<PAGE>
DEAN WITTER NATIONAL MUNICIPAL TRUST
Two World Trade Center, New York, New York 10048
LETTER TO THE SHAREHOLDERS
DEAR SHAREHOLDER:
Bond investments have improved steadily since late last year. Progressive
tightening of monetary policy by the Federal Reserve Board over the 12 months
through February 1995 led to slower economic growth and caused bonds to
rally. The trend toward lower interest rates this year was also aided by a 25
basis point reduction in the fed funds rate in July.
MUNICIPAL MARKET CONDITIONS
Long-term municipal bond yields declined 110 basis points from a high of 7.37
percent in November 1994 to 6.27 percent at the end of September 1995, as
tracked by The Bond Buyer Revenue Bond Index.* This yield decline
corresponded to a 9 percent price increase for callable municipal bonds with
30-year maturities. Similarly, yields on 1-year municipal notes moved from
4.51 percent to 3.96 percent. The yield pickup between 1-and 30-year
maturities narrowed by 55 basis points moving from 286 to 231 basis points.
Tax-exempt bonds began the year by outperforming U.S. Treasury bonds, but
then deteriorated on a relative basis. The ratio of the Revenue Bond Index
yield to the 30-year U.S. Treasury bond yield moved from 89 percent in
December 1994 to 84 percent by the end of February 1995. A declining ratio
means that municipal bond prices have been stronger than U.S. Treasury
prices. In the spring, the municipal market began to discount the risk of
comprehensive changes in the tax code created by flat-tax rhetoric from
Washington. This caused the yield ratio to rise as high as 95 percent. Over
the past 10 years, long municipal yields have averaged 89 percent of U.S.
Treasury yields.
The municipal market continued to experience consolidation in 1995. Municipal
underwriting in the first nine months of the year was down
- ------------
*The Bond Buyer Revenue Bond Index is an arithmetic average of the yields of
25 selected municipal revenue bonds with 30-year maturities. Credit ratings
of these bonds range from Aa1 to Baa1 by Moody's Investors Service, Inc., and
AA+ to A- by Standard & Poor's Corp.
<PAGE>
DEAN WITTER NATIONAL MUNICIPAL TRUST
LETTER TO THE SHAREHOLDERS, continued
20 percent from the same period in 1994. This change followed a 44 percent
drop in volume for all of 1994. Generally, demand for new issues was limited
to investors replacing older issues. CS First Boston and Donaldson Lufkin
Jenrette withdrew from the municipal business and caused further
consolidation.
TAX REFORM
Flat-tax advocates have generated increased publicity for their proposals and
have affected the municipal market since early 1995. Most of the discussion
on proposed tax-reform measures is based on theoretical concepts, containing
broad assumptions and lacking specific detail. Basically, the various plans
raise questions about the fairness of changing from a progressive to a
regressive tax structure. Low flat-tax rate plans call for the elimination of
deductions of mortgage interest, charitable contributions, property taxes and
state and local income taxes. If politicians make tax reform a central issue
in the 1996 elections, media coverage will expand from the financial page to
the front page. When major tax reform turmoil occurred in 1986, municipal
yields briefly exceeded taxable yields.
In addition to the market risk associated with the flat-tax proposals,
municipal credits would also be negatively affected. If mortgage interest and
property tax deductions were eliminated, municipalities would experience a
decline in their property tax base. The loss of state and local income tax
deductions would increase the relative economic disadvantage that high-tax
states already face. The flat tax represents a shift in tax accountability
from the federal to local governments. Taxpayer recognition of the extent of
changes under consideration may impede the passage of comprehensive tax
reform.
DEAN WITTER NATIONAL MUNICIPAL SECURITIES TRUST
GROWTH OF $10,000
LEHMAN BROTHERS
DATE TOTAL MUNICIPAL BOND
INDEX
- ---------------------------------------------------------------
June 2, 1994 $10,000 $10,000
September 30, 1994 $ 9,954 $10,007
September 30, 1995 $10,802 $11,126
- ---------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
1 YEAR LIFE OF FUND
- -----------------------------------------------------------
10.54 (1) 7.46 (1)
7.54 (2) 5.99 (2)
- -------------------------------------------------------------------------------
_____Fund _____Lehman (4)
- ---------------------------------------------------------------
Past performance is not predictive of future returns.
