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: 10/31/06
Date of reporting period: 11/01/05 - 04/30/06
Item 1 - Report to Stockholders
Semi-Annual Report
April 30, 2006
Merrill Lynch
EuroFund
(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.
Investment in foreign securities involves special risks including fluctuating
foreign exchange rates, foreign government regulations, differing degrees of
liquidity and the possibility of substantial volatility due to adverse
political, economic or other developments.
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 1-800-637-3863; (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)
It's Fast, Convenient, & Timely!
To sign up today, go to www.icsdelivery.com/live.
Merrill Lynch EuroFund
Announcement to Shareholders
On February 15, 2006, BlackRock, Inc. ("BlackRock") and Merrill Lynch & Co.,
Inc. ("Merrill Lynch") entered into an agreement to contribute Merrill Lynch's
investment management business, Merrill Lynch Investment Managers, L.P. and
certain affiliates (including Fund Asset Management, L.P. and Merrill Lynch
Investment Managers International Limited), to BlackRock to create a new
independent company that will be one of the world's largest asset management
firms with over $1 trillion in assets under management (based on combined
assets under management as of March 31, 2006). The transaction is expected to
close in the third quarter of 2006, at which time the new company will operate
under the BlackRock name. The Fund's Board of Trustees has approved a new
investment advisory agreement with BlackRock Advisors, Inc. or its successor
("BlackRock Advisors") on substantially the same terms and for the same
advisory fee as the current investment advisory agreement with the Investment
Adviser. If the new agreement is approved by the Fund's shareholders,
BlackRock Advisors is expected to become the Fund's investment adviser upon
the closing of the transaction between Merrill Lynch and BlackRock.
Geographic Allocation as a Percentage of Total Investments as of April 30, 2006
Percent of
Total
Country Investments
Belgium 0.9%
Finland 2.4%
France 18.1%
Germany 15.6%
Hungary 1.5%
Italy 10.3%
Netherlands 3.6%
Norway 2.1%
Spain 3.4%
Sweden 4.6%
Switzerland 7.6%
United Kingdom 27.8%
Other* 2.1%
* Includes portfolio holdings in short-term investments and warrants.
MERRILL LYNCH EUROFUND APRIL 30, 2006
A Letter From the President
Dear Shareholder
You may be aware that changes are on the horizon at Merrill Lynch Investment
Managers ("MLIM"). On February 15, 2006, Merrill Lynch announced plans to
combine the firm's investment advisory business, including MLIM, with another
highly regarded investment manager - BlackRock, Inc. ("BlackRock").
We believe this merger of asset management strength will benefit our
investors. MLIM is a leading investment management organization with over
$576 billion in assets under management globally and 2,757 employees in
17 countries. It offers over 100 investment strategies in vehicles ranging
from mutual funds to institutional portfolios. BlackRock is one of the
largest publicly traded investment management firms in the United States
with $463.1 billion in assets under management and 1,839 employees. It
manages assets on behalf of institutional and individual investors worldwide
through a variety of equity, fixed income, liquidity and alternative
investment products.
At the completion of the transaction, which is expected in the third quarter
of this year, the resultant firm will be a top-10 investment manager worldwide
with over $1 trillion in assets under management.* The combined company will
provide a wider selection of high-quality investment solutions across a
range of asset classes and investment styles. MLIM and BlackRock possess
complementary capabilities that together create a well-rounded organization
uniting some of the finest money managers in the industry. At the same time,
the firms share similar values and beliefs - they are focused on delivering
excellence on behalf of clients, and both make investment performance their
single most important mission. In short, the merger only reinforces our
commitment to shareholders.
Most of MLIM's investment products - including mutual funds, separately
managed accounts, annuities and variable insurance funds - eventually will
carry the "BlackRock" name. As a shareholder in one or more MLIM-advised
mutual funds, you will receive a proxy package in the coming weeks in
connection with this transaction. After you receive this information, should
you have any questions or concerns, do not hesitate to contact your financial
advisor.
As always, we thank you for entrusting us with your investment assets, and we
look forward to continuing to serve your investment needs with even greater
strength and scale as the new BlackRock.
Sincerely,
(Robert C. Doll, Jr.)
Robert C. Doll, Jr.
President and Chief Investment Officer
Merrill Lynch Investment Managers
* $1.039 trillion in assets under management as of March 31, 2006.
Data, including assets under management, are as of March 31, 2006.
MERRILL LYNCH EUROFUND APRIL 30, 2006
A Discussion With Your Fund's Portfolio Manager
The Fund outperformed the MSCI Europe Index for the period, benefiting from
both favorable sector allocations and successful stock selection in a
generally positive environment for European equities.
How did the Fund perform during the period in light of the existing market
conditions?
For the six-month period ended April 30, 2006, 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 +25.82%, +25.32%, +25.26%, +26.00% and +25.66%, 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 - 8 of this report to shareholders.) For the same period, the benchmark
Morgan Stanley Capital International (MSCI) Europe Index returned +22.55% (net
return in U.S. dollar terms), while the Fund's comparable Lipper category of
European Region Funds posted an average return of +26.18%. (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.)
Continental European equity markets continued their upward trend during the
six-month period, benefiting from strong global economic growth and European
companies' restructuring efforts. Leading indicators suggest that business
confidence has continued to rise, reflecting improving trends in consumption,
a decrease in unemployment and restructuring at the corporate level. Low
interest rates and financing costs have led to an increase in corporate
spending and merger-and-acquisition activity, and the market is rewarding
companies that look to spend excess cash flow through value-enhancing deals.
