MERRILL LYNCH
EUROFUND
FUND LOGO
Annual Report
October 31, 1995
This report is not authorized for use as an offer of
sale or a solicitation of an offer to buy shares of the
Fund unless accompanied or preceded by the Fund's
current prospectus. Past performance results shown
in this report should not be considered a representa-
tion of future performance. Investment return and
principal value of shares will fluctuate so that
shares, when redeemed, may be worth more or less
than their original cost.
<PAGE>
Merrill Lynch
EuroFund
Box 9011
Princeton, NJ
08543-9011
MERRILL LYNCH EUROFUND
PORTFOLIO INFORMATION
As a Percentage of Stocks &
Convertible Warrants
As of October 31, 1995
A pie chart illustrating the following percentages:
Netherlands 17.8%
Poland 0.1%
Austria 0.3%
Belgium 1.0%
Hungary 1.0%
Spain 4.8%
Finland 8.2%
France 11.8%
Sweden 9.3%
Germany 8.0%
Switzerland 7.8%
Italy 4.1%
Norway 2.6%
Ireland 2.2%
Czech Republic 0.6%
Greece 0.3%
Turkey 0.1%
United Kingdom 20.0%
<PAGE>
EUROPEAN STOCK MARKET PERFORMANCE
Total Return for the
Three-Month Period
Ended October 31, 1995
in US dollars*
A bar chart illustrating the following percentages:
Finland -13.2%
Austria -11.5%
Italy - 8.7%
France - 6.5%
Norway - 5.3%
Spain - 5.2%
Germany - 4.5%
Belgium - 2.1%
Netherlands - 2.1%
Ireland 0.6%
United Kingdom 1.1%
Sweden 7.6%
Switzerland 10.5%
Source: Financial Times/Standard & Poor's--Actuaries Index.
[FN]
*For the three-month period ended October 31, 1995,
total investment return for the Financial Times/
Standard & Poor's--Actuaries Europe Index
was -0.96%.
DEAR SHAREHOLDER
During the quarter ended October 31, 1995, the
unmanaged Financial Times/Standard & Poor's--
Actuaries Europe Index had a total return of -0.96%.
For the same period, Merrill Lynch EuroFund's
Class A, Class B, Class C and Class D Shares had total
returns of -4.98%, -5.27%, -5.27% and -5.06%,
respectively. (Results shown do not reflect sales
charges, and would be lower if sales charges were
included. Complete performance information can
be found on pages 3--6 of this report to shareholders.)
<PAGE>
The markets' weak performance over the last three
months was rooted in continued concerns about the
US dollar, European economic growth, and the
European Monetary Union (EMU). While economic
growth concerns allowed interest rate expectations
and bond yields to fall, the resultant downgrades
to earnings expectations forcedmost equity
markets lower.
The principal reasons for the Fund's underperform-
ance were a low exposure to the UK market which
performed strongly, an overweighted position in
value-oriented and economically sensitive stocks
which continued to underperform, and an under-
weighted position in defensive and growth stocks
which continued to outperform.
During the quarter ended October 31, 1995, economic
news was mixed. Economic activity continued at a
moderate pace in Europe, while US third-quarter
gross domestic product data suggested an accelera-
tion of US economic growth. We believe a primary
problem for western economies was the level of
inventories. Rising prices and strong demand caused
companies across the supply chain to build up high
levels of inventories. When price pressures and
demand eased, a period of heavy destocking com-
menced and has continued. We believe growing
consumer demand and the impact of lower interest
rates could lead to accelerated growth in early 1996.
Renewed uncertainties regarding the EMU process
negatively impacted the markets. Investors returned
to safe haven currencies and markets, such as Swit-
zerland, during the quarter ended October 31, 1995.
Investment Strategy
Although at October 31, 1995 the Fund held 8.5% of
net assets in cash, this was not reflective of a nega-
tive view on markets, but simply the timing of pur-
chases and sales. We expect to have the Fund fully
invested as we go into the new year. Valuations of
European equities remained low on an absolute basis,
relative to their own history, the US stock market and
European bonds. Under these conditions, a fully
invested position is warranted, in our opinion.
Some changes occurred in the Fund's geographic
allocations after a long period of fairly stable weight-
ings. We reduced the UK market weighting because
of extended valuations, and increased the French
market exposure because of undervaluation and a
heightened resolve on the part of the government
to tackle its fiscal problems. The Fund's key over-
weighted areas are Sweden, Holland and Finland,
while the key underweighted position is the
United Kingdom.
<PAGE>
We continue to focus on undervalued, economically
sensitive stocks, while remaining neutral on financial
stocks because of the positive interest rate back-
ground. We see little fundamental value in growth
stocks and defensive consumer issues as valuations
of cyclicals versus defensive issues are now at his-
torically low levels, in favor of cyclicals. For example,
Scandinavian paper stocks can be bought for two or
three times projected 1996 cash earnings. The Fund's
largest holdings continue to reflect a balance among
undervalued conglomerates, Dutch insurers and
Swiss pharmaceutical stocks.
Fiscal Year in Review
For the fiscal year ended October 31, 1995, Merrill
Lynch EuroFund's Class A, Class B, Class C and Class
D Shares had total returns of +6.19%, +5.12%, +5.04%
and +5.85%, respectively, while the total return for
the unmanaged Financial Times/Standard & Poor's-
Actuaries Europe Index was +14.37%. This substan-
tial underperformance followed two years when the
Fund significantly outperformed its benchmark. The
Fund also underperformed the average total return
of Lipper Analytical Services Inc.'s European Region
Funds, which was +9.33% in the 12 months ended
October 31, 1995.
Over the past year, the Fund's country allocations
made a positive contribution to total return because
of the overweighting of the Scandinavian markets and
the underweighting of Italy and France. Cyclical
stocks, an area we emphasized, were neglected
as investors focused on growth areas such as pharma-
ceuticals and technology. As a result, cyclical invest-
ments negatively impacted the Fund's performance.
Cyclicals seem to discount an economic downturn,
while growth companies are discounting a benign
economic outlook. Therefore, the Fund's focus on
cyclically oriented issues was the major source of its
underperformance.
In Conclusion
Investor sentiment concerning European equities is
currently poor, and there is a general feeling that
economic growth is going to decline further. We
believe there is no hard evidence for this, and many
factors point to a resumption of growth. If this
scenario unfolds, the Fund is well positioned. The
two major risks which could affect our positive out-
look would be a fall of both the US dollar and the US
stock market, as each has a significant influence on
European stock markets.
<PAGE>
We appreciate your ongoing interest in Merrill Lynch
EuroFund, and we look forward to assisting you with
your financial needs in the months and years to come.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Adrian C. Holmes)
Adrian C. Holmes
Vice President and Portfolio Manager
December 7, 1995
PERFORMANCE DATA
About Fund Performance
Since October 21, 1994, investors have been able to pur-
chase shares of the Fund through the Merrill Lynch
Select Pricing SM System, which offers four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge
(front-end load) of 5.25% and bear no ongoing distribu-
tion or account maintenance fees. Class A Shares are
available only to eligible investors.
* Class B Shares are subject to a maximum contingent
deferred sales charge of 4% if redeemed during the first
year, decreasing 1% each year thereafter to 0% after the
fourth year. In addition, Class B Shares are subject to a
distribution fee of 0.75% and an account maintenance
fee of 0.25%. These shares automatically convert to
Class D Shares after 8 years.
