MERRILL LYNCH
WORLD INCOME
FUND, INC.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Quarterly Report
March 31, 1999
<PAGE>
MERRILL LYNCH WORLD INCOME FUND, INC.
Officers and Directors
Terry K. Glenn, President and Director
James H. Bodurtha, Director
Herbert I. London, Director
Robert R. Martin, Director
Joseph L. May, Director
Andre F. Perold, Director
Arthur Zeikel, Director
Vincent T. Lathbury III, Senior Vice President
Joseph T. Monagle Jr., Senior Vice President
Donald C. Burke, Vice President and Treasurer
Robert Harris, Secretary
- --------------------------------------------------------------------------------
Gerald M. Richard, Treasurer of Merrill Lynch World Income Fund, Inc. has
recently retired. His colleagues at Merrill Lynch Asset Management, L.P. join
the Fund's Board of Directors in wishing Mr. Richard well in his retirement.
- --------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
<PAGE>
Merrill Lynch World Income Fund, Inc., March 31, 1999
DEAR SHAREHOLDER
During the quarter ended March 31, 1999, the markets for lower-quality,
fixed-income securities improved dramatically as the recovery from last year's
distressed conditions continued. The unmanaged benchmarks CS First Boston High
Yield Index and the J.P. Morgan Emerging Markets Bond Index (EMBI+) had total
returns of +1.64% and +5.30%, respectively, for the three months ended March 31,
1999. These returns compared favorably to the -3.27% return provided by ten-year
US Treasury securities for the same period. Total returns for Merrill Lynch
World Income Fund, Inc.'s Class A, Class B, Class C and Class D Shares for the
quarter ended March 31, 1999 were +2.25%, +2.23%, +2.05% and +2.36%,
respectively. (Fund results do not reflect sales charges; results would be lower
if sales charges were included. Complete performance information can be found on
pages 4 and 5 of this report to shareholders.)
During the March quarter, cash flow into high-yield mutual funds turned modestly
positive. Emerging market flows appeared less robust. However, liquidity in both
markets remained poor as dealers appeared reluctant to commit capital in support
of client sales. This lack of liquidity is evident on both the bid and offered
sides of the market. While there has been no surge of new money into the
high-yield or emerging markets, it appears that for the time being there are no
large sellers.
The emerging markets suffered a temporary setback in early January as Brazil's
foreign exchange reserves dried up as the country unsuccessfully attempted to
support its currency. Authorities gave up and allowed the currency to float on
January 16, 1999. Unlike the liquidity-driven, broad-based bond price declines
witnessed throughout the emerging markets when Russia defaulted, bond price
declines were generally localized to Brazil. Subsequent to the floating of the
currency, events in Brazil have been constructive. The country has met the
conditions for International Monetary Fund support. The currency has stabilized
and equity and debt markets have surged. Our outlook on Brazil is positive.
In summary, the US high-yield and global emerging markets have recovered but can
still be described as undervalued based on an exceptionally wide yield spread
off US Treasury securities. The US economy has demonstrated stronger growth than
most forecasters anticipated. While long-term interest rates have risen this
year, which is probably a reversal of last fall's rush to quality, short-term
interest rates are unchanged and, in our opinion, seem likely to remain so for
some time. There are some signs of economic recovery in Japan and elsewhere in
Asia. While economies in Europe and South America are slowing, we believe the
macroeconomic backdrop is likely to be relatively benign in the next three
months-six months. In this environment, risk premiums could continue to narrow.
We maintained the asset allocations adopted in late December. As of March 31,
1999, the Fund's asset allocation was high-yield corporate bonds and convertible
bonds, 70% of net assets, and emerging market issues, 30%. Of the 70% of the
Fund's net assets invested in the high-yield market, in the coming months we
expect to allocate some assets to the emerging markets corporate sector, where
we see many areas of undervaluation.
