MERRILL
LYNCH
GLOBAL
HOLDINGS
Semi-Annual Report May 31, 1994
This report is not authorized for use as an offer of sale
or a solicitation of an offer to buy shares of the Company
unless accompanied or preceded by the Company's current
prospectus. Past performance results shown in this report
should not be considered a representation of future
performance. Investment return and principal value of
shares will fluctuate so that shares, when redeemed,
may be worth more or less than their original cost.
Merrill Lynch
Global Holdings
Box 9011
Princeton, NJ
08543-9011
<PAGE>
MERRILL LYNCH GLOBAL HOLDINGS
Officers and
Directors
Arthur Zeikel, President and Director
Donald Cecil, Director
Ken E. Mathysen-Gerst, Director
Edward H. Meyer, Director
Charles C. Reilly, Director
John F. Wallace, Director
Richard R. West, Director
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Philip L. Kirstein, Senior Vice President
Donald C. Burke, Vice President
Gerald M. Richard, Treasurer
Robert Harris, Secretary
Custodian
The Chase Manhattan Bank, N.A.
Global Securities Services
Chase MetroTech Center
Brooklyn, New York 11245
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
DEAR SHAREHOLDER
Reflecting our more cautious investment strategy, Merrill Lynch
Global Holdings' cash reserves increased to nearly 15% of net
assets at the end of the May quarter, up from 9.9% at the end of
the February quarter. The sell-off in world financial markets
began in February with an initial increase in the Federal Funds
rate by the Federal Reserve Board in an effort to contain
incipient inflationary pressures. Continued tightening of
monetary policy by the US central bank and ongoing inflationary
concerns have continued to hamper US stock market performance,
and other world stock markets have also declined. The notable
exception to this trend during the May quarter was the Japanese
stock market.
<PAGE>
Pacific Basin Investment Activities
We continued to increase our Japanese investments during the May
quarter to 24.4% of net assets, up from 20.6% at the end of the
prior period. During the quarter the unmanaged Nikkei 225 Index
rose 4.9% in yen terms, and it ended the quarter with a new high
for the year. The index has risen 20.4% year-to-date in yen terms
and 28.4% in US dollars.
The rise in Japanese share prices reflects investors' confidence
that the prospects of an economic upturn in Japan are improving.
Early in 1994, there were concerns regarding the continued
strength of the yen, the instability of the Japanese government
and corporate earnings recovery prospects. However, these con-
cerns have diminished as recent data confirm that the environ-
ment is becoming better than investors originally anticipated.
The economic indicators suggest more signs of enduring recovery.
The yen, which many expected to strengthen significantly further,
has actually weakened. Recent corporate earnings announcements
also suggest that there is much scope for profits to stage a
strong rebound in the years ahead from their depressed levels
in fiscal year 1993. Furthermore, significant cost cutting
and restructuring have been accomplished, and the pace of these
rationalizations is likely to accelerate in the coming years.
On the political front, investors have not reacted negatively
to renewed uncertainty following the resignation of Prime Minister
Hosokawa in early April. Although concern remains that the ruling
coalition government could be dissolved, we believe that Japan
is moving toward much-needed political reform, albeit slowly,
thanks to Mr. Hosokawa's efforts.
Consistent with our confidence in a stronger economic environment
in the second half of the year, we have purchased shares of
companies that we believe are well-positioned to benefit from
better business conditions. These include Mitsubishi Heavy
Industries, Hitachi Ltd. and Tokio Marine & Fire Insurance Co.,
Ltd. We increased our exposure to the blue-chip technology sector
by increasing our investments in Sony Corp., Sharp Corp. and
Matsushita Electric Industrial Co. We also added shares of
companies in structurally weak industries such as steel and
construction. Although earnings for companies in these industries
are deeply depressed, we believe most of the negative news has
been discounted. These stocks currently trade at about 65%--75%
below their historic highs and appear to offer attractive total
returns as the stock market recovers.
<PAGE>
In summary, with support from a strengthening global economy,
the prospects of an upturn in economic activity in Japan are
improving and we are more positive on the outlook for Japanese
corporate earnings. In the near term, a further easing of fiscal
and monetary policy, combined with a weakening yen, should
support Japanese share prices. Our long-term outlook for the
Japanese stock market continues to be positive.
We made no notable changes in our investments in other smaller
Asian stock markets during the quarter. We slightly increased our
Korean, Australian and Thai exposures while taking some profits
in Malaysia. After the sharp volatility experienced earlier this
year, smaller Asian markets have settled down and recouped some
of their losses. However, most markets are well below their
recent peak levels and valuations are now more attractive. Since
we believe that long-term growth prospects for the region remain
robust, in the months ahead we will seek opportunities to
accumulate shares in well-positioned companies in the smaller
Asian markets.
Americas Investment Activities
We began the May quarter with an underweighted position in US
stocks and continued to trim our US exposure during the quarter,
since we had become concerned that a stronger economy was
rekindling inflationary fears. With higher US interest rates,
continued growth in capital goods expenditures may become
questionable as 1994 continues. Therefore, we reduced the fund's
exposure to the technology sector through the sale of our Micron
Technologies Inc. and LSI Logic Corp. holdings.
Elsewhere in the Americas, we also reduced the fund's investments
in Mexico and Canada. In Mexico, the assassination of the leading
presidential candidate triggered turbulence in the financial
markets. We believed it appropriate to trim investments there
until the situation stabilizes. In Canada, currency weakness con-
tinued to create an uncertain investment environment, so we took
profits in some holdings.
European Investment Activities
We reduced our European investments during the quarter from
20.2% of net assets to 18.5%. We continue to be underweighted
in Continental Europe and the United Kingdom. Europe's economy
is recovering more strongly than we had expected, and growth
forecasts for several European economies have been raised
recently. The main reason for these upward revisions is the
improved outlook for exports to the United States and the Far
East.
<PAGE>
Inflationary pressures remain subdued in Europe, and domestic
demand is still weak. European consumers remain cautious as
disposable incomes have dropped and unemployment has risen.
However, further interest rate cuts may not occur until late
summer. Exports are the source of economic growth at this time.
In the United Kingdom, export order books are at their highest
level in four years. German manufacturing is reporting large
order inflows. Auto factories are at full capacity, and paper
and pulp mills are running strong.
The European corporate earnings outlook has also improved,
largely through improved productivity and lower unit labor costs.
Stock markets have already discounted this earnings recovery to a
great extent. The risk is that earnings announcements may not
coincide with current expectations, but we currently see little
evidence of such a trend. In contrast, we believe that earnings
growth rates may exceed current expectations and that there will
be a number of positive earnings surprises.
During the quarter we established investments in European
companies likely to benefit from an improving economy. In Spain,
we purchased shares of Repsol S.A., the country's largest oil
company, which is likely to benefit from the recent rise in crude
oil prices as well as the strong growth of the Spanish economy
and its expanding natural gas sales. We also initiated a position
in Elf Aquitaine, France's largest oil company. This is Europe's
most undervalued energy stock, and has the largest turnaround
potential, in our view. We think the company's earnings growth
will likely be driven by higher oil prices, cost reductions and
improving chemical division earnings. In the Netherlands, we in-
vested in Ommeren (Kon. Van), a tank storage and shipping company.
We expect the company's profits to grow through rising volumes in
chemical and oil products created by worldwide economic growth.
In the United Kingdom, we invested in BTR PLC, one of the country's
leading industrial manufacturing companies. With a high return on
capital and strong cash inflows, BTR is well-positioned to benefit
from a recovering business environment.
