<PAGE>
MORGAN STANLEY DEAN WITTER INTERMEDIATE INCOME TWO WORLD TRADE CENTER,
SECURITIES NEW YORK, NEW YORK
LETTER TO THE SHAREHOLDERS AUGUST 31, 2000 10048
DEAR SHAREHOLDER:
Over the 12-month period ended August 31, 2000, the U.S. economy overcame Y2K
concerns, rising interest rates, soaring oil prices and tight labor markets to
produce four quarters of better than 5 percent GDP growth. This accomplishment
was due in large part to the ongoing technological revolution that enabled
productivity to soar and wages and salaries to outpace inflation. The stock
markets were volatile through much of this period, with business and consumer
spending escalating, evidenced by the record levels reached by home and vehicle
sales.
As the economy gathered momentum, worries that its strength could worsen
inflation prompted the Federal Reserve to raise the federal funds rate to 6.5
percent by late spring. During the period of rising short-term rates, yields on
intermediate U.S. Treasuries surged nearly 1 percentage point. However, in the
following months, indications of a slower economy encouraged investors to push
longer-term interest rates lower. Two-year and five-year Treasury yields rose to
6.90 percent and 6.81 percent, respectively, in mid May before falling 0.75 and
0.85 percentage points, respectively, from these levels by the end of August.
The yields of longer-maturity Treasuries peaked in January because of a
reduction in the issuance of such Treasury debt in response to the burgeoning
budget surplus.
Corporate markets did not fare as well, with yields remaining high as a result
of investors' increased sensitivity to potential credit erosion from reduced
earnings projections and a slowing economy. Retail was hit particularly hard by
a series of disappointing monthly sales figures, and the financial services
sector was periodically battered by liquidity concerns at certain institutions.
An increase in corporate issuance during the summer added additional pressure to
corporate yields, especially among telecommunications issues.
<PAGE>
MORGAN STANLEY DEAN WITTER INTERMEDIATE INCOME SECURITIES
LETTER TO THE SHAREHOLDERS AUGUST 31, 2000, CONTINUED
PERFORMANCE
For the 12-month period ended August 31, 2000, Morgan Stanley Dean Witter
Intermediate Income Securities' Class B shares returned 1.80 percent compared to
6.27 percent for the Lehman Brothers Intermediate U.S. Government/Credit Index
(formerly the Lehman Brothers Intermediate Government/Corporate Bond Index). For
the same period, the Fund's Class A, C and D shares returned 2.49 percent, 1.80
percent and 2.67 percent, respectively. The performance of the Fund's four share
classes varies because each has different expenses. The total return figures
given assume the reinvestment of all distributions but do not reflect the
deduction of any applicable sales charges. The accompanying chart compares the
Fund's performance to that of the Lehman index.
The Fund's total return was affected negatively by the market value declines of
three issues held in the portfolio. These issues, Oakwood Homes, Conseco and
Stewart Brothers, were downgraded from investment grade over the past 12 months
because of earnings disappointments. The resulting illiquidity and sharp market
reactions to the downgrades made it preferable to hold these securities,
awaiting an improvement in their status, rather than realize sizeable losses
that would likely not be recouped. We believe that the secondary markets are not
reflective of the bonds' true values and will therefore continue to hold them,
barring future unforeseen negative credit events.
The Fund did see considerable outperformance in a number of its corporate
holdings, however, including Republic of Korea, British Sky Broadcasting, Oracle
and Teleglobe. These positions were sold and their proceeds redeployed into
other securities perceived as offering better value. The Fund's other corporate
holdings performed more in line with the overall corporate market. The Fund's
lack of participation in the mortgage-backed market further exacerbated its
relative performance, because this sector outperformed Treasuries, agencies and
corporates during the period.
PORTFOLIO STRATEGY
In line with other fixed-income funds, the Fund's assets declined during the
period as the rising stock market continued to encourage outflows from bond
funds into equities. To compensate for the Fund's smaller asset size, we reduced
some of its larger positions, including Noranda Forest, Shawmut Bank and United
Utilities. The portfolio's smaller size increased the importance of liquidity,
prompting the Fund to increase its allocation to U.S. government securities and
sell some of its less frequently traded corporate names when reasonable prices
could be obtained.
2
<PAGE>
MORGAN STANLEY DEAN WITTER INTERMEDIATE INCOME SECURITIES
LETTER TO THE SHAREHOLDERS AUGUST 31, 2000, CONTINUED
We increased the percentage of the Fund's assets allocated to the
telecommunications and utilities sectors while reducing its holdings in finance,
industrials and Yankee bonds. While the percentage of assets rated below
investment grade increased, the portion of the invested portfolio rated A or
better increased, to 63.9 percent on August 31, 2000, from 55.0 percent a year
earlier. At the end of the period, the average quality rating for the
investments held by the Fund was A3. We anticipate that the Fund will continue
to emphasize quality and liquidity for the foreseeable future.
