UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-07540
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Global High Income Dollar Fund Inc.
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(Exact name of registrant as specified in charter)
51 West 52nd Street, New York, New York 10019-6114
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(Address of principal executive offices) (Zip code)
Mark F. Kemper, Esq.
UBS Global Asset Management (US) Inc.
51 West 52nd Street
New York, NY 10019-6114
(Name and address of agent for service)
Copy to:
Jack W. Murphy, Esq.
Dechert LLP
1775 I Street, N.W.
Washington, DC 20006-2401
Registrant's telephone number, including area code: 212-882 5000
Date of fiscal year end: October 31
Date of reporting period: October 31, 2005
ITEM 1. REPORTS TO STOCKHOLDERS.
---------------------------------
[LOGO OF UBS] UBS Global Asset
Management
GLOBAL HIGH INCOME DOLLAR FUND INC.
ANNUAL REPORT
OCTOBER 31, 2005
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After the conclusion of the fiscal year, the Fund commenced a "three-for-one"
non-transferable rights offering to the Fund's shareholders. The terms of the
rights offering are disclosed in a prospectus dated November 10, 2005, which has
been mailed to shareholders. You should carefully read the prospectus before
investing.
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GLOBAL HIGH INCOME DOLLAR FUND INC.
December 15, 2005
DEAR SHAREHOLDER,
We are pleased to present you with the annual report for Global High Income
Dollar Fund Inc. (the "Fund") for the fiscal year ended October 31, 2005.
PERFORMANCE
Over the one-year period ended October 31, 2005, the Fund's net asset value
return was 14.68%, compared with the 14.67% return of its peers, as measured by
the Lipper Emerging Markets Debt Funds median (the "median") and the 10.54%
return of its benchmark, the J.P. Morgan Emerging Markets Bond Index--Global
(the "Index"). On a market price basis, the Fund returned 13.25% over the
one-year period, compared with the median's return of 5.62% over the same
timeframe. (For more on the Fund's performance, please refer to "Performance at
a Glance" on page 5.)
The Fund did not use leverage during the period, which magnifies returns on both
the upside and on the downside, and creates a wider range of returns within the
Fund's peer group.
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GLOBAL HIGH INCOME DOLLAR FUND INC.
INVESTMENT GOALS:
Primarily, high level of current income; secondarily, capital appreciation.
PORTFOLIO MANAGEMENT:
Portfolio management team, including Uwe Schillhorn
UBS Global Asset Management (US) Inc.
COMMENCEMENT:
October 8, 1993
NYSE SYMBOL:
GHI
DIVIDEND PAYMENTS:
Monthly
--------------------------------------------------------------------------------
AN INTERVIEW WITH PORTFOLIO MANAGER UWE SCHILLHORN
Q: HOW DID EMERGING MARKETS DEBT PERFORM OVER THE PERIOD?
A. Emerging markets debt (EMD) performed well during the fiscal year, despite
concerns about the impact rising US interest rates would have on capital
flows into emerging markets countries. The market in general was supported by
US Treasury yields that were still relatively low by historical standards,
and by generally strong growth in emerging markets economies. In fact, the
growth rate in many emerging markets countries outpaced that of their
industrialized counterparts. This strength was reflected in the Index's
return of 10.54% over the fiscal year, compared with developed markets bonds'
return of 4.80%, as measured by the Citigroup World Government Bond Index
(WGBI) in US dollars on a currency-hedged basis.
While growth rates remained solid over the reporting period, EMD spreads (the
difference in yield between a bond and a comparable US Treasury) experienced
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1
GLOBAL HIGH INCOME DOLLAR FUND INC.
volatility in the early part of 2005 as US Treasury yields rose, making the
"carry trade" that drove many investors less attractive. (With a carry trade,
an investor borrows money using low-cost, short-term instruments, uses the
proceeds to purchase higher-yielding emerging markets debt, and then captures
the difference.) After this bout of turbulence, spreads resumed their
tightening, ending at levels more reflective of the fiscal and political
improvements seen in many of the EMD countries.
Q: WERE THERE ANY THEMES THAT EMERGED AT THE REGIONAL LEVEL?
A. The major economies of Latin America continued to expand in concert over the
year. European Economic Union accession for many economies in Eastern Europe,
an increasingly important region for emerging markets debt, also propped up
performance for the entire asset class.
Q: WHAT WERE SOME OF THE PORTFOLIO POSITIONING STRATEGIES YOU EMPLOYED OVER THE
PERIOD?
A. The biggest story for the Fund over the course of the fiscal year was our
overweight position to Argentina. ("Overweight" or "underweight" refers to
how much of a particular sector or country the Fund holds versus its
representative benchmark index.) The partial restructuring of its debt by
Argentina, which defaulted during the country's recent financial crisis,
closes a difficult period for the country. This restructuring improves the
prospects for servicing currently outstanding debt, which in turn helps
investor sentiment. As a result, the largest share of the Fund's
outperformance for the year came from its positions in Argentina.
We were also underweight to Turkey, Brazil and Mexico in varying degrees over
the course of the year. In the case of Turkey, we believed that its debt was
overvalued for much of the period, given where the country stood in relation
to being granted membership in the European Economic Union. This underweight
position hurt Fund performance in US dollar terms, but was offset by our
positions in bonds denominated in Turkish currency. We were underweight to
both Mexico and Brazil in order to overweight what we believed to be more
attractive opportunities in other countries, specifically Argentina. Both of
these positions helped the Fund over the fiscal year.
During the period, we also sought investment opportunities in non-US dollar-
denominated local market securities. Given the tight spread environment in
external debt at the beginning of the period, the portfolio had roughly a 13%
position in local market securities to take advantage of the higher yield
potential they offered. As the period progressed, we continued to identify
value in select local markets where fundamentals were favorable and interest
rates were relatively high, closing with a 21.6% position in local market
securities. (The Fund's policies currently permit investment of up to 20% of
its net assets in
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2
GLOBAL HIGH INCOME DOLLAR FUND INC.
non-US dollar-denominated debt securities under normal circumstances. As
long as this policy is satisfied at the time of investment, an increase above
20% is permissible if it results from a change in the relative value of
securities or the size of the Fund.)
It is important to keep in mind that our sources of return come from many
different areas--the overall emerging markets debt market, individual
countries, individual bonds, currencies, and duration (a measure of a bond's
sensitivity to interest rate changes)--and while a few areas may factor
prominently in the returns for a specific period, we do not expect to
narrowly focus on a few big country or market bets.
Q: HOW WERE YOU POSITIONED IN OTHER EMERGING MARKETS COUNTRIES?
A: We held overweight positions to both Russia and Qatar. Conversely, we found
less compelling values in South Africa, which we had sold off entirely by the
end of the reporting period. Elsewhere, our position in Serbia boosted Fund
performance for the year, while positions in both Venezuela and Colombia
(the latter of which we no longer hold in the portfolio) were a drag on
performance.
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3
GLOBAL HIGH INCOME DOLLAR FUND INC.
We thank you for your continued support, and welcome any comments or questions
you may have. For additional information on the UBS family of funds,* please
contact your financial advisor or visit us at www.ubs.com/globalam-us.
Sincerely,
/s/ W. Douglas Beck
W. Douglas Beck, CFA
President
Global High Income Dollar Fund Inc.
Executive Director
UBS Global Asset Management (US) Inc.
/s/ Uwe Schillhorn
Uwe Schillhorn, CFA
Portfolio Management Team Member
Global High Income Dollar Fund Inc.
Executive Director
UBS Global Asset Management (US) Inc.
This letter is intended to assist shareholders in understanding how the Fund
performed during the fiscal year ended October 31, 2005. The views and opinions
in the letter were current as of December 15, 2005. They are not guarantees of
performance or investment results, and should not be taken as investment advice.
Investment decisions reflect a variety of factors, and we reserve the right to
change our views about individual securities, sectors and markets at any time.
As a result, the views expressed should not be relied upon as a forecast of the
Fund's future investment intent.
We encourage you to consult your financial advisor regarding your personal
investment program.
* Mutual funds are sold by prospectus only. You should read it carefully and
consider a fund's investment objectives, risks, charges, expenses and other
important information contained in the prospectus before investing.
Prospectuses for most of our funds can be obtained from your financial
advisor, by calling UBS Funds at 800-647 1568 or by visiting our Web site at
www.ubs.com/globalam-us.
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4
GLOBAL HIGH INCOME DOLLAR FUND INC.
PERFORMANCE AT A GLANCE (UNAUDITED)
AVERAGE ANNUAL RETURNS FOR PERIODS ENDED 10/31/05
NET ASSET VALUE RETURNS* 6 MONTHS 1 YEAR 5 YEARS 10 YEARS
-----------------------------------------------------------------------------------------------------------
Global High Income Dollar Fund Inc. 8.75% 14.68% 15.16% 13.58%
===========================================================================================================
Lipper Emerging Markets Debt Funds median** 8.80% 14.67% 16.65% 14.80%
===========================================================================================================
MARKET PRICE RETURNS*
-----------------------------------------------------------------------------------------------------------
Global High Income Dollar Fund Inc. 7.32% 13.25% 20.49% 16.96%
===========================================================================================================
Lipper Emerging Markets Debt Funds median** 3.31% 5.62% 17.58% 14.21%
===========================================================================================================
* Past Performance does not predict future performance. The return and value
of an investment will fluctuate, so that an investor's shares, when sold,
may be worth more or less than their original cost. NAV return assumes, for
illustration only, that dividends/distributions were reinvested at the net
asset value on the payable dates. Market price returns assume that
dividends/distributions were reinvested under the Dividend Reinvestment
Plan.
NAV and market price returns for periods of less than one year have not been
annualized. Returns do not reflect taxes paid on dividends/distributions or
brokerage commissions and taxes paid on the sale of shares.
** Lipper peer group data calculated by Lipper Inc.; used with permission. The
Lipper median is the return of the fund that places in the middle of the
Lipper Emerging Markets Debt Funds peer group.
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5
GLOBAL HIGH INCOME DOLLAR FUND INC.
PORTFOLIO STATISTICS (UNAUDITED)
CHARACTERISTICS* 10/31/05 4/30/05 10/31/04
--------------------------------------------------------------------------------------------------------
Net Asset Value $15.72 $15.15 $16.43
--------------------------------------------------------------------------------------------------------
Market Price $17.82 $17.31 $18.31
--------------------------------------------------------------------------------------------------------
12-Month Dividends/Distributions $2.8920 $3.0134 $1.7443
--------------------------------------------------------------------------------------------------------
Dividend/Distribution at Period-End $0.1194 $0.1391 $0.1488
--------------------------------------------------------------------------------------------------------
Net Assets (mm) $305.7 $294.5 $319.4
--------------------------------------------------------------------------------------------------------
CURRENCY EXPOSURE** 10/31/05 4/30/05 10/31/04
--------------------------------------------------------------------------------------------------------
U.S. Dollar Denominated 78.4% 86.7% 98.3%
--------------------------------------------------------------------------------------------------------
Non-U.S. Dollar Denominated 21.6 13.3 1.7
--------------------------------------------------------------------------------------------------------
TOTAL 100.0% 100.0% 100.0%
========================================================================================================
TOP 10 COUNTRIES (EXCLUDING U.S.)** 10/31/05 4/30/05 10/31/04
--------------------------------------------------------------------------------------------------------
Brazil 17.6% Brazil 16.9% Brazil 22.4%
--------------------------------------------------------------------------------------------------------
Argentina 15.2 Russia 16.2 Russia 13.8
--------------------------------------------------------------------------------------------------------
Russia 11.2 Mexico 10.2 Mexico 10.1
--------------------------------------------------------------------------------------------------------
Mexico 7.0 Argentina 10.1 Argentina 8.4
--------------------------------------------------------------------------------------------------------
Qatar 5.7 Qatar 4.6 Malaysia 4.4
--------------------------------------------------------------------------------------------------------
Malaysia 5.5 Turkey 4.5 Turkey 4.2
--------------------------------------------------------------------------------------------------------
Philippines 5.4 Germany 3.7 Philippines 3.6
--------------------------------------------------------------------------------------------------------
Venezuela 3.5 Philippines 3.5 Colombia 3.5
--------------------------------------------------------------------------------------------------------
Turkey 3.4 Colombia 3.5 Germany 3.1
--------------------------------------------------------------------------------------------------------
Peru 3.2 Malaysia 2.9 Ecuador 3.1
--------------------------------------------------------------------------------------------------------
TOTAL 77.7% 76.1% 76.6%
========================================================================================================
CREDIT QUALITY** 10/31/05 4/30/05 10/31/04
--------------------------------------------------------------------------------------------------------
A 6.4% 8.5% 4.7%
--------------------------------------------------------------------------------------------------------
BBB 18.0 27.8 29.7
--------------------------------------------------------------------------------------------------------
BB 29.4 32.8 39.6
--------------------------------------------------------------------------------------------------------
B 18.8 5.7 15.3
--------------------------------------------------------------------------------------------------------
CCC 1.9 3.6 0.7
--------------------------------------------------------------------------------------------------------
Selective Default - 1.8 0.9
--------------------------------------------------------------------------------------------------------
Non-Rated 19.4 10.9 4.9
--------------------------------------------------------------------------------------------------------
Cash Equivalents 4.6 8.4 3.2
--------------------------------------------------------------------------------------------------------
Other assets less liabilities 1.5 0.5 1.0
--------------------------------------------------------------------------------------------------------
TOTAL 100.0% 100.0% 100.0%
========================================================================================================
* Prices and other characteristics will vary over time.
** Weightings represent percentages of net assets as of the dates indicated. The
Fund's portfolio is actively managed and its composition will vary over time.
Credit quality ratings shown are based on those assigned by Standard &
Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"), to individual
portfolio holdings. S&P is an independent ratings agency.
