MERRILL LYNCH
EUROFUND
FUND LOGO
Semi-Annual Report
April 30, 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 &
Convertible Warrants
As of April 30, 1997
A pie chart illustrating the following percentages:
Spain 0.5%
Denmark 0.5%
Slovakia 0.6%
Portugal 0.6%
Ireland 0.9%
Hungary 2.2%
Finland 5.2%
Switzerland 5.3%
Germany 12.8%
France 14.4%
Netherlands 11.6%
Sweden 8.2%
Italy 5.9%
Norway 2.0%
Poland 1.8%
Turkey 1.1%
Croatia 0.7%
Greece 0.5%
Czech Republic 0.4%
Russia 0.2%
United Kingdom 24.6%
<PAGE>
EUROPEAN STOCK MARKET PERFORMANCE
Total Return for the
Three-Month Period
Ended April 30, 1997
In US dollars*
A bar graph illustrating the following percentages:
Norway - 6.3
Italy - 6.3
Sweden - 2.9
Finland - 1.0
Denmark - 0.8
France + 0.2
Ireland + 0.6
United Kingdom + 5.0
Germany + 6.6
Netherlands + 6.7
Spain + 6.7
Switzerland +10.0
Source: Financial Times/
Standard & Poor's--
Actuaries Index.
[FN]
*For the three-month period ended April 30, 1997, total investment
return for the Financial Times/Standard & Poor's--Actuaries Europe
Index was +3.97%.
<PAGE>
DEAR SHAREHOLDER
During the quarter ended April 30, 1997, the unmanaged Financial
Times/Standard & Poor's--Actuaries Europe Index had a total return
of +3.97%, while the total return for the unmanaged Morgan Stanley
Capital International Europe Index was +4.07%. For the same period,
Merrill Lynch EuroFund's Class A, Class B, Class C and Class D
Shares provided total returns of +2.08%, +1.83%, +1.77% and +2.03%,
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--6 of this report to shareholders).
The Fund's underperformance relative to the European stock indexes
was caused principally by the Fund's heavy cash weighting and
underexposure to the pound sterling which rose as it continued to be
supported by higher interest rate expectations.
Global financial markets proved extremely volatile during the
quarter ended April 30, 1997. Western European bond and stock
markets fell sharply early in the period and recovered strongly
during the latter part of the period. The US dollar finished the
April quarter sharply higher, buoyed by robust US economic growth
and rising interest rates. As economic growth picks up in the rest
of the world--and there is evidence to suggest that it is happening,
especially in Europe--support for the US dollar should begin to
diminish, in our opinion.
In Europe, economic growth was appreciably stronger in the last few
months, along with more consistent economic data releases. However,
the composition of growth remained unbalanced, and continued to be
driven principally by the consumer sector in the United Kingdom and
the export sector in Continental Europe. The UK export sector may
continue to be burdened by a strong currency, but in Continental
Europe economic growth may broaden as consumer confidence continues
to pick up. We believe the European economies are also likely to be
aided by inventory rebuilding, as the excess stocks generated in
1994 and 1995 have worked their way out of the system and
manufacturers find themselves low on inventories at a time of rising
demand.
Rising growth caused bond yields to rise across the board. Investor
doubts about the European Monetary Union (EMU) briefly caused yield
spreads between the core and the periphery countries to widen, but
spreads narrowed again as bonds rallied and politicians made it
clear that they were committed to the EMU going ahead on schedule.
The interest rate outlook remained unchanged, with a bias to lower
interest rates in the periphery economies, flat interest rates in
the core European countries, and higher interest rates in the United
Kingdom.
<PAGE>
In the political arena, a number of surprises arose in the last few
weeks. The French called an unexpected election in an attempt to
gain support for the further measures to be taken to ensure EMU
participation. The election took place in two stages, at the end of
May and the start of June, and resulted in a Socialist victory. One
consequence has been widespread questioning of the regime of fiscal
austerity in Europe which has led to very high levels of
unemployment. In the United Kingdom, the Labour party achieved a
landslide victory and has a very powerful mandate to govern. It
should become evident over the next few months whether the Labour
party has shed its socialist policies and has really become a party
of the center right. Its early decision to grant quasi-independence
to the Bank of England bodes well, in our opinion, as does its
decision to raise interest rates promptly.
Investment Strategy
The recovery in stock markets to around peak levels left equity
valuations stretched, based on historic comparisons. We continue to
believe that on most investment criteria the markets are 10%--15%
overvalued, and should become relatively more expensive if bond
yields rise further. Although some of the Fund's cash reserves were
invested during the sharp stock market correction in April, the
Fund's cash and cash reserves level was still high at 15.3% of net
assets at April 30, 1997, and was principally denominated in
Deutschemarks. These cash reserves are unlikely to be invested
unless stock markets correct substantially and target prices for
individual stocks that we wish to purchase are reached. In our view,
the most likely catalysts for such a correction remain those
indicated in our January 31, 1997 shareholders' letter: a US stock
market correction; a fall in the US dollar; a further US interest
rate increase; a postponement of the EMU; or a technically inspired
fall caused by the overbought condition of many stocks and markets.
Seasonal factors may also have an impact, in our opinion.
Our market and sector views remained unchanged from those expressed
in our January 31, 1997 shareholders' letter. The British, Spanish
and Swiss markets are underweighted, although a number of investments
were recently made in the United Kingdom where value has apparently
begun to emerge. Sweden, Finland, Italy and Emerging/Eastern Europe
continue to be the most favored investment areas by the Fund.
In Conclusion
The fall and subsequent rally in European stock markets has left
them at what we believe are unsustainable levels, with an asymmetric
risk/return profile. As such, our investment stance remains
defensive, with a high cash weighting and a focus on low-rated value
stocks.
<PAGE>
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
(Adrian C. Holmes)
Adrian C. Holmes
Vice President and Portfolio Manager
June 6, 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.)
