<PAGE> 1
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
Two World Trade Center
LETTER TO THE SHAREHOLDERS June 30, 2000 New York, New York 10048
DEAR SHAREHOLDER:
During the six-month period ended June 30, 2000, the U.S. economy exhibited
strong economic growth with mounting inflationary pressure. In order to
counteract the economy's sustained strength and reduce the inflation threat, the
Federal Reserve Board continued on a path of tight monetary policy, raising the
federal funds rate 100 basis points, to 6.50 percent. This level was reached in
three steps, with the final one, a 50-basis-point hike in May, being the most
aggressive. Short-term interest rates (as measured by the two-year Treasury
note) rose 70 basis points, to 6.91 percent, before dropping in June to end the
period at 6.36 percent. The effect of these increases was less pronounced for
long-term Treasuries, which benefited from a federal government program of
buying back outstanding debt. The subsequent reduction in the supply of
long-term Treasuries resulted in an inverted yield curve, on which short-term
Treasury yields were higher than those of longer-term Treasuries.
By May, signs of more moderate economic growth appeared and the fixed-income
market rallied on hopes that the Fed tightening might be nearing its end. On
June 30, 2000, the five-year Treasury note was yielding 6.18 percent, compared
to 6.34 percent six months earlier.
PERFORMANCE AND PORTFOLIO STRATEGY
For the six-month period ended June 30, 2000, Morgan Stanley Dean Witter U.S.
Government Securities Trust's Class B shares produced a total return of 4.09
percent compared to 4.97 percent for the Lehman Brothers U.S. Government Index.*
For the same period, the Fund's Class A, C, and D shares posted total returns of
4.07 percent, 3.79 percent and 4.18 percent, respectively. The performance of
the Fund's four share classes varies because of differing expenses. The total
---------------------
*The Lehman Brothers 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.
<PAGE> 2
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
LETTER TO THE SHAREHOLDERS June 30, 2000, continued
return figures given assume reinvestment of all distributions but do not reflect
the deduction of any applicable sales charges.
The period was marked by increased volatility, with noteworthy outperformance by
the long-term Treasury market. As spreads widened between long-term Treasuries
and other fixed-income securities, sectors such as mortgage-backed securities
underperformed. Consequently, the Fund increased its exposure to long-term
Treasuries, purchasing 10-year notes, while reducing its exposure to
mortgage-backed securities from 63 percent to 60 percent. This reallocation let
the Fund participate more fully in the Treasury rally, thereby enhancing its
performance.
LOOKING AHEAD
We believe that the United States is entering a period of more moderate economic
growth with inflation remaining at acceptable levels. However, should the
economy display inordinately strong growth coupled with accelerating inflation,
the Fed may again feel a need to take a more aggressive stance on monetary
policy. Adjustments to the Fund's maturity and portfolio composition will be
made accordingly as conditions warrant and attractive opportunities become
available.
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.
<TABLE>
<S> <C>
Very truly yours,
/s/ CHARLES A. FIUMEFREDDO /s/ MITCHELL M. MERIN
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
</TABLE>
2
<PAGE> 3
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
FUND PERFORMANCE June 30, 2000
AVERAGE ANNUAL TOTAL RETURNS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A SHARES*
-----------------------------------------------
<S> <C> <C>
PERIOD ENDED 6/30/00
-------------------------
1 Year 4.67%(1) 0.22%(2)
Since Inception (7/28/97) 5.12%(1) 3.57%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES+
----------------------------------------------
<S> <C> <C>
PERIOD ENDED 6/30/00
-------------------------
1 Year 3.98%(1) 3.00%(2)
Since Inception (7/28/97) 4.82%(1) 4.82%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES**
----------------------------------------------
<S> <C> <C>
PERIOD ENDED 6/30/00
-------------------------
1 Year 4.57%(1) (0.32)%(2)
5 Years 5.55%(1) 5.24%(2)
10 Years 6.39%(1) 6.39%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS D SHARES++
----------------------------------------------
<S> <C> <C>
PERIOD ENDED 6/30/00
-------------------------
1 Year 4.87%(1)
Since Inception (7/28/97) 5.35%(1)
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE. WHEN YOU SELL FUND SHARES, THEY MAY BE WORTH
MORE OR LESS THAN THEIR ORIGINAL COST.