* Class C Shares are subject to a distribution fee of 0.75%
and an account maintenance fee of 0.25%. In addition,
Class C Shares are subject to a 1% contingent deferred
sales charge if redeemed within one year of purchase.
* Class D Shares incur a maximum initial sales charge of
5.25% and an account maintenance fee of 0.25% (but no
distribution fee).
Performance data for all of the Fund's shares are presented
in the "Total Return Based on a $10,000 Investment"
graphs and the "Recent Performance Results" and
"Performance Summary" tables on pages 4, 5 and 6. Data
for the Fund's Class A and Class B Shares are presented
in the "Average Annual Total Return" table on page 4.
Data for Class C and Class D Shares are presented in the
"Aggregate Total Return" table on page 5.
The "Recent Performance Results" table shows invest-
ment results before the deduction of any sales charges
for all of the Fund's shares for the 12-month and 3-month
periods ended October 31, 1995. All data in this table
assume imposition of the actual total expenses incurred
by each class of shares during the relevant period.
None of the past results shown should be considered a
representation of future performance. Investment return
and principal value of shares will fluctuate so that shares,
when redeemed, may be worth more or less than their
original cost. Dividends paid to each class of shares will
vary because of the different levels of account mainte-
nance, distribution and transfer agency fees applicable
to each class, which are deducted from the income avail-
able to be paid to shareholders.
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment--Class A Shares and Class B Shares
A line graph depicting growth of an investment in the Fund's Class A Shares
compared to the growth of an investment in the Morgan Stanley Capital
International Europe Index. Beginning and ending values are:
<PAGE>
10/26/88** 10/95
ML EuroFund++--
Class A Shares* $ 9,475 $19,533
Morgan Stanley Capital International
Europe Index++++ $10,000 $20,982
A line graph depicting growth of an investment in the Fund's Class B Shares
compared to the growth of an investment in the Morgan Stanley Capital
International Europe Index. Beginning and ending values are:
1/30/87** 10/95
ML EuroFund++--
Class B Shares* $10,000 $18,724
Morgan Stanley Capital International
Europe Index++++ $10,000 $23,703
[FN]
*Assuming maximum sales charge, transaction costs and other operating
expenses, including advisory fees.
**Commencement of operations.
++ML EuroFund invests primarily in equities of corporations in European
countries. Under normal market conditions, at least 80% of the Fund's net
assets will be invested in European corporate securities, primarily common
stocks and debt and preferred securities convertible into common stock.
++++This unmanaged market capitalization-weighted Index is comprised of 615
stocks, including a representative sampling of large-, medium-, and small-
capitalization companies.
Past performance is not predictive of future performance.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 9/30/95 +13.05% + 7.11%
Five Years Ended 9/30/95 +13.24 +12.02
Inception (10/26/88)
through 9/30/95 +11.42 +10.56
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<PAGE>
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 9/30/95 +11.96% + 7.96%
Five Years Ended 9/30/95 +12.08 +12.08
Inception (1/30/87) through 9/30/95 + 7.85 + 7.85
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced
to 0% after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment--Class C Shares and Class D Shares
A line graph depicting growth of an investment in the Fund's Class C Shares and
Class D Shares compared to the growth of an investment in the Morgan Stanley
Capital International Europe Index. Beginning and ending values are:
10/21/84** 10/95
ML EuroFund++--
Class C Shares* $10,000 $10,644
ML EuroFund++--
Class D Shares* $ 9,475 $10,163
Morgan Stanley Capital International
Europe Index++++ $10,000 $11,321
<PAGE>
[FN]
*Assuming maximum sales charge, transaction costs and other operating
expenses, including advisory fees.
**Commencement of operations.
++ML EuroFund invests primarily in equities of corporations in European
countries. Under normal market conditions, at least 80% of the Fund's net
assets will be invested in European corporate securities, primarily common
stocks and debt and preferred securities convertible into common stock.
++++This unmanaged market capitalization-weighted Index is comprised of 615
stocks, including a representative sampling of large-, medium-, and small-
capitalization companies.
Past performance is not predictive of future performance.
Aggregate Total Return
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Inception (10/21/94)
through 9/30/95 +9.44% +8.45%
[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*
Inception (10/21/94) through 9/30/95 +10.19% +4.40%
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<TABLE>
Recent Performance Results*
<CAPTION>
12 Month 3 Month
10/31/95 7/31/95 10/31/94 % Change % Change
<S> <C> <C> <C> <C>
ML EuroFund Class A Shares $15.07 $15.86 $15.96 -0.30%(1) -4.98%
ML EuroFund Class B Shares 14.20 14.99 15.28 -1.61(1) -5.27
ML EuroFund Class C Shares 14.19 14.98 15.28 -1.67(1) -5.27
ML EuroFund Class D Shares 15.02 15.82 15.96 -0.63(1) -5.06
ML EuroFund Class A Shares--Total Return +6.19(2) -4.98
ML EuroFund Class B Shares--Total Return +5.12(2) -5.27
ML EuroFund Class C Shares--Total Return +5.04(2) -5.27
ML EuroFund Class D Shares--Total Return +5.85(2) -5.06
<PAGE>
<FN>
*Investment results do not reflect sales charges; results shown
would be lower if a sales charge was included.
(1)Percent change includes reinvestment of $0.737 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.907 ordinary income
dividends and $0.737 per share capital gains distributions.
</TABLE>
PERFORMANCE DATA (concluded)
<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>
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
1/1/95--10/31/95 13.62 15.07 -- 0.019 +10.78
------ ------
Total $0.760 Total $1.676
Cumulative total return as of 10/31/95: +106.16%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains distributions
at net asset value on the ex-dividend date, and do
not include sales charge; results would be lower if sales charge was
included.
</TABLE>
<PAGE>
<TABLE>
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
1/1/95--10/31/95 12.95 14.20 -- 0.019 + 9.80
------ ------
Total $1.497 Total $1.616
Cumulative total return as of 10/31/95: +87.24%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains distributions
at net asset value on the ex-dividend date, and do not reflect deduction of
any sales charge; results would be lower if sales charge was deducted.
</TABLE>
<TABLE>
Performance Summary--Class C Shares
Net Asset Value Capital Gains Dividends
Period Covered Beginning Ending Distributed Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $15.08 $12.94 $0.737 $0.889 - 3.07%
1/1/95--10/31/95 12.94 14.19 -- 0.019 + 9.80
------ ------
Total $0.737 Total $0.908
Cumulative total return as of 10/31/95: + 6.44%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains distributions
at net asset value on the ex-dividend date, and do not reflect deduction of
any sales charge; results would be lower if sales charge was deducted.
