<PAGE>
--------------------------------------------------------------
MORGAN STANLEY
DEAN WITTER
GLOBAL OPPORTUNITY
BOND FUND, INC.
--------------------------------------------------------------
SEMI-ANNUAL REPORT
JUNE 30, 1999
MORGAN STANLEY DEAN WITTER
INVESTMENT MANAGEMENT INC.
INVESTMENT ADVISER
MORGAN STANLEY DEAN WITTER
GLOBAL OPPORTUNITY BOND FUND, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
Harold J. Schaaff, Jr.
VICE PRESIDENT
Joseph P. Stadler
VICE PRESIDENT
Mary E. Mullin
SECRETARY
Belinda A. Brady
ASSISTANT TREASURER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
CUSTODIAN
The Chase Manhattan Bank
3 Chase MetroTech Center
Brooklyn, New York 11245
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICING AGENT
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
(800) 278-4353
- --------------------------------------------------------------------------------
LEGAL COUNSEL
Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
- --------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers 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 or visit our website at
www.msdw.com/institutional/investmentmanagement.
<PAGE>
LETTER TO SHAREHOLDERS
- --------
For the six months ended June 30, 1999, the Morgan Stanley Dean Witter Global
Opportunity Bond Fund, Inc. (The "Fund") had a total return, based on net asset
value per share, of 9.29% compared to 5.40% for the Fund's benchmark (described
below). For the period from the Fund's commencement of operations on May 27,
1994 through June 30, 1999, the Fund's total return, based on net asset value
per share, was 48.96% compared to 65.82% 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 are not restricted and
will, under normal circumstances, fluctuate depending on market conditions. At
June 30, 1999, the Fund's investments in debt instruments were comprised of 72%
emerging markets debt securities and 28% U.S. High yield securities.
On June 30, 1999, the closing price of the Fund's shares on the New York Stock
Exchange was $10.00, representing an 0.2% premium to the Fund's net asset value
per share.
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. As the year progressed however, many of these negatives which had cast
a shadow over emerging markets proved to be less of an obstacle than originally
thought. OECD growth as a whole held up better than expected during the first
quarter. The Japanese economy stabilized temporarily, which helped to underpin a
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.
The Fund began 1999 reeling from the continued effects of the Brazilian crisis
of 1998. During the month of January, emerging markets debt as measured by the
J.P. Morgan Emerging Markets Bond Plus Index (JPM EMBI+) sold off by 3.7%, with
spreads widening by 137 basis points to +1,288 basis points over comparable U.S.
Treasury securities. Brazil floated its currency. The real subsequently
depreciated 42% during the month. The immediate economic fallout was felt in the
form of a deeper economic contraction, higher inflation, higher interest rates
and a deteriorating public sector debt dynamic. By the end of the first quarter,
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.
Another positive surprise was higher oil prices, which were the result of a
mid-March OPEC agreement to cut oil production. This eased the fiscal pressures
burdening many of the commodity exporting countries this year. While base metals
and other commodity prices remained weak, the positive move in the price of oil
since the beginning of the year served as a windfall to emerging countries such
as Ecuador, Mexico, Russia and Venezuela. To their credit, emerging countries by
and large made the necessary adjustments to cope with the realities of lower
revenues from commodity exports and higher costs of capital.
The conflict in Kosovo weighed on the market as Bulgarian assets bore the brunt
of investors' fears that the war would spread and destabilize the entire Balkan
region.
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, emerging market debt had a strong rebound during
the latter part of the first quarter of 1999. For the three months ended March
31, 1999, emerging market debt rose 5.06% as measured by the JPM EMBI+.
By the end of June, the spread of the broad market as measured by the Index had
tightened to 1,070 over U.S. Treasuries. The rally in June helped to reclaim
some of the losses in May and brought the year-to-date return up to 10.57%. The
market rally at the end of the month was spurred by the Federal Open Market
Committee adoption of a neutral policy bias after raising the Fed Funds rate by
the anticipated amount of 25 basis points. The neutral bias announcement helped
to ease investor fears that the Fed was about to undertake a series of interest
rate hikes.
In June, Russian assets significantly outperformed the general market, as the
prospects for a timely restructuring of outstanding debt improved. In addition,
Russia continued to post strong current account surpluses on the back of rising
oil prices. Bulgarian assets outperformed the market in the wake of a resolution
to the Kosovo conflict and the subsequent discussions by NATO of a Marshall-type
plan to rebuild the Balkan region.
The Indonesian economy, which has been lagging the rest of Asia, began to show
signs of a rebound as inflation declined significantly and domestic interest
rates fell dramatically. The recent rise in oil prices has improved Indonesia's
trade balance, which contributed to the country's, albeit modest, current
account surplus.
2
<PAGE>
This surplus combined with multi-lateral aid has led to an increase in
international reserves and a rally in the Indonesian rupiah.
On the down side, Ecuador significantly underperformed the market as the country
continued to struggle with a domestic political dynamic that has made it
impossible for the government to implement the structural reforms necessary to
clean up its banking system and secure multi-lateral aid.
Stronger growth in the developed world and the related upturn in commodity
prices during the last few months have provided a supportive global environment
in which most emerging economies have been able to stabilize. In general, spread
levels on emerging market debt traded within a relatively narrow (100 basis
point) range, albeit with plenty of interim volatility, and healthy returns were
earned by "clipping coupons" during the first six months of the year. Additional
support for the asset class came from the improved macro-economic fundamentals
in many of the large emerging economies.
Non-Japan Asian economies rebounded, partly due to base effects, but also due to
increased domestic demand and export volumes. However, these recoveries are
fragile and as we have seen in the past, there can be a wide gap between
committing to structural reform measures and actually implementing them.
Emerging economies are still vulnerable to external shocks such as an
inflationary surprise and higher U.S. interest rates. A correction in the
financial markets of the developed world would rattle the nascent recoveries in
emerging economies, as investors conclude that higher rates and lower asset
prices would slow the demand for exports from emerging market economies.
In the near term we do not expect any meaningful sell off in emerging market
debt. Despite the incremental improvement in credit fundamentals, the market has
not rallied substantially during the first half of the year. At current levels,
the downside risks are less worrisome than in times past, as we believe that a
healthy amount of skepticism is reflected in today's prices. However, a
significant rally in the near term seems unlikely to us as well. Investors
appear to be hesitant to commit new money to risky asset classes between now and
the end of the year due to concerns over Year 2000 and the direction of U.S.
monetary policy. A continuation of the "coupon clipping" environment seems the
most likely course during the medium term. We are optimistic that the three main
regions of the emerging world will be growing in unison during the latter part
of this year, which will improve the fiscal and balance of payments positions of
many emerging market countries. This should cause investors perceptions of
emerging market risks to fall and allow for increased upside in asset prices.
Concerning the U.S. high yield portion of the Fund, high yield bonds performed
well initially in the first half, supported by merger and investment activity in
the telecommunications and cable industries, and positive fund flows. By May,
liquidity concerns, technical conditions and rising interest rates contributed
to lower prices. Exposure to the telecommunications and cable sectors had the
largest positive impact on results. Holdings in healthcare, retail and gaming
sectors also helped performance. Underweighting in the commodity and cyclical
sectors, which performed well, and security selection detracted from returns.
This portion of the Fund continued to benefit from merger and investment
activities in telecommunications and cable sectors that have been generally
favorable for credit quality. Prices of many issues not directly involved in
transactions have also benefited.
The U.S. high yield portion of the Fund remains overweighted in the
telecommunications and cable sectors, where we continue to find value. We
continue to selectively add to commodity and cyclical issues, where we remain
underweighted, and are finding value in the gaming sector.
We expect U.S. economic growth to moderate and inflation to remain close to
current levels, which should be an attractive environment for U.S. high yield
bonds. We continue to believe that high yield bonds offer attractive value on a
risk-adjusted expected return basis.
Sincerely,
/s/ Michael F. Klein
Michael F. Klein
PRESIDENT AND DIRECTOR
July 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 INFORMATION FOR
THE FUND, ARE AVAILABLE ON OUR WEBSITE AT
www.msdw.com/institutional/investmentmanagement.
3
<PAGE>
Morgan Stanley Dean Witter Global Opportunity Bond Fund, Inc.