---------------------
<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 contingent deferred sales charge (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, 2000 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION
AMOUNT IN AND COUPON
THOUSANDS MATURITY DATE RATE VALUE
-------------------------------------------------------------------------------------
<C> <S> <C> <C>
MORTGAGE-BACKED SECURITIES (59.9%)
Government National Mortgage Assoc. I (57.9%)
$118,332 02/15/28 - 03/15/29........................... 6.00 % $ 108,976,735
328,685 10/15/22 - 09/15/29........................... 6.50 311,839,689
860,735 04/15/17 - 03/15/27........................... 7.00 836,796,138
444,564 11/15/02 - 06/15/27........................... 7.50 441,229,331
147,030 10/15/16 - 07/15/26........................... 8.00 148,546,325
140,463 07/15/06 - 04/15/25........................... 8.50 143,711,546
102,097 10/15/08 - 08/15/21........................... 9.00 105,350,988
65,468 10/15/09 - 12/15/20........................... 9.50 68,046,091
73,390 11/15/09 - 11/15/20........................... 10.00 77,563,616
201 05/15/10 - 06/15/15........................... 12.50 226,084
--------------
2,242,286,543
--------------
Government National Mortgage Assoc. II (1.9%)
30,719 01/20/24 - 02/20/24........................... 6.50 29,000,521
47,556 03/20/26 - 07/20/29........................... 7.00 45,965,520
--------------
74,966,041
--------------
Government National Mortgage Assoc. GPM I (0.1%)
2,622 08/15/13 - 07/15/15........................... 12.25 2,982,552
--------------
TOTAL MORTGAGE-BACKED SECURITIES
(Identified Cost $2,353,241,085)........................ 2,320,235,136
--------------
U.S. GOVERNMENT OBLIGATIONS (27.3%)
U.S. Treasury Notes (7.9%)
17,000 08/15/09...................................... 6.00 16,864,510
118,000 08/15/07...................................... 6.125 117,271,940
75,000 02/15/07...................................... 6.25 75,096,000
45,000 02/15/10...................................... 6.50 46,532,700
21,000 05/15/07...................................... 6.625 21,453,600
9,200 05/15/01...................................... 8.00 9,317,668
20,000 08/15/00...................................... 8.75 20,065,000
--------------
306,601,418
--------------
U.S. Treasury Principal Strips (19.4%)
60,500 02/15/04...................................... 0.00 48,490,145
373,000 05/15/04...................................... 0.00 294,625,240
346,000 08/15/04...................................... 0.00 270,291,740
75,000 11/15/04...................................... 0.00 57,518,250
26,000 02/15/05...................................... 0.00 19,624,800
106,500 05/15/09...................................... 0.00 61,754,025
--------------
752,304,200
--------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Identified Cost $1,013,714,103)........................ 1,058,905,618
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE> 5
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS June 30, 2000 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION
AMOUNT IN AND COUPON
THOUSANDS MATURITY DATE RATE VALUE
-------------------------------------------------------------------------------------
<C> <S> <C> <C>
U.S. GOVERNMENT AGENCIES (12.4%)
Housing Urban Development Ser 99 - A (0.8%)
$ 18,800 08/01/10...................................... 6.06 % $ 17,170,416
15,290 08/01/11...................................... 6.16 13,924,450
--------------
31,094,866
--------------
Resolution Funding Corp. Zero Coupon Strips (10.6%)
72,000 04/15/03...................................... 0.00 60,132,960
55,000 07/15/03...................................... 0.00 44,795,850
69,000 10/15/03...................................... 0.00 55,841,010
55,882 01/15/04...................................... 0.00 44,637,983
54,419 04/15/04...................................... 0.00 42,748,301
53,000 07/15/04...................................... 0.00 40,969,000
1,550 04/15/07...................................... 0.00 1,006,803
18,000 07/15/07...................................... 0.00 11,519,640
56,000 10/15/07...................................... 0.00 35,343,840
28,000 01/15/08...................................... 0.00 17,361,960
20,000 07/15/08...................................... 0.00 12,029,200
74,000 10/15/08...................................... 0.00 43,809,480
--------------
410,196,027
--------------
Small Business Administration (1.0%)
12,920 Ser 99 - D 04/01/19........................... 6.15 11,934,802
11,524 Ser 99 - F 06/01/19........................... 6.80 11,046,314
14,755 Ser 99 - G 07/01/19........................... 7.00 14,305,860
--------------
37,286,976
--------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
TOTAL U.S. GOVERNMENT AGENCIES
(Identified Cost $467,009,059)............................ 478,577,869
--------------
TOTAL INVESTMENTS
(Identified Cost $3,833,964,247) (a)............ 99.6% 3,857,718,623
OTHER ASSETS IN EXCESS OF LIABILITIES........... 0.4 15,744,817
---- --------------
NET ASSETS...................................... 100.0% $3,873,463,440
===== ==============
</TABLE>
---------------------
<TABLE>
<C> <S>
GPM Graduated Payment Mortgage.
