MERRILL LYNCH
EUROFUND
FUND LOGO
Semi-Annual Report
April 30, 1999
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 Informationn As a Percentage of Stocks
at Value As of April 30, 1999
Spain 0.5%
Norway 1.1%
Finland 3.5%
Switzerland 6.2%
Netherlands 8.8%
Germany 31.9%
United Kingdom 17.6%
France 15.2%
Sweden 6.6%
Italy 6.2%
Emerging Europe* 1.3%
Ireland 0.9%
Czech Republic 0.2%
[FN]
*Countries include Hungary, Poland 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, 1999 in US
dollars*
Denmark - 9.7%
Spain - 5.0%
Switzerland - 4.1%
Germany - 2.7%
Ireland - 1.8%
France - 0.9%
Italy - 0.7%
Netherlands + 5.5%
Sweden + 6.1%
Norway + 6.5%
Finland + 8.6%
United Kingdom +10.7%
Source: Financial Times/Standard & Poor's--Actuaries Index.
[FN]
*For the three-month period ended April 30, 1999, total investment
return for the Financial Times/Standard & Poor's--Actuaries Europe
Index was +2.71%.
Merrill Lynch EuroFund
April 30, 1999
Five-Star Morningstar Overall Rating TM--International Equity Funds as
of 4/30/99
Merrill Lynch EuroFund
Class A & B Shares
Five-star overall ratings in the Morningstar International Equity
Funds class is out of 944 funds. Morningstar proprietary ratings
reflect historical risk-adjusted performance as of May 31, 1999. The
ratings are subject to change every month. Past performance is no
guarantee of future results. Morningstar ratings are calculated from
the Fund's three-, five-, and ten-year average annual returns (if
applicable) in excess of 90-day Treasury bill returns with
appropriate fee adjustments, and a risk factor that reflects Fund
performance below 90-day Treasury-bill returns. Merrill Lynch
EuroFund's Class A and Class B Shares received five stars for the
three-, five-, and ten-year periods, respectively, ended May 31,
1999. The top 10% of the funds in a broad asset class receive five
stars, the next 22.5% receive four stars, the next 35% receive three
stars, the next 22.5% receive two stars, and the bottom 10% receive
one star. The Fund's Class A and B Shares were rated against 944,
464 and 112 funds in the Morningstar International Equity Funds
class for the three-, five- and ten-year periods, respectively.
Ratings are only for the share classes cited; ratings for other
share classes may vary.
DEAR SHAREHOLDER
During the quarter ended April 30, 1999, the unmanaged Financial
Times/Standard & Poor's--Actuaries Europe Index had a total return
of +2.71%, while the total return for the unmanaged Morgan Stanley
Capital International (MSCI) Europe Index was +1.46%. For the same
period, Merrill Lynch EuroFund's Class A, Class B, Class C and Class
D Shares had total returns of +9.01%, +8.73%, +8.71% and +8.89%,
respectively, substantially outperforming the indexes. The Fund's
performance also was significantly better than the Lipper European
Region Funds Average, which had a return of +0.18%. (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.)
The Fund's returns have not been achieved at the expense of higher
risk. As of May 31, 1999, the Fund's Class A and Class B Shares
achieved a Morningstar Overall Ratingtm of five stars, as outlined
below.
Investment Environment
A major increase in global confidence provided a benign backdrop for
equity markets during the April quarter. Interest rates in developed
markets have remained low or were cut further, inflationary
pressures have been muted, and the likelihood of a resynchronization
of global growth has increased. Liquidity has been abundant,
partially fueled by an extremely high level of merger and
acquisition activity. In Europe, the importance of the resignation
of Oskar Lafontaine should not be understated; his anti-business
stance threatened not just Germany but all of Europe. The more
pragmatic and pro-business approach of his successor is welcome.
On the negative side, a run up in oil prices, a bottoming and
recovery in other commodities and general expectations of higher
economic growth impacted bond markets negatively. Additionally, the
Kosovo situation has raised significant concerns, although these
have been reflected mainly in a weakening euro exchange rate rather
than in bond or equity markets.
Economic Outlook
The economic outlook improved over the last three months. The US
economy has been immensely strong and, with growth broadening out to
the manufacturing sector, potentially more sustainable. Japan and
Asia appear to be on a recovery track, while Latin American
economies are likely to outperform earlier expectations. In Europe,
interest rate cuts and weak currencies have led to a bottoming of
growth expectations and forecasts are starting to rise in certain
areas. In the United Kingdom, we believe recession will be avoided
in 1999 and the recovery is likely to pick up steam if the pound
sterling does not strengthen further.
Corporate earnings have generally been in line with expectations,
and the downgrading cycle has now given way to an upgrading cycle as
economic expectations improve. That elusive commodity, pricing
power, may begin to re-emerge as the year progresses.
Merrill Lynch EuroFund
April 30, 1999
Current Valuations
The positive investment environment and economic outlook are
generally fully reflected in equity pricing, in our view. In the
United States, equity markets are as richly priced as they have ever
been, in both absolute terms and relative to the bond market. With
interest rates and bond yields now more likely to rise than fall,
this valuation extreme is unsustainable, in our opinion. At present,
we have near-peak corporate earnings attracting valuation ratings
that would be more appropriate at the bottom of the earnings cycle.
Technically, the equity market also looks very extended. In Europe,
valuations are much more reasonable in both an absolute sense and
relative to bonds. However, correlations between the United States
and Europe have been climbing steadily, and should the US market
correct, European markets will most likely follow in spite of their
more defendable valuations.
