<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC. TWO WORLD TRADE CENTER, NEW
LETTER TO THE SHAREHOLDERS APRIL 30, 1998 YORK, NEW YORK 10048
DEAR SHAREHOLDER:
The global fixed-income markets had a mixed performance during the six-month
period ended April 30, 1998. The first half of this period was marked by
declining interest rates in all of the major bond markets, whereas the second
half saw European bond yields stabilize while rates in the United States edged
slightly higher.
GLOBAL BOND MARKET OVERVIEW
In the United States, the bond market initially benefited from its safe-haven
status as global investors sought relief from the ongoing turbulence in the
Southeast Asian financial markets. As 1998 began, however, the growing U.S.
economy and record-low unemployment ignited fears that inflation might begin to
move higher. As a result, yields on three-year U.S. Treasuries increased from
their January low of 5.19 percent, to 5.60 percent on April 30.
Meanwhile, the European bond markets also saw yields moving lower, at first in
conjunction with those in the United States, then later in response to the major
European countries' reports of ongoing moderate growth with low inflation.
Further supporting the European markets, particularly those in the south (e.g.,
Italy and Spain), was the market's realization that the European Monetary Union
and the common European currency, the euro, would be launched on schedule in
January 1999. As a result, three-year German government bond yields registered a
net decline of 28 basis points (0.28 percent) over the period, while three-year
Italian bond yields fell 100 basis points (1 percent).
With the flight into U.S. assets came a further strengthening of the U.S.
dollar. This upward move of the U.S. currency also reflected the attractiveness
of U.S. money market interest rates to international investors as well as the
firmness of the U.S. economy relative to other major economies. Over this
six-month period, the dollar appreciated 9.4 percent against the Japanese yen
and 4 percent against the German mark. Overall, the dollar rose 4.5 percent
against the world's major currencies.
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
LETTER TO THE SHAREHOLDERS APRIL 30, 1998, CONTINUED
PERFORMANCE AND PORTFOLIO STRATEGY
For the six-month period ended April 30, 1998, Dean Witter Global Short-Term
Income Fund posted a total return of 0.98 percent, compared to 0.72 percent for
the Lehman Brothers Mutual Fund Short World Multimarket Index and 1.87 percent
for the Lipper Short World Multi-Market Funds Average (which includes funds
invested in emerging market debt that have below-investment-grade credit
ratings).
Throughout this period, the Fund continued its strategy of investing in markets
that have attractive values commensurate with low relative risk. The Fund
maintained its overweighting in the United States through January 1998, when
market expectations for an Asian-induced economic slowdown began to wane. As the
Fund reduced its U.S. exposure, assets were reallocated to Europe, particularly
its higher-yielding southern countries, to take advantage of the stronger
performance of those markets. The Fund also increased its allocation to New
Zealand, which has a significant amount of export exposure to Asia. As the New
Zealand economy slows down from the Asian crisis, its bond market should perform
well.
The currency risks associated with the European bond investments were hedged
back into the U.S. dollar for most of the six-month period. This tactic
effectively protected the Fund from the decline in the values of those
currencies. In mid April, as Europe began to reflect a strengthening economy,
some of these hedges were removed, in order to take advantage of the
appreciation of those currencies.
LOOKING AHEAD
In the months ahead, we anticipate a continuation of the Fund's strategy of
diversification in global markets, with an emphasis on markets that exhibit
stable inflation outlooks and improving fiscal discipline. As the advent of the
new European Monetary Union approaches, and with the formation of the new
European Central Bank, we believe there will continue to be a credible
anti-inflationary policy in the new united Europe, as well as ongoing pressure
on the individual governments to reduce their budget deficits. In addition, we
anticipate that global growth will continue to be moderate as the Asian
economies slowly recover, allowing the global bond markets to continue to offer
compelling value over the months ahead. This positive outlook, together with our
investment strategy, should help the Fund seek its objective.
