MERRILL LYNCH
EUROFUND
FUND LOGO
Annual Report
October 31, 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 Information
As a Percentage of Stocks at Value As of
October 31, 1999
Ireland 0.9%
Spain 1.2%
Sweden 5.9%
Finland 3.5%
France 14.9%
Germany 26.5%
Italy 8.8%
Netherlands 8.0%
Switzerland 4.1%
Emerging Europe* 1.4%
Norway 0.6%
United Kingdom 24.2%
[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 October 31, 1999 In US dollars*
Ireland -10.00
Norway - 1.1%
Italy + 0.6%
United Kingdom + 1.0%
Switzerland + 1.8%
Spain + 2.2%
Netherlands + 2.4%
Denmark + 3.7%
Germany + 5.4%
France + 7.4%
Sweden +10.5%
Finland +23.2%
Source: Financial Times/Standard & Poor's--
Actuaries Index.
[FN]
*For the three-month period ended October 31, 1999, total investment
return for the Financial Times/Standard & Poor's--Actuaries Europe
Index was +3.44%.
Merrill Lynch EuroFund
October 31, 1999
DEAR SHAREHOLDER
During the quarter ended October 31, 1999, the unmanaged Financial
Times/Standard & Poor's--Actuaries Europe Index had a total return
of +3.44%, while the total return of the unmanaged Morgan Stanley
Capital International (MSCI) Europe Index was +3.93%. For the same
period, Merrill Lynch EuroFund's Class A, Class B, Class C and Class
D Shares had total returns of +0.17%, -0.07%, -0.07% and +0.12%,
respectively. The Fund underperformed the Lipper Analytical Service
Inc.'s European Region Funds Average, which had a +3.11% total
return for the three months ended October 31, 1999. The Fund's
performance suffered from a high cash position and a return to favor
of highly valued growth stocks. (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--6 of this report
to shareholders.)
Investment Environment
A continued strong two-way pull was once again evident in US and
European equity markets over the last three months. The markets
initially rallied, then pulled back and then experienced a very
powerful rally at the close of the October quarter. This rally was
brought about by evidence of a slowdown in the pace of US economic
growth, muted inflationary pressures and a rally in the bond market.
Although the markets ended the October quarter on a strong note, the
balance between positive and negative factors continued to swing
toward the negative. The principal positive factors are a continued
wave of merger and acquisition activity and rapid earnings growth.
However, the level of merger and acquisition activity is unlikely to
be sustainable and is of increasingly dubious merit. As far as
earnings are concerned, we believe that expectations are unlikely to
rise much higher. Current expectations are so high that a number of
high profile disappointments have been registered. On the negative
side, accelerating economic growth is having an increasingly
negative impact on inflation, interest rates and bond yields.
Additionally, the US trade and current account deficits remain of
significant concern, as does the US dollar/yen exchange rate.
Economic Outlook
While the pace of US economic growth may be slowing modestly, growth
continues to accelerate in the rest of the world. In the United
Kingdom, the labor market is now very tight and the property market
is overheating. On the European continent, export growth is picking
up rapidly. In both areas monetary policy tightening has commenced
and will probably continue into 2000. Inventory building on a global
basis is likely to be a key growth driver in the remainder of the
fourth quarter.
Current Valuations
Rather than improving the relative valuation of equities, the recent
bond market rally served to push equities higher. In both the United
States and Europe, equity valuations are at unprecedented levels in
absolute terms and relative to bonds. US equities are significantly
more expensive relative to bonds than they were prior to the 1987
crash and the summer 1998 correction. Overall market valuation
levels conceal the fact that the bulk of the overvaluation is
concentrated in a few major sectors such as technology and
telecommunications. Historically, such narrowness of stock market
leadership normally precedes a market downturn.
Investment Strategy
Early in the October quarter when markets were depressed, some cash
was redeployed in the markets. However, we were very selective in
our purchases, which we limited to those stocks that had suffered
unduly in the correction and offered attractive value. As of October
31, 1999, the Fund had 16.7% of net assets in cash and 4.2% in short
futures. This gave the Fund an effective cash position of 20.8% of
net assets, down from approximately 35% at the close of the July
quarter. If the markets continue to rally, we may increase the
Fund's position in cash and cash equivalents. We currently believe
the risk/reward ratio is very unattractive.
Fiscal Year in Review
For the fiscal year ended October 31, 1999, Merrill Lynch EuroFund's
Class A, Class B, Class C and Class D Shares had total returns of
+23.25%, +21.96%, +21.97% and +22.89%, respectively, while the total
return of the unmanaged Financial Times/Standard & Poor's--
Actuaries Europe Index was +13.80% and the total return for the
unmanaged MSCI Europe Index was +12.52%. The Fund also outperformed
Lipper Analytical Services Inc.'s European Region Funds Average
return of +12.52%. (See the table on page 3 for additional
comparative information.)
