UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-4612
Name of Fund: Merrill Lynch EuroFund, Inc.
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Terry K. Glenn, President,
Merrill Lynch EuroFund, Inc., 800 Scudders Mill Road, Plainsboro,
NJ, 08536. Mailing address: P.O. Box 9011, Princeton, NJ, 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 10/31/03
Date of reporting period: 11/01/02 - 10/31/03
Item 1 - Attach shareholder report
(BULL LOGO)
Merrill Lynch Investment Managers
www.mlim.ml.com
Merrill Lynch
EuroFund
Annual Report
October 31, 2003
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.
A description of the policies and procedures that the Fund uses to
determine how to vote proxies relating to portfolio securities is
available (1) without charge, upon request, by calling toll-free
1-800-MER-FUND (1-800-637-3863); (2) on www.mutualfunds.ml.com; and
(3) on the Securities and Exchange Commission's website at
http://www.sec.gov.
Merrill Lynch EuroFund
Box 9011
Princeton, NJ
08543-9011
Merrill Lynch EuroFund
Geographic Allocation as a Percentage of Stocks as of
October 31, 2003 (unaudited)
Percentage
Country of Stocks
Denmark 1.8%
Finland 1.5
France 20.4
Germany 12.0
Ireland 1.4
Italy 9.9
Netherlands 15.8
Sweden 2.6
Switzerland 11.8
United Kingdom 22.8
Portfolio Information as of October 31, 2003 (unaudited)
Percent of
Ten Largest Equity Holdings Net Assets
TotalFinaElf SA 3.6%
Credit Suisse Group 3.2
Intesa BCI SpA 3.2
BNP Paribas SA 3.0
Royal Dutch Petroleum Company 2.9
Nestle SA (Registered Shares) 2.9
ENI SpA 2.7
Novartis AG (Registered Shares) 2.7
Barclays PLC 2.5
Koninklijke (Royal) Philips Electronics NV 2.5
Percent of
Ten Largest Industries* Net Assets
Commercial Banks 20.9%
Energy 10.9
Pharmaceuticals & Biotechnology 5.7
Commercial Services & Supplies 5.5
Food, Beverage & Tobacco 5.2
*For Fund compliance purposes, "Industries" means any one or more
industry sub-classifications used by one or more widely recognized
market indexes or ratings group indexes, and/or as defined by Fund
management. This definition may not apply for purposes of this
report, which may combine such industry sub-classifications for
reporting ease. These industry classifications are unaudited.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2003
A Letter From the President
Dear Shareholder
As 2003 draws to a close, it seems appropriate to reflect on what
has been a meaningful year in many respects. We saw the beginning
and the end of all-out war in Iraq, global equity market uncertainty
turned to strength and an economic slowdown that finally started to
reverse trend in important areas around the globe.
The U.S. economy benefited from stimulative monetary and fiscal
policy, improving corporate profits and tightening credit spreads.
Gross domestic product (GDP) growth rallied from a dismal 1.4% in
the first quarter of the year to an extraordinary 8.2% in the third
quarter. In Europe, growth remained slower, but the central bank
initiated more active monetary policy in an effort to rouse economic
activity. National stock markets appeared to benefit from investor
anticipation of stronger European economies ahead.
The MSCI Europe Index, which measures the performance of equity
markets in 16 developed European countries, posted year-to-date
and 12-month returns of +22.80% and +24.16%, respectively, as of
October 31, 2003.
Against this backdrop, our portfolio managers continued to work
diligently to deliver on our commitment to provide superior
performance within reasonable expectations for risk and return. This
included striving to outperform our peers and the market indexes.
With that said, remember that the advice and guidance of a skilled
financial advisor often can mean the difference between successful
and unsuccessful investing. A financial professional can help you
choose those investments that will best serve you as you plan for
your financial future.
Finally, I am proud to premiere a new look to our shareholder
communications. Our portfolio manager commentaries have been trimmed
and organized in such a way that you can get the information you
need at a glance, in plain language. Today's markets are confusing
enough. We want to help you put it all in perspective. The report's
new size also allows us certain mailing efficiencies. Any cost
savings in production or postage are passed on to the Fund and,
ultimately, to Fund shareholders.
We thank you for trusting Merrill Lynch Investment Managers with
your investment assets, and we look forward to serving you in the
months and years ahead.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Trustee
MERRILL LYNCH EUROFUND, OCTOBER 31, 2003
A Discussion With Your Fund's Portfolio Manager
The period was characterized by volatile but strengthening global
equity markets. Overall, the Fund ended the fiscal year with
absolute returns exceeding 20%.
How did the Fund perform during the fiscal year relative to its
benchmark and comparable Lipper category?
For the 12-month period ended October 31, 2003, Merrill Lynch
EuroFund's Class A, Class B, Class C and Class I Shares had total
returns of +22.29%, +21.19%, +21.29% and +22.57%, respectively.
(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 6 - 11 of this report to shareholders.) A
significant portion of the positive performance during the period
came from the strengthening of the euro against the U.S. dollar.
For the same 12-month period, the Fund's unmanaged benchmark, the
Morgan Stanley Capital International (MSCI) Europe Index, had a
total return of +24.16% while the Fund's comparable Lipper category
of European Region Funds posted an average return of +23.64%. (This
Lipper category includes mutual funds that invest in equity
securities whose primary trading markets or operations are
concentrated in the European region or a single country within this
region.)
Fund performance was competitive with that of the benchmark for the
majority of the fiscal year. The relative underperformance for the
12-month period came from an underexposure to smaller-capitalization
stocks and, for most of the period, to cyclical sectors--both of
which tend to perform best during periods of economic recovery.
In the last quarter of the fiscal year, we saw bond yields move
higher, indicating that European economies were gaining strength.
Accordingly, we increased the economic sensitivity of the portfolio,
gravitating toward the more cyclical areas of the stock market,
which were most apt to benefit from improving economic conditions.
Fund performance benefited during the year from investments in the
commercial services, materials and financials sectors, while capital
goods, technology hardware and food, beverage and tobacco were the
primary areas that detracted from results.
In terms of specific stocks, we saw impressive performance from
Intesa BCI SpA, Italy's largest banking company, and Vedior NV, a
staffing company based in the Netherlands whose stock appreciated
150% on improving national economic conditions. Generali, an Italian
insurance company, outperformed both the stock market in general and
the insurance sector, contributing meaningfully to Fund returns for
the year. Generali's strong performance was supported by take-over
speculation. Buhrmann NV, a Netherlands-based office supply company,
also performed well during the period. The company was in financial
distress earlier in the year, but saw its shares triple after
renegotiating its debt, generating cash flow by cutting costs and
divesting its paper merchanting division. Another top performer for
the Fund was Credit Suisse Group, a large position in the portfolio
that benefited from improving profitability during the period. Also
worth noting is the French aluminum company Pechiney SA, which was
acquired during the period by Canadian aluminum producer Alcan, Inc.
The stock performed strongly on the take-over news, contributing to
Fund returns in the second half of the period.
In contrast, we had disappointing results during the year from
Unilever PLC, the large U.K./Netherlands-based producer of food and
consumer packaged goods, and from Netherlands media company Wolters
Kluwers NV. Our significantly underweight position in HSBC Holdings
PLC, the U.K.'s largest banking company and a substantial position
in the benchmark index, also detracted from returns. We felt the
stock's valuation was high on a relative basis, but despite this
fact, the stock performed better than anticipated.
How did market conditions impact Fund performance during the period?
The period began November 2002 with a recovery in global equity
markets that benefited performance significantly. The tide turned
quickly toward the beginning of 2003 as war fears dampened investor
sentiment. Returns for the Fund, the benchmark and the Lipper
category were all in negative territory for the first quarter of
2003.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2003
In April, as daily combat concluded in Iraq, global equity markets
embarked on a strong upturn. Although European equity market
volatility continued throughout the second quarter of 2003, we
observed an overriding tone of strength supported by improving
economic data and attractive stock valuations. The Fund made its
strongest gains in April through June 2003, marginally exceeding the
return of its benchmark and the Lipper European Region Funds
category average for the quarter.
In the following months, the weakening U.S. dollar continued to
weigh on European markets, as many European companies have sales in
the United States or feel competitive pressure from U.S. companies
exporting into Europe. Nevertheless, the fiscal year ended on a
relatively high note. The Fund performed favorably in October on
further positive economic data.
What changes were made to the portfolio during the period?
During the fiscal year, we gradually increased the Fund's exposure
to cyclical companies with managements that had proven track records
for successful restructuring and cost-cutting. In our view, these
companies were well positioned to benefit from an economic recovery.
From a sector perspective, we increased our weighting in commercial
services from 1% of net assets to 5.5%. In this area, we added to
our positions in ISS A/S, Hays PLC and Vedior. In addition, we
increased our exposure to hotels, restaurants and leisure as travel
prospects in Europe improved. Our overweight in banking was
maintained, but reduced from 2% to 1% above the benchmark weighting.
