MERRILL LYNCH
WORLD INCOME
FUND, INC.
FUND LOGO
Quarterly Report
March 31, 1997
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.
Statements and other information herein are as dated and are subject
to change.
<PAGE>
Merrill Lynch
World Income
Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MERRILL LYNCH WORLD INCOME FUND, INC.
Officers and
Directors
Arthur Zeikel, President and Director
James H. Bodurtha, Director
Herbert I. London, Director
Robert R. Martin, Director
Joseph L. May, Director
Andre F. Perold, Director
Terry K. Glenn, Executive Vice President
Joseph T. Monagle Jr., Senior Vice President
Donald C. Burke, Vice President
Vincent T. Lathbury III, Vice President
Robert J. Parish, Vice President
Gerald M. Richard, Treasurer
<PAGE>
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, Massachusetts 02101
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
DEAR SHAREHOLDER
In the March quarter, Merrill Lynch World Income Fund's managers
decided on a significant shift in emphasis. In the current
environment, non-dollar denominated investment-grade issues
generally seem unattractive. Yields have converged with US Treasury
securities and a strong dollar has negatively impacted principal.
Therefore, we have exited government markets in Australia, Denmark,
Germany, Italy, Spain, Sweden, and the United Kingdom. Greater
emphasis has been given to the below investment-grade emerging
markets. These markets have grown rapidly in both size and scope
over the past few years and offer many attractive opportunities. At
quarter-end the allocation of assets addressed four broad areas of
investment exposure: the US corporate high-yield market, 42% of
assets; emerging markets, 30%; US Governments, 20%; and convertible
securities, 8%. Within these broad areas, the Fund's managers have
selected the most attractive issues. Actual investment commitments
are below the allocation in all areas primarily because of concern
about the direction of interest rates, a factor that can negatively
affect all dollar-denominated financial assets.
The US economy shows no signs of slowing from the 3.8% pace posted
for fourth quarter 1996. With consumer confidence remaining high, job
and income growth accelerating and spending on durables strengthening,
first quarter gross domestic product (GDP) rose 5.6%, thus continuing
the above-trend growth pace in place for over a year. As a result, the
Federal Reserve Board raised the Federal Funds rate 25 basis points
(0.25%) on March 25, 1997 citing "persistent strength in demand" which
is "progressively increasing the risk of inflationary imbalances." By
diminishing the significance of actual inflation, investors' focus
should shift more toward economic activity data as the guidepost for
evaluating future potential interest rate increases.
<PAGE>
The Canadian economy continued to be robust with fourth quarter GDP
at +2.9% and domestic demand posting a +7.5% annual rate. Net
exports depressed fourth quarter activity because of the General
Motors Corp. strike, which should allow for first quarter GDP to
post well-above trend growth. Recent data releases suggested an
incipient upturn in the Australian economy, causing the Reserve Bank
of Australia to state its intentions of "assessing previous rate
cuts" before taking further action. Meanwhile, inflation news should
remain excellent with the possibility of a less than 1% rate in the
first quarter.
In Europe, the combination of recent signs of a revival in economic
activity, mainly in Germany, along with weaker currencies, dampened
the prospects of further interest rate cuts in the near term.
Unemployment hit record levels in Germany in January, but large
distortions caused by weather and changes in recording unemployment
levels make analysis of the underlying trend difficult to discern
over the next few months. On the other hand, the manufacturing
sector appears to have started the year on a firm note, which along
with the recent pickup in inflation should keep the Bundesbank on
hold over the near term.
UK economic activity was soft going into year-end 1996, which should
keep inflation well-contained for most of the first half of 1997.
Therefore, the Bank of England held monetary policy unchanged, and
perhaps will continue to do so until after the May elections. The
Italian economy finished 1996 on a weak note and will likely stay so
through the first half of 1997, since continued investor confidence
is low and the manufacturing sector is weak. Inflation should
continue to drift lower during the first half.
During the quarter ended March 31, 1997, ten-year yields rose
sharply in the United States and Australia while falling in all the
major European markets, while the US dollar soared over 10% relative
to the Deutschemark. US yields declined into mid-February as fourth-
quarter inflation data were excellent, reaching a low of 6.25%, then
began to rise following Federal Reserve Board Chairman Alan
Greenspan's Humphrey-Hawkins testimony, followed by a sharp rise to
6.9% from mid-March following the report of surging retail sales and
the Federal Funds rate increase. Australian yields rose more than US
yields as the yield curve adjusted to the possibility that the
central bank may not ease monetary policy further in the current
cycle. Yields in core Europe were largely unchanged as yields
dropped in response to Germany's weak employment situation and
reduced odds of a UK interest rate increase early in the March
quarter, then rose on the back of the US increase. The US dollar
soared against European currencies as the relative growth
differential widened in the fourth quarter, fueling expectations
that the short-term interest rate differential between the United
States and Germany was set to widen further.
