MERRILL
LYNCH
WORLD
INCOME
FUND, INC.
FUND LOGO
Semi-Annual Report June 30, 1994
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
<PAGE>
MERRILL LYNCH WORLD INCOME FUND, INC.
Officers and
Directors
Arthur Zeikel, President and Director
Kenneth S. Axelson, Director
Herbert I. London, Director
Robert R. Martin, 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
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian
State Street Bank & Trust Company
One Heritage Drive
North Quincy, Massachusetts 02171
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
<PAGE>
DEAR SHAREHOLDERS
During the June quarter, the sell-off
among global fixed-income markets
continued, prompted by the US
Federal Reserve Board's interest rate
hikes, heightened inflationary fears
inspired by rising commodity prices,
and turbulent political events. In the
United States, short-term interest
rates have continued to rise since
early February, following the Federal
Reserve Board's tighter monetary
policy actions which have been
designed to contain inflationary
pressures, contrary to recent reports
which continue to reveal, in general,
stable price patterns. In Europe,
while central banks have attempted
to follow the Bundesbank's lead by
mildly easing monetary policy to
revive their economies' prospects,
bond markets have continued to
decline as investors require higher
risk premiums to offset rising fears
over inflationary prospects and
political events. In Japan, a tenuous
political environment combined
with economic concerns have
caused fixed-income assets to
remain depressed.
While the US dollar was strong at the
beginning of the year, during the June
quarter the currency suffered the
harsh consequences from a crisis of
confidence surrounding the Clinton
Administration's domestic and
foreign policies, the strength of the
US economic recovery and reports
of record high levels for the Japanese
current account balance. Within
this environment, the US dollar has
fallen sharply versus the yen to record
low levels and to an 18-month low
versus the Deutschemark, despite
several rounds of concerted central
bank interventions. The absence of
any efforts by the Group of Seven
Industrialized Nations (G-7) to lend
concrete support to the US dollar
during the July summit has given
investors further opportunities to
push the currency into much broader
trading ranges.
<PAGE>
Since early February, the US Federal
Reserve Board has increased both the
Federal Funds rate and the discount
rate by 125 basis points (1.25%) and
50 basis points, respectively. Investors'
heightened concerns over additional
interest rate hikes have kept the
US Government yield curve within a
broad trading range, with the 30-year
maturity reaching 18-month highs.
An additional interest rate hike is
expected to slow the economy as
higher interest rates feed into the
interest rate sensitive sectors of the
economy. As suggested by a recent
report by the Federal Reserve Board,
evidence that second quarter growth
was not as strong as the first quarter's
3.4% level has begun to surface, as
housing and automobile purchases
have shown recent weakness. While
inflation may begin to show a modest
upturn with the economic recovery, it
is not expected to reach the levels that
appear to be priced into the market.
German interest rates have risen
during the June quarter following
Bundesbank officials' concerns
regarding the initial evidence of an
export-led economic recovery. Several
reductions earlier this year in both
the discount and Lombard interest
rates have arguably prepared the
economy to reach this stage. However,
while at the initial stage of the
recovery, the chronically high rates
of money supply growth have led
Bundesbank officials recently to
suggest that additional rate easings
would not be soon forthcoming.
Another challenge to the economy's
prospects is the stronger Deutsche-
mark, which will make export quotas
that much tougher to achieve.
<PAGE>
Thus far in 1994, the direction of the
Japanese bond market and the yen
have been dictated by turbulent
domestic political events and foreign
trade relations. Initial signs that the
long economic recession may be end-
ing, increased bond supply and the
banking system's poor financial condi-
tion have caused an increase in the
government yield curve. With the
continued political uncertainty
exemplified by the existence of three
different governments so far this
year and the stalled pace of US-
Japanese trade negotiations, which
has provided little incentive for
domestic investors to invest outside
their market, both the bond market
and the yen appear to be within
broad trading ranges.
In Canada, the economic outlook is
positive, with an export-driven
recovery supported by rising industrial
and agricultural commodity prices,
declining unemployment levels and
the lowest inflation economy among
the G-7. However, domestic fiscal and
political factors and developments
within the US market continue to
have negative effects on the Canadian
dollar and the bond market. Despite
rising commodity prices, which have
improved exporters' prospects, and
regular intervention by the Bank of
Canada, the Canadian dollar has
continued to weaken versus the US
dollar during this period. Investors
remain nervous over the government's
fiscal position, the Quebec political
scene and the prospective outlook by
the fixed-income rating agencies.
<PAGE>
Global Outlook & Strategy
Over the course of the June quarter,
we made modest changes in the two
major bond market blocs in which the
Fund invests (dollar/high yield and
Europe). We made a modest reduction
to the dollar bloc exposure in favor
of Europe. Within the European bloc
we eliminated the Fund's Belgian
position while raising exposures to
Spain and Sweden. We further reduced
the Fund's average maturity given no
signs that the bond sell-off which
began in the first quarter of 1994 was
nearing an end.
The outlook for global bonds over the
remainder of the year likely depends
on the course of the US bond market.
The US Federal Reserve Board will
likely maintain its bias to raise interest
rates until evidence of building infla-
tionary pressures subsides and clearer
signs of growth moderation arrive.
The significant declines suffered by
many of the European markets have
dramatically improved their relative
value as compared to the high-yield
market. This could allow for further
changes in the overall portfolio mix
during the remainder of the year.
Meanwhile, the excellent value in
many markets should prevent sus-
tained price erosion below this
year's lows.
<PAGE>
We significantly raised the Fund's
US-dollar exposure near the end of
the June quarter, reflecting the
dollar's improved relative value fol-
lowing its decline since February.
While the US dollar's drop largely
reflects the decline in anticipated real
interest rates and the US Administra-
tion's failure to resolve outstanding
trade policy issues, the outlook from
current levels appears promising
given the likelihood its current price
relative to the German Deutschemark
and Japanese yen represents attrac-
tive value.
High-Yield Market
During the quarter ended June 30,
1994, the high-yield bond market
eroded further in sympathy with
intermediate-term and long-term US
Treasury securities. The latter markets
were reacting to further Federal
Reserve Board tightening. The Merrill
Lynch High Yield Master Index posted
a negative return of -0.35% for the
June quarter and -1.21% for the
six-month period ended June 30.
Valuation remained little changed
with the yield premium of the Merrill
Lynch High Yield Master Index only
slightly lower at 45.0% on June 30
compared with 46.6% at the beginning
of the quarter.
The superior performance of high-
yield securities compared to most
sectors of the fixed-income markets
during 1994's first half can be attri-
buted to two factors: the high coupon
return of high-yield bonds, which
offset the price erosion from higher
interest rates, and the positive effects
of credit quality improvement on
certain companies in the portfolio.
Bonds of companies in cyclical busi-
nesses were particularly strong as a
result of positive price and volume
improvements in these industries.
<PAGE>
Because of the surprising underper-
formance of certain bond markets in
Europe, we reduced exposure in the
high-yield sector toward the end of
the June quarter by approximately
5% to a 40% portfolio weighting. The
assets were redeployed in European
bond markets. However, the high-yield
sector remains a major investment
area. The positives for the high-yield
market include reasonable valuations
and generally stable-to-improving
credit quality. Industry sectors that
appear particularly attractive to us at
this time include airlines, hotel and
gaming and selected energy issues.
The Fund had 3.8% of net assets in
convertible securities as of June 30,
1994. Convertibles provide a relatively
low yield compared to other sectors
of the portfolio but a high potential
for capital gains. Convertibles have
underperformed during the first half
of 1994, partly because small-capital-
ization stocks did poorly and partly
because convertibles adjusted from
rich to attractive relative to their
underlying equity. Our position is cur-
rently very modest because of our
caution in regard to common stocks.