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6
GLOBAL HIGH INCOME DOLLAR FUND INC.
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2005
FACE
AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------
INTERNATIONAL BONDS -- 93.77%
ARGENTINA -- 15.20%
Banco de Galicia y Buenos Aires+
4.000%, due 01/01/14 ................................................. $ 5,640,000 $ 4,709,400
Banco de Galicia y Buenos Aires++
7.190%, due 01/01/10 ................................................. 1,500,000 1,451,250
Banco de Galicia y Buenos Aires+
11.000%, due 01/01/19 ................................................ 753,823 768,899
Republic of Argentina@
0.000%, due 12/31/33 ................................................. ARS 11,624,143 4,325,895
Republic of Argentina@
0.153%, due 12/31/33 ................................................. 34,872,428 14,665,107
Republic of Argentina+
3.000%, due 04/30/13 ................................................. $ 2,820,000 2,295,480
Republic of Argentina+(a)
4.005%, due 08/03/12 ................................................. 23,212,000 18,221,420
------------
46,437,451
------------
BRAZIL -- 17.62%
Brazil Real Credit-Linked Note**
13.957%, due 01/05/10 ................................................ $ 6,026,619 3,305,868
Brazil Real Credit-Linked Note**
15.560%, due 01/03/07 ................................................ 3,192,333 2,637,202
Brazilian Real Credit-Linked Note@
18.870%, due 01/05/10 ................................................ BRL 19,570,000 4,564,588
Federal Republic of Brazil(b)
6.000%, due 09/15/13 ................................................. $ 3,333,333 3,254,166
Federal Republic of Brazil
8.250%, due 01/20/34 ................................................. 1,200,000 1,168,800
Federal Republic of Brazil
8.750%, due 02/04/25 ................................................. 2,500,000 2,556,250
Federal Republic of Brazil
8.875%, due 10/14/19 ................................................. 5,760,000 6,076,800
Federal Republic of Brazil
8.875%, due 04/15/24 ................................................. 4,870,000 5,045,320
Federal Republic of Brazil
12.000%, due 04/15/10 ................................................ 1,870,000 2,234,650
Federal Republic of Brazil
12.500%, due 01/05/16 ................................................ BRL 7,900,000 3,311,430
Federal Republic of Brazil, DCB++
5.250%, due 04/15/12 ................................................. $ 3,005,349 2,933,973
Federal Republic of Brazil, DISC++
5.188%, due 04/15/24 ................................................. 6,000,000 5,715,000
--------------------------------------------------------------------------------
7
GLOBAL HIGH INCOME DOLLAR FUND INC.
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2005
FACE
AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------
INTERNATIONAL BONDS -- (CONTINUED)
BRAZIL -- (CONCLUDED)
Federal Republic of Brazil, PAR(b)++
6.000%, due 04/15/24 ................................................. $ 11,730,000 $ 11,026,200
------------
53,830,247
------------
DOMINICAN REPUBLIC -- 1.58%
Republic of Dominican
9.500%, due 09/27/11 ................................................. $ 4,525,000 4,819,338
------------
ECUADOR -- 1.88%
Republic of Ecuador, 144A+
8.000%, due 08/15/30 ................................................. $ 4,945,000 4,425,775
Republic of Ecuador+
9.000%, due 08/15/30 ................................................. $ 1,490,000 1,333,550
------------
5,759,325
------------
EL SALVADOR -- 0.95%
Republic of El Salvador
8.250%, due 04/10/32 ................................................. $ 2,770,000 2,915,425
------------
GERMANY -- 1.47%
Aries Vermogensverwaltungs, 144A
9.600%, due 10/25/14 ................................................. $ 3,500,000 4,480,000
------------
INDONESIA -- 2.42%
Indonesia Government Credit-Linked Note, 144A
11.000%, due 10/15/14 ................................................ IDR 4,000,000,000 324,969
Indonesia Government Credit-Linked Note, 144A
13.150%, due 01/15/12 ................................................ 4,949,000,000 467,430
Republic of Indonesia
7.250%, due 04/20/15 ................................................. $ 581,000 572,285
Republic of Indonesia, 144A
7.250%, due 04/20/15 ................................................. 3,659,000 3,604,115
Republic of Indonesia, 144A
7.500%, due 01/15/16 ................................................. 1,270,000 1,252,538
Republic of Indonesia, 144A
8.500%, due 10/12/35 ................................................. 1,210,000 1,182,775
------------
7,404,112
------------
MALAYSIA -- 5.45%
Johor Corp.@
0.000%, due 07/31/09 ................................................. MYR 14,500,000 4,186,755
Johor Corp.
1.000%, due 07/31/12 ................................................. 43,970,000 12,463,020
------------
16,649,775
------------
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8
GLOBAL HIGH INCOME DOLLAR FUND INC.
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2005
FACE
AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------
INTERNATIONAL BONDS -- (CONTINUED)
MEXICO -- 6.99%
Conproca S.A. de C.V.
12.000%, due 06/16/10 ................................................ $ 1,145,000 $ 1,362,550
PEMEX Finance Ltd.
8.020%, due 05/15/07 ................................................. 478,333 487,723
PEMEX Project Funding Master Trust (b)
8.625%, due 02/01/22 ................................................. 9,250,000 11,053,750
United Mexican States
7.500%, due 04/08/33 ................................................. 3,762,000 4,288,680
United Mexican States
8.300%, due 08/15/31 ................................................. 3,400,000 4,182,000
------------
21,374,703
------------
PERU -- 3.15%
Republic of Peru++
4.687%, due 03/07/27 ................................................. $ 2,970,000 2,791,800
Republic of Peru
8.750%, due 11/21/33 ................................................. 3,970,000 4,565,500
Republic of Peru
9.125%, due 02/21/12 ................................................. 919,000 1,062,364
Republic of Peru
9.875%, due 02/06/15 ................................................. 980,000 1,207,850
------------
9,627,514
------------
PHILIPPINES -- 5.43%
National Power Corp.
9.875%, due 03/16/10 ................................................. $ 8,430,000 9,093,863
Republic of Philippines
9.500%, due 02/02/30 ................................................. 6,245,000 6,588,475
Republic of Philippines
10.625%, due 03/16/25 ................................................ 805,000 928,769
------------
16,611,107
------------
POLAND -- 0.41%
Republic of Poland
5.750%, due 06/24/08 ................................................. PLN 4,110,000 1,268,552
------------
QATAR -- 5.71%
State of Qatar
9.750%, due 06/15/30 ................................................. $ 11,760,000 17,463,600
------------
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9
GLOBAL HIGH INCOME DOLLAR FUND INC.
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2005
FACE
AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------
INTERNATIONAL BONDS -- (CONTINUED)
RUSSIA -- 11.22%
Russian Federation+
5.000%, due 03/31/30 ................................................. $ 3,560,000 $ 3,953,825
Russian Federation, 144A+
5.000%, due 03/31/30 ................................................. 9,153,589 10,166,205
Russian Federation
12.750%, due 06/24/28 ................................................ 8,370,000 15,149,700
Russian Gazprom Credit-Linked Note, 144A
8.110%, due 01/18/07 ................................................. RUB 34,500,000 1,231,539
Russian Ruble Credit-Linked Note, 144A
7.580%, due 10/09/07 ................................................. 66,000,000 2,352,521
OAO Gazprom
9.125%, due 04/25/07 ................................................. $ 1,380,000 1,447,275
------------
34,301,065
------------
SERBIA -- 2.69%
Republic of Serbia+
3.750%, due 11/01/24 ................................................. $ 9,500,000 8,217,500
------------
TURKEY -- 3.42%
Republic of Turkey
8.000%, due 02/14/34 ................................................. $ 2,870,000 2,974,038
Republic of Turkey
9.875%, due 03/19/08 ................................................. 480,000 523,800
Republic of Turkey
11.875%, due 01/15/30 ................................................ 2,032,000 2,951,480
Republic of Turkey
15.000%, due 02/10/10 ................................................ TRY 1,000,000 832,408
Turkish Credit-Linked Notes@
0.000%, due 04/27/07 ................................................. 3,871,577 3,179,764
------------
10,461,490
------------
UKRAINE -- 2.81%
City of Kiev, 144A
8.000%, due 11/06/15 ................................................. $ 2,950,000 2,961,948
ING Bank NV Credit-Linked Note
11.890%, due 12/30/09 ................................................ UAH 8,270,000 1,853,152
NAK Naftogaz Ukrainy
8.125%, due 09/30/09 ................................................. $ 1,200,000 1,248,000
Republic of Ukraine
7.650%, due 06/11/13 ................................................. 510,000 546,975
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10
GLOBAL HIGH INCOME DOLLAR FUND INC.
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2005
FACE
AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------
INTERNATIONAL BONDS -- (CONTINUED)
UKRAINE -- (CONCLUDED)
Ukraine Credit-Linked Note@
0.000%, due 12/30/09 ................................................. UAH 8,630,000 $ 1,988,570
------------
8,598,645
------------
URUGUAY -- 0.28%
Republic of Uruguay
9.250%, due 05/17/17 ................................................. $ 780,000 852,150
------------
VENEZUELA -- 3.45%
Republic of Venezuela
7.650%, due 04/21/25 ................................................. $ 2,800,000 2,779,000
Republic of Venezuela
9.375%, due 01/13/34 ................................................. 6,670,000 7,757,210
------------
10,536,210
------------
VIETNAM -- 1.64%
Socialist Republic of Vietnam, 144A
6.875%, due 01/15/16 ................................................. $ 5,070,000 5,019,300
------------
Total International Bonds (Cost $272,963,322) ........................... 286,627,509
------------
NUMBER OF
RIGHTS
---------
RIGHTS -- 0.03%
MEXICO -- 0.03%
United Mexican States Value Recovery Rights,
Series D, Expiration Date 06/30/06(c) ................................ 1,885,000 39,018
United Mexican States Value Recovery Rights,
Series E, Expiration Date 06/30/07(c) ................................ 1,885,000 48,068
------------
Total Rights (Cost $0) .................................................. 87,086
------------
SHARES
--------
WARRANTS -- 0.08%
ARGENTINA -- 0.08%
Republic of Argentina, expires 12/15/35 ................................. 15,308,832 249,670
------------
Total Warrants (Cost $195,233) .......................................... 249,670
------------
FACE
AMOUNT
--------
SHORT-TERM INVESTMENTS -- 4.65%
U.S. GOVERNMENT OBLIGATION -- 0.19%
U.S. Treasury Bills,
3.328%, due 01/05/06(d) ..................................... $ 575,000 571,219
------------
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11
GLOBAL HIGH INCOME DOLLAR FUND INC.
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2005
SHARES VALUE
--------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- (CONCLUDED)
OTHER -- 4.46%*
UBS Supplementary Trust--U.S. Cash Management Prime Fund, 4.003%** ...... 13,645,683 $ 13,645,683
------------
Total Short-Term Investments (Cost $14,217,227) ......................... 14,216,902
------------
Total Investments (Cost $287,375,782) -- 98.53% ......................... 301,181,167
Cash and other assets, less liabilities -- 1.47% ........................ 4,507,531
------------
Net Assets -- 100.00% ................................................... $305,688,698
============
Note: The Portfolio of Investments is listed by the issuer's country of origin.
+ Reflects rate at October 31, 2005 on step coupon rate instruments.
++ Reflects rate at October 31, 2005 on variable rate instruments.
@ Reflects annualized yield at October 31, 2005 on zero coupon bonds.
* Security is issued by a fund that is advised by a related entity of UBS
Global Asset Management (US) Inc., Global High Income Dollar Fund Inc.'s
advisor.
** Interest rate reflects yield at October 31, 2005.
(a) Bond interest in default.
(b) All or a portion of this security has been pledged to cover open forward
foreign currency contracts.
(c) Rights do not currently accrue income. Quarterly income, if any, will
vary based on several factors including oil exports, prices and
inflation.
(d) This security was pledged to cover margin requirements for futures
contracts.
144A Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities are considered liquid and may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At October 31, 2005 the value of these securities
amounted to $37,469,115 or 12.26% of net assets.
ARS Argentina Peso
BRL Brazilian Real
DCB Debt Conversion Bond
DISC Discount Bond
IDR Indonesian Rupiah
MYR Malaysian Ringgit
PAR Par Bond
PLN Polish Zloty
RUB Russian Ruble
TRY New Turkish Lira
UAH Ukraine Hryvnia
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12
GLOBAL HIGH INCOME DOLLAR FUND INC.
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2005
FORWARD FOREIGN CURRENCY CONTRACTS
Global High Income Dollar Fund Inc. had the following open forward foreign
currency contracts as of October 31, 2005:
UNREALIZED
CONTRACTS TO IN MATURITY APPRECIATION/
DELIVER EXCHANGE FOR DATES (DEPRECIATION)
-------------------------------------------------------------------------------------------------------------
Brazilian Real 26,841,320 USD 11,660,000 11/14/05 $(277,434)
-------------------------------------------------------------------------------------------------------------
Euro 10,105,000 USD 12,175,666 01/20/06 2,850
-------------------------------------------------------------------------------------------------------------
New Turkish Lira 5,418,347 USD 3,241,026 04/27/07 (320,256)
-------------------------------------------------------------------------------------------------------------
New Turkish Lira 4,978,800 USD 3,600,000 11/14/05 (71,836)
-------------------------------------------------------------------------------------------------------------
United States Dollar 11,853,089 BRL 26,841,320 11/14/05 84,345
-------------------------------------------------------------------------------------------------------------
United States Dollar 4,552,111 THB 186,500,000 01/20/06 21,445
-------------------------------------------------------------------------------------------------------------
United States Dollar 3,683,089 TRY 4,978,800 11/14/05 (11,253)
-------------------------------------------------------------------------------------------------------------
United States Dollar 3,528,719 TRY 5,418,347 04/27/07 32,564
-------------------------------------------------------------------------------------------------------------
Total net unrealized depreciation on forward foreign currency contracts $(539,575)
=============================================================================================================
CURRENCY TYPE ABBREVIATIONS:
BRL Brazilian Real
THB Thai Baht
TRY New Turkish Lira
USD United States Dollar
FUTURES CONTRACTS
Global High Income Dollar Fund Inc. had the following open futures contracts as
of October 31, 2005:
EXPIRATION CURRENT UNREALIZED
DATES PROCEEDS VALUE APPRECIATION
------------------------------------------------------------------------------------------------------------------
INDEX FUTURES SALE CONTRACTS:
5 Year U.S. Treasury Note, 150 contracts December 2005 $16,114,875 $15,883,594 $ 231,281
------------------------------------------------------------------------------------------------------------------
10 Year U.S. Treasury Note, 70 contracts December 2005 7,767,463 7,591,719 175,744
------------------------------------------------------------------------------------------------------------------
30 Year U.S. Treasury Bond, 163 contracts December 2005 19,036,474 18,250,906 785,568
------------------------------------------------------------------------------------------------------------------
Total net unrealized appreciation on futures contracts $1,192,593
==================================================================================================================
The segregated aggregate market value of investments to cover margin
requirements for the open futures positions at October 31, 2005 was $571,219.
