MERRILL LYNCH
EUROFUND
FUND LOGO
Semi-Annual Report
April 30, 1998
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.
Merrill Lynch
EuroFund
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MERRILL LYNCH EUROFUND
PORTFOLIO INFORMATION
Pie graph depicting Portfolio Information As a Percentage of Stocks
As of April 30, 1998
Spain 1.2%
Norway 1.9%
Switzerland 2.3%
Italy 6.6%
Netherlands 13.9%
United Kingdom 22.9%
Germany 20.0%
France 17.8%
Sweden 6.7%
Finland 4.5%
Emerging Europe* 1.3%
Ireland 0.9%
[FN]
*Countries include Croatia, Hungary, Poland, Romania, Slovakia,
Slovenia and Turkey.
EUROPEAN STOCK MARKET PERFORMANCE
Bar graph depicting European Stock Market Performance in terms of
Total Return for the Three-Month Period Ended April 30, 1998 In US
dollars*
Denmark + 8.4%
Switzerland +11.3%
United Kingdom +12.8%
Germany +16.8%
Norway +17.0%
Netherlands +18.3%
Italy +22.4%
Sweden +22.4%
France +24.7%
Ireland +29.7%
Spain +29.9%
Finland +44.2%
Source: Financial Times/Standard & Poor's--Actuaries Index.
[FN]
*For the three-month period ended April 30, 1998, total investment
return for the Financial Times/Standard & Poor's--Actuaries Europe
Index was +17.38%.
Merrill Lynch EuroFund
April 30, 1998
DEAR SHAREHOLDER
During the quarter ended April 30, 1998, the unmanaged Financial
Times/Standard and Poor's--Actuaries Europe Index had a total
return of +17.38%, while the total return for the unmanaged Morgan
Stanley Capital International Europe Index was +17.74%. For the same
period, Merrill Lynch EuroFund's Class A, Class B, Class C and Class
D Shares had total returns of +20.36%, +20.08%, +20.04% and +20.37%,
respectively. Despite its heavy cash position, the Fund outperformed
appreciably, principally as a result of its underweighted positions
in the United Kingdom and Switzerland and its overweighted position
in France. Weakness in the oil and pharmaceutical sectors and the
emerging strength in industrial issues were beneficial to the Fund's
overall performance. However, a lack of exposure to a strong
financial sector, driven primarily by speculative activity, was
detrimental. (Fund results do not reflect sales charges, and would
be lower if sales charges were included. Complete performance
information can be found on pages 4 and 5 of this report to
shareholders.)
These high short-term returns continue to be driven by a favorable
investment backdrop consisting of strong growth, low inflation, low
interest rates and abundant liquidity. However, recent increased
volatility may well signal a turning point. Given the strong
positive correlation between the US dollar relative to the
Deutschemark exchange rate and European equity market returns, the
latest fall in the US dollar does not bode well.
The recent acceleration in growth has raised the prospect of an
increase in interest rates as bond yields have risen from their
lows. If sustained, this should change sector preferences. In
Europe, it is generally in this type of environment where growth and
financial stocks tend to underperform and economically sensitive
stocks outperform.
The improving economic environment in Europe has led to a number of
upgrades in economic growth forecasts. Integral to this change has
been an improvement in consumer confidence and spending. High levels
of unemployment in recent years have depressed consumer spending,
but as unemployment rates decline and economies recover, restrained
consumer demand is released. This has greatly reduced the risk of a
slowdown caused by the Asian financial crisis, and there is now
sufficient domestic economic momentum to allow Europe to grow even
if faced with a slowdown in the United States. Negotiations
regarding the European Monetary Union (EMU), now proceeding
smoothly, should also act as a catalyst to growth.
Investment Strategy
During the quarter ended April 30, 1998, we maintained a more
cautious investment stance for the Fund as markets have risen to
valuation levels around 30% above their ten-year averages. High
valuation levels are warranted at present, but markets should begin
to see levels move lower as the cycle progresses. As of April 30,
1998, the Fund's cash level reached 23.6% of net assets.
Additionally, we had short futures positions in the United Kingdom
and Germany, which represented approximately 3% of the Fund. Out-of-
the-money call options, a strategy chosen as a low risk tool to
increase income for the Fund while providing protection on the low
end, also have been written on a number of portfolio securities.
Cash was held principally in Deutschemarks, which we believe will
realize significant appreciation following the successful conclusion
of recent EMU negotiations.
Geographically, we have made no major changes to the Fund. Because
of its high cash position, the Fund was underweighted in most
markets, but was particularly underinvested in Switzerland and the
United Kingdom. At the sector level, we continued to favor
industrial companies such as chemicals, metal and mining and forest
products. Although there are a number of attractive companies in the
financial, pharmaceutical and energy sectors, we maintain that
valuations in those sectors still appear to be extremely stretched.
Merrill Lynch EuroFund
April 30, 1998
In Conclusion
Markets continue to trade on valuation levels that leave little room
for disappointment. With a bias now emerging toward higher interest
rates, and the supply/demand balance in the markets deteriorating as
a result of substantial privatizations and rights issues, we believe
the markets will struggle to sustain current levels. Our current
strategy should at least partially limit any net asset value
deterioration in the event of any negative stock market
developments.
