<PAGE> 1
DEAN WITTER INTERMEDIATE INCOME SECURITIES
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- --------------------------------------------------------------------------------
For the past several years, falling interest rates have provided
fixed-income investors with a favorable market environment. However, sentiment
shifted over the past six months, as rates trended higher in response to
vigorous economic growth and increased inflationary expectations. This shift was
gradual until February 4, 1994, when the Federal Reserve Board raised the
federal-funds rate (the rate banks charge each other for overnight loans) to
3.25 percent; this was the first time in five years the central bank had moved
on short-term interest rates. During the ensuing three weeks alone, yields on
intermediate maturities rose by more than 50 basis points (0.50 percent). For
the full period under review, yields on 2-and 10-year U.S. Treasury notes
increased by 82 and 71 basis points, respectively. (On March 22, 1994, following
the close of the period under review, the federal-funds rate was raised another
25 basis points, as the Federal Reserve continued its resolve to remain ahead of
the curve; that is one step in front of inflation, rather than behind.)
FALLING PRICES + RISING YIELDS = DISAPPOINTING TOTAL RETURNS
Over the past six months, corporate bonds provided higher total returns
than U.S. government securities. For the six-month period under review, as
measured by the Lehman Brothers Intermediate Index, intermediate corporates due
to mature in 10 years or less returned an average of 0.32 percent versus a
return of 0.16 percent for U.S. government securities with comparable
maturities. The Index, which tracks both types of securities, returned 0.19
percent for the six months ended February 28, 1994, while Dean Witter
Intermediate Income Securities registered a total return of 0.14 percent. Though
this return is disappointing, it still placed the Fund within the top 18 percent
of all intermediate funds (#18 out of 99 funds), as measured by Lipper
Analytical Services, Inc., a leading monitor of the mutual-fund industry.
Over the six-month period, the Fund employed a moderately defensive
maturity stance and a sizeable commitment to corporate bonds. On February 28,
1994, the average maturity was 5 years and the average duration was 3.81 years.
The portfolio was diversified among 72 issues with an average coupon of 7.92
percent and an average quality rating of A2, as measured by Moody's Investors
Service, Inc. In response to the most recent rise in interest rates, temporary
cash reserves have been allowed to accumulate, but still represent only 2
percent of investable funds.
As corporate bond yields narrowed versus those of U.S. Treasury securities
of comparable maturity, the Fund reduced these holdings from 77 percent on
August 31, 1993 to 72 percent on February 28, 1994. In contrast, the Fund's
allocation to U.S. Treasury securities was increased from 15 percent on August
31, 1993, to 23 percent on February 28, 1994. The majority of corporate bond
sales occurred in the industrial and utilities sectors. During the six-month
period under review, additions were made to the bank, finance and Yankee bond
holdings. (Yankee bonds are issued by foreign entities and are denominated in
U.S. dollars.)
<PAGE> 2
On February 28, 1994, the Fund's net asset value per share was $9.97. Net
assets totaled more than $260 million. Income dividends totaling approximately
$0.31 per share, including short-and long-term capital gains distributions of
$0.01783 and $0.022806 per share, respectively, were paid during the six-month
period under review.
IS STABILITY ON THE HORIZON?
We believe the spurt in interest rates that followed the February 4, 1994
action by the central bank represents an overreaction to the current
inflationary environment. While the Federal Reserve Board deemed it necessary to
raise the federal-funds rate by only 25 basis points, interest rates on
intermediate maturity U.S. Treasury securities are higher by twice as much. We
view this as an opportunity to purchase bonds at attractive yields and
anticipate lower rates over the next few months.
The Federal Reserve Board's most recent move appears to represent, in large
part, an attempt to quell the fears of an anxiety-ridden fixed-income market.
For, while it was widely believed that another increase was inevitable, just how
far the central bank would push interest rates remained uncertain. It would
appear that the March 22, 1994 move was successful in allaying some of the
market's concerns as the initial reaction from long-term interest rates brought
the largest one-day drop in more than two months. Thus, near-term stability
seems possible -- at least until the Federal Open Market Committee, the Federal
Reserve Board's policy-setting arm, reconvenes on May 17, 1994. Another positive
for the inflationary outlook is the fact that, thus far in 1994, most data have
been weaker than the market anticipated following the robust fourth quarter of
last year. New jobs, housing starts and consumer spending have all been down.
