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MERRILL
LYNCH
WORLD
INCOME
FUND, INC.
FUND LOGO
Quarterly Report September 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
DEAR SHAREHOLDERS
During the September quarter, global
bond markets continued to be chal-
lenged by surging Organization for
Economic Cooperation and Develop-
ment economic activity, building
inflationary pressures and further
interest rate hikes in the United
States along with initial hikes in
Australia, the United Kingdom,
Italy and Sweden. The recent spurt
in global growth is similar to the
two global expansions of 1975 and
1983, in which growth accelerated
sharply then moderated. Moderation
is likely to show up first in Europe
where domestic demand remains weak.
Inflationary pressures are the highest
in the United States (where recovery
has been in place the longest) and
the weaker currency countries in
Europe (Sweden, Italy and Spain).
Despite this seemingly unfriendly
environment for global bonds, the
unmanaged JP Morgan Global Government
Bond Index rose 0.2%, its first
positive quarterly return (in local
currency terms) in 1994.
<PAGE>
In the United States, the Federal
Reserve Board raised the Federal
Funds and discount rates by 50 basis
points (0.50%) to 4.75% and 4.00%,
respectively, in response to rising
growth coupled with rapidly declining
capacity utilization rates, which
are fueling inflationary pressures.
Second-quarter gross domestic
product rose 4.1%, up from 3.3% in the
first quarter, with no signs of slowing.
In addition, consumer price inflation
rose to 2.9% from 2.3% in May. The
Canadian bond market recorded the
best global performance as the risks
associated with the Quebec election
faded rapidly, and continued growth
has allowed for temporary fiscal
improvement. In Australia, the Reserve
Bank of Australia raised interest rates
75 basis points in an effort to boost
its inflation fighting credentials.
Given no signs of slowing in activity,
the bond market reacted negatively.
In Europe, local returns ranged from
+1.3% (United Kingdom) to -1.4%
(Belgium) as investors tried to cope
with an "on hold" monetary policy in
Germany, while Italy and Sweden
surprised investors with interest rate
hikes. Bundesbank officials have not
closed the door on interest rate
declines but have clearly signaled
their intention to wait for additional
slowing in money supply as well as for
potential new fiscal developments
following the October 16, 1994
national elections. In Italy, authorities
were attempting to defend the Lire
which had fallen 5% from its April
high, while Sweden was responding to
rapidly building inflationary pres-
sures. While both governments may
also have been attempting to
warn the political establishment that
any movement toward fiscal laxity
would be countered by tighter mone-
tary policy, investor response was
negative. The hike in UK interest
rates was viewed positively given that
growth remains moderate, along with
stable low inflation and a restrained
fiscal stance.
<PAGE>
Global Outlook & Strategy
During the course of the September
quarter, we made modest changes in
the two major bond market blocs in
which your Fund invests (dollar/high
yield and Europe). Within the dollar
bloc, we reduced the Canadian bond
exposure while slightly increasing the
Australian position as well as estab-
lishing a new position in New Zealand
by eliminating the Fund's US Treasury
position. The high-yield portion of the
Fund remains significant. For the
nine-month period ended Septem-
ber 30, 1994, the US high-yield market
was the only bond market in the
developed world to turn in a positive
performance. We increased the alloca-
tion to the European bloc slightly
while its composition was changed.
Within Europe, we raised the Fund's
exposure to Spain, Italy and the
United Kingdom and initiated a new
position in Finland while reducing
our exposure to Denmark. We further
reduced the Fund's average maturity
during the mid-summer rally as inter-
est rates continued to rise over the
quarter in all global markets except
Canada.
The outlook for global bonds con-
tinues to depend on the course of the
US bond market. The Federal Reserve
Board will likely maintain its bias to
raise interest rates while economic
growth continues to grow above
potential and excess capacity shrinks
further. Bond prices are unlikely to
significantly improve until these
trends reverse. When 1994 began,
investors perceived the primary risk
in Europe to be whether slow growth
would substantially bloat fiscal defi-
cits. As 1995 approaches, the risk
seems to be shifting toward inflation,
as the solid growth this year has
reduced the risk of fiscal turmoil.
Since the overall stance of fiscal
policy in Europe for 1995 is expected
to be tight, the risk of an inflation
problem appears low, not including
the weak currency/high growth coun-
tries. Therefore, significant price
erosion for global bonds from current
levels is unlikely given the attractive
valuations available in today's market.
<PAGE>
The outlook for the US dollar remains
uncertain. It is extremely under-
valued relative to European curren-
cies, but continues to be hampered
by concerns that the Federal Reserve
Board is lacking in its resolve to com-
bat building inflationary pressures.
In our view, upside potential exists
once this concern is alleviated.
High-Yield Market
The high-yield market struggled in an
environment of generally weaker
prices in the Government and high-
grade bond markets and rising
short-term interest rates. While the
high-yield market fared better, the
total return of the unmanaged Merrill
Lynch High Yield Master Index was a
modest +1.36%. The table below
reflects quarterly yields, yield spreads
over US Treasury securities and
yield premiums of the Merrill Lynch
High Yield Master Index during the
past year.
