<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST Two World Trade Center,
LETTER TO THE SHAREHOLDERS June 30, 1997 New York, New York 10048
DEAR SHAREHOLDER:
We are pleased to present the semiannual report on the operations of Dean
Witter Tax-Exempt Securities Trust for the six-month period ended June 30,
1997.
A consumer-led acceleration in economic activity in late 1996 carried into
the first quarter of 1997. This contributed to a rise in interest rates
between December 1996 and April 1997. On March 25, 1997, the Federal Reserve
Board raised the federal-funds rate 25 basis points to 5.50 percent in a
preemptive move against a possible increase in the rate of inflation. The
bond market recognized that additional rate hikes by the central bank were
possible, but began to rally when short-term interest rates remained
unchanged in May.
MUNICIPAL MARKET CONDITIONS
Municipal yields followed the trend of U.S. Treasury yields, but with less
volatility. Long-term insured revenue bond yields rose from 5.45 percent at
the end of November 1996 to a high of 5.85 percent in mid April 1997 before
declining to 5.50 percent in June.
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE PURPOSE OF EDGAR
FILING.]
BOND YIELDS 1994-1997
<TABLE>
<CAPTION>
INSURED MUNICPAL
30-YEAR 30-YEAR REVENUE AS A
INSURED MUNICPAL U.S TREASURY PERCENTAGE OF
REVENUE YIELDS YIELDS U.S. TREASURY YIELDS
<S> <C> <C> <C>
Dec '93 5.45 6.35 0.8586
5.29 6.24 0.8481
5.64 6.66 0.8468
6.19 7.09 0.8728
6.24 7.31 0.8540
6.23 7.43 0.8387
Jun '94 6.31 7.61 0.8293
6.15 7.40 0.8314
6.17 7.45 0.8280
6.42 7.82 0.8212
6.66 7.97 0.8356
6.99 8.00 0.8738
Dec '94 6.65 7.88 0.8438
6.42 7.70 0.8340
6.12 7.44 0.8222
6.07 7.43 0.8167
6.05 7.34 0.8245
5.84 6.65 0.8784
Jun '95 6.00 6.62 0.9066
5.99 6.85 0.8750
5.98 6.65 0.8997
5.97 6.50 0.9184
5.79 6.33 0.9150
5.61 6.13 0.9151
Dec '95 5.49 5.95 0.9230
5.42 6.03 0.8989
5.55 6.47 0.8577
5.89 6.67 0.8835
5.94 6.91 0.8601
5.99 6.99 0.8571
Jun '96 5.86 6.87 0.8529
5.77 6.97 0.8278
5.82 7.12 0.8176
5.71 6.92 0.8248
5.60 6.64 0.8431
5.45 6.35 0.8583
Dec '96 5.56 6.64 0.8372
5.63 6.79 0.8293
5.53 6.80 0.8129
5.83 7.10 0.8216
5.74 6.96 0.8251
5.58 6.91 0.8081
Jun '97 5.49 6.78 0.8092
</TABLE>
Source: Bloomberg L.P.
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
LETTER TO THE SHAREHOLDERS June 30, 1997, continued
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE PURPOSE OF EDGAR
FILING.]
LARGEST SECTORS AS OF JUNE 30, 1997
(% OF NET ASSETS)
GENERAL OBLICATION 13%
TRANSPORTATION 13%
REFUNDED 12%
ELECTRIC 11%
SHORT-TERM 8%
WATER & SEWER 8%
HOSPITAL 7%
ALL OTHERS 19%
MORTGAGE 9%
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
CREDIT RATINGS AS OF JUNE 30, 1997
(% OF TOTAL LONG-TERM PORTFOLIO)
Aaa or AAA 54%
Aa or AA 19%
A or A 14%
Baa or BBB 8%
Ba or BB 2%
NR 3%
AS MEASURED BY MOODY'S INVESTORS SERVICE INC. OR STANDARD & POOR'S CORP.
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
CALL STRUCTURE AS OF JUNE 30, 1997 WEIGHTED AVERAGE
(% OF TOTAL LONG-TERM PORTFOLIO) CALL PROTECTION: 7 YEARS
1997 4.7%
1998 4.1%
1999 3.9%
2000 4.4%
2001 9.2%
2002 10.4%
2003 14.8%
2004 5.9%
2005 10.2%
2006 9.7%
2007+ 22.7%
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
LETTER TO THE SHAREHOLDERS June 30, 1997, continued
The ratio of 30-year insured revenue bond yields to 30-year U.S. Treasury
yields declined from 86 percent at the end of November 1996 to 81 percent in
June 1997. A declining ratio means that municipals have outperformed
Treasuries, but have become relatively less attractive. The annual range of
the ratio has averaged between 80 percent and 92 percent over the past three
years.
