<PAGE> 1
<TABLE>
<S> <C>
MORGAN STANLEY DEAN WITTER SHORT-TERM U.S. TREASURY TRUST Two World Trade Center
LETTER TO THE SHAREHOLDERS November 30, 1998 New York, New York 10048
</TABLE>
DEAR SHAREHOLDER:
During the six-month period ended November 30, 1998, the U.S. economy continued
to expand as employment grew, personal income climbed and consumers remained
resilient. Despite strong economic growth, inflation did not materialize, due
largely to continued turmoil in the Asian markets and other emerging-market
economies. As a result, the Federal Reserve Board left interest rates unchanged
until late September, when it initiated the first of three interest-rate cuts.
During the period under review, interest rates on short-term U.S. Treasuries
were highly volatile, with yields on two-year notes ranging from 3.82 percent to
5.59 percent. At the end of the six-month period, the two-year U.S. Treasury
note was yielding 4.51 percent, down one full percentage point from six months
earlier.
PERFORMANCE
Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust posted a total return
of 4.34 percent for the six-month period ended November 30, 1998. During the
same period, the Lehman Brothers 1-3 Year Government Bond Index and the Lipper
Short U.S. Treasury Funds Average returned 3.99 percent and 4.04 percent,
respectively. The Fund's strong performance for the period was reflective of the
overall declining interest rate environment.
On November 30, 1998, the Fund's net assets exceeded $357 million. Throughout
the reporting period, the Fund continued to maintain a diversified investment
strategy across the maturity spectrum, often out to a maximum of five years. By
November 30, 1998, the Fund's average maturity had been gradually extended to
approximately 2.8 years.
The Fund, whose income is free from state and local taxes in all 50 states and
the District of Columbia, continues to offer investors an attractive alternative
to other short-term investments.
<PAGE> 2
MORGAN STANLEY DEAN WITTER SHORT-TERM U.S. TREASURY TRUST
LETTER TO THE SHAREHOLDERS November 30, 1998, continued
LOOKING AHEAD
U.S. economic growth is showing signs of having stabilized as we look forward to
1999. We believe that the deflationary trend of Asian and other emerging-market
economies is likely to help keep inflation in check in the United States well
into 1999. Accordingly, the Federal Reserve will need to continually reassess
its stance on monetary policy and the pace of any future moves to ease rates.
Given the economic and political environments forecast for 1999, the state of
the U.S. budget and the lack of inflation, the portfolio manager may extend the
average maturity of the Fund slightly in the months ahead as opportunities
present themselves.
We appreciate your ongoing support of Morgan Stanley Dean Witter Short-Term U.S.
Treasury Trust and look forward to continuing to serve your investment needs.
Very truly yours,
/s/ CHARLES A. FIUMEFREDDO
CHARLES A. FIUMEFREDDO
Chairman of the Board
2
<PAGE> 3
MORGAN STANLEY DEAN WITTER SHORT-TERM U.S. TREASURY TRUST
PORTFOLIO OF INVESTMENTS November 30, 1998 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION
AMOUNT IN AND COUPON
THOUSANDS MATURITY DATE RATE VALUE
- -------------------------------------------------------------------------------------
<C> <S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS (95.9%)
U.S. Treasury Notes (79.5%)
$29,100 08/31/00........................................ 5.125% $ 29,344,440
5,000 08/15/03........................................ 5.25 5,146,050
34,200 01/31/03........................................ 5.50 35,274,564
9,000 02/28/03........................................ 5.50 9,286,020
4,900 03/31/03........................................ 5.50 5,061,945
3,300 11/15/00........................................ 5.75 3,369,135
12,600 10/31/02........................................ 5.75 13,084,722
20,800 11/30/02........................................ 5.75 21,614,528
4,400 06/30/99........................................ 6.00 4,433,088
14,700 07/31/02........................................ 6.00 15,369,585
26,930 09/30/00........................................ 6.125 27,634,489
17,100 12/31/01........................................ 6.125 17,833,761
1,000 03/31/99........................................ 6.25 1,005,370
13,500 04/30/01........................................ 6.25 14,000,175
18,000 10/31/01........................................ 6.25 18,796,140
3,500 02/28/02........................................ 6.25 3,668,700
2,200 06/30/02........................................ 6.25 2,314,928
1,300 04/30/99........................................ 6.375 1,309,126
10,000 05/15/99........................................ 6.375 10,073,300
1,600 01/15/00........................................ 6.375 1,629,264
8,000 04/30/00........................................ 6.75 8,226,240
14,900 04/15/99........................................ 7.00 15,028,289
20,000 02/29/00........................................ 7.125 20,586,800
------------
284,090,659
------------
U.S. Treasury Strips (16.4%)
14,100 05/15/99 (Coupon)............................... 0.00 13,818,564
5,000 05/15/99 (Principal)............................ 0.00 4,895,200
4,700 08/15/01 (Coupon)............................... 0.00 4,156,304
13,000 08/15/01 (Principal)............................ 0.00 11,485,630
6,100 11/15/01 (Principal)............................ 0.00 5,326,337
15,100 02/15/02 (Coupon)............................... 0.00 13,025,864
6,900 05/15/02 (Principal)............................ 0.00 5,879,835
------------
58,587,734
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Identified Cost $336,252,564) (a).............. 95.9% 342,678,393
CASH AND OTHER ASSETS IN EXCESS OF
LIABILITIES..................................... 4.1 14,786,985
----- ------------
NET ASSETS...................................... 100.0% $357,465,378
===== ============
</TABLE>
- ---------------------
(a) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $8,456,490 and the
aggregate gross unrealized depreciation is $2,030,661, resulting in net
unrealized appreciation of $6,425,829.
