MERRILL LYNCH
EUROFUND
FUND LOGO
Annual Report
October 31, 2000
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
A Pie Chart depicting Portfolio Information
as a Percentage of Stocks as of October 31, 2000:
Finland 2.9%
Sweden 4.1%
Italy 8.7%
Germany 10.5%
Netherlands 10.7%
United Kingdom 41.0%
Switzerland 3.1%
Spain 2.6%
Ireland 1.4%
Denmark 1.1%
Portugal 0.6%
Norway 0.2%
France 13.1%
EUROPEAN STOCK MARKET PERFORMANCE
A Bar Chart depicting percentage of
Total Return for the Six-Month Period
Ended October 31, 2000 In US dollars*
Finland -28.4%
Sweden -26.2%
Spain -11.2%
Germany - 7.0%
France - 3.9%
United Kingdom - 2.7%
Netherlands - 1.4%
Italy - 0.2%
Ireland + 1.6%
Switzerland + 4.8%
Denmark +11.2%
Norway +14.5%
Source: Financial Times/Standard & Poor's--
Actuaries Europe Index.
*For the six-month period ended October 31, 2000,
total investment return for the
Financial Times/Standard & Poor's--Actuaries
Europe Index was -4.96%.
Merrill Lynch EuroFund
October 31, 2000
DEAR SHAREHOLDER
During the six months ended October 31, 2000, the total return for
the unmanaged Morgan Stanley Capital International (MSCI) Europe
Index was -6.81%. For the same period, Merrill Lynch EuroFund's
Class A, Class B, Class C and Class D Shares had total returns of
0.00%, -0.48%, -0.49% and -0.07%, respectively. Fund performance was
better than the Lipper European Region Funds Average, which returned
-8.22%. (Fund results shown 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.)
Fiscal Year in Review
For the fiscal year ended October 31, 2000, the Fund's Class A,
Class B, Class C and Class D Shares had total returns of +1.52%,
+0.48%, +0.49% and +1.32%, respectively, while the MSCI Europe Index
returned +0.94%. There were two distinct patterns to the relative
performance of the Fund during the year. During the first six
months, the technology, media and telecommunications sectors
experienced strong returns. The Fund was significantly
underrepresented in these sectors, and its performance lagged well
behind that of the Index. However, this position reversed completely
following the declines occurring in these sectors starting in March
2000 when stocks that had been out of favor for some time and had
undergone a major de-rating were sought by investors for their
defensive characteristics and low valuations. Sectors that performed
well during the second half of the year included banks, insurance,
food, beverage and pharmaceutical stocks. This benefited the Fund's
performance since the Fund was overweighted in all of these sectors,
excluding the more highly rated pharmaceutical sector.
Investment Environment
During the last six months, the dominant factors affecting stock and
bond markets were related to both macroeconomic and microeconomic
concerns. The main macroeconomic issue was the anticipation of
slower economic growth, with inflation risks seen to be benign,
fueling a rally in government bonds. Equity markets have been
gradually adjusting to lower earnings expectations for 2001 and
2002, but have been jolted by a number of profit warnings from high
profile companies, particularly in the capital goods and technology
areas.
The primary focus of the last six-month period was the growing
anticipation of the slowdown in the US economy after nine years of
unbroken expansion. It is becoming clear that the US growth rate
peaked in the early part of 2000, as the bulge in investment
spending has moderated in line with reduced expectations for
corporate profits. The European economies remain robust but also
appear to have passed their highest rates of growth this cycle with
leading indicators such as industrial orders and business confidence
having peaked.
Underlying inflation has remained benign in most countries in
Europe, although the headline rates have risen above the European
Central Bank's target range in response to the large increase in the
oil price. This factor presents one of the greatest risks to global
equity markets going forward, with investors currently pricing in
oil to return to a $20 - $25 range and diminishing inflationary
pressures.
Another crucial factor to the performance of the European equity
markets has been the euro, which has shown significant weakness
against most currencies, but especially the US dollar. There have
been a number of reasons for this weakness, but they are related to
momentum and sentiment. It is clear that by purchasing-power parity
measures the currency is inexpensive relative to the dollar and the
yen, but undervaluation is not the only factor driving the
currency's movement. Money flow is having a significant impact, with
European companies having committed this year to spend at least $51
billion on acquisitions of US companies and European portfolio
managers increasing holdings in the US equity market to improve
their diversification following the introduction of the single
European currency. The European Central Bank demonstrated by its
recent intervention that it is no longer prepared to see the euro
slide unchallenged against the major currencies, and the prospect of
continued intervention could underpin the euro's value around
current levels.
Merrill Lynch EuroFund
October 31, 2000
European bond prices have moved steadily upwards over the last six
months in the face of monetary tightening neutralizing the impact of
reduced earnings expectations on overall equity market valuations.
