<PAGE>
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MORGAN STANLEY
GLOBAL OPPORTUNITY
BOND FUND, INC.
- --------------------------------------------------------------------------------
FIRST QUARTER REPORT
MARCH 31, 1999
MORGAN STANLEY DEAN WITTER INVESTMENT
MANAGEMENT INC.
INVESTMENT ADVISER
MORGAN STANLEY
GLOBAL OPPORTUNITY BOND FUND, INC.
- --------------------------------------------------------------------------------
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DIRECTORS AND OFFICERS
Barton M. Biggs
CHAIRMAN OF THE BOARD
OF DIRECTORS
Michael F. Klein
PRESIDENT AND DIRECTOR
Peter J. Chase
DIRECTOR
John W. Croghan
DIRECTOR
David B. Gill
DIRECTOR
Graham E. Jones
DIRECTOR
John A. Levin
DIRECTOR
William G. Morton, Jr.
DIRECTOR
Stefanie V. Chang
VICE PRESIDENT AND ACTING
SECRETARY
Harold J. Schaaff, Jr.
VICE PRESIDENT
Joseph P. Stadler
VICE PRESIDENT
Joanna M. Haigney
TREASURER
Belinda A. Brady
ASSISTANT TREASURER
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INVESTMENT ADVISER
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
- --------------------------------------------------------------------------------
ADMINISTRATOR
The Chase Manhattan Bank
73 Tremont Street
Boston, Massachusetts 02108
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CUSTODIAN
The Chase Manhattan Bank
3 Chase MetroTech Center
Brooklyn, New York 11245
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SHAREHOLDER SERVICING AGENT
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
(800) 278-4353
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LEGAL COUNSEL
Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
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INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
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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 or visit our website at
www.msdw.com/institutional/investmentmanagement.
<PAGE>
LETTER TO SHAREHOLDERS
- ---------
For the three months ended March 31, 1999, the Morgan Stanley Global Opportunity
Bond Fund, Inc. (the "Fund") had a total return, based on net asset value per
share, of 4.98% compared to 3.24% for the Fund's benchmark (described below).
For the period since the Fund's commencement of operations on May 27, 1994
through March 31, 1999, the Fund's total return, based on net asset value per
share, was 43.09% compared to 62.42% for the benchmark. The Fund uses as its
benchmark, for purposes of comparing its performance, a composite comprised of
25% of the J.P. Morgan Latin Eurobond Index, 25% of the J.P. 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. At
March 31, 1999, the Fund's investments in debt instruments were comprised of 67%
emerging markets debt securities and 33% U.S. high yield securities.
On March 31, 1999, the closing price of the Fund's shares on the New York Stock
Exchange was $9.00, representing an 8.5% discount to the Fund's net asset value
per share.
During the first quarter of 1999, emerging market investors decided that many of
the negative external factors overhanging the market were reflected in debt
prices and that the worst in terms of economic conditions would soon pass. As a
result, despite a poor start, the Fund had a strong rebound during the latter
part of the first quarter of 1999. The challenges facing emerging market
countries as they entered 1999 were daunting. The prospects for lower
Organization for Economic Co-operation and Development (OECD) growth, continued
weak commodity prices, global excess capacity and rising deficits were enough to
discourage even the most optimistic investor. However, OECD growth as a whole
held up a little better than expected during the first quarter. The Japanese
economy stabilized, at least temporarily, which helped to underpin a modest
recovery in most of the economies of Emerging Asia. The U.S. economy continued
to perform above trend while weakness was evident only in the Euro block
countries. Another positive surprise was higher oil prices, which resulted from
a mid-March OPEC agreement to cut oil production. This development eased the
fiscal pressures burdening many of the commodity exporting countries this year.
While base metals and other commodity prices remain weak, the 45% move in the
price of oil since the beginning of the year will serve as a windfall to
emerging countries such as Ecuador, Mexico, Russia and Venezuela. Still, global
excess oil capacity remains high and the moderate OECD growth rates will not
materially improve the outlook for oil. But to their credit, emerging countries
have by and large made the necessary adjustments to cope with the realities of
lower revenues from commodity exports and higher costs of capital.
