MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
SC TO-I/A, EX-99.(A)(1)(I), 2000-11-15
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<PAGE>
                                                               EXHIBIT (a)(1)(i)

                               OFFER TO PURCHASE
<PAGE>
                 MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST

                     OFFER TO PURCHASE FOR CASH 20,000,000
                           OUTSTANDING COMMON SHARES
                               SUMMARY TERM SHEET

    THIS SUMMARY HIGHLIGHTS CERTAIN INFORMATION IN THIS OFFER TO PURCHASE. TO
UNDERSTAND THE OFFER FULLY AND FOR A MORE COMPLETE DESCRIPTION OF THE TERMS OF
THE OFFER, YOU SHOULD READ CAREFULLY THIS ENTIRE OFFER TO PURCHASE AND THE
RELATED LETTER OF TRANSMITTAL. WE HAVE INCLUDED PAGE REFERENCES PARENTHETICALLY
TO DIRECT YOU TO A MORE COMPLETE DESCRIPTION OF THE TOPICS IN THIS SUMMARY.

WHAT SECURITIES IS MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST OFFERING TO
PURCHASE? (PAGE 6)

    The Trust is offering to purchase up to 20,000,000 of its common shares. If
more than 20,000,000 shares are surrendered in response to this offer, i.e.,
"tendered," the Trust expects to either extend the offer period and increase the
number of shares it is offering to purchase OR purchase the shares tendered on a
pro rata basis. The offer is not conditioned upon the tender of any minimum
number of shares.

HOW MUCH AND IN WHAT FORM WILL THE TRUST PAY ME FOR MY SHARES? (PAGE 6)

    The Trust will pay cash for your shares tendered in proper form. The
purchase price will equal the net asset value (NAV) per share, determined as of
4:00 p.m., New York City time, on the date the offer expires (currently,
December 15, 2000). As of November 6, 2000, the Trust's NAV was $9.62 per common
share. Of course, the NAV can change every business day.

WILL I HAVE TO PAY ANY FEES OR COMMISSIONS? (PAGES 6 AND 8)

    You will be charged an early withdrawal fee on tendered shares purchased by
the Trust, if you held those shares for four years or less. The maximum fee is
3% of the value of the tendered shares, scaled down for each year you held your
shares, reaching zero after four years. The charge is not imposed on shares
acquired through reinvestment of dividends nor on the value of your shares
attributable to appreciation.

DOES THE TRUST HAVE THE FINANCIAL RESOURCES TO PAY ME FOR MY SHARES? (PAGE 12)


    Assuming the Trust purchases 20,000,000 common shares at the November 6,
2000 NAV of $9.62 per share, the Trust's total cost, not including fees and
expenses incurred in connection with the offer, will be approximately
$192,400,000. The Trust believes that it will not need to borrow money to
finance the purchase of tendered shares, although the Trust has the authority to
do so, if necessary.


WHEN DOES THE OFFER EXPIRE? CAN THE TRUST EXTEND THE OFFER, AND IF SO, HOW WILL
I BE NOTIFIED? (PAGES 6 AND 13)

    - The offer expires Friday, December 15, 2000, at 12:00 midnight, New York
      City time, unless the Trust extends the offer.

    - The Trust may extend the offer period at any time.

    - If the offer period is extended, the Trust will make a public announcement
      of the extension no later than 9:00 a.m. on the next business day
      following the previously scheduled expiration date.

HOW DO I TENDER MY SHARES? (PAGE 6)

    If you decide to tender your shares:

    - You may contact your Morgan Stanley Dean Witter Financial Advisor and
      request that your shares be tendered to Morgan Stanley Dean Witter Trust
      FSB (the Depositary, i.e., acts as agent for the Trust).

    - If you do not have a MSDW Financial Advisor or you hold certificates of
      Trust shares, you must:

        a)  complete and sign in proper form the Letter of Transmittal
           accompanying this Offer to Purchase; and
<PAGE>
        b)  send the Letter of Transmittal, any certificates of shares and any
           other required documents to the Depositary (whose address is on the
           cover page) before the expiration date.

UNTIL WHAT TIME CAN I WITHDRAW TENDERED SHARES? (PAGE 9)

    You may withdraw your tendered shares at any time before the expiration
date. In addition, if the Trust has not yet accepted your tendered shares for
payment, you may withdraw your offer after 12:01 a.m. on January 16, 2001.

HOW DO I WITHDRAW TENDERED SHARES? (PAGE 9)

    - contact your MSDW Financial Advisor; or

    - submit proper written notice to the Depositary.

WILL THERE BE ANY TAX CONSEQUENCES TO TENDERING MY SHARES? (PAGE 13)

    If your tendered shares are accepted, it will be a taxable transaction
either in the form of a "sale or exchange" or under certain circumstances, as a
"dividend."

    Please consult your tax advisor as to the tax consequences of tendering your
shares.

WHAT IS THE PURPOSE OF THE OFFER? (PAGE 10)

    The offer seeks to provide liquidity for Trust shareholders. The Trust's
Board of Trustees presently intends to consider making similar offers each
quarter. However, the Trust cannot assure you that you will be provided
sufficient liquidity or that the Trust will make a similar tender offer in the
future.

    Please bear in mind that neither the Trust nor its Board has made any
recommendation as to whether or not you should tender your shares.

WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFER? (PAGE 10)

    The Trust may terminate the offer, amend its terms, and/or reject shares
tendered for payment or postpone payment, under any one of the following
circumstances which, in the Trust's view, make it inadvisable to proceed with
the offer, purchase or payment:

    - a secondary market for Trust shares develops.

    - the Trust believes it has insufficient liquidity to accommodate the offer.

    - the Trust believes the offer could impair compliance with SEC or IRS
      requirements.

    - trading generally on the New York Stock Exchange is suspended or limited.

    - there is in the Trust's judgment any material legal action threatened,
      pending or taken, challenging the offer or otherwise materially adversely
      affecting the Trust.

    - certain other circumstances where the Trust believes that it or
      shareholders may be adversely affected if shares were purchased pursuant
      to the offer.

IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY SHARES? (PAGE 12)

    If you do not tender you shares, your shares may be subject to increased
risk resulting from the Trust reducing its assets to pay for tendered shares.
Reduced assets could lead, for example, to increased volatility. The risks are
reduced, however, to the extent the Trust sells new shares.

WHO DO I CONTACT IF I HAVE QUESTIONS ABOUT THE TENDER OFFER?

    For additional information or assistance, you may contact your MSDW
Financial Advisor or the Depositary at the toll free number set forth on the
cover of this Offer to Purchase.

                                       2
<PAGE>
                 MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
                     OFFER TO PURCHASE FOR CASH 20,000,000
                  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 15, 2000, 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 20,000,000 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 15, 2000. The offer, proration period and withdrawal
rights will expire at 12:00 midnight New York City time on December 15, 2000
(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 6,
2000 was $9.62 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 20,000,000 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 20,000,000 of
the tendered Common Shares on a pro rata basis. If more than 20,000,000 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 20,000,000 (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

                                       3
<PAGE>
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 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 15, 2000                         MORGAN STANLEY DEAN WITTER PRIME
Morgan Stanley Dean Witter Advisors       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, NJ 07303

                                          By Hand Delivery or Courier:
                                          Morgan Stanley Dean Witter Trust FSB
                                          Harborside Financial Center,
                                          Plaza Two
                                          Jersey City, NJ 07311
                                          Attn: Morgan Stanley Dean Witter
                                               Prime Income Trust

                                          Telephone:  (800) 869-NEWS
                                                      Extension 0

                                       4
<PAGE>
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
 SECTION                                                       PAGE
 -------                                                       ----
 <C>       <S>                                                 <C>
     1.    Price; Number of Common Shares....................    6

     2.    Procedure for Tendering Common Shares.............    6

     3.    Early Withdrawal Charge...........................    8

     4.    Withdrawal Rights.................................    9

     5.    Payment for Shares................................    9

     6.    Certain Conditions of the Offer...................   10

     7.    Purpose of the Offer..............................   10

     8.    Plans or Proposals of the Trust...................   11

     9.    Price Range of Common Shares; Dividends...........   11

    10.    Interest of Trustees and Executive Officers;
            Transactions and Arrangements Concerning the
            Common Shares....................................   11

    11.    Certain Effects of the Offer......................   12

    12.    Source and Amount of Funds........................   12

    13.    Certain Information about the Trust...............   12

    14.    Additional Information............................   13

    15.    Certain Federal Income Tax Consequences...........   13

    16.    Extension of Tender Period; Termination;
            Amendments.......................................   13

    17.    Miscellaneous.....................................   14

    18.    Financial Statements--September 30, 2000..........   15

    19.    Financial Statements--September 30, 1999..........   41
</TABLE>

                                       5
<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) 20,000,000 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 15,
2000 (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 6, 2000 was $9.62 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 20,000,000 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 20,000,000
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
20,000,000 (or such larger number of Common Shares sought) of the Common Shares
tendered on a pro rata basis.

    On November 6, 2000, there were approximately 303,141,435 Common Shares
issued and outstanding and there were approximately 96,697 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 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.

                                       6
<PAGE>
    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 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.

                                       7
<PAGE>
    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 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.

                                       8
<PAGE>
    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 16, 2001.

    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 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

                                       9
<PAGE>
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 expiration of the offer, 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, 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.