We decreased our position in pharmaceuticals from a weighting in
line with that of the benchmark to a weighting 4% below the
benchmark. This was based on our assessment of heightening risk in
this sector precipitated by increased regulatory pressures,
competition from generic drug manufacturers and a thinner pipeline
of new blockbuster products. We also maintained an underweight
position in telecommunications during the fiscal year and in
hardware technology, which in our opinion appeared expensive
relative to other areas of investment.
In general, we reduced positions in several strong performers
during the period, using the proceeds to establish new positions
and add to existing holdings that we felt had good capital
appreciation potential ahead. Finally, we choose portfolio holdings
based on the merits of the individual stocks rather than geographic
considerations. However, it is worth noting that, during the period,
we increased our weighting in Germany in recognition of the
country's higher concentration of more cyclical companies. In
contrast, we decreased our investment in the United Kingdom, which
is home to many high-quality, defensive companies that are less
likely to benefit from economic revitalization.
How would you characterize the portfolio's position at the close of
the period?
At the close of the period, the portfolio was relatively
concentrated with 65 stocks. We will seek to further diversify the
portfolio by increasing the number of holdings and trimming some of
our larger positions as more stocks meet our price target. As of
October 31, 2003, we maintained our focus on cyclical areas of the
market. The Fund was significantly overweight compared to the
benchmark in commercial services, materials, hotels, restaurants and
banks, diversified financials and insurance, as we believe stocks in
these areas have attractive valuations based on a 12-month view.
Conversely, the Fund was underweight in pharmaceuticals,
telecommunication services and information technology, based on our
belief that these sectors possess a less attractive valuation/return
profile. We maintained a neutral allocation in growth stocks and an
underweight position in defensive sectors, particularly utilities,
which tend to underperform when markets are rising.
The central banks in Europe have taken more active steps to
stimulate economic growth, and this should bode well for equity
investment. As long as the European Central Bank can afford to keep
short-term interest rates low and in line with inflation, we expect
European consumer confidence to improve and companies to increase
their capital expenditures. This, in combination with cost-reduction
measures, should benefit company earnings growth and stock
valuations. In addition, we expect this should fuel liquidity into
equities after a long period of risk aversion by pension funds,
insurance companies and retail investors. Over the next 12 months,
we believe earnings growth will support a gradual increase in
European stock market levels.
Hubert Aarts
Vice President and Portfolio Manager
November 20, 2003
MERRILL LYNCH EUROFUND, OCTOBER 31, 2003
Performance Data
About Fund Performance
Effective April 14, 2003, Class A Shares were re-designated Class I
Shares and Class D Shares were redesignated Class A Shares.
Investors are able to purchase shares of the Fund through multiple
pricing alternatives:
* Class A Shares incur a maximum initial sales charge of 5.25% and
an account maintenance fee of 0.25% (but no distribution fee).
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% declining to 0% after six years. All Class B Shares
purchased prior to June 1, 2001 will maintain the four-year
schedule. 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 A Shares after approximately eight
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 I Shares incur a maximum initial sales charge (front-end
load) of 5.25% and bear no ongoing distri-bution or account
maintenance fees. Class I Shares are available only to eligible
investors.
* Class R Shares do not incur a maximum sales charge (front-end
load) or deferred sales charge. These shares are subject to a
distribution fee of 0.25% and an account maintenence fee of 0.25%.
Class R Shares are available only to certain retirement plans.
None of the past results shown should be considered a representation
of future performance. Performance results do not reflect the
deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. Figures shown in
each of the following 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.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2003
Performance Data (continued)
Recent Performance Results
Ten-Year/
6-Month 12-Month Since Inception
As of October 31, 2003 Total Return Total Return Total Return
ML EuroFund Class A Shares* +17.66% +22.29% +129.08%
ML EuroFund Class B Shares* +17.19 +21.19 +139.79
ML EuroFund Class C Shares* +17.21 +21.29 +113.23
ML EuroFund Class I Shares* +17.84 +22.57 +166.11
ML EuroFund Class R Shares* +18.04 -- + 17.06
MSCI Europe Index** +19.19 +24.16 +114.91/+93.19/+19.49
MSCI Europe Value Index*** +24.20 +32.03 +167.43/+132.77/+34.78
*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 B &
Class I Shares, from 10/21/94 for Class A & Class C Shares and from
1/03/03 for Class R Shares.
**This unmanaged capitalization-weighted Index is comprised of a
representative sampling of large-, medium- and small-capitalization
companies in developed European countries. Ten-year/since inception
total returns are for ten years, from 10/31/94 and from 1/03/03,
respectively.
***This unmanaged capitalization-weighted Index is comprised of a
representative sampling of large-, medium- and small-capitalization
companies in developed European countries that are classified as
value securities (that is, low price/book value securities). Ten-
year/since inception total returns are for ten years, from 10/31/94
and from 1/31/03, respectively.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2003
Performance Data (continued)
TOTAL RETURN BASED ON A $10,000 INVESTMENT
Class A & Class C Shares
A line graph illustrating the growth of a $10,000 investment in
ML EuroFund++ Class A and Class C Shares* compared to a similar
investment in Morgan Stanley Capital International Europe Index++++.
Values illustrated are as follows:
ML EuroFund++--Class A Shares*
Date Value
10/21/1994** $ 9,475.00
October 1994 $ 9,601.00
October 1995 $10,163.00
October 1996 $12,050.00
October 1997 $15,887.00
October 1998 $18,030.00
October 1999 $22,157.00
October 2000 $22,448.00
October 2001 $19,489.00
October 2002 $17,748.00
October 2003 $21,705.00
ML EuroFund++--Class C Shares*
Date Value
10/21/1994** $10,000.00
October 1994 $10,133.00
October 1995 $10,644.00
October 1996 $12,511.00
October 1997 $16,366.00
October 1998 $18,422.00
October 1999 $22,469.00
October 2000 $22,579.00
October 2001 $19,444.00
October 2002 $17,580.00
October 2003 $21,323.00
Morgan Stanley Capital International Europe Index++++
Date Value
10/31/1994** $10,000.00
October 1994 $10,000.00
October 1995 $11,321.00
October 1996 $13,299.00
October 1997 $16,754.00
October 1998 $20,617.00
October 1999 $23,198.00
October 2000 $23,417.00
October 2001 $18,067.00
October 2002 $15,560.00
October 2003 $19,319.00
*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 line graph is from 10/31/94.
Past performance is not predictive of future results.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
One Year Ended 10/31/03 +22.29% +15.87%
Five Years Ended 10/31/03 + 3.78 + 2.67
Inception (10/21/94) through 10/31/03 + 9.62 + 8.96
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
One Year Ended 10/31/03 +21.29% +20.29%
Five Years Ended 10/31/03 + 2.97 + 2.97
Inception (10/21/94) through 10/31/03 + 8.75 + 8.75
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after one year.
**Assuming payment of applicable contingent deferred sales charge.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2003
Performance Data (continued)
TOTAL RETURN BASED ON A $10,000 INVESTMENT
Class B & Class I Shares
A line graph illustrating the growth of a $10,000 investment in
ML EuroFund++ Class B and Class I Shares* compared to a similar
investment in Morgan Stanley Capital International Europe Index++++.
Values illustrated are as follows:
ML EuroFund++--Class B Shares*
Date Value
October 1993 $10,000.00
October 1994 $11,378.00
October 1995 $11,960.00
October 1996 $14,066.00
October 1997 $18,403.00
October 1998 $20,718.00
October 1999 $25,267.00
October 2000 $25,387.00
October 2001 $21,866.00
October 2002 $19,786.00
October 2003 $23,979.00
ML EuroFund++--Class I Shares*
Date Value
October 1993 $ 9,475.00
October 1994 $10,903.00
October 1995 $11,578.00
October 1996 $13,762.00
October 1997 $18,184.00
October 1998 $20,681.00
October 1999 $25,489.00
October 2000 $25,876.00
October 2001 $22,526.00
October 2002 $20,571.00
October 2003 $25,214.00
Morgan Stanley Capital International Europe Index++++
Date Value
October 1993 $10,000.00
October 1994 $11,124.00
October 1995 $12,594.00
October 1996 $14,794.00
October 1997 $18,638.00
October 1998 $22,935.00
October 1999 $25,806.00
October 2000 $26,050.00
October 2001 $20,098.00
October 2002 $17,309.00
October 2003 $21,491.00
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
++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.
Past performance is not predictive of future results.
