<PAGE>
------------------------------------------------------------
MORGAN STANLEY
DEAN WITTER
GLOBAL OPPORTUNITY
BOND FUND, INC.
------------------------------------------------------------
SEMI-ANNUAL REPORT
JUNE 30, 2000
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
Harold J. Schaaff, Jr.
PRESIDENT AND DIRECTOR
John D. Barrett II
DIRECTOR
Gerard E. Jones
DIRECTOR
Graham E. Jones
DIRECTOR
John A. Levin
DIRECTOR
Andrew McNally IV
DIRECTOR
William G. Morton, Jr.
DIRECTOR
Samuel T. Reeves
DIRECTOR
Fergus Reid
DIRECTOR
Frederick O. Robertshaw
DIRECTOR
Stefanie V. Chang
VICE PRESIDENT
Arthur J. Lev
VICE PRESIDENT
Joseph P. Stadler
VICE PRESIDENT
Mary E. Mullin
SECRETARY
Belinda A. Brady
TREASURER
Robin L. Conkey
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
Clifford Chance Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
--------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
================================================================================
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/im.
<PAGE>
LETTER TO SHAREHOLDERS
---------
For the six months ended June 30, 2000, the Morgan Stanley Dean Witter Global
Opportunity Bond Fund, Inc. (the "Fund") had a total return, based on net asset
value per share, of 3.83% compared to 3.05% for the Emerging Markets Bond/ High
Yield blended benchmark (the "Emerging Markets/High Yield benchmark"), and 2.03%
for the Latin American/Emerging Markets/High Yield blended benchmark (the
"Latin/Emerging Markets/High Yield benchmark"). For the period from the Fund's
commencement of operations on May 27, 1994 through June 30, 2000, the Fund's
total return, based on net asset value per share, was 73.70% compared to 87.43%
for the Emerging Markets/High Yield benchmark, and 80.43% for the Latin/Emerging
Markets/High Yield benchmark. Effective January 1, 2000, the Fund uses as its
benchmark the Emerging Markets/High Yield benchmark, which is comprised of 50%
of the J.P. Morgan Emerging Markets Bond Global Index and 50% of the C.S. First
Boston High Yield Index. At June 30, 2000, the Fund's investments in debt
instruments were comprised of 64% emerging markets debt securities and 36% U.S.
high yield securities. However, the Fund's weightings in these asset classes are
not restricted and will, under normal circumstances, fluctuate depending on
market conditions.
On June 30, 2000, the closing price of the Fund's shares on the New York Stock
Exchange was $8 5/8, representing a 16.6% discount to the Fund's net asset value
per share.
The global high yield market had mixed results in the first half of 2000. Stock
market volatility and several rate hikes by the Federal Reserve caused investors
to move money away from U.S. high yield securities. High yield spreads widened
by 155 basis points from the end of 1999. Emerging markets debt had better
results as investors looked past this news, for the most part, and focused on
the good economic growth and better fiscal and political environments that
occurred in the developing countries. Several countries had their credit ratings
upgraded, including Mexico, Russia, South Africa, Hungary and Tunisia.
During the second quarter of 2000, we had an above-benchmark allocation to
emerging markets which contributed to performance. Positions in Russia and
Brazil also added to returns while Colombia and the Philippines detracted from
results. An overweight position in the telecommunications sector was another
drag on performance as this sector performed poorly due mostly to the volatility
of the stock market and a poor technical situation. Our higher quality portfolio
than the benchmark benefited our returns as BB securities outperformed lower
rated bonds during the second quarter of 2000. Our overweight allocation to the
gaming sector also increased returns as this sector was one of the best
performing sectors in the high yield market.
In terms of portfolio activity, we lowered our allocation to emerging markets
debt in late March 2000 based on our view that this sector looked "rich"
compared to high yield. However, we currently have a close to benchmark
weighting in the sectors. We also added to our positions in telecommunications
as we feel this sector has become more undervalued.
We are optimistic about attaining better returns in the global high yield market
over the coming months. The U.S. high yield market continues to trade at spread
levels only surpassed during the last U.S. recession in the early 1990's. The
emerging markets debt asset class should continue to show good returns as both
the economic and political landscape in developing countries continue to
improve. Evidence is starting to appear that the Federal Reserve might be able
to stop or slow down the restrictive stance that it has had for over the past
year. The supply in the new issue market for high yield has slowed considerably
this year with issuance down over 50% from the same period last year. Stability
is what the high yield market needs: a Federal Reserve on hold, less volatile
interest rates and stock market, continued moderate new issue supply, and less
outflows (or possi-
2
<PAGE>
bly inflows) from high yield mutual funds. We are hopeful that this stability
will emerge soon.
Sincerely,
/s/ Harold J. Schaaff, Jr.
Harold J. Schaaff, Jr.
PRESIDENT AND DIRECTOR
July 2000
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.
FOREIGN INVESTING INVOLVES CERTAIN RISKS, INCLUDING CURRENCY FLUCTUATIONS AND
CONTROLS, RESTRICTIONS ON FOREIGN INVESTMENTS, LESS GOVERNMENTAL SUPERVISION AND
REGULATION, LESS LIQUIDITY AND THE POTENTIAL FOR MARKET VOLATILITY AND POLITICAL
INSTABILITY.
HIGH YIELD FIXED INCOME SECURITIES, ALSO KNOWN AS "JUNK BONDS" ARE CONSIDERED
SPECULATIVE, INVOLVE GREATER RISK OF DEFAULT AND TEND TO BE MORE VOLATILE THAN
INVESTMENT GRADE FIXED INCOME SECURITIES.
--------------------------------------------------------------------------------
DAILY NET ASSET AND MARKET VALUES, AS WELL AS MONTHLY PORTFOLIO INFORMATION FOR
THE FUND, ARE AVAILABLE ON OUR WEBSITE AT www.msdw.com/im.
3
<PAGE>
Morgan Stanley Dean Witter Global Opportunity Bond Fund, Inc.