Certainly, the harsh winter has played a role in these statistics, but only time
will tell if the weather will have a lasting effect on the economy.
We appreciate your support of Dean Witter Intermediate Income Securities
and look forward to continuing to serve your investment needs.
Very truly yours,
CHARLES A. FIUMEFREDDO
Charles A. Fiumefreddo
Chairman of the Board
<PAGE> 3
DEAN WITTER INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS February 28, 1994 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount (in Coupon Maturity
thousands) Rate Date Value
- ---------- ------ -------- ------------
<C> <S> <C> <C> <C>
BONDS (96.6%)
CORPORATE BONDS (71.8%)
AUTOMOTIVE FINANCE (4.8%)
$ 5,700 Ford Capital BV.............................................. 9.375% 5/15/01 $ 6,598,035
1,000 Ford Holdings, Inc. ......................................... 9.25 7/15/97 1,111,820
4,500 General Motors Acceptance Corp. ............................. 8.40 10/15/99 4,885,920
------------
12,595,775
------------
BANK HOLDING COMPANIES (4.1%)
2,050 Bank of Boston Corp. ........................................ 6.625 2/ 1/04 2,002,522
3,700 Bankers Trust NY Corp. ...................................... 8.00 3/15/97 3,981,126
4,000 First Chicago Corp. ......................................... 9.875 7/ 1/99 4,644,440
------------
10,628,088
------------
BANKS (1.9%)
5,000 Chemical Banking Corp. ...................................... 7.00 6/ 1/05 5,056,550
------------
BANKS -- INTERNATIONAL (3.2%)
1,000 Bank of Montreal, Quebec..................................... 10.30 3/15/99 1,002,000
3,300 Kansalis-Osake Pankki........................................ 6.375 8/15/00 3,241,326
4,000 Union Bank Finland........................................... 5.25 6/15/96 3,980,040
------------
8,223,366
------------
BANKS -- MULTINATIONAL (1.5%)
3,750 African Development Bank..................................... 7.75 12/15/01 4,028,962
------------
BROKERAGE (3.6%)
6,000 Paine Webber Group, Inc. .................................... 6.68 2/10/04 5,816,880
3,000 Shearson Lehman Brothers, Inc. .............................. 9.875 10/15/00 3,492,390
------------
9,309,270
------------
CONGLOMERATES (1.3%)
3,000 Tenneco, Inc. ............................................... 10.00 8/ 1/98 3,416,070
------------
ENTERTAINMENT/GAMING (0.2%)
479 Trump's Castle Funding, Inc. ................................ 11.75 11/15/03 444,504
99 Trump's Castle Funding, Inc. ................................ 0.00 11/15/05 88,150
------------
532,654
------------
FINANCE (6.3%)
7,015 General Electric Capital Corp. .............................. 8.65 5/ 1/18 7,537,828
5,000 Golden West Financial Corp. ................................. 10.25 5/15/97 5,689,900
3,000 Transamerica Finance Corp. .................................. 6.75 1/15/98 3,074,040
------------
16,301,768
------------
FOOD AND BEVERAGES (5.7%)
5,000 Coca-Cola Enterprises........................................ 6.50 11/15/97 5,185,600
4,000 Philip Morris Companies, Inc. ............................... 7.50 3/15/97 4,235,080
5,300 RJR Nabisco, Inc. ........................................... 8.75 8/15/05 5,410,982
------------
14,831,662
------------
HEALTHCARE (1.0%)
2,600 Columbia Healthcare Corp. ................................... 6.125 12/15/00 2,546,518
------------
INDUSTRIALS (4.7%)
3,000 Comdisco, Inc. .............................................. 6.50 6/15/94 3,017,700
4,000 Comdisco, Inc. .............................................. 8.95 5/15/95 4,206,600
2,050 General Motors Corp. ........................................ 7.625 2/15/97 2,168,634
3,000 Westinghouse Electric Corp. ................................. 6.875 9/ 1/03 2,862,360
------------
12,255,294
------------
INSURANCE (2.5%)
3,050 Continental Corp. ........................................... 7.25 3/ 1/03 3,061,193
2,915 Penn Central Corp............................................ 10.625 4/15/00 3,369,536
------------
6,430,729
------------
</TABLE>
<PAGE> 4
DEAN WITTER INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS February 28, 1994 (unaudited) (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount (in Coupon Maturity
thousands) Rate Date Value
- ---------- ------ -------- ------------
<C> <S> <C> <C> <C>
MANUFACTURING -- INTERNATIONAL (1.6%)
$ 4,000 Matsushita Electric Industrial, Ltd. ........................ 7.25 % 8/ 1/02 $ 4,151,040
------------
METALS & FORESTRY -- INTERNATIONAL (1.5%)
2,000 Noranda, Inc. ............................................... 8.00 6/ 1/03 2,079,020
1,825 Noranda, Inc. ............................................... 7.50 7/15/03 1,836,133
------------
3,915,153
------------
NATURAL GAS (1.8%)