Relative to last year, new-issue municipal volume was ahead only two percent
for the first six months of 1997. Estimated underwriting volume of $180
billion for the full year is expected to exceed bond maturities and
redemptions of $130 billion.
PERFORMANCE
Dean Witter Tax-Exempt Securities Trust's total return for the six-month
period ended June 30, 1997 was 2.79 percent. The Fund's net asset value
increased slightly from $11.77 to $11.78 per share. Tax-free dividends
totaling $0.32 per share and taxable capital gains distributions of $0.004
per share were paid during the period. Tax free dividends continued to be the
major component of total return. The Fund's net assets exceeded $1.1 billion.
PORTFOLIO STRUCTURE
The Fund's cash and short-term investment position during the first half of
1997 increased from 6 percent to 8 percent of net assets. Refunded bonds
added another 12 percent to the defensive position of the portfolio.
Portfolio sales involved market-sensitive discount and current-coupon issues.
The average maturity of the portfolio was 16 years. The distribution of bond
call dates produced an average call protection of 7 years.
Investments were diversified among 13 long-term sectors and 98 credits. The
portfolio has consistently maintained high quality, with over 70 percent of
its long-term holdings rated double "A" or better. Holdings in the electric
revenue sector reflect the portfolio's ability to respond to changing credit
conditions. With municipal electric utilities facing the increasingly
competitive pressures of deregulation, approximately 75 percent of the
electric credits are enhanced with bond insurance.
LOOKING AHEAD
Since the election-year collapse of flat-tax proposals, municipal bonds have
outperformed U.S. Treasury securities. Tax-free yields are currently somewhat
less attractive in their historical relationship with Treasury yields.
However, the long-term benefits of tax-exempt income remain intact and have
fostered demand for municipal bonds.
On June 30, 1997, the Fund's Board of Trustees approved a proposal to adopt a
multiple class share structure. Through this arrangement the Fund will offer
four classes of shares with various sales charges, ongoing fees and other
features. Existing shares were designated Class D. This conversion occurred on
July 28, 1997. A revised prospectus, which includes complete details
regarding this change, was mailed with your June 1997 statement.
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
LETTER TO THE SHAREHOLDERS June 30, 1997, continued
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
RESULTS OF SPECIAL MEETING (unaudited)
On May 21, 1997, a special meeting of the Fund's shareholders was held for
the purpose of voting on four separate matters, the results of which were as
follows:
(1) APPROVAL OF A NEW INVESTMENT MANAGEMENT AGREEMENT BETWEEN THE FUND AND
DEAN WITTER INTERCAPITAL INC. IN CONNECTION WITH THE MERGER OF MORGAN
STANLEY GROUP INC. WITH DEAN WITTER DISCOVER & CO.:
For ................................................. 59,538,943
Against ............................................. 1,406,853
Abstain ............................................. 4,117,748
(2) ELECTION OF TRUSTEES:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Michael Bozic John R. Haire Michael E. Nugent
For ................... 62,490,343 For ................... 62,438,859 For ................... 62,561,434
Withheld .............. 2,573,201 Withheld .............. 2,624,685 Withheld .............. 2,502,110
Charles A. Fiumefreddo Wayne E. Hedien Philip J. Purcell
For ................... 62,515,027 For ................... 62,529,775 For ................... 62,565,915
Withheld .............. 2,548,517 Withheld .............. 2,533,769 Withheld .............. 2,497,629
Edwin J. Garn Dr. Manuel H. Johnson John L. Schroeder
For ................... 62,461,015 For ................... 62,567,181 For ................... 62,480,562
Withheld .............. 2,602,529 Withheld .............. 2,496,363 Withheld .............. 2,582,982
</TABLE>
(3) APPROVAL OF A NEW INVESTMENT POLICY WITH RESPECT TO INVESTMENTS IN
CERTAIN OTHER INVESTMENT COMPANIES:
For .............................................. 57,095,092
Against .......................................... 2,662,961
Abstain .......................................... 5,305,491
(4) RATIFICATION OF PRICE WATERHOUSE LLP AS INDEPENDENT ACCOUNTANTS:
For .............................................. 61,658,268
Against .......................................... 529,660
Abstain .......................................... 2,875,616
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS June 30, 1997 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TAX-EXEMPT MUNICIPAL BONDS (90.5%)