Investment Summary as of June 30, 1999 (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 26.99% -- 9.29% -- 5.40% --
One Year -7.38 -7.38% -13.52 -13.52% -0.23 -0.23%
Five Year 57.35 9.49 59.12 9.73 69.06 11.07
Since Inception* 49.26 8.18 48.96 8.13 65.82 10.44
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
- --------------------------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION:
[GRAPH]
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS
ENDED
JUNE 30,
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 $9.98
Market Value Per Share ....... $12.50 $12.50 $14.63 $13.13 $8.31 $10.00
Premium/(Discount) ........... 2.0% -3.8% -1.5% -4.4% -13.8% 0.2%
Income Dividends ............. $0.91 $1.59 $1.49 $1.30 $1.18 $0.52
Capital Gains Distributions .. -- -- $0.50 $2.30 $0.06 --
Fund Total Return (2) ........ -6.42% 20.34% 31.45% 17.38% -21.57% 9.29%
Index Total Return (3) ....... -0.46% 22.03% 20.58% 12.56% -3.19% 5.40%
</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 June 30, 1999, the Fund's investment
in debt instruments was comprised of 72% emerging markets debt securities
and 28% U.S. high yield securities.
* The Fund commenced operations on May 27, 1994.
4
<PAGE>
Morgan Stanley Dean Witter Global Opportunity Bond Fund, Inc.
Portfolio Summary as of June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DIVERSIFICATION OF TOTAL INVESTMENTS
[PIE CHART]
<TABLE>
<S> <C>
Debt Securities (94.7%)
Debt Instruments (4.1%)
Equity Securities (1.2%)
</TABLE>
- --------------------------------------------------------------------------------
COUNTRY WEIGHTINGS
[PIE CHART]
<TABLE>
<S> <C>
United States (31.4%)
Mexico (12.4%)
Brazil (11.5%)
Argentina (10.9%)
Colombia (4.1%)
Russia (3.8%)
Turkey (2.9%)
Bulgaria (2.6%)
Venezuela (2.2%)
United Kingdom (2.0%)
Other (16.2%)
</TABLE>
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS*
<TABLE>
<CAPTION>
PERCENT OF
TOTAL
INVESTMENTS
-----------
<S> <C>
1. Republic of Argentina 'L'
5.938%, 3/31/05 (Argentina) 4.3%
2. Republic of Argentina
11.75%, 4/7/09 (Argentina) 3.2
3. Federative Republic of Brazil Debt Conversion
'L' Bond 5.938%, 4/15/12 (Brazil) 3.2
4. United Mexican States Par Bonds
6.25%, 12/31/19 (Mexico) 3.1
5. Federative Republic of Brazil 'C' Bond PIK
8.00%, 4/15/14 (Brazil) 2.8
6. United Mexican States Global Bond
11.375%, 9/15/16 (Mexico) 2.7%
7. United Mexican States Euro Bond
10.375%, 2/17/09 (Mexico) 2.6
8. United Mexican States Discount Bonds
12/31/19 (Mexico) 2.4
9. Russian Federation
11.00%, 7/24/18 (Russia) 1.8
10. Republic of Venezuela Debt Conversion Bond
'DL' 6.313%, 12/18/07 (Venezuela) 1.7
----
27.8%
----
----
</TABLE>
* Excludes short-term investments.
5
<PAGE>
FINANCIAL STATEMENTS
- --------
STATEMENT OF NET ASSETS (UNAUDITED)
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------
JUNE 30, 1999
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- --------------------------------------------------------------------------------
DEBT INSTRUMENTS (94.7%)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
ARGENTINA (10.9%)
CORPORATE (1.6%)
(b)Cablevision S.A.
13.75%, 5/1/09 U.S.$ 100 U.S.$ 91
CIA International Telecom
10.375%, 8/1/04 ARP 400 314
(b)10.375%, 8/1/04 100 79
(b)Multicanal S.A.
13.125%, 4/15/09 U.S.$ 190 176
(b)Supercanal Holdings S.A.
11.50%, 5/15/05 100 54
-----------
714
-----------
SOVEREIGN (9.3%)
Republic of Argentina
11.75%, 4/7/09 1,600 1,448
(c,e)Republic of Argentina 'L'
5.938%, 3/31/05 2,288 1,956
(e)Republic of Argentina
Global Units (Euro)
12.125%, 2/15/19 850 774
-----------
4,178
-----------
4,892
-----------
- --------------------------------------------------------------------------------
AUSTRALIA (0.6%)
CORPORATE (0.6%)
Glencore Nickel Property Ltd.
9.00%, 12/1/14 155 133
Murrin Murrin Holdings Property Ltd.
9.375%, 8/31/07 135 119
-----------
252
-----------
- --------------------------------------------------------------------------------
BRAZIL (11.5%)
CORPORATE (0.2%)
(b,d)Compania Energetica Sao Paulo
9.125%, 6/26/07 100 83
SOVEREIGN (11.3%)
(e)Brazil Global Bond
10.125%, 5/15/27 900 682
(e)Federative Republic of
Brazil 'C' Bond PIK
8.00%, 4/15/14 1,958 1,277
(c)Federative Republic of
Brazil 'EI-L' Bond
5.875%, 4/15/06 86 68
(c)Federative Republic of
Brazil Debt Conversion Bond
5.938%, 4/15/12 U.S.$ 260 U.S.$ 162
(c)Federative Republic of
Brazil Debt Conversion 'L' Bond
5.938%, 4/15/12 2,030 1,261
(d)Federative Republic of
Brazil 'L` Bond
5.00%, 4/15/09 300 173
(c)Federative Republic of
Brazil EI-Euro Bond
5.875%, 4/15/06 912 720
(c)Federative Republic of Brazil
New Money 'L' Bond
5.938%, 4/15/09 960 674
(c)Federative Republic of
Brazil New Money Bond
5.938%, 4/15/09 130 91
-----------
5,108
-----------
5,191
-----------
- --------------------------------------------------------------------------------
BULGARIA (2.6%)
SOVEREIGN (2.6%)
(c)Republic of Bulgaria
Discount Bond 'A' Euro
5.875%, 7/28/24 940 643
(d)Republic of Bulgaria
Front Loaded Interest Reduction
Bond
2.50%, 7/28/12 350 214
(c)Republic of Bulgaria Past
Due Interest Bond
5.875%, 7/28/11 480 331
------------
1,188
------------
- --------------------------------------------------------------------------------
CANADA (0.9%)
CORPORATE (0.9%)
Rogers Cablesystems
10.00%, 3/15/05 225 242
Rogers Communications, Inc.
9.125%, 1/15/06 90 92
Tembec Industries, Inc.
8.625%, 6/30/09 65 65
-----------
399
-----------
- --------------------------------------------------------------------------------
CHILE (1.4%)
CORPORATE (1.4%)
(b)Embotelladora Africa S.A. Series
9.875%, 3/15/06 325 331
Endesa
7.75%, 7/15/08 315 295
-----------
626
-----------
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
COLOMBIA (4.0%)
CORPORATE (0.8%)
(d,g)Occidente y Caribe
0.00%, 3/15/04 U.S.$ 550 U.S.$ 363
-----------
Sovereign (3.2%)
Republic of Colombia
9.75%, 4/23/09 850 702
Republic of Colombia Global Euro
10.875%, 3/9/04 590 566
(c)Republic of Columbia
9.705%, 8/13/05 200 174
-----------
1,442
-----------
1,805
-----------
- --------------------------------------------------------------------------------
ECUADOR (0.8%)
SOVEREIGN (0.8%)
(c)Republic of Ecuador Discount Bond
6.00%, 2/28/25 760 356
-----------
- --------------------------------------------------------------------------------
GERMANY (0.5%)
CORPORATE (0.5%)
(g)RSL Communications plc
0.00%, 6/15/08 DEM 256 163
(b)Sirona Dental Systems
9.125%, 7/15/08 89 85
-----------
248
-----------
- --------------------------------------------------------------------------------
INDONESIA (1.4%)
CORPORATE (1.0%)
Indah Kiat International Finance 'B'
11.875%, 6/15/02 U.S.$ 100 83
Tjiwi Kimia International
Global Bond
13.25%, 8/1/01 400 344
-----------
427
-----------
SOVEREIGN (0.4%)
Indonesia Exchange Loans
(c) 8.125%, 8/25/00 100 93
(c) 8.375%, 8/25/01 100 88
-----------
181
-----------
608
-----------
- --------------------------------------------------------------------------------
IVORY COAST (0.4%)
SOVEREIGN (0.4%)
(c)Ivory Coast
2.00%, 3/29/18 600 163
(d)Ivory Coast Past Due
Interest Bond
2.00%, 3/29/18 98 34
-----------
197
-----------
- --------------------------------------------------------------------------------
JORDAN (0.7%)
SOVEREIGN (0.7%)
Jordan Discount Bond
(c) 6.188%, 12/23/23 U.S.$ 368 U.S.$ 232
(b,c) 6.188%, 12/23/23 155 97
-----------
329
-----------
- --------------------------------------------------------------------------------
KOREA (1.1%)
CORPORATE (0.2%)
(b)Samsung Electronics, Co.
