MERRILL LYNCH
INTERNATIONAL
EQUITY FUND
FUND LOGO
Semi-Annual Report
November 30, 1996
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.
Statements and other information herein are as dated and are subject
to change.
<PAGE>
Merrill Lynch
International
Equity Fund
Box 9011
Princeton, NJ
Printed on post-consumer recycled paper
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 November 30, 1996
Bar Graph Depicting Total Return in US Dollars* of the Fund's Top
Ten Country Positions For the Three-Month Period Ended November 30,
1996
Japan - 2.2%
Brazil + 1.1%
Germany + 7.1%
Malaysia + 8.5%
Italy + 9.6%
Australia +10.5%
United Kingdom +12.8%
France +13.6%
Sweden +15.1%
Hong Kong +19.7%
<PAGE>
Source: Financial Times/S&P--Actuaries Index.
[FN]
*For the three-month period ended November 30, 1996, total
investment return in US dollars for the Financial Times/S&P--
Actuaries World (Ex-US) Index was +5.71%.
DEAR SHAREHOLDER
International equity markets rallied significantly during the three
months ended November 30, 1996. The sharp rise reflected the
combined impact of a weakening in both the yen and the Deutschemark
against the US dollar and a decline in global bond yields. Weaker
currencies and lower interest rates increased investor expectations
of future profits growth. Overall, the total return of the unmanaged
Financial Times/Standard & Poor's--Actuaries World (Ex-US) Index was
+5.7% in US dollar terms, during the November quarter. The total
return for the unmanaged Financial Times/Standard & Poor's--
Actuaries US Index was +16.3%.
For the quarter ended November 30, 1996, total returns for Merrill
Lynch International Equity Fund's Class A, Class B, Class C and
Class D Shares were +3.10%, +2.89%, +2.92% and +3.11%, respectively.
(Results shown do not reflect sales charges, and would be lower if
sales charges were included. Complete performance information,
including average annual total returns, can be found on pages 4--7
of this report to shareholders.) The Fund's underperformance during
the November period reflected our underweighting in European markets
and overweighting in emerging markets. For example, according to the
unmanaged Financial Times/Standard & Poor's--Actuaries Europe (Ex-
UK) Index, the continental European equity total return for the
three months ended November 30, 1996 was +8.6% in US dollar terms.
Over the past three months, the International Finance Corporation's
Investibles Index (an unmanaged broad emerging markets index) rose
by only 0.8%. Our decision to retain an 18%--20% US dollar-bloc
exposure benefited performance, as the US dollar bloc was generally
strong. The Fund's underweighted position in Japanese stocks also
benefited performance, as Japanese equities returned -2.2% during
the November quarter, in US dollar terms.
<PAGE>
Portfolio Matters
The Fund's effective equity exposure rose during the quarter ended
November 30, 1996, as we tactically added to positions in Europe and
Australia, while further reducing exposure in Japan. As of November
30, 1996, the Fund's effective equity position was about 88% of net
assets, similar to three months earlier.
In Europe, we increased exposure in Spain as equities appeared
undervalued, given improving confidence in progress toward forming
the European Monetary Union. Our investments in Spain included
Corporacion Bancaria de Espana S.A. (Argentaria), Telefonica de
Espana, S.A. and Empresa Nacional de Electricidad, S.A. (Endesa). In
Australia, we reduced the Fund's holding in Coca-Cola Amatil, Ltd.,
following that stock's sharp appreciation. At the same time, we
purchased index futures on the Australian All Ordinaries (an index
basket of major Australian stocks). The Fund's exposure to
Australian equities rose from 5.9% to 6.4% during the three months
ended November 30, 1996. In Japan, we eliminated the Fund's exposure
in smaller, less liquid companies such as Chukyo Coca-Cola Bottling
Co. Ltd., Sanyo Coca-Cola Bottling Co. Ltd., and Kinki Coca-Cola
Bottling Co. Ltd. Overall, the Fund's Japanese equity position
declined from about 36.7% of net assets to 33.2% at November 30,
1996.
Economic and Investment
Environment
We believe that global economic activity will remain relatively
robust. The Organization for Economic Cooperation and Development
(OECD) leading indicator of production continued to rise, and
monetary policies generally remain supportive of improving economic
growth. Specifically, in Germany, gross domestic product growth
picked up in the past two quarters, supported by a significant
easing in the Deutschemark and the impact of lower German interest
rates. However, indicators remain mixed. Consumer spending is weak,
reflecting in part a continued rise in unemployment. Throughout
continental Europe, unemployment trends remained a significant
impediment to an improvement in demand conditions.
In contrast, economic activity data and business and consumer
confidence reports in the United Kingdom continued to strengthen,
and now suggest the strong likelihood of above-trend growth being
sustained well into 1997. In response to the further strengthening
of UK demand, and early signs of wage and price inflation, the UK
Chancellor of the Exchequer increased interest rates during the
November period by 0.25% to 6.00%. The rise in interest rates was
associated with a sharp appreciation of the British pound against
both the US dollar and the Deutschemark.
<PAGE>
In the United States and Japan, economic growth appears to have
paused during the August to October period, with the monthly
National Association of Purchasing Managers (NAPM) reports for the
United States and the quarterly Bank of Japan Tankan report showing
activity levels consistent with below-trend growth. However, the
most recent November NAPM report showed a re-acceleration of
confidence and new orders, portending a firmer outlook for the
fourth quarter of 1996 and potentially stronger demand conditions in
early 1997 in the United States.
The outlook for Japanese economic growth remained encouraging
despite low business confidence. Industrial production data now show
a 6.1% gain year-on-year and low inventory levels. Private capital
expenditures appear to have recovered, while export orders and
output continue to rise, especially in the auto sector.
In non-Japan Asia, eight of the ten major countries in the region
experienced further export growth in the latest month and, with
inventory reduction nearing an end, a turning point in Asian
industrial production seems likely.
Against this mixed but improving cyclical demand backdrop, global
interest rates and bond yields declined further. Much of the impetus
for lower interest rates came from three sources. First, the
November quarter was marked by a surge in investor confidence
regarding the prospects for a successful introduction of a common
currency in Europe by 1999. This resulted in interest rate and bond
yield spreads in peripheral countries such as Spain, Italy and
Sweden narrowing sharply against Germany. Second, German interest
rates declined as investors expect the Bundesbank to maintain a
looser monetary policy in the face of continued high unemployment
and the prospect of a significant further tightening in fiscal
policies across Europe. Third, although Japanese economic growth is
improving, the Japanese financial system remains weak, and Japanese
interest rates are likely to remain lower for longer than investors
previously anticipated. As a result, Japanese institutions continue
to diversify their bond holdings by purchasing higher-yielding
foreign securities, and foreigners continue to borrow in yen to fund
long positions in other currencies.
At some stage, the effect of these three factors on the global bond
markets will end. We believe that evidence of stronger economic
activity, such as the overall improvement in the OECD leading
indicators, shortly will encourage investors to become more cautious
as real global yields could approach 3%, in our opinion. Overall,
however, we remain cautious on equity markets.
During the three months ended November 30, 1996, according to the
Institutional Broker Estimate Service, stock market earnings
expectations for 1996 declined in 10 of 12 developed countries, and
also declined for emerging markets in the aggregate. Moreover, a
deterioration in earnings expectations was also reported for 1997 in
9 of 12 developed countries, while emerging markets' earnings
expectations showed a slight improvement. Against the background of
deteriorating stock market earnings growth prospects and our
expectation that global bond yields have fallen below fair value, we
became more cautious about international stock markets. However, we
remain constructive on the outlook for most emerging markets and,
within the developed markets universe, for those markets that offer
attractive medium-term valuations, such as Australia.
<PAGE>
We believe equity markets, such as those in Hong Kong and many
interest rate-sensitive markets in Europe, may experience greater
volatility in 1997. As a result, we are in the process of decreasing
the Fund's exposure to these markets, which generally became
overvalued, and increasing exposure to markets which we believe
offer medium-term value, such as Australia, India, Italy, Korea and
Thailand. We may increase the Fund's exposure to the United Kingdom
should the equity market decline, as investors appear to have
increasingly discounted the likely impact of further increases in
interest rates.
