<PAGE>
Registration File No. 2-66268
DEAN WITTER TAX-EXEMPT SECURITIES TRUST Two World Trade Center,
New York, New York 10048
LETTER TO THE SHAREHOLDERS December 31, 1996
DEAR SHAREHOLDER:
We are pleased to present the annual report on the operations of Dean Witter
Tax-Exempt Securities Trust for the year ended December 31, 1996.
After accelerating in the first half of 1996, domestic economic growth
moderated during the summer. Inflation remained under control despite full
employment and stronger growth in the fourth quarter. The need for a
tightening move by the Federal Reserve Board abated. Market confidence
improved under these conditions and fixed-income yields moved lower in the
second half of the year.
MUNICIPAL MARKET CONDITIONS
Long insured revenue bond yields rose from 5.40 percent in February to reach
6.15 percent in April and again in mid-June. Subsequently, demand for
municipal bonds improved and followed the trend of U.S. Treasury securities
to lower yields. By the end of December, insured bond yields stood at 5.60
percent. The yield curve pickup for extending maturities from 1 to 30 years
was 210 basis points.
The ratio of insured revenue bond yields to 30-year U.S. Treasury yields,
fell from 92 to 84 percent during the year. A declining ratio means that
municipal bond prices outperformed U.S. Treasury prices. The ratio's average
range for the past three years has been as low (rich) as 81 and as high
(cheap) as 92 percent. The relative improvement in municipals occurred when
flat-tax proposals failed to gain public support.
The municipal market achieved a balance between new-issue supply and maturing
securities in 1996. New-issue volume increased 14 percent to $183 billion.
Maturities and redemptions of older issues essentially matched underwriting
volume.
PERFORMANCE
Dean Witter Tax-Exempt Securities Trust's total return for the year ended
December 31, 1996 was 3.61 percent. The Fund's net asset value declined from
$12.09 to $11.77 per share. Tax-free dividends of $0.65 per share and taxable
long-term capital gains distributions of $0.08 per share were paid during the
period. Dividends from tax-exempt income gave the Fund a
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
LETTER TO THE SHAREHOLDERS, continued
positive total return. The trailing 30-day SEC yield and distribution yield
on December 31, 1996 were 4.69 percent and 5.22 percent, respectively.
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
GROWTH OF $10,000
DATE TOTAL LEHMAN IX LIPPER IX
==============================================================================
December 31, 1986 $ 9,600 $10,000 $10,000
==============================================================================
December 31, 1987 $ 9,462 $10,151 $ 9,932
==============================================================================
December 31, 1988 $10,693 $11,182 $11,090
==============================================================================
December 31, 1989 $11,828 $12,389 $12,195
==============================================================================
December 31, 1990 $12,520 $13,292 $12,926
==============================================================================
December 31, 1991 $14,111 $14,906 $14,483
==============================================================================
December 31, 1992 $15,394 $16,220 $15,772
- ------------------------------------------------------------------------------
December 31, 1993 $17,123 $18,212 $17,732
- ------------------------------------------------------------------------------
December 31, 1994 $16,172 $17,271 $16,661
- ------------------------------------------------------------------------------
December 31, 1995 $18,981 $20,286 $19,545
- ------------------------------------------------------------------------------
December 31, 1996 $19,667(3) $21,185 $20,190
==============================================================================
AVERAGE ANNUAL TOTAL RETURNS
1 YEAR 5 YEARS 10 YEARS
==========================================================
3.61(1) 6.86(1) 7.44(1)
----------------------------------------------------------
-0.53(2) 6.00(2) 7.00(2)
==========================================================
============================================================
Fund Lehman IX (4) Lipper IX (5)
------- ------- -------
============================================================
Past performance is not predictive of future returns.
- -----------------------------
(1) Figure shown assumes reinvestment of all distributions and does not reflect
the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and the deduction of
the maximum applicable front-end sales charge (4%). See the Fund's current
prospectus for complete details on fees and sales charges.
(3) Closing value, assuming a complete redemption on December 31, 1996.
(4) The Lehman Brothers Municipal Bond Index tracks the performance of
municipal bonds with maturities of 2 years or more and a minimum credit
rating of Baa or BBB, as measured by Moody's Investors Service, Inc. or
Standard & Poor's Corp. The Index does not include any expenses, fees, or
charges. The Index is unmanaged and should not be considered an investment.
(5) The Lipper General Municipal Debt Funds Index is an equally-weighted
performance index of the largest qualifying funds (based on net assets) in
the Lipper General Municipal Debt Funds objective. The Index, which is
adjusted for capital gains distributions and income dividends, is unmanaged
and should not be considered an investment. There are currently 30 funds
represented in this index.
