<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- -----------------------------------------------------------------------------
After a difficult 1994, the fixed-income market in the United States has
staged a rally thus far in 1995, with the economy slowing and inflation
subsiding. Between early January and early November, 3- and 30-year U.S.
Treasury yields declined by approximately 200 and 150 basis points,
respectively. Recently, however, there have been signs of renewed growth in
the manufacturing sector, and housing has shown surprising strength. Although
the Federal Reserve Board appears to be satisfied with current economic
conditions, many analysts anticipate another easing if a workable deficit
reduction plan is hammered out in Washington.
In response to last December's economic crisis, the Mexican government
took several important steps this year to strengthen its financial situation.
In addition to negotiating an international financial assistance program to
resolve short-term liquidity needs, the Zedillo administration adopted an
austerity program to prevent a wage-price spiral. Since that time, the
monthly rate of inflation has declined. What's more, Mexico generated a trade
surplus of $4.4 billion during the first eight months of 1995 -- a big
improvement over the $12.1 billion deficit during the same period in 1994.
Also, Mexico was able to make an early payment to the United States in the
amount of $700 million on the emergency loan obtained earlier in the year.
Over the past 12 months, the peso has declined more than 50 percent in
U.S. dollar terms, moving from 3.4 pesos per dollar to 7.1 pesos per dollar.
Benchmark 28-day Mexican Treasury bills (Cetes) yields, which averaged
approximately 14 percent in November 1994, peaked at almost 83 percent in
March and currently stand at approximately 43 percent. The yield on the
Fund's short-term U.S. dollar-linked securities (Tesobonos) peaked in
mid-March at 30 percent, and these securities currently trade between 7.75
and 8.25 percent.
Canada also weathered a number of economic and political challenges over
the past 12 months, but the fixed-income market there experienced less
volatility than its Mexican counterpart. While the Canadian government has
taken some positive steps toward reducing its national deficit, the
separatist issue in Quebec has certainly dominated the political scene. The
extremely close referendum vote (50 to 49 percent against secession) in
October suggests that this issue will persist. The Canadian dollar has
experienced some volatility, but is basically unchanged since last year.
Interest rates have fallen in Canada, but have lagged the rally experienced
in the United States.
Despite the fixed-income market's strength in 1995, TCW/DW North American
Government Income Trust registered a total return of 1.61 percent for the
fiscal year ended October 31, 1995. This performance is based on a change in
net asset value from $8.89 to $8.33 per share and reinvestment of monthly
income dividends totaling approximately $0.66 per share. During the same
period the Lehman Brothers Short (1-5) U.S. Government Index posted a total
return of 10.25 percent. The divergence between the Fund's performance and
that of the Index is attributable to the depth of the price decline of the
portfolio's Mexican holdings, which resulted from the unanticipated
devaluation last December of the peso. Although Cetes were totally liquidated
by mid-January 1995 to avoid the effect of any further volatility, losses
were nonetheless incurred by the Fund. For the first 10 months of 1995,
however, the Fund outperformed the Index 13.25 to 10.57 percent.
<PAGE>
The accompanying chart illustrates the performance of a $10,000 investment
in the Fund from inception (July 31, 1992) through the fiscal year ended
October 31, 1995, versus the performance of a similar hypothetical investment
in the issues that comprise the Lehman Brothers Short (1-5) U.S. Government
Index.
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
GROWTH OF $10,000
LEHMAN SHORT U.S.
GOVERNMENT FUNDS
DATE TOTAL INDEX
July 31, 1992 $10,000 $10,000
October 31, 1992 $10,128 $10,120
October 31, 1993 $11,075 $10,879
October 31, 1994 $10,515 $10,846
October 31, 1995 $10,684 (2) $11,958
AVERAGE ANNUAL TOTAL RETURNS
1 YEAR LIFE OF FUND
1.61 (1) 2.06 (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 reinvestment of all distributions and
a complete redemption on October 31, 1995.
(3) The Lehman Brothers Short (1-5) U.S. Government Index measures
the performance of all U.S. Government agency and U.S.
Treasury securities with maturities of one to five years. The
Index is unmanaged and should not be considered an investment.
INVESTMENT SECTORS
Bearing in mind the problems in Mexico, as of October 31, 1995, the Fund's
investment adviser, TCW Funds Management, Inc. (TCW), had geographically
allocated approximately 81 percent of the Fund's net assets to the United
States and 19 percent to Mexico.