High-Yield Investments
In our view, the US high-yield market is attractive for the following reasons.
o Valuations are compelling. Yield spreads between high-yield and Treasury
securities narrowed by approximately 3.75% during the first quarter of 1999 but
remain wide at approximately 6%. This means that an investor receives
approximately 6% of additional yield for assuming the higher credit risk and
lesser liquidity of high-yield bonds. In our opinion, this spread is quite
attractive given the relatively benign credit conditions currently prevailing.
o The economic and interest rate outlook is likely to remain favorable, in our
view. We expect an environment of modest economic growth and stable interest
rates to continue. We believe that it is unlikely that last year's liquidity
debacle will recur and that as memories fade, risk aversion is likely to
moderate.
o Technical conditions are positive. Last year most asset allocators, hedge
funds and other opportunistic investors abandoned the high-yield market. The
flow of new money into mutual funds was relatively low in the first quarter,
reflecting the modest expectations of investors. We believe that greater
awareness of valuation will accelerate cash flows and result in improved bond
prices.
Given our positive view on the high-yield market, we structured our US
high-yield investments to seek to take advantage of anticipated rising bond
prices. We reduced the Fund's holdings in USAirways Group Inc., Trump Atlantic
City Associates, Doman Industries Ltd. and Lenfest Communications, Inc. in order
to establish new positions in RSL Communications PLC, Federal-Mogul Corporation,
Impsat Corp. and TFM, S.A. de C.V. We also realized profits in two newly
underwritten issues, Hermes Euro Rail and Chancellor Media Corp.
Emerging Markets Investments
While we believe that emerging market risks have not evaporated, we expect that
the benign investment climate will continue in the short term on the strength of
the trends already in place and on the strength of better underlying
fundamentals in emerging markets. Potential for further price appreciation
exists as the perception of risk in the asset class declines and cross-over
buyers enter the market in greater numbers. Consolidation of those gains and a
return to spreads existing prior to the advent of the Asian crisis will be
grounded on several developments, in our view. These include clear evidence of
positive economic growth trends in the world economy, facilitating commodity
price increases and growing markets for Third World exports; that Brazil finds
its way to a permanent solution of its endemic fiscal problems; and continued
recovery in emerging Asia and in Japan.
Immediately after the devaluation of the real, we overweighted our exposure to
Brazil relative to the EMBI+ benchmark. In addition, during the March quarter we
reduced our exposure to Argentina in order to enlarge our allocation to
Venezuela.
As of March 31, 1999, the asset allocation of the Fund's emerging markets
investments (as a percentage of the Fund's total exposure to emerging markets)
was: Argentina, 17.4%; Brazil, 35.4%; Bulgaria, 3.8%; Mexico, 23.6%; Panama,
2.6%; Peru, 3.5%; Poland, 5.3%; Russia, 0.4%; Venezuela, 7.3%; and cash
reserves, 0.7%.
In Conclusion
We appreciate your ongoing investment in Merrill Lynch World Income Fund, Inc.,
and we look forward to assisting you with your financial needs in the months and
years ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director
/s/ Vincent T. Lathbury
Vincent T. Lathbury III
Senior Vice President and
Portfolio Manager
May 14, 1999
================================================================================
After more than 20 years of service, Arthur Zeikel recently retired as Chairman
of Merrill Lynch Asset Management, L.P. (MLAM). Mr. Zeikel served as President
of MLAM from 1977 to 1997 and as Chairman since December 1997. Mr. Zeikel is one
of the country's most respected leaders in asset management and presided over
the growth of Merrill Lynch's asset management business. During his tenure,
client assets under management grew from $300 million to over $500 billion. Mr.
Zeikel will remain on Merrill Lynch World Income Fund, Inc.'s Board of
Directors. We are pleased to announce that Terry K. Glenn has been elected
President and Director of the Fund. Mr. Glenn has held the position of Executive
Vice President of MLAM since 1983.
Mr. Zeikel's colleagues at MLAM join the Fund's Board of Directors in wishing
him well in his retirement from Merrill Lynch and are pleased that he will
continue as a member of the Fund's Board of Directors.
================================================================================
2 & 3
<PAGE>
Merrill Lynch World Income Fund, Inc., March 31, 1999
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:
o 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.
o 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.)
o 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.
o Class D Shares incur a maximum initial sales charge of 4% and an account
maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation of
future performance. Figures shown in the "Recent Performance Results" and
"Average Annual Total Return" 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.