<PAGE>
In Conclusion
We are saddened to report the death of Frederick P. Ives, Vice
President and Senior Portfolio Manager of Merrill Lynch Global
Holdings. The fund benefited from his skillful and discerning
management since its inception in 1984. Fred's colleagues and
many friends at Merrill Lynch Asset Management will greatly miss
his companionship and guidance.
Peter A. Lehman, a former Fund Analyst for Merrill Lynch Global
Holdings, has been designated to be the fund's interim successor
Senior Portfolio Manager.
We thank you for your investment in Merrill Lynch Global Holdings,
and we look forward to reviewing our outlook and strategy with you
again in our upcoming annual report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
July 8, 1994
PERFORMANCE DATA
None of the past results shown should be considered a
representation of future performance. Investment return and
principal value of Class A and Class B Shares will fluctuate
so that shares, when redeemed, may be worth more or less
than their original cost.
<TABLE>
Performance
Summary--
Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
7/2/84--12/31/84 $ 9.15 $ 9.32 -- $0.170 + 3.68%
1985 9.32 12.28 -- 0.340 +36.05
1986 12.28 14.28 $1.270 0.300 +30.25
1987 14.28 11.52 3.638 0.372 + 6.54
1988 11.52 11.01 1.275 0.337 +10.04
1989 11.01 11.77 1.492 0.212 +23.53
1990 11.77 10.28 0.188 0.261 - 9.20
1991 10.28 11.67 0.221 0.123 +17.12
1992 11.67 11.27 0.817 0.063 + 4.28
1993 11.27 13.14 0.443 0.371 +24.08
1/1/94--5/31/94 13.14 13.22 -- -- + 0.61
------ ------
Total $9.344 Total $2.549
Cumulative total return as of 5/31/94: +268.35%**
<PAGE>
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains distributions
at net asset value on the ex-dividend date, and do not include sales charge;
results would be lower if sales charge was included.
</TABLE>
<TABLE>
Performance
Summary--
Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
10/21/88--12/31/88 $11.29 $11.00 $0.388 $0.147 + 2.22%
1989 11.00 11.71 1.492 0.138 +22.33%
1990 11.71 10.20 0.188 0.166 -10.18%
1991 10.20 11.56 0.221 0.036 +16.02%
1992 11.56 11.09 0.817 0.001 + 3.15%
1993 11.09 12.94 0.443 0.219 +22.87%
1/1/94--5/31/94 12.94 12.96 -- -- + 0.15%
------ ------
Total $3.549 Total $0.707
Cumulative total return as of 5/31/94: +65.42%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains distributions
at net asset value on the ex-dividend date, and do not reflect deduction of
any sales charge; results would be lower if sales charge was deducted.
</TABLE>
<TABLE>
Recent
Performance
Results*
<CAPTION>
12 Month 3 Month
5/31/94 2/28/94 5/31/93 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Global Holdings Class A Shares $13.22 $13.76 $12.33 +10.97%(1) -3.92%
ML Global Holdings Class B Shares 12.96 13.52 12.09 +11.00(1) -4.14
ML Global Holdings Class A Shares--Total Return +14.11(2) -3.92
ML Global Holdings Class B Shares--Total Return +12.88(3) -4.14
World Stock Index--Total Return** + 9.61 -1.17
<PAGE>
<FN>
*Investment results shown for the 3-month and 12-month periods are before the
deduction of any sales charges.
**The Capital International World Stock Index is an unmanaged US dollar-denominated
index of world stock markets compiled by Capital International Perspective S.A.
and published in Morgan Stanley Capital International Perspective.
(1) Percent change includes reinvestment of $0.443 per share capital gains distributions.
(2) Percent change includes reinvestment of $0.371 per share income dividends and
$0.443 per share capital gains distributions.
(3) Percent change includes reinvestment of $0.219 per share income dividends and
$0.443 per share capital gains distributions.
</TABLE>
Average
Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 3/31/94 +18.97% +11.23%
Five Years Ended 3/31/94 +10.53 + 9.06
Inception (7/2/84) through 3/31/94 +14.19 +13.41
[FN]
*Maximum sales charge is 6.5%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/94 +17.67% +13.67%
Five Years Ended 3/31/94 + 9.41% + 9.41
Inception (10/21/88) through 3/31/94 + 9.52% + 9.52%
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
LATIN Shares Held/ Value Percent of
AMERICA Industries Face Amount Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Argentina Beverages & Tobacco 47,000 Buenos Aires Embotelladora S.A. (BAESA)
(ADR)* $ 1,427,640 $ 1,633,250 0.4%
Energy 50,000 Yacimientos Petroliferos Fiscales S.A.
-Sponsored (ADR)* 950,000 1,318,750 0.3
Multi-Industry 187,500 Compania Naviera Perez Companc
S.A.C.F.I.M.F.A. 1,047,194 1,018,185 0.3
Telecommunications 40,000 ++Telecom Argentina Stet-France Telecom
S.A. (ADR)* 1,400,296 2,600,000 0.7
Utilities 30,000 Central Puerto (ADR)* 795,000 1,207,500 0.3
Total Investments in Argentina 5,620,130 7,777,685 2.0
Brazil Telecommunications 20,000,000 Telecomunicacoes Brasileiras S.A.--
Telebras PN (Preferred) 621,462 767,910 0.2
490,668 Telecomunicacoes Brasileiras S.A.
--Telebras PN (Rights) (a) 0 0 0.0
------------ ------------ ------
621,462 767,910 0.2
Total Investments in Brazil 621,462 767,910 0.2
Chile Chemicals 45,000 Sociedad Quimica y Minera de Chile S.A.
(B Shares) (ADR)* 1,158,750 1,271,250 0.3
Metals 35,000 Madeco S.A. (ADR)* 525,000 1,041,250 0.3
Multi-Industry 40,000 GT Chilean Growth Fund 1,365,000 1,160,000 0.3
Utilities 40,000 Enersis S.A. (ADR)* 779,762 920,000 0.2
Total Investments in Chile 3,828,512 4,392,500 1.1
<PAGE>
Mexico Beverages & Tobacco 20,000 Coca-Cola Femsa S.A. (ADR)* 454,319 622,500 0.2
30,000 Empresa La Moderna, S.A. de C.V. (ADR)* 992,735 847,500 0.2
20,000 Panamerican Beverages, Inc. (Class A)
(ADR)* 525,114 597,500 0.1
------------ ------------ ------
1,972,168 2,067,500 0.5
Broadcasting & 20,000 ++Grupo Televisa, S.A. de C.V. (ADR)* 500,000 1,155,000 0.3
Publishing
Engineering &
Construction 36,000 Grupo Mexicano de Desarrollo S.A.
(Class B) 612,000 580,500 0.2
36,000 Grupo Mexicano de Desarrollo S.A.
