The Latin America Dollar Income
Fund, Inc.
Semiannual Report
April 30, 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.
<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
Boston EquiServe L.P.
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.............................................19
Other Information.....................................................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 Latin American sovereign bonds posted strong gains for the past six months as
investors responded positively to improving credit fundamentals in several
Latin American countries.
o Reflecting this favorable environment, The Latin America Dollar Income Fund
posted a 14.09% total return based on net asset value for its most recent
semiannual period ended April 30, 1997. The Fund's total return based on its
share price on the New York Stock Exchange was 17.82% for the same period.
o The Fund continues to maintain a liquid portfolio that we believe is well
positioned to benefit from the improving balance sheets of Latin American
countries while earning a high level of current income.
Letter to Shareholders
================================================================================
Dear Shareholders,
Latin American debt markets posted positive returns during the six months
ended April 30, 1997, as investor interest continued to broaden, and bonds
benefited from favorable economic conditions and the improving credit quality of
Latin American countries. The Fund closed its semiannual period with a net asset
value ("NAV") of $16.07, up from $15.61 on October 31, 1996. Adjusting for $0.75
in income distributions, $0.59 in short-term capital gains, and $0.21 in
long-term capital gains during the period, the Fund posted a strong 14.09% total
return based on NAV. The unmanaged J.P. Morgan Latin Brady Bond Index during the
same period returned 11.70%. Since its inception on July 31, 1992, through April
30, 1997, the Fund's cumulative total return based on NAV was 111.74%, compared
with the Index return of 99.97%.
During the six months ended April 30, 1997, the Fund's share price on the New
York Stock Exchange rose from $13.875 to $14.75, contributing to a total return
of 17.82%. The $14.75 price of the shares on April 30, 1997, represented a 8.21%
discount to the Fund's NAV.
The long-term environment for emerging market bonds remains fundamentally
favorable, and credit rating announcements concerning several emerging countries
during the past six months reflected the improving credit quality of the sector
as a whole. In February, Panama received a credit rating of BB+, higher than
anticipated by the market. In addition, Argentina and Brazil received credit
rating upgrades from Standard and Poor's in 1997. The upgrades for Argentina and
Brazil were awarded earlier than was expected by market participants, and may
help to widen the investor base for both countries' sovereign bonds.
In April, Standard & Poor's also announced a major modification to its
ratings criteria for emerging market corporate bonds which for the first time
allows the ratings to exceed those of the country in which the issuer is
headquartered. This change in methodology is based on the rating agency's belief
that corporate exposure to sovereign risk in countries whose currencies are
pegged to the U.S. dollar is reduced if the governments are not expected to
interfere with private borrowers' access to foreign currency during a crisis.
The move was welcomed in Argentina, where 12 companies subsequently received
investment grade ratings. The effect of the improvement in credit quality was
reflected in lower interest rates and higher bond prices among emerging market
bonds as a whole. This favorable trend was interrupted in March and early April
as the U.S. Treasury market as well as emerging fixed income markets retraced
due to an increase in the Fed Funds rate in March and the anticipation of a
further interest rate hike in May. As the fear of an additional rate hike in May
subsided, the U.S. Treasury market rallied leading to a strong performance in
emerging market bonds.
3
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Portfolio Strategy
Because of expected volatility in the U.S. Treasury market resulting from the
fear of interest rate hikes, we kept most of the Fund's portfolio (65%) invested
in floating rate assets during the period. Floating rate assets generally carry
a shorter duration because their coupons reset every six months in relation to
the London Interbank Offered Rate, or LIBOR. (Duration is a measure of a bond's
responsiveness to interest rate fluctuations; the shorter the duration, the less
sensitive the bond is to rate changes.) This strategy continued to work to the
Fund's advantage as floating-rate securities in the Fund's portfolio
outperformed fixed-rate instruments, with average total returns of 12.91% and
10.54%, respectively.
As we've reported in the past, we continue to maintain a liquid portfolio
that is well positioned to benefit from the improved economic picture in many
Latin American countries while at the same time earning a high level of current
income. Country and security selection remain central to the Fund's strategy.
