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 811-04612
Name of Fund: Merrill Lynch EuroFund
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Terry K. Glenn, President,
Merrill Lynch EuroFund, 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: 10/31/04
Date of reporting period: 11/01/03 - 10/31/04
Item 1 - Report to Stockholders
(BULL LOGO)
Merrill Lynch Investment Managers
www.mlim.ml.com
Merrill Lynch
EuroFund
Annual Report
October 31, 2004
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) at www.mutualfunds.ml.com;
and (3) on the Securities and Exchange Commission's Web site at
http://www.sec.gov. Information about how the Fund voted proxies
relating to securities held in the Fund's portfolio during the
most recent 12-month period ended June 30 is available (1) at
www.mutualfunds.ml.com; and (2) on the Securities and Exchange
Commission's Web site at http://www.sec.gov.
Merrill Lynch EuroFund
Box 9011
Princeton, NJ
08543-9011
(GO PAPERLESS LOGO)
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To sign up today, go to www.icsdelivery.com/live.
Merrill Lynch EuroFund
Geographic Allocation as a Percentage of Total Investments as of
October 31, 2004++ (unaudited)
Percent of
Total
Country Investments
Belgium 2.9%
Finland 1.9%
France 15.1%
Germany 12.5%
Ireland 1.7%
Italy 13.9%
Netherlands 8.3%
Norway 1.3%
Portugal 1.3%
Spain 1.3%
Sweden 2.5%
Switzerland 7.7%
United Kingdom 27.5%
++ Total may not equal 100%.
Portfolio Information as of October 31, 2004 (unaudited)
Percent of
Ten Largest Equity Holdings Net Assets
TotalFinaElf SA 4.5%
BP Amoco PLC 3.9
ENI SpA 3.7
Royal Bank of Scotland Group PLC 3.0
Barclays PLC 3.0
E.On AG 2.8
BNP Paribas SA 2.7
HSBC Holdings PLC 2.5
Intesa BCI SpA 2.5
Telecom Italia SpA 2.2
Percent of
Five Largest Industries* Net Assets
Commercial Banks 20.8%
Oil & Gas 14.1
Diversified Telecommunication Services 6.3
Electric Utilities 5.8
Insurance 5.2
* For Fund compliance purposes, "Industries" 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.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2004
A Letter From the President
Dear Shareholder
For the 12 months ended October 31, 2004, the U.S. stock market, as
measured by the Standard & Poor's 500 (S&P 500) Index, returned
+9.42%. The Morgan Stanley Capital International (MSCI) World Index,
which measures the performance of equity markets in 23 developed
nations around the world, returned +13.25% for the same 12-month
period. Returns over the past six months were not as favorable, with
the S&P 500 Index returning +2.96% and the MSCI World Index
returning +4.45% as of October 31, 2004.
The relative weakness over the past six months may be attributed to
investor concern over global interest rates, which have entered a
tightening cycle in certain areas; oil and commodity prices, with
oil reaching $50 per barrel levels; and geopolitical stress,
including continued tensions in Iraq and the ever-present threat of
terrorism.
For the most part, however, equity markets have been supported by
improving economies in important areas around the globe. In the
United States, the Federal Reserve Board (the Fed) recently
increased the target interest rate from 1% to 2% in four separate
moves through November 10. This represents a shift from a long-run
accommodative monetary stance, and an indication from the Fed that
the U.S. economy is strengthening.
China has recorded a remarkable rate of economic expansion, which
has helped fuel growth in the economies of its trading partners.
Given efforts to preempt inflation, China's growth is expected to
ease somewhat, but still expanded at a rate of 9.6% in the second
quarter of 2004. Japan, in the meantime, could register growth of
4% this year after 13 years of sluggish economic activity, although
the rate of growth is expected to slow next year. Other Asian
economies, such as that of Korea, Malaysia, Singapore, Taiwan and
Thailand, appear primed for growth in the area of 5%-6%. While
economic expansion has not been as swift in Europe, the European
Union welcomed 10 new member nations in May, and the enhanced
integration could provide long-term economic benefits.
As always, our investment professionals are closely monitoring the
markets, the economy and the overall environment in an effort to
make well-informed decisions for the portfolios they manage. For the
individual investor, the key during uncertain times is to remain
focused on the big picture. Investment success comes not from
reacting to short-term volatility, but from maintaining a long-term
perspective and adhering to the disciplines of asset allocation,
diversification and rebalancing. We encourage you to work with your
financial advisor to ensure these time-tested techniques are
incorporated into your investment plan.
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, 2004
A Discussion With Your Fund's Portfolio Manager
The Fund provided double-digit total returns for the fiscal year and
continues to invest in stocks that we believe could benefit from
continued economic recovery in Europe.
How did the Fund perform during the fiscal year?
For the 12-month period ended October 31, 2004, Merrill Lynch
EuroFund's Class A, Class B, Class C, Class I and Class R Shares
had total returns (in U.S. dollar terms) of +18.98%, +18.14%,
+18.06%, +19.26% and +19.22%, 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 7 - 11 of this report to shareholders.) For the same period,
the Fund's benchmark, the Morgan Stanley Capital International
(MSCI) Europe Index, returned +21.89% while the Fund's comparable
Lipper category of European Region Funds posted an average return of
+21.59%. (Funds in this Lipper category invest in equity securities
whose primary trading markets or operations are concentrated in the
European region or a single country within this region.)
During the past 12 months, we observed a significant sector rotation
within the European equity markets. A market rally early in the
period was led by economically sensitive sectors and recovery
stocks. After the markets peaked in February 2004, there was a
change in leadership and defensive sectors began to outperform.
Between February and August 2004, markets drifted downward on
investor fears that economic growth could be nearing a peak and
corporate earnings growth might decline. The price of oil was in a
rising trend, which was viewed as a major cost for consumers and
corporations. In addition, the U.S. trade balance continued to
deteriorate and the U.S. dollar weakened further against most
international currencies. U.S. elections also created uncertainty
about how the markets might react under any given administration.
Continued fears of terrorism gave investors another reason to adopt
a more defensive stance.
The best-performing sectors of the European market during the
12-month period were utilities, real estate, healthcare equipment
and energy. Performance was mainly driven by the defensive nature,
attractive valuations and high dividend yields in these sectors. In
the case of energy, the rising oil price contributed to the strong
performance.
The worst-performing sectors were found in the more cyclical parts
of the market, such as semiconductors, software services, commercial
services, and household and personal products. The weak performance
of the latter sector is primarily attributed to lack of pricing
power, competition from private labels and valuations that were not
attractive enough to absorb profit downgrades.
What factors influenced Fund performance?
Because Fund results are largely driven by stock selection, the
underperformance of the benchmark reflects lackluster returns from a
number of individual holdings over the past 12 months. These
included Swiss Life Holding, which announced weak results and raised
capital to acquire Banca del Gottardo - a development that was
viewed negatively by the market. Nevertheless, the shares are
attractively valued and we expect positive returns going forward.
Swiss financial services company Credit Suisse Group performed
poorly due to profit-taking after a strong recovery in 2003. Dutch
retailer Koninklijke Ahold NV also hindered Fund results. The
company announced a rights issue to strengthen its balance sheet,
offering two new shares for three existing shares, but has not
delivered the promised operating turnaround in the North American
food services division. Nevertheless, we believe the market has been
somewhat impatient with Ahold, and we expect a positive trend in
operating results to materialize in the months ahead.
