DEAN WITTER TAX-EXEMPT SECURITIES TRUST
LETTER TO THE SHAREHOLDERS June 30, 1996
Two World Trade Center, New York, New York 10048
DEAR SHAREHOLDER:
During the first half of 1996, the fixed income market outlook shifted from
bullishness associated with a weak economy and low inflation to bearishness
caused by stronger economic growth and the potential threat of renewed
inflation. This change in market psychology began in earnest after a
surprisingly large increase in payroll employment was reported in early March.
Other measures of economic activity and rising commodity prices added to the
concern. In addition, the market began to speculate that the Federal Reserve
Board would reverse its series of interest rate reductions with a move toward
higher interest rates. The bond market reacted to these expectations by
pushing long-term yields sharply higher.
MUNICIPAL MARKET CONDITIONS
Municipal bond yields as measured by 30-year insured revenue bonds began the
year at 5.50 percent. Interest rates subsequently began to rise in
mid-February on signs of stronger economic growth and reached a high of 6.15
percent in April and again in mid-June before finishing the first half of 1996
at 5.90 percent. Yields on one-year municipal notes increased from 3.60
percent to 3.90 percent over the first six-months of the year. In June, the
yield curve pickup for extending maturities from 1 to 30 years was 200 basis
points.
Tax-exempt bonds outperformed U.S. Treasury securities during the first half
of 1996 as the risk faded that flat tax proposals would cause a radical change
in the tax code. The ratio of insured revenue bond yields to 30-year U.S.
Treasury yields, which began the year at 92 percent, declined to 85 percent by
the end of June. A declining ratio means that municipal bond prices were
relatively stronger than U.S. Treasury prices.
The municipal market also benefited from steady demand. In addition to regular
maturities and calls for redemption this year, it has been estimated that
investors also face the retirement of $66 billion of previously refunded debt.
On the supply side, new issues increased 30 percent to $90 billion during the
first six months of 1996. However, as interest rates rose, underwritings were
frequently postponed and the pace of activity slowed.
PERFORMANCE
Dean Witter Tax-Exempt Securities Trust's total return for the first half of
1996 was -1.45 percent. The Fund's net asset value declined from $12.09 to
$11.55 per share. Tax-free dividends of $0.33 per share and taxable long-term
capital gains distributions of $0.05 per share were paid
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
LETTER TO THE SHAREHOLDERS June 30, 1996, continued
during the period. Since its inception on March 27, 1980, the Fund has
provided shareholders with an average annual total return of 9.65 percent. The
trailing 30-day SEC and distribution yields on June 30, 1996 were 4.98 percent
and 5.34 percent, respectively.
(The charts below represent information which appears as a graphic in
the printed report)
A pie chart reflecting the Five Largest Sectors as of June 30, 1996 and
a pie chart reflecting the credit quality of the portfolio as rated by Moody's
or Standard & Poors Credit Ratings as of June 30, 1996.
SECTORS PERCENT
------- -------
Other 42%
Transportation 13%
Electric 10%
Water & Sewer 10%
General Obligation 9%
IDR/PCR (Industrial Development/
Pollution Control) 9%
CREDIT RATING PERCENT
------------- -------
Aaa or AAA 45%
Aa or AA 21%
A or A 21%
Baa or BBB 7%
Not rated 4%
Ba or BB 2%
PORTFOLIO STRUCTURE
The Fund's net assets of $1.2 billion were diversified among 12 long-term
sectors and 111 credits. In response to the changing interest rate environment
the Fund increased its cash and short-term investment position from 1 percent
to 6 percent of net assets during the first half of the year. Portfolio sales
shifted to more market sensitive issues. Discount and current-coupon sales
exceeded sales of defensive, higher-coupon bonds with shorter calls. The
average maturity and call protection of the long-term portfolio remained at 20
years and 8 years, respectively. The portfolio has consistently maintained its
high quality characteristic with 66 percent of its long-term holdings rated
double "A" or better.
LOOKING AHEAD
Future tax reduction proposals might renew investor concern. However, the
balance between the supply of new issues and demand created by maturities
should remain positive for the municipal market. Long-term insured municipal
securities currently yield 85 percent of the yield on U.S. Treasury securities
and may be expected to move in tandem with the Treasury market.
We appreciate your ongoing support of Dean Witter Tax-Exempt Securities Trust
and look forward to continuing to serve your investment needs.
