MERRILL
LYNCH
WORLD
INCOME
FUND, INC.
FUND LOGO
Annual Report December 31, 1993
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless accompanied
or preceded by the Fund's current prospectus. Past performance results
shown in this report should not be considered a representation of future
performance. Investment return and principal value of shares will fluctuate
so that shares, when redeemed, may be worth more or less than their original
cost.
Merrill Lynch
World Income Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MERRILL LYNCH WORLD INCOME FUND, INC.
Officers and
Directors
Arthur Zeikel, President and Director
Kenneth S. Axelson, Director
Herbert I. London, Director
Joseph L. May, Director
Andre F. Perold, Director
Terry K. Glenn, Executive Vice President
N. John Hewitt, Senior Vice President
Donald C. Burke, Vice President
Vincent T. Lathbury III, Vice President
Robert J. Parish, Vice President
Aldona Schwartz, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
<PAGE>
Custodian
State Street Bank & Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
Important Tax
Information
Merrill Lynch World Income Fund, Inc. declared a long-term capital
gains distribution of $0.028157 per share, which was payable on
December 31, 1993 to shareholders of record on December 22, 1993.
DEAR SHAREHOLDER
Throughout 1993, chronic global deflationary conditions continued to
support bond prices across many national markets. In Europe, many
central banks were impelled to effect monetary policy easings, either
independent of or in conjunction with the German Bundesbank, in an
endeavor to correct the harsh consequences from recessionary conditions.
In Japan, the combination of new fiscal stimulus programs and monetary
policy easings by the Bank of Japan demonstrated the government's
attempts to reverse the economy's predicament. In the United States,
the Federal Reserve Board's accommodative monetary policy was main-
tained during the year to encourage the economy's moderate recovery,
amidst recent mild price pressures. Although the majority of the
industrial economies have been hampered by recessionary downturns
over the past few years, the long-awaited successful conclusion of
the Uruguay round of negotiations on the General Agreement on Tariffs
and Trade (GATT) in November has now enhanced the prospects for global
growth over the next few years.
During 1993, the US dollar traded strongly in general versus the major
currencies, especially the Deutsche mark, mainly because of worsening
European and Japanese economic conditions, declining short-term
interest rate differentials following various central bank monetary
policy easings, and continuing evidence of the emergence of a moderate
US economic recovery.
<PAGE>
Although the revival of US economic activity seen this year has not
been as widespread as in previous recovery periods, notable gains have
been achieved over the past few months. The final report for third
quarter gross domestic product (GDP) posted growth of 2.9% (the
strongest level since the fourth quarter of 1992) and revealed strong
gains in housing sales, durable goods purchases and retail sales.
Following such an improvement, forecasters have raised their ex-
pectations for the fourth quarter. However, since the majority of
recent gains have been registered in non-recurring items such as
housing and vehicle purchases, it is possible that the recent pace
of growth may not carry over into 1994's first quarter. Furthermore,
we believe an additional risk to strong growth prospects is the imminent
imposition of higher taxes. Yet, given the low levels of both productive
capacity and price pressures, it is foreseeable that the US economy can
sustain a moderate growth pattern over the medium term.
Recent reports of significant declines registered in industrial production
and retail sales amidst rising unemployment and worsening corporate results
clearly exhibit Germany's economic predicament. Additionally, the recently
announced significant cuts in social welfare benefits in an endeavor to
correct the nation's worsening fiscal position suggest that the Bundesbank
will need to carry out another monetary policy easing to stimulate
domestic demand, despite the chronically high levels of prices and money
supply growth. However, since the causes of many of Germany's economic
ills are rooted in complex structural issues, the recession is now
forecast to persist until late 1994.
The painful combination of rising corporate bankruptcies and poor
income growth which have influenced sharp declines in the Nikkei
Index and depressed business and consumer confidence levels despite
record low interest rates paints a gloomy portrait of the Japanese
economy. The yen's strong value versus the principal traded currencies
for the majority of 1993 has contributed to declining economic growth, as
the erosion of industrial competitiveness and corporate profits have both
caused unforeseen rises in unemployment. As the new political coalition
is increasingly threatened over opposing intragovernmental views concerning
the appropriate mix of economic recovery measures, hope is now centered
around the introduction of income tax relief measures within a new
stimulus package during first quarter 1994 to boost the economy's
prospects.
Although Canada's real GDP grew 2.4% during the third quarter of 1993,
both the Canadian dollar and bond market were unduly pressured ahead of
October's federal election and with the reports of high federal and
provincial deficit levels. However, the new liberal government's re-
strictive view toward the nation's fiscal stance should become more
supportive of lower interest rates. Although gains were realized during
the past few months in net exports, business investment and personal
consumption, the persistently high unemployment rate and low productive
capacity levels still suggest that the economy will remain in a period
of sub-4% growth over the intermediate term.
<PAGE>
Global Outlook & Strategy
With the significant growth in the Fund's assets during 1993, we have
maintained an overweighted US-dollar concentration. We favored this
strategy because of the constrained value of alternative European
investments with their stubbornly high hedging costs.
While the further realization of weakening European economies suggests
less volatile currency trading and lower interest rate environments, the
prospect for near-term market volatility has yet to be diminished. In-
vestors may not react in unison to the prospect of federal elections in
several European nations during 1994, and their views of fiscal and monetary
policy mixes designed to stimulate economic activity may also differ.
During the year, we maintained the Fund's moderately overweighted
exposure to Italy, Spain and Sweden. However, given the prospects for
currency volatility, a core hedge position was maintained against
these countries' currencies. A new overweight position in Belgium was
established in the second half of the year after a substantial selloff
in the market provided us with excellent value. With the realization of
positive fundamentals benefiting the UK bond market, we are also main-
taining an overweighted position. Finally, during the year, we reduced
our Canadian exposure from a very overweight to an overweight position
while increasing our exposure to the Australian market. The Japanese
exposure remained largely unchanged while profits were taken in New
Zealand.
The US dollar remained strong versus the Deutschemark because of
Europe's languid economic condition, the continued signs of a moderate
US economic recovery, and the now smaller interest rate differential
between short-term US and German investments over the intermediate
term. However, we believe the dollar may experience some weakness
following the imposition of higher taxes in 1994, which could restrain
the US economy's future growth prospects. Nevertheless, as in pre-
vious periods, we will maintain the Fund's US-dollar composition,
while we stand ready to raise its exposure to unhedged European
investments when such opportunities arise.
High-Yield Market
Fiscal 1993 was a very good year for high-yield securities. It was a
year in which high-yield bond prices advanced with relative consistency
(excepting two minor corrections in April and September), capped by a
solid rally during October. The net result was a +3.5% return for the
unmanaged Merrill Lynch High Yield Master Index for the three months
ended December 31, 1993, bringing the twelve-month return to +17.20%.
During the year, a record 330 new issues totaling $59 billion were
brought to market compared with 204 issues and $38 billion in the
prior year. Steady cash inflows into high-yield mutual funds enhanced
the receptivity of new issues while price gains in selected cyclical
securities contributed to a strong secondary market environment.
Fortunately, the credit quality of the new-issue volume remained good.
Only 16% of the new high-yield bonds sold in 1993 were rated in the
lowest-quality categories (B- or lower) by the major rating services,
about the same as 1992. These numbers compare most favorably
with the 60% B- and below in 1987-1988, a time of exceptionally
low-quality new-issue supply.
We believe that the outlook for the high-yield market remains attractive.
Our positive view reflects:
<PAGE>
* Attractive valuations. The yield spreads off US Treasury securities
remain compelling at 4%. Also, yield premiums, which measure the
incremental yield provided by high-yield bonds over US Treasury
securities of similar maturity, are in the highest quartile of their
range over the past ten years.
* A benign environment for high-yield investments. The economy has been
expanding moderately throughout the year and we believe that growth
is likely to continue over at least the next few quarters. This means
generally improving corporate profits, a positive particularly for
cyclical companies. In addition, the relatively high valuations on
equities have encouraged reequitization or the substitution of debt
with equity on the balance sheets of leveraged companies. These trends
have resulted in the lowest default rates in years. We believe that
low default rates will continue at least through 1994.
* An improving technical situation. The high-yield bond market was
depressed in the third quarter by a record supply of new issues in
the face of modest flows of cash from the market. Much of the supply
reflected the desire of companies to reduce short-term bank debt, ex-
tend the maturity of debt obligations, and reduce annual debt repayment
requirements. Since that time, cash inflows have increased sharply
though supply has remained heavy. We believe supply could ease in the
second quarter of 1994, permitting the prices of outstanding bonds to
rise.
At December 31, 1993, cash equivalents totaled 11.48% of net assets. The
Fund's average maturity was 8 years, 9 months. Major industries repre-
sented in the portfolio include: energy, 4.09%; conglomerates, 3.78%;
food and beverage, 4.39%; broadcasting and publishing, 3.62%; and
hotels and casinos, 2.51%.
Fiscal Year In Review
Our main bond strategy of increasing the European bond position during
1993 benefited the Fund's total return since the European bloc was
the best performing of the three major bond blocs: dollar bloc, Japan
and Europe (dollar bloc countries include the United States, Canada,
Mexico, Australia and New Zealand). While the US market lagged all the
major markets, Canada and Australia substantially outperformed the
United States. The Japanese bond market underperformed relative to
all but the US bond market. Foreign exchange movements in Europe,
Canada and Australia adversely affected the Fund during the year as
the US dollar appreciated more than 9% versus the European currency
bloc, 4% versus the Canadian dollar and a modest 1.5% versus the
Australian dollar. The Japanese yen set new record highs, ending 1993
with a gain of 12% versus the US dollar.
