<PAGE>
GLOBAL HIGH INCOME DOLLAR FUND INC. ANNUAL REPORT
December 15, 1997
Dear Stockholder,
We are pleased to present you with the Annual Report for Global High Income
Dollar Fund Inc. for the year ended October 31, 1997. Although the second half
of the fiscal year was volatile for emerging markets, the Fund held its ground
due to its conservative stance.
GENERAL MARKET OVERVIEW
Emerging market debt outperformed developed bond markets during the Fund's
fiscal year. The JP Morgan Emerging Market Bond Index Plus (which includes
Russian debt) returned 10.82% for the period. In comparison, foreign government
bonds in developed markets, as measured by the Salomon Brothers World Government
Bond Index, advanced 10.33% on a currency-hedged basis (2.61% on an
unhedged-basis) and U.S. government bonds, as measured by the Lehman Brothers
U.S. Government Bond Index, returned 8.59%.
Global economies clearly operated at different phases of the business cycle
during the year. Domestic consumption and investment grew strongly in the United
States, and a moderate, export-led recovery evolved in Europe. On the other
hand, Japan's first quarter recovery was exhausted by tax measures introduced in
April.
On the inflation front, growth in the United States and Europe surprisingly
engendered no inflationary pressures, translating into a positive environment
for bond performance in these markets. The overall weakness of the Japanese yen
exerted a strong disinflationary effect globally. The impact of currency
devaluations in Southeast Asia and Korea has not yet had an impact on economic
activity and should deepen and prolong global disinflationary trends.
- --------------------------------------------------------------------------------
GLOBAL HIGH INCOME DOLLAR FUND INC.
FUND PROFILE
o Goal: Primarily, to achieve a high level of current income; secondarily to
seek capital appreciation, to the extent consistent with its primary objective
o Portfolio Manager/Adviser: Stuart Waugh, MH Asset Management Inc.
o Total Net Assets: $344.6 million as of October 31, 1997
o Dividend Payments: Monthly
- --------------------------------------------------------------------------------
Performance Comparisons Over the Last 12 Months as of October 31, 1997
JP Morgan Emerging Market Bond Index Plus 10.82%
SB World Government Bond Index (Hedged) 10.33%
SB World Government Bond Index (Unhedged) 2.61%
Lehman Brothers U.S. Government Bond Index 8.59%
- --------------------------------------------------------------------------------
PORTFOLIO REVIEW
Performance--As of October 31, 1997, the Fund's net asset value per share was
$15.16, and its share price on the New York Stock Exchange was $12.81. The
Fund's total return was 9.59% for the 12 months ended October 31, 1997, based on
the Fund's common stock net asset value change and, for illustrative purposes
only, assuming dividends were reinvested at the net asset value on the payable
dates. The Fund's total return for the same time period was 11.47%, based on the
Fund's New York Stock Exchange share price assuming dividends were reinvested
under the Fund's Dividend Reinvestment Plan. In comparison, the JP Morgan
Emerging Market Bond Index Plus (which includes Russian debt) returned 10.82%
for the same period.
During the fiscal year ended October 31, 1997, the Fund paid dividends from
net investment income to common shareholders totaling $1.27 per share of common
stock. The Fund has paid a monthly dividend of $0.1060 per share of common stock
since March 1995.
Strategy--Our strategy during the fiscal year has been to:
o Reduce cash balances by
1
<PAGE>
ANNUAL REPORT
- --------------------------------------------------------------------------------
GLOBAL HIGH INCOME DOLLAR FUND INC.
ASSET ALLOCATION
(as a % of net assets as of October 31, 1997)*
U.S. Dollar Denominated Sovereign Debt 60.4%
U.S. Dollar Denominated Corporate Debt 17.2%
Foreign Currency Debt 6.5%
Cash & Cash Equivalents (including 15.9%
other assets net of liabilities)
*Allocations are subject to change.
- --------------------------------------------------------------------------------
GLOBAL HIGH INCOME DOLLAR FUND INC.
TOP FIVE COUNTRIES
(% of net assets as of October 31, 1997)*
Mexico 24.5%
Poland 10.0%
Brazil 9.5%
Russia 5.5%
Venezuela 5.0%
* Allocations are subject to change.
- --------------------------------------------------------------------------------
investing in attractive new issues or in Brady bonds on market corrections.
o Diversify by broadly investing in issuers not included in the JP Morgan
EMBI+. By diversifying in this way, we have avoided the 49.7% weighting held
by the Index in Brazil and Argentine sovereign debt as of October 31, 1997.
o Overweight sovereign issuers of countries, where we believed improving
macro-economic fundamentals would lead to improvement in creditworthiness.
Generally, the Fund's allocation among markets remained substantially
unchanged for most of the year. We maintained overweighted positions in
Bulgaria, Mexico and Poland--countries which should be facing only moderate
financing needs over the next several years and whose governments are
implementing responsible fiscal reform.
In the case of Mexico, the Fund's largest holding at 24.5% of net assets as
of October 31, 1997, we are monitoring closely the extent of cooperation on
economic policy between the opposition-dominated lower house of Congress and the
government. If the opposing parties are able to reach consensus on responsible
spending and tax policies over the next two budgets, the probability of a credit
upgrade by the ratings agencies will be substantially enhanced. Failure to do so
will compound Mexico's current problems--for example, weakness of the banking
system, corruption--and make it difficult for the Mexican market to perform
well.