                                       10
<PAGE>
    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 6, 2000 was $9.62. 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 6, 2000 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 sixty 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 November 6, 2000, 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 average daily net assets over $1.5 billion but not exceeding
$2.5 billion; 0.80% of the portion of the average daily net assets over
$2.5 billion but not exceeding $3 billion; and 0.775% of the portion of the
average daily net assets over $3 billion. The Trust also is a party to an
Administration Agreement with Morgan Stanley Dean Witter

                                       11
<PAGE>
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
20,000,000 Common Shares pursuant to the Offer will be approximately
$192,400,000 (assuming a NAV of $9.62 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 total assets in interests in Senior
Loans of a single Borrower. To the extent the Trust invests its assets in

                                       12
<PAGE>
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 Form TO
with the Securities and Exchange Commission (the "Commission") which includes
certain additional information relating to the Offer. Such information is
available on the EDGAR Database on the SEC's Internet site (www.sec.gov) and
copies of this information may be obtained, after paying a duplicating fee, by
electronic request at the following e-mail address: [email protected], or by
writing the Public Reference Section of the SEC, Washington, DC 20549-0102.

    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
announcement thereof. Such public announcement will be issued no later than
9:00 A.M. New York City

                                       13
<PAGE>
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 15, 2000

                                       14
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2000

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN                                                                            COUPON     MATURITY
THOUSANDS                                                                             RATE        DATE        VALUE
------------------------------------------------------------------------------------------------------------------------
<C>        <S>                                                                     <C>          <C>       <C>
           SENIOR COLLATERALIZED TERM LOANS (a) (85.9%)
           AEROSPACE & DEFENSE (1.2%)
 $14,662   Avborne, Inc. (b).....................................................  10.44-10.50% 06/30/05  $   14,660,457
   6,895   Decrane Aircraft Holdings,
             Inc. (b)............................................................     10.12     09/30/05       6,894,583
  12,973   The Fairchild Corporation (b).........................................  9.62-12.62   04/30/06      12,980,496
                                                                                                          --------------
                                                                                                              34,535,536
                                                                                                          --------------
           AIR FREIGHT/COURIERS (1.1%)
   8,417   Erickson Air-Crane Co.,
             L.L.C. (b)..........................................................     10.16     12/31/04       8,413,286
   2,417   Evergreen International Aviation, Inc. (b)............................   9.89-9.91   05/31/02       2,415,764
   6,102   Evergreen International Aviation, Inc. (b)............................     9.91      05/07/03       6,099,169
   6,888   Evergreen International Aviation, Inc. (b)............................     9.88      05/02/04       6,887,477
   7,671   First Security Bank, National Association as Owner
             Trustee (b).........................................................     9.99      05/07/03       7,670,958
                                                                                                          --------------
                                                                                                              31,486,654
                                                                                                          --------------
           APPAREL/FOOTWEAR (1.9%)
  14,311   American Marketing Industries, Inc. (b)...............................  10.44-10.50  11/29/02      14,308,935
   3,860   American Marketing Industries, Inc. (b)...............................  10.44-10.50  11/30/03       3,859,444
   2,681   American Marketing Industries, Inc. (b)...............................  10.44-10.50  11/30/04       2,680,706
   4,144   American Marketing Industries, Inc. (b)...............................  10.44-10.50  11/30/05       4,142,999
   6,427   Arena Brands, Inc. (b)................................................  10.01-10.51  06/01/02       6,424,735
   1,418   Arena Brands, Inc. (Revolver) (b).....................................  9.87-11.75   06/01/02       1,418,633
  16,094   St. John Knits International,
             Inc. (b)............................................................     9.63      07/31/07      16,088,125
   5,859   The William Carter Co.................................................   8.69-8.94   10/30/03       5,856,539
                                                                                                          --------------
                                                                                                              54,780,116
                                                                                                          --------------
           AUTO PARTS - O.E.M. (2.2%)
   9,600   Accuride Corp. (b)....................................................     8.25      01/21/06       9,360,000
   7,275   Accuride Corp. (b)....................................................   8.94-9.00   01/21/07       7,274,957
   9,975   Amcan Consolidated Technologies Corp. (b).............................     10.69     03/28/07       9,879,739
   6,266   J.L. French Automotive Castings, Inc..................................     9.47      10/21/06       6,138,667
   6,982   Polypore Inc. (b).....................................................     10.13     12/31/06       6,982,430
   2,638   Special Devices, Inc. (b).............................................     10.19     12/15/05       2,637,015
</TABLE>

                       SEE NOTES TO FINANCIAL STATEMENTS
                                       15
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2000, CONTINUED

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN                                                                            COUPON     MATURITY
THOUSANDS                                                                             RATE       DATE         VALUE
------------------------------------------------------------------------------------------------------------------------
<C>        <S>                                                                     <C>          <C>       <C>
 $ 7,860   Stoneridge, Inc.......................................................     10.16%    12/31/05  $    7,860,885
   2,345   Tenneco, Inc. (b).....................................................     9.97      11/04/07       2,345,074
   2,345   Tenneco, Inc. (b).....................................................     10.22     05/04/08       2,345,051
   9,950   Transportation Technologies Industries, Inc. (b)......................     10.41     03/31/07       9,946,465
                                                                                                          --------------
                                                                                                              64,770,283
                                                                                                          --------------
           AUTOMOTIVE AFTERMARKET (0.1%)
   1,118   Safelite Glass Corp. (b)..............................................     11.14     09/30/07       1,118,128
   1,118   Safelite Glass Corp. (b)..............................................     11.64     09/30/07       1,118,128
                                                                                                          --------------
                                                                                                               2,236,256
                                                                                                          --------------
           BEVERAGES - NON-ALCOHOLIC (0.3%)
   9,405   The American Bottling Co..............................................     9.63      10/07/07       9,406,317
                                                                                                          --------------
           BROADCAST/MEDIA (2.6%)
  20,000   Benedek Broadcasting Corp. (b)........................................   9.89-9.96   11/20/07      19,997,446
   9,920   Black Entertainment Television, Inc...................................     8.38      06/30/06       9,800,166
   2,850   Cumulus Media, Inc. (b)...............................................     9.66      09/30/07       2,849,145
   1,900   Cumulus Media, Inc. (b)...............................................     9.66      02/28/08       1,899,430
   2,500   Entravision Communications Corp. (b)..................................     9.94      12/31/08       2,492,975
   5,000   Gray Communications Systems, Inc. (b).................................     9.88      12/31/05       4,999,950
   4,200   Nassau Broadcasting Partners I, LLC (b)...............................     10.39     12/04/07       4,199,202
  17,167   Sinclair Broadcast Group, Inc. (b)....................................     7.91      09/15/05      17,161,517
  10,000   Susquehanna Media Co..................................................     9.13      06/30/08      10,025,000
                                                                                                          --------------
                                                                                                              73,424,831
                                                                                                          --------------
           CABLE/SATELLITE TV (2.7%)
  15,000   Century Cable Holdings, LLC...........................................     9.66      12/31/09      14,995,350
  28,000   Charter Communications Operating, LLC.................................     9.24      03/18/08      27,963,880
  10,000   Charter Communications Operating, LLC.................................     9.24      09/18/08       9,993,800
   3,474   Classic Cable, Inc....................................................   9.44-9.56   01/31/08       3,460,658
   5,862   Classic Cable, Inc. (b)...............................................   9.44-9.56   01/31/08       5,860,875
  15,000   RCN Corp. (b).........................................................     10.25     06/03/07      14,999,400
                                                                                                          --------------
                                                                                                              77,273,963
                                                                                                          --------------
           CASINO/GAMING (0.6%)
   5,342   Alliance Gaming Corp. (b).............................................     10.87     01/31/05       5,342,079
   2,130   Alliance Gaming Corp. (b).............................................     11.12     07/31/05       2,130,249
   5,000   Harrah's Jazz Co. (b).................................................     8.00      04/30/05       5,000,950
   2,660   Isle of Capri Casinos, Inc............................................  9.88-10.05   03/02/06       2,676,013
</TABLE>

                       SEE NOTES TO FINANCIAL STATEMENTS
                                       16
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2000, CONTINUED

