<PAGE>
DEAN WITTER SHORT-TERM U.S. TREASURY TRUST
Two World Trade Center, New York, New York 10048
LETTER TO SHAREHOLDERS
DEAR SHAREHOLDER:
As Dean Witter Short-Term U.S. Treasury Trust's fiscal year began on June 1,
1994, the U.S. Treasury markets, and the fixed-income markets in general,
were in the midst of one of the worst performance periods in history. Faced
with an overheating economy and the threat of inflation, the Federal Reserve
Board continued its policy of raising short-term interest rates. In all,
within a twelve-month period, the central bank raised interest rates seven
times, doubling the federal-funds rate to its current level of 6.00 percent.
However, by mid-November, interest rates peaked and began to decline as
analysts and investors alike began to believe the Federal Reserve Board's
tight monetary policy would successfully restrain inflation and slow the
economy to more sustainable levels. This was evident in the markets'
favorable reaction to the central bank's November 1994 and February 1995 rate
increases. On May 31, 1995 the three-year U.S. Treasury note was yielding
5.91 percent versus 6.33 percent a year earlier. As the Fund's fiscal year
came to a close on May 31, 1995, signs of a rapidly slowing economy were
pointing to a "soft landing", whereby the economy slows to a moderate pace
with only minimal inflation.
PERFORMANCE AND PORTFOLIO
On May 31, 1995, the Fund's net asset value per share (NAV) was $9.98, up
from $9.88 on June 1, 1994. For the twelve-month period ended May 31, 1995,
the Fund provided a total return of 6.22 percent, compared to a return of
7.36 percent for the Lehman Brothers 1-3 Year Government Bond Index. The
accompanying chart illustrates the growth of a $10,000 investment in the Fund
from inception (August 13, 1991) through May 31, 1995, versus a similar
investment in the Lehman Brothers 1-3 Year Government Bond Index.
During the fiscal year, the Fund paid distributions totaling $0.49 per share.
The Fund's distribution rate as of May 31, 1995, was 5.31 percent and its
30-day SEC yield was 5.69 percent. The Fund, which continues to offer
<PAGE>
DEAN WITTER SHORT-TERM U.S. TREASURY TRUST
LETTER TO SHAREHOLDERS, continued
investors an attractive alternative to other short-term investments, is free
from state and local taxes in all 50 states and the District of Columbia. As
of May 31, 1995, the Fund had net assets in excess of $273 million.
DEAN WITTER SHORT TERM U.S TREASURY TRUST
GROWTH OF $10,000
DATE TOTAL LEHMAN 1-3 GOVT INDEX
---- ----- ---------------------
August 13, 1991 $10,000 $10,000
May 31, 1992 $10,655 $10,684
May 31, 1993 $11,373 $11,413
May 31, 1994 $11,401 $11,644
May 31, 1995 $12,110(2) $12,501
AVERAGE ANNUAL TOTAL RETURNS
1 YEAR LIFE OF FUND
------ ------------
6.22(1) 5.17(1)
____ Fund ____ Lehman(3)
Past performance is not predictive of future returns.
________________________________________
(1) Figure shown assumes reinvestment of all distributions. There is no sales
charge.
(2) Closing value assuming a complete redemption on May 31, 1995.
(3) The Lehman Brothers 1-3 Year Government Bond Index is a sub-index of the
Lehman Brothers Government Bond Index and is comprised of Agency and
Treasury securities with maturities of one to three years. The index does
not include any expenses, fees or charges.
The Fund maintains a diversified investment strategy across the maturity
spectrum, out to a maximum of five years. Between June 1994 and November
1994, in light of a continued rise in interest rates, the Fund's weighted
average maturity was reduced from 2.7 years to a very defensive 1.6 years.
Thereafter, to take advantage of the higher rates in late 1994, the average
maturity of the portfolio was slowly extended in 1995 to its present level of
2.1 years.
