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
Chase Manhattan Corporation
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
[WORLDWIDE VALUE FUND LOGO]
Report to Shareholders
For the year ended
December 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 enjoyed good performance again in 1996. Including
reinvestment of the $1.92 long-term and the $1.33 short-term capital gain
distributions per share payable to shareholders of record December 24, 1996,
total return on net asset value for the year was 31.5% and total return on
market price was an impressive 49.5%, compared to our benchmark's return of
18.4% (the Morgan Stanley European Index). We continue to be optimistic about
investment opportunities in Europe and the Fund's potential for good performance
by participating in those equity markets.
We were very pleased with the confidence displayed by our shareholders in
choosing to take the year-end distributions in additional Fund shares instead of
cash. Approximately 67% of the shares outstanding opted for new shares which
were reinvested at $22.175 per share.
On the following pages, Ronnie Armist and Mark Lloyd-Price, the Fund's
portfolio managers, discuss the portfolio's structure and the advisers'
investment outlook.
As always, we appreciate your support and welcome your comments.
Sincerely,
/s/ Charles J. Swindells
Charles J. Swindells
Chairman of the Board
February 14, 1997
<PAGE>
Investment Advisers' Comments
Fourth Quarter 1996
MSCI Europe Index +9.0%
Worldwide Value Fund +8.3%
The European markets put in an impressive performance in the last quarter
of 1996 with several of the local indices ending the year at all time highs.
Following a period of uncertainty over the summer, investor sentiment was
boosted at the beginning of October by the US non-farm payroll figures which
dissipated any concerns about an imminent interest rate hike by the Fed.
A general feature in Europe was the continuing programme of privatisations,
some of which were more successful than others. One was the very controversial
sale by the French Government of the Thomson Group to Lagardere at a cost of
US$2 bn to the French State. This act caused an uproar and at the time sparked a
political crisis and demands for Prime Minister Juppe to resign. The second was
the long-awaited placing of Deutsche Telekom, and the third was the placing of
another 16% of ENI, the Italian State Energy Group. In December, the Italian
Treasury also announced plans that would considerably speed up the full
privatisation of Stet by taking it from under the control of the State Holding
Company IRI.
In economic terms the dominant theme was whether or not European Monetary
Union ("EMU") would happen and which countries would qualify in the first round.
The biggest question mark was over the eligibility of Italy, but regardless of
the final outcome, one can have no doubt about the resolve of the Italian
government to be in EMU--sooner or later. The Italian government passed a very
tough 1997 budget law, and after much negotiation the lira was eventually
readmitted to the Exchange Rate Mechanism. Investors rewarded their efforts by
demonstrating huge enthusiasm for Italian financial assets, and, much to the
embarrassment of the United Kingdom, Italian bond yields actually moved lower
than those in the UK!
On the political front there was little to report, other than in the UK
where the Conservatives lost their one seat majority. Political concerns in the
UKobviously did not affect international investor sentiment, and over the
quarter, particularly in December, sterling was impressively strong,
appreciating, for example, by over 17% against the Swiss franc.
As the quarter came to a close, the financial markets were in a buoyant
mood, and at the end of the year, several of the European indices were breaking
new all time highs.
Specific market news
In Germany, there was little corporate news, but some encouraging
developments. There was good news for minority shareholders of VW when it was
announced that the major shareholder, the State of Lower Saxony, had had its
voting power reduced to represent more closely its 20% stake. This should free
the management to improve productivity as required, and hopefully enable the
company to improve visibility of profits. News from Daimler is also positive,
with real reorganisation of the group structure taking place with a clear
emphasis on increasing returns for the shareholders.
In France, AXAand UAP stated their intention to join forces, and thus be
able to realise significant synergy benefits and cost reduction, and,
simultaneously, create Europe's biggest insurance group. Another corporate
announcement that was well received by the market was the bid by LVMH for the
Tax Free Retail Chain DFS which will increase the group's local presence in both
the US and the Far East.
