board of each Fund has formed an Insurance Committee to
review and monitor the insurance coverage maintained by the Fund.

<PAGE>

ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT DIRECTORS/TRUSTEES
FOR ALL MORGAN STANLEY DEAN WITTER FUNDS. The independent directors/trustees
and the Funds' management believe that having the same independent
directors/trustees for each of the Morgan Stanley Dean Witter Funds avoids the
duplication of effort that would arise from having different groups of
individuals serving as independent directors/trustees for each of the Funds or
even of sub-groups of Funds. They believe that having the same individuals
serve as independent directors/trustees of all the Funds tends to increase
their knowledge and expertise regarding matters which affect the Fund complex
generally and enhances their ability to negotiate on behalf of each Fund with
the Fund's service providers. This arrangement also precludes the possibility
of separate groups of independent directors/trustees arriving at conflicting
decisions regarding operations and management of the Funds and avoids the cost
and confusion that would likely ensue. Finally, having the same independent
directors/trustees serve on all Fund boards enhances the ability of each Fund
to obtain, at modest cost to each separate Fund, the services of independent
directors/trustees, of the caliber, experience and business acumen of the
individuals who serve as independent directors/trustees of the Morgan Stanley
Dean Witter Funds.

TRUSTEE AND OFFICER INDEMNIFICATION. The Fund's Declaration of Trust
provides that no Trustee, officer, employee or agent of the Fund is liable to
the Fund or to a shareholder, nor is any Trustee, officer, employee or agent
liable to any third persons in connection with the affairs of the Fund, except
as such liability may arise from his/her or its own bad faith, willful
misfeasance, gross negligence or reckless disregard of his/her or its duties.
It also provides that all third persons shall look solely to the Fund property
for satisfaction of claims arising in connection with the affairs of the Fund.
With the exceptions stated, the Declaration of Trust provides that a Trustee,
officer, employee or agent is entitled to be indemnified against all liability
in connection with the affairs of the Fund.

C. COMPENSATION

The Fund pays each Independent Trustee an annual fee of $800 plus a per
meeting fee of $50 for meetings of the Board of Trustees, the Independent
Trustees or Committees of the Board of Trustees attended by the Trustee (the
Fund pays the Chairman of the Audit Committee an additional annual fee of $750,
and the Chairmen of the Derivatives and Insurance Committees additional annual
fees of $500). If a Board meeting and a meeting of the Independent Trustees or
a Committee meeting, or a meeting of the Independent Trustees and/or more than
one Committee meeting, take place on a single day, the Trustees are paid a
single meeting fee by the Fund. The Fund also reimburses such Trustees for
travel and other out-of-pocket expenses incurred by them in connection with
attending such meetings. Trustees and officers of the Fund who are or have been
employed by the Investment Manager or an affiliated company receive no
compensation or expense reimbursement from the Fund for their services as
Trustee.

The following table illustrates the compensation that the Fund paid to its
Independent Trustees for the fiscal year ended September 30, 2000.

FUND COMPENSATION

Aggregate
Compensation
Name of Independent Trustee From the Fund
------------------------------- --------------
Michael Bozic ................. $1,550
Edwin J. Garn ................. 1,600
Wayne E. Hedien ............... 1,600
Dr. Manuel H. Johnson ......... 2,350
Michael E. Nugent ............. 2,100
John L. Schroeder ............. 2,050

<PAGE>

The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1999 for services
to the 93 Morgan Stanley Dean Witter Funds that were in operation at December
31, 1999.

CASH COMPENSATION FROM MORGAN STANLEY DEAN WITTER FUNDS

TOTAL CASH
COMPENSATION
FOR SERVICES TO
93 MORGAN
STANLEY DEAN
NAME OF INDEPENDENT TRUSTEE WITTER FUNDS
------------------------------- ---------------
Michael Bozic .............................. $134,600
Edwin J. Garn .............................. 138,700
Wayne E. Hedien ............................ 138,700
Dr. Manuel H. Johnson ...................... 208,638
Michael E. Nugent .......................... 193,324
John L. Schroeder .......................... 193,324

As of the date of this Statement of Additional Information, 55 of the
Morgan Stanley Dean Witter Funds, not including the Fund, have adopted a
retirement program under which an independent director/trustee who retires
after serving for at least five years (or such lesser period as may be
determined by the board) as an independent director/trustee of any Morgan
Stanley Dean Witter Fund that has adopted the retirement program (each such
Fund referred to as an "Adopting Fund" and each such director/trustee referred
to as an "Eligible Trustee") is entitled to retirement payments upon reaching
the eligible retirement age (normally, after attaining age 72). Annual payments
are based upon length of service.

Currently, upon retirement, each Eligible Trustee is entitled to receive
from the Adopting Fund, commencing as of his or her retirement date and
continuing for the remainder of his or her life, an annual retirement benefit
(the "Regular Benefit") equal to 30.22% of his or her Eligible Compensation
plus 0.5036667% of such Eligible Compensation for each full month of service as
an independent director/trustee of any Adopting Fund in excess of five years up
to a maximum of 60.44% after ten years of service. The foregoing percentages
may be changed by the board.(1) "Eligible Compensation" is one-fifth of the
total compensation earned by such Eligible Trustee for service to the Adopting
Fund in the five year period prior to the date of the Eligible Trustee's
retirement. Benefits under the retirement program are accrued as expenses on
the books of the Adopting Funds. Such benefits are not secured or funded by the
Adopting Funds.

The following table illustrates the retirement benefits accrued to the
Fund's Independent Trustees by the 55 Morgan Stanley Dean Witter Funds (not
including the Fund) for the year ended December 31, 1999, and the estimated
retirement benefits for the Independent Trustees, to commence upon their
retirement, from the 55 Morgan Stanley Dean Witter Funds as of December 31,
1999.

-------------
(1) An Eligible Trustee may elect alternative payments of his or her
retirement benefits based upon the combined life expectancy of the
Eligible Trustee and his or her spouse on the date of such Eligible
Trustee's retirement. In addition, the Eligible Trustee may elect that
the surviving spouse's periodic payment of benefits will be equal to a
lower percentage of the periodic amount when both spouses were alive. The
amount estimated to be payable under this method, through the remainder
of the later of the lives of the Eligible Trustee and spouse, will be the
actuarial equivalent of the Regular Benefit.

<PAGE>

Retirement Benefits From the Fund and All Morgan Stanley Dean Witter Funds

<TABLE>
<CAPTION>
FOR ALL ADOPTING FUNDS
------------------------------- RETIREMENT ESTIMATED
ESTIMATED BENEFITS ANNUAL
CREDITED ACCRUED AS BENEFITS UPON
YEARS OF ESTIMATED EXPENSES RETIREMENT
SERVICE AT PERCENTAGE BY ALL FROM ALL
RETIREMENT OF ELIGIBLE ADOPTING ADOPTING
NAME OF INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION FUNDS FUNDS(2)
------------------------------- -------------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
Michael Bozic ................. 10 60.44% $20,933 $50,588
Edwin J. Garn ................. 10 60.44 31,737 50,675
Wayne E. Hedien ............... 9 51.37 39,566 43,000
Dr. Manuel H. Johnson ......... 10 60.44 13,129 75,520
Michael E. Nugent ............. 10 60.44 23,175 67,209
John L. Schroeder ............. 8 50.37 41,558 52,994
</TABLE>

----------
(2) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (1) on
page 14.

IV. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
--------------------------------------------------------------------------------

The following owned 5% or more of the outstanding Class A shares of the
Fund as of November 9, 2000: Morgan Stanley Dean Witter Trust FSB, Trustee for
Chattanooga Housing Authority Retirement Plan, P.O. Box 957, Jersey City, N.J.
07303-0957 - 18.649%; James P. Slavin, 258 Seaview St., Melbourne Beach, FL
32951-3475 - 9.618%; and Jean J. Cone, Trustee for the Wade H. Cone & Jean J.
Cone Family Trust dtd. 9-10-80, 518 Ridgeview Ct, Pleasant Hill, CA 94523-1024
- 5.735%. The following owned 5% or more of the outstanding Class D shares of
the Fund as of November 9, 2000: Morgan Stanley Dean Witter Trust FSB, Agent
for American Baptist Homes Foundation of the West Inc., Trustee FBO Gift
Annuity, P.O. Box 503, Jersey City, N.J. 07311 - 59.342%.

As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's
officers and Trustees as a group was less than 1% of the Fund's shares of
beneficial interest outstanding.

V. INVESTMENT MANAGEMENT AND OTHER SERVICES
--------------------------------------------------------------------------------

A. INVESTMENT MANAGER

The Investment Manager to the Fund is Morgan Stanley Dean Witter Advisors
Inc., a Delaware corporation, whose address is Two World Trade Center, New
York, NY 10048. The Investment Manager is a wholly-owned subsidiary of MSDW, a
Delaware corporation. MSDW is a preeminent global financial services firm that
maintains leading market positions in each of its three primary businesses:
securities, asset management and credit services.

Pursuant to an Investment Management Agreement (the "Management
Agreement") with the Investment Manager, the Fund has retained the Investment
Manager to provide administrative services and manage the investment of the
Fund's assets, including the placing of orders for the purchase and sale of
portfolio securities. The Fund pays the Investment Manager monthly compensation
calculated daily by applying the following annual rates to the net assets of
the Fund determined as of the close of each business day: 0.75% to the portion
of daily net assets not exceeding $500 million; and 0.725% to the portion of
daily net assets exceeding $500 million. The management fee is allocated among
the Classes pro rata based on the net assets of the Fund attributable to each
Class. For the fiscal years ended September 30, 1998, 1999 and 2000, the
Investment Manager accrued total compensation under the Management Agreement in
the amounts of $3,387,158, $3,213,769 and $2,388,886, respectively.

The Investment Manager has retained its wholly-owned subsidiary, MSDW
Services Company, to perform administrative services for the Fund.

<PAGE>

B. PRINCIPAL UNDERWRITER

The Fund's principal underwriter is the Distributor (which has the same
address as the Investment Manager). In this capacity, the Fund's shares are
distributed by the Distributor. The Distributor has entered into a selected
dealer agreement with Dean Witter Reynolds, which through its own sales
organization sells shares of the Fund. In addition, the Distributor may enter
into similar agreements with other selected broker-dealers. The Distributor, a
Delaware corporation, is a wholly-owned subsidiary of MSDW.

The Distributor bears all expenses it may incur in providing services
under the Distribution Agreement. These expenses include the payment of
commissions for sales of the Fund's shares and incentive compensation to
Financial Advisors, the cost of educational and/or business-related trips, and
educational and/or promotional and business-related expenses. The Distributor
also pays certain expenses in connection with the distribution of the Fund's
shares, including the costs of preparing, printing and distributing advertising
or promotional materials, and the costs of printing and distributing
prospectuses and supplements thereto used in connection with the offering and
sale of the Fund's shares. The Fund bears the costs of initial typesetting,
printing and distribution of prospectuses and supplements thereto to
shareholders. The Fund also bears the costs of registering the Fund and its
shares under federal and state securities laws and pays filing fees in
accordance with state securities laws.

The Fund and the Distributor have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act. Under the
Distribution Agreement, the Distributor uses its best efforts in rendering
services to the Fund, but in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations, the Distributor is
not liable to the Fund or any of its shareholders for any error of judgment or
mistake of law or for any act or omission or for any losses sustained by the
Fund or its shareholders.

C. SERVICES PROVIDED BY THE INVESTMENT MANAGER

The Investment Manager manages the investment of the Fund's assets,
including the placing of orders for the purchase and sale of portfolio
securities. The Investment Manager obtains and evaluates the information and
advice relating to the economy, securities markets, and specific securities as
it considers necessary or useful to continuously manage the assets of the Fund
in a manner consistent with its investment objectives.

Under the terms of the Management Agreement, in addition to managing the
Fund's investments, the Investment Manager maintains certain of the Fund's
books and records and furnishes, at its own expense, the office space,
facilities, equipment, clerical help, bookkeeping and certain legal services as
the Fund may reasonably require in the conduct of its business, including the
preparation of prospectuses, proxy statements and reports required to be filed
with federal and state securities commissions (except insofar as the
participation or assistance of independent auditors and attorneys is, in the
opinion of the Investment Manager, necessary or desirable). In addition, the
Investment Manager pays the salaries of all personnel, including officers of
the Fund, who are employees of the Investment Manager. The Investment Manager
also bears the cost of telephone service, heat, light, power and other
utilities provided to the Fund.

Expenses not expressly assumed by the Investment Manager under the
Management Agreement or by the Distributor, will be paid by the Fund. These
expenses will be allocated among the four Classes of shares pro rata based on
the net assets of the Fund attributable to each Class, except as described
below. Such expenses include, but are not limited to: expenses of the Plan of
Distribution pursuant to Rule 12b-1; charges and expenses of any registrar,
custodian, stock transfer and dividend disbursing agent; brokerage commissions;
taxes; engraving and printing share certificates; registration costs of the
Fund and its shares under federal and state securities laws; the cost and
expense of printing, including typesetting, and distributing prospectuses of
the Fund and supplements thereto to the Fund's shareholders; all expenses of
shareholders' and Trustees' meetings and of preparing, printing and mailing of
proxy statements and reports to shareholders; fees and travel expenses of
Trustees or

<PAGE>

members of any advisory board or committee who are not employees of the
Investment Manager or any corporate affiliate of the Investment Manager; all
expenses incident to any dividend, withdrawal or redemption options; charges
and expenses of any outside service used for pricing of the Fund's shares; fees
and expenses of legal counsel, including counsel to the Trustees who are not
interested persons of the Fund or of the Investment Manager (not including
compensation or expenses of attorneys who are employees of the Investment
Manager); fees and expenses of the Fund's independent auditors; membership dues
of industry associations; interest on Fund borrowings; postage; insurance
premiums on property or personnel (including officers and Trustees) of the Fund
which inure to its benefit; extraordinary expenses (including, but not limited
to, legal claims and liabilities and litigation costs and any indemnification
relating thereto); and all other costs of the Fund's operation. The 12b-1 fees
relating to a particular Class will be allocated directly to that Class. In
addition, other expenses associated with a particular Class (except advisory or
custodial fees) may be allocated directly to that Class, provided that such
expenses are reasonably identified as specifically attributable to that Class
and the direct allocation to that Class is approved by the Trustees.

The Management Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the Investment Manager is not liable to the Fund or any
of its investors for any act or omission by the Investment Manager or for any
losses sustained by the Fund or its investors.

The Management Agreement will remain in effect from year to year, provided
continuance of the Management Agreement is approved at least annually by the
vote of the holders of a majority, as defined in the Investment Company Act, of
the outstanding shares of the Fund, or by the Trustees; provided that in either
event such continuance is approved annually by the vote of a majority of the
Trustees, including a majority of the Independent Trustees.

D. DEALER REALLOWANCES

Upon notice to selected broker-dealers, the Distributor may reallow up to
the full applicable front-end sales charge during periods specified in such
notice. During periods when 90% or more of the sales charge is reallowed, such
selected broker-dealers may be deemed to be underwriters as that term is
defined in the Securities Act.

E. RULE 12B-1 PLAN

The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under
the Investment Company Act (the "Plan") pursuant to which each Class, other
than Class D, pays the Distributor compensation accrued daily and payable
monthly at the following annual rates: 0.25% and 1.0% of the average daily net
assets of Class A and Class C, respectively, and, with respect to Class B, 1.0%
of the lesser of: (a) the average daily aggregate gross sales of the Fund's
Class B shares since the inception of the Fund (not including reinvestment of
dividends or capital gains distributions), less the average daily aggregate net
asset value of the Fund's Class B shares redeemed since the Fund's inception
upon which a contingent deferred sales charge has been imposed or upon which
such charge has been waived, or (b) the average daily net assets of Class B.

The Distributor also receives the proceeds of front-end sales charges
("FSCs") and of contingent deferred sales charges ("CDSCs") imposed on certain
redemptions of shares, which are separate and apart from payments made pursuant
to the Plan. The Distributor has informed the Fund that it and/or Dean Witter
Reynolds received the proceeds of CDSCs and FSCs, for the last three fiscal
years ended September 30, in approximate amounts as provided in the table below
(the Distributor did not retain any of these amounts).

