UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
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: Robert C. Doll, Jr., Chief Executive
Officer, 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: 10/31/05
Date of reporting period: 11/01/04 - 04/30/05
Item 1 - Report to Stockholders
Merrill Lynch
EuroFund
Semi-Annual Report
April 30, 2005
(BULL LOGO) Merrill Lynch Investment Managers
www.mlim.ml.com
Mercury Advisors
A Division of Merrill Lynch Investment Managers
www.mercury.ml.com
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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Merrill Lynch EuroFund
Portfolio Information as of April 30, 2005
Percent of
Ten Largest Equity Holdings Net Assets
Royal Bank of Scotland Group Plc 4.0%
Total SA 4.0
Barclays Plc 3.6
BP Plc 3.5
RWE AG 2.8
Credit Suisse Group 2.8
ENI SpA 2.5
BNP Paribas 2.5
GlaxoSmithKline Plc 2.4
Peugeot SA 2.3
Percent of
Five Largest Industries* Net Assets
Commercial Banks 20.7%
Oil & Gas 11.8
Insurance 6.5
Diversified Telecommunication Services 5.5
Diversified Financial Services 4.8
* 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.
Geographic Allocation as a Percentage of Total Investments as of
April 30, 2005
A pie chart illustrates the following:
Percent of
Total
Country Investments
Belgium 2.1%
Denmark 1.3%
France 15.0%
Germany 12.1%
Ireland 1.7%
Italy 8.9%
Netherlands 7.6%
Norway 4.9%
Portugal 1.7%
Spain 1.5%
Sweden 4.1%
Switzerland 8.3%
United Kingdom 30.1%
Other* 0.7%
* Includes portfolio holdings in short-term investments.
MERRILL LYNCH EUROFUND, APRIL 30, 2005
A Letter From the President
Dear Shareholder
Financial markets faced a number of crosscurrents over the past several
months, but most major benchmarks managed to post positive returns for the
annual and semi-annual reporting periods ended April 30, 2005:
Total Returns as of April 30, 2005 6-month 12-month
U.S. equities (Standard & Poor's 500 Index) +3.28% + 6.34%
Small-cap U.S. equities (Russell 2000 Index) -0.15% + 4.71%
International equities (MSCI Europe Australasia Far East Index) +8.71% +14.95%
Fixed income (Lehman Brothers Aggregate Bond Index) +0.98% + 5.26%
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) +1.93% + 6.81%
High yield bonds (Credit Suisse First Boston High Yield Index) +0.65% + 6.92%
After expanding at an annualized rate of 4.4% in 2004, U.S. gross domestic
product growth for the first quarter of 2005 came in at an estimated 3.1%
(although that figure was later revised upward to 3.5%). Nevertheless, the
Federal Reserve Board continued increasing interest rates at a measured
pace to combat emergent inflation. The most recent hike came on May 3, and
brought the federal funds rate to 3%. Recently, signs of inflation have
taken the form of rising business costs and increasing consumer prices,
particularly in the areas of gasoline, healthcare, housing and education.
U.S. equities ended 2004 in a strong rally, but stumbled into negative
territory in 2005. The market weakness was largely fueled by the potential
for slowing economic and corporate earnings growth, renewed energy price
concerns and a lack of investor conviction. On the positive side, certain
sectors of the market have been performing well (particularly energy) and
corporate transactions, such as mergers and acquisitions, stock buy-backs
and dividend payouts, have all increased. International equities,
especially in Asia, have benefited from higher economic growth rates.
In the bond market, we witnessed a yield curve flattening trend over the
past several months as short-term yields increased and longer-term interest
rates remained more stable or fell. At the end of April 2005, the two-year
Treasury note yielded 3.66% and the 10-year Treasury note yielded 4.21%, a
difference of 55 basis points (.55%). This compared to a spread of 149 basis
points six months earlier and 222 basis points 12 months ago.
Looking ahead, the environment is likely to be a challenging one for
investors. With this in mind, we encourage you to meet with your financial
advisor to review your goals and asset allocation and to rebalance your
portfolio, as necessary, to ensure it remains aligned with your objectives
and risk tolerance. As always, 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,
(Robert C. Doll, Jr.)
Robert C. Doll, Jr.
President and Trustee
MERRILL LYNCH EUROFUND, APRIL 30, 2005
A Discussion With Your Fund's Portfolio Manager
The Fund outperformed its benchmark and its Lipper category average for the
six-month period, as we continued to invest in stocks leveraged to an
economic recovery in Europe.
How did the Fund perform during the period in light of the existing market
conditions?
For the six-month period ended April 30, 2005, 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 +11.31%, +10.82%, +10.86%, +11.47% and +11.26%,
respectively. (Fund results shown do not reflect sales charges and would be
lower if sales charges were included. Complete performance information can
be found on pages 6 - 9 of this report to shareholders.) For the same
period, the Fund's benchmark, the Morgan Stanley Capital International
(MSCI) Europe Index, returned +9.55% (net return in U.S. dollar terms),
while the Fund's comparable Lipper category of European Region Funds posted
an average return of +10.14%. (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 six months, we observed a significant sector rotation
within the equity markets. European equity markets advanced strongly from
November 2004 to mid-March 2005. Despite a challenging macroeconomic
backdrop (including another sharp spike in the price of oil, rising U.S.
interest rates and a weak U.S. dollar), the markets found support in the
uncontested outcome of the U.S. presidential election and generally
encouraging company results in Europe. Not surprisingly, in this environment
of rising stock prices, cyclical areas of the market and financial sectors
with direct exposure to the equity markets outperformed. Nevertheless,
this momentum came under pressure in the final months of the semi-annual
period. Equity markets were dragged down by concerns over global economic
growth and investor fears that higher inflation would bring more aggressive
interest rate hikes by the U.S. Federal Reserve Board. The materials and
information technology sectors led the decline, which was further accelerated
by investor fears over the weaker growth outlook. In this environment, it
was the more defensive sectors and higher-quality companies that outperformed.