Merrill Lynch EuroFund
October 31, 1999
The main reason the Fund outperformed its benchmark and peer group
so significantly during the fiscal year was our adherence to the
value style, which worked well as a result of a rapid recovery in
growth and earnings expectations. Value stocks have partially closed
the huge valuation gap relative to growth stocks that was apparent
at the start of the year, but still remain undervalued, in our
opinion. On the other hand, many growth stocks were trading at
valuations that are difficult to rationalize, in our view.
During the year, the Fund's geographic asset allocation was almost
uniformly positive. Overweighting Finland and Sweden and
underweighting Spain, Italy and Switzerland was beneficial to the
Fund. The only negative was the Fund's overweighting of Germany,
which underperformed in spite of its economic sensitivity. Our
choice of euros rather than pounds sterling as the currency for the
Fund's cash holdings was just modestly negative.
At a sector level, results were mixed during the fiscal year. Our
heavy exposure to basic resources and limited exposure to
financials, pharmaceuticals, food and utilities worked well, but
limited exposure to technology, telecommunications and energy issues
detracted from Fund performance.
In Conclusion
The fiscal year ended October 31, 1999 was good for the Fund in
terms of its performance relative to the benchmark and competitors
and in providing a high absolute return to shareholders. However, we
believe that such high levels of return are not sustainable and that
risks are not adequately reflected in current prices. We retain a
cautious stance in an effort to enable the Fund to continue to
perform relatively well should the markets correct once more.
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
Executive Vice President and Trustee
(Adrian C. Holmes)
Adrian C. Holmes
Senior Vice President and Portfolio Manager
December 8, 1999
To reduce shareholder expenses, Merrill Lynch EuroFund will no
longer be printing and mailing quarterly reports to shareholders. We
will continue to provide you with reports on a semi-annual and
annual basis.
Lipper Rankings as of 10/31/99*
Merrill Lynch EuroFund All Lipper
Class A Class B European
Ranking Ranking Region Funds
10-Year Period 1 2 out of 8
5-Year Period 5 12 out of 36
1-Year Period 12 15 out of 125
[FN]
*Rankings are according to Lipper Analytical Services, Inc. Lipper
rankings pertain to the Fund's total return performance and do not
take sales charges into consideration. Lipper European Region Funds
investment objective category consists of all funds tracked by
Lipper that concentrate investments in equity securities whose
primary trading markets or operations are in the European region or
a single country within this region.
Rankings are only for the share classes cited; rankings for other
share classes may vary. Past performance is no guarantee of future
results.
Merrill Lynch EuroFund
October 31, 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.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 9/30/99 +35.03% +27.94%
Five Years Ended 9/30/99 +19.21 +17.93
Ten Years Ended 9/30/99 +14.08 +13.47
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 9/30/99 +33.68% +29.68%
Five Years Ended 9/30/99 +17.99 +17.99
Ten Years Ended 9/30/99 +12.92 +12.92
[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 9/30/99 +33.70% +32.70%
Inception (10/21/94)
through 9/30/99 +17.65 +17.65
[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 9/30/99 +34.72% +27.65%
Inception (10/21/94)
through 9/30/99 +18.60 +17.31
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
Merrill Lynch EuroFund
October 31, 1999
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the
Fund's Class A & Class B Shares compared to growth of an
investment in the Morgan Stanley Capital International
Europe Index. Beginning and ending values are:
10/89 10/99
ML EuroFund++--
Class A Shares* $ 9,475 $38,485
ML EuroFund++--
Class B Shares* $10,000 $36,633
Morgan Stanley Capital
International Europe Index++++ $10,000 $38,433
A line graph depicting the growth of an investment in the
Fund's Class C & Class D Shares compared to growth of an
investment in the Morgan Stanley Capital International
Europe Index. Beginning and ending values are:
10/89 10/99
ML EuroFund++--
Class C Shares* $10,000 $22,469
ML EuroFund++--
Class D Shares* $ 9,475 $22,157
Morgan Stanley Capital
International Europe Index++++ $10,000 $23,198
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of operations.
++ML EuroFund invests primarily in equities of corporations
domiciled in European countries. Under normal market conditions, at
least 80% of the Fund's net assets will be invested in European
corporate securities, primarily common stocks and debt and preferred
securities convertible into common stock.
++++This unmanaged capitalization-weighted Index is comprised of a
representative sampling of large-, medium-, and small-capitalization
companies in developed European countries. The starting date for the
Index in the Class C & Class D Shares graph is from 10/31/94.
Past performance is not predictive of future performance.
Merrill Lynch EuroFund
October 31, 1999
PERFORMANCE DATA (concluded)
<TABLE>
Recent Performance Results*
<CAPTION>
Ten Years/
3 Month 12 Month Since Inception
As of October 31, 1999 Total Return Total Return Total Return
<S> <C> <C> <C>
ML EuroFund Class A Shares +0.17% +23.25% +306.21%
ML EuroFund Class B Shares -0.07 +21.96 +266.32
ML EuroFund Class C Shares -0.07 +21.97 +124.69
ML EuroFund Class D Shares +0.12 +22.89 +133.84
<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 ten years for Class A &
Class B Shares and from 10/21/94 for Class C & Class D Shares.
