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Scudder
World Income
Opportunities
Fund, Inc.
Annual Report
April 30, 1997
A non-diversified closed-end investment company seeking high current income as
its primary objective and capital appreciation as a secondary objective through
investment principally in global income and, to a limited extent, emerging
country equity securities.
<PAGE>
Scudder World Income
Opportunities Fund, Inc.
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Investment objectives and policies
o primarily high current income and secondarily capital appreciation through
investment principally in global income and, to a limited extent, emerging
country equity securities
Investment characteristics
o closed-end, non-diversified investment company investing principally in a
portfolio of global income and, to a limited extent, emerging country equity
securities
o a vehicle for international investment through participation in the economies
of emerging market countries
General Information
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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: 1-800-426-5523
Boston EquiServe L.P.
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
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In Brief 3
Letter to Shareholders 3
Other Information 6
Investment Summary 7
Portfolio Summary 8
Investment Portfolio 9
Financial Statements 13
Financial Highlights 16
Notes to Financial Statements 17
Report of Independent Accountants 21
Dividend Reinvestment Plan 23
Directors and Officers 25
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
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o During Scudder World Income Opportunities Fund's most recent fiscal year,
emerging market bonds continued to post strong gains as emerging countries
benefited from improving credit fundamentals.
o Reflecting this favorable environment, Scudder World Income Opportunities
Fund posted a 29.08% total return based on net asset value for its most
recent fiscal year ended April 30, 1997. The Fund's total return based on its
share price on the New York Stock Exchange was 36.68% for the same period.
o The Fund continues to maintain a liquid, varied portfolio -- with bonds
issued in Latin America, Eastern Europe, the Middle East, Northern Africa,
and Asia -- that we believe is well positioned to benefit from the improving
balance sheets of emerging countries while earning a high level of current
income.
Letter to Shareholders
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Dear Shareholders:
Emerging debt markets posted positive returns during the 12 months ended
April 30, 1997, as investor interest continued to broaden, and bonds benefited
from favorable economic conditions and the improving credit quality of emerging
countries. The Fund ended its fiscal year with a net asset value ("NAV") of
$15.94, up from $14.66 on April 30, 1996. The total distributions for the period
were $2.65, comprised of $1.31 in income distributions, $1.21 in short-term
capital gains and $0.13 in long-term capital gains. For the twelve month period
ending April 30, 1997, the Fund posted a 29.08% total return based on NAV. The
unmanaged J.P. Morgan Emerging Markets Bond Index (EMBI) during the same period
returned 29.02%. Since its inception on April 11, 1994, through April 30, 1997,
the Fund's cumulative total return based on NAV was 67.75%, compared with the
Index's return of 74.78%.
During the Fund's fiscal year ended April 30, 1997, the Fund's share price on
the New York Stock Exchange rose from $13.125 to $14.375, contributing to a
total return of 36.68%. The $14.375 price of the shares on April 30, 1997,
represented a 9.8% discount to the Fund's NAV.
The long-term environment for emerging market bonds remains fundamentally
favorable, and credit rating announcements concerning several emerging countries
during the past six months reflected the improving credit quality of the sector
as a whole. In January, both Croatia and Egypt received initial investment grade
credit ratings of BBB- from Standard & Poor's, and in February, Panama received
a credit rating of BB+, higher than anticipated by the market. In addition,
Argentina, Brazil, and the Philippines all received credit rating upgrades from
Standard & Poor's in 1997. The upgrades for Argentina and Brazil were awarded
earlier than expected by market participants, and may help to widen the investor
base for both countries' sovereign bonds.
In April, Standard & Poor's also announced a major modification to its
ratings criteria for emerging market corporate bonds which for the first time
allows the ratings to exceed those of the country in which the issuer is
headquartered. This change in methodology is based on the rating agency's belief
that corporate exposure to sovereign risk in countries whose currencies are
pegged to the U.S. dollar is reduced if the governments are not expected to
interfere with private borrowers' access to foreign currency during a crisis.
The move was welcomed in Argentina, where 12 companies subsequently received
investment grade ratings. The effect of the improvement in emerging market
country credit quality was reflected in lower interest rates and higher bond
prices among emerging market bonds as a whole. This favorable trend was
interrupted in March and early April as the U.S. Treasury market as well as
emerging fixed income markets retraced due to an increase in the Fed Funds rate
in March and the anticipation of a further interest rate hike in May. As the
fear of an additional rate hike in May subsided, the U.S. Treasury market
3
<PAGE>
rallied leading to a strong performance in emerging market bonds.
