<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC. TWO WORLD TRADE CENTER, NEW
YORK, NEW YORK 10048
LETTER TO THE SHAREHOLDERS OCTOBER 31, 1996
DEAR SHAREHOLDER:
The major global fixed-income markets turned in a mixed performance during the
twelve-month period ended October 31, 1996, with U.S. bonds significantly
underperforming the major bond markets in Europe and Asia as well as the bond
markets of emerging economies. At the same time, the U.S. dollar regained its
strength against the major currencies, most notably against the Japanese yen and
the German mark.
In the United States, economic growth alternated between near-recession levels
and that of rapid growth. This resulted in sharp fluctuations in interest rates.
During the first few months of the period under review, interest rates continued
to decline amid concern about the possibility of a recession. The market turned
sharply bearish in February in response to reports indicating an overheated
economy, possible inflationary pressures and monetary tightening by the Federal
Reserve Board. As it turned out, subsequent statistics led analysts to question
the sustainability of the economy's newfound vigor and indicated that the
pressures for inflation were very subdued. Thus, from the low point of 4.86
percent in February, yields on three-year U.S. Treasuries increased by 1.74
percent to 6.60 percent in early July before receding to 5.87 percent by October
31, 1996.
Meanwhile, European bond markets continued to respond to ongoing significant
progress in those countries that achieved deficit reductions and improved
inflation outlooks, most notably Italy, Spain and Sweden. These improvements
allowed European central banks to periodically reduce short-term rates, while
U.S. official rates remained unchanged. As a result, yields declined broadly
across the European markets, especially those in southern Europe (e.g., Italy
and Spain) and Sweden. Hence, three-year yields in Italy decreased by about 4.0
percent from the beginning of the year, while yields on three-year Spanish and
Swedish bonds declined by 3.5 percent and 3.1 percent, respectively. Yields on
three-year bonds in Canada and Australia also declined during the year, by about
2.0 percent and 1.2 percent, respectively.
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
LETTER TO THE SHAREHOLDERS OCTOBER 31, 1996, CONTINUED
In foreign exchange markets, the U.S. dollar, reacting to improving interest
rate differentials and a stronger U.S. economic outlook, appreciated against
most of the major currencies, including 10.5 percent against the Japanese yen
and 7.2 percent against the German mark. However, the dollar index, which
measures the U.S. currency's strength against a basket of currencies, registered
a more modest gain of only about 4 percent.
PERFORMANCE AND PORTFOLIO STRATEGY
Against this backdrop, Dean Witter
Global Short-Term Income Fund Inc. has
shown a strong performance during the
fiscal year. For the twelve-month
period ended October 31, 1996, the
Fund's total return was 12.66 percent,
compared to a total return of 9.44
percent for the Lipper Short World
Multi-Market Income Funds Average
(which includes funds invested in
emerging markets' debt which have
below-investment-grade credit ratings)
and an increase of 6.37 percent for
the unhedged and unmanaged Lehman
Brothers Mutual Fund Short World
Multimarket Index (which does not
allow for any expenses). The Lipper
Short World Multi-Market Income Funds
Average tracks the performance of
funds that primarily invest in non-
U.S. dollar and U.S. dollar debt
instruments and, by policy, keep a
dollar-weighted average maturity of
less than 5 years, as reported by
Lipper Analytical Services.
During the fiscal year, the Fund paid
dividend distributions in the amount
of $0.54 per share. The accompanying
chart illustrates the performance of a
$10,000 investment in the Fund since
inception (November 1, 1990) through
October 31, 1996, versus the
performance of the Lehman Brothers
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
LETTER TO THE SHAREHOLDERS OCTOBER 31, 1996, CONTINUED
Mutual Fund Short World Multimarket Index and the Lipper Short World
Multi-Market Income Funds Average.
