MERRILL LYNCH
S&P 500
INDEX FUND
Merrill Lynch
Index Funds, Inc.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Semi-Annual Report
June 30, 1998
<PAGE>
Merrill Lynch S&P 500 Index Fund
Officers and
Directors
Terry K. Glenn, President and Director
Jack B. Sunderland, Director
Stephen B. Swensrud, Director
J. Thomas Touchton, Director
Jay C. Harbeck, Senior Vice President
Norman R. Harvey, Senior Vice President
Jeffrey B. Hewson, Senior Vice President
Gregory Mark Maunz, Senior Vice President
Joseph T. Monagle Jr., Senior Vice President
Eric S. Mitofsky, Senior Vice President and
Portfolio Manager
Donald C. Burke, Vice President
Gerald M. Richard, Treasurer
Ira P. Shapiro, Secretary
Custodian
Merrill Lynch Trust Company
800 Scudders Mill Road
Plainsboro, NJ 08536
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
<PAGE>
Merrill Lynch S&P 500 Index Fund, June 30, 1998
DEAR SHAREHOLDER
Concerns regarding the impact of the Asian financial and currency crises
reemerged during the second quarter of 1998, but the unmanaged Standard & Poor's
500 Composite (S&P 500) Index still managed to provide investors with a
respectable total return of +3.30% for this period. Combined with the explosive
rally during the first three months of the year, in which the Index had a total
return of +13.95%, the S&P 500 has produced an extraordinary total return of
+17.71% for the first six months of 1998.
Uncertainty regarding the ultimate impact of the turmoil in Asia on earnings of
US corporations became most significant during the month of May, which was the
Index's only negative month through the first half of 1998, and the first down
month for the Index since October 1997. Such worries subsided again in June, as
signs of a moderating US economy caused long-term bonds to rally into record
breaking territory, with the yield on the 30-year US Treasury bond approaching
the 5.50% level by the end of June. This catapulted the S&P 500 Index to a new
all-time high of 1,138.49 just one day prior to the end of the second quarter.
The Index finished the first half of the year at 1,133.84, 163 points above its
1997 year-end close of 970.43.
As has been the case consistently during the past several years, it was once
again the largest stocks within the S&P 500 Index that powered its advance in
the first half of 1998. This occurred despite the potential negative effects
from Asia on the earnings of the huge multinational companies that dominate the
Index. While these concerns led to a nearly 5% decline in the Index between
mid-April and mid-June, the S&P 500 substantially outperformed both the
unmanaged S&P Mid Cap Index and the unmanaged S&P Small Cap Index during the
first half of 1998. In addition, the S&P 500 Index continued to fare better than
the average diversified US stock fund, which, according to Lipper Analytical
Services, posted a modest loss during the second quarter of 1998.
Portfolio Matters
Cash flow into Merrill Lynch S&P 500 Index Fund continued at a solid pace
throughout the first half of 1998 and, combined with continuing advances in the
equity market, net assets grew from $602.58 million at the end of 1997 to $1.01
billion as of June 30, 1998.
The Fund invests all of its assets in Merrill Lynch S&P 500 Index Series, which
has the same investment objective as the Fund. The principal investments of the
Series are a fully replicating portfolio of all 500 stocks in the Index, plus a
long position in S&P 500 futures contracts, which are used to quickly convert
most daily cash flows into the Series as equity exposure. At the end of June,
the Series' equity portfolio was valued at $984.26 million, which represented
more than 98% of the Series' net assets. In addition, the Series held a long
position of 89 S&P 500 September 1998 futures contracts. As always, it is our
goal to be 100% invested at all times.
The first half of 1998 was an active period regarding composition changes within
the Index. As a result, the Series initiated positions in the following stocks
during the first quarter of 1998: Lehman Brothers Holdings Inc., Consolidated
Stores Corporation, The Summit Bancorporation, Northern Trust Corporation,
Mercantile Bancorporation Inc., Sealed Air Corporation, Nextel Communications,
Inc. and Associates First Capital Corporation. During the second quarter of
1998, the Series added the following equities to its portfolio, in response to
Index composition changes: Gateway 2000, Inc., Franklin Resources, Inc., Ascend
Communications, Inc., The Bear Stearns Companies Inc., Capital One Financial
Corporation, The Dun & Bradstreet Corp., SLM Holding Corporation and Sempra
Energy.
Performance Results
For the six months ended June 30, 1998, Merrill Lynch S&P 500 Index Fund's Class
A and Class D Shares had total returns of +17.45% and +17.38%, respectively. The
Fund's benchmark, the Standard & Poor's 500 Composite Index, had a total return
of +17.71% during the same six-month period. (Fund results shown do not reflect
sales charges, and would be lower if sales charges were included. For complete
performance information, see page 4 of this report to shareholders.)
In Conclusion
We thank you for your continued investment in Merrill Lynch S&P 500 Index Fund,
and we look forward to serving your investment needs in the months and years
ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President
/s/ Eric S. Mitofsky
Eric S. Mitofsky
Senior Vice President and
Portfolio Manager
August 14, 1998
2 & 3
<PAGE>
Merrill Lynch S&P 500 Index Fund, June 30, 1998
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the Merrill Lynch
Select Pricing(SM) System, which offers two pricing alternatives:
o Class A Shares do not incur a maximum initial sales charge (front-end
load) or deferred sales charge and bear no ongoing distribution or account
maintenance fees. Class A Shares are available only to eligible investors.
o Class D Shares do not incur a maximum initial sales charge or deferred
sales charge and bear no ongoing distribution fee. In addition, Class D
Shares are subject to an ongoing account maintenance fee of 0.25%.
None of the past results shown should be considered a representation of future
performance. Figures shown in the "Recent Performance Results" and "Average
Annual Total Return" tables assume reinvestment of all dividends and capital
gains distributions at net asset value on the ex-dividend date. Investment
return and principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Dividends paid to
each class of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to each class,
which are deducted from the income available to be paid to shareholders.
Recent Performance Results
<TABLE>
<CAPTION>
12 Month 3 Month Since Inception
Total Return Total Return Total Return
=======================================================================================
<S> <C> <C> <C>
ML S&P 500 Index Fund Class A Shares* +29.75% +3.22% +53.63%
- ---------------------------------------------------------------------------------------
ML S&P 500 Index Fund Class D Shares* +29.41 +3.15 +53.22
- ---------------------------------------------------------------------------------------
S&P 500 Index** +30.16 +3.30 +54.24
=======================================================================================
</TABLE>
* Investment results shown do not reflect sales charges; results shown would
be lower if a sales charge was included. Total investment returns are
based on changes in net asset value for the periods shown, and assume
reinvestment of all dividends and capital gains distributions at net asset
value on the ex-dividend date. The Fund's inception date is 4/03/97.
** This unmanaged broad-based Index is comprised of common stocks. Since
inception total return is from 4/03/97 to 6/30/98.
