<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES TWO WORLD TRADE CENTER, NEW YORK,
NEW YORK 10048
LETTER TO THE SHAREHOLDERS
DEAR SHAREHOLDER:
The fiscal year ended August 31, 1995 was characterized first by rising interest
rates and a robust economy, followed by an economic slowdown and declining
interest rates. Overall, interest rates on intermediate-term U.S. Treasury
securities declined by 0.30 to 0.90 percentage points over the fiscal year.
Strong economic growth continued through the end of 1994 along with related
inflationary fears. In an effort to slow the rate of economic growth to more
sustainable levels, the Federal Reserve Board raised the federal-funds rate 0.75
percentage points to 5.75 percent in November. As a result, intermediate-term
interest rates continued to rise, and by December 31 had risen as much as 1.50
percentage points from the end of August 1994. Two-year Treasuries showed the
most dramatic increase, while ten-year Treasuries increased by only 0.65
percentage points.
Beginning in late January, sentiment shifted as the market focused on actual
inflation -- or rather its absence. By early February, not only had inflation
failed to surface, but the economy was beginning to show signs of slowing down.
As a result, interest rates began to fall, eventually plummeting by as much as
1.50 to 1.75 percentage points from their January 1995 levels, before retracing
about one quarter of that move in July and August. The renewed uptick in
interest rates during early summer, ironically, followed a move by the Federal
Reserve to lower the federal-funds rate by 0.25 percentage points. Almost
immediately following this shift in Federal Reserve policy, signs of a
resurgence in the economy began to appear. Housing, autos, and retail sales,
which had turned sluggish at higher interest rate levels, now looked healthier.
As a result of the strengthening economy, any further reduction in short-term
interest rates would likely be postponed until later in the year.
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
LETTER TO THE SHAREHOLDERS, CONTINUED
PERFORMANCE AND PORTFOLIO
Against this backdrop, Dean Witter Intermediate Income Securities posted a total
return of 8.56 percent for the twelve-month period ended August 31, 1995. During
the same period, the Lehman Brothers Intermediate Investment Grade Debt Index
returned 13.26 percent. This index tracks both U.S. government and corporate
bonds with maturities of less than ten years. For the twelve months ended August
31, 1995, intermediate-term government bonds returned 8.96 percent compared to
11.52 percent for intermediate-term corporate bonds.
On August 31, 1995, the Fund's net assets totaled nearly $233 million. During
the fiscal year, income dividends of $0.59 per share were distributed. The
accompanying chart illustrates the performance of a $10,000 investment in the
Fund from inception (May 3, 1989) through the fiscal year ended August 31, 1995,
versus the performance of a similar investment in the issues that comprise the
Lehman Brothers Intermediate Investment Grade Debt Index.
[GRAPHIC]
The Fund's underperformance to the
Index can be attributed to the
maintenance of its conservative
maturity structure through the first
half of 1995. As 1995 began, the
portfolio's average maturity was 4.6
years. As recently as June 30, with
interest rates having fallen nearly 2.0
percentage points, the average maturity
was only 4.71 years. As a result, the
Fund failed to capture a portion of the
potential gains generated by the
dramatic drop in interest rates.
Beginning in late July, when interest
rates began rising, the average
maturity was gradually extended to a
level of 4.9 years on August 31, 1995.
On the same date, the Fund's average
duration was 3.68 years.
[GRAPHIC]
On August 31, 1995, corporate bond
holdings comprised 73 percent of the
invested portion of the portfolio, with
U.S. government securities representing
the remaining 27 percent. The portfolio
was diversified among 64 issues with an
average coupon of 7.76 percent and an
average quality rating of A2.
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
LETTER TO THE SHAREHOLDERS, CONTINUED
In anticipation of continued moderate economic growth, the Fund maintained its
average maturity and duration, while seeking to add value through the selection
of individual corporate credits with potential for improving creditworthiness.
New purchases emphasized industrials at attractive yields. Sales centered on
electric utilities and yankees where spread incentives for owning these
investments dwindled. Recent purchases include China International Investment
Trust (CITIC) and Star Bank N.A., while included among those positions sold were
Grand Metropolitan and Bank of China.
LOOKING AHEAD
After four years of economic growth, momentum still appears to be able to
sustain moderate growth, although the manufacturing sector appears to be
lagging. At the same time, inflation remains benign. With the probability that
interest rates will remain at levels experienced over the past few months, or
decline on budget balancing reforms being approved by Congress, the Fund is
likely to extend its average maturity by taking advantage of temporary up ticks
in interest rates.