2,010 Enserch Corp. ............................................... 8.00 3/15/97 2,154,660
2,500 Panhandle Eastern Pipeline Co. .............................. 9.875 10/15/96 2,635,900
------------
4,790,560
------------
OIL RELATED (2.5%)
3,085 BP North America, Inc. ...................................... 9.375 6/ 1/97 3,121,187
3,000 Occidental Petroleum Corp. .................................. 9.625 7/ 1/99 3,265,170
------------
6,386,357
------------
OIL RELATED -- INTERNATIONAL (2.1%)
5,000 Societe Nationale Elf Aquitaine.............................. 7.75 5/ 1/99 5,362,250
------------
PHARMACEUTICAL (1.2%)
3,000 Eli Lilly & Co. ............................................. 6.75 11/15/99 3,121,350
------------
PHARMACEUTICAL -- INTERNATIONAL (2.0%)
5,000 Rhone Poulenc SA............................................. 7.75 1/15/02 5,232,650
------------
PHOTOGRAPHY (2.0%)
5,000 Eastman Kodak Co. ........................................... 9.125 3/ 1/98 5,209,450
------------
TECHNOLOGY (1.6%)
4,000 International Business Machines Corp. ....................... 7.25 11/ 1/02 4,112,400
------------
TRANSPORTATION (2.7%)
3,250 AMR Corp. ................................................... 9.50 5/15/01 3,574,610
3,380 Ryder Systems, Inc. ......................................... 9.375 1/15/98 3,522,906
------------
7,097,516
------------
UTILITIES -- ELECTRIC (11.0%)
4,000 Arizona Public Service Co. .................................. 10.25 2/15/00 4,184,400
2,000 Commonwealth Edison Co. ..................................... 6.50 7/15/97 2,036,520
3,000 Commonwealth Edison Co. ..................................... 6.40 10/15/05 2,777,100
3,000 Long Island Lighting Co. .................................... 7.125 6/ 1/05 2,870,010
1,500 Pacific Gas & Electric Co. .................................. 6.875 12/ 1/99 1,519,035
5,000 Public Service Co. of New Hampshire.......................... 9.17 5/15/98 5,487,850
2,600 Southern California Edison Co. .............................. 5.60 12/15/98 2,558,686
3,000 Texas Utilities Electric Co. ................................ 7.125 6/ 1/97 3,126,900
975 Texas Utilities Electric Co. ................................ 8.00 6/ 1/02 1,041,232
3,000 United Illuminating Co. ..................................... 6.20 1/15/99 2,953,350
------------
28,555,083
------------
UTILITIES -- INTERNATIONAL (1.0%)
2,850 Korea Electric Power Corp. .................................. 6.375 12/ 1/03 2,705,790
------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $186,043,873).................................................. 186,796,305
------------
</TABLE>
<PAGE> 5
DEAN WITTER INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS February 28, 1994 (unaudited) (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount (in Coupon Maturity
thousands) Rate Date Value
- ---------- ------ -------- ------------
<C> <S> <C> <C> <C>
FOREIGN GOVERNMENT OBLIGATIONS (2.3%)
CANADA (1.2%)
$ 3,000 Ontario Province, Canada..................................... 7.375% 1/27/03 $ 3,129,510
------------
CHINA (1.1%)
3,000 People's Republic of China................................... 6.50 2/17/04 2,891,190
------------
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $6,254,940).................................................... 6,020,700
------------
U.S. GOVERNMENT AGENCIES & OBLIGATIONS (22.5%)
424 Federal Home Loan Mortgage Corp. ............................ 8.50 12/ 1/01 442,894
307 Federal Home Loan Mortgage Corp. ............................ 8.50 1/ 1/02 320,420
1,059 Federal Home Loan Mortgage Corp. ............................ 8.50 7/ 1/02 1,104,026
468 Federal Home Loan Mortgage Corp. ............................ 9.00 8/ 1/02 492,201
3,230 Federal National Mortgage Association........................ 5.30 3/11/98 3,215,869
763 Federal National Mortgage Association........................ 9.80 12/10/98 781,563
104 Federal National Mortgage Association........................ 8.50 12/ 1/01 109,962
2,500 Federal National Mortgage Association........................ 7.00 8/12/02 2,567,187
3,200 Federal National Mortgage Association........................ 6.32 12/23/03 3,120,000
7,000 U.S. Treasury Note........................................... 8.25 11/15/94 7,205,625
4,450 U.S. Treasury Note........................................... 5.875 5/15/95 4,532,047
5,000 U.S. Treasury Note........................................... 11.50 11/15/95 5,571,094
7,600 U.S. Treasury Note........................................... 8.875 2/15/96 8,189,000
13,100 U.S. Treasury Note........................................... 6.75 2/28/97 13,705,875
2,565 U.S. Treasury Note........................................... 6.375 1/15/00 2,641,549