The Fund's performance this year was attributable to timely moves to protect the
Fund from interest rate gyrations and the strengthening of the dollar, as well
as to investments in markets that exhibited a continuously improving inflation
outlook and fiscal discipline. Thus, the Fund's average maturity has been
maintained at about 2.46 years, as compared to the maximum allowable average
maturity of 3 years. In addition, by mid-February the Fund had decreased its
weightings in the U.S. market to 35 percent while increasing its holdings in
Italy, Spain and Sweden to take advantage of the higher yields available in
those markets relative to the U.S. and rising bond prices. The net effect of the
short maturity stance is that the Fund had little interest rate risk in the U.S.
market, while benefiting from interest rate cuts in its European countries.
Furthermore, the Fund also increased its investments in Australia and New
Zealand to participate in the higher but stable yields and exchange rates of
those countries. This strategy has been maintained through the remainder of the
fiscal year. Most of the currency risks of the European investments were hedged
back in to the dollar as the U.S. currency appreciated in value. As of October
31, 1996, 21 percent of the Fund's assets were in North America, 60 percent were
in Europe and 19 percent in the Pacific Basin countries.
LOOKING AHEAD
Going forward, we anticipate a continuation of the Fund's strategy of
diversifying in global markets with an emphasis on markets that exhibit
improving inflation outlooks and fiscal discipline. We believe this strategy
should allow the Fund to seek its primary objective of high current income and
its secondary objective of capital appreciation.
We appreciate your ongoing support of Dean Witter Global Short-Term Income Fund
Inc. and look forward to continuing to serve your investment needs.
Very truly yours,
[SIGNATURE]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
GOVERNMENT & CORPORATE BONDS (82.4%)
AUSTRALIA (4.6%)
GOVERNMENT OBLIGATION
Au$ 4,530 Queensland Treasury Corp+................ 8.00 % 07/14/99 $ 3,694,315
---------------
DENMARK (3.7%)
GOVERNMENT OBLIGATION
DKr 15,300 Denmark Treasury Note.................... 9.00 11/15/00 2,965,269
---------------
GERMANY (6.5%)
BANKING - INTERNATIONAL
$ 5,000 Bayerische Vereinsbank+.................. 8.125 01/27/00 5,262,505
---------------
ITALY (21.1%)
FINANCE (0.5%)
ITL 560,000 Credit Suisse Finance Gibraltar.......... 11.625 05/27/97 375,650
---------------
GOVERNMENT OBLIGATIONS (20.6%)
11,570M Italy Treasury Bond+..................... 9.50 02/01/99 8,003,612
11,880M Italy Treasury Bond+..................... 10.50 07/15/00 8,597,471
---------------
16,601,083
---------------
TOTAL ITALY..................................................... 16,976,733
---------------
NEW ZEALAND (6.6%)
GOVERNMENT OBLIGATIONS
NZ$ 7,300 New Zealand Treasury Bill+............... 8.52 09/17/97 4,805,650
765 New Zealand Treasury Bond+............... 10.00 07/15/97 547,111
---------------
TOTAL NEW ZEALAND............................................... 5,352,761
---------------
PORTUGAL (5.1%)
GOVERNMENT OBLIGATION
PTE 616,000 Portugal Treasury Bond+.................. 8.375 01/23/99 4,147,882
---------------
SPAIN (21.9%)
GOVERNMENT OBLIGATIONS
ESP 1,679M Spain Treasury Bond+..................... 10.10 02/28/01 14,610,333
330M Spain Treasury Bond+..................... 11.30 01/15/02 3,028,764
---------------
TOTAL SPAIN..................................................... 17,639,097
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
UNITED STATES (12.9%)
BANKING (10.0%)
$ 5,000 National Bank of Detroit................. 6.85 % 05/11/98 $ 5,064,350
3,000 Norwest Corp+............................ 5.75 03/15/98 2,995,950
---------------
8,060,300
---------------
U.S. GOVERNMENT OBLIGATION (2.9%)
2,250 U.S. Treasury Note+...................... 7.50 10/31/99 2,346,030
---------------
TOTAL UNITED STATES............................................. 10,406,330
---------------
TOTAL GOVERNMENT & CORPORATE BONDS
(IDENTIFIED COST $65,387,399)................................... 66,444,892
---------------
SHORT-TERM INVESTMENTS (18.8%)
TIME DEPOSITS (a) (12.6%)
AUSTRALIA (1.5%)
BANKING - INTERNATIONAL
Au$ 1,511 Chase Manhattan Bank..................... 6.375 11/06/96 1,195,728
---------------
ITALY (2.2%)