Since its inception on March 27, 1980, the Fund has provided shareholders
with an average annual total return of 9.67 percent. The accompanying chart
illustrates the performance of a $10,000 investment in the Fund for the 10
years ended December 31, 1996, versus the performance of a similar
hypothetical investment in the issues that comprise the Lehman Brothers
Municipal Bond Index, as well as the performance of the Lipper Analytical
Services, Inc. General Municipal Debt Funds Index.
PORTFOLIO STRUCTURE
The Fund's net assets of $1.2 billion were diversified among 13 long-term
sectors and 104 credits. Cash and short-term investments were increased to a
range of 5 to 10 percent during 1996 in response to market volatility.
Portfolio sales shifted to more market sensitive issues. The sales of
discount and current-coupon issues exceeded sales of defensive, higher-coupon
bonds with shorter calls. New purchases focused on securities with 15-to
25-year maturities rather than 20-to 30-year maturities. Modest discount or
premium bonds with shorter durations were favored.
During the year the average maturity of the portfolio moved from 20 years to
17 years. The portfolio's distribution of older, shorter-call issues and
newer issues with longer call dates provided an average of 7 years of call
protection. Bonds with shorter than average call protection had book yields
in excess of 6 1/2 percent. The book yields of bonds with longer call
protection averaged less than 6 percent. The portfolio has continued to
maintain high-quality, with 70 percent of its long-term holdings rated double
"A" or better.
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
LETTER TO THE SHAREHOLDERS, continued
PORTFOLIO STRUCTURE, continued
(The chart below represents information which appears as a graphic in the
printed report)
The five largest sectors as of December 31, 1996 (% of net assets)
FIVE LARGEST SECTORS PERCENT
-------------------- --------
Transportation 13%
Electric 12%
General Obligation 11%
Refunded 10%
Water & Sewer 10%
All others 44%
Portfolio structure is subject to change
Also, a pie chart reflecting the credit ratings as of December 31, 1996
(% of Total Long-Term Portfolio)
CREDIT RATING PERCENT
------------- -------
Aaa or AAA 47%
Aa or AA 23%
A or A 18%
Baa or BBB 7%
Not Rated* 4%
Ba or BB 1%
As measured by Moody's Investors Service, Inc. or Standard & Poor's Corp.
* Not rated at time of purchase; deemed by investment manager to be
comparable to investment-grade securities.
Portfolio structure is subject to change
Also, a graph reflecting the call structure as of December 31, 1996
(% of Total Long-Term Portfolio)
YEARS BONDS CALLABLE PERCENT CALLABLE
-------------------- ----------------
1997 6%
1998 3%
1999 4%
2000 4%
2001 8%
2002 11%
2003 15%
2004 7%
2005 11%
2006 10%
2007-2011 13%
2012+ 8%
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
LETTER TO THE SHAREHOLDERS, continued
LOOKING AHEAD
With the collapse of flat-tax proposals, municipal bonds have improved
relative to U.S. Treasury securities. Tax-free bonds are currently near the
"rich" end of their average range versus Treasury yields. Under these
conditions, the Fund has accumulated an above average cash position and has
moved to shorter maturities. If municipals were to cheapen in the future, the
Fund would likely draw down some of its cash and extend maturities in seeking
opportunities to pick up income.
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 December 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TAX-EXEMPT MUNICIPAL BONDS (94.5%)
General Obligation (11.4%)
North Slope Borough, Alaska,
$ 5,000 Ser 1992 A Conv (MBIA) ........................................ 5.90 % 06/30/03 $ 5,358,450
15,000 Ser 1994 B (FSA) .............................................. 0.00 06/30/05 9,679,800
18,500 Ser 1995 A (MBIA) ............................................. 0.00 06/30/06 11,223,950
11,000 Ser 1996 B (MBIA) ............................................. 0.00 06/30/06 6,673,700
10,000 Ser 1996 B (MBIA) ............................................. 0.00 06/30/07 5,697,600
4,000 Connecticut, College Savings 1989 Ser A ........................ 0.00 07/01/08 2,209,080
Massachusetts,
20,000 Refg 1996 Ser A (AMBAC) ....................................... 6.00 11/01/10 21,480,800
10,000 Refg 1993 Ser A ............................................... 5.50 02/01/11 10,051,300
4,000 Clark County, Nevada, Transportation Ser 1992 A (AMBAC) ........ 6.50 06/01/17 4,518,640
New York City, New York,
10,000 1990 Ser D .................................................... 6.00 08/01/07 10,077,700