Very truly yours,
/s/ Charles A. Fiumefreddo
CHARLES A. FIUMEFREDDO
Chairman of the Board
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TAX-EXEMPT MUNICIPAL BONDS (93.4%)
General Obligation (9.4%)
North Slope Borough, Alaska,
$ 3,900 Ser 1992 A (MBIA) ............................................. 0.00 % 06/30/03 $ 2,720,094
5,000 Ser 1992 A Conv (MBIA) ........................................ 5.90 06/30/03 5,233,150
15,000 Ser 1994 B (FSA) .............................................. 0.00 06/30/05 9,234,450
18,500 Ser 1995 A (MBIA) ............................................. 0.00 06/30/06 10,739,435
4,000 Connecticut, College Savings 1989 Ser A ........................ 0.00 07/01/08 2,063,160
5,000 Florida Board of Education, Capital Outlay Refg 1995 Ser A ..... 5.50 06/01/13 4,881,500
Massachusetts,
10,000 Refg 1993 Ser A ............................................... 5.50 02/01/11 9,803,100
8,000 1994 Ser C (FGIC) ............................................. 6.75 11/01/12 8,656,160
4,000 Clark County, Nevada, Transportation Ser 1992 A (AMBAC) ........ 6.50 06/01/17 4,403,560
New York City, New York,
10,000 1990 Ser D .................................................... 6.00 08/01/07 9,785,800
10,000 1990 Ser D .................................................... 6.00 08/01/08 9,739,800
10,000 Pennsylvania, First Ser 1995 (FGIC) ............................ 5.50 05/01/12 9,802,500
7,500 Shelby County, Tennesee, Refg 1995 Ser A ....................... 5.625 04/01/14 7,412,250
20,120 King County, Washington, Ltd Tax 1995 (MBIA) ................... 6.00 01/01/23 20,225,026
- ----------- ------------
131,020 114,699,985
- ----------- ------------
Educational Facilities Revenue (5.8%)
4,000 FSU Financial Assistance Inc, Florida, Impr & Refg Ser 1994 .... 5.25 10/01/15 3,575,800
10,000 Indiana University, Student Fee Ser K (MBIA) ................... 5.875 08/01/20 9,828,700
7,000 Massachusetts Health & Educational Facilities Authority, Boston
University Ser 1991 (MBIA) .................................... 6.66 10/01/31 7,300,720
15,000 New Hampshire Higher Educational & Health Facilities Authority,
Dartmouth College Ser 1993 .................................... 5.375 06/01/23 13,730,550
2,000 New Jersey Development Authority, The Seeing Eye Inc 1991 ...... 7.30 04/01/11 2,044,820
New York State Dormitory Authority,
5,000 State University Ser 1989 B ................................... 0.00 05/15/02 3,619,600
20,000 State University Ser 1990 B ................................... 7.00 05/15/16 21,142,000
10,000 Vermont Educational & Health Buildings Financing Agency,
Middlebury College Ser 1996 ................................... 5.375 11/01/26 9,222,200
- ----------- ------------
73,000 70,464,390
- ----------- ------------
Electric Revenue (10.1%)
25,000 Salt River Project Agricultural Improvement & Power District,
Arizona, Refg 1993 Ser C ...................................... 5.50 01/01/10 24,999,750
10,000 Sacramento Municipal Utility District, California, Refg 1994 Ser
I (MBIA) ...................................................... 5.75 01/01/15 9,943,600
20,000 Southern California Public Power Authority, Mead-Adelanto 1994
Ser A (AMBAC) ................................................. 5.15 07/01/15 18,321,400
10,000 Municipal Electric Authority of Georgia, Fifth Crossover Ser ... 6.50 01/01/17 10,671,200
10,000 New York State Power Authority, General Purpose Ser CC ......... 5.25 01/01/18 9,202,300
15,000 Puerto Rico Electric Power Authority, Power Ser O .............. 0.00 07/01/17 4,257,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS June 30, 1996 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 15,000 South Carolina Public Service Authority, 1995 Refg Ser A (AMBAC) 6.25 % 01/01/22 $ 15,383,550
6,000 Austin, Texas, Combined Utilities Refg Ser 1993 A .............. 5.75 11/15/13 5,896,140
10,000 Intermountain Power Agency, Utah, Refg 1996 Ser D .............. 5.00 07/01/21 8,631,200
15,000 Washington Public Power Supply System, Proj #2 Refg Ser 1994 A
(Secondary MBIA) .............................................. 6.00 07/01/07 15,351,750
- ----------- ------------
136,000 122,657,890
- ----------- ------------
Hospital Revenue (8.4%)
10,000 Birmingham -Carraway Special Care Facilities Financing
Authority, Alabama, Carraway Methodist Health Systems Ser 1995
A (Connie Lee) ................................................ 6.25 08/15/09 10,455,600
3,000 Baxter County, Arkansas, Baxter County Regional Hospital Inc
Impr & Refg Ser 1992 .......................................... 7.50 09/01/21 3,175,860
10,000 California Health Facilities Financing Authority, Kaiser
Permanente Ser 1985 ........................................... 5.55 08/15/25 9,178,000
6,000 Connecticut Health & Educational Facilities Authority, Yale-New
