<PAGE> 1
DEAN WITTER NATIONAL MUNICIPAL TRUST
Two World Trade Center, New York, New York 10048
LETTER TO THE SHAREHOLDERS March 31, 1997
DEAR SHAREHOLDER:
We are pleased to present the semiannual report on the operations of Dean Witter
National Municipal Trust for the six-month period ended March 31, 1997.
Economic growth moderated during the third quarter of 1996, causing fixed-income
yields to move lower through November. However, increased consumer spending led
to an acceleration of economic activity, which prompted yields to rise between
December and March. On March 25, 1997, the Federal Reserve Board raised the
federal-funds rate 25 basis points to 5.50 percent in a preemptive move against
a possible acceleration in the rate of inflation.
MUNICIPAL MARKET CONDITIONS
Long-term insured municipal revenue bond yields rose from 5.70 percent in
September 1996 to 5.85 percent in March 1997. Although municipal yields followed
the pattern of Treasuries, they generally were less volatile.
The ratio of insured municipal revenue bond yields to 30-year U.S. Treasury
yields ranged from 86 percent to 81 percent and ended March at 82 percent. A
declining ratio means that municipal bond prices outperformed U.S. Treasury
prices. Over the past three years the annual range of the ratio averaged 81 to
92 percent.
On the supply side of the market, new-issue municipal volume increased 14
percent to $183 billion in 1996. Underwriting volume this year is expected to
exceed bond maturities and redemptions.
PERFORMANCE
Dean Witter National Municipal Trust's net asset value (NAV) declined modestly
from $10.50 to $10.44 per share during the six-month period ended March 31,
1997. Based on this NAV change, plus reinvestment of tax-free dividends of $0.23
per share, the Fund's total return was 1.64 percent. Net assets stood at $84
million.
<PAGE> 2
DEAN WITTER NATIONAL MUNICIPAL TRUST
LETTER TO THE SHAREHOLDERS March 31, 1997, continued
PORTFOLIO STRUCTURE
The Fund's investments were diversified among 10 municipal sectors and 53
separate issuers. In response to the risk of higher interest rates, cash and
short-term investments increased to a range of 5 to 10 percent. The Fund's
average maturity shortened to 17 years. This was accomplished by purchasing
maturities ranging between 15 and 25 years, and selling bonds with 20 to 30 year
maturities. Call protection was maintained at nearly 8 years. The portfolio has
consistently sought to upgrade quality, with nearly 90 percent of its long-term
holdings rated double "A" or better by Moody's Investors Service, Inc. or
Standard & Poor's Corp.
CREDIT RATINGS AS OF MARCH 31, 1997
(% OF TOTAL LONG-TERM PORTFOLIO)
Aaa or AAA - 73%
Baa or BBB - 5% [PIE CHART A]
A or A - 6%
Aa or AA - 16%
AS MEASURED BY MOODY'S INVESTORS SERVICE, INC. OR STANDARD &
POOR'S CORP.
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE
FIVE LARGEST SECTORS AS OF MARCH 31, 1997
(% OF NET ASSETS)
General Obligation - 18%
Water & Sewer - 13%
Transportation - 12% [PIE CHART B]
Hospital - 11%
Electric - 9%
All Others - 37%
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE
LOOKING AHEAD
With the collapse of flat-tax proposals, municipal bonds have improved relative
to U.S. Treasury securities. In their average range, tax-free yields are
currently somewhat rich compared to Treasury yields. If municipal yields were to
rise significantly in the future, the Fund would tend to sell its more defensive
holdings in order to extend maturity and increase call protection.