Portfolio Strategy
Because of expected volatility in the U.S. Treasury market resulting from the
fear of interest rate hikes, we increased our emphasis on floating rate
instruments from 55% to 75% during the period. Floating rate assets generally
carry a shorter duration because their coupons reset every six months in
relation to the London Interbank Offered Rate, or LIBOR. (Duration is a measure
of a bond's responsiveness to interest rate fluctuations; the shorter the
duration, the less sensitive the bond is to rate changes.) This strategy
continued to work to the Fund's advantage as floating-rate securities performed
well, with an average total return of 29.19%.
As we've reported in the past, we continue to maintain a liquid portfolio --
with bonds issued in Latin America, eastern Europe, the Middle East, northern
Africa, and Asia -- that is well positioned to benefit from the improved
economic picture in many emerging countries while at the same time earning a
high level of current income. Region, country, and security selection all remain
central to the Fund's strategy.
In terms of regional allocation, Latin America continued to make up the
highest percentage of Fund assets -- approximately 65%. The Fund's core Latin
America holdings are in Brazil (26%), Argentina (16%), Venezuela (11%), and
Mexico (9%). We increased our holdings in Argentina during the period following
the announcement that the country fulfilled its first quarter 1997 IMF budget
requirements. There was other good news from Argentina during the period:
Industrial production has been strong, debt requirements have been dramatically
reduced, and Argentine companies are already benefiting from the above-mentioned
change in Standard & Poor's corporate ratings criteria. We are hopeful that
much-needed labor reform to lift restrictions on employers, reduce unemployment,
and boost the "bottom line" of companies will take place soon.
We were cautious in making new commitments to Brazil and reduced our holdings
in Mexico during the six-month period for reasons also related to economic and
political reform. Though we believe Brazil's long-term prospects are extremely
bright, the country faces delays in needed administrative reforms and other
short-term economic obstacles. Legislative reform allowing President Cardoso to
run for reelection has not yet provided hoped-for momentum to administrative
reforms. Brazil faces additional challenges, including a fiscal deficit and a
widening trade deficit fed by an overexpansion of consumer credit.
In the case of Mexico, we reduced our holdings following a period of solid
performance by Mexican sovereign bonds. This reflects our concern that political
uncertainty stemming from upcoming elections could cause Mexican bonds to
underperform in the near term despite positive economic fundamentals such as
decreasing inflation, strong GDP growth, strict fiscal and monetary policies,
and government buybacks. For these reasons, we would look to add Mexico on
weakness.
Elsewhere in Latin America, we closed out our holdings in Ecuador and Panama
for contrasting reasons. The Ecuadorian parliament removed President Bucaram
from office during the period and replaced him with Fabion Alarcon, the head of
Ecuador's parliament. We are concerned that Interim President Alarcon may lack
the support to execute the austerity measures needed to solve the country's
fiscal problems. By contrast, we remain optimistic about Panama's economic
outlook but took profits after a period of superior performance. We will look
for opportunities to add Panama sovereign bonds to the Fund's portfolio when
valuations there are once again attractive.
In Eastern Europe, the Fund took a first-time position in Bulgarian bonds in
anticipation of an election victory by the UDF, a coalition party oriented
toward democracy. The UDF's stated objectives include active measures against
crime and corruption, NATO membership, and gradual steps toward membership in
the European Union. The UDF prevailed in convincing fashion, and we believe the
4
<PAGE>
implementation of the party's initiatives and clear progress toward economic
reform should result in outperformance by Bulgarian Brady bonds in the near
term.
We also increased our position in Russia, where relations with the
international financial community have improved, as evidenced by the World
Bank's commitment to provide $6 billion in fiscal support for the next two
years. Another sign that Russia is headed for better fiscal health is the recent
reintroduction of reformers to President Yeltsin's cabinet.
In the past twelve months, we have added local currency assets to the
portfolio. Local currency instruments are a large, liquid, and growing asset
class that provides attractive yields and potential for currency appreciation.
In addition, these instruments tend to exhibit lower volatility than the
currencies of G7 countries and Brady bonds. Because their prices and yields move
independently of emerging market bonds and other asset classes, local currency
instruments can also provide effective portfolio diversification. Currently,
approximately 18% of the portfolio is in local currency assets in countries such
as Greece, Egypt, South Africa, Chile, and Poland.