(Class L) (ADR)* 612,000 621,000 0.2
------------ ------------ ------
1,224,000 1,201,500 0.4
Multi-Industry 150,000 Grupo Carso, S.A. de C.V. 1,320,769 1,494,582 0.4
Steel 67,400 Grupo Simec, S.A. de C.V. (ADR)* 946,876 1,685,000 0.4
Telecommunications 20,000 Telefonos de Mexico, S.A. de C.V. (ADR)* 545,000 1,242,500 0.3
Total Investments in Mexico 6,508,813 8,846,082 2.3
Venezuela Steel 52,000 ++Venezolana de Prerreducidos Caroni
'Venprecar' C.A. (GDS)** 379,600 380,250 0.1
Total Investments in Venezuela 379,600 380,250 0.1
Total Investments in Latin America 16,958,517 22,164,427 5.7
NORTH AMERICA
Canada Oil-Field Equipment 17,200 Enerflex Systems, Ltd. 170,527 217,328 0.0
Telecommunications 55,000 Newbridge Networks Corp. 855,730 2,536,875 0.7
50,000 Northern Telecom 1,474,875 1,556,250 0.4
------------ ------------ ------
2,330,605 4,093,125 1.1
Total Investments in Canada 2,501,132 4,310,453 1.1
<PAGE>
United Appliances & Household 70,000 Corning Inc. 2,278,075 2,301,250 0.6
States 50,000 River Oaks Furniture Inc. 941,875 825,000 0.2
------------ ------------ ------
3,219,950 3,126,250 0.8
Automobiles 30,000 Ford Motor Corp. (8.40% Conv. Pfd.) 1,500,000 2,857,500 0.7
50,000 General Motors Corp. 2,112,574 2,687,500 0.7
------------ ------------ ------
3,612,574 5,545,000 1.4
Banking 25,000 Baybanks, Inc. 941,250 1,575,000 0.4
37,500 Mercantile Bancorp., Inc. 949,375 1,364,063 0.4
80,000 Midlantic National Bank 1,912,812 2,480,000 0.6
80,000 UJB Financial Corp. 1,602,623 2,280,000 0.6
------------ ------------ ------
5,406,060 7,699,063 2.0
Broadcasting & 50,000 Broadcasting Partners Inc. (Class A) 725,000 531,250 0.1
Publishing 25,000 Clear Channel Communications Inc. 707,500 915,625 0.2
100,000 Time Warner Inc. 2,832,157 3,875,000 1.0
50,000 Viacom Inc. 1,468,965 1,518,750 0.4
------------ ------------ ------
5,733,622 6,840,625 1.7
Building Materials 30,000 Owens-Corning Fiberglass Corp. 1,266,112 952,500 0.2
Business & Public 36,000 Microsoft Corp. 1,503,000 1,930,500 0.5
Services 70,000 Molten Metal Technology, Inc. 1,208,113 1,382,500 0.3
60,000 Oracle Systems Corp. 956,438 2,047,500 0.5
60,000 PacifiCare Health Systems (Class 'B') 1,862,500 3,405,000 0.9
80,000 Sierra Health Services Inc. 1,341,201 2,080,000 0.5
44,800 United HealthCare Corp. 737,136 2,156,000 0.6
25,000 US HealthCare Inc. 987,500 993,750 0.3
------------ ------------ ------
8,595,888 13,995,250 3.6
Computer Technology 40,000 Novell Inc. 1,253,000 710,000 0.2
Electrical Equipment 60,000 Ultratech Stepper Inc. 1,159,400 1,185,000 0.3
Electronics/ 25,000 Intel Corp. 590,937 1,562,500 0.4
Components 20,000 Motorola, Inc. 866,290 935,000 0.2
20,000 Texas Instruments Inc. 1,297,950 1,605,000 0.4
------------ ------------ ------
2,755,177 4,102,500 1.0
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
NORTH AMERICA Shares Held/ Value Percent of
(concluded) Industries Face Amount Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
United Energy Sources 20,000 Anadarko Petroleum, Inc. $ 724,326 $ 1,075,000 0.3%
States 15,000 Chevron Corp. 1,323,615 1,305,000 0.3
(concluded) 30,000 Enron Oil & Gas Co. 924,528 1,320,000 0.3
------------ ------------ ------
2,972,469 3,700,000 0.9
Food & Household 65,000 Performance Food Group Co. 1,010,421 1,332,500 0.4
Products
Forest Products & 25,000 Georgia-Pacific Corp. 1,820,250 1,612,500 0.4
Paper
Industrial--Other 60,000 Johnson Controls, Inc. 2,430,691 2,940,000 0.8
50,000 Varity Corp. 1,408,040 1,831,250 0.5
------------ ------------ ------
3,838,731 4,771,250 1.3
Insurance 170,000 AFLAC, Inc. 4,370,715 5,695,000 1.5
Leisure & Tourism 50,000 McDonald's Corp. 2,385,500 3,100,000 0.8
125,000 Mirage Resorts, Inc. 1,927,525 2,453,125 0.6
50,000 Walt Disney Co. 1,653,250 2,162,500 0.6
------------ ------------ ------
5,966,275 7,715,625 2.0
Merchandising 50,000 The Home Depot, Inc. 1,259,675 2,256,250 0.6
75,000 Home Shopping Network, Inc. 1,046,474 796,875 0.2
25,000 Sports & Recreation Inc. 972,500 975,000 0.3
30,000 Toys 'R' Us, Inc. 750,858 1,065,000 0.3
40,000 Wal-Mart Stores, Inc. 658,900 940,000 0.2
------------ ------------ ------
4,688,407 6,033,125 1.6
Metals--Non-Ferrous 40,000 Phelps Dodge Corp. 2,297,400 2,220,000 0.6
Multi-Industry 20,000 Tenneco Inc. 1,091,238 957,500 0.3
Oil-Field Equipment 30,000 Schlumberger Ltd. 1,752,332 1,717,500 0.5
Railroads 30,000 CSX Corp. 1,993,665 2,295,000 0.6
20,000 Consolidated Rail Corp. 931,200 1,097,500 0.3
------------ ------------ ------
2,924,865 3,392,500 0.9
<PAGE>
Recreation 18,300 Mikohn Gaming Corp. 263,062 242,475 0.1
US$ 1,500,000 United Gaming, Inc., 7.50% due 9/15/2003 1,500,000 1,215,000 0.3
------------ ------------ ------
1,763,062 1,457,475 0.4
Telecommunications 100,392 Airtouch Communications, Inc. 2,288,552 2,447,055 0.6
349 Pacific Telesis Group 11,111 10,601 0.0
------------ ------------ ------
2,299,663 2,457,656 0.6
Total Investments in the United States 69,797,611 87,218,819 22.6
Total Investments in North America 72,298,743 91,529,272 23.7
PACIFIC BASIN
Australia Banking 200,000 ANZ Banking Group 746,255 636,328 0.2
105,076 National Australia Bank, Ltd. 647,467 916,843 0.2
200,000 St. George Bank, Ltd. 873,812 930,132 0.2
------------ ------------ ------
2,267,534 2,483,303 0.6
Broadcasting & 150,000 News Corp., Ltd. (Ordinary) 1,090,627 1,000,999 0.3
Publishing
Industrial Components 220,000 Orbital Engine Corp., Ltd. 458,461 263,095 0.1
Metals 1,000,000 MIM Holdings, Ltd. 1,985,497 2,317,948 0.6
Real Estate 100,000 Lend Lease Corp. 1,265,923 1,218,030 0.3
Total Investments in Australia 7,068,042 7,283,375 1.9
Hong Kong Broadcasting & 1,000,000 Oriental Press Group 495,988 770,177 0.2
Publishing 380,000 Television Broadcast, Ltd. 1,477,469 1,537,117 0.4
------------ ------------ ------
1,973,457 2,307,294 0.6
Multi-Industry 520,000 Swire Pacific 'A' Ltd. 2,420,349 4,038,573 1.1
Real Estate 1,000,000 China Strategic Investment Ltd. 840,658 521,649 0.1
620,000 Sun Hung Kai Properties, Ltd. 2,945,354 4,173,193 1.1
------------ ------------ ------
3,786,012 4,694,842 1.2
