MERRILL LYNCH
EUROFUND
FUND LOGO
Quarterly Report
July 31, 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
EuroFund
Box 9011
Princeton, NJ
08543-9011
MERRILL LYNCH EUROFUND
PORTFOLIO INFORMATION
As a Percentage of Stocks &
Convertible Warrants
As of July 31, 1996
A pie chart illustrating the following percentages:
Croatia 0.3%
Denmark 0.5%
Slovakia 0.6%
Poland 1.9%
Hungary 1.9%
Finland 6.8%
Switzerland 8.0%
France 12.5%
United Kingdom 25.3%
Sweden 12.7%
Germany 9.7%
Italy 7.7%
Netherlands 6.3%
Norway 2.0%
Czech Republic 0.8%
Ireland 1.1%
Greece 0.6%
Turkey 0.6%
Spain 0.5%
Portugal 0.2%
<PAGE>
EUROPEAN STOCK MARKET PERFORMANCE
Total Return for the
Three-Month Period
Ended July 31, 1996
In US dollars*
A bar graph illustrating the following percentages:
Italy -8.1
France -2.2
Norway -1.6
Spain -0.8
Switzerland -0.6
Sweden +1.2
United Kingdom +1.5
Ireland +2.2
Netherlands +2.2
Germany +3.8
Denmark +5.5
Finland +6.1
Source: Financial Times/
Standard & Poor's--
Actuaries Index.
[FN]
*For the three-month period
ended July 31, 1996,
total investment return for
the Financial Times/
Standard & Poor's--
Actuaries Europe Index
was -0.65%.
DEAR SHAREHOLDER
During the quarter ended July 31, 1996, the unmanaged Financial
Times/Standard & Poor's--Actuaries Europe Index had a total return
of -0.65% while the total return for the unmanaged Morgan Stanley
Capital International Europe Index was +0.61%. For the same period,
Merrill Lynch EuroFund's Class A, Class B, Class C and Class D
Shares had total returns of +0.13%, -0.14%, -0.20% and +0.06%,
respectively. (Results shown do not reflect sales charges and would
be lower if sales charges were included. Complete performance
information can be found on pages 3-5 of this report to
shareholders.)
<PAGE>
The Fund performed approximately in line with the European stock
indexes during the quarter as a result of profit-taking in the more
economically sensitive stocks, following their strong moves in the
early part of the year. As economic recovery in Europe becomes more
soundly and broadly based in the next several months, we expect that
the relative outperformance of economically sensitive stocks will
resume.
Global capital markets proved extremely volatile over the three-
month period ended July 31, 1996, in response to concerns about
earnings, economic growth, inflation, interest rates and liquidity
in the United States. There was also disappointment in Europe at the
German Bundesbank's decision not to lower interest rates, which it
had hinted strongly that it would do. The Bundesbank's decision
suggests either that it believes economic growth is likely to
surprise on the upside, and that a further interest rate cut would
be unnecessary, or, more likely, that it feared that it was
beginning to be perceived as more pro-growth and less inflation-
conscious than historically. Such concerns generally pushed stock
markets lower in the last several months, and in addition part of
the US dollar's rise has been reversed. In Europe, this led to a
strengthening of the Deutschemark against the peripheral currencies,
and a reversal of the trend toward bond yield convergence in Europe.
Economic growth continued at a moderate pace in Europe, with the
only major acceleration occurring in the United Kingdom, where the
government is attempting to stimulate the economy in an effort to
gain reelection. Elsewhere, there were tentative signs of a pick-up
in industrial production, as lower inventory levels and higher-end
demand flowed through into order books and production. Real
increases in disposable income and pent-up demand pushed consumer
demand above expected levels. Inflation generally has been flat to
down, the principal concern being that wage growth may begin to
accelerate as in the United States. Although significant further
interest rate cuts are unlikely, interest rates are also unlikely to
rise for quite some time, in our view.
As anticipated in our April letter to shareholders, the theme of
enhancing shareholder value gained in importance over the last few
months. The most significant change came at the fund holding CS
Holding AG, a Swiss bank where a radical restructuring plan was
initiated and where, we believe, there is now scope for significant
long-term share price performance. Major announcements also were
made in the German financial sector, which suggest that corporate
strategies will be focused much more on profitability. Further
industry consolidation now seems highly likely.