10,000 1990 Ser D .................................................... 6.00 08/01/08 10,053,900
10,000 Pennsylvania, First Ser 1995 (FGIC) ............................ 5.50 05/01/12 10,074,700
7,500 Shelby County, Tennessee, Refg 1995 Ser A ...................... 5.625 04/01/14 7,610,025
20,120 King County, Washington, Ltd Tax 1995 (MBIA) ................... 6.00 01/01/23 20,632,255
- ------------ --------------
155,120 135,341,900
- ------------ --------------
Educational Facilities Revenue (5.4%)
10,000 Indiana University, Student Fee Ser K (MBIA) ................... 5.875 08/01/20 10,089,600
7,000 Massachusetts Health & Educational Facilities Authority, Boston
University Ser 1991 (MBIA) .................................... 6.66 10/01/31 7,524,650
15,000 New Hampshire Higher Educational & Health Facilities Authority,
Dartmouth College Ser 1993 .................................... 5.375 06/01/23 14,239,800
2,000 New Jersey Development Authority, The Seeing Eye Inc 1991 ...... 7.30 04/01/11 2,100,380
New York State Dormitory Authority,
5,000 State University Ser 1989 B ................................... 0.00 05/15/02 3,879,350
20,000 State University Ser 1990 B ................................... 7.00 05/15/16 21,422,400
5,000 Vermont Educational & Health Buildings Financing Agency,
Middlebury College Ser 1996 ................................... 5.375 11/01/26 4,795,450
- ------------ --------------
64,000 64,051,630
- ------------ --------------
Electric Revenue (11.7%)
25,000 Salt River Project Agricultural Improvement & Power District,
Arizona, Refg 1993 Ser C ...................................... 5.50 01/01/10 25,702,250
10,000 Sacramento Municipal Utility District, California, Refg 1994 Ser
I (MBIA) ...................................................... 5.75 01/01/15 10,104,900
10,000 Municipal Electric Authority of Georgia, Fifth Crossover Ser ... 6.50 01/01/17 10,922,200
8,000 New York State Power Authority, General Purpose Ser CC ......... 5.25 01/01/18 7,581,200
15,000 Puerto Rico Electric Power Authority, Power Ser O .............. 0.00 07/01/17 4,599,750
15,000 South Carolina Public Service Authority, 1995 Refg Ser A (AMBAC) 6.25 01/01/22 15,957,600
6,000 Austin, Texas, Combined Utilities Refg Ser 1993 A .............. 5.75 11/15/13 6,019,320
24,000 San Antonio, Texas, Electric & Gas Refg Ser 1994 C ............. 4.70 02/01/06 23,072,160
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS December 31, 1996, continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
Intermountain Power Agency, Utah,
$ 10,000 Refg 1996 Ser D ............................................... 5.00 % 07/01/21 $ 9,069,600
10,000 Refg 1997 Ser B (MBIA) (WI) ................................... 5.75 07/01/19 9,806,300
15,000 Washington Public Power System, Proj #2 Refg Ser 1994 A
(Secondary MBIA) .............................................. 6.00 07/01/07 16,061,850
- ------------ --------------
148,000 138,897,130
- ------------ --------------
Hospital Revenue (7.4%)
10,000 Birmingham -Carraway Special Care Facilities Financing
Authority, Alabama, Carraway Methodist Health Systems Ser 1995
A (Connie Lee) ................................................ 6.25 08/15/09 10,808,000
3,000 Baxter County, Arkansas, Baxter County Regional Hospital Inc
Impr & Refg Ser 1992 .......................................... 7.50 09/01/21 3,216,660
10,000 California Health Facilities Financing Authority, Kaiser
Permanente Ser 1985 ........................................... 5.55 08/15/25 9,544,900
1,500 Massachusetts Health & Educational Facilities Authority, Malden
Hospital - FHA Ins Mtge Ser A ................................. 5.00 08/01/16 1,343,580
Rochester, Minnesota,
5,000 Mayo Foundation/Mayo Medical Center Ser 1992 I ................ 5.75 11/15/21 4,999,600
3,700 Mayo Foundation/Mayo Medical Center Ser 1992 F ................ 6.25 11/15/21 3,870,274
10,000 Missouri Health & Educational Facilities Authority,
Barnes-Jewish Inc/Christian Health Services Ser 1993 A ........ 5.25 05/15/14 9,581,600
6,000 New York State Medical Care Facilities Finance Agency,
Presbyterian Hospital -FHA Ins Mtge 1984 Ser A Refg ........... 5.25 08/15/14 5,779,320
10,000 Charlotte-Mecklenburg County Hospital Authority, North Carolina,
Ser 1992 ...................................................... 6.00 01/01/22 10,136,700
5,000 University of North Carolina, Hospitals at Chapel Hill Ser 1996 5.00 02/15/29 4,486,600
4,000 Cuyahoga County, Ohio, The Cleveland Clinic Foundation Refg Ser
1988 A ........................................................ 8.00 12/01/15 4,156,680
5,000 North Central Texas Health Facilities Development Corporation,