--------------------------------------------------------------------------------
13
GLOBAL HIGH INCOME DOLLAR FUND INC.
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2005
INDUSTRY DIVERSIFICATION
AS A PERCENT OF NET ASSETS
AS OF OCTOBER 31, 2005 (UNAUDITED)
--------------------------------------------------------------------------------
International Bonds:
International Corporate Bonds:
Capital Markets ............................................ 1.13%
Commercial Banks ........................................... 4.05
Construction & Engineering ................................. 0.45
Diversified Financial Services ............................. 4.78
Electric Utilities ......................................... 2.97
Oil & Gas .................................................. 4.50
------
Total International Corporate Bonds .............................. 17.88
Foreign Government Bonds ...................................... 75.89
------
Total International Bonds ........................................... 93.77
Rights .............................................................. 0.03
Warrants ............................................................ 0.08
Short-Term Investments .............................................. 4.65
------
Total Investments ................................................... 98.53
Cash and other assets, less liabilities ............................. 1.47
------
Net Assets .......................................................... 100.00%
------
See accompanying notes to financial statements
--------------------------------------------------------------------------------
14
GLOBAL HIGH INCOME DOLLAR FUND INC.
STATEMENT OF ASSETS AND LIABILITIES -- OCTOBER 31, 2005
--------------------------------------------------------------------------------
ASSETS:
Investments in securities of unaffiliated issuers, at value
(cost - $273,730,099) $287,535,484
-----------------------------------------------------------------------------------------------------
Investments in securities of a related entity, at value
(cost - $13,645,683) 13,645,683
-----------------------------------------------------------------------------------------------------
Foreign currency, at value (cost - $530,062) 531,205
-----------------------------------------------------------------------------------------------------
Receivable for investments sold 8,130,823
-----------------------------------------------------------------------------------------------------
Interest receivable 3,565,346
-----------------------------------------------------------------------------------------------------
Due from broker 2,259,793
-----------------------------------------------------------------------------------------------------
Unrealized appreciation on forward foreign currency contracts 141,204
-----------------------------------------------------------------------------------------------------
Unrealized appreciation on swap agreements 116,848
-----------------------------------------------------------------------------------------------------
Other assets 6,384
-----------------------------------------------------------------------------------------------------
Total assets 315,932,770
-----------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased 8,996,705
-----------------------------------------------------------------------------------------------------
Unrealized depreciation on forward foreign currency contracts 680,779
-----------------------------------------------------------------------------------------------------
Payable to investment advisor and administrator 301,366
-----------------------------------------------------------------------------------------------------
Variation margin payable 30,000
-----------------------------------------------------------------------------------------------------
Unrealized depreciation on swap agreements 44,385
-----------------------------------------------------------------------------------------------------
Director's fees payable 3,702
-----------------------------------------------------------------------------------------------------
Accrued expenses and other liabilities 187,135
-----------------------------------------------------------------------------------------------------
Total liabilities 10,244,072
-----------------------------------------------------------------------------------------------------
NET ASSETS:
Capital stock - $0.001 par value; 100,000,000 shares authorized;
19,439,667 shares issued and outstanding 268,246,555
-----------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (185,012)
-----------------------------------------------------------------------------------------------------
Accumulated net realized gain from investment transactions 22,739,583
-----------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments, futures, swaps, forward foreign currency
transactions and other assets and liabilities denominated in foreign currencies 14,887,572
-----------------------------------------------------------------------------------------------------
Net assets $305,688,698
-----------------------------------------------------------------------------------------------------
Net asset value per share $15.72
=====================================================================================================
See accompanying notes to financial statements
--------------------------------------------------------------------------------
15
GLOBAL HIGH INCOME DOLLAR FUND INC.
STATEMENT OF OPERATIONS
FOR THE YEAR
ENDED
OCTOBER 31, 2005
-----------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest income net of foreign witholding taxes of $1,666 $23,883,324
-----------------------------------------------------------------------------------------------------
Affiliated interest 271,915
-----------------------------------------------------------------------------------------------------
Total Income 24,155,239
-----------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory and administration fees 3,820,148
-----------------------------------------------------------------------------------------------------
Custody and accounting fees 252,720
-----------------------------------------------------------------------------------------------------
Professional fees 107,717
-----------------------------------------------------------------------------------------------------
Reports and notices to shareholders 69,342
-----------------------------------------------------------------------------------------------------
Transfer agency fees 31,947
-----------------------------------------------------------------------------------------------------
Listing Fees 23,685
-----------------------------------------------------------------------------------------------------
Directors' fees 15,446
-----------------------------------------------------------------------------------------------------
Other expenses 48,185
-----------------------------------------------------------------------------------------------------
Total expenses 4,369,190
-----------------------------------------------------------------------------------------------------
Less: Fee waivers by investment advisor and administrator (67,739)
-----------------------------------------------------------------------------------------------------
Net Expenses 4,301,451
-----------------------------------------------------------------------------------------------------
Net investment income 19,853,788
-----------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM
INVESTMENT ACTIVITIES:
Net realized gain (loss) from:
-----------------------------------------------------------------------------------------------------
Investment transactions 34,163,837
-----------------------------------------------------------------------------------------------------
Futures (622,530)
-----------------------------------------------------------------------------------------------------
Foreign currency transactions 371,350
-----------------------------------------------------------------------------------------------------
Swap agreements 56,487
-----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation/(depreciation) of:
-----------------------------------------------------------------------------------------------------
Investments (12,780,742)
-----------------------------------------------------------------------------------------------------
Futures 1,471,180
-----------------------------------------------------------------------------------------------------
Swap agreements 72,463
-----------------------------------------------------------------------------------------------------
Other assets, liabilities and forward foreign currency contracts (37,034)
-----------------------------------------------------------------------------------------------------
Net realized and unrealized gains from investment activities 22,695,011
-----------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $42,548,799
=====================================================================================================
See accompanying notes to financial statements
--------------------------------------------------------------------------------
16
GLOBAL HIGH INCOME DOLLAR FUND INC.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED OCTOBER 31,
------------------------------------
2005 2004
-----------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 19,853,788 $ 19,115,856
-----------------------------------------------------------------------------------------------------------------
Net realized gain from investment transactions 34,163,837 39,638,312
-----------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from futures and foreign currency transactions (251,180) 816,652
-----------------------------------------------------------------------------------------------------------------
Net realized gain from swap agreements 56,487 -
-----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation of:
-----------------------------------------------------------------------------------------------------------------
Investments (12,780,742) (15,591,446)
-----------------------------------------------------------------------------------------------------------------
Futures 1,471,180 (222,228)
-----------------------------------------------------------------------------------------------------------------
Swap agreements 72,463 -
-----------------------------------------------------------------------------------------------------------------
Other assets, liabilities and forward foreign currency contracts (37,034) (5,537)
-----------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 42,548,799 43,751,609
-----------------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
-----------------------------------------------------------------------------------------------------------------
Net investment income (31,225,937) (18,957,163)
-----------------------------------------------------------------------------------------------------------------
Net realized gains (24,993,580) (14,951,448)
-----------------------------------------------------------------------------------------------------------------
Total dividends and distributions to shareholders (56,219,517) (33,908,611)
-----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (13,670,718) 9,842,998
-----------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of year $319,359,416 $309,516,418
-----------------------------------------------------------------------------------------------------------------
End of year $305,688,698 $319,359,416
-----------------------------------------------------------------------------------------------------------------
Distributions in excess of net investment income ($185,012) ($282,947)
=================================================================================================================
See accompanying notes to financial statements
--------------------------------------------------------------------------------
17
GLOBAL HIGH INCOME DOLLAR FUND INC.
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Global High Income Dollar Fund Inc. (the "Fund") was incorporated in Maryland on
February 23, 1993 and is registered with the Securities and Exchange Commission
as a closed-end, non-diversified management investment company. The Fund's
shares trade on the New York Stock Exchange ("NYSE"). The Fund's primary
investment objective is to achieve a high level of current income. As a
secondary objective the Fund seeks capital appreciation, to the extent
consistent with it's primary objective.
In the normal course of business the Fund may enter into contracts that contain
a variety of representations or that provide general indemnification for certain
liabilities. The Fund's maximum exposure under these arrangements is unknown as
this would involve future claims that may be made against the Fund that have not
yet occurred. However, the Fund has not had prior claims or losses pursuant to
these contracts and expects the risk of loss to be remote.
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles requires the Fund's management to make estimates
and assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates. The
following is a summary of significant accounting policies:
VALUATION OF INVESTMENTS--The Fund calculates its net asset value based on the
current market value, where available, for its portfolio securities. The Fund
normally obtains market values for its securities from independent pricing
sources and broker-dealers. Independent pricing sources may use reported last
sale prices, current market quotations or valuations from computerized "matrix"
systems that derive values based on comparable securities. A matrix system
incorporates parameters such as security quality, maturity and coupon, and/or
research and evaluations by its staff, including review of broker-dealer market
price quotations, if available, in determining the valuation of the portfolio
securities. Securities traded in the over-the-counter ("OTC") market and listed
on The Nasdaq Stock Market, Inc. ("NASDAQ") normally are valued at the NASDAQ
Official Closing Price. Other OTC securities are valued at the last bid price
available on the valuation date prior to valuation. Securities which are listed
on U.S. and foreign stock exchanges normally are valued at the last sale price
on the day the securities are valued or, lacking any sales on such day, at the
last available bid price. In cases where securities are traded on more than one
exchange, the securities are valued on the exchange designated as the primary
market by UBS Global Asset Management (US) Inc. ("UBS Global AM"), the
investment advisor and administrator of the Fund. UBS Global AM is an indirect
wholly owned asset management subsidiary of UBS AG, an internationally
diversified organization with headquarters in Zurich, Switzerland and operations
in many areas of the financial services industry. If a market value is not
available from an independent pricing source for a particular security, that
security is valued at fair value as determined in good faith by or under the
direction of the Fund's board of
--------------------------------------------------------------------------------
18
GLOBAL HIGH INCOME DOLLAR FUND INC.
NOTES TO FINANCIAL STATEMENTS
directors (the "Board"). All investments quoted in foreign currencies will be
valued weekly in U.S. dollars on the basis of the foreign currency exchange
rates. Foreign currency exchange rates were generally determined prior to the
close of the NYSE. Occasionally, events affecting the value of foreign
investments and such exchange rates occurred between the time at which they are
determined and the close of the NYSE, which will not be reflected in the
computation of the Fund's net asset value. If events materially affecting the
value of such securities or currency exchange rates occurred during such time
periods, the securities were valued at their fair value as determined in good
faith by or under the direction of the Board. The amortized cost method of
valuation, which approximates market value, generally is used to value
short-term debt instruments with sixty days or less remaining to maturity,
unless the Board determines that this does not represent fair value.
Effective November 1, 2005, the Fund began using the foreign currency exchange
rates determined as of the close of regular trading on the NYSE.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME--Investment transactions are
recorded on the trade date. Realized gains and losses from investment and
foreign exchange transactions are calculated using the identified cost method.
Interest income is recorded on an accrual basis. Discounts are accreted and
premiums are amortized as adjustments to interest income and the identified cost
of investments.
FOREIGN CURRENCY TRANSLATION--Prior to November 1, 2005, the books and records
of the Fund were maintained in U.S. dollars using the WM/Reuters closing spot
rates as of 4:00 pm London time. Effective November 1, 2005, the Fund began
using the foreign currency exchange rates determined as of the close of regular
trading on the NYSE. For purposes of calculating the U.S. dollar equivalent
value of a non-U.S. dollar denominated obligation, foreign currency amounts are
translated into U.S. dollars on the following basis: (1) market value of
investment securities and other assets and liabilities - at the exchange rates
prevailing at the end of the Fund's fiscal period; and (2) purchases and sales
of investment securities and income and expenses - at the rates of exchange
prevailing on the respective dates of such transactions.
Although the net assets and the market value of the Fund's portfolio are
presented at the foreign exchange rates at the end of the Fund's fiscal period,
the Fund does not generally isolate the effect of fluctuations in foreign
exchange rates from the effect of the changes in market prices of securities.
However, the Fund does isolate the effect of fluctuations in foreign exchange
rates when determining the gain or loss upon the sale or maturity of foreign
currency-denominated securities pursuant to U.S. federal income tax regulations.
Certain foreign exchange gains and losses included in realized and unrealized
gains and losses are included in or are a reduction of ordinary income in
accordance with U.S. federal income tax regulations.
