The Latin America
Dollar Income
Fund, Inc.
Annual Report
October 31, 1995
A closed-end investment company seeking high current income as its primary
objective and capital appreciation as a secondary objective through investment
principally in dollar-denominated Latin American debt instruments.
<PAGE>
The Latin America Dollar Income Fund, Inc.
- ------------------------------------------
Investment objectives and policies
o primarily high current income and secondarily capital appreciation through
investment principally in dollar-denominated Latin American debt
instruments
Investment characteristics
o closed-end investment company investing principally in a portfolio of
dollar-denominated Latin American debt instruments
o a vehicle for international diversification through participation in the
economies of Latin American countries
General Information
- -------------------
Executive offices
The Latin America Dollar Income Fund, Inc.
345 Park Avenue
New York, NY 10154
For Fund information: 1-800-349-4281
Transfer agent, registrar and dividend
reinvestment plan agent
For account information: 617-328-5000 x6406
State Street Bank & Trust Company
P.O. Box 8200
Boston, MA 02266-8200
Custodian
Brown Brothers Harriman & Co.
Legal counsel
Willkie Farr & Gallagher
Independent Accountants
Price Waterhouse LLP
New York Stock Exchange Symbol -- LBF
Contents
- --------
In Brief 3
Letter to Shareholders 3
Investment Summary 6
Investment Portfolio 7
Financial Statements 10
Financial Highlights 14
Notes to Financial Statements 15
Report of Independent Accountants 19
Shareholder Meeting Results 20
Investment Manager and Administrator 21
Dividend Reinvestment and
Cash Purchase Plan 22
Directors and Officers Back cover
This report is sent to the shareholders of The Latin America Dollar Income Fund,
Inc. for their information. It is not a prospectus, circular, or representation
intended for use in the purchase or sale of shares of the Fund or of any
securities mentioned in the report.
2
<PAGE>
In Brief
- --------
o The favorable momentum previously established in Latin American debt
markets was halted at the end of 1994 when Mexico devalued and subsequently
floated its currency. This action provoked a sharp sell-off in Latin
American debt securities, with prices declining through January and
February 1995.
o In mid-March, Latin American debt began a sustained rally after decisive
action by economic leaders in Argentina and Mexico bolstered investor
confidence. Positive monthly returns in Latin American debt markets were
posted through September before easing somewhat in October.
o Reflecting difficult market conditions, The Latin America Dollar Income
Fund posted a total return of -3.46% based on net asset value for its
fiscal year ended October 31, 1995. However, based on the Fund's New York
Stock Exchange share price, the Fund's total return was 5.78% for the same
period.
Letter to Shareholders
- ----------------------
Dear Shareholders:
We are pleased to present the annual report for the Latin America Dollar
Income Fund, Inc. (the "Fund") for the fiscal year ended October 31, 1995. This
has been a challenging period for the Latin American debt markets. The favorable
momentum previously achieved in Latin America and other emerging countries was
abruptly halted in late December 1994, when Mexico devalued and subsequently
floated its currency. The resulting sell-off in Mexico's financial markets
quickly spilled over into the debt and equity markets of other Latin American
countries. Delays in the development of an effective economic program and in a
U.S.-led support package for Mexico put additional pressure on financial markets
and capital flows to Latin America during most of the first quarter of 1995.
In mid-March, decisive action by economic leaders in Argentina and Mexico
to deepen economic reform bolstered investor confidence, helping to fuel a
strong rally in Latin American debt markets. First quarter losses in these
markets were erased by May and solid positive returns were posted for six
consecutive months through September, before easing slightly in October over
concerns about the lingering recessions in Argentina and Mexico. Increased
investor confidence was evidenced by a return of local capital to Latin American
economies and renewed access by a number of these countries to the international
capital markets. The market recovery was further enhanced by a decline in
long-term U.S. interest rates, which were particularly helpful for the many U.S.
dollar-denominated fixed-rate bonds in which the Fund invests.
Fund Performance and Strategy
Reflecting difficult market conditions, the net asset value (NAV) of the
Fund declined from $13.41 to $11.20 during the fiscal year. Adjusted for
distributions of $1.68 per share, the total return of the Fund based on NAV was
- -3.46% during the fiscal year. This compares with a total return of 5.59% during
the same period for the unmanaged J.P. Morgan Latin Brady Bond Index. During the
fiscal year, the decline in the Fund's share price on the New York Stock
Exchange from $13.25 to $12.13 was more than offset by distributions of $1.68
per share, resulting in a total return of 5.78% based on the market value of the
Fund's shares. As a result of currency losses on Mexican peso-denominated
holdings realized earlier in the year, $0.23 of the Fund's 1995 distributions
will be reported to shareholders as nontaxable. The $12.13 price of the shares
on October 31, 1995, represented an 8% premium over the NAV of the Fund.
Throughout the challenging market conditions during the fiscal year, we
have continued to maintain a well-diversified portfolio of some of the highest
quality and most liquid securities available in Latin America. Although the Fund
3
<PAGE>
may invest up to 35% of its assets in corporate obligations, only 5% of the
Fund's assets were invested in such securities as of October 31, 1995, while 93%
of assets were invested in sovereign debt. While having generally lower yields,
sovereign obligations tend to be of higher credit quality than corporate debt,
which is particularly important in the current recessionary environments of, for
example, Argentina and Mexico. In addition, we often favor sovereign Brady bonds
because their large volume greatly enhances their liquidity and because many of
them are backed by U.S. Treasury bonds, a defensive characteristic which aids
their performance in poor markets.
In June, we substantially increased the Fund's holdings in fixed-rate
securities based on their price appreciation potential because we believed the
U.S. Federal Reserve would soon begin to lower short-term interest rates (which
it did in early July). By the end of October, in light of the significant
declines that had taken place in long-term U.S. dollar interest rates, we took
some profits and reduced fixed-rate holdings to approximately 41% of the Fund's
assets.
Securities denominated in local currencies can offer relatively high yields
as well as the opportunity to benefit from currency appreciation in developing
countries with improving economies. As the Mexican peso crisis demonstrated,
however, local currencies can also be susceptible to dramatic devaluations when
there is a loss of confidence in economic policies. We have therefore continued
to adopt a cautious and opportunistic approach with respect to the Fund's
exposure to foreign currencies, limiting it to countries where we foresee a
stable or appreciating exchange rate. As of October 31, 1995, only 4% of the
Fund's assets were invested in local currency securities with the balance held
in U.S. dollar-denominated obligations.
