<PAGE>
Global High Income Dollar Fund Inc. Annual Report
December 15, 1998
Dear Shareholder,
We are pleased to present you with the annual report for Global High Income
Dollar Fund Inc. (the "Fund") for the fiscal year ended October 31, 1998.
Global High Income
Dollar Fund Inc.
FUND PROFILE
[arrow pointing up] Goal:
High level of current
income; secondarily
capital appreciation
[arrow pointing up] Portfolio Manager:
Stuart Waugh
Mitchell Hutchins
Asset Management Inc.
[arrow pointing up] Total Net Assets:
$294.1 million as of
October 31, 1998
[arrow pointing up] Dividend Payments:
Monthly
Market Overview
Emerging debt markets recovered from the sell-off of October 1997 in the
first half of the fiscal year, but fell again when Russia defaulted on its
domestic debt in August 1998. Liquidity dried up and selling became
indiscriminate as hedge funds sold to meet margin calls and open-end mutual
funds sold in anticipation of redemptions. Because of its closed-end
structure, the Fund was not forced to sell securities at disadvantageous
prices.
For the 12 months, riskier markets like Russia, Brazil and Venezuela
performed the worst; higher-rated markets like Poland, South Korea, Panama,
Mexico and Argentina did better. The JP Morgan Emerging Market Bond Index Plus
(EMBI+), the sector's benchmark, lost 10.10% for the year ended October 31,
1998. During the same period the developed markets, as measured by the Salomon
Brothers World Government Bond Index, gained 10.50% on a currency-hedged
basis.
Portfolio Review
Performance
For the fiscal year ended October 31, 1998, the Fund (symbol: GHI) lost
6.17% based on changes in its net asset value (assuming, for illustration
only, that dividends were reinvested at the net asset value on the payable
dates) and lost 0.70% based on changes in its share price on the New York
Stock Exchange (assuming dividends were reinvested under the Dividend
Reinvestment Plan).
At October 31, 1998 the Fund's net asset value per share was $13.02, while
its share price on the New York Stock Exchange was $11.50. During the year ended
October 31, 1998, the Fund paid dividends totaling $1.31 per share, or
approximately 11 cents per share per month.
Share Repurchases
On September 16, 1998, the Fund announced that its Board of Directors
authorized the Fund to repurchase up to 10% of its outstanding shares of common
stock. The goal of this repurchase program is to reduce the Fund's discount to
its net asset value and increase its return to shareholders. Share repurchases
commenced in mid-September and have continued into the new fiscal year.
Highlights
In the past, the Fund has taken a conservative approach to emerging-
1
<PAGE>
Annual Report
Global High
Income Dollar
Fund, Inc.
Currency exposure
October 31, 1998(1)
[PIE CHART APPEARS HERE]
U.S. Dollar Foreign Unhedged Foreign Hedged
----------- ---------------- --------------
95.2% 2.9% 1.9%
market debt and has avoided leverage. As a consequence, the Fund has trailed its
peers in bullish markets and outperformed them in bearish markets. This pattern
prevailed during the fiscal year ended October 31, 1998. On a net-asset-value
basis, the Fund lost 6.17% against the 23.56% loss of its Lipper peer group
median.
We did not sell the Fund's investments in Russian debt because the Fund
remained substantially underweighted in Russia relative to the EMBI+.
Additionally, the Fund held no ruble-denominated bonds or bills on which the
government effectively defaulted. However, the Fund's exposure to Russian
external debt hurt returns in August and September.
During the period we made no radical changes to the Fund's credit
allocations. While the Fund raised some cash during August, this was primarily
from transactions in Greek drachma and Hungarian forint government bonds --
securities which at the time of sale had not been materially impacted by the
sell-off in other emerging market securities. We used some of this cash to buy
Argentine bonds and Moroccan loans at depressed levels in early October. Over
the period, the Fund reduced allocations to Brazil and Mexico, and reinvested in
Korean bonds.
Global High
Income Dollar
Fund, Inc.
Top five countries
October 31, 1998(1)
Mexico 21.5%
Poland 9.5%
Brazil 7.8%
Morocco 5.5%
Bulgaria 4.2%
Outlook
Our view has evolved from the last reporting period. On the positive side,
emerging market debt valuations should benefit from low interest rates in
developed markets, replenishment of International Monetary Fund (IMF)
resources after approval of the United States' $18 billion contribution, a
consensus in Washington that official institutions (i.e., the IMF and the
World Bank) can and should act as lenders of last resort, and Japanese
government measures to improve bank solvency.
