<PAGE> 1
DEAN WITTER INTERMEDIATE INCOME SECURITIES Two World Trade Center, New York,
New York 10048
LETTER TO THE SHAREHOLDERS February 28, 1997
DEAR SHAREHOLDER:
Over the past six months, interest rates exhibited substantial volatility
corresponding to sharp shifts in perceived economic conditions. Although
inflation remained benign throughout the period, the consensus economic outlook
moved from one of slow growth in late summer to one of stronger growth as winter
approached. Indeed, for the last three months of 1996, the economy grew by
nearly 4 percent.
As 1997 began, interest rates were further pressured by indications of a second
consecutive quarterly increase in GDP of more than 3 percent. Federal Reserve
Chairman Alan Greenspan's comments, implying a possible need for a "preemptive
strike" against inflation, heightened expectations for an increase in short-term
rates as soon as late March. After falling by as much as 0.95 basis points from
September through November, intermediate-term rates rose and came within 0.25 to
0.38 points of their levels before the decline, with a further rise in yields
anticipated.
PERFORMANCE AND PORTFOLIO
From August 31, 1996, through February 28, 1997, Dean Witter Intermediate Income
Securities posted a total return of 4.38 percent. During the same period, the
Lehman Intermediate Government/ Corporate Bond Index (tracks U.S. government and
corporate bonds with maturities of one to ten years) returned 4.48 percent and
the Lipper Intermediate Investment Grade Debt Index returned 5.02 percent. For
the six months ended February 28, 1997, intermediate-term government bonds
returned 4.20 percent and intermediate-term corporate bonds returned 5.44
percent.
The net decline in interest rates during the period under review boosted the
Fund's performance. However, performance was constrained by shareholder
redemptions, which prevented the Fund from fully benefiting from the interest
rate decline that took place from September through November and from amassing a
larger defensive cash position. On
<PAGE> 2
DEAN WITTER INTERMEDIATE INCOME SECURITIES
LETTER TO THE SHAREHOLDERS February 28, 1997, continued
February 28, 1997, the Fund's duration (a measure of a portfolio's sensitivity
to interest-rate changes) was slightly more than 4.10 years, virtually unchanged
from its level on August 31, 1996. Cash reserves at the end of February were at
1.4 percent of investable assets compared to 4.8 percent at the onset of the
period.
With the economy growing at a healthy pace and creditworthiness improving among
corporate issuers, the Fund increased its corporate bond allocation from 76
percent of invested assets to nearly 82 percent. The largest new commitment was
to the industrial sector, which rose from slightly less than 23 percent of
invested assets on August 31, 1996 to 29 percent on February 28, 1997. We also
increased utility holdings and slightly decreased holdings in banks and Yankee
bonds (dollar-denominated bonds issued in the United States by foreign
entities).
To take further advantage of improving credit fundamentals as well as to bolster
income, we emphasized acquiring BBB-rated corporates over Treasuries. On
February 28, 1997, approximately 37 percent of the invested portion of the
portfolio was rated Baa by Moody's and BBB by Standard & Poor's, compared to
just over 19 percent on August 31, 1996. Due to this move toward higher-yielding
securities, the portfolio's average credit quality rating decreased from A2 at
the beginning of the period to A3 at the end of the period.
LOOKING AHEAD
As 1997 progresses and the economy continues to exhibit signs of healthy
positive momentum, the likelihood for some tightening by the Federal Reserve
increases, leading to higher interest rates across all maturities. While today's
levels already take into account some future increase in the federal funds rate,
they are likely to rise slightly more, if only temporarily, once such action is
taken. In anticipation of a higher interest rate environment that will
eventually slow economic growth, the Fund plans to return to a somewhat greater
U.S. government allocation and an overall higher average quality rating during
the course of the year, as opportunities permit. Any interim bond market rallies
will be used to shorten the Fund's duration until the direction of interest
rates appears to be reversing.