7.45%, 10/1/02 100 97
-----------
QUASI-SOVEREIGN (0.9%)
Export-Import Bank of Korea
6.50%, 2/10/02 200 196
Korea Electric Power Corp.
7.00%, 10/1/02 200 194
-----------
390
-----------
487
-----------
- --------------------------------------------------------------------------------
MEXICO (12.4%)
CORPORATE (1.7%)
(b)Innova
12.875%, 4/1/07 120 95
Petro Mexicanos
(b)9.50%, 9/15/27 550 528
(d)9.657%, 7/15/05 140 131
-----------
754
-----------
SOVEREIGN (10.7%)
United Mexican States
0.00%, 6/30/03 1,939 --@
(c)United Mexican States
Discount Bond 'A'
6.116%, 12/31/19 10 8
(c)United Mexican States
Discount Bond 'D'
6.068%, 12/31/19 1,250 1,053
(e)United Mexican States Euro Bond
10.375%, 2/17/09 1,150 1,169
(e)United Mexican States
Global Bond
11.375%, 9/15/16 1,120 1,205
United Mexican States Par
Bond 'W-A`
6.25%, 12/31/19 20 15
United Mexican States Par
Bond 'W-B`
6.25%, 12/31/19 1,870 1,393
-----------
4,843
-----------
5,597
-----------
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
MOROCCO (1.5%)
SOVEREIGN (1.5%)
(c)Morocco R&C 'A'
5.906%, 1/1/09 U.S.$ 835 U.S.$ 674
-----------
- --------------------------------------------------------------------------------
NETHERLANDS (1.0%)
CORPORATE (1.0%)
Hermes Europe Railtel B.V.
11.50%, 8/15/07 190 200
(b)Impress Metal Packaging
9.875%, 5/29/07 DEM 56 64
Tele1 Europe B.V.
13.00%, 5/15/09 U.S.$ 175 187
-----------
451
-----------
- --------------------------------------------------------------------------------
NIGERIA (0.1%)
SOVEREIGN (0.1%)
(d)Central Bank of Nigeria
Promissory Note
5.092%, 1/5/10 90 36
-----------
- --------------------------------------------------------------------------------
PANAMA (1.3%)
SOVEREIGN (1.3%)
Republic of Panama
9.375%, 4/1/29 600 573
-----------
- --------------------------------------------------------------------------------
PERU (1.3%)
SOVEREIGN (1.3%)
Peru Past Due Interest Bond
4.00%, 3/7/17 370 228
Republic of Peru Front Loaded
Interest Reduction Bond
(b,d)3.25%, 3/7/17 450 249
(d)3.75%, 3/7/17 150 83
-----------
560
-----------
- --------------------------------------------------------------------------------
PHILIPPINES (1.7%)
CORPORATE (0.5%)
Philippine Long Distance Telephone
7.85%, 3/6/07 250 214
-----------
SOVEREIGN (1.2%)
Republic of Philippines
9.875%, 1/15/19 300 295
(c)Republic of Phillippines 'B'
6.00%, 6/1/08 250 232
-----------
527
-----------
741
-----------
- --------------------------------------------------------------------------------
POLAND (1.5%)
CORPORATE (1.5%)
(b)At Entertainment Inc.
0.00%, 2/1/09 U.S.$ 260 U.S.$ 174
Netia Holdings II B.V.
13.50%, 6/15/09 375 399
(d)PTC International Finance B.V.
0.00%, 7/1/07 155 115
-----------
688
-----------
- --------------------------------------------------------------------------------
RUSSIA (3.8%)
SOVEREIGN (3.8%)
(c)Russia Interest Arrears Notes
6.063%, 12/15/15 150 24
(c,f)Russia Principal Note, PIK
6.063%, 12/15/20 6,135 755
Russian Federation
(b)8.75%, 7/24/05 300 151
11.00%, 7/24/18 1,570 789
-----------
1,719
-----------
- --------------------------------------------------------------------------------
TURKEY (0.7%)
CORPORATE (0.7%)
(b)Cellco Finance NV
15.00%, 8/1/05 320 331
-----------
- --------------------------------------------------------------------------------
UNITED KINGDOM (2.0%)
CORPORATE (2.0%)
Colt Telecommunications
Group plc
7.625%, 7/31/08 DEM 171 177
Dolphin Telecommunications plc
(d)0.00%, 6/1/08 ECU 190 97
(b,d)0.00%, 5/15/09 U.S.$ 100 48
(b)Esprit Telecommunications Group plc
11.00%, 6/15/08 DEM 233 257
(b)HMV Media Group plc
10.875%, 5/15/08 GBP 200 327
-----------
906
-----------
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
UNITED STATES (28.4%)
ASSET BACKED SECURITIES (2.9%)
(g)Aircraft Lease Portfolio
Securitization Ltd.
1996-1 P1D 12.75%, 6/15/06 U.S.$ 337 U.S.$ 337
CFS 1997-5 'A1'
7.72%, 6/15/05 248 62
DR Securitized Lease Trust
1993-K1 A1 6.66%, 8/15/10 80 74
1994-K1 A1 7.60%, 8/15/07 421 413
First Home Mortgage Acceptance
Corp., 1996-B, Class C
7.929%, 11/1/18 243 185
Jet Equipment Trust 'C1'
11.79%, 6/15/13 175 217
-----------
1,288
-----------
COLLATERALIZED MORTGAGE OBLIGATION (0.2%)
Long Beach Auto 1997-1, 'B'
14.22%, 10/26/03 99 99
-----------
CORPORATE (25.3%)
Adelphia Communications Corp. 'B'
(b)7.50%, 1/15/04 55 53
8.375%, 2/1/08 100 96
9.875%, 3/1/07 150 156
AES Corp.
8.50%, 11/1/07 215 202
(b)Allied Waste
7.875%, 1/1/09 75 69
(b)American Cellular Corp.
10.50%, 5/15/08 160 164
American Standard, Inc.
7.125%, 6/1/06 225 234
AMSC Acquisition Co., Inc. 'B'
12.25%, 4/1/08 180 138
(b)CA FM Lease Trust
8.50%, 7/15/17 233 217
(b)Centennial Cellular
10.75%, 12/15/08 140 145
Chancellor Media Corp. 'B'
8.125%, 12/15/07 315 306
CMS Energy Corp.
7.50%, 1/15/09 185 173
Columbia/HCA Healthcare Corp.
6.91%, 6/15/05 370 342
7.69%, 6/15/25 350 290
7.58%, 9/15/25 130 107
D.R. Horton Inc.
8.00%, 2/1/09 180 169
Dobson Communications Corp.
11.75%, 4/15/07 125 131
(b)Echostar DBS Corp.
9.375%, 2/1/09 190 193
(b)EES Coke Battery Co., Inc.
9.382%, 4/15/07 100 98
(b)Fresenius Medical Care AG
7.875%, 2/1/08 U.S.$ 130 U.S.$ 122
(b,d)Fuji JGB Investment LLC
9.87%, 12/31/49 150 132
Global Crossing Holdings Ltd.
9.625%, 5/15/08 140 148
Globalstar LP
11.375%, 2/15/04 150 99
11.50%, 6/1/05 30 19
Harrahs Operating Co., Inc.
7.875%, 12/15/05 185 179
(b)Hayes Lemmerz International, Inc.
8.25%, 12/15/08 140 133
Hilton Hotels
7.95%, 4/15/07 185 187
HMH Properties 'A'
7.875%, 8/1/05 275 260
(b)Horseshoe Gaming Holding
8.652%, 5/15/09 210 203
Huntsman ICI Chemicals
(b)10.125%, 7/1/09 225 233
(b)10.125%, 7/1/09 225 226
(d)Hyperion Telecommunications, Inc.
