<PAGE>
DEAN WITTER FEDERAL SECURITIES TRUST
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- - - - - - --------------------------------------------------------------------------------
When Dean Witter Federal Securities Trust's new fiscal year began in
November 1993, interest rates were at 20-year lows. Shortly thereafter, rates
began to rise as signs of substantial economic strength and heightened
inflationary expectations became apparent. At the same time, consumer spending
increased as mortgage refinancings generated increased disposable income. This
scenario induced the Federal Reserve Board to change its stance on monetary
policy by raising the federal-funds rate--the interest rate banks charge each
other for overnight loans--from 3.00 percent to 3.75 percent in three separate
moves starting in early February 1994. (Subsequent to the period under review,
the Federal Reserve Board initiated another round of tightening with a 50 basis
point increase in both the federal-funds rate and the discount rate--the
interest rate the Federal Reserve charges member banks for loans.) These
increases represented the first time in several years the central bank had acted
on short-term interest rates. Although these moves were presented as a series of
"preemptive" strikes in a war against potential inflationary pressure, the
markets interpreted the moves as the beginning of a trend toward higher interest
rates. The markets reacted immediately with both stock and bond prices tumbling.
By April, interest rates on intermediate- and long-term U.S. Treasury securities
were higher by 1.25 to 1.75 percentage points compared to October 31, 1993
levels. U.S. Treasury bonds due in 30 years were yielding 7.31 percent at the
end of April, versus 5.97 percent six months earlier.
PERFORMANCE AND PORTFOLIO STRUCTURE
In a sharply rising interest rate environment, Dean Witter Federal
Securities Trust declined by 6.24 percent for the six-month period ended April
30, 1994. This includes income distributions of $0.31 per share and a change in
net asset value from $10.03 per share on October 29, 1993 (the final business
day of the month) to $9.11 per share. Despite this decrease, the Fund
substantially outperformed the benchmark 30-year U.S. Treasury bond, which
declined by 12.80 percent on a total return basis.
As of April 30, 1994, the portfolio was well-diversified across the
maturity spectrum. Approximately 13 percent of the portfolio was invested in
U.S. Treasury bonds maturing in 20 to 30 years, 60 percent in U.S Treasury
issues maturing in 7 to 20 years, and 4 percent in U.S. Treasury issues maturing
in 1 to 7 years. For added income, 22 percent of the portfolio was invested in
U.S. Government and agency mortgage pass-through certificates, primarily Freddie
Macs. The remaining 1 percent was invested in high-grade short-term investments.
As of April 30, 1994, the Fund's net assets were in excess of $958 million.
<PAGE>
LOOKING AHEAD
For the balance of 1994 we expect the economy to continue to slow vis-a-vis
the rapid pace of 1993's fourth quarter. This should occur as the 1993 tax hike
and higher interest rates take their toll. The general concern over health care
reform and its effect on U.S. industry should also contribute to this scenario.
Although the markets have reacted negatively to heightened concerns over new
inflationary pressure, we believe 1994 will be a year of stable inflation of
approximately three percent. This would enable the Fund to continue to provide
an attractive income stream and competitive total return.
We appreciate your support of Dean Witter Federal Securities Trust and look
forward to continuing to serve your investment objectives in the months and
years to come.