Our Outlook
We continue to believe that improving credit fundamentals in many emerging
countries will provide a strong foundation for the performance of emerging
country debt. A favorable global interest rate environment coupled with strong
demand for dollar assets will continue to support emerging market fixed income
assets. The adherence to tight fiscal policy and prudent monetary policy, the
strong flow of foreign direct investment and the active balance sheet management
by emerging countries in Latin America and Eastern Europe will result in
improving creditworthiness.
Finally, the discount to net asset value at which the Fund trades on the NYSE
is discussed in detail at each Board meeting. We are continually reviewing
discount-closing alternatives in the market and will continue to do so. Although
many funds have tried to close their discounts by implementing one or more of
these techniques, as of this date we have not seen one, other than open ending
the Fund, that has lowered the discount for a sustained period of time. The
Board at this time has opted not to implement any of these techniques and has
decided that the investment objective of this Fund and current portfolio
composition, which includes relatively illiquid investments, are best served in
a closed-end fund format. The Board is pleased with the performance of the Fund
on both a price and NAV basis over the past year. Also, we have made great
efforts to convey this performance to the brokerage community and analysts who
follow closed-end funds.
We are pleased that you are an investor in 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
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Other Information
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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 a leader 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 nine other open-end investment companies which invest primarily
in foreign securities.
In addition to the Fund, Scudder also manages the assets of seven other
closed-end investment companies which invest in foreign securities: The
Argentina Fund, The Brazil Fund, The First Iberian Fund, The Korea Fund, The
Latin America Dollar Income Fund, Scudder New Asia Fund, and Scudder New Europe
Fund.
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.
Lead Portfolio Manager Susan Gray, who joined Scudder in 1987, sets the
investment strategy for the Fund. Ms. Gray and Portfolio Manager Isabel Saltzman
share responsibility for the day-to-day management of the fixed-income component
of the portfolio. Ms. Saltzman, who joined Scudder in 1990, has been involved in
foreign finance and investing since 1979. 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 Plan
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 23.
Net Asset Value
The Fund's NAV is published every Monday in The Wall Street Journal under the
heading "Closed End Funds." The Fund's NAV is also published in The New York
Times and Barron's.
As a service to overseas shareholders, the Fund's NAV is listed daily in The
Financial Times ("FT"). 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.
6
<PAGE>
SCUDDER WORLD INCOME OPPORTUNITIES FUND, INC.
INVESTMENT SUMMARY AS OF APRIL 30, 1997
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HISTORICAL
INFORMATION
LIFE OF FUND
<TABLE>
<CAPTION>
TOTAL RETURN (%)
---------------------------------------------------------------------------
MARKET VALUE NET ASSET VALUE (b) INDEX (a)
----------------------- ----------------------- ----------------------
AVERAGE AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL
----------------------- ----------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
CURRENT QUARTER (2.80)% -- 1.00% -- 1.14% --
ONE YEAR 36.68% 36.68% 29.08% 29.08% 29.02% 29.02%
LIFE OF FUND* 50.55% 14.33% 67.75% 18.45% 74.78% 20.06%
</TABLE>
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PER SHARE INFORMATION AND RETURNS (b)
YEARLY PERIODS ENDED APRIL 30
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) with the exact
data points listed in the table below.
<TABLE>
<CAPTION>
1994* 1995 1996 1997
-----------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE ....... $13.91 $12.11 $14.66 $15.94
INCOME DIVIDENDS ...... $ -- $ 1.24 $ 1.39 $ 1.31
CAPITAL GAINS
DISTRIBUTIONS ......... $ -- $ 0.38 $ -- $ 1.34
TOTAL RETURN (%) ...... -2.04 -1.37 34.53 29.08
</TABLE>
(a) J.P. Morgan Emerging Markets Bond Index
(b) Total investment returns reflect changes in net asset value per share
during each period and assume that dividends and capital gains
distributions, if any, were reinvested. These percentages are not an
indication of the performance of a shareholder's investment in the Fund
based on market price.
* The Fund commenced operations on April 11, 1994.
PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE OF THE
FUND.
7
<PAGE>
SCUDDER WORLD INCOME OPPORTUNITIES FUND, INC.
PORTFOLIO SUMMARY AS OF APRIL 30, 1997
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INVESTMENT ALLOCATION (EXCLUDES 9% CASH EQUIVALENTS)
Sovereign Bonds 80%
Corporate Bonds 16%
Equities 4%
---
100%
===
A graph in the form of a pie chart appears here,
illustrating the exact data points in the
above table.
