<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST Two World Trade Center,
LETTER TO THE SHAREHOLDERS April 30, 1998 New York, New York 10048
DEAR SHAREHOLDER:
During the past six months U.S. economic growth remained robust, while
inflationary pressure was virtually nonexistent. Interest rates declined
across most points on the yield curve, with the largest declines observed in
the intermediate-to longer-term maturities. So far the much anticipated and
widely debated effects of the Asian financial crisis on the U.S. economy have
been mild. Based on this uncertainty, few investors expected the Federal
Reserve Board to raise interest rates during the last six months, and they
were not disappointed. A decline in market volatility over the past few
months kept bonds trading within a fairly tight range, bolstering the
performance of mortgage-backed securities.
In Mexico, however, the financial markets did experience substantial
volatility, as a result of both the situation in Asia and a decline in oil
prices earlier this year. The Mexican government took a proactive stance
regarding the oil price situation and promptly cut back on fiscal
expenditures in an effort to relieve pressure. As a result, the peso
stabilized and interest rates fell. Despite this earlier volatility, recent
concerns about the ramifications of the Asian financial crisis have lessened
and market conditions in Mexico have improved.
The Canadian government remains committed to reducing its deficit, and its
economy continues to improve. The separatist issue in Quebec has taken a back
seat, at least temporarily, since the last election. Nonetheless, TCW/DW
North American Government Income Trust's investment adviser, TCW Funds
Management (TCW), remains concerned about currency risks in Canada and has
thus refrained from making investments in this market.
PERFORMANCE
For the six-month period ended April 30, 1998, TCW/DW North American
Government Income Trust's net asset value decreased slightly, from $8.59 per
share to $8.57 per share. Based on this change, and including reinvestment of
dividends totaling $0.22 per share, the Fund's total return for the period
was 2.37 percent. For the year ended April 30, 1998, the
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
LETTER TO THE SHAREHOLDERS April 30, 1998 continued
Fund was ranked #1 out of 27 short world multi-market income funds, as
measured by Lipper Analytical Services, Inc. For the three and five years
ended April 30, the Fund was ranked #9 out of 23 funds and #13 out of 18
funds, respectively, according to Lipper. Rankings are based on total returns
and assume reinvestment of dividends and capital gains, but exclude sales
charges.
INVESTMENT SECTORS
As of April 30, 1998, approximately 92 percent of the Fund's portfolio
remained invested in the United States. TCW continues to emphasize
high-quality mortgage-backed securities, including various types of AAA-rated
collateralized mortgage obligations (CMOs), pass-through securities and
adjustable rate mortgages (ARMs) that generally have yields in excess of U.S.
Treasury securities.
Declining interest rates in the United States fueled a surge in mortgage
refinancing activity, causing a dramatic rise in prepayments. However, demand
for mortgage-backed products has been strong, tempering price declines. In
TCW's view, many sectors of the mortgage-backed market look attractive on a
yield basis when compared to other fixed-income sectors of comparable quality
and maturity. The issuance of new CMOs has risen substantially since last
year with the increasing involvement of government agencies as investors in
this sector.
MEXICO AND CANADA
Over the past six months, stabilizing trends in the political and economic
environment have improved the investment outlook for Mexico. During periods
of temporary weakness in the market the Fund was able to purchase Mexican
securities at attractive levels. As of April 30, 1998, slightly more than 8
percent of the portfolio was invested in Mexican cetes, which are
peso-denominated Treasury bills guaranteed by the Mexican government, with
yields of approximately 20 percent. As mentioned earlier, the Fund has
remained on the sidelines with respect to investing in Canada, but TCW
continues to monitor this market for attractive investment opportunities.
LOOKING AHEAD
TCW continues to maintain a positive outlook on the financial markets in
general and the U.S. economy in particular. The Fund's emphasis on
mortgage-backed securities is based on this sector's ongoing yield advantage
and relative value. TCW's investment strategy with respect to mortgage-backed
securities focuses on call protection and working to mitigate the potentially
negative effects of rapid prepayments. The positive technical trends such as
strong demand, limited supply and high liquidity that have bolstered
2
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
LETTER TO THE SHAREHOLDERS April 30, 1998 continued
the mortgage-backed sector recently remain in place today. In TCW's view,
mortgage-backed yields are attractive on a relative value basis and, in
response, the market continues to innovate new products quickly to meet
investor demand.
