<PAGE> 1
<TABLE>
<S> <C>
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST Two World Trade Center
LETTER TO THE SHAREHOLDERS June 30, 1998 New York, New York 10048
</TABLE>
DEAR SHAREHOLDER:
During the first six months of 1998, interest rates continued to trend lower
while inflation remained benign. This scenario prevailed despite a robust
economy and tight labor conditions. Amid the financial turmoil in Asia, the
market witnessed a flight to the quality of U.S. government securities. In the
face of many weaker Asian currencies, observers cautioned that the dollar's
strength could cause worldwide demand for U.S. products to slow, eventually
weakening the U.S. economy. These factors, combined with prospects for the first
federal budget surplus in more than two decades, pushed down interest rates on
intermediate- and long-term securities.
Over the course of the six-month period ended June 30, 1998, yields on five-year
U.S. Treasury securities ranged from 5.21 percent to 5.79 percent. At the end of
the period, the five-year Treasury note was yielding 5.47 percent, compared to
5.71 percent six months ago.
PERFORMANCE AND PORTFOLIO
For the six-month period ended June 30, 1998, Morgan Stanley Dean Witter U.S.
Government Securities Trust Class B produced a total return of 3.20 percent,
compared to returns of 4.18 percent for the Lehman Brothers General U.S.
Government Funds Index and 3.54 percent for the Lipper General U.S. Government
Fund Index. For the same period, the Fund's Class A, C and D shares had total
returns of 3.46 percent, 3.09 percent and 3.58 percent, respectively. The
performance of the Fund's four share classes varies because of differing
expenses.
The Fund underperformed its benchmark indexes primarily because of its
overweighted position in mortgage-backed securities, which underperformed
duration-equivalent U.S. Treasury securities during the period. However, we
believe that despite their recent underperformance, mortgage-backed securities
continue to offer both significant long-term value and, in the current
investment environment, an incremental yield incentive over U.S. Treasury
securities having comparable maturities and the potential for better long-term
total returns over time.
<PAGE> 2
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
LETTER TO THE SHAREHOLDERS June 30, 1998, continued
As of June 30, 1998, approximately 74 percent of the Fund's portfolio was
invested in mortgage-backed securities issued by the Government National
Mortgage Association (GNMA), 22 percent in zero-coupon obligations of the U.S.
Government and the Resolution Funding Corporation (REFCORP) and 4 percent in
U.S. Treasury securities. The Fund's duration was approximately 4.6 years.
LOOKING AHEAD
As mentioned, the turmoil in the emerging markets and Southeast Asia increased
demand for U.S. Treasury securities and the U.S. dollar. As the crisis continues
to unfold through the remainder of 1998, we believe that the deflationary trend
of those economies could be beneficial to holding inflation in check in the
United States.
Although, there can be no assurances as to what the outcome will be, we believe
that the U.S. economy is likely to maintain a moderate pace for the balance of
1998. However, should inordinately strong economic growth give rise to
inflationary pressures, the Federal Reserve may need to reassess its current
monetary policy.
We appreciate your ongoing support of Morgan Stanley Dean Witter U.S. Government
Securities Trust and look forward to continuing to serve your investment
objectives.