Treasury Index Yield Yield
Yield* Yield Spread Premium
1/1/94 5.80% 9.82% 402 basis points 69%
3/31/94 6.77 9.95 318 47
6/30/94 7.33 10.68 335 46
9/30/94 7.63 10.88 325 43
[FN]
*10-year Treasury
<PAGE>
In each of the noted quarters, both
the Treasury and high-yield bond
prices have dropped and yields have
risen. In all but the June quarter, yield
spreads between high-yield bonds and
Treasuries have narrowed and the
yield premium has dropped. This
outperformance reflects two factors:
the much stronger technical condition
of the high-yield market and the
improving operating outlook for many
of the cyclical companies in the
portfolio. For the year ended
September 30, 1994, net sales and
net exchanges into high-yield mutual
funds totaled $1.7 billion compared to
enormous outflows from high-grade
bond funds. New-issue supply dropped
63% in the September 1994 quarter
compared to the September 1993
quarter as high-yield financings were
postponed or done with banks. We
believe that the narrowing in yield
spreads can be justified by the posi-
tive fundamentals. Defaults have been
historically low and reequitization
continues to generate net improve-
ment in overall credit quality. Certain
economically sensitive industries
such as paper and chemicals have
experienced an earnings surge which
has improved valuation. Nevertheless,
we would not expect further narrow-
ing in yield spreads. The high-yield
market therefore seems likely to be
more sensitive to movements in the
Government bond market than it has
been in recent years.
While maintaining approximately a
market weighting in terms of credit
quality sector representation, our
objective has been to sell what we
believe are overvalued companies and
industry sectors to buy the attractive
values that periodically emerge.
<PAGE>
The average maturity of the high-yield
sector was 8.25 years. Major indus-
tries represented in the portfolio
included food and beverage, 5.6% of
net assets; energy, 4.3%; conglomer-
ates, 3.2%; broadcasting and publish-
ing, 2.8%; and paper, 2.6%.
In Conclusion
We thank you for your continued sup-
port of Merrill Lynch World Income
Fund, Inc., and we look forward to
reviewing our outlook and strategy
with you again in our upcoming
annual 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)
Robert J. Parish
Vice President and Portfolio Manager
October 27, 1994
<PAGE>
<TABLE>
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.
<CAPTION>
Performance
Summary--
Class A Shares++
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--9/30/94 9.28 8.43 -- 0.514 - 3.55
------ ------
Total $0.049 Total $6.262
Cumulative total return as of 9/30/94: +80.05%**
<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.
<CAPTION>
Performance
Summary--
Class B Shares
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--9/30/94 9.28 8.42 -- 0.465 - 4.20
------ ------
Total $0.047 Total $2.177
Cumulative total return as of 9/30/94: +16.18%**
<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.
<PAGE>
<CAPTION>
Recent
Performance
Results 12 Month 3 Month
9/30/94 6/30/94 9/30/93 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $8.43 $8.52 $9.18 -7.89%(1) -1.06%
Class B Shares* 8.42 8.51 9.17 -7.90(1) -1.06
Class A Shares--Total Return* -0.34(2) +1.10(3)
Class B Shares--Total Return* -1.12(4) +0.89(5)
Class A Shares--Standardized 30-day Yield 8.78%
Class B Shares--Standardized 30-day Yield 8.37%
<FN>
*Investment results shown do not reflect sales charges; results shown would be lower
if a sales charge was included.
(1)Percent change includes reinvestment of $0.028 per share capital gains distributions.
(2)Percent change includes reinvestment of $0.711 per share ordinary income dividends and
$0.028 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.193 per share ordinary income dividends.
(4)Percent change includes reinvestment of $0.641 per share ordinary income dividends and
$0.028 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.175 per share ordinary income dividends.
<CAPTION>
Average Annual
Total Return++
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
<S> <C> <C>
Year Ended 9/30/94 - 0.34% -4.33%
Five Years Ended 9/30/94 +10.29 +9.39
Inception (9/29/88) through 9/30/94 +10.30 +9.55
<FN>
++Performance results for per share net asset value of Class A Shares prior to
November 18, 1991 are for the period when the Fund was closed-end.
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<PAGE>
<CAPTION>
% Return % Return
Without CDSC With CDSC**
Class B Shares*
<S> <C> <C>
Year Ended 9/30/94 -1.12% -4.77%
Inception (11/18/91) through 9/30/94 +5.37 +4.80
<FN>
*Maximum contingent deferred sales charge is 4% and is reduced to 0% after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
LATIN AMERICA
AND THE
CARIBBEAN Percent of
Industries Face Amount Fixed-Income Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Argentina Energy US$ 3,000,000 Hydroelectrica Alicura, 8.375% due $ 2,775,000 $ 2,715,000 0.1%
3/15/1999
Transportadora de Gas del Sur:
2,000,000 7.75% due 12/23/1998 1,837,500 1,820,000 0.1
4,000,000 7.75% due 12/23/1998 4,072,500 3,635,000 0.2
-------------- -------------- ------
8,685,000 8,170,000 0.4
Industrial Services Compania Naviera Perez Companc
S.A.C.F.I.M.F.A. S.A.:
7,000,000 8.375% due 7/30/1998 7,120,334 6,676,250 0.3
500,000 8.375% due 7/30/1998 471,250 476,875 0.0
-------------- -------------- ------
7,591,584 7,153,125 0.3
Telecommunications 500,000 Telecom Argentina, 8.375% due 10/18/2000 460,000 457,500 0.0
7,500,000 Telecom Argentina Stet--France Telecom,
S.A., 8.375% due 10/18/2000 7,471,125 6,810,000 0.3
7,000,000 Telefonica de Argentina, S.A., 8.375%
due 10/01/2000 7,025,800 6,422,500 0.3
-------------- -------------- ------
14,956,925 13,690,000 0.6
Total Fixed-Income Investments in Argentina 31,233,509 29,013,125 1.3
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
LATIN AMERICA
AND THE
CARIBBEAN Percent of
(concluded) Industries Face Amount Fixed-Income Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Colombia Banking US$ 3,000,000 Banko Ganadero S.A., 9.75% due 8/26/1999 $ 2,987,340 $ 3,026,250 0.2%
1,500,000 Empressa Colombia de Petroleos S.A.,
7.25% due 7/08/1998 1,440,000 1,440,000 0.1
-------------- -------------- ------
4,427,340 4,466,250 0.3
Total Fixed-Income Investments
in Colombia 4,427,340 4,466,250 0.3
Mexico Food & Beverage 4,000,000 Fomento Economico Mexico, S.A. de C.V.