</TABLE>
OFFICERS AND TRUSTEES
Donald Cecil, Trustee
Edward H. Meyer, Trustee
Charles C. Reilly, Trustee
Richard R. West, Trustee
Arthur Zeikel, Trustee
Edward D. Zinbarg, Trustee
Terry K. Glenn, Executive Vice President and Trustee
Robert C. Doll, Senior Vice President
Adrian C. Holmes, Senior Vice President
and Portfolio Manager
Donald C. Burke, Vice President and Treasurer
Robert E. Putney, III, Secretary
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
October 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Shares Value Percent of
Industries Held Investments (Note 1a) Net Assets
<S> <C> <C> <C>
Finland
Metals & Mining 990,307 Outokumpu Oyj $ 11,319,732 0.7%
Paper & Forest 2,266,341 Metsa-Serla Oyj 'B' 20,500,564 1.2
Products 511,300 Stora Enso Oyj 'R' 6,714,647 0.4
344,023 UPM-Kymmene Oyj 10,842,917 0.6
-------------- ------
38,058,128 2.2
Total Investments in Finland (Cost--$45,307,435) 49,377,860 2.9
France
Automobiles & 85,068 PSA Peugeot Citroen 16,310,470 1.0
Equipment
Banking 464,680 Banque Nationale de Paris (BNP) 40,764,100 2.4
91,572 Banque Nationale de Paris (BNP)(Warrants)(b) 540,675 0.0
91,830 Societe Generale 'A' 19,970,656 1.2
-------------- ------
61,275,431 3.6
Building & 85,241 Compagnie de Saint Gobain 14,776,442 0.9
Construction
Holding Company 73,646 Societe Eurafrance SA 44,411,808 2.6
Machinery 137,845 Compagnie Fives-Lille 12,599,336 0.7
Mining 1,515,312 Usinor SA 21,030,146 1.2
Oil & Related 319,187 Total Fina SA 'B' 43,090,993 2.5
Total Investments in France (Cost--$143,922,731) 213,494,626 12.5
Germany
Automobiles 254,391 Volkswagen AG 15,020,191 0.9
Banking 148,248 Commerzbank AG 5,645,914 0.3
402,015 Deutsche Bank AG (Registered) 28,804,745 1.7
176,601 Dresdner Bank AG (Registered) 9,044,929 0.5
653,210 HypoVereinsbank AG 42,822,775 2.5
-------------- ------
86,318,363 5.0
Chemicals 253,318 BASF AG 11,377,309 0.7
505,917 Bayer AG 20,675,988 1.2
82,508 ++Celanese AG 1,304,571 0.1
77,016 Henkel KGaA 4,547,311 0.3
290,660 Henkel KGaA (Preferred) 19,696,197 1.1
825,076 Hoechst AG 36,276,620 2.1
-------------- ------
93,877,996 5.5
Construction 33,402 ++Philipp Holzmann AG 4,842,716 0.3
Electrical Equipment 152,265 Siemens AG 13,653,406 0.8
Engineering 321,783 ++Kloeckner-Werke AG 26,555,023 1.5
Insurance 149,660 Muenchener Rueckversicherungs-Gesellschaft
AG (Registered Shares) 34,276,750 2.0
Machinery & Equipment 133,568 Jungheinrich AG (Preferred) 1,662,870 0.1
</TABLE>
Merrill Lynch EuroFund
October 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Value Percent of
Industries Held Investments (Note 1a) Net Assets
<S> <C> <C> <C>
Germany (concluded)
Medical Equipment 43,086 Fresenius AG (Preferred) $ 7,038,887 0.4%
Mining 1,200,095 ++Thyssen Krupp AG 28,381,054 1.7
Utilities 832,434 RWE AG 33,495,463 2.0
607,305 Veba AG 32,794,980 1.9
66,290,443 3.9
Total Investments in Germany (Cost--$364,180,597) 377,917,699 22.1
Hungary
Banking 168,537 OTP Bank Rt. (GDR)(a) 7,457,762 0.4
Oil & Gas Producers 406,729 ++MOL Magyar Olaj-es Gazipari Rt. (GDR)(a) 7,971,888 0.5
Total Investments in Hungary (Cost--$19,450,378) 15,429,650 0.9
Ireland
Banking 1,331,922 Bank of Ireland 10,382,934 0.6
Food 693,901 Greencore Group PLC 2,004,830 0.1
Total Investments in Ireland (Cost--$13,662,229) 12,387,764 0.7
Italy
Diversified Holdings 21,901,802 MontEdison SpA 39,002,006 2.3
Oil & Gas Producers 4,530,959 ENI SpA 26,466,854 1.5
Telecommunications 12,245,239 Telecom Italia SpA (Registered) 60,078,841 3.5
Total Investments in Italy (Cost--$123,588,466) 125,547,701 7.3
Netherlands
Chemicals 492,919 Akzo Nobel NV 21,201,217 1.2
285,370 ++European Vinyls Corporation International NV 2,548,383 0.2
-------------- ------
23,749,600 1.4
Diversified Holdings 327,079 Internatio-Muller NV 6,150,963 0.4
Food 113,452 Koninklijke Ahold NV 3,480,426 0.2
Insurance 463,869 ING Groep NV 27,330,070 1.6
Mining 174,270 Ispat International NV 1,821,726 0.1
1,161,001 Ispat International NV (NY Registered Shares) 12,045,385 0.7
-------------- ------
13,867,111 0.8
Paper & Forest 2,108,845 Buhrmann NV 36,312,906 2.1
Products
Transport Services 117,568 Koninklijke Pakhoed NV 3,279,375 0.2
Total Investments in the Netherlands
(Cost--$132,013,995) 114,170,451 6.7
</TABLE>
Merrill Lynch EuroFund
October 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Value Percent of
Industries Held Investments (Note 1a) Net Assets
<S> <C> <C> <C>
Norway
Services 1,006,619 Merkantildata ASA $ 8,526,540 0.5%
