<PAGE> 1
DEAN WITTER GOVERNMENT INCOME TRUST
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- --------------------------------------------------------------------------------
In 1994, as interest rates rose steeply, the intermediate U.S. Treasury
sector saw its worst-ever total return performance, with the general closed-end
U.S. government fund category registering a total return of -12.14 percent, as
measured by Lipper Analytical Services, Inc. Interest rates peaked and began to
decline, however, within two months of the close of Dean Witter Government
Income Trust's fiscal year on September 30, 1994. Shortly thereafter, analysts
and investors alike began to believe the Federal Reserve Board's tight monetary
policy would successfully corral inflation. This was evident in the markets'
favorable reaction to the central bank's November 1994 and February 1995 rate
increases. As of this writing, early signs of a slowing economy are emerging as
we await the arrival of the ever-evasive "soft landing," whereby the economy
slows to a more moderate pace with only minimal inflation.
FUND PERFORMANCE
On March 31, 1995, the Trust's net asset value per share (NAV) was $8.84,
up from $8.69 on September 30, 1994. Based on this increase, and including
reinvestment of income dividends totaling $0.30 per share, the Trust's total NAV
return for the six-month period under review was 5.69 percent. Over the same
period, the Trust's market price per share on the New York Stock Exchange (NYSE)
remained $7.875; on this basis, total return including reinvestment of income
dividends was 3.90 percent. As of March 31, 1995, the Trust had net assets in
excess of $474 million. With a total NAV return of 5.57 percent for the trailing
12 months ended March 31, 1995, the Trust was ranked #1 out of 7 general
closed-end U.S. government funds by Lipper Analytical Services, Inc. (the
average total NAV return for the category was -1.08 percent).
On March 28, 1995, the Board of Trustees declared a monthly income dividend
of $0.05 per share, payable April 21, 1995, to shareholders of record on April
7, 1995. In addition, the Trust has declared the following dividends.
<TABLE>
<CAPTION>
AMOUNT RECORD DATE PAYABLE DATE
- ------ -------------- ---------------
<S> <C> <C>
$0.05 May 05, 1995 May 19, 1995
$0.05 June 16, 1995 June 30, 1995
</TABLE>
The dividend rate, when annualized, provides a current yield of 7.62 percent,
based on the Trust's March 31, 1995 closing NYSE market price of $7.875 per
share. The Trust continues to be a competitive investment alternative in the
current low inflation environment.
LOOKING AHEAD
For the balance of 1995, we expect the economy to slow vis-a-vis the rapid
pace of 1994's fourth quarter. This should occur as higher interest rates take
their toll. 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 Trust to continue to provide an attractive income stream as well as total
return.
We would again like to remind shareholders that the Trustees have approved
a procedure whereby the Fund, when appropriate, may repurchase shares in the
open market or in privately negotiated transactions at a price not above market
value or net asset value, whichever is lower at the time of purchase. In
accordance with this procedure, 2,337,200 shares of the Trust were purchased on
the New York Stock Exchange over the six-month period ended March 31, 1995.
We appreciate your support of Dean Witter Government Income Trust and look
forward to continuing to serve your investment objectives in the months and
years to come.
Very truly yours,
/s/ CHARLES A. FIUMEFREDDO
--------------------------
Charles A. Fiumefreddo
Chairman of the Board
<PAGE> 2
DEAN WITTER GOVERNMENT INCOME TRUST
PORTFOLIO OF INVESTMENTS March 31, 1995 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(in Coupon Maturity
thousands) Rate Dates Value
-------- ------ ----------------- ------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS (22.2%)
Federal National Mortgage Assoc.
