OFFICERS AND DIRECTORS
Charles J. Swindells--Chairman
A. John W. Campbell--Director
Edmund J. Cashman, Jr.--Director
Henri Deegenaar--Director
Walter A. Eberstadt--Director
Ian F. H. Grant--Director
Lawrence W. Harris, III--Director
Robert H. C. Van Maasdijk--Director
Prinz Wolfgang E. Ysenburg--Director [WORLDWIDE VALUE FUND LOGO]
Peter E. F. Newbald--President
William H. Miller, III--Vice President
Edward A. Taber, III--Vice President
Marie K. Karpinski--Vice President, Secretary
and Treasurer
Andrew Roberts--Assistant Vice President
James N. H. Bennett--Assistant Vice President
Brian J. Pierce--Assistant Vice President
CUSTODIAN AND TRANSFER AGENT
State Street Bank & Trust Company
P.O. Box 1713
Boston, Massachusetts 02105
SUB-CUSTODIAN
The Chase Manhattan Bank, N.A.
1 Chaseside
Bournemouth, Dorset BH7 7DB
England
WORLDWIDE VALUE FUND, INC.
P.O. BOX 1476
7 EAST REDWOOD STREET, 10TH FLOOR
BALTIMORE, MD 21203-1476
REPORT TO SHAREHOLDERS
FOR THE QUARTER ENDED
MARCH 31, 1996
LOMBARD ODIER INTERNATIONAL
PORTFOLIO MANAGEMENT LIMITED
Investment Adviser
LEGG MASON FUND ADVISER, INC.
Investment Consultant
and Administrator
<PAGE>
TO OUR SHAREHOLDERS,
Worldwide Value Fund's good performance during 1995 continued through the
first quarter of 1996. The Fund's performance is indicative of the success of
the Adviser's longer-term strategy of focusing primarily on undervalued European
stocks. Good stock selection within Europe is reflected in the Fund's generally
positive average annual performance against its benchmark--the Morgan Stanley
Capital International Europe Index--for the following periods ended March 31,
1996:
Worldwide MSCI
Value Fund* Europe Index*
1 year +30.44% +16.17%
3 years +15.39 +13.58
5 years +7.41 +8.92
(*excluding dividends)
On the following pages, Ronnie Armist and Mark Lloyd-Price, the Fund's
portfolio managers, discuss the portfolio's structure and the investment
outlook.
At March 31, 1996, the discount to net asset value at which the Fund's
stock traded was 19.9%. As this letter is written, the discount has narrowed to
14.9%. The Board of Directors remains sensitive to the discount which the Board
believes is unjustified in view of the Fund's performance.
As always, we appreciate your support and welcome your suggestions.
Sincerely,
/s/ Charles J. Swindells
Charles J. Swindells
Chairman of the Board
May 13, 1996
<PAGE>
INVESTMENT ADVISERS' COMMENTS
FIRST QUARTER 1996
MSCI Europe Index +3.71%
Worldwide Value Fund +11.45%
SUMMARY OF EVENTS
The first quarter of 1996 has been exceptionally strong for most European
bourses. Buoyed by falling interest rates, a favourable flow of funds
(particularly from US investors) and flickering signs of economic life improving
later in the year, many markets achieved new all time highs.
January was a particularly strong month after a weak December. Full year
results revealed a disappointing final quarter in terms of activity, supported
by many corporate statements which indicated that a general slowdown was indeed
taking place, resulting in high levels of inventory. This heightened
expectations of interest rate cuts across Europe, fueling the performance of
many markets.
February continued the theme outlined at the start of the year of slowing
activity, low inflation and further lowering of interest rates. With the two
notable exceptions of Philips and Nokia, who announced profit warnings, most
corporate results were largely in line with market expectations and, despite
providing yet more evidence of a weak economic environment, were greeted with an
element of relief. The two most significant events occurred in the UK and Italy.
In Britain the IRA ended its 18-month ceasefire with a huge explosion in
London's Docklands and in Italy a General Election was called, upsetting the
market, after it became clear that forming (another!) new Government would be
impossible without a popular mandate.
