TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST, 497, 1998-12-08

TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
497, 1998-12-08

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<PAGE>
Filed Pursuant to Rule 497(??)
Registration File No.: 33-46049

TCW/DW
NORTH AMERICAN
GOVERNMENT INCOME TRUST

PROSPECTUS
NOVEMBER 25, 1998

TCW/DW North American Government Income Trust (the "Fund") is an open-end,
non-diversified management investment company whose investment objective is to
earn a high level of current income while maintaining relatively low volatility
of principal. The Fund seeks to achieve its investment objective by investing
primarily in investment grade fixed-income securities issued or guaranteed by
the U.S., Canadian or Mexican governments, or their subdivisions, or agencies
or instrumentalities of any of the foregoing. Shares of the Fund are not
issued, insured or guaranteed, as to value or yield, by the U.S. or any other
government.

Shares of the Fund are sold and redeemed at net asset value. The Fund pays a
distribution fee of up to 0.75% of its average daily net assets in accordance
with a Plan of Distribution pursuant to Rule 12b-1 under the Investment Company
Act of 1940.

This Prospectus sets forth concisely the information you should know before
investing in the Fund. It should be read and retained for future reference.
Additional information about the Fund is contained in the Statement of
Additional Information, dated November 25, 1998, which has been filed with the
Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at the address or telephone numbers listed on this page.
The Statement of Additional Information is incorporated herein by reference.

TABLE OF CONTENTS

Prospectus Summary 2

Summary of Fund Expenses 4

Financial Highlights 5

The Fund and its Management 5

Investment Objective and Policies 6

Risk Considerations 10

Investment Restrictions 16

Purchase of Fund Shares 17

Shareholder Services 18

Repurchases and Redemptions 20

Dividends, Distributions and Taxes 21

Performance Information 22

Additional Information 22

Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and the shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other agency.

TCW/DW NORTH AMERICAN
GOVERNMENT INCOME TRUST
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)

Morgan Stanley Dean Witter Distributors Inc.
Distributor

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>

PROSPECTUS SUMMARY
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<TABLE>
<CAPTION>
<S> <C>
THE The Fund is organized as a Massachusetts business trust, and is an open-end, non-diversified
FUND management investment company investing primarily in investment grade fixed-income
securities issued or guaranteed by the U.S., Canadian or Mexican governments or their
subdivisions, or the agencies or instrumentalities of any of the foregoing.

SHARES Shares of beneficial interest with $0.01 par value (see page 22).
OFFERED

OFFERING The price of the shares offered by this Prospectus is determined once daily as of 4:00 p.m.,
PRICE New York time, on each day that the New York Stock Exchange is open, and is equal to the
net asset value per share (see page 17).

MINIMUM The minimum initial investment is $1,000 ($100 if the account is opened through EasyInvestSM);
PURCHASE minimum subsequent investment is $100 (see page 17).

INVESTMENT The investment objective of the Fund is to earn a high level of current income while
OBJECTIVE maintaining relatively low volatility of principal.

MANAGER Morgan Stanley Dean Witter Services Company Inc. (the "Manager"), a wholly-owned
subsidiary of Morgan Stanley Dean Witter Advisors Inc. ("MSDW Advisors"), is the Fund's
manager. The Manager also serves as Manager to ten other investment companies which are
advised by TCW Funds Management, Inc. (the "TCW/DW Funds"). The Manager and
MSDW Advisors serve in various investment management, advisory, management and
administrative capacities to a total of 100 investment companies and other portfolios with
assets of approximately $117.3 billion at October 31, 1998.

ADVISER TCW Funds Management, Inc. (the "Adviser") is the Fund's investment adviser. In addition
to the Fund, the Adviser serves as investment adviser to ten other TCW/DW Funds. As of
October 31, 1998, the Adviser and its affiliates had approximately $50 billion under
management or committed to management in various fiduciary or advisory capacities,
primarily from institutional investors.

MANAGEMENT The Manager receives a monthly fee at the annual rate of 0.39% of daily net assets, scaled
AND ADVISORY down on assets over $3 billion. The Adviser receives a monthly fee at an annual rate of 0.26%
FEES of daily net assets, scaled down on assets over $3 billion (see page 5).

DIVIDENDS AND Dividends are declared and paid monthly. Capital gains distributions, if any, are paid at least
CAPITAL GAINS once a year or are retained for reinvestment by the Fund. Dividends and any capital gains
DISTRIBUTIONS distributions are automatically invested in additional shares at net asset value unless the
shareholder elects to receive cash (see page 21).

DISTRIBUTOR The Fund is authorized to reimburse Morgan Stanley Dean Witter Distributors Inc., the
AND Fund's Distributor, for specific expenses incurred in promoting the distribution of the Fund's
PLAN OF shares, including personal services to shareholders and maintenance of shareholder accounts,
DISTRIBUTION in accordance with a Plan of Distribution pursuant to Rule 12b-1 under the Investment
Company Act of 1940. Reimbursement may in no event exceed an amount equal to payments
at an annual rate of 0.75% of the average daily net assets of the Fund (see page 18).

REDEMPTION Shares are redeemable by the shareholder at net asset value. An account may be involuntarily
redeemed if the total value of the account is less than $100 or, if the account was opened
through EasyInvestSM, if after twelve months the shareholder has invested less than $1,000 in
the account (see page 20).

SPECIAL The net asset value of the Fund's shares will fluctuate with changes in the market value of its
RISK portfolio securities. A decline in prevailing interest rates will generally increase the value of
CONSIDERATIONS fixed-income securities, while an increase in rates usually reduces the value of those securities.
The Fund's yield also will vary based on the yield of the Fund's portfolio securities. The Fund
may invest in mortgage-backed securities issued in the United States and Canada; these
securities have different characteristics than traditional debt securities, primarily in that
interest and principal payments are made more frequently, usually monthly, and that principal

</TABLE>

2
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<TABLE>
<CAPTION>
<S> <C>
may be prepaid at any time. Certain derivative mortgage-backed securities in which the Fund invests
are extremely sensitive to changes in interest rates and in prepayment rates on the underlying
mortgage assets, and as a result may be highly volatile (see page 11). The Canadian mortgage-backed
securities market is of recent origin and is less well developed and less liquid than the U.S. market.
The Fund may invest a significant portion of its assets in securities issued and guaranteed by the
governments of Canada and Mexico. It should be recognized that the Canadian and Mexican debt securities
in which the Fund will invest pose different and greater risks than those customarily associated with
U.S. debt securities, including (i) the risks associated with international investments generally,
such as fluctuations in foreign currency exchange rates, (ii) the risks of investing in Canada and
Mexico, which have smaller, less liquid debt markets, such as limited liquidity, price volatility,
custodial and settlement issues, and (iii) specific risks associated with the Mexican economy,
including high levels of inflation, large amounts of debt and political and social uncertainties (see
page 12). The Fund is a non-diversified investment company and, as such, is not subject to the
diversification requirements of the Investment Company Act of 1940. As a result, a relatively high
percentage of the Fund's assets may be invested in a limited number of issuers. However, the Fund
intends to continue to qualify as a regulated investment company under the federal income tax laws
and, as such, is subject to the diversification requirements of the Internal Revenue Code (see
page 12). In addition, the Fund may utilize certain investment techniques, including forward
foreign currency exchange contracts, options and futures, and the speculative technique known as
leverage through the use of reverse repurchase agreements and dollar rolls, which entail additional
risks (see pages 13-16).
</TABLE>

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The above is qualified in its entirety by the detailed information appearing
elsewhere in this Prospectus and in the Statement of Additional Information.

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SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------

The following table illustrates all expenses and fees that a shareholder
of the Fund will incur. The expenses and fees set forth in the table are for
the fiscal year ended October 31, 1998.

<TABLE>
<CAPTION>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases ............................ None
Maximum Sales Charge Imposed on Reinvested Dividends ................. None
Deferred Sales Charge ................................................ None
Redemption Fees ...................................................... None
Exchange Fee ......................................................... None

ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management and Advisory Fees ......................................... 0.65%
12b-1 Fees* .......................................................... 0.73%
Other Expenses ....................................................... 0.31%
Total Fund Operating Expenses ........................................ 1.69%
</TABLE>

- ---------
* A portion of the 12b-1 fee equal to 0.25% of the Fund's average daily net
assets is characterized as a service fee within the meaning of National
Association of Securities Dealers Inc. ("NASD") guidelines (see "Purchase
of Fund Shares").

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
EXAMPLE ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses
on a $1,000 investment, assuming
(1) 5% annual return and (2)
redemption at the end of each time
period: $17 $53 $92 $200
</TABLE>

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND MAY BE MORE OR LESS
THAN THOSE SHOWN.

The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management" and "Purchase of Fund Shares--Plan of
Distribution" in this Prospectus.

Long-term shareholders of the Fund may pay more in distribution fees than
the economic equivalent of the maximum front-end sales charges permitted by the
NASD.

4
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FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

The following ratios and per share data for a share of beneficial interest
outstanding throughout each period have been audited by PricewaterhouseCoopers
LLP, independent accountants. The financial highlights should be read in
conjunction with the financial statements, notes thereto and the unqualified
report of independent accountants, which are contained in the Statement of
Additional Information. Further information about the performance of the Fund
is contained in the Fund's Annual Report to Shareholders, which may be obtained
without charge upon request to the Fund.

<TABLE>
<CAPTION>
For the period
For the Year ended October 31, July 31, 1992*
--------------------------------------------------------- through
1998 1997 1996 1995 1994 1993 October 31, 1992
------ ------ ------ ------ ------ ------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ............ $ 8.59 $ 8.39 $ 8.33 $ 8.89 $10.11 $ 9.96 $10.00
------ ------ ------ ------ ------ ------ ------
Net investment income ........................... 0.49 0.44 0.47 0.69 0.68 0.77 0.18
Net realized and unrealized gain (loss) ......... (0.05) 0.19 0.04 (0.59) (1.18) 0.14 (0.05)
------ ------ ------ ------ ------ ------ ------
Total from investment operations ................ 0.44 0.63 0.51 0.10 (0.50) 0.91 0.13
------ ------ ------ ------ ------ ------ ------
Less dividends and distributions from :
Net investment income .......................... (0.43) (0.43) (0.45) -- (0.47) (0.76) (0.17)
Net realized gain .............................. -- -- -- -- (0.02) -- --
Paid-in-capital ................................ -- -- -- (0.66) (0.23) -- --
------ ------ ------ ------ ------ ------ ------
Total dividends and distributions ............... (0.43) (0.43) (0.45) (0.66) (0.72) (0.76) (0.17)
------ ------ ------ ------ ------ ------ ------
Net asset value, end of period .................. $ 8.60 $ 8.59 $ 8.39 $ 8.33 $ 8.89 $10.11 $ 9.96
====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN+ ........................ 5.13% 7.80% 6.38% 1.61% (5.06)% 9.35% 1.28%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ........................................ 1.69%(3) 1.65% 1.64% 1.59% 1.52% 1.54% 1.80%(2)
Net investment income ........................... 5.52% 5.18% 5.71% 8.28% 6.85% 7.78% 8.36%(2)
SUPPLEMENTAL DATA :
Net assets, end of period, in millions .......... $ 150 $ 212 $ 351 $ 658 $1,360 $2,986 $ 762
Portfolio turnover rate ......................... 8% -- 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.
(3) Does not reflect the effect of expense offset of 0.01%.

THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------

TCW/DW North American Government Income Trust (the "Fund") is an
open-end, non-diversified management investment company. The Fund is a trust of
the type commonly known as a "Massachusetts business trust" and was organized
under the laws of Massachusetts on February 19, 1992.