Against the backdrop of rising interest rates, with relative yield values
favoring shorter maturities as interest rates fell, we shortened the average
maturity and duration of the Fund to 5.22 years and 4.02 years, respectively, on
August 31, 2000, from the year-earlier 5.45 years and 4.15 years.
LOOKING AHEAD
Signs of slowing growth and moderating inflation have been evident in the most
recent economic releases. Housing and auto sales remain at healthy levels,
though they have subsided somewhat since the first quarter of 2000. Inflation
remains contained, despite a tight but possibly loosening labor force, thanks to
productivity improvements. Such an environment could pave the way for an
economic soft landing and stable interest rates for the foreseeable future. The
major determinants of interest rates for 2001 are likely to be the effect of
surging energy prices on consumer and business spending and the generosity of
fiscal policy by a new administration. Over the coming months we plan to be
vigilant in monitoring the effects of these factors.
We appreciate your ongoing support of Morgan Stanley Dean Witter Intermediate
Income Securities and look forward to continuing to serve your investment needs.
Very truly yours,
[/S/ CHARLES A. FIUMEFREDDO] [/S/ MITCHELL M. MERIN]
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
CHAIRMAN OF THE BOARD PRESIDENT
3
<PAGE>
MORGAN STANLEY DEAN WITTER INTERMEDIATE INCOME SECURITIES
FUND PERFORMANCE AUGUST 31, 2000
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
GROWTH OF $10,000-CLASS B SHARES
($ in Thousands)
<TABLE>
<CAPTION>
FUND LEHMAN(4)
<S> <C> <C>
August 1990 $10,000 $10,000
August 1991 $11,078 $11,279
August 1992 $12,472 $12,760
August 1993 $13,524 $13,938
August 1994 $13,321 $13,892
August 1995 $14,461 $15,208
August 1996 $14,834 $15,883
August 1997 $16,010 $17,223
August 1998 $17,055 $18,770
August 1999 $17,212 $19,183
August 2000 $17,522(3) $20,387
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE. WHEN YOU SELL FUND SHARES, THEY MAY BE WORTH
LESS THAN THEIR ORIGINAL COST. PERFORMANCE FOR CLASS A, CLASS C, AND
CLASS D SHARES WILL VARY FROM THE PERFORMANCE OF CLASS B SHARES SHOWN ABOVE
DUE TO DIFFERENCES IN SALES CHARGES AND EXPENSES.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
----------------------------------------------------------------------------------------------
CLASS A SHARES* CLASS B SHARES**
------------------------------------------- ---------------------------------------------
PERIOD ENDED 8/31/00 PERIOD ENDED 8/31/00
-------------------- --------------------
<S> <C> <C> <C> <C> <C>
1 Year 2.49%(1) (1.87)%(2) 1 Year 1.80%(1) (3.02)%(2)
Since Inception (7/28/97) 3.43%(1) 1.98%(2) 5 Years 3.91%(1) 3.59%(2)
10 Years 5.77%(1) 5.77%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES+ CLASS D SHARES#
------------------------------------------- ---------------------------------------------
PERIOD ENDED 8/31/00 PERIOD ENDED 8/31/00
-------------------- --------------------
<S> <C> <C> <C> <C> <C>
1 Year 1.80%(1) 0.84%(2) 1 Year 2.67%(1)
Since Inception (7/28/97) 2.81%(1) 2.81%(2) Since Inception (7/28/97) 3.66%(1)
</TABLE>
------------------------
(1) Figure shown assumes reinvestment of all distributions and does not reflect
the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and the deduction of
the maximum applicable sales charge. See the Fund's current prospectus for
complete details on fees and sales charges.
(3) Closing value assuming a complete redemption on August 31, 2000.
(4) The Lehman Brothers Intermediate U.S. Government/Credit Index (formerly
Lehman Brothers Intermediate Government/Corporate Index) tracks the
performance of U.S. government and corporate obligations, including U.S.
government agency and Treasury securities, and corporate and Yankee bonds
with maturities of 1 to 10 years. The Index does not include any expenses,
fees or charges. The Index is unmanaged and should not be considered an
investment.
* The maximum front-end sales charge for Class A is 4.25%.
** The maximum contingent deferred sales charge (CDSC) for Class B is 5.0%.
The CDSC declines to 0% after six years.
+ The maximum contingent deferred sales charge for Class C shares is 1% for
shares redeemed within one year of purchase.