The main areas of industry concen-
tration include airlines, banks, home
builders and the pollution control
industry. We believe the fundamentals
of the airline industry are turning
upward after a rather long down
cycle. The same is true of the pollution
control industry. The bank and home
building industries are sectors where
we believe the valuations are low
and fundamentals good. We also
have exposure to cyclical companies
such as the paper group and silver
company as well as some energy
convertibles.
<PAGE>
In Conclusion
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
upcoming quarterly report to
shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent T. Lathbury III)
Vincent T. Lathbury III
Vice President and Portfolio Manager
Robert J. Parish
Vice President and Portfolio Manager
August 3, 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.
<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
1/1/94--6/30/94 9.28 8.52 -- 0.322 - 4.60
------ ------
Total $0.049 Total $6.070
Cumulative total return as of 6/30/94: +78.09%**
<PAGE>
<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
1/1/94--6/30/94 9.28 8.51 -- 0.290 - 5.05
------ ------
Total $0.047 Total $2.002
Cumulative total return as of 6/30/94: +15.15%**
<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>
Recent
Performance
Results*
<CAPTION>
12 Month 3 Month
6/30/94 3/31/94 6/30/93 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $8.52 $8.86 $9.16 -6.70%(1) -3.84%
Class B Shares 8.51 8.86 9.16 -6.81(1) -3.95
Class A Shares--Total Return +0.85(2) -1.88(3)
Class B Shares--Total Return -0.02(4) -2.18(5)
Class A Shares--Standardized 30-day Yield 8.19%
Class B Shares--Standardized 30-day Yield 7.76%
<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 $0.708 per share ordinary income
dividends and $0.028 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.174 per share ordinary income
dividends.
(4)Percent change includes reinvestment of $0.638 per share ordinary income
dividends and $0.028 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.157 per share ordinary income
dividends.
</TABLE>
<PAGE>
Average Annual
Total Return++
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/94 + 0.85% -3.18%
Five Years Ended 6/30/94 +10.86 +9.96
Inception (9/29/88) through 6/30/94 +10.55 +9.77
[FN]
++Performance results for per share net asset value of Class A Shares prior to
November 18, 1991 are for the period when the Fund was closed-end.
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/94 -0.02% -3.72%
Inception (11/18/91) through 6/30/94 +5.54 +4.90
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0% after
4 years.
**Assuming payment of applicable contingent deferred sales charge.
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
LATIN AMERICA
AND THE Face Value Percent of
CARIBBEAN Industries Amount Fixed-Income Investments Cost (Note 1a) Net Assets
<S> <S> <S> <C> <S> <C> <C> <C>
Argentina Banking US$ 6,750,000 Banco Rio de la Plata, S.A., 8.75%
due 12/15/2003 $ 6,882,000 $ 5,678,438 0.3%
Energy 5,000,000 Hydroelectrica Alicura, 8.375%
due 3/15/1999 4,978,900 4,587,500 0.2
4,000,000 Transportadora de Gas del Sur, 7.75%
due 12/23/1998++++ 4,072,500 3,650,000 0.2
9,500,000 YPF S.A., 8.00% due 2/15/2004 9,181,750 8,027,500 0.4
-------------- -------------- ------
18,233,150 16,265,000 0.8
<PAGE>
Foreign 10,000,000 Republic of Argentina, 8.375%
Government due 12/20/2003 9,936,800 8,225,000 0.4
Obligations
Industrial 7,000,000 Compania Naviera Perez Companc
Services S.A.C.F.I.M.F.A. S.A., 8.375%
due 7/30/1998 7,120,334 6,588,750 0.3
Telecommuni- 7,500,000 Telecom Argentina Stet-France
cations Telecom, S.A., 8.375% due
10/18/2000 7,471,125 6,740,625 0.3
7,000,000 Telefonica de Argentina, S.A.,
8.375% due 10/01/2000 7,025,800 6,335,000 0.3
-------------- -------------- ------
14,496,925 13,075,625 0.6
Total Fixed-Income Investments
in Argentina 56,669,209 49,832,813 2.4
Colombia Foreign 7,800,000 Republic of Colombia, 7.25% due
Government 2/23/2004 7,746,238 6,912,750 0.3
Obligations
--Agency
Total Fixed-Income Investments
in Colombia 7,746,238 6,912,750 0.3
Mexico Banking 3,000,000 Grupo Financiero Bancomer, S.A.
de C.V., 8.00% due 7/07/1998++++ 3,063,750 2,880,000 0.1
Food & Beverage 4,000,000 Fomento Economico Mexico, S.A. de
C.V. (Femsa), 9.50% due 7/22/1997 4,141,875 4,040,000 0.2
3,500,000 Grupo Embotellador de Mexico, S.A. de
C.V. (GEMEX), 10.75% due 11/19/1997 3,752,500 3,640,665 0.2
-------------- -------------- ------
7,894,375 7,680,665 0.4
Foreign 6,000,000 Banco Nacional de Commerce Exterior,
Government 8.00% due 8/05/2003 5,947,500 5,070,000 0.2
& Agency 4,000,000 Nafinsa, 10.625% due 11/22/2001 4,420,000 4,010,000 0.2
Obligations Pound 10,000,000 United Mexican States, Government
Sterling Bond, 12.25% due 12/03/1998 17,422,208 16,217,555 0.7
-------------- -------------- ------
27,789,708 25,297,555 1.1
<PAGE>
Industrial Cemex, S.A.:
Services US$ 7,000,000 8.875% due 6/10/1998 6,977,500 6,877,500 0.3
3,500,000 10.00% due 11/05/1999 3,572,875 3,526,250 0.2
4,000,000 Empresas ICA Sociedad Controladora,
S.A. de C.V., 9.75% due 2/11/1998 4,057,500 4,020,000 0.2
-------------- -------------- ------
10,607,875 14,423,750 0.7
Retail Stores 2,210,000 Controladora Comercial Mexicana, S.A.,
8.75% due 4/21/1998 2,236,615 2,138,175 0.1
Total Fixed-Income Investments in
Mexico 55,592,323 52,420,145 2.4
Trinidad Foreign Republic of Trinidad and Tobago:
& Tobago Government 2,000,000 11.50% due 11/20/1997 2,100,000 2,040,000 0.1
Obligations 4,000,000 9.75% due 11/03/2000 3,991,600 3,800,000 0.2
-------------- -------------- ------
6,091,600 5,840,000 0.3
Total Fixed-Income Investments in
Trinidad & Tobago 6,091,600 5,840,000 0.3
