WORLDWIDE
DOLLARVEST
FUND, INC.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Annual Report
November 30, 1998
<PAGE>
WORLDWIDE DOLLARVEST FUND, INC.
The Benefits and Risks of Leveraging
The Fund is authorized to utilize leverage in an amount up to 331/3% of the
Fund's total assets (including the amount obtained from the leverage).
The concept of leveraging is based on the premise that the cost of assets to be
obtained from leverage will be based on short-term interest rates, which
normally will be lower than the return earned by the Fund on its longer-term
portfolio investments. Since the total assets of the Fund (including the assets
obtained from leverage) will be invested in the higher-yielding portfolio
investments, the Fund's Common Stock shareholders are the beneficiaries of the
incremental yield. Should the differential between the underlying interest rates
narrow, the incremental yield "pick up" will be reduced. Furthermore, if
long-term interest rates rise, the Common Stock net asset value will reflect the
full decline in the entire portfolio holdings therefrom since the assets
obtained from leverage do not fluctuate.
Leverage creates risks for holders of Common Stock including the likelihood of
greater net asset value and market price volatility. In addition, there is the
risk that fluctuations in interest rates on borrowings (or in the dividend rates
on any Preferred Stock, if the Fund were to issue Preferred Stock) may reduce
the Common Stock's yield and negatively impact its market price. If the income
derived from securities purchased with assets received from leverage exceeds the
cost of leverage, the Fund's net income will be greater than if leverage had not
been used. Conversely, if the income from the securities purchased is not
sufficient to cover the cost of leverage, the Fund's net income will be less
than if leverage had not been used, and therefore the amount available for
distribution to Common Stock shareholders will be reduced. In this case, the
Fund may nevertheless decide to maintain its leveraged position in order to
avoid capital losses on securities purchased with leverage. However, the Fund
will not generally utilize leverage if it anticipates that its leveraged capital
structure would result in a lower rate of return for its Common Stock than would
be obtained if the Common Stock were unleveraged for any significant amount of
time.
Proxy Results
During the six-month period ended November 30, 1998, Worldwide DollarVest Fund,
Inc. shareholders voted on the following proposals. The proposals were approved
at a shareholders' meeting on July 9, 1998. The description of each proposal and
number of shares voted are as follows:
- --------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
- --------------------------------------------------------------------------------
1. To elect the Fund's
Board of Directors: Donald Cecil 6,086,177 145,557
Edward H. Meyer 6,053,047 178,687
Charles C. Reilly 6,120,627 111,107
Richard R. West 6,087,558 144,176
Arthur Zeikel 6,092,355 139,379
Edward D. Zinbarg 6,088,701 143,033
- --------------------------------------------------------------------------------
Shares Voted Shares Voted Shares Voted
For Against Abstain
- --------------------------------------------------------------------------------
2. To ratify the selection of Deloitte
& Touche LLP as the independent
auditors of the Fund to serve for
the current fiscal year. 6,068,258 62,009 101,467
- --------------------------------------------------------------------------------
<PAGE>
Worldwide DollarVest Fund, Inc., November 30, 1998
DEAR SHAREHOLDER
Investment Results
For the year ended November 30, 1998, total investment return of Worldwide
DollarVest Fund, Inc. was -45.59%, based on a change in per share net asset
value from $15.67 to $6.44, and assuming reinvestment of $3.337 per share income
dividends and $0.154 per share capital gains distributions. During the same
period, the Fund earned $1.165 per share income dividends, representing a net
annualized yield of 18.09%, based on a month-end per share net asset value of
$6.44.
For the six-month period ended November 30, 1998, total investment return of
Worldwide DollarVest Fund, Inc. was -46.57%, based on a change in per share net
asset value from $12.92 to $6.44, and assuming reinvestment of $0.570 per share
income dividends.
Investment Environment
The six-month period ended November 30, 1998 will be remembered as one of the
most volatile in the recent history of global financial markets. The Russian
devaluation and default on its local currency-denominated debt on August 17,
1998 were the detonators that triggered worldwide financial deleveraging and
wealth destruction in fixed-income and equity markets already weakened by the
Asian crisis and the drag of Japan's economic recession. Early in the period,
emerging markets' fixed-income yield spreads widened sharply, liquidity dried
up, and the markets braced themselves for the possibility of further credit
events elsewhere, particularly in Brazil.
The yield spread between the unmanaged J.P. Morgan Emerging Markets Bond Index
(EMBI+) and US Treasury securities widened from 813 basis points (8.13%) on the
eve of the Russian devaluation (August 16, 1998) to 1,406 basis points by
September 1, 1998 and 1,697 on September 10. This was amid sharply depressed
equity prices worldwide, widening spreads in investment-grade corporate and
high-yield markets, forced portfolio liquidations by highly leveraged investors,
and a flight to quality into US Government securities. In the investment
universe of Worldwide DollarVest Fund, Inc., prices traded down toward levels
that reflected imminent payment defaults. Yield curves for sovereign debt
inverted sharply as short-term assets were sold indiscriminately in the search
for liquidity. Trading volumes declined sharply as dealers reduced risk capital
and counterpart trading lines, and bid/offer spreads widened even for the most
widely held assets.
This dismal investor sentiment and technical pictures gave way to a sharp market
rebound in the latter part of the six-month period. This turnaround was
triggered by the intervention of the US Federal Reserve Board, which cut
interest rates three times beginning September 29, 1998 and whose action was
followed by central banks around the world. Prices rallied and the EMBI+ spread
over Treasury securities tightened to 1,017 basis points by November 20, 1998,
and remained in a narrow range until the close of the six-month period ended
November 30, 1998. Several other factors contributed to this recovery as well. A
strong rally in world equities, exemplified by the 22.27% rise in the unmanaged
Standard & Poor's 500 Index between October 10 and November 27, 1998, benefited
investors. In addition, the Group of Seven Industrialized Nations' (G-7) efforts
to shore up Brazil's finances and the announcement of an international ad-hoc
lending facility that would pool International Monetary Fund (IMF) and
industrialized countries' official funds to isolate potentially vulnerable
emerging economies from financial contagion aided the recovery.