Recent Performance Results*
<TABLE>
<CAPTION>
Ten Years/ Standardized
12 Month 3 Month Since Inception 30-Day Yield
Total Return Total Return Total Return As of 3/31/99
===========================================================================================================================
<S> <C> <C> <C> <C>
ML World Income Fund, Inc. Class A Shares -24.74% +2.25% +80.21% 8.72%
- ---------------------------------------------------------------------------------------------------------------------------
ML World Income Fund, Inc. Class B Shares -25.24 +2.23 +19.02 8.30
- ---------------------------------------------------------------------------------------------------------------------------
ML World Income Fund, Inc. Class C Shares -25.41 +2.05 + 1.53 8.26
- ---------------------------------------------------------------------------------------------------------------------------
ML World Income Fund, Inc. Class D Shares -24.93 +2.36 + 4.23 8.48
===========================================================================================================================
</TABLE>
* Investment results shown do not reflect sales charges; results shown would
be lower if a sales charge was included. Total investment returns are
based on changes in net asset values for the periods shown, and assume
reinvestment of all dividends and capital gains distributions at net asset
value on the payable date. The Fund's ten-year/since inception periods
are: Class A Shares, for the ten years ended 3/31/99; Class B Shares, from
11/18/91 to 3/31/99; and Class C & Class D Shares, from 10/21/94 to
3/31/99.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares+*
================================================================================
Year Ended 3/31/99 -24.74% -27.75%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/99 + 1.00 + 0.18
- --------------------------------------------------------------------------------
Ten Years Ended 3/31/99 + 6.07 + 5.63
- --------------------------------------------------------------------------------
+ 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 3/31/99 -25.24% -27.95%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/99 + 0.22 + 0.22
- --------------------------------------------------------------------------------
Inception (11/18/91) through 3/31/99 + 2.39 + 2.39
- --------------------------------------------------------------------------------
* 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 3/31/99 -25.41% -26.08%
- --------------------------------------------------------------------------------
Inception (10/21/94) through 3/31/99 + 0.34 + 0.34
- --------------------------------------------------------------------------------
* 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 3/31/99 -24.93% -27.93%
- --------------------------------------------------------------------------------
Inception (10/21/94) through 3/31/99 + 0.94 + 0.01
- --------------------------------------------------------------------------------
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
4 & 5
<PAGE>
Merrill Lynch World Income Fund, Inc., March 31, 1999
SCHEDULE OF INVESTMENTS (in US dollars)
<TABLE>
<CAPTION>
Percent of
AFRICA Industries Face Amount Fixed-Income Investments Cost Value Net Assets
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Morocco Loan Assignments/ US$ 2,000,000 Morocco Tranche A,
Participations 6.063% due 1/01/2009 $ 1,568,629 $ 1,615,000 0.5%
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments
in Morocco 1,568,629 1,615,000 0.5
====================================================================================================================================
Nigeria Foreign Government 1,750,000 Central Bank of Nigeria, 6.25%
Obligations due 11/15/2020+ 1,090,051 1,113,437 0.3
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments
in Nigeria 1,090,051 1,113,437 0.3
====================================================================================================================================
<CAPTION>
Shares Held Warrants
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Nigeria Energy 1,750 Nigeria Oil (Warrants) (b) 0 0 0.0
--------------------------------------------------------------------------------------------------------------------
Total Warrants in Nigeria 0 0 0.0
====================================================================================================================================
Total Investments in African
Securities 2,658,680 2,728,437 0.8
====================================================================================================================================
<CAPTION>
EUROPE Face Amount Fixed-Income Investments