By October 31, 2000, European equity markets were trading at similar
valuation ratios to the US market (20 times price/earnings 2001)
although earnings growth is forecast to be higher in the United
States over the next two years.
Investment Strategy
By October 31, 2000, we adopted a defensive stance in relation to
equity markets and favored those stocks with solid cash flow and
reasonable valuations. The main areas where the Fund was
overweighted included food and beverage, utilities and financials,
while the sectors where we have limited exposure included
technology, media and pharmaceuticals.
In Conclusion
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
(James A. Macmillan)
James A. Macmillan
Vice President and
Senior Portfolio Manager
November 30, 2000
Merrill Lynch EuroFund
October 31, 2000
<TABLE>
PROXY RESULTS
<CAPTION>
During the six-month period ended October 31, 2000, Merrill Lynch
EuroFund's shareholders voted on the following proposals. Proposals
1 and 2 were approved at a shareholders' meeting on July 25, 2000.
With respect to Proposal 3, the meeting was adjourned until March
21, 2001. The description of each proposal and number of shares
voted are as follows:
Shares Voted
For
<S> <S> <C>
1. To elect the Fund's Board of Trustees: Terry K. Glenn 89,233,674
Ronald W. Forbes 89,209,966
Cynthia A. Montgomery 89,192,935
Charles C. Reilly 89,172,341
Kevin A. Ryan 89.191,995
Roscoe S. Suddarth 89,199,787
Richard R. West 89,205,806
Arthur Zeikel 89,128,821
Edward D. Zinbarg 89,191,148
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
<S> <C> <C> <C>
2. To ratify the selection of Deloitte & Touche LLP as the Fund's
independent auditors for the current fiscal year. 87,455,843 1,806,671 3,271,165
3. To convert the Fund to "master/feeder" structure. Adjourned Adjourned Adjourned
</TABLE>
Merrill Lynch EuroFund
October 31, 2000
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*
One Year Ended 9/30/00 - 0.79% - 6.00%
Five Years Ended 9/30/00 +16.14 +14.89
Ten Years Ended 9/30/00 +14.68 +14.06
*Maximum sales charge is 5.25%. (Prior to October 21, 1994,
Class A Shares were offered at a higher sales charge. Thus, actual
returns would have been lower than shown for the ten-year period.)
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
One Year Ended 9/30/00 - 1.84% - 5.04%
Five Years Ended 9/30/00 +14.93 +14.93
Ten Years Ended 9/30/00 +13.50 +13.50
*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*
One Year Ended 9/30/00 - 1.79% - 2.59%
Five Years Ended 9/30/00 +14.92 +14.92
Inception (10/21/94)
through 9/30/00 +14.12 +14.12
*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*
One Year Ended 9/30/00 - 1.07% - 6.27%
Five Years Ended 9/30/00 +15.84 +14.60
Inception (10/21/94)
through 9/30/00 +15.03 +13.99
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
Merrill Lynch EuroFund
October 31, 2000
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment
A Line Graph illustrating the growth of an investment in
ML EuroFund Class A Shares* and Class B Shares* in comparison to the
Morgan Stanley Capital International Europe Index++++. Beginning
and ending values are:
10/31/90 10/31/00
ML EuroFund Class A Shares* $ 9,475 $35,392
ML EuroFund Class B Shares* $10,000 $33,711
Morgan Stanley Capital
International Europe Index++++ $10,000 $34,352
A Line Graph illustrating the growth of an investment in
ML EuroFund Class C Shares* and Class D Shares* in comparison to the
Morgan Stanley Capital International Europe Index++++. Beginning
and ending values are:
10/31/94 10/31/00
ML EuroFund Class C Shares* $ 9,475 $22,579
ML EuroFund Class D Shares* $10,000 $22,449
Morgan Stanley Capital
International Europe Index++++ $10,000 $23,417
*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, 2000
PERFORMANCE DATA (concluded)
<TABLE>
Recent Performance Results*
<CAPTION>
Ten Years/
6 Month 12 Month Since Inception
