<PAGE> 1
DEAN WITTER INTERMEDIATE INCOME SECURITIES Two World Trade Center, New York,
New York 10048
LETTER TO THE SHAREHOLDERS February 29, 1996
DEAR SHAREHOLDER:
For most of the six-month period under review, interest rates on intermediate
maturity U.S. Treasuries and corporate securities moved dramatically lower as
the economy continued to weaken and inflation remained relatively benign. In
addition, high expectations for the successful passage of a balanced budget,
despite a year-end Congressional bottleneck, further contributed to the decline
in rates. Given this environment, the market anticipated further reductions in
the federal-funds rate. As expected, the Federal Reserve Board lowered the
federal-funds rate by 0.25 percentage points in December and again in January.
U.S. Treasuries with final maturities from two to five years declined by
approximately one percentage point between August 31, 1995 and mid-February,
while ten-year U.S. Treasuries declined by nearly 0.75 percentage points during
the same period.
After a month of harsh winter weather and the resumption of more government
operations, however, the economy began to hint of a possible upturn. The
realization that legislative progress toward a balanced budget would be tabled
indefinitely and comments by Alan Greenspan, the Chairman of the Federal
Reserve, that he was satisfied with the level of current economic activity
erased much of the market's optimism and interest rates erased almost two-thirds
of their prior five and one-half month gain.
PERFORMANCE
Against this backdrop, Dean Witter Intermediate Income Securities produced a
total return of 2.73 percent, compared to a return of 3.93 percent for the
Lehman Brothers Intermediate Government Corporate Bond Index (the Index). The
Index tracks the performance of both U.S. government and corporate bonds due
from one to ten years. For the same six month period, intermediate government
bonds, as measured by the Lehman Brothers Intermediate Government Bond
<PAGE> 2
DEAN WITTER INTERMEDIATE INCOME SECURITIES
LETTER TO THE SHAREHOLDERS February 29, 1996, continued
Index, returned 3.80 percent, while intermediate corporate bonds, as measured by
the Lehman Brothers Intermediate Corporate Bond Index, returned 4.43 percent.
Although the average maturity and duration of the portfolio was modestly
extended in February as interest rates rose, the Fund under performed the Index
due to its relatively conservative duration stance during most of the past six
months. Market reaction to debt of Kmart Corp. held in the portfolio and
subsequently downgraded by the credit rating services during the period, also
exerted negative pressure on performance. At the end of the period, the Fund
still held Kmart Corp. securities in anticipation of price improvement as 1996
progressed. The company's financial condition is being carefully monitored and
it is our expectation that these bonds will improve in price and contribute to
better performance over the next six months.
PORTFOLIO STRATEGY
On February 29, 1996, the Fund's average maturity was 5.25 years on the invested
portion of the portfolio and the weighted average, adjusted modified duration
was 3.94 years. (Duration is a measure of the portfolio's sensitivity to changes
in interest rates.) Temporary reserves accounted for slightly more than one
percent of the investable assets. Approximately 17 percent of the portfolio was
invested in securities expected to come due in less than one year, down from 20
percent on August 31, 1995. Securities with final maturities of seven to ten
years were increased to approximately 33 percent of the portfolio, up from 29
percent at the end of August. As sector spreads widened and quality spreads
narrowed, the Fund reduced its holdings of U.S. Treasuries and securities rated
less than A by both Moody's Investors Service and Standard & Poor's Corporation,
in favor of adding securities rated A or better. As a result of this
repositioning, the average credit rating of the portfolio remained unchanged at
A2.
At the end of the period under review, corporate bond holdings comprised 78
percent of the portfolio with government bonds accounting for 21 percent
(temporary reserves comprised the remaining one percent). Slightly more than 25
percent of the Fund's holdings were rated at least A by either S&P or Moody's.
Trading activity throughout the period also served to lower the average coupon
of the investments held in the portfolio as older, higher-coupon issues were
retired to purchase newer items with lower coupons. The result was to reduce the
average coupon from 7.76 percent on August 31, 1995 to 7.35 percent on February
29, 1996.