<PAGE>
Within the high-yield portion of the portfolio, our strategies during
the fiscal year reflect our positive outlook for high-yield bonds. As
our confidence in the strength of the economy grew during the year, we
increased investments in cyclical companies (those whose earnings are
very sensitive to the business cycle). We added the issues of three
airlines in the second quarter and building products companies such
as USG Corp., Pacific Lumber Co., and American Standard Inc. We also
increased portfolio exposure to aluminum and paper industry issues
during the year. These strategies benefited the total return of the
high-yield portion the portfolio during the period under review.
Overall, yield spreads between quality groups continued to compress in
1993 with somewhat better performance in lower-quality, higher-yielding
names. It appears likely that this trend of compression of yields between
quality groups which began several years ago has about run its course. Our
credit quality profile therefore approaches a market weighting. We have
focused securities purchases on new issues generally with five-year call
protection. The largest contribution to portfolio returns was from cyclical
credits, including chemicals, paper, transportation, and building-related
companies. We believe cyclicals will continue to outperform in 1994.
We thank you for your continued investment in Merrill Lynch World
Income Fund, Inc., and we look forward to reviewing our outlook
and strategy with you again in our next report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent T. Lathbury)
Vincent T. Lathbury III
Vice President and Portfolio Manager
(Robert J. Parish)
Robert J. Parish
Vice President and Portfolio Manager
February 4, 1994
PERFORMANCE DATA
None of the past results shown should be considered a
representation of future performance. Investment return and
principal value of Class A and Class B Shares will fluctuate
so that shares, when redeemed, may be worth more or less than
their original cost.
<PAGE>
<TABLE>
Recent
Performance
Results*
<CAPTION>
12 Month 3 Month
12/31/93 9/30/93 12/31/92 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $9.28 $9.18 $8.85 +5.18%(1) +1.40%(1)
Class B Shares 9.28 9.17 8.85 +5.18(1) +1.51(1)
Class A Shares--Total Return +14.12(2) +3.33(3)
Class B Shares--Total Return +13.27(4) +3.22(5)
Class A Shares-Standardized 30--day Yield 6.88%
Class B Shares-Standardized 30--day Yield 6.39%
<FN>
*Investment results shown for the 3-month and 12-month periods are before the deduction of any sales charges.
(1)Percent change includes reinvestment of $0.028 per share capital gains distributions.
(2)Percent change includes reinvestment of $0.750 per share ordinary income dividends and $0.028 per share capital
gains distributions.
(3)Percent change includes reinvestment of $0.196 per share ordinary income dividends and $0.028 per share capital
gains distributions.
(4)Percent change includes reinvestment of $0.681 per share ordinary income dividends and $0.028 per share capital
gains distributions.
(5)Percent change includes reinvestment of $0.176 per share ordinary income dividends and $0.028 per share capital
gains distributions.
</TABLE>
PERFORMANCE DATA (concluded)
GRAPHIC MATERIAL APPEARS HERE.
SEE APPENDIX GRAPHIC AND IMAGE MATERIAL ITEM 1.
Average Annual
Total Return++
% Return Without % Return With
Sales Charge Sales Charge*
Class A Shares*
Year Ended 12/31/93 +14.12% + 9.56%
Five Years Ended 12/31/93 +11.88 +10.97
Inception (9/29/88) through 12/31/93 +12.61 +11.74
[FN]
++Performance results for per share net asset value of Class A Shares prior to
November 18, 1991 are for the period when the Fund was closed-end.
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/93 +13.27% +9.27%
Inception (11/18/91) through 12/31/93 + 9.52 +8.67
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0% after
4 years.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
<TABLE>
Performance
Summary--
Class A Shares++
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
9/29/88-12/31/88 $9.35 $9.68 -- $0.280 + 6.53%
1989 9.68 9.13 $0.002 1.159 + 6.32
1990 9.13 8.53 -- 1.463 + 9.46
1991 8.53 9.30 -- 1.106 +21.99
1992 9.30 8.85 0.019 0.990 + 6.15
1993 8.85 9.28 0.028 0.750 +14.12
------ ------
Total $0.049 Total $5.748
Cumulative total return as of 12/31/93: +86.68%**
<FN>
++Performance results for per share net asset value of Class A Shares prior to November 18, 1991 are for the period
when the Fund was closed-end.
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains distributions at net asset value on the payable date,
and do not include sales charge; results would be lower if sales charge was included.
</TABLE>
<TABLE>
Performance
Summary--
Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
11/18/91-12/31/91 $9.26 $9.30 -- $0.112 + 1.64%
1992 9.30 8.85 $0.019 0.919 + 5.34
1993 8.85 9.28 0.028 0.681 +13.27
------ ------
Total $0.047 Total $1.712
Cumulative total return as of 12/31/93: +21.27%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains distributions at net asset value on the payable date,
and do not reflect deduction of any sales charge; results would be lower if sales charge was deducted.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
LATIN AMERICA
AND THE Face Value Percent of
CARIBBEAN Industries Amount Fixed-Income Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Argentina
Automobiles US$ 5,570,000 Sevel Argentina, S.A., 8.50%
due 11/17/1996 $ 5,608,200 $ 5,674,438 0.22%
Banking 2,000,000 Banco de Galicia y Buenos Aires, S.A.,
9.75% due 10/08/1997 2,097,500 2,120,000 0.08
3,000,000 Banco Frances del Rio de la Plata, S.A.,
8.50% due 7/15/1998 3,012,500 3,090,000 0.12
------------ ------------ ----
5,110,000 5,210,000 0.20
Energy 2,000,000 ++Transportadora de Gas de Sur, 7.75% due
12/23/1998 2,010,000 2,002,500 0.08
Foreign Government Republic of Argentina:
Obligations 7,000,000 8.25% due 8/02/2000 7,038,405 7,188,125 0.28
10,000,000 8.375% due 12/20/2003 9,936,800 10,137,500 0.39
------------ ------------ ----
16,975,205 17,325,625 0.67
Industrial Services 8,560,000 Compania Naviera Perez Companc
S.A.C.F.I.M.F.A. S.A., 8.375%
due 7/30/1998 8,678,150 8,709,800 0.34
Telecommunications 7,500,000 Telecom Argentina Stet--France Telecom,
S.A., 8.375% due 10/18/2000 7,471,125 7,687,500 0.30
7,000,000 Telefonica de Argentina, S.A., 8.375% due
10/01/2000 7,025,800 7,166,250 0.28
------------ ------------ ----
14,496,925 14,853,750 0.58
Total Fixed-Income Investments in Argentina 52,878,480 53,776,113 2.09
Colombia
Foreign Government 3,000,000 Financiera Energetica Nacional, S.A., 6.625%
Obligations--Agency due 12/13/1996 2,977,500 2,981,250 0.12
Total Fixed-Income Investments in Colombia 2,977,500 2,981,250 0.12
Mexico
Banking 2,000,000 Banco del Atlantico SNC, 7.875%
due 11/05/1998 1,993,100 2,017,500 0.08
1,700,000 Banco Nacional Mexico, S.A. (BANAMEX),
9.125% due 4/06/2000 1,770,563 1,859,375 0.07
6,500,000 ++Grupo Financiero Bancomer, S.A. de C.V.,
8.00% due 7/07/1998 6,477,250 6,796,563 0.26
------------ ------------ ----
10,240,913 10,673,438 0.41
<PAGE>
Broadcasting & 2,500,000 Grupo Televisa, S.A. de C.V., 10.00%
Publishing due 11/09/1997 2,674,375 2,787,500 0.11
Food & Beverage 4,400,000 Fomento Economico Mexicano, S.A. de C.V.
(Femsa), 9.50% due 7/22/1997 4,553,875 4,785,000 0.19
1,500,000 Gruma, S.A. de C.V., 9.75% due 3/09/1998 1,499,250 1,659,375 0.06
3,500,000 Grupo Embotellador de Mexico, S.A. de C.V.
(GGEMEX), 10.75% due 11/19/1997 3,752,500 3,920,000 0.15
------------ ------------ ----
9,805,625 10,364,375 0.40
Foreign Government & 2,000,000 Banco Nacional of Commerce Exterior, 8.00%
Agency Obligations due 8/05/2003 2,002,500 2,045,000 0.08
4,000,000 Nacional Financiera, 10.625%
due 11/22/2001 4,420,000 4,695,000 0.18
Pound
Sterling 10,000,000 United Mexican States, Government Bond,
12.25% due 12/03/1998 17,422,207 17,265,996 0.67
------------ ------------ ----
23,844,707 24,005,996 0.93
Industrial Services Cemex, S.A.:
4,250,000 ++8.875% due 6/10/1998 4,230,025 4,571,406 0.18
2,500,000 10.00% due 11/05/1999 2,570,375 2,828,125 0.11
4,000,000 8.50% due 8/31/2000 4,049,800 4,262,500 0.17
3,500,000 Empresas ICA Sociedad Controladora, S.A.
de C.V., 9.75% due 2/11/1998 3,589,375 3,871,875 0.15
------------ ------------ ----
14,439,575 15,533,906 0.61
Retail Stores 2,210,000 Controladora Comercial Mexicana, S.A. de
C.V. (COMERCI), 8.75% due 4/21/1998 2,236,615 2,314,975 0.09
7,140,000 El Puerto de Liverpool, S.A.