We remain underweighted in Argentine (4.3% of net assets as of October 31,
1997), Brazilian (9.5% of net assets) and Russian (5.5% of net assets) debt
versus the Index. In the case of Argentina and Brazil, this derives primarily
from the fact that these countries make up large percentages of the Index. We
have also mentioned before that we are concerned over the fate of economic
reform measures through the Brazil Congress. Encouragingly, the threat of a
financial crisis brought about by Asia's problems finally helped the government
pass its administrative reform legislation through the lower house of Congress.
This reform should enhance the government's chances to lower its budget deficit
over the medium term and, in turn, lower the rate of growth of its internal
debt. Brazil's current challenge is to continue fiscal reform while it
concurrently lowers crushingly high real interest rates without causing a
currency crisis.
In October, we raised roughly 10% cash due to sales of particular securities
that had reached our price targets and, in our view, presented little upside
potential on a risk/return basis. This cash balance lessened the impact the
recent sell-off in emerging market debt had on the Fund's net asset value.
OUTLOOK
While the current Asian crisis is being compared to Mexico's currency crisis
in 1994, we believe the situations are very different. The International
Monetary Fund (IMF) played a critical role in stabilizing Mexico's economy in
1994, and the effort was successful partly because Mexico only faced a liquidity
crisis--not a solvency crisis. NAFTA (North American Free Trade Agreement)
provided a framework that encouraged a
2
<PAGE>
GLOBAL HIGH INCOME DOLLAR FUND INC. ANNUAL REPORT
steady flow of direct foreign investment. Additionally, U.S. economic growth in
the period after the crisis was substantial enough to generate a strong
export-led recovery in Mexico. Thus, despite market fears of a "tequila effect,"
the economic impact of the crisis was limited.
The Asian crisis is of a much larger scale; to date, three countries have
sought IMF emergency loans and possibly several more countries may need
assistance. More important, we do not perceive the growth prospects of any of
the region's economies to be capable of providing an engine of growth that is
sufficient enough to pull the Asian economies up from their downward spirals.
The economies of Japan and China, whose markets are large enough to provide
export markets for the other Asian economies, are not growing either.
Mexico's crisis did not strain IMF funding. During the crisis, the IMF
committed $18 billion in loans to Mexico, and the United States and other
developed nations supplemented this amount with $24 billion in commitments. In
comparison, since the Asian crisis began, the IMF has committed $35 billion to
Thailand, Indonesia and Korea, bringing total commitments to these three
countries from developed nations to roughly $106 billion.
Presently, we estimate the IMF has about $32 billion in hard currency assets
available for further loans. While this amount can be supplemented by $25
billion in credit available from developed countries under its General
Arrangement to Borrow, the IMF's resources are not infinite. What's more,
neither is the political will of developed countries to continue rescuing
emerging market countries that are facing liquidity problems.
In these evolving circumstances, emerging market countries must unilaterally
take steps to improve creditworthiness to avoid financial crisis. In particular,
measures need to be taken to recapitalize banking sectors in most emerging
markets. Going forward, our strategy will be to continue focusing on those
countries with improving credit fundamentals and identifying attractive
valuations.
For a quarterly Fund Profile on Global High Income Dollar Fund Inc. or
another fund in the PaineWebber Family of Funds, contact your Investment
Executive.
Our ultimate objective in managing your investments is to help you
successfully meet your financial goals. We thank you for your continued support,
and welcome any comments or questions you may have.
Sincerely,
/s/ Margo N. Alexander /s/ Stuart Waugh
- ----------------------------- -----------------------
MARGO N. ALEXANDER STUART WAUGH
President, Vice President and Portfolio
Mitchell Hutchins Asset Management Inc. Manager Global High Income Dollar
Fund Inc.
This letter is intended to assist stockholders in understanding how the Fund
performed during the 12 months ended October 31, 1997 and reflects our views at
the time we are writing this report. Of course, these views may change in
response to changing circumstances. We encourage you to consult your investment
executive regarding your personal investment program.
3
<PAGE>
GLOBAL HIGH INCOME DOLLAR FUND INC.
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1997
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000)* Dates Rates Value
- --------- -------------------- ---------------- ------------
<S> <C> <C> <C>
Long-Term Debt Securities--82.21%
Argentina--4.28%
US$ 7,435 Republic of Argentina(4) .......................................... 01/30/17 11.375% $ 7,323,475
US$ 278 Republic of Argentina ............................................. 03/31/05 6.688+ 241,373
US$ 4,033 Republic of Argentina, DISC ....................................... 03/31/23 6.875+ 3,105,410
5,000 Republic of Argentina ............................................. 02/12/07 11.750 4,102,482
------------
14,772,740
------------
Brazil--9.46%
US$ 6,000 Celulose Nipo-Brasileira, S.A. .................................... 12/21/03 9.375 5,640,000
US$ 3,000 Companhia Brasileira de Petroleos Ipiranga(5) ..................... 02/25/02 10.625++ 2,670,000
US$ 7,000 Federal Republic of Brazil, DISC .................................. 04/15/24 6.875+ 5,320,000
US$ 17,000 Federal Republic of Brazil, EXIT .................................. 09/15/13 6.000 12,325,000
