MERRILL LYNCH
INTERNATIONAL
EQUITY FUND
FUND LOGO
Annual Report
May 31, 1995
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.
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
<PAGE>
Merrill Lynch
International
Equity Fund
Box 9011
Princeton, NJ
08543-9011
MERRILL LYNCH INTERNATIONAL EQUITY FUND
International Stock Market Performance--Total Return in US
Dollars* of the Fund's Top Ten Country Positions for the Three--
Month Period Ended May 31, 1995
Bar graph illustrating the following percentages:
Australia 2.5%
Germany 3.1%
Ireland 6.1%
Japan 7.3%
Sweden 7.4%
Hong Kong 9.5%
Netherlands 10.9%
Canada 11.1%
United Kingdom 12.2%
South Africa 13.0%
Source: Financial Times--Actuaries Index
[FN]
* For the three-month period ended May 31, 1995, total investment
return in US dollars for the Financial Times--Actuaries World (Ex-
US) Index was +9.05%.
<PAGE>
DEAR SHAREHOLDER
The significant weakening in US eco-
nomic activity during the three months
ended May 31, 1995 contributed to a
general rebound in equity prices.
Among the major stock markets, only
Japanese equity prices fell during the
May quarter. Equity market returns,
when measured in US dollar terms,
were generally boosted by the weak-
ness of the US dollar relative to the
major currencies. The US-dollar total
return of the unmanaged Financial
Times--Actuaries World Index (Ex-US)
during the May quarter was +9.05%.
The weak performance in Japan,
which was down 6.1% in yen terms,
masked strong performances in other
markets.
For the quarter ended May 31, 1995,
total returns for Class A, Class B,
Class C and Class D Shares were
+6.22%, +5.93%, +5.87% and +6.10%,
respectively. (Complete performance
information, including average annual
and aggregate total returns, can be
found on pages 6 and 7 of this report
to shareholders.) The Fund's under-
performance during the quarter ended
May 31, 1995, reflected negative con-
tributions from an overweighted US-
dollar stance and underperformance
in European and emerging market
stocks. Equity asset allocation was
broadly neutral in terms of perform-
ance against the unmanaged
benchmark.
Portfolio Matters
Our investment strategy changed
marginally over the May quarter. In
particular, the UK weighting was
reduced in favor of underperforming
Japanese and Asian markets. However,
despite purchasing Japanese stocks,
the Fund retained an underweighted
stance in Japan.
<PAGE>
Our investment strategy reflects the
positive impact of slower economic
growth on world financial markets. We
tactically increased the Fund's expo-
sure to the equity markets that are
most likely to benefit from lower US
and global bond yields. For example,
the Fund's Hong Kong equity rose
from approximately 5% of net assets
to 6.9%. Overall, the Fund's equity
position was lifted from about 88%
to 91%, reflecting a reduction in
fixed-income and cash exposures.
We continue to emphasize a diversi-
fied portfolio of equity investments
across the major markets outside the
United States, as well as in emerging
markets. The Fund holds a broad port-
folio of equity investments in emerg-
ing markets. Currently, 9% of the
Fund's net assets is invested in 16
emerging markets, including Portugal,
Brazil, India and South Africa. In addi-
tion, we retain a 2% weight in emerg-
ing markets fixed-income investments
that still offer attractive high real
interest rates.
Our Continental European weighting
has remained relatively stable,
although we switched out of long
equity futures positions in France,
and closed short equity futures
positions in Germany and Holland.
On an individual stock level, we
reduced the Fund's holdings in Nestle
AG, Philips Industries Inc., ABN
Amro Bank and Generale de Banque
S.A. Significant European purchases
in the three-month period ended
May 31, 1995 included Siemens AG,
Mo Och Domsjo AB, Stora Kopparbergs
AB, and Electrolux AB.
<PAGE>
In the Pacific Basin, stock selection
focused on reducing the Fund's hold-
ings in Taisho Pharmaceutical Co.,
Ltd. and eliminating Hitachi Ltd.,
while reinvesting cash in underper-
forming Japanese Coca-Cola bottling
companies and Hong Kong securities
such as HSBC Holdings PLC. We also
sold call options on the Hong Kong
Hang Seng Index that expired in early
May without being exercised.
We significantly reduced the Fund's
US dollar exposure from 31% to 22%
following an unwinding of currency
hedges against European currencies
in March. We retain a significant hedge
out of yen into US dollars, reflecting
our medium-term strategic expecta-
tion for a stronger US dollar against
the yen.
Economic and Investment
Environment
The sharp slowing in US output and
employment indicators was associated
with a significant decline in US inter-
est rate expectations. The unexpected
weakness in economic activity
significantly impacted Merrill Lynch
International Equity Fund's relative
performance as the Fund was posi-
tioned for a continued US expansion.
The crucial question currently is
gauging the possible magnitude and
direction of the US economy. Further
weakness in US economic indicators
over the next three months would
potentially be associated with greater
risk for the global economic cycle, and
with a further rally in world bond
markets. However, we believe that US
interest rate expectations anticipate
significant weakness in the economy
and aggressive easing by the US
Federal Reserve Board. US financial
markets are now exposed to a pick-up
in consumer and business spending,
and such a rise would dampen bull-
ish market sentiment for lower
interest rates.
<PAGE>
Outside the United States, economic
indicators also show slowing growth
in Germany and Japan. Currency
appreciation has significantly affected
business confidence in both major
economies, while the US slowdown
will further restrict foreign demand
for their exports. However, consumers
and, increasingly, corporations in both
Germany and Japan are generally in a
strong financial position to increase
spending. As a result, we expect
domestic demand growth in these
economies to continue expanding into
1996. Additionally within Europe,
inventories are not excessive, so that
a resumption of demand growth may
translate relatively rapidly into
stronger output expansion. In general,
the downside risks to economic growth
outside the US appear limited.
As the cyclical upswing in Europe
strengthens again, monetary policy
tightening will be necessary in the
"soft currency" economies of the
United Kingdom, Sweden, Spain and
Italy. All of these economies have been
growing strongly. Although interest
rates in the "hard currency" European
bloc (for example, Germany and Swit-
zerland) will not need to rise by nearly
as much as in the soft currency region,
interest rates across Europe will
probably increase over the next year
or so.
<PAGE>
Contrary to our earlier expectations,
Japanese economic data remain weak.
Although interest rates continue to
decline, and fiscal policy remains stim-
ulatory, Japanese industry struggles
to adjust to the impacts of currency
strength, the short-term decline in
production caused by the Kobe earth-
quake, and the influence of subway
gas attacks and rising unemployment
on consumer sentiment. Over the next
few months we expect a further
deterioration in Japanese economic
activity. We believe Japanese financial
markets have probably now fully
discounted a poor growth outlook. For
example, five-year Japanese bond
yields fell below 2%, and one-year
interest rates are now less than 1%.
The consensus on Japanese gross
domestic product (GDP) growth in
1995 fell from 1.8% at the turn of the
year to just 1.3% currently. We believe
that a further fiscal expansion pack-
age, a very loose monetary policy and
some reversal of the yen's recent
strength will lift Japanese growth
expectations from their current low
levels. Japanese corporate earnings
could potentially double in the next
two years even with modest GDP
growth.
<PAGE>
Fiscal Year in Review
For the year ended May 31, 1995, total
returns for the Fund's Class B and
Class D Shares were -5.91% and
- -5.11%, respectively. Over the same
12-month period, the unmanaged
Financial Times--Actuaries World
Index (Ex-US) total return was
+3.94%. The total returns for Class A
and Class C Shares were -6.78% and
- -7.36%, respectively, since inception
(October 21, 1994) through May 31,
1995. The Fund's fiscal year was
marked by a number of notable mar-
ket factors. First, there was a signifi-
cant decline in the Japanese equity
market as the Nikkei 225 Index de-
clined from around 21,000 to 15,500
during the year. Second, the Mexican
peso crisis erupted and undermined
investor confidence in emerging mar-
kets as well as in some developed
economies with high-debt burdens.
Finally, the US dollar depreciated
sharply in March, 1995, against the yen
and Deutschemark. These three fac-
tors resulted in dramatic portfolio
volatility, and contributed to the Fund's
poor performance over the fiscal year.
Overall asset allocation across equity
markets proved broadly neutral for
the Fund's performance. Asset
allocation shifts in Japan added
about 0.5% to relative performance,
but the Fund's stance in emerging
markets and Europe reduced perfor-
mance by a similar amount. Japanese
equity positions also contributed
negatively to performance. The most
significant negative factor for Fund
performance was its overweighted
position in the US dollar.
<PAGE>
In Conclusion
Our investment strategy has evolved
to reflect a greater exposure to Pacific
and Asian markets at the expense of
core European markets. The Fund is
marginally underweighted in Japanese
equities. We continue to hedge a por-
tion of our European and Japanese
equity exposures back into US dollars.
The Fund retains a 9% position in
cash reserves. We may become more
defensive in our equity selection if
US interest rate expectations begin to
rise. Japanese equities may look
attractive in an environment of rising
US bond yields and a stronger US dollar.
We thank you for your continued inter-
est in Merrill Lynch International
Equity Fund, and we look forward to
reviewing our strategy with you in our
upcoming quarterly 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 Markets Investments
<PAGE>
(Stephen I. Silverman)
Stephen I. Silverman
Co-Portfolio Manager
Pacific Basin Investments
July 6, 1995
<TABLE>
PROXY RESULTS
During the year ended May 31, 1995, Merrill Lynch International Equity Fund
shareholders voted on the following proposals. Proposals 1, 2 and 4 were
approved at a special shareholders' meeting on September 28, 1994. Proposal
3 was passed at a special shareholders' meeting on January 31, 1995.
