<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 16, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(e)(1) OF THE
SECURITIES EXCHANGE ACT OF 1934)
(AMENDMENT NO. )
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
(Name of Issuer)
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
(Name of Person(s) Filing Statement)
COMMON SHARES OF BENEFICIAL INTEREST, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
616971-107
(CUSIP Number of Class of Securities)
Barry Fink, Esq.
Morgan Stanley Dean Witter Prime Income Trust
Two World Trade Center
New York, N.Y. 10048
(212) 392-1600
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of Person(s) Filing Statement)
------------------------
NOVEMBER 17, 1999
(Date Tender Offer First Published,
Sent or Given to Security Holders)
------------------------
CALCULATION OF FILING FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRANSACTION VALUATION $118,080,000 (a) AMOUNT OF FILING FEE: $23,616 (b)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(a) Calculated as the aggregate maximum purchase price to be paid for 12,000,000
shares in the offer.
(b) Calculated as 1/50 of 1% of the Transaction Valuation.
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: ____________________________________________________
Form or Registration No.: __________________________________________________
Filing Party: ______________________________________________________________
Date Filed: ________________________________________________________________
Exhibit Index
Located on Page 5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 1. SECURITY AND ISSUER.
(a) The name of the issuer is Morgan Stanley Dean Witter Prime Income
Trust, a non-diversified, closed-end management investment company organized as
a Massachusetts business trust (the "Trust") under the name "Allstate Prime
Income Trust." The name was changed to "Prime Income Trust," effective March 1,
1993 and then to "Morgan Stanley Dean Witter Prime Income Trust," effective
June 22, 1998. The principal executive offices of the Trust are located at Two
World Trade Center, New York, N.Y. 10048.
(b) The title of the securities being sought is common shares of beneficial
interest, par value $.01 per share (the "Common Shares"). As of November 5, 1999
there were approximately 260,788,644 Common Shares issued and outstanding.
The Trust is seeking tenders for up to 12,000,000 Common Shares, at the net
asset value per Common Share, calculated on the day the tender offer expires,
upon the terms and subject to the conditions set forth in the Offer to Purchase,
dated November 17, 1999 (the "Offer to Purchase"), and the related Letter of
Transmittal (which together constitute the "Offer"). An "Early Withdrawal
Charge" will be imposed on most Common Shares accepted for payment. A copy of
each of the Offer to Purchase and the Letter of Transmittal is attached hereto
as Exhibit (a)(1)(ii) and Exhibit (a)(2), respectively. Reference is hereby made
to the Cover Page and Section 1 "Price; Number of Common Shares" of the Offer to
Purchase, which are incorporated herein by reference. The Trust has been
informed that no trustees, officers or affiliates of the Trust intend to tender
Common Shares pursuant to the Offer.
(c) The Common Shares are not currently traded on an established trading
market.
(d) Not Applicable.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) Reference is hereby made to Section 12 "Source and Amount of Funds"
of the Offer to Purchase, which is incorporated herein by reference.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
Reference is hereby made to Section 7 "Purpose of the Offer," Section 8
"Plans or Proposals of the Trust," Section 11 "Certain Effects of the Offer" and
Section 12 "Source and Amount of Funds" of the Offer to Purchase, which are
incorporated herein by reference. In addition, the Trust regularly purchases and
sells assets in its ordinary course of business. Except as set forth above, the
Trust has no plans or proposals which relate to or would result in (a) the
acquisition by any person of additional securities of the Trust or the
disposition of securities of the Trust; (b) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving the
Trust; (c) a sale or transfer of a material amount of assets of the Trust;
(d) any change in the present Board of Trustees or management of the Trust,
including, but not limited to, any plans or proposals to change the number or
the term of Trustees, or to fill any existing vacancy on the Board of Trustees
or to change any material term of the employment contract of any executive
officer of the Trust; (e) any material change in the present dividend rate or
policy, or indebtedness or capitalization of the Trust; (f) any other material
change in the Trust's structure or business, including any plans or proposals to
make any changes in its investment policy for which a vote would be required by
Section 13 of the Investment Company Act of 1940; (g) any changes in the Trust's
declaration of trust, By-Laws or instruments corresponding thereto or other
actions which may impede the acquisition of control of the Trust by any person;
(h) a class of equity securities of the Trust being delisted from a national
securities exchange or ceasing to be authorized to be quoted on an inter-dealer
quotation system of a registered national securities association; (i) a class of
equity security of the Trust becoming eligible for termination of registration
under the Investment Company Act of 1940; or (j) the suspension of the Trust's
obligation to file reports pursuant to Section 15(d) of the Securities Exchange
Act of 1934.
2
<PAGE>
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
Reference is hereby made to Section 10 "Interest of Trustees and Executive
Officers; Transactions and Arrangements Concerning the Common Shares" of the
Offer to Purchase and the financial statements included as part of
Exhibit (a)(1)(ii) attached hereto, which are incorporated herein by reference.
Except as set forth therein, there have not been any transactions involving the
Common Shares of the Trust that were effected during the past 40 business days
by the Trust, any executive officer or Trustee of the Trust, any person
controlling the Trust, any executive officer or director of any corporation
ultimately in control of the Trust or by any associate or subsidiary of any of
the foregoing, including any executive officer or director of any such
subsidiary.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE ISSUER'S SECURITIES.
Reference is hereby made to Section 10 "Interest of Trustees and Executive
Officers; Transactions and Arrangements Concerning the Common Shares" of the
Offer to Purchase which is incorporated herein by reference. Except as set forth
therein, the Trust does not know of any contract, arrangement, understanding or
relationship relating, directly or indirectly, to the Offer (whether or not
legally enforceable) between the Trust, any of the Trust's executive officers or
Trustees, any person controlling the Trust or any officer or director of any
corporation ultimately in control of the Trust and any person with respect to
any securities of the Trust (including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the voting
of any such securities, joint ventures, loan or option arrangements, puts or
calls, guarantees of loans, guarantees against loss, or the giving or
withholding of proxies, consents or authorizations).
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
No persons have been employed, retained or are to be compensated by or on
behalf of the Trust to make solicitations or recommendations in connection with
the Offer.
ITEM 7. FINANCIAL INFORMATION.
(a)-(b) Reference is hereby made to the Financial Statements included as
part of Exhibit (a)(1)(ii) attached hereto, which are incorporated herein by
reference.
ITEM 8. ADDITIONAL INFORMATION.
(a) Reference is hereby made to Section 10 "Interests of Trustees and
Executive Officers; Transactions and Arrangements Concerning the Common Shares"
of the Offer to Purchase which is incorporated herein by reference.
(b)-(d) Not applicable.
(e) The Offer to Purchase, attached hereto as Exhibit (a)(1)(ii), is
incorporated herein by reference in its entirety.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1)(i) Advertisement printed in THE WALL STREET JOURNAL National Edition.
(ii) Offer to Purchase (including Financial Statements).
(iii) Form of Letter to Shareholders who have requested Offer to Purchase.
(a)(2) Form of Letter of Transmittal (including Guidelines for Certification
of Taxpayer Identification Number).
(b) Not applicable.
(c)(1) Hold Harmless Agreement between the Trust and Dean Witter Reynolds
Inc. dated May 2, 1990 previously filed as Exhibit (c)(1) to the
Trust's Schedule 13E-4 on May 22, 1990 and via EDGAR on
December 20, 1993.
(c)(2) Form of Depositary Agreement between the Trust and Morgan Stanley
Dean Witter Trust FSB dated as of November 5, 1999.
(c)(4) Form of Administration Agreement dated April 17, 1995 and amended as
of April 30, 1998. Previously filed as Exhibit (c)(2) to the
Trust's Schedule 13E-4 via EDGAR on August 14, 1998.
(d)-(f) Not applicable.
3
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
MORGAN STANLEY DEAN WITTER
PRIME INCOME TRUST
/s/ Barry Fink
--------------------------------------
Barry Fink
Vice President and Secretary
November 16, 1999
4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- --------------- ------------------------------------------------------------ -----
<S> <C> <C>
(a)(1)(i) Advertisement printed in THE WALL STREET JOURNAL National
Edition....................................................
(a)(1)(ii) Offer to Purchase (including Financial Statements)..........
(a)(1)(iii) Form of Letter to Shareholders who have requested Offer to
Purchase...................................................
(a)(2) Form of Letter of Transmittal (including Guidelines for
Certification of Tax Identification Number)................
(c)(1)* Hold Harmless Agreement.....................................
(c)(2) Form of Depositary Agreement between the Trust and Morgan
Stanley Dean Witter Trust FSB..............................
(c)(3)** Form of New Investment Advisory Agreement dated June 30,
1993.......................................................
(c)(4)*** Form of Administration Agreement dated April 17, 1995 and
amended as of April 30, 1998...............................
(c)(5)** Form of New Distribution Agreement dated June 30, 1993......
</TABLE>
- ------------------------
*Previously filed by the Trust as an exhibit to Schedule 13E-4 which was
filed with the Commission on May 22, 1990 and via EDGAR on December 20,
1993.
**Previously filed as an exhibit to Schedule 13E-4 via EDGAR on August 17,
1993.
***Previously filed as an exhibit to Schedule 13E-4 via EDGAR on August 14,
1998.
5
<PAGE>
EXHIBIT (a)(1)(i)
ADVERTISEMENT PRINTED IN THE WALL STREET JOURNAL
NATIONAL EDITION
<PAGE>
THIS ANNOUNCEMENT IS NOT AN OFFER TO PURCHASE OR A SOLICITATION OF AN OFFER TO
SELL COMMON SHARES. THE OFFER IS MADE ONLY BY THE OFFER TO PURCHASE DATED
NOVEMBER 17, 1999 AND THE RELATED LETTER OF TRANSMITTAL. THE OFFER IS
NOT BEING MADE TO, NOR WILL TENDERS BE ACCEPTED FROM OR ON BEHALF
OF, HOLDERS OF COMMON SHARES IN ANY JURISDICTION IN WHICH
MAKING OR ACCEPTING THE OFFER WOULD VIOLATE THAT
JURISDICTION'S LAWS.
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
NOTICE OF OFFER TO PURCHASE FOR CASH
12,000,000 OF ITS ISSUED AND OUTSTANDING COMMON SHARES
AT NET ASSET VALUE PER COMMON SHARE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME ON DECEMBER 17, 1999, UNLESS THE OFFER IS EXTENDED.
Morgan Stanley Dean Witter Prime Income Trust (the "Trust") is offering to
purchase 12,000,000 of its issued and outstanding common shares of beneficial
interest, par value of $.01 per share ("Common Shares") at a price equal to
their net asset value ("NAV") computed as of 4:00 P.M. New York City time on
December 17, 1999, the Expiration Date, unless extended, upon the terms and
conditions set forth in the Offer to Purchase dated November 17, 1999 and the
related Letter of Transmittal (which together constitute the "Offer"). An "Early
Withdrawal Charge" will be imposed on most Common Shares accepted for payment
that have been held for four years or less. The NAV on November 5, 1999, was
$9.84 per Common Share. The purpose of the Offer is to provide liquidity to
shareholders since the Trust is unaware of any secondary market which exists for
the Common Shares. The Offer is not conditioned upon the tender of any minimum
number of Common Shares.
If more than 12,000,000 Common Shares are duly tendered prior to the
expiration of the Offer, assuming no changes in the factors originally
considered by the Board of Trustees when it determined to make the Offer and
subject to the other conditions set forth in the Offer, the Trust will either
extend the Offer, if necessary, and increase the number of Common Shares that
the Trust is offering to purchase to an amount which it believes will be
sufficient to accommodate the excess Common Shares tendered as well as any
Common Shares tendered during the extended offer period or purchase 12,000,000
(or such larger number of Common Shares sought) of the Common Shares tendered on
a pro rata basis.
Common Shares tendered pursuant to the Offer may be withdrawn at any time
prior to 12:00 Midnight, New York City time on December 17, 1999, and, if not
yet accepted for payment by the Trust, Common Shares may also be withdrawn after
January 13, 2000. To be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by Morgan Stanley Dean
Witter Trust FSB, the Depositary. Any notice of withdrawal must specify the name
of the person having tendered the Common Shares to be withdrawn, the number of
Common Shares to be withdrawn, and, if certificates representing such Common
Shares have been delivered or otherwise identified to the Depositary, the name
of the registered holder(s) of such Common Shares as set forth in such
certificates if different from the name of the person tendering such Common
Shares. If certificates have been delivered to the Depositary, then, prior to
the release of such certificates, the Shareholder must also submit the
certificate numbers shown on the particular certificates evidencing such Common
Shares and the signature on the notice of withdrawal must be guaranteed by an
eligible guarantor acceptable to the Depositary. Any Common Shares tendered on
behalf of a shareholder by Dean Witter Reynolds Inc. may be withdrawn by Dean
Witter Reynolds Inc.
The Information required to be disclosed by paragraph (d)(1) of Rule 13e-4
under the Securities Exchange Act of 1934, as amended, is contained in the Offer
to Purchase and is incorporated herein by reference.
NEITHER THE TRUST NOR ITS BOARD OF TRUSTEES MAKES ANY RECOMMENDATION TO ANY
SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ANY OR ALL OF SUCH
SHAREHOLDER'S COMMON SHARES. SHAREHOLDERS ARE URGED TO EVALUATE CAREFULLY ALL
INFORMATION IN THE OFFER TO PURCHASE, CONSULT THEIR OWN INVESTMENT AND TAX
ADVISERS AND MAKE THEIR OWN DECISIONS WHETHER TO TENDER COMMON SHARES AND, IF
SO, HOW MANY COMMON SHARES TO TENDER.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION THAT SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
Questions and requests for assistance or current NAV quotations may be
directed to Morgan Stanley Dean Witter Advisors Inc., Two World Trade Center,
New York, NY 10048, telephone 800-869-NEWS extension 0. Requests for copies of
the Offer to Purchase, Letter of Transmittal and any other tender offer
documents may be directed to Morgan Stanley Dean Witter Trust FSB at the address
and telephone number below. Copies will be furnished promptly at no expense to
you.
MORGAN STANLEY DEAN WITTER TRUST FSB
By Mail: By Hand Delivery or Courier:
P.O. Box 984 Harborside Financial Center
Jersey City, New Jersey 07303 Plaza Two
Jersey City, New Jersey 07311
Attn: Morgan Stanley Dean Witter Prime Income Trust
(800) 869-NEWS extension 0
November 17, 1999
<PAGE>
EXHIBIT (a)(1)(ii)
OFFER TO PURCHASE
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
OFFER TO PURCHASE FOR CASH 12,000,000
OF ITS ISSUED AND OUTSTANDING COMMON SHARES
AT NET ASSET VALUE PER COMMON SHARE
- --------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS
WILL EXPIRE AT 12:00 MIDNIGHT NEW YORK CITY TIME
ON DECEMBER 17, 1999, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
To the Holders of Common Shares of
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST:
Morgan Stanley Dean Witter Prime Income Trust, a non-diversified, closed-end
management investment company organized as a Massachusetts business trust (the
"Trust") under the former name "Allstate Prime Income Trust," is offering to
purchase up to 12,000,000 of its common shares of beneficial interest, with par
value of $.01 per share ("Common Shares"), for cash at a price (the "Purchase
Price") equal to their net asset value ("NAV") computed as of 4:00 P.M. New York
City time on December 17, 1999. The offer, proration period and withdrawal
rights will expire at 12:00 midnight New York City time on December 17, 1999
(the "Initial Expiration Date"), unless extended (the Initial Expiration Date or
the latest date to which the Offer is extended, the "Expiration Date"), upon the
terms and conditions set forth in this Offer to Purchase and the related Letter
of Transmittal (which together constitute the "Offer"). An Early Withdrawal
Charge (as defined in Section 3) will be imposed on most Common Shares accepted
for payment that have been held for four years or less. The Common Shares are
not currently traded on an established trading market. The NAV on November 5,
1999 was $9.84 per Common Share. Through the Expiration Date, you can obtain
current NAV quotations from Morgan Stanley Dean Witter Advisors Inc. ("MSDW
Advisors") by calling (800) 869-NEWS Extension 0 between the hours of 8:30 A.M.
and 6:00 P.M. New York City time, Monday through Friday, except holidays. See
Section 9.
The Offer is not conditioned upon the tender of any minimum number of Common
Shares. If more than 12,000,000 Common Shares are tendered, no Common Shares may
be purchased if (a) the Offer is not extended and the number of Common Shares
for which tenders are sought is not increased to allow the purchase of such
additional Common Shares or (b) the Trust elects not to purchase 12,000,000 of
the tendered Common Shares on a pro rata basis. If more than 12,000,000 Common
Shares are duly tendered prior to the expiration of the Offer, subject to the
condition that there have been no material changes in the factors originally
considered by the Board of Trustees when it determined to make the Offer and in
the other conditions set forth in Section 6, the Trust will either extend the
Offer period, if necessary, and increase the number of Common Shares that the
Trust is offering to purchase to an amount which it believes will be sufficient
to accommodate the excess Common Shares tendered as well as any Common Shares
tendered during the extended Offer period or purchase 12,000,000 (or such larger
number of Common Shares sought) of the Common Shares tendered on a pro rata
basis.
THIS OFFER IS BEING MADE TO ALL SHAREHOLDERS
OF THE TRUST AND IS NOT CONDITIONED UPON ANY
MINIMUM NUMBER OF COMMON SHARES BEING TENDERED.
THIS OFFER IS SUBJECT TO
CERTAIN CONDITIONS. SEE SECTION 6.
IMPORTANT
If you desire to tender Common Shares, have a brokerage account at Dean
Witter Reynolds Inc. ("DWR") and your Common Shares are not evidenced by
certificates in your possession you may, if you wish, contact your Morgan
Stanley Dean Witter Financial Advisor and request that he or she effect the
tender on your behalf. If you elect to tender Common Shares through your Morgan
Stanley Dean Witter Financial Advisor, you do NOT have to complete the Letter of
Transmittal. If you do not have a brokerage account at DWR or if your Common
Shares are evidenced by certificates in your possession or you do not
<PAGE>
wish to tender Common Shares through your Morgan Stanley Dean Witter Financial
Advisor, all or any portion of your Common Shares may be tendered only by
completing and signing the Letter of Transmittal and mailing or delivering it
along with any Common Share certificate(s) and any other required documents to
Morgan Stanley Dean Witter Trust FSB (the "Depositary").
NEITHER THE TRUST NOR ITS BOARD OF TRUSTEES MAKES ANY RECOMMENDATION TO ANY
SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ANY OR ALL OF SUCH
SHAREHOLDER'S COMMON SHARES. SHAREHOLDERS ARE URGED TO EVALUATE CAREFULLY ALL
INFORMATION IN THE OFFER, CONSULT THEIR OWN INVESTMENT AND TAX ADVISERS AND MAKE
THEIR OWN DECISIONS WHETHER TO TENDER COMMON SHARES AND, IF SO, HOW MANY COMMON
SHARES TO TENDER.
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE
TRUST AS TO WHETHER SHAREHOLDERS SHOULD TENDER COMMON SHARES PURSUANT TO THE
OFFER. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED HEREIN
OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH RECOMMENDATION AND SUCH
INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE TRUST.
Requests for additional copies of this Offer to Purchase and the Letter of
Transmittal should be directed to Morgan Stanley Dean Witter Trust FSB at the
addresses and telephone number set forth below. Questions and requests for
assistance may be directed to MSDW Advisors at the telephone number set forth
below.
November 17, 1999 MORGAN STANLEY DEAN WITTER
Morgan Stanley Dean Witter Advisors PRIME INCOME TRUST
Inc. Depositary:
(800) 869-NEWS Morgan Stanley Dean Witter Trust FSB
Extension 0
By Mail:
Morgan Stanley Dean Witter Trust FSB
P.O. Box 984
Jersey City, New Jersey 07303
By Hand Delivery or Courier:
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center,
Plaza Two
Jersey City, New Jersey 07311
Attn: Morgan Stanley Dean Witter
Prime Income Trust
Telephone: (800) 869-NEWS
Extension 0
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- -------- -----
<C> <S> <C>
1. Price; Number of Common Shares.................... 4
2. Procedure for Tendering Common Shares............. 4
3. Early Withdrawal Charge........................... 6
4. Withdrawal Rights................................. 7
5. Payment for Shares................................ 7
6. Certain Conditions of the Offer................... 8
7. Purpose of the Offer.............................. 8
8. Plans or Proposals of the Trust................... 9
9. Price Range of Common Shares; Dividends........... 9
10. Interest of Trustees and Executive Officers;
Transactions and Arrangements Concerning the
Common Shares.................................... 9
11. Certain Effects of the Offer...................... 10
12. Source and Amount of Funds........................ 10
13. Certain Information about the Trust............... 10
14. Additional Information............................ 11
15. Certain Federal Income Tax Consequences........... 11
16. Extension of Tender Period; Termination;
Amendments....................................... 11
17. Miscellaneous..................................... 12
18. Financial Statements--September 30, 1999.......... 13
19. Financial Statements--September 30, 1998.......... 37
</TABLE>
3
<PAGE>
1. PRICE; NUMBER OF COMMON SHARES. The Trust will, upon the terms and
subject to the conditions of the Offer, accept for payment (and thereby
purchase) 12,000,000 or such lesser number of its issued and outstanding Common
Shares which are properly tendered (and not withdrawn in accordance with
Section 4) prior to 12:00 A.M., midnight, New York City time, on December 17,
1999 (such time and date being hereinafter called the "Initial Expiration
Date"). The Trust reserves the right to extend the Offer. See Section 16. The
later of the Initial Expiration Date or the latest time and date to which the
Offer is extended is hereinafter called the "Expiration Date." The purchase
price of the Common Shares will be their NAV computed as of 4:00 P.M. New York
City time on the Expiration Date. The NAV on November 5, 1999 was $9.84 per
Common Share. You can obtain current NAV quotations from Morgan Stanley Dean
Witter Advisors Inc. ("MSDW Advisors") by calling (800) 869-NEWS extension 0
during normal business hours. Shareholders tendering Common Shares shall be
entitled to receive all dividends declared on or before the Expiration Date, but
not yet paid on Common Shares tendered pursuant to the Offer. See Section 9. The
Trust will not pay interest on the purchase price under any circumstances. AN
EARLY WITHDRAWAL CHARGE WILL BE IMPOSED ON MOST COMMON SHARES ACCEPTED FOR
PAYMENT THAT HAVE BEEN HELD FOR FOUR YEARS OR LESS. SEE SECTION 3.
The Offer is being made to all shareholders of the Trust and is not
conditioned upon any minimum number of Common Shares being tendered. If the
number of Common Shares properly tendered prior to the Expiration Date and not
withdrawn is less than or equal to 12,000,000 Common Shares (or such greater
number of Common Shares as the Trust may elect to purchase pursuant to the
Offer), the Trust will, upon the terms and subject to the conditions of the
Offer, purchase at NAV all Common Shares so tendered. If more than 12,000,000
Common Shares are duly tendered prior to the expiration of the Offer and not
withdrawn, subject to the condition that there have been no changes in the
factors originally considered by the Board of Trustees when it determined to
make the Offer and the other conditions set forth in Section 6, the Trust will
either extend the Offer period, if necessary, and increase the number of Common
Shares that the Trust is offering to purchase to an amount which it believes
will be sufficient to accommodate the excess Common Shares tendered as well as
any Common Shares tendered during the extended Offer period or purchase
12,000,000 (or such larger number of Common Shares sought) of the Common Shares
tendered on a pro rata basis.
On November 5, 1999, there were approximately 260,788,644 Common Shares
issued and outstanding and there were approximately 90,857 holders of record of
Common Shares. The Trust has been advised that no trustees, officers or
affiliates of the Trust intend to tender any Common Shares pursuant to the
Offer.
The Trust reserves the right, in its sole discretion, at any time or from
time to time, to extend the period of time during which the Offer is open by
giving oral or written notice of such extension to the Depositary and making a
public announcement thereof. See Section 16. There can be no assurance, however,
that the Trust will exercise its right to extend the Offer. If the Trust
decides, in its sole discretion, to increase (except for any increase not in
excess of 2% of the outstanding Common Shares) or decrease the number of Common
Shares being sought and, at the time that notice of such increase or decrease is
first published, sent or given to holders of Common Shares in the manner
specified below, the Offer is scheduled to expire at any time earlier than the
tenth business day from the date that such notice is first so published, sent or
given, the Offer will be extended at least until the end of such ten business
day period.