Morgan Stanley Dean Witter Services Company Inc. (the "Manager"), whose
address is Two World Trade Center, New York, New York 10048, is the Fund's
Manager. The Manager is a wholly-owned subsidiary of Morgan Stanley Dean Witter
Advisors Inc. ("MSDW Advisors"). MSDW Advisors is a wholly-owned subsidiary of
Morgan Stanley Dean Witter & Co., a preeminent global financial services firm
that maintains leading market positions in each of its three primary
businesses--securities, asset management and credit services.

The Manager acts as manager to ten other TCW/DW Funds. The Manager and
MSDW Advisors act in various investment management, advisory, management and
administrative capacities to a total of 100 investment companies, twenty-eight
of which are listed on the New York Stock Exchange, with combined assets of
approximately $112.9 billion as of October 31, 1998. MSDW Advisors also manages
and advises portfolios of pension plans, other institutions and individuals
which aggregated approximately $4.4 billion at such date.

5
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The Fund has retained the Manager to manage its business affairs,
supervise its overall day-to-day operations (other than providing investment
advice) and provide all administrative services.

TCW Funds Management, Inc. (the "Adviser"), whose address is 865 South
Figueroa Street, Suite 1800, Los Angeles, California 90017, is the Fund's
investment adviser. The Adviser was organized in 1987 as a wholly-owned
subsidiary of The TCW Group, Inc. ("TCW"), whose subsidiaries, including Trust
Company of the West and TCW Asset Management Company, provide a variety of
trust, investment management and investment advisory services. Robert A. Day,
who is Chairman of the Board of Directors of TCW, may be deemed to be a control
person of the Adviser by virtue of the aggregate ownership of Mr. Day and his
family of more than 25% of the outstanding voting stock of TCW. The Adviser
serves as investment adviser to ten other TCW/DW Funds in addition to the Fund.
As of October 31, 1998, the Adviser and its affiliated companies had
approximately $50 billion under man-agement or committed to management,
primarily from institutional investors.

The Fund has retained the Adviser to invest the Fund's assets.

The Fund's Trustees review the various services provided by the Manager
and the Adviser to ensure that the Fund's general investment policies and
programs are being properly carried out and that administrative services are
being provided to the Fund in a satisfactory manner.

As full compensation for the services and facilities furnished to the
Fund and for expenses of the Fund assumed by the Manager, the Fund pays the
Manager monthly compensation calculated daily by applying the annual rate of
0.39% to the Fund's net assets up to $3 billion, scaled down to 0.36% on assets
over $3 billion. As compensation for its investment advisory services, the Fund
pays the Adviser monthly compensation calculated daily by applying an annual
rate of 0.26% to the Fund's net assets up to $3 billion, scaled down to 0.24%
on assets over $3 billion. For the fiscal year ended October 31, 1998, the Fund
accrued total compensation to the Manager and the Adviser amounting to 0.39%
and 0.26%, respectively, of the Fund's average daily net assets. During that
period, the Fund's total expenses amounted to 1.69% of the Fund's average daily
net assets.

INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------

The investment objective of the Fund is to earn a high level of current
income while maintaining relatively low volatility of principal. This objective
is fundamental and may not be changed without shareholder approval. There is no
assurance that the objective will be achieved.

The Fund seeks to achieve its investment objective by investing under
normal circumstances at least 65% of its total assets in investment grade
fixed-income securities issued or guaranteed by the U.S., Canadian or Mexican
governments or their subdivisions, or the agencies or instrumentalities of any
of the foregoing ("Government Securities"). In the case of the United States
and Canada, a substantial portion of such investments will be fixed rate and
adjustable rate mortgage-backed securities, including collateralized mortgage
obligations ("Mortgage-Backed Securities"). The term investment grade consists
of fixed-income securities rated Baa or higher by Moody's Investors Service,
Inc. ("Moody's") or BBB or higher by Standard & Poor's Corporation ("S&P") or,
if not rated, determined to be of comparable quality by the Adviser.
Investments in securities rated either Baa by Moody's or BBB by S&P may have
speculative characteristics and, therefore, changes in economic conditions or
other circumstances are more likely to weaken their capacity to make principal
and interest payments than would be the case with investments in securities
with higher credit ratings. If a fixed-income security held by the Fund is
rated BBB or Baa and is subsequently downgraded by a rating agency, the Fund
will retain such security in its portfolio until the Adviser determines that it
is practicable to sell the security without undue market or tax consequences to
the Fund. In the event that such downgraded securities constitute 5% or more of
the Fund's total assets, the Adviser will seek to sell immediately sufficient
securities to reduce the total to below 5%. A description of fixed-income
security ratings is contained in the Appendix to the Statement of Additional
Information.

The Fund may invest up to 35% of its total assets in securities which are
not Government Securities, including corporate debt securities and securities
backed by other assets, such as automobile or credit card receivables and home
equity loans ("Asset-Backed Securities"), and money market instruments, which
are short-term (maturities of up to thirteen months) fixed-income securities,
issued by private institutions. Such securities (except for Eurodollar
certificates of deposit) must be issued by U.S., Canadian or Mexican issuers
and (except for money market instruments) must be rated at least Aa by Moody's
or AA by S&P or, if not rated, determined to be of comparable quality by the
Adviser.

The Fund expects that under normal circumstances the market value dollar
weighted average life (or period until the next reset date) of the Fund's
portfolio securities will be no greater than three years. In addition, the Fund
will purchase only Mexican Government Securities with remaining maturities of
one year or less. The Fund seeks to achieve relatively low volatility by
investing in a portfolio of securities which the Adviser believes will, in the
aggregate, be resistant to significant fluctuations in market

6
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value. Although the values of fixed-income securities generally increase during
periods of declining interest rates and decrease during periods of increasing
interest rates, the extent of these fluctuations has historically generally
been smaller for short term securities than for securities with longer
maturities. Conversely, the yield available on shorter term securities has also
historically been lower on average than that available from longer term
securities.

Under normal circumstances the Fund will invest at least 50% of its total
assets in U.S. Government Securities. The Fund will invest no more than 25% of
its total assets in Canadian Government Securities and no more than 25% of its
total assets in Mexican Government Securities. Subject to the foregoing
guidelines, the Adviser will invest the Fund's assets, and allocate its
investments from time to time among U.S., Canadian and Mexican Government
Securities, based on its analysis of market conditions and changes in general
economic conditions in the United States, Canada and Mexico. In such analysis,
the Adviser will consider various factors, including its expectations regarding
interest rate changes and changes in currency exchange rates among the U.S.
dollar, the Canadian dollar and the Mexican peso, as well as general market,
economic and political factors, to attempt to take advantage of favorable
investment opportunities in each country.

Money market instruments in which the Fund may invest are securities
issued or guaranteed by the U.S. Government (Treasury bills, notes and bonds,
including zero coupon securities); obligations of banks subject to regulation
by the U.S. Government and having total assets of $1 billion or more;
Eurodollar certificates of deposit; obligations of savings banks and savings
and loan associations having total assets of $1 billion or more; fully insured
certificates of deposit; and commercial paper rated within the two highest
grades by Moody's or S&P or, if not rated, issued by a company having an
outstanding debt issue rated AAA by S&P or Aaa by Moody's.

In an effort to increase investment return or to hedge the Fund's
portfolio, the Fund may engage in various investment techniques, including
reverse repurchase agreements, dollar rolls, purchasing and selling call and
put options, entering into futures contracts and related options, purchasing
securities on a when-issued, delayed delivery or forward commitment basis and
lending portfolio securities (see "Other Investment Policies" below).

There may be periods during which, in the opinion of the Adviser, market
conditions warrant reduction of some or all of the Fund's securities holdings.
During such periods, the Fund may adopt a temporary "defensive" posture in
which greater than 35% of its total assets are invested in U.S. money market
instruments or cash.

GOVERNMENT SECURITIES

The Fund will invest at least 65% of its total assets in Government
Securities. Government Securities are securities issued or guaranteed by the
governments of the United States, Canada or Mexico, their political
subdivisions and agencies and instrumentalities of any of the foregoing. Such
securities may include U.S. Treasury securities, U.S. Mortgage-Backed
Securities, the sovereign debt of Canada or any of its Provinces, Canadian
Mortgage-Backed Securities, and the sovereign debt of Mexico or any of its
government agencies.

A portion of the Government Securities purchased by the Fund may be zero
coupon securities. Such securities are purchased at a discount from their face
amount, giving the purchaser the right to receive their full value at maturity.
The interest earned on such securities is, implicitly, automatically compounded
and paid out at maturity. While such compounding at a constant rate eliminates
the risk of receiving lower yields upon reinvestment of interest if prevailing
interest rates decline, the owner of a zero coupon security will be unable to
participate in higher yields upon reinvestment of interest received on
interest-paying securities if prevailing interest rates rise. For this reason,
zero coupon securities are subject to substantially greater price fluctuations
during periods of changing prevailing interest rates than are comparable
securities which pay interest on a current basis.

The zero coupon securities in which the Fund may invest are primarily
Canadian Government Securities with remaining maturities of two years or less
issued by Canadian provinces. Such securities generally are currently readily
available only in the form of zero coupon securities.

A zero coupon security pays no interest to its holder during its life.
Therefore, to the extent the Fund invests in zero coupon securities, it will
not receive current cash available for distribution to shareholders. However,
the Fund will invest in zero coupon securities only when the Adviser believes
that there will be cash in the Fund's portfolio representing return of
principal on portfolio securities of the Fund at least equal to the imputed
income on the zero coupon securities. The Adviser believes that a limited use
of zero coupon securities in the Fund's portfolio may enable the Fund to
increase the income available to shareholders (as a result of the yield premium
often obtainable on such securities) without significantly increasing the
volatility of the Fund's net asset value, although there is no assurance this
can be achieved. The Fund intends to limit its use of zero coupon securities
(other than Treasury bills with one year or less to maturity) to 10% of its
total assets.

UNITED STATES GOVERNMENT SECURITIES

Securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities include: (i) U.S. Treasury obligations, all of which are
backed by the full faith and credit of the United States and which differ only
in their interest rates, maturities and times of issuance: U.S. Treasury bills
(maturities of one year or less), U.S. Treasury notes (maturities of one to ten
years), and U.S.

7
<PAGE>

Treasury bonds (generally maturities of greater than ten years); and (ii)
obligations issued or guaranteed by U.S. Government agencies or
instrumentalities, including government guaranteed Mortgage-Backed Securities,
some of which are backed by the full faith and credit of the U.S. Treasury
(e.g., Government National Mortgage Association direct pass-through
certificates), some of which are supported by the right of the issuer to borrow
from the U.S. Government (e.g., obligations of Federal Home Loan Banks), and
some of which are backed only by the credit of the issuer itself (e.g.,
obligations of the Student Loan Marketing Association). The U.S. Government may
also guarantee other debt obligations of special purpose borrowers.

CANADIAN GOVERNMENT SECURITIES

Canadian Government Securities include securities issued or guaranteed by
the Government of Canada, the Government of a Province of Canada or their
agencies and Crown corporations. These securities may be denominated or payable
in U.S. dollars or Canadian dollars.