We maintained a relatively high level of cash during the first half of the
fiscal year. The Fund's cash position helped cushion the impact of market
volatility during this period and also provided the flexibility to acquire
attractively valued bonds at times of market weakness. As Latin American debt
markets rebounded strongly in March, we sold some securities into the rally and
raised cash in the event of a market correction. The market rally continued,
though, underpinned by the strong U.S. Treasury market. Our cash position
therefore restrained performance in the latter half of March and in April,
causing the Fund to underperform the J.P. Morgan Index for the Fund's fiscal
year. As market conditions continued to improve in the second half of the fiscal
year, however, the Fund was fully invested.
The Fund's core holdings continue to be in Argentina (25% of assets) and
Brazil (29% of assets). The Argentine government deftly handled the spill-over
effects of the Mexican peso crisis in early 1995. Officials made meaningful cuts
in government spending to ensure fiscal stability. Meanwhile, exports have grown
rapidly, enhancing the country's ability to pay back its debt. And President
Menem's first-round re-election in May signaled popular approval of the economic
measures undertaken by the government over the last several years. In September,
the Argentine debt markets experienced heightened volatility over the
uncertainty of highly regarded Economy Minister Cavallo's tenure within the
Menem administration. This has now subsided, and our long-term outlook for
Argentina remains positive.
The Fund's significant holdings in Brazil reflect our belief in a promising
fundamental outlook. Brazil successfully slowed the torrid pace of economic
growth exhibited early in 1995 (thereby reducing the risk of an overheated
economy) and has improved its external accounts. High real interest rates have
also bolstered international reserves. Moreover, President Cardoso has made
gradual but steady progress on advancing important financial and constitutional
reforms through Congress.
Throughout the fiscal year, the Fund has held underweight positions in
Mexico (16% of assets) and Venezuela (8% of assets). The Mexican government
appears to have steadfastly adhered to sound economic policies implemented in
the aftermath of the peso crisis, but lingering political concerns and a
4
<PAGE>
significant economic contraction have recently created some uneasiness in
Mexico's financial markets. We believe Venezuelan government bonds offer
attractive yields, but at the end of the fiscal year the markets were awaiting
progress on a program with the International Monetary Fund to address the
serious imbalances in the Venezuelan economy.
The Fund also holds positions in Panamanian debt (9% of assets). Guided by
sound economic policies, our fundamental outlook in Panama is positive and the
use of the U.S. dollar as legal tender in the economy insulates the country from
local currency uncertainties. Panama and its creditors have agreed to convert
its outstanding bank debt into Brady Bonds during 1996. This restructuring will
enhance Panama's standing in the international capital markets and should
further enhance the value of its outstanding debt.
Outlook
The effects of the Mexican peso crisis in early 1995 proved a daunting
challenge for economic leaders in Latin American countries. To preserve their
countries' creditworthiness and to safeguard their hard-won access to the
international capital markets, leaders in countries such as Argentina and Mexico
imposed further fiscal discipline and accelerated the pace of economic reforms.
In the near term, these measures have created difficult domestic conditions in
some Latin American economies, but we are confident that they will improve the
long-term fundamentals in these countries. Coupled with a constructive global
environment for the U.S. dollar, interest rates, and bond markets, we expect
this positive outlook will be reflected in improving prices for Latin American
debt.
A Team Approach to Investing
The Latin America Dollar Income Fund, Inc. is managed by a team of Scudder
investment professionals who each play an important role in the portfolio's
management process. Team members work together to develop investment strategies
and select securities for the portfolio. They are supported by Scudder's large
staff of economists, research analysts, traders, and other investment
specialists who work in Scudder's offices across the United States and abroad.
We believe our team approach benefits Fund investors by bringing together many
disciplines and leveraging Scudder's extensive resources.
M. Isabel Saltzman, Lead Portfolio Manager, has set the Fund's investment
strategy and overseen its daily operation since the Fund was introduced in 1992.
Isabel, who joined Scudder in 1990, has been involved in foreign finance and
investing since 1979. Lincoln Y. Rathnam, Portfolio Manager, has worked at
Scudder since 1984 and has 17 years of equity research and portfolio management
experience. Susan E. Gray, Portfolio Manager, has responsibility for developing
the Fund's trading strategies. Susan, who has six years of investment trading
experience, has worked at Scudder since 1987.
Dividend Reinvestment Option
The Fund's Dividend Reinvestment and Cash Purchase Plan (the "Plan") offers
you a convenient way to have your dividends and capital gain distributions
reinvested in the shares of the Fund. Your participation is automatic unless you
or the bank, broker, or other nominee holding shares beneficially owned by you
specifies otherwise. Its features are more fully described on page 22.
Other Information
The Fund's NAV is published every Monday in The Wall Street Journal under
the heading "Publicly Traded Funds." The Fund's NAV is also published in The New
York Times and Barron's.
We are pleased that you are an investor in The Latin American Dollar Income
Fund, Inc.
Respectfully,
/s/Lynn S. Birdsong /s/Edmond D. Villani
Lynn S. Birdsong Edmond D. Villani
President Chairman of the Board
5
<PAGE>
The Latin America Dollar Income Fund, Inc.
Investment Summary as of October 31, 1995
- -------------------------------------------------------------------------------
HISTORICAL INFORMATION
LIFE OF FUND
TOTAL RETURN (%)
------------------------------------------------------------
MARKET VALUE NET ASSET VALUE (a) INDEX (b)
------------------ ------------------ ------------------
AVERAGE AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL
------------------ ------------------ ------------------
CURRENT QUARTER 6.55 -- 2.89 -- 4.40 --
ONE YEAR 5.78 5.78 -3.46 -3.46 5.59 5.59
THREE YEAR 17.85 5.63 21.40 6.68 31.73 9.61
LIFE OF FUND* 18.89 5.46 19.11 5.52 26.78 7.57
(a) Total investment returns reflect changes in net asset value per share
during each period and assumes that dividends and capital gains
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.
(b) J.P. Morgan Latin Brady Bond Index U.S. $.
* The Fund commenced operations on July 31, 1992.
PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE OF THE
FUND.