As of October 31, 2000 Total Return Total Return Total Return
<S> <C> <C>
ML EuroFund Class A Shares 0.00% +1.52% +273.55%
ML EuroFund Class B Shares -0.48 +0.48 +237.08
ML EuroFund Class C Shares -0.49 +0.49 +125.79
ML EuroFund Class D Shares -0.07 +1.32 +136.92
*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
Terry K. Glenn, President and Trustee
Ronald W. Forbes, Trustee
Cynthia A. Montgomery, Trustee
Charles C. Reilly, Trustee
Kevin A. Ryan, Trustee
Roscoe S. Suddarth, Trustee
Richard R. West, Trustee
Arthur Zeikel, Trustee
Edward D. Zinbarg, Trustee
Robert C. Doll, Jr., Senior Vice President
James A. Macmillan, Vice President and
Senior 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, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Shares Percent of
Industries Held Investments Value Net Assets
<S> <C> <S> <C> <C>
Denmark
Services 207,398 ++ISS A/S $ 12,754,088 1.0%
Total Investments in Denmark (Cost--$13,307,146) 12,754,088 1.0
Finland
Forestry 2,020,719 Metsa-Serla Oyj 'B' 12,674,434 1.0
1,075,807 Stora Enso Oyj 'R' 11,033,434 0.9
421,648 UPM-Kymmene Oyj 11,918,918 1.0
-------------- ------
35,626,786 2.9
Total Investments in Finland (Cost--$35,245,710) 35,626,786 2.9
France
Automobiles 84,421 PSA Peugeot Citroen 15,527,487 1.3
Banking 188,197 Banque Nationale de Paris (BNP) 16,206,803 1.3
195,569 Societe Generale 'A' 11,089,631 0.9
-------------- ------
27,296,434 2.2
Building Materials 126,695 Compagnie de Saint Gobain 16,741,584 1.4
71,601 Lafarge SA (Ordinary) 5,279,944 0.4
-------------- ------
22,021,528 1.8
Holding Company 22,817 Societe Eurafrance SA 13,702,170 1.1
Leisure 47,079 Accor SA 1,903,428 0.2
Machinery 95,593 Compagnie Fives-Lille 7,130,167 0.6
Media 125,157 Vivendi 8,985,236 0.7
Mining 1,205,942 Usinor SA 13,134,710 1.1
Pharmaceuticals 459,918 Aventis SA 33,135,252 2.7
Telecommunications 151,704 France Telecom SA 15,841,587 1.3
Total Investments in France (Cost--$132,864,316) 158,677,999 13.0
Germany
Banking 145,412 Deutsche Bank AG (Registered Shares) 11,955,367 1.0
218,660 HypoVereinsbank 11,991,253 1.0
-------------- ------
23,946,620 2.0
Capital Goods 461,844 Kloeckner-Werke AG 8,846,973 0.7
421,908 Thyssen Krupp AG 6,043,596 0.5
-------------- ------
14,890,569 1.2
Chemicals 350,079 Bayer AG 15,162,748 1.2
265,056 Henkel KGaA (Preferred) 15,883,566 1.3
-------------- ------
31,046,314 2.5
</TABLE>
Merrill Lynch EuroFund
October 31, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Percent of
Industries Held Investments Value Net Assets
<S> <C> <S> <C> <C>
Germany (concluded)
Telecommunications 254,886 Deutsche Telekom AG (Registered Shares) $ 9,516,622 0.8%
Utilities 464,718 RWE AG 18,670,622 1.5
563,998 E. On AG 28,634,878 2.4
-------------- ------
47,305,500 3.9
Total Investments in Germany (Cost--$120,760,205) 126,705,625 10.4
Ireland
Banking 2,161,611 Bank of Ireland 16,315,576 1.3
Total Investments in Ireland (Cost--$15,827,611) 16,315,576 1.3
Italy
Banking 6,816,660 Banca Intesa SpA 28,253,447 2.3
Energy 4,530,959 ENI SpA 24,502,013 2.0
Insurance 550,000 Assicurazioni Generali 18,064,475 1.5
Telecommunications 3,512,009 Olivetti SpA 10,627,100 0.9
791,272 Telecom Italia Mobile (TIM) SpA 6,720,235 0.6
3,222,221 Telecom Italia SpA (Registered Shares) 17,506,701 1.4
-------------- ------
34,854,036 2.9
Total Investments in Italy (Cost--$105,252,754) 105,673,971 8.7
Netherlands
Chemicals 563,233 Akzo Nobel NV 25,612,311 2.1
Consumer Products 170,964 Koninklijke (Royal) Philips Electronics NV 6,710,740 0.5
Energy 549,579 Royal Dutch Petroleum Company 32,556,381 2.7
Insurance 439,067 ING Groep NV 30,114,636 2.5
Mining 1,161,001 Ispat International NV (NY Registered Shares) 4,498,879 0.4
Services 544,357 Buhrmann NV 14,856,983 1.2
375,014 Vedior NV 'A' 5,578,476 0.4
-------------- ------
20,435,459 1.6
Wholesaling 104,090 Hagemeyer NV 2,457,113 0.2
327,079 Internatio-Muller NV 6,376,340 0.5
-------------- ------