What factors influenced Fund performance during the period?
Both stock selection and sector exposure had a positive impact on
performance over the past six months. Favorable stock picking in sectors
such as capital goods, banks and diversified financials benefited the
Fund's relative results. Our stock selection in these sectors provided
better returns than the benchmark's stocks. The portfolio also benefited
significantly from its underweight exposure to information technology and
telecommunications, as both sectors underperformed the broader market
during the period.
Conversely, sectors that detracted from Fund returns, primarily due to
stock-specific performance, were food and staples retailing and materials.
Our underweight positions in food, beverage and tobacco, as well as
pharmaceuticals, also hampered relative results.
At the individual stock level, the Fund benefited from its overweight
positions in Capitalia SpA, Deutsche Boerse AG and Continental AG.
Capitalia (with an absolute return of +42%) performed well after stronger-
than-expected earnings reflected the effects of restructuring and cost
cutting, as well as bid speculation within the Italian banking sector.
Deutsche Boerse (+51%), a trading exchange, benefited after the company
announced it was withdrawing its bid for the London Stock Exchange in favor
of returning cash to shareholders through share buybacks. Finally, German
car components maker Continental (+35%) appreciated in response to strong
demand from auto manufacturers for its ESP (electronic stability program)
product. Other top performers included French construction group Vinci SA
(+28%), U.K. tobacco manufacturer Gallaher Group Plc (+23%) and Norwegian
oil producer Statoil ASA (+20%).
Stocks that detracted most from relative performance included French car
manufacturer PSA Peugeot Citroen SA (-4%), which fell as the company
disappointed investors by not increasing its dividend; U.K. retailer Boots
Group Plc (-4%), which declined due to a poor earnings statement and
concerns over a slowdown in U.K. consumer spending; Portuguese utility
company Energias de Portugal SA (EDP) (0%), which underperformed in line
with the broader utility sector; and French bank BNP Paribas (-3%) and the
Royal Bank of Scotland Group Plc (+5%), both of which suffered on general
concerns over European economic growth and a consumer slowdown. Although
Royal Bank of Scotland achieved a positive absolute return over the past
six months, it underperformed the broader market and our overweight
position proved unfavorable to relative results.
MERRILL LYNCH EUROFUND, APRIL 30, 2005
What changes were made to the portfolio during the period?
In the U.K. market, we added to our position in Gallaher given its
relatively attractive valuation and high dividend yield. The company also
has been the subject of takeover rumors within the tobacco industry.
Similarly, we increased our position in Cadbury Schweppes Plc based on its
attractive valuation and positive news flow on the Adams acquisition.
Cadbury Schweppes became the world's largest confectionery company following
the acquisition of Adams group, a unit of U.S.-based Pfizer. The additions
were funded through the sale of consumer goods leader Unilever Plc and
insurance company Aviva Plc, both of which reached our target prices.
In mainland Europe, we liquidated our position in Anglo Dutch oil major
Royal Dutch Petroleum Co. We used the proceeds to add to our position in
Norwegian oil company Statoil, which is trading at an attractive valuation
and should benefit from the recent high oil price. We also sold our holding
in Swiss investment bank UBS AG in favor of Credit Suisse Group, which is
trading at an attractive valuation and, in our view, should benefit from
management's restructuring of its investment management division. Other
significant purchases in mainland Europe included German utility company
RWE AG, Norwegian telecommunications company Telenor ASA, French retailer
Carrefour SA, Danish bank Danske Bank A/S and French car manufacturer PSA
Peugeot Citroen. Finally, a number of Fund holdings were sold during the
period as they reached our target prices. These included Swiss pharmaceutical
company Novartis AG, Italian electricity supplier Enel SpA and Belgian
bank Dexia.
The individual transactions executed during the period resulted in some
change in the portfolio's sector composition. The Fund's five largest
industries at April 30, 2005 were commercial banks (20.7% of net assets),
oil and gas (11.8%), insurance (6.5%), diversified telecommunication
services (5.5%) and diversified financial services (4.8%). This compared to
the five largest allocations at October 31, 2004: commercial banks (20.8%),
oil and gas (14.1%), diversified telecommunication services (6.3%),
electric utilities (5.8%) and insurance (5.2%).
How would you characterize the Fund's position at the close of the period?
At the end of the period, the Fund was overweight in cyclical and financial
stocks and underweight in growth companies and the defensive areas of the
market. More specifically, the Fund was overweight in capital goods, banks
and diversified financials, and underweight in pharmaceuticals, media,
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.
Recent surveys suggest that business confidence has deteriorated in Europe
against a backdrop of a strong euro and high energy prices. However,
earnings growth remains robust at close to double-digit levels despite weak
nominal revenue trends due to corporate restructuring, both financial and
operational. European equity valuations look attractive on both an absolute
and relative basis. The consensus view is that economic growth will remain
below its potential rate for the foreseeable future. As a result, few
observers expect the European Central Bank to raise interest rates any time
soon, and official interest rates in the United Kingdom may also be close
to a peak now.
We continue to believe that fundamental factors such as earnings growth
and cash-flow generation will be increasingly important to investors and
believe that Merrill Lynch EuroFund is well positioned for progress in the
future.