(1) Figure shown assumes reinvestment of all distributions and does not
reflect the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and the
deduction of the maximum applicable contingent deferred sales charge (CDSC)
(1 year-3%, since inception - 2%). See the Fund's current prospectus for
complete details on fees and sales charges.
(3) Closing value, assuming a complete redemption on September 30, 1995.
(4) The Lehman Brothers Municipal Bond Index tracks the performance of
municipal bonds with maturities of 2 years or greater and a minimum credit
rating of Baa or BBB, as rated by Moody's Investors Service, Inc. or Standard &
Poor's Corp., respectively. The Index does not include any expenses, fees or
charges. The Index is unmanaged and should not be considered an investment.
<PAGE>
DEAN WITTER NATIONAL MUNICIPAL TRUST
LETTER TO THE SHAREHOLDERS, continued
FUND PERFORMANCE
Dean Witter National Municipal Trust's total return for the fiscal year ended
September 30, 1995 was 10.54 percent. Tax-free dividends totaling $0.50 per
share were paid. The Fund's net assets more than doubled during the fiscal
year, increasing from $30 million to $64 million. Since its inception on June
2, 1994, the Fund has provided shareholders with an average annual total
return of 7.46 percent. The chart on the previous page illustrates the
performance of a $10,000 investment in the Fund from inception through the
fiscal year ended September 30, 1995, versus the performance of a similar
hypothetical investment in the Lehman Brothers Municipal Bond Index.
PORTFOLIO STRUCTURE
[The chart below represents information which appears as a graphic in the
printed Annual Report]
A Pie chart reflecting the bonds in the portfolio as they are rated by Moody's
Investor Service, Inc. and Standard & Poor's Corporation:
PERCENTAGE MOODY'S CREDIT S&P'S CREDIT
OF BONDS RATINGS RATINGS
__________________________________________________________________________
71% Aaa AAA
__________________________________________________________________________
18% Aa AA
___________________________________________________________________________
11% A A
___________________________________________________________________________
The Fund gradually increased its investments in the long end of the municipal
market during its first full fiscal year. By the end of September, long-term
municipal bonds represented 92 percent of net assets. Tax-free investments
were diversified among 11 specific municipal sectors and 49 separate credits.
The four largest municipal sectors -- general obligation bonds,
transportation, hospital and water & sewer revenue bonds -- represented
approximately 57 percent of net assets. The average maturity and call
protection of the bond holdings were 20 and 9 years, respectively. Over 70
percent of the bonds in the portfolio are rated triple "A" by either Moody's
Investors Service, Inc. or Standard & Poor's Corp. (see the chart at right).
LOOKING AHEAD
The slower pace of economic growth in 1995 and the Federal Reserve Board's
previous interest rate moves have improved bond-market expectations. The
decreasing supply of new issues, combined with significant
<PAGE>
DEAN WITTER NATIONAL MUNICIPAL TRUST
LETTER TO THE SHAREHOLDERS, continued
maturities and calls for redemption, should continue to be positive for the
municipal market. However, tax reduction proposals are likely to continue to
receive publicity and may cloud the outlook for tax-exempt bonds. With
long-term municipal securities yielding more than 90 percent of the yield on
U.S. Treasuries, the market has already begun the process of discounting the
risk that a flat tax may eventually pass.
We appreciate your ongoing support of Dean Witter National Municipal Trust
and look forward to continuing to serve your investment needs.