In Conclusion
The outlook for international equity markets is constrained near
term by downgrades to profits expectations and the potential for a
rise in bond yields. Our near-term strategy remains defensive. Since
our cash exposure is currently in US dollars, we have maintained an
overweighted stance in the US dollar. We expect that these cash
reserves will become invested in equities should a correction occur.
Looking ahead to 1997, we believe that the Fund is well-positioned
with its focus on emerging markets and Pacific Basin markets,
combined with a cyclical and value bias in Europe.
We thank you for your continued interest in Merrill Lynch
International Equity Fund, and we look forward to reviewing our
strategy and performance with you in our February 28, 1997 quarterly
shareholder letter.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
<PAGE>
(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
(Stephen Silverman)
Stephen Silverman
Co-Portfolio Manager
Pacific Basin Investments
December 31, 1996
PERFORMANCE DATA
About Fund
Performance
<PAGE>
Investors are 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 approximately 8 years. (There is no initial
sales charge for automatic share conversions.)
* 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).
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. 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.
<TABLE>
Performance
Summary--
Class A Shares***
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $11.73 $10.53 $0.091 $0.599 -4.23%
1995 10.53 11.13 -- -- +5.70
1/1/96--11/30/96 11.13 11.97 -- -- +7.55
------ ------
Total $0.091 Total $0.599
<PAGE>
Cumulative total return as of 11/30/96: +8.86%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do not
include sales charge; results would be lower if sales charge was
included.
***As a result of the implementation of the Merrill Lynch Select
Pricing SM System, Class A Shares of the Fund outstanding prior to
October 21, 1994 were redesignated to Class D Shares.
</TABLE>
<TABLE>
Performance
Summary--
Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
7/30/93--12/31/93 $10.00 $11.18 -- -- +11.80%
1994 11.18 10.52 $0.091 $0.490 - 0.61
1995 10.52 11.00 -- -- + 4.56
1/1/96--11/30/96 11.00 11.73 -- -- + 6.64
------ ------
Total $0.091 Total $0.490
Cumulative total return as of 11/30/96: +23.90%**
<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>
<PAGE>
<TABLE>
Performance
Summary--
Class C Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $11.62 $10.43 $0.091 $0.582 -4.33%
1995 10.43 10.90 -- -- +4.51
1/1/96--11/30/96 10.90 11.62 -- -- +6.61
------ ------
Total $0.091 Total $0.582
Cumulative total return as of 11/30/96: +6.59%**
<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>
PERFORMANCE DATA (concluded)
<TABLE>
Performance
Summary--
Class D Shares***
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
7/30/93--12/31/93 $10.00 $11.21 -- -- +12.10%
1994 11.21 10.56 $0.091 $0.566 + 0.18
1995 10.56 11.13 -- -- + 5.40
1/1/96--11/30/96 11.13 11.95 -- -- + 7.37
------ ------
Total $0.091 Total $0.566
Cumulative total return as of 11/30/96: +27.08%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do not
include sales charge; results would be lower if sales charge was
included.
***As a result of the implementation of the Merrill Lynch Select
Pricing SM System, Class A Shares of the Fund outstanding prior to
October 21, 1994 were redesignated to Class D Shares.
</TABLE>
<PAGE>
<TABLE>
Recent
Performance
Results
<CAPTION>
12 Month 3 Month
11/30/96 8/31/96 11/30/95 % Change % Change
<S> <C> <C> <C> <C> <C>
ML International Equity Fund Class A Shares* $11.97 $11.61 $10.79 +10.94% +3.10%
ML International Equity Fund Class B Shares* 11.73 11.40 10.67 + 9.93 +2.89
ML International Equity Fund Class C Shares* 11.62 11.29 10.58 + 9.83 +2.92
ML International Equity Fund Class D Shares* 11.95 11.59 10.79 +10.75 +3.11
ML International Equity Fund Class A Shares--Total Return* +10.94 +3.10
ML International Equity Fund Class B Shares--Total Return* + 9.93 +2.89
ML International Equity Fund Class C Shares--Total Return* + 9.83 +2.92
ML International Equity Fund Class D Shares--Total Return* +10.75 +3.11
Financial Times/S&P--Actuaries World (Ex-US) Index**--Total Return +12.25 +5.71
<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.
</TABLE>
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 9/30/96 +8.13% +2.45%
Inception (10/21/94) through 9/30/96 +3.88 +1.04
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
<PAGE>
Year Ended 9/30/96 +7.10% +3.10%
Inception (7/30/93) through 9/30/96 +6.68 +6.40
[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 % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 9/30/96 +7.07% +6.07%
Inception (10/21/94) through 9/30/96 +2.83 +2.83
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 9/30/96 +7.85% +2.18%
Inception (7/30/93) through 9/30/96 +7.48 +5.67
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Shares Value Percent of
AFRICA Industries Held Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
South Banking 526,940 Nedcor Ltd. (GDR) (d) (e) $ 5,620,874 $ 7,377,160 0.7%
Africa
Beverages 85,044 South African Breweries Ltd. 2,451,796 2,146,410 0.2
Entertainment 2,100,000 Sun International (South Africa),
Ltd. 2,598,413 1,823,708 0.2
<PAGE>
Mining 54,000 Anglo American Corp. of South
Africa, Ltd. 3,636,072 3,077,508 0.3
65,200 Anglo American Corp. of South
Africa, Ltd. (ADR) (a) 4,274,593 3,683,800 0.3
121,900 Driefontein Consolidated Ltd.
(ADR) (a) 1,836,087 1,386,613 0.1
183,616 Evander Gold Mines Ltd. 1,861,029 1,602,554 0.1
-------------- -------------- ------
11,607,781 9,750,475 0.8
Total Investments in South Africa 22,278,864 21,097,753 1.9
Zimbabwe Beverages 1,431,919 Delta Corporation Ltd. 2,313,200 4,461,222 0.4
Total Investments in Zimbabwe 2,313,200 4,461,222 0.4
Total Investments in Africa 24,592,064 25,558,975 2.3
EUROPE
Czech Broadcast--Media 42,500 ++Central European Media Enterprises
Republic Ltd. (Class A) 1,168,750 1,179,375 0.2
Total Investments in the Czech
Republic 1,168,750 1,179,375 0.2
Finland Diversified 103,600 Outokumpu OY 1,582,507 1,752,011 0.2
Paper & Forest 628,100 ++Enso OY (Class A) 4,574,740 4,875,221 0.4
Products 615,000 ++Metsa Serla OY (Class B) 4,764,160 4,133,513 0.4
268,967 ++UPM-Kymmene Corporation 5,353,596 5,388,320 0.5
-------------- -------------- ------
14,692,496 14,397,054 1.3
Total Investments in Finland 16,275,003 16,149,065 1.5
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
EUROPE Shares Held/ Value Percent of
(continued) Industries Face Amount Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