<PAGE> 3
DEAN WITTER NATIONAL MUNICIPAL TRUST
LETTER TO THE SHAREHOLDERS March 31, 1997, continued
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> 4
DEAN WITTER NATIONAL MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS March 31, 1997 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS (89.3%)
General Obligation (17.7%)
North Slope Borough, Alaska,
$ 3,000 Ser 1994 B (FSA)........................................................ 0.00% 06/30/05 $ 1,948,500
3,925 Ser 1996 B (MBIA)....................................................... 0.00 06/30/06 2,397,468
1,000 Santa Margarita/Dana Point Authority, California, Impr Dists #3, 3A,
4 & 4A 1994 Ser B Refg (MBIA)........................................... 5.75 08/01/20 977,320
1,000 Atlanta, Georgia, Public Impr Ser 1994 A................................. 6.125 12/01/23 1,016,300
2,000 Chicago, Illinois, Refg Ser 1995 B (FGIC)................................ 5.125 01/01/25 1,777,000
1,000 Chicago Park District, Illinois, Ser 1995................................ 6.60 11/15/14 1,070,010
1,000 Chelsea, Massachusetts, School Act of 1948 (AMBAC)....................... 6.50 06/15/12 1,069,880
1,500 New York City, New York, 1995 Ser D (MBIA)............................... 6.20 02/01/07 1,596,375
1,000 Delaware City School District, Ohio, Constr & Impr dtd 08/15/95 (FGIC)... 5.75 12/01/20 989,710
2,000 Washington, 1995 Ser A................................................... 5.80 09/01/08 2,059,820
- -------- ------------
17,425 14,902,383
- -------- ------------
Educational Facilities Revenue (6.6%)
1,000 California Educational Facilities Authority, Claremont Colleges Ser
1992.................................................................... 6.375 05/01/22 1,030,030
500 Atlanta Urban Residential Finance Authority, Georgia, Morehouse College
Refg Ser 1995 (MBIA).................................................... 5.75 12/01/14 501,535
2,000 New Jersey Economic Development Authority, Educational Testing Service
Ser 1995 (MBIA)......................................................... 6.125 05/15/15 2,064,540
New York State Dormitory Authority,
500 City University 1994 3rd Resolution Ser 1 (AMBAC)....................... 6.30 07/01/24 520,190
500 Cooper Union Ser 1996 (AMBAC)........................................... 5.375 07/01/20 466,970
1,000 Virginia Polytechnic Institute & State University, Ser 1996 A............ 5.50 06/01/16 965,480
- -------- ------------
5,500 5,548,745
- -------- ------------
Electric Revenue (9.1%)
Eugene, Oregon, Electric Utility
1,195 Ser 1996 (FSA).......................................................... 5.375 08/01/11 1,177,900
1,260 Ser 1996 (FSA).......................................................... 5.375 08/01/12 1,234,787
1,000 Ser 1996 (FSA).......................................................... 5.375 08/01/13 973,950
1,500 Puerto Rico Electric Power Authority, Power Ser X........................ 6.00 07/01/15 1,499,835
1,000 Austin, Texas, Combined Utilities Refg Ser 1994 (FGIC)................... 6.25 05/15/16 1,033,490
2,000 Intermountain Power Agency, Utah, Refg 1996 Ser D (Secondary FSA)........ 5.00 07/01/21 1,766,860
- -------- ------------
7,955 7,686,822
- -------- ------------
Hospital Revenue (11.4%)
1,465 Birmingham - Carraway Special Care Facilities Financing Authority,
Alabama, Carraway Methodist Health Ser 1995-A (Connie Lee).............. 6.25 08/15/09 1,559,844
2,000 Orange County Health Facilities Authority, Florida, Adventist
Health/Sunbelt Obligated Group Ser 1995 (AMBAC)......................... 5.25 11/15/20 1,830,560
1,000 Maryland Health & Higher Educational Facilities Authority, Kernan
Hospital Ser 1994 (Connie Lee).......................................... 6.10 07/01/24 1,000,580
1,300 New Hampshire Higher Educational & Health Facilities Authority, St Joseph
Hospital Ser 1994 (Connie Lee).......................................... 6.35 01/01/07 1,371,812
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 5
DEAN WITTER NATIONAL MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS March 31, 1997 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>> <C> <C> <C>
$ 2,000 University of North Carolina, Hospitals at Chapel Hill Ser 1996.......... 5.25% 02/15/19 $ 1,834,400
2,000 Jackson, Tennessee, Jackson-Madison County General Hospital Refg & Impr
Ser 1995 (AMBAC)........................................................ 5.625 04/01/15 1,950,320
- -------- ------------
9,765 9,547,516
- -------- ------------
Industrial Development/Pollution Control Revenue (1.9%)
1,500 Hawaii Department of Budget & Finance, Hawaiian Electric Co Ser 1995 A
- -------- (AMT) (MBIA)............................................................ 6.60 01/01/25 1,579,170
------------
Mortgage Revenue - Multi-Family (1.9%)