Total Investments in Norway (Cost--$6,172,754) 8,526,540 0.5
Poland
Banking & Financial 32,410 Bank Handlowy w Warszawie (GDR)(a) 448,879 0.0
Electrical Equipment 597,678 ++Bydgoska Fabryka Kabli SA 801,158 0.1
61,405 ++Elektrim Spolka Akcyjna SA 531,740 0.0
-------------- ------
1,332,898 0.1
Total Investments in Poland (Cost--$1,750,454) 1,781,777 0.1
Spain
Telecommunications 569,124 ++Telefonica, SA 9,351,495 0.5
Utilities--Electric 422,858 Endesa, SA 8,454,165 0.5
Total Investments in Spain (Cost--$16,672,672) 17,805,660 1.0
Sweden
Appliances 1,467,160 Electrolux AB 'B' 29,197,214 1.7
Automobiles & 549,126 Volvo AB 'B' 14,159,601 0.8
Equipment
Banking 1,567,731 Nordbanken Holding AB 9,131,305 0.5
858,705 Skandinaviska Enskilda Banken (SEB) 'A' 8,804,826 0.5
-------------- ------
17,936,131 1.0
Engineering 189,250 Svedala Industri AB 3,329,845 0.2
Mining 924,002 ++Avesta Sheffield AB 4,361,568 0.3
Paper & Forest 510,201 Mo och Domsjo AB (MoDo) 'B' 14,982,240 0.9
Products
Total Investments in Sweden (Cost--$75,513,773) 83,966,599 4.9
Switzerland
Banking 27,803 Banque Cantonale de Geneve (BCG) 5,395,102 0.3
58,673 UBS AG (Registered Shares) 17,058,788 1.0
-------------- ------
22,453,890 1.3
Healthcare 24,153 Novartis AG (Registered Shares) 36,101,246 2.1
Total Investments in Switzerland (Cost--$58,543,350) 58,555,136 3.4
</TABLE>
Merrill Lynch EuroFund
October 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Value Percent of
Industries Held Investments (Note 1a) Net Assets
<S> <C> <C> <C>
Turkey
Banking 20,705,000 Akbank T.A.S. $ 323,031 0.0%
66,256,000 Turkiye Is Bankasi (Isbank) 'C' 1,309,353 0.1
84,013,725 Yapi ve Kredi Bankasi AS 1,223,365 0.1
Total Investments in Turkey (Cost--$2,104,952) 2,855,749 0.2
United Kingdom
Banking 1,121,649 Alliance & Leicester PLC 16,350,735 0.9
432,584 Barclays PLC 13,229,720 0.8
1,623,284 Lloyds TSB Group PLC 22,424,149 1.3
1,244,164 Northern Rock PLC 8,404,557 0.5
-------------- ------
60,409,161 3.5
Building & 891,827 Jarvis PLC 3,810,120 0.2
Construction
Building Materials 2,321,268 Blue Circle Industries PLC 10,764,927 0.6
Engineering 3,378,255 Invensys PLC 16,581,773 1.0
Food & Drink 2,036,419 ++Allied Domecq PLC 11,433,010 0.7
1,780,299 Bass PLC 19,537,172 1.1
-------------- ------
30,970,182 1.8
Foods/Food 1,452,802 Unilever PLC 13,462,872 0.8
Processing
Insurance 1,065,477 Allied Zurich PLC 12,855,790 0.7
1,367,337 CGU PLC 19,898,560 1.2
3,976,507 Royal & Sun Alliance Insurance Group PLC 27,025,232 1.6
-------------- ------
59,779,582 3.5
Oil & Related 649,357 Expro International Group PLC 3,746,935 0.2
3,829,034 Shell Transport & Trading Company 29,322,987 1.7
-------------- ------
33,069,922 1.9
Pharmaceuticals 790,545 Glaxo Wellcome PLC 23,307,746 1.4
Restaurants & Food 889,658 Whitbread PLC 9,712,076 0.6
Service
Retail 1,287,367 J Sainsbury PLC 7,718,980 0.4
2,610,700 Safeway PLC 8,185,735 0.5
1,610,011 Tesco PLC 4,783,819 0.3
-------------- ------
20,688,534 1.2
Retail--Stores 813,218 Marks & Spencer PLC 3,737,940 0.2
Services 2,146,697 Reed International PLC 12,510,263 0.7
2,509,721 Rentokil Initial PLC 8,353,215 0.5
-------------- ------
20,863,478 1.2
</TABLE>
Merrill Lynch EuroFund
October 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
Shares Value Percent of
Industries Held Investments (Note 1a) Net Assets
<S> <C> <C> <C>
United Kingdom (concluded)
Telecommunications 2,293,776 Cable & Wireless PLC $ 26,772,440 1.6%
Utilities--Electric, 399,277 PowerGen PLC 3,496,842 0.2
Gas, & Water 621,507 Severn Trent PLC 8,912,023 0.5
-------------- ------
12,408,865 0.7
Total Investments in the United Kingdom
(Cost--$367,238,248) 346,339,618 20.2
Face
Amount Short-Term Securities
Repurchase US$ 8,890,000 Warburg Dillon Read LLC, purchased on 10/29/1999
Agreements* to yield 5.20% to 11/01/1999 8,890,000 0.5
Total Investments in Short-Term Securities
(Cost--$8,890,000) 8,890,000 0.5
Total Investments (Cost--$1,379,012,034) 1,437,046,830 83.9
Variation Margin on Financial Futures Contracts** (2,989,403) (0.2)
Foreign Time Deposits*** 278,898,166 16.3
Other Assets Less Liabilities 842,383 0.0
-------------- ------
Net Assets $1,713,797,976 100.0%
============== ======
<FN>
++Non-income producing security.
(a)Global Depositary Receipts (GDR).
(b)Warrants entitle the Fund to purchase a predetermined number of
shares of common stock and are non-income producing. The purchase
price and number of shares are subject to adjustment under certain