University Medical Center Inc Ser 1997 (FSA) (WI) ............. 5.45 04/01/15 4,889,900
7,000 Fairfax County Industrial Development Authority, Virginia, Inova
Health System Foundation Refg Ser 1993 A ...................... 5.25 08/15/19 6,601,840
10,000 Fredericksburg Industrial Development Authority, Virginia,
Medicorp Health System Refg Ser 1996 (AMBAC) .................. 5.25 06/15/16 9,634,000
- ------------ --------------
90,200 89,049,654
- ------------ --------------
Industrial Development/Pollution Control Revenue (6.7%)
1,300 Jefferson County, Kentucky, Louisville Gas & Electric Co 1993
Ser B ......................................................... 5.625 08/15/19 1,289,223
1,450 Maryland Industrial Development Financing Authority, Medical
Waste Assocs LP 1989 Ser (AMT) ................................ 8.75 11/15/10 1,450,000
5,000 Becker, Minnesota, Northern States Power Co Ser A 1989 ......... 6.80 04/01/07 5,300,250
15,000 Claiborne County, Mississippi, Middle South Energy Inc Ser C ... 9.875 12/01/14 16,619,100
10,000 Clark County, Nevada, Nevada Power Co Ser 1992 A (AMT) (FGIC) .. 6.70 06/01/22 10,757,700
10,000 Washoe County, Nevada, Sierra Pacific Power Co Ser 1987 (AMBAC) 6.30 12/01/14 10,585,600
5,000 Alliance Airport Authority, Texas, AMR Corp Ser 1990 (AMT) ..... 7.50 12/01/29 5,355,400
10,000 Dallas-Fort Worth International Airport Facility Improvement
Corporation, Texas, American Airlines Inc Ser 1995 ............ 6.00 11/01/14 9,923,400
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS December 31, 1996, continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
$ 7,000 Matagorda County Navigation District #1, Texas, Central Power &
Light Co Collateralized Ser 1984 A ............................ 7.50 % 12/15/14 $ 7,718,830
10,000 Weston, Wisconsin, Wisconsin Public Service Corp Refg Ser 1993 A 6.90 02/01/13 10,991,400
- ------------ --------------
74,750 79,990,903
- ------------ --------------
Mortgage Revenue -Multi-Family (2.1%)
7,000 Michigan Housing Development Authority, Rental Ser A (Bifurcated
FSA) .......................................................... 6.50 04/01/23 7,253,050
9,000 New Jersey Housing & Mortgage Finance Agency, 1995 Ser A (AMBAC) 6.05 11/01/20 9,179,190
New York City Housing Developement Corporation, New York,
4,514 Ruppert Proj -FHA Ins Sec 223F ................................ 6.50 11/15/18 4,637,092
4,371 Stevenson Commons Proj -FHA Ins Sec 223F ...................... 6.50 05/15/18 4,463,777
- ------------ --------------
24,885 25,533,109
- ------------ --------------
Mortgage Revenue -Single Family (6.7%)
10,000 Alaska Housing Finance Corporation, Governmental 1995 Ser A
(MBIA) ........................................................ 5.875 12/01/24 9,965,400
2,440 California Housing Finance Agency, Home Cap Apprec 1983 Ser B .. 0.00 08/01/15 381,372
12,100 Illinois Housing Development Authority, Residential 1991 Ser C
(AMT) ......................................................... 6.875 02/01/18 12,554,355
4,000 Missouri Housing Development Commission, Homeownership GNMA/FNMA
1996 Ser C (AMT) .............................................. 7.45 09/01/27 4,419,760
6,900 Nebraska Investment Finance Authority, GNMA-Backed 1990 Ser
(AMT) ......................................................... 7.631 09/10/30 7,305,306
4,010 North Carolina Housing Finance Agency, Ser Q (AMT) ............. 8.00 03/01/18 4,275,783
6,950 Ohio Housing Finance Agency, GNMA-Backed 1990 Ser A (AMT) ...... 6.903 03/01/31 7,285,824
10,000 Pennsylvania Housing Finance Agency, Ser 1991-31 (AMT) ......... 7.00 10/01/23 10,541,100
Tennessee Housing Development Agency,
4,000 Mortgage Finance 1993 Ser A ................................... 5.90 07/01/18 4,031,880
11,000 Mortgage Finance 1993 Ser A ................................... 5.95 07/01/28 11,065,560
7,600 Wisconsin Housing & Economic Development Authority, Home
Ownership 1991 Ser (AMT) ...................................... 7.097 10/25/22 7,965,864
- ------------ --------------
79,000 79,792,204
- ------------ --------------
Public Facilities Revenue (2.3%)
5,000 Palm Beach County, Florida, Criminal Justice Ser 1990 (FGIC) ... 6.00 06/01/13 5,092,200
10,000 Michigan Building Authority, 1993 Refg Ser I (AMBAC) ........... 5.30 10/01/16 9,494,500
6,000 Saint Louis Industrial Development Authority, Missouri, Kiel
Center Refg Ser 1992 (AMT) .................................... 7.75 12/01/13 6,423,540
5,000 Ohio Building Authority, Correctional 1985 Ser C BIGS .......... 9.75 10/01/05 6,619,750
- ------------ --------------
26,000 27,629,990
- ------------ --------------
Resource Recovery Revenue (5.8%)
