MERRILL
LYNCH
GLOBAL
RESOURCES
TRUST
Semi-Annual Report January 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 Trust
unless accompanied or preceded by the Trust'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 Resources Trust
Box 9011
Princeton, New Jersey
08543-9011
MERRILL LYNCH GLOBAL RESOURCES TRUST
DEAR SHAREHOLDER
<PAGE>
Effective January 31, 1993, the name of Merrill Lynch
Natural Resources Trust was changed to Merrill Lynch
Global Resources Trust. The Trust's management
expects that, under normal circumstances, at least
65% of its total assets will be invested in the securities
of issuers from at least three different countries
(including the United States), and as of February 4,
1994 may include South African investments. Since a
"global fund" is one which may invest within the
United States as well as in other markets, the Trust's
management believes that the name "Merrill Lynch
Global Resources Trust" better portrays the Trust's
worldwide investment capabilities. The change in the
Trust's name does not connote a change in its invest-
ment objective, which remains the same: seeking to
achieve long-term growth of capital and to protect the
purchasing power of shareholders' capital by invest-
ing in a portfolio of equity securities of domestic
and foreign companies with substantial natural
resource assets.
Investment Environment
Natural resource-related equities returned to favor
with investors during the January quarter, posting
solid gains in equity markets worldwide. For the
three-month period ended January 31, 1994, the total
returns for the Trust's Class A and Class B Shares
were +11.53% and +11.33%, respectively. While oil
prices declined sharply over the period, continued
evidence of economic recovery in the United States
helped push commodity prices in many industrial
sectors (such as base metals, chemicals and forest
products) sharply higher. The Trust's heavy exposure
to equities in these sectors significantly enhanced
performance during the period under review. (Com-
plete performance information, including average
annual total returns, can be found on pages 3 and 4
of this report to shareholders.)
<PAGE>
Investment Activities
In general, pricing in the paper/forest products sector,
particularly in wood products, has been strong and
should continue to improve with economic growth.
High investment activity in the past led to severe over-
capacities in many parts of the industry. However,
capacity utilization rates generally have bottomed
and in many cases are improving, giving the industry
greater pricing flexibility. Lumber prices have been
particularly firm, where an already tight supply situa-
tion is being aggravated by strong housing starts and
robust repair/remodeling activity in the United States.
With little new capacity scheduled to start up in the
wood products area until the second half of 1995, this
firm pricing trend is expected to continue in the near
term. Share prices of companies with large wood prod-
ucts exposure have responded positively to this
situation. The Trust's heavy exposure to this area bene-
fited performance during the January quarter.
In the base metals sector, we eliminated our positions
in aluminum companies by selling Aluminum Com-
pany of America and Alcan Aluminium Ltd. and
increased our exposure to copper-related companies
through the purchases of Phelps Dodge Corp. and
Noranda Inc. While base metal shares generally
should be among the prime beneficiaries of increasing
economic activity, the supply/demand picture,
particularly for metals such as aluminum and nickel,
remains fragile. Inventories of both aluminum and
nickel remain stubbornly high, leaving the supply/
demand balance reliant on the extent to which pro-
ducers are willing to cut back production. Conversely,
copper prices should benefit from an environment of
relatively low inventories and improving worldwide
demand. Including diversified copper producers like
Freeport-McMoRan Copper & Gold, Inc. and Cyprus
Amax Minerals Co., the Trust has about 12% of its
net assets in copper-related companies.
In the energy sector, we became cautious on the
near-term outlook for oil prices. The Organization of
Petroleum Exporting Countries' (OPEC) recent deci-
sion not to take any action to prop up oil prices reveals
an increasing inflexibility on the part of OPEC mem-
bers to accept production cuts. Meanwhile, produc-
tion outside of OPEC continues to increase steadily,
offsetting increases in demand. In addition, the mere
threat of Iraqi oil returning to the market is acting to
temper any oil price rallies. Accordingly, we reduced
the Trust's exposure to crude oil producers by selling
our position in Oil Search, Ltd., and through partial
sales of Mitchell Energy & Development Corp. and
Bridge Oil, Ltd.