- -------------------------------------------------------------------------------
DIVERSIFICATION BY COUNTRY (EXCLUDES 2% CASH EQUIVALENTS)
Brazil 30%
Argentina 25%
Mexico 16%
Panama 9%
Venezuela 8%
Costa Rica 4%
Ecuador 4%
Jamaica 4%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- -------------------------------------------------------------------------------
6
<PAGE>
<TABLE>
The Latin America Dollar Income Fund, Inc.
Investment Portfolio as of October 31, 1995
======================================================================================================================
<CAPTION>
Principal Market
Amount (b) Value (U.S.$)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER - 2.0%
1,620,000 Associates Corp. of North America,
5.82% 11/1/95 (Cost $1,620,000) 1,620,000
----------
- ----------------------------------------------------------------------------------------------------------------------
DEBT OBLIGATIONS- 93.5%
ARGENTINA - 20.0% ARP 2,300,300 Argentine Republic, Bonos de Consolidacion
de Deudas Previsionales Pre 1 (BOCON),
Variable Rate Interest Bond, 3.5%, 4/1/01..................... 1,077,352
ARP 1,717,719 Argentine Republic, Bonos de Consolidacion
de Deudas Previsionales Pre 3 (BOCON),
Variable Rate Interest Bond, 3.45%, 9/1/02.................... 594,444
11,250,000 Argentine Republic, Collateralized Par Bond,
Series L, Step-up Coupon, 5%, 3/31/23 (f)..................... 5,350,725
1,600,007 Argentine Republic, Floating Rate Note, LIBOR plus
.8125% (6.9375%), 10/25/99 (f)................................ 1,360,006
10,750,000 Argentine Republic, Floating Rate Bond, Series L,
LIBOR plus .8125% (6.8125%), 3/31/05 (f)..................... 6,362,603
2,100,000 Cedulas Hipotecarias, Floating Rate Bond, LIBOR plus 2.9%
(8.9781%), 9/1/00 ........................................... 1,845,327
----------
16,590,457
----------
BRAZIL - 29.1% 2,500,000 Minas Gerais, Series A, Without Warrants, 7.875%, 2/10/99 (f)... 2,093,750
1,500,000 Minas Gerais, Series B, Without Warrants, 8.25%, 2/10/00 (f).... 1,226,250
1,000,000 Federative Republic of Brazil, Collateralized Discount
Bond, LIBOR plus .8125% (6.8125%), 4/15/24 (d)............... 595,000
8,000,000 Federative Republic of Brazil, Collateralized Par Bond,
Series Z, Step-up Coupon, 4.25%, 4/15/24 (d) (f)............. 3,860,000
7,693,758 Federative Republic of Brazil C Bond, 8%, including 4% Interest
Capitalization, 4/15/14...................................... 3,904,582
5,250,000 Federative Republic of Brazil, Debt Conversion Bond, Series L,
Floating Rate Bond, LIBOR plus .875% (6.875%), 4/15/12 (f)... 2,874,375
7,875,000 Federative Republic of Brazil, Eligible Interest Bond, Floating
Rate Bond, LIBOR plus .8125% (6.8125%), 4/15/06 (f).......... 5,207,344
3,562,500 Federative Republic of Brazil, IDU Bond, Floating Rate Bond,
LIBOR plus .8125% (6.6875%), 1/1/01.......................... 3,043,693
714,286 Federative Republic of Brazil, New Money Bond, Floating Rate
Bond, LIBOR plus .8125% (6.75%), 10/15/99.................... 664,286
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
<TABLE>
The Latin America Dollar Income Fund, Inc.
Investment Portfolio (continued)
======================================================================================================================
<CAPTION>
Principal Market
Amount (b) Value (U.S.$)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1,000,000 Federative Republic of Brazil, New Money Bond, Series L,
Floating Rate Bond, LIBOR plus .875% (6.875%), 4/15/09............ 590,000
----------
24,059,280
----------
COSTA RICA - 3.8% 3,800,000 Banco Central de Costa Rica, Principal B, 6.25%, 5/21/15............. 1,976,000
2,000,000 Republic of Costa Rica, Series A, 6.25%, 5/21/10..................... 1,150,000
----------
3,126,000
----------
ECUADOR - 4.3% 1,250,000 Republic of Ecuador, Collateralized Global Par Bond,
Step-up Coupon, 3%, 2/28/25....................................... 414,063
9,550,068 Republic of Ecuador, Past Due Interest Bond, LIBOR plus .8125%
(6.8125%), including 3.8125% Interest Capitalization, 2/28/15..... 3,127,648
----------
3,541,711
----------
JAMAICA - 3.6% 4,500,000 Government of Jamaica Refinancing Agreement, Tranche B, Floating
Rate Bond, LIBOR plus .8125% (7.125%), 11/15/04 (f)............... 2,970,000
----------
MEXICO - 16.0% 2,000,000 Banco Nacional de Comercio Exterior S.N.C., 7.25%, 2/2/04............ 1,450,000
1,000,000 Cemex SA, 8.875%, 6/10/98............................................ 917,500
MXN 12,675,200 Certificados de la Tesoreria, 12/21/95............................... 1,691,229
1,000,000 Nacional Financiera S.N.C., 9.375%, 7/15/02 (f)...................... 850,000
2,500,000 United Mexican States, Collateralized Discount Bond, Series A,
Floating Rate Bond, LIBOR plus .8125% (6.76563%), 12/31/19........ 1,671,875
11,250,000 United Mexican States, Collateralized Fixed Par Bond,
Series A, 6.25%, 12/31/19......................................... 6,609,375
----------
13,189,979
----------
PANAMA - 9.1% 7,250,000 Republic of Panama, Floating Rate Bond, LIBOR plus 1% (7.25%),
5/10/02 (f)....................................................... 5,926,875
4,250,000 Republic of Panama, Interest Reduction Bond, 3.5%, 12/29/49 (c)...... 1,636,250
----------
7,563,125
----------
VENEZUELA - 7.6% 12,750,000 Republic of Venezuela, Debt Conversion Bond, Series DL, LIBOR
plus .875% (6.8125%), 12/18/07.................................... 6,279,375
----------
TOTAL DEBT OBLIGATIONS (Cost $78,515,523)............................ 77,319,927
----------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
<TABLE>
======================================================================================================================
<CAPTION>
Market
Shares Value (U.S.$)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PREFERRED STOCKS - 4.5%
ARGENTINA 470,740 Nortel Inversora "A" (ADR) (Cost $3,309,388) (e) (f)................. 3,704,724
----------
- ----------------------------------------------------------------------------------------------------------------------
PURCHASED OPTIONS - 0.0%
Principal
Amount (b)
----------
United States 12,750,000 Put on Venezuela Debt Conversion Bond 12/18/07, strike price
47.625, expires 11/13/95 (Cost $153,000)......................... 41,807
----------
- ----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO - 100.0%
(Cost $83,597,911) (a)........................................... 82,686,458
==========
<FN>
(a) The cost of the investment portfolio for federal income tax purposes was $85,089,716. At October 31, 1995, net
unrealized depreciation for all securities based on tax cost was $2,403,258. This consisted of aggregate gross
unrealized appreciation for all securities in which there was an excess of market value over tax cost of $804,594
and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over
market value of $3,207,852.