FORWARD FOREIGN CURRENCY CONTRACTS--The Fund may enter into forward foreign
currency exchange contracts ("forward contracts") in connection with planned
--------------------------------------------------------------------------------
19
GLOBAL HIGH INCOME DOLLAR FUND INC.
NOTES TO FINANCIAL STATEMENTS
purchases or sales of securities or to hedge the U.S. dollar value of portfolio
securities denominated in a particular currency. The Fund may also use forward
contracts to enhance income.
The Fund has no specific limitation on the percentage of assets which may be
committed to such contracts. The Fund may enter into forward contracts or
maintain a net exposure to forward contracts only if (1) the consummation of the
contracts would not obligate the Fund to deliver an amount of foreign currency
in excess of the value of the position being hedged by such contracts or (2) the
Fund identifies cash or liquid securities in an amount not less than the value
of its total assets committed to the consummation of the forward contracts and
not covered as provided in (1) above, as marked-to-market daily.
Risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their forward contracts and
from unanticipated movements in the value of foreign currencies relative to the
U.S. dollar.
Fluctuations in the value of forward contracts are recorded for book purposes as
unrealized gains or losses by the Fund. Realized gains and losses include net
gains and losses recognized by the Fund on contracts which have been sold or
matured.
FUTURES CONTRACTS--The Fund may use financial futures contracts for hedging
purposes and to adjust exposure to U.S. and foreign fixed income markets in
connection with a reallocation of the Fund's assets or to manage the average
duration of the Fund. However, imperfect correlations between futures contracts
and the related securities or markets, or market disruptions, do not normally
permit full control of these risks at all times. Using financial futures
contracts involves various market risks. The maximum amount at risk from the
purchase of a futures contract is the contract value.
Upon entering into a financial futures contract, the Fund is required to pledge
to a broker an amount of cash and/or liquid securities equal to a certain
percentage of the contract amount. This amount is known as the "initial margin".
Subsequent payments, known as "variation margin," are made or received by the
Fund each day, depending on the daily fluctuations in the value of the
underlying financial futures contracts. Such variation margin is recorded for
financial statement purposes on a daily basis as an unrealized gain or loss on
futures until the financial futures contract is closed, at which time the net
gain or loss is reclassified to realized gain or loss on futures.
SWAP AGREEMENTS--Total return swap agreements involve commitments to pay
interest in exchange for a market-linked return based on a notional amount. To
the extent the total return of the security or index underlying the transaction
exceeds or falls short of the offsetting interest rate obligation, the Fund will
receive a payment from or make a payment to the counterparty, respectively.
Total return swaps are marked-to-market daily, and the change, if any, is
recorded as unrealized
--------------------------------------------------------------------------------
20
GLOBAL HIGH INCOME DOLLAR FUND INC.
NOTES TO FINANCIAL STATEMENTS
appreciation or depreciation in the Statement of Operations. Periodic payments
received or made at the end of each measurement period, but prior to
termination, are recorded as realized gains or losses in the Statement of
Operations.
At October 31, 2005, the Fund had outstanding total return swap contracts with
the following terms:
PAYMENTS UNREALIZED
NOTIONAL TERMINATION PAYMENTS MADE RECEIVED APPRECIATION/
AMOUNT DATE BY THE FUND BY THE FUND (DEPRECIATION)
-------------------------------------------------------------------------------------------
USD 4,480,000 07/27/07 3.56708%* 11.75%+ $(17,066)
EUR 4,110,000 07/27/07 2.35975%** 11.00%++ $100,277
RUB 34,500,000 10/09/07 $1,396,580^ 7.58%# $(19,495)
IDR 12,500,000,000 10/15/14 $1,065,471^^ 11.00%## $ 16,571
CURRENCY TYPE ABBREVIATIONS:
EUR Euro
IDR Indonesian Rupiah
RUB Russian Ruble
USD United States Dollar
* Rate based on 6 month LIBOR (USD - BBA)
** Rate based on 12 month LIBOR (EUR - BBA) plus 29 basis points.
+ Rate is equal to the interest amounts, if any, paid to holders of record of
Government of Jamaica bond, due 05/15/2011.
++ Rate is equal to the interest amounts, if any, paid to holders of record of
Government of Jamaica bond, due 07/27/2012.
^ Payment made on 09/27/05 to fully fund the swap.
^^ Payment made on 10/07/05 to fully fund the swap.
# Rate is equal to the total return on the OAO Gazprom 7.58% bond,
due 10/09/07.
## Rate is equal to the total return on the Republic of Indonesia 11.00% bond,
due 10/15/14.
BBA British Banking Association
Credit default swap agreements involve commitments to pay interest and principal
in the event of a default of a security. The Fund makes payments to the
counterparty semi-annually, and the Fund would receive payments only in the
event of default. Credit default swaps are marked-to-market daily, and the
change, if any, is recorded as unrealized appreciation or depreciation in the
Statement of Operations. Periodic payments received or made during each
measurement period, but prior to termination, are recorded as realized gains or
losses in the Statement of Operations.
--------------------------------------------------------------------------------
21
GLOBAL HIGH INCOME DOLLAR FUND INC.
NOTES TO FINANCIAL STATEMENTS
At October 31, 2005, the Fund had outstanding credit default swap contracts with
the following terms:
PAYMENTS
NOTIONAL TERMINATION PAYMENTS MADE RECEIVED UNREALIZED
AMOUNT DATE BY THE FUND BY THE FUND DEPRECIATION
--------------------------------------------------------------------------------------
USD $4,500,000 10/20/07 1.50% 0.00%* $(7,824)
* Payment by the counterparty will be made upon the occurrence of a negative
credit event with respect to the Republic of Argentina bond, coupon 8.28%,
due 12/31/33.
DIVIDENDS AND DISTRIBUTIONS--Dividends and distributions to shareholders are
recorded on the ex-dividend date. The amount of dividends from net investment
income and distributions from net realized capital gains and/or return of
capital is determined in accordance with U.S. federal income tax regulations,
which may differ from U.S. generally accepted accounting principles. These
"book/tax" differences are either considered temporary or permanent in nature.
To the extent these differences are permanent in nature, such amounts are
reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification.
CONCENTRATION OF RISK
Investing in securities of foreign issuers and currency transactions may involve
certain considerations and risks not typically associated with investments in
the United States. These risks include revaluation of currencies, adverse
fluctuations in foreign currency values and possible adverse political, social
and economic developments, including those particular to a specific industry,
country or region, which could cause the securities and their markets to be less
liquid and prices more volatile than those of comparable U.S. companies and U.S.
government securities. These risks are greater with respect to securities of
issuers located in emerging market countries in which the Fund invests. The
ability of the issuers of debt securities held by the Fund to meet their
obligations may be affected by economic and political developments particular to
a specific industry, country or region.
INVESTMENT ADVISOR AND ADMINISTRATOR AND OTHER TRANSACTIONS WITH RELATED
ENTITIES
The Board has approved an investment advisory and administration contract
("Advisory Contract") with UBS Global AM, under which UBS Global AM serves as
investment advisor and administrator of the Fund. In accordance with the
Advisory Contract, the Fund pays UBS Global AM an investment advisory and
administration fee, which is accrued weekly and paid monthly, at the annual rate
of 1.25% of the Fund's average weekly net assets. Effective August 1, 2005,
--------------------------------------------------------------------------------
22
GLOBAL HIGH INCOME DOLLAR FUND INC.
NOTES TO FINANCIAL STATEMENTS
UBS Global AM has agreed to waive compensation otherwise payable to it to reduce
the fee it receives under the Advisory Contract so that it is paid at the
following rates:
AVERAGE WEEKLY NET ASSETS ADVISORY FEE
--------------------------------------------------------------------------------
Up to $200 million 1.25%
--------------------------------------------------------------------------------
Above $200 million 1.00%
--------------------------------------------------------------------------------
This waiver will continue indefinitely unless the Board agrees to any change. At
October 31, 2005, the Fund owed UBS Global AM $301,366, which is composed of
$326,383 of investment advisory and administration fees less fees waived of
$25,017. For the year ended October 31, 2005, UBS Global AM waived $67,739 of
investment advisory and administration fees from the Fund.
The Fund invests in shares of the UBS Supplementary Trust--U.S. Cash Management
Prime Fund ("Supplementary Trust"). Supplementary Trust is a business trust
managed by UBS Global Asset Management (Americas) Inc., an affiliate of UBS
Global AM.
The Fund pays no management fees to Supplementary Trust. Distributions from the
Supplementary Trust are reflected as interest income on the Statement of
Operations.
Amounts relating to those investments at October 31, 2005 and for the period
ended are summarized as follows:
SALES INTEREST % OF
FUND PURCHASES PROCEEDS INCOME VALUE NET ASSETS
--------------------------------------------------------------------------------------------------------
UBS Supplementary Trust --
U.S. Cash Management
Prime Fund $278,899,196 $275,372,061 $271,915 $13,645,683 4.46%
========================================================================================================
ADDITIONAL INFORMATION REGARDING COMPENSATION TO AFFILIATE OF A BOARD MEMBER
Effective March 1, 2005, Professor Meyer Feldberg accepted the position of
senior advisor to Morgan Stanley, resulting in his becoming an interested
director of the Fund. The Fund has been informed that Professor Feldberg's role
at Morgan Stanley does not involve matters directly affecting any UBS funds. UBS
Global AM may execute Fund portfolio transactions through Morgan Stanley based
on that firm's ability to provide best execution of the transactions. For the
year ended October 31, 2005, the Fund purchased and sold certain securities
(e.g., fixed income securities) in principal trades with Morgan Stanley having
an aggregate value of $2,534,640. Morgan Stanley received compensation in
connection with these trades, which may have been in the form of a "mark-up" or
"mark-down" of the price of the securities, a fee from the issuer for
maintaining a commercial paper program, or some other form of compensation.
Although the precise amount of this compensation is not generally known by UBS
Global AM,
--------------------------------------------------------------------------------
23
GLOBAL HIGH INCOME DOLLAR FUND INC.
NOTES TO FINANCIAL STATEMENTS
UBS Global AM believes that under normal circumstances it represents a small
portion of the total value of the transactions.
SECURITIES LENDING
The Fund may lend securities up to 331/3% of its total assets to qualified
broker-dealers or institutional investors. The loans are secured at all times by
cash, cash equivalents or U.S. government securities in an amount at least equal
to the market value of the securities loaned, plus accrued interest and
dividends, determined on a daily basis and adjusted accordingly. The Fund will
regain ownership of loaned securities to exercise certain beneficial rights;
however, the Fund may bear the risk of delay in recovery of, or even loss of
rights in, securities loaned should the borrower fail financially. The Fund
receives compensation for lending its securities from interest or dividends
earned on the cash, cash equivalents or U.S. government securities held as
collateral, net of fee rebates paid to the borrower plus reasonable
administrative and custody fees. UBS Financial Services Inc. and other
affiliated broker-dealers have been approved as borrowers under the Fund's
securities lending program. UBS Securities LLC is the lending agent for each
Fund. For the year ended October 31, 2005, the Fund did not have any securities
on loan and the Fund did not owe UBS Securities LLC compensation as the Fund's
lending agent.
CAPITAL STOCK
There are 100,000,000 shares of $0.001 par value common stock authorized and
19,439,667 shares outstanding at October 31, 2005. For the year ended October
31, 2005 and for the year ended October 31, 2004, the Fund did not repurchase
any shares of common stock.
For the period September 17, 1998 (commencement of repurchase program) through
February 28, 2001, the Fund repurchased 3,297,000 shares of common stock at an
average market price per share of $11.68 and a weighted average discount from
net asset value of 14.88%. As of October 31, 2005, paid-in-capital has been
reduced by the cost of $38,698,693 of capital stock repurchased since
commencement of the repurchase program.
PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 2005, aggregate purchases and sales of portfolio
securities, excluding short-term securities, were $465,114,762 and $504,429,689,
respectively.
FEDERAL TAX STATUS
The Fund intends to distribute substantially all of its taxable income and to
comply with the other requirements of the Internal Revenue Code applicable to
regulated investment companies. Accordingly, no provision for federal income
taxes is required. In addition, by distributing during each calendar year,
substantially all of
--------------------------------------------------------------------------------
24
GLOBAL HIGH INCOME DOLLAR FUND INC.
NOTES TO FINANCIAL STATEMENTS
its net investment income, realized capital gains and certain other amounts, if
any, the Fund intends not to be subject to a federal excise tax.
The tax character of distributions paid during the fiscal year ended October 31,
2005 and October 31, 2004, respectively were as follows:
DISTRIBUTIONS PAID FROM: 2005 2004
-------------------------------------------------------------------------------------------------
Ordinary income $31,225,937 $30,792,351
-------------------------------------------------------------------------------------------------
Net realized long-term capital gains 24,993,580 3,116,260
-------------------------------------------------------------------------------------------------
56,219,517 33,908,611
=================================================================================================
At October 31, 2005, the components of accumulated earnings on a tax basis were
as follows:
Undistributed ordinary income $6,575,976
-------------------------------------------------------------------------------------------------
Undistributed long-term capital gains 17,879,944
-------------------------------------------------------------------------------------------------
Net unrealized appreciation 12,838,324
-------------------------------------------------------------------------------------------------
Total accumulated earnings $37,294,244
=================================================================================================
The difference between book-basis and tax-basis net unrealized appreciation of
investments is attributable to premium amortization adjustments and wash sales.
During the current fiscal year, the Fund had no capital loss carry-forwards to
offset current year gains.
For federal income tax purposes, the components of net unrealized appreciation
of investments at October 31, 2005 were as follows:
Tax cost of investments $288,274,777
=================================================================================================
Gross appreciation (investments having an excess of value over cost) $ 15,021,793
-------------------------------------------------------------------------------------------------
Gross depreciation (investments having an excess of cost over value) 2,183,469
-------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments $ 12,838,324
=================================================================================================
To reflect reclassifications arising from permanent "book/tax" differences for
the year ended October 31, 2005, accumulated undistributed net investment income
was increased by $11,470,084, accumulated net realized gain from investment
activities was decreased by $11,470,084.