<PAGE> 3
DEAN WITTER INTERMEDIATE INCOME SECURITIES
LETTER TO THE SHAREHOLDERS February 29, 1996, continued
LOOKING AHEAD
As March began, uncertainty pervaded investor attitudes as the economy sent
mixed signals concerning its future growth pattern. Ironically, while
politicians and newspapers paint a bleak picture of the downsizing of the job
market, the most recent employment data appears surprisingly strong and will
likely be a factor in deterring further easing by the Federal Reserve Board.
Market psychology, which in February merely hinted at a possible shift from its
bullish sentiment, has become more bearish in recent weeks. If indeed the
economy did bottom in fourth quarter of 1995, higher interest rates are to be
expected as the year progresses. However, it is still unclear whether the
economy has found new vigor or is just recuperating from the one-time weather
and government shutdown-related depressants of the prior two months. The next
couple of months should provide more reliable data. With an addition 0.30
percentage rise in intermediate interest rates since the end of February, the
market has not only discounted a lack of further ease by the Federal Reserve,
but is beginning to anticipate a tightening in monetary policy. However, until a
clearer picture of the economy emerges, the Fund will seek to remain close to
its current maturity and duration levels with a slight bias toward lengthening
should interest rates rise further.
We appreciate your support of Dean Witter Intermediate Income Securities and
look forward to continuing to serve your investment needs.
Very truly yours,
/s/CHARLES A. FIUMEFREDDO
CHARLES A. FIUMEFREDDO
Chairman of the Board
<PAGE> 4
DEAN WITTER INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS February 29, 1996 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE BONDS (76.6%)
Automobile - Rentals (1.2%)
$ 2,900 Hertz Corp. ......................... 6.00 % 01/15/03 $ 2,802,212
----------
Automotive (2.0%)
4,300 Chrysler Corp. ...................... 10.40 08/01/99 4,558,602
----------
Automotive - Finance (5.4%)
7,000 Ford Motor Credit Co. ............... 6.25 11/08/00 6,992,580
4,975 General Motors Acceptance Corp. ..... 8.40 10/15/99 5,323,548
----------
12,316,128
----------
Bank Holding Companies (5.0%)
4,000 BankAmerica Corp. ................... 6.20 02/15/06 3,841,520
2,474 First Chicago Corp. ................. 7.625 01/15/03 2,619,051
4,975 Star Bank N.A. ...................... 6.375 03/01/04 4,873,510
----------
11,334,081
----------
Banks (2.5%)
5,000 Shawmut Bank Connecticut, N.A. ...... 8.625 02/15/05 5,617,900
----------
Banks - International (3.6%)
4,000 Santander Financial Issuances
(Cayman Islands)..................... 7.75 05/15/05 4,235,680
4,000 Union Bank Finland................... 5.25 06/15/96 3,996,320
----------
8,232,000
----------
Beverages - Brewers (4.7%)
5,000 Seagram (Joseph E.) & Sons, Inc. .... 9.75 06/15/00 5,056,200
5,000 Seagram (Joseph E.) & Sons, Inc. .... 8.375 02/15/07 5,570,950
----------
10,627,150
----------
Brokerage (5.7%)
2,100 Bear Stearns Co's, Inc. ............. 6.75 08/15/00 2,133,978
1,000 Lehman Brothers Holdings, Inc. ...... 9.875 10/15/00 1,133,330
5,000 Morgan Stanley Group, Inc. .......... 5.625 03/01/99 4,956,650
4,900 Salomon, Inc. ....................... 6.75 02/15/03 4,747,757
----------
12,971,715
----------
Cable & Telecommunications (1.1%)
2,500 Tele-Communications, Inc. ........... 6.875 02/15/06 2,413,225
----------
Electronics - Semiconductors/Components (2.3%)
3,000 Applied Materials Inc. .............. 8.00 09/01/04 3,218,760
2,000 Texas Instruments, Inc. ............. 6.125 02/01/06 1,914,780
----------
5,133,540
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 5
DEAN WITTER INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS February 29, 1996 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Finance (6.0%)