de C.V., 7.25% due 10/19/1996 7,180,350 7,229,250 0.28
------------ ------------ ----
9,416,965 9,544,225 0.37
Total Fixed-Income Investments in Mexico 70,422,160 72,909,440 2.83
Trinidad & Tobago
Foreign Government Republic of Trinidad and Tobago:
Obligations 2,000,000 11.50% due 11/20/1997 2,100,000 2,170,000 0.08
4,000,000 9.75% due 11/03/2000 3,991,600 4,120,000 0.16
------------ ------------ ----
6,091,600 6,290,000 0.24
Total Fixed-Income Investments in
Trinidad & Tobago 6,091,600 6,290,000 0.24
Total Fixed-Income Investments in
Latin American and Caribbean Securities 132,369,740 135,956,803 5.28
<PAGE>
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
NORTH Face Value Percent of
AMERICA Industries Amount Fixed-Income Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Canada
Food & Beverage US$ 10,000,000 Canandaigua Wine, 8.75% due 12/15/2003 $ 10,000,000 $ 10,025,000 0.39%
Foreign Government Canadian Government Bonds:
Obligations C$ 80,000,000 6.50% due 9/01/1998 61,439,136 62,344,411 2.42
80,000,000 7.50% due 12/01/2003 63,245,396 64,259,819 2.50
------------ ------------ ----
124,684,532 126,604,230 4.92
Total Fixed-Income Investments in Canada 134,684,532 136,629,230 5.31
United States
Air Transport Delta Air Lines, Inc.:
US$ 16,746,911 9.375% due 9/11/2007 (b) 17,032,948 17,258,043 0.67
10,000,000 10.50% due 4/30/2016 10,287,500 10,693,470 0.42
7,100,000 United Air Pass-Through, 10.125%
due 3/22/2015 7,684,046 7,805,215 0.30
15,000,000 USAir, 10.375% due 3/01/2013 15,000,000 14,977,305 0.58
------------ ------------ ----
50,004,494 50,734,033 1.97
Broadcasting & 12,000,000 Cablevision Systems Corp., 14.00%
Publishing due 11/15/2003 12,971,250 12,525,000 0.49
10,190,000 Century Communications Corp., 11.875%
due 10/15/2003 10,701,550 11,693,025 0.45
10,000,000 Continental Cablevision,
9.50% due 8/01/2013 10,000,000 11,150,000 0.43
13,000,000 Heritage Media, 11.00% due 6/15/2002 13,295,625 14,332,500 0.56
15,000,000 K-III Communications Corp., 10.625%
due 5/01/2002 15,125,000 16,275,000 0.63
10,000,000 Newscorporation of America Holdings, Inc.,
9.125% due 10/15/1999 9,688,500 11,200,000 0.44
5,000,000 Storer Communications, Inc., 10.00%
due 5/15/2003 4,587,500 5,050,000 0.20
10,000,000 Videotron Group, Ltd. Co., 10.25%
due 10/15/2002 10,043,750 11,050,000 0.42
------------ ------------ ----
86,413,175 93,275,525 3.62
Building Materials 15,300,000 Pacific Lumber Co., 10.50% due 3/01/2003 15,462,750 15,797,250 0.61
USG Corp.:
10,000,000 10.25% due 12/15/2002 9,968,750 10,250,000 0.40
11,035,000 8.75% due 3/01/2017 9,717,469 10,152,200 0.39
------------ ------------ ----
35,148,969 36,199,450 1.40
<PAGE>
Business Services 20,000,000 ADT Operations, 9.25% due 8/01/2003 20,073,188 20,500,000 0.80
10,000,000 Bell & Howell Co., Series B, 10.75%
due 10/01/2002 10,000,000 10,925,000 0.42
------------ ------------ ----
30,073,187 31,425,000 1.22
Capital Goods 6,000,000 Rexnord Corp., 10.75% due 7/01/2002 6,000,000 7,200,000 0.28
Cellular Telephones 5,000,000 Paging Network, Inc., 11.75% due 5/15/2002 5,000,000 5,637,500 0.22
& Paging 7,775,000 Rogers Communication, Inc., 10.875%
due 4/15/2004 7,809,875 8,669,125 0.34
------------ ------------ ----
12,809,875 14,306,625 0.56
Chemicals 33,860,000 G-I Holdings, Inc., 11.964%*
due 10/01/1998 20,032,213 21,585,750 0.83
12,000,000 Uniroyal Chemical, 9.00% due 9/01/2000 12,000,000 12,240,000 0.48
------------ ------------ ----
32,032,213 33,825,750 1.31
Conglomerates Coltec Industries:
5,000,000 9.75% due 11/01/1999 5,312,500 5,350,000 0.21
20,000,000 10.25% due 4/01/2002 20,387,500 21,450,000 0.83
11,000,000 Gillette Holdings, 12.25% due 6/30/2002 11,275,000 11,990,000 0.47
15,000,000 Jordan Industries, 10.375% due 8/01/2003 14,850,000 15,225,000 0.59
Sequa Corp.:
13,018,000 10.50% due 5/01/1998 13,393,630 13,603,810 0.53
9,000,000 9.375% due 12/15/2003 9,000,000 9,045,000 0.35
10,100,000 Sherritt Gordon, Ltd., 9.75% due 4/01/2003 10,148,750 10,150,500 0.39
10,000,000 Southern Pacific Rail Co.,
9.375% due 8/15/2005 10,000,000 10,650,000 0.41
------------ ------------ ----
94,367,380 97,464,310 3.78
Consumer Goods 10,000,000 Liggett Group, Inc., 11.50% due 2/01/1999 9,701,123 7,350,000 0.29
30,350,000 Revlon Worldwide, 12.00%* due 3/15/1998 18,605,506 15,478,500 0.60
------------ ------------ ----
28,306,629 22,828,500 0.89
Containers Owens Illinois:
5,000,000 10.00% due 8/01/2002 5,006,250 5,306,250 0.21
20,000,000 11.00% due 12/01/2003 21,906,562 23,000,000 0.89
6,100,000 Silgan Holdings Corp., 11.75%
due 6/15/2002 6,194,875 6,542,250 0.25
------------ ------------ ----
33,107,687 34,848,500 1.35
<PAGE>
Energy Clark Oil Co.:
8,360,000 10.50% due 12/01/2001 8,827,300 9,018,350 0.35
4,000,000 9.50% due 9/15/2004 4,000,000 4,200,000 0.16
7,000,000 Clark R & M Holdings, Inc., 11.391%*
due 2/15/2000 3,720,259 3,823,750 0.15
13,300,000 Ferrell Gas Co., Inc.,
11.625% due 12/15/2003 13,670,165 14,413,875 0.56
10,000,000 Gulf Canada Resources, Ltd., 9.00%
due 8/15/1999 9,158,438 9,916,500 0.39
Maxus Energy Corp.:
6,500,000 9.875% due 10/15/2002 6,485,050 6,483,750 0.25
1,000,000 11.50% due 11/15/2015 1,051,250 1,050,000 0.04
5,000,000 Oryx Energy Co., 10.375% due 9/15/2018 4,956,310 5,387,405 0.21
15,000,000 Rowan Companies, Inc., 11.875%
due 12/01/2001 15,590,000 16,687,500 0.65
15,000,000 Seagull Energy Corp., 8.625% due 8/01/2005 15,000,000 14,925,000 0.58
10,000,000 Trans Texas Gas Corp., 10.50% due 9/01/2000 10,000,000 10,500,000 0.41
9,100,000 Tucson Electric, 10.732% due 1/01/2013 8,713,250 8,872,500 0.34
------------ ------------ ----
101,172,022 105,278,630 4.09
Entertainment 28,465,000 Marvel Holdings, Inc., 12.392%*
due 4/15/1998 17,570,382 18,573,412 0.72
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
NORTH AMERICA Face Value Percent of
(continued) Industries Amount Fixed--Income Investments Cost (Note 1a) Net Assets
<S> <S> <S> <C> <C> <C> <C> <C>
United States (continued)
Financial Services US$ 17,375,000 Lomas Mortgage USA, 10.25% due 10/01/2002 $ 17,387,500 $ 18,243,750 0.71%
10,000,000 Penn Financial Corp., 9.25%
due 12/15/2003 10,000,000 10,100,000 0.39
10,000,000 Reliance Group Holdings,
9.00% due 11/15/2000 10,000,000 10,075,000 0.39
------------- ------------- ----
37,387,500 38,418,750 1.49
Food & Beverage 6,000,000 Coca-Cola Bottling Co., 9.00%
due 11/15/2003 6,000,000 5,985,000 0.23
17,250,000 Del Monte Corp., 10.00% due 5/01/2003 17,337,187 16,991,250 0.66
25,000,000 Grand Union Co., 11.25% due 7/15/2000 25,524,063 26,250,000 1.02
18,000,000 Penn Traffic Co., 9.625% due 4/15/2005 18,308,350 18,675,000 0.73
19,250,000 Pueblo Xtra, 9.50% due 8/01/2003 19,348,750 19,442,500 0.76
10,000,000 Seven-Up Bottling Co., 11.50%
due 8/01/1999 10,096,250 10,175,000 0.40
15,000,000 Specialty Foods, 10.25% due 8/15/2001 15,000,000 15,262,500 0.59
------------- ------------- ----
111,614,600 112,781,250 4.39
<PAGE>
Health Services American Medical International:
2,502,500 6.50% due 5/30/1997 2,029,634 2,452,450 0.10
11,000,000 11.25% due 6/01/2015 11,535,625 11,660,000 0.45
15,000,000 Continental Medical Systems, 10.875%
due 8/15/2002 15,029,063 15,525,000 0.60
Epic Properties, Inc.:
5,000,000 Series B-1, 11.375% due 7/15/2001 5,287,500 5,575,000 0.22
4,470,177 Series B-2, 11.50% due 7/15/2001 (b) 4,738,388 5,006,599 0.19
Healthtrust--The Hospital Co.:
14,000,000 10.75% due 5/01/2002 14,516,500 15,680,000 0.61
7,000,000 8.75% due 3/15/2005 6,938,750 7,245,000 0.28
5,000,000 MEDIQ, Inc., 11.125% due 7/01/1999 5,000,000 5,250,000 0.20
------------- ------------- ----
65,075,460 68,394,049 2.65
High Technology 7,000,000 Anacomp, Inc., 15.00% due 11/01/2000 8,001,250 8,050,000 0.31
15,000,000 Computervision Corp., 10.875%
due 8/15/1997 15,025,000 13,725,000 0.53
------------- ------------- ----
