<PAGE> 1
ACTIVE ASSETS GOVERNMENT SECURITIES TRUST
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
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As of December 31, 1994, Active Assets Government Securities Trust had
assets in excess of $535 million with an average maturity of 54 days. The
Trust's annualized yield for the twelve-month period ended December 31, 1994 was
3.61 percent.
CONTINUED YIELD CLIMB
Continuing the trend which began in early February, 1994, money market
yields climbed significantly during the second half of 1994. The yield on the
three-month Treasury bills increased from 4.25 percent in early July to over
5.50 percent by late December. Inflation rates have remained in check, with
consumer prices for 1994 rising by 2.7 percent. However, the Federal Reserve
Board has been attempting to stay ahead of possible inflationary pressures which
could arise as the pace of economic activity stays strong and there is less idle
capacity.
PORTFOLIO COMPOSITION AND STRUCTURE
On December 31, 1994, approximately 99 percent of the Trust's portfolio was
invested in Federal agency obligations, with the remaining one percent invested
in U.S. Treasury bills. More than 76 percent of the Trust's assets mature in
less than three months. Therefore, the portfolio is well positioned to take
advantage of any further upward rate pressures and has a very high degree of
liquidity. We continue to operate the Trust in a straight-forward, conservative
style without the use of "structured notes" or derivatives which fluctuate
excessively when interest rates change.
LOOKING AHEAD
The U.S. economy proved to be a powerful engine of growth during 1994,
producing robust job creation. In December, unemployment fell to 5.4 percent,
its lowest level since July, 1990. With most other key economic indicators also
reflecting strength, we believe the Federal Reserve Board could decide to raise
short-term rates further during the first half of 1995.
The recent steepness of the money market yield curve has anticipated such
yield increases, allowing us to maintain the average maturity of the portfolio
generally within a range of 40 to 75 days. The Trust continues to serve as a
very useful investment for liquidity, preservation of capital and a yield which
will reflect prevailing money market conditions.
We appreciate your support of Active Assets Government Securities 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> 2
ACTIVE ASSETS GOVERNMENT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS December 31, 1994 (unaudited)
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<TABLE>
<CAPTION>
Annualized
Principal Yield on
Amount (in Maturity Date of
thousands) Description Date Purchase Value
- ---------- -------------------------------------- --------------------- ------------ ------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT OBLIGATION (0.9%)
$ 5,000 U.S. Treasury Bill
(Amortized Cost $4,847,467)......... 07/27/95 5.57% $ 4,847,467
------------
U.S. GOVERNMENT AGENCIES (99.1%)
39,000 Federal Farm Credit Bank.............. 01/13/95 to 04/11/95 5.10 to 6.20 38,685,778
275,145 Federal Home Loan Banks............... 01/03/95 to 08/18/95 5.01 to 6.65 272,695,971
55,000 Federal Home Loan Mortgage Corp. ..... 01/13/95 to 04/03/95 5.33 to 6.30 54,550,525
139,600 Federal National Mortgage
Association......................... 01/03/95 to 04/18/95 5.08 to 6.32 138,541,517
26,590 Student Loan Marketing Association.... 01/20/95 to 04/05/95 5.97 to 6.44 26,414,267
------------
TOTAL U.S. GOVERNMENT AGENCIES
(AMORTIZED COST $530,888,058)............................................ 530,888,058
------------
TOTAL INVESTMENTS
(AMORTIZED COST $535,735,525)(A).......................... 100.0% 535,735,525
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS................ 0.0 (49,378)
------ ------------
NET ASSETS.................................................... 100.0% $535,686,147
====== ============
</TABLE>
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(a) Cost is the same for federal income tax purposes.