James Macmillan
Portfolio Manager
May 31, 2005
We are pleased to announce that James Macmillan is now primarily
responsible for the day-to-day management of Merrill Lynch EuroFund.
Mr. Macmillan has been a Managing Director of Merrill Lynch Investment
Managers, L.P. since 2000 and a Director thereof from 1993 to 2000.
MERRILL LYNCH EUROFUND, APRIL 30, 2005
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 distribution 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. Prior to inception,
Class R Share performance results are those of Class I Shares (which have
no distribution or account management fees) restated for Class R Share
fees.
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 may charge 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, APRIL 30, 2005
Performance Data (continued)
Recent Performance Results
6-Month 12-Month 10-Year
As of April 30, 2005 Total Return Total Return Total Return
ML EuroFund Class A Shares* +11.31% +19.47% +191.15%
ML EuroFund Class B Shares* +10.82 +18.53 +173.48
ML EuroFund Class C Shares* +10.86 +18.56 +169.00
ML EuroFund Class I Shares* +11.47 +19.71 +198.57
ML EuroFund Class R Shares* +11.26 +19.38 +187.65
MSCI Europe Index** + 9.55 +18.30 +143.44
* Investment results shown do not reflect sales charges; results shown would be lower if a sales charge was included.
Cumulative 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.
** This unmanaged capitalization-weighted Index is comprised of a representative sampling of large-, medium- and
small-capitalization companies in developed European countries.
MERRILL LYNCH EUROFUND, APRIL 30, 2005
Performance Data (continued)
Average Annual Total Return
Return Without Return With
Sales Charge Sales Charge**
Class A Shares*
One Year Ended 4/30/05 +19.47% +13.20%
Five Years Ended 4/30/05 + 5.06 + 3.93
Ten Years Ended 4/30/05 +11.28 +10.68
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
Return Return
Without CDSC With CDSC**
Class B Shares*
One Year Ended 4/30/05 +18.53% +14.53%
Five Years Ended 4/30/05 + 4.24 + 3.90
Ten Years Ended 4/30/05 +10.58 +10.58
* Maximum contingent deferred sales charge is 4% and is reduced to
0% after six years.
** Assuming payment of applicable contingent deferred sales charge.
Return Return
Without CDSC With CDSC**
Class C Shares*
One Year Ended 4/30/05 +18.56% +17.56%
Five Years Ended 4/30/05 + 4.23 + 4.23
Ten Years Ended 4/30/05 +10.40 +10.40
* 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 4/30/05 +19.71% +13.43%
Five Years Ended 4/30/05 + 5.31 + 4.18
Ten Years Ended 4/30/05 +11.56 +10.96
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
Class R Shares Return
One Year Ended 4/30/05 +19.38%
Five Years Ended 4/30/05 + 5.05
Ten Years Ended 4/30/05 +11.14
MERRILL LYNCH EUROFUND, APRIL 30, 2005
Performance Data (concluded)
MSCI COUNTRY INDEX PERFORMANCE
Total Return for the 6-Month Period Ended April 30, 2005
In U.S. dollars*
Percent of
Country Total Return
Norway 14.8%
Denmark 14.5
Italy 12.0
Switzerland 11.5
United Kingdom 10.3
Sweden 9.2
Spain 9.1
Finland 8.6
Netherlands 8.6
France 7.4
Germany 6.9
Ireland (0.3)
Source: MSCI Europe Index.
* For the 6-month period ended April 30, 2005, total investment return
for the MSCI Europe Index was +9.55%.
MERRILL LYNCH EUROFUND, APRIL 30, 2005
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 November 1, 2004 and held through April 30, 2005) 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
Beginning Ending During the Period*
Account Value Account Value November 1, 2004 to
November 1, April 30, April 30,
2004 2005 2005
Actual
Class A $1,000 $1,113.10 $ 6.53
Class B $1,000 $1,108.20 $10.56
Class C $1,000 $1,108.60 $10.62
Class I $1,000 $1,114.70 $ 5.22
Class R $1,000 $1,112.60 $ 7.74
Hypothetical (5% annual return before expenses)**
Class A $1,000 $1,018.72 $ 6.24
Class B $1,000 $1,014.88 $10.10
Class C $1,000 $1,014.83 $10.15
Class I $1,000 $1,019.96 $ 4.99
Class R $1,000 $1,017.57 $ 7.39
* For each class of the Fund, expenses are equal to the annualized expense ratio for the class
(1.24% for Class A, 2.01% for Class B, 2.02% for Class C, .99% for Class I and 1.47% for Class R),
multiplied by the average account value over the period, multiplied by 182/365 (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 365.
