[Worldwide Value Fund Logo]
Report to Shareholders
For the six months ended
June 30, 1996
Lombard Odier International
Portfolio Management Limited
Investment Adviser
Legg Mason Fund Adviser, Inc.
Investment Consultant
and Administrator
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
Wolfgang E. Furst zu Ysenburg--Director
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
[Recycled logo] Printed on Recycled Paper
<PAGE>
THIS To Our Shareholders,
Just under five years ago, the Board of Directors, on the recommendation of
the investment adviser of Worldwide Value Fund, Inc. (VLU), decided to focus
the Fund's investment strategy on Europe, as the region of the world with the
greatest potential investment values. Looking at our June 30, 1996
results, this "European strategy" has yielded the positive results we sought.
Our results, as well as those of our benchmark, the Morgan Stanley Capital
International Europe Index (MSCI EI) are as follows:
Periods ending June 30, 1996(dagger)
3 months 1 year 5 years*
Worldwide Value Fund, Inc. 6.79% 29.21% 9.62%
MSCI Europe Index 3.15% 12.19% 10.83%
* Average annual total return
(dagger) Excluding dividend reinvestment
We continue to be optimistic about investment opportunities in Europe and
the Fund's potential for good performance. We were disappointed with the voting
results, shown on the next page, on the shareholder proposal to open-end the
Fund, particularly since the Fund is performing so well. However, the Board
recognizes the need to respond to that vote. Consequently, the Board is in the
process of examining the Fund's structure and related options, including
open-ending, merging with a compatible fund or remaining closed-end. Each
option brings advantages and disadvantages and the Board will carefully
consider these before making its decision as to which structure is in the best
interest of our shareholders.
Sincerely,
/s/ Charles J. Swindells
Charles J. Swindells
Chairman of the Board
August 15, 1996
<PAGE>
The Fund's annual meeting of shareholders was held on April 25,
1996. Of the 2,928,577 shares outstanding, the following shares (in
thousands) were voted at the meeting:
For Against Abstain
Election of nine directors:
A. John W. Campbell 2,238 -- 40
Edmund J. Cashman, Jr. 2,241 -- 37
Henri Deegenaar 2,241 -- 37
Walter A. Eberstadt 2,240 -- 38
Ian F. H. Grant 2,241 -- 37
Lawrence W. Harris, III 2,238 -- 40
Charles J. Swindells 2,241 -- 37
Robert H. C. Van Maasdijk 2,238 -- 40
Wolfgang E. Furst zu Ysenburg 2,241 -- 37
Ratification of selection of Coopers
& Lybrand L.L.P. as the Fund's independent
accountants for the year ending December 31, 1996 2,138 53 87
Shareholder proposal recommending
that the directors consider converting the Fund
from a closed-end to an open-end fund 910 442 39
2
<PAGE>
Investment Advisers' Comments
During the second quarter of 1996, Worldwide Value Fund continued to
show good performance achieving a return of nearly 7% against a 3% return
generated by the European Index. Sentiment was generally buoyed by a
favourable currency background characterised by continuing strength of the
dollar.
2nd Quarter 1996
MSCI Europe Index +3.2%
Worldwide Value Fund +6.8%
The strongest performer (in both local and dollar terms) was the Italian
market, as investors celebrated the outcome of the General Election which
appeared to result in a workable majority government. At the other end of the
scale, the worst performing market was Switzerland which in local terms
appreciated by just over 2%, but in dollar terms was down by nearly 3%.
The quarter got off to a good start when the Bundesbank decided to cut
German interest rates to levels near their 20 year lows. The move was
obviously prompted by a continuing stream of subdued economic statistics
from Germany and a generally favourable inflationary trend. Elsewhere in
Europe, economic activity continues to be weak and GDP forecasts are still
being subject to downward revisions. Although investors were hopeful for
another round of monetary easing from the Bundesbank before it went into its
summer recess, they were disappointed, and it transpired that only Spain,
Sweden and the UK were able to implement further rate cuts unilaterally before
the end of the quarter. In the UK, a General Election is due to be held by
Spring 1997, and one may reasonably suspect that a looser monetary policy is
politically motivated. However, the industrial production figures for the
UK do indeed suggest GDP growth for 1996 will be lower than expected, and
inflation is still well under control.
As the quarter progressed, some corporations reported first quarter
figures, and on the whole they were in line, or slightly better than expected.
For those companies reporting in the Dm, Swiss franc or Dutch guilder, it was
clear that the currency effect had been neutralised or in some cases was
positive on translation. The financial sector in particular benefitted
from much higher commission and trading income, though generally provisioning
requirements are still very high.