The description of each proposal and number of shares voted are as follows:
<CAPTION>
Shares Voted Shares Voted
For Without Authority
<S> <S> <C> <C>
1. To elect the Fund's Board of Trustees: Donald Cecil 92,740,253 1,815,282
Edward H. Meyer 92,733,663 1,821,872
Charles C. Reilly 92,738,600 1,816,935
Richard R. West 92,744,015 1,811,520
Arthur Zeikel 92,728,994 1,826,541
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
<S> <C> <C> <C>
2. To select Deloitte & Touche LLP as the Fund's independent auditors. 91,688,672 792,366 2,074,497
3. To approve certain changes to the Fund's fundamental investment restrictions. 45,695,684 1,666,694 2,432,501
4. To amend the Fund's articles of incorporation to implement the Merrill Lynch
Select Pricing SM System. 85,961,408 3,671,802 4,922,325
</TABLE>
<TABLE>
IMPORTANT TAX INFORMATION (unaudited)
<PAGE>
The following information summarizes all per share distributions paid
by Merrill Lynch International Equity Fund during the fiscal year
ended May 31, 1995:
<CAPTION>
Qualifying Non-Qualifying
Domestic Interest from Domestic Total Foreign Taxes
Record Payable Ordinary Federal Ordinary Foreign Ordinary Paid or Long-Term
Date Date Income Obligations Income Source Income Income Withheld Capital Gains
<S> <C> <C> <C> <C> <C> <C> <C>
Class A Shares:
12/13/94 12/21/94 $.005294 $.013617 $.429147 $.150845 $.598903 $.016765 $.090644
Class B Shares:
12/13/94 12/21/94 $.004327 $.011130 $.350777 $.123298 $.489532 $.016765 $.090644
Class C Shares:
12/13/94 12/21/94 $.005149 $.013244 $.417380 $.146708 $.582481 $.016765 $.090644
Class D Shares:
12/13/94 12/21/94 $.005002 $.012865 $.405457 $.142517 $.565841 $.016765 $.090644
</TABLE>
The qualifying domestic ordinary income qualifies for the dividends-
received deduction for corporations.
The foreign taxes paid or withheld represent taxes incurred by the
Fund on dividends received by the Fund from foreign sources.
Foreign taxes paid or withheld should be included in taxable income
with an offsetting deduction from gross income or as a credit for
taxes paid to foreign governments. You should consult your tax
adviser regarding the appropriate treatment of foreign taxes paid.
The law varies in each state as to whether and what percentage
of dividend income attributable to Federal obligations is exempt
from state income tax. We recommend that you consult your tax
adviser to determine if any portion of the dividends you received
are exempt from state income tax.
Listed at right are the percentages of total assets of the Fund
invested in Federal obligations as of the end of each quarter of the
fiscal year.
<PAGE>
Please retain this information for your records.
Percentage of
Federal
For the Quarter Ended Obligations*
August 31, 1994 0.82%
November 30, 1994 0.04%
February 28, 1995 1.39%
May 31, 1995 1.82%
[FN]
*For purposes of this calculation, Federal Obligations include US
Treasury Notes, US Treasury Bills and US Treasury Bonds. Also
included are obligations issued by the following agencies: Banks
for Cooperatives, Federal Intermediate Credit Banks, Federal Land
Banks, Federal Home Loan Banks and the Student Loan Marketing
Association. Repurchase Agreements are not included in this
calculation.
PERFORMANCE DATA
About Fund
Performance
Since October 21, 1994, investors have been able to purchase
shares of the Fund through the Merrill Lynch Select Pricing SM
System, which offers four pricing alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 5.25% and bear no ongoing distribution or account
maintenance fees. Class A Shares are available only to eligible
investors, as detailed in the Fund's prospectus. If you were a
Class A shareholder on October 21, 1994, your Class A Shares
were redesignated to Class D Shares on October 21, 1994, which,
in the case of certain eligible investors, were simultaneously
exchanged for Class A Shares.
* Class B Shares are subject to a maximum contingent deferred
sales charge of 4% if redeemed during the first year,
decreasing 1% each year thereafter to 0% after the fourth year.
In addition, Class B Shares are subject to a distribution fee
of 0.75% and an account maintenance fee of 0.25%. These shares
automatically convert to Class D Shares after 8 years.
* Class C Shares are subject to a distribution fee of 0.75% and
an account maintenance fee of 0.25%. In addition, Class C
Shares are subject to a 1% contingent deferred sales charge if
redeemed within one year of purchase.
* Class D Shares incur a maximum initial sales charge of 5.25%
and an account maintenance fee of 0.25% (but no distribution
fee).
Performance data for the Fund's Class B and Class D Shares are
presented in the "Total Return Based on a $10,000 Investment,"
"Recent Performance Results" and "Average Annual Total Return"
tables below and on page 7. Data for Class A and Class C Shares
are also presented in the "Aggregate Total Return" and "Recent
Performance Results" tables on page 7.
The "Recent Performance Results" table shows investment results
before the deduction of any sales charges for Class B and Class D
Shares for the 12-month and 3-month periods ended May 31,
1995 and for Class A and Class C Shares for the since inception
and 3-month periods ended May 31, 1995. All data in this table
assume imposition of the actual total expenses incurred by
each class of shares during the relevant period.
None of the past results shown should be considered a repre-
sentation of future performance. Investment return and princi-
pal value of shares will fluctuate so that shares, when redeemed,
may be worth more or less than their original cost. Dividends
paid to each class of shares will vary because of the different
levels of account maintenance, distribution and transfer agency
fees applicable to each class, which are deducted from the
income available to be paid to shareholders.
Total Return
Based on a
$10,000
Investment
A line graph depicting the growth of an investment in the Fund's
Class B Shares and Class D Shares compared to growth of an
investment in the Financial Times--Actuaries World (Ex-US) Index.
Beginning and ending values are:
<PAGE>
7/30/93** 5/95
ML International Equity Fund++--
Class B Shares* $10,000 $10,463
ML International Equity Fund++--
Class D Shares $ 9,475 $10,348
Financial Times--Actuaries
World (Ex-US) Index++++ $10,000 $11,517
[FN]
*Assuming maximum sales charge, transaction costs, and other
operating expenses, including advisory fees.
**Commencement of Operations.
++Merrill Lynch International Equity Fund invests in a
diversified portfolio of equity securities of issuers located
in countries other than the United States.
++++This unmanaged capitalization-weighted Index is comprised of
over 1,800 companies in 24 countries, excluding the United States.
On October 31, 1994, Class Shares were redesignated to Class D
Shares.
Average Annual
Total Return
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/95 -6.06% -9.61%
Inception (7/30/93)
through 3/31/95 +2.65 +0.88
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 3/31/95 -5.36% -10.33%
Inception (7/30/93)
through 3/31/95 +3.44 + 0.15
<PAGE>
[FN]
*Maximum sales charge is 5.25%. On 10/21/94, Class A Shares were
redesignated to Class D Shares.
**Assuming maximum sales charge.
Aggregate
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Inception (10/21/94)
through 3/31/95 -9.69% -14.43%
[FN]
*Maximum sales charge is 5.25%. On 10/21/94, Class A Shares were
redesignated to Class D Shares.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Inception (10/21/94)
through 3/31/95 -10.11% -10.95%
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
<TABLE>
Recent
Performance
Results*
<CAPTION>
12 Month 3 Month
5/31/95 2/28/95 5/31/94++ % Change++ % Change
<S> <C> <C> <C> <C> <C>
ML International Equity Fund Class A Shares* $10.25 $9.65 $11.73 -11.85%(1) +6.22%
ML International Equity Fund Class B Shares* 10.19 9.62 11.44 -10.14(1) +5.93
ML International Equity Fund Class C Shares* 10.10 9.54 11.62 -12.31(1) +5.87
ML International Equity Fund Class D Shares* 10.27 9.68 11.51 - 9.99(1) +6.10
ML International Equity Fund Class A Shares--Total Return* - 6.78(2) +6.22
ML International Equity Fund Class B Shares--Total Return* - 5.91(3) +5.93
ML International Equity Fund Class C Shares--Total Return* - 7.36(4) +5.87
ML International Equity Fund Class D Shares--Total Return* - 5.11(5) +6.10
Financial Times--Actuaries World (Ex-US) Index**--Total Return + 3.94 +9.05
<FN>
*Investment results shown do not reflect 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.
++Investment results shown for Class A and Class C Shares are since
inception (10/21/94).
(1)Percent change includes reinvestment of $0.091 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.599 per share ordinary
income dividends and $0.091 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.490 per share ordinary
income dividends and $0.091 per share capital gains distributions.
(4)Percent change includes reinvestment of $0.582 per share ordinary
income dividends and $0.091 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.566 per share ordinary
income dividends and $0.091 per share capital gains distributions.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (in US Dollars)
<CAPTION>
Shares Held/ Value Percent of
AFRICA Industries Face Amount Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
South Banking 184,370 Nedcor Ltd. (f) $ 8,296,650 $ 8,803,668 0.7%
Africa
Beverages 69,800 South African Breweries Ltd. 1,651,958 1,973,145 0.2
Diversified 52,500 The Morgan Stanley Africa
Investment Fund, Inc. 608,602 630,000 0.1
8,800 New South Africa Fund, Inc. 119,423 126,500 0.0
47,500 Rembrandt Group Ltd. 321,088 345,372 0.0
22,200 Southern Africa Fund, Inc. 328,445 330,225 0.0
-------------- -------------- ------
1,377,558 1,432,097 0.1
<PAGE>
Mining 38,800 Anglo American Corp. of South Africa
Ltd. (ADR) (a) 1,866,237 2,061,250 0.2
11,000 De Beers Consolidated Mines Ltd.
(ADR) (a) 245,732 276,375 0.0
-------------- -------------- ------
2,111,969 2,337,625 0.2
Steel 1,618,400 South Africa Iron & Steel Industrial
Corp., Ltd. 1,769,589 1,935,569 0.1
Transportation ZAL 32,000,000 Transnet Ltd., 15% due 10/01/1995 7,714,286 8,698,016 0.7
Total Investments in South Africa 22,922,010 25,180,120 2.0
Total Investments in Africa 22,922,010 25,180,120 2.0
LATIN
AMERICA
Argentina Foreign Government Republic of Argentina:
Obligations ARS 6,000,000 5% due 3/31/2023 2,415,000 3,000,000 0.2
ARS 6,200,000 6.875% due 3/31/2023 3,589,500 3,789,750 0.3
-------------- -------------- ------
6,004,500 6,789,750 0.5
Oil--Related 172,600 Yacimientos Petroliferos Fiscales
S.A. (Sponsored) (ADR) (a) 4,331,570 3,495,150 0.3
Total Investments in Argentina 10,336,070 10,284,900 0.8
Brazil Automobiles 80,000 CAPCO Automotive Products Corp. S.A. 964,050 660,000 0.1
Banking 419,487,753 Banco Bradesco S.A. PN (Preferred) 3,215,742 3,607,502 0.3
Foreign BRC 3,500,000 Republic of Brazil, 7.25% due
Government 4/15/2024 1,906,250 1,995,000 0.2
Obligations
Mining 24,928,000 Companhia Vale do Rio Doce S.A.