US$ 4,000 Metalurgica Gerdau, S.A. .......................................... 11/23/01 to 05/24/04 10.250 to 11.125 3,845,000
US$ 3,000 Tevecap, S.A. ..................................................... 11/26/04 12.625 2,820,000
------------
32,620,000
------------
Bulgaria--4.32%
US$ 8,110 Republic of Bulgaria, IAB ......................................... 07/28/11 6.688+ 5,271,500
US$ 18,000 Republic of Bulgaria, FLIRB(4) 07/28/12 2.250++ 9,630,000
------------
14,901,500
------------
Chile--1.86%
US$ 3,000 Banco del Estado Chile, S.A. ...................................... 08/01/01 8.390 3,132,000
US$ 3,250 Empresa Nacional de Electricidad, S.A. ............................ 02/01/37 7.325 3,260,566
------------
6,392,566
------------
Hungary--2.03%
1,376,600 Government of Hungary ............................................. 01/12/99 to 04/12/99 16.500 to 19.500 6,995,101
------------
Jamaica--1.05%
US$ 2,859 Government of Jamaica Loan Participation
Tranche A (JP Morgan)(1)(5) .................................. 10/16/00 6.563+ 2,658,701
US$ 1,000 Government of Jamaica ............................................. 07/02/02 9.625 960,000
------------
3,618,701
------------
Kazakhstan--1.76%
US$ 6,500 Republic of Kazakhstan ............................................ 12/20/99 to 10/02/02 8.375 to 9.250 6,055,000
------------
Mexico--24.53%
US$ 1,000 Altos Hornos de Mexico ............................................ 04/30/04 11.875 1,050,000
US$ 4,000 Coca Cola Femsa, S.A. de C.V. ..................................... 11/01/06 8.950 3,980,000
US$ 3,485 Copamex Industrias, S.A. .......................................... 04/30/04 11.375 3,781,225
US$ 3,000 Grupo Industrial Durango, S.A. de C.V. ........................... 07/15/01 12.000 3,157,500
US$ 5,700 Grupo Televisa, S.A. de C.V. ...................................... 05/15/08 0/13.250@ 4,132,500
US$ 3,300 Hysla ............................................................. 09/15/07 9.250 3,201,000
US$ 9,375 Mexican Multi Year Refinance Loan Participation
(Salomon Brothers)(1)(5) ........................................... 03/20/05 6.625+ 8,343,750
US$ 9,500 Petroleos Mexicanos ............................................... 12/01/23 8.625 7,908,750
US$ 45,650 United Mexican States, DISC(2) .................................... 12/31/19 6.693 to 6.836+ 40,856,750
US$ 7,568 United Mexican States(4) .......................................... 05/15/26 11.500 8,135,600
------------
84,547,075
------------
Morocco--3.72%
US$ 5,000 Kingdom of Morocco Loan Participation,
Tranche A (Chase Manhattan Bank)(1)(5) ....................... 01/01/09 6.813+ 4,075,000
US$ 10,745 Kingdom of Morocco Loan Participation,
Tranche A (Morgan Guaranty Trust)(1)(5) ...................... 01/01/09 6.813+ 8,757,175
------------
12,832,175
------------
</TABLE>
4
<PAGE>
GLOBAL HIGH INCOME DOLLAR FUND INC.
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000)* Dates Rates Value
- --------- -------------------- ---------------- ------------
<S> <C> <C> <C>
Long-Term Debt Securities--(concluded)
Panama--2.82%
US$ 5,839 Republic of Panama ................................................ 09/30/27 8.875% $ 4,963,150
US$ 6,594 Republic of Panama, PDI ........................................... 07/17/16 6.688+ 4,747,806
------------
9,710,956
------------
Philippines--1.25%
US$ 5,000 Republic of Philippines, DCB ...................................... 12/01/09 6.813+ 4,300,000
------------
Poland--9.97%
43,640 Republic of Poland(5) ............................................. 10/12/01 to 02/12/03 12.000 9,341,116
US$ 30,600 Republic of Poland, PDI ........................................... 10/27/14 4.000++ 25,015,500
------------
34,356,616
------------
Romania--0.83%
US$ 3,000 National Bank of Romania .......................................... 06/25/99 9.750 2,845,000
------------
Russia--5.53%
US$ 3,000 City of St. Petersburg ............................................ 06/18/02 9.500 2,700,000
US$ 4,600 Russian IAN# ...................................................... 12/02/15 6.719 3,082,000
US$ 13,000 Russian Principal Loan (Chase Manhattan Bank)(1)(5)# .............. 12/15/20 6.719 7,670,000
US$ 9,500 Russian Principal Loan (Morgan Guaranty Trust)(1)(5)# ............. 12/15/20 6.719 5,605,000
------------
19,057,000
------------
Trinidad & Tobago--2.86%
US$ 9,000 Republic of Trinidad and Tobago ................................... 11/03/00 to 10/03/04 9.750 to 11.750 9,840,000
------------
Tunisia--0.96%
US$ 3,500 Banque Centrale de Tunisie ........................................ 09/19/07 7.500 3,307,500
------------
Venezuela--4.98%
US$ 8,175 Republic of Venezuela, PAR(3)(4) .................................. 03/31/20 6.750 6,764,813
US$ 3,250 Republic of Venezuela, DCB(4) ..................................... 12/18/07 6.750+ 2,811,250
US$ 9,010 Republic of Venezuela ............................................. 09/15/27 9.250 7,568,400
------------
17,144,463
------------
Total Long-Term Debt Securities (cost - $264,610,078) .......................... 283,296,393
------------
Short-Term Debt Securities--1.76%
Indonesia--0.16%
2,000,000 Bank Tambungan Negara(5) ........................................... 01/23/98 17.000 546,463
------------
Hungary--0.45%
300,000 Government of Hungary .............................................. 05/17/98 23.500 1,567,816
------------
United States--1.15%
4,000 U.S. Treasury Bills ................................................ 01/22/98 5.165(6) 3,954,640
------------
Total Short-Term Debt Securities (cost - $6,688,062) ........................... 6,068,919
------------
<CAPTION>
Number of
Contracts
(000)
- ---------
<S> <C>
Put Option--0.08%
10,000 Argentina Peso: $10,000,000
price 1.015; expiring 04/28/98 (Cost - $150,000) ................... 275,000
------------
</TABLE>
5
<PAGE>
GLOBAL HIGH INCOME DOLLAR FUND INC.