$ 6,000 General Electric Capital Corp. ...... 8.65 % 05/01/18 $ 6,029,880
7,250 Golden West Financial Corp. ......... 10.25 05/15/97 7,615,255
----------
13,645,135
----------
Foods (0.7%)
1,500 Nabisco Inc. ........................ 6.70 06/15/02 1,503,720
----------
Foreign Government (2.7%)
1,300 Israel (State of )................... 6.375 12/15/05 1,259,479
5,000 Quebec (Province of ) (Canada)....... 6.50 01/17/06 4,859,800
----------
6,119,279
----------
Healthcare (2.2%)
4,975 Columbia/HCA Healthcare Corp. ....... 6.87 09/15/03 5,032,163
----------
Industrials (2.7%)
3,900 Comdisco, Inc. ...................... 6.50 06/15/00 3,931,239
1,100 United Technologies Corp. ........... 9.625 05/15/99 1,108,129
1,075 Xerox Corp. ......................... 9.20 07/15/99 1,088,212
----------
6,127,580
----------
Leisure (2.8%)
5,950 Royal Caribbean Cruises, Ltd.
(Liberia)............................ 8.25 04/01/05 6,267,194
----------
Oil Integrated - International (2.3%)
5,000 Societe Nationale Elf Aquitaine
(France)............................. 7.75 05/01/99 5,257,550
----------
Oil Related (3.0%)
1,900 Lyondell Petrochemical Co. .......... 6.50 02/15/06 1,838,649
5,000 Occidental Petroleum Corp. .......... 9.625 07/01/99 5,060,100
----------
6,898,749
----------
Packaging & Bottling (2.2%)
5,000 Coca-Cola Enterprises, Inc. ......... 6.50 11/15/97 5,055,150
----------
Paper & Forest Products (1.7%)
4,000 Noranda Forest, Inc. (Canada)........ 6.875 11/15/05 3,939,960
----------
Retail Stores (4.8%)
4,000 Kmart Corp. ......................... 8.125 12/01/06 3,080,000
4,900 Sears Roebuck Acceptance Corp. ...... 6.75 09/15/05 4,905,831
3,000 TJX Companies Inc. .................. 6.625 06/15/00 3,024,510
----------
11,010,341
----------
Supermarkets (2.1%)
4,500 Great Atlantic & Pacific Tea Co.,
Inc. ................................ 9.125 01/15/98 4,678,200
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 6
DEAN WITTER INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS February 29, 1996 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Textiles (1.3%)
$ 2,975 Burlington Industries, Inc. ......... 7.25 % 09/15/05 $ 2,974,494
----------
Transportation (1.5%)
3,200 Union Pacific Corp. ................. 7.375 05/15/01 3,342,976
----------
Utilities - Electric (7.1%)
5,000 Chilgener S.A. (Chile)............... 6.50 01/15/06 4,798,850
2,000 Commonwealth Edison Co. ............. 7.50 01/01/01 2,003,280
500 Consolidated Edison Co. of New York,
Inc.................................. 5.90 12/15/96 501,220
5,000 Long Island Lighting Co. ............ 7.625 04/15/98 5,030,000
1,500 Niagara Mohawk Power Corp. .......... 8.00 06/01/04 1,418,610
2,500 Public Service Electric & Gas Co. ... 6.25 01/01/07 2,385,875
----------
16,137,835
----------
TOTAL CORPORATE BONDS
(Identified Cost $170,651,145).............................. 173,996,879
----------
U.S. GOVERNMENT & AGENCIES OBLIGATIONS (20.8%)
2,000 Federal Home Loan Mortgage Corp. .... 6.35 06/24/98 2,007,458
1,000 Federal Home Loan Mortgage Corp. .... 6.07 11/20/98 1,002,500
227 Federal Home Loan Mortgage Corp. .... 8.50 12/01/01 233,793
163 Federal Home Loan Mortgage Corp. .... 8.50 01/01/02 167,916
604 Federal Home Loan Mortgage Corp. .... 8.50 07/01/02 622,372
254 Federal Home Loan Mortgage Corp. .... 9.00 08/01/02 265,052
1,700 Federal Home Loan Mortgage Corp. .... 7.05 03/24/04 1,696,516
3,230 Federal National Mortgage Assoc. .... 5.30 03/11/98 3,202,747
65 Federal National Mortgage Assoc. .... 8.50 12/01/01 67,311
2,500 Federal National Mortgage Assoc. .... 6.90 03/10/04 2,456,641
3,000 Federal National Mortgage Assoc. .... 7.55 06/10/04 3,068,906
2,000 Federal National Mortgage Assoc. .... 7.73 08/26/04 2,084,140
3,060 Private Export Funding Corp. ........ 6.86 04/30/04 3,143,018
10,000 U.S. Treasury Note................... 6.50 09/30/96 10,071,875
1,600 U.S. Treasury Note................... 6.75 02/28/97 1,621,750