4,725 U.S. Treasury Note........................................... 5.75 8/15/03 4,579,559
------------
TOTAL U.S. GOVERNMENT AGENCIES & OBLIGATIONS
(IDENTIFIED COST $59,503,358)................................................... 58,578,871
------------
TOTAL BONDS (IDENTIFIED COST $251,802,171).......................................... 251,395,876
------------
SHORT-TERM INVESTMENTS (1.7%)
COMMERCIAL PAPER(A)(1.1%)
U.S. GOVERNMENT AGENCY (1.1%)
3,000 Federal Home Loan Mortgage Corp. 3.30% due 3/1/94 (Amortized
Cost $3,000,000).................................................................. 3,000,000
------------
REPURCHASE AGREEMENT (0.6%)
1,519 The Bank of New York 3.375% due 3/1/94 (dated 2/28/94;
proceeds $1,518,664; collateralized by $1,524,131 U.S. Treasury
Bonds 6.875% due 8/15/94 valued at $1,549,037) (Identified
Cost $1,518,664).................................................................. 1,518,664
------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $4,518,664).................................................... 4,518,664
------------
TOTAL INVESTMENTS
(IDENTIFIED COST $256,320,835)(B).................................. 98.3% 255,914,540
OTHER ASSETS IN EXCESS OF LIABILITIES.................................. 1.7 4,329,109
------ ------------
NET ASSETS............................................................. 100.0% $260,243,649
------ ------------
------ ------------
</TABLE>
- ---------------
(a) Investment was purchased on a discount basis. The interest rate shown has
been adjusted to reflect a bond equivalent yield.
(b) The aggregate cost for federal income tax purposes is $256,338,960; the
aggregate gross unrealized appreciation is $3,401,867 and the aggregate
gross unrealized depreciation is $3,826,287 resulting in net unrealized
depreciation of $424,420.
See Notes to Financial Statements
<PAGE> 6
DEAN WITTER INTERMEDIATE INCOME SECURITIES
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1994 (unaudited)
- -------------------------------------------
ASSETS:
Investments in securities, at value
(identified cost $256,320,835) (Note
1)....................................... $ 255,914,540
Receivable for:
Interest................................. 4,301,481
Shares of beneficial interest sold....... 1,488,651
Principal paydowns....................... 129,633
Prepaid expenses and other assets.......... 26,872
Deferred organizational expenses (Note
1)....................................... 2,878
-------------
TOTAL ASSETS....................... 261,864,055
-------------
LIABILITIES:
Payable for:
Shares of beneficial interest
repurchased............................ 543,671
Investments purchased.................... 511,059
Investment management fee (Note 2)....... 120,971
Plan of distribution fee (Note 3)........ 171,375
Dividends to shareholders.................. 165,321
Accrued expenses (Note 4).................. 108,009
-------------
TOTAL LIABILITIES.................. 1,620,406
-------------
NET ASSETS:
Paid-in-capital............................ 260,255,867
Accumulated net realized loss on
investments.............................. (217,689)
Net unrealized depreciation on
investments.............................. (406,295)
Accumulated undistributed net investment
income................................... 611,766
-------------
NET ASSETS......................... $ 260,243,649
-------------
-------------
NET ASSET VALUE PER SHARE,
26,108,598 shares outstanding (unlimited
shares authorized of $.01 par value)..... $9.97
-----
-----
STATEMENT OF OPERATIONS For the six months
ended February 28, 1994 (unaudited)
- -------------------------------------------
INVESTMENT INCOME:
INTEREST INCOME.......................... $ 9,353,972
-------------
EXPENSES
Plan of distribution fee (Note 3)........ 1,095,536
Investment management fee (Note 2)....... 773,320
Transfer agent fees and expenses (Note
4)..................................... 87,785
Registration fees........................ 45,426
Professional fees........................ 27,163
Shareholder reports and notices.......... 20,899
Custodian fees........................... 18,100
Trustees' fees & expenses (Note 4)....... 15,826
Organizational expenses (Note 1)......... 8,136
Other.................................... 8,579
-------------
TOTAL EXPENSES......................... 2,100,770
-------------
NET INVESTMENT INCOME................ 7,253,202
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (NOTE 1):
Net realized gain on investments......... 246,790
Net change in unrealized appreciation on
investments............................ (7,333,189)
-------------
NET LOSS ON INVESTMENTS................ (7,086,399)
