<PAGE>
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST TWO WORLD TRADE CENTER, NEW YORK,
NEW YORK 10048
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1997
DEAR SHAREHOLDER:
We are pleased to present the annual report on the operations of Dean Witter
U.S. Government Securities Trust for the fiscal year ended December 31, 1997.
Over the past year, the U.S. economy exhibited healthy growth with declining
inflation and strong employment growth. In this environment the Federal Reserve
Board periodically expressed concern that inflationary pressures could be on the
rise. However, inflation remained in check. Accordingly, since March the Federal
Reserve Board has left interest rates unchanged.
As the summer came to a close the Southeast Asian currency crises erupted,
causing an investor "flight to quality." As a result, demand for U.S. Treasury
securities and the U.S. dollar increased. With many of the Southeast Asian
"Tiger" economies in turmoil, 1998 may see the United States inherit the
deflationary (declining prices) aspect of those markets. This is likely to
benefit the disinflationary (slowing in the rate of price increases) trend here.
Real interest rates (market interest rates less inflation) in the United States
remain above historical norms. A realization of this situation by investors,
combined with the probability of a surplus in the U.S. budget (leading to a
reduction in the issuance of U.S. Treasury securities beginning in 1998), could
cause interest rates to continue to decline in the months to come.
On December 31, 1997, the five-year U.S. Treasury note was yielding 5.71 percent
compared to 6.21 percent a year ago.
PERFORMANCE
On December 31, 1997, Dean Witter U.S. Government Securities Trust had net
assets in excess of $5.4 billion. Total return for the Fund's Class B shares for
the fiscal year was 8.56 percent. This performance includes income distributions
totaling approximately $0.56 per share and a change in net asset value from
$8.92 per share on December 31, 1996,
<PAGE>
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1997, CONTINUED
to $9.10 per share at the end of 1997.
Performance for the fiscal year
reflected the volatility of the market
and the overall declining interest rate
environment in 1997. For the same
period the Lehman Brothers General U.S.
Government Index registered a total
return of 9.59 percent and the Lipper
Analytical Services Inc. General U.S.
Government Funds Index registered a
total return of 8.81 percent.
The accompanying chart illustrates the
growth of a $10,000 investment in the
Fund for the 10 years ended December
31, 1997, versus similar hypothetical
investments in the issues that comprise
the Lehman Brothers General U.S.
Government Index and the Lipper General
U.S. Government Funds Index.
PORTFOLIO STRUCTURE
As of December 31, 1997, 77 percent of
the Fund's assets was invested in
Government National Mortgage
Association mortgage-backed securities
(GNMAs). The balance of the Fund's
assets was invested in U.S. government
and agency (Resolution Funding
Corporation) securities (8 percent) and
U.S. Treasury securities (15 percent).
The Fund's average duration stood at
approximately 5 years. (Duration
measures a bond fund's sensitivity to
interest rate fluctuations.)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Growth of $10,000 -- Class
B
($ in Thousands)
Average Annual
Total Returns
1 Year 5 Years 10 Years
<S> <C> <C> <C>
8.56%(1) 6.21%(1) 7.44%(1)
3.56%(2) 5.90%(2) 7.44%(2)
Fund Lehman (4) Lipper (5)
December 1987 $10,000 $10,000 $10,000
December 1988 $10,674 $10,703 $10,666
December 1989 $11,858 $12,226 $11,990
December 1990 $12,866 $13,292 $12,951
December 1991 $14,336 $15,329 $14,846
December 1992 $15,161 $16,437 $15,752
December 1993 $16,243 $16,189 $17,062
December 1994 $15,672 $17,574 $16,253
December 1995 $18,296 $20,797 $19,007
December 1996 $18,874 $21,373 $19,389
December 1997 $20,489(3) $23,423 $21,097
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS.
(1) Figure shown assumes reinvestment of all distributions and does not reflect
the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and the deduction of
the maximum applicable contingent deferred sales charge (CDSC) (1 year-5%, 5
years-2%, 10 years-0%). See the Fund's current prospectus for complete
details on fees and sales charges.
(3) Closing value assuming a complete redemption on December 31, 1997.
(4) The Lehman Brothers General U.S. Government Index is a broad-based measure
of all U.S. Government and U.S. Treasury securities. The Index does not
include any expenses, fees or charges. The Index is unmanaged and should not
be considered an investment.