Within the markets, the huge valuation dichotomy discussed in our
last report to shareholders has begun to close, and at a rapid pace.
However, there is still a much larger-than-normal valuation gap
between long duration/growth/mega cap stocks and short
duration/value stocks, which are generally smaller. We continue to
expect this value gap to close as the year progresses.
Investment Strategy
As the markets rose, we adopted a more defensive position. As of
April 30, 1999, we had a cash position of 7.1% of net assets.
Additionally, the Fund was short futures to the extent of 9% of Fund
net assets, giving an effective cash/hedged position of 16.8%.
At the currency level, the Fund remains overweighted in the euro and
underweighted in the pound sterling, principally as a result of
geographic exposures of the Fund. The Fund is very underweighted in
the UK market and overweighted in Continental European markets,
especially Germany.
On a sector basis, we still favor cyclical/value stocks over mega
cap/growth stocks. However, in order to limit portfolio risk, we
reduced some cyclical stocks that had moved too far too fast, in our
view. If current trends of outperformance continue and growth stocks
reach attractive levels, we may attempt to reintroduce more balance
into the portfolio.
In Conclusion
We believe long-term prospects for European stocks remain good, but
prices may move lower in the short term, triggered by a setback in
the US equity and bond markets. In such an environment, we would
consider reinvesting the Fund's cash reserves.
We thank you for your investment in Merrill Lynch EuroFund, and we
look forward to reviewing our outlook and strategy with you in our
next report to shareholders.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Trustee
(Adrian C. Holmes)
Adrian C. Holmes
Senior Vice President and Portfolio Manager
June 15, 1999
After more than 20 years of service, Arthur Zeikel recently retired
as Chairman of Merrill Lynch Asset Management, L.P. (MLAM). Mr.
Zeikel served as President of MLAM from 1977 to 1997 and as Chairman
since December 1997. Mr. Zeikel is one of the country's most
respected leaders in asset management and presided over the growth
of Merrill Lynch's asset management business. During his tenure,
client assets under management grew from $300 million to over $500
billion. Mr. Zeikel will remain on Merrill Lynch EuroFund's Board of
Trustees. We are pleased to announce that Terry K. Glenn has been
elected President and Trustee of the Fund. Mr. Glenn has held the
position of Executive Vice President of MLAM since 1983.
Mr. Zeikel's colleagues at MLAM join the Fund's Board of Trustees in
wishing him well in his retirement from Merrill Lynch and are
pleased that he will continue as a member of the Fund's Board of
Trustees.
Merrill Lynch EuroFund
April 30, 1999
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 "Recent Performance
Results" and "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 +10.38% +9.01% +326.66%
ML EuroFund Class B Shares + 9.21 +8.73 +284.84
ML EuroFund Class C Shares + 9.24 +8.71 +121.68
ML EuroFund Class D Shares +10.04 +8.89 +129.87
<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/since inception periods are Class A & Class B
Shares, for the ten years ended 4/30/99 and Class C & Class D
Shares, from 10/21/94 to 4/30/99.
</TABLE>
Merrill Lynch EuroFund
April 30, 1999
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 3/31/99 + 6.89% + 1.28%
Five Years Ended 3/31/99 +18.00 +16.74
Ten Years Ended 3/31/99 +15.22 +14.60
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/99 + 5.88% + 2.47%
Five Years Ended 3/31/99 +16.80 +16.80
Ten Years Ended 3/31/99 +14.04 +14.04
[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 3/31/99 + 5.85% + 5.00%
Inception (10/21/94)
through 3/31/99 +17.98 +17.98
[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 3/31/99 + 6.66% + 1.06%
Inception (10/21/94)
through 3/31/99 +18.94 +17.50
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
OFFICERS AND TRUSTEES
Terry K. Glenn, President and Trustee
Donald Cecil, Trustee
Roland M. Machold, Trustee
Edward H. Meyer, Trustee
Charles C. Reilly, Trustee
Richard R. West, Trustee
Arthur Zeikel, Trustee
Edward D. Zinbarg, Trustee
Adrian C. Holmes, Senior Vice President
and Portfolio Manager
Alan J. Albert, Vice President
Donald C. Burke, Vice President and Treasurer
Philip M. Mandel, Secretary of Merrill Lynch EuroFund has recently
retired. His colleagues at Merrill Lynch Asset Management, L.P. join
the Fund's Board of Trustees in wishing Mr. Mandel well in his
retirement.
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
Merrill Lynch EuroFund
April 30, 1999
PORTFOLIO INFORMATION
Equity Portfolio Changes for the
Quarter Ended April 30, 1999
As of April 30, 1999
Percent of
Ten Largest Equity Holdings Net Assets
Telecom Italia S.p.A. 3.6%
HypoVereinsbank AG 2.9
Thyssen Krupp AG 2.9
Societe EuraFrance S.A. 2.5
Hoechst AG 2.5
Societe Generale 'A' 2.3
UBSAG 2.2
MontEdison S.p.A. 2.2
Veba AG 2.2
Bayer AG 2.1
Percent of
Ten Largest Industries Net Assets
Banking 16.5%
Chemicals 10.3
Insurance 7.7
Diversified Holdings 6.3
Mining 5.8
Paper & Forest Products 5.8
Telecommunications 4.9
Utilities 3.9
Electrical Equipment 3.6
Automobiles 2.8
Additions
ABB AG (Bearer)
Akbank T.A.S.
*BOC Group
Bank Handlowy w
Warszawie (GDR)
Bayerische Motoren
Werke (BMW) AG
BorsodChem Rt. (GDR)
CGU PLC
*Cukurova Elektrik AS
*Dogan Holdings
Glaxo Wellcome PLC
*Haci Omer Sabanci
Holdings
J Sainsbury PLC
*KOC Holding A.S.