United States
In the U.S. portion of the portfolio, the investment adviser continues to
emphasize high-yielding, high-quality, mortgaged- backed securities,
including various types of AAA-related CMOs. Lower volatility in the
fixed-income market and greatly improved liquidity have helped the
mortgage-backed sector's performance this year. The issuance of
collateralized mortgage obligations (CMOs) has fallen to one-tenth of the
volume generated in previous years, lending support to mortgage spreads.
Mortgage-derivative securities have performed well in 1995 and inverse
floaters have outperformed the market in response to declining interest
rates. (Like most other fixed-income securities the value of inverse floating
rate securities, or inverse floaters, will decrease as interest rates
increase and rise as rates go down. Inverse floaters exhibit greater price
volatility than do the majority of mortgage-backed securities and some are
extremely sensitive to changes in mortgage prepayment rates.) The flat yield
curve has reduced the economic incentive to refinance out of 30-year
mortgages and into adjustable- rate mortgages (ARMs) or balloons. If interest
rates continue to decline and the yield curve steepens, prepayment rates
could increase. The portfolio managers seek to minimize the negative impact
that mortgage prepayments can have on the Fund's performance by investing in
securities with call protection.
Mexico
To reduce the Fund's exposure to increased levels of volatility and risk,
all peso-denominated securities were sold in December 1994 and early January
1995, and reinvested in U.S.-dollar-linked Tesobonos. The average Tesobono
yield at the time of purchase was 14 percent. At the end of 1994, there were
$29 billion in Tesobonos outstanding, in sharp contrast to the $2 billion
currently outstanding. By February 1996 all remaining Tesobonos will have
matured. At this time, the Mexican government has not announced the issuance
of additional Tesobonos.
Canada
The Fund has allocated up to 5 percent of its total net assets to the
Canadian market on a number of occasions over the last 12 months. In
mid-October, uncertainty regarding the Quebec referendum led the investment
adviser to liquidate these holdings. In general, the portfolio managers
purchase Canadian
<PAGE>
securities when currency-hedge costs decline and yield spreads widen.
Similarly, when hedge costs increase or yield spreads narrow, Canadian issues
are sold. The adviser continually monitors this sector for attractive
investment opportunities relative to those in the Unites States and Mexico.
LOOKING AHEAD
There has been significant improvement in the U.S. fixed-income market
since last year. Even though yields are down, real rates of interest (taking
the effect of inflation into account) are still historically high. Despite
these levels, declining interest rates throughout North America have reduced
the income generated by the Fund, which led us to adjust the monthly dividend
from $0.056 to $0.046 per share, as outlined in a special letter to
shareholders dated September 29, 1995. However, the adviser's outlook for the
U.S. fixed-income market is favorable through the end of 1995 and into the
beginning of 1996. Mexico has made some progress toward economic
stabilization but still faces a number of challenges such as the development
of sound policies to lower inflation, stimulate the economy and transform the
political system. At this juncture, currency and interest rate volatility are
likely to continue to play a major role as Mexico confronts these and other
challenges. The investment adviser will strictly evaluate these factors when
weighing any decisions to invest in peso-denominated securities. The Fund's
net asset value will continue to fluctuate as the prices of the securities
held in the portfolio respond to changes in market conditions and interest
rates.