BANKING - INTERNATIONAL
ITL 2,730M Chase Manhattan Bank..................... 7.50 11/06/96 1,797,946
---------------
NEW ZEALAND (7.1%)
BANKING - INTERNATIONAL
NZ$ 2,037 Bank of New York......................... 9.25 11/06/96 1,439,232
6,003 Bankers Trust............................ 9.25 11/06/96 4,240,905
---------------
TOTAL NEW ZEALAND............................................... 5,680,137
---------------
UNITED STATES (1.8%)
BANKING
$ 1,450 Republic National Bank................... 5.3125 11/01/96 1,450,000
---------------
TOTAL TIME DEPOSITS
(IDENTIFIED COST $10,042,667)................................... 10,123,811
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER (b) (6.2%)
UNITED STATES
$ 5,000 J.P. Morgan & Co.
(Amortized Cost $5,000,000).............. 5.50 % 11/01/96 $ 5,000,000
---------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $15,042,667)................................... 15,123,811
---------------
TOTAL INVESTMENTS
(IDENTIFIED COST $80,430,066) (C)........ 101.2% 81,568,703
LIABILITIES IN EXCESS OF CASH AND OTHER
ASSETS................................... (1.2) (943,222)
----- ------------
NET ASSETS............................... 100.0% $ 80,625,481
----- ------------
----- ------------
<FN>
- ---------------------
M In millions.
+ Some or all of these securities are segregated in connection with open
forward foreign currency contracts.
(a) Subject to withdrawal restrictions until maturity.
(b) Security was purchased on a discount basis. The interest rate shown has
been adjusted to reflect a money market equivalent yield.
(c) The aggregate cost for federal income tax purposes is $80,430,066; the
aggregate gross unrealized appreciation is $1,333,333 and the aggregate
gross unrealized depreciation is $194,696, resulting in net unrealized
appreciation of $1,138,637.
</TABLE>
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT OCTOBER 31, 1996:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS IN EXCHANGE DELIVERY APPRECIATION/
TO DELIVER FOR DATE DEPRECIATION
- -------------------------------------------------------------------
<S> <C> <C> <C>
$ 2,953,825 DKr 17,253,810 11/01/96 $ 5,409
DEM 20,500,000 $ 13,633,945 04/01/97 (11,145)
DEM 7,092,960 $ 4,711,991 05/29/97 (25,921)
NLG 5,000,000 $ 2,983,098 07/29/97 254
CHF 10,000,000 $ 8,343,067 09/19/97 207,472
Y 650,000,000 $ 6,026,889 10/31/97 (4,496)
--------------
Net unrealized appreciation........................ $ 171,573
--------------
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $80,430,066)............................. $81,568,703
Unrealized appreciation on open forward foreign currency
contracts................................................. 213,135
Cash (including $9,844 in foreign currency)................. 29,466
Receivable for:
Interest................................................ 2,396,108
Compensated forward foreign currency contracts.......... 1,047,292
Capital stock sold...................................... 57,061
Prepaid expenses and other assets........................... 38,323
-----------
TOTAL ASSETS........................................... 85,350,088
-----------
LIABILITIES:
Unrealized depreciation on open forward foreign currency
contracts................................................. 41,562
Payable for:
Investments purchased................................... 2,959,233
Capital stock repurchased............................... 1,290,352
Compensated forward foreign currency contracts.......... 170,593
Plan of distribution fee................................ 52,903
Investment management fee............................... 38,795
Dividends to shareholders............................... 28,052
Accrued expenses and other payables......................... 143,117
-----------
TOTAL LIABILITIES...................................... 4,724,607
-----------
NET ASSETS:
Paid-in-capital............................................. 81,864,831
Net unrealized appreciation................................. 1,310,245
Accumulated undistributed net investment income............. 3,329,736
Accumulated net realized loss............................... (5,879,331)
-----------
NET ASSETS............................................. $80,625,481
-----------
-----------
NET ASSET VALUE PER SHARE,
8,537,086 SHARES OUTSTANDING (UNLIMITED SHARES AUTHORIZED
OF $.01 PAR VALUE)........................................