8,833,453 0.7
Total Investments in the Netherlands
(Cost--$127,892,023) 128,761,859 10.5
</TABLE>
Merrill Lynch EuroFund
October 31, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Percent of
Industries Held Investments Value Net Assets
<S> <C> <S> <C> <C>
Norway
Services 495,709 ++Merkantildata ASA $ 2,334,504 0.2%
Software 31,050 ++Hands ASA 97,485 0.0
Total Investments in Norway (Cost--$2,444,410) 2,431,989 0.2
Portugal
Utilities 2,866,762 Electricidade de Portugal, S.A. (EDP) 7,775,576 0.6
Total Investments in Portugal (Cost--$7,429,500) 7,775,576 0.6
Spain
Telecommunications 562,539 ++Telefonica SA 10,713,877 0.9
Utilities 1,246,556 Endesa SA 20,286,353 1.7
Total Investments in Spain (Cost--$37,797,057) 31,000,230 2.6
Sweden
Banking 1,250,000 Nordic Baltic AB 9,356,287 0.8
1,258,042 Skandinaviska Enskilda Banken (SEB) 'A' 14,815,265 1.2
-------------- ------
24,171,552 2.0
Capital Goods 189,250 Svedala Industri AB 2,814,197 0.2
Consumer Goods 1,281,571 Electrolux AB 'B' 16,115,564 1.3
Engineering 227,729 SKF AB 'B' 3,375,026 0.3
Mining 888,202 Avesta Sheffield AB 2,641,557 0.2
Total Investments in Sweden (Cost--$50,033,337) 49,117,896 4.0
Switzerland
Insurance 43,421 Zurich Financial Services AG 21,008,751 1.7
Pharmaceuticals 1,852 Roche Holding AG (Genuss) 16,912,207 1.4
Total Investments in Switzerland
(Cost--$40,506,697) 37,920,958 3.1
</TABLE>
Merrill Lynch EuroFund
October 31, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Percent of
Industries Held Investments Value Net Assets
<S> <C> <S> <C> <C>
United Kingdom
Banking 1,783,712 Abbey National PLC $ 24,632,119 2.0%
1,934,124 Alliance & Leicester PLC 16,542,309 1.3
1,020,231 Barclays PLC 29,214,735 2.4
1,451,802 HSBC Holdings PLC 20,702,148 1.7
3,250,222 Lloyds TSB Group PLC 33,131,924 2.7
-------------- ------
124,223,235 10.1
Building & 2,569,823 Hanson PLC 13,564,511 1.1
Construction
Capital Goods 8,053,549 Invensys PLC 19,237,549 1.6
891,827 Jarvis PLC 2,441,116 0.2
2,324,667 Rolls-Royce PLC 6,042,412 0.5
-------------- ------
27,721,077 2.3
Energy 2,371,696 British Energy PLC 6,199,092 0.5
Food 1,139,368 Allied Domecq PLC 5,894,072 0.5
2,036,960 Bass PLC 19,950,830 1.6
2,851,580 Cadbury Schweppes PLC 17,639,720 1.4
1,458,962 Diageo PLC 13,781,225 1.1
7,197,898 Unilever PLC 48,732,766 4.0
3,226,380 Whitbread PLC 23,776,509 2.0
-------------- ------
129,775,122 10.6
Insurance 1,621,919 CGNU PLC 21,714,839 1.8
978,931 Prudential Corporation PLC 13,177,358 1.1
1,390,827 Royal & Sun Alliance Insurance Group PLC 9,906,236 0.8
-------------- ------
44,798,433 3.7
Manufacturing 1,750,795 Williams PLC 8,389,687 0.7
Retail 1,798,502 Boots Company PLC 14,363,826 1.2
3,277,074 J Sainsbury PLC 18,427,830 1.5
1,624,449 Kingfisher PLC 9,718,513 0.8
1,524,590 Safeway PLC 6,342,701 0.5
-------------- ------
48,852,870 4.0
Telecommunications 1,827,084 British Telecommunications PLC 21,437,118 1.7
554,505 Cable & Wireless PLC 7,850,668 0.7
14,425,741 Vodafone AirTouch PLC 60,067,296 4.9
-------------- ------
89,355,082 7.3
Utilities 217,240 Severn Trent PLC 2,318,587 0.2
Total Investments in the United Kingdom
(Cost--$518,295,159) 495,197,696 40.5
</TABLE>
Merrill Lynch EuroFund
October 31, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
Face Percent of
Amount Short-Term Securities Value Net Assets
<S> <C> <S> <C> <C>
Short-Term Securities
Repurchase US$ 1,620,000 Warburg Dillon Read LLC, purchased on
Agreements* 10/31/2000 to yield 6.40% to 11/01/2000 $ 1,620,000 0.1%
Total Investments in Short-Term Securities
(Cost--$1,620,000) 1,620,000 0.1
Total Investments (Cost--$1,209,275,925) 1,209,580,249 98.9
Other Assets Less Liabilities 13,655,073 1.1
-------------- ------
Net Assets $1,223,235,322 100.0%
============== ======
++Non-income producing security.
*Repurchase Agreements are fully collateralized by US Government &
Agency Obligations.
See Notes to Financial Statements.