<PAGE>
* 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. 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 distributions 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 3/31/97 +25.41% +18.82%
Five Years Ended 3/31/97 +13.59 +12.37
Inception (10/26/88)
through 3/31/97 +13.10 +12.38
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/97 +24.06% +20.06%
Five Years Ended 3/31/97 +12.41 +12.41
Ten Years Ended 3/31/97 + 9.03 + 9.03
<PAGE>
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 3/31/97 +24.11% +23.11%
Inception (10/21/94)
through 3/31/97 +15.92 +15.92
[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 3/31/97 +25.07% +18.50%
Inception (10/21/94) through 3/31/97 +16.87 +14.31
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
PERFORMANCE DATA (continued)
<PAGE>
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains Dividends
Period Covered Beginning Ending Distributed Paid* % Change**
<C> <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--4/30/97 14.99 15.68 -- 0.001 + 4.61
------ ------
Total $3.471 Total $2.776
Cumulative total return as of 4/30/97:+174.87%**
<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>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains Dividends
Period Covered Beginning Ending Distributed Paid* % Change**
<C> <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--4/30/97 13.85 14.44 -- 0.001 + 4.27
------ ------
Total $4.208 Total $2.555
Cumulative total return as of 4/30/97:+145.89%**
<PAGE>
<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**
<C> <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--4/30/97 13.77 14.35 -- 0.001 + 4.22
------ ------
Total $3.448 Total $1.901
Cumulative total return as of 4/30/97:+39.63%**
<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>
PERFORMANCE DATA (concluded)
<TABLE>
Performance Summary--Class D Shares
<CAPTION>
Net Asset Value Capital Gains Dividends
Period Covered Beginning Ending Distributed Paid* % Change**
<C> <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--4/30/97 14.92 15.60 -- 0.001 + 4.56
------ ------
Total $3.448 Total $1.967
Cumulative total return as of 4/30/97:+42.55%**
<PAGE>
<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
4/30/97 1/31/97 4/30/96 % Change % Change
<S> <C> <C> <C> <C> <C>
ML EuroFund Class A Shares $15.68 $15.36 $15.71 +11.76%(1) +2.08%
ML EuroFund Class B Shares 14.44 14.18 14.66 +11.26(1) +1.83
ML EuroFund Class C Shares 14.35 14.10 14.64 +10.80(1) +1.77
ML EuroFund Class D Shares 15.60 15.29 15.64 +11.74(1) +2.03
ML EuroFund Class A Shares--Total Return +19.03(2) +2.08
ML EuroFund Class B Shares--Total Return +17.83(3) +1.83
ML EuroFund Class C Shares--Total Return +17.77(4) +1.77
ML EuroFund Class D Shares--Total Return +18.75(5) +2.03
<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>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Shares Value Percent of
Industries Held Investments Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Croatia
Banking 90,000 ++Zagrebacka Banka (GDR)* $ 1,234,184 $ 3,183,750 0.2%
<PAGE>
Pharmaceuticals 277,500 ++Pliva D.D. (GDR)* 2,255,760 4,551,000 0.3
Total Investments in Croatia 3,489,944 7,734,750 0.5
Czech Republic
Banking 44,000 Komercni Banka A.S. 1,148,451 794,444 0.1
Telecommunications 27,500 ++SPT Telecom A.S. 2,535,302 2,904,554 0.2
Utility 37,000 ++Ceske Energeticke Zavody 1,116,790 1,022,997 0.1
Total Investments in the Czech Republic 4,800,543 4,721,995 0.4
Denmark
Textiles 113,877 Carli Gry International A/S 3,257,298 5,720,118 0.4
Total Investments in Denmark 3,257,298 5,720,118 0.4
Finland
Diversified Holdings 73,092 Huhtamaki 'I' Group 3,284,993 3,191,238 0.2
Machinery 20,647 Rauma OY 441,252 424,917 0.0
Metals & Mining 596,782 Outokumpu OY 9,260,443 11,420,951 0.9
Paper & Forest 1,445,655 Enso-Gutzeit OY 'R' (Ordinary) (Registered) 10,651,652 11,956,294 0.9
Products 1,959,500 Metsa Serla OY (Class B) 14,945,500 14,698,511 1.1
741,447 UPM-Kymmene Corp. 15,230,692 16,970,340 1.3
-------------- -------------- ------
40,827,844 43,625,145 3.3
Total Investments in Finland 53,814,532 58,662,251 4.4
France
Automobiles & 146,616 Peugeot S.A. 17,915,506 14,595,031 1.1
Equipment 96,600 Sommer Allibert S.A. 2,862,214 3,475,713 0.3
-------------- -------------- ------
20,777,720 18,070,744 1.4
Banking 147,350 Societe Generale de France S.A. 15,756,729 16,511,077 1.2
<PAGE>
Communication 141,326 Alcatel Alsthom Cie Generale
Equipment d'Electricite S.A. 12,324,615 15,714,996 1.2
Construction 108,150 Bouygues S.A. 10,968,837 10,135,878 0.8
Electronics 88,051 ++SGS-Thomson Microelectronics N.V. 4,065,218 6,788,820 0.5
Financial Services 150,200 Compagnie Financiere de Paribas S.A. 8,164,002 9,472,907 0.7
48,020 EuraFrance S.A. 13,909,651 20,749,840 1.5
-------------- -------------- ------
22,073,653 30,222,747 2.2
Food Manufacturing 37,620 Groupe Danone S.A. 5,976,543 5,478,797 0.4
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Value Percent of
Industries Held Investments Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
France (concluded)
Home Furnishings 21,792 Castorama Dubois Investisse $ 3,395,341 $ 3,222,222 0.2%
Hotels 92,577 Accor S.A. 12,950,952 13,276,270 1.0
Machinery 177,431 Compagnie de Fives-Lille S.A. 9,488,305 14,075,311 1.1
Metals & Steel 924,708 Usinor-Sacilor 13,704,620 13,973,999 1.0
Oil--Related 169,290 Elf Aquitaine S.A. 12,219,543 16,417,055 1.2
Total Investments in France 143,702,076 163,887,916 12.2
Germany
Airlines 350,032 Deutsche Lufthansa AG 4,938,522 4,881,206 0.4
Automobiles 37,283 Volkswagen AG 14,090,571 23,702,843 1.8
Chemicals 77,016 Henkel KGaA 3,295,326 3,886,822 0.3