2. PROCEDURE FOR TENDERING COMMON SHARES.
PROPER TENDER OF COMMON SHARES. If you have a brokerage account at DWR and
your Common Shares are not evidenced by certificates in your possession, you may
contact your Morgan Stanley Dean Witter Financial Advisor and request that he or
she tender your Common Shares to the Depositary on your behalf. If you choose to
have your Morgan Stanley Dean Witter Financial Advisor tender your Common
Shares, you do not have to submit any documents to the Depositary. If you do not
wish to have your Morgan Stanley Dean Witter Financial Advisor tender your
Common Shares or you do not have a brokerage account at DWR or you have
certificates for Common Shares in your possession, for Common Shares to be
properly tendered pursuant to the Offer, a properly completed and duly executed
Letter of Transmittal (or manually signed facsimile thereof) with any required
signature guarantees, any certificates for such Common Shares, and any other
documents required by the Letter of Transmittal, must be received on or before
the
4
<PAGE>
Expiration Date by the Depositary at its address set forth on page 2 of this
Offer to Purchase. If you wish to tender your shares on the Expiration Date
following the close of business you may do so by calling (201) 938-6499.
It is a violation of Section 10(b) of the Securities Exchange Act of 1934
(the "Exchange Act"), and Rule 14e-4 promulgated thereunder, for a person to
tender Common Shares for such person's own account unless the person so
tendering (a) owns such Common Shares or (b) owns other securities convertible
into or exchangeable for such Common Shares or owns an option, warrant or right
to purchase such Common Shares and intends to acquire Common Shares for tender
by conversion, exchange or exercise of such option, warrant or right.
Section 10(b) and Rule 10b-4 provide a similar restriction applicable to the
tender or guarantee of a tender on behalf of another person.
The acceptance of Common Shares by the Trust for payment will constitute a
binding agreement between the tendering shareholder and the Trust upon the terms
and subject to the conditions of the Offer, including the tendering
shareholder's representation that (i) such shareholder owns the Common Shares
being tendered within the meaning of Rule 10b-4 promulgated under the Exchange
Act and (ii) the tender of such Common Shares complies with Rule 10b-4.
SIGNATURE GUARANTEES AND METHOD OF DELIVERY (only applicable if you are a
shareholder not tendering Common Shares through your Morgan Stanley Dean Witter
Financial Advisor). Signatures on the Letter of Transmittal are not required to
be guaranteed unless (1) the Letter of Transmittal is signed by someone other
than the registered holder of the Common Shares tendered therewith, or
(2) payment for tendered Common Shares is to be sent to a payee other than the
registered owner of such Common Shares and/or to an address other than the
registered address of the registered owner of the Common Shares. In those
instances, all signatures on the Letter of Transmittal must be guaranteed by an
eligible guarantor acceptable to the Depositary (an "Eligible Guarantor")
(shareholders should contact the Depositary for a determination as to whether a
particular institution is such an Eligible Guarantor). If Common Shares are
registered in the name of a person or persons other than the signer of the
Letter of Transmittal or if payment is to be made to, unpurchased Common Shares
are to be registered in the name of, or any certificates for unpurchased Common
Shares are to be returned to any person other than the registered owner, then
the Letter of Transmittal and, if applicable, the tendered Common Share
certificates must be endorsed or accompanied by appropriate authorizations, in
either case signed exactly as such name or names appear on the registration of
the Common Shares with the signatures on the certificates or authorizations
guaranteed by an Eligible Guarantor. See Instructions 1 and 5 of the Letter of
Transmittal.
Payment for Common Shares tendered and accepted for payment pursuant to the
Offer will be made (i) if you have tendered Common Shares directly to the
Depositary, only after receipt by the Depositary on or before the Expiration
Date of a properly completed and duly executed Letter of Transmittal (or
manually signed facsimile thereof) and any other documents required by the
Letter of Transmittal or (ii) if you have requested DWR to tender Common Shares
on your behalf, only after receipt by the Depositary on or before the Expiration
Date of a notice from DWR containing your name and the number of Common Shares
tendered. If your Common Shares are evidenced by certificates, those
certificates must be received by the Depositary on or prior to the Expiration
Date.
The method of delivery of any documents, including certificates for Common
Shares, is at the election and risk of the party tendering Common Shares. If
documents are sent by mail, it is recommended that they be sent by registered
mail, properly insured, with return receipt requested.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of tenders will be
determined by the Trust, in its sole discretion, whose determination shall be
final and binding. The Trust reserves the absolute right to reject any or all
tenders determined by it not to be in appropriate form or the acceptance of or
payment for which may, in the opinion of the Trust's counsel, be unlawful. The
Trust also reserves the absolute right to waive any of the conditions of the
Offer or any defect in any tender with respect to any particular Common Shares
or any particular shareholder, and the Trust's interpretations of the terms and
conditions of the Offer will be final and binding. Unless waived, any defects or
irregularities in connection with tenders must be cured within such times as the
Trust shall determine. Tendered Common Shares will not be accepted for payment
unless the defects or
5
<PAGE>
irregularities have been cured within such time or waived. Neither the Trust,
DWR, the Depositary nor any other person shall be obligated to give notice of
any defects or irregularities in tenders, nor shall any of them incur any
liability for failure to give such notice.
FEDERAL INCOME TAX WITHHOLDING. To prevent backup federal income tax
withholding equal to 31% of the gross payments made pursuant to the Offer, each
shareholder who has not previously submitted a Substitute Form W-9 to the Trust
or does not otherwise establish an exemption from such withholding must notify
the Depositary of such shareholder's correct taxpayer identification number (or
certify that such taxpayer is awaiting a taxpayer identification number) and
provide certain other information by completing the Substitute Form W-9 included
in the Letter of Transmittal. Foreign shareholders who are individuals and who
have not previously submitted a Form W-8 to the Trust must do so in order to
avoid backup withholding.
The Depositary will withhold 30% of the gross payments payable to a foreign
shareholder unless the Depositary determines that a reduced rate of withholding
or an exemption from withholding is applicable. (Exemption from backup
withholding does not exempt a foreign shareholder from the 30% withholding). For
this purpose, a foreign shareholder, in general, is a shareholder that is not
(i) a citizen or resident of the United States, (ii) a corporation, partnership
or other entity created or organized in or under the laws of the United States
or any political subdivision thereof, or (iii) an estate or trust the income of
which is subject to United States federal income taxation regardless of the
source of such income. The Depositary will determine a shareholder's status as a
foreign shareholder and eligibility for a reduced rate of, or an exemption from,
withholding by reference to the shareholder's address and to any outstanding
certificates or statements concerning eligibility for a reduced rate of, or
exemption from, withholding unless facts and circumstances indicate that
reliance is not warranted. A foreign shareholder who has not previously
submitted the appropriate certificates or statements with respect to a reduced
rate of, or exemption from, withholding for which such shareholder may be
eligible should consider doing so in order to avoid over-withholding. A foreign
shareholder may be eligible to obtain a refund of tax withheld if such
shareholder meets one of the three tests for capital gain or loss treatment
described in Section 15 or is otherwise able to establish that no tax or a
reduced amount of tax was due.
For a discussion of certain other federal income tax consequences to
tendering shareholders, see Section 15.
3. EARLY WITHDRAWAL CHARGE. The Depositary will impose an early withdrawal
charge (the "Early Withdrawal Charge") on most Common Shares accepted for
payment which have been held for four years or less. The Early Withdrawal Charge
will be imposed on a number of Common Shares accepted for payment from a record
holder of Common Shares the value of which exceeds the aggregate value at the
time the tendered Common Shares are accepted for payment of (a) all Common
Shares owned by such holder that were purchased more than four years prior to
such acceptance, (b) all Common Shares owned by such holder that were acquired
through reinvestment of dividends and distributions, and (c) the increase, if
any, of value of all other Common Shares owned by such holder (namely, those
purchased within the four years preceding acceptance for payment) over the
purchase price of such Common Shares. The Early Withdrawal Charge will be paid
to MSDW Advisors on behalf of the holder of the Common Shares. In determining
whether an Early Withdrawal Charge is payable, Common Shares accepted for
payment pursuant to the Offer shall be deemed to be those Common Shares
purchased earliest by the shareholder. Any Early Withdrawal Charge which is
required to be imposed will be made in accordance with the following schedule.
<TABLE>
<CAPTION>
EARLY
YEAR OF REPURCHASE WITHDRAWAL
AFTER PURCHASE CHARGE
---------------------------------------- ------------
<S> <C>
First................................... 3.0%
Second.................................. 2.5%
Third................................... 2.0%
Fourth.................................. 1.0%
Fifth and following..................... 0.0%
</TABLE>
The following example will illustrate the operation of the Early Withdrawal
Charge. Assume that an investor purchases $1000 worth of the Trust's Common
Shares for cash and that 21 months later the value of the account has grown
through the reinvestment of dividends and capital appreciation to $1,200. The
investor then may submit for repurchase pursuant to a tender offer up to $200
worth of Common Shares
6
<PAGE>
without incurring an Early Withdrawal Charge. If the investor should submit for
repurchase pursuant to a tender offer $500 worth of Common Shares, an Early
Withdrawal Charge would be imposed on $300 worth of the Common Shares submitted.
The charge would be imposed at the rate of 2.5% because it is in the second year
after the purchase was made and the charge would be $7.50.
4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4,
tenders of Common Shares made pursuant to the Offer will be irrevocable. If you
desire to withdraw Common Shares tendered on your behalf by DWR, you may
withdraw by contacting your Morgan Stanley Dean Witter Financial Advisor and
instructing him or her to withdraw such Common Shares, or by calling (201)
938-6499 on the Expiration Date following the close of business. You may
withdraw Common Shares tendered at any time prior to the Expiration Date and, if
the Common Shares have not yet been accepted for payment by the Trust, at any
time after 12:01 A.M., New York City time, on January 13, 2000.
To be effective, a written, telegraphic, telex or facsimile transmission
notice of withdrawal must be timely received by the Depositary at the address
set forth on page 2 of this Offer to Purchase. Any notice of withdrawal must
specify the name of the person having tendered the Common Shares to be
withdrawn, the number of Common Shares to be withdrawn, and, if certificates
representing such Common Shares have been delivered or otherwise identified to
the Depositary, the name of the registered holder(s) of such Common Shares as
set forth in such certificates if different from the name of the person
tendering such Common Shares. If certificates have been delivered to the
Depositary, then, prior to the release of such certificates, you must also
submit the certificate numbers shown on the particular certificates evidencing
such Common Shares and the signature on the notice of withdrawal must be
guaranteed by an Eligible Guarantor.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Trust in its sole discretion,
whose determination shall be final and binding. None of the Trust, DWR, the
Depositary or any other person is or will be obligated to give any notice of any
defects or irregularities in any notice of withdrawal, and none of them will
incur any liability for failure to give any such notice. Common Shares properly
withdrawn shall not thereafter be deemed to be tendered for purposes of the
Offer. However, withdrawn Common Shares may be retendered by following the
procedures described in Section 2 prior to the Expiration Date.
5. PAYMENT FOR SHARES. For purposes of the Offer, the Trust will be deemed
to have accepted for payment (and thereby purchased) Common Shares which are
tendered and not withdrawn when, as and if it gives oral or written notice to
the Depositary of its acceptance of such Common Shares for payment pursuant to
the Offer. Upon the terms and subject to the conditions of the Offer, the Trust
will, promptly after the Expiration Date, accept for payment (and thereby
purchase) Common Shares properly tendered prior to the Expiration Date.
Payment for Common Shares purchased pursuant to the Offer will be made by
the Depositary out of funds made available to it by the Trust. The Depositary
will act as agent for tendering shareholders for the purpose of effecting
payment to the tendering shareholders. If your tender of Common Shares is
effected through DWR, payment for Common Shares will be deposited directly to
your DWR brokerage account. In all cases, payment for Common Shares accepted for
payment pursuant to the Offer will be made (i) if you have requested DWR to
tender Common Shares on your behalf, only after timely receipt by the Depositary
of a notice from DWR containing your name and the number of Common Shares
tendered or (ii) if you have tendered Common Shares directly to the Depositary,
only after timely receipt by the Depositary, as required pursuant to the Offer,
of a properly completed and duly executed Letter of Transmittal (or manually
signed facsimile thereof), any certificates representing such Common Shares, if
issued, and any other required documents. Certificates for Common Shares not
purchased (see Sections 1 and 6), or for Common Shares not tendered included in
certificates forwarded to the Depositary, will be returned promptly following
the termination, expiration or withdrawal of the Offer, without expense to the
tendering shareholder.
The Trust will pay all transfer taxes, if any, payable on the transfer to it
of Common Shares purchased pursuant to the Offer. If, however, payment of the
purchase price is to be made to, or (in the circumstances permitted by the
Offer) if unpurchased Common Shares are to be registered in the name of any
person other than the registered holder, or if tendered certificates, if any,
are registered or the Common Shares tendered are held in the name of any person
other than the person signing the Letter of Transmittal, the
7
<PAGE>
amount of any transfer taxes (whether imposed on the registered holder or such
other person) payable on account of the transfer to such person will be deducted
from the Purchase Price unless satisfactory evidence of the payment of such
taxes, or exemption therefrom, is submitted. Shareholders tendering Common
Shares shall be entitled to receive all dividends declared on or before the
Expiration Date, but not yet paid, on Common Shares tendered pursuant to the
Offer. The Trust will not pay any interest on the Purchase Price under any
circumstances. An Early Withdrawal Charge will be imposed on most Common Shares
accepted for payment that have been held for four years or less. See Section 3.
In addition, if certain events occur, the Trust may not be obligated to purchase
Common Shares pursuant to the Offer. See Section 6.
Any tendering shareholder or other payee who has not previously submitted a
completed and signed Substitute Form W-9 and who fails to complete fully and
sign the Substitute Form W-9 in the Letter of Transmittal may be subject to
required federal income tax withholding of 31% of the gross proceeds paid to
such shareholder or other payee pursuant to the Offer. See Section 2.
6. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision of
the Offer, the Trust shall not be required to accept for payment, purchase or
pay for any Common Shares tendered, and may terminate or amend the Offer or may
postpone the acceptance for payment of, the purchase of and payment for Common
Shares tendered, if at any time at or before the time of purchase of any such
Common Shares, any of the following events shall have occurred (or shall have
been determined by the Trust to have occurred) which, in the Trust's sole
judgment in any such case and regardless of the circumstances (including any
action or omission to act by the Trust), makes it inadvisable to proceed with
the Offer or with such purchase or payment: (1) a secondary market develops for
the Common Shares; (2) in the reasonable business judgment of the Trustees,
there is not sufficient liquidity of the assets of the Trust; (3) such
transactions, if consummated, would (a) impair the Trust's status as a regulated
investment company under the Internal Revenue Code (which would make the Fund a
taxable entity, causing the Fund's taxable income to be taxed at the Trust
level) or (b) result in a failure to comply with applicable asset coverage
requirements; or (4) there is, in the Board of Trustees' judgment, any
(a) material legal action or proceeding instituted or threatened challenging
such transactions or otherwise materially adversely affecting the Trust,
(b) suspension of or limitation on prices for trading securities generally on
the New York Stock Exchange, (c) declaration of a banking moratorium by federal
or state authorities or any suspension of payment by banks in the United States
or New York State, (d) limitation affecting the Trust or the issuers of its
portfolio securities imposed by federal or state authorities on the extension of
credit by lending institutions, (e) commencement of war, armed hostilities or
other international or national calamity directly or indirectly involving the
United States or (f) other event or condition which would have a material
adverse effect on the Trust or the holders of its Common Shares if the tendered
Common Shares are purchased.
The foregoing conditions are for the Trust's sole benefit and may be
asserted by the Trust regardless of the circumstances giving rise to any such
condition (including any action or inaction by the Trust), and any such
condition may be waived by the Trust in whole or in part, at any time and from
time to time in its sole discretion. The Trust's failure at any time to exercise
any of the foregoing rights shall not be deemed a waiver of any such right; the
waiver of any such right with respect to particular facts and circumstances
shall not be deemed a waiver with respect to any other facts or circumstances;
and each such right shall be deemed an ongoing right which may be asserted at
any time and from time to time. Any determination by the Trust concerning the
events described in this Section 6 shall be final and shall be binding on all
parties.
If the Trust determines to terminate or amend the Offer or to postpone the
acceptance for payment of or payment for Common Shares tendered, it will, to the
extent necessary, extend the period of time during which the Offer is open as
provided in Section 16. Moreover, in the event any of the foregoing conditions
are modified or waived in whole or in part at any time, the Trust will promptly
make a public announcement of such waiver and may, depending on the materiality
of the modification or waiver, extend the Offer period as provided in
Section 16.
7. PURPOSE OF THE OFFER. The Trust currently does not believe that an
active secondary market for its Common Shares exists or is likely to develop. In
recognition of the possibility that a secondary market may not develop for the
Common Shares of the Trust, or, if such a market were to develop, that the
Common Shares might trade at a discount, the Trustees have determined that it
would be in the best interest of its shareholders for the Trust to take action
to attempt to provide liquidity to shareholders or to reduce or eliminate any
future market value discount from NAV that might otherwise exist, respectively.
To that end,
8
<PAGE>
the Trustees presently intend each quarter to consider making a tender offer to
purchase Common Shares at their NAV. The purpose of this Offer is to attempt to
provide liquidity to the holders of Common Shares. There can be no assurance
that this Offer will provide sufficient liquidity to all holders of Common
Shares that desire to sell their Common Shares or that the Trust will make any
such tender offer in the future.
NEITHER THE TRUST NOR ITS BOARD OF TRUSTEES MAKES ANY RECOMMENDATION TO ANY
SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ANY OR ALL OF SUCH
SHAREHOLDER'S COMMON SHARES AND HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY SUCH
RECOMMENDATION. SHAREHOLDERS ARE URGED TO EVALUATE CAREFULLY ALL INFORMATION IN
THE OFFER, CONSULT THEIR OWN INVESTMENT AND TAX ADVISERS AND MAKE THEIR OWN
DECISIONS WHETHER TO TENDER COMMON SHARES AND, IF SO, HOW MANY COMMON SHARES TO
TENDER.
8. PLANS OR PROPOSALS OF THE TRUST. The Trust has no present plans or
proposals which relate to or would result in any extraordinary transaction such
as a merger, reorganization or liquidation involving the Trust; a sale or
transfer of a material amount of assets of the Trust other than in its ordinary
course of business; any material changes in the Trust's present capitalization
(except as resulting from the Offer or otherwise set forth herein); or any other
material changes in the Trust's structure or business.
9. PRICE RANGE OF COMMON SHARES; DIVIDENDS. The Trust's NAV per Common
Share on November 5, 1999 was $9.84. You can obtain current NAV quotations from
MSDW Advisors by calling (800) 869-NEWS extension 0 or by calling (201) 938-6499
on the Expiration Date following the close of business. The Trust offers and
sells its Common Shares to the public on a continuous basis through Morgan
Stanley Dean Witter Distributors Inc. (the "Distributor") as principal
underwriter. The Trust is not aware of any secondary market trading for the
Common Shares. Dividends on the Common Shares are declared daily and paid
monthly. Shareholders tendering Common Shares shall be entitled to receive all
dividends declared on or before the Expiration Date, but not yet paid, on Common
Shares tendered pursuant to the Offer.
10. INTEREST OF TRUSTEES AND EXECUTIVE OFFICERS; TRANSACTIONS AND
ARRANGEMENTS CONCERNING THE COMMON SHARES. As of November 5, 1999 the Trustees
and executive officers of the Trust as a group beneficially owned no Common
Shares. The Trust has been informed that no Trustee or executive officer of the
Trust intends to tender any Common Shares pursuant to the Offer.
Except as set forth in this Section 10, based upon the Trust's records and
upon information provided to the Trust by its Trustees, executive officers and
affiliates (as such term is used in the Exchange Act), neither the Trust nor, to
the best of the Trust's knowledge, any of the Trustees or executive officers of
the Trust, nor any associates of any of the foregoing, has effected any
transactions in the Common Shares during the forty business day period prior to
the date hereof.
Except as set forth in this Offer to Purchase, neither the Trust nor, to the
best of the Trust's knowledge, any of its affiliates, Trustees or executive
officers, is a party to any contract, arrangement, understanding or relationship
with any other person relating, directly or indirectly, to the Offer with
respect to any securities of the Trust (including, but not limited to, any
contract, arrangement, understanding or relationship concerning the transfer or
the voting of any such securities, joint ventures, loan or option arrangements,
puts or calls, guaranties of loans, guaranties against loss or the giving or
withholding of proxies, consents or authorizations).
The Trust is a party to a Hold Harmless Agreement with DWR pursuant to which
DWR indemnifies the Trust from any loss it may suffer as a result of the use of
DWR to effect a tender or withdrawal of Common Shares on behalf of its
customers.
The Trust and the Depositary have entered into a Depositary Agreement dated
as of August 6, 1999, pursuant to which the Depositary will perform services for
the Trust in connection with the tender and withdrawal of Common Shares pursuant
to the Offer.
The Trust currently is a party to an Investment Advisory Agreement with MSDW
Advisors (the "Advisor") under which the Trust accrues daily and pays monthly to
the Advisor an investment advisory fee equal to 0.90% of the average daily net
assets of the Trust up to $500 million; 0.85% of the portion of average daily
net assets over $500 million but not exceeding $1.5 billion; 0.825% of the
portion of the
9
<PAGE>
average daily net assets over $1.5 billion but not exceeding $2.5 billion; and
0.80% of the portion of the average daily net assets over $2.5 billion. The
Trust also is a party to an Administration Agreement with Morgan Stanley Dean
Witter Services Company, Inc., a wholly-owned subsidiary of MSDW Advisors (the
"Administrator") and a Distribution Agreement with the Distributor. Under the
Administration Agreement, the Trust pays the Administrator a monthly fee at the
annualized rate of 0.25% of the Trust's average daily net assets. Under the
Distribution Agreement, the Trust offers and sells its Common Shares to the
public on a continuous basis through the Distributor as principal underwriter.
11. CERTAIN EFFECTS OF THE OFFER. The purchase of Common Shares pursuant
to the Offer will have the effect of increasing the proportionate interest in
the Trust of shareholders who do not tender their Common Shares. If you retain
your Common Shares you will be subject to any increased risks that may result
from the reduction in the Trust's aggregate assets resulting from payment for
the tendered Common Shares (e.g., greater volatility due to decreased
diversification and higher expenses). However, the Trust believes that since the
Trust is engaged in a continuous offering of the Common Shares, those risks
would be reduced to the extent new Common Shares of the Trust are sold. All
Common Shares purchased by the Trust pursuant to the Offer will be held in
treasury pending disposition.
12. SOURCE AND AMOUNT OF FUNDS. The total cost to the Trust of purchasing
12,000,000 Common Shares pursuant to the Offer will be approximately
$118,080,000 (assuming a NAV of $9.84 per Common Share on the Expiration Date)
plus the expenses incurred by the Trust in connection with the Offer. The Trust
anticipates that the Purchase Price for any Common Shares acquired pursuant to
the Offer will first be derived from cash on hand, such as proceeds from sales
of new Common Shares of the Trust and specified pay-downs from the participation
interests in senior corporate loans which it has acquired, and then from the
proceeds from the sale of cash equivalents held by the Trust. Although the Trust
is authorized to borrow money to finance the repurchase of Common Shares, the
Trustees believe that the Trust has sufficient liquidity to purchase the Common
Shares tendered pursuant to the Offer without utilizing such borrowing. However,
if, in the judgment of the Trustees, there is not sufficient liquidity of the
assets of the Trust to pay for tendered Common Shares, the Trust may terminate
the Offer. See Section 6.