# Class D shares have no sales charge.
4
<PAGE>
MORGAN STANLEY DEAN WITTER INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS AUGUST 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
--------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE BONDS (84.6%)
AEROSPACE & DEFENSE (2.1%)
$2,000 Textron, Inc.................................................................... 6.75% 09/15/02 $ 1,989,260
-----------
AUTO PARTS: O.E.M. (1.1%)
1,000 Visteon Corp.................................................................... 8.25 08/01/10 1,009,210
-----------
CHEMICALS: SPECIALTY (2.0%)
2,100 Millennium America, Inc......................................................... 7.00 11/15/06 1,902,012
-----------
DEPARTMENT STORES (1.8%)
2,000 Federated Department Stores, Inc................................................ 6.30 04/01/09 1,755,620
-----------
ELECTRIC UTILITIES (13.9%)
2,000 Dominion Resources, Inc. (Series A)............................................. 8.125 06/15/10 2,037,980
2,500 Israel Electric Co., Ltd. (Israel) - 144A*..................................... 7.75 03/01/09 2,455,775
1,066 Niagara Mohawk Power Corp....................................................... 7.25 10/01/02 1,061,535
2,000 South Carolina Electric & Gas Co................................................ 7.50 06/15/05 2,023,520
3,000 System Energy Resources, Inc.................................................... 7.71 08/01/01 3,005,430
3,000 United Utilities Corp. (United Kingdom)......................................... 6.45 04/01/08 2,703,120
-----------
13,287,360
-----------
ELECTRICAL PRODUCTS (1.1%)
1,000 Emerson Electric Co............................................................. 7.875 06/01/05 1,037,810
-----------
ELECTRONIC PRODUCTION EQUIPMENT (2.2%)
2,185 Applied Materials, Inc.......................................................... 6.75 10/15/07 2,099,064
-----------
FINANCE/RENTAL/LEASING (8.5%)
3,000 Capital One Bank................................................................ 6.375 02/15/03 2,893,440
3,350 Hertz Corp...................................................................... 6.00 01/15/03 3,245,614
2,000 Household Finance Corp.......................................................... 8.00 05/09/05 2,037,680
-----------
8,176,734
-----------
FINANCIAL CONGLOMERATES (3.3%)
2,000 Associates Corporation of North
America....................................................................... 6.10 01/15/05 1,895,860
2,000 Conseco, Inc.................................................................... 8.75 02/09/04 1,240,000
-----------
3,135,860
-----------
FOREST PRODUCTS (3.0%)
3,049 Noranda Forest, Inc. (Canada)................................................... 6.875 11/15/05 2,901,215
-----------
GAS DISTRIBUTORS (2.1%)
2,000 Sempra Energy Corp.............................................................. 7.95 03/01/10 2,034,360
-----------
HOME BUILDING (0.7%)
2,000 Oakwood Homes Corp.............................................................. 8.125 03/01/09 640,000
-----------
INDUSTRIAL MACHINERY (3.0%)
3,000 Atlas Copco (Sweden) - 144A*.................................................... 6.50 04/01/08 2,851,860
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
MORGAN STANLEY DEAN WITTER INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS AUGUST 31, 2000, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
--------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
INFORMATION TECHNOLOGY SERVICES (2.1%)
$2,000 Electronic Data Systems Corp.................................................... 6.85% 10/15/04 $ 1,981,520
-----------
INVESTMENT BANKS/BROKERS (2.5%)
2,500 Lehman Brothers Holdings, Inc................................................... 6.125 07/15/03 2,415,250
-----------
MAJOR BANKS (12.3%)
2,000 Bank One Texas N.A.............................................................. 6.25 02/15/08 1,829,320
2,000 Bankamerica Corp................................................................ 6.375 02/15/08 1,864,580
2,000 Chase Manhattan Corp. (The)..................................................... 6.375 04/01/08 1,871,540
3,000 First Union National Bank....................................................... 7.80 08/18/10 2,989,320
3,145 Shawmut Bank.................................................................... 8.625 02/15/05 3,264,038
-----------
11,818,798
-----------
MAJOR TELECOMMUNICATIONS (4.1%)
1,000 Cable & Wireless Optus Ltd. - 144A* (Australia)................................. 8.00 06/22/10 1,003,760
2,000 GTE Corp........................................................................ 7.51 04/01/09 1,989,740