<PAGE> 3
DEAN WITTER INTERMEDIATE INCOME SECURITIES
LETTER TO THE SHAREHOLDERS February 28, 1997, continued
We appreciate your ongoing 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 28, 1997 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE BONDS (82.1%)
Aerospace & Defense (2.2%)
$ 4,000 Lockheed Martin Corp................. 6.625% 06/15/98 $ 4,023,160
------------
Automobile - Rentals (1.7%)
3,250 Hertz Corp........................... 6.00 01/15/03 3,107,552
------------
Automotive (2.4%)
4,300 Chrysler Corp........................ 10.40 08/01/99 4,368,241
------------
Automotive - Finance (2.8%)
4,975 General Motors Acceptance Corp....... 8.40 10/15/99 5,199,472
------------
Bank Holding Companies (4.0%)
2,474 First Chicago Corp................... 7.625 01/15/03 2,561,357
4,975 Star Bank N.A........................ 6.375 03/01/04 4,794,059
------------
7,355,416
------------
Banks (7.4%)
3,000 Banque Nationale De Paris............ 7.20 01/15/07 2,981,310
5,000 Shawmut Bank Connecticut, N.A........ 8.625 02/15/05 5,461,750
5,000 Societe Generale..................... 7.40 06/01/06 5,066,450
------------
13,509,510
------------
Banks - International (2.8%)
5,000 Santander Financial Issuances
(Cayman Islands)..................... 7.75 05/15/05 5,183,050
------------
Brokerage (4.4%)
3,000 Lehman Brothers Inc.................. 6.125 02/01/01 2,926,380
5,000 Salomon Inc.......................... 7.00 05/15/99 5,043,600
------------
7,969,980
------------
Cable & Telecommunications (2.5%)
5,000 Tele-Communications, Inc............. 6.875 02/15/06 4,654,700
------------
Chemicals (1.1%)
2,000 Millennium America Inc............... 7.00 11/15/06 1,945,280
------------
Chemicals - Specialty (1.1%)
2,000 W. R. Grace & Co..................... 7.40 02/01/00 2,036,220
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 5
DEAN WITTER INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS February 28, 1997 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Computers (1.0%)
$ 1,900 Oracle Corp.......................... 6.91% 02/15/07 $ 1,869,391
------------
Electronics -
Semiconductors/Components (1.7%)
3,000 Applied Materials Inc................ 8.00 09/01/04 3,159,390
------------
Finance (6.8%)
7,250 Golden West Financial Corp........... 10.25 05/15/97 7,314,307
5,000 Household Finance Corp............... 7.65 05/15/07 5,164,050
------------
12,478,357
------------
Financial (1.7%)
3,000 Nac Re Corp.......................... 8.00 06/15/99 3,093,900
------------
Foreign Government (4.1%)
5,250 Israel (State of).................... 6.375 12/15/05 4,963,823
2,450 Republic of Indonesia................ 7.75 08/01/06 2,479,327
------------
7,443,150
------------
Funeral Services (1.6%)
3,000 Stewart Enterprises.................. 6.70 12/01/03 2,926,590
------------
Healthcare (2.7%)
4,975 Columbia/HCA Healthcare Corp......... 6.87 09/15/03 4,969,229
------------
Leasing (1.6%)
2,900 Comdisco, Inc........................ 6.375 11/30/01 2,847,945
------------
Leisure (1.7%)
3,000 Royal Caribbean Cruises, Ltd.