<PAGE>

<TABLE>
<CAPTION>
2000 1999 1998
------------------- --------------------- --------------------
<S> <C> <C> <C>
Class A ........... FSCs:(1) $ 13,117 FSCs:(1) $ 15,164 FSCs:(1) $ 99,718
CDSCs: $ 0 CDSCs: $ 0 CDSCs: $ 0
Class B ........... CDSCs: $879,018 CDSCs: $1,174,157 CDSCs: $1,076,184
Class C. .......... CDSCs: $ 1,420 CDSCs: $ 4,337 CDSCs: $ 4,960
</TABLE>

----------
(1) FSCs apply to Class A only.

The Distributor has informed the Fund that the entire fee payable by Class
A and a portion of the fees payable by each of Class B and Class C each year
pursuant to the Plan equal to 0.25% of such Class' average daily net assets are
currently each characterized as a "service fee" under the Rules of the National
Association of Securities Dealers, Inc. (of which the Distributor is a member).
The "service fee" is a payment made for personal service and/or the maintenance
of shareholder accounts. The remaining portion of the Plan fees payable by a
Class, if any, is characterized as an "asset-based sales charge" as such is
defined by the Rules of the Association.

Under the Plan and as required by Rule 12b-1, the Trustees receive and
review promptly after the end of each calendar quarter a written report
provided by the Distributor of the amounts expended under the Plan and the
purpose for which such expenditures were made. Class B shares of the Fund
accrued amounts payable to the Distributor under the Plan, during the fiscal
year ended September 30, 2000, of $2,776,290. This amount is equal to 1.00% of
the average daily net assets of Class B for the fiscal year and was calculated
pursuant to clause (b) of the compensation formula under the Plan. For the
fiscal year ended September 30, 2000, Class A and Class C shares of the Fund
accrued payments under the Plan amounting to $17,265 and $322,264,
respectively, which amounts are equal to 0.24% and 0.99% of the average daily
net assets of Class A and Class C, respectively, for the fiscal year.

The Plan was adopted in order to permit the implementation of the Fund's
method of distribution. Under this distribution method the Fund offers four
Classes, each with a different distribution arrangement.

With respect to Class A shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from proceeds of the FSC, commissions for
the sale of Class A shares, currently a gross sales credit of up to 5.0% of the
amount sold (except as provided in the following sentence) and an annual
residual commission, currently a residual of up to 0.25% of the current value
of the respective accounts for which they are the Financial Advisors or dealers
of record in all cases. On orders of $1 million or more (for which no sales
charge was paid) or net asset value purchases by employer-sponsored employee
benefit plans, whether or not qualified under the Internal Revenue Code, for
which the Transfer Agent serves as Trustee or MSDW's Retirement Plan Services
serves as recordkeeper pursuant to a written Recordkeeping Services Agreement
("MSDW Eligible Plans"), the Investment Manager compensates Financial Advisors
by paying them, from its own funds, a gross sales credit of 1.0% of the amount
sold.

With respect to Class B shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from its own funds, commissions for the sale
of Class B shares, currently a gross sales credit of up to 5.0% of the amount
sold (except as provided in the following sentence) and an annual residual
commission, currently a residual of up to 0.25% of the current value (not
including reinvested dividends or distributions) of the amount sold in all
cases. In the case of Class B shares purchased by MSDW Eligible Plans, Dean
Witter Reynolds compensates its Financial Advisors by paying them, from its own
funds, a gross sales credit of 3.0% of the amount sold.

With respect to Class C shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from its own funds, commissions for the sale
of Class C shares, currently a gross sales credit of up to 1.0% of the amount
sold and an annual residual commission, currently up to 1.0% of the current
value of the respective accounts for which they are the Financial Advisors of
record.

With respect to Class D shares other than shares held by participants in
the Investment Manager's mutual fund asset allocation program, the Investment
Manager compensates Dean Witter Reynolds' Financial Advisors by paying them,
from its own funds, commissions for the sale of Class D shares, currently a
gross sales credit of up to 1.0% of the amount sold. There is a chargeback of
100% of the

<PAGE>

amount paid if the Class D shares are redeemed in the first year and a
chargeback of 50% of the amount paid if the Class D shares are redeemed in the
second year after purchase. The Investment Manager also compensates Dean Witter
Reynolds' Financial Advisors by paying them, from its own funds, an annual
residual commission, currently up to 0.10% of the current value of the
respective accounts for which they are the Financial Advisors of record (not
including accounts of participants in the Investment Manager's mutual fund
asset allocation program).

The gross sales credit is a charge which reflects commissions paid by Dean
Witter Reynolds to its Financial Advisors and Dean Witter Reynolds'
Fund-associated distribution-related expenses, including sales compensation,
and overhead and other branch office distribution-related expenses including
(a) the expenses of operating Dean Witter Reynolds' branch offices in
connection with the sale of Fund shares, including lease costs, the salaries
and employee benefits of operations and sales support personnel, utility costs,
communications costs and the costs of stationery and supplies, (b) the costs of
client sales seminars, (c) travel expenses of mutual fund sales coordinators to
promote the sale of Fund shares and (d) other expenses relating to branch
promotion of Fund sales.

The Investment Manager pays a retention fee to Financial Advisors at an
annual rate of 0.05% of the value of shares of the Fund sold after January 1,
2000 and held for at least one year. Shares purchased through the reinvestment
of dividends will be eligible for a retention fee, provided that such dividends
were earned on shares otherwise eligible for a retention fee payment. Shares
owned in variable annuities, closed-end fund shares and shares held in 401(k)
plans where the Transfer Agent or MSDW's Retirement Plan Services is either
recordkeeper or trustee are not eligible for a retention fee.

For the first year only, the retention fee is paid on any shares of the
Fund sold after January 1, 2000 and held by shareholders on December 31, 2000.

The retention fees are paid by the Investment Manager from its own assets,
which may include profits from investment management fees payable under the
Management Agreement, as well as from borrowed funds.

The distribution fee that the Distributor receives from the Fund under the
Plan, in effect, offsets distribution expenses incurred under the Plan on
behalf of the Fund and, in the case of Class B shares, opportunity costs, such
as the gross sales credit and an assumed interest charge thereon ("carrying
charge"). These expenses may include the cost of Fund-related educational
and/or business-related trips or payment of Fund-related educational and/or
promotional expenses of Financial Advisors. For example, the Distributor has
implemented a compensation program available only to Financial Advisors meeting
specified criteria under which certain marketing and/or promotional expenses of
those Financial Advisors are paid by the Distributor out of compensation it
receives under the Plan. In the Distributor's reporting of the distribution
expenses to the Fund, in the case of Class B shares, such assumed interest
(computed at the "broker's call rate") has been calculated on the gross credit
as it is reduced by amounts received by the Distributor under the Plan and any
contingent deferred sales charges received by the Distributor upon redemption
of shares of the Fund. No other interest charge is included as a distribution
expense in the Distributor's calculation of its distribution costs for this
purpose. The broker's call rate is the interest rate charged to securities
brokers on loans secured by exchange-listed securities.

The Fund is authorized to reimburse expenses incurred or to be incurred in
promoting the distribution of the Fund's Class A and Class C shares and in
servicing shareholder accounts. Reimbursement will be made through payments at
the end of each month. The amount of each monthly payment may in no event
exceed an amount equal to a payment at the annual rate of 0.25%, in the case of
Class A, and 1.0%, in the case of Class C, of the average net assets of the
respective Class during the month. No interest or other financing charges, if
any, incurred on any distribution expenses on behalf of Class A and Class C
will be reimbursable under the Plan. With respect to Class A, in the case of
all expenses other than expenses representing the service fee, and, with
respect to Class C, in the case of all expenses other than expenses
representing a gross sales credit or a residual to Financial Advisors and other
authorized financial representatives, such amounts shall be determined at the
beginning of each calendar quarter by the Trustees, including, a majority of
the Independent Trustees. Expenses representing the service fee (for Class A)
or a gross sales credit or a residual to Financial Advisors and

<PAGE>

other authorized financial representatives (for Class C) may be reimbursed
without prior determination. In the event that the Distributor proposes that
monies shall be reimbursed for other than such expenses, then in making
quarterly determinations of the amounts that may be reimbursed by the Fund, the
Distributor will provide and the Trustees will review a quarterly budget of
projected distribution expenses to be incurred on behalf of the Fund, together
with a report explaining the purposes and anticipated benefits of incurring
such expenses. The Trustees will determine which particular expenses, and the
portions thereof, that may be borne by the Fund, and in making such a
determination shall consider the scope of the Distributor's commitment to
promoting the distribution of the Fund's Class A and Class C shares.

Each Class paid 100% of the amounts accrued under the Plan with respect to
that Class for the fiscal year ended September 30, 2000 to the Distributor. The
Distributor and Dean Witter Reynolds estimate that they have spent, pursuant to
the Plan, $33,423,716 on behalf of Class B since the inception of the Plan. It
is estimated that this amount was spent in approximately the following ways:
(i) 11.92% ($3,985,684)-advertising and promotional expenses; (ii) 0.78%
($260,633)-printing of prospectuses for distribution to other than current
shareholders; and (iii) 87.30% ($29,177,399)-other expenses, including the
gross sales credit and the carrying charge, of which 9.81% ($2,862,926)
represents carrying charges, 37.00% ($10,796,054) represents commission credits
to Dean Witter Reynolds' branch offices and other selected broker-dealers for
payments of commissions to Financial Advisors and other authorized financial
representatives, 52.38% ($15,281,372) represents overhead and other branch
office distribution-related expenses and 0.81% ($237,047) represents excess
distribution expenses of TCW/DW Income and Growth Fund, the net assets of which
were combined with those of the Fund on June 28, 1999, pursuant to an Agreement
and Plan of Reorganization. The amounts accrued by Class A and a portion of the
amounts accrued by Class C under the Plan during the fiscal year ended
September 30, 2000 were service fees. The remainder of the amounts accrued by
Class C were for expenses which relate to compensation of sales personnel and
associated overhead expenses.

In the case of Class B shares, at any given time, the expenses of
distributing shares of the Fund may be more or less than the total of (i) the
payments made by the Fund pursuant to the Plan; and (ii) the proceeds of CDSCs
paid by investors upon redemption of shares. For example, if $1 million in
expenses in distributing Class B shares of the Fund had been incurred and
$750,000 had been received as described in (i) and (ii) above, the excess
expense would amount to $250,000. The Distributor has advised the Fund that in
the case of Class B shares the excess distribution expenses, including the
carrying charge designed to approximate the opportunity costs incurred by Dean
Witter Reynolds which arise from it having advanced monies without having
received the amount of any sales charges imposed at the time of sale of the
Fund's Class B shares, totaled $16,457,049 as of September 30, 2000 (the end of
the Fund's fiscal year), which was equal to 7.37% of the net assets of Class B
on such date. Because there is no requirement under the Plan that the
Distributor be reimbursed for all distribution expenses with respect to Class B
shares or any requirement that the Plan be continued from year to year, this
excess amount does not constitute a liability of the Fund. Although there is no
legal obligation for the Fund to pay expenses incurred in excess of payments
made to the Distributor under the Plan and the proceeds of CDSCs paid by
investors upon redemption of shares, if for any reason the Plan is terminated,
the Trustees will consider at that time the manner in which to treat such
expenses. Any cumulative expenses incurred, but not yet recovered through
distribution fees or CDSCs, may or may not be recovered through future
distribution fees or CDSCs.

In the case of Class A and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales commission credited to Morgan Stanley Dean Witter Financial
Advisors and other authorized financial representatives at the time of sale may
be reimbursed in the subsequent calendar year. The Distributor has advised the
Fund that there were no such expenses that may be reimbursed in the subsequent
calendar year in the case of Class A or Class C at December 31, 1999 (end of
the calendar year). No interest or other financing charges will be incurred on
any Class A or Class C distribution expenses incurred by the Distributor under
the Plan or on any unreimbursed expenses due to the Distributor pursuant to the
Plan.

<PAGE>

No interested person of the Fund nor any Independent Trustee has any
direct financial interest in the operation of the Plan except to the extent
that the Distributor, the Investment Manager, Dean Witter Reynolds, MSDW
Services Company or certain of their employees may be deemed to have such an
interest as a result of benefits derived from the successful operation of the
Plan or as a result of receiving a portion of the amounts expended thereunder
by the Fund.

On an annual basis the Trustees, including a majority of the Independent
Trustees, consider whether the Plan should be continued. Prior to approving the
last continuation of the Plan, the Trustees requested and received from the
Distributor and reviewed all the information which they deemed necessary to
arrive at an informed determination. In making their determination to continue
the Plan, the Trustees considered: (1) the Fund's experience under the Plan and
whether such experience indicates that the Plan is operating as anticipated;
(2) the benefits the Fund had obtained, was obtaining and would be likely to
obtain under the Plan, including that: (a) the Plan is essential in order to
give Fund investors a choice of alternatives for payment of distribution and
service charges and to enable the Fund to continue to grow and avoid a pattern
of net redemptions which, in turn, are essential for effective investment
management; and (b) without the compensation to individual brokers and the
reimbursement of distribution and account maintenance expenses of Dean Witter
Reynolds' branch offices made possible by the 12b-1 fees, Dean Witter Reynolds
could not establish and maintain an effective system for distribution,
servicing of Fund shareholders and maintenance of shareholder accounts; and (3)
what services had been provided and were continuing to be provided under the
Plan to the Fund and its shareholders. Based upon their review, the Trustees,
including each of the Independent Trustees, determined that continuation of the
Plan would be in the best interest of the Fund and would have a reasonable
likelihood of continuing to benefit the Fund and its shareholders. In the
Trustees' quarterly review of the Plan, they will consider its continued
appropriateness and the level of compensation provided therein.

The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval by the shareholders of the
affected Class or Classes of the Fund, and all material amendments to the Plan
must also be approved by the Trustees in the manner described above. The Plan
may be terminated at any time, without payment of any penalty, by vote of a
majority of the Independent Trustees or by a vote of a majority of the
outstanding voting securities of the Fund (as defined in the Investment Company
Act) on not more than thirty days' written notice to any other party to the
Plan. So long as the Plan is in effect, the election and nomination of
Independent Trustees shall be committed to the discretion of the Independent
Trustees.

F. OTHER SERVICE PROVIDERS

(1) TRANSFER AGENT/DIVIDEND-PAYING AGENT

Morgan Stanley Dean Witter Trust FSB is the Transfer Agent for the Fund's
shares and the Dividend Disbursing Agent for payment of dividends and
distributions on Fund shares and Agent for shareholders under various
investment plans. The principal business address of the Transfer Agent is
Harborside Financial Center, Plaza Two, Jersey City, NJ 07311.

(2) CUSTODIAN AND INDEPENDENT AUDITORS

The Bank of New York, 100 Church Street, New York, NY 10007 is the
Custodian of the Fund's assets. Any of the Fund's cash balances with either
Custodian in excess of $100,000 are unprotected by federal deposit insurance.
These balances may, at times, be substantial.

Deloitte & Touche LLP, Two World Financial Center, New York, NY 10281,
serves as the independent auditors of the Fund. The independent auditors are
responsible for auditing the annual financial statements of the Fund.

(3) AFFILIATED PERSONS

The Transfer Agent is an affiliate of the Investment Manager, and of the
Distributor. As Transfer Agent and Dividend Disbursing Agent, the Transfer
Agent's responsibilities include maintaining share-

<PAGE>

holder accounts, disbursing cash dividends and reinvesting dividends,
processing account registration changes, handling purchase and redemption
transactions, mailing prospectuses and reports, mailing and tabulating proxies,
processing share certificate transactions, and maintaining shareholder records
and lists. For these services, the Transfer Agent receives a per shareholder
account fee from the Fund and is reimbursed for its out-of-pocket expenses in
connection with such services.

G. CODES OF ETHICS

The Fund, the Investment Manager and the Distributor have each adopted a
Code of Ethics pursuant to Rule 17j-1 under the Investment Company Act. The
Codes of Ethics are designed to detect and prevent improper personal trading.
The Codes of Ethics permit personnel subject to the Codes to invest in
securities, including securities that may be purchased, sold or held by the
Fund, subject to a number of restrictions and controls including prohibitions
against purchases of securities in an Initial Public Offering and a
preclearance requirement with respect to personal securities transactions.