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INTEREST RATE SENSITIVITY (EXCLUDES 9% CASH EQUIVALENTS)
Floating Rate Bonds 75%
Fixed Rate Bonds 15%
Non-Performing 6%
Equities 4%
---
100%
===
A graph in the form of a pie chart appears here,
illustrating the exact data points in the
above table.
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GEOGRAPHICAL (EXCLUDES 9% CASH EQUIVALENTS)
Brazil 29%
Argentina 18%
Venezuela 12%
Mexico 9%
Russia 7%
South Africa 5%
Morocco 5%
Greece 4%
Chile 3%
Other 8%
---
100%
===
A graph in the form of a pie chart appears here,
illustrating the exact data points in the
above table.
8
<PAGE>
SCUDDER WORLD INCOME OPPORTUNITIES FUND, INC.
INVESTMENT PORTFOLIO AS OF APRIL 30, 1997
<TABLE>
<CAPTION>
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Principal Market
Amount($)(e) Value($)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS -- 3.9%
2,208,000 Repurchase Agreement with Donaldson,
Lufkin & Jenrette dated 4/30/97 at
5.375% to be repurchased at $2,208,330
on 5/1/97, collateralized by a
$1,545,000 U.S. Treasury Note, 11.25%,
2/15/97 (Cost $2,208,000) .............. 2,208,000
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SHORT-TERM NOTES -- 5.3%
UNITED STATES 3,000,000 Student Loan Marketing Association
Discount Note, 5/1/97 (Cost $3,000,000) 3,000,000
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- ------------------------------------------------------------------------------------------------
U.S. DOLLAR-DENOMINATED DEBT -- 72.7%
Argentina -- 16.4% 238,161 Argentine Republic Bonos de Tesoreria
(BOTE 10), Floating Rate Bond,
5.627%, 4/1/00 ......................... 232,419
2,575,112 Argentine Republic, Bonos de Consolidacion
de Deudas Previsionales Pre 2 (BOCON),
Variable Rate Interest Bond, 5.5%,
4/1/01 ................................ 2,494,424
2,425,000 Argentine Republic, Floating Rate Bond,
Series L, LIBOR plus .8125% (6.75%),
3/31/05 (c) ............................ 2,224,938
3,250,000 Argentine Republic Discount Floating Rate
Collateralized Bond, Series L, 6.375%,
3/31/23 (c) ............................ 2,685,313
625,000 Argentine Republic, Collateralized Par Bond,
Series L, Step-up Coupon, 5.5%,
3/31/23 ................................ 407,813
1,250,000 Letras del Tesoro Discount Note,
8/15/97 .................................. 1,228,000
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9,272,907
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BRAZIL -- 26.3% 2,827,500 Federative Republic of Brazil, IDU Bond,
Floating Rate Bond, LIBOR plus .8125%
(6.5%), 1/1/01 ......................... 2,773,778
6,187,500 Federative Republic of Brazil, Eligible
Interest Floating Rate Bond, LIBOR
plus .8125% (6.875%), 4/15/06 (c) ...... 5,576,484
1,000,000 Federative Republic of Brazil, "New" Money
Bond, Floating Rate Bond, LIBOR plus .875%
(6.937%), 4/15/09 ...................... 848,750
3,782,500 Federative Republic of Brazil C Bond, 4.5%
with 3.5% Interest Capitalization,
4/15/14 (c) ............................ 2,865,244
3,500,000 Federative Republic of Brazil, Collateralized
Discount Bond, Floating Rate Bond, LIBOR
plus .8125% (6.875%) 4/15/24 ........... 2,813,125
----------
14,877,381
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
SCUDDER WORLD INCOME OPPORTUNITIES FUND, INC.