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Bulgaria Foreign Government US$ 2,300,000 Republic of Bulgaria, Discount,
Obligations Series A, 5.875% due 7/28/2024+ 1,596,557 1,546,750 0.5
2,300,000 Republic of Bulgaria, Front-Loaded
Interest Rate Reduction Bonds,
Series A, 2.50% due 7/28/2012+ 1,331,510 1,308,125 0.4
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments
in Bulgaria 2,928,067 2,854,875 0.9
====================================================================================================================================
Luxembourg Wireless Communications 10,000,000 Millicom International Cellular,
-- International 11.834%* due 6/01/2006 7,989,175 7,437,500 2.3
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments in
Luxembourg 7,989,175 7,437,500 2.3
====================================================================================================================================
Poland Telecommunications 4,750,000 TPSA Finance BV, 7.75% due 12/10/2008 4,715,895 4,631,369 1.4
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments
in Poland 4,715,895 4,631,369 1.4
====================================================================================================================================
Russia Financial Services 2,500,000 Unexim International Finance BV,
9.875% due 8/01/2000 (c) 2,514,750 200,000 0.1
--------------------------------------------------------------------------------------------------------------------
Foreign Government 3,343,702 Vnesheconombank, Interest Accrual
Obligations Note, 5.9687% due 12/15/2015 (a)(c)(e) 1,482,752 267,496 0.1
22,780,000 Vnesheconombank, Principal Loan,
5.9687% due 12/15/2020 (a)(c)(e) 13,323,608 1,509,175 0.4
------------ ------------ -----
14,806,360 1,776,671 0.5
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments
in Russia 17,321,110 1,976,671 0.6
====================================================================================================================================
United Kingdom Cable-- International 5,000,000 NTL, Inc., Series B, 10% due
2/15/2007 4,925,000 5,312,500 1.6
10,000,000 TeleWest Communications PLC,
11% due 10/01/2007 8,513,661 8,800,000 2.7
------------ ------------ -----
13,438,661 14,112,500 4.3
--------------------------------------------------------------------------------------------------------------------
Telephone 5,000,000 RSL Communications PLC, 9.125%
due 3/01/2008 4,672,500 4,950,000 1.5
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments
in the United Kingdom 18,111,161 19,062,500 5.8
====================================================================================================================================
<CAPTION>
Convertible Bonds
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Ireland Dental Equipment 500,000 Phoenix Shannon PLC, 9.50%
& Supplies due 11/01/2000 196,779 5,000 0.0
--------------------------------------------------------------------------------------------------------------------
Total Convertible Bonds in Ireland 196,779 5,000 0.0
====================================================================================================================================
Total Investments in European
Securities 51,262,187 35,967,915 11.0
====================================================================================================================================
<CAPTION>
LATIN
AMERICA Fixed-Income Investments
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Argentina Foreign Government 12,000 Republic of Argentina, 5.938%
Obligations due 3/31/2005+ 9,270 10,272 0.0
9,800,000 Republic of Argentina, 6% due
3/31/2023+ (e) 7,152,031 6,811,000 2.1
23,395,000 Republic of Argentina, 9.75%
due 9/19/2027 20,795,775 19,447,094 6.0
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments
in Argentina 27,957,076 26,268,366 8.1
====================================================================================================================================
Brazil Foreign Government 3,750,000 Republic of Brazil-DCB,
Obligations 6.188% due 4/15/2012+ (e) 2,161,193 2,182,500 0.7
20,019,540 Republic of Brazil, EC',
7.02% due 4/15/2014+ (e) 11,904,021 12,674,871 3.9
14,250,000 Republic of Brazil,
10.125% due 5/15/2027 11,619,063 10,331,250 3.2
2,500,000 Republic of Brazil, Discount Bond,
6.125% due 4/15/2024 1,562,500 1,506,250 0.4
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments
in Brazil 27,246,777 26,694,871 8.2
====================================================================================================================================
Colombia Utilities 5,887,200 TransGas de Occidente SA,
9.79% due 11/01/2010 6,022,115 5,063,952 1.5
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments
in Colombia 6,022,115 5,063,952 1.5