*Migros Turk T.A.S.
*Novartis AG--Bearer
Powergen
Prudential Corporation
PLC
*Ptofs Ti
SPT Telecom AS (GDR)
Severn Trent PLC
Skandinaviska Enskilda
Banken (SEB) 'A'
*Telefonaktiebolaget LM
Ericsson 'B'
Tesco PLC
Thyssen Krupp AG
*Turkiye Garanti Bankasi
AS
*Turkiye Is Bankasi AS C
*United Pan Europe
Yapi ve Kredi Bankasi AS
Deletions
ASDA Group PLC
Alcatel Alsthom Cie
Generale d' Electricite
S.A.
Allied Zurich PLC
Alpha Credit Bank
Astra AB (A Shares)
Axa
*BOC Group
CRH PLC
*Cukurova Elektrik AS
*Dogan Holdings
Guardian Royal Exchange
PLC
*Haci Omer Sabanci
Holdings
*KOC Holding A.S.
KPN NV
Lucas Varity PLC
*Migros Turk T.A.S.
Misys PLC
*Novartis AG--Bearer
Nestle SA (Registered
Shares)
Nokia Oyj 'A'
*Ptofs Ti
*Telefonaktiebolaget LM
Ericsson 'B'
Thyssen AG
*Turkiye Garanti Bankasi
AS
*Turkiye Is Bankasi AS C
*United Pan Europe
Zavod SNP A.S.
[FN]
*Added and deleted in the same quarter.
Merrill Lynch EuroFund
April 30, 1999
<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>
Czech Republic
Telecommunications 176,486 ++SPT Telecom AS (GDR)(a) $ 2,109,810 $ 2,559,047 0.2%
Total Investments in the Czech Republic 2,109,810 2,559,047 0.2
Finland
Metals & Mining 990,307 Outokumpu Oyj 14,892,711 11,372,329 0.6
Paper & Forest 2,266,341 Metsa-Serla Oyj 'B' 17,992,809 19,429,432 1.0
Products 511,300 Stora Enso Oyj 'A' 4,534,774 5,844,527 0.4
726,769 Stora Enso Oyj 'R' 7,187,246 8,499,796 0.4
453,952 UPM-Kymmene Oyj 9,899,207 13,765,259 0.8
-------------- -------------- ------
39,614,036 47,539,014 2.6
Total Investments in Finland 54,506,747 58,911,343 3.2
France
Automobiles & 85,068 PSA Peugeot Citroen 10,577,623 14,135,647 0.7
Equipment
Banking 260,404 Banque Nationale de Paris (BNP) 15,608,495 21,621,730 1.1
315,905 Compagnie Financiere de Paribas (CFP) 18,381,026 33,635,998 1.9
226,973 Societe Generale 'A' 32,379,977 40,694,661 2.3
-------------- -------------- ------
66,369,498 95,952,389 5.3
Building & 85,241 Compagnie de Saint Gobain 11,929,667 14,660,600 0.8
Construction
Diversified Holdings 93,972 Societe Eurafrance SA 32,169,274 47,342,943 2.5
Energy 165,297 Elf Aquitaine SA 20,140,776 25,717,701 1.4
Machinery 137,845 Compagnie Fives-Lille 7,371,396 10,781,651 0.6
Mining 2,075,312 Usinor SA 30,384,734 32,156,910 1.7
Oil & Related 144,103 Total SA 'B' 14,717,758 19,766,413 1.1
Total Investments in France 193,660,726 260,514,254 14.1
Germany
Auto & Truck 326,221 DaimlerChrysler AG 25,148,385 32,265,697 1.8
Automobiles 20,212 Bayerische Motoren Werke (BMW) AG 13,905,830 14,504,034 0.7
525,741 Volkswagen AG 33,154,856 37,337,411 2.1
-------------- -------------- ------
47,060,686 51,841,445 2.8
Banking 148,248 Commerzbank AG 5,388,529 4,801,314 0.2
582,028 Deutsche Bank AG 45,339,557 33,881,014 1.9
176,601 Dresdner Bank AG 10,238,267 7,626,112 0.5
843,730 HypoVereinsbank AG 53,114,719 55,098,336 2.9
-------------- -------------- ------
114,081,072 101,406,776 5.5
</TABLE>
Merrill Lynch EuroFund
April 30, 1999
<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 (concluded)
Chemicals 253,318 BASF AG $ 10,927,557 $ 11,113,233 0.6%
912,731 Bayer AG 35,386,424 38,834,587 2.1
77,016 Henkel KGaA 3,295,326 5,298,393 0.3
290,660 Henkel KGaA (Preferred) 13,952,608 23,041,827 1.3
992,432 Hoechst AG 38,436,892 47,109,993 2.5
-------------- -------------- ------
101,998,807 125,398,033 6.8
Construction 33,402 ++Philipp Holzmann AG 12,511,136 5,408,960 0.3
Electrical Equipment 379,722 Siemens AG 24,781,108 28,132,844 1.5
Engineering 321,783 ++Kloeckner-Werke AG 14,985,368 22,750,419 1.2
Insurance 38,392 ++Muenchener Rueckversicherungs-
Gesellschaft AG 7,388,926 7,639,209 0.4
111,268 Muenchener Rueckversicherungs-
Gesellschaft AG (Registered Shares) 21,836,009 22,375,550 1.2
-------------- -------------- ------
29,224,935 30,014,759 1.6
Machinery & 217,570 Jungheinrich AG (Preferred) 4,412,664 3,212,351 0.2
Equipment 103,233 Mannesmann AG 8,649,305 13,614,021 0.7
-------------- -------------- ------
13,061,969 16,826,372 0.9
Medical Equipment 43,086 Fresenius AG (Preferred) 8,524,834 7,524,367 0.4
Mining 2,449,688 ++Thyssen Krupp AG 51,224,486 53,669,920 2.9
Utilities 668,578 RWE AG 32,284,581 30,640,074 1.7
716,434 Veba AG 46,841,734 39,354,407 2.2
-------------- -------------- ------
79,126,315 69,994,481 3.9
Total Investments in Germany 521,729,101 545,234,073 29.6
Hungary
Banking 168,537 OTP Bank Rt. (GDR)(a) 8,888,973 7,179,676 0.3
Chemicals 47,872 BorsodChem Rt. (GDR)(a) 976,589 1,148,928 0.0
Oil & Gas Producers 329,741 MOL Magyar Olaj-es Gazipari Rt.