<PAGE>
We retained our position in integrated oil companies,
which are insulated from the full effect of declining
oil prices by their refining and marketing operations.
In addition, a rising production profile and good lever-
age to natural gas prices (in the case of Unocal Corp.)
and continued corporate restructuring benefits (in
the case of British Petroleum Co. PLC) should allow
these companies to maintain positive cash flow and
earnings growth despite lower oil prices.
In Conclusion
The strong performance of natural resource-related
equities during the January quarter caused many of
our holdings to reach our near-term price targets.
Accordingly, the Trust's cash position increased to
about 20% of net assets. We will be looking to put this
cash back to work opportunistically as the outlook for
commodity pricing generally remains positive, sup-
ported by strong demand in the United States and
Southeast Asia and prospects of economic recovery
in Europe and Japan.
We thank you for your investment in Merrill Lynch
Global Resources Trust, and we look forward to
reviewing our outlook and strategy with you again in
our next report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Peter A. Lehman)
Peter A. Lehman
Vice President and Portfolio Manager
March 3, 1994
Effective January 31, 1994, Peter A. Lehman assumed the responsibilities
as the Trust's portfolio manager. Mr. Lehman had been a senior fund analyst
for an international fund since 1992 and prior to that a global natural
resources portfolio manager.
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.
<PAGE>
<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>
10/24/88--12/31/88 $12.50 $12.00 $0.049 $0.139 - 2.48%
1989 12.00 14.89 -- 0.378 +27.39
1990 14.89 14.36 0.039 0.415 - 0.68
1991 14.36 13.94 0.786 0.471 + 5.91
1992 13.94 12.89 -- 0.238 - 5.87
1993 12.89 15.19 -- 0.138 +19.01
1/1/94--1/31/94 15.19 16.15 -- -- + 6.32
------ ------
Total $0.874 Total $1.779
Cumulative total return as of 1/31/94: +55.66%**
<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>
8/2/85--12/31/85 $10.00 $ 9.99 -- -- - 0.10%
1986 9.99 12.75 $0.280 $0.110 +32.37
1987 12.75 13.61 1.978 0.181 +21.22
1988 13.61 12.00 0.340 0.206 - 7.86
1989 12.00 14.89 -- 0.230 +26.09
1990 14.89 14.37 0.039 0.245 - 1.70
1991 14.37 13.96 0.786 0.305 + 4.79
1992 13.96 12.92 -- 0.090 - 6.82
1993 12.92 15.17 -- 0.049 +17.83
1/1/94--1/31/94 15.17 16.12 -- -- + 6.26
------ ------
Total $3.423 Total $1.416
Cumulative total return as of 1/31/94: +123.80%**
<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>
<PAGE>
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/93 +19.01% +11.27%
Five Years Ended 12/31/93 + 8.46 + 7.02
Inception (10/24/88) through 12/31/93 + 7.62 + 6.24
[FN]
*Maximum sales charge is 6.5%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/93 +17.83% +13.83%
Five Years Ended 12/31/93 + 7.35 + 7.35
Inception (8/2/85) through 12/31/93 + 9.25 + 9.25
[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>
PERFORMANCE DATA (concluded)
<TABLE>
Recent Performance Results*
<CAPTION>
12 Month 3 Month
1/31/94 10/31/93 1/31/93 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Global Resources Trust Class A Shares $16.15 $14.48 $13.00 +24.23% +11.53%
ML Global Resources Trust Class B Shares 16.12 14.48 13.02 +23.81 +11.33
ML Global Resources Trust Class A Shares--Total Return +25.46(1) +11.53
ML Global Resources Trust Class B Shares--Total Return +24.25(2) +11.33
<FN>
*Investment results shown for the 3-month and 12-month periods are before the deduction of any sales charges.
(1)Percent change includes reinvestment of $0.138 per share ordinary income dividends.
(2)Percent change includes reinvestment of $0.049 per share ordinary income dividends.
