<PAGE>
MORGAN STANLEY
GLOBAL OPPORTUNITY BOND FUND, INC.
- ---------------------------------------------
OFFICERS AND DIRECTORS
<TABLE>
<S> <C>
Barton M. Biggs William G. Morton, Jr.
CHAIRMAN OF THE BOARD DIRECTOR
OF DIRECTORS Frederick B. Whittemore
Warren J. Olsen DIRECTOR
PRESIDENT AND DIRECTOR James W. Grisham
Peter J. Chase VICE PRESIDENT
DIRECTOR Harold J. Schaaff, Jr.
John W. Croghan VICE PRESIDENT
DIRECTOR Joseph P. Stadler
David B. Gill VICE PRESIDENT
DIRECTOR Valerie Y. Lewis
Graham E. Jones SECRETARY
DIRECTOR James R. Rooney
John A. Levin TREASURER
DIRECTOR Joanna M. Haigney
ASSISTANT TREASURER
</TABLE>
- ---------------------------------------------
INVESTMENT ADVISER
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, New York 10020
- ---------------------------------------------------------
ADMINISTRATOR
The Chase Manhattan Bank, N.A.
73 Tremont Street
Boston, Massachusetts 02108
- ---------------------------------------------------------
CUSTODIANS
Morgan Stanley Trust Company (International)
One Pierrepont Plaza
Brooklyn, New York 11201
The Chase Manhattan Bank, N.A. (Domestic)
770 Broadway
New York, New York 10003
- ---------------------------------------------------------
SHAREHOLDER SERVICING AGENT
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
(800) 278-4353
- ---------------------------------------------------------
LEGAL COUNSEL
Rogers & Wells
200 Park Avenue
New York, New York 10166
- ---------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
- ---------------------------------------------------------
For additional Fund information, including the Fund's net asset value per share
and information regarding the investments comprising the Fund's portfolio,
please call 1-800-221-6726.
------------------------
MORGAN STANLEY
GLOBAL OPPORTUNITY
BOND FUND, INC.
---------------------
THIRD QUARTER REPORT
SEPTEMBER 30, 1995
MORGAN STANLEY ASSET MANAGEMENT INC.
INVESTMENT ADVISER
<PAGE>
LETTER TO SHAREHOLDERS
- -------
The high yield market continued to show positive returns during the third
quarter, with coupon income providing the bulk of the gain and bond prices
rallying modestly. High yield slightly outperformed Treasuries for the quarter,
with the spread to Treasuries narrowing by 17 basis points. For the third
quarter and the nine months ended September 30, 1995, the Morgan Stanley Global
Opportunity Bond Fund, Inc. had a total return , based on net asset value per
share, of 5.64% and 14.53%, respectively, compared to 5.96% and 15.74% for the
JP Morgan Emerging Markets Bond Index.
The quarter saw U.S. $13.2 billion of new issues priced, with U.S. $5.8 billion
priced during September. The forward calendar of new issues remained steady at
$6.0 billion. Mutual fund inflows continued to provide support for our market,
totaling $924 million for September and $2.5 billion for the quarter. There
appears to be substantial amounts of cash in the hands of many portfolio
managers, but they are generally discerning about what types of new issues they
will buy. Established companies with strong cash flows are aggressively bid for,
while newer, more speculative enterprises (such as direct broadcast satellite
companies Iridium and Globalstar) are having their offerings postponed or
canceled, despite strong alliances with premier partners like Motorola and large
equity market capitalizations.
While cyclicals outperformed defensive industries by 3.30% to 2.90% for the
quarter, cyclicals began to underperform defensive issues towards the end of the
quarter. Steel and paper companies reported disappointing inventory levels and
price discounting as the quarter ended. While underweighted in these sectors, we
are comfortable with the excess free cash flow of the companies we own. The
positive implications of the Turner/Time Warner merger improved the outlook for
media companies, which led the defensive sector. We are comfortable with our
overweighting in this sector, and continue to add modestly to our positions in
both cable and media bonds. Over the course of the quarter, we also increased
our commitments to companies in the chemical and healthcare industries. Finally,
we lightened positions in the casino sector and in certain cyclicals such as
textiles and steel.
