MERRILL LYNCH
EUROFUND
FUND LOGO
Semi-Annual Report
April 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 representa-
tion 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 informa-
tion 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 April 30, 1996
A pie chart illustrating the following percentages:
France 14.5%
Croatia 0.1%
Poland 1.5%
Hungary 1.7%
Spain 3.2%
Switzerland 6.2%
Finland 7.0%
Netherlands 9.7%
Sweden 12.9%
Italy 9.0%
Germany 7.1%
Norway 2.1%
Czech republic 1.2%
Ireland 1.1%
Turkey 0.8%
Greece 0.6%
Portugal 0.2%
United Kingdom 21.1%
<PAGE>
EUROPEAN STOCK MARKET PERFORMANCE
Total Return for the
Three-Month Period
Ended April 30, 1996
in US dollars*
A bar graph illustrating the following percentages:
Germany - 2.3
Finland + 1.0
United Kingdom + 2.8
Netherlands + 6.1
France + 7.1
Ireland + 7.5
Italy + 8.0
Spain + 8.1
Switzerland + 8.8
Norway +11.8
Sweden +12.4
Source: Financial Times/Standard & Poor's--Actuaries Index.
[FN]
*For the three-month period ended April 30, 1996, total investment
return for the Financial Times/ Standard & Poor's--actuaries
Europe Index was +4.22%.
<PAGE>
DEAR SHAREHOLDER
During the quarter ended April 30, 1996, the
unmanaged Financial Times/Standard & Poor's--
Actuaries Europe Index had a total return of +4.22%.
For the same period, Merrill Lynch EuroFund's
Class A, Class B, Class C and Class D Shares had total
returns of +8.34%, +8.03%, +8.04% and +8.31%,
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 and 5 of this report to shareholders.)
The Fund outperformed the benchmark index
because of the investment strategy we established
last year and reinforced in subsequent quarters. Our
strategy was based on the view that cyclical stocks
were substantially undervalued relative to most other
market sectors, especially consumer-related stocks.
The global economic environment improved signifi-
cantly over the quarter ended April 30, 1996, with
strong growth in the United States and Japan and
stabilization in Europe. As signs of economic growth
began to emerge, economically sensitive stocks began
to outperform. The Fund also benefited from its
currency hedging strategy during the April quarter.
Next year could be the first year since 1988 where
strong growth exists on a global basis. The easy
monetary policies which encouraged growth seemed
unlikely to be reversed in the short term.
In Europe, economic data remained mixed but with a
bias toward improvement. Industrial production con-
tinued to be subdued as the destocking process
progressed. It now appears that inventories are back
to near normal levels and, as orders improve, indus-
trial production growth should resume. The recent
weakness of European currencies also bodes well
for European export growth, especially as demand
firms in overseas markets.
Recent cuts in short-term interest rates provided
encouragement to consumers. Demand was particu-
larly strong in the United Kingdom, while France and
Germany experienced tentative signs of renewed
consumer spending growth. The rise in long-term
yields has so far been insufficient to negatively impact
sectors usually influenced by long-term interest rates
such as housing and construction. Although the
pick-up in long-term interest rates suggests renewed
growth and concomitant inflation pressures, the
inflation outlook remains moderate.
<PAGE>
Currently, the only drag on economic growth is in the
fiscal area. Fiscal policy remains tight and is being
tightened further in many countries in order to meet
the demanding criteria for European Monetary Union
(EMU) membership. Over the course of the last few
months, it became increasingly apparent that the
political will for EMU to proceed is so strong that it
is unlikely to be delayed. Although no relaxation of
the criteria was announced, it appears that certain
countries will be "accommodated" if their economies
are at least on track toward meeting the criteria. As
such, the convergence in bond yields which was a
feature of the previous quarter, could well continue.
Another key trend established late last year was the
increased focus by corporate managements on
enhancing shareholder values. Although much was
said, little progress has been achieved. However,
major moves were made in Switzerland and Germany
recently, and most major companies in Europe are
currently considering ways to unlock shareholder
value, whether by further restructuring, share
buybacks, special dividends, higher payout ratios
on an ongoing basis, divestments or mergers. This
new focus could have major implications for stock
market returns over the next few years. The Fund
has significant investments in stocks which we believe
could benefit significantly from this trend.
Investment Strategy
Our strategy for the Fund was little changed over the
quarter ended April 30, 1996, although cash reserves
were reduced as investment opportunities, especially
in the areas mentioned above, developed. As equity
markets rose and bond markets fell, the relative
attraction of equities deteriorated. However, corpo-
rate earnings estimates are starting to rise again,
which could assist in redressing this deterioration.
As indicated in our last letter to shareholders, a
dichotomy between the valuation of economically
sensitive stocks and growth/consumer stocks still
exists. With the Fund heavily weighted in the more
attractively valued areas of the stock market, we still
believe there is upward revaluation potential, even if
markets as a whole have already seen a good propor-
tion of their performance for the year.
<PAGE>
With the US dollar rising significantly from its lows,
we feel that its upside potential is now quite limited.
Therefore, the currency hedging strategy was closed
out, and the benefits of the policy locked in. A new
hedging strategy is not anticipated unless the US
dollar retraces some of its gains.
Some changes were made to the geographic alloca-
tions of the Fund. Investments in Italy were increased
prior to the election result which was well received
by investors, and Switzerland was increased for stock-
specific reasons. The trend to increase exposure to
emerging European markets, and especially Eastern
Europe, has continued. Investments in Spain and
Holland were cut back sharply because of the
exceptional performance of certain stocks within
those markets.
The broad sector weightings of the Fund were
adjusted slightly to reflect the change in the eco-
nomic environment. We cut back investments in the
financial sector which tends to underperform in
periods of rising bond yields. The proceeds from these
sales were invested primarily in stocks trading at
substantial discounts to asset values, which should
perform well as the shareholder value concept gains
credence and the underlying assets begin to appreci-
ate in value. The exposure to small-capitalization
stocks was also increased as these stocks often out-
perform large-capitalization stocks in periods of
economic growth.
In Conclusion
European markets in general moved strongly upward
in the last few months, reducing the near-term
potential for appreciation. However, we believe that
the trends which are becoming established will con-
tinue to favor the portfolio emphasis we have in
place, and that local currency returns could remain
positive. The principal risks are an unsustainable
acceleration in economic growth caused by the mag-
nitude and duration of easy monetary policy, and
potential problems arising as countries attempt to
meet the criteria for EMU.