MERRILL LYNCH EUROFUND, APRIL 30, 2005
Schedule of Investments (in U.S. dollars)
Shares
Country Industry* Common Stocks Held Value
Belgium--2.1%
Diversified Telecommunication
Services--1.6%
Belgacom SA 306,774 $ 11,785,579
Leisure Equipment & Products--0.5%
AGFA-Gevaert NV 113,056 3,702,860
Total Common Stocks in Belgium 15,488,439
Denmark--1.3%
Commercial Banks--1.3%
Danske Bank A/S 323,549 9,507,711
Total Common Stocks in Denmark 9,507,711
France--14.9%
Automobiles--2.3%
Peugeot SA 289,694 17,226,041
Commercial Banks--2.5%
BNP Paribas 278,486 18,436,456
Construction & Engineering--1.6%
Vinci SA 80,929 12,202,107
Food & Staples Retailing--1.4%
Carrefour SA 220,665 10,751,655
Hotels, Restaurants & Leisure--0.4%
Accor SA 66,617 3,058,373
Metals & Mining--1.5%
Arcelor 558,826 11,366,238
Oil & Gas--4.0%
Total SA 133,315 29,740,945
Pharmaceuticals--1.2%
Sanofi-Aventis 98,486 8,749,376
Total Common Stocks in France 111,531,191
Germany--12.0%
Air Freight & Logistics--1.9%
Deutsche Post AG 601,176 14,149,210
Auto Components--1.7%
Continental AG 171,039 12,648,486
Construction & Engineering--1.3%
Hochtief AG 325,642 9,706,519
Diversified Financial Services--1.6%
Deutsche Boerse AG 161,891 12,273,776
Diversified Telecommunication
Services--1.2%
Deutsche Telekom AG 458,109 8,684,789
Electric Utilities--1.5%
E.ON AG 131,703 11,198,485
Multi-Utilities & Unregulated
Power--2.8%
RWE AG 356,290 21,342,521
Total Common Stocks in Germany 90,003,786
Ireland--1.7%
Commercial Banks--1.7%
Bank of Ireland 854,002 12,989,850
Total Common Stocks in Ireland 12,989,850
Shares
Country Industry* Common Stocks Held Value
Italy--8.8%
Commercial Banks--3.8%
Banca Intesa SpA 1,653,798 $ 7,921,434
Capitalia SpA 2,421,178 13,018,942
UniCredito Italiano SpA 1,386,479 7,787,072
-------------
28,727,448
Diversified Telecommunication
Services--0.9%
Telecom Italia SpA 1,907,072 6,482,856
Insurance--1.2%
Fondiaria-Sai SpA 334,779 8,627,934
Oil & Gas--2.5%
ENI SpA 751,630 18,961,118
Transportation Infrastructure--0.4%
Societa Iniziative Autostradali e Servizi SpA 235,761 3,300,190
Total Common Stocks in Italy 66,099,546
Netherlands--7.6%
Commercial Services &
Supplies--1.1%
Buhrmann NV 967,988 8,636,530
Construction & Engineering--0.9%
Imtech NV 194,788 6,497,666
Diversified Financial Services--2.0%
ING Groep NV CVA 538,780 14,893,369
Food & Staples Retailing--1.3%
Koninklijke Ahold NV (a) 834,517 6,335,257
Koninklijke Ahold NV (a)(b)(d) 439,668 3,170,226
-------------
9,505,483
Household Durables--1.1%
Koninklijke Philips Electronics NV 333,855 8,308,358
Insurance--1.2%
Aegon NV 699,083 8,792,405
Total Common Stocks in the Netherlands 56,633,811
Norway--4.9%
Commercial Banks--1.3%
DNB NOR ASA 1,004,428 9,603,758
Diversified Telecommunication
Services--1.8%
Telenor ASA 1,627,245 13,622,641
Oil & Gas--1.8%
Statoil ASA 750,095 13,205,328
Total Common Stocks in Norway 36,431,727
Portugal--1.7%
Electric Utilities--1.7%
Energias de Portugal SA 4,596,124 12,484,849
Total Common Stocks in Portugal 12,484,849
Spain--1.5%
Tobacco--1.5%
Altadis SA 268,049 11,394,546
Total Common Stocks in Spain 11,394,546
MERRILL LYNCH EUROFUND, APRIL 30, 2005
Schedule of Investments (concluded) (in U.S. dollars)
Shares
Country Industry* Common Stocks Held Value
Sweden--4.1%
Diversified Financial Services--1.2%
Investor AB 700,229 $ 9,201,274
Insurance--1.0%
Skandia Forsakrings AB 1,555,612 7,385,925
Machinery--1.9%
Volvo AB Class B 352,831 14,319,853
Total Common Stocks in Sweden 30,907,052
Switzerland--8.2%
Capital Markets--2.8%
Credit Suisse Group 498,553 21,064,367
Chemicals--1.2%
Clariant AG 567,228 8,939,942
Construction Materials--1.8%
Holcim Ltd. 225,228 13,733,891
Electrical Equipment--1.1%
ABB Ltd. (a) 1,352,914 8,494,933
Insurance--1.3%
Swiss Life Holding (a) 69,525 9,626,989
Total Common Stocks in Switzerland 61,860,122
United Kingdom--29.8%
Aerospace & Defense--1.9%
BAE Systems Plc 2,901,427 14,230,002
Commercial Banks--10.1%
Barclays Plc 2,621,187 27,070,005
HBOS Plc 750,367 11,140,235
HSBC Holdings Plc 481,074 7,701,741
Royal Bank of Scotland Group Plc 991,159 29,962,333
-------------
75,874,314
Food & Staples Retailing--1.2%
Boots Group Plc 801,622 9,224,062
Food Products--1.8%
Cadbury Schweppes Plc 1,337,088 13,463,086
Shares
Country Industry* Common Stocks Held Value
United Kingdom (concluded)
Industrial Conglomerates--1.7%
Smiths Group Plc 763,558 $ 12,554,203
Insurance--1.8%
Prudential Plc 1,518,644 13,705,214
Oil & Gas--3.5%
BP Plc 2,595,234 26,484,435
Pharmaceuticals--2.4%
GlaxoSmithKline Plc 713,443 18,043,654
Specialty Retail--1.1%
Kesa Electricals Plc 1,565,131 7,946,934
Tobacco--1.5%
Gallaher Group Plc 727,716 11,361,949
Transportation Infrastructure--1.6%
BAA Plc 1,057,169 11,741,634
Wireless Telecommunication
Services--1.2%
Vodafone Group Plc 3,573,162 9,352,024
Total Common Stocks in the
United Kingdom 223,981,511
Total Common Stocks
(Cost--$587,567,051)--98.6% 739,314,141
Beneficial
Short-Term Securities Interest
Merrill Lynch Liquidity Series, LLC Cash Sweep
Series I (c) $5,303,785 5,303,785
Total Short-Term Securities
(Cost--$5,303,785)--0.7% 5,303,785
Total Investments
(Cost--$592,870,836**)--99.3% 744,617,926
Other Assets Less Liabilities--0.7% 5,504,064
-------------
Net Assets--100.0% $ 750,121,990
=============
* 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.
