<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST Two World Trade Center,
LETTER TO THE SHAREHOLDERS October 31, 1997 New York, New York 10048
DEAR SHAREHOLDER:
The fiscal year ended October 31, 1997, began with U.S. interest rates rising
moderately. However, in the second half, rates reversed course in response to
reassuring inflation data, a declining budget deficit and a somewhat
complacent Federal Reserve Board. Yields on three-and six-month treasuries
remained relatively stable during the period under review, while those on
three-and five-year treasuries declined by 18 and 35 basis points,
respectively. Yields on longer-term treasuries declined by as much as 50
basis points. Recent indications of accelerating economic growth call into
question the market's ability to sustain this rally much further. Economists
continue to see strong growth across a wide section of the economy including
consumer spending, housing and employment.
Mexico continues to follow sound economic policies and its currency is under
much less pressure now than in previous years. However, the recent market
sell-off in Asia increased volatility in Mexico, as it did in many countries
around the world. This situation, combined with persistent problems with drug
trafficking and a weak banking system, has reduced Mexico's attractiveness
for the Fund.
Canada continues to be characterized by increased economic and political
stability. The Separatist issue in Quebec has taken a back seat, at least
temporarily, and the Canadian government is moving forward in its attempts to
reduce the deficit. Nonetheless, the currency risk associated with Canadian
investments remains a concern.
PERFORMANCE
For the fiscal year ended October 31, 1997, TCW/DW North American Government
Income Trust's net asset value increased from $8.39 to $8.59 per share. Based
on this change, and including reinvestment of income distributions totaling
approximately $0.43 per share, the Fund's total return for the fiscal year
was 7.80 percent. During the same period, the Lehman Brothers Short (1-5
year) U.S. Government Index posted a total return of 6.84 percent, while the
Lipper Short World Multi-Market Income
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
LETTER TO THE SHAREHOLDERS October 31, 1997, continued
Funds Average registered a total return of 5.02 percent. The accompanying
chart illustrates the growth of a $10,000 investment in the Fund from
inception ( July 31, 1992) versus the performance of similar hypothetical
investments in the issues that comprise the Lehman Brothers Index and the
Lipper Average.
INVESTMENT SECTORS
#############################################################################
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
GROWTH OF $10,000
DATE TOTAL LEHMAN LIPPER
- ---- ----- ------ ------
July 31, 1992 $10,000 $10,000 $10,000
October 31, 1992 $10,128 $10,120 $ 9,765
October 31, 1993 $11,075 $10,879 $10,345
October 31, 1994 $10,515 $10,846 $10,314
October 31, 1995 $10,684 $11,958 $10,515
October 31, 1996 $11,366 $12,659 $11,535
October 31, 1997 $12,253(2) $13,524 $12,114
Average Annual Total Returns
1 Year 5 Years Life of Fund
------ ------- ------------
7.80(1) 3.88(1) 3.95(1)
--FUND --LEHMAN(3) --LIPPER(4)
- ------------------------------------------------------------
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 a complete redemption on October 31, 1997.
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 performance of the Index does
not include any expenses, fees or charges. The Index is unmanaged and
should not be considered an investment.
4. The Lipper Short World Multi-Market Income Funds Average tracks the
performance of funds which invest primarily in non-U.S. dollar and
U.S. dollar debt instruments and, by policy, keep a dollar-weighted
average maturity of less than 5 years, as reported by Lipper Analytical
Services.
#############################################################################
United States
As of October 31, 1997, 100 percent of the Fund's assets remained invested in
the United States. The Fund's investment adviser, TCW Funds Management, Inc.
(TCW), continues to emphasize high-quality mortgage-backed securities,
including various types of AAA-rated collateralized mortgage obligations
(CMOs), pass-through securities and adjustable rate mortgages (ARMs) that
generally have yields in excess of U.S. treasury securities.
The mortgage sector has been a top-performing fixed-income asset so far this
year. New CMO issuance activity has shown a strong resurgence with
year-to-date volume exceeding $100 billion, the highest level since 1994.