2
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
LETTER TO THE SHAREHOLDERS APRIL 30, 1998, CONTINUED
We appreciate your ongoing support of Dean Witter Global Short-Term Income Fund
and look forward to continuing to serve your investment needs.
Very truly yours,
[SIGNATURE]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
3
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
PORTFOLIO OF INVESTMENTS APRIL 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
GOVERNMENT & CORPORATE BONDS (96.1%)
DENMARK (6.3%)
GOVERNMENT OBLIGATION
DKK 20,000 Kingdom of Denmark+......................................................... 9.00% 11/15/00 $ 3,216,716
-----------
GERMANY+ (11.4%)
BANKS
DEM 2,800 Allgemeine HypothekenBank AG................................................ 5.75 03/13/00 1,599,220
L 300 Bayerische Hypotheken Bank.................................................. 6.75 12/30/99 497,908
300 Bayerische VereinsBank...................................................... 7.50 12/27/00 509,432
DEM 2,800 Depfa-Bank.................................................................. 6.00 08/28/00 1,611,852
2,800 Rheinische HypothekenBank AG................................................ 5.50 12/20/99 1,590,331
-----------
TOTAL GERMANY.................................................................................. 5,808,743
-----------
ITALY (6.4%)
GOVERNMENT OBLIGATIONS
ITL 3,285,000 Italy Treasury Bond......................................................... 10.50 11/01/00 2,102,252
1,660,000 Italy Treasury Bond+........................................................ 9.50 01/01/05 1,166,403
-----------
TOTAL ITALY.................................................................................... 3,268,655
-----------
NEW ZEALAND (10.3%)
BANKS (5.3%)
NZD 5,000 International Bank for Reconstruction & Development......................... 7.00 09/18/00 2,702,541
-----------
GOVERNMENT OBLIGATION (5.0%)
4,500 New Zealand Government Bond+................................................ 8.00 02/15/01 2,515,189
-----------
TOTAL NEW ZEALAND.............................................................................. 5,217,730
-----------
SPAIN (7.4%)
GOVERNMENT OBLIGATION
ESP 500,000 Spain Treasury Bond+........................................................ 12.25 03/25/00 3,738,221
-----------
SWEDEN (11.7%)
GOVERNMENT OBLIGATION
SEK 42,000 Swedish Treasury Bond+...................................................... 10.25 05/05/00 5,965,252
-----------
UNITED KINGDOM + (6.8%)
BANKS
L 900 Halifax PLC................................................................. 8.375 12/15/99 1,530,334
750 Lloyds TSB Group PLC........................................................ 8.50 03/29/06 1,388,127
DEM 900 Suedwest LB Capital Markets................................................. 7.00 03/31/00 524,546
-----------
TOTAL UNITED KINGDOM........................................................................... 3,443,007
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
PORTFOLIO OF INVESTMENTS APRIL 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
UNITED STATES (35.8%)
BANKS (6.3%)
$ 3,000 Bankers Trust Corp.+........................................................ 8.125% 04/01/02 $ 3,193,770
-----------
FINANCIAL (5.6%)
ITL 4,500,000 General Electric Capital Corp.+............................................. 10.375 06/14/00 2,821,388
-----------
U.S. GOVERNMENT & AGENCY OBLIGATIONS (23.9%)
NZD 4,500 Federal National Mortgage Assoc............................................. 7.00 09/26/00 2,425,519
$ 4,500 U.S. Treasury Note+......................................................... 8.50 11/15/00 4,801,365
4,000 U.S. Treasury Note+......................................................... 13.375 08/15/01 4,919,720
-----------
12,146,604
-----------
TOTAL UNITED STATES............................................................................ 18,161,762
-----------
TOTAL GOVERNMENT & CORPORATE BONDS
(IDENTIFIED COST $48,840,723).................................................................. 48,820,086
-----------
SHORT-TERM INVESTMENTS (a) (12.6%)
TIME DEPOSITS
GREECE (6.7%)
BANKS - COMMERCIAL
GRD 1,077,477 Bankers Trust............................................................... 12.00 05/07/98 3,429,162
-----------
UNITED STATES (5.9%)
BANKS - COMMERCIAL
$ 3,000 First National Bank of Chicago.............................................. 5.35 05/04/98 3,000,000
-----------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $6,803,884)................................................................... 6,429,162
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $55,644,607) (B).......................................................... 108.7 % 55,249,248
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS............................................. (8.7) (4,434,457)
------ ------------
NET ASSETS................................................................................. 100.0 % $ 50,814,791
------ ------------
------ ------------
</TABLE>
- ---------------------
+ Some or all of these securities are segregated in connection with open
forward foreign currency contracts.