$9.44
-----------
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1996
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME (net of $156,236 foreign withholding tax)... $ 7,553,965
-----------
EXPENSES
Plan of distribution fee.................................... 688,258
Investment management fee................................... 504,723
Transfer agent fees and expenses............................ 95,328
Professional fees........................................... 82,375
Custodian fees.............................................. 63,270
Shareholder reports and notices............................. 45,476
Registration fees........................................... 22,467
Directors' fees and expenses................................ 16,104
Other....................................................... 5,541
-----------
TOTAL EXPENSES......................................... 1,523,542
-----------
NET INVESTMENT INCOME.................................. 6,030,423
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments............................................. 3,977,732
Futures contracts....................................... (186,475)
Foreign exchange transactions........................... 1,132,362
-----------
NET GAIN............................................... 4,923,619
-----------
Net change in unrealized appreciation/depreciation on:
Investments............................................. (508,587)
Translation of forward foreign currency contracts, other
assets and liabilities denominated in foreign
currencies............................................ 350,998
-----------
NET DEPRECIATION....................................... (157,589)
-----------
NET GAIN............................................... 4,766,030
-----------
NET INCREASE................................................ $10,796,453
-----------
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 1996 OCTOBER 31, 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................... $ 6,030,423 $ 8,040,438
Net realized gain (loss).................................... 4,923,619 (2,375,703)
Net change in unrealized appreciation/depreciation.......... (157,589) 4,237,361
---------------- ----------------
NET INCREASE........................................... 10,796,453 9,902,096
---------------- ----------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income....................................... (5,418,221) (6,576,785)
Paid-in-capital............................................. -- (1,427,490)
---------------- ----------------
TOTAL.................................................. (5,418,221) (8,004,275)
---------------- ----------------
Net decrease from capital stock transactions................ (31,691,587) (65,075,624)
---------------- ----------------
NET DECREASE........................................... (26,313,355) (63,177,803)
NET ASSETS:
Beginning of period......................................... 106,938,836 170,116,639
---------------- ----------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$3,329,736 AND DISTRIBUTIONS IN EXCESS OF NET INVESTMENT
INCOME OF $121,077, RESPECTIVELY)....................... $ 80,625,481 $106,938,836
---------------- ----------------
---------------- ----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1996
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Global Short-Term Income Fund Inc. (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 achieve as high a level of current income as is consistent with
prudent investment risk. The Fund was incorporated in Maryland on August 2, 1990
and commenced operations on November 1, 1990.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect 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) all 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) listed options
are valued at the latest sale price on the exchange on which they are listed
unless no sales of such options have taken place that day, in which case they
will be valued at the mean between their latest bid and asked price; (3) futures
contracts are valued at the latest sale price on the commodities exchange on
which they trade unless the Directors determine that such price does not reflect
their market value, in which case it will be valued at fair value as determined
by the Directors; (4) when market quotations are not readily available,
including circumstances under which it is determined by the Investment Manager
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
Directors (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); (5) certain portfolio securities may be valued by an outside
pricing service approved by the Directors. The pricing service utilizes a matrix
system incorporating security quality, maturity and coupon as the evaluation
model parameters, and/or research and evaluations by its staff, including review
of broker-dealer market price quotations, if available, in determining what it
believes is the fair valuation of the securities valued by such pricing service;
and (6) 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.