Analysts expect economic and political conditions to continue to improve in
Mexico, with temporary periods of increased market volatility. Hedging costs
and interest-rate risks have reduced the relative attractiveness of the
Canadian sector. As always, TCW will evaluate these factors when weighing any
decision to invest in non-U.S.-dollar-denominated securities.
We appreciate your ongoing support of TCW/DW North American Government Income
Trust and look forward to continuing to serve your investment needs.
Very truly yours,
/s/ Charles A. Fiumefreddo
CHARLES A. FIUMEFREDDO
Chairman of the Board
3
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
PORTFOLIO OF INVESTMENTS April 30, 1998 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (43.2%)
$6,553 Federal Home Loan Mortgage Corp. ARM ............................ 7.82 % 08/01/23 $6,756,662
4,691 Federal Home Loan Mortgage Corp. ARM ............................ 7.912 03/01/25 4,829,332
2,924 Federal Home Loan Mortgage Corp. PC GOLD ........................ 6.00 12/01/00 2,904,521
1,090 Federal National Mortgage Assoc. ................................ 9.50 06/01/20 1,150,154
34,947 Government National Mortgage Assoc. II ARM ...................... 7.00 08/20/22-
12/20/24 35,782,676
24,041 Government National Mortgage Assoc. II ARM ...................... 7.375 06/20/22-
06/20/25 24,613,510
-------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES
(Identified Cost $74,751,349) .......................................................... 76,036,855
-------------
COLLATERALIZED MORTGAGE OBLIGATIONS (41.4%)
U.S. GOVERNMENT AGENCIES (32.9%)
19 Federal Home Loan Mortgage Corp. 1370 K (PAC I/O) ............... 1,089.16 09/15/22 506,473
3,255 Federal Home Loan Mortgage Corp. 1504 A (PAC) .................. 7.00 07/15/22 3,293,006
2,257 Federal Home Loan Mortgage Corp. 1508 Q ........................ 7.50 + 05/15/23 2,251,503
10,732 Federal Home Loan Mortgage Corp. 1560 A (PAC) .................. 6.50 02/15/23 10,417,178
19,366 Federal Home Loan Mortgage Corp. G 21 P ......................... 6.50 10/25/23 19,117,080
3,893 Federal National Mortgage Assoc. 1993-163 A ..................... 7.00 03/25/23 3,925,789
9,017 Federal National Mortgage Assoc. 1993-165 SE .................... 7.455+ 09/25/23 7,939,381
10,840 Federal National Mortgage Assoc. 1993-167 M (PAC) ............... 6.00 09/25/23 10,530,176
-------------
TOTAL U.S. GOVERNMENT AGENCIES (Identified Cost $59,454,693) ........................... 57,980,586
-------------
PRIVATE ISSUES (8.5%)
649 Citicorp Mortgage Securities, Inc. 1991-1 A ..................... 8.50 03/25/06 634,026
12,232 CountryWide Funding Corp. 1993-7 AS3 (TAC) ...................... 8.221+ 11/25/23 9,357,650
2,581 General Electric Capital Mortgage Services, Inc. 1992-11 M ..... 8.00 09/25/22 2,619,467
2,326 Resolution Trust Corp. 1991-6 C1 ............................... 9.00 09/25/28 2,342,014
-------------
TOTAL PRIVATE ISSUES (Identified Cost $18,510,288) ..................................... 14,953,157
-------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Identified Cost $77,964,981) ................ 72,933,743
-------------
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
PORTFOLIO OF INVESTMENTS April 30, 1998 (unaudited) continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS (14.9%)
MEXICAN GOVERNMENT SECURITIES (a) (8.5%)
MXN 14,013 Cetes (Amortized Cost $14,916,932) ............................. 17.01- 07/23/98-
18.61 % 03/11/99 $14,973,211
-------------
U.S. GOVERNMENT AGENCY (a) (2.9%)
$5,000 Federal National Mortgage Assoc. (Amortized Cost $4,991,000) ... 5.40 05/13/98 4,991,000
-------------
REPURCHASE AGREEMENT (3.5%)
6,137 The Bank of New York (dated 04/30/98; proceeds $6,137,713) (b)
(Identified Cost $6,136,775) ................................... 5.50 05/01/98 6,136,775
-------------
TOTAL SHORT-TERM INVESTMENTS (Identified Cost $26,044,707) ............................ 26,100,986
-------------
TOTAL INVESTMENTS (Identified Cost $178,761,037)(c) ...................... 99.5% 175,071,584
OTHER ASSETS IN EXCESS OF LIABILITIES ..................................... 0.5 927,508
----- -------------
NET ASSETS ................................................................ 100.0% $175,999,092
===== =============
</TABLE>
- ------------
ARM Adjustable rate mortgage.