General Obligation (13.2%)
North Slope Borough, Alaska,
$ 5,000 Ser 1992 A Conv (MBIA) ......................................... 5.90 % 06/30/03 $ 5,329,349
15,000 Ser 1994 B (FSA) ............................................... 0.00 06/30/05 10,018,050
18,500 Ser 1995 A (MBIA) .............................................. 0.00 06/30/06 11,696,070
10,000 Ser 1996 B (MBIA) .............................................. 0.00 06/30/07 5,950,000
10,000 Ser 1996 B (MBIA) .............................................. 0.00 06/30/06 6,322,200
4,000 Connecticut, College Savings 1989 Ser A ......................... 0.00 07/01/08 2,271,400
Massachusetts,
20,000 Refg 1996 Ser A (AMBAC) ........................................ 6.00 11/01/10 21,583,600
8,000 Refg 1993 Ser A ................................................ 5.50 02/01/11 8,048,880
4,000 Clark County, Nevada, Transportation Ser 1992 A (AMBAC) ......... 6.50 06/01/17 4,527,400
New York City, New York,
10,000 1990 Ser D ..................................................... 6.00 08/01/07 10,122,200
10,000 1990 Ser D ..................................................... 6.00 08/01/08 10,104,500
15,000 North Carolina, 1997 Ser A ...................................... 5.20 03/01/16 14,857,500
10,000 Pennsylvania, First Ser 1995 (FGIC) ............................. 5.50 05/01/12 10,129,600
7,000 Shelby County, Tennessee, Refg 1995 Ser A ....................... 5.625 04/01/14 7,108,080
20,000 King County, Washington, Ltd Tax 1995 (MBIA) .................... 6.00 01/01/23 20,474,600
- ------------ --------------
166,500 148,543,429
- ------------ --------------
Educational Facilities Revenue (5.3%)
10,000 Indiana University, Student Fee Ser K (MBIA) .................... 5.875 08/01/20 10,101,700
7,000 Massachusetts Health & Educational Facilities Authority, Boston
University Ser 1991 (MBIA) ..................................... 6.66 10/01/31 7,527,170
15,000 New Hampshire Higher Educational & Health Facilities Authority,
Dartmouth College Ser 1993 ..................................... 5.375 06/01/23 14,343,300
2,000 New Jersey Development Authority, The Seeing Eye Inc 1991 ....... 7.30 04/01/11 2,112,260
New York State Dormitory Authority,
5,000 State University Ser 1989 B .................................... 0.00 05/15/02 3,964,000
20,000 State University Ser 1990 B .................................... 7.00 05/15/16 21,348,800
- ------------ --------------
59,000 59,397,230
- ------------ --------------
Electric Revenue (10.9%)
25,000 Salt River Project Agricultural Improvement & Power District,
Arizona,
Refg 1993 Ser C (Secondary MBIA) ............................... 5.50 01/01/10 25,963,000
10,000 Sacramento Municipal Utility District, California, Refg 1994 Ser
L (MBIA) ....................................................... 5.75 01/01/15 10,181,500
10,000 Municipal Electric Authority of Georgia, Fifth Crossover Ser
(Secondary MBIA) ............................................... 6.50 01/01/17 11,303,400
5,000 New York State Power Authority, General Purpose Ser CC .......... 5.25 01/01/18 4,770,600
15,000 Puerto Rico Electric Power Authority, Power Ser O ............... 0.00 07/01/17 4,902,150
15,000 South Carolina Public Service Authority, 1995 Refg Ser A
(AMBAC) ........................................................ 6.25 01/01/22 15,900,750
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS June 30, 1997 (unaudited) continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
-----------------------------------------------------------------------------------------------------------------
$ 24,000 San Antonio, Texas, Electric & Gas Refg Ser 1994 C .............. 4.70 % 02/01/06 $ 23,322,480
10,000 Intermountain Power Agency, Utah, Refg 1997 Ser B (MBIA) ....... 5.75 07/01/19 10,000,000
15,000 Washington Public Power Supply System, Proj #2 Refg Ser 1994 A
(Secondary MBIA) ............................................... 6.00 07/01/07 16,120,500
- ------------ --------------
129,000 122,464,380
- ------------ --------------
Hospital Revenue (6.5%)
10,000 Birmingham -Carraway Special Care Facilities Financing Authority,
Alabama, Carraway Methodist Health Ser 1995 A (Connie Lee) ..... 6.25 08/15/09 10,887,900
3,000 Baxter County, Arkansas, Baxter County Regional Hospital Inc
Impr & Refg Ser 1992 ........................................... 7.50 09/01/21 3,222,750
1,500 Massachusetts Health & Educational Facilities Authority, Malden
Hospital - FHA Ins Mtge Ser A ................................. 5.00 08/01/16 1,366,380
Rochester, Minnesota,
5,000 Mayo Foundation/Medical Center Ser 1992 I ...................... 5.75 11/15/21 5,008,550