(b) Principal amount is stated in U.S. dollars unless otherwise noted.
(c) When-issued or forward delivery security (See Note A in Notes to Financial Statements).
(d) At October 31, 1995, these securities, in part or in full, have been segregated to cover when-issued or forward
delivery security.
(e) Security valued in good faith by the Valuation Committee of the Board of Directors. The cost of this security at
October 31, 1995 aggregated $3,309,388. (See Note A of the Notes to Financial Statements.)
(f) At October 31, 1995, these securities, in part or in full, have been delivered as loan collateral. (See Note D to
the Financial Statements.)
Currency Abbreviations
----------------------
ARP Argentine Peso
MXN Mexican Peso
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
<TABLE>
The Latin America Dollar Income Fund, Inc.
Financial Statements
===================================================================================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $83,597,911) (Note A)................................. $ 82,686,458
Cash.......................................................................................... 370
Receivables:
Investments sold........................................................................... 896,242
Interest................................................................................... 1,641,335
Deferred organization expenses (Note A)....................................................... 34,910
-------------
Total assets.................................................................. 85,259,315
LIABILITIES
Payables:
Note Payable (Note D)...................................................................... $ 15,000,000
Interest (Note D).......................................................................... 196,875
Investments purchased...................................................................... 881,242
When-issued and forward delivery security (Note A)......................................... 1,646,346
Accrued management fee (Note C)............................................................ 69,181
Other accrued expenses (Note C) ........................................................... 132,605
-------------
Total liabilities............................................................. 17,926,249
-------------
Net assets, at market value................................................................... $ 67,333,066
=============
NET ASSETS
Net assets consist of:
Distributions in excess of net investment income........................................... $ (638,495)
Accumulated net realized loss.............................................................. (12,297,121)
Net unrealized depreciation on:
Investments.............................................................................. (911,453)
Foreign currency related transactions.................................................... (53,404)
Common stock............................................................................... 60,104
Additional paid-in capital................................................................. 81,173,435
-------------
Net assets, at market value................................................................... $ 67,333,066
=============
NET ASSET VALUE per share ($67,333,066 -:- 6,010,387 shares of common stock
outstanding, $.01 par value, 100,000,000 shares authorized)................................ $ 11.20
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
10
<PAGE>
<TABLE>
===================================================================================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest (net of foreign taxes withheld of $10,320)....................................... $ 11,218,424
Dividends................................................................................. 495,454
-------------
11,713,878
Expenses:
Management fee (Note C)................................................................ $ 814,827
Directors' fees and expenses (Note C).................................................. 73,699
Custodian fees......................................................................... 169,494
Reports to shareholders................................................................ 56,486
Auditing and tax services.............................................................. 86,350
Legal.................................................................................. 14,980
Amortization of organization expenses (Note A)......................................... 19,998
Services to shareholders............................................................... 47,078
Interest (Note D)...................................................................... 1,155,755
Other.................................................................................. 47,747 2,486,414
------------- -------------
Net investment income..................................................................... 9,227,464
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized loss from:
Investments............................................................................ (14,198,773)
Foreign currency related transactions.................................................. (448,411) (14,647,184)
Net unrealized appreciation (depreciation) on: -------------
Investments............................................................................ 2,350,684
Foreign currency related transactions.................................................. (58,892) 2,291,792
------------- -------------
Net loss on investment transactions....................................................... (12,355,392)
-------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS......................................... $ (3,127,928)
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
11
<PAGE>
<TABLE>
The Latin America Dollar Income Fund, Inc.
Financial Statements (continued)
==================================================================================================================
- ------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEARS ENDED OCTOBER 31,
---------------------------
INCREASE (DECREASE) IN NET ASSETS 1995 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income .................................................. $ 9,227,464 $ 8,861,879
Net realized loss from investment transactions ......................... (14,647,184) (120,565)
Net unrealized appreciation (depreciation) on investment
transactions during the period ...................................... 2,291,792 (14,242,775)
----------- -----------
Net decrease in net assets resulting from operations ..................... (3,127,928) (5,501,461)
----------- -----------
Dividends to shareholders:
From net investment income ($1.30 and $1.51 per share, respectively) (7,694,526) (8,866,794)
----------- -----------
From net realized gains from investment transactions
($.15 and $.33 per share, respectively) ............................. (888,250) (1,912,858)
----------- -----------
In excess of net realized gains ($.03 per share) ....................... -- (191,510)
----------- -----------
Tax return of capital ($.23 per share) ................................. (1,391,841) --
----------- -----------
Fund share transactions:
Reinvestment of dividends .............................................. 1,005,660 1,154,662
----------- -----------
Net increase in net assets from Fund share transactions .................. 1,005,660 1,154,662
----------- -----------
DECREASE IN NET ASSETS ................................................... (12,096,885) (15,317,961)
Net assets at beginning of period ........................................ 79,429,951 94,747,912
----------- -----------
NET ASSETS AT END OF PERIOD (including distributions in excess of
net investment income of $638,495 and undistributed net
investment income of $403,545, respectively) ........................... $67,333,066 $79,429,951
=========== ===========
OTHER INFORMATION
INCREASE IN FUND SHARES
Shares outstanding at beginning of period ................................ 5,921,667 5,841,660
Shares issued to shareholders in reinvestment of dividends ............. 88,720 80,007
----------- -----------
Shares outstanding at end of period ...................................... 6,010,387 5,921,667
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
12
<PAGE>
<TABLE>
=======================================================================================================
- -------------------------------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS
YEAR ENDED OCTOBER 31, 1995
- -------------------------------------------------------------------------------------------------------
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C>
Investment income received ..................................................... $ 9,396,148
Payment of operating expenses .................................................. (2,490,662)
Proceeds from sales and maturities of investments .............................. 269,390,759
Purchases of investments ....................................................... (264,477,767)
Proceeds from sales of short-term investments .................................. 2,149,855
------------
Cash provided by operating activities ........................................ 13,968,333
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayment of loan principal ................................................ (5,000,000)
Distributions paid (net of reinvestment of dividends) (Note A) ................. (8,968,957)
------------
Cash used by financing activities ............................................ (13,968,957)
------------
Decrease in cash ............................................................. (624)
Cash at beginning of period .................................................. 994
------------
Cash at end of period ........................................................ $ 370
============
Reconciliation of net decrease in net assets from operations to cash provided by
operating activities:
Net decrease in net assets resulting from operations ........................... (3,127,928)
Amortization of organization costs ............................................. 19,998
Net decrease in investments .................................................... 15,936,611
Net decrease in unrealized depreciation on investments ......................... (2,350,684)
Decrease in interest receivable ................................................ 337,648
Decrease in receivable for investments sold .................................... 649,346
Increase in payable for investments purchased .................................. 2,527,588
Increase in accrued expenses ................................................... 845
Decrease in interest payable ................................................... (25,091)
------------
Cash provided by operating activities ........................................ $ 13,968,333
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
13
<PAGE>
<TABLE>
The Latin America Dollar Income Fund, Inc.