Uruguay Foreign 5,000,000 Republica Orient de Uruguay, 7.25%
Government due 3/07/2001 4,983,750 4,737,500 0.2
Obligations
Total Fixed-Income Investments in
Uruguay 4,983,750 4,737,500 0.2
Total Fixed-Income Investments in
Latin American and Caribbean
Securities 131,083,120 119,743,208 5.6
NORTH
AMERICA
<PAGE>
Canada Food & Beverage US$ 10,000,000 Canandaigua Wine, 8.75%
due 12/15/2003 10,000,000 8,800,000 0.4
Foreign Canadian Government Bonds:
Government C$ 55,000,000 6.50% due 9/01/1998 42,281,930 36,494,211 1.7
Obligations 19,000,000 7.75% due 9/01/1999 13,781,086 13,074,530 0.6
98,500,000 6.50% due 6/01/2004 71,099,256 58,836,288 2.7
-------------- -------------- ------
127,162,272 108,405,029 5.0
Total Fixed-Income Investments
in Canada 137,162,272 117,205,029 5.4
United Air Transport US$ 7,100,000 United Air Pass-Through, 10.125%
States due 3/22/2015 7,684,046 6,420,885 0.3
15,000,000 USAir Inc., 10.375% due 3/01/2013 15,000,000 13,200,000 0.6
-------------- -------------- ------
22,684,046 19,620,885 0.9
Broadcasting & 12,000,000 Cablevision Systems Corp., 14.00%
Publishing due 11/15/2003 12,971,250 12,210,000 0.6
10,190,000 Century Communications Corp., 11.875%
due 10/15/2003 10,701,550 10,826,875 0.5
10,000,000 Continental Cablevision, 9.50%
due 8/01/2013 10,000,000 9,125,000 0.4
13,000,000 Heritage Media Corp., 11.00%
due 6/15/2002 13,295,625 13,390,000 0.6
15,000,000 K-III Communications Corp., 10.625%
due 5/01/2002 15,125,000 15,150,000 0.7
10,000,000 Videotron Group, Ltd. Co., 10.25%
due 10/15/2002 10,043,750 10,100,000 0.5
-------------- -------------- ------
72,137,175 70,801,875 3.3
Building 15,300,000 Pacific Lumber Co., 10.50% due
Materials 3/01/2003 15,462,750 14,879,250 0.7
USG Corp.:
10,000,000 10.25% due 12/15/2002 9,968,750 10,000,000 0.5
11,035,000 8.75% due 3/01/2017 9,717,469 9,324,575 0.4
-------------- -------------- ------
35,148,969 34,203,825 1.6
<PAGE>
Business 18,500,000 ADT Operations, 9.25% due 8/01/2003 18,573,188 17,251,250 0.8
Services 8,000,000 Bell & Howell Co., Series B, 10.75%
due 10/01/2002 8,000,000 8,240,000 0.4
-------------- -------------- ------
26,573,188 25,491,250 1.2
</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> <S> <C> <C> <C>
United Chemicals US$ 12,000,000 Uniroyal Chemical Co., 9.00%
States due 9/01/2000 $ 12,000,000 $ 11,400,000 0.5%
(continued)
Conglomerates 20,000,000 Coltec Industries Inc., 10.25%
due 4/01/2002 20,387,500 20,200,000 0.9
9,500,000 Gillette Holdings, 12.25% due
6/30/2002 9,737,500 10,070,000 0.5
5,000,000 Jordan Industries Inc., 10.375%
due 8/01/2003 4,850,000 4,862,500 0.2
9,000,000 Sequa Corp., 9.375% due 12/15/2003 9,000,000 8,820,000 0.4
10,100,000 Sherritt Gordon, Ltd., 9.75%
due 4/01/2003 10,148,750 9,973,750 0.5
10,000,000 Southern Pacific Rail Co., 9.375%
due 8/15/2005 10,000,000 10,000,000 0.5
-------------- -------------- ------
64,123,750 63,926,250 3.0
Consumer Goods Liggett Group, Inc.:
8,000,000 11.50% due 2/01/1999 7,724,541 5,600,000 0.3
4,199,000 16.50% due 2/01/1999 4,199,000 3,149,250 0.1
30,350,000 Revlon Worldwide, 25.55%* due
3/15/1998 19,698,097 12,443,500 0.6
-------------- -------------- ------
31,621,638 21,192,750 1.0
Containers Owens Illinois:
2,500,000 10.00% due 8/01/2002 2,503,125 2,493,750 0.1
20,000,000 11.00% due 12/01/2003 21,906,563 21,200,000 1.0
6,100,000 Silgan Holdings Corp., 11.75%
due 6/15/2002 6,194,875 6,344,000 0.3
-------------- -------------- ------
30,604,563 30,037,750 1.4
<PAGE>
Energy Clark Oil Co.:
8,360,000 10.50% due 12/01/2001 8,827,300 8,610,800 0.4
4,000,000 9.50% due 9/15/2004 4,000,000 4,040,000 0.2
7,000,000 Clark R & M Holdings, Inc., 10.92%*
due 2/15/2000 3,912,118 3,850,000 0.2
Gulf Canada Resources, Ltd.:
10,000,000 9.00% due 8/15/1999 9,158,438 9,800,000 0.4
6,500,000 9.25% due 1/15/2004 6,458,855 5,980,000 0.3
Maxus Energy Corp.:
6,500,000 9.875% due 10/15/2002 6,485,050 6,175,000 0.3
1,000,000 11.50% due 11/15/2015 1,051,250 1,030,000 0.0
6,050,000 Oryx Energy Co., 10.375% due 9/15/2018 6,098,058 6,187,275 0.3
15,000,000 Rowan Companies, Inc., 11.875%
due 12/01/2001 15,590,000 15,900,000 0.7
15,000,000 Seagull Energy Corp., 8.625%
due 8/01/2005 15,000,000 13,800,000 0.6
10,000,000 Trans Texas Gas Corp., 10.50%
due 9/01/2000 10,000,000 10,000,000 0.5
-------------- -------------- ------
86,581,069 85,373,075 3.9
Entertainment 28,465,000 Marvel Holdings, Inc., 13.24%*
due 4/15/1998 18,551,193 17,505,975 0.8
5,000,000 Spectravision Inc., 16.01%* due
10/01/2001 3,920,996 3,000,000 0.1
4,500,000 Time Warner Inc., 6.58%* due
12/17/2012 1,364,648 1,361,250 0.1
-------------- -------------- ------
23,836,837 21,867,225 1.0
Financial Services 17,375,000 Lomas Mortgage USA, 10.25% due
10/01/2002 17,387,500 17,027,500 0.8
10,000,000 Penn Financial Corp., 9.25%
due 12/15/2003 10,000,000 9,300,000 0.4
10,000,000 Reliance Group Holdings, 9.00%
due 11/15/2000 10,000,000 9,100,000 0.4
-------------- -------------- ------
37,387,500 35,427,500 1.6
<PAGE>
Food & Beverage 10,000,000 Coca-Cola Bottling Co., 9.00%
due 11/15/2003 10,005,000 9,100,000 0.4
20,000,000 Del Monte Corp., 10.00% due 5/01/2003 20,025,313 18,200,000 0.8
25,000,000 Grand Union Co., 11.25% due 7/15/2000 25,524,063 24,500,000 1.1
20,000,000 Heileman Acquisition, 9.625%
due 1/31/2004 20,000,000 18,250,000 0.8
18,000,000 Penn Traffic Co., 9.625% due 4/15/2005 18,308,350 16,920,000 0.8
20,000,000 Pueblo Xtra International Inc.,
9.50% due 8/01/2003 20,111,875 18,000,000 0.8
10,000,000 Specialty Foods Corp., 10.25%
due 8/15/2001 10,000,000 9,050,000 0.4
-------------- -------------- ------
123,974,601 114,020,000 5.1
Health Services American Medical International Inc.:
2,502,500 6.50% due 5/30/1997 2,029,634 2,364,863 0.1
11,000,000 11.25% due 6/01/2015 11,535,625 11,605,000 0.5
15,000,000 Continental Medical Systems, Inc.,
10.875% due 8/15/2002 15,029,063 14,400,000 0.7
Healthtrust--The Hospital Co.:
14,000,000 10.75% due 5/01/2002 14,516,500 14,210,000 0.6
7,000,000 8.75% due 3/15/2005 6,938,750 6,300,000 0.3
2,500,000 MEDIQ, Inc., 11.125% due 7/01/1999 2,500,000 2,500,000 0.1
-------------- -------------- ------
52,549,572 51,379,863 2.3
High Technology 15,000,000 Computervision Corp., 10.875%
due 8/15/1997 15,025,000 14,175,000 0.6
Home Building Del Webb Corp.:
9,250,000 10.875% due 3/31/2000 9,376,875 9,065,000 0.4
3,500,000 9.75% due 3/01/2003 3,472,455 3,255,000 0.2
Kaufman & Broad Home, Inc.:
3,000,000 10.375% due 9/01/1999 3,030,000 3,045,000 0.1
5,250,000 9.375% due 5/01/2003 5,217,188 4,908,750 0.2
Ryland Group, Inc.:
3,750,000 10.50% due 7/15/2002 3,733,850 3,731,250 0.2
12,250,000 9.625% due 6/01/2004 11,991,250 11,453,750 0.5
-------------- -------------- ------
36,821,618 35,458,750 1.6
<PAGE>
Hotels & Casinos 1,906,000 Gold River Hotel & Casino Corp.,
11.375% due 8/31/1999 2,645,548 1,867,880 0.1
10,000,000 Greate Bay Properties, Inc., 10.875%
due 1/15/2004 9,996,250 8,000,000 0.4
4,260,000 MGM Grand Hotel Financial Corp.,
12.00% due 5/01/2002 4,526,100 4,600,800 0.2
14,000,000 Showboat, Inc., 9.25% due 5/01/2008 13,866,250 12,530,000 0.6
2,931,933 Trump Taj Mahal Funding, Inc., 11.35%
due 11/15/1999 (a) (c) 2,351,343 2,332,355 0.1
-------------- -------------- ------
33,385,491 29,331,035 1.4
Leisure Time 5,925,000 AMC Entertainment, Inc., 12.625%
due 8/01/2002 6,017,020 6,517,500 0.3
Paper 10,000,000 Container Corp. of America, 9.75%
due 4/01/2003 10,200,000 9,500,000 0.4
15,000,000 Fort Howard Corp., 9.00% due
2/01/2006 15,007,500 12,750,000 0.6
10,000,000 Riverwood International Corp., 11.25%
due 6/15/2002 10,385,750 10,350,000 0.5
Stone Container Group:
7,375,000 11.875% due 12/01/1998 7,327,125 7,577,813 0.3
12,000,000 9.875% due 2/01/2001 11,614,610 11,130,000 0.5
-------------- -------------- ------
54,534,985 51,307,813 2.3
</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> <S> <C> <C> <C>
United Restaurants & US$ 10,000,000 Family Restaurant Inc., 9.75%
States Food Services due 2/01/2002 $ 10,000,000 $ 9,100,000 0.4%
(concluded) Flagstar Corp.:
3,000,000 10.75% due 9/15/2001 3,172,500 2,895,000 0.1
2,000,000 10.875% due 12/01/2002 2,000,000 1,920,000 0.1
14,000,000 11.375% due 9/15/2003 14,000,000 12,740,000 0.6
20,000,000 Foodmaker, Inc., 9.75% due 6/01/2002 19,554,250 17,900,000 0.8
-------------- -------------- ------
48,726,750 44,555,000 2.0
<PAGE>
Retail Stores 2,000,000 Big B Inc., 6.50% due 3/15/2003** 2,366,800 2,150,000 0.1
13,000,000 Specialty Retailers, Inc., 10.00%
due 8/15/2000 13,112,500 12,740,000 0.6
-------------- -------------- ------
15,479,300 14,890,000 0.7
Textiles 15,000,000 WestPoint Stevens Inc., 8.75%
due 12/15/2001 15,093,750 13,725,000 0.6
Transport Services 9,750,000 Viking Star Shipping Co., 9.625%
due 7/15/2003 9,786,563 9,457,500 0.4
US Government 27,000,000 United States Treasury Note, 6.25%
Obligations due 8/15/2023 26,478,984 22,705,313 1.0
Utilities--Electric 4,000,000 CTC Mansfield Funding Corp., 11.125%
due 9/30/2016 4,301,250 3,871,440 0.2
Midland Cogeneration:
9,129,565 10.33% due 7/23/2002 (b) 9,392,385 9,026,035 0.4
10,000,000 13.25% due 7/23/2006 11,183,750 10,596,500 0.5
9,100,000 Tucson Electric Power Co., 10.732%
due 1/01/2013 8,713,250 8,508,500 0.4
-------------- -------------- ------
33,590,635 32,002,475 1.5
Total Fixed-Income Investments in
the United States 914,163,004 858,867,634 39.2
<CAPTION>>
Convertible Bonds
<S> <S> <C> <S> <C> <C> <C>
United Aerospace 1,775,000 Orbital Sciences Corp., 6.75%
States due 3/01/2003** 2,567,330 2,094,500 0.1
Airlines Delta Air Lines, Inc.:
16,585,948 9.375% due 9/11/2007 16,869,236 15,748,026 0.7
10,000,000 10.50% due 4/30/2016 10,287,500 9,749,600 0.4
-------------- -------------- ------
27,156,736 25,497,626 1.1
Biotechnology 4,000,000 Genzyme Corp., 6.75% due 10/01/2001 3,798,750 3,570,000 0.2
Broadcasting & 200,000 Jones Intercable Inc., 7.50%
Publishing due 6/01/2007** 202,000 196,000 0.0
Building & 650,000 Kumagai Gumi Ltd., 4.875% due
Construction 12/08/1998 623,675 581,750 0.0
1,500,000 Toll Brothers Inc., 4.75% due
1/15/2004 1,500,000 1,192,500 0.1
1,750,000 US Home Corp., 4.875% due 11/01/2005 1,741,000 1,172,500 0.1
-------------- -------------- ------
3,864,675 2,946,750 0.2
Chemicals 33,860,000 GI Holdings, Inc., 12.07%*
due 10/01/1998 21,149,076 20,569,950 0.9
Computers 2,500,000 Data General Corp., 7.75% due
6/01/2001 2,479,375 1,975,000 0.1
<PAGE>
Electronics 2,000,000 Wilcox & Gibbs Inc., 7.00%
due 8/01/2014** 2,040,000 1,620,000 0.1
Zenith Electric Corp.:**++++
1,000,000 8.50% due 11/19/2000 1,217,700 1,080,000 0.1
1,500,000 8.50% due 1/18/2001 1,500,000 1,584,375 0.1
-------------- -------------- ------
4,757,700 4,284,375 0.3
Food & Beverage 3,000,000 Boston Chicken Inc., 4.50%
due 2/01/2004 3,000,000 2,347,500 0.1
3,000,000 Farm Fresh, Inc., 7.50% due 3/01/2010 1,562,500 1,899,888 0.1
-------------- -------------- ------
4,562,500 4,247,388 0.2
Food--Retail 2,610,000 Giant Group, Ltd., 7.00% due
4/15/2006** 2,700,960 2,440,350 0.1
Healthcare 1,000,000 IVAX Corp., 6.50% due 11/15/2001 987,500 813,750 0.0
Home Building Engle Homes, Inc.:
2,300,000 7.00% due 3/01/2003++++ 2,369,000 2,047,000 0.1
500,000 7.00% due 3/01/2003 427,500 427,500 0.0
-------------- -------------- ------
2,796,500 2,474,500 0.1
Industrial Services 500,000 Mascotech, Inc., 4.50% due 12/15/2003 500,000 325,625 0.0
3,120,000 Mediplex Group, Inc., 6.50%