387,409 Henkel KGaA (Preferred) 16,360,407 21,028,090 1.5
-------------- -------------- ------
19,655,733 24,914,912 1.8
<PAGE>
Construction 30,480 ++Philipp Holzmann AG 11,661,385 8,104,885 0.6
Engineering 321,783 ++Kloeckner Werke AG 14,985,368 21,349,386 1.6
Insurance 38,643 Allianz AG Holding 6,839,040 7,497,429 0.6
Manufacturing 169,713 Thyssen AG 34,882,790 36,994,259 2.7
Retail Trade 50,702 Karstadt AG 18,574,550 15,194,790 1.1
55,190 Moebel Walther AG (Preferred) 2,067,520 2,549,486 0.2
-------------- -------------- ------
20,642,070 17,744,276 1.3
Total Investments in Germany 127,695,479 145,189,196 10.8
Greece
Banking 45,000 Alpha Credit Bank 2,755,552 3,196,645 0.2
Beverages 27,500 Hellenic Bottling Co. 915,027 893,045 0.1
Building Products 7,500 Titan Cement Co. S.A. 479,645 601,058 0.0
Packaging & 66,170 Maillis 668,382 651,743 0.1
Containers
Total Investments in Greece 4,818,606 5,342,491 0.4
Hungary
Chemicals 90,000 ++Tisza Vegyi Kombinat Reszvenytarsasag (GDR)* 792,900 1,467,000 0.1
Financial Services 75,000 ++Euronet Services, Inc. 1,038,281 946,875 0.1
Food/Grocery 27,500 Pick Szeged Reszvenytarsasag 1,236,391 1,656,989 0.1
Packaging & 29,500 ++Cofinec S.A. (GDR)* 1,066,831 848,125 0.1
Containers
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Value Percent of
Industries Held Investments Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Hungary (concluded)
Pharmaceuticals 52,500 Egis $ 1,108,085 $ 3,335,890 0.2%
220,000 Gedeon Richter (GDR)* 3,141,407 16,610,000 1.2
-------------- -------------- ------
4,249,492 19,945,890 1.4
Total Investments in Hungary 8,383,895 24,864,879 1.8
Ireland
Paper & Forest 4,279,417 Jefferson Smurfit Group PLC 12,726,781 10,627,593 0.8
Products
Total Investments in Ireland 12,726,781 10,627,593 0.8
Italy
Construction/ 771,200 Italcementi S.p.A. 5,174,183 4,321,243 0.3
Building Materials
Diversified 13,030,335 ++Compagnie Industriali Riunite S.p.A. (CIR) 12,170,577 8,527,009 0.7
Holdings 22,853,050 MontEdison S.p.A. 21,738,076 14,968,314 1.1
-------------- -------------- ------
33,908,653 23,495,323 1.8
Insurance 8,106,664 Istituto Nazionale delle Assicurazioni (INA) 11,436,540 10,870,461 0.8
US$ 1,755,000 Republic of Italy, INA Convertible, 5%
due 6/28/2001 1,755,000 1,719,900 0.1
-------------- -------------- ------
13,191,540 12,590,361 0.9
Oil & Gas 263,691 Ente Nazionale Idrocarburi S.p.A. (ENI) 1,284,656 1,338,869 0.1
Producers
Publishing 7,347,051 ++Seat S.p.A. 2,044,683 1,455,244 0.1
Telecommunications 6,311,693 Societa Finanziaria Telefonica S.p.A. (STET) 15,012,970 23,417,616 1.8
Total Investments in Italy 70,616,685 66,618,656 5.0
<PAGE>
Netherlands
Automobiles & 152,000 Vredestein Groep N.V. 1,513,329 1,802,002 0.1
Equipment
Chemicals 153,781 Akzo Nobel 19,260,838 19,809,613 1.5
310,870 European Vinyls Corporation International N.V. 11,599,987 8,902,513 0.7
-------------- -------------- ------
30,860,825 28,712,126 2.2
Diversified 141,504 Internatio-Mueller N.V. 2,822,501 4,103,144 0.3
Holdings
Electrical 398,965 Philips Electronics N.V. 14,401,801 20,823,577 1.6
Equipment 112,592 Twentsche Kabel Holding N.V. 4,628,319 5,316,122 0.4
-------------- -------------- ------
19,030,120 26,139,699 2.0
Engineering & 145,320 Kondor Wessels Groep N.V. 5,517,686 7,122,433 0.5
Construction
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Value Percent of
Industries Held Investments Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Netherlands (concluded)
Financial Services 760,927 Internationale Nederlanden Groep N.V. $ 20,024,803 $ 29,874,732 2.2%
Paper & Forest 498,668 Koninklijke KNP BT N.V. 10,162,721 9,827,483 0.7
Products
Telecommunications 532,339 Royal PTT Nederland N.V. 19,472,086 18,905,752 1.4
Transportation 202,108 KLM Royal Dutch Airlines N.V. 6,051,185 5,974,555 0.5
Total Investments in the Netherlands 115,455,256 132,461,926 9.9
Norway
Computer Software 283,464 Merkantildata ASA 6,562,851 5,177,788 0.4
Manufacturing 93,712 Orkla A.S. (Class A) 4,734,833 7,860,905 0.6
<PAGE>
Oil & Gas Producers 311,424 Saga Petroleum A.S. (Class B) 3,816,498 5,032,143 0.4
Publishing 262,196 Schibsted ASA 5,407,096 4,531,419 0.3
Total Investments in Norway 20,521,278 22,602,255 1.7
Poland
Banking 200,000 Wielkopolsky Bank Kredytowy S.A. 997,075 1,151,352 0.1
Chemicals 387,805 Polifarb Wroclaw S.A. 991,199 1,925,838 0.1
Electrical Equipment 600,000 ++Bydgoska Fabryka Kabli S.A. 1,790,810 4,554,800 0.3
73,203 Elektrobudowa S.A. 928,098 1,389,271 0.1
-------------- -------------- ------
2,718,908 5,944,071 0.4
Engineering & 890,000 Elektrim S.A. 3,945,778 7,994,939 0.6
Construction 360,000 Mostostal Zabrze 1,713,606 2,630,397 0.2
-------------- -------------- ------
5,659,384 10,625,336 0.8
Metals 110,000 ++Stalexport S.A. 1,887,541 1,297,802 0.1
Total Investments in Poland 12,254,107 20,944,399 1.5
Portugal
Construction/ 225,000 Cimpor-Cimentos de Portugal S.A. 4,581,513 4,839,544 0.4
Building Materials
Telecommunications 50,000 Portugal Telecom S.A. 1,143,326 1,841,787 0.1
Total Investments in Portugal 5,724,839 6,681,331 0.5
Russia
Natural Gas 154,406 ++RAO Gazprom (ADR)** (a) 2,431,895 2,408,734 0.2
Total Investments in Russia 2,431,895 2,408,734 0.2
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Value Percent of
Industries Held Investments Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Slovakia
Banking 37,500 ++SKB Banka (GDR)* $ 975,000 $ 1,321,875 0.1%
Metals & Mining 27,500 VSZ 389,875 606,431 0.1
121,700 ++Zavod SNP 1,835,272 1,631,999 0.1
-------------- -------------- ------
2,225,147 2,238,430 0.2
Pharmaceuticals 25,000 Slovakofarma 1,522,842 3,129,004 0.2