13. CERTAIN INFORMATION ABOUT THE TRUST. The Trust was organized as a
Massachusetts business trust, under the name "Allstate Prime Income Trust," on
August 17, 1989 and is a non-diversified, closed-end management investment
company under the Investment Company Act of 1940. The name was changed to "Prime
Income Trust" effective March 1, 1993 and then to "Morgan Stanley Dean Witter
Prime Income Trust," effective June 22, 1998. The Trust seeks a high level of
current income consistent with the preservation of capital by investing in a
professionally managed portfolio of interests in floating or variable rate
senior loans ("Senior Loans") to corporations, partnerships and other entities
("Borrowers"). Senior Loans may take the form of syndicated loans or of debt
obligations of Borrowers issued directly to investors in the form of debt
securities ("Senior Notes"). Although the Trust's NAV will vary, the Trust's
policy of acquiring interests in floating or variable rate Senior Loans is
expected to minimize fluctuations in the Trust's NAV as a result of changes in
interest rates. Senior Loans in which the Trust invests generally pay interest
at rates which are periodically redetermined by reference to a base lending rate
plus a premium. These base lending rates are generally the prime rate offered by
a major United States bank ("Prime Rate"), the London Inter-Bank Offered Rate,
the certificate of deposit rate or other base lending rates used by commercial
lenders. The Trust seeks to achieve over time an effective yield that will
exceed money market rates and will track the movements in the published Prime
Rate of major United States banks, although it may not equal the Prime Rate. The
Senior Loans in the Trust's portfolio at all times have a dollar-weighted
average time until next interest rate redetermination of 90 days or less. As a
result, as short-term interest rates increase, the interest payable to the Trust
from its investments in Senior Loans should increase, and as short-term interest
rates decrease, the interest payable to the Trust on its investments in Senior
Loans should decrease. The amount of time required to pass before the Trust
realizes the effects of changing short-term market interest rates on its
portfolio varies with the dollar-weighted average time until next interest rate
redetermination on securities in the Trust's portfolio.
The Trust has registered as a "non-diversified" investment company so that,
subject to its investment restrictions, it is able to invest more than 5% of the
value of its assets in the obligations of any single issuer, including Senior
Loans of a single Borrower or participations in Senior Loans purchased from a
single lender or selling participant. However, the Trust does not intend to
invest more than 10% of the value of its
10
<PAGE>
total assets in interests in Senior Loans of a single Borrower. To the extent
the Trust invests its assets in obligations of a more limited number of issuers
than a diversified investment company, the Trust will be more susceptible than a
more widely diversified investment company to any single corporate, economic,
political or regulatory occurrence.
The principal executive offices of the Trust are located at Two World Trade
Center, New York, N.Y. 10048.
Reference is hereby made to Section 9 of this Offer to Purchase and the
financial statements attached hereto as Exhibit A which are incorporated herein
by reference.
14. ADDITIONAL INFORMATION. The Trust has filed a statement on Schedule
13E-4 with the Securities and Exchange Commission (the "Commission") which
includes certain additional information relating to the Offer. Such material may
be inspected and copied at prescribed rates at the Commission's public reference
facilities at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 10549
and 75 Park Place, New York, New York 10007. Copies of such material may also be
obtained by mail at prescribed rates from the Public Reference Branch of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
15. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following discussion is a
general summary of the federal income tax consequences of a sale of Common
Shares pursuant to the Offer. Shareholders should consult their own tax advisers
regarding the tax consequences of a sale of Common Shares pursuant to the Offer,
as well as the effects of state, local and foreign tax laws. See also "Federal
Income Tax Withholding," supra.
The sale of Common Shares pursuant to the Offer will be a taxable
transaction for Federal income tax purposes, either as a "sale or exchange," or
under certain circumstances, as a "dividend." Under Section 302(b) of the
Internal Revenue Code of 1986, as amended (the "Code"), a sale of Common Shares
pursuant to the Offer generally will be treated as a "sale or exchange" if the
receipt of cash: (a) results in a "complete termination" of the shareholder's
interest in the Trust, (b) is "substantially disproportionate" with respect to
the shareholder, or (c) is "not essentially equivalent to a dividend" with
respect to the shareholder. In determining whether any of these tests has been
met, Common Shares actually owned, as well as Common Shares considered to be
owned by the shareholder by reason of certain constructive ownership rules set
forth in Section 318 of the Code, generally must be taken into account. If any
of these three tests for "sale or exchange" treatment is met, a shareholder will
recognize gain or loss equal to the difference between the amount of cash
received pursuant to the Offer and the tax basis of the Common Shares sold. If
such Common Shares are held as a capital asset, the gain or loss will be a
capital gain or loss.
If none of the tests set forth in Section 302(b) of the Code is met, amounts
received by a shareholder who sells Common Shares pursuant to the Offer will be
taxable to the shareholder as a "dividend" to the extent of such shareholder's
allocable share of the Trust's current or accumulated earnings or profits, and
the excess of such amounts received over the portion that is taxable as a
dividend would constitute a non-taxable return of capital (to the extent of the
shareholder's tax basis in the Common Shares sold pursuant to the Offer) and any
amounts in excess of the shareholder's tax basis would constitute taxable gain.
If the amounts received by a tendering Shareholder are treated as a "dividend,"
the tax basis in the Common Shares tendered to the Trust will be transferred to
any remaining Common Shares held by such shareholder. In addition, if a tender
of Common Shares is treated as a "dividend" to a tendering shareholder, the
Internal Revenue Service may take the position that a constructive distribution
under Section 305(c) of the Code may result to a shareholder whose proportionate
interest in the earnings and assets of the Trust has been increased by such
tender.
16. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS. The Trust
reserves the right, at any time and from time to time, to extend the period of
time during which the Offer is pending by making a public announcement thereof.
In the event that the Trust so elects to extend the tender period, the NAV for
the Common Shares tendered will be computed as of 4:00 P.M. New York City time
on the Expiration Date, as extended. During any such extension, all Common
Shares previously tendered and not purchased or withdrawn will remain subject to
the Offer. The Trust also reserves the right, at any time and from time to time
up to and including the Expiration Date, to (a) terminate the Offer and not to
purchase or pay for any Common Shares or, subject to applicable law, postpone
payment for Common Shares upon the occurrence of any of the conditions specified
in Section 6 and (b) amend the Offer in any respect by making a public
11
<PAGE>
announcement thereof. Such public announcement will be issued no later than
9:00 A.M. New York City time on the next business day after the previously
scheduled Expiration Date and will disclose the approximate number of Common
Shares tendered as of that date. Without limiting the manner in which the Trust
may choose to make a public announcement of extension, termination or amendment,
except as provided by applicable law (including Rule 13e-4(e)(2)), the Trust
shall have no obligation to publish, advertise or otherwise communicate any such
public announcement.
If the Trust materially changes the terms of the Offer or the information
concerning the Offer, or if it waives a material condition of the Offer, the
Trust will extend the Offer to the extent required by Rules 13e-4(d)(2) and
13e-4(e)(2) promulgated under the Exchange Act. These rules require that the
minimum period during which an offer must remain open following material changes
in the terms of the offer or information concerning the offer (other than a
change in price or a change in percentage of securities sought) will depend on
the facts and circumstances, including the relative materiality of such terms or
information. If (i) the Trust increases or decreases the price to be paid for
Common Shares, or the Trust increases the number of Common Shares being sought
by an amount exceeding 2% of the outstanding Common Shares, or the Trust
decreases the number of Common Shares being sought and (ii) the Offer is
scheduled to expire at any time earlier than the expiration of a period ending
on the tenth business day from, and including, the date that notice of such
increase or decrease is first published, sent or given, the Offer will be
extended at least until the expiration of such period of ten business days.
17. MISCELLANEOUS. The Offer is not being made to, nor will the Trust
accept tenders from, owners of Common Shares in any jurisdiction in which the
Offer or its acceptance would not comply with the securities or Blue Sky laws of
such jurisdiction. The Trust is not aware of any jurisdiction in which the
making of the Offer or the tender of Common Shares would not be in compliance
with the laws of such jurisdiction. However, the Trust reserves the right to
exclude holders in any jurisdiction in which it is asserted that the Offer
cannot lawfully be made. So long as the Trust makes a good-faith effort to
comply with any state law deemed applicable to the Offer, the Trust believes
that the exclusions of holders residing in such jurisdiction is permitted under
Rule 13e-4(f)(9) promulgated under the Exchange Act. In any jurisdiction the
securities or Blue Sky laws of which require the Offer to be made by a licensed
broker or dealer, the Offer shall be deemed to be made on the Trust's behalf by
Dean Witter Reynolds Inc.
Morgan Stanley Dean Witter Prime
Income Trust
November 17, 1999
12
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SENIOR COLLATERALIZED TERM LOANS (a) (b) (95.0%)
ACCIDENT & HEALTH INSURANCE (0.2%)
$ 2,475 BRW Acquisition, Inc........................................ 7.25% 07/10/06 $ 2,471,634
2,475 BRW Acquisition, Inc........................................ 7.50 07/10/07 2,471,560
--------------
4,943,194
--------------
AEROSPACE (1.5%)
14,813 Avborne, Inc................................................ 8.56 to 8.75 06/30/05 14,805,346
6,965 Decrane Aircraft Holdings, Inc.............................. 8.76 04/23/06 6,956,851
17,382 Fairchild Holding Corp...................................... 8.63 to 8.68 04/30/06 17,380,511
--------------
39,142,708
--------------
AIR FREIGHT/DELIVERY SERVICES (1.6%)
12,882 Atlas Freighter Leasing II, Inc............................. 7.50 05/29/04 12,867,858
8,531 Erickson Air-Crane Co., L.L.C............................... 9.01 12/31/04 8,520,756
3,883 Evergreen International Aviation, Inc....................... 8.62 05/31/02 3,881,840
6,201 Evergreen International Aviation, Inc....................... 8.54 05/07/03 6,200,382
8,447 First Security Bank, National Association as Owner
Trustee................................................... 8.68 05/07/03 8,445,753
--------------
39,916,589
--------------
APPAREL (2.3%)
14,462 American Marketing Industries, Inc.......................... 9.06 to 9.25 11/29/02 14,458,548
3,900 American Marketing Industries, Inc.......................... 9.06 to 9.25 11/30/03 3,899,086
2,709 American Marketing Industries, Inc.......................... 9.06 to 9.25 11/30/04 2,708,138
4,186 American Marketing Industries, Inc.......................... 9.06 to 9.25 11/30/05 4,185,358
7,039 Arena Brands, Inc........................................... 8.66 to 9.39 06/01/02 7,027,781
1,038 Arena Brands, Inc. (Revolver)............................... 8.62 to 11.00 06/01/02 1,038,320
18,000 St. John Knits International,
Inc....................................................... 9.38 07/31/07 17,985,780
5,985 The William Carter Co....................................... 7.79 to 7.97 10/30/03 5,980,940
--------------
57,283,951
--------------
AUTO PARTS - O.E.M. (2.5%)
9,900 Accuride Corp............................................... 7.06 01/21/06 9,898,911
7,500 Accuride Corp............................................... 7.81 01/21/07 7,499,025
11,542 AP Automotive Systems, Inc.................................. 7.56 to 7.69 12/19/05 11,541,601
6,316 J.L. French Automotive Castings, Inc........................ 8.13 10/21/06 6,315,788
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1999, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 15,000 Meridian Automotive Systems, Inc............................ 8.25% 05/25/06 $ 14,972,400
5,960 Special Devices, Inc........................................ 8.56 12/15/05 5,959,167
7,940 Stoneridge, Inc............................................. 9.01 12/31/05 7,930,710
--------------
64,117,602
--------------
AUTOMOTIVE AFTERMARKET (0.2%)
2,056 Safelite Glass Corp......................................... 8.50 12/23/04 2,053,787
2,056 Safelite Glass Corp......................................... 8.75 12/23/05 2,053,807
--------------
4,107,594
--------------
BOOKS/MAGAZINE (1.9%)
18,886 Advanstar Communications,
Inc....................................................... 7.88 04/30/05 18,885,622
4,991 Advanstar Communications,
Inc....................................................... 8.38 06/30/07 4,990,842
25,000 Ziff-Davis, Inc............................................. 8.81 03/31/06 24,996,000
--------------
48,872,464
--------------
BROADCAST/MEDIA (4.8%)
20,000 Benedek Broadcasting Corp................................... 8.69 to 8.70 11/20/07 19,964,741
10,000 Black Entertainment Television, Inc......................... 6.94 06/30/06 9,998,800
9,750 Capstar Broadcasting Partners,
Inc....................................................... 7.31 to 7.38 11/30/04 9,693,758
9,800 Capstar Broadcasting Partners,
Inc....................................................... 7.69 05/31/05 9,799,496
6,400 Chancellor Media Corp....................................... 7.56 06/30/05 6,400,103
1,339 Chancellor Media Corp. (Revolver)........................... 7.56 to 9.38 06/30/05 1,338,750
2,850 Cumulus Media, Inc.......................................... 8.38 09/30/07 2,849,971
1,900 Cumulus Media, Inc.......................................... 8.51 02/28/08 1,899,981
15,000 Emmis Communications Corp................................... 7.94 02/28/07 14,846,700
6,579 Latin Communications, Inc................................... 13.00 02/28/04 6,578,804
19,000 Sinclair Broadcast Group, Inc............................... 6.56 09/15/05 18,996,580
7,425 Spartan Communications, Inc................................. 8.63 06/30/05 7,424,852
10,000 Susquehanna Media Co........................................ 7.94 06/30/08 10,000,100
--------------
119,792,636
--------------
BUILDING MATERIALS (0.5%)
3,011 Atrium Co., Inc............................................. 8.53 06/30/05 3,007,328
4,316 Atrium Co., Inc............................................. 8.56 to 8.78 06/30/06 4,314,591
6,000 Dayton Superior Corp........................................ 8.13 09/29/05 5,999,880
--------------
13,321,799
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1999, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CABLE TELEVISION (3.6%)
$ 45,000 Charter Communications Operating, LLC....................... 7.81 to 7.89% 03/18/08 $ 44,996,911
10,750 Classic Cable, Inc.......................................... 8.00 to 8.25 01/31/08 10,749,770
17,500 General Cable Corp.......................................... 8.25 05/27/07 17,481,100
15,000 RCN Corp.................................................... 8.88 06/03/07 14,996,550
4,000 TWFanch-One Co.............................................. 8.00 12/31/07 3,990,520
--------------
92,214,851
--------------
CASINO/GAMBLING (0.9%)
5,519 Alliance Gaming Corp........................................ 8.56 to 8.62 01/31/05 5,517,653
2,203 Alliance Gaming Corp........................................ 8.81 to 8.87 07/31/05 2,202,624
5,000 Harrah's Jazz Co............................................ 6.06 04/30/05 4,997,450
10,000 Palace Station Hotel & Casino, Inc.......................... 7.87 12/31/05 9,999,900
--------------
22,717,627
--------------
CELLULAR TELEPHONE (1.8%)
7,444 Centenial Cellular Operating
Co. LLC................................................... 8.64 05/31/07 7,408,988
7,444 Centenial Cellular Operating
Co. LLC................................................... 8.89 11/30/07 7,408,839
30,602 Microcell Connexions, Inc................................... 8.51 to 8.63 03/01/06 30,594,521
--------------
45,412,348
--------------
COAL MINING (0.6%)
14,813 Quaker Coal Company, Inc.................................... 11.75 06/30/06 14,812,500
--------------
CONSTRUCTION/AGRICULTURAL EQUIPMENT/TRUCKS (0.4%)
10,000 Terex Corp.................................................. 8.68 03/06/06 10,000,000
--------------
CONSUMER SPECIALTIES (1.0%)
2,375 American Safety Razor Co.................................... 9.12 to 9.20 04/30/07 2,374,522
8,307 Amscan Holdings, Inc........................................ 7.75 to 7.91 12/31/04 8,298,994
5,563 Jet Plastica Industries, Inc................................ 7.69 to 8.00 12/31/02 5,558,935
8,891 Jet Plastica Industries, Inc................................ 8.19 to 8.50 12/31/04 8,882,738
--------------
25,115,189
--------------
CONSUMER SUNDRIES (0.8%)
324 Corning Consumer Products
Co. (Revolver)............................................ 7.00 to 7.51 04/09/05 323,527
15,840 Corning Consumer Products
Co........................................................ 7.38 10/09/06 15,837,624
3,055 The Boyds Collection, Ltd................................... 7.00 to 7.56 04/21/06 3,053,528
--------------
19,214,679
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1999, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CONSUMER/BUSINESS SERVICES (2.7%)
$ 16,951 Bridge Information Systems,
Inc....................................................... 8.06 to 8.19% 05/29/03 $ 16,951,111
2,556 Bridge Information Systems,
Inc. (Revolver)........................................... 8.19 to 9.50 05/29/03 2,555,572
19,950 Bridge Information Systems, Inc............................. 8.06 to 8.31 05/29/05 19,949,202
9,381 InfoUSA, Inc................................................ 8.94 06/30/06 9,381,102
4,833 Prime Succession, Inc....................................... 8.94 to 9.25 08/01/03 4,833,602
4,833 Prime Succession, Inc. (Participation: Goldman Sachs &
Co.) (d).................................................. 8.94 to 9.25 08/01/03 4,833,602
9,601 Rose Hills Co............................................... 8.31 12/01/03 9,590,387
--------------
68,094,578
--------------
CONTAINERS/PACKAGING (2.0%)
1,778 Graham Packaging Co......................................... 8.25 01/31/06 1,774,540
8,172 Graham Packaging Co......................................... 8.38 to 8.81 01/31/07 8,162,509
7,500 Impaxx, Inc................................................. 8.81 to 9.13 12/31/05 7,494,075
10,000 LLS Corp.................................................... 8.30 to 8.75 07/31/06 9,994,363
4,987 Mediapak Corp............................................... 8.77 to 10.25 12/31/05 4,980,708
4,987 Mediapak Corp............................................... 8.88 to 10.50 12/31/06 4,981,490
4,822 MPC Packaging Corp.......................................... 10.13 05/30/04 4,822,454
9,174 Packaging Corporation of America............................ 8.63 to 9.50 04/12/07 9,172,115
--------------
51,382,254
--------------
DISCOUNT CHAINS (0.5%)
11,528 Tuesday Morning Corp........................................ 7.88 12/29/04 11,527,594
--------------
DIVERSIFIED COMMERCIAL SERVICES (0.4%)
9,950 Building One Services Corp.................................. 8.31 to 8.50 04/30/04 9,931,582
--------------
DIVERSIFIED MANUFACTURING (1.6%)
6,197 Chatham Technologies, Inc................................... 8.44 08/18/03 6,196,703
7,914 Chatham Technologies, Inc................................... 8.94 08/18/05 7,914,649
3,000 Desa International, Inc..................................... 8.98 11/26/03 2,999,670
6,755 Desa International, Inc..................................... 9.00 11/26/04 6,747,772
6,860 Doskocil Manufacturing Co................................... 9.38 09/30/04 6,858,559
9,554 Insilco Corp................................................ 9.13 11/24/05 9,554,029
--------------
40,271,382
--------------
DRUGSTORE CHAINS (0.7%)
9,850 Duane Reade, Inc............................................ 8.06 02/15/05 9,849,015
6,683 Duane Reade, Inc............................................ 8.31 to 8.56 02/15/06 6,681,897
--------------
16,530,912
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
16
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1999, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
E.D.P. SERVICES (0.3%)
$ 14,738 DecisionOne Corp............................................ 10.00% 08/07/04 $ 8,105,625
--------------
EDUCATION (0.4%)
9,258 Children's Discovery Centers of America..................... 7.81 to 7.94 06/30/05 9,235,720
--------------
ELECTRONIC COMPONENTS (1.9%)
7,481 Communications Instruments,
Inc....................................................... 8.63 to 8.69 03/15/04 7,480,964
13,944 Dynamic Details, Inc........................................ 7.88 04/22/05 13,943,721
7,000 Knowles Electronics, Inc.................................... 8.60 06/29/07 6,987,680
2,968 Viasystems Group, Inc....................................... 8.75 03/31/04 2,964,622
2,443 Viasystems Group, Inc....................................... 8.79 06/30/04 2,440,274
14,000 Viasystems Group, Inc....................................... 9.18 to 9.19 06/30/05 13,997,495
--------------
47,814,756
--------------
ELECTRONIC PRODUCTION EQUIPMENT (0.2%)
5,706 Telex Communications, Inc................................... 8.96 to 8.98 11/06/04 5,704,728
--------------
ENERGY (0.6%)
15,000 AES Texas Funding, LLC...................................... 8.13 03/06/00 14,999,700
--------------
ENTERTAINMENT & LEISURE (1.1%)
7,500 MGM Studios, Inc............................................ 8.25 03/31/06 7,499,475
5,354 Premier Parks, Inc.......................................... 7.44 to 9.00 03/31/06 5,354,483
16,038 Six Flag Theme Parks, Inc................................... 8.19 11/30/04 16,037,256
--------------
28,891,214
--------------
ENVIRONMENTAL SERVICES (2.5%)
22,727 Allied Waste Industries, Inc................................ 8.19 07/30/06 22,727,273
27,273 Allied Waste Industries, Inc................................ 8.44 07/30/07 27,272,763
12,903 Environmental Systems Products Holdings, Inc................ 9.51 09/30/05 12,887,404
--------------
62,887,440
--------------
FINANCE (0.7%)
8,990 Blackstone Capital
Company II, L.L.C......................................... 11.75 11/30/00 8,990,066
8,830 Wasserstein/C&A Holdings, L.L.C............................. 10.00 11/30/00 8,813,283
--------------
17,803,349
--------------
FLUID CONTROLS (0.4%)
4,988 Mueller Group, Inc.......................................... 8.69 08/16/06 4,979,520
4,988 Mueller Group, Inc.......................................... 8.94 08/16/07 4,979,520
--------------
9,959,040
--------------
FOOD CHAINS (0.5%)
12,438 Big V Supermarkets, Inc..................................... 8.94 08/10/03 12,437,624
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1999, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FOOD & BEVERAGES (2.2%)
$ 9,250 B&G Foods, Inc.............................................. 8.63% 03/03/06 $ 9,249,815
7,425 Eagle Family Foods, Inc..................................... 8.69 to 9.01 12/31/05 7,424,421
8,415 Favorite Brands International, Inc.......................... 8.81 05/19/05 8,404,525
12,375 Leon's Bakery, Inc.......................................... 8.38 06/03/05 12,374,752
6,252 Specialty Food Corp. (Revolver)............................. 8.63 to 8.64 01/31/01 6,251,958
10,725 Specialty Food Corp......................................... 9.91 01/31/01 10,723,961
--------------
54,429,432
--------------
HOME FURNISHINGS (0.5%)
3,005 Sealy Mattress Co........................................... 7.88 12/15/04 3,001,814
2,165 Sealy Mattress Co........................................... 8.13 12/15/05 2,162,662
2,766 Sealy Mattress Co........................................... 8.38 12/15/06 2,763,872
1,424 Simmons Co.................................................. 8.69 10/29/05 1,424,533
3,563 Simmons Co.................................................. 8.94 10/29/06 3,562,606
--------------
12,915,487
--------------
HOSPITAL/NURSING MANAGEMENT (3.6%)
5,969 Columbia - HealthONE, LLC................................... 8.88 06/30/05 5,968,846
7,014 Community Health Systems, Inc............................... 8.50 12/31/03 7,005,352
7,014 Community Health Systems, Inc............................... 9.00 12/31/04 7,005,352
5,232 Community Health Systems, Inc............................... 9.25 12/31/05 5,226,650
4,410 GEAC/Multicare Co., Inc..................................... 9.49 to 9.51 09/30/04 4,404,957
1,466 GEAC/Multicare Co., Inc..................................... 9.74 06/01/05 1,466,089
4,300 Genesis Health Ventures, Inc................................ 8.73 to 8.81 09/30/04 4,299,431
4,290 Genesis Health Ventures, Inc................................ 8.98 to 9.06 06/01/05 4,289,289
17,194 Integrated Health Services, Inc............................. 8.56 to 8.88 09/30/04 17,181,195
3,684 Magellan Health Services, Inc............................... 8.00 02/12/05 3,680,985
3,684 Magellan Health Services, Inc............................... 8.25 02/12/06 3,680,949
5,011 Paracelsus Healthcare Corp.................................. 8.38 03/31/03 5,011,011
7,943 Paracelsus Healthcare Corp.................................. 8.63 03/31/04 7,942,698
14,552 Ventas Realty Limited Partnership........................... 8.14 10/30/99 14,551,938
--------------
91,714,742
--------------
HOTELS/RESORTS (3.0%)
15,000 Felcor Lodging Trust, Inc................................... 7.88 03/31/04 14,999,850
10,395 Meristar Hospitality Operating Partnership, L.P............. 7.38 01/31/04 10,394,896
4,727 Pebble Beach Company........................................ 8.63 07/30/06 4,727,226
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1999, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 20,000 Starwood Hotels & Resorts Worldwide, Inc.................... 9.13% 02/23/03 $ 19,999,600
10,000 Wyndham International, Inc.................................. 8.81 06/30/04 9,999,400
15,000 Wyndham International, Inc.................................. 9.06 06/30/06 14,999,250
--------------
75,120,222
--------------
INDUSTRIAL SPECIALTIES (0.8%)
13,301 Advanced Glassfiber Yarns
LLC....................................................... 9.01 09/30/05 13,285,848
5,955 Panolam Industries International, Inc....................... 8.88 to 8.98 12/31/05 5,954,395
--------------
19,240,243
--------------
INSURANCE BROKERS/SERVICES (0.5%)
7,271 Acordia, Inc................................................ 7.69 12/31/04 7,257,849