VI. BROKERAGE ALLOCATION AND OTHER PRACTICES
--------------------------------------------------------------------------------

A. BROKERAGE TRANSACTIONS

Subject to the general supervision of the Board of Trustees, the
Investment Manager is responsible for decisions to buy and sell securities for
the Fund, the selection of brokers and dealers to effect the transactions, and
the negotiation of brokerage commissions, if any. Purchases and sales of
securities on a stock exchange are effected through brokers who charge a
commission for their services. In the over-the-counter market, securities are
generally traded on a "net" basis with dealers acting as principal for their
own accounts without a stated commission, although the price of the security
usually includes a profit to the dealer. The Fund expects that securities will
be purchased at times in underwritten offerings where the price includes a
fixed amount of compensation, generally referred to as the underwriter's
concession or discount. Options and futures transactions will usually be
effected through a broker and a commission will be charged. On occasion, the
Fund may also purchase certain money market instruments directly from an
issuer, in which case no commissions or discounts are paid.

For the fiscal years ended September 30, 1998, 1999 and 2000, the Fund
paid a total of $314,715, $355,292 and $521,907, respectively, in brokerage
commissions.

B. COMMISSIONS

Pursuant to an order of the SEC, the Fund may effect principal
transactions in certain money market instruments with Dean Witter Reynolds. The
Fund will limit its transactions with Dean Witter Reynolds to U.S. Government
and government agency securities, bank money instruments (i.e., certificates of
deposit and bankers' acceptances) and commercial paper. The transactions will
be effected with Dean Witter Reynolds only when the price available from Dean
Witter Reynolds is better than that available from other dealers.

During the fiscal years ended September 30, 1998, 1999 and 2000, the Fund
did not effect any principal transactions with Dean Witter Reynolds.

Brokerage transactions in securities listed on exchanges or admitted to
unlisted trading privileges may be effected through Dean Witter Reynolds,
Morgan Stanley & Co. and other affiliated brokers and dealers. In order for an
affiliated broker or dealer to effect any portfolio transactions on an exchange
for the Fund, the commissions, fees or other remuneration received by the
affiliated broker or dealer must be reasonable and fair compared to the
commissions, fees or other remuneration paid to other brokers in connection
with comparable transactions involving similar securities being purchased or
sold on an exchange during a comparable period of time. This standard would
allow the affiliated broker or dealer to receive no more than the remuneration
which would be expected to be received by an unaffiliated broker in a
commensurate arm's-length transaction. Furthermore, the Trustees, including the
Independent Trustees, have adopted procedures which are reasonably designed to
provide that any commis-

<PAGE>

sions, fees or other remuneration paid to an affiliated broker or dealer are
consistent with the foregoing standard. The Fund does not reduce the management
fee it pays to the Investment Manager by any amount of the brokerage
commissions it may pay to an affiliated broker or dealer.

During the fiscal years ended September 30, 1998, 1999 and 2000, the Fund
paid a total of $141,296, $131,414 and $128,749, respectively, in brokerage
commissions to Dean Witter Reynolds. During the fiscal year ended September 30,
2000, the brokerage commissions paid to Dean Witter Reynolds represented
approximately 24.67% of the total commissions paid by the Fund during the year
and were paid on account of transactions having an aggregate dollar value equal
to approximately 34.49% of the aggregate dollar value of all portfolio
transactions of the Fund during the year for which commissions were paid.

During the fiscal years ended September 30, 1998, 1999 and 2000, the Fund
paid a total of $6,600, $0 and $17,425, respectively, in brokerage commissions
to Morgan Stanley & Co. During the fiscal year ended September 30, 2000, the
brokerage commissions paid to Morgan Stanley & Co. represented approximately
3.34% of the total brokerage commissions paid by the Fund during the year and
were paid on account of transactions having an aggregate dollar value equal to
approximately 3.74% of the aggregate dollar value of all portfolio transactions
of the Fund during the year for which commissions were paid.

C. BROKERAGE SELECTION

The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions. Consistent with this
policy, when securities transactions are effected on a stock exchange, the
Fund's policy is to pay commissions which are considered fair and reasonable
without necessarily determining that the lowest possible commissions are paid
in all circumstances. The Fund believes that a requirement always to seek the
lowest possible commission cost could impede effective portfolio management and
preclude the Fund and the Investment Manager from obtaining a high quality of
brokerage and research services. In seeking to determine the reasonableness of
brokerage commissions paid in any transaction, the Investment Manager relies
upon its experience and knowledge regarding commissions generally charged by
various brokers and on its judgment in evaluating the brokerage and research
services received from the broker effecting the transaction. These
determinations are necessarily subjective and imprecise, as in most cases an
exact dollar value for those services is not ascertainable.

The Fund anticipates that certain of its transactions involving foreign
securities will be effected on securities exchanges. Fixed commissions on such
transactions are generally higher than negotiated commissions on domestic
transactions. There is also generally less government supervision and
regulation of foreign securities exchanges and brokers than in the United
States.

In seeking to implement the Fund's policies, the Investment Manager
effects transactions with those brokers and dealers who the Investment Manager
believes provide the most favorable prices and are capable of providing
efficient executions. If the Investment Manager believes the prices and
executions are obtainable from more than one broker or dealer, it may give
consideration to placing portfolio transactions with those brokers and dealers
who also furnish research and other services to the Fund or the Investment
Manager. The services may include, but are not limited to, any one or more of
the following: information as to the availability of securities for purchase or
sale; statistical or factual information or opinions pertaining to investment;
wire services; and appraisals or evaluations of portfolio securities. The
information and services received by the Investment Manager from brokers and
dealers may be of benefit to the Investment Manager in the management of
accounts of some of its other clients and may not in all cases benefit the Fund
directly.

The Investment Manager currently serves as investment manager to a number
of clients, including other investment companies, and may in the future act as
investment manager or advisor to others. It is the practice of the Investment
Manager to cause purchase and sale transactions to be allocated among the Fund
and others whose assets it manages in such manner as it deems equitable. In
making such

<PAGE>

allocations among the Fund and other client accounts, various factors may be
considered, including the respective investment objectives, the relative size
of portfolio holdings of the same or comparable securities, the availability of
cash for investment, the size of investment commitments generally held and the
opinions of the persons responsible for managing the portfolios of the Fund and
other client accounts. In the case of certain initial and secondary public
offerings, the Investment Manager utilizes a pro rata allocation process based
on the size of the relevant funds and/or client accounts involved and the
number of shares available from the public offering.

D. DIRECTED BROKERAGE

During the fiscal year ended September 30, 2000, the Fund paid $358,509 in
brokerage commissions in connection with transactions in the aggregate amount
of $165,138,696 to brokers because of research services provided.

E. REGULAR BROKER-DEALERS

During the fiscal year ended September 30, 2000, the Fund purchased
securities issued by Bank of America Corp., which issuer was among the ten
brokers or ten dealers that executed transactions for or with the Fund in the
largest dollar amounts during the year. At September 30, 2000, the Fund held
securities issued by Bank of America Corp. in the following amount; $3,142,500.

VII. CAPITAL STOCK AND OTHER SECURITIES
--------------------------------------------------------------------------------

The shareholders of the Fund are entitled to a full vote for each full
share of beneficial interest held. The Fund is authorized to issue an unlimited
number of shares of beneficial interest. All shares of beneficial interest of
the Fund are of $0.01 par value and are equal as to earnings, assets and voting
privileges except that each Class will have exclusive voting privileges with
respect to matters relating to distribution expenses borne solely by such Class
or any other matter in which the interests of one Class differ from the
interests of any other Class. In addition, Class B shareholders will have the
right to vote on any proposed material increase in Class A's expenses, if such
proposal is submitted separately to Class A shareholders. Also, Class A, Class
B and Class C bear expenses related to the distribution of their respective
shares.

The Fund's Declaration of Trust permits the Trustees to authorize the
creation of additional series of shares (the proceeds of which would be
invested in separate, independently managed portfolios) and additional Classes
of shares within any series. The Trustees have not presently authorized any
such additional series or Classes of shares other than as set forth in the
Prospectus.

The Fund is not required to hold annual meetings of shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call special meetings of shareholders for action by shareholder
vote as may be required by the Investment Company Act or the Declaration of
Trust. Under certain circumstances, the Trustees may be removed by action of
the Trustees. In addition, under certain circumstances, the shareholders may
call a meeting to remove Trustees and the Fund is required to provide
assistance in communicating with shareholders about such a meeting. The voting
rights of shareholders are not cumulative, so that holders of more than 50
percent of the shares voting can, if they choose, elect all Trustees being
selected, while the holders of the remaining shares would be unable to elect
any Trustees.

Under Massachusetts law, shareholders of a business trust may, under
certain limited circumstances, be held personally liable as partners for the
obligations of the Fund. However, the Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Fund,
requires that notice of such Fund obligations include such disclaimer, and
provides for indemnification out of the Fund's property for any shareholder
held personally liable for the obligations of the Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations. Given the above limitations on shareholder personal liability, and
the nature of the Fund's assets and operations, the possibility of the Fund
being unable to meet its obligations is remote and thus, in the opinion of
Massachusetts counsel to the Fund, the risk to Fund shareholders of personal
liability is remote.

<PAGE>

All of the Trustees, except for James F. Higgins, have been elected by the
shareholders of the Fund, most recently at a Special Meeting of Shareholders
held on May 21, 1997. The Trustees themselves have the power to alter the
number and the terms of office of the Trustees (as provided for in the
Declaration of Trust), and they may at any time lengthen or shorten their own
terms or make their terms of unlimited duration and appoint their own
successors, provided that always at least a majority of the Trustees has been
elected by the shareholders of the Fund.

VIII. PURCHASE, REDEMPTION AND PRICING OF SHARES
--------------------------------------------------------------------------------
A. PURCHASE/REDEMPTION OF SHARES

Information concerning how Fund shares are offered to the public (and how
they are redeemed and exchanged) is provided in the Fund's Prospectus.

TRANSFER AGENT AS AGENT. With respect to the redemption or repurchase of
Fund shares, the application of proceeds to the purchase of new shares in the
Fund or any other Morgan Stanley Dean Witter Funds and the general
administration of the exchange privilege, the Transfer Agent acts as agent for
the Distributor and for the shareholder's authorized broker-dealer, if any, in
the performance of such functions. With respect to exchanges, redemptions or
repurchases, the Transfer Agent shall be liable for its own negligence and not
for the default or negligence of its correspondents or for losses in transit.
The Fund shall not be liable for any default or negligence of the Transfer
Agent, the Distributor or any authorized broker-dealer.

The Distributor and any authorized broker-dealer have appointed the
Transfer Agent to act as their agent in connection with the application of
proceeds of any redemption of Fund shares to the purchase of shares of any
other Morgan Stanley Dean Witter Fund and the general administration of the
exchange privilege. No commission or discounts will be paid to the Distributor
or any authorized broker-dealer for any transaction pursuant to the exchange
privilege.

TRANSFERS OF SHARES. In the event a shareholder requests a transfer of
Fund shares to a new registration, the shares will be transferred without sales
charge at the time of transfer. With regard to the status of shares which are
either subject to the CDSC or free of such charge (and with regard to the
length of time shares subject to the charge have been held), any transfer
involving less than all of the shares in an account will be made on a pro rata
basis (that is, by transferring shares in the same proportion that the
transferred shares bear to the total shares in the account immediately prior to
the transfer). The transferred shares will continue to be subject to any
applicable CDSC as if they had not been so transferred.

OUTSIDE BROKERAGE ACCOUNTS. If a shareholder wishes to maintain his or her
fund account through a brokerage company other than Dean Witter Reynolds, he or
she may do so only if the Distributor has entered into a selected dealer
agreement with that brokerage company. Accounts maintained through a brokerage
company other than Dean Witter Reynolds may be subject to certain restrictions
on subsequent purchases and exchanges. Please contact your brokerage company or
the Transfer Agent for more information.

B. OFFERING PRICE

The Fund's Class B, Class C and Class D shares are offered at net asset
value per share and the Class A shares are offered at net asset value per share
plus any applicable FSC which is distributed among the Fund's Distributor, Dean
Witter Reynolds and other authorized dealers as described in Section "V.
Investment Management and Other Services-E. Rule 12b-1 Plan." The price of Fund
shares, called "net asset value," is based on the value of the Fund's portfolio
securities. Net asset value per share of each Class is calculated by dividing
the value of the portion of the Fund's securities and other assets attributable
to that Class, less the liabilities attributable to that Class, by the number
of shares of that Class outstanding. The assets of each Class of shares are
invested in a single portfolio. The net asset value of each Class, however,
will differ because the Classes have different ongoing fees.

<PAGE>

In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange, NASDAQ,
or other exchange is valued at its latest sale price, prior to the time when
assets are valued; if there were no sales that day, the security is valued at
the latest bid price (in cases where a security is traded on more than one
exchange, the security is valued on the exchange designated as the primary
market pursuant to procedures adopted by the Trustees); and (2) all other
portfolio securities for which over-the-counter market quotations are readily
available are valued at the latest bid price. When market quotations are not
readily available, including circumstances under which it is determined by the
Investment Manager that sale or bid prices are not reflective of a security's
market value, portfolio securities are valued at their fair value as determined
in good faith under procedures established by and under the general supervision
of the Fund's Trustees. For valuation purposes, quotations of foreign portfolio
securities, other assets and liabilities and forward contracts stated in
foreign currency are translated into U.S. dollar equivalents at the prevailing
market rates prior to the close of the New York Stock Exchange.

Short-term debt securities with remaining maturities of sixty days or less
at the time of purchase are valued at amortized cost, unless the Trustees
determine such does not reflect the securities' market value, in which case
these securities will be valued at their fair value as determined by the
Trustees.

Certain of the Fund's portfolio securities may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service may
utilize a matrix system incorporating security quality, maturity and coupon as
the evaluation model parameters, and/or research evaluations by its staff,
including review of broker-dealer market price quotations in determining what
it believes is the fair valuation of the portfolio securities valued by such
pricing service.

Generally, trading in foreign securities, as well as corporate bonds, U.S.
Government securities and money market instruments, is substantially completed
each day at various times prior to the close of the New York Stock Exchange.
The values of such securities used in computing the net asset value of the
Fund's shares are determined as of such times. Foreign currency exchange rates
are also generally determined prior to the close of the New York Stock
Exchange. Occasionally, events which may affect the values of such securities
and such exchange rates may occur between the times at which they are
determined and the close of the New York Stock Exchange and will therefore not
be reflected in the computation of the Fund's net asset value. If events that
may affect the value of such securities occur during such period, then these
securities may be valued at their fair value as determined in good faith under
procedures established by and under the supervision of the Trustees.

IX. TAXATION OF THE FUND AND SHAREHOLDERS
--------------------------------------------------------------------------------

The Fund generally will make two basic types of distributions: ordinary
dividends and long-term capital gain distributions. These two types of
distributions are reported differently on a shareholder's income tax return and
they are also subject to different rates of tax. The tax treatment of the
investment activities of the Fund will affect the amount and timing and
character of the distributions made by the Fund. Tax issues relating to the
Fund are not generally a consideration for shareholders such as tax- exempt
entities and tax-advantaged retirement vehicles such as an IRA or 401(k) plan.
Shareholders are urged to consult their own tax professionals regarding
specific questions as to federal, state or local taxes.

INVESTMENT COMPANY TAXATION. The Fund intends to remain qualified as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986. As such, the Fund will not be subject to federal income tax on its net
investment income and capital gains, if any, to the extent that it distributes
such income and capital gains to its shareholders.

The Fund generally intends to distribute sufficient income and gains so
that the Fund will not pay corporate income tax on its earnings. The Fund also
generally intends to distribute to its shareholders in each calendar year a
sufficient amount of ordinary income and capital gains to avoid the imposition
of a 4% excise tax. However, the Fund may instead determine to retain all or
part of any net long-term capital gains in any year for reinvestment. In such
event, the Fund will pay federal income tax (and possibly excise tax) on such
retained gains.

<PAGE>

Gains or losses on sales of securities by the Fund will be long-term
capital gains or losses if the securities have a tax holding period of more
than one year. Gains or losses on the sale of securities with a tax holding
period of one year or less will be short-term gains or losses.

