Scudder
World Income
Opportunities
Fund, Inc.
Semiannual Report
October 31, 1995
A closed-end investment company seeking high current income as its primary
objective and capital appreciation as a secondary objective through investment
principally in global income and, to a limited extent, equity securities.
<PAGE>
Scudder World Income
Opportunities Fund, Inc.
Investment objectives and policies
o primarily high current income and secondarily capital appreciation through
investment principally in global income and, to a limited extent, equity
securities
Investment characteristics
o closed-end investment company investing principally in a portfolio of
global income and, to a limited extent, equity securities
o a vehicle for international diversification through participation in the
economies of emerging market countries
General Information
Executive offices
Scudder World Income Opportunities Fund, Inc.
345 Park Avenue
New York, NY 10154
For Fund information: 1-800-349-4281
Transfer agent, registrar and dividend
reinvestment plan agent
For account information: 617-328-5000
State Street Bank & Trust Company
P.O. Box 8200
Boston, MA 02266-8200
Custodian
Brown Brothers Harriman & Co.
Legal counsel
Willkie Farr & Gallagher
Independent Accountants
Coopers & Lybrand L.L.P.
New York Stock Exchange Symbol -- SWI
Contents
In Brief 3
Letter to Shareholders 3
Investment Summary 6
Investment Portfolio 7
Financial Statements 10
Financial Highlights 13
Notes to Financial Statements 14
Report of Independent Accountants 18
Shareholder Meeting Results 19
Dividend Reinvestment Plan 20
Investment Manager and Administrator 22
Directors and Officers 23
This report is sent to the shareholders of Scudder World Income Opportunities
Fund, Inc. for their information. It is not a prospectus, circular, or
representation intended for use in the purchase or sale of shares of the Fund or
of any securities mentioned in the report.
2
<PAGE>
In Brief
o Last spring, emerging market debt began a sustained rally after decisive
action by economic leaders in Argentina and Mexico bolstered investor
confidence. Solid positive monthly returns were posted through September
before easing somewhat in October.
o Despite difficult market conditions, Scudder World Income Opportunities Fund
posted a total return of 11.74% based on net asset value for its semiannual
period ended October 31, 1995. The Fund's total return based on its New York
Stock Exchange share price was 3.41% for the same period.
o The Fund continues to invest in a diversified group of debt securities, with
bonds issued in Latin America, central and eastern Europe, northern Africa,
and Asia.
Letter to Shareholders
Dear Shareholders:
We are pleased to present the semiannual report for Scudder World Income
Opportunities Fund, Inc. (the "Fund") covering the period from May 1, 1995, to
October 31, 1995. The powerful rally in emerging market debt that took hold in
March and April continued for the first five months of the semiannual period,
before the markets eased slightly in October over concerns about the lingering
recessions in Argentina and Mexico. As economic leaders demonstrated their
commitment to fiscal austerity and economic reforms, investor confidence was
bolstered, and emerging countries gained renewed access to the international
capital markets. The market recovery was further enhanced by a decline in
long-term U.S. interest rates, which was particularly helpful for the many U.S.
dollar fixed-rate bonds in the Fund's portfolio.
Reflecting these positive market conditions, the Fund finished the semiannual
period on October 31, 1995 with a net asset value (NAV) of $12.83, up from
$12.11 on April 30, 1995. Adjusted for distributions of $0.68 per share during
the period, the Fund's total return based on NAV was 11.74%. This compares with
a total return of 16.33% for the unmanaged J.P. Morgan Emerging Markets Bond
Index. The Fund underperformed the J.P. Morgan Index largely because we
maintained a defensive investment strategy following the turbulent first quarter
of 1995 that included a significant cash position. As market conditions
improved, however, the Fund became fully invested.
The price of Fund shares traded on the New York Stock Exchange declined from
$12.75 to $12.50 during the period, but the decline was offset by distributions
totaling $0.68 per share, resulting in a total return for the period of 3.41%
based on the market value of the Fund's shares. The $12.50 share price on
October 31, 1995, represented a 2.6% discount to the Fund's NAV.
Throughout the semiannual period, we have continued to maintain a liquid,
diversified portfolio well positioned to benefit from improving country
fundamentals. In accordance with this strategy, the Fund's portfolio continues
to hold a broad array of securities across a number of regions. Regional
diversification helped the Fund's performance: As confidence returned to the
emerging markets in the aftermath of the Mexican peso crisis, investors became
more discriminating among emerging market issuers. The portfolio benefited, for
example, from sizable positions in eastern and central Europe (18.4% of the
portfolio), where debt markets have performed particularly well during the six
month period. The Fund also holds positions in northern Africa (3.4% of the
portfolio) and Asia (1.5% of the portfolio).
3
<PAGE>
The Fund's core holdings in Latin America continue to be in Argentina (18.9%
of the portfolio) and Brazil (23.7% of the portfolio). Recent political tensions
within the Argentine cabinet and an economic slowdown in the aftermath of the
Mexican crisis have contributed to the Argentine debt markets' below-average
performance during the semiannual period. Over the coming months we expect the
Argentine markets to perform better. The Argentine government has consistently
adhered to sound economic policies (such as fiscal austerity and structural
reforms), and the expected economic recovery in 1996 should provide a solid
underpinning for the country's debt markets.
The fundamental outlook in Brazil is also promising. Brazil has successfully
slowed the torrid pace of economic growth exhibited early in 1995 (thereby
reducing the risk of an overheated economy) and has improved its external
accounts. High real interest rates have also bolstered international reserves.
In addition, President Cardoso has made gradual but steady progress advancing
important financial and constitutional reforms through Congress.