(5) The Lipper General U.S. Government Funds Index is an equally-weighted
performance index of the largest-qualifying funds (based on net assets) in
the Lipper General U.S. Government Funds objective. The Index, which is
adjusted for capital gains distributions and income dividends, is unmanaged
and should not be considered an investment. There are currently 30 funds
represented in this Index.
We believe that GNMAs continue to offer significant long-term value and, in the
current investment environment, offer not only an incremental yield incentive
over U.S. Treasury securities of similar maturity but also the potential for
attractive returns.
<PAGE>
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1997, CONTINUED
LOOKING AHEAD
U.S. economic growth is expected to remain healthy in early 1998, with the
Federal Reserve Board unlikely to raise interest rates. However, the central
bank may need to reassess its current complacent stance on monetary policy
during the year should inordinately strong economic growth cause an unacceptable
increase in inflation.
We appreciate your ongoing support of Dean Witter U.S Government Securities
Trust and look forward to continuing to serve your investment objectives in the
months and years to come.
Very truly yours,
[SIGNATURE]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
<PAGE>
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION
AMOUNT IN AND COUPON
THOUSANDS MATURITY DATE RATE VALUE
- ------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
MORTGAGE-BACKED SECURITIES (77.1%)
Government National Mortgage Assoc. I (76.1%)
$ 320,542 10/15/22 - 02/15/24................................................................. 6.50% $ 317,236,160
1,682,261 04/15/17 - 04/15/26................................................................. 7.00 1,695,929,120
842,318 11/15/02 - 06/15/27................................................................. 7.50 863,112,493
325,793 10/15/16 - 07/15/26................................................................. 8.00 337,806,278
325,080 07/15/06 - 04/15/25................................................................. 8.50 341,435,525
233,471 10/15/08 - 08/15/21................................................................. 9.00 249,667,923
157,340 10/15/09 - 12/15/20................................................................. 9.50 170,221,960
170,531 11/15/09 - 11/15/20................................................................. 10.00 185,771,705
457 05/15/10 - 06/15/15................................................................. 12.50 523,189
--------------
4,161,704,353
--------------
Government National Mortgage Assoc. II (0.8%)
45,149 01/20/24 - 02/20/24................................................................. 6.50 44,429,793
--------------
Government National Mortgage Assoc. GPM I (0.2%)
7,022 08/15/13 - 09/15/15................................................................. 12.25 8,130,656
--------------
TOTAL MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $4,097,770,804)............................................................ 4,214,264,802
--------------
U.S. GOVERNMENT OBLIGATIONS (15.3%)
U.S. Treasury Notes (3.1%)
10,000 08/15/07............................................................................ 6.125 10,277,100
10,000 02/15/07............................................................................ 6.25 10,319,800
149,100 04/15/98............................................................................ 7.875 150,082,569
--------------
170,679,469
--------------
U.S. Treasury Principal Strips (12.2%)
123,000 02/15/04............................................................................ 0.00 86,777,730
380,000 05/15/04............................................................................ 0.00 264,126,600
385,000 08/15/04............................................................................ 0.00 263,859,750
75,000 11/15/04............................................................................ 0.00 50,612,250
--------------
665,376,330
--------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $734,103,884).............................................................. 836,055,799
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION
AMOUNT IN AND COUPON
THOUSANDS MATURITY DATE RATE VALUE
- ------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
U.S. GOVERNMENT AGENCIES (7.5%)
Resolution Funding Corp. Zero Coupon Strips
$ 33,500 07/15/02............................................................................ 0.00% $ 25,808,400
5,049 10/15/02............................................................................ 0.00 3,831,383
109,000 04/15/03............................................................................ 0.00 80,065,950
55,000 07/15/03............................................................................ 0.00 39,815,050
69,000 10/15/03............................................................................ 0.00 49,193,550
89,882 01/15/04............................................................................ 0.00 63,143,903
84,419 04/15/04............................................................................ 0.00 58,412,883
68,000 07/15/04............................................................................ 0.00 46,370,560
18,000 07/15/07............................................................................ 0.00 10,285,200
56,000 10/15/07............................................................................ 0.00 31,505,040
--------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL U.S. GOVERNMENT AGENCIES
(IDENTIFIED COST $365,841,937)................................................................. 408,431,919
--------------
TOTAL INVESTMENTS
(IDENTIFIED COST $5,197,716,625) (a)........................................................... 99.9% 5,458,752,520
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES................................................. 0.1 6,663,774
------ --------------
NET ASSETS..................................................................................... 100.0% $5,465,416,294
------ --------------
------ --------------
</TABLE>
- ---------------------
GPM Graduated Payment Mortgage.
