<PAGE> 1
<TABLE>
<S> <C>
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST Two World Trade Center
LETTER TO THE SHAREHOLDERS, June 30, 1999 New York, New York 10048
</TABLE>
DEAR SHAREHOLDER:
During the six-month period ended June 30, 1999, the U.S. economy continued to
display signs of a robust expansion as employment grew, income climbed and
consumers remained confident. Strong economic growth domestically during the
period caused an uptick in inflation. Until recently, inflation was held in
abeyance by the lingering effects of last year's economic turmoil in Asia and
Russia and signs of distress in Latin American economies. Accordingly, in May
the Federal Reserve Board decided to change its open-market bias toward higher
interest rates, with the notion of making a preemptive strike against future
increases in inflation. On June 30 the federal-funds rate was increased by 25
basis points (.25 percent) to 5.00 percent.
Interest rates on intermediate-term U.S. Treasuries were highly volatile during
the period. Yields on five-year Treasuries ranged from 4.46 percent to 5.91
percent. On June 30 the five-year Treasury note was yielding 5.65 percent,
compared to 4.54 percent six months earlier.
PERFORMANCE
For the six-month period ended June 30, 1999, Morgan Stanley Dean Witter U.S.
Government Securities Trust's Class B shares produced a total return of -1.11
percent, compared to -2.45 percent for the Lipper General U.S. Government Funds
Index and -2.27 percent for the Lehman Brothers U.S. Government Bond Funds
Index. For the same period the Fund's Class A, C and D shares posted total
returns of -0.83 percent, -1.09 percent and -0.75 percent, respectively. The
performance of the Fund's four share classes varies because of differing
expenses.
The volatile interest-rate environment during the period under review negatively
affected the Fund's performance. However, the Fund's significant exposure to
Government National Mortgage Association mortgage-backed securities (GNMAs)
mitigated some of the volatility.
<PAGE> 2
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
LETTER TO THE SHAREHOLDERS, June 30, 1999, continued
PORTFOLIO
On June 30, 1999, the Fund's net assets exceeded $4.7 billion, with 64 percent
of the Fund's portfolio invested in GNMAs, 25 percent in Treasury securities and
11 percent in U.S. government agency securities. During the fiscal half-year, as
cash flows permitted, the Fund purchased current-coupon mortgages at very
attractive levels, enhancing the Fund's prospects for better total returns over
time.
In response to the overwhelming strength of the U.S. economy and the calming of
the global markets, the Fund's average maturity was decreased to approximately
five years as of June 30, 1999. As the year progresses, however, the average
maturity of the portfolio may be increased, as market conditions offer
incentives to further enhance the portfolio's income and its potential for total
return.
LOOKING AHEAD
We believe U.S. economic growth is likely to slow in the coming months, with
inflation remaining within a reasonable band. The deflationary trend evident in
the Asian and emerging-market economies is likely to help keep inflation in
check in the United States well into 2000, despite the sharp rise in oil prices
thus far in 1999. However, should our economy continue to show signs of
inordinately strong growth and begin to register higher levels of inflation, the
Federal Reserve may decide to reassess its current stance on monetary policy.
Accordingly, adjustments to the Fund's maturity and portfolio composition may be
made as conditions warrant and attractive opportunities become available.
On May 1, 1999, Mitchell M. Merin was named President of the Morgan Stanley Dean
Witter Funds. Mr. Merin is also the President and Chief Operating Officer of
Asset Management for Morgan Stanley Dean Witter & Co. and President, Chief
Executive Officer and Director of Morgan Stanley Dean Witter Advisors Inc., the
Fund's Investment Manager. He also serves as Chairman, Chief Executive Officer
and Director of the Fund's distributor and transfer agent.
We appreciate your ongoing support of Morgan Stanley Dean Witter U.S. Government
Securities Trust and look forward to continuing to serve your investment needs.