(GDR)(a) 8,910,012 7,419,173 0.5
Total Investments in Hungary 18,775,574 15,747,777 0.8
Ireland
Banking 665,961 Bank of Ireland 10,180,373 13,327,411 0.7
Food 693,901 Greencore Group PLC 3,481,856 2,714,749 0.2
Total Investments in Ireland 13,662,229 16,042,160 0.9
Italy
Diversified Holdings 42,118,867 MontEdison SpA 33,930,370 40,477,377 2.2
Telecommunications 12,245,239 Telecom Italia SpA 61,690,951 65,968,237 3.6
Total Investments in Italy 95,621,321 106,445,614 5.8
</TABLE>
Merrill Lynch EuroFund
April 30, 1999
<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 736,470 Akzo Nobel NV $ 25,151,247 $ 33,322,764 1.9%
285,370 European Vinyls Corporation Inter-
national NV 10,474,473 2,808,931 0.1
-------------- -------------- ------
35,625,720 36,131,695 2.0
Diversified Holdings 327,079 Internatio-Muller NV 8,602,626 7,269,789 0.4
Electrical Equipment 232,043 Koninklijke (Royal) Philips Electronics
NV 13,582,165 20,015,936 1.1
Insurance 463,869 ING Groep NV 18,655,960 28,622,907 1.6
Mining 174,270 Ispat International NV 4,720,005 1,936,697 0.0
1,161,001 Ispat International NV (NY Registered
Shares) 19,453,937 15,165,576 0.9
-------------- -------------- ------
24,173,942 17,102,273 0.9
Paper & Forest 2,108,845 Buhrmann NV 44,535,332 38,725,227 2.1
Products
Transport Services 117,568 Koninklijke Pakhoed NV 4,561,548 2,725,104 0.1
Total Investments in the Netherlands 149,737,293 150,592,931 8.2
Norway
Oil & Gas Producers 786,098 ++Saga Petroleum ASA 10,970,845 8,732,179 0.4
Service 1,006,619 Merkantildata ASA 6,172,754 10,082,995 0.6
Total Investments in Norway 17,143,599 18,815,174 1.0
Poland
Banking & Financial 164,709 Bank Handlowy w Warszawie (GDR)(a) 1,781,051 1,951,802 0.1
Electrical Equipment 597,678 ++Bydgoska Fabryka Kabli SA 893,400 772,272 0.0
122,810 Elektrim Spolka Akcyjna SA 1,003,591 1,462,394 0.1
-------------- -------------- ------
1,896,991 2,234,666 0.1
Total Investments in Poland 3,678,042 4,186,468 0.2
Spain
Telecommunications 185,989 Telefonica SA 7,807,168 8,730,331 0.5
185,989 Telefonica SA (Rights)(b) 0 173,229 0.0
Total Investments in Spain 7,807,168 8,903,560 0.5
</TABLE>
Merrill Lynch EuroFund
April 30, 1999
<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>
Sweden
Appliances 1,581,170 Electrolux AB 'B' $ 16,817,344 $ 32,128,818 1.8%
Automobiles & 549,126 Volvo AB 'B' 17,376,361 14,518,512 0.7
Equipment
Banking 1,241,371 Skandinaviska Enskilda Banken (SEB) 'A' 13,539,206 16,226,108 0.8
Engineering 189,250 Svedala Industri AB 2,485,262 3,328,263 0.1
Insurance 1,294,756 Skandia Forsakrings AB 9,874,016 25,078,157 1.3
Mining 924,002 Avesta Sheffield AB 7,741,629 3,974,674 0.3
Paper & Forest 510,201 Mo och Domsjo AB (MoDo) 'B' 12,808,027 13,155,917 0.8
Products 6,095,550 Rottneros AB 8,904,861 3,911,350 0.3
-------------- -------------- ------
21,712,888 17,067,267 1.1
Total Investments in Sweden 89,546,706 112,321,799 6.1
Switzerland
Banking 27,803 Banque Cantonale de Geneve (BCG) 9,263,273 5,479,503 0.2
158,788 Credit Suisse Group (Registered Shares) 26,978,066 31,555,229 1.8
-------------- -------------- ------
36,241,339 37,034,732 2.0
Banking & Financial 119,228 UBS AG 30,502,877 40,572,923 2.2
Drugs 8,233 Novartis AG (Registered Shares) 12,149,601 12,077,446 0.7
Electrical Equipment 11,495 ABB AG (Bearer) 13,463,054 16,802,243 0.9
Total Investments in Switzerland 92,356,871 106,487,344 5.8
Turkey
Banking 9,600,000 Akbank T.A.S. 234,696 306,396 0.0
84,015,875 Yapi ve Kredi Bankasi AS 1,434,836 2,016,467 0.1
Total Investments in Turkey 1,669,532 2,322,863 0.1
</TABLE>
Merrill Lynch EuroFund
April 30, 1999
<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>
United Kingdom
Banking 484,691 Barclays PLC $ 11,511,879 $ 15,404,159 0.8%
782,461 National Westminster Bank PLC 14,128,645 18,858,640 1.0
-------------- -------------- ------
25,640,524 34,262,799 1.8
Building & 891,827 Jarvis PLC 10,634,239 7,452,017 0.4
Construction
Chemicals 2,455,902 Imperial Chemical Industries PLC 21,214,819 26,610,435 1.5
Diversified Holdings 4,357,948 Invensys PLC 30,166,168 22,259,200 1.2
Food & Drink 2,036,419 Allied Domecq PLC 15,293,731 15,934,164 0.9
925,199 Bass PLC 13,596,207 14,553,103 0.8
-------------- -------------- ------
28,889,938 30,487,267 1.7
Insurance 1,123,903 CGU PLC 15,707,578 17,760,084 1.0
814,763 Prudential Corporation PLC 10,417,033 11,628,827 0.6
3,506,090 Royal & Sun Alliance Insurance
Group PLC 32,787,963 30,256,154 1.6
-------------- -------------- ------
58,912,574 59,645,065 3.2
Merchandising 3,327,059 J Sainsbury PLC 19,926,338 21,158,432 1.2
Metals 1,000,326 Johnson Matthey PLC 9,572,778 9,421,570 0.5
Oil & Related 649,357 Expro International Group PLC 5,177,253 3,099,803 0.2
Pharmaceuticals 620,289 Glaxo Wellcome PLC 18,800,378 18,355,468 1.0
Retail 2,332,866 Safeway PLC 12,415,385 9,718,428 0.5
2,743,493 Tesco PLC 7,336,681 8,160,451 0.4
-------------- -------------- ------
19,752,066 17,878,879 0.9
Steel 11,270,475 British Steel PLC 22,484,398 26,809,924 1.5
Telecommunications 797,631 Cable & Wireless PLC 6,266,983 11,454,938 0.6
Utilities--Electric, 399,277 Powergen 4,408,462 4,384,141 0.2
Gas & Water 621,507 Severn Trent PLC 9,258,093 8,180,120 0.5
-------------- -------------- ------
13,666,555 12,564,261 0.7
Total Investments in the United
Kingdom 291,105,011 301,460,058 16.4
</TABLE>
Merrill Lynch EuroFund
