<PAGE> 1
MORGAN STANLEY DEAN WITTER GOVERNMENT INCOME TRUST Two World Trade Center
LETTER TO THE SHAREHOLDERS March 31, 1999 New York, New York 10048
DEAR SHAREHOLDER:
During the six-month period ended March 31, 1999, the U.S. economy continued to
display signs of robust expansion as employment grew, income climbed and
consumers remained resilient. Despite strong economic growth, however, inflation
did not materialize, due primarily to the lingering effects of Asian and Russian
economic turmoil and signs of distress in the Latin American economies. In
mid-October and again in mid-November, the Federal Reserve Board cut the
federal-funds rate. The central bank's action served to provide stability to a
marketplace rocked by one financial crisis after another.
As of March 31, 1999, the inflation environment remained favorable. Going
forward, we believe that the deflationary trend evident in the Asian and
emerging-market economies is likely to help keep inflation in check in the
United States well into 2000.
During the period under review, interest rates on intermediate-term U.S.
Treasury securities were highly volatile. The yield on the five-year U.S.
Treasury note ranged from 3.97 percent to 5.31 percent. On March 31, 1999, the
five-year U.S. Treasury note was yielding 5.10 percent compared to 4.22 percent
on September 30, 1998.
PERFORMANCE AND PORTFOLIO STRATEGY
During the six-month period under review, Morgan Stanley Dean Witter Government
Income Trust's performance was reflective of the volatile interest-rate
environment. On March 31, 1999, the Trust's net asset value per share (NAV) was
$9.42, down from $9.72 per share on September 30, 1998. For this six-month
period, the Trust's total return (based on NAV) was 0.03 percent, including
reinvestment of dividends of $0.282 per share. Over the same period, the Trust's
market price per share on the New York Stock Exchange (NYSE) declined from $9.00
per share to $8.6875 per share. Based on market value, the Trust's total return
for the period was -0.37 percent, including the reinvestment of dividends. The
Trust continued to declare income dividends, at a rate of $0.047 per share per
month.
<PAGE> 2
MORGAN STANLEY DEAN WITTER GOVERNMENT INCOME TRUST
LETTER TO THE SHAREHOLDERS March 31, 1999, continued
As of March 31, 1999, the Trust had net assets in excess of $401 million, with
61 percent invested in mortgage-backed securities issued by the Government
National Mortgage Association (GNMA), the Federal National Mortgage Association
(FNMA) and the Federal Home Loan Mortgage Corp. (FHLMC), 27 percent in U.S.
government agency obligations, 10 percent in U.S. Treasury securities and the
remaining 2 percent in cash equivalents. On March 31, 1999, the Trust's average
maturity was 5.9 years.
For the balance of 1999, income and proceeds from sales or maturities may be
reinvested in mortgage-backed securities. We believe these securities continue
to offer not only significant long-term value, with an incremental yield
incentive over U.S. Treasury securities of similar maturity, but also the
potential for attractive total returns.
On March 30, 1999, the Board of Trustees declared a monthly income dividend of
$0.047 per share, payable April 23, 1999, to shareholders of record on April 9,
1999. In addition, the Trust has declared the following dividends:
<TABLE>
<CAPTION>
RECORD PAYABLE
AMOUNT DATE DATE
- ------ ------------ -------------
<S> <C> <C>
$0.047 May 7, 1999 May 21, 1999
$0.047 June 4, 1999 June 18, 1999
</TABLE>
The dividend rate, when annualized, provides a current yield of 6.49 percent,
based on the Trust's March 31, 1999, closing NYSE market price of $8.6875 per
share. The Trust continues to be a competitive investment alternative in the
current low-inflation environment.
LOOKING AHEAD
In the months ahead, U.S. economic growth is likely to moderate as inflation
remains contained. Should our economy show signs of inordinately strong growth
coupled with unacceptably high levels of inflation, the Federal Reserve may need
to reassess its current stance on monetary policy. Accordingly, adjustments to
the Trust's maturity and portfolio composition will be made as conditions
warrant and attractive opportunities become available.
We would again like to remind shareholders that the Trustees have approved a
procedure whereby the Trust may, when appropriate, 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, 914,600 shares of common stock at a weighted average
2
<PAGE> 3
MORGAN STANLEY DEAN WITTER GOVERNMENT INCOME TRUST
LETTER TO THE SHAREHOLDERS March 31, 1999, continued
market discount of 6.99 percent of the Trust were purchased on the New York
Stock Exchange over the six-month period ended March 31, 1999.
