MERRILL LYNCH
EUROFUND
FUND LOGO
Quarterly Report
July 31, 1997
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
Printed on post-consumer recycled paper
MERRILL LYNCH EUROFUND
PORTFOLIO INFORMATION
As a Percentage of Stocks
As of July 31, 1997
A pie chart illustrating the following percentages:
<PAGE>
Romania 0.2%
Denmark 0.6%
Slovakia 0.5%
Ireland 0.3%
Portugal 0.8%
Hungary 1.8%
Finland 5.0%
Switzerland 4.5%
Germany 11.3%
France 19.0%
Netherlands 10.6%
Sweden 7.4%
Italy 6.7%
Norway 1.3%
Poland 1.5%
Turkey 1.0%
Croatia 0.7%
Greece 0.4%
Czech Republic 0.4%
Russia 0.2%
United Kingdom 25.8%
EUROPEAN STOCK MARKET PERFORMANCE
Total Return for the
Three-Month Period
Ended July 31, 1997
In US dollars*
A bar graph illustrating the following percentages:
Spain + 8.7
France + 9.1
Norway + 9.6
United Kingdom +11.1
Denmark +12.6
Ireland +15.0
Italy +15.8
Switzerland +17.6
Germany +19.7
Sweden +21.3
Finland +21.8
Netherlands +22.9
Source: Financial Times/Standard & Poor's--Actuaries Index.
[FN]
*For the three-month period ended July 31, 1997, total investment
return for the Financial Times/Standard & Poor's--Actuaries Europe
Index was +14.31%.
DEAR SHAREHOLDER
<PAGE>
During the quarter ended July 31, 1997, the unmanaged Financial
Times/Standard & Poor's--Actuaries Europe Index had a total return
of +14.31%, while the total return for the unmanaged Morgan Stanley
Capital International Europe Index was +14.62%. For the same period,
Merrill Lynch EuroFund's Class A, Class B, Class C and Class D
Shares' total returns were +13.01%, +12.67%, +12.75% and +12.95%,
respectively. (Results do not reflect sales charges, and would be
lower if sales charges were included. Complete performance
information can be found on pages 4--6 of this report to
shareholders).
The Fund's underperformance was mainly attributable to its defensive
cash position and its underexposure to the pound sterling. Our light
exposure to the highly valued bank and pharmaceutical sectors was
also detrimental. On the positive side, a number of the Fund's major
holdings outperformed significantly.
During the July quarter, global capital markets were characterized
by extremely positive sentiment and abundant liquidity. Global bond
and stock markets advanced strongly, aided by continued strong
economic growth with low inflation, and favorable exchange rate
changes brought about by an increased belief in a broad European
Monetary Union (EMU). Sentiment was generally so positive that
political problems and risks were effectively ignored.
In Europe, economic growth continued to gather strength, and future
growth is likely to be supported by the reflationary policies of the
new French government and the absence of further fiscal tightening
in Europe in 1998. In the United Kingdom, the budget failed to
rebalance the two-tier economy and therefore, the pound sterling
rose further. Overheating risks increased, and in the absence of
sufficient fiscal tightening, there is a risk that monetary policy
may have to be used forcefully to generate a hard economic landing
in 1998. In Continental Europe, the balance of economic growth is
very different from the United Kingdom, and while the export sector
is flourishing, the consumer sector remains moribund. While equity
markets moved ahead rapidly, most bond markets fluctuated within a
narrow range. However, following the election of the Socialist Party
in France, which supports a broadly based EMU, peripheral bond yield
convergence with the core of Europe continued. Interest rate levels
are now moving in different directions--sharply higher in the United
Kingdom, moderately higher in Norway and the Netherlands, and
marginally lower in Spain and Italy.
In the political arena, we believe the importance of the election of
the Socialists in France should not be underestimated. It marks an
end to austerity in France and sends a warning to other countries
which face elections in 1998. The fiscal squeeze has gone far
enough, and electorates will not tolerate further spending cuts.