We appreciate your ongoing support of TCW/DW North American Government
Income 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
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
Portfolio of Investments October 31, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON
THOUSANDS) RATE MATURITY DATE VALUE
- ----------- ---------- ----------------- --------------
<C> <S> <C> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS (48.6%)
U.S. GOVERNMENT AGENCIES (45.4%)
$17,179 Federal Home Loan Mortgage Corp. 1067 I .......... 8.00 % 04/15/21 $ 17,449,129
40 Federal Home Loan Mortgage Corp. 1370 K
(PAC I/O) ........................................ 1089.16+ 09/15/22 1,046,553
10,966 Federal Home Loan Mortgage Corp. 1504 A (PAC) .... 7.00 07/15/22 10,927,357
13,897 Federal Home Loan Mortgage Corp. 1560 A (PAC) .... 6.50 02/15/23 13,350,404
13,420 Federal Home Loan Mortgage Corp. 1606 LB ......... 6.27+ 05/15/08 10,913,010
28,102 Federal Home Loan Mortgage Corp. 1610 A .......... 6.50 11/15/23 27,309,106
17,746 Federal Home Loan Mortgage Corp. G 93 P .......... 6.50 08/25/20 17,557,570
38,090 Federal Home Loan Mortgage Corp. G 21 M .......... 6.50 10/25/23 36,463,149
2,257 Federal Home Loan Mortgage Corp. 1508 Q1 ......... 6.75+ 05/15/23 1,549,266
20,338 Federal National Mortgage Assoc. 1993-121 A ...... 7.00 10/25/22 20,229,872
18,304 Federal National Mortgage Assoc. 1993-138 MA (PAC) 7.00 05/25/23 18,207,194
54,098 Federal National Mortgage Assoc. 1993-139 M (PAC) 6.50 08/25/23 51,706,432
10,394 Federal National Mortgage Assoc. 1993-163 A ...... 7.00 03/25/23 10,338,194
9,181 Federal National Mortgage Assoc. 1993-163 SB ..... 10.00+ 04/25/23 8,056,094
9,017 Federal National Mortgage Assoc. 1993-165 SE ..... 6.84+ 09/25/23 6,139,055
15,544 Federal National Mortgage Assoc. 1993-166 M (PAC) 7.00 06/25/23 15,459,813
22,036 Federal National Mortgage Assoc. 1993-167 M (PAC) 6.00 09/25/23 20,138,602
17,857 Federal National Mortgage Assoc. 1993-179 SJ ..... 6.84+ 10/25/23 12,417,853
--------------
299,258,653
--------------
PRIVATE ISSUES (3.2%)
2,075 Citicorp Mortgage Securities, Inc. 1991-1 A ...... 8.50 03/25/06 2,029,530
12,232 CountryWide Funding Corp. 1993-7 AS3 (TAC) ....... 14.33+ 11/25/23 10,527,051
3,901 General Electric Capital Mortgage Services, Inc.
1992-11 M ........................................ 8.00 09/25/22 3,984,265
4,376 Resolution Trust Corp. 1991-6 C1 .................. 9.00 09/25/28 4,342,601
--------------
20,883,447
--------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(IDENTIFIED COST $344,756,544) ................................................ 320,142,100
--------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES
(27.1%)
16,955 Federal Home Loan Mortgage Corp. ARM .............. 6.96++ 03/01/25 17,368,629
16,653 Federal Home Loan Mortgage Corp. ARM .............. 7.87++ 08/01/23 17,082,428
26,804 Federal Home Loan Mortgage Corp. PC GOLD ......... 6.00 11/01/00-12/01/00 26,435,087
12,581 Federal Home Loan Mortgage Corp. PC GOLD ......... 7.00 02/01/98 12,726,250
2,400 Federal National Mortgage Assoc. .................. 9.50 06/01/20 2,514,491
44,506 Government National Mortgage Assoc. II ............ 6.00 08/20/22 44,561,457
12,028 Government National Mortgage Assoc. II ............ 7.00 10/20/24-12/20/24 12,268,061
31,362 Government National Mortgage Assoc. II ............ 7.375 06/20/22-04/20/23 31,823,392
13,119 Small Business Administration ARM ................. 7.25++ 03/25/16 13,562,709
--------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $178,532,293) ................................................ 178,342,504
-----------
</TABLE>
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
Portfolio of Investments October 31, 1995 (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON
THOUSANDS) RATE MATURITY DATE VALUE
- ----------- ---------- ----------------- --------------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENTS (25.6%)
MEXICAN GOVERNMENT SECURITIES (a) (18.8%)
$125,612 Tesobonos ......................................... 7.875 %- 11/01/95-
21.50 % 02/15/96 $123,934,183
--------------
COMMERCIAL PAPER (a) (1.5%)
FINANCIAL SERVICES
10,000 Associate Corp. of North America .................. 5.90 11/01/95 10,000,000
--------------
U.S. GOVERNMENT AGENCY (a) (2.3%)
15,000 Federal Home Loan Mortgage Corp ................... 5.85 11/01/95 15,000,000
--------------
REPURCHASE AGREEMENT (3.0%)
19,565 The Bank of New York (dated 10/31/95; proceeds
$19,568,176; collateralized by $5,536,172
Government National Mortgage Assoc. 6.125% due
10/20/22 valued at $4,540,935 and $13,745,768
U.S. Treasury Bond 7.875% due 02/15/21 valued at
$16,366,242) ..................................... 5.8125 11/01/95 19,565,017
--------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $167,482,420) ................................................ 168,499,200
--------------
TOTAL INVESTMENTS
(IDENTIFIED COST $690,771,257) (B) .......................... 101.3% 666,983,804
LIABILITIES IN EXCESS OF OTHER ASSETS ........................ (1.3) (8,676,466)
------ --------------
NET ASSETS ................................................... 100.0% $658,307,338
====== ==============
<FN>
- ------------
ARM Adjustable rate mortgage.