Average Annual Total Return
% Return % Return
Without CDSC With CDSC**
Class B Shares*
One Year Ended 10/31/03 +21.19% +17.19%
Five Years Ended 10/31/03 + 2.97 + 2.71
Ten Years Ended 10/31/03 + 9.14 + 9.14
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after six years.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class I Shares*
One Year Ended 10/31/03 +22.57% +16.13%
Five Years Ended 10/31/03 + 4.04 + 2.93
Ten Years Ended 10/31/03 +10.28 + 9.69
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2003
Performance Data (continued)
TOTAL RETURN BASED ON A $10,000 INVESTMENT
Class R Shares
A line graph illustrating the growth of a $10,000 investment in
ML EuroFund++ Class Shares* compared to a similar investment in
Morgan Stanley Capital International Europe Index++++. Values
illustrated are as follows:
ML EuroFund++--Class R Shares*
Date Value
1/3/2003** $10,000.00
October 2003 $11,706.00
Morgan Stanley Capital International Europe Index++++
Date Value
1/3/2003** $10,000.00
October 2003 $11,949.00
*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.
Past performance is not predictive of future results.
Aggregate Total Return
% Return Without
Sales Charge
Class R Shares
Inception (1/03/03) through 10/31/03 +17.06%
MERRILL LYNCH EUROFUND, OCTOBER 31, 2003
Performance Data (concluded)
MSCI COUNTRY INDEX PERFORMANCE
Total Return for the 12-Month Period Ended October 31, 2003
In U.S. dollars*
Country Total Return
Sweden 50.1%
Denmark 46.9
Spain 40.6
Norway 39.8
Germany 36.2
Italy 31.0
Ireland 24.7
France 23.9
United Kingdom 20.3
Switzerland 17.8
Netherlands 13.6
Finland 12.4
Source: MSCI Europe Index.
* For the 12-month period ended October 31, 2003, total investment
return for the MSCI Europe Index was +24.16%.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2003
Schedule of Investments
Value Percent of
Country Industry* Shares Held Common Stocks (in U.S. dollars) Net Assets
Denmark Commercial Services 230,984 ISS A/S $ 11,017,213 1.8%
& Supplies
Total Common Stocks in Denmark 11,017,213 1.8
Finland Forestry 154,226 UPM-Kymmene Oyj 2,886,533 0.5
Technology, Hardware 378,324 Nokia Oyj (Series A) 6,425,502 1.0
& Equipment
Total Common Stocks in Finland 9,312,035 1.5
France Automobiles & 94,722 PSA Peugeot Citroen 4,063,219 0.7
Components
Building Materials 114,300 Lafarge SA (Ordinary) 8,185,024 1.3
Commercial Banks 352,829 BNP Paribas SA 18,539,401 3.0
319,552 Credit Agricole S.A. 6,786,925 1.1
-------------- ------
25,326,326 4.1
Diversified 373,497 ++France Telecom SA 9,039,842 1.4
Telecommunication
Services
Electrical Equipment 140,922 Schneider SA 8,248,429 1.3
Energy 144,698 TotalFinaElf SA 22,489,869 3.6
Hotels, Restaurants 284,409 Accor SA 11,185,060 1.8
& Leisure
Insurance 343,408 Axa 6,507,153 1.0
Materials 375,043 Arcelor 5,349,567 0.9
Media 519,895 ++Vivendi Universal SA 10,921,110 1.8
Software & Services 117,664 ++Cap Gemini SA 5,929,604 0.9
Utilities 475,718 Suez SA 7,631,706 1.2
Total Common Stocks in France 124,876,909 20.0
Germany Airlines 326,625 Deutsche Lufthansa AG (Registered Shares) 5,122,174 0.8
Automobiles 114,052 Bayerische Motoren Werke (BMW) AG 4,567,569 0.7
157,728 Volkswagen AG 7,955,939 1.3
-------------- ------
12,523,508 2.0
Capital Goods 149,496 Linde AG 6,855,980 1.1
Chemicals 274,663 Bayer AG 6,599,843 1.1
Financial Services 112,938 Deutsche Boerse AG 6,278,309 1.0
Pharmaceuticals & 136,831 Schering AG 6,389,683 1.0
Biotechnology
Telecommunication 199,389 ++Deutsche Telekom AG (Registered Shares) 3,140,751 0.5
Services
Textiles, Apparel 71,832 Adidas-Salomon AG 6,655,325 1.1
& Luxury Goods
Utilities 173,750 E.On AG 8,782,281 1.4
Total Common Stocks in Germany 62,347,854 10.0
Ireland Commercial Banks 693,082 Bank of Ireland 8,613,017 1.4
Total Common Stocks in Ireland 8,613,017 1.4
MERRILL LYNCH EUROFUND, OCTOBER 31, 2003
Schedule of Investments (continued)
Value Percent of
Country Industry* Shares Held Common Stocks (in U.S. dollars) Net Assets
Italy Commercial Banks 5,793,691 Intesa BCI SpA $ 19,572,393 3.2%
2,574,176 Unicredito Italiano SpA 12,682,129 2.0
-------------- ------
32,254,522 5.2
Diversified 4,466,510 ++Telecom Italia SpA 11,656,754 1.9
Telecommunication
Services
Energy 1,070,011 ENI SpA 16,986,533 2.7
Total Common Stocks in Italy 60,897,809 9.8
Netherlands Capital Goods 150,259 Imtech NV 3,091,767 0.5
Commercial Banks 229,598 ABN AMRO Holding NV 4,817,684 0.8
Commercial Services 665,758 ++Buhrmann NV 5,959,367 1.0
& Supplies 475,868 Vedior NV 'A' 6,859,638 1.1
-------------- ------
12,819,005 2.1
Consumer Durables 572,829 Koninklijke (Royal) Philips Electronics NV 15,442,540 2.5
& Apparel
Diversified Financial 732,251 ING Groep NV 15,203,179 2.4
Services
Energy 413,799 Royal Dutch Petroleum Company 18,361,349 2.9
Food Products 186,153 ++Koninklijke Numico NV 4,200,380 0.7
Insurance 484,651 Aegon NV 6,355,229 1.0
Materials 143,345 Akzo Nobel NV 4,532,569 0.7
Media 577,400 Wolters Kluwer NV 'A' 8,115,141 1.3
Retail 445,157 ++Koninklijke Ahold NV 3,767,364 0.6
Total Common Stocks in the Netherlands 96,706,207 15.5
Sweden Commercial Banks 1,173,619 Nordbanken Holding AB 7,281,663 1.2
Commercial Services 436,786 Securitas AB 'B' 5,375,242 0.9
& Supplies
Insurance 904,299 Skandia Forsakrings AB 3,315,402 0.5
Total Common Stocks in Sweden 15,972,307 2.6
Switzerland Commercial Banks 560,113 Credit Suisse Group 19,735,138 3.2
Construction 252,780 Holcim Ltd. (Registered Shares) 10,638,586 1.7
Materials
Electrical Equipment 639,767 ++ABB Ltd. 3,760,940 0.6
Food, Beverage 82,696 Nestle SA (Registered Shares) 18,206,930 2.9
& Tobacco
Insurance--Life 21,256 ++Swiss Life Holding 3,605,410 0.5
Pharmaceuticals 439,278 Novartis AG (Registered Shares) 16,744,112 2.7
& Biotechnology
Total Common Stocks in Switzerland 72,691,116 11.6
MERRILL LYNCH EUROFUND, OCTOBER 31, 2003
Schedule of Investments (continued)
Value Percent of
Country Industry* Shares Held Common Stocks (in U.S. dollars) Net Assets
United Aerospace & Defense 2,601,178 BAE Systems PLC $ 8,077,740 1.3%
Kingdom
Capital Goods 525,978 Smiths Industries PLC 6,261,292 1.0
Commercial Banks 1,878,640 Barclays PLC 15,844,140 2.5
574,332 Royal Bank of Scotland Group PLC 15,389,123 2.5
-------------- ------
31,233,263 5.0
Commercial Services 2,014,631 Hays PLC 4,170,845 0.7
& Supplies
Consumer Electricals 1,198,720 Kesa Electricals PLC 4,963,366 0.8
Energy 1,552,776 BP Amoco PLC 10,777,073 1.7
Food & Staples 840,213 J Sainsbury PLC 4,038,574 0.6
Retailing
Food, Beverage 1,681,060 Unilever PLC 14,334,680 2.3
& Tobacco
Hotels & Motels 471,174 InterContinental Hotels Group PLC 4,275,637 0.7
Hotels, Restaurants 841,850 Compass Group PLC 4,853,588 0.8
& Leisure
Insurance 735,326 AVIVA PLC 6,033,164 1.0
841,873 Prudential Corporation PLC 6,532,343 1.0
-------------- ------
12,565,507 2.0
Merchandising 550,502 Boots Group PLC 6,655,987 1.1
Pharmaceuticals 593,103 GlaxoSmithKline PLC 12,701,593 2.0
& Biotechnology
Telecommunication 3,675,616 Vodafone Group PLC 7,718,698 1.2
Services
Transportation 927,277 BAA PLC 7,332,703 1.2
Total Common Stocks in the United Kingdom 139,960,546 22.4
Total Common Stocks (Cost--$533,196,610) 602,395,013 96.6
Preferred Stocks
Germany Household & Personal 156,794 Henkel KGaA 11,532,415 1.9
Products
Total Preferred Stocks (Cost--$6,653,270) 11,532,415 1.9
Rights
France Commercial Banks 319,552 ++Credit Agricole S.A. (c) 74,296 0.0
Total Rights (Cost--$0) 74,296 0.0
Face
Amount Corporate Bonds
France Insurance Euro 16,905 ++Axa SA, 0%** due 12/21/2004 289,475 0.0
Total Corporate Bonds (Cost--$250,628) 289,475 0.0
MERRILL LYNCH EUROFUND, OCTOBER 31, 2003
Schedule of Investments (concluded)
Beneficial Interest/ Value Percent of
Shares Held Short-Term Securities (in U.S. dollars) Net Assets
US$ 4,112,341 Merrill Lynch Liquidity Series, LLC Cash Sweep
Series I (a) $ 4,112,341 0.7%
US$ 23,053,313 Merrill Lynch Liquidity Series, LLC Money Market
Series I (a)(b) 23,053,313 3.7
7,684,437 Merrill Lynch Premier Institutional Fund (a)(b) 7,684,437 1.2
Total Short-Term Securities
(Cost--$34,850,091) 34,850,091 5.6
Total Investments (Cost--$574,950,599) 649,141,290 104.1
Liabilities in Excess of Other Assets (25,501,508) (4.1)
-------------- ------
Net Assets $ 623,639,782 100.0%
============== ======
*For Fund compliance purposes, "Industry" means any one or more of
the industry sub-classifications used by one or more widely
recognized market indexes or ratings group indexes, and/or as
defined by Fund management. This definition may not apply for
purposes of this report, which may combine such industry sub-
classifications for reporting ease. These industry classifications
are unaudited.