France Automobiles 26,176 Peugeot S.A. $ 3,858,416 $ 3,215,466 0.3%
Banking 69,200 Compagnie Financiere de Paribas 3,508,929 4,752,096 0.4
94,500 Compagnie Financiere de Suez
(Ordinary) 3,718,127 4,041,243 0.4
28,450 Societe Generale de Surveillance
S.A. (Class A) (Ordinary) 3,018,733 3,108,308 0.3
-------------- -------------- ------
10,245,789 11,901,647 1.1
<PAGE>
Communication 40,200 Alcatel Alsthom Cie Generale
Equipment d'Electricite S.A. 3,848,764 3,652,098 0.3
Engineering & 38,440 Bouygues S.A. 3,774,027 4,273,318 0.4
Construction
Financial Services 15,767 EuraFrance S.A. 4,887,173 7,119,783 0.6
Foods 21,200 Groupe Danone S.A. (ADR) (a) 3,367,962 3,119,377 0.3
Insurance 65,018 Assurances Generales de France
S.A. (AGF) 1,658,287 2,127,332 0.2
Oil & Related 57,240 Elf Aquitaine S.A. 4,196,763 4,995,344 0.5
Semiconductors 49,691 ++SGS-Thomson Microelectronics N.V. 2,335,313 3,284,970 0.3
Steel 234,743 Usinor Sacilor S.A. 3,502,481 3,510,163 0.3
Total Investments in France 41,674,975 47,199,498 4.3
Germany Automobiles 13,157 Volkswagen AG 4,941,088 5,275,636 0.5
Banking 132,000 Commerzbank AG 3,011,276 3,245,268 0.3
17,800 Deutsche Bank AG (Ordinary) 867,216 848,611 0.1
117,000 Deutsche Bank AG (Warrants) (b) 1,003,241 722,927 0.0
-------------- -------------- ------
4,881,733 4,816,806 0.4
Chemicals 21,132 ++Henkel KGaA 907,822 1,030,829 0.1
180,188 ++Henkel KGaA (Preferred) 7,420,019 8,977,171 0.8
-------------- -------------- ------
8,327,841 10,008,000 0.9
Diversified Holdings 14,042 Thyssen AG 2,607,738 2,518,884 0.2
Engineering & 8,315 ++Philipp Holzmann AG 3,181,247 2,017,232 0.2
Construction
Machinery & Equipment 77,450 ++Kloeckner Werke AG 3,951,498 2,820,943 0.3
Metals 4,850 Degussa AG 1,738,447 2,012,553 0.2
Retail 9,695 Karstadt AG 3,783,415 3,370,392 0.3
Total Investments in Germany 33,413,007 32,840,446 3.0
<PAGE>
Greece Banking 33,480 Ergo Bank S.A. (Registered) 1,594,105 1,729,982 0.1
Food & Household 137,292 Hellenic Bottling Co. S.A. 2,763,631 3,961,383 0.4
Products
Total Investments in Greece 4,357,736 5,691,365 0.5
Hungary Telecommunications 26,000 ++Magyar TarKozlesi Reszvenytarsasag
(Ordinary) (e) 4,349,463 5,247,225 0.5
Total Investments in Hungary 4,349,463 5,247,225 0.5
Ireland Insurance 1,217,000 Irish Life PLC 4,006,737 5,625,217 0.5
Packaging & 1,161,675 Jefferson Smurfit Group PLC
Containers (Ordinary) 3,553,498 3,221,696 0.3
Total Investments in Ireland 7,560,235 8,846,913 0.8
Italy Building Products 455,481 Italcementi S.p.A. 2,529,683 2,661,127 0.2
Chemicals 7,115,840 ++Montedison S.p.A. 7,282,447 5,042,400 0.4
Diversified 8,003,400 ++Compagnie Industrial Riunite
S.p.A. (CIR) 7,348,440 4,567,699 0.4
Insurance 302,500 Assicurazioni Generali S.p.A. 6,963,833 6,087,403 0.6
2,439,850 Istituto Nazionale delle Assicurazioni
S.p.A. (INA) 3,456,845 3,396,662 0.3
-------------- -------------- ------
10,420,678 9,484,065 0.9
Oil & Related 972,770 Ente Nazionale Idrocarburi S.p.A. (ENI) 4,034,360 5,121,768 0.5
Telecommunications 2,764,400 STET, Di Risp (Non-Convertible) 6,501,552 8,499,504 0.8
Tire & Lit 4,131,384,400 Pirelli S.p.A., 5% due 12/31/1998 2,910,789 2,976,631 0.3
Rubber
Total Investments in Italy 41,027,949 38,353,194 3.5
<PAGE>
Netherlands Chemicals 27,480 Akzo Nobel N.V. 3,396,503 3,648,592 0.3
122,815 European Vinyls Corporation
International N.V. 4,990,011 3,818,378 0.4
-------------- -------------- ------
8,386,514 7,466,970 0.7
Diversified Holdings 22,700 Internatio-Muller N.V. 501,925 567,500 0.0
Electronics 117,250 Philips Electronics N.V. 4,232,479 4,740,328 0.4
Insurance 214,805 ++Internationale Nederlanden
Groep N.V. 5,650,900 7,525,651 0.7
Packaging & 128,600 Koninklijke KNP BT N.V. 3,005,375 2,931,543 0.3
Containers
Transportation 60,500 KLM Royal Dutch Airlines 1,656,767 1,561,630 0.1
Total Investments in the
Netherlands 23,433,960 24,793,622 2.2
Norway Consumer Goods 80,600 Orkla A.S. (Class A) 4,166,237 5,372,580 0.5
Oil & Gas Producers 169,475 Saga Petroleum A.S. (Class B) 1,876,383 2,494,259 0.2
Total Investments in Norway 6,042,620 7,866,839 0.7
Poland Automobiles & 97,200 ++T.C. Debica S.A. 1,310,106 2,079,691 0.2
Equipment
Engineering & 660,503 Mostostal-Export S.A. 1,679,914 1,563,800 0.1
Construction
Total Investments in Poland 2,990,020 3,643,491 0.3
Portugal Diversified 151,908 Sonae Investimentos--SGPS S.A. 3,599,776 4,548,237 0.4
Total Investments in Portugal 3,599,776 4,548,237 0.4
Russia Natural Gas 68,000 ++RAO Gazprom (ADR) (a) (e) 1,071,000 1,226,550 0.1
Total Investments in Russia 1,071,000 1,226,550 0.1
Spain Banking 70,900 Corporacion Bancaria de Espana
S.A. (Argentaria) 3,029,222 2,764,399 0.3
Engineering & 17,550 Fomento de Construcciones Y
Construction Contratas S.A. 1,453,056 1,483,728 0.1
Telecommunications 155,500 Telefonica de Espana S.A. 3,010,221 3,409,666 0.3
Utilities--Electric 51,300 Empresa Nacional de Electricidad
S.A. (Endesa) 3,020,051 3,465,681 0.3
Total Investments in Spain 10,512,550 11,123,474 1.0
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
EUROPE Shares Value Percent of
(concluded) Industries Held Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Sweden Banking 31,110 Sparbanken Sverige AB (Class A) $ 364,558 $ 514,521 0.0%
Electrical 102,705 Electrolux AB 4,981,607 6,021,667 0.5
Engineering & 107,300 SKF AB 1,967,545 2,230,254 0.2
Construction 140,795 Svedala Industry 1,848,943 2,412,490 0.2
-------------- -------------- ------
3,816,488 4,642,744 0.4
Finance 67,565 Stadshypotek AB 992,472 2,013,410 0.2
Forest Products 145,600 Mo och Domsj AB (Class B) 3,647,878 3,980,869 0.4
2,297,200 Rottneros Bruks AB 3,542,973 2,772,453 0.3
299,400 Stora Kopparbergs AB 3,864,464 4,104,120 0.4
-------------- -------------- ------
11,055,315 10,857,442 1.1
Insurance 128,100 Skandia Forsakrings AB 3,010,385 3,655,092 0.3
Metals & Mining 188,686 Avesta Sheffield AB 1,710,791 1,939,855 0.2
Pharmaceuticals 99,950 Astra AB (Class A) 4,336,591 4,795,336 0.4
Total Investments in Sweden 30,268,207 34,440,067 3.1
Switzerland Banking 44,927 CS Holding AG (Registered Shares) 4,609,487 4,788,095 0.4
Chemicals 7,005 Clariant AG 2,291,190 2,410,508 0.2
Diversified 59,691 ++Oerlikon-Buehrle Holding AG 6,330,109 6,166,710 0.6
Jewelry 11,592 SMH AG (Societe Suisse pour la
Microelectonique et l'Horlogerie) 1,627,957 1,682,839 0.2
Leisure 3,682 Fotolabo S.A. 1,529,233 1,442,369 0.1
Total Investments in Switzerland 16,387,976 16,490,521 1.5
Turkey Beverages 24,833,308 Erciyas Biracilik Ve Malt
Sanayii A.S. 4,082,497 2,911,575 0.3
Metal Fabricating 22,550,000 Eregli Demir Ve Celik Fabrikalari
T.A.S. 2,537,377 3,194,675 0.3
<PAGE>