On May 1, 1999, Mitchell M. Merin was named President of the Morgan Stanley Dean
Witter Funds. Mr. Merin is also the President and Chief Operating Officer of
Asset Management of Morgan Stanley Dean Witter & Co., and President, Chief
Executive Officer and Director of Morgan Stanley Dean Witter Advisors Inc., the
Trust's Investment Manager. He also serves as Chairman, Chief Executive Officer
and Director of the Morgan Stanley Dean Witter Distributors Inc. and Morgan
Stanley Dean Witter Trust FSB.
We appreciate your ongoing support of Morgan Stanley Dean Witter Government
Income Trust and look forward to continuing to serve your investment objectives.
Very truly yours,
/S/ CHARLES A. FIUMEFREDDO /S/ MITCHELL M. MERIN
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
3
<PAGE> 4
MORGAN STANLEY DEAN WITTER GOVERNMENT INCOME TRUST
RESULTS OF ANNUAL MEETING
* * *
On December 17, 1998, an annual meeting of the Trust's shareholders was held for
the purpose of voting on two separate matters, the results of which were as
follows:
(1) ELECTION OF TRUSTEES:
<TABLE>
<S> <C>
Edwin J. Garn
For.................... 33,034,125
Withheld............... 630,111
John R. Haire
For.................... 33,037,361
Withheld............... 626,875
Michael E. Nugent
For.................... 33,055,767
Withheld............... 608,469
Philip J. Purcell
For.................... 33,077,484
Withheld............... 586,752
</TABLE>
The following Trustees were not standing for reelection at this meeting: Michael
Bozic, Charles A. Fiumefreddo, Wayne E. Hedien, Dr. Manuel H. Johnson and John
L. Schroeder.
(2) RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
ACCOUNTANTS:
<TABLE>
<S> <C>
For..................................................... 32,834,490
Against................................................. 258,869
Abstain................................................. 570,877
</TABLE>
4
<PAGE> 5
MORGAN STANLEY DEAN WITTER GOVERNMENT INCOME TRUST
PORTFOLIO OF INVESTMENTS March 31, 1999 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION
AMOUNT IN AND COUPON
THOUSANDS MATURITY DATE RATE VALUE
- --------------------------------------------------------------------------------------
<C> <S> <C> <C>
MORTGAGE-BACKED SECURITIES (60.6%)
Federal Home Loan Mortgage Corp. (5.5%)
$ 3,890 12/01/18 - 02/01/19.............................. 9.50 % $ 4,133,486
9,757 07/01/09 - 08/01/20.............................. 10.00 10,525,589
6,644 08/01/14 - 05/01/19.............................. 10.50 7,249,927
------------
21,909,002
------------
Federal National Mortgage Assoc. (36.1%)
20,164 11/01/08 - 02/01/29.............................. 6.00 19,924,678
40,911 05/01/07 - 10/01/23.............................. 6.50 40,875,587
2,000 04/01/29 (a)..................................... 6.50 2,000,156
35,772 07/01/23 - 04/01/26.............................. 7.00 36,263,929
1,000 04/01/29 (a)..................................... 7.00 1,013,750
21,898 01/01/22 - 11/01/26.............................. 7.50 22,493,473
12,512 12/01/21 - 05/01/25.............................. 8.00 13,005,148
6,399 08/01/17 - 04/01/25.............................. 8.50 6,716,781
690 09/01/13 - 07/01/23.............................. 9.00 731,200
1,571 06/01/18 - 01/01/21.............................. 9.50 1,676,591
------------
144,701,293
------------
Government National Mortgage Assoc. (19.0%)
8,892 03/15/26 - 03/15/29.............................. 6.00 8,639,334
11,856 03/20/26 - 03/20/29.............................. 6.50 11,762,962
3,000 04/01/29 (a)..................................... 6.50 2,985,937
10,836 02/15/24 - 08/15/25.............................. 7.00 11,001,916
7,702 12/15/22 - 06/15/26.............................. 7.50 7,927,832
8,766 11/15/15 - 12/15/21.............................. 8.00 9,125,320
17,269 05/15/16 - 11/15/24.............................. 8.50 18,235,336
5,728 04/15/17 - 2/15/25............................... 9.00 6,112,361
619 08/15/18 - 08/15/20.............................. 9.50 667,220
------------
76,458,218
------------
TOTAL MORTGAGE-BACKED SECURITIES
(Identified Cost $236,752,019)............................. 243,068,513
------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS (36.7%)
1,500 Federal Farm Credit Bank
06/17/05......................................... 5.80 1,506,945
3,085 Federal Farm Credit Bank
01/10/05......................................... 5.90 3,110,390
2,000 Federal Farm Credit Corp.