(a) Subject to withdrawal restrictions until maturity.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $414,658 and the
aggregate gross unrealized depreciation is $810,017, resulting in net
unrealized depreciation of $395,359.
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
PORTFOLIO OF INVESTMENTS APRIL 30, 1998 (UNAUDITED) CONTINUED
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT APRIL 30, 1998:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS IN DELIVERY APPRECIATION
TO DELIVER EXCHANGE FOR DATE (DEPRECIATION)
- -------------------------------------------------------------------
<S> <C> <C> <C>
DEM 5,165,000 $ 2,850,835 05/18/98 $ (28,783)
NZD 900,000 $ 514,125 05/20/98 17,324
NZD 900,000 $ 514,800 05/20/98 18,000
ATS 30,257,810 $ 2,405,843 06/30/98 2,007
FRF 14,415,750 $ 2,406,034 06/30/98 2,235
BEF 88,817,790 $ 2,403,690 06/30/98 5,206
NLG 16,500,000 $ 7,951,807 07/06/98 (243,165)
DEM 500,000 $ 275,209 09/10/98 (5,297)
DEM 2,050,000 $ 1,130,660 09/10/98 (19,416)
SEK 11,246,250 $ 1,412,225 09/11/98 (46,737)
DEM 4,555,000 $ 2,525,785 09/18/98 (30,724)
DEM 4,665,000 $ 2,579,486 09/25/98 (39,744)
--------------
Net unrealized depreciation.................. $ (369,094)
--------------
--------------
</TABLE>
CURRENCY ABBREVIATIONS:
<TABLE>
<S> <C>
ATS Austrian Schilling.
BEF Belgian Franc.
L British Pound.
DKK Danish Krone.
NLG Dutch Guilder.
FRF French Franc.
DEM German Deutschemark.
GRD Greek Drachma.
ITL Italian Lira.
NZD New Zealand Dollar.
ESP Spanish Peseta.
SEK Swedish Krona.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $55,644,607)................................................................ $55,249,248
Unrealized appreciation on open forward foreign currency contracts............................. 44,772
Cash (including $1,558 in foreign currency).................................................... 103,708
Receivable for:
Interest..................................................................................... 1,688,884
Compensated forward foreign currency
contracts................................................................................... 299,390
Capital stock sold........................................................................... 11,613
Prepaid expenses............................................................................... 55,213
-----------
TOTAL ASSETS.............................................................................. 57,452,828
-----------
LIABILITIES:
Unrealized depreciation on open forward foreign currency contracts............................. 413,866
Payable for:
Investments purchased........................................................................ 5,228,414
Capital stock repurchased.................................................................... 545,017
Compensated forward foreign currency
contracts................................................................................... 269,057
Plan of distribution fee..................................................................... 33,385
Investment management fee.................................................................... 24,482
Dividends to shareholders.................................................................... 16,547
Accrued expenses............................................................................... 107,269
-----------
TOTAL LIABILITIES......................................................................... 6,638,037
-----------
NET ASSETS................................................................................ $50,814,791
-----------
-----------
COMPOSITION OF NET ASSETS:
Paid-in-capital................................................................................ $58,505,068
Net unrealized depreciation.................................................................... (662,277)
Dividends in excess of net investment income................................................... (446,758)
Accumulated net realized loss.................................................................. (6,581,242)
-----------
NET ASSETS................................................................................ $50,814,791
-----------
-----------
NET ASSET VALUE PER SHARE,
5,873,382 SHARES OUTSTANDING
(500,000,000 SHARES AUTHORIZED OF $.01 PAR VALUE)............................................ $8.65
-----------
-----------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME................................................................................ $ 2,164,710
-----------
EXPENSES
Plan of distribution fee....................................................................... 210,125
Investment management fee...................................................................... 154,092
Transfer agent fees and expenses............................................................... 40,282
Professional fees.............................................................................. 35,968
Shareholder reports and notices................................................................ 26,592
Registration fees.............................................................................. 25,328