Investment Summary as of June 30, 2000 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
HISTORICAL
INFORMATION TOTAL RETURN(%)
---------------------------------------------------------------------------------------------
MARKET VALUE(1) NET ASSET VALUE(2) EMBHY INDEX(3) LEMBHY INDEX(4)
-------------------- ----------------------------------------------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL
---------- ------- ---------- ------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR TO DATE 9.27% -- 3.83% -- 3.05% -- 2.03% --
ONE YEAR -2.82 -2.82% 16.67 16.67% 9.79 9.79% 8.81 8.81%
FIVE YEAR 44.99 7.71 71.21 11.35 72.02 11.46 66.88 10.79
SINCE INCEPTION* 44.97 6.28 73.70 9.48 87.43 10.86 80.43 10.17
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
--------------------------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION:
[CHART]
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS
ENDED
JUNE 30,
1994* 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value Per Share ...... $12.25 $12.99 $14.86 $13.74 $9.64 $10.56 $10.35
Market Value Per Share ......... $12.50 $12.50 $14.63 $13.13 $8.31 $ 8.38 $ 8.63
Premium/(Discount) ............. 2.0% -3.8% -1.5% -4.4% -13.8% -20.6% -16.6%
Income Dividends ............... $ 0.91 $ 1.59 $ 1.49 $ 1.30 $1.18 $ 1.05 $ 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% 22.73% 3.83%
EMBHY Index Total Return (3) ... -0.85% 22.16% 23.50% 12.52% -4.74% 13.44% 3.05%
LEMBHY Index Total Return (4) .. -0.46% 22.37% 25.36% 12.56% -3.19% 12.41% 2.03%
</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) From January 1, 2000, the Fund uses as its benchmark, for purpose of
comparing its performance, a composite comprised of 50% of the J.P. Morgan
Emerging Markets Bond Global 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, 2000, the Fund's investment in debt
instruments was comprised of 64% emerging markets debt securities and 36%
U.S. high yield securities. The Fund's performance will be compared to this
benchmark as the country weightings represented by the benchmark are more
representative of the Fund's portfolio.
(4) The Fund formerly used 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.
* 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, 2000 (Unaudited)
================================================================================
DIVERSIFICATION OF TOTAL INVESTMENTS
[CHART]
<TABLE>
<S> <C>
Debt Securities (93.4%)
Short-Term Investments (5.1%)
Equity Securities (1.5%)
</TABLE>
--------------------------------------------------------------------------------
COUNTRY WEIGHTINGS
[CHART]
<TABLE>
<S> <C>
United States (37.6%)
Argentina (11.8%)
Brazil (11.8%)
Mexico (8.9%)
Russia (6.2%)
Philippines (4.0%)
Colombia (3.3%)
Turkey (2.1%)
United Kingdom (2.2%)
Bulgaria (1.9%)
Other (10.2%)
</TABLE>
--------------------------------------------------------------------------------
TEN LARGEST HOLDINGS*
<TABLE>
<CAPTION>
PERCENT OF
TOTAL
INVESTMENTS
------------
<S> <C>
1. Republic of Argentina 11.75%, 6/15/15 (Argentina) 4.4%
2. Russia Principal Note PIK
7.938%, 12/15/20 (Russia) 3.9
3. Federative Republic of Brazil Global Bond
14.50%, 10/15/09 (Brazil) 2.7
4. Republic of Philippines
10.625%, 3/16/25 (Philippines) 2.6
5. Republic of Colombia Global Bond
11.75%, 2/25/20 (Colombia) 2.4
6. Federative Republic of Brazil Global Bond
12.25%, 3/06/30 (Brazil) 2.3
7. United Mexican States Discount Bond `A'
7.313%, 12/31/19 (Mexico) 2.2
8. Republic of Argentina
11.75%, 4/07/09 (Argentina) 2.2
9. Russian Federation
12.75%, 6/24/28 (Russia) 2.1
10. Nextel Communications, Inc. Step Bond
0.00%, 9/15/07 (United States) 2.0
-----
26.8%
=====
</TABLE>
* Excludes short-term investments.
5
<PAGE>
FINANCIAL STATEMENTS
---------
STATEMENT OF NET ASSETS (UNAUDITED)
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
---------
JUNE 30, 2000
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
---------------------------------------------------------------------------------------------------
<S> <C> <C>
DEBT INSTRUMENTS (93.4%)
---------------------------------------------------------------------------------------------------
ALGERIA (1.1%)
SOVEREIGN (1.1%)
Republic of Algeria Loan Agreement, Tranche 1
Zero Coupon, 3/31/10 U.S.$ 200 U.S.$ 165
Republic of Algeria Loan Agreement, Tranche 3,
Zero Coupon, 3/31/10 500 389
-------------
554
-------------
---------------------------------------------------------------------------------------------------
ARGENTINA (9.8%)
CORPORATE (1.5%)
(d)Cablevision SA
13.75%, 5/1/09 100 91
(d)CIA International Telecom
10.375%, 8/1/04 ARP 300 264
(c)CTI Holdings SA
0.00%, 4/15/08 U.S.$ 325 187
(d)Multicanal SA
13.125%, 4/15/09 190 184
-------------
726
SOVEREIGN (8.3%) -------------
(e)Republic of Argentina
11.75%, 4/7/09 1,150 1,072
11.75%, 6/15/15 2,330 2,120
(b)Republic of Argentina 'L'
7.375%, 3/31/05 928 847
-------------
4,039
-------------
4,765
-------------
---------------------------------------------------------------------------------------------------
AUSTRALIA (0.3%)
CORPORATE (0.3%)
Murrin Murrin Holdings
Property Ltd.