<PAGE>
In our view, the outlook for US bonds is currently poor since the
Federal Reserve Board increased interest rates. In addition, there
is a strong likelihood that economic growth will remain above trend
in the first quarter. European bonds are not well insulated from any
US weakness given current rich valuations set against a background
of a likely clear rebound in German economic growth, and continued
concerns regarding European Monetary Union (EMU), which may continue
up to the June European Union summit. In our opinion, the US dollar
should remain well supported against European currencies over the
next few months as the relative growth gap favoring the United
States is likely to be maintained. The potential for German economic
activity to rebound smartly presents a mixed picture for the US
dollar, as higher interest rate expectations are juxtaposed against
reduced EMU tensions.
Emerging Markets
The main factors that contributed to the powerful rally in emerging
markets debt valuations in 1996 remained in place during the early
part of 1997. The generally favorable interest rate outlook in the
United States along with positive global liquidity conditions,
improving credit fundamentals in the principal emerging market
economies, and cross-over investor quest for yield, all helped
propel prices of emerging market debt higher. This trend was
abruptly halted toward the end of February as Federal Reserve Board
Chairman Alan Greenspan's ominous warnings about US economic
indicators led investors to question whether the benign US interest
rate environment would continue.
The unmanaged JP Morgan Emerging Market Composite Index fell
approximately 6% from its peak in late February to the first week of
April. Emerging debt markets staged only a modest recovery in
subsequent weeks. Investor attention is now focused on US economic
fundamentals and the Federal Reserve Board monetary policy which
should continue to have a significant impact on emerging market debt
valuations for the foreseeable future.
Despite this recent setback, the credit fundamentals in the major
emerging economies are sound and improving. Sovereign ratings
upgrades already have occurred in Argentina and Brazil. In late
April, Standard & Poor's Corp. (S&P) also upgraded the ratings of
several Argentine banks and corporate issues above the Argentine
sovereign rating; most were upgraded to investment grade. This was
surprising as most investors believed in a "sovereign ceiling" for
non-government debt. Currently, S&P appears to have limited this
action to countries which have "dollarized" their economies.
However, it opens the possibility of similar action for companies in
"non-dollarized" economies which have significant dollar earnings or
overseas assets. In addition to the positive investment tone this
sets for emerging markets debt, investment-grade ratings imply a
much larger investor base.
<PAGE>
Mexico
Mexico's economic fundamentals continue to show signs of improvement
in 1997. Economic growth is expanding and includes more sectors of
the economy. The downward trend in inflation should continue in 1997
with a corresponding drop in local interest rates. The main risks
continue to be political and social, as Mexico faces contentious
elections in July and the need to improve the economic well being of
a population which has become more impoverished since the
devaluation of the peso.
Mexico, along with most other emerging countries, may also have to
deal with the prospect of higher international interest rates and
reduced global liquidity. This will make the structural reforms
instituted over the past few years all the more important. These
include a vastly reduced amount of short-term external debt and much
lower current account deficit which have dramatically reduced
Mexico's dependence on external savings. In fact, Mexico has already
met all of its public debt amortization needs for 1997.
Argentina
Argentina's economy continued to recover smartly from its "tequila
effect" recession. (The devaluation of the Mexican peso negatively
affected the other Latin American economies.) Gross domestic product
is expected to grow in excess of 5% in 1997, which should help the
government's finances and alleviate a major source of investor
concern. Argentina also made significant progress in restructuring
its foreign debt. There were concerns surrounding the approximately
$12 billion of public debt amortization in 1997. Argentina's rapidly
improving economic fundamentals along with a favorable global
investment climate enabled the country to successfully place
approximately $6 billion of debt in international capital markets
since the final months of 1996. Investors will now be mainly focused
on the progress surrounding labor and state reforms while keeping an
eye on October 1997 elections.
Brazil
Brazil continued to benefit from the real plan, as inflation remains
under control. This program conquered hyperinflation and brought the
level of price increases down to 10% in 1996 and a projected 8% in
1997. The downside to this program was the effect on the currency,
which has appreciated. Estimates vary on the amount of the
overvaluation, but the result can be seen in a deteriorating trade
balance. Brazil must also make progress on its chronic fiscal
deficit and attack significant structural imbalances in its economy.
Investors are hopeful as President Cardoso--who instituted the real
plan as finance minister in the previous administration--is expected
to succeed in his bid to change the constitution, which would enable
him to run for another term. This measure already passed the lower
house of congress and is expected to become law during the second
quarter. Progress was also made on the privatization program. Brazil
successfully sold cellular phone licenses in early April. The sale
of the state's massive CVRD mining operations is also expected to
occur in the months ahead.
<PAGE>
Ecuador
In Ecuador, the political risk which tends to be inherent in
emerging nations was manifested in the ouster of its president in
February. Ecuador's congress voted to impeach the highly unpopular
President Bucaram on the dubious charge of mental incompetence.
Bucaram was leading Ecuador down the difficult path of reforming the
economy and instituting fiscal and monetary austerity measures. The
congress took advantage of the ensuing public outcry to oust the
president and install its choice, Fabian Alarcon. The current
president, who is scheduled to remain in office until August 1998,
has committed to carrying out a more limited, yet important, set of
economic reforms.
