<PAGE>
PRIME INCOME TRUST TWO WORLD TRADE CENTER, NEW YORK, NEW YORK 10048
LETTER TO THE SHAREHOLDERS, MARCH 31, 1997
DEAR SHAREHOLDER:
We are pleased to present the semiannual report on the operations of Prime
Income Trust for the period ended March 31, 1997. Prime Income Trust continues
to be on track in meeting its dual objectives of providing high current income
while preserving capital. As designed, the Trust's distribution rate has
continued to track the movements of the short end of the yield curve.
PERFORMANCE AND PORTFOLIO
For the six-month period ended March 31, 1997, the Trust provided a total return
of 3.72 percent. The Trust's NAV ended the period at $9.94 per share, nearly its
November 1989 initial offering price of $10.00. The Trust's twelve-month
trailing yield of 7.10 percent shows that it has maintained a 200 to 300 basis
point yield advantage over money market instruments.
As designed, the Trust's portfolio of floating-rate loans has limited the price
volatility associated with interest-rate movements and has captured both
increases and decreases in short-term rates. The rates of the Trust's portfolio
loans are reset approximately every 45 days in an effort to track the movements
of current short-term benchmark rates such as the prime rate of leading U.S.
banks and LIBOR (London Inter-Bank Offered Rate). Approximately 90 percent of
the portfolio's securities currently track LIBOR movements. On March 25, 1997,
the U.S. Federal Reserve Board increased short-term rates by 25 basis points,
causing LIBOR to increase by the same margin. At the end of the period under
review, LIBOR had increased to 5.75 percent and the prime rate had increased to
8.50 percent.
Demand for the Trust has been strong, as evidenced by asset growth. Year-to-date
subscriptions total $214 million, bringing total assets to $1.13 billion.
Tenders for the Trust have remained stable at approximately 1 to 2 percent of
net assets per quarter.
<PAGE>
PRIME INCOME TRUST
LETTER TO THE SHAREHOLDERS, MARCH 31, 1997, CONTINUED
The Trust has remained well diversified, with the number of credits in the
portfolio currently at 100. These credits are spread out over 56 industry groups
and are actively managed. Transaction flow has been moderate, due to the strong
equity markets last year. With the recent adjustments that have occurred in
these markets, we expect transaction flow to increase, generating sufficient
product for our investment needs.
LOOKING AHEAD
It is likely, based on the prevailing views of many economists and Federal
Reserve bankers, that the Federal Reserve Board may possibly find it necessary
to raise rates once again. However, regardless of the frequency and magnitude of
these movements, the Trust's portfolio is designed to track them, thereby
providing the Trust with NAV stability and a yield that can remain competitive
with current short-term rates.
We appreciate your support of Prime Income Trust and look forward to continuing
to serve your investment needs.
Very truly yours,
[SIGNATURE]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
<PAGE>
PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS MARCH 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN INTEREST MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SENIOR COLLATERALIZED TERM LOANS (a) (84.8%)
ADVERTISING (2.4%)
$ 7,500 Eller Media Co...................... 8.31% 12/31/04 $ 7,498,800
6,230 Outdoor Systems, Inc................ 8.23 to 10.25 12/31/02 5,839,991
1,562 Outdoor Systems, Inc................ 8.48 to 10.50 12/31/03 1,947,005
11,880 Treasure Chest Advertising Co.,
Inc............................... 8.19 12/31/02 11,879,881
-----------------
27,165,677
-----------------
AEROSPACE (1.5%)
5,060 The Aerostructures Corp............. 8.50 09/30/03 5,058,179
1,840 The Aerostructures Corp............. 8.75 09/30/04 1,839,319
10,000 Tri-Star Aerospace.................. 8.56 09/30/03 9,994,100
-----------------
16,891,598
-----------------
AIRCRAFT & AEROSPACE (0.8%)
8,750 Erickson Air-Crane Co, L.L.C........ 8.94 12/31/04 8,749,213
-----------------
APPAREL (0.7%)
4,500 Hosiery Corporation of America,
Inc............................... 8.88 to 9.00 07/31/01 4,496,210
365 London Fog Industries, Inc. (b)..... 0.00 05/31/02 347,132
2,823 London Fog Industries, Inc.......... 9.50+ 05/31/02 2,681,831
581 London Fog Industries, Inc. (c)..... 12.50 05/31/02 551,691
-----------------
8,076,864
-----------------
AUTO PARTS (2.1%)
9,444 Hayes Wheels International, Inc..... 8.47 to 8.56 07/31/03 9,442,790
7,555 Hayes Wheels International, Inc..... 8.97 to 9.06 07/31/04 7,553,049
6,435 Sinter Metals, Inc. and certain
subsidiaries...................... 7.53 to 7.61 06/30/05 6,430,494
-----------------
23,426,333
-----------------
AUTO PARTS - AFTER MARKET (1.8%)
21,000 CSK Auto, Inc....................... 8.56 10/31/03 20,991,240
-----------------
BEVERAGES - SOFT DRINKS (0.9%)
3,960 Select Beverages, Inc............... 8.81 to 8.94 06/30/01 3,959,438
5,940 Select Beverages, Inc............... 9.06 to 9.19 06/30/02 5,935,505
-----------------
9,894,943
-----------------
BREWERS (1.3%)
14,651 The Stroh Brewery, Inc.............. 8.56 06/30/03 14,647,473
-----------------
BROADCAST MEDIA (2.7%)
3,375 Benedek Broadcasting Corp........... 8.81 05/01/01 3,373,515
3,470 Benedek Broadcasting Corp........... 9.31 11/01/02 3,468,162
10,000 Jacor Communications, Inc........... 8.04 09/18/04 9,998,900
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS MARCH 31, 1997 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN INTEREST MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 9,487 River City Broadcasting, L.P........ 8.81% 12/31/99 $ 9,486,857
4,755 Silver King Communications, Inc..... 8.66 07/31/02 4,755,398
-----------------
31,082,832
-----------------
BUILDING MATERIALS (1.1%)
12,458 National Gypsum Co.................. 7.69 to 9.75 09/30/03 12,452,006
-----------------
CABLE/CELLULAR (6.2%)
6,000 Cable Systems International, Inc.... 8.56 12/31/02 5,999,580
10,000 Charter Communications Entertainment
I, L.P............................ 8.19 12/31/04 9,998,900
9,238 Mobilemedia Communication, Inc...... 7.97 06/30/02 8,218,574
1,821 Mobilemedia Communication, Inc.