Corporate earnings growth was strong during the period with consistent
upgrades to earnings expectations. This has been particularly evident in the
financial and industrial sectors of the market.
What factors most influenced Fund performance during the period?
Fund performance was well diversified for the six-month period, with both
sector allocation and stock selection contributing positively. The portfolio
benefited from an overweight stance in the financial sector, especially
diversified financials and banks, and underweight positions in the more
defensive telecommunications, pharmaceuticals, and food, beverage & tobacco
sectors, all of which underperformed the broader market. The only significant
negative was the Fund's underweight exposure to the materials sector, which
rose sharply amid continued strong global demand and a surge in commodity
prices.
The financial sector was a key area of performance generation during the
period. The Fund's position in Swiss investment bank Credit Suisse Group rose
42% over the six months. The bank not only benefited from a favorable trading
environment in both debt and equity capital markets, but delivered positive
results on the restructuring of its investment bank CSFB. Italian retail bank
Capitalia SpA also contributed positively to Fund performance. The company
rose 71% after a series of strong quarterly results reassured investors
that management's restructuring program remained on track. Also within the
financials sector, U.K. insurer Prudential Plc (+42%), Dutch bank/insurer ING
Groep NV CVA (+44%) and French bank Credit Agricole SA (+38%) had positive
impacts on performance. The Fund also benefited from its positions in Finish
electricity generator Fortum Oyj (+50%) and German utility RWE AG (+39%),
both of which have been well positioned to benefit from a rise in wholesale
electricity prices across much of Europe. Other strong-performing stocks were
German construction group Hochtief AG (+69%), Norwegian oil company Statoil
ASA (+47%) and German steel company ThyssenKrupp AG (+28%).
The stocks that detracted from performance were mainly found in the
telecommunications sector - the worst-performing sector in the MSCI Europe
Index during the period. Telecomms lagged due to investor concerns that
increasing competition, new technologies and government regulation might
erode revenues. In terms of individual stocks, the Fund's holdings in Belgacom
SA (-9%), Deutsche Telekom AG (+1%) and Telenor ASA (-5%) all had a negative
impact on relative results. In addition, the Fund's relative performance was
hindered by its exposure to the large integrated oil majors, including Total
SA (+11%) and ENI SpA (+13%), French car manufacturer Peugeot SA (+8%) and
Italian utility Enel SpA (+10%).
MERRILL LYNCH EUROFUND APRIL 30, 2006
What changes were made to the portfolio during the period?
Our main transactions were the result of "bottom-up" stock selection, based on
our evaluation of companies' individual appreciation prospects. During the
period, we increased exposure to the materials sector through the purchase of
steel producer ThyssenKrupp, which should benefit from increased global demand
for steel, and chemical company BASF AG, which had lagged the sector and is
trading at an attractive valuation. BASF also is restructuring, which we view
as a positive, and its oil business offers some attractive upside. We also
increased exposure to the automobile sector with the purchase of French car
manufacturer Renault SA.
These transactions were funded by reducing the portfolio's holdings in
electricity generators E.On AG and Fortum, both of which reached our price
targets after strong performance. We also sold the Fund's position in Dutch
retailer Koninklijke Ahold NV amid concerns that increased competition in the
United States would impact the company's profit margins.
How would you characterize the Fund's position at the close of the period?
The Fund ended the period significantly overweight relative to the MSCI Europe
Index in financials, primarily through its exposure to banks, diversified
financials and insurance. The financials sector in Europe is well diversified,
and currently trades at an attractive valuation while offering compelling
yields. Other key sector positions in the Fund include overweights in energy
and capital goods. Conversely, the Fund ended the period with underweight
positions in pharmaceuticals, food, beverage & tobacco, media and
telecommunications.
At the country level, the Fund's largest overweight position at period-end
was in Germany, where we are increasingly optimistic on the prospects for
restructuring and reform at the company level. In order to compete on a global
scale, many companies are undergoing widespread corporate change and are
taking action in terms of restructuring and cost cutting. Fund holdings that
fit this description include industrial conglomerate Siemens AG, chemical
company BASF, utility RWE and steel manufacturer ThyssenKrupp.
Business confidence continues to rise in Continental Europe with economic
developments generally surprising on the upside. European companies are in a
healthier financial position than they have been in many years. The global
economic recovery since 2003 has resulted in very strong company cash-flow
generation, magnified by a dramatic improvement in profitability due to
radical restructuring across many European industries. Now that balance sheet
strength has been restored, companies are increasingly looking for suitable
acquisition candidates, and the market appears prepared to reward companies
that aim to boost the sustainable growth rates of their businesses through
increased investment spending and merger-and-acquisition activity. In our
assessment, European equity valuations are still attractive, earnings growth
is strong, and earnings revisions remain positive.
James Macmillan
Vice President and Portfolio Manager
May 11, 2006
MERRILL LYNCH EUROFUND APRIL 30, 2006
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. 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.
* Effective December 28, 2005, Class I Shares are no longer subject to any
front-end sales charge. Class I Shares bear no ongoing distribution or account
maintenance fees and are available only to eligible investors. Had the sales
charge been included, the Fund's Class I Shares' performance would have been
lower.
* 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 or exchange. 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.