The Fund held underweight debt positions in Mexico (10.2% of the portfolio)
and Venezuela (5.6% of the portfolio) throughout the six-month period ended
October 31, 1995. The Mexican government has steadfastly adhered to sound
economic policies implemented in the aftermath of the peso crisis, but lingering
political concerns and a significant economic contraction have created some
uneasiness in Mexico's financial markets. Venezuelan government bonds offer
attractive yields but at the end of the semiannual period the markets were
awaiting progress on a program with the International Monetary Fund to address
serious imbalances in the Venezuelan economy.
The vast majority of the Fund's assets (90.8%) continue to be invested in
sovereign debt obligations. These instruments offer the combined benefits of
extremely attractive yields, ample liquidity (particularly in the large Brady
bond issues), and better credit quality than many emerging market corporate
bonds.
Securities denominated in local currencies can offer relatively high yields
as well as the opportunity to benefit from currency appreciation. As the Mexican
peso crisis demonstrated, however, local currencies can also be susceptible to
dramatic devaluations when there is a loss of confidence in economic policies.
We have continued to take a cautious and opportunistic approach with respect to
the Fund's exposure to foreign currencies, limiting it to countries where we
foresee a stable or appreciating exchange rate. As of October 31, 1995, only
2.6% of the Fund's assets were invested in local currency securities, with the
balance held in U.S. dollar-denominated obligations.
In June, we substantially increased the Fund's holdings in fixed-rate
securities in the expectation that the U.S. Federal Reserve would begin to lower
interest rates, which it did in early July. (Fixed-rate bond prices generally
benefit from declines in U.S. interest rates.) By the end of October, in light
of the significant declines that had taken place in long-term U.S. dollar
interest rates, we took some profits and adjusted the Fund's portfolio to be
approximately equally weighted between fixed- and floating-rate instruments.
During the semiannual period, the Fund maintained a relatively low weighting
in emerging market equities (5.3% of the portfolio at October 31, 1995). The
extremely attractive returns currently offered on emerging market debt, together
with a difficult environment for equity markets in countries like Argentina and
Mexico, make it likely that the common stock component of the portfolio will
remain relatively small in the near term.
4
<PAGE>
Outlook
The commitment of leaders in many emerging economies to fiscal discipline and
accelerated economic reform has bolstered the confidence of emerging market
investors, creating a solid foundation for the strong performance of these
markets since early March of this year. These tough economic measures, while
creating difficult domestic conditions in the near term, constitute the basis
for sustained economic growth in many emerging countries. Coupled with a
constructive global environment for the U.S. dollar, interest rates, and bond
markets, we expect this positive outlook will be reflected in continued
improvement in prices for emerging market debt over the coming months.
A Team Approach to Investing
Scudder World Income Opportunities Fund is managed by a team of Scudder
investment professionals who each play an important role in the portfolio's
management process. Team members work together to develop investment strategies
and select securities for the portfolio. They are supported by Scudder's large
staff of economists, research analysts, traders, and other investment
specialists who work in Scudder's offices across the United States and abroad.
We believe our team approach benefits Fund investors by bringing together many
disciplines and leveraging Scudder's extensive resources.
M. Isabel Saltzman, Lead Portfolio Manager, sets Fund investment strategy.
Ms. Saltzman, who joined Scudder in 1990, has been involved in foreign finance
and investing since 1979. Susan E. Gray, Portfolio Manager, is responsible for
the day-to-day management of the fixed-income component of the portfolio. Ms.
Gray, who has over four years of investment trading experience, has worked at
Scudder since 1987. Joyce E. Cornell, Portfolio Manager, is responsible for
managing the equity component of the Fund's portfolio. Ms. Cornell, who joined
Scudder in 1991, has nine years of experience as a securities analyst.
Dividend Reinvestment Option
The Fund's Dividend Reinvestment Plan (the "Plan") offers you a convenient
way to have your dividends and capital gains distributions reinvested in the
shares of the Fund. Your participation is automatic unless you or the bank,
broker or other nominee holding shares beneficially owned by you specifies
otherwise. We believe this Plan is attractive for shareholders. Its features are
more fully described on page 20.
Other Information
The Fund's NAV is published every Monday in The Wall Street Journal under the
heading "Closed End Funds." The Fund's NAV is also published in The New York
Times and Barron's.
As a service to overseas shareholders, the Fund's NAV is listed daily in The
Financial Times ("FT"). For your information the NAV of the Fund and other
Scudder managed closed-end funds can be found in the "FT Managed Funds Service"
section under the heading "Other Offshore Funds" below the Scudder, Stevens, &
Clark, Inc. banner.
We are pleased that you are an investor in Scudder World Income Opportunities
Fund. We would be happy to receive any questions or comments. You can reach us
at 1-800-349-4281.
Respectfully,
/s/Lynn S. Birdsong /s/Edmond D. Villani
Lynn S. Birdsong Edmond D. Villani
President Chairman of the Board
5
<PAGE>
Scudder World Income Opportunities Fund, Inc.
Investment Summary as of October 31, 1995
- -------------------------------------------------------------------------------
HISTORICAL INFORMATION
LIFE OF FUND
TOTAL RETURN (%)
------------------------------------------------------------
MARKET VALUE NET ASSET VALUE* INDEX (a)
------------------ ------------------ ------------------
AVERAGE AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL
------------------ ------------------ ------------------
CURRENT QUARTER -2.18 -- 4.42 -- 4.80 --
FISCAL YEAR TO DATE 3.41 -- 11.74 -- 16.33 --
ONE YEAR 9.57 9.57 1.11 1.11 8.01 8.01
LIFE OF FUND** -.43 -.27 7.96 5.05 11.65 7.34
(a) J.P. Morgan Emerging Markets Bond Index
* Total investment returns reflect changes in net asset value per share
during each period and assumes that dividends and capital gains
distributions, if any, were reinvested. These percentages are not an
indication of the performance of a shareholder's investment in the Fund
based on market.