During the month of January 1999, the Fund benefited from underweight positions
in Ecuador, Brazil and Venezuela, the three worst performing countries for the
month. Fund performance was enhanced by overweights in Mexico and Bulgaria, and
to a lesser extent South Korea, as assets rallied in response to an upward
revision in the country's credit rating and outlook by S&P. An underweight in
Poland and Nigeria, the only other countries to post positive returns in
January, detracted from performance. Also during January, Brazil floated its
currency. The real subsequently depreciated 42% during the month. The
immediate economic fallout will be felt in the form of a deeper economic
contraction, higher inflation, higher interest rates and a deteriorating public
sector debt dynamic. The Brazilians will need to make further fiscal cuts and
adhere to tighter monetary policy to combat the short-term negative effects of
the devaluation.
For the month of February, Latin America led the market higher as Brazil, Peru
and Venezuela were among the top four performers during the month. Bulgaria,
with a 4.22% return, was the only non-Latin country to post strong positive
returns. Latin America also produced one of the worst performers of the month
as Ecuador declined by 9.67% due to a deteriorating fiscal and political
environment, which has reduced the prospects for IMF aid this year. Ecuadorian
bonds are trading at distressed levels reflecting the fact that without
multi-lateral aid, the probability of default this year is high. Russia was the
only country to fair worse, with a total return of -9.76% for the month, as
investors continued to doubt the government's ability to service its external
debt. Since the crisis last summer, the Russians have not articulated a coherent
economic policy framework. In the absence of such a framework, the prospects
for hyperinflation and continued capital flight remain high. Fund returns were
aided by overweights in Bulgaria, Turkey, Colombia and, to a lesser extent,
Peru. Underperformance attributable to underweight positions in Brazil and
Venezuela was mitigated somewhat by beneficial security selection within those
countries.
2
<PAGE>
Emerging markets debt staged a significant rally in the month of March. The
market was led higher by the riskier Latin American credits, with Brazil,
Ecuador and Venezuela producing the best returns for the month. Despite a
positive 14.87% return in March, Ecuadorian assets remain the worst performers
in 1999, as Ecuador has returned -7.98% year to date. In general, the Fund
rallied in March as many of the negative events that had been anticipated by
investors failed to materialize. Inflation in Brazil, while still high by most
standards, was tamer than expected allowing the Central Bank to lower domestic
interest rates sooner than had been anticipated. The current government in
Ecuador was able to piece together a fragile political coalition in support of a
fiscal reform package that is a pre-condition to any agreement with the IMF.
While the situation remains tenuous and banking sector reform still needs to be
addressed, the formation of this coalition is a significant first step towards
reform and again was unanticipated by the general market. Lastly, the recent
rebound in the price of oil had a significant positive impact on Venezuelan,
Mexican and Russian assets.
The conflict in Kosovo proved to be the only cloud hanging over the Fund in
March. Bulgarian assets bore the brunt of investors' fears, as Bulgarian debt
declined by 2.99%, making it the only country to produce negative returns last
month. While Bulgaria shares a border with Serbia, the trade links between the
countries are limited. Exports to Yugoslavia account for approximately 2.2% of
Bulgaria's total exports. However, most of the trade routes from Bulgaria to
Western Europe run through Yugoslavia and are now effectively closed due to the
war. Bulgarian goods must now be transported by a more circuitous route, which
will hinder trade flows in the future. In addition, fears that the war will
spread and destabilize the entire Balkan region adversely impacted Bulgaria's
performance. An overweight in Bulgarian assets and an underweight in Venezuelan
assets dampened Fund returns in March.
This confluence of positive external developments mentioned above helped propel
emerging debt prices during the first quarter and is likely to continue to
provide the necessary environment for a continued rally in the months ahead.
However, these conditions remain fragile. It may only be a matter of months
before OPEC quotas are ignored and the recent run up in oil prices reverses.
The nascent recovery in Japan appears to us to have been driven by last summer's
fiscal stimulus package. The effects of the government work spending became
visible during the fourth quarter of 1998 and the first quarter of 1999. All
other sectors of the economy continued to decline. So far, Brazil has done an
estimable job of managing investor expectations and market technicalities.
However, the difficult tasks of holding the line on fiscal cuts and implementing
structural reforms remain ahead. In short, the developments in March were
undoubtedly positive for the market, but the gains may be fleeting. Therefore we
will shift to a more aggressive posture only upon further evidence that these
positive trends are sustainable.
Concerning the domestic portion of the Fund's portfolio, the U.S. high yield
market outperformed high quality bonds in the first quarter as investors
continued to be more willing to bear risk. Despite volatility and a sell off
in the Treasury market, robust mergers and acquisitions activity, evidence of a
stronger than expected U.S. economy, and solid inflows into high yield mutual
funds contributed to the strength in the sector. In addition, a strong equity
market, rising energy prices and relative stability in the emerging markets also
helped the performance of high yield bonds.