9.375%, 8/31/07 160 139
-------------
---------------------------------------------------------------------------------------------------
BRAZIL (11.8%)
CORPORATE (0.6%)
(b)Banco Nacional de Desenvolvimento
Economico e Social
12.554%, 6/16/08 U.S.$ 300 282
SOVEREIGN (11.2%) -------------
Federative Republic of Brazil 'C'
Bond 'L'
8.00%, 4/15/14 246 179
SOVEREIGN (CONTINUED)
Federative Republic of Brazil 'C'
Bond PIK
8.00%, 4/15/14 U.S.$ 866 U.S.$ 628
(b)Federative Republic of Brazil 'EI-L' Bond
7.375%, 4/15/06 465 424
(c)Federative Republic of Brazil 'Z-L' Bond
6.00%, 4/15/24 200 131
(b,e)Federative Republic of Brazil
Debt Conversion 'L'
7.438%, 4/15/12 840 619
(b,e)Federative Republic of Brazil
Discount Bond
7.375%, 4/15/24 600 475
(b)Federative Republic of Brazil E-I
Euro
7.375%, 4/15/06 279 254
Federative Republic of Brazil
Global Bond
12.25%, 3/6/30 1,200 1,098
14.50%, 10/15/09 1,260 1,335
(b)Federative Republic of Brazil
New Money 'L' Bond
7.438%, 4/15/09 390 326
-------------
5,469
-------------
5,751
-------------
---------------------------------------------------------------------------------------------------
BULGARIA (1.9%)
SOVEREIGN (1.9%)
(b)Republic of Bulgaria
Front Loaded Interest
Reduction Bond
7.063%, 7/28/24 540 428
(b,e)Republic of Bulgaria Past
Due Interest Bond
7.063%, 7/28/11 600 476
-------------
904
-------------
---------------------------------------------------------------------------------------------------
COLOMBIA (3.3%)
CORPORATE (0.8%)
(c,d)Occidente y Caribe
14.00%, 3/15/04 550 391
SOVEREIGN (2.5%)
Republic of Colombia Global Bond
(e)9.75%, 4/23/09 100 79
11.75%, 2/25/20 1,400 1,151
-------------
1,230
-------------
1,621
-------------
---------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes ar an integral part of the financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
---------------------------------------------------------------------------------------------------
<S> <C> <C>
DENMARK (0.5%)
CORPORATE (0.5%)
(d)Callahan Nordrhein Westfalen
14.00%, 7/15/10 U.S.$ 250 U.S.$ 250
-------------
---------------------------------------------------------------------------------------------------
ECUADOR (0.4%)
Sovereign (0.4%)
(b)Republic of Ecuador Discount Bond
6.75%, 2/28/25 510 203
-------------
---------------------------------------------------------------------------------------------------
GERMANY (0.1%)
CORPORATE (0.1%)
(d)Sirona Dental Systems
9.125%, 7/15/08 EUR 77 60
-------------
---------------------------------------------------------------------------------------------------
INDONESIA (1.1%)
CORPORATE (1.1%)
Indah Kiat International Finance 'B'
11.875%, 6/15/02 U.S.$ 100 81
(d)Paiton Energy Funding BV
9.34%, 2/15/14 225 45
Tjiwi Kimia International Global Bond
13.25%, 8/1/01 450 396
-------------
522
-------------
---------------------------------------------------------------------------------------------------
IVORY COAST (0.1%)
SOVEREIGN (0.1%)
(b)Ivory Coast
2.00%, 3/29/18 400 64
-------------
---------------------------------------------------------------------------------------------------
JORDAN (0.3%)
SOVEREIGN (0.3%)
(b,d)Jordan Discount Bond
7.75%, 12/23/23 155 120
-------------
---------------------------------------------------------------------------------------------------
MEXICO (8.9%)
CORPORATE (2.7%)
(d)Grupo Elektra SA
12.00%, 4/1/08 100 91
Grupo Iusacell SA de CV
14.25%, 12/1/06 150 155
(d)Maxcom Corp.
13.75%, 4/1/07 150 133
Petroleos Mexicanos
9.50%, 9/15/27 350 355
(d)Sanluis Corp. SA
8.875%, 3/18/08 350 320
(d)TV Azteca 'B'
10.50%, 2/15/07 300 268
-------------
1,322
-------------
SOVEREIGN (6.2%)
(d)United Mexican States
7.50%, 3/8/10 EUR 200 U.S.$ 184
(b,e)United Mexican States Discount
Bond 'A'
7.313%, 12/31/19 U.S.$ 1,110 1,091
(b,e)United Mexican States Discount
Bond 'B'
7.603%, 12/31/19 250 246
(b)United Mexican States Discount
Bond 'C'
7.80%, 12/31/19 100 98
(b)United Mexican States Discount
Bond 'D'
7.925%, 12/31/19 850 835
United Mexican States Par Bond
'W- B'
6.25%, 12/31/19 650 540
-------------
2,994
-------------
4,316
-------------
---------------------------------------------------------------------------------------------------
MOROCCO (0.6%)
SOVEREIGN (0.6%)
(b)Morocco R&C 'A'
7.75%, 1/1/09 337 303
-------------
---------------------------------------------------------------------------------------------------
NETHERLANDS (1.3%)
CORPORATE (1.3%)
Hermes Europe Railtel
B.V.
11.50%, 8/15/07 190 165
(d)Tele1
13.00%, 5/15/09 EUR 175 170
(d)United Pan-Europe
Communications NV
10.875%, 8/1/09 U.S.$ 350 307
-------------
642
-------------
---------------------------------------------------------------------------------------------------
PANAMA (0.2%)
SOVEREIGN (0.2%)
(b)Republic of Panama Past Due
Interest Bond PIK
7.063%, 7/17/16 111 91
-------------
---------------------------------------------------------------------------------------------------
PERU (1.7%)
SOVEREIGN (1.7%)
(c,d)Republic of Peru Front Loaded
Interest Reduction Bond
3.75%, 3/7/17 1,050 638
(c)Republic of Peru Past Due
Interest Bond
4.50%, 3/7/17 270 181
-------------
819
-------------
---------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
---------------------------------------------------------------------------------------------------
<S> <C> <C>
PHILIPPINES (4.0%)
CORPORATE (1.0%)
(d)Bayan Telecommunications
13.50%, 7/15/06 U.S.$ 800 U.S.$ 468
SOVEREIGN (3.0%)
Republic of Philippines
9.875%, 1/15/19 300 246
10.625%, 3/16/25 1,450 1,245
-------------
1,491
-------------
1,959
-------------
---------------------------------------------------------------------------------------------------
POLAND (1.3%)
CORPORATE (1.3%)
Netia Holdings II B.V.