The Fund's performance relative to the MSCI Europe Index benefited
from sectors such as capital goods, media and pharmaceuticals. Our
stock picks in these sectors provided better results than the
benchmark's stocks. The Fund also benefited from our avoidance of
the semiconductor and technology hardware sectors. Sectors that
detracted from Fund returns, primarily due to stock-specific
performance, were diversified financials, commercial services and
food and staples retailing. Also hindering relative results was our
overweight position in hotels, restaurants and leisure.
On an individual stock level, the Fund's underweight position in
U.K. banking company HSBC Holdings PLC benefitted performance. Fund
holdings that contributed positively to performance included Italian
oil company Eni SpA, German utility company E.On AG, and two Italian
banking stocks, Intesa BCI SpA and Capitalia SpA.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2004
What changes were made to the portfolio during the period?
In the U.K. market, we sold our positions in Hays PLC, an employment
agency, and Intercontinental Hotels Group PLC after both stocks
hit our target prices. We also sold food retailer J Sainsbury PLC
after the company reported poor trading numbers and announced an
investment program to lower prices. Although the valuation was still
attractive, we did not like the strategic change. Compass Group PLC,
a catering company, was sold after the management indicated the
operating margin on its U.K. business was not sustainable.
In mainland Europe, several positions reached our price targets
and were sold out of the portfolio. The most important sales
were Unicredito Italiano Spa, one of Italy's largest banking groups;
Altadis Group SA, a Spain-based tobacco company; AXA SA, a French
insurance company; Vivendi Universal SA, a French media giant;
and Schering AG, a German pharmaceutical. The proceeds from these
sales were reinvested in U.K. banks HSBC and HBOS PLC, after
underperformance and a lower valuation made their shares look
attractive. Major purchases in mainland Europe included Hochtief AG,
a German construction company whose assets, we believe, are worth
more than the share price indicates; Swiss investment bank UBS AG,
after reporting strong results and returning cash to shareholders
via share buybacks; German express delivery and logistics provider
Deutsche Post AG, which is a restructuring story and made an initial
public offering of their stake in Postbank; and Enel SpA, an Italian
utility company that has strong cash-flow characteristics and will
give excess cash back to shareholders via a special dividend.
Another interesting story was the revival LM Ericsson, a Swedish
telecom equipment supplier, which we bought and sold in the past 12
months after an effective restructuring over the last two years
brought positive results. Finally, a strong truck cycle supported
the upgrades we expected for Volvo AB, prompting our investment in
the company.
In addition to individual purchases and sales, several positions in
the portfolio were reduced or increased, thus changing the sector
composition of the Fund. The Fund's five largest industries at
October 31, 2004, were commercial banks (20.8% of net assets), oil
and gas (14.1%), diversified telecommunication services (6.3%),
electric utilities (5.8%) and insurance (5.2%).
Finally, we choose portfolio holdings based on the merits of
individual stocks rather than geographic considerations. However,
it is worth noting that, for most of the fiscal year, the Fund was
underweight relative to its benchmark in the more defensive U.K.
market and overweight in Germany, where we found higher corporate
growth rates and a greater number of cyclical companies supported by
attractive valuations.
How would you characterize the Fund's position at the close of the
period?
The Fund was overweight in cyclical sectors of the market and
underweight in defensive areas. More specifically, the Fund had
overweights in automotive, capital goods, transportation, commercial
banks and energy, and was underweight in food, beverages and
tobacco, pharmaceuticals, media and software, and hardware
technology. Because we employ a bottom-up management approach, the
Fund's exposures are largely a result of stock selection among
undervalued equity investments rather than perceived fundamentals in
a given sector. Overall, the Fund is invested in companies that we
believe should benefit from a continued recovery in European
economies.
Although the price of oil has risen strongly and the U.S. dollar
has weakened significantly against the euro, corporate earnings for
most European companies have continued to grow. In addition, the
valuation of European markets is still attractive and offers what we
view as a healthy dividend yield.
Hubert T. Aarts
Vice President and Portfolio Manager
November 16, 2004
MERRILL LYNCH EUROFUND, OCTOBER 31, 2004
Performance Data
About Fund Performance
Investors are able to purchase shares of the Fund through multiple
pricing alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 5.25% and an account maintenance fee of 0.25% per year (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% per year and an account maintenance fee of 0.25% per
year. These shares automatically convert to Class A Shares after
approximately eight years. (There is no initial sales charge for
automatic share conversions.) All returns for periods greater than
eight years reflect this conversion.
* Class C Shares are subject to a distribution fee of 0.75% per year
and an account maintenance fee of 0.25% per year. 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% per year and an account maintenance fee of
0.25% per year. Class R Shares are available only to certain
retirement plans.
None of the past results shown should be considered a representation
of future performance. Current performance may be lower or higher
than the performance data quoted. Refer to www.mlim.ml.com to obtain
performance data current to the most recent month-end. Performance
results do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
The Fund is subject to a 2% redemption fee for sales or exchanges of
shares within 30 days of purchase. Performance data does not reflect
this potential fee. Figures shown in each of the following tables
assume reinvestment of all dividends and capital gain distributions,
if any, 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, 2004
Performance Data (continued)
Recent Performance Results
10-Year/
6-Month 12-Month Since Inception
As of October 31, 2004 Total Return Total Return Total Return
ML EuroFund Class A Shares* + 7.34% +18.98% +168.98%
ML EuroFund Class B Shares* + 6.95 +18.14 +153.05
ML EuroFund Class C Shares* + 6.94 +18.06 +148.44
ML EuroFund Class I Shares* + 7.39 +19.26 +175.80
ML EuroFund Class R Shares* + 7.30 +19.22 + 39.56
MSCI Europe Index** + 7.99 +21.89 +135.49/+45.65
* 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 10-year/since inception periods are 10 years for
Class A, Class B, Class C and Class I 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 10 years and from 1/03/03, respectively.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2004
Performance Data (continued)
TOTAL RETURN BASED ON A $10,000 INVESTMENT
Class A & Class B Shares
A line graph illustrating the growth of a $10,000 investment in
ML EuroFund++ Class A and Class B 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
October 1994 $ 9,475.00
October 1995 $10,029.00
October 1996 $11,892.00
October 1997 $15,678.00
October 1998 $17,793.00
October 1999 $21,865.00
October 2000 $22,153.00
October 2001 $19,233.00
October 2002 $17,515.00
October 2003 $21,420.00
October 2004 $25,486.00
ML EuroFund
Class B Shares*
Date Value
October 1994 $10,000.00
October 1995 $10,512.00
October 1996 $12,363.00
October 1997 $16,175.00
October 1998 $18,209.00
October 1999 $22,208.00
October 2000 $22,314.00
October 2001 $19,218.00
October 2002 $17,390.00
October 2003 $21,267.00
October 2004 $25,305.00
Morgan Stanley Capital International Europe Index++++
Date Value
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
October 2004 $23,549.00
* 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 Without Return With
Sales Charge Sales Charge**
Class A Shares*
One Year Ended 10/31/04 +18.98% +12.74%
Five Years Ended 10/31/04 + 3.11 + 2.01
Ten Years Ended 10/31/04 +10.40 + 9.81
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
Return Return
Without CDSC With CDSC**
Class B Shares*
One Year Ended 10/31/04 +18.14% +14.14%
Five Years Ended 10/31/04 + 2.31 + 2.00
Ten Years Ended 10/31/04 + 9.73 + 9.73
* Maximum contingent deferred sales charge is 4% and is reduced to
0% after six years.
