<PAGE>
MORGAN STANLEY DEAN WITTER NORTH AMERICAN Two World Trade Center,
GOVERNMENT INCOME TRUST New York, New York 10048
LETTER TO THE SHAREHOLDERS October 31, 2000
DEAR SHAREHOLDERS:
Short-term yields rose at the beginning of the year as reports of economic
strength led many investors to anticipate further rate hikes by the Federal
Reserve Board. Simultaneously, yields at the long end of the yield curve fell
on speculation of a supply shortage resulting from the federal budget surplus.
These opposing trends caused the yield curve in mid January to become inverted
(a situation in which yields on short-term securities are higher than those for
longer-term issues). The long-awaited evidence of slowing economic growth
finally emerged in June, boosting returns in most sectors of the U.S. bond
market. The bond market rallied for much of the summer on evidence of
moderating economic growth and benign inflation reports. Rising oil prices and
a heavy new-issue calendar in the corporate sector soon caused yields at the
intermediate to long end of the curve to move higher in late August. By mid
September, the yield on the 30-year Treasury had risen to 5.95 percent,
resulting in its worst performance period all year. But declines in the stock
market and tension in the Middle East brought yields on 10- and 30-year
benchmark Treasuries back down to 5.75 percent and 5.79 percent, respectively,
by October 31.
Mortgage spreads to Treasuries widened to historic levels in the second quarter
of 2000 as the government debated its support of the Federal Home Loan Mortgage
Corporation (FHLMC) and Federal National Mortgage Association (FNMA). These
issues produced unusual performance differentials between Government National
Mortgage Association (GNMA), FHLMC and FNMA securities. Recently, the political
risk associated with these Government Sponsored Enterprises declined with the
announcement that both FNMA and FHLMC are voluntarily providing greater
transparency and improving their risk profiles. These low-cost concessions are
expected to promote further tightening in both agency and mortgage spreads.
<PAGE>
MORGAN STANLEY DEAN WITTER NORTH AMERICAN GOVERNMENT INCOME TRUST
LETTER TO THE SHAREHOLDERS October 31, 2000, continued
PERFORMANCE AND PORTFOLIO STRATEGY
For the 12 months ended October 31, 2000, Morgan Stanley Dean Witter North
American Government Income Trust posted a total return of 5.55 percent,
compared to 6.34 percent for the Lehman Brothers U.S. Government (1-5 year)
Index.
As of October 31, 2000, 100 percent of the Fund's portfolio was invested in the
United States. TCW Investment Management Company (TCW), the Fund's sub-advisor,
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). The Fund is
currently on the sidelines with respect to investing in both the Mexican and
Canadian markets. TCW continues to monitor these markets for attractive
investment opportunities relative to those in the United States.
LOOKING AHEAD
TCW's outlook for the mortgage sector is favorable. According to the Fund's
sub-advisor, this asset class has far less exposure to economic slowdowns than
the credit sectors, because of U.S. government or agency guarantees. TCW
believes that other variables affecting mortgages on both a fundamental and
technical basis are positive. First, supply is decreasing, thanks to a slowing
housing market and an increase in consumers' preference for adjustable as
opposed to fixed-rate mortgage loans. Interest-rate volatility has also
declined, because the Fed appears to be on hold for the time being. TCW
anticipates that more money will flow into mortgage-backed securities in the
months ahead as managers attempt to minimize credit risk and avoid low Treasury
yields. These factors all promote a positive investment environment.
We appreciate your ongoing support of Morgan Stanley Dean Witter North American
Government Income Trust and look forward to continuing to serve your investment
needs.