** The Fund commenced operations on April 11, 1994.
PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE OF THE
FUND.
- -------------------------------------------------------------------------------
DIVERSIFICATION BY COUNTRY (EXCLUDES 2% CASH EQUIVALENTS)
Brazil 24%
Argentina 19%
Poland 12%
Venezuela 11%
Mexico 10%
Panama 7%
Ecuador 4%
Bulgaria 4%
Morocco 3%
Other 6%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- -------------------------------------------------------------------------------
6
<PAGE>
<TABLE>
Scudder World Income Opportunities Fund, Inc.
Investment Portfolio as of October 31, 1995
========================================================================================================
<CAPTION>
Principal Market
Amount ($) (e) Value ($)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER -- 2.4%
1,048,000 Associates Corp. of North America, 5.82%,
11/1/95 (Cost $1,048,000) .................. 1,048,000
----------
- ---------------------------------------------------------------------------------------------------------
U.S. DOLLAR-DENOMINATED DEBT -- 88.2%
ARGENTINA - 18.2% 6,500,000 Republic of Argentina, Floating Rate Bond,
Series L, LIBOR plus .8125%, (6.8125%),
3/31/05 (d) ................................ 3,847,155
8,750,000 Republic of Argentina, Collateralized Par Bond,
Series L, Step-up-Coupon, 5%, 3/31/23 ...... 4,161,675
----------
8,008,830
----------
BRAZIL-- 23.7% 1,000,000 Minas Gerais, Series A, Without Warrants,
7.875%, 2/10/99 ............................ 837,500
1,000,000 Minas Gerais, Series B, Without Warrants,
8.25%, 2/10/00 ............................. 817,500
1,425,000 Federative Republic of Brazil, IDU Bond, Floating
Rate Bond, LIBOR plus .8125%, (6.688)%, 1/1/01 1,217,477
1,500,000 Federative Republic of Brazil, Eligible Interest
Bond, LIBOR plus .8125%, (6.813%), 4/15/06 . 991,875
2,250,000 Federative Republic of Brazil, Debt Conversion
Bond, Series L, LIBOR plus .875%, (6.875%),
4/15/12 .................................... 1,231,875
5,000,000 Federative Republic of Brazil, Par Bond, Series Z,
4.25%, 4/15/24 ............................. 2,412,500
5,703,993 Federative Republic of Brazil C Bond, 4% with 4%
Interest Capitalization, 4/15/14 ........... 2,894,777
----------
10,403,504
----------
BULGARIA -- 3.9% 3,000,000 Republic of Bulgaria, Front Loaded Interest
Reduction Bond, Series A, 2%, 7/28/12 ...... 836,250
1,750,000 Republic of Bulgaria, Collateralized Discount
Bond, Tranche A, LIBOR plus .8125%,
(6.75%), 7/28/24 ........................... 883,750
----------
1,720,000
----------
ECUADOR -- 4.2% 2,000,000 Republic of Ecuador, Floating Rate Discount
Note, LIBOR plus .8125% (6.8125%), 2/28/25 . 991,240
2,604,819 Republic of Ecuador, Past Due Interest Bond,
LIBOR plus .8125%, 3%, with 3.8125%
Interest Capitalization, 6.8125%, 2/27/15 .. 853,078
----------
1,844,318
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
<TABLE>
Scudder World Income Opportunities Fund, Inc.
Investment Portfolio (continued)
=========================================================================================================
<CAPTION>
Principal Market
Amount ($) (e) Value ($)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
MEXICO -- 8.3% 3,750,000 United Mexican States, Collateralized Par Bond,
Series A, 6.25%, 12/31/19 ..................... 2,203,125
2,500,000 United Mexican States, Collateralized Par Bond,
Series B, 6.25%, 12/31/19 ..................... 1,468,750
----------
3,671,875
----------
MOROCCO -- 3.4% 2,500,000 Kingdom of Morocco, Tranche A, Restructuring
and Consolidation Agreement, LIBOR plus
.8125%, (6.688%), 1/1/09 ...................... 1,487,500
----------
PANAMA -- 6.4% 2,500,000 Republic of Panama, Floating Rate Bond,
LIBOR plus 1%, (7.25%), 5/10/02 ............... 2,043,750
2,000,000 Republic of Panama, 3.5%, 12/29/49 (c) .............. 770,000
----------
2,813,750
----------
POLAND -- 11.7% 6,500,000 Republic of Poland, Step-Up Note,
3.75%, 10/27/14 ............................... 4,176,250
1,250,000 Republic of Poland, Collateralized Discount Bond,
LIBOR plus .8125%, (6.875%), 10/27/24 ......... 956,250
----------
5,132,500
----------
RUSSIA -- 2.8% 3,750,000 Vnesheconombank, Bilateral Non-Performing
Loan Agreement 12/29/95* ...................... 1,218,750
----------
VENEZUELA -- 5.6% 5,000,000 Republic of Venezuela, Debt Conversion Bond,
Series DL, LIBOR plus .875%, (6.8125%),
12/18/07 ...................................... 2,462,500
----------
TOTAL U.S. DOLLAR-DENOMINATED DEBT
(Cost $38,881,251) ............................ 38,763,527
----------
- ---------------------------------------------------------------------------------------------------------
FOREIGN-DENOMINATED DEBT -- 2.6%
ARGENTINA - 0.7% ARP 657,229 Republic of Argentina, Bonos de Consolidacion
(BOCON), Series 1, 3.5%, 4/1/01 ............... 307,815
----------
MEXICO -- 1.9% MXN 6,088,700 Certificados de la Tesoreria, 12/28/95 .............. 815,405
----------
TOTAL FOREIGN-DENOMINATED DEBT
(Cost $1,258,905) ............................. 1,123,220
----------
- ---------------------------------------------------------------------------------------------------------
U.S. DOLLAR-DENOMINATED CONVERTIBLE DEBT -- 1.5%
KOREA -- 1.2% 700,000 Ssangyong Oil Refining Co., 3%, 12/31/04 ............ 542,500
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
================================================================================
<TABLE>
<CAPTION>
Principal Market
Amount ($) (e) Value ($)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
MALAYSIA -- 0.3% 125,000 Telekom Malaysia Berhad, 4%, 10/3/04 ............... 113,750
----------
TOTAL U.S. DOLLAR-DENOMINATED CONVERTIBLE DEBT
(Cost $795,729) .............................. 656,250
----------
- ---------------------------------------------------------------------------------------------------------
PURCHASED OPTIONS -- 0.0%