Custodian fees................................................................................. 10,352
Directors' fees and expenses................................................................... 9,427
Other.......................................................................................... 3,132
-----------
TOTAL EXPENSES............................................................................ 515,298
-----------
NET INVESTMENT INCOME..................................................................... 1,649,412
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments................................................................................ (454,069)
Futures contracts.......................................................................... 29,266
Foreign exchange transactions.............................................................. 339,733
-----------
NET LOSS.................................................................................. (85,070)
-----------
Net change in unrealized appreciation/ depreciation on:
Investments................................................................................ (802,771)
Translation of forward foreign currency contracts, other assets and liabilities denominated
in foreign currencies.................................................................... (230,471)
-----------
NET DEPRECIATION.......................................................................... (1,033,242)
-----------
NET LOSS.................................................................................. (1,118,312)
-----------
NET INCREASE................................................................................... $ 531,100
-----------
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31, 1997
- --------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income........................ $ 1,649,412 $ 4,132,653
Net realized loss............................ (85,070) (14,226 )
Net change in unrealized appreciation........ (1,033,242) (939,280 )
-------------- ----------------
NET INCREASE............................ 531,100 3,179,147
Dividends from net investment income......... (1,642,242) (8,518,932 )
Net decrease from capital stock
transactions............................... (9,451,755) (13,908,008 )
-------------- ----------------
NET DECREASE............................ (10,562,897) (19,247,793 )
NET ASSETS:
Beginning of period.......................... 61,377,688 80,625,481
-------------- ----------------
END OF PERIOD
(INCLUDING DIVIDENDS IN EXCESS OF NET
INVESTMENT INCOME OF $446,758 AND
$453,928, RESPECTIVELY).................. $ 50,814,791 $61,377,688
-------------- ----------------
-------------- ----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1998 (UNAUDITED)
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) 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; (3) when market quotations are not readily available, including
circumstances under which it is determined by Dean Witter InterCapital Inc. (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); (4) certain portfolio securities may be valued by an
outside pricing service approved by the Directors. The pricing service may
utilize 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 (5) 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.
9
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1998 (UNAUDITED) 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, U.S. Government securities or other liquid portfolio 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 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 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.
10
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1998 (UNAUDITED) CONTINUED
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 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 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
daily net assets not exceeding $500 million and 0.50% to the portion of the
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
11
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1998 (UNAUDITED) CONTINUED
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 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 others 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 utilize
fees paid pursuant to the plan to compensate DWR and other selected
broker-dealers for their opportunity costs in advancing such amounts, which
compensation would be in the form of a carrying charge on any unreimbursed
distribution expenses.
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 $7,551,331 at
April 30, 1998.
The Distributor has informed the Fund that for the six months ended April 30,
1998, it received $13,703 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 six months ended April 30, 1998 aggregated
$96,010,881 and $90,911,829, respectively. Included in the aforementioned are
purchases and sales of U.S. Government securities of $45,907,634 and
$50,691,306, respectively.
12
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1998 (UNAUDITED) CONTINUED
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At April 30, 1998, the Fund had
transfer agent fees and expenses payable of approximately $1,000.