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
Senior Vice President and
Portfolio Manager
June 9, 1998
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
Adrian C. Holmes, Senior Vice President
and Portfolio Manager
Alan J. Albert, Vice President
Donald C. Burke, Vice President
Gerald M. Richard, Treasurer
Philip M. Mandel, Secretary
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
Merrill Lynch EuroFund
April 30, 1998
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 5.25% and bear no ongoing distribution or account
maintenance fees. Class A Shares are available only to eligible
investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.75% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after approximately 8 years. (There is no initial
sales charge for automatic share conversions.)
* Class C Shares are subject to a distribution fee of 0.75% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 5.25% and
an account maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Average Annual Total
Return" 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.
<TABLE>
Recent Performance Results*
<CAPTION>
Ten Years/
12 Month 3 Month Since Inception
Total Return Total Return Total Return
<S> <C> <C> <C>
ML EuroFund Class A Shares +46.89% +20.36% +303.77%
ML EuroFund Class B Shares +45.36 +20.08 +264.50
ML EuroFund Class C Shares +45.33 +20.04 +102.93
ML EuroFund Class D Shares +46.54 +20.37 +108.89
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included. Total
investment returns are based on changes in net asset values for the
periods shown, and assume reinvestment of all dividends and capital
gains distributions at net asset value on the ex-dividend date. The
Fund's ten-year/inception dates are: Class A Shares, 10/26/88; Class
B Shares, ten years ended 4/30/98; and Class C and Class D Shares, 10/21/94.
</TABLE>
Merrill Lynch EuroFund
April 30, 1998
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 3/31/98 +38.74% +31.46%
Five Years Ended 3/31/98 +22.29 +20.98
Inception (10/26/88)
through 3/31/98 +15.58 +14.92
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/98 +37.31% +33.31%
Five Years Ended 3/31/98 +21.02 +21.02
Ten Years Ended 3/31/98 +13.63 +13.63
[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 3/31/98 +37.31% +36.31%
Inception (10/21/94)
through 3/31/98 +21.77 +21.77
[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 3/31/98 +38.45% +31.18%
Inception (10/21/94)
through 3/31/98 +22.77 +20.86
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
Merrill Lynch EuroFund
April 30, 1998
PORTFOLIO INFORMATION
As of April 30, 1998
Percent of
Ten Largest Equity Holdings Net Assets
MontEdison S.p.A. 2.8%
Koninklijke KNP BT N.V. 2.5
Volkswagen AG 2.4
Societe EuraFrance S.A. 2.3
Philips Electronics N.V. 2.3
Telecom Italia S.p.A. 2.2
Thyssen AG 2.2
Bayer AG 2.0
Hoechst AG 1.9
Unilever PLC 1.9
Percent of
Ten Largest Industries Net Assets
Chemicals 9.0%
Paper & Forest Products 7.4
Diversified Holdings 5.7
Telecommunications 4.6
Financial Services 4.3
Banking 4.2
Automobiles 3.3
Insurance 2.7
Electrical Equipment 2.7
Construction 2.4
Equity Portfolio Changes for the
Quarter Ended April 30, 1998
Additions
*Bass PLC (Class B)
Bass PLC (Ordinary)
Commerzbank AG
J. Sainsbury PLC
Novartis AG (Registered)
*Polygram N.V.
RWE AG
SmithKline Beecham PLC
Deletions
Assurances Generales de France (AGF)
*Bass PLC (Class B)
Bass PLC
British Airways PLC
Carli Gry International A/S
Cimpor-Cimentos de Portugal S.A.
Credit Suisse Group (Registered)
Fotolabo S.A.
Huhtamaki 'I' Group
Imperial Chemical Industries PLC
Italcementi S.p.A.
Nokia Oyj (Class A)
*Polygram N.V.
Saurer AG (Registered)
Sommer-Allibert S.A.
W. H. Smith Group PLC
[FN]
*Added and deleted in the same quarter.