The Fund's core holdings are in Argentina (30%), Brazil (26%), Venezuela
(14%), and Mexico (13%). We substantially increased our holdings in Argentina
during the period following the announcement that the country fulfilled its
first quarter 1997 IMF budget requirements. There was other good news from
Argentina during the period: Industrial production has been strong, debt
requirements have been dramatically reduced, and Argentine companies are already
benefiting from the above-mentioned change in Standard & Poor's corporate
ratings criteria. We are hopeful that much-needed labor reform to lift
restrictions on employers, reduce unemployment, and boost the "bottom line" of
companies will take place soon.
We were cautious in making new commitments to Brazil and reduced our holdings
in Mexico during the six-month period for reasons also related to economic and
political reform. Though we believe Brazil's long-term prospects are extremely
bright, the country faces delays in needed administrative reforms and other
short-term economic obstacles. Legislative reform allowing President Cardoso to
run for reelection has not yet provided hoped-for momentum to administrative
reforms. Brazil faces additional challenges, including a fiscal deficit and a
widening trade deficit fed by an overexpansion of consumer credit.
In the case of Mexico, we reduced our holdings following a period of solid
performance by Mexican sovereign bonds. This reflects our concern that political
uncertainty stemming from upcoming elections could cause Mexican bonds to
underperform in the near term despite positive economic fundamentals such as
decreasing inflation, strong GDP growth, strict fiscal and monetary policies,
and government buybacks. For these reasons, we would look to add Mexico on
weakness.
Elsewhere, we closed out our holdings in Ecuador and Panama for contrasting
reasons. The Ecuadorian parliament removed President Bucaram from office during
the period and replaced him with Fabion Alarcon, the head of Ecuador's
parliament. We are concerned that Interim President Alarcon may lack the support
and authority to execute the austerity measures needed to solve the country's
fiscal problems. By contrast, we remain optimistic about Panama's economic
outlook but took profits after a period of superior performance. We will look
for opportunities to add Panama sovereign bonds to the Fund's portfolio when
valuations there are once again attractive.
Our Outlook
We continue to believe that improving credit fundamentals will provide a
strong foundation for the performance of Latin American debt. A favorable global
interest rate environment coupled with strong demand for dollar assets will
continue to support emerging market fixed income assets. The adherence to tight
fiscal policy and prudent monetary policy, the strong flow of foreign direct
investment and the active balance sheet management by emerging countries in
Latin America will result in improving creditworthiness.
Finally, the discount to net asset value at which the Fund trades on the NYSE
is discussed in detail at each Board meeting. We are continually reviewing
4
<PAGE>
discount-closing alternatives in the market and will continue to do so. Although
many funds have tried to close their discounts by implementing one or more of
these techniques, as of this date we have not seen one, other than open ending
the Fund, that has lowered the discount for a sustained period of time. The
Board at this time has opted not to implement any of these techniques and has
decided that the investment objective of this Fund and current portfolio
composition, which includes relatively illiquid investments, are best served in
a closed-end fund format. The Board is pleased with the performance of the Fund
on both a price and NAV basis over the past year. Also, we have made great
efforts to convey this performance to the brokerage community and analysts who
follow closed-end funds.
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>
SCUDDER LATIN AMERICA DOLLAR INCOME FUND, INC.
INVESTMENT SUMMARY AS OF APRIL 30, 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 3.43% -- 1.11% -- .66% --
FISCAL YEAR
TO DATE 17.82% -- 14.09% -- 11.70% --
ONE YEAR 31.52% 31.52% 41.83% 41.83% 29.42% 29.42%
THREE YEAR 59.70% 16.89% 84.40% 22.63% 76.70% 20.85%
LIFE OF FUND* 79.19% 13.06% 111.74% 17.11% 99.97% 15.71%
- -----------------------------------------------------------------
PER SHARE INFORMATION AND RETURNS (a)
YEARLY PERIODS ENDED APRIL 30
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... $14.05 $13.21 $10.65 $13.26 $16.07
INCOME DIVIDENDS.. $ .87 $ 1.53 $ 1.53 $ 1.50 $ 1.50
CAPITAL GAINS
DISTRIBUTIONS..... $ .08 $ .34 $ .15 -- .80
TOTAL RETURN (%).. 8.27% 6.06% -7.56% 40.65% 41.83%
(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 April 30, 1997
================================================================================
INVESTMENT ALLOCATION
(Excludes 5% Cash Equivalents)
Sovereign Bonds (1) 92%
Preferred Stock 4%
Corporate Bonds 4%
-----
100%
-----
-----
(1) Includes 75% 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 5% Cash Equivalents)
Fixed Rate Bonds 27%
Floating Rate Bonds 73%
-----
100%
-----
-----
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table
================================================================================
GEOGRAPHICAL
(Excludes 5% Cash Equivalents)
Argentina 32%
Brazil 27%
Venezuela 14%
Mexico 13%
Costa Rica 5%
Jamaica 5%
Chile 4%
-----
100%
-----
-----
7
<PAGE>
<PAGE>
<TABLE>
The Latin America Dollar Income Fund, Inc.