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 six months ended April 30, 1998
included in Directors' fees and expenses in the Statement of Operations amounted
to $1,884. At April 30, 1998, the Fund had an accrued pension liability of
$46,833 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 SIX FOR THE
MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31, 1997
------------------------- --------------------------
(UNAUDITED)
SHARES AMOUNT SHARES AMOUNT
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Sold............................................................. 6,480,958 $56,447,628 18,695,388 $166,394,203
Reinvestment of dividends........................................ 112,412 978,206 566,141 5,089,726
----------- ----------- ----------- ------------
6,593,370 57,425,834 19,261,529 171,483,929
Repurchased...................................................... (7,681,025) (66,877,589) (20,837,578) (185,391,937)
----------- ----------- ----------- ------------
Net decrease..................................................... (1,087,655) $(9,451,755) (1,576,049) $(13,908,008)
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
</TABLE>
6. FEDERAL INCOME TAX STATUS
At October 31, 1997, the Fund had a net capital loss carryover of approximately
$6,970,000 to offset future capital gains to the extent provided by regulations
available through October 31 of the following years:
<TABLE>
<CAPTION>
AMOUNT IN THOUSANDS
--------------------------
2001 2002 2003 2005
---- ------ ------ ----
<S> <C> <C> <C>
$741 $4,853 $1,162 $214
---- ------ ------ ----
---- ------ ------ ----
</TABLE>
As of October 31, 1997, 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.
13
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1998 (UNAUDITED) 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 forward written options on interest rate futures and
interest rate futures contracts ("derivative investments").
Forward contracts and 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 April 30, 1998, there were outstanding forward contracts used to facilitate
settlement of foreign currency denominated portfolio transactions and to manage
foreign currency exposure.
At April 30, 1998, the Fund held a concentration of investments in securities of
issuers in the banking industry representing 42.4% of the Fund's net assets.
14
<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
SIX MONTHS
ENDED
APRIL 30, FOR THE YEAR ENDED OCTOBER 31
1998 --------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period............................ $ 8.82 $ 9.44 $ 8.89 $ 8.73 $ 9.23 $ 9.41
---------- ---------- ---------- ---------- ---------- ----------
Net investment income.............. 0.25 0.52 0.61 0.54 0.72 0.70
Net realized and unrealized gain
(loss)............................ (0.16) (0.08) 0.48 0.16 (0.66) (0.27)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations... 0.09 0.44 1.09 0.70 0.06 0.43
---------- ---------- ---------- ---------- ---------- ----------
Less dividends and distributions
from:
Net investment income........... (0.26) (1.06) (0.54) (0.44) (0.13) (0.61)
Paid-in-capital................. -- -- -- (0.10) (0.43) --
---------- ---------- ---------- ---------- ---------- ----------
Total dividends and
distributions..................... (0.26) (1.06) (0.54) (0.54) (0.56) (0.61)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period..... $ 8.65 $ 8.82 $ 9.44 $ 8.89 $ 8.73 $ 9.23
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
TOTAL INVESTMENT RETURN+........... 0.98%(1) 4.88% 12.66% 8.27% 0.65% 4.72%
RATIOS TO AVERAGE NET ASSETS:
Expenses........................... 1.84%(2) 1.79% 1.66% 1.68% 1.63% 1.55%
Net investment income.............. 5.89%(2) 5.85% 6.57% 6.17% 6.35% 6.97%
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands......................... $50,815 $61,378 $80,625 $106,939 $170,117 $305,278
Portfolio turnover rate............ 191%(1) 264% 138% 188% 123% 221%
</TABLE>
- ---------------------
+ Does not reflect the deduction of sales charge. 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>
DIRECTORS
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and General Counsel
Rajesh K. Gupta
Vice President
Anne Pickrell
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
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
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 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
[GRAPHIC]
SEMIANNUAL REPORT
APRIL 30, 1998