<PAGE>
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Adrian C. Holmes)
Adrian C. Holmes
Vice President and Portfolio Manager
June 12, 1996
OFFICERS AND TRUSTEES
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
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
<PAGE>
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 distribu-
tion 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 8 years.
* Class C Shares are subject to a distribution fee of 0.75%
and an account maintenance fee of 0.25%. In addition,
Class C Shares are subject to a 1% contingent deferred
sales charge if redeemed within one year of purchase.
* Class D Shares incur a maximum initial sales charge of
5.25% and an account maintenance fee of 0.25% (but no
distribution fee).
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 mainte-
nance, distribution and transfer agency fees applicable
to each class, which are deducted from the income avail-
able to be paid to shareholders.
<PAGE>
<TABLE>
Recent Performance Results*
<CAPTION>
12 Month 3 Month
4/30/96 1/31/96 4/30/95 % Change % Change
<S> <C> <C> <C> <C> <C>
ML EuroFund Class A Shares $15.71 $14.50 $14.63 +14.98%(1) +8.34%
ML EuroFund Class B Shares 14.66 13.57 13.86 +13.76(1) +8.03
ML EuroFund Class C Shares 14.64 13.55 13.85 +13.69(1) +8.04
ML EuroFund Class D Shares 15.64 14.44 14.61 +14.65(1) +8.31
ML EuroFund Class A Shares--Total Return +15.53(2) +8.34
ML EuroFund Class B Shares--Total Return +14.33(2) +8.03
ML EuroFund Class C Shares--Total Return +14.27(2) +8.04
ML EuroFund Class D Shares--Total Return +15.20(2) +8.31
<FN>
*Investment results do not reflect shown 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 $0.071 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 3/31/96 +19.88% +13.58%
Five Years Ended 3/31/96 +11.66 +10.46
Inception (10/26/88)
through 3/31/96 +11.53 +10.72
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<PAGE>
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/96 +18.63% +14.63%
Five Years Ended 3/31/96 +10.53 +10.53
Inception (1/30/87)
through 3/31/96 + 8.06 + 8.06
[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 3/31/96 +18.48% +17.48%
Inception (10/21/94)
through 3/31/96 +10.53 +10.53
[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 3/31/96 +19.53% +13.26%
Inception (10/21/94)
through 3/31/96 +11.47 + 7.38
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
PERFORMANCE DATA (concluded)
<PAGE>
<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--4/30/96 14.27 15.71 -- -- +10.09
------ ------
Total $1.746 Total $1.728
Cumulative total return as of 4/30/96: +130.93%**
</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--4/30/96 13.36 14.66 -- -- + 9.73
------ ------
Total $2.483 Total $1.668
Cumulative total return as of 4/30/96: +108.69%***
</TABLE>
<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--4/30/96 13.35 14.64 -- -- + 9.66
------ ------
Total $1.723 Total $0.960
<PAGE>
Cumulative total return as of 4/30/96: +18.55%***
</TABLE>
<TABLE>
Performance Summary--Class D 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 $15.75 $13.61 $0.737 $0.889 - 2.93%
1995 13.61 14.22 0.986 0.071 +12.44
1/1/96--4/30/96 14.22 15.64 -- -- + 9.99
------ ------
Total $1.723 Total $0.960
Cumulative total return as of 4/30/96: +20.04%**
<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>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Shares Value Percent of
Industry Held Investments Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Croatia
Pharmaceuticals 33,000 ++Pliva D.D. (GDR)* $ 617,430 $ 1,060,125 0.1%
Total Investments in Croatia 617,430 1,060,125 0.1
Czech Republic
Banking 38,060 Komercni Banka A.S. 993,579 982,079 0.1
Building
Materials 2,960 ++Vertex A.S. 173,793 190,146 0.0
Investment
Fund 33,000 ++Zivnobanka--Investicni Fond 545,247 547,486 0.1
Metals & Mining 27,500 ++VSZ 389,875 525,966 0.0
126,500 ++Zavod SNP 1,891,018 2,173,399 0.2
------------ -------------- ------
2,280,893 2,699,365 0.2
Pharmaceuticals 30,797 ++Slovakofarma 1,875,976 2,460,925 0.2
Telecommunications 27,500 ++SPT Telecom A.S. 2,535,302 3,364,883 0.3
Utility 55,000 ++Ceske Energeticke Zavody 1,659,778 1,662,648 0.2
Total Investments in the Czech Republic 10,064,568 11,907,532 1.1
Finland
Machine--Diversified 195,000 Rauma OY 3,519,206 3,543,405 0.3
Metals & Mining 505,700 Outokumpu OY 7,530,001 8,855,076 0.8
Paper & Forest
Products 2,003,700 Enso-Gutzeit OY 'R' (Ordinary) (Registered) 14,186,087 15,929,307 1.5
457,660 Kymmene OY 13,492,021 12,304,314 1.2
1,959,500 Metsa Serla OY (Class B) 14,945,500 14,283,132 1.3
801,925 Repola OY 'S' 12,642,630 15,532,453 1.5
------------ -------------- ------
55,266,238 58,049,206 5.5
Total Investments in Finland 66,315,445 70,447,687 6.6
France
Automobiles &
Equipment 141,315 Peugeot S.A. 17,468,422 19,698,703 1.8
Banking 87,750 Societe Generale 9,244,244 10,165,074 0.9
Beverage/Tobacco 70,800 Groupe Danone 11,247,721 10,675,702 1.0
Building &
Construction 70,248 Compagnie de Saint-Gobain S.A. 8,027,132 8,395,311 0.8
<PAGE>
Business Services/
Computers 12,140 Ecco S.A. 2,346,456 2,721,216 0.3
Communication
Equipment 136,850 Alcatel Alsthom Cie Generale
d'Electricite S.A. 13,026,056 12,840,834 1.2
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Value Percent of
Industry Held Investments Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
France (concluded)
Construction 72,900 Bouygues S.A. $ 7,603,111 $ 7,389,227 0.7%
Financial Services 134,600 Compagnie de Suez S.A. 5,295,872 5,563,831 0.5
110,800 Compagnie Financiere de Paribas 5,604,913 7,110,710 0.7
48,020 EuraFrance S.A. 13,909,651 18,431,076 1.7
------------ -------------- ------
24,810,436 31,105,617 2.9
Insurance 389,365 Assurances Generales de France S.A. (AGF) 10,588,142 10,607,086 1.0