Total Investments in Slovakia 4,722,989 6,689,309 0.5
Spain
Construction 56,459 Fomento de Construciones y Contratas S.A. 4,664,375 5,505,555 0.4
Total Investments in Spain 4,664,375 5,505,555 0.4
Sweden
Appliances 285,800 Electrolux AB 13,761,199 16,401,199 1.2
Engineering 170,861 SKF AB (Class A) 2,988,021 3,540,765 0.3
257,281 Svedala Industry AB 3,378,656 4,724,665 0.3
-------------- -------------- ------
6,366,677 8,265,430 0.6
Insurance 678,784 Skandia Forsakrings AB 17,373,626 19,649,808 1.5
Metals & Steel 934,351 Avesta-Sheffield AB 8,667,983 9,294,061 0.7
Paper & Forest 381,026 Mo och Domsjo AB (Class B) 8,992,127 11,394,580 0.8
Products 7,313,800 Rottneros Bruks AB 10,774,603 8,114,527 0.6
961,500 Stora Kopparbergs AB 11,893,653 13,303,928 1.0
-------------- -------------- ------
31,660,383 32,813,035 2.4
Pharmaceuticals 225,963 Pharmacia & Upjohn, Inc. 6,896,335 6,512,483 0.5
Total Investments in Sweden 84,726,203 92,936,016 6.9
<PAGE>
Switzerland
Banking 170,724 CS Holding AG (Registered) 17,066,521 19,239,772 1.4
Consumer Products 44,461 Societe Suisse pour la Microelectronique
et l'Horlogerie AG (Registered) 6,244,014 5,885,876 0.5
Diversified Holdings 239,817 Oerlikon-Buehrle Holding AG 25,353,554 23,770,049 1.8
Machinery 13,643 ++Saurer AG (Registered) 6,217,248 7,150,303 0.5
Retail 13,500 Fotolabo S.A. 5,606,913 4,426,680 0.3
Total Investments in Switzerland 60,488,250 60,472,680 4.5
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Value Percent of
Industries Held Investments Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Turkey
Appliances 8,782,000 Ardem Pisirici Ve Isitici Cihazlar
Sanayii A.S. $ 2,067,213 $ 1,506,875 0.1%
Automobiles 3,750,000 ++Otosan Otomobil Sanayii A.S. 2,068,027 1,743,525 0.1
Banking 1,772,000 Turk Dis Ticaret Bankasi A.S. (Disbank) 591,199 575,410 0.0
18,461,000 Yapi Ve Kredi Bankasi A.S. 928,786 776,588 0.1
-------------- -------------- ------
1,519,985 1,351,998 0.1
Building Products 11,426,000 Baticim Bati Anadolu Cimento Sanayii A.S. 1,250,127 1,138,372 0.1
Diversified 30,000,000 Dogan Sirketler Grubu Holding A.S. 842,288 730,627 0.1
Holdings
Electronics 3,712,000 Vestel Elektronik Sanayi Ve Ticaret A.S. 1,357,700 1,369,742 0.1
Home Furnishings 3,081,000 ++Eczacibasi Yapi Gerecleri Sanayi Ve
Ticaret A.S. 125,683 115,964 0.0
Insurance 8,940,000 Aksigorta 473,756 422,258 0.0
Medical Services 1,765,000 ++Sevgi Ozel Saglik Hizmetleri A.S. 137,878 127,653 0.0
<PAGE>
Steel 8,780,000 Eregli Demir Ve Celik Fabrikalari T.A.S. 1,407,576 858,561 0.1
Textiles 9,320,992 Aksu Iplik Dokuma Ve Boya Apre Fabrikalari T.A.S. 877,177 598,470 0.0
Utilities--Electric 1,946,500 ++Aktas Elektrik Ticaret A.S. 2,764,426 2,118,884 0.2
Wire & Cable 2,472,000 Sarkuysan Elektrolitik Bakir Sanayii
Products Ve Ticaret A.S. 236,738 237,166 0.0
Total Investments in Turkey 15,128,574 12,320,095 0.9
United Kingdom
Automobiles & 5,259,274 Lucas Varity PLC 16,920,886 15,971,784 1.2
Equipment
Banking 944,393 National Westminster Bank PLC 10,334,000 11,195,968 0.8
Beverages 1,314,814 ++Allied Domecq PLC 9,110,909 9,288,372 0.7
617,140 Matthew Clark PLC 6,049,421 2,836,326 0.2
-------------- -------------- ------
15,160,330 12,124,698 0.9
Chemicals 890,802 Imperial Chemical Industries PLC 10,691,467 10,141,104 0.8
1,495,500 Inspec Group PLC 6,707,529 4,663,089 0.3
-------------- -------------- ------
17,398,996 14,804,193 1.1
Computer/ 466,415 Misys PLC 6,652,871 9,316,733 0.7
Commercial/Office
Diversified 1,561,424 BTR PLC 6,374,989 6,390,096 0.5
Holdings
Financial Services 724,000 HSBC Holdings PLC 11,099,447 19,035,813 1.4
Food & Beverage 1,240,800 Cadbury Schweppes PLC 10,423,624 10,317,103 0.8
1,860,641 Grand Metropolitan PLC 11,691,883 15,561,657 1.2
981,800 Unilever PLC 18,696,594 25,845,924 1.9
-------------- -------------- ------
40,812,101 51,724,684 3.9
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
Shares Value Percent of
Industries Held Investments Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
United Kingdom (concluded)
Insurance 1,193,300 Prudential Corp. PLC $ 5,739,834 $ 11,608,136 0.9%
Oil--Related 281,578 ++Expro International Group PLC 2,194,079 2,194,957 0.2
Pharmaceuticals 1,298,151 Glaxo Wellcome PLC 18,577,878 25,572,432 1.9
Real Estate 687,475 Land Securities PLC 6,551,222 8,948,422 0.7
Retail 8,763,493 Asda Group PLC 15,993,806 16,366,700 1.2
2,910,000 Tesco PLC 12,545,688 16,918,507 1.3
-------------- -------------- ------
28,539,494 33,285,207 2.5
Telecommunications 2,135,020 Cable & Wireless PLC 15,324,908 16,474,052 1.2
Utilities-- 458,350 Anglian Water PLC 4,170,424 5,083,982 0.4
Electric, Gas & 517,175 Severn Trent PLC 5,282,947 6,341,186 0.5
Water 831,000 South West Water PLC 6,526,211 9,254,498 0.7
687,000 Thames Water PLC 5,710,625 7,530,894 0.6
609,500 United Utilities PLC 5,559,936 6,691,237 0.5
953,370 ++Yorkshire Water PLC 4,679,835 5,573,782 0.4
-------------- -------------- ------
31,929,978 40,475,579 3.1
Total Investments in the United Kingdom 233,611,013 279,122,754 21.0
Face
Amount Short-Term Securities
Repurchase US$ 19,427,000 HSBC Securities, Inc., purchased on 4/30/1997
Agreements*** to yield 5.36% to 5/01/1997 19,427,000 19,427,000 1.4
Total Investments in Short-Term Securities 19,427,000 19,427,000 1.4
Total Investments $1,012,461,618 1,154,941,899 86.1
==============
Foreign Time Deposit++++ 162,776,531 12.1
Other Assets Less Liabilities 23,560,198 1.8
-------------- ------
Net Assets $1,341,278,628 100.0%
============== ======
<PAGE>
<FN>
(a)The securitiy may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
*Global Depositary Receipts (GDR).