500 Honolulu, Hawaii, Waipahu Towers GNMA Collateralized 1995 Ser A (AMT).... 6.90 06/20/35 524,595
1,000 Massachusetts Housing Finance Agency, Rental 1994 Ser A (AMT) (AMBAC).... 6.65 07/01/19 1,036,890
- -------- ------------
1,500 1,561,485
- -------- ------------
Mortgage Revenue - Single Family (4.6%)
2,000 Alaska Housing Finance Corporation, Governmental 1995 Ser A (MBIA)....... 5.875 12/01/24 1,942,620
1,000 Tennessee Housing Development Agency, Finance 1994 Ser B (AMT)........... 6.55 07/01/19 1,024,240
845 Utah Housing Finance Agency, Federally Insured/Guaranteed Loans 1994
Issue E (AMT)........................................................... 6.50 07/01/26 861,351
- -------- ------------
3,845 3,828,211
- -------- ------------
Public Facilities Revenue (2.4%)
2,000 North City West School Facilities Authority, California, Community Facs
- -------- Dist #1 Special Tax Ser 1995 B (FSA).................................... 6.00 09/01/19 2,008,080
------------
Transportation Facilities Revenue (11.5%)
2,000 Dade County, Florida, Seaport Refg Ser 1996 (MBIA)....................... 5.125 10/01/16 1,845,760
1,000 Lee County, Florida, Ser 1995 (MBIA)..................................... 5.75 10/01/22 985,530
850 Regional Transportation Authority, Illinois, Ser 1994 A.................. 6.25 06/01/15 881,093
1,000 Kentucky Turnpike Authority, Economic Development Road Revitalization
Refg Ser 1995 (AMBAC)................................................... 5.625 07/01/15 985,890
2,500 Maine Turnpike Authority, Ser 1994 (MBIA)................................ 6.00 07/01/18 2,512,050
1,000 New York State Thruway, Authority General 1995 Ser C (FGIC).............. 6.00 01/01/25 1,003,550
1,500 Port Authority of New York & New Jersey, Cons One Hundredth Ser Second
Installment +........................................................... 5.75 12/15/20 1,461,990
- -------- ------------
9,850 9,675,863
- -------- ------------
Water & Sewer Revenue (12.5%)
1,000 Birmingham Waterworks & Sewer Board, Alabama, Ser 1993-A................. 6.00 01/01/20 1,010,370
1,000 Jefferson County, Alabama, Sewer Refg Ser 1997-A (FGIC).................. 5.375 02/01/27 925,320
1,000 Castaic Lake Water Agency, California, Refg Ser 1994 A COPs (MBIA)....... 6.00 08/01/18 1,004,150
1,000 Dade County, Florida, Water & Sewer Ser 1995 (FGIC)...................... 5.50 10/01/15 975,090
1,000 Chicago, Illinois, Wastewater Ser 1994 (MBIA)............................ 6.375 01/01/24 1,033,230
2,000 Massachusetts Water Resources Authority, 1992 Ser A...................... 6.50 07/15/07 2,203,280
2,000 Asheville, North Carolina, Water Ser 1996 (FGIC)......................... 5.70 08/01/25 1,953,140
1,250 Philadelphia, Pennsylvania, Water & Wastewater Ser 1995 (MBIA)........... 6.25 08/01/11 1,344,600
- -------- ------------
10,250 10,449,180
- -------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 6
DEAN WITTER NATIONAL MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS March 31, 1997 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Other Revenue (3.8%)
$ 2,000 Mashantucket (Western) Pequot Tribe, Connecticut, Special 1996 Ser A
(a)..................................................................... 6.50% 09/01/05 $ 2,127,660
1,000 New Jersey Economic Development Authority, Market Transition Sr Lien Ser
1994 A (MBIA)........................................................... 5.875 07/01/11 1,024,980
- -------- ------------
3,000 3,152,640
- -------- ------------
Refunded (5.9%)
500 Glendale Industrial Development Authority, Arizona, Thunderbird - The
American Graduate School of International Management Ser 1994 (Connie
Lee).................................................................... 7.125 07/01/05++ 573,650
500 Rancho Mirage Joint Powers Financing Authority, California, Eisenhower
Memorial Hospital COPs.................................................. 7.00 03/01/02++ 556,725
1,500 Hawaii, 1995 Ser C J..................................................... 6.25 01/01/05++ 1,549,050
1,000 Massachusetts, 1994 Ser C (FGIC)......................................... 6.75 11/01/04++ 1,121,530
1,000 Essex County Improvement Authority, New Jersey, County Jail & Youth House
Ser 1994 (AMBAC)........................................................ 6.90 12/01/04++ 1,137,090
- -------- ------------
4,500 4,938,045
- -------- ------------
77,090 TOTAL MUNICIPAL BONDS (Identified Cost $72,867,285)............................................. 74,878,140
- -------- ------------
SHORT-TERM MUNICIPAL OBLIGATIONS (9.3%)
3,600 Philadelphia Hospitals & Higher Educational Facilities Authority,
Pennsylvania, Children's Hospital of Philadelphia 1996 Ser A (Demand
04/01/97)............................................................... 3.85* 03/01/27 3,600,000