</TABLE>
PORTFOLIO INFORMATION
As of October 31, 2000
Percent of
Ten Largest Equity Holdings Net Assets
Vodafone AirTouch PLC 4.9%
Unilever PLC 4.0
Aventis SA 2.7
Lloyds TSB Group PLC 2.7
Royal Dutch Petroleum Company 2.7
ING Groep NV 2.5
Barclays PLC 2.4
E. On AG 2.4
Banca Intesa SpA 2.3
Akzo Nobel NV 2.1
Percent of
Ten Largest Industries Net Assets
Banking 19.9%
Telecommunications 13.2
Food 10.6
Insurance 9.4
Utilities 6.4
Energy 5.2
Chemicals 4.6
Pharmaceuticals 4.1
Retail 4.0
Capital Goods 3.7
Merrill Lynch EuroFund
October 31, 2000
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of October 31, 2000
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$1,209,275,925) $1,209,580,249
Receivables:
Securities sold $ 34,209,724
Dividends 3,778,728
Beneficial interest sold 427,116
Interest 288 38,415,856
--------------
Prepaid registration fees and other assets 119,234
--------------
Total assets 1,248,115,339
--------------
Liabilities: Payables:
Securities purchased 12,636,494
Custodian bank 5,076,466
Beneficial interest redeemed 4,840,767
Investment adviser 777,605
Distributor 516,756 23,848,088
--------------
Accrued expenses and other liabilities 1,031,929
--------------
Total liabilities 24,880,017
--------------
Net Assets: Net assets $1,223,235,322
==============
Net Assets Class A Shares of beneficial interest, $.10
Consist of: par value, unlimited number of shares authorized $ 2,534,049
Class B Shares of beneficial interest, $.10
par value, unlimited number of shares authorized 3,860,235
Class C Shares of beneficial interest, $.10
par value, unlimited number of shares authorized 357,090
Class D Shares of beneficial interest, $.10
par value, unlimited number of shares authorized 2,282,727
Paid-in capital in excess of par 1,173,289,311
Undistributed realized capital gains on
investments and foreign currency transactions--net
40,668,767
Unrealized appreciation on investments and
foreign currency transactions--net 243,143
--------------
Net assets $1,223,235,322
==============
Net Asset Value: Class A--Based on net assets of $368,995,495 and 25,340,490 shares
of beneficial interest outstanding $ 14.56
==============
Class B--Based on net assets of $481,875,769 and 38,602,347 shares
of beneficial interest outstanding $ 12.48
==============
Class C--Based on net assets of $43,735,667 and 3,570,905 shares
of beneficial interest outstanding $ 12.25
==============
Class D--Based on net assets of $328,628,391 and 22,827,267 shares
of beneficial interest outstanding $ 14.40
==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch EuroFund
October 31, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations for the Year Ended October 31, 2000
<S> <S> <C> <C>
Investment Dividends (net of $4,803,966 foreign withholding tax) $ 37,066,706
Income: Interest 4,404,331
--------------
Total income 41,471,037
--------------
Expenses: Investment advisory fees $ 10,854,795
Account maintenance and distribution fees--Class B 6,063,941
Transfer agent fees--Class B 969,773
Account maintenance fees--Class D 861,616
Custodian fees 746,200
Transfer agent fees--Class A 615,037
Account maintenance and distribution fees--Class C 480,544
Transfer agent fees--Class D 470,917
Accounting services 109,392
Professional fees 102,404
Transfer agent fees--Class C 81,775
Printing and shareholder reports 79,215
Registration fees 66,791
Trustees' fees and expenses 38,167
Pricing fees 21,049
Other 43,072
--------------
Total expenses 21,604,688
--------------
Investment income--net 19,866,349
--------------
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net 69,987,606
(Loss) on Foreign currency transactions--net (27,198,484) 42,789,122
Investments & --------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net: Investments--net (55,049,719)
Foreign currency transactions--net 195,273 (54,854,446)
-------------- --------------
Net Increase in Net Assets Resulting from Operations $ 7,801,025
==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch EuroFund
October 31, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended
October 31,
Increase (Decrease) in Net Assets: 2000 1999
<S> <S> <C> <C>
Operations: Investment income--net $ 19,866,349 $ 21,320,804
Realized gain on investments and foreign
currency transactions--net 42,789,122 264,283,426
Change in unrealized appreciation/depreciation on
investments and foreign currency transactions--net (54,854,446) 81,990,705
-------------- --------------
Net increase in net assets resulting from operations 7,801,025 367,594,935
-------------- --------------
Dividends & Investment income--net:
Distributions to Class A (11,202,253) (20,840,015)
Shareholders: Class B (8,390,029) (22,268,040)
Class C (651,595) (1,663,399)
Class D (6,514,765) (10,640,376)
In excess of investment income--net:
Class A (273,935) --
Class B (205,166) --
Class C (15,934) --
Class D (159,309) --
Realized gain on investments--net:
Class A (81,857,581) (99,747,120)
Class B (118,463,552) (147,583,398)
Class C (8,717,790) (9,884,004)
Class D (53,801,676) (54,000,884)
-------------- --------------
Net decrease in net assets resulting from
dividends and distributions to shareholders (290,253,585) (366,627,236)
-------------- --------------
Beneficial Net decrease in net assets derived from beneficial
Interest interest transactions (208,110,094) (133,919,709)
Transactions: -------------- --------------
Net Assets: Total decrease in net assets (490,562,654) (132,952,010)
Beginning of year 1,713,797,976 1,846,749,986
-------------- --------------
End of year* $1,223,235,322 $1,713,797,976
============== ==============
* Undistributed investment income--net $ -- $ 6,892,293
============== ==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch EuroFund