(a) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $264,369,394 and the
aggregate gross unrealized depreciation is $3,333,499, resulting in net
unrealized appreciation of $261,035,895.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $5,197,716,625)......................................................... $ 5,458,752,520
Cash....................................................................................... 160,038
Receivable for:
Interest............................................................................... 29,010,778
Shares of beneficial interest sold..................................................... 2,655,105
Prepaid expenses and other assets.......................................................... 73,731
---------------
TOTAL ASSETS.......................................................................... 5,490,652,172
---------------
LIABILITIES:
Payable for:
Dividends and distributions to shareholders............................................ 15,835,163
Plan of distribution fee............................................................... 3,703,798
Shares of beneficial interest repurchased.............................................. 3,112,142
Investment management fee.............................................................. 2,131,197
Accrued expenses........................................................................... 453,578
---------------
TOTAL LIABILITIES..................................................................... 25,235,878
---------------
NET ASSETS............................................................................ $ 5,465,416,294
---------------
---------------
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................................................ $ 6,228,468,468
Net unrealized appreciation................................................................ 261,035,895
Accumulated net realized loss.............................................................. (1,024,088,069)
---------------
NET ASSETS............................................................................ $ 5,465,416,294
---------------
---------------
CLASS A SHARES:
Net Assets................................................................................. $20,841,089
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE).................................. 2,292,255
NET ASSET VALUE PER SHARE............................................................. $9.09
---------------
---------------
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 4.44% OF NET ASSET VALUE)..................................... $9.49
---------------
---------------
CLASS B SHARES:
Net Assets................................................................................. $5,428,823,433
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE).................................. 596,277,853
NET ASSET VALUE PER SHARE............................................................. $9.10
---------------
---------------
CLASS C SHARES:
Net Assets................................................................................. $4,384,815
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE).................................. 478,135
NET ASSET VALUE PER SHARE............................................................. $9.17
---------------
---------------
CLASS D SHARES:
Net Assets................................................................................. $11,366,957
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE).................................. 1,248,136
NET ASSET VALUE PER SHARE............................................................. $9.11
---------------
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997*
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME............................................................................... $437,653,070
------------
EXPENSES
Plan of distribution fee (Class A shares)..................................................... 13,027
Plan of distribution fee (Class B shares)..................................................... 43,758,596
Plan of distribution fee (Class C shares)..................................................... 7,914
Investment management fee..................................................................... 24,916,951
Transfer agent fees and expenses.............................................................. 3,763,233
Custodian fees................................................................................ 890,060
Shareholder reports and notices............................................................... 197,342
Registration fees............................................................................. 127,534
Professional fees............................................................................. 85,861
Trustees' fees and expenses................................................................... 13,950
Other......................................................................................... 78,135
------------
TOTAL EXPENSES........................................................................... 73,852,603
------------
NET INVESTMENT INCOME.................................................................... 363,800,467
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss............................................................................. (3,836,410)
Net change in unrealized appreciation......................................................... 118,550,225
------------
NET GAIN................................................................................. 114,713,815
------------
NET INCREASE.................................................................................. $478,514,282
------------
------------
</TABLE>
- ---------------------
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31,1997* DECEMBER 31, 1996
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................................. $ 363,800,467 $ 445,096,615
Net realized loss..................................................... (3,836,410) (18,950,945)
Net change in unrealized appreciation................................. 118,550,225 (237,138,336)
----------------- -----------------
NET INCREASE..................................................... 478,514,282 189,007,334
----------------- -----------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A shares........................................................ (342,413) --
Class B shares........................................................ (363,065,315) (447,472,130)
Class C shares........................................................ (61,336) --
Class D shares........................................................ (326,681) --
----------------- -----------------
TOTAL............................................................ (363,795,745) (447,472,130)
----------------- -----------------
Net decrease from transactions in shares of beneficial interest....... (1,098,840,399) (1,246,903,069)
----------------- -----------------
NET DECREASE..................................................... (984,121,862) (1,505,367,865)
NET ASSETS:
Beginning of period................................................... 6,449,538,156 7,954,906,021
----------------- -----------------
END OF PERIOD
(INCLUDING DIVIDENDS IN EXCESS OF NET INVESTMENT INCOME OF $0 AND
$4,722, RESPECTIVELY)............................................. $ 5,465,416,294 $ 6,449,538,156
----------------- -----------------
----------------- -----------------
</TABLE>
- ---------------------
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter U.S. Government Securities Trust (the "Fund") is registered under
the Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end management investment company. The Fund'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 than 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 Dean Witter InterCapital Inc. (the "Investment Manager") 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 (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,
<PAGE>
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997, CONTINUED
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.
