<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES TWO WORLD TRADE CENTER, NEW YORK,
NEW YORK 10048
LETTER TO THE SHAREHOLDERS
DEAR SHAREHOLDER:
During the past six months, interest rates on two-year U.S. Treasury securities
rose by as much as 1.5 percentage points while yields on ten-year U.S. Treasury
securities climbed by nearly 0.875 percentage points before retracing much of
these moves in the first two months of 1995. The about-face in the investment
climate occurred despite a belief that the Federal Reserve Board would continue
to raise short-term interest rates should the economy heat up or if inflation
once again becomes a threat. The overriding logic behind the rally of 1995
centered around the continued lack of inflation at the consumer level and some
early evidence of a moderation in economic growth. Following a 4.6 percent
economic growth rate in the fourth quarter of 1994, some deceleration in retail
sales, home sales and auto sales gave rise to new projections for an economic
growth rate of a more moderate 3.0 percent or less in the quarters to come.
Against this backdrop, Dean Witter Intermediate Income Securities provided a
total return of 2.17 percent for the six months ended February 28, 1995,
compared to 2.72 percent for the unmanaged Lehman Brothers Intermediate
Government/Corporate Bond Index. This Index tracks both U.S. government
securities and corporate bonds with maturities of one to ten years.
The Fund was able to achieve a positive rate of return for the six-month period
in part because of the decline in intermediate interest rates and corresponding
rise in bond prices during the first two months of 1995. Despite the recent bond
market rally, yields on two- and five-year U.S. Treasury securities remained
higher on February 28, 1995 than their August 31, 1994 levels. However, during
the period, the yield spread (or difference between the yields available on two
and ten years) narrowed. On February 28, 1995, the yield spread was less than
0.50 percentage points with two-year U.S. Treasury securities yielding 6.76
percent and ten-year U.S. Treasury securities yielding 7.20 percent.
PORTFOLIO COMPOSITION
On February 28, approximately 47 percent of the securities held in the portfolio
were scheduled to come due in one to five years with
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
LETTER TO THE SHAREHOLDERS, CONTINUED
an additional 29 percent maturing in more than seven years. On February 28, the
Fund's average maturity was 4.87 years and the average duration was 3.57 years.
The portfolio was diversified among 64 issues with an average coupon of 7.93
percent and an average quality rating of A-1.
Throughout the reporting period, the Fund maintained a conservative investment
strategy. On December 31, 1994, the average maturity of the invested portion of
the portfolio was 4.44 years versus 4.80 years on August 31, 1994. Average
quality rating was held at A-1 with U.S. government securities increasing to
28.4 percent of the portfolio from 25.3 percent on August 31, 1994. However,
during the first two months of 1995, maturities were extended somewhat to an
average maturity of 4.87 years and the profile of the creditworthiness of the
Fund's portfolio quality has continued to nudge upward. At the end of the
reporting period, 16.9 percent of the portfolio was rated less than single A by
both Moody's and Standard & Poor's Corporation. The Fund's exposure to
industrials and electric utilities rated below A were reduced over the course of
the reporting period as yield incentives to purchase weaker credits contracted.
By February 28, 1995, temporary reserve positions represented 3.5 percent of the
Fund's assets, up from 1.8 percent on August 31, 1995.
LOOKING AHEAD
With intermediate interest rates beginning 1995 at 2 to 3.5 percentage points
above their starting point for 1994, there is a substantial cushion of potential
income to offset another round of interest rate increases. Although today's
yields offer protection from further significant rate increases, we do not yet
think this is the time to adopt an aggressive investment strategy. Inflation has
not been a problem to date, but dollar weakness is raising concerns within the
financial markets. While we do not expect the Federal Reserve Board to react to
currency pressures, we are not yet ready to proclaim that the economy is
sufficiently slowing or that higher inflation will not surface in the coming
months. The Federal Reserve Board remains vigilant in its war against inflation
and is likely to tighten at least one more time as a precautionary measure.
We appreciate your ongoing participation in Dean Witter Intermediate Income
Securities and we look forward to continuing to serve your investment needs.