Financial Highlights
================================================================================
- --------------------------------------------------------------------------------
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD (A) AND OTHER PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL
STATEMENTS AND MARKET PRICE DATA.
- --------------------------------------------------------------------------------
<CAPTION>
For the Period
July 31, 1992
(commencement
Years Ended October 31, of operations)
-------------------------------------- to October 31,
1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period ....... $13.41 $16.22 $13.45 $13.83(b)
------ ------ ------ ------
Net investment income .................... 1.55 1.51 1.53 .25
Net realized and unrealized gain (loss)
on investment transactions ............. (2.08) (2.45) 2.74 (.50)
------ ------ ------ ------
Total from investment operations ........... (.53) (.94) 4.27 (.25)
------ ------ ------ ------
Less distributions:
From net investment income ............... (1.30) (1.51) (1.49) (.13)
From net realized gains on investment
transactions .......................... (.15) (.33) (.01) --
In excess of net realized gains .......... -- (.03) -- --
Tax return of capital .................... (.23) -- -- --
------ ------ ------ ------
Total distributions ........................ (1.68) (1.87) (1.50) (.13)
------ ------ ------ ------
Net asset value, end of period ............. $11.20 $13.41 $16.22 $13.45
====== ====== ====== ======
Market value, end of period ................ $12.13 $13.25 $15.63 $15.00
====== ====== ====== ======
TOTAL INVESTMENT RETURN
Per share market value (%) .............. 5.78 (3.52) 15.47 .88**
Per share net asset value (%) (c) ....... (3.46) (5.94) 33.69 (1.89)**
Ratios and Supplemental Data
Net assets, end of period ($ millions) .. 67 79 95 77
Ratio of operating expenses (excluding
interest) to average net assets (%) ... 1.96 1.83 2.00 2.05*
Ratio of net investment income to average
net assets (%) .......................... 13.59 10.42 10.71 7.14*
Portfolio turnover rate (%) ................ 365.9 161.1 93.3 1.8*
<FN>
* Annualized
** Not annualized
(a) Based on monthly average of shares outstanding during each period.
(b) Beginning per share amount reflects $15.00 initial public offering price net of underwriting discount and offering
expenses ($1.17 per share).
(c) Total investment returns reflect changes in net asset value per share during each period and assumes that dividends
and capital gains 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.
</FN>
</TABLE>
- --------------------------------------------------------------------------------
14
<PAGE>
The Latin America Dollar Income Fund, Inc.
Notes to Financial Statements
================================================================================
A. SIGNIFICANT ACCOUNTING POLICIES
-------------------------------
The Latin America Dollar Income Fund, Inc. (the "Fund") is registered
under the Investment Company Act of 1940, as amended, as a non-diversified,
closed-end management investment company. The policies described below are
followed consistently by the Fund in the preparation of its financial
statements in conformity with generally accepted accounting principles.
SECURITY VALUATION. Portfolio debt securities with remaining maturities
greater than sixty days are valued by pricing agents approved by the Officers
of the Fund, which quotations reflect broker/dealer-supplied valuations and
electronic data processing techniques. If the pricing agents are unable to
provide such quotations, the most recent bid quotation supplied by a bona fide
market maker shall be used. Short-term investments having a maturity of sixty
days or less are valued at amortized cost.
All other securities are valued at their fair value as determined in
good faith by the Valuation Committee of the Board of Directors. Securities
valued in good faith by the Valuation Committee of the Board of Directors at
fair value amounted to $3,704,724 (5.5% of net assets) and have been noted in
the investment portfolio as of October 31, 1995.
FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are
maintained in U.S. dollars. Foreign currency transactions are translated into
U.S. dollars on the following basis:
(i) market value of investment securities, other assets and
liabilities at the daily rates of exchange, and
(ii) purchases and sales of investment securities, interest income
and certain expenses at the rates of exchange prevailing on the
respective dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes
in market prices of the investments. Such fluctuations are included with the
net realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the accrual and payment dates on
interest and foreign withholding taxes.
OPTIONS. An option contract is a contract in which the writer of the
option grants the buyer of the option the right to purchase from (call option),
or sell to (put option), the writer a designated instrument at a specified
price within a specified period of time. Certain options, including options on
indices, will require cash settlement by the Fund if the option is exercised.
During the year ended October 31, 1995, the Fund purchased put options and
wrote call options on securities and currencies as a hedge against potential
adverse price movements in the value of portfolio assets.
If the Fund writes an option and the option expires unexercised, the
Fund will realize income, in the form of a capital gain, to the extent of the
amount received for the option (the "premium"). If the Fund elects to close out
the option it would recognize a gain or loss based on the difference between
the cost of closing the option and the initial premium received. If the Fund
purchased an option and allows the option to expire it would realize a loss to
the extent of the premium paid. If the Fund elects to close out the option it
would recognize a gain or loss equal to the difference between the cost of
acquiring the option and the amount realized upon the sale of the option.