<PAGE>
Investment Strategy
With valuations overstretched by historic standards, we maintained a
high cash weighting in average of 18% of net assets during the
quarter ended July 31, 1997. The majority of the cash was held in
pound sterling, but with the pound becoming severely overvalued, we
started to move cash reserves into the Deutschemark. As stated in
our April 30, 1997 shareholder letter, this cash will not be
reinvested until the markets have suffered a substantial correction,
or until individual stocks reach attractive price levels. Given that
investors have focused on large, liquid stocks, which have become
the most overpriced, we moved more toward small-capitalization and
medium-capitalization stocks, where valuations generally are lower.
The Fund only owns 19 of the 100 largest stocks in Europe, and has
limited exposure to the very largest, and we believe most
overvalued, stocks.
At the market level, the Fund's exposure to the United Kingdom was
increased. The export segment of the market was oversold on the
basis of sterling strength, and certain companies' valuations are
very attractive. At the sector level, the paper and forest products
exposure was reduced following major price appreciation in the face
of still uncertain prospects.
In Conclusion
We believe that current market levels are speculative and that the
risk of a reversal in the next few months is very high. The reversal
could be caused by a bond market correction, a fall in the US
dollar, an unexpected turn in the EMU process, a decrease in
liquidity or simply technical overextension. Even if none of these
catalysts emerges, further upside is, we believe, highly unlikely
over the near term.
We thank you for your investment in Merrill Lynch EuroFund, and we
look forward to reviewing our outlook and strategy with you in the
next report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
<PAGE>
(Adrian C. Holmes)
Adrian C. Holmes
Vice President and Portfolio Manager
August 28, 1997
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. Figures shown in the "Average Annual Total
Return" tables as well as the total returns and cumulative total
returns in the "Performance Summary" tables assume reinvestment of
all dividends and capital gains distribution at net asset value on
the ex-dividend date. 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.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/97 +26.43% +19.79%
Five Years Ended 6/30/97 +15.31 +14.08
Inception (10/26/88)
through 6/30/97 +13.48 +12.78
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/97 +25.20% +21.20%
Five Years Ended 6/30/97 +14.13 +14.13
Ten Years Ended 6/30/97 + 9.22 + 9.22
[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*
<PAGE>
Year Ended 6/30/97 +25.12% +24.12%
Inception (10/21/94)
through 6/30/97 +16.81 +16.81
[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 6/30/97 +26.10% +19.48%
Inception (10/21/94) through 6/30/97 +17.76 +15.42
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
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
1996 14.27 14.99 1.725 1.047 +25.26
1/1/97--7/31/97 14.99 17.72 -- 0.001 +18.22
------ ------
Total $3.471 Total $2.776
Cumulative total return as of 7/31/97: +210.63%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not include sales charge; results would be lower if
sales charge was included.
</TABLE>
<PAGE>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains 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
1996 13.36 13.85 1.725 0.886 +24.00
1/1/97--7/31/97 13.85 16.27 -- 0.001 +17.48
------ ------
Total $4.208 Total $2.555
Cumulative total return as of 7/31/97: +177.05%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not reflect deduction of any sales charge; results
would be lower if sales charge was deducted.
</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
1996 13.35 13.77 1.725 0.940 +23.93
1/1/97--7/31/97 13.77 16.18 -- 0.001 +17.51
------ ------
Total $3.448 Total $1.901
Cumulative total return as of 7/31/97: +57.43%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not reflect deduction of any sales charge; results
would be lower if sales charge was deducted.
</TABLE>
<PAGE>
PERFORMANCE DATA (concluded)
<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
1996 14.22 14.92 1.725 1.006 +24.90
1/1/97--7/31/97 14.92 17.62 -- 0.001 +18.10
------ ------
Total $3.448 Total $1.967
Cumulative total return as of 7/31/97: +61.01%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not include sales charge; results would be lower if
sales charge was included.