Very truly yours,
[LOGO]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE BONDS (67.4%)
AUTOMOTIVE (2.0%)
$ 2,300 Chrysler Corp................................. 10.40 % 08/01/99 $ 2,431,583
2,050 General Motors Corp........................... 7.625 02/15/97 2,054,961
---------------
4,486,544
---------------
AUTOMOTIVE FINANCE (5.5%)
6,000 Ford Capital BV............................... 9.375 05/15/01 6,438,420
1,000 Ford Holdings Inc............................. 9.25 07/15/97 1,036,550
4,975 General Motors Acceptance Corp................ 8.40 10/15/99 5,072,261
---------------
12,547,231
---------------
BANK HOLDING COMPANIES (7.6%)
3,485 Chase Manhattan Bank.......................... 7.50 12/01/97 3,488,938
4,000 First Chicago Corp............................ 9.875 07/01/99 4,303,960
5,000 Fleet Financial Group, Inc.................... 8.125 07/01/04 4,983,600
5,000 Nationsbank Corp.............................. 6.875 02/15/05 4,586,000
---------------
17,362,498
---------------
BANKS - INTERNATIONAL (9.5%)
6,050 African Development Bank...................... 7.75 12/15/01 6,086,240
4,985 Bank of China................................. 6.75 03/15/99 4,742,231
3,000 BCH Cayman Islands Ltd........................ 8.25 06/15/04 2,943,540
4,000 Union Bank Finland............................ 5.25 06/15/96 3,904,000
3,970 Westpac Banking Corp.......................... 7.875 10/15/02 3,950,388
---------------
21,626,399
---------------
BROKERAGE (4.7%)
2,475 Bear Stearns Cos., Inc........................ 6.75 04/15/03 2,241,632
3,000 Lehman Brothers Holdings, Inc................. 8.80 03/01/15 3,022,500
6,000 Paine Webber Group, Inc....................... 6.68 02/10/04 5,391,120
---------------
10,655,252
---------------
FINANCE (6.8%)
3,000 Associates Corp. of North America............. 7.875 09/30/01 3,027,510
7,015 General Electric Capital Corp................. 8.65 05/01/18 7,146,545
5,000 Golden West Financial Corp.................... 10.25 05/15/97 5,281,100
---------------
15,455,155
---------------
FOODS & BEVERAGES (7.2%)
5,000 Coca-Cola Enterprises, Inc.................... 6.50 11/15/97 4,909,050
5,490 Grand Metropolitan Investment Corp............ 8.125 08/15/96 5,568,397
4,000 Phillip Morris Companies, Inc................. 7.50 03/15/97 4,008,120
1,990 RJR Nabisco, Inc.............................. 8.75 08/15/05 1,934,001
---------------
16,419,568
---------------
FOREIGN GOVERNMENT AGENCY (2.3%)
5,000 Quebec (Province of).......................... 8.625 01/19/05 5,168,200
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1995 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
HEALTHCARE (0.4%)
$ 1,000 Columbia/HCA Healthcare Corp.................. 7.15 % 03/30/04 $ 941,390
---------------
INDUSTRIALS (1.8%)
2,000 Comdisco, Inc................................. 8.95 05/15/95 2,007,780
1,100 United Technologies Corp...................... 9.625 05/15/99 1,129,667
1,050 Xerox Corp.................................... 9.20 07/15/99 1,111,887
---------------
4,249,334
---------------
INSURANCE (1.2%)
3,050 Continental Corp.............................. 7.25 03/01/03 2,812,222
---------------
NATURAL GAS (0.6%)
1,278 Panhandle Eastern Pipe Line Co................ 9.875 10/15/96 1,297,528
---------------
OIL INTEGRATED - INTERNATIONAL (2.2%)
5,000 Societe Nationale Elf Aquitaine............... 7.75 05/01/99 5,039,050
---------------
OIL RELATED (2.2%)
5,000 Occidental Petroleum Corp..................... 9.625 07/01/99 5,138,350
---------------
PHARMACEUTICAL - INTERNATIONAL (2.2%)
5,000 Rhone-Poulenc S.A............................. 7.75 01/15/02 4,956,200
---------------
TELECOMMUNICATIONS (1.8%)
2,225 TCI Communications Inc........................ 8.65 09/15/04 2,235,903
2,000 Tele-Communications, Inc...................... 7.25 08/01/05 1,820,040
---------------
4,055,943
---------------
UTILITIES - ELECTRIC (9.4%)
4,000 Arizona Public Service Co..................... 10.25 02/15/00 4,000,000
500 Consolidated Edison Co. of New York, Inc...... 5.90 12/15/96 489,740
2,000 Duke Power Co................................. 8.00 11/01/99 2,041,880
5,000 Pacific Gas & Electric Co..................... 6.25 03/01/04 4,484,000
5,000 Public Service Co. of New Hampshire........... 9.17 05/15/98 5,122,250
2,600 Southern California Edison Co................. 5.60 12/15/98 2,436,382
3,000 Texas Utilities Electric Co................... 7.125 06/01/97 2,984,940
---------------
21,559,192
---------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $158,178,566)....................................... 153,770,056
---------------
U.S. GOVERNMENT & AGENCIES OBLIGATIONS (27.3%)
1,000 Federal Farm Credit Bank...................... 6.81 05/19/97 993,750