**Represents a zero coupon or step bond; the interest rate on a step
bond represents the fixed rate of interest that will commence its
accrual on a predetermined date until maturity.
++Non-income producing security.
(a)Investments in companies considered to be an affiliate of the
Fund (such companies are defined as "Affiliated Companies" in
Section 2(a)(3) of the Investment Company Act of 1940) are as
follows:
Dividend/
Net Interest
Affiliate Activity Income
Merrill Lynch Liquidity Series,
LLC Cash Sweep Series I $ 4,112,341 $ 44,679
Merrill Lynch Liquidity Series,
LLC Money Market Series I $21,826,253 $275,585
Merrill Lynch Premier
Institutional Fund 6,184,697 $170,758
(b)Security was purchased with the cash proceeds from securities
loans.
(c)The rights may be exercised until 11/10/2003.
See Notes to Financial Statements.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2003
Statement of Assets and Liabilities
As of October 31, 2003
Assets
Investments, at value (including securities loaned of $29,329,232)
(identified cost--$574,950,599) $ 649,141,290
Cash 3,348
Foreign cash (cost--$11,525) 11,458
Receivables:
Securities sold $ 5,782,831
Dividends 1,697,664
Beneficial interest sold 432,857
Interest 5,619 7,918,971
---------------
Prepaid registration fees 31,018
---------------
Total assets 657,106,085
---------------
Liabilities
Collateral on securities loaned, at value 30,737,750
Payables:
Beneficial interest redeemed 984,743
Securities purchased 853,460
Investment adviser 443,226
Other affiliates 192,598
Distributor 162,340 2,636,367
---------------
Accrued expenses and other liabilities 92,186
---------------
Total liabilities 33,466,303
---------------
Net Assets
Net assets $ 623,639,782
===============
Net Assets Consist of
Class A Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized $ 2,179,702
Class B Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 862,151
Class C Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 232,182
Class I Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 1,705,940
Class R Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 1
Paid-in capital in excess of par 722,966,719
Undistributed investment income--net $ 9,760,049
Accumulated realized capital losses on investments and foreign
currency transactions--net (188,367,014)
Unrealized appreciation on investments and foreign currency
transactions--net 74,300,052
---------------
Total accumulated losses--net (104,306,913)
---------------
Net Assets $ 623,639,782
===============
Net Asset Value
Class A--Based on net assets of $280,222,577 and 21,797,016 shares of
beneficial interest outstanding $ 12.86
===============
Class B--Based on net assets of $96,395,415 and 8,621,512 shares of
beneficial interest outstanding $ 11.18
===============
Class C--Based on net assets of $25,133,877 and 2,321,823 shares of
beneficial interest outstanding $ 10.83
===============
Class I--Based on net assets of $221,887,796 and 17,059,400 shares of
beneficial interest outstanding $ 13.01
===============
Class R--Based on net assets of $117.09 and 10.34 shares of beneficial
interest outstanding $ 11.32
===============
See Notes to Financial Statements.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2003
Statement of Operations
For the Year Ended October 31, 2003
Investment Income
Dividends (net of $2,431,536 foreign withholding tax) $ 17,374,327
Securities lending--net 446,343
Interest 49,360
---------------
Total income 17,870,030
---------------
Expenses
Investment advisory fees $ 4,329,242
Account maintenance and distribution fees--Class B 976,651
Account maintenance fees--Class A 651,627
Transfer agent fees--Class A 521,874
Transfer agent fees--Class I 389,966
Accounting services 240,343
Account maintenance and distribution fees--Class C 236,638
Transfer agent fees--Class B 232,533
Custodian fees 124,549
Printing and shareholder reports 89,636
Professional fees 86,845
Registration fees 78,748
Transfer agent fees--Class C 58,176
Trustees' fees and expenses 51,320
Pricing fees 13,594
Other 44,330
---------------
Total expenses 8,126,072
---------------
Investment income--net 9,743,958
---------------
Realized & Unrealized Gain (Loss) on Investments & Foreign Currency Transactions--Net
Realized lossfrom:
Investments--net (57,748,704)
Foreign currency transactions--net (13,297) (57,762,001)
---------------
Change in unrealized appreciation/depreciation on:
Investments--net 165,347,794
Foreign currency transactions--net 15,575 165,363,369
--------------- ---------------
Total realized and unrealized gain on investments and foreign currency
transactions--net 107,601,368
---------------
Net Increase in Net Assets Resulting from Operations $ 117,345,326
===============
See Notes to Financial Statements.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2003
Statements of Changes in Net Assets
For the Year Ended October 31,
Increase (Decrease) in Net Assets: 2003 2002
Operations
Investment income--net $ 9,743,958 $ 8,471,631
Realized losson investments and foreign currency transactions--net (57,762,001) (29,115,484)
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions--net 165,363,369 (30,858,500)
--------------- ---------------
Net increase (decrease) in net assets resulting from operations 117,345,326 (51,502,353)
--------------- ---------------
Dividends to Shareholders
Investment income--net:
Class A (3,781,571) (4,346,901)
Class B (279,315) (632,583)
Class C (188,282) (236,668)
Class I (3,186,060) (4,868,725)
--------------- ---------------
Net decrease in net assets resulting from dividends to shareholders (7,435,228) (10,084,877)
--------------- ---------------
Beneficial Interest Transactions
Net decrease in net assets derived from beneficial interest transactions (74,261,031) (192,934,251)
--------------- ---------------
Net Assets
Total increase (decrease) in net assets 35,649,067 (254,521,481)
Beginning of year 587,990,715 842,512,196
--------------- ---------------
End of year* $ 623,639,782 $ 587,990,715
=============== ===============
*Undistributed investment income--net $ 9,760,049 $ 7,451,739
=============== ===============
See Notes to Financial Statements.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2003
Financial Highlights
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: 2003 2002 2001 2000 1999
Per Share Operating Performance
Net asset value, beginning of year $ 10.67 $ 11.89 $ 14.40 $ 17.07 $ 17.39
---------- ---------- ---------- ---------- ----------
Investment income--net++ .20 .16 .18 .25 .24
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net 2.14 (1.20) (1.96) (.08) 3.08
---------- ---------- ---------- ---------- ----------
Total from investment operations 2.34 (1.04) (1.78) .17 3.32
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.15) (.18) -- (.30) (.60)
In excess of investment income--net -- -- -- (.01) --
Realized gain on investments--net -- -- (.50) (2.53) (3.04)
In excess of realized gain on
investments--net -- -- (.23) -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.15) (.18) (.73) (2.84) (3.64)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 12.86 $ 10.67 $ 11.89 $ 14.40 $ 17.07
========== ========== ========== ========== ==========
Total Investment Return*
Based on net asset value per share 22.29% (8.93%) (13.18%) 1.32% 22.89%
========== ========== ========== ========== ==========
Ratios to Average Net Assets
Expenses 1.33% 1.31% 1.31% 1.22% 1.22%
========== ========== ========== ========== ==========
Investment income--net 1.78% 1.35% 1.36% 1.65% 1.48%
========== ========== ========== ========== ==========
Supplemental Data
Net assets, end of year (in thousands) $ 280,223 $ 265,602 $ 276,919 $ 328,628 $ 363,422
========== ========== ========== ========== ==========
Portfolio turnover 64.01% 39.98% 37.77% 100.17% 61.12%
========== ========== ========== ========== ==========
*Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
++++Effective April 14, 2003, Class D Shares were redesignated Class
A Shares.