23,026,250 21,775,000 0.84
Home Building Del Webb:
9,250,000 10.875% due 3/31/2000 9,376,875 9,828,125 0.38
3,500,000 9.75% due 3/01/2003 3,472,455 3,578,750 0.14
Kaufman & Broad Home, Inc.:
9,000,000 10.375% due 9/01/1999 9,050,000 9,630,000 0.37
5,250,000 9.375% due 5/01/2003 5,217,188 5,420,625 0.21
Ryland Group, Inc.:
8,250,000 10.50% due 7/15/2002 8,166,530 8,703,750 0.34
7,750,000 9.625% due 6/01/2004 7,750,000 7,779,063 0.30
------------- ------------- ----
43,033,048 44,940,313 1.74
Hotels & Casinos 13,060,000 Bally's Park Place Funding, Inc., 11.875%
due 8/15/1999 13,203,700 14,072,150 0.55
1,906,000 Gold River Hotel & Casino Corp., 11.375%
due 8/31/1999 2,645,548 1,543,860 0.06
11,010,000 MGM Grand Hotel Financial Corp., 12.00%
due 5/01/2002 11,608,963 12,744,075 0.50
14,000,000 Showboat, Inc., 9.25% due 5/01/2008 13,866,250 14,280,000 0.55
15,000,000 Treasure Island Finance Corp., 9.875%
due 10/01/2000 15,026,250 16,387,500 0.64
5,385,000 Trump Taj Mahal Funding, Inc., 11.35%
due 11/15/1999 (a)(c) 4,018,682 5,282,749 0.21
------------- ------------- ----
60,369,393 64,310,334 2.51
<PAGE>
Leisure Time AMC Entertainment, Inc.:
8,000,000 11.875% due 8/01/2000 8,050,500 8,900,000 0.35
5,925,000 12.625% due 8/01/2002 6,017,020 6,739,687 0.26
------------- ------------- ----
14,067,520 15,639,687 0.61
Paper 10,000,000 Container Corp. of America, 9.75%
due 4/01/2003 10,200,000 10,325,000 0.40
10,000,000 Riverwood International, 11.25%
due 6/15/2002 10,385,750 10,900,000 0.42
Stone Container Group:
10,000,000 10.75% due 6/15/1997 9,615,000 9,212,500 0.36
7,000,000 11.875% due 12/01/1998 7,122,750 7,105,000 0.28
------------- ------------- ----
37,323,500 37,542,500 1.46
Restaurants & Flagstar Corp.:
Food Services 2,000,000 10.875%* due 12/01/2002 2,000,000 2,065,000 0.08
14,000,000 11.375% due 9/15/2003 14,000,000 14,420,000 0.56
Foodmaker Inc.:
20,000,000 9.75% due 6/01/2002 19,554,250 20,250,000 0.79
250,000 9.75% due 11/01/2003 246,100 246,250 0.01
------------- ------------- ----
35,800,350 36,981,250 1.44
Retail Stores 10,000,000 Bradlees, Inc., 11.00% due 8/01/2002 10,240,625 10,737,500 0.42
10,000,000 ++Specialty Retailers, 10.00%
due 8/15/2000 10,000,000 10,200,000 0.40
------------- ------------- ----
20,240,625 20,937,500 0.82
Textiles 10,000,000 West Point Stevens Inc., 8.75%
due 12/15/2001 10,000,000 10,075,000 0.39
Transport Services 9,750,000 Viking Star Shipping, 9.625% due 7/15/2003 9,786,562 10,018,125 0.39
US Government & 9,500,000 Student Loan Marketing Association, 14.25%
Agency Obligations due 3/07/1994 9,951,675 6,661,875 0.26
82,000,000 United States Treasury Notes, 5.75%
due 8/15/2003 82,149,375 81,718,166 3.18
------------- - ------------ ----
92,101,050 88,380,041 3.44
Utilities 10,000,000 Midland Funding Corp. II, 13.25%
due 7/23/2006 11,183,750 11,760,250 0.46
10,000,000 Texas--New Mexico Power Co., 9.25%
due 9/15/2000 10,000,000 10,450,000 0.41
------------- ------------- ----
21,183,750 22,210,250 0.87
<PAGE>
Utilities--Gas 9,194,053 Midland Cogeneration, 10.33%
due 7/23/2002 (b) 9,458,731 9,476,154 0.37
Total Fixed-Income Investments in the
United States 1,117,474,353 1,147,839,938 44.60
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
NORTH AMERICA Face Value Percent of
(concluded) Industries Amount Convertible Bonds Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
United States (concluded)
Aerospace US$ 3,275,000 Orbital Sciences Corp., 6.75%
due 3/01/2003** $4,459,643 $4,928,875 0.19%
Automobile Parts 2,000,000 Arvin Industries Inc., 7.50%
due 9/30/2014** 2,145,000 2,320,000 0.09
Biotechnology 2,500,000 Genzyme Corp., 6.75% due 10/01/2001 2,382,500 2,375,000 0.09
Building 1,500,000 ++Kumagai Gumi Ltd., 4.875% due 12/08/1998 1,500,000 1,507,500 0.06
1,750,000 US Home Corp., 4.875% due 11/01/2005 1,741,000 1,695,313 0.07
---------- ---------- ----
3,241,000 3,202,813 0.13
Computers 2,500,000 Data General Corp., 7.75% due 6/01/2001 2,479,375 2,406,250 0.09
Disk Drives 2,685,000 Quantum Corp., 6.375% due 4/01/2002** 2,562,740 2,725,275 0.11
Electronics 1,500,000 Comptronix Corp., 6.75% due 3/01/2002 1,015,500 1,158,750 0.05
608,000 Park Electrochemical, 7.25%
due 6/15/2006** 604,960 699,960 0.03
1,000,000 ++Zenith Electric Corp., 8.50%
due 11/19/2000 1,000,000 990,000 0.04
---------- ---------- ----
2,620,460 2,848,710 0.12
Energy 2,250,000 Box Energy Corp., 8.25% due 12/01/2002** 2,733,219 2,953,125 0.11
Entertainment 2,269,000 Savoy Pictures Entertainment, 7.00%
due 7/01/2003** 2,543,172 2,847,595 0.11
Food & Beverage 3,000,000 Farm Fresh, Inc., 7.50% due 3/01/2010 1,562,500 1,980,000 0.08
Healthcare 2,000,000 IVAX Corp., 6.50% due 11/15/2001 1,971,250 2,150,000 0.08
2,251,000 Medaphis Corp., 6.50% due 1/01/2000** 2,510,100 2,746,220 0.11
---------- ---------- ----
4,481,350 4,896,220 0.19
<PAGE>
Home Building 2,500,000 ++Engle Homes, Inc., 7.00% due 3/01/2003 2,575,000 2,850,000 0.11
Industrials 2,000,000 Coeur D'Alene Mines Corp., 7.00%
due 11/30/2002** 2,112,500 2,970,000 0.12
3,183,000 ++Manpower, Inc., 6.25% due 10/01/2002** 3,298,025 3,608,726 0.14
3,755,000 Wainoco Oil Corp., 7.75% due 6/01/2014 3,324,115 3,426,438 0.13
---------- ---------- ----
8,734,640 10,005,164 0.39
Office Equipment 5,000,000 Staples, Inc., 5.00% due 11/01/1999** 4,789,135 5,237,500 0.20
Oil & Gas Diversified 2,165,000 Western Company of North America, 7.25%
due 1/15/2015** 1,847,080 2,165,000 0.08
Paper 2,000,000 Albany International Corp., 5.25%
due 3/15/2002 1,804,770 1,900,000 0.07
Pharmaceuticals 4,000,000 Air & Water Technologies Corp., 8.00%
due 5/15/2015 3,895,630 3,840,000 0.15
2,600,000 Bindley Western Industries, Inc., 6.50%
due 10/01/2002 2,563,000 2,483,000 0.10
2,000,000 Ciba-Geigy Corp., 6.25% due 3/15/2016 2,227,500 2,080,000 0.08
---------- ---------- ----
8,686,130 8,403,000 0.33
Restaurants 1,920,000 Daka International, Inc., 7.00%
due 3/15/2003** 2,037,421 2,116,800 0.08
Retail Stores 3,475,000 Big B Inc., 6.50% due 3/15/2003** 3,921,938 4,065,750 0.16
1,550,000 Home Depot, Inc., 4.50% due 2/15/1997** 1,937,500 1,819,313 0.07
---------- ---------- ----
5,859,438 5,885,063 0.23
Semiconductors 2,318,000 LTX Corp., 13.50% due 4/15/2011 2,359,360 2,291,923 0.09
Software 2,000,000 Sterling Software, 5.75% due 2/01/2003** 1,958,375 2,400,000 0.09
Technology 2,000,000 Conner Peripherals Inc., 6.50%
due 3/01/2002** 1,795,600 1,800,000 0.07
Telecommunications 3,000,000 Intelcom Group Inc., 7.00%
due 10/30/1998 (a)** 3,000,000 3,196,155 0.12
Waste Management 1,000,000 Phillips Environmental, 6.00%
due 10/15/2000 1,000,000 1,000,000 0.04
3,000,000 USA Waste Services Inc., 8.50%
due 10/15/2002 3,496,250 3,262,500 0.13
---------- ---------- ----
4,496,250 4,262,500 0.17
Total Investments in Convertible Bonds 81,154,158 85,996,968 3.34
<PAGE>
<CAPTION>
Shares Convertible Preferred Stocks,
Held Common Stocks & Warrants
<S> <C> <C> <C> <C> <C>
United States
Airlines 60,000 ++AMR Corp., $3.00 (Series A), Conv. Pfd. 3,000,000 3,157,500 0.12
52,500 Delta Air Lines Inc.,
$3.50 (Series C), Conv. Pfd. 2,756,900 2,828,438 0.11
25,000 ++United Airlines Corp., $3.50 (Series A),
Conv. Pfd. 2,482,500 2,743,750 0.11
------------- ------------- -----
8,239,400 8,729,688 0.34
Banking & Finance 40,000 Olympic Financial Ltd., $2.00, Conv. Pfd. 1,000,000 1,180,000 0.05
48,300 Rochester Community Savings Bank
(Series B) 1,387,224 1,424,850 0.06
------------- ------------- -----
2,387,224 2,604,850 0.11
Computers 42,500 Storage Technology Corp., $3.50,
Conv. Pfd. 2,355,987 3,357,500 0.13
Environmenta l3,500,000 ++Allied Waste, Conv. Pfd. (f) 3,500,000 4,056,938 0.16
High Technology 91,053 Anacomp, Inc. (Warrants) (d)(f) 120,000 227,632 0.01
Hotels & Casinos 16,432 Buckhead of America Corp. (f) 41,080 94,484 0.00
75,000 Gold River Hotel & Casino Corp.