2,500 Federal Home Loan Mortgage Corp............... 5.75 06/20/96 2,465,625
301 Federal Home Loan Mortgage Corp............... 8.50 12/01/01 306,738
215 Federal Home Loan Mortgage Corp............... 8.50 01/01/02 218,975
757 Federal Home Loan Mortgage Corp............... 8.50 07/01/02 769,829
334 Federal Home Loan Mortgage Corp............... 9.00 08/01/02 344,632
1,700 Federal Home Loan Mortgage Corp............... 7.05 03/24/04 1,629,875
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1995 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 3,230 Federal National Mortgage Association......... 5.30 % 03/11/98 $ 3,068,500
79 Federal National Mortgage Association......... 8.50 12/01/01 81,483
2,500 Federal National Mortgage Association......... 6.90 03/10/04 2,371,875
3,000 Federal National Mortgage Association......... 7.55 06/10/04 2,947,500
2,000 Federal National Mortgage Association......... 7.73 08/26/04 1,990,000
4,750 Private Export Funding Corp................... 6.86 04/30/04 4,643,125
2,600 U.S. Treasury Note............................ 5.875 05/15/95 2,598,781
6,000 U.S. Treasury Note............................ 8.50 05/15/95 6,029,063
5,000 U.S. Treasury Note............................ 11.50 11/15/95 5,171,875
7,600 U.S. Treasury Note............................ 8.875 02/15/96 7,766,250
11,600 U.S. Treasury Note............................ 6.75 02/28/97 11,598,187
2,000 U.S. Treasury Note............................ 5.125 04/30/98 1,898,437
2,000 U.S. Treasury Note............................ 6.25 02/15/03 1,886,250
3,600 U.S. Treasury Note............................ 7.25 08/15/04 3,606,750
---------------
TOTAL U.S. GOVERNMENT & AGENCIES OBLIGATIONS
(IDENTIFIED COST $64,458,482)........................................ 62,387,500
---------------
SHORT-TERM INVESTMENTS (3.4%)
U.S. GOVERNMENT AGENCY (a) (2.6%)
6,000 Federal Home Loan Banks
(Amortized Cost $6,000,000)................... 5.92 03/01/95 6,000,000
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1995 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENT (0.8%)
$ 1,772 The Bank of New York (dated 02/28/95; Proceeds
$1,772,685; collaterized by $1,892,819 Federal
Home Loan Mortgage Corporation 5.90% due
04/03/95 valued at $1,882,278) (Identified
Cost $1,772,390).............................. 6.00 % 03/01/95 $ 1,772,390
---------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $7,772,390)......................................... 7,772,390
---------------
TOTAL INVESTMENTS
(IDENTIFIED COST $230,409,438) (B).......... 98.1% 223,929,946
OTHER ASSETS IN EXCESS OF LIABILITIES....... 1.9 4,299,191
----- ------------
NET ASSETS.................................. 100.0% $228,229,137
----- ------------
----- ------------
<FN>
- ---------------------
(a) U.S. Government Agency was purchased on a discount basis. The interest
rate shown has been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes is $230,488,735; the
aggregate gross unrealized appreciation is $1,337,401 and the aggregate
gross unrealized depreciation is $7,896,190, resulting in net depreciation
of $6,558,789.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $230,409,438)............................ $223,929,946
Receivable for:
Investments sold........................................ 4,827,439
Interest................................................ 3,943,076
Shares of beneficial interest sold...................... 430,028
Principal paydowns...................................... 20,471
Prepaid expenses and other assets........................... 27,243
------------
TOTAL ASSETS........................................... 233,178,203
------------
LIABILITIES:
Payable for:
Investments purchased................................... 3,596,575
Shares of beneficial interest repurchased............... 818,296
Dividends to shareholders............................... 154,452
Plan of distribution fee................................ 147,585
Investment management fee............................... 104,178
Accrued expenses and other payables......................... 127,980
------------
TOTAL LIABILITIES...................................... 4,949,066
------------
NET ASSETS:
Paid-in-capital............................................. 242,869,344
Net unrealized depreciation................................. (6,479,492)
Accumulated undistributed net investment income............. 79,296
Accumulated net realized loss............................... (8,240,011)
------------
NET ASSETS............................................. $228,229,137
------------
------------
NET ASSET VALUE PER SHARE,
24,248,920 SHARES OUTSTANDING (UNLIMITED SHARES AUTHORIZED
OF $.01 PAR VALUE)........................................