(Preferred) 2,673,114 3,765,585 0.3
Oil--Related 32,650,000 Petroleo Brasileiro S.A. (Preferred) 2,988,395 3,059,813 0.2
Steel 200,000 Usinas Siderurgicas de Minas Gerais--
Usiminas S.A. (f) 3,226,000 2,262,500 0.2
<PAGE>
Telecommunications 51,551 Telecomunicacoes Brasileiras S.A.--
Telebras (ADR) (a) 2,231,272 1,759,178 0.1
32,213 Telecomunicacoes Brasileiras S.A.--
Telebras ON 1,431 998 0.0
1,122 Telecomunicacoes Brasileiras S.A.--
Telebras ON (Rights) (g) 0 0 0.0
1,524,347 Telecomunicacoes Brasileiras S.A.--
Telebras PN (Preferred) 67,886 53,108 0.0
53,110 Telecomunicacoes Brasileiras S.A.--
Telebras PN (Preferred) (Rights) (g) 0 0 0.0
-------------- -------------- ------
2,300,589 1,813,284 0.1
Total Investments in Brazil 17,274,140 17,163,684 1.4
Chile Telecommunications CLP 1,840,000 Compania de Telefonos de Chile S.A.,
4.50% due 1/15/2003 (Convertible) 2,160,652 2,180,400 0.2
45,700 Compania de Telefonos de Chile S.A.
(ADR) (a) 3,573,905 4,044,450 0.3
Total Investments in Chile 5,734,557 6,224,850 0.5
Mexico Beverages 278,000 Fomento Economico Mexicano, S.A.
de C.V. (Femsa) (ADR) (a) (f) 1,742,736 612,295 0.1
Building & 444,500 Cementos Mexicanos, S.A. de C.V.
Construction (Cemex) (Class B) (ADR) (a) 2,153,334 1,444,171 0.1
Diversified 333,000 Grupo Carso, S.A. de C.V. 'A1' (e) 2,213,698 1,560,343 0.1
Telecommunications 74,050 Telefonos de Mexico, S.A. de C.V.
(Telmex) (ADR) (a) 2,858,223 2,082,656 0.2
Total Investments in Mexico 8,967,991 5,699,465 0.5
Venezuela Foods 143,500 Mavesa S.A. (ADR) (a) (f) 1,004,375 394,625 0.0
410,000 Mavesa S.A. (Ordinary) 137,354 74,954 0.0
-------------- -------------- ------
1,141,729 469,579 0.0
Utilities--Electric 267,934 C.A. La Electricidad de Caracas
S.A.I.C.A.-S.A.C.A. 349,541 282,834 0.0
Total Investments in Venezuela 1,491,270 752,413 0.0
Total Investments in Latin America 43,804,028 40,125,312 3.2
NORTH
AMERICA
<PAGE>
Canada Diversified 813,000 Horsham Corp. 13,159,293 11,178,750 0.9
Energy Sources 172,000 Imperial Oil Ltd. (ADR) (a) 5,553,542 6,690,774 0.5
Foreign Government C$ 17,000,000 Canadian Government Bonds,
Obligations 8% due 3/15/1997 11,698,417 12,600,044 1.0
Gold/Resources 469,278 American Barrick Resources Corp. 12,031,054 11,827,081 1.0
Total Investments in Canada 42,442,306 42,296,649 3.4
Total Investments in North America 42,442,306 42,296,649 3.4
PACIFIC
BASIN
Australia Diversified 4,545,600 BTR Nylex Ltd. 11,064,684 9,156,293 0.7
Food & Beverage 2,257,873 Burns Philp & Co., Ltd. 6,735,186 5,002,887 0.4
826,644 Coca-Cola Amatil, Ltd. 4,161,752 4,929,961 0.4
-------------- -------------- ------
10,896,938 9,932,848 0.8
Media 707,264 The News Corp., Ltd. 3,610,407 3,760,074 0.3
355,219 The News Corp., Ltd. (Preferred) 1,558,829 1,712,148 0.1
-------------- -------------- ------
5,169,236 5,472,222 0.4
Merchandising 128,600 Amway Asia Pacific Ltd. 3,790,435 4,870,725 0.4
Natural Gas 420,522 Broken Hill Proprietary Co. 5,298,421 5,342,565 0.4
Property 1,381,251 Lend Lease Corp. 17,367,357 18,084,830 1.5
Total Investments in Australia 53,587,071 52,859,483 4.2
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US Dollars)
<CAPTION>
PACIFIC
BASIN Shares Held/ Value Percent of
(concluded) Industries Face Amount Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Hong Kong Banking 1,059,226 HSBC Holdings PLC $ 12,086,128 $ 13,762,762 1.1%
Foods 22,107,000 C.P. Pokphand Co., Ltd. 5,870,559 7,859,835 0.6
Multi-Industry 1,823,000 Swire Pacific Ltd. (Class A) 12,042,312 14,082,362 1.1
Telecommunications 11,298,000 Hong Kong Telecommunications, Ltd. 22,159,283 23,881,975 1.9
Utilities 4,647,600 China Light & Power Co., Ltd. 23,140,111 25,416,750 2.1
1,014,000 Hong Kong & China Gas Co., Ltd. 1,431,429 1,645,253 0.1
-------------- -------------- ------
24,571,540 27,062,003 2.2
Total Investments in Hong Kong 76,729,822 86,648,937 6.9
Japan Automobiles 1,736,000 Suzuki Motor Corp. 19,706,557 17,349,734 1.4
Beverages 139,000 Chukyo Coca-Cola Bottling Co., Ltd. 1,835,948 1,486,174 0.1
183,000 Hokkaido Coca-Cola Bottling Co., Ltd. 2,818,281 2,727,144 0.2
165,000 Kinki Coca-Cola Bottling Co., Ltd. 2,625,747 2,341,810 0.2
197,000 Mikuni Coca-Cola Bottling Co., Ltd. 3,160,732 2,562,980 0.2
153,100 Sanyo Coca-Cola Bottling Co., Ltd. 2,334,048 2,426,422 0.2
-------------- -------------- ------
12,774,756 11,544,530 0.9
Capital Goods 3,808,000 Mitsubishi Heavy Industries, Ltd. 25,615,591 26,167,333 2.1
Chemicals 733,000 Shin-Etsu Chemical Co., Ltd. 15,311,687 13,177,528 1.1
Containers 793,000 Toyo Seikan Kaisha, Ltd. 23,909,734 26,261,384 2.1
Electric Construction 380,450 Chudenko Corp. 13,607,957 14,174,069 1.1
435,000 Sanki Engineering Co., Ltd. 6,151,018 4,193,081 0.3
408,100 Taihei Dengyo Kaisha, Ltd. 9,667,248 6,757,422 0.6
-------------- -------------- ------
29,426,223 25,124,572 2.0
Electrical Equipment 910,600 Murata Manufacturing Co., Ltd. 34,192,770 34,786,966 2.8
569,000 The Nippon Signal Co., Ltd. 7,950,113 4,542,578 0.4
565,000 Rohm Co., Ltd. 21,622,065 25,794,205 2.1
650,000 Sumitomo Electric Industries, Ltd. 9,836,109 7,587,818 0.6
-------------- -------------- ------
73,601,057 72,711,567 5.9
Engineering & 830,000 Kinden Corp. 16,648,883 16,197,516 1.3
Construction
Iron & Steel 330,000 Maruichi Steel Tube, Ltd. 5,881,382 6,830,278 0.5
Office Equipment 2,036,000 Canon Inc. 33,971,212 31,786,162 2.5
<PAGE>
Pharmaceuticals 816,200 Sankyo Co., Ltd. 18,142,064 18,920,781 1.5
419,000 Taisho Pharmaceutical Co., Ltd. 8,298,783 7,879,480 0.6
-------------- -------------- ------
26,440,847 26,800,261 2.1
Property & Casualty 1,971,000 Dai-Tokyo Fire & Marine Insurance
Insurance Co., Ltd. 14,575,579 13,870,432 1.1
851,000 Fuji Fire & Marine Insurance
Co., Ltd. 5,819,056 4,599,728 0.4
1,268,000 Koa Fire & Marine Insurance
Co., Ltd. 8,833,667 8,068,409 0.7
742,000 Mitsui Marine & Fire Insurance
Co., Ltd. 6,045,628 5,186,541 0.4
1,696,000 Nichido Fire & Marine Insurance
Co., Ltd. 12,951,468 13,800,686 1.1
783,000 Nippon Fire & Marine Insurance
Co., Ltd. 5,748,509 4,954,524 0.4
1,681,000 Sumitomo Marine & Fire Insurance
Co., Ltd. 14,196,547 14,155,789 1.1
1,781,000 Tokio Marine & Fire Insurance
Co., Ltd. 21,375,308 20,432,525 1.6
1,257,000 Yasuda Fire & Marine Insurance
Co., Ltd. 9,408,702 8,518,758 0.7
-------------- -------------- ------
98,954,464 93,587,392 7.5
Retailing 510,000 Ito-Yokado Co., Ltd. 26,237,875 27,023,063 2.2
138,000 Sangetsu Co., Ltd. 4,742,639 4,080,426 0.3
-------------- -------------- ------
30,980,514 31,103,489 2.5
Transportation 160,000 Nippon Express Co., Ltd. 1,713,930 1,354,938 0.1
Total Investments in Japan 414,936,837 399,996,684 32.0
Malaysia Leisure 235,500 Genting BHD 1,450,561 2,484,984 0.2
446,000 Sime Darby (Malaysia) BHD 1,037,849 1,267,045 0.1
-------------- -------------- ------
2,488,410 3,752,029 0.3
Transportation 1,064,000 Malaysian International
Shipping Co. BHD 3,055,962 3,411,364 0.3
Total Investments in Malaysia 5,544,372 7,163,393 0.6
<PAGE>
New Zealand Foreign Government New Zealand Government Bonds:
Obligations NZ$ 9,570,000 8% due 11/15/1995 5,989,698 6,328,819 0.5
NZ$ 8,200,000 9% due 11/15/1996 4,988,596 5,496,503 0.4
Total Investments in New Zealand 10,978,294 11,825,322 0.9
Philippines Multi-Industry 282,370 Benpres Holdings Corp. (e) (f) 2,772,360 2,295,668 0.2
Total Investments in the Philippines 2,772,360 2,295,668 0.2
Singapore Banking 444,000 United Overseas Bank Ltd.