3,700 Mayo Foundation/Medical Center Ser 1992 F ...................... 6.25 11/15/21 3,902,760
10,000 Missouri Health & Educational Facilities Authority, Barnes-Jewish Inc/
Christian Health Services Ser 1993 A ........................... 5.25 05/15/14 9,802,100
6,000 New York State Medical Care Facilities Finance Agency, Presbyterian
Hospital -FHA Ins Mtge 1984 Ser A Refg ........................ 5.25 08/15/14 5,744,760
10,000 Charlotte-Mecklenburg County Hospital Authority, North Carolina,
Ser 1992 ....................................................... 6.00 01/01/22 10,172,000
5,000 University of North Carolina, Hospitals at Chapel Hill Ser 1996 . 5.00 02/15/29 4,530,000
4,000 Cuyahoga County, Ohio, The Cleveland Clinic Foundation Refg Ser
1988 A ......................................................... 8.00 12/01/15 4,115,200
5,000 North Central Texas Health Facilities Development Corporation,
University Medical Center Inc. Ser. 1997 (FSA).................. 5.45 04/01/15 4,920,250
10,000 Fredericksburg Industrial Development Authority, Virginia, Medicorp
Health Refg Ser 1996 (AMBAC) ................................... 5.25 06/15/16 9,605,400
- ------------ --------------
73,200 73,278,050
- ------------ --------------
Industrial Development/Pollution Control Revenue (6.3%)
1,450 Maryland Industrial Development Financing Authority, Medical
Waste Assocs LP 1989 Ser (AMT) ................................ 8.75 11/15/10 1,465,240
17,000 Claiborne County, Mississippi, Middle South Energy Inc Ser C .... 9.875 12/01/14 18,504,500
10,000 Clark County, Nevada, Nevada Power Co Ser 1992 A (AMT) (FGIC) ... 6.70 06/01/22 10,766,900
5,000 Washoe County, Nevada, Sierra Pacific Power Co Ser 1987 (AMBAC) . 6.30 12/01/14 5,381,600
5,000 Alliance Airport Authority, Texas, AMR Corp Ser 1990 (AMT) ...... 7.50 12/01/29 5,393,550
10,000 Dallas-Fort Worth International Airport Facility Improvement
Corporation, Texas, American Airlines Inc Ser 1995 ............. 6.00 11/01/14 10,089,500
7,000 Matagorda County Navigation District #1, Texas, Central Power &
Light Co Collateralized Ser 1984 A ............................. 7.50 12/15/14 7,662,620
10,000 Weston, Wisconsin, Wisconsin Public Service Corp Refg Ser 1993
A .............................................................. 6.90 02/01/13 11,047,900
- ------------ --------------
65,450 70,311,810
- ------------ --------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS June 30, 1997 (unaudited) continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
-----------------------------------------------------------------------------------------------------------------
Mortgage Revenue -Multi-Family (2.3%)
$ 7,000 Michigan Housing Development Authority, Rental Ser A (Bifurcated
FSA) ........................................................... 6.50 % 04/01/23 $ 7,265,020
9,000 New Jersey Housing & Mortgage Finance Agency, 1995 Ser A
(AMBAC) ........................................................ 6.05 11/01/20 9,199,890
New York City Housing Development Corporation, New York,
4,476 Ruppert Proj -FHA Ins Sec 223F ................................. 6.50 11/15/18 4,634,438
4,333 Stevenson Commons Proj -FHA Ins Sec 223F ...................... 6.50 05/15/18 4,459,101
- ------------ --------------
24,809 25,558,449
- ------------ --------------
Mortgage Revenue -Single Family (6.5%)
5,000 Alaska Housing Finance Corporation, Governmental 1995 Ser A
(MBIA) ......................................................... 5.875 12/01/24 4,996,349
2,440 California Housing Finance Agency, Home Cap Apprec 1983 Ser B ... 0.00 08/01/15 377,444
12,100 Illinois Housing Development Authority, Residential 1991 Ser C
(AMT) .......................................................... 6.875 02/01/18 12,594,406
3,975 Missouri Housing Development Commission, Homeownership GNMA-FNMA
1996 Ser C (AMT) .............................................. 7.45 09/01/27 4,395,873
6,000 Nebraska Investment Finance Authority, GNMA-Backed 1990 Ser
(AMT) .......................................................... 7.631 09/10/30 6,341,880
4,010 North Carolina Housing Finance Agency, Ser Q (AMT) .............. 8.00 03/01/18 4,269,367
6,400 Ohio Housing Finance Agency, GNMA-Backed 1990 Ser A (AMT) ....... 6.903 03/01/31 6,696,640
10,000 Pennsylvania Housing Finance Agency, Ser 1991-31 (AMT) .......... 7.00 10/01/23 10,481,400
Tennessee Housing Development Agency,
11,000 Mortgage Finance 1993 Ser A .................................... 5.95 07/01/28 11,069,520
4,000 Mortgage Finance 1993 Ser A .................................... 5.90 07/01/18 4,025,320
6,800 Wisconsin Housing & Economic Development Authority, Home
Ownership 1991 Ser (AMT) ....................................... 7.097 10/25/22 7,154,008
