The Latin America Dollar Income
Fund, Inc.
Annual Report
October 31, 1997
A non-diversified 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.
The Latin America Dollar Income Fund, Inc.
<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 a non-diversified closed-end investment company investing principally in a
portfolio of dollar-denominated Latin American debt instruments
o a vehicle for international investment 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 and Trust Company
Investor Relations Department
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
Portfolio Summary 7
Investment Portfolio 8
Financial Statements 11
Financial Highlights 15
Notes to Financial Statements 16
Report of Independent Accountants 20
Tax Information 21
Stockholder Meeting Results 22
Dividend Reinvestment and
Cash Purchase Plan 24
Other Information 26
Officers and Directors 27
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>
The Latin America Dollar Income Fund, Inc.
In Brief
- --------------------------------------------------------------------------------
o The Latin America Dollar Income Fund posted a 14.03% total return based on
net asset value for its most recent fiscal year ended October 31, 1997. The
J.P. Morgan Latin Brady Bond Index returned 13.54% over the same time period.
o Emerging markets from Thailand to Brazil weathered a series of currency
crises over the second half of the Fund's most recent fiscal year as these
countries struggled to deal with current account deficits and rising interest
rates.
o The Fund continues to maintain a liquid portfolio that we believe is well
positioned to benefit from improving economic fundamentals while earning a
high level of current income.
Letter to Shareholders
- --------------------------------------------------------------------------------
Dear Shareholders,
During a period of economic uncertainty for emerging countries, The Latin
America Dollar Income Fund pursued a conservative strategy, posting a 14.03%
total return based on NAV for its most recent fiscal year ended October 31,
1997. Contributing to the Fund's total return for the period were $1.50 per
share in income distributions, $2.55 in short-term capital gains, and $0.37 in
long-term capital gains. The unmanaged J.P. Morgan Latin Brady Bond Index during
the same period returned 13.54%. Since its inception on July 31, 1992, through
October 31, 1997, the Fund's total return based on NAV was 111.63%, compared
with the Index's return of 103.27%. The Fund closed its fiscal year with a net
asset value ("NAV") of $13.11, down from $15.61 on October 31, 1996. During the
12-month period ended October 31, 1997, the Fund's share price on the New York
Stock Exchange rose from $13.88 to $14.25, contributing to a total return of
19.72%. Although shares of your Fund sold at fiscal year end on the New York
Stock Exchange (NYSE) at a price of $14.25 per share, these shares ultimately
yielded only $12.13 to those shareholders who sold such shares net of the
attached "due bill" of $2.12 per share. A due bill -- or a statement of money
owed -- represents an obligation on the part of the seller of Fund shares to
make a payment to the buyer of such shares on the payment date of the
distribution that gave rise to the due bill. Because your Fund had declared a
distribution that was greater than 15% of the market value of its shares,
due-bill trading was mandated by the NYSE. Accordingly, rather than reducing the
trading price of the Fund's shares by the amount of the distribution (the normal
ex-dividend procedure), due bills were attached to shares of the Fund that
traded during the period beginning four business days prior to record date and
ending on the payment date of the distribution. Because of the due bill, it is
our view that $12.13 is more reflective of the true market value of the Fund at
year end and should be used in comparisons to historical market values and the
fiscal-year-end NAV. For information on the Fund's performance, please refer to
the table on page 6 entitled "Investment Summary."
Asian Currency Turmoil Spills Over
In July, Thailand, attempting to deal with a large current account deficit,
devalued its currency. This event put pressure on currencies in several other
Asian markets, including Malaysia, Indonesia, and the Philippines. The crisis
proceeded to spread to other large Asian economies such as Korea, Hong Kong, and
Japan, where currency and property exposure in the banking systems began to
worry investors. As the Asian crisis proceeded, concerns over countries posting
significant current account deficits and overvalued currencies --
3
<PAGE>
The Latin America Dollar Income Fund, Inc.
