The Latin America Dollar Income
Fund, Inc.
Semiannual Report
April 30, 1996
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: 1-800-426-5523
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 18
Other Information 19
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 Following difficult market conditions in early 1995, Latin American debt has
rebounded strongly as investors have responded positively to austerity
measures taken by Latin American countries in the wake of the Mexican peso
devaluation.
o Reflecting these favorable developments, The Latin America Dollar Income Fund
posted a total return of 25.34% based on net asset value for the six-month
period ended April 30, 1996. The Fund's total return based on its share price
on the New York Stock Exchange was 14.60% for the same period.
o The Fund continues to maintain a liquid, diversified portfolio that we
believe is well positioned to benefit from improving credit fundamentals
while earning a high level of current income.
Letter to Shareholders
- ----------------------
Dear Shareholders:
We are pleased to present The Latin America Dollar Income Fund semiannual
report for the six-month period ended April 30, 1996. Following difficult market
conditions in early 1995, Latin American debt markets have rebounded strongly
from depressed bond price levels on the basis of improving credit fundamentals.
The adherence of many Latin American countries to austerity measures in the
aftermath of the Mexican peso crisis has renewed investors' confidence that
these countries will honor their international debt obligations; this, in turn,
has restored liquidity to these markets. In addition, growth around the world is
reviving, which for many Latin American economies translates into improved
growth through an increase in export volumes. Furthermore, there is still ample
global liquidity, which has strengthened capital inflows into these countries.
Fund performance
The Latin America Dollar Income Fund benefited from the recovery of Latin
American debt markets during this period. The Fund finished its semiannual
period with a net asset value (NAV) of $13.26, up from $11.20 on October 31,
1995. Adjusting for distributions of $0.75 per share during the period, the
Fund's total return based on NAV was 25.34%. The unmanaged J.P. Morgan Latin
Brady Bond Index during the same period returned 21.87%. Since its inception on
July 31, 1992, through April 30, 1996, the Fund's total return based on NAV was
49.29%, compared with the Index's return of 54.51%.
During the period ended April 30, 1996, the Fund's share price on the New
York Stock Exchange rose from $12.13 to $13.13, contributing to a total return
of 14.60%. The $13.13 price of the shares on April 30, 1996, represented a 0.98%
discount to the Fund's NAV.
Benefiting from improving credits
Throughout the Fund's semiannual period, our strategy has been to maintain a
liquid, diversified portfolio that is well positioned to benefit from improving
credit fundamentals while at the same time earning a high level of current
income. The Fund's core holdings continue to be in Brazil (29% of investments)
followed by Argentina (22%), Mexico (13%), Ecuador (13%), and Venezuela (11%).
Brazil's prospects appear positive despite its slow progress in enacting
constitutional changes to shrink government and enhance the performance of its
capital markets. With $55 billion in foreign currency reserves, Brazil is well
positioned to defend the Real and continue to enact necessary internal reforms.
In Mexico, the economy is rebounding from its downturn in 1995. Recent data
show that domestic consumption and investment seem to be responding to greater
stability in domestic financial markets and to increases in government
expenditures. Declines in interest rates, coupled with a stable peso, have
3
<PAGE>
enhanced the credibility of the Mexican central bank's anti-inflation policy.
Investors' renewed confidence in Mexico was reflected recently in the successful
$1.75 billion transaction in which Mexico exchanged collateralized Brady bonds
for 30-year unsecured Mexican bonds.
Argentina, like Mexico, is rebounding from 1995's sharp recession. Foreign
exchange reserves, a key measure for Argentina given the fixed nature of the
country's monetary system, have returned to pre-recession levels. Other
positives include the country's revised fiscal policy, which should be much less
restrictive; and consumer sentiment, which has turned favorable as Argentina's
economic and political uncertainties have diminished.
Venezuela's prospects continue to brighten. The country recently completed
the initial measures necessary to secure an agreement with the IMF and return to
sound financial management of the economy. Key measures include a reduction in
the country's budget deficit, the lifting of exchange and interest controls, and
sharply increasing gasoline prices. This at the same time has allowed Venezuela
to increase foreign exchange resources. Yields of uncollateralized Venezuelan
bonds are roughly 10 percentage points higher than those of comparable
Treasuries, yet substantially less than prior to the above-noted measures.