Gains or losses on the Fund's transactions in listed non-equity options,
futures and options on futures generally are treated as 60% long-term and 40%
short-term. When the Fund engages in options and futures transactions, various
tax rules may accelerate or defer recognition of certain gains and losses,
change the character of certain gains or losses, or alter the holding period of
other investments held by the Fund. The application of these rules would
therefore also affect the amount, timing and character of distributions made by
the Fund.

The Fund's foreign currency gains or losses from forward contracts,
futures contracts that are not "regulated futures contracts," and unlisted
options, and certain other foreign currency gains or losses derived with
respect to fixed-income securities, are treated as ordinary income or loss. In
general, such foreign currency gains or losses will increase or decrease the
amount of the Fund's income available to be distributed to shareholders as
ordinary income, rather than increasing or decreasing the amount of the Fund's
net capital gain. Additionally, if such foreign currency losses exceed other
ordinary income during a taxable year, the Fund would not be able to make
ordinary income distributions for the year.

Under certain tax rules, the Fund may be required to accrue a portion of
any discount at which certain securities are purchased as income each year even
though the Fund receives no payments in cash on the security during the year.
In addition, if the Fund invests in an equity security of a non-U.S.
corporation classified as a "passive foreign investment company" for U.S. tax
purposes, the application of certain technical tax provisions applying to
investments in such companies may result in the Fund being required to accrue
income in respect of the security without any receipt of cash attributable to
such income. To the extent that the Fund invests in such securities, it would
be required to pay out such income as an income distribution in each year in
order to avoid taxation at the Fund level. Such distributions will be made from
the available cash of the Fund or by liquidation of portfolio securities if
necessary. If a distribution of cash necessitates the liquidation of portfolio
securities, the Investment Manager will select which securities to sell. The
Fund may realize a gain or loss from such sales. In the event the Fund realizes
net capital gains from such transactions, its shareholders may receive a larger
capital gain distribution, if any, than they would in the absence of such
transactions.

TAXATION OF DIVIDENDS AND DISTRIBUTIONS. Shareholders normally will have
to pay federal income taxes, and any state and/or local income taxes, on the
dividends and other distributions they receive from the Fund. Such dividends
and distributions, to the extent that they are derived from net investment
income or short-term capital gains, are taxable to the shareholder as ordinary
income regardless of whether the shareholder receives such payments in
additional shares or in cash.

Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder
has held the Fund's shares and regardless of whether the distribution is
received in additional shares or in cash. The maximum tax rate on long-term
capital gains realized by non-corporate shareholders is 20%.

Shareholders are generally taxed on any ordinary dividend or capital gain
distributions from the Fund in the year they are actually distributed. However,
if any such dividends or distributions are declared in October, November or
December and paid in January then such amounts will be treated for tax purposes
as received by the shareholders on December 31, to shareholders of record of
such month.

Subject to certain exceptions, a corporate shareholder may be eligible for
a 70% dividends received deduction to the extent that the Fund earns and
distributes qualifying dividends from its investments. Distributions of net
capital gains by the Fund will not be eligible for the dividends received
deduction.

Shareholders who are not citizens or residents of the United States and
certain foreign entities may be subject to withholding of United States tax on
distributions made by the Fund of investment income and short term capital
gains.

After the end of each calendar year, shareholders will be sent information
on their dividends and capital gain distributions for tax purposes, including
the portion taxable as ordinary income and the portion taxable as long-term
capital gains.

<PAGE>

PURCHASES AND REDEMPTIONS AND EXCHANGES OF FUND SHARES. Any dividend or
capital gains distribution received by a shareholder from any investment
company will have the effect of reducing the net asset value of the
shareholder's stock in that company by the exact amount of the dividend or
capital gains distribution. Furthermore, such dividends and capital gains
distributions are subject to federal income taxes. If the net asset value of
the shares should be reduced below a shareholder's cost as a result of the
payment of dividends or the distribution of realized long-term capital gains,
such payment or distribution would be in part a return of the shareholder's
investment but nonetheless would be taxable to the shareholder. Therefore, an
investor should consider the tax implications of purchasing Fund shares
immediately prior to a distribution record date.

In general, a sale of shares results in capital gain or loss, and for
individual shareholders, is taxable at a federal rate dependent upon the length
of time the shares were held. A redemption of a shareholder's Fund shares is
normally treated as a sale for tax purposes. Fund shares held for a period of
one year or less will, for tax purposes, generally result in short-term gains
or losses and those held for more than one year generally result in long-term
gain or loss. Under current law, the maximum tax rate on long-term capital
gains realized by non-corporate shareholders is 20%. Any loss realized by
shareholders upon a sale or redemption of shares within six months of the date
of their purchase will be treated as a long-term capital loss to the extent of
any distributions of net long-term capital gains with respect to such shares
during the six-month period.

Gain or loss on the sale or redemption of shares in the Fund is measured
by the difference between the amount received and the tax basis of the shares.
Shareholders should keep records of investments made (including shares acquired
through reinvestment of dividends and distributions) so they can compute the
tax basis of their shares. Under certain circumstances a shareholder may
compute and use an average cost basis in determining the gain or loss on the
sale or redemption of shares.

Exchanges of Fund shares for shares of another fund, including shares of
other Morgan Stanley Dean Witter Funds, are also subject to similar tax
treatment. Such an exchange is treated for tax purposes as a sale of the
original shares in the first fund, followed by the purchase of shares in the
second fund.

If a shareholder realizes a loss on the redemption or exchange of a fund's
shares and reinvests in that fund's shares within 30 days before or after the
redemption or exchange, the transactions may be subject to the "wash sale"
rules, resulting in a postponement of the recognition of such loss for tax
purposes.

X. UNDERWRITERS
--------------------------------------------------------------------------------

The Fund's shares are offered to the public on a continuous basis. The
Distributor, as the principal underwriter of the shares, has certain
obligations under the Distribution Agreement concerning the distribution of the
shares. These obligations and the compensation the Distributor receives are
described above in the sections titled "Principal Underwriter" and "Rule 12b-1
Plan."

XI. CALCULATION OF PERFORMANCE DATA
--------------------------------------------------------------------------------
From time to time the Fund may quote its "total return" in advertisements
and sales literature. These figures are computed separately for Class A, Class
B, Class C and Class D shares. The Fund's "average annual total return"
represents an annualization of the Fund's total return over a particular period
and is computed by finding the annual percentage rate which will result in the
ending redeemable value of a hypothetical $1,000 investment made at the
beginning of a one, five or ten year period, or for the period from the date of
commencement of operations, if shorter than any of the foregoing. The ending
redeemable value is reduced by any contingent deferred sales charge ("CDSC") at
the end of the one, five, ten year or other period. For the purpose of this
calculation, it is assumed that all dividends and distributions are reinvested.
The formula for computing the average annual total return involves a percentage
obtained by dividing the ending redeemable value by the amount of the initial
investment

<PAGE>

(which in the case of Class A shares is reduced by the Class A initial sales
charge), taking a root of the quotient (where the root is equivalent to the
number of years in the period) and subtracting 1 from the result. The average
annual total returns for Class B for the one year period ended September 30,
2000 and for the period June 26, 1996 (commencement of operations) through
September 30, 2000 were -2.72% and 8.09%, respectively. The average annual
total returns of Class A for the fiscal year ended September 30, 2000 and for
the period July 28, 1997 (inception of the Class) through September 30, 2000
were -2.68% and 2.53%, respectively. The average annual total returns of Class
C for the fiscal year ended September 30, 2000 and for the period July 28, 1997
(inception of the Class) through September 30, 2000 were 1.07% and 3.54%,
respectively. The average annual total returns of Class D for the fiscal year
ended September 30, 2000 and for the period July 28, 1997 (inception of the
Class) through September 30, 2000 were 2.98% and 4.56%, respectively.

In addition, the Fund may advertise its total return for each Class over
different periods of time by means of aggregate, average, year-by-year or other
types of total return figures. These calculations may or may not reflect the
imposition of the maximum front-end sales charge for Class A or the deduction
of the CDSC for each of Class B and Class C which, if reflected, would reduce
the performance quoted. For example, the average annual total return of the
Fund may be calculated in the manner described above, but without deduction for
any applicable sales charge. Based on this calculation, the average annual
total returns of Class B for the one year period ended September 30, 2000 and
for the period June 26, 1996 (commencement of operations) through September 30,
2000 were 2.00% and 8.46%, respectively. The average annual total returns of
Class A for the fiscal year ended September 30, 2000 and for the period July
28, 1997 through September 30, 2000 were 2.71% and 4.29%, respectively. The
average annual total returns of Class C for the fiscal year ended September 30,
2000 and for the period July 28, 1997 through September 30, 2000 were 2.01% and
3.54%, respectively. The average annual total returns of Class D for the fiscal
year ended September 30, 2000 and for the period July 28, 1997 through
September 30, 2000 were 2.98% and 4.56%, respectively.

In addition, the Fund may compute its aggregate total return for each
Class for specified periods by determining the aggregate percentage rate which
will result in the ending value of a hypothetical $1,000 investment made at the
beginning of the period. For the purpose of this calculation, it is assumed
that all dividends and distributions are reinvested. The formula for computing
aggregate total return involves a percentage obtained by dividing the ending
value (without reduction for any sales charge) by the initial $1,000 investment
and subtracting 1 from the result. Based on this calculation, the total returns
for Class B for the one year period ended September 30, 2000 and for the period
June 26, 1996 (commencement of operations) through September 30, 2000 were
2.00% and 41.35%, respectively. The total returns of Class A for the fiscal
year ended September 30, 2000 and for the period July 28, 1997 through
September 30, 2000 were 2.71% and 14.27%, respectively. The total returns of
Class C for the fiscal year ended September 30, 2000 and for the period July
28, 1997 through September 30, 2000 were 2.01% and 11.70%, respectively. The
total returns of Class D for the fiscal year ended September 30, 2000 and for
the period July 28, 1997 through September 30, 2000 were 2.98% and 15.23%,
respectively.

The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in each Class of shares of the Fund by adding 1
to the Fund's aggregate total return to date (expressed as a decimal and
without taking into account the effect of any applicable CDSC) and multiplying
by $9,475, $48,000 and $97,000 in the case of Class A (investments of $10,000,
$50,000 and $100,000 adjusted for the initial sales charge) or by $10,000,
$50,000 and $100,000 in the case of each of Class B, Class C and Class D, as
the case may be. Investments of $10,000, $50,000 and $100,000 in each Class at
inception of the Class would have grown to the following amounts at September
30, 2000:

<PAGE>

INVESTMENT AT INCEPTION OF:
----------------------------------
INCEPTION
CLASS DATE: $10,000 $50,000 $100,000
----------------- ---------- --------- --------- ----------
Class A ......... 07/28/97 $10,827 $54,850 $110,842
Class B ......... 06/26/96 14,135 70,675 141,350
Class C ......... 07/28/97 11,170 55,850 111,700
Class D ......... 07/28/97 11,523 57,615 115,230

The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by recognized organizations.

XII. FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

EXPERTS. The financial statements of the Fund for the fiscal year ended
September 30, 2000 included in this Statement of Additional Information and
incorporated by reference in the Prospectus have been so included and
incorporated in reliance on the report of Deloitte & Touche LLP, independent
auditors, given on the authority of said firm as experts in auditing and
accounting.

* * * * *

This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the SEC. The complete Registration Statement may be obtained from
the SEC.

<PAGE>

MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 2000

NUMBER OF
SHARES VALUE
-----------------------------------------------------------------------
COMMON STOCKS AND RIGHTS (48.9%)
Auto Parts: O.E.M. (2.4%)
190,000 Delphi Automotive Systems Corp. .......... $ 2,873,750
60,000 Johnson Controls, Inc. ................... 3,191,250
------------
6,065,000
------------
Beverages: Alcoholic (1.2%)
70,000 Anheuser-Busch Companies, Inc. ........... 2,961,875
------------
Chemicals: Major Diversified (1.1%)
115,000 Dow Chemical Co. ......................... 2,867,812
------------
Construction Materials (1.0%)
60,000 Vulcan Materials Co. ..................... 2,411,250
------------
Electric Utilities (5.1%)
55,000 Dominion Resources, Inc. ................. 3,193,437
50,000 FPL Group, Inc. .......................... 3,287,500
70,000 Reliant Energy, Inc. ..................... 3,255,000
110,000 TECO Energy, Inc. ........................ 3,162,500
------------
12,898,437
------------
Electrical Products (1.2%)
45,000 Emerson Electric Co. ..................... 3,015,000
------------
Electronic Equipment/Instruments (1.9%)
80,000 Rockwell International Corp. ............. 2,420,000
165,000 Xerox Corp. .............................. 2,485,312
------------
4,905,312
------------
Electronics/Appliances (0.9%)
60,000 Whirlpool Corp. .......................... 2,332,500
------------
Finance/Rental/Leasing (2.3%)
45,000 Fannie Mae ............................... 3,217,500
135,500 Ryder System, Inc. ....................... 2,498,281
------------
5,715,781
------------
Food Distributors (1.1%)
190,000 Supervalu, Inc. .......................... 2,861,875
------------
Food: Major Diversified (1.2%)
155,000 Sara Lee Corp. ........................... 3,148,437
------------
Food: Meat/Fish/Dairy (1.2%)
155,000 ConAgra, Inc. ............................ 3,109,687
------------
Industrial Conglomerates (1.2%)
82,000 Honeywell International, Inc. ............ 2,921,250
------------

See Notes to Financial Statements

<PAGE>

MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 2000, continued

NUMBER OF
SHARES VALUE
---------------------------------------------------------------------------
Industrial Specialties (1.2%)
75,000 PPG Industries, Inc. ......................... $ 2,976,562
------------
Life/Health Insurance (1.1%)
60,000 Lincoln National Corp. ....................... 2,887,500
------------
Major Banks (3.4%)
60,000 Bank of America Corp. ........................ 3,142,500
60,000 Chase Manhattan Corp. ........................ 2,771,250
70,000 FleetBoston Financial Corp. .................. 2,730,000
------------
8,643,750
------------
Major Telecommunications (2.4%)
94,500 AT&T Corp. ................................... 2,775,938
70,000 Verizon Communications ....................... 3,390,625
------------
6,166,563
------------
Motor Vehicles (1.1%)
110,000 Ford Motor Co. ............................... 2,784,375
------------
Oil & Gas Production (1.3%)
51,000 Kerr-McGee Corp. ............................. 3,378,750
------------
Oil Refining/Marketing (2.3%)
80,000 Ashland, Inc. ................................ 2,695,000
125,000 Ultramar Diamond Shamrock Corp. .............. 3,171,875
------------
5,866,875
------------
Pharmaceuticals: Major (2.6%)
45,000 Merck & Co., Inc. ............................ 3,349,688
70,000 Schering-Plough Corp. ........................ 3,255,000
------------
6,604,688
------------
Real Estate Investment Trusts (9.1%)
70,000 Archstone Communities Trust .................. 1,719,375
35,000 Avalonbay Communities, Inc. .................. 1,669,063
40,000 Boston Properties, Inc. ...................... 1,717,500
75,000 Duke-Weeks Realty Corp. ...................... 1,809,375
55,000 Equity Office Properties Trust ............... 1,708,438
40,000 Equity Residential Properties Trust .......... 1,920,000
60,000 First Industrial Realty Trust, Inc. .......... 1,845,000
85,000 Healthcare Realty Trust, Inc. ................ 1,795,625
70,000 Mack-Cali Realty Corp. ....................... 1,973,125
85,000 MeriStar Hospitality Corp. ................... 1,721,250
70,000 Reckson Associates Realty Corp. .............. 1,785,000
75,000 Simon Property Group, Inc. ................... 1,757,813
45,000 Vornado Realty Trust ......................... 1,670,625
------------
23,092,189
------------