April 30, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
Face Value Percent of
Amount Short-Term Securities Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Repurchase US$ 2,363,000 Warburg Dillon Read LLC, purchased
Agreements* on 4/30/1999 to yield 4.80% to
5/03/1999 $ 2,363,000 $ 2,363,000 0.0%
Total Investments in Short-Term
Securities 2,363,000 2,363,000 0.0
Total Investments $1,555,472,730 1,712,907,465 92.9
==============
Variation Margin on Financial Futures Contracts** 189,526 0.0
Foreign Time Deposits*** 202,897,998 11.0
Liabilities in Excess of Other Assets (72,500,628) (3.9)
-------------- ------
Net Assets $1,843,494,361 100.0%
============== ======
<FN>
++Non-income producing security.
(a)Global Depositary Receipts (GDR).
(b)The rights may be exercised until 5/20/1999.
*Repurchase Agreements are fully collateralized by US Government &
Agency Obligations.
**Financial futures contracts sold as of April 30, 1999 were as
follows:
Number of Expiration Value
Contracts Issue Exchange Date (Notes 1a &1c)
781 FTSE 100 FTSE June 1999 $ 82,536,392
36 FIB 30 MIB June 1999 7,000,935
382 DAX30 DAX June 1999 54,526,096
62 IBEX35 IBEX May 1999 6,529,926
402 CAC 40 CAC May 1999 18,772,036
Total Financial Futures Contracts Sold
(Total Contract Price--$161,798,807) $ 169,365,385
=============
***Foreign time deposits bear interest at 2.47% and 2.40% and mature
on 5/03/1999 and 5/05/1999, respectively.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch EuroFund
April 30, 1999
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Statement of Assets and Liabilities as of April 30, 1999
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$1,555,472,730) (Note 1a) $1,712,907,465
Cash 856
Foreign cash (Note 1b) 20,220,822
Foreign time deposits (Note 1b) 202,897,998
Receivables:
Securities sold $ 15,117,683
Dividends 9,637,458
Beneficial interest sold 1,091,762
Variation margin (Note 1c) 189,526
Interest 7,070 26,043,499
--------------
Prepaid registration fees and other assets (Note 1f) 69,882
--------------
Total assets 1,962,140,522
--------------
Liabilities: Payables:
Securities purchased 108,452,886
Beneficial interest redeemed 6,969,496
Investment adviser (Note 2) 1,114,270
Distributor (Note 2) 771,271 117,307,923
--------------
Accrued expenses and other liabilities 1,338,238
--------------
Total liabilities 118,646,161
--------------
Net Assets: Net assets $1,843,494,361
==============
Net Assets Class A Shares of beneficial interest, $0.10 par value,
Consist of: unlimited number of shares authorized $ 3,668,821
Class B Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 5,410,204
Class C Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 370,783
Class D Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 2,138,370
Paid-in capital in excess of par 1,535,736,067
Accumulated investment loss--net (7,938,716)
Undistributed realized capital gains on investments and foreign
currency transactions--net 154,476,505
Unrealized appreciation on investments and foreign currency
transactions--net 149,632,327
--------------
Net assets $1,843,494,361
==============
Net Asset Value: Class A--Based on net assets of $621,019,938 and 36,688,210 shares
of beneficial interest outstanding $ 16.93
==============
Class B--Based on net assets of $808,955,370 and 54,102,035 shares
of beneficial interest outstanding $ 14.95
==============
Class C--Based on net assets of $54,624,423 and 3,707,827 shares
of beneficial interest outstanding $ 14.73
==============
Class D--Based on net assets of $358,894,630 and 21,383,699 shares
of beneficial interest outstanding $ 16.78
==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch EuroFund
April 30, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
<CAPTION>
Statement of Operations for the Six Months Ended April 30, 1999
<S> <S> <C> <C>
Investment Dividends (net of $2,805,519 foreign withholding tax) $ 20,724,871
Income Interest 1,399,620
(Notes 1d & 1e): --------------
Total income 22,124,491
--------------
Expenses: Investment advisory fees (Note 2) $ 6,872,781
Account maintenance and distribution fees--Class B (Note 2) 4,051,434
Transfer agent fees--Class B (Note 2) 626,494
Custodian fees 569,773
Transfer agent fees--Class A (Note 2) 418,846
Account maintenance fees--Class D (Note 2) 417,327
Account maintenance and distribution fees--Class C (Note 2) 274,946
Transfer agent fees--Class D (Note 2) 218,234
Accounting services (Note 2) 111,884
Printing and shareholder reports 105,946
Professional fees 61,227
Registration fees (Note 1f) 60,520
Transfer agent fees--Class C (Note 2) 45,715
Trustees' fees and expenses 23,839
Pricing fees 9,298
Other 18,845
--------------
Total expenses 13,887,109
--------------
Investment income--net 8,237,382
--------------
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net 164,794,065
(Loss) on Foreign currency transactions--net (9,156,310) 155,637,755
Investments & --------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net 176,915,128
(Notes 1b, 1c, Foreign currency transactions--net (389,685) 176,525,443
1e & 3): -------------- --------------
Net realized and unrealized gain on investments and foreign
currency transactions 332,163,198
--------------
Net Increase in Net Assets Resulting from Operations $ 340,400,580
==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch EuroFund
April 30, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 1999 1998