** Assuming payment of applicable contingent deferred sales charge.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2004
Performance Data (continued)
TOTAL RETURN BASED ON A $10,000 INVESTMENT
Class C & Class I Shares
A line graph illustrating the growth of a $10,000 investment in
ML EuroFund++ Class C and Class I Shares* compared to a similar
investment in Morgan Stanley Capital International Europe Index++++.
Values illustrated are as follows:
ML EuroFund
Class C Shares*
Date Value
October 1994 $10,000.00
October 1995 $10,504.00
October 1996 $12,348.00
October 1997 $16,152.00
October 1998 $18,181.00
October 1999 $22,175.00
October 2000 $22,283.00
October 2001 $19,189.00
October 2002 $17,350.00
October 2003 $21,044.00
October 2004 $24,844.00
ML EuroFund
Class I Shares*
Date Value
October 1994 $ 9,475.00
October 1995 $10,062.00
October 1996 $11,960.00
October 1997 $15,802.00
October 1998 $17,973.00
October 1999 $22,151.00
October 2000 $22,487.00
October 2001 $19,576.00
October 2002 $17,878.00
October 2003 $21,912.00
October 2004 $26,132.00
Morgan Stanley Capital International Europe Index++++
Date Value
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
October 2004 $23,549.00
* 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 C Shares*
One Year Ended 10/31/04 +18.06% +17.06%
Five Years Ended 10/31/04 + 2.30 + 2.30
Ten Years Ended 10/31/04 + 9.53 + 9.53
* Maximum contingent deferred sales charge is 1% and is reduced to
0% after one year.
** Assuming payment of applicable contingent deferred sales charge.
Return Without Return With
Sales Charge Sales Charge**
Class I Shares*
One Year Ended 10/31/04 +19.26% +13.00%
Five Years Ended 10/31/04 + 3.36 + 2.25
Ten Years Ended 10/31/04 +10.68 +10.08
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2004
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 R 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
October 2004 $13,956.00
Morgan Stanley Capital International Europe Index++++
Date Value
1/3/2003** $10,000.00
October 2003 $11,949.00
October 2004 $14,565.00
* 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.
Average Annual Total Return
Class R Shares Return
One Year Ended 10/31/04 +19.22%
Inception (1/03/03) through 10/31/04 20.04
MERRILL LYNCH EUROFUND, OCTOBER 31, 2004
Performance Data (concluded)
MSCI COUNTRY INDEX PERFORMANCE
Total Return for the 6-Month Period Ended October 31, 2004
In U.S. dollars*
Country Total Return
Norway 25.6%
Ireland 16.0
Italy 12.6
Spain 12.2
Denmark 11.8
Sweden 11.3
Finland 10.3
France 9.1
United Kingdom 7.6
Germany 5.6
Netherlands 5.2
Switzerland 0.5
Source: MSCI Europe Index.
* For the 6-month period ended October 31, 2004, total investment
return for the MSCI Europe Index was +7.99%.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2004
Disclosure of Expenses
Shareholders of this Fund may incur the following charges:
(a) expenses related to transactions, including sales charges,
redemption fees and exchange fees; and (b) operating expenses
including advisory fees, distribution fees including 12(b)-1 fees,
and other Fund expenses. The following example (which is based on a
hypothetical investment of $1,000 invested on May 1, 2004 and held
through October 31, 2004) is intended to assist shareholders both in
calculating expenses based on an investment in the Fund and in
comparing these expenses with similar costs of investing in other
mutual funds.
The first table below provides information about actual account
values and actual expenses. In order to estimate the expenses a
shareholder paid during the period covered by this report,
shareholders can divide their account value by $1,000 and then
multiply the result by the number in the first line under the
heading entitled "Expenses Paid During the Period."
The second table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before
expenses. In order to assist shareholders in comparing the ongoing
expenses of investing in this Fund and other funds, compare the 5%
hypothetical example with the 5% hypothetical examples that appear
in other funds' shareholder reports.
The expenses shown in the table are intended to highlight
shareholders ongoing costs only and do not reflect any transactional
expenses, such as sales charges, redemption fees, or exchange fees.
Therefore, the second table is useful in comparing ongoing expenses
only, and will not help shareholders determine the relative total
expenses of owning different funds. If these transactional expenses
were included, shareholder expenses would have been higher.
Expenses Paid
Ending During the Period*
Beginning Account Value May 1, 2004 to
Account Value October 31, October 31,
May 1, 2004 2004 2004
Actual
Class A $1,000 $1,073.40 $ 6.84
Class B $1,000 $1,069.50 $10.81
Class C $1,000 $1,069.40 $10.86
Class I $1,000 $1,073.90 $ 5.55
Class R $1,000 $1,073.00 $ 6.84
Hypothetical (5% annual return before expenses)**
Class A $1,000 $1,018.40 $ 6.66
Class B $1,000 $1,014.55 $10.53
Class C $1,000 $1,014.50 $10.58
Class I $1,000 $1,019.65 $ 5.40
Class R $1,000 $1,018.40 $ 6.66
* For each class of the Fund, expenses are equal to the annualized expense ratio for the class
(1.32% for Class A, 2.09% for Class B, 2.10% for Class C, 1.07% for Class I and 1.32% for Class R),
multiplied by the average account value over the period, multiplied by 182/364 (to reflect the
one-half year period shown).