2,910 Willis Corroon Corp......................................... 7.98 11/19/07 2,909,738
2,910 Willis Corroon Corp......................................... 8.23 02/19/08 2,909,709
--------------
13,077,296
--------------
MAJOR CHEMICALS (0.6%)
7,500 Huntsman ICI Chemicals LLC.................................. 8.50 06/30/07 7,491,075
7,500 Huntsman ICI Chemicals LLC.................................. 8.63 06/30/08 7,499,850
--------------
14,990,925
--------------
MANAGED HEALTH CARE (0.5%)
9,595 Interim Healthcare, Inc..................................... 8.64 to 9.24 02/29/04 9,590,068
3,559 Interim Healthcare, Inc..................................... 9.03 to 9.49 02/28/05 3,554,500
--------------
13,144,568
--------------
MEDICAL SPECIALTIES (1.3%)
2,954 Alaris Medical Systems, Inc................................. 7.94 11/01/03 2,953,183
2,954 Alaris Medical Systems, Inc................................. 7.94 11/01/04 2,953,183
4,641 Alaris Medical Systems, Inc................................. 7.94 05/01/05 4,640,275
6,234 Dade Behring, Inc........................................... 8.24 to 10.13 06/30/06 6,233,813
6,234 Dade Behring, Inc........................................... 8.44 to 10.38 06/30/07 6,233,532
2,455 Medical Specialties Group, Inc.............................. 8.88 06/30/01 2,454,496
7,136 Medical Specialties Group, Inc.............................. 9.63 06/30/04 7,136,221
--------------
32,604,703
--------------
MEDICAL/NURSING SERVICES (2.5%)
1,965 Alliance Imaging, Inc....................................... 7.88 to 8.00 12/18/03 1,964,927
4,913 Alliance Imaging, Inc....................................... 7.88 to 8.44 06/18/04 4,910,574
12,902 Alliance Imaging, Inc....................................... 7.88 to 8.44 12/18/04 12,901,416
6,983 Alliance Imaging, Inc....................................... 8.13 to 8.69 06/18/05 6,979,654
8,147 FHC Health Systems, Inc..................................... 7.81 04/30/05 8,145,572
8,147 FHC Health Systems, Inc..................................... 8.06 04/30/06 8,145,572
10,400 Quest Diagnostics, Inc...................................... 8.72 08/16/06 10,398,752
9,600 Quest Diagnostics, Inc...................................... 9.27 to 9.7 08/16/07 9,592,944
--------------
63,039,411
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1999, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MOTOR VEHICLES (0.1%)
$ 3,400 Asbury Automotive Texas Holdings L.L.C...................... 9.06% 03/31/05 $ 3,399,830
--------------
MOVIES/ENTERTAINMENT (1.3%)
9,967 Panavision, Inc............................................. 8.79 to 8.94 03/31/05 9,947,948
8,904 United Artists Theatre Co................................... 9.69 to 11.50 04/21/06 8,903,589
13,355 United Artists Theatre Co................................... 9.69 to 11.50 04/21/07 13,341,088
--------------
32,192,625
--------------
MULTI-SECTOR COMPANIES (1.1%)
2,205 Mafco Finance Corp. (Revolver).............................. 9.31 to 9.52 04/28/00 2,202,735
25,442 Mafco Finance Corp.......................................... 9.52 04/28/00 25,413,304
--------------
27,616,039
--------------
NEWSPAPERS (0.2%)
4,925 21st Century Newspapers, Inc................................ 7.81 09/15/05 4,924,557
--------------
OFFICE EQUIPMENT/SUPPLIES (1.4%)
14,962 Global Imaging Systems, Inc................................. 8.63 06/30/06 14,962,201
19,970 US Office Products Co....................................... 7.89 06/09/06 19,970,170
--------------
34,932,371
--------------
OILFIELD SERVICES/EQUIPMENT (1.8%)
20,000 Plains Scurlock Permian, L.P................................ 8.47 05/12/04 19,997,600
15,000 Transmontaigne, Inc......................................... 8.69 06/30/06 15,000,450
10,000 US Synthetic Corp........................................... 8.81 to 9.02 05/31/05 9,989,679
--------------
44,987,729
--------------
OTHER CONSUMER SERVICES (0.6%)
7,800 PCA International, Inc...................................... 8.76 08/25/05 7,791,576
7,882 Volume - Services, Inc...................................... 9.31 12/31/06 7,872,395
--------------
15,663,971
--------------
OTHER METALS/MINERALS (1.2%)
7,635 CII Carbon, Inc............................................. 8.52 06/25/08 7,625,477
1,699 U.S. Silica Corp. (Revolver)................................ 7.56 to 9.00 06/30/04 1,697,835
14,966 U.S. Silica Corp............................................ 7.93 06/30/06 14,956,589
5,000 U.S. Silica Corp............................................ 8.88 12/31/06 4,999,900
--------------
29,279,801
--------------
OTHER PHARMACEUTICALS (0.8%)
19,838 King Pharmaceuticals, Inc................................... 9.24 12/22/06 19,815,543
--------------
OTHER SPECIALTY STORES (1.3%)
4,900 Caribbean Petroleum, LP..................................... 8.81 09/30/05 4,894,855
5,045 Cumberland Farms, Inc. (Participation Merrill Lynch
& Co., Inc.) (c).......................................... 9.75 12/31/00 5,045,019
7,500 Petro Stopping Centers, L.P................................. 8.56 07/23/06 7,492,125
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1999, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 14,924 The Pantry, Inc............................................. 8.89% 01/31/06 $ 14,924,113
--------------
32,356,112
--------------
PACKAGED FOODS (0.5%)
9,607 Formax, Inc................................................. 8.19 to 10.00 06/30/05 9,591,799
2,612 Southern Foods Group, L.P................................... 8.44 03/04/06 2,611,925
--------------
12,203,724
--------------
PAINTS/COATINGS (0.3%)
7,500 Metokote Corp............................................... 9.26 11/02/05 7,490,175
--------------
PAPER (1.6%)
7,149 Alabama Pine Pulp Co.,
Inc. (d).................................................. 9.38 06/30/03 6,791,064
3,325 Alabama Pine Pulp Co.,
Inc. (d).................................................. 9.38 06/30/05 1,866,237
4,429 Alabama Pine Pulp Co.,
Inc. (d).................................................. 10.75 12/31/08 182,934
8,524 Alabama River Newsprint Co. (Participation: Toronto Dominion
Bank) (c)................................................. 7.38 to 7.63 12/31/02 8,103,527
8,872 Bear Island Paper Company, LLC.............................. 8.38 12/31/05 8,871,846
5,655 Crown Paper Co. (Revolver).................................. 8.25 to 10.00 08/22/02 5,655,170
8,103 Crown Paper Co.............................................. 8.81 to 10.50 08/22/03 8,102,432
--------------
39,573,210
--------------
PRECISION INSTRUMENTS(0.6%)
4,892 Dynatech Corp............................................... 7.75 03/31/05 4,886,293
4,892 Dynatech Corp............................................... 8.00 03/31/06 4,886,293
4,892 Dynatech Corp............................................... 8.25 03/31/07 4,886,293
--------------
14,658,879
--------------
PRINTING/PUBLISHING (2.3%)
5,000 American Media Operations, Inc.............................. 8.63 to 8.88 04/01/07 4,998,050
10,656 Cygnus Publishing, Inc...................................... 8.24 06/05/05 10,655,504
17,500 Hollinger International Publishing, Inc..................... 10.25 12/31/04 17,500,000
10,879 The Sheridan Group, Inc..................................... 8.31 01/30/05 10,878,036
3,292 Von Hoffman Press, Inc...................................... 7.76 05/30/04 3,287,221
10,690 Von Hoffman Press, Inc...................................... 7.76 05/30/05 10,677,671
--------------
57,996,482
--------------
RECREATIONAL PRODUCTS/TOYS (0.9%)
7,205 Ritvik Toys, Inc............................................ 8.75 02/08/03 7,203,419
7,205 Ritvik Toys, Inc............................................ 9.38 02/08/04 7,203,346
913 Spalding Holdings Corp...................................... 7.79 09/30/03 912,607
3,494 Spalding Holdings Corp. (Revolver).......................... 7.79 to 9.75 09/30/03 3,493,695
1,828 Spalding Holdings Corp...................................... 8.23 09/30/04 1,827,458
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
21
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1999, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 1,828 Spalding Holdings Corp...................................... 8.79% 09/30/05 $ 1,827,440
1,052 Spalding Holdings Corp...................................... 9.29 03/30/06 1,052,092
--------------
23,520,057
--------------
RENTAL/LEASING COMPANIES (2.7%)
12,500 Avis Rent A Car, Inc........................................ 8.56 06/30/06 12,496,750
12,500 Avis Rent A Car, Inc........................................ 8.81 06/30/07 12,496,750
15,000 NationsRent, Inc............................................ 8.38 07/20/06 14,999,700
5,573 Rent-A-Center, Inc.......................................... 7.63 to 7.64 01/31/06 5,572,900
6,816 Rent-A-Center, Inc.......................................... 7.88 to 7.89 01/31/07 6,815,912
14,963 United Rentals, Inc......................................... 7.72 06/30/05 14,961,004
--------------
67,343,016
--------------
RESTAURANTS (0.3%)
6,825 Shoney's, Inc............................................... 8.08 to 10.50 04/30/02 6,824,041
--------------
RETAIL-SPECIALTY (1.1%)
12,492 CSK Auto, Inc............................................... 7.38 10/31/03 12,489,876
8,791 HMV Media Group PLC......................................... 8.26 02/25/06 8,787,684
6,059 HMV Media Group PLC......................................... 8.58 08/25/06 6,053,044
--------------
27,330,604
--------------
SEMICONDUCTORS (1.5%)
9,043 Fairchild Semiconductor Corp................................ 8.63 12/15/04 9,043,070
10,000 Intersil Corp............................................... 9.53 06/30/05 9,988,400
3,925 Mitel Corp.................................................. 7.81 12/26/03 3,920,220
7,222 Semiconductor Components Industries, LLC.................... 9.31 08/04/06 7,214,928
7,778 Semiconductor Components Industries, LLC.................... 9.56 08/04/07 7,769,688
--------------
37,936,306
--------------
SPECIALTY CHEMICALS (1.9%)
10,000 Lyondell Petrochemical Co................................... 8.67 to 8.69 06/30/03 9,888,815
14,925 Lyondell Petrochemical Co................................... 9.36 05/17/06 14,923,060
6,842 Pioneer America Acqusitions
Corp...................................................... 7.86 to 8.54 12/05/06 6,836,940
8,100 Pioneer Americas, Inc....................................... 7.88 to 8.66 12/05/06 8,092,032
8,080 Vining Industries, Inc...................................... 8.57 03/31/05 8,071,352
--------------
47,812,199
--------------
SPECIALTY STEELS (0.8%)
9,875 ISPAT Inland, L.P........................................... 7.69 to 7.76 07/16/05 9,859,211
9,875 ISPAT Inland, L.P........................................... 8.19 to 8.26 07/16/06 9,859,211
--------------
19,718,422
--------------
TELECOMMUNICATION EQUIPMENT (1.6%)
4,466 Channel Master, Inc......................................... 9.06 to 9.34 10/10/05 4,461,233
13,000 Pinnacle Towers, Inc........................................ 8.52 06/30/07 12,982,840
22,063 Superior Telecom, Inc....................................... 9.06 to 9.13 11/27/05 21,943,619
--------------
39,387,692
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
22
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1999, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TELECOMMUNICATIONS (5.2%)
$ 10,526 Alaska Communications Systems Holdings, Inc................. 8.50% 11/14/07 $ 10,525,579
9,474 Alaska Communications Systems Holdings, Inc................. 8.75 05/14/08 9,472,926
7,450 Davel Financing Co., LLC.................................... 9.72 to 9.76 06/23/05 7,435,959
25,000 Global Crossing Holdings,
Ltd....................................................... 8.26 07/02/07 25,000,000
15,000 IDT Corp.................................................... 8.75 05/10/04 14,971,200
9,975 Infonet Sevice Corp......................................... 8.26 06/30/06 9,962,033
25,000 KMC Telecom, Inc............................................ 9.31 07/01/07 24,995,250
10,000 Level 3 Communications, Inc................................. 10.75 01/15/08 10,000,000
7,528 MJD Communications, Inc..................................... 8.13 to 8.25 03/31/06 7,522,909
9,850 MJD Communications, Inc..................................... 8.50 to 10.25 03/31/07 9,838,155
--------------
129,724,011
--------------
TEXTILES (1.0%)
8,000 Globe Manufacturing, Inc.................................... 8.57 to 9.32 07/31/06 7,993,389
4,532 Joan Fabrics Corp........................................... 8.16 06/30/05 4,532,055
2,351 Joan Fabrics Corp........................................... 8.66 06/30/06 2,350,715
10,897 Polymer Group, Inc.......................................... 7.88 to 7.94 12/20/05 10,889,226
--------------
25,765,385
--------------
TRANSPORTATION (1.4%)
6,310 American Commercial Lines,
LLC....................................................... 7.56 06/30/06 6,307,547
8,604 American Commercial Lines,
LLC....................................................... 7.81 06/30/07 8,600,853
5,284 MTL, Inc.................................................... 7.63 02/28/05 5,284,222
4,528 MTL, Inc.................................................... 7.88 02/28/06 4,529,333
7,368 North American Van Lines, Inc............................... 8.27 03/31/06 7,360,497
3,591 Transportacion Ferroviaria Mexicana, S.A. de C.V............ 9.72 12/23/02 3,591,036
--------------
35,673,488
--------------
WIRELESS COMMUNICATIONS (4.9%)
13,684 Arch Paging, Inc............................................ 12.19 06/30/06 13,682,707
10,000 Nextel Communications, Inc.................................. 9.06 03/31/07 9,874,400
20,000 Nextel Finance Co........................................... 8.31 09/30/06 19,977,600
15,000 Nextel Partners Operating
Corp...................................................... 10.19 01/29/08 14,836,350
10,000 Nextel Partners Operating
Corp...................................................... 9.77 07/29/08 9,988,200
19,938 Omnipoint Communications,
Inc....................................................... 8.69 to 8.72 02/17/06 19,871,863
11,000 Powertel PCS, Inc........................................... 8.56 12/31/08 10,988,560
14,000 Powertel PCS, Inc. (Participation: Goldman Sachs & Co.)
(c)....................................................... 8.38 to 8.56 12/31/08 13,985,300
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
23
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1999, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 10,000 Teligent, Inc............................................... 8.45% 06/30/06 $ 9,992,100
--------------
123,197,080
--------------
TOTAL SENIOR COLLATERALIZED TERM LOANS
(IDENTIFIED COST $2,397,386,167)......................................................... 2,388,163,607
--------------
SENIOR NOTES (0.4%)
1,613 London Fog Industries, Inc. (e)............................. 10.00 02/27/03 629,121
9,563 Supercanal Holdings S.A. (Argentina)........................ 9.81 10/12/02 9,561,459
--------------
TOTAL SENIOR NOTES
(IDENTIFIED COST $11,452,484)............................................................ 10,190,580
--------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES
- ----------
<C> <S> <C> <C> <C>
COMMON STOCK (a) (f) (0.0%)
APPAREL
129,050 London Fog Industries, Inc. (Restricted)
(IDENTIFIED COST $2,258,908).............................. --
--------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION
WARRANTS DATE
- ---------- --------
<C> <S> <C> <C>
WARRANT (a) (f) (0.0%)
7,931 London Fog Industries, Inc. (Restricted)
(IDENTIFIED COST $1,722,237)................................................. 02/27/05 --
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE
- ---------- ---------------- --------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENTS (4.0%)
COMMERCIAL PAPER (g) (3.6%)
FINANCE - CONSUMER
$ 22,000 American Express Credit Corp................................ 5.44 10/01/99 22,000,000
27,000 American Express Credit Corp. (h)........................... 5.40 10/04/99 26,987,850
40,000 American Express Credit Corp. (h)........................... 5.28 10/08/99 39,958,933
--------------
TOTAL COMMERCIAL PAPER
(AMORTIZED COST $88,946,783)............................................................ 88,946,783
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
24
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1999, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENT (0.4%)
$ 11,004 The Bank of New York (dated 09/30/99; proceeds $11,005,055)
(i)
(IDENTIFIED COST $11,003,527)............................. 5.00% 10/01/99 $ 11,003,527
--------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $99,950,310)........................................................... 99,950,310
--------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $2,512,770,106) (J)............................................. 99.4% 2,498,304,497
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES................................... 0.6 15,654,526
-------- --------------
NET ASSETS....................................................................... 100.0% $2,513,959,023
-------- --------------
-------- --------------
</TABLE>
- ---------------------
(a) Valued using fair value procedures - total aggregate value is
$2,398,354,187.
(b) Floating rate securities. Interest rates shown are those in effect at
September 30, 1999.
(c) Participation interests were acquired through the financial institutions
indicated parenthetically.
(d) Payment in kind security.
(e) Non-income producing security; note in default.
(f) Non-income producing securities.
(g) Securities were purchased on a discount basis. The interest rates shown
have been adjusted to reflect a money market equivalent yield.
(h) All or a portion of these securities are segregated in connection with
unfunded loan commitments.
(i) Collateralized by $11,247,330 U.S. Treasury Note 5.375% due 06/30/03 valued
at $11,227,999.
(j) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $2,632,462 and the
aggregate gross unrealized depreciation is $17,098,071, resulting in net
unrealized depreciation of $14,465,609.
SEE NOTES TO FINANCIAL STATEMENTS
25
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1999
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $2,512,770,106).......................... $2,498,304,497
Cash........................................................ 3,735,088
Receivable for:
Interest................................................ 17,078,683
Shares of beneficial interest sold...................... 5,126,064
Investments sold........................................ 435,434
Prepaid expenses and other assets........................... 1,011,737
--------------
TOTAL ASSETS........................................... 2,525,691,503
--------------
LIABILITIES:
Payable for:
Investment advisory fee................................. 1,757,262
Dividends to shareholders............................... 1,220,374
Administration fee...................................... 517,047
Accrued expenses and other payables......................... 304,585
Deferred loan fees.......................................... 7,933,212
Commitments and contingencies (Note 7)...................... --
--------------
TOTAL LIABILITIES...................................... 11,732,480
--------------
NET ASSETS............................................. $2,513,959,023
==============
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................. $2,536,180,951
Net unrealized depreciation................................. (14,465,609)
Accumulated undistributed net investment income............. 704,520
Accumulated net realized loss............................... (8,460,839)
--------------
NET ASSETS............................................. $2,513,959,023
==============
NET ASSET VALUE PER SHARE,
254,813,996 SHARES OUTSTANDING
(UNLIMITED SHARES AUTHORIZED OF $.01 PAR VALUE)........... $9.87
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
26
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1999
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Interest.................................................... $183,155,103
Facility, amendment and other loan fees..................... 5,258,883
Other income................................................ 823,457
------------
TOTAL INCOME........................................... 189,237,443
------------
EXPENSES
Investment advisory fee..................................... 19,568,322
Administration fee.......................................... 5,740,526
Transfer agent fees and expenses............................ 1,008,446
Professional fees........................................... 616,632
Registration fees........................................... 407,360
Shareholder reports and notices............................. 353,753
Facility fees............................................... 144,412
Custodian fees.............................................. 115,375
Trustees' fees and expenses................................. 16,145
Other....................................................... 151,925
------------
TOTAL EXPENSES......................................... 28,122,896
Less: expense offset........................................ (33,238)
------------
NET EXPENSES........................................... 28,089,658
------------
NET INVESTMENT INCOME.................................. 161,147,785
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain........................................... 1,067,708
Net change in unrealized depreciation....................... (13,449,451)
------------
NET LOSS............................................... (12,381,743)
------------
NET INCREASE................................................ $148,766,042
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
27
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
- ---------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income......................... $ 161,147,785 $ 119,953,468
Net realized gain (loss)...................... 1,067,708 (10,227,863)
Net change in unrealized depreciation......... (13,449,451) 2,829,220
-------------- --------------
NET INCREASE............................. 148,766,042 112,554,825
Dividends from net investment income.......... (159,065,743) (120,722,134)
Net increase from transactions in shares of
beneficial interest......................... 527,549,296 660,273,515
-------------- --------------
NET INCREASE............................. 517,249,595 652,106,206
NET ASSETS:
Beginning of period........................... 1,996,709,428 1,344,603,222
-------------- --------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME OF $704,520 AND DIVIDENDS IN EXCESS
OF NET INVESTMENT INCOME OF $552,409,
RESPECTIVELY)............................. $2,513,959,023 $1,996,709,428
============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
28
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1999
<TABLE>
<S> <C>
INCREASE (DECREASE) IN CASH:
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net investment income....................................... $ 161,147,785
Adjustments to reconcile net investment income to net cash
provided by operating activities:
Increase in receivables and other assets related to
operations................................................ (4,819,335)
Increase in payables related to operations.................. 239,476
Net loan fees received...................................... 8,407,380
Amortization of loan fees................................... (5,258,883)
Accretion of discounts...................................... (399,778)
---------------
NET CASH PROVIDED BY OPERATING ACTIVITIES.............. 159,316,645
---------------
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Purchases of investments.................................... (1,547,470,530)
Principal repayments/sales of investments................... 904,621,846
Net sales/maturities of short-term investments.............. 113,054,438
---------------
NET CASH USED FOR INVESTING ACTIVITIES................. (529,794,246)
---------------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Shares of beneficial interest sold.......................... 649,548,611
Shares tendered............................................. (188,124,450)
Dividends from net investment income (net of reinvested
dividends of $69,946,361)................................. (88,658,423)
---------------
NET CASH PROVIDED BY FINANCING ACTIVITIES.............. 372,765,738
---------------
NET INCREASE IN CASH........................................ 2,288,137
CASH BALANCE AT BEGINNING OF YEAR........................... 1,446,951
---------------
CASH BALANCE AT END OF YEAR................................. $ 3,735,088
===============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
29
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1999
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Prime Income Trust (the "Trust") is registered under
the Investment Company Act of 1940, as amended, as a non-diversified, closed-end
management investment company. The Trust's investment objective is to provide a
high level of current income consistent with the preservation of capital. The
Trust was organized as a Massachusetts business trust on August 17, 1989 and
commenced operations on November 30, 1989.
The Trust offers and sells its shares to the public on a continuous basis. The
Trustees intend, each quarter, to consider authorizing the Trust to make tender
offers for all or a portion of its outstanding shares of beneficial interest at
the then current net asset value of such shares.
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) The Trustees believe that, at present, there
are not sufficient market quotations provided by banks, dealers or pricing
services respecting interests in senior collateralized loans ("Senior Loans") to
corporations, partnerships and other entities ("Borrower") to enable the Trust
to properly value Senior Loans based on available market quotations.
Accordingly, until the market for Senior Loans develops, interests in Senior
Loans held by the Trust are valued at their fair value in accordance with
procedures established in good faith by the Trustees. Under the procedures
adopted by the Trustees, interests in Senior Loans are priced using a matrix
which takes into account the relationship between current interest rates and
interest rates payable on each Senior Loan, as well as the total number of days
in each interest period and the period remaining until the next interest rate
determination or maturity of the Senior Loan. Adjustments in the matrix-
determined price of a Senior Loan will be made in the event of a default on a
Senior Loan or a significant change in the creditworthiness of the Borrower. The
fair values determined in accordance with these procedures may differ
significantly from the market values that would have been used had a ready
market for the Senior Loans existed; (2) portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest bid price; (3) all other securities and other assets are valued at their
fair value as determined in good faith under procedures established by and under
the general supervision of the Trustees; and (4) 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
30
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1999, CONTINUED
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.
Interest income is accrued daily except where collection is not expected. When
the Trust buys an interest in a Senior Loan, it may receive a facility fee,
which is a fee paid to lenders upon origination of a Senior Loan and/or a
commitment fee which is paid to lenders on an ongoing basis based upon the
undrawn portion committed by the lenders of the underlying Senior Loan. The
Trust amortizes the facility fee and accrues the commitment fee over the
expected term of the loan. When the Trust sells an interest in a Senior Loan, it
may be required to pay fees or commissions to the purchaser of the interest.