March was by far the most interesting month, both economically and in terms
of corporate activity. Higher than expected employment figures in the US sparked
a selloff in US bonds on the back of fears that the underlying economy was in
fact in a more robust state of health than previously thought and therefore
inflationary pressures could be building. On the corporate side, the two Swiss
pharmaceutical giants, Ciba and Sandoz, announced their betrothal. A spate of
similar unions were also revealed, Alcatel Alsthom and Alcatel Cable, BT and
Cable & Wireless to name just two. Activity was exceptionally high in the UK as
companies sought to close deals ahead of a possible General Election which would
almost certainly result in a Labour government. We believe these deals are
symptomatic of the current trading environment. With little pricing power,
companies are being forced to seek synergies and cost savings through mergers
and joint ventures in order to provide earnings growth.
SPECIFIC MARKET COMMENT
The best performing market over the quarter (in US$ terms) was SWEDEN
(+9.6%), vindicating our overweight position. Despite jitters in January when
finance minister (and Prime Minister-elect) Persson was rumoured to favour
enlarging the welfare state, sending Swedish bonds and the krone into a
temporary tailspin, the market recovered its December losses and moved steadily
upwards, reflecting an improving outlook with regard to the budget deficit (the
currency has strengthened significantly, keeping inflation low and thus allowing
interest rates to be cut sharply) and a market with a plethora of world class,
shareholder-oriented companies at attractive valuations.
FRANCE (+8.4%) also fared well following a package of measures to stimulate
the economy launched by the government early in the quarter. It consisted mostly
of fiscal incentives, targeting the automotive and construction sectors in
particular. We still foresee difficulties, however, as France attempts to
reconcile its apparently conflicting goals of lowering unemployment and the
budget deficit while maintaining a commitment to the franc fort (which by
implication necessitates high real rates).
Another of our favourite markets is the NETHERLANDS which rose 5.8%. The
publishing sector was very much in favour as investors turned to companies
offering solid, visible growth. Many companies that have
2
<PAGE>
recently made wise acquisitions to secure future growth, such as Nutricia,
Hagemeyer and Oce van der Grinten, were rewarded with good share price gains.
The Bundesbank responded to the weakening economic signals in GERMANY
(+4.8%) by lowering rates, triggering cuts in the rest of Europe. This also gave
some relief to the hard-pressed export sector as the deutschemark fell vs the
dollar and boosted the equity market which climbed steadily over the quarter.
The highlight of the corporate announcements during the quarter was in
SWITZERLAND (+6.8%) where the two pharmaceutical giants Ciba and Sandoz revealed
their intention to merge. The new entity will be known as Novartis, which along
with Roche will be one of the largest companies in Europe. The news surprised
the market but was nevertheless very well received as investors focused on the
logic of the deal and the potential for large cost savings and synergies.
Although these have yet to be quantified in detail, the merger will enhance
earnings this year. Both stocks rose by more than 20% on the announcement.
The fortunes of the Conservative Party in the UK worsened further, and were
reflected in the market's performance of only +0.1%. Defections and by-elections
have reduced the governing majority to 1 at the time of this writing, prompting
speculation of a General Election, possibly this year. Disappointingly, the IRA
resumed its bombing campaign and to cap it all, the `mad cow disease' crisis led
to fears for the (already deteriorating) budget deficit because of government
compensation to farmers. However, although manufacturing output continues to
decline, evidence is growing of an increasingly buoyant consumer, in the form of
improving retail sales. Takeover and merger activity has also been high in
corporate Britain with many high profile names involved.
MARKET OUTLOOK
Despite the fact that car sales in January and February were surprisingly
strong, economic statistics in Europe continue to give testimony to a slowdown
in activity, particularly in terms of industrial production.
The Bundesbank declined to cut rates at the end of March because of above
target money supply figures, but since then has eased monetary policy further.
This will be supported by the lack of inflationary pressure in the system. Even
in the high yielding countries the inflationary trend is impressive, and,
assuming the political environment develops favourably, there should be further
potential for these Central Banks to cut rates.