**American Depositary Receipts (ADR).
***Repurchase Agreements are fully collateralized by US Government &
Agency Obligations.
++Non-income producing security.
++++This foreign time deposit bears interest at 3.125% and matures
on 5/02/1997.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of April 30, 1997
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$1,012,461,618) (Note 1a) $1,154,941,899
Cash 9,000,668
Foreign cash (Note 1b) 403,797
Foreign time deposits (Note 1b) 162,776,531
Receivables:
Securities sold $ 22,931,362
Dividends 6,165,219
Beneficial interest sold 5,624,115
Interest 46,851 34,767,547
--------------
Prepaid registration fees and other assets (Note 1f) 109,941
--------------
Total assets 1,362,000,383
--------------
Liabilities: Payables:
Securities purchased 12,435,094
Beneficial interest redeemed 5,763,653
Investment adviser (Note 2) 816,468
Distributor (Note 2) 673,821 19,689,036
--------------
Accrued expenses and other liabilities 1,032,719
--------------
Total liabilities 20,721,755
--------------
<PAGE>
Net Assets: Net assets $1,341,278,628
==============
Net Assets Class A Shares of beneficial interest, $0.10 par value,
Consist of: unlimited number of shares authorized $ 2,740,520
Class B Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 5,323,163
Class C Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 134,865
Class D Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 791,782
Paid-in capital in excess of par 1,129,278,250
Accumulated investment loss--net (15,450,507)
Undistributed realized capital gains on investments and foreign
currency transactions--net 77,016,129
Unrealized appreciation on investments and foreign currency
transactions--net 141,444,426
--------------
Net assets $1,341,278,628
==============
Net Asset Value: Class A--Based on net assets of $429,820,735 and 27,405,196 shares
of beneficial interest outstanding $ 15.68
==============
Class B--Based on net assets of $768,585,789 and 53,231,633 shares
of beneficial interest outstanding $ 14.44
==============
Class C--Based on net assets of $19,354,948 and 1,348,651 shares
of beneficial interest outstanding $ 14.35
==============
Class D--Based on net assets of $123,517,156 and 7,917,823 shares
of beneficial interest outstanding $ 15.60
==============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations for the Six Months Ended April 30, 1997
<S> <S> <C> <C>
Investment Dividends (net of $1,662,740 foreign withholding tax) $ 12,927,379
Income Interest 2,135,736
(Notes 1d & 1e): --------------
Total income 15,063,115
--------------
<PAGE>
Expenses: Investment advisory fees (Note 2) $ 4,566,895
Account maintenance and distribution fees--Class B (Note 2) 3,842,394
Transfer agent fees--Class B (Note 2) 734,096
Custodian fees 500,940
Transfer agent fees--Class A (Note 2) 245,051
Account maintenance fees--Class D (Note 2) 150,036
Printing and shareholder reports 119,832
Account maintenance and distribution fees--Class C (Note 2) 97,401
Transfer agent fees--Class D (Note 2) 96,483
Accounting services (Note 2) 78,322
Registration fees (Note 1f) 62,678
Professional fees 39,563
Transfer agent fees--Class C (Note 2) 20,608
Trustees' fees and expenses 18,941
Pricing fees 6,317
Other 8,784
--------------
Total expenses 10,588,341
--------------
Investment income--net 4,474,774
--------------
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net 88,274,679
(Loss) on Foreign currency transactions--net (15,949,398) 72,325,281
Investments & --------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net 54,327,897
(Notes 1b, 1c, Foreign currency transactions--net (1,014,619) 53,313,278
1e & 3): -------------- --------------
Net realized and unrealized gain on investments and foreign
currency transactions 125,638,559
--------------
Net Increase in Net Assets Resulting from Operations $ 130,113,333
==============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the Year
Months Ended Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 1997 1996
<S> <S> <C> <C>
Operations: Investment income--net $ 4,474,774 $ 13,683,433
Realized gain on investments and foreign currency
transactions--net 72,325,281 174,762,791
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions--net 53,313,278 (13,107,489)
-------------- --------------
Net increase in net assets resulting from operations 130,113,333 175,338,735
-------------- --------------
Dividends & Investment income--net:
Distributions to Class A (8,111,008) --
Shareholders Class B (20,620,114) --
(Note 1g): Class C (561,592) --
Class D (3,691,110) --
Realized gain on investments--net:
Class A (29,824,100) (13,622,154)
Class B (104,006,968) (56,048,905)
Class C (2,515,859) (685,313)
Class D (14,571,788) (6,991,081)
-------------- --------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (183,902,539) (77,347,453)
-------------- --------------
Beneficial Net increase (decrease) in net assets derived from beneficial
Interest interest transactions 310,540,028 (127,806,154)
Transactions -------------- --------------
(Note 4):
Net Assets: Total increase (decrease) in net assets 256,750,822 (29,814,872)
Beginning of period 1,084,527,806 1,114,342,678
-------------- --------------
End of period* $1,341,278,628 $1,084,527,806
============== ==============
<FN>
*Undistributed (accumulated) investment income (loss)--net $ (15,450,507) $ 13,058,543
============== ==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
Class A
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended
April 30, For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: 1997++ 1996++ 1995++ 1994++ 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 16.67 $ 15.07 $ 15.96 $ 13.87 $ 10.53
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .12 .32 .19 .18 .26
Realized and unrealized gain on
investments and foreign currency
transactions--net 1.66 2.32 .56 1.91 3.08
---------- ---------- ---------- ---------- ----------
Total from investment operations 1.78 2.64 .75 2.09 3.34
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (0.59) -- -- -- --
Realized gain on investments--net (2.18) (1.04) (1.64) -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (2.77) (1.04) (1.64) -- --
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 15.68 $ 16.67 $ 15.07 $ 15.96 $ 13.87
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 12.17%++++ 18.86% 6.19% 15.07% 31.72%
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.04%* 1.10% 1.12% 1.03% 1.04%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 1.60%* 2.04% 1.32% 1.17% 1.50%