INVESTMENT PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
================================================================================================
- ------------------------------------------------------------------------------------------------
Principal Market
Amount($)(e) Value($)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BULGARIA -- 4.3% 2,000,000 Republic of Bulgaria, Past Due Interest
Floating Rate Bond, LIBOR plus .8125%
(6.563%), 7/28/11 ...................... 1,255,000
1,500,000 Republic of Bulgaria, Floating Rate
Interest Reduction, Step up Coupon
Collateralized Bond, "A", 2.25%,
7/28/12 ................................ 714,375
750,000 Republic of Bulgaria, Collateralized
Discount Floating Rate Bond, Tranche A,
LIBOR plus .8125% (6.563%), 7/28/24 .... 482,813
---------
2,452,188
---------
MEXICO -- 8.5% 1,750,000 United Mexican States Collateralized
Floating Rate Note Discount, (Detachable
Oil Price Indexed Value Recovery Rights),
Series B, 6.375%, 12/31/19 ............. 1,548,750
250,000 United Mexican States Collateralized
Floating Rate Note Discount, Series C,
(Detachable Oil Price Indexed Value
Recovery Rights), 6.375%, 12/31/19 ..... 221,250
500,000 United Mexican States, Collateralized
Discount Bond, Floating Rate Bond,
(Detachable Oil Price Indexed Value
Recovery Rights), Series A, LIBOR
plus .8125% (6.867%), 12/31/19 ......... 442,500
250,000 United Mexican States, Collateralized
Discount Bond, Floating Rate Bond,
(Detachable Oil Price Indexed Value
Recovery Rights), Series D, LIBOR
plus .8125% (6.352%), 12/31/19 ......... 221,250
2,500,000 United Mexican States, Collateralized Par
Bond, (Detachable Oil Price Indexed Value
Recovery Rights), Series B, 6.25%,
12/31/19 ............................... 1,812,500
750,000 United Mexican States, Collateralized Par
Bond, (Detachable Oil Price Indexed Value
Recovery Rights), Series A, 6.25%,
12/31/19 ............................... 543,750
---------
4,790,000
---------
MOROCCO -- 3.7% 2,400,000 Kingdom of Morocco, Restructuring and
Consolidation Agreement, Tranche A,
Floating Rate Bond, 6.375%, 1/1/09 ..... 2,109,000
---------
RUSSIA -- 5.9% 5,750,000 Russian Federation Principal Loans (When
issued), 12/15/20 (d) .................. 3,356,563
---------
VENEZUELA -- 7.7% 1,500,000 Republic of Venezuela, Collateralized
Par Bond, (Detachable Oil Price
Indexed Value Recovery Rights), Series A,
6.75%, 3/31/20 ......................... 1,089,375
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
================================================================================================
- ------------------------------------------------------------------------------------------------
Principal Market
Amount($)(e) Value($)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1,428,571 Republic of Venezuela, Collateralized
Front Loaded Interest Floating Rate
Reduction Bond, Series B, 6.750%,
3/31/07 .................................. 1,271,429
2,250,000 Republic of Venezuela, Debt Conversion
Bond, Floating Rate Bond, Series DL,
LIBOR plus .875% (6.5%), 12/18/07 ........ 1,988,438
----------
4,349,242
----------
TOTAL U.S. DOLLAR-DENOMINATED DEBT
(Cost $39,903,803) .......................41,207,281
----------
- ------------------------------------------------------------------------------------------------
FOREIGN-DENOMINATED DEBT -- 14.7%
CHILE -- 2.8% CLP 142,555,000 Citibank Time Deposit linked to Chilean
Peso, 13%, 5/28/97 ....................... 340,690
CLP 311,175,000 Citibank Time Deposit linked to Chilean
Peso, 10.7% 4/1/98 ....................... 740,775
CLP 207,400,000 Citibank Time Deposit linked to Chilean
Peso, 10.7% 4/2/98 ....................... 493,750
----------
1,575,215
----------
EGYPT -- 0.4% EGP 847,500 Citibank Time Deposit linked to Egyptian
Pound, 9%, 7/7/97 ........................ 249,875
----------
GREECE -- 3.9% GRD 303,300,000 Bankers Trust Co. Time Deposit, 9.31%,
5/14/97 .................................. 1,103,792
GRD 304,638,750 Deutsche Bank Time Deposit, 9.45%,
5/14/97 .................................. 1,108,664
----------
2,212,456
----------
MOROCCO -- .5% DEM 500,000 SNAP Limited, Morocco Repackaged Euro Note,
Kingdom of Morocco, Morocco Loan Tranch A,
11.5%, 1/29/09 ........................... 303,882
----------
POLAND -- 2.1% PLZ 3,846,250 ING Groep NV Time Deposit linked to Polish
Zloty, 21.25%, 9/22/97 ................... 1,213,279
----------
SOUTH AFRICA -- 4.9% ZAR 12,248,500 J.P. Morgan & Co. Time Deposit, 16.25%,
6/11/97 .................................. 2,753,710
----------
TOTAL FOREIGN-DENOMINATED DEBT
(Cost $8,435,313) ........................ 8,308,417
----------
- ------------------------------------------------------------------------------------------------
U.S. DOLLAR-DENOMINATED CONVERTIBLE DEBT -- 0.2%
MALAYSIA
125,000 Telekom Malaysia Berhad, 4%, 10/3/04
(Cost $125,000) ......................... 111,875
----------
- ------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
SCUDDER WORLD INCOME OPPORTUNITIES FUND, INC.