15
<PAGE>
The Latin America Dollar Income Fund, Inc.
Notes to Financial Statements (continued)
================================================================================
The gain or loss recognized by the Fund upon the exercise of a written call
or purchased put option is adjusted for the amount of option premium. If a
written put or purchased call option is exercised the Fund's cost basis of
the acquired security or currency would be the exercise price adjusted for
the amount of the option premium.
The liability representing the Fund's obligation under an exchange
traded written option or investment in a purchased option is valued at the last
sale price or, in the absence of a sale, the mean between the closing bid and
asked price or at the most recent asked price (bid for purchased options) if no
bid and asked price are available. Over-the-counter written or purchased
options are valued using dealer supplied quotations.
When the Fund writes a covered call option, the Fund foregoes, in
exchange for the premium, the opportunity to profit during the option period
from an increase in the market value of the underlying security or currency
above the exercise price. When the Fund writes a put option it accepts the risk
of a decline in the market value of the underlying security or currency below
the exercise price. Over-the-counter options have the risk of the potential
inability of counterparties to meet the terms of their contracts. The Fund's
maximum exposure to purchased options is limited to the premium initially paid.
In addition, certain risks may arise upon entering into option contracts
including the risk that an illiquid secondary market will limit the Fund's
ability to close out an option contract prior to the expiration date and, that
a change in the value of the option contract may not correlate exactly with
changes in the value of the securities or currencies hedged.
WHEN-ISSUED AND FORWARD DELIVERY SECURITIES. The Fund may purchase
securities on a when-issued or forward delivery basis, for payment and delivery
at a later date. The price of such securities, which may be expressed in yield
terms, is fixed at the time the commitment to purchase is made, but delivery
and payment take place at a later time.
At the time the Fund makes the commitment to purchase a security on a
when-issued basis or forward delivery basis, it will record the transaction and
reflect the value of the security in determining its net asset value. During
the period between purchase and settlement, no payment is made by the Fund to
the issuer and no interest accrues to the Fund. At the time of settlement, the
market value of the security may be more or less than the purchase price.
FEDERAL INCOME TAXES. The Fund's policy is to comply with the
requirements of the Internal Revenue Code which are applicable to regulated
investment companies, and to distribute all of its taxable income to its
shareholders. Accordingly, the Fund paid no federal income taxes, and no
federal income tax provision was required.
At October 31, 1995, the Fund had a net tax basis capital loss carryforward
of approximately $10,805,000, which may be applied against any realized net
taxable capital gains of each succeeding year until fully utilized or until
October 31, 2003.
DISTRIBUTION OF INCOME AND GAINS. The Fund's policy is to declare and
pay distributions to shareholders of substantially all net investment income
(generally without regard to foreign currency gains or losses which are
reclassified to income for federal tax purposes) of the Fund quarterly. Net
realized gains from investment transactions in excess of available capital loss
carryforwards, which would be taxable to the Fund if not distributed, will be
distributed to shareholders annually. Distributions to shareholders are
recorded on the ex-dividend date. An additional distribution may be made to the
extent necessary to avoid the payment of a four percent federal excise tax.
16
<PAGE>
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations which may differ from generally accepted accounting principles.
These differences primarily relate to investments in foreign denominated
securities and certain securities sold at a loss. As a result, net investment
income (loss) and net realized gain (loss) on investment transactions for a
reporting period may differ significantly from distributions during such
period. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting the net asset value of the
Fund.
The Fund uses the specific identification method for determining realized gain
or loss on investments.
STATEMENT OF CASH FLOWS. Information on financial transactions which
have been settled through the receipt and disbursement of cash is presented in
the Statement of Cash Flows. The cash amount shown in the Statement of Cash
Flows is the amount reported as cash in the Fund's Statement of Assets and
Liabilities and represents the cash position in its custodian bank account at
October 31, 1995.
ORGANIZATION COSTS. Costs incurred by the Fund in connection with its
organization have been deferred and are being amortized on a straight-line
basis over a five-year period.
OTHER. Portfolio securities transactions are accounted for on a
trade-date basis. Interest income is recorded on the accrual basis. Dividend
income is recorded on the ex-dividend date. Market discount on securities
purchased is accreted on an effective yield basis over the life of the
security. Such accretion was approximately $2,662,000 for the year ended
October 31, 1995.
B. PURCHASES AND SALES OF SECURITIES
---------------------------------
During the year ended October 31, 1995, purchases and sales of
investment securities (excluding short-term investments) aggregated
$267,005,355 and $269,196,888, respectively.
In addition, the Fund wrote and the holder exercised options during the period,
principal amount U.S. $4,750,000 on Republic of Argentina Floating Rate Bonds,
3/31/05 (premium received $79,250).
C. RELATED PARTIES
---------------
Under the Fund's Investment Advisory, Management and Administration
Agreement (the "Management Agreement") with Scudder, Stevens & Clark, Inc. (the
"Manager"), the Manager directs the investments of the Fund in accordance with
the Fund's investment objectives, policies, and restrictions and under the
direction and control of the Fund's Board of Directors. In addition to
portfolio management services, the Manager provides certain administrative
services in accordance with the Management Agreement. The Fund pays to the
Manager a monthly fee at an annualized rate of 1.20% of the average weekly net
assets of the Fund. For the year ended October 31, 1995, the fee pursuant to
such agreement amounted to $814,827, of which $69,181 is unpaid at October 31,
1995. The Fund pays each Director not affiliated with the Manager $6,000
annually, plus specified amounts for attended board and committee meetings. For
the year ended October 31, 1995, Directors' fees and expenses aggregated
$73,699.
D. BORROWINGS
----------
At October 31, 1995 the Fund had an outstanding loan balance of
$15,000,000. The interest rate at October 31, 1995 was 7.5%. The loan is
collateralized with certain portfolio holdings. In accordance with the terms of
the loan agreement, the Fund must maintain a level of collateral to debt
between 200 and 250%.
17
<PAGE>
The Latin America Dollar Income Fund, Inc.
Notes to Financial Statements (continued)
================================================================================
The weighted average outstanding daily balance of bank loans for the
year ended October 31, 1995 was $15,273,973, with a weighted average interest
rate of 7.483%. The maximum borrowings outstanding for the year ended October
31, 1995 was $20,000,000. Interest expense for the year ended October 31, 1995
was $1,155,755 ($.19 per share). Interest paid for the year ended October 31,
1995 was $1,180,846.