I/O Interest-only securities.
PAC Planned Amortization Class.
PC Participation Certificate.
TAC Targeted Amortization Class.
+ Inverse floater: interest rate moves inversely to a designated
index, such as LIBOR (London Inter-Bank Offered Rate) or COFI (Cost
of Funds Index), typically at a multiple of the changes of the
relevant index rate.
(a) Securities were purchased on a discount basis. The interest rates
shown have been adjusted to reflect a money market equivalent
yield.
(b) Collateralized by $3,763,146 Government National Mortgage Assoc.
8.00% due 09/15/26 valued at $3,110,496 and by $2,294,299 U.S.
Treasury Note 9.125% due 05/15/99 valued at $3,149,014.
(c) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$2,087,809 and the aggregate gross unrealized depreciation is
$5,777,262, resulting in net unrealized
depreciation of $3,689,453.
Currency Abbreviation:
- ----------------------
MXN Mexican Peso
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
April 30, 1998 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $178,761,037).................. $ 175,071,584
Receivable for:
Interest....................................... 884,244
Principal paydowns............................. 524,128
Shares of beneficial interest sold ............ 8,734
Prepaid expenses................................. 50,536
---------------
TOTAL ASSETS .................................. 176,539,226
---------------
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased ..... 191,239
Plan of distribution fee....................... 111,133
Dividends to shareholders...................... 74,506
Management fee ................................ 57,789
Investment advisory fee ....................... 38,526
Accrued expenses ................................ 66,941
Contingencies (Note 10).......................... --
---------------
TOTAL LIABILITIES ............................. 540,134
---------------
NET ASSETS .................................... $ 175,999,092
===============
COMPOSITION OF NET ASSETS:
Paid-in-capital.................................. $ 409,826,468
Net unrealized depreciation ..................... (3,689,453)
Accumulated undistributed net investment income . 423,474
Accumulated net realized loss ................... (230,561,397)
---------------
NET ASSETS .................................... $ 175,999,092
===============
NET ASSET VALUE PER SHARE,
20,543,847 shares outstanding
(unlimited shares authorized of $.01 par value) $ 8.57
===============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
FINANCIAL STATEMENTS, continued
Statement of Operations
For the six months ended April 30, 1998 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ....................... $6,582,365
------------
EXPENSES
Plan of distribution fee............... 682,606
Management fee ........................ 376,108
Investment advisory fee ............... 250,739
Transfer agent fees and expenses ...... 172,056
Professional fees ..................... 48,981
Shareholder reports and notices ...... 23,931
Registration fees ..................... 16,461
Trustees' fees and expenses ........... 16,235
Other ................................. 13,823
------------
TOTAL EXPENSES ...................... 1,600,940
------------
NET INVESTMENT INCOME ............... 4,981,425
------------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss ..................... (66,899)
Net change in unrealized depreciation (564,132)
------------
NET LOSS ............................ (631,031)
------------
NET INCREASE .......................... $4,350,394
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
FINANCIAL STATEMENTS, continued
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
APRIL 30, 1998 OCTOBER 31, 1997
-------------- ----------------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................. $ 4,981,425 $ 13,981,737
Net realized loss ..................................... (66,899) (2,132,540)
Net change in unrealized depreciation ................. (564,132) 6,751,649
-------------- ----------------
NET INCREASE ........................................ 4,350,394 18,600,846
Dividends from net investment income................... (4,949,144) (13,827,194)
Net decrease from transactions in shares of beneficial
interest.............................................. (35,441,893) (143,263,528)
-------------- ----------------
NET DECREASE ........................................ (36,040,643) (138,489,876)
NET ASSETS:
Beginning of period.................................... 212,039,735 350,529,611
-------------- ----------------
END OF PERIOD
(Including undistributed net investment income of
$423,474 and $391,193, respectively) ................ $175,999,092 $ 212,039,735
============== ================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1998 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
TCW/DW North American Government Income Trust (the "Fund") is registered
under the Investment Company Act of 1940, as amended (the "Act"), as a
non-diversified, open-end management investment company. The Fund's
investment objective is to earn a high level of income while maintaining
relatively low volatility of principal. The Fund was organized as a
Massachusetts business trust on February 19, 1992 and commenced operations on
July 31, 1992.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest available bid price prior to the time of valuation; (2) when market
quotations are not readily available, including circumstances under which it
is determined by TCW Funds Management, Inc. (the "Adviser") that sale or bid
prices are not reflective of a security's market value, portfolio securities
are valued at their fair value as determined in good faith under procedures
established by and under the general supervision of the Trustees (valuation
of debt securities for which market quotations are not readily available may
be based upon current market prices of securities which are comparable in
coupon, rating and maturity or an appropriate matrix utilizing similar
factors); and (3) short-term debt securities having a maturity date of more
than sixty days at time of purchase are valued on a mark-to-market basis
until sixty days prior to maturity and thereafter at amortized cost based on
their value on the 61st day. Short-term debt securities having a maturity
date of sixty days or less at the time of purchase are valued at amortized
cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). Realized gains
and losses on security transactions are determined by the identified cost
method. The Fund amortizes premiums and accretes discounts based on the
respective life of the securities. Interest income is accrued daily.