13.50%, 6/15/09 EUR 375 358
(d)PTC International Finance II SA
11.25%, 12/1/09 185 179
11.25%, 12/1/09 U.S.$ 100 101
-------------
638
-------------
---------------------------------------------------------------------------------------------------
QATAR (0.1%)
CORPORATE (0.1%)
(d)RAS Laffan Liquid Natural Gas
8.294%, 3/15/14 60 56
-------------
---------------------------------------------------------------------------------------------------
RUSSIA (6.2%)
SOVEREIGN (6.2%)
(b)Russia Interest Arrears Notes
7.938%, 12/15/15 350 109
(b)Russia Principal Note PIK
7.938%, 12/15/20 6,235 1,917
Russian Federation
12.75%, 6/24/28 1,150 999
-------------
3,025
-------------
---------------------------------------------------------------------------------------------------
TURKEY (1.2%)
CORPORATE (0.5%)
(d)Cellco Finance NV
15.00%, 8/1/05 220 237
SOVEREIGN (0.7%)
Turkey Linked Structured Note
8/7/00 310 323
-------------
560
-------------
---------------------------------------------------------------------------------------------------
UNITED KINGDOM (2.2%)
CORPORATE (2.2%)
Colt Telecommunications Group plc
7.625%, 7/31/08 EUR 205 179
Dolphin Telecommunication plc
(c,d)0.00%, 6/1/08 190 65
(c)0.00%, 5/15/09 U.S.$ 275 98
---------------------------------------------------------------------------------------------------
CORPORATE (CONTINUED)
(d)Esprit Telecommunications Group plc
11.00%, 6/15/08 EUR 233 U.S.$ 164
(d)HMV Media Group plc
10.875%, 5/15/08 GBP 125 132
RSL Communications plc
(c)0.00%, 6/15/08 EUR 256 104
9.125%, 3/1/08 U.S.$ 510 332
-------------
1,074
-------------
---------------------------------------------------------------------------------------------------
UNITED STATES (34.0%)
ASSET BACKED SECURITIES (2.7%)
(d)Aircraft Lease Portfolio Securitization
Ltd. 1996-1 P1D
12.75%, 6/15/06 322 309
(d)CA FM Lease Trust
8.50%, 7/15/17 224 207
CFS 1997-5 'A1'
7.72%, 6/15/05 248 62
DR Securitized Lease Trust
6.66%, 8/15/10 75 63
7.60%, 8/15/07 384 350
First Home Mortgage Acceptance
Corp.,
7.929%, 11/1/18 243 83
Jet Equipment Trust 'C1'
11.79%, 6/15/13 175 196
Long Beach Auto 1997-1, 'B'
14.22%, 10/26/03 41 41
-------------
1,311
-------------
(d)Adelphia Communications Corp. 'B'
7.75%, 1/15/09 205 173
8.375%, 2/1/08 160 142
9.875%, 3/1/07 150 144
Centex Corp.
9.75%, 6/15/05 150 152
Chancellor Media Corp.
9.00%, 10/1/08 125 127
Chancellor Media Corp. 'B'
8.125%, 12/15/07 315 317
(d)Charter Communications
10.25%, 1/15/10 285 276
D.R. Horton, Inc.
8.00%, 2/1/09 100 86
(d)Echostar DBS Corp.
9.375%, 2/1/09 200 193
(d)EES Coke Battery Co., Inc.
9.382%, 4/15/07 100 94
Exodus Communications, Inc.
11.625%, 7/15/10 165 166
Global Crossing Holdings Ltd.
9.625%, 5/15/08 625 608
---------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
FACE
AMOUNT AMOUNT
(000) (000)
---------------------------------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES (CONTINUED)
CORPORATE (CONTINUED)
Globalstar LP
11.375%, 2/15/04 U.S.$ 150 U.S.$ 43
11.50%, 6/1/05 30 8
Globix Corp.
12.50%, 2/1/10 125 104
(c,d)GT Group Telecom
0.00%, 2/1/10 240 133
(d)Hayes Lemmerz International, Inc.
8.25%, 12/15/08 530 448
HCA- The Healthcare Co.
6.91%, 6/15/05 160 146
7.00%, 7/1/07 200 178
7.58%, 9/15/25 130 103
7.69%, 6/15/25 220 179
Hilton Hotels
7.95%, 4/15/07 185 173
HMH Properties 'A'
7.875%, 8/1/05 355 327
(d)Horseshoe Gaming Holdings
8.625%, 5/15/09 745 700
Huntsman ICI Chemicals
10.125%, 7/1/09 EUR 225 215
(d)10.125%, 7/1/09 U.S.$ 225 226
(c)Intermedia Communications, Inc. 'B'
0.00%, 7/15/07 625 488
Intl. Game Technology
8.375%, 5/15/09 235 223
Lennar Corp.
9.95%, 5/1/10 130 127
Level 3 Communications, Inc.
9.125%, 5/1/08 975 875
Lyondell Chemical Co.
9.625%, 5/1/07 145 144
Motient Corp.
12.25%, 4/1/08 180 136
Musicland Group, Inc.
9.00%, 6/15/03 100 91
Musicland Group, Inc. 'B'
9.875%, 3/15/08 175 146
National Steel Corp. 'D'
9.875%, 3/1/09 225 191
(c)Nextel Communications, Inc.
0.00%, 9/15/07 1,250 980
0.00%, 2/15/08 300 219
NEXTLINK Communications, Inc.
(c)0.00%, 4/15/08 720 454
10.75%, 11/15/08 250 249
(a,d,f)NSM Steel, Inc.
12.25%, 2/1/08 100 --@
(c)NTL, Inc. 'B'
0.00%, 4/1/08 GBP 330 307
CORPORATE (CONTINUED)
Onepoint Communications Corp. 'B'
14.50%, 6/1/08 U.S.$ 145 U.S.$ 73
Park Place Entertainment
7.875%, 12/15/05 720 675
(d)Primus Telecommunications
Group, Inc.
11.25%, 1/5/09 100 82
(d)Primus Telecommunications
Group, Inc. 'B'
9.875%, 5/15/08 145 112
PSINet, Inc.
11.00%, 8/1/09 460 434
(d)PSINet, Inc. 'B'
10.00%, 2/15/05 110 102
(c)RCN Corp. 'B'
0.00%, 10/15/07 450 279
0.00%, 2/15/08 225 127
(c)Rhythms Netconnections 'B'
0.00%, 5/15/08 450 184
Rhythms NetConnections, Inc.
14.00%, 2/15/10 75 54
Station Casinos, Inc.
(d)8.875%, 12/1/08 425 405
10.125%, 3/15/06 205 208
Tenet Healthcare Corp.
8.625%, 1/15/07 405 385
TNP Enterprises, Inc.
14.50%, 4/1/11 20 198
(c)Viatel, Inc.
0.00%, 4/15/08 380 175
Vintage Petroleum
8.625%, 2/1/09 150 143
(c,d)WAM! Net Inc. 'B'
0.00%, 3/1/05 365 204
Waste Management, Inc.
(d)6.875%, 5/15/09 35 31
7.00%, 10/15/06 125 115
7.125%, 10/1/07 315 288
7.125%, 12/15/17 40 33
7.65%, 3/15/11 50 46
(c)Winstar Communications Inc.