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1996, CONTINUED
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.
Discounts are accreted over the life of the respective securities. Interest
income is accrued daily.
C. FUTURES CONTRACTS -- A futures contract is an agreement between two parties
to buy and sell financial instruments at a set price on a future date. Upon
entering into such a contract, the Fund is required to pledge to the broker cash
or U.S. Government securities equal to the minimum initial margin requirements
of the applicable futures exchange. Pursuant to the contract, the Fund agrees to
receive from or pay to the broker an amount of cash equal to the daily
fluctuation in the value of the contract which is known as variation margin.
Such receipts or payments are recorded by the Fund as unrealized gains or
losses. Upon closing of the contract, the Fund realizes a gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed.
D. FOREIGN CURRENCY TRANSLATION -- The books and records of the Fund are
maintained in U.S. dollars as follows: (1) the foreign currency market value of
investment securities, other assets and liabilities and forward contracts are
translated at the exchange rates prevailing at the end of the period; and (2)
purchases, sales, income and expenses are translated at the exchange rates
prevailing on the respective dates of such transactions. The resultant exchange
gains and losses are included in the Statement of Operations as realized and
unrealized gain/loss on foreign exchange transactions. Pursuant to U.S. Federal
income tax regulations, certain foreign exchange gains/losses included in
realized and unrealized gain/loss are included in or are a reduction of ordinary
income for federal income tax purposes. The Fund does not isolate that portion
of the results of operations arising as a result of changes in the foreign
exchange rates from the changes in the market prices of the securities.
E. 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.
F. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1996, CONTINUED
G. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to its shareholders on the record 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.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with Dean Witter InterCapital
Inc. (the "Investment Manager"), the Fund pays the Investment 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: 0.55% to the portion of the average daily net assets not exceeding
$500 million and 0.50% to the portion of the average daily net assets exceeding
$500 million.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment 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 Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted a
Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act pursuant
to which the Fund pays the Distributor compensation, accrued daily and payable
monthly, at an annual rate of 0.75% of the lesser of: (a) the average daily
aggregate gross sales of the Fund's shares since the Fund's inception (not
including reinvestment of dividend or capital gains distributions) less the
average daily aggregate net asset value of the Fund's shares
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1996, CONTINUED
redeemed since the Fund's inception upon which a contingent deferred sales
charge has been imposed or upon which such charge has been waived; or (b) the
Fund's average daily net assets. Amounts paid under the Plan are paid to the
Distributor to compensate it for the services provided and the expenses borne by
it and others in the distribution of the Fund's shares, including the payment of
commissions for sales of the Fund's shares and incentive compensation to, and
expenses of, account executives of Dean Witter Reynolds Inc., an affiliate of
the Investment Manager and Distributor, and other employees and selected
broker-dealers, who engage in or support distribution of the Fund's shares or
who service shareholder accounts, including overhead and telephone expenses,
printing and distribution of prospectuses and reports used in connection with
the offering of the Fund's shares to other than current shareholders and
preparation, printing and distribution of sales literature and advertising
materials. In addition, the Distributor may be compensated under the Plan for
its opportunity costs in advancing such amounts, which compensation would be in
the form of a carrying charge on any unreimbursed expenses incurred by the
Distributor.
Provided that the Plan continues in effect, any cumulative expenses incurred but
not yet recovered may be recovered through future distribution fees from the
Fund and contingent deferred sales charges from the Fund's shareholders.
Although there is no legal obligation for the Fund to pay expenses incurred in
excess of payments made to the Distributor under the Plan and the proceeds of
contingent deferred sales charges paid by investors upon redemption of shares,
if for any reason the Plan is terminated, the Directors will consider at that
time the manner in which to treat such expenses. The Distributor has advised the
Fund that such excess amounts, including carrying charges, totaled $6,987,294 at
October 31, 1996.