Very truly yours,
/s/ Charles A. Fiumefreddo
- --------------------------------
CHARLES A. FIUMEFREDDO
Chairman of the Board
<PAGE>
DEAN WITTER NATIONAL MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS September 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- -------------------------------------------------------------------------- -------- ---------- ------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS (91.7%) General Obligation (21.3%)
$ 3,000 North Slope Borough, Alaska, Ser 1994 B (CGIC) ............................ 0.00% 06/30/05 $ 1,779,060
1,000 Santa Margarita / Dana Point Authority, California, Impr Dists #3, 3A, 4
& 4A 1994 Ser B Refg (MBIA) ............................................... 5.75 08/01/20 962,830
500 Florida Board of Education, Cap Outlay Ser 1994 A ......................... 6.10 06/01/24 506,865
1,000 Atlanta, Georgia, Public Impr Ser 1994 A .................................. 6.125 12/01/23 1,009,960
1,500 Hawaii, 1995 Ser C J ...................................................... 6.25 01/01/15 1,536,855
1,000 Chicago Park District, Illinois, Ser 1995 ................................. 6.60 11/15/14 1,050,460
1,000 Chelsea, Massachusetts, School Act of 1948 (AMBAC) ........................ 6.50 06/15/12 1,061,710
1,000 Massachusetts, 1994 Ser C (FGIC) .......................................... 6.75 11/01/12 1,086,280
1,500 New York City, New York, 1995 Ser D (MBIA) ................................ 6.20 02/01/07 1,636,560
1,000 Delaware City School District, Ohio, Construction & Impr dtd 8/15/95
(FGIC) .................................................................... 5.75 12/01/20 988,110
2,000 Washington, 1994 Ser A .................................................... 5.80 09/01/08 2,061,640
- ----------- ------------
14,500 13,680,330
- ----------- ------------
Educational Facilities Revenue (7.9%)
500 Glendale Industrial Development Authority, Arizona, Thunderbird - The
American Graduate School of International Management (Connie Lee) ....... 7.125 07/01/20 561,975
1,000 California Educational Facilities Authority, Claremont Colleges Ser 1992 . 6.375 05/01/22 996,750
500 Atlanta Urban Residential Finance Authority, Georgia, Morehouse College
Refg Ser 1995 (MBIA) ..................................................... 5.75 12/01/14 494,800
2,000 New Jersey Economic Development Authority, Educational Testing Service
Ser 1995 (MBIA) .......................................................... 6.125 05/15/15 2,040,660
500 New York State Dormitory Authority, City University 1994 3rd Resolution
Ser 1 (AMBAC) ............................................................. 6.30 07/01/24 516,500
500 Rhode Island Health & Educational Building Corporation, Providence
College Ser 1993 (MBIA) ................................................... 5.60 11/01/15 477,915
- ----------- ------------
5,000 5,088,600
- ----------- ------------
Electric Revenue (5.3%)
900 Sacramento Municipal Utility District, California, Refg 1994 Ser I (MBIA) 5.75 01/01/15 883,476
1,500 Puerto Rico Electric Power Authority, Power Ser X ......................... 6.00 07/01/15 1,484,430
1,000 Austin, Texas, Combined Utilities Refg Ser 1994 (FGIC) .................... 6.25 05/15/16 1,027,350
- ----------- ------------
3,400 3,395,256
- ----------- ------------
</TABLE>
See Notes to Financial Statements
<PAGE>
DEAN WITTER NATIONAL MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS September 30, 1995, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- -------------------------------------------------------------------------- -------- ---------- ------------
<S> <C> <C> <C> <C>
Hospital Revenue (11.9%)
$ 500 Rancho Mirage Joint Powers Financing Authority, California,
Eisenhower Memorial Hospital COPs ........................................ 7.00% 03/01/22 $ 519,585
2,000 Orange County Health Facilities Authority, Florida, Adventist Health
System/Sunbelt Obligated Group Ser 1995 (AMBAC) ........................... 5.25 11/15/20 1,835,520
1,000 Maryland Health & Higher Educational Facilities Authority, Kernan
Hospital Ser 1994 (Connie Lee) ........................................... 6.10 07/01/24 1,003,780
1,300 New Hampshire Higher Educational & Health Facilities Authority, St Joseph
Hospital Ser 1994 (Connie Lee) ............................................ 6.35 01/01/07 1,399,606
3,000 Jackson, Tennessee, Jackson-Madison County General Hospital Refg & Impr
Ser 1995 (AMBAC) .......................................................... 5.625 04/01/15 2,895,030
- ----------- ------------
7,800 7,653,521
- ----------- ------------
Industrial Development/Pollution Control Revenue (6.4%)
1,500 Hawaii Department of Budget & Finance, Hawaiian Electric Co Ser 1995 A
(AMT) (MBIA) .............................................................. 6.60 01/01/25 1,553,475
2,500 New York State Energy Research & Development Authority, New York State