Liquidating Trust (f) 75,000 53,437 0.00
30,000 Gold River Hotel & Casino Corp.
(Series B)(e)(f) 219,738 112,500 0.01
6,000 Trump Taj Mahal Funding, Inc.
(Class A) (f) 3,000 132,000 0.01
------------- ------------- -----
338,818 392,421 0.02
Industrial 58,800 Petrolane, Inc. (f) 683,550 543,900 0.02
10,000 UGI Corp. (Warrants)(d)(f) 43,750 8,750 0.00
------------- ------------- -----
727,300 552,650 0.02
Insurance 40,000 ++Alexander & Alexander Services Inc.,
$3.625 (Holding Co.) 1,788,000 1,835,000 0.07
Machinery 120,000 AGCO Corp., $1.625, Conv. Pfd. 3,000,000 5,520,000 0.21
Software 120,000 ++Network Imaging Corp., $8.00 (f) 3,000,000 2,955,000 0.11
<PAGE>
Waste Management 81,779 ++Environmental Systems Co. (Series A) 1,567,383 1,635,580 0.06
Total Investments in United States
Convertible Preferred Stocks, Common
Stocks & Warrants 27,024,112 31,867,259 1.24
Total Investments in
North American Securities 1,360,337,155 1,402,333,395 54.49
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
PACIFIC Face Value Percent of
BASIN Industries Amount Fixed--Income Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Australia
Foreign Government Australia Government Bonds:
Obligations-- A$ 46,000,000 7.00% due 8/15/1998 $ 32,190,054 $ 32,230,173 1.25%
Regional & Agency 52,600,000 9.50% due 8/15/2003 41,981,677 42,639,626 1.66
25,315,779 FANMAC, Ltd., #17, 15.00% due 7/15/2002 (b) 19,285,336 19,358,412 0.75
Queensland Treasury Corp., Global Notes:
29,000,000 12.00% due 7/15/1999 24,131,236 24,689,280 0.96
8,500,000 12.00% due 8/15/2001 6,506,943 7,554,959 0.29
16,000,000 Victoria Finance, 10.25% due 9/15/1999 12,512,667 12,677,247 0.49
26,000,000 Western Australia Treasury Corp., 12.00%
due 8/01/2001 22,511,312 23,055,995 0.90
------------ ------------ ----
159,119,225 162,205,692 6.30
Total Fixed-Income Investments
in Australia 159,119,225 162,205,692 6.30
New Zealand
Foreign Government NZ$ 7,000,000 New Zealand Government Bonds, 8.00%
Obligations due 11/15/1995 3,888,339 4,092,568 0.16
Total Fixed-Income Investments
in New Zealand 3,888,339 4,092,568 0.16
Philippines
Banking US$ 6,000,000 ++Development Bank of the Philippines, 8.00%
due 7/22/1998 5,991,700 6,093,750 0.24
3,000,000 Philippine National Bank, 6.625%
due 12/09/1996 2,987,400 2,970,000 0.12
------------ ------------ ----
8,979,100 9,063,750 0.36
Utilities 5,000,000 National Power Corp., 7.625% due 11/15/2000 5,000,000 4,871,750 0.19
Total Fixed-Income Investments in the
Philippines 13,979,100 13,935,500 0.55
Total Fixed-Income in Pacific
Basin Securities 176,986,664 180,233,760 7.01
<PAGE>
WESTERN
EUROPE
Belgium
Foreign Government Bf 1,250,000,000 Government of Belgium, 7.25% due 4/29/2004 35,279,977 36,676,481 1.43
Obligations
Total Fixed-Income Investments in Belgium 35,279,977 36,676,481 1.43
Denmark
Foreign Government Denmark Government Bonds:
Obligations Dkr 330,000,000 9.75% due 2/10/1995 54,608,291 50,409,579 1.96
326,500,000 7.00% due 12/15/2004 51,460,767 51,452,157 2.00
------------ ------------ ----
106,069,058 101,861,736 3.96
Total Fixed-Income Investments in Denmark 106,069,058 101,861,736 3.96
Italy
Financial Services 30,000,000,000 The Goldman Sachs Group, L.P., 15.00%
due 8/16/1994 (1) 18,748,125 18,509,875 0.72
Foreign Government Buoni Poliennali del Tesoro
Obligations (Italian Government Bonds):
Lit 20,600,000,000 11.50% due 3/01/1998 12,772,488 13,238,951 0.51
128,400,000,000 9.00% due 10/01/1998 77,734,632 77,199,568 3.00
------------ ------------ ----
90,507,120 90,438,519 3.51
Total Fixed-Income Investments in Italy 109,255,245 108,948,394 4.23
Portugal
Supranational Esc 750,000,000 European Investment Bank, 15.50%
Entities due 7/12/1995 6,389,454 4,520,373 0.18
Total Fixed-Income Investments in Portugal 6,389,454 4,520,373 0.18
Spain
Foreign Government Government of Spain:
Obligations Pta 10,000,000,000 9.00%* due 2/28/1997 73,392,716 71,695,211 2.79
6,281,000,000 10.50% due 10/30/2003 53,271,447 50,823,191 1.97
------------ ------------ ----
126,664,163 122,518,402 4.76
Total Fixed-Income Investments in Spain 126,664,163 122,518,402 4.76
Sweden
Foreign Government Skr 298,000,000 Government of Sweden, 10.250% due 5/05/2003 42,953,543 43,430,653 1.69
Obligations-- 100,000,000 SBAB, 12.50% due 1/23/1997 14,062,736 13,799,559 0.53
Regional & Agency ------------ ------------ ----
57,016,279 57,230,212 2.22
Total Fixed-Income Investments in Sweden 57,016,279 57,230,212 2.22
<PAGE>
United Kingdom
Foreign Government United Kingdom Gilt:
Obligations Pound 62,000,000 7.75% due 9/08/2006 98,513,487 103,090,500 4.01
Sterling 14,300,000 8.00% due 9/27/2013 23,228,170 24,827,490 0.96
------------ ------------ ----
121,741,657 127,917,990 4.97
Total Fixed-Income Investments in the
United Kingdom 121,741,657 127,917,990 4.97
Total Investments in Western European
Securities 562,415,833 559,673,588 21.75
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
SHORT-TERM Face Value Percent of
SECURITIES Amount Issues Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Mexico
Government Mxn 30,465,160 Mexican Cetes, 0.00%* due 2/03/1994 $ 9,683,010 $ 9,710,851 0.38%
Obligations
Total Short-Term Investments in Mexico 9,683,010 9,710,851 0.38
United States
Commercial Paper++++ US$ 20,000,000 CSW Inc., 3.30% due 1/20/1994 19,968,833 19,968,833 0.78
73,414,000 General Electric Capital Corp., 3.22%
due 1/03/1994 73,414,000 73,414,000 2.85
10,000,000 Gesco Industries Inc., 3.32% due 1/13/1994 9,990,778 9,990,778 0.39
50,000,000 Goldman Sachs & Co., 3.30% due 1/10/1994 49,967,917 49,967,917 1.94
27,000,000 PHH Corp., 3.22% due 1/26/1994 26,944,455 26,944,455 1.05
22,900,000 Sheffield Receivables Co., 3.32%
due 1/06/1994 22,893,664 22,893,664 0.89
-------------- --------------- ------
203,179,647 203,179,647 7.89
US Government & 50,000,000 Federal National Mortgage Association,
Agency Obligations 3.12% due 1/19/1994 49,930,667 49,930,667 1.94
Total Short-Term Investments in the
United States 253,110,314 253,110,314 9.83
Total Investments in Short-Term
Securities 262,793,324 262,821,165 10.21
Total Investments $2,494,902,716 $ 2,541,018,711 98.74
==============
Short Sales (Proceeds--$27,710,903)** (31,669,856) (1.24)
Unrealized Depreciation on Forward Foreign Exchange Contracts*** (240,216) (0.01)
Put Options Purchased (Premium Paid--$230,395)+++ 11,523 0.00
<PAGE>
Call Options Written (Premium Received--$234,902)+++++ (287,938) (0.01)
Other Assets Less Liabilities 64,912,057 2.52
-------------- ------
Net Assets $2,573,744,281 100.00%
============== ======
<FN>
(a)Represents a pay-in-kind security which may pay interest/dividends
in additional face/shares.