See Notes to Financial Statements.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2003
Financial Highlights (continued)
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: 2003 2002 2001 2000 1999
Per Share Operating Performance
Net asset value, beginning of year $ 9.25 $ 10.25 $ 12.48 $ 15.15 $ 15.79
---------- ---------- ---------- ---------- ----------
Investment income--net++ .10 .03 .07 .12 .10
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net 1.85 (1.00) (1.70) (.08) 2.76
---------- ---------- ---------- ---------- ----------
Total from investment operations 1.95 (.97) (1.63) .04 2.86
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.02) (.03) -- (.18) (.46)
In excess of investment income--net -- -- -- --++++ --
Realized gain on investments--net -- -- (.41) (2.53) (3.04)
In excess of realized gain on
investments--net -- -- (.19) -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.02) (.03) (.60) (2.71) (3.50)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 11.18 $ 9.25 $ 10.25 $ 12.48 $ 15.15
========== ========== ========== ========== ==========
Total Investment Return*
Based on net asset value per share 21.19% (9.51%) (13.87%) .48% 21.96%
========== ========== ========== ========== ==========
Ratios to Average Net Assets
Expenses 2.12% 2.10% 2.08% 1.99% 2.00%
========== ========== ========== ========== ==========
Investment income--net .98% .30% .62% .90% .70%
========== ========== ========== ========== ==========
Supplemental Data
Net assets, end of year (in thousands) $ 96,395 $ 108,337 $ 253,646 $ 481,876 $ 730,361
========== ========== ========== ========== ==========
Portfolio turnover 64.01% 39.98% 37.77% 100.17% 61.12%
========== ========== ========== ========== ==========
*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.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2003
Financial Highlights (continued)
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: 2003 2002 2001 2000 1999
Per Share Operating Performance
Net asset value, beginning of year $ 9.00 $ 10.03 $ 12.25 $ 14.93 $ 15.66
---------- ---------- ---------- ---------- ----------
Investment income--net++ .09 .05 .07 .11 .10
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net 1.81 (1.00) (1.67) (.07) 2.72
---------- ---------- ---------- ---------- ----------
Total from investment operations 1.90 (.95) (1.60) .04 2.82
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.07) (.08) -- (.19) (.51)
In excess of investment income--net -- -- -- --++++ --
Realized gain on investments--net -- -- (.42) (2.53) (3.04)
In excess of realized gain on
investments--net -- -- (.20) -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.07) (.08) (.62) (2.72) (3.55)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 10.83 $ 9.00 $ 10.03 $ 12.25 $ 14.93
========== ========== ========== ========== ==========
Total Investment Return*
Based on net asset value per share 21.29% (9.59%) (13.88%) .49% 21.97%
========== ========== ========== ========== ==========
Ratios to Average Net Assets
Expenses 2.12% 2.10% 2.10% 2.00% 2.01%
========== ========== ========== ========== ==========
Investment income--net .99% .48% .58% .88% .67%
========== ========== ========== ========== ==========
Supplemental Data
Net assets, end of year (in thousands) $ 25,134 $ 24,153 $ 30,838 $ 43,736 $ 52,742
========== ========== ========== ========== ==========
Portfolio turnover 64.01% 39.98% 37.77% 100.17% 61.12%
========== ========== ========== ========== ==========
*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.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2003
Financial Highlights (continued)
The following per share data and ratios have been derived Class I++++
from information provided in the financial statements.
For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
Per Share Operating Performance
Net asset value, beginning of year $ 10.80 $ 12.03 $ 14.56 $ 17.24 $ 17.52
---------- ---------- ---------- ---------- ----------
Investment income--net++ .23 .18 .22 .28 .28
Realized and unrealized gain (loss)on
investments and foreign currency
transactions--net 2.17 (1.20) (1.98) (.07) 3.11
---------- ---------- ---------- ---------- ----------
Total from investment operations 2.40 (1.02) (1.76) .21 3.39
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.19) (.21) -- (.35) (.63)
In excess of investment income--net -- -- -- (.01) --
Realized gain on investments--net -- -- (.52) (2.53) (3.04)
In excess of realized gain on
investments--net -- -- (.25) -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.19) (.21) (.77) (2.89) (3.67)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 13.01 $ 10.80 $ 12.03 $ 14.56 $ 17.24
========== ========== ========== ========== ==========
Total Investment Return*
Based on net asset value per share 22.57% (8.68%) (12.95%) 1.52% 23.25%
========== ========== ========== ========== ==========
Ratios to Average Net Assets
Expenses 1.08% 1.06% 1.06% .97% .97%
========== ========== ========== ========== ==========
Investment income--net 2.00% 1.46% 1.59% 1.84% 1.70%
========== ========== ========== ========== ==========
Supplemental Data
Net assets, end of year (in thousands) $ 221,888 $ 189,899 $ 281,109 $ 368,995 $ 567,273
========== ========== ========== ========== ==========
Portfolio turnover 64.01% 39.98% 37.77% 100.17% 61.12%
========== ========== ========== ========== ==========
*Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
++++Effective April 14, 2003, Class A Shares were redesignated Class
I Shares.
See Notes to Financial Statements.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2003
Financial Highlights (concluded)
Class R
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. January 3, 2003++
to October 31,
Increase (Decrease) in Net Asset Value: 2003
Per Share Operating Performance
Net asset value, beginning of period $ 9.67
------------
Investment income--net++++ .25
Realized and unrealized gain on investments and foreign currency transactions--net 1.40
------------
Total from investment operations 1.65
------------
Net asset value, end of period $ 11.32
============
Total Investment Return**
Based on net asset value per share 17.06%+++
============
Ratios to Average Net Assets
Expenses 1.58%*
============
Investment income--net 1.50%*
============
Supplemental Data
Net assets, end of period (in thousands) $ --++++++
============
Portfolio turnover 64.01%
============
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Commencement of operations.
++++Based on average shares outstanding.
++++++Amount is less than $1,000.
+++Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2003
Notes to Financial Statements
1. Significant Accounting Policies:
Merrill Lynch EuroFund (the "Fund") is registered under the
Investment Company Act of 1940, as amended, 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 multiple classes of shares. Effective April 14, 2003, Class A
Shares were redesignated Class I Shares and Class D Shares were
redesignated Class A Shares. The Fund's financial statements and
financial highlights contained within this report reflect the new
share class redesignation. Shares of Class A and Class I are sold
with a front-end sales charge. Shares of Class B and Class C may be
subject to a contingent deferred sales charge. Class R Shares are
sold only to certain retirement Plans. All classes of shares have
identical voting, dividend, liquidation and other rights and the
same terms and conditions, except that Class A, Class B, Class C and
Class R Shares bear certain expenses related to the account
maintenance of such shares, and Class B, Class C and Class R 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. Income, expenses (other than expenses attributable to
a specific class) and realized and unrealized gains and losses on
investments and foreign currency transactions are allocated daily to
each class based on its relative net assets. The following is a
summary of significant accounting policies followed by the Fund.
(a) Valuation of investments--Equity securities that are held by the
Fund that are traded on stock exchanges or the Nasdaq National
Market are valued at the last sale price or official close price on
the exchange, as of the close of business on the day the securities
are being valued or, lacking any sales, at the last available bid
price for long positions, and at the last available ask price for
short positions. In cases where equity securities are traded on more
than one exchange, the securities are valued on the exchange
designated as the primary market by or under the authority of
the Board of Trustees of the Fund. Long positions traded in the over-
the-counter ("OTC") market, Nasdaq Small Cap or Bulletin Board are
valued at the last available bid price or yield equivalent obtained
from one or more dealers or pricing services approved by the Board
of Trustees of the Fund. Short positions traded in the OTC market
are valued at the last available ask price. Portfolio securities
that are traded both in the OTC market and on a stock exchange are
valued according to the broadest and most representative market.
Options written are valued at the last sale price in the case of
exchange-traded options or, in the case of options traded in the OTC
market, the last ask price. Options purchased are valued at their
last sale price in the case of exchange-traded options or, in the
case of options traded in the OTC market, the last bid price. Swap
agreements are valued daily based upon quotations from market
makers. Financial futures contracts and options thereon, which are
traded on exchanges, are valued at their last sale price as of the
close of such exchanges. Obligations with remaining maturities of
60 days or less are valued at amortized cost unless the Investment
Adviser believes that this method no longer produces fair
valuations.