- ------------ --------------
71,725 72,402,207
- ------------ --------------
Public Facilities Revenue (2.0%)
5,000 Palm Beach County, Florida, Criminal Justice Ser 1990 (FGIC) .... 6.00 06/01/13 5,090,550
5,000 Michigan Building Authority, 1993 Refg Ser I (AMBAC) ............ 5.30 10/01/16 4,801,400
6,000 Saint Louis Industrial Development Authority, Missouri, Kiel
Center Refg Ser 1992 (AMT) ..................................... 7.75 12/01/13 6,439,740
5,000 Ohio Building Authority, Correctional 1985 Ser C BIGS ........... 9.75 10/01/05 6,593,200
- ------------ --------------
21,000 22,924,890
- ------------ --------------
Resource Recovery Revenue (3.8%)
Connecticut Resources Recovery Authority,
9,000 American REF-FUEL Co of Southeastern Connecticut 1988 Ser A ... 8.00 11/15/15 9,643,680
4,950 Bridgeport RESCO Ser A ......................................... 7.625 01/01/09 5,113,895
7,000 Savannah Resource Recovery Development Authority, Georgia,
Savannah Energy Systems Co Ser 1992 ............................ 6.30 12/01/06 7,397,390
10,000 Northeast Maryland Waste Disposal Authority, Montgomery County
Ser 1993 A (AMT) ............................................... 6.30 07/01/16 10,284,300
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS June 30, 1997 (unaudited) continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
-----------------------------------------------------------------------------------------------------------------
$ 5,000 Onondaga County Resource Recovery Agency, New York, 1992 Ser
(AMT) .......................................................... 6.875% 05/01/06 $ 5,248,400
5,000 Fairfax County Economic Development Authority, Virginia, Ogden
Martin Systems of Fairfax Inc Ser 1998 A (AMT) ................ 7.75 02/01/11 5,344,600
- ------------ --------------
40,950 43,032,265
- ------------ --------------
Transportation Facilities Revenue (12.8%)
8,965 Mid-Bay Bridge Authority, Florida, Sr Lien Crossover Refg Ser
1993 A ......................................................... 6.00 10/01/13 9,056,891
Atlanta, Georgia,
5,000 Airport Refg Ser 1996 (AMBAC) .................................. 6.00 01/01/07 5,409,900
10,000 Airport Ser 1990 (AMT) ......................................... 6.25 01/01/21 10,337,600
8,100 Metropolitan Atlanta Rapid Transit Authority, Georgia, Sales Tax
Refg Ser K ..................................................... 7.25 07/01/10 8,486,451
5,000 Hawaii, Airports Second Ser 1991 (AMT) .......................... 7.00 07/01/18 5,361,600
Kentucky Turnpike Authority,
9,000 Economic Development Road Refg Ser 1995 (AMBAC) ................ 6.50 07/01/08 10,148,130
30,000 Resource Recovery Road 1987 Ser A .............................. 5.00 07/01/08 29,650,201
11,000 New Jersey Highway Authority, Sr Parkway Refg 1992 Ser .......... 6.25 01/01/14 11,696,850
6,595 Albuquerque, New Mexico, Airport Refg Ser 1997 (AMT) (AMBAC) .... 6.375 07/01/15 6,992,876
20,000 Ohio Turnpike Commission, 1996 Ser A (MBIA) ..................... 5.50 02/15/26 19,715,000
5,000 Pennsylvania Turnpike Commission, Ser L of 1991 (MBIA) .......... 6.00 06/01/15 5,132,200
10,000 Puerto Rico Highway & Transportation Authority, Refg Ser X ...... 5.50 07/01/15 9,921,000
8,000 Texas Turnpike Authority, Dallas North Tollway Refg Ser 1997
(FGIC) ......................................................... 5.25 01/01/23 7,632,640
4,000 Virginia Transportation Board, US Route 58 Corridor Ser 1993 B .. 5.625 05/15/13 4,013,600
- ------------ --------------
140,660 143,554,939
- ------------ --------------
Water & Sewer Revenue (8.2%)
10,000 Birmingham Water Works & Sewer Board, Alabama, Ser 1994 ......... 5.50 01/01/20 9,785,400
10,000 Phoenix Civic Improvement Corporation, Arizona, Jr Lien Water
Ser 1994 ....................................................... 5.45 07/01/19 9,911,400
10,000 California Department of Water Resources, Central Valley Refg
Ser L .......................................................... 5.50 12/01/23 9,714,800
10,000 East Bay Municipal Utility District, California, Water Refg Ser
1993 (MBIA) .................................................... 5.00 06/01/21 9,115,900
10,000 Los Angeles, California, Wastewater Ser 1994-A (MBIA) ........... 5.875 06/01/24 10,169,400
Massachusetts Water Resources Authority,
10,000 Refg 1992 Ser B ................................................ 5.50 11/01/15 9,818,100
10,000 1993 Ser C ..................................................... 5.25 12/01/15 9,701,000
10,000 1996 Ser A (FGIC) .............................................. 5.50 11/01/21 9,802,100
4,000 Detroit, Michigan, Sewage Refg Ser 1993-A (FGIC) ................ 5.70 07/01/13 4,068,320
