<PAGE>
MORGAN STANLEY
GLOBAL OPPORTUNITY BOND FUND, INC.
- ---------------------------------------------
DIRECTORS AND OFFICERS
<TABLE>
<S> <C>
Barton M. Biggs William G. Morton, Jr.
CHAIRMAN OF THE BOARD DIRECTOR
OF DIRECTORS James W. Grisham
Warren J. Olsen VICE PRESIDENT
PRESIDENT AND DIRECTOR Michael F. Klein
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 Belinda A. Brady
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
73 Tremont Street
Boston, Massachusetts 02108
- ---------------------------------------------------------
CUSTODIANS
Morgan Stanley Trust Company
One Pierrepont Plaza
Brooklyn, New York 11201
The Chase Manhattan Bank
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.
---------------------
FIRST QUARTER REPORT
MARCH 31, 1997
MORGAN STANLEY ASSET MANAGEMENT INC.
INVESTMENT ADVISER
<PAGE>
LETTER TO SHAREHOLDERS
- --------
For the three months ended March 31, 1997, the Morgan Stanley Global Opportunity
Bond Fund, Inc. (the "Fund") had a total return, based on net asset value per
share, of 2.99% compared with 1.14% for the Fund's benchmark. The Fund uses as
its benchmark, for purposes of comparing its performance, a composite comprised
of 50% of the JP Morgan Emerging Markets Bond Plus Index and 50% of the CS First
Boston High Yield Index. However, the Fund's weightings in these asset classes
is not restricted and will, under normal circumstances, fluctuate depending on
market conditions. As of March 31, 1997, the Fund's portfolio was comprised of
70.5% emerging market debt securities and 25.4% U.S. high yield securities. For
the period since the Fund's commencement of operations on May 27, 1994 through
March 31, 1997, the Fund's total return, based on net asset value per share, was
52.46% compared with 54.44% for the benchmark. On March 31, 1997, the closing
price of the Fund's shares on the New York Stock Exchange was $14.75,
representing a 1.1% discount to the Fund's net asset value per share.
For the first few weeks of the year, the trend of an across the board tightening
of credit spreads in emerging markets debt continued unabated. Attractive
relative valuations, the stretch for incremental yield, improving sovereign
credits and easy global monetary conditions prompted continued increases in
allocations to emerging market assets. Chairman Greenspan's comments on the
state of credit markets, extended valuations and mispricing of risks stopped the
music suddenly. A correction in fixed income markets started in the last week of
February and lasted for practically all of the month of March.
It is always easier with hindsight to point out the excesses in financial
markets. The only common theme this time around was the fact that it was no
different than the last time we encountered clear-air turbulence in emerging
markets. Valuations always look stretched, but somehow always justifiable,
late-comers to the party are the first to get "excessively exuberant",
self-fulfilling circular loops of logic are in fashion, hot investment ideas
proliferate as bull market geniuses are spawned every day and unsuspecting
investment professionals dance to the "its different this time around" chorus.
Before anyone knows it, a bear market/serious correction suddenly appears from
out of the blue. The specific catalyst or trigger can somehow never be
anticipated, as corrections seldom arrive accompanied by the sound of drums and
music. Two things remain true no matter what: that bulls are mortal and it
always appears pitch black before the dawn of a rally. So when the Fed is
expected to move another 100 basis points in 1997, political cycles are expected
to wreck the improving economic stories, oil prices are headed to $ 10 a barrel
and some emerging country is close to a default, it will be time to buy emerging
market bonds again. Or will it?
The markets didn't surprise by behaving differently this time around. An
increase in risk premiums affected all countries and all bonds. A correction,
precipitated by possible Fed action and deepened by redemptions and a reduction
in committed capital, tends to affect the broad market. Hot investments tend to
get hit the hardest as positions need to be reduced and the demand supply
imbalance grows exponentially. The weight of money heading for the exits drowns
the fundamentals for a while. The overbought and the overowned assets
underperformed as expected. The only safe havens proved to be short-duration
floating rate bonds of Argentina, Brazil and Morocco. The resilience of the
Mexican peso surprised everyone and assets with low correlations with the broad
market performed reasonably.