** Hypothetical 5% annual return before expenses is calculated by pro-rating the number of days in
the most recent fiscal half-year divided by 364.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2004
Schedule of Investments
Value
Country Industry* Shares Held Common Stocks (in U.S. dollars)
Belgium--2.8% Commercial Banks--1.3% 458,780 Dexia $ 9,162,376
Diversified 306,774 ++Belgacom SA 11,238,672
Telecommunication
Services--1.5%
Total Common Stocks in Belgium 20,401,048
Finland--1.9% Communications 252,395 Nokia Oyj (Series A) 3,881,602
Equipment--0.6%
Paper & Forest 671,495 Stora Enso Oyj 'R' (e) 9,558,216
Products--1.3%
Total Common Stocks in Finland 13,439,818
France--14.8% Automobiles--1.5% 179,874 PSA Peugeot Citroen 11,021,711
Commercial Banks--2.7% 289,457 BNP Paribas SA 19,643,662
Construction & 86,668 Vinci SA 10,291,462
Engineering--1.4%
Construction 90,810 Lafarge SA (Ordinary) 8,265,084
Materials--1.1%
Diversified 274,143 France Telecom SA 7,825,354
Telecommunication
Services--1.1%
Hotels, Restaurants & 200,266 Accor SA 8,289,508
Leisure--1.1%
Metals & Mining--1.4% 540,495 Arcelor 10,065,530
Oil & Gas--4.5% 156,145 TotalFinaElf SA 32,375,737
Total Common Stocks in France 107,778,048
Germany--12.3% Air Freight & 471,212 Deutsche Post AG (Registered Shares) 9,182,884
Logistics--1.3%
Auto Components--1.0% 138,607 Continental AG 7,546,280
Automobiles--0.9% 162,432 Bayerische Motoren Werke (BMW) AG 6,849,504
Chemicals--1.1% 128,519 Linde AG 7,740,897
Construction & 384,788 Hochtief AG 10,180,962
Engineering--1.4%
Diversified Financial 140,967 Deutsche Boerse AG 7,020,260
Services--1.0%
Diversified 585,425 ++Deutsche Telekom AG (Registered Shares) 11,185,236
Telecommunication
Services--1.5%
Electric Utilities--2.8% 246,691 E.On AG 20,014,364
Textiles, Apparel & 67,033 Adidas-Salomon AG 9,339,545
Luxury Goods--1.3%
Total Common Stocks in Germany 89,059,932
Ireland--1.7% Commercial Banks--1.7% 907,868 Bank of Ireland 12,414,669
Total Common Stocks in Ireland 12,414,669
Italy--13.7% Commercial Banks--4.5% 544,299 Banca Intesa SpA 1,828,563
3,468,786 Capitalia SpA 13,281,526
4,365,268 Intesa BCI SpA 17,824,605
---------------
32,934,694
Diversified 4,749,986 Telecom Italia SpA 15,770,186
Telecommunication
Services--2.2%
Electric Utilities--1.7% 1,365,675 Enel SpA 12,316,791
Insurance--1.0% 323,912 Fondiaria--SAI SpA 7,428,938
Oil & Gas--3.7% 1,191,422 Eni SpA 26,976,748
Transportation 301,169 Societa Iniziative Autostradali e Servizi SpA (SIAS) 4,073,522
Infrastructure--0.6%
Total Common Stocks in Italy 99,500,879
MERRILL LYNCH EUROFUND, OCTOBER 31, 2004
Schedule of Investments (continued)
Value
Country Industry* Shares Held Common Stocks (in U.S. dollars)
Netherlands-- Commercial Services 665,758 Buhrmann NV $ 4,937,293
8.2% & Supplies--1.7% 501,150 Vedior NV 'A' 7,343,857
---------------
12,281,150
Construction & 194,788 Imtech NV 5,223,201
Engineering--0.7%
Diversified Financial 538,780 ING Groep NV 14,221,111
Services--2.0%
Food & Staples 956,981 ++Koninklijke Ahold NV 6,622,259
Retailing--1.3% 439,668 ++Koninklijke Ahold NV (ADR) (a)(f) 2,902,908
---------------
9,525,167
Household Durables--0.5% 154,390 Koninklijke (Royal) Philips Electronics NV 3,643,066
Oil & Gas--2.0% 267,515 Royal Dutch Petroleum Company 14,493,049
Total Common Stocks in the Netherlands 59,386,744
Norway--1.3% Commercial Banks--1.3% 1,128,495 DNB Holding ASA 9,533,817
Total Common Stocks in Norway 9,533,817
Portugal--1.3% Electric Utilities--1.3% 3,171,344 Energias de Portugal, SA (EDP) 9,359,126
Total Common Stocks in Portugal 9,359,126
Spain--1.3% Tobacco--1.3% 255,022 Altadis, SA 9,333,005
Total Common Stocks in Spain 9,333,005
Sweden--2.5% Insurance--1.0% 1,975,139 Skandia Forsakrings AB 7,330,602
Machinery--1.5% 286,491 Volvo AB 'B' 10,814,173
Total Common Stocks in Sweden 18,144,775
Switzerland-- Capital Markets--2.8% 325,519 Credit Suisse Group 11,094,929
7.6% 127,149 UBS AG (Registered Shares) 9,133,096
---------------
20,228,025
Construction 187,712 Holcim Ltd. (Registered Shares) 9,999,224
Materials--1.4%
Food Products--0.5% 15,162 Nestle SA (Registered Shares) 3,574,544
Insurance--1.2% 69,525 ++Swiss Life Holding 8,859,526
Pharmaceuticals--1.7% 263,090 Novartis AG (Registered Shares) 12,503,591
Total Common Stocks in Switzerland 55,164,910
United Kingdom Aerospace & 2,082,335 BAE Systems PLC 9,090,342
- --27.0% Defense--1.3%
Commercial Banks--9.3% 2,188,290 Barclays PLC 21,331,098
535,838 HBOS PLC 7,162,349
1,113,123 HSBC Holdings PLC 17,938,070
732,704 Royal Bank of Scotland Group PLC 21,547,669
---------------
67,979,186
Food & Staples 936,385 Boots Group PLC 11,289,561
Retailing--1.5%
Food Products--1.6% 595,683 Cadbury Schweppes PLC 4,938,897
758,700 Unilever PLC 6,380,864
---------------
11,319,761
Industrial 796,172 Smiths Group PLC 10,875,551
Conglomerates--1.5%
Insurance--2.0% 518,808 Aviva PLC 5,180,836
1,250,628 Prudential Corporation PLC 9,177,559
---------------
14,358,395
Oil & Gas--3.9% 2,957,957 BP Amoco PLC 28,589,794
MERRILL LYNCH EUROFUND, OCTOBER 31, 2004
Schedule of Investments (concluded)
Value
Country Industry* Shares Held Common Stocks (in U.S. dollars)
United Kingdom Pharmaceuticals--1.7% 602,080 GlaxoSmithKline PLC $ 12,653,606
(concluded)
Specialty Retail--1.3% 1,884,750 Kesa Electricals PLC 9,393,325
Transportation 883,517 BAA PLC 9,284,212
Infrastructure--1.3%
Wireless 4,592,816 Vodafone Group PLC 11,739,510
Telecommunication
Services--1.6%
Total Common Stocks in the
United Kingdom 196,573,243
Total Common Stocks
(Cost--$564,133,980)--96.4% 700,090,014
Rights
United Kingdom Insurance--0.0% 197,959 ++Prudential PLC (d) 333,701
- --0.0%
Total Rights (Cost--$0)--0.0% 333,701
Beneficial
Interest Short-Term Securities
US$ 12,298,482 Merrill Lynch Liquidity Series, LLC Cash Sweep
Series I (b) 12,298,482
1,614,430 Merrill Lynch Liquidity Series, LLC Money Market
Series I (b)(c) 1,614,430
Total Short-Term Securities
(Cost--$13,912,912)--1.9% 13,912,912
Total Investments (Cost--$578,046,892**)--98.3% 714,336,627
Other Assets Less Liabilities--1.7% 11,996,331
---------------
Net Assets--100.0% $ 726,332,958
===============
* 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.
** The cost and unrealized appreciation/depreciation of investments as
of October 31, 2004, as computed for federal income tax purposes,
were as follows:
Aggregate cost $ 587,465,632
==============
Gross unrealized appreciation $ 140,707,019
Gross unrealized depreciation (13,836,024)
--------------
Net unrealized appreciation $ 126,870,995
==============
++ Non-income producing security.
(a) American Depositary Receipts (ADR).
(b) 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) were as follows:
Interest/
Net Dividend
Affiliate Activity Income
Merrill Lynch Liquidity Series,
LLC Cash Sweep Series I $ 8,186,141 $ 95,138
Merrill Lynch Liquidity Series,
LLC Money Market Series $(21,438,883) $ 39,218
Merrill Lynch Premier
Institutional Fund (7,684,437) $ 9,640
(c) Security was purchased with the cash proceeds from securities loans.
(d) The rights may be exercised until 11/09/2004.
(e) Security, or a portion of security, is on loan.
(f) Restricted security as to resale.