During the six-month period ended November 30, 1998, investors remained sharply
focused on the credit developments affecting Russia and Brazil. In Russia, the
devaluation aftershocks triggered bank failures and defaults in financial
structures. A political backlash resulted in the resignation of the prime
minister and his cabinet, and opened new uncertainties as to Russia's future
economic policy and its ability and willingness to service foreign obligations.
By the end of the six-month period, Russia had plunged into a sharp economic
recession. We believe that a recovery for this country is far into the future.
Russian officials now hint that the public sector will be unable to service some
of its foreign debt, particularly the debt contracted under the umbrella of the
old Soviet Union. Regarding the defaulted local currency debt, terms of its
restructuring have yet to be made public.
In Brazil, massive capital outflows reduced foreign reserve levels from $67
billion at the beginning of September to approximately $40 billion by the end of
November, with the bulk of the losses occurring in September and early October.
Local interest rates rose to extremely high levels, which affected economic
activity. Only after the successful reelection of President Cardoso at the end
of October was the government in a position to unveil a massive fiscal austerity
package. A $41.5 billion funding facility involving IMF and G-7 countries
followed, allowing a quick replenishment of Brazil's foreign reserves. The
government has begun lowering interest rates as investors await the
implementation of the fiscal package, the main elements of which require
legislative approval. To date, the program has suffered delays in the hands of
congress, which may require the government to enact additional corrective
action.
We believe that the financial contagion risks have subsided measurably,
particularly for countries such as Argentina and Mexico, whose economies are
stronger and diversified and whose macroeconomic policy management during the
recent selloff received high marks from credit markets and international
financial institutions. Venezuela, which successfully withstood the onslaught on
its currency early in the financial crisis, became the object of much investor
speculation as the price of oil, which is its main export staple, fell and
presidential elections neared. On December 6, 1998, Venezuelans elected Cesar
Chavez as their new President on a platform that advocated deep political
reforms and populist policies. While Mr. Chavez' initial declarations have
reassured investors, the appointment of his future economic cabinet and policy
stance will dictate investor sentiment in the short run.
Portfolio Matters
We began the six-month period ended November 30, 1998 with leverage equivalent
to 25.2% of total assets and overweight positions in Brazil and Russia. By the
end of the six-month period, the Fund was leveraged at 19.5% of the portfolio's
total assets. (For a complete explanation of the benefits and risks of
leveraging, see page 1 of this report to shareholders.) We increased our
relative weightings in Argentina to 20.3% of net assets and reduced Brazil's
weighting from 52.1% of net assets at the beginning of the period to 14.3% by
November 30, 1998. We also allocated 28.5% of the portfolio to US high-yield
securities, which we believed offer an attractive risk/reward trade-off since
these securities appear to be less vulnerable to potential financial contagion
and may lead to higher price appreciation when more stability returns to the
markets. Yield spreads relative to the unmanaged CS First Boston High Yield
Index have widened to 6.25% over US Treasury securities of similar maturity,
several percentage points wider than the historic norm.
In our view, a number of potential developments in the world economy call for
continued caution. First, commodity prices (particularly crude oil) have
continued in a sharp downward trend, with a deep impact in the balance of
payments and fiscal situation of a number of emerging economies, dampening
growth prospects and increasing external financial requirements. Second, private
capital flows to developing countries may still be waning, which bodes ill for
the additional supply of fixed-income securities that will inevitably come to
market in the future. Third, the world economy is in the midst of a slowdown
that may result in lower international interest rates, improving the
attractiveness of emerging market fixed-income securities. However, lower world
economic growth may rob emerging countries of markets for their manufactured and
commodity exports, which are needed to quickly rebalance their external
accounts.
In Conclusion
We thank you for your investment in Worldwide DollarVest Fund, Inc., and we look
forward to updating our outlook and strategy with you in our next report to
shareholders.
Sincerely,
/s/ Arthur Zeikel
Arthur Zeikel
President
/s/ Vincent T. Lathbury III
Vincent T. Lathbury III
Vice President and Portfolio Manager
January 6, 1999
Effective December 1, 1998, Vincent T. Lathbury III became portfolio manager of
Worldwide DollarVest Fund, Inc. Mr. Lathbury has been First Vice President of
Merrill Lynch Asset Management, L.P. (MLAM) (an affiliate of the Investment
Adviser) since 1997. Prior thereto, he was Vice President of MLAM from 1982 to
1997.