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN                                                                            COUPON     MATURITY
THOUSANDS                                                                             RATE       DATE         VALUE
------------------------------------------------------------------------------------------------------------------------
<C>        <S>                                                                     <C>          <C>       <C>
 $ 2,328   Isle of Capri Casinos, Inc............................................  10.02-10.45% 03/02/07  $    2,341,512
                                                                                                          --------------
                                                                                                              17,490,803
                                                                                                          --------------
           CELLULAR TELEPHONE (4.3%)
   8,400   American Cellular Corp................................................     9.63      03/31/08       8,405,796
   9,600   American Cellular Corp................................................     9.88      03/31/09       9,606,624
  16,476   Centennial Puerto Rico Operating Corp.................................     9.62      05/31/07      16,520,480
  10,219   Centennial Puerto Rico Operating Corp.................................     9.87      11/30/07      10,249,505
   4,962   Dobson Operating Co., L.L.C...........................................     9.64      12/31/07       4,960,713
  14,925   Dobson Operating Co., L.L.C...........................................     9.63      03/31/08      14,939,925
  35,602   Microcell Connexions, Inc. (b)........................................   9.66-9.87   03/01/06      35,599,295
  12,500   Rural Cellular Corp...................................................     9.63      10/03/08      12,503,875
  12,500   Rural Cellular Corp...................................................     9.88      04/03/09      12,503,875
                                                                                                          --------------
                                                                                                             125,290,088
                                                                                                          --------------
           CHEMICALS: MAJOR DIVERSIFIED (0.7%)
   9,925   Georgia Gulf Corp.....................................................     9.38      11/12/06       9,973,368
  10,000   Huntsman Corp. (b)....................................................     9.75      12/31/05       9,999,600
                                                                                                          --------------
                                                                                                              19,972,968
                                                                                                          --------------
           CHEMICALS: SPECIALTY (1.6%)
   7,425   Huntsman ICI Chemicals LLC............................................     9.69      06/30/07       7,485,736
   7,425   Huntsman ICI Chemicals LLC............................................  9.94-10.00   06/30/08       7,485,736
   9,435   Lyondell Chemical Company.............................................     10.37     06/30/05       9,558,549
   6,773   Pioneer America Acqusitions Corp. (b).................................   8.92-9.75   12/05/06       6,775,225
   8,000   Pioneer Americas, Inc. (b)............................................   9.18-9.79   12/05/06       7,998,992
   7,999   Vining Industries, Inc. (b)...........................................     9.44      03/31/05       7,997,697
                                                                                                          --------------
                                                                                                              47,301,935
                                                                                                          --------------
           COAL (0.3%)
  14,717   Quaker Coal Company,
             Inc. (b) (d)........................................................     13.00     06/30/06       7,838,419
                                                                                                          --------------
           COMPUTER COMMUNICATIONS (0.5%)
  13,390   Acterna Corporation...................................................     9.89      09/30/07      13,400,254
                                                                                                          --------------
           COMPUTERS SOFTWARE AND SERVICES (0.2%)
   7,044   DecisionOne Corp. (b).................................................  10.09-11.75  04/18/05       6,691,339
                                                                                                          --------------
           CONSTRUCTION MATERIALS (0.5%)
   6,562   Dayton Superior Corp. (b).............................................   9.69-9.75   06/01/08       6,559,431
   8,938   Onex ABCO Limited
             Partnership (b).....................................................     10.12     11/15/05       8,936,487
                                                                                                          --------------
                                                                                                              15,495,918
                                                                                                          --------------
</TABLE>

                       SEE NOTES TO FINANCIAL STATEMENTS
                                       17
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2000, CONTINUED

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN                                                                            COUPON     MATURITY
THOUSANDS                                                                             RATE       DATE         VALUE
------------------------------------------------------------------------------------------------------------------------
<C>        <S>                                                                     <C>          <C>       <C>
           CONSUMER SUNDRIES (1.6%)
 $ 2,357   American Safety Razor Co..............................................  10.41-10.47% 04/30/07  $    2,356,270
   8,155   Amscan Holdings, Inc. (b).............................................   9.06-9.16   12/31/04       8,152,591
  17,000   Jostens, Inc..........................................................     10.18     05/03/08      17,079,050
     878   The Boyds Collection, Ltd. (b)........................................   8.74-8.75   04/21/06         877,774
     979   World Kitchen, Inc.
             (Revolver) (b)......................................................  9.01-11.00   04/09/05         979,170
  15,680   World Kitchen, Inc. (b)...............................................   9.35-9.57   10/09/06      15,674,776
                                                                                                          --------------
                                                                                                              45,119,631
                                                                                                          --------------
           CONSUMER/BUSINESS SERVICES (2.9%)
  11,435   Bridge Information Systems,
             Inc. (b)............................................................     10.44     05/29/03      11,432,465
   2,360   Bridge Information Systems,
             Inc. (Revolver) (b).................................................     10.44     05/29/03       2,359,773
  14,610   Bridge Information Systems,
             Inc. (b)............................................................     10.69     05/29/05      14,606,519
  23,357   Buhrmann US Inc.......................................................     10.25     10/26/07      23,442,969
   8,445   InfoUSA, Inc. (b).....................................................     10.19     06/30/06       8,444,514
   4,000   Iron Mountain, Inc....................................................   9.44-9.59   09/15/00       4,032,160
   9,444   Prime Succession, Inc. (b)............................................     11.75     08/01/03       9,444,444
   9,336   Rose Hills Co. (b)....................................................     8.94      12/01/03       9,333,557
                                                                                                          --------------
                                                                                                              83,096,401
                                                                                                          --------------
           CONTAINERS/PACKAGING (2.0%)
   1,764   Graham Packaging Co...................................................     9.75      01/31/06       1,760,306
   8,110   Graham Packaging Co...................................................  10.00-10.06  01/31/07       8,094,530
  10,000   Huntsman Packaging Corp...............................................     9.69      05/31/08       9,776,400
   9,000   Impress Metal Packaging Holdings B.V. (b).............................     9.87      12/31/06       8,977,410
  14,000   LLS Corp. (b).........................................................  9.91-10.02   07/31/06      13,991,390
   4,950   Nexpak Corp. (b)......................................................     10.03     12/31/05       4,949,833
   4,937   Nexpak Corp. (b)......................................................     10.19     12/31/06       4,936,247
   4,988   Tekni-Plex, Inc.......................................................     10.19     06/21/08       5,011,839
                                                                                                          --------------
                                                                                                              57,497,955
                                                                                                          --------------
           DISCOUNT STORES (0.5%)
  15,164   Tuesday Morning Corp. (b).............................................     9.62      12/29/04      15,163,942
                                                                                                          --------------
           DRUGSTORE CHAINS (0.6%)
   9,750   Duane Reade, Inc. (b).................................................   9.44-9.50   02/15/05       9,749,801
   8,107   Duane Reade, Inc. (b).................................................   9.69-9.75   02/15/06       8,107,393
                                                                                                          --------------
                                                                                                              17,857,194
                                                                                                          --------------
           EDUCATION (0.3%)
   9,164   Children's Discovery Centers of America (b)...........................     9.81      06/30/05       9,160,957
                                                                                                          --------------
</TABLE>

                       SEE NOTES TO FINANCIAL STATEMENTS
                                       18
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2000, CONTINUED

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN                                                                            COUPON     MATURITY
THOUSANDS                                                                             RATE       DATE         VALUE
------------------------------------------------------------------------------------------------------------------------
<C>        <S>                                                                     <C>          <C>       <C>
           ELECTRIC UTILITIES (0.3%)
 $10,000   Western Resources, Inc................................................     9.38%     03/17/03  $   10,058,300
                                                                                                          --------------
           ELECTRONIC COMPONENTS (0.8%)
   7,329   Communications Instruments, Inc. (b)..................................  10.31-10.38  03/15/04       7,328,568
   8,314   Dynamic Details, Inc. (b).............................................     9.13      04/22/05       8,313,465
   7,000   Knowles Electronics, Inc. (b).........................................  9.81-10.00   06/29/07       6,998,693
                                                                                                          --------------
                                                                                                              22,640,726
                                                                                                          --------------
           ELECTRONIC PRODUCTION EQUIPMENT (0.2%)
   5,661   Telex Communications, Inc. (b)........................................     10.38     11/06/04       5,660,978
                                                                                                          --------------
           ENERGY (0.5%)
  15,000   AES Texas Funding II, LLC.............................................     9.38      04/24/01      15,002,400
                                                                                                          --------------
           ENGINEERING & CONSTRUCTION (0.5%)
  15,000   Washington Group International, Inc...................................     9.87      07/07/07      15,009,300
                                                                                                          --------------
           ENTERTAINMENT & LEISURE (0.6%)
   7,500   MGM Studios, Inc......................................................     9.44      03/31/06       7,443,750
  10,000   Six Flags, Inc........................................................   9.88-9.93   09/30/05      10,068,100
                                                                                                          --------------
                                                                                                              17,511,850
                                                                                                          --------------
           ENVIRONMENTAL SERVICES (2.2%)
  27,727   Allied Waste Industries, Inc. (b).....................................   9.44-9.75   07/30/06      26,905,714
  27,273   Allied Waste Industries, Inc. (b).....................................   9.69-9.75   07/30/07      26,464,636
  12,804   Environmental Systems Products Holdings, Inc. (b).....................     12.78     09/30/05       7,452,177
   3,746   Stericycle, Inc.......................................................  10.13-12.00  11/10/06       3,768,310
                                                                                                          --------------
                                                                                                              64,590,837
                                                                                                          --------------
           FINANCE - COMMERCIAL (0.3%)
   9,925   Outsourcing Solutions, Inc............................................     10.73     06/10/06       9,898,103
                                                                                                          --------------
           FINANCE/RENTAL/LEASING (2.8%)
   8,990   Blackstone Capital Company II, LLC (b)................................     11.19     11/30/00       8,989,257
  29,800   NationsRent, Inc......................................................     10.06     07/20/06      29,601,234
   5,531   Rent-A-Center, Inc....................................................   8.62-8.63   01/31/06       5,501,407
   6,770   Rent-A-Center, Inc....................................................   8.87-8.88   01/31/07       6,733,196
  14,813   United Rentals, Inc...................................................     9.31      06/30/05      14,590,313
   6,000   United Rentals, Inc...................................................  9.12-10.13   06/30/06       5,933,760
   8,830   Wasserstein/C & A Holdings, LLC (b)...................................     11.19     11/30/00       8,826,792
                                                                                                          --------------
                                                                                                              80,175,959
                                                                                                          --------------
           FINANCIAL PUBLISHING/SERVICES (0.3%)
   7,925   Merrill Communications LLC (b)........................................  10.37-10.39  11/23/07       7,922,265
                                                                                                          --------------
</TABLE>

                       SEE NOTES TO FINANCIAL STATEMENTS
                                       19
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2000, CONTINUED

