WORLDWIDE
Officers and Directors [Worldwide Value Fund Logo]
VALUE
Charles J. Swindells--Chairman FUND
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 Report to Shareholders
For the quarter ended
Sub-Custodian September 30, 1996
The Chase Manhattan Bank, N.A.
1 Chaseside
Bournemouth, Dorset BH7 7DB
England
Worldwide Value Fund, Inc. Lombard Odier International
P.O. Box 1476 Portfolio Management Limited
7 East Redwood Street, 10th floor Investment Adviser
Baltimore, MD 21203-1476
To Our Shareholders,
Legg Mason Fund Adviser, Inc.
Investment Consultant
and Administrator
[Recycled Logo] Printed on Recycled Paper
<PAGE>
To Our Shareholders,
Worldwide Value Fund (VLU) recorded a 2.0% increase in its net asset value
during the third quarter of 1996, closing at $25.68 per share at September 30
against $25.17 at June 30. Total return for the nine months ended September 30
is 21.5%.
Net investment income for the quarter was $23,000, or $.008 per share,
against a loss of $37,000, or $(.012) per share, in the like period a year
earlier. Realized and unrealized gains for the same period were $1,475,000, or
$0.50 per share, in 1996, against $3,023,000, or $1.02 per share, in 1995.
VLU's portfolio continues to be focused on Europe, with the United Kingdom
representing the largest holding at 35.9% of net assets, followed by the
Netherlands with 13.0%, Germany 11.9%, France 10.7% and Switzerland 8.5%. The
remainder of the portfolio is comprised mainly of other European securities.
Beginning on page 2, the Fund's portfolio managers discuss political and
economic conditions in Europe and their investment strategies.
Sincerely,
/s/ Charles J. Swindells
--------------------------
Charles J. Swindells
Chairman of the Board
November 11, 1996
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Investment Advisers' Comments
During the third quarter of 1996, the Worldwide Value Fund gave back some
of the strong out-performance exhibited since the beginning of the year, but
year-to-date still shows an impressive relative performance, returning 21.5%
versus its benchmark's return (the Morgan Stanley European Index) of 10.8%.
Third Quarter 1996
MSCI Europe Index +3.2%
Worldwide Value Fund +2.0%
The quarter started off with volatile and nervous trading conditions as a
result of the stronger than expected US employment figures which demonstrated
the robust state of health of the US economy. The fact that the Fed had not
acted to raise interest rates prior to these figures coupled with very light
trading volumes around the fourth of July holiday, exacerbated a sharp fall in
the Dow Jones, and this nervousness spilled over into Europe with most markets
suffering from profit taking and all ending the month at lower levels.
In terms of sector performance, the most active was that of the financials.
In Switzerland the theme of rationalisation was reawakened with the announcement
by CS Holding that it would trim its domestic cost base and shed some 15% of
Group personnel. The theme was further extended into Europe when Deutschebank
declared that it had taken a 5% stake in Bayerische Vereinsbank prompting
expectations that the long awaited restructuring process was getting underway
amongst the German banks. The Dutch financials lost out as investors realised
their profits and increased their exposure to the German banking sector.
In the UK, the privatisation of British Energy, the last of such sell-offs
in this Government's term of office, did not appeal to investors and fell below
its issue price.
In August, the markets rebounded strongly, though volumes were still light
for much of the month as many investors were away enjoying their summer break.
The US jobs' data in August provided relief as it came in at the bottom end of
the range and therefore the concerns demonstrated during July faded away, and
the Fed left interest rates unchanged.
In Europe sentiment was also buoyed by the fact that the Bundesbank cut the
Repo rate by 30 basis points to 3% (100 basis points = 1%). What was surprising
was the magnitude of the reduction rather than the cut itself, and it was all
the more encouraging to see the Bank's willingness to act even though growth in
M3 remains above target. More importantly, there are signs that the economy was
stabilising as industrial figures in June were positive and an IFO survey (an
economic forecasting research firm) provided grounds for cautious optimism for
the rest of the year.
In France the outlook is less positive and the economy remains weak; in
addition fears surfaced over the French government's ability to control the
budget deficit and meet its debt targets so it can be a founding member of the
European Monetary Union (EMU).
September, by contrast to the preceding months, was relatively eventful as
investors returned from their holidays to learn about the first half results of
corporate Europe. There were also some salutary lessons for the investment
community. At the start of September, the news broke about the unrepresentative
valuation and questionable status of a large number of non-quoted holdings in
the Morgan Grenfell European Growth Fund which obliged Deutshe Bank to provide
some 180 million sterling liquidity as investors retrieved their funds. The
other `scandal' regarded further revelations about the current financial
situation of Olivetti which has halved since the widely supported rights issue
at the end of 1995.