On the negative side, emerging-market debt valuations are constrained by
falling prices for commodity exports (primarily oil and copper), an uncertain
outlook for fiscal reform in Brazil, the prospect of recession in Latin
America exacerbated by a retraction of external financing, and chronic banking
problems in Latin American, East European and Asian markets.
After its deep sell-off in the August-September period, non-Russian,
emerging-market debt has recovered strongly. Improvement in the sector's
credit fundamentals, however, depends on resolution of Brazil's fiscal
problems.
Russian Soviet-era
- ----------
(1) All weightings represent percentages of net assets as of October 31, 1998,
unless noted otherwise. The portfolio is actively managed and all holdings are
subject to change.
2
<PAGE>
Global High Income Dollar Fund Inc. Annual Report
external debt is trading at levels which suggest investors expect the Russian
government to repudiate that debt, an event we believe is unlikely. The Russian
government has said it does not have enough foreign exchange reserves to service
all external debt next year. Since default would exclude Russia from foreign
capital markets for some time, the government has a strong incentive to service
its debt or work out another restructuring. Consequently, at present valuation
levels the Fund will most likely continue to maintain some Russian exposure.
The Fund is overweighted in Bulgaria, Mexico, Morocco and Poland, markets
with only moderate financing requirements over the next 12 months and stable or
improving credit fundamentals. It is underweighted in markets with large
financing requirements such as Argentina, or where the risk of capital flight is
greatest, such as Brazil and Venezuela. We remain wary of Brazil's fiscal and
balance of payments problems, and have a defensive cash position of roughly 19%.
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.
For a quarterly Fund Profile on the Global High Income Dollar Fund Inc. or a
fund in the PaineWebber Family of Funds,2 please contact your investment
executive.
Sincerely,
/s/ Margo Alexander /s/ Stuart Waugh
Margo Alexander Stuart Waugh
President Managing Director
Mitchell Hutchins Asset Management Inc. Mitchell Hutchins Asset
Management Inc.
Portfolio Manager, Global High
Income Dollar Fund Inc.
This letter is intended to assist shareholders in understanding how the
Fund performed during the fiscal year ended October 31, 1998, and reflects our
views at the time of 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.
- ----------
(2) Mutual funds are sold by prospectus only. The prospectuses for the funds
contain more complete information regarding risks, charges and expenses, and
should be read carefully before investing.
3
<PAGE>
Global High Income Dollar Fund Inc.
Portfolio of Investments October 31, 1998
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- ---------- -------- -------- -----
<S> <C> <C> <C>
LONG-TERM DEBT SECURITIES--77.59%
Argentina--4.83%
ARS 9,050 Republic of Argentina 02/12/07 11.750% $7,400,817
$ 5,000 Republic of Argentina 03/31/05 6.188+ 4,150,000
4,033 Republic of Argentina, DISC 03/31/23 6.625+ 2,661,780
------------
14,212,597
------------
Brazil--7.78%
16,300 Federal Republic of Brazil, DISC 04/15/24 6.125+ 9,657,750
3000 Federal Republic of Brazil, EXIT 09/15/13 6.000 1,800,000
4,000 Federal Republic of Brazil, NMB 04/15/09 6.188+ 2,225,000
15,000 Federal Republic of Brazil, PAR 04/15/24 5.500 9,187,500
------------
22,870,250
------------
Bulgaria--4.17%
3,500 Republic of Bulgaria, DISC 07/28/24 6.688+ 2,476,250
13,700 Republic of Bulgaria, FLIRB 07/28/12 2.500+ 7,449,375
3,555 Republic of Bulgaria, IAB 07/28/11 6.688+ 2,346,300
------------
12,271,925
------------
Chile--1.59%
3,000 Banco del Estado Chile, S.A.(4) 08/01/01 8.390 3,019,800
2,000 Empresa Nacional de Electricidad, S.A. 02/01/37 7.325 1,650,358
------------
4,670,158
------------
Colombia--2.35%
8,000 Republic of Colombia 08/13/05 8.820 6,920,000
------------
Kazakhstan--0.83%
3,500 Republic of Kazakhstan 10/02/02 8.375 2,432,500
------------
Korea--4.20%
13,270 Republic of Korea 04/15/03 to 04/15/08 8.750 to 8.875 12,345,363