Very truly yours,
/s/ CHARLES A. FIUMEFREDDO
CHARLES A. FIUMEFREDDO
Chairman of the Board
2
<PAGE> 3
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS June 30, 1998 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION
AMOUNT IN AND COUPON
THOUSANDS MATURITY DATE RATE VALUE
- --------------------------------------------------------------------------------------
<C> <S> <C> <C>
MORTGAGE-BACKED SECURITIES (74.0%)
Government National Mortgage Assoc. I (73.0%)
$ 25,000 *............................................. 6.00 % $ 24,421,875
304,593 10/15/22 - 02/15/24........................... 6.50 303,831,500
1,528,747 04/15/17 - 04/15/26........................... 7.00 1,552,633,421
756,160 11/15/02 - 06/15/27........................... 7.50 776,954,650
274,343 10/15/16 - 07/15/26........................... 8.00 284,202,658
270,985 07/15/06 - 04/15/25........................... 8.50 285,719,614
198,580 10/15/08 - 08/15/21........................... 9.00 212,480,952
132,736 10/15/09 - 12/15/20........................... 9.50 143,313,393
145,389 11/15/09 - 11/15/20........................... 10.00 158,746,076
405 05/15/10 - 06/15/15........................... 12.50 462,991
--------------
3,742,767,130
--------------
Government National Mortgage Assoc. II (0.8%)
42,797 01/20/24 - 02/20/24........................... 6.50 42,516,602
--------------
Government National Mortgage Assoc. GPM I
(0.2%)
6,247 08/15/13 - 09/15/15........................... 12.25 7,217,604
--------------
TOTAL MORTGAGE-BACKED SECURITIES
(Identified Cost $3,674,125,130)........................ 3,792,501,336
--------------
U.S. GOVERNMENT OBLIGATIONS (17.7%)
U.S. Treasury Notes (4.1%)
50,000 08/15/07...................................... 6.125 51,995,500
10,000 02/15/07...................................... 6.25 10,468,400
3,800 01/15/99...................................... 6.375 3,819,836
88,200 10/15/98...................................... 7.125 88,670,106
57,500 08/15/98...................................... 9.25 57,752,425
--------------
212,706,267
--------------
U.S. Treasury Principal Strips (13.6%)
123,000 02/15/04...................................... 0.00 90,519,390
380,000 05/15/04...................................... 0.00 275,667,200
385,000 08/15/04...................................... 0.00 275,767,800
75,000 11/15/04...................................... 0.00 52,902,750
--------------
694,857,140
--------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Identified Cost $799,477,318).......................... 907,563,407
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
3
<PAGE> 4
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS June 30, 1998 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION
AMOUNT IN AND COUPON
THOUSANDS MATURITY DATE RATE VALUE
- --------------------------------------------------------------------------------------
<C> <S> <C> <C>
U.S. GOVERNMENT AGENCIES (8.3%)
Resolution Funding Corp Zero Coupon Strips
$ 33,500 07/15/02...................................... 0.00 % $ 26,910,550
5,049 10/15/02...................................... 0.00 4,001,231
109,000 04/15/03...................................... 0.00 83,608,450
55,000 07/15/03...................................... 0.00 41,608,050
69,000 10/15/03...................................... 0.00 51,481,590
89,882 01/15/04...................................... 0.00 66,004,847
84,419 04/15/04...................................... 0.00 61,134,550
68,000 07/15/04...................................... 0.00 48,562,880
18,000 07/15/07...................................... 0.00 10,805,940
56,000 10/15/07...................................... 0.00 33,146,960
--------------
TOTAL U.S. GOVERNMENT AGENCIES
(Identified Cost $380,190,771).......................... 427,265,048
--------------
TOTAL INVESTMENTS
(Identified Cost $4,853,793,219) (a).......... 100.0% 5,127,329,791
LIABILITIES IN EXCESS OF CASH AND OTHER
ASSETS........................................ (0.0) (333,565)
----- --------------
NET ASSETS.................................... 100.0% $5,126,996,226
===== ==============
</TABLE>
- ---------------------
GPM Graduated Payment Mortgage.
* Securities purchased on a forward commitment with an approximate principal
amount and no definite maturity date; the actual principal amount and
maturity date will be determined upon settlement.
(a) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $274,537,327 and the
aggregate gross unrealized depreciation is $1,000,755, resulting in net
unrealized appreciation of $273,536,572.