Merrill Lynch EuroFund
April 30, 1998
<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 D.D. (GDR)* $ 1,234,184 $ 2,364,750 0.1%
Pharmaceuticals 237,492 Pliva D.D. (GDR)* 2,053,449 4,298,605 0.2
Total Investments in Croatia 3,287,633 6,663,355 0.3
Finland
Metals & Mining 637,680 Outokumpu OY 9,746,544 8,959,141 0.4
Paper & Forest 1,642,749 Enso-Gutzeit OY 'R' (Ordinary)
Products (Registered) 14,186,732 17,498,520 0.8
1,959,500 Metsa Serla OY (Class B) 14,945,500 20,332,736 1.0
790,706 UPM-Kymmene Corp. 17,268,069 23,742,963 1.2
-------------- -------------- ------
46,400,301 61,574,219 3.0
Total Investments in Finland 56,146,845 70,533,360 3.4
France
Automobiles & 117,405 Peugeot S.A. 13,621,767 20,384,643 1.0
Equipment
Banking 140,413 Banque Nationale de Paris 6,207,685 11,839,444 0.6
55,740 Societe Generale de France S.A. 6,187,629 11,606,127 0.6
-------------- -------------- ------
12,395,314 23,445,571 1.2
Communication 49,206 Alcatel Alsthom Cie Generale
Equipment d'Electricite S.A. 5,532,750 9,124,497 0.4
Construction 211,631 Bouygues S.A. 19,941,371 33,401,157 1.6
Electronics 133,159 ++SGS-Thomson Microelectronics N.V. 7,698,605 11,382,815 0.5
Energy 276,911 Elf Aquitaine S.A. 31,923,896 36,335,675 1.8
Financial Services 150,200 Compagnie Financiere de Paribas S.A. 8,164,002 15,986,961 0.8
84,535 Societe EuraFrance S.A. 28,905,970 47,519,217 2.3
-------------- -------------- ------
37,069,972 63,506,178 3.1
Hotels 41,943 Accor S.A. 5,867,767 11,432,849 0.5
Insurance 275,389 AXA-UAP 17,340,225 32,334,586 1.6
Machinery 177,431 ++Compagnie de Fives-Lille S.A. 9,488,305 12,243,031 0.6
Metals & Steel 1,756,676 Usinor-Sacilor 27,910,057 26,293,609 1.3
Total Investments in France 188,790,029 279,884,611 13.6
</TABLE>
Merrill Lynch EuroFund
April 30, 1998
<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>
Germany
Automobiles 197,781 Daimler-Benz AG $ 13,452,925 $ 19,315,068 0.9%
60,401 Volkswagen AG 30,977,352 48,112,056 2.4
-------------- -------------- ------
44,430,277 67,427,124 3.3
Banking 148,248 Commerzbank AG 5,388,529 5,718,373 0.3
Chemicals 458,077 BASF AG 17,918,780 20,401,534 1.0
907,829 Bayer AG 35,814,480 40,381,691 2.0
77,016 Henkel KGaA 3,295,326 5,387,686 0.3
387,409 Henkel KGaA (Preferred) 16,360,407 30,232,586 1.5
988,278 Hoechst AG 36,885,114 39,878,174 1.9
-------------- -------------- ------
110,274,107 136,281,671 6.7
Construction 33,402 ++Philipp Holzmann AG 12,511,136 9,886,545 0.5
Engineering 321,783 ++Kloeckner Werke AG 14,985,368 22,815,383 1.1
Mining 201,207 Thyssen AG 43,437,931 46,006,194 2.2
Oil--International 168,676 RWE AG 9,073,103 8,584,236 0.4
Retail Trade 31,732 Karstadt AG 11,171,623 14,327,157 0.7
55,190 Moebel Walther AG (Preferred) 2,067,520 2,338,038 0.1
-------------- -------------- ------
13,239,143 16,665,195 0.8
Total Investments in Germany 253,339,594 313,384,721 15.3
Hungary
Financial Services 75,000 ++Euronet Services, Inc. 1,038,281 496,875 0.0
Total Investments in Hungary 1,038,281 496,875 0.0
Ireland
Building & 686,394 CRH PLC 7,454,519 9,786,334 0.5
Construction
Food 693,901 Greencore Group PLC 3,481,856 4,289,668 0.2
Total Investments in Ireland 10,936,375 14,076,002 0.7
Italy
Diversified Holdings 45,173,130 MontEdison S.p.A. 37,082,335 57,016,488 2.8
Telecommunications 8,759,032 ++Telecom Italia S.p.A. 33,315,716 46,200,400 2.2
Total Investments in Italy 70,398,051 103,216,888 5.0
</TABLE>
Merrill Lynch EuroFund
April 30, 1998
<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
Chemicals 133,140 Akzo Nobel $ 16,709,629 $ 27,089,376 1.3%
310,870 European Vinyls Corporation
International N.V. 11,599,987 6,078,894 0.3
-------------- -------------- ------
28,309,616 33,168,270 1.6
Construction 102,867 NBM-Amstelland N.V. 2,731,181 3,004,531 0.1
107,027 Volker Wessels Stevin N.V. 2,334,258 3,565,801 0.2
-------------- -------------- ------
5,065,439 6,570,332 0.3
Diversified Holdings 169,026 Internatio-Mueller N.V. 3,606,779 5,857,337 0.3
Electrical Equipment 534,440 Philips Electronics N.V. 24,896,538 47,094,218 2.3
113,948 Twentsche Kabel Holding N.V. 4,695,441 4,360,485 0.2
-------------- -------------- ------
29,591,979 51,454,703 2.5
Financial Services 376,515 ING Groep N.V. 15,464,692 24,473,475 1.2
Paper & Forest 1,825,748 Koninklijke KNP BT N.V. 40,032,447 50,162,878 2.5
Products
Steel 174,270 ++Ispat International N.V. 4,720,005 4,969,283 0.2
311,726 Ispat International N.V. (NY Registered
Shares) 7,365,895 8,728,328 0.4
-------------- -------------- ------
12,085,900 13,697,611 0.6
Telecommunications 545,294 Royal PTT Nederland N.V. 19,395,059 28,182,522 1.4
Transport Services 117,568 Koninklijke Pakhoed N.V. 4,561,548 4,306,947 0.2
Total Investments in the Netherlands 158,113,459 217,874,075 10.6
Norway
Computer Software 921,820 Merkantildata ASA 4,358,000 11,620,411 0.6
Oil & Gas Producers 786,098 Saga Petroleum ASA (Class B) 10,970,845 14,020,898 0.7
Publishing 262,196 Schibsted ASA 5,407,096 4,993,004 0.2