Average Annual Total Return
% Return
================================================================
Class A Shares
================================================================
Year Ended 6/30/98 +29.75%
- ----------------------------------------------------------------
Inception (4/03/97) through 6/30/98 +41.34
- ----------------------------------------------------------------
% Return
================================================================
Class D Shares
================================================================
Year Ended 6/30/98 +29.41%
- ----------------------------------------------------------------
Inception (4/03/97) through 6/30/98 +41.03
- ----------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
MERRILL LYNCH
S&P 500
INDEX FUND As of June 30, 1998
================================================================================================================================
<S> <C> <C> <C>
Assets: Investment in Merrill Lynch S&P 500 Index Series, at value
(identified cost--$853,516,718) (Note 1a) ..................................... $1,009,087,765
Receivable from administrator (Note 2) ........................................ 526
Deferred organization expenses (Note 1d) ...................................... 18,553
Prepaid registration fees and other assets (Note 1d) .......................... 55,387
--------------
Total assets .................................................................. 1,009,162,231
--------------
================================================================================================================================
Liabilities: Payables:
Administrative fees (Note 2) ................................................ $ 168,964
Distributor (Note 2) ........................................................ 60,660 229,624
------------
Accrued expenses .............................................................. 143,297
--------------
Total liabilities ............................................................. 372,921
--------------
================================================================================================================================
Net Assets: Net assets .................................................................... $1,008,789,310
==============
================================================================================================================================
Net Assets Class A Shares of Common Stock, $0.0001 par value, 125,000,000
shares authorized ........................................................... $ 4,860
Consist of: Class D Shares of Common Stock, $0.0001 par value, 125,000,000
shares authorized ........................................................... 1,986
Paid-in capital in excess of par .............................................. 838,409,603
Undistributed investment income--net .......................................... 5,010,972
Undistributed realized capital gains on investments from the Series--net ...... 9,790,842
Unrealized appreciation on investments from the Series--net ................... 155,571,047
--------------
Net assets .................................................................... $1,008,789,310
==============
================================================================================================================================
Net Asset Class A--Based on net assets of $716,465,963 and 48,604,008 shares
outstanding ................................................................ $ 14.74
==============
Value: Class D--Based on net assets of $292,323,347 and 19,862,930 shares
outstanding ................................................................ $ 14.72
==============
================================================================================================================================
</TABLE>
See Notes to Financial Statements.
4 & 5
<PAGE>
Merrill Lynch S&P 500 Index Fund, June 30, 1998
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
MERRILL LYNCH
S&P 500
INDEX FUND For the Six Months Ended June 30, 1998
================================================================================================================================
<S> <C> <C> <C>
Investment Investment income allocated from the Series .................................. $ 6,834,460
Income Expenses allocated from the Series ........................................... (388,530)
(Note 1b): -------------
Net investment income from the Series ........................................ 6,445,930
-------------
================================================================================================================================
Expenses: Administration fee (Note 2) .................................................. $ 793,195
Account maintenance fee--Class D (Note 2) .................................... 273,841
Transfer agent fees (Note 2) ................................................. 223,963
Registration fees (Note 1d) .................................................. 98,322
Printing and shareholder reports ............................................. 73,646
Professional fees ............................................................ 9,550
Amortization of organization expenses (Note 1d) .............................. 1,954
Accounting services (Note 2) ................................................. 269
Other ........................................................................ 4,591
------------
Total expenses before reimbursement .......................................... 1,479,331
Reimbursement of expenses (Note 2) ........................................... (24,922)
------------
Total expenses after reimbursement ........................................... 1,454,409
-------------
Investment income--net ....................................................... 4,991,521
-------------
================================================================================================================================
Realized & Realized gain on investments from the Series--net ............................ 7,770,389
Unrealized Change in unrealized appreciation on investments from the Series--net ........ 109,520,195
Gain from -------------
the Series-- Net Increase in Net Assets Resulting from Operations ......................... $ 122,282,105
Net: =============
================================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MERRILL LYNCH For the Six For the Period
S&P 500 Months Ended April 3, 1997+ to
INDEX FUND Increase (Decrease) in Net Assets: June 30, 1998 December 31, 1997
==========================================================================================================================
<S> <C> <C> <C>
Operations: Investment income--net .............................................. $ 4,991,521 $ 4,878,634
Realized gain on investments from the Series--net ................... 7,770,389 20,857,038
Change in unrealized appreciation on investments from the
Series--net ....................................................... 109,520,195 46,050,852
-------------- --------------
Net increase in net assets resulting from operations ................ 122,282,105 71,786,524
-------------- --------------
==========================================================================================================================
Dividends & Investment income--net
Distributions Class A ........................................................... -- (3,734,820)
to Shareholders Class D ........................................................... -- (1,124,363)
(Note 1e): Realized gain on investments from the Series--net
Class A ........................................................... -- (13,898,161)
Class D ........................................................... -- (4,938,424)
-------------- --------------
Net decrease in net assets resulting from dividends
and distributions to shareholders ................................. -- (23,695,768)
-------------- --------------
==========================================================================================================================
Capital Share Net increase in net assets derived from capital share transactions .. 283,924,519 554,466,930
Transactions -------------- --------------
(Note 4):
==========================================================================================================================
Net Assets: Total increase in net assets ........................................ 406,206,624 602,557,686
Beginning of period ................................................. 602,582,686 25,000
-------------- --------------
End of period* ...................................................... $1,008,789,310 $ 602,582,686
============== ==============
==========================================================================================================================
* Undistributed investment income--net $ 5,010,972 $ 19,451
============== ==============
==========================================================================================================================
</TABLE>
+ Commencement of operations.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Class A Class D
The following per share data and ratios -------------------------------- --------------------------------
have been derived from information For the Six For the Period For the Six For the Period
MERRILL LYNCH provided in the financial statements. Months Ended April 3, 1997+ to Months Ended April 3, 1997+ to
S&P 500 June 30, December 31, June 30, December 31,
INDEX FUND Increase (Decrease) in Net Asset Value: 1998 1997 1998 1997
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ... $ 12.55 $ 10.00 $ 12.54 $ 10.00
Operating --------- --------- --------- ---------
Performance: Investment income--net ................. .08 .11 .05 .11
Realized and unrealized gain on
investments from the Series--net ..... 2.11 2.97 2.13 2.95
--------- --------- --------- ---------
Total from investment operations ....... 2.19 3.08 2.18 3.06
--------- --------- --------- ---------
Less dividends and distributions:
Investment income--net ............... -- (.11) -- (.10)
Realized gain on investments
from the Series--net ................ -- (.42) -- (.42)
--------- --------- --------- ---------
Total dividends and distributions ...... -- (.53) -- (.52)
--------- --------- --------- ---------
Net asset value, end of period ......... $ 14.74 $ 12.55 $ 14.72 $ 12.54
========= ========= ========= =========
===================================================================================================================================
Total Based on net asset value per share ..... 17.45%+++ 30.80%+++ 17.38%+++ 30.53%+++
Investment ========= ========= ========= =========
Return:
===================================================================================================================================
Ratios to Expenses, net of reimbursement++ ....... .40%* .40%* .65%* .65%*
Average ========= ========= ========= =========
Net Assets: Expenses++ ............................. .40%* .57%* .65%* .82%*
========= ========= ========= =========
Investment income--net ................. 1.33%* 1.71%* 1.08%* 1.47%*
========= ========= ========= =========
===================================================================================================================================
Supplemental Net assets, end of period (in thousands) $ 716,466 $ 445,016 $ 292,323 $ 157,567
Data: ========= ========= ========= =========
===================================================================================================================================
</TABLE>
+ Commencement of operations.
++ Includes the Fund's share of the Series' allocated
expenses.
+++ Aggregate total investment return.
* Annualized.
See Notes to Financial Statements.
6 & 7
<PAGE>
Merrill Lynch S&P 500 Index Fund, June 30, 1998
NOTES TO FINANCIAL STATEMENTS
MERRILL LYNCH
S&P 500
INDEX FUND
1. Significant Accounting Policies:
Merrill Lynch S&P 500 Index Fund (the "Fund") is part of Merrill Lynch Index
Funds, Inc. The Fund is registered under the Investment Company Act of 1940 as a
non-diversified mutual fund. These unaudited financial statements reflect all
adjustments which are, in the opinion of management, necessary to a fair
statement of the results for the interim period presented. All such adjustments
are of a normal recurring nature. The Fund seeks to achieve its investment
objective by investing all of its assets in the Merrill Lynch S&P 500 Index
Series (the "Series") of the Merrill Lynch Index Trust, which has the same
investment objective as the Fund. The value of the Fund's investment in the
Series reflects the Fund's proportionate interest in the net assets of the
Series. The performance of the Fund is directly affected by the performance of
the Series. The financial statements of the Series, including the Schedule of
Investments, are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements. The Fund offers two classes of
shares, Class A Shares and Class D Shares. Shares of Class A and Class D are
sold without the imposition of a front-end or deferred sales charge. Both
classes of shares have identical voting, dividend, liquidation and other rights
and the same terms and conditions, except that Class D Shares bear certain
expenses related to the account maintenance of such shares. The following is a
summary of significant accounting policies followed by the Fund.