First half results were generally mixed with no real features, though those
benefiting from a weak currency in 1995 were suffering from a reversal of their
fortunes in 1996, especially amongst the Italian industrials. Other
disappointments included Vienna Airport, Heineken, Peugeot and Fiat, but despite
the weak consumer demand throughout continental Europe, the retail sector
enjoyed strong performance.
2
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In terms of European economic data released during the month, indications
still point to very slow economic activity in Europe. All inflation figures show
declines, and it transpired that in France, GDP was negative in the second
quarter. In Germany, although industrial production data for July was revised
upwards, engineering orders in August were weak, and closer inspection of the
figures show that the activity is concentrated on those companies that operate
outside Europe. The outlook for construction continues to look grim, and indeed,
the interim results of the major cement companies in Europe were extremely
disappointing.
Despite the weak economic growth and lack of infrastructure investment in
Europe, the European equity markets have enjoyed good performance throughout the
year, and as the quarter drew to a close the markets were in a relatively
relaxed mood, with little concern about the need for monetary tightening.
Market Outlook
Central Banks across Europe have responded to economic weakness by lowering
interest rates. While we cannot identify much in the way of inflationary
pressure today, we concede that the scope for significant further lowering of
rates is limited in most countries--Italy is a notable exception.
The overriding theme of EMUwill govern Central Bank and politicians'
decisions throughout Europe, as economies are pushed, pulled or even fudged to
meet the Maastricht criteria. It is not at all clear which countries will sign
up at the initial stage, who will join later and who will remain outside. There
have been angry exchanges between the French and Italian monetary authorities
with regard to the eligibility of Italy to be amongst the first, but it must be
acknowledged that unless the imminent wage settlements indicate that there will
be Italian wage moderation, the `real' value of the lira will continue to be a
delicate subject.
Consumption in Europe may recover from the low levels in 1995, but one
cannot expect that the stringent budget laws will not have some depressing
effect. Conversations with managers in all industrial sectors illustrate that
the only obvious source of growth in the world is still the US and Southeast
Asia. Increasingly fierce global competition continues to bite into profit
margins, and as a result we anticipate an ongoing restructuring effort across
European industry.
We believe that the portfolio is well positioned to benefit from this
ongoing trend. We remain underweight in the European banking sector, but are
concentrating on those banks where restructuring appears to be a serious
proposition. We are also concentrating on companies in those sectors that will
benefit from a growing tendency of international companies to outsource services
that hitherto have been in-house. We are aware that there is a risk that
economic growth may be lower than expected, but believe that our holdings will
generally benefit from a moderate growth, low-inflationary environment.
Although we remain positive on the outlook for equity markets in Europe, we
must approach the future with some caution given that the European bourses have
performed exceptionally well this year, with many recording new highs. The
valuations of many stocks and markets have consequently risen in expectation of
improved earnings in 1997 and 1998, and therefore selecting those stocks which
offer solid growth prospects at an attractive valuation will remain of paramount
importance. We feel confident that our style of rigorous analysis and stock
selection will continue to reap the rewards of enhanced performance and result
in further growth in value of the Worldwide Value Fund.