<S> <S> <C> <C>
Operations: Investment income--net $ 8,237,382 $ 30,626,507
Realized gain on investments and foreign currency
transactions--net 155,637,755 331,672,476
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions--net 176,525,443 (214,475,220)
-------------- --------------
Net increase in net assets resulting from operations 340,400,580 147,823,763
-------------- --------------
Dividends & Investment income--net:
Distributions to Class A (20,840,015) (3,661,941)
Shareholders Class B (22,268,040) --
(Note 1h): Class C (1,663,399) --
Class D (10,640,376) (687,312)
Realized gain on investments--net:
Class A (99,747,120) (90,342,323)
Class B (147,583,398) (135,005,638)
Class C (9,884,004) (3,894,837)
Class D (54,000,884) (25,058,924)
-------------- --------------
Net decrease in net assets resulting from dividends
and distributions to shareholders (366,627,236) (258,650,975)
-------------- --------------
Beneficial Net increase in net assets derived from beneficial
Interest interest transactions 22,971,031 409,885,874
Transactions -------------- --------------
(Note 4):
Net Assets: Total increase (decrease) in net assets (3,255,625) 299,058,662
Beginning of period 1,846,749,986 1,547,691,324
-------------- --------------
End of period* $1,843,494,361 $1,846,749,986
============== ==============
<FN>
*Undistributed (accumulated) investment income (loss)--net $ (7,938,716) $ 39,235,732
============== ==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch EuroFund
April 30, 1999
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: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 17.52 $ 18.47 $ 16.67 $ 15.07 $ 15.96
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .11 .40 .26 .32 .19
Realized and unrealized gain on investments
and foreign currency transactions--net 2.97 1.73 4.31 2.32 .56
--------- --------- --------- --------- ---------
Total from investment operations 3.08 2.13 4.57 2.64 .75
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.63) (.12) (.44) -- --
In excess of investment income--net -- -- (.15) -- --
Realized gain on investments--net (3.04) (2.96) (2.18) (1.04) (1.64)
--------- --------- --------- --------- ---------
Total dividends and distributions (3.67) (3.08) (2.77) (1.04) (1.64)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 16.93 $ 17.52 $ 18.47 $ 16.67 $ 15.07
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 21.03%+++ 13.73% 32.13% 18.86% 6.19%
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses .99%* 1.00% 1.03% 1.10% 1.12%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 1.39%* 2.21% 1.53% 2.04% 1.32%
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 621,020 $ 691,197 $ 563,098 $ 216,056 $ 204,713
Data: ========= ========= ========= ========= =========
Portfolio turnover 30.12% 78.75% 92.65% 92.34% 72.16%
========= ========= ========= ========= =========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Based on average shares outstanding.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch EuroFund
April 30, 1999
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: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 15.79 $ 16.92 $ 15.47 $ 14.20 $ 15.28
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .03 .17 .07 .14 .04
Realized and unrealized gain on
investments and foreign currency
transactions--net 2.63 1.60 3.99 2.17 .52
--------- --------- --------- --------- ---------
Total from investment operations 2.66 1.77 4.06 2.31 .56
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.46) -- (.32) -- --
In excess of investment income--net -- -- (.11) -- --
Realized gain on investments--net (3.04) (2.90) (2.18) (1.04) (1.64)
--------- --------- --------- --------- ---------
Total dividends and distributions (3.50) (2.90) (2.61) (1.04) (1.64)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 14.95 $ 15.79 $ 16.92 $ 15.47 $ 14.20
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 20.35%+++ 12.58% 30.84% 17.61% 5.12%
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses 2.01%* 2.03% 2.06% 2.13% 2.15%
Net Assets: ========= ========= ========= ========= =========
Investment income--net .41%* 1.07% .45% 1.00% .27%
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in
Data: thousands) $ 808,955 $ 787,595 $ 811,859 $ 738,535 $ 795,469
========= ========= ========= ========= =========
Portfolio turnover 30.12% 78.75% 92.65% 92.34% 72.16%
========= ========= ========= ========= =========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Based on average shares outstanding.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch EuroFund
April 30, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class C++
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: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 15.66 $ 16.82 $ 15.45 $ 14.19 $ 15.28
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .03 .19 .07 .15 .01
Realized and unrealized gain on
investments and foreign currency
transactions--net 2.59 1.56 3.97 2.15 .54
--------- --------- --------- --------- ---------
Total from investment operations 2.62 1.75 4.04 2.30 .55
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.51) -- (.36) -- --
In excess of investment income--net -- -- (.13) -- --
Realized gain on investments--net (3.04) (2.91) (2.18) (1.04) (1.64)
--------- --------- --------- --------- ---------