However, the decline in interest rates in the last six months has led to
renewed concerns about prepayment rates. Refinancing activity has been
steadily increasing since the summer and analysts expect prepayments to
continue moving higher. Therefore, TCW continues to emphasize securities with
call protection and other features designed to soften the effects of rapid
prepayment rates on returns.
Mexico and Canada
The Fund continued to remain on the sidelines with respect to investing in
Mexico and Canada during the past 12 months. In general, TCW only purchases
securities with currency risk when currency hedge costs decline and yield
spreads widen. Similarly, when hedge costs increase and/or yield spreads
narrow, foreign securities are generally sold. However, TCW will continue to
monitor these sectors for attractive investment opportunities relative to
those in the United States.
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
LETTER TO THE SHAREHOLDERS October 31, 1997, continued
LOOKING AHEAD
Although nominal interest rates have been falling over the past six months,
real rates of interest, which take into account the rate of inflation, are
still historically high. The persistent lack of inflationary pressure over
the past few quarters has kept the Federal Reserve Board from raising
interest rates in this part of the economic cycle. However, the Federal
Reserve Board will be closely watching inflationary data, wage and employment
figures, and consumer spending numbers for possible indications that they
should take action.
In spite of the considerable progress that Mexico and Canada have made
towards economic stability, they still face a number of challenges. The cost
to hedge currency and interest-rate risks currently reduces the
attractiveness of Mexican and Canadian securities as investment vehicles for
the Fund. TCW will continue to evaluate these factors when weighing any
decision to invest in non-dollar denominated securities.
We appreciate your ongoing support of TCW/DW North American Government Income
Trust and look forward to continuing to serve your investment needs.
Sincerely,
/s/ Charles A. Fiumefreddo
CHARLES A. FIUMEFREDDO
Chairman of the Board
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
PORTFOLIO OF INVESTMENTS October 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (48.8%)
$8,223 Federal Home Loan Mortgage Corp. ARM ............................ 7.884% 08/01/23 $8,606,707
6,029 Federal Home Loan Mortgage Corp. ARM ............................ 7.961 03/01/25 6,306,627
8,899 Federal Home Loan Mortgage Corp. PC GOLD ........................ 6.00 11/01/00-
12/01/00 8,787,415
6,848 Federal Home Loan Mortgage Corp. PC GOLD ........................ 7.00 02/01/98 6,945,960
1,259 Federal National Mortgage Assoc. ................................ 9.50 06/01/20 1,327,910
7,772 Government National Mortgage Assoc. II ARM ...................... 6.875 10/20/24-
12/20/24 7,991,868
31,528 Government National Mortgage Assoc. II ARM ...................... 7.125 08/20/22 32,514,994
29,935 Government National Mortgage Assoc. II ARM ...................... 7.375 06/20/22-
06/20/25 30,915,072
-------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES
(Identified Cost $101,424,921) ....................................................... 103,396,553
-------------
COLLATERALIZED MORTGAGE OBLIGATIONS (46.6%)
U.S. GOVERNMENT AGENCIES (39.1%)
23 Federal Home Loan Mortgage Corp. 1370 K (PAC I/O) ............... 1,089.16 09/15/22 660,169
8,205 Federal Home Loan Mortgage Corp. 1504 A (PAC) ................... 7.00 07/15/22 8,404,224
2,257 Federal Home Loan Mortgage Corp. 1508 Q ......................... 7.50 + 05/15/23 1,933,930
11,120 Federal Home Loan Mortgage Corp. 1560 A (PAC) ................... 6.50 02/15/23 10,961,552
6,789 Federal Home Loan Mortgage Corp. G 15 P ......................... 6.50 08/25/20 6,746,838
22,265 Federal Home Loan Mortgage Corp. G 21 M ......................... 6.50 10/25/23 21,822,047
7,856 Federal National Mortgage Assoc. 1993-163 A ..................... 7.00 03/25/23 7,900,752
9,017 Federal National Mortgage Assoc. 1993-165 SE .................... 7.543+ 09/25/23 7,995,740
16,940 Federal National Mortgage Assoc. 1993-167 M (PAC) ............... 6.00 09/25/23 16,616,415
-------------
TOTAL U.S. GOVERNMENT AGENCIES (Identified Cost $84,638,282) .... 83,041,667
-------------
PRIVATE ISSUES (7.5%)
874 Citicorp Mortgage Securities, Inc. 1991-1 ...................... 8.50 03/25/06 854,675
12,232 CountryWide Funding Corp. 1993-7 AS3 (TAC) ...................... 8.662+ 11/25/23 9,517,893
2,890 General Electric Capital Mortgage Services, Inc. 1992-11 M ...... 8.00 09/25/22 2,955,376
2,721 Resolution Trust Corp. 1991-6 C1 ................................ 9.00 09/25/28 2,611,702
-------------