In Italy, the news that Stet (telecom holding company) was to merge with
its main operating affiliate, Telecom Italia sent the Stet share price flying as
the discount normally attributed to holding companies was reduced. Telecom
Italia Mobile also performed well as subscriber figures for the last quarter of
1997 became available. The Fiat share price was supported by well-founded
rumours (eventually confirmed) that the government would introduce incentives
for new car purchases in 1997.
2
<PAGE>
In Holland, there were two main pieces of news. The first was that ABN Amro
made its largest ever takeover by acquiring a US savings and loan for US$1.9 bn.
The second was that Aegon would purchase the US insurer Providian. The move
takes Aegon from No. 17 to No. 12 worldwide, and will immediately enhance
earnings. The market interpreted these acquisitions very favourably and both
stocks were strong for the last few months of the year.
The Spanish market was particularly strong toward the end of 1996. The
index is particularly interest rate sensitive by nature of its composition, and
the performance resulted from interest rate expectations rather than by any
fundamental news regarding corporate prospects. The EMU theme led the Spanish
financial markets up on the expectation that bond yields would decline further,
and that Spain would indeed be a founding member of EMU.
In Scandinavia, there was a fair amount of corporate news. Skandia launched
a bid for Stadshypotek but the move was the result of an agreement between the
two managements, without the knowledge or approval of the Swedish government
which is Stadshypotek's major shareholder, and as a result, the bid was aborted.
Elsewhere in Sweden, the main stock of the index, Ericsson, issued plans to
improve productivity, and amongst its moves is the rationalisation of five
divisions down to only three. Astra, was very strong and continues to be the
subject of speculation that Roche will bid for it. Scania which had been taken
to the stockmarket and placed earlier in the year, shocked the market with a
profit warning, blaming disappointing sales development. On another note, in
Finland, Nokia released figures which were accompanied by an encouraging trading
statement which caused the stock to rally over 15%.
In the UK, Chancellor Clarke delivered his budget, the last before the
current government goes to the polls. It was in the end a cautious budget that
balanced the robust state of the UK economy with modest, potentially
vote-winning tax cuts. However, it did little to revive the fortunes of the Tory
Party which remained deeply divided over Europe and the EMU.
On the political front, the only major event will be the UK election (date
yet to be announced) for which the financial markets are discounting a Labour
victory. Elsewhere we anticipate political stability--even in Italy!
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.
We continue to focus on two main issues in an attempt to identify
investments that will provide good capital appreciation. First, those companies
that enjoy niche positions and favourable pricing environment, and offer
sustainable growth prospects, and second, those companies that are headed by
credible management teams capable of implementing successful restructuring or
cost cutting programmes. The Worldwide Value Fund performed well in 1996 and we
are hopeful that this will continue in 1997.