4,200 Harris County Health Facilities Development Corporation, Texas, Methodist
Hospital Ser 1994 (Demand 04/01/97)..................................... 3.85* 12/01/25 4,200,000
- -------- ------------
7,800 TOTAL SHORT-TERM MUNICIPAL OBLIGATIONS (Identified Cost $7,800,000)............................. 7,800,000
- -------- ------------
$84,890 TOTAL INVESTMENTS (Identified Cost $80,667,285) (b).................................... 98.6% 82,678,140
========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES........................................... 1.4 1,194,857
---- ------------
NET ASSETS.............................................................................. 100.0% $83,872,997
===== ============
</TABLE>
- ---------------------
<TABLE>
<C> <S>
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
+ Joint exemption in New York and New Jersey.
++ Prerefunded to call date shown.
* Current coupon of variable rate demand obligation.
(a) Resale is restricted to qualified institutional investors.
(b) The aggregate cost for federal income tax purposes approximates identified cost. The aggregate gross
unrealized appreciation is $2,436,525 and the aggregate gross unrealized depreciation is $425,670,
resulting in net unrealized appreciation of $2,010,855.
Bond Insurance:
AMBAC AMBAC Indemnity Corporation.
Connie Lee Connie Lee Insurance Company.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 7
DEAN WITTER NATIONAL MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS March 31, 1997 (unaudited) continued
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
March 31, 1997
<TABLE>
<S> <C>
Alabama.................. 4.2%
Alaska................... 7.5
Arizona.................. 0.7
California............... 6.6
Connecticut.............. 2.5
Florida.................. 6.7
Georgia.................. 1.8
Hawaii................... 4.4
Illinois................. 5.7
Kentucky................. 1.2
Maine.................... 3.0%
Maryland................. 1.2
Massachusetts............ 6.5
New Hampshire............ 1.6
New Jersey............... 6.8
New York................. 6.0
North Carolina........... 4.5
Ohio..................... 1.2
Oregon................... 4.0
Pennsylvania............. 5.9
Puerto Rico.............. 1.8%
Tennessee................ 3.5
Texas.................... 6.2
Utah..................... 3.1
Virginia................. 1.2
Washington............... 2.5
Joint Exemption*......... (1.7)
----
Total.................... 98.6%
====
</TABLE>
- ---------------------
* Joint exemption has been included in both geographic locations.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 8
DEAN WITTER NATIONAL MUNICIPAL TRUST
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1997 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $80,667,285)......................................... $82,678,140
Cash................................................................... 147,202
Receivable for:
Interest........................................................... 1,115,138
Shares of beneficial interest sold................................. 56,198
Deferred organizational expenses....................................... 64,207
Prepaid expenses....................................................... 53,078
------------
TOTAL ASSETS....................................................... 84,113,963
------------
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased.......................... 91,406
Dividends to shareholders.......................................... 52,277
Plan of distribution fee........................................... 42,792
Investment management fee.......................................... 18,609
Accrued expenses....................................................... 35,882
------------
TOTAL LIABILITIES.................................................. 240,966
------------
NET ASSETS:
Paid-in-capital........................................................ 81,876,721
Net unrealized appreciation............................................ 2,010,855
Accumulated net realized loss.......................................... (14,579)
------------
NET ASSETS......................................................... $83,872,997
============
NET ASSET VALUE PER SHARE,
8,030,246 shares outstanding
(unlimited shares authorized of $.01 par value)....................... $10.44
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 9
DEAN WITTER NATIONAL MUNICIPAL TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the six months ended March 31, 1997 (unaudited)
NET INVESTMENT INCOME:
INTEREST INCOME......................................................... $2,306,734
----------
EXPENSES
Plan of distribution fee................................................ 247,642
Investment management fee............................................... 146,237