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000)* Dates Rates Value
- --------- -------------------- ---------------- ------------
<S> <C> <C> <C>
Repurchase Agreements--15.29%
$17,561 Repurchase agreement dated 10/31/97 with Dresdner Securities,
Inc., collateralized by $17,422,000 U.S. Treasury Notes,
6.250% due 02/28/02; proceeds: $17,569,312 ...................... 11/03/97 5.680% $ 17,561,000
17,559 Repurchase agreement dated 10/31/97 with Salomon Brothers,
Inc., collateralized by $17,369,000 U.S. Treasury Notes,
6.625% due 04/30/02; proceeds: $17,567,238 ...................... 11/03/97 5.630 17,559,000
17,559 Repurchase agreement dated 10/31/97 with First Chicago National
Bank, Inc., collateralized by $17,435,000 U.S. Treasury Notes,
6.125 to 7.125% due 10/15/98 to 12/31/01; proceeds: $17,567,297 . 11/03/97 5.670 17,559,000
------------
Total Repurchase Agreements (cost - $52,679,000)................................ 52,679,000
------------
Investments of Cash Collateral for
Securities Loaned--10.75%
Repurchase Agreement--4.33%
14,939 Repurchase agreement dated 10/31/97 with Union Bank of
Switzerland, collateralized by $15,510,000 U.S Treasury Bonds,
6.000% due 02/15/26; proceeds: $14,946,071 (cost - $14,939,000) . 11/03/97 5.680 14,939,000
------------
</TABLE>
<TABLE>
<CAPTION>
Number of
Shares
- ---------
<S> <C>
Money Market Funds--6.42%
18,468,575 Liquid Assets Portfolio ............................................ 18,468,575
56,100 Prime Portfolio .................................................... 56,100
33,361 TempFund Portfolio ................................................ 33,361
3,569,191 TempCash Portfolio ................................................. 3,569,191
------------
Total Money Market Funds (cost - $22,127,227) .................................. 22,127,227
Total Investments of Cash Collateral for Securities Loaned (cost - $37,066,227) 37,066,227
------------
Total Investments (cost - $361,193,367) - 110.09% ............................. 379,385,539
Liabilities in excess of other assets - (10.09%) ............................... (34,773,763)
------------
Net Assets - 100.00% ........................................................... 344,611,776
------------
</TABLE>
- ---------------------
Note: The Portfolio of Investments is listed by the issuer's country of origin
* In local currency unless otherwise indicated
@ Current coupon rate is 0% on step coupon rate instrument, subsequent to
5/15/01 will change to 13.250%
+ Reflects rate at October 31, 1997 on variable rate instruments
++ Reflects rate at October 31, 1997 on step coupon rate instruments
# Purchased on a when issued basis
(1) Participation interest was acquired through the financial institution
indicated parenthetically
(2) With an additional 70,229,000 recoverable rights attached maturing on
06/30/03 with no market value
(3) With an additional 40,875 warrants attached maturing on 04/15/20 with no
market value
(4) Security, or portion thereof, was on loan at October 31, 1997
(5) Illiquid securities represent 14.41% of net assets
(6) Yield to Maturity
DCB Debt Conversion Bond
DISC Discount Bond
EXIT Investment Bond
FLIRB Front-loaded Interest Reduction Bond
IAB Interest Arrears Bond
IAN Interest Accrual Note
PAR Par Bond
PDI Past Due Interest Bond
6
<PAGE>
Foreign Currency Contracts
<TABLE>
<CAPTION>
Unrealized
Contract to Appreciation
Deliver In Exchange for Maturity Dates (Depreciation)
-------------- ------------------ -------------- -------------
<S> <C> <C> <C> <C>
Indonesian Rupiah ........................ 14,500,000,000 US$ 5,657,433 04/06/98 $ 1,635,241
Polish Zloty ............................. 22,730,000 US$ 5,957,748 03/02/98 (564,490)
U.S. Dollars ............................. 6,189,919 PLN 22,730,000 03/02/98 332,319
U.S. Dollars ............................. 5,650,819 IDR 14,500,000,000 04/06/98 (1,628,627)
------------
$ (225,557)
=============
</TABLE>
- ---------------------
Currency Type Abbreviations:
IDR-Indonesian Rupiah
PLN-Polish Zloty
Investments by Type of Issuer
<TABLE>
<CAPTION>
Percentage of Net Assets
----------- ---------------
Long-term Short-term
---------- ----------
<S> <C> <C>
Government and other public issuers ................................................... 66.33% 1.68%
Repurchase agreements ................................................................. -- 15.29
Collateral for Securities Loaned ...................................................... -- 10.75
Industrial ............................................................................ 5.50 --
Oil/Gas ............................................................................... 3.07 --
Banks ................................................................................. 2.69 0.16
Paper ................................................................................. 2.55 --
Steel ................................................................................. 1.12 --
Utilities - Electric & Water .......................................................... 0.95 --
---------- ----------
82.21% 27.88%
========== ==========
</TABLE>
See accompanying notes to financial statements
7
<PAGE>
GLOBAL HIGH INCOME DOLLAR FUND INC.