We appreciate your support of Dean Witter Intermediate Income Securities and
look forward to continuing to serve your investment needs.
Very truly yours,
[SIGNATURE]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS AUGUST 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE BONDS (72.5%)
AUTOMOTIVE (4.1%)
$ 4,300 Chrysler Corp................................. 10.40 % 08/01/99 $ 4,596,184
2,050 General Motors Corp........................... 7.625 02/15/97 2,085,752
2,975 Hertz Corp.................................... 6.70 06/15/02 2,974,583
---------------
9,656,519
---------------
AUTOMOTIVE FINANCE (5.6%)
6,000 Ford Capital BV (Netherlands)................. 9.375 05/15/01 6,728,820
1,000 Ford Holdings Inc............................. 9.25 07/15/97 1,051,590
4,975 General Motors Acceptance Corp................ 8.40 10/15/99 5,281,808
---------------
13,062,218
---------------
BANK HOLDING COMPANIES (8.4%)
4,000 First Chicago Corp............................ 9.875 07/01/99 4,436,840
5,000 Nationsbank Corp.............................. 6.875 02/15/05 4,934,700
5,000 Shawmut Bank Connecticut, N.A................. 8.625 02/15/05 5,526,450
4,975 Star Bank N.A................................. 6.375 03/01/04 4,759,682
---------------
19,657,672
---------------
BANKS - INTERNATIONAL (9.5%)
4,900 ABN AMRO Bank NV (Singapore).................. 7.25 05/31/05 5,010,299
4,000 Banco Central Hispano (Cayman Islands)........ 7.50 06/15/05 4,018,360
4,985 Bank of China................................. 6.75 03/15/99 4,955,888
4,000 Union Bank Finland............................ 5.25 06/15/96 3,971,080
3,970 Westpac Banking Corp. (Australia)............. 7.875 10/15/02 4,204,786
---------------
22,160,413
---------------
BEVERAGES - BREWERS (4.5%)
5,000 Seagram (Joseph E.) & Sons, Inc............... 9.75 06/15/00 5,129,650
5,000 Seagram (Joseph E.) & Sons, Inc............... 8.375 02/15/07 5,458,050
---------------
10,587,700
---------------
CABLE & TELECOMMUNICATIONS (2.3%)
5,225 TCI Communications Inc........................ 8.00 08/01/05 5,351,184
---------------
ELECTRONICS - SEMICONDUCTORS/COMPONENTS (1.4%)
3,000 Applied Materials Inc......................... 8.00 09/01/04 3,185,940
---------------
FINANCE (5.3%)
7,015 General Electric Capital Corp................. 8.65 05/01/18 7,109,141
5,000 Golden West Financial Corp.................... 10.25 05/15/97 5,309,700
---------------
12,418,841
---------------
FINANCIAL (2.2%)
4,975 Salomon, Inc.................................. 7.75 05/15/00 5,041,168
---------------
FOOD PROCESSING (2.0%)
4,500 Great Atlantic & Pacific Tea Co., Inc......... 9.125 01/15/98 4,689,810
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS AUGUST 31, 1995, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FOODS & BEVERAGES (2.8%)
$ 5,000 Coca-Cola Enterprises, Inc.................... 6.50 % 11/15/97 $ 5,030,150
1,500 Nabisco Inc................................... 6.70 06/15/02 1,485,870
---------------
6,516,020
---------------
HEALTHCARE (2.1%)
4,975 Columbia/HCA Healthcare....................... 6.91 06/15/05 4,949,976
---------------
INDUSTRIALS (1.0%)
1,100 United Technologies Corp...................... 9.625 05/15/99 1,125,080
1,075 Xerox Corp.................................... 9.20 07/15/99 1,101,122
---------------
2,226,202
---------------
LEISURE (2.5%)
5,475 Royal Caribbean Cruises, Ltd.................. 8.25 04/01/05 5,757,346
---------------
METALS & MINING (1.3%)
3,000 Placer Dome Inc. (Canada)..................... 7.125 06/15/07 2,950,230
---------------
NATURAL GAS (0.6%)
1,278 Panhandle Eastern Pipe Line Co................ 9.875 10/15/96 1,282,358
---------------
OIL INTEGRATED - INTERNATIONAL (2.2%)
5,000 Societe Nationale Elf Aquitaine (France)...... 7.75 05/01/99 5,224,850
---------------
OIL RELATED (2.2%)
5,000 Occidental Petroleum Corp..................... 9.625 07/01/99 5,129,750
---------------
RETAIL STORES (4.7%)
2,000 KMart Corp.................................... 8.125 12/01/06 2,074,040
4,975 Sears, Roebuck Acceptance Corp................ 6.50 06/15/00 4,956,393
3,000 TJX Companies Inc............................. 6.625 06/15/00 2,983,500
1,000 Woolworth Corp................................ 7.00 06/01/00 991,680
---------------
11,005,613
---------------
TOBACCO (0.9%)
2,000 RJR Nabisco, Inc.............................. 8.75 08/15/05 2,041,560
---------------
TRANSPORTATION (1.2%)
2,725 Union Pacific Corp............................ 7.375 05/15/01 2,818,958
---------------
UTILITIES - ELECTRIC (5.7%)
2,000 Commonwealth Edison Co........................ 7.50 01/01/01 2,031,060