Machinery 177,431 Compagnie de Fives-Lille 9,488,305 18,703,992 1.7
Manufacturing 9,660 Sommer Allibert S.A. 2,862,214 2,752,806 0.3
Metal & Steel 706,150 ++Usinor-Sacilor 10,604,816 10,900,028 1.0
Total Investments in France 127,317,055 145,955,596 13.6
Germany
Banking 94,300 Deutsche Bank AG 4,594,297 4,513,236 0.4
135,993 Deutsche Bank AG (Warrants) (a) 2,264,746 2,217,759 0.2
------------ -------------- ------
6,859,043 6,730,995 0.6
Chemicals 61,685 Bayer AG 12,936,346 19,837,381 1.8
8,230 Henkel KGaA (Preferred) 3,143,800 3,151,344 0.3
------------ -------------- ------
16,080,146 22,988,725 2.1
Engineering 321,783 ++Kloeckner Werke AG 14,985,368 10,831,052 1.0
21,254 Mannesmann AG 5,728,562 7,251,039 0.7
------------ -------------- ------
20,713,930 18,082,091 1.7
<PAGE>
Engineering &
Construction 30,480 Philipp Holzmann AG 11,661,385 9,821,996 0.9
Retail Trade 30,485 Karstadt AG 11,896,585 11,370,726 1.1
55,190 Moebel Walther AG (Preferred) 2,067,520 2,178,079 0.2
------------ -------------- ------
13,964,105 13,548,805 1.3
Total Investments in Germany 69,278,609 71,172,612 6.6
Greece
Beverages 35,750 Hellenic Bottling Co. 991,391 1,283,807 0.1
Engineering &
Construction 80,666 AEGEK 945,100 513,142 0.0
Telecommunications 129,370 ++Hellenic Tellecommunication
Organization S.A. 2,142,863 2,171,563 0.2
Tobacco 60,000 Papastratos Cigarette S.A. 1,825,929 1,819,749 0.2
Total Investments in Greece 5,905,283 5,788,261 0.5
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Value Percent of
Industry Held Investments Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Hungary
Food/Grocery 27,500 ++Pick Szeged Reszvenytarsasag $ 1,236,392 $ 1,321,400 0.1%
Natural Gas 275,000 ++Mol Re Hung Oil & Gas 2,361,515 2,968,496 0.3
Pharmaceuticals 120,000 Egis 2,532,765 5,197,618 0.5
220,000 Gedeon Richter (GDR)* 3,141,407 7,755,000 0.7
------------ -------------- ------
5,674,172 12,952,618 1.2
Total Investments in Hungary 9,272,079 17,242,514 1.6
Ireland
<PAGE>
Paper & Forest
Products 4,279,417 Jefferson Smurfit Group PLC 12,726,781 11,439,755 1.1
Total Investments in Ireland 12,726,781 11,439,755 1.1
Italy
Automobiles &
Equipment 3,720,000 Fiat S.p.A. (Ordinary) 11,161,864 12,656,133 1.2
Construction/ 771,200 Italcementi S.p.A. 5,174,183 5,589,977 0.5
Building Materials
Diversified
Companies 13,030,335 ++Compagnie Industriali Riunite S.p.A. (CIR) 12,170,577 8,824,700 0.8
30,882,500 ++Montedison S.p.A. 21,738,076 18,665,605 1.8
------------ -------------- ------
33,908,653 27,490,305 2.6
Engineering 2,571,700 ++Filippo Fochi S.p.A. 8,169,638 640,801 0.1
Insurance 5,656,000 Istituto Nazionale delle Assicurazioni (INA) 7,915,888 8,672,796 0.8
Oil & Gas
Producers 2,830,800 ++Ente Nazionale Idrocarburi S.p.A. 11,074,616 12,208,195 1.1
Telecommunications 8,947,051 Societa Finanziaria Telefonica S.p.A. (STET) 21,474,033 23,408,431 2.2
Total Investments in Italy 98,878,875 90,666,638 8.5
Netherlands
Automobiles &
Equipment 152,000 Vredestein Groep N.V. 1,513,329 1,895,240 0.2
Banking 205,085 ABN AMRO Holding N.V. 7,739,553 10,598,986 1.0
Capital Goods 178,882 Ahrend Groep N.V. 2,542,036 7,785,635 0.7
Chemicals 310,870 European Vinyls Corporation International
N.V. 11,599,987 11,139,373 1.0
Diversified Holdings 35,376 Internatio-Mueller N.V. 2,822,501 3,067,033 0.3
Electrical Equipment 70,292 Twentsche Kabel Holding N.V. 2,767,218 2,956,990 0.3
Insurance 223,135 Aegon N.V. 4,699,202 10,608,761 1.0
149,660 Amev N.V. 6,221,205 10,673,183 1.0
152,763 International Nederlanden Groep N.V. 6,632,497 11,775,648 1.1
------------ -------------- ------
17,552,904 33,057,592 3.1
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Value Percent of
Industry Held Investments Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Netherlands (concluded)
Packaging &
Containers 360,100 Koninklijke KNP BT N.V. $ 8,415,518 $ 8,581,303 0.8%
Telecommunications 313,125 Royal Ptt Nederland N.V. 11,337,264 11,731,013 1.1
Transportation 202,108 KLM Royal Dutch Airlines N.V. 6,051,185 6,771,083 0.6
Total Investments in the Netherlands 72,341,495 97,584,248 9.1
Norway
Oil & Gas
Producers 670,170 Saga Petroleum A.S. (Class B) 7,879,131 9,066,952 0.9
Oil & Related 265,600 Norsk Hydro A.S. 11,124,622 12,092,364 1.1
Total Investments in Norway 19,003,753 21,159,316 2.0
Poland
Automobile
Components 68,112 ++Stomil Olsztyn S.A. 889,741 997,135 0.1
Banking 4,785 ++Bank Przemyslowo-Handlowy S.A. 180,361 244,279 0.0
Chemicals 404,195 Polifarb Wroclaw S.A. 1,034,973 1,820,698 0.2
Electrical Equipment 120,000 ++Bydgoska Fabryka Kabli S.A. 1,790,810 3,333,333 0.3
67,703 ++Elektrobudowa S.A. 860,255 833,580 0.1
------------ -------------- ------
2,651,065 4,166,913 0.4
Engineering &
Construction 883,861 Elektrim S.A. 3,895,370 5,640,254 0.5
20,258 ++Mostostal Zabrze 96,526 104,940 0.0
------------ -------------- ------
3,991,896 5,745,194 0.5
Machinery 110,000 Stalexport S.A. 1,887,541 1,936,562 0.2
Total Investments in Poland 10,635,577 14,910,781 1.4
Portugal
<PAGE>
Banking 71,020 Banco de Fomento e Exterior (BFE) 918,617 903,850 0.1
65,825 Banco Totta & Acores, S.A. 1,274,421 1,264,979 0.1
Total Investments in Portugal 2,193,038 2,168,829 0.2
Spain
Banking 63,512 Banco Popular Espanol S.A. 6,902,483 10,500,651 1.0
Construction 64,300 Fomento de Construcciones y Contratas S.A. 5,323,781 5,471,804 0.5
Petroleum 436,868 Repsol S.A. 12,275,512 15,984,229 1.5
Total Investments in Spain 24,501,776 31,956,684 3.0
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Value Percent of
Industry Held Investments Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Sweden
Appliances 285,800 Electrolux AB $ 13,761,199 $ 14,390,989 1.3%
Automobile