Recent Performance Results
6-Month 12-Month 10-Year
As of April 30, 2006 Total Return Total Return Total Return
ML EuroFund Class A Shares* +25.82% +31.35% +231.97%
ML EuroFund Class B Shares* +25.32 +30.37 +211.86
ML EuroFund Class C Shares* +25.26 +30.30 +206.74
ML EuroFund Class I Shares* +26.00 +31.70 +240.38
ML EuroFund Class R Shares* +25.66 +31.03 +227.86
MSCI Europe Index** +22.55 +30.10 +173.14
* 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, 2006
Performance Data (continued)
Average Annual Total Return
Return Without Return With
Sales Charge Sales Charge**
Class A Shares*
One Year Ended 4/30/06 +31.35% +24.46%
Five Years Ended 4/30/06 +10.66 + 9.48
Ten Years Ended 4/30/06 +12.75 +12.14
Return Return
Without CDSC With CDSC++++++
Class B Shares++
One Year Ended 4/30/06 +30.37% +26.37%
Five Years Ended 4/30/06 + 9.80 + 9.53
Ten Years Ended 4/30/06 +12.05 +12.05
Return Return
Without CDSC With CDSC++++++
Class C Shares++++
One Year Ended 4/30/06 +30.30% +29.30%
Five Years Ended 4/30/06 + 9.79 + 9.79
Ten Years Ended 4/30/06 +11.86 +11.86
Class I Shares Return
One Year Ended 4/30/06 +31.70%
Five Years Ended 4/30/06 +10.94
Ten Years Ended 4/30/06 +13.03
Class R Shares Return
One Year Ended 4/30/06 +31.03%
Five Years Ended 4/30/06 +10.66
Ten Years Ended 4/30/06 +12.61
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
++ Maximum contingent deferred sales charge is 4% and is reduced
to 0% after six years.
++++ Maximum contingent deferred sales charge is 1% and is reduced
to 0% after one year.
++++++ Assuming payment of applicable contingent deferred sales
charge.
MERRILL LYNCH EUROFUND APRIL 30, 2006
Performance Data (concluded)
MSCI Country index Performance
Total Return for the
6-Month Period Ended
April 30, 2006
In U.S. dollars*
Country Total Return
Norway 39.1%
Finland 36.7
Ireland 30.7
Sweden 29.6
Germany 28.7
Netherlands 27.8
Denmark 26.6
France 23.1
Italy 21.4
Switzerland 20.2
Spain 19.1
United Kingdom 18.5
* For the 6-month period ended April 30, 2006, total investment return for
the MSCI Europe Index was +22.55%.
Past performance is not a guarantee of future results.
Source: MSCI Europe Index.
MERRILL LYNCH EUROFUND APRIL 30, 2006
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 12b-1 fees, and other Fund expenses. The following example (which is
based on a hypothetical investment of $1,000 invested on November 1, 2005 and
held through April 30, 2006) 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, 2005
November 1, April 30, to April 30,
2005 2006 2006
Actual
Class A $1,000 $1,258.20 $ 6.92
Class B $1,000 $1,253.20 $11.22
Class C $1,000 $1,252.60 $11.21
Class I $1,000 $1,260.00 $ 5.54
Class R $1,000 $1,256.60 $ 8.30
Hypothetical (5% annual return before expenses)**
Class A $1,000 $1,018.37 $ 6.19
Class B $1,000 $1,014.54 $10.03
Class C $1,000 $1,014.54 $10.03
Class I $1,000 $1,019.60 $ 4.95
Class R $1,000 $1,017.14 $ 7.42
* For each class of the Fund, expenses are equal to the annualized expense ratio for the class
(1.25% for Class A, 2.03% for Class B, 2.03% for Class C, 1.00% for Class I and 1.50% for Class R),
multiplied by the average account value over the period, multiplied by 179/365 (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, 2006
Portfolio Information
As of April 30, 2006
Percent of
Ten Largest Equity Holdings Net Assets
Credit Suisse Group 4.9%
Total SA 4.1
ING Groep NV CVA 3.6
Vodafone Group Plc 3.5
ENI SpA 3.5
Banco Bilbao Vizcaya Argentaria SA 3.3
HBOS Plc 3.2
BNP Paribas 3.1
Barclays Plc 3.0
Siemens AG 3.0
Percent of
Five Largest Industries Net Assets
Commercial Banks 24.5%
Oil, Gas & Consumable Fuels 16.4
Insurance 10.6
Diversified Financial Services 6.2
Capital Markets 5.0
For Fund compliance purposes, the Fund's industry classifications
refer to 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 industry
sub-classifications for reporting ease.