Very truly yours,
/S/ C. Fiumefreddo
Charles A. Fiumefreddo
Chairman of the Board
<PAGE>
<TABLE>
DEAN WITTER FEDERAL SECURITIES TRUST
PORTFOLIO OF INVESTMENTS APRIL 30, 1994 (UNAUDITED)
- - - - - - --------------------------------------------------------------------------------
<CAPTION>
Principal
Amount Coupon Maturity
(in thousands) Rate Dates Value
-------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS (76.6%)
U.S. TREASURY BONDS (68.7%)
$20,000+ ........... 9.875% 11/15/12 $ 25,100,000
30,000+ ........... 10.375 11/15/12 37,593,750
235,600+ ........... 12.00 8/15/13 330,502,625
50,000 ............ 12.50 8/15/14 73,125,000
15,000 ............ 13.25 5/15/14 22,921,875
110,000 ............ 14.00 11/15/11 169,778,125
------------
659,021,375
------------
U.S. TREASURY NOTES (7.6%)
20,000 ............. 4.75 2/15/97 19,315,625
25,000 ............. 5.00 1/31/99 23,375,000
29,000 ............. 9.50 10/15/94 29,629,844
------------
72,320,469
------------
U.S. TREASURY BILLS (a) (0.3%)
3,000 .............. 3.58 6/4/94 2,988,365
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Identified Cost $713,055,395) ............................ 734,330,209
------------
U.S. GOVERNMENT AGENCIES (22.7%)
FEDERAL NATIONAL MORTGAGE ASSOC. (3.3%)
PRINCIPAL STRIPS (a) (3.3%)
(Identified Cost $32,926,470)
38,323 ............. 0.00 12/20/01-3/9/02 31,327,461
-----------
MORTGAGE PASS-THROUGH CERTIFICATES (19.4%)
FEDERAL HOME LOAN MORTGAGE CORP. (8.2%)
45,451 ............. 9.50 10/1/10-2/1/20 47,524,500
23,614 ............ 10.00 9/1/15-10/1/19 25,252,292
5,352 ............. 10.50 1/1/16-10/1/18 5,786,845
------------
78,563,637
------------
FEDERAL NATIONAL MORTGAGE ASSOC. (2.9%)
19,874 ............. 6.50 9/15/23-12/1/23 18,134,763
4,318 ............. 8.50 1/1/22-3/1/22 4,390,786
4,272 ............. 9.50 9/1/16-5/1/20 4,509,397
389 .............. 9.75 3/1/16-2/1/18 414,465
------------
27,449,411
------------
GOVERNMENT NATIONAL MORTGAGE ASSOC. (8.3%)
25,000 ............. 7.00 * 24,679,500
14,211 ............. 7.00 12/15/22-4/15/23 12,068,825
41,287 ............. 7.50 6/15/17-11/15/23 39,984,506
2,665 ............. 10.00 5/15/16-11/15/20 2,867,055
484 ............. 11.00 9/15/18 548,984
------------
80,148,870
------------
TOTAL MORTGAGE PASS-THROUGH CERTIFICATE
(Identified Cost $187,578,935) ............................ 186,161,918
------------
TOTAL U.S. GOVERNMENT AGENCIES
(Identified Cost $220,505,405) ............................ 217,489,379
------------
</TABLE>
<PAGE>
<TABLE>
Dean Witter Federal Securities Trust
Portfolio of Investments April 30, 1994 (unaudited) (continued)
- - - - - - --------------------------------------------------------------------------------
<CAPTION>
Principal
Amount Coupon Maturity
(in thousands) Rate Dates Value
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS (0.9%)
REPURCHASE AGREEMENT (0.9%)
The Bank of New York
(dated 04/29/94; proceeds $8,386,047;
collateralized by $8,603,553, U.S. Treasury
Notes, 4.25% due 7/31/94 valued at
$8,551,184) (Identified Cost $8,383,514)
$ 8,384 ........... 3.625% 6/2/24 $ 8,383,514
------------
TOTAL INVESTMENTS
(Identified Cost $941,944,314) (c) ......................... $960,203,102
============
</TABLE>
<TABLE>
<CAPTION>
Number Expiration
of Month/Strike
Contracts Price Value
---------- ---------- ---------
<S> <C> <C> <C> <C>
WRITTEN OPTIONS OUTSTANDING (0.00%)**
CALL OPTIONS ON TREASURY BOND FUTURES (0.00%)
200 ............................. June/107 $59,375***
----------
PUT OPTIONS ON TREASURY BOND FUTURES (0.00%)
100 ............................. June/105 93,750***
----------
TOTAL WRITTEN OPTIONS OUTSTANDING
(Premium Received $132,525) .................................. $153,125***
===========
Delivery
Year/Month
----------
FINANCIAL FUTURES (b) (0.00%)
SHORT POSITION
U.S. TREASURY BONDS
911 1994/June $227,750
=========
TOTAL INVESTMENTS (Identified Cost
$941,944,314)(c) ............................... 100.2% 960,203,102
TOTAL WRITTEN OPTIONS OUTSTANDING
(Premiums Received $132,525) ................... 0.0 (153,125)
TOTAL VARIATION MARGIN ON FINANCIAL FUTURES ....... 0.0 227,750
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS .... (0.2) (1,545,203)
------- ------------
NET ASSETS ........................................ 100.0% $958,732,524
======= ============
<FN>
- - - - - - -------------
* Securities purchased on a forward commitment basis with an approximate
principal amount and no definite maturity date, the actual principal
amount and maturity date will be determined upon settlement.