One of our more recent strategies was to decrease the interest rate
sensitivity of the portfolio because of our concerns over the direction of U.S.
interest rates. As of April 30, 1996, we had reduced fixed-rate instruments to
29.4% of debt assets from 45.7% on December 31, 1995, and increased
floating-rate instruments (assets with coupons that reset every six months in
relation to the London Interbank Offered Rate or LIBOR) to 66.2% of assets from
53.4% over the same time period. This strategy worked to the Fund's advantage as
floating-rate securities outperformed fixed-rate securities through the first
four months of 1996, with average total returns of 13.60% and 4.54%,
respectively. The majority of Fund assets continues to be invested in sovereign
debt obligations because of their attractive yields and higher credit quality
versus many emerging market corporate bonds. As of April 30, 1996, sovereign
securities constituted 91.4% of the portfolio and equity securities 3.7% with
the remainder of the portfolio invested in cash instruments.
Outlook
We believe that improvements in the balance sheets of many Latin American
countries will continue to be the dominant theme in our market for the remainder
of 1996. Additionally, significant potential for further gains in bond prices
exists in Latin American countries that demonstrate the commitment to address
budget imbalances and continue on the path of fiscal reform. We believe that
ample global liquidity and moderate economic growth will continue to create a
positive environment for Latin American market debt over the coming months.
A Team Approach to Investing
The Latin America Dollar Income Fund 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.
Ms. Saltzman, who joined Scudder in 1990, has been involved in foreign finance
and investing since 1979. Susan E. Gray, Portfolio Manager, is involved in
developing strategy for the Fund as well as day-to-day management. Ms. Gray, who
has five years of emerging markets experience, has worked at Scudder since 1987.
4
<PAGE>
We are pleased that you are an investor in The Latin America Dollar Income
Fund. We would be happy to receive any questions or comments. You can reach us
at 1-800-349-4281.
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 APRIL 30, 1996
- -------------------------------------------------------------------------------
HISTORICAL
INFORMATION TOTAL RETURN (%)
LIFE OF FUND ---------------------------------------------------------------
MARKET VALUE NET ASSET VALUE (a) INDEX (b)
------------------- -------------------- -------------------
AVERAGE AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL
------------------- -------------------- -------------------
CURRENT QUARTER -2.69 -- 1.95 -- .34 --
FISCAL YEAR
TO DATE 14.60 -- 25.34 -- 21.87 --
ONE YEAR 26.18 26.18 40.65 40.65 40.66 40.66
THREE YEAR 32.25 9.77 37.89 11.30 45.52 13.31
LIFE OF FUND* 36.25 8.60 49.29 11.28 54.51 12.30
(a) Total investment returns reflect changes in net asset value per share
during each period and assume 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 price.
(b) The unmanaged J.P Morgan Latin Brady Bond Index tracks the performance
of U.S. dollar-denominated sovereign restructured bonds (mostly Brady
Bonds). Index returns assume reinvested dividends, and unlike Fund returns,
do not reflect any fees or expenses.
* The Fund commenced operations on July 31, 1992.
PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE OF THE FUND.
- -------------------------------------------------------------------------------
DIVERSIFICATION BY COUNTRY (EXCLUDES 5% CASH EQUIVALENTS)
Brazil 29%
Argentina 22%
Mexico 13%
Ecuador 13%
Venezuela 11%
Panama 5%
Costa Rica 4%
Jamaica 3%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the
above table.
- -------------------------------------------------------------------------------
6
<PAGE>
The Latin America Dollar Income Fund, Inc.