Very truly yours,
/s/ Charles A. Fiumefreddo /s/ Mitchell M. Merin
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
2
<PAGE>
MORGAN STANLEY DEAN WITTER NORTH AMERICAN GOVERNMENT INCOME TRUST
FUND PERFORMANCE October 31, 2000
GROWTH OF $10,000
Date Total Lehman
=======================================================
July 31, 1992 $10,000 $10,000
=======================================================
October 31, 1992 $10,128 $10,120
=======================================================
January 31, 1993 $10,455 $10,357
=======================================================
April 30, 1993 $10,734 $10,594
=======================================================
July 31, 1993 $10,977 $10,691
=======================================================
October 31, 1993 $11,075 $10,879
=======================================================
January 31, 1994 $11,272 $10,989
=======================================================
April 30, 1994 $10,694 $10,711
=======================================================
July 31, 1994 $10,727 $10,856
=======================================================
October 31, 1994 $10,515 $10,846
=======================================================
January 31, 1995 $9,478 $10,979
=======================================================
April 30, 1995 $9,962 $11,343
=======================================================
July 31, 1995 $10,356 $11,697
=======================================================
October 31, 1995 $10,684 $11,957
=======================================================
January 31, 1996 $11,043 $12,294
=======================================================
April 30, 1996 $10,616 $12,164
=======================================================
July 31, 1996 $10,969 $12,322
=======================================================
October 31, 1996 $11,366 $12,658
=======================================================
January 31, 1997 $11,418 $12,803
=======================================================
April 30, 1997 $11,535 $12,911
=======================================================
July 31, 1997 $12,075 $13,293
=======================================================
October 31, 1997 $12,253 $13,524
=======================================================
January 31, 1998 $12,420 $13,808
=======================================================
April 30, 1998 $12,543 $13,919
=======================================================
July 31, 1998 $12,845 $14,143
=======================================================
October 31, 1998 $12,881 $14,679
=======================================================
January 31, 1999 $13,180 $14,759
=======================================================
April 30, 1999 $13,326 $14,779
=======================================================
July 31, 1999 $13,364 $14,796
=======================================================
October 31, 1999 $13,435 $14,978
=======================================================
January 31, 2000 $13,452 $14,954
=======================================================
April 30, 2000 $13,644 $15,206
=======================================================
July 31, 2000 $13,887 $15,557
=======================================================
October 31, 2000 $14,182 (2) $15,929
=======================================================
Past performance is not predictive of future returns. Investment return and
principal value will fluctuate. When you sell fund shares, they may be worth
less than their original cost.
Average Annual Total Returns
<TABLE>
<CAPTION>
Period Ended 10/31/00
---------------------
<S> <C>
1 Year 5.55%(1)
5 Years 5.83%(1)
Since Inception (7/31/92) 4.32%(1)
</TABLE>
---------------
(1) Figure shown assumes reinvestment of all distributions. There is no sales
charge.
(2) Closing value assuming a complete redemption on October 31, 2000.
(3) The Lehman Brothers U.S. Government Index (1-5 Year) measures the
performance of all U.S. government agency and Treasury securities with
maturities of one to five years. The Index does not include any expenses,
fees or charges. The Index is unmanaged and should not be considered an
investment.
3
<PAGE>
MORGAN STANLEY DEAN WITTER NORTH AMERICAN GOVERNMENT INCOME TRUST
PORTFOLIO OF INVESTMENTS October 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U. S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (64.7%)
$ 2,097 Federal Home Loan Mortgage Corp. ARM ................................. 8.219% 03/01/25 $ 2,139,582
7,196 Federal National Mortgage Assoc. ..................................... 7.00 01/01/04 7,200,207
488 Federal National Mortgage Assoc. ..................................... 9.50 06/01/20 488,204
13,994 Government National Mortgage Assoc. II ARM ........................... 5.50 08/20/29 13,945,774
7,915 Government National Mortgage Assoc. II ARM ........................... 6.00 07/20/29-
09/20/29 7,916,945
12,271 Government National Mortgage Assoc. II ARM ........................... 6.75 08/20/22 12,372,647
3,336 Government National Mortgage Assoc. II ARM ........................... 7.125 10/20/24-