LOOKING AHEAD
For the balance of this year, we expect economic growth to continue to
moderate vis-a-vis the rapid pace of 1994, as evidenced by the slowing of the
economy in 1995's first quarter. This should occur as the Federal Reserve's
rate increases in 1994 take their toll in 1995. Inflation should continue to
remain subdued, albeit at a modestly higher level than 1994, at approximately
3.00 percent to 3.50 percent, enabling the Fund to continue to provide an
attractive income stream as well as total return.
We appreciate your support of Dean Witter Short-Term U.S. Treasury Trust and
look forward to continuing to serve your investment objectives.
Very truly yours,
/s/ Charles A. Fiumefreddo
----------------------------------
CHARLES A. FIUMEFREDDO
Chairman of the Board
<PAGE>
DEAN WITTER SHORT-TERM U.S. TREASURY TRUST
PORTFOLIO OF INVESTMENTS May 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON
THOUSANDS DESCRIPTION AND MATURITY DATE RATE VALUE
- ----------- ------------------------------------- -------- -------------
<S> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS (98.7%)
U.S. Treasury Principal Strip (3.5%)
$10,000 05/15/96 ............................. 0.00% $ 9,461,637
-------------
U.S. Treasury Notes (95.2%)
25,000 07/31/97 ............................. 5.50 24,804,688
10,000 09/30/97 ............................. 5.50 9,912,500
37,500 06/30/96 ............................. 6.00 37,546,875
40,000 12/31/96 ............................. 6.125 40,187,500
10,000 06/30/97 ............................. 6.375 10,103,125
20,000 01/15/00 ............................. 6.375 20,259,375
25,000 11/30/96 ............................. 6.50 25,226,562
10,000 04/30/00 ............................. 6.75 10,284,375
15,000 10/31/96 ............................. 6.875 15,201,562
40,000 09/30/96 ............................. 7.00 40,581,250
20,000 02/29/00 ............................. 7.125 20,862,500
5,000 02/15/98 ............................. 7.25 5,161,719
-------------
260,132,031
-------------
TOTAL U.S. GOVERNMENT OBLIGATIONS (a)
(Identified Cost $266,756,265) ...... 98.7% 269,593,668
CASH AND OTHER ASSETS IN EXCESS OF
LIABILITIES .......................... 1.3 3,590,531
------ -------------
NET ASSETS ........................... 100.0% $273,184,199
====== =============
</TABLE>
(a) The aggregate cost for federal income tax purposes is $266,756,265;
the aggregate gross unrealized appreciation is $3,210,615 and the
aggregate gross unrealized depreciation is $373,212, resulting in net
unrealized appreciation of $2,837,403.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER SHORT-TERM U.S. TREASURY TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $266,756,265) ......... $269,593,668
Cash .................................... 319,130
Receivable for:
Interest .............................. 4,368,018
Shares of beneficial interest sold ... 27,751
Deferred organizational expenses ....... 33,621
Prepaid expenses and other assets ...... 38,552
--------------
TOTAL ASSETS .......................... 274,380,740
--------------
LIABILITIES:
Payable for:
Shares of beneficial interest
repurchased .......................... 740,236
Dividends to shareholders ............. 199,319
Investment management fee ............. 86,990
Plan of distribution fee .............. 86,990
Accrued expenses and other payables .... 83,006
--------------
TOTAL LIABILITIES ..................... 1,196,541
--------------
NET ASSETS:
Paid-in-capital ......................... 287,738,891
Net unrealized appreciation ............. 2,837,403
Accumulated undistributed net investment
income ................................. 440,564
Accumulated net realized loss ........... (17,832,659)
--------------
NET ASSETS ............................ $273,184,199
==============
NET ASSET VALUE PER SHARE, 27,372,328
shares outstanding (unlimited shares
authorized of $.01 par value) .......... $9.98
==============
</TABLE>
Statement of Operations
For the year ended May 31, 1995
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ....................... $ 21,960,153
--------------
EXPENSES
Investment management fee ............. 1,303,748
Plan of distribution fee .............. 1,283,532
Transfer agent fees and expenses ..... 201,254
Registration fees ..................... 120,771
Professional fees ..................... 61,518
Shareholder reports and notices ...... 49,882
Trustees' fees and expenses ........... 32,244
Organizational expenses ............... 26,937
Custodian fees ........................ 19,293
Other ................................. 12,159
--------------
TOTAL EXPENSES ...................... 3,111,338
--------------
NET INVESTMENT INCOME ............... 18,848,815
--------------
NET REALIZED AND UNREALIZED GAIN