====================================================================================================================================
Ecuador Foreign Government 3,900,000 Republic of Ecuador, 4% due
Obligations 2/28/2025+ 1,757,657 1,550,250 0.5
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments
in Ecuador 1,757,657 1,550,250 0.5
====================================================================================================================================
Mexico Foreign Government 4,000,000 United Mexican States, 11.50%
Obligations due 5/15/2026 3,400,000 4,455,000 1.4
9,120,000 United Mexican States, Series B,
6.25% due 12/31/2019 7,051,998 7,170,600 2.2
12,878,000 United Mexican States, Series W-A,
6.25% due 12/31/2019 9,930,946 10,125,328 3.1
------------ ------------ -----
20,382,944 21,750,928 6.7
--------------------------------------------------------------------------------------------------------------------
Transportation 5,000,000 TFM, S.A. de C.V., 13.896%* due
6/15/2009 2,950,000 2,962,500 0.9
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments
in Mexico 23,332,944 24,713,428 7.6
====================================================================================================================================
Panama Foreign Government 2,700,000 Panama, Front-Loaded Interest Rate
Obligations Reduction Bonds, 4% due
7/17/2014+ 2,041,316 2,124,562 0.6
600,000 Republic of Panama, 8.875% due
9/30/2027 546,000 555,000 0.2
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments
in Panama 2,587,316 2,679,562 0.8
====================================================================================================================================
Peru Foreign Government 3,820,000 Republic of Peru, Front-Loaded
Obligations Interest Rate
Reduction Bonds, 3.75% due
3/07/2017+ 2,384,335 2,263,350 0.7
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments
in Peru 2,384,335 2,263,350 0.7
====================================================================================================================================
</TABLE>
6 & 7
<PAGE>
Merrill Lynch World Income Fund, Inc., March 31, 1999
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<TABLE>
<CAPTION>
LATIN AMERICA Percent of
(concluded) Industries Face Amount Fixed-Income Investments Cost Value Net Assets
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Venezuela Foreign Government US $10,750,000 Republic of Venezuela, 9.25% due
Obligations 9/15/2027 $ 9,605,125 $ 6,638,125 2.0%
1,285,710 Republic of Venezuela -- DCB,
5.938% due 12/18/2007 803,569 901,604 0.3
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments
in Venezuela 10,408,694 7,539,729 2.3
====================================================================================================================================
Total Investments in Latin
American Securities 101,696,914 96,773,508 29.7
====================================================================================================================================
NORTH AMERICA
====================================================================================================================================
Canada Paper 5,000,000 Doman Industries Limited,
8.75% due 3/15/2004 4,500,000 3,250,000 1.0
--------------------------------------------------------------------------------------------------------------------
Telephony 5,000,000 Metronet Communications,
10.625% due 11/01/2008 5,268,750 5,825,000 1.8
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments
in Canada 9,768,750 9,075,000 2.8
====================================================================================================================================
United States Airlines 5,000,000 USAir Inc., 10.375% due 3/01/2013 5,000,000 5,381,350 1.7
--------------------------------------------------------------------------------------------------------------------
Automotive 5,000,000 Federal-Mogul Corporation,
7.375% due 1/15/2006 4,979,150 4,906,905 1.5
--------------------------------------------------------------------------------------------------------------------
Cable Television 5,000,000 Century Communications Corporation,
9.50% due 3/01/2005 4,897,500 5,350,000 1.6
5,000,000 Lenfest Communications, Inc.,
10.50% due 6/15/2006 4,961,050 5,775,000 1.8
------------ ------------ -----
9,858,550 11,125,000 3.4
--------------------------------------------------------------------------------------------------------------------
Chemicals 5,340,000 ISP Holdings Inc., 9.75% due
2/15/2002 5,340,000 5,486,850 1.7
--------------------------------------------------------------------------------------------------------------------
Communications 5,000,000 Impsat Corp., 12.375% due