Very truly yours,
/S/ CHARLES A. FIUMEFREDDO /S/ MITCHELL M. MERIN
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
2
<PAGE> 3
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
FUND PERFORMANCE June 30, 1999
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A SHARES*
- ----------------------------------------------
<S> <C> <C>
PERIOD ENDED 6/30/99
- -------------------------
1 Year 3.24(1) -1.15(2)
Since Inception (7/28/97) 5.36(1) 3.00(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES++
- ----------------------------------------------
<S> <C> <C>
PERIOD ENDED 6/30/99
- -------------------------
1 Year 2.80(1) 1.83(2)
Since Inception (7/28/97) 5.27(1) 5.27(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES+
- ----------------------------------------------
<S> <C> <C>
PERIOD ENDED 6/30/99
- -------------------------
1 Year 2.79(1) -2.06(2)
5 Years 6.93(1) 6.63(2)
10 Years 6.69(1) 6.69(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS D SHARES#
- ----------------------------------------------
<S> <C> <C>
PERIOD ENDED 6/30/99
- -------------------------
1 Year 3.22(1)
Since Inception (7/28/97) 5.61(1)
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS.
- ---------------------
<TABLE>
<S> <C>
(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 sales charge. See
the Fund's current prospectus for complete details on fees
and sales charges.
* The maximum front-end sales charge for Class A is 4.25%.
+ The maximum CDSC for Class B is 5.0%. The CDSC declines to
0% after six years.
++ The maximum CDSC for Class C shares is 1% for shares
redeemed within one year of purchase.
# Class D shares have no sales charge.
</TABLE>
3
<PAGE> 4
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION
AMOUNT IN AND COUPON
THOUSANDS MATURITY DATE RATE VALUE
- ------------------------------------------------------------------------------------
<C> <S> <C> <C>
MORTGAGE-BACKED SECURITIES (64.4%)
Government National Mortgage Assoc. I (62.5%)
$ 124,399 02/15/28 - 03/15/29........................... 6.00% $ 116,896,361
364,788 10/15/22 - 09/15/29........................... 6.50 352,362,348
1,240,021 04/15/17 - 03/15/27........................... 7.00 1,227,233,230
530,462 06/15/27...................................... 7.50 537,092,801
177,940 07/15/26...................................... 8.00 182,944,681
177,473 04/15/25...................................... 8.50 185,847,549
132,713 10/15/08 - 08/15/21........................... 9.00 140,882,953
85,815 10/15/09 - 12/15/20........................... 9.50 92,438,338
96,474 11/15/09 - 11/15/20........................... 10.00 105,367,419
305 05/15/10 - 06/15/15........................... 12.50 348,141
--------------
2,941,413,821
--------------
Government National Mortgage Assoc. II (1.8%)
35,858 01/20/24 - 02/20/24........................... 6.50 34,490,585
25,670 03/20/26 - 07/20/29........................... 7.00 25,332,705
25,000 *............................................. 7.00 24,671,875
--------------
84,495,165
--------------
Government National Mortgage Assoc. GPM I (0.1%)
3,628 08/15/13 - 07/15/15........................... 12.25 4,192,505
--------------
TOTAL MORTGAGE-BACKED SECURITIES
(Identified Cost $3,010,341,334)...................... 3,030,101,491
--------------
U.S. GOVERNMENT OBLIGATIONS (24.5%)
U.S. Treasury Notes (8.5%)
60,000 05/31/03...................................... 5.50 59,520,600
79,000 08/15/07...................................... 6.125 79,925,090
63,000 02/15/07**.................................... 6.25 64,231,650
1,050 09/30/01...................................... 6.375 1,067,105
7,000 08/31/99...................................... 6.875 7,024,080
145,000 09/30/99...................................... 7.125 145,784,450
26,500 10/31/99...................................... 7.50 26,706,170
14,500 08/15/99...................................... 8.00 14,558,435
--------------
398,817,580
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE> 5
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS June 30, 1999 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION
AMOUNT IN AND COUPON
THOUSANDS MATURITY DATE RATE VALUE
- ------------------------------------------------------------------------------------
<C> <S> <C> <C>
U.S. Treasury Principal Strips (16.0%)
$ 13,000 05/15/03...................................... 0.00% $ 10,415,340
123,000 02/15/04...................................... 0.00 94,225,380
380,000 05/15/04...................................... 0.00 286,839,200
385,000 08/15/04...................................... 0.00 286,863,500
75,000 11/15/04...................................... 0.00 54,850,500
26,000 02/15/05...................................... 0.00 18,711,680
--------------
751,905,600
--------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Identified Cost $1,074,971,433)...................... 1,150,723,180
--------------
U.S. GOVERNMENT AGENCIES (11.3%)
Housing Urban Development Ser 99-A (0.7%)
18,800 08/01/10...................................... 6.06 17,829,356
15,290 08/01/11...................................... 6.16 14,504,247
--------------
32,333,603
--------------
Resolution Funding Corp. Zero Coupon Strips (10.1%)
33,500 07/15/02...................................... 0.00 28,144,020