Venezuela
Venezuela benefited from higher-than-expected oil prices which led
to a significant fiscal and current account surplus in 1996.
Although oil prices fell substantially since last year, they are
still above projections used by the Venezuelan government in their
fiscal projections for 1997. At the same time, the country appears
to be making progress addressing structural and economic
deficiencies. Large-scale privatizations are expected to eventually
occur in the aluminum and steel industries which show help reduce
the bloated state influence on the economy. Further progress is
necessary in areas such as state subsidies and labor reform in order
to continue along the path of free market reform.
High-Yield Market
The high-yield market posted positive total returns in the first
quarter of 1997 despite a very weak period for bond prices in March
precipitated by a Federal Reserve Board interest rate increase. The
unmanaged CS First Boston High Yield Index returned +1.47% compared
to -2.3% for ten-year Treasury Notes.
The March quarter's positive returns masked a sharp deterioration in
the internal dynamics of the high-yield market during the last two
weeks of March. Demand faded with the Federal Reserve Board's
interest rate increase. Prices softened and the resulting decline in
mutual fund net asset values precipitated significant outflows from
the high-yield funds, which tend to be used extensively by market-
timing services. The $335 million mutual fund outflow in March was
the first negative month seen in over a year.
<PAGE>
In our December 31, 1996 shareholder's letter, we observed that the
narrow yield spreads that developed between high-yield bonds and
Treasury securities of similar maturity left high-yield bonds
vulnerable to either a change in fundamentals or to investor
sentiment. We also expressed uncertainty about the direction of
interest rates. The rise in yields during the quarter ended March
31, 1997 gave us a measure of comfort; while yields may rise
somewhat from current levels, the 7% area on ten-year Treasury
securities appears to offer excellent value. However, we are still
uncomfortable with the historically narrow yield spreads between
high-yield bonds and Treasury securities. The yield spread
represents the premium demanded by investors for the credit risk
assumed in owning high-yield bonds. These spreads can be very wide
in periods of weak economic activity or high perceived default risk.
They are quite narrow currently because fundamentals were
extraordinarily good for a while, and the economy is healthy.
The quality of new-issue supply was excellent, and default rates
were historically low. High-yield bonds outperformed high-grade
bonds by a wide margin over the past 15 months. Since the end of
1995, the yield spread between the Merrill Lynch High Yield Master
Index and ten-year Treasury securities narrowed approximately 0.75%.
These positive arguments for investing in high-yield bonds attracted
large amounts of new funds to the market. New-issue supply was
rationed to eager buyers. Not surprisingly, the quality of many
recent new issues has deteriorated.
In an investment environment in which risk premiums are small, we
believe it is appropriate to reduce the portfolio's exposure to
credit risk. Consequently, the portfolio has been structured in a
somewhat defensive manner. We are emphasizing shorter maturities and
higher-quality BB-rated issues which, we believe, will be less
sensitive to widening yield spreads.
During the three months ended March 31, 1997, we reduced the Fund's
exposure to convertible securities to 6.1% of total net assets as of
March 31, from 8.2% at year-end 1996. We became somewhat cautious on
the stock market because of the deterioration of its internal
condition. Therefore, as a precautionary move we took profits in
many of our more equity-sensitive convertibles during the March
quarter. Many of our remaining positions are more defensively
postured with lessened equity sensitivity caused by higher
conversion premiums.
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 next report to shareholders.
Sincerely,
<PAGE>
(Arthur Zeikel)
Arthur Zeikel
President
(Robert J. Parish)
Robert J. Parish
Vice President and Portfolio Manager
(Vincent T. Lathbury III)
Vincent T. Lathbury III
Vice President and Portfolio Manager
May 9, 1997
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 4% and bear no ongoing distribution or account maintenance
fees. Class A Shares are available only to eligible investors.
<PAGE>
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.50% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after approximately 10 years. (There is no initial
sales charge for automatic share conversions.)
* Class C Shares are subject to a distribution fee of 0.55% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.25% (but no distri-bution fee).
None of the past results shown should be considered a rep-
resentation of future performance. Figures shown in the "Average
Annual Total Return" tables as well as the total returns and
cumulative total returns in the "Performance Summary" tables assume
reinvestment of all dividends and capital gains distributions at net
asset value on the payable date. Investment return and principal
value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Dividends paid to each
class of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
<TABLE>
Performance
Summary--
Class A Shares++
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
9/29/88--12/31/88 $9.35 $9.68 $0.001 $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
1994 9.28 8.20 -- 0.711 - 4.05
1995 8.20 8.69 -- 0.718 +15.35
1996 8.69 8.94 -- 0.673 +11.09
1/1/97--3/31/97 8.94 8.66 -- 0.143 - 1.43
------ ------
Total $0.050 Total $7.993
Cumulative total return as of 3/31/97: +126.44%**
<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 and
return of capital distribution, if any.