Total Investments in Norway 20,735,941 30,634,313 1.5
Poland
Chemicals 387,805 ++Polifarb Wroclaw S.A. 991,199 1,439,700 0.1
Electrical Equipment 489,144 ++Bydgoska Fabryka Kabli S.A. 1,464,063 4,467,727 0.2
Plastics 70,000 Zaklady Lentex S.A. 684,961 1,008,545 0.1
Total Investments in Poland 3,140,223 6,915,972 0.4
Romania
Investments 135,000 Romanian Growth Fund 1,390,500 641,250 0.0
Total Investments in Romania 1,390,500 641,250 0.0
</TABLE>
Merrill Lynch EuroFund
April 30, 1998
<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
Metals & Mining 121,700 ++Zavod SNP $ 1,835,272 $ 501,288 0.0%
Pharmaceuticals 29,167 Slovakofarma 2,128,863 3,502,680 0.2
Total Investments in Slovakia 3,964,135 4,003,968 0.2
Slovenia
Banking 17,853 +++SKB Banka (GDR)* 601,707 270,473 0.0
Total Investments in Slovenia 601,707 270,473 0.0
Spain
Utilities--Electric 743,095 Endesa S.A. 12,631,953 18,042,204 0.9
Total Investments in Spain 12,631,953 18,042,204 0.9
Sweden
Appliances 316,234 Electrolux AB 16,817,344 29,431,185 1.4
Engineering 127,619 SKF AB (Class A) 2,229,577 2,474,419 0.1
189,250 Svedala Industry AB 2,485,262 4,513,349 0.2
-------------- -------------- ------
4,714,839 6,987,768 0.3
Insurance 310,132 Skandia Forsakrings AB 8,582,737 21,607,377 1.1
Metals & Steel 1,258,445 Avesta-Sheffield AB 10,665,001 8,035,777 0.4
Paper & Forest 510,201 Mo och Domsjo AB (Class B) 12,808,027 15,827,752 0.8
Products 6,095,550 Rottneros Bruks AB 8,904,861 5,200,242 0.3
1,005,923 Stora Kopparbergs AB 12,861,379 17,228,494 0.8
-------------- -------------- ------
34,574,267 38,256,488 1.9
Total Investments in Sweden 75,354,188 104,318,595 5.1
Switzerland
Consumer Products 44,461 Societe Suisse pour la Microelectronique
et l'Horlogerie AG (Registered) 6,244,014 6,671,374 0.4
Diversified Holdings 108,734 Oerlikon-Buehrle Holding AG 11,225,019 18,563,457 0.9
Drugs 6,477 Novartis AG (Registered) 10,237,852 10,712,211 0.5
Total Investments in Switzerland 27,706,885 35,947,042 1.8
</TABLE>
Merrill Lynch EuroFund
April 30, 1998
<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 17,564,000 Ardem Pisirici Ve Isitici Cihazlar
Sanayii A.S. $ 2,067,213 $ 1,704,731 0.1%
Total Investments in Turkey 2,067,213 1,704,731 0.1
United Kingdom
Automobiles & 5,259,274 LucasVarity PLC 16,920,886 23,483,779 1.1
Equipment
Banking 932,381 HSBC Holdings PLC 28,260,928 29,396,104 1.4
1,205,210 National Westminster Bank PLC 15,424,151 24,103,568 1.2
-------------- -------------- ------
43,685,079 53,499,672 2.6
Beverages 2,036,419 Allied Domecq PLC 15,293,731 20,925,061 1.0
856,906 Bass PLC (Ordinary) 12,693,421 16,250,005 0.8
617,140 Matthew Clark PLC 6,049,421 2,041,613 0.1
-------------- -------------- ------
34,036,573 39,216,679 1.9
Chemicals 649,357 Expro International Group PLC 5,177,253 5,500,675 0.3
1,495,500 Inspec Group PLC 6,707,529 7,321,137 0.3
-------------- -------------- ------
11,884,782 12,821,812 0.6
Computer/ 155,669 Misys PLC 2,977,349 7,477,638 0.4
Commercial/Office
Diversified Holdings 10,488,189 BTR PLC 36,158,111 34,828,287 1.7
Electronics 177,517 Fairey Group PLC 1,480,357 1,643,139 0.1
2,162,162 General Electric Company PLC 14,158,564 17,882,074 0.9
-------------- -------------- ------
15,638,921 19,525,213 1.0
Food 1,825,174 Safeway PLC 10,383,035 10,871,470 0.5
Food & Beverage 3,609,169 Unilever PLC 19,516,576 38,412,371 1.9
Metals 580,189 Johnson Matthey PLC 5,297,007 5,874,441 0.3
Metals & Mining 858,187 Rio Tinto PLC (Registered) 13,701,314 12,309,678 0.6
Pharmaceuticals 955,560 SmithKline Beecham PLC 10,734,411 11,383,399 0.5
Retail 1,081,634 J. Sainsbury PLC 7,969,414 8,466,704 0.4
Steel 3,664,523 British Steel PLC 7,541,936 9,735,069 0.5
Telecommunications 1,730,855 Cable & Wireless PLC 12,596,679 19,809,601 1.0
Tobacco 2,976,639 B.A.T. Industries PLC 25,342,446 28,049,798 1.4
Utilities-- 458,350 Anglian Water PLC 4,170,424 7,014,830 0.3
Electric, Gas & 752,544 Energy Group PLC 7,984,002 10,542,884 0.5
Water 450,247 United Utilities PLC 4,108,789 6,258,909 0.3
-------------- -------------- ------
16,263,215 23,816,623 1.1
Total Investments in the
United Kingdom 290,647,734 359,582,234 17.5
</TABLE>
Merrill Lynch EuroFund
April 30, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
Face Value Percent of
Amount Short-Term Securities Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Repurchase US$ 24,555,000 UBS Securities, Inc., purchased on
Agreements** 4/30/1998 to yield 5.45% to
5/31/1998 $ 24,555,000 $ 24,555,000 1.2%
Total Investments in Short-Term
Securities 24,555,000 24,555,000 1.2
Total Investments 1,204,845,746 1,592,745,669 77.6
<CAPTION>
Nominal Value
Covered by Premiums
Options Written Issue Received
<S> <C> <S> <C> <C> <C>
Options Written
Currency Call 12,390,113 Italian Lira, expiring June 1998
Options at Lit 239 (678,442) (167,155) (0.0)
Written 742,702 Italian Lira, expiring June 1998
at Lit 242 (43,095) (9,513) (0.0)
227,817 Netherlands Guilder, expiring
June 1998 at NLG 116.34 (307,546) (86,841) (0.0)