In terms of market trends during the second quarter, despite the good
results, the financial sector continued to underperform except for some of the
Dutch and UKholdings which are beneficiaries of clear restructuring and cost
cutting strategies. Another noticeable feature was the strength of the retail
sector throughout Europe--Next, Vendex, Hennes & Mauritz and
Pinault-Printemps--all significantly outperformed the European index. Against a
background of weak economic activity, it is not surprising that the services
sector did well since operating costs there are more flexible and
profitability is less compromised by any economic slowdown. Indeed, the
services sector is a major beneficiary of global corporate decisions to
continue cutting costs where possible, and to contract out various operating
functions.
Sentiment towards the markets was generally favourable during the
second quarter as investors felt
3
<PAGE>
secure in their belief that there was room for further loosening in monetary
policy.
Market Outlook
Although the financial markets are vulnerable to profit taking, we
believe that any resulting weakness provides a good opportunity to add to
favoured positions. Not only does European inflation appear to be under
control, but European Monetary Union (EMU) is drawing ever nearer, and the need
for governments to implement budget deficit constraints is ever more urgent. In
the last few months some doubt has been expressed about the ability of Germany
and France to comply with all the Maastricht requirements, let alone the black
sheep of Italy. Will EMU be delayed, or will the requirements be made a little
more flexible? The answers to these questions will unfold in the coming months,
and the commitment of the European governments to EMU will be confirmed by
the budget laws that are drafted and approved by the end of 1996. There is
no doubt that throughout Europe, governments must adopt restrictive measures
to increase revenues or reduce costs.
A symptom of the effort to reduce budget deficits is the wave of
privatisation issues set to come onto the European equity markets in the
coming months. These will obviously represent a drain on liquidity, but at the
same time will contribute to a lower interest rate environment by
reducing government funding requirements. Another by-product of
privatisation is that Europe will undergo another wave of restructuring
measures as the newly privatised businesses hasten to increase efficiency and
management becomes aware of the need to create value for shareholders.
The shareholder friendly corporate environment prevailing in the US and
the UK should start to extend to Continental Europe, and we are very excited
about the prospects for quoted companies to benefit in a more productive and
profitable corporate Europe.
The structure of the portfolio is already tilted towards companies that
benefit directly, or indirectly, from restructuring measures. One of the
principal reasons for our underweight position in Continental financial
institutions is precisely that we are not convinced about their will, or
indeed their ability, to cut operating costs and enhance profitability.
We remain committed to our investment philosophy which concentrates on
investing in companies with superior management that demonstrate the
ability to create true value for shareholders. We believe that there is
enormous potential for further capital appreciation in the European
stockmarkets, and are confident that we will be able to continue generating
healthy returns for your fund.
Ronnie Armist
Mark Lloyd-Price
August 15, 1996
4
<PAGE>
================================================================================
INDUSTRY DIVERSIFICATION
Worldwide Value Fund, Inc. / June 30, 1996
================================================================================
% of Net Market
Assets Value
(000)
Pharmaceuticals and Health Care 14.2% $10,489
Retail Sales 9.1 6,670
Utilities 6.0 4,416
Miscellaneous Services 5.8 4,241
Publishing 5.5 4,085
Manufacturing 5.5 4,046
Automotive 4.9 3,600
Consumer Durable Goods 4.7 3,444
Transportation 4.4 3,265
Oil and Gas 4.4 3,264
Banking 4.2 3,080
Insurance 3.7 2,724
Leisure 3.0 2,201
Telecommunications 2.6 1,942
Finance 2.5 1,863
Multi-Industry 2.4 1,746
Construction Materials 2.4 1,737
Chemicals 2.1 1,554