09/23/04......................................... 6.30 2,059,840
1,000 Federal Farm Credit Corp.
09/24/07......................................... 6.52 1,037,760
14,000 Federal Home Loan Banks
02/25/04 - 07/02/12.............................. 0.00 9,412,780
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE> 6
MORGAN STANLEY DEAN WITTER GOVERNMENT INCOME TRUST
PORTFOLIO OF INVESTMENTS March 31, 1999 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION
AMOUNT IN AND COUPON
THOUSANDS MATURITY DATE RATE VALUE
- --------------------------------------------------------------------------------------
<C> <S> <C> <C>
$ 2,000 Federal Home Loan Banks
04/23/03......................................... 5.785% $ 2,012,700
1,000 Federal Home Loan Banks
11/25/08......................................... 5.88 977,000
1,000 Federal Home Loan Banks
07/28/08......................................... 5.945 999,090
2,000 Federal Home Loan Banks
02/05/08......................................... 5.96 2,000,300
2,000 Federal Home Loan Banks
03/17/08......................................... 6.02 2,008,680
3,500 Federal Home Loan Banks
10/10/07......................................... 6.20 3,558,625
2,000 Federal Home Loan Banks
08/15/07......................................... 6.295 2,045,280
2,000 Federal Home Loan Mortgage Corp.
04/15/08......................................... 5.75 1,982,400
2,500 Federal National Mortgage Assoc.
02/01/04 - 08/01/04.............................. 0.00 1,885,612
2,000 Federal National Mortgage Assoc.
01/26/09......................................... 5.80 1,942,360
1,000 Federal National Mortgage Assoc.
07/30/07......................................... 6.75 1,012,340
103,000 Resolution Funding Corp.
10/15/01 - 10/15/07.............................. 0.00 70,908,530
7,500 U.S. Treasury Note
02/28/03 - 05/31/03.............................. 5.50 7,575,315
7,500 U.S. Treasury Note
12/31/02 - 02/15/06.............................. 5.625 7,612,850
2,000 U.S. Treasury Note
11/15/05......................................... 5.875 2,054,220
6,000 U.S. Treasury Note
08/15/07......................................... 6.125 6,273,720
8,500 U.S. Treasury Note
02/15/07......................................... 6.25 8,940,300
2,000 U.S. Treasury Note
08/15/05......................................... 6.50 2,120,460
5,000 U.S. Treasury Strip
02/15/03......................................... 0.00 4,088,150
------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(Identified Cost $141,623,650)............................. 147,125,647
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 7
MORGAN STANLEY DEAN WITTER GOVERNMENT INCOME TRUST
PORTFOLIO OF INVESTMENTS March 31, 1999 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION
AMOUNT IN AND COUPON
THOUSANDS MATURITY DATE RATE VALUE
- --------------------------------------------------------------------------------------
<C> <S> <C> <C>
SHORT-TERM INVESTMENTS (3.5%)
U.S. GOVERNMENT AGENCIES (b) (2.2%)
$ 2,000 Federal Home Loan Mortgage Corp.
04/01/99......................................... 4.52 % $ 2,000,000
4,000 Federal Home Loan Mortgage Corp.
04/06/99......................................... 4.74 3,997,367
3,000 Federal Home Loan Mortgage Corp.
04/09/99......................................... 4.80 2,996,800
------------
TOTAL U.S. GOVERNMENT AGENCIES
(Amortized Cost $8,994,167)................................ 8,994,167
------------
REPURCHASE AGREEMENT (1.3%)
5,224 The Bank of New York due 04/01/99 (dated
03/31/99; proceeds $5,224,549) (c)
(Identified Cost $5,223,842).................... 4.875 5,223,842
------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $14,218,009).............................. 14,218,009
------------
TOTAL INVESTMENTS
(Identified Cost $392,593,678) (d)............... 100.8% 404,412,169
LIABILITIES IN EXCESS OF OTHER ASSETS............ (0.8) (3,044,276)
---- ------------
NET ASSETS....................................... 100.0% $401,367,893
==== ============
</TABLE>
- ---------------------
(a) Security purchased on a forward commitment basis with an approximate
principal amount. The actual principal amount will be determined upon
settlement.
(b) Securities were purchased on a discount basis. The interest rates shown have
been adjusted to reflect a money market equivalent yield.
(c) Collateralized by $2,512,211 U.S. Treasury Bond 13.125% due 05/15/01 valued
at $3,038,432 and $5,838,716 U.S. Treasury Note 0.0% due 11/15/14 valued at
$2,289,887.