Telecommunications 600,000 Hong Kong Telecommunications Ltd. 1,236,727 1,188,273 0.3
Utilities 1,000,000 China Light & Power Co., Ltd. 4,133,650 5,565,983 1.5
Total Investments in Hong Kong 13,550,195 17,794,965 4.7
<PAGE>
Indonesia Automobile 100,000 Astra International Inc. 793,975 882,625 0.2
Cement 200,000 P.T. Indocement Tunggal Prakar 1,423,188 1,675,139 0.4
Textiles 330,000 Indorama Synthetics (Foreign) 975,477 1,319,085 0.3
Total Investments in Indonesia 3,192,640 3,876,849 0.9
Japan Appliances 200,000 Matsushita Electric Industrial Co. 2,837,637 3,499,044 0.9
80,000 Rinnai Corp. 1,452,936 2,302,103 0.6
44,500 Sony Corp. 2,433,123 2,646,176 0.7
------------ ------------ ------
6,723,696 8,447,323 2.2
Automobiles 40,000 Mabuchi Motor Co. 2,349,535 2,894,838 0.8
200,000 Toyota Motor Corp. 2,884,634 4,034,417 1.1
------------ ------------ ------
5,234,169 6,929,255 1.9
Banking 170,000 The Asahi Bank, Ltd. 1,779,958 1,885,277 0.5
100,000 The Bank of Tokyo, Ltd. 1,301,028 1,596,558 0.4
150,000 The Mitsubishi Bank, Ltd. 3,821,028 4,015,296 1.0
------------ ------------ ------
6,902,014 7,497,131 1.9
Broadcasting & 300,000 Tokyo Broadcasting System 3,736,661 4,990,440 1.3
Publishing
Business Services 150,000 Kamigumi Co., Ltd. 1,805,921 1,806,883 0.5
Chemicals 250,000 Asahi Chemical Industry 1,760,321 1,909,656 0.5
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
PACIFIC BASIN Value Percent of
(concluded) Industries Shares Held Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Japan Construction & Housing 50,000 Kandenko Co., Ltd. $ 1,194,554 $ 1,008,604 0.3%
(concluded) 120,000 National House Industries 1,925,972 2,099,426 0.6
160,000 Sekisui House Ltd. 1,954,055 2,003,824 0.5
130,000 Shimizu Corp. 1,188,683 1,175,717 0.3
150,000 Taisei Prefab Construction Co. 2,333,723 1,864,245 0.5
------------ ------------ ------
8,596,987 8,151,816 2.2
<PAGE>
Electrical & Electronics 200,000 Hitachi Ltd. 2,079,745 2,065,009 0.5
Electronics 150,000 Casio Computer Co. 1,853,397 1,892,925 0.5
29,500 Keyence Corp. 2,063,993 2,820,268 0.7
70,000 Murata Manufacturing Co., Ltd. 2,121,289 3,131,931 0.8
200,000 Sharp Corp. 3,027,869 3,441,683 0.9
70,000 Uniden Corp. 2,226,522 2,208,413 0.6
50,000 Victor Co. of Japan, Ltd. 682,703 702,677 0.2
------------ ------------ ------
11,975,773 14,197,897 3.7
Financial Services 300,000 Daiwa Securities Co., Ltd. 3,725,815 5,162,524 1.3
150,000 Mitsubishi Trust & Banking Corp. 1,920,692 2,423,518 0.6
------------ ------------ ------
5,646,507 7,586,042 1.9
Industrial Components 100,000 Futaba Industrial Co. 1,670,788 1,873,805 0.5
Insurance 200,000 Tokio Marine & Fire Insurance Co., Ltd. 2,573,815 2,619,503 0.7
Machinery & Engineering 100,000 Aichi Corp. 1,167,209 1,137,667 0.3
200,000 Makino Milling Machine 1,422,848 1,481,836 0.4
300,000 Mitsubishi Heavy Industries 2,198,026 2,199,809 0.6
------------ ------------ ------
4,788,083 4,819,312 1.3
Merchandising 60,000 Ito-Yokado Co., Ltd. 2,604,246 3,086,042 0.8
Metals 800,000 NKK Corp. 2,195,708 2,195,029 0.4
Real Estate 200,000 Mitsui Fudosan 2,482,763 2,390,057 0.6
Recreation 63,000 Sony Music Entertainment (Japan) Inc. 2,865,499 3,559,560 0.9
Telecommunications 94,000 Daimei Telecom Engineering 1,314,138 1,285,086 0.3
Utilities 270,000 Sumitomo Electric Industries, Ltd. 2,968,251 4,104,206 1.1
60,000 Tohoku Electric Power Co. 1,442,569 1,531,549 0.4
------------ ------------ ------
4,410,820 5,635,755 1.5
Wholesale & Inter- 35,000 Aoyama Trading Co. 2,287,334 1,435,469 0.4
national Trade 200,000 Mitsui & Co. 1,346,038 1,577,438 0.4
------------ ------------ ------
3,633,372 3,012,907 0.8
Total Investments in Japan 83,001,026 94,058,508 24.4
<PAGE>
Malaysia Automobiles 100,000 Edaran Otomobil Nasional BHD 464,057 647,463 0.2
Banking 583,333 Commerce Asset-Holding BHD 1,276,855 1,967,587 0.5
Construction & Housing 150,000 Ekran BHD 573,279 1,221,262 0.3
Telecommunications 400,000 Telekom Malaysia BHD 1,837,601 2,946,536 0.8
Utilities 200,000 Tenaga Nasional BHD 879,094 1,054,550 0.3
Total Investments in Malaysia 5,030,886 7,837,398 2.1
New Zealand Telecommunications 400,000 Telecom Corp. of New Zealand Ltd.
(Class C) (ADR)* 1,278,315 1,176,714 0.3
Total Investments in New Zealand 1,278,315 1,176,714 0.3
Singapore Air Transport 100,000 Singapore Airlines, Ltd. 383,769 867,580 0.2
Banking 149,500 The Development Bank of Singapore Ltd. 822,928 1,579,843 0.4
Multi-Industry 300,000 Amcol Holdings Ltd. 838,802 602,740 0.2
Shipping 350,000 Straits Steamship Land 788,684 940,639 0.3
Telecommunications 400,000 Singapore Telecommunications Ltd. 907,320 913,242 0.2
Transportation 120,000 Keppel Corp. Ltd. 851,434 845,401 0.2
Total Investments in Singapore 4,592,937 5,749,445 1.5
South Korea Aerospace 20,000 Samsung Aerospace Industries 821,485 868,702 0.2
2,983 Samsung Aerospace Industries (New) 77,985 78,110 0.0
------------ ------------ ------
899,470 946,812 0.2
Banking 75,640 Hanil Bank 1,123,122 857,967 0.2
Construction & Housing 26,265 Hyundai Engineering and Construction Co. 539,284 1,342,911 0.4
Ship Building 14,500 Samsung Heavy Industry 737,089 827,389 0.2
Utilities 40,000 Korea Electric Power Co. 1,097,115 1,528,915 0.4
Total Investments in South Korea 4,396,080 5,503,994 1.4
<PAGE>
Thailand Building Materials 35,000 Siam Cement Group 1,001,562 1,672,886 0.4
Building Products 48,500 Jasmine Ltd. 670,900 670,901 0.2
Electrical Equipment 30,000 United Communication Industry 519,292 714,569 0.2
Electrical Services 20,000 Advanced Information Service 626,971 793,966 0.2
Total Investments in Thailand 2,818,725 3,852,322 1.0
Total Investments in the Pacific Basin 124,928,846 147,133,570 38.2
SOUTHEAST
ASIA Face Amount
<S> <S> <C> <S> <C> <C> <C>
India Electrical & Electronics $ 75,000 Sterlite Industry, 3.50% due 6/30/1999 75,000 74,250 0.0
Textiles & Apparel 40,000 Indian Rayon & Industries 844,207 830,000 0.2
Total Investments in India 919,207 904,250 0.2
Total Investments in Southeast Asia 919,207 904,250 0.2
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
WESTERN Shares Held/ Value Percent of
