<PAGE> 1
DEAN WITTER FEDERAL SECURITIES TRUST Two World Trade Center, New York,
LETTER TO THE SHAREHOLDERS April 30, 1996 New York 10048
DEAR SHAREHOLDER:
Interest rates on intermediate- and long-term U.S. Treasury securities were
highly volatile during the six-month period ended April 30, 1996. During the
final two months of 1995, interest rates continued to decline ultimately
reaching levels last seen before the Federal Reserve Board began its restrictive
monetary policy in early 1994. Much of the bond market's strength in late 1995
was attributed to economic data supporting the perception that the economy had
indeed slowed. By early 1996, however, the market's perception of the economy
had changed and interest rates began to climb. The combined effect of the
government shut-down and the severe winter weather of 1996 created pent-up
demand by the consumer sector. Reinvigorated by low mortgage rates, rebate-
incentives by the auto dealers and extraordinary sale prices at local retailers,
retail sales and housing starts soared, signaling a quickly rebounding economy,
and possibly an inflation surge. Consequently, interest rates rose dramatically
during the first four months of 1996. On April 30, 1996, the 30-year Treasury
bond was yielding 6.91 percent compared to 6.13 percent six-months ago.
PERFORMANCE AND PORTFOLIO
On April 30, 1996, Dean Witter Federal Securities Trust had net assets in excess
of $756 million. The Fund's total return for the six month period ended April
30, 1996 was -1.01 percent, including income distributions totaling
approximately $0.29 per share and a change in net asset value from $9.58 per
share on November 30, 1995, to $9.11 per share on April 30, 1996. The Fund
continues to provide a competitive level of income.
The Fund's performance for the six-month period was reflective of the sharply
higher interest rate environment. The Fund's average maturity on April 30, 1996
was approximately ten years.
As of April 30, 1996, the majority of the portfolio continued to be represented
by notes and bonds maturing in 7 to 20 years. At the end of the period, 63
percent of the Fund's net assets were invested in U.S.
<PAGE> 2
DEAN WITTER FEDERAL SECURITIES TRUST
LETTER TO THE SHAREHOLDERS April 30, 1996, continued
Treasury bonds with 7- to 20-year maturities and 1 percent was in the 1- to
7-year range. Approximately 25 percent of the Fund's net assets was invested in
mortgage-backed securities issued primarily by the Government National Mortgage
Association (GNMA). The balance of the portfolio consisted of U.S. agency
obligations (5 percent of net assets) and short-term money market investments (6
percent). In the months to come, as conditions warrant, accrued income and the
proceeds from sales and/or maturities may be invested in mortgage-backed
securities, which we believe continue to offer significant long-term value as
well as an incremental yield incentive over U.S. Treasury securities of similar
maturities and the potential for attractive returns.
LOOKING AHEAD
We believe the U.S. economy will continue to grow at a slow-to-moderate pace
during the remainder of 1996, while inflation should continue to remain subdued
albeit at a slightly higher level in the year ahead. Thus, we expect the Federal
Reserve Board will continue to make modest adjustments to monetary policy if
evidence of a weak economy emerges.
We appreciate your ongoing 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/ CHARLES A. FIUMEFREDDO
CHARLES A. FIUMEFREDDO
Chairman of the Board
<PAGE> 3
DEAN WITTER FEDERAL SECURITIES TRUST
PORTFOLIO OF INVESTMENTS April 30, 1996 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION
AMOUNT IN AND COUPON
THOUSANDS MATURITY DATE RATE VALUE
- -------------------------------------------------------------------------------------------
<C> <S> <C> <C>
U.S. GOVERNMENT & AGENCIES OBLIGATIONS (72.6%)
$ 38,323 Federal National Mortgage Assoc. (4.8%)
Principal Strips 12/20/01 - 03/09/02......... 7.56 - 7.89%++ $ 36,318,244
----------
U.S. Treasury Bonds (63.2%)
20,000 11/15/15..................................... 9.875 25,906,250
22,000 11/15/12..................................... 10.375 27,854,062
225,600 08/15/13..................................... 12.00 + 318,483,750