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1997
<TABLE>
<S> <C>
Assets
Investments in securities, at value (cost - $271,448,140) ..................... $289,640,312
Repurchase agreements (cost - $52,679,000) .................................... 52,679,000
Investment of Cash Collateral for Securities Loaned (cost - $37,066,227) ...... 37,066,227
Cash .......................................................................... 2,892,763
Receivable for investments and foreign currency sold .......................... 27,640,557
Interest receivable ........................................................... 6,879,798
Unrealized appreciation on forward foreign currency contracts ................. 1,967,560
Deferred organizational expenses .............................................. 24,933
Other assets .................................................................. 3,869
------------
Total assets .................................................................. 418,795,019
------------
Liabilities
Collateral for securities loaned .............................................. 37,066,227
Payable for investments and foreign currency purchased ........................ 34,273,897
Unrealized depreciation on forward currency contracts ......................... 2,193,117
Due to affiliate .............................................................. 404,054
Accrued expenses and other liabilities ........................................ 245,948
------------
Total liabilities ............................................................. 74,183,243
------------
Net Assets
Capital stock - $0.001 par value; total authorized shares - 100,000,000;
22,736,667 shares issued and outstanding .................................... 331,328,209
Distributions in excess of net investment income .............................. (734)
Accumulated net realized losses from investment transactions .................. (4,656,811)
Net unrealized appreciation of investments, other assets, liabilities
and forward contracts denominated in foreign currencies ..................... 17,941,112
------------
Net assets .................................................................... $344,611,776
============
------------
Net asset value per share ..................................................... $15.16
======
</TABLE>
See accompanying notes to financial statements
8
<PAGE>
GLOBAL HIGH INCOME DOLLAR FUND INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Year
Ended
October 31, 1997
----------------
<S> <C>
Investment income:
Interest (net of foreign withholding taxes) ............................................... $ 34,864,034
------------
Expenses:
Investment advisory and administration .................................................... 4,508,193
Custody and accounting .................................................................... 289,054
Reports and notices to shareholders ....................................................... 133,605
Legal and audit ........................................................................... 85,470
Transfer agency fees ...................................................................... 41,144
Amortization of organizational expenses ................................................... 27,812
Directors' fees ........................................................................... 12,250
Other expenses ............................................................................ 32,690
------------
5,130,218
------------
Net investment income ..................................................................... 29,733,816
------------
Realized and unrealized gains (losses) from investment activities:
Net realized gains (losses) from:
Investment transactions ................................................................ 23,969,822
Foreign currency transactions .......................................................... (5,045,492)
Net change in unrealized appreciation/depreciation of:
Investments ............................................................................ (15,723,541)
Other assets, liabilities and forward contracts denominated in foreign currencies ...... (311,768)
------------
Net realized and unrealized gains from investment activities .............................. 2,889,021
------------
Net increase in net assets resulting from operations ...................................... $ 32,622,837
============
</TABLE>
See accompanying notes to financial statements
9
<PAGE>
GLOBAL HIGH INCOME DOLLAR FUND INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Years Ended
October 31,
----------------------------------
1997 1996
------------- -------------
<S> <C> <C>
From operations:
Net investment income .............................................................. $ 29,733,816 $ 29,631,958
Net realized gains from investment transactions .................................... 23,969,822 6,972,906
Net realized losses from foreign currency transactions ............................. (5,045,492) (590,711)
Net change in unrealized appreciation/depreciation of:
Investments ..................................................................... (15,723,541) 36,371,633
Other assets, liabilities and forward contracts denominated in foreign currencies (311,768) 357,946
------------- -------------
Net increase in net assets resulting from operations ............................... 32,622,837 72,743,732
------------- -------------
Dividends and distributions to stockholders:
From net investment income ......................................................... (24,688,136) (28,921,040)
In excess of net investment income ................................................. (4,232,904) --
------------- -------------
Total dividends and distributions to stockholders .................................. (28,921,040) (28,921,040)
------------- -------------
Net increase in net assets ......................................................... 3,701,797 43,822,692
Net Assets:
Beginning of year .................................................................. 340,909,979 297,087,287
------------- -------------
End of year ........................................................................ $ 344,611,776 $ 340,909,979
============= =============
</TABLE>
See accompanying notes to financial statements
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Global High Income Dollar Fund Inc. (the "Fund") was incorporated in the
State of Maryland on February 23, 1993 and is registered with the Securities and
Exchange Commission as a closed-end, non-diversified management investment
company. Organizational costs have been deferred and are being amortized using
the straight line method over a period not to exceed 60 months from the date the
Fund commenced operations.
The preparation of financial statements in accordance with generally accepted
accounting principles requires Fund management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies:
Valuation of Investments--Securities which are listed on stock exchanges are
valued at the last sale price on the day the securities are being valued or,
lacking any sales on such day, at the last available bid price. In cases where
securities are traded on more than one exchange, the securities are generally
valued on the exchange designated as the primary market by Mitchell Hutchins
Asset Management Inc. ("Mitchell Hutchins"), a wholly owned asset management
subsidiary of PaineWebber Incorporated ("PaineWebber") and investment adviser
and administrator of the Fund. Securities traded in the over-the-counter ("OTC")
market and listed on The Nasdaq Stock Market, Inc. ("Nasdaq") are valued at the
last available sales price, or last bid price available if no sales occur on
Nasdaq prior to the time of valuation; other OTC securities are valued at the
last bid price available in the OTC market prior to the time of valuation (other
than short-term investments that mature in 60 days or less). The amortized cost
method of valuation is used to value short-term debt instruments with sixty days
or less remaining to maturity. Securities and assets for which market quotations
are not readily available (including restricted and/or illiquid securities
subject to limitations as to their sale) are valued at fair value as determined
in good faith by a management committee under the direction of the Fund's board
of directors. All investments quoted in foreign currencies will be valued weekly
in U.S. dollars on the basis of foreign currency exchange rates prevailing at
the time such valuation is determined by the Fund's custodian.