(a) Valuation of investments--Valuation of securities is discussed in Note 1a of
the Series' Notes to Financial Statements which is included elsewhere in this
report.
(b) Income--The Fund's net investment income consists of the Fund's pro rata
share of the net investment income of the Series, less all actual and accrued
expenses of the Fund determined in accordance with generally accepted accounting
principles.
(c) 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 all of its taxable income to shareholders. Therefore, no Federal
income tax provision is required.
(d) Prepaid registration fees and deferred organization expenses--Prepaid
registration fees are charged to expense as the related shares are issued.
Deferred organization expenses are charged to expense on a straight-line basis
over a period not exceeding five years.
(e) Dividends and distributions--Dividends and distributions paid by the Fund
are recorded on the ex-dividend dates.
(f) Investment transactions--Investment transactions are accounted for on a
trade date basis.
2. Transactions with Affiliates:
The Fund has entered into a Distribution Agreement and Distribution Plans with
Merrill Lynch Funds Distributor ("MLFD" or "Distributor"), a division of
Princeton Funds, Distributor, Inc. ("PFD"), which is a wholly-owned subsidiary
of Merrill Lynch Group, Inc. 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 fees. The fees are accrued
daily and paid monthly at the annual rate of 0.25% based upon the average daily
net assets of Class D shares.
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Inc. ("MLPF&S"), a subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."),
also provides account maintenance services to the Fund. The ongoing account
maintenance fee compensates the Distributor and MLPF&S for providing account
maintenance services to Class D shareholders.
The Fund has also entered into an Administrative Services Agreement with Merrill
Lynch Asset Management, L.P. ("MLAM"). The general partner of MLAM is Princeton
Services, Inc. ("PSI"), a wholly-owned subsidiary of ML & Co., which is the
limited partner. The Fund pays a monthly fee at an annual rate of 0.20% of the
Fund's average daily net assets for the performance of administrative services
(other than investment advice and related portfolio activities) necessary for
the operation of the Fund. For the six months ended June 30, 1998, MLAM earned
fees of $793,195, of which $24,922 was voluntarily waived.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), an indirect wholly-owned
subsidiary of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
Certain officers and/or directors of the Fund are officers and/or directors of
MLAM, PSI, PFD, MLFDS, and/or ML & Co.
3. Investments:
Increases and decreases in the Fund's investments in the Series for the six
months ended June 30, 1998 were $317,873,830 and $35,322,949, respectively.
4. Capital Share Transactions:
Net increase in net assets derived from capital share transactions was
$283,924,519 and $554,466,930 for the six months ended June 30, 1998 and the
period April 3, 1997 to December 31, 1997, respectively.
Transactions in capital shares for each class were as follows:
- -------------------------------------------------------------------------------
Class A Shares for the Six Months Dollar
Ended June 30, 1998 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ................................. 21,883,059 $300,709,743
Shares redeemed ............................. (8,752,293) (118,435,758)
---------- ------------
Net increase ................................ 13,130,766 $182,273,985
========== ============
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class A Shares for the Period Dollar
April 3, 1997+ to December 31, 1997 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ................................. 37,854,298 $438,112,086
Shares issued to shareholders
in reinvestment of dividends
and distributions ........................... 1,361,172 17,164,377
---------- ------------
Total issued ................................ 39,215,470 455,276,463
Shares redeemed ............................. (3,743,478) (45,298,859)
---------- ------------
Net increase ................................ 35,471,992 $409,977,604
========== ============
- -------------------------------------------------------------------------------
+ Prior to April 3, 1997 (commencement of operations), the Fund issued 1,250
shares to MLAM for $12,500.
- -------------------------------------------------------------------------------
Class D Shares for the Six Months Dollar
Ended June 30, 1998 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ................................. 11,148,022 $154,178,232
Shares redeemed ............................. (3,850,195) (52,527,698)
---------- ------------
Net increase ................................ 7,297,827 $101,650,534
========== ============
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class D Shares for the Period Dollar
April 3, 1997+ to December 31, 1997 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ................................. 16,128,798 $187,590,003
Shares issued to shareholders
in reinvestment of dividends
and distributions ........................... 366,327 4,615,723
---------- ------------
Total issued ................................ 16,495,125 192,205,726
Shares redeemed ............................. (3,931,272) (47,716,400)
---------- ------------
Net increase ................................ 12,563,853 $144,489,326
========== ============
- -------------------------------------------------------------------------------
+ Prior to April 3, 1997 (commencement of operations), the Fund issued 1,250
shares to MLAM for $12,500.
8 & 9
<PAGE>
Merrill Lynch S&P 500 Index Fund, June 30, 1998
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
Merrill Lynch S&P 500 Index Series
- --------------------------------------------------------------------------------------------------
Shares Value
Issue Held (Note 1a)
==================================================================================================
<S> <C> <C> <C>
Common + 3Com Corporation .............................. 38,975 $ 1,196,045
Stocks ALLTEL Corporation ............................ 29,976 1,393,884
+ ALZA Corporation .............................. 9,471 409,621
AMP Inc. ...................................... 24,073 827,509
+ AMR Corporation ............................... 19,948 1,660,671
ASARCO Inc. ................................... 4,347 96,721
AT&T Corp. .................................... 178,006 10,168,593
Abbott Laboratories ........................... 169,170 6,914,824
Adobe Systems Inc. ............................ 7,302 309,879
+ Advanced Micro Devices, Inc. .................. 15,712 268,086
Aeroquip-Vickers Inc. ......................... 3,065 178,919
Aetna, Inc. ................................... 15,943 1,213,661
Ahmanson (H.F.) & Company ..................... 11,978 850,438
Air Products & Chemicals, Inc. ................ 25,670 1,026,800
+ AirTouch Communications, Inc. ................. 62,735 3,666,077
Alberto-Culver Company (Class B) .............. 6,224 180,496
Albertson's, Inc. ............................. 26,941 1,395,881
Alcan Aluminium Ltd. .......................... 24,892 687,642
Allegheny Teledyne, Inc. ...................... 21,549 492,933
Allergan, Inc. ................................ 7,204 334,086
AlliedSignal, Inc. ............................ 61,957 2,749,342
Allstate Corporation .......................... 46,010 4,212,791
Aluminum Company of America ................... 18,455 1,216,877
Amerada Hess Corporation ...................... 10,029 544,700
Ameren Corp. .................................. 14,995 596,051
American Electric Power Company, Inc. ......... 20,870 946,976
American Express Company ...................... 50,540 5,761,560
American General Corporation .................. 27,804 1,979,297
American Greetings Corporation
(Class A) ................................... 7,975 406,227
American Home Products Corp. .................. 143,857 7,444,600
American International Group, Inc. ............ 76,677 11,194,842
American Stores Company ....................... 29,945 724,295
Ameritech Corporation ......................... 120,610 5,412,374
+ Amgen Inc. .................................... 27,845 1,820,367
Amoco Corporation ............................. 105,171 4,377,743
Anadarko Petroleum Corporation ................ 6,577 441,892
+ Andrew Corporation ............................ 9,695 175,116
Anheuser-Busch Companies, Inc. ................ 53,256 2,513,018
Aon Corporation ............................... 18,483 1,298,431
Apache Corporation ............................ 10,806 340,389
+ Apple Computer, Inc. .......................... 14,546 417,288
+ Applied Materials, Inc. ....................... 40,106 1,183,127
Archer-Daniels-Midland Company ................ 62,529 1,211,499
+ Armco Inc. .................................... 11,813 75,308
Armstrong World Industries, Inc. .............. 4,387 295,574
+ Ascend Communications, Inc. ................... 21,107 1,046,116
Ashland Inc. .................................. 8,325 429,778
Associates First Capital Corporation
(Class A) ................................... 37,934 2,916,176
Atlantic Richfield Company .................... 35,143 2,745,547
Autodesk, Inc. ................................ 5,109 197,335
Automatic Data Processing, Inc. ............... 32,991 2,404,219
+ AutoZone, Inc. ................................ 16,720 533,995
Avery Dennison Corporation .................... 12,855 690,956
Avon Products, Inc. ........................... 14,463 1,120,883
BB&T Corporation .............................. 15,474 1,046,429