Letter to Shareholders
- --------------------------------------------------------------------------------
in combination with a move towards general global risk reduction by investors --
began to put pressure on other markets and countries. Brazil's currency soon
came under pressure: Heavy selling of the Brazilian real began in late October
and the country's central bank spent an estimated $8 billion in reserves to
defend the currency. In addition, Brazil raised interest rates to an annual rate
of 45% to encourage investors to hold the real. President Cardoso also renewed
his efforts to push additional reforms through Congress targeting tight fiscal
policy and increased government revenues. The real held firm through this
initial assault, relieving some pressure on other Latin American countries. The
speed with which Brazil passed legislation aimed at reducing the fiscal deficit
also served to calm investors and renew confidence locally.
A Conservative Strategy
The Latin America Dollar Income Fund had adopted a more conservative stance
prior to the outbreak of the Asian turmoil and was thus well positioned as the
yield differential (or "spread") between emerging market bonds and Treasury
bonds of similar maturity widened from approximately 3.3 percentage points over
U.S. Treasuries to 6 percentage points by the close of the period. This
conservative strategy included reducing the Fund's average effective maturity,
underweighting Brazil and Argentina, and overweighting Mexico, Panama, Peru, and
Venezuela. We also reduced the Fund's local currency assets to 4.59% by the
close of the period.
During the most recent fiscal year, the Fund increased its position in Mexico
through additional holdings of dollar-denominated debt. With strong credit
fundamentals, we expect Mexico to outperform other Latin American countries in
the coming months and exhibit less volatility due to its strong ties with the
U.S. and relatively flexible currency regime, which frees Mexico from constantly
defending its currency and dipping into reserves. Inflation appears to be
declining in Mexico, and retail sales have been strong. Preliminary budget
discussions also imply a relatively low budget deficit for the coming fiscal
year.
We took advantage of opportunities to add back substantial amounts of Panamanian
sovereign bonds during the period due to our continued optimism concerning the
country's economic outlook and improving relative value. In addition, Panama's
economy is largely dollarized and thus is relatively isolated from currency
related volatility.
Our Outlook
Latin American sovereign bonds represent attractive relative value, especially
in the context of the recent sell-off. As a benchmark, yields on U.S. high yield
bonds with an average credit rating of B were less than two percentage points
higher than comparable Treasuries at the close of the period. Latin American
bonds, which on average have a higher credit rating than the B-rated U.S. High
Yield Index, yielded 6% more than Treasuries of similar maturity. That said, we
do expect continued volatility, especially in light of continued pressure on the
Brazilian and other currencies. We will continue to pursue a cautious strategy,
confining our focus to countries with strong credit fundamentals and banking
systems, as well as limited current account deficits, flexible exchange rates,
and positive capital flows. Several Latin American countries have in particular
made great strides in structural reform and have already undergone adjustments
to alleviate potential currency and current account pressures. We believe that
investors worldwide will return to the market as Latin American countries with
solid fundamentals and growing domestic economies once again begin to
distinguish themselves. The Latin America Dollar Income Fund, Inc. Letter to
Shareholders
Important Note: Fund Merger and Name Change
On November 5, 1997, stockholders of the Fund approved a Plan of Reorganization
that had been approved by the Fund's Board of Directors. Under the
Reorganization, the Fund acquired substantially all of the assets and
liabilities of Scudder World Income Opportunities Fund, Inc., in a tax free
4
<PAGE>
The Latin America Dollar Income Fund, Inc.
Letter to Shareholders
- --------------------------------------------------------------------------------
exchange for shares. In addition, the investment objective of the Fund was
broadened to encompass global emerging market bonds; as a result, the Fund
changed its name to Scudder Global High Income Fund, Inc., as of November 14,
1997. We would be happy to receive any questions or comments about the Fund or
its Reorganization. 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>
SCUDDER LATIN AMERICA DOLLAR INCOME FUND, INC.
INVESTMENT SUMMARY AS OF OCTOBER 31, 1997
- -----------------------------------------------------------------
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 -10.52% -- -6.93% -- -8.64% --
ONE YEAR 19.72% 19.72% 14.03% 14.03% 13.54% 13.54%
THREE YEAR 62.01% 17.45% 71.53% 19.71% 69.30% 19.16%
FIVE YEAR 80.50% 12.54% 115.71% 16.62% 111.20% 16.11%
LIFE OF FUND* 82.09% 12.08% 111.63% 15.33% 103.27% 14.45%
- -----------------------------------------------------------------
PER SHARE INFORMATION AND RETURNS (a)
YEARLY PERIODS ENDED OCTOBER 31
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) with the exact
data points listed in the table below.