1,000 Sprint Capital Corp............................................................. 6.375 05/01/09 908,990
-----------
3,902,490
-----------
OIL & GAS PIPELINES (2.1%)
2,000 Columbia Energy Group (Series A)................................................ 6.39 11/28/00 1,994,060
-----------
OIL REFINING/MARKETING (2.1%)
2,000 Repsol International Finance (Netherlands)...................................... 7.45 07/15/05 2,009,380
-----------
OILFIELD SERVICES/EQUIPMENT (1.9%)
2,000 Petro Geo-Services ASA (Norway)................................................. 6.625 03/30/08 1,837,380
-----------
OTHER CONSUMER SERVICES (1.9%)
3,000 Stewart Enterprises, Inc........................................................ 6.70 12/01/03 1,860,000
-----------
PULP & PAPER (2.1%)
2,000 International Paper Co. - 144A*................................................. 8.00 07/08/03 2,029,580
-----------
SPECIALTY TELECOMMUNICATIONS (4.7%)
2,000 Frontier Corp................................................................... 7.25 05/15/04 1,883,380
3,000 Qwest Corp...................................................................... 5.625 11/15/08 2,637,990
-----------
4,521,370
-----------
TEXTILES (1.9%)
3,000 Burlington Industries, Inc...................................................... 7.25 09/15/05 1,800,000
-----------
WIRELESS COMMUNICATIONS (2.1%)
2,000 Vodafone Group PLC (United Kingdom) - 144A*..................................... 7.75 02/15/10 2,008,960
-----------
TOTAL CORPORATE BONDS
(COST $86,841,490)................................................................................ 80,999,153
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
MORGAN STANLEY DEAN WITTER INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS AUGUST 31, 2000, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
--------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS (15.2%)
$4,000 Federal Home Loan Banks......................................................... 6.75% 02/01/02 $ 4,001,960
2,000 Federal Home Loan Banks......................................................... 7.125 02/15/05 2,025,660
21 Federal Home Loan Mortgage Corp................................................. 8.50 12/01/01 20,579
14 Federal Home Loan Mortgage Corp................................................. 8.50 01/01/02 14,395
47 Federal Home Loan Mortgage Corp................................................. 8.50 07/01/02 47,316
32 Federal Home Loan Mortgage Corp................................................. 9.00 08/01/02 31,991
7 Federal National Mortgage Assoc................................................. 8.50 12/01/01 7,040
1,440 Private Export Funding Corp..................................................... 6.86 04/30/04 1,445,774
2,000 U.S. Treasury Note.............................................................. 6.50 05/31/01 2,001,080
1,000 U.S. Treasury Note.............................................................. 6.25 06/30/02 1,000,330
2,000 U.S. Treasury Note.............................................................. 5.75 08/15/03 1,980,780
2,000 U.S. Treasury Note.............................................................. 6.00 08/15/09 2,011,160
-----------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(COST $14,502,625)................................................................................ 14,588,065
-----------
</TABLE>
<TABLE>
<CAPTION>
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENT (2.7%)
REPURCHASE AGREEMENT
2,581 The Bank of New York (dated
08/31/00; proceeds $2,581,950) (a)
(COST $2,581,488)................................................... 6.438 09/01/00 2,581,488
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(COST $103,925,603) (B).................................................................... 102.5% 98,168,706
LIABILITIES IN EXCESS OF OTHER ASSETS...................................................... (2.5) (2,436,419)
----- ------------
NET ASSETS................................................................................. 100.0% $ 95,732,287
----- ------------
----- ------------
</TABLE>
---------------------
* Resale is restricted to qualified institutional investors.
(a) Collateralized by $956,578 U.S. Treasury Bill 5.85% due 08/30/01 valued at
$900,149 and $6,075,723 U.S. Treasury Strip 0.00% due 02/15/22 valued at
$1,733,465.
(b) The aggregate cost for federal income tax purposes approximates the
aggregate cost for book purposes. The aggregate gross unrealized
appreciation is $458,565 and the aggregate gross unrealized depreciation is
$6,215,462, resulting in net unrealized depreciation of $5,756,897.