Baker Hughes, Inc. ............................ 18,568 641,757
Ball Corporation .............................. 3,312 133,101
Baltimore Gas and Electric Company ............ 16,206 503,399
Banc One Corporation .......................... 76,913 4,292,707
Bank of New York Co., Inc. (The) .............. 41,198 2,500,204
BankAmerica Corporation ....................... 74,822 6,467,427
BankBoston Corporation ........................ 32,188 1,790,458
Bankers Trust NY Corporation .................. 10,719 1,244,074
Bard (C.R.), Inc. ............................. 6,234 237,282
Barrick Gold Corporation ...................... 40,837 783,560
Battle Mountain Gold Company .................. 25,139 149,263
Bausch & Lomb Inc. ............................ 6,055 303,507
Baxter International, Inc. .................... 30,800 1,657,425
+ Bay Networks, Inc. ............................ 24,318 784,256
Bear Stearns Companies Inc. (The) ............. 12,660 718,455
Becton, Dickinson & Company ................... 13,491 1,047,239
Bell Atlantic Corp. ........................... 170,174 7,764,189
BellSouth Corporation ......................... 108,511 7,283,801
Bemis Company, Inc. ........................... 5,850 239,119
Beneficial Corporation ........................ 5,995 918,359
Bestfoods ..................................... 31,649 1,837,620
+ Bethlehem Steel Corporation ................... 14,061 174,884
+ Biomet, Inc. .................................. 12,244 404,817
Black & Decker Corporation (The) .............. 10,379 633,119
Block (H & R), Inc. ........................... 11,502 484,522
Boeing Company (The) .......................... 110,732 4,934,495
Boise Cascade Corporation ..................... 6,153 201,511
+ Boston Scientific Corporation ................. 21,293 1,525,111
Briggs & Statton Corporation .................. 2,643 98,947
Bristol-Myers Squibb Co. ...................... 109,080 12,537,383
+ Brown-Forman Corporation (Class B) ............ 7,538 484,317
Browning-Ferris Industries, Inc. .............. 20,175 701,081
Brunswick Corporation ......................... 10,924 270,369
Burlington Northern Santa Fe Corp. ............ 17,271 1,695,796
Burlington Resources Inc. ..................... 19,409 835,800
CBS Corporation ............................... 78,703 2,498,820
CIGNA Corporation ............................. 23,602 1,628,538
CINergy Corp. ................................. 17,290 605,150
COMPAQ Computer Corporation ................... 181,131 5,139,592
CSX Corporation ............................... 24,012 1,092,546
CVS Corporation ............................... 42,127 1,640,320
+ Cabletron Systems, Inc. ....................... 17,334 232,926
Campbell Soup Company ......................... 49,771 2,644,084
Capital One Financial Corporation ............. 7,200 894,150
Cardinal Health, Inc. ......................... 12,111 1,135,406
Carolina Power & Light Company ................ 16,586 719,418
Case Corporation .............................. 8,217 396,470
Caterpillar, Inc. ............................. 40,179 2,124,465
+ Cendant Corporation ........................... 93,292 1,947,471
Centex Corporation ............................ 6,484 244,771
Central & South West Corporation .............. 23,221 624,064
+ Ceridian Corporation .......................... 7,960 467,650
Champion International Corp. .................. 10,518 517,354
Chase Manhattan Corporation ................... 93,534 7,061,817
Chevron Corporation ........................... 71,681 5,954,003
Chrysler Corporation .......................... 70,743 3,988,137
Chubb Corporation ............................. 18,421 1,480,588
Cincinnati Financial Corporation .............. 18,275 701,303
Cincinnati Milacron Inc. ...................... 4,356 105,905
Circuit City Stores--Circuit City Group ....... 10,802 506,344
+ Cisco Systems, Inc. ........................... 112,115 10,321,587
Citicorp ...................................... 49,485 7,385,636
+ Clear Channel Communications, Inc. ............ 13,585 1,482,463
Clorox Company ................................ 11,385 1,085,844
Coastal Corporation (The) ..................... 11,595 809,476
Coca-Cola Company (The) ....................... 270,630 23,138,865
+ Cognizant Corporation ......................... 17,848 1,124,424
Colgate-Palmolive Company ..................... 32,453 2,855,864
Columbia Gas System, Inc. (The) ............... 9,128 507,745
Columbia/HCA Healthcare Corp. ................. 70,528 2,054,128
Comcast Corporation (Class A) ................. 40,415 1,640,596
Comerica, Inc. ................................ 17,164 1,137,115
Computer Associates International, Inc. ....... 59,806 3,322,971
+ Computer Sciences Corporation ................. 17,086 1,093,504
ConAgra, Inc. ................................. 52,651 1,668,379
Conseco, Inc. ................................. 20,488 957,814
Consolidated Edison Company of
New York, Inc. .............................. 25,809 1,188,827
Consolidated Natural Gas Company .............. 10,500 618,188
+ Consolidated Stores Corporation ............... 11,804 427,895
Cooper Industries, Inc. ....................... 13,241 727,427
Cooper Tire & Rubber Company .................. 8,623 177,849
Coors (Adolph) Company (Class B) .............. 3,975 135,150
Corning, Inc. ................................. 25,435 883,866
+ Costco Companies, Inc. ........................ 23,635 1,490,482
Countrywide Credit Industries, Inc. ........... 11,892 603,519
Crane Co. ..................................... 5,010 243,298
Crown Cork & Seal Company, Inc. ............... 13,637 647,758
Cummins Engine Co., Inc. ...................... 4,178 214,123
Cyprus Amax Minerals Co. ...................... 10,264 135,998
+ DSC Communications Corporation ................ 13,017 390,510
DTE Energy Company ............................ 15,858 640,267
Dana Corporation .............................. 11,597 620,440
Darden Restaurants, Inc. ...................... 15,645 248,364
+ Data General Corporation ...................... 5,386 80,453
Dayton Hudson Corp. ........................... 47,889 2,322,617
Deere & Company ............................... 27,187 1,437,513
+ Dell Computer Corporation ..................... 70,580 6,550,706
Delta Air Lines, Inc. ......................... 8,301 1,072,904
Deluxe Corp. .................................. 8,901 318,767
Dillard's Inc. (Class A) ...................... 11,798 488,880
Disney (Walt) Company (The) ................... 74,715 7,849,745
Dominion Resources, Inc. ...................... 21,439 873,639
Donnelley (R.R.) & Sons Co. ................... 15,552 711,504
Dover Corporation ............................. 24,438 837,002
Dow Chemical Company, Inc. .................... 24,673 2,385,571
Dow Jones & Company (The) ..................... 10,209 569,152
Dresser Industries, Inc. ...................... 19,205 846,220
du Pont (E.I.) de Nemours & Company ........... 123,679 9,229,545
Duke Energy Corporation ....................... 39,500 2,340,375
+ Dun & Bradstreet Corp. (The) .................. 18,814 679,656
EG & G, Inc. .................................. 4,987 149,610
+ EMC Corporation ............................... 54,542 2,444,163
Eastern Enterprises ........................... 2,221 95,225
Eastman Chemical Company ...................... 8,671 539,770
Eastman Kodak Company ......................... 35,365 2,583,855
Eaton Corporation ............................. 7,851 610,415
Echlin Inc. ................................... 6,970 341,966
Ecolab Inc. ................................... 14,131 438,061
Edison International .......................... 39,699 1,173,602
Emerson Electric Co. .......................... 48,519 2,929,335
Engelhard Corporation ......................... 15,808 320,112
Enron Corp. ................................... 35,988 1,945,601
Entergy Corporation ........................... 27,004 776,365
Equifax Inc. .................................. 16,208 588,553
Exxon Corporation++ ........................... 268,159 19,123,089
+ FDX Corp. ..................................... 16,077 1,008,832
+ FMC Corporation ............................... 3,821 260,544
FPL Group, Inc. ............................... 19,935 1,255,905
</TABLE>
10 & 11
<PAGE>
Merrill Lynch S&P 500 Index Fund, June 30, 1998
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
Merrill Lynch S&P 500 Index Series (continued)
- --------------------------------------------------------------------------------------------------
Shares Value
Issue Held (Note 1a)
==================================================================================================
<S> <C> <C> <C>
Common Federal Home Loan Mortgage
Stocks Corporation ................................. 74,373 $ 3,500,179
(continued) Federal National Mortgage Association ......... 113,640 6,903,630
+ Federated Department Stores, Inc. ............. 23,081 1,242,046
Fifth Third BanCorp ........................... 28,765 1,812,195
First Chicago NBD Corporation ................. 31,475 2,789,472
First Data Corporation ........................ 48,932 1,630,047
First Union Corporation ....................... 106,204 6,186,383
FirstEnergy Corp. ............................. 25,231 775,853
Fleet Financial Group, Inc. ................... 31,144 2,600,524
Fleetwood Enterprises, Inc. ................... 3,996 159,840
Fluor Corporation ............................. 8,995 458,745
Ford Motor Company ............................ 132,939 7,843,401
Fort James Corporation ........................ 24,156 1,074,942
Fortune Brands Inc. ........................... 18,956 728,621
Foster Wheeler Corporation .................... 4,443 95,247
Franklin Resources, Inc. ...................... 27,680 1,494,720
Freeport-McMoRan Copper & Gold, Inc.