C. FOREIGN CURRENCY TRANSLATION -- The books and records of the Fund are
maintained in U.S. dollars as follows: (1) the foreign currency market value
of investment securities, other assets and liabilities and forward foreign
currency contracts are translated at the exchange rates prevailing at the end
of the period; and (2) purchases, sales, income and expenses are translated
at the exchange rates prevailing on the respective dates of such
transactions. The resultant exchange gains and losses are included in the
9
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1998 (unaudited) continued
Statement of Operations as realized and unrealized gain/loss on foreign
exchange transactions. Pursuant to U.S. Federal income tax regulations,
certain foreign exchange gains/losses included in realized and unrealized
gain/loss are included in or are a reduction of ordinary income for federal
income tax purposes. The Fund does not isolate that portion of the results of
operations arising as a result of changes in the foreign exchange rates from
the changes in the market prices of the securities.
D. FORWARD FOREIGN CURRENCY CONTRACTS -- The Fund may enter into forward
foreign currency contracts which are valued daily at the appropriate exchange
rates. The resultant unrealized exchange gains and losses are included in the
Statement of Operations as unrealized foreign currency gain or loss. The Fund
records realized gains or losses on delivery of the currency or at the time
the forward contract is extinguished (compensated) by entering into a closing
transaction prior to delivery.
E. DOLLAR ROLLS -- The Fund may enter into dollar rolls in which the Fund
sells securities for delivery and simultaneously contracts to repurchase
substantially similar securities at the current sales price on a specified
future date. The difference between the current sales price and the lower
forward price for the future purchase (often referred to as the "drop") is
amortized over the life of the dollar roll.
F. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
G. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends
and distributions which exceed net investment income and net realized capital
gains for financial reporting purposes but not for tax purposes are reported
as dividends in excess of net investment income or distributions in excess of
net realized capital gains. To the extent they exceed net investment income
and net realized capital gains for tax purposes, they are reported as
distributions of paid-in-capital.
10
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1998 (unaudited) continued
2. MANAGEMENT AGREEMENT
Pursuant to a Management Agreement, the Fund pays the Manager a management
fee, accrued daily and payable monthly, by applying the following annual
rates to the net assets of the Fund determined as of the close of each
business day: 0.39% to the portion of daily net assets not exceeding $3
billion and 0.36% to the portion of daily net assets exceeding $3 billion.
Under the terms of the Agreement, the Manager maintains certain of the Fund's
books and records and furnishes, at its own expense, office space,
facilities, equipment, clerical, bookkeeping and certain legal services and
pays the salaries of all personnel, including officers of the Fund who are
employees of the Manager. The Manager also bears the cost of telephone
services, heat, light, power and other utilities provided to the Fund.
3. INVESTMENT ADVISORY AGREEMENT
Pursuant to an Investment Advisory Agreement with the Adviser, the Fund pays
an advisory fee, calculated daily and payable monthly, by applying the
following annual rates to the net assets of the Fund determined as of the
close of each business day: 0.26% to the portion of average daily net assets
not exceeding $3 billion and 0.24% to the portion of average daily net assets
exceeding $3 billion.
Under the terms of the Agreement, the Fund has retained the Adviser to invest
the Fund's assets, including placing orders for the purchase and sale of
portfolio securities. The Adviser obtains and evaluates such information and
advice relating to the economy, securities markets, and specific securities
as it considers necessary or useful to continuously manage the assets of the
Fund in a manner consistent with its investment objective. In addition, the
Adviser pays the salaries of all personnel, including officers of the Fund,
who are employees of the Adviser.