<PAGE>
Investment Strategy
As stock markets fell in the last several months, valuations became
more attractive. The Fund is effectively fully invested. The Fund
was unhedged going into the recent US dollar decline. More recently,
with the dollar at more attractive levels, we hedged approximately
20% of the Fund's currency exposure in the forward currency market.
Valuations and likely interest rate differentials suggest the US
dollar is moderately undervalued at present, in our opinion.
The geographic exposures of the Fund were little changed during the
July quarter. However, we directed assets to the UK stock market as
valuations improved following its poor performance in the first half
of the year. However, the United Kingdom is still underweighted
relative to a benchmark position.
On a sector basis, we increased the Fund's financial stocks exposure
to neutral, following poor performance and in the belief that the
sector will respond well to expected restructuring and consolidation
announcements. The Fund remains underweighted in highly-valued
growth/consumer stocks, and overweighted in low-valued, economically-
sensitive stocks.
In Conclusion
The recent stock market declines brought valuations down to more
attractive levels. We believe European stock markets offer
reasonable upside potential in the latter part of the year as
economic recovery gathers speed. A stronger US dollar and stability
in the US stock market would increase confidence in these beliefs.
We thank you for your investment in Merrill Lynch EuroFund, and we
look forward to reviewing our outlook and strategy with you in our
upcoming annual report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
<PAGE>
(Adrian C. Holmes)
Adrian C. Holmes
Vice President and Portfolio Manager
August 29, 1996
PERFORMANCE DATA
About Fund Performance
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.
* 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).
<PAGE>
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.
PERFORMANCE DATA (continued)
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains Dividends
Period Covered Beginning Ending Distributed Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/26/88--12/31/88 $ 8.83 $ 8.83 $0.023 -- + 0.26%
1989 8.83 10.99 -- $0.087 +25.48
1990 10.99 10.53 -- 0.230 - 2.23
1991 10.53 11.75 -- 0.451 +16.20
1992 11.75 11.12 -- -- - 5.36
1993 11.12 14.67 -- -- +31.92
1994 14.67 13.62 0.737 0.889 + 4.29
1995 13.62 14.27 0.986 0.071 +12.72
1/1/96--7/31/96 14.27 15.73 -- -- +10.23
------ ------
Total $1.746 Total $1.728
Cumulative total return as of 7/31/96: +131.22%**
</TABLE>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains Dividends
Period Covered Beginning Ending Distributed Paid* % Change***
<S> <C> <C> <C> <C> <C>
1/30/87--12/31/87 $10.00 $ 8.61 $0.737 $0.055 - 5.98%
1988 8.61 8.80 0.023 0.126 + 3.98
1989 8.80 10.85 -- 0.071 +24.13
1990 10.85 10.38 -- 0.124 - 3.26
1991 10.38 11.59 -- 0.332 +15.08
1992 11.59 10.85 -- -- - 6.38
1993 10.85 14.17 -- -- +30.60
1994 14.17 12.95 0.737 0.889 + 3.24
1995 12.95 13.36 0.986 0.071 +11.52
1/1/96--7/31/96 13.36 14.64 -- -- + 9.58
------ ------
Total $2.483 Total $1.668
Cumulative total return as of 7/31/96: +108.40%***
</TABLE>
<PAGE>
<TABLE>
Performance Summary--Class C Shares
<CAPTION>
Net Asset Value Capital Gains Dividends
Period Covered Beginning Ending Distributed Paid* % Change***
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $15.08 $12.94 $0.737 $0.889 - 3.07%
1995 12.94 13.35 0.986 0.071 +11.53
1/1/96--7/31/96 13.35 14.61 -- -- + 9.44
------ ------
Total $1.723 Total $0.960
Cumulative total return as of 7/31/96: +18.31%***
<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.
***Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do not
reflect deduction of any sales charge; results would be lower if
sales charge was deducted.