25,000 08/15/14..................................... 12.50 36,808,594
45,000 11/15/11..................................... 14.00 68,814,844
----------
477,867,500
----------
U.S. Treasury Notes (4.6%)
10,000 01/31/99..................................... 5.00 9,700,000
25,000 07/15/96..................................... 7.875 25,125,000
----------
34,825,000
----------
TOTAL U.S. GOVERNMENT & AGENCIES OBLIGATIONS
(Identified Cost $526,411,806)............................. 549,010,744
----------
MORTGAGE-BACKED SECURITIES (24.9%)
Federal Home Loan Mortgage Corp. (6.5%)
28,854 10/01/10 - 02/01/20.......................... 9.50 30,810,801
13,645 09/01/15 - 10/01/19.......................... 10.00 14,949,611
3,346 01/01/16 - 10/01/18.......................... 10.50 3,690,863
----------
49,451,275
----------
Federal National Mortgage Assoc. (6.3%)
18,425 10/01/23 - 12/01/23.......................... 6.50 17,267,630
17,335 05/01/24 - 06/01/25.......................... 8.00 17,486,854
10,042 01/01/22 - 04/01/25.......................... 8.50 10,311,826
2,332 09/01/16 - 05/01/20.......................... 9.50 2,482,340
197 03/01/16 - 02/01/18.......................... 9.75 213,199
----------
47,761,849
----------
Government National Mortgage Assoc. (12.1%)
36,244 12/15/22 - 05/15/24.......................... 7.00 34,862,218
34,772 06/15/17 - 01/15/23.......................... 7.50 34,337,750
19,559 10/15/19 - 10/15/24.......................... 8.50 20,188,232
1,416 05/15/16 - 11/15/20.......................... 10.00 1,554,156
281 09/15/18..................................... 11.00 314,299
----------
91,256,655
----------
TOTAL MORTGAGE-BACKED SECURITIES
(Identified Cost $186,489,742)............................. 188,469,779
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 4
DEAN WITTER FEDERAL SECURITIES TRUST
PORTFOLIO OF INVESTMENTS April 30, 1996 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION
AMOUNT IN AND COUPON
THOUSANDS MATURITY DATE RATE VALUE
- -------------------------------------------------------------------------------------------
<C> <S> <C> <C>
SHORT-TERM INVESTMENTS (a) (0.7%)
U.S. GOVERNMENT & AGENCY OBLIGATION
$ 2,500 Federal Home Loan Mortgage Corp. 05/01/96.... 5.30 % $ 2,500,000
3,000 U.S. Treasury Bill 06/20/96.................. 4.96 2,979,333
----------
TOTAL SHORT-TERM INVESTMENTS
(Amortized Cost $5,479,333)................................ 5,479,333
----------
TOTAL INVESTMENTS
(Identified Cost $718,380,881) (c)......................... $742,959,856
===========
<CAPTION>
DESCRIPTION,
NUMBER OF EXPIRATION MONTH
CONTRACTS AND STRIKE PRICE VALUE
<C> <S> <C> <C>
WRITTEN OPTIONS (0.0%)
6 Put options on Treasury bond futures June/1996/120
(Premiums Received $13,853)................................ $ (65,063)*
==========
</TABLE>
<TABLE>
<CAPTION>
DESCRIPTION,
NUMBER OF DELIVERY YEAR
CONTRACTS AND MONTH VALUE
- ------------------------------------------------------------------------------------------
<C> <S> <C> <C>
FINANCIAL FUTURES (b) (0.0%)
LONG POSITIONS
42 U.S. Treasury Bonds June/1996............................... $ (28,875)*
===========
TOTAL INVESTMENTS
(Identified Cost $718,380,881) (c)................ 98.2% $742,959,856
TOTAL WRITTEN OPTIONS OUTSTANDING................. 0.0 (65,063)
TOTAL FINANCIAL FUTURES........................... 0.0 (28,875)
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES.... 1.8 13,098,946
---- -----------
NET ASSETS........................................ 100.0% $755,964,864
===== ===========
</TABLE>
- ---------------------
* The market value of U.S. Treasury securities pledged to cover written
options on futures and open futures contracts is $91,761,719.
+ Some or all of these securities are segregated in connection with open
written options.
++ Currently zero coupon bond and will pay interest at the rate shown at a
future specified date, unless called on that date.
(a) Securities were purchased on a discount basis. The interest rates shown
have been adjusted to reflect a money market equivalent yield.
(b) Value represents variation margin on open futures contract at April 30,
1996. The market value of these futures contracts is $4,584,563 and the
unrealized depreciation is $358,579.
