MERRILL
LYNCH
INTERNATIONAL
EQUITY FUND
Quarterly Report August 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 Fund
unless accompanied or preceded by the Fund's current
prospectus. Past performance results shown in this report
should not be considered a representation of future
performance. Investment return and principal value of
shares will fluctuate so that shares, when redeemed,
may be worth more or less than their original cost.
Merrill Lynch
International Equity Fund
Box 9011
Princeton, NJ
08543-9011
MERRILL LYNCH INTERNATIONAL EQUITY FUND
International
Stock Market
Performance
GRAPHIC MATERIAL APPEAR HERE.
SEE APPENDIX GRAPHIC AND IMAGE MATERIAL ITEM 1.
<PAGE>
DEAR SHAREHOLDER
An apparent slowing in US demand
and a subsequent rally in world bond
markets supported equity prices in
the three months ended August 31,
1994. Over the period, gains in equity
prices were most marked in Latin
America, the United Kingdom and in
some smaller countries such as
Finland, Ireland, India and Malaysia.
The unmanaged Financial Times--
Actuaries World (Ex-US) Index rose
approximately 4.7% in total return
terms during the three-month period.
The gains were largely achieved in
the month of August.
We have increased the Fund's cash
weightings and have taken advantage
of the rise in Latin American and UK
equity prices as well as commodity
prices to reduce weightings in those
assets. Additionally, in June we tac-
tically reduced our market exposure
in Japan. We retain a positive cyclical
view of likely equity returns in Japan,
and we expect to strengthen our
weighting on any further relative
weakness.
Despite a significant overweight posi-
tion in Latin America and an under-
weight position in Japan, the Fund
marginally underperformed the un-
managed benchmark index during the
three months ended August 31, 1994.
Total returns for the Fund's Class A
and Class B Shares were +4.17% and
+3.93%, respectively. (Complete
performance information, including
aggregate total returns, can be found
on page 5 of this report.) The Fund's
overweight position in US dollars
largely accounted for the Fund's
underperformance.
<PAGE>
Cash inflows have continued to ex-
pand rapidly. At August 31, 1994, the
Fund's net assets were $1.23 billion
compared to $1.05 billion three
months earlier.
Portfolio Matters
The Fund's effective equity market
exposure was reduced in favor of US
cash. We have built cash resources to
around 12% of net assets from about
6% at the end of May. The reduction
in market exposure reflects reduced
Japanese, Latin American, UK and
Australian positions. The Fund also
liquidated its commodity index-linked
bond holding.
At August 31, 1994, the Fund had 43%
of its net assets invested in Japan,
18% in Continental Europe, 9% in the
United Kingdom and Ireland and 6%
in both Latin America and the devel-
oped Pacific (ex-Japan) markets.
Remaining investments in emerging
Asian, emerging European and South
African markets accounted for about
6% of net assets in total.
We still rate highly the prospects of
further gains in Japan. Having re-
duced weightings from about 48% to
43%, we are now looking for opportu-
nities to rebuild our position. Within
Japan, the Fund has significant
weightings in manufacturing com-
panies, the beverage sector and non-
life insurers. We retain investment
positions in smaller companies via
Tokyo Stock Exchange Second Section
index contracts.
<PAGE>
Proceeds from the Fund's sale of the
commodity index-linked bond were invested
in commodity-related equity positions.
For instance, we strengthened the
Fund's position in oil and forest prod-
uct stocks and purchased Canadian equity
futures. The commodity index-linked
bond provided investors with a 5% positive
return in the six months it was held,
in contrast to the lesser performance
in most foreign equity markets.
UK equity prices recovered in the
three months ended August 31, 1994,
outperforming most European mar-
kets. We have further reduced the
Fund's UK weighting via direct mar-
ket sales, short positions in FTSE 100
futures contracts and sales of stock
call options.
The Fund's Continental European
weightings rose slightly in the three
months ended August 31, 1994, largely
reflecting purchases of specific stock-
related opportunities. We increased
the Fund's positions in the Nether-
lands, Germany, France and the Scan-
dinavian markets. In contrast, we
reduced positions in Switzerland and
Belgium.
Economic Environment
The broad economic environment
remains largely intact. Global growth
is recovering more rapidly than gen-
erally appreciated, and inflationary
pressures--especially in the United
States, Southeast Asia, Australia and
the United Kingdom--are becoming
evident. Monetary policy will, at best,
be on hold in some countries, and the
process of tightening already under-
way elsewhere will be extended. As
growth strengthens and policy tight-
ens, the economic environment is
likely to remain most favorable in
commodity-producing regions, laggard
economies and in countries where
spare capacity is extensive.
<PAGE>
Economic growth continued to accel-
erate in the first half of 1994. Indus-
trial production growth rose around
5.5% in industrialized economies,
contributing to a further increase in
commodity prices. Against this back-
ground, investors remain focused
on the US economy and the path of
US interest rates as spare capacity is
taken up.
With mounting US inflationary pres-
sures, a further tightening of US
monetary policy had been anticipated
by financial markets. Consequently, a
rise in US interest rates in August,
coupled with some partial indicators
of a slowdown in US growth, proved a
positive tactical turning point for
investor sentiment. US bond yields
fell slightly, assisting for a short
period improved confidence in most
overseas bond markets.
Over the quarter ended August 31,
1994, expectations of world growth
tended to continue to firm. Strength-
ening growth expectations proved
most significant in Europe, particu-
larly in Germany and the United
Kingdom. In contrast, inflation indi-
cators in Europe remained relatively
optimistic. The background of stable-
to-lower bond yields and stronger
growth lifted equity markets.
Latin American financial markets
have also been assisted by positive
economic developments. In Brazil,
the introduction of its new currency,
the real, has lifted consensus growth
expectations and reduced inflation
forecasts. Similarly, Mexican and
Argentine inflation forecasts have
fallen. Coupled with a perceived
reduction in political risk, improv-
ing economic fundamentals have
been reflected in reduced sover-
eign bond yields and much higher
equity returns. Overall, Latin
American growth prospects remain
positive.
<PAGE>
The Japanese domestic economic
recovery remains on track. We believe
that the consensus is still too
pessimistic regarding growth pros-
pects, especially following the addi-
tional demand impetus from the
unexpectedly hot summer weather.
Furthermore, the rebound in cor-
porate profits is likely to prove more
robust than domestic institutions
believe. Among the major markets,
Japanese profits remain most geared
to economic recovery and growth.