</TABLE>
<PAGE>
PORTFOLIO INFORMATION
For the Quarter Ended January 31, 1994
Percent of
Ten Largest Equity Holdings Net Assets
British Petroleum Co. PLC* 6.8%
Louisiana-Pacific Corp. 6.0
Weyerhaeuser Co. 5.8
Coastal Corp. 4.9
Freeport-McMoRan Copper & Gold, Inc. 4.6
Cyprus Amax Minerals Co. 3.9
Chauvco Resources, Ltd. 3.9
Mitchell Energy & Development Corp.** 3.7
Bridge Oil, Ltd. 3.4
Slocan Forest Products Ltd. 3.3
[FN]
*Includes American Depositary Receipts.
**Includes Class A and Class B Shares.
Additions
Noranda Inc.
Phelps Dodge Corp.
Deletions
Alcan Aluminium Ltd.
Aluminum Company of America
Oil Search, Ltd.
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Shares Value Percent of
Industries Held Common Stocks Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Chemical 150,000 Air Products and Chemicals, Inc. $ 6,531,950 $ 7,443,750 3.2%
105,000 Hanna (M.A.) Co. 3,130,050 3,937,500 1.7
------------- ------------ ------
9,662,000 11,381,250 4.9
Diversified 200,000 Coastal Corp. 5,117,978 6,175,000 4.9
Companies 375,000 Cyprus Amax Minerals Co. 10,963,751 11,250,000 3.9
110,000 Mitchell Energy & Development Corp.
(Class A) 2,303,358 2,337,500 2.7
175,000 Mitchell Energy & Development Corp.
(Class B) 3,666,183 3,784,375 1.0
500,000 Occidental Petroleum Corp. 9,585,073 9,000,000 1.7
------------- ------------ ------
31,636,343 32,546,875 14.2
Diversified 200,000 Unocal Corp. 5,792,080 5,875,000 2.6
Integrated
Oil Companies--
Domestic
Integrated Oil 2,300,000 British Petroleum Co. PLC 13,891,471 12,925,424 5.6
Companies--Foreign 40,000 British Petroleum Co. PLC (ADR)* 2,527,260 2,730,000 1.2
------------- ------------ ------
16,418,731 15,655,424 6.8
Metals & Mining 400,000 Freeport-McMoRan Copper & Gold, Inc. 8,558,839 10,650,000 4.6
100,000 Noranda Inc. 1,911,452 2,008,221 0.9
85,000 Phelps Dodge Corp. 3,997,431 4,611,250 2.0
------------- ------------ ------
14,467,722 17,269,471 7.5
Oil & Gas 18,000,000 Bridge Oil, Ltd. 8,202,780 7,782,624 3.4
Producers 700,000 Chauvco Resources, Ltd. 8,670,323 8,975,713 3.9
12,500,000 Premier Consolidated Oilfields PLC 6,793,854 4,875,325 2.1
------------- ------------ ------
23,666,957 21,633,662 9.4
Paper & Pulp 364,400 Aracruz Celulose S.A. (ADR)* 3,161,045 5,648,200 2.5
90,000 Georgia-Pacific Corp. 5,778,780 6,772,500 3.0
150,000 Pope and Talbot, Inc. 3,477,225 4,818,750 2.1
300,000 Slocan Forest Products Ltd. 5,136,011 7,495,474 3.3
270,000 Weyerhaeuser Co. 10,496,289 13,196,250 5.8
80,000 Willamette Industries, Inc. 3,013,670 4,560,000 2.0
------------- ------------ ------
31,063,020 42,491,174 18.7
<PAGE>
Petroleum Refining 250,000 Total Petroleum (North America), Ltd. 3,028,198 3,343,750 1.4
Wood Products 310,000 Louisiana-Pacific Corp. 10,634,960 13,717,500 6.0
375,000 Pacific Forest Products Ltd. 4,004,695 5,480,182 2.4
146,100 Riverside Forest Products, Ltd. 2,401,222 2,975,336 1.3
------------- ------------ ------
17,040,877 22,173,018 9.7
Total Common Stocks 152,775,928 172,369,624 75.2
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Face Value Percent of
Industries Amount Short-Term Securities Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Repurchase $ 9,231,000 Bankers Trust Company, purchased on
Agreements** 1/31/1994 to yield 3.15% to 2/01/1994 $ 9,231,000 $ 9,231,000 4.0%
US Government US Treasury Bills:
Obligations*** 4,000,000 2.85% due 3/03/1994 3,990,166 3,990,166 1.7
5,000,000 2.93% due 3/03/1994 4,987,385 4,987,385 2.2
4,000,000 3.02% due 3/03/1994 3,989,598 3,989,563 1.7
10,000,000 3.03% due 3/03/1994 9,974,080 9,973,908 4.4
9,000,000 2.92% due 3/10/1994 8,972,260 8,972,260 3.9
3,000,000 2.81% due 3/31/1994 2,986,184 2,986,184 1.3
2,000,000 2.945% due 5/05/1994 1,984,621 1,984,621 0.9
------------- ------------ ------
36,884,294 36,884,087 16.1
Total Short-Term Securities 46,115,294 46,115,087 20.1
Total Investments $ 198,891,222 218,484,711 95.3
=============
Other Assets Less Liabilities 10,819,800 4.7
------------ ------
Net Assets $229,304,511 100.0%
============ ======
<FN>
*American Depositary Receipt (ADR).