Total dividends and distributions (3.55) (2.91) (2.67) (1.04) (1.64)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 14.73 $ 15.66 $ 16.82 $ 15.45 $ 14.19
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 20.33%+++ 12.56% 30.81% 17.55% 5.04%
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses 2.02%* 2.04% 2.08% 2.15% 2.18%
Net Assets: ========= ========= ========= ========= =========
Investment income--net .41%* 1.18% .43% 1.04% .11%
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in
Data: thousands) $ 54,624 $ 51,671 $ 22,260 $ 15,917 $ 9,668
========= ========= ========= ========= =========
Portfolio turnover 30.12% 78.75% 92.65% 92.34% 72.16%
========= ========= ========= ========= =========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Based on average shares outstanding.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch EuroFund
April 30, 1999
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class D++
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: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 17.39 $ 18.35 $ 16.57 $ 15.02 $ 15.96
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .10 .36 .20 .28 .20
Realized and unrealized gain on
investments and foreign currency
transactions--net 2.93 1.72 4.31 2.31 .50
--------- --------- --------- --------- ---------
Total from investment operations 3.03 2.08 4.51 2.59 .70
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.60) (.08) (.41) -- --
In excess of investment income--net -- -- (.14) -- --
Realized gain on investments--net (3.04) (2.96) (2.18) (1.04) (1.64)
--------- --------- --------- --------- ---------
Total dividends and distributions (3.64) (3.04) (2.73) (1.04) (1.64)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 16.78 $ 17.39 $ 18.35 $ 16.57 $ 15.02
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 20.80%+++ 13.49% 31.84% 18.57% 5.85%
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses 1.23%* 1.25% 1.28% 1.34% 1.38%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 1.23%* 2.01% 1.21% 1.83% 1.37%
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 358,895 $ 316,287 $ 150,474 $ 114,020 $ 104,493
Data: ========= ========= ========= ========= =========
Portfolio turnover 30.12% 78.75% 92.65% 92.34% 72.16%
========= ========= ========= ========= =========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Based on average shares outstanding.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch EuroFund
April 30, 1999
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. The Fund's financial statements are prepared in
accordance with generally accepted accounting principles which may
require the use of management accruals and estimates. 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 or
purchased are valued at the last sale price in the case of exchange-
traded options. In the case of options traded in the over-the-
counter market, valuation is the last asked price (options written)
or the last bid price (options purchased). 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.
* 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.
Merrill Lynch EuroFund
April 30, 1999
* Foreign currency options and futures--The Fund may also purchase
or sell listed or over-the-counter foreign currency options, foreign
currency futures and related options on foreign currency futures as
a short or long hedge against possible variations in foreign
exchange rates. Such transactions may be effected with respect to
hedges on non-US dollar denominated securities owned by the Fund,
sold by the Fund but not yet delivered, or committed or anticipated
to be purchased by the Fund.
(d) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required. Under the applicable foreign tax law, a
withholding tax may be imposed on interest, dividends, and capital
gains at various rates.
(e) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Dividend income is recorded on the ex-
dividend dates. Dividends from foreign securities where the ex-
dividend date may have passed are subsequently recorded when the
Fund has determined the ex-dividend date. Interest income is
recognized on the accrual basis. Realized gains and losses on
security transactions are determined on the identified cost basis.
(f) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(g) Repurchase agreements--The Fund invests in US Government
securities pursuant to repurchase agreements. Under such agreements,
the counterparty 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. Distributions in
excess of net investment income are due primarily to differing tax
treatments for foreign currency transactions.
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 ("MLFD" or the "Distributor"), a division of Princeton
Funds Distributor, Inc. ("PFD"), which is 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, 1999, MLAM paid MLAM U.K. a fee of $944,242
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 Incorporated ("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, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
For the six months ended April 30, 1999, 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 $1,315 $ 11,594
Class D $6,599 $ 86,077
For the six months ended April 30, 1999, MLPF&S received contingent
deferred sales charges of $640,538 and $42,964 relating to
transactions in Class B and Class C Shares, respectively.