The Distributor has informed the Fund that for the year ended October 31, 1996,
it received approximately $33,000 in contingent deferred sales charges from
certain redemptions of the Fund's shares.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended October 31, 1996 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
-------------- --------------
<S> <C> <C>
Corporate Bonds......................... $ -- $ 17,666,443
Foreign Government Bonds................ 111,836,649 110,991,299
U.S. Government and Agency
Obligations............................ 2,075,000 25,532,233
</TABLE>
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1996, CONTINUED
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At October 31, 1996, the Fund had
transfer agent fees and expenses payable of approximately $11,000.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Directors of the Fund who will have served as independent
Directors for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the year ended October 31, 1996 included
in Directors' fees and expenses in the Statement of Operations amounted to
$2,863. At October 31, 1996, the Fund had an accrued pension liability of
$46,815 which is included in accrued expenses in the Statement of Assets and
Liabilities.
5. CAPITAL STOCK
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED OCTOBER 31, 1996 ENDED OCTOBER 31, 1995
------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Sold................................................... 9,251,527 $ 85,394,562 332,379 $ 2,925,344
Reinvestment of dividends and distributions............ 348,451 3,177,482 535,338 4,696,544
-------------- -------------- -------------- --------------
9,599,978 88,572,044 867,717 7,621,888
Repurchased............................................ (13,089,159) (120,263,631) (8,316,754) (72,697,512)
-------------- -------------- -------------- --------------
Net decrease........................................... (3,489,181) $ (31,691,587) (7,449,037) $ (65,075,624)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
6. FEDERAL INCOME TAX STATUS
During the year ended October 31, 1996, the Fund utilized approximately
$1,579,000 of its net capital loss carryover. At October 31, 1996, the Fund had
a net capital loss carryover of approximately $6,756,000 of which $741,000 will
be available through October 31, 2001, $4,853,000 will be available through
October 31, 2002 and $1,162,000 will be available through October 31, 2003 to
offset future capital gains to the extent provided by regulations.
As of October 31, 1996, the Fund had temporary book/tax differences primarily
attributable to the mark-to-market of open forward foreign currency exchange
contracts and compensated forward foreign currency exchange contracts and
permanent book/tax differences primarily attributable to foreign currency gains.
To reflect reclassifications arising from permanent book/tax differences for the
year ended October 31, 1996, accumulated net realized loss was charged and
accumulated undistributed net investment income was credited $2,838,611.
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1996, CONTINUED
7. 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 its foreign currency exposure or to sell, for a fixed amount of
U.S. dollars or other currency, the amount of foreign currency approximating the
value of some or all of its holdings denominated in such foreign currency or an
amount of foreign currency other than the currency in which the securities to be
hedged are denominated approximating the value of some or all of its holdings to
be hedged. Additionally, when the Investment Manager anticipates purchasing
securities at some time in the future, the Fund may enter into a forward
contract to purchase an amount of currency equal to some or all the value of the
anticipated purchase for a fixed amount of U.S. dollars or other currency.
To hedge against adverse interest rate, foreign currency and market risks, the
Fund may enter into written options on interest rate futures and interest rate
future contracts ("derivative investments").
At October 31, 1996, there were no outstanding forward contracts other than
those used to facilitate settlement of foreign currency denominated portfolio
transactions and to manage foreign currency exposure.
These derivative instruments involve elements of market risk in excess of the
amount 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, 1996 investments in securities of issuers in Spain and Italy
represented 45.2% of the Fund's net assets. These investments, which involve
risks and considerations not present with respect to U.S. securities, may be
affected by economic or political developments in these regions.