<TABLE>
Investment Portfolio as of April 30, 1996
===============================================================================================================
<CAPTION>
Principal Market
Amount ($) Value (U.S.$)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER - 4.9%
3,500,515 Associates Corp. of North America, 5.3%, 5/1/96 ....... 3,500,515
1,330,418 Ford Motor Credit Corp., 5.3%, 5/1/96 ................. 1,330,418
----------
TOTAL COMMERCIAL PAPER (Cost $4,830,933) .............. 4,830,933
----------
- ---------------------------------------------------------------------------------------------------------------
DEBT OBLIGATIONS - 91.4%
ARGENTINA - 16.8% 10,786,964 Argentine Republic, Bonos de Consolidacion de
Deudas Previsionales Pre 2 (BOCON), Variable
Rate Interest Bond, 5.422%, 4/1/01 .................. 9,349,898
3,588,750 Argentine Republic, Floating Rate Bond,
Series L, LIBOR plus .8125% (6.3125%), 3/31/05 ...... 2,738,683
5,750,000 Argentine Republic, Collateralized Par Bond,
Series L, Step-up Coupon, 5.25%, 3/31/23 ............ 3,130,185
1,470,000 Cedulas Hipotecarias, Floating Rate Bond, LIBOR plus
2.9% (8.978%), 9/1/00 ............................... 1,427,635
----------
16,646,401
----------
BRAZIL - 28.1% 1,000,000 Minas Gerais, Series A, Without Warrants,
7.875%, 2/10/99 (c) ................................. 905,000
625,000 Federative Republic of Brazil, "Old" New Money Bond,
Floating Rate Bond, LIBOR plus .8125%
(6.4375%), 10/15/99 ................................. 598,437
2,557,500 Federative Republic of Brazil, IDU Bond, Floating
Rate Bond, LIBOR plus .8125% (6.375%), 1/1/01 ....... 2,348,105
1,000,000 Federative Republic of Brazil, New Money Bond,
Floating Rate Bond, LIBOR plus .875%
(6.5625%), 4/15/09 .................................. 696,250
7,577,025 Federative Republic of Brazil C Bond, 4.5% with
3.5% Interest Capitalization, 4/15/14 ............... 4,541,517
8,000,000 Federative Republic of Brazil, Collateralized Par Bond,
Series Z, Step-up Coupon, 5%, 4/15/24 (c) ........... 4,200,000
21,500,000 Federative Republic of Brazil, Collateralized Discount
Bond, Floating Rate Bond, LIBOR plus
.8125% (6.5%), 4/15/24 (c) .......................... 14,539,375
----------
27,828,684
----------
COSTA RICA - 3.6% 2,000,000 Republic of Costa Rica Principal Bond, Series A,
6.25%, 5/21/10 ...................................... 1,310,000
3,800,000 Republic of Costa Rica Principal Bond, Series B,
6.25%, 5/21/15 ...................................... 2,223,000
----------
3,533,000
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
The Latin America Dollar Income Fund, Inc.
<TABLE>
Investment Portfolio (continued)
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Market
Amount ($) Value (U.S.$)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ECUADOR - 12.0% 4,512,500 Republic of Ecuador, Interest Equalization Bond,
Floating Rate Bond, LIBOR plus .8125%
(6.5%), 12/21/04 ................................... 3,203,875
17,701,590 Republic of Ecuador, Past Due Interest Bond,
3% with 3.0625% Interest Capitalization, 2/27/15 ... 7,678,065
1,750,000 Republic of Ecuador, Collateralized Discount Bond,
Floating Rate Discount Bond, LIBOR plus .8125%
(6.0625%), 2/28/25 ................................. 975,625
----------
11,857,565
----------
JAMAICA - 3.3% 4,500,000 Government of Jamaica Refinancing Agreement,
Tranche B, Floating Rate Bond, LIBOR plus .8125%
(6.0625%), 11/15/04 (c) ............................ 3,240,000
----------
MEXICO - 12.5% 8,500,000 Banco Nacional de Comercio Exterior S.N.C,
7.25%, 2/2/04 ...................................... 7,033,750
1,000,000 Nacional Financiera S.N.C., 9.375%, 7/15/02 (c) ...... 947,500
1,000,000 United Mexican States, 9.75%, 2/6/01 ................. 990,000
2,750,000 United Mexican States, Collateralized Discount Bond,
Floating Rate Bond, Series A, LIBOR plus .8125%
(6.398%), 12/31/19 ................................. 2,198,295
1,500,000 United Mexican States, Collateralized Discount Bond,
Floating Rate Bond, Series D, LIBOR plus .8125%
(6.547%), 12/31/19 ................................. 1,199,070
----------
12,368,615
----------
PANAMA - 4.9% 5,250,000 Republic of Panama, Floating Rate Bond, LIBOR plus
1% (6.75%), 5/10/02 (c) ............................ 4,856,250
----------
VENEZUELA - 10.2% 15,500,000 Republic of Venezuela, Debt Conversion Bond,
Floating Rate Bond, Series DL, LIBOR plus .875%,
(6.5625%), 12/18/07 (c) ............................ 10,123,515
----------
TOTAL DEBT OBLIGATIONS (Cost $86,129,291) ............ 90,454,030
----------
- ---------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS - 3.7%
Shares
------
ARGENTINA 470,740 Nortel Inversora "A" (ADR) (Cost $3,309,388) (b) (c) . 3,704,724
----------
- ---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO - 100.0%
(Cost $94,269,612) (a) ......................... 98,989,687
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
(a) The cost of the investment portfolio for federal income tax purposes was
$95,477,970. At April 30, 1996, net unrealized appreciation for all
securities based on tax cost was $3,511,717. This consisted of aggregate
gross unrealized appreciation for all securities in which there was an
excess of market value over tax cost of $4,540,357 and aggregate gross
unrealized depreciation for all securities in which there was an excess of
tax cost over market value of $1,028,640.