The distracting domestic political
situation and strong yen have tended
to overshadow the continued im-
provement in Japanese domestic
fundamentals. The consensus has
by now well discounted a lack of
political progress in either fiscal
or trade issues, and it is now possible
that expectations have become
overly pessimistic. As economic
recovery becomes more pronounced,
we expect an improvement in
sentiment consistent with
fundamentals.
Regional and Major Stock
Changes
Portfolio turnover has remained
low. During the three months ended
August 31, 1994, major purchase
activity was confined to the
establishment of new positions
in emerging markets and increasing
exposure to commodity-related
equities in Europe. Over the same
period, sales occurred mainly in
Mexico, Brazil and Australia. The
most significant portfolio changes by
size were the sale of the Finnish
Export Credit Goldman Sachs Com-
modity Index-Linked three-year note
and the withdrawal of market expo-
sure in Japan on the expiration of
the June Nikkei 225 futures contracts.
<PAGE>
Consistent with the commodity
theme, we purchased or added to
positions in Royal Dutch Petroleum
PLC, Saga Petroleum A.S., Kansallis-
Osake-Pankki, Petrobras, Yacimientos
Petroliferos Fiscales S.A. and Carter
Holt Harvey, Ltd. Cyclical stocks
purchased or added to over the
period included a range of Japanese
securities (such as Murata Manufac-
turing Co., Ltd., Sangetsu Co. and
Toyota Motor Corp.). Elsewhere we
purchased or added to stock in
Tomkins PLC, Blue Circle Industries
PLC, Tate & Lyle PLC and Sociedade
de Construsoes Soares da Costa S.A.
Fund sales largely reflected our deci-
sion to reduce overweight positions
in Australia, Mexico and Brazil. Addi-
tionally, for stock specific reasons we
sold Sandoz AG and Jefferson Smurfit
Group PLC.
In Conclusion
The investment climate still remains
supportive of international equity
markets. However, the tension be-
tween rising interest rates and
stronger profit growth is likely to
continue to contribute to market vol-
atility, and further rapid equity price
appreciation may encourage a more
defensive strategy.
We have previously emphasized the
Fund's weighting in Latin America.
Although Latin American equity mar-
kets still offer good intermediate-term
potential, we have become more cau-
tious following the strong perform-
ance in August. Elsewhere we still
favor cyclical and commodity-related
European markets, and we believe
that the Japanese stock market, to-
gether with emerging Asian markets
such as India, Korea and Indonesia,
offer excellent intermediate-term
prospects as profit growth exceeds
current expectations.
<PAGE>
We thank you for your continued
interest in Merrill Lynch Interna-
tional Equity Fund, and we look
forward to reviewing our investment
strategy with you in our upcoming
semi-annual shareholder letter.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Andrew Bascand)
Andrew Bascand
Senior Portfolio Manager/
Asset Allocator
(Adrian Holmes)
Adrian Holmes
Co-Portfolio Manager
European Investments
(Grace Pineda)
Grace Pineda
Co-Portfolio Manager
Emerging Market Investments
(Stephen I. Silverman)
Stephen I. Silverman
Co-Portfolio Manager
Pacific Basin Investments
September 22, 1994
<PAGE>
PERFORMANCE DATA
None of the past results shown should 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.
<TABLE>
Recent
Performance
Results
<CAPTION>
12 Month 3 Month
8/31/94 5/31/94 8/31/93 % Change %Change
<S> <C> <C> <C> <C> <C>
ML International Equity Fund Class A Shares* $11.99 $11.51 $10.26 +16.86% +4.17%
ML International Equity Fund Class B Shares* 11.89 11.44 10.26 +15.89 +3.93
ML International Equity Fund Class A Shares--Total Return* +16.86 +4.17
ML International Equity Fund Class B Shares--Total Return* +15.89 +3.93
Financial Times-Actuaries World (Ex-US) Index++--Total Return +10.80 +4.73
<FN>
*Investment results shown do not reflect any sales charges;
results shown would be lower if a sales charge was included.
++An unmanaged capitalization-weighted index comprised of over
1,800 companies in 24 countries, excluding the United States.
</TABLE>
<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>
7/30/93-12/31/93 $10.00 $11.21 -- -- +12.10%
1/1/94-8/31/94 11.21 11.99 -- -- + 6.96
Cumulative total return as of 8/31/94: +19.90%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestments 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>
<PAGE>
<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>
7/30/93-12/31/93 $10.00 $11.18 -- -- +11.80%
1/1/94-8/31/94 11.18 11.89 -- -- + 6.35
Cumulative total return as of 8/31/94: +18.90%**
<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>
Aggregate
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Inception (7/30/93)
through 6/30/94 +13.60% +6.22%
[FN]
*Maximum sales charge is 6.5%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Inception (7/30/93)
through 6/30/94 +12.80% +8.80%
[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 (in US dollars)
<CAPTION>
Shares Held/ Percent of
AFRICA Industries Face Amount Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
South Mining 330,000 De Beers Consolidated Mines Ltd. (ADR) (a) $ 7,820,253 $ 7,507,000 0.6%
Africa
Total Investments in Africa 7,820,253 7,507,500 0.6
LATIN
AMERICA
Argentina Banking 109,425 Banco de Galicia y Buenos Aires S.A. (ADR)
(a) 2,983,033 3,501,600 0.3
Energy 200,600 Yacimientos Petroliferos Fiscales S.A.
(Sponsored) (ADR) (a) 5,027,566 5,190,525 0.4
Total Investments in Argentina 8,010,599 8,692,125 0.7
Brazil Banking 226,587,754 Banco Bradesco S.A. PN 1,810,884 2,219,947 0.2
Mining 24,928,000 Companhia Vale do Rio Doce S.A. 2,673,114 3,873,946 0.3
Telecommunications 17,323,924 Telecomunicacoes Brasileiras S.A.-Telebras
ON 641,293 782,038 0.1
168,857,187 Telecomunicacoes Brasileiras S.A.-Telebras
PN (Preferred) 6,731,582 9,723,415 0.8
400,000 Telecomunicacoes de Sao Paulo S.A.
(Preferred) 194,505 202,698 0.0
-------------- -------------- ------
7,567,380 10,708,151 0.9
Utilities--Electric 206,100 Companhia Energetica de Minas Gerais S.A.