The Bank of Canada, acting on behalf of the federal government, is
responsible for the distribution of Government of Canada Treasury bills and
federal bond issues. The Bank of Canada holds weekly auctions of Treasury bills
(maturities of one year or less) and offers new issues of federal bonds through
investment dealers and banks. An offering of Government of Canada bonds
frequently consists of several different issues with various maturity dates,
representing different segments of the yield curve and generally having
maturities ranging from three to 25 years. The Bank of Canada usually purchases
a previously announced amount of each offering of bonds. Mortgage-Backed
Securities issued pursuant to the program established under the National
Housing Act of Canada are also Canadian Government Securities because they
benefit from a guarantee by the Canada Mortgage and Housing Corporation, but
are not distributed by the Bank of Canada.

All Canadian Provinces have outstanding bond issues and several Provinces
also guarantee bond issues of Provincial authorities, agencies and provincial
Crown corporations. Spreads in the marketplace are determined by various
factors, including the relative supply and the rating assigned by the rating
agencies. Most Provinces also issue treasury bills.

Many municipalities and municipal financial authorities in Canada raise
funds through the bond market in order to finance capital expenditures. Unlike
U.S. municipal securities, which have special tax status, Canadian municipal
securities have the same tax status as other Canadian Government Securities and
trade similarly to such securities. The Canadian municipal market may be less
liquid than the Provincial bond market.

The Fund will only invest in Canadian Government Securities which are
rated at least A by Moody's or S&P, or, if not rated, are determined to be of
comparable quality by the Adviser.

MEXICAN GOVERNMENT SECURITIES

Mexican Government Securities include those securities which are issued
or guaranteed by the Mexican Treasury or by Mexican government agencies or
instrumentalities. These securities may be denominated and payable in Mexican
pesos or U.S. dollars.

The debt market in Mexico began to develop rapidly after the promulgation
of the Securities Market Law in 1975. Since 1975, the government has authorized
a range of Mexican government issued debt securities, all of which are traded
on the Mexican Stock Exchange: (i) Cetes--peso-denominated discount debt
securities having maturities of two years or less sold through auctions
regulated by Banco de Mexico; (ii) Bondes--peso-denominated long-term
development bonds sold through auctions regulated by Banco de Mexico; (iii)
Ajustabonos--peso-denominated bonds with a fixed coupon rate on a variable face
amount which is adjusted in proportion to fluctuations in the Mexican consumer
price index; and (iv) Nafinsa Pagares--peso denominated promissory notes, with
maturities approximating those of Cetes, issued by the Nacional Financiera
(Nafinsa), an agency of the Mexican government.

In addition, a variety of other special purpose bonds are issued by the
Mexican federal government or its agencies, such as development bonds, bank
indemnity bonds and urban renovation bonds, as well as bank development bonds
and industrial development bonds.

The Fund will only invest in Mexican Government Securities which are
rated at least Baa by Moody's or BBB by S&P or, if not rated, are determined to
be of comparable quality by the Adviser.

MORTGAGE-BACKED SECURITIES

Mortgage-Backed Securities are securities that directly or indirectly
represent a participation in, or are secured by and payable from, mortgage
loans secured by real property. The term Mortgage-Backed Securities as used
herein includes adjustable rate mortgage securities and derivative mortgage
products such as collateralized mortgage obligations, stripped Mortgage-Backed
Securities and other products described below.

U.S. MORTGAGE-BACKED SECURITIES

There are currently three basic types of U.S. Mortgage-Backed Securities:
(i) those issued or guaranteed by the United States Government or one of its
agencies or instrumentalities, such as the Government National Mortgage
Association ("GNMA"), the Federal

8
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National Mortgage Association ("FNMA") and the Federal Home Loan Mortgage
Corporation ("FHLMC") (securities issued by GNMA, but not those issued by FNMA
or FHLMC, are backed by the "full faith and credit" of the United States); (ii)
those issued by private issuers that represent an interest in or are
collateralized by Mortgage-Backed Securities issued or guaranteed by the United
States Government or one of its agencies or instrumentalities; and (iii) those
issued by private issuers that represent an interest in or are collateralized
by whole mortgage loans or Mortgage-Backed Securities without a government
guarantee but usually having some form of private credit enhancement. The
latter category of Mortgage-Backed Securities are not considered Government
Securities for purposes of this Prospectus.

The mortgage pass-through securities in which the Fund may invest include
those issued or guaranteed by GNMA, FNMA and FHLMC. GNMA certificates are
direct obligations of the U.S. Government and, as such, are backed by the "full
faith and credit" of the United States. FNMA is a federally chartered,
privately owned corporation and FHLMC is a corporate instrumentality of the
United States. FNMA and FHLMC certificates are not backed by the full faith and
credit of the United States but the issuing agency or instrumentality has the
right to borrow, to meet its obligations, from an existing line of credit with
the U.S. Treasury. The U.S. Treasury has no legal obligation to provide such
line of credit and may choose not to do so. Each of GNMA, FNMA and FHLMC
guarantee timely distribution of interest to certificate holders. GNMA and FNMA
also guarantee timely distribution of scheduled principal payments. FHLMC
generally guarantees only the ultimate collection of principal of the
underlying mortgage loans.

The Fund may also invest in adjustable rate mortgage securities, which
are pass-through mortgage securities collateralized by mortgages with
adjustable rather than fixed rates.

Collateralized Mortgage Obligations and Multiclass Pass-Through
Securities. The Fund may invest in collateralized mortgage obligations or
"CMOs." CMOs are debt obligations collateralized by mortgage loans or mortgage
pass-through securities. Typically, CMOs are collateralized by GNMA, FNMA or
FHLMC certificates, but also may be collateralized by whole loans or private
mortgage pass-through securities (such collateral is collectively hereinafter
referred to as "Mortgage Assets"). Multiclass pass-through securities are
equity interests in a trust composed of Mortgage Assets. Payments of principal
of and interest on the Mortgage Assets, and any reinvestment income thereon,
provide the funds to pay debt service on the CMOs or make scheduled
distributions on the multiclass pass-through securities. CMOs may be issued by
agencies or instrumentalities of the United States Government, or by private
originators of, or investors in, mortgage loans, including savings and loan
associations, mortgage banks, commercial banks, investment banks and special
purpose subsidiaries of the foregoing. The issuer of a series of CMOs may elect
to be treated as a Real Estate Mortgage Investment Conduit ("REMIC"). REMICs
include governmental and/or private entities that issue a fixed pool of
mortgages secured by an interest in real property. REMICs are similar to CMOs
in that they issue multiple classes of securities, but unlike CMOs, which are
required to be structured as debt securities, REMICs may be structured as
indirect ownership interests in the underlying assets of the REMICs themselves.
However, there are no effects on the Fund from investing in CMOs issued by
entities that have elected to be treated as REMICs, and all future references
to CMOs shall also be deemed to include REMICs. The Fund may invest without
limitation in CMOs.

In a CMO, a series of bonds or certificates is issued in multiple
classes. Each class of CMOs, often referred to as a "tranche," is issued at a
specific fixed or floating coupon rate and has a stated maturity or final
distribution date. Principal prepayments on the Mortgage Assets may cause the
CMOs to be retired substantially earlier than their stated maturities or final
distribution dates. Interest is paid or accrues on all classes of the CMOs on a
monthly, quarterly or semiannual basis. Certain CMOs may have variable or
floating interest rates and others may be stripped (securities which provide
only the principal or interest feature of the underlying security).

The principal of and interest on the Mortgage Assets may be allocated
among the several classes of a CMO series in a number of different ways.
Generally, the purpose of the allocation of the cash flow of a CMO to the
various classes is to obtain a more predictable cash flow to the individual
tranches than exists with the underlying collateral of the CMO. As a general
rule, the more predictable the cash flow is on a CMO tranche, the lower the
anticipated yield will be on that tranche at the time of issuance relative to
prevailing market yields on Mortgage-Backed Securities. As part of the process
of creating more predictable cash flows on most of the tranches in a series of
CMOs, one or more tranches generally must be created that absorb most of the
volatility in the cash flows on the underlying mortgage loans. The yields on
these tranches, which may include inverse floaters and Stripped Mortgage-Backed
Securities as described below, may be higher than prevailing market yields on
Mortgage-Backed Securities with similar maturities. As a result of the
uncertainty of the cash flows of these tranches, the market prices of and yield
on these tranches generally are more volatile.

The Fund may invest up to 10% of its total assets in inverse floaters.
Inverse floaters constitute a class of CMOs with a coupon rate that moves
inversely to a designated index, such as the LIBOR (London Inter-Bank Offered
Rate) Index. Inverse floaters have coupon rates that typically change at a
multiple of the changes of the relevant index rate. Any rise in the index rate
(as a consequence of an increase in interest rates) causes a drop in the coupon
rate of an inverse floater while any drop in the index rate

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causes an increase in the coupon of an inverse floater. In addition, like most
other fixed-income securities, the value of inverse floaters will decrease as
interest rates increase. Inverse floaters exhibit greater price volatility than
the majority of mortgage pass-through securities or CMOs. In addition, some
inverse floaters exhibit extreme sensitivity to changes in prepayments. As a
result, the yield to maturity of an inverse floater is sensitive not only to
changes in interest rates but also to changes in prepayment rates on the
related underlying Mortgage Assets. The Adviser believes that, notwithstanding
the fact that inverse floaters exhibit price volatility, the use of inverse
floaters as a component of the Fund's overall portfolio, in light of the Fund's
anticipated portfolio composition in the aggregate, is compatible with the
Fund's objective to earn a high level of current income while maintaining
relatively low volatility of principal.

The Fund also may invest in, among other things, parallel pay CMOs and
Planned Amortization Class CMOs ("PAC Bonds"). Parallel pay CMOs are structured
to provide payments of principal on each payment date to more than one class.
These simultaneous payments are taken into account in calculating the stated
maturity date or final distribution date of each class, which, as with other
CMO structures, must be retired by its stated maturity date or final
distribution date but may be retired earlier. PAC Bonds generally require
payments of a specified amount of principal on each payment date. PAC Bonds
always are parallel pay CMOs with the required principal payment on such
securities having the highest priority after interest has been paid to all
classes.

Stripped Mortgage-Backed Securities. Stripped Mortgage-Backed Securities
are derivative multiclass mortgage securities. Stripped Mortgage-Backed
Securities may be issued by agencies or instrumentalities of the United States
Government, or by private originators of, or investors in, mortgage loans,
including savings and loan associations, mortgage banks, commercial banks,
investment banks and special purpose subsidiaries of the foregoing.

Stripped Mortgage-Backed Securities usually are structured with two
classes that receive different proportions of the interest and principal
distribution on a pool of Mortgage Assets. A common type of Stripped Mortgage-
Backed Securities will have one class receiving some of the interest and most
of the principal from the Mortgage Assets, while the other class will receive
most of the interest and the remainder of the principal. In the most extreme
case, one class will receive all of the interest (the interest-only or "IO"
class), while the other class will receive all of the principal (the
principal-only or "PO" class). PO classes generate income through the accretion
of the deep discount at which such securities are purchased, and, while PO
classes do not receive periodic payments of interest, they receive monthly
payments associated with scheduled amortization and principal prepayment from
the Mortgage Assets underlying the PO class. The yield to maturity on an IO
class is extremely sensitive to the rate of principal payments (including
prepayments) on the related underlying Mortgage Assets, and a rapid rate of
principal payments may have a material adverse effect on the Fund's yield to
maturity. If the underlying Mortgage Assets experience greater than anticipated
prepayments of principal, the Fund may fail to fully recoup its initial
investment in these securities even if the securities are rated Aaa by Moody's
or AAA by S&P.