(d) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $20,883,594 and the
aggregate gross unrealized depreciation is $9,065,103, resulting in net
unrealized appreciation of $11,818,491.
7
<PAGE> 8
MORGAN STANLEY DEAN WITTER GOVERNMENT INCOME TRUST
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1999 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $392,593,678)............................. $404,412,169
Receivable for:
Interest................................................ 2,350,800
Principal paydowns...................................... 1,037,907
Prepaid expenses and other assets........................... 4,810
-----------
TOTAL ASSETS............................................ 407,805,686
-----------
LIABILITIES:
Payable for:
Investments purchased................................... 6,017,503
Investment management fee............................... 218,282
Shares of beneficial interest repurchased............... 70,240
Accrued expenses and other payables......................... 131,768
-----------
TOTAL LIABILITIES....................................... 6,437,793
-----------
NET ASSETS.............................................. $401,367,893
===========
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................. $409,809,466
Net unrealized appreciation................................. 11,818,491
Dividends in excess of net investment income................ (116,740)
Accumulated net realized loss............................... (20,143,324)
-----------
NET ASSETS.............................................. $401,367,893
===========
NET ASSETS VALUE PER SHARE,
42,604,000 shares outstanding
(unlimited shares authorized of $.01 par value)............ $9.42
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 9
MORGAN STANLEY DEAN WITTER GOVERNMENT INCOME TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the six months ended March 31, 1999 (unaudited)
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $13,543,562
-----------
EXPENSES
Investment management fee................................... 1,230,635
Transfer agent fees and expenses............................ 115,844
Custodian fees.............................................. 38,758
Shareholder reports and notices............................. 29,355
Registration fees........................................... 25,025
Professional fees........................................... 20,458
Trustees' fees and expenses................................. 11,271
Other....................................................... 4,721
-----------
TOTAL EXPENSES.......................................... 1,476,067
-----------
NET INVESTMENT INCOME................................... 12,067,495
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain........................................... 11,152
Net change in unrealized appreciation....................... (13,467,966)
-----------
NET LOSS................................................ (13,456,814)
-----------
NET DECREASE................................................ $(1,389,319)
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE> 10
MORGAN STANLEY DEAN WITTER GOVERNMENT INCOME TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX
MONTHS ENDED FOR THE YEAR
MARCH 31, ENDED
1999 SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income.............................. $12,067,495 $ 26,458,740
Net realized gain.................................. 11,152 18,077
Net change in unrealized appreciation.............. (13,467,966) 16,040,482
------------ ------------
NET INCREASE (DECREASE)........................ (1,389,319) 42,517,299
Dividends from net investment income............... (12,134,223) (26,897,809)
Net decrease from transactions in shares of
beneficial interest............................... (8,138,681) (22,353,586)
------------ ------------
NET DECREASE................................... (21,662,223) (6,734,096)
NET ASSETS:
Beginning of period................................ 423,030,116 429,764,212
------------ ------------
END OF PERIOD
(Including dividends in excess of net
investment income of $116,740 and $50,012,
respectively).................................. $401,367,893 $423,030,116
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE> 11
MORGAN STANLEY DEAN WITTER GOVERNMENT INCOME TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 1999 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Government Income Trust (the "Trust"), formerly Dean
Witter Government Income Trust, is registered under the Investment Company Act
of 1940, as amended, as a diversified, closed-end management investment company.
The Trust's primary investment objective is to provide as high a level of
current income as is consistent with prudent investment and as a secondary
objective, capital appreciation. The Trust commenced operations on February 29,
1988.
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); (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 service; 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 are accreted over the life of the respective securities. Interest
income is accrued daily.
11
<PAGE> 12
MORGAN STANLEY DEAN WITTER GOVERNMENT INCOME TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 1999 (unaudited) continued
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, the Trust pays the Investment
Manager a management fee, accrued weekly and payable monthly, by applying the
annual rate of 0.60% to the Trust's weekly net assets.
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/prepayments of portfolio
securities, excluding short-term investments, for the six months ended March 31,
1999 aggregated $33,127,449 and $48,039,711, respectively.
12
<PAGE> 13
MORGAN STANLEY DEAN WITTER GOVERNMENT INCOME TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 1999 (unaudited) continued
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager, is
the Trust's transfer agent. At March 31, 1999, the Trust had transfer agent fees
and expenses payable of approximately $7,200.