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
MORGAN STANLEY DEAN WITTER INTERMEDIATE INCOME SECURITIES
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 2000
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (cost $103,925,603)....................................... $ 98,168,706
Receivable for:
Interest.................................................................................. 1,691,897
Shares of beneficial interest sold........................................................ 205,879
Principal paydowns........................................................................ 7,024
Prepaid expenses and other assets............................................................. 46,255
------------
TOTAL ASSETS............................................................................. 100,119,761
------------
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased................................................. 4,102,245
Dividends to shareholders................................................................. 70,858
Plan of distribution fee.................................................................. 64,658
Investment management fee................................................................. 50,480
Accrued expenses and other payables........................................................... 99,233
------------
TOTAL LIABILITIES........................................................................ 4,387,474
------------
NET ASSETS............................................................................... $ 95,732,287
============
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................................................... $114,652,604
Net unrealized depreciation................................................................... (5,756,897)
Accumulated undistributed net investment income............................................... 56
Accumulated net realized loss................................................................. (13,163,476)
------------
NET ASSETS............................................................................... $ 95,732,287
============
CLASS A SHARES:
Net Assets.................................................................................... $4,195,639
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)..................................... 467,872
NET ASSET VALUE PER SHARE................................................................ $8.97
============
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 4.44% OF NET ASSET VALUE)........................................ $9.37
============
CLASS B SHARES:
Net Assets.................................................................................... $82,964,423
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)..................................... 9,243,000
NET ASSET VALUE PER SHARE................................................................ $8.98
============
CLASS C SHARES:
Net Assets.................................................................................... $1,737,891
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)..................................... 193,329
NET ASSET VALUE PER SHARE................................................................ $8.99
============
CLASS D SHARES:
Net Assets.................................................................................... $6,834,334
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)..................................... 761,385
NET ASSET VALUE PER SHARE................................................................ $8.98
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
MORGAN STANLEY DEAN WITTER INTERMEDIATE INCOME SECURITIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 2000
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME................................................................................. $8,299,121
----------
EXPENSES
Plan of distribution fee (Class A shares)....................................................... 7,327
Plan of distribution fee (Class B shares)....................................................... 867,659
Plan of distribution fee (Class C shares)....................................................... 16,010
Investment management fee....................................................................... 697,022
Transfer agent fees and expenses................................................................ 142,505
Professional fees............................................................................... 78,786
Shareholder reports and notices................................................................. 63,670
Registration fees............................................................................... 55,771
Trustees' fees and expenses..................................................................... 17,176
Custodian fees.................................................................................. 5,116
Other........................................................................................... 10,026
----------
TOTAL EXPENSES............................................................................. 1,961,068
----------
NET INVESTMENT INCOME...................................................................... 6,338,053
----------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss............................................................................... (3,368,625)
Net change in unrealized depreciation........................................................... (1,059,229)
----------
NET LOSS................................................................................... (4,427,854)
----------
NET INCREASE.................................................................................... $1,910,199
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
MORGAN STANLEY 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, 2000 AUGUST 31, 1999
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income..................................................... $ 6,338,053 $ 7,604,016
Net realized loss......................................................... (3,368,625) (274,339)
Net change in unrealized depreciation..................................... (1,059,229) (5,665,329)
------------ ------------
NET INCREASE......................................................... 1,910,199 1,664,348
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A shares............................................................ (243,814) (218,762)
Class B shares............................................................ (5,487,625) (6,857,509)
Class C shares............................................................ (101,308) (67,287)
Class D shares............................................................ (506,299) (474,780)
------------ ------------
TOTAL DIVIDENDS...................................................... (6,339,046) (7,618,338)
------------ ------------
Net decrease from transactions in shares of beneficial interest........... (33,490,429) (21,549,707)
------------ ------------
NET DECREASE......................................................... (37,919,276) (27,503,697)
NET ASSETS:
Beginning of period....................................................... 133,651,563 161,155,260
------------ ------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $56 AND $993,
RESPECTIVELY)......................................................... $ 95,732,287 $133,651,563
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
MORGAN STANLEY DEAN WITTER INTERMEDIATE INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2000
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley 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. On July 28, 1997, the Fund converted to a
multiple class share structure.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year, six
years and one year, respectively. Class D shares are not subject to a sales
charge. Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
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 portfolio security listed or traded
on the New York or American Stock Exchange, NASDAQ, or other exchange is valued
at its latest sale price, 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 Morgan Stanley Dean Witter
Advisors 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 (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
11
<PAGE>
MORGAN STANLEY DEAN WITTER INTERMEDIATE INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2000, CONTINUED
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 the identified cost method.
Dividend income and other distributions are recorded on the ex-dividend date.
Discounts are accreted over the life of the respective securities. Interest
income is accrued daily.
C. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date such
items are recognized. Distribution fees are charged directly to the respective
class.
D. 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.
E. 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 tax purposes are
reported as distributions of paid-in-capital.
12
<PAGE>
MORGAN STANLEY DEAN WITTER INTERMEDIATE INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2000, CONTINUED
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement, the Fund pays the 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% of the portion of daily net assets not
exceeding $500 million; 0.50% of the portion of daily net assets
exceeding $500 million but not exceeding $750 million; 0.40% of the portion of
the daily net assets exceeding $750 million but not exceeding $1 billion; and
0.30% of the portion of the daily net asset exceeding $1 billion.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Morgan Stanley 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. The Plan provides that the Fund will pay the Distributor a fee which is
accrued daily and paid monthly at the following annual rates: (i) Class A -- up
to 0.25% of the average daily net assets of Class A; (ii) Class B -- 0.85% of
the lesser of : (a) the average daily aggregate gross sales of the Class B
shares since the inception of the Fund (not including reinvestment of dividend
or capital gain distributions) less the average daily aggregate net asset value
of the Class B shares redeemed since the Fund's inception upon which a
contingent deferred sales charge had been imposed or waived; or (b) the average
daily net assets of Class B; and (iii) Class C -- up to 0.85% of the average
daily net assets of Class C.