Machinery 2.1 1,533
Food and Beverage 2.0 1,480
Electrical Equipment 1.8 1,345
Consumer Non-Durable Goods 1.8 1,341
Metals 1.7 1,254
Lodging 1.6 1,215
Commercial Services 1.4 1,012
Total Investment Portfolio 99.8 73,547
Other Assets Less Liabilities 0.2 171
Net Assets 100.0% $73,718
5
<PAGE>
================================================================================
STATEMENT OF NET ASSETS / Unaudited
Worldwide Value Fund, Inc. / June 30, 1996 / Amounts in Thousands
================================================================================
Shares Value
COMMON STOCKS AND
EQUITY INTERESTS--98.8%
Austria--1.8%
Flughafen Wien AG 11 $ 748
Voest-Alpine Stahl AG 17 560
1,308
France--11.3%
Christian Dior SA 10 1,341
Industrielle de Transports
Automobiles SA 9 2,249
Michelin 29 1,401
Pechiney S.A. 40 1,587(A)
Pinault-Printemps SA 5 1,751
8,329
Germany--8.3%
Adidas AG 13 1,116
Altana AG 1 943
Hoechst AG 46 1,554
Siemens AG 22 1,198
Veba AG 25 1,340
6,151
Italy--2.4%
Edison S.p.A. 253 1,529
Telecom Italia S.p.A. 107 239
1,768
Netherlands--14.9%
ABN Amro Holding N.V. 21 1,117
Elsevier NV 69 1,045
Fortis Amev NV 19 534
Hagemeyer N.V. 13 927
Hunter Douglas N.V. 12 799
ING Groep NV 45 1,329
Koninklijke PTT Nederland NV 30 1,131
RoyalDutchPetroleum Company 12 1,855
Vendex International N.V. 36 1,246
VNU-Verenigde Nederlandse
Uitgeversbedrijven Verenigd
Bezit 64 997
10,980
Shares Value
Norway--0.6%
Christiania Bank OG Kreditkasse 187 $ 440
Spain--2.5%
Centros Comerciales Pryca, SA 40 1,010
Empresa Nacional
de Electricidad SA 13 805
1,815
Sweden--4.9%
Atlas Copco ABSeries B 52 977
Hennes & Mauritz AB 5 490
Sandvik AB 24 556
Scania AB Series A & B 25 694
Svedala Industrier AB 50 938
3,655
Switzerland--12.6%
Nestle S.A . 1 1,480
Roche Holding AG N.M. 1,733
Sandoz AG 2 2,175
Swiss Reinsurance Group 3 2,724
Swissair AG 1 1,172
9,284
United Kingdom--34.4%
BBA Group plc 305 1,459
Cookson Group plc 287 1,261
Farnell Electronic PLC 128 1,345
Granada Group plc 165 2,201
Henlys Group plc 210 2,141
Jarvis Hotels plc 455 1,215
Next Plc 249 2,173
Rentokil Group PLC 314 1,992
Securicor plc 249 1,012
Stagecoach Holdings plc 200 1,345
Standard Chartered Bank PLC 153 1,523
United News & Media Plc 189 2,043
Vodafone Group plc 522 1,942
Wassall PLC 391 1,746
Zeneca Group plc 88 1,946
25,344
6
<PAGE>
Shares Value
United States--5.1%
Britmar Corporation 46 $ 69
Ultrafem, Inc. 187 3,692
3,761
Total Common Stocks and Equity
Interests
(Identified Cost--$59,211) 72,835
PREFERRED STOCK--1.0%
Italy--1.0%
Telecom Italia S.p.A. Savings Shares
(Identified Cost--$586) 522 712
Total Investments--99.8%
(Identified Cost--$59,797) 73,547
Other Assets Less Liabilities--0.2% 171
NET ASSETS--100.0% $73,718
NET ASSETS CONSISTING OF:
Common stock at par value
$.001 per share, authorized
50,000 shares, issued 3,005
shares, outstanding 2,929
shares $ 3
Accumulated paid-in capital 52,628
Accumulated net
investment loss (1)
Undistributed net realized gain on
investments and foreign currency
transactions 7,344
Unrealized appreciation of
investments and foreign
currency transactions 13,744
-------
NET ASSETS--100.0% $73,718
=======
NET ASSET VALUE PER SHARE $ 25.17
=======
(A) Non-income producing
N.M. Not meaningful
See notes to financial statements.
7
<PAGE>
================================================================================
STATEMENT OF OPERATIONS / Unaudited
Worldwide Value Fund, Inc. / For the Six Months Ended June 30, 1996 /
Amounts in Thousands
================================================================================
Investment Income:
Dividends $1,032
Interest 44
Less foreign income tax expense (158)
Total investment income $918
Expenses:
Investment advisory fee 340
Administration fee 68
Custodian fees 85
Legal and audit fees 54
Directors' fees and expenses 60
Reports to shareholders 25
Transfer agent and shareholder servicing expense 9
Registration expense 8
Other expenses 27
Total expenses 676
----
Net Investment Income 242
Net Realized and Unrealized Gain (Loss):
Realized gain on:
Investments 7,786
Foreign currency transactions 188
Unrealized gain (loss):
Investments 3,573
Assets and liabilities denominated in foreign currencies (1)
Net Realized and Unrealized Gain 11,546
Increase in Net Assets Resulting From Operations $11,788
See notes to financial statements.