4. PLAN OF DISTRIBUTION
Dean Witter Distributors Inc. (the "Distributor"), an affiliate of the
Manager, is the distributor of the Fund's shares and, in accordance with a
Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act,
finances certain expenses in connection with the distribution of shares of
the Fund.
Under the Plan, the Distributor bears the expense of all promotional and
distribution related activities on behalf of the Fund, except for expenses
that the Trustees determine to reimburse, as described below. The following
activities and services may be provided by the Distributor, Dean Witter
Reynolds Inc. ("DWR"), an affiliate of the Distributor and Investment
Manager, its affiliates or any other selected broker-dealer under the Plan:
(1) compensation to, and expenses of, account executives of DWR and others,
including
11
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1998 (unaudited) continued
overhead and telephone expenses; (2) sales incentives and bonuses to sales
representatives and to marketing personnel in connection with promoting sales
of the Fund's shares; (3) expenses incurred in connection with promoting
sales of the Fund's shares; (4) preparing and distributing sales literature;
and (5) providing advertising and promotional activities, including direct
mail solicitation and television, radio, newspaper, magazine and other media
advertisements.
The Fund is authorized to reimburse the Distributor for specific expenses the
Distributor incurs or plans to incur in promoting the distribution of the
Fund's shares. The amount of each monthly reimbursement payment may in no
event exceed an amount equal to a payment at the annual rate of 0.75% of the
Fund's average daily net assets during the month. Expenses incurred pursuant
to the Plan in any fiscal year in excess of 0.75% of the Fund's average daily
net assets will not be reimbursed by the Fund through payments accrued in any
subsequent fiscal year. For the six months ended April 30, 1998, the
distribution fee was accrued at the annual rate of 0.71%.
5. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The proceeds from sales/prepayments of portfolio securities, excluding
short-term investments, for the six months ended April 30, 1998 were as
follows:
<TABLE>
<CAPTION>
SALES/
PREPAYMENTS
-------------
<S> <C>
U.S. Government Agencies......... $51,310,466
Private Issue CMOs .............. 929,697
</TABLE>
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Manager and
Distributor, is the Fund's transfer agent. At April 30, 1998, the Fund had
transfer agent fees and expenses payable of approximately $11,000.
6. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
APRIL 30, 1998 OCTOBER 31, 1997
------------------------------ -------------------------------
(UNAUDITED)
SHARES AMOUNT SHARES AMOUNT
------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Sold ...................... 3,736,794 $ 31,979,977 2,792,480 $ 23,503,988
Reinvestment of dividends 426,360 3,637,705 1,223,673 10,240,883
Repurchased ............... (8,298,756) (71,059,575) (21,098,837) (177,008,399)
------------- --------------- -------------- ---------------
Net decrease .............. (4,135,602) $(35,441,893) (17,082,684) $(143,263,528)
============= =============== ============== ===============
</TABLE>
12
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1998 (unaudited) continued
7. FEDERAL INCOME TAX STATUS
At October 31, 1997, the Fund had a net capital loss carryover of
approximately $230,494,000 which may be used to offset future capital gains
to the extent provided by regulations and is available through October 31 of
the following years:
<TABLE>
<CAPTION>
AMOUNT IN THOUSANDS
2002 2003 2004 2005
------------ ---------- --------- ----------
<S> <C> <C> <C>
$53,086 $160,560 $14,716 $2,132
============ ========== ========= ==========
</TABLE>
8. REVERSE REPURCHASE AND DOLLAR ROLL AGREEMENTS
Reverse repurchase and dollar roll agreements involve the risk that the
market value of the securities the Fund is obligated to repurchase under the
agreement may decline below the repurchase price. In the event the buyer of
securities under a reverse repurchase or dollar roll agreement files for
bankruptcy or becomes insolvent, the Fund's use of proceeds of the agreement
may be restricted pending a determination by the other party, its trustee or
receiver, whether to enforce the Fund's obligation to repurchase the
securities.
Reverse repurchase agreements are collateralized by Fund securities with a
market value in excess of the Fund's obligation under the contract.
9. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS
The Fund may enter into forward foreign currency contracts ("forward
contracts") to facilitate settlement of foreign currency denominated
portfolio transactions or to manage foreign currency exposure associated with
foreign currency denominated securities.
Forward contracts involve elements of market risk in excess of the amounts
reflected in the Statement of Assets and Liabilities. The Fund bears the risk
of an unfavorable change in the foreign exchange rates underlying the forward
contracts. Risks may also arise upon entering into these contracts from the
potential inability of the counterparties to meet the terms of their
contracts.