The timetable for European Monetary Union may also fall under the spotlight
in the coming months. Not only will meeting the Maastricht criteria be a problem
for Italy and Spain, but at present Germany, with a budget deficit above 3% of
GDP, would fail the test. Despite categorical confirmations by the German and
French governments that monetary union will occur in 1999, unemployment and the
concomitant implications for the budget deficit could derail the plan.
We feel that the merger of Ciba and Sandoz will initiate increased
corporate activity in Europe. Further restructuring, particularly in the
manufacturing sector, is bound to take place as this is the only way many
companies will be able to show earnings growth. A declining interest rate
environment should have a positive effect on the markets, but individual stock
performance will depend on each company's ability to control operating costs in
the face of an increasingly fierce pricing environment.
During the months ahead we maintain a very positive stance towards the
European markets. Stock selection will remain of paramount importance and we are
therefore confident of continuing the recent strong performance of the Worldwide
Value Fund.
Ronnie Armist
Mark Lloyd-Price
May 8, 1996
3
<PAGE>
===============================================================================
INDUSTRY DIVERSIFICATION
Worldwide Value Fund, Inc. / March 31, 1996
===============================================================================
% of Net Market
Assets Value
(000)
Pharmaceuticals and Health Care 13.3% $ 9,153
Retail Sales 10.1 6,960
Utilities 6.5 4,500
Banking 6.5 4,469
Automotive 6.3 4,327
Miscellaneous Services 5.8 3,978
Leisure 5.5 3,817
Multi-Industry 4.6 3,198
Publishing 4.5 3,134
Manufacturing 4.4 3,070
Telecommunications 4.0 2,741
Consumer Durable Goods 3.6 2,496
Consumer Non-Durable Goods 3.4 2,334
Finance 3.2 2,205
Chemicals 2.4 1,623
Oil and Gas 2.3 1,622
Construction Materials 2.3 1,601
Machinery 2.1 1,445
Industrial Material 2.0 1,373
Transportation 1.8 1,272
Electrical Equipment 1.4 936
Metals 0.8 519
Insurance 0.7 508
Short-Term Investments 5.0 3,456
Total Investment Portfolio 102.5 70,737
Other Assets Less Liabilities (2.5) (1,717)
NET ASSETS 100.0% $69,020
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<PAGE>
===============================================================================
PORTFOLIO OF INVESTMENTS / Unaudited
Worldwide Value Fund, Inc. / March 31, 1996 / Amounts in Thousands
===============================================================================
SHARES VALUE
COMMON STOCKS AND
EQUITY INTERESTS--96.7%
AUSTRIA--0.8%
Voest-Alpine Stahl Ag 17 $ 519
- -------------------------------------------------------------------------------
FRANCE--10.1%
Christian Dior SA 8 1,019
Compagnie Generale des Eaux 5 547
Industrielle de Transports
Automobiles SA 9 1,782
Pechiney S.A. 44 1,837A
Peugeot SA 6 846
Pinault-Printemps SA 3 925
- -------------------------------------------------------------------------------
6,956
- -------------------------------------------------------------------------------
GERMANY--9.4%
Adidas AG 22 1,609
Altana AG 1 785
Hoechst AG 5 1,623
Siemens AG 2 1,233
Veba AG 25 1,225
- -------------------------------------------------------------------------------
6,475
- -------------------------------------------------------------------------------
ITALY--2.1%
Edison S.p.A. 253 1,271
Telecom Italia S.p.A. 107 194
- -------------------------------------------------------------------------------
1,465
- -------------------------------------------------------------------------------
NETHERLANDS--15.3%
ABN Amro Holding N.V. 21 1,035
Elsevier NV 69 1,054
Fortis Amev NV 13 934
Hagemeyer N.V. 13 887
Hunter Douglas N.V. 12 793
ING Groep NV 17 1,271
Koninklijke PTT Nederland NV 30 1,175
Nutricia Verenigde Bedrijven N.V. 13 1,315
Vendex International N.V. 36 1,022
Verenigde Nederlandse
Uitgevbedri Verigd Bezit 64 1,069