0.00%, 4/15/03 235 194
(d)Intermedia Communications, Inc. 'B'
0.00%, 7/15/07 565 403
(b)Iridium LLC/Capital Corp.
13.00%, 7/15/05 155 31
(b)Metromedia Fiber Network 'B'
10.00%, 11/15/08 100 103
Musicland Group, Inc.
9.00%, 6/15/03 100 97
Musicland Group, Inc. 'B'
9.875%, 3/15/08 125 122
Nextel Communications, Inc.
(d)0.00%, 9/15/07 220 161
(d)0.00%, 2/15/08 120 83
(d,g)9.75%, 8/15/04 300 304
(d)NEXTLINK Communications, Inc.
0.00%, 4/15/08 375 224
(d)Norcal Waste Systems, Inc.
13.50%, 11/15/05 180 199
(b)Nortek, Inc.
8.875%, 8/1/08 140 138
(b)NSM Steel, Inc.
12.25%, 2/1/08 100 --@
(d)NTL Inc. 'B'
0.00%, 4/1/08 GBP 330 352
(b)Onepoint Communications Corp.
14.50%, 6/1/08 U.S.$ 145 79
Outdoor Systems, Inc.
8.875%, 6/15/07 410 428
Park Place Entertainment
7.875%, 12/15/05 195 185
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
UNITED STATES (CONTINUED)
CORPORATE (CONTINUED)
Primus Telecommunications
Group 'B'
9.875%, 5/15/08 U.S.$ 145 U.S.$ 138
(b)Primus Telecommunications
Group, Inc.
11.25%, 1/15/09 45 46
PSINet, Inc. 'B'
10.00%, 2/15/05 110 109
(b)RAS Laffan Liquid Natural Gas
8.294%, 3/15/14 100 92
(d)RCN Corp.
0.00%, 10/15/07 275 184
(d)Rhythms Netconnections 'B'
0.00%, 5/15/08 400 211
(d)RSL Communications plc
9.125%, 3/1/08 215 197
(b)Samsung Electron America
9.75%, 5/1/03 300 311
(b,d)SB Treasury Co. LLC
9.40%, 12/29/49 100 97
SD Warren Co. 'B'
12.00%, 12/15/04 215 229
Smithfield Foods, Inc.
7.625%, 2/15/08 145 132
Snyder Oil Corp.
8.75%, 6/15/07 200 197
Station Casinos, Inc.
(b)8.875%, 12/1/08 100 98
10.125%, 3/15/06 205 211
Tenet Healthcare Corp.
8.625%, 1/15/07 375 367
(d)Viatel, Inc.
0.00%, 4/15/08 380 244
Vintage Petroleum
8.625%, 2/1/09 75 72
(d)WAM! Net Inc. 'B'
0.00%, 3/1/05 200 118
-----------
11,380
-----------
12,767
-----------
- -------------------------------------------------------------------------------
VENEZUELA (2.2%)
SOVEREIGN (2.2%)
(c,e)Republic of Venezuela Debt Conversion Bond 'DL'
6.313%, 12/18/07 1,012 784
Republic of Venezuela Global Bond
9.25%, 9/15/27 300 202
-----------
986
-----------
- -------------------------------------------------------------------------------
TOTAL DEBT INSTRUMENTS
(Cost U.S.$42,311) 42,607
-----------
- -------------------------------------------------------------------------------
<CAPTION>
No. of Value
Warrants (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
WARRANTS (0.4%)
- -------------------------------------------------------------------------------
ARGENTINA (0.0%)
(a)Republic of Argentina,
expiring 2/25/00 1,800 U.S.$ 2
-----------
- -------------------------------------------------------------------------------
COLOMBIA (0.1%)
(a,b)Occidente y Caribe, expiring
3/15/04 21,790 37
-----------
- -------------------------------------------------------------------------------
POLAND (0.0%)
(a,b)At Entertainment, Inc.,
expiring 2/1/09 1,040 -- @
-----------
- -------------------------------------------------------------------------------
UNITED STATES (0.3%)
(a,b)American Mobile Satellite
Corp., expiring 4/1/08 1,800 6
(a,b)NSM Steel, Inc., expiring
2/1/08 633,090 1
(a,b)Onepoint Communications
Corp., expiring 6/1/08 1,450 -- @
(a,b)Rhythms Netcommunications,
expiring 5/15/08 9,500 137
(a,b)WAM! Net., Inc., expiring
3/1/05 6,000 14
-----------
158
-----------
- -------------------------------------------------------------------------------
TOTAL WARRANTS
(Cost U.S.$14) 197
-----------
- -------------------------------------------------------------------------------
<CAPTION>
Shares
- -------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCK (0.8%)
- -------------------------------------------------------------------------------
UNITED STATES (0.8%)
(a)Concentric Network Corp. 'B' 1,106 105
(a,g)IXC Communications, Inc. 'B' 122 117
(g)Paxson Communications Corp. 1,599 144
-----------
(Cost U.S.$339) 366
-----------
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS (4.1%)
- --------------------------------------------------------------------------------
TURKEY (2.2%)
BILLS
Turkey Treasury Bill
9/15/99 TRL 243,514,000 U.S.$ 492
2/9/00 339,911,000 505
-----------
997
-----------
- --------------------------------------------------------------------------------
UNITED STATES (1.9%)
REPURCHASE AGREEMENT
Chase Securities Inc. 4.55%,
dated 6/30/99, due
7/1/99, to be repurchased
at U.S.$822, collateralized
by U.S.$765 United States
Treasury Bonds, 7.25%,
due 5/15/16, valued
at U.S.$850 U.S.$ 822 822
-----------
- --------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(Cost U.S.$1,923) 1,819
-----------
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.0%)
(Cost U.S.$44,587) 44,989
-----------
- --------------------------------------------------------------------------------
ASSETS
Receivable for Investments
Sold 1,890
Interest Receivable 946
Net Unrealized Gain on Foreign
Currency Exchange Contracts 58
Receivable for Daily Variation
on Futures Contracts 20
Other Assets 14 2,928
----------- -----------
- --------------------------------------------------------------------------------
LIABILITIES
Payable For:
Dividends Declared (1,086)
Reverse Repurchase Agreements (4,452)
Investments Purchased (440)
Bank Overdraft (48)
Directors' Fees and Expenses (44)
Professional Fees (37)
Shareholder Reporting Expenses (36)
Investment Advisory Fees (35)
Administrative Fees (12)
Custodian Fees (12)
Other Liabilities (27) (6,229)
- --------------------------------------------------------------------------------
NET ASSETS
Applicable to 4,178,082, issued and
outstanding U.S.$0.01 par value shares
(100,000,000 shares authorized) U.S.$ 41,688
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE U.S.$ 9.98
- --------------------------------------------------------------------------------
<CAPTION>
Amount
(000)
- --------------------------------------------------------------------------------
AT JUNE 30, 1999, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------
<S> <C>
Common Stock U.S.$ 42
Capital Surplus 58,070
Undistributed Net Investment Income 79
Accumulated Net Realized Loss (16,966)
Unrealized Appreciation on Investments,
Foreign Currency Translations and Futures
Contracts 463
- --------------------------------------------------------------------------------
TOTAL NET ASSETS U.S.$41,688
- --------------------------------------------------------------------------------
</TABLE>
(a)-- Non-income producing
(b)-- 144A Security - certain conditions for public sale may
exist.
(c)-- Variable/floating rate security -- rate disclosed is as of
June 30, 1999.
(d)-- Step Bond - coupon rate increases in increments to
maturity. Rate disclosed is as of June 30, 1999.
Maturity date disclosed is the ultimate maturity.
(e)-- Denotes all or a portion of securities subject to
repurchase under Reverse Repurchase Agreements as
of June 30, 1999 -- see note A-4 to financial statements.
(f)-- Security is in default.
(g)-- Security valued at fair value -- See note A-1 to
financial statements.
@ -- Value is less than U.S.$500.