The positive results versus the benchmark were primarily a result of a large
overweight in the telecommunications sector, which continued to demonstrate
strong performance. Results also benefited from security selection across
sectors, and from an underweight in the energy sector, which performed poorly.
Exposure to the healthcare sector, which is under pressure, and an underweight
in cyclical issues, which started to rebound in the first quarter of 1999,
detracted from relative performance.
Cyclical issues rebounded somewhat in the period. While the Fund has benefited
as certain individual cyclical credits have done well, being underweighted in
these issues was a negative for returns. Pricing has been somewhat better in
many product lines, but security prices may be a bit ahead of the fundamentals
in some cases. For example, capacity utilization in steel is still at
unacceptable levels and the likelihood of strong profitability is questionable
for many companies. However, the level of imports is declining and some price
increases are taking hold.
The weakest sectors have been healthcare and energy as weak industry pricing has
put serious pressure on the most leveraged competitors. The price of Vencor, a
holding in the long-term care segment, has fallen dramatically due to difficulty
adjusting to a new regulatory pricing scheme. In addition, Columbia HCA, an
important holding that we believe is a sound credit, sold off when it lost its
investment grade rating by S&P. Until recently, weak oil prices depressed the
energy sector. OPEC pledged to reduce production and several major oil
companies have announced mergers with the likely result that combined drilling
plans will be reduced significantly. This should be
3
<PAGE>
beneficial for the exploration and production companies that survive, but spells
continued problems for drilling companies and other service companies.
Even with the rebound in the high yield market relative to high quality bonds,
we continue to believe that the sector offers attractive relative value.
Spread levels versus high quality bonds are still at levels that are wider than
long term averages at a time when the economy and credit quality of most issuers
is strong. High yield bonds also appear compelling versus equities on a risk
adjusted expected return basis.
Sincerely,
/s/ Michael F. Klein
Michael F. Klein
PRESIDENT AND DIRECTOR
April 1999
THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL THE SECURITIES MENTIONED.
- --------------------------------------------------------------------------------
DAILY NET ASSET AND MARKET VALUES, AS WELL AS MONTHLY PORTFOLIO CHARACTERISTICS,
CAN NOW BE ACCESSED AT WWW.MSDW.COM/INSTITUTIONAL/INVESTMENTMANAGEMENT.
4
<PAGE>
Morgan Stanley Global Opportunity Bond Fund, Inc.
Investment Summary as of March 31, 1999 (Unaudited)
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<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 11.36% -- 4.98% -- 3.24% --
One Year -25.34 -25.34% -22.09 -22.09% -3.95 -3.95%
Since Inception* 30.88 5.71 43.09 7.67 62.42 10.53
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
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RETURNS AND PER SHARE INFORMATION:
[GRAPH]
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS
ENDED
MARCH 31,
1994* 1995 1996 1997 1998 1999
------- ------- ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value Per Share. . . . . $12.25 $12.99 $14.86 $13.74 $ 9.64 $9.84
Market Value Per Share . . . . . . $12.50 $12.50 $14.63 $13.13 $ 8.31 $9.00
Premium/(Discount) . . . . . . . . 2.0% -3.8% -1.5% -4.4% -13.8% -8.5%
Income Dividends . . . . . . . . . $ 0.91 $ 1.59 $ 1.49 $ 1.30 $ 1.18 $0.26
Capital Gains Distributions. . . . -- -- $ 0.50 $ 2.30 $ 0.06 --
Fund Total Return (2). . . . . . . -6.42% 20.34% 31.45% 17.38% -21.57% 4.98%
Index Total Return (3) . . . . . . -0.46% 22.03% 20.58% 12.56% -3.19% 3.24%
</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) The Fund uses as its benchmark, for purpose of comparing its
performance, a composite comprised of 25% of the J.P. Morgan Latin