1993 1994 1995 1996 1997
------------------------------------------
NET ASSET VALUE... $16.22 $13.41 $11.20 $15.61 $13.11
INCOME DIVIDENDS.. $ 1.49 $ 1.51 $ 1.53 $ 1.50 $ 1.50
CAPITAL GAINS
DISTRIBUTIONS..... $ .01 $ .36 $ .15 -- 2.92
TOTAL RETURN (%).. 33.69 -5.94 -3.46 55.81 14.03
(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.
6
<PAGE>
THE LATIN AMERICA DOLLAR INCOME FUND, INC.
PORTFOLIO SUMMARY as of October 31, 1997
================================================================================
INVESTMENT ALLOCATION
(Excludes 17% Cash Equivalents)
Sovereign Bonds (1) 83%
Preferred Stock 4%
Corporate Bonds 13%
-----
100%
-----
-----
(1) Includes 69% investments in Brady Bonds.
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
================================================================================
INTEREST RATE SENSITIVITY
(Excludes 17% Cash Equivalents)
Fixed Rate Bonds 75%
Floating Rate Bonds 25%
-----
100%
-----
-----
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table
================================================================================
GEOGRAPHICAL
(Excludes 17% Cash Equivalents)
Mexico 31%
Argentina 18%
Brazil 16%
Jamaica 7%
Panama 7%
Costa Rica 7%
Peru 6%
Venezuela 4%
Chile 3%
Ecuador 1%
-----
100%
-----
-----
7
<PAGE>
The Latin America Dollar Income Fund, Inc.
Investment Portfolio
<TABLE>
<CAPTION>
===============================================================================================
Principal Market
Amount($)(c) Value(U.S.$)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
JAMAICA -- 6.1% 2,750,000 Government of Jamaica, 9.625%, 7/2/02 ........ 2,571,250
2,500,000 Government of Jamaica, Refinancing Agreement,
Tranche B, Floating Rate Bond, LIBOR plus
.8125% (6.313%), 11/15/04 ................. 2,250,000
----------
4,821,250
----------
MEXICO -- 26.1% 500,000 AXA S.A. de C.V., 9%, 8/4/04 ................. 485,000
1,000,000 Nacional Financiera S.N.C., 9.375%, 7/15/02 .. 930,000
3,500,000 Petroleos Mexicanos, 9.5%, 9/15/27 ........... 3,202,500
1,250,000 United Mexican States, (Detachable Oil
Priced Indexed Value Recovery Rights),
6.25%, 12/31/19 ........................... 1,000,000
2,500,000 United Mexican States Par Bond, (Detachable
Oil Priced Indexed Value Recovery
Rights), 6.25%, 12/31/19 .................. 2,000,000
3,750,000 United Mexican States, Collateralized Par
Bond, (Detachable Oil Priced Indexed
Value Recovery Rights), Series B, 6.25%,
12/31/19 .................................. 3,000,000
11,000,000 United Mexican States, Collateralized Par
Bond, (Detachable Oil Priced Indexed
Value Recovery Rights), Series A, 6.25%,
12/31/19 .................................. 8,800,000
1,250,000 United Mexican States, (Detachable Oil
Priced Indexed Value Recovery Rights),
11.5%, 5/15/26............................. 1,359,375
----------
20,776,875
----------
PANAMA -- 5.8% 5,750,000 Republic of Panama, Interest Reduction Bond,
3.75%, 7/17/14 ............................ 4,053,750
638,000 Republic of Panama, 8.875%, 9/30/27 .......... 542,300
----------
4,596,050
----------
PERU -- 5.2% 3,300,000 Republic of Peru, Floating Rate Interest
Reduction Bond, 3.25%, 3/7/17 ............. 1,650,000
4,350,000 Republic of Peru, Past Due Interest Bond,
4%, 3/7/17 ................................ 2,479,500
----------
4,129,500
----------
VENEZUELA -- 3.4% 250,000 Republic of Venezuela, Collateralized Par
Bond, (Detachable Oil Priced Indexed
Value Recovery Rights) Series A, 6.75%,
3/31/20 ................................... 208,750
678,583 Republic of Venezuela, Front Loaded Interest
Reduction Bond, Series B, LIBOR plus
.875% (6.75%), 3/31/07 .................... 586,975
250,000 Republic of Venezuela, Debt Conversion Bond,
Floating Rate Bond, Series DL, LIBOR
plus .875% (6.75%), 12/18/07 .............. 216,875
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
The Latin America Dollar Income Fund, Inc.