Principal Strip (7.6%)................... $ 42,280 0.00 % 12/20/01-03/09/02 $ 35,957,356
------------
U.S. Treasury Notes (12.8%)................ 43,500 4.375 11/15/96 41,950,313
10,000 4.75 08/31/98 9,328,125
10,000 4.75 09/30/98 9,314,063
------------
60,592,501
------------
U.S. Treasury Strip (1.8%)................. 10,000 0.00 05/15/97 8,669,639
------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(IDENTIFIED COST $112,168,409)......................................................... 105,219,496
------------
MORTGAGE PASS-THROUGH CERTIFICATES (83.0%)
Federal Home Loan Mortgage
Corp. (14.0%)............................ 8,837 9.50 12/01/18-02/01/19 9,154,925
32,642 10.00 07/01/09-08/01/20 34,325,106
21,396 10.50 08/01/14-05/01/19 22,920,777
------------
66,400,808
------------
Federal National Mortgage
Assoc. (48.1%)........................... 27,567 6.00 11/01/08-01/01/09 25,560,013
62,074 6.50 05/01/07-12/01/23 57,389,576
46,630 7.00 06/01/23-06/01/24 43,919,394
29,762 7.50 01/01/22-03/01/23 28,785,686
25,632 8.00 12/01/21-10/01/25 25,375,919
15,000 8.00 * 14,821,875
9,651 8.50 09/01/24-05/01/25 9,750,550
15,000 8.50 * 15,126,563
2,326 9.00 09/01/13-07/01/23 2,389,887
4,596 9.50 06/01/18-01/01/21 4,786,966
------------
227,906,429
------------
Government National Mortgage
Assoc. (20.9%)........................... 8,432 7.50 12/15/22-01/15/23 8,139,424
17,777 8.00 11/15/15-12/15/21 17,615,427
50,316 8.50 05/15/16-11/15/24 51,008,047
19,600 9.00 04/15/17-02/15/25 20,236,886
2,030 9.50 08/15/18-08/15/20 2,128,294
------------
99,128,078
------------
TOTAL MORTGAGE PASS-THROUGH CERTIFICATES
(IDENTIFIED COST $398,048,576)........................................................ 393,435,315
------------
SHORT-TERM INVESTMENT (0.3%)
REPURCHASE AGREEMENT
The Bank of New York (dated 03/31/95,
proceeds $1,509,964, collateralized by
$1,560,052 U.S. Treasury Bill 6.10% due
09/07/95 valued at $1,520,544)
(Identified Cost $1,509,225)............. 1,509 5.875 04/03/95 1,509,225
------------
TOTAL INVESTMENTS
(IDENTIFIED COST $511,726,210) (a)....................................... 105.5% 500,164,036
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS............................. (5.5) (26,100,110)
------ ------------
NET ASSETS................................................................. 100.0% $474,063,926
===== ============
</TABLE>
- ---------------
* Securities were purchased on a forward commitment basis with an approximate
principal amount and no definite maturity date, the actual principal amount
and maturity date will be determined upon settlement.
(a) The aggregate cost of investments for federal income tax purposes is
$512,480,116; the aggregate gross unrealized appreciation is $1,222,612 and
the aggregate gross unrealized depreciation is $13,538,692, resulting in net
unrealized depreciation of $12,316,080.
See Notes to Financial Statements
<PAGE> 3
DEAN WITTER GOVERNMENT INCOME TRUST
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1995 (unaudited)
- --------------------------------------------------------
ASSETS:
Investments in securities, at value
(identified cost $511,726,210)......... $ 500,164,036
Cash..................................... 237,500
Receivable for:
Interest............................... 3,807,299
Principal paydowns..................... 671,383
Prepaid expenses and other assets........ 9,451
-------------
TOTAL ASSETS..................... 504,889,669
-------------
LIABILITIES:
Payable for:
Investments purchased.................. 29,965,625
Shares of beneficial interest
repurchased.......................... 393,470
Management fee......................... 274,715
Accrued expenses and other payables...... 191,933
-------------
TOTAL LIABILITIES................ 30,825,743
-------------
NET ASSETS:
Paid-in-capital.......................... 518,930,077
Net unrealized depreciation.............. (11,562,174)
Accumulated undistributed net investment
income................................. 1,389,297
Accumulated net realized loss............ (34,693,274)
-------------
NET ASSETS....................... $ 474,063,926
=============
NET ASSET VALUE PER SHARE,
53,649,200 shares outstanding
(unlimited shares authorized of $.01
par value)............................. $8.84
=====
STATEMENT OF OPERATIONS For the six months
ended March 31, 1995 (unaudited)
- --------------------------------------------------------
NET INVESTMENT INCOME:
INTEREST INCOME......................... $ 17,929,154
-------------
EXPENSES
Investment management fee.............. 1,422,718
Transfer agent fees and expenses....... 165,308
Custodian fees......................... 34,189
Shareholder reports and notices........ 32,122
Professional fees...................... 30,664
Registration fees...................... 25,475
Trustees' fees and expenses............ 19,216
Other.................................. 2,691
-------------
TOTAL EXPENSES....................... 1,732,383
-------------
NET INVESTMENT INCOME.............. 16,196,771
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss...................... (1,008,692)
Net change in unrealized
depreciation......................... 6,910,476
-------------
NET GAIN............................. 5,901,784
-------------
NET INCREASE....................... $ 22,098,555
=============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the
six months
ended
March 31, For the
1995 year ended
(unaudited) September 30, 1994
------------- ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income................................................. $ 16,196,771 $ 35,103,869
Net realized loss..................................................... (1,008,692) (10,233,785)
Net change in unrealized appreciation/depreciation.................... 6,910,476 (33,692,553)
------------- --------------
Net increase (decrease)............................................. 22,098,555 (8,822,469)
Dividends to shareholders from net investment income.................... (16,496,732) (41,688,803)
Net decrease from transactions in shares of beneficial interest......... (18,171,726) (14,514,293)
------------- --------------
Total decrease...................................................... (12,569,903) (65,025,565)
NET ASSETS:
Beginning of period..................................................... 486,633,829 551,659,394
------------- --------------
END OF PERIOD (including undistributed net investment income of
$1,389,297 and $1,689,258, respectively).............................. $ 474,063,926 $ 486,633,829
============= ==============
</TABLE>
See Notes to Financial Statements
<PAGE> 4
DEAN WITTER GOVERNMENT INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES -- Dean Witter Government Income Trust
(the "Trust") is registered under the Investment Company Act of 1940, as
amended, as a diversified, closed-end management investment company. The Trust
commenced operations on February 29, 1988.