</TABLE>
<TABLE>
PERFORMANCE DATA (concluded)
<CAPTION>
Performance Summary--Class D Shares
Net Asset Value Capital Gains Dividends
Period Covered Beginning Ending Distributed Paid* % Change***
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $15.75 $13.61 $0.737 $0.889 - 2.93%
1995 13.61 14.22 0.986 0.071 +12.44
1/1/96--7/31/96 14.22 15.65 -- -- +10.06
------ ------
Total $1.723 Total $0.960
Cumulative total return as of 7/31/96: +20.12%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do not
include sales charge; results would be lower if sales charge was
included.
</TABLE>
<PAGE>
<TABLE>
Recent Performance Results*
<CAPTION>
12 Month 3 Month
7/31/96 4/30/96 7/31/95 % Change % Change
<S> <C> <C> <C> <C> <C>
ML EuroFund Class A Shares $15.73 $15.71 $15.86 +6.20%(1) +0.13%
ML EuroFund Class B Shares 14.64 14.66 14.99 +5.04(1) -0.14
ML EuroFund Class C Shares 14.61 14.64 14.98 +4.90(1) -0.20
ML EuroFund Class D Shares 15.65 15.64 15.82 +5.95(1) +0.06
ML EuroFund Class A Shares--Total Return +6.57(2) +0.13
ML EuroFund Class B Shares--Total Return +5.43(2) -0.14
ML EuroFund Class C Shares--Total Return +5.29(2) -0.20
ML EuroFund Class D Shares--Total Return +6.32(2) +0.06
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
(1)Percent change includes reinvestment of $0.986 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.053 ordinary income
dividends and $0.986 per share capital gains distributions.
</TABLE>
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/96 +15.71% + 9.63%
Five Years Ended 6/30/96 +13.50 +12.28
Inception (10/26/88)
through 6/30/96 +11.89 +11.11
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/96 +14.44% +10.44%
Five Years Ended 6/30/96 +12.34 +12.34
Inception (1/30/87) through 6/30/96 + 8.40 + 8.40
<PAGE>
[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 6/30/96 +14.37% +13.37%
Inception (10/21/94)
through 6/30/96 +12.13 +12.13
[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 6/30/96 +15.39% +9.34%
Inception (10/21/94) through 6/30/96 +13.07 +9.52
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Shares Percent of
Industries Held Investments Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Croatia
Banking 45,500 Zagrebacka Banka (GDR)* $ 388,684 $ 553,735 0.1%
Pharmaceuticals 75,000 Pliva D.D. (GDR)* 2,255,760 2,943,750 0.3
Total Investments in Croatia 2,644,444 3,497,485 0.4
<PAGE>
Czech Republic
Banking 44,000 Komercni Banka A.S. 1,148,451 1,201,001 0.1
Investment Fund 33,000 Zivnobanka--Investicni Fond 545,247 595,496 0.1
Mining 55,000 Severoceske Doly 1,213,512 1,386,572 0.1
Telecommunications 27,500 SPT Telecom A.S. 2,535,302 3,466,430 0.3
Utility 55,000 Ceske Energeticke Zavody 1,659,778 1,876,564 0.2
Total Investments in the Czech Republic 7,102,290 8,526,063 0.8
Denmark
Textiles 137,502 Carli Gry International A/S 3,862,756 4,591,455 0.5
Total Investments in Denmark 3,862,756 4,591,455 0.5
Finland
Metals & Mining 405,100 Outokumpu OY 6,167,229 7,312,437 0.7
Paper & Forest 2,003,700 Enso-Gutzeit OY 'R' (Ordinary)(Registered) 14,186,087 15,941,009 1.6
Products 1,959,500 Metsa Serla OY (Class B) 14,945,500 13,973,659 1.4
1,426,249 UPM-Kymmene Corp. (c) 25,938,719 31,307,362 3.1
-------------- -------------- ------
55,070,306 61,222,030 6.1
Total Investments in Finland 61,237,535 68,534,467 6.8
France
Automobiles & 141,315 Peugeot S.A. 17,468,422 17,079,392 1.7
Equipment
Banking 87,750 Societe Generale de France S.A. 9,244,244 9,674,887 1.0
Business Services/ 9,750 Ecco S.A. 1,885,546 2,315,808 0.2
Computers
Communication 115,350 Alcatel Alsthom Cie Generale
Equipment d'Electricite S.A. 10,954,707 9,440,350 0.9