**Repurchase Agreements are fully collateralized by US Government & Agency Obligations.
***US Government Obligations are traded on a discount basis; the interest rates shown are the discount rates paid at the
time of purchase by the Trust.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Statement of Assets and Liabilities as of January 31, 1994
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$198,891,222) (Note 1a) $218,484,711
Cash 1,886,463
Receivables:
Securities sold $ 8,294,274
Beneficial interest sold 1,721,580
Dividends 394,717 10,410,571
------------
Deferred organization expenses (Note 1f) 5,285
Prepaid registration fees and other assets (Note 1f) 36,419
------------
Total assets 230,823,449
------------
Liabilities: Payables:
Beneficial interest redeemed 1,072,015
Distributor (Note 2) 177,263
Investment adviser (Note 2) 113,051 1,362,329
------------
Accrued expenses and other liabilities 156,609
------------
Total liabilities 1,518,938
------------
Net Assets: Net assets $229,304,511
============
Net Assets Class A Shares of beneficial interest, $0.10 par value, unlimited number of
Consist of: shares authorized $ 87,455
Class B Shares of beneficial interest, $0.10 par value, unlimited number of
shares authorized 1,335,182
Paid-in capital in excess of par 238,988,253
Undistributed investment income--net 153,978
Accumulated realized capital losses and foreign currency transactions--net
(Note 5) (30,847,990)
Unrealized appreciation on investments and foreign currency
transactions--net 19,587,633
------------
Net assets $229,304,511
============
Net Asset Class A--Based on net assets of $14,128,064 and 874,548 shares of beneficial
Value: interest outstanding $ 16.15
============
Class B--Based on net assets of $215,176,447 and 13,351,822 shares of
beneficial interest outstanding $ 16.12
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
<CAPTION>
Statement of Operations for the Six Months Ended January 31, 1994
<S> <S> <C>
Investment Dividends (net of $79,598 foreign withholding tax) $ 2,074,257
Income Interest and discount earned 228,040
(Notes 1d & 1e): ------------
Total income 2,302,297
------------
Expenses: Distribution fees--Class B (Note 2) 1,024,551
Investment advisory fees (Note 2) 651,450
Transfer agent fees--Class B (Note 2) 199,395
Printing and shareholder reports 51,952
Custodian fees 29,481
Accounting services (Note 2) 25,850
Professional fees 25,850
Registration fees (Note 1f) 24,807
Trustees' fees and expenses 19,450
Transfer agent fees--Class A (Note 2) 9,979
Amortization of organization expenses (Note 1f) 2,481
Other 3,200
------------
Total expenses 2,068,446
------------
Investment income--net 233,851
------------
Realized & Realized gain (loss) from:
Unrealized Investments--net $ (2,332,826)
Gain (Loss) on Foreign currency transactions 19,947 (2,312,879)
Investments ------------
& Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net 33,025,127
(Notes 1b, 1d & 3): Foreign currency transactions (3,170) 33,021,957
------------ ------------
Net realized and unrealized gain on investments and
foreign currency transactions 30,709,078
------------
Net Increase in Net Assets Resulting from Operations $ 30,942,929
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the Year
Months Ended Ended
January 31, July 31,
Increase (Decrease) in Net Assets: 1994 1993
<S> <S> <C> <C>
Operations: Investment income--net $ 233,851 $ 1,612,413
Realized loss on investments and foreign currency transactions--net (2,312,879) (25,207,926)
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions--net 33,021,957 18,886,523
------------ ------------
Net increase (decrease) in net assets resulting from operations 30,942,929 (4,708,990)
------------ ------------
Dividends to Investment income--net:
Shareholders Class A (114,152) (184,310)
(Note 1g): Class B (703,582) (1,546,283)
------------ ------------