(Revolver)........................ 7.97 to 8.25 06/30/02 1,619,822
2,500 Mobilemedia Communication, Inc...... 8.47 06/30/03 2,273,949
15,000 Nextel Communications, Inc.......... 8.56 06/30/03 14,999,700
2,809 Nextel Communications, Inc.......... 7.94 03/31/03 2,715,423
4,596 Nextel Communications, Inc.
(Revolver)........................ 7.94 to 8.19 03/31/03 4,595,301
20,000 Western Wireless Corp............... 8.19 to 8.30 03/31/05 19,994,400
-----------------
70,415,649
-----------------
CHEMICALS - SPECIALTY (0.7%)
3,929 Huntsman Specialty Chemicals
Corp.............................. 8.125 03/15/04 3,928,257
3,929 Huntsman Specialty Chemicals
Corp.............................. 8.375 03/15/05 3,928,257
-----------------
7,856,514
-----------------
COAL (1.2%)
6,716 Alliance Coal Corp.................. 9.03 12/31/02 6,715,222
7,462 Calciner Industries, Inc............ 9.04 09/30/04 7,461,829
-----------------
14,177,051
-----------------
COMPUTERS - SYSTEMS (0.5%)
6,100 Anacomp, Inc........................ 8.69 03/31/01 6,100,000
-----------------
CONSUMER PRODUCTS (1.4%)
6,380 Chattem, Inc........................ 8.69 10/29/03 6,379,804
9,923 Revlon Consumer Products Corp....... 8.06 to 8.19 03/31/99 9,918,808
-----------------
16,298,612
-----------------
CONTAINERS (1.4%)
16,452 Silgan Corporations................. 8.44 to 8.60 03/15/02 16,442,052
-----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS MARCH 31, 1997 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN INTEREST MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CONVENIENCE STORE (0.8%)
$ 8,749 Cumberland Farms, Inc.
(Participation: Merrill Lynch &
Co., Inc.) (d).................... 8.75% 12/31/98 $ 8,749,006
-----------------
DRUG STORES (1.0%)
7,500 Duane Reade, Inc.................... 9.50 12/31/99 7,496,700
3,549 M & H Drugs, Inc.................... 9.88 06/30/97 3,548,835
-----------------
11,045,535
-----------------
ELECTRONICS (0.7%)
2,288 Axsys Technologies, Inc............. 9.25 04/25/02 2,286,222
6,000 Details, Inc........................ 8.50 01/31/02 5,997,720
-----------------
8,283,942
-----------------
ENERGY TECHNOLOGY & EQUIPMENT (1.0%)
11,425 IRI International Corp.............. 10.00 03/31/02 11,425,000
-----------------
ENTERTAINMENT & LEISURE TIME (2.1%)
13,312 Orion Pictures Corp................. 8.13 06/30/01 13,307,574
10,817 Six Flag Theme Parks, Inc........... 8.63 06/23/03 10,814,853
-----------------
24,122,427
-----------------
FINANCE (2.3%)
13,000 Blackstone Capital Company II,
L.L.C............................. 8.56 05/31/99 12,998,830
13,000 Wasserstein/C & A Holdings,
L.L.C............................. 8.81 05/31/99 12,991,420
-----------------
25,990,250
-----------------
FOOD PROCESSING (1.0%)
10,945 American Italian Pasta Co........... 9.25 02/27/04 10,939,637
-----------------
FOOD SERVICES (4.1%)
5,281 Restaurant Associates, Inc.......... 8.03 04/23/02 5,280,121
6,842 Restaurant Associates, Inc.......... 8.53 04/23/03 6,841,353
6,716 Rykoff-Sexton, Inc.................. 8.69 10/31/02 6,714,672
3,223 Rykoff-Sexton, Inc.................. 8.94 04/30/03 3,222,232
4,452 SC International Services, Inc. &
Caterair International Corp....... 7.94 to 8.07 09/15/00 4,449,808
3,876 SC International Services, Inc &
Caterair International Corp....... 8.44 to 8.57 09/15/01 3,873,383
4,835 SC International Services, Inc &
Caterair International Corp....... 8.44 to 8.57 09/15/02 4,832,378
1,061 SC International Services, Inc. &
Caterair International Corp....... 8.69 to 8.82 09/15/03 1,061,020
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS MARCH 31, 1997 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN INTEREST MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 6,638 Volume - Services, Inc.............. 8.84 to 10.75% 12/31/02 $ 6,635,149