6/15/2008 4,525,000 4,400,000 1.3
--------------------------------------------------------------------------------------------------------------------
Computer Services -- 5,000,000 Advanced Micro Devices, Inc.,
Electronics 11% due 8/01/2003 5,512,500 5,150,000 1.6
5,000,000 Hadco Corp., 9.50% due 6/15/2008 4,983,000 4,937,500 1.5
------------ ------------ -----
10,495,500 10,087,500 3.1
--------------------------------------------------------------------------------------------------------------------
Consumer Services 5,000,000 Protection One Alarm Monitoring,
8.125% due 1/15/2009 5,000,000 5,100,000 1.6
--------------------------------------------------------------------------------------------------------------------
Energy 10,000,000 Chesapeake Energy Corp., 8.50%
due 3/15/2012 9,941,400 6,900,000 2.1
5,000,000 Ocean Energy Inc., 8.375% due
7/01/2008 4,793,750 4,825,000 1.5
10,670,000 TransAmerican Energy Corp.,
13.22%* due 6/15/2002 10,291,204 2,680,837 0.8
------------ ------------ -----
25,026,354 14,405,837 4.4
--------------------------------------------------------------------------------------------------------------------
Financial Services 10,000,000 PennCorp Financial Group, 9.25%
due 12/15/2003 10,000,000 7,350,000 2.3
5,000,000 SB Treasury Company LLC, 9.40%
due 12/29/2049 (e) 4,800,000 4,900,000 1.5
------------ ------------ -----
14,800,000 12,250,000 3.8
--------------------------------------------------------------------------------------------------------------------
Gaming 10,000,000 GB Property Funding Corp.,
10.875% due 1/15/2004 9,996,250 7,100,000 2.2
5,000,000 Harrah's Operating Co. Inc.,
7.875% due 12/15/2005 5,018,750 5,025,000 1.5
Jazz Casino Co. LLC:
3,232,500 5.867% due 11/15/2009 (a) 1,560,336 1,810,200 0.5
315,000 Contingent Notes, due
11/15/2009 (d)(e) 0 0 0.0
5,000,000 Trump Atlantic City Associates/
Funding Inc., 11.25% due
5/01/2006 4,900,000 4,425,000 1.4
------------ ------------ -----
21,475,336 18,360,200 5.6
--------------------------------------------------------------------------------------------------------------------
Health Care 5,000,000 Columbia/HCA Healthcare Corp.,
7.25% due 5/20/2008 4,696,650 4,565,500 1.4
5,000,000 Fresenius Medical Capital Trust I,
9% due 12/01/2006 5,237,500 5,200,000 1.6
5,000,000 Tenet Healthcare Corp., 8.125%
due 12/01/2008 4,980,600 4,800,000 1.5
------------ ------------ -----
14,914,750 14,565,500 4.5
--------------------------------------------------------------------------------------------------------------------
Hotels 5,000,000 HMH Properties, Inc., 7.875% due
8/01/2008 4,967,600 4,812,500 1.5
--------------------------------------------------------------------------------------------------------------------
Internet Transport 5,000,000 PSINet, Inc., 10% due 2/15/2005 4,862,500 5,275,000 1.6
--------------------------------------------------------------------------------------------------------------------
Paper 5,000,000 Container Corporation of America,
9.75% due 4/01/2003 5,100,000 5,262,500 1.6
--------------------------------------------------------------------------------------------------------------------
Printing & 5,000,000 Primedia, Inc., 7.625% due
Publishing 4/01/2008 4,971,250 4,950,000 1.5
--------------------------------------------------------------------------------------------------------------------
Supermarkets 5,000,000 Pueblo Xtra International Inc.,
9.50% due 8/01/2003 5,098,125 4,781,250 1.5
--------------------------------------------------------------------------------------------------------------------
Telephony 5,000,000 Intermedia Communication Inc.,
8.60% due 6/01/2008 4,792,500 5,000,000 1.5
--------------------------------------------------------------------------------------------------------------------
Utilities 10,000,000 Tucson Electric & Power Co.,
10.732% due 1/01/2013 9,607,625 11,741,100 3.6
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments
in the United States 160,814,240 147,891,492 45.4
====================================================================================================================================
<CAPTION>
Convertible Bonds
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
United States Banking & 400,000 BankAtlantic Bancorp, Inc., 5.625%
Financial due 12/01/2007 400,000 315,000 0.1
--------------------------------------------------------------------------------------------------------------------
Conglomerates 600,000 Polyphase Corporation, 12% due
7/01/1999*** 600,000 132,000 0.0
1,000,000 Thermo Fibertek Inc., 4.50% due
7/15/2004 887,500 821,250 0.3
------------ ------------ -----
1,487,500 953,250 0.3
--------------------------------------------------------------------------------------------------------------------