**Figures 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**
<S> <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
1994 9.28 8.19 -- 0.645 - 4.90
1995 8.19 8.69 -- 0.653 +14.61
1996 8.69 8.94 -- 0.606 +10.25
1/1/97--3/31/97 8.94 8.65 -- 0.128 - 1.72
------ ------
Total $0.047 Total $3.744
Cumulative total return as of 3/31/97: +43.21%**
<FN>
*Figures may include short-term capital gains distributions and
return of capital distribution, if any.
**Figures do not reflect deduction of any sales charge; results
would be lower if sales charge was deducted.
</TABLE>
<TABLE>
Performance
Summary--
Class C Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $8.42 $8.19 -- $0.129 - 1.20%
1995 8.19 8.68 -- 0.645 +14.38
1996 8.68 8.93 -- 0.601 +10.19
1/1/97--3/31/97 8.93 8.64 -- 0.126 - 1.74
------
Total $1.501
<PAGE>
Cumulative total return as of 3/31/97: +22.35%**
<FN>
*Figures may include short-term capital gains distributions and
return of capital distribution, if any.
**Figures do not reflect deduction of any sales charge; results
would be lower if sales charge was deducted.
</TABLE>
<TABLE>
Performance
Summary--
Class D Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $8.43 $8.20 -- $0.139 - 1.09%
1995 8.20 8.69 -- 0.697 +15.06
1996 8.69 8.94 -- 0.652 +10.82
1/1/97--3/31/97 8.94 8.65 -- 0.138 - 1.60
------
Total $1.626
Cumulative total return as of 3/31/97: +24.10%**
<FN>
*Figures may include short-term capital gains distributions and
return of capital distribution, if any.
**Figures do not include sales charge; results would be lower if
sales charge was included.
</TABLE>
PERFORMANCE DATA (concluded)
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
<PAGE>
Class A Shares++*
Year Ended 3/31/97 + 8.01% +3.69%
Five Years Ended 3/31/97 + 7.33 +6.46
Inception (9/29/88) through 3/31/97 +10.09 +9.56
[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 3/31/97 +7.19% +3.19%
Five Years Ended 3/31/97 +6.49 +6.49
Inception (11/18/91) through 3/31/97 +6.92 +6.92
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 3/31/97 +7.01% +6.01%
Inception (10/21/94) through 3/31/97 +8.62 +8.62
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 3/31/97 +7.62% +3.32%
Inception (10/21/94) through 3/31/97 +9.25 +7.44
<PAGE>
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<TABLE>
Recent
Performance
Results
<CAPTION>
12 Month 3 Month
3/31/97 12/31/96 3/31/96 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $8.66 $8.94 $8.64 +0.23% -3.13%
Class B Shares* 8.65 8.94 8.63 +0.23 -3.24
Class C Shares* 8.64 8.93 8.63 +0.12 -3.25
Class D Shares* 8.65 8.94 8.64 +0.12 -3.24
Class A Shares--Total Return* +8.01(1) -1.43(2)
Class B Shares--Total Return* +7.19(3) -1.72(4)
Class C Shares--Total Return* +7.01(5) -1.74(6)
Class D Shares--Total Return* +7.62(7) -1.60(8)
Class A Shares--Standardized 30-day Yield 6.57%
Class B Shares--Standardized 30-day Yield 6.06%
Class C Shares--Standardized 30-day Yield 6.01%
Class D Shares--Standardized 30-day Yield 6.33%
<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 $0.658 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.143 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.590 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.128 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.585 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.126 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.636 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.138 per share ordinary
income dividends.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
LATIN Percent of
AMERICA Industries Face Amount Fixed-Income Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Argentina Communications US$ 10,000,000 Telefonica de Argentina S.A.,
11.875% due 11/01/2004 $ 9,800,800 $ 11,175,000 1.0%
Foreign 7,840,000 Republic of Argentina, Floating
Government Rate Brady Bonds, 6.75% due
Obligations 3/31/2005++ 6,736,275 6,997,200 0.6
23,000,000 Republic of Argentina, Global
Bonds, 11.375% due 1/30/2017 24,422,498 23,575,000 2.2
-------------- -------------- ------
31,158,773 30,572,200 2.8
Total Fixed-Income Investments
in Argentina 40,959,573 41,747,200 3.8
Brazil Broadcasting/ 8,000,000 Globo Communicacoes e Participacoes,
Cable Ltd., 10.50% due 12/20/2006 7,997,640 8,090,000 0.7
Communications 5,000,000 Comtel Brasileira Ltd., 10.75%
due 9/26/2004 5,000,000 5,275,000 0.5
Foreign 46,257,637 Republic of Brazil, C Bonds, 36,317,043 34,259,794 3.1