I/O Interest-only securities.
PC Participation Certificate.
PAC Planned Amortization Class.
TAC Targeted Amortization Class.
+ Inverse floater: coupon rate moves inversely to a designated index,
such as LIBOR (London Inter-Bank Offered Rate) or COFI (Cost of Funds
Index), typically at a multiple of the changes of the relevant index
rate. Rate shown is the rate in effect at October 31, 1995.
++ Floating rate security. Rate shown is the rate in effect at October
31, 1995.
(a) Securities were purchased on a discount basis. The interest rates
shown have been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost of investments for federal income tax purposes is
$690,771,257; the aggregate gross unrealized appreciation is
$4,346,969 and the aggregate gross unrealized depreciation is
$28,134,422, resulting in net unrealized depreciation of $23,787,453.
</TABLE>
See Notes to Financial Statements
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
Financial Statements
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $690,771,257) ............ $ 666,983,804
Receivable for:
Interest .................................. 3,090,426
Principal paydowns ........................ 1,033,683
Shares of beneficial interest sold ....... 897,606
Compensated foreign currency contracts ... 105,587
Deferred organizational expenses ........... 70,208
Prepaid expenses and other assets .......... 239,599
---------------
TOTAL ASSETS ............................. 672,420,913
---------------
LIABILITIES:
Payable for:
Investments purchased ..................... 9,840,206
Shares of beneficial interest repurchased 2,821,430
Plan of distribution fee .................. 445,499
Dividends to shareholders ................. 391,745
Management fee ............................ 231,660
Investment advisory fee ................... 154,440
Accrued expenses and other payables ....... 228,595
Contingencies (Note 10) ....................
---------------
TOTAL LIABILITIES ........................ 14,113,575
---------------
NET ASSETS:
Paid-in-capital ............................ 896,132,002
Net unrealized depreciation ................ (23,787,453)
Distributions in excess of net investment
income .................................... (391,745)
Accumulated net realized loss .............. (213,645,466)
---------------
NET ASSETS ............................... $ 658,307,338
===============
NET ASSET VALUE PER SHARE, 79,073,584
shares outstanding (unlimited shares
authorized of $.01 par value) ............. $8.33
===============
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ....................... $ 80,194,529
---------------
EXPENSES
Plan of distribution fee ............. 5,756,266
Management fee ....................... 3,166,169
Investment advisory fee .............. 2,110,779
Transfer agent fees and expenses .... 814,060
Registration fees .................... 383,800
Professional fees .................... 265,314
Custodian fees ....................... 142,609
Shareholder reports and notices ..... 96,547
Organizational expenses .............. 39,978
Trustees' fees and expenses .......... 34,080
Other ................................ 125,731
---------------
TOTAL EXPENSES ...................... 12,935,333
---------------
NET INVESTMENT INCOME ............... 67,259,196
---------------
NET REALIZED AND UNREALIZED GAIN
(LOSS):
Net realized loss on:
Investments .......................... (244,050,043)
Foreign exchange transactions ....... (12,373,176)
---------------
TOTAL LOSS .......................... (256,423,219)
Net change in unrealized depreciation 162,024,285
---------------
NET LOSS ............................ (94,398,934)
---------------
NET DECREASE ........................ $ (27,139,738)
===============
</TABLE>
See Notes to Financial Statements
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
Financial Statements (continued)
- -----------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED OCTOBER ENDED OCTOBER
31, 1995 31, 1994
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income ..................................................... $ 67,259,196 $ 159,532,551
Net realized loss ......................................................... (256,423,219) (106,304,030)
Net change in unrealized depreciation ..................................... 162,024,285 (182,144,828)
---------------- ----------------
Net Decrease ............................................................. (27,139,738) (128,916,307)
---------------- ----------------
Dividends and distributions from:
Net investment income ..................................................... -- (111,457,152)
Net realized gain ......................................................... -- (6,378,851)
Paid-in-capital ........................................................... (64,021,457) (56,645,215)
---------------- ----------------
Total .................................................................... (64,021,457) (174,481,218)
Net decrease from transactions in shares of beneficial interest ........... (610,142,782) (1,323,313,917)
---------------- ----------------
Total Decrease ........................................................... (701,303,977) (1,626,711,442)
NET ASSETS:
Beginning of period ........................................................ 1,359,611,315 2,986,322,757
---------------- ----------------
END OF PERIOD (including distributions in excess of net investment income
of $391,745 and $1,308,948, respectively) .................................. $ 658,307,338 $ 1,359,611,315
================ ================
</TABLE>
See Notes to Financial Statements
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
Notes to Financial Statements October 31, 1995
- -----------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES --TCW/DW North American Government
Income Trust (the "Fund") is registered under the Investment Company Act of
1940, as amended (the "Act"), as a non-diversified, open-end management
investment company. The Fund was organized as a Massachusetts business trust
on February 19, 1992 and commenced operations on July 31, 1992.