</TABLE>
<PAGE>
<TABLE>
Performance Summary--Class 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%
1/1/95--10/31/95 13.61 15.02 -- 0.019 +10.50
------ ------
Total $0.737 Total $0.908
Cumulative total return as of 10/31/95: + 7.26%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains distributions
at net asset value on the ex-dividend date, and do not include sales charge;
results would be lower if sales charge was included.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Shares Value Percent of
Industry Held Investments Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Austria
Engineering 21,800 ++V.A. Technologie AG $ 2,383,280 $ 2,527,409 0.2%
Total Investments in Austria 2,383,280 2,527,409 0.2
Belgium
Banking 29,350 Generale de Banque S.A. 7,163,490 9,583,466 0.9
Total Investments in Belgium 7,163,490 9,583,466 0.9
Czech Republic
Building & 14,667 ++Metrostav AS 1,167,050 1,266,135 0.1
Construction
<PAGE>
Chemicals 30,797 ++Slovakofarma 1,875,976 1,886,814 0.2
Telecommuni- 27,500 ++SPT Telecom AS 2,684,119 2,704,832 0.2
cations
Total Investments in the Czech Republic 5,727,145 5,857,781 0.5
Finland
Banking 9,921,672 ++Kansallis-Osake-Pankki 17,104,769 7,962,067 0.7
2,116,800 ++Unitas Bank Ltd. (Class A) 5,714,168 5,146,110 0.5
-------------- -------------- ------
22,818,937 13,108,177 1.2
Machinery-- 195,000 ++Rauma OY 3,519,206 4,261,943 0.4
Diversified
Metals & Mining 687,700 Outokumpu OY 9,764,165 10,956,323 1.0
Paper & Forest 1,743,700 Enso-Gutzeit OY 'R' (Ordinary) (Registered) 12,175,093 13,704,968 1.2
Products 406,660 ++Kymmene OY 12,225,146 11,134,007 1.0
391,900 Metsa Serla OY (Class B) 14,945,500 14,614,851 1.3
801,925 ++++Repola OY 'S' 12,642,630 15,558,496 1.4
-------------- -------------- ------
51,988,369 55,012,322 4.9
Total Investments in Finland 88,090,677 83,338,765 7.5
France
Automobiles & 141,315 Peugeot S.A. 17,468,422 18,429,247 1.6
Equipment
Banking 122,000 ++Societe Generale 12,844,185 13,962,125 1.3
Building & 97,000 Compagnie de Saint-Gobain S.A. 11,606,838 11,577,644 1.0
Construction
Communication 116,550 Alcatel Alsthom Cie Generale d'Electricite S.A. 11,228,641 9,964,434 0.9
Equipment
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Value Percent of
Industry Held Investments Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
France (concluded)
Financial 134,600 Compagnie de Suez S.A. $ 5,295,872 $ 5,086,940 0.5%
Services 110,800 Compagnie Financiere de Paribas 5,604,913 6,101,996 0.5
45,734 EuraFrance S.A. 13,909,651 15,308,648 1.4
-------------- -------------- ------
24,810,436 26,497,584 2.4
Industrial 177,431 Compagnie de Fives-Lille 9,488,305 14,348,499 1.3
Materials
Insurance 352,600 ++Assurances Generales de France S.A. (AGF) 9,486,945 10,178,442 0.9
Metal & Steel 626,500 ++Usinor-Sacilor 11,334,702 9,363,190 0.8
Oil & Related 74,050 Societe Nationale Elf Aquitaine 5,209,575 5,048,347 0.5
Total Investments in France 113,478,049 119,369,512 10.7
Germany
Chemicals 62,110 BASF AG 11,228,370 13,661,724 1.2
54,000 Bayer AG 10,934,945 14,391,800 1.3
-------------- -------------- ------
22,163,315 28,053,524 2.5
Diverified 85,000 Veba AG (Warrants) (a) 3,659,373 5,022,067 0.4
Companies
Electronics 34,000 ++Siemens AG 17,077,978 17,861,617 1.6
<PAGE>
Engineering 321,783 ++Kloeckner Werke AG 14,985,368 14,384,946 1.3
47,654 Mannesmann AG 12,941,208 15,716,186 1.4
-------------- -------------- ------
27,926,576 30,101,132 2.7
Total Investments in Germany 70,827,242 81,038,340 7.2
Greece
Engineering & 80,666 ++AEGEK 945,100 852,253 0.1
Construction
Tobacco 60,000 ++Papastratos Cigarette Co. 1,825,929 2,151,932 0.2
Total Investments in Greece 2,771,029 3,004,185 0.3
Hungary
Natural Gas 44,000 ++Mol Re Hung Oil & Gas 3,778,425 3,964,190 0.4
Pharmaceuticals 131,001 ++Egis 2,764,956 3,273,777 0.3
251,167 ++Gedeon Richter 3,567,148 3,861,693 0.3
-------------- -------------- ------
6,332,104 7,135,470 0.6
Total Investments in Hungary 10,110,529 11,099,660 1.0
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Value Percent of
Industry Held Investments Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Ireland
Building 1,592,400 CRH PLC $ 9,477,830 $ 10,536,822 1.0%
Materials
<PAGE>
Paper & Forest 4,279,417 Jefferson Smurfit Group PLC 12,726,781 11,520,995 1.0
Products
Total Investments in Ireland 22,204,611 22,057,817 2.0
Italy
Diversified 13,030,335 ++Compagnie Industriali Riunite S.p.A. (CIR) 12,170,577 8,213,050 0.7
Companies 18,730,000 ++Montedison S.p.A. 14,319,765 12,923,735 1.2
-------------- -------------- ------
26,490,342 21,136,785 1.9
Engineering 2,571,700 ++Filippo Fochi S.p.A. 8,169,638 808,050 0.0
Utilities 9,033,151 Societa Finanziaria Telefonica S.p.A. 20,800,422 19,726,136 1.8
Total Investments in Italy 55,460,402 41,670,971 3.7
Netherlands
Automobiles & 352,000 Vredestein Groep N.V. 3,504,552 3,776,536 0.3
Equipment
Banking 405,850 ABN AMRO Holding N.V. 14,543,240 17,082,183 1.5
Capital Goods 459,000 Ahrend Groep N.V. 6,522,706 16,259,650 1.5
Chemicals 57,050 Akzo N.V. 6,319,474 6,508,307 0.6
298,628 ++++European Vinyls Corporation International N.V. 12,750,475 9,384,260 0.8
-------------- -------------- ------
19,069,949 15,892,567 1.4
Electrical 838,700 Philips Electronics N.V. 25,902,391 32,478,860 2.9
Equipment
<PAGE>
Insurance 781,125 Aegon N.V. 13,638,817 29,703,776 2.7
428,100 ++Amev N.V. 14,838,504 26,932,904 2.4
423,528 International Nederlanden Groep N.V. 15,831,917 25,300,905 2.3
-------------- -------------- ------
44,309,238 81,937,585 7.4
Paper & Forest 434,530 KNP BT (Koninklijke) (Warrants) (a) 1,500,004 129,653 0.0
Products
Transportation 385,908 ++KLM Royal Dutch Airlines N.V. 9,890,072 12,763,971 1.2
Total Investments in the Netherlands 125,242,152 180,321,005 16.2
Norway
Oil & Gas 218,000 Saga Petroleum A.S. (Class A) 2,577,113 2,735,521 0.2
Producers 1,102,400 Saga Petroleum A.S. (Class B) 12,575,675 13,301,158 1.2
-------------- -------------- ------
15,152,788 16,036,679 1.4
Oil & Related 265,600 Norsk Hydro AS 11,124,622 10,596,654 1.0
Total Investments in Norway 26,277,410 26,633,333 2.4