Government Floating Rate Brady Bonds, 7.17%
Obligations due 4/15/2014++
Total Fixed-Income Investments
in Brazil 49,314,683 47,624,794 4.3
Colombia Energy 5,000,000 Oleoducts Central S.A., 9.35% due
9/01/2005 5,000,000 5,256,250 0.5
Utilities 10,000,000 Transgas de Occidente S.A., 9.79%
due 11/01/2010 10,137,500 10,651,270 0.9
Total Fixed-Income Investments
in Colombia 15,137,500 15,907,520 1.4
Ecuador Foreign 9,683,049 Republic of Ecuador, PDI, 5.15%
Government due 2/27/2015 6,151,563 5,458,819 0.5
Obligations
<PAGE>
Total Fixed-Income Investments
in Ecuador 6,151,563 5,458,819 0.5
Mexico Broadcasting & 7,500,000 Grupo Televisa S.A., 11.375% due
Publishing 5/15/2003 7,678,125 7,875,000 0.7
Foreign United Mexican States, Floating Rate
Government Brady Bonds++:
Obligations 3,000,000 6.351% due 12/31/2019 2,610,000 2,619,390 0.2
2,000,000 Discount, Series A, 6.398% due
12/31/2019 1,562,500 1,746,260 0.2
4,000,000 Par, Series A, 6.25% due
12/31/2019 2,700,000 2,802,520 0.3
2,000,000 Par, Series B, 6.25% due
12/31/2019 1,390,356 1,401,260 0.1
50,000,000 United Mexican States, Government
Bonds, 11.50% due 5/15/2026 55,831,000 1,625,000 4.7
13,691,000 United Mexican States, Value
Recovery Rights (e) 0 14 0.0
-------------- -------------- ------
64,093,856 60,194,444 5.5
Total Fixed-Income Investments
in Mexico 71,771,981 68,069,444 6.2
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
LATIN
AMERICA Percent of
(concluded) Industries Face Amount Fixed-Income Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Venezuela Foreign US$ 25,000,000 Republic of Venezuela, Brady Par
Government Bonds, 6.75% due 3/31/2020++ $ 19,140,625 $ 17,468,750 1.6%
Obligations 125,000 Republic of Venezuela, Brady Par
Bonds, Oil Link Certificates++ 0 0 0.0
21,000,000 Republic of Venezuela, Floating
Rate Brady Bonds, 6.50% due
12/18/2007++ 16,341,875 18,073,230 1.6
Total Fixed-Income Investments
in Venezuela 35,482,500 35,541,980 3.2
Total Investments in Latin
American Securities 218,817,800 214,349,757 19.4
<PAGE>
NORTH
AMERICA
Canada Broadcasting/ 10,000,000 Videotron Group, Ltd. Co., 10.25%
Cable due 10/15/2002 10,043,750 10,600,000 1.0
Paper 10,000,000 Doman Industries Ltd., 8.75% due
3/15/2004 9,300,000 9,350,000 0.8
Total Fixed-Income Investments
in Canada 19,343,750 19,950,000 1.8
United Airlines 12,500,000 USAir Inc., 10.375% due 3/01/2013 12,500,000 13,250,000 1.2
States
Broadcasting/ 10,000,000 Lenfest Communications, Inc.,
Cable 10.50% due 6/15/2006 9,922,100 10,200,000 0.9
Building 10,000,000 Pacific Lumber Co., 10.50% due
Materials 3/01/2003 10,140,625 10,100,000 0.9
11,035,000 USG Corp., 8.75% due 3/01/2017 9,717,469 11,076,381 1.0
-------------- -------------- ------
19,858,094 21,176,381 1.9
Chemicals 10,340,000 ISP Holdings Inc., 9.75% due
2/15/2002 10,340,000 10,753,600 1.0
Conglomerates 10,000,000 Sequa Corp., 9.375% due 12/15/2003 9,915,000 9,900,000 0.9
Consumer Products 10,000,000 Revlon Consumer Products Corp.,
9.375% due 4/01/2001 8,854,315 10,375,000 0.9
Energy 10,000,000 Chesapeake Energy Corporation,
8.50% due 3/15/2012 9,941,400 9,700,000 0.9
10,000,000 Clark R & M Holdings, Inc.,
10.43%* due 2/15/2000 7,432,567 7,275,000 0.7
9,100,000 Maxus Energy Corp., 9.875% due
10/15/2002 9,086,800 9,418,500 0.9
10,000,000 Rowan Companies, Inc., 11.875% due
12/01/2001 10,402,500 10,637,500 1.0
10,000,000 Seagull Energy Corp., 8.625% due
8/01/2005 10,000,000 10,000,000 0.9
10,000,000 TransTexas Gas Corp., 11.50% due
6/15/2002 9,996,125 10,950,000 1.0
-------------- -------------- ------
56,859,392 57,981,000 5.4
Entertainment 10,000,000 Viacom, Inc., 8% due 7/07/2006 10,031,250 9,300,000 0.8
Financial 10,000,000 Penn Financial Corp., 9.25% due
Services 12/15/2003 10,000,000 10,100,000 0.9
10,000,000 Reliance Group Holdings, Inc., 9%
due 11/15/2000 10,000,000 10,100,000 0.9
-------------- -------------- ------
20,000,000 20,200,000 1.8
<PAGE>
Food & Beverage 5,000,000 Coca-Cola Bottling Co., 9% due
11/15/2003 5,005,000 4,962,500 0.5
11,500,000 Del Monte Co., 10% due 5/01/2003 11,482,188 11,413,750 1.0
-------------- -------------- ------
16,487,188 16,376,250 1.5
Gaming 10,000,000 Greate Bay Properties, Inc.,
10.875% due 1/15/2004 9,996,250 8,200,000 0.7
7,500,000 Harrah's Jazz Co., 14.25% due
11/15/2001 5,178,125 3,487,500 0.3
10,000,000 Showboat, Inc., 9.25% due 5/01/2008 9,748,750 9,900,000 0.9