------------
Mexico--21.45%
3,464 Coca Cola Femsa, S.A. de C.V. 11/01/06 8.950 3,360,080
3,000 Grupo Industrial Durango, S.A. de C.V. 07/15/01 12.000 2,190,000
5,700 Grupo Televisa, S.A. de C.V. 05/15/08 0/13.250@ 4,018,500
8,125 Mexican Multi Year Refinance Loan Participation
(Salomon Brothers)(1)(4) 03/20/05 6.500+ 6,403,556
9,500 Petroleos Mexicanos 03/30/05 to 12/01/23 8.375 to 8.625 7,517,500
12,568 United Mexican States 05/15/26 11.500 12,945,040
30,621 United Mexican States, DISC(2) 12/31/19 6.116 to 6.617+ 23,999,209
3,500 United Mexican States, PAR(5) 12/31/19 6.250 2,638,125
------------
63,072,010
------------
Morocco--5.48%
5,000 Kingdom of Morocco Loan Participation,
Tranche A (Chase Manhattan Bank)(1)(4) 01/01/09 6.563+ 3,750,000
16,495 Kingdom of Morocco Loan Participation,
Tranche A (Morgan Guaranty Trust)(1)(4) 01/01/09 6.563+ 12,371,250
------------
16,121,250
------------
Panama--2.85%
11,306 Republic of Panama, PDI 07/17/16 6.688+ 8,366,407
------------
</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)
Peru--1.54%
$ 8,000 Republic of Peru, PDI 03/07/17 4.000%++ $4,520,000
------------
Philippines--1.10%
4,600 Republic of Philippines, DCB 12/01/09 6.563+ 3,220,000
------------
Poland--9.52%
PLN 23,780 Republic of Poland(4) 06/12/02 to 02/12/03 12.000 6,684,380
$ 32,300 Republic of Poland, PAR 10/27/24 3.000++ 21,318,000
------------
28,002,380
------------
Russia--1.44%
18,236 Russian IAN 12/15/15 6.625+ 1,800,785
22,080 Russian Principal Loan (Chase Manhattan Bank)(1)(4) 12/15/20 6.625+ 1,738,800
3,000 Russia Federation 06/24/28 12.750 705,000
------------
4,244,585
------------
Trinidad & Tobago--2.94%
9,000 Republic of Trinidad and Tobago(4) 11/03/00 to 10/03/04 9.750 to 11.750 8,640,000
------------
Tunisia--2.00%
7,000 Banque Centrale de Tunisie 09/19/07 7.500 5,880,000
------------
Venezuela--3.52%
7,590 Republic of Venezuela, 08/15/18 to 09/15/27 9.250 to 13.625 4,923,600
8,175 Republic of Venezuela, PAR(3) 03/31/20 6.750 5,436,375
------------
10,359,975
------------
Total Long-Term Debt Securities (cost - $267,382,429) 228,149,400
------------
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- -------- -------- -----
<S> <C> <C> <C>
REPURCHASE AGREEMENTS--19.29%
10,000 Repurchase agreement dated 10/30/98 with Deutsche Bank Securities Incorporated,
collateralized by $9,725,000 U.S. Treasury Notes, 7.125% due 02/29/00
(value - $10,316,729); proceeds: $10,004,479 11/02/98 5.375 10,000,000
10,000 Repurchase agreement dated 10/30/98 with Dresdner Kleinwort Benson N.A.
LLC, collateralized by $9,425,000 U.S. Treasury Notes, 6.500% due 05/31/01
(value - $10,456,021); proceeds: $10,004,417 11/02/98 5.300 10,000,000
6,733 Repurchase agreement dated 10/30/98 with Morgan Stanley &Company, Incorporated,
collateralized by $5,105,000 U.S. Treasury Bonds, 10.375% due 11/15/09
(value - $7,112,011); proceeds: $6,735,991 11/02/98 5.330 6,733,000
10,000 Repurchase agreement dated 10/30/98 with Salomon Smith Barney
Inc., collateralized by $9,560,000 U.S. Treasury Notes, 7.500%
due 10/31/99;
(value - $10,563,513); proceeds: $10,004,458 11/02/98 5.350 10,000,000
10,000 Repurchase agreement dated 10/30/98 with SG Cowen Securities Corp.,
collateralized by $9,027,000 U.S. Treasury Notes, 6.500% due 10/15/06
(value - $10,226,021); proceeds: $10,004,500 11/02/98 5.400 10,000,000
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- -------- -------- -----
<S> <C> <C> <C>
REPURCHASE AGREEMENTS (concluded)
$ 10,000 Repurchase agreement dated 10/30/98 with State Street Bank Corporation,
collateralized by $7,105,000 U.S. Treasury Bonds, 8.875% due 08/15/17
(value - $10,336,496); proceeds: $10,004,417 11/02/98 5.300% $ 10,000,000
-------------
Total Repurchase Agreements (cost - $56,733,000) 56,733,000
-------------
Total Investments (cost - $324,115,429) - 96.88% 284,882,400
Other assets in excess of liabilities - 3.12% 9,184,760
-------------
Net Assets - 100.00% $ 294,067,160
=============
</TABLE>
- ----------
Note: The Porfolio of Investments is listed by the issuer's country of origin
@ Current coupon rate is 0% on step up rate. Subsequent to 05/15/01 rate
will change to 13.250%.