(Class B) ................................... 19,826 301,107
Frontier Corporation .......................... 18,764 591,066
+ Fruit of the Loom, Inc. (Class A) ............. 7,884 261,650
GPU, Inc. ..................................... 14,015 529,942
GTE Corporation ............................... 105,495 5,868,159
Gannett Co., Inc. ............................. 31,172 2,215,160
Gap, Inc. (The) ............................... 43,086 2,655,175
+ Gateway 2000, Inc. ............................ 17,053 863,308
General Dynamics Corporation .................. 13,851 644,072
General Electric Company ...................... 357,067 32,493,097
+ General Instrument Corp. ...................... 16,454 447,343
General Mills, Inc. ........................... 17,314 1,183,845
General Motors Corporation .................... 73,252 4,894,149
General Re Corporation ........................ 8,385 2,125,598
General Signal Corporation .................... 4,788 172,368
Genuine Parts Company ......................... 19,616 677,978
Georgia-Pacific Corporation ................... 10,061 592,970
Giant Food Inc. (Class A) ..................... 6,575 283,136
Gillette Company (The) ........................ 123,122 6,979,478
Golden West Financial Corporation ............. 6,239 663,284
Goodrich (B.F.) Company (The) ................. 7,991 396,553
Goodyear Tire & Rubber Co. (The) .............. 17,233 1,110,451
+ Grace (W.R.) & Co. ............................ 8,318 141,926
Grainger (W.W.), Inc. ......................... 10,712 533,592
Great Atlantic & Pacific Tea Co., Inc. ........ 4,178 138,135
Great Lakes Chemical Corporation .............. 6,470 255,161
Green Tree Financial Corporation .............. 14,690 628,916
Guidant Corporation ........................... 16,525 1,178,439
HBO & Company ................................. 47,088 1,659,852
+ HEALTHSOUTH Corporation ....................... 43,910 1,171,848
Halliburton Company ........................... 28,823 1,284,425
Harcourt General, Inc. ........................ 7,746 460,887
Harnischfeger Industries, Inc. ................ 5,238 148,301
+ Harrah's Entertainment, Inc. .................. 11,036 256,587
Harris Corporation ............................ 8,735 390,345
Hartford Financial Services Group, Inc. ....... 12,916 1,477,268
Hasbro Inc. ................................... 14,602 574,041
Heinz (H.J.) Company .......................... 40,041 2,247,301
Helmerich & Payne, Inc. ....................... 5,512 122,642
Hercules Inc. ................................. 10,401 427,741
Hershey Foods Corporation ..................... 15,640 1,079,160
Hewlett-Packard Company ....................... 113,523 6,797,190
Hilton Hotels Corporation ..................... 27,048 770,868
Home Depot, Inc. (The) ........................ 80,529 6,688,940
Homestake Mining Company ...................... 23,143 240,109
Honeywell Inc. ................................ 13,825 1,155,252
Household International, Inc. ................. 35,289 1,755,628
Houston Industries Inc. ....................... 32,407 1,000,566
+ Humana, Inc. .................................. 18,242 568,922
Huntington Bancshares Inc. .................... 21,079 706,147
ITT Industries, Inc. .......................... 12,934 483,408
Ikon Office Solutions, Inc. ................... 14,839 216,093
Illinois Tool Works, Inc. ..................... 27,387 1,826,371
Inco Limited .................................. 18,195 247,907
Ingersoll-Rand Company ........................ 18,133 798,985
Intel Corporation ............................. 185,875 13,777,984
International Business Machines Corp. ......... 103,338 11,864,494
International Flavors & Fragrances Inc. ....... 11,811 513,040
International Paper Company ................... 33,699 1,449,057
Interpublic Group of Companies, Inc. .......... 14,946 907,035
Jefferson-Pilot Corporation ................... 11,659 675,493
Johnson & Johnson ............................. 147,341 10,866,399
Johnson Controls, Inc. ........................ 9,272 530,243
Jostens, Inc. ................................. 4,055 97,827
+ KLA-Tencor Corporation ........................ 9,521 263,613
Kaufman and Broad Home Corporation ............ 4,299 136,493
Kellogg Company ............................... 44,846 1,684,528
Kerr-McGee Corporation ........................ 5,244 303,497
KeyCorp Limited ............................... 48,230 1,718,194
Kimberly-Clark Corporation .................... 61,061 2,801,173
+ King World Productions, Inc. .................. 8,027 204,689
+ Kmart Corporation ............................. 53,456 1,029,028
Knight-Ridder, Inc. ........................... 8,599 473,482
+ Kroger Co. (The) .............................. 28,063 1,203,201
+ LSI Logic Corporation ......................... 15,427 355,785
Laidlaw Inc. (Class B) ........................ 36,008 438,848
Lehman Brothers Holdings Inc. ................. 12,991 1,007,614
Lilly (Eli) & Company ......................... 121,369 8,017,940
Limited, Inc. (The) ........................... 24,878 824,084
Lincoln National Corporation .................. 11,010 1,006,039
Liz Claiborne, Inc. ........................... 7,237 378,133
Lockheed Martin Corporation ................... 21,430 2,268,901
Loews Corporation ............................. 12,568 1,094,987
Longs Drug Stores Corporation ................. 4,252 122,777
Louisiana-Pacific Corporation ................. 12,035 219,639
Lowe's Companies, Inc. ........................ 38,322 1,554,436
Lucent Technologies, Inc. ..................... 143,787 11,961,281
MBIA, Inc. .................................... 10,700 801,163
MBNA Corporation .............................. 54,909 1,811,997
MCI Communications Corporation ................ 79,389 4,614,486
MGIC Investment Corp. ......................... 12,481 712,197
Mallinckrodt Inc. ............................. 7,983 236,995
Manor Care, Inc. .............................. 6,956 267,371
Marriott International, Inc. (Class A) ........ 27,965 905,367
Marsh & McLennan Companies, Inc. .............. 28,127 1,699,895
Masco Corporation ............................. 18,629 1,127,055
Mattel, Inc. .................................. 32,168 1,361,109
May Department Stores Company (The) ........... 25,306 1,657,543
Maytag Corporation ............................ 10,310 509,056
McDermott International, Inc. ................. 6,580 226,599
McDonald's Corporation ........................ 75,340 5,198,460
McGraw-Hill Companies, Inc. ................... 10,859 885,687
Mead Corporation (The) ........................ 11,405 362,109
