<PAGE> 1
DEAN WITTER FEDERAL SECURITIES TRUST Two World Trade Center, New York, New York
10048
LETTER TO THE SHAREHOLDERS
DEAR SHAREHOLDER:
As the six-month reporting began on October 31, 1994, interest rates had risen
sharply resulting in one of the worst-ever performance periods for the U.S.
Treasury market. By the end of November, interest rates peaked and began to
decline. Shortly thereafter, analysts and investors alike began to believe the
Federal Reserve Board's tight monetary policy would successfully corral
inflation and result in a "soft landing" for the economy. This was evident in
the market's favorable reaction to the central bank's November 1994 and February
1995 rate increases.
During the first four months of 1995, the bond markets reacted favorably as
signs of an economic slowdown became more evident. And, as interest rates
declined, the bond markets recouped more than half of their previous losses.
FUND PERFORMANCE
Against this backdrop, Dean Witter Federal Securities Trust provided a total
return of 6.78 percent for the six-month period ended April 30, 1995. On April
30, 1995, the Fund's net asset value per share (NAV) was $9.02, up from $8.74 on
October 31, 1994. During the reporting period, the Fund paid distributions
totaling $.30 per share. As of April 30, 1995, the Fund had net assets in excess
of $825.6 million.
At the end of the reporting period, the Fund's assets were allocated as follows:
74 percent in U.S. Treasury bonds and notes, 7 percent in mortgage backed
securities issued by the Federal Home Loan Mortgage Corporation (FHLMCs), 12
percent by the Government National Mortgage Association (GNMAs) and 4 percent by
the Federal National Mortgage Association (FNMAs). The remaining 1 percent was
in commercial paper and U.S. Treasury bills.
LOOKING AHEAD
For the balance of this year, we expect economic growth to continue to moderate
vis-a-vis the rapid pace of 1994's fourth quarter, as evidenced by the slowing
of the economy in 1995's first quarter. This should occur as the
<PAGE> 2
DEAN WITTER FEDERAL SECURITIES TRUST
LETTER TO SHAREHOLDERS continued
interest rate increases by the Federal Reserve in 1994 take their toll in 1995.
We believe, inflation should continue to remain subdued, albeit at a modestly
higher level than 1994, at approximately 3.00 percent to 3.50 percent. Given
this scenario, the Fund will continue to maintain its current strategy of
investing approximately 75 percent of its portfolio in longer-term U.S.
Treasuries and 25 percent in mortgage-backed securities. This strategy should
enable the Fund to continue to provide an attractive income stream as well as
total return.
We appreciate your support of Dean Witter Federal Securities Trust's 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> 3
DEAN WITTER FEDERAL SECURITIES TRUST
PORTFOLIO OF INVESTMENTS April 30, 1995 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION
AMOUNT IN AND COUPON
THOUSANDS MATURITY DATE RATE VALUE
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS (73.6%)
$ 38,323 Federal National Mortgage Assoc. Principal Strip
(4.0%) 12/20/01 - 03/09/02...................... 0.00 % $ 33,441,175
------------
U.S. Treasury Bonds (66.2%)
20,000 11/15/15........................................ 9.875 25,087,500
22,000 11/15/12........................................ 10.375 27,348,750
225,600 08/15/13+....................................... 12.00 313,443,000
25,000 08/15/14........................................ 12.50 36,160,156
95,000 11/15/11........................................ 14.00 144,429,688
------------
546,469,094
------------
U.S. Treasury Notes (3.4%)
5,000 02/15/97........................................ 4.75 4,844,531
25,000 01/31/99........................................ 5.00 23,511,719