Our outlook for the high yield market remains positive. A moderate new issue
calendar, continued strong mutual fund inflows, and high cash positions at many
funds complete a positive technical picture. The current spread to Treasuries of
445 basis points is more than reasonable given the relatively strong credit
characteristics of our market today. New bond issues in the third quarter had
cash flow coverage of interest of 2.4x on average and only 48% were rated single
B or lower, versus 75% in 1989 (right before the severe downturn in the U.S.
high yield market). With these credit statistics, we see the default rate
remaining low, and the high yield market continuing to offer good potential
returns.
Emerging Market Debt (EMD) allocations remain at 70% of the portfolio. After the
sharp rally in the second quarter, the decline in credit spreads has slowed to a
more sustainable rate. High yields and a benign U.S. treasury environment
continue to make EMD an attractive asset class. Credit perceptions with the
exception of Argentina will continue to improve over the next few months.
Argentina continues to suffer from a sharp decline in economic activity and a
lack of policy alternatives to re-inflate the economy. Rising political tensions
have driven recent price declines. We maintain a 7% allocation to Argentina.
Brazil remains our largest position at 14%. Economic stabilization and continued
progress in the reform process have made Brazil the benchmark credit of the
region.
In Mexico we have retained our position in local currency treasury bills. Real
interest rates of close to 20%
1
<PAGE>
are attractive. Short term volatility in the Mexican Peso not withstanding a
tight fiscal and monetary policy combined with structural reform should pay off
by 1996.
We retain our allocation to the high yielding segment of the market, comprised
of Nigeria, Ecuador, Bulgaria and Venezuela. This segment has outperformed the
market this year as relative higher yields have not resulted in the same
volatility experienced by the major Latin countries.
Sincerely,
[SIG]
Robert E. Angevine
PORTFOLIO MANAGER
[SIG]
Paul Ghaffari
PORTFOLIO MANAGER
November 7, 1995
2
<PAGE>
Morgan Stanley Global Opportunity Bond Fund, Inc.
Investment Summary as of September 30, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL
INFORMATION
TOTAL RETURN (%)
-----------------------------------------------------------------------------------------
MARKET VALUE (1) NET ASSET VALUE (2) INDEX (3)
----------------------------- ---------------------------- ----------------------------
AVERAGE AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL
<S> <C> <C> <C> <C> <C> <C>
----------------------------- ---------------------------- ----------------------------
CURRENT QUARTER 4.37% -- 5.64% -- 5.96% --
FISCAL YEAR TO DATE 9.28 -- 14.53 -- 15.74 --
ONE YEAR 8.05 8.05% 6.94 6.94% 6.04 6.04%
SINCE INCEPTION* 4.35 3.22 7.18 5.29 8.27 6.08
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
- --------------------------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION (2)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERIODS ENDED SEPTEMBER 30
<S> <C> <C>
1994 9 MONTHS ENDED 9/30/95 (UNAUDITED)
Net Asset Value $12.25 $12.71
Income Dividends 0.91 1.21
Capital Gains and Other Distributions - -
Total Return (2) (6.42%) 14.53%
Index Total Return (3) (6.45%) 15.74%
</TABLE>
(1)Assumes dividends and distributions, if any, were reinvested.
(2)Total investment return based on per share net asset value reflects the
effects of changes in net asset value on the performance of the Fund during
each period, and assumes dividends and distributions, if any, were
reinvested. These percentages are not an indication of the performance of a
shareholder's investment in the Fund based on market value due to differences
between the market price of the stock and the net asset value of the Fund.
(3)JP Morgan Emerging Markets Bond Index
*The Fund commenced operations on May 27, 1994.
3
<PAGE>
Morgan Stanley Global Opportunity Bond Fund, Inc.