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Value Percent of
Industry Held Investments Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Poland
Electrical 15,504 ++Bydgoska Fabryka Kabli S.A. $ 202,022 $ 220,673 0.0%
Equipment
Engineering & 112,163 ++Elektrim S.A. 374,243 375,096 0.0
Construction
Wholesale 264,464 ++Polifarb Wroclaw S.A. 663,262 690,281 0.1
Total Investments in Poland 1,239,527 1,286,050 0.1
<PAGE>
Spain
Banking 86,553 Banco Popular Espanol S.A. 9,630,077 13,761,892 1.2
Petroleum 766,268 Repsol S.A. 21,422,573 22,903,213 2.1
Utilities- 240,000 Empresa Nacional de Electricidad S.A. 9,119,821 11,945,879 1.1
Electric
Total Investments in Spain 40,172,471 48,610,984 4.4
Sweden
Appliances 320,800 Electrolux AB 15,488,929 13,732,753 1.2
Automobiles & 729,900 Volvo AB (Class B) 13,808,866 16,447,862 1.5
Equipment
Engineering 565,600 SKF AB (Class A) 10,412,644 10,528,858 0.9
277,800 SKF AB (Class B) 5,353,782 5,276,035 0.5
189,000 ++++Svedala Industry AB 3,602,704 4,800,280 0.4
-------------- -------------- ------
19,369,130 20,605,173 1.8
Financial 472,300 Stadshypotek AB 6,965,920 8,578,471 0.8
Services
Metals & Mining 543,500 Avesta-Sheffield AB 4,750,742 5,365,939 0.5
Paper & Forest 224,200 Mo och Domsjo AB (Class B) 10,674,791 11,422,396 1.0
6,310,300 ++Rottneros Bruks AB 9,732,457 8,370,233 0.8
826,300 Stora Kopparbergs AB 10,348,305 10,026,250 0.9
-------------- -------------- ------
30,755,553 29,818,879 2.7
Total Investments in Sweden 91,139,140 94,549,077 8.5
<PAGE>
Switzerland
Banking 140,700 ++CS Holdings AG (Registered) 13,360,741 14,400,212 1.3
Electrical 13,460 BBC Brown Boveri & Cie (Bearer) 10,355,594 15,640,392 1.4
Equipment
Pharmaceuticals 28,855 Ciba-Geigy AG 16,473,100 25,025,997 2.2
3,310 Roche Holdings AG 18,033,362 24,093,436 2.2
-------------- -------------- ------
34,506,462 49,119,433 4.4
Total Investments in Switzerland 58,222,797 79,160,037 7.1
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Value Percent of
Industry Held Investments Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Turkey
Beverages 550,000 ++Erciyas Biracilik Ve Malt Sanayii A.S. $ 366,993 $ 348,508 0.0%
Engineering & 161,538 ++Enka Holding Yatirim AS 129,911 133,854 0.0
Construction
Total Investments in Turkey 496,904 482,362 0.0
United Kingdom
Beverages 1,501,800 Cadbury Schweppes PLC 12,907,676 12,409,880 1.1
Commercial 5,084,300 BET PLC 9,048,427 10,131,434 0.9
Services
Engineering 3,795,200 T & N PLC 10,154,703 8,613,026 0.8
<PAGE>
Financial 1,035,000 ++HSBC Holdings PLC 15,208,147 15,402,782 1.4
Services 615,000 National Westminster Bank PLC 5,611,738 6,142,111 0.5
-------------- -------------- ------
20,819,885 21,544,893 1.9
Food & Beverage 2,004,900 Grand Metropolitan PLC 13,021,249 13,887,882 1.2
897,400 Tate & Lyle PLC 5,868,055 6,372,379 0.6
904,800 Unilever PLC 14,464,573 17,586,267 1.6
-------------- -------------- ------
33,353,877 37,846,528 3.4
Industrials 3,942,200 Tomkins PLC 14,155,374 15,555,300 1.4
Insurance 1,193,300 Prudential Corp. PLC 5,739,834 7,463,892 0.7
Multi-Industry 2,161,200 BTR PLC (Ordinary) 11,953,505 11,484,271 1.0
Oil & Related 2,701,300 The British Petroleum Co. PLC 19,726,742 19,886,653 1.8
Pharmaceuticals 1,459,800 Glaxo Holdings PLC 17,625,687 19,704,530 1.8
Retail Trade 7,485,000 Asda Group PLC 7,856,805 12,133,466 1.1
634,500 ++J Sainsbury PLC 4,170,184 4,249,660 0.4
-------------- -------------- ------
12,026,989 16,383,126 1.5
Telecommuni- 2,169,400 Racal Electronics PLC 8,446,944 8,663,038 0.8
cations 3,126,700 Vodafone Group PLC 11,501,793 12,906,126 1.1
-------------- -------------- ------
19,948,737 21,569,164 1.9
Total Investments in the United Kingdom 187,461,436 202,592,697 18.2
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face Value Percent of
Amount Short-Term Securities Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Repurchase $ 54,909,000 PaineWebber Group, Inc., purchased on
Agreements* 10/31/1995 to yield 5.83% to 11/01/1995 $ 54,909,000 $ 54,909,000 4.9%
40,000,000 UBS Securities Funding, Inc., purchased on
10/26/1995 to yield 5.72% to 11/02/1995 40,000,000 40,000,000 3.6
Total Investments in Short-Term Securities 94,909,000 94,909,000 8.5
Number of Contracts/ Premiums
Face Amount Issue Paid
Currency Put 90,000,000 Finnish Mark, expiring December 1995 at Fim 4.235 2,949,750 1,515,690 0.1
Options 121,000,000 French Franc, expiring December 1995 at Frf 4.861 3,734,350 2,066,680 0.2
Purchased 100,000,000 German Deutschemark, expiring December 1995 at
DM 1.400 3,270,000 2,010,000 0.2
180,000,000 Netherlands Guilder, expiring December 1995 at
Nlg 1.568 5,859,000 3,708,000 0.3
69,000,000 Swiss Franc, expiring December 1995 at Chf 1.145 1,749,150 1,035,000 0.1
Total Options Purchased 17,562,250 10,335,370 0.9
Total Investments 1,020,939,541 1,118,427,821 100.3
Premiums
Received
Currency Put 90,000,000 Finnish Mark, expiring December 1995 at Fim 4.463 (879,750) (189,540) (0.0)
Options 121,000,000 French Franc, expiring December 1995 at Frf 5.124 (993,150) (193,842) (0.0)
Written 100,000,000 German Deutschemark, expiring December 1995
at DM 1.475 (1,080,000) (350,000) (0.0)
180,000,000 Netherlands Guilder, expiring December 1995
at Nlg 1.652 (1,935,000) (648,000) (0.1)
69,000,000 Swiss Franc, expiring December 1995 at Chf 1.202 (610,650) (207,000) (0.0)
Total Options Written (5,498,550) (1,588,382) (0.1)
Total Investments, Net of Options Written $1,015,440,991 1,116,839,439 100.2
==============
Liabilities in Excess of Other Assets (2,496,761) (0.2)
-------------- ------
Net Assets $1,114,342,678 100.0%
============== ======
<PAGE>
<FN>
(a)Warrants entitle the Fund to purchase a predetermined
number of shares of common stock. The purchase price and
number of shares are subject to adjustment under certain
conditions until the expiration date.
*Repurchase Agreements are fully collateralized by US
Government & Agency Obligations.
See Notes to Financial Statements.
++Non-income producing security.
++++Restricted security as to resale. The value of the Fund's investment in
restricted securities was approximately $29,743,000, representing 2.7% of
net assets.