(Warrants) (b) (e) 1,993,262 2,183,659 0.2
Machinery 259,000 Jurong Shipyard Ltd. 2,090,007 2,138,498 0.2
Newspaper/Publishing 188,000 Singapore Press Holdings Ltd. 2,969,610 3,509,477 0.3
Total Investments in Singapore 7,052,879 7,831,634 0.7
South Korea Telecommunications 4,500 Korea Mobile Telecommunications
Corp. (e) 3,430,390 3,724,466 0.3
Utilities 154,000 Korea Electric Power Corp. 5,946,629 6,060,016 0.5
Total Investments in South Korea 9,377,019 9,784,482 0.8
Taiwan Merchandising 121,020 Hocheng Group Corp. (ADR) (a) (e) (f) 3,458,835 1,724,535 0.1
Total Investments in Taiwan 3,458,835 1,724,535 0.1
Thailand Banking 454,000 Bangkok Bank Co., Ltd. 'Foreign' 4,003,922 4,968,788 0.4
Total Investments in Thailand 4,003,922 4,968,788 0.4
Total Investments in the
Pacific Basin 588,441,411 585,098,926 46.8
SOUTHEAST
ASIA
India Automobiles 102,000 Ashok Leyland Ltd. (GDR) (d) (e) 1,304,580 1,466,760 0.1
63,000 Reliance Industries Ltd.
(ADR) (a) (e) 1,188,746 1,181,250 0.1
-------------- -------------- ------
2,493,326 2,648,010 0.2
<PAGE>
Media 643,600 Videocon International Ltd.
(GDR) (d) 6,184,111 2,091,700 0.2
Textiles 30,000 JCT Ltd. (GDR) (d) (e) 557,500 562,500 0.0
20,000 Raymond Woolen Mills Ltd.
(GDR) (d) (e) 300,000 305,000 0.0
-------------- -------------- ------
857,500 867,500 0.0
Tobacco 466,000 Indian Tobacco Co. Ltd. (e) 6,288,713 3,378,500 0.3
Total Investments in India 15,823,650 8,985,710 0.7
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US Dollars)
<CAPTION>
SOUTHEAST
ASIA Shares Held/ Value Percent of
(concluded) Industries Face Amount Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Indonesia Energy Equipment & 188,000 P.T. Supreme Cable Manufacturing
Services Company (GDR) (d) $ 534,547 $ 591,195 0.1%
Food & Household 1,138,000 P.T. Wicaksana Overseas
Products International (e) 1,754,711 2,862,893 0.2
Telecommunications 167,580 P.T. Indonesian Satellite Corp.
(ADR) (a) 5,961,188 6,619,410 0.5
Total Investments in Indonesia 8,250,446 10,073,498 0.8
Total Investments in Southeast Asia 24,074,096 19,059,208 1.5
WESTERN
EUROPE
Austria Engineering & 7,300 V.A. Technologie AG 798,071 839,368 0.1
Construction
Utilities 52,905 Verbund Oesterreichische
Elekrizitats AG 3,038,564 3,755,339 0.3
Total Investments in Austria 3,836,635 4,594,707 0.4
<PAGE>
Belgium Banking 9,230 Generale de Banque S.A. (Ordinary) 2,268,755 2,923,327 0.2
Total Investments in Belgium 2,268,755 2,923,327 0.2
Finland Banking 2,754,000 Kansallis-Osake-Pankki (e) 4,133,835 2,919,750 0.2
605,000 Unitas Bank Ltd. (e) 1,480,046 1,890,625 0.2
-------------- -------------- ------
5,613,881 4,810,375 0.4
Diversified 235,000 Outokumpu OY 3,395,069 3,775,231 0.3
Paper & Forest 471,500 Enso-Gutzeit OY 3,363,502 3,830,937 0.3
Products 104,250 Metsa Serla OY 3,999,018 4,416,146 0.4
269,600 Repola OY S (f) 4,412,103 5,466,889 0.4
-------------- -------------- ------
11,774,623 13,713,972 1.1
Total Investments in Finland 20,783,573 22,299,578 1.8
France Automobiles 52,000 Peugeot S.A. 7,378,548 7,857,172 0.6
Banking 19,000 Societe Generale de Surveillance
S.A. (Class A) (Ordinary) 2,052,425 2,234,618 0.2
Building & 29,000 Compagnie de Saint-Gobain S.A. 3,470,085 3,633,044 0.3
Construction
Multi-Industry 9,292 EuraFrance S.A. 2,952,247 3,186,685 0.2
Oil & Related 42,525 Societe Nationale Elf Aquitane 2,991,724 3,440,090 0.3
Steel 18,300 Ugine S.A. 1,239,895 1,273,653 0.1
Total Investments in France 20,084,924 21,625,262 1.7
Germany Automobiles 7,200 BMW AG 3,465,277 3,886,306 0.3
22,000 Volkswagen AG 5,859,361 6,198,611 0.5
-------------- -------------- ------
9,324,638 10,084,917 0.8
Chemicals 17,500 BASF AG (Ordinary) 3,354,097 3,752,304 0.3
15,800 Bayer AG (Ordinary) 3,005,961 3,822,328 0.3
-------------- -------------- ------
6,360,058 7,574,632 0.6
Electronics 7,100 Siemens AG 3,578,944 3,381,911 0.3
<PAGE>
Insurance 1,930 Munich Reinsurance Co. (Ordinary) 3,350,470 3,844,131 0.3
Machinery & 77,450 Kloeckner Werke AG (e) 3,951,498 5,681,936 0.5
Equipment 18,200 Mannesmann AG 4,519,528 5,338,219 0.4
-------------- -------------- ------
8,471,026 11,020,155 0.9
Utilities 17,000 Vereinigte Elektrizitaets & Bergwerks
AG (Veba) (Warrants) (b) (e) 731,875 757,095 0.1
Total Investments in Germany 31,817,011 36,662,841 3.0
Greece Banking 29,180 Ergo Bank S.A. (Registered) 1,166,836 1,358,888 0.1
Beverages 186,592 Hellenic Bottling Co. S.A. 3,645,447 5,243,340 0.4
Financial Services 62,720 Etba Leasing S.A. (Ordinary) 1,950,587 1,195,762 0.1
Total Investments in Greece 6,762,870 7,797,990 0.6
Hungary Foods 10,000 Pick Szeged Reszvenytarsasag
(ADR) (a) (e) 627,990 532,450 0.0
5,500 Pick Szeged Reszvenytarsasag
(Ordinary) (e) 269,061 309,164 0.0
-------------- -------------- ------
897,051 841,614 0.0
Telecommunications 4,000 Magyar Tarkozlesi Reszvenytarsasag
(Ordinary) 851,768 590,406 0.0
Total Investments in Hungary 1,748,819 1,432,020 0.0
Ireland Banking 1,239,000 Allied Irish Banks PLC (Ordinary) 5,154,888 5,829,086 0.5
Building & 1,475,300 CRH PLC (Ordinary) 8,238,429 9,382,046 0.8
Construction
Closed-End Funds 2,990,000 First Ireland Investment Co. 4,453,231 5,269,417 0.4
Forest Products 690,000 Jefferson Smurfit Group PLC
(Ordinary) 4,051,433 3,940,242 0.3
Total Investments in Ireland 21,897,981 24,420,791 2.0
Italy Building & 671,350 Fochi Filippo S.p.A. (e) 2,130,531 372,653 0.0
Construction
<PAGE>
Diversified 3,863,400 Compagnie Industrial Riunite S.p.A.
(CIR) (e) 3,769,097 3,165,907 0.3
Telecommunications 2,458,000 STET, Di Risp (Non-Convertible) 5,629,782 5,656,108 0.5
Total Investments in Italy 11,529,410 9,194,668 0.8
Netherlands Banking 90,100 ABN Amro Bank (Ordinary) 3,018,860 3,413,354 0.3
Chemicals 45,500 Akzo N.V. (Ordinary) 4,781,143 5,548,780 0.4
71,125 European Vinyls Corporation
International N.V. 3,038,939 3,226,196 0.3
-------------- -------------- ------
7,820,082 8,774,976 0.7
Electrical Equipment 306,000 Philips Industries Inc. 9,064,562 12,212,860 1.0
Insurance 73,500 AEGON N.V. (Ordinary) 3,764,707 5,941,463 0.5
120,000 Amev N.V. (Ordinary) 4,786,225 6,545,455 0.5
105,500 Internationale Nederlanden Groep N.V. 4,342,817 5,727,811 0.5
-------------- -------------- ------
12,893,749 18,214,729 1.5
Paper & Forest 125,677 Koninklijke KNP (Warrants) (b) (e) 433,839 360,669 0.0
Products
Transportation 183,100 KLM Royal Dutch Airlines (e) 4,035,344 5,741,812 0.5
Total Investments in the Netherlands 37,266,436 48,718,400 4.0
Norway Oil & Gas Producers 81,000 Saga Petroleum A.S. (Class A) 957,551 1,163,514 0.1
340,000 Saga Petroleum A.S. (Class B) 3,749,345 4,612,561 0.4
Total Investments in Norway 4,706,896 5,776,075 0.5
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US Dollars)
<CAPTION>
WESTERN
EUROPE Shares Held/ Value Percent of
(concluded) Industries Face Amount Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Portugal Banking 89,000 Banco Comercial Portugues S.A.
(ADR) (a) $ 1,289,946 $ 1,179,250 0.1%
241,700 Banco Comercial Portugues S.A.