========== ========== ========== ========== ==========
Supplemental Net assets, end of period
Data: (in thousands) $ 429,821 $ 216,056 $ 204,713 $ 236,288 $ 182,612
========== ========== ========== ========== ==========
Portfolio turnover 33.31% 92.34% 72.16% 82.47% 115.10%
========== ========== ========== ========== ==========
Average commission rate paid+++ $ .0015 $ .0046 -- -- --
========== ========== ========== ========== ==========
<PAGE>
<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. The "Average
Commission Rate Paid" includes commissions paid in foreign
currencies, which have been converted into US dollars using the
prevailing exchange rate on the date of the transaction. Such
conversions may significantly affect the rate shown.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class B
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended
April 30, For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: 1997++ 1996++ 1995++ 1994++ 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 15.47 $ 14.20 $ 15.28 $ 13.43 $ 10.30
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .02 .14 .04 .02 .16
Realized and unrealized gain on
investments and foreign currency
transactions--net 1.56 2.17 .52 1.83 2.97
---------- ---------- ---------- ---------- ----------
Total from investment operations 1.58 2.31 .56 1.85 3.13
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.43) -- -- -- --
Realized gain on investments--net (2.18) (1.04) (1.64) -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (2.61) (1.04) (1.64) -- --
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 14.44 $ 15.47 $ 14.20 $ 15.28 $ 13.43
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 11.66%++++ 17.61% 5.12% 13.78% 30.39%
Return:** ========== ========== ========== ========== ==========
<PAGE>
Ratios to Average Expenses 2.08%* 2.13% 2.15% 2.06% 2.08%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net .34%* 1.00% .27% .14% .51
========== ========== ========== ========== ==========
Supplemental Net assets, end of period
Data: (in thousands) $ 768,586 $ 738,535 $ 795,469 $1,086,480 $ 765,279
========== ========== ========== ========== ==========
Portfolio turnover 33.31% 92.34% 72.16% 82.47% 115.10%
========== ========== ========== ========== ==========
Average commission rate paid+++ $ .0015 $ .0046 -- -- --
========== ========== ========== ========== ==========
<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. The "Average
Commission Rate Paid" includes commissions paid in foreign
currencies, which have been converted into US dollars using the
prevailing exchange rate on the date of the transaction. Such
conversions may significantly affect the rate shown.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class C++++
For the
For the For the Period
The following per share data and ratios have been derived Six Months Year Oct. 21,
from information provided in the financial statements. Ended Ended 1994++ to
April 30, October 31, Oct. 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 15.45 $ 14.19 $ 15.28 $ 15.08
Operating --------- --------- --------- ---------
Performance: Investment income (loss)--net .03 .15 .01 (.01)
Realized and unrealized gain on investments
and foreign currency tranactions--net 1.54 2.15 .54 .21
--------- --------- --------- ---------
Total from investment operations 1.57 2.30 .55 .20
<PAGE> --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.49) -- -- --
Realized gain on investments--net (2.18) (1.04) (1.64) --
--------- --------- --------- ---------
Total dividends and distributions (2.67) (1.04) (1.64) --
--------- --------- --------- ---------
Net asset value, end of period $ 14.35 $ 15.45 $ 14.19 $ 15.28
========= ========= ========= =========
Total Investment Based on net asset value per share 11.60%+++ 17.55% 5.04% 1.33%+++
Return:** ========= ========= ========= =========
Ratios to Average Expenses 2.10%* 2.15% 2.18% 2.86%*
Net Assets: ========= ========= ========= =========
Investment income (loss)--net .35%* 1.04% .11% (2.47%)*
========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 19,355 $ 15,917 $ 9,668 $ 462
Data: ========= ========= ========= =========
Portfolio turnover 33.31% 92.34% 72.16% 82.47%
========= ========= ========= =========
Average commission rate paid+++++ $ .0015 $ .0046 -- --
========= ========= ========= =========
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
++Commencement of Operations.
++++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. The "Average
Commission Rate Paid" includes commissions paid in foreign
currencies, which have been converted into US dollars using the
prevailing exchange rate on the date of the transaction. Such
conversions may significantly affect the rate shown.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<PAGE>
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class D++++
For the
For the For the Period
The following per share data and ratios have been derived Six Months Year Oct. 21,
from information provided in the financial statements. Ended Ended 1994++ to
April 30, October 31, Oct. 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 16.57 $ 15.02 $ 15.96 $ 15.75
Operating --------- --------- --------- ---------
Performance: Investment income--net .09 .28 .20 --++++++
Realized and unrealized gain on investments
and foreign currency tranactions--net 1.67 2.31 .50 .21
--------- --------- --------- ---------
Total from investment operations 1.76 2.59 .70 .21
--------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.55) -- -- --
Realized gain on investments--net (2.18) (1.04) (1.64) --
--------- --------- --------- ---------
Total dividends and distributions (2.73) (1.04) (1.64) --
--------- --------- --------- ---------
Net asset value, end of period $ 15.60 $ 16.57 $ 15.02 $ 15.96
========= ========= ========= =========
Total Investment Based on net asset value per share 12.08%+++ 18.57% 5.85% 1.33%+++
Return:** ========= ========= ========= =========
Ratios to Average Expenses 1.30%* 1.34% 1.38% 2.11%*
Net Assets: ========= ========= ========= =========
Investment income (loss)--net 1.11%* 1.83% 1.37% (1.70%)*
========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 123,517 $ 114,020 $ 104,493 $ 340
Data: ========= ========= ========= =========
Portfolio turnover 33.31% 92.34% 72.16% 82.47%
========= ========= ========= =========
Average commission rate paid+++++ $ .0015 $ .0046 -- --
========= ========= ========= =========
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
++Commencement of Operations.