Acquisition Value
Issue Dates Cost (Note 1a)
European Vinyls
Corporation International N.V. 11/18/1994 $12,750,475 $ 9,384,260
Repola OY 'S' 5/18/1993
to 12/13/1994 12,642,630 15,558,496
Svedala Industry AB 6/17/1993 3,602,704 4,800,280
Total $28,995,809 $29,743,036
=========== ===========
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of October 31, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$1,003,377,291) (Note 1a) $1,108,092,451
Options purchased (cost--$17,562,250) (Notes 1a & 1c) 10,335,370
Cash 31,800
Foreign cash (Note 1b) 28,920,100
Receivables:
Securities sold $ 6,808,481
Dividends 2,843,172
Beneficial interest sold 1,072,305
Interest 47,025 10,770,983
--------------
Prepaid registration fees and other assets (Note 1f) 72,662
--------------
Total assets 1,158,223,366
--------------
<PAGE>
Liabilities: Options written, at value (premiums received--$5,498,550)
(Notes 1a & 1c) 1,588,382
Payables:
Securities purchased 36,352,892
Beneficial interest redeemed 3,146,025
Investment adviser (Note 2) 744,017
Distributor (Note 2) 741,429 40,984,363
--------------
Accrued expenses and other liabilities 1,307,943
--------------
Total liabilities 43,880,688
--------------
Net Assets: Net assets $1,114,342,678
==============
Net Assets Class A Shares of beneficial interest, $0.10 par value,
Consist of: unlimited number of shares authorized $ 1,358,543
Class B Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 5,601,900
Class C Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 68,136
Class D Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 695,518
Paid-in capital in excess of par 947,810,609
Undistributed realized capital gains on investments and foreign
currency transactions--net 57,569,335
Unrealized appreciation on investments and foreign currency
transactions--net 101,238,637
--------------
Net assets $1,114,342,678
==============
Net Asset Value: Class A--Based on net assets of $204,712,539 and 13,585,427
shares of beneficial interest outstanding $ 15.07
==============
Class B--Based on net assets of $795,469,321 and 56,019,004
shares of beneficial interest outstanding $ 14.20
==============
Class C--Based on net assets of $9,668,362 and 681,358
shares of beneficial interest outstanding $ 14.19
==============
Class D--Based on net assets of $104,492,456 and 6,955,175
shares of beneficial interest outstanding $ 15.02
==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations for the Year Ended October 31, 1995
<S> <S> <C> <C>
Investment Income Dividends (net of $4,349,992 foreign withholding tax) $ 25,982,820
(Notes 1d & 1e): Interest 1,737,185
--------------
Total income 27,720,005
--------------
Expenses: Account maintenance & distribution fees--Class B (Note 2) $ 8,713,065
Investment advisory fees (Note 2) 8,514,893
Transfer agent fees--Class B (Note 2) 1,885,539
Custodian fees 1,133,852
Transfer agent fees--Class A (Note 2) 367,010
Printing and shareholder reports 330,764
Accounting services (Note 2) 277,433
Registration fees (Note 1f) 200,481
Account maintenance fees--Class D (Note 2) 148,608
Transfer agent fees--Class D (Note 2) 112,159
Professional fees 105,163
Trustees' fees and expenses 38,811
Account maintenance & distribution fees--Class C (Note 2) 32,919
Transfer agent fees--Class C (Note 2) 7,664
Pricing fees 6,727
Other 22,953
--------------
Total expenses 21,898,041
--------------
Investment income--net 5,821,964
--------------
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net 82,394,935
(Loss) on Foreign currency transactions--net (8,386,320) 74,008,615
Investments & --------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net (42,923,551)
1e & 3): Foreign currency transactions--net 9,440,757 (33,482,794)
-------------- --------------
Net realized and unrealized gain on investments and
foreign currency transactions 40,525,821
--------------
Net Increase in Net Assets Resulting from Operations $ 46,347,785
==============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended
October 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 5,821,964 $ 4,476,269
Realized gain on investments and foreign currency
transactions--net 74,008,615 145,799,258
Change in unrealized appreciation/depreciation on
investments and foreign currency transactions--net (33,482,794) 5,122,748
-------------- --------------
Net increase in net assets resulting from operations 46,347,785 155,398,275
-------------- --------------
Distributions to Realized gain on investments--net:
Shareholders Class A (22,844,949) --
(Note 1g): Class B (110,166,564) --
Class C (139,938) --
Class D (1,841,772) --
-------------- --------------
Net decrease in net assets resulting from
distributions to shareholders (134,993,223) --
-------------- --------------
<PAGE>
Beneficial Interest Net increase (decrease) in net assets derived
Transactions from beneficial interest transactions (120,582,541) 220,281,320
(Note 4): -------------- --------------
Net Assets: Total increase (decrease) in net assets (209,227,979) 375,679,595
Beginning of year 1,323,570,657 947,891,062
-------------- --------------
End of year $1,114,342,678 $1,323,570,657
============== ==============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class A
For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: 1995++ 1994++ 1993 1992 1991
<S> <S> <C> <C> <C> <C> <C>
Per Share Operating Net asset value, beginning of year $ 15.96 $ 13.87 $ 10.53 $ 11.62 $ 10.70
Performance: -------- -------- -------- -------- --------
Investment income--net .19 .18 .26 .24 .25
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net .56 1.91 3.08 (1.02) .96
-------- -------- -------- -------- --------
Total from investment operations .75 2.09 3.34 (.78) 1.21
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net -- -- -- (.31) (.29)
Realized gain on investments--net (1.64) -- -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions (1.64) -- -- (.31) (.29)
-------- -------- -------- -------- --------
Net asset value, end of year $ 15.07 $ 15.96 $ 13.87 $ 10.53 $ 11.62
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 6.19% 15.07% 31.72% (6.90%) 11.54%
Return:* ======== ======== ======== ======== ========
Ratios to Expenses 1.12% 1.03% 1.04% 1.09% 1.14%
Average ======== ======== ======== ======== ========
Net Assets: Investment income--net 1.32% 1.17% 1.50% (2.69%) 2.94%
======== ======== ======== ======== ========
<PAGE>
Supplemental Net assets, end of year (in thousands) $204,713 $236,288 $182,612 $ 87,865 $ 83,229
Data: ======== ======== ======== ======== ========
Portfolio turnover 72.16% 82.47% 115.10% 109.95% 124.64%
======== ======== ======== ======== ========
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class B
For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: 1995++ 1994++ 1993 1992 1991
<S> <S> <C> <C> <C> <C> <C>
Per Share Operating Net asset value, beginning of year $ 15.28 $ 13.43 $ 10.30 $ 11.41 $ 10.51
Performance: -------- ---------- -------- -------- --------
Investment income--net .04 .02 .16 .12 .13
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net .52 1.83 2.97 (.98) .94
-------- ---------- -------- -------- --------
Total from investment operations .56 1.85 3.13 (.86) 1.07
-------- ---------- -------- -------- --------
Less dividends and distributions:
Investment income--net -- -- -- (.25) (.17)
Realized gain on investments--net (1.64) -- -- -- --
-------- ---------- -------- -------- --------
Total dividends and distributions (1.64) -- -- (.25) (.17)
-------- ---------- -------- -------- --------
Net asset value, end of year $ 14.20 $ 15.28 $ 13.43 $ 10.30 $ 11.41
======== ========== ======== ======== ========
Total Investment Based on net asset value per share 5.12% 13.78% 30.39% (7.73%) 10.35%
Return:* ======== ========== ======== ======== ========
Ratios to Expenses, excluding account maintenance
Average and distribution fees 1.15% 1.06% 1.08% 1.12% 1.17%
Net Assets: ======== ========== ======== ======== ========
Expenses 2.15% 2.06% 2.08% 2.12% 2.17%
======== ========== ======== ======== ========
Investment income--net .27% .14% .51% (3.37%) 1.94%
======== ========== ======== ======== ========
<PAGE>
Supplemental Net assets, end of year (in thousands) $795,469 $1,086,480 $765,279 $447,104 $484,031
Data: ======== ========== ======== ======== ========
Portfolio turnover 72.16% 82.47% 115.10% 109.95% 124.64%
======== ========== ======== ======== ========
<FN>
*Total investment returns exclude the effect of sales loads.