Net decrease in net assets resulting from dividends to shareholders (817,734) (1,730,593)
------------ ------------
Beneficial Net decrease in net assets derived from beneficial interest transactions (21,020,722) (39,490,887)
Interest ------------ ------------
Transactions
(Note 4):
Net Assets: Net increase (decrease) in net assets 9,104,473 (45,930,470)
Beginning of period 220,200,038 266,130,508
------------ ------------
End of period* $229,304,511 $220,200,038
============ ============
*Undistributed investment income--net $ 153,978 $ 737,861
============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
Class A
For the
Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended For the Year Ended
January 31, July 31,
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 $ 14.07 $ 14.33 $ 15.38 $ 15.93 $ 13.63
Operating ------- ------- ------- ------- -------
Performance: Investment income--net .09 .24 .34 .37 .39
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net(1) 2.13 (.26) (.13) (.47) 2.29
------- ------- ------- ------- -------
Total from investment operations 2.22 (.02) .21 (.10) 2.68
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net (.14) (.24) (.47) (.41) (.38)
Realized gain on investments--net -- -- (.79) (.04) --
------- ------- ------- ------- -------
Total dividends and distributions (.14) (.24) (1.26) (.45) (.38)
------- ------- ------- ------- -------
Net asset value, end of period $ 16.15 $ 14.07 $ 14.33 $ 15.38 $ 15.93
======= ======= ======= ======= =======
Total Based on net asset value per share 15.92%+++ (.05%) 1.66% (.57%) 19.99%
Investment ======= ======= ======= ======= =======
Return:**
Ratios to Expenses .93%* .95% .97% .95% .93%
Average ======= ======= ======= ======= =======
Net Assets: Investment income--net 1.16%* 1.62% 1.82% 2.89% 3.18%
======= ======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $14,128 $12,087 $11,265 $ 6,699 $ 5,440
Data: ======= ======= ======= ======= =======
Portfolio turnover 13.45% 66.78% 31.43% 71.42% 57.21%
======= ======= ======= ======= =======
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
+++Aggregate total investment return.
(1)Foreign currency transaction amounts have been reclassified to conform to 1994 presentation.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class B
For the
Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended For the Year Ended
January 31, July 31,
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 $ 14.02 $ 14.26 $ 15.30 $ 15.84 $ 13.55
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .01 .09 .13 .31 .33
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net(1) 2.14 (.24) (.08) (.56) 2.19
-------- -------- -------- -------- --------
Total from investment operations 2.15 (.15) .05 (.25) 2.52
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.05) (.09) (.30) (.25) (.23)
Realized gain on investments--net -- -- (.79) (.04) --
-------- -------- -------- -------- --------
Total dividends and distributions (.05) (.09) (1.09) (.29) (.23)
-------- -------- -------- -------- --------
Net asset value, end of period $ 16.12 $ 14.02 $ 14.26 $ 15.30 $ 15.84
======== ======== ======== ======== ========
Total Based on net asset value per share 15.38%+++ (1.02%) .53% (1.61%) 18.79%
Investment ======== ======== ======== ======== ========
Return:**
Ratios to Expenses, excluding distribution fees .96%* .99% 1.00% .99% .96%
Average ======== ======== ======== ======== ========
Net Assets: Expenses 1.96%* 1.99% 2.00% 1.99% 1.96%
======== ======== ======== ======== ========
Investment income--net .16%* .60% .94% 1.85% 1.96%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $215,176 $208,113 $254,866 $322,502 $420,951
Data: ======== ======== ======== ======== ========
Portfolio turnover 13.45% 66.78% 31.43% 71.42% 57.21%
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
+++Aggregate total investment return.