The Fund may purchase Stripped Mortgage-Backed Securities for income, or
for hedging purposes to protect the Fund's portfolio against interest rate
fluctuations. For example, since an IO class will tend to increase in value as
interest rates rise, it may be utilized to hedge against a decrease in value of
other fixed-income securities in a rising interest rate environment. The Fund's
management understands that the staff of the Securities and Exchange Commission
considers privately issued Stripped Mortgage-Backed Securities representing
interest only or principal only components of U.S. Government or other debt
securities to be illiquid securities. The Fund will treat such securities as
illiquid so long as the staff maintains such position. Stripped Mortgage-Backed
Securities issued by the U.S. Government or its agencies, and which are backed
by fixed-rate mortgages, will be treated as liquid provided they are so
determined by, or under procedures approved by, the Board of Trustees. The Fund
may not invest more than 15% of its net assets in illiquid securities.

CANADIAN MORTGAGE-BACKED SECURITIES

Canadian Mortgage-Backed Securities may be issued in several ways, the
most common of which is a modified pass-through vehicle issued pursuant to the
program established under the National Housing Act of Canada. Certificates
issued pursuant to this program have some structural similarities to GNMA
securities and benefit from the guarantee of the Canada Mortgage and Housing
Corporation, a federal Crown corporation that is (except for certain limited
purposes) an agent of the Government of Canada.

Canadian private issuers such as banks and trust companies also issue
Mortgage-Backed Securities backed by private insurance or other forms of credit
support. Such Mortgage-Backed Securities are not considered Government
Securities for purposes of this Prospectus.

While most Canadian Mortgage-Backed Securities are subject to voluntary
prepayments, some pools are not subject to such prepayments and thus have yield
characteristics similar to bonds.

As the Canadian Mortgage-Backed Securities market was only recently
established, it is less well developed and less liquid than its U.S.
counterpart.

RISK CONSIDERATIONS

The net asset value of the Fund's shares will fluctuate with changes in
the market value of the Fund's portfolio

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securities. The market value of the Fund's portfolio securities will increase
or decrease due to a variety of economic, market and political factors which
cannot be predicted, in particular movements in interest rates and, with
respect to foreign currencies, currency exchange rates. A decline in prevailing
interest rates generally increases the value of fixed-income securities, while
an increase in rates usually reduces the value of those securities. (The Fund's
yield also will vary based on the yield of the Fund's portfolio securities.)

Mortgage-Backed Securities. Mortgage-Backed Securities have certain
different characteristics than traditional debt securities. Among the major
differences are that interest and principal payments are made more frequently,
usually monthly, and that principal may be prepaid at any time because the
underlying mortgage loans or other assets generally may be prepaid at any time.
As a result, if the Fund purchases such a security at a premium, a prepayment
rate that is faster than expected will reduce yield to maturity, while a
prepayment rate that is slower than expected will have the opposite effect of
increasing yield to maturity. Alternatively, if the Fund purchases these
securities at a discount, faster than expected prepayments will increase, while
slower than expected prepayments will reduce, yield to maturity. The Fund may
invest a portion of its assets in derivative Mortgage-Backed Securities such as
Stripped Mortgage-Backed Securities which are highly sensitive to changes in
prepayment and interest rates. The Adviser seeks to manage these risks (and
potential benefits) by investing in a variety of such securities.

Mortgage-Backed Securities, like all fixed-income securities, generally
decrease in value as a result of increases in interest rates. In addition,
although generally the value of fixed-income securities increases during
periods of falling interest rates and, as stated above, decreases during
periods of rising interest rates, as a result of prepayments and other factors,
this is not always the case with respect to Mortgage-Backed Securities.

Although the extent of prepayments on a pool of mortgage loans depends on
various economic and other factors, as a general rule prepayments on fixed rate
mortgage loans will increase during a period of falling interest rates and
decrease during a period of rising interest rates. Accordingly, amounts
available for reinvestment by the Fund are likely to be greater during a period
of declining interest rates and, as a result, likely to be reinvested at lower
interest rates than during a period of rising interest rates. Mortgage-Backed
Securities generally decrease in value as a result of increases in interest
rates and may benefit less than other fixed-income securities from declining
interest rates because of the risk of prepayment.

The Fund may invest in mortgage derivative securities, such as CMOs, the
average life of which is determined using mathematical models that incorporate
prepayment assumptions and other factors that involve estimates of future
economic and market conditions. These estimates may vary from actual future
results, particularly during periods of extreme market volatility. In addition,
under certain market conditions, such as those that developed in 1994, the
average weighted life of mortgage derivative securities may not accurately
reflect the price volatility of such securities. For example, in periods of
supply and demand imbalances in the market for such securities and/or in
periods of sharp interest rate movements, the prices of mortgage derivative
securities may fluctuate to a greater extent than would be expected from
interest rate movements alone.

The Fund's investments in mortgage derivative securities also subject the
Fund to extension risk. Extension risk is the possibility that rising interest
rates may cause prepayments to occur at a slower than expected rate. This
particular risk may effectively change a security which was considered short or
intermediate-term at the time of purchase into a long-term security. Long-term
securities generally fluctuate more widely in response to changes in interest
rates than short or intermediate-term securities.

There are certain risks associated specifically with CMOs. CMOs issued by
private entities are not U.S. Government Securities and are not guaranteed by
any government agency, although the securities underlying a CMO may be subject
to a guarantee. Therefore, if the collateral securing the CMO, as well as any
third party credit support or guarantees, is insufficient to make payment, the
holder could sustain a loss. However, as stated above, the Fund will invest in
CMOs issued by private entities only if the CMOs are rated at least AA by S&P
or Aa by Moody's or, if unrated, are determined to be of comparable quality.
Also, a number of different factors, including the extent of prepayment of
principal of the Mortgage Assets, affect the availability of cash for principal
payments by the CMO issuer on any payment date and, accordingly, affect the
timing of principal payments on each CMO class. In addition, as stated above,
inverse floaters, a class of CMOs in which the Fund may invest up to 10% of its
net assets, exhibit greater price volatility than the majority of CMOs.

CURRENCY RISKS

Investors should carefully consider the risks of investing in securities
of foreign issuers and securities denominated in non-U.S. currencies.
Fluctuations in the relative rates of exchange among the currencies of the
United States, Canada and Mexico will affect the value of the Fund's
investments. Changes in foreign currency exchange rates relative to the U.S.
dollar will affect the U.S. dollar value of the Fund's assets denominated in
that currency and thereby impact upon the Fund's total return on such assets.

Foreign currency exchange rates are determined by forces of supply and
demand on the foreign exchange markets. These forces are themselves affected by
the international balance of payments and other economic and

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<PAGE>

financial conditions, government intervention, speculation and other factors.
Moreover, foreign currency exchange rates may be affected by the regulatory
control of the exchanges on which the currencies trade.

RISKS OF INTERNATIONAL INVESTING

Investments in foreign securities will occasion risks relating to
political and economic developments abroad, including the possibility of
expropriations or confiscatory taxation, limitations on the use or transfer of
Fund assets and any effects of foreign social, economic or political
instability. Foreign securities are not subject to the regulatory requirements
of U.S. securities and, as such, there may be less publicly available
information about such securities. Moreover, issuers of foreign securities are
not subject to uniform accounting, auditing and financial standards and
requirements comparable to those applicable to issuers of U.S. securities.

Securities of foreign issuers may be less liquid than comparable
securities of U.S. issuers and, as such, their price changes may be more
volatile. Furthermore, foreign exchanges and broker-dealers are generally
subject to less government and exchange scrutiny and regulation than their
American counterparts. Brokerage commissions, dealer concessions and other
transaction costs may be higher on foreign markets than in the U.S. In
addition, differences in clearance and settlement procedures on foreign markets
may occasion delays in settlements of Fund trades effected in such markets.
Inability to dispose of portfolio securities due to settlement delays could
result in losses to the Fund due to subsequent declines in value of such
securities and the inability of the Fund to make intended security purchases
due to settlement problems could result in a failure of the Fund to make
potentially advantageous investments.

Canada. The Canadian debt securities market is significantly smaller than
the U.S. debt securities market. In particular, the Canadian Mortgage-Backed
Securities market is of recent origin, and, although continued growth is
anticipated, is less well developed and less liquid than its U.S. counterpart.

Mexico. Because the Fund intends to invest in Mexican debt instruments,
investors in the Fund should be aware of certain special considerations
associated with investing in debt obligations of the Mexican government.

The Mexican government has exercised and continues to exercise a
significant influence over many aspects of the private sector in Mexico.
Mexican government actions concerning the economy could have a significant
effect on market conditions and prices and yields of Mexican debt obligations,
including those in which the Fund invests. Mexico is currently a major debtor
nation (among developing countries) to commercial banks and foreign
governments.

The value of the Fund's portfolio investments may be affected by changes
in oil prices, interest rates, taxation and other political or economic
developments in Mexico, including recent rates of inflation which have exceeded
the rates of inflation in the U.S. and Canada. The Fund can provide no
assurance that future developments in the Mexican economy will not impair its
investment flexibility, operations or ability to achieve its investment
objective.

In September, 1982, Mexico imposed foreign exchange controls and
maintained a dual foreign exchange rate system, with a "controlled" rate and a
"free market" rate. Under economic policy initiatives implemented since
December, 1987, the Mexican government introduced a schedule of gradual
devaluation of the controlled rate which initially amounted to an average
depreciation of the Mexican peso against the U.S. dollar of one Mexican peso
per day. The extended initiatives included an adjustment in the scheduled
devaluation rate of the Mexican peso against the U.S. dollar. The Fund's net
asset value and its computation and distribution of income to its shareholders
will be adversely affected by continued reductions in the value of the Mexican
peso relative to the U.S. dollar because all Fund assets must be converted to
U.S. dollars prior to any distributions to shareholders. On December 22, 1994,
the Mexican government determined to allow the Mexican peso to trade freely
against the U.S. dollar rather than within a controlled band, which action
resulted in a significant devaluation of the Mexican peso against the U.S.
dollar.

Non-Diversified Status. The Fund is classified as a non-diversified
investment company under the Investment Company Act of 1940, as amended (the
"Act"), and as such is not limited by the Act in the proportion of its assets
that it may invest in the obligations of a single issuer. However, the Fund
intends to conduct its operations so as to qualify as a "regulated investment
company" under Subchapter M of the Internal Revenue Code. See "Dividends,
Distributions and Taxes." In order to qualify, among other requirements, the
Fund will limit its investments so that at the close of each quarter of the
taxable year, (i) not more than 25% of the market value of the Fund's total
assets will be invested in the securities of a single issuer (other than U.S.
Government Securities) and, (ii) with respect to 50% of the market value of its
total assets not more than 5% will be invested in the securities of a single
issuer (other than U.S. Government Securities) and the Fund will not own more
than 10% of the outstanding voting securities of a single issuer. To the extent
that a relatively high percentage of the Fund's assets may be invested in the
obligations of a limited number of issuers, the Fund's portfolio securities may
be more susceptible to any single economic, political or regulatory occurrence
than the portfolio securities of a diversified investment company. The
limitations described in this paragraph are not fundamental policies and may be
revised to the extent applicable Federal income tax requirements are revised.

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<PAGE>
Debt securities which are issued or guaranteed by an agency or
instrumentality of the United States, including certificates issued by GNMA,
are treated like U.S. Government Securities for purposes of the diversification
tests. However, securities issued or guaranteed by foreign governments, their
political subdivisions, agencies and instrumentalities, including Canadian NHA
Mortgage-Backed Securities, are not treated like U.S. Government Securities for
purposes of the diversification tests described in the preceding paragraph, but
instead are subject to these tests in the same manner as the securities of
non-governmental issuers. In this regard, securities issued or guaranteed by a
foreign government, its political subdivisions, agencies or instrumentalities
may in certain circumstances be treated as issued by a single issuer for
purposes of these diversification tests. Thus, in order to meet the
diversification tests and thereby maintain its status as a regulated investment
company, the Fund will be required to diversify its portfolio of Canadian
Government Securities and Mexican Government Securities in a manner which would
not be necessary if the Fund limited its investments to U.S. Government
Securities.