+ Reflects rate at October 31, 1998 on variable rate instruments
++ Reflects rate at October 31, 1998 on step coupon rate instruments
(1) Participation interest was acquired through the financial institution
indicated parenthetically
(2) With an additional 47,108,000 recoverable rights attached maturing on
06/30/03 with no market value
(3) With an additional 40,875 warrants attached maturing on 4/15/20 with no
market value
(4) Illiquid securities represent 14.49% of net assets
(5) With an additional 3,500,000 warrants attached maturing on 06/30/03 with
no market value
ARS Argentine Peso
DCB Debt Conversion Bond
DISC Discount Bond
EXIT Investment Bond
FLIRB Front-loaded Interest Reduction Bond
IAB Interest Arrears Bond
IAN Interest Arrears Note
NMB New Money Bond
PAR Par Bond
PDI Past Due Interest Bond
PLN Polish Zloties
FORWARD FOREIGN CURRENCY CONTRACT
<TABLE>
<CAPTION>
Unrealized
Contract to Deliver In Exchange for Maturity Date Depreciation
------------------- --------------- ------------- ------------
<S> <C> <C> <C> <C>
Polish Zloties 20,500,493 US$ 5,477,912 02/22/99 $ 277,169
============
</TABLE>
INVESTMENTS BY TYPE OF ISSUER
<TABLE>
<CAPTION>
Percentage of Net Assets
------------------------
Long-term Short-term
--------- ----------
<S> <C> <C>
Government and other public issuers 70.19% --
Repurchase agreements -- 19.29%
Oil/Gas 2.56 --
Broadcasting 1.37 --
Beverage/Bottling 1.14 --
Banks 1.03 --
Industrial 0.74 --
Utilities--Electric & Water 0.56 --
----- -----
77.59% 19.29%
===== =====
</TABLE>
See accompanying notes to financial statements
6
<PAGE>
Global High Income Dollar Fund Inc.
Statement of Assets and Liabilities October 31, 1998
<TABLE>
<S> <C>
Assets
Investments in securities, at value (cost - $267,382,429) $228,149,400
Repurchase agreements (cost - $56,733,000) 56,733,000
Cash denominated in foreign currencies (cost - $4,162) 4,180
Receivable for investments sold 3,921,180
Interest receivable 6,114,063
Other assets 3,326
------------
Total assets 294,925,149
------------
Liabilities
Payable to investment adviser and administrator 307,253
Unrealized depreciation on forward currency contracts 277,169
Payable for shares of capital stock repurchased 59,788
Accrued expenses and other liabilities 213,779
------------
Total liabilities 857,989
------------
Net Assets
Capital stock - $0.001 par value; total authorized shares - 100,000,000;
22,587,267 shares issued and outstanding 327,308,707
Accumulated net realized gain from investments 6,285,829
Net unrealized depreciation of investments, other assets, liabilities and
forward contracts denominated in foreign currencies (39,527,376)
------------
Net assets $294,067,160
============
Net asset value per share $13.02
======
</TABLE>
See accompanying notes to financial statements
7
<PAGE>
Global High Income Dollar Fund Inc.