See Notes to Financial Statements

<PAGE>

MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 2000, continued

<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
------------------------------------------------------------------------------------
<S> <C> <C>
Savings Banks (1.3%)
80,000 Washington Mutual, Inc. ................................... $ 3,185,000
------------
Tobacco (1.1%)
95,000 Philip Morris Companies, Inc. ............................. 2,796,563
------------
TOTAL COMMON STOCKS AND RIGHTS
(Cost $122,350,310)........................................ 123,597,031
------------
CONVERTIBLE PREFERRED STOCKS (11.1%)
Auto Parts: O.E.M. (0.0%)
94,000 BTI Capital Trust $3.25 - 144A*............................ 11,750
------------
Containers/Packaging (0.1%)
4,900 Sealed Air Corp. (Series A) $2.00.......................... 220,500
------------
Household/Personal Care (1.0%)
38,500 Estee Lauder Co. $3.80..................................... 2,497,687
------------
Industrial Machinery (0.5%)
69,000 Ingersoll-Rand Co. $1.688.................................. 1,242,000
------------
Major Banks (1.6%)
155,900 National Australia Bank, Ltd. $1.97 (Australia) (Units)+ .. 3,946,219
------------
Movies/Entertainment (0.4%)
30,000 Six Flags, Inc. $4.05...................................... 945,000
------------
Oil Refining/Marketing (0.8%)
200,000 Tesoro Petroleum Corp. $1.16............................... 2,100,000
------------
Publishing: Books/Magazines (0.9%)
70,000 Reader's Digest Association, Inc $1.93..................... 2,170,000
------------
Railroads (0.6%)
37,200 Union Pacific Capital Trust $3.13.......................... 1,507,902
------------
Real Estate Investment Trusts (0.8%)
70,000 SL Green Realty Corp. $2.00................................ 2,100,000
------------
Regional Banks (3.4%)
126,500 CNB Capital Trust I $1.50.................................. 4,822,813
120,700 WBK Strypes Trust $3.14.................................... 3,854,856
------------
8,677,669
------------
Tools/Hardware (1.0%)
109,700 Metromedia International Group, Inc. $3.63................. 2,495,675
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $35,302,458)......................................... 27,914,402
------------
</TABLE>

See Notes to Financial Statements

<PAGE>

MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 2000, continued

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONVERTIBLE BONDS (14.6%)
Apparel/Footwear Retail (1.2%)
$ 3,160 Genesco Inc. ................................ 5.50 % 04/15/05 $ 3,054,330
------------
Auto Parts: O.E.M. (0.9%)
300 Magna International, Inc. (Canada) -
144A* ....................................... 4.875 02/15/05 273,012
3,000 MascoTech, Inc. ............................. 4.50 12/15/03 2,040,000
------------
2,313,012
------------
Biotechnology (0.7%)
810 Athena Neurosciences, Inc. - 144A* .......... 4.75 11/15/04 1,276,997
180 Johnson & Johnson - 144A* ................... 4.75 02/15/05 229,911
165 Johnson & Johnson ........................... 4.75 02/15/05 210,751
------------
1,717,659
------------
Broadcasting (0.6%)
1,400 Clear Channel Communications, Inc. .......... 2.625 04/01/03 1,549,828
------------
Cable/Satellite TV (1.0%)
1,975 EchoStar Communications Corp. ............... 4.875 01/01/07 2,628,468
------------
Contract Drilling (0.2%)
440 Diamond Offshore Drilling, Inc. ............. 3.75 02/15/07 491,643
------------
Electronic Components (0.6%)
1,925 Solectron Corp. - 144A* ..................... 0.00 01/27/19 1,423,133
------------
Electronic Equipment/Instruments (0.8%)
2,000 SCI Systems, Inc. ........................... 3.00 03/15/07 2,034,560
------------
Electronic Production Equipment (0.7%)
1,690 Photronics Inc. ............................. 6.00 06/01/04 1,698,112
------------
Hospital/Nursing Management (0.2%)
1,295 Emeritus Corp. - 144A* ...................... 6.25 01/01/06 491,310
105 Sunrise Assisted Living, Inc. - 144A* ....... 5.50 06/15/02 96,206
------------
587,516
------------
Industrial Machinery (0.8%)
2,300 Thermo Fibertek, Inc. - 144A* ............... 4.50 07/15/04 2,080,074
------------
Internet Software/Services (1.2%)
7,000 AT Home Corp. ............................... 0.525 12/28/18 3,031,630
------------
Major Telecommunications (3.0%)
3,700 Bell Atlantic Financial Service - 144A*...... 4.25 09/15/05 4,093,125
</TABLE>

See Notes to Financial Statements

<PAGE>

MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 2000, continued

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 3,700 Bell Atlantic Financial Service - 144A*
(exchangeable into Telecom
Corporation of New Zealand
common stock) ............................... 5.75% 04/01/03 $ 3,575,125
------------
7,668,250
------------
Medical/Nursing Services (0.1%)
580 Alternative Living Services, Inc. ........... 5.25 12/15/02 282,315
------------
Metal Fabrications (0.2%)
225 Hexcel Corp. ................................ 7.00 08/01/03 225,000
300 Tower Automotive, Inc. - 144A* .............. 5.00 08/01/04 228,270
------------
453,270
------------
Movies/Entertainment (0.1%)
255 Speedway Motorsports, Inc. .................. 5.75 09/30/03 226,978
------------
Packaged Software (0.3%)
350 Hyperion Solutions Corp. .................... 4.50 03/15/05 287,042
260 Network Associates, Inc. .................... 0.00 02/13/18 100,721
745 Network Associates, Inc. - 144A* ............ 0.00 02/13/18 288,606
------------
676,369
------------
Personnel Services (0.1%)
370 Metamor Worldwide, Inc. ..................... 2.94 08/15/04 171,417
------------
Property - Casualty Insurers (0.8%)
640 Berkshire Hathaway, Inc. .................... 1.00 12/02/01 2,048,064
------------
Semiconductors (0.3%)
310 STMicroelectronics NV (Netherlands) ......... 0.00 06/10/08 801,273
------------
Services to the Health Industry (0.0%)
150 Quadramed Corp. ............................. 5.25 05/01/05 50,400
50 Quadramed Corp. - 144A* ..................... 5.25 05/01/05 16,800
------------
67,200
------------
Specialty Telecommunications (0.8%)
3,000 Efficient Networks, Inc. .................... 5.00 03/15/05 1,964,400
750 SA Telecommunications, Inc. - 144A* (a)...... 10.00 08/15/06 22,500
------------
1,986,900
------------
TOTAL CONVERTIBLE BONDS
(Cost $36,405,722)................................................... 36,992,001
------------
CORPORATE BONDS (22.9%)
Aerospace & Defense (0.0%)
140 BE Aerospace, Inc. (Series B) ............... 8.00 03/01/08 123,550
------------
</TABLE>

See Notes to Financial Statements

<PAGE>

MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 2000, continued

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alternative Power Generation (0.0%)
$ 50 CalEnergy Co., Inc. .......................... 7.63% 10/15/07 $ 49,668
------------
Aluminum (0.0%)
100 Golden Northwest Aluminum .................... 12.00 12/15/06 102,000
------------
Auto Parts: O.E.M. (0.1%)
175 Hayes Lemmerz International, Inc. ............ 8.25 12/15/08 141,750
100 Hayes Wheels International, Inc.
(Series B) ................................... 9.125 07/15/07 86,000
------------
227,750
------------
Beverages: Non-Alcoholic (0.2%)
165 Cott Corp. (Canada) .......................... 9.375 07/01/05 163,762
350 Packaged Ice Inc. (Series B) ................. 9.75 02/01/05 304,500
------------
468,262
------------
Broadcasting (3.5%)
150 Emmis Communications Corp.
(Series B) ................................... 8.125 03/15/09 142,500
2,900 EZ Communications, Inc. ...................... 9.75 12/01/05 3,050,336
145 Lamar Media Corp. ............................ 9.25 08/15/07 147,175
200 STC Broadcasting, Inc. ....................... 11.00 03/15/07 198,000
5,060 Young Broadcasting Corp. ..................... 11.75 11/15/04 5,180,175
------------
8,718,186
------------
Cable/Satellite TV (0.9%)
175 Echostar DBS Corp. ........................... 9.375 02/01/09 171,500
2,000 Tele-Communications, Inc. .................... 9.25 04/15/02 2,063,700
------------
2,235,200
------------
Casino/Gaming (0.1%)
200 Boyd Gaming Corp. ............................ 9.25 10/01/03 197,500
------------
Chemicals: Agricultural (0.0%)
100 Scotts Co. - 144A* ........................... 8.625 01/15/09 96,500
------------
Chemicals: Specialty (2.8%)
6,960 Huntsman Polymers Corp. ...................... 11.75 12/01/04 7,029,600
175 Texas Petrochemicals Corp. ................... 11.125 07/01/06 148,750
------------
7,178,350
------------
Coal (0.1%)
175 P&L Coal Holdings Corp. (Series B) ........... 8.875 05/15/08 173,250
------------
Construction Materials (1.1%)
2,850 USG Corp. (Series B) ......................... 9.25 09/15/01 2,892,037
------------
Consumer/Business Services (0.0%)
100 American Business Information, Inc. .......... 9.50 06/15/08 82,000
------------
</TABLE>

See Notes to Financial Statements

<PAGE>

MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 2000, continued

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Containers/Packaging (0.2%)
$ 225 Ball Corp. ................................. 7.75% 08/01/06 $ 217,125
125 Ball Corp. ................................. 8.25 08/01/08 120,312
100 Consumers Packaging, Inc. .................. 9.75 02/01/07 20,000
225 U.S. Can Corp. ............................. 10.125 10/15/06 242,719
------------
600,156
------------
Drugstore Chains (0.7%)
1,950 Thrifty PayLess Holdings, Inc. ............. 12.25 04/15/04 1,790,344
------------
Electric Utilities (0.2%)
100 CMS Energy Corp. ........................... 7.50 01/15/09 89,194
113 Niagara Mohawk Power (Series F) ............ 7.625 10/01/05 114,330
175 Niagara Mohawk Power (Series G) ............ 7.75 10/01/08 175,786
125 Niagara Mohawk Power (Series H) ............ 8.50 \^\^ 07/01/10 100,640
------------
479,950
------------
Electrical Products (0.1%)
335 Communications & Power Industries,
Inc. (Series B) ............................ 12.00 08/01/05 227,381
------------
Engineering & Construction (0.1%)
225 Mastec Inc. (Series B) ..................... 7.75 02/01/08 213,750
------------
Finance/Rental/Leasing (0.0%)
25 Anthony Crane Rentals ...................... 10.375 08/01/08 12,750
------------
Financial Conglomerates (0.0%)
75 GS Escrow Corp. ............................ 7.125 08/01/05 69,101
------------
Food Distributors (0.0%)
100 Di Giorgio Corp. ........................... 10.00 06/15/07 88,000
------------
Food: Major Diversified (0.2%)
475 International Home Foods, Inc. ............. 10.375 11/01/06 508,250
------------
Food: Specialty/Candy (0.0%)
100 Mrs. Fields Original (Series B) ............ 10.125 12/01/04 87,000
------------
Home Building (0.1%)
75 D.R. Horton Inc. ........................... 8.00 02/01/09 69,750
50 Standard Pacific Corp. (Series A) .......... 8.00 02/15/08 46,250
290 Williams Scotsman, Inc. .................... 9.875 06/01/07 255,200
------------
371,200
------------
Home Furnishings (0.1%)
200 Westpoint Stevens, Inc. .................... 7.875 06/15/08 166,500
------------
Hotels/Resorts/Cruiselines (0.1%)
400 ITT Corp. (New) ............................ 7.375 11/15/15 356,228
------------
</TABLE>

See Notes to Financial Statements

<PAGE>

MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 2000, continued

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Industrial Specialties (0.0%)
$ 125 Fibermark Inc. ............................ 9.375% 10/15/06 $ 123,750
------------
Major Telecommunications (1.4%)
225 RCN Corp. ................................. 11.125\^\^ 10/15/07 114,750
3,250 Sprint Spectrum L.P. ...................... 11.00 08/15/06 3,508,895
------------
3,623,645
------------
Media Conglomerates (0.8%)
2,000 Time Warner Entertainment Co. ............. 9.625 05/01/02 2,073,780
------------
Medical/Nursing Services (2.0%)
4,800 Healthsouth Corp. ......................... 9.50 04/01/01 4,788,000
225 Prime Medical Services Inc. ............... 8.75 04/01/08 202,500
------------
4,990,500
------------
Metal Fabrications (0.1%)
200 International Wire Group (Series B) ....... 11.75 06/01/05 201,500
100 Neenah Corp. (Series F) ................... 11.125 05/01/07 77,500
------------
279,000
------------
Miscellaneous Manufacturing (0.1%)
200 Ametek Inc. ............................... 7.20 07/15/08 183,008
155 Insilco Corp. (Series B) .................. 12.00 08/15/07 154,225
------------
337,233
------------
Miscellaneous Commercial Services(0.2%)
250 Iron Mountain, Inc. ....................... 10.125 10/01/06 254,375
75 Iron Mountain, Inc. ....................... 8.75 09/30/09 70,875
75 Pierce Leahy Command Co. .................. 8.125 05/15/08 70,125
------------
395,375
------------
Oil & Gas Production (0.1%)
275 Magnum Hunter Resources ................... 10.00 06/01/07 270,875
------------
Other Consumer Services (0.0%)
100 Protection One Alarm Monitoring, Inc....... 7.375 08/15/05 70,000
------------
Other Consumer Specialties (0.0%)
95 Boyds Collection Ltd. ..................... 9.00 05/15/08 90,250
------------
Other Metals/Minerals (4.3%)
10,500 Cyprus Amax Minerals Inc. ................. 10.125 04/01/02 10,867,500
------------
Publishing: Books/Magazines (0.1%)
50 Primedia, Inc. ............................ 7.625 04/01/08 45,500
250 Von Hoffman Press, Inc. - 144A* ........... 10.875 05/15/07 230,000
------------
275,500
------------
</TABLE>

See Notes to Financial Statements

<PAGE>

MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 2000, continued

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Publishing: Newspapers (0.5%)
$ 275 Garden State Newspapers (Series B) ........... 8.75% 10/01/09 $ 257,125
1,000 Hollinger International Publishing, Inc....... 9.25 02/01/06 998,750
------------
1,255,875
------------
Pulp & Paper (0.0%)
125 Paperboard Industrial International Inc....... 8.375 09/15/07 105,000
------------
Real Estate Development (0.1%)
300 Forest City Enterprises ...................... 8.50 03/15/08 285,000
------------
Recreational Products (0.0%)
125 CSC Holdings, Inc. ........................... 7.625 07/15/18 113,058
------------
Regional Banks (0.1%)
50 Chevy Chase Savings Bank ..................... 9.25 12/01/05 47,750
100 Chevy Chase Savings Bank, F.S.B. ............. 9.25 12/01/08 92,000
------------
139,750
------------
Specialty Stores (0.1%)
175 Michaels Stores, Inc. ........................ 10.875 06/15/06 180,250
175 Zale Corp. (Series B) ........................ 8.50 10/01/07 168,000
------------
348,250
------------
Specialty Telecommunications (0.1%)
325 Level 3 Communications, Inc. ................. 9.125 05/01/08 280,719
------------
Textiles (1.7%)
4,300 Dan River, Inc. .............................. 10.125 12/15/03 4,214,000
100 Polymer Group Inc. (Series B) ................ 8.75 03/01/08 79,000
------------
4,293,000
------------
Wholesale Distributors (0.0%)
300 Home Interiors & Gifts ....................... 10.125 06/01/08 89,625
------------
TOTAL CORPORATE BONDS
(Cost $62,228,627)...................................................... 57,822,548
------------
SHORT-TERM INVESTMENT (1.1%)
REPURCHASE AGREEMENT
2,825 The Bank of New York (dated 09/29/00;
proceeds $2,826,003) (b)
(Cost $2,824,532)............................. 6.25 10/02/00 2,824,532
------------
TOTAL INVESTMENTS
(Cost $259,111,649) (c).................................. 98.6% 249,150,514
OTHER ASSETS IN EXCESS OF LIABILITIES ................... 1.4 3,441,116
----- ------------
NET ASSETS .............................................. 100.0% $252,591,630
===== ============
</TABLE>

See Notes to Financial Statements

<PAGE>

MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 2000, continued

---------------------
* Resale is restricted to qualified institutional investors.
+ Consists of more than one class of securities traded together as a unit;
stocks with attached warrants.
++ Currently a zero coupon bond that will pay interest at the rate shown at a
future specified date.
(a) Non-income producing security; bond in default.
(b) Collateralized by $2,813,904 Federal Home Loan Mortgage Corp.
6.875% due 01/15/05 valued at $2,881,025.
(c) The aggregate cost for federal income tax purposes approximates the
aggregate cost for book purposes. The aggregate gross unrealized
appreciation is $20,533,973 and the aggregate gross unrealized
depreciation is $30,495,108, resulting in net unrealized
depreciation of $9,961,135.