** Non-income producing security.
*** The market value of U.S. Treasury securities pledged to cover written
options on futures contracts is $21,042,187.
+ Some or all of these securities are held in connection with open options
written. See portfolio of written options.
(a) Securities were purchased on a discount basis. The rate shown reflects a
bond equivalent interest rate.
(b) Value represents variation margin on open futures contracts at April 30,
1994. The market value of the futures contracts is $99,080,000 and the
unrealized appreciation of these contracts is $3,878,541.
(c) The aggregate cost of investments for federal income tax purposes is
$945,299,627; the aggregate gross unrealized appreciation is $27,077,971
and the aggregate gross unrealized depreciation is $12,174,496,
resulting in net unrealized appreciation of $14,903,475.
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
- - - - - - --------------------------------------------------------------------------------
DEAN WITTER FEDERAL SECURITIES TRUST
FINANCIAL STATEMENTS
- - - - - - --------------------------------------------------------------------------------
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1994 (unaudited)
- - - - - - --------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments in securities, at value
(Identified cost $941,944,314) (Note 1) .................. $960,203,102
Cash ........................................................ 1,783,902
Receivable for:
Principal paydowns ....................................... 2,925,673
Interest ................................................. 20,000,756
Shares of beneficial interest sold ....................... 1,289,304
Variation margin (Note 5) ................................. 227,750
Prepaid expenses and other assets ............................ 66,703
------------
Total Assets ............................................... 986,497,190
------------
LIABILITIES:
Written options outstanding, at value
(premiums received $132,525) (Note 1) ..................... 153,125
Payable for:
Investments purchased ..................................... 25,304,340
Shares of beneficial interest
repurchased ............................................. 447,979
Plan of distribution fee (Note 3) ......................... 678,742
Investment management fee (Note 2) ........................ 439,186
Dividends to shareholders ................................. 528,742
Accrued expenses and other liabilities
(Note 5) ................................................. 212,552
------------
Total Liabilities ............................................. 27,764,666
------------
NET ASSETS:
Paid-in-capital ............................................. 1,034,090,308
Accumulated net realized loss on
investments .............................................. (97,132,986)
Net unrealized appreciation on
investments .............................................. 22,116,729
Distributions in excess of net
investment income ........................................ (341,527)
-------------
Net Assets .................................................. $958,732,524
=============
Net Asset Value Per Share,
105,240,074 shares outstanding
(unlimited authorized shares of
$.01 par value) .......................................... $9.11
=====
</TABLE>
<TABLE>
<CAPTION>
- - - - - - --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the six months ended April 30, 1994 (unaudited)
- - - - - - --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest Income .......................................... $41,150,975
------------
Expenses
Plan of distribution fee (Note 3) .......................... 4,432,607
Investment management fee
(Note 2) ................................................ 2,861,160
Transfer agent fees and expenses ........................... 417,647
Custodian fees ............................................. 45,060
Professional fees .......................................... 43,196
Shareholder reports and notices ............................ 36,504
Registration fees .......................................... 34,995
Trustees' fees and expenses (Note 5) ....................... 17,557
Other ...................................................... 6,229
----------
Total Expenses .......................................... 7,894,955
----------
Net Investment Income ................................ 33,256,020
----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS (Note 1):
Net realized gain (loss) on:
Investments ........................................ (6,310,000)
Futures contracts .................................. 11,210,996
Options written .................................... 945,852
Net change in unrealized
appreciation on investments ........................ (105,757,152)
------------
Net Loss on Investments ............................ (99,910,304)
------------
Net Decrease in Net Assets
Resulting from Operations ..................... ($66,654,284)
============
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- - - - - - --------------------------------------------------------------------------------
<CAPTION>
For the six
months ended For the
April 30, 1994 year ended
(unaudited) October 31, 1993
-------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income .................... $ 33,256,020 $ 76,148,935
Net realized gain (loss) on investments .. 5,846,848 (29,752,910)
Net change in unrealized appreciation
on investments ......................... (105,757,152) 84,572,343
------------- ------------
Net increase (decrease) in net assets
resulting from operations .......... (66,654,284) 130,968,368
Dividends to shareholders from net
investment income ....................... (33,446,732) (75,986,599)
Net decrease form transactions in shares of
beneficial interest (Note 6) ............ (69,560,181) (97,826,746)
------------- ------------