Ronnie Armist
Mark Lloyd-Price
February 14, 1997
3
<PAGE>
================================================================================
INDUSTRY DIVERSIFICATION
Worldwide Value Fund, Inc. / December 31, 1996
================================================================================
% of Net Market
Assets Value
-------- -------
(000)
Pharmaceuticals and Health Care 19.8% $14,084
Banking 15.4 10,901
Miscellaneous Services 10.8 7,654
Retail Sales 7.9 5,635
Oil and Gas 7.7 5,434
Automotive 7.6 5,402
Utilities 5.9 4,169
Chemicals 5.4 3,795
Consumer Non-Durable Goods 3.6 2,577
Publishing 3.5 2,506
Multi-Industry 3.0 2,130
Leisure 2.9 2,092
Electrical Equipment 2.8 1,961
Consumer Durable Goods 2.6 1,874
Finance 2.3 1,629
Manufacturing 2.1 1,490
Lodging 1.8 1,255
Research and Development 1.7 1,188
Telecommunications 1.4 990
Construction Materials 1.1 806
Metals 0.8 589
Short-term Investments 3.4 2,443
Total Investment Portfolio 113.5 80,604
Other Assets Less Liabilities (13.5) (9,613)
Net Assets 100.0% $70,991
4
<PAGE>
================================================================================
STATEMENT OF NET ASSETS
Worldwide Value Fund, Inc. / December 31, 1996 / Amounts in Thousands
================================================================================
<TABLE>
<CAPTION>
Shares Value
------ ------
<S> <C>
COMMON STOCKS AND EQUITY INTERESTS -- 108.2%
Austria--0.8%
Voest-Alpine Stahl AG--produces and distributes steel products 17 $ 589
- --------------------------------------------------------------------------------------------------------------
France--13.0%
Christian Dior SA--manufactures wine and spirits, perfumes, cosmetics and
luggage 13 2,097
Guilbert SA--distributes office and business-machine supplies and furniture 10 1,868
Pechiney S.A.--produces primary aluminum and aluminum products 36 1,491
Pinault-Printemps SA--distributes household products and other consumer goods 4 1,610
Sodexho SA--industrial catering and catering for restaurants 4 2,178
- --------------------------------------------------------------------------------------------------------------
9,244
- --------------------------------------------------------------------------------------------------------------
Germany--15.4%
Adidas AG--manufactures and markets sportswear and equipment worldwide 13 1,146
Altana AG--produces and markets pharmaceutical and chemical products 1 950
Commerzbank AG--provides a wide range of banking services to private
and business customers 47 1,184
Deutsche Telekom--provides local and long-distance telephone services,
and voice, data and image transmissions 56 1,187
Gehe AG--manufactures pharmaceutical products and medical supplies 18 1,178
Hoechst AG--produces chemicals, fibers and polymers 46 2,164
Veba AG--provides electrical energy services throughout Germany 25 1,457
Volkswagen AG--manufactures cars and other vehicles for sale worldwide 4 1,639
- --------------------------------------------------------------------------------------------------------------
10,905
- --------------------------------------------------------------------------------------------------------------
Hungary--1.4%
Richter Gedeon Rt--manufactures pharmaceutical products 17 964
- --------------------------------------------------------------------------------------------------------------
Italy--2.2%
Edison S.p.A.--provides thermoelectrical and co-generating services 253 1,601
- --------------------------------------------------------------------------------------------------------------
Netherlands--15.7%
ABN Amro Holding N.V.--provides worldwide banking operations 21 1,379
Elsevier NV--holding company for international publishing group 69 1,164
Gucci Group NV--produces and distributes luxury apparel and accessories 7 480
Hagemeyer N.V.--imports and distributes brand name products 9 728
Hunter Douglas N.V.--manufactures, markets and distributes
window coverings and architectural products 12 806
ING Groep NV--offers a wide range of financial services worldwide 45 1,629
Royal Dutch Petroleum Company--involved in all phases of the petroleum industry 12 2,105
Vendex International N.V.--a retailing and services group 36 1,541
VNU-Verenigde Nederlandse Uitgeversbedrijven Verenigd Bezit--diversified media company 64 1,342
- --------------------------------------------------------------------------------------------------------------
11,174
- --------------------------------------------------------------------------------------------------------------
Norway--1.1%
Christiania Bank OG Kreditkasse--provides banking services for retail
and corporate markets 249 780
- --------------------------------------------------------------------------------------------------------------
Poland--1.0%
Bank Slaski S.A. w Katowicach--commercial bank catering to companies
and individuals 4 407
Electrim Spolka Akcyjna S.A.--export/import activities throughout Europe,
the U.S., U.K., Russia and Korea 35 317
- --------------------------------------------------------------------------------------------------------------
724
- --------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
================================================================================