5,000 New York City Municipal Water Finance Authority, New York, 1994
Ser B .......................................................... 5.30 06/15/06 5,097,350
5,000 Philadelphia, Pennsylvania, Water & Wastewater Ser 1993 (FSA) ... 5.50 06/15/15 4,943,700
- ------------ --------------
94,000 92,127,470
- ------------ --------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS June 30, 1997 (unaudited) continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
-----------------------------------------------------------------------------------------------------------------
Other Revenue (1.0%)
$3,500 Denver, Colorado, Excise Tax Ser 1985 A ......................... 5.00 % 11/01/08 $3,449,180
5,000 New York Local Government Assistance Corporation, Ser 1994 A .... 5.50 04/01/17 5,011,500
3,000 Houston, Texas, Sr Lien Hotel Occupancy Tax Refg Ser 1995 (FSA) . 5.50 07/01/11 3,016,920
- ------------ --------------
11,500 11,477,600
- ------------ --------------
Refunded (11.7%)
5,000 Central Coast Water Authority, California, Ser 1992 (AMBAC) ..... 6.60 10/01/02++ 5,615,150
9,000 Los Angeles Convention and Exhibition Center Authority,
California, Ser 1985 COPs ...................................... 9.00 12/01/05++ 11,782,170
6,000 Connecticut Health & Educational Facilities Authority, Yale-New
Haven Hospital Ser F (MBIA) .................................... 7.10 07/01/00++ 6,570,600
2,500 Mid-Bay Bridge Authority, Florida, Ser 1991 A (ETM) ............. 6.875 10/01/22 2,906,400
9,790 Metropolitan Pier & Exposition Authority, Illinois, McCormick Place
Ser 1992 A ..................................................... 6.50 06/15/03++ 10,926,032
8,000 Massachusetts, 1994 Ser C (FGIC) ................................ 6.75 11/01/04++ 9,090,640
14,000 New York State Dormitory Authority, Suffolk County Judicial Ser
1986 (ETM) ..................................................... 7.375 07/01/16 16,802,660
6,000 New York State Environmental Facilities Corporation, Huntington
1989 Ser A (AMT) ............................................... 7.50 10/01/99+++ 6,446,280
25,000 Intermountain Power Agency, Utah, Refg 1985 Ser H GAINS ......... 0.00 + 07/01/03++ 24,980,750
5,000 Salt Lake City, Utah, IHC Hospital Inc Ser 1983 (ETM) ........... 5.00 06/01/15 4,806,350
28,000 Fairfax County Industrial Development Authority, Virginia,
Fairfax Hospital System Inc/Inova Health Ser 1991 .............. 6.801 08/29/01++ 30,983,680
- ------------ --------------
118,290 130,910,712
- ------------ --------------
1,016,084 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $944,228,954) ....................... 1,015,983,431
- ------------ --------------
SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (7.8%)
17,800 Dade County Health Facilities Authority, Florida, Miami
Childrens Hospital
Ser 1990 (Demand 07/01/97) ..................................... 4.20 * 09/01/20 17,800,000
11,000 East Baton Rouge Parish, Louisiana, Exxon Corp Ser 1989
(Demand 07/01/97) .............................................. 4.10 * 11/01/19 11,000,000
25,900 Missouri Health & Educational Facilities Authority, Washington
University
Ser 1996 D (Demand 07/01/97) ................................... 4.10 * 02/01/30 25,900,000
23,100 Harris County Health Facilities Development Corporation, Texas,
Methodist Hospital Ser 1994 (Demand 07/01/97) .................. 4.15 * 12/01/25 23,100,000
9,410 Washington Health Care Facilities Authority, Fred Hutchinson
Cancer Center
Ser 1996 (Demand 07/01/97) ..................................... 4.10 * 01/01/23 9,410,000
- ------------ --------------
87,210 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (Identified Cost $87,210,000) ....... 87,210,000
- ------------ --------------
$1,103,294 TOTAL INVESTMENTS (Identified Cost $1,031,438,954) (a) ................... 98.3% 1,103,193,431
============
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ........................... 1.7 18,761,803
------------ --------------
NET ASSETS ............................................................... 100.0% $1,121,955,234
============ ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS June 30, 1997 (unaudited) continued
[FN]
- ------------
AMT Alternative Minimum Tax.
BIGS Bond Income Growth Security.
COPs Certificates of Participation.
ETM Escrowed to Maturity.
GAINS Growth and Income Security.
+ Zero coupon; will convert to 10.00% on July 1, 2000.
++ Prerefunded to call date shown.
+++ Refunded to call date shown by forward delivery contract.
* Current coupon of variable rate demand obligation.
(a) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$73,554,611 and the aggregate gross unrealized depreciation is
$1,800,134, resulting in a net unrealized appreciation of
$71,754,477.