TOTAL PRIVATE ISSUES (Identified Cost $19,439,984) .................................... 15,939,646
-------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Identified Cost $104,078,266) ....................................................... $98,981,313
-------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
PORTFOLIO OF INVESTMENTS October 31, 1997, continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (4.4%)
COMMERCIAL PAPER (a)(3.7%)
$7,800 BP America, Inc. (Amortized Cost $7,797,543) .................... 5.67% 11/03/97 $7,797,543
REPURCHASE AGREEMENT (0.7%)
1,535 The Bank of New York (dated 10/31/97; proceeds $1,536,188) (b)
(Identified Cost $1,535,484) ................................... 5.50 11/03/97 1,535,484
-------------
TOTAL SHORT-TERM INVESTMENTS (Identified Cost $9,333,027) ............................. 9,333,027
-------------
TOTAL INVESTMENTS (Identified Cost $214,836,214)(c) ........................ 99.8% 211,710,893
OTHER ASSETS IN EXCESS OF LIABILITIES ...................................... 0.2 328,842
---------- -------------
NET ASSETS ................................................................. 100.0% $212,039,735
========== =============
</TABLE>
- ------------
ARM Adjustable rate mortgage.
I/O Interest-only securities.
PAC Planned Amortization Class.
PC Participation Certificate.
TAC Targeted Amortization Class.
+ Inverse floater: interest 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.
(a) Security was purchased on a discount basis. The interest rate shown
has been adjusted to reflect a money market equivalent yield.
(b) Collateralized by $1,536,978 Federal National Mortgage Assoc. 6.60%
due 09/20/02 valued at $1,566,194.
(c) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$2,858,987 and the aggregate gross unrealized depreciation is
$5,984,308, resulting in net unrealized depreciation of $3,125,321.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $214,836,214)........... $ 211,710,893
Receivable for:
Interest................................. 1,209,408
Principal paydowns....................... 663,193
Shares of beneficial interest sold ...... 98,697
Prepaid expenses.......................... 40,059
---------------
TOTAL ASSETS............................ 213,722,250
---------------
LIABILITIES:
Payable for:
Shares of beneficial interest
repurchased............................. 1,230,284
Plan of distribution fee................. 138,344
Dividends to shareholders................ 89,056
Management fee........................... 71,939
Investment advisory fee.................. 47,959
Accrued expenses.......................... 104,933
Contingencies (Note 10)................... --
---------------
TOTAL LIABILITIES....................... 1,682,515
---------------
NET ASSETS.............................. $ 212,039,735
===============
COMPOSITION OF NET ASSETS:
Paid-in-capital........................... $ 445,268,361
Net unrealized depreciation............... (3,125,321)
Accumulated undistributed net investment
income................................... 391,193
Accumulated net realized loss............. (230,494,498)
---------------
NET ASSETS.............................. $ 212,039,735
===============
NET ASSET VALUE PER SHARE,
24,679,449 shares outstanding (unlimited
shares authorized of $.01 par value) .... $8.59
======
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1997
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME....................... $18,423,552
-------------
EXPENSES
Plan of distribution fee.............. 1,978,311
Management fee........................ 1,052,959
Investment advisory fee............... 701,973
Transfer agent fees and expenses ..... 371,370
Professional fees..................... 147,017
Registration fees..................... 44,216
Shareholder reports and notices ...... 42,085
Trustees' fees and expenses........... 33,413
Organizational expenses............... 30,208
Other................................. 40,263
-------------
TOTAL EXPENSES...................... 4,441,815
-------------
NET INVESTMENT INCOME............... 13,981,737
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss..................... (2,132,540)
Net change in unrealized
depreciation......................... 6,751,649
-------------
NET GAIN............................ 4,619,109
-------------
NET INCREASE.......................... $18,600,846
=============
</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 ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................. $ 13,981,737 $ 27,987,343
Net realized loss...................................... (2,132,540) (14,716,492)
Net change in unrealized appreciation.................. 6,751,649 13,910,483
---------------- ----------------
NET INCREASE......................................... 18,600,846 27,181,334
