Officers and Directors
Charles J. Swindells--Chairman
A. John W. Campbell--Director
Edmund J. Cashman, Jr.--Director
Henri Deegenaar--Director
Ian F. H. Grant--Director
Robert H. C. Van Maasdijk--Director [WORLDWIDE VALUE FUND LOGO]
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 Report to Shareholders
State Street Bank & Trust Company For the quarter ended
P.O. Box 1713 March 31, 1997
Boston, Massachusetts 02105
Sub-Custodian
Chase Manhattan Corporation Lombard Odier International
1 Chaseside Portfolio Management Limited
Bournemouth, Dorset BH7 7DB Investment Adviser
England
Worldwide Value Fund, Inc.
P.O. Box 1476 Legg Mason Fund Adviser, Inc.
7 East Redwood Street, 10th floor Investment Consultant
Baltimore, MD 21203-1476 and Administrator
[Recycled logo] Printed on Recycled Paper WVFCM-AR-97
<PAGE>
To Our Shareholders,
Worldwide Value Fund recorded a total return on net asset value of 4.7% for
the quarter ended March 31, 1997.
The Fund's annual meeting of shareholders was held April 30. At that
meeting, the shareholders approved the prosposal to open-end the Fund. We are
working on the operational and other issues involved in converting the Fund to
open-end status and we currently expect the conversion to take place in late
July or early August. We will send you information regarding the conversion as
the date draws closer.
On the following pages, the Fund's portfolio managers discuss the market
outlook for Europe.
Sincerely,
/s/ Charles J. Swindells
Charles J. Swindells
Chairman of the Board
May 13, 1997
<PAGE>
Investment Advisers' Comments
First Quarter 1997
MSCI European Index +4.7%
Worldwide Value Fund +4.4%
Market Review
Despite closing 1996 at record levels, nearly all the European markets
continued to gain ground into 1997. There was little corporate news of note, but
in January, the markets were driven higher by strong liquidity inflows. This was
particularly the case in Italy where inflows into Italian equities exceeded US$1
bn as investors, unexcited by the ever lower yield on Italian Bonds, sought out
the laggard stocks of 1996. Having been the worst performing market in 1996, the
Italian index gained over 16% in January! However, this was subsequently all
given back over the quarter as concerns about the government and the credibility
of its budget proposals came under scrutiny.
There were several notable currency moves. Towards the end of 1996, the
Swiss Franc had been extremely weak; with the Swiss economy slipping into
recession, the Swiss National Bank saw fit to let the currency weaken in the
hope that it would help initiate an economic recovery. In the UK, the sterling
was incredibly strong in January as the financial markets anticipated a hike in
interest rates to control what is plainly the most buoyant economy in Europe. In
the absence of a subsequent interest rate rise--probably for political reasons
ahead of a General Election--investor interest moved from sterling back to the
dollar which rallied strongly in the following months.
In the UK, although politics apparently played little part in affecting
investor sentiment, they were a constant source of discussion and speculation.
Most of the news reflected the poor position of the Tories and the divide over
Europe. Regardless of the date, which was finally declared to be May 1st, the
financial community has spent time trying to understand the policies of the `New
Labour.'
As 1997 progressed, the two main themes that dominated the financial
markets were the strength of the dollar and the European Monetary Union ("EMU").
The discussion on EMU progressed from who would be founding members to whether
or not EMU would happen on time. As a consequence of these discussions, the
previous enthusiasm for the `high yielding' markets became more subdued and the
Spanish, Swedish and Italian currencies gave up some of their strength against
the DM and the US$.
On the corporate front, there were several announcements giving testimony
to the fact that European restructuring efforts continue apace. In Holland,
Unilever disclosed plans to sell off its speciality chemicals division; in
France there were several high profile placings of blocks of stock in the market
as companies attempted to rationalise their investment portfolios, and Renault
bit the bullet and announced the closure of two of its plants. In Sweden,
Svedbank and Foreiningsbank declared their sensible intention to merge and cut
costs; and finally in Switzerland, Novartis completed a highly successful sale
of its own speciality chemicals division--CSC. Only in Germany was there a
certain amount of disappointing news--Hoechst said that it would not float their
medical healthcare subsidiary, HMR, in the short term--and Krupp launched a very
temporary hostile bid on Thyssen. Krupp's aggressive steps were quickly retraced
in the face of union opposition, and the final solution appears to be a much
diluted plan to form a joint steel company.
In March, following an extremely strong performance for over two quarters,
the European markets showed signs of nervousness, finally weakening at the end
of the month when the US Fed Funds rate was raised by 0.25%. As the quarter came
to a close, the world equity markets were pausing for breath and experiencing a
period of healthy consolidation.