Components 215,600 Garphyttan Industrier AB 2,774,235 2,983,863 0.3
Automobiles &
Equipment 543,700 Volvo AB (Class B) 10,286,177 12,447,784 1.2
Engineering 565,600 SKF AB (Class A) 10,412,644 12,865,901 1.2
140,300 SKF AB (Class B) 2,684,184 3,263,751 0.3
408,350 Svedala Industry AB 9,363,783 14,609,695 1.4
------------ -------------- ------
22,460,611 30,739,347 2.9
Financial Services 482,565 Stadshypotek AB 7,621,397 10,515,256 1.0
Insurance 411,950 Skandia Forsakrings AB 9,778,411 9,401,097 0.9
Medical Supplies 108,700 Getinge Industrier AB ('B' Shares) 5,582,240 5,713,472 0.5
Metals & Steel 828,500 Avesta-Sheffield AB 7,384,277 8,538,722 0.8
<PAGE>
Paper & Forest
Products 250,350 Mo och Domsjo AB (Class B) 11,769,975 13,306,294 1.2
7,313,800 Rottneros Bruks AB 10,774,603 8,506,923 0.8
961,500 Stora Kopparbergs AB 11,893,653 12,953,070 1.2
------------ -------------- ------
34,438,231 34,766,287 3.2
Total Investments in Sweden 114,086,778 129,496,817 12.1
Switzerland
Chemicals 25,748 ++Clariant AG (Registered) 8,421,526 9,195,714 0.9
Diversified Holdings 96,125 ++Oerlikon-Buehrle Holding AG 10,364,502 10,260,534 0.9
Jewelry 84,390 Societe Suisse pour la Microelectronique et
l'Horlogerie AG (Registered) 11,851,563 12,529,815 1.2
Pharmaceuticals 19,505 Ciba-Geigy AG 13,001,098 22,557,548 2.1
7,340 Sandoz AG (Registered) 7,986,598 7,987,994 0.7
------------ -------------- ------
20,987,696 30,545,542 2.8
Total Investments in Switzerland 51,625,287 62,531,605 5.8
Turkey
Banking 7,517,000 Turkiye Is Bankasi A.S. 841,970 759,394 0.1
Beverages 550,000 Erciyas Biracilik Ve Malt Sanayii A.S. 366,993 387,478 0.0
3,839,925 Guney Biracilik Ve Malt Sanayii A.S. 816,067 816,680 0.1
------------ -------------- ------
1,183,060 1,204,158 0.1
Building Materials 550,000 Intema Insaat Ve Tesisat Malz. Yat. Ve
Paz. A.S. 167,807 124,286 0.0
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Value Percent of
Industry Held Investments Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Turkey (concluded)
<PAGE>
Consumer Goods 12,834,000 Arcelik A.S. $ 1,614,454 $ 1,484,192 0.2%
1,505,742 Peg Profilo Elektrikli Gerecler Sanayii A.S. 117,213 270,205 0.0
------------ -------------- ------
1,731,667 1,754,397 0.2
Diversified Holdings 2,750,000 Alarko Holdings A.S. 1,031,791 986,973 0.1
1,064,700 ++Eczacibasi Yatirim Holding Ortakligi A.S. 200,785 180,446 0.0
367,127 ++Enka Holding Yatirim A.S. 129,911 109,801 0.0
------------ -------------- ------
1,362,487 1,277,220 0.1
Metal Fabricating 11,000,000 Eregli Demir Ve Celik Fabrikalari T.A.S. 1,313,619 1,198,990 0.1
Pharmaceuticals 1,970,320 ++Eczacibasi Ilac Sanayi Ve Ticaret A.S. 156,446 165,001 0.0
Printing &
Publishing 22,309,515 ++Hurriyet Gazetecilik Ve Matbaacilik A.S. 877,675 1,097,238 0.1
Total Investments in Turkey 7,634,731 7,580,684 0.7
United Kingdom
Banking 621,800 Barclays PLC 7,655,770 6,882,248 0.6
Beverages 255,000 Matthew Clark PLC 2,733,106 2,956,443 0.3
Chemicals 497,000 Inspec Group PLC 2,671,025 2,537,742 0.2
Computer/
Commercial/Office 248,500 Misys PLC 2,693,600 3,067,682 0.3
Diversified Holdings 3,686,600 Hanson PLC (Ordinary) 11,061,299 10,879,293 1.0
Financial Services 997,000 HSBC Holdings PLC 15,115,875 14,748,352 1.4
2,060,448 Lloyds TSB Group PLC 9,644,151 9,871,075 0.9
615,000 National Westminster Bank PLC 5,611,738 5,657,093 0.5
------------ -------------- ------
30,371,764 30,276,520 2.8
Food & Beverage 1,837,550 Cadbury Schweppes PLC 15,832,150 14,212,108 1.3
1,770,100 Grand Metropolitan PLC 11,302,439 11,590,346 1.1
888,800 Unilever PLC 16,412,323 16,217,818 1.5
------------ -------------- ------
43,546,912 42,020,272 3.9
Industrials 1,910,200 Tomkins PLC 6,911,157 7,860,343 0.7
Insurance 1,193,300 Prudential Corp. PLC 5,739,834 8,171,967 0.8
<PAGE>
Pharmaceuticals 1,048,600 Glaxo Wellcome PLC (b) 12,614,625 12,684,913 1.2
210,500 Zeneca Group PLC 4,322,374 4,409,998 0.4
------------ -------------- ------
16,936,999 17,094,911 1.6
Real Estate 687,475 Land Securities PLC 6,551,222 6,762,547 0.6
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
Shares Value Percent of
Industry Held Investments Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
United Kingdom (concluded)
Shipping &
Construction 708,300 Peninsular & Oriental Steam Navigation Co. $ 5,666,308 $ 5,563,281 0.5%
Telecommunications 1,970,800 British Telecommunications PLC 11,128,835 10,803,078 1.0
1,695,000 Cable & Wireless PLC 11,441,733 13,262,321 1.3
------------ -------------- ------
22,570,568 24,065,399 2.3
Utilities--Electric, 458,350 Anglian Water PLC 4,170,424 4,006,197 0.4
Gas & Water 2,997,400 British Gas PLC (Ordinary) 11,286,460 10,618,127 1.0
517,175 Severn Trent PLC 5,282,947 4,660,160 0.4
831,000 South West Water PLC 6,526,211 8,523,811 0.8
687,000 Thames Water PLC 5,710,625 5,901,533 0.6
609,500 United Utilities PLC 5,559,936 5,428,008 0.5
529,650 Yorkshire Water PLC 5,154,410 5,337,324 0.5
------------ -------------- ------
43,691,013 44,475,160 4.2
Total Investments in the United Kingdom 208,800,577 212,613,808 19.8
Face
Amount Short-Term Securities
Repurchase
Agreements** $20,988,000 SBC Capital Markets, Inc., purchased on
4/30/1996 to yield 5.28% to 5/01/1996 20,988,000 20,988,000 2.0
Total Investments in Short-Term Securities 20,988,000 20,988,000 2.0
Total Investments $932,187,137 1,026,671,492 95.8
============
<PAGE>
Unrealized Appreciation on Forward Foreign Exchange Contracts++++ 15,045,918 1.4
Other Assets Less Liabilities 30,274,611 2.8
-------------- ------
Net Assets $1,071,992,021 100.0%
============== ======
<FN>
(a)Warrants entitle the Fund to purchase a predetermined number of
shares of common stock. The purchase price and numbers of shares
are subject to adjustment under certain conditions until the
expiration date.