5,000,000 Put on Venezuela Debt Conversion Bond
12/18/07, strike price $47.625, expires 11/13/95
(Cost $60,000) ............................... 16,395
----------
- ---------------------------------------------------------------------------------------------------------
COMMON STOCKS -- 5.3%
Shares
--------------
VENEZUELA 23,500 Alambres y Cables Venezolanos "C" (Alcave) (b)*
(Cost $2,350,000) ............................ 2,350,000
----------
- ---------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO - 100.0%
(Cost $44,393,885) (a) ....................... 43,957,392
==========
<FN>
* Non-income producing security.
(a) The cost of the investment portfolio for federal income tax purposes was $44,997,590. At October 31, 1995, net unrealized
depreciation for all securities based on tax cost was $1,040,198. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost of $510,241 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost over market value of $1,550,439.
(b) Security valued in good faith by the Valuation Committee of the Board of Directors. The cost of this security at October 31,
1995 was $2,350,000. See Note A of the Notes to Financial Statements.
(c) When issued or forward delivery securities. See Note A of the Notes to Financial Statements.
(d) At October 31, 1995, these securities, in part or in whole, have been segregated to cover the when-issued or forward
delivery security.
(e) Principal amount is stated in U.S. dollars unless otherwise noted.
CURRENCY ABBREVIATIONS
ARP Argentine Peso
MXN Mexican Peso
</FN>
</TABLE>
<TABLE>
<CAPTION>
Transactions in written call options during the six months ended October 31, 1995 were:
Principal Premiums
Amount ($) Received ($)
---------------------------------------------
<S> <C> <C>
Outstanding at April 30, 1995 ............ 3,000,000 50,000
Contracts exercised .............. (3,000,000) (50,000)
---------------------------------------------
Outstanding at October 31, 1995 .......... -- --
========= ======
</TABLE>
The accompanying notes are an integral part of the financial statements
9
<PAGE>
<TABLE>
Scudder World Income Opportunities Fund, Inc.
Financial Statements
============================================================================================================
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $44,393,885) (Note A) ............ $43,957,392
Cash ..................................................................... 266
Receivables:
Investments sold ................................................. 1,194,990
Interest ......................................................... 732,210
Deferred organization expenses, net of accumulated amortization of $30,607
(Note A) ......................................................... 67,559
-----------
Total assets ............................................. 45,952,417
LIABILITIES
Payables:
Investments purchased ........................................... $1,174,990
When-issued and forward delivery securities (Note A) ............ 781,598
Dividends ....................................................... 42,559
Accrued management fee (Note C) ................................. 44,843
Other accrued expenses (Note C) ................................. 82,569
----------
Total liabilities ....................................... 2,126,559
-----------
Net assets, at market value ............................................. $43,825,858
===========
NET ASSETS
Net assets consist of:
Undistributed net investment income ............................. $ 599,305
Accumulated net realized loss ................................... (4,807,632)
Unrealized appreciation (depreciation) on:
Investments ............................................. (436,493)
Foreign currency related transactions ................... (16,844)
Common stock .................................................... 34,158
Additional paid-in capital ...................................... 48,453,364
-----------
Net assets, at market value ............................................. $43,825,858
NET ASSET VALUE per share ($43,825,858 [division sign] 3,415,756 shares of common stock
outstanding, $.01 par value, 100,000,000 shares authorized) ..... $12.83
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
- ----------------------------------------------------------------------------
10
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED OCTOBER 31, 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest .................................................... $3,026,332
Expenses:
Management fee (Note C) ............................. $ 263,657
Directors' fees and expenses (Note C) ............... 50,799
Custodian fees ...................................... 65,421
Reports to shareholders ............................. 29,997
Auditing ............................................ 39,030
Legal ............................................... 20,487
Services to shareholders ............................ 37,176
Amortization of organization expenses (Note A) ...... 9,898
Other ............................................... 28,473 544,938
---------- ----------
Net investment income ....................................... 2,481,394
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investments ......................................... (1,811,961)
Foreign currency related transactions ............... 37,464 (1,774,497)
----------
Net unrealized appreciation (depreciation) during the period on:
Investments ......................................... 4,074,055
Options ............................................. 40,150
Foreign currency related transactions ............... (27,690) 4,086,515
---------- ----------
Net gain on investments ..................................... 2,312,018
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $4,793,412
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
11
<PAGE>
<TABLE>
Scudder World Income Opportunities Fund, Inc.