EUROPE Industries Face Amount Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Belgium Utilities 5,250 Electrabel NPV $ 912,538 $ 887,674 0.2%
Total Investments in Belgium 912,538 887,674 0.2
Denmark Telecommunications 4,000 GN Store Nord Holding (GREAT NORDIC) 335,774 319,529 0.1
15,000 Tele Danmark A/S "B" 710,499 758,492 0.2
------------ ------------ ------
1,046,273 1,078,021 0.3
Total Investments in Denmark 1,046,273 1,078,021 0.3
Finland Food & Household 40,000 Huhtamaki Corp. 904,752 1,545,055 0.4
Products
Multi--Industry 5,000 OY Nokia AB 255,224 370,629 0.1
Total Investments in Finland 1,159,976 1,915,684 0.5
<PAGE>
France Broadcasting & 5,000 Canal Plus 1,040,635 804,904 0.2
Publishing
Building Materials 8,500 Lapeyre S.A. 496,706 475,746 0.1
Business & Public 4,285 Compagnie Generale des Eaux 1,574,432 1,902,668 0.5
Services
Chemicals 5,000 Imetal Co. 502,687 501,954 0.1
Energy Services 6,000 Elf Aquitane 444,920 437,313 0.1
Engineering & 2,325 Colas Co. 411,884 418,897 0.1
Construction
Total Investments in France 4,471,264 4,541,482 1.1
Germany Automobiles 43,000 Daimler-Benz AG (ADR)* 2,010,250 2,112,375 0.6
Banking 2,000 Deutsche Bank AG 651,283 896,594 0.2
Health & Personal Care 3,000 Wella AG (Preferred) 1,257,499 1,682,482 0.4
Merchandising 3,000 Hornbach AG (Preferred) 1,612,790 3,156,934 0.8
1,312 Hornbach Baumarkt AG 691,841 798,053 0.2
------------ ------------ ------
2,304,631 3,954,987 1.0
Steel 4,000 Friedrich Grohe (Preferred) 874,709 1,090,024 0.3
Total Investments in Germany 7,098,372 9,736,462 2.5
Italy Banking 96,000 IMI (Ordinary) 619,722 739,158 0.2
Merchandising 125,000 La Rinascente RISP 285,348 492,615 0.1
Telecommunications 300,000 SIP Italia (Ordinary) 280,800 810,811 0.2
300,000 SIP Italia (Savings) 490,473 677,876 0.2
------------ ------------ ------
771,273 1,488,687 0.4
Total Investments in Italy 1,676,343 2,720,460 0.7
<PAGE>
Netherlands Banking 26,000 ABN Amro Bank N.V. 770,721 851,396 0.2
Beverages & Tobacco 15,000 Heineken N.V. 1,523,893 1,833,830 0.5
Construction & Housing 50,000 IHC Caland N.V. 1,035,401 1,024,668 0.3
Food & Household 35,000 Kon Bols Wessanen 798,182 760,911 0.2
Products
Shipping 30,000 Ommeren (Kon. Van) 911,131 878,287 0.2
Total Investments in the Netherlands 5,039,328 5,349,092 1.4
Norway Broadcasting & 100,000 Schibsted Gruppen A/S 1,039,688 1,149,731 0.3
Publishing
Multi-Industry 40,000 Unitor Ships Service 796,035 757,140 0.2
Total Investments in Norway 1,835,723 1,906,871 0.5
Spain Energy & Petroleum 50,000 Repsol S.A. 1,662,606 1,578,753 0.4
Telecommunications 150,000 Telefonica de Espana Co. 2,015,867 2,036,149 0.5
Utilities 58,060 Empresa Nacional de Electricidad S.A. 2,056,698 2,805,555 0.7
Total Investments in Spain 5,735,171 6,420,457 1.6
Sweden Automobiles 14,500 Volvo AB 1,448,465 1,342,868 0.4
Health & Personal Care 113,400 Astra 'B' Fria 2,120,584 2,356,439 0.6
Merchandising 15,000 Hennes & Mauritz 409,324 781,170 0.2
Total Investments in Sweden 3,978,373 4,480,477 1.2
Switzerland Banking 4,000 Swiss Bank Corp. (Bearer) 849,733 1,152,639 0.3
Electrical Equipment 2,000 BBC Brown Boveri & Co. 1,542,228 1,797,432 0.5
Food & Household 1,100 Nestle AG 439,670 899,929 0.2
Products
Health & Personal Care 1,731 Roche Holding AG 6,874,061 8,284,600 2.2
Insurance 2,000 Swiss Reinsurance Co. (PC) 725,688 833,096 0.2
1,180 Zurich Insurance Co. 1,169,946 1,136,234 0.3
------------ ------------ ------
1,895,634 1,969,330 0.5
<PAGE>
Recreation 7,500 Societe de Microelectronique et Horlogerie
(S.M.H.) AG (Registered) 255,866 941,512 0.3
Total Investments in Switzerland 11,857,192 15,045,442 4.0
United Banking 400,000 Bank of Scotland 1,207,550 1,070,284 0.3
Kingdom 300,000 National Westminster Bank PLC 1,836,513 1,931,953 0.5
------------ ------------ ------
3,044,063 3,002,237 0.8
Building Materials 500,000 Spring Ram Corp. PLC 1,450,088 436,503 0.1
& Components
Business & Public 125,000 Carlton Communications PLC (Ordinary) 1,292,970 1,647,753 0.4
Services
Energy Sources 450,000 British Petroleum Co. PLC 2,236,817 2,613,068 0.7
Food & Household 200,000 Cadbury Schweppes PLC 1,741,253 1,388,874 0.4
Products
Health & Personal Care 200,000 Goldsborough Healthcare PLC 506,868 453,510 0.1
Merchandising 100,102 Boots Co. PLC 721,992 773,267 0.2
125,714 Kingfisher PLC 1,115,090 1,026,463 0.3
160,000 Lloyds Chemists PLC 679,285 749,803 0.2
275,000 Next PLC 783,755 991,486 0.3
------------ ------------ ------
3,300,122 3,541,019 1.0
Multi-Industry 250,000 BTR PLC 1,464,905 1,409,660 0.4
150,000 Siebe PLC 1,033,849 1,253,955 0.3
------------ ------------ ------
2,498,754 2,663,615 0.7
Telecommunications 240,000 British Telecommunications PLC
(Ordinary) 1,460,378 1,316,086 0.3
Total Investments in the United Kingdom 17,531,313 17,062,665 4.5
Total Investments in Western Europe 62,341,866 71,144,787 18.5
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
SHORT-TERM Face Value Percent of
SECURITIES Amount Issue Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
United Commercial Paper*** $16,890,000 Associates Corp. of North America, 4.22%
States due 6/01/1994 $ 16,890,000 $ 16,890,000 4.4%
US Government & Federal Home Loan Mortgage Association:
Agency Obligations*** 8,000,000 3.82% due 6/01/1994 8,000,000 8,000,000 2.1
6,000,000 4.15% due 6/22/1994 5,985,475 5,985,475 1.5
Federal National Mortgage Association:
10,000,000 4.17% due 6/13/1994 9,986,100 9,986,100 2.6
15,000,000 4.16% due 6/27/1994 14,954,933 14,954,933 3.9
------------ ------------ ------
38,926,508 38,926,508 10.1
Total Investments in Short-Term
Securities 55,816,508 55,816,508 14.5
<CAPTION>
OPTIONS
Premiums Paid
<S> <C> <S> <C> <C> <C>
Currency Put Options Japanese Yen:
Purchased 139,108 Expiring December 1994 at Yen 107.80 625,985 189,743 0.1
136,030 Expiring January 1995 at Yen 110.27 627,097 126,508 0.0
Total Options Purchased 1,253,082 316,251 0.1
Total Investments $334,516,769 389,009,065 100.9
============
Liabilities in Excess of Other Assets (3,638,270) (0.9)
------------ ------
Net Assets $385,370,795 100.0%
============ ======
<FN>
(a)The rights may be exercised until June 27, 1994.