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, 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Alabama 1.8% Louisiana 1.0% North Carolina 3.0%
Alaska 4.0 Maryland 1.1 Ohio 3.3
Arizona 3.2 Massachusetts 6.9 Pennsylvania 2.7
Arkansas 0.3 Michigan 1.4 Puerto Rico 1.3
California 5.1 Minnesota 0.8 South Carolina 1.4
Colorado 0.3 Mississippi 1.6 Tennessee 2.0
Connecticut 2.1 Missouri 4.1 Texas 7.6
Florida 3.1 Nebraska 0.6 Utah 3.5
Georgia 3.8 Nevada 1.8 Virginia 4.5
Hawaii 0.5 New Hampshire 1.3 Washington 4.1
Illinois 2.1 New Jersey 2.1 Wisconsin 1.6
Indiana 0.9 New Mexico 0.6 ------
Kentucky 3.6 New York 9.2 Total 98.3%
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 1997 (unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $1,031,438,954)............................ $1,103,193,431
Cash......................................................... 3,121,503
Receivable for:
Interest................................................... 15,966,001
Shares of beneficial interest sold......................... 1,024,875
Investment sold............................................ 27,921
Prepaid expenses and other assets............................ 58,886
--------------
TOTAL ASSETS............................................... 1,123,392,617
--------------
LIABILITIES:
Payable for:
Dividends to shareholders.................................. 665,159
Investment management fee.................................. 419,847
Shares of beneficial interest repurchased.................. 227,563
Accrued expenses ............................................ 124,814
--------------
TOTAL LIABILITIES.......................................... 1,437,383
--------------
NET ASSETS:
Paid-in-capital.............................................. 1,047,215,076
Net unrealized appreciation.................................. 71,754,477
Accumulated undistributed net investment income ............ 16,350
Accumulated undistributed net realized gain.................. 2,969,331
--------------
NET ASSETS................................................. $1,121,955,234
==============
NET ASSET VALUE PER SHARE,
95,208,514 shares outstanding (unlimited shares authorized
of
$.01 par value)............................................. $11.78
MAXIMUM OFFERING PRICE PER SHARE
(net asset value plus 4.17% of net asset value)* ........... $12.27
</TABLE>
- ------------
* On sales of $25,000 or more the offering price is reduced.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the six months ended June 30, 1997 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME......................... $33,641,367
-------------
EXPENSES
Investment management fee............... 2,484,801
Transfer agent fees and expenses ....... 188,661
Professional fees....................... 30,851
Shareholder reports and notices......... 29,077
Custodian fees.......................... 23,260
Registration fees....................... 21,662
Trustees' fees and expenses............. 7,978
Other................................... 17,116
-------------
TOTAL EXPENSES ....................... 2,803,406
LESS: EXPENSE OFFSET ................. (23,213)
-------------
NET EXPENSES.......................... 2,780,193
-------------
NET INVESTMENT INCOME................. 30,861,174
-------------
NET REALIZED AND UNREALIZED GAIN
(LOSS):
Net realized gain....................... 3,148,730
Net change in unrealized appreciation .. (2,230,347)
-------------
NET GAIN.............................. 918,383
-------------
NET INCREASE............................ $31,779,557
=============
</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
JUNE 30, 1997 DECEMBER 31, 1996
- ------------------------------------------------------ -------------- -----------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................. $ 30,861,174 $ 68,165,561
Net realized gain...................................... 3,148,730 2,959,135
Net change in unrealized appreciation.................. (2,230,347) (29,830,436)
-------------- -----------------
NET INCREASE ........................................ 31,779,557 41,294,260
-------------- -----------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income.................................. (30,844,824) (68,543,874)
Net realized gain...................................... (342,107) (8,374,759)
-------------- -----------------
TOTAL................................................ (31,186,931) (76,918,633)
-------------- -----------------
Net decrease from transactions in shares of beneficial
interest.............................................. (68,671,382) (99,650,138)
-------------- -----------------
NET DECREASE......................................... (68,078,756) (135,274,511)
NET ASSETS:
Beginning of period.................................... 1,190,033,990 1,325,308,501
-------------- -----------------
END OF PERIOD
(Including undistributed net investment of income of
$16,350 and $0, respectively) ....................... $1,121,955,234 $1,190,033,990
============== =================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 1997 (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.
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 1997 (unaudited) continued
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to its shareholders on the record date. The amount of
dividends and distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends
and distributions which exceed net investment income and net realized capital
gains for financial reporting purposes but not for tax purposes are reported
as dividends in excess of net investment income or distributions in excess of
net realized capital gains. To the extent they exceed net investment income
and net realized capital gains for tax purposes, they are reported as
distributions of paid-in-capital.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with Dean Witter InterCapital
Inc. (the "Investment Manager"), the Fund pays 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, 1997
aggregated $53,278,800 and $175,094,891, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Fund's transfer agent. At June 30, 1997, the Fund had transfer agent fees and
expenses payable of approximately $44,000.