See Notes to Financial Statements

<PAGE>

MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
September 30, 2000

<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments in securities, at value
(cost $259,111,649).............................................. $249,150,514
Receivable for:
Interest ....................................................... 2,531,181
Investments sold ............................................... 738,076
Dividends ...................................................... 719,822
Shares of beneficial interest sold ............................. 28,948
Deferred organizational expenses .................................. 24,048
Prepaid expenses and other assets ................................. 26,694
------------
TOTAL ASSETS ................................................... 253,219,283
------------
LIABILITIES:
Payable for:
Plan of distribution fee ....................................... 208,470
Shares of beneficial interest repurchased ...................... 169,938
Investment management fee ...................................... 158,131
Accrued expenses and other payables ............................... 91,114
------------
TOTAL LIABILITIES .............................................. 627,653
------------
NET ASSETS ..................................................... $252,591,630
============
COMPOSITION OF NET ASSETS:
Paid-in-capital ................................................... $279,790,552
Net unrealized depreciation ....................................... (9,961,135)
Accumulated undistributed net investment income ................... 3,007,106
Accumulated net realized loss ..................................... (20,244,893)
------------
NET ASSETS ..................................................... $252,591,630
============
CLASS A SHARES:
Net Assets ........................................................ $2,871,709
Shares Outstanding (unlimited authorized, $.01 par value).......... 277,157
NET ASSET VALUE PER SHARE ...................................... $10.36
======
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value) ................ $10.93
======
CLASS B SHARES:
Net Assets ........................................................ $223,413,016
Shares Outstanding (unlimited authorized, $.01 par value) ......... 21,554,281
NET ASSET VALUE PER SHARE ...................................... $10.37
======
CLASS C SHARES:
Net Assets ........................................................ $25,594,439
Shares Outstanding (unlimited authorized, $.01 par value) ......... 2,474,938
NET ASSET VALUE PER SHARE ...................................... $10.34
======
CLASS D SHARES:
Net Assets ........................................................ $712,466
Shares Outstanding (unlimited authorized, $.01 par value) ......... 68,780
NET ASSET VALUE PER SHARE ...................................... $10.36
======
</TABLE>

See Notes to Financial Statements

<PAGE>

MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
FINANCIAL STATEMENTS, continued

STATEMENT OF OPERATIONS
For the year ended September 30, 2000

NET INVESTMENT INCOME:
INCOME
Dividends ......................................... $ 9,791,902
Interest .......................................... 9,729,479
-----------
TOTAL INCOME ................................... 19,521,381
-----------
EXPENSES
Plan of distribution fee (Class A shares) ......... 17,265
Plan of distribution fee (Class B shares) ......... 2,776,290
Plan of distribution fee (Class C shares) ......... 322,264
Investment management fee ......................... 2,388,886
Transfer agent fees and expenses .................. 335,279
Shareholder reports and notices ................... 89,142
Registration fees ................................. 86,013
Professional fees ................................. 79,464
Custodian fees .................................... 35,237
Organizational expenses ........................... 32,779
Trustees' fees and expenses ....................... 16,883
Other ............................................. 22,875
-----------
TOTAL EXPENSES ................................. 6,202,377
-----------
NET INVESTMENT INCOME .......................... 13,319,004
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss ................................. (18,829,120)
Net change in unrealized depreciation ............. 10,092,703
-----------
NET LOSS ....................................... (8,736,417)
-----------
NET INCREASE ...................................... $ 4,582,587
===========

See Notes to Financial Statements

<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, 2000 SEPTEMBER 30, 1999
-------------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................ $ 13,319,004 $ 18,480,801
Net realized gain (loss) ............................. (18,829,120) 15,975,924
Net change in unrealized depreciation ................ 10,092,703 3,774,240
------------- -------------
NET INCREASE ...................................... 4,582,587 38,230,965
------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A shares .................................... (259,840) (646,373)
Class B shares .................................... (11,009,664) (17,881,658)
Class C shares .................................... (1,295,836) (604,652)
Class D shares .................................... (66,785) (76,726)
Net realized gain
Class A shares .................................... (425,264) (671,285)
Class B shares .................................... (11,062,251) (24,998,743)
Class C shares .................................... (1,329,137) (346,036)
Class D shares .................................... (25,446) (40,395)
------------- -------------
TOTAL DIVIDENDS AND DISTRIBUTIONS ................. (25,474,223) (45,265,868)
------------- -------------
Net decrease from transactions in shares of beneficial
interest ........................................... (128,727,015) (23,984,846)
------------- -------------
NET DECREASE ...................................... (149,618,651) (31,019,749)
NET ASSETS:
Beginning of period .................................. 402,210,281 433,230,030
------------- -------------
END OF PERIOD
(Including undistributed net investment income of
$3,007,106 and $2,449,140, respectively)........... $ 252,591,630 $ 402,210,281
============= ==============
</TABLE>

See Notes to Financial Statements

<PAGE>

MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
NOTES TO FINANCIAL STATEMENTS September 30, 2000

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 share structure.

The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within 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 portfolio security listed or traded
on the New York or American Stock Exchange, NASDAQ, or other exchange is valued
at its latest sale price, prior to the time when assets are valued; if there
were no sales that day, the security is valued at the latest bid price (in
cases where securities are traded on more than one exchange; the securities are
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; (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 utilize a matrix system
incorporating

<PAGE>

MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
NOTES TO FINANCIAL STATEMENTS September 30, 2000, continued

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 tax purposes 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.

<PAGE>

MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
NOTES TO FINANCIAL STATEMENTS September 30, 2000, continued

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.

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 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 totaled
$16,457,049 at September 30, 2000.

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, 2000, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.24% and
0.99%, respectively.

<PAGE>

MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
NOTES TO FINANCIAL STATEMENTS September 30, 2000, continued

The Distributor has informed the Fund that for the year ended September 30,
2000, it received contingent deferred sales charges from certain redemptions of
the Fund's Class B shares and Class C shares of $879,018 and $1,420,
respectively and received $13,117 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, 2000
aggregated $119,776,502 and $258,287,455, respectively.

For the year ended September 30, 2000, the Fund incurred $128,749 in brokerage
commissions with Dean Witter Reynolds Inc. ("DWR"), an affiliate of the
Investment Manager and Distributor, for portfolio transactions executed on
behalf of the Fund. At September 30, 2000, the Fund's receivable for
investments sold included unsettled trades with DWR of $279,841.

For the year ended September 30, 2000, the Fund incurred $17,425 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

At September 30, 2000, the Fund had a net capital loss carryover of
approximately $4,600,000 which will be available through September 30, 2008 to
offset future capital gains to the extent provided by regulations.

Capital losses incurred after October 31 ("post-October" losses) within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. The Fund incurred and will elect to defer net capital losses of
approximately $14,902,000 during fiscal 2000.

As of September 30, 2000, the Fund had temporary book/tax differences primarily
attributable to post-October losses and capital loss deferrals on wash sales
and permanent book/tax differences primarily attributable to a dividend
redesignation and 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 $128,913,
paid-in-capital was charged $32,799 and accumulated net realized gain was
credited $161,712.

<PAGE>

MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
NOTES TO FINANCIAL STATEMENTS September 30, 2000, continued

6. 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, 2000 SEPTEMBER 30, 1999
---------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- ------------------ ---------------- -----------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold .................................................. 165,350 $ 1,746,960 373,161 $ 4,311,270
Reinvestment of dividends and distributions ........... 49,956 516,422 72,926 807,614
Shares issued in connection with the acquisition of
TCW/DW Income and Growth Fund ........................ - - 8,607 101,458
Redeemed .............................................. (1,080,681) (11,152,505) (213,154) (2,454,803)
---------- -------------- -------- -------------
Net increase (decrease) - Class A ..................... (865,375) (8,889,123) 241,540 2,765,539
---------- -------------- -------- -------------
CLASS B SHARES
Sold .................................................. 2,079,343 21,898,681 3,043,825 35,162,596
Reinvestment of dividends and distributions ........... 1,715,995 17,730,597 3,152,355 34,981,362
Shares issued in connection with the acquisition of
TCW/DW Income and Growth Fund ........................ - - 723,832 8,541,094
Redeemed .............................................. (13,931,822) (146,329,936) (12,509,897) (143,652,130)
----------- -------------- ----------- -------------
Net decrease - Class B ................................ (10,136,484) (106,700,658) (5,589,885) (64,967,078)
----------- -------------- ----------- -------------
CLASS C SHARES
Sold .................................................. 86,384 904,529 114,511 1,316,245
Reinvestment of dividends and distributions ........... 216,767 2,235,520 72,635 801,880
Shares issued in connection with the acquisition of
TCW/DW Income and Growth Fund ........................ - - 3,554,666 41,847,822
Redeemed .............................................. (1,556,094) (16,250,626) (518,349) (5,997,769)
----------- -------------- ----------- -------------
Net increase (decrease) - Class C ..................... (1,252,943) (13,110,577) 3,223,463 37,968,178
----------- -------------- ----------- -------------
CLASS D SHARES
Sold .................................................. 214,024 2,220,160 449,722 5,167,272
Reinvestment of dividends and distributions ........... 2,726 28,226 4,118 45,524
Redeemed .............................................. (215,266) (2,275,043) (441,802) (4,964,281)
----------- -------------- ----------- -------------
Net increase (decrease) - Class D ..................... 1,484 (26,657) 12,038 248,515
----------- -------------- ----------- -------------
Net decrease in Fund .................................. (12,253,318) $ (128,727,015) (2,112,844) $ (23,984,846)
=========== ============== =========== =============
</TABLE>

<PAGE>

MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
NOTES TO FINANCIAL STATEMENTS September 30, 2000, continued

7. FUND ACQUISITION

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 asset 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 net assets of the Fund
amounted to $452,693,939.

<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 ENDED SEPTEMBER 30, JULY 28, 1997*
------------------------------------------------ THROUGH
2000 1999 1998 SEPTEMBER 30, 1997
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period ................... $10.98 $11.18 $12.81 $12.20
------ ------ ------ ------
Income (loss) from investment operations:
Net investment income ................................. 0.53 0.58 0.59 0.12
Net realized and unrealized gain (loss) ............... (0.26) 0.54 (1.12) 0.61
------ ------ ------ ------
Total income (loss) from investment operations ......... 0.27 1.12 (0.53) 0.73
------ ------ ------ ------
Less dividends and distributions from:
Net investment income ................................. (0.51) (0.62) (0.51) (0.12)
Net realized gain ..................................... (0.38) (0.70) (0.59) --
------ ------ ------ ------
Total dividends and distributions ...................... (0.89) (1.32) (1.10) (0.12)
------ ------ ------ ------
Net asset value, end of period ......................... $10.36 $10.98 $11.18 $12.81
====== ====== ====== ======
TOTAL RETURN+ ......................................... 2.71% 10.15% (4.67)% 5.95%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................... 1.21%(3) 1.17%(3) 1.17 %(3) 1.28%(2)
Net investment income .................................. 4.92%(3) 5.02%(3) 4.61 %(3) 5.77%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $2,872 $12,541 $10,073 $1,047
Portfolio turnover rate ................................ 38% 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

<PAGE>
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
FINANCIAL HIGHLIGHTS, continued

<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------------
2000# 1999# 1998++ 1997**++
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period ................... $10.98 $11.18 $12.81 $10.23
------ ------ ------ ------
Income (loss) from investment operations:
Net investment income ................................. 0.44 0.50 0.50 0.46
Net realized and unrealized gain (loss) ............... (0.23) 0.53 (1.11) 2.54
------ ------ ------ ------
Total income (loss) from investment operations ......... 0.21 1.03 (0.61) 3.00
------ ------ ------ ------
Less dividends and distributions from:
Net investment income ................................. (0.44) (0.53) (0.43) (0.41)
Net realized gain ..................................... (0.38) (0.70) (0.59) (0.01)
------ ------ ------ ------
Total dividends and distributions ...................... (0.82) (1.23) (1.02) (0.42)
------ ------ ------ ------
Net asset value, end of period ......................... $10.37 $10.98 $11.18 $12.81
====== ====== ====== ======
TOTAL RETURN+ ......................................... 2.00% 9.31% (5.29)% 29.83%
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................... 1.97%(3) 1.90%(3) 1.80 %(3) 1.85%
Net investment income .................................. 4.16%(3) 4.29%(3) 3.98 %(3) 4.16%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $223,413 $348,070 $416,909 $358,973
Portfolio turnover rate ................................ 38% 36% 58 % 74%

<CAPTION>
FOR THE PERIOD
JUNE 26, 1996*
THROUGH
SEPTEMBER 30, 1996
------------------------------------------------------------------------------
<S> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period ................... $10.00
------
Income (loss) from investment operations:
Net investment income ................................. 0.08
Net realized and unrealized gain (loss) ............... 0.23
------
Total income (loss) from investment operations ......... 0.31
------
Less dividends and distributions from:
Net investment income ................................. (0.08)
Net realized gain ..................................... --
------
Total dividends and distributions ...................... (0.08)
------
Net asset value, end of period ......................... $10.23
======
TOTAL RETURN+ .......................................... 3.10%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................... 2.25%(2)
Net investment income .................................. 3.60%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $148,142
Portfolio turnover rate ................................ 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

51
<PAGE>

MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
FINANCIAL HIGHLIGHTS, continued

<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED SEPTEMBER 30, JULY 28, 1997*
------------------------------------------------ THROUGH
2000 1999 1998 SEPTEMBER 30, 1997
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS C SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period ................... $10.96 $11.16 $12.80 $12.20
------ ------ ------ ------
Income (loss) from investment operations:
Net investment income ................................. 0.44 0.48 0.50 0.10
Net realized and unrealized gain (loss) ............... (0.24) 0.55 (1.12) 0.61
------ ------ ------ ------
Total income (loss) from investment operations ......... 0.20 1.03 (0.62) 0.71
------ ------ ------ ------
Less dividends and distributions from:
Net investment income ................................. (0.44) (0.53) (0.43) (0.11)
Net realized gain ..................................... (0.38) (0.70) (0.59) --
------ ------ ------ ------
Total dividends and distributions ...................... (0.82) (1.23) (1.02) (0.11)
------ ------ ------ ------
Net asset value, end of period ......................... $10.34 $10.96 $11.16 $12.80
====== ======
TOTAL RETURN+ .......................................... 2.01% 9.38% (5.38)% 5.79%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................... 1.96%(3) 1.90%(3) 1.92 %(3) 1.98%(2)
Net investment income .................................. 4.17%(3) 4.29%(3) 3.86 %(3) 4.61%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $ 25,594 $ 40,859 $5,630 $987
Portfolio turnover rate ................................ 38% 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

<PAGE>

MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
FINANCIAL HIGHLIGHTS, continued

<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED SEPTEMBER 30, JULY 28, 1997*
------------------------------------------------ THROUGH
2000 1999 1998 SEPTEMBER 30, 1997
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS D SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period ................... $10.99 $11.18 $12.82 $12.20
------ ------ ------ ------
Income (loss) from investment operations:
Net investment income ................................. 0.54 0.60 0.64 0.12
Net realized and unrealized gain (loss) ............... (0.24) 0.55 (1.15) 0.62
------ ------ ------ ------
Total income (loss) from investment operations ......... 0.30 1.15 (0.51) 0.74
------ ------ ------ ------
Less dividends and distributions from:
Net investment income ................................. (0.55) (0.64) (0.54) (0.12)
Net realized gain ..................................... (0.38) (0.70) (0.59) --
------ ------ ------ ------
Total dividends and distributions ...................... (0.93) (1.34) (1.13) (0.12)
------ ------ ------ ------
Net asset value, end of period ......................... $10.36 $10.99 $11.18 $12.82
====== ====== ======
TOTAL RETURN+ .......................................... 2.98% 10.51% (4.46)% 5.98%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................... 0.97%(3) 0.93%(3) 0.92 %(3) 0.96%(2)
Net investment income .................................. 5.16%(3) 5.26%(3) 4.86 %(3) 5.41%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $712 $740 $618 $21
Portfolio turnover rate ................................ 38% 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

<PAGE>

MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
INDEPENDENT AUDITORS' REPORT

TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
OF MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND:

We have audited the accompanying statement of assets and liabilities of Morgan
Stanley Dean Witter Income Builder Fund (the "Fund"), including the portfolio
of investments, as of September 30, 2000, and the related statements of
operations and changes in net assets, and the financial highlights for the year
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit. The statement of changes in net assets for the year ended September 30,
1999 and the financial highlights for each of the respective stated periods
ended September 30, 1999 were audited by other independent accountants whose
report, dated November 9, 1999, expressed an unqualified opinion on that
statement and financial highlights.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation
of securities owned as of September 30, 2000, by correspondence with the
custodian. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Morgan Stanley Dean Witter Income Builder Fund as of September 30, 2000, the
results of its operations, the changes in its net assets, and the financial
highlights for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.