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN                                                                            COUPON     MATURITY
THOUSANDS                                                                             RATE       DATE         VALUE
------------------------------------------------------------------------------------------------------------------------
<C>        <S>                                                                     <C>          <C>       <C>
           FOOD CHAINS (0.6%)
 $12,344   Big V Supermarkets, Inc. (b)..........................................  10.52-12.38% 08/10/03  $   12,342,149
   4,964   Big V Supermarkets, Inc. (b)..........................................     10.77     11/10/03       4,933,430
                                                                                                          --------------
                                                                                                              17,275,579
                                                                                                          --------------
           FOOD & BEVERAGES (1.5%)
   8,724   Aurora Foods, Inc. (b)................................................     9.87      06/30/05       7,797,223
   4,915   Aurora Foods, Inc. (Revolver) (b).....................................     9.87      06/30/05       4,914,456
   6,930   Aurora Foods, Inc. (b)................................................     10.37     09/30/06       6,929,861
   9,250   B&G Foods, Inc. (b)...................................................     10.52     03/03/06       9,247,040
   7,382   Eagle Family Foods, Inc. (b)..........................................  10.41-10.52  12/31/05       7,381,992
   7,960   Merisant Company......................................................     9.93      03/31/07       8,003,143
                                                                                                          --------------
                                                                                                              44,273,715
                                                                                                          --------------
           HOME BUILDING (0.7%)
  10,945   Formica Corp. (b).....................................................  10.16-10.56  04/30/06      10,943,453
   9,950   Therma-Tru Holdings, Inc. (b).........................................     10.19     05/09/07       9,946,517
                                                                                                          --------------
                                                                                                              20,889,970
                                                                                                          --------------
           HOME FURNISHINGS (0.2%)
   6,769   Sleepmaster L.L.C. (b)................................................     10.62     12/31/06       6,769,436
                                                                                                          --------------
           HOSPITAL/NURSING MANAGEMENT (3.1%)
   5,928   Columbia - HealthOne, LLC (b).........................................     10.13     06/30/05       5,927,527
   6,904   Community Health Systems, Inc.........................................     9.63      12/31/03       6,835,759
   6,904   Community Health Systems, Inc.........................................     10.13     12/31/04       6,840,109
   5,123   Community Health Systems, Inc.........................................     10.38     12/31/05       5,080,047
   8,064   FHC Health Systems, Inc. (b)..........................................     9.71      04/30/05       8,063,810
   8,065   FHC Health Systems, Inc. (b)..........................................     9.96      04/30/06       8,063,730
   4,150   GEAC/Multicare Co., Inc. (b)..........................................     11.75     09/30/04       3,668,744
   1,376   GEAC/Multicare Co., Inc. (b)..........................................     12.00     06/01/05       1,216,659
   4,268   Genesis Health Ventures, Inc. (b).....................................     10.37     06/01/05       3,772,949
   4,289   Genesis Health Ventures, Inc. (b).....................................     10.12     09/30/04       3,791,544
  17,194   Integrated Health Services,
             Inc. (b) (d)........................................................  11.06-13.25  09/30/04       4,814,250
   9,468   Interim Healthcare, Inc. (b)..........................................     13.50     02/29/04       9,468,201
   3,495   Interim Healthcare, Inc. (b)..........................................     14.00     02/28/05       3,494,893
   3,435   Magellan Health Services,
             Inc. (b)............................................................     10.56     02/12/05       3,435,511
   3,435   Magellan Health Services,
             Inc. (b)............................................................     10.81     02/12/06       3,435,511
   7,938   Ventas Realty, Limited Partnership (b)................................     9.37      12/31/02       7,936,468
   3,969   Ventas Realty, Limited Partnership (b)................................     10.37     12/31/05       3,968,115
                                                                                                          --------------
                                                                                                              89,813,827
                                                                                                          --------------
</TABLE>

                       SEE NOTES TO FINANCIAL STATEMENTS
                                       20
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2000, CONTINUED

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN                                                                            COUPON     MATURITY
THOUSANDS                                                                             RATE       DATE         VALUE
------------------------------------------------------------------------------------------------------------------------
<C>        <S>                                                                     <C>          <C>       <C>
           HOTELS/RESORTS (1.5%)
 $ 5,315   Meristar Hospitality Operating Partnership, L.P.......................     8.63%     01/31/04  $    5,312,085
  12,406   Strategic Hotel Funding, L.L.C........................................     10.37     11/16/04      12,457,984
  10,000   Wyndham International, Inc............................................     11.44     06/30/04      10,004,200
  15,000   Wyndham International, Inc............................................     10.44     06/30/06      14,861,250
                                                                                                          --------------
                                                                                                              42,635,519
                                                                                                          --------------
           INDUSTRIAL MACHINERY (1.5%)
  10,000   Flowserve Corp........................................................     10.25     06/30/08      10,030,000
   9,016   Formax, Inc. (b)......................................................  9.12-11.00   06/30/05       9,012,938
   4,950   Mueller Group, Inc....................................................  10.37-10.47  08/16/06       4,962,375
   4,950   Mueller Group, Inc....................................................  10.62-10.72  08/16/07       4,964,701
   3,990   Mueller Group, Inc. (b)...............................................  10.62-10.68  08/16/07       3,988,864
   9,950   SPX Corp..............................................................     8.94      12/31/06       9,984,228
                                                                                                          --------------
                                                                                                              42,943,106
                                                                                                          --------------
           INDUSTRIAL SPECIALTIES (1.7%)
  11,416   Advanced Glassfiber Yarns,
             LLC (b).............................................................     10.16     09/30/05      11,412,557
   5,428   Jet Plastica Industries, Inc. (b).....................................     9.38      12/31/02       5,428,216
   8,891   Jet Plastica Industries, Inc. (b).....................................     9.88      12/31/04       8,890,185
   1,327   Jet Plastica Industries, Inc. (Revolver) (b)..........................   9.31-9.44   12/31/04       1,327,028
   7,444   Metokote Corp. (b)....................................................  10.38-10.81  11/02/05       7,443,788
  15,645   Panolam Industries International, Inc. and Panolam Industries, Ltd.
             (b).................................................................  9.94-11.75   11/24/06      15,663,556
                                                                                                          --------------
                                                                                                              50,165,330
                                                                                                          --------------
           INSURANCE BROKERS/SERVICES (0.5%)
   7,196   Acordia, Inc. (b).....................................................     9.19      12/31/04       7,195,543
   2,880   Willis North America, Inc.............................................     9.19      11/19/07       2,881,210
   2,880   Willis North America, Inc.............................................     9.44      02/19/08       2,881,210
                                                                                                          --------------
                                                                                                              12,957,963
                                                                                                          --------------
           MEDICAL SPECIALTIES (1.4%)
   2,653   Alaris Medical Systems, Inc. (b)......................................     10.19     11/01/03       2,652,500
   2,653   Alaris Medical Systems, Inc. (b)......................................     10.19     11/01/04       2,652,500
   4,168   Alaris Medical Systems, Inc. (b)......................................     10.19     05/01/05       4,167,958
   6,172   Dade Behring, Inc. (b)................................................   9.56-9.69   06/30/06       6,171,214
   6,172   Dade Behring, Inc. (b)................................................   9.81-9.94   06/30/07       6,171,121
   8,935   Inamed Corp. (b)......................................................     9.69      01/31/05       8,934,612
</TABLE>

                       SEE NOTES TO FINANCIAL STATEMENTS
                                       21
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2000, CONTINUED

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN                                                                            COUPON     MATURITY
THOUSANDS                                                                             RATE       DATE         VALUE
------------------------------------------------------------------------------------------------------------------------
<C>        <S>                                                                     <C>          <C>       <C>
 $ 2,455   Medical Specialties Group,
             Inc. (b)............................................................     10.16%    06/30/01  $    2,453,809
   7,136   Medical Specialties Group,
             Inc. (b)............................................................     10.91     06/30/04       7,134,223
                                                                                                          --------------
                                                                                                              40,337,937
                                                                                                          --------------
           MISCELLANEOUS COMMERCIAL SERVICES (0.3%)
   9,950   Encompass Services Corp. (b)..........................................     9.87      05/10/07       9,949,743
                                                                                                          --------------
           MISCELLANEOUS MANUFACTURING (1.2%)
  10,000   Citation Corp. (b)....................................................     10.44     12/01/07       9,996,400
   2,550   Desa International, Inc. (b)..........................................     9.94      11/26/03       2,549,796
   6,615   Desa International, Inc. (b)..........................................  10.08-12.00  11/26/04       6,614,869
   6,365   Doskocil Manufacturing Co. (b)........................................     10.64     09/30/04       6,363,890
   8,000   Insilco Technologies, Inc. (b)........................................     10.38     08/25/07       7,979,920
                                                                                                          --------------
                                                                                                              33,504,875
                                                                                                          --------------
           MOTOR VEHICLES (0.1%)
   3,366   Asbury Automotive Texas Holdings L.L.C. (b)...........................     10.38     03/31/05       3,365,495
                                                                                                          --------------
           MOVIES/ENTERTAINMENT (1.0%)
   9,472   Panavision, Inc. (b)..................................................  10.16-10.61  03/31/05       9,470,833
  22,147   United Artists Theatre Co. (b)........................................  10.87-12.75  04/21/05      18,669,617
                                                                                                          --------------
                                                                                                              28,140,450
                                                                                                          --------------
           MULTI-SECTOR COMPANIES (1.0%)
  28,000   Mafco Finance Corp. (b)...............................................     11.68     06/15/01      27,799,520
                                                                                                          --------------
           OFFICE EQUIPMENT/SUPPLIES (1.0%)
  14,813   Global Imaging Systems, Inc. (b)......................................     9.87      06/30/06      14,812,204
  17,608   US Office Products Co. (b)............................................     10.13     06/09/06      13,258,458
                                                                                                          --------------
                                                                                                              28,070,662
                                                                                                          --------------
           OILFIELD SERVICES/EQUIPMENT (0.4%)
   9,974   US Synthetic Corp. (b)................................................  10.13-10.18  05/31/05       9,970,051
                                                                                                          --------------
           OIL & GAS PIPELINES (0.2%)
   7,080   Transmontaigne, Inc. (b)..............................................     10.16     06/30/06       7,077,739
                                                                                                          --------------
           OTHER CONSUMER SERVICES (0.5%)
   7,800   PCA International, Inc. (b)...........................................     9.63      08/25/05       7,800,000
   7,823   Volume - Services, Inc. (b)...........................................  10.44-12.25  12/03/06       7,820,109
                                                                                                          --------------
                                                                                                              15,620,109
                                                                                                          --------------
           OTHER METALS/MINERALS (0.6%)
   9,921   Better Minerals & Aggregates Company (b)..............................  10.31-12.00  09/30/07       9,920,657
   7,561   CII Carbon, Inc. (b)..................................................   9.40-9.43   06/25/08       7,558,489
                                                                                                          --------------
                                                                                                              17,479,146
                                                                                                          --------------
</TABLE>