++Based on average shares outstanding during the period.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class C Class D
For the For the
For the Period For the Period
The following per share data and ratios have been derived Year Oct. 21, Year Oct. 21,
from information provided in the financial statements. Ended 1994++ Ended 1994++
Oct. 31, to Oct. 31, Oct. 31, to Oct. 31,
Increase (Decrease) in Net Asset Value: 1995++++ 1994++++ 1995++++ 1994++++
<S> <S> <C> <C> <C> <C>
Per Share Operating Net asset value, beginning of period $ 15.28 $ 15.08 $ 15.96 $ 15.75
Performance: ------- ------- -------- -------
Investment income (loss)--net .01 (.01) .20 --
Realized and unrealized gain on
investments and foreign
currency transactions--net .54 .21 .50 .21
------- ------- -------- -------
Total from investment operations .55 .20 .70 .21
------- ------- -------- -------
Less distributions from realized gain
on investments--net (1.64) -- (1.64) --
------- ------- -------- -------
Net asset value, end of period $ 14.19 $ 15.28 $ 15.02 $ 15.96
======= ======= ======== =======
Total Investment Based on net asset value per share 5.04% 1.33%+++ 5.85% 1.33%+++
Return:** ======= ======= ======== =======
<PAGE>
Ratios to Expenses, excluding account maintenance
Average and distribution fees 1.18% 1.86%* 1.13% 1.86%*
Net Assets: ======= ======= ======== =======
Expenses 2.18% 2.86%* 1.38% 2.11%*
======= ======= ======== =======
Investment income--net .11% (2.47%)* 1.37% (1.70%)*
======= ======= ======== =======
Supplemental Net assets, end of period (in thousands) $ 9,668 $ 462 $104,493 $ 340
Data: ======= ======= ======== =======
Portfolio turnover 72.16% 82.47% 72.16% 82.47%
======= ======= ======== =======
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
+++Aggregate total investment return.
++Commencement of Operations.
++++Based on average shares outstanding during the period.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch EuroFund (the "Fund") is registered
under the Investment Company Act of 1940 as a diver-
sified, open-end management investment company.
The Fund offers four classes of shares under the Merrill
Lynch Select Pricing SM System. Shares of Class A and
Class D are sold with a front-end sales charge. Shares of
Class B and Class C may be subject to a contingent
deferred sales charge. All classes of shares have identical
voting, dividend, liquidation and other rights and the
same terms and conditions, except that Class B, Class C
and Class D Shares bear certain expenses related to the
account maintenance of such shares, and Class B and
Class C Shares also bear certain expenses related to the
distribution of such shares. Each class has exclusive
voting rights with respect to matters relating to its
account maintenance and distribution expenditures.
The following is a summary of significant accounting
policies followed by the Fund.
<PAGE>
(a) Valuation of investments--Portfolio securities which
are traded on stock exchanges are valued at the last
sale price on the exchange on which such securities are
traded, as of the close of business on the day the
securities are being valued or, lacking any sales, at the
last available bid price. Securities traded in the over-
the-counter market are valued at the last available bid
price prior to the time of valuation. In cases where
securities are traded on more than one exchange, the
securities are valued on the exchange designated by or
under the authority of the Board of Trustees as the
primary market. Securities which are traded both in
the over-the-counter and on a stock exchange are valued
according to the broadest and most representative
market. Options written are valued at the last sale
price in the case of exchange-traded options or, in the
case of options traded in the over-the-counter market,
the last asked price. Options purchased are valued at
the last sale price in the case of exchange-traded options
or, in the case of options traded in the over-the-counter
market, the last bid price. Short-term securities are
valued at amortized cost, which approximates market
value. Other investments, including futures contracts
and related options, are stated at market value. Securi-
ties and assets for which market quotations are not
available are valued at fair value as determined in good
faith by or under the direction of the Fund's Board
of Trustees.
(b) Foreign currency transactions--Transactions
denominated in foreign currencies are recorded at the
exchange rate prevailing when recognized. Assets and
liabilities denominated in foreign currencies are valued
at the exchange rate at the end of the period. Foreign
currency transactions are the result of settling (realized)
or valuing (unrealized) assets or liabilities expressed
in foreign currencies into US dollars. Realized and
unrealized gains or losses from investments include the
effects of foreign exchange rates on investments.
(c) Derivative financial instruments--The Fund may
engage in various portfolio strategies to seek to increase
its return by hedging its portfolio against adverse move-
ments in the equity, debt, and currency markets. Losses
may arise due to changes in the value of the contract or
if the counterparty does not perform under the contract.
* 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.
<PAGE>
* Forward foreign exchange contracts--The Fund is
authorized to enter into forward foreign exchange
contracts as a hedge against either specific transactions
or portfolio positions. Such contracts are not entered
on the Fund's records. However, the effect on operations
is recorded from the date the Fund enters into such
contracts. Premium or discount is amortized over the
life of the contracts.
* Options--The Fund is authorized to write covered
call options and purchase put options. When the Fund
writes an option, an amount equal to the premium
received by the Fund is reflected as an asset and an
equivalent liability. The amount of the liability is sub-
sequently marked to market to reflect the current
market value of the option written. When a security is
purchased or sold through an exercise of an option, the
related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or
deducted from (or added to) the proceeds of the security
sold. When an option expires (or the Fund enters into a
closing transaction), the Fund realizes a gain or loss on
the option to the extent of the premiums received or
paid (or gain or loss to the extent the cost of the closing
transaction exceeds the premium paid or received).
Written and purchased options are non-income
producing investments.
(d) Income taxes--It is the Fund's policy to comply
with the requirements of the Internal Revenue Code
applicable to regulated investment companies and to
distribute substantially all of its taxable income to its
shareholders. Therefore, no Federal income tax provi-
sion is required. Under the applicable foreign tax law, a
withholding tax may be imposed on interest, dividends,
and capital gains at various rates.
(e) Security transactions and investment income--
Security transactions are recorded on the dates the
transactions are entered into (the trade dates). Dividend
income is recorded on the ex-dividend dates, except that
if the ex-dividend date has passed, certain dividends
from foreign securities are recorded as soon as the Fund
is informed of the ex-dividend date. Interest income
is recognized on the accrual basis. Realized gains and
losses on security transactions are determined on the
identified cost basis.
<PAGE>
(f) Prepaid registration fees--Prepaid registration fees
are charged to expense as the related shares are issued.
(g) Dividends and distributions--Dividends and distri-
butions paid by the Fund are recorded on the ex-dividend
dates.