STATEMENT OF NET ASSETS Continued
Worldwide Value Fund, Inc. / Amounts in Thousands
================================================================================
<TABLE>
<CAPTION>
Shares Value
------ ------
<S> <C>
Spain--3.2%
Banco Santander SA--commercial bank operating throughout Spain 22 $ 1,387
Centros Comerciales Pryca, SA--owns and operates hypermarkets throughout Spain 40 856
- --------------------------------------------------------------------------------------------------------------
2,243
- --------------------------------------------------------------------------------------------------------------
Sweden--1.2%
Astra AB-Class A--manufactures and markets pharmaceuticals 17 841
- --------------------------------------------------------------------------------------------------------------
Switzerland--7.7%
CS Holding AG--provides universal bank services in Switzerland 15 1,495
Roche Holding AG--manufactures chemical and pharmaceutical products N.M. 1,766
Novartis--produces pharmaceuticals and chemicals 2 2,176
- --------------------------------------------------------------------------------------------------------------
5,437
- --------------------------------------------------------------------------------------------------------------
United Kingdom--40.9%
AEA Technology plc--provides various engineering and scientific services
for consumers in private and public business in the United Kingdom 176 1,188
BBA Group plc--manufactures a diverse range of products related
to the defense and aviation industries 305 1,839
Barclays PLC--offers commercial and investment banking, insurance,
financial and related services 125 2,143
British Petroleum Company plc--produces and retails petroleum
products and chemicals 156 1,871
Granada Group plc--provides television, leisure and computer maintenance services 142 2,092
Hays plc--offers business-to-business and other specialty services 190 1,829
Henlys Group plc--manufactures buses and operates auto dealerships 210 1,924
Jarvis Hotels plc--owns and operates full service hotels throughout the United Kingdom 455 1,255
Laporte plc--produces and sells speciality chemicals 140 1,631
Medeva plc--produces various pharmaceutical products 332 1,445
Next plc--clothing retailer, home shopping and financial services company 167 1,628
Premier Farnell plc--manufactures and distributes electronic components
and equipment internationally 128 1,644
Rentokil Initial PLC--international environmental services group 236 1,779
Standard Chartered plc--international bank holding company 173 2,125
Vodafone Group plc--provides telecommunications services 234 990
Wassall PLC--holding company whose subsidiaries manufacture a variety
of consumer products 391 2,130
Zeneca Group plc--a holding company whose subsidiaries manufacture
and sell pharmaceutical agrochemical products 53 1,494
- --------------------------------------------------------------------------------------------------------------
29,007
- --------------------------------------------------------------------------------------------------------------
United States--4.6%
Ultrafem, Inc.--addresses women's health care needs 187 3,271(A)
- --------------------------------------------------------------------------------------------------------------
Total Common Stocks and Equity Interests
(Identified Cost - $58,085) 76,780
- --------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
================================================================================
================================================================================
<TABLE>
<CAPTION>
Shares Value
------ ------
<S> <C>
PREFERRED STOCK--1.9%
Italy
Telecom Italia S.p.A. Saving Shares--provides telephone
services throughout Italy
(Identified Cost - $1,147) 968 $ 1,381
- -------------------------------------------------------------------------------------------------------------
Principal
Amount
- -------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT--3.4%
Prudential Securities, Inc.
7.15% dated 12-31-96, to be repurchased at $2,444
on 1-2-97 (Collateral: $2,831 Federal Home Loan
Mortgage Association, 7.0% due 10-1-10, value $2,502)
(Identified Cost--$2,443) $ 2,443 2,443
- -------------------------------------------------------------------------------------------------------------
Total Investments--113.5%
(Identified Cost - $61,675) 80,604
Other Assets Less Liabilities--(13.5%) (9,613)
- -------------------------------------------------------------------------------------------------------------
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 (183)
Overdistribution of net realized gain on investments
and foreign currency transactions (359)
Unrealized appreciation of investments and
foreign currency transactions 18,902
- -------------------------------------------------------------------------------------------------------------
NET ASSETS--100% $70,991
=============================================================================================================
NET ASSET VALUE PER SHARE $24.24
=============================================================================================================
(A) Non-income producing
N.M. Not meaningful
See notes to financial statements.