Retail 4,640,824 Migros Turk A.S. 2,111,166 4,534,269 0.4
Total Investments in Turkey 8,731,040 10,640,519 1.0
United Beverages 546,300 Grand Metropolitan PLC (Ordinary) 3,378,498 4,265,137 0.4
Kingdom
169,650 Matthew Clark PLC 1,745,135 841,186 0.1
-------------- -------------- ------
5,123,633 5,106,323 0.5
Chemicals 430,500 Inspec Group PLC 1,300,917 1,414,607 0.1
24,540 ++Millennium Chemicals Inc. 722,333 506,137 0.0
-------------- -------------- ------
2,023,250 1,920,744 0.1
Computer Services 119,824 Misys PLC 1,480,177 2,005,946 0.2
Diversified 1,717,825 Hanson PLC (Ordinary) 2,991,317 2,309,856 0.2
677,600 Tomkins PLC 2,319,318 2,830,192 0.3
-------------- -------------- ------
5,310,635 5,140,048 0.5
Food & Beverage 335,221 Cadbury Schweppes PLC 2,597,814 2,881,993 0.3
Food Processing 1,998,440 ASDA Group PLC 3,676,944 3,980,389 0.4
249,920 Unilever PLC 4,614,951 5,889,319 0.5
-------------- -------------- ------
8,291,895 9,869,708 0.9
Insurance 487,500 Prudential Corp. PLC 2,379,631 3,994,526 0.4
Pharmaceuticals 202,650 Glaxo Wellcome PLC 2,630,976 3,354,368 0.3
Real Estate 264,400 Land Securities PLC 3,018,596 3,275,254 0.3
Retail 708,000 Tesco PLC (Ordinary) 3,035,925 4,051,972 0.4
Telecommunications 367,847 ++Cable & Wireless PLC 2,494,011 2,943,000 0.3
Tobacco 171,782 ++Imperial Tobacco Group PLC 1,228,013 1,092,848 0.1
Utilities--Water 256,700 Anglian Water PLC 2,217,039 2,513,262 0.2
232,700 Severn Trent PLC 2,211,107 2,557,939 0.2
255,000 Thames Water PLC 2,226,873 2,475,188 0.2
244,500 United Utilities PLC 2,244,875 2,424,638 0.2
230,750 Yorkshire Water PLC 2,206,652 2,650,918 0.2
-------------- -------------- ------
11,106,546 12,621,945 1.0
Total Investments in the United
Kingdom 50,721,102 58,258,675 5.3
Total Investments in Europe 303,585,369 328,539,076 29.9
<PAGE>
LATIN
AMERICA
Argentina Banking 168,569 Banco Frances del Rio de la Plata
S.A. (ADR) (a) 4,078,507 5,099,212 0.5
Oil & Related 790,000 Companhia Naviera Perez Companc
S.A.C.F.I.M.F.A. (Class B) 4,882,504 5,374,311 0.5
Telecommunications 46,700 Telefonica de Argentina S.A. (Class B)
(ADR) (a) 1,137,452 1,190,850 0.1
Total Investments in Argentina 10,098,463 11,664,373 1.1
Brazil Banking 573,750,000 Banco Bradesco S.A. PN (Preferred) 4,430,630 4,166,061 0.4
Beverages 10,344,000 Companhia Cervejaria Brahma S.A. PN
(Preferred) 5,032,202 6,103,851 0.6
Telecommunications 238,000 Telecomunicacoes Brasileiras S.A.--
Telebras (ADR) (a) 10,705,155 18,028,500 1.6
Utilities 103,250 Companhia Energetica de Minas Gerais
S.A. (CEMIG) (ADR) (a) 2,650,313 3,200,750 0.3
Total Investments in Brazil 22,818,300 31,499,162 2.9
Chile Telecommunications 52,825 Compania de Telecomunicaciones de
Chile S.A. (ADR) (a) 3,756,222 5,024,978 0.4
Utilities 80,000 Enersis S.A. (ADR) (a) 2,002,257 2,260,000 0.2
Total Investments in Chile 5,758,479 7,284,978 0.6
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
LATIN AMERICA Shares Value Percent of
(concluded) Industries Held Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Mexico Beverages 116,600 Panamerican Beverages, Inc.
(Class A) $ 5,234,832 $ 5,451,050 0.5%
<PAGE>
Broadcast--Media 78,000 ++Grupo Televisa S.A. de C.V.
(GDR) (d) 2,010,348 2,125,500 0.2
Building & 815,550 Apasco, S.A. de C.V. 'A' 4,523,505 5,403,251 0.5
Construction
Health & Personal 216,000 Kimberly-Clark de Mexico, S.A.
de C.V. (ADR) (a) 7,896,272 8,262,000 0.7
Multi-Industry 1,121,063 Grupo Carso, S.A. de C.V. 'A1' 5,661,341 5,730,288 0.5
Telecommunications 814,063 ++Carso Global Telecom, S.A. de
C.V. 'A1' 2,145,094 1,856,237 0.2
Total Investments in Mexico 27,471,392 28,828,326 2.6
Total Investments in Latin
America 66,146,634 79,276,839 7.2
PACIFIC
BASIN
Australia Food & Beverage 713,315 Coca-Cola Amatil, Ltd. 4,007,170 8,054,311 0.7
Media 458,847 The News Corp., Ltd. (Ordinary) 2,356,360 2,441,199 0.2
260,450 The News Corp., Ltd. (Preferred) 1,148,701 1,144,131 0.1
-------------- -------------- ------
3,505,061 3,585,330 0.3
Merchandising 78,500 Amway Asia Pacific Ltd. 2,536,717 3,149,813 0.3
Property 1,556,541 Lend Lease Corp. 20,004,400 28,870,411 2.6
Resources 191,964 Broken Hill Proprietary Co. 2,423,961 2,814,052 0.3
Total Investments in Australia 32,477,309 46,473,917 4.2
Hong Kong Banking 1,563,290 HSBC Holdings PLC 19,478,842 32,553,798 3.0
132,000 J.C.G. Holdings Ltd. 124,849 125,487 0.0
-------------- -------------- ------
19,603,691 32,679,285 3.0
Conglomerates 2,333,325 Hutchison Whampoa Ltd. 12,386,774 18,032,228 1.6
Diversified 1,571,000 Swire Pacific Ltd. (Class A) 10,709,324 14,884,013 1.4
Foods 2,216,000 C.P. Pokphand Co. Ltd. 773,250 773,873 0.1
20,838,000 ++Tingyi (Cayman Islands)
Holdings Co. 5,493,255 5,309,560 0.5
-------------- -------------- ------
6,266,505 6,083,433 0.6
<PAGE>
Insurance 698,000 National Mutual Asia Ltd. 733,581 636,474 0.1
Property 1,796,000 Cheung Kong (Holdings) Ltd. 12,482,306 15,796,159 1.4
18,166,000 China Overseas Land & Investment 5,085,987 6,931,346 0.6
-------------- -------------- ------
17,568,293 22,727,505 2.0
Total Investments in Hong Kong 67,268,168 95,042,938 8.7
Japan Automobiles 1,719,000 Suzuki Motor Corp. 19,748,859 17,973,904 1.6
Capital Goods 3,467,000 Mitsubishi Heavy Industries, Ltd. 24,884,826 28,330,639 2.6
Chemicals 1,264,000 Shin-Etsu Chemical Co., Ltd. 24,429,917 23,100,958 2.1
Containers 424,000 Toyo Seikan Kaisha, Ltd. 13,231,220 13,449,082 1.2
Electric 370,000 Chudenko Corp. 13,245,535 11,216,062 1.0
Construction 352,000 Kinden Corp. 6,435,321 4,917,670 0.5
116,000 Sanki Engineering Co., Ltd. 1,526,293 1,212,899 0.1
255,000 Taihei Dengyo Kaisha, Ltd. 5,692,906 2,733,503 0.2
-------------- -------------- ------
26,900,055 20,080,134 1.8
Electrical 892,000 Murata Manufacturing Co., Ltd. 33,911,847 30,488,358 2.8
Equipment 1,877,000 NEC Corporation 23,792,016 22,759,511 2.1
393,000 Rohm Co., Ltd. 17,561,071 24,171,865 2.2
719,000 Sharp Corporation 11,276,848 11,245,233 1.0
-------------- -------------- ------
86,541,782 88,664,967 8.1
Office Equipment 1,586,000 Canon Inc. 28,165,574 33,445,216 3.0
Pharmaceuticals 705,000 Sankyo Co., Ltd. 15,554,988 18,893,331 1.7
408,000 Taisho Pharmaceutical Co., Ltd. 8,105,811 9,105,702 0.9
-------------- -------------- ------
23,660,799 27,999,033 2.6
Property & 1,347,000 Dai-Tokyo Fire & Marine Insurance
Casualty Co., Ltd. 9,593,625 8,166,506 0.7
Insurance 1,000,000 Koa Fire & Marine Insurance
Co., Ltd. 6,878,670 5,509,182 0.5
242,000 Mitsui Marine & Fire Insurance
Co., Ltd. 1,999,470 1,558,615 0.1
616,000 Nichido Fire & Marine Insurance
Co., Ltd. 4,351,122 3,783,358 0.3
1,973,000 Sumitomo Marine & Fire Insurance
Co., Ltd. 16,692,362 14,042,088 1.3