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 the Adviser 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. The Fund amortizes premiums and accretes
discounts over the life of the respective securities. Interest income is
accrued daily.
C. Foreign Currency Translation -- The books and records of the Fund are
maintained in U.S. dollars as follows: (1) the foreign currency market
value of investment securities, other assets and liabilities and forward
contracts are translated at the exchange rates prevailing at the end of
the period; and (2) purchases, sales, income and expenses are translated
at the exchange rates prevailing on the respective dates of such
transactions. The resultant exchange gains and losses are included in
the Statement of Operations as realized and unrealized gain/loss on
foreign exchange transactions. Pursuant to U.S. Federal income tax
regulations, certain foreign exchange gains/losses included in realized
and unrealized gain/loss are included in or are a reduction of ordinary
income for federal income tax purposes. The Fund does not isolate that
portion of the results of operations arising as a result of changes in
the foreign exchange rates from the changes in the market prices of the
securities.
D. Forward Foreign Currency Contracts -- The Fund may enter into forward
foreign currency contracts which are valued daily at the appropriate
exchange rates. The resultant unrealized exchange gains and losses are
included in the Statement of Operations as unrealized foreign currencies
gain or loss. The Fund records realized gains or losses on delivery of
the currency or at the time the forward contract is extinguished
(compensated) by entering into a closing transaction prior to delivery.
E. Dollar Rolls -- The Fund may enter into dollar rolls in which the
Fund sells securities for delivery and simultaneously contracts to
repurchase substantially similar securities at the current sales price
on a specified future date. The difference between the current sales
price and the lower forward price for the future purchase (often
referred to as the "drop") is amortized over the life of the dollar
roll.
F. 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.
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
Notes to Financial Statements October 31, 1995 (continued)
- -----------------------------------------------------------------------------
G. 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.
H. Organizational Expenses -- Dean Witter InterCapital Inc., an
affiliate of Dean Witter Services Company Inc. (the "Manager"), paid the
organization expenses which have been reimbursed by the Fund in the
amount of $200,000. Such expenses have been deferred and are being
amortized by the Fund on the straight-line method over a period not to
exceed five years from the commencement of operations.
2. MANAGEMENT AGREEMENT -- Pursuant to a Management Agreement, the Fund pays
a management fee, accrued daily and payable monthly, by applying the
following annual rates to the net assets of the Fund determined as of the
close of each business day: 0.39% to the average daily net assets of the Fund
not exceeding $3 billion and 0.36% to the average daily net assets exceeding
$3 billion.
Under the terms of the Agreement, the 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 Manager also bears the cost of telephone
services, heat, light, power and other utilities provided to the Fund.
3. INVESTMENT ADVISORY AGREEMENT -- Pursuant to an Investment Advisory
Agreement with TCW Funds Management, Inc. (the "Adviser"), the Fund pays an
advisory fee, calculated daily and payable monthly, by applying the following
annual rates to the net assets of the Fund determined as of the close of each
business day: 0.26% to the average daily net assets of the Fund not exceeding
$3 billion and 0.24% to the average daily net assets exceeding $3 billion.