                       SEE NOTES TO FINANCIAL STATEMENTS
                                       22
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2000, CONTINUED

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN                                                                            COUPON     MATURITY
THOUSANDS                                                                             RATE       DATE         VALUE
------------------------------------------------------------------------------------------------------------------------
<C>        <S>                                                                     <C>          <C>       <C>
           PHARMACEUTICALS: OTHER (0.0%)
 $   972   King Pharmaceuticals, Inc.............................................     10.37%    12/22/06  $      973,017
                                                                                                          --------------
           PRINTING/PUBLISHING (1.8%)
   6,304   Mail-Well I Corp. (b).................................................     9.16      02/22/07       6,301,684
  10,771   The Sheridan Group, Inc. (b)..........................................     9.94      01/30/05      10,770,974
  19,854   Vertis, Inc...........................................................  10.38-10.44  12/07/08      19,852,633
   3,255   Von Hoffman Press, Inc. (b)...........................................     8.91      05/30/04       3,254,381
  10,582   Von Hoffman Press, Inc. (b)...........................................     8.91      05/30/05      10,578,946
                                                                                                          --------------
                                                                                                              50,758,618
                                                                                                          --------------
           PUBLISHING: BOOKS/MAGAZINES (1.5%)
  18,648   Advanstar Communications, Inc.........................................     9.12      04/30/05      18,647,901
   4,929   Advanstar Communications, Inc.........................................     9.62      06/30/07       4,928,994
  10,000   American Media Operations, Inc........................................  10.16-10.49  04/01/07      10,014,500
   9,150   Ziff Davis Media, Inc.................................................     10.26     03/31/07       9,176,561
                                                                                                          --------------
                                                                                                              42,767,956
                                                                                                          --------------
           PUBLISHING: NEWSPAPERS (0.9%)
   4,875   21st Century Newspapers,
             Inc. (b)............................................................     9.25      09/15/05       4,874,903
  17,500   Hollinger International Publishing, Inc. (b)..........................     9.81      12/31/04      17,499,825
   3,433   Hollinger International Publishing, Inc. (b)..........................     9.75      09/30/05       3,439,067
                                                                                                          --------------
                                                                                                              25,813,795
                                                                                                          --------------
           PULP & PAPER (1.1%)
   7,511   Alabama Pine Pulp Co., Inc. (b).......................................     10.62     06/30/03       7,135,259
   3,679   Alabama Pine Pulp Co.,
             Inc. (b) (e)........................................................     10.62     06/30/05       1,246,515
   4,927   Alabama Pine Pulp Co.,
             Inc. (b) (e)........................................................     10.75     12/31/08         203,474
   7,786   Alabama River Newsprint Co. (Participation: Toronto Dominion Bank) (b)
             (c).................................................................   8.69-8.75   12/31/02       7,521,078
   6,340   Crown Paper Co. (Revolver) (b)........................................     13.00     08/22/02       6,340,045
   8,082   Crown Paper Co. (b)...................................................     10.50     08/22/03       8,081,536
                                                                                                          --------------
                                                                                                              30,527,907
                                                                                                          --------------
           RECREATIONAL PRODUCTS/TOYS (0.8%)
   7,187   Ritvik Toys, Inc. (b).................................................     10.19     02/08/03       7,184,591
   7,187   Ritvik Toys, Inc. (b).................................................     10.69     02/08/04       7,184,447
     365   Spalding Holdings Corp. (b)...........................................     9.21      09/30/03         364,919
   4,007   Spalding Holdings Corp. (Revolver) (b)................................  9.21-11.00   09/30/03       4,007,327
   1,828   Spalding Holdings Corp. (b)...........................................     9.71      09/30/04       1,827,678
   1,828   Spalding Holdings Corp. (b)...........................................     10.21     09/30/05       1,827,641
</TABLE>

                       SEE NOTES TO FINANCIAL STATEMENTS
                                       23
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2000, CONTINUED

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN                                                                            COUPON     MATURITY
THOUSANDS                                                                             RATE       DATE         VALUE
------------------------------------------------------------------------------------------------------------------------
<C>        <S>                                                                     <C>          <C>       <C>
 $ 1,052   Spalding Holdings Corp. (b)...........................................     10.71%    03/30/06  $    1,052,218
                                                                                                          --------------
                                                                                                              23,448,821
                                                                                                          --------------
           RESTAURANTS (0.1%)
   4,101   Captain D's Inc.......................................................     10.62     12/31/01       4,018,110
                                                                                                          --------------
           RETAIL-SPECIALTY (0.8%)
   7,434   CSK Auto, Inc.........................................................     8.44      10/31/03       7,425,827
   8,702   HMV Media Group PLC (b)...............................................     9.41      02/25/06       8,699,006
   5,998   HMV Media Group PLC (b)...............................................     10.23     08/25/06       5,997,840
                                                                                                          --------------
                                                                                                              22,122,673
                                                                                                          --------------
           SEMICONDUCTORS (1.5%)
   6,275   Semiconductor Components Industries, LLC..............................     10.19     08/04/06       6,324,434
  16,758   Semiconductor Components Industries, LLC..............................  9.69-10.44   08/04/07      16,831,729
  20,000   Viasystems, Inc.......................................................   9.64-9.66   03/31/07      19,980,000
                                                                                                          --------------
                                                                                                              43,136,163
                                                                                                          --------------
           SERVICES TO THE HEALTH INDUSTRY (2.1%)
  11,194   Alliance Imaging, Inc.................................................     9.94      11/02/07      11,072,799
  13,806   Alliance Imaging, Inc.................................................     10.19     11/02/08      13,656,451
  19,367   Quest Diagnostics, Inc................................................  9.69-10.48   06/15/06      19,430,475
  17,261   Unilab Corp. (b)......................................................     10.56     11/23/06      17,259,105
                                                                                                          --------------
                                                                                                              61,418,830
                                                                                                          --------------
           SPECIALTY INSURANCE (0.2%)
   2,450   BRW Acquisition, Inc. (b).............................................     9.19      07/10/06       2,449,682
   2,450   BRW Acquisition, Inc. (b).............................................     9.44      07/10/07       2,449,608
                                                                                                          --------------
                                                                                                               4,899,290
                                                                                                          --------------
           SPECIALTY STORES (1.0%)
   4,850   Caribbean Petroleum, LP (b)...........................................     10.14     09/30/05       4,848,351
   3,269   Cumberland Farms, Inc. (Participation Merrill Lynch & Co., Inc.) (b)
             (c).................................................................     11.00     12/31/00       3,268,491
   7,453   Petro Stopping Centers, L.P. (b)......................................     9.66      07/23/06       7,450,889
  12,227   The Pantry, Inc.......................................................     10.13     01/31/06      12,227,346
   1,519   The Pantry, Inc.......................................................     10.38     07/31/06       1,519,440
                                                                                                          --------------
                                                                                                              29,314,517
                                                                                                          --------------
           STEEL (0.9%)
  12,181   ISPAT Inland, L.P.....................................................     8.87      07/16/05      12,180,529
  12,243   ISPAT Inland, L.P.....................................................     9.37      07/16/06      12,243,189
                                                                                                          --------------
                                                                                                              24,423,718
                                                                                                          --------------
</TABLE>

                       SEE NOTES TO FINANCIAL STATEMENTS
                                       24
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2000, CONTINUED