Total Options Written (1,029,083) (263,509) (0.0)
Total Investments, Net of Options Written $1,203,816,663 1,592,482,160 77.6
==============
Foreign Time Deposits++++ 617,375,156 30.1
Variation Margin on Financial Futures Contracts++++++ (179,591) 0.0
Liabilities in Excess of Other Assets (157,276,012) (7.7)
-------------- ------
Net Assets $2,052,401,713 100.0%
============== ======
<FN>
*Global Depositary Receipts (GDR).
**Repurchase Agreements are fully collateralized by US Government &
Agency Obligations.
++Non-income producing security.
++++Foreign time deposits bear interest at 3.437%, 3.187% and 3.375%
and mature on 5/04/1998, 5/05/1998 and 5/06/1998, respectively.
++++++Financial futures contracts sold as of April 30, 1998 were as
follows:
<CAPTION>
Number of Expiration Value
Contracts Issue Exchange Date (Notes 1a &1c)
<S> <S> <S> <S> <C>
134 DAX Index DTB June 1998 $ 39,240,189
175 FTSE Index LIFFE June 1998 17,455,683
-------------
Total Financial Futures Contracts Sold
(Total Contract Price--$54,617,054) $ 56,695,872
=============
+++The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch EuroFund
April 30, 1998
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of April 30, 1998
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$1,204,845,746)
(Note 1a) $1,592,745,669
Cash 18,485
Foreign cash (Note 1b) 5,895,496
Foreign time deposits (Note 1b) 617,375,156
Receivables:
Beneficial interest sold $ 7,548,806
Dividends 6,814,409
Interest 286,992
Securities sold 2,336 14,652,543
--------------
Prepaid registration fees and other assets (Note 1f) 97,430
--------------
Total assets 2,230,784,779
--------------
Liabilities: Options written, at value (premiums received--$1,029,083)
(Notes 1a & 1c) 263,509
Payables:
Securities purchased 169,647,093
Beneficial interest redeemed 5,209,971
Investment adviser (Note 2) 1,228,831
Distributor (Note 2) 805,870
Variation margin (Note 1b) 179,591 177,071,356
--------------
Accrued expenses and other liabilities 1,048,201
--------------
Total liabilities 178,383,066
--------------
Net Assets: Net assets $2,052,401,713
==============
Net Assets Class A Shares of beneficial interest, $0.10 par value,
Consist of: unlimited number of shares authorized $ 4,320,897
Class B Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 5,106,676
Class C Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 246,851
Class D Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 1,525,982
Paid-in capital in excess of par 1,496,508,829
Accumulated distributions in excess of investment income--net
(Note 1h) (8,150,542)
Undistributed realized capital gains on investments and foreign
currency transactions--net 167,105,836
Unrealized appreciation on investments and foreign currency
transactions--net 385,737,184
--------------
Net assets $2,052,401,713
==============
Net Asset Value: Class A--Based on net assets of $830,108,487 and 43,208,974 shares
of beneficial interest outstanding $ 19.21
==============
Class B--Based on net assets of $888,458,661 and 51,066,761 shares
of beneficial interest outstanding $ 17.40
==============
Class C--Based on net assets of $42,589,389 and 2,468,507 shares
of beneficial interest outstanding $ 17.25
==============
Class D--Based on net assets of $291,245,176 and 15,259,819 shares
of beneficial interest outstanding $ 19.09
==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch EuroFund
April 30, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations for the Six Months Ended April 30, 1998
<S> <S> <C> <C>
Investment Dividends (net of $1,774,985 foreign withholding tax) $ 14,708,239
Income Interest 4,321,222
(Notes 1d & 1e): --------------
Total income 19,029,461
--------------
Expenses: Investment advisory fees (Note 2) $ 6,165,259
Account maintenance and distribution fees--Class B (Note 2) 3,966,718
Transfer agent fees--Class B (Note 2) 616,705
Custodian fees 604,404
Transfer agent fees--Class A (Note 2) 410,270
Account maintenance fees--Class D (Note 2) 246,407
Account maintenance and distribution fees--Class C (Note 2) 130,535
Transfer agent fees--Class D (Note 2) 128,211
Registration fees (Note 1f) 119,840
Accounting services (Note 2) 90,671
Printing and shareholder reports 86,534
Professional fees 40,341
Transfer agent fees--Class C (Note 2) 21,606
Trustees' fees and expenses 17,787
Pricing fees 9,282
Other 13,337
--------------
Total expenses 12,667,907
--------------
Investment income--net 6,361,554
--------------
Realized & Realized gain from:
Unrealized Gain Investments--net 165,483,534
(Loss) on Foreign currency transactions--net 119,301 165,602,835
Investments & --------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net 199,091,775
(Notes 1b, 1c, Foreign currency transactions--net (936,695) 198,155,080
1e & 3): -------------- --------------
Net realized and unrealized gain on investments and foreign
currency transactions 363,757,915
--------------
Net Increase in Net Assets Resulting from Operations $ 370,119,469
==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch EuroFund