Financial Statements (continued)
============================================================================================================
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
INCREASE (DECREASE) IN NET ASSETS OCTOBER 31,1995 APRIL 30,1995
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ................................. $ 2,481,394 $ 4,629,202
Net realized loss from investment transactions ........ (1,774,497) (1,790,396)
Net unrealized appreciation (depreciation) on investment
transactions during the period ................ 4,086,515 (3,476,795)
----------- -----------
Net increase (decrease) in net assets resulting from operations 4,793,412 (637,989)
----------- -----------
Distributions to shareholders from:
Net investment income ($.68 and $1.24 per share,
respectively) ................................. (2,321,582) (4,229,517)
Net realized gains from investment transactions ----------- -----------
($.38 per share) .............................. -- (1,285,161)
Fund share transactions: ----------- -----------
Reinvestment of distributions ......................... 80,495 30,632
----------- -----------
INCREASE (DECREASE) IN NET ASSETS ............................. 2,552,325 (6,122,035)
Net assets at beginning of period ............................. 41,273,533 47,395,568
----------- -----------
NET ASSETS AT END OF PERIOD (including undistributed net
investment income of $599,305 and $439,493, respectively) $43,825,858 $41,273,533
=========== ===========
OTHER INFORMATION
INCREASE IN FUND SHARES
Shares outstanding at beginning of period ..................... 3,409,266 3,406,900
----------- -----------
Shares issued to shareholders in reinvestment of distributions 6,490 2,366
----------- -----------
Shares outstanding at end of period 3,415,756 3,409,266
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
12
<PAGE>
<TABLE>
Financial Highlights
================================================================================
- --------------------------------------------------------------------------------
<CAPTION>
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD AND OTHER
PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL STATEMENTS AND MARKET PRICE DATA.
- ---------------------------------------------------------------------------------------------------
FOR THE PERIOD
SIX MONTHS YEAR APRIL 11, 1994
ENDED ENDED (COMMENCEMENT OF
OCTOBER 31, APRIL 30 OPERATIONS) TO
1995 1995 APRIL 30, 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period ............. $12.11 $13.91 $14.20(b)
------ ------ ------
Income from investment operations:
Net investment income (a) ................ .73 1.36 .03
Net realized and unrealized gain (loss) on investment
transactions .................... .67 (1.54) (.32)
------ ------ ------
Total from investment operations ................. 1.40 (.18) (.29)
------ ------ ------
Less distributions from:
Net investment income .................... (.68) (1.24) --
Net realized gains on investment transactions -- (.38) --
------ ------ ------
Total distributions .............................. (.68) (1.62) --
------ ------ ------
Net asset value, end of period ................... $12.83 $12.11 $13.91
====== ====== ======
Market value, end of period ...................... $12.50 $12.75 $14.00
====== ====== ======
TOTAL RETURN
Per share market value (%) ....................... 3.41** 3.17 (6.67)**
Per share net asset value (%) (c) ................ 11.74** (1.37) (2.04)**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) ........... 44 41 47
Ratio of operating expenses to average net assets (%) 2.46* 2.30 2.74*
Ratio of net investment income to average net assets (%) 11.21* 9.94 3.73*
Portfolio turnover rate (%) 444.9* 232.8 266.3*
<FN>
* Annualized
** Not annualized
(a) Based on monthly average shares outstanding during the period.
(b) Beginning per share amount reflects $15.00 initial public offering price net of underwriting discount and offering expenses
($0.80 per share).
(c) Total investment returns reflect changes in net asset value per share during each period and assumes that dividends and capital
gains distributions, if any, were reinvested. These percentages are not an indication of the performance of a shareholder's
investment in the Fund based on market.
</FN>
</TABLE>
- --------------------------------------------------------------------------------
13
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Scudder World Income Opportunities Fund, Inc.
Notes to Financial Statements
================================================================================
A. SIGNIFICANT ACCOUNTING POLICIES
-------------------------------
Scudder World Income Opportunities Fund, Inc. (the "Fund") is registered under
the Investment Company Act of 1940, as amended, as a non-diversified,
closed-end management investment company. The policies described below are
followed consistently by the Fund in the preparation of its financial
statements in conformity with generally accepted accounting principles.
SECURITY VALUATION. Portfolio debt securities with remaining maturities greater
than sixty days are valued by pricing agents approved by the officers of the
Fund, which quotations reflect broker/dealer-supplied valuations and electronic
data processing techniques. If the pricing agents are unable to provide such
quotations, the most recent bid quotation supplied by a bona fide market maker
shall be used. Short-term investments having a maturity of sixty days or less
are valued at amortized cost.
All other securities are valued at fair value as determined in good faith by
the Valuation Committee of the Board of Directors although the actual
calculation may be done by others. The securities valued in good faith by the
Valuation Committee of the Board of Directors at fair value amounted to
$2,350,000 (5.36% of net assets) and have been noted in the Investment
Portfolio as of October 31, 1995.
OPTIONS. An option contract is a contract in which the writer of the option
grants the buyer of the option the right to purchase from (call option), or
sell to (put option), the writer a designated instrument at a specified price
within a specified period of time. Certain options, including options on
indices, will require cash settlement by the Fund if the option is exercised.
During the period, the Fund purchased put options on securities as a hedge
against potential adverse price movements in the value of portfolio assets. If
the Fund writes an option and the option expires unexercised, the Fund will
realize income, in the form of a capital gain, to the extent of the amount
received for the option (the "premium"). If the Fund elects to close out the
option it would recognize a gain or loss based on the difference between the
cost of closing the option and the initial premium received. If the Fund
purchased an option and allows the option to expire it would realize a loss to
the extent of the premium paid. If the Fund elects to close out the option it
would recognize a gain or loss equal to the difference between the cost of
acquiring the option and the amount realized upon the sale of the option.