PIK -- Payment-in-Kind. Income may be paid in additional
securities or cash at the discretion of the issuer.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
JUNE 30, 1999 EXCHANGE RATES:
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
ARP Argentine Peso 1.000 = U.S. $1.00
ECU European Currency Unit 0.968 = U.S. $1.00
GBP British Pound 0.602 = U.S. $1.00
TRL Turkish Lira 421,810.000 = U.S. $1.00
- --------------------------------------------------------------------------------
</TABLE>
FUTURES CONTRACTS:
At June 30, 1999, the following futures contracts were open:
<TABLE>
<CAPTION>
NET
NUMBER AGGREGATE UNREALIZED
OF FACE VALUE EXPIRATION GAIN
CONTRACTS (000) DATE (000)
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
SHORT:
GILT 3 U.S.$ 538 SEP-99 U.S.$8
--- ------
--- ------
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
Foreign Currency Exchange Contract Information:
Under the terms of foreign currency exchange contracts open at June 30, 1999,
the Fund is obligated to deliver foreign currency in exchange for U.S.
dollars as indicated below:
<TABLE>
<CAPTION>
Currency In Net
to Exchange Unrealized
Deliver Value Settlement For Value Gain
(000) (000) Date (000) (000) (000)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ECU 375 U.S.$ 378 07/26/99 U.S.$ 378 U.S.$ 378 U.S.$--
ECU 55 57 07/27/99 59 59 2
ECU 15 16 07/27/99 16 16 --
ECU 750 776 07/27/99 802 802 26
ECU 225 233 07/27/99 239 239 6
ECU 225 233 07/27/99 233 233 --
ECU 75 78 08/10/99 82 82 4
ECU 60 62 08/20/99 64 64 2
ECU 115 119 08/20/99 122 122 3
GBP 455 718 09/03/99 733 733 15
---------- ---------- -------
U.S.$2,670 U.S.$2,728 U.S.$58
---------- ---------- -------
---------- ---------- -------
- ------------------------------------------------------------------------------------
</TABLE>
SUMMARY OF TOTAL INVESTMENTS BY INDUSTRY --
JUNE 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Percent
Value of Total
Industry (000) Investments
- -------------------------------------------------------------------------------
<S> <C> <C>
Aerospace & Defense U.S.$ 217 0.5%
Asset Backed Securities 1,288 2.9
Automotive 231 0.5
Banking 447 1.0
Broadcast-- Radio & Television 2,018 4.5
Building Materials & Components 234 0.5
Cable 417 0.9
Coal, Gas & Oil 691 1.5
Collateralized Mortgage Obligation 99 0.2
Construction & Mining 119 0.3
Electrical Equipment 97 0.2
Electronics 312 0.7
Energy 655 1.4
Financial Services 759 1.7
Food 132 0.3
Foreign Government & Agency
Obligation 24,286 53.9
Gaming & Lodging 885 2.0
Health Care Supplies & Services 1,375 3.1
Industrial 131 0.3
Media & Entertainment 220 0.5
Metals 65 0.1
Multi-Industry 2,732 6.1
Real Estate 260 0.6
Repurchase Agreement 822 1.9
Services 627 1.4
Telecommunications 5,676 12.6
Utilities 194 0.4
----------- -----
U.S.$44,989 100.0%
----------- -----
----------- -----
- -------------------------------------------------------------------------------
</TABLE>
SUMMARY OF TOTAL INVESTMENTS BY COUNTRY --
JUNE 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Percent
Value of Total
Country (000) Investments
- -----------------------------------------------------------------
<S> <C> <C>
Argentina U.S.$ 4,894 10.9%
Australia 252 0.6
Brazil 5,191 11.5
Bulgaria 1,188 2.6
Canada 399 0.9
Chile 626 1.4
Colombia 1,842 4.1
Ecuador 356 0.8
Germany 248 0.5
Indonesia 608 1.4
Ivory Coast 197 0.4
Jordan 329 0.7
Korea 487 1.1
Mexico 5,597 12.4
Morocco 674 1.5
Netherlands 451 1.0
Nigeria 36 0.1
Panama 573 1.3
Peru 560 1.3
Philippines 741 1.7
Poland 688 1.5
Russia 1,719 3.8
Turkey 1,328 2.9
United Kingdom 906 2.0
United States 14,113 31.4
Venezuela 986 2.2
----------- -----
U.S.$44,989 100.0%
----------- -----
----------- -----
- -----------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS SIX MONTHS
ENDED
JUNE 30, 1999
(UNAUDITED)
(000)
- ----------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Interest ....................................................... U.S.$ 2,728
- ----------------------------------------------------------------------------------------
Total Income ................................................. 2,728
- ----------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees ....................................... 206
Interest Expense ............................................... 96
Administrative Fees ............................................ 70
Professional Fees .............................................. 46
Shareholder Reporting Expenses ................................. 38
Directors' Fees and Expenses ................................... 23
Custodian Fees ................................................. 17
Transfer Agent Fees ............................................ 5
Amortization of Organization Costs ............................. 2
Other Expenses ................................................. 28
- ----------------------------------------------------------------------------------------
Total Expenses ............................................... 531
- ----------------------------------------------------------------------------------------
Net Investment Income ...................................... 2,197
- ----------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS)
Investment Securities Sold ..................................... (520)
Foreign Currency Transactions .................................. (350)
Futures Contracts .............................................. 19
- ----------------------------------------------------------------------------------------
Net Realized Loss ............................................ (851)
- ----------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION
Appreciation on Investments .................................... 2,129
Appreciation on Foreign Currency Translations .................. 92
- ----------------------------------------------------------------------------------------
Change in Unrealized Appreciation/Depreciation ............... 2,221
- ----------------------------------------------------------------------------------------
Net Realized Loss and Change in Unrealized Appreciation/Depreciation 1,370
- ----------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........... U.S.$ 3,567
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
STATEMENT OF CHANGES IN NET ASSETS (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Income ..................................................... U.S.$ 2,197 U.S.$ 5,159
Net Realized Loss ......................................................... (851) (15,859)
Change in Unrealized Appreciation/Depreciation ............................ 2,221 (1,230)
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations ........... 3,567 (11,930)
- ---------------------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income ..................................................... (2,173) (4,917)
In Excess of Net Realized Gains ........................................... - (261)
- ---------------------------------------------------------------------------------------------------------------------------
Total Distributions ....................................................... (2,173) (5,178)
- ---------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Reinvestment of Distributions (0 and 24,590 shares, respectively) ......... - 333
- ---------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) ................................................. 1,394 (16,775)
Net Assets:
Beginning of Period ....................................................... 40,294 57,069
- ---------------------------------------------------------------------------------------------------------------------------
End of Period (including undistributed net investment income of U.S.$79 ...