Professional fees....................................................... 24,306
Registration fees....................................................... 21,546
Transfer agent fees and expenses........................................ 15,478
Shareholder reports and notices......................................... 15,160
Organizational expenses................................................. 14,748
Trustees' fees and expenses............................................. 6,889
Custodian fees.......................................................... 2,145
Other................................................................... 5,654
----------
TOTAL EXPENSES...................................................... 499,805
LESS: AMOUNTS REIMBURSED/WAIVED..................................... (41,142)
LESS: EXPENSE OFFSET................................................ (2,111)
----------
NET EXPENSES........................................................ 456,552
----------
NET INVESTMENT INCOME............................................... 1,850,182
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain....................................................... 39,589
Net change in unrealized appreciation................................... (509,458)
----------
NET LOSS............................................................ (469,869)
----------
NET INCREASE............................................................ $1,380,313
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 10
DEAN WITTER NATIONAL MUNICIPAL TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX
MONTHS ENDED FOR THE YEAR
MARCH 31, ENDED
1997 SEPTEMBER 30, 1996
------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income.............................. $ 1,850,182 $ 3,636,862
Net realized gain (loss)........................... 39,589 (54,168)
Net change in unrealized appreciation.............. (509,458) 432,258
----------- -----------
NET INCREASE................................... 1,380,313 4,014,952
----------- -----------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income.............................. (1,853,174) (3,642,942)
Net realized gain.................................. -- (776)
----------- -----------
TOTAL.......................................... (1,853,174) (3,643,718)
----------- -----------
Net increase from transactions in shares of
beneficial interest............................... 2,729,653 16,969,296
----------- -----------
NET INCREASE................................... 2,256,792 17,340,530
NET ASSETS:
Beginning of period................................ 81,616,205 64,275,675
----------- -----------
END OF PERIOD
(Including undistributed net investment income
of $0 and $2,992, respectively)................ $83,872,997 $81,616,205
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 11
DEAN WITTER NATIONAL MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 1997 (unaudited)
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's investment objective is to
provide a high level of current income which is exempt from federal income tax,
consistent with the preservation of capital. The Fund was organized as a
Massachusetts business trust on March 29, 1994 and commenced operations on June
2, 1994.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- Portfolio securities are valued by an outside
independent pricing service approved by the Trustees. The pricing service has
informed the Fund that in valuing the 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 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 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.
<PAGE> 12
DEAN WITTER NATIONAL MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 1997 (unaudited) continued
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
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 -- Dean Witter InterCapital Inc. (the "Investment
Manager") paid the organizational expenses of the Fund in the amount of $148,017
which were reimbursed exclusive of $46,853 which was absorbed by the Investment
Manager. Such expenses have been deferred and are being amortized 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 the Investment
Manager 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.
For the period January 1, 1996 through June 30, 1997, The Investment Manager
will continue to waive the management fee and reimburse expenses (except for the
plan of distribution fee) to the extent they exceed 0.50% of daily net assets.
<PAGE> 13
DEAN WITTER NATIONAL MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 1997 (unaudited) continued
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 affiliate of the Investment
Manager and Distributor, and other employees and 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.