+ MediaOne Group Inc. ........................... 66,732 2,932,037
Medtronic, Inc. ............................... 51,457 3,280,384
Mellon Bank Corporation ....................... 28,518 1,985,566
Mercantile Bancorporation Inc. ................ 14,601 735,525
Mercantile Stores Company, Inc. ............... 4,019 317,250
Merck & Co., Inc. ............................. 130,996 17,520,715
Meredith Corporation .......................... 5,826 273,458
Merrill Lynch & Co., Inc. ..................... 37,919 3,498,028
+ Micron Technology, Inc. ....................... 23,315 578,503
+ Microsoft Corporation++ ....................... 270,053 29,266,994
Millipore Corporation ......................... 4,801 130,827
Minnesota Mining & Manufacturing
Company ..................................... 44,335 3,643,783
+ Mirage Resorts, Inc. .......................... 19,630 418,364
Mobil Corporation ............................. 85,637 6,561,935
Monsanto Company .............................. 65,640 3,667,635
Moore Corporation Limited
(NY Registered Shares) ...................... 9,705 128,591
Morgan (J.P.) & Co., Inc. ..................... 19,554 2,290,262
Morgan Stanley, Dean Witter,
Discover & Co. .............................. 65,758 6,008,637
Morton International, Inc. .................... 14,282 357,050
Motorola, Inc. ................................ 65,503 3,443,001
NACCO Industries, Inc. (Class A) .............. 894 115,550
Nalco Chemical Company ........................ 7,254 254,797
National City Corporation ..................... 35,976 2,554,296
+ National Semiconductor Corporation ............ 17,994 237,296
National Service Industries, Inc. ............. 4,651 236,620
NationsBank Corporation ....................... 104,980 8,030,970
+ Navistar International Corp. .................. 7,563 218,382
New York Times Company
(The) (Class A) ............................. 10,506 832,601
Newell Co. .................................... 17,436 868,531
Newmont Mining Corporation .................... 17,123 404,531
+ Nextel Communications, Inc. (Class A) ......... 29,950 745,006
+ Niagara Mohawk Power Corp. .................... 20,530 306,667
Nicor Inc. .................................... 5,303 212,783
Nike Inc. (Class B) ........................... 31,534 1,535,312
Nordstrom, Inc. ............................... 8,358 645,655
Norfolk & Southern Corporation ................ 41,509 1,237,487
Northern States Power Company ................. 16,520 472,885
Northern Telecom, Limited ..................... 57,027 3,236,282
Northern Trust Corporation .................... 12,246 933,757
Northrop Grumman Corporation .................. 7,418 764,981
Norwest Corporation ........................... 82,940 3,099,882
+ Novell, Inc. .................................. 38,537 491,347
Nucor Corporation ............................. 9,650 443,900
ONEOK, Inc. ................................... 3,460 137,967
Occidental Petroleum Corporation .............. 40,258 1,086,966
Omnicom Group, Inc. ........................... 18,657 930,518
+ Oracle Corporation ............................ 106,688 2,620,524
+ Oryx Energy Company ........................... 11,635 257,424
Owens-Corning Fiberglass Corp. ................ 5,916 241,447
+ Owens-Illinois, Inc. .......................... 16,859 754,440
PACAAR, Inc. .................................. 8,560 447,260
PECO Energy Company ........................... 24,382 711,650
PG & E Corporation ............................ 41,808 1,319,565
PNC Bank Corp. ................................ 32,968 1,774,090
PP&L Resources, Inc. .......................... 18,364 416,633
PPG Industries, Inc. .......................... 19,438 1,352,156
PacifiCorp .................................... 32,578 737,077
Pall Corporation .............................. 13,600 278,800
+ Parametric Technology Corporation ............. 29,651 804,283
Parker-Hannifin Corporation ................... 12,119 462,037
Penney (J.C.) Company, Inc. ................... 27,509 1,989,245
</TABLE>
12 & 13
<PAGE>
Merrill Lynch S&P 500 Index Fund, June 30, 1998
SCHEDULE OF INVESTMENTS (concluded)
<TABLE>
<CAPTION>
Merrill Lynch S&P 500 Index Series (concluded)
- --------------------------------------------------------------------------------------------------
Shares Value
Issue Held (Note 1a)
==================================================================================================
<S> <C> <C> <C>
Common Pennzoil Co. .................................. 5,194 $ 262,946
Stocks Peoples Energy Corporation .................... 3,830 147,934
(concluded) Pep Boys-Manny, Moe & Jack (The) .............. 6,921 131,066
PepsiCo, Inc. ................................. 163,411 6,730,491
Perkin-Elmer Corporation (The) ................ 5,383 334,755
Pfizer Inc. ................................... 143,092 15,552,312
Pharmacia & Upjohn, Inc. ...................... 55,674 2,567,963
Phelps Dodge Corporation ...................... 6,431 367,773
Philip Morris Companies, Inc. ................. 266,249 10,483,554
Phillips Petroleum Company .................... 28,610 1,378,644
Pioneer Hi-Bred International, Inc. ........... 26,719 1,105,499
Pitney Bowes Inc. ............................. 29,936 1,440,670
Placer Dome, Inc. ............................. 27,401 321,962
Polaroid Corporation .......................... 4,860 172,834
Potlatch Corporation .......................... 3,159 132,678
Praxair, Inc. ................................. 17,256 807,796
Procter & Gamble Company (The) ................ 146,966 13,383,091
Progressive Corporation ....................... 7,946 1,120,386
Providian Financial Corporation ............... 10,411 817,914
Public Service Enterprise Group, Inc. ......... 25,375 873,852
Pulte Corporation ............................. 4,636 138,500
Quaker Oats Company (The) ..................... 15,149 832,248
Ralston Purina Company ........................ 11,573 1,351,871
Raychem Corporation ........................... 9,188 271,620
Raytheon Company (Class B) .................... 37,091 2,193,005
+ Reebok International Ltd. ..................... 6,174 170,943
Republic of New York Corp. .................... 11,838 745,054
Reynolds Metals Company ....................... 7,891 441,403
Rite Aid Corporation .......................... 28,246 1,060,990
Rockwell International Corporation ............ 21,537 1,035,122
Rohm & Haas Company ........................... 6,695 695,862
+ Rowan Companies, Inc. ......................... 9,521 185,064
Royal Dutch Petroleum Co. .....................