MERRILL LYNCH EUROFUND APRIL 30, 2006
Schedule of Investments (in U.S. dollars)
Shares
Country Industry Common Stocks Held Value
Belgium--0.9%
Leisure Equipment & Products--0.9%
AGFA-Gevaert NV 389,580 $ 7,886,116
Total Common Stocks in Belgium 7,886,116
Finland--2.4%
Electric Utilities--2.4%
Fortum Oyj 813,477 20,514,454
Total Common Stocks in Finland 20,514,454
France--17.8%
Automobiles--3.9%
Peugeot SA 211,748 13,896,571
Renault SA 165,732 19,206,349
-------------
33,102,920
Commercial Banks--6.2%
BNP Paribas 276,012 26,041,164
BNP Paribas (a) 30,764 2,803,703
Credit Agricole SA 587,854 23,651,299
-------------
52,496,166
Construction & Engineering--1.7%
Vinci SA 122,860 12,187,417
Vinci SA--New Shares (a) 22,338 2,180,703
-------------
14,368,120
Food & Staples Retailing--1.9%
Carrefour SA 282,190 16,344,107
Oil, Gas & Consumable Fuels--4.1%
Total SA 127,960 35,331,770
Total Common Stocks in France 151,643,083
Germany--15.4%
Air Freight & Logistics--2.2%
Deutsche Post AG 709,099 18,873,697
Chemicals--2.0%
BASF AG (a) 194,197 16,624,420
Construction & Engineering--1.7%
Hochtief AG 208,463 14,232,424
Industrial Conglomerates--3.0%
Siemens AG 266,771 25,202,898
Insurance--2.0%
Allianz AG Registered Shares 100,472 16,794,481
Metals & Mining--2.5%
ThyssenKrupp AG 659,747 21,715,380
Multi-Utilities--2.0%
RWE AG 195,973 16,964,068
Total Common Stocks in Germany 130,407,368
Shares
Country Industry Common Stocks Held Value
Hungary--1.4%
Oil, Gas & Consumable Fuels--1.4%
Mol Magyar Olaj-es Gazipari Rt. 102,595 $ 12,190,246
Total Common Stocks in Hungary 12,190,246
Italy--10.2%
Commercial Banks--3.9%
Capitalia SpA 1,429,446 12,388,160
UniCredito Italiano SpA 2,761,260 20,775,449
-------------
33,163,609
Electric Utilities--1.4%
Enel SpA 1,372,313 11,851,535
Insurance--1.4%
Assicurazioni Generali SpA 317,174 11,870,003
Oil, Gas & Consumable Fuels--3.5%
ENI SpA 968,619 29,551,378
Total Common Stocks in Italy 86,436,525
Netherlands--3.6%
Diversified Financial Services--3.6%
ING Groep NV CVA 744,773 30,264,876
Food & Staples Retailing--0.0%
Koninklijke Ahold NV (a) 22,230 183,413
Total Common Stocks in the Netherlands 30,448,289
Norway--2.1%
Oil, Gas & Consumable Fuels--2.1%
Statoil ASA 538,548 17,697,328
Total Common Stocks in Norway 17,697,328
Spain--3.3%
Commercial Banks--3.3%
Banco Bilbao Vizcaya Argentaria SA 1,271,888 28,053,408
Total Common Stocks in Spain 28,053,408
Sweden--4.5%
Commercial Banks--1.9%
Svenska Handelsbanken Class A 560,970 16,063,954
Diversified Financial Services--2.6%
Investor AB 1,131,872 22,067,964
Total Common Stocks in Sweden 38,131,918
Switzerland--7.4%
Capital Markets--4.9%
Credit Suisse Group 666,419 41,739,932
Insurance--2.5%
Swiss Reinsurance Registered Shares 87,485 6,365,743
Zurich Financial Services AG 62,749 15,223,727
-------------
21,589,470
Total Common Stocks in Switzerland 63,329,402
MERRILL LYNCH EUROFUND APRIL 30, 2006
Schedule of Investments (concluded) (in U.S. dollars)
Shares
Country Industry Common Stocks Held Value
United Kingdom--27.4%
Aerospace & Defense--1.7%
BAE Systems Plc 1,892,762 $ 14,363,606
Commercial Banks--9.2%
Barclays Plc 2,078,150 25,874,886
HBOS Plc 1,544,871 27,027,380
Royal Bank of Scotland Group Plc 772,457 25,146,693
-------------
78,048,959
Insurance--4.7%
Aviva Plc 1,492,165 21,725,028
Prudential Plc 1,547,142 18,096,297
-------------
39,821,325
Oil, Gas & Consumable
Fuels--5.3%
BP Plc 1,679,922 20,657,031
Royal Dutch Shell Plc Class B 695,982 24,807,705
-------------
45,464,736
Specialty Retail--1.2%
Kesa Electricals Plc 1,723,803 9,932,484
Transportation Infrastructure--1.8%
BAA Plc 991,880 15,279,524
Wireless Telecommunication
Services--3.5%
Vodafone Group Plc 12,626,489 29,720,996
Total Common Stocks in the United Kingdom 232,631,630
Total Common Stocks
(Cost--$569,975,601)--96.4% 819,369,767
Shares
Country Industry Warrants (d) Held Value
United Kingdom--0.1%
Capital Markets--0.1%
Deutsche Bank AG (expires 9/15/2006) 2,917,812 $ 715,982
Total Warrants
(Cost--$1,760,717)--0.1% 715,982
Rights
Switzerland--0.0%
Insurance--0.0%
Swiss Reinsurance (e) 87,485 0
Total Rights (Cost--$0)--0.0% 0
Beneficial
Short-Term Securities Interest
Merrill Lynch Liquidity Series, LLC
Cash Sweep Series I,
4.75% (b)(c) $ 16,594,438 16,594,438
Total Short-Term Securities
(Cost--$16,594,438)--2.0% 16,594,438
Total Investments (Cost--$588,330,756*)--98.5% 836,680,187
Other Assets Less Liabilities--1.5% 13,042,804
-------------
Net Assets--100.0% $ 849,722,991
=============
* The cost and unrealized appreciation (depreciation) of investments
as of April 30, 2006, as computed for federal income tax purposes,
were as follows:
Aggregate cost $ 596,637,006
================
Gross unrealized appreciation $ 245,296,471
Gross unrealized depreciation (5,253,290)
----------------
Net unrealized appreciation $ 240,043,181
================
(a) Non-income producing security.
(b) Represents the current yield as of 4/30/2006.
(c) Investments in companies considered to be an affiliate of the Fund,
for purposes of 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 $12,986,000 $235,070
Merrill Lynch Liquidity Series, LLC
Money Market Series (8,150,887) $ 7,658
(d) Warrants entitle the Fund to purchase a predetermined number of
shares of common stock and are non-income producing. The purchase
price and number of shares are subject to adjustment under certain
conditions until the expiration date.