3,319 Volume - Services, Inc.............. 9.34 to 11.25 12/31/03 3,317,475
-----------------
46,227,591
-----------------
FOODS (2.2%)
8,799 Keebler Holding Corp................ 8.19 to 8.38 07/31/03 8,798,338
9,823 Keebler Holding Corp................ 8.13 to 8.44 07/31/04 9,823,450
4,733 Leon's Bakery, Inc.................. 8.31 to 8.50 05/31/01 4,732,496
1,253 Leon's Bakery, Inc. (Participation:
Bankers Trust) (d)................ 8.31 to 8.50 05/31/01 1,252,833
-----------------
24,607,117
-----------------
FOODS & BEVERAGES (2.0%)
5,398 International Home Foods, Inc....... 8.60 to 10.50 09/30/04 5,378,641
4,588 International Home Foods, Inc....... 9.10 to 11.00 09/30/05 4,569,887
7,664 Van de Kamp's, Inc.................. 8.57 to 10.50 04/30/03 7,660,255
4,802 Van de Kamp's, Inc.................. 8.82 to 10.75 09/30/03 4,800,006
-----------------
22,408,789
-----------------
FUNERAL SERVICES (1.8%)
4,972 Prime Succession, Inc............... 8.56 to 8.69 08/01/03 4,964,735
4,972 Prime Succession, Inc.
(Participation: Goldman Sachs &
Co.) (d).......................... 8.56 to 8.69 08/01/03 4,964,735
10,000 Rose Hills Co....................... 8.47 to 8.60 12/01/03 9,991,765
-----------------
19,921,235
-----------------
GAS - TRUCK STOP (0.6%)
6,667 Petro Stopping Centers, L.P......... 8.69 09/30/03 6,665,933
-----------------
HEALTHCARE (1.7%)
7,205 Community Health Systems, Inc....... 8.63 12/31/03 7,203,534
7,205 Community Health Systems, Inc....... 9.13 12/31/04 7,203,318
5,425 Community Health Systems, Inc....... 9.38 12/31/05 5,422,976
-----------------
19,829,828
-----------------
HOTELS/MOTELS (0.6%)
6,428 Doubletree Corp..................... 8.00 05/15/04 6,427,232
-----------------
HOUSEHOLD APPLIANCES (0.8%)
9,000 Coinmach Corp....................... 8.19 06/30/04 8,999,010
-----------------
HOUSEHOLD FURNISHINGS & APPLIANCES (0.7%)
8,018 Lifestyle Furnishings International,
Ltd............................... 8.56 08/05/04 8,017,471
-----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS MARCH 31, 1997 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN INTEREST MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MANUFACTURING (2.4%)
$ 9,320 Desa International, Inc............. 8.06% 08/31/01 $ 9,318,501
9,900 Desa International, Inc............. 8.44 to 8.56 02/28/03 9,898,388
4,745 InterMetro Industries Corp.......... 8.44 06/30/03 4,744,186
3,690 InterMetro Industries Corp.......... 8.94 06/30/04 3,689,922
-----------------
27,650,997
-----------------
MANUFACTURING - CONSUMER & INDUSTRIAL PRODUCTS (1.3%)
4,655 C.S. Brooks Canada, Inc............. 8.56 06/30/02 4,653,000
10,345 C.S. Brooks Canada, Inc............. 8.81 06/30/04 10,339,931
-----------------
14,992,931
-----------------
MANUFACTURING - DIVERSIFIED (1.3%)
4,921 Health O' Meter, Inc................ 8.13 to 9.25 08/15/01 4,916,762
4,389 Mettler-Toledo, Inc................. 8.70 to 8.75 12/31/03 4,385,667
5,086 Mettler-Toledo, Inc................. 8.84 to 9.00 12/31/04 5,084,146
-----------------
14,386,575
-----------------
MANUFACTURING - RENTAL CAREER APPAREL (0.5%)
6,300 The William Carter Company.......... 8.56 to 8.75 10/30/03 6,285,103
-----------------
MEDIA GROUP (1.6%)
17,717 ADVO, Inc........................... 8.57 03/03/04 17,652,831
-----------------
MEDICAL EQUIPMENT (1.4%)
2,763 Hanger Orthopedic Group, Inc........ 9.06 to 9.19 12/31/03 2,762,518
3,189 JE Hanger, Inc. of Georgia.......... 9.06 to 9.19 12/31/03 3,187,496
2,693 Medical Specialties Group, Inc...... 8.94 to 10.50 06/30/01 2,692,384
7,250 Medical Specialties Group, Inc...... 9.69 to 11.25 06/30/04 7,247,832
-----------------
15,890,230
-----------------
MEDICAL PRODUCTS & SUPPLIES (2.2%)