(Femsa), 9.50% due 7/22/1997 4,141,875 4,060,000 0.2
9,500,000 Grupo Embotellador de Mexico, S.A. de
C.V. (GEMEX), 10.75% due 11/19/1997 10,107,500 9,919,045 0.5
-------------- -------------- ------
14,249,375 13,979,045 0.7
Foreign Government & 10,000,000 Banco Nacional de Commerce Exterior,
Agency Obligations 8.00% due 8/05/2003 9,481,250 8,700,000 0.4
5,000,000 Empresas ICA Sociedad Controladora, S.A.
de C.V., 9.75% due 2/11/1998 5,093,750 5,043,750 0.2
Nafinsa:
4,000,000 10.625% due 11/22/2001 4,420,000 4,140,000 0.2
1,500,000 10.625% due 11/22/2001 1,588,125 1,552,500 0.1
5,000,000 United Mexican States, 8.50% due
9/15/2002 4,768,750 4,675,000 0.2
Pound Sterling 10,000,000 United Mexican States, Government Bond,
12.25% due 12/03/1998 17,422,208 16,344,028 0.8
-------------- -------------- ------
42,774,083 40,455,278 1.9
Retail Stores 6,210,000 Controladora Comercial Mexicana, S.A. de
C.V., 8.75% due 4/21/1998 6,196,615 6,039,225 0.3
4,000,000 El Puerto de Liverpool, S.A. de C.V.,
7.25% due 10/19/1996 3,901,875 3,880,000 0.2
-------------- -------------- ------
10,098,490 9,919,225 0.5
Total Fixed-Income Investments in Mexico 67,121,948 64,353,548 3.1
<PAGE>
Trinidad & Foreign Government Republic of Trinidad and Tobago:
Tobago Obligations 2,000,000 11.50% due 11/20/1997 2,100,000 2,040,000 0.1
4,000,000 9.75% due 11/03/2000 3,991,600 3,780,000 0.2
-------------- -------------- ------
6,091,600 5,820,000 0.3
Total Fixed-Income Investments in
Trinidad & Tobago 6,091,600 5,820,000 0.3
Uruguay Foreign Government 5,000,000 Republica Orient de Uruguay, 7.25%
Obligations due 3/07/2001 4,983,750 4,762,500 0.2
Total Fixed-Income Investments in Uruguay 4,983,750 4,762,500 0.2
Convertible Bonds
Mexico Industrial Services Cemex, S.A.:
3,500,000 4.25% due 11/01/1997 3,500,000 3,548,125 0.2
2,000,000 10.00% due 11/05/1999 2,035,000 2,027,500 0.1
-------------- -------------- ------
5,535,000 5,575,625 0.3
Total Convertible Bonds in Mexico 5,535,000 5,575,625 0.3
Total Investments in Latin American
and Caribbean Securities 119,393,147 113,991,048 5.5
NORTH
AMERICA Fixed-Income Investments
Canada Foreign Government Canadian Government Bonds:
Obligations C$ 55,000,000 6.50% due 9/01/1998 42,281,930 38,789,258 1.9
22,000,000 7.75% due 9/01/1999 15,155,309 16,026,110 0.8
-------------- -------------- ------
57,437,239 54,815,368 2.7
Total Fixed-Income Investments in Canada 57,437,239 54,815,368 2.7
United States Air Transport Delta Air Lines, Inc.:
US$ 16,332,054 9.375% due 9/11/2007 16,611,005 15,342,821 0.8
10,000,000 10.50% due 4/30/2016 10,287,500 9,731,700 0.5
7,100,000 United Air Pass-Through, 10.125% due
3/22/2015 7,684,046 6,505,943 0.3
15,000,000 USAir Inc., 10.375% due 3/01/2013 15,000,000 12,975,000 0.6
-------------- -------------- ------
49,582,551 44,555,464 2.2
<PAGE>
Broadcasting & 10,190,000 Century Communications Corp., 11.875%
Publishing due 10/15/2003 10,701,550 10,699,500 0.5
10,000,000 Continental Cablevision, 9.50% due
8/01/2013 10,000,000 8,950,000 0.4
13,000,000 Heritage Media Corp., 11.00% due
6/15/2002 13,295,625 13,520,000 0.7
15,000,000 K-III Communications Corp., 10.625%
due 5/01/2002 15,125,000 15,000,000 0.7
10,000,000 Videotron Group, Ltd. Co., 10.25%
due 10/15/2002 10,043,750 10,100,000 0.5
-------------- -------------- ------
59,165,925 58,269,500 2.8
Building Materials 15,300,000 Pacific Lumber Co., 10.50% due 3/01/2003 15,462,750 14,229,000 0.7
USG Corp.:
8,000,000 10.25% due 12/15/2002 7,981,250 8,140,000 0.4
11,035,000 8.75% due 3/01/2017 9,717,469 9,490,100 0.5
-------------- -------------- ------
33,161,469 31,859,100 1.6
Business Services 18,500,000 ADT Operations, 9.25% due 8/01/2003 18,573,188 17,575,000 0.9
8,000,000 Bell & Howell Co., Series B, 10.75%
due 10/01/2002 8,000,000 8,080,000 0.4
-------------- -------------- ------
26,573,188 25,655,000 1.3
Chemicals 33,860,000 GI Holdings, Inc., 11.38%*
due 10/01/1998 21,758,653 20,654,600 1.0
12,000,000 Uniroyal Chemical Co., 9.00%
due 9/01/2000 12,000,000 11,580,000 0.6
-------------- -------------- ------
33,758,653 32,234,600 1.6
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
NORTH