Electric & Gas Corp 1987 Ser A (AMT) (MBIA) ............................... 6.15 07/01/26 2,524,700
- ----------- ------------
4,000 4,078,175
- ----------- ------------
Mortgage Revenue - Multi-Family (2.4%)
500 Honolulu, Hawaii, Waipahu Towers GNMA Collateralized 1995 Ser A (AMT) ... 6.90 06/20/35 518,235
1,000 Massachusetts Housing Finance Agency, Rental 1994 Ser A (AMT) (AMBAC) ... 6.65 07/01/19 1,028,480
- ----------- ------------
1,500 1,546,715
- ----------- ------------
Mortgage Revenue - Single Family (4.7%)
1,000 Pennsylvania Housing Finance Agency, Ser 1995-96 (AMT) (WI) .............. 6.30 10/01/27 1,002,480
1,000 Tennessee Housing Development Agency, Finance 1994 Ser B (AMT) ........... 6.55 07/01/19 1,019,190
1,000 Utah Housing Finance Agency, Federally Insured/Guaranteed Loans 1994
Issue E (AMT) ............................................................. 6.50 07/01/26 1,022,380
- ----------- ------------
3,000 3,044,050
- ----------- ------------
Public Facilities Revenue (6.3%)
North City West School Facilities Financing Authority, California,
Community Facs Dist #1 Spl Tax
1,000 Ser 1995 B (CGIC) ........................................................ 5.75 09/01/15 969,980
2,000 Ser 1995 B (CGIC) ........................................................ 6.00 09/01/19 1,979,840
1,000 Essex County Improvement Authority, New Jersey, County Jail & Youth House
Ser 1994 (AMBAC) .......................................................... 6.90 12/01/14 1,121,100
- ----------- ------------
4,000 4,070,920
- ----------- ------------
</TABLE>
See Notes to Financial Statements
<PAGE>
DEAN WITTER NATIONAL MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS September 30, 1995, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- -------------------------------------------------------------------------- -------- ---------- ------------
<S> <C> <C> <C> <C>
Transportation Facilities Revenue (12.1%)
$ 1,000 Lee County, Florida, Ser 1995 (MBIA) ...................................... 5.75% 10/01/22 $ 987,830
850 Regional Transportation Authority, Illinois, Ser 1994 A ................... 6.25 06/01/15 865,810
1,000 Kentucky Turnpike Authority, Economic Development Road Revitalization
Refg Ser 1995 (AMBAC) ..................................................... 5.625 07/01/15 986,410
2,500 Maine Turnpike Authority, Ser 1994 (MBIA) ................................. 6.00 07/01/18 2,493,550
1,000 New York State Thruway Authority, General 1995 Ser C (FGIC) .............. 6.00 01/01/25 1,001,510
1,500 Port Authority of New York & New Jersey, Cons One Hundredth Ser
Second Installment** ..................................................... 5.75 12/15/20 1,460,895
------------
7,850 7,796,005
- ----------- ------------
Water & Sewer Revenue (11.8%)
1,000 Birmingham Waterworks & Sewer Board, Alabama, Ser 1993-A .................. 6.00 01/01/20 1,002,700
1,000 Castaic Lake Water Agency, California, Refg Ser 1994 A COPs (MBIA) ....... 6.00 08/01/18 990,090
1,000 Chicago, Illinois, Wastewater Ser 1994 (MBIA) ............................. 6.375 01/01/24 1,027,770
500 Indiana Bond Bank, Revolving Fund Ser 1994 A .............................. 6.00 02/01/16 488,475
2,000 Massachusetts Water Resources Authority, 1992 Ser A ....................... 6.50 07/15/07 2,204,580
500 Santa Fe, New Mexico, Ser 1994 A (AMBAC) .................................. 6.30 06/01/24 514,225
1,250 Philadelphia, Pennsylvania, Water & Wastewater Ser 1995 (MBIA) ........... 6.25 08/01/11 1,335,813
- ----------- ------------
7,250 7,563,653
- ----------- ------------
Other Revenue (1.6%)
1,000 New Jersey Economic Development Authority, Market Transition
Sr Lien Ser 1994 A (MBIA) ................................................ 5.875 07/01/11 1,013,020
- -----------
59,300 TOTAL MUNICIPAL BONDS (Identified Cost $56,842,190) ............................................. 58,930,245
- -----------
</TABLE>
See Notes to Financial Statements
<PAGE>
DEAN WITTER NATIONAL MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS September 30, 1995, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- -------------------------------------------------------------------------- -------- ---------- ------------
<S> <C> <C> <C> <C>
Short-Term Municipal Obligations (7.0%)
$ 1,200 Dade County Health Facilities Authority, Florida, Miami Children's
Hospital Ser 1990 (Demand 10/02/95) ...................................... 4.60*% 01/02/00 $ 1,200,000
400 Massachusetts Port Authority, Refg Ser 1995 A (Demand 10/02/95) .......... 4.75* 07/01/15 400,000
1,100 New Jersey Economic Development Authority, Toys 'R' Us Inc
(Demand 10/02/95) ........................................................ 4.20* 04/01/19 1,100,000
1,300 Delaware County Industrial Development Authority, Pennsylvania,
United Parcel Service Ser 1985 (Demand 10/02/95) ......................... 4.75* 12/01/15 1,300,000