</TABLE>
<TABLE>
Recent Performance Results*
<CAPTION>
12 Month 3 Month
7/31/97 4/30/96 7/31/96 % Change % Change
<S> <C> <C> <C> <C> <C>
ML EuroFund Class A Shares $17.72 $15.68 $15.73 +26.15%(1) +13.01%
ML EuroFund Class B Shares 16.27 14.44 14.64 +25.54(1) +12.67
ML EuroFund Class C Shares 16.18 14.35 14.61 +25.19(1) +12.75
ML EuroFund Class D Shares 17.62 15.60 15.65 +26.13(1) +12.95
ML EuroFund Class A Shares--Total Return +34.34(2) +13.01
ML EuroFund Class B Shares--Total Return +32.94(3) +12.67
ML EuroFund Class C Shares--Total Return +33.07(4) +12.75
ML EuroFund Class D Shares--Total Return +34.04(5) +12.95
<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 $1.725 per share capital
gains distributions.
(2)Percent change includes reinvestment of $1.048 per share ordinary
income dividends and $1.725 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.887 per share ordinary
income dividends and $1.725 per share capital gains distributions.
(4)Percent change includes reinvestment of $0.941 per share ordinary
income dividends and $1.725 per share capital gains distributions.
(5)Percent change includes reinvestment of $1.007 per share ordinary
income dividends and $1.725 per share capital gains distributions.
</TABLE>
<PAGE>
<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 90,000 Zagrebacka Banka D.D. (GDR)* $ 1,234,184 $ 3,363,750 0.2%
Pharmaceuticals 277,500 Pliva D.D. (GDR)* 2,255,760 4,856,250 0.3
Total Investments in Croatia 3,489,944 8,220,000 0.5
Czech Republic
Banking 44,000 Komercni Banka A.S. 1,148,451 636,191 0.0
Telecommunications 27,500 SPT Telecom A.S. 2,535,302 3,068,497 0.2
Utility 37,000 Ceske Energeticke Zavody 1,116,790 756,536 0.1
Total Investments in the Czech
Republic 4,800,543 4,461,224 0.3
Denmark
Textiles 113,877 Carli Gry International A/S 3,257,298 6,915,838 0.5
Total Investments in Denmark 3,257,298 6,915,838 0.5
Finland
Food 73,092 Huhtamaki 'I' Group 3,284,993 3,313,134 0.2
Metals & Mining 596,782 Outokumpu OY 9,260,443 11,344,006 0.8
Paper & Forest 1,144,993 Enso-Gutzeit OY 'R' (Ordinary)
Products (Registered) 8,747,378 10,401,037 0.7
1,959,500 Metsa Serla OY (Class B) 14,945,500 17,191,110 1.2
741,447 UPM-Kymmene Corp. 15,230,692 17,996,813 1.2
-------------- -------------- ------
38,923,570 45,588,960 3.1
<PAGE>
Total Investments in Finland 51,469,006 60,246,100 4.1
France
Automobile Parts 82,016 Bertrand Faure S.A. 4,001,822 4,610,602 0.3
Automobiles & 146,616 Peugeot S.A. 17,915,506 16,953,111 1.2
Equipment 96,600 Sommer Allibert S.A. 2,862,214 3,354,058 0.2
-------------- -------------- ------
20,777,720 20,307,169 1.4
Banking 147,350 Societe Generale de France S.A. 15,756,729 19,465,182 1.3
Communication 167,305 Alcatel Alsthom Cie Generale d'
Equipment Electricite S.A. 15,100,683 21,858,103 1.5
Construction 157,914 Bouygues S.A. 15,444,286 13,490,602 0.9