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE> 5
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998 (unaudited)
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $4,853,793,219)....... $ 5,127,329,791
Cash.................................... 323,266
Receivable for:
Interest............................ 27,994,318
Shares of beneficial interest
sold............................... 11,780,403
Prepaid expenses and other assets....... 94,672
---------------
TOTAL ASSETS........................ 5,167,522,450
---------------
LIABILITIES:
Payable for:
Investments purchased............... 24,318,490
Shares of beneficial interest
repurchased........................ 6,944,617
Dividends and distributions to
shareholders....................... 3,394,613
Plan of distribution fee............ 3,385,017
Investment management fee........... 1,966,473
Accrued expenses........................ 517,014
---------------
TOTAL LIABILITIES................... 40,526,224
---------------
NET ASSETS.......................... $ 5,126,996,226
===============
COMPOSITION OF NET ASSETS:
Paid-in-capital......................... $ 5,878,575,140
Net unrealized appreciation............. 273,536,572
Accumulated net realized loss........... (1,025,115,486)
---------------
NET ASSETS.......................... $ 5,126,996,226
===============
CLASS A SHARES:
Net Assets.............................. $37,904,811
Shares Outstanding (unlimited
authorized,
$.01 par value)........................ 4,162,351
NET ASSET VALUE PER SHARE........... $9.11
=====
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 4.44% of net
asset value)....................... $9.51
=====
CLASS B SHARES:
Net Assets.............................. $5,069,836,062
Shares Outstanding (unlimited authorized,
$.01 par value)........................ 555,702,133
NET ASSET VALUE PER SHARE........... $9.12
=====
CLASS C SHARES:
Net Assets.............................. $8,199,214
Shares Outstanding (unlimited authorized,
$.01 par value)........................ 892,764
NET ASSET VALUE PER SHARE........... $9.18
=====
CLASS D SHARES:
Net Assets.............................. $11,056,139
Shares Outstanding (unlimited authorized,
$.01 par value)........................ 1,211,459
NET ASSET VALUE PER SHARE........... $9.13
=====
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1998
(unaudited)
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME.......................... $193,315,626
------------
EXPENSES
Plan of distribution fee (Class A
shares)................................. 29,894
Plan of distribution fee (Class B
shares)................................. 19,628,639
Plan of distribution fee (Class C
shares)................................. 26,189
Investment management fee................ 11,384,142
Transfer agent fees and expenses......... 1,982,628
Custodian fees........................... 428,671
Shareholder reports and notices.......... 87,535
Professional fees........................ 39,383
Registration fees........................ 18,374
Trustees' fees and expenses.............. 9,961
Other.................................... 39,565
------------
TOTAL EXPENSES....................... 33,674,981
------------
NET INVESTMENT INCOME................ 159,640,645
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss........................ (1,027,417)
Net change in unrealized appreciation.... 12,500,677
------------
NET GAIN............................. 11,473,260
------------
NET INCREASE............................. $171,113,905
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE> 6
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JUNE 30, 1998 DECEMBER 31, 1997*
- ------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income............................ $ 159,640,645 $ 363,800,467
Net realized loss................................ (1,027,417) (3,836,410)
Net change in unrealized appreciation............ 12,500,677 118,550,225
-------------- --------------
NET INCREASE................................. 171,113,905 478,514,282
-------------- --------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT
INCOME:
Class A shares................................... (857,591) (342,413)
Class B shares................................... (158,217,387) (363,065,315)
Class C shares................................... (208,999) (61,336)
Class D shares................................... (356,668) (326,681)
-------------- --------------
TOTAL DIVIDENDS.............................. (159,640,645) (363,795,745)
-------------- --------------
Net decrease from transactions in shares of
beneficial interest............................. (349,893,328) (1,098,840,399)
-------------- --------------
NET DECREASE................................. (338,420,068) (984,121,862)
NET ASSETS:
Beginning of period.............................. 5,465,416,294 6,449,538,156
-------------- --------------
END OF PERIOD................................ $5,126,996,226 $5,465,416,294
============== ==============
</TABLE>
- ---------------------
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 7
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 1998 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter U.S. Government Securities Trust (the "Fund"),
formerly Dean Witter U.S. Government Securities Trust, 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 high
current income consistent with safety of principal. The Fund seeks to achieve
its objective by investing in obligations issued or guaranteed by the U.S.
Government or its instrumentalities. The Fund was organized as a Massachusetts
business trust on September 29, 1983 and commenced operations on June 29, 1984.
On July 28, 1997, the Fund commenced offering three additional classes of
shares, with the then current shares, other then shares held by certain employee
benefit plans established by Dean Witter Reynolds Inc. and its affiliate, SPS
Transaction Services, Inc., designated as Class B shares. Shares held by those
employee benefit plans prior to July 28, 1997 have been designated Class D
shares.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase, some Class
A shares, and most Class B shares and Class C shares are subject to a contingent
deferred sales charge imposed on shares redeemed within one year, six years and
one year, respectively. Class D shares are not subject to a sales charge.
Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
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 -- (1) all portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest available bid price prior to the time of valuation; (2) when market
quotations are not readily available, including circumstances under which it is
determined by Morgan Stanley Dean Witter Advisors Inc. (the "Investment
Manager"), formerly Dean Witter InterCapital Inc., that sale or bid prices are
not reflective of a security's market value, portfolio securities are valued at
their fair value as determined in good faith under procedures established by and
under the general supervision of the Trustees (valuation of debt securities for
which market quotations are not readily available may be based upon current
market prices of securities which are comparable in coupon, rating and maturity
or an appropriate matrix utilizing similar factors); and
7
<PAGE> 8
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 1998 (unaudited) continued
(3) certain portfolio securities may be valued by an outside pricing service
approved by the Trustees. The pricing service may utilize a matrix system
incorporating security quality, maturity and coupon as the evaluation model
parameters, and/or research and evaluations by its staff, including review of
broker-dealer market price quotations, if available, in determining what it
believes is the fair valuation of the securities valued by such pricing service;
(4) 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 over the life of the respective securities. Interest
income is accrued daily.
C. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date such
items are recognized. Distribution fees are charged directly to the respective
class.
D. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the 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.
8
<PAGE> 9
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 1998 (unaudited) continued
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with the Investment Manager, the
Fund pays the Investment Manager a management fee, accrued daily and payable
monthly, by applying the following annual rates to the Fund's net assets
determined at the close of each business day: 0.50% to the portion of daily net
assets not exceeding $1 billion; 0.475% to the portion of daily net assets
exceeding $1 billion but not exceeding $1.5 billion; 0.45% to the portion of
daily net assets exceeding $1.5 billion but not exceeding $2 billion; 0.425% to
the portion of daily net assets exceeding $2 billion but not exceeding $2.5
billion; 0.40% to the portion of daily net assets exceeding $2.5 billion but not
exceeding $5 billion; 0.375% to the portion of daily net assets exceeding $5
billion but not exceeding $7.5 billion; 0.35% to the portion of daily net assets
exceeding $7.5 billion but not exceeding $10 billion; 0.325% to the portion of
daily net assets exceeding $10 billion but not exceeding $12.5 billion; and
0.30% to the portion of daily net assets exceeding $12.5 billion.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Morgan Stanley 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. The Plan provides that the Fund will pay the Distributor a fee which is
accrued daily and paid monthly at the following annual rates: (i) Class A -- up
to 0.25% of the average daily net assets of Class A; (ii) Class B -- 0.75%
(0.65% on amounts over $10 billion) of the lesser of: (a) the average daily
aggregate gross sales of the Class B shares since the inception of the Fund (not
including reinvestment of dividend or capital gain distributions) less the
average daily aggregate net asset value of the Class B shares redeemed since the
Fund's inception upon which a contingent deferred sales charge has been imposed
or waived; or (b) the average daily net assets of Class B; and (iii) Class
C -- up to 0.75% of the average daily net assets of Class C. In the case of
Class A shares, amounts paid under the Plan are paid to the Distributor for
services provided. In the
9
<PAGE> 10
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 1998 (unaudited) continued
case of Class B and Class C shares, amounts paid under the Plan are paid to the
Distributor for services provided and the expenses borne by it and others in the
distribution of the shares of these Classes, including the payment of
commissions for sales of these Classes and incentive compensation to, and
expenses of, Morgan Stanley Dean Witter Financial Advisors and others who engage
in or support distribution of the 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 these shares to
other than current shareholders; and preparation, printing and distribution of
sales literature and advertising materials. In addition, the Distributor may
utilize fees paid pursuant to the Plan, in the case of Class B shares, to
compensate Dean Witter Reynolds Inc. ("DWR"), an affiliate of the Investment
Manager and Distributor, and other selected broker-dealers for their opportunity
costs in advancing such amounts, which compensation would be in the form of a
carrying charge on any unreimbursed expenses.
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon
redemption of Class B shares. 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, including
carrying charges, totaled $20,580,121 at June 30, 1998.
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 0.75% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Dean Witter Financial Advisors or other
selected broker-dealer representatives may be reimbursed in the subsequent
calendar year. For the six months ended June 30, 1998, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.25% and
0.75%, respectively.