(Registered) 3,561,811 3,205,096 0.3
-------------- -------------- ------
4,851,757 4,384,346 0.4
<PAGE>
Building & 29,470 Sociedade de Construsoes Soares
Construction da Costa S.A. 231,771 584,599 0.0
Retail 171,600 Sonae Investimentos--SGPS S.A. 3,559,893 4,198,748 0.3
Total Investments in Portugal 8,643,421 9,167,693 0.7
Spain Banking 24,500 Banco Popular Espanol (Ordinary) 2,677,926 3,677,204 0.3
Oil--Related 243,750 Repsol S.A. (Ordinary) 7,094,222 7,895,060 0.6
Total Investments in Spain 9,772,148 11,572,264 0.9
Sweden Appliances 102,705 Electrolux AB 4,981,607 4,748,053 0.4
Automobiles & 370,000 Volvo AB 6,780,616 6,509,021 0.5
Equipment
Banking 224,475 Stadshypotek AB 3,310,941 3,336,712 0.3
Building Related 144,000 Svedala Industry (f) 2,795,410 3,966,780 0.3
Engineering 7,560 Celsius Industrier AB 110,459 110,829 0.0
183,850 SKF AB 3,438,484 3,597,823 0.3
95,800 SKF AB 'B' Free 1,859,982 1,868,210 0.1
-------------- -------------- ------
5,408,925 5,576,862 0.4
Forest Products 72,800 Mo Och Domsjo AB 3,647,878 3,847,045 0.3
36,900 Stora Kopparbergs AB 2,328,112 2,314,773 0.2
-------------- -------------- ------
5,975,990 6,161,818 0.5
Metals & Mining 149,100 Avesta Sheffield AB 1,303,285 1,453,811 0.1
Total Investments in Sweden 30,556,774 31,753,057 2.5
Switzerland Chemicals 8,400 Ciba-Geigy AG (Registered) 4,520,209 5,967,568 0.5
Electrical Equipment 6,050 BBC Brown Boveri & Cie 5,016,227 6,182,368 0.5
Food & Beverage 270 Nestle AG 259,832 272,896 0.0
Pharmaceuticals 985 Roche Holding Genusschein AG 4,999,066 6,072,265 0.5
Total Investments in Switzerland 14,795,334 18,495,097 1.5
<PAGE>
Turkey Beverages 121,312 Erciyas Biracilik Ve Malt Sanayii
A.S. (e) 119,860 186,200 0.0
Building Materials 984,640 Alarko Holdings A.S. 1,134,759 755,654 0.1
657,152 Cimentas Izmir Cimento Fabrikasi
T.A.S. 465,286 489,043 0.0
-------------- -------------- ------
1,600,045 1,244,697 0.1
Food & Household 53,856 Dardanel Onentas Gida A.S. (e) 103,984 75,148 0.0
Products
Insurance 4,749,000 Aksigorta A.S. 1,187,250 1,049,198 0.1
Retail Stores 699,312 Migros Turk A.S. 1,579,218 2,358,145 0.2
Steel 23,199,190 Izmir Demir Celik Sanayii A.S. 840,971 984,617 0.1
Total Investments in Turkey 5,431,328 5,898,005 0.5
United Aerospace 1,776,888 Rolls Royce PLC (Ordinary) 4,880,458 5,303,790 0.4
Kingdom
Automobile Parts 754,700 T & N PLC 1,956,674 2,019,030 0.2
Banking & Financial 935,700 Standard Chartered PLC (Ordinary) 4,406,200 5,221,922 0.4
Services
Beverages 1,762,600 Grand Metropolitan PLC (Ordinary) 11,332,223 11,081,981 0.9
Broadcast--Media 858,400 British Sky Broadcasting Group
PLC (e) 3,581,733 3,638,894 0.3
Building Materials 700,000 BAT Industries PLC 5,382,771 5,462,482 0.4
970,450 Tarmac PLC (Ordinary) 2,614,730 1,864,348 0.1
-------------- -------------- ------
7,997,501 7,326,830 0.5
Conglomerates 1,135,500 Hanson PLC (Ordinary) 4,383,962 4,313,279 0.3
Consumer--Goods 574,500 Vendome Luxury Group (Units) (c) 4,337,621 4,629,078 0.4
Electrical Equipment 495,900 The BICC Group PLC 2,642,947 2,633,654 0.2
1,813,800 General Electric Co., Ltd. PLC
(Ordinary) 8,780,326 9,215,265 0.7
-------------- -------------- ------
11,423,273 11,848,919 0.9
<PAGE>
Food & Beverage 328,000 Tate & Lyle PLC (Ordinary) 2,080,911 2,348,653 0.2
Food Manufacturing 304,100 Unilever Capital Corp. 4,935,583 5,902,469 0.5
Foreign Pound 16,700,000 UK Treasury Gilt, 8.75% due 9/01/1997 27,598,324 27,252,040 2.2
Goverment Sterling
Obligations
Industrial--Other 1,797,600 Tomkins PLC 6,247,638 6,949,611 0.6
Insurance 1,024,200 Prudential Corp. PLC 4,936,971 5,545,077 0.4
Leisure & 1,036,800 Forte PLC 3,823,352 3,802,554 0.3
Entertainment 539,450 The Rank Organisation PLC (Ordinary) 3,367,445 3,755,686 0.3
-------------- -------------- ------
7,190,797 7,558,240 0.6
Metals & Mining 382,500 The RTZ Corp. PLC 4,706,085 4,879,617 0.4
Oil--Related 734,000 The Shell Transport & Trading Co. PLC 8,166,327 8,996,670 0.7
Services 2,579,300 BET PLC 4,556,484 5,323,701 0.4
Telecommunications 950,800 Racal Electronics PLC 3,217,515 4,068,332 0.3
Utilities 1,322,400 British Telecommunications PLC
(Ordinary) 8,165,110 8,282,821 0.7
Total Investments in the
United Kingdom 136,101,390 142,490,954 11.3
Total Investments in Western Europe 368,003,705 404,822,729 32.4
SHORT-TERM Face
SECURITIES Amount Issue
Commercial US$ 32,152,000 General Electric Capital Corp.,
Paper* 6.13% due 6/01/1995 32,152,000 32,152,000 2.6
Total Investments in Commercial Paper 32,152,000 32,152,000 2.6
<PAGE>
Commercial Finance One Co., Ltd.:
Paper--Foreign* ThB 18,000,000 12.76% due 7/18/1995 715,332 715,768 0.1
120,000,000 12.66% due 8/09/1995 4,732,487 4,732,874 0.4
Siam City Bank Ltd.:
100,000,000 13% due 8/10/1995 4,045,984 4,058,776 0.3
30,000,000 11.92% due 8/16/1995 1,182,045 1,182,002 0.1
50,000,000 Thai Military Bank, Ltd.,
11.90% due 8/22/1995 1,966,222 1,965,951 0.2
Total Investments in
Commercial Paper--Foreign 12,642,070 12,655,371 1.1
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US Dollars)
<CAPTION>
SHORT-TERM
SECURITIES Face Value Percent of
(concluded) Amount Issue Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Foreign Government C$ 16,600,000 Canadian Treasury Bill,
Obligations* 7.14% due 6/15/1995 $ 12,017,394 $ 12,085,295 1.0%
NZ$52,000,000 New Zealand Treasury Bill,
7.54% due 6/21/1995 32,965,906 34,377,549 2.7
Total Investments in
Foreign Government Obligations 44,983,300 46,462,844 3.7
US Government & United States Treasury Bills (h):
Agency Obligations* US$ 240,000 5.25% due 7/27/1995 238,040 237,894 0.0
400,000 5.59% due 7/27/1995 396,522 396,491 0.0
11,500,000 5.60% due 7/27/1995 11,399,822 11,399,111 0.9
5,000,000 5.625% due 7/27/1995 4,956,250 4,956,135 0.4
600,000 5.66% due 7/27/1995 594,717 594,736 0.0
300,000 5.68% due 7/27/1995 297,349 297,368 0.0
6,000,000 5.69% due 7/27/1995 5,946,893 5,947,362 0.5
Total Investments in
US Government & Agency Obligations 23,829,593 23,829,097 1.8
Total Investments in
Short-Term Securities 113,606,963 115,099,312 9.2
OPTIONS Number of Contracts/ Premiums
PURCHASED Face Amount Paid
Call Options 339,631 Topix 2nd Section++, expiring
Purchased July 1995 at YEN 2512.93 917,849 0 0.0
344,060 Topix 2nd Section++, expiring
August 1995 at YEN 2453.64 1,016,983 2 0.0
300,436 Topix 2nd Section++, expiring
September 1995 at YEN 2311.31 700,000 66 0.0
-------------- -------------- ------
2,634,832 68 0.0
<PAGE>
Currency Put 25,000,000 German Deutschemark, expiring
Options Purchased August 1995 at DM 1.45 365,000 377,500 0.0
10,000,000 Japanese Yen, expiring June 1995
at YEN 100 302,000 0 0.0
65,000,000 Japanese Yen, expiring August 1995
at YEN 99 828,550 19,500 0.0
93,000,000 Japanese Yen, expiring January 1996
at YEN 86.15 2,555,800 1,674,000 0.1
-------------- -------------- ------
4,051,350 2,071,000 0.1
Total Options Purchased 6,686,182 2,071,068 0.1
Total Investments 1,209,980,701 1,233,753,324 98.6
OPTIONS Premiums
WRITTEN Received
Currency Call US$ 25,000,000 German Deutschemark, expiring
Options Written August 1995 at DM 1.282 (265,000) (65,000) 0.0
25,000,000 German Deutschemark, expiring
August 1995 at DM 1.433 (336,250) (927,500) (0.1)
50,000,000 Japanese Yen, expiring August 1995
at YEN 91.29 (632,500) (4,760,000) (0.4)
15,000,000 Japanese Yen, expiring August 1995
at YEN 91.38 (196,050) (1,728,000) (0.1)
43,000,000 Japanese Yen, expiring December 1995
at YEN 87 (685,119) (3,771,100) (0.3)
50,000,000 Japanese Yen, expiring January 1996
at YEN 81.75 (1,661,400) (2,485,000) (0.2)
-------------- -------------- ------
(3,776,319) (13,736,600) (1.1)
Put Options Written 344,060 Topix 2nd Section++, expiring
August 1995 at YEN 2453.64 (714,584) (3,731,682) (0.3)
Currency Put 10,000,000 Japanese Yen, expiring June 1995
Options Written at YEN 108 (110,000) 0 (0.0)
Total Options Written (4,600,903) (17,468,282) (1.4)
<PAGE>
Total Investments, Net of Options Written $1,205,379,798 1,216,285,042 97.2
==============
Variation Margin on Financial Futures Contracts** (2,258,537) (0.2)
Unrealized Depreciation on Forward Foreign Exchange Contracts*** (13,086,342) (1.0)
Other Assets Less Liabilities 49,882,958 4.0
-------------- ------
Net Assets $1,250,823,121 100.0%
============== ======
<FN>
(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.
(d)Global Depositary Receipt (GDR).
(e)Non-income producing security.
(f)Restricted securities as to resale. The value of the Fund's investments in
restricted securities was approximately $25,527,000, representing 2.0% of
net assets.
<CAPTION>
Acquisition Value
Issue Date Cost (Note 1a)
<S> <C> <C> <C>
Benpres Holdings Corp. 10/25/1994 $ 2,772,360 $ 2,295,668
Fomento Economico
Mexicano, S.A. de C.V.
(Femsa) (ADR) 11/18/1993 1,742,736 612,295
Hocheng Group Corp. 10/20/1994-11/04/1994 3,458,835 1,724,535
Mavesa S.A. (ADR) 10/30/1993-1/03/1994 1,004,375 394,625
Nedcor Ltd. 5/23/1995 8,296,650 8,803,668
Repola OY S 8/02/1993 4,412,103 5,466,889
Svedala Industry 8/02/1993 2,795,410 3,966,780
Usinas Siderurgicas de Minas
Gerais-Usiminas S.A. 10/05/1994-12/01/1994 3,226,000 2,262,500
Total $27,708,469 $25,526,960
=========== ===========
(g)The rights may be exercised until June 26, 1995.