Portfolio Summary as of September 30, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO INVESTMENTS DIVERSIFICATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Debt Securities 99.1%
Short-Term Investments 0.9%
</TABLE>
- --------------------------------------------------------------------------------
COUNTRY WEIGHTINGS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Argentina 6.5%
Brazil 14.4%
Bulgaria 3.9%
Ecuador 6.5%
Mexico 12.2%
Morocco 4.4%
Nigeria 5.9%
Russia 10.8%
United States 29.7%
Venezuela 4.8%
Other 0.9%
</TABLE>
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS
<TABLE>
<C> <S>
1. Bank for Foreign Economic Affairs
2. Federative Republic of Brazil 'C' Bond 'Euro'
8.00%, 4/15/14 PIK
3. Petroleos Mexicanos 8.625%, 12/1/23
4. Republic of Ecuador Discount Bond 'Euro'
6.8125%, 2/28/25
5. Central Bank of Nigeria Par Bond 6.25%, 11/15/20
6. Republic of Venezuela Debt Conversion Bond 'DL'
6.8125%, 12/18/07
7. Kingdom of Morocco Restructuring and
Consolidation Agreement 'A' 1990 6.6875%, 1/1/09
8. Marvel Holdings, Inc. 0.00%, 4/15/98
9. Grupo Industrial Durango 12.00%, 7/15/01
10. Metrigas S.A. 'A' 12.00%, 8/15/00
</TABLE>
4
<PAGE>
INVESTMENTS (UNAUDITED)
(Showing Percentage of Total Value of Investments)
- ---------
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
<C> <S> <C> <C>
---------------------------------------------------------
- ------------
DEBT INSTRUMENTS (99.1%)
---------------------------------------------------------
- ------------
ARGENTINA (6.5%)
BONDS
Metrogas S.A. 'A' 12.00%,
8/15/00 U.S.$ 1,800 U.S.$ 1,771
+++ Republic of Argentina Discount
Bond 6.875%, 3/31/23 2,000 1,165
+++ Republic of Argentina Par Bond
5.00%, 3/31/23 1,000 485
-----------
3,421
-----------
---------------------------------------------------------
- ------------
BRAZIL (14.4%)
BONDS
+++ Federative Republic of Brazil
'C' Bond 'Euro' 8.00%, 4/15/14
PIK 9,832 5,236
+++ Federative Republic of Brazil
New Money Bond 7.3125%,
4/15/09 1,500 915
Iochpe Maxion 12.375%, 11/8/02 250 210
Minas Gerais 8.25%, 2/10/00 1,500 1,243
-----------
7,604
-----------
---------------------------------------------------------
- ------------
BULGARIA (3.9%)
BONDS
+++ The Republic of Bulgaria
Discount Bond 'A' 6.75%,
7/28/24 2,750 1,387
+++ The Republic of Bulgaria
Interest Arrears Bond 6.75%,
7/28/11 1,500 678
-----------
2,065
-----------
---------------------------------------------------------
- ------------
ECUADOR (6.5%)
BOND
+++ Republic of Ecuador Discount
Bond 'Euro' 6.8125%, 2/28/25 7,000 3,447
-----------
---------------------------------------------------------
- ------------
MEXICO (12.2%)
BONDS
Grupo Industrial Durango
12.00%, 7/15/01 2,300 2,127
Petroleos Mexicanos 8.625%,
12/1/23 6,000 4,350
-----------
6,477
-----------
---------------------------------------------------------
- ------------
MOROCCO (4.4%)
LOAN AGREEMENT
+++ Kingdom of Morocco
Restructuring and
Consolidation Agreement 'A'
1990 6.6875%, 1/1/09
(Participation: Goldman Sachs,
Salomon Brothers) 3,700 2,313
-----------
---------------------------------------------------------
- ------------
NIGERIA (5.9%)
BOND
Central Bank of Nigeria Par
Bond 6.25%, 11/15/20 7,000 3,140
-----------
---------------------------------------------------------
- ------------
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
<C> <S> <C> <C>
---------------------------------------------------------
- ------------
RUSSIA (10.8%)
LOAN AGREEMENT
Bank for Foreign Economic