April 30, 1998
FINANCIAL INFORMATION (continued)
<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: 1998 1997
<S> <S> <C> <C>
Operations: Investment income--net $ 6,361,554 $ 11,429,733
Realized gain on investments and foreign currency
transactions--net 165,602,835 249,446,581
Change in unrealized appreciation/depreciation on
investments and foreign currency transactions--net 198,155,080 99,450,956
-------------- --------------
Net increase in net assets resulting from operations 370,119,469 360,327,270
-------------- --------------
Dividends & Investment income--net:
Distributions to Class A (3,661,941) (6,021,879)
Shareholders Class B -- (15,309,051)
(Note 1h): Class C -- (416,944)
Class D (687,312) (2,740,402)
In excess of investment income--net:
Class A -- (2,089,129)
Class B -- (5,311,063)
Class C -- (144,648)
Class D -- (950,709)
Realized gain on investments--net:
Class A (90,342,323) (29,824,108)
Class B (135,005,638) (104,006,961)
Class C (3,894,837) (2,515,859)
Class D (25,058,924) (14,571,787)
-------------- --------------
Net decrease in net assets resulting from dividends
and distributions to shareholders (258,650,975) (183,902,540)
-------------- --------------
Beneficial Net increase in net assets derived from beneficial
Interest interest transactions 393,241,895 286,738,788
Transactions -------------- --------------
(Note 4):
Net Assets: Total increase in net assets 504,710,389 463,163,518
Beginning of period 1,547,691,324 1,084,527,806
-------------- --------------
End of period $2,052,401,713 $1,547,691,324
============== ==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch EuroFund
April 30, 1998
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: 1998 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 18.47 $ 16.67 $ 15.07 $ 15.96 $ 13.87
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .12 .26 .32 .19 .18
Realized and unrealized gain on
investments and foreign currency
transactions--net 3.70 4.31 2.32 .56 1.91
---------- ---------- ---------- ---------- ----------
Total from investment operations 3.82 4.57 2.64 .75 2.09
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.12) (.44) -- -- --
In excess of investment income--net -- (.15) -- -- --
Realized gain on investments--net (2.96) (2.18) (1.04) (1.64) --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (3.08) (2.77) (1.04) (1.64) --
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 19.21 $ 18.47 $ 16.67 $ 15.07 $ 15.96
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 24.71%+++ 32.13% 18.86% 6.19% 15.07%
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.00%* 1.03% 1.10% 1.12% 1.03%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 1.34%* 1.53% 2.04% 1.32% 1.17%
========== ========== ========== ========== ==========
Supplemental Net assets, end of period (in
Data: thousands) $ 830,109 $ 563,098 $ 216,056 $ 204,713 $ 236,288
========== ========== ========== ========== ==========
Portfolio turnover 26.73% 92.65% 92.34% 72.16% 82.47%
========== ========== ========== ========== ==========
Average commission rate paid+++++ $ .0253 $ .0029 $ .0046 -- --
========== ========== ========== ========== ==========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Based on average shares outstanding.
+++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>
Merrill Lynch EuroFund
April 30, 1998
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: 1998 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 16.92 $ 15.47 $ 14.20 $ 15.28 $ 13.43
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .02 .07 .14 .04 .02
Realized and unrealized gain on
investments and foreign currency
transactions--net 3.36 3.99 2.17 .52 1.83
---------- ---------- ---------- ---------- ----------
Total from investment operations 3.38 4.06 2.31 .56 1.85
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net -- (.32) -- -- --
In excess of investment income--net -- (.11) -- -- --
Realized gain on investments--net (2.90) (2.18) (1.04) (1.64) --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (2.90) (2.61) (1.04) (1.64) --
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 17.40 $ 16.92 $ 15.47 $ 14.20 $ 15.28
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 24.05%+++ 30.84% 17.61% 5.12% 13.78%
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses 2.03%* 2.06% 2.13% 2.15% 2.06%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net .22%* .45% 1.00% .27% .14%
========== ========== ========== ========== ==========
Supplemental Net assets, end of period
Data: (in thousands) $ 888,459 $ 888,459 $ 738,535 $ 795,469 $1,086,480
========== ========== ========== ========== ==========
Portfolio turnover 26.73% 92.65% 92.34% 72.16% 82.47%
========== ========== ========== ========== ==========
Average commission rate paid+++++ $ .0253 $ .0029 $ .0046 -- --
========== ========== ========== ========== ==========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Based on average shares outstanding.