Dividends from net investment income................... (13,827,194) (26,893,174)
Net decrease from transactions in shares of beneficial
interest.............................................. (143,263,528) (308,065,887)
---------------- ----------------
NET DECREASE......................................... (138,489,876) (307,777,727)
NET ASSETS:
Beginning of period.................................... 350,529,611 658,307,338
---------------- ----------------
END OF PERIOD
(Including undistributed net investment income of
$391,193 and $236,650, respectively)................. $ 212,039,735 $ 350,529,611
================ ================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1997
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's
investment objective is to earn a high level of income while maintaining
relatively low volatility of principal. The Fund was organized as a
Massachusetts business trust on February 19, 1992 and commenced operations on
July 31, 1992.
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 TCW Funds Management, Inc. (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 based on the
respective life of the 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 foreign
currency 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
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1997, continued
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 currency 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.
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.
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1997, continued
H. ORGANIZATIONAL EXPENSES -- Dean Witter InterCapital Inc., an affiliate of
Dean Witter Services Company Inc. (the "Manager"), paid the organizational
expenses of the Fund in the amount of approximately $200,000 and was
reimbursed for the full amount thereof. Such expenses have been deferred and
were fully amortized as of July 30, 1997.
2. MANAGEMENT AGREEMENT
Pursuant to a Management Agreement, the Fund pays the Manager 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 portion of daily net assets not exceeding $3
billion and 0.36% to the portion of 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 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 portion of average daily net assets
not exceeding $3 billion and 0.24% to the portion of 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.
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1997, continued
Under the Plan, the Distributor bears the expense of all promotional and
distribution related activities on behalf of the Fund, except for expenses
that the Trustees determine to reimburse, as described below. The following
activities and services may be provided by the Distributor, Dean Witter
Reynolds Inc. ("DWR"), an affiliate of the Distributor and Investment
Manager, its affiliates or any other selected broker-dealer under the Plan:
(1) compensation to, and expenses of, account executives of DWR and others,
including overhead and telephone expenses; (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, 1997, the distribution
fee was accrued at the annual rate of 0.73%.
5. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The proceeds from sales/prepayments of portfolio securities, excluding
short-term investments, for the year ended October 31, 1997 were as follows:
<TABLE>
<CAPTION>
SALES/
PREPAYMENTS
-------------
<S> <C>
U.S. Government Agencies..... $124,400,112
Private Issue CMOs .......... 1,743,128
</TABLE>
Dean Witter Trust FSB, an affiliate of the Manager and Distributor, is the
Fund's transfer agent. At October 31, 1997, the Fund had transfer agent fees
and expenses payable of approximately $8,300.
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1997, continued
6. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Sold ..................... 2,792,480 $ 23,503,988 4,379,571 $ 36,607,829
Reinvestment of
dividends................ 1,223,673 10,240,883 2,403,699 19,895,478
Repurchased .............. (21,098,837) (177,008,399) (44,094,721) (364,569,194)
-------------- -------------- -------------- ---------------
Net decrease.............. (17,082,684) $(143,263,528) (37,311,451) $(308,065,887)
============== ============== ============== ===============
</TABLE>
7. FEDERAL INCOME TAX STATUS
At October 31, 1997, the Fund had an approximate net capital loss carryover
of $230,494,000, which may be used to offset future capital gains to the
extent provided by regulations, which is available through October 31 of the
following years:
<TABLE>
<CAPTION>
AMOUNTS IN THOUSANDS
- ----------------------------------------
2002 2003 2004 2005
- --------- ---------- --------- -------
<S> <C> <C> <C>
$53,086 $160,560 $14,716 $2,132
========= ========== ========= =======
</TABLE>
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.