Over the course of the quarter, though, the improving credit stories did
outperform. Argentina, Brazil, Bulgaria, Mexico and Morocco did manage to hold
on to positive returns. The countries with deteriorating outlooks
underperformed. Ecuador, Venezuela and Russia took up the rear of the
performance pack. The performance of Panama, Peru, Philippines and Poland proved
to be mediocre.
The Fund outperformed by sticking to our religion. Buying cheap credits with an
improving economic outlook proved successful in Bulgaria as we retained our
overweight in the best performing country for the quarter based on the premise
that a political consensus existed to undertake serious macroeconomic
stabilization
2
<PAGE>
for the first time in many years. A transition government that replaced the
ex-socialists negotiated for help from the International Monetary Fund (IMF),
World Bank and the European Union for external financing that would improve the
country's ability to implement a currency board after the elections scheduled
for mid-April. The reformers are expected to win and implement the IMF
prescribed stabilization and de-regulation program.
Our focus on values and improvement steered us away from the pitfalls in Ecuador
as an ambitious President was ousted by the population on charges of corruption,
nepotism and conservatism. Economic policies, however well crafted, need careful
execution. Ecuador reminded us that drastic reform can run the risk of a
backlash. We managed to side-step the problems by reducing our exposure as
valuations became stretched and the first sign of trouble emerged.
Mexico proved to be a difficult country in 1997. The strong tail-winds of firm
oil prices, low global interest rates and a weak peso turned into head winds for
the first time since the crisis of 1995. Expensive assets and risk of further
political upheaval before the elections in July did not warrant an excessive
allocation. The country performed well in January as excessive liquidity drove
spreads lower but has underperformed the market since.
Argentina, on the other hand, was an easier credit to invest in. A buoyant
economy, bouncing of cyclical troughs, improved domestic sentiment. Intelligent
pre-financing of the government borrowing needs during easy money conditions and
refocus on structural reform of the labor markets reduced perceived risks. A
manageable fiscal position and ample domestic liquidity helped Argentina to
remain as one of the top performers in 1997.
In South Africa, the Fund invested in rand denominated South African gilts as
high real interest rates and a cheap currency proved to be attractive. Interest
rates were maintained at high levels as the Central Bank sought to cool the
growth in private sector credit. The prospect of declining inflation over the
course of the year and a tight fiscal policy made the local bond market
attractive. The currency should find support from a much smaller trade balance
and privatization related inflows during 1997.
We reduced positions in Morocco as the economic recovery after the drought in
1995 was fully priced into current prices and implementation of structural
reforms seemed to be losing steam during 1997. The prospect of favorable ratings
also buoyed prices. We used the rally in prices during February to reduce our
allocations to Morocco. We will consider increasing them again once valuations
reach attractive levels again and are consistent with an expected rating in the
BB category.
Brazil weathered its first concern over the currency fairly well but doubts over
the sustainability of the current regime remain. The appearance of large trade
deficits cast doubts on the government's balance of policies. Clearly, in the
absence of a reduction in the growth of domestic demand, higher interest rates
or a tighter fiscal policy are inevitable. Privatizations and amendments to the
Constitution, if permitted by President Cardoso, may provide short-term relief.
The government needs to deliver on key reform initiatives this year to safeguard
the long-run viability of the Real plan. We reduced our allocations to Brazil as
relative valuations proved to be unattractive compared to the possible downside
risks in the absence of reform.
A decline in oil prices burst Venezuela's bubble. Venezuela has benefited from
the rally in oil prices as higher oil prices have increased foreign reserves of
the Central Bank as well as improved the fiscal position of the government. A
slight delay in enacting other reform measures such as the labor and severance
pay reform bill and the granting of high adjustments to salaried workers gave
investors the excuse to take profits. Price declines were severe as the
Venezuelan story had been bought by all. We did not materially change our
exposure to Venezuela during the quarter.