Connecticut Resources Recovery Authority,
9,000 American REF-FUEL Co of Southeastern Connecticut 1988 Ser A
(AMT) ......................................................... 8.00 11/15/15 9,720,540
4,950 Bridgeport RESCO Ser A ........................................ 7.625 01/01/09 5,107,707
7,000 Savannah Resource Recovery Development Authority, Georgia,
Savannah Energy Systems Co Ser 1992 ........................... 6.30 12/01/06 7,385,210
10,000 Northeast Maryland Waste Disposal Authority, Montgomery County
Ser 1993 A (AMT) .............................................. 6.30 07/01/16 10,197,500
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS December 31, 1996, continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
$ 9,000 Mercer County Improvement Authority, New Jersey, Refg Ser A 1992
(AMT) (FGIC) .................................................. 6.70 % 04/01/13 $ 9,009,990
10,000 Hempstead Industrial Development Agency, New York, 1985 American
REF-FUEL Co of Hempstead ...................................... 7.40 12/01/10 10,250,000
6,000 New York State Environmental Facilities Corporation, Huntington
1989 Ser A (AMT) .............................................. 7.50 10/01/12 6,344,220
5,000 Onondaga County Resource Recovery Agency, New York, 1992 Ser
(AMT) ......................................................... 6.875 05/01/06 5,219,800
5,000 Fairfax County Economic Development Authority, Virginia, Ogden
Martin Systems of Fairfax Inc Ser 1988 A (AMT) ................ 7.75 02/01/11 5,387,800
- ------------ --------------
65,950 68,622,767
- ------------ --------------
Transportation Facilities Revenue (12.5%)
8,965 Mid-Bay Bridge Authority, Florida, Sr Lien Crossover Refg Ser
1993 A ........................................................ 6.00 10/01/13 8,954,601
Atlanta, Georgia,
5,000 Airport Refg Ser 1996 (AMBAC) ................................. 6.00 01/01/07 5,393,800
10,000 Airport Ser 1990 (AMT) ........................................ 6.25 01/01/21 10,281,300
8,100 Metropolitan Atlanta Rapid Transit Authority, Georgia, Sales Tax
Refg Ser K .................................................... 7.25 07/01/10 8,574,822
5,000 Hawaii, Airports Second Ser 1991 (AMT) ......................... 7.00 07/01/18 5,365,450
Kentucky Turnpike Authority,
9,000 Economic Development Road Refg Ser 1995 (AMBAC) ............... 6.50 07/01/08 10,153,080
30,000 Resource Recovery Road Refg 1987 Ser A ........................ 5.00 07/01/08 29,232,300
11,000 New Jersey Highway Authority, Sr Parkway Refg 1992 Ser ......... 6.25 01/01/14 11,532,510
6,595 Albuquerque, New Mexico, Airport Refg Ser 1997 (AMT) (AMBAC)
(WI) .......................................................... 6.375 07/01/15 6,955,878
Ohio Turnpike Commission,
4,000 1994 Ser A .................................................... 5.75 02/15/24 3,988,800
20,000 1996 Ser A (MBIA) ............................................. 5.50 02/15/26 19,656,600
5,000 Pennsylvania Turnpike Commission, Ser L of 1991 (MBIA) ......... 6.00 06/01/15 5,141,500
10,000 Puerto Rico Highway & Transportation Authority, Refg Ser X ..... 5.50 07/01/15 9,931,200
10,000 Texas Turnpike Authority, Dallas North Tollway Refg Ser 1997
(FGIC) ........................................................ 5.25 01/01/23 9,550,000
4,000 Virginia Transportation Board, US Route 58 Corridor Ser 1993 B . 5.625 05/15/13 4,008,960
- ------------ --------------
146,660 148,720,801
- ------------ --------------
Water & Sewer Revenue (9.7%)
10,000 Birmingham Water Works & Sewer Board, Alabama, Ser 1994 ........ 5.50 01/01/20 9,935,500
10,000 Phoenix Civic Improvement Corporation, Arizona, Jr Lien Water
Ser 1994 ...................................................... 5.45 07/01/19 9,734,700
10,000 California Department of Water Resources, Central Valley Refg
Ser L ......................................................... 5.50 12/01/23 9,766,200
10,000 East Bay Municipal Utility District, California, Water Refg Ser
1993 (MBIA) ................................................... 5.00 06/01/21 9,131,900
10,000 Los Angeles, California, Wastewater Ser 1994-A (MBIA) .......... 5.875 06/01/24 10,198,600
10,000 Dade County, Florida, Water & Sewer Ser 1995 (FGIC) ............ 5.50 10/01/25 9,814,900
5,000 Rockdale County Water & Sewerage Authority, Georgia, Ser 1996
(FSA) ......................................................... 5.00 07/01/22 4,659,400
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS December 31, 1996, continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
Massachusetts Water Resources Authority,
$ 10,000 Refg 1992 Ser B ............................................... 5.50 % 11/01/15 $ 9,747,500