Eurobond Index, 25% of the J.P. Morgan Emerging Markets Bond Plus Index,
and 50% of the CS First Boston High Yield Index. 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, 1999, the Fund's investment in debt instruments was comprised
of 67% emerging markets debt securities and 33% 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, 1999 (Unaudited)
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DIVERSIFICATION OF TOTAL INVESTMENTS
[CHART]
<TABLE>
<S> <C>
Debt Instruments (95.3%)
Equity Securities (1.0%)
Short-Term Investments (3.7%)
</TABLE>
- --------------------------------------------------------------------------------
COUNTRY WEIGHTINGS
[CHART]
<TABLE>
<S> <C>
Other (17.1%)
Russia (1.9%)
Philippines (1.9%)
United Kingdom (2.0%)
Korea (2.1%)
Bulgaria (3.1%)
Colombia (3.4%)
Argentina (11.6%)
Brazil (11.8%)
United States (32.2%)
Mexico (12.9%)
</TABLE>
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TEN LARGEST HOLDINGS*
<TABLE>
<CAPTION>
PERCENT OF
TOTAL
INVESTMENTS
-----------
<S> <C>
1. Republic of Argentina 'L'
6.188%, 3/31/05 (Argentina) 5.6%
2. United Mexican States Par Bond
6.25%, 12/31/19 (Mexico) 4.5
3. Republic of Argentina Global Units (Euro)
12.125%, 2/15/19 (Argentina) 3.9
4. United Mexican States Discount Bond
12/31/19 (Mexico) 3.1
5. Federative Republic of Brazil 'EI-L' Bond
6.625%, 4/15/06 (Brazil) 2.7
6. United Mexican States Euro Bond
10.375%, 2/17/09 (Mexico) 2.4%
7. Federative Republic of Brazil 'C' Bond PIK
8.00%, 4/15/14 (Brazil) 2.4
8. United Mexican States Global Bond
11.375%, 9/15/16 (Mexico) 2.3
9. Republic of Colombia Global Euro
10.875%, 3/9/04 (Colombia) 2.0
10. Federative Republic of Brazil Debt
Conversion 'L' Bond
6.688%, 4/15/12 (Brazil) 1.8
----
30.7%
----
----
</TABLE>
* Excludes short-term investments.
6
<PAGE>
FINANCIAL STATEMENTS
- ---------
STATEMENT OF NET ASSETS (UNAUDITED)
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- ---------
MARCH 31, 1999
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
DEBT INSTRUMENTS (95.3%)
- --------------------------------------------------------------------------------
ARGENTINA (11.6%)
Corporate (1.0%)
CIA International Telecom
(a)10.375%, 8/1/04 ARP 400 U.S.$ 310
10.375%, 8/1/04 100 78
(a)Supercanal Holdings S.A.
11.50%, 5/15/05 U.S.$ 200 90
-----------
478
-----------
SOVEREIGN (10.6%)
Republic of Argentina
11.75%, 4/7/09 500 486
(c)Republic of Argentina 'L'
6.188%, 3/31/05 2,971 2,546
Republic of Argentina Global
Units (Euro)
12.125%, 2/15/19 1,800 1,783
-----------
4,815
-----------
5,293
-----------
- --------------------------------------------------------------------------------
AUSTRALIA (0.6%)
CORPORATE (0.6%)
Glencore Nickel Property Ltd.
9.00%, 12/1/14 155 133
Murrin Murrin Holdings
Property Ltd.
9.375%, 8/31/07 135 121
-----------
254
-----------
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BRAZIL (11.8%)
CORPORATE (0.2%)
(a,c)Compania Energetica Sao Paulo
9.125%, 6/26/07 100 80
-----------
SOVEREIGN (11.6%)
Brazil Global Bond
10.125%, 5/15/27 1,000 730
(c)Federative Republic of Brazil
Debt Conversion 'L' Bond
6.188%, 4/15/12 260 152
(c)Federative Republic of Brazil
'C' Bond PIK
8.00%, 4/15/14 1,693 1,074
(c)Federative Republic of Brazil
'EI-L' Bond
6.625%, 4/15/06 1,718 1,246
Federative Republic of Brazil 'L'
4.50%, 1/1/80 300 166
Federative Republic of Brazil
Debt Conversion 'L' Bond
6.688%, 4/15/12 1,430 834
Federative Republic of Brazil E-I Euro
6.125%, 4/15/06 730 529
Federative Republic of Brazil
New Money Bond 'L'
6.75%, 1/1/80 U.S.$ 760 U.S.$ 483
Federative Republic of Brazil
New Money Bond 'L'
6.188%, 4/15/09 130 83
-----------
5,297
-----------
5,377
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BULGARIA (3.1%)
SOVEREIGN (3.1%)
(c)Republic of Bulgaria Discount
Bond 'A' Euro
6.688%, 7/28/24 1,140 775
(c)Republic of Bulgaria Front Loaded
Interest Reduction Bond
2.50%, 7/28/12 550 315
(b)Republic of Bulgaria Past Due
Interest Bond
6.688%, 7/28/11 480 323
-----------
1,413
-----------
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CANADA (0.1%)
CORPORATE (0.1%)
Tembec Industries, Inc.