The outlook for emerging markets debt is dependent on the course of U.S.
interest rates. At this time it appears that another 50 basis points increase in
Fed funds will be necessary to slow demand. Higher wages and a
3
<PAGE>
resultant increase in unit labor costs threaten the period of price stability
that we have had since the late 1980's. Once this has been priced into the bond
market, and a certain amount of stability returns to the U.S. bond market,
emerging market bonds should recover. The correction in prices has restored
valuations to attractive levels. Any further declines in the absence of any
major increase in U.S. rates should prove to be buying opportunities. A buoyant
U.S. dollar, a competitive environment in goods and labor markets in the U.S., a
general lack of pricing power and the absence of a synchronized expansion in
Europe and some parts of Asia should limit the dangers of inflation in the near
term.
The U.S. high yield bond market performed well in the first quarter of 1997,
with a return that compared favorably with other U.S. asset classes. The quarter
was divided with an extremely strong performance in January and February
followed by a correction in March associated with the impact of the Federal
Reserve's decision to raise interest rates.
Securities which performed particularly well included KMart, which continued to
post favorable results. Our holding in Echostar, a satellite television service,
performed strongly on the news that a division of News Corporation planned to
purchase 50% of the company. The only notable underperforming position was
Paging Network, Inc. While PageNet is the leader in the U.S. paging industry, it
has recently suffered from investor skepticism regarding the success of its new
enhanced voice-messaging service.
In terms of sector exposure, we added to our telecommunications sector on
weakness late in the quarter. In contrast, we reduced our cable television
exposure in the first quarter. We had added to our cable holdings in 1996 when
the sector underperformed the broader high-yield market, and then were able to
take profits as prices rebounded early in the first quarter.
Our overall portfolio structure continues to feature average credit quality
somewhat higher than market benchmarks. Our duration and interest rate
sensitivity is moderately longer than that of market benchmarks. We believe the
value in the U.S. bond market as well as the opportunities we see in the high
yield sector continue to make this an appropriate position.
Sincerely,
[SIGNATURE]
Warren J. Olsen
PRESIDENT AND DIRECTOR
[SIGNATURE]
Robert E. Angevine
PORTFOLIO MANAGER
[SIGNATURE]
Paul Ghaffari
PORTFOLIO MANAGER
April 1997
4
<PAGE>
Morgan Stanley Global Opportunity Bond Fund, Inc.
Investment Summary as of March 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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>
---------------------------- ---------------------------- ----------------------------
FISCAL YEAR TO DATE 3.45% -- 2.99% -- 1.14% --
ONE YEAR 29.75 29.75% 31.54 31.54% 22.90 22.90%
SINCE INCEPTION* 50.74 15.51 52.46 15.97 54.44 16.51
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
- --------------------------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
A BAR CHART REFLECTING THE DATA BELOW IS REFLECTED HERE.
<TABLE>
<CAPTION>
TOTAL RETURN
YEARS ENDED DECEMBER 31:
1994* 1995 1996 THREE MONTHS ENDED MARCH 31, 1997
<S> <C> <C> <C> <C>
Net Asset Value Per Share $12.25 $12.99 $14.86 $14.92
Market Value Per Share $12.50 $12.50 $14.63 $14.75
Premium/(Discount) 2.0% -3.8% -1.5% -1.1%
Income Dividends $0.91 $1.59 $1.49 $0.38
Capital Gains Distributions _ _ $0.50 _
Fund Total Return (2) -6.42% 20.34% 31.45% 2.99%
Index Total Return (3) -0.46% 22.37% 25.36% 1.14%
Morgan Stanley Global Opportunity Bond Fund, Inc. (2)
Global Opportunity Blended Composite (3)
J.P. Morgan Emerging Markets Bond Index
</TABLE>
(1) Assumes dividends and distributions, if any, were reinvested.
(2) Total investment return based on net asset value per share 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
per share of the Fund.
(3) Prior to fiscal year 1997, the Fund used the J.P. Morgan Emerging Markets
Bond Index for performance purposes. Beginning in 1997, the Fund is now
using a Global Opportunity Blended Composite comprised of 50% of the JP
Morgan Emerging Markets Bond Plus Index and 50% of the CS First Boston High
Yield Index for the purpose of performance comparisons. This composite
better represents the investment strategy of the Fund. However, the Fund's
weighting in these asset classes is not restricted and will, under normal
circumstances, fluctuate depending on market conditions. As of March 31,
1997, the Fund's portfolio was comprised of 70.5% emerging market debt
securities and 25.4% U.S. high yield securities.