Construction 72,900 Bouygues S.A. 7,603,111 7,833,377 0.8
Financial Services 201,300 Compagnie de Suez S.A. 7,592,048 6,895,960 0.7
110,800 Compagnie Financiere de Paribas S.A. 5,604,913 6,669,063 0.6
48,020 EuraFrance S.A. 13,909,651 18,871,692 1.9
-------------- -------------- ------
27,106,612 32,436,715 3.2
<PAGE>
Food Manufacturing 37,620 Groupe Danone S.A. 5,976,543 5,623,240 0.6
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Percent of
Industries Held Investments Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
France(concluded)
Insurance 421,465 Assurances Generales de France
S.A. (AGF) $ 11,424,808 $ 11,402,115 1.1%
Machinery 177,431 Compagnie de Fives-Lille S.A. 9,488,305 16,218,205 1.6
Manufacturing 96,600 Sommer Allibert S.A. 2,862,214 2,191,984 0.2
Metals & Steel 775,975 Usinor-Sacilor 11,588,744 10,830,266 1.0
Total Investments in France 115,603,256 125,046,339 12.3
Germany
Banking 89,300 Commerzbank AG (Warrants)(a) 2,484,778 3,573,213 0.3
444,600 Deutsche Bank AG (Warrants)(a) 3,812,315 3,866,087 0.4
-------------- -------------- ------
6,297,093 7,439,300 0.7
Chemicals 628,365 Bayer AG 15,575,902 21,130,481 2.1
77,016 Henkel KGaA 3,295,326 3,207,256 0.3
693,144 Henkel KGaA (Preferred) 28,354,283 27,923,532 2.7
-------------- -------------- ------
47,225,511 52,261,269 5.1
Construction 30,480 Philipp Holzmann AG 11,661,385 7,412,935 0.7
Engineering 321,783 Kloeckner Werke AG 14,985,368 11,148,732 1.1
Metals 14,069 Degussa AG 4,679,131 4,646,020 0.5
Retail Trade 30,485 Karstadt AG 11,896,585 10,976,257 1.1
55,190 Moebel Walther AG (Preferred) 2,067,520 2,886,977 0.3
-------------- -------------- ------
13,964,105 13,863,234 1.4
Total Investments in Germany 98,812,593 96,771,490 9.5
<PAGE>
Greece
Beverages 55,000 Hellenic Bottling Co. 1,677,636 1,885,761 0.2
Engineering & 80,666 AEGEK S.A. 945,100 412,543 0.0
Construction
Telecommunications 111,100 Hellenic Tellecommunication
Organization S.A. 1,840,242 1,830,044 0.2
Tobacco 60,000 Papastratos Cigarette S.A. 1,825,929 1,687,692 0.2
Total Investments in Greece 6,288,907 5,816,040 0.6
Hungary
Chemicals 90,000 Tisza Vegyi Kombinat
Reszvenytarsasag (GDR)* 792,900 765,000 0.1
Food/Grocery 27,500 Pick Szeged Reszvenytarsasag 1,236,392 1,108,647 0.1
Natural Gas 165,000 Mol Re Hung Oil & Gas 1,416,909 1,629,712 0.1
Pharmaceuticals 120,000 Egis 2,532,765 5,950,413 0.6
220,000 Gedeon Richter (GDR)* 3,141,407 9,240,000 0.9
-------------- -------------- ------
5,674,172 15,190,413 1.5
Total Investments in Hungary 9,120,373 18,693,772 1.8
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Held/ Percent of
Industries Face Amount Investments Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Ireland
Paper & Forest 4,279,417 Jefferson Smurfit Group PLC $ 12,726,781 $ 11,110,860 1.1%
Products
Total Investments in Ireland 12,726,781 11,110,860 1.1
Italy
<PAGE>
Automobiles & 3,720,000 Fiat S.p.A. (Ordinary) 11,161,864 11,642,791 1.2
Equipment
Construction/ 771,200 Italcementi S.p.A. 5,174,183 5,445,362 0.5
Building Materials
Diversified 13,030,335 Compagnie Industriali Riunite
Holdings S.p.A. (CIR) 12,170,577 6,983,884 0.7
22,853,050 Montedison S.p.A. 21,738,076 16,391,476 1.6
-------------- -------------- ------
33,908,653 23,375,360 2.3
Engineering 2,277,541 Filippo Fochi S.p.A. 7,224,452 433,826 0.0
Insurance US$ 1,755,000 INA Convertible, 5% due 6/28/2001 1,755,000 1,750,613 0.2
8,106,664 Istituto Nazionale delle
Assicurazioni (INA) 11,436,541 11,607,800 1.1
-------------- -------------- ------
13,191,541 13,358,413 1.3
Oil & Gas 1,234,656 Ente Nazionale Idrocarburi S.p.A. 4,830,204 5,546,938 0.5
Producers 1,400,000 Ente Nazionale Idrocarburi S.p.A.