(h)Securities held as collateral in connection with open financial futures
contracts.
++All Topix 2nd Section OTCs are with Morgan Stanley & Co. International Ltd.
as counterparty.
*Commercial Paper, certain Foreign Government and 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 Fund.
**Financial futures contracts purchased as of May 31, 1995 were as follows:
<PAGE>
<CAPTION>
Number of Expiration Value
Contracts Issue Exchange Date (Notes 1a & 1c)
<C> <S> <S> <S> <C>
263 Nikkei 225 CME June 1995 $ 20,467,975
757 Nikkei 225 SIMEX June 1995 69,208,870
252 Nikkei 225 SIMEX Sept. 1995 23,106,210
Total Financial Futures Contracts Purchased
(Total Contract Price--$114,529,371) $112,783,055
============
Financial futures contracts sold as of May 31, 1995 were as follows:
<CAPTION>
Number of Expiration Value
Contracts Issue Exchange Date (Notes 1a & 1c)
<C> <S> <S> <S> <C>
142 FTSE 100 LIFFE June 1995 $ 18,740,814
Total Financial Futures Contracts Sold
(Total Contract Price--$18,643,250) $ 18,740,814
============
***Forward foreign exchange contracts as of May 31, 1995 were as follows:
<CAPTION>
Foreign Currency Expiration Unrealized Appreciation
Purchased Date (Depreciation) (Note 1c)
<S> <S> <C>
Bf 35,688,660 September 1995 $ 2,738
C$ 8,607,000 July 1995 (52,144)
Chf 11,163,000 July 1995 (231,507)
DM 30,090,000 July 1995 13,207
Pound 2,386,025 September 1995 (64,437)
Sterling
Nlg 42,109,295 July 1995 (193,789)
YEN 20,371,953,500 June 1995 888,353
Total (US$ Commitment--$309,606,293) $ 362,421
============
<PAGE>
<CAPTION>
Foreign Currency Sold
<S> <S> <C>
Bf 112,000,000 September 1995 $ (33,115)
Chf 11,163,000 July 1995 385,203
DM 30,090,000 July 1995 (1,374,944)
Frf 49,565,100 July 1995 (175,707)
Pound 772,867 September 1995 8,429
Sterling
Nlg 59,965,404 July 1995 (1,477,572)
NZ$ 9,500,000 July 1995 41,012
YEN 20,371,953,500 June 1995 (9,461,435)
YEN 2,284,465,275 July 1995 (19,508)
YEN 816,270,000 August 1995 (1,341,126)
Total (US$ Commitment--$354,837,412) $(13,448,763)
------------
Total Unrealized Depreciation--Net on
Forward Foreign Exchange Contracts $(13,086,342)
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of May 31, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$1,203,294,519) (Note 1a) $1,231,682,256
Put options purchased, at value (cost--$6,686,182) (Notes 1a & 1c) 2,071,068
Foreign cash (Note 1b) 32,523,515
Cash 881,643
Receivables:
Securities sold $31,332,462
Dividends 5,160,213
Capital shares sold 3,885,521
Interest 1,436,327 41,814,523
-----------
Deferred organization expenses (Note 1f) 31,466
Prepaid registration fees and other assets (Note 1f) 92,310
--------------
Total assets 1,309,096,781
--------------
Liabilities: Unrealized depreciation on forward foreign exchange contracts (Note 1c) 13,086,342
Variation margin on stock index futures contracts (Note 1c) 2,258,537
Put options written, at value (premiums received--$4,600,903) (Notes 1a & 1c) 17,468,282
Payables:
Securities purchased 15,089,225
Forward foreign exchange contracts (Note 1c) 4,042,000
Capital shares redeemed 3,742,112
Distributor (Note 2) 947,569
Investment adviser (Note 2) 854,575 24,675,481
-----------
Accrued expenses 785,018
--------------
Total liabilities 58,273,660
--------------
<PAGE>
Net Assets: Net assets $1,250,823,121
==============
Net Assets Class A Shares of beneficial interest, $0.10 par value, unlimited number
Consist of: of shares authorized $ 726,731
Class B Shares of beneficial interest, $0.10 par value, unlimited number
of shares authorized 9,438,920
Class C Shares of beneficial interest, $0.10 par value, unlimited number
of shares authorized 255,657
Class D Shares of beneficial interest, $0.10 par value, unlimited number
of shares authorized 1,836,991
Paid-in capital in excess of par 1,327,449,843
Accumulated realized capital losses on investments and foreign currency
transactions--net (84,993,401)
Unrealized depreciation on investments and foreign currency transactions--net (3,891,620)
--------------
Net assets $1,250,823,121
==============
Net Asset Class A--Based on net assets of $74,477,854 and 7,267,309 shares of
Value: beneficial interest outstanding $ 10.25
==============
Class B--Based on net assets of $961,940,611 and 94,389,199 shares of
beneficial interest outstanding $ 10.19
==============
Class C--Based on net assets of $25,821,874 and 2,556,578 shares of
beneficial interest outstanding $ 10.10
==============
Class D--Based on net assets of $188,582,782 and 18,369,913 shares of
beneficial interest outstanding $ 10.27
==============
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Year Ended May 31, 1995
<S> <S> <C> <C>
Investment Dividends (net of $2,362,101 foreign withholding tax) $ 17,962,680
Income Interest and discount earned (net of $4,038 foreign withholding tax) 12,011,958
(Notes 1d --------------
& 1e): Total income 29,974,638
--------------
<PAGE>
Expenses: Account maintenance and distribution fees--Class B (Note 2) 9,760,817
Investment advisory fees (Note 2) 9,162,743
Transfer agent fees--Class B (Note 2) 1,642,825
Custodian fees 1,291,399
Account maintenance fees--Class D (Note 2) 514,516
Printing and shareholder reports 394,211
Registration fees (Note 1f) 296,629
Transfer agent fees--Class D (Note 2) 280,859
Accounting services (Note 2) 236,221
Professional fees 108,669
Account maintenance and distribution fees--Class C (Note 2) 94,340
Transfer agent fees--Class A (Note 2) 58,376
Trustees' fees and expenses 39,596
Amortization of organization expenses (Note 1f) 25,430
Transfer agent fees--Class C (Note 2) 22,562
Pricing fees 7,198
Other 224,169
--------------
Total expenses 24,160,560
--------------
Investment income--net 5,814,078
--------------
Realized & Realized loss from:
Unrealized Investments--net $ (31,133,268)
Loss on Foreign currency transactions--net (26,368,930) (57,502,198)
Investments --------------
& Foreign Change in unrealized appreciation/depreciation on:
Currency Investments--net (8,343,081)
Transactions Foreign currency transactions--net (22,484,545) (30,827,626)
- --Net (Notes -------------- --------------
1b, 1c, Net realized and unrealized loss on investments and foreign currency transactions (88,329,824)
1e & 3): --------------
Net Decrease in Net Assets Resulting from Operations $ (82,515,746)
==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the For the Period
Year Ended July 30, 1993++
Increase (Decrease) in Net Assets: May 31, 1995 to May 31, 1994
<S> <S> <C> <C>
Operations: Investment income (loss)--net $ 5,814,078 $ (163,554)
Realized gain (loss) on investments and foreign currency transactions--net (57,502,198) 36,397,551
Change in unrealized appreciation/depreciation on investments and foreign currency
transactions--net (30,827,626) 26,936,006
-------------- --------------
Net increase (decrease) in net assets resulting from operations (82,515,746) 63,170,003
-------------- --------------
Dividends & Investment income--net:
Distributions Class A (599,105) --
to Share- Class B (3,723,247) --
holders Class C (112,393) --
(Note 1g): Class D (2,136,488) --
Realized gain on investments--net:
Class A (2,168,344) --
Class B (50,410,142) --
Class C (457,066) --
Class D (9,932,493) --
-------------- --------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (69,539,278) --
-------------- --------------
Capital Share Net increase in net assets derived from capital share transactions 350,576,453 989,031,689
Transactions -------------- --------------
(Note 4):
Net Assets: Total increase in net assets 198,521,429 1,052,201,692
Beginning of period 1,052,301,692 100,000
-------------- --------------
End of period $1,250,823,121 $1,052,301,692
============== ==============
<FN>
++Commencement of Operations.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Class A Class B
For the For the
Period Period
The following per share data and ratios have been derived October 21, For the July 30,
from information provided in the financial statements. 1994++ to Year Ended 1993++ to
May 31, May 31, May 31,
Increase (Decrease) in Net Asset Value: 1995 1995 1994++++
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.73 $ 11.44 $ 10.00
Operating --------- --------- ---------
Performance: Investment income (loss)--net .26 .02 (.02)
Realized and unrealized gain (loss) on investments and foreign
currency transactions--net (1.05) (.69) 1.46
--------- --------- ---------
Total from investment operations (.79) (.67) 1.44
--------- --------- ---------
Less dividends and distributions:
Investment income--net (.15) (.04) --
Realized gain on investments--net (.54) (.54) --
--------- --------- ---------
Total dividends and distributions (.69) (.58) --
--------- --------- ---------
Net asset value, end of period $ 10.25 $ 10.19 $ 11.44
========= ========= =========
Total Based on net asset value per share (6.78%)+++ (5.91%) 14.40%+++
Investment ========= ========= =========
Return:**
Ratios to Expenses, excluding account maintenance and distribution fees 1.23%* 1.13% 1.07%*
Average ========= ========= =========
Net Assets: Expenses 1.23%* 2.13% 2.07%*
========= ========= =========
Investment income--net 4.64%* .23% (.19)%*
========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 74,478 $ 961,941 $ 844,295
Data: ========= ========= =========
Portfolio turnover 63.95% 63.95% 50.63%
========= ========= =========
<PAGE>
<CAPTION>
Class C Class D
For the For the
Period Period
The following per share data and ratios have been derived October 21, For the July 30,
from information provided in the financial statements. 1994++ to Year Ended 1993++ to
May 31, May 31, May 31,
Increase (Decrease) in Net Asset Value: 1995 1995 1994++++
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.62 $ 11.51 $ 10.00
Operating --------- --------- ---------
Performance: Investment income--net .24 .10 .04
Realized and unrealized gain (loss) on investments and foreign
currency transactions--net (1.09) (.68) 1.47
--------- --------- ---------
Total from investment operations (.85) (.58) 1.51
--------- --------- ---------
Less dividends and distributions:
Investment income--net (.13) (.12) --
Realized gain on investments--net (.54) (.54) --
--------- --------- ---------
Total dividends and distributions (.67) (.66) --
--------- --------- ---------
Net asset value, end of period $ 10.10 $ 10.27 $ 11.51
========= ========= =========
Total Based on net asset value per share (7.36%)+++ (5.11%) 15.10%+++
Investment ========= ========= =========
Return:**
Ratios to Expenses, excluding account maintenance and distribution fees 1.30%* 1.09% 1.06%*
Average ========= ========= =========
Net Assets: Expenses 2.30%* 1.34% 1.31%*
========= ========= =========
Investment income--net 4.26%* .85% .55%*
========= ========= =========
<PAGE>
Supplemental Net assets, end of period (in thousands) $ 25,822 $ 188,583 $208,007
Data: ========= ========= =========
Portfolio turnover 63.95% 63.95% 50.63%
========= ========= =========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
+++Aggregate total investment return.