+++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>
Merrill Lynch EuroFund
April 30, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class C++
For the
For the Period
The following per share data and ratios have been derived Six Months For the Oct 21,
from information provided in the financial statements. Ended Year Ended 1994++ to
April 30, October 31, Oct. 31,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 16.82 $ 15.45 $ 14.19 $ 15.28 $ 15.08
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income (loss)--net .03 .07 .15 .01 (.01)
Realized and unrealized gain on
investments and foreign currency
transactions--net 3.31 3.97 2.15 .54 .21
---------- ---------- ---------- ---------- ----------
Total from investment operations 3.34 4.04 2.30 .55 .20
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net -- (.36) -- -- --
In excess of investment income--net -- (.13) -- -- --
Realized gain on investments--net (2.91) (2.18) (1.04) (1.64) --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (2.91) (2.67) (1.04) (1.64) --
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 17.25 $ 16.82 $ 15.45 $ 14.19 $ 15.28
========== ========== ========== ========== ==========
Total Based on net asset value per share 23.99%+++ 30.81% 17.55% 5.04% 1.33%+++
Investment ========== ========== ========== ========== ==========
Return:**
Ratios Expenses 2.03%* 2.08% 2.15% 2.18% 2.86%*
to Average ========== ========== ========== ========== ==========
Net Assets: Investment income (loss)--net .37%* .43% 1.04% .11% (2.47%)*
========== ========== ========== ========== ==========
Supplemental Net assets, end of period
Data: (in thousands) $ 42,589 $ 22,260 $ 15,917 $ 9,668 $ 462
========== ========== ========== ========== ==========
Portfolio turnover 26.73% 92.65% 92.34% 72.16% 82.47%
========== ========== ========== ========== ==========
Average commission rate paid+++++ $ .0253 $ .0029 $ .0046 -- --
========== ========== ========== ========== ==========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of operations.
++++Based on average shares outstanding.
+++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>
Merrill Lynch EuroFund
April 30, 1998
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class D++
For the
For the Period
The following per share data and ratios have been derived Six Months For the Oct 21,
from information provided in the financial statements. Ended Year Ended 1994++ to
April 30, October 31, Oct. 31,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of
Operating period $ 18.35 $ 16.57 $ 15.02 $ 15.96 $ 15.75
Performance: ---------- ---------- ---------- ---------- ----------
Investment income--net .11 .20 .28 .20 --++++++
Realized and unrealized gain on
investments and foreign currency
transactions--net 3.67 4.31 2.31 .50 .21
---------- ---------- ---------- ---------- ----------
Total from investment operations 3.78 4.51 2.59 .70 .21
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.08) (.41) -- -- --
In excess of investment income--net -- (.14) -- -- --
Realized gain on investments--net (2.96) (2.18) (1.04) (1.64) --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (3.04) (2.73) (1.04) (1.64) --
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 19.09 $ 18.35 $ 16.57 $ 15.02 $ 15.96
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 24.58%+++ 31.84% 18.57% 5.85% 1.33%+++
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.25%* 1.28% 1.34% 1.38% 2.11%*
Net Assets: ========== ========== ========== ========== ==========
Investment income (loss)--net 1.25%* 1.21% 1.83% 1.37% (1.70%)*
========== ========== ========== ========== ==========
Supplemental Net assets, end of period (in
Data: thousands) $ 291,245 $ 150,474 $ 114,020 $ 104,493 $ 340
========== ========== ========== ========== ==========
Portfolio turnover 26.73% 92.65% 92.34% 72.16% 82.47%
========== ========== ========== ========== ==========
Average commission rate paid+++++ $ .0253 $ .0029 $ .0046 -- --
========== ========== ========== ========== ==========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of operations.
++++Based on average shares outstanding.
++++++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>
Merrill Lynch EuroFund
April 30, 1998
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 market 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.
(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
put 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).
Written and purchased options are non-income producing investments.
* 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.
Merrill Lynch EuroFund
April 30, 1998
(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) Repurchase agreements--The Fund invests in US Government
securities pursuant to repurchase agreements with a member bank of
the Federal Reserve System or a primary dealer in US Government
securities. Under such agreements, the bank or primary dealer agrees
to repurchase the security at a mutually agreed upon time and price.
The Fund takes possession of the underlying securities, marks to
market such securities and, if necessary, receives additional
securities daily to ensure that the contract is fully
collateralized.
(h) 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
subsidiary 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, 1998, MLAM paid MLAM U.K. a fee of $1,233,052
pursuant to such agreement.
Pursuant to 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.
Merrill Lynch EuroFund
April 30, 1998
NOTES TO FINANCIAL STATEMENTS (concluded)
For the six months ended April 30, 1998, 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 $1,770 $ 22,062
Class D $8,790 $127,265
For the six months ended April 30, 1998, MLPF&S received contingent
deferred sales charges of $455,615 and $5,925 relating to
transactions in Class B and Class C Shares, respectively.
Furthermore, MLPF&S received contingent deferred sales charges of
$10,340 and $9,433, relating to transactions subject to front-end
sales charge waivers in Class A Shares and Class D Shares,
respectively.
In addition, MLPF&S received $129,881 in commissions on the
execution of portfolio security transactions for the Fund for the
six months ended April 30, 1998.