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon
redemption of Class B shares. 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 totaled $5,133,177
at August 31, 2000.
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 0.85% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except
13
<PAGE>
MORGAN STANLEY DEAN WITTER INTERMEDIATE INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2000, CONTINUED
that expenses representing a gross sales credit to Morgan Stanley Dean Witter
Financial Advisors or other selected broker-dealer representatives may be
reimbursed in the subsequent calendar year. For the year ended August 31, 2000,
the distribution fee was accrued for Class A shares and Class C shares at the
annual rate of 0.18% and 0.85%, respectively.
The Distributor has informed the Fund that for the year ended August 31, 2000,
it received contingent deferred sales charges from certain redemptions of the
Fund's Class B shares and Class C shares of $127,052 and $752 respectively and
received $4,869 in front-end sales charges from sales of the Fund's Class A
shares. The respective 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/prepayments of portfolio
securities, excluding short-term investments, for the year ended August 31,
2000, aggregated $125,631,836 and $152,868,758, respectively. Included in the
aforementioned are purchases and sales of U.S. Government securities of
$58,527,267 and $56,564,541, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At August 31, 2000, the Fund had
transfer agent fees and expenses payable of approximately $200.
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. Aggregate pension costs for the year ended August 31, 2000 included
in Trustees' fees and expenses in the Statement of Operations amounted to
$5,845. At August 31, 2000, the Fund had an accrued pension liability of $53,789
which is included in accrued expenses in the Statement of Assets and
Liabilities.
14
<PAGE>
MORGAN STANLEY DEAN WITTER INTERMEDIATE INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2000, CONTINUED
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
AUGUST 31, 2000 AUGUST 31, 1999
--------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold............................................................. 4,353,253 $ 38,861,896 364,951 $ 3,556,044
Reinvestment of dividends........................................ 22,336 202,239 20,532 197,937
Redeemed......................................................... (4,290,288) (38,294,480) (358,928) (3,471,507)
----------- ------------- ----------- -------------
Net increase - Class A........................................... 85,301 769,655 26,555 282,474
----------- ------------- ----------- -------------
CLASS B SHARES
Sold............................................................. 20,543,046 186,216,467 20,031,737 194,361,889
Reinvestment of dividends........................................ 347,587 3,155,855 396,884 3,831,712
Redeemed......................................................... (24,630,768) (223,376,585) (23,059,093) (223,519,294)
----------- ------------- ----------- -------------
Net decrease - Class B........................................... (3,740,135) (34,004,263) (2,630,472) (25,325,693)
----------- ------------- ----------- -------------
CLASS C SHARES
Sold............................................................. 700,596 6,319,873 175,120 1,695,278
Reinvestment of dividends........................................ 9,819 89,205 6,052 58,156
Redeemed......................................................... (705,747) (6,365,319) (39,598) (379,949)
----------- ------------- ----------- -------------
Net increase - Class C........................................... 4,668 43,759 141,574 1,373,485
----------- ------------- ----------- -------------
CLASS D SHARES
Sold............................................................. 5,861,354 53,879,856 243,390 2,355,047
Reinvestment of dividends........................................ 49,423 448,511 48,914 471,734
Acquisition of Dean Witter Retirement Series - Intermediate
Income Securities Series........................................ -- -- 250,724 2,441,399
Redeemed......................................................... (5,954,411) (54,627,947) (328,222) (3,148,153)
----------- ------------- ----------- -------------
Net increase (decrease) - Class D................................ (43,634) (299,580) 214,806 2,120,027
----------- ------------- ----------- -------------
Net decrease in Fund............................................. (3,693,800) $ (33,490,429) (2,247,537) $ (21,549,707)
=========== ============= =========== =============
</TABLE>
6. FEDERAL INCOME TAX STATUS
At August 31, 2000, the Fund had a net capital loss carryover of approximately
$10,113,000, which may be used to offset future capital gains to the extent
provided by regulations, which is available through August 31 of the following
years:
<TABLE>
<CAPTION>
AMOUNT IN THOUSANDS
-----------------------------------------------------------------
2003 2004 2005 2006 2008
--------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$6,103 $313 $2,351 $200 $1,146
====== ==== ====== ==== ======
</TABLE>
15
<PAGE>
MORGAN STANLEY DEAN WITTER INTERMEDIATE INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2000, CONTINUED
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 $3,050,000 during fiscal 2000.
As of August 31, 2000, the Fund had temporary book/tax differences primarily
attributable to post-October losses.