due 8/01/2003 3,648,717 3,588,000 0.2
1,015,000 Sanifill Inc., 7.50% due 6/01/2006** 1,073,068 1,015,000 0.0
500,000 United Engineers Malaysia Ltd., 2.00%
due 3/01/2004 531,250 456,875 0.0
3,605,000 Wainoco Oil Corp., 7.75% due
6/01/2014 3,201,115 3,208,450 0.1
-------------- -------------- ------
8,954,150 8,593,950 0.3
Insurance 1,500 Westbridge Capital Corp., 3.375%
due 2/15/2001 1,500,000 1,451,250 0.1
Mining Coeur D'Alene Mines Corp.:**
2,000,000 7.00% due 11/30/2002 2,112,500 2,560,000 0.1
1,500,000 6.375% due 1/31/2004 1,500,000 1,335,000 0.1
-------------- -------------- ------
3,612,500 3,895,000 0.2
Paper 2,000,000 Albany International Corp., 5.25%
due 3/15/2002 1,813,596 1,790,000 0.1
Pharmaceuticals 2,600,000 Bindley Western Industries, Inc.,
6.50% due 10/01/2002 2,563,000 2,314,000 0.1
<PAGE>
Restaurants 1,920,000 Daka International, Inc., 7.00%
due 3/15/2003** 2,037,421 2,208,000 0.1
Technology 2,000,000 Conner Peripherals Inc., 6.50%
due 3/01/2002** 1,795,600 1,630,000 0.1
Telecommunications 3,105,000 Intelcom Group Inc., 7.00%
due 10/30/1998** 3,105,394 2,322,981 0.1
Transportation 711,000 Builders Transport & Trucking Co.,
8.00% due 8/15/2005** 716,332 647,010 0.0
Waste Management 1,000,000 Phillips Environmental, Inc., 6.00%
due 10/15/2000 1,000,000 1,090,000 0.1
2,000,000 USA Waste Services Inc., 8.50%
due 10/15/2002 2,331,250 2,040,000 0.1
-------------- -------------- ------
3,331,250 3,130,000 0.2
Total Investments in United States
Convertible Bonds 106,452,345 99,092,380 4.6
<CAPTION>
Shares Convertible Preferred Stocks, Value Percent of
Held Common Stocks & Warrants Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
United Airlines 60,000 AMR Corp., $3.00 (Series A),
States Conv. Pfd.++++ $ 2,711,250 $ 2,640,000 0.1%
52,500 Delta Air Lines Inc., $3.50
(Series C), Conv. Pfd. 2,756,900 2,375,625 0.1
25,000 United Airlines Corp., $6.25 (Series
A), Conv. Pfd.++++ 2,482,500 2,131,250 0.1
-------------- -------------- ------
7,950,650 7,146,875 0.3
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
NORTH AMERICA Shares Convertible Preferred Stocks, Value Percent of
(concluded)Industries Held Common Stocks and Warrents Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
United Banking & Finance 48,300 Rochester Community Savings Bank
States (Series B) $ 1,387,224 $ 1,545,600 0.1
(concluded) 36,300 Southern National Corp., Pfd. $1.6875 1,158,678 1,125,300 0.1
55,200 Union Planters Corp. 1,949,405 1,890,600 0.1
-------------- -------------- ------
4,495,307 4,561,500 0.3
Computers 42,500 Storage Technology Corp.,
$3.50, Conv. Pfd.** 2,355,987 3,060,000 0.1
Electronics 60,000 Cooper Industries, $8.00 1,536,750 1,365,000 0.1
Environmental 3,500,000 ++Allied Waste Industries, Inc.,
Conv. Pfd. 3,500,000 3,864,700 0.2
Food & Beverage 231,500 RJR Nabisco, Inc. 1,534,269 1,533,687 0.1
High Technology 91,053 Anacomp, Inc. (Warrants) (d) 120,000 125,198 0.0
Hotels & Casinos 18,270 Buckhead of America Corp. 51,647 45,675 0.0
75,000 Gold River Hotel & Casino Corp.
Liquidating Trust 75,000 53,438 0.0
30,000 Gold River Hotel & Casino Corp.
(Series B) (e) 219,738 106,875 0.0
6,000 Trump Taj Mahal Funding, Inc.
(Class A) 3,000 138,000 0.0
-------------- -------------- ------
349,385 343,988 0.0
Industrial 58,800 Petrolane, Inc. 683,550 617,400 0.0
10,000 UGI Corp. (Warrants) (d) 43,750 11,250 0.0
-------------- -------------- ------
727,300 628,650 0.0
Oil & Gas 52,300 Gerrity Oil & Gas Corp. 830,550 849,875 0.0
Diversified 20,000 Western Gas Resources, Inc. 1,000,000 875,000 0.0
-------------- -------------- ------
1,830,550 1,724,875 0.0
Paper Products 40,000 Boise Cascade Corp. (Series E) 1,025,520 885,000 0.0
83,400 James River Corp. of Virginia
(Series P) 1,438,650 1,469,925 0.1
-------------- -------------- ------
2,464,170 2,354,925 0.1
<PAGE>
Software 116,400 Network Imaging Corporation, $8.00 2,910,000 2,531,700 0.1
Total Investments in United States
Convertible Preferred Stocks, Common
Stocks & Warrants 29,774,368 29,241,098 1.3
Total Investments in
North American Securities 1,187,551,989 1,104,406,141 50.5
<CAPTION>
PACIFIC Face
BASIN Amount Fixed-Income Investments
<S> <S> <S><C> <S> <C> <C> <C>
Australia Foreign Australia Government Bonds:
Government A$ 46,000,000 7.00% due 8/15/1998 33,910,610 31,486,125 1.4
Obligations-- 52,600,000 9.50% due 8/15/2003 45,394,682 38,111,079 1.7
Regional 25,000,000 9.00% due 9/15/2004 17,198,853 17,485,573 0.8
& Agency 9,000,000 Queensland Treasury Corp., Domestic
Notes, 8.00% due 7/14/1999 6,136,331 6,221,126 0.3
41,500,000 Queensland Treasury Corp., Global
Notes, 8.00% due 5/14/2003 31,269,513 27,275,190 1.2
16,000,000 Victoria Financial Corp., 10.25%
due 9/15/1999 13,083,725 12,034,292 0.6
-------------- -------------- ------
146,993,714 132,613,385 6.0
Total Fixed-Income Investments in
Australia 146,993,714 132,613,385 6.0
Japan Foreign Yen 85,000,000 Makita Electric Works Co., Ltd., 3.60%
Government due 3/31/1999 938,422 1,015,601 0.0
Obligations 100,000,000 Matsushita Electric Industrial Co.,
2.70% due 5/31/2002 1,215,582 1,271,436 0.1
50,000,000 No. 8 Nippon Oil Co., 2.80% due
3/31/2000 594,095 640,284 0.0
50,000,000 Sagami Railway, 3.80% due 9/30/1999 593,777 616,438 0.0
25,000,000 Yamato Transport Co. Ltd., 3.90%
due 3/30/2001 304,151 331,684 0.0
-------------- -------------- ------
3,646,027 3,875,443 0.1
Total Fixed-Income Investments
in Japan 3,646,027 3,875,443 0.1
Total Fixed-Income Investments in
Pacific Basin Securities 150,639,741 136,488,828 6.1
WESTERN
EUROPE
Denmark Foreign Dkr 426,500,000 Denmark Government Bonds, 7.00%
Government due 12/15/2004 67,067,232 61,968,042 2.8
Obligations
Total Fixed-Income Investments
in Denmark 67,067,232 61,968,042 2.8