(e) The rights may be exercised until 5/08/2006.
o For Fund compliance purposes, the Fund's industry classifications
refer to 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 industry
sub-classifications for reporting ease. Industries are shown as a
percent of net assets.
o Forward foreign exchange contracts as of April 30, 2006
were as follows:
Foreign Settlement Unrealized
Currency Sold Date Depreciation
EUR 6,680,301 May 2006 $ (84,295)
-----------
Total Unrealized Depreciation on Forward Foreign
Exchange Contracts--Net (USD Commitment--$8,333,160) $ (84,295)
===========
See Notes to Financial Statements.
MERRILL LYNCH EUROFUND APRIL 30, 2006
Statement of Assets and Liabilities
As of April 30, 2006
Assets
Investments in unaffiliated securities, at value (identified cost--$571,736,318) $ 820,085,749
Investments in affiliated securities, at value (identified cost--$16,594,438) 16,594,438
Foreign cash (cost--$225) 230
Receivables:
Securities sold $ 13,899,667
Dividends 5,193,335
Beneficial interest sold 716,955 19,809,957
---------------
Prepaid expenses and other assets 56,523
---------------
Total assets 856,546,897
---------------
Liabilities
Unrealized depreciation on forward foreign exchange contracts 84,295
Bank overdraft 3,269,985
Payables:
Beneficial interest redeemed 2,137,348
Investment adviser 475,156
Other affiliates 252,752
Distributor 195,718
Securities purchased 174,566 3,235,540
---------------
Accrued expenses 234,086
---------------
Total liabilities 6,823,906
---------------
Net Assets
Net assets $ 849,722,991
===============
Net Assets Consist of
Class A Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized $ 1,794,756
Class B Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 597,433
Class C Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 304,348
Class I Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 1,383,205
Class R Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 8,748
Paid-in capital in excess of par 590,916,792
Undistributed investment income--net $ 5,094,785
Undistributed realized capital gains--net 1,099,829
Unrealized appreciation--net 248,523,095
---------------
Total accumulated earnings--net 254,717,709
---------------
Net Assets $ 849,722,991
===============
Net Asset Value
Class A--Based on net assets of $383,922,792 and 17,947,564 shares of beneficial
interest outstanding $ 21.39
===============
Class B--Based on net assets of $110,605,879 and 5,974,333 shares of beneficial
interest outstanding $ 18.51
===============
Class C--Based on net assets of $54,249,378 and 3,043,482 shares of beneficial
interest outstanding $ 17.82
===============
Class I--Based on net assets of $299,317,474 and 13,832,047 shares of beneficial
interest outstanding $ 21.64
===============
Class R--Based on net assets of $1,627,468 and 87,484 shares of beneficial
interest outstanding $ 18.60
===============
See Notes to Financial Statements.
MERRILL LYNCH EUROFUND APRIL 30, 2006
Statement of Operations
For the Six Months Ended April 30, 2006
Investment Income
Dividends (net of $942,136 foreign withholding tax) $ 11,620,537
Interest from affiliates 235,070
Securities lending--net 7,658
---------------
Total income 11,863,265
---------------
Expenses
Investment advisory fees $ 2,878,743
Account maintenance and distribution fees--Class B 524,179
Account maintenance fees--Class A 421,927
Account maintenance and distribution fees--Class C 239,479
Transfer agent fees--Class A 217,529
Custodian fees 179,971
Transfer agent fees--Class I 178,106
Accounting services 144,510
Transfer agent fees--Class B 79,620
Printing and shareholder reports 40,358
Transfer agent fees--Class C 37,074
Professional fees 33,550
Registration fees 31,877
Trustees' fees and expenses 22,070
Pricing fees 4,760
Account maintenance and distribution fees--Class R 2,975
Transfer agent fees--Class R 764
Other 20,949
---------------
Total expenses 5,058,441
---------------
Investment income--net 6,804,824
---------------
Realized & Unrealized Gain (Loss)--Net
Realized gain (loss) on:
Investments--net 60,883,168
Foreign currency transactions--net (120,385) 60,762,783
---------------
Change in unrealized appreciation on:
Investments--net 112,163,435
Foreign currency transactions--net 87,171 112,250,606
--------------- ---------------
Total realized and unrealized gain--net 173,013,389
---------------
Net Increase in Net Assets Resulting from Operations $ 179,818,213
===============
See Notes to Financial Statements.
MERRILL LYNCH EUROFUND APRIL 30, 2006
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 2006 2005
Operations
Investment income--net $ 6,804,824 $ 13,497,007
Realized gain--net 60,762,783 101,410,969
Change in unrealized appreciation--net 112,250,606 (456,540)
--------------- ---------------
Net increase in net assets resulting from operations 179,818,213 114,451,436
--------------- ---------------
Dividends to Shareholders
Investment income--net:
Class A (6,259,841) (3,365,709)
Class B (1,569,366) (817,956)
Class C (794,429) (349,969)
Class I (5,788,862) (3,564,298)
Class R (28,475) (2,125)
--------------- ---------------
Net decrease in net assets resulting from dividends to shareholders (14,440,973) (8,100,057)
--------------- ---------------
Beneficial Interest Transactions
Net decrease in net assets derived from beneficial interest transactions (39,158,252) (109,193,086)
--------------- ---------------
Redemption Fees
Redemption fees 1,525 11,227
--------------- ---------------
Net Assets
Total increase (decrease) in net assets 126,220,513 (2,830,480)
Beginning of period 723,502,478 726,332,958
--------------- ---------------
End of period* $ 849,722,991 $ 723,502,478
=============== ===============
* Undistributed investment income--net $ 5,094,785 $ 12,730,934
=============== ===============
See Notes to Financial Statements.