(c) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation was $26,351,578 and the
aggregate gross unrealized depreciation was $4,872,447, resulting in net
unrealized appreciation of $21,479,131.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 5
DEAN WITTER FEDERAL SECURITIES TRUST
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1996 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $718,380,881)....................................... $742,959,856
Cash.................................................................. 37,694
Receivable for:
Interest.......................................................... 13,520,666
Principal paydowns................................................ 1,039,345
Shares of beneficial interest sold................................ 706,602
Prepaid expenses and other assets..................................... 91,332
-----------
TOTAL ASSETS...................................................... 758,355,495
-----------
LIABILITIES:
Written call options outstanding, at value
(premiums received $13,853).......................................... 65,063
Payable for:
Shares of beneficial interest repurchased......................... 635,922
Plan of distribution fee.......................................... 570,951
Dividends to shareholders......................................... 525,334
Investment management fee......................................... 369,439
Variation margin.................................................. 28,875
Accrued expenses and other payables................................... 195,047
-----------
TOTAL LIABILITIES................................................. 2,390,631
-----------
NET ASSETS:
Paid-in-capital....................................................... 832,765,355
Net unrealized appreciation........................................... 24,169,186
Distributions in excess of net investment income...................... (480,847)
Accumulated net realized loss......................................... (100,488,830)
-----------
NET ASSETS........................................................ $755,964,864
===========
NET ASSET VALUE PER SHARE,
83,009,824 shares outstanding
(unlimited shares authorized of $.01 par value)...................... $9.11
===========
</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, 1996 (unaudited)
NET INVESTMENT INCOME:
INTEREST INCOME....................................................... $ 31,241,449
----------
EXPENSES
Plan of distribution fee.............................................. 3,446,043
Investment management fee............................................. 2,229,792
Transfer agent fees and expenses...................................... 342,660
Custodian fees........................................................ 41,836
Professional fees..................................................... 39,616
Shareholder reports and notices....................................... 30,027
Registration fees..................................................... 24,616
Trustees' fees and expenses........................................... 9,093
Other................................................................. 12,644
----------
TOTAL EXPENSES.................................................... 6,176,327
----------
NET INVESTMENT INCOME............................................. 25,065,122
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments....................................................... 531,250
Futures contracts................................................. (484,530)
Options written................................................... 1,385,428
----------
TOTAL GAIN........................................................ 1,432,148
Net change in unrealized appreciation................................. (33,609,273)
----------
NET LOSS.......................................................... (32,177,125)
----------
NET DECREASE.......................................................... $ (7,112,003)
============
</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 FOR THE YEAR
MONTHS ENDED ENDED
APRIL 30, OCTOBER 31,
1996 1995
------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income............................... $ 25,065,122 $ 53,936,004
Net realized gain (loss)............................ 1,432,148 (11,074,215)
Net change in unrealized appreciation............... (33,609,273) 79,255,121
----------- -----------
NET INCREASE (DECREASE)......................... (7,112,003) 122,116,910
Dividends from net investment income................ (25,028,536) (53,936,003)
Net decrease from transactions in shares of
beneficial interest................................ (41,139,072) (79,663,066)
----------- -----------
TOTAL DECREASE.................................. (73,279,611) (11,482,159)
NET ASSETS:
Beginning of period................................. 829,244,475 840,726,634
----------- -----------
END OF PERIOD
(Including distributions in excess of net
investment income of $480,847 and $517,433,
respectively)................................... $755,964,864 $829,244,475
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 8
DEAN WITTER FEDERAL SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1996 (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 are accreted 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
<PAGE> 9
DEAN WITTER FEDERAL SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1996 (unaudited) continued
premium 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
<PAGE> 10
DEAN WITTER FEDERAL SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1996 (unaudited) continued
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 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
<PAGE> 11
DEAN WITTER FEDERAL SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1996 (unaudited) continued
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, 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,
1996, it received approximately $385,000 in contingent deferred sales charges
from certain redemptions of the Fund's shares.
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, 1996 were $14,910,938 and
$82,268,871, respectively.
Transactions in written options for the six months ended April 30, 1996 were as
follows:
<TABLE>
<CAPTION>
CONTRACTS PREMIUMS
--------- -----------
<S> <C> <C>
Option contracts written, outstanding at beginning of the period............................. 600 $ 330,674
Options written.............................................................................. 7,112 4,359,917
Options closed............................................................................... (6,612) (4,047,656)
Options exercised............................................................................ (694) (519,049)
Options expired.............................................................................. (400) (110,033)
----- ----------
Option contracts written, outstanding at end of the period................................... 6 $ 13,853
===== ==========
</TABLE>
For the six months ended April 30, 1996, the Fund incurred $4,655 and $33,667 in
brokerage commissions for transactions executed and for clearing options and
futures transactions, respectively, with DWR on behalf of the Fund.