Germany Consumer US$ 10,000,000 Tarkett International, 9.50%
Products due 3/01/2002 10,000,000 9,250,000 0.4
Total Fixed-Income Investments
in Germany 10,000,000 9,250,000 0.4
Hungary Federal Agencies 5,000,000 National Bank of Hungary, 8.80%
due 10/01/2002 5,281,250 4,475,000 0.2
Total Fixed-Income Investments
in Hungary 5,281,250 4,475,000 0.2
Italy Financial
Services Lit 30,000,000,000 The Goldman Sachs Group, L.P.,
15.00% due 8/16/1994 (1) 18,748,125 18,789,738 0.9
Foreign Buoni Poliennali del Tesoro
Government (Italian Government Bonds):
Obligations 25,000,000,000 12.00% due 9/18/1998 16,883,056 16,369,848 0.7
123,400,000,000 9.00% due 10/01/1998 74,680,868 74,376,478 3.4
-------------- -------------- ------
91,563,924 90,746,326 4.1
Total Fixed-Income Investments
in Italy 110,312,049 109,536,064 5.0
Portugal Supranational Esc 750,000,000 European Investment Bank, 15.50%
Entities due 7/12/1995 6,389,454 4,710,591 0.2
Total Fixed-Income Investments
in Portugal 6,389,454 4,710,591 0.2
Spain Foreign Government of Spain:
Government Pta 10,000,000,000 9.00%* due 2/28/1997 73,392,716 74,834,286 3.4
Obligations 5,900,000,000 8.30% due 12/15/1998 42,367,579 41,423,619 1.9
2,000,000,000 8.00% due 5/30/2004 13,465,991 12,655,238 0.6
-------------- -------------- ------
129,226,286 128,913,143 5.9
Total Fixed-Income Investments
in Spain 129,226,286 128,913,143 5.9
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
WESTERN EUROPE Shares Convertible Preferred Stocks, Value Percent of
(concluded)Industries Held Common Stocks and Warrents Cost (Note 1a) Net Assets
<S> <S> <S> <C> <S> <C> <C> <C>
Sweden Foreign Government of Sweden:
Government Skr 402,000,000 11.00% due 1/21/1999 $ 58,502,186 $ 55,042,666 2.5%
Obligations-- 276,000,000 10.25% due 5/05/2003 38,049,515 36,460,089 1.7
Regional 102,000,000 SBAB, 11.00% due 1/21/1999 14,229,266 13,632,512 0.6
& Agency --------------- -------------- ------
110,780,967 105,135,267 4.8
Total Fixed-Income Investments
in Sweden 110,780,967 105,135,267 4.8
United Foreign Pound 2,000,000 Hanson Trust PLC, 9.50% due
Kingdom Government Sterling 1/31/2006 3,559,598 3,279,938 0.2
Obligations United Kingdom Gilt:
46,000,000 7.00% due 11/06/2001 71,171,278 64,699,661 3.0
62,000,000 8.50% due 7/16/2007 108,675,423 94,740,030 4.3
--------------- -------------- ------
183,406,299 162,719,629 7.5
Total Fixed-Income Investments in
the United Kingdom 183,406,299 162,719,629 7.5
Total Investments in Western European
Securities 622,463,537 586,707,736 26.8
<PAGE>
<CAPTION>
SHORT-TERM
SECURITIES Issue
<S> <S> <S> <C> <S> <C> <C> <C>
United Commercial Paper*** US$ 40,000,000 Banc One Diversified Services Corp.,
States 4.35% due 7/22/1994 39,898,500 39,898,500 1.8
62,629,000 General Electric Capital Corp.,
4.30% due 7/01/1994 62,629,000 62,629,000 2.8
50,000,000 National Australia Funding
(Delaware), Inc., 4.27% due
7/18/1994 49,899,180 49,899,180 2.2
50,000,000 Wal-Mart Stores, Inc., 4.20%
due 7/07/1994 49,965,000 49,965,000 2.2
--------------- -------------- ------
202,391,680 202,391,680 9.0
Total Short-Term Investments in the
United States 202,391,680 202,391,680 9.0
Total Investments in Short-Term
Securities 202,391,680 202,391,680 9.0
<CAPTION>
OPTIONS Premiums
PURCHASED Paid
<S> <S> <C> <S> <C> <C> <C>
Currency Call A$ 15,000,000 Australian Dollar, expiring September
Options Purchased 1994 at A$8.69 220,380 94,095 0.0
Currency Put A$ 32,000,000 Australian Dollar, expiring September
Options Purchased 1994 at A$.725 358,400 389,760 0.0
DM 18,000,000 Deutschemark, expiring July 1994
at DM1.639 37,889 4,393 0.0
--------------- -------------- ------
396,289 394,153 0.0
<PAGE>
Total Options Purchased 616,669 488,248 0.0
Total Investments 2,294,746,736 2,150,225,841 98.0
<CAPTION>
OPTIONS WRITTEN Premiums Received
<S> <S> <C> <S> <C> <C> <C>
Currency Call A$ 32,000,000 Australian Dollar, expiring
Options Written September 1994 at A$.735 (358,400) (336,336) 0.0
15,000,000 Australian Dollar, expiring
September 1994 at A$.810 (88,152) (37,470) 0.0
--------------- -------------- ------
(446,552) (373,806) 0.0
Currency Put A$ 15,000,000 Australian Dollar, expiring September
Options Written 1994 at A$.940 (132,228) (479,805) 0.0
Total Options Written (578,780) (853,611) 0.0
Total Investments Net of Currency Options Written $ 2,294,167,956 2,149,372,230 98.0
===============
Short Sales (Proceeds--$17,243,388)** (15,262,613) (0.7)
Unrealized Depreciation on Forward Foreign Exchange Contracts+++ (9,597,658) (0.4)
Other Assets Less Liabilities 69,200,583 3.1
-------------- ------
Net Assets $2,193,712,542 100.0%
============== ======
<PAGE>
<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.
(1)Indexed instrument for which the yield-to-maturity, if any, will be deter-
mined by the relative value of the foreign currency indicated.
*Represents the yield to maturity.
**Covered Short Sales entered into as of June 30, 1994 are as follows:
Value
Shares Issue (Note 1i)
107,600 Big B Inc. $ (1,250,850)
10,800 Builders Transport & Trucking Co. (147,150)
88,400 Coeur D'Alene Mines Corp. (1,646,450)
40,000 Conner Peripherals Inc. (485,000)
110,300 Daka International, Inc. (1,447,688)
10,300 Giant Group, Ltd. (110,725)
115,700 Intelcom Group Inc. (1,316,088)
7,900 Jones Intercable Inc. (97,762)
117,300 Orbital Sciences Corp. (1,906,125)
12,500 Sanifill Inc. (315,625)
85,900 Storage Technology Corp. (2,802,487)
88,598 Sun Healthcare Group, Inc. (1,650,138)
11,000 Wilcox & Gibbs Inc. (70,125)
227,200 Zenith Electric Corp. (2,016,400)
Total (proceeds--$17,243,388) $(15,262,613)
============
***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.
++Restricted securities as to resale.