Repurchase agreements are valued at cost plus accrued interest. The
Fund employs pricing services to provide certain securities prices
for the Fund.
Securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or
under the direction of the Board of Trustees of the Fund, including
valuations furnished by the pricing services retained by the Fund,
which may use a matrix system for valuations. The procedures of a
pricing service and its valuations are reviewed by the officers of
the Fund under the general supervision of the Fund's Board of
Trustees. Such valuations and procedures will be reviewed
periodically by the Board of Trustees of the Fund.
Generally, trading in foreign securities, as well as U.S. government
securities and money market instruments, is substantially completed
each day at various times prior to the close of business on the New
York Stock Exchange ("NYSE"). The values of such securities used in
computing the net asset value of the Fund's shares are determined as
of such times. Foreign currency exchange rates also are generally
determined prior to the close of business on the NYSE. Occasionally,
events affecting the values of such securities and such exchange
rates may occur between the times at which they are determined and
the close of business on the NYSE that may not be reflected in the
computation of the Fund's net asset value. If events (for example, a
company announcement, market volatility or a natural disaster) occur
during such periods that are expected to materially affect the value
of such securities, those securities may be valued at their fair
value as determined in good faith by the Fund's Board of Trustees or
by the Investment Adviser using a pricing service and/or procedures
approved by the Fund's Board of Trustees.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2003
Notes to Financial Statements (continued)
(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 U.S. 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 both to increase the return of the
Fund and to hedge, or protect, its exposure to interest rate
movements and movements in the securities 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. The contract is
marked-to-market daily and the change in market value is recorded by
the Fund as an unrealized gain or loss. When the contract is closed,
the Fund records a realized gain or loss equal to the difference
between the value at the time it was opened and the value at the
time it was closed.
* 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-U.S. dollar denominated securities owned by the Fund,
sold by the Fund but not yet delivered, or committed or anticipated
to be purchased by the Fund.
(d) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required. Under the applicable foreign tax law, a
withholding tax may be imposed on interest, dividends and capital
gains at various rates.
(e) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Realized gains and losses on security
transactions are determined on the identified cost basis. 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.
(f) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(g) Repurchase agreements--The Fund invests in U.S. 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. If the counterparty defaults and
the fair value of the collateral declines, liquidation of the
collateral by the Fund may be delayed or limited.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2003
Notes to Financial Statements (continued)
(h) Dividends and distributions--Dividends and distributions paid by
the Fund are recorded on the ex-dividend dates.
(i) Securities lending--The Fund may lend securities to financial
institutions that provide cash or securities issued or guaranteed by
the U.S. government as collateral, which will be maintained at all
times in an amount equal to at least 100% of the current market
value of the loaned securities. The market value of the loaned
securities is determined at the close of business of the Fund and
any additional required collateral is delivered to the Fund on the
next business day. Where the Fund receives securities as collateral
for the loaned securities, it collects a fee from the borrower. The
Fund typically receives the income on the loaned securities but does
not receive the income on the collateral. Where the Fund receives
cash collateral, it may invest such collateral and retain the amount
earned on such investment, net of any amount rebated to the
borrower. Loans of securities are terminable at any time and the
borrower, after notice, is required to return borrowed securities
within five business days. The Fund may pay reasonable finder's,
lending agent, administrative and custodial fees in connection with
its loans. In the event that the borrower defaults on its obligation
to return borrowed securities because of insolvency or for any other
reason, the Fund could experience delays and costs in gaining access
to the collateral. The Fund also could suffer a loss where the value
of the collateral falls below the market value of the borrowed
securities, in the event of borrower default or in the event of
losses on investments made with cash collateral.
(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 differences of $13,297 have been reclassified
between undistributed net investment income and accumulated net
realized capital losses and $12,877 has been reclassified between
paid-in capital in excess of par 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 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 Asset Management
U.K., Ltd. ("MLAM U.K."), an affiliate of MLIM, pursuant to which
MLIM 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 MLIM with respect to the Fund. There is no
increase in the aggregate fees paid by the Fund for these services.
Pursuant to the Distribution Plans adopted by the Fund in accordance
with Rule 12b-1 under the Investment Company Act of 1940, the Fund
pays the Distributor ongoing account maintenance and distribution
fees. The fees are accrued daily and paid monthly at annual rates
based upon the average daily net assets of the shares as follows:
Account
Maintenance Distribution
Fee Fee
Class A .25% --
Class B .25% .75%
Class C .25% .75%
Class R .25% .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 A, Class B and Class C 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, 2003
Notes to Financial Statements (continued)
For the year ended October 31, 2003, FAMD earned underwriting
discounts and direct commissions and MLPF&S earned dealer
concessions on sales of the Fund's Class A and Class I Shares as
follows:
FAMD MLPF&S
Class A $ 988 $ 14,939
Class I $ 86 $ 1,289
For the year ended October 31, 2003, MLPF&S received contingent
deferred sales charges of $67,590 and $2,448 relating to
transactions in Class B and Class C Shares, respectively.
The Fund has received an exemptive order from the Securities and
Exchange Commission permitting it to lend portfolio securities to
MLPF&S or its affiliates. Pursuant to that order, the Fund also has
retained Merrill Lynch Investment Managers, LLC ("MLIM, LLC"), an
affiliate of MLIM, as the securities lending agent for a fee based
on a share of the returns on investment of cash collateral. MLIM,
LLC may, on behalf of the Fund, invest cash collateral received by
the Fund for such loans, among other things, in a private investment
company managed by MLIM, LLC or in registered money market funds
advised by MLIM or its affiliates. For the year ended October 31,
2003, MLIM, LLC received $191,549 in securities lending agent fees.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
For the year ended October 31, 2003, the Fund reimbursed MLIM
$12,330 for certain accounting services.
Certain officers and/or trustees of the Fund are officers and/or
directors of MLIM, PSI, MLAM U.K., FDS, FAMD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended October 31, 2003 were $365,118,422 and
$436,596,705, respectively.
Net realized losses for the year ended October 31, 2003 and net
unrealized gains as of October 31, 2003 were as follows:
Realized Unrealized
Losses Gains
Long-term investments $ (57,748,704) $ 74,190,691
Foreign currency transactions (13,297) 109,361
-------------- --------------
Total $ (57,762,001) $ 74,300,052
============== ==============
As of October 31, 2003, net unrealized appreciation for Federal
income tax purposes aggregated $68,560,686, of which $84,111,450
related to appreciated securities and $15,550,764 related to
depreciated securities. At October 31, 2003, the aggregate cost of
investments for Federal income tax purposes was $580,580,604.
4. Shares of Beneficial Interest:
Net decrease in net assets derived from beneficial interest
transactions was $74,261,031 and $192,934,251 for the years ended
October 31, 2003 and October 31, 2002, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Year Dollar
Ended October 31, 2003++ Shares Amount
Shares sold 10,498,985 $ 121,805,445
Automatic conversion of shares 1,043,503 11,802,114
Shares issued to shareholders
in reinvestment of dividends 304,883 3,201,268
--------------- ---------------
Total issued 11,847,371 136,808,827
Shares redeemed (14,934,182) (171,716,220)
--------------- ---------------
Net decrease (3,086,811) $ (34,907,393)
=============== ===============
++Effective April 14, 2003, Class D Shares were redesignated Class A
Shares.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2003
Notes to Financial Statements (continued)
Class A Shares for the Year Dollar
Ended October 31, 2002++ Shares Amount
Shares sold 1,656,030 $ 19,592,533
Automatic conversion of shares 7,407,867 90,375,530
Shares issued to shareholders
in reinvestment of dividends 304,494 3,690,473
--------------- ---------------
Total issued 9,368,391 113,658,536
Shares redeemed (7,782,436) (92,963,202)
--------------- ---------------
Net increase 1,585,955 $ 20,695,334
=============== ===============
++Effective April 14, 2003, Class D Shares were redesignated Class A
Shares.