Statement of Operations
<TABLE>
<CAPTION>
For the
Year Ended
October 31,1998
---------------
<S> <C>
Investment income:
Interest (net of foreign withholding taxes) $34,080,304
------------
Expenses:
Investment advisory and administration 4,262,691
Custody and accounting 286,286
Reports and notices to shareholders 115,777
Legal and audit 80,239
Transfer agency fees 74,012
Amortization of organizational expenses 24,933
Directors' fees 10,500
Other expenses 59,330
------------
4,913,768
------------
Net investment income 29,166,536
------------
Realized and unrealized gains (losses) from investment activities:
Net realized gains (losses) from:
Investment transactions 13,429,681
Foreign currency transactions (4,298,228)
Net change in unrealized appreciation/depreciation of:
Investments (57,425,201)
Other assets, liabilities and forward contracts denominated in foreign currencies (43,287)
------------
Net realized and unrealized loss from investment activities (48,337,035)
------------
Net decrease in net assets resulting from operations $(19,170,499)
=============
</TABLE>
See accompanying notes to financial statements
8
<PAGE>
Global High Income Dollar Fund Inc.
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the Years Ended
October 31,
------------------------
1998 1997
-------- --------
<S> <C> <C>
From operations:
Net investment income $29,166,536 $29,733,816
Net realized gains on investment transactions 13,429,681 23,969,822
Net realized losses from foreign currency transactions (4,298,228) (5,045,492)
Net change in unrealized appreciation/depreciation of:
Investments (57,425,201) (15,723,541)
Other assets, liabilities and forward contracts denominated in
foreign currencies (43,287) (311,768)
------------ ------------
Net increase (decrease) in net assets resulting from operations (19,170,499) 32,622,837
------------ ------------
Dividends and distributions to stockholders:
From net investment income (24,868,308) (24,688,136)
From net realized gains from investment transactions (2,487,041) --
In excess of net investment income (2,369,284) (4,232,904)
------------ ------------
Total dividends and distributions to stockholders (29,724,633) (28,921,040)
------------ ------------
Capital stock transactions:
Cost of shares repurchased (1,649,484) --
------------ ------------
Net increase (decrease) in net assets (50,544,616) 3,701,797
Net Assets:
Beginning of year 344,611,776 340,909,979
------------ ------------
End of year $294,067,160 $344,611,776
============ ============
</TABLE>
See accompanying notes to financial statements
9
<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. 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. Organizational costs have
been fully amortized on a straight line basis over a period of 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 may be valued by outside pricing
services approved by a management committee under the direction of the Board
of Directors. 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.
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.
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. 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.
10
<PAGE>
Notes to Financial Statements
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 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
11
<PAGE>
Notes to Financial Statements
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 Adviser 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, 1998, the Fund owed Mitchell Hutchins
$307,253 in investment advisory and administration fees.
Security Lending
The Fund may lend securities up to 33 1/3% 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, 1998, PaineWebber earned $116,947 as the Fund's
lending agent. At October 31, 1998, the Fund had no securities on loan.
12
<PAGE>
Notes to Financial Statements
Investments in Securities
For federal income tax purposes, the cost of securities owned at October
31, 1998, was substantially the same as the cost of securities for financial
statement purposes.
At October 31, 1998, the components of net unrealized depreciation of
investments were as follows:
<TABLE>
<S> <C>
Gross depreciation (investments having an excess of cost over value) $(45,265,187)
Gross appreciation (investments having an excess of value over cost) 6,032,158
------------
Net unrealized depreciation of investments $(39,233,029)
============
</TABLE>
For the period ended October 31, 1998, total aggregate purchases and sales
of portfolio securities, excluding short-term securities, were $244,700,501
and $258,528,558, respectively.
Capital Stock
There are 100,000,000 shares of $0.001 par value capital stock authorized.
Of the 22,587,267 shares outstanding at October 31, 1998 Mitchell Hutchins
owned 8,969 shares.
For the period September 17, 1998 (commencement of repurchase program)
through October 31, 1998, the Fund repurchased 149,400 shares of common stock
at an average market price per share of $10.98 and a weighted average discount
from net asset value of 12.26% per share. At October 31, 1998, paid-in-capital
was reduced by the cost of $1,649,484 of capital stock repurchased.
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.
To reflect reclassifications arising from permanent "book/tax" differences
for the year ended October 31, 1998, undistributed net investment income was
decreased by $1,928,210, accumulated net realized gains from investment
transactions were increased by $4,298,228 and capital stock was decreased by
$2,370,018. Permanent book/tax differences are primarily attributable to
foreign currency gains/losses.
13
<PAGE>
Global High Income Dollar Fund Inc.