10,000 1993 Ser C .................................................... 5.25 12/01/15 9,707,800
10,000 1996 Ser A (FGIC) ............................................. 5.50 11/01/21 9,826,400
4,000 Detroit, Michigan, Sewage Refg Ser 1993-A (FGIC) ............... 5.70 07/01/13 4,040,240
8,500 New York City Municipal Water Finance Authority, New York, 1994
Ser B ......................................................... 5.30 06/15/06 8,592,055
10,000 Philadelphia, Pennsylvania, Water & Wastewater Ser 1993 (FSA) .. 5.50 06/15/15 9,773,200
- ------------ --------------
117,500 114,928,395
- ------------ --------------
Other Revenue (2.4%)
3,500 Denver, Colorado, Excise Tax Ser 1985 A ........................ 5.00 11/01/08 3,414,320
New York Local Government Assistance Corporation,
5,000 Ser 1993 C Refg ............................................... 5.375 04/01/14 4,881,500
10,000 Ser 1994 A .................................................... 5.50 04/01/17 9,987,000
5,000 Ser 1995 A .................................................... 6.00 04/01/24 5,106,900
5,000 Houston, Texas, Sr Lien Hotel Occupancy Tax Refg Ser 1995 (FSA) 5.50 07/01/11 5,011,000
- ------------ --------------
28,500 28,400,720
- ------------ --------------
Refunded (10.4%)
5,000 Central Coast Water Authority, California, Ser 1992 (AMBAC) .... 6.60 10/01/02++ 5,647,550
9,000 Los Angeles Convention & Exhibition Center Authority,
California, Ser 1985 COPs ..................................... 9.00 12/01/05++ 11,869,290
6,000 Connecticut Health & Educational Facilities Authority, Yale-New
Haven Hospital Ser F (MBIA) ................................... 7.10 07/01/00++ 6,633,600
2,500 Mid-Bay Bridge Authority, Florida, Ser 1991 A (ETM) ............ 6.875 10/01/22 2,854,200
9,790 Metropolitan Pier & Exposition Authority, Illinois, McCormick
Place Ser 1992 A .............................................. 6.50 06/15/03++ 10,994,366
8,000 Massachusetts, 1994 Ser C (FGIC) ............................... 6.75 11/01/04++ 9,164,640
14,000 New York State Dormitory Authority, Suffolk County Judicial Ser
1986 (ETM) .................................................... 7.375 07/01/16 16,952,460
25,000 Intermountain Power Agency, Utah, Refg 1985 Ser H (GAINS) ...... 0.00 + 07/01/03++ 24,159,500
5,000 Salt Lake City, Utah, IHC Hospital Inc Ser of 1983 (ETM) ....... 5.00 06/01/15 4,835,050
28,000 Fairfax County Industrial Development Authority, Virginia,
Fairfax Hospital System Inc/Inova Health Ser 1991 ............. 6.801 08/15/01++ 30,990,680
- ------------ --------------
112,290 124,101,336
- ------------ --------------
1,132,855 TOTAL TAX-EXEMPT MUNICIPAL BONDS
(Identified Cost $1,051,723,235) .................................................... 1,125,060,539
- ------------ --------------
SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (6.1%)
9,700 Dade County Health Facilities Authority, Florida, Miami
Childrens Hospital Ser 1990 (Demand 01/02/97) ................. 5.05* 09/01/20 9,700,000
13,900 Hapeville Development Authority, Georgia, Hapeville Hotel Ltd
Ser 1985 (Demand 01/02/97) ....//.............................. 5.00* 11/01/15 13,900,000
8,700 University of Michigan, Hospital Ser 1995 A (Demand 01/02/97) .. 5.10* 12/01/19 8,700,000
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS December 31, 1996, continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
$ 18,900 Missouri Health & Educational Facilities Authority, Washington
University Ser 1996 D (Demand 01/02/97) ....................... 4.75*% 02/01/30 $ 18,900,000
9,000 North Central Texas Health Facilities Development Corporation,
University Medical Center Inc Ser 1987 ........................ 7.75 04/01/97++ 9,294,570
11,600 Kemmerer, Wyoming, Exxon Corp Ser 1984 (Demand 01/02/97) ....... 5.10* 11/01/14 11,600,000
- ------------ --------------
71,800 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS
- ------------
(Identified Cost $71,447,050) ....................................................... 72,094,570
--------------
$1,204,655 TOTAL INVESTMENTS (Identified Cost $1,123,170,285) (a) .................. 100.6% 1,197,155,109
============
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS .......................... (0.6) (7,121,119)
----- --------------
NET ASSETS .............................................................. 100.0% $1,190,033,990
===== ==============
</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 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 is
$77,142,347 and the aggregate gross unrealized depreciation is
$3,157,523, resulting in net unrealized appreciation of
$73,984,824.