AMERICA Percent of
(continued) Industries Face Amount Fixed-Income Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
United States Conglomerates US$ 20,000,000 Coltec Industries Inc., 10.25%
(continued) due 4/01/2002 $ 20,387,500 $ 20,200,000 1.0%
9,500,000 Gillette Holdings, 12.25% due 6/30/2002 9,737,500 10,046,250 0.5
5,000,000 Jordan Industries Inc., 10.375%
due 8/01/2003 4,850,000 4,562,500 0.2
10,000,000 Sequa Corp., 9.375% due 12/15/2003 9,915,000 9,250,000 0.5
10,100,000 Sherritt Gordon, Ltd., 9.75%
due 4/01/2003 10,148,750 9,898,000 0.5
10,000,000 Southern Pacific Rail Co., 9.375%
due 8/15/2005 10,000,000 9,750,000 0.5
-------------- -------------- ------
65,038,750 63,706,750 3.2
<PAGE>
Consumer Goods Liggett Group, Inc.:
8,000,000 11.50% due 2/01/1999 7,724,541 5,240,000 0.3
4,199,000 16.50% due 2/01/1999 4,199,000 3,194,240 0.2
30,350,000 Revlon Worldwide, 12.00%* due 3/15/1998 20,295,103 13,961,000 0.7
-------------- -------------- ------
32,218,644 22,392,240 1.2
Containers Owens Illinois:
2,500,000 10.00% due 8/01/2002 2,503,125 2,487,500 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 6,283,000 0.3
-------------- -------------- ------
30,604,563 29,970,500 1.4
Energy Clark Oil Co.:
8,360,000 10.50% due 12/01/2001 8,827,300 8,757,100 0.4
4,000,000 9.50% due 9/15/2004 4,000,000 3,960,000 0.2
7,000,000 Clark R & M Holdings, Inc., 10.54%*
due 2/15/2000 4,016,536 4,112,500 0.2
Gulf Canada Resources, Ltd.:
10,000,000 9.00% due 8/15/1999 9,158,438 9,800,000 0.5
6,500,000 9.25% due 1/15/2004 6,458,855 6,045,000 0.3
Maxus Energy Corp.:
6,500,000 9.875% due 10/15/2002 6,485,050 6,207,500 0.3
1,000,000 11.50% due 11/15/2015 1,051,250 1,000,000 0.1
6,050,000 Oryx Energy Co., 10.375% due 9/15/2018 6,098,058 6,046,310 0.3
15,000,000 Rowan Companies, Inc., 11.875%
due 12/01/2001 15,590,000 16,200,000 0.8
15,000,000 Seagull Energy Corp., 8.625%
due 8/01/2005 15,000,000 13,800,000 0.7
10,000,000 Trans Texas Gas Corp., 10.50%
due 9/01/2000 10,000,000 9,800,000 0.5
-------------- -------------- ------
86,685,487 85,728,410 4.3
Entertainment 28,465,000 Marvel Holdings, Inc., 11.47%*
due 4/15/1998 19,085,950 17,932,950 0.9
5,000,000 Spectravision Inc., 10.92%*
due 10/01/2001 3,953,872 3,050,000 0.2
5,000,000 Trump Plaza Funding, Inc., 10.875%
due 6/15/2001 3,957,500 3,575,000 0.2
-------------- -------------- ------
26,997,322 24,557,950 1.3
<PAGE>
Financial Services 17,375,000 Lomas Mortgage USA, 10.25%
due 10/01/2002 17,387,500 15,637,500 0.8
10,000,000 Penn Financial Corp., 9.25%
due 12/15/2003 10,000,000 9,200,000 0.5
10,000,000 Reliance Group Holdings, 9.00%
due 11/15/2000 10,000,000 9,250,000 0.5
-------------- -------------- ------
37,387,500 34,087,500 1.8
Food & Beverage 10,000,000 Canandaigua Wine, 8.75% due 12/15/2003 10,000,000 8,900,000 0.4
10,000,000 Coca-Cola Bottling Co., 9.00%
due 11/15/2003 10,005,000 9,100,000 0.5
20,000,000 Del Monte Corp., 10.00% due 5/01/2003 20,025,313 17,000,000 0.8
25,000,000 Grand Union Co., 11.25% due 7/15/2000 25,524,063 22,750,000 1.1
20,000,000 Heileman Acquisition, 9.625%
due 1/31/2004 20,000,000 16,800,000 0.8
18,000,000 Penn Traffic Co., 9.625% due 4/15/2005 18,308,350 16,380,000 0.8
20,000,000 Pueblo Xtra International Inc.,
9.50% due 8/01/2003 20,111,875 17,000,000 0.8
10,000,000 Specialty Foods Corp., 10.25%
due 8/15/2001 10,000,000 8,900,000 0.4
-------------- -------------- ------
133,974,601 116,830,000 5.6
Health Services 2,502,500 American Medical International Inc.,
6.50% due 5/30/1997 2,029,634 2,430,553 0.1
15,000,000 Continental Medical Systems, Inc.,
10.875% due 8/15/2002 15,029,063 14,250,000 0.7
Healthtrust--The Hospital Co.:
14,000,000 10.75% due 5/01/2002 14,516,500 14,665,000 0.7
7,000,000 8.75% due 3/15/2005 6,938,750 6,580,000 0.3
2,500,000 MEDIQ, Inc., 11.125% due 7/01/1999 2,500,000 2,475,000 0.1
-------------- -------------- ------
41,013,947 40,400,553 1.9
High Technology 15,000,000 Computervision Corp., 10.875%
due 8/15/1997 15,025,000 13,950,000 0.7
Home Building Del Webb Corp.:
9,250,000 10.875% due 3/31/2000 9,376,875 9,342,500 0.5
3,500,000 9.75% due 3/01/2003 3,472,455 3,185,000 0.2