Total decrease ............................... (169,661,197) (42,844,977)
NET ASSETS:
Beginning of period ....................... 1,128,393,721 1,171,238,698
------------- -------------
End of period (including distributions in
excess of net investment income of
$341,527 and $150,815, respectively) .... $ 958,732,524 $1,128,393,721
============== ==============
See Notes to Financial Statements
</TABLE>
<PAGE>
DEAN WITTER FEDERAL SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (unaudited)
- - - - - - --------------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES--Dean Witter Federal Securities Trust,
formerly Dean Witter Government Securities Plus, (the "Fund") is registered
under the Investment Company Act of 1940 as amended (the "Act") as a
diversified, open-end management investment company. The Fund commenced
operations on March 31, 1987.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS--(1) all portfolio securities for which over-
the-counter market quotations are readily available are valued at the
latest bid price; (2) an option listed on an exchange is valued at its last
sale price on that exchange (if there were no sales that day, the option is
valued at the mean between the latest bid and asked prices); (3) a futures
contract is valued at the last sale price as of the close of the
commodities exchange on which it trades unless the Trustees determine that
such price does not reflect its market value, in which case it will be
valued at its fair value as determined by the Trustees; (4) when market
quotations are not readily available, portfolio securities are valued at
their fair value as determined in good faith under procedures established
by and under the general supervision of the Trustees (valuation of
securities for which market quotations are not readily available may be
based upon current market prices of securities which are comparable in
coupon, rating and maturity or an appropriate matrix utilizing similar
factors); (5) the fair value of short-term debt securities which mature at
a date less than sixty days subsequent to valuation date will be determined
on an amortized cost or amortized value basis; and (6) the value of other
assets will be at their fair value as determined in good faith under
procedures established by and under the general supervision of the
Trustees.
B. ACCOUNTING FOR INVESTMENTS--Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). In computing
net investment income, the Fund does not amortize premiums or accrue
discounts on fixed income securities in the portfolio, except those
original issue discounts for which amortization is required for federal
income tax purposes. Additionally, with respect to market discount, a
portion of any capital gain realized upon disposition is recharacterized as
investment income. Realized gains and losses on security transactions are
determined on the identified cost method. Interest income is accrued daily.
C. OPTIONS AND FUTURES--(1) Options on debt obligations: When the Fund
writes a call or a put option, an amount equal to the premium received by
the Fund is included in the Fund's Statement of Assets and Liabilities as
an asset and as an equivalent liability. The amount of the liability is
subsequently marked-to-market to reflect the current market value of the
option written. If an option which the Fund has written either expires on
its stipulated expiration date, or if the Fund enters into a closing
purchase transaction, the Fund realizes a gain (or loss if the cost of a
closing purchase transaction exceeds the premium received when the option
was written) without regard to any unrealized gain or loss on the
underlying security, and the liability related to such option is
extinguished. If a call option which the Fund has written is exercised, the
Fund realizes a gain or loss from the sale of the underlying security and
the proceeds from such sale are increased by the premium originally
received. If a put option which the Fund has written is exercised, the
amount of the premium originally received will reduce the cost of the
security which the Fund purchases upon exercise of the option; (2) Options
on futures contracts: The Fund is required to deposit U.S. Government
securities, "initial margin" and "variation margin," with respect to put
and call options on futures contracts written. If an option which the Fund
has written expires on its stipulated expiration date, the Fund realizes a
gain. If a call or put option which the Fund has written is exercised,
premiums will decrease the unrealized loss or increase the unrealized gain
on the futures contracts. If the Fund enters into a closing purchase
transaction, the Fund realized a gain (or loss if the cost of a closing
purchase transaction exceeds the premium received when the option was
written) without regard to any unrealized gain or loss on the underlying
futures contract, and the liability related to such option is extinguished;
(3) Futures contracts: A futures contract is an agreement between two
parties to buy and sell financial instruments at a set price on a future
date. Upon entering into such a contract the Fund is required to pledge to
<PAGE>
DEAN WITTER FEDERAL SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
- - - - - - --------------------------------------------------------------------------------
the broker cash or U.S. Government securities equal to the minimum "initial
margin" requirements of the applicable futures exchange. Pursuant to the
contract, the Fund agrees to receive from or pay to the broker an amount of
cash equal to the daily fluctuation in value of the contract. Such receipts
or payments are known as "variation margin," and are recorded by the Fund
as unrealized gains or losses. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the value
of the contract at the time it was opened and the value at the time it was
closed.