5,049 10/15/02...................................... 0.00 4,186,429
109,000 04/15/03...................................... 0.00 87,775,520
55,000 07/15/03...................................... 0.00 43,839,950
69,000 10/15/03...................................... 0.00 54,151,200
89,882 01/15/04...................................... 0.00 68,890,058
84,419 04/15/04...................................... 0.00 63,472,958
68,000 07/15/04...................................... 0.00 50,254,720
1,550 04/15/07...................................... 0.00 966,549
18,000 07/15/07...................................... 0.00 11,058,120
56,000 10/15/07...................................... 0.00 33,849,760
54,000 10/15/08...................................... 0.00 30,744,900
--------------
477,334,184
--------------
Small Business Administration Ser 99-D (0.3%)
13,300 04/01/19...................................... 6.15 12,755,498
Small Business Administration Ser 99-F (0.2%)
12,000 06/01/19...................................... 6.80 11,955,000
--------------
24,710,498
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE> 6
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS June 30, 1999 (unaudited) continued
<TABLE>
<CAPTION>
VALUE
- ------------------------------------------------------------------------------------
<C> <S> <C> <C>
TOTAL U.S. GOVERNMENT AGENCIES
(Identified Cost $504,004,374)........................ $ 534,378,285
--------------
TOTAL INVESTMENTS
(Identified Cost $4,589,317,141) (a)........... 100.2% 4,715,202,956
LIABILITIES IN EXCESS OF CASH AND OTHER
ASSETS......................................... (0.2) (11,529,229)
----- --------------
NET ASSETS..................................... 100.0% $4,703,673,727
===== ==============
</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.
** Some of these securities are segregated in connection with securities
purchased on a forward commitment basis.
(a) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $171,659,529 and the
aggregate gross unrealized depreciation is $45,773,714, resulting in net
unrealized appreciation of $125,885,815.
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 7
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999 (unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (identified cost
$4,589,317,141)............................................ $4,715,202,956
Cash........................................................ 113,864
Receivable for:
Interest................................................ 26,248,474
Shares of beneficial interest sold...................... 2,191,325
Prepaid expenses and other assets........................... 175,451
--------------
TOTAL ASSETS............................................ 4,743,932,070
--------------
LIABILITIES:
Payable for:
Investments purchased................................... 25,063,021
Shares of beneficial interest repurchased............... 8,326,608
Plan of distribution fee................................ 3,159,773
Investment management fee............................... 1,868,712
Dividends to shareholders............................... 1,535,760
Accrued expenses............................................ 304,469
--------------
TOTAL LIABILITIES....................................... 40,258,343
--------------
NET ASSETS.............................................. $4,703,673,727
==============
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................. $5,499,762,748
Net unrealized appreciation................................. 125,885,815
Accumulated net realized loss............................... (921,974,836)
--------------
NET ASSETS.............................................. $4,703,673,727
==============
CLASS A SHARES:
Net Assets.................................................. $68,975,949
Shares Outstanding (unlimited authorized, $.01 par value)... 7,816,254
NET ASSET VALUE PER SHARE............................... $8.82
==============
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 4.44% of net asset value)........ $9.21
==============
CLASS B SHARES:
Net Assets.................................................. $4,590,074,592
Shares Outstanding (unlimited authorized, $.01 par value)... 519,276,879
NET ASSET VALUE PER SHARE............................... $8.84
==============
CLASS C SHARES:
Net Assets.................................................. $20,752,577
Shares Outstanding (unlimited authorized, $.01 par value)... 2,331,583
NET ASSET VALUE PER SHARE............................... $8.90
==============
CLASS D SHARES:
Net Assets.................................................. $23,870,609
Shares Outstanding (unlimited authorized, $.01 par value)... 2,705,037
NET ASSET VALUE PER SHARE............................... $8.82
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the six months ended June 30, 1999 (unaudited)
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $174,653,997
------------
EXPENSES
Plan of distribution fee (Class A shares)................... 82,664
Plan of distribution fee (Class B shares)................... 17,956,185
Plan of distribution fee (Class C shares)................... 77,037
Investment management fee................................... 10,647,555
Transfer agent fees and expenses............................ 1,748,172