<PAGE>
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997, 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 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 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
<PAGE>
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997, CONTINUED
Classes, including the payment of commissions for sales of these Classes and
incentive compensation to, and expenses of, the account executives of Dean
Witter Reynolds Inc. ("DWR"), an affiliate of the Investment Manager and
Distributor, and 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 DWR 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 $34,202,402 at December 31, 1997.
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 account executives may be reimbursed in the subsequent
calendar year. For the period ended December 31, 1997, 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 year ended December 31, 1997,
it received contingent deferred sales charges from certain redemptions of the
Fund's Class A shares, Class B shares and Class C shares of $25, $5,836,190 and
$7,040, respectively and received $159,161 in front-end sales charges from sales
of the Fund's Class A shares. The respective shareholders pay such charges which
are not an expense of the Fund.
<PAGE>
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997, CONTINUED
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The costs of purchases and sales/prepayments of portfolio securities, excluding
short-term investments, for the year ended December 31, 1997 were $230,029,244
and $1,421,599,531, respectively.
Dean Witter Trust FSB, an affiliate of the Investment Manager and Distributor,
is the Fund's transfer agent. At December 31, 1997, the Fund had transfer agent
fees and expenses payable of approximately $151,000.
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 year ended December 31, 1997
included in Trustees' fees and expenses in the Statement of Operations amounted
to $2,435. At December 31, 1997, the Fund had an accrued pension liability of
$49,587 included in accrued expenses in the Statement of Assets and Liabilities.
5. FEDERAL INCOME TAX STATUS
At December 31, 1997, the Fund had a 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>
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.
At December 31, 1997, the Fund had temporary book/tax differences primarily
attributable to post-October losses and permanent book/tax differences
attributable to an expired capital loss carryover. To reflect reclassifications
arising from the permanent differences, accumulated net realized loss was
credited and paid-in-capital was charged $270,986,532.
<PAGE>
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997, CONTINUED
6. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1997+ DECEMBER 31, 1996
-------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- --------------- -------------- ----------------
<S> <C> <C> <C> <C>
CLASS A SHARES*
Sold............................... 2,724,542 $ 24,540,441 -- --
Reinvestment of dividends.......... 7,949 72,059 -- --
Redeemed........................... (440,236) (3,982,964) -- --
-------------- --------------- -------------- ----------------
Net increase - Class A............. 2,292,255 20,629,536 -- --
-------------- --------------- -------------- ----------------
CLASS B SHARES
Sold............................... 67,708,563 606,120,050 44,291,927 $ 394,473,930
Reinvestment of dividends.......... 20,782,743 185,683,576 25,980,320 230,960,458
Redeemed........................... (214,633,493) (1,917,929,811) (210,573,457) (1,872,337,457)
-------------- --------------- -------------- ----------------
Net decrease - Class B............. (126,142,187) (1,126,126,185) (140,301,210) (1,246,903,069)
-------------- --------------- -------------- ----------------
CLASS C SHARES*
Sold............................... 552,334 5,029,381 -- --
Reinvestment of dividends.......... 4,930 45,056 -- --
Redeemed........................... (79,129) (724,422) -- --
-------------- --------------- -------------- ----------------
Net increase - Class C............. 478,135 4,350,015 -- --
-------------- --------------- -------------- ----------------
CLASS D SHARES*
Sold............................... 324,174 2,938,529 -- --
Reinvestment of dividends.......... 34,780 314,925 -- --
Redeemed........................... (104,962) (947,219) -- --
-------------- --------------- -------------- ----------------
Net increase - Class D............. 253,992 2,306,235 -- --
-------------- --------------- -------------- ----------------
Net decrease in Fund............... (123,117,805) $(1,098,840,399) (140,301,210) $ (1,246,903,069)
-------------- --------------- -------------- ----------------
-------------- --------------- -------------- ----------------
</TABLE>
- ---------------------
+ On July 28, 1997, 994,144 shares representing $8,977,118 were transferred
to Class D.