Financial Highlights
Selected data for a share of common stock outstanding throughout each year is
presented below:
<TABLE>
<CAPTION>
For the Years Ended October 31,
----------------------------------------------------------
1998 1997 1996 1995 1994
-------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 15.16 $ 14.99 $ 13.07 $ 12.83 $ 15.21
--------- --------- --------- --------- ---------
Net investment income 1.28 1.31 1.30 1.34 1.43
Net realized and unrealized gains (losses) from
investments and foreign currency (2.12) 0.13 1.89 0.21 (2.40)
--------- --------- --------- --------- ---------
Net increase (decrease) from investment operations (0.84) 1.44 3.19 1.55 (0.97)
--------- --------- --------- --------- ---------
Dividends from net investment income (1.10) (1.08) (1.27) (1.16) (1.34)
Distributions from net realized gains from investment
transactions (0.11) -- -- -- --
Distributions in excess of net investment income (0.10) (0.19) -- -- --
Distributions from paid-in-capital -- -- -- (0.15) (0.07)
--------- --------- --------- --------- ---------
Total dividends and distributions to shareholders (1.31) (1.27) (1.27) (1.31) (1.41)
--------- --------- --------- --------- ---------
Net increase in net asset value resulting from
repurchase of common stock 0.01 -- -- -- --
--------- --------- --------- --------- ---------
Net asset value, end of year $ 13.02 $ 15.16 $ 14.99 $ 13.07 $ 12.83
========= ========= ========= ========= ==========
Market value, end of year $ 11.50 $ 12.81 $ 12.63 $ 11.63 $ 11.50
========= ========= ========= ========= ==========
Total investment return (1) (0.70)% 11.47% 20.26% 13.65% (14.80)%
========= ========= ========= ========= ==========
Ratios/supplemental data:
Net assets, end of year (000's) $ 294,067 $ 344,612 $ 340,910 $ 297,087 $ 291,752
Expenses to average net assets 1.44% 1.42% 1.43% 1.46% 1.50%
Net investment income to average net assets 8.55% 8.24% 9.18% 10.76% 10.40%
Portfolio turnover rate 89% 56% 80% 71% 51%
</TABLE>
- ----------
(1) Total investment return 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 does not reflect brokerage commissions.
14
<PAGE>
Global High Income Dollar Fund Inc.
Report of PricewaterhouseCoopers 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, 1998, 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 five years in the period then ended, 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, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
December 21, 1998
15
<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, 1998) as to the federal tax status of distributions received by
stockholders during such fiscal year. Accordingly, we are advising you that
distributions of $1.20 per share were paid during the fiscal year by the Fund
and are taxable as ordinary income, and $0.11 per share are taxable as
long-term capital gains.
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 1998. 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 1999. Stockholders are advised to consult their own tax
advisers with respect to the tax consequences of their investment in the Fund.
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 $56 billion in assets under management as of
November 30, 1998.
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.
The Fund's board of directors amended the Fund's bylaws to require that the
Fund receive notice of board nominations or proposals that any shareholder
wishes to be considered at an annual or special shareholder meeting. This
notice will give Fund management an opportunity to inform shareholders of and
respond to those nominations and proposals. The amendment will be effective
for meetings that occur after the Fund's 1999 annual meeting.
The amended bylaws require that the Fund receive notice of a nomination or
proposal for an annual meeting at least 120 days in advance of the anniversary
of the date that the Fund's proxy statement for the previous year's annual
meeting was first released to shareholders. For a special shareholder meeting,
the Fund must receive notice within seven days of the date on which notice of
the special meeting is first given to shareholders. In order to make a
nomination or proposal to be considered at the 2000 annual meeting of
shareholders, the Fund must receive notice of that nomination or proposal no
later than September 20, 1999.
Year 2000 Risks
Like other funds and financial and business organizations around the world,
the Fund could be adversely affected if the computer systems used by its
investment adviser, other service providers and entities with computer systems
that are linked to Fund records do not properly process and calculate
date-related information and data from and after January 1, 2000. This is
commonly known as the "Year 2000 Issue."
Mitchell Hutchins is taking steps that it believes are reasonably designed
to address the Year 2000 Issue with respect to the computer systems that it
uses, and to obtain satisfactory assurances that each of the Fund's other
major service providers is taking comparable steps. However, there can be no
assurance that these steps will be sufficient to avoid any adverse impact on
the Fund.
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.
17
<PAGE>
Global High Income Dollar Fund Inc.
General Information (concluded)
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.
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
Dennis L. McCauley
Vice President
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 shareholders 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>
----------
Global High
Income Dollar
Fund Inc.
ANNUAL REPORT
October 31, 1998
[LOGO] PaineWebber
(C)1998 PaineWebber Incorporated
Member SIPC