2 & 3
<PAGE>
Worldwide DollarVest Fund, Inc., November 30, 1998
SCHEDULE OF INVESTMENTS (in US dollars)
<TABLE>
<CAPTION>
Maturity
COUNTRY Industry Face Amount Bonds Interest Date
================================================================================================================================
<C> <C> <C> <S> <C> <C>
Argentina Sovereign US$ 2,500,000 Republic of Argentina, Global Bonds 9.75% 9/19/2027
Government
Obligations
-----------------------------------------------------------------------------------------------------------------
Total Bonds in Argentina (Cost--$1,702,500)
================================================================================================================================
Brazil Communications 5,000,000 Globo Communicacoes e Participacoes S.A. 10.625 12/05/2008
-----------------------------------------------------------------------------------------------------------------
Industrial 500,000 CSN Iron S.A. 9.125 6/01/2007
-----------------------------------------------------------------------------------------------------------------
Sovereign Government 1,000,000 Republic of Brazil, Global Bonds 10.125 5/15/2027
Obligations
-----------------------------------------------------------------------------------------------------------------
Utilities--Electric 1,500,000 Espirito Santo--Escelsa 10.00 7/15/2007
-----------------------------------------------------------------------------------------------------------------
Total Bonds in Brazil (Cost--$7,199,375)
================================================================================================================================
Canada Computer Services-- 750,000 Celestica International 10.50 12/31/2006
Electronics
-----------------------------------------------------------------------------------------------------------------
Media-- 1,000,000 Call-Net Enterprises Inc. 8.00 8/15/2008
Communications
-----------------------------------------------------------------------------------------------------------------
Total Bonds in Canada (Cost--$1,763,750)
================================================================================================================================
China Transportation 2,000,000 Cathay International Ltd.(c) 13.00 4/15/2008
-----------------------------------------------------------------------------------------------------------------
Total Bonds in China (Cost--$2,000,000)
================================================================================================================================
Mexico Industrial 5,100,000 Petroleos Mexicanos 9.50 9/15/2027
-----------------------------------------------------------------------------------------------------------------
Total Bonds in Mexico (Cost--$4,908,001)
================================================================================================================================
Panama Sovereign Government 2,750,000 Republic of Panama(a) 8.875 9/30/2027
Obligations
-----------------------------------------------------------------------------------------------------------------
Total Bonds in Panama (Cost--$2,103,750)
================================================================================================================================
Philippines Sovereign Government 2,000,000 Bangko Sentral Pilipinas 8.60 6/15/2027
Obligations
-----------------------------------------------------------------------------------------------------------------
Telecommunications 2,000,000 Philippine Long Distance Telephone Co. 8.35 3/06/2017
-----------------------------------------------------------------------------------------------------------------
Total Bonds in the Philippines (Cost--$3,752,140)
================================================================================================================================
Russia Financial Services 4,500,000 Unexim International Finance BV(d) 9.875 8/01/2000
-----------------------------------------------------------------------------------------------------------------
Sovereign Government 552,617 VnesheconomBank--Government National Bank,
Obligations Floating Rate, Interest Accrual Note(b)(c)(d) 6.625 12/15/2015
29,600,000 VnesheconomBank--Government National Bank,
Floating Rate, Principal Loan(b)(d) 6.625 12/15/2020
-----------------------------------------------------------------------------------------------------------------
Total Bonds in Russia (Cost--$19,850,163)
================================================================================================================================
United States Airlines 500,000 US Air Inc. 9.625 2/01/2001
-----------------------------------------------------------------------------------------------------------------
Broadcasting-- 750,000 Cumulus Media, Inc. 10.375 7/01/2008
Radio & Television
-----------------------------------------------------------------------------------------------------------------
Computer Services 1,000,000 Advanced Micro Devices, Inc. 11.00 8/01/2003
-----------------------------------------------------------------------------------------------------------------
Electronics
-----------------------------------------------------------------------------------------------------------------
Energy 1,000,000 Ocean Energy Inc. 7.625 7/01/2005
-----------------------------------------------------------------------------------------------------------------
Gaming 1,000,000 Venetian Casino Resorts 12.25 11/15/2004
-----------------------------------------------------------------------------------------------------------------
Health Services 600,000 Fresenius Medical Capital Trust II 7.875 2/01/2008
-----------------------------------------------------------------------------------------------------------------
Hotels 1,000,000 HMH Properties 7.875 8/01/2008
-----------------------------------------------------------------------------------------------------------------
Publishing & Printing 500,000 American Lawyer Media, Inc. 9.75 12/15/2007
-----------------------------------------------------------------------------------------------------------------
Real Estate 500,000 Forest City Enterprises Inc. 8.50 3/15/2008
-----------------------------------------------------------------------------------------------------------------
Telecommunications 1,000,000 Comcast Cellular Holdings, Series B 9.50 5/01/2007
1,000,000 Intermedia Communication Inc. 8.60 6/01/2008
1,250,000 Nextel Communications, Inc.(c) 11.815** 2/15/2008
1,000,000 PSINet, Inc. 10.00 2/15/2005
2,000,000 Pinnacle Holdings Inc. 12.384** 3/15/2008
-----------------------------------------------------------------------------------------------------------------
Total Bonds in the United States (Cost--$11,642,750)
================================================================================================================================
Venezuela Sovereign Government 4,000,000 Republic of Venezuela(a) 9.25 9/15/2027
Obligations
-----------------------------------------------------------------------------------------------------------------
Total Bonds in Venezuela (Cost--$2,545,000)
================================================================================================================================
Total Investments in Bonds (Cost--$57,467,429)
================================================================================================================================
<CAPTION>
Brady Bonds*
================================================================================================================================
<C> <C> <C> <S> <C> <C>
Argentina Sovereign Government 8,500,000 Republic of Argentina, Par `L' Bonds(a) 5.75 3/31/2023
Obligations
-----------------------------------------------------------------------------------------------------------------
Total Brady Bonds in Argentina (Cost--$5,575,950)
================================================================================================================================
Ecuador Sovereign Government 1,754,073 Ecuador-PDI(Bearer)(b) 6.625 2/27/2015
Obligations
-----------------------------------------------------------------------------------------------------------------
Total Brady Bonds in Ecuador (Cost--$649,007)
================================================================================================================================
Mexico Sovereign Government 6,000,000 United Mexican States, Series B(a) 6.25 12/31/2019
Obligations 1,000,000 United Mexican States, Series W-A 6.25 12/31/2019
-----------------------------------------------------------------------------------------------------------------
Total Brady Bonds in Mexico (Cost--$5,727,500)
================================================================================================================================
Peru Sovereign Government 2,000,000 Republic of Peru, Floating Rate Reduction Bonds 3.25 3/07/2017
Obligations
-----------------------------------------------------------------------------------------------------------------
Total Brady Bonds in Peru (Cost--$1,243,277)
================================================================================================================================
Total Investments in Brady Bonds (Cost--$13,195,734)