7. FUND ACQUISITION
As of the close of business on September 11, 1998, the Fund acquired all the net
assets of Dean Witter Retirement Series -- Intermediate Income Securities
Series (" Retirement Intermediate") pursuant to a plan of reorganization
approved by the shareholders of Retirement Intermediate on August 19, 1998. The
acquisition was accomplished by a tax-free exchange of 250,724 Class D shares of
the Fund at a net asset value of $9.74 per share for 247,422 shares of
Retirement Intermediate. The net assets of the Fund and Retirement Intermediate
immediately before the acquisition were $159,153,039, and $2,441,399,
respectively, including unrealized appreciation of $62,584 for Retirement
Intermediate. Immediately after the acquisition, the combined net assets of the
Fund amounted to $161,594,438.
16
<PAGE>
MORGAN STANLEY 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
FOR THE YEAR ENDED AUGUST 31, JULY 28, 1997*
----------------------------------- THROUGH
2000 1999 1998 AUGUST 31, 1997
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $ 9.30 $ 9.71 $ 9.59 $ 9.68
------ ------ ------ ------
Income (loss) from investment operations:
Net investment income.................................... 0.55 0.55 0.56 0.06
Net realized and unrealized gain (loss).................. (0.33) (0.41) 0.13 (0.10)
------ ------ ------ ------
Total income (loss) from investment operations.............. 0.22 0.14 0.69 (0.04)
------ ------ ------ ------
Less dividends from net investment income................... (0.55) (0.55) (0.57) (0.05)
------ ------ ------ ------
Net asset value, end of period.............................. $ 8.97 $ 9.30 $ 9.71 $ 9.59
====== ====== ====== ======
TOTAL RETURN+............................................... 2.49% 1.39% 7.30% (0.46)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.10%(3) 1.08%(3) 1.10%(3) 2.18%(2)
Net investment income....................................... 6.02%(3) 5.67%(3) 5.80%(3) 6.10%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $4,196 $3,557 $3,457 $1,855
Portfolio turnover rate..................................... 114% 99% 98% 98%
</TABLE>
---------------------
* The date shares were first issued.
+ 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.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE>
MORGAN STANLEY DEAN WITTER INTERMEDIATE INCOME SECURITIES
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE YEAR ENDED AUGUST 31
----------------------------------------------------------------------
2000 1999 1998 1997* 1996
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period..................... $ 9.31 $ 9.70 $ 9.59 $ 9.39 $ 9.69
------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income................................. 0.49 0.49 0.51 0.53 0.55
Net realized and unrealized gain (loss)............... (0.33) (0.39) 0.11 0.20 (0.30)
------- -------- -------- -------- --------
Total income from investment operations.................. 0.16 0.10 0.62 0.73 0.25
------- -------- -------- -------- --------
Less dividends from net investment income................ (0.49) (0.49) (0.51) (0.53) (0.55)
------- -------- -------- -------- --------
Net asset value, end of period........................... $ 8.98 $ 9.31 $ 9.70 $ 9.59 $ 9.39
======= ======== ======== ======== ========
TOTAL RETURN+............................................ 1.80% 0.92% 6.53% 7.93% 2.58%
RATIOS TO AVERAGE NET ASSETS:
Expenses................................................. 1.77%(1) 1.75%(1) 1.71%(1) 1.65% 1.62%
Net investment income.................................... 5.35%(1) 5.00%(1) 5.19%(1) 5.52% 5.69%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands.................. $82,964 $120,843 $151,515 $162,959 $208,911
Portfolio turnover rate.................................. 114% 99% 98% 98% 115%
</TABLE>
---------------------
* Prior to July 28, 1997, the Fund issued one class of shares. All shares of
the Fund held prior to that date, other than shares held by certain
employee benefit plans established by Dean Witter Reynolds Inc., have been
designated as Class B shares. Shares held by those employee benefit plans
prior to July 28, 1997 have been designated Class D shares.
+ 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) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE>
MORGAN STANLEY DEAN WITTER INTERMEDIATE INCOME SECURITIES
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED AUGUST 31 JULY 28, 1997*
----------------------------------- THROUGH
2000 1999 1998 AUGUST 31, 1997
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS C SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $ 9.32 $ 9.71 $ 9.61 $ 9.68
------ ------ ------ ------
Income (loss) from investment operations:
Net investment income.................................... 0.49 0.49 0.49 0.04
Net realized and unrealized gain (loss).................. (0.33) (0.39) 0.11 (0.07)
------ ------ ------ ------
Total income (loss) from investment operations.............. 0.16 0.10 0.60 (0.03)
------ ------ ------ ------
Less dividends from net investment income................... (0.49) (0.49) (0.50) (0.04)
------ ------ ------ ------
Net asset value, end of period.............................. $ 8.99 $ 9.32 $ 9.71 $ 9.61
====== ====== ====== ======
TOTAL RETURN+............................................... 1.80% 0.91% 6.39% (0.31)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.77%(3) 1.75%(3) 1.71%(3) 2.02%(2)
Net investment income....................................... 5.35%(3) 5.00%(3) 5.19%(3) 4.22%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $1,738 $1,759 $457 $38
Portfolio turnover rate..................................... 114% 99% 98% 98%
</TABLE>
---------------------
* The date shares were first issued.