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1997, continued
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.
At October 31, 1997, there were no outstanding forward contracts.
10. LITIGATION
Several class action lawsuits, which have been consolidated for pretrial
purposes, were instituted in 1995 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, and on May 8, 1996 the motions to dismiss
were denied. The defendants moved for reargument and on August 28, 1996 the
Court issued a second opinion which granted the motion to dismiss in part. On
December 4, 1996 the defendants filed a renewed motion to dismiss which was
denied by the Court on November 20, 1997. The Court has also certified a
plaintiff class pursuant to the Federal Rules of Civil Procedure.
The ultimate outcome of these matters is not presently determinable, and no
provision has been made in the Fund's financial statements for the effect, if
any, of such matters.
<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
1997 1996 1995 1994 1993 OCTOBER 31, 1992
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ... $ 8.39 $ 8.33 $ 8.89 $10.11 $ 9.96 $10.00
-------- -------- -------- --------- -------- ----------------
Net investment income ................... 0.44 0.47 0.69 0.68 0.77 0.18
Net realized and unrealized gain (loss) 0.19 0.04 (0.59) (1.18) 0.14 (0.05)
-------- -------- -------- --------- -------- ----------------
Total from investment operations ....... 0.63 0.51 0.10 (0.50) 0.91 0.13
-------- -------- -------- --------- -------- ----------------
Less dividends and distributions from:
Net investment income .................. (0.43) (0.45) -- (0.47) (0.76) (0.17)
Net capital gain ....................... -- -- -- (0.02) -- --
Paid-in-capital ........................ -- -- (0.66) (0.23) -- --
-------- -------- -------- --------- -------- ----------------
Total dividends and distributions ...... (0.43) (0.45) (0.66) (0.72) (0.76) (0.17)
-------- -------- -------- --------- -------- ----------------
Net asset value, end of period .......... $ 8.59 $ 8.39 $ 8.33 $ 8.89 $10.11 $ 9.96
======== ======== ======== ========= ======== ================
TOTAL INVESTMENT RETURN+ ................ 7.80% 6.38% 1.61% (5.06)% 9.35% 1.28%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................ 1.65% 1.64% 1.59% 1.52% 1.54% 1.80%(2)
Net investment income ................... 5.18% 5.71% 8.28% 6.85% 7.78% 8.36%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in millions . $212 $351 $658 $1,360 $2,986 $762
Portfolio turnover rate ................. -- 13% 44% 27% 77% 2%(1)
</TABLE>
- ------------
* Commencement of operations.
+ Calculated based on the net asset value as of the last business day of
the period.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
<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, 1997, 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 five 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, 1997 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
December 17, 1997
<PAGE>
TRUSTEES
John C. Argue
Richard M. DeMartini
Charles A. Fiumefreddo
John R. Haire
Dr. Manuel H. Johnson
Thomas E. Larkin, Jr.
Michael E. Nugent
John L. Schroeder
Marc L. Stern
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Thomas E. Larkin, Jr.
President
Barry Fink
Vice President, Secretary and General Counsel
Philip A. Barach
Vice President
James M. Goldberg
Vice President
Jeffrey E. Gundlach
Vice President
Frederick H. Horton
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust FSB
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 Fund. For more detailed information about the Fund, its officers
and trustees, fees, expenses and other pertinent information, please see
the prospectus of the Fund.
This report is not authorized for distribution to prospective investors
in the Fund unless preceded or accompanied by an effective prospectus.
TCW/DW
NORTH AMERICAN
GOVERNMENT
INCOME TRUST
ANNUAL REPORT
OCTOBER 31, 1997