500 Harris County Health Facilities Development Corporation, Texas, Methodist
Hospital Ser 1994 (Demand 10/02/95) ...................................... 4.85* 12/01/25 500,000
------------
4,500 TOTAL SHORT-TERM MUNICIPAL OBLIGATIONS (Identified Cost $4,500,000) ............................. 4,500,000
- ----------- ------------
$63,800 TOTAL INVESTMENTS (Identified Cost $61,342,190) (a) ................................. 98.7% 63,430,245
===========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ...................................... 1.3 845,430
------------
NET ASSETS .......................................................................... 100.0% $64,275,675
============
</TABLE>
- ------------
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
WI Security purchased on a when issued basis.
* Current coupon of variable rate security.
** Joint exemption in New York and New Jersey.
(a) The aggregate cost for federal income tax purposes is $61,342,190;
the aggregate gross unrealized appreciation is $2,088,527 and the
aggregate gross unrealized depreciation is $472, resulting in net
unrealized appreciation of $2,088,055.
Bond Insurance
- ------------- :
AMBAC AMBAC Indemnity Corporation.
CGIC Capital Guaranty Insurance Company.
Connie Lee Connie Lee Insurance Company.
FGIC Financial Guaranty Insurance Company.
MBIA Municipal Bond Investors Assurance Corporation.
Geographic Summary of Investments
Based on Market Value as a Percent of Net Assets
September 30, 1995
<TABLE>
<CAPTION>
<S> <C>
Alabama ........ 1.5%
Alaska ......... 2.8
Arizona ........ 0.9
California ..... 11.4
Florida ........ 7.0
Georgia ........ 2.3
Hawaii ......... 5.6
Illinois ....... 4.6%
Indiana ........ 0.8
Kentucky ....... 1.5
Maine .......... 3.9
Maryland ....... 1.6
Massachusetts . 9.0
New Hampshire . 2.2
New Jersey ..... 8.2%
New Mexico ..... 0.8
New York ....... 8.8
Ohio ........... 1.5
Pennsylvania .. 5.7
Puerto Rico ... 2.3
Rhode Island .. 0.7
Tennessee ...... 6.1%
Texas .......... 2.4
Utah ........... 1.6
Washington ..... 3.2
Joint Exemption 2.3
------
Total .......... 98.7%
======
See Notes to Financial Statements.
</TABLE>
<PAGE>
DEAN WITTER NATIONAL MUNICIPAL TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS :
Investments in securities, at value
(identified cost $61,342,190) ............. $63,430,245
Cash ....................................... 128,550
Receivable for:
Shares of beneficial interest sold ...... 973,284
Interest ................................. 820,324
Deferred organizational expenses ........... 113,095
Receivable from affiliate .................. 53,107
Prepaid expenses and other assets .......... 4,222
-------------
TOTAL ASSETS ............................. 65,522,827
-------------
LIABILITIES :
Payable for:
Investments purchased .................... 1,009,275
Plan of distribution fee ................. 29,490
Shares of beneficial interest
repurchased ............................. 19,522
Dividends to shareholders ................ 18,441
Accrued expenses and other payables ....... 57,329
Organizational expenses payable ............ 113,095
-------------
TOTAL LIABILITIES ........................ 1,247,152
-------------
NET ASSETS :
Paid-in-capital ............................ 62,177,772
Net unrealized appreciation ................ 2,088,055
Accumulated undistributed net investment
income .................................... 9,072
Accumulated undistributed net realized gain 776
-------------
NET ASSETS ............................... $64,275,675
=============
NET ASSET VALUE PER SHARE,
6,183,399 shares outstanding (unlimited
shares authorized of $.01 par value) ..... $ 10.39
=============
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME :
INTEREST INCOME ....................... $2,500,615
------------
EXPENSES
Plan of distribution fee .............. 271,201
Investment management fee ............. 158,216
Professional fees ..................... 53,598
Shareholder reports and notices ...... 40,745
Organizational expenses ............... 30,784
Transfer agent fees and expenses ..... 21,733
Registration fees ..................... 17,784
Other ................................. 10,129
------------
Total Expenses before fees paid
indirectly and Amounts
Waived/Assumed ...................... 604,190
LESS: AMOUNTS WAIVED/ASSUMED ....... (329,874)
Less: Fees paid indirectly .......... (3,115)
------------
Total Expenses after fees paid
indirectly and Amounts
Waived/Assumed ...................... 271,201
------------
NET INVESTMENT INCOME ............... 2,229,414
------------
NET REALIZED AND UNREALIZED GAIN :
Net realized gain ..................... 776
Net change in unrealized depreciation 2,452,914
------------
NET GAIN ............................ 2,453,690
------------
NET INCREASE .......................... $4,683,104
============
</TABLE>
See Notes to Financial Statements.