(CEMIG) (ADR) (a) 4,780,061 6,131,475 0.5
Total Investments in Brazil 16,831,439 22,933,519 1.9
Chile Building & 55,000 Maderas y Sinteticos S.A. (MASISA)
Construction (Sponsored) (ADR) (a) 977,412 1,347,500 0.1
Telecommunications 20,000 Compania de Telefonos de Chile S.A.
(ADR) (a) 2,406,988 1,825,000 0.2
Total Investments in Chile 3,384,400 3,172,500 0.3
<PAGE>
Mexico Beverages 278,000 Fomento Economico Mexicano, S.A. de C.V.
(Femsa) (ADR) (a) 1,742,736 1,497,72 0.1
356,000 Fomento Economico Mexicano, S.A. de C.V.
(Femsa) (Class B) 1,965,085 1,956,160 0.2
195,300 Panamerican Beverages, Inc. (Class A) 6,094,170 6,420,487 0.5
-------------- -------------- ------
9,801,991 9,874,372 0.8
Building & 89,437 Cementos Mexicanos, S.A. de C.V. (Cemex)
Construction (Class B) (ADR) (a) 1,607,856 1,609,866 0.1
Diversified 210,000 Grupo Carso, S.A. de C.V. (ADR) (a) 4,070,394 4,830,000 0.4
Financial Services 119,700 Servicios Financieros Quadrum, S.A. de C.V.
(ADR) (a) 2,451,561 2,289,262 0.2
Leisure 75,000 Grupo Situr, S.A. de C.V. (ADR) (a) 1,875,000 2,442,000 0.2
Telecommunications 215,600 Telefonos de Mexico, S.A. de C.V. (Telmex)
(ADR) (a) 12,419,026 13,528,900 1.1
Total Investments in Mexico 32,225,828 34,574,400 2.8
Peru Mining 227,266 Southern Peru Copper Corp. 728,471 1,027,963 0.1
Total Investments in Peru 728,471 1,027,963 0.1
Venezuela Foods 140,000 Mavesa S.A. (ADR) (a) 1,004,375 787,500 0.1
400,000 Mavesa S.A. (Ordinary) 137,354 123,843 0.0
-------------- -------------- ------
1,141,729 911,343 0.1
Utilities--Electric 165,620 C.A. La Electricidad de Caracas
S.A.I.C.A.-S.A.C.A. 332,605 320,360 0.0
Total Investments in Venezuela 1,474,334 1,231,703 0.1
Total Investments in Latin America 62,655,071 71,632,210 5.9
NORTH
AMERICA
Canada Foreign Government Canadian Government Bonds:
Obligations C$ 12,750,000 6.50% due 8/01/1996 10,008,529 9,121,671 0.7
C$ 25,800,000 5.75% due 3/01/1999 18,644,485 17,096,771 1.4
-------------- -------------- ------
28,653,014 26,218,442 2.1
<PAGE>
Total Investments in North America 28,653,014 26,218,442 2.1
PACIFIC
BASIN
Australia Diversified 2,067,000 BTR Nylex Ltd. 5,250,110 4,846,826 0.4
Food & Beverage 1,762,200 Burns Philp & Co., Ltd. (Ordinary) 5,417,083 5,037,242 0.4
768,836 Coca-Cola Amatil, Ltd. (Ordinary) 3,798,092 5,150,894 0.4
-------------- -------------- ------
9,215,175 10,188,136 0.8
Media 704,074 The News Corp., Ltd. 5,141,735 4,779,908 0.4
Merchandising 17,800 Amway Asia Pacific Ltd. 524,391 582,950 0.1
Natural Gas 377,387 Broken Hill Proprietary Co. 5,225,761 5,764,620 0.5
Property 497,493 Lend Lease Corp. 6,003,006 6,414,181 0.5
Total Investments in Australia 31,360,178 32,576,621 2.7
Hong Kong Property 2,588,000 Hang Lung Development Co., Ltd. (Ordinary) 4,128,204 4,705,637 0.4
Utilities 1,551,600 China Light & Power Co., Ltd. (Ordinary) 7,552,276 8,011,808 0.7
2,196,000 Hong Kong & China Gas Co. (Ordinary) 3,963,131 4,163,397 0.3
2,638,000 Hong Kong Telecommunications Ltd.
(Ordinary) 4,492,512 5,803,655 0.5
-------------- -------------- ------
16,007,919 17,978,860 1.5
Total Investments in Hong Kong 20,136,123 22,684,497 1.9
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
PACIFIC
BASIN Shares Held/ Percent of
(concluded)Industries Face Amount Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Japan Automobiles 1,239,000 Suzuki Motor Co. (Ordinary) $ 14,003,522 $ 15,099,191 1.2%
523,000 Toyota Motor Corp. 9,819,266 11,284,387 0.9
-------------- -------------- ------
23,822,788 26,383,578 2.1
Beverages 99,000 Chukyo Coca-Cola Bottling Co., Ltd.
(Ordinary) 1,398,440 1,246,029 0.1
106,000 Hokkaido Coca-Cola Bottling Co., Ltd.
(Ordinary) 1,754,547 1,651,783 0.1
102,000 Kinki Coca-Cola Bottling Co., Ltd.