(b)Subject to principal paydowns as a result of prepayments or refinancings
of the underlying mortgage instruments. As a result, the average life may
be substantially less than the original maturity.
(c)Each $1,000 face amount contains one non-detachable share of Taj Mahal
Holding Corp.'s Class B redeemable Common Stock.
(d)Warrants entitle the Fund to purchase a predetermined number of shares
of Common Stock. The purchase price and number of shares are subject
to adjustment under certain conditions until the expiration date.
(e)Each share of Series B stock contains a right which entitles the holder
to purchase a predetermined number of shares of Preferred Stock.
(f)Non-income producing security.
(1)Indexed instrument for which yield-to-maturity, if any, will be deter-
mined by the relative value of the foreign reference rates.
++Restricted securities as to resale. The value of the Fund's investment in
restricted securities is approximately $55,004,000, representing 2.14% of
net assets.
Acquisition Value
Issue Date Cost (Note 1a)
Alexander & Alexander
Services Inc., $3.625
(Holding Co.) 12/21/1993 $1,788,000 $1,835,000
Allied Waste ($1,000 Pfd.) 9/23/1993 3,500,000 4,056,938
AMR Corp., $3.00 (Series A) 3/03/1993 3,000,000 3,157,500
Cemex S.A., 8.875% due 6/10/1998 5/27/1993 4,230,025 4,571,406
Development Bank of the
Philippines, 8.00% due 7/22/1998 6/30/1993 5,991,700 6,093,750
Engle Homes, Inc., 7.00%
due 3/01/2003 3/11/1993-5/21/1993 2,575,000 2,850,000
Environmental Systems Co.,
$1.75 (Series A) 5/03/1993 1,567,383 1,635,580
Grupo Financiero
Bancomer, S.A. de C.V.,
8.00% due 7/07/1998 6/11/1993 6,477,250 6,796,563
Kumagai Gumi Ltd.,
4.875% due 12/08/1998 5/03/1993 1,500,000 1,507,500
Manpower, Inc., 6.25% due
10/01/2002 5/18/1993-5/21/1993 3,298,025 3,608,726
Network Imaging Corp., $8.00 12/07/1993 3,000,000 2,955,000
Specialty Retailers, 10.00%
due 8/15/2000 7/22/1993 10,000,000 10,200,000
Transportadora de Gas
de Sur, 7.75% due 12/23/1998 12/30/1993 2,010,000 2,002,500
United Airlines Corp.,
$3.50 (Series A) 3/03/1993 2,482,500 2,743,750
Zenith Electric Corp., 8.50%
due 11/19/2000 11/24/1993 1,000,000 990,000
Total $52,419,883 $55,004,213
=========== ===========
<PAGE>
++++Commercial Paper is traded on a discount basis; the interest rates shown
are the discount rates paid at the time of purchase by the Fund.
*Represents the yield to maturity.
**Covered Short Sales entered into as of December 31, 1993 are as follows:
Shares Issue Value
(Note 1i)
150,100 Agco Corp. $(5,140,925)
24,500 Arvin Industries, Inc. (784,000)
213,500 Big B Inc. (2,668,750)
155,400 Box Energy Corp. (1,864,800)
45,500 Coeur D'Alene Mines Corp. (978,250)
30,800 Conner Peripherals Inc. (450,450)
110,300 Daka International, Inc. (1,282,238)
31,000 Home Depot, Inc. (1,224,500)
70,000 Intelcom Group (1,225,000)
107,050 Manpower, Inc. (1,886,756)
60,300 Medaphis Corp. (1,989,900)
197,900 Orbital Sciences (4,056,950)
13,200 Park Electrochemical (308,550)
81,200 Quantum Corp. (1,167,250)
95,700 Savoy Pictures Entertainment (2,009,700)
96,600 Staples, Inc. (2,439,150)
53,000 Sterling Software (1,503,875)
53,500 Western Co. of North America (688,812)
Total (proceeds-$27,710,903) $(31,669,856)
============
***Forward foreign exchange contracts as of December 31, 1993 are as follows:
Unrealized
Expiration Appreciation
Date (Depreciation)
Foreign Currency Purchased
C$ 212,182,607 January 1994 $ 351,360
DM 450,040,529 January 1994 (4,305,234)
Pta 1,586,436,575 January 1994 (25,539)
Fmk 112,039,136 January 1994 (81,757)
Lit 102,313,301,600 January 1994 (158,983)
NZ$ 18,300,806 January 1994 102,302
Total (US$ Commitment--$523,260,668) $(4,117,851)
-----------
<PAGE>
Foreign Currency Sold
A$ 120,952,574 January 1994 $ (781,591)
Bf 1,232,032,100 January 1994 324,054
C$ 205,495,999 January 1994 (1,174,264)
DM 372,567,387 January 1994 3,839,601
Dkr 42,728,889 January 1994 124,222
Pta 5,168,287,259 January 1994 1,145,465
Fmk 149,318,042 January 1994 133,162
Frf 224,705,389 January 1994 401,424
Pound sterling 21,502,527 January 1994 238,313
Lit 138,926,992,816 January 1994 (146,953)
NZ$ 7,238,224 January 1994 (85,773)
Skr 478,634,768 January 1994 (140,025)
Total (US$ Commitment--$769,500,968) $3,877,635
----------
Total Unrealized Depreciation on Forward
Foreign Exchange Contracts--Net $ (240,216)
==========
+++Put options purchased as of December 31, 1993 are as follows:
Value
Par Value Premiums (Notes 1a
Subject to Put Issue Paid & 1d)
$50,100,000 DM currency put option, strike price
2.505, expiring 1/20/94 $230,395 $11,523
Total Put Options Purchased $230,395 $11,523
======== =======
+++++Call options written as of December 31, 1993 are as follows:
Value
Par Value Premiums (Notes 1a
Subject to Call Issue Received & 1d)
$51,080,000 Pound sterling currency call option,
strike price 2.554, knock out
Pound sterling, expiring 1/20/94 $234,902 $(287,938)
Total Call Options Written $234,902 $(287,938)
======== =========
</TABLE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<PAGE>
<CAPTION>
As of December 31, 1993
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$2,494,902,716) (Note 1a) $2,541,018,711
Put options purchased, at value (cost--$230,395) (Notes 1a & 1d) 11,523
Foreign cash (Note 1c) 1,252,845
Cash 143,162
Receivables:
Interest $ 55,242,497
Short sales (Note 1i) 27,282,035
Securities sold 24,487,291
Capital shares sold 6,232,955
Dividends 62,770 113,307,548
------------
Prepaid registration fees and other assets (Note 1g) 122,460
--------------
Total assets 2,655,856,249
Liabilities: Common stocks sold short, at market value (proceeds--$27,710,903) (Note 1i) 31,669,856
Unrealized depreciation on forward foreign exchange contracts (Note 1c) 240,216
Call options written, at value (premiums received--$234,902) (Notes 1a & 1d) 287,938
Payables:
Securities purchased 25,348,764
Dividends to shareholders (Note 1h) 14,673,312
Capital shares redeemed 5,779,027
Distributor (Note 2) 1,423,767
Investment adviser (Note 2) 1,394,539
Forward exchange contract (Note 1c) 90,393
Short sales dividends (Note 1i) 13,411 48,723,213
------------
Accrued expenses and other liabilities 1,190,745
--------------
Total liabilities 82,111,968
--------------
Net Assets: Net assets $2,573,744,281
==============
Net Assets Class A Common Stock, $.10 par value, 1,000,000,000 shares authorized $ 5,037,752
Consist of: Class B Common Stock, $.10 par value, 1,000,000,000 shares authorized 22,704,224
Paid-in capital in excess of par 2,523,124,461
Accumulated realized capital losses on investments and foreign currency
transactions--net (18,458,151)
Unrealized appreciation on investments and foreign currency transactions--net 41,335,995
--------------
Net assets $2,573,744,281
==============
Net Asset Class A-Based on net assets of $467,624,734 and 50,377,518 shares outstanding $ 9.28
==============
Value: Class B-Based on net assets of $2,106,119,547 and 227,042,238 shares outstanding $ 9.28
==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the
Year Ended
Dec. 31, 1993
<S> <S> <C> <C>
Investment Interest and discount earned (net of $1,292,433 foreign withholding tax) $ 206,949,484
Income Dividend income 991,949
(Notes 1e --------------
& 1f):
Total income 207,941,433
--------------
Expenses: Investment advisory fees (Note 2) 13,902,958
Distribution fees--Class B (Note 2) 13,901,525
Transfer agent fees--Class B (Note 2) 1,646,476
Custodian fees 1,162,086
Registration fees (Note 1g) 593,300
Transfer agent fees--Class A (Note 2) 359,490
Printing and shareholder reports 255,957
Accounting services (Note 2) 169,845
Pricing fees 112,938
Professional fees 109,269
Directors' fees and expenses 40,553
Other 24,191
--------------
Total expenses 32,278,588
--------------
Investment income--net 175,662,845
--------------
Realized & Realized gain (loss) from:
Unrealized Investments--net $ 62,063,244
Gain (Loss) Foreign currency transactions--net (46,877,299) 15,185,945
on Invest- Change in unrealized appreciation/depreciation on: ------------
ments & Investments--net 98,325,889
Foreign Foreign currency transactions--net (79,606) 98,246,283
Currency ------------ --------------
Trans- Net realized and unrealized gain on investments and foreign currency transactions 113,432,228
actions-- --------------
Net (Notes Net Increase in Net Assets Resulting from Operations $ 289,095,073
1c, 1f & 3): ==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Year For the Four
Ended Months Ended
Increase (Decrease) in Net Assets: Dec. 31, 1993 Dec. 31, 1992
<S> <S> <C> <C>
Operations: Investment income--net $ 175,662,845 $ 63,045,040
Realized gain (loss) on investments and foreign currency transactions 15,185,945 (49,365,781)
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions--net 98,246,283 (42,590,216)
-------------- --------------
Net increase (decrease) in net assets resulting from operations 289,095,073 (28,910,957)
-------------- --------------
Dividends & Investment income--net:
Distributions Class A (29,629,878) (18,879,217)
to Class B (106,918,287) (57,359,550)
Shareholders Realized gain on investments--net:
(Note 1h): Class A (1,417,282) (972,869)
Class B (6,362,072) (3,345,631)
Return of capital:
Class A (8,487,578) --
Class B (30,627,102) --
Net decrease in net assets resulting from dividends -------------- --------------
and distributions to shareholders (183,442,199) (80,557,267)
-------------- --------------
Capital Share Net increase in net assets derived from capital share transactions 430,150,076 106,372,763
Transactions -------------- --------------
(Note 4):
Net Assets: Total increase (decrease) in net assets 535,802,950 (3,095,461)
Beginning of period 2,037,941,331 2,041,036,792
-------------- --------------
End of period $2,573,744,281 $2,037,941,331
============== ==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Class A