Kaufman & Broad Home, Inc.:
3,000,000 10.375% due 9/01/1999 3,030,000 3,030,000 0.2
5,250,000 9.375% due 5/01/2003 5,217,188 4,764,375 0.2
Ryland Group, Inc.:
3,750,000 10.50% due 7/15/2002 3,733,850 3,600,000 0.2
12,250,000 9.625% due 6/01/2004 11,991,250 11,025,000 0.5
-------------- -------------- ------
36,821,618 34,946,875 1.8
<PAGE>
Hotels & Casinos 1,906,000 Gold River Hotel & Casino Corp.,
13.375% due 8/31/1999 2,645,548 1,753,520 0.1
10,000,000 Great Bay Properties, Inc., 10.875%
due 1/15/2004 9,996,250 7,500,000 0.4
14,000,000 Showboat, Inc., 9.25% due 5/01/2008 13,866,250 11,550,000 0.6
2,931,933 Trump Taj Mahal Funding, Inc., 11.35%
due 11/15/1999 (a) (c) 2,367,339 1,801,923 0.1
-------------- -------------- ------
28,875,387 22,605,443 1.2
Leisure Time 5,925,000 AMC Entertainment, Inc., 12.625%
due 8/01/2002 6,017,020 6,576,750 0.3
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
NORTH
AMERICA Percent of
(continued) Industries Face Amount Fixed-Income Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
United States Paper US$ 10,000,000 Container Corp. of America, 9.75%
(concluded) due 4/01/2003 $ 10,200,000 $ 9,650,000 0.5%
15,000,000 Fort Howard Corp., 9.00% due 2/01/2006 15,007,500 12,825,000 0.6
10,000,000 Riverwood International Corp., 11.25%
due 6/15/2002 10,385,750 10,450,000 0.5
Stone Container Group:
7,375,000 11.875% due 12/01/1998 7,327,125 7,596,250 0.4
12,000,000 9.875% due 2/01/2001 11,614,610 11,280,000 0.6
-------------- -------------- ------
54,534,985 51,801,250 2.6
Restaurants & 10,000,000 Family Restaurant Inc., 9.75% 10,000,000 8,800,000 0.4
Food Services due 2/01/2002
Flagstar Corp.:
2,000,000 10.875% due 12/01/2002 2,000,000 1,885,000 0.1
17,000,000 11.375% due 9/15/2003 16,640,000 14,620,000 0.7
20,000,000 Foodmaker, Inc., 9.75% due 6/01/2002 19,554,250 16,750,000 0.8
-------------- -------------- ------
48,194,250 42,055,000 2.0
<PAGE>
Retail Stores 13,000,000 Specialty Retailers, Inc., 10.00%
due 8/15/2000 13,112,500 12,415,000 0.6
Textiles 15,000,000 WestPoint Stevens Inc., 8.75%
due 12/15/2001 15,093,750 13,875,000 0.7
Transport Services 10,000,000 Viking Star Shipping Co., 9.625%
due 7/15/2003 10,028,438 9,600,000 0.5
Utilities--Electric 4,000,000 CTC Mansfield Funding Corp., 11.125%
due 9/30/2016 4,301,250 3,815,120 0.2
Midland Cogeneration:
9,372,115 10.33% due 7/23/2002 (b) 9,184,673 9,114,382 0.5
10,000,000 13.25% due 7/23/2006 11,183,750 10,114,800 0.5
9,100,000 Tucson Electric Power Co., 10.732%
due 1/01/2013 8,713,250 8,417,500 0.4
-------------- -------------- ------
33,382,923 31,461,802 1.6
Total Fixed-Income Investments in the
United States 917,248,471 849,534,687 42.2
Convertible Bonds
United States Building & 650,000 Kumagai Gumi Ltd., 4.875% due 12/08/1998 623,675 569,563 0.0
Construction 1,500,000 Toll Brothers Inc., 4.75% due 1/15/2004 1,500,000 1,170,000 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 2,912,063 0.2
Building Materials 2,000,000 Owens-Corning Fiberglass Corp., 8.00%
due 12/30/2005** 2,189,357 2,300,000 0.1
Computers 2,500,000 Data General Corp., 7.75% due 6/01/2001 2,479,375 2,125,000 0.1
1,000,000 Storage Technology Corp., 8.00%
due 5/31/2015** 1,132,500 1,000,000 0.1
-------------- -------------- ------
3,611,875 3,125,000 0.2
Electrical Equipment 2,000,000 Polyphase Corp., 12.00% due 7/01/1999 2,000,000 2,125,000 0.1
Electronics 2,000,000 Wilcox & Gibbs Inc., 7.00% due 8/01/2014 2,040,000 1,805,000 0.1
Entertainment 4,500,000 Time Warner Inc., 7.99%* due 12/17/2012 1,387,660 1,372,500 0.1
Environmental Control 900,000 Ray F. Weston, Inc., 7.00% due 4/15/2002 756,900 756,000 0.0
Food & Beverage 3,000,000 Boston Chicken Inc., 4.50% due 2/01/2004 3,000,000 2,550,000 0.1
3,000,000 Farm Fresh, Inc., 7.50% due 3/01/2010 1,562,500 1,856,412 0.1
976,000 Hudson Foods, Inc., 8.00%
due 10/01/2006** 1,029,149 1,049,200 0.1
-------------- -------------- ------
5,591,649 5,455,612 0.3
<PAGE>
Food--Retail 1,210,000 Giant Group, Ltd., 7.00% due 4/15/2006 1,244,960 1,210,000 0.1
Healthcare 1,000,000 IVAX Corp., 6.50% due 11/15/2001 987,500 911,250 0.0
Home Building 3,300,000 Engle Homes, Inc., 7.00% due 3/01/2003 2,884,280 3,135,000 0.2