conditions until the expiration date.
*Repurchase Agreements are fully collateralized by US Government &
Agency Obligations.
**Financial futures contracts sold as of October 31, 1999 were as
follows:
Number of Expiration Value
Contracts Issue Exchange Date (Notes 1a &1c)
1,402 CAC 40 CAC November 1999 $ 71,982,636
------------
Total Financial Futures Contracts Sold
(Total Contract Price--$69,301,883) $ 71,982,636
============
***Foreign time deposits bear interest at 2.52 and 2.53% and mature
on 11/01/1999.
See Notes to Financial Statements.
</TABLE>
PORTFOLIO INFORMATION
As of October 31, 1999
Percent of
Ten Largest Equity Holdings Net Assets
Telecom Italia SpA (Registered) 3.5%
Societe Eurafrance SA 2.6
HypoVereinsbank AG 2.5
Banque Nationale de Paris (BNP) 2.4
MontEdison SpA 2.3
Buhrmann NV 2.1
Hoechst AG 2.1
Novartis AG (Registered Shares) 2.1
Muenchener Rueckversicherungs-
Gesellschaft AG (Registered Shares) 2.0
RWE AG 2.0
Percent of
Ten Largest Industries Net Assets
Banking 15.6%
Insurance 7.1
Chemicals 6.9
Telecommunications 5.6
Paper & Forest Products 5.2
Oil & Related 4.4
Mining 4.0
Utilities 3.9
Engineering 2.7
Diversified Holdings 2.7
Merrill Lynch EuroFund
October 31, 1999
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of October 31, 1999
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$1,379,012,034)
(Note 1a) $1,437,046,830
Cash 3,371
Foreign cash (Note 1b) 29,437,077
Foreign time deposits (Note 1b) 278,898,166
Receivables:
Securities sold $ 8,714,467
Dividends 4,277,562
Beneficial interest sold 2,227,860
Options written 1,209,220
Interest 20,860 16,449,969
--------------
Prepaid registration fees and other assets (Note 1f) 45,134
--------------
Total assets 1,761,880,547
--------------
Liabilities: Payables:
Securities purchased 39,581,596
Variation margin (Note 1c) 2,989,403
Beneficial interest redeemed 2,509,437
Investment adviser (Note 2) 1,233,771
Distributor (Note 2) 696,059 47,010,266
--------------
Accrued expenses and other liabilities 1,072,305
--------------
Total liabilities 48,082,571
--------------
Net Assets: Net assets $1,713,797,976
==============
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 3,290,310
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 4,820,139
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 353,299
Class D Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 2,128,580
Paid-in capital in excess of par 1,379,841,178
Undistributed investment income--net 6,892,293
Undistributed realized capital gains on investments and foreign
currency transactions--net 261,374,588
Unrealized appreciation on investments and foreign currency
transactions--net 55,097,589
--------------
Net assets $1,713,797,976
==============
Net Asset Value: Class A--Based on net assets of $567,273,512 and 32,903,104 shares
of beneficial interest outstanding $ 17.24
==============
Class B--Based on net assets of $730,360,993 and 48,201,387 shares
of beneficial interest outstanding $ 15.15
==============
Class C--Based on net assets of $52,741,665 and 3,532,989 shares
of beneficial interest outstanding $ 14.93
==============
Class D--Based on net assets of $363,421,806 and 21,285,803 shares
of beneficial interest outstanding $ 17.07
==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch EuroFund
October 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations for the Year Ended October 31, 1999
<S> <S> <C> <C>
Investment Dividends (net of $5,858,056 foreign withholding tax) $ 43,371,108
Income Interest 4,862,290
(Notes 1d & 1e): --------------
Total income 48,233,398
--------------
Expenses: Investment advisory fees (Note 2) $ 13,468,035
Account maintenance and distribution fees--Class B (Note 2) 7,840,904
Transfer agent fees--Class B (Note 2) 1,207,178
Custodian fees 1,047,758
Account maintenance fees--Class D (Note 2) 868,772
Transfer agent fees--Class A (Note 2) 806,625
Account maintenance and distribution fees--Class C (Note 2) 536,854
Transfer agent fees--Class D (Note 2) 453,852
Accounting services (Note 2) 232,787
Professional fees 161,752
Printing and shareholder reports 106,459
Transfer agent fees--Class C (Note 2) 88,554
Trustees' fees and expenses 45,462
Registration fees (Note 1f) 36,616
Pricing fees 10,986
--------------
Total expenses 26,912,594
--------------
Investment income--net 21,320,804
--------------
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net 269,644,564
(Loss) on Foreign currency transactions--net (5,361,138) 264,283,426