12/20/24 3,361,957
11,810 Government National Mortgage Assoc. II ARM ........................... 7.375 06/20/22-
06/20/25 11,880,606
-----------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (Cost $59,043,838) ................... 59,305,922
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS (27.7%)
U.S. GOVERNMENT AGENCIES (25.8%)
6 Federal Home Loan Mortgage Corp. 1370 K (PAC I/O) .................... 1,089.16 09/15/22 183,793
4,285 Federal Home Loan Mortgage Corp. 2061 CD ............................. 7.50 02/15/27 4,318,938
10,449 Federal Home Loan Mortgage Corp. G 21 M .............................. 6.50 10/25/23 9,981,104
501 Federal National Mortgage Assoc. 1993-163 A .......................... 7.00 03/25/23 491,670
3,734 Federal National Mortgage Assoc. 1993-167 M (PAC) .................... 6.00 09/25/23 3,683,432
5,000 Federal National Mortgage Assoc. G96-1 PJ (PAC) ...................... 7.50 11/17/25 4,971,850
-----------
TOTAL U.S. GOVERNMENT AGENCIES (Cost $24,340,600) ............................................ 23,630,787
-----------
PRIVATE ISSUES (1.9%)
614 Residential Funding Mortgage Security I, 1997-S12 A10 (PAC) .......... 6.70 08/25/27 610,952
1,168 Resolution Trust Corp. 1991-6 C1 ..................................... 9.00 09/25/28 1,168,308
-----------
TOTAL PRIVATE ISSUES (Cost $1,860,269)........................................................ 1,779,260
-----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $26,200,869).................................. 25,410,047
-----------
SHORT-TERM INVESTMENTS (8.1%)
U.S. GOVERNMENT AGENCY (a) (3.2%)
3,000 Federal Home Loan Banks (Cost $2,991,440)............................. 6.42 11/17/00 2,991,440
-----------
REPURCHASE AGREEMENT (4.9%)
4,508 The Bank of New York (dated 10/31/00; proceeds $4,508,307) (b)
(Cost $4,507,501)................................................... 6.44 11/01/00 4,507,501
-----------
TOTAL SHORT-TERM INVESTMENTS (Cost $7,498,941) ............................................... 7,498,941
-----------
</TABLE>
See Notes to Financial Statements
4
<PAGE>
Morgan Stanley Dean Witter North American Government Income Trust
Portfolio of Investments October 31, 2000, continued
<TABLE>
<CAPTION>
VALUE
------------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL INVESTMENTS (Cost $92,743,648) (c)... 100.5% $92,214,910
LIABILITIES IN EXCESS OF OTHER ASSETS ..... (0.5) (519,426)
----- -----------
NET ASSETS ................................ 100.0% $91,695,484
===== ===========
</TABLE>
---------------
ARM Adjustable Rate Mortgage.
I/O Interest-only securities.
PAC Planned Amortization Class.
(a) Purchased on a discount basis. The interest rate shown has been adjusted
to reflect a money market equivalent yield.
(b) Collateralized by $4,511,661 U.S. Treasury Note 6.25% due 07/31/02
valued at $4,597,662.
(c) The aggregate cost for federal income tax purposes approximates the
aggregate cost for book purposes. The aggregate gross unrealized
appreciation is $518,000 and the aggregate gross unrealized depreciation
is $1,046,738, resulting in net unrealized depreciation of $528,738.
See Notes to Financial Statements
5
<PAGE>
MORGAN STANLEY DEAN WITTER NORTH AMERICAN GOVERNMENT INCOME TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2000
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments in securities, at value
(cost $92,743,648) .............................. $ 92,214,910
Receivable for:
Interest ...................................... 494,547
Shares of beneficial interest sold ............ 570
Principal paydowns ............................ 16,002
Prepaid expenses ................................... 20,787
--------------
TOTAL ASSETS .................................. 92,746,816
--------------
LIABILITIES:
Payable for:
Plan of distribution fee ...................... 64,330
Investment management fee ..................... 55,753
Shares of beneficial interest repurchased ..... 883,703
Accrued expenses ................................... 47,546
--------------
TOTAL LIABILITIES ............................. 1,051,332
--------------
NET ASSETS ......................................... $ 91,695,484
==============
COMPOSITION OF NET ASSETS:
Paid-in-capital .................................... $ 323,924,264
Net unrealized depreciation ........................ (528,738)
Accumulated undistributed net investment
income .......................................... 504,364
Accumulated net realized loss ...................... (232,204,406)
--------------
NET ASSETS .................................... $ 91,695,484
==============
NET ASSET VALUE PER SHARE,
10,657,615 shares outstanding (unlimited
shares authorized of $.01 par value) ............ $8.60
=====
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 2000
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ............................... $6,689,529
----------
EXPENSES
Plan of distribution fee ...................... 781,848
Investment management fee ..................... 685,082