Fees received in connection with loan amendments are amortized over the expected
term of the loan.
C. SENIOR LOANS -- The Trust invests primarily in Senior Loans to Borrowers.
Senior Loans are typically structured by a syndicate of lenders ("Lenders"), one
or more of which administers the Senior Loan on behalf of the Lenders ("Agent").
Lenders may sell interests in Senior Loans to third parties ("Participations")
or may assign all or a portion of their interest in a Senior Loan to third
parties ("Assignments"). Senior Loans are exempt from registration under the
Securities Act of 1933. Presently, Senior Loans are not readily marketable and
are often subject to restrictions on resale.
Some of the Trust's Senior Loans are "Revolver Loans." For these loans, the
Trust commits to provide funding up to the face amount of the loan. The amount
drawn down by the borrower may vary during the term of the loan.
D. FEDERAL INCOME TAX STATUS -- It is the Trust'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 Trust records dividends
and distributions to its shareholders on the record date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial
31
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1999, CONTINUED
reporting purposes but not for tax purposes are reported as dividends in excess
of net investment income or distributions in excess of net realized capital
gains. To the extent they exceed net investment income and net realized capital
gains for tax purposes, they are reported as distributions of paid-in-capital.
2. INVESTMENT ADVISORY AGREEMENT
Pursuant to an Investment Advisory Agreement with Morgan Stanley Dean Witter
Advisors Inc. (the "Investment Advisor"), the Trust pays an advisory fee,
accrued daily and payable monthly, by applying the following annual rates to the
net assets of the Trust determined as of the close of each business day: 0.90%
to the portion of the daily net assets not exceeding $500 million; 0.85% to the
portion of the daily net assets exceeding $500 million but not exceeding $1.5
billion; and 0.825% to the portion of daily net assets exceeding $1.5 billion.
Effective May 1, 1999 the Agreement was amended to reduce the annual rate to
0.80% of the portion of daily net assets in excess of $2.5 billion.
Under the terms of the Agreement, in addition to managing the Trust's
investments, the Investment Advisor pays the salaries of all personnel,
including officers of the Trust, who are employees of the Investment Advisor.
3. ADMINISTRATION AGREEMENT
Pursuant to an Administration Agreement with Morgan Stanley Dean Witter Services
Company Inc. (the "Administrator"), an affiliate of the Investment Advisor, the
Trust pays an administration fee, calculated daily and payable monthly, by
applying the annual rate of 0.25% to the Trust's daily net assets.
Under the terms of the Administration Agreement, the Administrator maintains
certain of the Trust's books and records and furnishes, at its own expense,
office space, facilities, equipment, clerical, bookkeeping and certain legal
services and pays the salaries of all personnel, including officers of the Trust
who are employees of the Administrator. The Administrator also bears the cost of
telephone services, heat, light, power and other utilities provided to the
Trust.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales/principal repayments of portfolio
securities, excluding short-term investments, for the year ended September 30,
1999 aggregated $1,547,470,530 and $905,057,280, respectively.
32
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1999, CONTINUED
Shares of the Trust are distributed by Morgan Stanley Dean Witter Distributors
Inc. (the "Distributor"), an affiliate of the Investment Advisor and
Administrator. Pursuant to a Distribution Agreement between the Trust, the
Investment Advisor and the Distributor, the Investment Advisor compensates the
Distributor at an annual rate of 2.75% of the purchase price of shares purchased
from the Trust. The Investment Advisor will compensate the Distributor at an
annual rate of 0.10% of the value of shares sold for any shares that remain
outstanding after one year from the date of their initial purchase. Any early
withdrawal charge to defray distribution expenses will be charged to the
shareholder in connection with shares held for four years or less which are
accepted by the Trust for repurchase pursuant to tender offers. For the year
ended September 30, 1999, the Investment Advisor has informed the Trust that it
received approximately $2,651,000 in early withdrawal charges.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Advisor and
Administrator, is the Trust's transfer agent. At September 30, 1999, the Trust
had transfer agent fees and expenses payable of approximately $8,300.
The Trust has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Trust who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the year ended September 30, 1999
included in Trustees' fees and expenses in the Statement of Operations amounted
to $5,742. At September 30, 1999, the Trust had an accrued pension liability of
$52,116 which is included in accrued expenses in the Statement of Assets and
Liabilities.
5. FEDERAL INCOME TAX STATUS
At September 30, 1999, the Trust had a net capital loss carryover of
approximately $7,723,000 of which $62,000 will be available through
September 30, 2004 and $7,661,000 will be available through September 30, 2007
to offset future capital gains to the extent provided by regulations.
As of September 30, 1999, the Trust had temporary book/tax differences primarily
attributable to dividends payable and tax adjustments on revolver loans held by
the Trust and permanent book/tax differences attributable to revolver loans sold
by the Trust. To reflect reclassifications arising from the permanent
differences, accumulated undistributed net investment income was charged
$825,113 and accumulated net realized loss was credited $825,113.
33
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1999, CONTINUED
6. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
----------- --------------
<S> <C> <C>
Balance, September 30, 1997................................. 135,154,983 $1,348,358,142
Shares sold................................................. 73,974,045 735,805,027
Shares issued to shareholders for reinvestment of
dividends.................................................. 5,468,432 54,381,913
Shares tendered (four quarterly tender offers).............. (13,071,383) (129,913,425)
----------- --------------
Balance, September 30, 1998................................. 201,526,077 2,008,631,657
Shares sold................................................. 65,236,515 645,727,385
Shares issued to shareholders for reinvestment of
dividends.................................................. 7,070,460 69,946,361
Shares tendered (four quarterly tender offers).............. (19,019,056) (188,124,450)
----------- --------------
Balance, September 30, 1999................................. 254,813,996 $2,536,180,953
=========== ==============
</TABLE>
On October 20, 1999, the Trustees approved a tender offer to purchase up to 12
million shares of beneficial interest to commence on November 17, 1999.
7. COMMITMENTS AND CONTINGENCIES
As of September 30, 1999, the Trust had unfunded loan commitments pursuant to
the following loan agreements:
<TABLE>
<CAPTION>
UNFUNDED
BORROWER COMMITMENT
- -------- -----------
<S> <C>
Arena Brands, Inc........................................... $ 1,045,000
Bridge Information Systems, Inc............................. 222,222
Chancellor Media Corp....................................... 4,261,250
Corning Consumer Products Co................................ 676,364
Crown Paper Co.............................................. 2,056,500
Jet Plastica Industries, Inc................................ 2,702,703
Mafco Finance Corp.......................................... 3,246,923
Spalding Holdings Corp...................................... 2,388,235
Spectrasite Communications, Inc. (Revolver)................. 714,286
Spectrasite Communications, Inc. (Term Loan)................ 4,285,714
Teligent, Inc. (Multi-Draw)................................. 6,666,667
Teligent, Inc. (Revolver)................................... 3,333,333
Tenneco Automotive.......................................... 10,000,000
U.S. Silica Co. (Working Capital)........................... 1,302,000
-----------
$42,901,197
===========
</TABLE>
The total value of securities segregated for unfunded loan commitments was
$49,954,433.
34
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE PERIOD
NOVEMBER 30,
1989*
FOR THE YEAR ENDED SEPTEMBER 30, THROUGH
--------------------------------------------------------------------------------------- SEPTEMBER 30,
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA:
Net asset value,
beginning of
period........... $ 9.91 $ 9.95 $ 9.94 $9.99 $10.00 $9.91 $9.99 $10.00 $10.00 $ 10.00
-------- -------- -------- ----- ----- ----- ----- ----- ----- ---------------
Income (loss) from
investment
operations:
Net investment
income......... 0.70 0.71 0.75 0.74 0.82 0.62 0.55 0.62 0.84 0.74
Net realized
and unrealized
gain (loss).... (0.05) (0.03) -- (0.04) 0.01 0.09 (0.08) (0.01) -- (0.01)
-------- -------- -------- ----- ----- ----- ----- ----- ----- ---------------
Total income from
investment
operations....... 0.65 0.68 0.75 0.70 0.83 0.71 0.47 0.61 0.84 0.73
-------- -------- -------- ----- ----- ----- ----- ----- ----- ---------------
Less dividends and
distributions
from:
Net investment
income......... (0.69) (0.72) (0.74) (0.75) (0.81) (0.62) (0.55) (0.62) (0.84) (0.73)
Net realized
gain........... -- -- -- -- (0.03) -- -- -- -- --
-------- -------- -------- ----- ----- ----- ----- ----- ----- ---------------
Total dividends
and
distributions.... (0.69) (0.72) (0.74) (0.75) (0.84) (0.62) (0.55) (0.62) (0.84) (0.73)
-------- -------- -------- ----- ----- ----- ----- ----- ----- ---------------
Net asset value,
end of period.... $ 9.87 $ 9.91 $ 9.95 $9.94 $9.99 $10.00 $9.91 $9.99 $10.00 $ 10.00
======== ======== ======== ===== ===== ===== ===== ===== ===== ===============
TOTAL RETURN+..... 6.72% 7.14% 7.78% 7.25% 8.57% 7.32% 4.85% 6.23% 8.77% 7.57%(1)
RATIOS TO AVERAGE
NET ASSETS:
Expenses.......... 1.22% 1.29% 1.40% 1.46% 1.52% 1.60% 1.45% 1.47% 1.52% 1.48%(2)
Net investment
income........... 7.02% 7.17% 7.53% 7.50% 8.11% 6.14% 5.53% 6.14% 8.23% 8.95%(2)
SUPPLEMENTAL DATA:
Net assets, end of
period, in
thousands........ $2,513,959 $1,996,709 $1,344,603 $939,471 $521,361 $305,034 $311,479 $413,497 $479,941 $328,189
Portfolio turnover
rate............. 44% 68% 86% 72% 102% 147% 92% 46% 42% 35%(1)
</TABLE>
- ---------------------
* Commencement of operations.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period. Dividends and
distributions are assumed to be reinvested at the prices obtained under the
Trust's dividend reinvestment plan.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
35
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations, of
changes in net assets and of cash flows and the financial highlights present
fairly, in all material respects, the financial position of Morgan Stanley Dean
Witter Prime Income Trust (the "Trust") at September 30, 1999, the results of
its operations and its cash flows for the year then ended, the changes in its
net assets for each of the two years in the period then ended and the financial
highlights for each of the nine years in the period then ended and for the
period November 30, 1989 (commencement of operations) through September 30,
1990, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
September 30, 1999 by correspondence with the custodian and, with respect to
senior collateralized loans, the selling participants and agent banks, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
NOVEMBER 15, 1999
36
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SENIOR COLLATERIZED TERM LOANS (a)(b) (88.4%)
ACCIDENT & HEALTH INSURANCE (0.2%)
$ 2,500 BRW Acquisition Inc................................................... 8.19% 07/10/06 $ 2,500,475
2,500 BRW Acquisition Inc................................................... 8.44 07/10/07 2,500,475
--------------
5,000,950
--------------
AEROSPACE (1.1%)
11,250 Fairchild Holding Corp................................................ 8.63 to 8.69 06/18/04 11,251,744
9,800 Tri-Star Aerospace Co................................................. 7.75 09/30/03 9,802,744
--------------
21,054,488
--------------
AIR FREIGHT/DELIVERY SERVICES (1.2%)
8,480 Atlas Freighter Leasing II, Inc....................................... 7.91 05/29/04 8,482,936
5,063 Evergreen International Aviation, Inc................................. 8.69 05/31/02 5,062,703
9,649 First Security Bank, National Association as Owner Trustee............ 8.69 05/07/03 9,651,107
--------------
23,196,746
--------------
AIRCRAFT & AEROSPACE (1.8%)
8,619 Erickson Air-Crane Co., L.L.C......................................... 9.13 to 10.50 12/31/04 8,619,440
14,963 Nortek Aviation Support Inc........................................... 8.75 to 8.81 07/01/05 14,965,448
11,796 Western Sky Industries Inc............................................ 8.04 07/31/03 11,797,780
--------------
35,382,668
--------------
APPAREL (0.1%)
1,613 London Fog Industries, Inc. (c)....................................... 10.00 02/27/03 1,613,132
--------------
AUTO PARTS (0.9%)
18,000 Federal Mogul Corp.................................................... 7.82 to 7.88 12/31/05 18,001,674
--------------
AUTO PARTS - ORIGINAL EQUIPMENT (1.8%)
10,000 Accuride Corp......................................................... 7.69 01/21/06 10,001,200
10,000 American Axle & Manufacturing, Inc.................................... 8.19 04/30/06 10,001,700
15,501 AP Automotive Systems, Inc............................................ 8.50 to 8.69 12/19/05 15,506,510
--------------
35,509,410
--------------
AUTOMOTIVE AFTERMARKET (0.6%)
12,564 CSK Auto, Inc......................................................... 7.44 to 9.25 10/31/03 12,567,139
--------------
BREWERS (0.9%)
3,317 The Stroh Brewery Co.................................................. 8.56 06/30/01 3,317,868
2,505 The Stroh Brewery Co. (Revolver)...................................... 8.63 06/30/01 2,505,076
12,508 The Stroh Brewery Co.................................................. 9.06 06/30/03 12,512,477
--------------
18,335,421
--------------
BROADCASTING (0.6%)
12,391 Latin Communications, Inc............................................. 13.25 02/28/04 12,391,305
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
37
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
BROADCAST MEDIA (3.3%)
$ 10,000 Black Entertainment Television Inc.................................... 7.69% 06/30/06 $ 10,002,800
19,950 Capstar Media Broadcasting Partners................................... 8.13 05/31/05 19,951,397
6,400 Chancellor Media Corp................................................. 6.25 06/30/05 6,400,551
1,288 Chancellor Media Corp. (Revolver)..................................... 6.25 to 8.50 06/30/05 1,288,156
20,000 Sinclair Broadcast Group.............................................. 7.16 to 7.20 09/15/05 20,000,399
7,500 Spartan Communications, Inc........................................... 8.95 06/30/05 7,500,000
--------------
65,143,303
--------------
BUILDING MATERIALS (0.8%)
6,000 Dayton Superior Corp.................................................. 8.44 09/29/05 6,002,520
9,943 Falcon Building Products, Inc......................................... 8.38 06/30/05 9,943,155
--------------
15,945,675
--------------
BUSINESS PUBLISHING (0.9%)
18,981 Advanstar Communications, Inc......................................... 7.88 04/30/05 18,981,569
--------------
BUSINESS SERVICES (1.8%)
5,000 Bridge Information Systems............................................ 8.44 05/29/03 5,000,150
15,000 Bridge Information Systems............................................ 8.69 05/29/05 15,000,351
15,000 United Rentals Inc.................................................... 7.56 06/30/05 15,001,200
--------------
35,001,701
--------------
CABLE TELEVISION (1.7%)
5,895 Cable Systems International,
Inc................................................................. 8.69 12/31/02 5,895,059
9,975 Charter Communications Entertainment I, L.P........................... 8.38 to 10.00 12/31/04 9,975,200
8,499 Falcon Cable Communications........................................... 7.31 to 7.70 12/31/07 8,501,888
9,564 Supercanal Holdings S.A. (Argentina) (c).............................. 10.13 10/12/02 9,567,962
--------------
33,940,109
--------------
CHEMICALS - DIVERSIFIED (0.5%)
3,846 Lyondell Petrochemical Co............................................. 7.53 06/30/99 3,817,731
6,154 Lyondell Petrochemical Co............................................. 7.69 06/30/00 6,109,477
--------------
9,927,208
--------------
COAL MINING (1.7%)
6,487 Alliance Coal Corp.................................................... 8.57 12/31/02 6,487,302
13,385 P&L Coal Holdings Corp................................................ 7.88 to 8.13 06/30/06 13,391,486
14,963 Quaker Coal Company Inc............................................... 8.84 06/30/06 14,971,178
--------------
34,849,966
--------------
COMMUNICATIONS - EQUIPMENT & SOFTWARE (1.3%)
5,001 Channel Master, Inc................................................... 8.69 10/10/05 5,000,349
4,964 Dynatech Corp......................................................... 7.81 to 9.75 03/31/05 4,964,680
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
38
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 4,964 Dynatech Corp......................................................... 8.06 to 10.00% 03/31/06 $ 4,964,680
4,964 Dynatech Corp......................................................... 8.31 to 10.25 03/31/07 4,964,680
5,965 Telex Communications, Inc............................................. 8.69 11/06/04 5,967,413
--------------
25,861,802
--------------
COMPUTERS - SERVICES (0.7%)
14,851 DecisionOne Corp...................................................... 8.32 to 8.82 08/07/04 14,858,113
--------------
CONSUMER SPECIALITIES (1.2%)
8,391 Amscan Holdings, Inc.................................................. 7.69 to 7.88 12/31/04 8,394,751
6,710 Renters Choice Inc.................................................... 8.13 01/31/06 6,710,157
8,201 Renters Choice Inc.................................................... 8.38 01/31/07 8,201,122
--------------
23,306,030
--------------
CONSUMER SUNDRIES (1.6%)
6,602 Chattem, Inc.......................................................... 8.88 02/14/04 6,602,395
308 Corning Consumer Products Co.......................................... 7.28 to 7.38 04/09/05 309,126
16,000 Corning Consumer Products Co.......................................... 7.53 10/09/06 16,001,920
9,212 The Boyds Collection, Ltd............................................. 7.75 to 7.94 04/21/06 9,212,844
--------------
32,126,285
--------------
CONTAINERS/PACKAGING (0.9%)
5,432 Graham Packaging Co................................................... 8.13 01/31/06 5,432,455
7,394 Graham Packaging Co................................................... 8.38 to 8.56 01/31/07 7,394,410
4,786 MPC Packaging Corp.................................................... 8.06 05/30/04 4,786,687
--------------
17,613,552
--------------
CONVENIENCE STORES (0.6%)
4,950 Caribbean Petroleum, L.P.............................................. 8.63 09/30/05 4,950,149
7,009 Cumberland Farms, Inc. (Participation Merrill Lynch &
Co., Inc.) (d)...................................................... 9.00 12/31/98 7,009,096
--------------
11,959,245
--------------
DEPARTMENT STORES (0.6%)
12,500 Tuesday Morning Corp.................................................. 8.68 12/29/04 12,500,750
--------------
DIVERSIFIED MANUFACTURING (0.4%)
4,020 Werner Holding Co., Inc............................................... 8.25 11/30/04 4,025,654
4,913 Werner Holding Co., Inc............................................... 8.50 11/30/05 4,920,146
--------------
8,945,800
--------------
DRUG STORE CHAIN (0.6%)
9,950 Duane Reade, Inc...................................................... 8.38 02/13/05 9,950,697
1,250 Duane Reade, Inc...................................................... 8.38 02/15/06 1,250,113
--------------
11,200,810
--------------
EDUCATION (0.5%)
9,352 Childrens Discovery Centers of America................................ 10.63 06/30/05 9,351,563
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
39
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
ELECTRIC UTILITIES (0.7%)
$ 15,000 AES Edelap Funding Co................................................. 8.13% 06/29/99 $ 15,000,900
--------------
FINANCE (3.5%)
13,000 Blackstone Capital Company II, L.L.C.................................. 9.06 05/31/99 13,001,820
36,750 Mafco Holdings, Inc................................................... 9.22 04/28/00 36,757,718
7,403 Mafco Finance Corp. (Revolver)........................................ 8.88 to 11.00 04/28/00 7,402,996
13,000 Wasserstein/C & A Holdings, L.L.C..................................... 9.00 05/31/99 13,005,200
--------------
70,167,734
--------------
FOOD DISTRIBUTORS (0.6%)
12,500 Leon's Bakery, Inc.................................................... 8.63 06/03/05 12,506,375
--------------
FOOD SERVICES (0.5%)
6,588 Volume - Services, Inc................................................ 8.75 12/31/02 6,590,440
3,294 Volume - Services, Inc................................................ 9.25 12/31/03 3,295,004
--------------
9,885,444
--------------
FOODS & BEVERAGES (1.9%)
7,467 Eagle Family Foods, Inc............................................... 7.57 12/31/05 7,468,604
8,472 Favorite Brands International,
Inc................................................................. 8.50 05/19/05 8,475,140
9,975 Formax Inc............................................................ 8.44 06/30/05 9,975,299
11,080 Specialty Foods Corp.................................................. 9.50 01/31/00 11,080,978
--------------
37,000,021
--------------
FUNERAL SERVICES (1.0%)
4,889 Prime Succession, Inc................................................. 8.44 to 8.50 08/01/03 4,891,517
4,889 Prime Succession, Inc. (Participation: Goldman Sachs & Co.) (d)....... 8.44 to 8.50 08/01/03 4,891,517
9,734 Rose Hills Co......................................................... 8.44 to 8.56 12/01/03 9,740,857
--------------
19,523,891
--------------
GAS - TRUCK STOP (0.3%)
6,457 Petro Stopping Centers, L.P........................................... 8.31 09/30/03 6,457,943
--------------
GLASS - PRODUCTS (0.2%)
2,500 Safelite Glass Corp................................................... 7.35 12/23/04 2,500,225
2,500 Safelite Glass Corp................................................... 7.60 12/23/05 2,500,225
--------------
5,000,450
--------------
HEALTH CARE DIVERSIFIED (1.3%)
17,500 Integrated Health Service, Inc........................................ 7.44 12/31/04 17,506,300
4,000 Magellan Health Services, Inc......................................... 8.09 02/12/05 4,000,560
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
40
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 4,000 Magellan Health Services, Inc......................................... 8.34% 02/12/06 $ 4,000,560
--------------
25,507,420
--------------
HOSPITAL/NURSING MANAGEMENT (3.6%)
7,123 Community Health Systems,
Inc................................................................. 8.38 12/31/03 7,123,501
7,123 Community Health Systems,
Inc................................................................. 8.88 12/31/04 7,123,501
5,342 Community Health Systems,
Inc................................................................. 9.13 12/31/05 5,342,626
4,455 GEAC/Multicare Co., Inc............................................... 8.22 to 8.41 09/30/04 4,456,096
1,481 GEAC/Multicare Co., Inc............................................... 8.69 06/01/05 1,481,813
5,459 Genesis Health Ventures, Inc.......................................... 8.31 to 8.44 09/30/04 5,459,650
5,445 Genesis Health Ventures, Inc.......................................... 8.56 to 8.69 06/01/05 5,445,904
5,353 Paracelsus Healthcare Corp............................................ 7.84 03/31/03 5,353,762
8,000 Paracelsus Healthcare Corp............................................ 8.09 03/31/04 8,000,640
21,167 Ventas Bridge Loan.................................................... 8.34 10/30/99 21,168,572
--------------
70,956,065
--------------
HOTELS/RESORTS (4.2%)
20,000 Florida Panthers Holdings, Inc........................................ 8.75 12/15/98 20,006,400
10,500 Meristar Hospitality Operating Partners............................... 7.69 01/31/04 10,502,625
3,529 Patriot American Hospitality
Inc................................................................. 7.99 03/31/99 3,530,859
3,971 Patriot American Hospitality
Inc................................................................. 7.99 03/31/00 3,972,216
14,994 Patriot American Hospitality
Inc................................................................. 8.24 to 9.25 03/31/03 14,999,595
2,892 Premier Parks Inc..................................................... 8.00 03/31/06 2,892,470
8,608 Six Flag Theme Parks, Inc............................................. 8.50 11/30/04 8,607,990
20,000 Starwood Hotels & Resorts Worldwide, Inc.............................. 8.34 02/23/03 20,002,800
--------------
84,514,955
--------------
HOUSEHOLD APPLIANCES (0.7%)
14,925 Coinmach Corp......................................................... 8.06 06/30/05 14,926,194
--------------
HOUSEHOLD FURNISHINGS & APPLIANCES (1.1%)
13,941 Pillowtex Corp........................................................ 7.82 to 7.94 12/31/04 13,943,693
3,019 Sealy Mattress Co..................................................... 8.25 12/15/04 3,020,964
2,175 Sealy Mattress Co..................................................... 8.50 12/15/05 2,175,633
2,779 Sealy Mattress Co..................................................... 8.75 12/15/06 2,780,094
--------------
21,920,384
--------------
INSURANCE BROKERS/SERVICES (0.4%)
7,363 Acordia, Inc.......................................................... 8.13 12/31/04 7,363,221
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
41
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MANUFACTURER CONSUMER & INDUSTRIAL PRODUCTS (0.7%)
$ 15,000 Hexcel Corp........................................................... 7.63% 09/14/05 $ 15,000,900
--------------
MANUFACTURING (2.0%)
5,672 Alliance Gaming Corp.................................................. 8.44 to 8.56 01/31/05 5,677,777
2,263 Alliance Gaming Corp.................................................. 8.75 to 8.81 07/31/05 2,265,157
7,564 Arena Brands, Inc..................................................... 8.88 to 9.38 06/01/02 7,567,617
601 Arena Brands, Inc (Revolver).......................................... 8.88 to 10.75 06/01/02 601,202
6,647 Chatham Technologies, Inc............................................. 8.13 08/18/03 6,647,372
7,939 Chatham Technologies, Inc............................................. 8.63 08/18/05 7,939,152
9,895 Desa International, Inc............................................... 8.31 to 8.38 11/26/04 9,901,465
--------------
40,599,742
--------------
MANUFACTURING - APPAREL (1.1%)
15,000 Sun Apparel, Inc...................................................... 8.13 09/30/04 15,001,050