** The cost and unrealized appreciation (depreciation) of investments as of April 30,
2005, as computed for federal income tax purposes, were as follows:
Aggregate cost $ 602,289,576
================
Gross unrealized appreciation $ 154,251,650
Gross unrealized depreciation (11,923,300)
----------------
Net unrealized appreciation $ 142,328,350
================
(a) Non-income producing security.
(b) Depositary Receipts.
(c) 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:
Net Interest
Affiliate Activity Income
Merrill Lynch Liquidity Series, LLC
Cash Sweep Series I $(6,994,697) $104,731
Merrill Lynch Liquidity Series, LLC
Money Market Series $(1,614,430) $ 1,071
(d) Restricted security as to resale, representing 0.4% of net assets.
Acquisition
Issue Date Cost Value
Koninklijke Ahold NV* 12/11/2003 $2,612,154 $3,170,226
* Depositary Receipts.
See Notes to Financial Statements.
MERRILL LYNCH EUROFUND, APRIL 30, 2005
Statement of Assets and Liabilities
As of April 30, 2005
Assets
Investments in unaffiliated securities, at value (identified cost--$587,567,051) $ 739,314,141
Investments in affiliated securities, at value (identified cost--$5,303,785) 5,303,785
Cash 99,546
Foreign cash (cost--$40,750) 40,728
Receivables:
Dividends $ 7,258,603
Securities sold 4,840,544
Beneficial interest sold 360,642
Interest from affiliates 5,178 12,464,967
---------------
Prepaid expenses and other assets 124,219
---------------
Total assets 757,347,386
---------------
Liabilities
Payables:
Securities purchased 5,176,575
Beneficial interest redeemed 1,048,224
Investment adviser 443,549
Other affiliates 284,788
Distributor 201,598 7,154,734
---------------
Accrued expenses 70,662
---------------
Total liabilities 7,225,396
---------------
Net Assets
Net assets $ 750,121,990
===============
Net Assets Consist of
Class A Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized $ 1,897,401
Class B Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 842,212
Class C Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 324,598
Class I Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 1,598,669
Class R Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 1,980
Paid-in capital in excess of par 688,900,282
Undistributed investment income--net $ 6,540,582
Accumulated realized capital losses--net (101,957,765)
Unrealized appreciation--net 151,974,031
---------------
Total accumulated earnings--net 56,556,848
---------------
Net Assets $ 750,121,990
===============
Net Asset Value
Class A--Based on net assets of $314,985,045 and 18,974,008 shares of beneficial
interest outstanding $ 16.60
===============
Class B--Based on net assets of $121,404,532 and 8,422,117 shares of beneficial
interest outstanding $ 14.41
===============
Class C--Based on net assets of $45,150,518 and 3,245,982 shares of beneficial
interest outstanding $ 13.91
===============
Class I--Based on net assets of $268,294,400 and 15,986,688 shares of beneficial
interest outstanding $ 16.78
===============
Class R--Based on net assets of $287,495 and 19,800 shares of beneficial interest
outstanding $ 14.52
===============
See Notes to Financial Statements.
MERRILL LYNCH EUROFUND, APRIL 30, 2005
Statement of Operations
For the Six Months Ended April 30, 2005
Investment Income
Dividends (net of $1,733,231 foreign withholding tax) $ 12,204,930
Interest from affiliates 104,731
Securities lending--net 1,071
---------------
Total income 12,310,732
---------------
Expenses
Investment advisory fees $ 2,912,480
Account maintenance and distribution fees--Class B 666,249
Account maintenance fees--Class A 401,349
Account maintenance and distribution fees--Class C 232,828
Transfer agent fees--Class A 214,457
Transfer agent fees--Class I 183,912
Accounting services 157,147
Transfer agent fees--Class B 106,201
Custodian fees 104,852
Transfer agent fees--Class C 38,431
Registration fees 35,586
Printing and shareholder reports 32,078
Professional fees 27,883
Trustees' fees and expenses 22,861
Pricing fees 6,124
Account maintenance and distribution fees--Class R 961
Transfer agent fees--Class R 268
Other 18,444
---------------
Total expenses 5,162,111
---------------
Investment income--net 7,148,621
---------------
Realized & Unrealized Gain (Loss)--Net
Realized gainon:
Investments--net 59,131,505
Foreign currency transactions--net 159,137 59,290,642
---------------
Change in unrealized appreciation/depreciation on:
Investments--net 15,457,355
Foreign currency transactions--net (212,353) 15,245,002
--------------- ---------------
Total realized and unrealized gain--net 74,535,644
---------------
Net Increase in Net Assets Resulting from Operations $ 81,684,265
===============
See Notes to Financial Statements.