* The Fund commenced operations on May 27, 1994.
5
<PAGE>
Morgan Stanley Global Opportunity Bond Fund, Inc.
Portfolio Summary as of March 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO INVESTMENTS DIVERSIFICATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Debt Securities 94.0%
Equity Securities 1.8%
Short-Term Investments 4.2%
</TABLE>
- --------------------------------------------------------------------------------
COUNTRY WEIGHTINGS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
United States 30.6%
Argentina 16.2%
Russia 15.1%
Brazil 10.4%
Mexico 7.6%
Bulgaria 6.6%
Venezuela 6.1%
Ivory Coast 3.0%
Ecuador 2.1%
Jamaica 1.7%
Other 0.6%
</TABLE>
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS*
<TABLE>
<CAPTION>
PERCENT OF
NET ASSETS
------------
<C> <S> <C>
1. Republic of Russia Debt 15.1%
2. Republic of Argentina Debt 12.4
3. Federative Republic of Brazil Debt 10.0
4. The Republic of Bulgaria Debt 6.6
5. Republic of Venezuela Debt 6.1
<CAPTION>
PERCENT OF
NET ASSETS
------------
<C> <S> <C>
6. United Mexican States Debt 4.2%
7. Empresas ICA Sociedad Controladora S.A. 3.4
8. Republic of Ivory Coast Debt 3.0
9. Industrias Pescarmona S.A. 2.1
10. The Republic of Ecuador Debt 2.1
-----
65.0%
-----
-----
</TABLE>
*Excludes short-term investments.
6
<PAGE>
INVESTMENTS (UNAUDITED)
- ---------
MARCH 31, 1997
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
<S> <C> <C>
- --------------------------------------------------------
- ------------
DEBT INSTRUMENTS (93.1%)
- --------------------------------------------------
- ----------
ARGENTINA (16.2%)
BONDS
Industrias Pescarmona S.A. 144A 11.75%, 3/27/98 U.S.$ 1,250 U.S.$ 1,284
Metrogas S.A. 'B' 10.875%, 5/15/01 1,000 1,065
Republic of Argentina 6.75%, 3/31/05 6,936 6,207
Republic of Argentina 11.75%, 2/12/07 ARP 1,250 1,257
Republic of Argentina 11.375%, 1/30/17 U.S.$ 225 232
-------------
10,045
-------------
- --------------------------------------------------------
- ------------
BRAZIL (5.8%)
BONDS
Federative Republic of Brazil 'C' Bond PIK
8.00%, 4/15/04 2,203 1,640
+Federative Republic of Brazil Debt Conversion
'L' Bond 6.56%, 4/15/12 1,350 1,065
+Federative Republic of Brazil Discount 'Z-L'
Bond 6.50%, 4/15/24 1,100 883
-------------
3,588
-------------
- --------------------------------------------------------
- ------------
BULGARIA (6.6%)
BONDS
The Republic of Bulgaria Discount Bond 'A' Euro
6.56%, 7/28/24 950 564
The Republic of Bulgaria Front Loaded Interest
Reduction Bond 2.25%, 7/28/12 5,450 2,296
+The Republic of Bulgaria Past Due Interest Bond
6.56%, 7/28/11 2,140 1,224
-------------
4,084
-------------
- --------------------------------------------------------
- ------------
COLOMBIA (0.5%)
BOND
Occidente y Caribe 0.00%, 3/15/04 525 320
-------------
- --------------------------------------------------------
- ------------
ECUADOR (2.1%)
BONDS
+The Republic of Ecuador 3.50%, 2/28/25 250 103
+The Republic of Ecuador Past Due Interest Bond
PIK 6.44%, 2/27/15 2,045 1,164
-------------
1,267
-------------
- --------------------------------------------------------
- ------------
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
<S> <C> <C>
- --------------------------------------------------------
- ------------
IVORY COAST (3.0%)
LOAN AGREEMENTS
Republic of Ivory Coast Syndicated Loan, Zero
Coupon, 12/31/00 U.S.$ 450 U.S.$ 172
Republic of Ivory Coast Syndicated Loan, Zero