(Liberia)............................ 8.25 04/01/05 3,170,040
------------
Manufacturing - Diversified (1.1%)
2,000 Carlisle Companies Inc............... 7.25 01/15/07 1,997,220
------------
Medical Services (1.6%)
3,000 Medpartners Inc...................... 7.375 10/01/06 3,007,260
------------
Mortgage Revenue (1.7%)
3,000 Source One Mortgage Services Corp.... 8.875 10/15/01 3,186,360
------------
Oil Integrated - International (2.8%)
5,000 Societe Nationale Elf Aquitaine
(France)............................. 7.75 05/01/99 5,132,750
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 6
DEAN WITTER INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS February 28, 1997 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Paper & Forest Products (2.6%)
$ 4,900 Noranda Forest, Inc. (Canada)........ 6.875% 11/15/05 $ 4,782,204
------------
Photography (2.2%)
4,000 Polaroid Corp........................ 8.00 03/15/99 4,113,160
------------
Retail Stores (2.2%)
1,000 Kmart Corp........................... 8.125 12/01/06 977,500
3,000 TJX Companies, Inc................... 6.625 06/15/00 2,984,550
------------
3,962,050
------------
Telephones (1.6%)
3,000 U.S. West Capital Funding, Inc....... 6.85 01/15/02 2,996,130
------------
Textiles (1.6%)
2,975 Burlington Industries, Inc........... 7.25 09/15/05 2,916,214
------------
Utilities - Electric (9.4%)
2,000 Arizona Public Service Co............ 7.625 06/15/99 2,046,120
5,000 Chilgener S.A. (Chile)............... 6.50 01/15/06 4,740,550
2,000 Commonwealth Edison Co............... 7.50 01/01/01 2,012,280
3,800 Connecticut Light & Power Co......... 7.875 06/01/01 3,845,372
1,500 Niagara Mohawk Power Corp............ 8.00 06/01/04 1,469,025
3,000 System Energy Resources, Inc......... 7.71 08/01/01 3,056,880
------------
17,170,227
------------
TOTAL CORPORATE BONDS
(Identified Cost $152,495,988)................................ 150,574,148
------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS
(15.4%)
1,000 Federal Home Loan Mortgage Corp...... 6.07 11/20/98 997,570
162 Federal Home Loan Mortgage Corp...... 8.50 12/01/01 164,979
119 Federal Home Loan Mortgage Corp...... 8.50 01/01/02 121,834
389 Federal Home Loan Mortgage Corp...... 8.50 07/01/02 396,978
179 Federal Home Loan Mortgage Corp...... 9.00 08/01/02 184,094
1,700 Federal Home Loan Mortgage Corp...... 7.05 03/24/04 1,679,583
3,230 Federal National Mortgage Assoc...... 5.30 03/11/98 3,211,654
2,000 Federal National Mortgage Assoc...... 6.50 01/27/00 1,998,540
45 Federal National Mortgage Assoc...... 8.50 12/01/01 46,566
2,000 Federal National Mortgage Assoc...... 7.55 06/10/04 2,015,560
2,000 Federal National Mortgage Assoc...... 7.73 08/26/04 2,030,280
2,700 Private Export Funding Corp.......... 6.86 04/30/04 2,720,385
1,150 U.S. Treasury Note................... 5.125 04/30/98 1,141,490
7,700 U.S. Treasury Note................... 5.875 02/15/00 7,629,699
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 7
DEAN WITTER INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS February 28, 1997 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 850 U.S. Treasury Note................... 5.875% 11/30/01 $ 832,252
3,000 U.S. Treasury Note................... 6.50 10/15/06 2,981,414
------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(Identified Cost $27,954,990)................................. 28,152,878
------------
SHORT-TERM INVESTMENT (1.1%)
REPURCHASE AGREEMENT
1,987 The Bank of New York (dated 02/28/97;
proceeds $1,988,090; collateralized
by $1,446,798 Federal National
Mortgage Assoc. 6.75% due 08/24/00
valued at $1,452,029 and $574,519
U.S. Treasury Note 6.375% due
08/15/02 valued at $574,936)
(Identified Cost $1,987,221)....... 5.25 03/03/97 1,987,221
------------
TOTAL INVESTMENTS
(Identified Cost $182,438,199) (a).............. 98.6% 180,714,247
OTHER ASSETS IN EXCESS OF LIABILITIES........... 1.4 2,494,718
======== ------------
NET ASSETS...................................... 100.0% $183,208,965
======== ============
</TABLE>
- ---------------------
(a) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $1,256,060 and the
aggregate gross unrealized depreciation is $2,980,012, resulting in net
unrealized depreciation of $1,723,952.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 8
DEAN WITTER INTERMEDIATE INCOME SECURITIES
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1997 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $182,438,199)....................................... $180,714,247
Receivable for:
Interest.......................................................... 3,197,831
Shares of beneficial interest sold................................ 77,742
Principal paydowns................................................ 14,852
Prepaid expenses and other assets..................................... 55,515
------------
TOTAL ASSETS...................................................... 184,060,187
------------
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased......................... 190,397
Plan of distribution fee.......................................... 121,768
Investment management fee......................................... 85,954
Dividends to shareholders......................................... 56,143
Accrued expenses and other payables................................... 396,960
------------
TOTAL LIABILITIES................................................. 851,222
------------
NET ASSETS:
Paid-in-capital....................................................... 194,279,890
Net unrealized depreciation........................................... (1,723,952)
Accumulated undistributed net investment income....................... 32,835
Accumulated net realized loss......................................... (9,379,808)
------------