(h) Reclassification--Generally accepted accounting
principals require that certain components of net assets
be reclassified to reflect permanent differences between
financial reporting and tax purposes. Accordingly, cur-
rent year's permanent book/tax differences of $5,821,964
and $450 have been reclassified from undistributed net
investment income and paid-in capital in excess of par,
respectively, to undistributed net realized capital gains.
These reclassifications have no effect on net assets or
net asset values per share.
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 subsidi-
ary of Merrill Lynch & Co., Inc. ("ML & Co."), which
is the limited partner. The Fund has also entered into a
Distribution Agreement and Distribution Plans with
Merrill Lynch Funds Distributor, Inc. ("MLFD" or
"Distributor"), a wholly-owned subsidiary of Merrill
Lynch Group, Inc.
MLAM is responsible for the management of the Fund's
portfolio and provides the necessary personnel, facili-
ties, equipment and certain other services necessary to
the operations of the Fund. For such services, the Fund
pays a monthly fee of 0.75% on an annual basis of the
average daily value of the Fund's net assets. MLAM has
entered into a Sub-Advisory Agreement with Merrill
Lynch Asset Management U.K., Ltd. ("MLAM U.K."), an
affiliate of MLAM, pursuant to which MLAM pays MLAM
U.K. a fee computed at the rate of 0.15% of the average
daily net assets of the Fund for providing investment
advisory services to MLAM with respect to the Fund.
Certain states in which the shares of the Fund are
qualified for sale impose limitations on the expenses of
the Fund. The most restrictive annual expense limitation
requires that MLAM reimburse the Fund to the extent
the Fund's expenses (excluding interest, taxes, distri-
bution fees, brokerage fees and commissions, and
extraordinary items) exceed 2.5% of the Fund's first
$30 million of average daily net assets, 2.0% of the next
$70 million of average daily net assets and 1.5% of the
average daily net assets in excess thereof. MLAM's obli-
gation to reimburse the Fund is limited to the amount of
the management fee. No fee payment will be made to
MLAM during any fiscal year which will cause such
expenses to exceed the most restrictive expense limita-
tion at the time of such payment.
<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 mainte-
nance and distribution fees. The fees are accrued daily
and paid monthly at annual rates based upon the average
daily net assets of the shares as follows:
Account
Maintenance Fee Distribution Fee
Class B 0.25% 0.75%
Class C 0.25% 0.75%
Class D 0.25% --
Pursuant to a sub-agreement with the Distributor,
Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S"),
a subsidiary of ML & Co., also provides account main-
tenance and distribution services to the Fund. The
ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account main-
tenance services to Class B, Class C and Class D share-
holders. The ongoing distribution fee compensates the
Distributor and MLPF&S for providing shareholder and
distribution-related services to Class B and Class C
shareholders.
For the year ended October 31, 1995, 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:
NOTES TO FINANCIAL STATEMENTS (concluded)
MLFD MLPF&S
Class A $3,461 $ 52,055
Class D $8,688 $135,599
For the year ended October 31, 1995, MLPF&S received
contingent deferred sales charges of $2,352,273 and
$2,495 relating to transactions in Class B and Class C
Shares, respectively.
In addition, MLPF&S received $169,311 in commissions
on the execution of portfolio security transactions for
the Fund for the year ended October 31, 1995.
<PAGE>
Merrill Lynch Financial Data Services, Inc. ("MLFDS"),
a wholly-owned subsidiary of ML & Co., is the Fund's
transfer agent.
Accounting services are provided to the Fund by MLAM
at cost.
Certain officers and/or trustees of the Fund are officers
and/or directors of MLAM, PSI, MLPF&S, MLFDS,
MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-
term securities, for the year ended October 31, 1995
were $782,756,897 and $1,092,539,127, respectively.
Net realized and unrealized gains (losses) as of October
31, 1995 were as follows:
Realized Unrealized
Gains (Losses) Gains (Losses)
Investments:
Long-term $82,527,897 $104,715,160
Options written (132,962) --
----------- ------------
Total investments 82,394,935 104,715,160
Currency transactions:
Options purchased (16,036,100) (7,226,880)
Options written 6,603,800 3,910,168
Foreign currency transactions 1,045,980 (159,811)
----------- ------------
Total currency transactions (8,386,320) (3,476,523)
----------- ------------
Total $74,008,615 $101,238,637
=========== ============
Transactions in call options written for the year ended
October 31, 1995 were as follows:
<PAGE>
Premiums
Par Value Received
Outstanding call options
written at beginning of year -- --
Options written $ 2,972,700 $ 1,045,324
Options exercised (2,229,500) (783,792)
Options closed (743,200) (261,532)
----------- ------------
Outstanding call options
written at end of year $ -- $ --
=========== ============
Transactions in put options written for the year ended
October 31, 1995 were as follows:
Premiums
Par Value Received
Outstanding put options
written at beginning of year -- --
Options written $1,081,000,000 $ 9,139,350
Options closed (521,000,000) (3,640,800)
-------------- ------------
Outstanding put options
written at end of year $ 560,000,000 $ 5,498,550
============== ============
As of October 31, 1995, net unrealized appreciation for
Federal income tax purposes aggregated $98,415,716, of
which $143,032,361 related to appreciated securities
and $44,616,645 related to depreciated securities. The
aggregate cost of investments at October 31, 1995 for
Federal income tax purposes was $1,009,676,735.
4. Shares of Beneficial Interest:
Net increase (decrease) in net assets derived from
beneficial interest transactions was $(120,582,541) and
$220,281,320 for the years ended October 31, 1995 and
October 31, 1994, respectively.
<PAGE>
Transactions in shares of beneficial interest for each
class were as follows:
Class A Shares for the Year Dollar
Ended October 31, 1995 Shares Amount
Shares sold 3,992,118 $ 59,286,758
Shares issued to shareholders in
reinvestment of distributions 1,491,120 19,695,986
----------- -------------
Total issued 5,483,238 78,982,744
Shares redeemed (6,703,037) (97,147,606)
----------- -------------
Net decrease (1,219,799) $ (18,164,862)
=========== =============
Class A Shares for the Year Dollar
Ended October 31, 1995 Shares Amount
Shares sold 12,530,353 $ 190,014,197
Shares redeemed (10,887,820) (167,629,564)
----------- -------------
Net increase 1,642,533 $ 22,384,633
=========== =============
Class B Shares for the Year Dollar
Ended October 31, 1995 Shares Amount
Shares sold 8,300,407 $ 118,574,899
Shares issued to shareholders in
reinvestment of distributions 7,573,598 95,092,943
----------- -------------
Total issued 15,874,005 213,667,842
Shares redeemed (23,991,158) (330,882,601)
Automatic conversion of
shares (6,951,752) (95,508,046)
----------- -------------
Net decrease (15,068,905) $(212,722,805)
=========== =============
<PAGE>
Class B Shares for the Year Dollar
Ended October 31, 1995 Shares Amount
Shares sold 41,040,817 $ 596,780,681
Shares redeemed (26,955,193) (399,676,122)
----------- -------------
Net increase 14,085,624 $ 197,104,559
=========== =============
Class C Shares for the Year Dollar
Ended October 31, 1995 Shares Amount
Shares sold 1,234,402 $ 17,745,431
Shares issued to shareholders in
reinvestment of distributions 10,171 128,000
----------- -------------
Total issued 1,244,573 17,873,431
Shares redeemed (593,463) (8,515,458)
----------- -------------
Net increase 651,110 $ 9,357,973
=========== =============
Class C Shares for the Period Dollar
October 21, 1994++++ to October 31, 1994 Shares Amount
Shares sold 30,249 $ 456,068
Shares redeemed (1) (15)
----------- -------------
Net increase 30,248 $ 456,053
=========== =============
[FN]
++Commencement of Operations.