Coupon, 12/31/00 FRF 20,100 1,445
Republic of Ivory Coast Syndicated Loan, Zero
Coupon, 12/31/00 DEM 1,105 259
-------------
1,876
-------------
- --------------------------------------------------------
- ------------
JAMAICA (1.7%)
BOND
Mechala Group Jamaica, Ltd. 12.75%, 12/30/99 U.S.$ 1,000 1,035
-------------
- --------------------------------------------------------
- ------------
MEXICO (7.6%)
BONDS
Empresas ICA Sociedad Controladora S.A. 11.875%,
5/30/01 2,000 2,130
National Financiera 17.00%, 2/26/99 ZAR 4,000 892
United Mexican States 6.375%, 9/9/97 U.S.$ 2,500 1,680
-------------
4,702
-------------
- --------------------------------------------------------
- ------------
PANAMA (0.8%)
BONDS
+Republic of Panama Interest Reduction Bond
3.50%, 7/17/14 550 384
Republic of Panama Past Due Interest Bond PIK
6.56%, 7/17/16 101 81
-------------
465
-------------
- --------------------------------------------------------
- ------------
PERU (1.5%)
BONDS
Republic of Peru Front Loaded Interest Reduction
Bond Euro 3.25%, 3/7/17 750 388
Republic of Peru Front Loaded Interest Reduction
Bond 144A 3.25%, 3/7/17 1,000 517
-------------
905
-------------
- --------------------------------------------------------
- ------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- --------------------------------------------------------
- ------------
<S> <C> <C>
RUSSIA (15.1%)
BONDS (9.4%)
Ministry of Finance Tranche IV 3.00%, 5/14/03 U.S.$ 6,650 U.S.$ 4,081
Ministry of Finance Tranche VI GDR 3.00%,
5/14/06 2,600 1,259
Russia Past Due Interest Bond 750 507
-------------
5,847
-------------
LOAN AGREEMENTS (5.7%)
Bank for Foreign Economic Affairs
(Participation: Salomon Brothers, Inc.) 2,000 1,565
Russia Principal Notes 3,500 1,969
-------------
3,534
-------------
9,381
-------------
- --------------------------------------------------------
- ------------
SOUTH AFRICA (1.7%)
BOND
Republic of South Africa '150' 12.00%, 2/28/05 ZAR 5,300 1,029
-------------
- --------------------------------------------------------
- ------------
UNITED STATES (24.4%)
ASSET BACKED SECURITIES (1.6%)
Aircraft Lease Portfolio Securitization Ltd.,
1996-1 P1D 12.75%, 6/15/06 U.S.$ 375 394
DR Securitized Lease Trust 1993-K1 A1 6.66%,
8/15/10 164 141
1994-K1 A1 7.60%, 8/15/07 487 449
-------------
984
-------------
BONDS (22.5%)
Advanced Micro Devices, Inc. 11.00%, 8/1/03 260 286
Amresco Inc. '97-A' 10.00%, 3/15/04 240 238
Anthem Insurance 9.00%, 4/1/27 175 173
Borg-Warner Security Corp. 9.625%, 3/15/07 265 261
Boyd Gaming Corp. 9.25%, 10/1/03 260 246
Brooks Fiber Properties
0.00%, 3/1/06 700 443
0.00%, 11/1/06 160 96
CA FM Lease Trust 8.50%, 7/15/17 250 252
Cablevision Systems Corp. 9.875%, 5/15/06 405 401
Comcast Cellular Corp.
'A' Zero Coupon, 3/5/00 100 74
'B' Zero Coupon, 3/5/00 465 342
Comcast Corp. 9.375%, 5/15/05 190 195
- --------------------------------------------------------
- ------------
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
<S> <C> <C>
- --------------------------------------------------------
- ------------
UNITED STATES (CONTINUED)
Courtyard By Marriott 'B' 10.75%, 2/1/08 U.S.$ 400 U.S.$ 417
Dial Call Communications 'B' 0.00%, 12/15/05 165 116
Digital Equipment 8.625%, 11/1/12 125 122
Echostar Satellite Broadcast 0.00%, 3/15/04 395 315
First Nationwide
9.125%, 2/15/03 200 204
10.625%, 10/1/03 95 102
Gaylord Container Corp.