For the
The following per share data and ratios have been For the For the Four Period
derived from information provided in the financial Year Months Sept. 29,
statements. Ended Ended 1988++ to
Dec. 31, Dec. 31, For the Year Ended August 31, Aug. 31,
Increase (Decrease) in Net Asset Value: 1993 1992 1992 1991 1990 1989
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 8.85 $ 9.34 $ 9.07 $ 9.48 $ 9.32 $ 9.35
Operating -------- -------- -------- -------- -------- --------
Performance: Investment income--net .75 .29 .99 1.12 1.23 1.03
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net .46 (.41) .40 (.16) .15 (.12)
-------- -------- -------- -------- -------- --------
Total from investment operations 1.21 (.12) 1.39 .96 1.38 .91
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.58) (.35) (1.12) (1.37) (1.17) (.94)
Realized gain on investments--net (.03) (.02) -- -- (.05) --
Return of capital--net (.17) -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total dividends and distributions (.78) (.37) (1.12) (1.37) (1.22) (.94)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 9.28 $ 8.85 $ 9.34 $ 9.07 $ 9.48 $ 9.32
======== ======== ======== ======== ======== ========
Total Based on net asset value per share 14.12% (1.26%)+++16.09% 11.50% 16.48% 9.86%+++
Investment ======== ======== ======== ======== ======== ========
Return:**
Ratios to Expenses .78% .76%* .88% .85% .86% .81%*
Average ======== ======== ======== ======== ======== ========
Net Assets: Investment income-net 8.22% 8.09%* 11.16% 12.38% 16.27% 10.87%*
======== ======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $467,625 $455,672 $526,631 $292,709 $299,700 $296,247
Data: ======== ======== ======== ======== ======== ========
Portfolio turnover 182.88% 68.42% 76.18% 63.83% 99.86% 157.67%
======== ======== ======== ======== ======== ========
<PAGE>
<CAPTION>
Class B
For the
The following per share data and ratios have been derived For the For the Period
from information provided in the financial statements. Year Four Months Nov. 18,
Ended Ended 1991++ to
Dec. 31, Dec. 31, Aug. 31,
1993 1992 1992
Increase (Decrease) in Net Asset Value:
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 8.85 $ 9.33 $ 9.26
Operating ----------- ---------- ---------
Performance: Investment income--net .70 .27 .77
Realized and unrealized gain(loss) on investments and foreign currency
transactions--net .44 (.40) --
----------- ---------- ---------
Total from investment operations 1.14 (.13) .77
Less dividends and distributions: ----------- ---------- ---------
Investment income--net (.53) (.33) (.70)
Realized gain on investments--net (.03) (.02) --
Return of capital--net (.15) -- --
----------- ---------- ---------
Total dividends and distributions (.71) (.35) (.70)
----------- ---------- ---------
Net asset value, end of period $ 9.28 $ 8.85 $ 9.33
=========== ========== =========
Total Based on net asset value per share 13.27% (1.42%)+++ 8.61%+++
Investment =========== ========== =========
Return:**
Ratios to Expenses, excluding distribution fees .80% .78%* .88%*
Average =========== ========== =========
Net Assets: Expenses 1.55% 1.53%* 1.63%*
=========== ========== =========
Investment income--net 7.42% 7.08%* 8.02%*
=========== ========== =========
Supplemental Net assets, end of period (in thousands) $2,106,120 $1,582,270 $1,514,406
Data: =========== ========== ==========
Portfolio turnover 182.88% 68.42% 76.18%
=========== ========== ==========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch World Income Fund, Inc. (the "Fund") is registered under
the Investment Company Act of 1940 as a non-diversified, open-end
management investment company. The Fund offers both Class A and Class
B Shares. Class A Shares are sold with a front-end sales charge. Class B
Shares may be subject to a contingent deferred sales charge. Both classes
of shares have identical voting, dividend, liquidation and other rights
and the same terms and conditions, except that Class B Shares bear certain
expenses related to the distribution of such shares and have exclusive
voting rights with respect to matters relating to such distribution
expenditures. The following is a summary of significant accounting
policies followed by the Fund.
(a) Valuation of Securities--Securities traded in the over-the-counter
market are valued at the last available bid price or yield equivalents
obtained from one or more dealers in the over-the-counter market prior
to the time of valuation. Portfolio securities which are traded on
stock exchanges are valued at the last sale price on the principal
market on which such securities are traded, as of the close of busi-
ness on the day the securities are being valued or, lacking any sales,
at the last available bid price. Options traded on exchanges are
valued at the last asked price for options written and last bid price
for options purchased. Options traded in the over-the-counter market
are valued at the average of the last asked price as obtained from
one or more dealers for options written and at the average of the
last bid price as obtained from two or more dealers, unless there
is only one dealer, in which case that dealer's price is used for
options purchased. Short-term securities with less than sixty days
to maturity are valued at amortized cost, which approximates market.
Securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or
under the direction of the Board of Directors of the Fund.
(b) Repurchase Agreements--The Fund invests in US Government securities
pursuant to repurchase agreements with a member bank of the Federal
Reserve System or a primary dealer in US Government securities. Under
such agreements, the bank or primary dealer agrees to repurchase the
security at a mutually agreed upon time and price. The Fund takes
possession of the underlying securities, marks to market such securities
and, if necessary, receives additional securities daily to ensure that
the contract is fully collateralized.
(c) Foreign Currency Transactions--Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized.
Assets and liabilities denominated in foreign currencies are valued at
the exchange rate at the end of the period. Foreign currency transactions
are the result of settling (realized) or valuing (unrealized) such
transactions expressed in foreign currencies into US dollars. Realized
and unrealized gains or losses from investments include the effects of
foreign exchange rates on investments.
<PAGE>
The Fund is authorized to enter into forward foreign exchange contracts
as a hedge against either specific transactions or portfolio positions.
Such contracts are not entered on the Fund's records. However, the effect
on operations is recorded from the date the Fund enters into such contracts.
Premium or discount is amortized over the life of the contracts.
(d) Options--The Fund can write covered call options and purchase
put options. When the Fund writes an option, an amount equal to the
premium received by the Fund is reflected as an asset and an equiva-
lent liability. The amount of the liability is subsequently marked
to market to reflect the current market value of the option written.
When a security is sold through an exercise of an option, the related
premium received or paid is deducted from or added to the basis of
the security sold. When an option expires (or the Fund enters into
a closing transaction), the Fund realizes a gain or loss on the option
to the extent that the premium received or paid on the written option
and purchased option is greater than or less than the premium paid or
received on the closing transaction.
Written and purchased options are non-income producing investments.
(e) Income Taxes--It is the Fund's policy to comply with the require-
ments of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its share-
holders. Therefore, no Federal income tax provision is required. Under
the applicable foreign tax law, a withholding tax may be imposed on
interest and capital gains at various rates.
(f) Security Transactions and Investment Income--Security trans-
actions are recorded on the dates the transactions are entered into
(the trade dates). Interest income (including amortization of dis-
count) is recognized on the accrual basis. Realized gains and losses
on security transactions are determined on the identified cost basis.
(g) Deferred Organization Expenses and Prepaid Registration Fees--
Deferred organization expenses are charged to expense on a straight-
line basis over a five-year period. Prepaid registration fees are
charged to expense as the related shares are issued.
(h) Dividends and Distributions--Dividends from net investment income,
excluding transaction gains/losses, are declared daily and paid monthly.
Distributions of capital gains are recorded on the ex-dividend dates.
(i) Short Sales--When the Fund engages in a short sale, an amount
equal to the proceeds received by the Fund is reflected as an asset
and equivalent liability. The amount of the liability is subsequently
marked to market to reflect the market value of the short sale. The
Fund maintains a segregated account of securities as collateral for
the short sales. The Fund is exposed to market risk based on the amount,
if any, that the market value of the stock exceeds the market value of
the securities in the segregated account.
<PAGE>
(j) Reclassifications--Certain 1992 amounts have been reclassified
to conform to the 1993 presentations.
2. Investment Advisory Agreement and Transactions
with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, Inc. ("FAMI"), a wholly-owned subsidiary of Merrill
Lynch Investment Management, Inc. ("MLIM"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. and a Distribution Agreement
and a Distribution Plan with Merrill Lynch Funds Distributor, Inc.