++++Based on average shares outstanding during the period.
++++++Amount is less than $.01 per share.
+++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. The "Average
Commission Rate Paid" includes commissions paid in foreign
currencies, which have been converted into US dollars using the
prevailing exchange rate on the date of the transaction. Such
conversions may significantly affect the rate shown.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch EuroFund (the "Fund") is registered under the
Investment Company Act of 1940 as a diversified, open-end management
investment company. These unaudited financial statements reflect all
adjustments which are, in the opinion of management, necessary to a
fair statement of the results for the interim period presented. All
such adjustments are of a normal recurring nature. The Fund offers
four classes of shares under the Merrill Lynch Select Pricing SM
System. Shares of Class A and Class D are sold with a front-end
sales charge. Shares of Class B and Class C may be subject to a
contingent deferred sales charge. All classes of shares have
identical voting, dividend, liquidation and other rights and the
same terms and conditions, except that Class B, Class C and Class D
Shares bear certain expenses related to the account maintenance of
such shares, and Class B and Class C Shares also bear certain
expenses related to the distribution of such shares. Each class has
exclusive voting rights with respect to matters relating to its
account maintenance and distribution expenditures. The following is
a summary of significant accounting policies followed by the Fund.
(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. Securities and assets
for which market quotations are not available are valued at fair
value as determined in good faith by or under the direction of the
Fund's Board of Trustees.
<PAGE>
(b) Foreign currency transactions--Transactions denominated in
foreign currencies are recorded at the exchange rate prevailing when
recognized. Assets and liabilities denominated in foreign currencies
are valued at the exchange rate at the end of the period. Foreign
currency transactions are the result of settling (realized) or
valuing (unrealized) assets or liabilities expressed in foreign
currencies into US dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on
investments.
(c) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the equity, debt, and
currency markets. Losses may arise due to changes in the value of
the contract or if the counterparty does not perform under the
contract.
* 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 and call options. When the Fund writes an option, an
amount equal to the premium received by the Fund is reflected as an
asset and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written. When a security is purchased or sold through an
exercise of an option, the related premium paid (or received) is
added to (or deducted from) the basis of the security acquired or
deducted from (or added to) the proceeds of the security sold. When
an option expires (or the Fund enters into a closing transaction),
the Fund realizes a gain or loss on the option to the extent of the
premiums received or paid (or gain or loss to the extent the cost of
the closing transaction exceeds the premium paid or received).
NOTES TO FINANCIAL STATEMENTS (continued)
Written and purchased options are non-income producing investments.
<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.
(d) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required. Under the applicable foreign tax law, a
withholding tax may be imposed on interest, dividends, and capital
gains at various rates.
(e) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Dividend income is recorded on the ex-
dividend dates. Dividends from foreign securities where the ex-
dividend date may have passed are subsequently recorded when the
Fund has determined 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 distributions paid by
the Fund are recorded on the ex-dividend dates.
2. Investment Advisory Agreement and Transactions
with Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Merrill Lynch Asset Management, L.P. ("MLAM"). The general partner
of MLAM is Princeton Services, Inc. ("PSI"), an indirect wholly-
owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is
the limited partner. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds
Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned subsid-
iary of Merrill Lynch Group, Inc.
MLAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee of 0.75% on an annual basis of
the average daily value of the Fund's net assets. MLAM has entered
into a Sub-Advisory Agreement with Merrill Lynch Asset Management
U.K., Ltd. ("MLAM U.K."), an affiliate of MLAM, pursuant to which
MLAM pays MLAM U.K. a fee 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, 1997, MLAM paid MLAM U.K. a fee of $919,856
pursuant to such Agreement.
<PAGE>
Pursuant to the distribution plans ( the "Distribution Plans")
adopted by the Fund in accordance with Rule 12b-1 under the
Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are
accrued daily and paid monthly at annual rates based upon the
average daily net assets of the shares as follows:
Account
Maintenance Distribution
Fee Fee
Class B 0.25% 0.75%
Class C 0.25% 0.75%
Class D 0.25% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the six months ended April 30, 1997, 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 $1,499 $21,581
Class D $6,052 $81,479
For the six months ended April 30, 1997, MLPF&S received contingent
deferred sales charges of $849,236 and $3,553 relating to
transactions in Class B and Class C Shares, respectively.
In addition, MLPF&S received $51,702 in commissions on the execution
of portfolio security transactions for the Fund for the six months
ended April 30, 1997.
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, MLFDS, MLFD, and/or ML & Co.
<PAGE>
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended April 30, 1997 were $359,380,372 and
$424,984,598, respectively.
Net realized and unrealized gains (losses) as of April 30, 1997,
were as follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
Long-term investments $ 88,274,679 $ 142,480,281
Foreign currency transactions (15,949,398) (1,035,855)
------------- -------------
Total $ 72,325,281 $ 141,444,426
============= =============
As of April 30, 1997, net unrealized appreciation for Federal income
tax purposes aggregated $142,480,281, of which $192,610,708 related
to appreciated securities and $50,130,427 related to depreciated
securities. The aggregate cost of investments at April 30, 1997 for
Federal income tax purposes was $1,012,461,618.