See Notes to Financial Statements
<PAGE> 3
ACTIVE ASSETS GOVERNMENT SECURITIES TRUST
FINANCIAL STATEMENTS
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<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994 (unaudited)
- -------------------------------------------------------
ASSETS:
Investments in securities, at value
(amortized cost $535,735,525).......... $535,735,525
Cash..................................... 57,511
Receivable for shares of beneficial
interest sold.......................... 178,838
Prepaid expenses and other assets........ 94,632
------------
TOTAL ASSETS..................... 536,066,506
------------
LIABILITIES:
Payable for:
Investment management fee.............. 213,954
Plan of distribution fee............... 43,088
Accrued expenses and other payables...... 123,317
------------
TOTAL LIABILITIES................ 380,359
------------
NET ASSETS:
Paid-in-capital.......................... 535,686,084
Accumulated undistributed net
investment income...................... 63
------------
NET ASSETS....................... $535,686,147
============
NET ASSET VALUE PER SHARE,
535,686,084 shares outstanding
(unlimited
shares authorized of $.01 par value)... $1.00
=====
STATEMENT OF OPERATIONS For the six months
ended December 31, 1994 (unaudited)
- -------------------------------------------------------
NET INVESTMENT INCOME:
INTEREST INCOME......................... $12,365,615
------------
EXPENSES
Investment management fee.............. 1,261,395
Plan of distribution fee............... 252,835
Transfer agent fees and expenses....... 54,403
Registration fees...................... 42,395
Professional fees...................... 28,213
Custodian fees......................... 19,672
Trustees' fees and expenses............ 12,933
Shareholder reports and notices........ 11,327
Other.................................. 3,476
------------
TOTAL EXPENSES....................... 1,686,649
------------
NET INVESTMENT INCOME AND
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS........ $10,678,966
============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
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<TABLE>
<CAPTION>
For the six
months ended For the year
December 31, 1994 ended
(unaudited) June 30, 1994
----------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income and net increase in net assets
resulting from operations............................................. $ 10,678,966 $ 14,190,506
Dividends to shareholders from net investment income...................... (10,679,477) (14,190,247)
Net increase (decrease) from transactions in shares of beneficial
interest................................................................ 64,186,054 (37,081,813)
----------------- -------------
Total increase (decrease)............................................. 64,185,543 (37,081,554)
NET ASSETS
Beginning of period....................................................... 471,500,604 508,582,158
----------------- -------------
END OF PERIOD (including undistributed net investment income of $63 and
$574, respectively)..................................................... $ 535,686,147 $471,500,604
================= =============
</TABLE>
See Notes to Financial Statements
<PAGE> 4
ACTIVE ASSETS GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (unaudited)
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1. ORGANIZATION AND ACCOUNTING POLICIES -- Active Assets Government Securities
Trust (the "Trust") is registered under the Investment Company Act of 1940, as
amended (the "Act"), as a diversified, open-end management investment company.
The Trust was organized as a Massachusetts business trust on March 30, 1981 and
commenced operations on July 7, 1981.
The following is a summary of significant accounting policies:
A. Valuation of Investments -- Portfolio securities are valued at amortized
cost, which approximates market value.
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. The Trust amortizes premiums and discounts on securities purchased
over the life of the respective securities. Interest income is accrued
daily.
C. Federal Income Tax Status -- It is the Trust'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 Trust records
dividends and distributions to shareholders as of the close of each
business day.
2. INVESTMENT MANAGEMENT AGREEMENT -- Pursuant to an Investment Management
Agreement with Dean Witter InterCapital Inc. (the "Investment Manager"), the
Trust pays its Investment Manager a management fee, accrued daily and payable
monthly, by applying the following annual rates to the net assets of the Trust
determined as of the close of each business day: 0.50% to the portion of the
daily net assets not exceeding $500 million; 0.425% to the portion of the daily
net assets exceeding $500 million but not exceeding $750 million; 0.375% to the
portion of the daily net assets exceeding $750 million but not exceeding $1
billion; 0.35% to the portion of the daily net assets exceeding $1 billion but
not exceeding $1.5 billion; 0.325% to the portion of the daily net assets
exceeding $1.5 billion but not exceeding $2 billion; 0.30% to the portion of the
daily net assets exceeding $2 billion but not exceeding $2.5 billion; 0.275% to
the portion of the daily net assets exceeding $2.5 billion but not exceeding $3
billion; and 0.25% to the portion of the daily net assets exceeding $3 billion.
Under the terms of the Agreement, in addition to managing the Trust's
investments, the Investment Manager maintains certain of the Trust'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 Trust 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 Trust.
3. PLAN OF DISTRIBUTION -- Dean Witter Distributors Inc. (the "Distributor"),
an affiliate of the Investment Manager, is the distributor of the Trust's shares
and, in accordance with a Plan of Distribution (the "Plan") pursuant to Rule
12b-1 under the Act, finances certain expenses in connection therewith.