================================================================================================================================
<CAPTION>
Value Percent of
COUNTRY Industry Face Amount Bonds (Note 1a) Net Assets
==================================================================================================================================
<C> <C> <C> <S> <C> <C>
Argentina Sovereign US$ 2,500,000 Republic of Argentina, Global Bonds $ 2,243,750 5.4%
Government
Obligations
-------------------------------------------------------------------------------------------------------------------
Total Bonds in Argentina (Cost--$1,702,500) 2,243,750 5.4
==================================================================================================================================
Brazil Communications 5,000,000 Globo Communicacoes e Participacoes S.A. 3,700,000 8.9
-------------------------------------------------------------------------------------------------------------------
Industrial 500,000 CSN Iron S.A. 371,250 0.9
-------------------------------------------------------------------------------------------------------------------
Sovereign Government 1,000,000 Republic of Brazil, Global Bonds 753,750 1.8
Obligations
-------------------------------------------------------------------------------------------------------------------
Utilities--Electric 1,500,000 Espirito Santo--Escelsa 1,140,000 2.7
-------------------------------------------------------------------------------------------------------------------
Total Bonds in Brazil (Cost--$7,199,375) 5,965,000 14.3
==================================================================================================================================
Canada Computer Services-- 750,000 Celestica International 819,375 2.0
Electronics
-------------------------------------------------------------------------------------------------------------------
Media-- 1,000,000 Call-Net Enterprises Inc. 975,000 2.3
Communications
-------------------------------------------------------------------------------------------------------------------
Total Bonds in Canada (Cost--$1,763,750) 1,794,375 4.3
==================================================================================================================================
China Transportation 2,000,000 Cathay International Ltd.(c) 660,000 1.6
-------------------------------------------------------------------------------------------------------------------
Total Bonds in China (Cost--$2,000,000) 660,000 1.6
==================================================================================================================================
Mexico Industrial 5,100,000 Petroleos Mexicanos 4,411,500 10.5
-------------------------------------------------------------------------------------------------------------------
Total Bonds in Mexico (Cost--$4,908,001) 4,411,500 10.5
==================================================================================================================================
Panama Sovereign Government 2,750,000 Republic of Panama(a) 2,585,000 6.2
Obligations
-------------------------------------------------------------------------------------------------------------------
Total Bonds in Panama (Cost--$2,103,750) 2,585,000 6.2
==================================================================================================================================
Philippines Sovereign Government 2,000,000 Bangko Sentral Pilipinas 1,692,500 4.0
Obligations
-------------------------------------------------------------------------------------------------------------------
Telecommunications 2,000,000 Philippine Long Distance Telephone Co. 1,576,742 3.8
-------------------------------------------------------------------------------------------------------------------
Total Bonds in the Philippines (Cost--$3,752,140) 3,269,242 7.8
==================================================================================================================================
Russia Financial Services 4,500,000 Unexim International Finance BV(d) 270,000 0.6
-------------------------------------------------------------------------------------------------------------------
Sovereign Government 552,617 VnesheconomBank--Government National Bank,
Obligations Floating Rate, Interest Accrual Note(b)(c)(d) 67,696 0.2
29,600,000 VnesheconomBank--Government National Bank,
Floating Rate, Principal Loan(b)(d) 1,864,171 4.5
---------- ----
1,931,867 4.7
-------------------------------------------------------------------------------------------------------------------
Total Bonds in Russia (Cost--$19,850,163) 2,201,867 5.3
==================================================================================================================================
United States Airlines 500,000 US Air Inc. 517,100 1.2
-------------------------------------------------------------------------------------------------------------------
Broadcasting-- 750,000 Cumulus Media, Inc. 802,500 1.9
Radio & Television
-------------------------------------------------------------------------------------------------------------------
Computer Services 1,000,000 Advanced Micro Devices, Inc. 1,067,500 2.6
-------------------------------------------------------------------------------------------------------------------
Electronics
-------------------------------------------------------------------------------------------------------------------
Energy 1,000,000 Ocean Energy Inc. 995,000 2.4
-------------------------------------------------------------------------------------------------------------------
Gaming 1,000,000 Venetian Casino Resorts 955,000 2.3
-------------------------------------------------------------------------------------------------------------------
Health Services 600,000 Fresenius Medical Capital Trust II 594,000 1.4
-------------------------------------------------------------------------------------------------------------------
Hotels 1,000,000 HMH Properties 982,500 2.4
-------------------------------------------------------------------------------------------------------------------
Publishing & Printing 500,000 American Lawyer Media, Inc. 520,000 1.2
-------------------------------------------------------------------------------------------------------------------
Real Estate 500,000 Forest City Enterprises Inc. 502,500 1.2
-------------------------------------------------------------------------------------------------------------------
Telecommunications 1,000,000 Comcast Cellular Holdings, Series B 1,052,500 2.5
1,000,000 Intermedia Communication Inc. 972,500 2.3
1,250,000 Nextel Communications, Inc.(c) 767,187 1.8
1,000,000 PSINet, Inc. 1,000,000 2.4
2,000,000 Pinnacle Holdings Inc. 1,190,000 2.9
4,982,187 11.9
---------- ----
-------------------------------------------------------------------------------------------------------------------
Total Bonds in the United States (Cost--$11,642,750) 11,918,287 28.5
==================================================================================================================================
Venezuela Sovereign Government 4,000,000 Republic of Venezuela(a) 2,220,000 5.3
Obligations
-------------------------------------------------------------------------------------------------------------------
Total Bonds in Venezuela (Cost--$2,545,000) 2,220,000 5.3
==================================================================================================================================
Total Investments in Bonds (Cost--$57,467,429) 37,269,021 89.2
==================================================================================================================================
<CAPTION>
Brady Bonds*
==================================================================================================================================
<C> <C> <C> <S> <C> <C>
Argentina Sovereign Government 8,500,000 Republic of Argentina, Par 'L' Bonds(a) 6,226,250 14.9
Obligations
-------------------------------------------------------------------------------------------------------------------
Total Brady Bonds in Argentina (Cost--$5,575,950) 6,226,250 14.9
==================================================================================================================================
Ecuador Sovereign Government 1,754,073 Ecuador-PDI(Bearer)(b) 858,399 2.0
Obligations
-------------------------------------------------------------------------------------------------------------------
Total Brady Bonds in Ecuador (Cost--$649,007) 858,399 2.0
==================================================================================================================================
Mexico Sovereign Government 6,000,000 United Mexican States, Series B(a) 4,620,000 11.1
Obligations 1,000,000 United Mexican States, Series W-A 770,000 1.8
-------------------------------------------------------------------------------------------------------------------
Total Brady Bonds in Mexico (Cost--$5,727,500) 5,390,000 12.9
==================================================================================================================================
Peru Sovereign Government 2,000,000 Republic of Peru, Floating Rate Reduction Bonds 1,130,000 2.7
Obligations
-------------------------------------------------------------------------------------------------------------------