Industrial Services 500,000 Mascotech, Inc., 4.50% due 12/15/2003 500,000 340,625 0.0
495,000 Mediplex Group, Inc., 6.50%
due 8/01/2003 581,130 639,788 0.0
1,015,000 Sanifill Inc., 7.50% due 6/01/2006** 1,073,068 999,775 0.1
500,000 United Engineers Malaysia Ltd., 2.00%
due 3/01/2004 531,250 503,750 0.0
2,080,000 Wainoco Oil Corp., 7.75% due 6/01/2014 1,880,353 1,934,400 0.1
-------------- -------------- ------
4,565,801 4,418,338 0.2
Insurance 3,320,000 Statesman Group, Inc., 6.25%
due 5/01/2003 3,368,957 3,386,400 0.2
Machinery 2,000,000 Albany International Corp., 5.25%
due 3/15/2002 1,818,334 1,740,000 0.1
Medical 2,125,000 Sun Healthcare Group, Inc., 6.00%
due 3/01/2004** 2,488,750 2,406,563 0.1
Mining Coeur D'Alene Mines Corp.:**
2,000,000 7.00% due 11/30/2002 2,112,500 2,700,000 0.1
1,500,000 6.375% due 1/31/2004 1,500,000 1,492,500 0.1
-------------- -------------- ------
3,612,500 4,192,500 0.2
Paper 1,500,000 Mead Corp., 6.75% due 9/15/2012 1,537,500 1,560,000 0.1
Pharmaceuticals 2,600,000 Bindley Western Industries, Inc., 6.50%
due 10/01/2002 2,563,000 2,463,500 0.1
Restaurants 1,745,000 Daka International, Inc., 7.00%
due 3/15/2003** 1,851,921 2,181,250 0.1
Retail 2,000,000 Big B Inc., 6.50% due 3/15/2003** 2,366,800 2,180,000 0.1
Technology 2,000,000 Conner Peripherals Inc., 6.50%
due 3/01/2002** 1,795,600 1,570,000 0.1
Telecommunications 3,105,000 Intelcom Group Inc., 7.00% due
10/30/1998** (a) 3,105,394 2,581,540 0.1
Textiles 1,560,000 Interface, Inc., 8.00% due 9/15/2013 1,498,950 1,528,800 0.1
Transportation 511,000 Builders Transport & Trucking Co., 8.00%
due 8/15/2005** 514,833 475,230 0.0
<PAGE>
Waste Management 1,000,000 Phillips Environmental, Inc., 6.00%
due 10/15/2000 1,000,000 1,045,000 0.1
2,000,000 USA Waste Services Inc., 8.50%
due 10/15/2002 2,331,250 2,340,000 0.1
-------------- -------------- ------
3,331,250 3,385,000 0.2
Total Convertible Bonds
in the United States 60,978,446 59,176,546 3.1
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
NORTH AMERICA Convertible Preferred Stocks, Percent of
(concluded) Industries Shares Held Common Stocks & Warrants Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
United States Airlines 60,000 AMR Corp., $3.00 (Series A), Conv. Pfd. $ 2,711,250 $ 2,475,000 0.1%
52,500 Delta Air Lines Inc., $3.50
(Series C), Conv. Pfd. 2,756,900 2,362,500 0.1
25,000 United Airlines Corp., $6.25 (Series A),
Conv. Pfd. 2,482,500 2,050,000 0.1
-------------- -------------- ------
7,950,650 6,887,500 0.3
Banking & Finance 48,300 Rochester Community Savings Bank
(Series B) 1,387,224 1,569,750 0.1
36,300 Southern National Corp., Pfd. $1.6875 1,158,678 1,134,375 0.1
55,200 Union Planters Corp. 1,949,405 1,780,200 0.1
-------------- -------------- ------
4,495,307 4,484,325 0.3
Computers 42,500 Storage Technology Corp., $3.50,
Conv. Pfd.** 2,355,988 2,847,500 0.1
Electronics 60,000 Cooper Industries, $8.00 1,536,750 1,425,000 0.1
Environmental 3,500,000 Allied Waste Industries, Inc., Conv. Pfd. 3,500,000 3,542,700 0.2
Food & Beverage 231,500 RJR Nabisco, Inc. 1,534,269 1,620,500 0.1
High Technology 91,053 Anacomp, Inc. (Warrants) (d) 120,000 159,343 0.0
Hotels & Casinos 18,270 Buckhead of America Corp. 51,648 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 84,375 0.0
6,000 Trump Taj Mahal Funding, Inc. (Class A) 3,000 45,000 0.0
-------------- -------------- ------
349,386 228,488 0.0
<PAGE>
Industrial 58,800 Petrolane, Inc. 683,550 793,800 0.0
10,000 UGI Corp. (Warrants) (d) 43,750 10,625 0.0
-------------- -------------- ------
727,300 804,425 0.0
Industrial Services 20,000 Mascotech, Inc. 312,460 267,500 0.0
Insurance 1,500 Westbridge Capital Corp., 3.375%
due 2/15/2001 1,500,000 1,672,500 0.1
Oil & Gas Diversified 118,700 Gerrity Oil & Gas Corp.** 1,964,372 1,735,988 0.1
20,000 Western Gas Resources, Inc. 1,000,000 757,500 0.0
-------------- -------------- ------
2,964,372 2,493,488 0.1
Paper Products 40,000 Boise Cascade Corp. (Series E) 1,025,520 1,120,000 0.1
83,400 James River Corp. of Virginia (Series P) 1,438,650 1,991,175 0.1
-------------- -------------- ------