7
<PAGE>
================================================================================
STATEMENT OF OPERATIONS
Worldwide Value Fund, Inc. / For the Year Ended December 31, 1996 / Amounts in
Thousands
================================================================================
Investment Income:
Dividends $1,610
Interest 95
Less foreign income tax expense (219)
- --------------------------------------------------------------------------------
Total investment income $ 1,486
Expenses:
Investment advisory fee 711
Administration fee 141
Legal and audit fees 179
Custodian fees 150
Directors' fees and expenses 108
Reports to shareholders 53
Transfer agent and shareholder servicing expense 20
Registration expense 17
Other expenses 52
- --------------------------------------------------------------------------------
Total expenses 1,431
- --------------------------------------------------------------------------------
Net Investment Income 55
Net Realized and Unrealized Gain:
Realized gain on:
Investments 9,567
Foreign currency transactions 195
Options 33
Unrealized gain:
Investments 8,705
Assets and liabilities denominated in foreign currencies 24
- --------------------------------------------------------------------------------
Net Realized and Unrealized Gain 18,524
- --------------------------------------------------------------------------------
Increase in Net Assets Resulting From Operations $18,579
- ----------
See notes to financial statements.
8
<PAGE>
================================================================================
STATEMENT OF CHANGES IN NET ASSETS
Worldwide Value Fund, Inc. / Amounts in Thousands
================================================================================
</TABLE>
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------
1996 1995
<S> <C>
Change in Net Assets:
Operations:
Net investment income $ 55 $ 43
Net realized gain on investments and foreign currency transactions 9,795 2,599
Increase in unrealized appreciation of investments
and foreign currency transactions 8,729 7,574
- -------------------------------------------------------------------------------------------------------
Increase in net assets resulting from operations 18,579 10,216
Distributions to shareholders:
Net investment income -- (43)
Net realized gains (9,518)
In excess of net investment income -- (134)
Decrease in net assets from Fund stock repurchases* (319) (925)
- -------------------------------------------------------------------------------------------------------
Increase in net assets 8,742 9,114
Net Assets:
Beginning of year 62,249 53,135
- -------------------------------------------------------------------------------------------------------
End of year (including accumulated net investment
losses of $183 and $243, respectively) $70,991 $62,249
=======================================================================================================
</TABLE>
- ----------
*As of December 31, 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 Years Ended December 31,
- ----------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
<S> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value beginning of year $21.13 $17.68 $18.46 $14.29 $15.44
- ----------------------------------------------------------------------------------------------------------------
Net investment income (loss) .02 .01 (.03) .14 .08
Net realized and unrealized gain (loss)
on investments, options and currency
transactions 6.34 3.50 (.75) 4.13 (1.19)
- ----------------------------------------------------------------------------------------------------------------
Total from investment operations 6.36 3.51 (.78) 4.27 (1.11)
- ----------------------------------------------------------------------------------------------------------------
Dividends and distributions paid:
Net investment income -- (.06) -- (.05) (.04)
Net realized gains (3.25) -- -- -- --
In excess of net investment income -- -- -- (.05) --
- ----------------------------------------------------------------------------------------------------------------
Total dividends and distributions (3.25) (.06) -- (.10) (.04)
- ----------------------------------------------------------------------------------------------------------------
Net asset value, end of year $24.24 $21.13 $17.68 $18.46 $14.29
================================================================================================================
Market value per share, end of year $22.00 $16.88 $14.25 $16.63 $12.00
================================================================================================================
TOTAL INVESTMENT RETURN:
Based on market value per share 49.5% 18.8% (14.3%) 39.3% (3.7%)
RATIOS/SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses 2.0% 2.1% 2.1% 2.1% 2.2%
Net investment income 0.1% 0.1% -- 0.9% 0.5%
Portfolio turnover rate 109.0% 147.7% 75.0% 66.8% 148.4%
Average commission rate paid(A) $.0313 -- -- -- --
Net assets at end of year (in thousands) $70,991 $62,249 $53,135 $55,486 $42,930
</TABLE>
- ----------
(A) Pursuant to SEC regulations adopted for fiscal years beginning after
September 1, 1995, this is the average commission rate paid on securities
purchased and sold by the Fund.