Acquisition
Issue Date Cost Value
Koninklijke Ahold NV
(ADR) 12/11/2003 $2,612,154 $2,902,908
See Notes to Financial Statements.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2004
Statement of Assets and Liabilities
As of October 31, 2004
Assets
Investments in unaffiliated securities, at value (including securities
loaned of $1,568,612) (identified cost--$564,133,980) $ 700,423,715
Investments in affiliated securities, at value (identified cost--$13,912,912) 13,912,912
Foreign cash (cost--$12,754) 12,703
Receivables:
Securities sold $ 17,163,195
Dividends 3,390,000
Beneficial interest sold 325,840
Interest from affiliates 21,506
Securities lending--net 1,056 20,901,597
---------------
Prepaid expenses 14,040
---------------
Total assets 735,264,967
---------------
Liabilities
Collateral on securities loaned, at value 1,614,430
Payables:
Securities purchased 4,868,096
Beneficial interest redeemed 1,171,199
Investment adviser 516,266
Other affiliates 250,407
Distributor 241,429
Custodian bank 5,444 7,052,841
---------------
Accrued expenses and other liabilities 264,738
---------------
Total liabilities 8,932,009
---------------
Net Assets
Net assets $ 726,332,958
===============
Net Assets Consist of
Class A Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized $ 1,969,477
Class B Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 1,015,067
Class C Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 349,527
Class I Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 1,656,100
Class R Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 790
Paid-in capital in excess of par 738,369,357
Undistributed investment income--net $ 7,492,018
Accumulated realized capital losses--net (161,248,407)
Unrealized appreciation--net 136,729,029
---------------
Total accumulated losses--net (17,027,360)
---------------
Net Assets $ 726,332,958
===============
MERRILL LYNCH EUROFUND, OCTOBER 31, 2004
Statement of Assets and Liabilities (concluded)
As of October 31, 2004
Net Asset Value
Class A--Based on net assets of $296,757,068 and 19,694,772 shares of beneficial
interest outstanding $ 15.07
===============
Class B--Based on net assets of $132,724,966 and 10,150,674 shares of beneficial
interest outstanding $ 13.08
===============
Class C--Based on net assets of $44,165,934 and 3,495,267 shares of beneficial
interest outstanding $ 12.64
===============
Class I--Based on net assets of $252,580,493 and 16,561,003 shares of beneficial
interest outstanding $ 15.25
===============
Class R--Based on net assets of $104,497 and 7,897 shares of beneficial interest
outstanding $ 13.23
===============
See Notes to Financial Statements.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2004
Statement of Operations
For the Year Ended October 31, 2004
Investment Income
Dividends (net of $2,471,193 foreign withholding tax) $ 16,352,214
Interest (including $95,138 from affiliates) 150,810
Securities lending--net 48,858
---------------
Total income 16,551,882
---------------
Expenses
Investment advisory fees $ 4,951,042
Account maintenance and distribution fees--Class B 990,670
Account maintenance fees--Class A 729,091
Transfer agent fees--Class A 500,955
Transfer agent fees--Class I 412,077
Account maintenance and distribution fees--Class C 297,580
Accounting services 267,119
Custodian fees 253,939
Transfer agent fees--Class B 200,579
Registration fees 91,264
Professional fees 84,782
Printing and shareholder reports 80,846
Transfer agent fees--Class C 61,379
Trustees' fees and expenses 45,474
Pricing fees 12,458
Account maintenance and distribution fees--Class R 148
Transfer agent fees--Class R 91
Other 53,928
---------------
Total expenses 9,033,422
---------------
Investment income--net 7,518,460
---------------
Realized & Unrealized Gain (Loss)--Net
Realized gain (loss)on:
Investments--net 66,426,176
Foreign currency transactions--net (11,778) 66,414,398
---------------
Change in unrealized appreciation/depreciation on:
Investments--net 43,956,515
Foreign currency transactions--net 329,933 44,286,448
--------------- ---------------
Total realized and unrealized gain--net 110,700,846
---------------
Net Increase in Net Assets Resulting from Operations $ 118,219,306
===============
See Notes to Financial Statements.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2004
Statements of Changes in Net Assets
For the Year Ended October 31,
Increase (Decrease) in Net Assets: 2004 2003
Operations
Investment income--net $ 7,518,460 $ 9,743,958
Realized gain (loss)--net 66,414,398 (57,762,001)
Change in unrealized appreciation/depreciation--net 44,286,448 165,363,369
--------------- ---------------
Net increase in net assets resulting from operations 118,219,306 117,345,326
--------------- ---------------
Dividends to Shareholders
Investment income--net:
Class A (4,465,133) (3,781,571)
Class B (965,539) (279,315)
Class C (308,166) (188,282)
Class I (4,042,258) (3,186,060)
Class R (2) --
--------------- ---------------
Net decrease in net assets resulting from dividends to shareholders (9,781,098) (7,435,228)
--------------- ---------------
Beneficial Interest Transactions
Net decrease in net assets derived from beneficial interest transactions (5,745,667) (74,261,031)
--------------- ---------------
Redemption Fees
Redemption fees 635 --
--------------- ---------------
Net Assets
Total increase in net assets 102,693,176 35,649,067
Beginning of year 623,639,782 587,990,715
--------------- ---------------
End of year* $ 726,332,958 $ 623,639,782
=============== ===============
* Undistributed investment income--net $ 7,492,018 $ 9,760,049
=============== ===============
See Notes to Financial Statements.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2004
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: 2004 2003 2002 2001 2000
Per Share Operating Performance
Net asset value, beginning of year $ 12.86 $ 10.67 $ 11.89 $ 14.40 $ 17.07
---------- ---------- ---------- ---------- ----------
Investment income--net** .18 .20 .16 .18 .25
Realized and unrealized gain (loss)--net 2.24 2.14 (1.20) (1.96) (.08)
---------- ---------- ---------- ---------- ----------
Total from investment operations 2.42 2.34 (1.04) (1.78) .17
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.21) (.15) (.18) -- (.30)
In excess of investment income--net -- -- -- -- (.01)
Realized gain--net -- -- -- (.50) (2.53)
In excess of realized gain--net -- -- -- (.23) --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.21) (.15) (.18) (.73) (2.84)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 15.07 $ 12.86 $ 10.67 $ 11.89 $ 14.40
========== ========== ========== ========== ==========
Total Investment Return*
Based on net asset value per share 18.98% 22.29% (8.93%) (13.18%) 1.32%
========== ========== ========== ========== ==========
Ratios to Average Net Assets
Expenses 1.30% 1.33% 1.31% 1.31% 1.22%
========== ========== ========== ========== ==========
Investment income--net 1.24% 1.78% 1.35% 1.36% 1.65%
========== ========== ========== ========== ==========
Supplemental Data
Net assets, end of year (in thousands) $ 296,757 $ 280,223 $ 265,602 $ 276,919 $ 328,628
========== ========== ========== ========== ==========
Portfolio turnover 78.02% 64.01% 39.98% 37.77% 100.17%
========== ========== ========== ========== ==========
* Total investment returns exclude the effects of sales charges.