SEE NOTES TO FINANCIAL STATEMENTS
3
<PAGE> 4
MORGAN STANLEY DEAN WITTER SHORT-TERM U.S. TREASURY TRUST
FINANCIAL STATEMENTS
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<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1998 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $336,252,564)............................. $342,678,393
Cash........................................................ 96,967
Receivable for:
Shares of beneficial interest sold...................... 12,796,834
Interest................................................ 3,363,966
Prepaid expenses and other assets........................... 62,439
------------
TOTAL ASSETS............................................ 358,998,599
------------
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased............... 1,003,568
Dividends to shareholders............................... 233,058
Plan of distribution fee................................ 103,897
Investment management fee............................... 103,897
Accrued expenses and other payables......................... 88,801
------------
TOTAL LIABILITIES....................................... 1,533,221
------------
NET ASSETS.............................................. $357,465,378
============
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................. $369,656,433
Net unrealized appreciation................................. 6,425,829
Accumulated net realized loss............................... (18,616,884)
------------
NET ASSETS.............................................. $357,465,378
============
NET ASSET VALUE PER SHARE,
35,288,124 shares outstanding
(unlimited shares authorized of $.01 par value)............ $10.13
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE> 5
MORGAN STANLEY DEAN WITTER SHORT-TERM U.S. TREASURY TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the six months ended November 30, 1998 (unaudited)
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $ 8,200,064
-----------
EXPENSES
Plan of distribution fee.................................... 494,288
Investment management fee................................... 494,288
Transfer agent fees and expenses............................ 52,778
Registration fees........................................... 41,241
Professional fees........................................... 28,147
Shareholder reports and notices............................. 18,500
Trustees' fees and expenses................................. 11,484
Custodian fees.............................................. 5,174
Other....................................................... 7,508
-----------
TOTAL EXPENSES.......................................... 1,153,408
-----------
NET INVESTMENT INCOME................................... 7,046,656
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss........................................... (152,106)
Net change in unrealized appreciation....................... 3,911,484
-----------
NET GAIN................................................ 3,759,378
-----------
NET INCREASE................................................ $10,806,034
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE> 6
MORGAN STANLEY DEAN WITTER SHORT-TERM U.S. TREASURY TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
NOVEMBER 30, 1998 MAY 31, 1998
- ---------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................ $ 7,046,656 $ 12,745,247
Net realized loss.................................... (152,106) (250,683)
Net change in unrealized appreciation................ 3,911,484 3,306,205
------------ ------------
NET INCREASE..................................... 10,806,034 15,800,769
Dividends from net investment income................. (7,251,917) (12,934,573)
Net increase from transactions in shares of
beneficial interest................................. 112,886,721 7,891,155
------------ ------------
NET INCREASE..................................... 116,440,838 10,757,351
NET ASSETS:
Beginning of period.................................. 241,024,540 230,267,189
------------ ------------
END OF PERIOD
(Including undistributed net investment income of
$0 and $205,261, respectively)................... $357,465,378 $241,024,540
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 7
MORGAN STANLEY DEAN WITTER SHORT-TERM U.S. TREASURY TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1998 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley 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's investment
objective is current income, preservation of principal and liquidity. The Fund
seeks to achieve its objective by investing its assets in U.S. Treasury
securities backed by the full faith and credit of the U.S. Government. The Fund
was organized as a Massachusetts business trust on June 4, 1991 and commenced
operations on August 13, 1991.
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) 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) 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.
7
<PAGE> 8
MORGAN STANLEY DEAN WITTER SHORT-TERM U.S. TREASURY TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1998 (unaudited) continued
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 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 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 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
Morgan Stanley 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 with the distribution of shares
of the Fund.