------------
28,356,250
------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(Identified Cost $598,650,684)............................. 608,266,519
------------
MORTGAGE-BACKED SECURITIES (23.9%)
Federal Home Loan Mortgage Corp. (7.3%)
35,592 10/01/10 - 02/01/20............................. 9.50 36,893,433
17,962 09/01/15 - 10/01/19............................. 10.00 19,034,549
4,323 01/01/16 - 10/01/18............................. 10.50 4,640,884
------------
60,568,866
------------
Federal National Mortgage Assoc. (4.3%)
19,231 10/01/23 - 12/01/23............................. 6.50 17,752,814
13,554 01/01/22 - 04/01/25............................. 8.50 13,761,516
3,304 09/01/16 - 05/01/20............................. 9.50 3,449,606
251 03/01/16 - 02/01/18............................. 9.75 264,914
------------
35,228,850
------------
Government National Mortgage Assoc. (12.3%)
38,562 12/15/22 - 05/15/24............................. 7.00 36,489,558
38,523 06/15/17 - 01/15/23............................. 7.50 37,559,782
24,864 10/15/19 - 10/15/24............................. 8.50 25,353,660
1,895 05/15/16 - 10/15/24............................. 10.00 2,033,675
322 09/15/18........................................ 11.00 355,207
------------
101,791,882
------------
TOTAL MORTGAGE-BACKED SECURITIES
(Identified Cost $198,309,132)............................. 197,589,598
------------
SHORT-TERM INVESTMENTS (0.6%)
U.S. GOVERNMENT OBLIGATION (a) (0.4%)
3,000 U.S. Treasury Bill 05/18/95..................... 5.615 2,992,046
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 4
DEAN WITTER FEDERAL SECURITIES TRUST
PORTFOLIO OF INVESTMENTS April 30, 1995 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION
AMOUNT IN AND COUPON
THOUSANDS MATURITY DATE RATE VALUE
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REPURCHASE AGREEMENT (0.2%)
$ 1,314 The Bank of New York 05/01/95 (dated 04/28/95;
proceeds $1,314,460, collateralized by
$1,344,454 U.S. Treasury Note 6.75% due
02/28/97, valued at $1,362,538).................. 6.0625% $ 1,313,796
------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $4,305,842)............................... 4,305,842
------------
TOTAL INVESTMENTS
(Identified Cost $801,265,658) (b)......................... $810,161,959
============
<CAPTION>
DESCRIPTION,
NUMBER OF EXPIRATION MONTH
CONTRACTS AND STRIKE PRICE VALUE
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
WRITTEN OPTIONS (0.00%)
Call options on Treasury bond futures June/104*
400 (Premiums Received $216,285)............................... $ 650,000
============
</TABLE>
<TABLE>
<CAPTION>
DESCRIPTION,
NUMBER OF DELIVERY YEAR
CONTRACTS AND MONTH VALUE
- ------------------------------------------------------------------------------------------
<C> <S> <C> <C>
FINANCIAL FUTURES (a) (0.00%)
SHORT POSITIONS
430 U.S. Treasury Bonds 1995/June..................... $ --
============
TOTAL INVESTMENTS
(Identified Cost $801,265,658) (b)................ 98.1% $810,161,959
TOTAL WRITTEN OPTIONS OUTSTANDING................. (0.1) (650,000)
TOTAL FINANCIAL FUTURES........................... 0.0 --
OTHER ASSETS IN EXCESS OF OTHER LIABILITIES....... 2.0 16,108,323
----- ------------
NET ASSETS........................................ 100.0% $825,620,282
===== ============
</TABLE>
- ---------------------
* The market value of U.S. Treasury securities pledged to cover written
options on futures contracts is $20,840,625.
+ Some or all of these securities are held in connection with open options
written.
(a) Value represents variation margin on open futures contract at April 30,
1995. The market value of these futures contracts is $45,297,813 and the
unrealized appreciation is $549,050.