Class B Shares for the Year Dollar
Ended October 31, 2003 Shares Amount
Shares sold 1,999,580 $ 19,401,366
Shares issued to shareholders
in reinvestment of dividends 25,951 238,751
--------------- ---------------
Total issued 2,025,531 19,640,117
Shares redeemed (3,923,726) (37,794,158)
Automatic conversion of shares (1,197,883) (11,802,114)
--------------- ---------------
Net decrease (3,096,078) $ (29,956,155)
=============== ===============
Class B Shares for the Year Dollar
Ended October 31, 2002 Shares Amount
Shares sold 1,010,841 $ 10,351,250
Shares issued to shareholders
in reinvestment of dividends 51,171 540,877
--------------- ---------------
Total issued 1,062,012 10,892,127
Shares redeemed (5,551,931) (57,855,424)
Automatic conversion of shares (8,529,696) (90,375,530)
--------------- ---------------
Net decrease (13,019,615) $ (137,338,827)
=============== ===============
Class C Shares for the Year Dollar
Ended October 31, 2003 Shares Amount
Shares sold 394,467 $ 3,593,734
Shares issued to shareholders
in reinvestment of dividends 19,204 171,104
--------------- ---------------
Total issued 413,671 3,764,838
Shares redeemed (775,781) (7,162,092)
--------------- ---------------
Net decrease (362,110) $ (3,397,254)
=============== ===============
Class C Shares for the Year Dollar
Ended October 31, 2002 Shares Amount
Shares sold 1,374,716 $ 13,260,089
Shares issued to shareholders
in reinvestment of dividends 20,662 212,610
--------------- ---------------
Total issued 1,395,378 13,472,699
Shares redeemed (1,786,154) (17,452,450)
--------------- ---------------
Net decrease (390,776) $ (3,979,751)
=============== ===============
Class I Shares for the Year Dollar
Ended October 31, 2003++ Shares Amount
Shares sold 12,778,436 $ 138,770,580
Shares issued to shareholders
in reinvestment of dividends 265,907 2,818,609
--------------- ---------------
Total issued 13,044,343 141,589,189
Shares redeemed (13,565,594) (147,589,518)
--------------- ---------------
Net decrease (521,251) $ (6,000,329)
=============== ===============
++Effective April 14, 2003, Class A Shares were redesignated Class I
Shares.
Class I Shares for the Year Dollar
Ended October 31, 2002++ Shares Amount
Shares sold 12,972,775 $ 149,724,514
Shares issued to shareholders
in reinvestment of dividends 340,031 4,161,981
--------------- ---------------
Total issued 13,312,806 153,886,495
Shares redeemed (19,105,157) (226,197,502)
--------------- ---------------
Net decrease (5,792,351) $ (72,311,007)
=============== ===============
++Effective April 14, 2003, Class A Shares were redesignated Class I
Shares.
Class R Shares for the
Period January 3, 2003++ Dollar
to October 31, 2003 Shares Amount
Shares sold 10 $ 100
--------------- ---------------
Net increase 10 $ 100
=============== ===============
++Commencement of operations.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2003
Notes to Financial Statements (concluded)
5. Short-Term Borrowings:
The Fund, along with certain other funds managed by MLIM and its
affiliates, is a party to a $500,000,000 credit agreement with Bank
One, N.A. and certain other lenders. The Fund may borrow under the
credit agreement to fund shareholder redemptions and for 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 credit agreement. Amounts borrowed under the credit
agreement 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 One, N.A. On November 29, 2002, the credit agreement was
renewed for one year under the same terms, except that the
commitment was reduced from $1,000,000,000 to $500,000,000. The Fund
did not borrow under the credit agreement during the year ended
October 31, 2003.
6. Commitments:
At October 31, 2003, the Fund had outstanding foreign exchange
contracts under which it had agreed to sell various foreign
currencies with an approximate value of $4,908,000.
7. Distributions to Shareholders:
The tax character of distributions paid during the fiscal years
ended October 31, 2003 and October 31, 2002 was as follows:
10/31/2003 10/31/2002
Distributions paid from:
Ordinary income $ 7,435,228 $ 10,084,877
--------------- ---------------
Total taxable distributions $ 7,435,228 $ 10,084,877
=============== ===============
As of October 31, 2003, the components of accumulated losses on a
tax basis were as follows:
Undistributed ordinary income--net $ 9,781,034
Undistributed long-term capital gains--net --
---------------
Total undistributed earnings--net 9,781,034
Capital loss carryforward (182,737,007)*
Unrealized gains--net 68,649,060**
---------------
Total accumulated losses--net $ (104,306,913)
===============
*On October 31, 2003, the Fund had a net capital loss carryforward
of $182,737,007, of which $93,739,668 expires in 2009, $33,617,465
expires in 2010 and $55,379,874 expires in 2011. This amount will be
available to offset like amounts of any future taxable gains.
**The difference between book-basis and tax-basis net unrealized
gains is attributable primarily to the tax deferral of losses on
wash sales, and the realization for tax purposes of unrealized gains
(losses) on certain foreign currency contracts.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2003
Independent Auditors' Report
To the Shareholders and Board of Trustees
of 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, 2003, and the related statement of
operations for the year then ended, the statements of changes in net
assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and 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 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 as of October 31, 2003, 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, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Merrill Lynch EuroFund as of October 31, 2003,
the results of its operations for the year then ended, the changes
in its net assets for each of the two years in the period then
ended, and its financial highlights for each of the five years in
the period then ended, in conformity with accounting principles
generally accepted in the United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
December 17, 2003
MERRILL LYNCH EUROFUND, OCTOBER 31, 2003
Officers and Trustees (unaudited)
Number of
Portfolios in Other Public
Position(s) Length Fund Complex Directorships
Held Of Time Overseen by Held by
Name, Address & Age with Fund Served Principal Occupation(s) During Past 5 Years Trustee Trustee
Interested Trustee
Terry K. Glenn* President 1999 to President and Chairman of Merrill Lynch 124 Funds None
P.O. Box 9011 and present Investment Managers, L.P. ("MLIM")/Fund 163 Portfolios
Princeton, Trustee and Asset Management, L.P. ("FAM")--Advised
NJ 08543-9011 1987 to Funds since 1999; Chairman (Americas
Age: 63 present Region) of MLIM from 2000 to 2002;
Executive Vice President of MLIM and
FAM (which terms as used herein include
their corporate predecessors) from 1983
to 2002; President of FAM Distributors,
Inc. ("FAMD") from 1986 to 2002 and
Director thereof from 1991 to 2002;
Executive Vice President and Director
of Princeton Services, Inc. ("Princeton
Services") from 1993 to 2002; President
of Princeton Administrators, L.P. from
1989 to 2002; Director of Financial Data
Services, Inc. since 1985.
* Mr. Glenn is a director, trustee or member of an advisory board of
certain other investment companies for which MLIM or FAM acts as
investment adviser. Mr. Glenn is an "interested person," as
described in the Investment Company Act, of the Fund based on his
former positions with MLIM, FAM, FAMD, Princeton Services and
Princeton Administrators, L.P. The Trustee's term is unlimited.
Trustees serve until their resignation, removal or death, or until
December 31 of the year in which they turn 72. As Fund President,
Mr. Glenn serves at the pleasure of the Board of Trustees.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2003
Officers and Trustees (unaudited)(continued)
Number of
Portfolios in Other Public
Position(s) Length Fund Complex Directorships
Held Of Time Overseen by Held by
Name, Address & Age with Fund Served Principal Occupation(s) During Past 5 Years Trustee Trustee
Independent Trustees*
Ronald W. Forbes Trustee 2000 to Professor Emeritus of Finance, School of 50 Funds None
P.O. Box 9095 present Business, State University of New York 49 Portfolios
Princeton, at Albany since 2000 and Professor
NJ 08543-9095 thereof from 1989 to 2000; International
Age: 63 Consultant at the Urban Institute from
1995 to 1999.
Cynthia A. Montgomery Trustee 2000 to Professor, Harvard Business School since 50 Funds Unum Provident
P.O. Box 9095 present 1989. 49 Portfolios Corporation;
Princeton, Newell
NJ 08543-9095 Rubbermaid, Inc.
Age: 51
Charles C. Reilly Trustee 1990 to Self-employed financial consultant since 50 Funds None
P.O. Box 9095 present 1990. 49 Portfolios
Princeton,
NJ 08543-9095
Age: 72
Kevin A. Ryan Trustee 2000 to Founder and Director Emeritus of The Boston 50 Funds None
P.O. Box 9095 present University Center for the Advancement of 49 Portfolios
Princeton, Ethics and Character; Professor of
NJ 08543-9095 Education at Boston University from 1982
Age: 71 to 1999 and Professor Emeritus thereof
since 1999.
Roscoe S. Suddarth Trustee 2000 to President, Middle East Institute from 50 Funds None
P.O. Box 9095 present 1995 to 2001; Foreign Service Officer, 49 Portfolios
Princeton, United States Foreign Service, from 1961
NJ 08543-9095 to 1995; Career Minister from 1989 to 1995;
Age: 68 Deputy Inspector General, U.S. Department
of State, from 1991 to 1994; U.S. Ambassador
to the Hashemite Kingdom of Jordan from 1987
to 1990.
Richard R. West Trustee 1987 to Dean Emeritus of New York University, 50 Funds Bowne & Co.,
P.O. Box 9095 present Leonard N. Stern School of Business 49 Portfolios Inc.; Vornado
Princeton, Administration since 1994. Realty Trust;
NJ 08543-9095 Vornado
Age: 65 Operating
Company;
Alexander's, Inc.
Edward D. Zinbarg Trustee 1994 to Self-employed financial consultant since 50 Funds None
P.O. Box 9095 present 1994; Executive Vice President of The 49 Portfolios
Princeton, Prudential Insurance Company of America
NJ 08543-9095 from 1988 to 1994; Former Director of
Age: 69 Prudential Reinsurance Company and former
Trustee of The Prudential Foundation.