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of capital stock outstanding
throughout each period:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31
---------------------------------------------------------------------
1996 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value,
beginning of period............... $ 8.89 $ 8.73 $ 9.23 $ 9.41 $ 9.77 $ 10.00
--------- --------- --------- --------- --------- ---------
Net investment income.............. 0.61 0.54 0.72 0.70 0.82 0.95
Net realized and unrealized gain
(loss)............................ 0.48 0.16 (0.66) (0.27) (0.46) (0.23)
--------- --------- --------- --------- --------- ---------
Total from investment operations... 1.09 0.70 0.06 0.43 0.36 0.72
--------- --------- --------- --------- --------- ---------
Less dividends and distributions
from:
Net investment income........... (0.54) (0.44) (0.13) (0.61) (0.72) (0.95)
Paid-in-capital................. -- (0.10) (0.43) -- -- --
--------- --------- --------- --------- --------- ---------
Total dividends and
distributions..................... (0.54) (0.54) (0.56) (0.61) (0.72) (0.95)
--------- --------- --------- --------- --------- ---------
Net asset value, end of period..... $ 9.44 $ 8.89 $ 8.73 $ 9.23 $ 9.41 $ 9.77
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN+........... 12.66% 8.27% 0.65% 4.72% 3.76% 7.49%
RATIOS TO AVERAGE NET ASSETS:
Expenses........................... 1.66% 1.68% 1.63% 1.55% 1.55% 1.61%
Net investment income.............. 6.57% 6.17% 6.35% 6.97% 8.43% 9.49%
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands......................... $80,625 $106,939 $170,117 $305,278 $441,191 $462,263
Portfolio turnover rate............ 138% 188% 123% 221% 149% 8%
<FN>
- ---------------------
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value of the last business day of the period.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
OF DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Dean Witter Global Short-Term
Income Fund Inc. (the "Fund") at October 31, 1996, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended and the financial highlights for each of the six years
in the period then ended, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1996 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
DECEMBER 17, 1996
<PAGE>
DIRECTORS
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
Vinh Q. Tran
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and directors,
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.
DEAN WITTER
GLOBAL SHORT-TERM
INCOME FUND
ANNUAL REPORT
OCTOBER 31, 1996
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND
GROWTH OF $10,000
LEHMAN BROTHERS
DATE TOTAL MUTUAL FUND SHORT LIPPER
WORLD MULTIMARKET IX
-----------------------------------------------------------------
November 1, 1990 $10,000 $10,000 $10,000
October 31, 1991 $10,749 $10,780 $10,684
October 31, 1992 $11,154 $11,971 $10,827
October 31, 1993 $11,680 $12,762 $11,467
October 31, 1994 $11,756 $13,449 $11,414
October 31, 1995 $12,728 $15,074 $11,710
October 31, 1996 $14,339 (3) $16,034 $12,815
-----------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
1 YEAR 5 YEAR LIFE OF FUND
-------------------------------------------------------
12.66 6.19 (1)
9.66 (2) 5.93 (2) 6.19 (2)
-------------------------------------------------------
-------------------------------------------------------
_____Fund _____Lehman (4) _____Lipper (5)
-------------------------------------------------------
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS.
- ----------------------------------------
(1) Figure shown assumes reinvestment of all distributions and does not reflect
the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and the deduction of
the maximum applicable contingent deferred sales charge (CDSC) (1 year-3%,
5 year-0%, since inception - 0%). See the Fund's current prospectus for
complete details on fees and sales charges.
(3) Closing value assuming a complete redemption on October 31, 1996.
(4) The Lehman Brothers Mutual Fund Short World Multimarket Index measures the
performance of all debt instruments of the United States and 12 Lehman
major countries denominated in dollars with maturities of one to five
years. The performance of the index does not include any expenses, fees or
charges. The Index is unmanaged and should not be considered an
investment.
(5) The Lipper Short World Multi-Market Income Funds Average tracks the
performance of funds which primarily invest in non-U.S. dollar and U.S.
dollar debt instruments and, by policy, keep a dollar weighted average
maturity of less than 5 years, as reported by Lipper Analytical Services.