(a) The aggregate cost for federal income tax purposes
approximates identified cost. The aggregate gross unrealized
appreciation is $90,053,293 and the aggregate gross
unrealized depreciation is $66,298,917, resulting in net
unrealized appreciation of $23,754,376.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE> 6
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2000 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $3,833,964,247)........................... $3,857,718,623
Cash........................................................ 770,611
Receivable for:
Interest................................................ 23,056,112
Shares of beneficial interest sold...................... 4,653,502
Prepaid expenses and other assets........................... 118,687
--------------
TOTAL ASSETS............................................ 3,886,317,535
--------------
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased............... 7,383,286
Plan of distribution fee................................ 2,322,354
Investment management fee............................... 1,413,939
Dividends and distributions to shareholders............. 1,392,051
Accrued expenses and other payables......................... 342,465
--------------
TOTAL LIABILITIES....................................... 12,854,095
--------------
NET ASSETS.............................................. $3,873,463,440
==============
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................. $4,513,037,758
Net unrealized appreciation................................. 23,754,376
Accumulated net realized loss............................... (663,328,694)
--------------
NET ASSETS.............................................. $3,873,463,440
==============
CLASS A SHARES:
Net Assets.................................................. $84,950,539
Shares Outstanding (unlimited authorized, $.01 par value)... 9,836,422
NET ASSET VALUE PER SHARE............................... $8.64
==============
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 4.44% of net asset value)........ $9.02
==============
CLASS B SHARES:
Net Assets.................................................. $3,721,832,778
Shares Outstanding (unlimited authorized, $.01 par value)... 430,360,082
NET ASSET VALUE PER SHARE............................... $8.65
==============
CLASS C SHARES:
Net Assets.................................................. $20,402,929
Shares Outstanding (unlimited authorized, $.01 par value)... 2,342,406
NET ASSET VALUE PER SHARE............................... $8.71
==============
CLASS D SHARES:
Net Assets.................................................. $46,277,194
Shares Outstanding (unlimited authorized, $.01 par value)... 5,359,100
NET ASSET VALUE PER SHARE............................... $8.64
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 7
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the six months ended June 30, 2000 (unaudited)
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $148,846,733
------------
EXPENSES
Plan of distribution fee (Class A shares)................... 81,080
Plan of distribution fee (Class B shares)................... 14,434,683
Plan of distribution fee (Class C shares)................... 76,599
Investment management fee................................... 8,837,539
Transfer agent fees and expenses............................ 1,425,183
Custodian fees.............................................. 318,728
Shareholder reports and notices............................. 107,080
Professional fees........................................... 45,287
Registration fees........................................... 41,789
Trustees' fees and expenses................................. 9,092
Other....................................................... 26,953
------------
TOTAL EXPENSES.......................................... 25,404,013
Less: plan of distribution fee rebate (Class B shares)...... (11,306,800)
------------
NET EXPENSES............................................ 14,097,213
------------
NET INVESTMENT INCOME................................... 134,749,520
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss........................................... (1,312,936)
Net change in unrealized depreciation....................... 24,085,984
------------