2,640 Dade International, Inc............. 8.38 to 8.50 12/31/01 2,637,467
258 Dade International, Inc.
(Revolver)........................ 8.19 to 8.25 12/31/01 258,044
4,894 Dade International, Inc............. 8.86 to 8.94 12/31/02 4,889,574
4,894 Dade International, Inc............. 9.06 12/31/03 4,891,078
5,165 Dade International, Inc............. 9.375 12/31/04 5,161,167
2,314 IVAC Holdings, Inc.................. 8.50 to 8.56 11/01/03 2,457,659
2,459 IVAC Holdings, Inc.................. 9.00 to 9.06 11/01/04 2,457,634
2,459 IVAC Holdings, Inc.................. 9.25 to 9.31 05/01/05 2,313,066
-----------------
25,065,689
-----------------
METALS & MINING (0.8%)
8,760 U.S. Silica Corp.................... 8.81 12/31/03 8,758,248
-----------------
MISCELLANEOUS (2.5%)
16,000 Mafco Finance Corp.................. 10.13 03/20/99 15,999,200
12,729 Pinnacle Brands, Inc................ 9.00 05/29/02 12,728,148
-----------------
28,727,348
-----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS MARCH 31, 1997 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN INTEREST MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
PAPER (2.0%)
$ 12,405 Alabama Pine Pulp Co., Inc.......... 6.75 to 6.88% 12/31/02 $ 10,542,720
1,111 Crown Paper Co...................... 8.19 to 8.38 08/22/02 1,110,980
1,107 Crown Paper Co. (Revolver).......... 8.00 to 10.00 08/22/02 1,105,299
9,949 Crown Paper Co...................... 8.81 to 8.94 08/22/03 9,946,187
-----------------
22,705,186
-----------------
PRINTED CIRCUIT BOARDS (1.1%)
7,000 Celestica, Inc...................... 8.69 04/22/03 6,999,930
2,500 Circo Craft Technologies, Inc....... 8.54 06/30/04 2,498,725
2,500 Circo Craft Technologies, Inc....... 9.04 06/30/05 2,498,700
-----------------
11,997,355
-----------------
PUBLISHING - BUSINESS (1.3%)
14,375 Advanstar Communications, Inc....... 8.66 12/31/03 14,374,281
-----------------
PUBLISHING - NEWSPAPER (1.0%)
11,000 Newsquest Media Group, Ltd.......... 8.09 12/31/04 10,991,530
-----------------
RAILROAD EQUIPMENT (0.8%)
9,584 Johnstown America Industries,
Inc............................... 8.50 to 9.00 03/31/03 9,581,408
-----------------
RECORD & TAPE DISTRIBUTION (0.3%)
4,875 Camelot Music, Inc. (b)............. 10.00 02/28/01 3,022,500
-----------------
RETAIL - DEPARTMENT STORES (1.5%)
16,680 Caldor Corp. (Revolver)............. 6.19 to 8.50 12/31/98 16,678,259
-----------------
RETAIL - SPECIALTY (1.2%)
13,400 AnnTaylor Stores, Inc............... 9.19 07/29/98 13,399,866
-----------------
SEMICONDUCTORS (0.7%)
7,500 Fairchild Semiconductor Corp........ 10.25 03/11/03 7,500,000
-----------------
SPECIALTY PACKAGING (0.9%)
5,910 Calmar, Inc......................... 8.56 to 10.50 09/15/03 5,906,991
4,433 Calmar, Inc......................... 8.81 to 10.75 03/15/04 4,430,256
-----------------
10,337,247
-----------------
SPORTING GOODS (2.5%)
4,117 E & S Holdings Corp................. 7.69 09/30/03 4,117,565
588 E & S Holdings Corp. (Revolver)..... 7.69 09/30/03 588,172
7,000 E & S Holdings Corp................. 8.19 09/30/04 6,999,790
7,000 E & S Holdings Corp................. 8.69 09/30/05 6,999,790
4,000 E & S Holdings Corp................. 9.19 03/30/06 3,999,880
970 Worldwide Sports & Recreation,
Inc............................... 8.75 04/26/00 969,105
4,903 Worldwide Sports & Recreation,
Inc............................... 9.25 04/26/01 4,902,382
-----------------
28,576,684
-----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS MARCH 31, 1997 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN INTEREST MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SUPERMARKETS (1.3%)
$ 1,161 Ralphs Grocery Company (Revolver)... 8.25 to 10.00% 06/15/01 $ 1,160,454
1,724 Ralphs Grocery Company.............. 8.25 06/15/01 1,724,185
5,000 Smith's Food & Drug Centers, Inc.... 7.44 05/01/05 4,999,850
3,766 Star Markets Company, Inc........... 8.47 12/31/01 3,764,057
2,818 Star Markets Company, Inc........... 8.97 12/31/02 2,817,096
-----------------
14,465,642
-----------------
TOYS (1.3%)
7,232 Ritvik Toys, Inc.................... 8.94 02/08/03 7,231,596
7,232 Ritvik Toys, Inc.................... 9.44 02/08/04 7,231,596
-----------------
14,463,192
-----------------
WASTE DISPOSAL (1.5%)
3,350 Allied Waste North America, Inc..... 8.19 to 8.38 06/30/03 3,349,604
6,700 Allied Waste North America, Inc..... 8.49 to 8.63 06/30/04 6,699,187
6,700 Allied Waste North America, Inc..... 8.69 to 8.86 06/30/05 6,699,187
-----------------
16,747,978
-----------------
WHOLESALE DISTRIBUTOR (1.6%)
14,725 American Marketing Industries,
Inc............................... 9.19 11/29/02 14,724,181
4,000 American Marketing Industries,
Inc............................... 9.19 11/30/03 3,999,880
-----------------
18,724,061
-----------------
WIRE & CABLE (1.7%)
12,424 International Wire Group, Inc....... 8.44 to 10.50 09/30/02 12,420,304
7,474 International Wire Group, Inc....... 9.04 to 11.00 09/30/03 7,469,728
-----------------
19,890,032
-----------------
TOTAL SENIOR COLLATERALIZED TERM LOANS
(IDENTIFIED COST $963,337,593)..................................... 961,193,233
-----------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES
- -----------