Foreign currency exchange rates are generally determined prior to the close
of regular trading on the New York Stock Exchange ("NYSE"). Occasionally events
affecting the value of foreign investments and such exchange rates occur between
the time at which they are determined and the close of the NYSE, which will not
be reflected in the computation of the Fund's net asset value on that day. If
events materially affecting the value of such securities or currency exchange
rates occurred during such time period, the securities will be valued at their
fair value as determined in good faith by or under the direction of the Fund's
board of directors.
Repurchase Agreements--The Fund's custodian takes possession of the
collateral pledged for investments in repurchase agreements. The underlying
collateral is valued daily on a mark-to-market basis to ensure that the value,
including accrued interest, is at least equal to the repurchase price.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
In the event of default of the obligation to repurchase, the Fund has the right
to liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral may be subject to legal proceedings. The Fund occasionally
participates in joint repurchase agreement transactions with other funds managed
by Mitchell Hutchins.
Investment Transactions and Investment Income--Investment transactions are
recorded on the trade date. Realized gains and losses from investments and
foreign exchange transactions are calculated on the identified cost method.
Interest income is recorded on an accrual basis. Discounts are accreted as
adjustments to interest income and the identified cost of investments.
Foreign Currency Translation--The books and records of the Fund are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars on the following basis: (1) market value of investment securities, other
assets and liabilities--at the exchange rates prevailing at the end of the
period; and (2) purchases and sales of investment securities, income and
expenses--at the rates of exchange prevailing on the respective dates of such
transactions.
Although the net assets and the market value of the Fund's portfolio are
presented at the foreign exchange rates at the end of the period, the Fund does
not generally isolate the effect of fluctuations in foreign exchange rates from
the effect of the changes in market prices of securities. However, the Fund does
isolate the effect of fluctuations in foreign exchange rates when determining
the gain or loss upon the sale or maturity of foreign currency-denominated debt
obligations pursuant to federal income tax regulations. Certain foreign exchange
gains and losses included in realized and unrealized gains and losses are
included in or are a reduction of ordinary income in accordance with federal
income tax regulations.
Forward Foreign Currency Contracts--The Fund may enter into forward foreign
currency exchange contracts ("forward contracts") in connection with planned
purchases or sales of securities or to hedge the U.S. dollar value of portfolio
securities denominated in a particular currency. The Fund may also use forward
currency contracts to enhance income.
The Fund has no specific limitation on the percentage of assets which may be
committed to such contracts. The Fund may enter into forward contracts or
maintain a net exposure to forward contracts only if (1) the consummation of the
contracts would not obligate the Fund to deliver an amount of foreign currency
in excess of the value of the position being hedged by such contracts or (2) the
Fund maintains cash or liquid securities in a segregated account in an amount
not less than the value of its total assets committed to the consummation of the
forward contracts and not covered as provided in (1) above, as marked-to-market
daily.
Risks may arise with respect to entering into forward contracts from the
potential inability of counterparties to meet the terms of their forward
contracts and from unanticipated movements in the value of foreign currencies
relative to the U.S. dollar.
Fluctuations in the value of forward contracts are recorded for book purposes
as unrealized gains or losses by the Fund. Realized gains and losses include net
gains and losses recognized by the Fund on contracts which have matured.
Option Transactions--For hedging purposes and to enhance income, the Fund may
purchase and write (sell) put and call options on debt securities, indices of
debt securities and foreign currencies. The risk associated with purchasing an
option is that the Fund pays a premium whether or not the option is exercised.
Additionally, the Fund bears the risk of loss of premium and change in market
value should the counterparty not perform under the contract. Put and call
options
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS
purchased are accounted for in the same manner as portfolio securities. The cost
of securities acquired through the exercise of call options is increased by the
premiums paid. The proceeds from securities sold through the exercise of put
options are decreased by the premiums paid.
Dividends and Distributions--Dividends and distributions to stockholders are
recorded on the ex-dividend date. The amount of dividends and distributions are
determined in accordance with federal income tax regulations, which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification.
CONCENTRATION OF RISK
Investing in securities of foreign issuers and currency transactions may
involve certain considerations and risks not typically associated with
investments in the United States. These risks include revaluation of currencies,
adverse fluctuations in foreign currency values and possible adverse political,
social and economic developments, including those particular to a specific
industry, country or region, which could cause the securities and their markets
to be less liquid and prices more volatile than those of comparable U.S.
companies and U.S. government securities. These risks are greater with respect
to securities of issuers located in emerging market countries in which the Fund
invests. The ability of the issuers of debt securities held by the Fund to meet
their obligations may be affected by economic and political developments
particular to a specific industry, country or region.
INVESTMENT ADVISOR AND ADMINISTRATOR
The Fund's board of directors has approved an Investment Advisory and
Administration Contract ("Advisory Contract") with Mitchell Hutchins, under
which Mitchell Hutchins serves as investment adviser and administrator of the
Fund. In accordance with the Advisory Contract, the Fund pays Mitchell Hutchins
an investment advisory and administration fee, which is accrued weekly and paid
monthly, at the annual rate of 1.25% of the Fund's average weekly net assets. At
October 31, 1997, the Fund owed Mitchell Hutchins $398,830 in investment
advisory and administration fees.