Energy 1,000,000 Pennzenergy Company, 4.95% due
8/15/2008
(Convertible in Chevron Corp.) 1,013,750 1,003,750 0.3
--------------------------------------------------------------------------------------------------------------------
Environmental 1,063,000 Thermo TerraTech, Inc., 4.625%
due 5/01/2003 1,114,735 896,906 0.3
1,000,000 U.S. Filter Corp., 4.50% due
12/15/2001 1,044,000 980,000 0.3
------------ ------------ -----
2,158,735 1,876,906 0.6
--------------------------------------------------------------------------------------------------------------------
Health Care 1,000,000 Integrated Health Services, Inc.,
5.75% due 1/01/2001 993,750 640,000 0.2
--------------------------------------------------------------------------------------------------------------------
Instruments/Scientific 500,000 ThermoQuest Corporation, 5% due
8/15/2000 507,500 486,875 0.1
--------------------------------------------------------------------------------------------------------------------
Internet 450,000 Amazon.com Inc., 4.75% due
2/01/2009 450,000 571,500 0.2
--------------------------------------------------------------------------------------------------------------------
Medical Laser 2,000,000 Thermolase Corp., 4.375% due
Systems 8/05/2004 1,960,625 1,612,500 0.5
--------------------------------------------------------------------------------------------------------------------
Oil Drilling 1,000,000 Diamond Offshore Drilling, 3.75%
due 2/15/2007 934,312 1,033,750 0.3
500,000 Parker Drilling Company, 5.50% due
8/01/2004 505,000 292,500 0.1
------------ ------------ -----
1,439,312 1,326,250 0.4
--------------------------------------------------------------------------------------------------------------------
Optical Equipment 1,430,000 Thermo Optek Inc., 5% due
10/15/2000 1,433,950 1,387,100 0.4
--------------------------------------------------------------------------------------------------------------------
Technology Data General Corp:
750,000 6% due 5/15/2004 750,000 604,687 0.2
250,000 6% due 5/15/2004 246,875 211,250 0.1
------------ ------------ -----
996,875 815,937 0.3
--------------------------------------------------------------------------------------------------------------------
Total Convertible Bonds in the
United States 12,841,997 10,989,068 3.4
====================================================================================================================================
</TABLE>
8 & 9
<PAGE>
Merrill Lynch World Income Fund, Inc., March 31, 1999
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<TABLE>
<CAPTION>
NORTH AMERICA Convertible Preferred Stock, Preferred Percent of
(concluded) Industries Shares Held Stocks, Common Stocks & Warrants Cost Value Net Assets
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
United States Broadcasting/Cable 137,257 On Command Corporation $ 4,061,096 $ 1,243,892 0.4%
43,675 On Command Corporation
(Warrants) (b) 349,400 109,188 0.0
------------ ------------ -----
4,410,496 1,353,080 0.4
--------------------------------------------------------------------------------------------------------------------
Conglomerates 105,000 Polyphase Corporation*** 158,550 39,375 0.0
52,500 Polyphase Corporation
(Warrants) (b)*** 13,125 525 0.0
52,500 Polyphase Corporation
(Warrants) (b)*** 26,250 2,100 0.0
------------ ------------ -----
197,925 42,000 0.0
--------------------------------------------------------------------------------------------------------------------
Containers 10,000 Owens-Illinois Inc., 4.75% 500,000 364,375 0.1
--------------------------------------------------------------------------------------------------------------------
Energy TCR Holdings Corp., Conv. Pfd.:
25,172 (Class B) 1,510 1,510 0.0
13,845 (Class C) 775 775 0.0
36,500 (Class D) 1,935 1,935 0.0
75,516 (Class E) 4,758 4,758 0.0
------------ ------------ -----
8,978 8,978 0.0
--------------------------------------------------------------------------------------------------------------------
Gaming 75,000 Goldriver Hotel & Casino Corp.,
Liquidating Trust 75,000 0 0.0
91,338 JCC Holding Company (Class A) 365,352 308,266 0.1
------------ ------------ -----
440,352 308,266 0.1
--------------------------------------------------------------------------------------------------------------------
Manufactured Housing 10,000 Fleetwood Capital Trust, 6% 540,000 425,000 0.1
--------------------------------------------------------------------------------------------------------------------
Special Services 10,000 Union Pacific Capital Trust, 6.25% 460,625 498,750 0.2
--------------------------------------------------------------------------------------------------------------------
Steel 50,000 Worthington Industries, Inc.