INVESTMENT PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
================================================================================================
- ------------------------------------------------------------------------------------------------
Market
Shares Value($)
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- 3.2%
VENEZUELA
417,283 Alambres y Cables Venezolanos "C" (Alcave)
(Cost $2,350,000)(b) ..................... 1,797,750
----------
- ------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $56,022,116)(a) .................... 56,633,323
==========
</TABLE>
* Non-income producing security.
(a) The cost of the investment portfolio for federal income tax purposes was
$56,283,087. At April 30, 1997, net unrealized appreciation for all
securities based on tax cost was $350,236. This consisted of aggregate
gross unrealized appreciation for all securities in which there was an
excess of market value over tax cost of $1,239,948 and aggregate gross
unrealized depreciation for all securities in which there was an excess of
tax cost over market value of $889,712.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $1,797,750 (3.3% of net assets). Their
values have been estimated by the Valuation Committee in the absence of
readily ascertainable market values. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the difference could be material. The cost of these
securities at April 30, 1997 aggregated $2,350,000. These securities may
also have certain restrictions as to resale.
(c) At April 30, 1997, these securities, in whole or in part, have been
segregated to cover when-issued securities.
(d) When-issued or forward delivery securities.
(e) Principal amount is stated in U.S. dollars unless otherwise noted.
Transactions in written call options during the year ended April 30, 1997 were:
<TABLE>
<CAPTION>
Principal Premiums
Amount($) Received($)
--------------------------------------
<S> <C> <C>
Outstanding at April 30, 1996 ...... -- --
Contracts opened ........... 1,500,000 3,300
Contracts closed ........... (1,500,000) (3,300)
--------------------------------------
Outstanding at April 30, 1997 ...... -- --
========== =====
</TABLE>
CURRENCY ABBREVIATIONS
CLP Chilean Peso
ZAR South African Rand
PLZ Polish Zloty
DEM German Deutsche Marks
EGP Egyptian Pounds
GRD Greek Drachma
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
SCUDDER WORLD INCOME OPPORTUNITIES FUND, INC.
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
================================================================================
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $56,022,116) .. $56,633,323
Cash .................................................. 483
Receivables:
Interest .......................................... 737,616
Investments sold .................................. 1,143,404
When-issued and forward delivery securities ........ 13,976,560
Unrealized appreciation on forward foreign
currency exchange contracts ........................ 3,103
Deferred organization expenses, (net of accumulated
amortization of $60,030) ............................ 38,136
Other assets .......................................... 1,052
-----------
Total assets .................................. 72,533,677
-----------
LIABILITIES
Payables:
When-issued and forward delivery securities ....... $16,824,248
Investments purchased ............................. 1,024,056
Unrealized depreciation on forward foreign currency
exchange contracts ................................ 3,984
Dividends ......................................... 48,878
Accrued management fee ............................ 52,514
Other accrued expenses ............................ 91,360
-----------
Total liabilities ............................. 18,045,040
-----------
Net assets, at market value ........................... $54,488,637
===========
NET ASSETS
Net assets consist of:
Undistributed net investment income ............... $ 384,212
Accumulated net realized gain ..................... 4,964,522
Unrealized appreciation (depreciation) on:
Investments ................................... 611,207
Foreign currency related transactions ......... (1,383)
Paid-in capital ................................... 48,530,079
-----------
Net assets, at market value ........................... $54,488,637
===========
NET ASSET VALUE per share ($54,488,637 / 3,419,143
shares of common stock outstanding, $.01 par value,
100,000,000 shares authorized) .................... $ 15.94
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
13
<PAGE>
SCUDDER WORLD INCOME OPPORTUNITIES FUND, INC.
FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
================================================================================
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest ......................................... $ 5,484,920
Expenses:
Management fee ................................ $ 650,255
Custodian and accounting fees ................. 119,671
Directors' fees and expenses .................. 90,971
Reports to shareholders ....................... 34,805
Legal ......................................... 19,616
Interest ...................................... 2,103
Auditing ...................................... 62,141
Services to shareholders ...................... 84,600
Exchange listing fee .......................... 16,411
Amortization of organization expenses ......... 19,633
Other ......................................... 46,803 1,147,009
--------- -----------
Net investment income ............................... 4,337,911
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investments ................................... 10,243,493
Options ....................................... (5,325)
Foreign currency related transactions ......... 71,696 10,309,864
---------- -----------
Net unrealized appreciation (depreciation)
during the period on:
Investments ................................... (1,180,395)
Foreign currency related transactions ......... (19,994) (1,200,389)
---------- -----------
Net gain on investments .......................... 9,109,475
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS ....................................... $13,447,386
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
14
<PAGE>
<TABLE>
<CAPTION>
=====================================================================================================
- -----------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------
YEARS ENDED APRIL 30,
--------------------------------
INCREASE (DECREASE) IN NET ASSETS
1997 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ........................................... $ 4,337,911 $ 4,584,927
Net realized gain from investment transactions .................. 10,309,864 2,533,081
Net unrealized appreciation (depreciation) on investment
transactions during the period ............................... (1,200,389) 6,350,065
----------- -----------
Net increase in net assets resulting from operations ............... 13,447,386 13,468,073
----------- -----------
Distributions to shareholders from:
Net investment income ........................................... (4,485,762) (4,755,994)
----------- -----------
Net realized gains .............................................. (4,581,651) --
----------- -----------
Fund share transactions:
Reinvestment of distributions ................................... -- 123,052
----------- -----------
INCREASE IN NET ASSETS ............................................. 4,379,973 8,835,131
Net assets at beginning of period .................................. 50,108,664 41,273,533
----------- -----------
NET ASSETS AT END OF PERIOD (including undistributed net
investment income of $384,212 and $196,128, respectively) .... $54,488,637 $50,108,664
=========== ===========
OTHER INFORMATION
INCREASE IN FUND SHARES
Shares outstanding at beginning of period .......................... 3,419,143 3,409,266
Shares issued to shareholders in reinvestment of distributions ..... -- 9,877
----------- -----------
Shares outstanding at end of period ................................ 3,419,143 3,419,143
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
15
<PAGE>
SCUDDER WORLD INCOME OPPORTUNITIES FUND, INC.
FINANCIAL HIGHLIGHTS
================================================================================
- --------------------------------------------------------------------------------
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD (a) AND OTHER PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL
STATEMENTS AND MARKET PRICE DATA.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
FOR THE PERIOD
APRIL 11, 1994
YEARS ENDED APRIL 30, (COMMENCEMENT OF
--------------------------- OPERATIONS) TO
1997 1996 1995 APRIL 30, 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................ $14.66 $12.11 $13.91 $14.20(b)
------ ------ ------ ------
Income from investment operations:
Net investment income ............................. 1.27 1.34 1.36 .03
Net realized and unrealized gain (loss) on
investment transactions ................... 2.66 2.60 (1.54) (.32)
------ ------ ------ ------
Total from investment operations .................... 3.93 3.94 (.18) (.29)
------ ------ ------ ------
Less distributions from:
Net investment income ............................. (1.31) (1.39) (1.24) --
Net realized gains on investment transactions ..... (1.34) -- (.38) --
------ ------ ------ ------
Total distributions ................................. (2.65) (1.39) (1.62) --
------ ------ ------ ------
Net asset value, end of period ...................... $15.94 $14.66 $12.11 $13.91
====== ====== ====== ======
Market value, end of period ......................... $14.38 $13.13 $12.75 $14.00
====== ====== ====== ======
TOTAL RETURN
Per share market value (%) .......................... 36.68 14.40 3.17 (6.67)**
Per share net asset value (%) (c) ................... 29.08 34.53 (1.37) (2.04)**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) .............. 54 50 41 47
Ratio of operating expenses to average net
assets (%) .................................. 2.11 2.28 2.30 2.74*
Ratio of net investment income to average net
assets (%) .................................. 7.98 9.98 9.94 3.73*
Portfolio turnover rate (%) ......................... 443.3(d) 375.6(d) 232.8 266.3*
</TABLE>
* 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 assume that dividends and capital gains
distributions, if any, were reinvested. These percentages are not an
indication of the performance of a shareholder's investment in the Fund
based on market price.
(d) Economic and market conditions necessitated more active trading, resulting
in a higher portfolio turnover rate.