The gain or loss recognized by the Fund upon the exercise of a written call or
purchased put option is adjusted for the amount of option premium. If a
written put or purchased call option is exercised the Fund's cost basis of the
acquired security or currency would be the exercise price adjusted for the
amount of the option premium.
The liability representing the Fund's obligation under an exchange traded
written option or investment in a purchased option is valued at the last sale
price or, in the absence of a sale, the mean between the closing bid and asked
price or at the most recent asked price (bid for purchased options) if no bid
and asked price are available. Over-the-counter written or purchased options
are valued using dealer supplied quotations.
When the Fund writes a covered call option, the Fund foregoes, in exchange for
the premium, the opportunity to profit during the option period from an
increase in the market value of the underlying security or currency above the
exercise price. When the Fund writes a put option it accepts the risk of a
decline in the market value of the underlying security
14
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================================================================================
or currency below the exercise price. Over-the-counter options have the risk of
the potential inability of counterparties to meet the terms of their contracts.
The Fund's maximum exposure to purchased options is limited to the premium
initially paid. In addition, certain risks may arise upon entering into option
contracts including the risk that an illiquid secondary market will limit the
Fund's ability to close out an option contract prior to the expiration date
and, that a change in the value of the option contract may not correlate
exactly with changes in the value of the securities or currencies hedged.
WHEN-ISSUED AND FORWARD DELIVERY SECURITIES. The Fund may purchase securities
on a when-issued or forward delivery basis, for payment and delivery at a later
date. The price of such securities, which may be expressed in yield terms, is
fixed at the time the commitment to purchase is made, but delivery and payment
take place at a later time. At the time the Fund makes the commitment to
purchase a security on a when-issued or forward delivery basis, it will record
the transaction and reflect the value of the security in determining its net
asset value. During the period between purchase and settlement, no payment is
made by the Fund to the issuer and no interest accrues to the Fund. At the time
of settlement, the market value of the security may be more or less than the
purchase price. The Fund will establish a segregated account in which it will
maintain cash and/or liquid debt securities equal in value to commitments for
when-issued or forward delivery securities.
FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S.
dollars on the following basis:
(i) market value of investment securities, other assets and
liabilities at the daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and
interest income and certain expenses at the daily rates of
exchange prevailing on the respective dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes
in market prices of the investments. Such fluctuations are included with the
net realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes currency gains and losses between trade and settlement
dates on securities transactions, gains and losses arising from the sales of
foreign currency, and gains and losses between the ex and payment dates on
dividends, interest, and foreign withholding taxes.
FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements of
the Internal Revenue Code which are applicable to regulated investment
companies, and to distribute substantially all of its investment company
taxable income to its shareholders. Accordingly, the Fund paid no federal
income taxes, and no federal income tax provision was required.
In addition, from November 1, 1994 through April 30, 1995, the Fund incurred
$2,457,666 of net realized capital losses and $84,933 of net realized currency
losses. As permitted by tax regulations, the Fund intends to elect to defer
these losses and treat them as arising in the fiscal year ended April 30, 1996.
15
<PAGE>
Scudder World Income Opportunities Fund, Inc.
Notes to Financial Statements (continued)
================================================================================
DISTRIBUTION OF INCOME AND GAINS. The Fund's policy is to declare and pay
distributions to shareholders of substantially all net investment income of the
Fund quarterly. Net realized gains from investment transactions in excess of
available capital loss carryforwards, which would be taxable to the Fund if not
distributed, will be distributed to shareholders annually. Distributions to
shareholders are recorded on the ex-dividend date. An additional distribution
may be made to the extent necessary to avoid the payment of a four percent
federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations which may differ from generally accepted accounting principles.
These differences relate primarily to foreign currency denominated investments.
As a result, net investment income (loss) and net realized gain (loss) on
investment transactions for a reporting period may differ significantly from
distributions during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
The Fund uses the specific identification method for determining realized gain
or loss on investments for both financial and federal income tax reporting
purposes.
ORGANIZATION COSTS. Costs incurred by the Fund in connection with its
organization have been deferred and are being amortized on a straight-line
basis over a five-year period.
OTHER. Investment securities transactions are accounted for on a trade-date
basis. Interest income is recorded on the accrual basis. Discount on securities
purchased is accreted on an effective yield basis over the life of the
security. Dividend income is recorded on the ex-dividend date.
B. PURCHASES AND SALES OF SECURITIES
---------------------------------
During the six months ended October 31, 1995, purchases and sales of investment
securities (excluding short-term investments) aggregated $95,376,264 and
$90,710,449, respectively.
C. RELATED PARTIES
---------------
Under the Fund's Investment Advisory, Management and Administration Agreement
(the "Management Agreement") with Scudder, Stevens & Clark, Inc. (the
"Manager"), the Manager directs the investments of the Fund in accordance with
the Fund's investment objectives, policies, and restrictions and under the
direction and control of the Fund`s Board of Directors. In addition to
portfolio management services, the Manager provides certain administrative
services in accordance with the Management Agreement. The Fund pays to the
Manager a monthly fee at an annualized rate of 1.20% of the average weekly net
assets of the Fund. For the six months ended October 31, 1995, the fee pursuant
to such agreement amounted to $263,657, of which $44,843 is unpaid at October
31, 1995.
The Fund pays each Director not affiliated with the Manager $6,000 annually,
plus specified amounts for attended board and committee meetings. For the six
months ended October 31, 1995, Directors' fees and expenses aggregated $50,799.
