NOTES TO FINANCIAL STATEMENTS December 31, 1996 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Active Assets Government Securities Trust (the "Trust") is registered under the Investment Company Act of
1940, as amended (the "Act"), as a diversified, open-end management investment company. The Trust's
investment objectives are high current income, preservation of capital and liquidity. The Trust was organized as a
Massachusetts business trust on March 30, 1981 and commenced operations on July 7, 1981.
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 -- Portfolio securities are valued at amortized cost, which approximates
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. The Trust amortizes premiums and accretes discounts over the life of the respective
securities. Interest income is accrued daily.
C. FEDERAL INCOME TAX STATUS -- It is the Trust's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable and
nontaxable income to its shareholders. Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Trust records dividends and
distributions to shareholders as of the close of each business day.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with Dean Witter InterCapital Inc. (the "Investment
Manager"), the Trust pays the Investment Manager a management fee, accrued daily and payable monthly, by
applying the follow