MERRILL LYNCH EUROFUND APRIL 30, 2006
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. 2006 2005 2004 2003 2002
Per Share Operating Performance
Net asset value, beginning of period $ 17.33 $ 15.07 $ 12.86 $ 10.67 $ 11.89
---------- ---------- ---------- ---------- ----------
Investment income--net*** .17 .31 .18 .20 .16
Realized and unrealized gain (loss)--net 4.24++ 2.12++ 2.24++ 2.14 (1.20)
---------- ---------- ---------- ---------- ----------
Total from investment operations 4.41 2.43 2.42 2.34 (1.04)
---------- ---------- ---------- ---------- ----------
Less dividends from investment income--net (.35) (.17) (.21) (.15) (.18)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 21.39 $ 17.33 $ 15.07 $ 12.86 $ 10.67
========== ========== ========== ========== ==========
Total Investment Return**
Based on net asset value per share 25.82%+++ 16.20% 18.98% 22.29% (8.93%)
========== ========== ========== ========== ==========
Ratios to Average Net Assets
Expenses 1.25%* 1.24% 1.30% 1.33% 1.31%
========== ========== ========== ========== ==========
Investment income--net 1.86%* 1.84% 1.24% 1.78% 1.35%
========== ========== ========== ========== ==========
Supplemental Data
Net assets, end of period (in thousands) $ 383,923 $ 312,606 $ 296,757 $ 280,223 $ 265,602
========== ========== ========== ========== ==========
Portfolio turnover 36.06% 72.29% 78.02% 64.01% 39.98%
========== ========== ========== ========== ==========
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Based on average shares outstanding.
++ Includes redemption fee, which is less than $.01 per share.
+++ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH EUROFUND APRIL 30, 2006
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. 2006 2005 2004 2003 2002
Per Share Operating Performance
Net asset value, beginning of period $ 14.99 $ 13.08 $ 11.18 $ 9.25 $ 10.25
---------- ---------- ---------- ---------- ----------
Investment income--net*** .08 .16 .03 .10 .03
Realized and unrealized gain (loss)--net 3.68++ 1.84++ 1.99++ 1.85 (1.00)
---------- ---------- ---------- ---------- ----------
Total from investment operations 3.76 2.00 2.02 1.95 (.97)
---------- ---------- ---------- ---------- ----------
Less dividends from investment income--net (.24) (.09) (.12) (.02) (.03)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 18.51 $ 14.99 $ 13.08 $ 11.18 $ 9.25
========== ========== ========== ========== ==========
Total Investment Return**
Based on net asset value per share 25.32%+++ 15.28% 18.14% 21.19% (9.51%)
========== ========== ========== ========== ==========
Ratios to Average Net Assets
Expenses 2.03%* 2.01% 2.09% 2.12% 2.10%
========== ========== ========== ========== ==========
Investment income--net 1.03%* 1.06% .23% .98% .30%
========== ========== ========== ========== ==========
Supplemental Data
Net assets, end of period (in thousands) $ 110,606 $ 103,836 $ 132,725 $ 96,395 $ 108,337
========== ========== ========== ========== ==========
Portfolio turnover 36.06% 72.29% 78.02% 64.01% 39.98%
========== ========== ========== ========== ==========
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Based on average shares outstanding.
++ Includes redemption fee, which is less than $.01 per share.
+++ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH EUROFUND APRIL 30, 2006
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. 2006 2005 2004 2003 2002
Per Share Operating Performance
Net asset value, beginning of period $ 14.47 $ 12.64 $ 10.83 $ 9.00 $ 10.03
---------- ---------- ---------- ---------- ----------
Investment income--net*** .08 .15 .02 .09 .05
Realized and unrealized gain (loss)--net 3.53++ 1.78++ 1.92++ 1.81 (1.00)
---------- ---------- ---------- ---------- ----------
Total from investment operations 3.61 1.93 1.94 1.90 (.95)
---------- ---------- ---------- ---------- ----------
Less dividends from investment income--net (.26) (.10) (.13) (.07) (.08)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 17.82 $ 14.47 $ 12.64 $ 10.83 $ 9.00
========== ========== ========== ========== ==========
Total Investment Return**
Based on net asset value per share 25.26%+++ 15.33% 18.06% 21.29% (9.59%)
========== ========== ========== ========== ==========
Ratios to Average Net Assets
Expenses 2.03%* 2.02% 2.08% 2.12% 2.10%
========== ========== ========== ========== ==========
Investment income--net 1.07%* 1.05% .20% .99% .48%
========== ========== ========== ========== ==========
Supplemental Data
Net assets, end of period (in thousands) $ 54,249 $ 44,881 $ 44,166 $ 25,134 $ 24,153
========== ========== ========== ========== ==========
Portfolio turnover 36.06% 72.29% 78.02% 64.01% 39.98%
========== ========== ========== ========== ==========
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Based on average shares outstanding.
++ Includes redemption fee, which is less than $.01 per share.