The Trust has 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, 1999
included in Trustees' fees and expenses in the Statement of Operations amounted
to $11,271. At March 31, 1999, the Trust had an accrued pension liability of
$52,042 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>
CAPITAL
PAID IN
PAR VALUE EXCESS OF
SHARES OF SHARES PAR VALUE
---------- --------- ------------
<S> <C> <C> <C>
Balance, September 30, 1997................................. 46,089,300 $460,893 $444,901,836
Treasury shares purchased and retired (weighted average
discount 7.73%)*........................................... (2,570,700) (25,707) (22,327,879)
Reclassification due to permanent book/tax differences...... -- -- (5,060,996)
---------- -------- ------------
Balance, September 30, 1998................................. 43,518,600 435,186 417,512,961
Treasury shares purchased and retired (weighted average
discount 6.99%)*........................................... (914,600) (9,146) (8,129,535)
---------- -------- ------------
Balance, March 31, 1999..................................... 42,604,000 $426,040 $409,383,426
========== ======== ============
</TABLE>
- ---------------------
* The Trustees have voted to retire the shares purchased.
5. DIVIDENDS
On March 31, 1999, the Trust declared the following dividends from net
investment income:
<TABLE>
<CAPTION>
AMOUNT RECORD PAYABLE
PER SHARE DATE DATE
- --------- ------------- --------------
<S> <C> <C>
$.047 April 9, 1999 April 23, 1999
$.047 May 7, 1999 May 21, 1999
$.047 June 4, 1999 June 21, 1999
</TABLE>
13
<PAGE> 14
MORGAN STANLEY DEAN WITTER GOVERNMENT INCOME TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 1999 (unaudited) continued
6. FEDERAL INCOME TAX STATUS
At September 30, 1998, the Trust had a net capital loss carryover of
approximately $20,152,000, to offset future capital gains to the extent provided
by regulations, available through September 30 of the following years:
<TABLE>
<CAPTION>
AMOUNT IN THOUSANDS
- -------------------------------------------------------------
1999 2000 2003 2004 2006
- --------------------- -------- -------- -------- ----
<S> <C> <C> <C> <C>
$191 $8,299 $9,638 $2,019 $5
==== ====== ====== ====== ==
</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 Trust's next
taxable year. The Trust incurred and will elect to defer net capital losses of
approximately $2,000 during fiscal 1998.
14
<PAGE> 15
MORGAN STANLEY 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 FOR THE YEAR ENDED SEPTEMBER 30,
MONTHS ENDED ----------------------------------------------------
MARCH 31, 1999* 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA:
Net asset value, beginning of period..................... $ 9.72 $ 9.32 $ 9.08 $ 9.17 $ 8.69 $ 9.54
------ ------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income................................... 0.28 0.59 0.61 0.60 0.58 0.62
Net realized and unrealized gain (loss)................. (0.31) 0.37 0.19 (0.14) 0.43 (0.77)
------ ------ ------ ------ ------ ------
Total income (loss) from investment operations........... (0.03) 0.96 0.80 0.46 1.01 (0.15)
------ ------ ------ ------ ------ ------
Less dividends from net investment income................ (0.28) (0.60) (0.60) (0.60) (0.60) (0.73)
------ ------ ------ ------ ------ ------
Anti-dilutive effect of acquiring treasury shares........ 0.01 0.04 0.04 0.05 0.07 0.03
------ ------ ------ ------ ------ ------
Net asset value, end of period........................... $ 9.42 $ 9.72 $ 9.32 $ 9.08 $ 9.17 $ 8.69
====== ====== ====== ====== ====== ======
Market value, end of period.............................. $8.688 $ 9.00 $8.438 $ 8.25 $ 8.25 $7.875
====== ====== ====== ====== ====== ======
TOTAL RETURN+............................................ (0.37)%(1) 14.26% 9.86% 7.31% 12.97% (5.97)%
RATIOS TO AVERAGE NET ASSETS:
Expenses................................................. 0.71 %(2) 0.70% 0.73% 0.73% 0.71% 0.70%
Net investment income.................................... 5.84 %(2) 6.27% 6.60% 6.56% 6.50% 6.73%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands.................. $401,368 $423,030 $429,764 $439,896 $475,471 $486,634
Portfolio turnover rate.................................. 8 %(1) 16% 19% 21% 25% 59%
</TABLE>
- ---------------------
+ Total investment return is based upon the current market value on the last
day of each period reported. Dividends are assumed to be reinvested at the
prices obtained under the Trust's dividend reinvestment plan. Total
investment return does not reflect brokerage commissions.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE> 16
BOARD OF DIRECTORS
- ----------------------------------
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
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
Mitchell M. Merin
President
Barry Fink
Vice President, Secretary and General Counsel
Rajesh F. 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.
MORGAN STANLEY
DEAN WITTER
GOVERNMENT
INCOME TRUST
Semiannual Report
March 31, 1999