Transfer agent fees and expenses .............. 176,400
Professional fees ............................. 143,719
Shareholder reports and notices ............... 24,639
Registration fees ............................. 20,805
Trustees' fees and expenses ................... 11,817
Custodian fees ................................ 10,854
Other ......................................... 6,794
----------
TOTAL EXPENSES ........................... 1,861,958
----------
Less: expense offset .......................... (10,025)
----------
NET EXPENSES ............................. 1,851,933
----------
NET INVESTMENT INCOME: ........................ 4,837,596
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain ............................. 792,094
Net change in unrealized depreciation ......... (109,419)
----------
NET GAIN ................................. 682,675
----------
NET INCREASE .................................. $5,520,271
==========
</TABLE>
See Notes to Financial Statements
6
<PAGE>
MORGAN STANLEY DEAN WITTER NORTH AMERICAN GOVERNMENT INCOME TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 2000 OCTOBER 31, 1999
-----------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................... $ 4,837,596 $ 7,068,155
Net realized gain (loss) ................................ 792,094 (3,955,389)
Net change in unrealized depreciation ................... (109,419) 2,776,303
------------ ------------
NET INCREASE ......................................... 5,520,271 5,889,069
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ................................... (4,457,000) (6,221,679)
Paid-in-capital ......................................... -- (1,056,747)
------------ ------------
TOTAL DIVIDENDS AND DISTRIBUTIONS .................... (4,457,000) (7,278,426)
------------ ------------
Net decrease from transactions in shares of beneficial
interest .............................................. (29,670,526) (28,748,862)
------------ ------------
NET DECREASE ......................................... (28,607,255) (30,138,219)
NET ASSETS:
Beginning of period ..................................... 120,302,739 150,440,958
------------ ------------
END OF PERIOD
(Including undistributed net investment income of
$504,364 and $0, respectively) ....................... $ 91,695,484 $120,302,739
============ ============
</TABLE>
See Notes to Financial Statements
7
<PAGE>
MORGAN STANLEY DEAN WITTER NORTH AMERICAN GOVERNMENT INCOME TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 2000
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter 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 Morgan Stanley Dean Witter Advisors Inc. (the "Investment
Manager") or TCW Investment Management Company (the "Sub-Advisor") 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 ("forward contracts") are translated at the exchange rates
prevailing at the end of the period; and (2) purchases, sales, income and
expenses are translated at the exchange rates
8
<PAGE>
MORGAN STANLEY DEAN WITTER NORTH AMERICAN GOVERNMENT INCOME TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 2000, continued
prevailing on the respective dates of such transactions. The resultant exchange
gains and losses are included in the Statement of Operations as realized and
unrealized gain/loss on foreign exchange transactions. Pursuant to U.S. Federal
income tax regulations, certain foreign exchange gains/losses included in
realized and unrealized gain/loss are included in or are a reduction of
ordinary income for federal income tax purposes. The Fund does not isolate that
portion of the results of operations arising as a result of changes in the
foreign exchange rates from the changes in the market prices of the securities.
D. FORWARD FOREIGN CURRENCY CONTRACTS - The Fund may enter into forward
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 tax purposes are reported as distributions of paid-in-capital.
2. INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS
Pursuant to an Investment Management Agreement with the Investment Manager, the
Fund pays the Investment Manager a management fee, accrued daily and payable
monthly, by applying the following
9
<PAGE>
MORGAN STANLEY DEAN WITTER NORTH AMERICAN GOVERNMENT INCOME TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 2000, continued
annual rate to the net assets of the Fund determined as of the close of each
business day: 0.65% to the portion of the daily net assets not exceeding $500
million and 0.60% to the portion of the daily net assets exceeding $500
million.
Under a Sub-Advisory Agreement between the Investment Manager and the
Sub-Advisor, the Sub-Advisor provides the Fund with investment advice and
portfolio management relating to the Fund's investments in securities, subject
to the overall supervision of the Investment Manager. As compensation for its
services provided pursuant to the Sub-Advisory Agreement, the Investment
Manager pays the Sub-Advisor compensation equal to 40% of its monthly
compensation.