Custodian fees.............................................. 411,949
Shareholder reports and notices............................. 109,911
Registration fees........................................... 77,548
Professional fees........................................... 49,327
Trustees' fees and expenses................................. 9,227
Other....................................................... 2,693
------------
TOTAL EXPENSES.......................................... 31,172,268
Less: plan of distribution fee rebate (Class B shares)...... (30,706)
------------
NET EXPENSES............................................ 31,141,562
------------
NET INVESTMENT INCOME................................... 143,512,435
------------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss........................................... (4,233,655)
Net change in unrealized appreciation....................... (190,042,546)
------------
NET LOSS................................................ (194,276,201)
------------
NET DECREASE................................................ $(50,763,766)
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 9
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JUNE 30, 1999 DECEMBER 31, 1998
- ---------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income.............................. $ 143,512,435 $ 310,576,566
Net realized loss.................................. (4,233,655) (2,384,102)
Net change in unrealized appreciation.............. (190,042,546) 54,569,658
-------------- --------------
NET INCREASE (DECREASE)........................ (50,763,766) 362,762,122
-------------- --------------
DIVIDENDS TO SHAREHOLDERS FROM NET
INVESTMENT INCOME:
Class A shares................................. (2,123,119) (2,396,071)
Class B shares................................. (139,995,981) (306,635,357)
Class C shares................................. (595,370) (600,619)
Class D shares................................. (797,965) (944,519)
-------------- --------------
TOTAL DIVIDENDS................................ (143,512,435) (310,576,566)
-------------- --------------
Net decrease from transactions in shares of
beneficial interest............................... (194,253,791) (425,398,131)
-------------- --------------
NET DECREASE................................... (388,529,992) (373,212,575)
NET ASSETS:
Beginning of period................................ 5,092,203,719 5,465,416,294
-------------- --------------
END OF PERIOD.................................. $4,703,673,727 $5,092,203,719
============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE> 10
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 1999 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley 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 converted to a multiple class share
structure.
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 and 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"), 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, 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
10
<PAGE> 11
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 1999 (unaudited) continued
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.
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
11
<PAGE> 12
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 1999 (unaudited) continued
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 case of Class B and Class C shares, amounts paid under
the Plan are paid to the Distributor for (1) 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
12
<PAGE> 13
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 1999 (unaudited) continued
support distribution of the shares or who service shareholder accounts,
including overhead and telephone expenses; (2) printing and distribution of
prospectuses and reports used in connection with the offering of these shares to
other than current shareholders; and (3) 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 there were no excess expenses as of
June 30, 1999.
For the six months ended June 30, 1999, the Distributor rebated a portion of the
distribution fees paid by the fund on Class B shares in the amount of $30,706.
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, 1999, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.16% and
0.75%, respectively.
The Distributor has informed the Fund that for the six months ended June 30,
1999 it received contingent deferred sales charges from certain redemptions of
the Fund's Class A shares, Class B shares and Class C shares of $20,783 ,
$1,260,516 and $11,307, respectively and received $61,813 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.
13
<PAGE> 14
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 1999 (unaudited) continued
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,
1999 were $388,508,033 and $551,791,561, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At June 30, 1999, the Fund had
transfer agent fees and expenses payable of approximately $15,000.
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, 1999
included in Trustees' fees and expenses in the Statement of Operations amounted
to $2,964. At June 30, 1999, the Fund had an accrued pension liability of
$52,224 included in accrued expenses in the Statement of Assets and Liabilities.