(LOSS):
Net realized loss ..................... (15,967,802)
Net change in unrealized appreciation 16,077,178
--------------
NET GAIN ............................ 109,376
--------------
NET INCREASE .......................... $ 18,958,191
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
MAY 31, 1995 MAY 31, 1994
- ----------------------------------------------------- --------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................ $ 18,848,815 $ 30,514,814
Net realized loss .................................... (15,967,802) (1,832,563)
Net change in unrealized appreciation/depreciation .. 16,077,178 (26,597,480)
--------------- --------------
NET INCREASE ....................................... 18,958,191 2,084,771
--------------- --------------
Dividends and distributions to shareholders from:
Net investment income ................................ (18,580,804) (30,758,353)
Net realized gain .................................... -- (298,412)
--------------- --------------
TOTAL .............................................. (18,580,804) (31,056,765)
--------------- --------------
Net decrease from transactions in shares of
beneficial
interest ............................................ (243,210,264) (39,217,191)
--------------- --------------
TOTAL DECREASE ..................................... (242,832,877) (68,189,185)
NET ASSETS:
Beginning of period .................................. 516,017,076 584,206,261
--------------- --------------
END OF PERIOD (Including undistributed net
investment income of $440,564 and $172,670,
respectively) ....................................... $ 273,184,199 $516,017,076
=============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER SHORT-TERM U.S. TREASURY TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1995
1. Organization and Accounting Policies
Dean Witter Short-Term U.S. Treasury 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 was organized as a
Massachusetts business trust on June 4, 1991 and commenced operations on
August 13, 1991.
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, 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) 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 on securities purchased are amortized over the life of the
respective
securities. Interest income is accrued daily.
C. 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.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to its shareholders on the ex-dividend 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
<PAGE>
DEAN WITTER SHORT-TERM U.S. TREASURY TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1995, continued
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.
E. ORGANIZATIONAL EXPENSES -- Dean Witter InterCapital Inc. (the "Investment
Manager") paid the organizational expenses of the Fund in the amount of
approximately $135,000. Such expenses have been deferred and are being amortized
on the straight-line method over a period not to exceed five years from the
commencement of operations.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement, the Fund pays its Investment
Manager a management fee, accrued daily and payable monthly, by applying the
annual rate of 0.35% to the net assets of the Fund determined as of the close
of each business day.
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
Dean Witter Distributors Inc. (the "Distributor"), an affiliate of the
Investment Manager, is the distributor of the Fund's shares and in accordance
with a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act
finances certain expenses in connection therewith.
Under the Plan, the Distributor bears the expense of all promotional and
distribution related activities on behalf of the Fund, except for expenses
that the Trustees determine to reimburse, as described below. The following
activities and services may be provided by the Distributor, Dean Witter
Reynolds Inc. ("DWR"), an affiliate of the Investment Manager and
Distributor, its affiliates and other selected broker-dealers under the Plan:
(1) compensation to, and expenses of, account executives of DWR and other
selected
<PAGE>
DEAN WITTER SHORT-TERM U.S. TREASURY TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1995, continued
broker-dealers' account executives and other employees, including overhead
and telephone expenses; (2) sales incentives and bonuses to sales
representatives and to marketing personnel in connection with promoting sales
of the Fund's shares; (3) expenses incurred in connection with promoting
sales of the Fund's shares; (4) preparing and distributing sales literature;
and (5) providing advertising and promotional activities, including direct
mail solicitation and television, radio, newspaper, magazine and other media
advertisements.