8
<PAGE> 9
MORGAN STANLEY DEAN WITTER SHORT-TERM U.S. TREASURY TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1998 (unaudited) continued
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 under the Plan: (1)
compensation to, and expenses of, Morgan Stanley Dean Witter Financial Advisors,
other employees and selected broker-dealers; (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 during the month. For the six months ended November 30, 1998,
the distribution fee was accrued at the annual rate of 0.35%.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales/maturities of portfolio securities
for the six months ended November 30, 1998 aggregated $198,613,847 and
$111,465,170, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At November 30, 1998, the Fund had
transfer agent fees and expenses payable of approximately $3,600.
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 November 30, 1998
included in Trustees' fees and expenses in the Statement of Operations amounted
to $4,359. At November 30, 1998, the Fund had an accrued pension liability of
$41,691 which is included in accrued expenses in the Statement of Assets and
Liabilities.
9
<PAGE> 10
MORGAN STANLEY DEAN WITTER SHORT-TERM U.S. TREASURY TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1998 (unaudited) continued
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
NOVEMBER 30, 1998 MAY 31, 1998
-------------------------- ---------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................................... 37,669,771 $381,678,377 28,646,260 $285,059,941
Shares issued in reinvestment of dividends................ 567,268 5,718,254 1,058,231 10,524,484
---------- ------------ ---------- ------------
38,237,039 387,396,631 29,704,491 295,584,425
Shares repurchased........................................ (27,141,320) (274,509,910) (28,891,924) (287,693,270)
---------- ------------ ---------- ------------
Net increase.............................................. 11,095,719 $112,886,721 812,567 $ 7,891,155
========== ============ ========== ============
</TABLE>
6. FEDERAL INCOME TAX STATUS
At May 31, 1998, the Fund had a net capital loss carryover of approximately
$18,356,000, which may be used to offset future capital gains to the extent
provided by regulations, which is available through May 31 of the following
years:
<TABLE>
<CAPTION>
AMOUNT IN THOUSANDS
-------------------------------------------
2003 2004 2005 2006
-------- -------- -------- --------
<S> <C> <C> <C>
$11,507 $6,271 $333 $245
======= ====== ==== ====
</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 $108,000 during fiscal 1998.
As of May 31, 1998, the Fund had temporary book/tax differences primarily
attributable to post-October losses.
7. RISK RELATING TO CERTAIN FINANCIAL INSTRUMENTS
The Fund may invest a portion of its assets in zero coupon U.S. Treasury
securities. Zero coupon securities are subject to substantially greater market
fluctuations during periods of changing prevailing interest rates than are
comparable debt securities.
10
<PAGE> 11
MORGAN STANLEY 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 SIX FOR THE YEAR ENDED MAY 31,
MONTHS ENDED ----------------------------------------------------
NOVEMBER 30, 1998 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA:
Net asset value, beginning of period................... $ 9.96 $ 9.85 $ 9.84 $ 9.98 $ 9.88 $ 10.34
------ ------ ------ ------- ------- -------
Income from investment operations:
Net investment income................................. 0.25 0.53 0.54 0.54 0.49 0.49
Net realized and unrealized gain (loss)............... 0.18 0.11 -- (0.14) 0.10 (0.45)
------ ------ ------ ------- ------- -------
Total income from investment operations................ 0.43 0.64 0.54 0.40 0.59 0.04
------ ------ ------ ------- ------- -------
Less dividends from net investment income.............. (0.26) (0.53) (0.53) (0.54) (0.49) (0.50)
------ ------ ------ ------- ------- -------
Net asset value, end of period......................... $10.13 $ 9.96 $ 9.85 $ 9.84 $ 9.98 $ 9.88
====== ====== ====== ======= ======= =======
TOTAL RETURN+.......................................... 4.34%(1) 6.68% 5.63% 4.09% 6.22% 0.25%
RATIOS TO AVERAGE NET ASSETS:
Expenses............................................... 0.82%(2) 0.82% 0.83% 0.84% 0.84% 0.79%
Net investment income.................................. 4.99%(2) 5.30% 5.42% 5.33% 4.93% 4.74%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands................ $357,465 $241,025 $230,267 $258,637 $273,184 $516,017
Portfolio turnover rate................................ 42%(1) 95% 149% 63% 30% 49%
</TABLE>
- ---------------------
+ Calculated based on the net asset value as of the last business day of the
period.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE> 12
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and General Counsel
Rajesh K. Gupta
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center -- Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
The financial statements included herein have been taken from the records of the
Fund without examination by the independent accountants and accordingly they do
not express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus of the
Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus.
MORGAN STANLEY
DEAN WITTER
SHORT-TERM
U.S. TREASURY
TRUST
[MORGAN STANLEY GRAPHIC]
SEMIANNUAL REPORT
NOVEMBER 30, 1998