The following is a summary of significant accounting policies:
A. Valuation of Investments -- (1) a portfolio security listed or traded on
the New York or American Stock Exchange is valued at its latest sale price
on that exchange prior to the time when assets are valued; if there were no
sales that day, the security is valued at the latest bid price; (2) all
other 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; (3) 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 (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 on securities purchased are amortized over the life of
the respective securities. The Trust does not amortize premiums on
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 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 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 Dean Witter InterCapital Inc. (the "Investment Manager"), the
Trust pays its Investment Manager a management fee, accrued weekly and payable
monthly, by applying the annual rate of 0.60% to the Trust's average weekly net
assets.
<PAGE> 5
DEAN WITTER GOVERNMENT INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
- --------------------------------------------------------------------------------
Under the terms of the Agreement, in addition to managing the Trust's
investments, the Investment Manager maintains certain of the Trust'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 Trust 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 Trust.
3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES -- The cost of
purchases and proceeds from sales of portfolio securities, excluding short-term
investments, for the six months ended March 31, 1995 aggregated $66,317,716 and
$95,052,811, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Trust's transfer agent. At March 31, 1995, the Trust had transfer agent fees and
expenses payable of approximately $58,000.
The Trust established an unfunded noncontributory defined benefit pension
plan covering all independent Trustees of the Trust 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 March
31, 1995 included in Trustees' fees and expenses in the Statement of Operations
amounted to $3,782. At March 31, 1995, the Trust had an accrued pension
liability of $48,117 which is included in accrued expenses in the Statement of
Assets and Liabilities.
4. SHARES OF BENEFICIAL INTEREST -- Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
Par Value Paid in
of Excess of
Shares Shares Par Value
----------- --------- -------------
<S> <C> <C> <C>
Balance, September 30, 1993....................... 57,818,800 $ 578,188 $ 551,037,908
Treasury shares purchased and retired
(weighted average discount 9.932%)*............. (1,832,400) (18,324) (14,495,969)
----------- --------- -------------
Balance, September 30, 1994....................... 55,986,400 559,864 536,541,939
----------- --------- -------------
Treasury shares purchased and retired
(weighted average discount 10.019%)*............ (2,337,200) (23,372) (18,148,354)
----------- --------- -------------
Balance, March 31, 1995........................... 53,649,200 $ 536,492 $ 518,393,585
========== ========= =============
</TABLE>
- ---------------
* The Trustees have voted to retire the shares purchased.
5. DIVIDENDS -- On March 28, 1995, the Trust has declared the following
dividends from net investment income payable to shareholders of record
subsequent to March 31, 1995:
<TABLE>
<CAPTION>
Declaration Amount Record
Date per Share Date
---- -------------- --------------
<S> <C> <C>
$.05 April 07, 1995 April 21, 1995
$.05 May 05, 1995 May 19, 1995
$.05 June 16, 1995 June 30, 1995
</TABLE>
<PAGE> 6
DEAN WITTER GOVERNMENT INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
- --------------------------------------------------------------------------------
6. FEDERAL INCOME TAX STATUS -- At September 30, 1994, the Trust had net
capital loss carryovers of approximately $23,292,000 of which $9,742,000 will be
available through September 30, 1997, $5,061,000 will be available through
September 30, 1998, $190,000 will be available through September 30, 1999 and
$8,299,000 will be available through September 30, 2002 to offset future capital
gains to the extent provided by regulations.
Any net capital losses incurred after October 31 ("post-October losses")
within the taxable year is deemed to arise on the first day of the Trust's next
taxable year. The Trust incurred and will elect to defer net capital losses of
approximately $9,638,000 during fiscal 1994. As of September 30, 1994, the Trust
had temporary book/tax differences primarily attributable to capital loss
carryovers.