(b)Formerly Glaxo Holdings PLC.
*Global Depositary Receipts (GDR).
**Repurchase Agreements are fully collateralized by US Government &
Agency Obligations.
++Non-income producing security.
++++Forward foreign exchange contracts as of April 30, 1996 were as follows:
Unrealized
Appreciation/
Foreign Expiration Depreciation
Currency Sold Date (Note 1c)
Chf 58,065,954 July 1996 $ 2,089,958
DM 97,898,950 July 1996 2,886,201
Frf 714,573,100 July 1996 4,632,282
Nlg 197,346,489 July 1996 7,454,853
Total (US$ Commitment--$382,000,000) $17,063,294
-----------
Foreign
Currency Purchased
Chf 58,065,954 July 1996 $ (350,694)
DM 97,898,950 July 1996 (52,072)
Frf 714,573,100 July 1996 (525,541)
Nlg 197,346,489 July 1996 (1,089,069)
Total (US$ Commitment--$366,954,082) $(2,017,376)
-----------
Total Unrealized Appreciation on Forward
Foreign Exchange Contracts--Net $15,045,918
===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of April 30, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$932,187,137) (Note 1a) $1,026,671,492
Unrealized appreciation on forward foreign exchange contracts (Note 1c) 15,045,918
Cash 617
Foreign cash (Note 1b) 3,509,756
Receivables:
Securities sold $ 44,133,815
Dividends 6,514,909
Beneficial interest sold 656,728
Interest 3,078 51,308,530
--------------
Prepaid registration fees and other assets (Note 1f) 73,663
--------------
Total assets 1,096,609,976
--------------
Liabilities: Payables:
Securities purchased 19,764,177
Beneficial interest redeemed 2,562,433
Investment adviser (Note 2) 697,245
Distributor (Note 2) 683,843 23,707,698
--------------
Accrued expenses and other liabilities 910,257
--------------
Total liabilities 24,617,955
--------------
Net Assets: Net assets $1,071,992,021
==============
<PAGE>
Net Assets Class A Shares of beneficial interest, $0.10 par value, unlimited number
Consist of: of shares authorized $ 1,282,175
Class B Shares of beneficial interest, $0.10 par value, unlimited number
of shares authorized 5,079,080
Class C Shares of beneficial interest, $0.10 par value, unlimited number
of shares authorized 84,662
Class D Shares of beneficial interest, $0.10 par value, unlimited number
of shares authorized 726,197
Paid-in capital in excess of par 866,493,128
Undistributed investment income--net 3,812,985
Undistributed realized capital gains on investments and foreign
currency transactions--net 85,058,955
Unrealized appreciation on investments and foreign currency
transactions--net 109,454,839
--------------
Net assets $1,071,992,021
==============
Net Asset Class A--Based on net assets of $201,432,384 and 12,821,754 shares of
Value: beneficial interest outstanding $ 15.71
==============
Class B--Based on net assets of $744,591,529 and 50,790,801 shares of
beneficial interest outstanding $ 14.66
==============
Class C--Based on net assets of $12,392,744 and 846,622 shares of
beneficial interest outstanding $ 14.64
==============
Class D--Based on net assets of $113,575,364 and 7,261,973 shares of
beneficial interest outstanding $ 15.64
==============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations for the Six Months Ended April 30, 1996
<S> <S> <C> <C>
Investment Dividends (net of $2,045,688 foreign withholding tax) $ 12,238,210
Income Interest 1,512,089
(Notes 1d --------------
& 1e): Total income 13,750,299
--------------
<PAGE>
Expenses: Investment advisory fees (Note 2) $ 3,995,656
Account maintenance & distribution fees--Class B (Note 2) 3,765,455
Transfer agent fees--Class B (Note 2) 827,604
Custodian fees 528,071
Transfer agent fees--Class A (Note 2) 183,061
Account maintenance fees--Class D (Note 2) 131,001
Printing and shareholder reports 123,215
Transfer agent fees--Class D (Note 2) 97,341
Accounting services (Note 2) 94,340
Account maintenance & distribution fees--Class C (Note 2) 51,142
Registration fees (Note 1f) 50,823
Professional fees 40,045
Trustees' fees and expenses 20,200
Transfer agent fees--Class C (Note 2) 12,243
Pricing fees 4,612
Other 12,505
--------------
Total expenses 9,937,314
--------------
Investment income--net 3,812,985
--------------
Realized & Realized gain from:
Unrealized Investments--net 102,025,353
Gain Foreign currency transactions--net 2,811,720 104,837,073
(Loss) on --------------
Investments Change in unrealized appreciation/depreciation on:
& Foreign Investments--net (10,230,805)
Currency Foreign currency transactions--net 18,447,007 8,216,202
Transactions -------------- --------------
- --Net Net realized and unrealized gain on investments and
(Notes 1b, foreign currency transactions 113,053,275
1c, 1e & 3): --------------
Net Increase in Net Assets Resulting from Operations $ 116,866,260
==============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the Year
Months Ended Ended
Increase (Decrease) in Net Assets: April 30, 1996 Oct. 31, 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 3,812,985 $ 5,821,964
Realized gain on investments and foreign currency transactions--net 104,837,073 74,008,615
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions--net 8,216,202 (33,482,794)
-------------- --------------
Net increase in net assets resulting from operations 116,866,260 46,347,785
-------------- --------------
<PAGE>
Distributions Realized gain on investments--net:
to Shareholders Class A (13,622,154) (22,844,949)
(Note 1g): Class B (56,048,905) (110,166,564)
Class C (685,313) (139,938)
Class D (6,991,081) (1,841,772)
-------------- --------------
Net decrease in net assets resulting from distributions to shareholders (77,347,453) (134,993,223)
-------------- --------------
Beneficial Net decrease in net assets derived from beneficial interest transactions (81,869,464) (120,582,541)
Interest -------------- --------------
Transactions
(Note 4):
Net Assets: Total decrease in net assets (42,350,657) (209,227,979)
Beginning of period 1,114,342,678 1,323,570,657
-------------- --------------