<C> <S> <C>
PREFERRED STOCK (b) (0.1%)
APPAREL
1,722K London Fog Industries, Inc. 17.50% due 02/28/05 (Series A-1)
(Restricted) (Identified Cost $2,325,846)........................... 1,222,422
-----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS MARCH 31, 1997 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (b) (0.0%)
APPAREL (0.0%)
1,291 London Fog Industries, Inc. (Restricted).............................. $ --
-----------------
FOOD SERVICES (0.0%)
4,209 Flagstar Companies, Inc. (Restricted)................................. 2,236
-----------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $60,507)............................................. 2,236
-----------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION
WARRANTS DATE
- ----------- -----------
<C> <S> <C> <C>
WARRANT (b) (0.0%)
OIL & GAS
1 Rigco North America, L.L.C. (Identified Cost
$24,500)............................................. 09/30/98 24,500
-----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE
- ----------- --------- ----------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENTS (14.6%)
COMMERCIAL PAPER (e) (11.9%)
AUTOMOTIVE - FINANCE (2.7%)
$ 30,000 Ford Motor Credit Co........................ 5.61% 04/02/97 29,995,325
-----------------
FINANCE - DIVERSIFIED (3.5%)
40,000 General Electric Capital Corp............... 5.60 04/03/97 39,987,556
-----------------
FOODS & BEVERAGES (2.6%)
30,000 Coca-Cola Co................................ 5.45 04/04/97 29,986,375
-----------------
TELECOMMUNICATIONS (3.1%)
35,000 Lucent Technologies (f)..................... 5.28 04/07/97 34,969,200
-----------------
TOTAL COMMERCIAL PAPER
(AMORTIZED COST $134,938,456)...................................... 134,938,456
-----------------
U.S. GOVERNMENT AGENCY (e) (1.8%)
20,000 Federal Home Loan Mortgage Corp. (Amortized
Cost $20,000,000)......................... 6.50 04/01/97 20,000,000
-----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
PRIME INCOME TRUST
PORTFOLIO OF INVESTMENTS MARCH 31, 1997 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENT (0.9%)
$ 10,487 The Bank of New York (dated 03/31/97;
proceeds $10,488,223; collateralized by
$10,908,394 U.S. Treasury Note 6.25% due
02/15/03 valued at $10,696,391)
(Identified Cost $10,486,658)............. 5.375% 04/01/97 $ 10,486,658
-----------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $165,425,114)............. 165,425,114
-------------
TOTAL INVESTMENTS
(IDENTIFIED COST $1,131,173,560) (G)....... 99.5% 1,127,867,505
CASH AND OTHER ASSETS IN EXCESS OF
LIABILITIES................................ 0.5 5,278,382
----- -------------
NET ASSETS................................. 100.0% $1,133,145,887
----- -------------
----- -------------
<FN>
- ---------------------
K In thousands.
+ 3 percent pays in cash, 6.50 percent pays-in-kind; converts to prime plus
1 percent cash payment on May 31, 1997.
(a) Floating rate securities. Interests rates shown are those in effect at
March 31, 1997.
(b) Non-income producing securities.
(c) Payment-in-kind security.
(d) Participation interests were acquired through the financial institutions
indicated parenthetically.
(e) Securities were purchased on a discount basis. The interest rates shown
have been adjusted to reflect a money market equivalent yield.
(f) Security segregated in connection with unfunded loan commitments.
(g) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $1,372,229 and the
aggregate gross unrealized depreciation is $4,678,284, resulting in net
unrealized depreciation of $3,306,055.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
PRIME INCOME TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments at value
(identified cost $1,131,173,560).......................... $1,127,867,505
Cash........................................................ 945,142
Receivable for:
Interest................................................ 6,991,976
Shares of beneficial interest sold...................... 4,586,997
Prepaid expenses and other assets........................... 511,584
--------------
TOTAL ASSETS........................................... 1,140,903,204
--------------
LIABILITIES:
Payable for:
Dividends to shareholders............................... 1,115,912
Investment advisory fee................................. 834,771
Administration fee...................................... 239,276
Deferred loan fees.......................................... 5,316,892
Accrued expenses and other payables......................... 250,466
Commitments and contingencies (Note 7)...................... --
--------------
TOTAL LIABILITIES...................................... 7,757,317
--------------
NET ASSETS:
Paid-in-capital............................................. 1,138,500,817
Net unrealized depreciation................................. (3,306,055)
Accumulated undistributed net investment income............. 1,401,182
Accumulated net realized loss............................... (3,450,057)
--------------
NET ASSETS............................................. $1,133,145,887
--------------
--------------
NET ASSET VALUE PER SHARE,
114,043,462 SHARES OUTSTANDING (UNLIMITED SHARES
AUTHORIZED OF $.01 PAR VALUE).............................