+++ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH EUROFUND APRIL 30, 2006
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. 2006 2005 2004 2003 2002
Per Share Operating Performance
Net asset value, beginning of period $ 17.54 $ 15.25 $ 13.01 $ 10.80 $ 12.03
---------- ---------- ---------- ---------- ----------
Investment income--net*** .20 .36 .21 .23 .18
Realized and unrealized gain (loss)--net 4.29++ 2.15++ 2.27++ 2.17 (1.20)
---------- ---------- ---------- ---------- ----------
Total from investment operations 4.49 2.51 2.48 2.40 (1.02)
---------- ---------- ---------- ---------- ----------
Less dividends from investment income--net (.39) (.22) (.24) (.19) (.21)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 21.64 $ 17.54 $ 15.25 $ 13.01 $ 10.80
========== ========== ========== ========== ==========
Total Investment Return**
Based on net asset value per share 26.00%+++ 16.52% 19.26% 22.57% (8.68%)
========== ========== ========== ========== ==========
Ratios to Average Net Assets
Expenses 1.00%* .99% 1.05% 1.08% 1.06%
========== ========== ========== ========== ==========
Investment income--net 2.07%* 2.09% 1.50% 2.00% 1.46%
========== ========== ========== ========== ==========
Supplemental Data
Net assets, end of period (in thousands) $ 299,317 $ 261,358 $ 252,580 $ 221,888 $ 189,899
========== ========== ========== ========== ==========
Portfolio turnover 36.06% 72.29% 78.02% 64.01% 39.98%
========== ========== ========== ========== ==========
* Annualized.
** Total investment returns exclude the effects of sales charges. Effective December 28, 2005,
Class I Shares are no longer subject to any front-end sales charge.
*** Based on average shares outstanding.
++ Includes redemption fee, which is less than $.01 per share.
+++ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH EUROFUND APRIL 30, 2006
Financial Highlights (concluded)
Class R
For the Period
For the January 3,
Period Ended For the Year Ended 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. 2006 2005 2004 2003
Per Share Operating Performance
Net asset value, beginning of period $ 15.14 $ 13.23 $ 11.32 $ 9.67
---------- ---------- ---------- ----------
Investment income--net** .13 .18 .33 .25
Realized and unrealized gain--net 3.69++ 1.93++ 1.82++ 1.40
---------- ---------- ---------- ----------
Total from investment operations 3.82 2.11 2.15 1.65
---------- ---------- ---------- ----------
Less dividends from investment income--net (.36) (.20) (.24) --
---------- ---------- ---------- ----------
Net asset value, end of period $ 18.60 $ 15.14 $ 13.23 $ 11.32
========== ========== ========== ==========
Total Investment Return
Based on net asset value per share 25.66%+++ 16.01% 19.22% 17.06%+++
========== ========== ========== ==========
Ratios to Average Net Assets
Expenses 1.50%* 1.48% 1.35% 1.58%*
========== ========== ========== ==========
Investment income--net 1.57%* 1.10% 2.51% 1.50%*
========== ========== ========== ==========
Supplemental Data
Net assets, end of period (in thousands) $ 1,627 $ 823 $ 104 --++++
========== ========== ========== ==========
Portfolio turnover 36.06% 72.29% 78.02% 64.01%
========== ========== ========== ==========
* Annualized.
** Based on average shares outstanding.
++ Includes redemption fee, which is less than $.01 per share.
++++ Amount is less, than $1,000.
+++ Aggregate total investment return.
+++++ Commencement of operations.
See Notes to Financial Statements.
MERRILL LYNCH EUROFUND APRIL 30, 2006
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. Effective
December 28, 2006, Class I Shares are no longer subject to any front-end sales
charge. Shares of Class A 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 I Shares are sold only to certain eligible investors. 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 based upon fair
valuations received daily by the Fund from a pricing service or counterparty.
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. Valuation of other short-term investment
vehicles is generally based on the net asset value of the underlying
investment vehicle or amortized cost.
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, money market instruments and certain fixed income securities, 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 APRIL 30, 2006
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. The Fund invests in foreign securities, which may involve a
number of risk factors and special considerations not present with investments
in securities of U.S. corporations.
(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, 2006
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) Bank Overdraft--The Fund recorded an amount payable to the custodian
reflecting an overnight overdraft, which resulted from failed trades.
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.
For the six months ended April 30, 2006, 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 $ 1,637 $ 18,153
Class I $ 4 $ 58
MERRILL LYNCH EUROFUND APRIL 30, 2006
Notes to Financial Statements (continued)
For the six months ended April 30, 2006, MLPF&S received contingent deferred
sales charges of $9,081 and $1,178 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 six months ended April 30,
2006, MLIM, LLC received $3,055 in securities lending agent fees.
In addition, MLPF&S received $11,516 in commissions on the execution of
portfolio security transactions for the Fund for the six months ended
April 30, 2006.
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, 2006, the Fund reimbursed MLIM $7,457 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, ML & Co., and/or MLIM, LLC.
In February 2006, ML & Co. and BlackRock, Inc. entered into an agreement to
contribute ML & Co.'s investment management business, including MLIM, to the
investment management business of BlackRock, Inc. The transaction is expected
to close in the third quarter of 2006.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
six months ended April 30, 2006 were $278,248,840 and $353,793,508,
respectively.
4. Shares of Beneficial Interest:
Net decrease in net assets derived from beneficial interest transactions was
$39,158,252 and $109,193,086 for the six months ended April 30, 2006 and the
year ended October 31, 2005, respectively.