** Based on average shares outstanding.
See Notes to Financial Statements.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2004
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: 2004 2003 2002 2001 2000
Per Share Operating Performance
Net asset value, beginning of year $ 11.18 $ 9.25 $ 10.25 $ 12.48 $ 15.15
---------- ---------- ---------- ---------- ----------
Investment income--net** .03 .10 .03 .07 .12
Realized and unrealized gain (loss)--net 1.99 1.85 (1.00) (1.70) (.08)
---------- ---------- ---------- ---------- ----------
Total from investment operations 2.02 1.95 (.97) (1.63) .04
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.12) (.02) (.03) -- (.18)
In excess of investment income--net -- -- -- -- --++
Realized gain--net -- -- -- (.41) (2.53)
In excess of realized gain--net -- -- -- (.19) --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.12) (.02) (.03) (.60) (2.71)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 13.08 $ 11.18 $ 9.25 $ 10.25 $ 12.48
========== ========== ========== ========== ==========
Total Investment Return*
Based on net asset value per share 18.14% 21.19% (9.51%) (13.87%) .48%
========== ========== ========== ========== ==========
Ratios to Average Net Assets
Expenses 2.09% 2.12% 2.10% 2.08% 1.99%
========== ========== ========== ========== ==========
Investment income--net .23% .98% .30% .62% .90%
========== ========== ========== ========== ==========
Supplemental Data
Net assets, end of year (in thousands) $ 132,725 $ 96,395 $ 108,337 $ 253,646 $ 481,876
========== ========== ========== ========== ==========
Portfolio turnover 78.02% 64.01% 39.98% 37.77% 100.17%
========== ========== ========== ========== ==========
* 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, 2004
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: 2004 2003 2002 2001 2000
Per Share Operating Performance
Net asset value, beginning of year $ 10.83 $ 9.00 $ 10.03 $ 12.25 $ 14.93
---------- ---------- ---------- ---------- ----------
Investment income--net** .02 .09 .05 .07 .11
Realized and unrealized gain (loss)--net 1.92 1.81 (1.00) (1.67) (.07)
---------- ---------- ---------- ---------- ----------
Total from investment operations 1.94 1.90 (.95) (1.60) .04
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.13) (.07) (.08) -- (.19)
In excess of investment income--net -- -- -- -- --++
Realized gain--net -- -- -- (.42) (2.53)
In excess of realized gain--net -- -- -- (.20) --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.13) (.07) (.08) (.62) (2.72)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 12.64 $ 10.83 $ 9.00 $ 10.03 $ 12.25
========== ========== ========== ========== ==========
Total Investment Return*
Based on net asset value per share 18.06% 21.29% (9.59%) (13.88%) .49%
========== ========== ========== ========== ==========
Ratios to Average Net Assets
Expenses 2.08% 2.12% 2.10% 2.10% 2.00%
========== ========== ========== ========== ==========
Investment income--net .20% .99% .48% .58% .88%
========== ========== ========== ========== ==========
Supplemental Data
Net assets, end of year (in thousands) $ 44,166 $ 25,134 $ 24,153 $ 30,838 $ 43,736
========== ========== ========== ========== ==========
Portfolio turnover 78.02% 64.01% 39.98% 37.77% 100.17%
========== ========== ========== ========== ==========
* 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, 2004
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: 2004 2003 2002 2001 2000
Per Share Operating Performance
Net asset value, beginning of year $ 13.01 $ 10.80 $ 12.03 $ 14.56 $ 17.24
---------- ---------- ---------- ---------- ----------
Investment income--net** .21 .23 .18 .22 .28
Realized and unrealized gain (loss)--net 2.27 2.17 (1.20) (1.98) (.07)
---------- ---------- ---------- ---------- ----------
Total from investment operations 2.48 2.40 (1.02) (1.76) .21
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.24) (.19) (.21) -- (.35)
In excess of investment income--net -- -- -- -- (.01)
Realized gain--net -- -- -- (.52) (2.53)
In excess of realized gain--net -- -- -- (.25) --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.24) (.19) (.21) (.77) (2.89)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 15.25 $ 13.01 $ 10.80 $ 12.03 $ 14.56
========== ========== ========== ========== ==========
Total Investment Return*
Based on net asset value per share 19.26% 22.57% (8.68%) (12.95%) 1.52%
========== ========== ========== ========== ==========
Ratios to Average Net Assets
Expenses 1.05% 1.08% 1.06% 1.06% .97%
========== ========== ========== ========== ==========
Investment income--net 1.50% 2.00% 1.46% 1.59% 1.84%
========== ========== ========== ========== ==========
Supplemental Data
Net assets, end of year (in thousands) $ 252,580 $ 221,888 $ 189,899 $ 281,109 $ 368,995
========== ========== ========== ========== ==========
Portfolio turnover 78.02% 64.01% 39.98% 37.77% 100.17%
========== ========== ========== ========== ==========
* Total investment returns exclude the effects of sales charges.
** Based on average shares outstanding.
See Notes to Financial Statements.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2004
Financial Highlights (concluded)
Class R
The following per share data and ratios have been derived For the For the Period
from information provided in the financial statements. Year Ended January 3, 2003++
October 31, to October 31,
Increase (Decrease) in Net Asset Value: 2004 2003
Per Share Operating Performance
Net asset value, beginning of period $ 11.32 $ 9.67
------------ ------------
Investment income--net*** .33 .25
Realized and unrealized gain--net 1.82 1.40
------------ ------------
Total from investment operations 2.15 1.65
------------ ------------
Less dividends from investment income--net (.24) --
------------ ------------
Net asset value, end of period $ 13.23 $ 11.32
============ ============
Total Investment Return**
Based on net asset value per share 19.22% 17.06%+++
============ ============
Ratios to Average Net Assets
Expenses 1.35% 1.58%*
============ ============
Investment income--net 2.51% 1.50%*
============ ============
Supplemental Data
Net assets, end of period (in thousands) $ 104 --++++
============ ============
Portfolio turnover 78.02% 64.01%
============ ============
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Based on average shares outstanding.
++ Commencement of operations.
++++ Amount is less than $1,000.
+++ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2004
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 U.S. generally accepted accounting
principles, which may require the use of management accruals and
estimates. Actual results may differ from these estimates. The Fund
offers multiple classes of shares. 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 (except that Class B shareholders may vote on material
changes to the Class A distribution plan). Income, expenses (other
than expenses attributable to a specific class) and realized and
unrealized gains and losses 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, 2004
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 may 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 may 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) Dividends and distributions--Dividends and distributions paid by
the Fund are recorded on the ex-dividend dates.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2004
Notes to Financial Statements (continued)
(h) 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.
(i) Custodian bank--The Fund recorded an amount payable to the
custodian bank reflecting an overnight overdraft, which resulted
from management estimates of available cash.
(j) Reclassifications--U.S. generally accepted accounting
principles require that certain components of net assets be
adjusted to reflect permanent differences between financial
and tax reporting. Accordingly, during the current year,
$25,884,208 has been reclassified between paid-in capital in
excess of par and accumulated realized net capital losses, $11,778
has been reclassified between undistributed net investment income
and accumulated realized net capital losses and $6,385 has been
reclassified between paid-in capital in excess of par and
undistributed net investment income as a result of permanent
differences attributable to limitations on the utilization of
capital loss carryforwards, foreign currency transactions and
non-deductible expenses. 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%
MERRILL LYNCH EUROFUND, OCTOBER 31, 2004
Notes to Financial Statements (continued)
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, Class C and Class R
shareholders. The ongoing distribution fee compensates the
Distributor and MLPF&S for providing shareholder and distribution-
related services to Class B, Class C and Class R shareholders.
For the year ended October 31, 2004, 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 $ 2,011 $ 25,245
Class I $ 229 $ 3,161
For the year ended October 31, 2004, MLPF&S received contingent
deferred sales charges of $266,989 and $3,878 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,
2004, MLIM, LLC received $19,994 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, 2004, the Fund reimbursed MLIM
$13,347 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, 2004 were $512,192,310 and
$622,525,954, respectively.