The premium paid by the Fund for the purchase of a call or a put
option is included in the Fund's Statement of Assets and Liabilities as an
investment and subsequently marked-to-market to reflect the current market
value of the option. If an option which the Fund has purchased expires on
the stipulated expiration date, the Fund will realize a loss in the amount
of the cost of the option. If the Fund enters into a closing sale
transaction, the Fund will realize a gain or loss, depending on whether the
sale proceeds from the closing sale transaction are greater or less than
the cost of the option. If the Fund exercises a put option, it will realize
a gain or loss from the sale of the underlying security and the proceeds
from such sale will be decreased by the premium originally paid. If the
Fund exercises a call option, the cost of the security which the Fund
purchases upon exercise will be increased by the premium originally paid.
D. FEDERAL INCOME TAX STATUS--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Accordingly, no federal income tax provision is required.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS--The Fund records
dividends and distributions to its shareholders on the ex-dividend 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 that 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
reclassifications. 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 that they exceed net investment income and net realized capital
gains for tax purposes, they are reported as distributions of paid-in-
capital.
F. REPURCHASE AGREEMENTS--The Fund's custodian takes possession on behalf
of the Fund of the collateral pledged for investments in repurchase
agreements. It is the policy of the Fund to value the underlying collateral
daily on a mark-to-market basis to determine that the value, including
accrued interest, is at least equal to the repurchase price plus accrued
interest. In the event of default of the obligation to repurchase, the Fund
has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation.
2. INVESTMENT MANAGEMENT AGREEMENT--Pursuant to an Investment Management
Agreement (the "Agreement") with Dean Witter InterCapital Inc., (the "Investment
Manager"), the Fund pays its Investment Manager a management fee, calculated and
accrued daily and payable monthly, by applying the following annual rates to the
Fund's daily net assets: 0.55% of the portion of such daily net assets not
exceeding $1 billion; 0.525% of the portion of such daily net assets exceeding
$1 billion but not exceeding $1.5 billion; 0.50% of the portion of such daily
net assets exceeding $1.5 billion but not exceeding $2 billion; 0.475% of the
portion of such daily net assets exceeding $2 billion but not exceeding $2.5
billion; 0.45% of the portion of such daily net assets exceeding $2.5 billion
but not exceeding $5 billion; 0.425% of the portion of such daily net assets
exceeding $5 billion but not exceeding $7.5 billion; 0.40% of the portion of
<PAGE>
DEAN WITTER FEDERAL SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
- - - - - - --------------------------------------------------------------------------------
such daily net assets exceeding $7.5 billion but not exceeding $10 billion;
0.375% of the portion of such daily net assets exceeding $10 billion but not
exceeding $12.5 billion and 0.35% of the portion of such daily net assets
exceeding $12.5 billion.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's book and
records and furnishes office space and 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. PLAN OF DISTRIBUTION--Shares of the Fund are distributed by Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager.