(b) The aggregate cost of investments for federal income tax purposes is
$804,378,002; the aggregate gross appreciation is $16,778,555 and the
aggregate gross unrealized depreciation is $10,994,598, resulting in net
unrealized appreciation of $5,783,957.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 5
DEAN WITTER FEDERAL SECURITIES TRUST
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1995 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $801,265,658)....................................... $810,161,959
Receivable for:
Interest.......................................................... 16,548,454
Shares of beneficial interest sold................................ 841,709
Principal paydowns................................................ 514,305
Prepaid expenses and other assets..................................... 87,019
------------
TOTAL ASSETS...................................................... 828,153,446
------------
LIABILITIES:
Written call options outstanding, at value (premiums received
$216,285)............................................................ 650,000
Payable for:
Plan of distribution fee.......................................... 576,872
Investment management fee......................................... 373,270
Shares of beneficial interest repurchased......................... 334,430
Dividends to shareholders......................................... 294,958
Investments purchased............................................. 16,242
Accrued expenses and other payables................................... 287,392
------------
TOTAL LIABILITIES................................................. 2,533,164
------------
NET ASSETS:
Paid-in-capital....................................................... 912,595,819
Net unrealized appreciation........................................... 7,913,536
Distribution in excess of net investment income....................... (222,701)
Accumulated net realized loss......................................... (94,666,372)
------------
NET ASSETS........................................................ $825,620,282
============
NET ASSET VALUE PER SHARE:
91,515,478 shares outstanding (unlimited shares authorized of
$.01 par value)...................................................... $9.02
=====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 6
DEAN WITTER FEDERAL SECURITIES TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the six months ended April 30, 1995 (unaudited)
NET INVESTMENT INCOME:
INTEREST INCOME........................................................ $34,281,908
-----------
EXPENSES
Plan of distribution fee............................................... 3,452,601
Investment management fee.............................................. 2,234,036
Transfer agent fees and expenses....................................... 414,736
Shareholder reports and notices........................................ 69,525
Professional fees...................................................... 38,861
Custodian fees......................................................... 34,884
Trustees' fees and expenses............................................ 13,412
Registration fees...................................................... 9,213
Other.................................................................. 4,980
-----------
TOTAL EXPENSES..................................................... 6,272,248
-----------
NET INVESTMENT INCOME.............................................. 28,009,660
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments........................................................ 617,060
Futures contracts.................................................. (4,436,669)
Net change in unrealized depreciation on investments................... 29,390,198
-----------
NET GAIN........................................................... 25,570,589
-----------
NET INCREASE........................................................... $53,580,249
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 7
DEAN WITTER FEDERAL SECURITIES TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE
SIX MONTHS FOR THE YEAR
ENDED ENDED
APRIL 30, OCTOBER 31,
1995 1994
- --------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income............................ $ 28,009,660 $ 64,333,610
Net realized gain (loss)......................... (3,819,609) 12,133,071
Net change in unrealized appreciation
(depreciation).................................. 29,390,198 (149,350,543)
------------ -------------
NET INCREASE (DECREASE)...................... 53,580,249 (72,883,862)
------------ -------------
Dividends to shareholders from net investment
income.......................................... (27,714,927) (64,700,229)
Net decrease from transactions in shares of
beneficial interest............................. (40,971,674) (150,082,996)
------------ -------------
TOTAL DECREASE............................... (15,106,352) (287,667,087)
NET ASSETS:
Beginning of period.............................. 840,726,634 1,128,393,721
------------ -------------
END OF PERIOD
(Including distributions in excess of net
investment income of $222,701 and $517,434,
respectively)................................. $825,620,282 $ 840,726,634
============ =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 8
DEAN WITTER FEDERAL SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1995 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Federal Securities Trust (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 available bid price prior to the time of valuation; (2) listed options
are valued at the latest sale price on the exchange on which they are listed
unless no sales of such options have taken place that day, in which case they
will be valued at the mean between their latest bid and asked price; (3) futures
contracts are valued at the latest sale price as of the close of the commodities
exchange on which they trade unless the Trustees determine that such price does
not reflect their market value, in which case it will be valued at 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 debt 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); and (5) short-term debt securities having a maturity date of
more than sixty days at the 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.
Discounts on securities purchased are amortized over the life of the respective
securities. Interest income is accrued daily.