Investment Strategy
Our geographical asset allocation is a direct result of our bottom-up stock
selection. We have been heavily overweight in the Dutch market because of the
good quality of the Dutch financials, good selection of pub-
2
<PAGE>
lishers and very profitable retailers. We further increased our position in
Philips where new management is making significant operating changes. We have
gradually increased our exposure to Germany, enjoying recoveries in stocks such
as Daimler Benz where there is a strong move to simplify the group
organisational structure. In the German retail sector we believe that there is
good restructuring potential in Metro which we bought for the Fund in February.
Our underweight position in Italian denominated equities reflects our lack of
conviction in the quality of stocks available and the generally uninspiring
corporate management.
In Switzerland we maintain an overweight position in the pharmaceutical
sector, favouring Novartis for its cost cutting potential. We consolidated our
position in the Swiss financial sector by moving funds from Swiss Re into Credit
Suisse Group where again, there is new management and a clear programme to
improve return on equity.
Our investment strategy is clear--continue to focus on three desirable
characteristics for our stock selection, namely, clear corporate change and
restructuring, strong growth prospects and top quality credible management. We
believe that these are the main driving forces behind a sustainable improvement
in profits, which in turn will result in strong share price performance. We are
confident that the Worldwide Value Fund will continue to perform well in the
months ahead.
Market Outlook
At the beginning of April 1997, the world financial markets were focused on
the direction of interest rates. We are confident that the recent move by the
Federal Reserve to raise rates by only 25 basis points (100 basis points = 1%)
has been pre-emptive rather than reactive, and demonstrates its intention to
keep the US economy well under control.
We do not anticipate further significant hikes in interest rates because
quite simply, the inflationary outlook in the major markets is still very
positive. Secular trends involving increased use of computer systems is an
important factor enabling the quality of service or products to improve, but at
the same time, keep costs down. Furthermore, in both the Emerging and Developed
markets, corporate management teams are keenly concentrated on improving
efficiency and enhancing the return on their own, not to mention shareholder
investments.
European economic growth is still sluggish, and recent statistics show that
unemployment in France, Germany and Italy is still on the increase. Despite
tight fiscal policies and the will to reduce budget deficits, the goal of
bringing them down to 3% GDP could be compromised by lower than expected growth.
Consequently, the outlook for European interest rates is much more benign than
might be the case in the US, and European restructuring efforts continue apace
in order to compensate for tight fiscal policies and depressed consumption
patterns.
The recent General Election in the UK resulted in an overwhelming majority
for the Labour party--the first change in Government in 18 years. This result
was discounted by the market. However, the momentous announcement to create an
independent Bank of England with operational control over interest rate policy
has been well received by the equity market, especially the financial sector.
Despite the strong performance of the European markets in 1996, the
backdrop for investments is still very encouraging. We anticipate a relatively
stable political scene, stable monetary policy, tight fiscal policy and
competitive pricing policies both in the private and public sectors.
The recent strength of the US dollar merely serves to enhance the
competitiveness of European manufacturing capacity, and we are optimistic with
regard to inflation trends and European corporate profitability over the next
six months.
Ronnie Armist
Mark Lloyd-Price
May 13, 1997
3
<PAGE>
================================================================================
INDUSTRY DIVERSIFICATION
Worldwide Value Fund, Inc. / March 31, 1997
================================================================================
% of Net Market
Assets Value
------ -----
(000)
Pharmaceuticals and Health Care 14.4% $11,799
Retail Sales 12.7 10,400
Banking 8.5 6,960
Oil and Gas 8.3 6,755
Automotive 8.1 6,656
Telecommunications 6.1 4,967
Multi-Industry 3.9 3,210
Insurance 3.9 3,206
Chemicals 3.9 3,158
Miscellaneous Services 3.7 3,008
Finance 3.6 2,949
Consumer Non-Durable Goods 3.2 2,568
Leisure 3.1 2,563
Publishing 2.5 2,065
Electrical Equipment 2.5 2,025
Aerospace 2.3 1,907
Transportation 2.2 1,775
Utilities 2.2 1,761
Consumer Durable Goods 1.9 1,506
Metals 1.0 849
Human Resources 0.8 690
Short-Term Investments 1.0 844
----- -------
Total Investment Portfolio 99.8 81,621
Other Assets Less Liabilities 0.2 133
----- -------
Net Assets 100.0% $81,754
===== =======