3,000 U.S. Treasury Note................... 5.125 04/30/98 2,980,312
1,000 U.S. Treasury Note................... 6.75 06/30/99 1,034,219
4,300 U.S. Treasury Note................... 5.75 10/31/00 4,298,656
2,500 U.S. Treasury Note................... 5.75 08/15/03 2,459,780
4,600 U.S. Treasury Note................... 6.50 08/15/05 4,706,375
----------
TOTAL U.S. GOVERNMENT & AGENCIES OBLIGATIONS
(Identified Cost $53,249,224)............................... 47,191,337
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 7
DEAN WITTER INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS February 29, 1996 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENT (a) (1.1%)
U.S. GOVERNMENT AGENCY
$ 2,600 Federal Home Loan Mortgage Corp.
(Amortized Cost $2,600,000).......... 5.30 % 03/01/96 $ 2,600,000
----------
TOTAL INVESTMENTS
(Identified Cost $226,500,369) (b).................. 98.5% 223,788,216
OTHER ASSETS IN EXCESS OF LIABILITIES................. 1.5 3,431,830
---- ----------
NET ASSETS.......................................... 100.0% $227,220,046
---- ----------
---- ----------
- ---------------------
<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 $226,535,616; the
aggregate gross unrealized appreciation is $1,937,736 and the aggregate gross
unrealized depreciation is $4,685,136, resulting in net unrealized depreciation
of $2,747,400.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 8
DEAN WITTER INTERMEDIATE INCOME SECURITIES
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
February 29, 1996 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $226,500,369)....................................... $223,788,216
Receivable for:
Investments sold.................................................. 4,277,776
Interest.......................................................... 3,909,483
Shares of beneficial interest sold................................ 273,445
Principal paydowns................................................ 44,188
Prepaid expenses...................................................... 39,569
----------
TOTAL ASSETS...................................................... 232,332,677
----------
LIABILITIES:
Payable for:
Investments purchased............................................. 4,266,406
Shares of beneficial interest repurchased......................... 282,249
Plan of distribution fee.......................................... 155,425
Investment management fee......................................... 109,732
Dividends to shareholders......................................... 69,491
Accrued expenses and other payables................................... 229,328
----------
TOTAL LIABILITIES................................................. 5,112,631
----------
NET ASSETS:
Paid-in-capital....................................................... 235,669,789
Net unrealized depreciation........................................... (2,712,153)
Accumulated undistributed net investment income....................... 27,945
Accumulated net realized loss......................................... (5,765,535)
----------
NET ASSETS........................................................ $227,220,046
----------
----------
NET ASSET VALUE PER SHARE, 23,508,691 shares outstanding
(unlimited shares authorized of $.01 par value)...................... $9.67
----
----
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 9
DEAN WITTER INTERMEDIATE INCOME SECURITIES
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the six months ended February 29, 1996 (unaudited)
NET INVESTMENT INCOME:
INTEREST INCOME........................................................ $ 8,589,730
---------
EXPENSES
Plan of distribution fee............................................... 979,853
Investment management fee.............................................. 691,661
Transfer agent fees and expenses....................................... 89,085
Shareholder reports and notices........................................ 33,005