D. CREDIT RISK
-----------
The yields of emerging country debt obligations reflect perceived credit risk,
the need to compete with other local investments in potentially illiquid
domestic financial markets and the difficulty in raising hard currencies to
meet external debt servicing requirements. The consequences of political,
social, economic or diplomatic changes may have disruptive effects on the
market prices of investments held by the Fund.
16
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================================================================================
<TABLE>
<CAPTION>
E. QUARTERLY RESULTS OF OPERATIONS (000 OMITTED) (UNAUDITED)
---------------------------------------------------------
NET INCREASE
NET GAIN (LOSS (DECREASE) IN NET
QUARTER INVESTMENT NET INVESTMENT ON INVESTMENT ASSETS RESULTING
ENDED INCOME INCOME TRANSACTIONS FROM OPERATIONS
- ------- ---------- -------------- -------------- -----------------
PER PER PER PER
FISCAL 1996 TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE
- ----------- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
July 31, 1,644 .48 1,385 .41 1,515 .44 2,900 .85
October 31, 1,382 .41 1,096 .32 797 .23 1,893 .55
------ ----- ------ ----- ------ ----- ------ -----
Totals $3,026 $ .89 $2,481 $ .73 $2,312 $ .67 $4,793 $1.40
====== ===== ====== ===== ====== ===== ====== =====
PER PER PER PER
FISCAL 1995 TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE
- ----------- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
July 31, 1,501 .44 1,182 .35 (1,574) (.46) (392) (.11)
October 31, 1,315 .39 1,035 .30 3,354 .98 4,389 1.28
January 31, 1,414 .42 1,174 .34 (5,902) (1.72) (4,728) (1.38)
April 30, 1,470 .42 1,238 .37 (1,145) (.34) 93 .03
------ ----- ------ ----- ------ ----- ------ -----
Totals $5,700 $1.67 $4,629 $1.36 $(5,267) $(1.54) $ (638) $(.18)
====== ===== ====== ===== ====== ===== ====== =====
</TABLE>
17
<PAGE>
Scudder World Income Opportunities Fund, Inc.
Report of Independent Accountants
================================================================================
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF SCUDDER WORLD INCOME
OPPORTUNITIES FUND, INC.:
We have audited the accompanying statement of assets and liabilities of Scudder
World Income Opportunities Fund, Inc., including the investment portfolio, as
of October 31, 1995, the related statement of operations for the six months
then ended, the statements of changes in net assets for the six months then
ended and for the year ended April 30, 1995, and the financial highlights for
the six month period ended October 31, 1995, for the year ended April 30, 1995
and for the period April 11, 1994 (commencement of operations) to April 30,
1994. These financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements.
Our procedures included confirmation of securities owned as of October 31,
1995, by correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder World Income Opportunities Fund, Inc. as of October 31, 1995, the
results of its operations for the six months then ended, the changes in its net
assets for the six months then ended and for the year ended April 30, 1995, and
the financial highlights for the six month period ended October 31, 1995, for
the year ended April 30, 1995 and for the period April 11, 1994 (commencement
of operations) to April 30, 1994 in conformity with generally accepted
accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
December 14, 1995
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<PAGE>
Scudder World Income Opportunities Fund, Inc.
Shareholder Meeting Results
The Annual Meeting of Shareholders of Scudder World Income Opportunities Fund,
Inc. was held on Tuesday, October 24, 1995, at the offices of Scudder, Stevens &
Clark, Inc., 25th Floor, 345 Park Avenue, New York, New York. The three matters
voted upon by Shareholders and the resulting votes for each matter are presented
below.
1. The election of two Directors to hold office for a term of three years
or until their respective successors shall have been duly elected and
qualified.
Director: Number of Votes:
--------- ----------------
For Withheld Broker Non-Votes*
--- -------- -----------------
Robert J. Boyd 3,228,816 49,652 0
Ronaldo A. da Frota Nogueira 3,231,103 47,366 0
2. Ratification or rejection of the action taken by the Board of Directors
in selecting Coopers & Lybrand L.L.P. as independent accountants for the
fiscal year ending April 30, 1996.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
3,218,893 13,254 46,322 0
3. Approval or disapproval of the continuance of the Investment Advisory,
Management and Administration Agreement between the Fund and Scudder,
Stevens & Clark, Inc.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
3,165,835 35,552 67,292 9,790
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary
power to vote on a particular matter.
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<PAGE>
Scudder World Income Opportunities Fund, Inc.
Dividend Reinvestment Plan
The Plan
The Fund's Dividend Reinvestment Plan (the "Plan") offers you an automatic
way to reinvest your dividends and capital gains distributions in shares of the
Fund.
Automatic Participation
Each shareholder of record is automatically a participant in the Plan unless
the shareholder has instructed the Plan Agent in writing otherwise. Such a
notice must be received by the Plan Agent not less than 10 days prior to the
record date for a dividend or distribution in order to be effective with respect
to that dividend or distribution. A notice which is not received by that time
will be effective only with respect to subsequent dividends and distributions.
Shareholders who do not participate in the Plan will receive all
distributions in cash paid by check in dollars mailed directly to the
shareholder by State Street Bank and Trust Company, as dividend paying agent.
Shares Held by a Nominee
If your shares are held in the name of a brokerage firm, bank, or other
nominee as the shareholder of record, please consult your nominee (or any
successor nominee) to determine whether it is participating in the Plan on your
behalf. Many nominees are generally authorized to receive cash dividends unless
they are specifically instructed by a client to reinvest. If you would like your
nominee to participate in the Plan on your behalf, you should give your nominee
instructions to that effect as soon as possible.