8
<PAGE>
================================================================================
STATEMENT OF CHANGES IN NET ASSETS
Worldwide Value Fund, Inc. / Amounts in Thousands
================================================================================
<TABLE>
<CAPTION>
For the Six For the
Months Ended Year Ended
June 30, 1996 Dec. 31, 1995
(Unaudited)
<S> <C>
Change in Net Assets:
Operations:
Net investment income $ 242 $ 43
Net realized gain on investments and foreign currency transactions 7,974 2,599
Increase in unrealized appreciation of investments
and foreign currency transactions 3,572 7,574
Increase in net assets resulting from operations 11,788 10,216
Distributions to shareholders:
Net investment income -- (43)
In excess of net investment income -- (134)
Decrease in net assets from Fund stock repurchases* (319) (925)
Increase in net assets 11,469 9,114
Net Assets:
Beginning of period 62,249 53,135
End of period (including accumulated net investment
losses of $1 and $243, respectively) $73,718 $62,249
</TABLE>
*Through June 30, 1996, 76 shares of Fund common stock were purchased at market
prices which averaged a 19.8% discount to net asset value.
See notes to financial statements.
9
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
Worldwide Value Fund, Inc.
================================================================================
Contained below is per share operating performance data for a share of
common stock outstanding, total investment return, ratios to average net assets
and other supplemental data. This information has been derived from information
provided in the financial statements and market price data for the Fund's
shares.
<TABLE>
<CAPTION>
For the Six For the Years Ended December 31,
Months Ended ------------------------------------------------------
June 30, 1996 1995 1994 1993 1992 1991
(Unaudited)
<S> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value beginning of period $21.13 $17.68 $18.46 $14.29 $15.44 $14.65
Net investment income (loss) .08 .01 (.03) .14 .08 .08
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions 3.96 3.50 (.75) 4.13 (1.19) .92
Total from investment operations 4.04 3.51 (.78) 4.27 (1.11) 1.00
Dividends and distributions paid:
Net investment income -- (.06) -- (.05) (.04) (.21)
In excess of net investment income -- -- -- (.05) -- --
Total dividends and distributions -- (.06) -- (.10) (.04) (.21)
Net asset value, end of period $25.17 $21.13 $17.68 $18.46 $14.29 $15.44
Market value per share, end of period $21.50 $16.88 $14.25 $16.625 $12.00 $12.50
TOTAL INVESTMENT RETURN:
Based on market value per share 27.4%(B) 18.8% (14.3%) 39.3% (3.7%) 4.7%
RATIOS/SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses 2.0%(A) 2.1% 2.1% 2.1% 2.2% 2.3%
Net investment income 0.7%(A) 0.1% -- 0.9% 0.5% 0.5%
Portfolio turnover rate 149.1%(A) 147.7% 75.0% 66.8% 148.4% 91.9%
Net assets at end of period (in thousands) $73,718 $62,249 $53,135 $55,486 $42,930 $46,405
</TABLE>
(A) Annualized
(B) Not annualized
See notes to financial statements.
10
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS / Unaudited
Worldwide Value Fund, Inc. / Amounts in Thousands
================================================================================
1. Significant Accounting Policies:
- --------------------------------------------------------------------------------
Worldwide Value Fund, Inc. ("Fund") is registered under the Investment Company
Act of 1940, as amended, as a closed-end, diversified investment company. The
following accounting policies are in conformity with generally accepted
accounting principles for investment companies. Such policies are consistently
followed by the Fund in the preparation of its financial statements.
Security Valuation
All securities for which market quotations are readily available are valued at
the last sales price, or if no sales price is available at that time, at the
mean between the latest bid and asked prices. Securities that are traded
over-the-counter are valued at the mean between the latest bid and asked prices.
If market or bid and asked quotations are not available, securities will be
valued as determined in good faith by the Board of Directors.
Currency Translation
The books and records of the Fund are maintained in US dollars. Foreign currency
amounts are translated into US dollars on the following basis:
(i) market value of investment securities, options, assets and
liabilities are translated at the closing daily rate of exchange, and
(ii)purchases and sales of investment securities, options, dividend and
interest income and expenses are translated at the rate of exchange
prevailing on the respective date of such transactions.
The effect of changes in foreign exchange rates on realized and unrealized
security gains or losses is reflected as a component of such gains or losses.
Security Transactions and
Investment Income
Security transactions are recorded on the trade date. Realized gains and losses
from security transactions are reported on an identified cost basis. Dividend
income is recorded on the ex-dividend date. Interest income and expenses are
recorded on the accrual basis.
Federal Income Tax
No provision for federal income or excise tax is required, since the Fund
intends to continue to qualify as a regulated investment company and distribute
all of its taxable income to its shareholders.