$9.41
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1995 (UNAUDITED)
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $ 9,119,312
-----------
EXPENSES
Plan of distribution fee.................................... 974,802
Investment management fee................................... 688,095
Transfer agent fees and expenses............................ 91,039
Professional fees........................................... 32,600
Registration fees........................................... 26,834
Shareholder reports and notices............................. 23,393
Custodian fees.............................................. 17,538
Trustees' fees and expenses................................. 13,749
Other....................................................... 6,595
-----------
TOTAL EXPENSES......................................... 1,874,645
-----------
NET INVESTMENT INCOME.................................. 7,244,667
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss........................................... (2,753,727)
Net change in unrealized depreciation....................... 261,100
-----------
NET LOSS............................................... (2,492,627)
-----------
NET INCREASE................................................ $ 4,752,040
-----------
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED FOR THE YEAR
FEBRUARY 28, 1995 ENDED
(UNAUDITED) AUGUST 31, 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................... $ 7,244,667 $ 14,717,007
Net realized loss........................................... (2,753,727) (5,288,443)
Net change in unrealized appreciation (depreciation)........ 261,100 (13,667,486)
------------------ ---------------
NET INCREASE (DECREASE)................................ 4,752,040 (4,238,922)
------------------ ---------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income....................................... (7,171,547) (14,239,594)
Net realized gain........................................... (307,903) (1,050,020)
------------------ ---------------
TOTAL.................................................. (7,479,450) (15,289,614)
------------------ ---------------
Net increase (decrease) from transactions in shares of
beneficial interest....................................... (14,793,360) 10,847,274
------------------ ---------------
TOTAL DECREASE......................................... (17,520,770) (8,681,262)
NET ASSETS:
Beginning of period......................................... 245,749,907 254,431,169
------------------ ---------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$79,296 AND $6,176, RESPECTIVELY)....................... $228,229,137 $ 245,749,907
------------------ ---------------
------------------ ---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1995 (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 was organized as a
Massachusetts business trust on September 1, 1988 and commenced operations on
May 3, 1989.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York or American Stock Exchange is valued at its latest sale price on that
exchange prior to the time when assets are valued (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 available bid price prior to the time of valuation; (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
debt securities for which market quotations are not readily available may be
based upon current market prices of securities which are comparable in coupon,
rating and maturity or an appropriate matrix utilizing similar factors); (4)
certain of the Fund's portfolio securities may be valued by an outside pricing
service approved by the 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, if available, in determining what it
believes is the fair valuation of the portfolio securities valued by such
pricing service; and (5) short-term debt securities having a maturity date of
more than sixty days at time of purchase are valued on a mark-to-market basis
until sixty days prior to maturity and thereafter at amortized cost based on
their value on the 61st day. Short-term debt securities having a maturity date
of sixty days or less at the time of purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Discounts on securities purchased are amortized over the life of the respective
securities. The Fund does not amortize premiums on securities. 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.
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1995 (UNAUDITED) CONTINUED
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 reclassification. Dividends and distributions which
exceed net investment income and net realized capital gains for financial
reporting purposes but not for tax purposes are reported as dividends in excess
of net investment income or distributions in excess of net realized capital
gains. To the extent they exceed net investment income and net realized capital
gains for tax purposes, they are reported as distributions of paid-in-capital.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with Dean Witter InterCapital
Inc. (the "Investment Manager"), the Fund pays its Investment Manager a
management fee, calculated daily and payable monthly, by applying the following
annual rates to the net assets of the Fund determined as of the close of each
business day: 0.60% to the portion of daily net assets not exceeding $500
million; 0.50% to the portion of daily net assets exceeding $500 million but not
exceeding $750 million; 0.40% to the portion of daily net assets exceeding $750
million but not exceeding $1 billion; 0.30% to the portion of 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, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the 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 an annual rate of 0.85% of the lesser of: (a) the average daily
aggregate gross sales of the Fund's shares since the Fund's inception (not
including reinvestment of dividend or
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1995 (UNAUDITED) CONTINUED
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, the account executives of Dean
Witter Reynolds Inc., an affiliate of the Investment Manager and Distributor,
and other employees or selected dealers 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 amounts, which compensation
would be in the form of a carrying charge on any unreimbursed expenses incurred
by the Distributor.