10,000,000 Trump Atlantic City Associates,
11.25% due 5/01/2006 9,943,750 9,025,000 0.8
-------------- -------------- ------
34,866,875 30,612,500 2.7
Hotels 10,000,000 HMC Acquisition Properties, 9% due
12/15/2007 9,346,250 9,950,000 0.9
Packaging 10,000,000 Owens-Illinois, Inc., 11% due
12/01/2003 11,401,563 11,025,000 1.0
Paper 10,000,000 Container Corp. of America, 9.75%
due 4/01/2003 10,200,000 10,400,000 0.9
10,000,000 Fort Howard Corp., 9% due 2/01/2006 10,007,500 10,100,000 0.9
10,000,000 Stone Container Corp., 9.875% due
2/01/2001 9,317,650 9,350,000 0.8
-------------- -------------- ------
29,525,150 29,850,000 2.6
Supermarkets 10,000,000 Pueblo Xtra International Inc.,
9.50% due 8/01/2003 10,116,875 9,600,000 0.9
Telecommunications 10,000,000 Century Communications Corp.,
9.50% due 3/01/2005 9,797,500 9,800,000 0.9
10,000,000 International CableTel, Inc., 10%
due 2/15/2007 9,880,000 9,500,000 0.9
10,000,000 Millicom International Cellular
S.A., 11.834%* due 6/01/2006 6,578,733 6,500,000 0.6
-------------- -------------- ------
26,256,233 25,800,000 2.4
Textiles 10,000,000 WestPoint Stevens Inc., 8.75% due
12/15/2001 10,093,750 10,000,000 0.9
<PAGE>
Transportation 10,000,000 Viking Star Shipping Co., 9.625%
due 7/15/2003 10,028,438 10,300,000 0.9
US Government 34,000,000 US Treasury Notes, 5.875% due
Obligations 1/31/1999 34,013,281 33,681,080 3.1
Utilities 9,848,000 Beaver Valley II Funding, 9% due
6/01/2017 7,262,900 9,729,725 0.9
4,000,000 CTC Mansfield Funding Corp.,
11.125% due 9/30/2016 4,301,250 4,205,080 0.4
Midland Cogeneration Venture
Limited Partnership:
7,287,064 10.33% due 7/23/2002 (b) 7,141,323 7,797,159 0.7
10,000,000 13.25% due 7/23/2006 11,183,750 11,790,900 1.1
10,000,000 Tucson Electric & Power Co.,
10.732% due 1/01/2013 9,607,625 9,849,100 0.9
-------------- -------------- ------
39,496,848 43,371,964 4.0
Total Fixed-Income Investments in
the United States 389,912,602 393,702,775 35.7
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
NORTH AMERICA Percent of
(concluded) Industries Face Amount Convertible Bonds Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
United Building & US$ 800,000 Continental Homes Holding Corp.,
States Construction 6.875% due 11/01/2002 $ 800,000 $ 768,000 0.1%
1,740,000 Engle Homes, Inc., 7% due
3/01/2003*** 1,694,760 1,566,000 0.1
1,500,000 Toll Brothers Inc., 4.75% due
1/15/2004 1,500,000 1,530,000 0.1
1,000,000 US Home Corp., 4.875% due
11/01/2005 991,000 940,000 0.1
-------------- -------------- ------
4,985,760 4,804,000 0.4
Computers 5,000,000 Apple Computer, Inc., 6% due
6/01/2001 4,945,000 4,225,000 0.4
Conglomerates Polyphase Corp.***:
500,000 12% due 12/01/1997 500,000 110,000 0.0
2,000,000 12% due 7/01/1999 2,000,000 400,000 0.0
1,000,000 Thermo Electron Corp., 4.25% due
1/01/2003 1,000,000 1,041,250 0.1
-------------- -------------- ------
3,500,000 1,551,250 0.1
<PAGE>
Electronics 1,585,000 Thermo Optik Corp., 5% due
10/15/2000 1,588,950 1,644,437 0.2
Environmental 1,063,000 Thermo TerraTech, Inc., 4.625%
due 5/01/2003 1,114,735 934,111 0.1
Financial Services 2,250,000 NAL Acceptance Corp., 10% due
9/12/1998 2,250,000 2,081,250 0.2
Healthcare 1,500,000 Integrated Health Services Inc.,
5.75% due 1/01/2001 1,493,750 1,560,000 0.1
Industrial 140,000 Recognition Equipment International,
Inc., 7.25% due 4/15/2011 103,600 138,600 0.0
Medical 5,000,000 Healthsource, Inc., 5% due 3/01/2003 4,979,155 4,887,500 0.4
Office Equipment 2,500,000 US Office Products Co., 5.50% due
5/15/2003 2,413,750 2,075,000 0.2
Oil--Domestic 3,757,000 Key Energy Group, Inc., 7.50% due
7/01/2003 5,329,067 5,710,640 0.5
2,080,000 Wainoco Oil Corp., 7.75% due
6/01/2014 1,880,352 1,830,400 0.2
-------------- -------------- ------
7,209,419 7,541,040 0.7
Retail 200,000 Baby Superstores Inc., 4.875% due
10/01/2000 200,000 199,000 0.0
500,000 Baker (J.) Inc., 7% due 6/01/2002 499,865 447,500 0.1
-------------- -------------- ------
699,865 646,500 0.1
Technology 1,250,000 Broadband Technologies, Inc., 5%
due 5/15/2001 1,246,250 892,187 0.1
Transportation 300,000 Varlen Corp., 6.50% due 6/01/2003 297,000 307,125 0.0
Products
Total Investments in United States
Convertible Bonds 36,827,234 33,288,000 3.0
Convertible Preferred
Stocks, Preferred Stocks,
Shares Held Common Stocks & Warrants
<PAGE>
United Banking & Finance 38,000 RCSB Financial, Inc. 698,503 1,140,000 0.1
States 21,700 Union Planters Corp., Conv. Pfd.