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.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended April 30, 1998 were $382,711,417 and
$598,086,786, respectively.
Net realized gains (losses) for the six months ended April 30, 1998
and net unrealized gains (losses) as of April 30, 1998 were as
follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
Long-term investments $ 173,383,268 $ 387,899,923
Financial futures contracts (7,899,734) (2,078,818)
Foreign currency transactions 119,301 (849,495)
Options written -- 765,574
------------- -------------
Total $ 165,602,835 $ 385,737,184
============= =============
Transactions in call options written for the six months ended April
30, 1998 were as follows:
Premiums
Par Value Received
Outstanding put options written
at beginning of period -- --
Options written $ 13,360,632 $ 1,029,083
------------- -------------
Outstanding put options
written at end of period $ 13,360,632 $ 1,029,083
============= =============
As of April 30, 1998, net unrealized appreciation for Federal income
tax purposes aggregated $387,899,923, of which $416,323,444 related
to appreciated securities and $28,423,521 related to depreciated
securities. The aggregate cost of investments at April 30, 1998 for
Federal income tax purposes was $1,204,845,746.
4. Shares of Beneficial Interest:
Net increase in net assets derived from beneficial interest
transactions was $393,241,895 and $286,738,788 for the six months
ended April 30, 1998 and the year ended October 31, 1997,
respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Six Months Dollar
Ended April 30, 1998 Shares Amount
Shares sold 18,251,978 $ 329,487,119
Shares issued to shareholders
in reinvestment of dividends
and distributions 5,764,313 89,116,286
------------- -------------
Total issued 24,016,291 418,603,405
Shares redeemed (11,288,950) (201,160,008)
------------- -------------
Net increase 12,727,341 $ 217,443,397
============= =============
Class A Shares for the Year Dollar
Ended October 31, 1997 Shares Amount
Shares sold 26,338,718 $ 430,396,173
Shares issued to shareholders in
reinvestment of dividends and
distributions 2,393,410 34,465,523
------------- -------------
Total issued 28,732,128 464,861,696
Shares redeemed (11,210,660) (185,967,493)
------------- -------------
Net increase 17,521,468 $ 278,894,203
============= =============
Merrill Lynch EuroFund
April 30, 1998
Class B Shares for the
Six Months Ended Dollar
April 30, 1998 Shares Amount
Shares sold 9,245,973 $ 149,511,340
Shares issued to shareholders in
reinvestment of distributions 8,377,046 117,781,272
------------- -------------
Total issued 17,623,019 267,292,612
Shares redeemed (8,767,131) (138,235,347)
Automatic conversion of
shares (5,776,547) (88,583,309)
------------- -------------
Net increase 3,079,341 $ 40,473,956
============= =============
Class B Shares for the Year Dollar
Ended October 31, 1997 Shares Amount
Shares sold 12,478,198 $ 191,822,144
Shares issued to shareholders
in reinvestment of dividends
and distributions 8,168,942 108,729,884
------------- -------------
Total issued 20,647,140 300,552,028
Shares redeemed (19,835,758) (306,830,535)
Automatic conversion of ------------- -------------
shares (554,263) (8,320,978)
------------- -------------
Net increase (decrease) 257,119 $ (14,599,485)
============= =============
Class C Shares for the Six Months Dollar
Ended April 30, 1998 Shares Amount
Shares sold 3,910,672 $ 61,736,692
Shares issued to shareholders
in reinvestment of
distributions 247,386 3,448,559
------------- -------------
Total issued 4,158,058 65,185,251
Shares redeemed (3,013,375) (46,993,280)
------------- -------------
Net increase 1,144,683 $ 18,191,971
============= =============
Class C Shares for the Year Dollar
Ended October 31, 1997 Shares Amount
Shares sold 5,368,818 $ 83,195,165
Shares issued to shareholders
in reinvestment of dividends
and distributions 210,334 2,782,759
------------- -------------
Total issued 5,579,152 85,977,924
Shares redeemed (5,285,585) (82,227,446)
------------- -------------
Net increase 293,567 $ 3,750,478
============= =============
Class D Shares for the
Six Months Ended Dollar
April 30, 1998 Shares Amount
Shares sold 5,788,656 $ 100,628,847
Automatic conversion of
shares 5,277,874 88,583,309
Shares issued to shareholders
in reinvestment of dividends
and distributions 1,382,415 21,261,544
------------- -------------
Total issued 12,448,945 210,473,700
Shares redeemed (5,387,930) (93,341,129)
------------- -------------
Net increase 7,061,015 $ 117,132,571
============= =============
Class D Shares for the
Year Ended Dollar
October 31, 1997 Shares Amount
Shares sold 9,883,349 $ 166,073,878
Automatic conversion of
shares 513,600 8,320,978
Shares issued to shareholders
in reinvestment of dividends
and distributions 1,058,039 15,172,446
------------- -------------
Total issued 11,454,988 189,567,302
Shares redeemed (10,135,898) (170,873,710)
------------- -------------
Net increase 1,319,090 $ 18,693,592
============= =============
5. Commitments:
At April 30, 1998, the Fund had outstanding foreign exchange
contracts under which it had agreed to purchase and sell foreign
currency aggregating approximately $3,115,000 and $3,113,000,
respectively.