(Warrants)(a) 784,864 786,498 0.1
-------------- -------------- ------
5,615,068 6,333,436 0.6
Telecommunications 7,347,051 Societa Finanziaria Telefonica
S.p.A. (STET) 17,586,684 16,962,491 1.7
Total Investments in Italy 93,862,445 77,551,679 7.6
Netherlands
Automobiles & 152,000 Vredestein Groep N.V. 1,513,329 1,710,655 0.2
Equipment
Chemicals 310,870 European Vinyls Corporation
International N.V. 11,599,987 9,047,526 0.9
Diversified Holdings 141,504 Internatio-Mueller N.V. 2,822,501 2,953,886 0.3
Electrical Equipment 137,292 Twentsche Kabel Holding N.V. 5,600,167 5,939,601 0.6
Engineering & 114,450 Kondor Wessels Groep N.V. 4,290,980 4,016,518 0.4
Construction
Financial Services 223,135 Aegon N.V. 4,699,202 10,233,940 1.0
261,562 Fortis Amev N.V. 4,457,390 7,501,687 0.7
381,907 International Nederlanden Groep N.V. 6,632,497 11,715,789 1.1
-------------- -------------- ------
15,789,089 29,451,416 2.8
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Percent of
Industries Held Investments Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Netherlands(concluded)
Packaging & 160,100 Koninklijke KNP BT N.V. $ 3,741,528 $ 3,632,692 0.4%
Containers
Transportation 202,108 KLM Royal Dutch Airlines N.V. 6,051,185 6,371,287 0.6
Total Investments in the Netherlands 51,408,766 63,123,581 6.2
Norway
Manufacturing 222,000 Orkla A.S. (Class A) 11,216,632 11,645,673 1.1
Oil & Gas Producers 605,620 Saga Petroleum A.S. (Class B) 7,158,949 8,037,520 0.8
Total Investments in Norway 18,375,581 19,683,193 1.9
Poland
Automobile 23,926 Stomil Olsztyn S.A. 312,543 279,085 0.0
Components
Banking 200,000 Wielkopolsky Bank Kredytowy S.A. 997,075 1,007,221 0.1
Chemicals 396,000 Polifarb Wroclaw S.A. 1,013,086 1,920,978 0.2
Electrical Equipment 120,000 Bydgoska Fabryka Kabli S.A. 1,790,810 3,466,025 0.4
73,203 Elektrobudowa S.A. 928,099 1,076,156 0.1
-------------- -------------- ------
2,718,909 4,542,181 0.5
Engineering & 883,861 Elektrim S.A. 3,895,370 7,855,088 0.8
Construction 330,000 Mostostal Zabrze 1,584,821 1,393,075 0.1
-------------- -------------- ------
5,480,191 9,248,163 0.9
Metals 110,000 Stalexport S.A. 1,887,541 2,281,059 0.2
Total Investments in Poland 12,409,345 19,278,687 1.9
<PAGE>
Portugal
Banking 24,010 Banco Totta & Acores, S.A. 467,551 435,308 0.1
Telecommunications 53,690 Portugal Telecom S.A. 1,227,704 1,378,709 0.1
Total Investments in Portugal 1,695,255 1,814,017 0.2
Slovakia
Metals & Mining 27,500 VSZ 389,875 607,316 0.1
126,500 Zavod SNP 1,891,018 2,541,595 0.2
-------------- -------------- ------
2,280,893 3,148,911 0.3
Pharmaceuticals 30,000 Slovakofarma 1,827,425 2,789,586 0.3
Total Investments in Slovakia 4,108,318 5,938,497 0.6
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Percent of
Industries Held Investments Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Spain
Construction 64,300 Fomento de Construcciones y
Contratas S.A. $ 5,323,781 $ 5,194,977 0.5%
Total Investments in Spain 5,323,781 5,194,977 0.5
Sweden
Appliances 285,800 Electrolux AB 13,761,199 14,013,620 1.4
Automobile 215,600 Garphyttan Industrier AB 2,774,235 3,067,042 0.3