NET GAIN................................................ 22,773,048
------------
NET INCREASE................................................ $157,522,568
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
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, 2000 DECEMBER 31, 1999
---------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income.............................. $ 134,749,520 $ 291,189,703
Net realized loss.................................. (1,312,936) (5,800,037)
Net change in unrealized
appreciation/depreciation......................... 24,085,984 (316,259,969)
-------------- --------------
NET INCREASE (DECREASE)........................ 157,522,568 (30,870,303)
-------------- --------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A shares..................................... (2,574,493) (4,445,707)
Class B shares..................................... (130,275,846) (283,752,269)
Class C shares..................................... (628,915) (1,291,578)
Class D shares..................................... (1,270,266) (1,700,149)
-------------- --------------
TOTAL DIVIDENDS................................ (134,749,520) (291,189,703)
-------------- --------------
Net decrease from transactions in shares of
beneficial interest............................... (417,540,965) (501,912,356)
-------------- --------------
NET DECREASE................................... (394,767,917) (823,972,362)
NET ASSETS:
Beginning of period................................ 4,268,231,357 5,092,203,719
-------------- --------------
END OF PERIOD.................................. $3,873,463,440 $4,268,231,357
============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 9
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 2000 (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
9
<PAGE> 10
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 2000 (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
10
<PAGE> 11
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 2000 (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.
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 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, 2000.
For the six months ended June 30, 2000, the Distributor rebated a portion of the
distribution fees paid by the fund on Class B shares in the amount of
$11,306,800.
11
<PAGE> 12
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 2000 (unaudited) continued
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, 2000, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.21% and
0.75%, respectively.
The Distributor has informed the Fund that for the six months ended June 30,
2000 it received contingent deferred sales charges from certain redemptions of
the Fund's Class A shares, Class B shares and Class C shares of $2,212,
$1,189,561 and $11,990, respectively and received $7,313 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.
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,
2000 were $224,609,073 and $676,001,022, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At June 30, 2000, the Fund had
transfer agent fees and expenses payable of approximately $39,000.
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, 2000
included in Trustees' fees and expenses in the Statement of Operations amounted
to $3,079. At June 30, 2000, the Fund had an accrued pension liability of
$53,275 included in accrued expenses in the Statement of Assets and Liabilities.
12
<PAGE> 13
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 2000 (unaudited) continued
5. FEDERAL INCOME TAX STATUS
At December 31, 1999, the Fund had a net capital loss carryover of approximately
$661,678,000, 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
--------------------------------------------------------------------------------------------------
2000 2001 2002 2003 2004 2005 2006 2007
--------------------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$154,964 $263,492 $118,056 $63,667 $49,153 $3,006 $2,711 $6,629
======== ======== ======== ======= ======= ====== ====== ======
</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 $169,000 during fiscal 1999.
At December 31, 1999, the Fund had temporary book/tax differences primarily
attributable to post-October losses and capital loss deferrals on wash sales.