Investment Portfolio
<TABLE>
<CAPTION>
===============================================================================================
Principal Market
Amount($)(c) Value(U.S.$)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2,000,000 Republic of Venezuela Global, 9.25%,
9/15/27 .................................. 1,670,000
----------
2,682,600
----------
TOTAL DEBT OBLIGATIONS (Cost $64,334,021) ... 60,864,463
----------
- -----------------------------------------------------------------------------------------------
FOREIGN-DENOMINATED DEBT -- 2.3%
CHILE CLP 345,738,302 Citibank Time Deposit linked to Chilean
Peso, 9.5%, 11/24/97 ..................... 819,885
CLP 414,800,000 Citibank Time Deposit linked to Chilean
Peso, 10.7%, 4/2/98 ...................... 983,400
----------
TOTAL FOREIGN-DENOMINATED DEBT
(Cost $1,825,250) ........................ 1,803,285
----------
- -----------------------------------------------------------------------------------------------
PREFERRED STOCKS -- 4.4%
Shares
-------
ARGENTINA 274,190 Nortel Inversora "A" (ADR)
(Telecommunication services)
(Cost $2,007,427)(b) ..................... 3,487,697
----------
- -----------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $81,490,931)(a) .................... 79,479,678
==========
- -----------------------------------------------------------------------------------------------
</TABLE>
(a) The cost of the investment portfolio for federal income tax purposes was
$81,547,861. At October 31, 1997, net unrealized depreciation for all
securities based on tax cost was $2,068,183. This consisted of aggregate
gross unrealized appreciation for all securities in which there was an
excess of market value over tax cost of $2,938,094 and aggregate gross
unrealized depreciation for all securities in which there was an excess of
tax cost over market value of $5,006,277.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $3,487,697 (4.32% of net assets). Their
values have been estimated by the Valuation Committee 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. The cost of these
securities at October 31, 1997 aggregated $2,007,427. These securities may
also have certain restrictions as to resale.
(c) Principal amounts are stated in U.S. dollars unless otherwise noted.
CURRENCY ABBREVIATIONS
- ---------------------------
CLP Chilean Peso
ARA Argentine Peso
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
The Latin America Dollar Income Fund, Inc.
Financial Statements
<TABLE>
<CAPTION>
===============================================================================================
- -----------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $81,490,931) ............... $79,479,678
Cash ............................................................... 1,140
Receivables:
Investments sold ............................................... 13,553,694
Interest ....................................................... 1,099,912
Other assets ....................................................... 12,214
-----------
Total assets ................................................... $94,146,638
LIABILITIES
Payables:
Dividends ...................................................... $13,018,581
Unrealized depreciation on forward foreign currency
exchange contracts .......................................... 16,268
Accrued management fee ......................................... 109,110
Other accrued expenses ......................................... 280,835
-----------
Total liabilities .............................................. 13,424,794
-----------
Net assets, at market value ........................................ $80,721,844
===========
NET ASSETS
Net assets consist of:
Undistributed net investment income ............................ $ 31,162
Accumulated net realized loss .................................. (409,807)
Net unrealized appreciation (depreciation) on:
Investments .................................................... (2,011,253)
Foreign currency related transactions .......................... (16,256)
Paid-in capital ................................................ 83,127,998
-----------
Net assets, at market value ........................................ $80,721,844
===========
NET ASSET VALUE per share ($80,721,844 [divided by] 6,155,449 shares
of common stock outstanding, $.01 par value, 100,000,000
shares authorized) ............................................. $ 13.11
===========
The accompanying notes are an integral part of the financial statements.
- -----------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
The Latin America Dollar Income Fund, Inc.