Electronics 88,051 SGS-Thomson Microelectronics N.V. 4,065,218 7,977,231 0.5
Financial Services 150,200 Compagnie Financiere de Paribas S.A. 8,164,002 10,794,063 0.7
48,644 EuraFrance S.A. 14,169,000 20,016,297 1.4
-------------- -------------- ------
22,333,002 30,810,360 2.1
Home Furnishings 59,647 Castorama Dubois Investisse 7,987,461 7,147,391 0.5
</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)
Hotels 92,577 Accor S.A. $ 12,950,953 $ 13,933,943 0.9%
Insurance 527,517 Assurances Generales de France (AGF) 16,893,934 18,954,900 1.3
337,791 Axa-UAP 21,157,910 22,098,628 1.5
-------------- -------------- ------
38,051,844 41,053,528 2.8
Machinery 177,431 Compagnie de Fives-Lille S.A. 9,488,305 11,576,197 0.8
Metals & Steel 924,708 Usinor-Sacilor 13,704,620 18,442,789 1.3
<PAGE>
Oil--Related 169,290 Elf Aquitaine S.A. 12,219,543 19,328,838 1.3
Total Investments in France 191,882,186 230,001,935 15.6
Germany
Airlines 201,528 Deutsche Lufthansa AG 2,836,196 4,067,004 0.3
Automobiles 28,460 Volkswagen AG 10,784,935 21,795,719 1.5
Chemicals 77,016 Henkel KGaA 3,295,326 3,905,545 0.3
387,409 Henkel KGaA (Preferred) 16,360,407 21,629,404 1.4
-------------- -------------- ------
19,655,733 25,534,949 1.7
Construction 31,475 Philipp Holzmann AG 11,942,993 9,429,299 0.7
Engineering 321,783 Kloeckner Werke AG 14,985,368 23,924,712 1.6
Manufacturing 18,901 Plettac AG 4,353,643 4,323,994 0.3
Mining 144,179 Thyssen AG 30,140,874 32,866,121 2.2
Retail Trade 31,732 Karstadt AG 11,171,623 12,358,179 0.8
55,190 Moebel Walther AG (Preferred) 2,067,520 2,705,540 0.2
-------------- -------------- ------
13,239,143 15,063,719 1.0
Total Investments in Germany 107,938,885 137,005,517 9.3
Greece
Banking 35,000 Alpha Credit Bank 2,143,207 2,422,485 0.2
Beverages 27,500 Hellenic Bottling Co. 915,027 993,652 0.1
Building Products 15,000 Titan Cement Co. 479,645 771,659 0.0
Packaging & 66,170 Maillis 668,382 801,970 0.0
Containers
Total Investments in Greece 4,206,261 4,989,766 0.3
Hungary
Financial Services 75,000 Euronet Services, Inc. 1,038,281 853,125 0.1
Food/Grocery 27,500 Pick Szeged Reszvenytarsasag 1,236,392 2,100,305 0.1
<PAGE>
Packaging & 29,500 Cofinec S.A. (GDR)* 1,066,831 752,250 0.1
Containers
</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>
Hungary (concluded)
Pharmaceuticals 30,000 Egis $ 633,191 $ 1,986,507 0.1%
165,260 Gedeon Richter (GDR)* 2,393,658 16,030,220 1.1
-------------- -------------- ------
3,026,849 18,016,727 1.2
Total Investments in Hungary 6,368,353 21,722,407 1.5
Ireland
Foods 693,901 Greencore Group PLC 3,481,856 3,314,848 0.2
Total Investments in Ireland 3,481,856 3,314,848 0.2
Italy
Construction/ 771,200 Italcementi S.p.A. 5,174,183 5,354,390 0.4
Building Materials
Diversified 13,030,335 Compagnie Industriali Riunite S.p.A.