++Commencement of Operations.
++++Based on average shares outstanding during the period.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch International Equity Fund (the "Fund") is registered
under the Investment Company Act of 1940 as a diversified, open-
end management investment company. The Fund offers four classes
of shares under the Merrill Lynch Select Pricing SM System. Shares of
Class A and Class D are sold with a front-end sales charge. Shares
of Class B and Class C may be subject to a contingent deferred
sales charge. All classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions,
except that Class B, Class C and Class D Shares bear certain
expenses related to the account maintenance of such shares, and
Class B and Class C Shares also bear certain expenses related to the
distribution of such shares. Each class has exclusive voting rights
with respect to matters relating to its account maintenance and
distribution expenditures. The following is a summary of significant
accounting policies followed by the Fund.
(a) Valuation of investments--Portfolio securities which are traded
on stock exchanges are valued at the last sale price on the exchange on
which such securities are traded, as of the close of business on the
day the securities are being valued or, lacking any sales, at the last
available bid price. Securities traded in the over-the-counter market
are valued at the last available bid price prior to the time of valuation.
In cases where securities are traded on more than one exchange,
the securities are valued on the exchange designated by or under
the authority of the Board of Directors as the primary market.
Securities which are traded both in the over-the-counter market and
on a stock exchange are valued according to the broadest and most
representative market. Options written are valued at the last sale
price in the case of exchange-traded options or, in the case of options
traded in the over-the-counter market, the last asked price. Options
purchased are valued at the last sale price in the case of exchange-
traded options or, in the case of options traded in the over-the-
counter market, the last bid price. Short-term securities are valued
at amortized cost, which approximates market value. Other invest-
ments, including futures contracts and related options, are stated
at market value. Securities and assets for which market quotations
are not available are valued at fair value as determined in good
faith by or under the direction of the Fund's Board of Trustees.
<PAGE>
(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 cur-
rency transactions are the result of settling (realized) or valuing
(unrealized) receivables or payables expressed in foreign currencies
into US dollars. Realized and unrealized gains or losses from invest-
ments include the effects of foreign exchange rates on investments.
(c) Derivative financial instruments--The Fund may engage in vari-
ous portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the equity, debt, and cur-
rency markets. Losses may arise due to changes in the value of the
contract or if the counterparty does not perform under the contract.
* Financial futures contracts--The Fund may purchase or sell
stock index futures contracts and options on such futures contracts
for the purpose of hedging the market risk on existing securities
or the intended purchase of securities. Futures contracts are
contracts for delayed delivery of securities at a specific future date
and at a specific price or yield. Upon entering into a contract, the
Fund deposits and maintains as collateral such initial margin as
required by the exchange on which the transaction is effected.
Pursuant to the contract, the Fund agrees to receive from or pay to
the broker an amount of cash equal to the daily fluctuation in value
of the contract. Such receipts or payments are known as variation
margin and are recorded by the Fund as unrealized gains or losses.
When the contract is closed, the Fund records a realized gain or loss
equal to the difference between the value of the contract at the time
it was opened and the value at the time it was closed.
* Foreign currency options and futures--The Fund may also
purchase or sell listed or over-the-counter foreign currency options,
foreign currency futures and related options on foreign currency
futures as a short or long hedge against possible variations in foreign
exchange rates. Such transactions may be effected with respect to
hedges on non-US dollar-denominated securities owned by the Fund,
sold by the Fund but not yet delivered, or committed or anticipated
to be purchased by the Fund.
<PAGE>
* Forward foreign exchange contracts--The Fund 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 Fund's records. However, the effect on opera-
tions is recorded from the date the Fund enters into such contracts.
Premium or discount is amortized over the life of the contracts.
* Options--The Fund is authorized to write and purchase put and
call options. When the Fund writes an option, an amount equal to
the premium received by the Fund is reflected as an asset and an
equivalent liability. The amount of the liability is subsequently
marked to market to reflect the current market value of the option
written. When a security is purchased or sold through an exercise
of an option, the related premium paid (or received) is added to
(or deducted from) the basis of the security acquired or deducted
from (or added to) the proceeds of the security sold. When an option
expires (or the Fund enters into a closing transaction), the Fund
realizes a gain or loss on the option to the extent of the premiums
received or paid (or gain or loss to the extent the cost of the closing
transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(d) Income taxes--It is the Fund's policy to comply with the require-
ments of the Internal Revenue Code applicable to regulated invest-
ment 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 transac-
tions 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 divi-
dends from foreign securities are recorded as soon as the Fund is
informed of the ex-dividend date. Interest income (including amorti-
zation of discount) is recognized on the accrual basis. Realized gains
and losses on security transactions are determined on the identified
cost basis.
(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. Prepaid registration fees
are charged to expense as the related shares are issued.
(g) Dividends and distributions--Dividends and distributions paid
by the Fund are recorded on the ex-dividend dates.
<PAGE>
(h) Reclassification--Generally accepted accounting principles
require that certain differences between accumulated net invest-
ment loss for financial reporting and tax purposes, if permanent, be
reclassified to accumulated net realized capital losses. Accordingly,
current year's permanent book/tax differences of $757,155 have
been reclassified from accumulated net investment loss to accumu-
lated net realized capital losses. These reclassifications have no
effect on net assets or net asset values per share.
2. Investment Advisory Agreement and Transactions
with Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Merrill Lynch Asset Management, L.P. ("MLAM"). The general partner
of MLAM is Princeton Services, Inc. ("PSI"), an indirect wholly-
owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which
is the limited partner. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds Distrib-
utor, Inc. ("MLFD" or "Distributor"), a wholly-owned subsidiary
of Merrill Lynch Group, Inc.
MLAM is responsible for the management of the Fund's portfolio
and provides the necessary personnel, facilities, equipment and
certain other services necessary to the operations of the Fund. For
such services, the Fund pays a monthly fee of 0.75%, on an annual
basis, of the average daily value of the Fund's net assets. MLAM has
entered into a Sub-Advisory Agreement with Merrill Lynch Asset
Management U.K., Ltd. ("MLAM U.K."), an affiliate of MLAM, pursu-
ant to which MLAM pays MLAM U.K. a fee in an amount to be
determined from time to time by the Investment Adviser and MLAM
U.K. but in no event in excess of the amount that the Investment
Adviser actually receives. For the year ended May 31, 1995, MLAM
paid MLAM U.K. a fee of $1,278,923 pursuant to such Agreement.
Certain of the states in which the shares of the Fund are qualified
for sale impose limitations on the expenses of the Fund. The most
restrictive annual expense limitation requires that the Investment
Adviser reimburse the Fund to the extent the Fund's expenses
(excluding interest, taxes, distribution fees, brokerage fees and
commissions, and extraordinary items) exceed 2.5% of the Fund's
first $30 million of average daily net assets, 2.0% of the next $70 mil-
lion of average daily net assets, and 1.5% of the average daily net
assets in excess thereof. MLAM's obligation to reimburse the Fund
is limited to the amount of the management fee. No fee payment will
be made to MLAM during any fiscal year which will cause such
expenses to exceed the most restrictive expense limitation at the
time of such payment.
Pursuant to the distribution plans (the "Distribution Plans") adopted
by the Fund in accordance with Rule 12b-1 under the Investment
Company Act of 1940, the Fund pays the Distributor ongoing account
maintenance and distribution fees. The fees are accrued daily and
paid monthly at annual rates based upon the average daily net assets
of the shares as follows:
<PAGE>
Account Maintenance Fee Distribution Fee
Class B 0.25% 0.75%
Class C 0.25% 0.75%
Class D 0.25% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services
to Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing share-
holder and distribution-related services to Class B and Class C
shareholders.
For the year ended May 31, 1995, MLFD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of the
Fund's Class A and Class D Shares as follows:
MLFD MLPF&S
Class A $ 314 $ 5,403
Class D $67,957 $990,639
NOTES TO FINANCIAL STATEMENTS (concluded)
For the year ended May 31, 1995, MLPF&S received contingent
deferred sales charges of $2,159,588 and $3,862 relating to trans-
actions in Class B and Class C Shares, respectively.
In addition, MLPF&S received $139,691 in commissions on the
execution of portfolio security transactions for the Fund for the year
ended May 31, 1995.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of MLAM, PSI, MLPF&S, MLFDS, MLFD, and/or ML & Co.
<PAGE>
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended May 31, 1995 were $991,372,468 and $732,513,588,
respectively.
Net realized and unrealized gains (losses) as of May 31, 1995 were
as follows:
Realized Unrealized
Gains (Losses Gains (Losses)
Investments:
Long-term $(14,874,958) $ 26,895,388
Short-term 1,646,026 1,492,349
Stock index futures contracts (18,019,266) (1,843,880)
Options written 1,758,276 (3,017,098)
Options purchased (1,643,346) (2,634,764)
------------ ------------
Total Investments (31,133,268) 20,891,995
Currency transactions:
Options written 1,273,178 (9,850,281)
Options purchased (6,450,782) (1,980,350)
Forward foreign exchange contracts (26,447,274) (13,086,342)
Foreign currency transactions 5,255,948 133,358
------------ ------------
Total currency transactions (26,368,930) (24,783,615)
------------ ------------
Total $(57,502,198) $ (3,891,620)
============ ============
Transactions in call options written for the year ended May 31, 1995
were as follows:
Par Value
Covered by Premiums
Written Options Received
Outstanding call options written
at beginning of period $ 23,669,039 $ 826,781
Options written 314,612,462 6,923,527
Options exercised (647,000) (855,456)
Options closed (64,610,040) (563,524)
Options expired (65,024,461) (2,555,009)
------------ ------------
Outstanding call options written
at end of period $208,000,000 $ 3,776,319
============ ============
<PAGE>
Transactions in put options written for the year ended May 31,
1995 were as follows:
Par Value
Covered by Premiums
Written Options Received
Outstanding put options written
at beginning of period $ 194,819 $ 205,795
Options written 53,350,880 1,322,685
Options closed (194,819) (205,794)
Options expired (43,006,820) (498,102)
------------ ------------
Outstanding put options written
at end of period $ 10,344,060 $ 824,584
============ ============
As of May 31, 1995, net unrealized appreciation for Federal income
tax purposes aggregated $21,310,918, of which $83,394,134 related
to appreciated securities and $62,083,216 related to depreciated
securities. At May 31, 1995, the aggregate cost of investments, for
Federal income tax purposes was $1,206,639,724.