Pricing of Dividends and Distributions
If the market price per share on the payment date for the dividend or
distribution (the "Valuation Date") equals or exceeds net asset value per share
on that date, the Fund will issue new shares to participants at the greater of
the following on the Valuation Date: (a) net asset value, or (b) 95% of the
market price. The Valuation Date will be the dividend or distribution payment
date or, if that date is not a New York Stock Exchange trading date, the next
preceding trading date. If the net asset value exceeds the market price of Fund
shares at such time, participants in the Plan are considered to have elected to
receive shares of stock from the Fund, valued at market price, on the Valuation
Date. In either case, for Federal income tax purposes, the shareholder receives
a distribution equal to the market value on Valuation Date of new shares issued.
State and local taxes may also apply. If the Fund should declare an income
dividend or net capital gains distribution payable only in cash, the Plan Agent
will, as agent for the participants, buy Fund shares in the open market, on the
New York Stock Exchange or elsewhere, for the participants' account on, or
shortly after, the payment date.
Participant Plan Accounts
The Plan Agent maintains all participant accounts in the Plan and furnishes
written confirmation of all transactions in the account, including information
needed by participants for personal and tax records. Shares in the account of
each plan participant will be held by the Plan Agent in non-certificated form in
the name of the participant, and each participant will be able to vote those
shares purchased pursuant to the Plan at a shareholder meeting or by proxy.
No Service Fee to Reinvest
There is no service fee charged to participants for reinvesting dividends or
distributions from net realized capital gains. The Plan Agent's fees for the
handling of the reinvestment of dividends and capital gains distributions will
be paid by the Fund. There will be no brokerage commissions with respect to
shares issued directly by the Fund as a result of dividends or capital gains
distributions payable either in stock or in cash. However, participants will pay
a pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of any
dividends or capital gains distributions payable only in cash.
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<PAGE>
Amendment or Termination
The Fund and the Plan Agent each reserve the right to terminate the Plan.
Notice of the termination will be sent to the participants of the Plan at least
30 days before the record date for a dividend or distribution. The Plan also may
be amended by the Fund or the Plan Agent, but (except when necessary or
appropriate to comply with applicable law, rules or policies of a regulatory
authority) only by giving at least 30 days' written notice to participants in
the Plan.
A participant may terminate his account under the Plan by written notice to
the Plan Agent. If the written notice is received 10 days before the record day
of any distribution, it will be effective immediately. If received after that
date, it will be effective as soon as possible after the reinvestment of the
dividend or distribution.
If a participant elects to sell his shares before the Plan is terminated, the
Plan Agent will deduct a $2.50 fee plus brokerage commissions from the sale
transaction.
Plan Agent Address and Telephone Number
You may obtain more detailed information by requesting a copy of the Plan
from the Plan Agent. All correspondence (including notifications) should be
directed to: Scudder World Income Opportunities Fund, Inc. Dividend Reinvestment
Plan, c/o State Street Bank and Trust Company, P.O. Box 8200, Boston, MA
02266-8200, (617) 328-5000, ext. 6406.
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Investment Manager
and Administrator
The investment manager and administrator of Scudder World Income
Opportunities Fund, Inc. (the "Fund") is Scudder, Stevens & Clark, Inc., one of
the most experienced investment management and investment counsel firms in the
United States. Established in 1919, the firm provides investment counsel for
individuals, investment companies and institutions. Scudder has offices
throughout the United States and subsidiaries in London and Tokyo.
Scudder has been active in international investment management for over 40
years. It manages Scudder International Fund, which was initially incorporated
in Canada in 1953 as the first foreign investment company registered with the
United States Securities and Exchange Commission. Scudder's investment company
clients include seven other open-end investment companies which invest
worldwide.
In addition to the Fund, Scudder also manages the assets of seven other
closed-end investment companies which invest in foreign securities: The
Argentina Fund, Inc. (investing primarily in equity securities of Argentine
issuers), The Brazil Fund, Inc. (investing in securities, primarily equity
securities, of Brazilian issuers), The First Iberian Fund, Inc. (investing
primarily in Spanish and Portuguese equity securities), The Korea Fund, Inc.
(investing in a broad spectrum of Korean companies), The Latin America Dollar
Income Fund, Inc. (investing principally in Latin American debt instruments),
Scudder New Asia Fund, Inc. (investing in a broad spectrum of Asian companies),
and Scudder New Europe Fund, Inc. (investing in equity securities traded in
smaller or emerging European securities markets).
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<PAGE>
Directors and Officers
EDMOND D. VILLANI*
Chairman of the Board and Director
LYNN S. BIRDSONG*
President and Director
ROBERT J. BOYD
Director
ROBERT J. CALLANDER
Director
GEORGE M. LOVEJOY, JR.
Director
RONALDO A. DA FROTA NOGUEIRA
Director
DR. SUSAN KAUFMAN PURCELL
Director
JERARD K. HARTMAN*
Vice President
DAVID S. LEE*
Vice President
JURIS PADEGS*
Vice President
LINCOLN Y. RATHNAM*
Vice President
M. ISABEL SALTZMAN*
Vice President
PAUL J. ELMLINGER*
Vice President and Assistant Secretary
EDWARD J. O'CONNELL*
Vice President and Assistant Treasurer
KATHRYN L. QUIRK*
Vice President and Assistant Secretary
THOMAS F. McDONOUGH*
Secretary
PAMELA A. McGRATH*
Treasurer
COLEEN DOWNS DINNEEN*
Assistant Secretary
* Scudder, Stevens & Clark, Inc.
23