Year 2000. The management services provided to the Fund by the Manager,
the investment advisory services provided to the Fund by the Adviser and the
services provided to shareholders by the Distributor and the Transfer Agent
depend on the smooth functioning of their computer systems. Many computer
software systems in use today cannot recognize the year 2000, but revert to
1900 or some other date, due to the manner in which dates were encoded and
calculated. That failure could have a negative impact on the handling of
securities trades, pricing and account services. The Manager, the Adviser, the
Distributor and the Transfer Agent have been actively working on necessary
changes to their own computer systems to prepare for the year 2000 and expect
that their systems will be adapted before that date, but there can be no
assurance that they will be successful, or that interaction with other
non-complying computer systems will not impair their services at that time.

In addition, it is possible that the markets for securities in which the
Fund invests may be detrimentally affected by computer failures throughout the
financial services industry beginning January 1, 2000. Improperly functioning
trading systems may result in settlement problems and liquidity issues. In
addition, corporate and governmental data processing errors may result in
production problems for individual companies and overall economic
uncertainties. Earnings of individual issuers will be affected by remediation
costs, which may be substantial and may be reported inconsistently in U.S. and
foreign financial statements. Accordingly, the Fund's investments may be
adversely affected.

The risks of other investment techniques which may be utilized by the
Fund, including options and futures transactions, are described under "Other
Investment Policies," below.

OTHER INVESTMENT POLICIES

Asset-Backed Securities. The Fund may invest in Asset-Backed Securities.
Asset-Backed Securities represent the securitization techniques used to develop
Mortgage-Backed Securities applied to a broad range of other assets. Through
the use of trusts and special purpose corporations, various types of assets,
primarily automobile and credit card receivables and home equity loans, are
being securitized in pass-through structures similar to the mortgage
pass-through structures described above or in a pay-through structure similar
to the CMO structure.

Asset-Backed Securities involve certain risks that are not posed by
Mortgage-Backed Securities, resulting mainly from the fact that Asset-Backed
Securities do not usually contain the complete benefit of a security interest
in the related collateral. For example, credit card receivables generally are
unsecured and the debtors are entitled to the protection of a number of state
and federal consumer credit laws, including the bankruptcy laws, some of which
may reduce the ability to obtain full payment. In the case of automobile
receivables, due to various legal and economic factors, proceeds for
repossessed collateral may not always be sufficient to support payments on
these securities.

New instruments and variations of existing Mortgage-Backed Securities and
Asset-Backed Securities continue to be developed. The Fund, following revision
to this Prospectus, may invest in any such instruments or variations as may be
developed, to the extent consistent with its investment objective and policies
and applicable regulatory requirements.

Repurchase Agreements. The Fund may enter into repurchase agreements,
which may be viewed as a type of secured lending by the Fund, and which
typically involve the acquisition by the Fund of debt securities, from a
selling financial institution such as a bank, savings and loan association or
broker-dealer. The agreement provides that the Fund will sell back to the
institution, and that the institution will repurchase, the underlying security
at a specified price and at a fixed time in the future, usually not more than
seven days from the date of purchase.

While repurchase agreements involve certain risks not associated with
direct investments in debt securities, the Fund follows procedures designed to
minimize such risks. These procedures include effecting repurchase transactions
only with large, well-capitalized and well-established financial institutions
whose financial condition will be continually monitored by the Adviser subject
to procedures established by the Board of Trustees of the Fund. In addition,
the value of the collateral underlying the repurchase agreement will be at
least equal to the repurchase price, including any accrued interest earned on
the repurchase agreement. In the event of a default or bankruptcy by a selling
financial institution, the Fund will seek to liquidate such collateral.
However, the exercising of the Fund's right to liquidate such collateral could

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<PAGE>

involve certain costs or delays and, to the extent that proceeds from any sale
upon a default of the obligation to repurchase were less than the repurchase
price, the Fund could suffer a loss. It is the current policy of the Fund not
to invest in repurchase agreements that do not mature within seven days if any
such investment, together with any other illiquid assets held by the Fund,
amounts to more than 15% of its net assets.

Reverse Repurchase Agreements and Dollar Rolls. The Fund may also use
reverse repurchase agreements and dollar rolls as part of its investment
strategy. Reverse repurchase agreements involve sales by the Fund of portfolio
assets concurrently with an agreement by the Fund to repurchase the same assets
at a later date at a fixed price. The Fund may enter into dollar rolls in which
the Fund sells securities for delivery in the current month and simultaneously
contracts to repurchase substantially similar (same type and coupon) securities
on a specified future date. Reverse repurchase agreements and dollar rolls
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 agreement or
dollar roll 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, or its trustee or receiver, whether to enforce the Fund's
obligation to repurchase the securities.

Reverse repurchase agreements and dollar rolls are speculative techniques
involving leverage, and are considered borrowings by the Fund. The Fund does
not expect to engage in reverse repurchase agreements and dollar rolls with
respect to greater than 25% of the Fund's total assets.

Private Placements. The Fund may invest up to 5% of its total assets in
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or which are otherwise not readily marketable. (Securities eligible for
resale pursuant to Rule 144A under the Securities Act, and determined to be
liquid pursuant to the procedures discussed in the following paragraph, are not
subject to the foregoing restriction.) These securities are generally referred
to as private placements or restricted securities. Limitations on the resale of
such securities may have an adverse effect on their marketability, and may
prevent the Fund from disposing of them promptly at reasonable prices. The Fund
may have to bear the expense of registering such securities for resale and the
risk of substantial delays in effecting such registration.

The Securities and Exchange Commission has adopted Rule 144A under the
Securites Act, which permits the Fund to sell restricted securities to
qualified institutional buyers without limitation. The Adviser, pursuant to
procedures adopted by the Trustees of the Fund, will make a determination as to
the liquidity of each restricted security purchased by the Fund. If a
restricted security is determined to be "liquid," such security will not be
included within the category "illiquid securities," which under current policy
may not exceed 15% of the Funds net assets. However, investing in Rule 144A
securities could have the effect of increasing the level of Fund illiquidity to
the extent that the Fund, at a particular point in time, may be unable to find
qualified institutional buyers interested in purchasing such securities.

When-Issued and Delayed Delivery Securities and Forward Commitments. From
time to time, in the ordinary course of business, the Fund may purchase
securities on a when-issued or delayed delivery basis or may purchase or sell
securities on a forward commitment basis. The securities so purchased or sold
are subject to market fluctuation and no interest or dividends accrue to the
purchaser prior to the settlement date. When such transactions are negotiated,
the price is fixed at the time of the commitment, but delivery and payment can
take place a month or more after the date of the commitment. At the time of
delivery of the securities, the value may be more or less than the purchase or
sale price. An increase in the percentage of the Fund's assets committed to the
purchase of securities on a when issued, delayed delivery or forward commitment
basis may increase the volatility of the Fund's net asset value. The Fund will
establish a segregated account with its custodian bank in which it will
maintain cash, U.S. Government securities or other liquid portfolio securities
equal in value to its obligations in respect of when-issued or delayed delivery
securities and forward commitments. The Fund's ability to enter into such
transactions is not otherwise limited, but the Fund expects that under normal
circumstances no more than 15% of the Fund's total assets will be so invested.

When, As and If Issued Securities. The Fund may purchase securities on a
"when, as and if issued" basis under which the issuance of the security depends
upon the occurrence of a subsequent event, such as approval of a merger,
corporate reorganization, leveraged buyout or debt restructuring. If the
anticipated event does not occur and the securities are not issued, the Fund
will have lost an investment opportunity. An increase in the percentage of the
Fund's assets committed to the purchase of securities on a "when, as and if
issued" basis may increase the volatility of its net asset value. The Fund may
also sell securities on a "when, as and if issued" basis provided that the
issuance of the security will result automatically from the exchange or
conversion of a security owned by the Fund at the time of sale.

Forward Foreign Currency Exchange Contracts

The Fund may engage in transactions in forward foreign currency exchange
contracts. A forward foreign currency exchange contract ("forward contract")
involves an obligation to purchase or sell a currency at a future

14
<PAGE>

date, which may be any fixed number of days from the date of the contract
agreed upon by the parties, at a price set at the time of the contract.

Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also limit the opportunity
for gain if the value of the hedged currency should rise. Moreover, it may not
be possible for the Fund to hedge against a devaluation that is so generally
anticipated that the Fund is not able to contract to sell the currency at a
price above the devaluation level it anticipates.

The Fund may enter into forward contracts under various circumstances.
When the Fund enters into a contract for the purchase or sale of a security
denominated in either the Canadian dollar or Mexican peso ("foreign currency"),
it may, for example, desire to "lock in" the price of the security in U.S.
dollars, Canadian dollars or Mexican pesos. At other times, when, for example,
the Adviser believes that the Canadian dollar or the Mexican peso may suffer a
substantial decline against the U.S. dollar, the Fund may enter into a forward
contract to sell, for a fixed amount of dollars or pesos, the amount of foreign
currency approximating the value of some or all of the Fund's portfolio
securities (or securities which the Fund has purchased for its portfolio)
denominated in such foreign currency.

If the Fund enters into forward contract transactions, and the currency
in which the Fund's portfolio securities (or anticipated portfolio securities)
are denominated rises in value with respect to the currency which is being
purchased (or sold), then the Fund will have realized fewer gains than had the
Fund not entered into the forward contracts. Moreover, the precise matching of
the forward contract amounts and the value of the securities involved will not
generally be possible, since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and the
date it matures. The Fund is not required to enter into such transactions with
regard to its foreign currency-denominated securities and will not do so unless
deemed appropriate by the Adviser. Currently, only a limited market exists for
certain hedging transactions in future foreign exchange rates. This may limit
the Fund's ability to effectively hedge its investments in Mexico.

Options and Futures Transactions

The Fund may engage in transactions involving options on securities and
currencies and futures contracts on securities, currencies and indexes, each as
described below.

Options. The Fund may purchase and sell (write) call and put options on
U.S. Treasury notes, bonds and bills and on the Canadian dollar or Mexican peso
which are or may in the future be listed on several U.S. and foreign securities
exchanges or are written in over-the-counter transactions ("OTC options").
Listed options are issued or guaranteed by the exchange on which they trade or
by a clearing corporation such as the Options Clearing Corporation. OTC options
are purchased from or sold (written) to dealers or financial institutions which
have entered into direct agreements with the Fund. The Fund is permitted to
write covered call options on portfolio securities and the U.S. dollar, the
Canadian dollar and the Mexican peso, without limit, in order to aid it in
achieving its investment objective. The Fund may also write covered put
options; however, the aggregate value of the obligations underlying the puts
determined as of the date the options are sold will not exceed 50% of the
Fund's net assets.

The Fund may purchase listed and OTC call and put options in amounts
equalling up to 5% of its total assets. The Fund may purchase call options to
close out a covered call position or to protect against an increase in the
price of a security it anticipates purchasing or, in the case of call options
on a foreign currency, to hedge against an adverse exchange rate change of the
currency in which the security it anticipates purchasing is denominated
vis-a-vis the currency in which the exercise price is denominated. The Fund may
purchase put options on securities which it holds in its portfolio only to
protect itself against a decline in the value of the security. The Fund may
also purchase put options to close out written put positions. There are no
other limits on the Fund's ability to purchase call and put options.