1,344,000 Tokio Marine & Fire Insurance
Co., Ltd. 15,822,559 14,879,536 1.4
655,000 Yasuda Fire & Marine Insurance
Co., Ltd. 4,910,438 4,149,504 0.4
-------------- -------------- ------
60,248,246 52,088,789 4.7
<PAGE>
Retail 484,000 Ito-Yokado Co., Ltd. 25,627,534 24,453,036 2.2
Tire & Rubber 750,000 Bridgestone Corporation 13,653,443 13,838,854 1.3
Total Investments in Japan 347,092,255 343,424,612 31.2
Malaysia Airlines 1,839,000 ++Malaysian Airline System BHD 4,680,685 4,767,643 0.4
Banking 681,000 Arab-Malaysian Merchant Bank
Holding BHD 4,768,886 5,417,811 0.5
854,000 Malayan Banking BHD 7,214,839 8,450,425 0.8
2,434,666 Public Bank (Malaysia) BHD 'Foreign' 4,300,793 5,203,719 0.5
-------------- -------------- ------
16,284,518 19,071,955 1.8
Broadcasting & 956,000 New Straits Times Press (Malaysia)
Publishing BHD 5,178,451 5,410,964 0.5
Building Products 780,500 Hume Industries (Malaysia) BHD 5,105,410 5,097,269 0.5
Diversified 2,968,000 Renong BHD 4,799,134 5,474,324 0.5
Holdings
Telecommunications 2,160,000 ++Technology Resources Industries
BHD 6,854,862 4,402,929 0.4
Utilities--Electric 185,000 Tenaga Nasional BHD 850,048 842,074 0.1
Total Investments in Malaysia 43,753,108 45,067,158 4.2
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
PACIFIC BASIN Shares Value Percent of
(concluded) Industries Held Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
New Zealand Chemicals 60,000 Fernz Corporation Ltd. $ 163,272 $ 217,535 0.0%
Electronics 69,000 PDL Holdings Ltd. 340,434 349,251 0.0
Finance 2,509,300 Wrightson Ltd. 1,911,453 2,229,827 0.2
Telecommunications 227,000 Telecom Corporation of New Zealand 970,676 1,195,784 0.1
Textiles 298,800 Lane Walker Rudkin Industries, Ltd. 356,852 327,122 0.0
Total Investments in New Zealand 3,742,687 4,319,519 0.3
<PAGE>
South Korea Telecommunications 330,900 ++Korea Mobile Telcommunications
Corp. (ADR) (a) (e) 5,645,755 4,301,700 0.4
Utilities 67,880 Korea Electric Power Corp. 2,753,162 2,170,391 0.2
Total Investments in South Korea 8,398,917 6,472,091 0.6
Thailand Banking 320,500 Finance One Public Co., Ltd.
'Foreign' 2,622,142 916,145 0.1
1,675,300 Krung Thai Bank Public Co., Ltd. 7,939,717 4,788,821 0.4
1,690,400 Phatra Thanakit Public Co., Ltd.
'Foreign' 12,967,637 6,288,198 0.6
Total Investments in Thailand 23,529,496 11,993,164 1.1
Total Investments in the Pacific
Basin 526,261,940 552,793,399 50.3
SOUTHEAST
ASIA
India Automobiles 144,000 Ashok Leyland Ltd. (GDR) (d) 1,763,344 1,224,000 0.1
102,000 Ashok Leyland Ltd. (GDR) (d) (e) 1,304,580 867,000 0.1
-------------- -------------- ------
3,067,924 2,091,000 0.2
Banking 285,000 State Bank of India 2,015,768 1,742,478 0.2
Chemicals 76,100 Reliance Industries Ltd. 485,816 385,329 0.0
Financial Services 1,000,400 Industrial Credit & Investment
Corporation of India Ltd. 3,286,841 1,464,294 0.1
Hotels 100,000 East India Hotels Ltd. (GDR)
(d) (e) 2,772,888 1,880,000 0.2
Real Estate 44,280 Housing Development Finance
Corp., Ltd. 3,461,023 2,635,626 0.2
Utilities--Electric 146,500 Bombay Suburban Electric Supply
Co., Ltd. (Registered Shares) 2,711,447 2,893,375 0.3
Total Investments in India 17,801,707 13,092,102 1.2
<PAGE>
Indonesia Food & Household 2,570,000 P.T. Wicaksana Overseas International 2,158,799 2,905,503 0.3
Products
Telecommunications 964,500 P.T. Kabelmetal Indonesia 1,198,945 411,476 0.0
32,000 P.T. Telekomunikasi Indonesia
(ADR) (a) 1,044,829 1,052,000 0.1
-------------- -------------- ------
2,243,774 1,463,476 0.1
Total Investments in Indonesia 4,402,573 4,368,979 0.4
Total Investments in Southeast Asia 22,204,280 17,461,081 1.6
SHORT-TERM Face
SECURITIES Amount
Commercial US$ 7,000,000 American Brands, Inc., 5.30% due
Paper* 12/11/1996 6,988,664 6,988,664 0.6
5,106,000 General Electric Capital Corp.,
5.70% due 12/02/1996 5,104,383 5,104,383 0.5
Total Investments in Commercial
Paper 12,093,047 12,093,047 1.1
Commercial A$ 42,000,000 Westpac Banking Corp., 6.257% due
Paper--Foreign* 5/15/1997 32,273,680 33,213,741 3.0
Total Investments in Commercial
Paper--Foreign 32,273,680 33,213,741 3.0
Foreign Pound 11,170,000 United Kingdom Treasury Bills,
Government Sterling 5.592% due 12/17/1996 17,329,406 18,725,722 1.7
Obligations*
Total Investments in Foreign 17,329,406 18,725,722 1.7
Government Obligations
US Government United States Treasury Bills (c):
& Agency US$ 18,000,000 4.98% due 1/09/1997 17,900,400 17,906,580 1.6
Obligations* 11,000,000 5.114% due 1/09/1997 10,939,256 10,942,910 1.0
1,900,000 4.94% due 1/30/1997 1,884,096 1,884,686 0.2
700,000 4.98% due 1/30/1997 694,093 694,358 0.1
1,000,000 4.99% due 1/30/1997 991,545 991,940 0.1
1,600,000 4.99% due 2/27/1997 1,580,262 1,580,672 0.1
Total Investments in US Government
& Agency Obligations 33,989,652 34,001,146 3.1
Total Investments in Short-Term
Securities 95,685,785 98,033,656 8.9
<PAGE>
OPTIONS Nominal Value Covered Premiums
PURCHASED by Options Purchased Paid
Put Options Purchased 138 Bovespa, expiring December 1996
at US$58,142.5 738,023 33,374 0.0
150 Bovespa, expiring February 1997
at US$64,469.2 502,500 407,193 0.1
-------------- -------------- ------
1,240,523 440,567 0.1
Currency Put 14,000,000 German Deutschemark, expiring
Options Purchased July 1997 at DM1.55 162,120 215,600 0.0
20,000,000 Japanese Yen, expiring July 1997
at YEN 115.50 307,000 188,000 0.0
20,000,000 Japanese Yen, expiring September
1997 at YEN 115.50 252,000 188,000 0.0
10,000,000 Swiss Franc, expiring July 1997
at Chf1.285 135,000 261,000 0.0
-------------- -------------- ------
856,120 852,600 0.0
Total Options Purchased 2,096,643 1,293,167 0.1
Total Investments 1,040,572,715 1,102,956,193 100.3
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
OPTIONS Nominal Value Covered Premiums Value Percent of
WRITTEN by Options Written Issue Received (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Call Options Written 138 Bovespa, expiring December 1996
at US$59,886.8 $ (738,023) $ (705,935) (0.1)%
150 Bovespa, expiring February 1997
at US$64,469.2 (502,500) (479,517) 0.0
Total Investments in Options
Written (1,240,523) (1,185,452) (0.1)
Total Investments, Net of Options Written $1,039,332,192 $1,101,770,741 100.2
==============
Variation Margin on Financial Futures Contracts** (320,652) 0.0
Unrealized Appreciation on Forward Foreign Exchange Contracts*** 258,183 0.0
Liabilities in Excess of Other Assets (2,490,665) (0.2)
-------------- ------
Net Assets $1,099,217,607 100.0%
============== ======
<PAGE>
<FN>
(a)American Depositary Receipts (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)Securities held as collateral in connection with open futures
contracts.