500 Consolidated Edison Co. of New York, Inc...... 5.90 12/15/96 498,440
5,000 Long Island Lighting Co....................... 7.625 04/15/98 5,082,700
2,600 Southern California Edison Co................. 5.60 12/15/98 2,536,768
3,000 Texas Utilities Electric Co................... 7.125 06/01/97 3,039,690
---------------
13,188,658
---------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $168,668,052)....................................... 168,902,986
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS AUGUST 31, 1995, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT & AGENCIES OBLIGATIONS (24.5%)
$ 1,000 Federal Farm Credit Bank...................... 6.81 % 05/19/97 $ 1,003,278
2,000 Federal Home Loan Mortgage Corp............... 6.35 06/24/98 1,998,102
264 Federal Home Loan Mortgage Corp............... 8.50 12/01/01 270,916
190 Federal Home Loan Mortgage Corp............... 8.50 01/01/02 195,431
695 Federal Home Loan Mortgage Corp............... 8.50 07/01/02 713,687
292 Federal Home Loan Mortgage Corp............... 9.00 08/01/02 302,318
1,700 Federal Home Loan Mortgage Corp............... 7.05 03/24/04 1,686,578
3,230 Federal National Mortgage Association......... 5.30 03/11/98 3,156,820
73 Federal National Mortgage Association......... 8.50 12/01/01 76,089
2,500 Federal National Mortgage Association......... 6.90 03/10/04 2,485,938
3,000 Federal National Mortgage Association......... 7.55 06/10/04 3,077,344
2,000 Federal National Mortgage Association......... 7.73 08/26/04 2,068,440
4,500 Private Export Funding Corp................... 6.86 04/30/04 4,536,765
11,000 U.S. Treasury Note............................ 7.875 02/15/96 11,104,858
7,600 U.S. Treasury Note............................ 8.875 02/15/96 7,706,875
1,600 U.S. Treasury Note............................ 6.75 02/28/97 1,621,500
7,940 U.S. Treasury Note............................ 5.125 04/30/98 7,783,681
1,000 U.S. Treasury Note............................ 6.75 06/30/99 1,023,438
3,000 U.S. Treasury Note............................ 5.75 08/15/03 2,898,281
2,975 U.S. Treasury Note............................ 7.50 02/15/05 3,216,718
---------------
TOTAL U.S. GOVERNMENT & AGENCIES OBLIGATIONS
(IDENTIFIED COST $57,196,492)........................................ 56,927,057
---------------
SHORT-TERM INVESTMENT (a) (2.3%)
U.S. GOVERNMENT AGENCY
5,300 Federal Home Loan Banks (Amortized Cost
$5,300,000)................................... 5.70 09/01/95 5,300,000
---------------
TOTAL INVESTMENTS
(IDENTIFIED COST $231,164,544) (B).......... 99.3% 231,130,043
OTHER ASSETS IN EXCESS OF LIABILITIES....... 0.7 1,621,541
----- ------------
NET ASSETS.................................. 100.0% $232,751,584
----- ------------
----- ------------
<FN>
- ---------------------
(a) Security 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 $231,199,791; the
aggregate gross unrealized appreciation is $3,200,038 and the aggregate
gross unrealized depreciation is $3,269,786, resulting in net unrealized
depreciation of $69,748.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $231,164,544)............................ $ 231,130,043
Receivable for:
Interest................................................ 3,842,467
Shares of beneficial interest sold...................... 308,167
Principal paydowns...................................... 26,794
Prepaid expenses and other assets........................... 18,568
-------------
TOTAL ASSETS........................................... 235,326,039
-------------
LIABILITIES:
Payable to bank............................................. 1,910,870
Payable for:
Shares of beneficial interest repurchased............... 187,320
Plan of distribution fee................................ 167,011
Investment management fee............................... 117,890
Dividends to shareholders............................... 67,440
Accrued expenses and other payables......................... 123,924
-------------
TOTAL LIABILITIES...................................... 2,574,455
-------------
NET ASSETS:
Paid-in-capital............................................. 240,605,495
Net unrealized depreciation................................. (34,501)
Accumulated undistributed net investment income............. 39,127
Accumulated net realized loss............................... (7,858,537)
-------------
NET ASSETS............................................. $ 232,751,584
-------------
-------------
NET ASSET VALUE PER SHARE,
24,013,746 SHARES OUTSTANDING (UNLIMITED SHARES AUTHORIZED
OF $.01 PAR VALUE)........................................