(1)Foreign currency transaction amounts have been reclassified to conform to 1994 presentation.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Global Resources Trust (the "Trust") is
registered under the Investment Company Act of 1940
as a non-diversified, open-end investment management
company. The Trust 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 distribu-
tion expenditures. The following is a summary of signifi-
cant accounting policies followed by the Trust.
(a) Valuation of investments--Securities traded on a
stock exchange are valued at the last sale price 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 quoted bid price at the close of
trading on such day by dealers that make markets in
such securities. Securities which are traded both in
the over-the-counter market and on a stock exchange
are valued based upon the prices or quotes obtained
from the broadest and most representative market.
Short-term securities are valued at amortized cost
which approximates market. Options which are traded
on exchanges are valued at the last sale price as of the
close of such exchanges or, lacking any sales, at the
last available bid price. Securities for which market
quotations are not readily available are valued at their
fair value as determined in good faith by or under the
direction of the Trustees of the Trust.
(b) Foreign currency transactions--Transactions denomi-
nated 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 valu-
ing (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 Trust 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 Trust's records. However, the effect
on net investment income is recorded from the date the
Trust enters into such contracts. Premium or discount
is amortized over the life of the contracts.
(c) Options--The Trust can write covered call options
and purchase put options. When the Trust writes an
option, an amount equal to the premium received by
the Trust 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
Trust enters into a closing transaction), the Trust
realizes a gain or loss on the option to the extent of the
premiums received or paid (or loss or gain to the extent
the cost of the closing transaction is less than or greater
than the premiums paid or received).
Written and purchased options are non-income pro-
ducing investments.
(d) Income taxes--It is the Trust'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 provi-
sion is required. Under the applicable foreign tax law, a
withholding tax may be imposed on interest, dividends
and capital gains at various rates.
(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 dates except that
if the ex-dividend date has passed, certain dividends
from foreign securities are recorded as soon as the Fund
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.
<PAGE>
(f) Deferred organization expenses and prepaid
registration fees--Deferred organization expenses are
charged to expense on a straight-line basis over a
five-year period. Costs related to the organization of
the second class of shares are charged to expense
over a period not exceeding five years. Prepaid
registration fees are charged to expense as the related
shares are issued.
(g) Dividends and distributions--Dividends and
distributions paid by the Trust are recorded on the
ex-dividend dates.
(h) Reclassifications--Certain 1993 amounts have been
reclassified to conform to the 1994 presentation.
2. Investment Advisory Agreement and Transactions
with Affiliates:
The Trust 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
Fund 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.
MLAM is responsible for the management of the Trust's
portfolio and provides the necessary personnel, facili-
ties, equipment and certain other services necessary to
the operations of the Trust. For such services, the Trust
pays a monthly fee of 0.60% on an annual basis, of the
average daily value of the Trust's net assets. The Invest-
ment Advisory Agreement obligates MLAM to reimburse
the Trust to the extent the Trust's expenses (excluding
interest, taxes, distribution fees, brokerage fees and com-
missions, and extraordinary items) exceed 2.5% of the
Trust's first $30 million of average daily net assets, 2.0%
of the next $70 million of average daily net assets, and
1.5% of the average daily net assets in excess thereof.
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.
<PAGE>
Pursuant to a distribution plan adopted by the Trust
pursuant to Rule 12b-1 under the Investment Company
Act of 1940 ("the Distribution Plan"), the Trust pays the
Distributor an ongoing account maintenance fee and
distribution fee, which are accrued daily and paid
monthly, at the annual rates of 0.25% and 0.75%, respec-
tively, of the average daily net assets of the Class B
Shares of the Trust. This fee is to compensate MLFD for
services provided and the expense borne by it under
the Distribution Agreement. As authorized by the Plan,
MLFD has entered into an agreement with Merrill
Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S"), which
provides for the compensation of MLPF&S for providing
distribution-related services to the Trust.