Investment Portfolio as of April 30, 1997
===================================================================================================================
<CAPTION>
Principal Market
Amount ($)(c) Value (U.S.$)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS -- 2.8%
UNITED STATES 2,568,000 Repurchase Agreement with Donaldson, Lufkin &
Jenrette dated 4/30/97at 5.375% to be repurchased at
$2,568,383 on 5/1/97, collateralized by a
$2,581,000 U.S. Treasury Note, 5.125%,
11/30/98 (Cost $2,568,000) ............................ 2,568,000
----------
===================================================================================================================
SHORT-TERM DEBT -- 2.2%
UNITED STATES 2,000,000 Student Loan Marketing Association Discount Note,
5/1/97 (Cost $2,000,000) .............................. 2,000,000
----------
===================================================================================================================
U.S. DOLLAR-DENOMINATED DEBT -- 87.8%
ARGENTINA -- 26.2% 357,239 Argentine Republic 10 year Floating Rate Note,
5.627%, 4/1/00 ........................................ 348,627
7,319,594 Argentine Republic, Bonos de Consolidacion de
Deudas Previsionales Pre 2 (BOCON), Variable
Rate Interest Bond, 5.5%, 4/1/01 ...................... 7,090,244
7,881,250 Argentine Republic, Floating Rate Bond, Series L,
LIBOR plus .8125%, (6.75%), 3/31/05 ................... 7,231,047
7,750,000 Argentine Republic, Discount Floating Rate Note,
Series L, 6.375%, 3/31/23 ............................. 6,403,438
4,250,000 Argentine Republic, Collateralized Par Bond, Series L,
Step-up Coupon, 5.5%, 3/31/23 ......................... 2,773,125
----------
23,846,481
----------
BRAZIL -- 25.8% 2,175,000 Federative Republic of Brazil, IDU Bond, Floating
Rate Bond, LIBOR plus .8125%, (6.5%), 1/1/01 .......... 2,133,675
7,425,000 Federative Republic of Brazil, Eligible Interest Bond,
LIBOR plus .8125%, (6.875%), 4/15/06 .................. 6,691,781
4,250,000 Federative Republic of Brazil, "New" Money Bond,
Floating Rate Bond, LIBOR plus .875%,
(6.9375%), 4/15/09 .................................... 3,607,188
8,965,209 Federative Republic of Brazil, C Bond, 4.5% with
3.5% Interest Capitalization, 4/15/14 ................. 6,791,146
5,250,000 Federative Republic of Brazil, Collateralized Discount
Bond, Floating Rate Bond, LIBOR plus .8125%,
(6.875%), 4/15/24 ..................................... 4,219,688
----------
23,443,478
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
<TABLE>
===================================================================================================================
<CAPTION>
Principal Market
Amount ($)(c) Value (U.S.$)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COSTA RICA -- 5.1% 2,000,000 Banco Central de Costa Rica Principal Bond, Series A,
6.25%, 5/21/10 ........................................ 1,660,000
3,800,000 Banco Central de Costa Rica Principal Bond, Series B,
6.25%, 5/21/15 ........................................ 3,002,000
----------
4,662,000
----------
JAMAICA -- 4.5% 4,500,000 Government of Jamaica, Refinancing Agreement,
Tranche B, Floating Rate Bond, LIBOR plus
.8125%, (6.625%), 11/15/04 ............................ 4,050,000
----------
MEXICO -- 12.6% 1,000,000 Nacional Financiera S.N.C., 9.375%, 7/15/02 .............. 980,000
1,000,000 United Mexican States, Collateralized Discount Bond,
(Detachable Oil Price Indexed Value Recovery
Rights) Floating Rate Bond, Series B, LIBOR plus
.8125%, 6.375%, 12/31/19 .............................. 885,000
5,750,000 United Mexican States, Collateralized Discount Bond,
(Detachable Oil Price Indexed Value Recovery
Rights) Floating Rate Bond, Series A, LIBOR plus
.8125%, (6.867%), 12/31/19 ............................ 5,088,750
3,250,000 United Mexican States, Collateralized Par Bond,
(Detachable Oil Price Indexed Value Recovery
Rights), Series B, 6.25%, 12/31/19 .................... 2,356,250
3,000,000 United Mexican States, Collateralized Par Bond,
(Detachable Oil Price Indexed Value Recovery
Rights) Series A, 6.25%, 12/31/19 ..................... 2,175,000
----------
11,485,000
----------
VENEZUELA -- 13.6% 1,428,571 Republic of Venezuela, Front Loaded Interest
Reduction Bond, Series A, LIBOR plus .875%