13
<PAGE> 14
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 2000 (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, 2000 DECEMBER 31, 1999
--------------------------- ------------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold.................................................... 10,545,215 $ 90,290,311 11,523,348 $ 102,048,487
Reinvestment of dividends............................... 204,375 1,746,778 334,531 2,951,866
Redeemed................................................ (9,176,071) (78,491,611) (9,971,519) (88,017,794)
----------- ------------- ------------ ---------------
Net increase - Class A.................................. 1,573,519 13,545,478 1,886,360 16,982,559
----------- ------------- ------------ ---------------
CLASS B SHARES
Sold.................................................... 30,669,297 262,897,315 82,020,305 731,591,171
Reinvestment of dividends............................... 8,095,279 69,271,361 17,318,048 153,220,238
Redeemed................................................ (90,880,436) (777,093,596) (160,169,929) (1,421,802,486)
----------- ------------- ------------ ---------------
Net decrease - Class B.................................. (52,115,860) (444,924,920) (60,831,576) (536,991,077)
----------- ------------- ------------ ---------------
CLASS C SHARES
Sold.................................................... 650,456 5,594,971 8,354,968 75,105,241
Reinvestment of dividends............................... 45,198 389,582 96,528 858,566
Redeemed................................................ (896,389) (7,725,611) (7,754,529) (69,533,325)
----------- ------------- ------------ ---------------
Net increase (decrease) - Class C....................... (200,735) (1,741,058) 696,967 6,430,482
----------- ------------- ------------ ---------------
CLASS D SHARES
Sold.................................................... 6,587,033 56,233,921 5,347,842 47,178,034
Reinvestment of dividends............................... 120,749 1,032,361 173,200 1,530,121
Redeemed................................................ (4,882,502) (41,686,747) (4,208,333) (37,042,475)
----------- ------------- ------------ ---------------
Net increase - Class D.................................. 1,825,280 15,579,535 1,312,709 11,665,680
----------- ------------- ------------ ---------------
Net decrease in Fund.................................... (48,917,796) $(417,540,965) (56,935,540) $ (501,912,356)
=========== ============= ============ ===============
</TABLE>
14
<PAGE> 15
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 PERIOD
FOR THE SIX FOR THE YEAR FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED ENDED THROUGH
JUNE 30, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
----------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
CLASS A SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period............. $ 8.58 $ 9.18 $ 9.09 $ 9.03
------ ------ ------ -------
Income (loss) from investment operations:
Net investment income........................... 0.29 0.58 0.59 0.25
Net realized and unrealized gain (loss)......... 0.06 (0.60) 0.09 0.06
------ ------ ------ -------
Total income (loss) from investment operations... 0.35 (0.02) 0.68 0.31
------ ------ ------ -------
Less dividends from net investment income........ (0.29) (0.58) (0.59) (0.25)
------ ------ ------ -------
Net asset value, end of period................... $ 8.64 $ 8.58 $ 9.18 $ 9.09
====== ====== ====== =======
TOTAL RETURN+.................................... 4.07%(1) (0.26)% 7.70% 3.50%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses......................................... 0.75%(2)(3) 0.70 %(3) 0.76%(3) 0.77%(2)
Net investment income............................ 6.70%(2)(3) 6.50 %(3) 6.45%(3) 6.57%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands.......... $84,951 $70,881 $58,538 $20,841
Portfolio turnover rate.......................... 6%(1) 11 % 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
15
<PAGE> 16
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR ENDED DECEMBER 31,
MONTHS ENDED ----------------------------------------------------------------------------
JUNE 30, 2000 1999 1998 1997* 1996 1995
---------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning
of period.................. $ 8.59 $ 9.20 $ 9.10 $ 8.92 $ 9.21 $ 8.41
------ ------ ------ ------ ------ ------
Income (loss) from
investment operations:
Net investment income...... 0.29 0.55 0.54 0.56 0.56 0.57
Net realized and unrealized
gain (loss).............. 0.06 (0.61) 0.10 0.18 (0.29) 0.80
------ ------ ------ ------ ------ ------
Total income (loss) from
investment operations...... 0.35 (0.06) 0.64 0.74 0.27 1.37
------ ------ ------ ------ ------ ------
Less dividends from net
investment income.......... (0.29) (0.55) (0.54) (0.56) (0.56) (0.57)
------ ------ ------ ------ ------ ------
Net asset value, end of
period..................... $ 8.65 $ 8.59 $ 9.20 $ 9.10 $ 8.92 $ 9.21
====== ====== ====== ====== ====== ======
TOTAL RETURN+............... 4.09%(1) (0.65)% 7.27% 8.56% 3.16% 16.74%
RATIOS TO AVERAGE NET
ASSETS:
Expenses.................... 0.70%(2)(3)(4) 1.02%(3)(4) 1.27%(3) 1.26% 1.25% 1.24%
Net investment income....... 6.75%(2)(3)(4) 6.18%(3)(4) 5.94%(3) 6.22% 6.28% 6.44%
SUPPLEMENTAL DATA:
Net assets, end of period,
in millions................ $3,722 $4,145 $4,996 $5,429 $6,450 $7,955
Portfolio turnover rate..... 6%(1) 11% 14% 4% 8% 14%
</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.