and U.S.$55, respectively)............................................... U.S.$ 41,688 U.S.$ 40,294
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1999
(UNAUDITED)
STATEMENT OF CASH FLOWS (000)
- -------------------------------------------------------------------------------------------------------------
<S> <C>
CASH FLOWS FROM INVESTING AND OPERATING ACTIVITIES:
Proceeds from Sales of Investments ..................................................... U.S.$ 29,049
Purchases of Investments ............................................................... (31,987)
Net Increase in Short-Term Investments ................................................. (251)
Investment Income ...................................................................... 2,011
Interest Expense Paid .................................................................. (85)
Net Operating Expenses Paid ............................................................ (419)
- -------------------------------------------------------------------------------------------------------------
Net Cash Used for Investing and Operating Activities ................................... (1,682)
- -------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash Received for Reverse Repurchase Agreements ........................................ 3,477
Cash Distributions Paid ................................................................ (2,243)
- -------------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities .............................................. 1,234
- -------------------------------------------------------------------------------------------------------------
Net Decrease in Cash ................................................................... (448)
CASH AT BEGINNING OF PERIOD ................................................................ 400
- -------------------------------------------------------------------------------------------------------------
CASH AT END OF PERIOD ...................................................................... U.S.$ (48)
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
RECONCILIATION OF NET INVESTMENT INCOME TO NET CASH PROVIDED BY INVESTING AND OPERATING
ACTIVITIES
- -------------------------------------------------------------------------------------------------------------
Net Investment Income .................................................................. U.S.$ 2,197
Proceeds from Sales of Investments ..................................................... 29,049
Purchases of Investments ............................................................... (31,987)
Net Increase in Short-Term Investments ................................................. (251)
Net Increase in Receivables Related to Operations ...................................... (46)
Net Increase in Payables Related to Operations ......................................... 34
Accretion/Amortization of Discounts and Premiums ....................................... (678)
- -------------------------------------------------------------------------------------------------------------
Net Cash Used for Investing and Operating Activities ................................... U.S.$ (1,682)
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTHS MAY 27, 1994*
ENDED YEAR ENDED DECEMBER 31, TO
SELECTED PER SHARE DATA JUNE 30, 1999 ------------------------------------------------------ DECEMBER 31,
AND RATIOS: (UNAUDITED) 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ...... U.S.$ 9.64 U.S.$ 13.74 U.S.$ 14.86 U.S.$ 12.99 U.S.$ 12.25 U.S.$ 14.10
- ------------------------------------------------------------------------------------------------------------------------------------
Offering Costs ............................ - - - - - (0.17)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income ..................... 0.53 1.23 1.29 1.71 1.61 0.95
Net Realized and Unrealized Gain (Loss)
on Investments ......................... 0.33 (4.09) 1.19 2.15 0.72 (1.72)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations.... 0.86 (2.86) 2.48 3.86 2.33 (0.77)
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income .................. (0.52) (1.18) (1.29) (1.49) (1.59) (0.91)
In Excess of Net Investment Income .... - - (0.01) - - -
Net Realized Gain....................... - - (2.25) (0.50) - -
In Excess of Net Realized Gains ........ - (0.06) (0.05) - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions ................ (0.52) (1.24) (3.60) (1.99) (1.59) (0.91)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ............ U.S.$ 9.98 U.S.$ 9.64 U.S.$ 13.74 U.S.$ 14.86 U.S.$ 12.99 U.S.$ 12.25
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE MARKET VALUE, END OF PERIOD ..... U.S.$ 10.00 U.S.$ 8.31 U.S.$ 13.13 U.S.$ 14.63 U.S.$ 12.50 U.S.$ 12.50
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:
Market Value ............................ 26.99% (29.20)% 13.93% 34.44% 13.49% (4.51)%
Net Asset Value (1) .................... 9.29% (21.57)% 17.38% 31.45% 20.34% (6.42)%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS, SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (THOUSANDS) ..... U.S.$41,688 U.S.$40,294 U.S.$57,069 U.S.$61,591 U.S.$53,847 U.S.$50,607
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses Before Interest Expense
to Average Net Assets .................. 2.06%** 2.03% 1.75% 1.81% 1.95% 1.75%**
Ratio of Expenses After Interest Expense
to Average Net Assets .................. 2.58%** 2.59% 1.86% 2.00% 2.06% 2.97%**
Ratio of Net Investment Income
to Average Net Assets .................. 10.48%** 10.13% 8.15% 12.17% 13.07% 11.90%**
Portfolio Turnover Rate ................... 69% 266% 333% 280% 160% 86%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of Operations.
** Annualized.
(1) 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. This percentage is 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.
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1999
- -----------
The Morgan Stanley Dean Witter Global Opportunity Bond Fund, Inc. (formerly
Morgan Stanley Global Opportunity Bond Fund, Inc.) (the "Fund"), was
incorporated in Maryland on March 31, 1994, and is registered as a
non-diversified, closed-end management investment company under the Investment
Company Act of 1940, as amended. The Fund's primary objective is to produce high
current income and as a secondary objective to seek capital appreciation through
investments primarily in high yield bonds.
A. The following significant accounting policies, which are in conformity with
generally accepted accounting principles for investment companies, are
consistently followed by the Fund in the preparation of its financial
statements. Generally accepted accounting principles may require management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results may differ from those estimates.
1. SECURITY VALUATION: In valuing the Fund's assets, all listed securities for
which market quotations are readily available are valued at the last sale
price on the valuation date, or if there was no sale on such date, at the
mean between the current bid and asked prices or the bid price if only bid
quotations are available. Securities which are traded over-the-counter are
valued at the average of the mean of the current bid and asked prices
obtained from reputable brokers. Securities may be valued by independent
pricing services which use prices provided by market-makers or estimates of
market values obtained from yield data relating to investments or securities
with similar characteristics. Certain securities may be valued on the basis
of bid prices provided by one principal market maker. Short-term securities
which mature in 60 days or less are valued at amortized cost. All other
securities and assets for which market values are not readily available
(including investments which are subject to limitations as to their sale)
are valued at fair value as determined in good faith by the Board of
Directors (the "Board") although the actual calculations may be done by
others.
2. TAXES: It is the Fund's intention to continue to qualify as a regulated
investment company and distribute all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial
statements.
The Fund may be subject to taxes imposed by countries in which it invests.
Such taxes are generally based on either income or gains earned or
repatriated. Taxes are accrued and applied to net investment income, net
realized gains and net unrealized appreciation as such income and/or gains
are earned.
3. REPURCHASE AGREEMENTS: In connection with transactions in repurchase
agreements, a bank as custodian for the Fund takes possession of the
underlying securities, with a market value at least equal to the amount of
the repurchase transaction, including principal and accrued interest. To the
extent that any repurchase transaction exceeds one business day, the value
of the collateral is marked-to-market on a daily basis to determine the
adequacy of the collateral. In the event of default on the obligation to
repurchase, the Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. In the event of default or
bankruptcy by the counter-party to the agreement, realization and/or
retention of the collateral or proceeds may be subject to legal proceedings.
4. REVERSE REPURCHASE AGREEMENTS: The Fund may enter into reverse repurchase
agreements with institutions that the Fund's investment adviser has
determined are creditworthy. Under a reverse repurchase agreement, the Fund
sells securities and agrees to repurchase them at a mutually agreed upon
date and price. Reverse repurchase agreements involve the risk that the
market value of the securities purchased with the proceeds from the sale of
securities received by the Fund may decline below the price of the
securities the Fund is obligated to repurchase. Reverse repurchase
agreements also involve credit risk with the counter party to the extent
that the value of securities subject to repurchase exceed the Fund's
liability under the reverse repurchase agreement. Securities subject to
repurchase under reverse repurchase agreements, if any, are designated as
such in the Statement of Net Assets.
At June 30, 1999, the Fund had reverse repurchase agreements outstanding as
follows:
<TABLE>
<CAPTION>
MATURITY IN
LESS THAN
365 DAYS
-----------
<S> <C>
Value of Securities Subject to
Repurchase ....................... $ 5,401,000
Liability Under Reverse
Repurchase Agreement ............. $ 4,452,000
Weighted Average Interest Rate .... 5.01%
</TABLE>
The average weekly balance of reverse repurchase agreements outstanding
during the six months ended June 30, 1999 was approximately $4,107,000 at a
weighted average interest rate of 4.57%.
5. FOREIGN CURRENCY TRANSLATION: The books and records of the Fund are
maintained in U.S. dollars. Foreign currency amounts are translated into
U.S. dollars at the mean of the bid and asked prices of such currencies
against U.S. dollars last quoted by a major bank as follows:
16
<PAGE>
- investments, other assets and liabilities at the prevailing rates of
exchange on the valuation date;
- investment transactions and investment income at the prevailing rates of
exchange on the dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange
rates and market values at the close of the period, 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 fluctuations arising from
changes in the market prices of the securities held at period end.
Similarly, the Fund does not isolate the effect of changes in foreign
exchange rates from the fluctuations arising from changes in the market
prices of securities sold during the period. Accordingly, realized and
unrealized foreign currency gains (losses) are included in the reported net
realized and unrealized gains (losses) on investment transactions and
balances.
Net realized gains (losses) on foreign currency transactions represent net
foreign exchange gains (losses) from sales and maturities of foreign
currency exchange contracts, disposition of foreign currencies, currency
gains or losses realized between the trade and settlement dates on
securities transactions, and the difference between the amount of investment
income and foreign withholding taxes recorded on the Fund's books and the
U.S. dollar equivalent amounts actually received or paid. Net unrealized
currency gains (losses) from valuing foreign currency denominated assets and
liabilities at period end exchange rates are reflected as a component of
unrealized appreciation (depreciation) on investments and foreign currency
translations in the Statement of Net Assets. The change in net unrealized
currency gains (losses) for the period is reflected in the Statement of
Operations.
Foreign security and currency transactions may involve certain
considerations and risks not typically associated with those of U.S. dollar
denominated transactions as a result of, among other factors, the
possibility of lower levels of governmental supervision and regulation of
foreign securities markets and the possibility of political or economic
instability.
The Fund may use derivatives to achieve its investment objectives. The Fund may
engage in transactions in futures contracts on foreign currencies, stock
indices, as well as in options, swaps and structured notes. Consistent with the
Fund's investment objectives and policies, the Fund may use derivatives for
non-hedging as well as hedging purposes.