Bond Insurance:
AMBAC AMBAC Indemnity Corporation.
Connie Lee Connie Lee Insurance Company.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Company.
MBIA Municipal Bond Investors Assurance Corporation.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS December 31, 1996, continued
Geographic Summary of Investments
Based on Market Value as a Percent of Net Assets
December 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Alabama 1.7%
Alaska 4.1
Arizona 3.0
Arkansas 0.3
California 5.6
Colorado 0.3
Connecticut 2.0
Florida 3.1
Georgia 5.1
Hawaii 0.4
Illinois 2.0
Indiana 0.8
Kentucky 3.4
Maryland 1.0%
Massachusetts 6.6
Michigan 2.5
Minnesota 1.2
Mississippi 1.4
Missouri 3.3
Nebraska 0.6
Nevada 2.2
New Hampshire 1.2
New Jersey 2.7
New Mexico 0.6
New York 11.4
North Carolina 1.6
Ohio 3.5%
Pennsylvania 3.0
Puerto Rico 1.2
South Carolina 1.3
Tennessee 1.9
Texas 6.8
Utah 4.0
Vermont 0.4
Virginia 4.7
Washington 3.1
Wisconsin 1.6
Wyoming 1.0
-------
Total 100.6%
=======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $1,123,170,285) ..................................... $1,197,155,109
Cash .................................................................. 887,063
Receivable for:
Interest ............................................................ 17,424,216
Shares of beneficial interest sold .................................. 244,066
Prepaid expenses and other assets ..................................... 27,394
--------------
TOTAL ASSETS ........................................................ 1,215,737,848
--------------
LIABILITIES:
Payable for:
Investments purchased ............................................... 20,777,892
Dividends and distributions ......................................... 3,724,283
Shares of beneficial interest repurchased ........................... 596,522
Investment management fee ........................................... 452,931
Accrued expenses ...................................................... 152,230
--------------
TOTAL LIABILITIES ................................................... 25,703,858
--------------
NET ASSETS:
Paid-in-capital ....................................................... 1,115,886,458
Net unrealized appreciation ........................................... 73,984,824
Accumulated undistributed net realized gain ........................... 162,708
--------------
NET ASSETS .......................................................... $1,190,033,990
==============
NET ASSET VALUE PER SHARE,
101,083,561 shares outstanding (unlimited shares authorized of $.01
par value) ........................................................... $ 11.77
==============
MAXIMUM OFFERING PRICE PER SHARE
(net asset value plus 4.17% of net asset value)* ..................... $ 12.26
==============
</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 YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ........................ $ 74,093,062
--------------
EXPENSES
Investment management fee .............. 5,320,578
Transfer agent fees and expenses ...... 387,764
Shareholder reports and notices ....... 62,672
Custodian fees ......................... 52,615
Professional fees ...................... 52,404
Registration fees ...................... 46,458
Trustees' fees and expenses ............ 15,285
Other .................................. 30,574
--------------
TOTAL EXPENSES ....................... 5,968,350
LESS: EXPENSE OFFSET ................ (40,849)
--------------
NET EXPENSES ......................... 5,927,501
--------------
NET INVESTMENT INCOME ................ 68,165,561
--------------
NET REALIZED AND UNREALIZED GAIN
(LOSS):
Net realized gain ...................... 2,959,135
Net change in unrealized appreciation . (29,830,436)
--------------
NET LOSS ............................. (26,871,301)
--------------
NET INCREASE ........................... $ 41,294,260
==============
</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 YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................. $ 68,165,561 $ 76,135,601
Net realized gain ..................................... 2,959,135 17,721,238
Net change in unrealized appreciation/depreciation ... (29,830,436) 117,785,387
----------------- -----------------
NET INCREASE ........................................ 41,294,260 211,642,226
----------------- -----------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income ................................. (68,543,874) (75,983,289)
Net realized gain ..................................... (8,374,759) (12,426,304)
----------------- -----------------
TOTAL ............................................... (76,918,633) (88,409,593)
----------------- -----------------
Net decrease from transactions in shares of beneficial
interest ............................................. (99,650,138) (93,207,593)
----------------- -----------------
NET INCREASE (DECREASE) ............................. (135,274,511) 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
$0 and $378,313, respectively) ...................... $1,190,033,990 $1,325,308,501
================= =================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS December 31, 1996
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 December 31, 1996, 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 year ended December 31, 1996
aggregated $215,642,138 and $383,666,566, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Fund's transfer agent. At December 31, 1996, the Fund had transfer agent fees
and expenses payable of approximately $52,400.