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN                                                                            COUPON     MATURITY
THOUSANDS                                                                             RATE       DATE         VALUE
------------------------------------------------------------------------------------------------------------------------
<C>        <S>                                                                     <C>          <C>       <C>
           TELECOMMUNICATION EQUIPMENT (2.4%)
 $15,000   American Tower, L.P., American Towers, Inc. and ATC
             Teleports, Inc......................................................     9.98%     12/31/07  $   15,095,400
   4,214   Channel Master, Inc. (b)..............................................  9.14-11.00   10/10/05       4,213,768
   7,000   Crown Castle Operating Co.............................................     9.38      03/15/08       7,022,820
  21,000   Pinnacle Towers, Inc. (b).............................................     9.41      06/30/07      20,991,810
  21,674   Superior Telecom, Inc.................................................     10.44     11/27/05      21,521,315
                                                                                                          --------------
                                                                                                              68,845,113
                                                                                                          --------------
           TELECOMMUNICATIONS (6.8%)
  22,000   360network holdings (USA) inc.........................................     13.00     12/31/07      21,890,000
  10,526   Alaska Communications Systems Holdings, Inc...........................     9.63      11/14/07      10,521,053
   9,474   Alaska Communications Systems Holdings, Inc...........................     9.88      05/14/08       9,468,947
   7,406   Davel Financing Co., LLC (b)..........................................     10.87     06/23/05       1,185,000
   7,452   Fairpoint Communications, Inc.........................................   9.25-9.44   03/31/06       7,451,688
   9,750   Fairpoint Communications, Inc.........................................  9.69-11.25   03/31/07       9,750,137
  20,000   Global Crossing Holdings, Ltd.........................................     9.38      06/30/06      20,135,800
  25,000   KMC Telecom, Inc. (b).................................................     12.00     07/01/07      24,998,000
  10,000   Level 3 Communications, Inc. (b)......................................     10.48     01/15/08      10,034,400
  20,000   McleodUSA Inc.........................................................     9.63      05/30/08      20,045,400
  17,000   XO Communications, Inc................................................     9.94      06/30/07      16,962,770
   4,058   Teligent, Inc. (b)....................................................     9.51      06/30/06       4,058,174
  10,000   Teligent, Inc. (b)....................................................     9.57      06/30/06       9,998,300
  30,000   WCI Capital Corp......................................................     11.43     09/30/07      29,236,400
                                                                                                          --------------
                                                                                                             195,736,069
                                                                                                          --------------
           TEXTILES (1.0%)
   7,960   Globe Manufacturing, Inc. (b).........................................     12.25     07/31/06       6,161,040
   4,198   Joan Fabrics Corp.....................................................     9.44      06/30/05       4,196,918
   2,174   Joan Fabrics Corp.....................................................     9.44      06/30/06       2,173,888
  10,802   Polymer Group, Inc. (b)...............................................     10.13     12/20/05      10,802,331
   4,000   Polymer Group, Inc. (b)...............................................     10.38     12/30/06       3,999,960
                                                                                                          --------------
                                                                                                              27,334,137
                                                                                                          --------------
           TRANSPORTATION (0.7%)
   9,925   Allied Worldwide, Inc. (b)............................................     10.64     11/18/07       9,923,214
   5,244   Quality Distribution, Inc. (b)........................................     8.91      08/28/05       5,244,089
   4,484   Quality Distribution, Inc. (b)........................................     9.14      02/28/06       4,481,628
                                                                                                          --------------
                                                                                                              19,648,931
                                                                                                          --------------
           WIRELESS COMMUNICATIONS (6.1%)
  13,547   Arch Paging, Inc. (b).................................................     13.63     06/30/06      13,545,609
  15,000   Cook Inlet/VoiceStream Operating Company, LLC.........................     10.63     12/31/08      15,157,500
</TABLE>

                       SEE NOTES TO FINANCIAL STATEMENTS
                                       25
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2000, CONTINUED

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN                                                                            COUPON     MATURITY
THOUSANDS                                                                             RATE       DATE         VALUE
------------------------------------------------------------------------------------------------------------------------
<C>        <S>                                                                     <C>          <C>       <C>
 $22,500   Nextel Finance Co.....................................................     10.13%    06/30/08  $   22,695,975
  22,500   Nextel Finance Co.....................................................     10.31     12/31/08      22,695,975
  15,000   Nextel Partners Operating Corp........................................     11.41     01/29/08      14,872,350
  10,000   Nextel Partners Operating Corp........................................     11.22     07/29/08      10,041,700
  10,355   Powertel PCS, Inc. (b)................................................     9.69      12/31/08      10,352,948
  13,805   Powertel PCS, Inc. (Participation:
             Goldman Sachs & Co.) (c) (b)........................................     9.69      12/31/08      13,804,906
  15,000   VoiceStream PCS Holding L.L.C. & Omnipoint Finance, LLC...............     9.66      02/25/09      14,963,700
  25,000   VoiceStream PCS Holding L.L.C. & Omnipoint Finance, LLC...............     9.64      06/30/09      24,870,750
  12,500   Western Wireless Corp.................................................   9.38-9.44   09/30/08      12,552,500
                                                                                                          --------------
                                                                                                             175,553,913
                                                                                                          --------------

           TOTAL SENIOR COLLATERALIZED TERM LOANS
           (COST $2,523,383,252)........................................................................   2,477,544,228
                                                                                                          --------------
           SENIOR NOTES (b) (f) (0.3%)
           APPAREL/FOOTWEAR (0.0%)
   1,613   London Fog Industries,
             Inc.................................................................     10.00     02/27/03         629,121
                                                                                                          --------------
           CABLE/SATELLITE TV (0.3%)
   9,563   Supercanal Holdings S.A. (Argentina)..................................     11.25     10/12/02       7,880,297
                                                                                                          --------------

           TOTAL SENIOR NOTES
           (COST $11,452,484)...........................................................................       8,509,418
                                                                                                          --------------
</TABLE>

<TABLE>
<CAPTION>
NUMBER OF
 SHARES
---------
<C>        <S>                                                                                        <C>
           COMMON STOCKS (g) (0.1%)
           APPAREL/FOOTWEAR (0.0%)
 129,050   London Fog Industries, Inc. (Restricted).................................................        --
                                                                                                      --------------
           AUTOMOTIVE AFTERMARKET (0.0%)
 100,632   Safelite Glass Corp. (b).................................................................          58,636
   6,793   Safelite Realty Corp. (b)................................................................           3,958
                                                                                                      --------------
                                                                                                              62,594
                                                                                                      --------------
           DATA PROCESSING SERVICES (0.1%)
 186,430   DecisionOne Corp. (b)....................................................................       1,414,286
                                                                                                      --------------

           TOTAL COMMON STOCKS
           (COST $3,735,788)........................................................................       1,476,880
                                                                                                      --------------
</TABLE>

                       SEE NOTES TO FINANCIAL STATEMENTS
                                       26
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2000, CONTINUED

<TABLE>
<CAPTION>
NUMBER OF                                                                                             EXPIRATION
WARRANTS                                                                                                 DATE         VALUE
--------------------------------------------------------------------------------------------------------------------------------
<C>        <S>                                                                                        <C>         <C>
           WARRANT (b) (g) (0.0%)
           APPAREL/FOOTWEAR
   7,931   London Fog Industries, Inc. (Restricted) (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 (13.0%)
           COMMERCIAL PAPER (h) (12.4%)
           FINANCE -- AUTOMOTIVE (6.0%)
$ 40,000   Ford Motor Credit Co..............................................................   6.49%  10/05/00  $   39,963,944
  52,000   Ford Motor Credit Co. (i).........................................................   6.51   10/12/00      51,887,160
  20,000   General Motors Acceptance Corp....................................................   6.00   10/02/00      19,993,333
  60,000   General Motors Acceptance Corp....................................................   6.48   10/04/00      59,956,800
                                                                                                                 --------------
                                                                                                                    171,801,237
                                                                                                                 --------------
           FINANCE -- CONSUMER (4.2%)
 102,000   American Express Credit Corp......................................................   6.50   10/03/00     101,944,750
  18,000   American Express Credit Corp......................................................   6.56   10/06/00      17,980,320
                                                                                                                 --------------
                                                                                                                    119,925,070
                                                                                                                 --------------
           FINANCIAL PUBLISHING/SERVICES (2.2%)
  65,000   General Electric Capital Corp.....................................................   6.49   10/04/00      64,953,128
                                                                                                                 --------------

           TOTAL COMMERCIAL PAPER
           (COST $356,743,598).................................................................................     356,679,435
                                                                                                                 --------------

           REPURCHASE AGREEMENT (0.6%)
  18,718   The Bank of New York (dated 09/29/00; proceeds $18,727,472) (j)
             (COST $18,717,723)..............................................................   6.25   10/02/00      18,717,723
                                                                                                                 --------------

           TOTAL SHORT-TERM INVESTMENTS
           (COST $375,461,321).................................................................................     375,397,158
                                                                                                                 --------------
</TABLE>

                       SEE NOTES TO FINANCIAL STATEMENTS
                                       27
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2000, CONTINUED

<TABLE>

                                                                                                                 VALUE
---------------------------------------------------------------------------------------------------------------------------
<C>        <S>                                                                               <C>   <C>       <C>
</TABLE>

<TABLE>
<S>                                                                                       <C>     <C>
TOTAL INVESTMENTS
(COST $2,915,755,082) (k)...............................................................   99.3%  $ 2,862,927,684

OTHER ASSETS IN EXCESS OF LIABILITIES...................................................    0.7        21,401,930
                                                                                          -----   ---------------

NET ASSETS..............................................................................  100.0%  $ 2,884,329,614
                                                                                          -----   ---------------
                                                                                          -----   ---------------
</TABLE>

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

(a)  Floating rate securities. Interest rates shown are those in effect at
     September 30, 2000.
(b)  Valued using fair value procedures -- total aggregate value is
     $1,395,330,385.
(c)  Participation interests were acquired through the financial institutions
     indicated parenthetically.
(d)  Non-income producing security; loan in default.
(e)  Payment-in-kind security.
(f)  Non-income producing security; note in default.
(g)  Non-income producing securities.
(h)  Purchased on a discount basis. The interest rate shown has been adjusted to
     reflect a money market equivalent yield.
(i)  A portion of this security is segregated in connection with unfunded loan
     commitments.
(j)  Collateralized by $18,753,171 Federal Home Loan Mortgage Corp. 7.00% due
     02/15/03 valued at $19,092,078.
(k)  The aggregate cost for federal income tax purposes approximates the
     aggregate cost for book purposes. The aggregate gross unrealized
     appreciation is $5,376,816 and the aggregate gross unrealized depreciation
     is $58,204,214, resulting in net unrealized depreciation of $52,827,398.