2,464,170 3,111,175 0.2
Software 96,700 Network Imaging Corporation, $8.00 2,417,500 1,934,000 0.1
Total Convertible Preferred Stocks, Common
Stocks & Warrants in the United States 32,228,152 31,478,444 1.6
Total Investments in North American
Securities 1,067,892,308 995,005,045 49.6
PACIFIC
BASIN Face Amount Fixed-Income Investments
Australia Foreign Government Australian Government Bonds:
Obligations-- A$ 52,600,000 9.50% due 8/15/2003 38,699,872 37,208,619 1.8
Regional & Agency 22,500,000 9.00% due 9/15/2004 15,877,975 15,301,517 0.8
25,000,000 7.50% due 7/15/2005 15,346,175 15,072,875 0.7
34,000,000 Queensland Treasury Corp., Domestic Notes,
8.00% due 7/14/1999 23,685,928 23,405,593 1.2
41,500,000 Queensland Treasury Corp., Global Notes,
8.00% due 5/14/2003 31,269,513 26,447,759 1.3
16,000,000 Victoria Financial Corp., 10.25%
due 9/15/1999 12,421,713 11,928,918 0.6
-------------- -------------- ------
137,301,176 129,365,281 6.4
Total Fixed-Income Investments
in Australia 137,301,176 129,365,281 6.4
<PAGE>
Hong Kong Engineering & HK$ 1,000,000 Paul Y-ITC Construction Holdings, Inc.,
Construction 5.00% due 2/03/2001 845,625 800,000 0.0
Total Fixed-Income Investments in Hong Kong 845,625 800,000 0.0
Japan Foreign Government Yen 85,000,000 Makita Electric Works Co., Ltd., 3.60%
due 3/31/1999 938,422 950,658 0.0
Obligations 50,000,000 No. 8 Nippon Oil Co., 2.80% due 3/31/2000 594,095 584,514 0.0
50,000,000 Sagami Railway, 3.80% due 9/30/1999 593,777 592,105 0.0
25,000,000 Yamato Transport Co. Ltd., 3.90%
due 3/30/2001 304,151 304,276 0.0
-------------- -------------- ------
2,430,445 2,431,553 0.0
Total Fixed-Income Investments in Japan 2,430,445 2,431,553 0.0
New Zealand Foreign NZ$ 21,200,000 New Zealand Government Bonds,
Government 10.00% due 3/15/2002 13,404,050 13,226,058 0.7
Obligations
Total Fixed-Income Investments in
New Zealand 13,404,050 13,226,058 0.7
Philippines Industrial Pp 7,000,000 San Miguel Corp., 9.00% due 4/27/2000 6,965,000 6,942,250 0.3
Total Fixed-Income Investments
in the Philippines 6,965,000 6,942,250 0.3
Total Investments in Pacific
Basin Securities 160,946,296 152,765,142 7.4
WESTERN
EUROPE
Denmark Foreign Dkr 200,000,000 Denmark Kingdom, 9.00% due 12/15/1998 32,728,737 $ 33,172,080 1.6
Government
Obligations
Total Fixed-Income Investments in Denmark 32,728,737 33,172,080 1.6
Finland Foreign Fim 103,000,000 Government of Finland, 11.00% due 1/15/1999 21,068,286 22,121,603 1.1
Government
Obligations
Total Fixed-Income Investments in Finland 21,068,286 22,121,603 1.1
<PAGE>
Germany Consumer US$ 10,000,000 Tarkett International, 9.00% due 3/01/2002 10,000,000 9,150,000 0.5
Products
Total Fixed-Income Investments in Germany 10,000,000 9,150,000 0.5
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
WESTERN EUROPE Face Percent of
(concluded) Industries Amount Fixed-Income Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Italy Foreign Buoni Poliennali del Tesoro
Government (Italian Government Bonds):
Obligations Lit 85,000,000,000 8.50% due 8/01/1997 51,054,487 50,975,986 2.5%
25,000,000,000 12.00% due 9/18/1998 16,883,056 16,220,945 0.8
70,400,000,000 9.00% due 10/01/1998 42,566,872 42,030,256 2.1
53,000,000,000 8.50% due 10/01/1999 31,647,308 30,740,272 1.5
-------------- -------------- ------
142,151,723 139,967,459 6.9
Total Fixed-Income Investments in Italy 142,151,723 139,967,459 6.9
Portugal Supranational Esc 750,000,000 European Investment Bank, 15.50%
Entities due 7/12/1995 6,389,454 4,841,772 0.2
Total Fixed-Income Investments in Portugal 6,389,454 4,841,772 0.2
Spain Foreign Government of Spain:
Government Pta 2,950,000,000 11.00% due 6/15/1997 22,951,273 23,071,367 1.1
Obligations 15,092,000,000 11.45% due 8/30/1998 119,383,410 118,995,746 5.9
-------------- -------------- ------
142,334,683 142,067,113 7.0
Total Fixed-Income Investments in Spain 142,334,683 142,067,113 7.0
Sweden Foreign Government Government of Sweden:
Government Skr 405,000,000 11.00% due 1/21/1999 56,495,128 54,652,704 2.7
Obligations-- 120,000,000 13.00% due 6/15/2001 17,411,249 17,641,440 0.9
Regional & Agency 145,000,000 SBAB, 11.00% due 1/21/1999 19,797,077 19,184,872 0.9