$9.94
--------------
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
PRIME INCOME TRUST
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Interest.................................................... $43,683,785
Net facility, amendment and other fees...................... 2,879,403
Other income................................................ 190,037
-----------
TOTAL INCOME........................................... 46,753,225
-----------
EXPENSES
Investment advisory fee..................................... 4,553,135
Administration fee.......................................... 1,302,493
Net facility fees........................................... 423,683
Professional fees........................................... 366,818
Transfer agent fees and expenses............................ 254,911
Shareholder reports and notices............................. 147,886
Registration fees........................................... 74,087
Custodian fees.............................................. 43,530
Trustees' fees and expenses................................. 7,509
Other....................................................... 257,858
-----------
TOTAL EXPENSES......................................... 7,431,910
-----------
NET INVESTMENT INCOME.................................. 39,321,315
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain........................................... 1,423,234
Net change in unrealized depreciation....................... (2,870,929)
-----------
NET LOSS............................................... (1,447,695)
-----------
NET INCREASE................................................ $37,873,620
-----------
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
PRIME INCOME TRUST
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
MARCH 31, 1997 SEPTEMBER
(UNAUDITED) 30, 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................... $ 39,321,315 $55,337,469
Net realized gain (loss).................................... 1,423,234 (1,507,802 )
Net change in unrealized appreciation/depreciation.......... (2,870,929) (2,222,920 )
------------------ -----------
NET INCREASE........................................... 37,873,620 51,606,747
------------------ -----------
Dividends from net investment income........................ (38,158,960) (55,512,316)
Net increase from transactions in shares of beneficial
interest.................................................. 193,960,672 422,015,163
------------------ -----------
NET INCREASE........................................... 193,675,332 418,109,594
NET ASSETS:
Beginning of period......................................... 939,470,555 521,360,961
------------------ -----------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$1,401,182 AND $238,827, RESPECTIVELY).................. $1,133,145,887 $939,470,555
------------------ -----------
------------------ -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
PRIME INCOME TRUST
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
INCREASE (DECREASE) IN CASH:
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net investment income................................................................. $ 39,321,315
Adjustments to reconcile net investment income to net cash provided by operating
activities:
Increase in receivables and other assets related to operations........................ (346,921)
Increase in payables related to operations............................................ 231,861
Net loan fees received................................................................ 2,560,851
Amortization of loan fees............................................................. (2,879,403)
Accretion of discounts................................................................ (524,948)
---------------
NET CASH PROVIDED BY OPERATING ACTIVITIES........................................ 38,362,755
---------------
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Purchases of investments.............................................................. (471,151,795)
Principal repayments/sales of investments............................................. 383,171,067
Net sales/maturities of short-term investments........................................ (108,558,237)
---------------
NET CASH USED FOR INVESTING ACTIVITIES........................................... (196,538,965)
---------------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Shares of beneficial interest sold.................................................... 214,217,061
Shares tendered....................................................................... (39,017,713)
Dividends from net investment income
(net of reinvested dividends of $18,088,009)......................................... (19,787,173)
---------------
NET CASH PROVIDED BY FINANCING ACTIVITIES........................................ 155,412,175
---------------
NET DECREASE IN CASH.................................................................. (2,764,035)
CASH BALANCE AT BEGINNING OF PERIOD................................................... 3,709,177
---------------
CASH BALANCE AT END OF PERIOD......................................................... $ 945,142
---------------
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
PRIME INCOME TRUST
NOTES TO FINANCIAL STATEMENTS MARCH 31, 1997 (UNAUDITED)
1. ORGANIZATION AND ACCOUNTING POLICIES
Prime Income Trust (the "Trust") is registered under the Investment Company Act
of 1940, as amended, as a non-diversified, closed-end management investment
company. The Trust's investment objective is to provide a high level of current
income consistent with the preservation of capital. The Trust was organized as a
Massachusetts business trust on August 17, 1989 and commenced operations on
November 30, 1989.
The Trust offers and sells its shares to the public on a continuous basis. The
Trustees intend, each quarter, to consider authorizing the Trust to make tender
offers for all or a portion of its outstanding shares of beneficial interest at
the then current net asset value of such shares.
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) The Trustees believe that, at present, there
are not sufficient market quotations provided by banks, dealers or pricing
services respecting interests in senior collateralized loans ("Senior Loans") to
corporations, partnerships and other entities ("Borrower") to enable the Trust
to properly value Senior Loans based on available market quotations.