                       SEE NOTES TO FINANCIAL STATEMENTS
                                       28
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000

<TABLE>
<S>                                                                                           <C>
ASSETS:
Investments in securities, at value (cost $2,915,755,082)...................................  $2,862,927,684
Cash........................................................................................       2,699,955
Receivable for:
    Interest................................................................................      24,803,642
    Shares of beneficial interest sold......................................................       5,410,414
    Investments sold........................................................................         124,478
Prepaid expenses and other assets...........................................................       1,066,150
                                                                                              --------------

     TOTAL ASSETS...........................................................................   2,897,032,323
                                                                                              --------------

LIABILITIES:
Payable for:
    Investment advisory fee.................................................................       2,002,816
    Dividends to shareholders...............................................................       1,371,494
    Administration fee......................................................................         593,862
Accrued expenses and other payables.........................................................         433,401
Deferred loan fees..........................................................................       8,301,136
Commitments and contingencies (Note 6)......................................................        --
                                                                                              --------------

     TOTAL LIABILITIES......................................................................      12,702,709
                                                                                              --------------

     NET ASSETS.............................................................................  $2,884,329,614
                                                                                              ==============

COMPOSITION OF NET ASSETS:
Paid-in-capital.............................................................................  $2,948,052,125
Net unrealized depreciation.................................................................     (52,827,398)
Accumulated undistributed net investment income.............................................       2,777,873
Accumulated net realized loss...............................................................     (13,672,986)
                                                                                              --------------

     NET ASSETS.............................................................................  $2,884,329,614
                                                                                              ==============

NET ASSET VALUE PER SHARE,
  296,722,545 SHARES OUTSTANDING (UNLIMITED SHARES AUTHORIZED OF $.01 PAR VALUE)............           $9.72
                                                                                              ==============
</TABLE>

                       SEE NOTES TO FINANCIAL STATEMENTS
                                       29
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
FINANCIAL STATEMENTS, CONTINUED

STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2000

<TABLE>
<S>                                                                                             <C>
NET INVESTMENT INCOME

INCOME
Interest......................................................................................  $251,170,051
Facility, amendment and other loan fees.......................................................     5,646,808
Other.........................................................................................       155,899
                                                                                                ------------

     TOTAL INCOME.............................................................................   256,972,758
                                                                                                ------------

EXPENSES
Investment advisory fee.......................................................................    22,919,576
Administration fee............................................................................     6,771,743
Transfer agent fees and expenses..............................................................     1,049,805
Professional fees.............................................................................       896,208
Registration fees.............................................................................       368,280
Shareholder reports and notices...............................................................       357,746
Facility fees.................................................................................       162,005
Custodian fees................................................................................       126,096
Trustees' fees and expenses...................................................................        17,197
Other.........................................................................................       193,717
                                                                                                ------------

     TOTAL EXPENSES...........................................................................    32,862,373

Less: expense offset..........................................................................      (122,585)
                                                                                                ------------

     NET EXPENSES.............................................................................    32,739,788
                                                                                                ------------

     NET INVESTMENT INCOME....................................................................   224,232,970
                                                                                                ------------

NET REALIZED AND UNREALIZED LOSS:
Net realized loss.............................................................................    (5,523,905)
Net change in unrealized depreciation.........................................................   (38,361,789)
                                                                                                ------------

     NET LOSS.................................................................................   (43,885,694)
                                                                                                ------------

NET INCREASE..................................................................................  $180,347,276
                                                                                                ============
</TABLE>

                       SEE NOTES TO FINANCIAL STATEMENTS
                                       30
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
FINANCIAL STATEMENTS, CONTINUED

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
                                                                         FOR THE YEAR        FOR THE YEAR
                                                                            ENDED               ENDED
                                                                      SEPTEMBER 30, 2000  SEPTEMBER 30, 1999
------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                 <C>
INCREASE (DECREASE) IN NET ASSETS:

OPERATIONS:
Net investment income...............................................    $  224,232,970      $  161,147,785
Net realized gain (loss)............................................        (5,523,905)          1,067,708
Net change in unrealized depreciation...............................       (38,361,789)        (13,449,451)
                                                                        --------------      --------------

     NET INCREASE...................................................       180,347,276         148,766,042

Dividends from net investment income................................      (221,847,859)       (159,065,743)
Net increase from transactions in shares of beneficial interest.....       411,871,174         527,549,296
                                                                        --------------      --------------

     NET INCREASE...................................................       370,370,591         517,249,595

NET ASSETS:
Beginning of period.................................................     2,513,959,023       1,996,709,428
                                                                        --------------      --------------

     END OF PERIOD
    (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $2,777,873 AND
    $704,520, RESPECTIVELY).........................................    $2,884,329,614      $2,513,959,023
                                                                        ==============      ==============
</TABLE>

                       SEE NOTES TO FINANCIAL STATEMENTS
                                       31
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
FINANCIAL STATEMENTS, CONTINUED

STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 2000

<TABLE>
<S>                                                                                          <C>
INCREASE (DECREASE) IN CASH:

CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net investment income......................................................................  $   224,232,970
Adjustments to reconcile net investment income to net cash provided by operating
  activities:
Increase in receivables and other assets related to operations.............................       (7,779,372)
Increase in payables related to operations.................................................          451,183
Net loan fees received.....................................................................        6,014,732
Amortization of loan fees..................................................................       (5,646,808)
Accretion of discounts.....................................................................         (214,480)
                                                                                             ---------------

     NET CASH PROVIDED BY OPERATING ACTIVITIES.............................................      217,058,225
                                                                                             ---------------

CASH FLOWS USED FOR INVESTING ACTIVITIES:
Purchases of investments...................................................................   (1,220,677,158)
Principal repayments/sales of investments..................................................    1,088,204,725
Net sales/maturities of short-term investments.............................................     (275,511,011)
                                                                                             ---------------

     NET CASH USED FOR INVESTING ACTIVITIES................................................     (407,983,444)
                                                                                             ---------------

CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Shares of beneficial interest sold.........................................................      594,981,844
Shares tendered............................................................................     (280,275,046)
Dividends from net investment income (net of reinvested dividends of $96,880,027)..........     (124,816,712)
                                                                                             ---------------

     NET CASH PROVIDED BY FINANCING ACTIVITIES.............................................      189,890,086
                                                                                             ---------------

NET DECREASE IN CASH.......................................................................       (1,035,133)

CASH BALANCE AT BEGINNING OF YEAR..........................................................        3,735,088
                                                                                             ---------------

CASH BALANCE AT END OF YEAR................................................................  $     2,699,955
                                                                                             ===============
</TABLE>

                       SEE NOTES TO FINANCIAL STATEMENTS
                                       32
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000

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) Certain senior collateralized loans ("Senior
Loans") are valued based on quotations received from an independent pricing
service; (2) all other Senior Loans 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
of the Senior Loan. 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 these Senior Loans existed; (3) portfolio securities
for which over-the-counter market quotations are readily available are valued at
the latest bid price; (4) 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 (5) short-term debt
securities having a maturity date of more than sixty days at time of purchase
are valued on a mark-to-market basis until sixty days prior to maturity and
thereafter at amortized cost based on their value on the 61st day. Short-term
debt securities having a maturity date of sixty days or less at the time of
purchase are valued at amortized cost.

                                       33
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000, CONTINUED

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 tax purposes are reported as distributions of paid-in-capital.

                                       34
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000, CONTINUED

2. INVESTMENT ADVISORY/ADMINISTRATION AGREEMENTS

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; 0.825% to the portion of daily net assets exceeding $1.5 billion
but not exceeding $2.5 billion; and 0.80% to the portion of daily net assets
exceeding $2.5 billion, but not exceeding $3 billion. Effective May 1, 2000, the
Agreement was amended to reduce the annual rate to 0.775% of the portion of
daily net assets in excess of $3 billion.

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.

3. 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,
2000 aggregated $1,220,677,158 and $1,087,893,769, respectively.

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, 2000, the Investment Advisor has informed the Trust that it
received approximately $3,361,000 in early withdrawal charges.

                                       35
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000, CONTINUED

Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Advisor,
Administrator and Distributor, is the Trust's transfer agent. At September 30,
2000, the Trust had transfer agent fees and expenses payable of approximately
$1,900.

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, 2000
included in Trustees' fees and expenses in the Statement of Operations amounted
to $5,863. At September 30, 2000, the Trust had an accrued pension liability of
$52,664 which is included in accrued expenses in the Statement of Assets and
Liabilities.

4. FEDERAL INCOME TAX STATUS

During the year ended September 30, 2000, the Trust utilized approximately
$63,000 of its net capital loss carryover. At September 30, 2000, the Trust had
a net capital loss carryover of approximately $7,660,000 which will be available
through September 30, 2007 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 loss of
approximately $5,362,000 during fiscal 2000.

As of September 30, 2000, the Trust had temporary book/tax differences primarily
attributable to post-October losses 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 and
accumulated net realized loss was credited $311,758.

                                       36
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000, CONTINUED

5. SHARES OF BENEFICIAL INTEREST

Transactions in shares of beneficial interest were as follows:

<TABLE>
<CAPTION>
                                                                     SHARES         AMOUNT
                                                                   -----------  --------------
<S>                                                                <C>          <C>
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
Shares sold......................................................   60,576,915     595,266,193
Shares issued to shareholders for reinvestment of dividends......    9,863,237      96,880,027
Shares tendered (four quarterly tender offers)...................  (28,531,603)   (280,275,046)
                                                                   -----------  --------------
Balance, September 30, 2000......................................  296,722,545  $2,948,052,127
                                                                   ===========  ==============
</TABLE>

On October 26, 2000, the Trustees approved a tender offer to purchase up to
20 million shares of beneficial interest to commence on November 15, 2000.