5. FEDERAL INCOME TAX STATUS
At December 31, 1998, the Fund had an net capital loss carryover of
approximately $916,574,000, 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
- --------------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004 2005 2006
- -------- -------- -------- -------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
$261,525 $154,964 $263,492 $118,056 $63,667 $49,153 $3,006 $2,711
======== ======== ======== ======== ======= ======= ====== ======
</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 $1,048,000 during fiscal 1998.
At December 31, 1998, the Fund had temporary book/tax differences primarily
attributable to post-October losses.
14
<PAGE> 15
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 1999 (unaudited) continued
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, 1999 DECEMBER 31, 1998
--------------------------- ------------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold....................................................... 5,618,425 $ 50,564,353 4,837,972 $ 44,356,004
Reinvestment of dividends.................................. 153,197 1,376,494 145,211 1,330,450
Redeemed................................................... (4,331,911) (38,846,493) (898,895) (8,228,417)
----------- ------------- ------------ ---------------
Net increase - Class A..................................... 1,439,711 13,094,354 4,084,288 37,458,037
----------- ------------- ------------ ---------------
CLASS B SHARES
Sold....................................................... 50,150,661 453,624,427 103,474,883 948,990,970
Reinvestment of dividends.................................. 8,274,640 74,539,975 17,451,085 159,732,499
Redeemed................................................... (82,455,940) (744,461,276) (173,896,303) (1,593,120,481)
----------- ------------- ------------ ---------------
Net decrease - Class B..................................... (24,030,639) (216,296,874) (52,970,335) (484,397,012)
----------- ------------- ------------ ---------------
CLASS C SHARES
Sold....................................................... 5,052,099 45,993,838 4,818,849 44,609,503
Reinvestment of dividends.................................. 42,552 385,400 41,862 386,582
Redeemed................................................... (4,609,242) (41,875,119) (3,492,672) (32,338,148)
----------- ------------- ------------ ---------------
Net increase - Class C..................................... 485,409 4,504,119 1,368,039 12,657,937
----------- ------------- ------------ ---------------
CLASS D SHARES
Sold....................................................... 1,479,260 13,420,263 1,554,909 14,290,193
Reinvestment of dividends.................................. 83,501 750,684 97,395 892,667
Acquisition of Dean Witter Retirement Series - U.S
Government Securities Trust Series........................ -- -- 986,985 9,087,435
Redeemed................................................... (1,078,835) (9,726,337) (1,666,314) (15,387,388)
----------- ------------- ------------ ---------------
Net increase - Class D..................................... 483,926 4,444,610 972,975 8,882,907
----------- ------------- ------------ ---------------
Net decrease in Fund....................................... (21,621,593) $(194,253,791) (46,545,033) $ (425,398,131)
=========== ============= ============ ===============
</TABLE>
7. ACQUISITION OF DEAN WITTER RETIREMENT SERIES -- U.S. GOVERNMENT SECURITIES
SERIES
As of the close of business on September 11, 1998, the Fund acquired all the net
assets of Dean Witter Retirement Series -- U.S. Government Securities Series
("Retirement U.S. Government") pursuant to a plan of reorganization approved by
the shareholders of Retirement U.S. Government on August 19, 1998.
15
<PAGE> 16
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 1999 (unaudited) continued
The acquisition was accomplished by a tax-free exchange of 986,985 Class D
shares of the Fund at a net asset value of $9.21 per share for 899,123 shares of
Retirement U.S. Government. The net assets of the Fund and Retirement U.S.
Government immediately before the acquisition were $5,193,431,112 and
$9,087,435, respectively, including unrealized appreciation of $322,808 for
Retirement U.S. Government. Immediately after the acquisition, the combined net
assets of the Fund amounted to $5,202,518,547.