Haven Hospital Ser F (MBIA) ................................... 7.10 07/01/25 6,469,140
Massachusetts Health & Educational Facilities Authority,
1,500 Malden Hospital -FHA Ins Mtge Ser A ........................... 5.00 08/01/16 1,299,375
10,000 New England Medical Center Ser G (MBIA) ....................... 5.375 07/01/24 9,207,900
Rochester, Minnesota,
5,000 Mayo Foundation/Mayo Medical Center Ser 1992 I ................ 5.75 11/15/21 4,888,700
3,700 Mayo Foundation/Mayo Medical Center Ser 1992 F ................ 6.25 11/15/21 3,789,281
15,000 Missouri Health & Educational Facilities Authority,
Barnes-Jewish Inc/ Christian Health Services Ser 1993 A ....... 5.25 05/15/14 13,852,800
6,000 New York State Medical Care Facilities Finance Agency,
Presbyterian Hospital -FHA Ins Mtge 1984 Ser A Refg ........... 5.25 08/15/14 5,568,900
10,000 Charlotte-Mecklenburg County Hospital Authority, North Carolina,
Ser 1992 ...................................................... 6.00 01/01/22 9,922,500
5,000 University of North Carolina, Hospitals at Chapel Hill Ser 1996 5.00 02/15/29 4,344,850
4,000 Cuyahoga County, Ohio, The Cleveland Clinic Foundation Refg Ser
1988 A ........................................................ 8.00 12/01/15 4,193,360
9,000 North Central Texas Health Facilities Development Corporation,
University Medical Center Inc Ser 1987 ........................ 7.75 04/01/17 9,278,730
7,000 Fairfax County Industrial Development Authority, Virginia, Inova
Health System Foundation Refg Ser 1993 A ...................... 5.25 08/15/19 6,454,070
- ----------- ------------
105,200 102,079,066
- ----------- ------------
Industrial Development/Pollution Control Revenue (8.8%)
10,000 Jefferson County, Kentucky, Louisville Gas & Electric Co 1993
Ser B ......................................................... 5.625 08/15/19 9,620,400
1,490 Maryland Industrial Development Financing Authority, Medical
Waste Assocs LP 1989 Ser (AMT) ................................ 8.75 11/15/10 1,490,000
5,000 Becker, Minnesota, Northern States Power Co Ser A 1989 ......... 6.80 04/01/07 5,300,000
15,000 Claiborne County, Mississippi, Middle South Energy Inc Ser C ... 9.875 12/01/14 16,768,200
10,000 Clark County, Nevada, Nevada Power Co Ser 1992 A (AMT) (FGIC) .. 6.70 06/01/22 10,461,400
10,000 Washoe County, Nevada, Sierra Pacific Power Co Ser 1987 (AMBAC) 6.30 12/01/14 10,588,700
5,000 Alliance Airport Authority, Texas, AMR Corp Ser 1990 (AMT) ..... 7.50 12/01/29 5,289,300
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS June 30, 1996 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 20,000 Dallas-Fort Worth International Airport Facility Improvement
Corporation, Texas, American Airlines Inc Ser 1995 ............ 6.00 % 11/01/14 $ 19,461,000
Matagorda County Navigational District #1, Texas,
7,000 Central Power & Light Co Collateralized Ser 1984 A ............ 7.50 12/15/14 7,723,520
10,000 Central Power & Light Co Ser 1986 (AMT) ....................... 7.875 12/01/16 10,315,100
10,000 Weston, Wisconsin, Wisconsin Public Service Corp Refg Ser 1993 A 6.90 02/01/13 10,830,700
- ----------- ------------
103,490 107,848,320
- ----------- ------------
Mortgage Revenue -Multi-Family (2.2%)
2,060 Massachusetts Housing Finance Agency, Hsg Dev 1986 Ser A (AMT) . 7.75 12/01/19 2,113,148
7,000 Michigan Housing Development Authority, Rental Ser A (Bifurcated
FSA) .......................................................... 6.50 04/01/23 7,142,310
9,000 New Jersey Housing & Mortgage Finance Agency, 1995 Ser A (AMBAC) 6.05 11/01/20 9,006,210
New York City Housing Development Corporation, New York,
4,550 Ruppert Proj -FHA Insured Sec 223F ............................ 6.50 11/15/18 4,577,115
4,409 Stevenson Commons Proj -FHA Insured Sec 223F .................. 6.50 05/15/18 4,434,619
- ----------- ------------
27,019 27,273,402
- ----------- ------------
Mortgage Revenue -Single Family (6.2%)
10,000 Alaska Housing Finance Corporation, Governmental 1995 Ser A
(MBIA) ........................................................ 5.875 12/01/24 9,684,300
2,440 California Housing Finance Agency, Home Cap Apprec 1983 Ser B .. 0.00 08/01/15 334,134
12,100 Illinois Housing Development Authority, Residential 1991 Ser C
(AMT) ......................................................... 6.875 02/01/18 12,309,451
7,400 Nebraska Investment Finance Authority, GNMA-Backed 1990 Ser
(AMT) ......................................................... 7.631 09/10/30 7,812,624
4,010 North Carolina Housing Finance Agency, Ser Q (AMT) ............. 8.00 03/01/18 4,225,979
7,350 Ohio Housing Finance Agency, GNMA-Backed 1990 Ser A (AMT) ...... 6.903 03/01/31 7,512,361
10,000 Pennsylvania Housing Finance Agency, Ser 1991-31 (AMT) ......... 7.00 10/01/23 10,272,300
Tennessee Housing Development Agency,
4,000 Mortgage Finance 1993 Ser A ................................... 5.90 07/01/18 3,937,080