6,111 The William Carter Co................................................. 8.16 to 8.25 10/30/03 6,113,507
--------------
21,114,557
--------------
MANUFACTURING - DIVERSIFIED INDUSTRIES (1.9%)
8,042 Adience, Inc. and Refraco Holdings, Ltd............................... 8.56 04/15/05 8,042,036
1,990 Adience, Inc. and Refraco Holdings, Ltd............................... 8.81 07/30/05 1,990,159
10,857 Adience, Inc. and Refraco Holdings, Ltd............................... 9.31 10/15/05 10,858,446
6,930 Doskocil Manufacturing Co............................................. 8.13 09/30/04 6,930,208
3,700 Eagle-Picher Industries, Inc.......................................... 8.16 08/31/05 3,700,444
5,550 Eagle-Picher Industries, Inc.......................................... 8.41 08/31/06 5,550,666
--------------
37,071,959
--------------
MEDICAL ELECTRONICS (0.5%)
2,455 Medical Specialties Group, Inc........................................ 8.88 to 11.00 06/30/01 2,454,617
7,136 Medical Specialties Group, Inc........................................ 9.63 to 11.75 06/30/04 7,136,577
--------------
9,591,194
--------------
MEDICAL SPECIALTIES (1.0%)
3,044 Alaris Medical Systems, Inc........................................... 8.19 11/01/03 3,044,145
3,044 Alaris Medical Systems, Inc........................................... 8.19 11/01/04 3,044,145
4,782 Alaris Medical Systems, Inc........................................... 8.06 to 8.19 05/01/05 4,783,241
2,942 Dade International, Inc............................................... 7.69 to 7.75 12/31/02 2,942,502
2,942 Dade International, Inc............................................... 7.69 to 7.75 12/31/03 2,942,608
2,643 Dade International, Inc............................................... 7.69 12/31/04 2,644,038
--------------
19,400,679
--------------
MEDICAL/NURSING SERVICES (2.3%)
1,985 Alliance Imaging, Inc................................................. 8.04 to 8.25 12/18/03 1,986,057
4,963 Alliance Imaging, Inc................................................. 8.07 06/18/04 4,964,932
8,412 Alliance Imaging, Inc................................................. 9.75 12/18/04 8,411,765
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
42
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 3,741 FHC Health System Inc................................................. 8.09% 04/30/05 $ 3,741,186
3,741 FHC Health System Inc................................................. 8.34 04/30/06 3,741,186
9,818 Interim Healthcare, Inc............................................... 8.44 02/29/04 9,818,594
3,670 Interim Healthcare, Inc............................................... 8.69 02/28/05 3,670,040
9,900 SMT Health Services, Inc.............................................. 8.13 to 8.31 08/31/03 9,900,687
--------------
46,234,447
--------------
MOTOR VEHICLE (0.2%)
4,250 Asbury Automotive Texas Holdings...................................... 9.44 03/31/05 4,250,085
--------------
MOVIES/ENTERTAINMENT (1.9%)
7,500 MGM Studios, Inc...................................................... 8.19 03/31/06 7,502,775
10,000 Panavision Inc........................................................ 8.13 to 8.25 03/31/05 10,004,140
2,353 Regal Cinemas Inc..................................................... 7.88 05/27/06 2,354,024
2,647 Regal Cinemas Inc..................................................... 8.13 05/27/07 2,648,250
6,000 United Artists Theatre Co............................................. 8.31 to 8.38 04/21/06 6,007,052
9,000 United Artists Theatre Co............................................. 8.56 to 8.63 04/21/07 9,010,577
--------------
37,526,818
--------------
NEWSPAPERS (0.2%)
4,975 21st Century Newspapers, Inc.......................................... 7.88 09/15/05 4,975,149
--------------
OFFICE EQUIPMENT & SUPPLIES (1.0%)
20,000 US Office Products Co................................................. 8.19 06/09/06 20,001,400
--------------
OIL RELATED (1.3%)
15,000 Plains All American Inc............................................... 8.69 06/30/05 15,002,700
10,000 US Synthetic Corp..................................................... 8.53 05/31/05 10,024,810
--------------
25,027,510
--------------
OTHER METALS/MINERALS (1.2%)
8,978 Calciner Industries Inc............................................... 8.76 to 8.83 06/25/08 8,988,441
15,000 U.S. Silica Corp...................................................... 8.13 06/30/06 15,000,750
--------------
23,989,191
--------------
PACKAGED FOODS (0.2%)
3,492 Southern Foods Group, L.P............................................. 8.44 to 8.63 03/04/06 3,492,684
--------------
PAPER (2.2%)
12,405 Alabama Pine Pulp Co., Inc. (e)....................................... 10.25 12/31/02 10,544,581
9,262 Alabama River Newsprint Co. (Participation: Toronto Dominion
Bank) (d)........................................................... 7.38 to 7.63 12/31/02 8,675,748
9,925 Bear Island Paper Co., L.L.C.......................................... 8.59 12/31/05 9,929,367
2,828 Crown Paper Co. (Revolver)............................................ 8.25 to 8.38 08/22/02 2,829,908
1,285 Crown Paper Co. (Revolver)............................................ 8.25 to 10.00 08/22/02 1,285,995
9,715 Crown Paper Co........................................................ 9.00 to 9.13 08/22/03 9,722,893
--------------
42,988,492
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
43
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
PHARMACEUTICALS (0.2%)
$ 4,988 Roberts Pharmaceuticals Corp.......................................... 7.81% 06/30/03 $ 4,987,899
--------------
PHOTOGRAPHY - IMAGING (0.4%)
8,000 PCA International Inc................................................. 8.41 to 8.44 08/25/05 8,002,240
--------------
PLASTICS (0.8%)
7,649 Jet Plastica Industries, Inc.......................................... 8.00 to 8.19 12/31/02 7,648,947
9,005 Jet Plastica Industries, Inc.......................................... 8.50 12/31/04 9,005,676
--------------
16,654,623
--------------
PRINTED CIRCUIT BOARDS (0.8%)
9,000 Details, Inc.......................................................... 8.04 04/22/05 9,001,080
2,989 Viasystems Group, Inc................................................. 8.35 03/31/04 2,990,721
2,466 Viasystems Group, Inc................................................. 8.69 06/30/04 2,466,624
1,500 Viasystems Group, Inc................................................. 9.19 06/30/05 1,500,405
--------------
15,958,830
--------------
PUBLISHING (3.5%)
10,931 Cygnus Publishing, Inc................................................ 8.44 06/05/05 10,936,060
8,880 HMV Media Group PLC................................................... 8.34 02/25/06 8,884,174
6,120 HMV Media Group PLC................................................... 8.84 08/25/06 6,122,815
9,975 The Sheridan Group, Inc............................................... 8.69 01/30/05 9,975,599
3,327 Von Hoffman Press, Inc................................................ 7.56 05/30/04 3,327,052
10,801 Von Hoffman Press, Inc................................................ 7.56 05/30/05 10,801,757
20,000 Ziff Davis Inc........................................................ 7.44 03/31/06 20,006,000
--------------
70,053,457
--------------
RAILROADS (0.2%)
4,000 Transportacion Ferroviaria Mexicana, S.A. de C.V...................... 9.69 12/23/02 4,000,160
--------------
RECREATIONAL PRODUCTS/TOYS (0.7%)
7,210 Ritvik Toys, Inc...................................................... 9.19 02/08/03 7,211,443
7,210 Ritvik Toys, Inc...................................................... 9.69 02/08/04 7,211,298
--------------
14,422,741
--------------
RESTAURANTS (0.5%)
9,238 Shoney's, Inc......................................................... 8.85 to 10.75 04/30/02 9,240,915
--------------
SCIENTIFIC INSTRUMENTS (0.3%)
3,192 Fisher Scientific International,
Inc................................................................. 8.19 01/21/05 3,192,013
2,209 Fisher Scientific International,
Inc................................................................. 8.44 10/21/05 2,208,873
--------------
5,400,886
--------------
SEMICONDUCTORS (1.0%)
17,028 Fairchild Semiconductor Corp.......................................... 8.07 to 8.19 03/11/03 17,028,692
3,965 Mitel Corp............................................................ 7.75 12/26/03 3,966,996
--------------
20,995,688
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
44
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SOFT DRINKS (0.9%)
$ 8,581 Snapple/Mistic Beverages, Inc......................................... 8.63% 06/01/04 $ 8,585,035
8,581 Snapple/Mistic Beverages, Inc......................................... 8.88 06/01/05 8,585,485
--------------
17,170,520
--------------
SPECIALTY CHEMICALS (1.6%)
3,850 Huntsman Speciality Chemicals Corp.................................... 7.81 03/15/04 3,850,308
3,850 Huntsman Speciality Chemicals Corp.................................... 8.06 03/15/05 3,850,308
6,913 Pioneer America Acquitions Corp....................................... 7.82 to 8.25 12/05/06 6,923,820
8,200 Pioneer Americas, Inc................................................. 8.63 to 8.82 12/05/06 8,206,437
8,160 Vining Industries Inc................................................. 8.25 to 8.32 03/31/05 8,161,322
--------------
30,992,195
--------------
SPECIALTY STEEL (1.0%)
9,975 ISPAT Inland L.P...................................................... 7.63 07/16/05 9,975,299
9,975 ISPAT Inland L.P...................................................... 8.13 07/16/06 9,975,299
--------------
19,950,598
--------------
SPORTING GOODS (0.7%)
913 E & S Holdings Corp................................................... 8.08 09/30/03 912,835
2,875 E & S Holdings Corp. (Revolver)....................................... 8.02 to 10.00 09/30/03 2,875,513
1,828 E & S Holdings Corp................................................... 8.58 to 10.50 09/30/04 1,827,933
1,828 E & S Holdings Corp................................................... 9.08 to 11.00 09/30/05 1,827,933
1,052 E & S Holdings Corp................................................... 9.58 09/30/06 1,052,397
723 Worldwide Sports & Recreation, Inc.................................... 8.31 04/26/00 722,455
4,903 Worldwide Sports & Recreation, Inc.................................... 8.81 04/26/01 4,903,706
--------------
14,122,772
--------------
SUPERMARKETS (0.4%)
3,110 Star Markets Company, Inc............................................. 8.69 12/31/01 3,110,811
2,329 Star Markets Company, Inc............................................. 9.19 12/31/02 2,330,163
2,064 Star Markets Company, Inc............................................. 9.19 12/31/03 2,064,926
--------------
7,505,900
--------------
TELECOMMUNICATIONS (0.2%)
994 MJD Communications, Inc............................................... 8.06 03/31/06 993,746
3,980 MJD Communications, Inc............................................... 8.31 to 10.25 03/31/07 3,980,313
--------------
4,974,059
--------------
TELEPHONE - LONG DISTANCE (0.5%)
9,925 Access Communications & S.J. Investments, Inc......................... 8.50 to 10.50 12/31/04 9,927,000
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
45
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TEXTILES (1.1%)
$ 8,000 Globe Manufacturing Inc............................................... 8.44 to 8.50% 07/31/06 $ 8,005,993
4,566 Joan Fabrics Corp..................................................... 8.38 06/30/05 4,566,436
2,372 Joan Fabrics Corp..................................................... 8.88 06/30/06 2,372,543
6,972 Polymer Group, Inc.................................................... 8.10 12/20/05 6,972,558
--------------
21,917,530
--------------
TRANSPORTATION - SHIPPING (1.1%)
6,342 American Commercial Lines LLC......................................... 8.19 06/30/06 6,342,010
8,641 American Commercial Lines LLC......................................... 8.44 06/30/07 8,641,364
7,463 North American Van Lines, Inc......................................... 8.07 03/31/06 7,462,575
--------------
22,445,949
--------------
TRUCKING (0.5%)
5,371 MTL Inc............................................................... 7.56 to 7.63 08/28/05 5,371,537
4,604 MTL Inc............................................................... 7.81 to 7.88 02/28/06 4,604,174
--------------
9,975,711
--------------
WHOLESALE DISTRIBUTOR (1.3%)
14,613 American Marketing Industries, Inc.................................... 9.19 11/29/02 14,619,386
3,940 American Marketing Industries, Inc.................................... 9.19 to 9.25 11/30/03 3,941,307
2,736 American Marketing Industries, Inc.................................... 9.19 to 9.25 11/30/04 2,737,083
4,229 American Marketing Industries, Inc.................................... 9.19 to 9.25 11/30/05 4,230,057
--------------
25,527,833
--------------
WIRE & CABLE (0.6%)
12,899 International Wire Group, Inc......................................... 7.50 to 9.50 09/30/03 12,903,313
--------------
WIRELESS COMMUNICATION (4.1%)
13,684 Arch Paging Inc....................................................... 9.00 06/30/06 13,684,760
17,500 CCPR Services Inc..................................................... 8.19 06/30/06 17,505,425
6,821 Mobilemedia Communications Corp....................................... 8.19 06/30/02 6,822,164
1,341 Mobilemedia Communications Corp. (Revolver)........................... 8.19 06/30/02 1,341,074
1,846 Mobilemedia Communications Corp....................................... 8.69 06/30/03 1,846,102
20,000 Nextel Finance Co..................................................... 8.38 09/30/06 20,001,600
11,001 Powertel PCS, Inc..................................................... 8.31 12/31/08 11,000,879
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
46
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 10,000 Sprint Spectrum L.P................................................... 8.38 to 9.05% 12/31/00 $ 10,002,857
--------------
82,204,861
--------------
TOTAL SENIOR COLLATERIZED TERM LOANS
(IDENTIFIED COST $1,764,957,912)................................................................. 1,765,897,898
--------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES
- ----------
<C> <S> <C>
COMMON STOCK (a)(f) (0.1%)
APPAREL
129,050 London Fog Industries, Inc. (Restricted)
(IDENTIFIED COST $2,258,908)................................................................ 1,929,001
--------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION
WARRANTS DATE
- --------- ----------
<C> <S> <C> <C> <C>
WARRANT (a)(f) (0.0%)
APPAREL
7,931 London Fog Industries, Inc.
(IDENTIFIED COST $1,722,237)........................................................ 02/27/05 96,000
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE
- --------- ------------- --------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENTS (10.7%)
COMMERCIAL PAPER (g) (9.2%)
AUTOMOTIVE - FINANCE (3.9%)
$ 23,000 Ford Motor Credit Co................................................... 5.55% 10/01/98 23,000,000
21,000 Ford Motor Credit Co................................................... 5.30 10/06/98 20,984,542
22,000 Ford Motor Credit Co. (h).............................................. 5.51 10/16/98 21,949,492
12,000 General Motors Acceptance Corp......................................... 5.56 10/02/98 11,998,146
--------------
77,932,180
--------------
ENERGY (2.7%)
54,000 Texaco, Inc. (h)....................................................... 5.50 10/19/98 53,851,500
--------------
FINANCE - COMMERCIAL (0.8%)
16,000 C I T Group Holdings Inc............................................... 5.40 10/05/98 15,990,400
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
47
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MAJOR CHEMICALS (1.8%)
$ 10,000 Dupont (E.I.) De Nemours & Co.......................................... 5.30% 10/07/98 $ 9,991,167
26,000 Dupont (E.I.) De Nemours & Co.......................................... 5.51 10/09/98 25,968,164
--------------
35,959,331
--------------
TOTAL COMMERCIAL PAPER
(AMORTIZED COST $183,733,411)................................................................... 183,733,411
--------------
REPURCHASE AGREEMENT (1.5%)
29,271 The Bank of New York (dated 09/30/98; proceeds $29,275,403) (i)
(IDENTIFIED COST $29,271,337)........................................ 5.00 10/01/98 29,271,337
--------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $213,004,748).................................................................. 213,004,748
--------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $1,981,943,805) (J).................................................... 99.2% 1,980,927,647
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES.......................................... 0.8 15,781,781
------ --------------
NET ASSETS.............................................................................. 100.0% $1,996,709,428
------ --------------
------ --------------
</TABLE>
- ---------------------
(a) Valued using fair value procedures - total aggregate value is
$1,767,922,899.
(b) Floating rate securities. Interest rates shown are those in effect at
September 30, 1998.
(c) Senior notes.
(d) Participation interests were acquired through the financial institutions
indicated parenthetically.
(e) Non-income producing security; loan in default.
(f) Non-income producing securities.
(g) Securities were purchased on a discount basis. The interest rates shown
have been adjusted to reflect a money market equivalent yield.
(h) All of these securities are segregated in connection with unfunded loan
commitments.
(i) Collateralized by $26,807,417 U.S. Treasury Note 5.625% due 05/15/08 valued
at $29,856,764.
(j) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $1,215,873 and the
aggregate gross unrealized depreciation is $2,232,031, resulting in net
unrealized depreciation of $1,016,158.
SEE NOTES TO FINANCIAL STATEMENTS
48
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1998
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $1,981,943,805).......................... $1,980,927,647
Cash........................................................ 1,446,951
Receivable for:
Interest................................................ 13,059,776
Shares of beneficial interest sold...................... 8,947,291
Prepaid expenses and other assets........................... 211,311
--------------
TOTAL ASSETS........................................... 2,004,592,976
--------------
LIABILITIES:
Payable for:
Investment advisory fee................................. 1,396,769
Dividends to shareholders............................... 759,415
Administration fee...................................... 407,696
Accrued expenses and other payables......................... 534,953
Deferred loan fees.......................................... 4,784,715
Commitments and contingencies (Note 7)...................... --
--------------
TOTAL LIABILITIES...................................... 7,883,548
--------------
NET ASSETS............................................. $1,996,709,428
==============
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................. $2,008,631,657
Net unrealized depreciation................................. (1,016,158)
Dividends in excess of net investment income................ (552,409)
Accumulated net realized loss............................... (10,353,662)
--------------
NET ASSETS............................................. $1,996,709,428
==============
NET ASSET VALUE PER SHARE,
201,526,077 SHARES OUTSTANDING
(UNLIMITED SHARES AUTHORIZED OF $.01 PAR VALUE)........... $9.91
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
49
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1998
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Interest.................................................... $136,371,569
Facility, amendment and other loan fees..................... 4,748,863
Other income................................................ 464,840
------------
TOTAL INCOME........................................... 141,585,272
------------
EXPENSES
Investment advisory fee..................................... 14,434,352
Administration fee.......................................... 4,183,528
Transfer agent fees and expenses............................ 803,950
Professional fees........................................... 771,174
Facility fees............................................... 443,003
Registration fees........................................... 410,136
Shareholder reports and notices............................. 289,200
Custodian fees.............................................. 100,267
Trustees' fees and expenses................................. 19,434
Other....................................................... 176,760
------------
TOTAL EXPENSES......................................... 21,631,804
------------
NET INVESTMENT INCOME.................................. 119,953,468
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss........................................... (10,227,863)
Net change in unrealized depreciation....................... 2,829,220
------------
NET LOSS............................................... (7,398,643)
------------
NET INCREASE................................................ $112,554,825
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
50
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
- ---------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income......................... $ 119,953,468 $ 86,249,515
Net realized gain (loss)...................... (10,227,863) 3,073,930
Net change in unrealized depreciation......... 2,829,220 (3,410,252)
-------------- --------------
NET INCREASE............................. 112,554,825 85,913,193
Dividends from net investment income.......... (120,722,134) (84,598,513)
Net increase from transactions in shares of
beneficial interest......................... 660,273,515 403,817,997
-------------- --------------
NET INCREASE............................. 652,106,206 405,132,677
NET ASSETS:
Beginning of period........................... 1,344,603,222 939,470,545
-------------- --------------
END OF PERIOD
(INCLUDING DIVIDENDS IN EXCESS OF NET
INVESTMENT INCOME OF $552,409 AND
UNDISTRIBUTED NET INVESTMENT INCOME OF
$526,876, RESPECTIVELY)................... $1,996,709,428 $1,344,603,222
============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
51
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1998
<TABLE>
<S> <C>
INCREASE (DECREASE) IN CASH:
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net investment income.................................. $ 119,953,468
Adjustments to reconcile net investment income to net
cash provided by operating activities:
Increase in receivables and other assets related to
operations............................................ (5,071,990)
Increase in payables related to operations............. 754,088
Net loan fees received................................. 5,158,117
Amortization of loan fees.............................. (4,748,863)
Accretion of discounts................................. 779,503
---------------
NET CASH PROVIDED BY OPERATING ACTIVITIES......... 116,824,323
---------------
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Purchases of investments............................... (1,615,617,814)
Principal repayments/sales of investments.............. 981,437,783
Net purchases of short-term investments................ (27,417,522)
---------------
NET CASH USED FOR INVESTING ACTIVITIES............ (661,597,553)
---------------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Shares of beneficial interest sold..................... 731,134,981
Shares tendered........................................ (130,137,075)
Dividends from net investment income (net of reinvested
dividends of $54,381,913)............................. (66,805,964)
---------------
NET CASH PROVIDED BY FINANCING ACTIVITIES......... 534,191,942
---------------
NET DECREASE IN CASH................................... (10,581,288)
CASH BALANCE AT BEGINNING OF YEAR...................... 12,028,239
---------------
CASH BALANCE AT END OF YEAR............................ $ 1,446,951
===============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
52
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1998
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Prime Income Trust (the "Trust"), formerly Prime
Income Trust, is registered under the Investment Company Act of 1940, as
amended, as a non-diversified, closed-end management investment company. The
Trust's investment objective is to provide a high level of current income
consistent with the preservation of capital. The Trust was organized as a
Massachusetts business trust on August 17, 1989 and commenced operations on
November 30, 1989.
The Trust offers and sells its shares to the public on a continuous basis. The
Trustees intend, each quarter, to consider authorizing the Trust to make tender
offers for all or a portion of its outstanding shares of beneficial interest at
the then current net asset value of such shares.
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) The Trustees believe that, at present, there
are not sufficient market quotations provided by banks, dealers or pricing
services respecting interests in senior collateralized loans ("Senior Loans") to
corporations, partnerships and other entities ("Borrower") to enable the Trust
to properly value Senior Loans based on available market quotations.
Accordingly, until the market for Senior Loans develops, interests in Senior
Loans held by the Trust are valued at their fair value in accordance with
procedures established in good faith by the Trustees. Under the procedures,
adopted by the Trustees, interests in Senior Loans are priced using a matrix
which takes into account the relationship between current interest rates and
interest rates payable on each Senior Loan, as well as the total number of days
in each interest period and the period remaining until the next interest rate
determination or maturity of the Senior Loan. Adjustments in the matrix-
determined price of a Senior Loan will be made in the event of a default on a
Senior Loan or a significant change in the creditworthiness of the Borrower. The
fair values determined in accordance with these procedures may differ
significantly from the market values that would have been used had a ready
market for the Senior Loans existed; (2) portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest bid price; (3) all other securities and other assets are valued at their
fair value as determined in good faith under procedures established by and under
the general supervision of the Trustees; and (4) 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
53
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1998, CONTINUED
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.
Interest income is accrued daily except where collection is not expected. When
the Trust buys an interest in a Senior Loan, it may receive a facility fee,
which is a fee paid to lenders upon origination of a Senior Loan and/or a
commitment fee which is paid to lenders on an ongoing basis based upon the
undrawn portion committed by the lenders of the underlying Senior Loan. The
Trust amortizes the facility fee and accrues the commitment fee over the
expected term of the loan. When the Trust sells an interest in a Senior Loan, it
may be required to pay fees or commissions to the purchaser of the interest.
Fees received in connection with loan amendments are amortized over the expected
term of the loan.