MERRILL LYNCH EUROFUND, APRIL 30, 2005
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 2005 2004
Operations
Investment income--net $ 7,148,621 $ 7,518,460
Realized gain--net 59,290,642 66,414,398
Change in unrealized appreciation/depreciation--net 15,245,002 44,286,448
--------------- ---------------
Net increase in net assets resulting from operations 81,684,265 118,219,306
--------------- ---------------
Dividends to Shareholders
Investment income--net:
Class A (3,365,709) (4,465,133)
Class B (817,956) (965,539)
Class C (349,969) (308,166)
Class I (3,564,298) (4,042,258)
Class R (2,125) (2)
--------------- ---------------
Net decrease in net assets resulting from dividends to shareholders (8,100,057) (9,781,098)
--------------- ---------------
Beneficial Interest Transactions
Net decrease in net assets derived from beneficial interest transactions (49,806,285) (5,745,667)
--------------- ---------------
Redemption Fees
Redemption fees 11,109 635
--------------- ---------------
Net Assets
Total increase in net assets 23,789,032 102,693,176
Beginning of period 726,332,958 623,639,782
--------------- ---------------
End of period* $ 750,121,990 $ 726,332,958
=============== ===============
* Undistributed investment income--net $ 6,540,582 $ 7,492,018
=============== ===============
See Notes to Financial Statements.
MERRILL LYNCH EUROFUND, APRIL 30, 2005
Financial Highlights
Class A
For the Six
Months Ended
The following per share data and ratios have been derived April 30, For the Year Ended October 31,
from information provided in the financial statements. 2005 2004 2003 2002 2001
Per Share Operating Performance
Net asset value, beginning of period $ 15.07 $ 12.86 $ 10.67 $ 11.89 $ 14.40
---------- ---------- ---------- ---------- ----------
Investment income--net*** .16 .18 .20 .16 .18
Realized and unrealized gain (loss)--net 1.54 2.24 2.14 (1.20) (1.96)
---------- ---------- ---------- ---------- ----------
Total from investment operations 1.70 2.42 2.34 (1.04) (1.78)
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.17) (.21) (.15) (.18) --
Realized gain--net -- -- -- -- (.50)
In excess of realized gain--net -- -- -- -- (.23)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.17) (.21) (.15) (.18) (.73)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 16.60 $ 15.07 $ 12.86 $ 10.67 $ 11.89
========== ========== ========== ========== ==========
Total Investment Return**
Based on net asset value per share 11.31%++ 18.98% 22.29% (8.93%) (13.18%)
========== ========== ========== ========== ==========
Ratios to Average Net Assets
Expenses 1.24%* 1.30% 1.33% 1.31% 1.31%
========== ========== ========== ========== ==========
Investment income--net 1.95%* 1.24% 1.78% 1.35% 1.36%
========== ========== ========== ========== ==========
Supplemental Data
Net assets, end of period (in thousands) $ 314,985 $ 296,757 $ 280,223 $ 265,602 $ 276,919
========== ========== ========== ========== ==========
Portfolio turnover 35.10% 78.02% 64.01% 39.98% 37.77%
========== ========== ========== ========== ==========
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Based on average shares outstanding.
++ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH EUROFUND, APRIL 30, 2005
Financial Highlights (continued)
Class B
For the Six
Months Ended
The following per share data and ratios have been derived April 30, For the Year Ended October 31,
from information provided in the financial statements. 2005 2004 2003 2002 2001
Per Share Operating Performance
Net asset value, beginning of period $ 13.08 $ 11.18 $ 9.25 $ 10.25 $ 12.48
---------- ---------- ---------- ---------- ----------
Investment income--net*** .08 .03 .10 .03 .07
Realized and unrealized gain (loss)--net 1.34 1.99 1.85 (1.00) (1.70)
---------- ---------- ---------- ---------- ----------
Total from investment operations 1.42 2.02 1.95 (.97) (1.63)
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.09) (.12) (.02) (.03) --
Realized gain--net -- -- -- -- (.41)
In excess of realized gain--net -- -- -- -- (.19)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.09) (.12) (.02) (.03) (.60)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 14.41 $ 13.08 $ 11.18 $ 9.25 $ 10.25
========== ========== ========== ========== ==========
Total Investment Return**
Based on net asset value per share 10.82%++ 18.14% 21.19% (9.51%) (13.87%)
========== ========== ========== ========== ==========
Ratios to Average Net Assets
Expenses 2.01%* 2.09% 2.12% 2.10% 2.08%
========== ========== ========== ========== ==========
Investment income--net 1.08%* .23% .98% .30% .62%
========== ========== ========== ========== ==========
Supplemental Data
Net assets, end of period (in thousands) $ 121,405 $ 132,725 $ 96,395 $ 108,337 $ 253,646
========== ========== ========== ========== ==========
Portfolio turnover 35.10% 78.02% 64.01% 39.98% 37.77%
========== ========== ========== ========== ==========
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Based on average shares outstanding.
++ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH EUROFUND, APRIL 30, 2005
Financial Highlights (continued)
Class C
For the Six
Months Ended
The following per share data and ratios have been derived April 30, For the Year Ended October 31,
from information provided in the financial statements. 2005 2004 2003 2002 2001
Per Share Operating Performance
Net asset value, beginning of period $ 12.64 $ 10.83 $ 9.00 $ 10.03 $ 12.25
---------- ---------- ---------- ---------- ----------
Investment income--net*** .08 .02 .09 .05 .07
Realized and unrealized gain (loss)--net 1.29 1.92 1.81 (1.00) (1.67)
---------- ---------- ---------- ---------- ----------
Total from investment operations 1.37 1.94 1.90 (.95) (1.60)
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.10) (.13) (.07) (.08) --
Realized gain--net -- -- -- -- (.42)
In excess of realized gain--net -- -- -- -- (.20)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.10) (.13) (.07) (.08) (.62)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 13.91 $ 12.64 $ 10.83 $ 9.00 $ 10.03
========== ========== ========== ========== ==========
Total Investment Return**
Based on net asset value per share 10.86%++ 18.06% 21.29% (9.59%) (13.88%)
========== ========== ========== ========== ==========
Ratios to Average Net Assets
Expenses 2.02%* 2.08% 2.12% 2.10% 2.10%
========== ========== ========== ========== ==========
Investment income--net 1.15%* .20% .99% .48% .58%
========== ========== ========== ========== ==========
Supplemental Data
Net assets, end of period (in thousands) $ 45,151 $ 44,166 $ 25,134 $ 24,153 $ 30,838
========== ========== ========== ========== ==========
Portfolio turnover 35.10% 78.02% 64.01% 39.98% 37.77%
========== ========== ========== ========== ==========
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Based on average shares outstanding.
++ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH EUROFUND, APRIL 30, 2005
Financial Highlights (continued)
Class I
For the Six
Months Ended
The following per share data and ratios have been derived April 30, For the Year Ended October 31,
from information provided in the financial statements. 2005 2004 2003 2002 2001
Per Share Operating Performance
Net asset value, beginning of period $ 15.25 $ 13.01 $ 10.80 $ 12.03 $ 14.56
---------- ---------- ---------- ---------- ----------
Investment income--net*** .19 .21 .23 .18 .22
Realized and unrealized gain (loss)--net 1.56 2.27 2.17 (1.20) (1.98)
---------- ---------- ---------- ---------- ----------
Total from investment operations 1.75 2.48 2.40 (1.02) (1.76)
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.22) (.24) (.19) (.21) --
Realized gain--net -- -- -- -- (.52)
In excess of realized gain--net -- -- -- -- (.25)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.22) (.24) (.19) (.21) (.77)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 16.78 $ 15.25 $ 13.01 $ 10.80 $ 12.03
========== ========== ========== ========== ==========
Total Investment Return**
Based on net asset value per share 11.47%++ 19.26% 22.57% (8.68%) (12.95%)
========== ========== ========== ========== ==========
Ratios to Average Net Assets
Expenses .99%* 1.05% 1.08% 1.06% 1.06%
========== ========== ========== ========== ==========
Investment income--net 2.20%* 1.50% 2.00% 1.46% 1.59%
========== ========== ========== ========== ==========
Supplemental Data
Net assets, end of period (in thousands) $ 268,294 $ 252,580 $ 221,888 $ 189,899 $ 281,109
========== ========== ========== ========== ==========
Portfolio turnover 35.10% 78.02% 64.01% 39.98% 37.77%
========== ========== ========== ========== ==========
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Based on average shares outstanding.
++ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH EUROFUND, APRIL 30, 2005
Financial Highlights (concluded)
Class R
For the Six For the For the Period
Months Ended Year Ended January 3, 2003++
The following per share data and ratios have been derived April 30, October 31, to October 31,
from information provided in the financial statements. 2005 2004 2003
Per Share Operating Performance
Net asset value, beginning of period $ 13.23 $ 11.32 $ 9.67
------------ ------------ ------------
Investment income--net*** .15 .33 .25
Realized and unrealized gain--net 1.34 1.82 1.40
------------ ------------ ------------
Total from investment operations 1.49 2.15 1.65
------------ ------------ ------------
Less dividends from investment income--net (.20) (.24) --
------------ ------------ ------------
Net asset value, end of period $ 14.52 $ 13.23 $ 11.32
============ ============ ============
Total Investment Return**
Based on net asset value per share 11.26%+++ 19.22% 17.06%+++
============ ============ ============
Ratios to Average Net Assets
Expenses 1.47%* 1.35% 1.58%*
============ ============ ============
Investment income--net 1.62%* 2.51% 1.50%*
============ ============ ============
Supplemental Data
Net assets, end of period (in thousands) $ 287 $ 104 $ --++++
============ ============ ============
Portfolio turnover 35.10% 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, APRIL 30, 2005
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. These unaudited financial statements reflect
all adjustments, which are, in the opinion of management, necessary to
present a fair statement of the results for the interim period. All such
adjustments are of a normal, recurring nature. 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 certain 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 asked 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
asked 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 asked 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.
MERRILL LYNCH EUROFUND, APRIL 30, 2005
Notes to Financial Statements (continued)
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.
(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, APRIL 30, 2005
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.
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 Plan
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., Limited ("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 Plan adopted by the Fund in accordance with
Rule 12b-1 under the Investment Company Act of 1940, the Fund pays the
Distributor ongoing account maintenance and distribution fees. The fees are
accrued daily and paid monthly at annual rates based upon the average daily
net assets of the shares as follows:
Account
Maintenance Distribution
Fee Fee
Class A .25% --
Class B .25% .75%
Class C .25% .75%
Class R .25% .25%
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S"), an affiliate of MLIM, 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. The Fund did not
accrue Class R distribution fees because of regulatory fee limits for a
portion of the six months ended April 30, 2005.
For the six months ended April 30, 2005, FAMD earned underwriting discounts
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 $ 1,452 $ 18,791
Class I $ 294 $ 3,847
For the six months ended April 30, 2005, MLPF&S received contingent deferred
sales charges of $35,427 and $840 relating to transactions in Class B and
Class C Shares, respectively.
MERRILL LYNCH EUROFUND, APRIL 30, 2005
Notes to Financial Statements (continued)
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 six months ended
April 30, 2005, MLIM, LLC received $440 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 six months ended April 30, 2005, the Fund reimbursed MLIM $9,658
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 six months ended April 30, 2005 were $266,630,259 and $300,199,859,
respectively.