("MLFD" or "Distributor") a wholly-owned subsidiary of MLIM.
Effective January 1, 1994, the investment advisory business of FAMI
reorganized from a corporation to a limited partnership. The general
partner of FAMI is Princeton Services, Inc., an indirect wholly-owned
subsidiary of Merrill Lynch & Co.
FAMI is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain other
services necessary to the operations of the Fund. For such services, the
Fund pays a monthly fee of 0.60%, on an annual basis, of the average daily
value of the Fund's net assets. Certain of the states in which the shares
of the Fund are qualified for sale impose limitations on the expenses of
the Fund. The most restrictive annual expense limitation requires that the
Investment Adviser reimburse the Fund to the extent the Fund's expenses
(excluding interest, taxes, distribution fees, brokerage fees and commissions,
and extraordinary items) exceed 2.5% of the Fund's first $30 million of
average daily net assets, 2.0% of the next $70 million of average daily
net assets, and 1.5% of the average daily net assets in excess thereof.
No fee payment will be made to FAMI during any fiscal year which will
cause such expenses to exceed the most restrictive expense limitation at
the time of such payment.
The Fund has adopted a Plan of Distribution (the "Plan") pursuant to Rule
12b-1 under the Investment Company Act of 1940, pursuant to which MLFD
receives a fee from the Fund for the sale of Class B Shares at the end
of each month at the annual rate of 0.75% of the average daily net assets
attributable to Class B Shares of the Fund to compensate the Distributor
for services provided and the expenses borne by it under the Plan. As
authorized by the Plan, the Distributor has entered into an agreement
with Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S"), an affiliate
of MLIM, which provides for the compensation of MLPF&S for providing
distribution-related services to the Fund. For the year ended December
31, 1993, MLFD earned $13,901,525 under the Plan, all of which was paid
to MLPF&S pursuant to the agreement.
For the year ended December 31, 1993, MLFD earned underwriting discounts
of $118,553, and MLPF&S earned dealer concessions of $1,272,540 on the
sales of the Fund's Class A Shares. MLPF&S also received contingent
deferred sales charges of $4,162,049 relating to Class B Share transactions
in during the year.
<PAGE>
Accounting services are provided to the Fund by FAMI at cost.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of Merrill
Lynch & Co., Inc., is the Fund's transfer agent.
Certain officers and/or directors of the Fund are officers and/or directors
of MLPF&S, MLFD, FAMI, MLIM, and/or Merrill Lynch & Co., Inc.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for
the year ended December 31, 1993 were $3,865,381,201 and $3,606,566,850,
respectively.
Net realized and unrealized gains (losses) as of December 31, 1993
were as follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
Investments:
Long-term $ 62,063,300 $ 46,088,155
Short-term (56) 27,840
Short sales -- (3,958,953)
-------------- --------------
Total investments 62,063,244 42,157,042
-------------- --------------
Currency Transactions:
Options purchased (218,872)
Options written (942,583) (53,036)
Foreign currency transactions (67,830,013) (308,923)
Forward foreign exchange contracts 21,895,297 (240,216)
-------------- --------------
Total currency transactions (46,877,299) (821,047)
-------------- --------------
Total $ 15,185,945 $ 41,335,995
============== ==============
NOTES TO FINANCIAL STATEMENTS (concluded)
Transactions in call options purchased for the year ended
December 31, 1993 were as follows:
Premiums
Call Options Purchased Par Value Paid
Outstanding call options purchased
at beginning of year $ 35,000,000 $ 155,750
Options expired (35,000,000) (155,750)
-------------- --------------
Outstanding call options purchased
at end of year $ -- $ --
============== ==============
<PAGE>
Transactions in put options purchased for the year ended
December 31, 1993 were as follows:
Premiums
Put Options Purchased Par Value Paid
Outstanding put options
purchased at beginning of year -- --
Options purchased $1,329,151,000 $ 1,055,614
Options exercised (29,051,000) (398,200)
Options expired (1,250,000,000) (427,019)
-------------- --------------
Outstanding put options
purchased at end of year $ 50,100,000 $ 230,395
============== ==============
Transactions in call options written for the year ended December 31,
1993 were as follows:
Par Value
Covered by Premiums
Call Options Written Written Options Received
Outstanding call options
written at beginning of year -- --
Options written $1,329,680,000 $ 813,721
Options closed (28,600,000) --
Options exercised -- (151,800)
Options expired (1,250,000,000) (427,019)
-------------- --------------
Outstanding call options
written at end of year $ 51,080,000 $ 234,902
============== ==============
Transactions in put options written for the year ended December 31,
1993 were as follows:
<PAGE>
Par Value
Covered by Premiums
Put Options Written Written Options Received
Outstanding put options written at
beginning of year $ 70,000,000 $ 1,027,268
Options written 139,400,000 1,904,396
Options expired (77,400,000) (860,750)
Options exercised (132,000,000) (2,070,914)
-------------- --------------
Outstanding put options written at
end of year $ -- $ --
============== ==============
As of December 31, 1993, net unrealized appreciation for Federal income
tax purposes aggregated $41,423,028, of which $71,963,908 related to
appreciated securities and $30,540,880 related to depreciated securities.
The aggregate cost of investments, plus premiums paid for options
purchased, less premiums received for options written, at December 31,
1993 for Federal income tax purposes was $2,467,649,412.
4. Capital Share Transactions:
Net increase in net assets derived from capital share transactions
was $430,150,076 and $106,372,763 for the year ended December 31,
1993 and for the period ended December 31, 1992, respectively.
Transactions in shares of capital for Class A and Class B Shares were
as follows:
Class A Shares for the Year Dollar
Ended December 31, 1993 Shares Amount
Shares sold 9,678,184 $ 88,499,395
Shares issued to shareholders in
reinvestment of dividends and
distributions 1,510,091 13,811,988
-------------- --------------
Total issued 11,188,275 102,311,383
Shares redeemed (12,293,992) (112,364,468)
-------------- --------------
Net decrease (1,105,717) $ (10,053,085)
============== ==============
<PAGE>
Class A Shares for the Four Months Dollar
Ended December 31, 1992 Shares Amount
Shares sold 2,518,530 $ 22,927,597
Shares issued to shareholders in
reinvestment of dividends 941,825 8,406,560
-------------- --------------
Total issued 3,460,355 31,334,157
Shares redeemed (8,388,139) (75,774,081)
-------------- --------------
Net decrease (4,927,784) $ (44,439,924)
============== ==============
Class B Shares for the Year Dollar
Ended December 31, 1993 Shares Amount
Shares sold 72,899,782 $ 666,438,413
Shares issued to shareholders in
reinvestment of dividends and
distributions 7,596,227 69,595,664
-------------- --------------
Total issued 80,496,009 736,034,077
Shares redeemed (32,339,396) (295,830,916)
-------------- --------------
Net increase 48,156,613 $ 440,203,161
============== ==============
Class B Shares for the Four Months Dollar
Ended December 31, 1992 Shares Amount
Shares sold 28,784,511 $ 261,420,886
Shares issued to shareholders in
reinvestment of dividends 3,463,058 30,879,275
-------------- --------------
Total issued 32,247,569 292,300,161
Shares redeemed (15,687,293) (141,487,474)
-------------- --------------
Net increase 16,560,276 $ 150,812,687
============== ==============
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch World Income Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of Merrill Lynch World Income
Fund, Inc. as of December 31, 1993, the related statements of opera-
tions for the year then ended and changes in net assets for the year
then ended and the four-month period ended December 31, 1992, and the
financial highlights for the periods presented. These financial statements
and the financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.
<PAGE>
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
the 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 at December 31,
1993 by correspondence with the custodian and brokers. An audit also in-
cludes 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, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Merrill Lynch
World Income Fund, Inc. as of December 31, 1993, the results of its
operations, the changes in its net assets, and the financial highlights
for the respective stated periods in conformity with generally accepted
accounting principles.
Deloitte & Touche
Princeton, New Jersey
February 4, 1994
</AUDIT-REPORT>
APPENDIX:
GRAPHIC AND IMAGE MATERIAL ITEM 1.
Total Return Based on a $10,000 Investment--Class A Shares
A line graph depicting the growth of an investment in the Fund's
Class A Shares compared to growth of an investment in the ML G5AO
Index and the Composite Index. Beginning and ending values are:
9/29/88** 12/31/93
ML World Income Fund, Inc. ++-- $ 9,600 $17,921
Class A Shares*
MLG5AO Index ++++ $10,000 $16,384
Composite Index++++++ $10,000 $17,790
Total Return Based on a $10,000 Investment--Class B Shares
<PAGE>
A line graph depicting the growth of an investment in the Fund's
Class B Shares compared to growth of an investment in the ML G5AO
Index and the Composite Index. Beginning and ending values are:
11/18/91** 12/31/93
ML World Income Fund, Inc. ++-- $10,000 $11,927
Class B Shares*
MLG5AO Index ++++ $10,000 $11,847
Composite Index++++++ $10,000 $12,880
[FN]
*Assuming maximum sales charge, transaction costs and other operating
expenses, including advisory fees.
**Commencement of Operations.
++ML World Income Fund, Inc. invests in a global portfolio of fixed-income
securities denominated in various currencies, including multinational
currency units.
++++This unmanaged Index is comprised of intermediate-term Government bonds
maturing in one to ten years.
++++++This unmanaged Index, which is a blend of the First Boston High Yield
and the JP Morgan Global Government Bond Index, is comprised of mutual
funds whose objectives include high current income and total returns.
Past performance is not predictive of future performance.