Holdings (CIR) 12,170,577 8,726,888 0.6
22,853,050 MontEdison S.p.A. 21,738,076 14,693,296 1.0
-------------- -------------- ------
33,908,653 23,420,184 1.6
Insurance 940,382 Assicurazioni Generali 17,193,228 19,261,627 1.3
6,466,574 Istituto Nazionale delle Assicurazioni
(INA) 9,155,561 9,383,615 0.6
-------------- -------------- ------
26,348,789 28,645,242 1.9
Publishing 7,347,051 Seat S.p.A. 2,044,683 1,720,155 0.1
Telecommunications 6,311,693 Telecom Italia S.p.A. 15,012,970 22,562,519 1.5
Total Investments in Italy 82,489,278 81,702,490 5.5
Netherlands
<PAGE>
Chemicals 153,781 Akzo Nobel 19,260,838 23,864,621 1.6
310,870 European Vinyls Corporation
International N.V. 11,599,987 7,248,420 0.5
-------------- -------------- ------
30,860,825 31,113,041 2.1
Construction 160,201 NBM-Amstelland N.V. 4,257,208 4,370,809 0.3
258,670 Volker Wessels Stevin N.V. 5,517,686 7,958,295 0.5
-------------- -------------- ------
9,774,894 12,329,104 0.8
Diversified Holdings 145,041 Internatio-Mueller N.V. 2,923,171 4,862,297 0.3
Electrical Equipment 315,668 Philips Electronics N.V. 11,394,953 25,654,133 1.8
113,948 Twentsche Kabel Holding N.V. 4,695,441 6,250,824 0.4
-------------- -------------- ------
16,090,394 31,904,957 2.2
Financial Services 276,564 ING Groep N.V. 9,772,122 13,485,706 0.9
Paper & Forest 653,287 Koninklijke KNP BT N.V. 13,448,879 15,042,793 1.0
Products
Telecommunications 377,166 Royal PTT Nederland N.V. 13,796,112 15,508,470 1.1
Transport Services 117,568 Koninklijke Pakhoed N.V. 4,561,548 4,265,480 0.3
Total Investments in the Netherlands 101,227,945 128,511,848 8.7
</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>
Norway
Computer Software 283,464 Merkantildata ASA $ 6,562,852 $ 5,954,501 0.4%
Oil & Gas Producers 311,424 Saga Petroleum A.S. (Class B) 3,816,498 5,642,332 0.4
Publishing 262,196 Schibsted ASA 5,407,096 4,716,003 0.3
Total Investments in Norway 15,786,446 16,312,836 1.1
Poland
<PAGE>
Banking 200,000 Wielkopolsky Bank Kredytowy S.A. 997,075 1,051,112 0.1
Chemicals 387,805 Polifarb Wroclaw S.A. 991,199 1,377,419 0.1
Electrical Equipment 600,000 Bydgoska Fabryka Kabli S.A. 1,790,810 4,591,395 0.3
73,203 Elektrobudowa S.A. 928,098 1,152,054 0.1
-------------- -------------- ------
2,718,908 5,743,449 0.4
Engineering & 743,000 Elektrim S.A. 3,407,367 7,015,911 0.5
Construction 360,000 Mostostal Zabrze 1,713,606 2,120,705 0.1
-------------- -------------- ------
5,120,973 9,136,616 0.6
Plastics 70,000 Zaklady Lentex S.A. 684,961 758,013 0.0
Total Investments in Poland 10,513,116 18,066,609 1.2
Portugal
Construction/Building 225,000 Cimpor-Cimentos de Portugal S.A. 4,581,513 5,802,695 0.4
Materials
Telecommunications 50,000 Portugal Telecom S.A. 1,143,326 1,997,305 0.1
Utilities--Electric 82,655 Electricidade de Portugal S.A. 1,065,752 1,404,021 0.1
Total Investments in Portugal 6,790,591 9,204,021 0.6
Romania
Investments 205,000 Romanian Growth Fund 2,111,500 2,203,750 0.2