0.00%, 4/15/10 1,445 665
(d)XM Satellite Radio Holdings Inc.
14.00%, 3/15/10 175 153
-------------
15,262
-------------
16,573
-------------
---------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
---------------------------------------------------------------------------------------------------
<S> <C> <C>
VENEZUELA (1.0%)
SOVEREIGN (1.0%)
Republic of Venezuela Global Bond
9.25%, 9/15/27 U.S.$ 450 U.S.$ 297
Republic of Venezuela Par Bond
6.75%, 3/31/20 250 175
-------------
472
-------------
---------------------------------------------------------------------------------------------------
TOTAL DEBT INSTRUMENTS
(Cost U.S.$47,183) 45,481
-------------
---------------------------------------------------------------------------------------------------
<CAPTION>
SHARES
---------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (0.1%)
SWEDEN
(a,d)Tele1 ADR
(Cost U.S.$--@) 3,288 40
-------------
---------------------------------------------------------------------------------------------------
PREFERRED STOCK (1.4%)
UNITED STATES
Concentric Network Corp. 'B',
13.50% 1,263 125
(a)Dobson Communications Corp.
PIK 13.00% 1,084 112
IXC Communications, Inc. 'B',
12.50% 194 194
Kmart Financing, 7.75% 2,000 73
(a)Paxson Communications Corp.,
PIK 13.25% 1,819 174
-------------
---------------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCK
(Cost U.S.$611) 678
-------------
---------------------------------------------------------------------------------------------------
<CAPTION>
NO. OF
WARRANTS
---------------------------------------------------------------------------------------------------
<S> <C> <C>
WARRANTS (0.0%)
---------------------------------------------------------------------------------------------------
COLOMBIA (0.0%)
(a,d)Occidente y Caribe, expiring
3/15/04 21,790 8
-------------
---------------------------------------------------------------------------------------------------
<CAPTION>
NO. OF VALUE
WARRANTS (000)
---------------------------------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES (0.0%)
(a,d)Motient Corp., expiring 4/1/08 1,800 U.S.$ 6
(a,d)NSM Steel, Inc., expiring 2/1/08 633,090 1
(a,d)Onepoint Communications
Corp., expiring 6/1/08 1,450 3
(a)WAM! Net., Inc., expiring 3/1/05 6,000 7
-------------
17
-------------
---------------------------------------------------------------------------------------------------
TOTAL WARRANTS
(Cost U.S.$14) 25
-------------
---------------------------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
---------------------------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (5.1%)
---------------------------------------------------------------------------------------------------
ARGENTINA (2.0%)
COMMERCIAL PAPER
Republic of Argentina
7/8/00 U.S.$ 1,000 979
-------------
---------------------------------------------------------------------------------------------------
TURKEY (0.9%)
BILLS
Turkey Treasury Bill
8/23/00 TRL 287,900 ,000 410
-------------
---------------------------------------------------------------------------------------------------
UNITED STATES (2.2%)
BILLS (0.2%)
U.S. Treasury Bill
7/27/00 U.S.$ 100 100
REPURCHASE AGREEMENT (2.0%)
Chase Securities Inc., 6.15%,
dated 6/31/00, due 7/03/00,
to be repurchased at U.S.$984,
collateralized by U.S.$1,045
United States Treasury Notes,
5.50%, due 5/15/09, valued at
U.S.$1,008 983 983
-------------
1,083
-------------
---------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(Cost U.S.$2,531) 2,472
-------------
---------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AMOUNT
(000) (000)
---------------------------------------------------------------------------------------------------
<S> <C> <C>
TOTAL INVESTMENTS (100.0%)
(Cost U.S.$50,339) U.S.$ 48,696
--------------
---------------------------------------------------------------------------------------------------
ASSETS
Cash U.S.$ 464
Receivable for Investments
Sold 2,351
Interest Receivable 1,005
Due from Broker 927
Foreign Withholding Tax
Receivable 2
Other 11 4,760
------------- -------------
---------------------------------------------------------------------------------------------------
LIABILITIES
Securities Sold Short, at Value
(Proceeds U.S.$ 882) (898)
Deferred Country Taxes (4)
Payable For:
Reverse Repurchase
Agreements (4,010)
Investments Purchased (3,961)
Dividends Declared (1,087)
Directors' Fees and
Expenses (58)
Shareholder Reporting
Expenses (42)
Investment Advisory Fees (36)
Professional Fees (32)
Administrative Fees (26)
Custodian Fees (13)
Net Unrealized Loss on
Foreign Currency
Exchange Contracts (3)
Other Liabilities (26) (10,196)
------------- -------------
---------------------------------------------------------------------------------------------------
NET ASSETS
Applicable to 4,180,704, issued and
outstanding U.S.$ 0.01 par value shares
(100,000,000 shares authorized) U.S.$ 43,260
=============
---------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE U.S.$ 10.35
=============
---------------------------------------------------------------------------------------------------
AT JUNE 30, 2000, NET ASSETS CONSISTED OF:
Common Stock U.S.$ 42
Capital Surplus 58,140
Undistributed Net Investment Income 246
Accumulated Net Realized Loss (13,512)
Unrealized Depreciation on Investments,
Foreign Currency Translation and
Futures Contracts (net of accrued foreign
taxes of U.S.$4 on unrealized
appreciation) (1,656)
---------------------------------------------------------------------------------------------------
TOTAL NET ASSETS U.S.$ 43,260
==============
---------------------------------------------------------------------------------------------------
(a) -- Non-income producing.
(b) -- Variable/floating -- rate security rate disclosed is as of
June 30, 2000.
(c) -- Step Bond -- coupon rate increases in increments to maturity. Rate
disclosed is as of June 30, 2000. Maturity date disclosed is the
ultimate maturity.
(d) -- 144A Security -- certain conditions for public sale may exist.
(e) -- Denotes all or a portion of securities subject to repurchase under
Reverse Repurchase Agreements as of June 30, 2000. See note A-4 to
financial statements.
(f) -- Security in default.
@ -- Value is less than U.S. $500.
PIK -- Payment-in-Kind. Income may be paid in additional securities or cash
at the discretion of the issuer.