To compensate the Distributor, the Fund adopted a Plan of Distribution (the
"Plan") pursuant to Rule 12b-1 under the Act pursuant to which the Fund pays the
Distributor a fee, which is accrued daily and payable monthly, at an annual rate
of .85% of the lesser of: (a) the average daily aggregate gross sale of the
Fund's shares since the inception of the Fund (not including reinvestment of
dividends or capital gains distributions), less the average daily aggregate net
asset value of the Fund's shares redeemed since the Fund's inception upon which
a contingent deferred sales charge has been imposed or waived; or (b) the Fund's
average daily net assets. Amounts paid under the Plan are paid to the
Distributor to compensate it for the services provided and the expenses borne by
it and others in the distribution of the Fund's shares, including the payment of
commissions for sales of the Fund's shares and incentive compensation to and
expenses of DWR's account executives and others who engage in or support
distribution of shares or who service shareholder accounts, including overhead
and telephone expenses; printing and distribution of prospectuses and reports
used in connection with the offering of the Fund's shares to other than current
shareholders; and preparation, printing and distribution of sales literature and
advertising materials. In addition, the Distributor may be compensated under the
Plan for this opportunity costs in advancing such amounts, which compensation
would be in the form of a carrying charge on any unreimbursed expenses incurred
by the Distributor.
Provided that the Plan continues in effect, any cumulative expenses
incurred by the Distributor, but not yet recovered, may be recovered through
future distribution fees from the Fund and contingent deferred sales charges
from the Fund's shareholders.
The Distributor has informed the Fund that for the six months ended April
30, 1994, it received approximately $343,000 for contingent deferred sales
charges from certain redemptions of the Fund's shares. The Fund's shareholder
pays such charges which are not an expense of the Fund.
4. FEDERAL INCOME TAX STATUS--At October 31, 1993, the Fund had net capital
loss carryovers of approximately $54,428,000 of which $28,036,000 will be
available through October 31, 1996, $15,672,000 will be available through
October 31, 1997, $6,866,000 will be available through October 31, 1998 and
$3,854,000 will be available through October 31, 2000 to offset net realized
gains to the extent provided by regulations. The Fund utilized approximately
$1,767,000 of net capital losses during fiscal 1993. In addition, at October 31,
1993, the Fund was required for federal income tax purposes to defer
approximately $45,209,000 of realized losses on certain closed options and
futures contracts of which $32,183,000 were incurred during fiscal 1993. During
the six months ended April 30, 1994, the Fund had net realized capital gains of
approximately $5,847,000.
As of October 31, 1993, the Fund had temporary book/tax differences
primarily attributable to capital loss deferrals on wash sales and straddles and
permanent book/tax differences primarily attributable to dividend
redesignations. To reflect reclassifications arising from permanent book/tax
differences as of October 31, 1993, paid-in-capital was credited $877,428,
accumulated net realized loss on investments was charged $359,996 and
accumulated undistributed net investment income was charged $517,432.
<PAGE>
DEAN WITTER FEDERAL SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
- - - - - - --------------------------------------------------------------------------------
5. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES--The cost of
purchases and the proceeds from sales/prepayments of portfolio securities,
excluding short-term investments, and transactions in written put option
contracts for the six months ended April 30, 1994 were as follows:
<TABLE>
<CAPTION>
Sales/
Purchases Prepayments
------------ -----------
<S> <C> <C>
U.S. Government Agencies and Obligations ..... $114,496,111 $148,931,733
Contracts Premium
---------- ----------
Option contracts written: outstanding
at beginning of period ........................ 200 $ 83,137
Options written ............................. 6,100 2,611,523
Options closed .............................. (5,352) (2,389,127)
Options exercised ........................... (648) (173,008)
--------- ----------
Option contracts written:
outstanding at end of period ................. 300 $ 132,525
========= ==========
</TABLE>
For the six months ended April 30, 1994, the Fund incurred $38,381 and
$48,182 in brokerage commissions for transactions executed and for clearing
options and futures transactions, respectively, with Dean Witter Reynolds Inc.,
on behalf of the Fund.
At April 30, 1994 there were receivables from Dean Witter Reynolds Inc., in
the amount of $227,750 for variation margin on futures contracts.
On April 1, 1991, the Fund established an unfunded noncontributory defined
benefit pension plan covering all independent Trustees of the Fund who will have
served as an Independent Trustee 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 cost for
the six months ended April 30, 1994, included in Trustees' fees and expenses in
the Statement of Operations, amounted to $4,384. At April 30, 1994, the Fund had
an accrued pension liability of $41,645 which is included in accrued expenses in
the Statement of Assets and Liabilities.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At April 30, 1994, the Fund had
transfer agent fees and expenses payable of approximately $53,000.