8.625%, 6/30/09 35 36
-----------
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CHILE (1.4%)
CORPORATE (1.4%)
(a)Embotelladora Africa S.A.
9.875%, 3/15/06 325 327
Endesa
7.75%, 7/15/08 315 305
-----------
632
-----------
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COLOMBIA (3.4%)
CORPORATE (0.1%)
(b)Transtel Structured Note
1.57%, 8/13/08 550 61
-----------
SOVEREIGN (3.3%)
Republic of Colombia Global Euro
10.875%, 3/9/04 890 923
(b)Republic of Columbia
8.82%, 8/13/05 600 550
-----------
1,473
-----------
1,534
-----------
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ECUADOR (1.2%)
CORPORATE (0.2%)
(a)Consorcio Ecuatorian Notes
14.00%, 5/1/02 190 79
-----------
- --------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
ECUADOR (CONTINUED)
SOVEREIGN (1.0%)
(b)Republic of Ecuador Discount Bond
6.625%, 2/28/25 U.S.$ 1,010 U.S.$ 480
-----------
559
-----------
- --------------------------------------------------------------------------------
GERMANY (0.6%)
CORPORATE (0.6%)
(c)RSL Communications plc
0.00%, 6/15/08 DEM 256 178
(a)Sirona Dental Systems
9.125%, 7/15/08 89 103
-----------
281
-----------
- --------------------------------------------------------------------------------
HONG KONG (0.7%)
CORPORATE (0.7%)
(a)Hutchison Whampoa Financial 'B'
7.45%, 8/1/17 U.S.$ 380 338
-----------
- --------------------------------------------------------------------------------
INDIA (0.6%)
CORPORATE (0.6%)
(a)Reliance Industries Ltd.
10.375%, 6/24/16 290 259
-----------
- --------------------------------------------------------------------------------
JORDAN (0.7%)
SOVEREIGN (0.7%)
Jordan Discount Bond
(b)6.00%, 12/23/23 418 234
(a,b)6.00%, 12/23/23 155 87
-----------
321
-----------
- --------------------------------------------------------------------------------
KOREA (2.1%)
CORPORATE (0.2%)
(a)Samsung Electronics, Co.
7.45%, 10/1/02 100 95
-----------
QUASI-SOVEREIGN (1.9%)
Export-Import Bank of Korea
6.50%, 2/10/02 500 483
Korea Electric Power Corp.
7.00%, 10/1/02 400 381
-----------
864
-----------
959
-----------
- --------------------------------------------------------------------------------
MEXICO (12.9%)
CORPORATE (0.5%)
(a)Innova
12.875%, 4/1/07 120 99
(b)Petro Mexicanos
11.157%, 7/15/05 140 131
-----------
230
-----------
SOVEREIGN (12.4%)
(b)United Mexican States
Discount Bond 'A'
6.594%, 12/31/19 10 9
(b)United Mexican States
Discount Bond 'D'
6.602%, 12/31/19 U.S.$ 1,650 U.S.$ 1,407
United Mexican States Euro
Bond
10.375%, 2/17/09 1,050 1,088
United Mexican States Global Bond
11.375%, 9/15/16 970 1,049
United Mexican States Par
Bond 'W-A'
6.25%, 12/31/19 20 16
United Mexican States Par
Bond 'W-B'
6.25%, 12/31/19 2,620 2,058
-----------
5,627
-----------
5,857
-----------
- --------------------------------------------------------------------------------
MOROCCO (0.6%)
SOVEREIGN (0.6%)
Morocco R&C 'A'
6.063%, 1/1/09 360 293
-----------
- --------------------------------------------------------------------------------
NETHERLANDS (0.6%)
CORPORATE (0.6%)
Hermes Europe Railtel B.V.