The difference is primarily due to tax treatment of paydown gains and losses,
distributions in excess of net investment income and adjustments for certain
debt obligations.
SUBSEQUENT EVENT
On November 10, 2005, the Fund announced the commencement of a "three-for-one"
non-transferable rights offering to the Fund's shareholders. The terms of the
rights offering are disclosed in a prospectus, dated November 10, 2005, which
has been mailed to shareholders and is available on the SEC's Web site at
http://www.sec.gov.
--------------------------------------------------------------------------------
25
GLOBAL HIGH INCOME DOLLAR FUND INC.
FINANCIAL HIGHLIGHTS
Selected data for a share of common stock outstanding throughout each year is
presented below:
FOR THE YEARS ENDED OCTOBER 31,
------------------------------------------------------------
2005 2004 2003 2002+ 2001
--------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR $ 16.43 $ 15.92 $ 14.14 $ 14.16 $ 14.42
--------------------------------------------------------------------------------------------------------------------------------
Net investment income 1.02 0.98 1.02 1.04 1.24
--------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains from investment activities 1.17 1.27 2.44 0.52 0.10
--------------------------------------------------------------------------------------------------------------------------------
Net increase from investment operations 2.19 2.25 3.46 1.56 1.34
--------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (1.61) (0.97) (1.13) (1.31) (1.15)
--------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains from investment transactions (1.29) (0.77) (0.53) - -
--------------------------------------------------------------------------------------------------------------------------------
Distributions from paid-in-capital - - (0.02) (0.27) (0.46)
--------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions to shareholders (2.90) (1.74) (1.68) (1.58) (1.61)
--------------------------------------------------------------------------------------------------------------------------------
Net increase in net asset value resulting
from repurchase of common stock - - - - 0.01
--------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 15.72 $ 16.43 $ 15.92 $ 14.14 $ 14.16
--------------------------------------------------------------------------------------------------------------------------------
MARKET VALUE, END OF YEAR $ 17.82 $ 18.31 $ 17.07 $ 13.87 $ 12.98
--------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN(1) 13.25% 18.68% 36.52% 19.38% 15.80%
--------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) $305,689 $319,359 $309,516 $274,968 $275,205
--------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets:
Before fee waivers by advisor 1.43% 1.40% 1.43% 1.43% 1.41%
--------------------------------------------------------------------------------------------------------------------------------
After fee waivers by advisor 1.41% 1.40% 1.43% 1.43% 1.41%
--------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average assets:
Before fee waivers by advisor 6.47% 6.18% 6.66% 7.23% 8.46%
--------------------------------------------------------------------------------------------------------------------------------
After fee waivers by advisor 6.49% 6.18% 6.66% 7.23% 8.46%
--------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 160% 140% 53% 57% 51%
--------------------------------------------------------------------------------------------------------------------------------
(1) Total investment return is calculated assuming a $10,000 purchase of common
stock at the current market price on the first day of each year reported
and a sale at the current market price on the last day of each year
reported, and assuming reinvestment of dividends and other distributions at
prices obtained under the Fund's Dividend Reinvestment Plan. Total
investment return does not reflect brokerage commissions or the deduction
of taxes that a shareholder would pay on Fund dividends/distributions or a
sale of Fund shares.
+ As required, effective as of November 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide, Audits of Investment
Companies, and began amortizing premium on debt securities for financial
statement reporting purposes only. The effect of this change for the year
ended October 31, 2002 was to decrease net investment income per share by
$0.02, increase net realized and unrealized gains from investment
activities per share by $0.02, and decrease the ratio of net investment
income to average net assets from 7.35% to 7.23%. Per share ratios and
supplemental data for years prior to November 1, 2001 have not been
restated to reflect this change in presentation.
--------------------------------------------------------------------------------
26
GLOBAL HIGH INCOME DOLLAR FUND INC.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Global High Income Dollar Fund Inc.
We have audited the accompanying statement of assets and liabilities of Global
High Income Dollar Fund Inc. (the "Fund"), including the portfolio of
investments, as of October 31, 2005, and the related statement of operations for
the year then ended, the statement of changes in net assets for each of the two
years in the period then ended and the financial highlights for each of the five
years in the period then ended. These financial statements and 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 the standards of the Public Company
Accounting Oversight Board (United States). 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. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned at October 31, 2005, by correspondence with the custodian and
other brokers or by other appropriate auditing procedures where replies from
brokers were not received. 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 Global
High Income Dollar Fund Inc. at October 31, 2005, and the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with U.S. generally
accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
December 23, 2005
--------------------------------------------------------------------------------
27
GLOBAL HIGH INCOME DOLLAR FUND INC.
TAX INFORMATION (UNAUDITED)
Dividends received by tax-exempt recipients (e.g., IRAs and Keoghs) need not be
reported as taxable income. Some retirement trusts (e.g., corporate, Keogh and
403(b)(7) plans) may need this information for their annual reporting. Since the
Fund's fiscal year is not the calendar year, another notification will be sent
in respect of calendar year 2005. The second notification, which will reflect
the amount to be used by calendar year taxpayers on their federal income tax
returns, will be made in conjunction with Form 1099 DIV and will be mailed in
January 2006. Shareholders are advised to consult their own tax advisors with
respect to the tax consequences of their investment in the Fund.
--------------------------------------------------------------------------------
28
GLOBAL HIGH INCOME DOLLAR FUND INC.
GENERAL INFORMATION (UNAUDITED)
THE FUND
Global High Income Dollar Fund Inc. (the "Fund") is a non-diversified,
closed-end management investment company whose shares trade on the New York
Stock Exchange ("NYSE"). The Fund's primary investment objective is to achieve a
high level of current income. As a secondary objective the Fund seeks capital
appreciation, to the extent consistent with its primary objective. The Fund's
investment advisor and administrator is UBS Global Asset Management (US) Inc.
("UBS Global AM"), an indirect wholly owned asset management subsidiary of UBS
AG, which had over $50.2 billion in assets under management as of September 30,
2005.
SHAREHOLDER INFORMATION
The Fund's NYSE trading symbol is "GHI." Comparative net asset value and market
price information about the fund is published weekly in The Wall Street Journal,
The New York Times and Barron's, as well as in numerous other publications.
QUARTERLY FORM N-Q PORTFOLIO SCHEDULE
The Fund will file its complete schedule of portfolio holdings with the
Securities and Exchange Commission ("SEC") for the first and third quarter of
each fiscal year on Form N-Q. The Fund's Forms N-Q are available on the SEC's
Web site at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied
at the SEC's Public Reference Room in Washington, D.C. Information on the
operation of the SEC's Public Reference Room may be obtained by calling
1-800-SEC-0330. Additionally, you may obtain copies of Forms N-Q from the Fund
upon request by calling 1-800-647-1568.
PROXY VOTING POLICIES AND PROCEDURES AND RECORD
You may obtain a description of the Fund's (1) proxy voting policies, (2) proxy
voting procedures and (3) information regarding how the Fund voted any proxies
related to portfolio securities during the 12-month period ended June 30, 2005
without charge, upon request by contacting the Fund directly at 1-800-647 1568,
online on the Fund's Web site: www.ubs.com/ubsglobalam-proxy, or on the EDGAR
Database on the SEC's Web site (http://www.sec.gov.)
DIVIDEND REINVESTMENT PLAN
The Fund's Board has established a Dividend Reinvestment Plan (the "Plan") under
which all shareholders whose shares are registered in their own names, or in the
name of UBS Financial Services Inc. or its nominee, will have all dividends and
other distributions on their shares of common stock automatically reinvested in
additional shares, unless such shareholders elect to receive cash. Shareholders
who elect to hold their shares in the name of another broker or nominee should
contact such broker or nominee to determine whether, or how, they may
participate
--------------------------------------------------------------------------------
29
GLOBAL HIGH INCOME DOLLAR FUND INC.
GENERAL INFORMATION (UNAUDITED)
in the Plan. The ability of such shareholders to participate in the Plan may
change if their shares are transferred into the name of another broker or
nominee.
A shareholder may elect not to participate in the Plan or may terminate
participation in the Plan at any time without penalty, and shareholders who have
previously terminated participation in the Plan may rejoin it at any time.
Changes in elections must be made in writing to the Fund's transfer agent and
should include the shareholder's name and address as they appear on that share
certificate or in the transfer agent's records. An election to terminate
participation in the Plan, until such election is changed, will be deemed an
election by a shareholder to take all subsequent distributions in cash. An
election will be effective only for distributions declared and having a record
date at least ten days after the date on which the election is received.
Additional shares of common stock acquired under the Plan will be purchased in
the open market, on the NYSE or otherwise, at prices that may be higher or lower
than the net asset value per share at the time of the purchase. Investors should
consider whether continued participation in the dividend reinvestment plan is
appropriate for them when the Fund's market price exceeds its net asset value; a
portion of a dividend may represent a return of capital, which would be
reinvested in the Fund at a premium to net asset value. The number of shares of
common stock purchased with each dividend will be equal to the result obtained
by dividing the amount of the dividend payable to a particular shareholder by
the average price per share (including applicable brokerage commissions) that
the transfer agent was able to obtain in the open market. The Fund will not
issue any new shares in connection with the Plan. There currently is no charge
to participants for reinvesting dividends or other distributions. The transfer
agents fees for handling the reinvestment of distributions are paid by the Fund.
However, each participant pays a pro rata share of brokerage commissions
incurred with respect to the transfer agent's open market purchases of common
stock in connection with the reinvestment of distributions. The automatic
reinvestment of dividends and other distributions in shares of common stock does
not relieve participants of any income tax that may be payable on such
distributions.
Experience under the Plan may indicate that changes are desirable. Accordingly,
the Fund reserves the right to amend or terminate the Plan with respect to any
dividend or other distribution if notice of the change is sent to Plan
participants at least 30 days before the record date for such distribution. The
Plan also may be amended or terminated by the transfer agent by at least 30
days' written notice to all Plan participants. Additional information regarding
the Plan may be obtained from, and all correspondence concerning the Plan should
be directed to, the transfer agent at PFPC Inc., P.O. Box 43027. Providence,
Rhode Island 02940-3027. For further information regarding the Plan, you may
also contact the transfer agent directly at 1-800-331-1710.
--------------------------------------------------------------------------------
30
GLOBAL HIGH INCOME DOLLAR FUND INC.
GENERAL INFORMATION (UNAUDITED)
DISTRIBUTION POLICY
The Fund's Board adopted a managed distribution policy in December 1999.
Pursuant to the policy as in effect from December 1999 through early May 2005,
the Fund made regular monthly distributions at an annualized rate equal to 11%
of the Fund's net asset value, as determined as of the last trading day during
the first week of that month (usually a Friday, unless the NYSE is closed that
Friday). The Board approved reducing the annualized rate for distributions
pursuant to the policy from 11% to 9% effective beginning with the June 2005
monthly distribution. Prior to December 20, 1999, the Fund's distributions
varied based on the Fund's net investment income and realized capital gains or
losses. The Fund's Board may change or terminate the managed distribution policy
at any time; any such change or termination may have adverse effect on the
market price for the Fund's shares.
To the extent that the Fund's taxable income in any fiscal year exceeds the
aggregate amount distributed based on a fixed percentage of its net asset value,
the Fund would make an additional distribution in the amount of that excess near
the end of the fiscal year. To the extent that the aggregate amount distributed
by the Fund (based on a fixed percentage of its net asset value) exceeds its
current and accumulated earnings and profits, the amount of that excess would
constitute a return of capital or net realized capital gains for tax purposes.
Monthly distributions based on a fixed percentage of the Fund's net asset value
may require the Fund to make multiple distributions of long-term capital gains
during a single fiscal year. The Fund has received exemptive relief from the
Securities and Exchange Commission that enables it to do so. The Fund's Board
will reassess the annualized percentage of net assets at which the Fund's
monthly distributions will be made no less frequently than annually.
--------------------------------------------------------------------------------
31
GLOBAL HIGH INCOME DOLLAR FUND INC.
GENERAL INFORMATION (UNAUDITED)
BOARD APPROVAL OF ADVISORY AND ADMINISTRATION CONTRACT
BACKGROUND--At a meeting of the Board of Global High Income Dollar Fund Inc.
(the "Fund") on July 20, 2005, the members of the Board, including the directors
who are not "interested persons" of the Fund ("Independent Directors") as
defined in the Investment Company Act of 1940, as amended, considered and
approved the continuance of the Investment Advisory and Administration Contract
("Advisory and Administration Contract") for the Fund. In preparing for the
meeting, the Board members had requested and received information from UBS
Global Asset Management (US) Inc. ("UBS Global AM") to assist them, including
performance and expense information for other investment companies with similar
investment objectives to the Fund. The Board received and considered a variety
of information about UBS Global AM, as well as the advisory and administrative
arrangements for the Fund. The Independent Directors discussed the materials
initially provided by management prior to the scheduled Board meeting in a
session with their independent legal counsel and requested, and received from
management, supplemental materials to assist them in their consideration of the
Advisory and Administration Contract. Subsequently, the Chairman of the Board
and independent legal counsel to the Independent Directors met with management
representatives to discuss generally how information would be provided at the
Board meeting. The Independent Directors also met for several hours the evening
before the Board meeting and met again after management's presentation was
completed to review the disclosure that had been made to them at the meeting. At
all of these sessions the Independent Directors met in session with their
independent legal counsel. The Independent Directors also received a memorandum
from their independent legal counsel discussing the duties of Board members in
considering approval of advisory and administration contracts. In its
consideration of the approval of the Advisory and Administration Contract, the
Board, including the Independent Directors, considered the following factors:
NATURE, EXTENT AND QUALITY OF THE SERVICES UNDER THE ADVISORY AND ADMINISTRATION
CONTRACT--The Board received and considered information regarding the nature,
extent and quality of management services provided to the Fund by UBS Global AM
under the Advisory and Administration Contract during the past year. The Board
also received a description of the administrative and other services rendered to
the Fund and its shareholders by UBS Global AM. The Board noted that information
received at regular meetings throughout the year related to the services
rendered by UBS Global AM concerning the management of the Fund's affairs and
UBS Global AM's role in coordinating providers of other services to the Fund,
including custody, accounting and transfer agency services. The Board's
evaluation of the services provided by UBS Global AM took into account the
Board's knowledge and familiarity gained as board members of funds in the UBS
New York fund complex, including the scope and quality of UBS Global AM's
--------------------------------------------------------------------------------
32
GLOBAL HIGH INCOME DOLLAR FUND INC.