6. SHARES OF BENEFICIAL INTEREST--Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
For the six months ended For the year ended
April 30, 1994 October 31, 1993
----------------------- -----------------
Shares Amount Shares Amount
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sold 5,885,285 $ 56,765,166 11,777,136 $ 116,032,284
Reinvestment of
dividends ........ 1,967,088 18,892,091 4,374,510 43,009,775
---------- ---------- ---------- ----------
7,852,373 75,657,257 16,151,646 159,042,059
Repurchased ........ (15,096,595) (145,217,438) (26,099,762) (256,868,805)
---------- ---------- ---------- ------------
Net decrease ...... (7,244,222) $ (69,560,181) (9,948,116) $ (97,826,746)
========== ========== =========== ============
</TABLE>
7. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK--As of April 30, 1994,
the Fund had outstanding written options on interest rate futures and interest
rate futures contracts to hedge positions or anticipated positions in U.S.
Government securities, or in the case of written options to close out long or
short positions in futures contracts. Written options and futures contracts
involve elements of market risk in excess of the amounts reflected in the
Statement of Assets and Liabilities. The Fund bears the risk of an unfavorable
change in the price of interest rate futures contracts, an unfavorable change in
interest rates and the absence of a liquid secondary market. As of April 30,
1994, written options had a value of $153,125 and the variation margin on
futures contracts was $227,750.
<PAGE>
<TABLE>
DEAN WITTER FEDERAL SECURITIES TRUST
FINANCIAL HIGHLIGHTS
- - - - - - --------------------------------------------------------------------------------
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<CAPTION>
For the six
months ended For the year ended October 31,
April 30, 1993 ------------------------------
(unaudited) 1993 1992 1991 1990 1989
------------- ----- ----- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period ........ $10.03 $ 9.57 $ 9.46 $ 8.87 $ 9.27 $ 9.13
------ ----- ----- ---- ---- -----
Net investment income ...... 0.31 0.65 0.68 0.72 0.72 0.71
Net realized and unrealized
gain (loss) on
investments .............. (0.92) 0.46 0.11 0.59 (0.40) 0.34
------ ----- ----- ---- ---- -----
Total from investment
operations ................ (0.61) 1.11 0.79 1.31 0.32 1.05
------ ----- ----- ---- ---- -----
Less dividends and
distributions:
Dividends from net
investment income ....... (0.31) (0.65) (0.68) (0.72) (0.72) (0.71)
Distribution from paid
in capital .............. -0- -0- -0- -0- -0- (0.20)
------ ----- ----- ---- ---- -----
Total dividends and
distributions ............. (0.31) (0.65) (0.68) (0.72) (0.72) (0.91)
------ ----- ----- ---- ---- -----
Net asset value,
end of period ............. $ 9.11 $10.03 $ 9.57 $ 9.46 $ 8.87 $ 9.27
====== ====== ===== ===== ===== =====
TOTAL INVESTMENT RETURN+...... (6.24%)(1) 12.03% 8.56% 15.26% 3.64% 12.32%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in millions) ............ $ 959 $1,128 $1,171 $1,252 $1,397 $1,824
Ratio of expenses to average
net assets ................. 1.51%(2) 1.50% 1.48% 1.50% 1.54% 1.47%
Ratio of net investment
income to average
net assets ................. 6.38%(2) 6.59% 7.18% 7.79% 7.92% 7.90%
Portfolio turnover rate ....... 11% 7% 6% 0% 5% 19%
<FN>
- - - - - - ----------
+ Does not reflect the deduction of sales load.
(1) Not Annualized.
(2) Annualized.
See Notes to Financial Statements
</TABLE>
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
TRUSTEES
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. John E. Jeuck
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
Edward R. Telling
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
Rajesh K. Gupta
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center--Plaza Two
Jersey City, New Jersey 07311
LEGAL COUNSEL
Sheldon Curtis
Two World Trade Center
New York, New York 10048
INDEPENDENT ACCOUNTANTS
Price Waterhouse
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 informatin about the Fund, its officers and
trustees, fees, expenses and other pertinent information, please see the
prospecuts of the Fund.
This report is not authorized for distribution to prospective investors
in the Fund unless preceded or accompanied by an effective prospectus.
DEAN WITTER
FEDERAL
SECURITIES TRUST
Semiannual Report
April 30, 1994