Total Brady Bonds in Peru (Cost--$1,243,277) 1,130,000 2.7
==================================================================================================================================
Total Investments in Brady Bonds (Cost--$13,195,734) 13,604,649 32.5
==================================================================================================================================
</TABLE>
4 & 5
<PAGE>
Worldwide DollarVest Fund, Inc., November 30, 1998
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<TABLE>
<CAPTION>
Value Percent of
COUNTRY Industry Shares Held Trusts (Note 1a) Net Assets
==========================================================================================================
<C> <C> <C> <S> <C> <C>
Mexico Conglomerates 1,242,000 Sidek Credito Trust, Series B(c) $ 43,470 0.1%
-------------------------------------------------------------------------------------------------
Total Investments in Trusts (Cost--$114,577) 43,470 0.1
==========================================================================================================
Total Investments (Cost--$70,777,740) 50,917,140 121.8
Liabilities in Excess of Other Assets (9,110,660) (21.8)
----------- -----
Net Assets $41,806,480 100.0%
=========== =====
==========================================================================================================
</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 step bond; the interest rate shown is the effective yield at
the time of purchase by the Fund.
(a) Security represents collateral in connection with reverse repurchase
agreements (Note 5).
(b) Represents a pay-in-kind security which may pay interest in additional
shares/face.
(c) The security may be offered and sold to "qualified institutional buyers"
under Rule 144a of the Securities Act of 1933.
(d) Due to uncertainty of financial and economic conditions in Russia,
effective September 29, 1998, interest accrual ceased.
See Notes to Financial Statements.
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<TABLE>
<CAPTION>
As of November 30, 1998
==========================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$70,777,740) (Note 1a) .. $ 50,917,140
Receivables:
Interest ...................................................... $ 2,303,589
Reverse repurchase agreements (Note 5) ........................ 2,450,817
Securities sold ............................................... 1,356,475 6,110,881
-----------
Deferred organization expenses (Note 1e) ........................ 831
Prepaid expenses and other assets ............................... 2,318
------------
Total assets .................................................... 57,031,170
------------
==========================================================================================================
Liabilities: Payables:
Reverse repurchase agreements (Note 5) ........................ 11,525,036
Short sales (Note 1g) ......................................... 2,180,222
Custodian bank (Note 1h) ...................................... 795,844
Securities purchased .......................................... 506,556
Interest on short sales (Note 1g) ............................. 46,847
Investment adviser (Note 2) ................................... 23,872 15,078,377
-----------
Accrued expenses and other liabilities .......................... 146,313
------------
Total liabilities ............................................... 15,224,690
------------
==========================================================================================================
Net Assets: Net assets ...................................................... $ 41,806,480
============
==========================================================================================================
Capital: Common Stock, $.10 par value, 200,000,000 shares authorized ..... $ 649,414
Paid-in capital in excess of par ................................ 90,432,850
Undistributed investment income--net ............................ 703,793
Accumulated realized capital losses on investments--net (Note 6) (17,936,066)
Accumulated distributions in excess of realized capital gains on
investments--net (Note 1f) ..................................... (12,182,911)
Unrealized depreciation on investments--net ..................... (19,860,600)
------------
Total--Equivalent to $6.44 per share based on 6,494,144 shares of
capital stock issued and outstanding (market price--$6.50) ..... $ 41,806,480
============
==========================================================================================================
</TABLE>
See Notes to Financial Statements.
6 & 7
<PAGE>
Worldwide DollarVest Fund, Inc., November 30, 1998
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Year Ended November 30, 1998
===============================================================================================================
<S> <C> <C> <C>
Investment Income Interest and amortization of premium and discount earned .. $ 9,776,006
(Note 1d):
===============================================================================================================
Expenses: Interest on reverse repurchase agreements (Note 5) ........ $1,189,677
Investment advisory fees (Note 2) ......................... 555,438
Accounting services (Note 2) .............................. 80,316
Interest on short sales ................................... 65,101
Professional fees ......................................... 50,532
Custodian fees ............................................ 29,994
Printing and shareholder reports .......................... 29,335
Directors' fees and expenses .............................. 28,192
Transfer agent fees ....................................... 20,069
Listing fees .............................................. 16,170
Amortization of organization expenses (Note 1e) ........... 4,931
Pricing services .......................................... 879
Other ..................................................... 19,183
----------
Total expenses ............................................ 2,089,817
------------
Investment income--net .................................... 7,686,189
------------
===============================================================================================================
Realized & Unrealized Realized loss on investments--net ......................... (26,142,101)
Loss on Investments-- Change in unrealized depreciation on investments--net ..... (18,452,841)
------------
Net (Notes 1b, 1d & 3): Net Decrease in Net Assets Resulting from Operations ...... $(36,908,753)
============
===============================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Year Ended
November 30,
---------------------------
Increase (Decrease) in Net Assets: 1998 1997
===========================================================================================================================
<S> <C> <C> <C>
Operations: Investment income--net ..................................................... $ 7,686,189 $ 8,589,688
Realized gain (loss) on investments--net ................................... (26,142,101) 8,410,892
Change in unrealized appreciation/depreciation on investments--net ......... (18,452,841) (10,513,250)
------------ ------------
Net increase (decrease) in net assets resulting from operations ............ (36,908,753) 6,487,330
------------ ------------
===========================================================================================================================
Dividends & Investment income--net ..................................................... (10,161,119) (7,604,323)
Distributions to Realized gain on investments--net .......................................... -- (13,842,809)
Shareholders In excess of realized gain on investments--net ............................. (12,182,921) --
(Note 1f): Net decrease in net assets resulting from dividends and distributions to ------------ ------------
shareholders .............................................................. (22,344,040) (21,447,132)
------------ ------------
===========================================================================================================================
Capital Stock Value of shares issued to Common Stock shareholders in reinvestment of
Transactions dividends and distributions ............................................... 885,633 --
(Note 4): ------------ ------------
===========================================================================================================================
Net Assets: Total decrease in net assets ............................................... (58,367,160) (14,959,802)
Beginning of year .......................................................... 100,173,640 115,133,442
------------ ------------
End of year* ............................................................... $ 41,806,480 $100,173,640
============ ============
===========================================================================================================================
* Undistributed investment income--net (Note 1i) ........................... $ 703,793 $ 3,179,608
============ ============
===========================================================================================================================
</TABLE>
See Notes to Financial Statements.