11,000 Mortgage Finance 1993 Ser A ................................... 5.95 07/01/28 10,738,750
8,220 Wisconsin Housing & Economic Development Authority, Home
Ownership 1991 Ser (AMT) ...................................... 7.097 10/25/22 8,422,705
- ----------- ------------
76,520 75,249,684
- ----------- ------------
Public Facilities Revenue (3.8%)
10,000 Los Angeles Convention & Exhibition Center Authority,
California, 1993 Refg Ser A COPs (MBIA) ....................... 5.375 08/15/18 9,320,100
5,000 Palm Beach County, Florida, Criminal Justice Ser 1990 (FGIC) ... 6.00 06/01/13 5,058,800
10,000 Metropolitan Pier & Exposition Authority, Illinois, McCormick
Place Ser 1992 A .............................................. 6.50 06/15/27 10,128,200
10,000 Michigan Building Authority, 1993 Refg Ser I (AMBAC) ........... 5.30 10/01/16 9,362,500
6,000 Saint Louis Industrial Development Authority, Missouri, Kiel
Center
Refg Ser 1992 (AMT) ........................................... 7.75 12/01/13 6,355,800
5,000 Ohio Building Authority, Correctional 1985 Ser C BIGS .......... 0.00+ 10/01/05 6,385,950
- ----------- ------------
46,000 46,611,350
- ----------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS June 30, 1996 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Resource Recovery Revenue (6.4%)
Connecticut Resources Recovery Authority,
$ 9,000 American REF-FUEL Co of Southeastern Connecticut 1988 Ser A
(AMT) ......................................................... 8.00 % 11/15/15 $ 9,740,520
4,950 Bridgeport RESCO Ser A ........................................ 7.625 01/01/09 5,149,238
7,000 Savannah Resource Recovery Development Authority, Georgia,
Savannah Energy Systems Co Ser 1992 ........................... 6.30 12/01/06 7,305,690
10,000 Northeast Maryland Waste Disposal Authority, Montgomery County
Ser 1993 A (AMT) .............................................. 6.30 07/01/16 10,013,500
9,000 Mercer County Improvement Authority, New Jersey, Refg Ser A 1992
(AMT) (FGIC) .................................................. 6.70 04/01/13 9,137,250
9,000 Union County Utilities Authority, New Jersey, 1991 Ser A (AMT) . 7.20 06/15/14 9,197,730
10,000 Hempstead Industrial Development Agency, New York, 1985 American
REF-FUEL Co of Hempstead ...................................... 7.40 12/01/10 10,286,000
6,000 New York State Environmental Facilities Corporation, Huntington
1989 Ser A (AMT) .............................................. 7.50 10/01/12 6,323,520
5,000 Onondaga County Resource Recovery Agency, New York, 1992 Ser
(AMT) ......................................................... 6.875 05/01/06 5,049,050
5,000 Fairfax County Economic Development Authority, Virginia, Ogden
Martin Systems of Fairfax Inc Ser 1988 A (AMT) ................ 7.75 02/01/11 5,410,900
- ----------- ------------
74,950 77,613,398
- ----------- ------------
Transportation Facilities Revenue (13.2%)
5,000 Dade County, Florida, Seaport Refg Ser 1996 (MBIA) ............. 5.125 10/01/26 4,488,150
8,965 Mid-Bay Bridge Authority, Florida, Sr Lien Crossover Refg Ser
1993 A ........................................................ 6.00 10/01/13 8,784,893
Atlanta, Georgia,
5,000 Airport Refg Ser 1996 (AMBAC) (WI) ............................ 6.00 01/01/07 5,217,800
10,000 Airport Ser 1990 (AMT) ........................................ 6.25 01/01/21 10,122,300
8,100 Metropolitan Atlanta Rapid Transit Authority, Georgia, Sales Tax
Refg Ser K .................................................... 7.25 07/01/10 8,690,733
5,000 Hawaii, Airports Second Ser 1991 (AMT) ......................... 7.00 07/01/18 5,316,950
Kentucky Turnpike Authority,
9,000 Economic Development Road Refg Ser 1995 (AMBAC) ............... 6.50 07/01/08 9,950,400
30,000 Resource Recovery Road Refg 1987 Ser A ........................ 5.00 07/01/08 28,542,300
11,000 New Jersey Highway Authority, Sr Parkway Refg 1992 Ser ......... 6.25 01/01/14 11,426,470
6,595 Albuquerque, New Mexico, Airport Refg Ser 1997 (AMT) (AMBAC)
(WI) .......................................................... 6.375 07/01/15 6,617,687
Ohio Turnpike Commission,
22,025 1996 Ser A (MBIA) ............................................. 5.50 02/15/26 21,003,701
4,000 1994 Ser A .................................................... 5.75 02/15/24 3,902,400
5,000 Pennsylvania Turnpike Commission, Ser L of 1991 (MBIA) ......... 6.00 06/01/15 5,036,300
10,000 Puerto Rico Highway & Transportation Authority, Refg Ser X ..... 5.50 07/01/15 9,668,300
20,000 Texas Turnpike Authority, Dallas North Tollway Refg Ser 1997
(FGIC) ........................................................ 5.25 01/01/23 18,318,200
4,000 Virginia Transportation Board, US Route 58 Corridor Ser 1993 B . 5.625 05/15/13 3,920,760
- ----------- ------------
163,685 161,007,344