NET ASSETS........................................................ $183,208,965
============
NET ASSET VALUE PER SHARE,
19,179,664 shares outstanding
(unlimited shares of $.01 par value)................................. $9.55
=====
</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 28, 1997 (unaudited)
NET INVESTMENT INCOME:
INTEREST INCOME......................................................... $6,973,782
----------
EXPENSES
Plan of distribution fee................................................ 827,775
Investment management fee............................................... 584,312
Professional fees....................................................... 253,641
Transfer agent fees and expenses........................................ 81,549
Custodian fees.......................................................... 48,757
Shareholder reports and notices......................................... 34,356
Registration fees....................................................... 16,720
Trustees' fees and expenses............................................. 4,564
Other................................................................... 3,407
----------
TOTAL EXPENSES...................................................... 1,855,081
----------
NET INVESTMENT INCOME............................................... 5,118,701
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss....................................................... (732,773)
Net change in unrealized depreciation................................... 4,333,699
----------
NET GAIN............................................................ 3,600,926
----------
NET INCREASE............................................................ $8,719,627
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 10
DEAN WITTER INTERMEDIATE INCOME SECURITIES
FINANCIAL STATEMENTS continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
FEBRUARY 28, 1997 AUGUST 31, 1996
- ----------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................ $ 5,118,701 $ 12,684,563
Net realized loss.................................... (732,773) (788,498)
Net change in unrealized depreciation................ 4,333,699 (6,023,150)
------------- -------------
NET INCREASE..................................... 8,719,627 5,872,915
Dividends from net investment income................. (5,120,761) (12,688,795)
Net decrease from transactions in shares of
beneficial interest................................. (29,300,782) (17,024,823)
------------- -------------
NET DECREASE..................................... (25,701,916) (23,840,703)
NET ASSETS:
Beginning of period.................................. 208,910,881 232,751,584
------------- -------------
END OF PERIOD
(Including undistributed net investment income of
$32,835 and $34,895, respectively)............... $ 183,208,965 $ 208,910,881
============= =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 11
DEAN WITTER INTERMEDIATE INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS February 28, 1997 (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's investment objective is high
current income consistent with safety of principal. The Fund was organized as a
Massachusetts business trust on September 1, 1988 and commenced operations on
May 3, 1989.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American or other domestic or foreign 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 (in cases
where a security is traded on more than one exchange, the security is valued on
the exchange designated as the primary market pursuant to procedures adopted by
the Trustees); (2) all other portfolio securities for which over-the-counter
market quotations are readily available are valued at the latest available bid
price; (3) when market quotations are not readily available, including
circumstances under which it is determined by Dean Witter InterCapital Inc. (the
"Investment Manager") that sale and bid prices are not reflective of a
security's market value, 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; (4) certain portfolio securities may be valued by
an outside pricing service approved by the Trustees. The pricing service may
utilize a matrix system incorporating security quality, maturity and coupon as
the evaluation model parameters, and/or research and evaluations by its staff,
including review of broker-dealer market price quotations, in determining what
it believes is the fair valuation of the portfolio securities valued by such
pricing service; and (5) short-term debt securities 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
<PAGE> 12
DEAN WITTER INTERMEDIATE INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS February 28, 1997 (unaudited) continued
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.
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 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.
<PAGE> 13
DEAN WITTER INTERMEDIATE INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS February 28, 1997 (unaudited) continued
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 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.
Although there is no legal obligation for the Fund to pay expenses incurred in
excess of payments made to the Distributor under the Plan and the proceeds of
contingent deferred sales charges paid by investors upon redemption of shares,
if for any reason the Plan is terminated, the Trustees will consider at that
time the manner in which to treat such expenses. The Distributor has advised the
Fund that such excess amounts, including carrying charges, totaled $5,848,541 at
February 28, 1997.
The Distributor has informed the Fund that for the six months ended February 28,
1997, it received approximately $183,000 in contingent deferred sales charges
from certain redemptions of the Fund's shares.