Futures Contracts. The Fund may purchase and sell futures contracts that
are currently traded, or may in the future be traded, on U.S. and foreign
commodity exchanges on such underlying fixed-income securities as U.S. Treasury
bonds, notes, and bills and/or any Canadian or Mexican government fixed-income
security ("interest rate" futures), on the Canadian or Mexican currencies
("currency" futures) and on such indexes of U.S. or foreign fixed-income
securities as may exist or come into being, such as the Moody's Investment
Grade Corporate Bond Index ("index" futures). The Fund will purchase or sell
interest rate futures contracts for the purpose of hedging some or all of the
value of its portfolio securities (or anticipated portfolio securities) against
changes in prevailing interest rates. The Fund will purchase or sell index
futures contracts for the purpose of hedging some or all of its portfolio (or
anticipated portfolio) securities against changes in their prices.

The Fund also may purchase and write call and put options on futures
contracts which are traded on an exchange and enter into closing transactions
with respect to such options to terminate an existing position.

New futures contracts, options and other financial products and various
combinations thereof continue to be developed. The Fund may invest in any such
futures, options or products as may be developed, to the extent consistent with
its investment objective and applicable regulatory requirements.

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<PAGE>
Risks of Options and Futures Transactions. The Fund may close out its
position as writer of an option, or as a buyer or seller of a futures contract,
only if a liquid secondary market exists for options or futures contracts of
that series. There is no assurance that such a market will exist, particularly
in the case of OTC options, as such options may generally only be closed out by
entering into a closing purchase transaction with the purchasing dealer. Also,
exchanges may limit the amount by which the price of many futures contracts may
move on any day. If the price moves equal the daily limit on successive days,
then it may prove impossible to liquidate a futures position until the daily
limit moves have ceased.

Participation in the options or futures markets involves investment risks
and transaction costs to which the Fund would not be subject absent the use of
these strategies. If the Adviser's prediction of movements in the direction of
the securities, currency or interest rate markets are inaccurate, the adverse
consequences to the Fund (e.g., a reduction in the Fund's net asset value or a
reduction in the amount of income available for distribution) may leave the
Fund in a worse position than if such strategies were not used. Risks inherent
in the use of options, futures contracts and options on futures contracts
include (a) dependence on the Adviser's ability to predict correctly movements
in the direction of interest rates, as well as securities and/or currency
markets; (b) imperfect correlation between the price of options and futures
contracts and options thereon and movements in the prices of the securities or
currencies being hedged; (c) the fact that skills needed to use these
strategies are different from those needed to select portfolio securities; (d)
the possible absence of a liquid secondary market for any particular instrument
at any time; and (e) the possible need to defer closing out certain hedged
positions to avoid adverse tax consequences.

PORTFOLIO MANAGEMENT

The Fund's portfolio is actively managed by the Adviser with a view to
achieving the Fund's investment objective. Philip A. Barach and Jeffrey E.
Gundlach, Group Managing Directors of the Adviser, and James M. Goldberg and
Frederick H. Horton, Managing Directors of the Adviser, are the Fund's primary
portfolio managers, and, with the exception of Mr. Horton, have been so since
the Fund's inception. Mr. Horton has been a primary portfolio manager since
December, 1994. Messrs. Barach, Gundlach, Goldberg and Horton have each been
portfolio managers with affiliates of TCW for over five years.

In determining which securities to purchase for the Fund or hold in the
Fund's portfolio, the Adviser will rely on information from various sources,
including research, analysis and appraisals of brokers and dealers, including
Dean Witter Reynolds Inc., Morgan Stanley & Co. Incorporated and other
broker-dealers that are affiliates of the Manager, and others regarding
economic developments and interest rate trends, and the Adviser's own analysis
of factors it deems relevant.

Brokerage commissions are not normally charged on the purchase or sale of
U.S., Canadian or Mexican Government Securities, but such transactions
generally involve costs in the form of spreads between bid and asked prices.
Orders for transactions in portfolio securities are placed for the Fund with a
number of brokers and dealers, including Dean Witter Reynolds Inc., Morgan
Stanley & Co. Incorporated and other brokers and dealers that are affiliates of
the Manager or Adviser. In addition, the Fund may incur brokerage commissions
on transactions conducted through such affiliates. Under normal circumstances
it is not anticipated that the portfolio trading will result in the Fund's
portfolio turnover rate exceeding 100% in any one year.

Except as specifically noted, all investment policies and practices
discussed in this Prospectus are not fundamental policies of the Fund and, as
such, may be changed without shareholder approval.

INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------

The investment restrictions listed below are among the restrictions that
have been adopted by the Fund as fundamental policies. Under the Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act.

The Fund may not:

1. Invest 25% or more of the value of its total assets in securities
of issuers in any one industry, except that the Fund will concentrate in
Mortgage-Backed Securities (unless it has adopted a temporary "defensive"
posture). This restriction does not apply to obligations issued or
guaranteed by the United States Government or its agencies or
instrumentalities.

2. Invest more than 5% of the value of its total assets in securities
of issuers having a record, together with predecessors, of less than
three years of continuous operation. This restriction shall not apply to
Mortgage-Backed Securities or Asset-Backed Securities or to any
obligation of the United States Government, its agencies or
instrumentalities.

3. Purchase or sell commodities or commodities contracts except that
the Fund may purchase and sell financial futures contracts and related
options thereon.

In addition, as a non-fundamental policy, the Fund may not, as to 75% of
its total assets, purchase more than 10% of the voting securities of any
issuer.
16
<PAGE>

If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of total or net assets will not be considered a
violation of any of the foregoing restrictions.

PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------

The Fund offers its shares for sale to the public on a continuous basis.
Pursuant to a Distribution Agreement between the Fund and Morgan Stanley Dean
Witter Distributors Inc. ("MSDW Distributors" or the "Distributor"), an
affiliate of the Manager, shares of the Fund are distributed by the Distributor
and offered by Dean Witter Reynolds Inc. ("DWR"), a selected dealer and
subsidiary of Morgan Stanley Dean Witter & Co., and others (which may include
TCW Brokerage Services, an affiliate of the Adviser) which have entered into
selected dealer agreements with the Distributor ("Selected Broker-Dealers"). It
is anticipated that DWR will undergo a change of corporate name which is
expected to incorporate the brand name of "Morgan Stanley Dean Witter," pending
approval of various regulatory authorities. The principal executive office of
the Distributor is located at Two World Trade Center, New York, New York 10048.

The minimum initial purchase is $1,000 and subsequent purchases of $100
or more may be made by sending a check, payable to TCW/DW North American
Government Income Trust, directly to Morgan Stanley Dean Witter Trust FSB (the
"Transfer Agent" or "MSDW Trust") at P.O. Box 1040, Jersey City, NJ 07303, or
by contacting a Morgan Stanley Dean Witter Financial Advisor or other Selected
Broker-Dealer representative. The minimum initial purchase in the case of
investments through EasyInvestSM, an automatic purchase plan (see "Shareholder
Services"), is $100, provided that the schedule of automatic investments will
result in investments totalling at least $1,000 within the first twelve months.
The minimum initial purchase in the case of an "Education IRA" is $500, if the
Distributor has reason to believe that additional investments will increase the
investment in the account to $1,000 within three years. In the case of
investments pursuant to (i) Systematic Payroll Deduction Plans (including
Individual Retirement Plans), (ii) the MSDW Advisors mutual fund asset
allocation program and (iii) fee-based programs approved by the Distributor,
pursuant to which participants pay an asset based fee for services in the
nature of investment advisory, administrative and/or brokerage services, the
Fund, in its discretion, may accept investments without regard to any minimum
amounts which would otherwise be required, provided, in the case of Systematic
Payroll Deduction Plans, that the Distributor has reason to believe that
additional investments will increase the investment in all accounts under such
Plans to at least $1,000. Certificates for shares purchased will not be issued
unless a request is made by the shareholder in writing to the Transfer Agent.

Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment generally is due on or before
the third business day (settlement date) after the order is placed with the
Distributor. Since DWR and other Selected Broker-Dealers forward investors'
funds on settlement date, they may benefit from the temporary use of the funds
where payment is made prior thereto. As noted above, orders placed directly
with the Transfer Agent must be accompanied by payment. Investors will be
entitled to receive dividends and capital gains distributions if their order is
received by the close of business on the day prior to the record date for such
distributions.

Sales personnel of a Selected Broker-Dealer are compensated for shares of
the Fund sold by them by the Distributor or any of its affiliates and/or the
Selected Broker-Dealer. In addition, some sales personnel of the Selected
Broker-Dealer will receive various types of non-cash compensation as special
sales incentives, including trips, educational and/or business seminars and
merchandise. The Fund and the Distributor reserve the right to reject any
purchase order.

DETERMINATION OF NET ASSET VALUE

The net asset value per share of the Fund is determined once daily at
4:00 p.m., New York time (or, on days when the New York Stock Exchange closes
prior to 4:00 p.m., at such earlier time), on each day that the New York Stock
Exchange is open by taking the value of all assets of the Fund, subtracting all
its liabilities, dividing by the number of shares outstanding and adjusting to
the nearest cent. The net asset value per share will not be determined on Good
Friday and on such other federal and non-federal holidays as are observed by
the New York Stock Exchange.

In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
stock exchange is valued at its latest sale price on that exchange; if there
were no sales that day, the security is valued at the latest bid price (in
cases where a security is traded on more than one exchange, the security is
valued on the exchange designated as the primary market pursuant to procedures
adopted by the Trustees); and (2) all other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest bid price prior to the time of valuation. 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 Fund's Trustees (valuation of securities

17
<PAGE>

for which market quotations are not readily available may also be based upon
current market prices of securities which are comparable in coupon, rating and
maturity or an appropriate matrix utilizing similar factors). For valuation
purposes, quotations of foreign portfolio securities, other assets and
liabilities and forward contracts stated in foreign currency are translated
into U.S. dollar equivalents at the prevailing market rates prior to the close
of the New York Stock Exchange.

Certain of the Fund's portfolio securities may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service may
utilize a matrix system incorporating security quality, maturity and coupon as
the evaluation model parameters, and/or research evaluations by its staff,
including review of broker-dealer market price quotations, in determining what
the pricing service believes is the fair valuation of such portfolio
securities.

Short-term debt securities with remaining maturities of sixty days or
less at the time of purchase are valued at amortized cost, unless the Trustees
determine such does not reflect the securities' market value, in which case
these securities will be valued at their fair value as determined by the
Trustees.

PLAN OF DISTRIBUTION

The Fund has entered into a Plan of Distribution pursuant to Rule 12b-1
under the Act with the Distributor whereby the expenses of certain activities
and services, including personal services to shareholders and maintenance of
shareholder accounts, in connection with the distribution of the Fund's shares
are reimbursed. The principal activities and services which may be provided by
DWR, its affiliates or any other Selected Broker-Dealer under the Plan include:
(1) compensation to, and expenses of, Morgan Stanley Dean Witter Financial
Advisors 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. Reimbursements for these
services will be made in monthly payments by the Fund, which will 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. A portion of the amount payable pursuant to the Plan,
which may not exceed 0.25% of the Fund's average daily net assets, is
characterized as a service fee within NASD guidelines. The service fee is a
payment made for personal service and/or the maintenance of shareholder
accounts. 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. The Fund accrued
$1,299,994 to the Distributor pursuant to the Plan for the fiscal year ended
October 31, 1998. This is an accrual at the annual rate of 0.73% of the Fund's
average daily net assets.

SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------

Automatic Investment of Dividends and Distributions. All income dividends
and capital gains distributions are automatically paid in full and fractional
shares of the Fund (or, if specified by the shareholder, any other open-end
TCW/DW Fund), unless the shareholder requests that they be paid in cash.

Investment of Distributions Received in Cash. Any shareholder who
receives a cash payment representing a dividend or capital gains distribution
may invest such dividend or distribution at the net asset value next determined
after receipt by the Transfer Agent by returning the check or the proceeds to
the Transfer Agent within thirty days after the payment date.

EasyInvestSM. Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account or following
redemption of shares of a Morgan Stanley Dean Witter money market fund, on a
semi-monthly, monthly or quarterly basis, to the Transfer Agent for investment
in shares of the Fund (see "Purchase of Fund Shares" and "Repurchases and
Redemptions -- Involuntary Redemption").

Systematic Withdrawal Plan. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders whose shares of TCW/DW Funds have an
aggregate value of $10,000 or more. Shares of any Fund from which redemptions
will be made pursuant to the Plan must have a value of $1,000 or more (referred
to as a "SWP Fund"). The required share values are determined on the date the
shareholder establishes the Withdrawal Plan. The Withdrawal Plan provides for
monthly, quarterly, semi-annual or annual payments in any amount not less than
$25, or in any whole percentage of the value of the SWP Funds' shares, on an
annualized basis. Any applicable contingent deferred sales charge ("CDSC") will
be imposed on shares redeemed under the Withdrawal Plan (see "Purchase of Fund
Shares"), except that the CDSC, if any, will be waived on redemptions under the
Withdrawal Plan of up to 12% annually of the value of each SWP Fund account,
based on the share values next determined after the shareholder establishes the
Withdrawal Plan. Redemptions for which this CDSC waiver policy applies may be
in amounts up to 1% per month, 3% per quarter, 6% semi-annually or 12%
annually. Under this CDSC waiver policy, amounts withdrawn each period will be
paid by first redeeming shares not subject to a CDSC because the

18
<PAGE>

shares were purchased by the reinvestment of dividends or capital gains
distributions, the CDSC period has elapsed or some other waiver of the CDSC
applies. If shares subject to a CDSC must be redeemed, shares held for the
longest period of time will be redeemed first and continuing with shares held
the next longest period of time until shares held the shortest period of time
are redeemed. Any shareholder participating in the Withdrawal Plan will have
sufficient shares redeemed from his or her account so that the proceeds (net of
any applicable CDSC) to the shareholder will be the designated monthly,
quarterly, semi-annual or annual amount.

A shareholder may suspend or terminate participation in the Withdrawal
Plan at any time. A shareholder who has suspended participation may resume
payments under the Withdrawal Plan, without requiring a new determination of
the account value for the 12% CDSC waiver. The Withdrawal Plan may be
terminated or revised at any time by the Fund.

Prior to adding an additional SWP Fund to an existing Withdrawal Plan,
the required $10,000/$1,000 shares values must be met, to be calculated on the
date the shareholder adds the additional SWP Fund. However, the addition of a
new SWP Fund will not change the account value for the 12% CDSC waiver for the
SWP Funds already participating in the Withdrawal Plan.

Withdrawal Plan payments should not be considered dividends, yields or
income. If periodic Withdrawal Plan payments continuously exceed net investment
income and net capital gains, the shareholder's original investment will be
correspondingly reduced and ultimately exhausted. Each withdrawal constitutes a
redemption of shares and any gain or loss realized must be recognized for
federal income tax purposes.

Shareholders should contact their Morgan Stanley Dean Witter Financial
Advisor or other Selected Broker-Dealer representative or the Transfer Agent
for further information about any of the above services.

Tax Sheltered Retirement Plans. Retirement plans are available for use by
the self-employed, eligible Individual Retirement Accounts and Custodial
Accounts under Section 403(b)(7) of the Internal Revenue Code. Adoption of such
plans should be on advice of legal counsel or tax advisor.

For further information regarding plan administration, custodial fees and
other details, investors should contact their Morgan Stanley Dean Witter
Financial Advisor or other Selected Broker-Dealer representative or the
Transfer Agent.

EXCHANGE PRIVILEGE

An "Exchange Privilege," that is, the privilege of exchanging shares of
certain Funds for shares of the Fund, exists whereby shares of TCW/DW Funds
that are multiple class funds ("TCW/DW Multi-Class Funds") may be exchanged for
shares of the Fund and for shares of five money market funds for which MSDW
Advisors serves as investment manager: Morgan Stanley Dean Witter Liquid Asset
Fund Inc., Morgan Stanley Dean Witter U.S. Government Money Market Trust,
Morgan Stanley Dean Witter Tax-Free Daily Income Trust, Morgan Stanley Dean
Witter California Tax-Free Daily Income Trust and Morgan Stanley Dean Witter
New York Municipal Money Market Trust (the foregoing six funds, including the
Fund, are hereinafter collectively referred to as "Exchange Funds"). Shares of
the Exchange Funds received in an exchange for shares of a TCW/DW Multi-Class
Fund may be redeemed and exchanged only for shares of the corresponding Class
of a TCW/DW Multi-Class Fund or for shares of one of the other Exchange Funds.

An exchange to the Fund is on the basis of the next calculated net asset
value per share of the Fund after the exchange order is received. When
exchanging into a money market fund, shares of the TCW/DW Multi-Class Fund are
redeemed at their next calculated net asset value and exchanged for shares of
the money market fund at their net asset value determined the following
business day. Ultimately, any applicable contingent deferred sales charge
("CDSC") will have to be paid upon redemption of shares originally purchased
from a Class of a TCW/DW Multi-Class Fund that imposes a CDSC. During the
period of time the shares originally purchased from a Class of a TCW/DW
Multi-Class Fund that imposes a CDSC remain in the Exchange Fund, the holding
period (for the purpose of determining the rate of CDSC) is frozen. If those
shares are subsequently re-exchanged for shares of a TCW/DW Multi-Class Fund,
the holding period previously frozen when the first exchange was made resumes
on the last day of the month in which shares of a TCW/DW Multi-Class Fund are
reacquired. Thus, the CDSC is based upon the time (calculated as described
above) the shareholder was invested in shares of a TCW/DW Multi-Class Fund. In
the case of shares exchanged into an Exchange Fund, upon a redemption of shares
which results in a CDSC being imposed, a credit (not to exceed the amount of
the CDSC) will be given in an amount equal to the Exchange Fund 12b-1
distribution fees which are attributable to those shares (see "Purchase of Fund
Shares--Plan of Distribution" in the respective Exchange Fund prospectus for a
description of Exchange Fund 12b-1 distribution fees). Exchanges may be made
after the shares of the fund acquired by purchase (not by exchange or dividend
reinvestment) have been held for thirty days. There is no waiting period for
exchanges of shares acquired by exchange or dividend reinvestment.

Additional Information Regarding Exchanges. Purchases and exchanges
should be made for investment purposes only. A pattern of frequent exchanges
may be deemed by the Manager to be abusive and contrary to the best interests
of the Fund's other shareholders and, at the Manager's discretion, may be
limited by the Fund's refusal to accept additional purchases and/or exchanges
from the

19
<PAGE>

investor. Although the Fund does not have any specific definition of what
constitutes a pattern of frequent exchanges, and will consider all relevant
factors in determining whether a particular situation is abusive and contrary
to the best interests of the Fund and its other shareholders, investors should
be aware that the Fund, each of the other TCW/DW Funds and each of the money
market funds may in their discretion limit or otherwise restrict the number of
times this Exchange Privilege may be exercised by any investor. Any such
restriction will be made by the Fund on a prospective basis only, upon notice
to the shareholder not later than ten days following such shareholder's most
recent exchange. Also, the Exchange Privilege may be terminated or revised at
any time by the Fund and/or any other TCW/DW Funds or money market funds for
which shares of the Fund may be exchanged, upon such notice as may be required
by applicable regulatory agencies. Shareholders maintaining margin accounts
with DWR or another Selected Broker-Dealer are referred to their Morgan Stanley
Dean Witter Financial Advisor or other Selected Broker-Dealer representative
regarding restrictions on exchange of shares pledged in the margin account.

The current prospectus for each fund describes its investment
objective(s) and policies, and shareholders should obtain a copy and examine it
carefully before investing. Exchanges are subject to the minimum investment
requirement of each Class of shares and any other conditions imposed by each
fund. In the case of any shareholder holding a share ceritificate or
certificates, no exchanges may be made until all applicable share certificates
have been received by the Transfer Agent and deposited in the shareholder's
account. An exchange will be treated for federal income tax purposes the same
as a repurchase or redemption of shares, on which the shareholder may realize a
capital gain or loss. However, the ability to deduct capital losses on an
exchange may be limited in situations where there is an exchange of shares
within ninety days after the shares are purchased. The Exchange Privilege is
only available in states where an exchange may legally be made.

If DWR or another Selected Broker-Dealer is the current dealer of record
and its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the Funds for
which the Exchange Privilege is available by contacting their Morgan Stanley
Dean Witter Financial Advisor or other Selected Broker-Dealer representative
(no Exchange Privilege Authorization Form is required). Other shareholders (and
those shareholders who are clients of DWR or another Selected Broker-Dealer but
who wish to make exchanges directly by writing or telephoning the Transfer
Agent) must complete and forward to the Transfer Agent an Exchange Privilege
Authorization Form, copies of which may be obtained from the Transfer Agent, to
initiate an exchange. If the Authorization Form is used, exchanges may be made
in writing or by contacting the Transfer Agent at (800) 869-NEWS (toll-free).
The Fund will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. Such procedures may
include requiring various forms of personal identification such as name,
mailing address, social security or other tax identification number and DWR or
other Selected Broker-Dealer account number (if any). Telephone instructions
may also be recorded. If such procedures are not employed, the Fund may be
liable for any losses due to unauthorized or fraudulent instructions.

Telephone exchange instructions will be accepted if received by the
Transfer Agent between 9:00 a.m. and 4:00 p.m. New York time, on any day the
New York Stock Exchange is open. Any shareholder wishing to make an exchange
who has previously filed an Exchange Privilege Authorization Form and who is
unable to reach the Fund by telephone should contact his or her Morgan Stanley
Dean Witter Financial Advisor or other Selected Broker-Dealer representative,
if appropriate, or make a written exchange request. Shareholders are advised
that during periods of drastic economic or market changes it is possible that
the telephone exchange procedures may be difficult to implement, although this
has not been the experience in the past with other funds managed by the
Manager.

REPURCHASES AND REDEMPTIONS
- --------------------------------------------------------------------------------

Repurchases. DWR and other Selected Broker-Dealers are authorized to
repurchase, as agent for the Fund, shares represented by a share certificate
which is delivered to any of their offices. Shares held in a shareholder's
account without a share certificate may also be repurchased by DWR and other
Selected Broker-Dealers upon the telephonic request of the shareholder. The
repurchase price is the net asset value next determined (see "Purchase of Fund
Shares--Determination of Net Asset Value") after such repurchase order is
received by DWR or the other Selected Broker-Dealer. The offers by DWR and
other Selected Broker-Dealers to repurchase shares from shareholders may be
suspended by them at any time. In that event, shareholders may redeem their
shares through the Fund's Transfer Agent as set forth below under
"Redemptions."