(NY Registered Shares) ...................... 235,006 12,881,266
Rubbermaid Inc. ............................... 16,370 543,279
Russell Corporation ........................... 3,988 120,388
Ryder System, Inc. ............................ 8,145 257,077
SBC Communications Inc. ....................... 201,530 8,061,200
SLM Holding Corporation ....................... 18,705 916,545
+ St. Jude Medical, Inc. ........................ 9,173 337,681
St. Paul Companies, Inc. (The) ................ 25,710 1,081,427
Safeco Corporation ............................ 15,445 700,817
Sara Lee Corporation .......................... 51,191 2,863,497
Schering-Plough Corporation ................... 80,407 7,367,291
Schlumberger Ltd. ............................. 54,667 3,734,439
Schwab (Charles) Corporation (The) ............ 29,254 950,755
Scientific-Atlanta, Inc. ...................... 8,636 219,138
+ Seagate Technology, Inc. ...................... 26,638 634,317
Seagram Company Ltd. (The) .................... 37,953 1,553,701
+ Sealed Air Corporation ........................ 9,153 336,373
Sears, Roebuck and Co. ........................ 42,858 2,617,017
+ Sempra Energy ................................. 26,116 724,719
Service Corporation International ............. 28,056 1,202,901
Shared Medical Systems Corporation ............ 2,868 210,619
Sherwin-Williams Company (The) ................ 19,015 629,872
Sigma-Aldrich Corporation ..................... 11,021 387,113
+ Silicon Graphics, Inc. ........................ 20,691 250,878
Snap-on Inc. .................................. 6,487 235,154
Sonat Inc. .................................... 12,031 464,697
Southern Company (The) ........................ 76,430 2,116,156
Southwest Airlines Co. ........................ 24,457 724,539
Spring Industries, Inc. (Class A) ............. 2,091 96,447
Sprint Corporation ............................ 47,185 3,326,542
Stanley Works (The) ........................... 9,732 404,486
State Street Corporation ...................... 17,670 1,228,065
+ Stone Container Corporation ................... 10,931 170,797
Summit Bancorporation (The) ................... 19,456 924,160
Sun Company, Inc. ............................. 10,280 398,992
+ Sun Microsystems, Inc. ........................ 41,516 1,803,351
SunAmerica, Inc. .............................. 21,414 1,229,967
SunTrust Banks, Inc. .......................... 23,136 1,881,246
SuperValu Stores Inc. ......................... 6,610 293,319
Synovus Financial Corp. ....................... 28,830 684,712
Sysco Corporation ............................. 36,998 948,074
TJX Companies, Inc. ........................... 35,004 844,471
TRW Inc. ...................................... 13,474 736,017
Tandy Corporation ............................. 11,099 588,941
Tektronix, Inc. ............................... 5,537 195,871
+ Tele-Communications, Inc. (Class A) ........... 55,567 2,135,857
+ Tellabs, Inc. ................................. 19,969 1,430,280
Temple-Inland, Inc. ........................... 6,145 331,062
+ Tenet Healthcare Corporation .................. 33,783 1,055,719
Tenneco, Inc. ................................. 18,592 707,658
Texaco Inc. ................................... 59,304 3,539,707
Texas Instruments Inc. ........................ 42,756 2,493,209
Texas Utilities Company ....................... 30,632 1,275,057
Textron Inc. .................................. 17,931 1,285,429
+ Thermo Electron Corporation ................... 17,462 596,982
Thomas & Betts Corporation .................... 6,013 296,140
Time Warner, Inc. ............................. 64,750 5,532,078
Times Mirror Company (The)
(Class A) ................................... 9,725 611,459
Timken Company (The) .......................... 6,809 209,802
Torchmark Corporation ......................... 15,371 703,223
+ Toys 'R' Us, Inc. ............................. 30,582 720,588
Transamerica Corporation ...................... 6,904 794,823
Travelers Group, Inc. ......................... 126,041 7,641,236
Tribune Company ............................... 13,381 920,780
+ Tricon Global Restaurants, Inc. ............... 16,692 528,928
Tupperware Corporation ........................ 6,835 192,234
Tyco International Ltd. ....................... 63,905 4,026,015
UNUM Corporation .............................. 15,181 842,545
+ USAirways Group, Inc. ......................... 11,056 876,188
US Bancorp .................................... 81,419 3,501,017
US West Media Group Inc. ...................... 54,893 2,579,990
UST, Inc. ..................................... 20,343 549,261
USX-Marathon Group, Inc. ...................... 31,695 1,087,535
USX-US Steel Group, Inc. ...................... 9,517 314,061
Unicom Corp. .................................. 23,772 833,505
Unilever N.V. (NY Registered Shares) .......... 70,136 5,536,360
Union Camp Corporation ........................ 7,598 377,051
Union Carbide Corporation ..................... 14,926 796,675
Union Pacific Corporation ..................... 27,084 1,195,081
Union Pacific Resources Group Inc. ............ 27,515 483,232
+ Unisys Corporation ............................ 27,552 778,344
United Healthcare Corporation ................. 21,120 1,341,120
United States Surgical Corporation ............ 8,401 383,296
United Technologies Corporation ............... 25,154 2,326,745
Unocal Corporation ............................ 26,453 945,695
V.F. Corporation .............................. 13,366 688,349
+ Venator Group Inc. ............................ 14,755 282,189
+ Viacom, Inc. (Class A) ........................ 434 25,389
+ Viacom, Inc. (Class B) ........................ 38,649 2,251,304
Wachovia Corporation .......................... 22,561 1,906,404
Wal-Mart Stores, Inc. ......................... 246,143 14,953,187
Walgreen Co. .................................. 54,433 2,248,763
Warner-Lambert Company ........................ 89,813 6,230,777
Washington Mutual Savings Bank ................ 42,424 1,842,792
Waste Management Inc. ......................... 52,124 1,824,340
Wells Fargo & Company ......................... 9,354 3,451,626
Wendy's International, Inc. ................... 14,388 338,118
+ Western Atlas Inc. ............................ 5,964 506,194
Westvaco Corporation .......................... 11,144 314,818
Weyerhaeuser Company .......................... 21,807 1,007,211
Whirlpool Corporation ......................... 8,279 569,181
Willamette Industries, Inc. ................... 12,166 389,312
Williams Companies, Inc. (The) ................ 46,464 1,568,160
Winn-Dixie Stores, Inc. ....................... 16,315 835,124
+ WorldCom Inc. ................................. 113,113 5,478,911
Worthington Industries, Inc. .................. 10,565 158,475
Wrigley (Wm.) Jr. Company (Class B) ........... 12,690 1,243,620
Xerox Corporation ............................. 35,973 3,655,756
---------------------------------------------------------------------------------
Total Common Stocks (Cost--$829,147,561)--97.5% 984,260,092
==================================================================================================
<CAPTION>
Face
Amount Short-Term Obligations
==================================================================================================
<S> <C> <C>
Commercial $27,722,000 CIT Group Holdings, Inc., 6.50% due 7/01/1998 27,722,000
Paper*
==================================================================================================
Total Short-Term Obligations (Cost--$27,722,000)--2.8% 27,722,000
==================================================================================================
Total Investments (Cost--$856,869,561)--100.3% 1,011,982,092
Variation Margin on Financial Futures Contracts**--(0.0%) (198,815)
Liabilities in Excess of Other Assets--(0.3%) (2,695,358)
--------------
Net Assets--100.0% $1,009,087,919
==============
==================================================================================================
</TABLE>
+ Non-income producing security.
++ Portion of securities held as collateral for open
financial futures contracts.
* Commercial Paper is traded on a discount basis; the
interest rate shown is the discount rate paid at the
time of purchase by the Fund.
** Financial futures contracts purchased as of June 30,
1998 were as follows:
---------------------------------------------------------------
Number of Expiration Value
Contracts Issue Date (Notes 1a & 1b)
---------------------------------------------------------------
89 S&P 500 Stock Index September 1998 $25,431,750
---------------------------------------------------------------
Total Financial Futures Contracts
Purchased (Total Contract Price--$24,973,190) $25,431,750
===========
---------------------------------------------------------------
See Notes to Financial Statements.