$9.69
-------------
-------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1995
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $18,205,136
-----------
EXPENSES
Plan of distribution fee.................................... 1,969,829
Investment management fee................................... 1,390,467
Transfer agent fees and expenses............................ 177,398
Professional fees........................................... 58,027
Shareholder reports and notices............................. 55,239
Custodian fees.............................................. 44,318
Registration fees........................................... 42,171
Trustees' fees and expenses................................. 27,812
Other....................................................... 8,446
-----------
TOTAL EXPENSES......................................... 3,773,707
-----------
NET INVESTMENT INCOME.................................. 14,431,429
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss........................................... (2,372,243)
Net change in unrealized depreciation....................... 6,706,091
-----------
NET GAIN............................................... 4,333,848
-----------
NET INCREASE................................................ $18,765,277
-----------
-----------
</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 YEAR FOR THE YEAR
ENDED ENDED
AUGUST 31, 1995 AUGUST 31, 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................... $ 14,431,429 $ 14,717,007
Net realized loss........................................... (2,372,243) (5,288,443)
Net change in unrealized appreciation/depreciation.......... 6,706,091 (13,667,486)
--------------- ---------------
NET INCREASE (DECREASE)................................ 18,765,277 (4,238,922)
--------------- ---------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income....................................... (14,398,478) (14,239,594)
Net realized gain........................................... (307,913) (1,050,020)
--------------- ---------------
TOTAL.................................................. (14,706,391) (15,289,614)
--------------- ---------------
Net increase (decrease) from transactions in shares of
beneficial interest....................................... (17,057,209) 10,847,274
--------------- ---------------
TOTAL DECREASE......................................... (12,998,323) (8,681,262)
NET ASSETS:
Beginning of period......................................... 245,749,907 254,431,169
--------------- ---------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$39,127 AND $6,176, RESPECTIVELY)....................... $ 232,751,584 $ 245,749,907
--------------- ---------------
--------------- ---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1995
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 on the identified cost method.
Discounts on securities purchased are accreted over the life of the respective
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 AUGUST 31, 1995, 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; and 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 AUGUST 31, 1995, 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 year ended August 31, 1995,
it received approximately $500,000 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 year ended August 31, 1995, aggregated
$252,171,881 and $278,702,873, respectively. Included in the aforementioned are
purchases and sales of U.S. Government securities of $69,563,197 and
$82,452,664, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the Fund's
transfer agent. At August 31, 1995, the Fund had transfer agent fees and
expenses payable of approximately $16,000.