11.50%, 8/15/07 190 208
Impress Metal Packaging
9.875%, 5/29/07 DEM 56 68
-----------
276
-----------
- --------------------------------------------------------------------------------
NIGERIA (0.6%)
SOVEREIGN (0.6%)
Central Bank of Nigeria Par Bond
6.25%, 11/15/20 U.S.$ 250 157
Central Bank of Nigeria
Promissory Note
3.586%, 1/5/10 290 120
-----------
277
-----------
- --------------------------------------------------------------------------------
PANAMA (1.5%)
SOVEREIGN (1.5%)
Republic of Panama
9.375%, 4/1/29 700 700
-----------
- --------------------------------------------------------------------------------
PERU (1.3%)
SOVEREIGN (1.3%)
(c)Peru Past Due Interest Bond
4.00%, 3/7/17 370 236
Republic of Peru Front Loaded
Interest Reduction Bond
(c)3.25%, 3/7/17 150 89
(a,c)3.25%, 3/7/17 450 268
-----------
593
-----------
- --------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
PHILIPPINES (1.9%)
CORPORATE (0.4%)
Philippine Long Distance Telephone
7.85%, 3/6/07 U.S.$ 250 U.S.$ 219
------------
SOVEREIGN (1.5%)
(c)Republic of Philippines 'B'
5.962%, 6/1/08 750 664
-----------
883
-----------
- --------------------------------------------------------------------------------
POLAND (0.4%)
CORPORATE (0.4%)
(c)PTC International Finance B.V.
0.00%, 7/1/07 255 186
------------
- --------------------------------------------------------------------------------
RUSSIA (1.9%)
SOVEREIGN (1.9%)
(b)Russia Interest Arrears Notes
6.625%, 12/15/15 38 3
(b)Russia Principal Note, PIK
3.313%, 12/15/20 2,235 156
Russian Federation
(a)8.75%, 7/24/05 1,000 253
(a)11.00%, 7/24/18 1,230 318
11.00%, 7/24/18 540 140
-----------
870
-----------
- --------------------------------------------------------------------------------
TURKEY (1.1%)
CORPORATE (1.1%)
(a)Cellco Finance NV
15.00%, 8/1/05 320 312
Pera Financial Services
9.375%, 10/15/02 200 170
-----------
482
-----------
- --------------------------------------------------------------------------------
UNITED KINGDOM (2.0%)
CORPORATE (2.0%)
Colt Telecommunications
Group plc
7.625%, 7/31/08 DEM 171 190
(c)Dolphin Telecommunications plc
0.00%, 6/1/08 ECU 190 99
(a)Esprit Telecommunications
Group plc
11.00%, 6/15/08 DEM 233 266
(a)HMV Media Group plc
10.875%, 5/15/08 GBP 200 339
-----------
894
-----------
- --------------------------------------------------------------------------------
UNITED STATES (31.2%)
ASSET BACKED SECURITIES (2.6%)
Aircraft Lease Portfolio
Securitization Ltd.
1996-1 P1D 12.75%, 6/15/06 U.S.$ 337 337
CFS 1997-5 'A1'
7.72%, 6/15/05 249 162
DR Securitized Lease Trust
1993-K1 A1 6.66%, 8/15/10 U.S.$ 80 U.S.$ 76
1994-K1 A1 7.60%, 8/15/07 421 420
(a)First Home Mortgage Acceptance
Corp., 1996-B, Class C
7.929%, 11/1/18 243 185
-----------
1,180
-----------
COLLATERALIZED MORTGAGE OBLIGATION (0.3%)
Long Beach Auto 1997-1, 'B'
14.22%, 10/26/03 121 120
-----------
CORPORATE (28.3%)
(c)At Entertainment Inc.
0.00%, 2/1/09 460 205
Adelphia Communications 'B'
9.875%, 3/1/07 25 28
8.375%, 2/1/08 100 103
Adelphia Communications Corp.
7.50%, 1/15/04 55 55
AES Corp.
8.50%, 11/1/07 215 212
(a)Allied Waste
7.875%, 1/1/09 75 73
(a)American Cellular Corp.
10.50%, 5/15/08 160 167
American Standard Cos., Inc.
7.375%, 2/1/08 145 142
AMSC Acquisition Co., Inc. 'B'
12.25%, 4/1/08 180 90
(a)CA FM Lease Trust
8.50%, 7/15/17 235 253
CB Richard Ellis Services
8.875%, 6/1/06 15 15
(a)Centennial Cellular
10.75%, 12/15/08 90 96
Chancellor Media Corp. 'B'
8.125%, 12/15/07 315 320
CMS Energy Corp.