3. PLAN OF DISTRIBUTION
Morgan Stanley Dean Witter Distributors Inc. (the "Distributor"), an affiliate
of the Investment 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.
The Fund is authorized to reimburse the Distributor for specific expenses the
Distributor incurs or plans to incur in promoting the distribution of the
Fund's shares. The amount of each monthly reimbursement payment may in no event
exceed an amount equal to a payment at the annual rate of 0.75% of the Fund's
average daily net assets during the month. Expenses incurred pursuant to the
Plan in any fiscal year in excess of 0.75% of the Fund's average daily net
assets will not be reimbursed by the Fund through payments accrued in any
subsequent fiscal year. For the year ended October 31, 2000, the distribution
fee was accrued at the annual rate of 0.74%.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The proceeds from sales/prepayments of portfolio securities, excluding
short-term investments, for the year ended October 31, 2000 were as follows:
<TABLE>
<CAPTION>
SALES/
PURCHASES PREPAYMENTS
--------- -----------
<S> <C> <C>
U.S. Government Agencies ......... $2,732 $27,695,251
Private Issue CMOs ............... -- 2,626,131
</TABLE>
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager
and Distributor, is the Fund's transfer agent. At October 31, 2000, the Fund
had transfer agent fees and expenses payable of approximately $2,600.
10
<PAGE>
MORGAN STANLEY DEAN WITTER NORTH AMERICAN GOVERNMENT INCOME TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 2000, continued
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 2000 OCTOBER 31, 1999
------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
Sold .............................. 27,659,513 $ 235,059,575 10,687,742 $ 91,592,005
Reinvestment of dividends ......... 390,253 3,309,760 627,075 5,382,544
Repurchased ....................... (31,548,244) (268,039,861) (14,660,742) (125,723,411)
----------- -------------- ----------- --------------
Net decrease ...................... (3,498,478) $ (29,670,526) (3,345,925) $ (28,748,862)
=========== ============== =========== ==============
</TABLE>
6. FEDERAL INCOME TAX STATUS
At October 31, 2000, the Fund had a net capital loss carryover of approximately
$232,204,000 which may be used to offset future capital gains to the extent
provided by regulations, which is available through October 31 of the following
years:
<TABLE>
<CAPTION>
AMOUNTS IN THOUSANDS
------------------------------------------------------------------------------
2002 2003 2004 2005 2006 2007 2008
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
$53,086 $160,560 $14,716 $2,013 $152 $1,657 $20
======= ======== ======= ====== ==== ====== ===
</TABLE>
As of October 31, 2000, the Fund had permanent book/tax differences primarily
attributable to tax adjustments on securities held in the portfolio. To reflect
reclassifications arising from these differences, paid-in-capital was charged
$140,851, accumulated net realized loss was credited $17,083 and accumulated
undistributed net investment income was credited $123,768.
7. 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.
11
<PAGE>
MORGAN STANLEY DEAN WITTER NORTH AMERICAN GOVERNMENT INCOME TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 2000, continued
At October 31, 2000, there were no outstanding reverse repurchase or dollar
roll agreements.
8. EXPENSE OFFSET
The expense offset represents a reduction of the custodian fees for earnings on
cash balances maintained by the Fund.
9. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS
The Fund may enter into 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.
At October 31, 2000, there were no outstanding forward contracts.