- ----------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS June 30, 1996 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water & Sewer Revenue (9.5%)
$ 10,000 Birmingham Water Works & Sewer Board, Alabama, Ser 1994 ........ 5.50 % 01/01/20 $ 9,568,200
10,000 Phoenix Civic Improvement Corporation, Arizona, Jr Lien Water
Ser 1994 ...................................................... 5.45 07/01/19 9,342,100
10,000 California Department of Water Resources, Central Valley Refg
Ser L ......................................................... 5.50 12/01/23 9,343,600
5,000 Central Coast Water Authority, California, Ser 1992 (AMBAC) .... 6.60 10/01/22 5,329,850
10,000 East Bay Municipal Utility District, California, Water Refg Ser
1993 (MBIA) ................................................... 5.00 06/01/21 8,784,900
10,000 Los Angeles, California, Wastewater Ser 1994-A (MBIA) .......... 5.875 06/01/24 9,965,400
10,000 Dade County, Florida, Water & Sewer Ser 1995 (FGIC) ............ 5.50 10/01/25 9,498,000
Massachusetts Water Resources Authority,
10,000 1993 Ser C .................................................... 5.25 12/01/15 9,319,500
10,000 Refg 1992 Ser B ............................................... 5.50 11/01/15 9,453,200
4,000 Detroit, Michigan, Sewage Refg Ser 1993-A (FGIC) ............... 5.70 07/01/13 3,940,120
8,500 New York City Municipal Water Finance Authority, New York, 1994
Ser B ......................................................... 5.30 06/15/06 8,434,975
Philadelphia, Pennsylvania,
10,000 Water & Wastewater Ser 1993 (FSA) ............................. 5.50 06/15/15 9,613,000
5,000 Water & Wastewater Ser 1995 (MBIA) ............................ 5.60 08/01/18 4,827,800
10,000 Upper Occoquan Sewerage Authority, Virginia, Regl Sewerage Ser
1995 A (MBIA) ................................................. 5.00 07/01/25 8,732,000
- ----------- -------------
122,500 116,152,645
- ----------- -------------
Other Revenue (2.3%)
3,500 Denver, Colorado, Excise Tax Ser 1985 A ........................ 5.00 11/01/08 3,302,495
New York Local Government Assistance Corporation,
5,000 Ser 1993 C Refg ............................................... 5.375 04/01/14 4,681,700
11,000 Ser 1994 A .................................................... 5.50 04/01/17 10,616,430
5,000 Ser 1995 A .................................................... 6.00 04/01/24 5,003,350
5,000 Houston, Texas, Sr Lien Hotel Occupancy Tax Refg Ser 1995 (FSA) 5.50 07/01/11 4,870,500
- ----------- -------------
29,500 28,474,475
- ----------- -------------
Refunded (7.3%)
9,000 Los Angeles Convention & Exhibition Center Authority,
California, Ser 1985 COPs ..................................... 9.00 12/01/05++ 11,718,450
2,500 Mid-Bay Bridge Authority, Florida, Ser 1991 A (ETM) ............ 6.875 10/01/22 2,738,150
14,000 New York State Dormitory Authority, Suffolk County Judicial Ser
1986 (ETM) .................................................... 7.375 07/01/16 16,212,560
25,000 Intermountain Power Agency, Utah, Refg 1985 Ser H (GAINS) ...... 0.00++ 07/01/03++ 22,997,000
5,000 Salt Lake City, Utah, IHC Hospital Inc Ser of 1983 (ETM) ....... 5.00 06/01/15 4,542,800
28,000 Fairfax County Industrial Development Authority, Virginia,
Fairfax Hospital System Inc/Inova Health Ser 1991 ............. 6.801 08/15/01++ 30,765,000
- ----------- -------------
83,500 88,973,960
- ----------- -------------
1,172,384 TOTAL TAX-EXEMPT MUNICIPAL BONDS(Identified Cost $1,094,611,869) .................... 1,139,105,909
- ----------- -------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS June 30, 1996 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (6.1%)
$ 29,540 Massachusetts Health & Educational Facilities Authority, Capital
Asset Ser E (Demand 07/01/96) ................................. 3.50*% 01/01/35 $ 29,540,000
9,500 University of Michigan, Hospital Ser 1995 A (Demand 07/01/96) .. 3.55* 12/01/27 9,500,000
14,000 Missouri Health & Educational Facilities Authority, Washington
University Ser 1996 D (Demand 07/01/96) ....................... 3.70* 02/01/30 14,000,000
10,000 Philadelphia Hospitals & Higher Education Facilities Authority,
Pennsylvania, Children's Hospital of Philadelphia 1996 Ser A
(Demand 07/01/96) ............................................. 3.60* 03/01/27 10,000,000
11,600 Kemmerer, Wyoming, Exxon Corp Ser 1984 (Demand 07/01/96) ....... 3.50* 11/01/14 11,600,000
- ----------- --------------
74,640 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS
(Identified Cost $74,640,000) ....................................................... 74,640,000
- ----------- --------------
$1,247,024 TOTAL INVESTMENTS (Identified Cost $1,169,251,869) (a) .................. 99.5% 1,213,745,909
===========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES .......................... 0.5 6,441,560