Acquisition Value
Issue Date Cost (Note 1a)
Allied Waste Industries, Inc. Conv. Pfd. 9/23/1993 $3,500,000 $ 3,864,700
Total $3,500,000 3,864,700
---------- -----------
++++Other Restricted Securities 16,012,625
Total Restricted Securities--0.9% $19,877,325
===========
<PAGE>
+++Forward foreign exchange contracts as of June 30, 1994 are as follows:
Unrealized
Expiration Appreciation
Date (Depreciation)
Foreign Currency Purchased
A$ 76,176,483 July 1994 $ 461,423
Bf 529,833,333 July 1994 115,171
C$ 16,564,800 July 1994 (17,639)
DM 125,265,212 July 1994 2,229,250
Total (US$ Commitment--$159,771,094) $ 2,788,205
------------
Foreign Currency Sold
A$ 146,406,563 July 1994 $ (799,898)
Bf 1,226,704,400 July 1994 (266,653)
C$ 41,981,149 July 1994 89,362
DM 386,440,725 July 1994 (6,321,034)
Pound Sterling 37,767,134 July 1994 (942,630)
Lit 80,785,250,000 July 1994 (857,365)
Pta 10,831,530,684 July 1994 (1,608,371)
Skr 491,184,417 July 1994 (1,656,826)
Yen 385,000,000 July 1994 (22,448)
Total (US$ Commitment-$664,889,678) $(12,385,863)
------------
Total Unrealized Depreciation on Forward
Foreign Exchange Contracts-Net $ (9,597,658)
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of June 30, 1994
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$2,294,130,067) (Note 1a) $2,149,737,593
Options purchased, at value (cost--$616,669) (Notes 1a & 1d) 488,248
Cash 4,280,636
Receivables:
Securities sold $ 57,172,153
Interest 52,188,513
Short sales (Note 1i) 17,243,388
Capital shares sold 2,027,507
Dividends 669,694
Options written 358,400 129,659,655
------------
Prepaid registration fees and other assets (Note 1g) 122,460
--------------
Total assets 2,284,288,592
--------------
Liabilities: Common stocks sold short, at market value (proceeds--$17,243,388) (Note 1i) 15,262,613
Unrealized depreciation on forward foreign exchange contracts (Note 1c) 9,597,658
Options written, at value (premiums received--$578,780) (Notes 1a & 1d) 853,611
Payables:
Securities purchased 45,464,449
Capital shares redeemed 8,120,510
Dividends to shareholders (Note 1h) 4,620,292
Distributor (Note 2) 1,138,842
Investment adviser (Note 2) 1,103,267
Options purchased 358,400
Forward foreign exchange contract (Note 1c) 60,081 60,865,841
------------
Accrued expenses and other liabilities 3,996,327
--------------
Total liabilities 90,576,050
Net Assets: Net assets $2,193,712,542
==============
<PAGE>
Net Assets Class A Common Stock, $0.10 par value, 1,000,000,000 shares authorized $ 4,473,993
Consist of: Class B Common Stock, $0.10 par value, 1,000,000,000 shares authorized 21,300,423
Paid-in capital in excess of par 2,351,791,868
Accumulated realized capital losses on investments and foreign currency
transactions--net (32,043,383)
Unrealized depreciation on investments and foreign currency transactions--net (151,810,359)
--------------
Net assets $2,193,712,542
==============
Net Asset Class A--Based on net assets of $380,996,640 and 44,739,930 shares outstanding $ 8.52
Value: ==============
Class B--Based on net assets of $1,812,715,902 and 213,004,234 shares outstanding $ 8.51
==============
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Six Months Ended June 30, 1994
<S> <S> <C> <C>
Investment Interest and discount earned (net of $515,156 foreign withholding tax) $ 99,576,652
Income Dividend income 808,185
(Notes 1e & 1f): Other income 520,588
--------------
Total income 100,905,425
--------------
Expenses: Distribution fees--Class B (Note 2) 7,317,655
Investment advisory fees (Note 2) 7,113,842
Transfer agent fees--Class B (Note 2) 900,891
Custodian fees 403,326
Transfer agent fees--Class A (Note 2) 170,480
Printing and shareholder reports 133,801
Accounting services (Note 2) 123,805
Pricing fees 52,098
Professional fees 47,100
Registration fees (Note 1g) 44,024
Short sale of dividends 28,865
Directors' fees and expenses 23,646
Other 23,261
--------------
Total expenses 16,382,794
--------------
Investment income--net 84,522,631
--------------
<PAGE>
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net $ 8,486,241
(Loss) on Foreign currency transactions--net (22,071,473) (13,585,232)
Investments & ------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net (184,568,741)
(Notes 1c, 1f & Foreign currency transactions--net (8,577,613) (193,146,354)
3): ------------ --------------
Net realized and unrealized loss on investments and foreign currency
transactions (206,731,586)
--------------
Net Decrease in Net Assets Resulting from Operations $ (122,208,955)
==============
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Six For the Year
Months Ended Ended
Increase (Decrease) in Net Assets: June 30, 1994 Dec. 31, 1993
<S> <S> <C> <C>
Operations: Investment income--net $ 84,522,631 $ 175,662,845
Realized gain (loss) on investments and foreign currency transactions--net (13,585,232) 15,185,945
Change in unrealized appreciation/depreciation on investments and foreign
currency transactions--net (193,146,354) 98,246,283
-------------- --------------
Net increase (decrease) in net assets resulting from operations (122,208,955) 289,095,073
-------------- --------------
<PAGE>
Dividends & Investment income--net:
Distributions to Class A (16,272,636) (29,629,878)
Shareholders Class B (68,249,995) (106,918,287)
(Note 1h): Realized gain on investments--net:
Class A -- (1,417,282)
Class B -- (6,362,072)
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 (84,522,631) (183,442,199)
-------------- --------------
Capital Share Net increase (decrease) in net assets derived from capital share transactions (173,300,153) 430,150,076
Transactions -------------- --------------
(Note 4):
Net Assets: Total increase (decrease) in net assets (380,031,739) 535,802,950
Beginning of period 2,573,744,281 2,037,941,331
-------------- --------------
End of period $2,193,712,542 $2,573,744,281
============== ==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Class A
For the
The following per share data and For the Six Four
ratios have been derived from information Months For the Year Months
provided in the financial statements Ended Ended Ended
June 30, Dec. 31, Dec. 31, For the Year Ended August 31,
Increase (Decrease) in Net Asset Value: 1994++++ 1993 1992 1992 1991 1990
<S> <S> <C <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.28 $ 8.85 $ 9.34 $ 9.07 $ 9.48 $ 9.32
Operating --------- --------- --------- --------- --------- --------
Performance: Investment income--net .34 .75 .29 .99 1.12 1.23
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net (.78) .46 (.41) .40 (.16) .15
--------- --------- --------- --------- --------- --------
Total from investment operations (.44) 1.21 (.12) 1.39 .96 1.38
--------- --------- --------- --------- --------- --------
Less dividends and distributions:
Investment income--net (.32) (.58) (.35) (1.12) (1.37) (1.17)
Realized gain on investments--net -- (.03) (.02) -- -- (.05)
Return of capital--net -- (.17) -- -- -- --
--------- --------- --------- --------- --------- --------
Total dividends and distributions (.32) (.78) (.37) (1.12) (1.37) (1.22)
--------- --------- --------- --------- --------- --------
Net asset value, end of period $ 8.52 $ 9.28 $ 8.85 $ 9.34 $ 9.07 $ 9.48
========= ========= ========= ========= ========= ========
Total Investment Based on net asset value per share (4.60%)+++ 14.12% (1.26%)+++ 16.09% 11.50% 16.48%
Return:** ========= ========= ========= ========= ========= ========
Ratios to Average Expenses .75%* .78% .76%* .88% .85% .86%
Net Assets: ========= ========= ========= ========= ========= ========
Investment income--net 7.75%* 8.22% 8.09%* 11.16% 12.38% 16.27%
========= ========= ========= ========= ========= ========
Supplemental Net assets, end of period
Data: (in thousands) $ 380,997 $ 467,625 $ 455,672 $ 526,631 $ 292,709 $299,700
========= ========= ========= ========= ========= ========
Portfolio turnover 52.44% 182.88% 68.42% 76.18% 63.83% 99.86%
========= ========= ========= ========= ========= ========
<PAGE>
</TABLE>
<TABLE>
<CAPTION> Class B
The following per share data and ratios For the Six For the For the For the Period
have been derived from information Months Year Four Months Nov. 18,
provided in the financial statements. Ended Ended Ended 1991++ to
June 30, Dec. 31, Dec. 31, Aug. 31,
Increase (Decrease) in Net Asset Value: 1994++++ 1993 1992 1992
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.28 $ 8.85 $ 9.33 $ 9.26
Operating ---------- ---------- ---------- ----------
Performance: Investment income--net .31 .70 .27 .77
Realized and unrealized gain (loss) on investments and
foreign currency transactions--net (.79) .44 (.40) --
---------- ---------- ---------- ----------
Total from investment operations (.48) 1.14 (.13) .77
---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.29) (.53) (.33) (.70)
---------- ---------- ---------- ----------
Realized gain on investments--net -- (.03) (.02) --
Return of capital--net -- (.15) -- --
---------- ---------- ---------- ----------
Total dividends and distributions (.29) (.71) (.35) (.70)
---------- ---------- ---------- ----------
Net asset value, end of period $ 8.51 $ 9.28 $ 8.85 $ 9.33
========== ========== ========== ==========
Total Investment Based on net asset value per share (5.05%)+++ 13.27% (1.42%)+++ 8.61%+++
Return:** ========== ========== ========== ==========
Ratios to Average Expenses, excluding distribution fees .77%* .80% .78%* .88%*
Net Assets: ========== ========== ========== ==========
Expenses 1.52%* 1.55% 1.53%* 1.63%*
========== ========== ========== ==========
Investment income--net 7.00%* 7.42% 7.08%* 8.02%*
========== ========== ========== ==========
<PAGE>
Supplemental Net assets, end of period (in thousands) $1,812,801 $2,106,120 $1,582,270 $1,514,406
Data: ========== ========== ========== ==========
Portfolio turnover 52.44% 182.88% 68.42% 76.18%
========== ========== ========== ==========
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
++++Based on average number of shares outstanding during the period.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
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
account maintenance and 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 remaining maturities
of sixty days or less are valued at amortized cost, which approxi-
mates market value. Securities and assets for which market quota-
tions 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.