See notes to financial statements.
10
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
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.
Use of Estimates
The preparation of the financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
2. Investment Transactions:
- --------------------------------------------------------------------------------
Investment transactions for the year ended December 31, 1996 (excluding
short-term securities) were as follows:
Purchases $77,019
Proceeds from sales 79,369
At December 31, 1996, the cost of securities for federal income tax
purposes was $61,675. Aggregate gross unrealized appreciation for all securities
in which there was an excess of value over tax cost was $19,051 and aggregate
gross unrealized depreciation for all securities in which there was an excess of
tax cost over value was $122.
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.
11
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS Continued
Worldwide Value Fund, Inc. / Amounts in Thousands
================================================================================
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 $100 million.
The Administrator also serves as Investment Consultant ("Consultant") to
the Adviser pursuant to an Investment Consultant Contract with the Adviser and
the Fund. Under the Investment Consultant Contract, the Consultant provides the
Adviser with investment advice, research and assistance, primarily regarding
United States securities. For its services, the Consultant receives from the
Adviser a monthly fee at the same rate and basis as in the Administration
Contract discussed in the preceding paragraph.
4. Financial Instruments:
- --------------------------------------------------------------------------------
As part of the Fund's investment program, the Fund may utilize repurchase
agreements, forward currency contracts, options and futures. The nature and risk
of these financial instruments and the reasons for using them are set forth more
fully in the Fund's Prospectus.
Repurchase Agreements
All repurchase agreements are fully collateralized by obligations issued by the
US government or its agencies and such collateral is in the possession of the
Fund's custodian. The value of such collateral includes accrued interest. Risks
arise from the possible delay in recovery or potential loss of rights in the
collateral should the issuer of the repurchase agreement fail financially.
Forward Currency Contracts
The Fund may enter into foreign forward currency contracts to hedge against
adverse changes in the relationship of the US dollar to foreign currencies.
Risks arise from the possible inability of counterparties to meet the terms of
their contracts and from movements in currency values. Forward currency
contracts are valued using the forward rate.
As of December 31, 1996 the Fund had entered into the following currency
contracts.
Settlement Unrealized
Date Loss (US$)
Contract to Sell
- --------------------------------------------------------------------------------
41,600 French Francs 3/4/97 $(47)
================================================================================
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. Call
options written by the Fund and related premiums received during the year were
as follows:
Contracts Premiums
Options outstanding
January 1, 1996 -- $--
Options written 350 42
Options closed (350) (42)
- --------------------------------------------------------------------------------
Options outstanding
December 31, 1996 -- $--
================================================================================
12
<PAGE>
================================================================================
DIVIDEND REINVESTMENT PLAN
Worldwide Value Fund, Inc.
================================================================================
Worldwide Value Fund, Inc. ("Fund") offers an Automatic Dividend
Reinvestment Plan ("PIan"). All shareholders of the Fund are automatically
participants in the Plan unless they elect otherwise. Under the Plan, if the
Fund declares and pays its dividends and distributions in cash, State Street
Bank and Trust Company ("State Street"), as Plan Agent, will automatically apply
your dividends and distributions to purchase shares of the Fund for your
account. If the Fund declares an income dividend or capital gain distribution
payable in shares of the Fund or cash at the option of shareholders, State
Street, as your agent, will accept and hold for your account those shares. If
you own shares in your own name, you participate directly in the Plan. If you
own shares that are held in the name of a brokerage firm, bank, or other
nominee, you should contact your nominee to see if it will participate on your
behalf. If you wish to participate in the Plan, but your brokerage firm, bank or
other nominee is unable to participate on your behalf, you should request your
nominee to re-register your shares in your own name which will enable you to
participate in the Plan. Currently, the Plan does not have a cash purchase plan
option.