Affairs U.S.$17,500 U.S.$ 5,734
-----------
---------------------------------------------------------
- ------------
UNITED STATES (29.7%)
BONDS
Ackerley Communications, Inc.,
'A', 10.75%, 10/1/03 800 844
AES Corp. 9.75%, 6/15/00 1,000 1,023
Arcadian Partners, L.P.,
10.75%, 5/1/05 1,000 1,050
Cablevision Systems Corp.,
9.875%, 2/15/13 1,300 1,371
Columbia Gas Systems, Inc.,
10.50%, 6/1/12 500 753
Corporate Express, Inc. 9.125%,
3/15/04 1,300 1,287
IMC Global, Inc., 9.25%,
10/1/00 450 462
Marvel Holdings, Inc. 0.00%,
4/15/98 3,000 2,179
MAXUS Energy Corp., 11.50%,
11/15/15 1,000 1,040
Owens-Illinois, Inc. 9.75%,
8/15/04 500 516
Owens-Illinois, Inc. 9.95%,
10/15/04 500 523
Pilgrim's Pride Corp., 10.875%,
8/1/03 500 480
Plantronics, Inc. 10.00%,
1/15/01 500 507
Sheffield Steel Corp. 12.00%,
11/1/01 150 138
Six Flags Theme Parks, Inc.,
0.00% to 6/15/98, 12.25% to
6/1/05 1,700 1,275
Viacom, Inc. 8.00%, 7/7/06 1,000 980
Westpoint Stevens, Inc.,
9.375%, 12/15/05 1,050 1,040
-----------
15,468
-----------
UNITS
Trump Taj Mahal PIK
(Bond + 1 share of Taj Mahal
Holding Corp. 'B' Common
Stock) 11.35%, 11/15/99 260 231
-----------
15,699
-----------
---------------------------------------------------------
- ------------
VENEZUELA (4.8%)
BOND
+++ Republic of Venezuela Debt
Conversion Bond 'DL' 6.8125%,
12/18/07 5,000 2,528
-----------
---------------------------------------------------------
- ------------
TOTAL DEBT INSTRUMENTS
(Cost U.S.$51,929) 52,428
-----------
---------------------------------------------------------
- ------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
NO. OF VALUE
WARRANTS (000)
---------------------------------------------------------
<C> <S> <C> <C>
- ------------
WARRANTS (0.0%)
---------------------------------------------------------
- ------------
NIGERIA (0.0%)
Nigeria Oil, expiring 11/15/20 7 U.S.$ --
-----------
---------------------------------------------------------
- ------------
UNITED STATES (0.0%)
Petro PSC Properties, expiring
6/1/97 1 --
Sheffield Steel Corp., expiring
11/1/01 1 4
-----------
4
-----------
---------------------------------------------------------
- ------------
TOTAL WARRANTS
(Cost U.S. $5) 4
-----------
---------------------------------------------------------
- ------------
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
<C> <S> <C> <C>
---------------------------------------------------------
- ------------
SHORT TERM INVESTMENT (0.9%)
---------------------------------------------------------
- ------------
MEXICO (0.9%)
MEXICAN CETES
2/22/96 (Cost U.S. $490) MXN 3,336 U.S.$ 456
-----------
---------------------------------------------------------
- ------------
TOTAL INVESTMENTS (100.0%)
(Cost U.S. $52,424) 52,888
-----------
---------------------------------------------------------
- ------------
OTHER ASSETS AND LIABILITIES
Other Assets U.S.$ 4,977
Liabilities (5,285) (308)
----------- -----------
---------------------------------------------------------
- ------------
NET ASSETS
Applicable to 4,138,397 issued and outstanding
U.S.$.01 par value shares (100,000,000 shares
authorized) U.S.$52,580
------------
---------------------------------------------------------
- ------------
NET ASSET VALUE PER SHARE U.S. $12.71
------------
---------------------------------------------------------
- ------------
</TABLE>
+++-- Variable/floating rate security--rate disclosed is as of September 30,
1995
PIK--Payment-in-Kind
MXN--Mexican New Peso
6