------ --------------
NET ASSETS .............................................................. 100.0% $1,220,187,469
====== ==============
</TABLE>
- ------------
AMT Alternative Minimum Tax.
BIGS Bond Income Growth Security.
COPs Certificates of Participation.
ETM Escrowed to Maturity.
GAINS Growth and Income Security.
WI Security purchased on a when issued basis.
+ Zero coupon; will convert to 9.75% on October 1, 1996.
++ Zero coupon; will convert to 10.00% on July 1, 2000.
++ Prerefunded to call date shown.
* Current coupon of variable rate security.
(a) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation was
$58,142,502 and the aggregate gross unrealized depreciation was
$13,648,462, resulting in net unrealized appreciation of
$44,494,040.
Bond Insurance:
AMBAC AMBAC Indemnity Corporation.
Connie Lee Connie Lee Insurance Company.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
Geographic Summary of Investments
Based on Market Value as a Percent of Net Assets
June 30, 1996
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS June 30, 1996 (unaudited) continued
<TABLE>
<CAPTION>
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
June 30, 196
<S> <C> <C> <C> <C> <C>
Alabama 1.6% Maryland 0.9% Ohio 3.5%
Alaska 3.1 Massachusetts 7.1 Pennsylvania 4.1
Arizona 2.8 Michigan 2.5 Puerto Rico 1.1
Arkansas 0.2 Minnesota 1.1 South Carolina 1.3
California 7.6 Mississippi 1.4 Tennessee 1.8
Colorado 0.3 Missouri 2.8 Texas 6.7
Connecticut 1.9 Nebraska 0.6 Utah 3.0
Florida 3.2 Nevada 2.1 Vermont 0.8
Georgia 3.5 New Hampshire 1.1 Virginia 4.5
Hawaii 0.5 New Jersey 3.3 Washington 2.9
Illinois 1.8 New Mexico 0.5 Wisconsin 1.6
Indiana 0.8 New York 11.0 Wyoming 1.0
Kentucky 4.0 North Carolina 1.5 ------
Total 99.5%
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (unaudited)
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $1,169,251,869) ...... $1,213,745,909
Cash .................................... 1,026,026
Receivable for:
Interest .............................. 18,337,634
Investments sold ...................... 3,500,905
Shares of beneficial interest sold ... 279,358
Prepaid expenses and other assets ...... 63,499
--------------
TOTAL ASSETS .......................... 1,236,953,331
--------------
LIABILITIES:
Payable for:
Investments purchased .................. 15,534,013
Investment management fee .............. 429,881
Dividends to shareholders .............. 368,943
Shares of beneficial interest
repurchased ........................... 302,519
Accrued expenses ........................ 130,506
--------------
TOTAL LIABILITIES ..................... 16,765,862
--------------
NET ASSETS:
Paid-in-capital ......................... 1,169,480,272
Net unrealized appreciation ............. 44,494,040
Accumulated undistributed net investment
income ................................. 368,338
Accumulated undistributed net realized
gain ................................... 5,844,819
--------------
NET ASSETS ............................ $1,220,187,469
==============
NET ASSET VALUE PER SHARE,
105,670,780 shares outstanding
(unlimited shares authorized of $.01
par value) ............................. $ 11.55
==============
MAXIMUM OFFERING PRICE PER SHARE
(net asset value plus 4.17% of net
asset value)* .......................... $ 12.03
==============
</TABLE>
- ------------
* On sales of $25,000 or more, the offering price is reduced.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1996 (unaudited)
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME .......................... $ 37,958,608
--------------
EXPENSES
Investment management fee ................ 2,693,311
Transfer agent fees and expenses ........ 207,283
Shareholder reports and notices .......... 31,629
Custodian fees ........................... 28,366
Registration fees ........................ 25,099
Professional fees ........................ 24,848
Trustees' fees and expenses .............. 8,005
Other .................................... 14,578
--------------
TOTAL EXPENSES BEFORE EXPENSE OFFSET ... 3,033,119
LESS: EXPENSE OFFSET .................. (24,040)
--------------
TOTAL EXPENSES AFTER EXPENSE OFFSET .... 3,009,079
--------------
NET INVESTMENT INCOME .................. 34,949,529
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain ........................ 5,878,323
Net change in unrealized appreciation ... (59,321,220)
--------------
NET LOSS ............................... (53,442,897)
--------------
NET DECREASE ............................. $(18,493,368)
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED DECEMBER
JUNE 30, 1996 31, 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C>
(unaudited)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................. $ 34,949,529 $ 76,135,601
Net realized gain ..................................... 5,878,323 17,721,238