(b) Security valued in good faith by the Valuation Committee of the Board of
Directors. The cost of this security at April 30, 1996 aggregated
$3,309,388. See Note A of the Notes to Financial Statements.
(c) At April 30, 1996, these securities, in part or in full, have been
delivered as loan collateral. (See Note D to the Financial Statements.)
The accompanying notes are an integral part of the financial statements
9
<PAGE>
The Latin America Dollar Income Fund, Inc.
<TABLE>
Financial Statements
================================================================================
<CAPTION>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost
$94,269,612) (Note A) ................... $ 98,989,687
Cash ...................................... 41
Receivables:
Investments sold ........................ 1,935,138
When-issued and forward delivery
security (Note A) ..................... 5,350,841
Interest ................................ 1,887,521
Deferred organization expenses
(Note A) ................................ 24,938
------------
Total assets 108,188,166
LIABILITIES
Payables:
Note payable (Note D) ................... $20,000,000
Interest payable (Note D) ............... 205,384
Investments purchased ................... 2,152,213
When-issued and forward delivery
security (Note A) ..................... 5,501,875
Accrued management fee (Note C) ......... 78,776
Other accrued expenses (Note C) ......... 128,110
-----------
Total liabilities ..................... 28,066,358
------------
Net assets, at market value ............... $ 80,121,808
============
NET ASSETS
Net assets consist of:
Distributions in excess of net investment
income ................................ $ (714,214)
Accumulated net realized loss ........... (5,502,620)
Net unrealized appreciation
(depreciation) on:
Investments ........................... 4,720,075
Foreign currency related transactions . (25,254)
Common stock ............................ 60,420
Additional paid-in capital .............. 81,583,401
------------
Net assets, at market value ............... $ 80,121,808
============
NET ASSET VALUE per share ($80,121,808
DIVIDED BY 6,042,047 shares of common
stock outstanding, $.01 par value,
100,000,000 shares authorized) .......... $ 13.26
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
10
<PAGE>
<TABLE>
================================================================================
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest $ 5,817,462
Expenses:
Management fee (Note C)..................... $ 450,038
Directors' fees and expenses (Note C)....... 31,309
Custodian and accounting fees (Note C)...... 87,722
Reports to shareholders..................... 27,379
Auditing and tax services................... 48,925
Legal....................................... 3,902
Amortization of organization expenses
(Note A)................................... 9,972
Services to shareholders.................... 18,061
Interest (Note D)........................... 692,148
Other....................................... 9,851 1,379,307
---------- -----------
Net investment income 4,438,155
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investments................................. 6,722,399
Options..................................... 82,500
Foreign currency related transactions....... (10,398) 6,794,501
----------
Net unrealized appreciation on:
Investments................................. 5,631,528
Foreign currency related transactions....... 28,150 5,659,678
---------- -----------
Net gain on investment transactions........... 12,454,179
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS.................................... $16,892,334
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
11
<PAGE>
The Latin America Dollar Income Fund, Inc.