<PAGE>
DEAN WITTER NATIONAL MUNICIPAL TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED JUNE 2, 1994* THROUGH
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
- ------------------------------------------------------ ------------------ ---------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS :
OPERATIONS :
Net investment income ................................. $ 2,229,414 $ 186,504
Net realized gain ..................................... 776 --
Net change in unrealized depreciation ................. 2,452,914 (364,859)
------------------ ---------------------
NET INCREASE (DECREASE) ............................. 4,683,104 (178,355)
Dividends from net investment income .................. (2,220,342) (186,504)
Net increase from transactions in shares of beneficial
interest ............................................. 31,953,161 30,124,611
------------------ ---------------------
TOTAL INCREASE ...................................... 34,415,923 29,759,752
NET ASSETS :
Beginning of period ................................... 29,859,752 100,000
------------------ ---------------------
END OF PERIOD
(Including undistributed net investment income of
$9,072 and $0, respectively) ........................ $64,275,675 $29,859,752
================== =====================
</TABLE>
- ------------
* Commencement of operations.
See Notes to Financial Statements.
<PAGE>
DEAN WITTER NATIONAL MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS September 30, 1995
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter National Municipal 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 was organized as a
Massachusetts business trust on March 29, 1994 and on May 10, 1994 issued
10,000 shares of beneficial interest for $100,000 to Dean Witter InterCapital
Inc. (the "Investment Manager") to effect the Fund's initial capitalization.
The Fund commenced operations on June 2, 1994.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- -- Portfolio securities are valued for the
Fund by an outside independent pricing service approved by the Trustees. The
pricing service has informed the Fund that in valuing the Fund's portfolio
securities, it uses both a computerized matrix of tax-exempt securities and
evaluations by its staff, in each case based on information concerning market
transactions and quotations from dealers which reflect the bid side of the
market each day. The Fund's portfolio securities are thus valued by reference
to a combination of transactions and quotations for the same or other
securities believed to be comparable in quality, coupon, maturity, type of
issue, call provisions, trading characteristics and other features deemed to
be relevant. Short-term debt securities having a maturity date of more than
sixty days at time of purchase are valued on a mark-to-market basis until
sixty days prior to maturity and thereafter at amortized cost based on their
value on the 61st day. Short-term debt securities having a maturity date of
sixty days or less at the time of purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). Realized gains
and losses on security transactions are determined by the identified cost
method. Discounts are accreted and premiums are amortized on securities
purchased over the life of the respective securities. Interest income is
accrued daily.
C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable and nontaxable income to its
shareholders. Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to its shareholders on the record date. The amount of
dividends and distributions from net investment income 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
<PAGE>
DEAN WITTER NATIONAL MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS September 30, 1995, continued
differences do not require reclassification. Dividends and distributions
which exceed net investment income and net realized capital gains for
financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of
net realized capital gains. To the extent they exceed net investment income
and net realized capital gains for tax purposes, they are reported as
distributions of paid-in-capital.