Professional fees...................................................... 29,836
Custodian fees......................................................... 19,698
Registration fees...................................................... 12,703
Trustees' fees and expenses............................................ 11,443
Other.................................................................. 5,053
---------
TOTAL EXPENSES..................................................... 1,872,337
---------
NET INVESTMENT INCOME.............................................. 6,717,393
---------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain...................................................... 2,093,002
Net change in unrealized depreciation.................................. (2,677,652)
---------
NET LOSS........................................................... (584,650)
---------
NET INCREASE........................................................... $ 6,132,743
---------
---------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 10
DEAN WITTER INTERMEDIATE INCOME SECURITIES
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
<S> <C> <C>
FOR THE YEAR
FOR THE SIX ENDED
MONTHS ENDED AUGUST 31,
FEBRUARY 29, 1996 1995
------------------------------------------------------------------------------
(unaudited)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income............................. $ 6,717,393 $ 14,431,429
Net realized gain (loss).......................... 2,093,002 (2,372,243)
Net change in unrealized
appreciation/depreciation........................ (2,677,652) 6,706,091
------------ ------------
NET INCREASE.................................. 6,132,743 18,765,277
------------ ------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income............................. (6,728,575) (14,398,478)
Net realized gain................................. -- (307,913)
------------ ------------
TOTAL......................................... (6,728,575) (14,706,391)
------------ ------------
Net decrease from transactions in shares of
beneficial interest.............................. (4,935,706) (17,057,209)
------------ ------------
TOTAL DECREASE................................ (5,531,538) (12,998,323)
NET ASSETS:
Beginning of period............................... 232,751,584 245,749,907
------------ ------------
END OF PERIOD
(Including undistributed net investment income
of $27,945 and $39,127, respectively)......... $227,220,046 $232,751,584
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 11
DEAN WITTER INTERMEDIATE INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS February 29, 1996 (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 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 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> 12
DEAN WITTER INTERMEDIATE INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS February 29, 1996 (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 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 capital
<PAGE> 13
DEAN WITTER INTERMEDIATE INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS February 29, 1996 (unaudited) continued
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. ("DWR"), an affiliate of the Investment Manager and
Distributor, and other employees or selected broker-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 29,
1996, it received approximately $208,000 in contingent deferred sales charges
from certain redemptions of the Fund's shares.
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 29, 1996, aggregated
$138,243,552 and $141,051,542, respectively. Included in the aforementioned are
purchases and sales of U.S. Government securities of $33,130,672 and
$35,184,544, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At February 29, 1996, the Fund had
transfer agent fees and expenses payable of approximately $15,000.