<PAGE>
(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) assets of liabilities expressed in foreign currencies into
US dollars. Realized and unrealized gains or losses from investments
include the effects of foreign exchange rates on investments.
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.
The Fund may also purchase or sell listed or over-the-counter
foreign currency options, foreign currency futures and related
options on foreign currency futures as a short or long hedge against
possible variations in foreign exchange rates. Such transactions
may be effected with respect to hedges on non-US dollar denominated
securities owned by the Fund, sold by the Fund but not yet
delivered, or committed or anticipated to be purchased by the Fund.
(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.
<PAGE>
(e) Income Taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to
its shareholders. Therefore, no Federal income tax provision is
required. Under the applicable foreign tax law, a withholding tax may
be imposed on interest, dividends, 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) Prepaid Registration Fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(h) Dividends and Distributions--Dividends from net investment
income 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.
2. Investment Advisory Agreement and Transactions
with Affiliates:
The Fund has entered into an Investment Advisory Agreement
with Fund Asset Management, L.P. ("FAM"), a wholly-owned sub-
sidiary of Fund Asset Management, Inc. ("FAMI"), an indirect wholly-
owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co.") and a
Distribution Agreement with Merrill Lynch Funds Distributor, Inc.
("MLFD" or "Distributor"), a wholly-owned subsidiary of Merrill
Lynch Investment Management, Inc. ("MLIM").
FAM 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 expenses limitation requires that the Investment Adviser
reimburse the Fund to the extent the Fund's expenses (excluding
interest rates, 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 Fund's 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 FAM during any fiscal
year which will cause such expenses to exceed the most restrictive
expense limitation at the time of such payment.
<PAGE>
The Fund has adopted a Plan of Distribution (the "Plan") in accord-
ance with Rule 12b-1 under the Investment Company Act of 1940
pursuant to which MLFD receives from the Fund an account main-
tenance fee and a distribution fee for the sale of Class B Shares at
the end of each month at the annual rates of 0.25% and 0.50%,
respectively, 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 author-
ized 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 six
months ended June 30, 1994, MLFD earned $7,317,655 under the
Plan, all of which was paid to MLPF&S pursuant to the agreement.
For the six months ended June 30, 1994, MLFD earned underwriting
discounts of $18,327, and MLPF&S earned dealer concessions of
$187,789 on the sales of the Fund's Class A Shares. MLPF&S also
received contingent deferred sales charges of $3,212,095 relating to
Class B Share transactions during the year.
During the period June 20, 1994 to June 30, 1994, the Fund paid
Merrill Lynch Security Pricing Service, an affiliate of MLPF&S,
$52,098 for security price quotations to compute the net asset
value of the Fund.
Accounting services are provided to the Fund by FAM at cost.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., 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 ML & Co., Inc.
Merrill Lynch World Income Fund, Inc., June 30, 1994
NOTES TO FINANCIAL STATEMENTS (concluded)
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended June 30, 1994 were $1,142,465,321 and
$1,295,391,151, respectively.
<PAGE>
Net realized and unrealized gains (losses) as of June 30, 1994
were as follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
Investments:
Long-term $ 11,840,315 $(144,392,474)
Short-term $ (25,265) --
Short sales (3,391,309) 1,980,775
Options purchased -- --
Options written 62,500 --
------------- -------------
Total investments 8,486,241 (142,411,699)
------------- -------------
Currency Transactions:
Options written (963,044) (274,831)
Options purchased (230,395) (128,421)
Foreign currency transactions (28,406,484) 602,250
Forward foreign exchange contracts 7,528,450 (9,597,658)
------------- -------------
Total currency transactions (22,071,473) (9,398,660)
------------- -------------
Total $ (13,585,232) $(151,810,359)
============= =============
Transactions in call options written for the six months ended June 30,
1994 were as follows:
Par Value
Covered by Premiums
Call Options Written Written Options Received
Outstanding call options written at
beginning of period $ 29,510,000 $ 234,902
Options written 78,588,729 737,640
Options expired (40,068,729) (291,088)
Options exercised (29,510,000) (234,902)
------------- -------------
Outstanding call options written at
end of period $ 38,520,000 $ 446,552
============= =============
<PAGE>
Transactions in put options written for the six months ended June 30,
1994 were as follows:
Par Value
Covered by Premiums
Put Options Written Written Options Received
Outstanding put options written at
beginning of period -- --
Options written $ 44,266,896 $ 220,054
Options exercised (29,266,896) (87,826)
------------- -------------
Outstanding put options written at
end of period $ 15,000,000 $ 132,228
============= =============
As of June 30, 1994, net unrealized depreciation for Federal
income tax purposes aggregated $142,411,699, of which $10,397,464
related to appreciated securities and $152,809,163 related to depreci-
ated securities. The aggregate cost of investments, plus premiums
paid for options purchased, less premiums received for options
written, at June 30, 1994 for Federal income tax purposes was
$2,294,130,067.
4. Capital Share Transactions:
Net increase (decrease) in net assets derived from capital share
transactions was $(173,300,153) and $430,150,076 for the six months
ended June 30, 1994 and for the year ended December 31, 1993,
respectively.
Transactions in shares of capital for Class A and Class B Shares were
as follows:
Class A Shares for the Six Months Dollar
Ended June 30, 1994 Shares Amount
Shares sold 1,598,618 $ 14,536,392
Shares issued to shareholders in
reinvestment of dividends
to shareholders 482,676 4,298,675
------------- -------------
Total issued 2,081,294 18,835,067
Shares redeemed (7,718,882 (69,117,362)
------------- -------------
Net decrease (5,637,588) $ (50,282,295)
============= =============
<PAGE>
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 to shareholders 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)
============= =============
Class B Shares for the Six Months Dollar
Ended June 30, 1994 Shares Amount
Shares sold 15,430,003 $ 139,690,248
Shares issued to shareholders in
reinvestment of dividends
to shareholders 3,398,635 30,232,676
------------- -------------
Total issued 18,828,638 169,922,924
Shares redeemed (32,866,642 (292,940,782)
------------- -------------
Net decrease (14,038,004) $(123,017,858)
============= =============
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 to shareholders 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
============= =============
<PAGE>
5. Commitments:
At June 30, 1994, the Fund entered into forward exchange contracts
under which it had agreed to buy and sell foreign currencies with
values of approximately $31,400,000 and $28,729,000, respectively.