7. SELECTED QUARTERLY FINANCIAL DATA --
<TABLE>
<CAPTION>
Quarters Ended
------------------------------------------------
03/31/95 12/31/94
-------------------- ---------------------
Per Per
Total* Share Total* Share
-------- ------ -------- -------
<S> <C> <C> <C> <C>
Total investment income.............................................. $ 8,970 $ 0.16 $ 8,959 $ 0.16
Net investment income................................................ 8,075 0.16 8,122 0.17
Net realized and unrealized gain (loss).............................. 10,495 0.21 (4,593) (0.09)
</TABLE>
<TABLE>
<CAPTION>
Quarters Ended
----------------------------------------------------------------------------------------------
09/30/94 06/30/94 03/31/94 12/31/93
------------------- -------------------- -------------------- --------------------
Per Per Per Per
Total* Share Total* Share Total* Share Total* Share
-------- ------- --------- ------- --------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income..... $ 9,158 $ 0.16 $ 9,281 $ 0.16 $ 9,698 $ 0.17 $ 10,615 $ 0.18
Net investment income....... 8,336 0.15 8,335 0.15 8,784 0.15 9,649 0.17
Net realized and unrealized
loss...................... (4,684) (0.07) (12,124) (0.20) (20,191) (0.35) (6,927) (0.12)
</TABLE>
<TABLE>
<CAPTION>
Quarters Ended
-------------------------------------------------------------------------------------------------
09/30/93 06/30/93 03/31/93 12/31/92
------------------- ------------------- ------------------ --------------------
Per Per Per Per
Total* Share Total* Share Total* Share Total* Share
-------- ------- -------- ------- -------- ------ -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income.... $ 12,813 $ 0.22 $ 13,132 $ 0.23 $ 12,769 $ 0.22 $ 12,764 $ 0.22
Net investment income...... 11,833 0.20 12,149 0.21 11,785 0.20 11,810 0.20
Net realized and unrealized
gain (loss).............. (6,097) (0.11) (3,012) (0.05) 516 0.01 (8,313) (0.14)
</TABLE>
- ---------------
* Totals expressed in thousands.
<PAGE> 7
DEAN WITTER GOVERNMENT INCOME TRUST
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
For the six
months ended For the year ended September 30,
March 31, 1995* --------------------------------------------------------------
(unaudited) 1994* 1993* 1992* 1991* 1990*
--------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period..................... $ 8.69 $ 9.54 $ 9.72 $ 9.70 $ 9.32 $ 9.31
--------- --------- --------- --------- --------- ---------
Net investment income........ 0.33 0.62 0.81 0.78 0.83 0.84
Net realized and unrealized
gain (loss)................ 0.12 (0.74) (0.29) -- 0.39 0.04
--------- --------- --------- --------- --------- ---------
Total from investment
operations................. 0.45 (0.12) 0.52 0.78 1.22 0.88
--------- --------- --------- --------- --------- ---------
Dividends from net investment
income..................... (0.30) (0.73) (0.70) (0.76) (0.84) (0.87)
--------- --------- --------- --------- --------- ---------
Net asset value, end of
period..................... $ 8.84 $ 8.69 $ 9.54 $ 9.72 $ 9.70 $ 9.32
======== ======== ======== ======== ======== ========
Market value, end of
period..................... $ 7.875 $ 7.875 $ 9.125 $ 9.25 $ 9.375 $ 8.75
======== ======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN+..... 3.90%(1) (5.97)% 6.51% 8.85% 17.28% 8.65%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)................. $ 474,064 $ 486,634 $ 551,659 $ 561,749 $ 561,318 $ 538,889
Ratios to average net assets:
Expenses................... 0.73%(2) 0.70% 0.70% 0.72% 0.72% 0.76%
Net investment income...... 6.83%(2) 6.73% 8.54% 8.06% 8.81% 9.01%
Portfolio turnover rate...... 13%(1) 59% 132% 70% 10% 20%
</TABLE>
- ---------------
* The per share amounts were computed using an average number of shares
outstanding during the period.
+ Total investment return is based upon the current market value on the first
day of each period reported. Dividends and distributions are assumed to be
reinvested at the prices obtained under the Trust's reinvestment plan.
Total investment return does not reflect sales charges or brokerage
commissions.
(1) Not annualized.
(2) Annualized.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
The financial statements included herein have been taken from the records
of the Trust without examination by the independent accountants and accordingly,
they do not express an opinion thereon.
<PAGE> 8
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
DEAN WITTER
GOVERNMENT
INCOME TRUST
Semiannual Report
March 31, 1995