End of period* $1,071,992,021 $1,114,342,678
============== ==============
<FN>
*Undistributed investment income--net $ 3,812,985 $ --
============== ==============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Financial Highlights
<CAPTION>
Class A
For the
Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
April 30, For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: 1996++ 1995++ 1994++ 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 15.07 $ 15.96 $ 13.87 $ 10.53 $ 11.62
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .11 .19 .18 .26 .24
Realized and unrealized gain (loss) on invest-
ments and foreign currency transactions--net 1.57 .56 1.91 3.08 (1.02)
-------- -------- -------- -------- --------
Total from investment operations 1.68 .75 2.09 3.34 (.78)
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net -- -- -- -- (.31)
Realized gain on investments--net (1.04) (1.64) -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions (1.04) (1.64) -- -- (.31)
-------- -------- -------- -------- --------
Net asset value, end of period $ 15.71 $ 15.07 $ 15.96 $ 13.87 $ 10.53
======== ======== ======== ======== ========
Total Based on net asset value per share 12.02%+++ 6.19% 15.07% 31.72% (6.90%)
Investment ======== ======== ======== ======== ========
Return:**
Ratios to Expenses 1.10%* 1.12% 1.03% 1.04% 1.09%
Average ======== ======== ======== ======== ========
Net Assets: Investment income--net 1.50%* 1.32% 1.17% 1.50% (2.69%)
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $201,432 $204,713 $236,288 $182,612 $ 87,865
Data: ======== ======== ======== ======== ========
Portfolio turnover 52.81% 72.16% 82.47% 115.10% 109.95%
======== ======== ======== ======== ========
Average commission paid+++++ $ .0091 -- -- -- --
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
++Based on average shares outstanding during the period.
+++Aggregate total investment return.
+++++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.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class B
For the
Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
April 30, For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: 1996++ 1995++ 1994++ 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 14.20 $ 15.28 $ 13.43 $ 10.30 $ 11.41
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .03 .04 .02 .16 .12
Realized and unrealized gain (loss) on invest-
ments and foreign currency transactions--net 1.47 .52 1.83 2.97 (.98)
-------- -------- -------- -------- --------
Total from investment operations 1.50 .56 1.85 3.13 (.86)
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net -- -- -- -- (.25)
Realized gain on investments--net (1.04) (1.64) -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions (1.04) (1.64) -- -- (.25)
-------- -------- -------- -------- --------
Net asset value, end of period $ 14.66 $ 14.20 $ 15.28 $ 13.43 $ 10.30
======== ======== ======== ======== ========
Total Based on net asset value per share 11.45%+++ 5.12% 13.78% 30.39% (7.73%)
Investment ======== ======== ======== ======== ========
Return:**
Ratios to Expenses 2.13%* 2.15% 2.06% 2.08% 2.12%
Average ======== ======== ======== ======== ========
Net Assets: Investment income--net .43%* .27% .14% .51% (3.37%)
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $744,592 $795,469 $1,086,480 $765,279 $447,104
Data: ======== ======== ======== ======== ========
Portfolio turnover 52.81% 72.16% 82.47% 115.10% 109.95%
======== ======== ======== ======== ========
Average commission paid+++++ $ .0091 -- -- -- --
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
++Based on average shares outstanding during the period.
+++Aggregate total investment return.
+++++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.
<PAGE>
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class C Class D
For the For the For the For the
The following per share data and ratios Six For the Period Six For the Period
have been derived from information Months Year Oct. 21, Months Year Oct. 21,
provided in the financial statements. Ended Ended 1994++ to Ended Ended 1994++ to
April 30, Oct. 31, Oct. 31, April 30, Oct. 31, Oct. 31,
Increase (Decrease) in Net Asset Value: 1996++++ 1995++++ 1994++++ 1996++++ 1995++++ 1994++++
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 14.19 $ 15.28 $ 15.08 $ 15.02 $ 15.96 $ 15.75
Operating -------- -------- -------- -------- -------- --------
Performance: Investment income (loss)-- net .04 .01 (.01) .09 .20 .00++++++
Realized and unrealized gain
on investments and foreign
currency transactions--net 1.45 .54 .21 1.57 .50 .21
-------- -------- -------- -------- -------- --------
Total from investment operations 1.49 .55 .20 1.66 .70 .21
-------- -------- -------- -------- -------- --------
Less distributions from realized gain
on investments--net (1.04) (1.64) -- (1.04) (1.64) --
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 14.64 $ 14.19 $ 15.28 $ 15.64 $ 15.02 $ 15.96
======== ======== ======== ======== ======== ========
Total Based on net asset value
Investment per share 11.38%+++ 5.04% 1.33%+++ 11.92%+++ 5.85% 1.33%+++
Return:** ======== ======== ======== ======== ======== ========
<PAGE>
Ratios to Expenses 2.15%* 2.18% 2.86%* 1.35%* 1.38% 2.11%*
Average ======== ======== ======== ======== ======== ========
Net Assets: Investment income (loss)--net .60%* .11% (2.47%)* 1.27%* 1.37% (1.70%)*
======== ======== ======== ======== ======== ========
Supplemental Net assets, end of period
Data: (in thousands) $ 12,393 $ 9,668 $ 462 $113,575 $104,493 $ 340
======== ======== ======== ======== ======== ========
Portfolio turnover 52.81% 72.16% 82.47% 52.81% 72.16% 82.47%
======== ======== ======== ======== ======== ========
Average commission paid+++++ $ .0091 -- -- $ .0091 -- --
======== ======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
+++Aggregate total investment return.