-------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS.......... $ 166,803
-------------
-------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the six
months ended For the
February 28, 1994 year ended
(unaudited) August 31, 1993
------------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income................................................. $ 7,253,202 $ 13,433,405
Net realized gain on investments...................................... 246,790 4,550,512
Net change in unrealized appreciation on investments.................. (7,333,189) 468,423
------------------- -------------------
Net increase in net assets resulting from operations.............. 166,803 18,452,340
------------------- -------------------
Dividends and distributions from:
Net investment income................................................. (6,744,740) (13,060,483)
Net realized gain..................................................... (1,050,020) -0-
------------------- -------------------
Total dividends and distributions................................. (7,794,760) (13,060,483)
------------------- -------------------
Net increase from transactions in shares of beneficial interest (Note
5).................................................................... 13,440,437 61,754,344
------------------- -------------------
Total increase.................................................... 5,812,480 67,146,201
NET ASSETS:
Beginning of period..................................................... 254,431,169 187,284,968
------------------- -------------------
END OF PERIOD (including undistributed net investment income of $611,766
and $103,304, respectively)............................................ $ 260,243,649 $ 254,431,169
------------------- -------------------
------------------- -------------------
</TABLE>
See Notes to Financial Statements
<PAGE> 7
DEAN WITTER INTERMEDIATE INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS (unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES -- Dean Witter Intermediate Income
Securities (the "Fund") is registered under the Investment Company Act of 1940,
as amended (the "Act"), as a diversified, open-end management investment
company. The Fund commenced operations on May 3, 1989.
The following is a summary of significant accounting policies:
A. Valuation of Investments -- (1) an equity portfolio security listed or
traded on the New York or American Stock Exchange is valued at its latest
sale price on that exchange (if there were no sales that day, the security
is valued at the latest bid price); (2) all other portfolio securities for
which over-the-counter market quotations are readily available are valued
at the latest bid price; (3) when market quotations are not readily
available, portfolio securities are valued at their fair value as
determined in good faith under procedures established by and under the
general supervision of the Trustees (valuation of securities for which
market quotations are not readily available may be based upon current
market prices of securities which are comparable in coupon, rating and
maturity or an appropriate matrix utilizing similar factors); (4) certain
of the Fund's portfolio securities may be valued by an outside pricing
service approved by the Fund's Trustees. The pricing service utilizes a
matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research and evaluations by its staff,
including review of broker-dealer market price quotations, in determining
what it believes is the fair valuation of the portfolio securities valued
by such pricing service; and (5) short-term debt securities with remaining
maturities of 60 days or less at time of purchase are valued at amortized
cost; other short-term securities are valued on a mark-to-market basis
until such time as they reach a remaining maturity of 60 days, whereupon
they are valued at amortized cost using their value on the 61st day. 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.
B. Accounting for Investments -- Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). In computing
net investment income, the Fund does not amortize premiums or accrue
discounts on fixed income securities in the portfolio, except those
original issue discounts for which amortization is required for federal
income tax purposes. Additionally, with respect to market discount, a
portion of any capital gain realized upon disposition may be
recharacterized as investment income. Realized gains and losses on security
transactions are determined on the identified cost method. Interest income
is accrued daily.
C. Federal Income Tax Status -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Accordingly, no federal income tax provision is required.