Financial Statements
<TABLE>
<CAPTION>
===============================================================================================
- -----------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest ...................................................... $10,032,569
Dividends ..................................................... 195,744
-----------
10,228,313
Expenses:
Management fee ............................................. $ 1,212,155
Directors' fees and expenses ............................... 72,934
Custodian and accounting fees .............................. 159,758
Reports to shareholders .................................... 48,852
Auditing ................................................... 87,016
Legal ...................................................... 29,525
Amortization of organization expenses ...................... 14,859
Services to shareholders ................................... 33,469
Interest ................................................... 510,933
Reorganization expense ..................................... 144,000
Other ...................................................... 64,386 2,377,887
----------- -----------
Net investment income ......................................... 7,850,426
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investments................................................. 13,626,749
Foreign currency related transactions ...................... (33,925) 13,592,824
-----------
Net unrealized appreciation (depreciation) on:
Investments ................................................ (9,697,559)
Foreign currency related transactions ...................... 38,300 (9,659,259)
----------- -----------
Net gain on investment transactions ........................... 3,933,565
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............. $11,783,991
===========
The accompanying notes are an integral part of the financial statements.
- -----------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
The Latin America Dollar Income Fund, Inc.
Financial Statements
<TABLE>
<CAPTION>
===============================================================================================
- -----------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------
YEARS ENDED OCTOBER 31,
-----------------------
INCREASE (DECREASE) IN NET ASSETS 1997 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ............................................ $ 7,850,426 $ 9,575,823
Net realized gain (loss) from investment transactions ............ 13,592,824 17,490,571
Net unrealized appreciation (depreciation) on
investment transactions during the period .................... (9,659,259) 8,596,607
----------- -----------
Net increase (decrease) in net assets resulting from operations ..... 11,783,991 35,663,001
----------- -----------
Dividends to shareholders:
From net investment income ....................................... (9,170,408) (9,050,902)
----------- -----------
From net realized gains from investment transactions ............. (17,875,360) --
----------- -----------
Fund share transactions:
Reinvestment of dividends ........................................ 1,235,015 803,441
----------- -----------
INCREASE (DECREASE) IN NET ASSETS ................................... (14,026,762) 27,415,540
Net assets at beginning of period ................................... 94,748,606 67,333,066
----------- -----------
NET ASSETS AT END OF PERIOD (including undistributed
net investment income of $31,162 and distributions in
excess of net investment income of $7,699) ....................... $80,721,844 $94,748,066
=========== ===========
OTHER INFORMATION
INCREASE IN FUND SHARES
Shares outstanding at beginning of period ........................... 6,070,974 6,010,387
Shares issued to shareholders in reinvestment of dividends ....... 84,475 60,587
----------- -----------
Shares outstanding at end of period ................................. 6,155,449 6,070,974
=========== ===========
The accompanying notes are an integral part of the financial statements.
- -----------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
The Latin America Dollar Income Fund, Inc.
Financial Statements
<TABLE>
<CAPTION>
===============================================================================================
- -----------------------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS
YEAR ENDED OCTOBER 31, 1997
- -----------------------------------------------------------------------------------------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Investment income received ..................................................... $ 9,154,345
Payment of operating expenses .................................................. (2,412,979)
Proceeds from sales and maturities of investments .............................. 393,945,185
Purchases of investments ....................................................... (361,113,430)
Net purchases of short-term investments ........................................ (6,902,203)
-------------
Cash provided by operating activities ....................................... 32,670,918
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease of loan principal ................................................. (19,900,000)
Distributions paid (net of reinvestment of dividends) .......................... (12,792,175)
-------------
Cash used by financing activities ........................................... (32,692,175)
-------------
Decrease in cash ............................................................ (21,257)
Cash at beginning of period ................................................. 22,397
-------------
Cash at end of period ....................................................... $ 1,140
=============
Reconciliation of net increase in net assets from
operations to cash provided by operating activities:
Net increase in net assets resulting from operations ........................... 11,783,991
Amortization of organization costs ............................................. 14,859
Net decrease in cost of investments ............................................ 21,066,525
Net decrease in unrealized appreciation on investments ......................... 9,697,559
Decrease in interest receivable ................................................ 819,656
Increase in receivable for investments sold .................................... (8,296,449)
Increase in other assets ....................................................... (12,214)
Increase in depreciation on forward currency exchange contracts ................ 16,268
Decrease in payable for investments purchased .................................. (2,369,391)
Increase in accrued expenses ................................................... 166,701
Decrease in interest payable ................................................... (216,587)
-------------
Cash provided by operating activities ....................................... $ 32,670,918
=============
The accompanying notes are an integral part of the financial statements.