- -------------------------------------------------------------------------------
10,555
- -------------------------------------------------------------------------------
NORWAY--0.6%
Christiania Bank OG Kreditkasse 187 434
- -------------------------------------------------------------------------------
SHARES VALUE
SPAIN--2.9%
Centros Comerciales Pryca, SA 40 $ 918
Empresa Nacional
de Electricidad SA 13 739
Repsol SA 9 328
- -------------------------------------------------------------------------------
1,985
- -------------------------------------------------------------------------------
SWEDEN--5.7%
Atlas Copco AB-Series B 52 941
Hennes &Mauritz AB 5 375
Sandvik AB, Class B 24 504
Svedala Industrier AB 25 808
Telefonaktienbolaget LM Ericsson 37 809
Trygg-Hansa AB 32 508
- -------------------------------------------------------------------------------
3,945
- -------------------------------------------------------------------------------
SWITZERLAND--11.2%
Alusuisse-Lonza Holding AG 2 1,306
Publicitas Holding S.A. 1 1,011
Roche Holding AG N.M. 1,886
Sandoz AG 2 2,228
Swissair AG 1 1,272
- -------------------------------------------------------------------------------
7,703
- -------------------------------------------------------------------------------
UNITED KINGDOM--35.0%
Allied Irish Banks plc 397 2,021
Barclays PLC 88 979
BBA Group plc 305 1,494
Compass Group plc 240 1,934
Cookson Group plc 287 1,373
Farnell Electronic PLC 99 936
Granada Group plc 164 1,883
Henlys Group plc 209 1,987
Next Plc 347 2,684
Rentokil Group PLC 398 2,196
Storehouse PLC 199 1,036
Vodafone Group plc 522 1,932
Wassall PLC 391 1,892
Zeneca Group plc 88 1,824
- -------------------------------------------------------------------------------
24,171
- -------------------------------------------------------------------------------
UNITED STATES--3.6%
Britmar Corporation 46 69(A)
Ultrafem, Inc. 187 2,430(A)
- -------------------------------------------------------------------------------
2,499
- -------------------------------------------------------------------------------
Total Common Stocks and
Equity Interests
(Identified Cost--$55,002) 66,707
- -------------------------------------------------------------------------------
5
<PAGE>
SHARES VALUE
PREFERRED STOCK--0.8%
ITALY--0.8%
Telecom Italia S.p.A.
(Identified Cost--$586) 522 $ 574
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
REPURCHASE AGREEMENT--5.0%
Prudential Securities, Inc.
5.5% dated 3-29-96, to be
repurchased at $3,457 on
4-1-96 (Collateral: $3,635
Federal National Mortgage
Association Mortgage-
backed securities 7% due
4-1-26, value $3,558)
(Identified Cost--$3,456) $3,456 3,456
- -------------------------------------------------------------------------------
Total Investments--102.5%
(Identified Cost--$59,044) 70,737
Other Assets Less Liabilities--(2.5%) (1,717)
- -------------------------------------------------------------------------------
NET ASSETS--100.0% $69,020
NET ASSET VALUE PER SHARE $23.57
- -------------------------------------------------------------------------------
(A) Non-income producing
N.M. Not meaningful
6
<PAGE>
DIVIDEND REINVESTMENT PLAN
Worldwide Value Fund, Inc. offers an Automatic Dividend Reinvestment
Plan, whereby dividends and distributions are automatically reinvested in
additional shares of the Fund. Shareholders who prefer to receive dividends and
distributions in cash should contact their investment broker if shares are held
in street name, or State Street Bank and Trust Company, P.O. Box 8200, Boston,
MA 02266-8200 if shares are held in their own name.
SHAREHOLDER ACCOUNT INFORMATION
Shareholders whose accounts are held in their own name may contact the
Fund's Transfer Agent, State Street Bank & Trust Company at (800) 426-5523 for
information concerning their accounts.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase, from time to time, up to
150,000 of the outstanding shares of its common stock at market prices.
7