C. OPTIONS AND FUTURES -- (1) Written options on debt obligations: When the Fund
writes a call or put option, an amount equal to the premium received is included
in the Fund's Statement of Assets and Liabilities as a liability which is
subsequently marked-to-market to reflect the current market value. If a written
option either expires or the Fund enters into a closing purchase transaction,
the Fund realizes a gain or loss without regard to any unrealized gain or loss
on the underlying security and the liability related to such option is
extinguished. If a written call option 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
<PAGE> 9
DEAN WITTER FEDERAL SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1995 (unaudited) continued
originally received. If a written put option is exercised, the amount of the
premium originally received reduces the cost of the security which the Fund
purchases upon exercise of the option; (2) Purchased options on debt
obligations: When the Fund purchases a call or put option, the premium paid is
recorded as an investment which is subsequently marked-to-market to reflect the
current market value. If a purchased option expires, the Fund will realize a
loss to the extent of the premium paid. If the Fund enters into a closing sale
transaction, a gain or loss is realized for the difference between the proceeds
from the sale and the cost of the option. If a put option is exercised, the cost
of the security sold upon exercise will be increased by the premium originally
paid. If a call option is exercised, the cost of the security purchased upon
exercise will be increased by the premium originally paid; (3) Option on futures
contracts: The Fund is required to deposit U.S. Government securities as
"initial margin" and "variation margin" with respect to written call and put
options on futures contracts. If a written option expires, the Fund realizes a
gain. If a written call or put option is exercised, the premium received will
decrease or increase the unrealized loss or gain on the futures contract. If the
Fund enters into a closing purchase transaction, the Fund realizes a gain or
loss without regard to any unrealized gain or loss on the underlying futures
contract and the liability related to such option is extinguished and (4)
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 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 the value of the contract. Such receipts or payments known as
variation margin are recorded by the Fund as unrealized gains or losses. Upon
closing of the contract, the Fund realizes a 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.
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 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
<PAGE> 10
DEAN WITTER FEDERAL SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1995 (unaudited) continued
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 its Investment Manager a
management fee, accrued daily and payable monthly, by applying the following
annual rates to the Fund's net assets determined at the close of each business
day: 0.55% to the portion of daily net assets not exceeding $1 billion; 0.525%
to the portion of daily net assets exceeding $1 billion but not exceeding $1.5
billion; 0.50% to the portion of daily net assets exceeding $1.5 billion but not
exceeding $2 billion; 0.475% to the portion of daily net assets exceeding $2
billion but not exceeding $2.5 billion; 0.45% to the portion of daily net assets
exceeding $2.5 billion but not exceeding $5 billion; 0.425% to the portion of
daily net assets exceeding $5 billion but not exceeding $7.5 billion; 0.40% to
the portion of daily net assets exceeding $7.5 billion but not exceeding $10
billion; 0.375% to the portion of daily net assets exceeding $10 billion but not
exceeding $12.5 billion; and 0.35% to the portion of 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 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. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted a
Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act pursuant
to which the Fund pays the Distributor compensation, accrued daily and payable
monthly, at an annual rate of 0.85% of the lesser of: (a) the average daily
aggregate gross sales of the Fund's shares since the Fund's inception (not
including reinvestment of dividend or capital gain 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 upon which such charge has been 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
<PAGE> 11
DEAN WITTER FEDERAL SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1995 (unaudited) continued
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, the
account executives of Dean Witter Reynolds Inc. ("DWR"), an affiliate of the
Investment Manager and Distributor, and other employees or selected broker-
dealers who engage in or support distribution of the Fund's 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
its 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,
1995, it received approximately $377,000 in contingent deferred sales charges
from certain redemptions of the Fund's shares. The Fund's shareholders pay such
charges which are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
Purchases and sales/prepayments of portfolio securities, excluding short-term
investments, for the six months ended April 30, 1995 were $9,803,324 and
$46,299,099, respectively.
Transactions in written options for the six months ended April 30, 1995 were as
follows:
<TABLE>
<CAPTION>
CONTRACTS PREMIUMS
--------- ----------
<S> <C> <C>
Option contracts written, outstanding at beginning of the period............................... 100 $ 27,508
Options written................................................................................ 5,831 3,139,569
Options closed................................................................................. (5,301) (2,854,323)
Options exercised.............................................................................. (230) (96,469)
------ ----------
Option contracts written, outstanding at end of the period..................................... 400 $ 216,285
====== ==========
</TABLE>
For the six months ended April 30, 1995, the Fund incurred $52,541 and $39,834
in brokerage commissions for transactions executed and for clearing options and
futures transactions, respectively, with DWR on behalf of the Fund.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At April 30, 1995, the Fund had
transfer agent fees and expenses payable of approximately $124,000.