E. ORGANIZATIONAL EXPENSES -- The Investment Manager paid the organizational
expenses of the Fund in the amount of approximately $154,000 which will be
reimbursed, exclusive of amounts assumed of $40,905. Such expenses have been
deferred and are being amortized by the Fund on the straight-line method over
a period not to exceed five years from the commencement of operations.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement, the Fund pays a management
fee, accrued daily and payable monthly, by applying the annual rate of 0.35%
to the Fund's net assets determined as of the close of each business day.
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.
The Investment Manager has undertaken to assume all expenses (except for the
plan of distribution fee and brokerage fees) and waive the compensation
provided for in the Agreement until December 31, 1995.
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 0.60% 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 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 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 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, account executives of Dean Witter
Reynolds Inc., an
<PAGE>
DEAN WITTER NATIONAL MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS September 30, 1995, continued
affiliate of the Investment Manager and Distributor, and other 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
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 year ended September 30,
1995, it received approximately $144,000 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
The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the year ended September 30, 1995
aggregated $39,204,511 and $786,191, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At September 30, 1995, the Fund
had transfer agent fees and expenses payable of approximately $2,300.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE PERIOD JUNE 2, 1994*
SEPTEMBER 30, 1995 THROUGH SEPTEMBER 30, 1994
----------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
------------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold ..................... 4,055,681 $ 40,945,963 3,078,785 $30,761,843
Reinvestment of dividends 129,694 1,316,413 11,037 109,831
------------- -------------- ----------- -------------
4,185,375 42,262,376 3,089,822 30,871,674
Repurchased .............. (1,026,786) (10,309,215) (75,012) (747,063)
------------- -------------- ----------- -------------
Net increase ............. 3,158,589 $ 31,953,161 3,014,810 $30,124,611
============= ============== =========== =============
<FN>
- ------------
* Commencement of operations .
</TABLE>
<PAGE>
DEAN WITTER NATIONAL MUNICIPAL TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR JUNE 2, 1994*
ENDED THROUGH
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
- ------------------------------------------------- ---------------------- ----------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ............. $ 9.87 $10.00
---------------------- ----------------------
Net investment income ............................ 0.50 0.09
Net realized and unrealized gain (loss) ......... 0.52 (0.13)
---------------------- ----------------------
Total from investment operations ................. 1.02 (0.04)
Dividends from net investment income ............. (0.50) (0.09)
---------------------- ----------------------
Net asset value, end of period ................... $10.39 $ 9.87
====================== ======================
TOTAL INVESTMENT RETURN+ ......................... 10.54% (0.46)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ......................................... 0.60%(4) 0.60 %(2)(3)
Net investment income ............................ 4.93%(4) 3.07 %(2)(3)
SUPPLEMENTAL DATA:
Net asset value, end of period, in thousands .... $64,276 $29,860
Portfolio turnover rate .......................... 2% -- %
<FN>
- ------------
* Commencement of operations .
+ Does not reflect the deduction of sales charge.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had borne all expenses that were assumed or waived by the
Investment Manager, the above annualized expense and net investment
income ratios would have been 2.08% and 1.59%, respectively.
(4) If the Fund had borne all expenses that were assumed or waived by the
Investment Manager, the above expense and net investment income ratios
would have been 1.34% (which includes 0.01% gross-up for custody cash
credits) and 4.20%, respectively.
</TABLE>
See Notes to Financial Statements
<PAGE>
DEAN WITTER NATIONAL MUNICIPAL TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF DEAN WITTER NATIONAL MUNICIPAL TRUST
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Dean Witter
National Municipal Trust (the "Fund") at September 30, 1995, the results of
its operations for the year then ended, and the changes in its net assets and
the financial highlights for the year then ended and for the period June 2,
1994 (commencement of operations) through September 30, 1994, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities owned at
September 30, 1995 by correspondence with the custodian and a broker, provide
a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
November 10, 1995
1995 FEDERAL TAX NOTICE (unaudited)
During the year ended September 30, 1995, the Fund paid to the shareholders
$0.50 per share from net investment income. All of the Fund's dividends from
net investment income were exempt interest dividends, excludable from gross
income for Federal income tax purposes.
<PAGE>
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
James F. Willison
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and
trustees, fees, expenses and other pertinent information, please see the
prospectus of the Fund.
This report is not authorized for distribution to prospective investors in
the Fund unless preceded or accompanied by an effective prospectus.
DEAN WITTER
NATIONAL MUNICIPAL
TRUST
ANNUAL REPORT
SEPTEMBER 30, 1995