4
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS / Unaudited
Worldwide Value Fund, Inc. / March 31, 1997 / Amounts in Thousands
================================================================================
Shares Value
------ -----
COMMON STOCKS AND
EQUITY INTERESTS--96.6%
Austria--1.0%
Voest-Alpine Stahl AG 21 $ 849
- --------------------------------------------------------------------------------
France--15.4%
Alcatel Alsthom 15 1,866
AXA-UAP 25 1,674
Christian Dior SA 11 1,670
Compagnie Bancaire SA 9 1,168
Compagnie Generale des Eaux 10 1,390
Guilbert SA 4 834
Pinault-Printemps SA 3 1,461
Sodexho SA 2 785
Total SA 20 1,708
- --------------------------------------------------------------------------------
12,556
- --------------------------------------------------------------------------------
Germany--14.2%
Adidas AG 13 1,506
BASF AG 43 1,635
Daimler-Benz AG 35 2,823
Gehe AG 18 1,263
Hoechst AG 38 1,523
Metro AG 14 1,466
Veba AG 25 1,427
- --------------------------------------------------------------------------------
11,643
- --------------------------------------------------------------------------------
Hungary--1.7%
Richter Gedeon Rt 22 1,422
- --------------------------------------------------------------------------------
Italy--2.2%
ENI 355 1,806
- --------------------------------------------------------------------------------
Netherlands--15.7%
ABN Amro Holding N.V. 21 1,431
Aegon N.V. 22 1,532
Gucci Group NV 12 898
Koninklijke Ahold NV 25 1,716
ING Groep NV 45 1,781
Philips Electronics N.V. 37 1,718
Vendex International N.V. 36 1,691
VNU-Verenigde Nederlandse
Uitgeversbedrijven Verenigd
Bezit 46 947
Wolters Kluwer NV 9 1,118
- --------------------------------------------------------------------------------
12,832
- --------------------------------------------------------------------------------
Shares Value
------ -----
Poland--0.4%
Elektrim Spolka Akcyjna S.A. 35 $ 307
- --------------------------------------------------------------------------------
Spain--2.8%
Banco Santander SA 22 1,495
Centros Comerciales Pryca, SA 40 758
- --------------------------------------------------------------------------------
2,253
- --------------------------------------------------------------------------------
Sweden--4.4%
Astra AB - Class A 33 1,601
Telefonaktiebolaget LM Ericsson 57 2,027
- --------------------------------------------------------------------------------
3,628
- --------------------------------------------------------------------------------
Switzerland--8.4%
Adecco SA 2 690
Credit Suisse Group 9 1,047
Novartis 3 3,201
Roche Holding AG N.M. 1,963
- --------------------------------------------------------------------------------
6,901
- --------------------------------------------------------------------------------
United Kingdom--29.0%
BBA Group plc 334 1,989
Barclays PLC 104 1,764
British Aerospace PLC 85 1,908
British-Borneo Petroleum
Syndicate PLC 74 1,814
Carpetright plc 183 1,596
Granada Group plc 170 2,563
Henlys Group plc 210 1,844
Medeva plc 247 1,244
Next Plc 167 1,712
Railtrack Group PLC 96 712
Rentokil Initial PLC 201 1,389
Stagecoach Holdings plc 95 1,063
Standard Chartered plc 87 1,222
Vodafone Group plc 234 1,074
Wassall PLC 316 1,820
- --------------------------------------------------------------------------------
23,714
- --------------------------------------------------------------------------------
United States--1.4%
Ultrafem, Inc. 77 1,105(A)
- --------------------------------------------------------------------------------
Total Common Stocks and Equity
Interests
(Identified Cost--$63,671) 79,016
- --------------------------------------------------------------------------------
5
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS / Continued
Worldwide Value Fund, Inc. / March 31, 1997 / Amounts in Thousands
================================================================================
Shares Value
------ -----
PREFERRED STOCK--2.2%
Italy--2.2%
Telecom Italia Mobile SpA--
Savings Shares
(Identified Cost--$1,275) 1,053 $ 1,761
- --------------------------------------------------------------------------------
Principal
Amount
------
REPURCHASE AGREEMENT--1.0%
State Street Bank and Trust Company
4.25% dated 3-31-97, to be
repurchased at $844 on
4-1-97 (Collateral: $865
U.S. Treasury Note, 7.125%
due 2-15-23, value $870)
(Identified Cost--$844) $844 844
- --------------------------------------------------------------------------------
Total Investments--99.8%
(Identified Cost--$65,790) 81,621
Other Assets Less Liabilities--0.2% 133
- --------------------------------------------------------------------------------
NET ASSETS--100.0% $81,754
================================================================================
NET ASSET VALUE PER SHARE $25.37
================================================================================
- ------------
(A) Non-income producing
N.M. Not meaningful
6
<PAGE>
- --------------------------------------------------------------------------------
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