Components
Automobiles & 455,700 Volvo AB (Class B) 8,621,318 9,861,845 1.0
Equipment
Banking 945,200 Sparbanken Sverige AB (Class A) 11,094,050 11,371,924 1.1
<PAGE>
Engineering 565,600 SKF AB (Class A) 10,412,644 11,683,828 1.1
53,450 SKF AB (Class B) 997,968 1,136,494 0.1
468,694 Svedala Industry AB 6,063,936 8,298,859 0.8
-------------- -------------- ------
17,474,548 21,119,181 2.0
Financial Services 482,565 Stadshypotek AB 7,621,397 11,100,499 1.1
Insurance 411,950 Skandia Forsakrings AB 9,778,411 10,255,422 1.0
Medical Supplies 326,100 Getinge Industrier AB (Class B) 5,582,240 5,576,637 0.5
Metals & Steel 828,500 Avesta-Sheffield AB 7,384,277 7,773,692 0.8
Paper & Forest 500,700 Mo och Domsjo AB (Class B) 11,769,975 12,767,933 1.3
Products 7,313,800 Rottneros Bruks AB 10,774,603 8,522,694 0.8
961,500 Stora Kopparbergs AB 11,893,654 12,077,318 1.2
-------------- -------------- ------
34,438,232 33,367,945 3.3
Total Investments in Sweden 118,529,907 127,507,807 12.5
Switzerland
Banking 154,433 CS Holding AG (Registered) 15,844,746 16,312,437 1.6
Chemicals 20,248 Clariant AG (Registered) 6,645,306 7,016,466 0.7
Consumer 44,461 Societe Suisse pour la Microelectronique
Products et l'Horlogerie AG (Registered) 6,244,014 6,571,140 0.6
Diversified Holdings 157,055 Oerlikon-Buehrle Holding AG 16,925,019 14,425,559 1.4
Leisure 13,500 Fotolabo S.A. 5,606,913 5,016,283 0.5
Pharmaceuticals 19,505 Ciba-Geigy AG 13,001,098 23,143,458 2.3
7,340 Sandoz AG (Registered) 7,986,598 8,188,243 0.8
-------------- -------------- ------
20,987,696 31,331,701 3.1
Total Investments in Switzerland 72,253,694 80,673,586 7.9
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Percent of
Industries Held Investments Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Turkey
Banking 12,450,000 Turkiye Is Bankasi A.S. $ 1,307,643 $ 986,790 0.1%
Beverages 176,000 Erciyas Biracilik Ve Malt Sanayii A.S. 117,438 92,999 0.0
158,025 Guney Biracilik Ve Malt Sanayii A.S. 32,706 34,634 0.0
-------------- -------------- ------
150,144 127,633 0.0
Consumer Goods 5,130,000 Arcelik A.S. 393,940 406,605 0.0
Diversified Holdings 5,500,000 Alarko Holdings A.S. 1,052,794 908,190 0.1
1,760,416 Eczacibasi Yatirim Holding Ortakligi
A.S. 202,742 128,960 0.0
-------------- -------------- ------
1,255,536 1,037,150 0.1
Metal Fabricating 7,304,000 Eregli Demir Ve Celik Fabrikalari T.A.S. 799,424 666,631 0.1
Printing & 24,680,000 Hurriyet Gazetecilik Ve Matbaacilik A.S. 1,030,788 992,891 0.1
Publishing
Utilities--Electric 2,220,000 Cukurova Elektrik A.S. 1,874,178 1,786,238 0.2
Total Investments in Turkey 6,811,653 6,003,938 0.6
United Kingdom
Beverages 469,140 Matthew Clark PLC 5,285,783 4,987,081 0.5
Chemicals 997,000 Inspec Group PLC 5,302,536 3,518,581 0.3
Computer/ 248,500 Misys PLC 2,693,600 2,955,524 0.3
Commercial/Office
Diversified Holdings 5,468,250 Hanson PLC (Ordinary) 16,101,342 13,602,381 1.3
Financial Services 455,133 Barclays PLC 5,604,522 5,759,826 0.6
997,000 HSBC Holdings PLC 15,115,875 16,461,381 1.6
2,060,448 Lloyds TSB Group PLC 9,644,151 11,083,690 1.1