Transactions in shares of beneficial interest for each class were as follows:
Class A Shares for the
Six Months Ended Dollar
April 30, 2006 Shares Amount
Shares sold 1,386,969 $ 27,438,793
Automatic conversion of shares 303,675 5,892,552
Shares issued to shareholders in
reinvestment of dividends 289,051 5,263,623
--------------- ---------------
Total issued 1,979,695 38,594,968
Shares redeemed (2,068,152) (40,065,424)
--------------- ---------------
Net decrease (88,457) $ (1,470,456)
=============== ===============
Class A Shares for the Year Dollar
Ended October 31, 2005 Shares Amount
Shares sold 730,850 $ 12,402,263
Automatic conversion of shares 884,567 15,092,810
Shares issued to shareholders in
reinvestment of dividends 170,169 2,814,591
--------------- ---------------
Total issued 1,785,586 30,309,664
Shares redeemed (3,444,337) (58,496,300)
--------------- ---------------
Net decrease (1,658,751) $ (28,186,636)
=============== ===============
Class B Shares for the
Six Months Ended Dollar
April 30, 2006 Shares Amount
Shares sold 259,627 $ 4,385,411
Shares issued to shareholders in
reinvestment of dividends 82,366 1,301,388
--------------- ---------------
Total issued 341,993 5,686,799
--------------- ---------------
Shares redeemed (943,460) (15,602,870)
Automatic conversion of shares (350,569) (5,892,552)
--------------- ---------------
Total redeemed (1,294,029) (21,495,422)
--------------- ---------------
Net decrease (952,036) $ (15,808,623)
=============== ===============
Class B Shares for the Year Dollar
Ended October 31, 2005 Shares Amount
Shares sold 621,825 $ 9,113,250
Shares issued to shareholders in
reinvestment of dividends 46,466 669,568
--------------- ---------------
Total issued 668,291 9,782,818
--------------- ---------------
Shares redeemed (2,873,266) (42,086,236)
Automatic conversion of shares (1,019,330) (15,092,810)
--------------- ---------------
Total redeemed (3,892,596) (57,179,046)
--------------- ---------------
Net decrease (3,224,305) $ (47,396,228)
=============== ===============
MERRILL LYNCH EUROFUND APRIL 30, 2006
Notes to Financial Statements (concluded)
Class C Shares for the
Six Months Ended Dollar
April 30, 2006 Shares Amount
Shares sold 214,519 $ 3,476,968
Shares issued to shareholders in
reinvestment of dividends 44,392 675,644
--------------- ---------------
Total issued 258,911 4,152,612
Shares redeemed (318,071) (5,058,827)
--------------- ---------------
Net decrease (59,160) $ (906,215)
=============== ===============
Class C Shares for the Year Dollar
Ended October 31, 2005 Shares Amount
Shares sold 272,704 $ 3,909,716
Shares issued to shareholders in
reinvestment of dividends 21,164 294,186
--------------- ---------------
Total issued 293,868 4,203,902
Shares redeemed (686,493) (9,693,026)
--------------- ---------------
Net decrease (392,625) $ (5,489,124)
=============== ===============
Class I Shares for the
Six Months Ended Dollar
April 30, 2006 Shares Amount
Shares sold 1,167,119 $ 22,957,153
Shares issued to shareholders in
reinvestment of dividends 268,460 4,939,666
--------------- ---------------
Total issued 1,435,579 27,896,819
Shares redeemed (2,500,803) (49,417,286)
--------------- ---------------
Net decrease (1,065,224) $ (21,520,467)
=============== ===============
Class I Shares for the Year Dollar
Ended October 31, 2005 Shares Amount
Shares sold 2,353,688 $ 40,343,208
Shares issued to shareholders in
reinvestment of dividends 181,926 3,039,982
--------------- ---------------
Total issued 2,535,614 43,383,190
Shares redeemed (4,199,346) (72,200,408)
--------------- ---------------
Net decrease (1,663,732) $ (28,817,218)
=============== ===============
Class R Shares for the
Six Months Ended Dollar
April 30, 2006 Shares Amount
Shares sold 65,190 $ 1,077,893
Shares issued to shareholders in
reinvestment of dividends 1,797 28,475
--------------- ---------------
Total issued 66,987 1,106,368
Shares redeemed (33,840) (558,859)
--------------- ---------------
Net increase 33,147 $ 547,509
=============== ===============
Class R Shares for the Year Dollar
Ended October 31, 2005 Shares Amount
Shares sold 83,995 $ 1,255,856
Shares issued to shareholders in
reinvestment of dividends 147 2,125
--------------- ---------------
Total issued 84,142 1,257,981
Shares redeemed (37,702) (561,861)
--------------- ---------------
Net increase 46,440 $ 696,120
=============== ===============
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 or exchange. 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, 2006. On
November 23, 2005, the credit agreement was renewed for one year under
substantially the same terms.
6. Capital Loss Carryforward:
On October 31, 2005, the Fund had a net capital loss carryforward of
$53,074,584, of which $6,606,462 expires in 2008, $11,183,902 expires in 2009,
and $35,284,220 expires in 2011. This amount will be available to offset like
amounts of any future taxable gains.
7. Reorganization Plan:
The Board of Trustees approved a plan of reorganization, subject to
shareholder approval and certain other conditions, whereby the Fund will
acquire substantially all of the assets and assume substantially all of the
liabilities of The Europe Fund, Inc. in exchange for newly issued shares of
the Fund.
MERRILL LYNCH EUROFUND APRIL 30, 2006
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
James A. Macmillan, Vice President
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
MERRILL LYNCH EUROFUND APRIL 30, 2006
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, 2006
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 22, 2006
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 22, 2006
By: /s/ Donald C. Burke
---------------------------
Donald C. Burke,
Chief Financial Officer of
Merrill Lynch EuroFund
Date: June 22, 2006