Under the terms of the Agreement, the Fund has retained the Adviser to
invest the Fund's assets, including placing orders for the purchase and sale
of portfolio securities. The Adviser obtains and evaluates such information
and advice relating to the economy, securities markets, and specific
securities as it considers necessary or useful to continuously manage the
assets of the Fund in a manner consistent with its investment objective. In
addition, the Adviser pays the salaries of all personnel, including officers
of the Fund, who are employees of the Adviser.
4. PLAN OF DISTRIBUTION -- Dean Witter Distributors Inc. (the "Distributor"),
an affiliate of the 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.
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
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
Notes to Financial Statements October 31, 1995 (continued)
- -----------------------------------------------------------------------------
following activities and services may be provided by the Distributor under
the Plan: (1) compensation to, and expenses of, account executives of Dean
Witter Reynolds Inc., an affiliate of the Manager and Distributor, and other
employees or 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 0.75% of the
Fund's average daily net assets during the month. Expenses incurred pursuant
to the Plan in any fiscal year in excess of 0.75% of the Fund's average daily
net assets will not be reimbursed by the Fund through payments accrued in any
subsequent fiscal year. For the year ended October 31, 1995, the distribution
fee was accrued at the annual rate of 0.71%.
5. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES -- The cost of
purchases and proceeds from sales/prepayments of portfolio securities,
excluding short-term investments, for the year ended October 31, 1995 were as
follows:
<TABLE>
<CAPTION>
SALES/
PURCHASES PREPAYMENTS
------------- -------------
<S> <C> <C>
Foreign Government Obligations $ 35,751,847 $ 35,518,136
U.S. Government Agencies ...... 222,522,764 505,722,139
Private Issue CMOs ............. -- 115,156,036
</TABLE>
Dean Witter Trust Company, an affiliate of the Manager and Distributor, is
the Fund's transfer agent. At October 31, 1995, the Fund had transfer agent
fees and expenses payable of approximately $116,000.
6. SHARES OF BENEFICIAL INTEREST -- Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994
------------------------------ ---------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
Sold ......................... 11,625,629 $ 96,045,510 156,152,730 $ 1,548,418,896
Reinvestment of dividends and
distributions ............... 5,930,740 48,356,244 14,740,453 141,335,062
-------------- -------------- --------------- ----------------
17,556,369 144,401,754 170,893,183 1,689,753,958
Repurchased .................. (91,392,898) (754,544,536) (313,455,527) (3,013,067,875)
-------------- -------------- --------------- ----------------
Net decrease ................. (73,836,529) $(610,142,782) (142,562,344) $(1,323,313,917)
============== ============== =============== ================
</TABLE>
7. FEDERAL INCOME TAX STATUS -- At October 31, 1995, the Fund had a net
capital loss carryover of approximately $213,645,000 of which $53,085,000
will be available through October 31, 2002 and $160,560,000 will be available
through October 31, 2003 to offset future capital gains to the extent
provided by regulations.
As of October 31, 1995, the Fund had temporary book/tax differences
primarily attributable to dividend payable and permanent book/tax differences
primarily attributable to a net operating loss and foreign
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
Notes to Financial Statements October 31, 1995 (continued)
- -----------------------------------------------------------------------------
currency losses. To reflect reclassifications arising from permanent book/tax
differences for the year ended October 31, 1995, distributions in excess of
net investment income was charged $66,341,993, paid-in-capital was charged
$29,554,165 and accumulated net realized loss was credited $95,896,158.
8. REVERSE REPURCHASE AND DOLLAR ROLL AGREEMENTS --Reverse repurchase and
dollar roll agreements involve the risk that the market value of the
securities the Fund is obligated to repurchase under the agreement may
decline below the repurchase price. In the event the buyer of securities
under a reverse repurchase or dollar roll agreement files for bankruptcy or
becomes insolvent, the Fund's use of proceeds of the agreement may be
restricted pending a determination by the other party, its trustee or
receiver, whether to enforce the Fund's obligation to repurchase the
securities.
Reverse repurchase agreements are collateralized by Fund securities with a
market value in excess of the Fund's obligation under the contract.
9. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS -- The
Fund may enter into forward foreign currency contracts ("forward contracts")
to facilitate settlement of foreign currency denominated portfolio
transactions or to manage foreign currency exposure associated with foreign
currency denominated securities.