16
<PAGE> 17
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, 1999 1998 1997* 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period........ $ 9.20 $ 9.10 $ 8.92 $ 9.21 $ 8.41 $ 9.31
------ ------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income...................... 0.26 0.54 0.56 0.56 0.57 0.58
Net realized and unrealized gain (loss).... (0.36) 0.10 0.18 (0.29) 0.80 (0.90)
------ ------- ------- ------- ------- -------
Total income (loss) from investment
operations................................. (0.10) 0.64 0.74 0.27 1.37 (0.32)
------ ------- ------- ------- ------- -------
Less dividends from net investment income... (0.26) (0.54) (0.56) (0.56) (0.57) (0.58)
------ ------- ------- ------- ------- -------
Net asset value, end of period.............. $ 8.84 $ 9.20 $ 9.10 $ 8.92 $ 9.21 $ 8.41
====== ======= ======= ======= ======= =======
TOTAL RETURN+............................... (1.11)%(1) 7.27% 8.56% 3.16% 16.74% (3.51)%
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................... 1.29%(2)(3) 1.27%(3) 1.26% 1.25% 1.24% 1.22%
Net investment income....................... 5.85%(2)(3) 5.94%(3) 6.22% 6.28% 6.44% 6.57%
SUPPLEMENTAL DATA:
Net assets, end of period, in millions...... $4,590 $4,996 $5,429 $6,450 $7,955 $8,211
Portfolio turnover rate..................... 8%(1) 14% 4% 8% 14% 26%
</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. 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.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE> 18
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED THROUGH
JUNE 30, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
- ----------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C>
CLASS A SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $ 9.18 $ 9.09 $ 9.03
------ ------ ------
Income (loss) from investment operations:
Net investment income...................................... 0.29 0.59 0.25
Net realized and unrealized gain (loss).................... (0.36) 0.09 0.06
------ ------ ------
Total income (loss) from investment operations.............. (0.07) 0.68 0.31
------ ------ ------
Less dividends from net investment income................... (0.29) (0.59) (0.25)
------ ------ ------
Net asset value, end of period.............................. $ 8.82 $ 9.18 $ 9.09
====== ====== ======
TOTAL RETURN+............................................... (0.83)%(1) 7.70% 3.50%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 0.70%(2)(3) 0.76%(3) 0.77%(2)
Net investment income....................................... 6.44%(2)(3) 6.45%(3) 6.57%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $68,976 $58,538 $20,841
Portfolio turnover rate..................................... 8%(1) 14% 4%
CLASS C SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $ 9.26 $ 9.17 $ 9.03
------ ------ ------
Income (loss) from investment operations:
Net investment income...................................... 0.26 0.55 0.23
Net realized and unrealized gain (loss).................... (0.36) 0.09 0.14
------ ------ ------
Total income (loss) from investment operations.............. (0.10) 0.64 0.37
------ ------ ------
Less dividends from net investment income................... (0.26) (0.55) (0.23)
------ ------ ------
Net asset value, end of period.............................. $ 8.90 $ 9.26 $ 9.17
====== ====== ======
TOTAL RETURN+............................................... (1.09)%(1) 7.14% 4.14%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.29%(2)(3) 1.27%(3) 1.25%(2)
Net investment income....................................... 5.85%(2)(3) 5.94%(3) 5.81%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $20,753 $17,087 $4,385
Portfolio turnover rate..................................... 8%(1) 14% 4%
</TABLE>
- ---------------------
* The date shares were first 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.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE> 19
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED THROUGH
JUNE 30, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
- ----------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C>
CLASS D SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $ 9.18 $ 9.11 $ 9.03
------ ------ ------
Income (loss) from investment operations:
Net investment income...................................... 0.30 0.61 0.27
Net realized and unrealized gain (loss).................... (0.36) 0.07 0.08
------ ------ ------
Total income (loss) from investment operations.............. (0.06) 0.68 0.35
------ ------ ------
Less dividends from net investment income................... (0.30) (0.61) (0.27)
------ ------ ------
Net asset value, end of period.............................. $ 8.82 $ 9.18 $ 9.11
====== ====== ======
TOTAL RETURN+............................................... (0.75)%(1) 7.72% 3.87%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 0.54%(2)(3) 0.52%(3) 0.52%(2)
Net investment income....................................... 6.60%(2)(3) 6.69%(3) 6.91%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $23,871 $20,392 $11,367
Portfolio turnover rate..................................... 8%(1) 14% 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.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE> 20
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
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
Mitchell M. Merin
President
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. Read the
prospectus carefully before investing.
MORGAN STANLEY
DEAN WITTER
U.S GOVERNMENT
SECURITIES TRUST
Semiannual Report
June 30, 1999