D. Dividends and Distributions to Shareholders -- The Fund 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
reclassifications. Dividends and distributions which exceed net investment
income and net realized capital gains for financial reporting purposes but
not for
<PAGE> 8
DEAN WITTER INTERMEDIATE INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
- --------------------------------------------------------------------------------
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.
E. Organizational Expenses -- The Fund's Investment Manager paid
organizational expenses of the Fund in the amount of approximately
$129,000. The Fund reimbursed the Investment Manager for these costs which
have been deferred and are being amortized by the Fund on a straight-line
method over a period not to exceed five years from the commencement of
operations.
F. Repurchase Agreements -- The Fund's custodian takes possession on behalf
of the Fund of the collateral pledged for investments in repurchase
agreements. It is the policy of the Fund to value the underlying collateral
daily on a mark-to-market basis to determine that the value, including
accrued interest, is at least equal to the repurchase price plus accrued
interest. In the event of default of the obligation to repurchase, the Fund
has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation.
2. INVESTMENT MANAGEMENT AGREEMENT -- Pursuant to an Investment Management
Agreement (the "Agreement") with Dean Witter InterCapital Inc. (the "Investment
Manager"), the Fund pays its Investment Manager a management fee, accrued daily
and payable monthly at an annual rate of 0.60% of the Fund's daily net assets
not exceeding $500 million; 0.50% of the portion of the daily net assets
exceeding $500 million but not exceeding $750 million; 0.40% of the portion of
the daily net assets exceeding $750 million but not exceeding $1 billion; and
0.30% of the portion of the daily net assets exceeding $1 billion.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes office space and facilities, equipment, clerical,
bookkeeping and certain legal services, and pays the salaries of all personnel,
including officers of the Fund who are employees of the Investment Manager. The
Investment Manager also bears the cost of telephone services, heat, light, power
and other utilities provided to the Fund.
3. PLAN OF DISTRIBUTION -- Shares of the Fund are distributed by Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager.
The Fund has adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1
under the Act pursuant to which the Fund pays the Distributor compensation
accrued daily and payable monthly, at the annual rate of 0.85% of the lesser of:
(a) the average daily aggregate gross sales of the Fund's shares since the
inception of the Fund (not including reinvestments of dividends or capital gain
distributions), less the average daily aggregate net asset value of the Fund's
shares redeemed since the Fund's inception upon which a contingent deferred
sales charge has been imposed or upon which such charge has been waived; or (b)
the Fund's average daily net assets. Amounts paid under the Plan are paid to the
Distributor to compensate it for the services provided and the expenses borne by
it and others in the distribution of the Fund's shares, including the payment of
commissions for sales of the Fund's shares and incentive compensation to and
expenses of Dean Witter Reynolds Inc.'s account executives and others, who
engage in or support distribution of the Fund's shares or who service
shareholder accounts, including overhead and telephone expenses; printing and
distribution of prospectuses and reports used in connection with the offering of
the Fund's shares to other than current shareholders; and preparation, printing
and distribution of sales literature and advertising materials. In addition, the
Distributor may be compensated under the Plan for its opportunity costs in
advancing such
<PAGE> 9
DEAN WITTER INTERMEDIATE INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
- --------------------------------------------------------------------------------
amounts, which compensation would be in the form of a carrying charge on any
unrecovered expenses incurred by the Distributor.
Provided that the Plan continues in effect, any cumulative expenses
incurred by the Distributor, but not yet recovered, may be recovered through
future distribution fees from the Fund and contingent deferred sales charges
from the Fund's shareholders.
The Distributor has informed the Fund that for the six months ended
February 28, 1994, it received approximately $280,000 in deferred sales charges
from certain redemptions of the Fund's shares. The Fund's shareholders pay such
charges which are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES -- The cost of
purchases and the proceeds from sales of portfolio securities, excluding
short-term investments, for the six months ended February 28, 1994, aggregated
$182,248,706 and $165,471,423, respectively, including purchases and sales of
U.S. Government agencies and obligations of $73,158,015 and $48,159,326,
respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At February 28, 1994, the Fund had
transfer agent fees and expenses payable of approximately $17,000.
On April 1, 1991, the Fund established an unfunded noncontributory defined
benefit pension plan covering all independent Trustees of the Fund who will have
served as an Independent Trustee 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 cost for
the six months ended February 28, 1994, included in Trustees' fees and expenses
in the Statement of Operations, amounted to $4,718. At February 28, 1994, the
Fund had an accrued pension liability of $39,941 which is included in accrued
expenses in the Statement of Assets and Liabilities.