---------------------------------------------------------------------------------------------------
FUTURES CONTRACTS:
At June 30, 2000, the following futures contracts were open:
<CAPTION>
NET
NUMBER NOTIONAL UNREALIZED
OF VALUE EXPIRATION GAIN/LOSS
CONTRACTS (000) DATE (000)
----------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Long:
10 Year U.S
Treasury Note 2 U.S.$ 197 Sep-00 U.S.$ 6
Short: ===== ========
Long Gilt 2 U.S.$ 227 Sep-00 U.S.$ 3
===== ========
---------------------------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
---------------------------------------------------------------------------------------------------
<S> <C> <C>
SECURITIES SOLD SHORT
ARGENTINA BOND
Republic of Agentina
Global Bond
11.375%, 01/30/17
(Total Proceeds U.S.$882) U.S.$ 1, 000 U.S.$ 898
----------
---------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
--------------------------------------------------------------------------------
JUNE 30, 2000 EXCHANGE RATES:
--------------------------------------------------------------------------------
ARP Argentine Peso 0.999 = U.S.$ 1.00
EUR Euro 1.048 = U.S.$ 1.00
GBP British Pound 0.661 = U.S.$ 1.00
TRL Turkish Lira 620,445 = U.S.$ 1.00
--------------------------------------------------------------------------------
FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
Under the terms of foreign currency exchange contracts open
at June 30, 2000, the Fund is obligated to deliver or is to
receive foreign currency in exchange for U.S. dollars as
indicated below:
<TABLE>
<CAPTION>
NET
CURRENCY IN UNREALIZED
TO EXCHANGE GAIN
DELIVER VALUE SETTLEMENT FOR VALUE (LOSS)
(000) (000) DATE (000) (000) (000)
------------ ----------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
EUR 150 U.S.$ 143 07/05/00 U.S.$ 142 U.S.$ 142 U.S.$ (1)
U.S.$ 267 267 07/05/00 EUR 286 273 6
U.S.$ 130 130 07/05/00 EUR 137 130 --@
EUR 375 358 07/26/00 U.S.$ 354 354 (4)
EUR 1,000 956 07/28/00 U.S.$ 950 950 (6)
EUR 180 172 07/28/00 U.S.$ 170 170 (2)
U.S.$ 94 94 07/28/00 EUR 100 96 2
U.S.$ 38 38 07/28/00 EUR 40 38 --@
EUR 136 130 08/07/00 U.S.$ 130 130 --@
EUR 35 33 08/08/00 U.S.$ 31 31 (2)
GBP 350 530 08/03/00 U.S.$ 544 544 14
U.S.$ 53 53 08/03/00 GBP 35 53 --@
EUR 175 167 08/10/00 U.S.$ 157 157 (10)
---------- ---------- ---------
U.S.$3,071 U.S.$3,068 U.S.$ (3)
========== ========== =========
--------------------------------------------------------------------------------
</TABLE>
SUMMARY OF TOTAL INVESTMENTS BY INDUSTRY
CLASSIFICATION -- JUNE 30, 2000
<TABLE>
<CAPTION>
PERCENT
VALUE OF TOTAL
INDUSTRY (000) INVESTMENTS
--------------------------------------------------------------------------------
<S> <C> <C>
Sovereign & Emerging Markets U.S.$ 23,490 48.2%
Asset Backed Securities 1,311 2.7
Banks 282 0.6
Cable 1,874 3.8
Chemicals 584 1.2
Energy 244 0.5
Financial 518 1.1
Gaming 2,211 4.6
General Merchandise 677 1.4
Healthcare 992 2.0
Homebuilders/Building Materials 152 0.3
Hotel & Lodging 500 1.0
Industrial 594 1.2
Media & Entertainment 964 2.0
Metals 425 0.9
Packaging 396 0.8
Real Estate 214 0.4
Retail 442 0.9
Telecommunications 11,545 23.7
Utilities 198 0.4
Other 1,083 2.3
------------ ---------
U.S.$ 48,696 100.0%
============ =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 2000
(UNAUDITED)
STATEMENT OF OPERATIONS (000)
--------------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Interest ............................................................................................. U.S.$ 2,843
Dividends ............................................................................................ 12
--------------------------------------------------------------------------------------------------------------------------
Total Income ......................................................................................... 2,855
--------------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees ............................................................................. 223
Interest Expense on Borrowings ....................................................................... 105
Administrative Fees .................................................................................. 73
Country Tax Expense .................................................................................. 65
Professional Fees .................................................................................... 44
Custodian Fees ....................................................................................... 38
Shareholder Reporting Expenses ....................................................................... 32
Directors' Fees and Expenses ......................................................................... 15
Transfer Agent Fees .................................................................................. 3
Other Expenses ....................................................................................... 27
--------------------------------------------------------------------------------------------------------------------------
Total Expenses ....................................................................................... 625
--------------------------------------------------------------------------------------------------------------------------
Net Investment Income ................................................................................ 2,230
--------------------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS)
Investment Securities Sold ........................................................................... 2,560
Foreign Currency Transactions ........................................................................ (208)
Futures Contracts .................................................................................... 2
--------------------------------------------------------------------------------------------------------------------------
Net Realized Gain .................................................................................... 2,354
--------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION
Depreciation on Investments .......................................................................... (3,340)
Appreciation on Foreign Currency Translations ........................................................ 26
--------------------------------------------------------------------------------------------------------------------------
Change in Unrealized Appreciation/Depreciation ....................................................... (3,314)
-------------------------------------------------------------------------------------------------------------------------
Net Realized Gain and Change in Unrealized Appreciation/Depreciation ................................. (960)
--------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................................................. U.S.$ 1,270
==========================================================================================================================
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
STATEMENT OF CHANGES IN NET ASSETS (000) (000)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Income .......................................................... U.S.$ 2,230 U.S.$ 4,825
Net Realized Gain (Loss) ....................................................... 2,354 (10)
Change in Unrealized Appreciation/Depreciation ................................. (3,314) 3,416
--------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations ........................... 1,270 8,231
--------------------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income .......................................................... (2,174) (4,387)
--------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Reinvestment of Distributions (0 and 2,622 shares, respectively) ............... -- 26
--------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) (904) 3,870
Net Assets:
Beginning of Period ............................................................ 44,164 40,294
--------------------------------------------------------------------------------------------------------------------------
End of Period (including undistributed net investment income of
U.S.$246 and U.S.$190, respectively ............................................. U.S.$ 43,260 U.S.$ 44,164
==========================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000
(UNAUDITED)
STATEMENT OF CASH FLOWS (000)
---------------------------------------------------------------------------------------------------------------------------
<S> <C>
CASH FLOWS FROM INVESTING AND OPERATING ACTIVITIES:
Proceeds from Sales of Investments ................................................................... U.S.$ 41,012
Purchases of Investments ............................................................................. (39,564)
Net Decrease in Short-Term Investments ............................................................... 185