The Fund is authorized to reimburse the Distributor for specific expenses the
Distributor incurs or plans to incur in promoting the distribution of the
Fund's shares. The amount of each monthly reimbursement payment may in no
event exceed an amount equal to a payment at the annual rate of 0.35% of the
Fund's average daily net assets. Expenses incurred by the Distributor
pursuant to the Plan in any fiscal year will not be reimbursed by the Fund
through payments accrued in any subsequent fiscal year. For the year ended
May 31, 1995, the distribution fee was accrued at the annual rate of 0.34%.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales/maturities of portfolio
securities for the year ended May 31, 1995 aggregated $104,530,050 and
$344,039,160, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At May 31, 1995, the Fund had
transfer agent fees and expenses payable of approximately $18,300.
The Fund established 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 May 31, 1995, included in Trustees' fees and expenses in the Statement
of Operations amounted to $12,149. At May 31, 1995, the Fund had an accrued
pension liability of $11,614 which is included in accrued expenses in the
Statement of Assets and Liabilities.
5. FEDERAL INCOME TAX STATUS
At May 31, 1995, the Fund had a net capital loss carryover of approximately
$11,507,000 which will be available through May 31, 2003 to offset future
capital gains to the extent provided by regulations. 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
$6,325,000 during fiscal 1995. As of May 31, 1995, the Fund had temporary
book/tax differences primarily attributable to post-October losses.
<PAGE>
DEAN WITTER SHORT-TERM U.S. TREASURY TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1995, continued
6. Shares of Beneficial Interest
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
MAY 31, 1995 MAY 31, 1994
------------------------------ -------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Shares sold ................................... 13,555,042 $ 133,430,704 81,445,102 $ 837,411,660
Shares issued in reinvestment of dividends and
distributions ................................ 1,536,708 15,079,568 2,575,965 26,371,210
-------------- -------------- -------------- ---------------
15,091,750 148,510,272 84,021,067 863,782,870
Shares repurchased ............................ (39,933,119) (391,720,536) (88,298,619) (903,000,061)
-------------- -------------- -------------- ---------------
Net decrease .................................. (24,841,369) $(243,210,264) (4,277,552) $ (39,217,191)
============== ============== ============== ===============
</TABLE>
<PAGE>
DEAN WITTER SHORT-TERM U.S. TREASURY 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 YEAR ENDED MAY 31 AUGUST 13, 1991*
---------------------------------- THROUGH
1995 1994 1993 MAY 31, 1992
- --------------------------------------- ---------- ---------- ---------- -----------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.88 $10.34 $10.21 $10.00
---------- ---------- ---------- ----------------
Net investment income 0.49 0.49 0.54 0.44
Net realized and unrealized gain (loss) 0.10 (0.45) 0.13 0.20
---------- ---------- ---------- ----------------
Total from investment operations 0.59 0.04 0.67 0.64
---------- ---------- ---------- ----------------
Less dividends and distributions from:
Net investment income (0.49) (0.50) (0.53) (0.43)
Net realized gain -- -- (0.01) --
---------- ---------- ---------- ----------------
Total dividends and distributions (0.49) (0.50) (0.54) (0.43)
---------- ---------- ---------- ----------------
Net asset value, end of period $ 9.98 $ 9.88 $10.34 $10.21
========== ========== ========== ================
TOTAL INVESTMENT RETURN 6.22% 0.25% 6.75% 6.55%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.84% 0.79% 0.80% 0.79%(2)(3)
Net investment income 4.93% 4.74% 5.18% 5.49%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $273,184 $516,017 $584,206 $523,555
Portfolio turnover rate 30% 49% 21% 12%(1)
</TABLE>
* Commencement of operations.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had borne all expenses that were assumed or waived by the
Investment Manager, the above annualized expense and net investment
income ratios would have been 0.81% and 5.47%, respectively.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER SHORT-TERM U.S. TREASURY TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF DEAN WITTER SHORT-TERM U.S. TREASURY 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
Short-Term U.S. Treasury Trust (the "Fund") at May 31, 1995, 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 three years in the period then ended and for the period
August 13, 1991 (commencement of operations) through May 31, 1992, 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 May 31, 1995 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
July 11, 1995
<PAGE>
TRUSTEES
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
Rajesh K. Gupta
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
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.
DEAN WITTER
SHORT-TERM
U.S. TREASURY
TRUST
ANNUAL REPORT
MAY 31, 1995