(d)Global Depositary Receipts (GDR).
(e)Restricted securities as to resale. The value of the Fund's
investment in restricted securities was approximately $20,900,000,
representing 1.9% of net assets.
<CAPTION>
Acquisition Value
Issue Date(s) Cost (Note 1a)
<S> <S> <C> <C>
Ashok Leyland Ltd. (GDR) 3/09/1995-
10/23/1995 $ 1,304,580 $ 867,000
East India Hotels Ltd. (GDR) 4/23/1996-
4/25/1996 2,772,888 1,880,000
Korea Mobile Telecommuni- 7/13/1996-
cations Corp. (ADR) 7/26/1996 5,645,755 4,301,700
Magyar TarKzlesi 2/15/1995-
Reszvenytarsasag Ordinary 12/09/1995 4,349,463 5,247,225
Nedcor Ltd. (GDR) 5/23/1995-
5/26/1996 5,620,874 7,377,160
RAO Gazprom (ADR) 10/21/1996 1,071,000 1,226,550
Total $20,764,560 $20,899,635
=========== ===========
++Non-income producing security.
*Commercial Paper, Commercial Paper--Foreign, 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 November 30, 1996 were
as follows:
<CAPTION>
Number of Expiration Value
Contracts Issue Exchange Date (Notes 1a & 1c)
<C> <S> <S> <S> <C>
505 All Ordinaries SFE December 1996 $24,505,264
234 Nikkei 225 SIMEX December 1996 21,717,116
Total Financial Futures Contracts Purchased
(Total Contract Price--$46,255,656) $46,222,380
===========
<PAGE>
Financial futures contracts sold as of November 30, 1996 were as
follows:
<CAPTION>
Number of Expiration Value
Contracts Issue Exchange Date (Notes 1a & 1c)
<C> <S> <S> <S> <C>
187 CAC40 Index MATIF December 1996 $16,595,029
100 DAX Index DTB December 1996 18,549,594
263 Hang Seng HKFE December 1996 22,910,237
Total Financial Futures Contracts Sold
(Total Contract Price--$56,625,619) $58,054,860
===========
***Forward foreign exchange contracts as of November 30, 1996 were
as follows:
<CAPTION>
Unrealized
Foreign Appreciation
Currency Expiration (Depreciation)
Purchased Date (Note 1c)
<C> <S> <C>
DM 22,848,750 January 1997 $ (84,071)
Total (US$ Commitment--$14,992,618) $ (84,071)
-----------
Foreign Currency Sold
DM 22,848,750 January 1997 $ 342,254
Total (US$ Commitment--$15,250,801) $ 342,254
-----------
Total Unrealized Appreciation--Net on
Forward Foreign Exchange Contracts $ 258,183
===========
See Notes to Financial Statements.
</TABLE>
PORTFOLIO INFORMATION
<PAGE>
Worldwide
Investments as of
November 30, 1996
Percent of
Ten Largest Equity Holdings Net Assets
Canon Inc. 3.0%
HSBC Holdings PLC 3.0
Murata Manufacturing Co., Ltd. 2.8
Lend Lease Corp. 2.6
Mitsubishi Heavy Industries, Ltd. 2.6
Ito-Yokado Co., Ltd. 2.2
Rohm Co., Ltd. 2.2
Shin-Etsu Chemical Co., Ltd. 2.1
NEC Corporation 2.1
Sankyo Co., Ltd. 1.7
Percent of
Ten Largest Countries Net Assets
Japan 31.2%
Hong Kong 8.7
United Kingdom 5.3
France 4.3
Malaysia 4.2
Australia 4.2
Italy 3.5
Sweden 3.1
Germany 3.0
Brazil 2.9
Percent of
Asset Mix* Net Assets
Japan 31.2%
Europe (Ex-United Kingdom
and Ireland) 23.8
Pacific Basin (Ex-Japan) 19.1
Other Emerging Markets 11.1
Cash 8.9
United Kingdom and Ireland 6.1
[FN]
*Percent of net assets may not equal 100%, and excludes the impact
of futures and options.
<PAGE>
Ten Largest Industries Percent of
(Equity Investments) Net Assets
Banking 10.0%
Electrical Equipment 8.1
Telecommunications 5.2
Property & Casualty Insurance 4.7
Property 4.6
Chemicals 4.4
Diversified 3.5
Retail 3.3
Pharmaceuticals 3.3
Insurance 3.1
Financial Futures Contracts
Percent of
Country Issue Exchange Net Assets
Australia All Ordinaries SFE 2.2%
Japan Nikkei 225 SIMEX 2.0
Hong Kong Hang Seng HKFE (2.1)
Germany DAX Index DTB (1.7)
France CAC40 Index MATIF (1.5)
------
(1.1)%
======
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of November 30, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$1,038,476,072) (Note 1a) $1,101,663,026
Unrealized appreciation on forward foreign exchange
contracts (Note 1c) 258,183
Options purchased, at value (cost--$2,096,643) (Notes 1a & 1c) 1,293,167
Foreign cash (Note 1b) 2,871,710
Cash 189,912
Receivables:
Securities sold $ 7,732,577
Dividends 1,722,398
Capital shares sold 607,019
Forward foreign exchange contracts (Note 1c) 395,849
Interest 109,221 10,567,064
--------------
Deferred organization expenses (Note 1f) 54,971
Prepaid registration fees and other assets (Note 1f) 51,232
--------------
Total assets 1,116,949,265
--------------
<PAGE>
Liabilities: Options written, at value (premiums received--$1,240,523)
(Notes 1a & 1c) 1,185,452
Variation margin on stock index futures contracts (Note 1c) 320,652
Payables:
Securities purchased 9,554,518
Capital shares redeemed 3,318,179
Distributor (Note 2) 713,003
Investment adviser (Note 2) 664,705 14,250,405
--------------
Accrued expenses and other liabilities 1,975,149
--------------
Total liabilities 17,731,658
--------------
Net Assets: Net assets $1,099,217,607
==============
Net Assets Class A Shares of beneficial interest, $0.10 par value,
Consist of: unlimited number of shares authorized $ 830,676
Class B Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 6,848,777
Class C Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 353,896
Class D Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 1,301,975
Paid-in capital in excess of par 998,913,177
Undistributed investment income--net 11,066,127
Undistributed realized capital gains on investments and
foreign currency transactions--net 19,713,226
Unrealized appreciation on investments and foreign currency
transactions--net 60,189,753
--------------
Net assets $1,099,217,607
==============
Net Asset Class A--Based on net assets of $99,392,680 and 8,306,761 shares
Value: of beneficial interest outstanding $ 11.97
==============
Class B--Based on net assets of $803,109,935 and 68,487,765 shares
of beneficial interest outstanding $ 11.73
==============
Class C--Based on net assets of $41,124,367 and 3,538,960 shares
of beneficial interest outstanding $ 11.62
==============
Class D--Based on net assets of $155,590,625 and 13,019,747 shares
of beneficial interest outstanding $ 11.95
==============
<PAGE>
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Six Months Ended November 30, 1996
<S> <S> <C> <C>
Investment Income Dividends (net of $830,226 foreign withholding tax) $ 9,859,985
(Notes 1d & 1e): Interest and discount earned (net of $2,705 foreign withholding tax) 3,383,059
Other 2,409
--------------
Total income 13,245,453
--------------
Expenses: Investment advisory fees (Note 2) 4,515,343
Account maintenance and distribution fees--Class B (Note 2) 4,404,714
Transfer agent fees--Class B (Note 2) 902,186
Custodian fees 723,289
Account maintenance and distribution fees--Class C (Note 2) 225,705
Account maintenance fees--Class D (Note 2) 207,186
Transfer agent fees--Class D (Note 2) 144,625
Printing and shareholder reports 137,078
Transfer agent fees--Class A (Note 2) 97,764
Accounting services (Note 2) 65,614
Registration fees (Note 1f) 56,928
Transfer agent fees--Class C (Note 2) 48,795
Professional fees 40,527
Trustees' fees and expenses 19,398
Amortization of organization expenses (Note 1f) 12,773
Pricing fees 7,246
Other 32,371
--------------
Total expenses 11,641,542
--------------
Investment income--net 1,603,911
--------------
Realized & Realized gain from:
Unrealized Gain Investments--net $ 28,178,741
(Loss) on Foreign currency transactions--net 1,798,097 29,976,838
Investments & --------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net (35,474,376)
(Notes 1b, 1c, Foreign currency transactions--net (718,213) (36,192,589)
1e & 3): -------------- --------------
Net realized and unrealized loss on investments and foreign
currency transactions (6,215,751)
--------------
Net Decrease in Net Assets Resulting from Operations $ (4,611,840)
==============
<PAGE>
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: Nov. 30, 1996 May 31, 1996
<S> <S> <C> <C>
Operations: Investment income--net $ 1,603,911 $ 7,131,549
Realized gain on investments and foreign currency transactions
--net 29,976,838 75,604,968
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions--net (36,192,589) 100,273,961
-------------- --------------