Under the Plan, the Distributor bears the expense of all promotional and
distribution related activities on behalf of the Trust, except for expenses that
the Trustees determine to reimburse, as described
<PAGE> 5
ACTIVE ASSETS GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
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below. The following activities and services may be provided by the Distributor
and other broker-dealers under the Plan: (1) compensation to and expenses of the
Distributor and other broker-dealers; (2) sales incentives and bonuses to sales
representatives and to marketing personnel in connection with promoting sales of
the Trust's shares; (3) expenses incurred in connection with promoting sales of
the Trust's shares; (4) preparing and distributing sales literature; and (5)
providing advertising and promotional activities, including direct mail
solicitation and television, radio, newspaper, magazine and other media
advertisements.
The Trust is authorized to reimburse the Distributor for specific expenses
the Distributor incurs or plans to incur in promoting the distribution of the
Trust's shares. The amount of each monthly reimbursement payment may in no event
exceed an amount equal to a payment at the annual rate of 0.15% of the Trust's
average daily net assets during the month. Expenses incurred by the Distributor
pursuant to the Plan in any fiscal year will not be reimbursed by the Trust
through payments accrued in any subsequent fiscal year. For the six months ended
December 31, 1994, the distribution fee was accrued at the annual rate of 0.10%.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES -- The cost of
purchases and proceeds from sales/maturities of portfolio securities for the six
months ended December 31, 1994 aggregated $3,895,710,024 and $3,813,650,286,
respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Trust's transfer agent. At December 31, 1994, the Trust had
transfer agent fees and expenses payable of approximately $9,000.
The Trust established an unfunded noncontributory defined benefit pension
plan covering all independent Trustees of the Trust 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 December
31, 1994, included in Trustees' fees and expenses in the Statement of Operations
amounted to $4,092. At December 31, 1994, the Trust had an accrued pension
liability of $46,903 included in accrued expenses in the Statement of Assets and
Liabilities.
5. SHARES OF BENEFICIAL INTEREST -- Transactions in shares of beneficial
interest, at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
For the six For the year
months ended ended
December 31, 1994 June 30, 1994
----------------- ------------------
<S> <C> <C>
Shares sold.............................................. 954,238,060 1,898,931,530
Shares issued in reinvestment of dividends............... 10,664,673 14,176,134
---------------- ------------------
964,902,733 1,913,107,664
Shares repurchased....................................... (900,716,679) (1,950,189,477)
---------------- ------------------
Net increase (decrease) in shares outstanding............ 64,186,054 (37,081,813)
================ ==================
</TABLE>
<PAGE> 6
ACTIVE ASSETS GOVERNMENT SECURITIES TRUST
FINANCIAL HIGHLIGHTS
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Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
For the six
months ended
December 31, For the year ended June 30,
1994 --------------------------------------------------------
(unaudited) 1994 1993 1992 1991 1990
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of
period............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- --------- ---------
Net investment
income............... 0.021 0.027 0.027 0.043 0.065 0.077
Less dividends from net
investment income.... (0.021) (0.027) (0.027) (0.043) (0.065) (0.077)
--------- --------- --------- --------- -------- ---------
Net asset value, end of
period............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= ========= =========
TOTAL INVESTMENT
RETURN............... 2.13%(1) 2.76% 2.71% 4.37% 6.72% 8.03%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (in
thousands)........... $535,686 $471,501 $508,582 $533,438 $597,098 $300,213
Ratios to average net
assets:
Expenses............. 0.67%(2) 0.66% 0.66% 0.68% 0.70% 0.68%
Net investment
income............ 4.22%(2) 2.72% 2.68% 4.28% 6.39% 7.74%
</TABLE>
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(1) Not annualized.
(2) Annualized.
See Notes to Financial Statements
<PAGE> 7
TRUSTEES
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Phillip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
Jonathan R. Page
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 Trust 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
Trust. For more detailed information about the Trust, its officers and
trustees, fees, expenses and other pertinent information, please see the
prospectus of the Trust.
This report is not authorized for distribution to prospective investors in the
Trust unless preceded or accompanied by an effective prospectus.
ACTIVE
ASSETS (R)
ACCOUNT
ACTIVE ASSETS
GOVERNMENT
SECURITIES TRUST
SEMIANNUAL REPORT
DECEMBER 31, 1994