SECURITY LENDING
The Fund may lend securities up to 331/3% of its total assets to qualified
institutions. The loans are secured at all times by cash or U.S. government
securities in an amount at least equal to the market value of the securities
loaned, plus accrued interest, determined on a daily basis and adjusted
accordingly. The Fund will regain record ownership of loaned securities to
exercise certain beneficial rights, however, the Fund may bear the risk of delay
in recovery of, or even loss of rights in, the securities loaned should the
borrower fail financially. The Fund receives compensation, which is included in
interest income, for lending its securities from interest earned on the cash or
U.S. government securities held as collateral, net of fee rebates paid to the
borrower plus reasonable administrative and custody fees. For the year ended
October 31, 1997, PaineWebber earned $43,227 as the Fund's lending agent. At
October 31, 1997, the Fund owed PaineWebber $5,224 for security lending.
As of October 31, 1997, the Fund's custodian held cash and/or cash
equivalents having an aggregate value of $37,066,227 as collateral for portfolio
securities loaned having a market value of $29,949,250.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at October 31,
1997, was substantially the same as the cost of securities for financial
statement purposes.
At October 31, 1997, the components of net unrealized appreciation of
investments were as follows:
<TABLE>
<S> <C>
Gross appreciation (investments having an excess of value over cost) ......... $28,500,698
Gross depreciation (investments having an excess of cost over value) ......... (10,308,526)
-----------
Net unrealized appreciation of investments .................................... $18,192,172
===========
</TABLE>
For the period ended October 31, 1997, total aggregate purchases and sales of
portfolio securities, excluding short-term securities, were $169,508,397 and
$172,034,370, respectively.
CAPITAL STOCK
There are 100,000,000 shares of $0.001 par value capital stock authorized. Of
the 22,736,667 shares outstanding at October 31, 1997 Mitchell Hutchins owned
8,182 shares.
FEDERAL INCOME TAX STATUS
The Fund intends to distribute substantially all of its taxable income and to
comply with the other requirements of the Internal Revenue Code applicable to
regulated investment companies. Accordingly, no provision for federal income
taxes is required. In addition, by distributing during each calendar year
substantially all of its net investment income, capital gains and certain other
amounts, if any, the Fund intends not to be subject to a federal excise tax.
At October 31, 1997, the Fund had capital loss carryforwards of $4,656,811
available as a reduction, to the extent provided in the regulations, of any
future net realized capital gains which will expire by October 31, 2003. To the
extent that such losses are used to offset future capital gains, it is probable
that the gains so offset will not be distributed.
To reflect reclassifications arising from permanent "book/tax" differences
for the year ended October 31, 1997, undistributed net investment income was
decreased by $812,588, accumulated net realized losses from investment
transactions were decreased by $5,045,492 and capital stock was decreased by
$4,232,904. Permanent book/tax differences are primarily attributable to foreign
currency gains/losses.
14
<PAGE>
GLOBAL HIGH INCOME DOLLAR FUND INC.
FINANCIAL HIGHLIGHTS
Selected data for a share of common stock outstanding throughout each period is
presented below:
<TABLE>
<CAPTION>
For the
Period
October 8,
For the Years Ended 1993+
October 31, through
--------------------------------------- October 31,
1997 1996 1995 1994 1993
-------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....................... $ 14.99 $ 13.07 $ 12.83 $ 15.21 $ 15.00
------- ------- ------ ------ ------
Net investment income ...................................... 1.31 1.30 1.34 1.43 0.04
Net realized and unrealized gains (losses) from
investments and foreign currency ........................... .13 1.89 0.21 (2.40) 0.17
------- ------- ------ ------ ------
Net increase (decrease) from investment operations ......... 1.44 3.19 1.55 (0.97) 0.21
------- ------- ------ ------ ------
Dividends from net investment income ....................... (1.08) (1.27) (1.16) (1.34) --
Distributions in excess of net investment income ........... (0.19) -- -- -- --
Distributions from paid-in-capital ......................... -- -- (0.15) (0.07) --
------- ------- ------ ------ ------
Total dividends and distributions to shareholders .......... (1.27) (1.27) (1.31) (1.41) --
------- ------- ------ ------ ------
Net asset value, end of period ............................. $ 15.16 $ 14.99 $ 13.07 $ 12.83 $ 15.21
======= ======= ====== ====== ======
Per share market value, end of period ...................... $ 12.81 $ 12.63 $ 11.63 $ 11.50 $ 15.00
======= ======= ====== ====== ======
Total investment return (1) ................................ 11.47% 20.26% 13.65% (14.80%) 0.00%
======= ======= ====== ======== ======
Ratios/supplemental data:
Net assets, end of period (000's) $ 344,612 $ 340,910 $ 297,087 $ 291,752 $ 345,755
Expenses to average net assets 1.42% 1.43% 1.46% 1.50% 1.41%*
Net investment income to average net assets 8.24% 9.18% 10.76% 10.40% 4.60%*
Portfolio turnover rate 56% 80% 71% 51% 1%
</TABLE>
- ---------------
+ Commencement of operations
* Annualized
(1) Total investment return on market value is calculated assuming a purchase at
market value on the first day of each period reported, reinvestment of all
dividends and distributions in accordance with the Dividend Reinvestment Plan,
and a sale at market value on the last day of each period reported. Total
investment return for a period of less than one year has not been annualized.
Total investment return does not reflect brokerage commissions.
15
<PAGE>
GLOBAL HIGH INCOME DOLLAR FUND INC.
REPORT OF PRICE WATERHOUSE LLP, INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
Global High Income Dollar Fund Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Global High Income Dollar Fund Inc.