$2.00 767,637 1,101,275 0.1
-------------- -------------- ------
1,466,140 2,241,275 0.2
Broadcasting/ 137,257 On Command Corporation 4,061,096 1,475,513 0.1
Cable 43,675 On Command Corporation (Warrants)(c) 349,400 185,619 0.0
-------------- -------------- ------
4,410,496 1,661,132 0.1
Entertainment 11,028 Time Warner, Inc. (Series M),
Pfd. (a) 10,988,830 11,799,960 1.1
Environmental 737,944 Allied Waste Industries, Inc.*** 3,520,401 5,995,795 0.5
Financial 28,125 NAL Acceptance Corp. (Warrants)(c) 0 24,609 0.0
Services 22,000 SunAmerica Inc., Conv. Pfd. 825,000 869,000 0.1
-------------- -------------- ------
825,000 893,609 0.1
Forest Products 11,700 James River Corp. of Virginia
& Paper (Series P), Conv. Pfd. 282,964 315,900 0.0
Gaming 75,000 Goldriver Hotel & Casino Corp.,
Liquidating Trust 75,000 26,719 0.0
30,000 Goldriver Hotel & Casino Corp.
(Series B)(d) 219,738 0 0.0
-------------- -------------- ------
294,738 26,719 0.0
Industrial Services 118,500 Albany International Corp.
(Class A) 2,271,228 2,444,062 0.2
23,400 Mascotech, Inc., Conv. Pfd. $1.20 357,153 432,900 0.1
-------------- -------------- ------
2,628,381 2,876,962 0.3
Insurance 163,141 Kemper Corp., Conv. Pfd. $5.25
(Series E) 8,349,078 8,544,510 0.8
1,500 Westbridge Capital Corp., Conv. Pfd. 1,500,000 1,823,850 0.2
-------------- -------------- ------
9,849,078 10,368,360 1.0
Mining 148,400 Coeur d'Alene Mines Corp., Conv.
Pfd. 2,772,608 2,634,100 0.2
Oil & Gas 20,000 Calenergy Capital Trust II, Conv.
Pfd. 1,000,000 1,005,000 0.1
20,000 Western Gas Resources, Inc., Conv.