Net Realized Loss on Foreign Currency Transactions ................................................... (208)
Investment Income .................................................................................... 2,338
Interest Expense Paid ................................................................................ (112)
Net Operating Expenses Paid .......................................................................... (534)
---------------------------------------------------------------------------------------------------------------------------
Net Cash Provided from Investing and Operating Activities ............................................ 3,117
---------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash Paid for Reverse Repurchase Agreements - Net .................................................... (576)
Cash Distributions Paid .............................................................................. (2,214)
--------------------------------------------------------------------------------------------------------------------------
Net Cash Used for Financing Activities ............................................................... (2,790)
--------------------------------------------------------------------------------------------------------------------------
Net Increase in Cash ................................................................................. 327
CASH AT BEGINNING OF PERIOD .......................................................................... 137
---------------------------------------------------------------------------------------------------------------------------
CASH AT END OF PERIOD ................................................................................ U.S.$ 464
===========================================================================================================================
RECONCILIATION OF NET INVESTMENT INCOME TO NET CASH PROVIDED BY INVESTING AND OPERATING ACTIVITIES
---------------------------------------------------------------------------------------------------------------------------
Net Investment Income ................................................................................ U.S.$ 2,230
Proceeds from Sales of Investments ................................................................... 41,012
Purchases of Investments ............................................................................. (39,564)
Net Decrease in Short-Term Investments ............................................................... 185
Net Realized Loss on Foreign Currency Transactions ................................................... (208)
Net Decrease in Receivables Related to Operations .................................................... 195
Net Decrease in Payables Related to Operations ....................................................... (13)
Accretion/Amortization of Discounts and Premiums ..................................................... (720)
---------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Investing and Operating Activities .............................................. U.S.$ 3,117
===========================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS
SELECTED PER SHARE DATA ENDED YEARS ENDED DECEMBER 31,
AND RATIOS: JUNE 30, 2000 ------------------------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........ U.S.$ 10.56 U.S.$ 9.64 U.S.$ 13.74 U.S.$ 14.86 U.S.$ 12.99 U.S.$ 12.25
------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income....................... 0.53 1.15 1.23 1.29 1.71 1.61
Net Realized and Unrealized Gain (Loss) on
Investments................................. (0.22) 0.82 (4.09) 1.19 2.15 0.72
------------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations............ 0.31 1.97 (2.86) 2.48 3.86 2.33
------------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income....................... (0.52) (1.05) (1.18) (1.29) (1.49) (1.59)
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) (1.05) (1.24) (3.60) (1.99) (1.59)
------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD.............. U.S.$ 10.35 U.S.$ 10.56 U.S.$ 9.64 U.S.$ 13.74 U.S.$ 14.86 U.S.$ 12.99
====================================================================================================================================
PER SHARE MARKET VALUE, END OF PERIOD....... U.S.$ 8.63 U.S.$ 8.38 U.S.$ 8.31 U.S.$ 13.13 U.S.$ 14.63 U.S.$ 12.50
====================================================================================================================================
TOTAL INVESTMENT RETURN:
Market Value................................ 9.27% 12.88% (29.20)% 13.93% 34.44% 13.49%
Net Asset Value (1)......................... 3.83% 22.73% (21.57)% 17.38% 31.45% 20.34%
====================================================================================================================================
RATIOS, SUPPLEMENTAL DATA:
------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (THOUSANDS)....... U.S.$43,260 U.S.$44,164 U.S.$40,294 U.S.$57,069 U.S.$61,591 U.S.$53,847
------------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets..... 2.83%* 2.60% 2.59% 1.86% 2.00% 2.06%
Ratio of Expenses Excluding Interest Expense to
Average Net Assets.......................... 2.35%* 2.08% 2.03% 1.75% 1.81% 1.95%
Ratio of Net Investment Income to Average
Net Assets.................................. 10.10%* 11.53% 10.13% 8.15% 12.17% 13.07%
Portfolio Turnover Rate..................... 96% 125% 266% 333% 280% 160%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* 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
JUNE 30, 2000 (UNAUDITED)
--------
Morgan Stanley Dean Witter 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. The prices provided by a pricing service take into account
broker dealer market price quotations for institutional size trading in
similar groups of securities, security quality, maturity, coupon and other
security characteristics as well as any developments related to the specific
securities. 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 under procedures approved by the
Board of Directors 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: The Fund may enter into repurchase agreements under
which the Fund lends excess cash and takes possession of securities with an
agreement that the counterparty will repurchase such securities. In
connection with transactions in repurchase agreements, a bank as custodian
for the Fund takes possession of the underlying securities (collateral),
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 counterparty 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 counterparty 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, 2000 the Fund had reverse repurchase agreements outstanding
with Lehman Brothers and J.P. Morgan as follows:
<TABLE>
<CAPTION>
MATURITY IN
LESS THAN
365 DAYS
-----------
<S> <C>
Value of Securities Subject to Repurchase ................ $ 4,378,000
Liability Under Reverse Repurchase Agreement ............. $ 4,010,000
Interest Rate ............................................ 6.875%
</TABLE>
The average weekly balance of reverse repurchase agreements outstanding
during the six month period
16
<PAGE>
ended June 30, 2000 was approximately $1,466,000 at a weighted average
interest rate of 5.93%.
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:
- 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) due to securities transactions
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) on foreign
currency translations 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 ("Par-
17
<PAGE>
ticipations") 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 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 and any intermediaries between the Lender and the Fund.
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 assets as segregated on the
Fund's records. 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
18
<PAGE>
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.
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.
Risks also arise from potential losses from adverse market movements, and
such losses could exceed the related amounts shown in the Statement of Net
Assets.
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. FUTURES: The Fund may purchase and sell futures contracts. Futures contracts
provide for the sale by one party and purchase by another party of a
specified amount of a specified security, index, instrument or basket of
instruments. Futures contracts (secured by cash, government or other liquid
securities deposited with brokers or custodians as "initial margin") are
valued based upon their quoted daily settlement prices; changes in initial
settlement value (represented by cash paid to or received from brokers as
"variation margin") are accounted for as unrealized appreciation
(depreciation). When futures contracts are closed, the difference between
the opening value at the date of purchase and the value at closing is
recorded as realized gains or losses in the Statement of Operations.