(6.75%), 3/31/07 ...................................... 1,271,429
3,809,524 Republic of Venezuela, Front Loaded Interest
Reduction Bond, Series B, LIBOR plus .875%
(6.75%), 3/31/07 ...................................... 3,390,476
8,750,000 Republic of Venezuela, Debt Conversion Bond,
Floating Rate Bond, Series DL, LIBOR plus .875%,
(6.5%), 12/18/07 ...................................... 7,732,810
----------
12,394,715
----------
TOTAL DEBT OBLIGATIONS (Cost $76,063,262) ................ 79,881,674
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
<TABLE>
The Latin America Dollar Income Fund, Inc.
Investment Portfolio (continued)
===================================================================================================================
<CAPTION>
Principal Market
Amount ($)(c) Value (U.S.$)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FOREIGN-DENOMINATED DEBT -- 3.5%
CHILE CLP 305,475,000 Citibank Time Deposit linked to Chilean Peso,
13%, 5/28/97 .......................................... 730,050
CLP 622,350,000 Citibank Time Deposit linked to Chilean Peso,
10.7%, 4/1/98 ......................................... 1,481,550
CLP 414,800,000 Citibank Time Deposit linked to Chilean Peso,
10.7%, 4/2/98 ......................................... 987,500
----------
TOTAL FOREIGN-DENOMINATED DEBT
(Cost $3,250,000) ..................................... 3,199,100
----------
- -------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS -- 3.7%
Shares
ARGENTINA 274,190 Nortel Inversora "A" (ADR) (Telecommunication
services) (b) (Cost $2,007,427) ....................... 3,402,699
----------
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $85,888,689) (a) ................................ 91,051,473
==========
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The cost of the investment portfolio for federal income tax purposes was
$85,946,054. At April 30, 1997, net unrealized appreciation for all
securities based on tax cost was $5,105,419. This consisted of aggregate
gross unrealized appreciation for all securities in which there was an
excess of market value over tax cost of $5,569,438 and aggregate gross
unrealized depreciation for all securities in which there was an excess of
tax cost over market value of $464,019.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $3,402,699 (3.5% 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 April 30, 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
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
Financial Statements
====================================================================================================
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $85,888,689) .................. $91,051,473
Cash .................................................................. 1,282
Receivables:
Investments sold ............................................... 6,338,962
Interest ....................................................... 1,268,153
Deferred organization expenses ........................................ 4,939
Other assets .......................................................... 1,807
-----------
Total assets .......................................... 98,666,616
LIABILITIES
Payables:
Investments purchased ......................................... $12,312
Accrued management fee ........................................ 97,961
Other accrued expenses ........................................ 89,222
-------
Total liabilities ............................................. 199,495
-----------
Net assets, at market value ........................................... $98,467,121
===========
NET ASSETS
Net assets consist of:
Distributions in excess of net investment income .............. $ (191,268)
Accumulated net realized gain ................................. 10,628,418
Net unrealized appreciation on investments .................... 5,162,784
Paid--in capital ............................................... 82,867,187
-----------
Net assets, at market value ........................................... $98,467,121
===========
Net asset value per share ($98,467,121/6,128,593 shares of common stock
outstanding, $.01 par value, 100,000,000 shares authorized) ... $ 16.07
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
11
<PAGE>
<TABLE>
The Latin America Dollar Income Fund, Inc.