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 year ended
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1995, CONTINUED
August 31, 1995 included in Trustees' fees and expenses in the Statement of
Operations amounted to $7,847. At August 31, 1995, the Fund had an accrued
pension liability of $51,000 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 YEAR ENDED FOR THE YEAR ENDED
AUGUST 31, 1995 AUGUST 31, 1994
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Sold............................................................. 4,829,143 $ 45,425,471 7,997,562 $ 79,234,382
Reinvestment of dividends and distributions...................... 845,190 8,195,495 803,966 7,889,222
----------- -------------- ----------- ------------
5,674,333 53,620,966 8,801,528 87,123,604
Repurchased...................................................... (7,500,636) (70,678,175) (7,753,698) (76,276,330)
----------- -------------- ----------- ------------
Net increase (decrease).......................................... (1,826,303) $ (17,057,209) 1,047,830 $ 10,847,274
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
</TABLE>
6. FEDERAL INCOME TAX STATUS
At August 31, 1995, the Fund had a net capital loss carryover of approximately
$6,656,000 which will be available through August 31, 2003 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 Fund's next taxable year. The Fund
incurred and will elect to defer net capital losses of approximately $1,167,000
during fiscal 1995. As of August 31, 1995, the Fund had temporary book/tax
differences primarily attributable to post-October 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
PERIOD
MAY 3,
1989*
FOR THE YEAR ENDED AUGUST 31 THROUGH
---------------------------------------------------------------- AUGUST
1995 1994 1993 1992 1991 1990 31, 1989
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <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 $ 10.00
--------- --------- --------- --------- --------- --------- ---------
Net investment income.............. 0.59 0.58 0.62 0.70 0.79 0.86 0.28
Net realized and unrealized gain
(loss)............................ 0.19 (0.73) 0.20 0.46 0.17 (0.55) (0.02)
--------- --------- --------- --------- --------- --------- ---------
Total from investment operations... 0.78 (0.15) 0.82 1.16 0.96 0.31 0.26
--------- --------- --------- --------- --------- --------- ---------
Less dividends and distributions
from:
Net investment income........... (0.59) (0.56) (0.61) (0.70) (0.79) (0.86) (0.28)
Net realized gain............... (0.01) (0.04) -- -- -- (0.01) --
--------- --------- --------- --------- --------- --------- ---------
Total dividends and
distributions..................... (0.60) (0.60) (0.61) (0.70) (0.79) (0.87) (0.28)
--------- --------- --------- --------- --------- --------- ---------
Net asset value, end of period..... $ 9.69 $ 9.51 $ 10.26 $ 10.05 $ 9.59 $ 9.42 $ 9.98
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN+........... 8.56% (1.50)% 8.43% 12.58% 10.78% 3.22% 2.57%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses........................... 1.63% 1.63% 1.62% 1.69% 1.69% 1.75% 1.42%(2)(3)
Net investment income.............. 6.23% 5.80% 6.12% 7.11% 8.49% 8.78% 8.18%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands......................... $232,752 $245,750 $254,431 $187,285 $115,204 $114,086 $69,946
Portfolio turnover rate............ 114% 122% 132% 93% 150% 135% 30%(1)
<FN>
- ---------------------
* Commencement of operations.
+ Does not reflect the deduction of sales charge.
(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 and net investment income ratios
would have been 2.15% and 7.44%, respectively.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF DEAN WITTER INTERMEDIATE INCOME SECURITIES
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Dean Witter Intermediate Income
Securities (the "Fund") at August 31, 1995, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended and the financial highlights for each of the six years in
the period then ended and for the period May 3, 1989 (commencement of
operations) through August 31, 1989, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities owned at August 31, 1995 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
OCTOBER 10, 1995
<PAGE>
TRUSTEES
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin 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
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
[Graphic]
ANNUAL REPORT
AUGUST 31, 1995
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
GROWTH OF $10,000
DATE TOTAL LEHMAN INTERMEDIATE
INVESTMENT GRADE DEBT INDEX
$10,000 $10,000
August 31, 1989 $10,257 $10,375
August 31, 1990 $10,587 $11,047
August 31, 1991 $11,729 $12,621
August 31, 1992 $13,205 $14,686
August 31, 1993 $14,318 $16,706
August 31, 1994 $14,103 $16,382
August 31, 1995 $15,310 (3) $18,552
AVERAGE ANNUAL TOTAL RETURNS
1 YEAR 5 YEARS LIFE OF FUND
8.56 (1) 7.66 (1) 6.96 (1)
3.56 (2) 7.36 (2) 6.96 (2)
_____ Fund _____ LEHMAN (4)
Past performance is not predictive of future returns.
- ---------------
(1) Figure shown assumes reinvestment of all distributions and does not reflect
the deduction of sales charges.
(2) Figure shown assumes reinvestment of all distributions and the deduction of
the maximum applicable contingent deferred sales charge (CDSC) (1 year-5%,
5 years-2%, since inception-0%). See the Fund's current prospectus for
complete details on fees and sales charges.
(3) Closing value assuming a complete redemption on August 31, 1995.
(4) The Lehman Brothers Intermediate Investment Grade Debt Index is an
unmanaged index of 5- to 10- year investment-grade corporate debt
securities.