11.50%, 5/15/01 500 526
12.75%, 5/15/05 180 198
Grand Casinos 10.125%, 12/1/03 400 397
HMC Acquisition Properties 9.00%, 12/15/07 350 353
Homeside, Inc. 11.25%, 5/15/03 52 59
Host Marriott Travel 9.50%, 5/15/05 450 457
ISP Holdings, Inc. 9.00%, 10/15/03 395 398
IXC Communications, Inc. 12.50%, 10/1/05 165 183
Jet Equipment Trust 'C-1' 11.79%, 6/15/13 175 207
KMart Corp. 7.75%, 10/1/12 125 109
Marcus Cable Co. 0.00%, 12/15/05 280 193
Midland Cogeneration Ventures
'C-91' 10.33%, 7/23/02 24 25
'C-94' 10.33%, 7/23/02 188 200
Midland Funding II 'A' 11.75%, 7/23/05 80 88
Nextel Communications 0.00%, 8/15/04 1,010 697
Norcal Waste Systems Inc. 13.00%, 11/15/05 500 555
Nuevo Energy Co. 9.50%, 4/15/06 240 247
Owen-Illinois, Inc. 11.00%, 12/1/03 285 315
Paging Network Inc.
10.00%, 10/15/08 215 198
10.125%, 8/1/07 80 75
Qwest Communications International 10.875%,
4/1/07 235 234
Riggs Capital Trust II 8.875%, 3/15/27 265 265
RJR Nabisco Inc. 8.75%, 4/15/04 265 264
Rogers Cablesystems 'B' 10.00%, 3/15/05 425 448
- --------------------------------------------------------
- ------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- --------------------------------------------------------
- ------------
<S> <C> <C>
UNITED STATES (CONTINUED)
Rogers Communications, Inc. 9.125%, 1/15/06 U.S.$ 90 U.S.$ 89
SD Warren Co. 'B' 12.00%, 12/15/04 215 239
Southland Corp. 5.00%, 12/15/03 290 238
Stone Container Corp. 11.50%, 8/15/06 125 123
Sun International Hotels 9.00%, 3/15/07 85 82
TCI Satellite Entertainment 0.00%, 2/15/07 565 260
Tele-Communications, Inc. 9.25%, 1/15/23 500 481
Teleport Communications 0.00%, 7/1/07 505 342
Tenet Healthcare Corp. 8.625%, 1/15/07 200 197
TLC Beatrice International Holdings 11.50%,
10/1/05 255 274
Viacom, Inc. 8.00%, 7/7/06 475 447
Vintage Petroleum 8.625%, 2/1/09 200 190
-------------
13,936
-------------
COLLATERALIZED MORTGAGE OBLIGATION (0.3%)
First Home Mortgage Acceptance Corp., Series
1996-B, Class C, 7.9289%, 11/1/18 250 208
-------------
15,128
-------------
- --------------------------------------------------------
- ------------
VENEZUELA (6.1%)
BONDS
Republic of Venezuela Discount Bonds 'A' 6.44%,
3/31/20 1,400 1,138
Republic of Venezuela Discount Bonds 'B' 6.44%,
3/31/20 700 569
Republic of Venezuela Front Loaded Interest
Reduction Bond 'A' 6.75%, 3/31/07 714 623
Republic of Venezuela Front Loaded Interest
Reduction Bond 'B' 6.75%, 3/31/07 1,667 1,454
-------------
3,784
-------------
- --------------------------------------------------------
- ------------
TOTAL DEBT INSTRUMENTS
(Cost U.S. $57,747) 57,609
-------------
- --------------------------------------------------------
- ------------
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
<S> <C> <C>
- --------------------------------------------------------
- ------------
STRUCTURED INVESTMENT (4.2%)
- --------------------------------------------------------
- ------------
BRAZIL
Federative Republic of Brazil Credit Linked
Enhanced Note 9.00%, 1/15/99
(Cost U.S. $2,500) U.S.$ 2,500 U.S.$ 2,572
-------------
- --------------------------------------------------------
- ------------
<CAPTION>
NO. OF
UNITS
<S> <C> <C>
- --------------------------------------------------------
- ------------
UNITS (0.4%)
- --------------------------------------------------------
- ------------
BRAZIL
Globalstar L.P. 11.375%, 2/15/04 (Sr. Notes + 1
Warrant) (Cost U.S. $279) 280,000 274
-------------
- --------------------------------------------------------
- ------------
<CAPTION>
NO. OF
WARRANTS
<S> <C> <C>