E. CREDIT RISK
-----------
The yields of Latin American debt obligations reflect perceived credit
risk, the need to compete with other local investments in potentially illiquid
domestic financial markets and the difficulty in raising hard currencies to
meet external debt servicing requirements. The consequences of political,
social, economic or diplomatic changes may have disruptive effects on the
market prices of investments held by the Fund.
F. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) (000 OMITTED)
---------------------------------------------------------
<TABLE>
<CAPTION>
NET INCREASE
(DECREASE)
NET GAIN (LOSS) IN NET ASSETS
QUARTER INVESTMENT NET INVESTMENT ON INVESTMENT RESULTING
ENDED INCOME* INCOME TRANSACTIONS FROM OPERATIONS
- ------------- --------------- ----------------- -------------------- -----------------
PER PER PER PER
1995 TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE
- ---- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
January 31, 1995 $ 2,931 $ .49 $2,293 $ .39 $(13,733) $(2.31) $(11,440) $(1.92)
April 30, 1995 2,597 .44 2,017 .34 (1,508) (.25) 509 .09
July 31, 1995 3,423 .57 2,790 .46 433 .07 3,223 .53
October 31, 1995 2,763 .46 2,127 .36 2,453 .41 4,580 .77
------- ----- ------ ----- -------- ------ -------- ------
Totals $11,714 $1.96 $9,227 $1.55 $(12,355) $(2.08) $ (3,128) $ (.53)
======= ===== ====== ===== ======== ====== ======== ======
</TABLE>
<TABLE>
<CAPTION>
PER PER PER PER
1994 TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE
- ---- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
January 31, 1994 $ 2,719 $ .46 $1,987 $ .34 $ 2,528 $ .43 $ 4,515 $ .77
April 30, 1994 2,678 .46 1,949 .33 (17,616) (2.99) (15,667) (2.66)
July 31, 1994 3,372 .57 2,618 .45 (3,049) (.52) (431) (.07)
October 31, 1994 2,988 .51 2,308 .39 3,774 .63 6,082 1.02
------- ----- ------ ----- -------- ------ -------- ------
Totals $ 11,757 $2.00 $8,862 $1.51 $(14,363) $(2.45) $ (5,501) $ (.94)
======= ===== ====== ===== ======== ====== ======== ======
<FN>
* Net of foreign taxes withheld
</FN>
</TABLE>
18
<PAGE>
The Latin America Dollar Income Fund, Inc.
Report of Independent Accountants
================================================================================
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF THE LATIN AMERICA DOLLAR INCOME
FUND, INC.:
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations, cash flows, and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
The Latin America Dollar Income Fund, Inc. (the "Fund") at October 31, 1995,
the results of its operations, cash flows, the changes in its net assets and
the financial highlights for each of the periods indicated, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at October 31, 1995 by
correspondence with the custodian and brokers and the application of
alternative procedures where confirmations from brokers were not received,
provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
December 8, 1995
19
<PAGE>
Shareholder Meeting Results
- ---------------------------
The Annual Meeting of Shareholders of The Latin America Dollar Income Fund, Inc.
was held on Tuesday, July 25, 1995, at the offices of Scudder, Stevens & Clark,
Inc., 25th Floor, 345 Park Avenue, New York, New York. The three matters voted
upon by Shareholders and the resulting votes for each matter are presented
below.
1. The election of two Directors of the Fund to hold office for a term of
three years or until their respective successors shall have been duly
elected and qualified.
Director: Number of Votes:
--------- ----------------
For Withheld
--- --------
Robert J. Boyd 5,425,033 132,726
Ronaldo A. da Frota Nogueira 5,437,570 120,189
2. Ratification or rejection of the action taken by the Board of Directors
in selecting Price Waterhouse LLP as independent accountants for the
fiscal year ending October 31, 1995.
Number of Votes:
----------------
For Against Abstain
--- ------- -------
5,453,628 37,862 66,269
3. Approval or disapproval of the continuance of the Investment Advisory,
Management and Administration Agreement between the Fund and Scudder,
Stevens & Clark, Inc.
Number of Votes:
----------------
For Against Abstain
--- ------- -------
5,394,840 72,574 90,345
20
<PAGE>
Investment Manager and Administrator
- ------------------------------------
The investment manager and administrator of The Latin America Dollar Income
Fund, Inc. (the "Fund") is Scudder, Stevens & Clark, Inc., one of the most
experienced investment management and investment counsel firms in the United
States. Established in 1919, the firm provides investment counsel for
individuals, investment companies and institutions. Scudder has offices
throughout the United States and subsidiaries in London and Tokyo.
Scudder has been active in international investment management for over 40
years. It manages Scudder International Fund, which was initially incorporated
in Canada in 1953 as the first foreign investment company registered with the
United States Securities and Exchange Commission. Scudder's investment company
clients include seven other open-end investment companies which invest
worldwide.
In addition to the Fund, Scudder also manages the assets of seven other
closed-end investment companies which invest in foreign securities: The
Argentina Fund, Inc. (investing primarily in equity securities of Argentine
issuers), The Brazil Fund, Inc. (investing in securities, primarily equity
securities, of Brazilian issuers), The First Iberian Fund, Inc. (investing
primarily in Spanish and Portuguese equity securities), The Korea Fund, Inc.
(investing in a broad spectrum of Korean companies), Scudder New Asia Fund, Inc.
(investing in a broad spectrum of Asian companies), Scudder World Income
Opportunities Fund, Inc. (investing in global income and, to a limited extent,
equity securities), and Scudder New Europe Fund, Inc. (investing in equity
securities traded in smaller or emerging European securities markets).
21
<PAGE>
The Latin America Dollar Income Fund, Inc.
Dividend Reinvestment and Cash Purchase Plan
- --------------------------------------------
The Plan
The Fund's Dividend Reinvestment and Cash Purchase Plan (the "Plan") offers
you an automatic way to reinvest your dividends and capital gains distributions
in shares of the Fund. The Plan also provides for cash investments in Fund
shares of $100 to $3,000 semiannually through State Street Bank and Trust
Company, the Plan Agent.