Net increase (decrease) in net assets resulting from operations (4,611,840) 183,010,478
-------------- --------------
Beneficial Interest Net decrease in net assets derived from beneficial interest
Transactions transactions (180,302,991) (149,701,161)
(Note 4): -------------- --------------
Net Assets: Total increase (decrease) in net assets (184,914,831) 33,309,317
Beginning of period 1,284,132,438 1,250,823,121
-------------- --------------
End of period* $1,099,217,607 $1,284,132,438
============== ==============
<FN>
*Undistributed investment income--net $ 11,066,127 $ 9,462,216
============== ==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Class A Class B
The following per share data
and ratios have been derived For the For the
from information provided in For the Six Period For the Six Period
the financial statements. Months For the Oct. 21, Months July 30,
Ended Year Ended 1994++ to Ended For the Year 1993++ to
Increase (Decrease) in Net Nov. 30, May 31, May 31, Nov. 30, Ended May 31, May 31,
Asset Value: 1996++++ 1996++++ 1995 1996++++ 1996++++ 1995 1994++++
<S> <S> <C> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning
Operating of period $ 11.94 $ 10.25 $ 11.73 $ 11.76 $ 10.19 $ 11.44 $ 10.00
Performance: -------- -------- -------- -------- -------- -------- --------
Investment income (loss)
--net .07 .16 .26 .00+++++ .04 .02 (.02)
Realized and unrealized
gain (loss) on investments
and foreign currency
transactions--net (.04) 1.53 (1.05) (.03) 1.53 (.69) 1.46
-------- -------- -------- -------- -------- -------- --------
Total from investment
operations .03 1.69 (.79) (.03) 1.57 (.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 $ 11.97 $ 11.94 $ 10.25 $ 11.73 $ 11.76 $ 10.19 $ 11.44
======== ======== ======== ======== ======== ======== ========
Total Investment Based on net asset value
Return:** per share .25%+++ 16.49% (6.78%)+++ (.26%)+++ 15.41% (5.91%) 14.40%+++
======== ======== ======== ======== ======== ======== ========
Ratios to Average Expenses 1.11%* 1.06% 1.23%* 2.14%* 2.09% 2.13% 2.07%*
Net Assets: ======== ======== ======== ======== ======== ======== ========
Investment income (loss)
--net 1.10%* 1.47% 4.64%* .06%* .37% .23% (.19%)*
======== ======== ======== ======== ======== ======== ========
Supplemental Net assets, end of period
Data: (in thousands) $ 99,393 $116,628 $ 74,478 $803,110 $945,368 $961,941 $844,295
======== ======== ======== ======== ======== ======== ========
Portfolio turnover 19.48% 71.86% 63.95% 19.48% 71.86% 63.95% 50.63%
======== ======== ======== ======== ======== ======== ========
Average commission rate
paid++++++ $ .0002 $ .0005 -- $ .0002 $ .0005 -- --
======== ======== ======== ======== ======== ======== ========
<PAGE>
<CAPTION>
Class C Class D
The following per share data
and ratios have been derived For the For the
from information provided in For the Six Period For the Six Period
the financial statements. Months For the Oct. 21, Months July 30,
Ended Year Ended 1994++ to Ended For the Year 1993++ to
Increase (Decrease) in Net Nov. 30, May 31, May 31, Nov. 30, Ended May 31, May 31,
Asset Value: 1996++++ 1996++++ 1995 1996++++ 1996++++ 1995 1994++++
<S> <S> <C> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning
Operating of period $ 11.65 $ 10.10 $ 11.62 $ 11.94 $ 10.27 $ 11.51 $ 10.00
Performance: -------- -------- -------- -------- -------- -------- --------
Investment income--net .00+++++ .05 .24 .05 .13 .10 .04
Realized and unrealized
gain (loss) on investments
and foreign currency
transactions--net (.03) 1.50 (1.09) (.04) 1.54 (.68) 1.47
-------- -------- -------- -------- -------- -------- --------
Total from investment
operations (.03) 1.55 (.85) .01 1.67 (.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 $ 11.62 $ 11.65 $ 10.10 $ 11.95 $ 11.94 $ 10.27 $ 11.51
======== ======== ======== ======== ======== ======== ========
Total Investment Based on net asset
Return:** value per share (.26%)+++ 15.35% (7.36%)+++ .08%+++ 16.26% (5.11%) 15.10%+++
======== ======== ======== ======== ======== ======== ========
Ratios to Average Expenses 2.15%* 2.09% 2.30%* 1.36%* 1.31% 1.34% 1.31%*
Net Assets: ======== ======== ======== ======== ======== ======== ========
Investment income--net .05%* .45% 4.26%* .83%* 1.13% .85% .55%*
======== ======== ======== ======== ======== ======== ========
Supplemental Net assets, end of
Data: period (in thousands) $ 41,124 $ 46,985 $ 25,822 $155,591 $175,151 $188,583 $208,007
======== ======== ======== ======== ======== ======== ========
Portfolio turnover 19.48% 71.86% 63.95% 19.48% 71.86% 63.95% 50.63%
======== ======== ======== ======== ======== ======== ========
Average commission
rate paid++++++ $ .0002 $ .0005 -- $ .0002 $ .0005 -- --
======== ======== ======== ======== ======== ======== ========
<PAGE>
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
+++Aggregate total investment return.
+++++Amount is less than $.01 per share.
++Commencement of Operations.
++++Based on average shares outstanding during the period.
++++++For fiscal years beginning on or after September 1, 1995, the
Fund is required to disclose its average commission rate per share
for purchases and sales of equity securities. The "Average
Commission Rate Paid" includes commissions paid in foreign
currencies, which have been converted into US dollars using the
prevailing exchange rate on the date of the transaction. Such
conversions may significantly affect the rate shown.
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. These unaudited financial statements
reflect all adjustments which are, in the opinion of management,
necessary to a fair statement of the results for the interim period
presented. All such adjustments are of a normal recurring nature.
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.
<PAGE>
(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 Trustees 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 investments, 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.
(b) Foreign currency transactions--Transactions denominated in
foreign currencies are recorded at the exchange rate prevailing when
recognized. Assets and liabilities denominated in foreign currencies
are valued at the exchange rate at the end of the period. Foreign
currency transactions are the result of settling (realized) or
valuing (unrealized) assets or liabilities expressed in foreign
currencies into US dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on
investments.
(c) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the equity, debt, and
currency 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.
<PAGE>
* 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.
* 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
operations 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
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required. Under the applicable foreign tax law, a
withholding tax may be imposed on interest, dividends, and capital
gains at various rates.
(e) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Dividend income is recorded on the ex-
dividend dates except that if the ex-dividend date has passed,
certain dividends from foreign securities are recorded as soon as
the Fund is informed of the ex-dividend date. Interest income
(including amortization of discount) is recognized on the accrual
basis. Realized gains and losses on security transactions are
determined on the identified cost basis.
<PAGE>
(f) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are charged to expense on a straight-
line basis over a five-year period. 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.
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
Distributor, 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, pursuant
to which MLAM pays MLAM U.K. a fee in an amount to be determined
from time to time by MLAM and MLAM U.K. but in no event in excess of
the amount that MLAM actually receives. For the six months ended
November 30, 1996, MLAM paid MLAM U.K. a fee of $604,729 pursuant to
such Agreement.