(Ordinary) 1,893,379 1,732,095 0.1
111,000 Mikuni Coca-Cola Bottling Co., Ltd. 2,093,307 1,685,346 0.1
111,000 Sanyo Coca-Cola Bottling Co., Ltd. 1,874,646 1,774,049 0.1
-------------- -------------- ------
9,014,319 8,089,302 0.5
Capital Goods 2,800,000 Mitsubishi Heavy Industries, Ltd. 18,078,701 21,955,849 1.8
Chemicals 733,000 Shin-Etsu Chemical Co., Ltd. (Ordinary) 15,311,687 15,156,428 1.2
Consumer 965,000 Matsushita Electric Industrial Co., Ltd. 16,374,849 16,965,338 1.4
Electronics 279,000 Sony Corp. (Ordinary) 15,871,076 17,028,169 1.4
-------------- -------------- ------
32,245,925 33,993,507 2.8
Electric 223,000 Chudenko Corp. (Ordinary) 8,393,697 8,576,066 0.7
Construction 446,000 Sanki Engineering Co., Ltd. 6,307,262 6,014,384 0.5
371,000 Taihei Dengyo Kaisha, Ltd. 9,667,248 11,303,067 0.9
-------------- -------------- ------
24,368,207 25,893,517 2.1
Electrical 486,000 Murata Manufacturing Co., Ltd. 19,516,291 21,069,224 1.7
Equipment 569,000 The Nippon Signal Co., Ltd. 7,950,113 7,161,522 0.6
326,000 Rohm Co. 11,884,632 14,035,161 1.1
1,415,000 Sumitomo Electric Industries, Ltd. 19,791,497 21,201,678 1.7
-------------- -------------- ------
59,142,533 63,467,585 5.1
Iron & Steel 330,000 Maruichi Steel Tube, Ltd. (Ordinary) 5,881,382 6,362,002 0.5
Office Equipment 1,329,000 Canon, Inc. (Ordinary) 20,499,530 23,231,945 1.9
1,657,000 Hitachi Ltd. 15,974,544 16,419,379 1.3
-------------- -------------- ------
36,474,074 39,651,324 3.2
<PAGE>
Packaging 609,000 Toyo Seikan Kaisha, Ltd. (Ordinary) 17,864,689 20,135,751 1.6
Pharmaceuticals 699,000 Sankyo Co., Ltd. (Ordinary) 17,050,198 16,897,213 1.4
763,000 Taisho Pharmaceutical Co., Ltd. (Ordinary) 15,232,435 15,167,016 1.2
-------------- -------------- ------
32,282,633 32,064,229 2.6
Photography 743,000 Fuji Photo Film Co., Ltd. 17,555,576 16,699,131 1.4
Property & Casualty 1,475,000 Dai-Tokyo Fire & Marine Insurance Co., Ltd. 11,241,301 11,403,956 0.9
Insurance 851,000 Fuji Fire & Marine Insurance Co., Ltd. 5,819,056 5,873,949 0.5
1,268,000 Koa Fire & Marine Insurance Co., Ltd. 8,833,667 9,119,569 0.7
742,000 Mitsui Marine & Fire Insurance Co., Ltd. 6,045,628 5,929,478 0.5
1,566,000 Nichido Fire & Marine Insurance Co., Ltd. 11,986,774 14,109,799 1.2
783,000 Nippon Fire & Marine Insurance Co., Ltd. 5,748,509 5,983,368 0.5
1,356,000 Sumitomo Marine & Fire Insurance Co., Ltd. 11,597,542 12,745,939 1.0
1,352,000 Tokio Marine & Fire Insurance Co., Ltd. 16,730,311 16,746,379 1.4
1,257,000 Yasuda Fire & Marine Insurance Co., Ltd. 9,408,702 9,969,613 0.8
-------------- -------------- ------
87,411,490 91,882,050 7.5
Retailing 388,000 Ito-Yokado Co., Ltd. (Ordinary) 19,556,224 20,541,404 1.7
138,000 Sangetsu Co. (Ordinary) 4,742,639 4,824,693 0.4
116,000 Shimachu Co. (Ordinary) 4,860,372 4,519,029 0.4
-------------- -------------- ------
29,159,235 29,885,126 2.5
Transportation 1,098,000 Nippon Express Co., Ltd. 11,235,190 11,735,691 1.0
Total Investments in Japan 419,848,429 443,355,070 35.9
Malaysia Leisure 235,500 Genting BHD 1,450,561 2,209,107 0.2
Total Investments in Malaysia 1,450,561 2,209,107 0.2
New Foreign Government New Zealand Government Bonds:
Zealand Obligations NZ$8,200,000 9.00% due 11/15/1996 4,988,597 5,035,478 0.4
NZ$8,350,000 6.50% due 2/15/2000 4,665,647 4,653,128 0.4
-------------- -------------- ------
9,654,244 9,688,606 0.8
Paper & Forest 3,975,000 Carter Holt Harvey, Ltd. 9,117,010 9,544,698 0.8
Products
Telecommunications 81,400 Telecom Corp. of New Zealand (Class C)
(ADR) (a) 3,696,614 4,080,175 0.3
Total Investments in New Zealand 22,467,868 23,313,479 1.9
<PAGE>
South Financial Services 170,590 Hanyang Securities Co. 3,913,001 2,472,010 0.2
Korea
Foods 8,370 Lotte Confectionary Co. (Ordinary) 1,130,764 966,131 0.1
Utilities 132,000 Korea Electric Power Corp. 4,989,696 5,245,042 0.4
Total Investments in South Korea 10,033,461 8,683,183 0.7
Taiwan Merchandising 36,720 Hocheng Group Corp. (ADR) (a) 1,053,595 1,064,880 0.1
Total Investments in Taiwan 1,053,595 1,064,880 0.1
Total Investments in the Pacific Basin 506,350,215 533,886,837 43.4
SOUTHEAST
ASIA
India Media 643,600 Videocon International Ltd. (ADR) (a) 6,184,111 5,470,600 0.4
Metals 217,500 Hindalco Industries Ltd. 6,814,275 7,123,125 0.6
Tobacco 233,000 Indian Tobacco Co. Ltd. 6,288,713 5,883,250 0.5
Total Investments in India 19,287,099 18,476,975 1.5
Indonesia Consumer-Goods 1,138,000 PT Wicaksana Overseas International 1,754,711 2,225,469 0.2
Total Investments in Indonesia 1,754,711 2,225,469 0.2
Total Investments in Southeast Asia 21,041,810 20,702,444 1.7
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
WESTERN Shares Held/ Percent of
EUROPE Industries Face Amount Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Austria Utilities 46,355 Verbund Oesterreichische Elekrizitats AG $ 2,625,340 $ 2,992,934 0.2%
Total Investments in Austria 2,625,340 2,992,934 0.2
Belgium Banking 15,000 Generale de Banque S.A. (Ordinary) 3,677,777 3,804,181 0.3
Chemicals 3,200 Solvay Group (Ordinary) 1,240,133 1,576,391 0.1
Total Investments in Belgium 4,917,910 5,380,572 0.4
Finland Banking 1,050,000 Kansallis-Osake-Pankki 2,548,811 2,222,309 0.2
1,225,000 Unitas Bank Ltd. 2,996,787 3,240,868 0.3
-------------- -------------- ------
5,545,598 5,463,177 0.5
Diversified 235,000 Outokumpu OY 3,395,069 4,881,634 0.4
Paper & Forest 306,500 Enso-Gutzeit OY 1,987,636 2,781,012 0.2
Products 86,150 Metsa Serla OY 3,366,405 4,186,956 0.3
165,300 Repola OY S 2,629,548 3,563,338 0.3
-------------- -------------- ------
7,983,589 10,531,306 0.8
Total Investments in Finland 16,924,256 20,876,117 1.7
France Automobiles 39,850 Peugeot S.A. 5,321,779 6,401,369 0.5
Banking 43,992 Compagnie Financiere de Paribas 3,207,208 3,016,385 0.2
35,300 Compagnie Financiere de Suez (Ordinary) 2,018,337 1,801,747 0.2
19,000 Societe Generale de Surveillance S.A.