Distributions to Shareholders
Distributions to shareholders are recorded on the ex-dividend date. The Fund
expects to distribute annually to shareholders all of its net investment income
and net realized short-term and long-term capital gain.
2. Investment Transactions:
- --------------------------------------------------------------------------------
Investment transactions for the six months ended June 30, 1996 (excluding
short-term securities) were as follows:
Purchases $49,893
Proceeds from sales 49,898
At June 30, 1996, the cost of securities for federal income tax purposes
was $60,045. Aggregate gross unrealized appreciation for all securities in which
there was an excess of value over tax cost was $14,433 and aggregate gross
unrealized depreciation for all securities in which there was an excess of tax
cost over value was $684. The Fund has unused capital loss carryforwards for
federal income tax purposes of $400 which expire in 2000.
3. Transactions with Affiliates:
- --------------------------------------------------------------------------------
The Fund has an investment advisory agreement with Lombard Odier International
Portfolio Management Limited ("Adviser") for which the Adviser receives a
monthly fee at an annual rate of 1% of the Fund's net assets, based on the net
assets on the last business day of each month. This rate is reduced on net asset
values in excess of $100 million. The Adviser has managed the Fund's portfolio
since its inception in 1986.
The Fund has an administration contract with Legg Mason Fund Adviser, Inc.
("Administrator") for which the Administrator receives from the Fund a monthly
fee at an annual rate of .20% of the Fund's net assets, based on the net assets
on the last business day of each month. This rate is reduced on net asset values
in excess of $100 million.
11
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS / Continued
Worldwide Value Fund, Inc. / Amounts in Thousands
================================================================================
The Administrator also serves as Investment Consultant ("Consultant") to
the Adviser pursuant to an Investment Consultant Contract with the Adviser and
the Fund. Under the Investment Consultant Contract, the Consultant provides the
Adviser with investment advice, research and assistance, primarily regarding
United States securities. For its services, the Consultant receives from the
Adviser a monthly fee at the same rate and basis as in the Administration
Contract discussed in the preceding paragraph.
4. Financial Instruments:
- --------------------------------------------------------------------------------
As part of the Fund's investment program, the Fund may utilize repurchase
agreements, forward currency contracts, options and futures. The nature and risk
of these financial instruments and the reason for using them are set forth more
fully in the Fund's Prospectus.
Repurchase Agreements
All repurchase agreements are fully collateralized by obligations issued by the
US government or its agencies and such collateral is in the possession of the
Fund's custodian. The value of such collateral includes accrued interest. Risks
arise from the possible delay in recovery or potential loss of rights in the
collateral should the issuer of the repurchase agreement fail financially.
Forward Currency Contracts
The Fund may enter into foreign forward currency contracts to hedge against
adverse changes in the relationship of the US dollar to foreign currencies.
Risks arise from the possible inability of counterparties to meet the terms of
their contracts and from movements in currency values. Forward currency
contracts are valued using the forward rate. As of June 30, 1996 the Fund had no
open forward currency contracts.
Option Transactions
A call option written gives the option holder the right to purchase the
underlying security at a specified price until a specified date. A put option
written gives the option holder the right to sell the underlying security at a
specified price until a specified date. Risks arise from the possible
illiquidity of the options market and from movements in security values. No call
options were written by the Fund during the period.
12
<PAGE>
Quarterly Results of Investment Operations
(Unaudited)
Shown in thousands of dollars and per common share:
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------------------------------
June 30, 1996 March 31, 1996 Dec. 31, 1995 Sept. 30, 1995
--------------------------------------------------------------------------
<S> <C>
Total investment income $ 633 $0.21 $ 285 $ 0.10 $ 153 $ 0.05 $ 265 $ 0.09
Net investment income (loss) 276 0.09 (34) (0.01) (192) (0.07) (37) (0.01)
Net realized and unrealized gain
(loss) on investments, options
and foreign currency contracts 4,423 1.51 7,123 2.45 2,102 0.74 3,023 1.05
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------------------------------
June 30, 1995 March 31, 1995 Dec. 31, 1994 Sept. 30, 1994
--------------------------------------------------------------------------
<S> <C>
Total investment income $ 631 $0.21 $ 199 $ 0.07 $ 86 $ 0.03 $ 267 $ 0.09
Net investment income (loss) 337 0.11 (65) (0.02) (222) (0.07) (18) (0.01)
Net realized and unrealized gain
(loss) on investments, options
and foreign currency contracts 3,811 1.30 1,237 0.41 (149) (0.05) 1,618 0.54
</TABLE>
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 & Trust Company, P.O. Box
366, Boston, MA 02101 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..
13