12
<PAGE>
MORGAN STANLEY DEAN WITTER 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 YEAR ENDED OCTOBER 31
-------------------------------------------------------------------------
2000 1999 1998 1997 1996
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA:
Net asset value, beginning of period ............. $8.50 $8.60 $8.59 $8.39 $8.33
----- ----- ----- ----- -----
Income (loss) from investment operations:
Net investment income ........................... 0.40 0.44 0.49 0.44 0.47
Net realized and unrealized gain (loss) ......... 0.06 (0.09) (0.05) 0.19 0.04
----- ----- ----- ----- -----
Total income from investment operations .......... 0.46 0.35 0.44 0.63 0.51
----- ----- ----- ----- -----
Less dividends and distributions from:
Net investment income ........................... (0.36) (0.38) (0.43) (0.43) (0.45)
Paid-in-capital ................................. -- (0.07) -- -- --
----- ----- ----- ----- -----
Total dividends and distributions ................ (0.36) (0.45) (0.43) (0.43) (0.45)
----- ----- ----- ----- -----
Net asset value, end of period ................... $8.60 $8.50 $8.60 $8.59 $8.39
===== ===== ===== ===== =====
TOTAL RETURN+ .................................... 5.55% 4.30% 5.13% 7.80% 6.38%
RATIOS TO AVERAGE NET ASSETS:
Expenses ......................................... 1.76% (1) 1.81%(1) 1.69%(1) 1.65% 1.64%
Net investment income ............................ 4.58% 5.11% 5.52% 5.18% 5.71%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands .......... $91,695 $120,303 $150,441 $212,040 $350,530
Portfolio turnover rate .......................... -- 43% 8% -- 13%
</TABLE>
-------------
+ Calculated based on the net asset value as of the last business day of the
period.
(1) Does not reflect the effect of expense offset of 0.01%
See Notes to Financial Statements
13
<PAGE>
MORGAN STANLEY DEAN WITTER NORTH AMERICAN GOVERNMENT INCOME TRUST
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
MORGAN STANLEY DEAN WITTER NORTH AMERICAN GOVERNMENT INCOME TRUST:
We have audited the accompanying statement of assets and liabilities of Morgan
Stanley Dean Witter North American Government Income Trust (the "Fund"),
including the portfolio of investments, as of October 31, 2000, and the related
statements of operations and changes in net assets, and the financial
highlights for the year then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit. The statement of changes in net assets for the year ended
October 31, 1999 and the financial highlights for each of the respective stated
periods ended October 31, 1999 were audited by other independent accountants
whose report, dated December 13, 1999, expressed an unqualified opinion on that
statement and financial highlights.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation
of securities owned as of October 31, 2000, by correspondence with the
custodian. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Morgan Stanley Dean Witter North American Government Income Trust as of October
31, 2000, the results of its operations, the changes in its net assets, and the
financial highlights for the year then ended, in conformity with accounting
principles generally accepted in the United States of America.
Deloitte & Touche LLP
New York, New York
December 11, 2000
--------------------------------------------------------------------------------
2000 FEDERAL TAX NOTICE (unaudited)
Of the Fund's ordinary income dividends paid during the fiscal year ended
October 31, 2000, 2.04% was attributable to qualifying Federal obligations.
Please consult your tax advisor to determine if any portion of the dividends you
received is exempt from state income tax.
--------------------------------------------------------------------------------
14
<PAGE>
MORGAN STANLEY DEAN WITTER NORTH AMERICAN GOVERNMENT INCOME TRUST
CHANGE IN INDEPENDENT ACCOUNTANTS
On July 1, 2000, PricewaterhouseCoopers LLP resigned as independent accountants
of the Fund.
The reports of PricewaterhouseCoopers LLP on the financial statements of the
Fund for the past two fiscal years contained no adverse opinion or disclaimer
of opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principal.
In connection with its audits for the two most recent fiscal years and through
July 1, 2000, there have been no disagreements with PricewaterhouseCoopers LLP
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of PricewaterhouseCoopers LLP would have caused them to
make reference thereto in their report on the financial statements for such
years.
The Fund, with the approval of its Board of Trustees and its Audit Committee,
engaged Deloitte & Touche LLP as its new independent auditors as of July 1,
2000.
15
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn MORGAN STANLEY
Wayne E. Hedien DEAN WITTER
James F. Higgins NORTH AMERICAN
Dr. Manuel H. Johnson GOVERNMENT
Michael E. Nugent INCOME TRUST
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Mitchell M. Merin
President
Barry Fink
Vice President, Secretary and General Counsel
Philip A. Barach
Vice President
Jeffrey E. Gundlach
Vice President
[GRAPHIC OMITTED]
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 AUDITORS
Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281
INVESTMENT MANAGER
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
SUB-ADVISOR
TCW Investment Management Company
865 South Figueroa Street, Suite 1800
Los Angeles, CA 90017
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. Read the
prospectus carefully before investing.
Morgan Stanley Dean Witter Distributors Inc., member NASD.
ANNUAL REPORT
OCTOBER 31, 2000