The Distributor has informed the Fund that for the six months ended June 30,
1998, it received contingent deferred sales charges from certain redemptions of
the Fund's Class B shares and Class C shares of $1,774,882 and $7,769,
respectively and received $24,229 in front-end sales charges from sales
10
<PAGE> 11
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 1998 (unaudited) continued
of the Fund's Class A shares. The respective shareholders pay such charges which
are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The costs of purchases and proceeds from sales/prepayments of portfolio
securities, excluding short-term investments, for the six months ended June 30,
1998 were $146,330,469 and $530,685,691, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At June 30, 1998, the Fund had
transfer agent fees and expenses payable of approximately $239,000.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the six months ended June 30, 1998
included in Trustees' fees and expenses in the Statement of Operations amounted
to $3,083. At June 30, 1998, the Fund had an accrued pension liability of
$50,195 included in accrued expenses in the Statement of Assets and Liabilities.
5. FEDERAL INCOME TAX STATUS
At December 31, 1997, the Fund had an net capital loss carryover of
approximately $1,022,594,000 which may be used to offset future capital gains to
the extent provided by regulations which is available through December 31 of the
following years:
<TABLE>
<CAPTION>
AMOUNT IN THOUSANDS
- -------------------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003 2004 2005
- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$108,731 $261,525 $154,964 $263,492 $118,056 $63,667 $49,153 $3,006
======== ======== ======== ======== ======== ======= ======= ======
</TABLE>
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 $1,418,000 during fiscal 1997.
11
<PAGE> 12
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 1998 (unaudited) continued
At December 31, 1997, the Fund had temporary book/tax differences primarily
attributable to post-October losses.
6. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JUNE 30, 1998 DECEMBER 31, 1997+*
--------------------------- ------------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold.................................................... 2,162,608 $ 19,689,269 2,724,542 $ 24,540,441
Reinvestment of dividends............................... 40,938 372,107 7,949 72,059
Redeemed................................................ (333,450) (3,041,423) (440,236) (3,982,964)
----------- ------------- ------------ ---------------
Net increase - Class A.................................. 1,870,096 17,019,953 2,292,255 20,629,536
----------- ------------- ------------ ---------------
CLASS B SHARES
Sold.................................................... 39,100,295 356,468,372 67,708,563 606,120,050
Reinvestment of dividends............................... 8,770,423 79,846,184 20,782,743 185,683,576
Redeemed................................................ (88,446,438) (806,707,265) (214,633,493) (1,917,929,811)
----------- ------------- ------------ ---------------
Net decrease - Class B.................................. (40,575,720) (370,392,709) (126,142,187) (1,126,126,185)
----------- ------------- ------------ ---------------
CLASS C SHARES
Sold.................................................... 1,127,966 10,364,303 552,334 5,029,381
Reinvestment of dividends............................... 14,317 131,219 4,930 45,056
Redeemed................................................ (727,654) (6,679,084) (79,129) (724,422)
----------- ------------- ------------ ---------------
Net increase - Class C.................................. 414,629 3,816,438 478,135 4,350,015
----------- ------------- ------------ ---------------
CLASS D SHARES
Sold.................................................... 293,295 2,676,176 324,174 2,938,529
Reinvestment of dividends............................... 37,014 337,100 34,780 314,925
Redeemed................................................ (366,986) (3,350,286) (104,962) (947,219)
----------- ------------- ------------ ---------------
Net increase (decrease) - Class D....................... (36,677) (337,010) 253,992 2,306,235
----------- ------------- ------------ ---------------
Net decrease in Fund.................................... (38,327,672) $(349,893,328) (123,117,805) $(1,098,840,399)
=========== ============= ============ ===============
</TABLE>
- ---------------------
+ On July 28, 1997, 994,144 shares representing $8,977,118 were transferred to
Class D.
* For Class A, C and D shares, for the period July 28, 1997 (issue date) through
December 31, 1997.