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 December 31, 1996, 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 year ended December 31, 1996 included in Trustees' fees and expenses
in the Statement of Operations amounted to $837. At December 31, 1996, the
Fund had an accrued pension liability of $48,696 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 year ended December 31, 1996, it received
approximately $1,050,000 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 YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Sold 3,179,464 $ 37,259,996 3,469,058 $ 40,446,608
Reinvestment of dividends and distributions 3,684,669 43,078,883 4,260,271 50,182,467
-------------- --------------- -------------- ---------------
6,864,133 80,338,879 7,729,329 90,629,075
Repurchased (15,389,992) (179,989,017) (15,722,604) (183,836,668)
-------------- --------------- -------------- ---------------
Net decrease (8,525,859) $ (99,650,138) (7,993,275) $ (93,207,593)
============== =============== ============== ===============
</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
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- --------- -------- --------
<S> <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
-------- -------- --------- -------- --------
Net investment income .... 0.65 0.67 0.70 0.77 0.79
Net realized and
unrealized gain (loss) .. (0.24) 1.19 (1.37) 0.54 0.23
-------- -------- --------- -------- --------
Total from investment
operations .............. 0.41 1.86 (0.67) 1.31 1.02
-------- -------- --------- -------- --------
Less dividends and
distributions from:
Net investment income ... (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 ........... (0.73) (0.78) (0.73) (0.78) (0.79)
-------- -------- --------- -------- --------
Net asset value,
end of period ............ $11.77 $12.09 $11.01 $12.41 $11.88
======== ======== ========= ======== ========
TOTAL INVESTMENT RETURN+ 3.61% 17.37% (5.55)% 11.23% 9.09%
RATIOS TO
AVERAGE NET ASSETS:
Expenses .................. 0.48% 0.48% 0.47% 0.47% 0.49%
Net investment income .... 5.52% 5.76% 6.02% 6.23% 6.74%
SUPPLEMENTAL DATA:
Net assets, end of period,
in millions ............. $1,190 $1,325 $1,295 $1,582 $1,323
Portfolio turnover rate .. 18% 21% 16% 13% 4%
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
1991 1990 1989 1988 1987
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE
OPERATING PERFORMANCE:
Net asset value,
beginning of period ...... $11.09 $11.28 $10.96 $10.45 $11.50
-------- -------- -------- -------- ---------
Net investment income .... 0.80 0.80 0.81 0.81 0.80
Net realized and
unrealized gain (loss) .. 0.56 (0.18) 0.32 0.51 (0.97)
-------- -------- -------- -------- ---------
Total from investment
operations .............. 1.36 0.62 1.13 1.32 (0.17)
-------- -------- -------- -------- ---------
Less dividends and
distributions from:
Net investment income ... (0.80) (0.81) (0.81) (0.81) (0.83)
Net realized gain ........ -- -- -- -- (0.05)
-------- -------- -------- -------- ---------
Total dividends and
distributions ........... (0.80) (0.81) (0.81) (0.81) (0.88)
-------- -------- -------- -------- ---------
Net asset value,
end of period ............ $11.65 $11.09 $11.28 $10.96 $10.45
======== ======== ======== ======== =========
TOTAL INVESTMENT RETURN+ 12.71% 5.86% 10.61% 13.02% (1.44)%
RATIOS TO
AVERAGE NET ASSETS:
Expenses .................. 0.51% 0.51% 0.51% 0.54% 0.52%
Net investment income .... 7.05% 7.25% 7.31% 7.51% 7.42%
SUPPLEMENTAL DATA:
Net assets, end of period,
in millions ............. $1,145 $1,010 $1,033 $908 $896
Portfolio turnover rate .. 10% 19% 13% 17% 37%
</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.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER TAX-EXEMPT SECURITIES TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF DEAN WITTER TAX-EXEMPT SECURITIES TRUST
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Dean Witter
Tax-Exempt Securities Trust (the "Fund") at December 31, 1996, the results of
its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended and the financial highlights
for each of the ten years in the period then ended, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at
December 31, 1996 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
February 10, 1997
1996 FEDERAL TAX NOTICE (unaudited)
During the year ended December 31, 1996, the Fund paid to the
shareholders $0.65 per share from net investment income. All of the
Fund's dividends from net investment income were exempt interest
dividends, excludable from gross income for Federal income tax
purposes. For the year ended December 31, 1996, the Fund paid to
shareholders $0.08 per share from long-term capital gains.
<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
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.
ANNUAL REPORT
DECEMBER 31, 1996