Total Investments in Romania 2,111,500 2,203,750 0.2
Russia
Natural Gas 154,406 RAO Gazprom (ADR)** 2,431,895 2,648,063 0.1
Total Investments in Russia 2,431,895 2,648,063 0.1
</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>
Slovakia
<PAGE>
Banking 37,500 SKB Banka (GDR)* $ 975,000 $ 1,256,250 0.1%
Metals & Mining 27,500 VSZ 389,875 515,947 0.0
121,700 Zavod SNP 1,835,272 1,036,268 0.1
-------------- -------------- ------
2,225,147 1,552,215 0.1
Pharmaceuticals 25,000 Slovakofarma 1,522,842 3,016,308 0.2
Total Investments in Slovakia 4,722,989 5,824,773 0.4
Sweden
Appliances 285,800 Electrolux AB 12,469,331 22,110,797 1.5
Engineering 127,619 SKF AB (Class A) 2,229,577 3,397,916 0.2
257,281 Svedala Industry AB 3,378,656 5,525,420 0.4
-------------- -------------- ------
5,608,233 8,923,336 0.6
Insurance 481,244 Skandia Forsakrings AB 12,632,082 19,582,665 1.3
Metals & Steel 934,351 Avesta-Sheffield AB 8,667,983 10,209,178 0.7
Paper & Forest 321,435 Mo och Domsjo AB (Class B) 7,608,913 11,303,493 0.8
Products 6,095,550 Rottneros Bruks AB 8,904,861 6,851,685 0.5
680,554 Stora Kopparbergs AB 8,542,903 11,196,837 0.7
-------------- -------------- ------
25,056,677 29,352,015 2.0
Total Investments in Sweden 64,434,306 90,177,991 6.1
Switzerland
Banking 81,873 Credit Suisse Group (Registered) 8,173,370 11,060,988 0.7
Consumer Products 44,461 Societe Suisse pour la
Microelectronique et l'Horlogerie
AG (Registered) 6,244,014 6,065,540 0.4
Diversified Holdings 239,817 Oerlikon-Buehrle Holding AG 25,353,554 24,458,158 1.7
Machinery 11,885 Saurer AG (Registered) 5,453,107 9,169,553 0.6
Retail 13,500 Fotolabo S.A. 5,606,913 3,741,556 0.3
Total Investments in Switzerland 50,830,958 54,495,795 3.7
</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
Appliances 17,564,000 Ardem Pisirici Ve Isitici Cihazlar
Sanayii A.S. $ 2,067,213 $ 1,868,511 0.1%
Automobiles 2,992,000 Otosan Otomobil Sanayii A.S. 1,677,465 1,760,000 0.1
Building Products 11,426,000 Baticim Bati Anadolu Cimento Sanayii
A.S. 1,250,127 1,197,656 0.1
Chemicals 17,500,000 Bayrakli Boya Ve Vernik Sanayii A.S. 915,591 711,827 0.1
Diversified Holdings 30,000,000 Dogan Sirketler Grubu Holding A.S. 842,288 779,099 0.1
Electronics 30,235,077 Vestel Elektronik Sanayi Ve Ticaret
A.S. 1,727,790 1,967,740 0.1
Medical Services 7,000,000 Sevgi Ozel Saglik Hizmetleri A.S. 534,942 359,199 0.0
Oil & Gas Producers 6,845,000 Tupras-Turkiye Petrol Rafinerileri
A.S. 752,466 685,357 0.1
Retail 1,859,000 Tansas Izmir Buyuksehir Belediyesi Ic
Ve Dis Ticaret A.S. 537,807 570,031 0.0
Steel 8,538,000 Eregli Demir Ve Celik Fabrikalari
T.A.S. 1,074,624 1,429,233 0.1
Textiles 13,981,487 Aksu Iplik Dokuma Ve Boya Apre
Fabrikalari T.A.S. 897,148 437,468 0.0
Utilities--Electric 580,000 Cukurova Elektrik A.S. 1,033,387 961,827 0.1
Total Investments in Turkey 13,310,848 12,727,948 0.9
United Kingdom
Automobiles & 5,259,274 LucasVarity PLC 16,920,886 16,175,844 1.1
Equipment