13
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1998 (unaudited) continued
10. LITIGATION
Several class action lawsuits, which have been consolidated for pretrial
purposes, were instituted in 1995 in the United States District Court, in New
York, against the Fund, some of its Trustees and officers, its underwriter
and distributor, the Adviser, the Manager, and other defendants, by certain
shareholders of the Fund. The consolidated amended complaint asserts claims
under the Securities Act of 1933 and generally alleges that the defendants
made inadequate and misleading disclosures in the prospectuses for the Fund,
in particular as such disclosures relate to the nature and risks of the
Fund's investments in mortgage-backed securities and Mexican securities. The
plaintiffs also challenge certain fees paid by the Fund as excessive. Damages
are sought in an unspecified amount. All defendants moved to dismiss the
consolidated amended complaint, and on May 8, 1996 the motions to dismiss
were denied. The defendants moved for reargument, and on August 28, 1996, the
Court issued a second opinion which granted the motion to dismiss in part. On
December 4, 1996 the defendants filed a renewed motion to dismiss, which was
denied by the Court on November 20, 1997. The Court has also certified a
plaintiff class pursuant to the Federal Rules of Civil Procedure. The
ultimate outcome of these matters is not presently determinable, and no
provision has been made in the Fund's financial statements for the effect, if
any, of such matters.
14
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
Financial Highlights
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR ENDED OCTOBER 31
MONTHS ENDED -----------------------------------------------
APRIL 30, 1998 1997 1996 1995 1994 1993
- ---------------------------------------- -------------- -------- -------- -------- --------- ---------
(UNAUDITED)
<S> <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
-------------- -------- -------- -------- --------- --------
Net investment income.................... 0.22 0.44 0.47 0.69 0.68 0.77
Net realized and unrealized gain (loss) (0.02) 0.19 0.04 (0.59) (1.18) 0.14
-------------- -------- -------- -------- --------- --------
Total from investment operations ....... 0.20 0.63 0.51 0.10 (0.50) 0.91
-------------- -------- -------- -------- --------- --------
Less dividends and distributions from:
Net investment income................... (0.22) (0.43) (0.45) -- (0.47) (0.76)
Net realized gain....................... -- -- -- -- (0.02) --
Paid-in-capital......................... -- -- -- (0.66) (0.23) --
-------------- -------- -------- -------- --------- --------
Total dividends and distributions ....... (0.22) (0.43) (0.45) (0.66) (0.72) (0.76)
-------------- -------- -------- -------- --------- --------
Net asset value, end of period........... $ 8.57 $ 8.59 $ 8.39 $ 8.33 $ 8.89 $10.11
============== ======== ======== ======== ========= ========
TOTAL INVESTMENT RETURN+................. 2.37%(1) 7.80% 6.38% 1.61% (5.06)% 9.35%
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................ 1.66%(2) 1.65% 1.64% 1.59% 1.52 % 1.54%
Net investment income.................... 5.17%(2) 5.18% 5.71% 8.28% 6.85 % 7.78%
SUPPLEMENTAL DATA:
Net assets, end of period, in millions . $176 $212 $351 $658 $1,360 $2,986
Portfolio turnover rate.................. -- -- 13% 44% 27 % 77%
</TABLE>
- ------------
+ Calculated based on the net asset value as of the last business day of
the period.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE>
TRUSTEES
John C. Argue
Richard M. DeMartini
Charles A. Fiumefreddo
John R. Haire
Dr. Manuel H. Johnson
Thomas E. Larkin, Jr.
Michael E. Nugent
John L. Schroeder
Marc L. Stern
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Thomas E. Larkin, Jr.
President
Barry Fink
Vice President, Secretary and
General Counsel
Philip A. Barach
Vice President
James M. Goldberg
Vice President
Jeffrey E. Gundlach
Vice President
Frederick H. Horton
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
MANAGER
Dean Witter Services Company Inc.
ADVISER
TCW Funds Management, Inc.
The financial statements included herein have been taken from the records
of the Fund without examination by the independent accountants and
accordingly they do not express an opinion thereon.
This report is submitted for the general information of shareholders
of the Fund. For more detailed information about the Fund, its officers
and trustees, fees, expenses and other pertinent information, please see
the prospectus of the Fund.
This report is not authorized for distribution to prospective investors
in the Fund unless preceded or accompanied by an effective prospectus.
TCW/DW
NORTH AMERICAN
GOVERNMENT
INCOME TRUST
SEMIANNUAL REPORT
APRIL 30, 1998