4. Shares of Beneficial Interest:
Net increase (decrease) in net assets derived from beneficial
interest transactions was $310,540,028 and $(127,806,154) for the
six months ended April 30, 1997 and the year ended October 31, 1996,
respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Six Months Dollar
Ended April 30, 1997 Shares Amount
Shares sold 15,973,994 $ 248,577,921
Shares issued to shareholders
in reinvestment of dividends
and distributions 2,393,410 34,465,523
----------- -------------
Total issued 18,367,404 283,043,444
Shares redeemed (3,922,373) (61,509,018)
----------- -------------
Net increase 14,445,031 $ 221,534,426
=========== =============
<PAGE>
Class A Shares for the Year Dollar
Ended October 31, 1996 Shares Amount
Shares sold 3,553,169 $ 55,452,673
Shares issued to shareholders in
reinvestment of distributions 885,595 12,345,189
----------- -------------
Total issued 4,438,764 67,797,862
Shares redeemed (5,064,026) (77,283,493)
----------- -------------
Net decrease (625,262) $ (9,485,631)
=========== =============
Class B Shares for the Six Months Dollar
Ended April 30, 1997 Shares Amount
Shares sold 6,353,541 $ 92,491,648
Shares issued to shareholders in
reinvestment of dividends
and distributions 8,168,942 108,729,883
----------- -------------
Total issued 14,522,483 201,221,531
Shares redeemed (8,687,661) (125,864,141)
Automatic conversion of shares (333,490) (4,873,235)
----------- -------------
Net increase 5,501,332 $ 70,484,155
=========== =============
Class B Shares for the Year Dollar
Ended October 31, 1996 Shares Amount
Shares sold 6,274,132 $ 90,913,954
Shares issued to shareholders
in reinvestment of distributions 3,757,600 49,074,253
----------- -------------
Total issued 10,031,732 139,988,207
Shares redeemed (17,727,472) (252,558,644)
Automatic conversion of
shares (592,963) (8,462,694)
----------- -------------
Net decrease (8,288,703) $(121,033,131)
=========== =============
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded)
Class C Shares for the Six Months Dollar
Ended April 30, 1997 Shares Amount
Shares sold 1,971,774 $ 28,436,815
Shares issued to shareholders
in reinvestment of dividends
and distributions 210,334 2,782,759
----------- -------------
Total issued 2,182,108 31,219,574
Shares redeemed (1,863,714) (26,831,259)
----------- -------------
Net increase 318,394 $ 4,388,315
=========== =============
Class C Shares for the Year Dollar
Ended October 31, 1996 Shares Amount
Shares sold 2,608,151 $ 37,883,986
Shares issued to shareholders
in reinvestment of distributions 48,252 629,693
----------- -------------
Total issued 2,656,403 38,513,679
Shares redeemed (2,307,504) (33,480,305)
----------- -------------
Net increase 348,899 $ 5,033,374
=========== =============
Class D Shares for the Six Months Dollar
Ended April 30, 1997 Shares Amount
Shares sold 3,954,957 $ 61,301,768
Automatic conversion of
shares 309,519 4,873,235
Shares issued to shareholders
in reinvestment of dividends
and distributions 1,058,039 15,172,446
----------- -------------
Total issued 5,322,515 81,347,449
Shares redeemed (4,284,406) (67,214,317)
----------- -------------
Net increase 1,038,109 $ 14,133,132
=========== =============
<PAGE>
Class D Shares for the Year Dollar
Ended October 31, 1996 Shares Amount
Shares sold 10,577,168 $ 162,480,079
Automatic conversion of
shares 557,082 8,462,694
Shares issued to shareholders
in reinvestment of distributions 421,472 5,854,244
----------- -------------
Total issued 11,555,722 176,797,017
Shares redeemed (11,631,183) (179,117,783)
----------- -------------
Net decrease (75,461) $ (2,320,766)
=========== =============
5. Commitments:
At April 30, 1997, the Fund had outstanding foreign exchange
contracts, under which it had agreed to purchase and sell foreign
currency aggregating approximately $6,485,000 and $17,456,000,
respectively.
PORTFOLIO INFORMATION
As of April 30, 1997
Percent of
Ten Largest Equity Holdings Net Assets
Thyssen AG 2.7%
Internationale Nederlanden Groep N.V. 2.2
Unilever PLC 1.9
Glaxo Wellcome PLC 1.9
Oerlikon-Buehrle Holding AG 1.8
Volkswagen AG 1.8
Societa Finanziaria Telefonica S.p.A. (STET) 1.8
Henkel KGaA* 1.8
Kloeckner Werke AG 1.6
Philips Electronics N.V. 1.6
<PAGE>
Percent of
Ten Largest Industries Net Assets
Paper & Forest Products 7.2%
Financial Services 5.9
Chemicals 5.3
Telecommunications 4.7
Diversified Holdings 4.7
Pharmaceuticals 4.3
Banking 4.2
Insurance 3.9
Food & Beverage 3.9
Manufacturing 3.3
[FN]
*Includes combined holdings.
Equity Portfolio Changes for the
Quarter Ended April 30, 1997
Additions
Accor S.A.
Aksigorta
Alpha Credit Bank
*Anadolu Isuzu Otomotiv Ve Ticaret A.S.
BTR PLC
Baticim Bati Anadolu Cimento Sanayii A.S.
Castorama Dubois Investisse
Deutsche Lufthansa AG
Eczacibasi Yapi Gerecleri Sanayi Ve Ticaret A.S.
Euronet Services, Inc.
Expro International Group PLC
Huhtamaki 'I' Group
Koninklijke KNP BT N.V.
Lucas Varity PLC
Maillis
National Westminster Bank PLC
Otosan Otomobili Sanayii A.S.
Pharmacia & Upjohn, Inc.
Rauma OY
Royal PTT Nederland N.V.
SKB Banka (GDR)
Sarkuysan Elektrolitik Bakir Sanayi Ve Ticaret A.S.
Sevgi Ozel Saglick Hizmetleri A.S.
Titan Cement Co. S.A.
*Yorkshire Water PLC (Class B)
<PAGE>
Deletions
Alcatel Teletas Telekomunikasyon Endustri
Ve Ticaret A.S.
*Anadolu Isuzu Otomotiv Ve Ticaret A.S.
Assurances Generales de France S.A. (AGF)
Astra AB 'A'
Clariant AG (Registered)
Commerzbank AG
Compagnie de Suez S.A.
Degussa AG
Deutsche Bank AG (Warrants)
Eczacibasi Ilac Sanayi Ve Ticaret A.S.
Hurriyet Gazetecilik Ve Matbaacilik A.S.
Izmir Demir Celik Sanayii A.S.
Severoceske Doly
Sparbanken Sverige AB (Class A)
Stomil Olsztyn S.A.
Turcas Petroculuk A.S.
Usas Ucak Servisa A.S.
*Yorkshire Water PLC (Class B)
[FN]
*Added and deleted in the same quarter.
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
Donald Cecil, Trustee
Edward H. Meyer, Trustee
Charles C. Reilly, Trustee
Richard R. West, Trustee
Edward D. Zinbarg, Trustee
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Alan J. Albert, Vice President
Donald C. Burke, Vice President
Adrian C. Holmes, Vice President and
Portfolio Manager
Gerald M. Richard, Treasurer
Robert Harris, Secretary
<PAGE>
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