4. Shares of Beneficial Interest:
Net decrease in net assets derived from beneficial interest
transactions was $5,745,667 and $74,261,031 for the year ended
October 31, 2004 and the year ended October 31, 2003, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Year Dollar
Ended October 31, 2004 Shares Amount
Shares sold 694,486 $ 9,796,831
Automatic conversion of shares 853,461 12,235,452
Shares issued to shareholders
in reinvestment of dividends 277,998 3,775,211
Shares issued resulting from
reorganization 471,734 6,615,501
-------------- ---------------
Total issued 2,297,679 32,422,995
Shares redeemed (4,399,923) (62,434,629)
-------------- ---------------
Net decrease (2,102,244) $ (30,011,634)
============== ===============
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)
============== ===============
MERRILL LYNCH EUROFUND, OCTOBER 31, 2004
Notes to Financial Statements (continued)
Class B Shares for the Year Dollar
Ended October 31, 2004 Shares Amount
Shares sold 695,607 $ 8,646,065
Shares issued to shareholders
in reinvestment of dividends 69,927 830,038
Shares issued resulting from
reorganization 4,337,313 52,862,876
-------------- ---------------
Total issued 5,102,847 62,338,979
Shares redeemed (2,593,448) (32,155,835)
Automatic conversion of shares (980,237) (12,235,452)
-------------- ---------------
Net increase 1,529,162 $ 17,947,692
============== ===============
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 C Shares for the Year Dollar
Ended October 31, 2004 Shares Amount
Shares sold 259,859 $ 3,111,916
Shares issued to shareholders
in reinvestment of dividends 24,054 275,895
Shares issued resulting from
reorganization 1,584,595 18,663,787
-------------- ---------------
Total issued 1,868,508 22,051,598
Shares redeemed (695,064) (8,368,312)
-------------- ---------------
Net increase 1,173,444 $ 13,683,286
============== ===============
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 I Shares for the Year Dollar
Ended October 31, 2004 Shares Amount
Shares sold 2,504,179 $ 36,220,817
Shares issued to shareholders
in reinvestment of dividends 259,805 3,564,504
Shares issued resulting from
reorganization 583,702 8,281,601
-------------- ---------------
Total issued 3,347,686 48,066,922
Shares redeemed (3,846,083) (55,535,220)
-------------- ---------------
Net decrease (498,397) $ (7,468,298)
============== ===============
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)
============== ===============
Class R Shares for the Year Dollar
Ended October 31, 2004 Shares Amount
Shares sold 11,127 $ 142,930
Shares issued to shareholders
in reinvestment of dividends -- 2
Shares issued resulting from
reorganization -- --
-------------- ---------------
Total issued 11,127 142,932
Shares redeemed (3,240) (39,645)
-------------- ---------------
Net increase 7,887 $ 103,287
============== ===============
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.
The Fund charges a 2% redemption fee on the proceeds (calculated at
market value) of a redemption (either by sale or exchange) of Fund
shares made within 30 days of purchase. The redemption fee is paid
to the Fund and is intended to offset the trading costs, market
impact and other costs associated with short-term trading into and
out of the Fund. For the year ended October 31, 2004, the Fund
charged a redemption fee of $635.
MERRILL LYNCH EUROFUND, OCTOBER 31, 2004
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 a
group of 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 defined in the credit
agreement. The Fund did not borrow under the credit agreement during
the year ended October 31, 2004. On November 26, 2004, the credit
agreement was renewed for one year under substantially the same
terms.
6. Acquisition of Merrill Lynch Pan-European Growth Fund:
On August 23, 2004, the Fund acquired substantially all of the
assets and the liabilities of Merrill Lynch Pan-European Growth
Fund of Mercury Funds, Inc. pursuant to a plan of reorganization.
The acquisition was accomplished by a tax-free exchange of 9,632,364
shares of common stock of Merrill Lynch Pan-European Growth Fund
for 6,977,344 shares of common stock of the Fund. Merrill Lynch
Pan-European Growth Fund's net assets on that date of $86,423,765,
including $18,142,529 of net unrealized appreciation and $65,191,777
of accumulated net realized capital losses were combined with those
of the Fund. The aggregate net assets immediately after the
acquisition amounted to $695,739,118.
7. Commitments:
At October 31, 2004, the Fund had outstanding foreign exchange
contracts under which it had agreed to purchase and sell various
foreign currencies with an approximate value of $1,973,915 and
$14,366,298, respectively.
8. Distributions to Shareholders:
The tax character of distributions paid during the fiscal years
ended October 31, 2004 and October 31, 2003 was as follows:
10/31/2004 10/31/2003
Distributions paid from:
Ordinary income $ 9,781,098 $ 7,435,228
-------------- ---------------
Total taxable distributions $ 9,781,098 $ 7,435,228
============== ===============
As of October 31, 2004, the components of accumulated losses on a
tax basis were as follows:
Undistributed ordinary income--net $ 7,476,854
Undistributed long-term capital gains--net --
---------------
Total undistributed earnings--net 7,476,854
Capital loss carryforward (151,829,667)*
Unrealized gains--net 127,325,453**
---------------
Total accumulated losses--net $ (17,027,360)
===============
* On October 31, 2004, the Fund had a net capital loss carry-
forward of $151,829,667, of which $15,545,212 expires in 2008,
$36,103,214 expires in 2009, $44,801,367 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
losses 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, 2004
Report of Independent Registered Public Accounting Firm
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, 2004, 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 the standards of the
Public Company Accounting Oversight Board (United States). 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, 2004, 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, 2004,
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 U.S. generally accepted
accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
December 14, 2004
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 15, 2003:
Qualified Dividend Income for Individuals 100%
Foreign Source Income 97.33
Foreign Taxes Paid Per Share $.032571
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, 2004
Officers and Trustees (unaudited)
Number of
Portfolios in Other Public
Position(s) Length of Fund Complex Directorships
Held with Time Overseen by Held by
Name, Address & Age Fund Served Principal Occupation(s) During Past 5 Years Trustee Trustee
Interested Trustee
Terry K. Glenn* President 1999 to President of the Merrill Lynch Investment 124 Funds None
P.O. Box 9011 and present Managers, L.P. ("MLIM")/Fund Asset 157 Portfolios
Princeton, Trustee Management, L.P. ("FAM")-advised funds
NJ 08543-9011 since 1999; Chairman (Americas Region)
Age: 64 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
present and 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, 2004
Officers and Trustees (unaudited)(continued)
Number of
Portfolios in Other Public
Position(s) Length of Fund Complex Directorships
Held with Time Overseen by Held by
Name, Address & Age 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 48 Funds None
P.O. Box 9095 present Business, State University of New York at 48 Portfolios
Princeton, Albany since 2000 and Professor thereof
NJ 08543-9095 from 1989 to 2000; International Consultant,
Age: 64 Urban Institute, Washington, D.C. from
1995 to 1999.
Cynthia A. Montgomery Trustee 2000 to Professor, Harvard Business School since 48 Funds Newell
P.O. Box 9095 present 1989; Associate Professor, J.L. Kellogg 48 Portfolios Rubbermaid,
Princeton, Graduate School of Management, Northwestern Inc.
NJ 08543-9095 University from 1985 to 1989; Associate
Age: 52 Professor, Graduate School of Business
Administration, University of Michigan
from 1979 to 1985.