+ 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.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE>
MORGAN STANLEY DEAN WITTER INTERMEDIATE INCOME SECURITIES
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED AUGUST 31 JULY 28, 1997*
----------------------------------- THROUGH
2000 1999 1998 AUGUST 31, 1997
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS D SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $ 9.31 $ 9.70 $ 9.59 $ 9.68
------ ------ ------ ------
Income (loss) from investment operations:
Net investment income.................................... 0.57 0.57 0.59 0.05
Net realized and unrealized gain (loss).................. (0.33) (0.39) 0.11 (0.09)
------ ------ ------ ------
Total income (loss) from investment operations.............. 0.24 0.18 0.70 (0.04)
------ ------ ------ ------
Less dividends from net investment income................... (0.57) (0.57) (0.59) (0.05)
------ ------ ------ ------
Net asset value, end of period.............................. $ 8.98 $ 9.31 $ 9.70 $ 9.59
====== ====== ====== ======
TOTAL RETURN+............................................... 2.67% 1.79% 7.43% (0.44)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 0.92%(3) 0.90%(3) 0.86%(3) 1.11%(2)
Net investment income....................................... 6.20%(3) 5.85%(3) 6.04%(3) 5.91%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $6,834 $7,493 $5,726 $4,880
Portfolio turnover rate..................................... 114% 99% 98% 98%
</TABLE>
---------------------
* The date shares were first issued.
+ Calculated based on the net asset value as of the last business day of the
period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE>
MORGAN STANLEY DEAN WITTER INTERMEDIATE INCOME SECURITIES
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
MORGAN STANLEY DEAN WITTER INTERMEDIATE INCOME SECURITIES:
We have audited the accompanying statement of assets and liabilities of Morgan
Stanley Dean Witter Intermediate Income Securities (the "Fund") including the
portfolio of investments, as of August 31, 2000, and the related statements of
operations and changes in net assets, and the financial highlights for the year
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit. The statement of changes in net assets for the year ended August 31, 1999
and the financial highlights for each of the respective stated periods ended
August 31, 1999 were audited by other independent accountants whose report,
dated October 8, 1999, expressed an unqualified opinion on that statement and
financial highlights.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards 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. Our procedures included confirmation of securities owned as of
August 31, 2000, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Morgan
Stanley Dean Witter Intermediate Income Securities as of August 31, 2000, the
results of its operations, the changes in its net assets, and the financial
highlights for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.
Deloitte & Touche LLP
NEW YORK, NEW YORK
OCTOBER 9, 2000
2000 FEDERAL TAX NOTICE (UNAUDITED)
Of the Fund's ordinary income dividends paid during the fiscal
year ended August 31, 2000, 8.53% was attributable to qualifying
Federal obligations. Please consult your tax advisor to determine
if any portion of the dividends you received is exempt from state
income tax.
21
<PAGE>
MORGAN STANLEY DEAN WITTER INTERMEDIATE INCOME SECURITIES
CHANGE IN INDEPENDENT ACCOUNTANTS
On July 1, 2000 PricewaterhouseCoopers LLP resigned as independent accountants
of the Fund.
The reports of PricewaterhouseCoopers LLP on the financial statements of the
Fund for the past two fiscal years contained no adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principle.
In connection with its audits for the two most recent fiscal years and through
July 1, 2000, there have been no disagreements with PricewaterhouseCoopers LLP
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of PricewaterhouseCoopers LLP would have caused them to make
reference thereto in their report on the financial statements for such years.
The Fund, with the approval of its Board of Trustees and its Audit Committee,
engaged Deloitte & Touche LLP as its new independent accountants as of July 1,
2000.
22
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
James F. Higgins
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Mitchell M. Merin
President
Barry Fink
Vice President, Secretary and General Counsel
Rochelle G. Siegel
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center -- Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281
INVESTMENT MANAGER
Morgan Stanley Dean Witter Advisors 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. Read the
prospectus carefully before investing.
Morgan Stanley Dean Witter Distributors Inc., member NASD.
MORGAN STANLEY
DEAN WITTER
INTERMEDIATE
INCOME SECURITIES
ANNUAL REPORT
AUGUST 31, 2000