<TABLE>
Financial Statements (continued)
================================================================================
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets
- -----------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended
April 30, October 31,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ............................................... $ 4,438,155 $ 9,227,464
Net realized gain (loss) from investment transactions ............... 6,794,501 (14,647,184)
Net unrealized appreciation on investment transactions during
the period ........................................................ 5,659,678 2,291,792
----------- ------------
Net increase (decrease) in net assets resulting from operations ....... 16,892,334 (3,127,928)
----------- ------------
Dividends to shareholders:
From net investment income ($.75 and $1.30 per share, respectively) . (4,513,874) (7,694,526)
----------- ------------
From net realized gains from investment transactions ($.15 per share) -- (888,250)
----------- ------------
Tax return of capital ($.23 per share) .............................. -- (1,391,841)
----------- ------------
Fund share transactions:
Reinvestment of dividends ........................................... 410,282 1,005,660
----------- ------------
Net increase in net assets from Fund share transactions ............... 410,282 1,005,660
----------- ------------
INCREASE (DECREASE) IN NET ASSETS ..................................... 12,788,742 (12,096,885)
Net assets at beginning of period ..................................... 67,333,066 79,429,951
----------- ------------
NET ASSETS AT END OF PERIOD (including distributions in excess of
net investment income of $714,214 and $638,495, respectively) ....... $80,121,808 $ 67,333,066
=========== ============
OTHER INFORMATION
INCREASE IN FUND SHARES
Shares outstanding at beginning of period ............................. 6,010,387 5,921,667
Shares issued to shareholders in reinvestment of dividends .......... 31,660 88,720
----------- ------------
Shares outstanding at end of period ................................... 6,042,047 6,010,387
=========== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
12
<PAGE>
<TABLE>
================================================================================
- --------------------------------------------------------------------------------
Statement of Cash Flows
Six Months Ended April 30, 1996
- --------------------------------------------------------------------------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Investment income received ................................... $ 3,985,185
Payment of operating expenses ................................ (1,355,726)
Proceeds from sales and maturities of investments ............ 117,941,915
Purchases of investments ..................................... (118,747,482)
Net purchases of short-term investments ...................... (2,720,629)
-------------
Cash used by operating activities .......................... (896,737)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase of loan principal ............................... 5,000,000
Distributions paid (net of reinvestment of dividends) (Note A) (4,103,592)
-------------
Cash provided by financing activities ...................... 896,408
-------------
Decrease in cash ........................................... (329)
Cash at beginning of period ................................ 370
-------------
Cash at end of period ...................................... $ 41
=============
Reconciliation of net increase in net assets from operations
to cash used by operating activities:
Net increase in net assets resulting from operations ......... 16,892,334
Amortization of organization costs ........................... 9,972
Net increase in investments .................................. (10,671,701)
Net increase in unrealized appreciation on investments ....... (5,631,528)
Increase in interest receivable
Increase in receivable for investments sold .................. (13,228,583)
Increase in payable for investments purchased ................ 11,965,346
Increase in accrued expenses ................................. 5,100
Increase in interest payable ................................. 8,509
-------------
Cash used by operating activities .......................... $ (896,737)
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
13
<PAGE>
The Latin America Dollar Income Fund, Inc.
<TABLE>
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
SIX MONTHS (COMMENCEMENT
ENDED YEARS ENDED OCTOBER 31, OF OPERATIONS)
APRIL 30, ----------------------- TO OCTOBER 31
1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period ....... $11.20 $13.41 $16.22 $13.45 $13.83(b)
------ ------ ------ ------ ------
Net investment income .................... .74 1.55 1.51 1.53 .25
Net realized and unrealized gain (loss) on
investment transactions ................ 2.07 (2.08) (2.45) 2.74 (.50)
------ ------ ------ ------ ------
Total from investment operations ........... 2.81 (.53) (.94) 4.27 (.25)
------ ------ ------ ------ ------
Less distributions:
From net investment income ............... (.75) (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 ........................ (.75) (1.68) (1.87) (1.50) (.13)
------ ------ ------ ------ ------
Net asset value, end of period ............. $13.26 $11.20 $13.41 $16.22 $13.45
====== ====== ====== ====== ======
Market value, end of period ................ $13.13 $12.13 $13.25 $15.63 $15.00
====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN
Per share market value (%) ............... 14.60** 5.78 (3.52) 15.47 .88**
Per share net asset value (%) (c) ........ 25.34** (3.46) (5.94) 33.69 (1.89)**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ... 80 67 79 95 77
Ratio of operating expenses (excluding
interest) to average net assets (%) .... 1.83* 1.96 1.83 2.00 2.05*
Ratio of net investment income to average
net assets (%) ......................... 11.80* 13.59 10.42 10.71 7.14*
Portfolio turnover rate (%) .............. 287.4(d)* 365.9(d) 161.1 93.3 1.8*
- ----------
<FN>
(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 assume 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 price.