6. COMMITMENTS AND CONTINGENCIES

As of September 30, 2000, the Trust had unfunded loan commitments pursuant to
the following loan agreements:

<TABLE>
<CAPTION>
                                                                    UNFUNDED
BORROWER                                                           COMMITMENT
--------                                                           -----------
<S>                                                                <C>
Arena Brands, Inc................................................  $   664,583
Aurora Foods, Inc................................................      126,752
Bridge Information Systems, Inc..................................      417,437
Crown Paper Co...................................................      413,042
Jet Plastica Industries, Inc.....................................    1,375,633
Nassau Broadcasting Partners I, LLC (Term C).....................    2,800,000
Spalding Holdings Corp...........................................    1,842,353
Teligent, Inc. (Multi-Draw)......................................    2,608,696
Teligent, Inc. (Revolver)........................................    3,333,333
World Kitchen Consumer Products, Inc.............................       20,727
                                                                   -----------
                                                                   $13,602,556
                                                                   ===========
</TABLE>

The total value of securities segregated for unfunded loan commitments was
$19,956,600.

                                       37
<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 YEAR ENDED SEPTEMBER 30,
                             ----------------------------------------------------------
                                2000         1999        1998        1997        1996
---------------------------------------------------------------------------------------
<S>                          <C>            <C>         <C>         <C>         <C>
SELECTED PER SHARE DATA:

Net asset value, beginning
 of period.................  $     9.87     $  9.91     $  9.95     $  9.94     $  9.99
                             ----------     -------     -------     -------     -------

Income (loss) from
 investment operations:
   Net investment income...        0.82        0.70        0.71        0.75        0.74
   Net realized and
   unrealized gain
   (loss)..................       (0.16)      (0.05)      (0.03)      --          (0.04)
                             ----------     -------     -------     -------     -------

Total income from
 investment operations.....        0.66        0.65        0.68        0.75        0.70
                             ----------     -------     -------     -------     -------

Less dividends and
 distributions from:
   Net investment income...       (0.81)      (0.69)      (0.72)      (0.74)      (0.75)
   Net realized gain.......      --           --          --          --          --
                             ----------     -------     -------     -------     -------

Total dividends and
 distributions.............       (0.81)      (0.69)      (0.72)      (0.74)      (0.75)
                             ----------     -------     -------     -------     -------

Net asset value, end of
 period....................  $     9.72     $  9.87     $  9.91     $  9.95     $  9.94
                             ==========     =======     =======     =======     =======

TOTAL RETURN+..............        6.87%       6.72%       7.14%       7.78%       7.25%

RATIOS TO AVERAGE NET
ASSETS:
Expenses...................        1.21%       1.22%       1.29%       1.40%       1.46%

Net investment income......        8.26%       7.02%       7.17%       7.53%       7.50%

SUPPLEMENTAL DATA:
Net assets, end of period,
 in thousands..............  $2,884,330     $2,513,959  $1,996,709  $1,344,603  $939,471

Portfolio turnover rate....          45%         44%         68%         86%         72%

<CAPTION>
                                          FOR THE YEAR ENDED SEPTEMBER 30,
                             ----------------------------------------------------------
                               1995        1994        1993         1992         1991
---------------------------  ----------------------------------------------------------
<S>                          <C>          <C>         <C>         <C>          <C>
SELECTED PER SHARE DATA:
Net asset value, beginning
 of period.................  $  10.00     $  9.91     $  9.99     $  10.00     $  10.00
                             --------     -------     -------     --------     --------
Income (loss) from
 investment operations:
   Net investment income...      0.82        0.62        0.55         0.62         0.84
   Net realized and
   unrealized gain
   (loss)..................      0.01        0.09       (0.08)       (0.01)       --
                             --------     -------     -------     --------     --------
Total income from
 investment operations.....      0.83        0.71        0.47         0.61         0.84
                             --------     -------     -------     --------     --------
Less dividends and
 distributions from:
   Net investment income...     (0.81)      (0.62)      (0.55)       (0.62)       (0.84)
   Net realized gain.......     (0.03)      --          --           --           --
                             --------     -------     -------     --------     --------
Total dividends and
 distributions.............     (0.84)      (0.62)      (0.55)       (0.62)       (0.84)
                             --------     -------     -------     --------     --------
Net asset value, end of
 period....................  $   9.99     $ 10.00     $  9.91     $   9.99     $  10.00
                             ========     =======     =======     ========     ========
TOTAL RETURN+..............      8.57%       7.32%       4.85%        6.23%        8.77%
RATIOS TO AVERAGE NET
ASSETS:
Expenses...................      1.52%       1.60%       1.45%        1.47%        1.52%
Net investment income......      8.11%       6.14%       5.53%        6.14%        8.23%
SUPPLEMENTAL DATA:
Net assets, end of period,
 in thousands..............  $521,361     $305,034    $311,479    $413,497     $479,941
Portfolio turnover rate....       102%        147%         92%          46%          42%
</TABLE>

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

 +   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.

                       SEE NOTES TO FINANCIAL STATEMENTS
                                       38
<PAGE>

MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
INDEPENDENT AUDITORS' REPORT

TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST:

We have audited the accompanying statement of assets and liabilities of Morgan
Stanley Dean Witter Prime Income Trust (the "Trust"), including the portfolio of
investments, as of September 30, 2000, and the related statements of operations
and cash flows, changes in net assets and the financial highlights for the year
then ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit. The statement of changes in net assets for the year ended September 30,
1999 and the financial highlights for each of the respective periods ended
September 30, 1999 were audited by other independent accountants whose report,
dated November 15, 1999, expressed an unqualified opinion on that statement and
the financial highlights.

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

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

Deloitte & Touche LLP
NEW YORK, NEW YORK
NOVEMBER 13, 2000

                                       39
<PAGE>

MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
CHANGE IN INDEPENDENT ACCOUNTANTS

On July 1, 2000 PrincewaterhouseCoopers LLP resigned as independent accountants
of the Trust.

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

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

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

                                       40
<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
                                       41
<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
                                       42
<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
                                       43
<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
                                       44
<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
                                       45
<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
                                       46
<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
                                       47
<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
                                       48
<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
                                       49
<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
                                       50
<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
                                       51
<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
                                       52
<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
                                       53
<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
                                       54
<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
                                       55
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
FINANCIAL STATEMENTS, CONTINUED

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
                                                                         FOR THE YEAR        FOR THE YEAR
                                                                            ENDED               ENDED
                                                                      SEPTEMBER 30, 1999  SEPTEMBER 30, 1998
------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                 <C>
INCREASE (DECREASE) IN NET ASSETS:

OPERATIONS:
Net investment income...............................................    $  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
                                       56
<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
                                       57
<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

                                       58
<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

                                       59
<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.

                                       60
<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.

                                       61
<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.

                                       62
<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 YEAR ENDED SEPTEMBER 30,
                            ----------------------------------------------------------------------------------------------
                               1999        1998        1997       1996      1995      1994      1993      1992      1991
--------------------------------------------------------------------------------------------------------------------------
<S>                         <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
                            ----------  ----------  ----------  --------    ------  --------  --------  --------  --------

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
   Net realized and
   unrealized gain
   (loss)..................      (0.05)      (0.03)     --         (0.04)     0.01      0.09     (0.08)    (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
                            ----------  ----------  ----------  --------    ------  --------  --------  --------  --------

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)
   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)
                            ----------  ----------  ----------  --------    ------  --------  --------  --------  --------

Net asset value, end of
 period.................... $     9.87  $     9.91  $     9.95  $   9.94    $ 9.99  $  10.00  $   9.91  $   9.99  $  10.00
                            ==========  ==========  ==========  ========    ======  ========  ========  ========  ========

TOTAL RETURN+..............       6.72%       7.14%       7.78%     7.25%     8.57%     7.32%     4.85%     6.23%     8.77%

RATIOS TO AVERAGE NET
ASSETS:
Expenses...................       1.22%       1.29%       1.40%     1.46%     1.52%     1.60%     1.45%     1.47%     1.52%

Net investment income......       7.02%       7.17%       7.53%     7.50%     8.11%     6.14%     5.53%     6.14%     8.23%

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

Portfolio turnover rate....         44%         68%         86%       72%      102%      147%       92%       46%       42%

<CAPTION>
                               FOR THE PERIOD
                             NOVEMBER 30, 1989*
                                   THROUGH
                             SEPTEMBER 30, 1990
---------------------------  -------------------
<S>                          <C>
SELECTED PER SHARE DATA:
Net asset value, beginning
 of period.................    $         10.00
                               ---------------
Income (loss) from
 investment operations:
   Net investment income...               0.74
   Net realized and
   unrealized gain
   (loss)..................              (0.01)
                               ---------------
Total income from
 investment operations.....               0.73
                               ---------------
Less dividends and
 distributions from:
   Net investment income...              (0.73)
   Net realized gain.......         --
                               ---------------
Total dividends and
 distributions.............              (0.73)
                               ---------------
Net asset value, end of
 period....................    $         10.00
                               ===============
TOTAL RETURN+..............               7.57%(1)
RATIOS TO AVERAGE NET
ASSETS:
Expenses...................               1.48%(2)
Net investment income......               8.95%(2)
SUPPLEMENTAL DATA:
Net assets, end of period,
 in thousands..............           $328,189
Portfolio turnover rate....                 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
                                       63
<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

                                       64


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