C. SENIOR LOANS -- The Trust invests primarily in Senior Loans to Borrowers.
Senior Loans are typically structured by a syndicate of lenders ("Lenders"), one
or more of which administers the Senior Loan on behalf of the Lenders ("Agent").
Lenders may sell interests in Senior Loans to third parties ("Participations")
or may assign all or a portion of their interest in a Senior Loan to third
parties ("Assignments"). Senior Loans are exempt from registration under the
Securities Act of 1933. Presently, Senior Loans are not readily marketable and
are often subject to restrictions on resale.
Some of the Trust's Senior Loans are "Revolver Loans." For these loans, the
Trust commits to provide funding up to the face amount of the loan. The amount
drawn down by the borrower may vary during the term of the loan.
D. FEDERAL INCOME TAX STATUS -- It is the Trust'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 Trust records dividends
and distributions to its shareholders on the record date. The amount 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
54
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1998, CONTINUED
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.
2. INVESTMENT ADVISORY AGREEMENT
Pursuant to an Investment Advisory Agreement with Morgan Stanley Dean Witter
Advisors Inc. (the "Investment Advisor"), formerly Dean Witter InterCapital
Inc., the Trust pays an advisory fee, accrued daily and payable monthly, by
applying the following annual rates to the net assets of the Trust determined as
of the close of each business day: 0.90% to the portion of the daily net assets
not exceeding $500 million and 0.85% to the portion of the daily net assets
exceeding $500 million. Effective May 1, 1998, the Agreement was amended to
reduce the annual fee to 0.825% of the portion of daily net assets exceeding
$1.5 billion.
Under the terms of the Agreement, in addition to managing the Trust's
investments, the Investment Advisor pays the salaries of all personnel,
including officers of the Trust, who are employees of the Investment Advisor.
3. ADMINISTRATION AGREEMENT
Pursuant to an Administration Agreement with Morgan Stanley Dean Witter Services
Company Inc. (the "Administrator"), an affiliate of the Investment Advisor, the
Trust pays an administration fee, calculated daily and payable monthly, by
applying the annual rate of 0.25% to the Trust's daily net assets.
Under the terms of the Administration Agreement, the Administrator maintains
certain of the Trust's books and records and furnishes, at its own expense,
office space, facilities, equipment, clerical, bookkeeping and certain legal
services and pays the salaries of all personnel, including officers of the Trust
who are employees of the Administrator. The Administrator also bears the cost of
telephone services, heat, light, power and other utilities provided to the
Trust.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales/principal repayments of portfolio
securities, excluding short-term investments, for the year ended September 30,
1998 aggregated $1,615,617,814 and $981,192,947, respectively.
55
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1998, CONTINUED
Shares of the Trust are distributed by Morgan Stanley Dean Witter Distributors
Inc. (the "Distributor"), an affiliate of the Investment Advisor and
Administrator. Pursuant to a Distribution Agreement between the Trust, the
Investment Advisor and the Distributor, the Investment Advisor compensates the
Distributor at an annual rate of 2.75% of the purchase price of shares purchased
from the Trust. The Investment Advisor will compensate the Distributor at an
annual rate of 0.10% of the value of shares sold for any shares that remain
outstanding after one year from the date of their initial purchase. Any early
withdrawal charge to defray distribution expenses will be charged to the
shareholder in connection with shares held for four years or less which are
accepted by the Trust for repurchase pursuant to tender offers. For the year
ended September 30, 1998, the Investment Advisor has informed the Trust that it
received approximately $2,085,000 in early withdrawal charges.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Advisor and
Administrator, is the Trust's transfer agent. At September 30, 1998, the Trust
had transfer agent fees and expenses payable of approximately $7,200.
The Trust has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Trust who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the year ended September 30, 1998
included in Trustees' fees and expenses in the Statement of Operations amounted
to $5,577. At September 30, 1998, the Trust had an accrued pension liability of
$50,637 which is included in accrued expenses in the Statement of Assets and
Liabilities.
5. FEDERAL INCOME TAX STATUS
During the year ended September 30, 1998, the Trust utilized approximately
$49,000 of its net capital loss carryover. At September 30, 1998, the Trust had
a net capital loss carryover of approximately $62,000 available through
September 30, 2004 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
Trust's next taxable year. The Trust incurred and will elect to defer net
capital losses of approximately $10,246,000 during fiscal 1998.
As of September 30, 1998, the Trust had temporary book/tax differences primarily
attributable to post-October losses and permanent book/tax differences
attributable to tax adjustments on revolver
56
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1998, CONTINUED
loans sold by the Trust. To reflect reclassifications arising from the permanent
differences, dividends in excess of net investment income was charged and
accumulated net realized loss was credited $310,619.
6. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
----------- --------------
<S> <C> <C>
Balance, September 30, 1996...................................... 94,535,310 $ 944,540,145
Shares sold...................................................... 45,281,310 450,176,134
Shares issued to shareholders for reinvestment of dividends...... 3,988,872 39,655,716
Shares tendered (four quarterly tender offers)................... (8,650,509) (86,013,853)
---------- -------------
Balance, September 30, 1997...................................... 135,154,983 1,348,358,142
Shares sold...................................................... 73,974,045 735,805,027
Shares issued to shareholders for reinvestment of dividends...... 5,468,432 54,381,913
Shares tendered (four quarterly tender offers)................... (13,071,383) (129,913,425)
---------- -------------
Balance, September 30, 1998...................................... 201,526,077 $2,008,631,657
========== =============
</TABLE>
On October 28, 1998, the Trustees approved a tender offer to purchase up to
10 million shares of beneficial interest to commence on November 18, 1998.
57
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1998, CONTINUED
7. COMMITMENTS AND CONTINGENCIES
As of September 30, 1998, the Trust had unfunded loan commitments pursuant to
the following loan agreements:
<TABLE>
<CAPTION>
UNFUNDED
BORROWER COMMITMENT
- ----------------------------------------------------------------- --------------
<S> <C>
Alliance Imaging, Inc............................................ $ 4,588,235
Arena Brands, Inc................................................ 1,482,167
Chancellor Media Corp............................................ 4,312,000
Corning Consumer Products Inc.................................... 690,909
Crown Paper Co................................................... 3,598,874
Dade International, Inc.......................................... 645,289
E & S Holdings Corp.............................................. 3,007,059
Fairchild Holding Corp........................................... 3,750,000
Graham Packaging Co.............................................. 3,857,143
Jet Plastica Industries, Inc..................................... 1,945,946
Mafco Finance Corp............................................... 8,347,500
MJD Communications, Inc.......................................... 9,006,333
Specialty Foods Corp............................................. 6,392,694
Supercanal Holdings S.A.......................................... 8,651,408
Teligent Inc..................................................... 10,000,000
The Stroh Brewery Co............................................. 1,245,000
U.S. Silica Co. (Acquistion)..................................... 1,500,000
U.S. Silica Co. (Working Capital)................................ 1,500,000
-------------
$ 74,520,557
=============
</TABLE>
The total value of securities segregated for unfunded loan commitments were
$75,800,992.
58
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE
PERIOD
NOVEMBER
30, 1989*
FOR THE YEAR ENDED SEPTEMBER 30, THROUGH
----------------------------------------------------------------------------------------- SEPTEMBER
1998 1997 1996 1995 1994 1993 1992 1991 30, 1990
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE
OPERATING PERFORMANCE:
Net asset value,
beginning of
period.......... $ 9.95 $ 9.94 $ 9.99 $ 10.00 $ 9.91 $ 9.99 $ 10.00 $ 10.00 $ 10.00
--------- -------- -------- --------- -------- -------- --------- -------- ---------
Net investment
income.......... 0.71 0.75 0.74 0.82 0.62 0.55 0.62 0.84 0.74
Net realized and
unrealized gain
(loss).......... (0.03) -- (0.04) 0.01 0.09 (0.08) (0.01) -- (0.01)
--------- -------- -------- --------- -------- -------- --------- -------- ---------
Total from
investment
operations...... 0.68 0.75 0.70 0.83 0.71 0.47 0.61 0.84 0.73
--------- -------- -------- --------- -------- -------- --------- -------- ---------
Less dividends
and
distributions
from:
Net investment
income........ (0.72) (0.74) (0.75) (0.81) (0.62) (0.55) (0.62) (0.84) (0.73)
Net realized
gain.......... -- -- -- (0.03) -- -- -- -- --
--------- -------- -------- --------- -------- -------- --------- -------- ---------
Total dividends
and
distributions... (0.72) (0.74) (0.75) (0.84) (0.62) (0.55) (0.62) (0.84) (0.73)
--------- -------- -------- --------- -------- -------- --------- -------- ---------
Net asset value,
end of period... $ 9.91 $ 9.95 $ 9.94 $ 9.99 $ 10.00 $ 9.91 $ 9.99 $ 10.00 $ 10.00
========= ======== ======== ========= ======== ======== ========= ======== =========
TOTAL INVESTMENT
RETURN+.......... 7.14% 7.78% 7.25% 8.57% 7.32% 4.85% 6.23% 8.77% 7.57%(1)
RATIOS TO AVERAGE
NET ASSETS:
Expenses......... 1.29% 1.40% 1.46% 1.52% 1.60% 1.45% 1.47% 1.52% 1.48%(2)
Net investment
income.......... 7.17% 7.53% 7.50% 8.11% 6.14% 5.53% 6.14% 8.23% 8.95%(2)
SUPPLEMENTAL DATA:
Net assets, end
of period, in
thousands....... $1,996,709 $1,344,603 $939,471 $521,361 $305,034 $311,479 $413,497 $479,941 $328,189
Portfolio
turnover rate... 68% 86% 72% 102% 147% 92% 46% 42% 35%(1)
</TABLE>
- ---------------------
* Commencement of operations.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period. Dividends and
distributions are assumed to be reinvested at the prices obtained under the
Trust's dividend reinvestment plan.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
59
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations, of
changes in net assets and of cash flows and the financial highlights present
fairly, in all material respects, the financial position of Morgan Stanley Dean
Witter Prime Income Trust (the "Trust"), formerly Prime Income Trust, at
September 30, 1998, the results of its operations and its cash flows for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the eight years in
the period then ended and for the period November 30, 1989 (commencement of
operations) through September 30, 1990, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Trust's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at September 30, 1998 by correspondence with the
custodian and, with respect to senior collateralized loans, the selling
participants and agent banks, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
NOVEMBER 2, 1998
60
<PAGE>
EXHIBIT (a)(1)(iii)
FORM OF LETTER TO SHAREHOLDERS WHO HAVE
REQUESTED OFFER TO PURCHASE
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
Dear Shareholder:
As you requested, we are enclosing a copy of the Morgan Stanley Dean Witter
Prime Income Trust (the "Trust") Offer to Purchase 12,000,000 of its issued and
outstanding common shares of beneficial interest (the "Common Shares") and the
related Letter of Transmittal (which together constitute the "Offer"). The Offer
is for cash at the net asset value ("NAV") per Common Share computed as of
4:00 P.M. New York City time on the expiration date of the Offer. The expiration
date is 12:00, midnight, New York City time on December 17, 1999, unless
extended as stated in the Offer. An "Early Withdrawal Charge" will be imposed on
most Common Shares accepted for payment that have been held for four years or
less. Please read carefully the enclosed documents, which include the Trust's
most recent financial statements.
If after reviewing the information set forth in the Offer, you wish to
tender Common Shares for purchase by the Trust, and you have a brokerage account
at Dean Witter Reynolds Inc. and your Common Shares are not evidenced by
certificates in your possession you may, if you wish, contact your Morgan
Stanley Dean Witter Financial Advisor and request that he or she tender your
Common Shares on your behalf. In such event you are not required to complete the
enclosed Letter of Transmittal.
If you do not have a brokerage account at Dean Witter Reynolds Inc. and wish
to tender Common Shares or do not wish to tender Common Shares through your
Morgan Stanley Dean Witter Financial Advisor at Dean Witter Reynolds Inc. or
your Common Shares are evidenced by certificates in your possession, please
follow the instructions contained in the Offer to Purchase and Letter of
Transmittal.
Neither the Trust nor the Board of Trustees is making any recommendations to
any holder of Common Shares as to whether to tender Common Shares. Each
shareholder is urged to consult his or her Financial Advisor or tax professional
before deciding whether to tender any Common Shares.
The Trust's NAV per Share on November 5, 1999 was $9.84. You can obtain
current NAV quotations from Dean Witter Reynolds Inc. by calling (800) 869-NEWS
extension 0. The Trust offers and sells its Common Shares to the public on a
continuous basis. The Trust is not aware of any secondary market trading for the
Common Shares.
Should you have any questions on the enclosed material, please do not
hesitate to call Dean Witter Reynolds Inc. at (800) 869-NEWS extension 0 during
ordinary business hours. We appreciate your continued interest in Morgan Stanley
Dean Witter Prime Income Trust.
Sincerely,
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
Two World Trade Center
New York, NY 10048
Telephone (212) 392-1600
<PAGE>
EXHIBIT (a)(2)
FORM OF LETTER OF TRANSMITTAL
<PAGE>
LETTER OF TRANSMITTAL
REGARDING COMMON SHARES
OF
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
TENDERED PURSUANT TO THE OFFER TO PURCHASE
DATED NOVEMBER 17, 1999
- -----------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT NEW YORK CITY
TIME ON FRIDAY, DECEMBER 17, 1999, UNLESS THE OFFER IS EXTENDED
- -----------------------------------------------------------------------------
TO THE DEPOSITARY:
MORGAN STANLEY DEAN WITTER TRUST FSB
<TABLE>
<S> <C>
BY MAIL: BY HAND DELIVERY OR COURIER:
Morgan Stanley Dean Witter Morgan Stanley Dean Witter
Trust FSB Trust FSB
P.O. Box 984 Harborside Financial Center
Jersey City, New Jersey 07303 Plaza Two
Jersey City, New Jersey 07311
Attn: Morgan Stanley Dean Witter
Prime Income Trust
</TABLE>
FOR DELIVERY INFORMATION CALL:
(800) 869-NEWS extension 0
<TABLE>
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF COMMON SHARES TENDERED (SEE INSTRUCTIONS 3 AND 4)
- ----------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED
OWNER(S) (PLEASE FILL IN EXACTLY THE
NAME(S) IN WHICH COMMON SHARES ARE COMMON SHARES TENDERED
REGISTERED) (ATTACH ADDITIONAL SCHEDULE IF NECESSARY)
- ----------------------------------------------------------------------------------------------------------------------
NO. OF COMMON
CERTIFICATE NO.(S)* NO. OF COMMON SHARES* SHARES TENDERED**
--------------------------- ------------------------ -------------------
--------------------------- ------------------------ -------------------
--------------------------- ------------------------ -------------------
--------------------------- ------------------------ -------------------
Total Common Shares
Account No. Tendered
- ----------------------------------------------------------------------------------------------------------------------
* If Common Shares are not evidenced by certificates please write "None."
** To be completed by all tendering shareholders, whether or not your Common Shares are evidenced by certificates. If
you desire to tender fewer than all Common Shares held in your account or evidenced by a certificate listed above,
please indicate in this column the number you wish to tender. Otherwise all Common Shares evidenced by such
certificate or held in your account will be deemed to have been tendered.
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
IMPORTANT
- -----------------------------------------------------------------------------
YOU SHOULD NOT COMPLETE THE LETTER OF TRANSMITTAL IF YOU ARE TENDERING
COMMON SHARES THROUGH YOUR MORGAN STANLEY DEAN WITTER FINANCIAL ADVISOR.
- -----------------------------------------------------------------------------
DELIVERY TO AN ADDRESS OTHER THAN THAT SHOWN ABOVE DOES NOT CONSTITUTE VALID
DELIVERY.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Gentlemen:
The undersigned hereby tenders to the Morgan Stanley Dean Witter Prime
Income Trust, a non-diversified, closed-end management investment company
organized as a Massachusetts business trust (the "Trust") under the former name
"Allstate Prime Income Trust," the above-described common shares of beneficial
interest, par value $.01 per share, of the Trust (the "Common Shares"), at a
price (the "Purchase Price") equal to the net asset value per Common Share
("NAV") computed as of 4:00 P.M. New York City time on the Expiration Date (as
defined in the Offer to Purchase) in cash, upon the terms and conditions set
forth in the Offer to Purchase, dated November 17, 1999, receipt of which is
hereby acknowledged, and in this Letter of Transmittal (which together
constitute the "Offer"). An Early Withdrawal Charge (as defined in the Offer to
Purchase) will be imposed on most Common Shares accepted for payment which have
been held for four years or less.
Subject to and effective upon acceptance for payment of the Common Shares
tendered hereby in accordance with the terms of the Offer (including, if the
Offer is extended or amended, the terms or conditions of any such extension or
<PAGE>
amendment), the undersigned hereby sells, assigns and transfers to or upon the
order of the Trust all right, title and interest in and to all Common Shares
tendered hereby that are purchased pursuant to the Offer and hereby irrevocably
constitutes and appoints Morgan Stanley Dean Witter Trust FSB (the "Depositary")
as attorney-in-fact of the undersigned with respect to such Common Shares, with
full power of substitution (such power of attorney being deemed to be an
irrevocable power coupled with an interest), to (a) deliver certificates for
such Common Shares or transfer ownership of such Common Shares on the Trust's
books, together in either such case with all accompanying evidences of transfer
and authenticity, to or upon the order of the Trust, upon receipt by the
Depositary, as the undersigned's agent, of the NAV per Common Share with respect
to such Common Shares; (b) present certificates for such Common Shares, if any,
for cancellation and transfer on the Trust's books; (c) deduct from the Purchase
Price deposited with the Depositary the applicable Early Withdrawal Charge and
remit such charge to Morgan Stanley Dean Witter Advisors Inc., and (d) receive
all benefits and otherwise exercise all rights of beneficial ownership of such
Common Shares, subject to the next paragraph, all in accordance with the terms
of the Offer.
The undersigned hereby represents and warrants that: (a) the undersigned
"owns" the Common Shares tendered hereby within the meaning of Rule 10b-4
promulgated under the Securities Exchange Act of 1934, as amended, and has full
power and authority to validly tender, sell, assign and transfer the Common
Shares tendered hereby; (b) when and to the extent the Trust accepts the Common
Shares for purchase, the Trust will acquire good, marketable and unencumbered
title to them, free and clear of all security interests, liens, charges,
encumbrances, conditional sales agreements or other obligations relating to
their sale or transfer, and not subject to any adverse claim; (c) on request,
the undersigned will execute and deliver any additional documents the Depositary
or the Trust deems necessary or desirable to complete the assignment, transfer
and purchase of the Common Shares tendered hereby; and (d) the undersigned has
read and agrees to all of the terms of the Offer.
The names and addresses of the registered owners should be printed, if they
are not already printed above, as they appear on the registration of the Common
Shares. The certificate numbers, if any, and the number of Common Shares that
the undersigned wishes to tender should be indicated in the appropriate boxes.
The undersigned recognizes that under certain circumstances set forth in the
Offer to Purchase, the Trust may terminate or amend the Offer or may not be
required to purchase any of the Common Shares tendered hereby. In any such
event, the undersigned understands that certificate(s) for any Common Shares not
purchased, if any, will be returned to the undersigned at the address indicated
above unless otherwise indicated under the Special Payment Instructions or
Special Delivery Instructions below. The undersigned recognizes that the Trust
has no obligation, pursuant to the Special Payment Instructions, to transfer any
Common Shares from the name of the registered owner thereof if the Trust
purchases none of such Common Shares.
The undersigned understands that acceptance of Common Shares by the Trust
for payment will constitute a binding agreement between the undersigned and the
Trust upon the terms and subject to the conditions of the Offer.
The check for the Purchase Price of the tendered Common Shares purchased,
minus any applicable Early Withdrawal Charge, will be issued to the order of the
undersigned and mailed to the address indicated above unless otherwise indicated
under the Special Payment Instructions or the Special Delivery Instructions
below. Shareholders tendering Common Shares shall be entitled to receive all
dividends declared on or before the Expiration Date, but not yet paid, on Common
Shares tendered pursuant to the Offer. The Trust will not pay interest on the
Purchase Price under any circumstances.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and all obligations of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Except as stated in the Offer, this tender is
irrevocable.
<TABLE>
<S> <C>
- ------------------------------------------------ ------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 4, 5, 6 and 7) (See Instructions 4 and 7)
To be completed ONLY if certificates for Common To be completed ONLY if certificates for Common
Shares not tendered or not purchased and/or any Shares not tendered or not purchased and/or any
checks are to be issued in the name of or sent to checks issued in the name of the undersigned are
someone other than the undersigned. to be sent to someone other than the undersigned
or to the undersigned at an address other than
that shown above.
Issue: / / check Mail: / / check
/ / certificates to: / / certificates to:
Name(s) Name(s)
- --------------------------------------------- ---------------------------------------------
(Please Print) (Please Print)
Address ------------------------------------------ Address ------------------------------------------
- -------------------------------------------------- --------------------------------------------------
(Include Zip Code) (Include Zip Code)
- -------------------------------------------------- --------------------------------------------------
(Taxpayer Identification or (Tax Identification or
Social Security Number(s)) Social Security Number(s))
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------
SHAREHOLDER(S) SIGN HERE
(See Instructions 1 and 5)
(Please see Substitute Form W-9 on Reverse Side)
Must be signed by registered owner(s) exactly as registered or by person(s) authorized to
become registered owner(s) by documents transmitted with the Letter of Transmittal. If
signature is by attorney-in-fact, executor, administrator, trustee, guardian, officer of a
corporation or another acting in a fiduciary or representative capacity, please set forth
the full title. See Instruction 5.
----------------------------------------------------------------------
----------------------------------------------------------------------
(SIGNATURE(S) OF OWNER(S) EXACTLY AS REGISTERED)
Dated _______________________________________________________ , 19____
Name(s)_______________________________________________________________
----------------------------------------------------------------------
(PLEASE PRINT)
----------------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER(S))
Area Code and Daytime Telephone Number ( ) _________________________
GUARANTEE OF SIGNATURE(S)
(See Instructions 1 and 5)
Authorized Signature ---------------------------------------------
Name ------------------------------------------------------------
(PLEASE PRINT)
Title -------------------------------------------------------------
Name of Firm ----------------------------------------------------
Address ----------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
(INCLUDE ZIP CODE)
----------------------------------------------------------------------
Area Code and Telephone Number _______________________________________
Dated ______________________________________________________ , 19_____
</TABLE>
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. If the Letter of Transmittal is signed by the
registered owner of the Common Shares, the payment of the Purchase Price is to
be sent to the registered owner of the Common Shares and to the address shown in
the Common Share registration, unless such owner has completed the box entitled
either "Special Payment Instructions" or "Special Delivery Instructions" above,
no signature guarantee is required. In all other cases, all signatures on this
Letter of Transmittal must be guaranteed by an eligible guarantor acceptable to
the Depositary (an "Eligible Guarantor") (shareholders should contact the
Depositary for a determination as to whether a particular institution is an
Eligible Guarantor).
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of
Transmittal is to be used only if you do not have a brokerage account at DWR or
you desire to effect the tender offer transaction yourself. A properly completed
and duly executed Letter of Transmittal or manually signed facsimile of it, any
certificates representing Common Shares tendered and any other documents
required by this Letter of Transmittal should be mailed or delivered to the
Depositary at the appropriate address set forth herein and must be received by
the Depositary on or prior to the Expiration Date (as defined in the Offer to
Purchase).
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES FOR COMMON
SHARES, IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. IF DELIVERY IS
BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED.
The Trust will not accept any alternative, conditional or contingent
tenders. All tendering shareholders, by execution of this Letter of Transmittal
(or a manually signed facsimile of it), waive any right to receive any notice of
the acceptance of their tender.
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Common Shares Tendered" is inadequate, the certificate numbers,
if any, and number of Common Shares should be listed on a separate signed
schedule attached hereto.
4. PARTIAL TENDERS AND UNPURCHASED SHARES. If fewer than all of the Common
Shares evidenced by any certificate submitted are to be tendered, fill in the
number of Common Shares which are to be tendered in the column entitled "No. of
Common Shares Tendered." In such case, if any tendered Common Shares are
purchased, a new certificate for the remainder of the Common Shares evidenced by
your old certificate(s) will be issued and sent to the registered owner, unless
otherwise specified in the "Special Payment Instructions" or "Special Delivery
Instructions" boxes on this Letter of Transmittal, as soon as practicable after
the Expiration Date of the Offer. All Common Shares represented by certificates
listed and delivered to the Depositary are deemed to have been tendered unless
otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, AUTHORIZATIONS AND ENDORSEMENTS.