++Restricted securities pursuant to Rule 144A amounted to $4,135,250, representing
1.1% of net assets.
*American Depositary Receipts (ADR).
**Global Depositary Shares (GDS).
***Commercial Paper and certain US Government & Agency Obligations are traded on a
discount basis; the interest rates shown are the discount rates paid at the time of
purchase by the Company.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of May 31, 1994
Assets: Investments, at value (identified cost--$333,263,687) (Note 1a) $388,692,814
Put options purchased, at value (cost--$1,253,082) (Notes 1a & 1c) 316,251
Receivables:
Capital shares sold $ 6,894,229
Securities sold 1,819,420
Dividends 1,021,871
Interest 25,007 9,760,527
------------
Prepaid registration fees and other assets (Note 1f) 19,130
------------
Total assets 398,788,722
------------
Liabilities: Payables:
Securities purchased 11,069,186
Capital shares redeemed 905,079
Investment adviser (Note 2) 332,516
Distributor (Note 2) 43,815 12,350,596
------------
Accrued expenses and other liabilities 1,067,331
------------
Total liabilities 13,417,927
------------
Net Assets: Net assets $385,370,795
============
Net Assets Class A Common Stock, $0.10 par value, 100,000,000 shares authorized $ 2,527,222
Consist of: Class B Common Stock, $0.10 par value, 100,000,000 shares authorized 396,546
Paid-in capital in excess of par 322,313,284
Undistributed investment income--net 718,979
Undistributed realized capital gains on investments and foreign
currency transactions--net 4,954,560
Unrealized appreciation on investments and foreign currency transactions--net 54,460,204
------------
Net assets $385,370,795
============
Net Asset Class A Shares--Based on net assets of $333,995,295 and
Value: 25,272,218 shares outstanding $ 13.22
============
Class B Shares--Based on net assets of $51,375,500 and
3,965,457 shares outstanding $ 12.96
============
See Notes to Financial Statements.
<PAGE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Six Months Ended May 31, 1994
<S> <S> <C> <C>
Investment Dividends (net of $264,419 foreign withholding tax) $ 2,427,671
Income Interest and discount earned 709,454
(Notes 1d & 1e): ------------
Total income 3,137,125
------------
Expenses: Investment advisory fees (Note 2) 1,795,559
Distribution fees--Class B (Note 2) 220,132
Transfer agent fees--Class A (Note 2) 203,747
Custodian fees 111,547
Printing and shareholder reports 85,094
Accounting services 59,929
Registration fees (Note 1f) 36,052
Transfer agent fees--Class B (Note 2) 33,158
Professional fees 32,422
Directors' fees and expenses 14,280
Pricing fees 5,735
Other 3,278
------------
Total expenses 2,600,933
------------
Investment income--net 536,192
------------
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net $ 6,927,146
(Loss) on Foreign currency transactions--net (76,661) 6,850,485
Investments & ------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net 14,101,116
(Notes 1b, 1e &3): Foreign currency transactions--net (950,940) 13,150,176
------------ ------------
Net realized and unrealized gain on investments
and foreign currency transactions 20,000,661
------------
Net Increase in Net Assets Resulting from Operations $ 20,536,853
============
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Six For the Year
Months Ended Ended
Increase (Decrease) in Net Assets: May 31, 1994 Nov. 30, 1993
<S> <S> <C> <C>
Operations: Investment income--net $ 536,192 $ 475,574
Realized gain on investments and foreign currency transactions--net 6,850,485 19,105,708
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions--net 13,150,176 18,287,892
------------ ------------
Net increase in net assets resulting from operations 20,536,853 37,869,174
------------ ------------
Dividends & Distri- Investment income--net:
butions to Share- Class A (292,787) --
holders (Note 1g): Realized gain on investments--net:
Class A (15,976,086) (11,512,553)
Class B (1,819,251) (1,598,607)
------------ ------------
Net decrease in net assets resulting from dividends and distributions
to shareholders (18,088,124) (13,111,160)
------------ ------------
Capital Share Net increase in net assets derived from capital share transactions 92,478,571 75,813,575
Transactions ------------ ------------
(Note 4):
Net Assets: Total increase in net assets 94,927,300 100,571,589
Beginning of period 290,443,495 189,871,906
------------ ------------
End of period* $385,370,795 $290,443,495
============ ============
<FN>
*Undistributed investment income--net $ 718,979 $ 475,574
============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Class A
The following per share data and For the For the
ratios have been derived from information Six Months Seven-Month
provided in the financial statements. Ended For the Year Ended Period Ended
May 31, November 30, Nov. 30,
Increase (Decrease) in Net Asset Value: 1994++ 1993++ 1992++ 1991 1990
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 13.07 $ 11.78 $ 10.95 $ 10.48 $ 10.91
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .03 .04 .10 .16 .17
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net .93 2.07 1.05 .53 (.30)
-------- -------- -------- -------- --------
Total from investment operations .96 2.11 1.15 .69 (.13)
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.01) -- (.10) (.21) (.13)
Realized gain on investments--net (.80) (.82) (.22) (.01) (.17)
-------- -------- -------- -------- --------
Total dividends and distributions (.81) (.82) (.32) (.22) (.30)
-------- -------- -------- -------- --------
Net asset value, end of period $ 13.22 $ 13.07 $ 11.78 $ 10.95 $ 10.48
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 7.65%+++ 19.16% 10.67% 6.77% (1.45%)+++
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses 1.32%* 1.43% 1.49% 1.48% 1.59%*
Net Assets: ======== ======== ======== ======== ========
Investment income (loss)--net .42%* .32% (.19%) 1.31% 2.63%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $333,995 $256,203 $166,947 $165,687 $176,898
Data: ======== ======== ======== ======== ========
Portfolio turnover 22.44% 56.98% 65.93% 63.94% 34.44%
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Based on average shares outstanding during the period.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS (concluded)
<CAPTION>
Class B
The following per share data and For the For the
ratios have been derived from information Six Months Seven-Month
provided in the financial statements. Ended For the Year Ended Period Ended
May 31, November 30, Nov. 30,
Increase (Decrease) in Net Asset Value: 1994++ 1993++ 1992++ 1991 1990
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 12.74 $ 11.62 $ 10.82 $ 10.36 $ 10.82
Operating -------- -------- -------- -------- --------
Performance: Investment income (loss)--net (.04) (.08) (.03) .04 .10
Realized and unrealized gain (loss)
on investments and foreign
currency transactions--net .92 2.02 1.05 .54 (.30)
-------- -------- -------- -------- --------
Total from investment operations .88 1.94 1.02 .58 (.20)
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net -- -- -- (.11) (.09)
Realized gain on investments--net (.66) (.82) (.22) (.01) (.17)
-------- -------- -------- -------- --------
Total dividends and distributions (.66) (.82) (.22) (.12) (.26)
-------- -------- -------- -------- --------
Net asset value, end of period $ 12.96 $ 12.74 $ 11.62 $ 10.82 $ 10.36
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 7.12%+++ 17.87% 9.58% 5.67% (2.08%)+++
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, excluding distribution fees 1.34%* 1.46% 1.52% 1.51% 1.63%*
Net Assets: ======== ======== ======== ======== ========
Expenses 2.34%* 2.46% 2.52% 2.51% 2.63%*
======== ======== ======== ======== ========
Investment income (loss)--net (.57%)* (.72%) (1.19%) .25% 1.54%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 51,376 $ 34,241 $ 22,925 $ 24,960 $ 22,623
Data: ======== ======== ======== ======== ========
Portfolio turnover 22.44% 56.98% 65.93% 63.94% 34.44%
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Based on average shares outstanding during the period.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Global Holdings (the "Company") is registered under the
Investment Company Act of 1940 as a diversified, open-end management
investment company. The Company offers both Class A and Class B Shares.