Provided that the Plan continues in effect, any cumulative expenses incurred 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,
1995, it received approximately $327,000 in contingent 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 proceeds from sales of portfolio securities, excluding
short-term investments, for the six months ended February 28, 1995, aggregated
$93,254,735 and $117,342,764, respectively. Included in the aforementioned are
purchases and sales of U.S. Government securities of $39,543,369 and
$41,672,176, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the Fund's
transfer agent. At February 28, 1995, the Fund had transfer agent fees and
expenses payable of approximately $21,000.
The Fund established an unfunded noncontributory defined benefit pension plan
covering all independent Trustees of the Fund 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 six months ended
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1995 (UNAUDITED) CONTINUED
February 28, 1995 included in Trustees' fees and expenses in the Statement of
Operations amounted to $3,857. At February 28, 1995, the Fund had an accrued
pension liability of $47,843 which is included in accrued expenses in the
Statement of Assets and Liabilities.
5. 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, 1995 AUGUST 31, 1994
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Sold............................................................. 2,140,568 $ 19,651,913 7,997,562 $ 79,234,382
Reinvestment of dividends and distributions...................... 427,229 4,181,412 803,966 7,889,222
----------- -------------- ----------- ------------
2,567,797 23,833,325 8,801,528 87,123,604
Repurchased...................................................... (4,158,926) (38,626,685) (7,753,698) (76,276,330)
----------- -------------- ----------- ------------
Net increase (decrease).......................................... (1,591,129) $ (14,793,360) 1,047,830 $ 10,847,274
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
</TABLE>
6. FEDERAL INCOME TAX STATUS
Any net capital losses incurred after October 31 ("post-October" losses) within
the taxable year are deemed to arise on the first business day of the Fund's
next taxable year. The Fund incurred and will elect to defer such net capital
losses of approximately $5,421,000 during fiscal 1994.
At August 31, 1994, the Fund had temporary book/tax differences primarily
attributable to post-October losses and permanent book/tax differences primarily
attributable to foreign currency losses.
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE
SIX
MONTHS
ENDED
FEBRUARY FOR THE YEAR ENDED AUGUST 31
28, 1995 -----------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period............................ $ 9.51 $ 10.26 $ 10.05 $ 9.59 $ 9.42 $ 9.98
---------- --------- --------- --------- --------- ---------
Net investment income.............. 0.29 0.58 0.62 0.70 0.79 0.86
Net realized and unrealized gain
(loss)............................ (0.09) (0.73) 0.20 0.46 0.17 (0.55)
---------- --------- --------- --------- --------- ---------
Total from investment operations... 0.20 (0.15) 0.82 1.16 0.96 0.31
---------- --------- --------- --------- --------- ---------
Less dividends and distributions
from:
Net investment income........... (0.29) (0.56) (0.61) (0.70) (0.79) (0.86)
Net realized gain............... (0.01) (0.04) -- -- -- (0.01)
---------- --------- --------- --------- --------- ---------
Total dividends and
distributions..................... (0.30) (0.60) (0.61) (0.70) (0.79) (0.87)
---------- --------- --------- --------- --------- ---------
Net asset value, end of period..... $ 9.41 $ 9.51 $ 10.26 $ 10.05 $ 9.59 $ 9.42
---------- --------- --------- --------- --------- ---------
---------- --------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN+........... 2.17%(2) (1.50)% 8.43% 12.58% 10.78% 3.22%
RATIOS TO AVERAGE NET ASSETS:
Expenses........................... 1.63%(1) 1.63% 1.62% 1.69% 1.69% 1.75%
Net investment income.............. 6.32%(1) 5.80% 6.12% 7.11% 8.49% 8.78%
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands......................... $228,229 $245,750 $254,431 $187,285 $115,204 $114,086
Portfolio turnover rate............ 49%(2) 122% 132% 93% 150% 135%
<FN>
- ---------------------
+ Does not reflect the deduction of sales charge.
(1) Annualized.
(2) Not annualized.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
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<PAGE>
TRUSTEES
Jack F. Bennett
Michael Bozic
Charles A. FiumefreddoeEdwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
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
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
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.
This 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
SEMIANNUAL REPORT
FEBRUARY 28, 1995