8 & 9
<PAGE>
Worldwide DollarVest Fund, Inc., November 30, 1998
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the Year Ended November 30, 1998
========================================================================================================
<S> <C> <C>
Cash Provided by Net decrease in net assets resulting from operations ....... $ (36,908,753)
Operating Activities: Adjustments to reconcile net decrease in net assets
resulting from operations to net cash provided by
operating activities:
Increase in receivables ................................. (306,943)
Decrease in other assets ................................ 2,601,800
Increase in other liabilities ........................... 3,047,278
Realized and unrealized loss on investments--net ........ 44,594,942
Amortization of premium and discount .................... (789,426)
---------------
Net cash provided by operating activities .................. 12,238,898
---------------
========================================================================================================
Cash Used for Proceeds from sales of long-term investments ............... 638,490,544
Investing Activities: Purchases of long-term investments ......................... (658,186,262)
Purchases of short-term investments ........................ (1,019,483,552)
Proceeds from sales and maturities of short-term
investments ............................................... 1,037,414,442
---------------
Net cash used for investing activities ..................... (1,764,828)
---------------
========================================================================================================
Cash Used for Cash receipts from borrowings .............................. 94,921,494
Financing Activities: Cash payments on borrowings ................................ (85,847,275)
Dividends and distributions paid to shareholders ........... (21,584,209)
---------------
Net cash used for financing activities ..................... (12,509,990)
---------------
========================================================================================================
Cash: Net decrease in cash ....................................... (2,035,920)
Cash at beginning of year .................................. 2,035,920
---------------
Cash at end of year ........................................ $ --
===============
========================================================================================================
Cash Flow Cash paid for interest ..................................... $ 1,221,431
Information: ===============
========================================================================================================
</TABLE>
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For the
Period
Feb. 4,
The following per share data and ratios have been derived For the Year Ended November 30, 1994+ to
from information provided in the financial statements. ---------------------------------------- Nov. 30,
Increase (Decrease) in Net Asset Value: 1998++ 1997++ 1996 1995 1994
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ...................... $ 15.67 $ 18.01 $ 12.22 $ 11.90 $ 14.18
Operating Investment income--net .................................... 1.20 1.34 1.61 1.33 .97
Performance: Realized and unrealized gain (loss) on investments--net ... (6.93) (.32) 5.65 .24 (2.39)
Total from investment operations .......................... (5.73) 1.02 7.26 1.57 (1.42)
Less dividends and distributions:
Investment income--net ................................ (1.59) (1.19) (1.47) (1.25) (.86)
Realized gain on investments--net ..................... -- (2.17) -- -- --
In excess of realized gain on investments--net ........ (1.91) -- -- -- --
Total dividends and distributions ......................... (3.50) (3.36) (1.47) (1.25) (.86)
Net asset value, end of period ............................ $ 6.44 $ 15.67 $ 18.01 $ 12.22 $ 11.90
======= ======== ======== ======= =======
Market price per share, end of period ..................... $ 6.50 $ 13.75 $ 14.75 $ 11.25 $ 11.00
======= ======== ======== ======= =======
================================================================================================================================
Total Investment Based on market price per share ........................... (37.42%) 15.91% 45.94% 14.88% (21.13%)++
Return:** ======= ======== ======== ======= =======
Based on net asset value per share ........................ (45.59%) 8.19% 64.05% 15.35% (9.71%)++
======= ======== ======== ======= =======
================================================================================================================================
Ratios to Expenses, net of reimbursement and excluding interest
Average expense .................................................. 1.15% .82% .80% .97% .18%*
Net Assets: ======= ======== ======== ======= =======
Expenses, net of reimbursement ............................ 2.89% 1.47% 2.10% 1.83% .59%*
======= ======== ======== ======= =======
Expenses .................................................. 2.89% 1.47% 2.10% 1.83% 1.26%*
======= ======== ======== ======= =======
Investment income--net .................................... 10.63% 7.39% 8.54% 10.48% 8.84%*
======= ======== ======== ======= =======
================================================================================================================================
Supplemental Net assets, end of period (in thousands) .................. $41,806 $100,174 $115,133 $78,139 $76,052
Data: ======= ======== ======== ======= =======
Portfolio turnover ........................................ 626.23% 578.05% 342.06% 183.01% 68.31%
======= ======== ======== ======= =======
================================================================================================================================
Leverage: Amount of borrowings outstanding, end of period (in
thousands) ............................................... $11,525 -- $53,706 $25,456 $ 8,761
======= ======== ======== ======= =======
Average amount of borrowings outstanding during the
period (in thousands) .................................... $20,540 $ 11,427 $ 26,812 $10,829 $ 9,853
======= ======== ======== ======= =======
Average amount of borrowings per share during the
period ................................................... $ 3.20 $ 1.79 $ 4.19 $ 1.69 $ 1.54
======= ======== ======== ======= =======
================================================================================================================================
</TABLE>
+ Commencement of operations.