Class A Shares are sold with a front-end sales charge. Class B Shares
may be subject to a contingent deferred sales charge. Both classes of
shares have identical voting, dividend, liquidation and other rights
and the same terms and conditions, except that Class B Shares bear
certain expenses related to the distribution of such shares and have
exclusive voting rights with respect to matters relating to such
distribution expenditures. The following is a summary of significant
accounting policies followed by the Company.
(a) Valuation of securities--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. 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
traded in the over-the-counter market are valued at the last available
bid price in the over-the-counter market prior to the time of valuation.
Options written by the Company are valued at the last asked price in the
case of exchange-traded options or in the case of options traded in the
over-the-counter market, the average of the last asked price as obtained
from one or more dealers. Options purchased by the Company are valued at
the last bid price in the case of exchange-traded options or, in the case
of options traded in the over-the-counter market, the average of the last
bid price as obtained from two or more dealers unless there is only one
dealer, in which case that dealer's price is used. Securities with sixty
days or less to maturity are valued at amortized cost, which approximates
market value. Securities and assets for which market quotations
are not readily available are valued at fair value as determined in
good faith by or under the direction of the Board of Directors of
the Company.
(b) Foreign currency transactions--Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized.
Assets and liabilities denominated in foreign currencies are valued at the
exchange rate at the end of the period. Foreign currency transactions are
the result of settling (realized) or valuing (unrealized) such transactions
expressed in foreign currencies into US dollars. Realized and unrealized gains
or losses from investments include the effects of foreign exchange rates on
investments.
<PAGE>
The Company is authorized to purchase or sell listed or over-the-counter
foreign currency options, foreign currency futures and related options on
foreign currency futures.
The Company is authorized to enter into forward foreign exchange contracts
as a hedge against either specific transactions or portfolio positions.
Such contracts are not entered on the Company's records. However, the effect
on operations is recorded from the date the Company enters into such contracts.
Premium or discount is amortized over the life of the contracts.
(c) Options--The Company can write covered call options and purchase put
options. When the Company writes an option, an amount equal to the premium
received by the Company is reflected as an asset and an equivalent liability.
The amount of the liability is subsequently marked to market to reflect the
current value of the option written.
When a security is sold through an exercise of an option, the related
premium received (or paid) is deducted from (or added to) the basis of the
security sold. When an option expires (or the Company enters into a closing
transaction), the Company 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 transactions exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(d) Income taxes--It is the Company'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, dividends, and
capital gains at various rates.
NOTES TO FINANCIAL STATEMENTS (concluded)
(e) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Dividend income is recorded on the ex-dividend date, except that if the
ex-dividend date has passed, certain dividends from foreign securities are
recorded as soon as the Company is informed of the ex-dividend date. Interest
income is recognized on the accrual basis. Realized gains and losses on
security transactions are determined on the identified cost basis.
(f) Prepaid registration fees--Prepaid registration fees are charged to
expense as the related shares are issued.
(g) Dividends and distributions--Dividends and distributions paid by the
Company are recorded on the ex-dividend dates.
<PAGE>
2. Investment Advisory Agreement and Transactions
with Affiliates:
The Company has entered into an Investment Advisory Agreement with Merrill
Lynch Asset Management, L.P. ("MLAM"). Effective January 1, 1994, the
investment advisory business of MLAM was reorganized from a corporation
to a limited partnership. Both prior to and after the reorganization,
ultimate control of MLAM was vested with Merrill Lynch & Co., Inc.
("ML & Co."). The general partner of MLAM is Princeton Services, Inc.,
an indirect wholly-owned subsidiary of ML & Co. The limited partners are
ML & Co. and Merrill Lynch Investment Management, Inc. ("MLIM"), which is
also an indirect wholly-owned subsidiary of ML & Co. The Company has also
entered into a Distribution Agreement and a Distribution Plan with Merrill
Lynch Funds Distributor, Inc. ("MLFD" or Distributor"), a wholly-owned
subsidiary of MLIM.
As compensation for its services to the Company, the Investment Adviser
receives monthly compensation at the annual rate of 1.0% of the average
daily net assets of the Company. MLAM entered into Investment Research
Agreements with Lombard Odier Global Portfolio Management Limited ("LOIPM")
and Nomura Capital Management, Inc. ("NCM") pursuant to which LOIPM and NCM
furnished MLAM with economic research, securities analysis and investment
recommendations and reviewed and rendered investment research with respect
to the portfolio of the Company. The Investment Research Agreements with
LOIPM and NCM were terminated as of April 1, 1994. Pursuant to their
respective Investment Research Agreements, the Investment Adviser paid
LOIPM and NCM fees at the annual rates of 0.15% and 0.20%, respectively,
of the average daily net assets of the Company.
Certain states in which shares of the Company are qualified for sale
impose limitations on the expenses of the Company. The most restrictive
annual expense limitation requires that the Investment Adviser reimburse
the Company to the extent that expenses (excluding interest, taxes,
distribution fees, brokerage fees and commissions, and extraordinary items)
exceed 2.5% of the Company's first $30 million of average daily net assets,
2.0% of the Company's next $70 million of average daily net assets, and
1.5% of the daily net assets in excess thereof. In the event reimbursement
is required pursuant to such limitations, MLAM will be responsible for the
amounts required to be reimbursed, but the fees paid to LOIPM and NCM will
be reduced pro rata. No fee payment will be made to the Investment Adviser
during any fiscal year which will cause such expenses to exceed the most
restrictive expense limitation at the time of such payment. For the year
ended May 31, 1994, investment advisory fees were $1,795,559, of which
$1,167,113 was paid to MLAM, $269,334 was paid to LOIPM and $359,112 was
paid to NCM under the terms of their respective research agreements.
<PAGE>
The Company has adopted a Plan of Distribution (the "Plan") in accordance
with Rule 12b-1 under the Investment Company Act of 1940 pursuant to which
Merrill Lynch Funds Distributor, Inc. ("MLFD" or "Distributor"), a
wholly-owned subsidiary of MLIM, receives fees. The Company pays the
Distributor an ongoing account maintenance fee and a distribution fee,
which are accrued daily and paid monthly at the annual rates of 0.25% and
0.75%, respectively, of the average daily net assets of the Class B Shares of
the Company. Pursuant to a sub-agreement with the Distributor, Merrill Lynch
also provides account maintenance and distribution services to the Company.
The ongoing account maintenance fee compensates the Distributor and Merrill
Lynch for providing account maintenance services to Class B shareholders.
The ongoing distribution fee compensates the Distributor and Merrill Lynch
for providing shareholder and distribution services and bearing certain
distribution-related expenses of the Company, including payments to
financial consultants for selling Class B Shares. For the six months ended
May 31, 1994, MLFD earned $220,132 under the Plan, all of which was paid to
MLPF&S pursuant to the agreement.
For the six months ended May 31, 1994, MLFD earned underwriting discounts of
$5,796, and MLPF&S earned dealer concessions of $82,669 on the sale of the
Company's Class A Shares. MLPF&S also received contingent deferred sales
charges of $15,605 relating to transactions in Class B Shares and $19,039
in commissions on the execution of portfolio security transactions for the
Company during the period.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co.,
acts as the Company's transfer agent.