14 & 15
<PAGE>
Merrill Lynch S&P 500 Index Fund, June 30, 1998
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
MERRILL LYNCH
S&P 500
INDEX SERIES As of June 30, 1998
================================================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$856,869,561) (Note 1a) .............. $1,011,982,092
Cash ......................................................................... 420
Receivables:
Contributions .............................................................. $ 2,807,520
Dividends .................................................................. 957,244
Securities sold ............................................................ 163,455 3,928,219
Deferred organization expenses (Note 1e) ..................................... ------------- 13,247
--------------
Total assets ................................................................. 1,015,923,978
--------------
================================================================================================================================
Liabilities: Payables:
Securities purchased ....................................................... 3,651,984
Withdrawals ................................................................ 2,799,251
Variation margin (Note 1b) ................................................. 198,815
Investment adviser (Note 2) ................................................ 42,249 6,692,299
-------------
Accrued expenses and other liabilities ....................................... 143,760
--------------
Total liabilities ............................................................ 6,836,059
--------------
================================================================================================================================
Net Assets: Net assets ................................................................... $1,009,087,919
==============
================================================================================================================================
Net Assets Partners' capital ............................................................ $ 853,516,828
Consist of: Unrealized appreciation on investments--net .................................. 155,571,091
--------------
Net assets ................................................................... $1,009,087,919
==============
================================================================================================================================
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
MERRILL LYNCH
S&P 500
INDEX SERIES For the Six Months Ended June 30, 1998
=============================================================================================================================
<S> <C> <C> <C>
Investment Dividends (net of $9,189 foreign withholding tax) ......................... $ 5,525,767
Income Interest and discount earned .............................................. 1,271,379
(Notes 1c & 1d): Other ..................................................................... 37,315
--------------
Total income .............................................................. 6,834,461
--------------
=============================================================================================================================
Expenses: Investment advisory fees (Note 2) ......................................... $ 198,355
Accounting services (Note 2) .............................................. 129,265
Custodian fees ............................................................ 47,866
Pricing fees .............................................................. 5,825
Professional fees ......................................................... 2,796
Trustees' fees and expenses ............................................... 2,678
Amortization of organization expenses (Note 1e) ........................... 1,440
Other ..................................................................... 305
------------
Total expenses ............................................................ 388,530
--------------
Investment income--net .................................................... 6,445,931
--------------
=============================================================================================================================
Realized & Realized gain from investments--net ....................................... 7,770,390
Unrealized Change in unrealized appreciation on investments--net ..................... 109,520,216
Gain on --------------
Investments-- Net Increase in Net Assets Resulting from Operations ...................... $ 123,736,537
Net (Notes 1b, ==============
1d & 3):
=============================================================================================================================
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MERRILL LYNCH For the Six For the Period
S&P 500 Months Ended April 3, 1997+ to
INDEX SERIES Increase (Decrease) in Net Assets: June 30, 1998 December 31, 1997
================================================================================================================================
<S> <C> <C> <C>
Operations: Investment income--net .................................................... $ 6,445,931 $ 5,923,564
Realized gain on investments--net ......................................... 7,770,390 20,857,044
Change in unrealized appreciation on investments--net ..................... 109,520,216 46,050,875
-------------- --------------
Net increase in net assets resulting from operations ...................... 123,736,537 72,831,483
-------------- --------------
================================================================================================================================
Net Capital Increase in net assets derived from net capital contributions ............. 282,550,881 529,969,018
Contributions: -------------- --------------
================================================================================================================================
Net Assets: Total increase in net assets .............................................. 406,287,418 602,800,501
Beginning of period ....................................................... 602,800,501 --
-------------- --------------
End of period ............................................................. $1,009,087,919 $ 602,800,501
============== ==============
================================================================================================================================
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
MERRILL LYNCH The following ratios have been derived from information For the Six For the Period
S&P 500 provided in the financial statements. Months Ended April 3, 1997+ to
INDEX SERIES June 30, 1998 December 31, 1997
================================================================================================================================
<S> <C> <C> <C>
Ratios to Expenses, net of reimbursement ............................................ .10%* .12%*
Average ============ ============
Net Assets: Expenses .................................................................. .10%* .17%*
============ ============
Investment income--net .................................................... 1.62%* 1.99%*
============ ============
================================================================================================================================
Supplemental Net assets, end of period (in thousands) .................................. $ 1,009,088 $ 602,801
Data: ============ ============
Portfolio turnover ........................................................ 4.44% 24.31%
============ ============
================================================================================================================================
</TABLE>
+ Commencement of operations.
* Annualized.
See Notes to Financial Statements.
16 & 17
<PAGE>
Merrill Lynch S&P 500 Index Fund, June 30, 1998
NOTES TO FINANCIAL STATEMENTS
MERRILL LYNCH
S&P 500
INDEX SERIES
1. Significant Accounting Policies:
Merrill Lynch S&P 500 Index Series (the "Series") is part of Merrill Lynch Index
Trust (the "Trust"). The Trust is registered under the Investment Company Act of
1940 and is organized as a Delaware business trust. These unaudited financial
statements reflect all adjustments which are, in the opinion of management,
necessary to a fair statement of the results for the interim period presented.
All such adjustments are of a normal recurring nature. The following is a
summary of significant accounting policies followed by the Series.
(a) Valuation of investments--Portfolio securities which are traded on stock
exchanges are valued at the last sale price as of the close of business on the
day the securities are being valued or, lacking any sales, at the closing bid
price. Securities traded in the over-the-counter market are valued at the last
quoted bid price at the close of trading on the New York Stock Exchange on each
day by brokers that make markets in the securities. Securities traded in the
NASDAQ National Market System are valued at the last sale price prior to the
time of valuation. Portfolio securities which are traded both on the
over-the-counter 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 over-the-counter market, the last asked price. Options purchased
are valued at the last sale price in the case of exchange-traded options or, in
the case of options traded in the over-the-counter market, the last bid price.
Other investments, including futures contracts and related options, are stated
at market value. Short-term securities are valued at amortized cost, which
approximates market value. Securities and assets for which market quotations are
not readily available are valued at fair market value, as determined in good
faith by or under the direction of the Trust's Board of Trustees.
(b) Derivative financial instruments--The Series may engage in various portfolio
investment techniques to provide liquidity, or in connection with the Series'
arbitrage strategies. Losses may rise due to changes in the value of the
contract or if the counterparty does not perform under the contract.
o Financial futures contracts--The Series may purchase or sell financial futures
contracts and options on such futures contracts as a proxy for a direct
investment in securities underlying the Series' index. Upon entering into a
contract, the Series deposits and maintains as collateral such initial margin as
required by the exchange on which the transaction is effected. Pursuant to the
contract, the Series agrees to receive from or pay to the broker an amount of
cash equal to the daily fluctuation in value of the contract. Such receipts or
payments are known as variation margin and are recorded by the Series as
unrealized gains or losses. When the contract is closed, the Series records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed.
o Options--The Series is authorized to purchase and write call and put options.
When the Series writes an option, an amount equal to the premium received by the
Series 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 Series enters into
a closing transaction), the Series realizes a gain or loss on the option to the
extent of the premiums received or paid (or a gain or loss to the extent that
the cost of the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes--The Series is classified as a partnership for Federal income
tax purposes. As a partnership for Federal income tax purposes, the Series will
not incur Federal income tax liability. Items of partnership income, gain, loss
and deduction will pass through to investors as partners in the Series.
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.
(d) Security transactions and investment income--Security transactions are
accounted for on the date the securities are purchased or sold (the trade
dates). Dividend income is recorded on the ex-dividend dates. Interest income
(including amortization of discount) is recognized on the accrual basis.
Realized gains and losses on security transactions are determined on the
identified cost basis.
(e) Deferred organization expenses--Deferred organization expenses are charged
to expense on a straight-line basis over a period not exceeding five years.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Series has entered into an Investment Advisory Agreement with Merrill Lynch
Asset Management, L.P. ("MLAM"). The general partner of MLAM is Princeton
Services, Inc. ("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch &
Co., Inc. ("ML & Co."), which is the limited partner.
MLAM 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 Series pays a monthly fee
at an annual rate of 0.05% of the average daily value of the Series' net assets.
Accounting services are provided to the Series by MLAM at cost.
Certain officers and/or trustees of the Series are officers and/or directors of
MLAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended June 30, 1998 were $318,932,892 and $34,114,941, respectively.
Net realized gains for the six months ended June 30, 1998 and unrealized gains
as of June 30, 1998 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains Gains
- --------------------------------------------------------------------------------
Long-term investments .................... $ 6,378,244 $155,112,531
Financial futures contracts .............. 1,392,146 458,560
------------ ------------
Total .................................... $ 7,770,390 $155,571,091
============ ============
- --------------------------------------------------------------------------------
As of June 30, 1998, net unrealized appreciation for Federal income tax purposes
aggregated $155,112,531, of which $173,095,004 related to appreciated securities
and $17,982,473 related to depreciated securities. At June 30, 1998, the
aggregate cost of investments for Federal income tax purposes was $856,869,561.
18&19
<PAGE>
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of the Fund unless accompanied or preceded by the Fund's
current prospectus. Past performance results shown in this report should not be
considered a representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Statements and other information
herein are as dated and are subject to change.
Merrill Lynch
Index Funds, Inc.
Box 9011
Princeton, NJ
08543-9011 Index 4--6/98
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