7.50%, 1/15/09 155 158
Columbia/ HCA Healthcare Corp.
7.58%, 9/15/25 130 109
Columbia/HCA Healthcare
6.91%, 6/15/05 300 274
7.69%, 6/15/25 350 294
CSC Holdings, Inc.
7.875%, 12/15/07 175 184
9.875%, 5/15/06 220 242
D.R. Horton Inc.
8.00%, 2/1/09 180 177
Dobson Communications Corp.
11.75%, 4/15/07 125 134
Echostar DBS Corp.
9.375%, 2/1/09 190 197
(a)EES Coke Battery Co., Inc.
9.382%, 4/15/07 100 98
- --------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES (CONTINUED)
CORPORATE (CONTINUED)
(a)Fresenius Medical Care AG
7.875%, 2/1/08 U.S.$ 130 U.S.$ 128
Fuji JGB Investment LLC
9.87%, 12/31/49 150 133
Global Crossing Holdings Ltd.
9.625%, 5/15/08 165 184
Globalstar LP
11.375%, 2/15/04 150 98
11.50%, 6/1/05 30 19
Harrahs Operating Co., Inc.
7.875%, 12/5/05 185 186
(a)Hayes Lemmerz International, Inc.
8.25%, 12/15/08 140 140
Hilton Hotels
7.95%, 4/15/07 230 236
HMH Properties 'A'
7.875%, 8/1/05 275 268
(c)Hyperion Telecommunications, Inc.
0.00%, 4/15/03 115 95
(c)Intermedia Communications, Inc. 'B'
0.00%, 7/15/07 565 431
(a)Iridium LLC/Capital Corp.
13.00%, 7/15/05 155 67
ISP Holdings, Inc. 'B'
9.00%, 10/15/03 195 201
Jet Equipment Trust 'C1'
11.79%, 6/15/13 175 222
K Mart Funding Corp. 'F'
8.80%, 7/1/10 100 104
Lenfest Communications, Inc.
8.375%, 11/1/05 185 198
(a)Level 3 Communications, Inc.
9.125%, 5/1/08 125 125
Metromedia Fiber Network, Inc.
10.00%, 11/15/08 100 107
Musicland Group, Inc.
9.00%, 6/15/03 100 101
Musicland Group, Inc. 'B'
9.875%, 3/15/08 175 179
(c)Nextel Communications, Inc.
0.00%, 8/15/04 300 312
0.00%, 9/15/07 220 161
0.00%, 2/15/08 150 105
(c)NEXTLINK Communications, Inc.
0.00%, 4/15/08 375 240
(c)Norcal Waste Systems, Inc.
13.50%, 11/15/05 180 200
(a)Nortek, Inc.
8.875%, 8/1/08 140 144
(a)NSM Steel, Inc.
12.25%, 2/1/08 100 6
(a,c)NTL Inc. 'B'
0.00%, 4/1/08 GBP 330 355
(a)Onepoint Communications Corp.
14.50%, 6/1/08 U.S.$ 145 U.S.$ 74
Outdoor Systems, Inc.
8.875%, 6/15/07 410 439
Primus Telecommunications
Group 'B'
9.875%, 5/15/08 145 140
Primus Telecommunications
Group, Inc.
11.25%, 1/15/09 45 46
PSINet, Inc. 'B'
10.00%, 2/15/05 110 117
(c)Qwest Communications
International
0.00%, 10/15/07 485 384
R&B Falcon Corp.
9.50%, 12/15/08 90 80
(a)RAS Laffan Liquid Natural Gas
8.294%, 3/15/14 100 94
(c)RCN Corp.
0.00%, 10/15/07 495 334
(c)Rhythms Netconnections 'B'
0.00%, 5/15/08 400 224
Rogers Cablesystems 'B'
10.00%, 3/15/05 225 254
Rogers Communications, Inc.
9.125%, 1/15/06 90 95
RSL Communications plc
9.125%, 3/1/08 315 312
(a)Samsung Electron America
9.75%, 5/1/03 300 307
(a)SB Treasury Co. LLC
9.40%, 12/29/49 100 98
SD Warren Co. 'B'
12.00%, 12/15/04 215 233
Smithfield Foods, Inc.
7.625%, 2/15/08 145 140
Snyder Oil Corp.
8.75%, 6/15/07 200 200
Station Casinos, Inc.
10.125%, 3/15/06 205 218
Station Casinos, Inc.
8.875%, 12/1/08 100 103
Tenet Healthcare Corp.