Pfd. $2.62 1,000,000 752,500 0.1
-------------- -------------- ------
2,000,000 1,757,500 0.2
<PAGE>
Oil--Domestic 139,099 Key Energy Group, Inc. (Warrants) (c) 772,055 973,693 0.1
Pharmaceuticals 40,000 IVAX Corp. 628,776 395,000 0.0
Transportation 19,000 Sea Containers Ltd., Conv. Pfd. $4.00 875,463 893,000 0.1
Utilities 361,493 Citizens Utilities Company (Class A) 4,202,319 4,202,354 0.4
Total Investments in United States
Convertible Preferred Stocks,
Preferred Stocks, Common Stocks
& Warrants 45,517,249 47,035,359 4.3
Total Investments in North
American Securities 491,600,835 493,976,134 44.8
PACIFIC
BASIN Face Amount Fixed-Income Investments
Indonesia Paper US$ 5,000,000 P.T. Indah Kiat International Finance,
12.50% due 6/15/2006 5,025,000 5,550,000 0.5
Total Fixed-Income Investments in
Indonesia 5,025,000 5,550,000 0.5
Philippines Telecommunications 5,000,000 Philippine Long Distance Telephone
Co., 8.35% due 3/06/2017 4,981,200 4,625,000 0.4
Total Fixed-Income Investments in
the Philippines 4,981,200 4,625,000 0.4
Total Investments in Pacific Basin
Securities 10,006,200 10,175,000 0.9
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
WESTERN Percent of
EUROPE Industries Face Amount Fixed-Income Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
United Communications US$ 20,000,000 TeleWest Communications PLC,
Kingdom 11.41%* due 10/01/2007 $ 13,744,803 $ 13,000,000 1.2%
<PAGE>
Total Fixed-Income Investments
in the United Kingdom 13,744,803 13,000,000 1.2
Convertible Bonds
Finland Forest Fim 2,320,000 Kymmene Corp., 8.25% due 11/18/2043 549,503 545,318 0.0
Products
& Paper
Total Investments in Finnish
Convertible Bonds 549,503 545,318 0.0
Ireland Dental US$ 500,000 Phoenix Shannon PLC, 9.50% due
Equipment 11/01/2000 500,000 150,000 0.0
& Supplies
Total Investments in Irish
Convertible Bonds 500,000 150,000 0.0
Total Investments in Western
European Securities 14,794,306 13,695,318 1.2
SHORT-TERM
SECURITIES Issue
Commercial US$ 20,000,000 Dean Witter, Discover & Co., 5.30%
Paper** due 4/08/1997 19,979,389 19,979,389 1.8
7,640,000 Deer Park Refining L.P., 5.36% due
4/21/1997 7,617,250 7,617,250 0.7
13,000,000 GTE Corporation, 5.34% due 4/08/1997 12,986,502 12,986,502 1.2
42,141,000 General Motors Acceptance Corp.,
6.75% due 4/01/1997 42,141,000 42,141,000 3.8
31,000,000 National Fleet Funding Corp., 5.34%
due 5/02/1997 30,857,452 30,857,452 2.8
23,350,000 Preferred Receivable Funding Corp.,
5.37% due 4/15/1997 23,301,237 23,301,237 2.1
-------------- -------------- ------
136,882,830 136,882,830 12.4
US Government 30,000,000 Federal National Mortgage
& Agency Association, 5.23% due 4/07/1997 29,973,850 29,973,850 2.7
Obligations** US Treasury Bills:
185,000,000 4.87% due 4/03/1997 184,949,947 184,950,050 16.8
1,250,000 5.17% due 8/21/1997 1,224,509 1,223,725 0.1
-------------- -------------- ------
216,148,306 216,147,625 19.6
<PAGE>
Total Investments in Short-Term
Securities 353,031,136 353,030,455 32.0
Total Investments 1,088,250,277 1,085,226,664 98.3
<CAPTION>
OPTIONS Nominal Value Premiums
WRITTEN Covered by Options Received
Currency Call 13,320,000 British Pound, expiring April 1997
Options Written at Pound Sterling 1.665 (27,199) (133) 0.0
Total Options Written (27,199) (133) 0.0
Total Investments, Net of Options Written $1,088,223,078 1,085,226,531 98.3
==============
Short Sales (Proceeds--$5,616,162)*** (5,415,634) (0.5)
Unrealized Appreciation on Forward Foreign Exchange Contracts**** 78,987 0.0
Other Assets Less Liabilities 24,282,752 2.2
-------------- ------
Net Assets $1,104,172,636 100.0%
============== ======
Net Asset Value: Class A--Based on net assets of $193,090,329 and
22,309,623 shares outstanding $ 8.66
==============
Class B--Based on net assets of $885,377,909 and
102,359,359 shares outstanding $ 8.65
==============
Class C--Based on net assets of $10,930,645 and
1,264,772 shares outstanding $ 8.64
==============
Class D--Based on net assets of $14,773,753 and
1,707,037 shares outstanding $ 8.65
==============
<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)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.
(d)Each share of Series B stock contains a right which entitles the
holder to purchase a predetermined number of shares of Preferred
Stock.
(e)The rights may be exercised until 2/06/2001.
++Brady Bonds are securities which have been issued to refinance
commercial bank loans and other debt. The risk associated with
these instruments is the amount of any uncollateralized principal
or interest payments since there is a high default rate of
commercial bank loans by countries issuing these securities.
*Represents a zero coupon or step bond; the interest rate shown is
the effective yield at the time of purchase by the Fund.
**Commercial Paper and certain US Government & Agency Obligations
are traded on a discount basis; the interest rates shown are the
discount rates paid at the time of purchase by the Fund.
***Covered Short Sales entered into as of March 31, 1997 were as
follows:
Shares Issue Value
581,270 Allied Waste Industries, Inc. $(4,795,478)
67,000 Engle Homes, Inc. (603,000)
4,500 Polyphase Corp. (17,156)
Total (Proceeds--$5,616,162) $(5,415,634)
===========
****Forward foreign exchange contracts as of March 31, 1997 were as
follows:
Foreign Currency Expiration Unrealized
Purchased Date Appreciation
DM 38,372,740 April 1997 $ 78,987
Total Unrealized Appreciation on Forward
Foreign Exchange Contracts--Net
(US$ Commitment--$23,000,000) $ 78,987
===========
<PAGE>
</TABLE>