Accounting services are provided to the Company by MLAM at cost.
Certain officers and/or directors of the Company are officers and/or directors
of MLIM, NCM, LOIPM (including their affiliated companies), MLPF&S, FDS, MLFD,
and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
six months ended May 31, 1994 were $115,420,462 and $71,140,819, respectively.
Net realized and unrealized gains (losses) as of May 31, 1994 were
as follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
Long-term investments $ 6,927,327 $ 55,429,127
Short-term investments (181) --
Currency put options purchased -- (936,831)
Foreign currency transactions (76,661) (32,092)
------------ ------------
Total $ 6,850,485 $ 54,460,204
============ ============
<PAGE>
As of May 31, 1994, net unrealized appreciation for Federal income tax
purposes aggregated $54,492,296, of which $63,668,103 related to appreciated
securities and $9,175,807 related to depreciated securities. The aggregate
cost of investments including call options at May 31, 1994 for Federal
income tax purposes was $333,263,687.
4. Capital Stock Transactions:
Net increase in net assets derived from capital share transactions
was $92,478,571 and $75,813,575 for the six months ended May
31, 1994 and the year ended November 30, 1993, respectively.
Transactions in capital shares for Class A and Class B Shares were
as follows:
Class A Shares for the Six Months Ended Dollar
May 31, 1994 Shares Amount
Shares sold 7,930,258 $106,531,072
Shares issued to shareholders in reinvest-
ment of dividends and distributions 1,160,533 14,703,953
----------- ------------
Total issued 9,090,791 121,235,025
Shares redeemed (3,417,724) (45,527,043)
----------- ------------
Net increase 5,673,067 $ 75,707,982
=========== ============
Class A Shares for the Year Ended Dollar
November 30, 1993 Shares Amount
Shares sold 9,166,536 $112,504,555
Shares issued to shareholders in reinvest-
ment of distributions 900,399 9,949,408
----------- ------------
Total issued 10,066,935 122,453,963
Shares redeemed (4,639,892) (55,755,689)
----------- ------------
Net increase 5,427,043 $ 66,698,274
=========== ============
<PAGE>
Class B Shares for the Six Months Ended Dollar
May 31, 1994 Shares Amount
Shares sold 1,593,113 $ 20,973,634
Shares issued to shareholders in reinvest-
ment of distributions 131,099 1,636,116
----------- ------------
Total issued 1,724,212 22,609,750
Shares redeemed (445,482) (5,839,161)
----------- ------------
Net increase 1,278,730 $ 16,770,589
=========== ============
Class B Shares for the Year Ended Dollar
November 30, 1993 Shares Amount
Shares sold 1,235,408 $ 15,456,464
Shares issued to shareholders in reinvest-
ment of distributions 126,908 1,380,757
----------- ------------
Total issued 1,362,316 16,837,221
Shares redeemed (649,303) (7,721,920)
----------- ------------
Net increase 713,013 9,115,301
=========== ============
5. Commitments:
On May 31, 1994, the Company had entered into forward exchange contracts
under which it had agreed to sell various foreign currencies with an
approximate value of $6,904,000 and buy various foreign currencies with
an approximate value of $10,993,000.
<PAGE>
PORTFOLIO CHANGES
For the Quarter Ended May 31, 1994
Additions
ANZ Banking Group
Advanced Information Service
Airtouch Communications, Inc.
Asahi Chemical Industry
Astra International Inc.
BTR PLC
Casio Computer Co.
Corning Inc.
Daimei Telecom Engineering
Elf Aquitane
Goldsborough Healthcare PLC
Hitachi Ltd.
Jasmine Ltd.
Keppel Corp. Ltd.
Lend Lease Corp.
Mitsubishi Heavy Industries
Mitsui Fudosan
Northern Telecom
Ommeren (Kon. Van)
Phelps Dodge Corp.
Repsol S.A.
Samsung Aerospace Industries (New)
Samsung Heavy Industry
Shimizu Corp.
Sports & Recreation Inc.
Tele Danmark A/S "B"
Telecom Corp. of New Zealand (Class C) (ADR)
Telecomunicacoes Brasileiras S.A.-Telebras PN (Rights)
Tokio Marine & Fire Insurance Co., Ltd.
US HealthCare Inc.
Unitor Ships Service
Viacom Inc.
Victor Co. of Japan, Ltd.
Volvo AB
<PAGE>
Deletions
Acesa Auto Pistas Cesa
Addington Resources, Inc.
Advance Bank Australia, Ltd.
Aumar-Autopistas Del Mare Nostrum S.A.
Autotote Corp. (Class A)
Beverly Enterprises
CMAC Investment Corp.
Canadian Fracmaster, Ltd.
Cifra, S.A. C.V. (Class C)
Chemical New York
Commerzbank AG
Cott Corp.
Dofasco Inc.
Ferro Corporation
First Pacific Co. Ltd.
Grupo Financiero Bancomer, S.A. de C.V. (ADR)
Iberdola I S.A.
International Semi-Tech Microelectronics, Inc. (Installment Receipts)
Jurong Shipyard, Ltd.
Keiyo Co., Ltd.
LSI Logic Corp.
Lasmo PLC (Ordinary)
Lodgenet Entertainment Corp.
Logic Devices Inc.
Luscar Oil & Gas Ltd.
Marsam Pharmaceuticals Inc.
Maybelline Inc.
Mercer International Inc.
Micron Technologies Inc.
New Zealand Telecommunications
Nutramax Products, Inc.
Orkla A S-Frie A-Aksjer
Paul Y-ITC Construction Hldg.
Purus Inc.
Sainsbury (J.) PLC
The Siam Commercial Bank Ltd.
Siderugica Venezolana SIVENSA, S.A.I.C.A.-S.A.C.A. (Warrants) (ADR)
Slocan Forest Products, Ltd.
Spring Ram Corp. (Rights)
Swiss Reinsurance Co. 'A' (Warrants)
Swiss Reinsurance Co. 'B' (Warrants)
Tokyo Electric Power Co., Inc.
Tomkins PLC
Watson Pharmaceutical Inc.
WMS Industries, Inc.
Wolters Kluwer CVA
<PAGE>
PORTFOLIO INFORMATION
Worldwide
Investments as of
May 31, 1994
Percent of
Ten Largest Industries Net Assets
Banking 7.8%
Telecommunications 6.3
Automobiles 5.2
Merchandising 4.7
Broadcasting & Publishing 4.7
Utilities 4.6
Electronics 4.5
Business Services 3.9
Multi-Industry 3.6
Appliances 3.3
Country of Percent of
Ten Largest Equity Holdings Origin Net Assets
Roche Holding AG Switzerland 2.2%
AFLAC, Inc. United State 1.5
China Light & Power Co., Ltd Hong Kong 1.5
Daiwa Securities Co., Ltd. Japan 1.3
Tokyo Broadcasting System Japan 1.3
Sun Hung Kai Properties, Ltd. Hong Kong 1.1
Sumitomo Electric Industries, Ltd. Japan 1.1
Swire Pacific 'A' Ltd. Hong Kong 1.1
Toyota Motor Corp. Japan 1.1
The Mitsubishi Bank, Ltd. Japan 1.0
<PAGE>
Global Economic
Sector
Representation
As a Percentage
Of Equities as of
May 31, 1994
Services 30.0%
Consumer Goods 17.1
Finance 14.5
Capital Equipment 13.0
Materials 4.0
Multi-Industry 3.6
Energy Sources 3.5