Redemptions. Shares of the Fund can be redeemed for cash at any time at
net asset value per share next determined. If shares are held in a
shareholder's account at the Transfer Agent without a share certificate, a
written request for redemption must be sent to the Fund's Transfer Agent at
P.O. Box 983, Jersey City, NJ 07303. The share

20
<PAGE>

certificate, or an accompanying stock power, and the request for redemption,
must be signed by the shareholder or shareholders exactly as the shares are
registered. Each request for redemption, whether or not accompanied by a share
certificate, must be sent to the Fund's Transfer Agent, which will redeem the
shares at their net asset value next determined as described under "Purchase of
Fund Shares--Determination of Net Asset Value" after it receives the request,
and certificate, if any, in good order. Any redemption request received after
such determination will be redeemed at the next determined net asset value. The
term "good order" means that the share certificate, if any, and request for
redemption are properly signed, accompanied by any documentation required by
the Transfer Agent, and bear signature guarantees when required by the Fund or
the Transfer Agent. If redemption is requested by a corporation, partnership,
trust or fiduciary, the Transfer Agent may require that written evidence of
authority acceptable to the Transfer Agent be submitted before such request is
accepted. With regard to shares of the Fund acquired pursuant to the Exchange
Privilege, any applicable contingent deferred sales charge will be imposed upon
the redemption of such shares (see "Purchase of Fund Shares--Exchange
Privilege").

Whether certificates are held by the shareholder or shares are held in a
shareholder's account, if the proceeds are to be paid to any person other than
the record owner, or if the proceeds are to be paid to a corporation (other
than DWR or another Selected Broker-Dealer for the account of the shareholder),
partnership, trust or fiduciary, or sent to the shareholder at an address other
than the registered address, signatures must be guaranteed by an eligible
guarantor acceptable to the Transfer Agent (shareholders should contact the
Transfer Agent for a determination as to whether a particular institution is
such an eligible guarantor). A stock power may be obtained from any dealer or
commercial bank. The Fund may change the signature guarantee requirements from
time to time upon notice to shareholders, which may be by means of a revised
prospectus.

Payment for Shares Repurchased or Redeemed. Payment for shares presented
for repurchase or redemption will be made by check within seven days after
receipt by the Transfer Agent of the certificate and/or written request in good
order. Such payment may be postponed or the right of redemption suspended under
unusual circumstances. If the shares to be redeemed have recently been
purchased by check, payment of the redemption proceeds may be delayed for the
minimum time needed to verify that the check used for investment has been
honored (not more than fifteen days from the time of receipt of the check by
the Transfer Agent). Shareholders maintaining margin accounts with DWR or
another Selected Broker-Dealer are referred to their Morgan Stanley Dean Witter
Financial Advisor or other Selected Broker-Dealer representative regarding
restrictions on redemption of shares of the Fund pledged in the margin account.

Reinstatement Privilege. A shareholder who has had his or her shares
redeemed or repurchased and has not previously exercised this reinstatement
privilege may, within thirty days after the date of the redemption or
repurchase, reinstate any portion or all of the proceeds of such redemption or
repurchase in shares of the Fund at net asset value next determined after a
reinstatement request, together with the proceeds, is received by the Transfer
Agent.

Involuntary Redemption. The Fund reserves the right to redeem, on sixty
days' notice and at net asset value, the shares of any shareholder (other than
shares held in an Individual Retirement Account or Custodial Account under
Section 403(b)(7) of the Internal Revenue Code) whose shares have a value of
less than $100 as a result of redemptions or repurchases, or such lesser amount
as may be fixed by the Trustees or, in the case of an account opened through
EasyInvest, if after twelve months the shareholder has invested less than
$1,000 in the account. However, before the Fund redeems such shares and sends
the proceeds to the shareholder, it will notify the shareholder that the value
of the shares is less than the applicable amount and allow the shareholder 60
days to make an additional investment in an amount which will increase the
value of the account to at least the applicable amount before the redemption is
processed.

DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------

Dividends and Distributions. The Fund intends to pay monthly income
dividends and to distribute net capital gains, if any, at least once each year.
The Fund may, however, determine either to distribute or to retain all or part
of any long-term capital gains in any year for reinvestment.

The Fund may, at times, make payments from sources other than net
investment income, net realized short-term capital gains and net realized
long-term capital gains. Payments from such sources would, in effect, represent
a return of a portion of each shareholder's investment. All, or a portion, of
such payments would not be taxable to shareholders.

Any dividends declared in the last quarter of any calendar year which are
paid in the following calendar year prior to February 1 will be deemed, for tax
purposes, to have been received by the shareholder in the prior calendar year.

All dividends and any capital gains distributions will be paid in
additional Fund shares and automatically credited to the shareholder's account
without issuance of a share certificate unless the shareholder requests in
writing that all dividends and/or distributions be paid in cash. (See
"Shareholder Services--Automatic Investment of Dividends and Distributions.")

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<PAGE>
Taxes. Because the Fund intends to distribute all of its net investment
income and net short-term capital gains to shareholders and otherwise remain
qualified as a regulated investment company under Subchapter M of the Internal
Revenue Code, it is not expected that the Fund will be required to pay any
federal income tax on such income and capital gains.

Shareholders who are required to pay taxes on their income will normally
have to pay federal income taxes, and any applicable state and/or local income
taxes, on the dividends and distributions they receive from the Fund. Such
dividends and distributions, to the extent that they are derived from net
investment income and net short-term capital gains, are taxable to the
shareholder as ordinary dividend income regardless of whether the shareholder
receives such distributions in additional shares or in cash. Any dividends
declared in the last quarter of any calendar year which are paid in the
following calendar year prior to February 1 will be deemed, for tax purposes,
to have been received by the shareholder in the prior calendar year.

Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder
has held the Fund's shares and regardless of whether the distribution is
received in additional shares or in cash. It is not anticipated that any
portion of the Fund's distributions will be eligible for the dividends received
deduction to corporate shareholders.

After the end of the calendar year, shareholders will be sent full
information on their dividends and capital gains distributions for tax
purposes.

To avoid being subject to a 31% federal backup withholding tax on taxable
dividends, capital gains distributions and the proceeds of redemptions and
repurchases, shareholders' taxpayer identification numbers must be furnished
and certified as to their accuracy. Shareholders who are not citizens or
residents of, or entities organized in, the United States may be subject to
withholding taxes of up to 30% on certain payments received from the Fund.

Dividends, interest and gains received by the Fund may give rise to
withholding and other taxes imposed by foreign countries. If it qualifies for
and has made the appropriate election with the Internal Revenue Service, the
Fund will report annually to its shareholders the amount per share of such
taxes, to enable shareholders to claim United States foreign tax credits or
deductions with respect to such taxes. In the absence of such an election, the
Fund would deduct foreign tax in computing the amount of its distributable
income.

The foregoing discussion relates solely to the federal income tax
consequences of an investment in the Fund. Distributions may also be subject to
state and local taxes; therefore, each shareholder is advised to consult his or
her own tax advisor.

PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------

From time to time the Fund may quote its "yield" and/or its "total
return" in advertisements and sales literature. Both the yield and the total
return of the Fund are based on historical earnings and yield of the Fund is
computed by dividing the net investment income of the Fund over a 30-day period
by an average value (using the average number of shares entitled to receive
dividends and the net asset value per share at the end of the period), all in
accordance with applicable regulatory requirements. Such amount is compounded
for six months and then annualized for a twelve-month period to derive the
yield of the Fund.

The "average annual total return" of the Fund refers to a figure
reflecting the average annualized percentage increase (or decrease) in the
value of an initial investment in the Fund of $1,000 over one, five and ten
years or the life of the Fund, if less than any of the foregoing. Average
annual total return reflects all income earned by the Fund, any appreciation or
depreciation of the assets of the Fund, and all expenses incurred by the Fund,
for the stated periods. It also assumes reinvestment of all dividends and
distributions paid by the Fund.

In addition to the foregoing, the Fund may advertise its total return
over different periods of time by means of aggregate, average, year-by-year or
other types of total return figures. The Fund may also advertise the growth of
hypothetical investments of $10,000, $50,000 and $100,000 in shares of the
Fund. The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent
organizations(such as mutual fund performance rankings of Lipper Analytical
Services, Inc.).

ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------

Voting Rights. All shares of beneficial interest of the Fund are of $0.01
par value and are equal as to earnings, assets and voting privileges.

The Fund is not required to hold Annual Meetings of Shareholders and, in
ordinary circumstances, the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. Under certain
circumstances, the Trustees may be removed by action of the Trustees or by the
shareholders.

Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for the
obligations of the Fund. However,

22
<PAGE>

the Declaration of Trust contains an express disclaimer of shareholder
liability for acts or obligations of the Fund, requires that Fund obligations
include such disclaimer, and provides indemnification and reimbursement of
expenses out of the Fund's property for any shareholder held personally liable
for the obligations of the Fund. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Fund itself would be unable to meet its obligations. Given the
above limitations on shareholder personal liability, and the nature of the
Fund's assets and operations, the possibility of the Fund being unable to meet
its obligations is remote and thus, in the opinion of Massachusetts counsel to
the Fund, the risk to Fund shareholders of personal liability is remote.

Code of Ethics. The Adviser is subject to a Code of Ethics with respect
to investment transactions in which the Adviser's officers, directors and
certain other persons have a beneficial interest to avoid any actual or
potential conflict or abuse of their fiduciary position. The Code of Ethics, as
it pertains to the TCW/DW Funds, contains several restrictions and procedures
designed to eliminate conflicts of interest including: (a) pre-clearance of
personal investment transactions to ensure that personal transactions by
employees are not being conducted at the same time as the Adviser's clients;
(b) quarterly reporting of personal securities transactions; (c) a prohibition
against personally acquiring securities in an initial public offering, entering
into uncovered short sales and writing uncovered options; (d) a seven day
"black-out period" prior or subsequent to a TCW/DW Fund transaction during
which portfolio managers are prohibited from making certain transactions in
securities which are being purchased or sold by a TCW/DW Fund; (e) a
prohibition, with respect to certain investment personnel, from profiting in
the purchase and sale, or sale and purchase, of the same (or equivalent)
securities within 60 calendar days; and (f) a prohibition against acquiring any
security which is subject to firm wide or, if applicable, a department
restriction of the Adviser. The Code of Ethics provides that exemptive relief
may be given from certain of its requirements, upon application. The Adviser's
Code of Ethics complies with regulatory requirements and, insofar as it relates
to persons associated with registered investment companies, the 1994 Report of
the Advisory Group on Personal Investing of the Investment Company Institute.

Litigation. Several class action lawsuits, which have been consolidated,
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 as excessive certain fees paid by the Fund. Damages
are sought in an unspecified amount. All defendants 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. The Court
also certified a plaintiff class pursuant to the Federal Rules of Civil
Procedure. On December 4, 1996, the defendants filed a renewed motion to
dismiss which was denied by the Court on November 20, 1997. The Adviser and the
Manager believe that the litigation will not have a material adverse effect on
their ability to perform under their respective agreements with the
Fund or a material adverse effect on the Fund and its shareholders.

Shareholder Inquiries. All inquiries regarding the Fund should be
directed to the Fund at the telephone numbers or address set forth on the front
cover of this Prospectus.

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<PAGE>

TCW/DW NORTH AMERICAN
GOVERNMENT INCOME TRUST
Two World Trade Center
New York, New York 10048

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 I. 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

CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286

TRANSFER AGENT AND
DIVIDEND DISBURSING 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

MANAGER
Morgan Stanley Dean Witter Services Company Inc.

ADVISER
TCW Funds Management, Inc.