Investments & --------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net 82,401,014
(Notes 1b, 1c, Foreign currency transactions--net (410,309) 81,990,705
1e & 3): -------------- --------------
Net realized and unrealized gain on investments and
foreign currency transactions 346,274,131
--------------
Net Increase in Net Assets Resulting from Operations $ 367,594,935
==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch EuroFund
October 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended
October 31,
Increase (Decrease) in Net Assets: 1999 1998
<S> <S> <C> <C>
Operations: Investment income--net $ 21,320,804 $ 30,626,507
Realized gain on investments and foreign currency
transactions--net 264,283,426 331,672,476
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions--net 81,990,705 (214,475,220)
-------------- --------------
Net increase in net assets resulting from operations 367,594,935 147,823,763
-------------- --------------
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 (decrease) in net assets derived from beneficial
Interest interest transactions (133,919,709) 409,885,874
Transactions -------------- --------------
(Note 4):
Net Assets: Total increase (decrease) in net assets (132,952,010) 299,058,662
Beginning of year 1,846,749,986 1,547,691,324
-------------- --------------
End of year* $1,713,797,976 $1,846,749,986
============== ==============
<FN>
*Undistributed investment income--net (Note 1i) $ 6,892,293 $ 39,235,732
============== ==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch EuroFund
October 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements Class A++
For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 17.52 $ 18.47 $ 16.67 $ 15.07 $ 15.96
Performance: ---------- ---------- ---------- ---------- ----------
Investment income--net .28 .40 .26 .32 .19
Realized and unrealized gain
on investments and foreign
currency transactions--net 3.11 1.73 4.31 2.32 .56
---------- ---------- ---------- ---------- ----------
Total from investment operations 3.39 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 year $ 17.24 $ 17.52 $ 18.47 $ 16.67 $ 15.07
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 23.25% 13.73% 32.13% 18.86% 6.19%
Return:* ========== ========== ========== ========== ==========
Ratios to Average Expenses .97% 1.00% 1.03% 1.10% 1.12%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 1.70% 2.21% 1.53% 2.04% 1.32%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year
Data: (in thousands) $ 567,273 $ 691,197 $ 563,098 $ 216,056 $ 204,713
========== ========== ========== ========== ==========
Portfolio turnover 61.12% 78.75% 92.65% 92.34% 72.16%
========== ========== ========== ========== ==========
<FN>
*Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch EuroFund
October 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements Class B++
For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 15.79 $ 16.92 $ 15.47 $ 14.20 $ 15.28
Performance: ---------- ---------- ---------- ---------- ----------
Investment income--net .10 .17 .07 .14 .04
Realized and unrealized gain on
investments and foreign currency
transactions--net 2.76 1.60 3.99 2.17 .52
---------- ---------- ---------- ---------- ----------
Total from investment operations 2.86 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 year $ 15.15 $ 15.79 $ 16.92 $ 15.47 $ 14.20
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 21.96% 12.58% 30.84% 17.61% 5.12%
Return:* ========== ========== ========== ========== ==========
Ratios to Average Expenses 2.00% 2.03% 2.06% 2.13% 2.15%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net .70% 1.07% .45% 1.00% .27%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year
Data: (in thousands) $ 730,361 $ 787,595 $ 811,859 $ 738,535 $ 795,469
========== ========== ========== ========== ==========
Portfolio turnover 61.12% 78.75% 92.65% 92.34% 72.16%
========== ========== ========== ========== ==========
<FN>
*Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch EuroFund
October 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements Class C++
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,
Operating beginning of year $ 15.66 $ 16.82 $ 15.45 $ 14.19 $ 15.28
Performance: ---------- ---------- ---------- ---------- ----------
Investment income--net .10 .19 .07 .15 .01
Realized and unrealized gain on
investments and foreign currency
transactions--net 2.72 1.56 3.97 2.15 .54
---------- ---------- ---------- ---------- ----------