The Fund has 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
<PAGE> 14
DEAN WITTER INTERMEDIATE INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS February 29, 1996 (unaudited) continued
five years of service. Aggregate pension costs for the six months ended February
29, 1996 included in Trustees' fees and expenses in the Statement of Operations
amounted to $1,806. At February 29, 1996, the Fund had an accrued pension
liability of $51,998 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 FOR THE
MONTHS ENDED YEAR ENDED
FEBRUARY 29, 1996 AUGUST 31, 1995
-------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ----------- ---------- ------------
(unaudited)
<S> <C> <C> <C> <C>
Sold.......................................................... 2,216,254 $21,658,508 4,829,143 $ 45,425,471
Reinvestment of dividends and distributions................... 378,148 3,684,667 845,190 8,195,495
-------- --------- -------- ----------
2,594,402 25,343,175 5,674,333 53,620,966
Repurchased................................................... (3,099,457) (30,278,881) (7,500,636) (70,678,175)
-------- --------- -------- ----------
Net decrease.................................................. (505,055) $(4,935,706) (1,826,303) $(17,057,209)
-------- --------- -------- ----------
-------- --------- -------- ----------
</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 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> 15
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 YEAR
FOR THE SIX ENDED AUGUST 31
MONTHS ENDED -----------------
FEBRUARY 29, 1996 1995
- ----------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period..................................... $ 9.69 $ 9.51
----- -----
Net investment income.................................................... 0.28 0.59
Net realized and unrealized gain (loss).................................. (0.02) 0.19
----- -----
Total from investment operations......................................... 0.26 0.78
----- -----
Less dividends and distributions from:
Net investment income................................................. (0.28) (0.59)
Net realized gain..................................................... -- (0.01)
----- -----
Total dividends and distributions........................................ (0.28) (0.60)
----- -----
Net asset value, end of period........................................... $ 9.67 $ 9.69
----- -----
----- -----
TOTAL INVESTMENT RETURN+................................................. 2.73%(1) 8.56%
RATIOS TO AVERAGE NET ASSETS:
Expenses................................................................. 1.62%(2) 1.63%
Net investment income.................................................... 5.83%(2) 6.23%
SUPPLEMENTAL DATA:
Net assets, end of period, in millions................................... $227 $233
Portfolio turnover rate.................................................. 65%(1) 114%
<CAPTION>
FOR THE YEAR
ENDED AUGUST 31
-----------------
1994 1993
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period..................................... $10.26 $10.05
----- -----
Net investment income.................................................... 0.58 0.62
Net realized and unrealized gain (loss).................................. (0.73) 0.20
----- -----
Total from investment operations......................................... (0.15) 0.82
----- -----
Less dividends and distributions from:
Net investment income................................................. (0.56) (0.61)
Net realized gain..................................................... (0.04) --
----- -----
Total dividends and distributions........................................ (0.60) (0.61)
----- -----
Net asset value, end of period........................................... $ 9.51 $10.26
----- -----
----- -----
TOTAL INVESTMENT RETURN+................................................. (1.50)% 8.43%
RATIOS TO AVERAGE NET ASSETS:
Expenses................................................................. 1.63% 1.62%
Net investment income.................................................... 5.80% 6.12%
SUPPLEMENTAL DATA:
Net assets, end of period, in millions................................... $246 $254
Portfolio turnover rate.................................................. 122% 132%
<CAPTION>
FOR THE YEAR
ENDED AUGUST 31
-----------------
1992 1991
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period..................................... $ 9.59 $ 9.42
----- -----
Net investment income.................................................... 0.70 0.79
Net realized and unrealized gain (loss).................................. 0.46 0.17
----- -----
Total from investment operations......................................... 1.16 0.96
----- -----
Less dividends and distributions from:
Net investment income................................................. (0.70) (0.79)
Net realized gain..................................................... -- --
----- -----
Total dividends and distributions........................................ (0.70) (0.79)
----- -----
Net asset value, end of period........................................... $10.05 $ 9.59
----- -----
----- -----
TOTAL INVESTMENT RETURN+................................................. 12.58% 10.78%
RATIOS TO AVERAGE NET ASSETS:
Expenses................................................................. 1.69% 1.69%
Net investment income.................................................... 7.11% 8.49%
SUPPLEMENTAL DATA:
Net assets, end of period, in millions................................... $187 $115
Portfolio turnover rate.................................................. 93% 150%
</TABLE>
- ---------------------
+ Does not reflect the deduction of sales charge.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 16
TRUSTEES
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
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 preceeded or accompanied by an effective prospectus.
DEAN WITTER
INTERMEDIATE
INCOME
SECURITIES
[PHOTO]
SEMIANNUAL REPORT
FEBRUARY 29, 1996