October 31, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and ratios have been derived Class A++
from information provided in the financial statements. For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 17.24 $ 17.52 $ 18.47 $ 16.67 $ 15.07
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .28 .28 .40 .26 .32
Realized and unrealized gain (loss)on
investments and foreign currency
transactions--net (.07) 3.11 1.73 4.31 2.32
---------- ---------- ---------- ---------- ----------
Total from investment operations .21 3.39 2.13 4.57 2.64
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.35) (.63) (.12) (.44) --
In excess of investment income--net (.01) -- -- (.15) --
Realized gain on investments--net (2.53) (3.04) (2.96) (2.18) (1.04)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (2.89) (3.67) (3.08) (2.77) (1.04)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 14.56 $ 17.24 $ 17.52 $ 18.47 $ 16.67
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 1.52% 23.25% 13.73% 32.13% 18.86%
Return:* ========== ========== ========== ========== ==========
Ratios to Average Expenses .97% .97% 1.00% 1.03% 1.10%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 1.84% 1.70% 2.21% 1.53% 2.04%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year
Data: (in thousands) $ 368,995 $ 567,273 $ 691,197 $ 563,098 $ 216,056
========== ========== ========== ========== ==========
Portfolio turnover 100.17% 61.12% 78.75% 92.65% 92.34%
========== ========== ========== ========== ==========
*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, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
FINANCIAL HIGHLIGHTS (continued)
<CAPTION>
The following per share data and ratios have been derived Class B++
from information provided in the financial statements. For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 15.15 $ 15.79 $ 16.92 $ 15.47 $ 14.20
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .12 .10 .17 .07 .14
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net (.08) 2.76 1.60 3.99 2.17
---------- ---------- ---------- ---------- ----------
Total from investment operations .04 2.86 1.77 4.06 2.31
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.18) (.46) -- (.32) --
In excess of investment income--net --++++ -- -- (.11) --
Realized gain on investments--net (2.53) (3.04) (2.90) (2.18) (1.04)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (2.71) (3.50) (2.90) (2.61) (1.04)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 12.48 $ 15.15 $ 15.79 $ 16.92 $ 15.47
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 0.48% 21.96% 12.58% 30.84% 17.61%
Return:* ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.99% 2.00% 2.03% 2.06% 2.13%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net .90% .70% 1.07% .45% 1.00%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year
Data: (in thousands) $ 481,876 $ 730,361 $ 787,595 $ 811,859 $ 738,535
========== ========== ========== ========== ==========
Portfolio turnover 100.17% 61.12% 78.75% 92.65% 92.34%
========== ========== ========== ========== ==========
*Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
++++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch EuroFund
October 31, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
FINANCIAL HIGHLIGHTS (continued)
<CAPTION>
The following per share data and ratios have been derived Class C++
from information provided in the financial statements. For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 14.93 $ 15.66 $ 16.82 $ 15.45 $ 14.19
Operating ---------- ---------- ---------- --------- ---------
Performance: Investment income--net .11 .10 .19 .07 .15
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net (.07) 2.72 1.56 3.97 2.15
---------- ---------- ---------- --------- ---------
Total from investment operations .04 2.82 1.75 4.04 2.30
---------- ---------- ---------- --------- ---------
Less dividends and distributions:
Investment income--net (.19) (.51) -- (.36) --
In excess of investment income--net --++++ -- -- (.13) --
Realized gain on investments--net (2.53) (3.04) (2.91) (2.18) (1.04)
---------- ---------- ---------- --------- ---------
Total dividends and distributions (2.72) (3.55) (2.91) (2.67) (1.04)
---------- ---------- ---------- --------- ---------
Net asset value, end of year $ 12.25 $ 14.93 $ 15.66 $ 16.82 $ 15.45
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 0.49% 21.97% 12.56% 30.81% 17.55%
Return:* ========== ========== ========== ========== ==========
Ratios to Average Expenses 2.00% 2.01% 2.04% 2.08% 2.15%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net .88% .67% 1.18% .43% 1.04%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year
Data: (in thousands) $ 43,736 $ 52,742 $ 51,671 $ 22,260 $ 15,917
========== ========== ========== ========== ==========
Portfolio turnover 100.17% 61.12% 78.75% 92.65% 92.34%
========== ========== ========== ========== ==========
*Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
++++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch EuroFund
October 31, 2000
FINANCIAL INFORMATION (concluded)
<TABLE>
FINANCIAL HIGHLIGHTS (concluded)
<CAPTION>
The following per share data and ratios have been derived Class D++
from information provided in the financial statements. For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 17.07 $ 17.39 $ 18.35 $ 16.57 $ 15.02
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .25 .24 .36 .20 .28
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net (.08) 3.08 1.72 4.31 2.31
---------- ---------- ---------- ---------- ----------
Total from investment operations .17 3.32 2.08 4.51 2.59
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.30) (.60) (.08) (.41) --