(a) If this Letter of Transmittal is signed by the registered owner(s) of
the Common Shares tendered hereby, the signature(s) must correspond exactly with
the name(s) in which the Common Shares are registered.
(b) If the Common Shares are held of record by two or more joint owners,
each such owner must sign this Letter of Transmittal.
(c) If any tendered Common Shares are registered in different names, it will
be necessary to complete, sign and submit as many separate Letters of
Transmittal (or manually signed facsimiles of it) as there are different
registrations of Common Shares.
(d) When this Letter of Transmittal is signed by the registered owner(s) of
the Common Shares listed and transmitted hereby, no endorsements of any
certificate(s) representing such Common Shares or separate authorizations are
required. If, however, payment is to be made to a person other than the
registered owner(s) or any certificates for unpurchased Common Shares are to be
issued to a person other than the registered owner(s), then the Letter of
Transmittal and, if applicable, the certificate(s) transmitted hereby, must be
endorsed or accompanied by appropriate authorizations, in either case signed
exactly as such name(s) appear on the registration of the Common Shares and on
the face of the certificate(s) and such endorsements or authorizations must be
guaranteed by an Eligible Guarantor. See Instruction 1.
(e) If this Letter of Transmittal or any certificates or authorizations are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and must submit proper
evidence satisfactory to the Trust of their authority so to act.
6. TRANSFER TAXES. The Trust will pay all share transfer taxes, if any,
payable on the transfer to it of Common Shares purchased pursuant to the Offer.
If, however, (a) payment of the Purchase Price is to be made to any person other
than the registered owner(s), (b) (in the circumstances permitted by the Offer)
unpurchased Common Shares are to be registered in the name(s) of any person
other than the registered owner(s) or (c) tendered certificates are registered
in the name(s) of any person other than the person(s) signing this Letter of
Transmittal, the amount of any transfer taxes (whether imposed on the registered
owner(s) or such other persons) payable on account of the transfer to such
person(s) will be deducted from the Purchase Price by the Depositary unless
satisfactory evidence of the payment of such taxes, or exemption therefrom, is
submitted.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If certificates for
unpurchased Common Shares and/or checks are to be issued in the name of a person
other than the signer of this Letter of Transmittal or if such certificates
and/or checks are to be sent to someone other than the signer of this Letter of
Transmittal or to the signer at a different address, the captioned boxes
"Special Payment Instructions" and/or "Special Delivery Instructions" on this
Letter of Transmittal should be completed.
8. IRREGULARITIES. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance of any tender of Common Shares will
be determined by the Trust in its sole discretion, whose determination shall be
final and binding on all parties. The Trust reserves the absolute right to
reject any or all tenders determined by it not to be in appropriate form or the
acceptance of or payment for any Common Shares which may, in the opinion of the
Trust's counsel be unlawful. The Trust also reserves the absolute right to waive
any of the conditions of the Offer or any defect or irregularity in
<PAGE>
tender of any particular Common Shares or any particular shareholder, and the
Trust's interpretations of the terms and conditions of the Offer (including
these instructions) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders must be cured within such
time as the Trust shall determine. Tendered Common Shares will not be accepted
for payment unless all defects and irregularities have either been cured within
such time or waived by the Trust. None of the Trust, Dean Witter Reynolds Inc.,
the Depositary, or any other person shall be obligated to give notice of defects
or irregularities in tenders, nor shall any of them incur any liability for
failure to give any such notice.
9. QUESTIONS AND REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions
and requests for assistance may be directed to Morgan Stanley Dean Witter
Advisors Inc., Two World Trade Center, New York, N.Y. 10048, or by telephone
(800) 869-NEWS extension 61. Additional copies of the Offer to Purchase and this
Letter of Transmittal may be obtained from Morgan Stanley Dean Witter Trust FSB,
(by mail) P.O. Box 984, Jersey City, New Jersey 07303 or (by hand delivery or
courier) Harborside Financial Center, Plaza Two, Jersey City, New Jersey 07311
or by telephone (800) 869-NEWS extension 0.
10. SUBSTITUTE FORM W-9. Each tendering shareholder who has not already
submitted a completed and signed Substitute Form W-9 to the Trust is required to
provide the Depositary with a correct taxpayer identification number ("TIN") on
Substitute Form W-9 which is provided under "Important Tax Information" below,
and to indicate that the shareholder is not subject to backup withholding by
checking the box in Part 2 of the form. Failure to provide the information on
the form or to check the box in Part 2 of the form may subject the tendering
shareholder to 31% federal income tax withholding on the payments made to the
shareholder or other payee with respect to Common Shares purchased pursuant to
the Offer. The box in Part 3 of the Form may be checked if the tendering
shareholder has not been issued a TIN and has applied for a TIN or intends to
apply for a TIN in the near future. If the box in Part 3 is checked and the
Depositary is not provided with a TIN within sixty (60) days, the Depositary
will withhold 31% on all such payments thereafter until a TIN is provided to the
Depositary.
11. WITHHOLDING ON FOREIGN SHAREHOLDERS. The Depositary will withhold
federal income taxes equal to 30% of the gross payments payable to a foreign
shareholder unless the Depositary determines that a reduced rate of withholding
or an exemption from withholding is applicable. For this purpose, a foreign
shareholder is any shareholder that is not (i) a citizen or resident of the
United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or any political subdivision
thereof, or (iii) any estate or trust the income of which is subject to United
States federal income taxation regardless of the source of such income. The
Depositary will determine a shareholder's status as a foreign shareholder and
eligibility for a reduced rate of, or an exemption from, withholding by
reference to the shareholder's address and to any outstanding certificates or
statements concerning eligibility for a reduced rate of, or exemption from,
withholding unless facts and circumstances indicate that reliance is not
warranted. A foreign shareholder who has not previously submitted the
appropriate certificates or statements with respect to a reduced rate of, or an
exemption from, withholding for which such shareholder may be eligible should
consider doing so in order to avoid overwithholding. A foreign shareholder may
be eligible to obtain a refund of tax withheld if such shareholder meets one of
the three tests for capital gain or loss treatment described in Section 15 of
the Offer to Purchase or is otherwise able to establish that no tax or a reduced
amount of tax was due.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE OF IT
(TOGETHER WITH ANY CERTIFICATES FOR COMMON SHARES AND ALL OTHER REQUIRED
DOCUMENTS) MUST BE RECEIVED BY THE DEPOSITARY ON OR BEFORE THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under federal income tax law, a shareholder whose tendered Common Shares are
accepted for payment is required by law to provide the Depositary with such
shareholder's correct TIN on Substitute Form W-9 below. If the Depositary is not
provided with a certified TIN, the Internal Revenue Service may subject the
shareholder or other payee to a $50 penalty. In addition, payments that are made
to such shareholder or other payee with respect to Common Shares purchased
pursuant to the Offer may be subject to backup withholding.
Certain shareholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, the shareholder must submit a Form W-8, signed under penalties of
perjury, attesting to that individual's exempt status. A Form W-8 can be
obtained from the Depositary. See the enclosed "Guidelines for Certificate of
Taxpayer Identification Number on Substitute Form W-9" for more instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any such payments made to the shareholder or other payee. Backup withholding is
not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made to a shareholder or other
payee with respect to Common Shares purchased pursuant to the Offer, the
shareholder who has not already submitted a completed and signed Substitute Form
W-9 to the Trust is required to notify the Depositary of the shareholder's
correct TIN by completing the form below, certifying that the TIN provided on
Substitute Form W-9 is correct (or that such shareholder is awaiting a TIN) and
that:
(a) the shareholder has not been notified by the Internal Revenue
Service that the shareholder is subject to backup withholding as a result of
failure to report all interest or dividends; or
(b) the Internal Revenue Service has notified the shareholder that the
shareholder is no longer subject to backup withholding.
<PAGE>
WHAT NUMBER TO GIVE THE DEPOSITARY
The shareholder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the record owner of the
Common Shares. If the Common Shares are in more than one name or are not in the
name of the actual owner, consult the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional guidance
on which number to report.
<TABLE>
<C> <S> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
PAYER'S NAME: MORGAN STANLEY DEAN WITTER TRUST FSB
- -----------------------------------------------------------------------------------------------------------------------------------
Part 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND Social Security Number
SUBSTITUTE CERTIFY BY SIGNING AND DATING BELOW. OR --------------------------
FORM W-9 Employer Identification Number
-------------------------------------------------------------------------------------------------
Part 2--Check the box if you are NOT subject to backup withholding under the provisions of
Section 3406(a)(1)(C) of the Internal Revenue Code because (1) you have not been notified that
you are subject to backup withholding as a result of failure to report all interest or dividends
Department of the Treasury or (2) the Internal Revenue Service has notified you that you are no longer subject to backup
Internal Revenue Service withholding. / /
</TABLE>
<TABLE>
<C> <S> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
CERTIFICATION--UNDER PENALTIES OF PERJURY, I CERTIFY THAT Part 3
PAYER'S REQUEST FOR TAXPAYER THE INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT,
IDENTIFICATION NUMBER ("TIN") AND COMPLETE.
SIGNATURE --------------------------- DATE --------------- Awaiting TIN / /
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 3 OF SUBSTITUTE FORM W-9
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a Taxpayer
Identification Number has not been issued to me, and
either (a) I have mailed or delivered an application to
receive a Taxpayer Identification Number to the
appropriate Internal Revenue Service Center or Social
Security Administration Office, or (b) I intend to mail or
deliver an application in the near future. I understand
that if I do not provide a Taxpayer Identification Number
within sixty (60) days, 31% of all reportable payments
made to me thereafter will be withheld until I provide a
number.
----------------------------------------------------------
------------------------------------------
SIGNATURE DATE
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT (c)(2)
FORM OF DEPOSITARY AGREEMENT BETWEEN THE TRUST AND MORGAN STANLEY DEAN WITTER
TRUST FSB
<PAGE>
DEPOSITARY AGREEMENT
Date: November 5, 1999
Morgan Stanley Dean Witter Trust FSB
2 Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
Attn: John Van Heuvelen
President
Gentlemen:
Morgan Stanley Dean Witter Prime Income Trust, a non-diversified, closed-end
management investment company organized as a Massachusetts business trust (the
"Trust") under the name "Allstate Prime Income Trust" is offering to purchase up
to 12,000,000 of its common shares of beneficial interest, par value $.01 per
share ("Common Shares") for cash at a price equal to their net asset value
("NAV") computed as of 4:00 P.M. New York City time on the Expiration Date, upon
the terms and conditions set forth in its Offer to Purchase dated November 17,
1999 (the "Offer to Purchase"), and in the related Letter of Transmittal, copies
of which together, as they may be amended from time to time, constitute the
"Offer." The "Expiration Date" for the Offer shall be 12:00 midnight, New York
City Time, on December 17, 1999, unless and until the Trust shall have extended
the period of time for which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as so
extended by the Trust, shall expire. All terms not defined herein shall have the
same meaning as in the Offer.
The Trust hereby agrees with you as follows:
1. You will act as the Depositary in connection with the Offer. In such
capacity you are authorized and directed to accept tenders of Common Shares in
accordance with the instructions received from the Trust. Tenders of Common
Shares may be made only as set forth in the Offer to Purchase, and tenders shall
be considered properly made to you only when:
(a) if such Common Shares are evidenced by certificates, certificate(s)
for such Common Shares, together with a properly completed and duly executed
Letter of Transmittal or manually executed facsimile thereof and any other
documents required by the Letter of Transmittal, are received by you on or
prior to the Expiration Date; or
(b) if such Common Shares are uncertificated, a properly completed and
duly executed Letter of Transmittal or manually executed facsimile thereof
indicating that such Common Shares are registered with you as Transfer Agent
in the name of the shareholder(s) and any other documents required by the
Letter of Transmittal, are received by you on or prior to the Expiration
Date; or
(c) if such Common Shares are uncertificated and have been tendered by
Dean Witter Reynolds Inc. ("DWR") on behalf of a shareholder, notification
is delivered by DWR to you by hand or transmitted by mail, telegram, telex,
facsimile transmission or by any other acceptable form and are received by
you on or prior to the Expiration Date, which notification, in whatever
form, contains the name of the tendering shareholder(s) and the number of
Common Shares tendered on behalf of such shareholder(s).
To be considered validly tendered, signatures on all Letters of Transmittal
must be guaranteed by an eligible guarantor acceptable to the Depositary (an
"Eligible Guarantor") (shareholders should contact the Depositary for a
determination as to whether a particular institution is an Eligible
1
<PAGE>
Guarantor), unless the Common Shares tendered thereby are tendered by a
registered holder of Common Shares who has not completed either the box entitled
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal. If the certificates are registered
in the name of a person other than the signer of the Letter of Transmittal, the
certificates must be endorsed or accompanied by appropriate authorizations, in
either case signed exactly as the name or names of the registered owner or
owners appear on the certificates, with the signatures on the certificates or
authorizations guaranteed as aforesaid and accompanied by such other
documentation as is customarily required by transfer agents under such
circumstances. Notwithstanding the foregoing provisions of this paragraph,
Common Shares that the Trust shall approve as having been properly tendered
shall be considered to be properly tendered.
You are also authorized and directed to return to any person tendering
Common Shares, in the manner described in Section 7 hereof, any certificates
representing Common Shares tendered by such person but duly withdrawn pursuant
to the Offer to Purchase. To be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be received by you within the
time period specified for withdrawal in the Offer to Purchase at your address
set forth on the back page of the Offer to Purchase. Any notice of withdrawal
must specify the name of the person having deposited the Common Shares to be
withdrawn, the number of Common Shares to be withdrawn and, if the certificates
representing such Common Shares have been delivered or otherwise identified to
you, the name of the registered holder(s) of such Common Shares as set forth in
such certificates. If the certificates have been delivered to you, then prior to
the release of such certificates the tendering stockholder must also submit the
serial numbers shown on the particular certificate evidencing such Common Shares
and the signature on the notice of withdrawal must be guaranteed by an Eligible
Guarantor. If Common Shares have been tendered pursuant to the procedures
described in subparagraph (b) above, the notice of withdrawal must specify the
name and number of the shareholder's account established with you as Transfer
Agent to be credited with the withdrawn Common Shares. If Common Shares have
been tendered on behalf of the shareholder by DWR pursuant to the procedures
described in subparagraph (c) above, a notice of withdrawal which follows the
procedures described above for uncertificated shares may be delivered by DWR.
All questions as to the form and validity (including time of receipt) of notices
of withdrawal will be determined by the Trust in its sole discretion whose
determination shall be final and binding. Any Common Shares withdrawn shall no
longer be considered to be properly tendered unless such Common Shares are
re-tendered on or prior to the Expiration Date pursuant to the Offer to
Purchase.
2. You are authorized and directed to examine any certificate representing
Common Shares, Letter of Transmittal (or facsimile thereof) and any other
document required by the Letter of Transmittal, which is delivered or mailed to
you to determine whether any tender is defective. In the event that any Letter
of Transmittal or other document has been improperly completed or executed or
any of the certificates for Common Shares are not in proper form for transfer
(as required by the aforesaid instructions) or if some other irregularity in
connection with the tender of Common Shares exists, you are authorized to advise
the tendering stockholder of the existence of the irregularity, but you are not
authorized (unless otherwise instructed by the Trust) to accept any tender of
fractional Common Shares, any tender not in accordance with the terms and
subject to the conditions set forth in the Offer, or any other tender which you
deem to be defective.
Promptly upon your determination that any tender is defective, you shall,
after consultation with and on the instruction of the Trust, use your best
efforts to notify the person tendering such Common Shares of such determination
and, if applicable, may return the certificates involved to such person in the
manner described in Section 7 hereof. The Trust shall have full discretion to
determine whether any tender is complete and proper and have the absolute right
to reject any or all tenders of any particular Common Shares determined by it
not to be in proper form and to determine whether the acceptance of or payment
for such tenders may, in the opinion of counsel for the Trust, be unlawful; it
2
<PAGE>
being specifically agreed that you shall neither have discretion nor
responsibility with respect to these determinations. The Trust also reserves the
absolute right to waive any of the conditions of the Offer or any defect or
irregularity in the tender of any particular Common Shares. The interpretation
by the Trust of the terms and conditions of the Offer to Purchase and Letter of
Transmittal shall be final and binding.
3. Any extension of the Offer, as the Trust shall determine, shall be
effective upon notice to you from the Trust given prior to the time the Offer
would otherwise have expired, and shall be promptly confirmed by the Trust in
writing. If at any time the Offer shall be terminated as permitted by the terms
thereof, the Trust shall promptly notify you of such termination.
4. At 5:00 P.M. New York City time, or as promptly as practicable
thereafter, daily or more frequently if requested as to major tally figures, you
shall advise each of the parties named below by telephone as to (i) the number
of Common Shares duly tendered; (ii) the number of Common Shares defectively
tendered; (iii) the number of Common Shares duly tendered represented by
certificates physically held by you as Transfer Agent; (iv) the number of Common
Shares tendered through DWR; (v) the number of Common Shares withdrawn on such
day; and (vi) the cumulative totals of Common Shares in categories (i) thru (v)
above through 12:00 noon on such day:
(a) Barry Fink, Esq. or
Todd Lebo, Esq.
Morgan Stanley Dean Witter Prime Income Trust
Two World Trade Center
New York, New York 10048
(212) 392-1600
(b) Mitchell M. Merin
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
(212) 392-1600
You should also furnish to the above-named persons a written report
confirming the above information which has been communicated orally on the day
following such oral communication.
You shall furnish to the above-named persons and the Trust, such reasonable
information on the tendering shareholders as may be requested from time to time.
You shall furnish to the Trust, upon request, master lists of Common Shares
tendered for purchase, including an A to Z list of the tendering shareholders.
You are also authorized and directed to provide the persons listed above or
any other persons designated by such persons and approved by the Trust with such
other information relating to the Common Shares, the Offer to Purchase, and
Letters of Transmittal, as the Trust may reasonably request from time to time.
5. Letters of Transmittal, Telegrams, Telexes, Facsimile Transmissions,
Notices and Letters submitted to you pursuant to the Offer to Purchase shall be
stamped by you to indicate the date and time of the receipt thereof and these
documents, or copies thereof, shall be preserved by you for a reasonable time
not to exceed one year or the term of this Agreement, whichever is longer, and
thereafter shall be delivered by you to the Trust.
6. (a) If under the terms and conditions set forth in the Offer to
Purchase the Trust becomes obligated to accept and pay for Common Shares
tendered, upon instruction by the Trust and as promptly as practicable you
shall, subject to Section 7 hereof, deliver or cause to be delivered to the
tendering shareholders and designated payees, consistent with this Agreement and
the Letter of
3
<PAGE>
Transmittal, payment in the amount of the applicable purchase price specified in
the Offer for the Common Shares theretofore properly tendered and purchased
under the terms and conditions of the Offer. The Trust shall ensure that
sufficient funds are available to you to enable you to deliver or cause to be
delivered such payment.
(b) At such time as shall be determined by the Trust, you shall effect the
transfer of all Common Shares purchased pursuant to the Offer, in accordance
with instructions from the Trust, and deliver the certificates for such Common
Shares to the Trust.
7. If, pursuant to the terms and conditions of the Offer, the Trust does
not accept certain of the Common Shares tendered or a shareholder withdraws any
tendered Common Shares, you shall promptly return the deposited certificates, if
any, for such Common Shares and a duplicate of the Letter of Transmittal
relating to such Common Shares, together with any other required documents, to
the persons who deposited the same, without expense to such person. If a
shareholder delivers to you a certificate representing a number of Common Shares
in excess of the number of Common Shares tendered by such shareholder, you shall
promptly after the Expiration Date return to such shareholder a certificate
representing the Common Shares not tendered. Certificates, if any, for such
unpurchased Common Shares shall be forwarded by you by (i) first class mail
under a blanket surety bond protecting you and the Trust from loss or
liabilities arising out of the non-receipt or non-delivery of such Common
Shares; or (ii) registered mail insured separately for the replacement value of
such Common Shares.
8. You shall take all reasonable action as may from time to time be
requested by the Trust and you shall be reasonably compensated for such action.
9. For your services as Depositary hereunder you shall be entitled to
compensation as described in the Amended and Restated Transfer Agency and
Service Agreement between you and the Trust dated as of June 22, 1998, as
amended to date.
10. As Depositary hereunder you:
(a) shall have no duties or obligations other than those specifically
set forth herein or in Exhibits A and B hereto, or as may subsequently be
agreed to by you and the Trust;
(b) shall have no obligation to make payment for any tendered Common
Shares unless the Trust shall have provided the necessary funds to pay in
full all amounts due and payable with respect thereto;
(c) shall be regarded as making no representations and having no
responsibilities as to the validity, sufficiency, value or genuineness of
any certificates of the Common Shares represented thereby deposited with you
hereunder and will not be required to and will make no representations as to
the validity, value, or genuineness of the Offer;
(d) shall not be obligated to take any legal action hereunder and where
the taking of such action might in your judgment involve any expense or
liability you shall not act unless you shall have been furnished with an
indemnity reasonably satisfactory to you;
(e) may rely on and shall be protected in acting upon any certificate,
instrument, opinion, notice, letter, telegram, or other document or security
delivered to you and believed by you to be genuine and to have been signed
by the proper party or parties;
(f) may rely on and shall be protected in acting upon the written and
oral instructions, with respect to any matter relating to your actions as
Depositary specifically covered by this Agreement (or supplementing or
qualifying any such actions), of officers of the Trust;
(g) may consult counsel satisfactory to you, including your in-house
counsel, and the opinion of such counsel shall be full and complete
authorization and protection in respect of any action
4
<PAGE>
taken, suffered, or omitted by you hereunder in good faith and in accordance
with the opinion of such counsel;
(h) shall not be called upon at any time to, and shall not, advise any
person tendering pursuant to the Offer as to the wisdom of making such
tender or as to the market value of any security tendered thereunder; and
(i) are not authorized, and shall have no obligation, to pay any
brokers, dealers, or soliciting fees to any person.
11. The Trust covenants to indemnify and hold you harmless against any loss,
liability, or expense (including any loss, liability, or expense incurred for
submitting for transfer Common Shares tendered without a signature guarantee
pursuant to the Letter of Transmittal and including the reasonable fees and
expenses of your counsel) incurred without negligence or bad faith on your part
arising out of or in connection with the administration of your duties
hereunder, including the costs and expenses of defending yourself against any
claim or liability in the premises. In no case shall the Trust be liable under
this indemnity with respect to any claim against you unless the Trust shall be
notified by you, by letter or by telex confirmed by letter, of the written
assertion of a claim against you or of any action commenced against you,
promptly after you shall have been served with the summons, or other first legal
process giving information as to the nature and basis of the claim, but failure
to so notify the Trust shall not release the Trust of any liability which it may
otherwise have on account of this Agreement. The Trust shall be entitled to
participate at its own expense in the defense of any suit brought to enforce any
such claim.
12. Unless terminated earlier by the parties hereto, this Agreement shall
terminate upon conclusion of the Offer.
13. The instructions contained herein may be modified or supplemented by the
Trust or by an officer thereof authorized to give any notice, approval, or
waiver on its behalf. In the event that any claim of inconsistency between this
Agreement and the terms of the Offer arise, as they may from time to time be
amended, the terms of the Offer shall control, except with respect to the
duties, liabilities and indemnification of you as Depositary which shall be
controlled by the terms of this Agreement.
14. If any provision of this Agreement shall be held illegal, invalid, or
unenforceable by any court, this Agreement shall be construed and enforced as if
such provision had not been contained herein and shall be deemed an Agreement
among us to the full extent permitted by applicable law.
15. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York, and shall inure to the benefit of and be binding
upon the successors and assigns of the parties hereto; provided that this
Agreement may not be assigned by you without the prior written consent of the
Trust.
5
<PAGE>
Please acknowledge receipt of this Letter, the Offer to Purchase and the
Letter of Transmittal and confirm the arrangements herein provided by signing
and returning the enclosed copy hereof, whereupon this Agreement and your
acceptance of the terms and conditions herein provided shall constitute a
binding Agreement between us.
Very truly yours,
MORGAN STANLEY DEAN WITTER
PRIME INCOME TRUST
By:
--------------------------------------
(Name & Title)
Accepted as of the date
first above written:
MORGAN STANLEY DEAN WITTER TRUST
FSB, as DEPOSITARY
By:
- --------------------------------------
(Name & Title)
6