During the six months ended January 31, 1994, MLFD
earned underwriting discounts of $3,330, and MLPF&S
earned dealer concessions of $40,031 on sales of the
Trust's Class A Shares.
MLPF&S received contingent deferred sales charges for
the sale of Class B Shares of $94,903 during the period.
Financial Data Services, Inc. ("FDS"), a wholly-owned
subsidiary of Merrill Lynch & Co., Inc., is the Trust's
transfer agent.
Accounting services are provided to the Trust by MLAM
at cost.
Certain officers and/or trustees of the Trust are officers
and/or directors of MLIM, MLPF&S, FDS, MLFD, and/or
ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-
term securities, for the six months ended January 31,
1994 were $26,291,043 and $93,972,661, respectively.
Net realized and unrealized gains (losses) as of
January 31, 1994 were as follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
Long-term investments $ (2,333,540) $ 19,593,696
Short-term investments 714 (207)
Foreign currency transactions 19,947 (5,856)
------------ ------------
Total $ (2,312,879) $ 19,587,633
============ ============
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded)
As of January 31, 1994, net unrealized appreciation
for Federal income tax purposes aggregated $19,593,489,
of which $23,483,501 related to appreciated securities
and $3,890,012 related to depreciated securities. The
aggregate cost of investments at January 31, 1994 for
Federal income tax purposes was $198,891,222.
4. Shares of Beneficial Interest:
Net decrease in net assets derived from beneficial inter-
est transactions was $21,020,722 and $39,490,887 for
the six months ended January 31, 1994 and the year
ended July 31, 1993, respectively.
Transactions in shares of beneficial interest for Class A
and Class B Shares were as follows:
Class A Shares For the Six Months Dollar
Ended January 31, 1994 Shares Amount
Shares sold 425,149 $ 6,237,925
Shares issued to shareholders
in reinvestment of dividends 6,902 96,377
--------- ------------
Total issued 432,051 6,334,302
Shares redeemed (416,522) (6,011,822)
--------- ------------
Net increase 15,529 $ 322,480
========= ============
Class A Shares For the Year Dollar
Ended July 31, 1993 Shares Amount
Shares sold 651,703 $ 9,124,901
Shares issued to shareholders
in reinvestment of dividends 11,188 149,234
--------- ------------
Total issued 662,891 9,274,135
Shares redeemed (590,161) (8,196,043)
--------- ------------
Net increase 72,730 $ 1,078,092
========= ============
<PAGE>
Class B Shares For the Six Months Dollar
Ended January 31, 1994 Shares Amount
Shares sold 1,405,767 $ 20,874,163
Shares issued to shareholders
in reinvestment of dividends 38,723 541,357
---------- ------------
Total issued 1,444,490 21,415,520
Shares redeemed (2,935,229) (42,758,722)
---------- ------------
Net decrease (1,490,739) $(21,343,202)
========== ============
Class B Shares For the Year Dollar
Ended July 31, 1993 Shares Amount
Shares sold 2,354,206 $ 32,785,764
Shares issued to shareholders
in reinvestment of dividends 88,895 1,184,467
---------- ------------
Total issued 2,443,101 33,970,231
Shares redeemed (5,467,068) (74,539,210)
---------- ------------
Net decrease (3,023,967) $(40,568,979)
========== ============
5. Capital Loss Carryforward:
At July 31, 1993, the Trust has a net capital loss
carryforward of approximately $4,649,000, of which
$2,786,000 expires in 2000 and $1,863,000 expires in
2001 and will be available to offset a like amount of any
future taxable gains.
6. Commitments:
At January 31, 1994, the Trust entered into forward
exchange contracts under which it had agreed to sell
various foreign currencies with values of approximately
$2,674,000.
<PAGE>
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
Donald Cecil, Trustee
M. Colyer Crum, Trustee
Edward H. Meyer, Trustee
Jack B. Sunderland, Trustee
J. Thomas Touchton, Trustee
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Donald C. Burke, Vice President
Peter A. Lehman, Vice President and Portfolio Manager
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian
The Bank of New York
90 Washington Street
New York, New York 10015
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