GENERAL INFORMATION (UNAUDITED)
investment management and other capabilities and the quality of its
administrative and other services. The Board observed that the scope of services
provided by UBS Global AM had expanded over time as a result of regulatory and
other developments, including maintaining and monitoring its own and the Fund's
expanded compliance programs.
The Board had available to it the qualifications, backgrounds and
responsibilities of the Fund's senior personnel and the portfolio management
team primarily responsible for the day-to-day portfolio management of the Fund
and recognized that these persons report to the Board regularly, some at every
Board meeting. The Board also considered, based on its knowledge of UBS Global
AM and its affiliates, the financial resources available to UBS Global AM and
its parent organization, UBS AG.
The Board reviewed how transactions in Fund assets are effected. In conducting
its review, the Board had available UBS Global AM's brokerage policies and
practices, the standards applied in seeking best execution, UBS Global AM's soft
dollar policies and practices, the use of a broker affiliated with UBS Global AM
and the existence of quality controls applicable to brokerage allocation
procedures. In addition, management also reported to the Board on, among other
things, its disaster recovery plans and portfolio manager compensation plan.
The Board concluded that, overall, it was satisfied with the nature, extent and
quality of services provided, and expected to be provided, to the Fund under the
Advisory and Administration Contract.
FUND PERFORMANCE--The Board received and considered performance information of
the Fund compared to other funds (the "Performance Universe") selected by
Lipper, Inc. ("Lipper"), an independent provider of investment company data,
over the one-, three-, five- and ten-year periods ended May 31, 2005 and since
inception. The Board was provided with a description of the methodology Lipper
used to determine the similarity of the Fund with the funds included in the
Performance Universe. The Board also noted that it had received information
throughout the year at periodic intervals with respect to the Fund's
performance.
The comparative Lipper information showed that the Fund's NAV performance as
compared against the Performance Universe was consistently at or below average
for the comparative periods. Specifically, the Fund's NAV performance was in the
third quartile for the one-year period and since the Fund's inception and in the
fourth quartile for the three-, five- and ten year periods. The Board in its
review noted that more than three-quarters of the Performance Universe utilized
leverage, most in excess of twenty percent (20%), allowing for amplified returns
in this prolonged bull market, but with an increased level of risk. Management
explained that the Fund, which has a lower beta/duration (risk profile), has
underperformed its peers during this period, although it has outperformed on
--------------------------------------------------------------------------------
33
GLOBAL HIGH INCOME DOLLAR FUND INC.
GENERAL INFORMATION (UNAUDITED)
corrections, as might be expected with a lower beta/duration. The Board also
noted that the Fund has performed on par with its peer group since the inception
of the Fund. Based on its review, the Board concluded that the Fund's investment
performance was satisfactory.
MANAGEMENT FEE AND EXPENSE RATIO--The Board reviewed and considered the
contractual advisory and administration fee (the "Contractual Management Fee")
payable by the Fund to UBS Global AM in light of the nature, extent and quality
of the advisory and administrative services provided by UBS Global AM. The Board
also reviewed and considered the actual fee rate (the "Actual Management Fee")
paid by the Fund.
Additionally, the Board received and considered information comparing the Fund's
Contractual Management Fee, Actual Management Fee and overall expenses with
those of funds in a group of funds selected and provided by Lipper (the "Expense
Group").
In connection with its consideration of the Fund's management fees, the Board
also received information on an affiliate of UBS Global AM's standard
institutional account fees for accounts of a similar investment type to the
Fund. The Board noted that these fees were lower than the Contractual Management
Fee and Actual Management Fee for the Fund, but also noted management's
explanation that comparisons with such accounts may be of limited relevance
given the different structures and regulatory requirements of closed-end funds
versus such accounts, the differences in the levels of services required by
closed-end funds and such accounts and the memorandum provided by the Fund's
legal counsel discussing court decisions regarding the limited usefulness of
such comparisons.
The comparative Lipper information showed that the Fund's Contractual Management
Fee and Actual Management Fee were in the last quintile in the Fund's Expense
Group and was the highest in its Expense Group (i.e., sixth out of six for the
periods included in the Lipper report). In addition, the Board noted that the
Fund's total expenses were in the third quintile in its Expense Group for the
comparison period. The Board noted that although the Fund had a high Contractual
Management Fee and Actual Management Fee, the Fund's total expenses were average
in comparison with the Fund's Expense Group, resulting from below average
nonmanagement fees.
After further discussion, the Board requested that management consider the
possibility of instituting a breakpoint for the Fund, particularly in light of
the Fund's proposed rights offering. After further discussion, management
recommended, and the Board approved, that the Fund's management fee, currently
1.25%, be revised to provide for a breakpoint such that the Fund's management
fee would remain at 1.25% of the Fund's average weekly net assets ("average net
assets")
--------------------------------------------------------------------------------
34
GLOBAL HIGH INCOME DOLLAR FUND INC.
GENERAL INFORMATION (UNAUDITED)
for the first $200 million of assets under management and be reduced to 1.00% of
the Fund's average net assets for amounts above $200 million.
Taking all of the above into consideration, the Board determined that the
Contractual Management Fee was reasonable in light of the nature, extent and
quality of the services provided to the Fund under the Advisory and
Administration Contract.
ADVISOR PROFITABILITY--The Board received and considered a profitability
analysis of UBS Global AM and its affiliates in providing services to the Fund.
The Board also received profitability information with respect to the UBS New
York Fund complex as a whole. In addition, the Board received information with
respect to UBS Global AM's allocation methodologies used in preparing this
profitability data. UBS Global AM's profitability was considered not excessive
in light of the nature, extent and quality of the services provided to the Fund.
ECONOMIES OF SCALE--The Board received and considered information from
management regarding whether it has achieved economies of scale with respect to
the management of the Fund, whether the Fund has appropriately benefited from
any economies of scale, and whether there is potential realization of further
economies of scale. The Board considered whether economies of scale in the
provision of services to the Fund were being passed along to shareholders.
In conducting its review, the Board noted that the Fund's Contractual Management
Fee did not currently contain any breakpoints but that management had proposed,
and the Board had approved, the institution of a breakpoint in the Fund's
management fee, as described above. As the Fund's current asset level exceeded
the breakpoint, and as any increase in assets due to the proposed rights
offering would incur the management fee at the level above the breakpoint, the
Board determined that actual economies of scale (on a going forward basis)
existed in the form of the breakpoint to the Contractual Management Fee.
Management also noted that, if the proposed rights offering is completed, to the
extent fixed costs are spread over more assets, the Fund's shareholders may
receive a marginal benefit from economies of scale.
Generally, in light of information provided and discussed, the Board believed
that UBS Global AM's sharing of current economies of scale with the Fund was
acceptable.
OTHER BENEFITS TO UBS GLOBAL AM--The Board considered other benefits received by
UBS Global AM and its affiliates as a result of its relationship with the Fund,
including the opportunity to offer additional products and services to Fund
shareholders.
In light of the costs of providing investment management, administrative and
other services to the Fund and UBS Global AM's ongoing commitment to the
--------------------------------------------------------------------------------
35
GLOBAL HIGH INCOME DOLLAR FUND INC.
GENERAL INFORMATION (UNAUDITED)
Fund, the profits and other ancillary benefits that UBS Global AM and its
affiliates received were considered reasonable.
In light of all of the foregoing, the Board approved the Advisory and
Administration Contract to continue for another year.
In making its decision, the Board identified no single factor as being
determinative in approving the Advisory and Administration Contract. The
Independent Directors were advised by separate independent legal counsel
throughout the entire process. The Board discussed the proposed continuance of
the Advisory and Administration Contract in a private session with their
independent legal counsel at which no representatives of UBS Global AM were
present.
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36
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37
GLOBAL HIGH INCOME DOLLAR FUND INC.
SUPPLEMENTAL INFORMATION (UNAUDITED)
BOARD OF DIRECTORS & OFFICERS
The Fund is governed by a Board of Directors which oversees the Fund's
operations. Each director serves until the next annual meeting of shareholders
or until his or her successor is elected and qualified, or until he or she
resigns or is otherwise removed. Officers are appointed by the directors and
serve at the pleasure of the Board. The table below shows, for each director and
officer, his or her name, address and age, the position held with the Fund, the
length of time served as a director and officer of the Fund, the director's or
officer's principal occupations during the last five years, the number of funds
in the UBS fund complex overseen by the director or for which a person served as
an officer, and other directorships held by the director.
The Fund's Statement of Additional Information contains additional information
about the directors and is available, without charge, upon request by calling
1-800-780-7438.
INTERESTED DIRECTORS
Term of
Position(s) Office+ and
Name, Address, Held with Length of Principal Occupation(s)
and Age Fund Time Served During Past 5 Years
-------------------------------------------------------------------------------------------------------
Margo N. Alexander++; Director Since 1996 Mrs. Alexander is retired. She was an
58 c/o UBS Global executive vice president of UBS Financial
Asset Management Services Inc. (from March 1984 to December
51 W 52nd Street 2002). She was chief executive officer
New York, NY 10019 (from January 1995 to October 2000), a
director (from January 1995 to September
2001) and chairman (from March 1999 to
September 2001) of UBS Global AM (formerly
known as Mitchell Hutchins Asset Management
Inc.)
Meyer Feldberg+++; Director Since 1996 Professor Feldberg is Dean Emeritus and
63 Morgan Stanley Sanford Bernstein Professor of Leadership
1585 Broadway and Ethics at Columbia Business School,
33rd Floor although on a two year leave of absence.
New York, NY 10036 He is also a senior advisor to Morgan
Stanley (financial services) (since March
2005). Prior to July 2004, he was Dean
and Professor of Management of the
Graduate School of Business at Columbia
University (since 1989).
--------------------------------------------------------------------------------
38
GLOBAL HIGH INCOME DOLLAR FUND INC.
SUPPLEMENTAL INFORMATION (UNAUDITED)
Number of
Portfolios in Fund Complex Other Directorships
Overseen by Director Held by Director
-------------------------------------------------------------------------------------------------------
Mrs. Alexander is a director or trustee of 16 None
investment companies (consisting of 33 portfolios)
for which UBS Global AM or one of its affiliates
serves as investment advisor, sub-advisor or
manager.
Professor Feldberg is a director or trustee of Professor Feldberg is also a director of
30 investment companies (consisting of 47 Primedia Inc. (publishing), Federated Department
portfolios) for which UBS Global AM or one of Stores, Inc. (operator of department stores),
its affiliates serves as investment advisor, Revlon, Inc. (cosmetics) and SAPPI, Ltd.
sub-advisor or manager. (producer of paper).
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39
GLOBAL HIGH INCOME DOLLAR FUND INC.
SUPPLEMENTAL INFORMATION (UNAUDITED)
INDEPENDENT DIRECTORS
Term of
Position(s) Office+ and
Name, Address, Held with Length of Principal Occupation(s)
and Age Fund Time Served During Past 5 Years
-------------------------------------------------------------------------------------------------------
Richard Q. Armstrong; 70 Director and Since 1995 Mr. Armstrong is chairman and principal of
c/o Willkie Farr & Chairman of R.Q.A. Enterprises (management consulting
Gallagher LLP the Board of firm) (since April 1991 and principal
787 Seventh Avenue Directors occupation since March 1995).
New York, NY 10019-6099
David J. Beaubien; 71 Director Since 2001 Mr. Beaubien is retired (since 2003). He was
84 Doane Road chairman of Yankee Environmental Systems,
Ware, MA 01082 Inc., a manufacturer of meteorological
measuring systems (since 1991).
Richard R. Burt; 58 Director Since 1995 Mr. Burt is chairman of Diligence LLC
1275 Pennsylvania Ave., (international information and security
N.W. Washington, D.C. firm) and IEP Advisors (international
20004 investments and consulting firm).
William D. White; 71 Director Since 2001 Mr. White is retired (since 1994).
P.O. Box 199
Upper Black Eddy, PA 18972
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40
GLOBAL HIGH INCOME DOLLAR FUND INC.
SUPPLEMENTAL INFORMATION (UNAUDITED)
Number of
Portfolios in Fund Complex Other Directorships
Overseen by Director Held by Director
-------------------------------------------------------------------------------------------------------
Mr. Armstrong is a director or trustee of 16 None
investment companies (consisting of 33 portfolios)
for which UBS Global AM or one of its affiliates
serves as investment advisor, sub-advisor or
manager.
Mr. Beaubien is a director or trustee of 16 Mr. Beaubien is also a director of IEC
investment companies (consisting of 33 portfolios) Electronics, Inc., a manufacturer of electronic
for which UBS Global AM or one of its affiliates assemblies.
serves as investment advisor, sub-advisor or
manager.