Accordingly, until the market for Senior Loans develops, interests in Senior
Loans held by the Trust continue to be valued at their fair value in accordance
with procedures established in good faith by the Trustees. Under the procedures,
adopted by the Trustees, interests in Senior Loans are priced using a matrix
which takes into account the relationship between current interest rates and
interest rates payable on each Senior Loan, as well as the total number of days
in each interest period and the period remaining until the next interest rate
determination or maturity of the Senior Loan. Adjustments in the
matrix-determined price of a Senior Loan will be made in the event of a default
on a Senior Loan or a significant change in the creditworthiness of the
Borrower. The fair values determined in accordance with these procedures may
differ significantly from the market values that would have been used had a
ready market for the Senior Loans existed; (2) portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest bid price; (3) all other securities and other assets are valued at their
fair value as determined in good faith under procedures established by and under
the general supervision of the Trustees; and (4) short-term debt securities
having a maturity date of more than sixty days at time of purchase are valued on
a mark-
<PAGE>
PRIME INCOME TRUST
NOTES TO FINANCIAL STATEMENTS MARCH 31, 1997 (UNAUDITED) CONTINUED
to-market basis until sixty days prior to maturity and thereafter at amortized
cost based on their value on the 61st day. Short-term debt securities having a
maturity date of sixty days or less at the time of purchase are valued at
amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Interest income is accrued daily except where collection is not expected. When
the Trust buys an interest in a Senior Loan, it may receive a facility fee,
which is a fee paid to lenders upon origination of a Senior Loan and/or a
commitment fee which is paid to lenders on an ongoing basis based upon the
undrawn portion committed by the lenders of the underlying Senior Loan. The
Trust amortizes the facility fee and accrues the commitment fee over the
expected term of the loan. When the Trust sells an interest in a Senior Loan, it
may be required to pay fees or commissions to the purchaser of the interest.
Fees received in connection with loan amendments are amortized over the expected
term of the loan.
C. SENIOR LOANS -- The Trust invests primarily in Senior Loans to Borrowers.
Senior Loans are typically structured by a syndicate of lenders ("Lenders"), one
or more of which administers the Senior Loan on behalf of the Lenders ("Agent").
Lenders may sell interests in Senior Loans to third parties ("Participations")
or may assign all or a portion of their interest in a Senior Loan to third
parties ("Assignments"). Senior Loans are exempt from registration under the
Securities Act of 1933. Presently, Senior Loans are not readily marketable and
are often subject to restrictions on resale.
D. FEDERAL INCOME TAX STATUS -- It is the Trust'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 Trust 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
<PAGE>
PRIME INCOME TRUST
NOTES TO FINANCIAL STATEMENTS MARCH 31, 1997 (UNAUDITED) CONTINUED
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 ADVISORY AGREEMENT
Pursuant to an Investment Advisory Agreement with Dean Witter InterCapital Inc.
(the "Investment Adviser"), the Trust pays an advisory fee, accrued daily and
payable monthly, by applying the following annual rates to the net assets of the
Trust determined as of the close of each business day: 0.90% to the portion of
the daily net assets not exceeding $500 million and 0.85% to the portion of the
daily net assets exceeding $500 million.
Under the terms of the Agreement, in addition to managing the Trust's
investments, the Investment Adviser pays the salaries of all personnel,
including officers of the Trust, who are employees of the Investment Adviser.
3. ADMINISTRATION AGREEMENT
Pursuant to an Administration Agreement with Dean Witter Services Company Inc.
(the "Administrator"), the Trust pays an administration fee, calculated daily
and payable monthly, by applying the annual rate of 0.25% to the Trust's daily
net assets.
Under the terms of the Administration Agreement, the Administrator maintains
certain of the Trust'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 Trust
who are employees of the Administrator. The Administrator also bears the cost of
telephone services, heat, light, power and other utilities provided to the
Trust.
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 March 31, 1997 aggregated
$471,151,795 and $383,171,067, respectively.
Shares of the Trust are distributed by Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Adviser and Administrator.
Pursuant to a Distribution Agreement between the Trust, the Investment Adviser
and the Distributor, the Investment Adviser compensates the Distributor at an
annual rate of 2.75% of the purchase price of shares purchased from the Trust.
The Investment Adviser will compensate the Distributor at an annual rate of
0.10% of the value of shares sold for
<PAGE>
PRIME INCOME TRUST
NOTES TO FINANCIAL STATEMENTS MARCH 31, 1997 (UNAUDITED) CONTINUED
any shares that remain outstanding after one year from the date of their initial
purchase. Any early withdrawal charge to defray distribution expenses will be
charged to the shareholder in connection with shares held for four years or less
which are accepted by the Trust for repurchase pursuant to tender offers. For
the six months ended March 31, 1997, the Investment Adviser has informed the
Trust that it received approximately $613,000 in early withdrawal charges.
Dean Witter Trust Company, an affiliate of the Investment Adviser and
Administrator, is the Trust's transfer agent. At March 31, 1997, the Trust had
transfer agent fees and expenses payable of approximately $70,000.