- --------------------------------------------------------
- ------------
WARRANTS (0.0%)
- --------------------------------------------------------
- ------------
COLOMBIA (0.0%)
Occidente y Caribe, expiring 3/15/04 2,100 --@
-------------
- --------------------------------------------------------
- ------------
VENEZUELA (0.0%)
Republic of Venezuela Oil, expiring 4/15/20 14,995 --@
-------------
- --------------------------------------------------------
- ------------
TOTAL WARRANTS (Cost U.S. $0) --@
-------------
- --------------------------------------------------------
- ------------
<CAPTION>
NO. OF
CONTRACTS
<S> <C> <C>
- --------------------------------------------------------
- ------------
PURCHASED OPTION (0.0%)
- --------------------------------------------------------
- ------------
BRAZIL
Federative Republic of Brazil 'C' Bond Call
Option, Strike price 77.40625, expiring 4/7/97
(Cost U.S. $61) 39,000 --@
-------------
- --------------------------------------------------------
- ------------
<CAPTION>
NO. OF
RIGHTS
<S> <C> <C>
- --------------------------------------------------------
- ------------
RIGHTS (0.0%)
- --------------------------------------------------------
- ------------
MEXICO
United Mexican States Par Bond Value Recovery
Rights, expiring 6/30/03 (Cost U.S. $0) 1,538,000 --@
-------------
- --------------------------------------------------------
- ------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------------------------------------------------
- ------------
<S> <C> <C>
PREFERRED STOCKS (1.9%)
- --------------------------------------------------------
- ------------
UNITED STATES
TCI Communications, Inc. 5.00% (Convertible) 2,985 U.S.$ 273
Time Warner, Inc. Series 'M' 10.25% 666 719
Sinclair Capital 11.625% 1,850 184
-------------
- --------------------------------------------------------
- ------------
TOTAL PREFERRED STOCKS
(Cost U.S. $1,129) 1,176
-------------
- --------------------------------------------------------
- ------------
<CAPTION>
FACE
AMOUNT
(000)
<S> <C> <C>
- --------------------------------------------------------
- ------------
SHORT-TERM INVESTMENT (4.3%)
- --------------------------------------------------------
- ------------
UNITED STATES
REPURCHASE AGREEMENT
Chase Securities, Inc., 6.00%, dated 3/31/97, due
4/1/97, to be repurchased at U.S. $2,675,
collateralized by United States Treasury
Notes, 6.75%, due 4/30/00, valued at U.S.
$2,734
(Cost U.S. $2,675) U.S.$ 2,675 2,675
-------------
- --------------------------------------------------------
- ------------
TOTAL INVESTMENTS (103.9%)
(Cost U.S. $64,391) 64,306
-------------
- --------------------------------------------------------
- ------------
OTHER ASSETS AND LIABILITIES (-3.9%)
Other Assets 10,923
Liabilities (13,363) (2,440)
------------- -------------
- --------------------------------------------------------
- ------------
NET ASSETS (100%)
Applicable to 4,145,999 issued and outstanding
U.S.$0.01 par value shares (100,000,000 shares
authorized) U.S.$ 61,866
-------------
-------------
- --------------------------------------------------------
- ------------
NET ASSET VALUE PER SHARE U.S.$ 14.92
-------------
-------------
- --------------------------------------------------------
- ------------
</TABLE>
+ -- Variable/floating rate security -- rate disclosed is as of March 31,
1997.
@ -- Value is less than U.S. $500.
GDR -- Global Depositary Receipt
PIK -- Payment-in-Kind. Income may be paid in additional securities or cash at
the discretion of the issuer.
10