<PAGE> 12
DEAN WITTER FEDERAL SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1995 (unaudited) continued
The Fund established 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 April
30, 1995 included in Trustees' fees and expenses in the Statement of Operations,
amounted to $3,666. At April 30, 1995, the Fund had an accrued pension liability
of $50,923 included in accrued expenses in the Statement of Assets and
Liabilities.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED
APRIL 30, 1995 OCTOBER 31, 1994
---------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Sold....................................................... 6,231,805 $ 54,957,816 10,119,372 $ 93,966,925
Reinvestment of dividends.................................. 1,752,220 15,497,238 3,923,981 36,393,372
----------- ------------ ----------- -------------
7,984,025 70,455,054 14,043,353 130,360,297
Repurchased................................................ (12,679,586) (111,426,728) (30,316,610) (281,320,721)
----------- ------------ ----------- -------------
Reclassification due to permanent book/tax differences..... -- -- -- 877,428
----------- ------------ ----------- -------------
Net decrease............................................... (4,695,561) $(40,971,674) (16,273,257) $(150,082,996)
=========== ============ =========== =============
</TABLE>
6. FEDERAL INCOME TAX STATUS
At October 31, 1994, the Fund had approximate net capital loss carryovers which
may be used to offset future capital gains to the extent provided by regulations
which are available through October 31 in the following years:
<TABLE>
<CAPTION>
AMOUNTS IN THOUSANDS
-----------------------------------------------------------------
1996 1997 1998 2000 2002 Total
------- ------- ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
$28,036 $15,672 $6,866 $3,854 $31,125 $85,553
======= ======= ====== ====== ======= =======
</TABLE>
At October 31, 1994, the Fund was required for Federal income tax purposes to
defer approximately $2,182,000 of realized losses on certain closed options and
futures contracts.
As of October 31, 1994, 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.
<PAGE> 13
DEAN WITTER FEDERAL SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1995 (unaudited) continued
7. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS
To hedge against adverse interest rate and market risks on portfolio 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, the
Fund may enter into written options on interest rate futures and interest rate
futures contracts ("derivative instruments").
These derivative instruments involve elements of market risk in excess of the
amount reflected in the Statement of Assets and Liabilities. The Fund bears the
risk of an unfavorable change in the value of the underlying securities or
currencies.
At April 30, 1995, there were no outstanding written options on interest rate
futures and interest rate futures than those used to manage interest rate and
market exposure on portfolio positions or anticipated positions in U.S.
Government securities.
<PAGE> 14
DEAN WITTER FEDERAL 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 MONTHS
ENDED FOR THE YEAR ENDED OCTOBER 31
APRIL 30, ----------------------------------------------------------
1995 1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value,
beginning of period.............................. $8.74 $10.03 $9.57 $9.46 $8.87 $9.27
----- ----- ----- ----- ----- -----
Net investment income............................. 0.30 0.60 0.65 0.68 0.72 0.72
Net realized and unrealized gain (loss)........... 0.28 (1.28) 0.46 0.11 0.59 (0.40)
----- ----- ----- ----- ----- -----
Total from investment operations.................. 0.58 (0.68) 1.11 0.79 1.31 0.32
----- ----- ----- ----- ----- -----
Less dividends and distributions from net
investment income................................ (0.30) (0.61) (0.65) (0.68) (0.72) (0.72)
----- ----- ----- ----- ----- -----
Net asset value,
end of period.................................... $9.02 $8.74 $10.03 $9.57 $9.46 $8.87
===== ===== ====== ===== ===== =====
TOTAL INVESTMENT RETURN+.......................... 6.78%(1) (6.92)% 12.03% 8.56% 15.26% 3.64%
RATIOS TO AVERAGE NET ASSETS:
Expenses.......................................... 1.54%(2) 1.52% 1.50% 1.48% 1.50% 1.54%
Net investment income............................. 6.90%(2) 6.56% 6.59% 7.18% 7.79% 7.92%
SUPPLEMENTAL DATA:
Net assets, end of period, in millions............ $826 $841 $1,128 $1,171 $1,252 $1,397
Portfolio turnover rate........................... 1%(1) 18% 7% 6% --% 5%
</TABLE>
- ---------------------
+ Does not reflect the deduction of sales charge.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 15
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<PAGE> 16
TRUSTEES
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
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
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
SUB-ADVISOR
Morgan Grenfell Investment Services Limited
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.
DEAN WITTER
FEDERAL SECURITIES
TRUST
[PHOTO]
SEMIANNUAL REPORT
APRIL 30, 1995