Banking 944,393 National Westminster Bank PLC 10,334,000 13,379,933 0.9
<PAGE>
Beverages 1,594,814 Allied Domecq PLC 11,063,834 11,401,836 0.8
674,598 Bass PLC 8,610,189 9,204,377 0.6
568,313 Guinness PLC 5,734,387 5,439,096 0.3
617,140 Matthew Clark PLC 6,049,421 2,503,910 0.2
-------------- -------------- ------
31,457,831 28,549,219 1.9
Chemicals 1,068,952 Imperial Chemical Industries PLC 13,336,504 17,516,200 1.2
1,495,500 Inspec Group PLC 6,707,529 4,379,482 0.3
-------------- -------------- ------
20,044,033 21,895,682 1.5
Computer/ 466,415 Misys PLC 6,652,871 11,598,435 0.8
Commercial/Office
Diversified Holdings 7,897,742 BTR PLC 29,374,369 24,484,738 1.7
Electronics 402,917 Fairey Group PLC 3,425,946 3,388,145 0.2
Financial Services 724,000 HSBC Holdings PLC 24,164,182 25,252,772 1.7
Food & Beverage 1,240,800 Cadbury Schweppes PLC 10,423,624 11,966,548 0.8
1,186,299 Unilever PLC 24,760,963 34,293,674 2.3
-------------- -------------- ------
35,184,587 46,260,222 3.1
</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)
Glass 3,832,491 Pilkington PLC $ 7,721,763 $ 8,276,341 0.6%
Metals 353,903 Johnson Matthey PLC 3,055,519 3,352,325 0.2
Oil--Related 445,270 Expro International Group PLC 3,473,861 3,492,974 0.2
Retail 8,763,493 Asda Group PLC 15,993,806 20,502,017 1.4
2,840,701 Tesco PLC 15,074,678 19,193,708 1.3
1,082,901 W.H. Smith Group PLC 6,617,463 6,622,515 0.5
-------------- -------------- ------
37,685,947 46,318,240 3.2
Telecommunications 1,730,855 Cable & Wireless PLC 12,596,679 17,386,508 1.2
Tobacco 445,007 Gallaher Group PLC 1,850,855 2,002,087 0.1
<PAGE>
Utilities--Electric, 458,350 Anglian Water PLC 4,170,424 6,010,133 0.4
Gas & Water
517,175 Severn Trent PLC 5,282,947 7,318,750 0.5
831,000 South West Water PLC 6,526,211 10,645,010 0.7
687,000 Thames Water PLC 5,710,625 9,025,174 0.6
609,500 United Utilities PLC 5,559,936 7,034,837 0.5
-------------- -------------- ------
27,250,143 40,033,904 2.7
Total Investments in the United
Kingdom 271,193,472 311,847,369 21.1
Face
Amount Short-Term Securities
Repurchase US$ 8,433,000 UBS Securities Inc., purchased on
Agreements*** 7/31/1997 to yield 5.70% to 8/01/1997 8,433,000 8,433,000 0.6
Total Investments in Short-Term
Securities 8,433,000 8,433,000 0.6
Total Investments $1,011,170,676 1,219,034,128 82.5
==============
Foreign Time Deposits++ 222,118,142 15.0
Other Assets Less Liabilities 37,147,149 2.5
-------------- ------
Net Assets $1,478,299,419 100.0%
============== ======
Net Asset Class A--Based on net assets of $488,483,258
Value: and 27,560,137 shares outstanding $ 17.72
==============
Class B--Based on net assets of $827,103,174
and 50,822,533 shares outstanding $ 16.27
==============
Class C--Based on net assets of $21,578,409
and 1,334,008 shares outstanding $ 16.18
==============
Class D--Based on net assets of $141,134,578
and 8,010,867 shares outstanding $ 17.62
==============
<FN>
*Global Depositary Receipts (GDR).