++ Based on average shares outstanding.
++ Aggregate total investment return.
* Annualized.
** Total investment returns based on market value, which can be significantly
greater or lesser than the net asset value, may result in substantially
different returns. Total investment returns exclude the effects of sales
loads.
See Notes to Financial Statements.
10 & 11
<PAGE>
Worldwide DollarVest Fund, Inc., November 30, 1998
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Worldwide DollarVest Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940 as a non-diversified, closed-end management investment
company. The Fund's financial statements are prepared in accordance with
generally accepted accounting principles which may require the use of management
accruals and estimates. The Fund determines and makes available for publication
the net asset value of its common stock on a weekly basis. The Fund's Common
Stock is listed on the New York Stock Exchange under the symbol WDV.
(a) Valuation of investments--Portfolio securities which are traded on stock
exchanges are valued at the last sale price on the exchange on which such
securities are traded, as of the close of business on the day the securities are
being valued or, lacking any sales, at the last available bid price. Securities
traded in the over-the-counter market are valued at the last available bid price
prior to the time of valuation. In cases where securities are traded on more
than one exchange, the securities are valued on the exchange designated by or
under the authority of the Board of Directors as the primary market. Securities
which are traded both in the over-the-counter market and on a stock exchange are
valued according to the broadest and most representative market. Options written
or purchased are valued at the last sale price in the case of exchange-traded
options. In the case of options traded in the over-the-counter market, valuation
is the last asked price (options written) or the last bid price (options
purchased). Short-term securities are valued at amortized cost, which
approximates market value. Other investments, including futures contracts and
related options, are stated at market value. Securities and assets for which
market value quotations are not available are valued at their fair value as
determined in good faith by or under the direction of the Fund's Board of
Directors.
(b) Derivative financial instruments--The Fund may engage in various portfolio
strategies to seek to increase its return by hedging its portfolio against
adverse movements in the debt markets. Losses may arise due to changes in the
value of the contract or if the counterparty does not perform under the
contract.
o Options--The Fund is authorized to purchase and write call and put options.
When the Fund writes an option, an amount equal to the premium received by the
Fund is reflected as an asset and an equivalent liability. The amount of the
liability is subsequently marked to market to reflect the current market value
of the option written.
When a security is purchased or sold through an exercise of an option, the
related premium paid (or received) is added to (or deducted from) the basis of
the security acquired or deducted from (or added to) the proceeds of the
security sold. When an option expires (or the Fund enters into a closing
transaction), the Fund realizes a gain or loss on the option to the extent of
the premiums received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
o Financial futures contracts--The Fund may purchase or sell financial futures
contracts and options on such futures contracts for the purpose of hedging the
market risk on existing securities or the intended purchase of securities.
Futures contracts are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a contract, the
Fund deposits and maintains as collateral such initial margin as required by the
exchange on which the transaction is effected. Pursuant to the contract, the
Fund agrees to receive from or pay to the broker an amount of cash equal to the
daily fluctuation in value of the contract. Such receipts or payments are known
as variation margin and are recorded by the Fund as unrealized gains or losses.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed.
o Interest rate transactions--The Fund is authorized to enter into interest rate
swaps and purchase or sell interest rate caps and floors. In an interest rate
swap, the Fund exchanges with another party their respective commitments to pay
or receive interest on a specified notional principal amount. The purchase of an
interest rate cap (or floor) entitles the purchaser, to the extent that a
specified index exceeds (or falls below) a predetermined interest rate, to
receive payments of interest equal to the difference between the index and the
predetermined rate on a notional principal amount from the party selling such
interest rate cap (or floor).
(c) Income taxes--It is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required. Under the applicable
foreign tax law, a withholding tax may be imposed on interest and capital gains
at various rates.
(d) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Interest income (including amortization of discount) is recognized on the
accrual basis. Realized gains and losses on security transactions are determined
on the identified cost basis.
(e) Deferred organization expenses--Deferred organization expenses are amortized
on a straight-line basis over a period not exceeding five years. In accordance
with Statement of Position 98-5, any unamortized organization expenses will be
expensed on the first day of the next fiscal year beginning after December 15,
1998. This charge will not have any material impact on the operations of the
Fund.
(f) Dividends and distributions--Dividends from net investment income are
declared and paid monthly. Distribution of capital gains are recorded on the
ex-dividend dates. Distributions in excess of realized capital gains are due
primarily to differing tax treatments for futures transactions and post-October
losses.
(g) Short sales--When the Fund engages in a short sale, an amount equal to the
proceeds received by the Fund is reflected as an asset and an equivalent
liability. The amount of the liability is subsequently marked to market to
reflect the market value of the short sale. The Fund maintains a segregated
account of securities as collateral for the short sales. The Fund is exposed to
market risk based on the amount, if any, that the market value of the stock
exceeds the market value of the securities in the segregated account.
(h) Custodian bank--The Fund recorded an amount payable to the Custodian Bank
reflecting an overnight overdraft resulting from a failed trade, which settled
the next day.
(i) Reclassification--Generally accepted accounting principles require that
certain components of net assets be adjusted to reflect permanent differences
between financial and tax reporting. Accordingly, current year's permanent
book/tax differences of $885 have been reclassified between accumulated net
realized capital losses and undistributed net investment income and $6 has been
reclassified between paid-in capital in excess of par and accumulated net
realized capital losses. These reclassifications have no effect on net assets or
net asset value per share.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML &
Co."), which is the limited partner.
FAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee at
an annual rate of 0.60% of the Fund's average weekly net assets, plus the
proceeds of any outstanding borrowings used for leverage.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or directors of
FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended November 30, 1998 were $560,909,191 and $535,653,875, respectively.
Net realized gains (losses) for the year ended November 30, 1998 and net
unrealized losses as of November 30, 1998 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains (Losses) Losses
- --------------------------------------------------------------------------------
Long-term investments ...................... $(28,602,450) $(19,860,600)
Short-term investments ..................... (7,839) --
Short sales ................................ 2,399,818 --
Options written ............................ 51,000 --
Financial futures contracts ................ 17,370 --
------------ ------------
Total ...................................... $(26,142,101) $(19,860,600)
============ ============
- --------------------------------------------------------------------------------
12 & 13
<PAGE>
Worldwide DollarVest Fund, Inc., November 30, 1998
NOTES TO FINANCIAL STATEMENTS (concluded)
Transactions in call options written for the year ended November 30, 1998 were
as follows:
- --------------------------------------------------------------------------------
Nominal Value
Covered by Premiums
Written Options Received
- --------------------------------------------------------------------------------
Outstanding call options written
at beginning of year ............................. -- --
Options written .................................. 13,000,000 $ 51,000
Options expired .................................. (13,000,000) (51,000)
----------- --------
Outstanding call options written
at end of year ................................... -- $ --
=========== ========
- --------------------------------------------------------------------------------
As of November 30, 1998, net unrealized depreciation for Federal income tax
purposes aggregated $23,853,406, of which $1,420,842 related to appreciated
securities and $25,274,248 related to depreciated securities. At November 30,
1998, the aggregate cost of investments for Federal income tax purposes was
$74,770,546.
4. Capital Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of capital stock, par value
$.10 per share. Shares issued and outstanding during the year ended November 30,
1998 increased by 101,182 as a result of dividend reinvestment and during the
year ended November 30, 1997 remained constant.
5. Reverse Repurchase Agreements:
Under a reverse repurchase agreement, the Fund sells securities and agrees to
repurchase them at a mutually agreed upon date and price. As of November 30,
1998, the Fund had entered into reverse repurchase agreements in the amount of
$11,525,036. For the year ended November 30, 1998, the average amount
outstanding was approximately $20,540,000 and the daily weighted average
interest rate was 5.79%.
6. Capital Loss Carryforward:
At November 30, 1998, the Fund had a net capital loss carryforward of
approximately $25,858,000, all of which expires in 2006. This amount will be
available to offset like amounts of any future taxable gains.
7. Subsequent Events:
On December 1, 1998, the Fund's Board of Directors declared an ordinary income
dividend to Common Stock shareholders in the amount of $.046636 per share
payable on December 18, 1998 to shareholders of record as of December 11, 1998.
In addition, on December 22, 1998, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the amount of $.046009
per share payable on January 8, 1999 to shareholders of record as of December
31, 1998.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders, Worldwide DollarVest Fund, Inc.:
We have audited the accompanying statement of assets, liabilities and capital,
including the schedule of investments, of Worldwide DollarVest Fund, Inc. as of
November 30, 1998, the related statements of operations for the year then ended,
changes in net assets for each of the years in the two-year period then ended,
and cash flows for the year then ended, and the financial highlights for each of
the years in the four-year period then ended and the period February 4, 1994
(commencement of operations) to November 30, 1994. These financial statements
and the financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial statements and
the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at November
30, 1998 by correspondence with the custodian and brokers or other alternative
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Worldwide DollarVest
Fund, Inc. as of November 30, 1998, the results of its operations, the changes
in its net assets, its cash flows, and the financial highlights for the
respective stated periods in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Princeton, New Jersey
January 20, 1999
IMPORTANT TAX INFORMATION (unaudited)
Of the net investment income distributions paid monthly by Worldwide DollarVest
Fund, Inc. during its fiscal year ended November 30, 1998, 89.53% represents
income received by the Fund from foreign sources. There were no foreign taxes
associated with this income. Additionally, the Fund paid a short-term capital
gain distribution of $1.751525 per share and a long-term capital gain
distribution of $.154152 per share to shareholders of record on December 31,
1997.
Please retain this information for your records.
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Donald Cecil, Director
Roland M. Machold, Director
Edward H. Meyer, Director
Charles C. Reilly, Director
Richard R. West, Director
Edward D. Zinbarg, 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
Gerald M. Richard, Treasurer
Robert Harris, Secretary
Custodian
The Bank of New York
One Wall Street
New York, NY 10286
Transfer Agent
The Bank of New York
101 Barclay Street
New York, NY 10286
NYSE Symbol
WDV
14 & 15
<PAGE>
The Fund is leveraged to provide shareholders with a potentially higher rate of
return. However, leveraging may exaggerate changes in the net asset value of the
Fund's shares and in the yield on the Fund's portfolio.
Investing in emerging market securities involves a number of risk factors and
special considerations, including restrictions on foreign investments and on
repatriation of capital invested in emerging markets, currency fluctuations, and
potential price volatility and less liquidity of securities traded in emerging
markets. In addition, there may be less publicly available information about the
issuers of securities, and such issuers may not be subject to accounting,
auditing and financial reporting standards and requirements comparable to those
to which US companies are subject. Therefore, the Fund is designed as a
long-term investment for investors capable of assuming the risks of investing in
emerging markets. The Fund should be considered as a vehicle for diversification
and not as a complete investment program. Please refer to the prospectus for
details.
This report, including the financial information herein, is transmitted to the
shareholders of Worldwide DollarVest Fund, Inc. for their information. It is not
a prospectus, circular or representation intended for use in the purchase of
shares of the Fund or any securities mentioned in the report. Past performance
results shown in this report should not be considered a representation of future
performance. Statements and other information herein are as dated and are
subject to change.
Worldwide DollarVest
Fund, Inc.
Box 9011
Princeton, NJ
08543-9011 #16971--11/98
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