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 1997 (unaudited) continued
The Fund has an unfunded noncontributory defined benefit pension plan
covering all independent Trustees of the Fund who will have served as
independent Trustees for at least five years at the time of retirement.
Benefits under this plan are based on years of service and compensation
during the last five years of service. Aggregate pension costs for the six
months ended June 30, 1997 included in Trustees' fees and expenses in the
Statement of Operations amounted to $1,208. At June 30, 1997, the Fund had an
accrued pension liability of $47,549 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, 1997, it received
approximately $357,000 in commissions from the sale of the Fund's shares.
Such commissions are deducted from the proceeds of the Fund's shares and are
not an expense of the Fund.
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, 1997 DECEMBER 31, 1996
----------------------------- ------------------------------
(UNAUDITED)
SHARES AMOUNT SHARES AMOUNT
------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Sold ...................................... 1,273,577 $ 13,065,247 3,179,464 $ 37,259,996
Reinvestment of dividends and distributions 1,268,200 16,660,932 3,684,669 43,078,883
------------- --------------- -------------- ---------------
2,541,777 29,726,179 6,864,133 80,338,879
Repurchased ............................... (8,416,824) (98,397,561) (15,389,992) (179,989,017)
------------- --------------- -------------- ---------------
Net decrease .............................. (5,875,047) $(68,671,382) (8,525,859) $ (99,650,138)
============= =============== ============== ===============
</TABLE>
5. FEDERAL INCOME TAX STATUS
Capital losses incurred after October 31 ("post-October" losses) within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. The Fund incurred and will elect to defer net capital losses of
approximately $146,000 during fiscal 1996.
As of December 31, 1996, the Fund had temporary book/tax differences
primarily attributable to post-October losses.
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 1997 (unaudited) continued
6. SUBSEQUENT EVENTS
On June 30, 1997, the Fund's Board of Trustees approved a proposal to adopt
a multiple class share structure. Through this arrangement, the Fund will offer
four classes of shares with various sales charges, ongoing fees and other
features. This conversion occurred on July 28, 1997.
On June 30, 1997, the Board of Trustees of the Fund and of Dean Witter
National Municipal Trust ("National Municipal") approved a reorganization
plan whereby National Municipal would be merged into the Fund. This plan is
subject to the consent of National Municipal shareholders. If approved, the
assets of National Municipal would be combined with those of the Fund and
shareholders of National Municipal would become shareholders of the Fund,
receiving shares equal to the value of their holdings in National Municipal.
<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 THE YEAR ENDED DECEMBER 31,
MONTHS ENDED ----------------------------------------------------
JUNE 30, 1997 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ... $11.77 $12.09 $11.01 $12.41 $11.88 $11.65
--------------- ---------- ---------- ---------- ---------- ---------
Net investment income .................. 0.32 0.65 0.67 0.70 0.77 0.79
Net realized and unrealized gain
(loss)................................. 0.01 (0.24) 1.19 (1.37) 0.54 0.23
--------------- ---------- ---------- ---------- ---------- ---------
Total from investment operations ....... 0.33 0.41 1.86 (0.67) 1.31 1.02
--------------- ---------- ---------- ---------- ---------- ---------
Less dividends and distributions from:
Net investment income.................. (0.32) (0.65) (0.67) (0.70) (0.77) (0.79)
Net realized gain...................... --* (0.08) (0.11) (0.03) (0.01) --
--------------- ---------- ---------- ---------- ---------- ---------
Total dividends and distributions ...... (0.32) (0.73) (0.78) (0.73) (0.78) (0.79)
--------------- ---------- ---------- ---------- ---------- ---------
Net asset value, end of period.......... $11.78 $11.77 $12.09 $11.01 $12.41 $11.88
=============== ========== ========== ========== ========== =========
TOTAL INVESTMENT RETURN+ ............... 2.79%(1) 3.61% 17.37% (5.55)% 11.23% 9.09%
RATIOS TO AVERAGE NET ASSETS:
Expenses................................ 0.49%(2) 0.48% 0.48% 0.47% 0.47% 0.49%
Net investment income................... 5.43%(2) 5.52% 5.76% 6.02% 6.23% 6.74%
SUPPLEMENTAL DATA:
Net assets, end of period, in millions . $1,122 $1,190 $1,325 $1,295 $1,582 $1,323
Portfolio turnover rate................. 5%(1) 18% 21% 16% 13% 4%
</TABLE>
- ------------
* The Fund paid a capital gain distribution of $0.004.
+ 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 DEAN WITTER
Edwin J. Garn TAX-EXEMPT
John R. Haire SECURITIES
Dr. Manuel H. Johnson TRUST
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
James F. Willison
Vice President
Joseph Arcieri
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, 1997