12
<PAGE> 13
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR ENDED DECEMBER 31
MONTHS ENDED ----------------------------------------------------
JUNE 30, 1998++ 1997* 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period..................... $9.10 $8.92 $9.21 $8.41 $9.31 $9.30
----- ----- ----- ----- ----- -----
Net investment income.................................... 0.27 0.56 0.56 0.57 0.58 0.64
Net realized and unrealized gain (loss).................. 0.02 0.18 (0.29) 0.80 (0.90) 0.01
----- ----- ----- ----- ----- -----
Total from investment operations......................... 0.29 0.74 0.27 1.37 (0.32) 0.65
----- ----- ----- ----- ----- -----
Less dividends from net investment income................ (0.27) (0.56) (0.56) (0.57) (0.58) (0.64)
----- ----- ----- ----- ----- -----
Net asset value, end of period........................... $9.12 $9.10 $8.92 $9.21 $8.41 $9.31
===== ===== ===== ===== ===== =====
TOTAL INVESTMENT RETURN+................................. 3.20%(1) 8.56% 3.16% 16.74% (3.51)% 7.13%
RATIOS TO AVERAGE NET ASSETS:
Expenses................................................. 1.28%(2) 1.26% 1.25% 1.24% 1.22% 1.18%
Net investment income.................................... 6.05%(2) 6.22% 6.28% 6.44% 6.57% 6.78%
SUPPLEMENTAL DATA:
Net assets, end of period, in millions................... $5,070 $5,429 $6,450 $7,955 $8,211 $12,235
Portfolio turnover rate.................................. 3%(1) 4% 8% 14% 26% 32%
</TABLE>
- ---------------------
* Prior to July 28, 1997, the Fund issued one class of shares. All shares of
the Fund held prior to that date, other than shares held by certain employee
benefit plans established by Dean Witter Reynolds Inc. and its affiliate,
SPS Transaction Services, Inc., have been designated Class B shares. Shares
held by those employee benefit plans prior to July 28, 1997 have been
designated Class D shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE> 14
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX JULY 28, 1997*
MONTHS ENDED THROUGH
JUNE 30, 1998++ DECEMBER 31, 1997
- ----------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $9.09 $9.03
----- -----
Net investment income....................................... 0.30 0.25
Net realized and unrealized gain............................ 0.02 0.06
----- -----
Total from investment operations............................ 0.32 0.31
----- -----
Less dividends from net investment income................... (0.30) (0.25)
----- -----
Net asset value, end of period.............................. $9.11 $9.09
===== =====
TOTAL INVESTMENT RETURN+.................................... 3.46%(1) 3.50%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 0.75%(2) 0.77%(2)
Net investment income....................................... 6.52%(2) 6.57%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $37,905 $20,841
Portfolio turnover rate..................................... 3%(1) 4%
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $9.17 $9.03
----- -----
Net investment income....................................... 0.28 0.23
Net realized and unrealized gain............................ 0.01 0.14
----- -----
Total from investment operations............................ 0.29 0.37
----- -----
Less dividends from net investment income................... (0.28) (0.23)
----- -----
Net asset value, end of period.............................. $9.18 $9.17
===== =====
TOTAL INVESTMENT RETURN+.................................... 3.09%(1) 4.14%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.28%(2) 1.25%(2)
Net investment income....................................... 5.99%(2) 5.81%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $8,199 $4,385
Portfolio turnover rate..................................... 3%(1) 4%
</TABLE>
- ---------------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE> 15
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX JULY 28, 1997*
MONTHS ENDED THROUGH
JUNE 30, 1998++ DECEMBER 31, 1997
- -------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $9.11 $9.03
----- -----
Net investment income....................................... 0.31 0.27
Net realized and unrealized gain............................ 0.02 0.08
----- -----
Total from investment operations............................ 0.33 0.35
----- -----
Less dividends from net investment income................... (0.31) (0.27)
----- -----
Net asset value, end of period.............................. $9.13 $9.11
===== =====
TOTAL INVESTMENT RETURN+.................................... 3.58%(1) 3.87%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 0.53%(2) 0.52%(2)
Net investment income....................................... 6.78%(2) 6.91%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $11,056 $11,367
Portfolio turnover rate..................................... 3%(1) 4%
</TABLE>
- ---------------------
* The date shares were first issued. Shareholders who held shares of the Fund
prior to July 28, 1997 (the date the Fund converted to a multiple class
share structure) should refer to the Financial Highlights of Class B to
obtain the historical per share data and ratio information of their shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Calculated based on the net asset value as of the last business day of the
period.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE> 16
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
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
Rajesh K. Gupta
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
The financial statements included herein have been taken from the records of
the Fund without examination by the independent accountants and accordingly
they do not express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and
trustees, fees, expenses and other pertinent information, please see the
prospectus of the Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus.
MORGAN STANLEY
DEAN WITTER
U.S. GOVERNMENT
SECURITIES TRUST
[PHOTO]
SEMIANNUAL REPORT
JUNE 30, 1998