4. Beneficial Interest Transactions:
Net increase in net assets derived from beneficial interest trans-
actions was $350,576,453 and $989,031,689 for the years ended
May 31, 1995 and May 31, 1994, respectively.
Transactions in shares of beneficial interest for each class were
as follows:
Class A Shares for the Period Dollar
October 21, 1994++ to May 31, 1995 Shares Amount
Shares sold 8,250,116 $ 90,125,806
Shares issued to shareholders in
reinvestment of dividends and
distributions 214,636 2,215,037
------------ ------------
Total issued 8,464,752 92,340,843
Shares redeemed (1,197,443) (12,452,266)
------------ ------------
Net increase 7,267,309 $ 79,888,577
============ ============
[FN]
++Commencement of Operations.
<PAGE>
Class B Shares for the Year Dollar
Ended May 31, 1995 Shares Amount
Shares sold 39,671,147 $441,827,803
Shares issued to shareholders in
reinvestment of dividends and
distributions 4,695,329 48,408,841
------------ ------------
Total issued 44,366,476 490,236,644
Shares redeemed (23,278,562) (245,072,223)
Automatic conversion of shares (497,771) (5,021,412)
------------ ------------
Net increase 20,590,143 $240,143,009
============ ============
Class B Shares for the Period Dollar
July 30, 1993++ to May 31, 1994 Shares Amount
Shares sold 78,960,422 $853,108,016
Shares redeemed (5,166,366) (57,440,434)
------------ ------------
Net increase 73,794,056 $795,667,582
============ ============
[FN]
++Prior to July 30, 1993 (commencement of operations), the Fund issued 5,000
shares to MLAM for $50,000.
Class C Shares for the Period Dollar
October 21, 1994++ to May 31, 1995 Shares Amount
Shares sold 2,764,893 $ 28,810,393
Shares issued to shareholders in
reinvestment of dividends and
distributions 49,952 510,509
------------ ------------
Total issued 2,814,845 29,320,902
Shares redeemed (258,267) (2,631,066)
------------ ------------
Net increase 2,556,578 $ 26,689,836
============ ============
[FN]
++Commencement of Operations.
<PAGE>
Class D Shares for the Year Dollar
Ended May 31, 1995 Shares Amount
Shares sold 8,565,081 $ 95,498,843
Automatic conversion of shares 494,928 5,021,412
Shares issued to shareholders in
reinvestment of dividends and
distributions 979,800 10,140,928
------------ ------------
Total issued 10,039,809 110,661,183
Shares redeemed (9,738,345) (106,806,152)
------------ ------------
Net increase 301,464 $ 3,855,031
============ ============
Class D Shares for the Period Dollar
July 30, 1993++ to May 31, 1994 Shares Amount
Shares sold 22,000,407 $236,735,011
Shares redeemed (3,936,958) (43,370,904)
------------ ------------
Net increase 18,063,449 $193,364,107
============ ============
[FN]
++Prior to July 30, 1993 (commencement of operations), the Fund issued 5,000
shares to MLAM for $50,000.
As a result of the Merrill Lynch Select Pricing SM System, Class A
Shares of the Fund outstanding prior to October 21, 1994 have been
redesignated to Class D Shares. There were 20,292,011 shares
redesignated to $219,466,427.
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
Merrill Lynch International Equity Fund:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of Merrill Lynch
International Equity Fund as of May 31, 1995, the related state-
ments of operations for the year then ended and changes in net assets
and the financial highlights for the year then ended and for the
period from July 30, 1993 (commencement of operations) to May 31,
1994. These financial statements and the financial highlights are
the responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and the
financial highlights based on our audits.
<PAGE>
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and per-
form the audit to obtain reasonable assurance about whether the
financial statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evi-
dence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities
owned at May 31, 1995, by correspondence with the custodian and
brokers, or other alternate procedures. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch International Equity Fund as of May 31, 1995, the
results of its operations, the changes in its net assets, and the
financial highlights for the periods presented in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
July 18, 1995
</AUDIT-REPORT>
PORTFOLIO CHANGES (unaudited)
For the Quarter Ended May 31, 1995
<PAGE>
Additions
Ashok Leyland Ltd. (GDR)
BAT Industries PLC
The BICC Group PLC
British Sky Broadcasting Group PLC
Celsius Industrier AB
Compagnie de Saint-Gobain S.A.
Compania de Telefonos de Chile S.A.,
4.50% due 1/15/2003 (Convertible)
Hanson PLC (Ordinary)
JCT Ltd. (GDR)
Jefferson Smurfit Group PLC (Ordinary)
Kinden Corp.
Mo Och Domsjo AB
Nedcor Ltd.
P.T. Supreme Cable Manufacturing Company
(GDR)
*Pearson PLC
Raymond Woolen Mills Ltd. (GDR)
Reliance Industries Ltd. (ADR)
Republic of Argentina:
5% due 3/31/2023
6.875% due 3/31/2023
Republic of Brazil, 7.25% due 4/15/2024
*Sedgewick Group PLC
Siemens AG
Standard Chartered PLC (Ordinary)
Stora Kopparbergs AG
T & N PLC
Telecomunicacoes Brasileiras S.A.--
Telebras ON (Rights)
Telecomunicacoes Brasileiras S.A.--
Telebras PN (Preferred) (Rights)
Ugine S.A.
V.A. Technologie AG
Volkswagen AG
<PAGE>
Deletions
American Barrick Resources Corp. (ADR)
BTR PLC (Ordinary)
Baloise (Warrants)
Banca Quadrum, S.A. de C.V. (ADR)
Banco de Galicia y Buenos Aires S.A. (ADR)
British Airways PLC
Carter Holt Harvey, Ltd.
Centrais Eletricas Brasileiras S.A.--
Eletrobras 'B' (Preferred)
Commercial Union Assurance Co. PLC
(Ordinary)
Compagnie Financiere de Suez (Ordinary)
Continental AG (Warrants)
Empresa Nacional de Electricidad S.A.
Estabelecimentes Jeronimo Martins &
Filho S.A.
Fomento Economico Mexicano, S.A. de C.V.
(Femsa) (Class B)
Glaverbel S.A. (Ordinary)
Hang Lung Development Co., Ltd. (Warrants)
Hanyang Securities Co.
Hitachi Ltd.
Iberdrola S.A.
Imperial Chemical Industries PLC
(Ordinary)
Imperial Oil Ltd.
New Zealand Government Bonds,
6.50% due 2/15/2000
*Pearson PLC
Republic of Argentina:
4.25% due 3/31/2023
7.125% due 3/31/2023
Republic of Brazil, 6.687% due 4/15/2024
Scottish Power PLC (Ordinary)
*Sedgewick Group PLC
Shimachu Co., Ltd.
SmithKline Beecham Corp. PLC (Class A)
Sociedade de Construsoes Soares da Costa
S.A. (New) (Baby Shares)
South Africa Iron & Steel Industrial
Corp., Ltd. (Rights)
Telefonica Nacional de Espana S.A.
(Ordinary)
Turk Otomobil Fabrikasi A.S. (GDR)
Volkswagen AG (Preferred)
Volkswagen AG (Preferred) (Warrants)
[FN]
*Added and deleted in the same quarter.
<PAGE>
PORTFOLIO INFORMATION (unaudited)
Worldwide
Investments as of
May 31, 1995
Percent of
Ten Largest Equity Holdings Net Assets
Murata Manufacturing Co., Ltd. 2.8%
Canon Inc. 2.5
Ito-Yokado Co., Ltd. 2.2
Toyo Seikan Kaisha, Ltd. 2.1
Mitsubishi Heavy Industries, Ltd. 2.1
Rohm Co., Ltd 2.1
China Light & Power Co., Ltd. 2.1
Hong Kong Telecommunications, Ltd. 1.9
Tokio Marine & Fire Insurance Co., Ltd. 1.6
Sankyo Co., Ltd. 1.5
Percent of
Ten Largest Countries Net Assets
Japan 32.0%
United Kingdom 11.3
Hong Kong 6.9
Australia 4.2
Netherlands 4.0
Canada 3.4
Germany 3.0
Sweden 2.5
South Africa 2.0
Ireland 2.0
<PAGE>
Ten Largest Industries Percent of
(Equity Investments) Net Assets
Electrical Equipment 8.3%
Property & Casuality Insurance 7.5
Banking 5.4
Telecommunications 4.3
Utilities 3.8
Automobiles 3.1
Chemicals 2.9
Pharmaceuticals 2.6
Office Equipment 2.5
Retailing 2.5
Percent of
Asset Mix* Net Assets
Japan 32.0%
Europe (Ex--United Kingdom and Ireland) 19.1
Pacific Basin (Ex--Japan) 14.8
United Kingdom and Ireland 13.3
Other Emerging Markets 10.1
Cash 9.2
[FN]
*Percent of net assets may not equal 100% and excludes
the impact of futures and options.
Financial Futures
Contracts
Percent of
Country Issue Exchange Net Assets
Japan Nikkei 225 CME 1.6%
Japan Nikkei 225 SIMEX 7.4
United Kingdom FTSE 100 LIFFE (1.5)
-----
7.5%
=====
<PAGE>
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
Donald Cecil, Trustee
Edward H. Meyer, Trustee
Charles C. Reilly, Trustee
Richard R. West, Trustee
Edward D. Zinbarg, Trustee
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior
Vice President
Andrew John Bascand, Vice President
Donald C. Burke, Vice President
Adrian Holmes, Vice President
Grace Pineda, Vice President
Stephen I. Silverman, Vice President
Gerald M. Richard, Treasurer
Michael J. Hennewinkel, Secretary
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>
