<PAGE>
<TABLE>
<S> <C>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST TWO WORLD TRADE CENTER,
LETTER TO THE SHAREHOLDERS SEPTEMBER 30, 2000 NEW YORK, NEW YORK 10048
</TABLE>
DEAR SHAREHOLDER:
Over the 12-month period ended September 30, 2000, the economy overcame
potential Y2K concerns, rising interest rates, soaring oil prices and tight
labor markets to produce four quarters of better than 5 percent GDP growth. In
large part this accomplishment was due to the ongoing technological revolution
that enabled productivity to soar and wages and salaries to outpace inflation.
As the economy gathered momentum, worries that its strength could worsen
inflation prompted the Federal Reserve to raise the federal funds rate to 6.5
percent by late spring. During the period of rising short-term rates, yields on
intermediate U.S. Treasuries surged nearly 1 percentage point. However, in the
following months indications of a slower economy encouraged investors to push
longer-term interest rates lower. Five-year Treasury yields rose to 6.81 percent
in mid May before falling nearly one percentage point from this level by the end
of September. Longer maturities peaked in yield in January because of a
reduction in the issuance of such Treasury debt in response to a burgeoning
budget surplus. At the end of September, 10-year and 30-year Treasuries were
yielding 5.80 percent and 5.88 percent, respectively, below where they were one
year earlier.
Corporate markets did not fare as well, with yields remaining high as a result
of investors' increased sensitivity to potential credit erosion from reduced
earnings projections and a slowing economy. Retailing was hit particularly hard
by a series of disappointing monthly sales figures, and the financial services
sector was periodically battered by liquidity concerns at certain institutions.
LOAN SYNDICATION OVERVIEW
The syndicated loan market experienced greater volatility during the period as
an increase in corporate defaults and a rise in nonperforming loans negatively
affected the sector's performance. According to Moody's Investors Service, the
corporate default rate for the 12-month
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
LETTER TO THE SHAREHOLDERS SEPTEMBER 30, 2000, CONTINUED
period ended September 30, 2000, was approximately 5.13 percent. Despite this
difficult operating environment, however, senior loans were less volatile than
comparable asset classes, due to their seniority in corporate capital structures
and asset coverage. In addition, the floating-rate mechanism of senior loans
further insulated the loans from the steady increase in interest rates.
Growth in the senior loan asset class was measurably slower in 2000 versus 1999.
There were fewer refinancings, because of the higher-interest-rate environment
and increased volatility in the equity and high-yield markets -- key components
to deal structures that include senior loans.
PERFORMANCE
For the 12-month period ended September 30, 2000, Morgan Stanley Dean Witter
Prime Income Trust returned 6.87 percent. The Trust's net asset value declined
from $9.87 to $9.72 per share during its fiscal year. This decline reflects an
increased default rate for senior loans as well as technical pressure on the
sector's market values. The Trust's annual distribution rate as of
September 30, 2000, was 8.63 percent, a 200- to 300-basis-point yield advantage
over short-term debt instruments.
The Trust's net assets exceeded $2.8 billion at the close of September, an
increase of nearly 15 percent during the fiscal year. Assets of the Trust
continued to grow, the result in large part to new subscriptions of $595.3
million and dividend reinvestment of $96.9 million. The Trust's four quarterly
tenders totaled $280 million, or approximately 9.7 percent of net assets at the
end of September.
PORTFOLIO STRATEGY
The Trust seeks to provide a high level of current income consistent with the
preservation of capital by investing its assets primarily in senior loans, which
generally pay interest at rates that float or are reset at a margin above a
generally recognized base-lending rate. These base-lending rates are the prime
rate, London Interbank Offered Rate (LIBOR) or other base-lending rates
typically used by commercial lenders. The Trust continues to place a premium on
strict credit analysis when evaluating investments for the portfolio. The
portfolio is widely diversified, allowing the Trust to avoid concentrations in
any one industry or issuer. At fiscal year-end, the Trust had exposure to nearly
200 issuers across more than eighty industry segments. The Trust continues to
seek investments in industries and issuers with strong asset coverage, justified
market positions and sufficient liquidity as well as strong overall capital
structures.
2
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
LETTER TO THE SHAREHOLDERS SEPTEMBER 30, 2000, CONTINUED
LOOKING AHEAD
Our long-term outlook for the senior loan asset class remains positive. Although
we do anticipate that the corporate default rate may increase over the short
term, we believe the senior loan asset class continues to offer benefits to
investors. Corporate earnings growth rates are expected to decline for the
remainder of 2000 and into 2001. We also expect interest rates to remain in the
current range or possibly to trend slightly lower over the first half of 2001.
Going forward, we will continue to maintain a watchful eye on credit conditions
in the senior loan sector. In addition, we will continue to scrutinize the
financial position of the Trust's borrowers and uphold our strict screening
process for credit approval, both for positions owned and for potential
investments.
We appreciate your ongoing support of Morgan Stanley Dean Witter Prime Income
Trust and look forward to continuing to serve your investment needs.
Very truly yours,
[/S/ CHARLES A. FIUMEFREDDO]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
[/S/ MITCHELL M. MERIN]
MITCHELL M. MERIN
PRESIDENT
3
<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
4
<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
5
<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
6
<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
7
<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
8
<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
9
<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
10
<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
11
<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
12
<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
13
<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
14
<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
15
<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
16
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2000, CONTINUED
<TABLE>
<S> <C> <C>
Value
----------------------------------------------------------------------------------------------------------------------------
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
17
<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
18
<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
19
<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
20
<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
21
<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.
22
<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.
23
<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.
24
<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.
25
<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.
26
<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
27
<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
28
<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.
29
<PAGE>
TRUSTEES
----------------------
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
James F. Higgins
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
-----------------------------------
Charles A. Fiumefreddo
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Mitchell M. Merin
PRESIDENT
Barry Fink
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
Rajesh K. Gupta
VICE PRESIDENT
Sheila A. Finnerty
VICE PRESIDENT
Peter Gewirtz
ASSISTANT VICE PRESIDENT
Thomas F. Caloia
TREASURER
TRANSFER AGENT
------------------------------------
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center -- Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
------------------------------------
Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281
INVESTMENT ADVISOR
-------------------------------------
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
This report is submitted for the
general information of
shareholders of the Trust. For
more detailed information about
the Trust, its officers and
trustees, fees, expenses and
other pertinent information,
please see the prospectus of the
Trust.
This report is not authorized
for distribution to prospective
investors in the Trust unless
preceded or accompanied by an
effective prospectus. Read the
prospectus carefully before
investing.
Morgan Stanley Dean Witter Distributors Inc., member NASD.
MORGAN STANLEY
DEAN WITTER
PRIME INCOME TRUST
[PHOTO]
ANNUAL REPORT
SEPTEMBER 30, 2000