Class D Shares for the Year Dollar
Ended October 31, 1995 Shares Amount
Shares sold 2,264,532 $ 34,246,830
Automatic conversion of
shares 6,576,119 95,508,046
Shares issued to shareholders in
reinvestment of distributions 127,438 1,690,498
----------- -------------
Total issued 8,968,089 131,445,374
Shares redeemed (2,034,217) (30,498,221)
----------- -------------
Net increase 6,933,872 $ 100,947,153
=========== =============
<PAGE>
Class D Shares for the Period Dollar
October 21, 1994++++ to October 31, 1994 Shares Amount
Shares sold 24,171 $ 381,029
Shares redeemed (2,868) (44,954)
----------- -------------
Net increase 21,303 $ 336,075
=========== =============
[FN]
++Commencement of Operations.
5. Commitments:
At October 31, 1995, the Fund had outstanding foreign
exchange contracts under which it had agreed to
purchase and sell foreign currency aggregating approxi-
mately $1,865,000 and $1,976,000, respectively.
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
Merrill Lynch EuroFund:
We have audited the accompanying statement of assets
and liabilities, including the schedule of investments,
of Merrill Lynch EuroFund as of October 31, 1995, the
related statements of operations for the year then
ended and changes in net assets for each of the years
in the two-year period then ended, and the financial
highlights for each of the years in the five-year period
then ended. These financial statements and the finan-
cial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion
on these financial statements and the financial high-
lights based on our audits.
<PAGE>
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
the financial highlights are free of material misstate-
ment. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in
the financial statements. Our procedures included
confirmation of securities owned at October 31, 1995
by correspondence with the custodian and brokers.
An audit also includes assessing the accounting
principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial
highlights present fairly, in all material respects, the
financial position of Merrill Lynch EuroFund as of
October 31, 1995, the results of its operations, the
changes in its net assets, and the financial highlights
for the respective stated periods in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
December 8, 1995
</AUDIT-REPORT>
PORTFOLIO INFORMATION (unaudited)
Percent of
Ten Largest Equity Holdings Net Assets
Philips Electronics N.V. 2.9%
Aegon N.V. 2.7
Amev N.V. 2.4
International Nederlanden Groep N.V. 2.3
Ciba-Geigy AG 2.2
Roche Holdings AG 2.2
Repsol S.A. 2.1
The British Petroleum Co. PLC 1.8
Societa Finanziaria Telefonica S.p.A. (STET) 1.8
Glaxo Holdings PLC 1.8
<PAGE>
Percent of
Ten Largest Industries Net Assets
Insurance 9.0%
Paper & Forest Products 8.6
Banking 7.4
Pharmaceuticals 6.8
Engineering 5.5
Financial Services 5.1
Electrical Equipment 4.3
Chemicals 4.1
Automobiles & Equipment 3.4
Food & Beverage 3.4
PORTFOLIO CHANGES (unaudited)
For the Quarter Ended
October 31, 1995
Additions
*AEGEK (Preferred) (Rights)
*AEGEK (Rights)
Alcatel Alsthom Cie Generale d'Electricite S.A.
Assurances Generales de France S.A. (AGF)
Bydgoska Fabryka Kabli S.A.
Cadbury Schweppes PLC
Compagnie de Suez S.A.
Compagnie Financiere de Paribas
Elektrim S.A.
Enka Holding Yatirim AS
*Eregli Demir Ve Celik Fabrikalari T.A.S.
HSBC Holdings PLC
J Sainsbury PLC
Metrostav AS
*Migros Turk T.A.S.
National Westminster Bank PLC
Norsk Hydro AS
Papastratos Cigarette Co.
Polifarb Wroclaw S.A.
Rottneros Bruks AB
SPT Telecom AS
Slovakofarma
Societe Generale
Usinor-Sacilor
<PAGE>
Deletions
*AEGEK (Preferred) (Rights)
*AEGEK (Rights)
Allied Irish Banks PLC (Ordinary)
The BICC Group PLC
Biocel Paskov AS
British Gas PLC (Ordinary)
British Sky Broadcasting Group PLC
British Telecommunications PLC
Celsius Industrier AB
*Eregli Demir Ve Celik Fabrikalari T.A.S.
*Migros Turk T.A.S.
Munich Reinsurance Co.
NYNEX CableComms Group PLC
The RTZ Corp. PLC
Rank Organisation PLC
Rolls Royce PLC
Standard Chartered PLC
Ugine S.A.
Vendome Luxury Group (Units)
Verbund Oesterreichische Elekrizitats AG
Volkswagen AG
[FN]
*Added and deleted in the same quarter.
<TABLE>
IMPORTANT TAX INFORMATION (unaudited)
<CAPTION>
The following information summarizes all per share distributions paid
by Merrill Lynch EuroFund during its taxable year ended October 31, 1995:
Qualifying Domestic
Domestic Non-Qualifying Foreign Source Total Ordinary Foreign Taxes Long-Term
Record Date Payable Date Ordinary Income Ordinary Income Income Income Paid or Withheld Capital Gains
<S> <C> <C> <C> <C> <C> <C> <C>
Class A Shares:
12/13/94 12/21/94 $0.002527 $0.613625 $0.272609 $0.888761 $0.048370 $0.737166
6/22/95 6/30/95 $0.000053 $0.012911 $0.005736 $0.018700 -- --
Class B Shares:
12/13/94 12/21/94 $0.002527 $0.613625 $0.272609 $0.888761 $0.048370 $0.737166
6/22/95 6/30/95 $0.000053 $0.012911 $0.005736 $0.018700 -- --
<PAGE>
Class C Shares:
12/13/94 12/21/94 $0.002527 $0.613625 $0.272609 $0.888761 $0.048370 $0.737166
6/22/95 6/30/95 $0.000053 $0.012911 $0.005736 $0.018700 -- --
Class D Shares:
12/13/94 12/21/94 $0.002527 $0.613625 $0.272609 $0.888761 $0.048370 $0.737166
6/22/95 6/30/95 $0.000053 $0.012911 $0.005736 $0.018700 -- --
</TABLE>
The qualifying domestic ordinary income qualifies for the dividends
received deduction for corporations.
All of the foreign taxes paid or withheld represent taxes incurred by
the Fund on dividends received by the Fund from foreign sources. Foreign
taxes paid or withheld should be included in taxable income with an
offsetting deduction from gross income or as a credit for taxes paid to
foreign governments. You should consult your tax adviser regarding the
appropriate treatment of foreign taxes paid.
Please retain this information for your records.
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
Donald Cecil, Trustee
Edward H. Meyer, Trustee
Charles C. Reilly, Trustee
Richard R. West, Trustee
Edward D. Zinbarg, Trustee
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Alan J. Albert, Vice President
Donald C. Burke, Vice President
Adrian C. Holmes, Vice President and
Portfolio Manager
Gerald M. Richard, Treasurer
Robert Harris, Secretary
<PAGE>
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