(Class A) (Ordinary) 2,052,425 2,046,451 0.2
-------------- -------------- ------
7,277,970 6,864,583 0.6
Chemicals 155,900 Rhone-Poulenc S.A. 3,910,519 3,961,334 0.3
Communication 15,620 Alcatel Alsthom 1,549,944 1,731,541 0.1
Equipment
<PAGE>
Consumer--Goods 19,030 LVMH 2,636,044 3,137,916 0.3
Insurance 35,400 Societe Centrale du Groupe des Assurances
Nationales S.A. 3,149,239 2,476,395 0.2
Total Investments in France 23,845,495 24,573,138 2.0
Germany Automobile Parts 7,480 Continental AG 1,146,246 1,192,786 0.1
28,100 Continental AG (Warrants) (b) 1,597,366 1,459,856 0.1
-------------- -------------- ------
2,743,612 2,652,642 0.2
Automobiles 11,572 Daimler-Benz AG 5,372,539 6,132,728 0.5
2,400 Volkswagen AG 646,363 757,071 0.1
3,815 Volkswagen AG (Preferred) 711,409 945,120 0.1
26,212 Volkswagen AG (Preferred) (Warrants) (b) 2,406,624 3,051,957 0.3
-------------- -------------- ------
9,136,935 10,886,876 1.0
Banking 16,437 Deutsche Bank AG (Ordinary) 7,904,511 7,624,072 0.6
Chemicals 23,732 BASF AG (Ordinary) 4,017,446 4,973,763 0.4
24,496 Bayer AG (Ordinary) 4,511,717 5,890,325 0.5
-------------- -------------- ------
8,529,163 10,864,088 0.9
Insurance 1,930 Munich Reinsurance Co. (Ordinary) 3,350,470 3,480,668 0.3
Machinery & 68,200 Kloeckner Werke AG 3,365,767 6,602,924 0.5
Equipment 17,154 Mannesmann AG 4,686,580 4,767,473 0.4
-------------- -------------- ------
8,052,347 11,370,397 0.9
Metal & Mining 29,860 Thyssen AG (Ordinary) 4,172,755 6,036,999 0.5
Utilities 41,000 Vereinigte Elektrizitaets & Bergwerks AG
(Veba) (Warrants) (b) 1,765,109 2,586,661 0.2
Total Investments in Germany 45,654,902 55,502,403 4.6
Greece Beverages 113,495 Hellenic Bottling Co. S.A. 3,269,544 3,199,442 0.3
Financial Services 44,800 Etba Leasing S.A. (Ordinary) 1,628,693 887,406 0.1
Total Investments in Greece 4,898,237 4,086,848 0.4
<PAGE>
Hungary Foods 7,000 Pick Szeged Reszvenytarsasag (ADR) (a) 487,095 511,560 0.0
Total Investments in Hungary 487,095 511,560 0.0
Ireland Banking 339,500 Bank of Ireland 1,469,685 1,429,306 0.1
Building & 610,000 CRH PLC (Ordinary) 2,912,864 3,602,758 0.3
Construction
Closed-End Funds 2,990,000 First Ireland Investment Co. 4,453,231 4,776,035 0.4
Total Investments in Ireland 8,835,780 9,808,099 0.8
Italy Diversified 2,220,000 Compagnie Industrial Riunite S.p.A. (CIR) 2,154,516 3,118,648 0.3
Insurance 154,900 Assicurazioni Generali S.p.A. (Ordinary) 4,070,240 4,092,308 0.3
Telecommunications 2,281,100 STET, Di Risp (Non Conv.) 5,202,050 5,990,359 0.5
Total Investments in Italy 11,426,806 13,201,315 1.1
Nether- Banking 134,500 ABN Amro Bank (Ordinary) 4,555,152 4,545,816 0.4
lands
Beverages 8,504 Heineken Holdings (Class A) 705,797 1,034,030 0.1
9,000 Heineken N.V. 949,291 1,225,865 0.1
-------------- -------------- ------
1,655,088 2,259,895 0.2
Chemicals 41,125 Akzo N.V. (Ordinary) 3,932,413 5,095,667 0.4
Electrical Equipment 253,500 Philips Industries Inc. 6,132,292 8,238,786 0.7
Insurance 79,282 AEGON N.V. (Ordinary) 3,874,041 4,536,024 0.4
132,665 Amev N.V. (Ordinary) 5,264,628 5,644,045 0.5
91,197 Internationale Nederlanden Groep N.V. 3,491,374 4,168,006 0.3
-------------- -------------- ------
12,630,043 14,348,075 1.2
Oil--International 92,000 Royal Dutch Petroleum PLC (Warrants) (b) 3,000,120 3,054,400 0.3
Paper & Forest 130,477 Koninklijke KNP 2,479,391 3,703,094 0.3
Products 43,492 Koninklijke KNP (Preferred) 176,682 190,184 0.0
-------------- -------------- ------
2,656,073 3,893,278 0.3
Transportation 217,809 KLM Royal Dutch Airlines 4,716,559 6,353,735 0.5
Total Investments in the Netherlands 39,277,740 47,789,652 4.0
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
WESTERN
EUROPE Shares Held/ Percent of
(concluded)Industries Face Amount Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Norway Oil & Gas Producers 81,000 Saga Petroleum A.S. (Class A) $ 957,551 $ 970,536 0.1%
225,300 Saga Petroleum A.S. (Class B) 2,482,570 2,667,004 0.2
-------------- -------------- ------
3,440,121 3,637,540 0.3
Total Investments in Norway 3,440,121 3,637,540 0.3
Portugal Banking 241,700 Banco Comercial Portugues S.A. 3,561,811 3,435,711 0.3
89,000 Banco Comercial Portugues S.A. (ADR) (a) 1,289,946 1,234,875 0.1
-------------- -------------- ------
4,851,757 4,670,586 0.4
Building & 76,900 Sociedade de Construsoes Soares da Costa
Construction S.A. 1,748,708 1,622,012 0.1
Retail 171,600 Sonae Investimentos S.A. 3,559,893 3,664,209 0.3
Retail Stores 12,600 Estabelecimentes Jeronimo Martins & Filho
S.A. 494,447 524,022 0.0
Total Investments in Portugal 10,654,805 10,480,829 0.8
Spain Banking 26,924 Banco Popular Espanol (Ordinary) 2,970,407 3,165,473 0.3
Oil--Related 170,492 Repsol S.A. (Ordinary) 4,760,015 5,470,332 0.4
Telecommunications 441,440 Telefonica Nacional de Espana S.A.