615,000 National Westminster Bank PLC 5,611,738 5,985,440 0.6
-------------- -------------- ------
35,976,286 39,290,337 3.9
<PAGE>
Food & Beverage 2,133,100 Cadbury Schweppes PLC 18,110,654 16,846,959 1.7
2,222,960 Grand Metropolitan PLC 14,283,698 15,206,558 1.5
813,800 Unilever PLC 15,027,395 15,562,143 1.5
-------------- -------------- ------
47,421,747 47,615,660 4.7
Industrials 1,910,200 Tomkins PLC 6,911,157 7,483,866 0.7
Insurance 1,193,300 Prudential Corp. PLC 5,739,834 8,029,036 0.8
Pharmaceuticals 1,508,600 Glaxo Wellcome PLC (b) 18,740,661 20,979,786 2.1
210,500 Zeneca Group PLC 4,322,374 4,548,974 0.4
-------------- -------------- ------
23,063,035 25,528,760 2.5
Real Estate 687,475 Land Securities PLC 6,551,222 6,958,001 0.7
Retail--Grocery 2,910,000 Tesco PLC 12,545,688 13,210,597 1.3
Shipping & 708,300 Peninsular & Oriental Steam
Construction Navigation Co. 5,666,308 5,340,791 0.5
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
Shares Percent of
Industries Held Investments Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
United Kingdom(concluded)
Telecommunications 3,842,600 British Telecommunications PLC $ 20,683,879 $ 21,685,947 2.1%
1,695,000 Cable & Wireless PLC 11,441,733 10,725,331 1.1
-------------- -------------- ------
32,125,612 32,411,278 3.2
Utilities--Electric, 458,350 Anglian Water PLC 4,170,424 3,990,542 0.4
Gas & Water 2,997,400 British Gas PLC (Ordinary) 11,286,460 8,947,311 0.9
517,175 Severn Trent PLC 5,282,947 4,607,218 0.5
831,000 South West Water PLC 6,526,211 9,185,805 0.9
687,000 Thames Water PLC 5,710,625 5,746,264 0.6
609,500 United Utilities PLC 5,559,936 5,334,930 0.5
529,650 Yorkshire Water PLC 5,154,410 5,228,888 0.5
-------------- -------------- ------
43,691,013 43,040,958 4.3
Total Investments in the United Kingdom 249,075,163 253,972,851 25.0
<PAGE>
Face
Amount Short-Term Securities
Repurchase US$ 3,396,000 UBS Securities Funding Corp., purchased
Agreements** on 7/31/1996 to yield 5.60% to 8/01/1996 3,396,000 3,396,000 0.3
Total Investments in Short-Term Securities 3,396,000 3,396,000 0.3
Total Investments $ 954,648,843 1,006,726,784 99.0
==============
Unrealized Depreciation on Forward Foreign Exchange Contracts++ (377,202) 0.0
Other Assets Less Liabilities 9,921,952 1.0
-------------- ------
Net Assets $1,016,271,534 100.0%
============== ======
Net Asset Class A--Based on net assets of $195,860,604 and
Value: 12,451,745 shares of beneficial interest outstanding $ 15.73
==============
Class B--Based on net assets of $701,663,401 and
47,936,359 shares of beneficial interest outstanding $ 14.64
==============
Class C--Based on net assets of $12,158,389 and
831,926 shares of beneficial interest outstanding $ 14.61
==============
Class D--Based on net assets of $106,589,140 and
6,811,909 shares of beneficial interest outstanding $ 15.65
==============
<FN>
(a)Warrants entitle the Fund to purchase a predetermined number of
shares of common stock. The purchase prices and number of shares are
subject to adjustment under certain conditions until the expiration
date.