<PAGE> 14
DEAN WITTER INTERMEDIATE INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS February 28, 1997 (unaudited) continued
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales/prepayments of portfolio
securities, excluding short-term investments, for the six months ended February
28, 1997, aggregated $85,612,676 and $103,075,546, respectively. Included in the
aforementioned are purchases and sales of U.S. Government securities of
$24,791,766 and $47,924,592 respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At February 28, 1997, 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 five years
of service. At February 28, 1997, the Fund had an accrued pension liability of
$47,054 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 YEAR
MONTHS ENDED ENDED
FEBRUARY 28, 1997 AUGUST 31, 1996
--------------------------- ---------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold......................................................... 3,145,944 $ 30,047,421 5,122,000 $ 49,165,458
Reinvestment of dividends.................................... 294,780 2,824,098 725,423 6,970,644
---------- ------------ ---------- ------------
3,440,724 32,871,519 5,847,423 56,136,102
Repurchased.................................................. (6,505,010) (62,172,301) (7,617,219) (73,160,925)
---------- ------------ ---------- ------------
Net decrease................................................. (3,064,286) $(29,300,782) (1,769,796) $(17,024,823)
========== ============ ========== ============
</TABLE>
6. FEDERAL INCOME TAX STATUS
At August 31, 1996, the Fund had a net capital loss carryover of approximately
$6,966,000 of which $6,656,000 will be available through August 31, 2003 and
$310,000 will be available through August 31, 2004 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 $1,681,000 during fiscal
1996. As of August 31, 1996, 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 SIX FOR THE YEAR ENDED AUGUST 31
MONTHS ENDED ---------------------------------------
FEBRUARY 28, 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period......................... $ 9.39 $ 9.69 $ 9.51
-------- -------- --------
Net investment income........................................ 0.29 0.55 0.59
Net realized and unrealized gain (loss)...................... 0.16 (0.30) 0.19
-------- -------- --------
Total from investment operations............................. 0.45 0.25 0.78
-------- -------- --------
Less dividends and distributions from:
Net investment income..................................... (0.29) (0.55) (0.59)
Net realized gain......................................... -- -- (0.01)
-------- -------- --------
Total dividends and distributions............................ (0.29) (0.55) (0.60)
-------- -------- --------
Net asset value, end of period............................... $ 9.55 $ 9.39 $ 9.69
======== ======== ========
TOTAL INVESTMENT RETURN+..................................... 4.38%(1) 2.58% 8.56%
RATIOS TO AVERAGE NET ASSETS:
Expenses..................................................... 1.88%(2) 1.62% 1.63%
Net investment income........................................ 5.15%(2) 5.69% 6.23%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands...................... $183,209 $208,911 $232,752
Portfolio turnover rate...................................... 48%(1) 115% 114%
<CAPTION>
FOR THE YEAR ENDED AUGUST 31
----------------------------------------------------------
1994 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period......................... $ 10.26 $ 10.05 $ 9.59
-------- -------- --------
Net investment income........................................ 0.58 0.62 0.70
Net realized and unrealized gain (loss)...................... (0.73) 0.20 0.46
-------- -------- --------
Total from investment operations............................. (0.15) 0.82 1.16
-------- -------- --------
Less dividends and distributions from:
Net investment income..................................... (0.56) (0.61) (0.70)
Net realized gain......................................... (0.04) -- --
-------- -------- --------
Total dividends and distributions............................ (0.60) (0.61) (0.70)
-------- -------- --------
Net asset value, end of period............................... $ 9.51 $ 10.26 $ 10.05
======== ======== ========
TOTAL INVESTMENT RETURN+..................................... (1.50)% 8.43% 12.58%
RATIOS TO AVERAGE NET ASSETS:
Expenses..................................................... 1.63% 1.62% 1.69%
Net investment income........................................ 5.80% 6.12% 7.11%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands...................... $245,750 $254,431 $187,285
Portfolio turnover rate...................................... 122% 132% 93%
</TABLE>
- ---------------------
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(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
Michael E. Nugent
Philip J. Purcell
John L.Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and General Counsel
Rochelle G. Siegel
Vice President
Thomas F. Caloin
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 10018
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
[PHOTO]
SEMIANNUAL REPORT
FEBRUARY 28, 1997