Mr. Burt is a director or trustee of 16 investment Mr. Burt is also a director of Hollinger
companies (consisting of 33 portfolios) for which International, Inc. (publishing), HCL
UBS Global AM or one of its affiliates serves as Technologies, Ltd., (software and information
investment advisor, sub-advisor or manager. technologies), The Central European Fund, Inc.,
The Germany Fund, Inc., IGT, Inc. (provides
technology to gaming and wagering industry) and
chairman of Weirton Steel Corp. (makes and
finishes steel products). He is also a director
or trustee of funds in the Scudder Mutual Funds
Family (consisting of 52 portfolios).
Mr. White is a director or trustee of 16 investment None
companies (consisting of 33 portfolios) for which
UBS Global AM or one of its affiliates serves as
investment advisor, sub-advisor or manager.
--------------------------------------------------------------------------------
41
GLOBAL HIGH INCOME DOLLAR FUND INC.
SUPPLEMENTAL INFORMATION (UNAUDITED)
OFFICERS
Term of Principal Occupation(s)
Position(s) Office+ and During Past 5 Years;
Name, Address, Held with Length of Number of Portfolios in Fund Complex
and Age the Fund Time Served for which Person Serves as Officer
------------------------------------------------------------------------------------------------------------------
Joseph Allessie*; 40 Vice President Since 2005 Mr. Allessie is a director and deputy general
and Assistant counsel at UBS Global Asset Management (UB)
Secretary Inc. and UBS Global Asset Management
(Americas) Inc. (collectively, "UBS Global
AM--Americas region") (since 2005). Prior to
joining UBS Global AM--Americas region, he was
senior vice president and general counsel of
Kenmar Advisory Corp. (from 2004 to 2005).
Prior to that Mr. Allessie was general counsel
and secretary of GAM USA Inc., GAM
Investments, GAM Services, GAM Funds, Inc. and
the GAM Avalon Funds (from 1999 to 2004). Such
entities are affiliates of UBS Global
AM--Americas region. Prior to joining GAM,
Mr. Allessie was regulatory officer to the
State of New Jersey, Department of Law and
Public Safety, Bureau of Securities (from 1993
to 1999). Mr. Allessie is a vice president and
assistant secretary of 20 investment companies
(consisting of 86 portfolios) for which UBS
Global AM-- Americas region or one of its
affiliates serves as investment advisor,
sub-advisor or manager.
W. Douglas Beck*; 38 President Since 2005 Mr. Beck is an executive director and head of
product development and management for UBS
Global AM--Americas region (since 2002). From
March 1998 to November 2002, he held various
positions at Merrill Lynch, the most recent
being first vice president and co-manager of
the managed solutions group. Mr. Beck is
president of 20 investment companies
(consisting of 86 portfolios) for which UBS
Global AM--Americas region or one of its
affiliates serves as investment advisor,
sub-advisor or manager, and was vice president
of such investment companies from 2003 to
2005.
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42
GLOBAL HIGH INCOME DOLLAR FUND INC.
SUPPLEMENTAL INFORMATION (UNAUDITED)
OFFICERS (CONTINUED)
Term of Principal Occupation(s)
Position(s) Office+ and During Past 5 Years;
Name, Address, Held with Length of Number of Portfolios in Fund Complex
and Age the Fund Time Served for which Person Serves as Officer
------------------------------------------------------------------------------------------------------------------
Thomas Disbrow*; 39 Vice President Since 2000 Mr. Disbrow is a director, head of retail
and Treasurer (Vice President) mutual fund operations and co-head of the
Since 2004 mutual fund finance department of UBS Global
(Treasurer) AM--Americas region. Prior to November 1999,
he was a vice president of Zweig/Glaser
Advisers. Mr. Disbrow is a vice president and
treasurer of 16 investment companies
(consisting of 33 portfolios) and vice
president and assistant treasurer of four
investment companies (consisting of 53
portfolios) for which UBS Global AM or one of
its affiliates serves as investment advisor,
sub-advisor or manager.
Mark F. Kemper**; 47 Vice President Since 2004 Mr. Kemper is general counsel of UBS Global
and Secretary AM--Americas region (since July 2004).
Mr. Kemper also is an executive director of
UBS Global AM--Americas region. He was
deputy general counsel of UBS Global Asset
Management (Americas) Inc. from July 2001
to July 2004. He has been secretary of UBS
Global AM--Americas since 1999 and assistant
secretary of UBS Global Asset Management Trust
Company since 1993. Mr. Kemper is secretary
of UBS Global AM-- Americas region
(since 2004). Mr. Kemper is vice president and
secretary of 20 investment companies
(consisting of 86 portfolios) for which UBS
Global AM--Americas region or one of its
affiliates serves as investment advisor,
sub-advisor or manager.
Joanne M. Kilkeary*; 37 Vice President Since 2004 Ms. Kilkeary is an associate director (since
and Assistant 2000) and a senior manager (since 2004) of the
Treasurer mutual fund finance department of UBS Global
AM--Americas region. Ms. Kilkeary is a vice
president and assistant treasurer of 16
investment companies (consisting of 33
portfolios) for which UBS Global AM--Americas
region or one of its affiliates serves as
investment advisor, sub-advisor or manager.
--------------------------------------------------------------------------------
43
GLOBAL HIGH INCOME DOLLAR FUND INC.
SUPPLEMENTAL INFORMATION (UNAUDITED)
OFFICERS (CONTINUED)
Term of Principal Occupation(s)
Position(s) Office+ and During Past 5 Years;
Name, Address, Held with Length of Number of Portfolios in Fund Complex
and Age the Fund Time Served for which Person Serves as Officer
------------------------------------------------------------------------------------------------------------------
Tammie Lee*; 34 Vice President Since 2005 Ms. Lee is a director and associate general
and Assistant counsel of UBS Global AM--Americas region
Secretary (since November 2005). Prior to joining UBS
Global AM--Americas region, she was vice
president and counsel at Deutsche Asset
Management/Scudder Investments from April
2003 to October 2005. Prior to that she was
assistant vice president and counsel at
Deutsche Asset Management/Scudder Investments
from July 2000 to March 2003. Prior to
joining Deutsche Asset Management/ Scudder
Investments, she was assistant counsel at
First Investors Corporation from August 1996
to June 2000. Ms. Lee is a vice president and
assistant secretary of 20 investment companies
(consisting of 86 portfolios) for which UBS
Global AM--Americas region or one of its
affiliates serves as investment advisor,
sub-advisor or manager.
Joseph T. Malone*; 38 Vice President Since 2004 Mr. Malone is a director and co-head of the
and Assistant mutual fund finance department of UBS Global
Treasurer AM--Americas region. From August 2000 through
June 2001, he was the controller at AEA
Investors Inc. From March 1998 to August 2000,
Mr. Malone was a manager within the investment
management services practice of
PricewaterhouseCoopers LLC. Mr. Malone is vice
president and assistant treasurer of 16
investment companies (consisting of 33
portfolios) and vice president, treasurer and
principal accounting officer of four
investment companies (consisting of 53
portfolios) for which UBS Global AM--Americas
region or one of its affiliates serves as
investment advisor, sub-advisor or manager.
--------------------------------------------------------------------------------
44
GLOBAL HIGH INCOME DOLLAR FUND INC.
SUPPLEMENTAL INFORMATION (UNAUDITED)
OFFICERS (CONTINUED)
Term of Principal Occupation(s)
Position(s) Office+ and During Past 5 Years;
Name, Address, Held with Length of Number of Portfolios in Fund Complex
and Age the Fund Time Served for which Person Serves as Officer
------------------------------------------------------------------------------------------------------------------
Joseph McGill*; 43 Vice President Since 2004 Mr. McGill is an executive director and chief
and Chief compliance officer at UBS Global AM--Americas
Compliance region (since 2003). Prior to joining UBS
Officer Global AM he was assistant general counsel,
J.P. Morgan Investment Management (from
1999-2003). Mr. McGill is a vice president and
chief compliance officer of 20 investment
companies (consisting of 86 portfolios) for
which UBS Global AM-- Americas region or one
of its affiliates serves as investment advisor,
sub-advisor or manager.
John Penicook**; 47 Vice President Since 2002 Mr. Penicook is a managing director and global
head of fixed income of UBS Global AM.
Mr. Penicook is a vice president of three
investment companies (consisting of three
portfolios) for which UBS Global AM--Americas
region or one of its affiliates serves as
investment advisor, sub-advisor or
manager.
Eric Sanders*; 40 Vice President Since 2005 Mr. Sanders is a director and associate
and Assistant general counsel of UBS Global AM--Americas
Secretary region (since July 2005). From 1996 until June
2005, he held various positions at Fred Alger
& Company, Incorporated, the most recent being
assistant vice president and associate general
counsel. Mr. Sanders is a vice president and
assistant secretary of 20 investment companies
(consisting of 86 portfolios) for which UBS
Global AM-- Americas region or one of its
affiliates serves as investment advisor,
sub-advisor or manager.
--------------------------------------------------------------------------------
45
GLOBAL HIGH INCOME DOLLAR FUND INC.
SUPPLEMENTAL INFORMATION (UNAUDITED)
OFFICERS (CONCLUDED)
Term of Principal Occupation(s)
Position(s) Office+ and During Past 5 Years;
Name, Address, Held with Length of Number of Portfolios in Fund Complex
and Age the Fund Time Served for which Person Serves as Officer
------------------------------------------------------------------------------------------------------------------
Uwe Schillhorn**; 41 Vice President Since 2004 Mr. Schillhorn is an executive director, and
head of emerging markets debt (since 2004) of
UBS Global AM--Americas region. Mr. Schillhorn
is a vice president of two investment
companies (consisting of two portfolios) for
which UBS Global AM--Americas region or one of
its affiliates serves as investment advisor,
sub-advisor or manager.
Keith A. Weller*; 44 Vice President Since 1995 Mr. Weller is an executive director and senior
and Assistant associate general counsel of UBS Global
Secretary AM--Americas region. Mr. Weller is a vice
president and assistant secretary of 20
investment companies (consisting of 86
portfolios) for which UBS Global AM--Americas
region or one of its affiliates serves as
investment advisor, sub-advisor or manager.
* This person's business address is 51 West 52nd Street, New York, New York
10019-6114.
** This person's business address is One North Wacker Drive, Chicago, IL 60606.
+ Each director serves until the next annual meeting of shareholders or until
his or her successor is elected and qualified or until he or she resigns or
is otherwise removed. Each Director who has attained the age of seventy-two
(72) years will be subject to retirement on the last day of the month in
which he or she attains such age. Officers are appointed by the Director and
serve at the pleasure of the Board.
++ Mrs. Alexander is deemed an "interested person" of the fund as defined in
the Investment Company Act because an immediate family member is an employee
of an affiliate of UBS Global AM.
+++ Professor Feldberg is deemed an "interested person" of the Fund as defined
in the Investment Company Act because he is a senior advisor to Morgan
Stanley, a financial services firm with which the Fund may conduct
transactions.
--------------------------------------------------------------------------------
46
GLOBAL HIGH INCOME DOLLAR FUND INC.
NEW YORK STOCK EXCHANGE CERTIFICATIONS (UNAUDITED)
Global High Income Dollar Fund Inc. (the "Fund") is listed on the New York Stock
Exchange ("NYSE"). As a result, it is subject to certain corporate governance
rules and related interpretations issued by the exchange. Pursuant to those
requirements, the Fund must include information in this report regarding certain
certifications. The Fund's president and treasurer have filed certifications
with the SEC regarding the quality of the Fund's public disclosure. Those
certifications were made pursuant to Section 302 of the Sarbanes-Oxley Act
("Section 302 Certifications"). The Section 302 Certifications were filed as
exhibits to the Fund's annual report on Form N-CSR, which included a copy of
this annual report along with other information about the Fund. After the Fund's
2005 annual meeting of shareholders, it filed a certification with the NYSE on
March 11, 2005 stating that its president was unaware of any violation of the
NYSE's Corporate Governance listing standards.
--------------------------------------------------------------------------------
47
(This page has been left blank intentionally)
--------------------------------------------------------------------------------
48
DIRECTORS
Richard Q. Armstrong
Chairman
Margo N. Alexander
David J. Beaubien
Richard R. Burt
Meyer Feldberg
William D. White
PRINCIPAL OFFICERS
W. Douglas Beck John Penicook
President Vice President
Mark F. Kemper Uwe Schillhorn
Vice President and Secretary Vice President
Thomas Disbrow
Vice President and Treasurer
INVESTMENT ADVISOR AND ADMINISTRATOR
UBS Global Asset Management (US) Inc.
51 West 52nd Street
New York, New York 10019-6114
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that from time to time the Fund may purchase shares of its
common stock in the open market at market prices.
This report is sent to the shareholders of the Fund for their information. It is
not a prospectus, circular or representation intended for the use in the
purchase or sale of shares of the Fund or of any securities mentioned in this
report.
(C) 2005 UBS Global Asset Management (US) Inc. All rights reserved.
[LOGO OF UBS] UBS
---------------
UBS GLOBAL ASSET MANAGEMENT (US) INC. Presorted
51 West 52nd Street Standard
New York, New York 10019-6114 US Postage
PAID
Smithtown, NY
Permit 700
---------------
ITEM 2. CODE OF ETHICS.
------------------------
The registrant has adopted a code of ethics that applies to its principal
executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions pursuant to Section 406 of
the Sarbanes-Oxley Act of 2002. (The registrant has designated the code of
ethics adopted pursuant to Sarbanes-Oxley as a "Code of Conduct" to lessen the
risk of confusion with its separate code of ethics adopted pursuant to Rule
17j-1 under the Investment Company Act of 1940, as amended.)