+++++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.
++Commencement of Operations.
++++Based on average shares outstanding during the period.
++++++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch EuroFund (the "Fund") is registered
under the Investment Company Act of 1940 as a diver-
sified, open-end management investment company.
These unaudited financial statements reflect all adjust-
ments which are, in the opinion of management, neces-
sary 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 PricingSM 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 ex-
penses 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 dis-
tribution 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 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. Securi-
ties 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 move-
ments 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.
<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 covered
call options and purchase put 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 sub-
sequently 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).
NOTES TO FINANCIAL STATEMENTS (continued)
Written and purchased options are non-income
producing investments.
<PAGE>
(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 provi-
sion is required. Under the applicable foreign tax law, a
withholding tax may be imposed on interest, dividends,
and capital gains at various rates.
(e) Security transactions and investment income--
Security transactions are recorded on the dates the
transactions are entered into (the trade dates). Dividend
income is recorded on the ex-dividend dates, except that
if the ex-dividend date has passed, certain dividends
from foreign securities are recorded as soon as the Fund
is informed of the ex-dividend date. Interest income
is recognized on the accrual basis. Realized gains and
losses on security transactions are determined on the
identified cost basis.
(f) Prepaid registration fees--Prepaid registration fees
are charged to expense as the related shares are issued.
(g) Dividends and distributions--Dividends and distri-
butions 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 sub-
sidiary 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, facili-
ties, 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 computed at the rate of 0.15% of the average
daily net assets of the Fund for providing investment
advisory services to MLAM with respect to the Fund.
For the six months ended April 30, 1996, MLAM paid
MLAM UK a fee of $798,254 pursuant to such Agreement.
<PAGE>
Certain states in which shares of the Fund are
qualified for sale impose limitations on the expenses of
the Fund. The most restrictive annual expense limitation
requires that MLAM reimburse the Fund to the extent
the Fund's expenses (excluding interest, taxes, distri-
bution fees, brokerage fees and commissions, and
extraordinary items) exceed 2.5% of the Fund's first
$30 million of average daily net assets, 2.0% of the next
$70 million of average daily net assets and 1.5% of the
average daily net assets in excess thereof. MLAM's obli-
gation to reimburse the Fund is limited to the amount of
the management fee. No fee payment will be made to
MLAM during any fiscal year which will cause such
expenses to exceed the most restrictive expense limita-
tion at the time of such payment.
Pursuant to the distribution plans (the "Distribution
Plans") adopted by the Fund in accordance with
Rule 12b-1 under the Investment Company Act of 1940,
the Fund pays the Distributor ongoing account mainte-
nance 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
Maintenance Fee Distribution Fee
Class B 0.25% 0.75%
Class C 0.25% 0.75%
Class D 0.25% --
Pursuant to a sub-agreement with the Distributor,
Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S"),
a subsidiary of ML & Co., also provides account main-
tenance and distribution services to the Fund. The
ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account main-
tenance services to Class B, Class C and Class D share-
holders. The ongoing distribution fee compensates the
Distributor and MLPF&S for providing shareholder and
distribution-related services to Class B and Class C
shareholders.
<PAGE>
For the six months ended April 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 $2,492 $30,896
Class D $4,732 $59,383
For the six months ended April 30, 1996, MLPF&S
received contingent deferred sales charges of $858,730
and $2,811 relating to transactions in Class B and
Class C Shares, respectively.
In addition, MLPF&S received $131,216 in commissions
on the execution of portfolio security transactions for
the Fund for the six months ended April 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 April 30, 1996
were $533,212,080 and $632,358,939, respectively.
Net realized and unrealized gains (losses) as of April 30,
1996 were as follows:
Realized Unrealized
Gains (Losses) Gains (Losses)
Investments:
Long-term $102,025,353 $94,484,355
------------ ------------
Currency transactions:
Options purchased (1,120,982) --
Options written 5,423,750 --
Foreign currency transactions (1,354,249) (75,434)
Forward foreign
exchange contracts (136,799) 15,045,918
------------ ------------
Total currency transactions 2,811,720 14,970,484
------------ ------------
Total $104,837,073 $109,454,839
============ ============
<PAGE>
Transactions in put options written for the six months
ended April 30, 1996 were as follows:
Premiums
Par Value Received
Outstanding put options
written at beginning of period $560,000,000 $5,498,550
Options expired (474,000,000) (4,650,200)
Options closed (86,000,000) (848,350)
------------ ----------
Outstanding put options
written at end of period $ -- $ --
============ ==========
As of April 30, 1996, net unrealized appreciation for
Federal income tax purposes aggregated $94,484,355, of
which $128,750,081 related to appreciated securities
and $34,265,726 related to depreciated securities. The
aggregate cost of investments at April 30, 1996 for
Federal income tax purposes was $932,187,137.
4. Shares of Beneficial Interest:
Net decrease in net assets derived from beneficial
interest transactions was $81,869,464 and $120,582,541
for the six months ended April 30, 1996 and for the
year ended October 31, 1995, respectively.