The Trust has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Trust who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the six months ended March 31, 1997
included in Trustees' fees and expenses in the Statement of Operations amounted
to $644. At March 31, 1997, the Trust had an accrued pension liability of
$44,689 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>
SHARES AMOUNT
----------- --------------
<S> <C> <C>
Balance, September 30, 1995...................................... 52,197,974 $ 522,524,992
Shares sold...................................................... 45,304,780 451,573,849
Shares issued to shareholders for reinvestment of dividends...... 2,706,326 26,959,275
Shares tendered (four quarterly tender offers)................... (5,673,770) (56,517,971)
----------- --------------
Balance, September 30, 1996...................................... 94,535,310 944,540,145
Shares sold...................................................... 21,614,034 214,890,376
Shares issued to shareholders for reinvestment of dividends...... 1,819,441 18,088,009
Shares tendered (two quarterly tender offers).................... (3,925,323) (39,017,713)
----------- --------------
Balance, March 31, 1997.......................................... 114,043,462 $1,138,500,817
----------- --------------
----------- --------------
</TABLE>
On April 24, 1997, the Trustees approved a tender offer to purchase up to 4
million shares of beneficial interest to commence on May 14, 1997.
6. FEDERAL INCOME TAX STATUS
At September 30, 1996, the Trust had a net capital loss carryover of
approximately $4,140,000 of which $1,384,000 will be available through September
30, 2003 and $2,756,000 will be available through September 30, 2004 to offset
future capital gains to the extent provided by regulations.
<PAGE>
PRIME INCOME TRUST
NOTES TO FINANCIAL STATEMENTS MARCH 31, 1997 (UNAUDITED) 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 Trust's next
taxable year. The Trust incurred and will elect to defer net capital losses of
approximately $557,000 during fiscal 1996.
As of September 30, 1996, the Trust had temporary book/tax differences primarily
attributable to post-October losses and market discount on revolver loans.
7. COMMITMENTS AND CONTINGENCIES
As of March 31, 1997, the Trust had unfunded loan commitments pursuant to the
following loan agreements:
<TABLE>
<CAPTION>
UNFUNDED
BORROWER COMMITMENT
- ----------------------------------------------------------------- ----------------
<S> <C>
Caldor Corp...................................................... $ 4,327,409
Crown Paper Co................................................... 2,750,568
Dade International, Inc.......................................... 1,758,065
E & S Holdings Corp.............................................. 5,294,117
Leons Bakery, Inc................................................ 2,529,412
Mafco Finance Corp............................................... 4,000,000
Nextel Communications, Inc....................................... 7,595,506
Ralphs Grocery Company........................................... 3,554,566
Restaurant Associates, Inc....................................... 377,193
----------------
$ 32,186,836
----------------
----------------
</TABLE>
<PAGE>
PRIME INCOME TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED
MARCH 31, FOR THE YEAR ENDED SEPTEMBER 30
1997 -----------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period............................ $ 9.94 $ 9.99 $ 10.00 $ 9.91 $ 9.99 $ 10.00
---------- --------- --------- --------- --------- ---------
Net investment income.............. 0.38 0.74 0.82 0.62 0.55 0.62
Net realized and unrealized gain
(loss)............................ (0.01) (0.04) 0.01 0.09 (0.08) (0.01)
---------- --------- --------- --------- --------- ---------
Total from investment operations... 0.37 0.70 0.83 0.71 0.47 0.61
---------- --------- --------- --------- --------- ---------
Less dividends and distributions
from:
Net investment income........... (0.37) (0.75) (0.81) (0.62) (0.55) (0.62)
Net realized gain............... -- -- (0.03) -- -- --
---------- --------- --------- --------- --------- ---------
Total dividends and
distributions..................... (0.37) (0.75) (0.84) (0.62) (0.55) (0.62)
---------- --------- --------- --------- --------- ---------
Net asset value, end of period..... $ 9.94 $ 9.94 $ 9.99 $ 10.00 $ 9.91 $ 9.99
---------- --------- --------- --------- --------- ---------
---------- --------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN+........... 3.72%(1) 7.25% 8.57% 7.32% 4.85% 6.23%
RATIOS TO AVERAGE NET ASSETS:
Expenses........................... 1.43%(2) 1.46% 1.52% 1.60% 1.45% 1.47%
Net investment income.............. 7.55%(2) 7.50% 8.11% 6.14% 5.53% 6.14%
SUPPLEMENTAL DATA:
Net assets, end of period, in
millions.......................... $1,133 $939 $521 $305 $311 $413
Portfolio turnover rate............ 42%(1) 72% 102% 147% 92% 46%
<FN>
- ---------------------
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period. Dividends and
distributions are assumed to be reinvested at the prices obtained under the
Trust's dividend reinvestment plan.
(1) Not annualized.
(2) Annualized.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TRUSTEES
- --------------------------------------------- PRIME
Michael Bozic INCOME
Charles A. Fiumefreddo TRUST
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
Rafael Scolari
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 ADVISER
- --------------------------------------------- Semiannual Report
Dean Witter InterCapital Inc. March 31, 1997
Two World Trade Center
New York, New York 10048
The financial statements included herein have been taken from the
records of the Trust 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 Trust. For more detailed information about the Trust, its officers and
trustees, fees, expenses and other pertinent information, please see the
prospectus of the Trust.
This report is not authorized for distribution to prospective investors
in the Trust unless preceded or accompanied by an effective prospectus.