-------------- -------------- ------
93,703,454 91,479,016 4.5
Total Fixed-Income Investments in Sweden 93,703,454 91,479,016 4.5
<PAGE>
United Foreignnment Pound 750,000 Hanson Trust PLC, 9.50% due 1/31/2006 1,252,920 1,241,887 0.1
Kingdom Government Sterling United Kingdom Gilt:
Obligations 22,000,000 9.00% due 3/03/2000 34,769,634 35,019,256 1.7
46,000,000 7.00% due 11/06/2001 71,171,278 65,627,841 3.2
19,000,000 9.50% due 4/18/2005 30,992,302 31,198,974 1.5
17,000,000 8.50% due 7/16/2007 29,798,100 26,096,886 1.3
-------------- -------------- ------
167,984,234 159,184,844 7.8
Total Fixed-Income Investments in the
United Kingdom 167,984,234 159,184,844 7.8
Total Investments in
Western European Securities 616,360,571 601,983,887 29.6
SHORT TERM
SECURITIES Issue
United States Commercial US$ 50,000,000 ANZ (Delaware), Inc., 4.85%
Paper*** due 11/04/1994 49,784,444 49,784,444 2.4
76,290,000 General Electric Capital Corp.,
4.95% due 10/03/1994 76,290,000 76,290,000 3.7
-------------- -------------- ------
126,074,444 126,074,444 6.1
Total Investments in
Short-Term Securities 126,074,444 126,074,444 6.1
Total Investments $2,090,666,766 1,989,819,566 98.2
==============
Short Sales (Proceeds--$13,774,112)** (13,319,406) (0.7)
Unrealized Depreciation on Forward Foreign Exchange Contracts++ (6,251,428) (0.3)
Other Assets Less Liabilities 56,972,226 2.8
-------------- ------
Net Assets $2,027,220,958 100.0%
============== ======
Net Asset Class A--Based on net assets of $350,076,719 and
Value: 41,530,392 shares outstanding $ 8.43
==============
Class B--Based on net assets of $1,677,144,239 and
199,094,316 shares outstanding $ 8.42
==============
<FN>
*Represents the yield to maturity.
**Covered Short Sales entered into as of September 30, 1994 are as follows:
<PAGE>
<CAPTION>
Shares Issue Value
<C> <S> <C>
56,400 Big B Inc. $ (641,550)
6,800 Builders Transport & Trucking Co. (79,050)
88,400 Coeur D'Alene Mines Corp. (1,878,500)
40,000 Conner Peripherals Inc. (435,000)
110,300 Daka International, Inc. (1,709,650)
15,000 Gerrity Oil & Gas Corp. (105,000)
27,800 Hudson Foods, Inc. (632,450)
80,000 Intelcom Group Inc. (1,111,000)
47,000 Owens-Corning Fiberglass Corp. (1,574,500)
12,500 Sanifill Inc. (278,125)
102,900 Storage Technology Corp. (2,958,375)
87,598 Sun Healthcare Group, Inc. (1,916,206)
-------------
Total (proceeds--$13,774,112) $ (13,319,406)
=============
***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.
(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 $1,000 face amount contains one non-detachable share of Taj Mahal
Holding Corp.'s Class B redeemable Common Stock.
(d)Warrants entitle the Fund to purchase a predetermined number of shares
of Common Stock. The purchase price and number of shares are subject
to adjustment under certain conditions until the expiration date.
(e)Each share of Series B stock contains a right which entitles the holder
to purchase a predetermined number of shares of Preferred Stock.
(1)Indexed instrument for which the yield-to-maturity, if any, will be deter-
mined by the relative value of the foreign currency indicated.
++Forward foreign exchange contracts as of September 30, 1994 are as follows:
<PAGE>
<CAPTION>
Unrealized
Expiration Appreciation
Date (Depreciation)
Foreign Currency Purchased
<S> <C> <S> <C>
C$ 14,402,088 October 1994 $ 100,983
DM 123,769,958 October 1994 (297,270)
Dkr 138,761,611 October 1994 237,304
Skr 54,244,322 October 1994 3,978
-------------
Total (US$ Commitment--$120,678,640) $ 44,995
-------------
Foreign Currency Sold
A$ (24,695,480) October 1994 $ (12,640)
C$ (50,271,087) October 1994 (851,912)
DM (238,769,500) October 1994 (3,643,935)
Fim (115,950,008) October 1994 (332,120)
Pound
Sterling (37,767,134) October 1994 (1,539,766)
Lit (128,580,028,580) October 1994 (21,483)
Pta (5,442,850,684) October 1994 32,497
Skr (741,325,117) October 1994 72,936
-------------
Total (US$ Commitment--$510,847,350) $ (6,296,423)
Total Unrealized Depreciation on Forward
Foreign Exchange Contracts--Net $ (6,251,428)
=============
</TABLE>
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