(4) If the Distributor had not rebated a portion of its fees to the Fund, the
expense and net investment income ratios would have been 1.29% and 6.16%,
respectively, for the six months ended June 30, 2000 and 1.29% and 5.91%,
respectively, for the year ended December 31, 1999.
SEE NOTES TO FINANCIAL STATEMENTS
16
<PAGE> 17
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED ENDED THROUGH
JUNE 30, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
-----------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
CLASS C SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period............. $ 8.65 $ 9.26 $ 9.17 $ 9.03
------ ------ ------ ------
Income (loss) from investment operations:
Net investment income........................... 0.26 0.53 0.55 0.23
Net realized and unrealized gain (loss)......... 0.06 (0.61) 0.09 0.14
------ ------ ------ ------
Total income (loss) from investment operations... 0.32 (0.08) 0.64 0.37
------ ------ ------ ------
Less dividends from net investment income........ (0.26) (0.53) (0.55) (0.23)
------ ------ ------ ------
Net asset value, end of period................... $ 8.71 $ 8.65 $ 9.26 $ 9.17
====== ====== ====== ======
TOTAL RETURN+.................................... 3.79%(1) (0.90)% 7.14% 4.14%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses......................................... 1.29%(2)(3) 1.29 %(3) 1.27%(3) 1.25%(2)
Net investment income............................ 6.16%(2)(3) 5.91 %(3) 5.94%(3) 5.81%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands.......... $20,403 $22,004 $17,087 $4,385
Portfolio turnover rate.......................... 6%(1) 11 % 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
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 FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED ENDED THROUGH
JUNE 30, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
-----------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
CLASS D SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period............. $ 8.58 $ 9.18 $ 9.11 $ 9.03
------ ------ ------ ------
Income (loss) from investment operations:
Net investment income........................... 0.29 0.59 0.61 0.27
Net realized and unrealized gain (loss)......... 0.06 (0.60) 0.07 0.08
------ ------ ------ ------
Total income (loss) from investment operations... 0.35 (0.01) 0.68 0.35
------ ------ ------ ------
Less dividends from net investment income........ (0.29) (0.59) (0.61) (0.27)
------ ------ ------ ------
Net asset value, end of period................... $ 8.64 $ 8.58 $ 9.18 $ 9.11
====== ====== ====== ======
TOTAL RETURN+.................................... 4.18%(1) (0.10)% 7.72% 3.87%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses......................................... 0.54%(2)(3) 0.54 %(3) 0.52%(3) 0.52%(2)
Net investment income............................ 6.91%(2)(3) 6.66 %(3) 6.69%(3) 6.91%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands.......... $46,277 $30,315 $20,392 $11,367
Portfolio turnover rate.......................... 6%(1) 11 % 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
18
<PAGE> 19
MORGAN STANLEY DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
CHANGE IN INDEPENDENT ACCOUNTANTS
On July 1, 2000 PricewaterhouseCoopers LLP resigned as independent accountants
of the Fund.
The reports of PricewaterhouseCoopers LLP on the financial statements of the
Fund for the past two fiscal years contained no adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principle.
In connection with its audits for the two most recent fiscal years and through
July 1, 2000, there have been no disagreements with PricewaterhouseCoopers LLP
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of PricewaterhouseCoopers LLP would have caused them to make
reference thereto in their report on the financial statements for such years.
The Fund, with the approval of its Board of Trustees and its Audit Committee,
engaged Deloitte & Touche LLP as its new independent accountants as of July 1,
2000.
19
<PAGE> 20
TRUSTEES
----------------------------------
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
James F. Higgins
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
----------------------------------
Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281
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 Distributors Inc., member NASD
MORGAN STANLEY
DEAN WITTER
U.S GOVERNMENT
SECURITIES TRUST
SEMIANNUAL REPORT
JUNE 30, 2000