(Ordinary) 5,464,092 6,120,807 0.5
Total Investments in Spain 13,194,514 14,756,612 1.2
Sweden Banking 225,500 Svenska Handelsbanken, Inc. 3,009,657 2,858,751 0.2
Building Related 158,100 Svedala Industry 3,038,534 3,272,318 0.3
Engineering 183,850 SKF AB 3,438,484 3,305,842 0.3
95,800 SKF AB 'B' Free 1,859,982 1,722,598 0.1
-------------- -------------- ------
5,298,466 5,028,440 0.4
<PAGE>
Metals & Mining 204,460 Trelleborg AB (Class B) 1,373,199 2,644,917 0.2
Pharmaceutical--
Prescription 151,750 Astra 'A' Fria 3,179,941 3,454,976 0.3
Total Investments in Sweden 15,899,797 17,259,402 1.4
Switzer- Banking 17,633 Swiss Bank Corp. (Bearer) 5,467,840 5,032,324 0.4
land
Chemicals 5,512 Ciba-Geigy AG (Registered) 2,750,861 3,336,592 0.3
Electrical Equipment 8,751 BBC Brown Boveri & Cie 5,616,031 7,932,750 0.6
Insurance 700 Baloise 1,164,989 1,303,793 0.1
9,700 Baloise (Warrants) (b) 813,755 1,090,161 0.1
-------------- -------------- ------
1,978,744 2,393,954 0.2
Total Investments in Switzerland 15,813,476 18,695,620 1.5
Turkey Automobiles & 491,200 Turk Otomobil Fabrikasi A.S. 3,927,600 2,234,960 0.2
Equipment
Total Investments in Turkey 3,927,600 2,234,960 0.2
<PAGE>
United Aerospace 1,985,000 Rolls Royce PLC (Ordinary) 5,564,973 5,762,159 0.5
Kingdom
Banking 355,000 National Westminster Bank PLC (Ordinary) 2,743,986 2,715,318 0.2
Beverages 1,336,600 Grand Metropolitan PLC (Ordinary) 8,759,700 9,135,334 0.7
Building Materials 669,500 Blue Circle Industries PLC (Ordinary) 3,043,131 3,311,078 0.3
1,907,350 Tarmac PLC (Ordinary) 4,878,546 4,701,846 0.4
-------------- -------------- ------
7,921,677 8,012,924 0.7
Chemicals 455,000 Imperial Chemical Industries PLC
(Ordinary) 5,454,384 5,838,762 0.5
Consumer--Goods 792,900 Vendome Luxury Group (Units)(c) 4,735,895 6,490,955 0.5
Electrical Equipment 1,098,400 General Electric Co., Ltd. PLC (Ordinary) 5,507,919 5,229,801 0.4
<PAGE>
Food & Beverage 898,000 Tate & Lyle PLC (Ordinary) 5,450,476 6,185,883 0.5
Food Manufacturing 215,600 Unilever Capital Corp. 3,247,073 3,803,143 0.3
Industrial--Other 1,355,400 Tomkins PLC 4,669,166 5,131,536 0.4
Insurance 456,300 Commercial Union Assurance Co. PLC
(Ordinary) 4,365,810 3,912,390 0.3
Leisure & 1,620,000 Forte PLC 6,035,578 6,015,122 0.5
Entertainment 271,800 Granada Group PLC 2,232,453 2,078,939 0.2
810,850 The Rank Organisation PLC (Ordinary) 4,829,015 5,280,430 0.4
305,600 Thorn EMI (Ordinary) 4,654,880 4,811,053 0.4
-------------- -------------- ------
17,751,926 18,185,544 1.5
Media/Publishing 902,400 Reuters Holdings PLC 6,518,327 7,120,555 0.6
Oil--Related 881,000 British Petroleum Co., Ltd. 4,711,737 5,601,950 0.5
Pharmaceuticals 1,552,800 SmithKline Beecham Corp. PLC (Class A) 9,622,001 10,851,502 0.9
Retail Trade 2,640,200 Sears PLC 4,730,391 4,926,926 0.4
Telecommunications 883,800 Cable & Wireless Public Co. Ltd.