Deloitte & Touche LLP
New York, New York
November 9, 2000

2000 FEDERAL TAX NOTICE (unaudited)

During the fiscal year ended July 31, 2000, the Fund paid to its
shareholders $0.37 per share from long-term capital gains. For such
period, 70.11% of the income dividends paid qualified for the dividends
received deduction available to corporations.

<PAGE>

MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
CHANGE IN INDEPENDENT ACCOUNTANTS

On July 1, 2000 PricewaterhouseCoopers LLP resigned as independent accountants
of the Fund.

The reports of PricewaterhouseCoopers LLP on the financial statements of the
Fund for the past two fiscal years contained no adverse opinion or disclaimer
of opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principle.

In connection with its audits for the two most recent fiscal years and through
July 1, 2000, there have been no disagreements with PricewaterhouseCoopers LLP
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of PricewaterhouseCoopers LLP would have caused them to
make reference thereto in their report on the financial statements for such
years.

The Fund, with the approval of its Board of Trustees and its Audit Committee,
engaged Deloitte & Touche LLP as its new independent accountants as of July 1,
2000.

<PAGE>

MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
REPORT OF INDEPENDENT ACCOUNTANTS

TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND

In our opinion, the statement of changes in net assets and the financial
highlights of Morgan Stanley Dean Witter Income Builder Fund (the "Fund")(not
presented separately herein) present fairly, in all material respects, the
changes in its net assets for the year ended September 30, 1999 and the
financial highlights for each of the years in the period ended September 30,
1999, in conformity with generally accepted accounting principles. This
financial statement 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 provide a reasonable basis for the
opinion expressed above. We have not audited the financial statements or
financial highlights of the Fund for any period subsequent to September 30,
1999.

PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
November 9, 1999

<PAGE>

MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND
PART C OTHER INFORMATION

Item 23. Exhibits
------- -------------------------------------------------------------------
1 (a). Declaration of Trust of the Registrant, dated March 20, 1996, is

incorporated by reference to Exhibit 1 of the Initial Registration
Statement on Form N-1A, filed on March 27, 1996.

1 (b). Instrument Establishing and Designating Additional Classes, dated
July 28, 1997, is incorporated by reference to Exhibit 1 of
Post-Effective Amendment No. 2 to the Registration Statement on
Form N-1A, filed on July 23, 1997.

1 (c). Amendment to the Declaration of Trust of the Registrant, dated June
22, 1998, is incorporated by reference to Exhibit 1 of
Post-Effective Amendment No. 4 to the Registration Statement on
Form N-1A, filed on November 25, 1998.

2. Amended and Restated By-Laws of the Registrant, dated May 1, 1999,
is incorporated by reference to Exhibit 2 of Post-Effective
Amendment No. 5 to the Registration Statement on Form N-1A, filed
on September 24, 1999.

3. Not Applicable.

4. Amended Investment Management Agreement between the Registrant and
Morgan Stanley Dean Witter Advisors Inc., dated May 1, 1998, is
incorporated by reference to Exhibit 5 of Post-Effective Amendment
No. 4 to the Registration Statement on Form N-1A, filed on November
25, 1998.

5 (a). Amended Distribution Agreement, dated June 22, 1998, is
incorporated by reference to Exhibit 6(a) of Post-Effective
Amendment No. 4 to the Registration Statement on Form N-1A, filed
on November 25, 1998.

5 (b). Selected Dealer Agreement between Morgan Stanley Dean Witter
Distributors Inc. and Dean Witter Reynolds Inc., is incorporated by
reference to Exhibit 6(b) of Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1A, filed on April 29, 1996.

5 (c). Omnibus Selected Dealer Agreement between Morgan Stanley Dean
Witter Distributors Inc. and National Financial Services
Corporation, dated October 17, 1998, is incorporated by reference
to Exhibit 6(b) of Post-Effective Amendment No. 4 to the
Registration Statement on Form N-1A, filed on November 25, 1998.

6. Not Applicable.

7. Custody Agreement between The Bank of New York and the Registrant
is incorporated by reference to Exhibit 9 of Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A, filed
on April 29, 1996.

1
<PAGE>

8 (a). Amended and Restated Transfer Agency and Service Agreement between
the Registrant and Morgan Stanley Dean Witter Trust FSB, dated
September 1, 2000, filed herein.

8 (b). Amended Services Agreement between Morgan Stanley Dean Witter
Advisors Inc. and Morgan Stanley Dean Witter Services Company
Inc.,, dated June 22, 1998, is incorporated by reference to Exhibit
9 of Post-Effective Amendment No. 4 to the Registration Statement
on Form N-1A, filed on November 25, 1998.

9 (a). Opinion of Sheldon Curtis, Esq., dated April 22, 1996, is
incorporated by reference to Exhibit 10(a) of Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A, filed
on April 29, 1996.

9 (b). Opinion of Lane, Altman & Owens LLP, Massachusetts Counsel, dated
April 22, 1996, is incorporated by reference to Exhibit 10(b) of
Pre-Effective Amendment No. 1 to the Registration Statement on Form
N-1A, filed on April 29, 1996.

10 (a). Consent of Independent Auditors, filed herein.

10 (b). Consent of PricewaterhouseCoopers LLP, filed herein.

11. Not Applicable.

12. Not Applicable.

13. Amended and Restated Plan of Distribution pursuant to Rule 12b-1
between the Registrant and Morgan Stanley Dean Witter Distributors
Inc., dated July 28, 1997, is incorporated by reference to Exhibit
15 of Post-Effective Amendment No. 2 to the Registration Statement
on Form N-1A, filed on July 23, 1997.

14. Amended Multi-Class Plan pursuant to Rule 18f-3, dated August 15,
2000, filed herein.

16. (a) Code of Ethics of Morgan Stanley Dean Witter Advisors Inc., Morgan
Stanley Dean Witter Services Company Inc. and Morgan Stanley Dean
Witter Distributors Inc., filed herein.

16. (b) Code of Ethics of the Morgan Stanley Dean Witter Funds, filed
herein.

Other Powers of Attorney are incorporated by reference to Exhibit (Other)
of Pre-Effective Amendment No. 1 to the Registration Statement on
Form N-1A, filed on April 29, 1996 and Exhibit (Other) of
Post-Effective Amendment No. 3 to the Registration Statement on
Form N-1A, filed on November 25, 1997. Power of Attorney for James
F. Higgins, filed herein.

2
<PAGE>

Item 24. Persons Controlled by or Under Common Control with the Fund.
------------------------------------------------------------

None

Item 25. Indemnification.
----------------

Pursuant to Section 5.3 of the Registrant's Declaration of Trust and under
Section 4.8 of the Registrant's By-Laws, the indemnification of the Registrant's
trustees, officers, employees and agents is permitted if it is determined that
they acted under the belief that their actions were in or not opposed to the
best interest of the Registrant, and, with respect to any criminal proceeding,
they had reasonable cause to believe their conduct was not unlawful. In
addition, indemnification is permitted only if it is determined that the actions
in question did not render them liable by reason of willful misfeasance, bad
faith or gross negligence in the performance of their duties or by reason of
reckless disregard of their obligations and duties to the Registrant. Trustees,
officers, employees and agents will be indemnified for the expense of litigation
if it is determined that they are entitled to indemnification against any
liability established in such litigation. The Registrant may also advance money
for these expenses provided that they give their undertakings to repay the
Registrant unless their conduct is later determined to permit indemnification.

Pursuant to Section 5.2 of the Registrant's Declaration of Trust and
paragraph 8 of the Registrant's Investment Management Agreement, neither the
Investment Manager nor any trustee, officer, employee or agent of the Registrant
shall be liable for any action or failure to act, except in the case of bad
faith, willful misfeasance, gross negligence or reckless disregard of duties to
the Registrant.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer, or controlling person of the Registrant
in connection with the successful defense of any action, suit or proceeding) is
asserted against the Registrant by such trustee, officer or controlling person
in connection with the shares being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act, and will
be governed by the final adjudication of such issue.

The Registrant hereby undertakes that it will apply the indemnification
provision of its by-laws in a manner consistent with Release 11330 of the
Securities and Exchange Commission under the Investment Company Act of 1940, so
long as the interpretation of Sections 17(h) and 17(i) of such Act remains in
effect.

Registrant, in conjunction with the Investment Manager, Registrant's
Trustees, and other registered investment management companies managed by the
Investment Manager, maintains insurance on behalf of any person who is or was a
Trustee, officer, employee, or agent of Registrant, or who is or was serving at
the request of Registrant as a trustee, director, officer, employee or agent of
another trust or corporation, against any liability asserted against him and
incurred by him or arising out of his position. However, in no event will
Registrant

3
<PAGE>

maintain insurance to indemnify any such person for any act for which Registrant
itself is not permitted to indemnify him.

Item 26. Business and Other Connections of Investment Advisor
----------------------------------------------------

See "The Fund and Its Management" in the Prospectus regarding the business
of the investment advisor. The following information is given regarding officers
of Morgan Stanley Dean Witter Advisors Inc. ("MSDW Advisors"). MSDW Advisors is
a wholly-owned subsidiary of Morgan Stanley Dean Witter & Co.

The term "Morgan Stanley Dean Witter Funds" refers to the following
registered investment companies:

Closed-End Investment Companies
-------------------------------

(1) Morgan Stanley Dean Witter California Insured Municipal Income Trust
(2) Morgan Stanley Dean Witter California Quality Municipal Securities
(3) Morgan Stanley Dean Witter Government Income Trust
(4) Morgan Stanley Dean Witter High Income Advantage Trust
(5) Morgan Stanley Dean Witter High Income Advantage Trust II
(6) Morgan Stanley Dean Witter High Income Advantage Trust III
(7) Morgan Stanley Dean Witter Income Securities Inc.
(8) Morgan Stanley Dean Witter Insured California Municipal Securities
(9) Morgan Stanley Dean Witter Insured Municipal Bond Trust
(10) Morgan Stanley Dean Witter Insured Municipal Income Trust
(11) Morgan Stanley Dean Witter Insured Municipal Securities
(12) Morgan Stanley Dean Witter Insured Municipal Trust
(13) Morgan Stanley Dean Witter Municipal Income Opportunities Trust
(14) Morgan Stanley Dean Witter Municipal Income Opportunities Trust II
(15) Morgan Stanley Dean Witter Municipal Income Opportunities Trust III
(16) Morgan Stanley Dean Witter Municipal Income Trust
(17) Morgan Stanley Dean Witter Municipal Income Trust II
(18) Morgan Stanley Dean Witter Municipal Income Trust III
(19) Morgan Stanley Dean Witter Municipal Premium Income Trust
(20) Morgan Stanley Dean Witter New York Quality Municipal Securities
(21) Morgan Stanley Dean Witter Prime Income Trust
(22) Morgan Stanley Dean Witter Quality Municipal Income Trust
(23) Morgan Stanley Dean Witter Quality Municipal Investment Trust
(24) Morgan Stanley Dean Witter Quality Municipal Securities

Open-end Investment Companies
-----------------------------

4
<PAGE>

(12) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(13) Morgan Stanley Dean Witter California Tax-Free Income Fund
(14) Morgan Stanley Dean Witter Capital Growth Securities
(15) Morgan Stanley Dean Witter Competitive Edge Fund, "Best Ideas Portfolio"
(16) Morgan Stanley Dean Witter Convertible Securities Trust
(17) Morgan Stanley Dean Witter Developing Growth Securities Trust
(18) Morgan Stanley Dean Witter Diversified Income Trust
(19) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
(20) Morgan Stanley Dean Witter Equity Fund
(21) Morgan Stanley Dean Witter European Growth Fund Inc.
(22) Morgan Stanley Dean Witter Federal Securities Trust
(23) Morgan Stanley Dean Witter Financial Services Trust
(24) Morgan Stanley Dean Witter Fund of Funds
(25) Morgan Stanley Dean Witter Global Dividend Growth Securities
(26) Morgan Stanley Dean Witter Global Utilities Fund
(27) Morgan Stanley Dean Witter Growth Fund
(28) Morgan Stanley Dean Witter Hawaii Municipal Trust
(29) Morgan Stanley Dean Witter Health Sciences Trust
(30) Morgan Stanley Dean Witter High Yield Securities Inc.
(31) Morgan Stanley Dean Witter Income Builder Fund
(32) Morgan Stanley Dean Witter Information Fund
(33) Morgan Stanley Dean Witter Intermediate Income Securities
(34) Morgan Stanley Dean Witter International Fund
(35) Morgan Stanley Dean Witter International SmallCap Fund
(36) Morgan Stanley Dean Witter Japan Fund
(37) Morgan Stanley Dean Witter Latin American Growth Fund
(38) Morgan Stanley Dean Witter Limited Term Municipal Trust
(39) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(40) Morgan Stanley Dean Witter Market Leader Trust
(41) Morgan Stanley Dean Witter Mid-Cap Equity Trust
(42) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(43) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(44) Morgan Stanley Dean Witter New Discoveries Fund
(45) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(46) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(47) Morgan Stanley Dean Witter Next Generation Trust
(48) Morgan Stanley Dean Witter North American Government Income Trust
(49) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(50) Morgan Stanley Dean Witter Real Estate Fund
(51) Morgan Stanley Dean Witter S&P 500 Index Fund
(52) Morgan Stanley Dean Witter S&P 500 Select Fund
(53) Morgan Stanley Dean Witter Select Dimensions Investment Series
(54) Morgan Stanley Dean Witter Select Municipal Reinvestment Fund
(55) Morgan Stanley Dean Witter Short-Term Bond Fund
(56) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(57) Morgan Stanley Dean Witter Small Cap Growth Fund
(58) Morgan Stanley Dean Witter Special Value Fund
(59) Morgan Stanley Dean Witter Strategist Fund
(60) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(61) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(62) Morgan Stanley Dean Witter Tax-Managed Growth Fund

5
<PAGE>

(63) Morgan Stanley Dean Witter Technology Fund
(64) Morgan Stanley Dean Witter Total Market Index Fund
(65) Morgan Stanley Dean Witter Total Return Trust
(66) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(67) Morgan Stanley Dean Witter U.S. Government Securities Trust
(68) Morgan Stanley Dean Witter Utilities Fund
(69) Morgan Stanley Dean Witter Value-Added Market Series
(70) Morgan Stanley Dean Witter Value Fund
(71) Morgan Stanley Dean Witter Variable Investment Series
(72) Morgan Stanley Dean Witter World Wide Income Trust

NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
---------------------- ---------------------------------------------------

Mitchell M. Merin President and Chief Operating Officer of Asset
President, Chief Management of Morgan Stanley Dean Witter & Co.
Executive Officer and ("MSDW); Chairman, Chief Executive Officer and
Director Director of Morgan Stanley Dean Witter Distributors
Inc. ("MSDW Distributors") and Morgan Stanley Dean
Witter Trust FSB ("MSDW Trust"); President, Chief
Executive Officer and Director of Morgan Stanley
Dean Witter Services Company Inc. ("MSDW
Services"); President of the Morgan Stanley Dean
Witter Funds; Executive Vice President and Director
of Dean Witter Reynolds Inc. ("DWR"); Director of
various MSDW subsidiaries; Trustee of various Van
Kampen investment companies.

Barry Fink General Counsel of Asset Management of MSDW;
Executive Vice President, Executive Vice President, Secretary, General
Secretary, General Counsel Counsel and Director of MSDW Services; Vice
and Director President and Secretary of MSDW Distributors; Vice
President, Secretary and General Counsel of the
Morgan Stanley Dean Witter Funds.