Total from investment operations 2.82 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 year $ 14.93 $ 15.66 $ 16.82 $ 15.45 $ 14.19
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 21.97% 12.56% 30.81% 17.55% 5.04%
Return:* ========== ========== ========== ========== ==========
Ratios to Average Expenses 2.01% 2.04% 2.08% 2.15% 2.18%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net .67% 1.18% .43% 1.04% .11%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year
Data: (in thousands) $ 52,742 $ 51,671 $ 22,260 $ 15,917 $ 9,668
========== ========== ========== ========== ==========
Portfolio turnover 61.12% 78.75% 92.65% 92.34% 72.16%
========== ========== ========== ========== ==========
<FN>
*Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch EuroFund
October 31, 1999
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements Class D++
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,
Operating beginning of year $ 17.39 $ 18.35 $ 16.57 $ 15.02 $ 15.96
Performance: ---------- ---------- ---------- ---------- ----------
Investment income--net .24 .36 .20 .28 .20
Realized and unrealized gain on
investments and foreign currency
transactions--net 3.08 1.72 4.31 2.31 .50
---------- ---------- ---------- ---------- ----------
Total from investment operations 3.32 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 year $ 17.07 $ 17.39 $ 18.35 $ 16.57 $ 15.02
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 22.89% 13.49% 31.84% 18.57% 5.85%
Return:* ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.22% 1.25% 1.28% 1.34% 1.38%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 1.48% 2.01% 1.21% 1.83% 1.37%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year
Data: (in thousands) $ 363,422 $ 316,287 $ 150,474 $ 114,020 $ 104,493
========== ========== ========== ========== ==========
Portfolio turnover 61.12% 78.75% 92.65% 92.34% 72.16%
========== ========== ========== ========== ==========
<FN>
*Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch EuroFund
October 31, 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. 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 that 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 that 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.
* 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
October 31, 1999
NOTES TO FINANCIAL STATEMENTS (continued)
(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.
(i) Reclassification--Generally accepted accounting principles
require that certain components of net assets be adjusted to reflect
permanent differences between financial and tax reporting.
Accordingly, current year's permanent book/tax differences of
$1,747,587 have been reclassified between undistributed net realized
capital gains and undistributed net investment income. These
reclassifications have no effect on net assets or net asset values
per share.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Merrill Lynch Asset Management, L.P. ("MLAM"). The general partner
of MLAM is Princeton Services, Inc. ("PSI"), an indirect wholly-
owned 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 .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 .15% of the
average daily net assets of the Fund for providing investment
advisory services to MLAM with respect to the Fund. For the year
ended October 31, 1999, MLAM paid MLAM U.K. a fee of $1,356,022
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 Distribution
Maintenance Fee Fee
Class B .25% .75%
Class C .25% .75%
Class D .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
October 31, 1999
For the year ended October 31, 1999, MLFD earned underwriting
discounts and direct 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 $ 2,153 $ 18,951
Class D $13,509 $396,982
For the year ended October 31, 1999, MLPF&S received contingent
deferred sales charges of $1,037,370 and $55,801 relating to
transactions in Class B and Class C Shares, respectively.
Furthermore, MLPF&S received contingent deferred sales charges of
$126,744 and $15,020 relating to transactions subject to front-end
sales charge waivers in Class A and Class D Shares, respectively.
In addition, MLPF&S received $272,650 in commissions on the
execution of portfolio security transactions for the Fund for the
year ended October 31, 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 year ended October 31, 1999 were $969,513,560 and
$1,643,685,378, respectively.