Ronnie Armist
Mark Lloyd-Price
November 11, 1996
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INDUSTRY DIVERSIFICATION
Worldwide Value Fund, Inc. / September 30, 1996
===============================================================================
% of Net Market
Assets Value
(000)
Pharmaceuticals and Health Care 18.5% $13,899
Banking 10.5 7,871
Retail Sales 8.0 5,989
Utilities 7.5 5,666
Automotive 6.5 4,862
Publishing 5.4 4,064
Consumer Durable Goods 4.5 3,371
Chemicals 4.4 3,295
Oil and Gas 4.2 3,193
Manufacturing 4.1 3,108
Miscellaneous Services 3.9 2,942
Transportation 2.9 2,149
Multi-Industry 2.5 1,922
Leisure 2.5 1,897
Construction Materials 1.9 1,409
Finance 1.8 1,388
Electrical Equipment 1.8 1,339
Metals 1.7 1,248
Telecommunications 1.6 1,245
Consumer Non-Durable Goods 1.6 1,204
Lodging 1.5 1,125
Research and Development 1.2 895
Machinery 0.8 570
Short-term Investments 2.3 1,737
----- -------
Total Investment Portfolio 101.6 76,388
Other Assets Less Liabilities (1.6) (1,172)
----- -------
Net Assets 100.0% $75,216
===== =======
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================================================================================
PORTFOLIO OF INVESTMENTS / Unaudited
Worldwide Value Fund, Inc. / September 30, 1996 / Amounts in Thousands
================================================================================
Shares Value
COMMON STOCKS AND
EQUITY INTERESTS--97.7%
Austria--2.3%
Flughafen Wien AG 22 $ 1,155
Voest-Alpine Stahl AG 17 572
-------
1,727
-------
France--10.7%
Christian Dior SA 10 1,204
Compagnie Generale des Eaux 17 1,878
Michelin 29 1,459
Pechiney S.A. 40 1,690
Pinault-Printemps SA 5 1,839
-------
8,070
-------
Germany--11.9%
Adidas AG 13 1,206
Altana AG 1 988
Commerzbank AG 5 1,064
Gehe AG 18 1,229
Hoechst AG 46 1,670
Veba AG 25 1,319
Volkswagen AG 4 1,468
-------
8,944
-------
Hungary--0.7%
Richter Gedeon Rt 10 494
-------
Italy--2.4%
Edison S.p.A. 253 1,576
Telecom Italia S.p.A. 107 237
-------
1,813
-------
Netherlands--13.0%
ABN Amro Holding N.V. 21 1,153
Elsevier NV 69 1,137
Hagemeyer N.V. 9 706
Hunter Douglas N.V. 12 833
INGGroep NV 45 1,388
RoyalDutchPetroleum Company 12 1,874
Vendex International N.V. 36 1,391
VNU-Verenigde Nederlandse
Uitgeversbedrijven Verenigd
Bezit 64 1,256
-------
9,738
-------
Shares Value
Norway--0.9%
Christiania Bank OG Kreditkasse 249 $ 639
-------
Spain--2.3%
Centros Comerciales Pryca, SA 40 986
Telefonica de Espana 42 774
-------
1,760
-------
Sweden--3.4%
Pharmacia & Upjohn, Inc. 17 728
Sandvik AB, Class B 24 570
Scania AB Series A & B 25 677
Svedala Industrier AB 33 575
-------
2,550
-------
Switzerland--8.5%
CSHolding AG 15 1,438
Roche Holding AG N.M. 1,670
Sandoz AG 2 2,280
Swissair AG 1 994
-------
6,382
-------
United Kingdom--35.9%
Aea Technology plc 176 895
Barclays PLC 130 1,910
BBAGroup plc 305 1,614
Cookson Group plc 363 1,418
Farnell Electronic PLC 128 1,339
Granada Group plc 142 1,897
Hays plc 190 1,398
Henlys Group plc 210 1,780
Jarvis Hotels plc 455 1,125
Laporte plc 140 1,625
Next Plc 200 1,773
Rentokil Group PLC 236 1,544
Standard Chartered Bank PLC 153 1,668
United News & Media plc 155 1,671
Vodafone Group plc 359 1,245
Wassall PLC 391 1,922
Zeneca Group plc 88 2,187
-------
27,011
-------
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================================================================================
PORTFOLIO OF INVESTMENTS / Continued
Worldwide Value Fund, Inc. / September 30, 1996 / Amounts in Thousands
================================================================================
Shares Value
United States--5.7%
Ultrafem, Inc. 187 $ 4,322(A)
-------
Total Common Stocks and Equity
Interests
(Identified Cost--$59,815) 73,450
--------
PREFERRED STOCK--1.6%
Italy--1.6%
Telecom Italia S.p.A. Savings
Shares
(Identified Cost--$1,147) 968 1,201
--------
Principal
Amount Value
REPURCHASE AGREEMENT--2.3%
Prudential Securities, Inc.
5.75% dated 9-30-96 to be
repurchased at $1,737 on
10-1-96 (Collateral: $3,250
Federal National Mortgage
Association Mortgage-backed
securities, 8.0% due 2-1-23,
value $1,794)
(Identified Cost--$1,737) $1,737 $ 1,737
-------
Total Investments--101.6%
(Identified Cost--$62,699) 76,388
Other Assets Less Liabilities--(1.6%) (1,172)
-------
NET ASSETS--100.0% $75,216
=======
NET ASSET VALUE PER SHARE $25.68
======
- ----------
(A) Non-income producing
N.M. Not meaningful
6
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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.
7