5. FEDERAL INCOME TAX STATUS -- The Fund had permanent book/tax differences
primarily attributable to foreign currency losses. To reflect cumulative
reclassifications arising from permanent book/tax differences for the year ended
August 31, 1993, accumulated undistributed net investment income was charged and
accumulated net realized gain on investments was credited for $323,446.
6. SHARES OF BENEFICIAL INTEREST -- Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
For the six
months ended For the year ended
February 28, 1994 August 31, 1993
--------------------------- ---------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold............................... 4,476,584 $ 45,557,377 11,085,474 $111,077,050
Reinvestment of dividends and
distributions.................... 359,399 3,645,653 668,818 6,705,955
---------- ------------ ---------- ------------
4,835,983 49,203,030 11,754,292 117,783,005
Repurchased........................ (3,519,604) (35,762,593) (5,590,708) (56,028,661)
---------- ------------ ---------- ------------
Net increase....................... 1,316,379 $ 13,440,437 6,163,584 $ 61,754,344
---------- ------------ ---------- ------------
---------- ------------ ---------- ------------
</TABLE>
<PAGE> 10
DEAN WITTER INTERMEDIATE INCOME SECURITIES
FINANCIAL HIGHLIGHTS (unaudited)
- --------------------------------------------------------------------------------
Selected data and ratios for a share of beneficial interest outstanding
throughout each period:
<TABLE>
<CAPTION>
For the period
May 3, 1989*
For the six For the year ended August 31, through
months ended ----------------------------------------- August 31,
February 28, 1994 1993 1992 1991 1990 1989
----------------- -------- -------- -------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period............................. $ 10.26 $ 10.05 $ 9.59 $ 9.42 $ 9.98 $ 10.00
----------------- -------- -------- -------- -------- --------------
Investment income - net............ .29 .62 .70 .79 .86 .28
Realized and unrealized gain (loss)
on investments - net............. (.27) .20 .46 .17 (.55) (.02)
----------------- -------- -------- -------- -------- --------------
Total from investment operations..... .02 .82 1.16 .96 .31 .26
----------------- -------- -------- -------- -------- --------------
Less dividends and distributions:
Dividends from net investment
income........................... (.27) (.61) (.70) (.79) (.86) (.28)
Distributions from net realized
gains on investments............. (.04) -0- -0- -0- (.01) -0-
----------------- -------- -------- -------- -------- --------------
Total dividends and distributions.... (.31) (.61) (.70) (.79) (.87) (.28)
----------------- -------- -------- -------- -------- --------------
Net asset value, end of period....... $ 9.97 $ 10.26 $ 10.05 $ 9.59 $ 9.42 $ 9.98
----------------- -------- -------- -------- -------- --------------
----------------- -------- -------- -------- -------- --------------
TOTAL INVESTMENT RETURN +.............. .14%(1) 8.43% 12.58% 10.78% 3.22% 2.57%(1)
----------------- -------- -------- -------- -------- --------------
----------------- -------- -------- -------- -------- --------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)......................... $ 260,244 $254,431 $187,285 $115,204 $114,086 $ 69,946
Ratio of expenses to average net
assets............................. 1.63%(2) 1.62% 1.69% 1.69% 1.75% 1.42%(2)(3)
Ratio of net investment income to
average net assets................. 5.62%(2) 6.12% 7.11% 8.49% 8.78% 8.18%(2)(3)
Portfolio turnover rate................ 67% 132% 93% 150% 135% 30%
</TABLE>
- ---------------
* Date of commencement of operations.
+ Does not reflect the deduction of sales load.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had borne all the expenses that were assumed or waived by the
Investment Manager, the above expense ratio would have been 2.15% and the
above net investment income ratio would have been 7.44%.
See Notes to Financial Statements
<PAGE> 11
(This page intentionally left blank)
<PAGE> 12
TRUSTEES
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. John E. Jeuck
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
Edward R. Telling
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
Rochelle G. Siegel
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
LEGAL COUNSEL
Sheldon Curtis
Two World Trade Center
New York, New York 10048
INDEPENDENT ACCOUNTANTS
Price Waterhouse
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
The financial statements included herein have been taken from the records of
the Fund without examination by the independent accountants and accordingly
they do not express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus of
the Fund.
The report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus.
DEAN WITTER
INTERMEDIATE
INCOME
SECURITIES
Semi Annual Report
February 28, 1994