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
------------------------------------------
The registrant's Board has determined that the following person serving on the
registrant's Audit Committee is an "audit committee financial expert" as defined
in item 3 of Form N-CSR: Richard Q. Armstrong. Mr. Armstrong is independent as
defined in item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
------------------------------------------------
(a) Audit Fees:
----------
For the fiscal years ended October 31, 2005 and October 31, 2004,
the aggregate Ernst & Young LLP (E&Y) audit fees for professional
services rendered to the registrant were approximately $51,400 and
$46,100, respectively.
Fees included in the audit fees category are those associated with
the annual audits of financial statements and services that are
normally provided in connection with statutory and regulatory
filings.
(b) Audit-Related Fees:
------------------
In each of the fiscal years ended October 31, 2005 and October 31,
2004, the aggregate audit-related fees billed by E&Y for services
rendered to the registrant that are reasonably related to the
performance of the audits of the financial statements, but not
reported as audit fees, were approximately $3,712 and $3,500,
respectively.
Fees included in the audit-related category are those associated
with(1) the reading and providing of comments on the 2005 and 2004
semiannual financial statements, and (2) review of the consolidated
2004 and 2003 report on the profitability of the UBS Funds to UBS
Global Asset Management (US) Inc. ("UBS Global AM") and its
affiliates to assist the board members in their annual
advisory/administration contract reviews.
There were no audit-related fees required to be approved pursuant
to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the
fiscal years indicated above.
(c) Tax Fees:
--------
In each of the fiscal years ended October 31, 2005 and October 31,
2004, the aggregate tax fees billed by E&Y for professional
services rendered to the registrant were approximately $9,775 and
$9,200, respectively.
Fees included in the tax fees category comprise all services
performed by professional staff in the independent accountant's tax
division except those services related to the audits. This category
comprises fees for tax return preparation and review of excise tax
calculations.
There were no tax fees required to be approved pursuant to
paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the
fiscal years indicated above.
(d) All Other Fees:
--------------
In each of the fiscal years ended October 31, 2005 and October 31,
2004, there were no fees billed by E&Y for products and services,
other than the services reported in Item 4(a)-(c) above, rendered
to the registrant.
Fees included in the all other fees category would consist of
services related to internal control reviews, strategy and other
consulting, financial information systems design and
implementation, consulting on other information systems, and other
tax services unrelated to the registrant.
There were no "all other fees" required to be approved pursuant to
paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the
fiscal years indicated above.
(e) (1) Audit Committee Pre-Approval Policies and Procedures:
----------------------------------------------------
The registrant's Audit Committee ("audit committee") has
adopted an "Audit Committee Charter (Amended and Restated as of
May 12, 2004)" (the "charter"). The charter contains the audit
committee's pre-approval policies and procedures. Reproduced
below is an excerpt from the charter regarding pre-approval
policies and procedures:
The [audit] Committee shall:
...
2. Pre-approve (a) all audit and permissible non-audit
services(1) to be provided to the Fund and (b) all
permissible non-audit services to be provided by the
Fund's independent auditors to UBS Global [AM] and any
Covered Service Providers, if the engagement relates
directly to the operations and financial reporting of the
Fund. In carrying out this responsibility, the Committee
shall seek periodically from UBS Global [AM] and from the
independent auditors a list of such audit and permissible
non-audit services that can be expected to be rendered to
the Fund, UBS Global [AM] or any Covered Service
Providers by the Fund's independent auditors, and an
estimate of the fees sought to be paid in connection with
such services. The Committee may delegate its
responsibility to pre-approve any such audit and
permissible non-audit services to a sub-committee
consisting of the Chairperson of the Committee and two
other members of the Committee as the Chairperson, from
time to time, may determine and appoint, and such
sub-committee shall report to the Committee, at its next
regularly scheduled meeting after the sub- committee's
meeting, its decision(s). From year to year, the
Committee shall
report to the Board whether this system of pre-approval
has been effective and efficient or whether this Charter
should be amended to allow for pre-approval pursuant to
such policies and procedures as the Committee shall
approve, including the delegation of some or all of the
Committee's pre-approval responsibilities to other
persons (other than UBS Global [AM] or the Fund's
officers).
---------------
(1)The Committee will not approve non-audit services
that the Committee believes may taint the
independence of the auditors. Currently, permissible
non-audit services include any professional services
(including tax services) that are not prohibited
services as described below, provided to the Fund by
the independent auditors, other than those provided
to the Fund in connection with an audit or a review
of the financial statements of the Fund. Permissible
non-audit services may not include: (i) bookkeeping
or other services related to the accounting records
or financial statements of the Fund; (ii) financial
information systems design and implementation; (iii)
appraisal or valuation services, fairness opinions or
contribution-in-kind reports; (iv) actuarial
services; (v) internal audit outsourcing services;
(vi) management functions or human resources; (vii)
broker or dealer, investment adviser or investment
banking services; (viii) legal services and expert
services unrelated to the audit; and (ix) any other
service the Public Company Accounting Oversight Board
determines, by regulation, is impermissible.
Pre-approval by the Committee of any permissible
non-audit services is not required so long as: (i)
the aggregate amount of all such permissible
non-audit services provided to the Fund, UBS Global
[AM] and any service providers controlling,
controlled by or under common control with UBS Global
[AM] that provide ongoing services to the Fund
("Covered Service Providers") constitutes not more
than 5% of the total amount of revenues paid to the
independent auditors (during the fiscal year in which
the permissible non-audit services are provided) by
(a) the Fund, (b) its investment adviser and (c) any
entity controlling, controlled by, or under common
control with the investment adviser that provides
ongoing services to the Fund during the fiscal year
in which the services are provided that would have to
be approved by the Committee; (ii) the permissible
non-audit services were not recognized by the Fund at
the time of the engagement to be non-audit services;
and (iii) such services are promptly brought to the
attention of the Committee and approved by the
Committee (or its delegate(s)) prior to the
completion of the audit.
(e) (2) Services approved pursuant to paragraph (c)(7)(i)(C) of
Rule 2-01 of Regulation S-X:
Audit-Related Fees:
------------------
There were no amounts that were approved by the audit
committee pursuant to the de minimis exception for the
fiscal years ended October 31, 2005 and October 31, 2004 on
behalf of the registrant.
There were no amounts that were required to be approved by
the audit committee pursuant to the de minimis exception for
the fiscal years ended October 31, 2005 and October 31, 2004
on behalf of the registrant's service providers that relate
directly to the operations and financial reporting of the
registrant.
Tax Fees:
--------
There were no amounts that were approved by the audit
committee pursuant to the de minimis exception for the
fiscal years ended October 31, 2005 and October 31, 2004 on
behalf of the registrant.
There were no amounts that were required to be approved by
the audit committee pursuant to the de minimis exception for
the fiscal years ended October 31, 2005 and October 31, 2004
on behalf of the registrant's service providers that relate
directly to the operations and financial reporting of the
registrant.
All Other Fees:
--------------
There were no amounts that were approved by the audit
committee pursuant to the de minimis exception for the
fiscal years ended October 31, 2005 and October 31, 2004 on
behalf of the registrant.
There were no amounts that were required to be approved by
the audit committee pursuant to the de minimis exception for
the fiscal years ended October 31, 2005 and October 31, 2004
on behalf of the registrant's service providers that relate
directly to the operations and financial reporting of the
registrant.
(f) According to E&Y, for the fiscal year ended October 31, 2005, the
percentage of hours spent on the audit of the registrant's
financial statements for the most recent fiscal year that were
attributed to work performed by persons who are not full-time,
permanent employees of E&Y was 0%.
(g) For the fiscal years ended October 31, 2005 and October 31, 2004,
the aggregate fees billed by E&Y of $920,314 and $2,035,989
respectively, for non-audit services rendered on behalf of the
registrant ("covered"), its investment adviser (not including any
sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser) and
any entity controlling, controlled by, or under common control with
the adviser ("non-covered") that provides ongoing services to the
registrant for each of the last two fiscal years of the registrant
is shown in the table below:
2005 2004
---- ----
Covered Services $13,487 $12,700
Non-Covered Services 906,827 2,023,289
(h) The registrant's audit committee was not required to consider
whether the provision of non-audit services that were rendered to
the registrant's investment adviser (not including any sub-adviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
-----------------------------------------------
The registrant has a separately designated standing audit committee (the "Audit
Committee") established in accordance with Section 3(a)(58)(A) of the Securities
Exchange Act of 1934, as amended. The Audit Committee is comprised of the
following board members: Mr. Armstrong, Mr. Beaubien, Mr. Burt, and Mr. White.
ITEM 6. SCHEDULE OF INVESTMENTS
--------------------------------
Included as part of the report to shareholders filed under Item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
--------------------------------------------------------------------------
The registrant's Board of Directors believes that the voting of proxies on
securities held by the registrant is an important element of the overall
investment process. As such, the Board has delegated the responsibility to vote
such proxies to the registrant's advisor. Following is a summary of the proxy
voting policy of the advisor.
CORPORATE GOVERNANCE PHILOSOPHY, VOTING GUIDELINES AND POLICY SUMMARY
The proxy voting policy of UBS Global AM is based on its belief that voting
rights have economic value and must be treated accordingly. Generally, UBS
Global AM expects the boards of directors of companies issuing securities held
by its clients to act as stewards of the financial assets of the company, to
exercise good judgment and practice diligent oversight with the management of
the company. While there is no absolute set of rules that determines appropriate
corporate governance under all circumstances and no set of rules will guarantee
ethical behavior, there are certain benchmarks, which, if substantial progress
is made toward, give evidence of good corporate governance. UBS Global AM may
delegate to an independent proxy voting and research service the authority to
exercise the voting rights associated with certain client holdings. Any such
delegation shall be made with the direction that the votes be exercised in
accordance with UBS Global AM's proxy voting policy.
When UBS Global AM's view of a company's management is favorable, UBS Global AM
generally supports current management initiatives. When UBS Global AM's view is
that changes to the management structure would probably increase shareholder
value, UBS Global AM may not support existing management proposals. In general,
UBS Global AM (1) opposes proposals which act to entrench management; (2)
believes that boards should be independent of company management and composed of
persons with requisite skills, knowledge and experience; (3) opposes structures
which impose financial constraints on changes in control; (4) believes
remuneration should be commensurate with responsibilities and performance; and
(5) believes that appropriate steps should be taken to ensure the independence
of auditors.
UBS Global AM has implemented procedures designed to identify whether it has a
conflict of interest in voting a particular proxy proposal, which may arise as a
result of its or its affiliates' client relationships, marketing efforts or
banking and broker/dealer activities. To address such conflicts, UBS Global AM
has imposed information barriers between it and its affiliates who conduct
banking, investment banking and
broker/dealer activities and has implemented procedures to prevent business,
sales and marketing issues from influencing our proxy votes. Whenever UBS Global
AM is aware of a conflict with respect to a particular proxy, its appropriate
local corporate governance committee is required to review and agree to the
manner in which such proxy is voted.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
--------------------------------------------------------------------------
Form N-CSR disclosure requirement not yet effective with respect to the
registrant.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
---------------------------------------------------------------------------
There were no purchases made by or on behalf of the registrant or any
"affiliated purchaser," as defined in Rule 10b-18(a)(3) under the Securities
Exchange Act of 1934, as amended, of shares of the registrant's equity
securities made in the period covered by this report.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
-------------------------------------------------------------
The registrant's Board has established a Nominating and Corporate Governance
Committee. The Nominating and Corporate Governance Committee will consider
nominees recommended by shareholders if a vacancy occurs among those board
members who are not "interested persons" as defined in Section 2(a)(19) of the
Investment Company Act of 1940, as amended. In order to recommend a nominee, a
shareholder should send a letter to the chairperson of the Nominating and
Corporate Governance Committee, Richard Burt care of the Secretary
of the registrant at UBS Global Asset Management (US) Inc., 51 West 52nd Street,
New York, New York 10019-6114, and indicate on the envelope "Nominating and
Corporate Governance Committee." The shareholder's letter should state the
nominee's name and should include the nominee's resume or curriculum vitae, and
must be accompanied by a written consent of the individual to stand for election
if nominated for the Board and to serve if elected by shareholders.
ITEM 11. CONTROLS AND PROCEDURES.
---------------------------------
(a) The registrant's principal executive officer and principal
financial officer have concluded that the registrant's disclosure
controls and procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940, as amended) are effective based on
their evaluation of these controls and procedures as of a date
within 90 days of the filing date of this document.
(b) The registrant's principal executive officer and principal
financial officer are aware of no changes in the registrant's
internal control over financial reporting (as defined in Rule
30a-3(d) under the Investment Company Act of 1940, as amended) that
occurred during the registrant's last fiscal quarter that has
materially affected, or is reasonably likely to materially affect,
the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
------------------
(a) (1) Code of Ethics as required pursuant to Section 406 of the
Sarbanes-Oxley Act of 2002 (and designated by registrant as a "Code
of Conduct") is incorporated by reference herein from
Exhibit EX-99 CODE ETH to the registrant's Report on Form N-CSR
filed December 30, 2003 (Accession Number: 0001206774-03-000909)
(SEC File No. 811-07540).
(a) (2) Certifications of principal executive officer and principal
financial officer pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002 is attached hereto as Exhibit EX-99.CERT.
(a) (3) Written solicitation to purchase securities under Rule 23c-1
under the Investment Company Act of 1940 sent or given during the
period covered by the report by or on behalf of the registrant to
10 or more persons - The registrant has not engaged in such a
solicitation during the period covered by this report.
(b) Certifications of principal executive officer and principal
financial officer pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 is attached hereto as Exhibit EX-99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Global High Income Dollar Fund Inc.
By: /s/ W. Douglas Beck
-------------------
W. Douglas Beck
President
Date: December 29, 2005
-----------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ W. Douglas Beck
-------------------
W. Douglas Beck
President
Date: December 29, 2005
-----------------
By: /s/ Thomas Disbrow
------------------
Thomas Disbrow
Vice President and Treasurer
Date: December 29, 2005
-----------------