<PAGE> 12
DEAN WITTER FEDERAL SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1996 (unaudited) continued
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At April 30, 1996, the Fund had
transfer agent fees and expenses payable of approximately $63,000.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of 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, 1996
included in Trustees' fees and expenses in the Statement of Operations amounted
to $643. At April 30, 1996, the Fund had an accrued pension liability of $56,415
which is 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
APRIL 30, 1996 FOR THE YEAR
----------------------------- ENDED
OCTOBER 31, 1995
(unaudited) -----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold..................................................... 4,961,437 $ 47,262,061 9,811,932 $ 88,420,535
Reinvestment of dividends................................ 1,459,154 13,812,370 3,274,181 29,717,628
--------- ----------- ---------- -----------
6,420,591 61,074,431 13,086,113 118,138,163
Repurchased.............................................. (10,776,645) (102,213,503) (21,931,274) (197,801,229)
--------- ----------- ---------- -----------
Net decrease............................................. (4,356,054) $ (41,139,072) (8,845,161) $ (79,663,066)
========= =========== ========== ===========
</TABLE>
6. FEDERAL INCOME TAX STATUS
During the year ended October 31, 1995, the Fund utilized approximately $896,000
of its net capital loss carryover.
At October 31, 1995, the Fund had an approximate net capital loss carryover of
$84,656,000, which may be used to offset future capital gains to the extent
provided by regulations, which is 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>
$27,140 $15,672 $6,866 $3,854 $31,124 $84,656
======= ======= ====== ====== ======= =======
</TABLE>
At October 31, 1995, the Fund was required for Federal income tax purposes to
defer approximately $14,165,000 of realized losses on certain closed options and
futures contracts.
<PAGE> 13
DEAN WITTER FEDERAL SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1996 (unaudited) continued
As of October 31, 1995, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales and straddles.
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, 1996, there were no outstanding written options on interest rate
futures and interest rate futures 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, -------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period..................................... $ 9.49 $ 8.74 $ 10.03
-------- ----- -----
Net investment income.................................................... 0.29 0.59 0.60
Net realized and unrealized gain (loss).................................. (0.38) 0.75 (1.28)
-------- ----- -----
Total from investment operations......................................... (0.09) 1.34 (0.68)
-------- ----- -----
Less dividends from net investment income................................ (0.29) (0.59) (0.61)
-------- ----- -----
Net asset value, end of period........................................... $ 9.11 $ 9.49 $ 8.74
======== ===== =====
TOTAL INVESTMENT RETURN+................................................. (1.01)%(1) 15.89% (6.92)%
RATIOS TO AVERAGE NET ASSETS:
Expenses................................................................. 1.52%(2) 1.52% 1.52%
Net investment income.................................................... 6.17%(2) 6.53% 6.56%
SUPPLEMENTAL DATA:
Net assets, end of period, in millions................................... $ 756 $ 829 $ 841
Portfolio turnover rate.................................................. 2%(1) 7% 18%
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31
----------------------------------------------
1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period..................................... $ 9.57 $ 9.46 $ 8.87
----- ----- -----
Net investment income.................................................... 0.65 0.68 0.72
Net realized and unrealized gain (loss).................................. 0.46 0.11 0.59
----- ----- -----
Total from investment operations......................................... 1.11 0.79 1.31
----- ----- -----
Less dividends from net investment income................................ (0.65) (0.68) (0.72)
----- ----- -----
Net asset value, end of period........................................... $ 10.03 $ 9.57 $ 9.46
===== ===== =====
TOTAL INVESTMENT RETURN+................................................. 12.03% 8.56% 15.26%
RATIOS TO AVERAGE NET ASSETS:
Expenses................................................................. 1.50% 1.48% 1.50%
Net investment income.................................................... 6.59% 7.18% 7.79%
SUPPLEMENTAL DATA:
Net assets, end of period, in millions................................... $ 1,128 $ 1,171 $ 1,252
Portfolio turnover rate.................................................. 7% 6% --%++
</TABLE>
- ---------------------
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
++ Less than 0.5%.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 15
(This Page Intentionally Left Blank)
<PAGE> 16
TRUSTEES
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
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, 1996