Net change in unrealized appreciation/depreciation ... (59,321,220) 117,785,387
-------------- --------------
NET INCREASE (DECREASE) ............................. (18,493,368) 211,642,226
-------------- --------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income ................................. (34,959,504) (75,983,289)
Net realized gain ..................................... (5,611,836) (12,426,304)
-------------- --------------
TOTAL ............................................... (40,571,340) (88,409,593)
-------------- --------------
Net decrease from transactions in shares of beneficial
interest ............................................. (46,056,324) (93,207,593)
-------------- --------------
TOTAL INCREASE (DECREASE) ........................... (105,121,032) 30,025,040
NET ASSETS:
Beginning of period ................................... 1,325,308,501 1,295,283,461
-------------- --------------
END OF PERIOD
(Including undistributed net investment income of
$368,338 and $378,313, respectively) ................ $1,220,187,469 $1,325,308,501
============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 1996 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Tax-Exempt Securities Trust (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund's investment objective is to provide a
high level of current income which is exempt from federal income tax,
consistent with the preservation of capital. The Fund was incorporated in
Maryland in 1979, commenced operations on March 27, 1980 and reorganized as a
Massachusetts business trust on April 30, 1987.
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 -- Portfolio securities are valued for the Fund by
an outside independent pricing service approved by the Trustees. The pricing
service has informed the Fund that in valuing the Fund's portfolio securities,
it uses both a computerized matrix of tax-exempt securities and evaluations by
its staff, in each case based on information concerning market transactions
and quotations from dealers which reflect the bid side of the market each day.
The Fund's portfolio securities are thus valued by reference to a combination
of transactions and quotations for the same or other securities believed to be
comparable in quality, coupon, maturity, type of issue, call provisions,
trading characteristics and other features deemed to be relevant. 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 by the identified cost method.
The Fund amortizes premiums and accretes discounts over the life of the
respective securities. Interest income is accrued daily.
C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable and nontaxable income to its
shareholders. Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to its shareholders on the record date. The amount of
dividends and distributions from net investment income
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 1996 (unaudited) continued
and net realized capital gains are determined in accordance with federal
income tax regulations which may differ from generally accepted accounting
principles. These "book/tax" differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in nature,
such amounts are reclassified within the capital accounts based on their
federal tax-basis treatment; temporary differences do not require
reclassification. Dividends and distributions which exceed net investment
income and net realized capital gains for financial reporting purposes but not
for tax purposes are reported as dividends in excess of net investment income
or distributions in excess of net realized capital gains. To the extent they
exceed net investment income and net realized capital gains for tax purposes,
they are reported as distributions of paid-in-capital.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with Dean Witter InterCapital
Inc. (the "Investment Manager"), the Fund pays the Investment Manager a
management fee, accrued daily and payable monthly, by applying the following
annual rates to the Fund's net assets determined as of the close of each
business day: 0.50% to the portion of daily net assets not exceeding $500
million; 0.425% to the portion of daily net assets exceeding $500 million but
not exceeding $750 million; 0.375% to the portion of daily net assets
exceeding $750 million but not exceeding $1 billion; 0.35% to the portion of
daily net assets exceeding $1 billion but not exceeding $1.25 billion; and
0.325% to the portion of daily net assets exceeding $1.25 billion.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities,
equipment, clerical, bookkeeping and certain legal services and pays the
salaries of all personnel, including officers of the Fund who are employees of
the Investment Manager. The Investment Manager also bears the cost of
telephone services, heat, light, power and other utilities provided to the
Fund.