(Ordinary) 6,321,413 6,312,042 0.5
Utilities 798,200 British Telecommunications PLC (Ordinary) 3,253,055 3,310,080 0.3
Utilities--Electric 593,700 Scottish Power PLC (Ordinary) 3,072,926 3,889,099 0.3
Total Investments in the United Kingdom 114,402,835 122,415,903 10.0
Total Investments in Western Europe 336,226,709 374,203,504 30.6
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS(concluded) (in US dollars)
<CAPTION>
SHORT-TERM Face Percent of
SECURITIES Amount Issue Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Commercial US$15,000,000 Avco Financial Services, Inc., 4.72%
Paper* due 9/26/1994 $ 14,950,833 $ 14,950,833 1.2%
5,000,000 BASF AG Corp., 4.70% due 9/26/1994 4,983,680 4,983,680 0.4
66,648,000 General Electric Capital Co., 4.75%
due 9/01/1994 66,648,000 66,648,000 5.4
35,000,000 Wal-Mart Stores, Inc., 4.65% due 9/16/1994 34,932,187 34,932,187 2.8
-------------- -------------- ------
121,514,700 121,514,700 9.8
US Government & 30,000,000 Federal Home Loan Bank, 4.62% due 29,903,750 29,903,750 2.4
Agency Obligations* 9/26/1994
US Treasury Bills:
6,400,000 4.06% due 9/15/1994 6,389,895 6,389,173 0.5
2,700,000 4.11% due 9/15/1994 2,695,684 2,695,376 0.2
115,000 4.14% due 9/15/1994 114,816 114,816 0.0
370,000 4.09% due 9/22/1994 369,117 369,117 0.0
600,000 4.13% due 9/22/1994 598,554 598,554 0.0
200,000 4.18% due 9/22/1994 199,519 199,519 0.0
35,000,000 4.25% due 9/22/1994 34,913,127 34,913,127 2.8
125,000 4.28% due 9/22/1994 124,688 124,688 0.0
25,000 4.289% due 9/22/1994 24,937 24,937 0.0
40,000 4.30% due 9/22/1994 39,899 39,899 0.0
405,000 4.35% due 9/22/1994 403,972 403,972 0.0
-------------- -------------- ------
75,777,958 75,776,928 5.9
Total Investments in Short-Term Securities 197,292,658 197,291,628 15.7
<CAPTION>
OPTIONS Number of Contracts/ Premiums
PURCHASED Face Amount Paid
<S> <C> <S> <C> <C> <C>
Call Options 188,501 Topix 2nd Section++, expiring May 1995 at
Purchased YEN 2330 420,000 434,394 0.1
339,631 Topix 2nd Section++, expiring July 1995 at
YEN 2512.93 917,849 656,905 0.1
344,060 Topix 2nd Section++, expiring August 1995
at YEN 2453.64 1,016,983 905,946 0.1
194,819 Topix 2nd Section++, expiring October 1995
at YEN 2270 278,894 355,971 0.0
-------------- -------------- ------
2,633,726 2,353,216 0.3
<PAGE>
Currency Put US$ 6,100,000 Deutschemark, expiring September 1994
Options Purchased at DM 1.65 91,195 1,220 0.0
US$40,000,000 Japanese Yen, expiring September 1994 at
YEN 105 924,000 0 0.0
US$80,000,000 Japanese Yen, expiring September 1994 at
YEN 107 1,792,000 0 0.0
US$50,000,000 Japanese Yen, expiring February 1995 at
YEN 100 1,045,000 1,270,000 0.1
US$10,000,000 Japanese Yen, expiring June 1995 at YEN 100 302,000 314,500 0.0
US$12,400,000 Netherlands Guilder, expiring September 1994
at Nlg 1.85 182,900 2,480 0.0
US$17,200,000 Swiss Franc, expiring September 1994
at Chf 1.387 259,720 8,600 0.0
-------------- -------------- ------
4,596,815 1,596,800 0.1
Total Options Purchased 7,230,541 3,950,016 0.4
Total Investments 1,167,270,271 1,235,392,581 100.4
<CAPTION>
OPTIONS Number of Contracts/ Premiums
WRITTEN Face Amount Issue Received
<S> <C> <S> <C> <C> <C>
Call Options Written 524,651 Reuters Holdings PLC, expiring October
1994 at 5.1 Pounds (170,609) (197,424) (0.0)
209,689 Thorn EMI, expiring October 1994 at
10.5 Pounds (154,234) (104,670) (0.0)
-------------- -------------- ------
(324,843) (302,094) (0.0)
Currency Call $50,000,000 Japanese Yen, expiring February 1995 at
Options Written YEN 94.6 (1,045,000) (755,000) (0.1)
Put Options Written 194,819 Topix 2nd section++, October 1994 at
YEN 2270 (205,794) (42,132) (0.0)
344,060 Topix 2nd section++, expiring August 1995
at YEN 2453.64 (714,583) (738,366) (0.1)
-------------- -------------- ------
(920,377) (780,498) (0.1)
Currency Put $10,000,000 Japanese Yen, expiring June 1995 at
Options Written YEN 108 (110,000) (104,000) (0.0)
Total Options Written (2,400,220) (1,941,592) (0.2)
<PAGE>
Total Investments, Net of Options Written $1,164,870,051 1,233,450,989 100.2
==============
Variation Margin on Stock Index Futures Contracts** 162,843 0.0
Unrealized Depreciation on Forward Foreign Exchange Contracts*** (9,735,876) (0.8)
Other Assets Less Liabilities 7,034,506 0.6
-------------- ------
Net Assets $1,230,912,462 100.0%
============== ======
Net Asset Value: Class A--Based on net assets of $229,653,144 and 19,155,053 shares
outstanding $ 11.99
==============
Class B--Based on net assets of $1,001,259,318 and 84,199,169 shares
outstanding $ 11.89
==============
(a)American Depositary Receipt (ADR).
(b)Warrants entitle the Fund to purchase a predetermined number of
shares of common stock. The purchase price and the number of shares
are subject to adjustment under certain conditions until the
expiration date.
(c)Each unit consists of one ordinary 5p Vendome PLC and one ordinary
NPV Vendome SA.
++All Topix 2nd Section OTC's are with Morgan Stanley & Co. International
LTD. as counterparty.
*Commercial Paper and certain 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 Fund.
**Stock index futures contracts purchased as of August 31, 1994 were as follows:
<CAPTION>
Number of Expiration
Contracts Issue Exchange Date Value
<C> <S> <S> <S> <C>
621 Nikkei 225 CME September 1994 $64,226,925
110 TSE 35 Toronto September 1994 9,121,208
Total Stock Index Futures Contracts Purchased
(Total Contract Price--$74,223,867) $73,348,133
===========
**Stock index futures contracts sold as of August 31, 1994 were as follows:
<PAGE>
<CAPTION>
Number of Expiration
Contracts Issue Exchange Date Value
<C> <S> <S> <S> <C>
114 E0E20 EOE September 1994 $(5,396,973)
213 FTSE 100 LIFFE September 1994 (26,686,992)
Total Stock Index Futures Contracts Sold
(Total Contract Price--$31,078,657) $(32,083,965)
============
***Forward foreign exchange contracts as of August 31, 1994 were as follows:
<CAPTION>
Unrealized
Foreign Expiration Appreciation
Currency Sold Date (Depreciation)
<S> <C> <S> <C>
A$ 23,732,602 September 1994 $(172,044)
Bf 207,054,996 September 1994 (517,584)
DM 18,096,812 September 1994 (913,103)
Fmk 18,726,095 September 1994 (278,874)
Frf 86,635,768 September 1994 (1,334,502)
Nlg 15,045,479 September 1994 (675,198)
Pta 1,012,303,596 September 1994 (509,235)
Skr 29,179,296 September 1994 (112,283)
YEN 14,896,716,999 September 1994 (3,619,787)
YEN 5,518,100,000 December 1994 (1,509,769)
YEN 2,482,500,000 February 1995 (116,509)
YEN 816,270,000 August 1995 23,012
Total (US$ Commitment--$287,831,106) $(9,735,876)
===========
Total Unrealized Depreciation on
Forward Foreign Exchange Contracts $(9,735,876)
===========
</TABLE>
<PAGE>
PORTFOLIO CHANGES
For the Quarter Ended August 31, 1994
Additions
Alcatel Alsthom
Amway Asia Pacific Ltd.