As a Plan participant, your cash dividends and distributions will be
promptly invested for you, automatically increasing your holdings in the Fund.
If the Fund declares a dividend or distribution payable at the option of the
shareholder either in cash or in stock of the Fund, as a Plan participant you
will automatically receive stock valued at the lower of market price (determined
in a fair manner) or net asset value. If the market price of shares on the
valuation date equals or exceeds the net asset value, the Fund will issue new
shares to you at net asset value, provided that the Fund will not issue new
shares at a discount of more than 5% from the then current market price. If
dividends or distributions are payable only in cash, then you will receive
shares purchased by State Street on the New York Stock Exchange ("NYSE") or
otherwise on the open market. If the market price exceeds net asset value before
State Street has completed its purchases. the average purchase price may exceed
net asset value resulting in fewer shares being acquired than if the dividend or
distribution had been paid in newly issued shares. All reinvestments are in full
and fractional shares, carried to three decimal places. However, if your shares
are held by a broker, bank or nominee, who participates in the Plan on your
behalf, any amounts not sufficient to purchase a whole share may be credited to
your account in cash in lieu of the fractional share interest. Your
reinvestments will begin with the next dividend or distribution payable by the
Fund unless you elect to withdraw from the Plan, provided that State Street
receives your authorization to withdraw prior to the record date. Should your
authorization arrive after the record date, your withdrawal from the Plan will
begin with the following dividend or distribution.
There is no charge to participants for reinvesting dividends and
distributions (except for certain brokerage commissions, as described below),
since State Street's fees are paid by the Fund. There are no brokerage charges
for shares issued directly by the Fund. Whenever shares are purchased by State
Street on the NYSE or otherwise on the open market, each participant will pay a
pro rata portion of brokerage commissions. Brokerage charges for purchasing
shares through the Plan are expected to be less than the usual brokerage charges
for individual transactions, because State Street will purchase stock for all
participants in blocks, resulting in lower commissions for each individual
participant. Brokerage commissions will be averaged and added to the purchase
prices.
You will receive information annual!y, concerning the U.S. federal income
tax status of dividends and distributions you receive, for your personal records
and to help you prepare your federal income tax return. The automatic
reinvestment of dividends and distributions does not relieve you of any income
tax which may be payable on such reinvested dividends or distributions.
You may elect to withdraw from the Plan without penalty at any time by
written notice to State Street. If you are a shareholder of record and decide to
withdraw, you will receive, without charge, stock certificates issued in your
name for all full shares; or, if you wish, State Street will sell your shares
and send you the proceeds, less a service fee of $2.50 and less brokerage
commissions. State Street will convert any fractional shares you hold at the
time of your withdrawal to cash at the current market price and send you a check
for the proceeds.
Further information about the Plan may be obtained by writing to State
Street Bank and Trust Company, PO. Box 8200, Boston, MA 02266-8200.
13
<PAGE>
================================================================================
REPORT OF INDEPENDENT ACCOUNTANTS
================================================================================
To the Shareholders and Directors
of Worldwide Value Fund, Inc.:
We have audited the accompanying statement of net assets of Worldwide Value
Fund, Inc., as of December 31, 1996, 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 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 generally accepted auditing
standards. 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. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996 by correspondence with the custodians and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. 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
Worldwide Value Fund, Inc. as of December 31, 1996, and the results of its
operations, changes in its net assets, and financial highlights for each of the
respective periods stated in the first paragraph, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
February 20, 1997
Baltimore, Maryland
14
<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.
15