8.625%, 1/15/07 405 401
Vencor, Inc.
9.875%, 5/1/05 250 38
(c)Viatel, Inc.
0.00%, 4/15/08 140 86
(c)WAM! Net Inc. 'B'
0.00%, 3/1/05 200 116
-----------
12,904
-----------
14,204
-----------
- --------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
VENEZUELA (1.4%)
SOVEREIGN (1.4%)
(c)Republic of Venezuela Debt
Conversion Bond 'DL'
6.625%, 12/18/07 U.S.$ 643 U.S.$ 452
Republic of Venezuela Global Bond
9.25%, 9/15/27 300 184
-----------
636
-----------
- --------------------------------------------------------------------------------
TOTAL DEBT INSTRUMENTS
(Cost U.S.$42,927) 43,407
-----------
- --------------------------------------------------------------------------------
<CAPTION>
SHARES
- --------------------------------------------------------------------------------
<S> <C>
PREFERRED STOCK (0.8%)
- --------------------------------------------------------------------------------
UNITED STATES (0.8%)
Concentric Network Corp. 'B' 1 116
IXC Communications, Inc. 'B' 118 127
Paxson Communications Corp. 2 125
Viatel, Inc., Series 'A' 10.00% 548 9
-----------
- --------------------------------------------------------------------------------
TOTAL PREFERRED STOCK
(Cost U.S.$339) 377
-----------
- --------------------------------------------------------------------------------
<CAPTION>
NO. OF
RIGHTS
- --------------------------------------------------------------------------------
RIGHTS(0.0%)
- --------------------------------------------------------------------------------
MEXICO (0.0%)
United Mexican States (Cost U.S.$) 2,554,000 --
-----------
- --------------------------------------------------------------------------------
<CAPTION>
NO. OF
WARRANTS
- --------------------------------------------------------------------------------
WARRANTS(0.2%)
- --------------------------------------------------------------------------------
ARGENTINA (0.0%)
Republic of Argentina, expiring
2/25/00 1,800 5
-----------
- --------------------------------------------------------------------------------
NIGERIA (0.0%)
Central Bank of Nigeria, expiring
11/15/20 250 --
-----------
- --------------------------------------------------------------------------------
UNITED STATES (0.2%)
(a)American Mobile Satellite
Corp., expiring 4/1/08 1,800 1
(a)NSM Steel, Inc., expiring
2/1/08 633,090 1
- --------------------------------------------------------------------------------
<CAPTION>
NO. OF VALUE
WARRANTS (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
(a)Onepoint Communications
Corp., expiring 6/1/08 1,450 U.S.$ --@
(a)Rhythms Netcommunications,
expiring 5/15/08 16,000 63
(a)WAM! Net., Inc.,
expiring 3/1/05 6,000 12
-----------
77
-----------
- --------------------------------------------------------------------------------
TOTAL WARRANTS
(Cost U.S.$--) 82
-----------
- --------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- --------------------------------------------------------------------------------
<S> <C>
SHORT-TERM INVESTMENTS(3.7%)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT(3.7%)
Chase Securities, Inc. 4.65%,
dated 3/31/99, due 4/1/99,
to be repurchased at
U.S.$1,659, collateralized by
U.S.$1,530 United States
Treasury Bonds, 6.625%, due
2/15/27, valued at
U.S.$1,672
(Cost U.S.$1,659) U.S.$ 1,659 U.S.$ 1,659
-----------
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS(100.0%)
(Cost U.S.$44,925) 45,525
-----------
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES
Other Assets U.S.$ 4,609
Liabilities (9,039) (4,430)
--------------- -----------
- --------------------------------------------------------------------------------
NET ASSETS
Applicable to 4,178,082 issued and
outstanding U.S.$0.01 par value shares
(100,000,000 shares authorized) U.S.$ 41,095
-----------
-----------
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE U.S.$ 9.84
-----------
-----------
- --------------------------------------------------------------------------------
</TABLE>
(a) -- 144A Security - certain conditions for public sale may exist.
(b) -- Variable/floating rate security rate disclosed is as of
March 31, 1999.
(c) -- Step Bond -- coupon rate increases in increments to maturity. Rate
disclosed is as of March 31, 1999. Maturity date disclosed is ultimate
maturity.
@ -- Value is less than U.S.$500.
PIK -- Payment-in-Kind. Income may be paid in additional securities or cash.
11