**American Depositary Receipts (ADR).
***Repurchase Agreements are fully collateralized by US Government &
Agency Obligations.
++Foreign time deposits bear interest at 3.125% and 6.625% with both
maturing on 8/01/1997.
</TABLE>
<PAGE>
PORTFOLIO INFORMATION
As of July 31, 1997
Percent of
Ten Largest Equity Holdings Net Assets
Unilever PLC 2.3%
Thyssen AG 2.2
Philips Electronics N.V. 1.8
Henkel KGaA* 1.7
HSBC Holdings PLC 1.7
BRTPLC 1.7
Oerlikon-Buehrle Holding AG 1.7
Kloeckner Werke AG 1.6
Akzo Nobel 1.6
Telecom Italia S.p.A. 1.5
[FN]
*Includes combined holdings.
Percent of
Ten Largest Industries Net Assets
Paper & Forest Products 6.1%
Insurance 6.0
Chemicals 5.5
Diversified Holdings 5.4
Financial Services 4.8
Telecommunications 4.1
Banking 3.5
Retail 3.5
Food & Beverage 3.1
Utilities--Electric, Gas & Water 2.7
Equity Portfolio Changes for the
Quarter Ended July 31, 1997
Additions
<PAGE>
*Asku Iplik Dokuma Ve Boya
Apre Fabrikalari T.A.S.
Assicurazioni Generali
Assurances Generales de
France (AGF)
Axa-UAP
*Banque Nationale de Paris
Bass PLC
Bayrakli Boya Ve Vernik
Sanayii A.S.
Bertrand Faure S.A.
Cukurova Elektrik A.S.
Electicidade de Portugal S.A.
Fairey Group PLC
Gallaher Group PLC
*Granges AB
Greencore Group PLC
Guinness PLC
Johnson Matthey PLC
Koninklijke Pakhoed N.V.
NBM-Amstelland N.V.
Pilkington PLC
Plettac AG
Romanian Growth Fund
Tansas Izmir Buyuksehir
Belediyesi Ic Ve Dis
Ticaret A.S.
Telecom Italia S.p.A.
*Thorn PLC (Class B)
Tupras-Turkiye Petrol
Rafinerileri A.S.
*Vestel Electronik Sanayi Ve
Ticaret A.S.
Volker Wessels Stevin N.V.
W.H. Smith Group PLC
Zaklady Lentex S.A.
Deletions
<PAGE>
Aksigorta
*Aksu Iplik Dokuma Ve Boya
Apre Fabrikalari T.A.S.
Aktas Elektrik Ticaret A.S.
Allianz AG Holding
*Banque Nationale de Paris
Eczacibasi Yapi Gerecleri Sanayi
Ve Ticaret A.S.
Ente Nazionale Idrocarburi
S.p.A. (ENI)
Fomento de Construciones
y Contratas S.A.
Glaxo Wellcome PLC
Grand Metropolitan PLC
*Granges AB
Groupe Danone S.A.
Jefferson Smurfit Group PLC
KLM Royal Dutch Airlines N.V.
Kondor Wessels Groep N.V.
Land Securities PLC
Orkla A.S. (Class A)
Pharmacia & Upjohn, Inc.
Prudential Corp. PLC
Rauma OY
Sarkuysan Elektrolitik Bakir
Sanayii Ve Ticaret A.S.
Societa Finanziaria
Telefonica S.p.A. (STET)
Stalexport S.A.
*Thorn PLC (Class B)
Tisza Vegyi Kombinat
Reszvenytarsasag (GDR)
Turk Dis Ticaret Bankasi A.S.
(Disbank)
*Vestel Electronik Sanayi Ve
Ticaret A.S.
Vredestein Groep N.V.
Yapi Ve Kredi Bankasi A.S.
Yorkshire Water PLC
[FN]
*Added and deleted in
the same quarter.
OFFICERS AND TRUSTEES
<PAGE>
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
Philip M. Mandel, Secretary
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