The Fund may use futures contracts in order to manage its exposure to the
stock and bond markets, to hedge against unfavorable changes in the value
of securities or to remain fully invested and to reduce transaction costs.
Futures contract involve market risk in excess of the amounts recognized in
the Statement of Net Assets. Risks arise from the possible movements in
security values underlying these instruments. The change in value of futures
contracts primarily corresponds with the value of their underlying
instruments, which may not correlate with the change in value of the hedged
investments. In addition, there is the risk that the Fund may not be able
to enter into a closing transaction because of an illiquid secondary market.
15. OVER-THE-COUNTER TRADING: Securities and other 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.
During the six month period ended June 30, 2000, the Fund's investments in the
derivative instruments described above only included foreign currency exchange
contracts, securities sold short, structured securities and futures.
16. 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 by the Fund are determined in accordance with Federal income tax
regulations,
19
<PAGE>
which may differ from generally accepted accounting principles. The
book/tax differences are either considered temporary or permanent in nature.
Temporary differences are attributable to differing book and tax treatments
for the timing of the recognition of gains and losses on certain investment
transactions and the timing of the deductibility of certain expenses.
Permanent book and tax basis differences may result in reclassifications
among undistributed net investment income (loss), accumulated net realized
gain (loss) and paid in capital.
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 month period ended June 30, 2000, the Fund made purchases and
sales totaling $43,527,000 and $42,792,000, respectively, of investments other
than long-term U.S. Government securities and short-term investments. There
were no purchases or sales of long-term U.S. Government securities. At June 30,
2000, the U.S. Federal income tax cost basis of securities was $50,339,000 and,
accordingly, net unrealized depreciation for U.S. Federal income tax purposes
was $1,643,000 of which $1,672,000 related to appreciated securities and
$3,315,000 related to depreciated securities. At December 31, 1999, the Fund had
a capital loss carryforward for U.S. Federal income tax purposes of
approximately $15,296,000 to offset against future capital gains of which
$13,340,000 will expire on December 31, 2006 and $1,956,000 will expire on
December 31, 2007. To the extent that capital gains are offset, such gains will
not be distributed to shareholders.
F. A significant portion of the Fund's net assets consist of securities of
issuers located in emerging markets or which are denominated in foreign
currencies. Changes in currency exchange rates will affect the value of and
investment income from such securities. Emerging market securities are often
subject to greater price volatility, limited capitalization and liquidity, and
higher rates of inflation than U.S. securities. In addition, emerging market
securities may be subject to substantial governmental involvement in the economy
and greater social, economic and political uncertainty.
At June 30, 2000, approximately 12% 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.
Emerging market and high yield 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. At June 30, 2000, the deferred fees payable, under the Plan, totaled
$58,000 and are included in Payable for Directors' Fees and Expenses on the
Statement of Net Assets.
H. During June 2000, the Board of Directors declared a dividend distribution of
$0.26 per share, derived from net investment income, payable on July 14, 2000,
to shareholders of record on June 30, 2000.
20
<PAGE>
I. Supplemental Proxy Information
The Annual Meeting of the Stockholders of the Fund was held on June 15, 2000.
The following is a summary of the proposal presented and the total number of
shares voted:
<TABLE>
<CAPTION>
VOTES IN VOTES VOTES
PROPOSAL: FAVOR OF AGAINST ABSTAINED
--------- ---------- --------- ---------
<S> <C> <C> <C>
1. To elect the following Directors: Andrew McNally IV ........................ 3,653,035 90,077 --
Frederick O. Robertshaw .................. 3,652,935 90,177 --
Harold J. Schaaff, Jr .................... 3,653,035 90,077 --
Fergus Reid .............................. 3,653,035 90,077 --
Graham E. Jones .......................... 3,653,035 90,077 --
John D. Barrett II ....................... 3,653,035 90,077 --
Samuel T. Reeves. ........................ 3,653,035 90,077 --
Gerard E. Jones .......................... 3,653,035 90,077 --
</TABLE>
The Annual Meeting of the Stockholders of the Fund was reconvened on August 1,
2000. The following is a summary of the proposal presented and the total number
of shares voted:
<TABLE>
<CAPTION>
VOTES IN VOTES VOTES
PROPOSAL: FAVOR OF AGAINST ABSTAINED
--------- --------- --------- ---------
<S> <C> <C> <C>
2. To ratify the selection of Ernst & Young LLP as independent
accountants of the Fund ................................................... 3,873,846 7,700 22,663
</TABLE>
-------------------------------------------------------------------------------
CHANGE IN INDEPENDENT ACCOUNTANTS:
ON JULY 5, 2000, PRICEWATERHOUSECOOPERS LLP RESIGNED AS INDEPENDENT ACCOUNTANTS
OF THE FUND. THE REPORTS OF PRICEWATERHOUSECOOPERS LLP ON THE FINANCIAL
STATEMENTS OF THE FUND FOR THE PAST TWO FISCAL YEARS CONTAINED NO ADVERSE
OPINION OR DISCLAIMER OF OPINION AND WERE NOT QUALIFIED OR MODIFIED AS TO
UNCERTAINTY, AUDIT SCOPE OR ACCOUNTING PRINCIPLE. IN CONNECTION WITH ITS AUDITS
FOR THE TWO MOST RECENT FISCAL YEARS AND THROUGH JULY 5, 2000, THERE HAVE BEEN
NO DISAGREEMENTS WITH PRICEWATERHOUSECOOPERS LLP ON ANY MATTER OF ACCOUNTING
PRINCIPLES OR PRACTICES, FINANCIAL STATEMENT DISCLOSURE, OR AUDITING SCOPE OR
PROCEDURE, WHICH DISAGREEMENTS, IF NOT RESOLVED TO THE SATISFACTION OF
PRICEWATERHOUSECOOPERS LLP, WOULD HAVE CAUSED THEM TO MAKE REFERENCE THERETO IN
THEIR REPORT ON THE FINANCIAL STATEMENTS FOR SUCH YEARS. THE FUND, WITH THE
APPROVAL OF ITS BOARD OF DIRECTORS, AUDIT COMMITTEE AND SHAREHOLDERS, ENGAGED
ERNST & YOUNG LLP AS INDEPENDENT ACCOUNTANTS AS OF AUGUST 1, 2000.
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. 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, that 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