Following is a description of derivative instruments that the Fund may utilize
and their associated risks:
6. PURCHASED OPTIONS: The Fund may purchase call and put options on listed
securities or securities traded over the counter. The Fund may purchase call
options on securities to protect against an increase in the price of the
underlying security. The Fund may purchase put options on securities to
protect against a decline in the value of the underlying security. Risks may
arise from an imperfect correlation between the change in market value of
the securities held by the Portfolio and the prices of options relating to
the securities purchased or sold by the Portfolio and from the possible lack
of a liquid secondary market for an option. Possible losses from purchased
options cannot exceed the total amount invested. Realized gains or losses on
purchased options are included with net gain (loss) on investment securities
sold in the financial statements.
7. FOREIGN CURRENCY EXCHANGE CONTRACTS: The Fund may enter into foreign
currency exchange contracts generally to attempt to protect securities and
related receivables and payables against changes in future foreign exchange
rates and, in certain situations, to gain exposure to a foreign currency. A
foreign currency exchange contract is an agreement between two parties to
buy or sell currency at a set price on a future date. The market value of
the contract will fluctuate with changes in currency exchange rates. The
contract is marked-to-market daily and the change in market value is
recorded by the Fund as unrealized gain or loss. The Fund records realized
gains or losses when the contract is closed 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. Risk may arise upon entering into these contracts from
the potential inability of counterparties to meet the terms of their
contracts and is generally limited to the amount of unrealized gain on the
contracts, if any, at the date of default. Risks may also arise from
unanticipated movements in the value of a foreign currency relative to the
U.S. dollar.
8. LOAN AGREEMENTS: The Fund may invest in fixed and floating rate loans
("Loans") arranged through private negotiations between an issuer of
sovereign debt obligations and one or more financial institutions
("Lenders") deemed to be creditworthy by the investment adviser. The Fund's
investments in Loans may be in the form of participations in Loans
("Participations") or assignments of all or a portion of Loans
("Assignments") from third parties. The Fund's investment in Participations
typically results in the Fund having a contractual relationship with only
the Lender and not with the borrower. The Fund has the right to receive
payments of principal, interest and any fees to which it is entitled only
from the Lender selling the Participation and only upon receipt by the
Lender of the payments from the borrower. The Fund generally has no right to
enforce compliance by the
17
<PAGE>
borrower with the terms of the loan agreement. As a result, the Fund may be
subject to the credit risk of both the borrower and the Lender that is
selling the Participation. When the Fund purchases Assignments from Lenders
it acquires direct rights against the borrower on the Loan. Because
Assignments are arranged through private negotiations between potential
assignees and potential assignors, the rights and obligations acquired by
the Fund as the purchaser of an Assignment may differ from, and be more
limited than, those held by the assigning Lender.
9. FORWARD COMMITMENTS AND WHEN-ISSUED/DELAYED DELIVERY SECURITIES: The Fund
may make forward commitments to purchase or sell securities. Payment and
delivery for securities which have been purchased or sold on a forward
commitment basis can take place a month or more (not to exceed 120 days)
after the date of the transaction. Additionally, the Fund may purchase
securities on a when-issued or delayed delivery basis. Securities purchased
on a when-issued or delayed delivery basis are purchased for delivery beyond
the normal settlement date at a stated price and yield, and no income
accrues to the Fund on such securities prior to delivery. When the Fund
enters into a purchase transaction on a when-issued or delayed delivery
basis, it either establishes a segregated account in which it maintains
liquid assets in an amount at least equal in value to the Fund's commitments
to purchase such securities or denotes such securities on the custody
statement for its regular custody account. Purchasing securities on a
forward commitment or when-issued or delayed-delivery basis may involve a
risk that the market price at the time of delivery may be lower than the
agreed upon purchase price, in which case there could be an unrealized loss
at the time of delivery.
10. SECURITIES SOLD SHORT: The Fund may sell securities short. A short sale is a
transaction in which the Fund sells securities it may or may not own, but
has borrowed, in anticipation of a decline in the market price of the
securities. The Fund is obligated to replace the borrowed securities at
their market price at the time of replacement. The Fund may have to pay a
premium to borrow the securities as well as pay any dividends or interest
payable on the securities until they are replaced. The Fund's obligation to
replace the securities borrowed in connection with a short sale will
generally be secured by collateral deposited with the broker that consists
of cash, U.S. government securities or other liquid, high grade debt
obligations. In addition, the Fund will either place in a segregated account
with its custodian or denote on its custody records an amount of cash, U.S.
government securities or other liquid high grade debt obligations equal to
the difference, if any, between (1) the market value of the securities sold
at the time they were sold short and (2) any cash, U.S. government
securities or other liquid high grade debt obligations deposited as
collateral with the broker in connection with the short sale (not including
the proceeds of the short sale). Short sales by the Fund involve certain
risks and special considerations. Possible losses from short sales differ
from losses that could be incurred from a purchase of a security because
losses from short sales may be unlimited, whereas losses from purchases
cannot exceed the total amount invested.
11. WRITTEN OPTIONS: The Fund may write covered call options in an attempt to
increase the Fund's total return. The Fund will receive premiums that are
recorded as liabilities and subsequently adjusted to the current value of
the options written. Premiums received from writing options which expire are
treated as realized gains. Premiums received from writing options which are
exercised or are closed are added to or offset against the proceeds or
amount paid on the transaction to determine the net realized gain or loss.
By writing a covered call option, the Fund forgoes in exchange for the
premium the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase.
12. SWAP AGREEMENTS: The Fund may enter into swap agreements to exchange the
return generated by one security, instrument or basket of instruments for
the return generated by another security, instrument or basket of
instruments. The following summarizes swaps which may be entered into by the
Fund:
INTEREST RATE SWAPS: Interest rate swaps involve the exchange of commitments
to pay and receive interest based on a notional principal amount. Net
periodic interest payments to be received or paid are accrued daily and are
recorded in the Statement of Operations as an adjustment to interest income.
Interest rate swaps are marked-to-market daily based upon quotations from
market makers and the change, if any, is recorded as unrealized appreciation
or depreciation in the Statement of Operations.
TOTAL RETURN SWAPS: Total return swaps involve commitments to pay interest
in exchange for a market-linked return based on a notional amount. To the
extent the total return of the security, instrument or basket of instruments
underlying the transaction exceeds or falls short of the offsetting interest
obligation, the Fund will receive a payment from or make a payment to the
counterparty, respectively. Total return swaps are marked-to-market daily
based upon quotations from market makers and the change, if any, is recorded
as unrealized gains or losses in the Statement of Operations. Periodic
payments received or made at the end of each measurement period, but prior
to termination, are recorded as realized gains or losses in the Statement of
Operations.
18
<PAGE>
Realized gains or losses on maturity or termination of interest rate and
total return swaps are presented in the Statement of Operations. Because
there is no organized market for these swap agreements, the value reported
in the Statement of Net Assets may differ from that which would be realized
in the event the Fund terminated its position in the agreement. Risks may
arise upon entering into these agreements from the potential inability of
the counterparties to meet the terms of the agreements and are generally
limited to the amount of net interest payments to be received and/or
favorable movements in the value of the underlying security, instrument or
basket of instruments, if any, at the date of default.
13. STRUCTURED SECURITIES: The Fund may invest in interests in entities
organized and operated solely for the purpose of restructuring the
investment characteristics of sovereign debt obligations. This type of
restructuring involves the deposit with or purchase by an entity of
specified instruments and the issuance by that entity of one or more classes
of securities ("Structured Securities") backed by, or representing interests
in, the underlying instruments. Structured Securities generally will expose
the Fund to credit risks of the underlying instruments as well as of the
issuer of the Structured Security. Structured Securities are typically sold
in private placement transactions with no active trading market. Investments
in Structured Securities may be more volatile than their underlying
instruments, however, any loss is limited to the amount of the original
investment.
14. OVER-THE-COUNTER TRADING: Derivative instruments that may be purchased or
sold by the Fund are expected to regularly consist of instruments not traded
on an exchange. The risk of nonperformance by the obligor on such an
instrument may be greater, and the ease with which the Fund can dispose of
or enter into closing transactions with respect to such an instrument may be
less, than in the case of an exchange-traded instrument. In addition,
significant disparities may exist between bid and asked prices for
derivative instruments that are not traded on an exchange. Derivative
instruments not traded on exchanges are also not subject to the same type of
government regulation as exchange traded instruments, and many of the
protections afforded to participants in a regulated environment may not be
available in connection with such transactions.