- -----------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
The Latin America Dollar Income Fund, Inc.
Financial Highlights
<TABLE>
<CAPTION>
===============================================================================================
- -----------------------------------------------------------------------------------------------
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.
- -----------------------------------------------------------------------------------------------
YEARS ENDED OCTOBER 31,
----------------------------------------------
1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period ..... $15.61 $11.20 $13.41 $16.22 $13.45
------ ------ ------ ------ ------
Net investment income ................ 1.28 1.59 1.55 1.51 1.53
Net realized and unrealized gain
(loss) on investment transactions .. .64 4.32 (2.08) (2.45) 2.74
------ ------ ------ ------ ------
Total from investment operations ......... 1.92 5.91 (.53) (.94) 4.27
------ ------ ------ ------ ------
Less distributions:
From net investment income ........... (1.50) (1.50) (1.30) (1.51) (1.49)
From net realized gains on investment
transactions ....................... (2.92) -- (.15) (.33) (.01)
In excess of net realized gains ...... -- -- (.03) --
Tax return of capital .................... -- (.23) -- --
------ ------ ------ ------ ------
Total distributions ...................... (4.42) (1.50) (1.68) (1.87) (1.50)
------ ------ ------ ------ ------
Net asset value, end of period ........... $13.11 $15.61 $11.20 $13.41 $16.22
====== ====== ====== ====== ======
Market value, end of period .............. $12.13(b) $13.88 $12.13 $13.25 $15.63
====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN
Per share market value(%) ................ 19.72 27.93 5.78 (3.52) 15.47
Per share net asset value(%)(c) .......... 14.03 55.81 (3.46) (5.94) 33.69
Ratios and Supplemental Data
Net assets, end of period($ millions) .... 81 95 67 79 95
Ratio of operating expenses (excluding
interest) to average net assets(%) .... 1.85 1.79 1.96 1.83 2.00
Ratio of operating expenses to average
net assets(%) ...................... 2.36 3.28 3.66 3.41 3.42
Ratio of net investment income to average
net assets(%) ...................... 7.80 11.66 13.59 10.42 10.71
Portfolio turnover rate(%) ............... 362.3(d) 322.3(d) 365.9(d) 161.1 93.3
</TABLE>
(a) Based on monthly average of shares outstanding during each period.
(b) Market value of $14.25 has been reduced to reflect a distribution of $2.12
per share, relating to a due bill which entitles individuals who purchased
shares prior to November 4, 1997, the ex-date of the dividend, to be
reimbursed by the seller in the amount of the distribution.
(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.
- --------------------------------------------------------------------------------
15
<PAGE>
The Latin America Dollar Income Fund, Inc.
Note 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 original 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. Money Market investments having an original 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.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value, depending on the maturity of the repurchase
agreement, is at least equal to the repurchase price plus accrued interest.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A forward foreign currency exchange
contract (forward contract) is a commitment to purchase or sell a foreign
currency at the settlement date at a negotiated rate. During the period, the
Fund utilized forward contracts as a hedge in connection with portfolio
purchases and sales of securities denominated in foreign currencies and as a
hedge against changes in exchange rates relating to foreign currency denominated
assets.
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Forward
contracts having the same settlement date and broker are offset and any gain
(loss) is realized on the date of offset; otherwise, gain (loss) is realized on
settlement date. Realized and unrealized gains and losses which represent the
difference between the value of the forward contract to buy and the forward
contract to sell are included in net realized and unrealized gain (loss) from
foreign currency related transactions.
Certain risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their contracts. Additionally,
when utilizing forward contracts to hedge the Fund gives up the opportunity to
profit from favorable exchange rate movements during the term of the contract.
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.
16
<PAGE>
The Latin America Dollar Income Fund, Inc.
Note to Financial Statements
================================================================================
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.
FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements of
the Internal Revenue Code, as amended, 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.
DISTRIBUTION OF INCOME AND GAINS. The Fund's policy is to declare and pay
distributions to shareholders of substantially all net investment income 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 October 31,
1997.
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. All discounts are accreted for both tax and
financial reporting purposes.
B. PURCHASES AND SALES OF SECURITIES
During the year ended October 31, 1997, purchases and sales of investment
securities (excluding short-term investments) aggregated $358,752,107 and
$402,241,634, respectively.
17
<PAGE>
The Latin America Dollar Income Fund, Inc.
Note to Financial Statements
================================================================================
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, 1997, the fee pursuant to such agreement amounted
to $1,212,155, of which $109,110 is unpaid at October 31, 1997.
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, 1997, Directors' fees and expenses aggregated $72,934, of
which $2,120 is unpaid at October 31, 1997.
On June 26, 1997, the Manager entered into an agreement with The Zurich
Insurance Company ("Zurich"), an international insurance and financial services
organization, pursuant to which Zurich will acquire a majority interest in the
Manager, and the Manager will form a new global investment organization by
combining with Zurich's subsidiary, Zurich Kemper Investments, Inc. and change
its name to Scudder Kemper Investments, Inc. Subject to the receipt of the
required regulatory and shareholder approvals, the transaction is expected to
close by the end of the fourth quarter of 1997.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Manager, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the year ended
October 31, 1997, the amount charged to the Fund by SFAC aggregated $91,468, of
which $15,523 is unpaid at October 31, 1997.
D. BORROWINGS
The weighted average outstanding daily balance of bank loans and reverse
repurchase agreements for the year ended October 31, 1997 was $8,293,425 with a
weighted average interest rate of 6.16%. The maximum borrowings outstanding for
the year ended October 31, 1997 was $26,100,000. Interest expense for the year
ended October 31, 1997 was $510,933 ($.08 per share). Interest paid for the year
ended October 31, 1997 was $727,520.
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.
18
<PAGE>
The Latin America Dollar Income Fund, Inc.
Note to Financial Statements
================================================================================
F. COMMITMENTS
As of October 31, 1997, the Fund had entered into the following forward currency
exchange contracts resulting in net unrealized depreciation of $16,268.
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION
(DEPRECIATION)
CONTRACTS TO DELIVER IN EXCHANGE FOR SETTLEMENT DATE (U.S.$)
-------------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
DEM 961,816 USD 541,825 11/17/97 (16,268)
</TABLE>
G. PLAN OF REORGANIZATION
On November 5, 1997 the Stockholders of the Fund approved a Plan of
Reorganization (the "Reorganization") that had been approved by the Fund's Board
of Directors. Under the Reorganization the Fund acquired substantially all of
the assets and liabilities of the Scudder World Income Opportunities Fund, Inc.
in a tax free exchange for shares. In addition, on November 14, 1997 the
investment objectives of the Fund were broadened and as a result the Fund
changed its name to Scudder Global High Income Fund, Inc. Latin America Dollar
Income Fund, Inc.'s proportionate share of reorganization expenses, as approved
by the Fund's Board of Directors, amounted to $144,000 as of October 31, 1997.
19
<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, of 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, 1997, the results of its
operations, of 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, 1997 by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, provide
a reasonable basis for the opinion expressed above.
As discussed in Note G to the financial statements, on November 5, 1997 the
shareholders of the Fund approved a Plan of Reorganization. Pursuant to the
approval by the shareholders, on November 14, 1997 the Fund acquired
substantially all of the assets and liabilities of the Scudder World Income
Opportunities Fund, Inc. in exchange for shares of the Fund. In addition, the
investment objectives of the Fund were broadened and as a result, the Fund
changed its name to Scudder Global High Income Fund, Inc.
PRICE WATERHOUSE LLP
Boston, Massachusetts
December 12, 1997
20
<PAGE>
The Latin America Dollar Income Fund, Inc.
Tax Information
================================================================================
The Fund paid $0.37 per share net long-term capital gains during its fiscal year
ended October 31, 1997. Pursuant to section 852 of the Internal Revenue Code,
the Fund designates $977,712 as capital gain dividends for the year ended
October 31, 1997.
21