Joseph J. McAlinden Vice President of the Morgan Stanley Dean Witter
Executive Vice President Funds; Director of MSDW Trust.
and Chief Investment
Officer

Ronald E. Robison Executive Vice President, Chief Administrative
Executive Vice President, Officer and Director of MSDW Services; Vice
Chief Administrative President of the Morgan Stanley Dean Witter Funds.
Officer and Director

Edward C. Oelsner, III
Executive Vice President

Joseph R. Arcieri Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.

6
<PAGE>

Peter M. Avelar Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
and Director of the High
Yield Group

Mark Bavoso Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.

Douglas Brown
Senior Vice President

Rosalie Clough
Senior Vice President
and Director of Marketing

Richard G. DeSalvo
Senior Vice President
and Director of Investment
Management Services

Richard Felegy
Senior Vice President

Sheila A. Finnerty Vice President of Morgan Stanley Dean Witter Prime
Senior Vice President Income Trust.

Edward F. Gaylor Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
Director of the Research
Group

Robert S. Giambrone Senior Vice President of MSDW Services, MSDW
Senior Vice President Distributors and MSDW Trust and Director of MSDW
Trust; Vice President of the Morgan Stanley Dean
Witter Funds.

Rajesh K. Gupta Vice President of various Morgan Stanley Dean
Senior Vice President, Witter Funds.
Director of the Taxable
Fixed Income Group and
Chief Administrative
Officer - Investments

Kenton J. Hinchliffe Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.

Kevin Hurley Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.

7
<PAGE>

Jenny Beth Jones Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.

Michelle Kaufman Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.

John B. Kemp, III President of MSDW Distributors.
Senior Vice President

Anita H. Kolleeny Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
and Director of Sector
Rotation

Jonathan R. Page Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
and Director of the
Money Market Group

Ira N. Ross Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.

Guy G. Rutherfurd, Jr. Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
and Director of the
Growth Group

Rochelle G. Siegel Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.

James Solloway Jr.
Senior Vice President

Katherine H. Stromberg Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.

Paul D. Vance Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
and Director of the
Growth and Income Group

Elizabeth A. Vetell
Senior Vice President
and Director of
Shareholder Communication

8
<PAGE>

James F. Willison Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
and Director of the
Tax-Exempt Fixed
Income Group

Raymond A. Basile
First Vice President

Thomas F. Caloia First Vice President and Assistant Treasurer of
First Vice President MSDW Services; Assistant Treasurer of MSDW
and Assistant Distributors; Treasurer and Chief Financial and
Treasurer Accounting Officer of the Morgan Stanley Dean
Witter Funds.

Thomas Chronert
First Vice President

Richard Colville First Vice President and Controller of MSDW
First Vice President Services; Assistant Treasurer of MSDW Distributors;
and Controller First Vice President and Treasurer of MSDW Trust.

Marilyn K. Cranney Assistant Secretary of DWR; First Vice President
First Vice President and Assistant Secretary of MSDW Services; Assistant
and Assistant Secretary Secretary of MSDW Distributors and the Morgan
Stanley Dean Witter Funds.

Salvatore DeSteno First Vice President of MSDW Services.
First Vice President

Peter W. Gurman
First Vice President

David Johnson
First Vice President

Stanley Kapica
First Vice President

Douglas J. Ketterer
First Vice President

Todd Lebo First Vice President and Assistant Secretary of
First Vice President and MSDW Services; Assistant Secretary of MSDW
Assistant Secretary Distributors and the Morgan Stanley Dean Witter
Funds.

9
<PAGE>

Lou Anne D. McInnis First Vice President and Assistant Secretary of
First Vice President and MSDW Services; Assistant Secretary of MSDW
Assistant Secretary Distributors and the Morgan Stanley Dean Witter
Funds.

Carsten Otto First Vice President and Assistant Secretary of
First Vice President MSDW Services; Assistant Secretary of MSDW
and Assistant Secretary Distributors and the Morgan Stanley Dean Witter
Funds.

Carl F. Sadler
First Vice President

Ruth Rossi First Vice President and Assistant Secretary of
First Vice President and MSDW Services; Assistant Secretary of MSDW
Assistant Secretary Distributors and the Morgan Stanley Dean Witter
Funds.

James P. Wallin
First Vice President

Robert Abreu
Vice President

Dale Albright
Vice President

Joan G. Allman
Vice President

Andrew Arbenz Vice President of Morgan Stanley Dean Witter Global
Vice President Utilities Fund.

Sean Aurigemma
Vice President

Armon Bar-Tur Vice President of various Morgan Stanley Dean
Vice President Witter Funds.

Thomas A. Bergeron
Vice President

Philip Bernstein
Vice President

Dale Boettcher
Vice President

Michelina Calandrella
Vice President

10
<PAGE>

Ronald Caldwell
Vice President

Joseph Cardwell
Vice President

Christie Carr-Waldron
Vice President

Liam Carroll
Vice President

Philip Casparius
Vice President

Annette Celenza
Vice President

Aaron Clark Vice President of Morgan Stanley Dean Witter Market
Vice President Leader Trust

William Connerly
Vice President

Virginia Connors
Vice President

Michael J. Davey
Vice President

David Dineen Vice President of various Morgan Stanley Dean
Vice President Witter Funds.

June Ewers
Vice President

Jeffrey D. Geffen Vice President of Morgan Stanley Dean Witter U.S.
Vice President Government Securities Trust

Sandra Gelpieryn
Vice President

Charmaine George
Vice President

Michael Geringer
Vice President

11
<PAGE>

Gail Gerrity Burke
Vice President

Peter Gewirtz
Vice President

Mina Gitsevich
Vice President

Ellen Gold
Vice President

Amy Golub
Vice President

Stephen Greenhut
Vice President

Joan Hamilton
Vice President

Trey Hancock
Vice President

Matthew T. Haynes Vice President of various Morgan Stanley Dean
Vice President Witter Funds.

Peter Hermann Jr. Vice President of various Morgan Stanley Dean
Vice President Witter Funds.

David T. Hoffman
Vice President

Thomas G. Hudson II
Vice President

Linda Jones
Vice President

Norman Jones
Vice President

Kevin Jung Vice President of various Morgan Stanley Dean
Vice President Witter Funds.

Carol Espejo-Kane
Vice President

12
<PAGE>

Nancy Karole Kennedy
Vice President

Paula LaCosta Vice President of various Morgan Stanley Dean
Vice President Witter Funds.

Kimberly LaHart
Vice President

Thomas Lawlor
Vice President

Lester Lay
Vice President

Phuong Le
Vice President

Gerard J. Lian Vice President of various Morgan Stanley Dean
Vice President Witter Funds.

Cameron J. Livingstone
Vice President

Nancy Login Cole
Vice President

Sharon Loguercio
Vice President

Stephanie Lovinger
Vice President

Steven MacNamara
Vice President

Catherine Maniscalco Vice President of various Morgan Stanley Dean
Vice President Witter Funds.

Peter R. McDowell
Vice President

Albert McGarity
Vice President

Teresa McRoberts Vice President of various Morgan Stanley Dean
Vice President Witter Funds.

13
<PAGE>

Mark Mitchell
Vice President

Thomas Moore
Vice President

Julie Morrone Vice President of various Morgan Stanley Dean
Vice President Witter Funds.

Mary Beth Mueller
Vice President

David Myers Vice President of Morgan Stanley Dean Witter
Vice President Natural Resource Development Securities Inc.

James Nash
Vice President

Daniel Niland
Vice President

Richard Norris
Vice President

Hilary A. O'Neill
Vice President

Steven Orlov
Vice President

Mori Paulsen
Vice President

Anne Pickrell
Vice President

Reginald Rigaud
Vice President

Frances Roman
Vice President

Dawn Rorke
Vice President

John Roscoe Vice President of various Morgan Stanley Dean
Vice President Witter Funds.

14
<PAGE>

Hugh Rose
Vice President

Robert Rossetti Vice President of Morgan Stanley Dean Witter
Vice President Competitive Edge Fund.

Sally Sancimino Vice President of various Morgan Stanley Dean
Vice President Witter Funds.

Deborah Santaniello
Vice President

Patrice Saunders
Vice President

Donna Savoca
Vice President

Howard A. Schloss Vice President of Morgan Stanley Dean Witter
Vice President Federal Securities Trust.

Alison M. Sharkey
Vice President

Peter J. Seeley Vice President of various Morgan Stanley Dean
Vice President Witter Funds.

Ronald B. Silvestri Vice President of various Morgan Stanley Dean
Vice President Witter Funds.

Herbert Simon
Vice President

Martha Slezak
Vice President

Frank Smith
Vice President

Otha Smith
Vice President

Stuart Smith
Vice President

Robert Stearns
Vice President

15
<PAGE>

Naomi Stein
Vice President

William Stevens
Vice President

Michael Strayhorn
Vice President

Marybeth Swisher
Vice President

Michael Thayer
Vice President

Bradford Thomas
Vice President

Barbara Toich
Vice President

Robert Vanden Assem
Vice President

Frank Vindigni
Vice President

David Walsh
Vice President

Alice Weiss Vice President of various Morgan Stanley Dean
Vice President Witter Funds.

John Wong
Vice President

The principal address of MSDW Advisors, MSDW Services, MSDW Distributors,
DWR, and the Morgan Stanley Dean Witter Funds is Two World Trade Center, New
York, New York 10048. The principal address of MSDW is 1585 Broadway, New York,
New York 10036. The principal address of MSDW Trust is 2 Harborside Financial
Center, Jersey City, New Jersey 07311.

Item 27. Principal Underwriters
----------------------

(a) Morgan Stanley Dean Witter Distributors Inc. ("MSDW Distributors"), a
Delaware corporation, is the principal underwriter of the Registrant. MSDW
Distributors is also the principal underwriter of the following investment
companies:

16
<PAGE>

(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Institutional Money Trust
(4) Active Assets Money Trust
(5) Active Assets Premier Money Trust
(6) Active Assets Tax-Free Trust
(7) Morgan Stanley Dean Witter 21st Century Trend Fund
(8) Morgan Stanley Dean Witter Aggressive Equity Fund
(9) Morgan Stanley Dean Witter American Opportunities Fund
(10) Morgan Stanley Dean Witter Balanced Growth Fund
(11) Morgan Stanley Dean Witter Balanced Income Fund
(12) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(13) Morgan Stanley Dean Witter California Tax-Free Income Fund
(14) Morgan Stanley Dean Witter Capital Growth Securities
(15) Morgan Stanley Dean Witter Competitive Edge Fund, "Best Ideas Portfolio"
(16) Morgan Stanley Dean Witter Convertible Securities Trust
(17) Morgan Stanley Dean Witter Developing Growth Securities Trust
(18) Morgan Stanley Dean Witter Diversified Income Trust
(19) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
(20) Morgan Stanley Dean Witter Equity Fund
(21) Morgan Stanley Dean Witter European Growth Fund Inc.
(22) Morgan Stanley Dean Witter Federal Securities Trust
(23) Morgan Stanley Dean Witter Financial Services Trust
(24) Morgan Stanley Dean Witter Fund of Funds
(25) Morgan Stanley Dean Witter Global Dividend Growth Securities
(26) Morgan Stanley Dean Witter Global Utilities Fund
(27) Morgan Stanley Dean Witter Growth Fund
(28) Morgan Stanley Dean Witter Hawaii Municipal Trust
(29) Morgan Stanley Dean Witter Health Sciences Trust
(30) Morgan Stanley Dean Witter High Yield Securities Inc.
(31) Morgan Stanley Dean Witter Income Builder Fund
(32) Morgan Stanley Dean Witter Information Fund
(33) Morgan Stanley Dean Witter Intermediate Income Securities
(34) Morgan Stanley Dean Witter International Fund
(35) Morgan Stanley Dean Witter International SmallCap Fund
(36) Morgan Stanley Dean Witter Japan Fund
(37) Morgan Stanley Dean Witter Latin American Growth Fund
(38) Morgan Stanley Dean Witter Limited Term Municipal Trust
(39) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(40) Morgan Stanley Dean Witter Market Leader Trust
(41) Morgan Stanley Dean Witter Mid-Cap Equity Trust
(42) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(43) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(44) Morgan Stanley Dean Witter New Discoveries Fund
(45) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(46) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(47) Morgan Stanley Dean Witter Next Generation Trust
(48) Morgan Stanley Dean Witter North American Government Income Trust
(49) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(50) Morgan Stanley Dean Witter Prime Income Trust

17
<PAGE>

(51) Morgan Stanley Dean Witter Real Estate Fund
(52) Morgan Stanley Dean Witter S&P 500 Index Fund
(53) Morgan Stanley Dean Witter S&P 500 Select Fund
(54) Morgan Stanley Dean Witter Short-Term Bond Fund
(55) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(56) Morgan Stanley Dean Witter Small Cap Growth Fund
(57) Morgan Stanley Dean Witter Special Value Fund
(58) Morgan Stanley Dean Witter Strategist Fund
(59) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(60) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(61) Morgan Stanley Dean Witter Tax-Managed Growth Fund
(62) Morgan Stanley Dean Witter Technology Fund
(63) Morgan Stanley Dean Witter Total Market Index Fund
(64) Morgan Stanley Dean Witter Total Return Trust
(65) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(66) Morgan Stanley Dean Witter U.S. Government Securities Trust
(67) Morgan Stanley Dean Witter Utilities Fund
(68) Morgan Stanley Dean Witter Value-Added Market Series
(69) Morgan Stanley Dean Witter Value Fund
(70) Morgan Stanley Dean Witter Variable Investment Series
(71) Morgan Stanley Dean Witter World Wide Income Trust

(b) The following information is given regarding directors and officers of MSDW
Distributors not listed in Item 26 above. The principal address of MSDW
Distributors is Two World Trade Center, New York, New York 10048. Other than
Messrs. Higgins and Purcell, who are Trustees of the Registrant, none of the
following persons has any position or office with the Registrant.

Name Positions and Office with MSDW Distributors
---- -------------------------------------------

James F. Higgins Director

Philip J. Purcell Director

John Schaeffer Director

Charles Vadala Senior Vice President and Financial Principal.

Item 28. Location of Accounts and Records
--------------------------------

All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained by the Investment Manager at its offices, except records relating to
holders of shares issued by the Registrant, which are maintained by the
Registrant's Transfer Agent, at its place of business as shown in the
prospectus.

Item 29. Management Services
-------------------

Registrant is not a party to any such management-related service contract.

18
<PAGE>

Item 30. Undertakings
------------

Registrant hereby undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.

<PAGE>

SIGNATURES
----------

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York on the 29th day of November, 2000.

MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND

By /s/ Barry Fink
---------------------------------
Barry Fink
Vice President and Secretary

Pursuant to the requirements of the Securities Act of 1933, this Post
-Effective Amendment No.7 has been signed below by the following persons in the
capacities and on the dates indicated.

Signatures Title Date
---------- ----- ----

(1) Principal Executive Officer Chief Executive Officer,
Trustee and Chairman
By /s/ Charles A. Fiumefreddo 11/29/00
---------------------------------
Charles A. Fiumefreddo

(2) Principal Financial Officer Treasurer and Principal
Accounting Officer

By /s/ Thomas F. Caloia 11/29/00
---------------------------------
Thomas F. Caloia

(3) Majority of the Trustees

Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
James F. Higgins

By /s/ Barry Fink 11/29/00
---------------------------------
Barry Fink
Attorney-in-Fact

Michael Bozic Manuel H. Johnson
Edwin J. Garn Michael E. Nugent
Wayne E. Hedien John L. Schroeder

By /s/ David M. Butowsky 11/29/00
---------------------------------
David M. Butowsky
Attorney-in-Fact

<PAGE>

MORGAN STANLEY DEAN WITTER INCOME BUILDER FUND

EXHIBIT INDEX
-------------

8(a). Amended and Restated Transfer Agency and Services Agreement, dated
September 1, 2000, between the Registrant and Morgan Stanley Dean
Witter Trust FSB.

10(a). Consent of Independent Auditors.

10(b). Consent of PricewaterhouseCoopers LLP.

15. Amended and Restated Multiple Class Plan pursuant to Rule 18f-3.

16(a). Code of Ethics of Morgan Stanley Dean Witter Advisors, Inc., Morgan
Stanley Dean Witter Services Company Inc., and Morgan Stanley Dean
Witter Distributors Inc.

16(b). Code of Ethics of the Morgan Stanley Dean Witter Funds.

Other. Power of Attorney for James F. Higgins.