In excess of investment income--net (.01) -- -- (.14) --
Realized gain on investments--net (2.53) (3.04) (2.96) (2.18) (1.04)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (2.84) (3.64) (3.04) (2.73) (1.04)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 14.40 $ 17.07 $ 17.39 $ 18.35 $ 16.57
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 1.32% 22.89% 13.49% 31.84% 18.57%
Return:* ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.22% 1.22% 1.25% 1.28% 1.34%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 1.65% 1.48% 2.01% 1.21% 1.83%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year
Data: (in thousands) $ 328,628 $ 363,422 $ 316,287 $ 150,474 $ 114,020
========== ========== ========== ========== ==========
Portfolio turnover 100.17% 61.12% 78.75% 92.65% 92.34%
========== ========== ========== ========== ==========
*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, 2000
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
conformity with accounting principles generally accepted in the
United States of America, 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 investment strategies to increase or decrease the level of
risk to which the Fund is exposed more quickly and efficiently than
transactions in other types of instruments. 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 transac-tions 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, 2000
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 counter-party 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. If the couterparty defaults and
the fair value of the collateral declines, liquidation of the
collateral by the Fund may be delayed or limited.
(h) Dividends and distributions--Dividends and distributions paid by
the Fund are recorded on the ex-dividend dates. Distribution in
excess of investment income is due primarily to differing tax
treatments for foreign currency transactions.
(i) Custodian bank--The Fund recorded an amount payable to the
Custodian Bank resulting from a timing difference of security
transaction settlements.
(j) Reclassification--Accounting principles generally accepted in
the United States of America require that certain components of net
assets be adjusted to reflect permanent differences between
financial and tax reporting. Accordingly, the current year's
permanent book/tax difference of $654,344 have been reclassified
between undistributed net realized capital gains and accumulated net
investment loss. 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 Investment Managers, L.P. ("MLIM"). The general
partner of MLIM 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 FAM Distributors,
Inc. ("FAMD" or the "Distributor"), which is a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
MLIM 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. MLIM has entered
into a Sub-Advisory Agreement with Merrill Lynch Investment Managers
U.K., Ltd. ("MLIM U.K."), an affiliate of MLIM, pursuant to which
MLIM pays MLIM 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 MLIM with respect to the Fund. For the year
ended October 31, 2000, MLIM paid MLIM U.K. a fee of $2,183,916
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, 2000
For the year ended October 31, 2000, FAMD 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:
FAMD MLPF&S
Class A $ 1,068 $ 12,460
Class D $10,625 $137,333
For the year ended October 31, 2000, MLPF&S received contingent
deferred sales charges of $792,773 and $23,143 relating to
transactions in Class B and Class C Shares, respectively.
Furthermore, MLPF&S received contingent deferred sales charges of
$3,260 relating to transactions subject to front-end sales charge
waivers in Class D Shares.
In addition, MLPF&S received $81,067 in commissions on the execution
of portfolio security transactions for the Fund for the year ended
October 31, 2000.
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 MLIM.
Certain officers and/or trustees of the Fund are officers and/or
directors of MLIM, PSI, FAMD, FDS, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended October 31, 2000 were $1,314,715,955 and
$1,591,842,456, respectively.
Net realized gains (losses) for the year ended October 31, 2000 and
net unrealized gains (losses) as of October 31, 2000 were as
follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
Long-term investments $ 110,945,567 $ 304,324
Financial futures contracts (21,178,813) --
Options purchased (3,519,753) --
Options written (16,259,395) --
Foreign currency transactions (27,198,484) (61,181)
------------- -------------
Total $ 42,789,122 $ 243,143
============= =============
Transactions in call options written for the year ended October 31,
2000 were as follows:
Premiums
Par Value Received
Outstanding call options
written at beginning of year -- --
Options written $ 297,004 $ 740,682
Options exercised (297,004) (740,682)
------------- -------------
Outstanding call options
written at end of year $ -- $ --
============= =============
Transactions in put options written for the year ended October 31,
2000 were as follows:
Premiums
Par Value Received
Outstanding put options
written at beginning of year -- --
Options written $ 99,373 $ 17,000,076
Options exercised (99,373) (17,000,076)
------------- -------------
Outstanding put options
written at end of year $ -- $ --
============= =============
As of October 31, 2000, net unrealized depreciation for Federal
income tax purposes aggregated $16,873,389, of which $108,311,767
related to appreciated securities and $125,185,156 related to
depreciated securities. At October 31, 2000, the aggregate cost of
investments, for Federal income tax purposes was $1,226,453,638.