(Convertible, Series DECS into
Rouge Steel Common Stock), 7.25% 850,000 450,000 0.2
--------------------------------------------------------------------------------------------------------------------
Utilities 16,259 Citizens Utilities Company (Class B) 148,700 126,007 0.0
30,000 Citizens Utilities Trust, 5% 1,284,300 1,200,000 0.4
------------ ------------ -----
1,433,000 1,326,007 0.4
--------------------------------------------------------------------------------------------------------------------
Total Convertible Preferred Stocks,
Preferred Stocks, Common Stocks &
Warrants in the United States 8,841,376 4,776,456 1.5
====================================================================================================================================
Total Investments in North American
Securities 192,266,363 172,732,016 53.1
====================================================================================================================================
<CAPTION>
PACIFIC
BASIN/ASIA Face Amount Fixed-Income Investments
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
China Transportation US$ 6,620,000 Cathay International Ltd.,
13% due 4/15/2008 6,620,000 1,655,000 0.5
10,000,000 GS Superhighway Holdings, 9.875%
due 8/15/2004 9,262,500 5,000,000 1.6
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments
in China 15,882,500 6,655,000 2.1
====================================================================================================================================
Indonesia Paper 5,000,000 Indah Kiat International Finance,
12.50% due 6/15/2006 5,025,000 3,300,000 1.0
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments
in Indonesia 5,025,000 3,300,000 1.0
====================================================================================================================================
South Korea Foreign Government 3,330,000 Republic of Korea, 8.875% due
Obligations 4/15/2008 3,398,125 3,563,193 1.1
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments
in South Korea 3,398,125 3,563,193 1.1
====================================================================================================================================
Total Investments in Pacific
Basin/Asian Securities 24,305,625 13,518,193 4.2
====================================================================================================================================
<CAPTION>
SHORT-TERM
SECURITIES Issue
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Commercial 6,705,000 General Motors Acceptance Corp.,
Paper** 5.13% due 4/01/1999 6,705,000 6,705,000 2.1
--------------------------------------------------------------------------------------------------------------------
Total Investments in Short-Term
Securities 6,705,000 6,705,000 2.1
====================================================================================================================================
Total Investments $378,894,769 328,425,069 100.9
============
Short Sales (Proceeds--$18,472)*** (1,688) (0.0)
Liabilities in Excess of Other Assets (2,866,425) (0.9)
------------ -----
Net Assets $325,556,956 100.0%
============ =====
====================================================================================================================================
Net Asset Value: Class A -- Based on net assets of $68,190,895 and 11,082,583
shares outstanding $ 6.15
============
Class B -- Based on net assets of $246,235,894 and 40,043,877
shares outstanding $ 6.15
============
Class C -- Based on net assets of $3,558,660 and 579,135
shares outstanding $ 6.14
============
Class D -- Based on net assets of $7,571,507 and 1,230,679
shares outstanding $ 6.15
============
====================================================================================================================================
</TABLE>
+ 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 reflects
the effective yield at the time of purchase by the Fund.
** Commercial Paper is traded on a discount basis; the interest rate shown
reflects the discount rate paid at the time of purchase by the Fund.
*** Covered Short Sales entered into as of March 31, 1998 were as follows:
- --------------------------------------------------------------------------------
Shares Issue Value
- --------------------------------------------------------------------------------
4,500 Polyphase Corp. $(1,688)
- --------------------------------------------------------------------------------
Total (Proceeds--$18,472) $(1,688)
=======
- --------------------------------------------------------------------------------
(a) Represents a pay-in-kind security which may pay interest/ dividends in
additional face/shares.
(b) Warrants entitle the Fund to purchase a predetermined number of shares of
common stock and are non-income producing. The purchase price and number
of shares are subject to adjustment under certain conditions until the
expiration date.
(c) Due to the uncertainty of financial and economic conditions in Russia,
effective September 30, 1998, interest accrual was ceased.
(d) Represents an obligation by Jazz Casino Co. LLC to pay a semi-annual
amount to the Portfolio through 11/15/2009. The payments are based upon
varying interest rates and the amounts, which may be paid-in-kind, are
contingent upon the earnings before income taxes, depreciation and
amortization of Jazz Casino Co. LLC on a fiscal year basis.
(e) Floating Rate Note.
10 & 11
<PAGE>
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.
Merrill Lynch
World Income
Fund, Inc.
Box 9011
Princeton, NJ
08543-9011 #10788--3/99
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