Jean Margo Reid Trustee 2004 to Self-employed consultant since 2001; 48 Funds None
P.O. Box 9095 present Counsel of Alliance Capital Management 48 Portfolios
Princeton, (investment adviser) in 2000; General
NJ 08543-9095 Counsel, Director and Secretary of Sanford C.
Age: 59 Bernstein & Co., Inc. (investment adviser/
broker-dealer) from 1997 to 2000; Secretary,
Sanford C. Bernstein Fund, Inc. from 1994
to 2000; Director and Secretary of SCB, Inc.
since 1998; Director and Secretary of SCB
Partners, Inc. since 2000; Director of
Covenant House from 2001 to 2004.
Kevin A. Ryan Trustee 2000 to Founder and currrently Director Emeritus of 48 Funds None
P.O. Box 9095 present Boston University Center for the Advancement 48 Portfolios
Princeton, of Ethics and Character and Director thereof
NJ 08543-9095 from 1989 to 1999; Professor from 1982
Age: 72 to 1999 and currently Professor Emeritus of
Education of Boston University; formerly
taught on the faculties of The University
of Chicago, Stanford University and Ohio
State University.
Roscoe S. Suddarth Trustee 2000 to President, Middle East Institute from 1995 48 Funds None
P.O. Box 9095 present to 2001; Foreign Service Officer, United 48 Portfolios
Princeton, States Foreign Service from 1961 to 1995;
NJ 08543-9095 Career Minister from 1989 to 1995; Deputy
Age: 69 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 Professor of Finance from 1984 to 1995, 48 Funds Bowne & Co.,
P.O. Box 9095 present Dean from 1984 to 1993 and currently Dean 48 Portfolios Inc.; Vornado
Princeton, Emeritus of New York University Leonard N. Realty Trust;
NJ 08543-9095 Stern School of Business Administration, New Vornado
Age: 66 York University from 1995 to present. Operating
Company;
Alexander's, Inc.
Edward D. Zinbarg Trustee 1994 to Self-employed financial consultant since 48 Funds None
P.O. Box 9095 present 1994; Executive Vice President of The 48 Portfolios
Princeton, Prudential Insurance Company of America
NJ 08543-9095 from 1988 to 1994; former Director of
Age: 70 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, 2004
Officers and Trustees (unaudited)(concluded)
Position(s) Length of
Held with Time
Name, Address & Age 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 and Director since 2004; Vice President of FAMD since 1999; Vice President of
NJ 08543-9011 Treasurer 1999 to MLIM and FAM from 1990 to 1997; Director of MLIM Taxation since 1990.
Age: 44 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: 50 thereof from 1998 to 1999; Executive Vice President of Oppenheimer Funds, Inc.
from 1991 to 1999.
Hubertus T. Aarts Vice 2003 to Director of MLIM since 2002; Vice President of MLIM from 1995 to 2000.
P.O. Box 9011 President present
Princeton,
NJ 08543-9011
Age: 41
Jeffrey Hiller Chief 2004 to Chief Compliance Officer of the MLIM/FAM-advised funds and First Vice
P.O. Box 9011 Compliance present President and Chief Compliance Officer of MLIM since 2004; Global Director
Princeton, Officer of Compliance at Morgan Stanley Investment Management from 2002 to 2004;
NJ 08543-9011 Managing Director and Global Director of Compliance at Citigroup Asset
Age: 53 Management from 2000 to 2002; Chief Compliance Officer at Soros Fund
Management in 2000; Chief Compliance Officer at Prudential Financial from
1995 to 2000.
Alice A. Pellegrino Secretary 2004 to Director (Legal Advisory) of MLIM since 2002; Vice President of MLIM from
P.O. Box 9011 present 1999 to 2002; Attorney associated with MLIM since 1997.
Princeton,
NJ 08543-9011
Age: 44
* 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, 2004
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission ("SEC") for the first and third
quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q are
available on the SEC's Web site at http://www.sec.gov. The Fund's
Forms N-Q may also be reviewed and copied at the SEC's Public
Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Electronic Delivery
The Fund offers 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 Web site
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, 2004
Item 2 - Code of Ethics - 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 - Audit Committee Financial Expert - 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 - Principal Accountant Fees and Services
(a) Audit Fees - Fiscal Year Ending October 31, 2004 - $31,000
Fiscal Year Ending October 31, 2003 - $40,000
(b) Audit-Related Fees -
Fiscal Year Ending October 31, 2004 - $0
Fiscal Year Ending October 31, 2003 - $0
(c) Tax Fees - Fiscal Year Ending October 31, 2004 - $5,800
Fiscal Year Ending October 31, 2003 - $6,100
The nature of the services include tax compliance, tax advice and
tax planning.
(d) All Other Fees - Fiscal Year Ending October 31, 2004 - $0
Fiscal Year Ending October 31, 2003 - $0
(e)(1) The registrant's audit committee (the "Committee") has
adopted policies and procedures with regard to the pre-approval of
services. Audit, audit-related and tax compliance services provided
to the registrant on an annual basis require specific pre-approval
by the Committee. The Committee also must approve other non-audit
services provided to the registrant and those non-audit services
provided to the registrant's affiliated service providers that
relate directly to the operations and the financial reporting of the
registrant. Certain of these non-audit services that the Committee
believes are a) consistent with the SEC's auditor independence rules
and b) routine and recurring services that will not impair the
independence of the independent accountants may be approved by the
Committee without consideration on a specific case-by-case basis
("general pre-approval"). However, such services will only be
deemed pre-approved provided that any individual project does not
exceed $5,000 attributable to the registrant or $50,000 for all of
the registrants the Committee oversees. Any proposed services
exceeding the pre-approved cost levels will require specific pre-
approval by the Committee, as will any other services not subject to
general pre-approval (e.g., unanticipated but permissible services).
The Committee is informed of each service approved subject to
general pre-approval at the next regularly scheduled in-person board
meeting.
(e)(2) 0%
(f) Not Applicable
(g) Fiscal Year Ending October 31, 2004 - $13,270,096
Fiscal Year Ending October 31, 2003 - $18,737,552
(h) The registrant's audit committee has considered and determined
that the provision of non-audit services that were rendered to the
registrant's 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.
Regulation S-X Rule 2-01(c)(7)(ii) - $945,000, 0%
Item 5 - Audit Committee of Listed Registrants - Not Applicable
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for
Closed-End Management Investment Companies - Not Applicable
Item 8 - Purchases of Equity Securities by Closed-End Management
Investment Company and Affiliated Purchasers - Not Applicable
Item 9 - Submission of Matters to a Vote of Security Holders - Not
Applicable
Item 10 - Controls and Procedures
10(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.
10(b) - There were no changes in the registrant's internal control
over financial reporting (as defined in Rule 30a-3(d) under the Act
(17 CFR 270.30a-3(d)) that occurred during the second fiscal half-
year of the period covered by this report that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 11 - Exhibits attached hereto
11(a)(1) - Code of Ethics - See Item 2
11(a)(2) - Certifications - Attached hereto
11(a)(3) - Not Applicable
11(b) - Certifications - 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
By: _/s/ Terry K. Glenn_______
Terry K. Glenn,
President of
Merrill Lynch EuroFund
Date: December 13, 2004
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
Date: December 13, 2004
By: _/s/ Donald C. Burke________
Donald C. Burke,
Chief Financial Officer of
Merrill Lynch EuroFund
Date: December 13, 2004