Financial Statements (continued)
====================================================================================================
- ----------------------------------------------------------------------------------------------------
<CAPTION>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest ................................................. $ 5,506,098
Dividends ................................................ 195,744
-----------
5,701,842
Expenses:
Management fee ................................... $ 590,823
Directors' fees and expenses ..................... 26,762
Custodian and accounting fees .................... 74,558
Reports to shareholders .......................... 17,886
Auditing and tax services ........................ 43,500
Legal ............................................ 23,331
Amortization of organization expenses ............ 9,917
Services to shareholders ......................... 16,207
Interest ......................................... 499,114
Exchange listing fee ............................. 8,207
Other ............................................ 5,736 1,316,041
----------- -----------
Net investment income .................................... 4,385,801
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investments ...................................... 10,409,999
Foreign currency related transactions ............ (12,374) 10,397,625
-----------
Net unrealized appreciation (depreciation) on:
Investments ...................................... (2,523,522)
Foreign currency related transactions ............ 54,556 (2,468,966)
----------- -----------
Net gain on investment transactions ...................... 7,928,659
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............. $12,314,460
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
12
<PAGE>
<TABLE>
================================================================================================================
- ----------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, OCTOBER 31,
INCREASE (DECREASE) IN NET ASSETS 1997 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ............................................... $ 4,385,801 $ 9,575,823
Net realized gain (loss) from investment transactions ............... 10,397,625 17,490,571
Net unrealized appreciation (depreciation) on investment transactions
during the period ........................................... (2,468,966) 8,596,607
------------ ------------
Net increase (decrease) in net assets resulting from operations ............. 12,314,460 35,663,001
------------ ------------
Dividends to shareholders:
From net investment income .......................................... (4,569,370) (9,050,902)
------------ ------------
From net realized gains from investment transactions ................ (4,856,779) --
------------ ------------
Fund share transactions:
Reinvestment of dividends ........................................... 830,204 803,441
------------ ------------
Net increase in net assets from Fund share transactions ..................... 830,204 803,441
------------ ------------
INCREASE (DECREASE) IN NET ASSETS ........................................... 3,718,515 27,415,540
Net assets at beginning of period ........................................... 94,748,606 67,333,066
------------ ------------
NET ASSETS AT END OF PERIOD (including distributions in excess of
net investment income of $191,268 and $7,699, respectively) .......... $ 98,467,121 $ 94,748,606
============ ============
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 .......... 57,619 60,587
------------ ------------
Shares outstanding at end of period ......................................... 6,128,593 6,070,974
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
13
<PAGE>
<TABLE>
The Latin America Dollar Income Fund, Inc.
Financial Statements (continued)
====================================================================================================
- ----------------------------------------------------------------------------------------------------
<CAPTION>
STATEMENT OF CASH FLOWS
SIX MONTHS ENDED APRIL 30, 1997
- ----------------------------------------------------------------------------------------------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Investment income received ..................................................... $ 5,188,794
Payment of operating expenses .................................................. (1,563,750)
Proceeds from sales and maturities of investments .............................. 207,837,187
Purchases of investments ....................................................... (185,883,969)
Net maturities of short--term investments ....................................... 2,896,568
-------------
Cash provided by operating activities .................................. 28,474,830
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease of loan principal ................................................. (19,900,000)
Distributions paid (net of reinvestment of dividends) .......................... (8,595,945)
-------------
Cash used by financing activities ...................................... (28,495,945)
-------------
Decrease in cash ....................................................... (21,115)
Cash at beginning of period ............................................ 22,397
-------------
Cash at end of period .................................................. $ 1,282
=============
Reconciliation of net increase in net assets from operations to cash provided by
operating activities:
Net increase in net assets resulting from operations ........................... 12,314,460
Amortization of organization costs ............................................. 9,917