Furthermore, MLPF&S received contingent deferred sales charges of
$50,000 relating to transactions subject to front-end sales charge
waivers in Class A Shares.
In addition, MLPF&S received $133,468 in commissions on the
execution of portfolio security transactions for the Fund for the
six months ended April 30, 1999.
Financial Data Services, Inc. ("FDS"), 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, FDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended April 30, 1999 were $523,810,805 and
$900,272,902, respectively.
Net realized gains (losses) for the six months ended April 30, 1999
and net unrealized gains (losses) as of April 30, 1999 were as
follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
Long-term investments $ 160,180,089 $ 157,434,735
Financial futures contracts 1,647,033 (7,566,578)
Options written 2,966,943 --
Foreign currency transactions (9,156,310) (235,830)
------------- -------------
Total $ 155,637,755 $ 149,632,327
============= =============
Transactions in call options written for the six months ended April
30, 1999 were as follows:
Premiums
Par Value Received
Outstanding call options written
at beginning of period $ 1,763,068 $ 3,615,851
Options written 103,233 841,797
Options expired (1,866,301) (4,457,648)
------------- -------------
Outstanding call options
written at end of period $ -- $ --
============= =============
As of April 30, 1999, net unrealized appreciation for Federal income
tax purposes aggregated $157,434,735, of which $259,659,513 related
to appreciated securities and $102,224,778 related to depreciated
securities. At April 30, 1999, the aggregate cost of investments,
net of options written, for Federal income tax purposes was
$1,555,472,730.
4. Shares of Beneficial Interest:
Net increase in net assets derived from beneficial interest
transactions was $22,971,031 and $409,885,874 for the six months
ended April 30, 1999 and for the year ended October 31, 1998,
respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Six Months Dollar
Ended April 30, 1999 Shares Amount
Shares sold 8,576,059 $ 136,695,582
Shares issued to shareholders
in reinvestment of dividends
and distributions 6,134,572 89,258,042
------------- -------------
Total issued 14,710,631 225,953,624
Shares redeemed (17,463,097) (294,940,593)
------------- -------------
Net decrease (2,752,466) $ (68,986,969)
============= =============
Class A Shares for the Year Dollar
Ended October 31, 1998 Shares Amount
Shares sold 31,832,178 $ 572,990,851
Shares issued to shareholders in
reinvestment of dividends and
distributions 5,764,313 89,116,286
------------- -------------
Total issued 37,596,491 662,107,137
Shares redeemed (28,637,448) (491,035,443)
------------- -------------
Net increase 8,959,043 $ 171,071,694
============= =============
Merrill Lynch EuroFund
April 30, 1999
Class B Shares for the Six Months Dollar
Ended April 30, 1999 Shares Amount
Shares sold 6,169,965 $ 88,717,029
Shares issued to shareholders
in reinvestment of dividends
and distributions 11,666,062 150,492,545
------------- -------------
Total issued 17,836,027 239,209,574
Shares redeemed (11,826,986) (170,266,416)
Automatic conversion of
shares (1,787,129) (25,847,471)
------------- -------------
Net increase 4,221,912 $ 43,095,687
============= =============
Class B Shares for the Year Dollar
Ended October 31, 1998 Shares Amount
Shares sold 20,637,674 $ 346,740,573
Shares issued to shareholders in
reinvestment of distributions 8,377,046 117,781,272
------------- -------------
Total issued 29,014,720 464,521,845
Shares redeemed (17,716,020) (282,471,179)
Automatic conversion of
shares (9,405,997) (150,820,513)
------------- -------------
Net increase 1,892,703 $ 31,230,153
============= =============
Class C Shares for the Six Months Dollar
Ended April 30, 1999 Shares Amount
Shares sold 1,373,933 $ 19,455,224
Shares issued to shareholders
in reinvestment of dividends
and distributions 823,710 10,469,359
------------- -------------
Total issued 2,197,643 29,924,583
Shares redeemed (1,789,797) (25,343,064)
------------- -------------
Net increase 407,846 $ 4,581,519
============= =============
Class C Shares for the Year Dollar
Ended October 31, 1998 Shares Amount
Shares sold 6,966,258 $ 114,030,342
Shares issued to shareholders in
reinvestment of distributions 247,386 3,448,559
------------- -------------
Total issued 7,213,644 117,478,901
Shares redeemed (5,237,487) (84,231,413)
------------- -------------
Net increase 1,976,157 $ 33,247,488
============= =============
Class D Shares for the Six Months Dollar
Ended April 30, 1999 Shares Amount
Shares sold 2,578,870 $ 41,526,395
Automatic conversion of
shares 1,600,069 25,847,471
Shares issued to shareholders
in reinvestment of dividends
and distributions 3,801,451 54,893,228
------------- -------------
Total issued 7,980,390 122,267,094
Shares redeemed (4,786,062) (77,986,300)
------------- -------------
Net increase 3,194,328 $ 44,280,794
============= =============
Class D Shares for the Year Dollar
Ended October 31, 1998 Shares Amount
Shares sold 9,981,419 $ 164,257,372
Automatic conversion of
shares 7,844,570 150,820,513
Shares issued to shareholders
in reinvestment of dividends
and distributions 1,382,415 21,261,544
------------- -------------
Total issued 19,208,404 336,339,429
Shares redeemed (9,217,837) (162,002,890)
------------- -------------
Net increase 9,990,567 $ 174,336,539
============= =============
5. Commitments:
At April 30, 1999, the Fund had outstanding foreign exchange
contracts under which it had agreed to purchase and sell foreign
currency aggregating approximately $581,000 and $6,230,000,
respectively.