* The Trustee's term is unlimited. Trustees serve until their
resignation, removal or death, or until December 31 of the year in
which they turn 72.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2003
Officers and Trustees (unaudited)(concluded)
Position(s) Length
Held Of Time
Name, Address & Age with Fund Served* Principal Occupation(s) During Past 5 Years
Fund Officers
Donald C. Burke Vice 1993 to First Vice President of MLIM and FAM since 1997 and Treasurer thereof since
P.O. Box 9011 President present 1999; Senior Vice President and Treasurer of Princeton Services since 1999;
Princeton, and and Vice President of FAMD since 1999; Director of MLIM Taxation since 1990.
NJ 08543-9011 Treasurer 1999 to
Age: 43 present
Robert C. Doll, Jr. Senior 1999 to President of MLIM and member of the Executive Management Committee of
P.O. Box 9011 Vice present ML & Co., Inc. since 2001; Global Chief Investment Officer and Senior
Princeton, President Portfolio Manager of MLIM since 1999; Chief Investment Officer of Equities
NJ 08543-9011 at Oppenheimer Funds, Inc. from 1990 to 1999 and Chief Investment Officer
Age: 49 thereof from 1998 to 1999; Executive Vice President of Oppenheimer Funds, Inc.
from 1991 to 1999.
Hubertus T. Aarts Vice 2003 to Director (Equities) of MLIM since 2002; Vice President of MLIM from 1995 to
P.O. Box 9011 President present 2000.
Princeton,
NJ 08543-9011
Age: 41
Phillip S. Gillespie Secretary 2003 to First Vice President of MLIM since 2001; Director of MLIM from 2000 to 2001;
P.O. Box 9011 present Vice President (Legal Advisory) of MLIM from 1999 to 2000 and Attorney
Princeton, associated with MLIM since 1998; Assistant General Counsel of Chancellor LGT
NJ 08543-9011 Asset Management, Inc. from 1997 to 1998.
Age: 39
* Officers of the Fund serve at the pleasure of the Board of
Trustees.
Further information about the Fund's Officers and Trustees is
available in the Fund's Statement of Additional Information, which
can be obtained without charge by calling 1-800-MER-FUND.
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109-3661
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
800-637-3863
MERRILL LYNCH EUROFUND, OCTOBER 31, 2003
Important Tax Information (unaudited)
The following information is provided with respect to the ordinary
income distribution paid by Merrill Lynch Eurofund to shareholders
of record on December 12, 2002:
Foreign Source Income 100%
Foreign Taxes Paid Per Share $.047736
The foreign taxes paid represent taxes incurred by the Fund from
foreign sources. Foreign taxes paid may be included in taxable
income with an offsetting deduction from gross income or may be
taken 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.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2003
Electronic Delivery
The Fund is now offering electronic delivery of communications to
its shareholders. In order to receive this service, you must
register your account and provide us with e-mail information.
To sign up for this service, simply access this website
http://www.icsdelivery.com/live and follow the instructions.
When you visit this site, you will obtain a personal identification
number (PIN). You will need this PIN should you wish to update your
e-mail address, choose to discontinue this service and/or make any
other changes to the service. This service is not available for
certain retirement accounts at this time.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2003
Item 2 - Did registrant adopt a code of ethics, as of the end of the
period covered by this report, that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by
the registrant or a third party? If not, why not? Briefly describe
any amendments or waivers that occurred during the period. State
here if code of ethics/amendments/waivers are on website and give
website address-. State here if fund will send code of ethics to
shareholders without charge upon request--
The registrant has adopted a code of ethics, as of the end of the
period covered by this report, that applies to the registrant's
principal executive officer, principal financial officer and
principal accounting officer, or persons performing similar
functions. A copy of the code of ethics is available without charge
upon request by calling toll-free 1-800-MER-FUND (1-800-637-3863).
Item 3 - Did the registrant's board of directors determine that the
registrant either: (i) has at least one audit committee financial
expert serving on its audit committee; or (ii) does not have an
audit committee financial expert serving on its audit committee? If
yes, disclose name of financial expert and whether he/she is
"independent," (fund may, but is not required, to disclose name/
independence of more than one financial expert) If no, explain why
not. -
The registrant's board of directors has determined that (i) the
registrant has the following audit committee financial experts
serving on its audit committee and (ii) each audit committee
financial expert is independent: (1) Ronald W. Forbes, (2) Richard
R. West, and (3) Edward D. Zinbarg.
Item 4 - Disclose annually only (not answered until December 15,
2003)
(a) Audit Fees - Disclose aggregate fees billed for each of the last
two fiscal years for professional services rendered by the principal
accountant for the audit of the registrant's annual financial
statements or services that are normally provided by the accountant
in connection with statutory and regulatory filings or engagements
for those fiscal years. N/A.
(b) Audit-Related Fees - Disclose aggregate fees billed in each of
the last two fiscal years for assurance and related services by the
principal accountant that are reasonably related to the performance
of the audit of the registrant's financial statements and are not
reported under paragraph (a) of this Item. Registrants shall
describe the nature of the services comprising the fees disclosed
under this category. N/A.
(c) Tax Fees - Disclose aggregate fees billed in each of the last
two fiscal years for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning.
Registrants shall describe the nature of the services comprising the
fees disclosed under this category. N/A.
(d) All Other Fees - Disclose aggregate fees billed in each of the
last two fiscal years for products and services provided by the
principal accountant, other than the services reported in paragraphs
(a) through (c) of this Item. Registrants shall describe the nature
of the services comprising the fees disclosed under this category.
N/A.
(e)(1) Disclose the audit committee's pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of Regulation
S-X. N/A.
(e)(2) Disclose the percentage of services described in each of
paragraphs (b) through (d) of this Item that were approved by the
audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X. N/A.
(f) If greater than 50%, disclose the percentage of hours expended
on the principal accountant's engagement to audit the registrant's
financial statements for the most recent fiscal year that were
attributed to work performed by persons other than the principal
accountant's full-time, permanent employees. N/A.
(g) Disclose the aggregate non-audit fees billed by the registrant's
accountant for services rendered to the registrant, and rendered to
the registrant's investment adviser (not including any sub-adviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the adviser
that provides ongoing services to the registrant for each of the
last two fiscal years of the registrant. N/A.
(h) Disclose whether the registrant's audit committee has considered
whether the provision of non-audit services that were rendered to
the registrant's investment adviser (not including any subadviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence. N/A.
Item 5 - If the registrant is a listed issuer as defined in Rule
10A-3 under the Exchange Act, state whether or not the registrant
has a separately-designated standing audit committee established in
accordance with Section 3(a)(58)(A) of the Exchange Act. If the
registrant has such a committee, however designated, identify each
committee member. If the entire board of directors is acting as the
registrant's audit committee in Section 3(a)(58)(B) of the Exchange
Act, so state.
If applicable, provide the disclosure required by Rule 10A-3(d)
under the Exchange Act regarding an exemption from the listing
standards for audit committees. N/A
(Listed issuers must be in compliance with the new listing rules by
the earlier of their first annual shareholders meeting after January
2004, or October 31, 2004 (annual requirement))
Item 6 - Reserved
Item 7 - For closed-end funds that contain voting securities in
their portfolio, describe the policies and procedures that it uses
to determine how to vote proxies relating to those portfolio
securities. N/A
Item 8--Reserved
Item 9(a) - The registrant's certifying officers have reasonably
designed such disclosure controls and procedures to ensure material
information relating to the registrant is made known to us by others
particularly during the period in which this report is being
prepared. The registrant's certifying officers have determined that
the registrant's disclosure controls and procedures are effective
based on our evaluation of these controls and procedures as of a
date within 90 days prior to the filing date of this report.
Item 9(b)--There were no significant changes in the registrant's
internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Item 10 - Exhibits
10(a) - Attach code of ethics or amendments/waivers, unless code of
ethics or amendments/waivers is on website or offered to
shareholders upon request without charge. N/A.
10(b) - Attach certifications pursuant to Section 302 of the
Sarbanes-Oxley Act. Attached hereto.
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Merrill Lynch EuroFund, Inc.
By: _/s/ Terry K. Glenn_______
Terry K. Glenn,
President of
Merrill Lynch EuroFund, Inc.
Date: December 22, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
By: _/s/ Terry K. Glenn________
Terry K. Glenn,
President of
Merrill Lynch EuroFund, Inc.
Date: December 22, 2003
By: _/s/ Donald C. Burke________
Donald C. Burke,
Chief Financial Officer of
Merrill Lynch EuroFund, Inc.
Date: December 22, 2003
Attached hereto as a furnished exhibit are the certifications
pursuant to Section 906 of the Sarbanes-Oxley Act.