Baloise
Baloise (Warrants)
*Banco Bradesco S.A.
Bank of Ireland
British Telecommunications PLC (Ordinary)
*Daimler Benz A.G. (Rights)
Forte PLC
Hindalco Industries Ltd.
Hocheng Group Corp. (ADR)
Imperial Chemical Industries PLC (Ordinary)
Indian Tobacco Co. Ltd.
*Jeronimo Martins (Bonus Rights)
LVMH
Mannesmann AG
New Zealand Government Bonds:
9.00% due 11/15/1996
6.50% due 2/15/2000
PT Wicaksana Overseas International
*Petroleo Brasileiro S.A.
Royal Dutch Petroleum PLC (Warrants)
Saga Petroleum A.S. (Class A)
Saga Petroleum A.S. (Class B)
Sonae Investimentos S.A.
Svenska Handelsbanken, Inc.
Telecomunicacoes Brasileiras S.A.--
Telebras ON
Tomkins PLC
Unilever Capital Corp.
Unitas Bank Ltd.
Volkswagen AG
<PAGE>
Deletions
Allianz AG Holding (Warrants)
Australia National Industries,
Ltd. (Ordinary)
*Banco Bradesco S.A.
Bangkok Bank Co., Ltd. (Foreign Registered)
Boots Co. PLC (Ordinary)
Cadbury Schweppes PLC (Ordinary)
Cementos Mexicanos, S.A. de
C.V. Nom 'B' (Cemex)
Cifra, S.A. de C.V. (Class C)
Compagnie Financiere de Paribas
(Ordinary) (New Shares)
*Daimler Benz A.G. (Rights)
Delhaize 'le Lion' Group (Ordinary)
Finnish Export Credit, 0.00% due 3/10/1997
Goodman Fielder Wattie, Ltd. (Ordinary)
Grupo Carso, S.A. de C.V., Series A
Grupo Situr, S.A. (Ordinary)
Grupo Tribasa, S.A. de C.V. (ADR)
Hanson PLC (Ordinary)
The Hong Kong & China Gas Co. (Warrants)
Irish Gilts, 9.25% due 7/11/2003
Jefferson Smurfit Group PLC (Ordinary)
*Jeronimo Martins (Bonus Rights)
Maruichi Malaysia Steel Tube BHD
Nippon Telephone & Telegraph Corp.
(Ordinary)
Nisshinbo Industries
*Petroleo Brasileiro
Sandoz AG (Registered)
Telecomunicacoes Brasileiras
S.A.--Telebras (ADR)
Telecomunicacoes Brasileiras
S.A.--Telebras PN
Tesco PLC (Ordinary)
Transportadora de Gas del Sur (TGS)
Uniphone Telecommunications BHD
Vallehermoso Espanola S.A. (New)
WPP Group PLC
Winton Holdings
[FN]
*Added and deleted in the same quarter.
<PAGE>
PORTFOLIO INFORMATION
Worldwide
Investments as of
August 31, 1994
Ten Largest Industries Percent of
(Equity Investments) Net Assets
Property & Casualty Insurance 7.5%
Electrical Equipment 6.8
Banking 4.5
Telecommunications 4.0
Chemicals 3.7
Automobiles 3.6
Pharmaceuticals 3.5
Office Equipment 3.2
Consumers Electronics 2.8
Utilities 2.6
Percent of
Ten Largest Countries Net Assets
Japan 35.9%
United Kingdom 10.0
Germany 4.6
Netherlands 4.0
Mexico 2.8
Australia 2.7
Canada 2.1
France 2.0
New Zealand 1.9
Brazil 1.9
<PAGE>
Percent of
Asset Mix* Net Assets
Japan 35.9%
Europe (Ex. United Kingdom and Ireland) 19.5
Cash 15.7
United Kingdom and Ireland 11.1
Other Emerging Markets 10.3
Pacific Basin (Ex. Japan) 7.5
[FN]
*Percent of net assets may not equal 100%, and
excludes the impact of futures and options.
Stock Index
Futures Contracts
Percent of
Country Issue Exchange Net Assets
Japan Nikkei 225 CME 5.2%
Canada TSE 35 TFE 0.8
United Kingdom FTSE 100 LIFFE (2.2)
Netherlands EOE20 EOE (0.4)
------
3.4%
======
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
Donald Cecil, Trustee
Edward H. Meyer, Trustee
Charles C. Reilly, Trustee
Richard R. West, Trustee
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Donald C. Burke, Vice President
Gerald M. Richard, Treasurer
Michael J. Hennewinkel, Secretary
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
<PAGE>
Merrill Lynch
International
Equity Fund
Management
Team
Andrew John Bascand--Senior Portfolio Manager/Asset
Allocator. As the Fund's Asset Allocator, Mr. Bascand is
primarily responsible for determining the allocation of the
Fund's assets among equity markets in Europe, the
emerging markets and the Pacific Basin.
Adrian Holmes--Co-Portfolio Manager--European
Investments. Mr. Holmes is primarily responsible for the
Fund's European investments.
Grace Pineda--Co-Portfolio Manager--Emerging Markets
Investments. Ms. Pineda is primarily responsible for
investments in emerging markets in Europe, Latin America
and the smaller markets in the Pacific Basin.
Stephen I. Silverman--Co-Portfolio Manager--Pacific
Basin Investments. Mr. Silverman is primarily responsible for
the Fund's investments in the larger Pacific Basin markets.
<PAGE>
APPENDIX GRAPHIC AND IMAGE MATERIAL.
ITEM 1:
International Stock Market Performance--Total Return in US
Dollars* of the Fund's Top Ten Country Positions for the Three-
Month Period Ended August 31, 1994
Bar graph illustrating the following percentages:
United Kingdom 12.0%
Netherlands 9.6%
Germany 8.2%
Mexico 7.1%
France 6.2%
New Zealand 5.6%
Hong Kong 4.2%
Australia 4.1%
Canada 4.0%
Japan 1.6%
Source: Financial Times--Actuaries Index
[FN]
*For the three-month period ended August 31, 1994, total
investment return in US dollars for the Financial Times--Actuaries
World (Ex-US) Index was +4.73%.