Transactions in shares of beneficial interest for each
class were as follows:
Class A Shares for the Six Dollar
Months Ended April 30, 1996 Shares Amount
Shares sold 1,737,665 $ 25,889,965
Shares issued to shareholders in
reinvestment of distributions 885,595 12,345,189
------------- -------------
Total issued 2,623,260 38,235,154
Shares redeemed (3,386,933) (50,373,659)
------------- -------------
Net decrease (763,673) $ (12,138,505)
============= =============
<PAGE>
Class A Shares for the Year Dollar
Ended October 31, 1995 Shares Amount
Shares sold 3,992,118 $ 59,286,758
Shares issued to shareholders in
reinvestment of distributions 1,491,120 19,695,986
------------- -------------
Total issued 5,483,238 78,982,744
Shares redeemed (6,703,037) (97,147,606)
------------- -------------
Net decrease (1,219,799) $ (18,164,862)
============= =============
Class B Shares for the Six Dollar
Months Ended April 30, 1996 Shares Amount
Shares sold 3,162,823 $ 43,658,160
Shares issued to shareholders in
reinvestment of distributions 3,757,600 49,074,253
------------- -------------
Total issued 6,920,423 92,732,413
Shares redeemed (11,739,730) (162,979,596)
Automatic conversion of
shares (408,896) (5,715,197)
------------- -------------
Net decrease (5,228,203) $ (75,962,380)
============= =============
Class B Shares for the Year Dollar
Ended October 31, 1995 Shares Amount
Shares sold 8,300,407 $ 118,574,899
Shares issued to shareholders in
reinvestment of distributions 7,573,598 95,092,943
------------- -------------
Total issued 15,874,005 213,667,842
Shares redeemed (23,991,158) (330,882,601)
Automatic conversion of
shares (6,951,752) (95,508,046)
------------- -------------
Net decrease (15,068,905) $(212,722,805)
============= =============
<PAGE>
Class C Shares for the Six Dollar
Months Ended April 30, 1996 Shares Amount
Shares sold 1,110,233 $ 15,426,242
Shares issued to shareholders in
reinvestment of distributions 48,253 629,693
------------- -------------
Total issued 1,158,486 16,055,935
Shares redeemed (993,222) (13,808,120)
------------- -------------
Net increase 165,264 $ 2,247,815
============= =============
NOTES TO FINANCIAL STATEMENTS (concluded)
Class C Shares for the Year Dollar
Ended October 31, 1995 Shares Amount
Shares sold 1,234,402 $ 17,745,431
Shares issued to shareholders in
reinvestment of distributions 10,171 128,000
------------- -------------
Total issued 1,244,573 17,873,431
Shares redeemed (593,463) (8,515,458)
------------- -------------
Net increase 651,110 $ 9,357,973
============= =============
Class D Shares for the Six Dollar
Months Ended April 30, 1996 Shares Amount
Shares sold 5,792,844 $ 86,432,574
Automatic conversion of
shares 384,823 5,715,197
Shares issued to shareholders in
reinvestment of distributions 421,472 5,854,245
------------- -------------
Total issued 6,599,139 98,002,016
Shares redeemed (6,292,341) (94,018,410)
------------- -------------
Net increase 306,798 $ 3,983,606
============= =============
<PAGE>
Class D Shares for the Year Dollar
Ended October 31, 1995 Shares Amount
Shares sold 2,264,532 $ 34,246,830
Automatic conversion of
shares 6,576,119 95,508,046
Shares issued to shareholders in
reinvestment of distributions 127,438 1,690,498
------------- -------------
Total issued 8,968,089 131,445,374
Shares redeemed (2,034,217) (30,498,221)
------------- -------------
Net increase 6,933,872 $ 100,947,153
============= =============
6. Commitments:
At April 30, 1996, the Fund had outstanding 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 aggregating
approximately $11,299,000 and $14,169,000, respectively.
PORTFOLIO INFORMATION
As of April 30, 1996 Percent of
Ten Largest Equity Holdings Net Assets
Societa Finanziaria Telefonica S.p.A. (STET) 2.2%
Ciba-Geigy AG 2.1
Bayer AG 1.8
Peugeot S.A. 1.8
Montedison S.p.A. 1.8
Compagnie de Fives-Lille 1.7
EuraFrance S.A. 1.7
Unilever PLC 1.5
Repsol S.A. 1.5
Enso-Gutzeit OY `R' (Ordinary) (Registered) 1.5
<PAGE>
Percent of
Ten Largest Industries Net Assets
Paper & Forest Products 9.8%
Financial Services 6.7
Insurance 6.6
Telecommunications 6.1
Pharmaceuticals 5.9
Engineering 4.7
Banking 4.5
Chemicals 4.4
Automobiles & Equipment 4.4
Utilities--Electric, Gas & Water 4.2
PORTFOLIO CHANGES
For the Quarter Ended April 30, 1996
Additions
Alarko Holdings A.S.
Anglian Water PLC
Arcelik A.S.
Banco de Fomento e Exterior (BFE)
Bank Przemyslowo-Handlowy S.A.
Barclays PLC
Bouygues S.A.
British Gas PLC (Ordinary)
British Telecommunications PLC
Ceske Energeticke Zavody
Clariant AG (Registered)
Ecco S.A.
Eczacibasi Ilac Sanayi Ve Ticaret A.S.
Elektrobudowa S.A.
Ente Nazionale Idrocarburi S.p.A.
Eregli Demir Ve Celik Fabrikalari T.A.S.
Fomento de Construcciones y Contratas S.A.
Garphyttan Industrier AB
Getinge Industrier AB (`B' Shares)
Groupe Danone
<PAGE>
Guney Biracilik Ve Malt Sanayii A.S.
Hanson PLC (Ordinary)
Hellenic Tellecommunication Organization S.A.
Henkel KGaA (Preferred)
Inspec Group PLC
Intema Insaat Ve Tesisat Malz. Yat. Ve Paz. A.S.
Internatio-Mueller N.V.
Italcementi S.p.A.
Karstadt AG
Komercni Banka A.S.
Koninklijke KNP BT N.V.
Land Securities PLC
Matthew Clark PLC
Misys PLC
Moebel Walther AG (Preferred)
Oerlikon-Buehrle Holding AG
Peg Profilo Elektrikli Gerecler Sanayii A.S.
Philipp Holzmann AG
Pick Szeged Reszvenytarsasag
Pliva D.D. (GDR)
Sandoz AG (Registered)
Skandia Forsakrings AB
Societe Suisse pour la Microelectronique et
l'Horlogerie AG (Registered)
Sommer Allibert S.A.
South West Water PLC
Stalexport S.A.
Thames Water PLC
Turkiye Is Bankasi A.S.
Twentsche Kabel Holdings N.V.
Unilever PLC
United Utilities PLC
Vertex A.S.
Zavod SNP
Zeneca Group PLC
Zivnobanka-Investicni Fond
Deletions
BBC Brown Boveri & Cie (Bearer)
The British Petroleum Co. PLC
CRH PLC
Christiania Bank OG Kreditkass
Empresa Nacional de
Electricidad S.A.
Fabryka Kotlow Rafako S.A.
General Electric Co. PLC (Ordinary)
Hoechst AG
J Sainsbury PLC
Merita Bank Ltd.
Metrostav AS
Nokia OY
<PAGE>
Otosan Otomobil Sanayii A.S.
Pharmacia & Upjohn Inc.
Philips Electronics N.V.
Racal Electronics PLC
Societe Nationale Elf Aquitaine
T&N PLC
Tate & Lyle PLC
Tele Danmark AS (Class B)
Turk Siemens Kabb Ve Elektrik Sanayii A.S.
Turk Sise Ve Cam Fabrikalari A.S.
V.A. Technologie AG
Veba AG (Warrants)
Vodafone Group PLC
Yapi Ve Kredi Bankasi A.S.