Although there is no legal obligation for the Fund to pay expenses incurred in
excess of payments made to the Distributor under the Plan and the proceeds of
contingent deferred sales charges paid by investors upon redemption of shares,
if for any reason the Plan is terminated, the Trustees will consider at that
time the manner in which to treat such expenses. The Distributor has advised the
Fund that such excess amounts, included carrying charges, totaled $2,348,350 at
March 31, 1997.
The Distributor has informed the Fund that for the six months ended March 31,
1997, it received approximately $81,225 in contingent deferred sales charges
from certain redemptions of the Fund's shares.
<PAGE> 14
DEAN WITTER NATIONAL MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 1997 (unaudited) continued
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the six months ended March 31, 1997 aggregated
$7,616,803 and $7,763,410, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At March 31, 1997, the Fund had
transfer agent fees and expenses payable of approximately $5,500.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
MARCH 31, 1997 FOR THE YEAR
------------------------- ENDED
SEPTEMBER 30, 1996
(unaudited) ---------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Sold............................................................ 932,585 $9,878,215 2,938,811 $31,065,314
Reinvestment of dividends and distributions..................... 95,845 1,014,913 198,921 2,094,383
--------- ---------- ---------- -----------
1,028,430 10,893,128 3,137,732 33,159,697
Repurchased..................................................... (770,833) (8,163,475) (1,548,482) (16,190,401)
--------- ---------- ---------- -----------
Net increase.................................................... 257,597 $2,729,653 1,589,250 $16,969,296
========= =========== ========== ============
</TABLE>
6. FEDERAL INCOME TAX STATUS
Capital losses incurred after October 31 ("post-October losses") within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. The Fund incurred and will elect to defer net capital losses of
approximately $54,000 during fiscal 1996.
<PAGE> 15
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 SIX FOR THE PERIOD
MONTHS ENDED FOR THE YEAR FOR THE YEAR JUNE 2, 1994*
MARCH 31, ENDED ENDED THROUGH
1997 SEPTEMBER 30, 1996 SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
---------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........ $ 10.50 $ 10.39 $ 9.87 $ 10.00
------ ------ ------ ------
Net investment income....................... 0.23 0.50 0.50 0.09
Net realized and unrealized gain (loss)..... (0.06) 0.11 0.52 (0.13)
------ ------ ------ ------
Total from investment operations............ 0.17 0.61 1.02 (0.04)
------ ------ ------ ------
Less dividends from net investment income... (0.23) (0.50) (0.50) (0.09)
------ ------ ------ ------
Net asset value, end of period.............. $ 10.44 $ 10.50 $ 10.39 $ 9.87
====== ====== ====== ======
TOTAL INVESTMENT RETURN+.................... 1.64%(1) 5.94% 10.54% (0.46)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................... 1.09%(2)(3) 0.97%(3) 0.60%(3) 0.60% (2)(3)
Net investment income....................... 4.43%(2)(3) 4.72%(3) 4.93%(3) 3.07% (2)(3)
SUPPLEMENTAL DATA:
Net asset value, end of period, in
thousands.................................. $83,873 $81,616 $64,276 $29,860
Portfolio turnover rate..................... 10%(1) 13% 2% -- %++
</TABLE>
- ---------------------
* Commencement of operations.
+ 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.
(3) If the Fund had borne all expenses that were assumed or waived by the
Investment Manager, the annualized expense and net investment income ratios
would have been 2.08% and 1.59%, respectively, for the period ended
September 30, 1994, 1.34% (including 0.01% of expense offsets) and 4.20%,
respectively, for the year ended September 30, 1995, 1.19% (including 0.01%
of expense offsets) and 4.50%, respectively, for the year ended September
30, 1996 and 1.20% (including 0.01% of expense offsets) and 4.32%,
respectively for the six months ended March 31, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 16
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and General Counsel
James F. Willison
Vice President
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 proceeded or accompanied by an effective prospectus.
DEAN WITTER
NATIONAL MUNICIPAL
TRUST
[PICTURE]
SEMIANNUAL REPORT
MARCH 31, 1997