3. 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 June 30, 1996
aggregated $102,164,578 and $236,269,145, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Fund's transfer agent. At June 30, 1996, the Fund had transfer agent fees and
expenses payable of approximately $45,000.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 1996 (unaudited) continued
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 June 30, 1996 included in Trustees' fees and expenses
in the Statement of Operations amounted to $415. At June 30, 1996, the Fund
had an accrued pension liability of $49,060 which is included in accrued
expenses in the Statement of Assets and Liabilities.
Shares of the Fund are distributed by Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager. The Distributor has
informed the Fund that for the six months ended June 30, 1996, it received
approximately $993,000 in commissions from the sale of the Fund's shares. Such
commissions are not an expense of the Fund; they are deducted from the
proceeds of the shares.
4. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JUNE 30, 1996 DECEMBER 31, 1995
------------------------------ -------------------------------
(UNAUDITED)
SHARES AMOUNT SHARES AMOUNT
------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Sold ........................................ 2,306,075 $ 19,203,043 3,469,058 $ 40,446,608
Reinvestment of dividends and distributions.. 1,266,604 22,680,145 4,260,271 50,182,467
------------- --------------- -------------- ---------------
3,572,679 41,883,188 7,729,329 90,629,075
Repurchased ................................. (7,511,319) (87,939,512) (15,722,604) (183,836,668)
------------- --------------- -------------- ---------------
Net decrease ................................ (3,938,640) $(46,056,324) (7,993,275) $ (93,207,593)
============= =============== ============== ===============
</TABLE>
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR ENDED DECEMBER 31
MONTHS ENDED -------------------------------------------------
JUNE 30, 1996 1995 1994 1993 1992 1991
--------------- -------- --------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ... $ 12.09 $11.01 $12.41 $11.88 $11.65 $11.09
--------------- -------- --------- -------- -------- --------
Net investment income ................... 0.33 0.67 0.70 0.77 0.79 0.80
Net realized and unrealized gain (loss) (0.49) 1.19 (1.37) 0.54 0.23 0.56
--------------- -------- --------- -------- -------- --------
Total from investment operations ....... (0.16) 1.86 (0.67) 1.31 1.02 1.36
--------------- -------- --------- -------- -------- --------
Less dividends and distributions from:
Net investment income .................. (0.33) (0.67) (0.70) (0.77) (0.79) (0.80)
Net realized gain ...................... (0.05) (0.11) (0.03) (0.01) -- --
--------------- -------- --------- -------- -------- --------
Total dividends and distributions ...... (0.38) (0.78) (0.73) (0.78) (0.79) (0.80)
--------------- -------- --------- -------- -------- --------
Net asset value, end of period .......... $ 11.55 $12.09 $11.01 $12.41 $11.88 $11.65
=============== ======== ========= ======== ======== ========
TOTAL INVESTMENT RETURN+ ................ (1.45)%(1) 17.37% (5.55)% 11.23% 9.09% 12.71%
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................ 0.48%(2) 0.48% 0.47% 0.47% 0.49% 0.51%
Net investment income ................... 5.50%(2) 5.76% 6.02% 6.23% 6.74% 7.05%
SUPPLEMENTAL DATA:
Net assets, end of period, in millions . $ 1,220 $1,325 $1,295 $1,582 $1,323 $1,145
Portfolio turnover rate ................. 8%(1) 21% 16% 13% 4% 10%
</TABLE>
- ------------
+ Does not reflect the deduction of sales load. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TRUSTEES
- ----------------------------------
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire DEAN WITTER
Dr. Manuel H. Johnson TAX-EXEMPT
Michael E. Nugent SECURITIES
Philip J. Purcell TRUST
John L. Schroeder
OFFICERS
- ----------------------------------
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
James F. Willison
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
- ----------------------------------
Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
- ----------------------------------
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
- ----------------------------------
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
The financial statements included herein have been taken from the records of
the Fund without examination by the independent accountants and accordingly
they do not express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and
trustees, fees, expenses and other pertinent information, please see the
prospectus of the Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus.
SEMIANNUAL REPORT
JUNE 30, 1996