Automatic Participation
Each shareholder of record is automatically a participant in the Plan
unless the shareholder has instructed the Plan Agent in writing otherwise. Such
a notice must be received by the Plan Agent not less than 10 days prior to the
record date for a dividend or distribution in order to be effective with respect
to that dividend or distribution. A notice which is not received by that time
will be effective only with respect to subsequent dividends and distributions.
Shareholders who do not participate in the Plan will receive all
distributions in cash paid by check in dollars mailed directly to the
shareholder by State Street Bank and Trust Company, as dividend paying agent.
Shares Held by a Nominee
If your shares are held in the name of a brokerage firm, bank, or other
nominee as the shareholder of record, please consult your nominee (or any
successor nominee) to determine whether it is participating in the Plan on your
behalf. Many nominees are generally authorized to receive cash dividends unless
they are specifically instructed by a client to reinvest. If you would like your
nominee to participate in the Plan on your behalf, you should give your nominee
instructions to that effect as soon as possible.
Pricing of Dividends and Distributions
If the market price per share on the payment date for the dividend or
distribution (the "Valuation Date") equals or exceeds net asset value per share
on that date, the Fund will issue new shares to participants at the greater of
the following on the Valuation Date: (a) net asset value, or (b) 95% of the
market price. The Valuation Date will be the dividend or distribution payment
date or, if that date is not a New York Stock Exchange trading date, the next
preceding trading date. If the net asset value exceeds the market price of Fund
shares at such time, participants in the Plan are considered to have elected to
receive shares of stock from the Fund, valued at market price, on the Valuation
Date. In either case, for Federal income tax purposes, the shareholder receives
a distribution equal to the market value on Valuation Date of new shares issued.
State and local taxes may also apply. If the Fund should declare an income
dividend or net capital gains distribution payable only in cash, the Plan Agent
will, as agent for the participants, buy Fund shares in the open market, on the
New York Stock Exchange or elsewhere, for the participants' account on, or
shortly after, the payment date.
Voluntary Cash Purchases
Participants in the Plan have the option of making additional cash payments
to the Plan Agent, semiannually, in any amount from $100 to $3,000, for
investment in the Fund's shares. The Plan Agent will use all such monies
received from participants to purchase Fund shares in the open market on or
about February 15 and August 15. Any voluntary cash payments received more than
30 days prior to these dates will be returned by the Plan Agent, and interest
will not be paid on any uninvested cash payments. To avoid unnecessary cash
accumulations, and also to allow ample time for receipt and processing by the
Plan Agent, it is suggested that participants send in voluntary cash payments to
be received by the Plan Agent approximately ten days before February 15, or
August 15, as the case may be. A participant may withdraw a voluntary cash
payment by written notice, if the notice is received by the Plan Agent not less
than 48 hours before such payment is to be invested.
22
<PAGE>
Participant Plan Accounts
The Plan Agent maintains all participant accounts in the Plan and furnishes
written confirmation of all transactions in the account, including information
needed by participants for personal and tax records. Shares in the account of
each plan participant will be held by the Plan Agent in non-certificated form in
the name of the participant, and each participant will be able to vote those
shares purchased pursuant to the Plan at a shareholder meeting or by proxy.
No Service Fee to Reinvest
There is no service fee charged to participants for reinvesting dividends
or distributions from net realized capital gains. The Plan Agent's fees for the
handling of the reinvestment of dividends and capital gains distributions will
be paid by the Fund. There will be no brokerage commissions with respect to
shares issued directly by the Fund as a result of dividends or capital gains
distributions payable either in stock or in cash. However, participants will pay
a pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of any
dividends or capital gains distributions payable only in cash.
Costs for Cash Purchases
With respect to purchases of Fund shares from voluntary cash payments, the
Plan Agent will charge $0.75 for each such purchase for a participant. Each
participant will pay a pro rata share of brokerage commissions incurred with
respect to the Plan Agent's open market purchases of Fund shares in connection
with voluntary cash payments made by the participant.
Brokerage charges for purchasing small amounts of stock for individual
accounts through the Plan are expected to be less than the usual brokerage
charges for such transactions, because the Plan Agent will be purchasing stock
for all participants in blocks and pro-rating the lower commission thus
attainable.
Amendment or Termination
The Fund and the Plan Agent each reserve the right to terminate the Plan.
Notice of the termination will be sent to the participants of the Plan at least
30 days before the record date for a dividend or distribution. The Plan also may
be amended by the Fund or the Plan Agent, but (except when necessary or
appropriate to comply with applicable law, rules or policies of a regulatory
authority) only by giving at least 30 days' written notice to participants in
the Plan.
A participant may terminate his account under the Plan by written notice to
the Plan Agent. If the written notice is received 10 days before the record day
of any distribution, it will be effective immediately. If received after that
date, it will be effective as soon as possible after the reinvestment of the
dividend or distribution.
If a participant elects to sell his shares before the Plan is terminated,
the Plan Agent will deduct a $2.50 fee plus brokerage commissions from the sale
transaction.
Plan Agent Address and Telephone Number
You may obtain more detailed information by requesting a copy of the Plan
from the Plan Agent. All correspondence (including notifications) should be
directed to: The Latin America Dollar Income Fund, Inc. Dividend Reinvestment
and Cash Purchase Plan, c/o State Street Bank and Trust Company, P.O. Box 8200,
Boston, MA 02266-8200, (617) 328-5000, ext. 6406.
23
<PAGE>
Directors and Officers
- ----------------------
EDMOND D. VILLANI*
Chairman of the Board and Director
LYNN S. BIRDSONG*
President and Director
ROBERT J. BOYD
Director
ROBERT J. CALLANDER
Director
GEORGE M. LOVEJOY, JR.
Director
RONALDO A. DA FROTA NOGUEIRA
Director
DR. SUSAN KAUFMAN PURCELL
Director
JERARD K. HARTMAN*
Vice President
DAVID S. LEE*
Vice President
JURIS PADEGS*
Vice President
LINCOLN Y. RATHNAM*
Vice President
M. ISABEL SALTZMAN*
Vice President
PAUL J. ELMLINGER*
Vice President and Assistant Secretary
EDWARD J. O'CONNELL*
Vice President and Assistant Treasurer
KATHRYN L. QUIRK*
Vice President and Assistant Secretary
THOMAS F. McDONOUGH*
Secretary
PAMELA A. McGRATH*
Treasurer
COLEEN DOWNS DINNEEN*
Assistant Secretary
* Scudder, Stevens & Clark, Inc.