15. OTHER: Security transactions are accounted for on the date the securities
are purchased or sold. Realized gains and losses on the sale of investment
securities are determined on the specific identified cost basis. Interest
income is recognized on the accrual basis and discounts and premiums on
investments purchased are accreted or amortized in accordance with the
effective yield method over their respective lives, except where collection
is in doubt. Distributions to shareholders are recorded on the ex-dividend
date. The amount and character of income and capital gain distributions to
be paid are determined in accordance with Federal income tax regulations
which may differ from generally accepted accounting principles. These
differences are primarily due to differing book and tax treatments for
foreign currency transactions and the timing of the recognition of losses on
securities. Permanent book and tax basis differences relating to shareholder
distributions may result in reclassifications to undistributed net
investment income (loss), accumulated net realized gain (loss) and capital
surplus.
Adjustments for permanent book-tax differences, if any, are not reflected in
ending undistributed net investment income (loss) for the purpose of
calculating net investment income (loss) per share in the financial
highlights.
B. Morgan Stanley Dean Witter Investment Management Inc. (the "Adviser")
provides investment advisory services to the Fund under the terms of an
Investment Advisory and Management Agreement (the "Agreement"). Under the
Agreement, the Adviser is paid a fee computed weekly and payable monthly at an
annual rate of 1.00% of the Fund's average weekly net assets.
C. The Chase Manhattan Bank, through its corporate affiliate Chase Global Funds
Services Company (the "Administrator"), provides administrative services to the
Fund under an Administration Agreement. Under the Administration Agreement, the
Administrator is paid a fee computed weekly and payable monthly at an annual
rate of 0.08% of the Fund's average weekly net assets, plus $100,000 per annum.
In addition, the Fund is charged certain out-of-pocket expenses by the
Administrator.
D. The Chase Manhattan Bank serves as custodian for the Fund. Custody fees are
payable monthly based on assets held in custody, investment purchase and sales
activity and account maintenance fees, plus reimbursement for certain
out-of-pocket expenses.
E. For the six months ended June 30, 1999, the Fund made purchases and sales
totaling $32,028,000 and $29,755,000, respectively, of investments other than
long-term U.S. Government securities and short-term investments. There were no
purchases and sales of long-term U.S. Government securities. At June 30, 1999,
the U.S. Federal income tax cost basis of securities was $44,587,000 and,
accordingly, net unrealized appreciation for U.S. Federal income tax purposes
was $402,000 of which $2,376,000 related to appreciated securities and
$1,974,000 related to depreciated securities. At December 31, 1998, the Fund had
a capital loss carryforward for U.S. Federal income tax purposes of
approximately $13,340,000 to offset against future capital gains which will
expire on December 31,
19
<PAGE>
2006. To the extent that capital gains are offset, such gains will not be
distributed to shareholders.
F. At June 30, 1999, approximately 28% of the Fund's total investments consist
of U.S. high yield securities rated below investment grade. Investments in high
yield securities are accompanied by a greater degree of credit risk and the risk
tends to be more sensitive to economic conditions than higher-rated securities.
These investments are often traded by one market maker who may also be utilized
by the Fund to provide pricing information used to value such securities. The
amounts which will be realized upon disposition of the securities may differ
from the value reflected on the statement of net assets and the differences
could be material.
G. Each Director of the Fund who is not an officer of the Fund or an affiliated
person as defined under the Investment Company Act of 1940, as amended, may
elect to participate in the Directors' Deferred Compensation Plan (the "Plan").
Under the Plan, such Directors may elect to defer payment of a percentage of
their total fees earned as a Director of the Fund. These deferred portions are
treated, based on an election by the Director, as if they were either invested
in the Fund's shares or invested in U.S. Treasury Bills, as defined under the
Plan. The deferred fees payable, under the Plan, at June 30, 1999 totaled
$41,000 and are included in Payable for Directors' Fees and Expenses on the
Statement of Net Assets.
H. During June 1999, the Officers declared a dividend distribution of $0.26 per
share, derived from net investment income, payable on July 15, 1999, to
shareholders of record on June 30, 1999.
I. Supplemental Proxy Information
The Annual Meeting of the Stockholders of the Morgan Stanley Global Opportunity
Bond Fund, Inc. was held on June 21, 1999. The following is a summary of each
proposal presented and the total number of shares voted:
<TABLE>
<CAPTION>
VOTES IN VOTES AUTHORITY VOTES
PROPOSAL: FAVOR OF AGAINST WITHHELD ABSTAINED
- --------- --------- ------- --------- ---------
<S> <C> <C> <C> <C>
1. To elect the following Directors: Peter J. Chase..................... 3,550,926 - 82,472 -
David B. Gill...................... 3,550,926 - 82,472 -
Michael F.Klein.................... 3,550,926 - 82,472 -
2. To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants of the Fund............................................... 3,596,948 11,836 - 24,614
3. To approve an amendment to the Fund's Articles of Incorporation to
change the name of the Fund to Morgan Stanley Dean Witter Global
Opportunity Bond Fund, Inc............................................ 3,515,583 90,325 - 27,490
</TABLE>
20
<PAGE>
YEAR 2000 DISCLOSURE (UNAUDITED):
The investment advisory services provided to the Fund by the Adviser depend on
the smooth operation of its computer systems. Many computer and software systems
in use today cannot recognize the year 2000, but revert to 1900 or some other
date, due to the manner in which dates were encoded and calculated. That failure
could have a negative impact on the handling of securities trades, pricing and
account services. The Adviser has been actively working on necessary changes to
its own computer systems to deal with the year 2000 problem and expects that its
systems will be adapted before that date. There can be no assurance, however,
that the Adviser will be successful. In addition, other unaffiliated service
providers may be faced with similar problems. The Adviser is monitoring their
remedial efforts, but, there can be no assurance that they and the services they
provide will not be adversely affected.
In addition, it is possible that the markets for securities in which the Fund
invests may be detrimentally affected by computer failures throughout the
financial services industry beginning January 1, 2000. Improperly functioning
trading systems may result in settlement problems and liquidity issues. In
addition, corporate and governmental data processing errors may result in
production problems for individual companies and overall economic uncertainties.
Earnings of individual issuers will be affected by remediation costs, which may
be substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected.
21
<PAGE>
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
Pursuant to the Dividend Reinvestment and Cash Purchase Plan (the "Plan"),
each shareholder may elect by providing written instructions to American Stock
Transfer & Trust Company (the "Plan Agent") to have all distributions
automatically reinvested in Fund shares. Participants in the Plan have the
option of making additional voluntary cash payments to the Plan Agent, annually,
in any amount from $100 to $3,000, for investment in Fund shares.
Dividend and capital gain distributions will be reinvested on the
reinvestment date in full and fractional shares. If the market price per share
equals or exceeds net asset value per share on the reinvestment date, the Fund
will issue shares to participants at net asset value. If net asset value is less
than 95% of the market price on the reinvestment date, shares will be issued at
95% of the market price. If net asset value exceeds the market price on the
reinvestment date, participants will receive shares valued at market price. The
Fund may purchase shares of its Common Stock in the open market in connection
with dividend reinvestment requirements at the discretion of the Board of
Directors. Should the Fund declare a dividend or capital gain distribution
payable only in cash, the Plan Agent will purchase Fund shares for participants
in the open market as agent for the participants.
The Plan Agent's fees for the reinvestment of dividends and distributions
will be paid by the Fund. However, each participant's account will be charged a
pro rata share of brokerage commissions incurred on any open market purchases
effected on such participant's behalf. A participant will also pay brokerage
commissions incurred on purchases made by voluntary cash payments. Although
shareholders in the Plan may receive no cash distributions, participation in the
Plan will not relieve participants of any income tax which may be payable on
such dividends or distributions.
In the case of shareholders, such as banks, brokers or nominees, which hold
shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by the
shareholder as representing the total amount registered in the shareholder's
name and held for the account of beneficial owners who are participating in the
Plan.
Shareholders who do not wish to have distributions automatically reinvested
should notify the Plan Agent in writing. There is no penalty for
non-participation or withdrawal from the Plan, and shareholders who have
previously withdrawn from the Plan may rejoin at any time. Requests for
additional information or any correspondence concerning the Plan should be
directed to the Plan Agent at:
Morgan Stanley Dean Witter Global Opportunity Bond Fund, Inc.
American Stock Transfer & Trust Company
Dividend Reinvestment and Cash Purchase Plan
40 Wall Street
New York, NY 10005
1-800-278-4353
22