Forward contracts involve elements of market risk in excess of the amounts
reflected in the Statement of Assets and Liabilities. The Fund bears the risk
of an unfavorable change in the foreign exchange rates underlying the forward
contracts. Risks may also arise upon entering into these contracts from the
potential inability of the counterparties to meet the terms of their
contracts.
10. LITIGATION -- Several purported class action lawsuits have been
consolidated in the United States District Court, in New York, against the
Fund, some of its Trustees and officers, its underwriter and distributor, the
Adviser, the Manager, and other defendants, by certain shareholders of the
Fund. The consolidated amended complaint asserts claims under the Securities
Act of 1933 and generally alleges that the defendants made inadequate and
misleading disclosures in the prospectuses for the Fund, in particular as
such disclosures relate to the nature and risks of the Fund's investments in
mortgage-backed securities and Mexican securities. The plaintiffs also
challenge certain fees paid by the Fund as excessive. Damages are sought in
an unspecified amount. All defendants have moved to dismiss the consolidated
amended complaint.
The ultimate outcome of this matter is not presently determinable, and no
provision has been made in the Fund's financial statements for the effect, if
any, of such matter.
<PAGE>
TCW/DW NORTH AMERICAN 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 PERIOD
FOR THE YEAR ENDED OCTOBER 31, JULY 31, 1992*
------------------------------ THROUGH
1995 1994 1993 October 31, 1992
-------- --------- -------- ------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .. $ 8.89 $10.11 $ 9.96 $10.00
-------- --------- -------- ----------------
Net investment income .................. 0.69 0.68 0.77 0.18
Net realized and unrealized gain (loss) (0.59) (1.18) 0.14 (0.05)
-------- --------- -------- ----------------
Total from investment operations ...... 0.10 (0.50) 0.91 0.13
-------- --------- -------- ----------------
Less dividends and distributions from:
Net investment income ................. -- (0.47) (0.76) (0.17)
Net capital gain ...................... -- (0.02) -- --
Paid-in-capital ....................... (0.66) (0.23) -- --
-------- --------- -------- ----------------
Total dividends and distributions ..... (0.66) (0.72) (0.76) (0.17)
-------- --------- -------- ----------------
Net asset value, end of period ......... $ 8.33 $ 8.89 $10.11 $ 9.96
======== ========= ======== ================
TOTAL INVESTMENT RETURN + .............. 1.61% (5.06)% 9.35% 1.28%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................... 1.59% 1.52% 1.54% 1.80%(2)
Net investment income .................. 8.28% 6.85% 7.78% 8.36%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in millions $658 $1,360 $2,986 $762
Portfolio turnover rate ................ 44% 27% 77% 2%(1)
<FN>
- ------------
* Commencement of operations.
+ Does not reflect the deduction of sales charge.
(1) Not annualized.
(2) Annualized.
</TABLE>
See Notes to Financial Statements
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
Report of Independent Accountants
- -----------------------------------------------------------------------------
To the Shareholders and Trustees of TCW/DW North American Government Income
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 TCW/DW North
American Government Income Trust (the "Fund") at October 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 July 31, 1992 (commencement of operations) through October 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 October 31, 1995 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
As discussed in Note 10 to the financial statements, the Fund is one of
several defendants in litigation. The ultimate outcome of the litigation
cannot be determined at present. No provision for any liability that may
result upon resolution of the matter has been made in the accompanying
financial statements.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
December 14, 1995
<PAGE>
TRUSTEES
John C. Argue
Richard M. DeMartini
Charles A. Fiumefreddo
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Thomas E. Larkin, Jr.
Michael E. Nugent
John L. Schroeder
Marc I. Stern
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Thomas E. Larkin, Jr.
President
Sheldon Curtis
Vice President, Secretary and
General Counsel
Philip A. Barach
Vice President
James M. Goldberg
Vice President
Jeffrey E. Gundlach
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
MANAGER
Dean Witter Services Company Inc.
ADVISER
TCW Funds Management, Inc.
This report is submitted for the general information of shareholders of the
Trust. For more detailed information about the Trust, its officers and
trustees, fees, expenses and other pertinent information, please see the
prospectus of the Trust.
This report is not authorized for distribution to prospective investors in
the Trust unless preceded or accompanied by an effective prospectus.
TCW/DW
NORTH AMERICAN
GOVERNMENT
INCOME TRUST
ANNUAL REPORT
OCTOBER 31, 1995