(b)Formerly Glaxo Holdings PLC.
(c)Created as a result of the merger of Kymmene Corporation and
Repola Ltd.
*Global Depositary Receipts (GDR).
**Repurchase Agreements are fully collateralized by US Government &
Agency Obligations.
++Forward foreign exchange contracts sold as of July 31, 1996 were
as follows:
<PAGE>
Foreign Expiration Unrealized
Currency Sold Date Depreciation
Chf 47,666,000 October 1996 $ (51,793)
DM 73,487,500 October 1996 (161,226)
Frf 299,526,000 October 1996 (164,183)
Nlg 49,247,100 August 1996 --
Total Unrealized Depreciation on Forward
Foreign Exchange Contracts--Net
(US$ Commitment--$180,000,000) $(377,202)
=========
</TABLE>
EQUITY PORTFOLIO CHANGES
For the Quarter Ended July 31, 1996
Additions
CS Holding AG (Registered)
Carli Gry International A/S
Commerzbank AG (Warrants)
Cukurova Elektrik A.S.
Degussa AG
Ente Nazionale Idrocarburi S.p.A. (Warrants)
Fortis Amev N.V.
Fotolabo S.A.
Henkel KGaA
Kondor Wessels Groep N.V.
Orkla A.S. (Class A)
Portugal Telecom S.A.
Severoceske Doly
Sparbanken Sverige AB (Class A)
Tesco PLC
Tisza Vegyi Kombinat Re'szve'nyta'rsasa'g (GDR)
Wielkopolsky Bank Kredytowy S.A.
Zagrebacka Banka (GDR)
Deletions
ABN AMRO Holding N.V.
Ahrend Groep N.V.
Amev N.V.
Banco de Fomento e Exterior (BFE)
Banco Popular Espanol S.A.
Bank Przemyslowo-Hanlowy S.A.
Compagnie de Saint-Gobain S.A
Deutsche Bank AG
Eczacibasi Ilac Sanayi Ve Ticaret A.S.
Enka Holding Yatirim A.S.
Intema Insaat Ve Tesisat Malz. Yat. Ve Paz. A.S.
Mannesmann AG
Norsk Hydro A.S.
Peg Profilo Elektrikli Gerecler Sanayii A.S.
Rauma OY
Repsol S.A.
Royal Ptt Nederland N.V.
Vertex A.S.
<PAGE>
PORTFOLIO INFORMATION
Percent of
Ten Largest Equity Holdings Net Assets
UPM-Kymmene Corp. 3.1%
Henkel KGaA (Preferred) 2.7
Ciba-Geigy AG 2.3
British Telecommunications PLC 2.1
Bayer AG 2.1
Glaxo Wellcome PLC 2.1
EuraFrance S.A. 1.9
Peugeot S.A. 1.7
Societa Finanziaria Telefonica
S.p.A. (STET) 1.7
Cadbury Schweppes PLC 1.7
Percent of
Ten Largest Industries Net Assets
Financial Services 11.0%
Paper & Forest Products 10.5
Pharmaceuticals 7.7
Chemicals 7.3
Telecommunications 5.5
Diversified Holdings 5.4
Banking 4.8
Food & Beverage 4.7
Utilities--Electric, Gas & Water 4.3
Insurance 4.2
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
Alan J. Albert, Vice President
Donald C. Burke, Vice President
Adrian C. Holmes, Vice President and
Portfolio Manager
Gerald M. Richard, Treasurer
Robert Harris, Secretary
<PAGE>
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