* For the period July 28, 1997 (issue date) through December 31, 1997.
<PAGE>
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 YEAR ENDED DECEMBER 31
-----------------------------------------------------------------------------------------------------------
1997* 1996 1995 1994 1993 1992 1991 1990 1989 1988
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
PER SHARE
OPERATING
PERFORMANCE:
Net asset value,
beginning of
period.......... $ 8.92 $ 9.21 $ 8.41 $ 9.31 $ 9.30 $ 9.52 $ 9.37 $ 9.51 $ 9.42 $ 9.75
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net investment
income.......... 0.56 0.56 0.57 0.58 0.64 0.74 0.87 0.90 0.91 0.97
Net realized and
unrealized gain
(loss).......... 0.18 (0.29) 0.80 (0.90) 0.01 (0.22) 0.15 (0.14) 0.09 (0.33)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from
investment
operations...... 0.74 0.27 1.37 (0.32) 0.65 0.52 1.02 0.76 1.00 0.64
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Less dividends
from net
investment
income.......... (0.56) (0.56) (0.57) (0.58) (0.64) (0.74) (0.87) (0.90) (0.91) (0.97)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value,
end of period... $ 9.10 $ 8.92 $ 9.21 $ 8.41 $ 9.31 $ 9.30 $ 9.52 $ 9.37 $ 9.51 $ 9.42
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL INVESTMENT
RETURN+.......... 8.56% 3.16% 16.74% (3.51)% 7.13% 5.76% 11.43% 8.49% 11.10% 6.74%
RATIOS TO AVERAGE
NET ASSETS:
Expenses......... 1.26% 1.25% 1.24% 1.22% 1.18% 1.20% 1.17% 1.23% 1.19% 1.21%
Net investment
income.......... 6.22% 6.28% 6.44% 6.57% 6.78% 7.91% 9.23% 9.60% 9.62% 10.01%
SUPPLEMENTAL DATA:
Net assets, end
of period, in
millions........ $5,429 $6,450 $7,955 $8,211 $12,235 $12,484 $11,736 $9,829 $10,167 $10,366
Portfolio
turnover rate... 4% 8% 14% 26% 32% 40% 104% 54% 44% 15%
</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.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
DECEMBER 31,
1997
- ----------------------------------------------------------------------------------------
<S> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 9.03
------
Net investment income................................................. 0.25
Net realized and unrealized gain...................................... 0.06
------
Total from investment operations...................................... 0.31
------
Less dividends from net investment income............................. (0.25)
------
Net asset value, end of period........................................ $ 9.09
------
------
TOTAL INVESTMENT RETURN+.............................................. 3.50%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 0.77%(2)
Net investment income................................................. 6.57%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $20,841
Portfolio turnover rate............................................... 4%
</TABLE>
<TABLE>
<S> <C>
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 9.03
------
Net investment income................................................. 0.23
Net realized and unrealized gain...................................... 0.14
------
Total from investment operations...................................... 0.37
------
Less dividends from net investment income............................. (0.23)
------
Net asset value, end of period........................................ $ 9.17
------
------
TOTAL INVESTMENT RETURN+.............................................. 4.14%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 1.25%(2)
Net investment income................................................. 5.81%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $4,385
Portfolio turnover rate............................................... 4%
</TABLE>
- ---------------------
* The date shares were issued.
+ 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
<PAGE>
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
DECEMBER 31,
1997
- ----------------------------------------------------------------------------------------
<S> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 9.03
------
Net investment income................................................. 0.27
Net realized and unrealized gain...................................... 0.08
------
Total from investment operations...................................... 0.35
------
Less dividends from net investment income............................. (0.27)
------
Net asset value, end of period........................................ $ 9.11
------
------
TOTAL INVESTMENT RETURN+.............................................. 3.87%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 0.52%(2)
Net investment income................................................. 6.91%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $11,367
Portfolio turnover rate............................................... 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.
+ 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
<PAGE>
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Dean Witter U.S. Government
Securities Trust (the "Fund") at December 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the periods presented, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1997 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
FEBRUARY 9, 1998
<PAGE>
TRUSTEES DEAN WITTER
U.S. GOVERNMENT
Michael Bozic SECURITIES TRUST
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 [PHOTO]
Dean Witter Trust FSB
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
ANNUAL REPORT
DECEMBER 31, 1997
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.