- --------------------------------------------------------------------------------
16
<PAGE>
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 Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
SECURITY VALUATION. Portfolio debt securities with remaining maturities greater
than sixty days are valued by pricing agents approved by the officers of the
Fund, which quotations reflect broker/dealer-supplied valuations and electronic
data processing techniques. If the pricing agents are unable to provide such
quotations, the most recent bid quotation supplied by a bona fide market maker
shall be used. Short--term investments having a maturity of sixty days or less
are valued at amortized cost. All other securities are valued at fair value as
determined in good faith by the Valuation Committee of the Board of Directors.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value, depending on the maturity of the repurchase
agreement, is equal to at least 100.5% of the repurchase price.
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 and wrote call 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
17
<PAGE>
SCUDDER WORLD INCOME OPPORTUNITIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
- --------------------------------------------------------------------------------
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 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 marketable securities equal in value to commitments for
when--issued securities.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A forward foreign currency exchange
contract (forward contract) is a commitment to purchase or sell a foreign
currency at the settlement date at a negotiated rate. During the period, the
Fund utilized forward contracts as a hedge in connection with portfolio
purchases and sales of securities denominated in foreign currencies and as a
hedge against changes in exchange rates relating to foreign currency denominated
assets.
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Forward
contracts having the same settlement date and broker are offset and any gain
(loss) is realized on the date of offset; otherwise, gain (loss) is realized on
settlement date. Realized and unrealized gains and losses which represent the
difference between the value of the forward contract to buy and the forward
contract to sell are included in net realized and unrealized gain (loss) from
foreign currency related transactions.
Certain risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their contracts. Additionally,
when utilizing forward contracts to hedge the Fund gives up the opportunity to
profit from favorable exchange rate movements during the term of the contract.
FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S. dollars
on the following basis:
(i) market value of investment securities, other assets and liabilities at
the daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and interest
income and certain expenses at the daily rates of exchange prevailing
on the respective dates of such transactions.
18
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
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, 1996 through April 30, 1997, the Fund incurred
approximately $158,000 of net realized capital 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, 1998.
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 and
certain securities sold at a loss. As a result, net investment income (loss) and
net realized gain (loss) on investment transactions for a reporting period may
differ significantly from distributions during such period. Accordingly, the
Fund may periodically make reclassifications among certain of its capital
accounts without impacting the net asset value of the Fund.
The Fund uses the specific identification method for determining realized gain
or loss on investments 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 year ended April 30, 1997, purchases and sales of investment
securities (excluding short-term investments) aggregated $212,431,764 and
$220,792,933, 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
19
<PAGE>
SCUDDER WORLD INCOME OPPORTUNITIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
- --------------------------------------------------------------------------------
the Fund in accordance with the Fund's investment objectives, policies, and
restrictions and under the direction and control of the Fund`s Board of
Directors. In addition to portfolio management services, the Manager provides
certain administrative services in accordance with the Management Agreement. The
Fund pays to the Manager a monthly fee at an annualized rate of 1.20% of the
average weekly net assets of the Fund. For the year ended April 30, 1997, the
fee pursuant to such agreement amounted to $650,255, of which $52,514 is unpaid
at April 30, 1997.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Manager, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the year ended
April 30, 1997, the amount charged to the Fund by SFAC aggregated $57,032, of
which $4,931 is unpaid at April 30, 1997.
The Fund pays each Director not affiliated with the Manager $6,000 annually,
plus specified amounts for attended board and committee meetings. For the year
ended April 30, 1997, Directors' fees and expenses aggregated $90,971.
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.
E. COMMITMENTS
-----------
As of April 30, 1997, the Fund had entered into the following forward currency
exchange contracts resulting in net unrealized depreciation of $881.
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
(Depreciation)
Contracts to Deliver In Exchange For Settlement Date (U.S.$)
- -------------------- ----------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
DEM 494,605 USD 289,856 6/10/97 3,103
USD 290,737 DEM 494,605 6/10/97 (3,984)
------
(881)
======
</TABLE>
20
<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
April 30, 1997, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the three years in the period
then ended 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 April
30, 1997, 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 April 30, 1997, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights for
each of the three years in the period then ended 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.
June 20, 1997
21
<PAGE>
This Page
intentionally
left blank.
22
<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.
23
<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 Boston EquiServe, P.O. Box 8200, Boston, MA 02266-8200,
1-800-426-5523.
24
<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
SUSAN E. GRAY*
Vice President
JERARD K. HARTMAN*
Vice President
DAVID S. LEE*
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*
Vice President and Secretary
PAMELA A. McGRATH*
Vice President and Treasurer
* Scudder, Stevens & Clark, Inc.
25