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:
Account Distribution
Maintenance Fee Fee
<PAGE>
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 shareholder
and distribution-related services to Class B and Class C
shareholders.
For the six months ended November 30, 1996, MLFD earned underwriting
discounts and commissions 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 $ 290 $ 4,154
Class D $3,866 $54,775
NOTES TO FINANCIAL STATEMENTS (concluded)
For the six months ended November 30, 1996, MLPF&S received
contingent deferred sales charges of $1,122,825 and $10,372 relating
to transactions in Class B and Class C Shares, respectively.
In addition, MLPF&S received $50,954 in commissions on the execution
of portfolio security transactions for the Fund for the six months
ended November 30, 1996.
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.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended November 30, 1996 were $221,943,033 and
$359,941,793, respectively.
Net realized and unrealized gains (losses) as of November 30, 1996
were as follows:
<PAGE>
Realized Unrealized
Gains Gains
(Losses) (Losses)
Investments:
Long-term $ 26,635,510 $ 60,839,083
Short-term (675) 2,347,871
Stock index futures contracts 2,892,184 (1,462,517)
Options written (806,788) 55,071
Options purchased (541,490) (799,956)
------------- -------------
Total investments 28,178,741 60,979,552
Currency transactions:
Options purchased (190,765) (3,520)
Forward foreign exchange
contracts 2,616,095 258,183
Foreign currency transactions (627,233) (1,044,462)
------------- -------------
Total currency transactions 1,798,097 (789,799)
------------- -------------
Total $ 29,976,838 $ 60,189,753
============= =============
Transactions in call options written for the six months ended
November 30, 1996 were as follows:
Par Value
Covered by Premiums
Written Options Received
Outstanding call options
written at beginning of period $ 150 $ 450,000
Options written 288 1,240,523
Options exercised (150) (450,000)
------------- -------------
Outstanding call options
written at end of period $ 288 $ 1,240,523
============= =============
Transactions in put options written for the six months ended
November 30, 1996 were as follows:
<PAGE>
Par Value
Covered By Premiums
Written Options Paid
Outstanding put options written
at beginning of period $ 3,655 $ 85,750
Options expired (3,655) (85,750)
------------- -------------
Outstanding put options written
at end of period $ -- $ --
============= =============
As of November 30, 1996, net unrealized appreciation for Federal
income tax purposes aggregated $62,442,069, of which $129,356,990
related to appreciated securities and $66,914,921 related to
depreciated securities. At November 30, 1996, the aggregate cost of
investments, net of options written, for Federal income tax purposes
was $1,038,476,072.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest trans-
actions was $180,302,991 and $149,701,161 for the six months ended
November 30,1996 and the year ended May 31, 1996, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Six Months Dollar
Ended November 30, 1996 Shares Amount
Shares sold 2,166,232 $ 25,558,166
Shares redeemed (3,628,894) (42,807,015)
------------- -------------
Net decrease (1,462,662) $ (17,248,849)
============= =============
Class A Shares for the Dollar
Year Ended May 31, 1996 Shares Amount
Shares sold 8,917,021 $ 98,608,956
Shares redeemed (6,414,907) (71,336,354)
------------- -------------
Net increase 2,502,114 $ 27,272,602
============= =============
Class B Shares for the Six Months Dollar
Ended November 30, 1996 Shares Amount
<PAGE>
Shares sold 5,027,349 $ 58,158,391
Shares redeemed (16,852,753) (195,051,657)
Automatic conversion of shares (81,505) (942,332)
------------- -------------
Net decrease (11,906,909) $(137,835,598)
============= =============
Class B Shares for the Dollar
Year Ended May 31, 1996 Shares Amount
Shares sold 20,260,350 $ 222,170,714
Shares redeemed (33,910,956) (370,155,135)
Automatic conversion of shares (343,919) (4,169,385)
------------- -------------
Net decrease (13,994,525) $(152,153,806)
============= =============
Class C Shares for the Six Months Dollar
Ended November 30, 1996 Shares Amount
Shares sold 1,102,305 $ 12,612,424
Shares redeemed (1,595,328) (18,297,805)
------------- -------------
Net decrease (493,023) $ (5,685,381)
============= =============
Class C Shares for the Dollar
Year Ended May 31, 1996 Shares Amount
Shares sold 3,578,857 $ 39,004,743
Shares redeemed (2,103,452) (22,986,000)
------------- -------------
Net increase 1,475,405 $ 16,018,743
============= =============
Class D Shares for the Six Months Dollar
Ended November 30, 1996 Shares Amount
Shares sold 1,620,972 $ 19,113,635
Automatic conversion of shares 79,959 942,332
Shares redeemed (3,353,981) (39,589,130)
------------- -------------
Net decrease (1,653,050) $ (19,533,163)
============= =============
<PAGE>
Class D Shares for the Dollar
Year Ended May 31, 1996 Shares Amount
Shares sold 5,012,975 $ 55,718,753
Automatic conversion of shares 340,392 4,169,385
Shares redeemed (9,050,483) (100,726,838)
------------- -------------
Net decrease (3,697,116) $ (40,838,700)
============= =============
5. Commitments:
At November 30, 1996, the Fund had entered into foreign exchange
contracts, in addition to the contracts listed on the Schedule of
Investments, under which it had agreed to purchase and sell foreign
currency with an approximate value of $7,431,000 and $23,990,000,
respectively.
6. Subsequent Event:
On December 1, 1996, the Fund's Board of Directors declared an
ordinary income dividend in the amount of $0.311766 per Class A
Share, $0.168234 per Class B Share, $0.203711 per Class C Share and
$0.276184 per Class D Share, and a long-term capital gains
distribution of $0.288428 per share for each of the four classes,
payable on December 19, 1996 to shareholders of record December 11,
1996.
PORTFOLIO CHANGES
For the Quarter Ended November 30, 1996
Additions
<PAGE>
ASDA Group PLC
Akzo Nobel N.V.
Anglian Water PLC
Arab-Malaysian Merchant Bank
Holdings BHD
Astra AB (Class A)
Cable & Wireless PLC
Central European Media Enterprises Ltd.
(Class A)
Commerzbank AG
Corporacion Bancaria de Espana S.A.
Degussa AG
Empresa Nacional de Electricidad S.A.
(Endesa)
Evander Gold Mines Ltd.
Hume Industries (Malaysia) BHD
Imperial Tobacco Group PLC
Internatio-Muller N.V.
Italcementi S.p.A.
Land Securities PLC
Malaysian Airline System BHD
Millennium Chemicals Inc.
P.T. Telekomunikasi Indonesia (ADR)
Philips Electronics N.V.
RAO Gazprom (ADR)
Renong BHD
SGS-Thomson Microelectronics N.V.
Severn Trent PLC
Sharp Corporation
Telefonica de Espana S.A.
Tenaga Nasional BHD
Thames Water PLC
Thyssen AG
United Utilities PLC
Yorkshire Water PLC
Deletions
<PAGE>
AEGON N.V. (Ordinary)
Bank Hapoalim Ltd.
Bayer AG (Ordinary)
British Gas PLC (Ordinary)
British Telecommunications PLC (Ordinary)
Chukyo Coca-Cola Bottling Co., Ltd.
Ciba-Geigy AG (Registered)
Cifra, S.A. de C.V. `C'
Fiat S.p.A. (Ordinary)
Fochi Filippo S.p.A.
Fortis Amev N.V.
Fuji Fire & Marine Insurance Co., Ltd.
Hokkaido Coca-Cola Bottling Co., Ltd.
(Class B)
Inspec Group PLC (Rights)
Invercorporacion, S.A. de C.V. 'A1'
Kinki Coca-Cola Bottling Co., Ltd.
Kinross Mines Ltd.
Koor Industries Ltd.
Mannesmann AG
Maruichi Steel Tube, Ltd.
Mikuni Coca-Cola Bottling Co., Ltd.
Mostostal-Export S.A. (Series E)
Nippon Fire & Marine Insurance Co., Ltd.
Norsk Hydro A.S.
Royal PTT Nederland N.V.
SKF AB 'B' Free
Sandoz AG
Sangetsu Co., Ltd.
Sanyo Coca-Cola Bottling Co., Ltd.
Volvo AB (Class B)
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
Ira P. Shapiro, Secretary
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Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
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.