4. Shares of Beneficial Interest:
Net decrease in net assets derived from beneficial interest transactions
was $49,806,285 and $5,745,667 for the six months ended April 30, 2005 and
the year ended October 31, 2004, respectively.
Transactions in shares of beneficial interest for each class were as follows:
Class A Shares for the
Six Months Ended Dollar
April 30, 2005 Shares Amount
Shares sold 432,759 $ 7,276,723
Automatic conversion of shares 448,100 7,558,488
Shares issued to shareholders in
reinvestment of dividends 170,169 2,814,591
--------------- ---------------
Total issued 1,051,028 17,649,802
Shares redeemed (1,771,792) (29,526,421)
--------------- ---------------
Net decrease (720,764) $ (11,876,619)
=============== ===============
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 B Shares for the
Six Months Ended Dollar
April 30, 2005 Shares Amount
Shares sold 395,451 $ 5,747,703
Shares issued to shareholders in
reinvestment of dividends 46,466 669,568
--------------- ---------------
Total issued 441,917 6,417,271
--------------- ---------------
Shares redeemed (1,654,739) (23,849,115)
Automatic conversion of shares (515,735) (7,558,488)
--------------- ---------------
Total redeemed (2,170,474) (31,407,603)
--------------- ---------------
Net decrease (1,728,557) $ (24,990,332)
=============== ===============
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)
--------------- ---------------
Total redeemed (3,573,685) (44,391,287)
--------------- ---------------
Net increase 1,529,162 $ 17,947,692
=============== ===============
Class C Shares for the
Six Months Ended Dollar
April 30, 2005 Shares Amount
Shares sold 159,501 $ 2,266,636
Shares issued to shareholders in
reinvestment of dividends 21,164 294,186
--------------- ---------------
Total issued 180,665 2,560,822
Shares redeemed (429,950) (5,979,569)
--------------- ---------------
Net decrease (249,285) $ (3,418,747)
=============== ===============
MERRILL LYNCH EUROFUND, APRIL 30, 2005
Notes to Financial Statements (concluded)
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 I Shares for the
Six Months Ended Dollar
April 30, 2005 Shares Amount
Shares sold 1,523,661 $ 25,730,833
Shares issued to shareholders in
reinvestment of dividends 181,926 3,039,982
--------------- ---------------
Total issued 1,705,587 28,770,815
Shares redeemed (2,279,902) (38,457,681)
--------------- ---------------
Net decrease (574,315) $ (9,686,866)
=============== ===============
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 R Shares for the
Six Months Ended Dollar
April 30, 2005 Shares Amount
Shares sold 45,942 $ 673,817
Shares issued to shareholders in
reinvestment of dividends 147 2,125
--------------- ---------------
Total issued 46,089 675,942
Shares redeemed (34,186) (509,663)
--------------- ---------------
Net increase 11,903 $ 166,279
=============== ===============
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
--------------- ---------------
Total issued 11,127 142,932
Shares redeemed (3,240) (39,645)
--------------- ---------------
Net increase 7,887 $ 103,287
=============== ===============
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.
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 .07% 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 six months ended
April 30, 2005. On November 26, 2004, the credit agreement was renewed for
one year under substantially the same terms.
6. Capital Loss Carryforward:
On October 31, 2004, the Fund had a net capital loss carryforward of
$151,829,665, of which $15,545,212 expires in 2008, $47,287,114 expires in
2009, $33,617,465 expires in 2010 and $55,379,874 expires in 2011. This
amount will be available to offset like amounts of any future taxable
gains.
7. Commitments:
At April 30, 2005, the Fund had outstanding foreign exchange contracts
under which it had agreed to purchase and sell various foreign currencies
with approximate values of $5,184,000 and $4,841,000, respectively.
MERRILL LYNCH EUROFUND, APRIL 30, 2005
Officers and Trustees
Robert C. Doll, Jr., President and Trustee
Ronald W. Forbes, Trustee
Cynthia A. Montgomery, Trustee
Jean Margo Reid, Trustee
Roscoe S. Suddarth, Trustee
Richard R. West, Trustee
Edward D. Zinbarg, Trustee
Donald C. Burke, Vice President and Treasurer
Jeffrey Hiller, Chief Compliance Officer
Alice A. Pellegrino, Secretary
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
Effective January 1, 2005, Terry K. Glenn, President and Trustee and Kevin
A. Ryan, Trustee of Merrill Lynch EuroFund retired. The Fund's Board of
Trustees wishes Messrs. Glenn and Ryan well in their retirements.
Effective January 1, 2005, Robert C. Doll, Jr. became President and Trustee
of the Fund.
MERRILL LYNCH EUROFUND, APRIL 30, 2005
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 at 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, APRIL 30, 2005
Item 2 - Code of Ethics - Not Applicable to this semi-annual report
Item 3 - Audit Committee Financial Expert - Not Applicable to this semi-
annual report
Item 4 - Principal Accountant Fees and Services - Not Applicable to this
semi-annual report
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 - Portfolio Managers of Closed-End Management Investment Companies -
Not Applicable
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 10 - Submission of Matters to a Vote of Security Holders - Not
Applicable
Item 11 - Controls and Procedures
11(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.
11(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 last 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 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - Not Applicable to this semi-annual report
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
12(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/ Robert C. Doll, Jr.
-------------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
Merrill Lynch EuroFund
Date: June 20, 2005
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/ Robert C. Doll, Jr.
--------------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
Merrill Lynch EuroFund
Date: June 20, 2005
By: /s/ Donald C. Burke
----------------------------
Donald C. Burke,
Chief Financial Officer of
Merrill Lynch EuroFund
Date: June 20, 2005