Net realized gains (losses) for the year ended October 31, 1999 and
net unrealized gains (losses) as of October 31, 1999 were as
follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
Long-term investments $ 275,412,897 $ 58,034,796
Financial futures contracts (8,981,036) (2,680,753)
Options written 2,966,943 --
Options purchased 245,760 --
Foreign currency transactions (5,361,138) (256,454)
------------- -------------
Total $ 264,283,426 $ 55,097,589
============= =============
Transactions in call options written for the year ended October 31,
1999 were as follows:
Premiums
Par Value Received
Outstanding call options
written at beginning of year $ 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 year $ -- $ --
============= =============
As of October 31, 1999, net unrealized appreciation for Federal
income tax purposes aggregated $37,995,446, of which $159,955,345
related to appreciated securities and $121,959,899 related to
depreciated securities. At October 31, 1999, the aggregate cost of
investments, net of options written, for Federal income tax purposes
was $1,399,051,384.
4. Shares of Beneficial Interest:
Net increase (decrease) in net assets derived from beneficial
interest transactions was $(133,919,709) and $409,885,874 for the
years ended October 31, 1999 and October 31, 1998, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Year Dollar
Ended October 31, 1999 Shares Amount
Shares sold 12,500,587 $ 203,500,820
Shares issued to shareholders
in reinvestment of dividends
and distributions 6,134,572 89,258,042
------------- -------------
Total issued 18,635,159 292,758,862
Shares redeemed (25,172,731) (425,974,797)
------------- -------------
Net decrease (6,537,572) $(133,215,935)
============= =============
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
October 31, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
Class B Shares for the Year Dollar
Ended October 31, 1999 Shares Amount
Shares sold 8,946,659 $ 130,492,047
Shares issued to shareholders in
reinvestment of dividends and
distributions 11,666,062 150,492,545
------------- -------------
Total issued 20,612,721 280,984,592
Shares redeemed (18,891,195) (276,122,622)
Automatic conversion of
shares (3,400,262) (50,197,908)
------------- -------------
Net decrease (1,678,736) $ (45,335,938)
============= =============
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 Year Dollar
Ended October 31, 1999 Shares Amount
Shares sold 2,589,720 $ 37,332,059
Shares issued to shareholders
in reinvestment of dividends and
distributions 823,710 10,469,359
------------- -------------
Total issued 3,413,430 47,801,418
Shares redeemed (3,180,422) (45,800,142)
------------- -------------
Net increase 233,008 $ 2,001,276
============= =============
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 Year Dollar
Ended October 31, 1999 Shares Amount
Shares sold 3,533,874 $ 57,534,783
Automatic conversion of
shares 3,034,965 50,197,908
Shares issued to shareholders
in reinvestment of dividends
and distributions 3,801,451 54,893,228
------------- -------------
Total issued 10,370,290 162,625,919
Shares redeemed (7,273,858) (119,995,031)
------------- -------------
Net increase 3,096,432 $ 42,630,888
============= =============
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 October 31, 1999, the Fund had outstanding foreign exchange
contracts under which it had agreed to purchase and sell foreign
currency aggregating approximately $15,735,000 and $14,507,000,
respectively.
Merrill Lynch EuroFund
October 31, 1999
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
Merrill Lynch EuroFund:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of Merrill
Lynch EuroFund as of October 31, 1999, the related statements of
operations for the year then ended, and changes in net assets for
each of the years in the two-year period then ended, and the
financial highlights for each of the years in the five-year period
then ended. These financial statements and the financial highlights
are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at October
31, 1999 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch EuroFund as of October 31, 1999, the results of its
operations, the changes in its net assets, and the financial
highlights for the respective stated periods in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
December 14, 1999
</AUDIT-REPORT>
<TABLE>
IMPORTANT TAX INFORMATION (unaudited)
<CAPTION>
The following information summarizes all per share distributions
paid by Merrill Lynch EuroFund during its taxable year ended October
31, 1999:
Foreign Non-Qualifying Total Foreign Taxes Long-Term
Record Payable Source Domestic Ordinary Paid or Capital
Date Date Income Income Income Withheld Gains*
<S> <C> <C> <C> <C> <C> <C> <C>
Class A 12/14/98 12/22/98 $.498974 $1.071536 $1.570510 $.046601 $2.10316
Class B 12/14/98 12/22/98 $.442934 $ .951193 $1.394127 $.046601 $2.10316
Class C 12/14/98 12/22/98 $.459741 $ .987284 $1.447025 $.046601 $2.10316
Class D 12/14/98 12/22/98 $.487497 $1.046889 $1.534386 $.046601 $2.10316
<FN>
*The entire distribution is subject to the 20% tax rate.
All of the foreign taxes paid or withheld represent taxes incurred
by the Fund on dividends received by the Fund from foreign sources.
Foreign taxes paid or withheld should be included in taxable income
with an offsetting deduction from gross income or as a credit for
taxes paid to foreign governments. You should consult your tax
adviser regarding the appropriate treatment of foreign taxes paid.
Please retain this information for your records.
</TABLE>