4. Shares of Beneficial Interest:
Net decrease in net assets derived from beneficial interest
transactions was $208,110,094 and $133,919,709 for the years ended
October 31, 2000 and October 31, 1999, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the
Year Ended Dollar
October 31, 2000 Shares Amount
Shares sold 7,395,283 $ 108,550,285
Shares issued to shareholders
in reinvestment of dividends
and distributions 5,713,176 81,698,419
------------- -------------
Total issued 13,108,459 190,248,704
Shares redeemed (20,671,073) (297,813,177)
------------- -------------
Net decrease (7,562,614) $(107,564,473)
============= =============
Merrill Lynch EuroFund
October 31, 2000
NOTES TO FINANCIAL STATEMENTS (concluded)
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 B Shares for the Year Dollar
Ended October 31, 2000 Shares Amount
Shares sold 6,738,055 $ 86,287,195
Shares issued to shareholders
in reinvestment of dividends
and distributions 9,022,003 111,602,182
------------- -------------
Total issued 15,760,058 197,889,377
Shares redeemed (20,639,772) (260,694,124)
Automatic conversion of
shares (4,719,326) (59,726,260)
------------- -------------
Net decrease (9,599,040) $(122,531,007)
============= =============
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 C Shares for the Year Dollar
Ended October 31, 2000 Shares Amount
Shares sold 1,789,088 $ 22,260,080
Shares issued to shareholders
in reinvestment of dividends
and distributions 691,421 8,393,845
------------- -------------
Total issued 2,480,509 30,653,925
Shares redeemed (2,442,593) (30,297,168)
------------- -------------
Net increase 37,916 $ 356,757
============= =============
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 D Shares for the Year Dollar
Ended October 31, 2000 Shares Amount
Shares sold 3,076,783 $ 45,292,754
Automatic conversion of
shares 4,111,701 59,726,260
Shares issued to shareholders
in reinvestment of dividends
and distributions 3,649,408 51,712,108
------------- -------------
Total issued 10,837,892 156,731,122
Shares redeemed (9,296,428) (135,102,493)
------------- -------------
Net increase 1,541,464 $ 21,628,629
============= =============
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
============= =============
5. Short-Term Borrowings:
On December 3, 1999, the Fund, along with certain other funds
managed by MLIM and its affiliates, entered into a $1,000,000,000
credit agreement with Bank of America, N.A. and certain other
lenders. The Fund may borrow under the credit agreement to fund
shareholder redemptions and other lawful purposes other than for
leverage. The Fund may borrow up to the maximum amount allowable
under the Fund's current prospectus and statement of additional
information, subject to various other legal, regulatory or
contractual limits. The Fund pays a commitment fee of .09% per annum
based on the Fund's pro rata share of the unused portion of the
facility. Amounts borrowed under the facility bear interest at a
rate equal to, at each fund's election, the Federal Funds rate plus
.50% or a base rate as determined by Bank of America, N.A. The Fund
did not borrow under the facility during the year ended October 31,
2000.
6. Commitments:
At October 31, 2000, the Fund had outstanding foreign exchange
contracts under which it had agreed to purchase and sell foreign
currency aggregating approximately $13,262,000 and $14,781,000,
respectively.
Merrill Lynch EuroFund
October 31, 2000
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, 2000, 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 auditing standards
generally accepted in the United States of America. 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, 2000 by
correspondence with the custodian and brokers; where replies were
not received from brokers, we performed other auditing procedures.
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, 2000, the results of its
operations, the changes in its net assets, and the financial
highlights for the respective stated periods in conformity with
accounting principles generally accepted in the United States of
America.
Deloitte & Touche LLP
Princeton, New Jersey
December 7, 2000
IMPORTANT TAX INFORMATION (unaudited)
<TABLE>
The following information summarizes all per share distributions
paid by Merrill Lynch EuroFund during its taxable year ended October
31, 2000:
<CAPTION>
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 12/13/99 12/17/99 $.410910 $1.284513 $1.695423 $.056479 $1.193932
Class B 12/13/99 12/17/99 $.369366 $1.154648 $1.524014 $.056479 $1.193932
Class C 12/13/99 12/17/99 $.371832 $1.162357 $1.534189 $.056479 $1.193932
Class D 12/13/99 12/17/99 $.400992 $1.253512 $1.654504 $.056479 $1.193932
*The entire distribution is subject to the 20% tax rate.
</TABLE>
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.