(the "Fund") at October 31, 1997, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the four years in the
period then ended and for the period October 8, 1993 (commencement of
operations) through October 31, 1993, 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, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
December 23, 1997
16
<PAGE>
GLOBAL HIGH INCOME DOLLAR FUND INC.
GENERAL INFORMATION
THE FUND
Global High Income Dollar Fund Inc. (the "Fund") is a non-diversified,
closed-end management investment company whose shares trade on the New York
Stock Exchange ("NYSE"). The Fund's primary investment objective is to achieve a
high level of current income. As a secondary objective the Fund seeks capital
appreciation, to the extent consistent with its primary objective. The Fund's
investment adviser and administrator is Mitchell Hutchins Asset Management Inc.,
a wholly owned asset management subsidiary of PaineWebber Incorporated, which
has over $47.0 billion in assets under management as of October 31, 1997.
SHAREHOLDER INFORMATION
The Fund's NYSE trading symbol is "GHI." Comparative net asset value and
market price information about the Fund is published weekly in The Wall Street
Journal and New York Times and Barron's, as well as numerous other publications.
DISTRIBUTION POLICY
The Fund has established a Dividend Reinvestment Plan under which all
stockholders whose shares are registered in their own names, or in the name of
PaineWebber or its nominee, will have all dividends and other distributions on
their shares automatically reinvested in additional shares, unless such
stockholders elect to receive cash. Stockholders who elect to hold their shares
in the name of another broker or nominee should contact such broker or nominee
to determine whether, or how, they may participate in the Dividend Reinvestment
Plan. The ability of such stockholders to participate in the Plan may change if
their shares are transferred into the name of another broker or nominee.
A stockholder may elect not to participate in the Plan or may terminate
participation in the Plan at any time without penalty, and stockholders who have
previously terminated participation in the Plan may rejoin it at any time.
Changes in elections must be made in writing to the Fund's transfer agent and
should include the stockholder's name and address as they appear on that share
certificate or in the transfer agent's records. An election to terminate
participation in the Plan, until such election is changed, will be deemed an
election by a stockholder to take all subsequent distributions in cash. An
election will be effective only for distributions declared and having a record
date at least ten days after the date on which the election is received.
Additional shares of common stock acquired under the Dividend Reinvestment
Plan will be purchased in the open market, on the NYSE or otherwise, at prices
that may be higher or lower than the net asset value per share at the time of
the purchase. The number of shares of common stock purchased with each dividend
will be equal to the result obtained by dividing the amount of the dividend
payable to a particular stockholder by the average price per share (including
applicable brokerage commissions) that the transfer agent was able to obtain in
the open market. The Fund will not issue any new shares in connection with its
Dividend Reinvestment Plan. There currently is no charge to participants for
reinvesting dividends or other distributions. The transfer agent's fees for
handling the reinvestment of distributions are paid by the Fund. However, each
participant pays a pro rata share of brokerage commissions incurred with respect
to the transfer agent's open market purchases of common stock in connection with
the reinvestment of distributions. The automatic reinvestment of dividends and
other distributions in shares of common stock does not relieve participants of
any income tax that may be payable on such distributions. See "Tax Information."
Additional information regarding the Plan may be obtained from, and all
correspondence concerning the Plan should be directed to, the transfer agent at
PNC Bank, National Association, c/o PFPC Inc., P.O. Box 8950, Wilmington,
Delaware 19899.
17
<PAGE>
GLOBAL HIGH INCOME DOLLAR FUND INC.
TAX INFORMATION (unaudited)
We are required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you within 60 days of the Fund's fiscal year end (October 31,
1997) as to the federal tax status of distributions received by stockholders
during such fiscal year. Accordingly, we are advising you that all of the
distributions paid during the fiscal year by the Fund are taxable as ordinary
income.
Dividends received by tax-exempt recipients (e.g., IRAs and Keoghs) need not
be reported as taxable income. Some retirement trusts (e.g., corporate, Keogh
and 403(b)(7) plans) may need this information for their annual information
reporting.
Since the Fund's fiscal year is not the calendar year, another notification
will be sent in respect of calendar 1997. The second notification, which will
reflect the amount to be used by calendar year taxpayers on their federal income
tax returns, will be made in conjunction with Form 1099 DIV and will be mailed
in January 1998. Stockholders are advised to consult their own tax advisers with
respect to the tax consequences of their investment in the Fund.
18
<PAGE>
DIRECTORS
E. Garrett Bewkes, Jr.
Chairman
Margo N. Alexander
Richard Q. Armstrong
Richard R. Burt
Mary C. Farrell
Meyer Feldberg
George W. Gowen
Frederic V. Malek
Carl W. Schafer
PRINCIPAL OFFICERS
Margo N. Alexander
President
Victoria E. Schonfeld
Vice President
Dianne E. O'Donnell
Vice President and Secretary
Paul H. Schubert
Vice President and Treasurer
Stuart Waugh
Vice President
INVESTMENT ADVISER AND
ADMINISTRATOR
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
This report is sent to the stockholders of the Fund for their information. It is
not a prospectus, circular or representation intended for the use in the
purchase or sale of shares of the Fund or of any securities mentioned in this
report.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that from time to time the Fund may purchase shares of its
common stock in the open market at market prices.
<PAGE>
PaineWebber
(Copyright) 1997 PaineWebber Incorporated
Member SIPC
- -------------------------------------------------------------------------------
October 31, 1997
- ------------------------------------
GLOBAL HIGH
INCOME DOLLAR
FUND INC.
ANNUAL REPORT