Net decrease in cost of investments ............................................ 16,668,767
Net decrease in unrealized appreciation on investments ......................... 2,523,522
Decrease in interest receivable ................................................ 651,415
Increase in receivable for investments sold .................................... (1,081,717)
Increase in other assets ....................................................... (1,807)
Decrease in payable for investments purchased .................................. (2,357,079)
Decrease in accrued expenses ................................................... (36,061)
Decrease in interest payable ................................................... (216,587)
-------------
Cash provided by operating activities .................................. $ 28,474,830
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
14
<PAGE>
Financial Highlights
================================================================================
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------
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,
1997 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <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 $13.83(b)
------ ------ ------ ------ ------ ------
Net investment income .................... .72 1.59 1.55 1.51 1.53 .25
Net realized and unrealized gain (loss)
on investment transactions ............. 1.29 4.32 (2.08) (2.45) 2.74 (.50)
------ ------ ------ ------ ------ ------
Total from investment operations ........... 2.01 5.91 (.53) (.94) 4.27 (.25)
------ ------ ------ ------ ------ ------
Less distributions:
From net investment income ............... (.75) (1.50) (1.30) (1.51) (1.49) (.13)
From net realized gains on investment
transactions ........................... (.80) -- (.15) (.33) (.01) --
In excess of net realized gains .......... -- -- -- (.03) -- --
Tax return of capital .................... -- -- (.23) -- -- --
------ ------ ------ ------ ------ ------
Total distributions ........................ (1.55) (1.50) (1.68) (1.87) (1.50) (.13)
------ ------ ------ ------ ------ ------
Net asset value, end of period ............. $16.07 $15.61 $11.20 $13.41 $16.22 $13.45
====== ====== ====== ====== ====== ======
Market value, end of period ................ $14.75 $13.88 $12.13 $13.25 $15.63 $15.00
====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN
Per share market value (%) ............... 17.82** 27.93 5.78 (3.52) 15.47 .88**
Per share net asset value (%) (c) ........ 14.09** 55.81 (3.46) (5.94) 33.69 (1.89)**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ... 98 95 67 79 95 77
Ratio of operating expenses (excluding
interest) to average net assets (%) .... 1.67* 1.79 1.96 1.83 2.00 2.05*
Ratio of operating expenses to average net
assets (%) ............................. 2.69* 3.28 3.66 3.41 3.42 2.36*
Ratio of net investment income to average
net assets (%) ......................... 8.98* 11.66 13.59 10.42 10.71 7.14*
Portfolio turnover rate (%) .............. 347.2*(d) 322.3(d) 365.9(d) 161.1 93.3 1.8*
</TABLE>
(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
- --------------------------------------------------------------------------------
15
<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.
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.
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.
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
16
<PAGE>
================================================================================
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,
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. Accretion for the six months ended April 30, 1997
was approximately $1,164,463.
B. PURCHASES AND SALES OF SECURITIES
---------------------------------
During the six months ended April 30, 1997, purchases and sales of investment
securities (excluding short-term investments) aggregated $183,526,890 and
$208,918,904, 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 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, 1997, the fee pursuant to such agreement
amounted to $590,823, of which $97,961 is unpaid at April 30, 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 six months
ended April 30, 1997, Directors' fees and expenses aggregated $26,762.
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 six months
ended April 30, 1997, the amount charged to the Fund by SFAC aggregated $45,416,
of which $7,471 is unpaid at April 30, 1997.
D. BORROWINGS
----------
During the six months ended April 30, 1997, the Fund repaid loans aggregating
$19,900,000.
The weighted average outstanding daily balance of bank loans and reverse
repurchase agreements for the six months ended April 30, 1997 was $16,022,403
with a weighted average interest rate of 6.12%. The maximum borrowings
outstanding for the six months ended April 30, 1997 was $26,100,000. Interest
expense for the six months ended April 30, 1997 was $499,114 ($.08 per share).
Interest paid for the six months ended April 30, 1997 was $715,701.
17
<PAGE>
The Latin America Dollar Income Fund, Inc.
Notes to Financial Statements (continued)
================================================================================
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.
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, 1997, 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, 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.
PRICE WATERHOUSE LLP
Boston, Massachusetts
June 18, 1997
19
<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 Boston EquiServe L.P., P.O. Box 8200, Boston, MA 02266-8200, 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.
20