(d) Economic and market conditions necessitated more active trading, resulting
in a higher portfolio turnover rate.
* Annualized ** Not annualized
</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 Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
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 (4.6% of net assets) and have been noted in the
investment portfolio as of April 30, 1996. Their values have been estimated by
the Board of Directors in the absence of readily ascertainable market values.
However, because of the inherent uncertainty of valuation, those estimated
values may differ significantly from the values that would have been used had a
ready market for the securities existed, and the difference could be material.
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.
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.
15
<PAGE>
The Latin America Dollar Income Fund, Inc.
Notes to Financial Statements (continued)
================================================================================
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.
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 April 30,
1996.
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 $1,586,000 for the six months ended April 30, 1996.
B. PURCHASES AND SALES OF SECURITIES
---------------------------------
During the six months ended April 30, 1996, purchases and sales of investment
securities (excluding short-term investments) aggregated $130,597,178 and
$131,170,498 respectively.
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
16
<PAGE>
================================================================================
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 six months ended April 30, 1996, the fee pursuant to
such agreement amounted to $450,038, of which $78,776 is unpaid at April 30,
1996. The Fund pays each Director not affiliated with the Manager $6,000
annually, plus specified amounts for attended board and committee meetings. For
the six months ended April 30, 1996, Directors' fees and expenses aggregated
$31,309. Effective January 15, 1996, Scudder Fund Accounting Corporation
("SFAC"), a subsidiary of the Adviser, assumed responsibility for determining
the daily net asset value per share and maintaining the portfolio and general
accounting records of the Fund. For the six months ended April 30, 1996, the
amount charged to the Fund by SFAC aggregated $23,523, of which $6,027 is unpaid
at April 30, 1996.
D. BORROWINGS
----------
At April 30, 1996 the Fund had an outstanding loan balance of $20,000,000. The
interest rate at April 30, 1996 was 5.875%. 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 125 and 150%.
The weighted average outstanding daily balance of bank loans for the six months
ended April 30, 1996 was $20,556,831, with a weighted average interest rate of
6.75%. The maximum borrowings outstanding for the six months ended April 30,
1996 was $25,000,000. Interest expense for the six months ended April 30, 1996
was $692,148 ($.11 per share). Interest paid for the six months ended April 30,
1996 was $683,639.
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.
17
<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 April 30, 1996, 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 April 30, 1996 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
June 12, 1996
18
<PAGE>
Other Information
- -----------------
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, The Brazil Fund, The First Iberian Fund, The Korea Fund, Scudder
New Asia Fund, Scudder World Income Opportunities Fund, and Scudder New Europe
Fund.
Dividend Reinvestment and Cash Purchase Plan
We are pleased to advise you of an optional plan for the automatic
reinvestment of your dividends and capital gains distributions in shares of the
Fund. We recommend that you consider enrolling in the Dividend Reinvestment and
Cash Purchase Plan (the "Plan") to build your investment. 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 & Trust Company, P.O. Box 8209, Boston, MA 02266-8209,
1-800-426-5523.
Net Asset Value
The Fund's NAV is published every Monday in The Wall Street Journal under the
heading "Closed End Funds." The Fund's NAV is also published in The New York
Times and Barron's.
As a service to overseas shareholders, the Fund's NAV is listed daily in The
Financial Times ("FT"). The NAV of the Fund, and other Scudder managed
closed-end funds, can be found in the "FT Managed Funds Service" section under
the heading "other off-shore funds" below the Scudder, Stevens & Clark banner.
19
<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
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.
