MERRILL LYNCH
INTERNATIONAL
INDEX FUND
Merrill Lynch
Index Funds, Inc.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Semi-Annual Report
June 30, 1999
<PAGE>
Merrill Lynch International Index Fund
Officers and Directors
Terry K. Glenn, President and Director
Jack B. Sunderland, Director
Stephen B. Swensrud, Director
J. Thomas Touchton, Director
Christopher G. Ayoub, Senior Vice President
Robert C. Doll, 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
Jeffrey B. Hewson, Vice President
Donald C. Burke, Vice President and Treasurer
Ira P. Shapiro, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
<PAGE>
Merrill Lynch International Index Fund, June 30, 1999
DEAR SHAREHOLDER
For the three months ended June 30, 1999, Merrill Lynch International Index
Fund's Class A and Class D Shares each had a total return of +3.17%. The Fund's
benchmark, the unmanaged Morgan Stanley Capital International Europe,
Australasia and Far East (MSCI EAFE) Gross Domestic Product (GDP) Weighted
Index, had a total return of +3.52% for the same three-month period. (Complete
performance information can be found below on page 3 of this report to
shareholders.) The Fund's net assets stood at $126.8 million on June 30, 1999,
down slightly from its level of $130.5 million at March 31, 1999.
Market Review
Strong returns in the Pacific Rim component of the MSCI EAFE Index during the
second quarter of 1999 overcame relative weakness in European currency markets.
For the third consecutive quarter, the strong showing by the MSCI Far Eastern
countries led to a greater return contribution from the Pacific region than from
Europe. (References to markets of all regions/countries in this letter to
shareholders correspond to those regions'/countries' stock market component in
the MSCI EAFE Index and are in US dollars unless otherwise noted.) The MSCI
Pacific Index had a total return of +9.55% in the June quarter, following its
+11.19% advance during the March quarter. At the same time, the MSCI Europe
Index posted a decline of 0.31% in US dollar terms, as continued strength in the
US dollar overshadowed a moderate 3.59% advance of the MSCI Europe Index in
local terms. A continuation of the declines in the euro, the unit of currency
for six of the MSCI EAFE Index's constituents, was again a factor during the
second quarter, as it posted a further deterioration against the US dollar of
nearly 4%. The euro has declined for six consecutive months since its
introduction at the end of 1998.
During the June quarter, the MSCI EAFE Index was led by double-digit returns
posted by Singapore (+45.49%), Hong Kong (+23.27%), and Sweden (+13.36%). The
worst-performing countries during the second quarter of 1999 were the MSCI
components of Ireland and Italy, which posted double-digit declines of 11.13%
and 10.32%, respectively. The other large European components of the Index fared
somewhat better, as Germany and France gained 5.57% and 3.25%, respectively,
while the United Kingdom declined by 1.62%. The largest country in the Index,
Japan (with a weight of 33 1/3% in the MSCI EAFE GDP Weighted Index) posted an
advance of 7.61% during the second quarter.
MSCI revises its set of GDP weights for the constituent countries at the end of
June. On a regional basis, this rebalancing amounted to little more than a 0.50%
increase in the European weight to 64.1% and a 0.50% decline in the Pacific Rim
weight to 35.9%, as compared to the weights established from the prior year-end.
Portfolio Matters
Merrill Lynch International Index Fund invests all of its assets in Merrill
Lynch International Index Series, which has the same investment objective as the
Fund. There are two principal investments made by the Series in its attempt to
replicate the returns of the Index. First, the Series holds a basket of stocks
in the Index designed to replicate the returns of the Index as a whole, with
share quantities designed to closely approximate each country's actual weight in
the Index. In addition, the Series frequently maintains positions in several
foreign futures contracts, which are available in most of the major foreign
markets in the EAFE Index. These futures contracts provide an efficient
mechanism for maintaining exposure to the Index but can be sold quickly and with
less cost than stocks if necessary to raise cash to meet redemp tions. As of
June 30, 1999, the Series' equity portfolio was valued at $146.7 million, and
the Series' financial futures contracts were valued at $5.2 million. It is our
goal for the Series to be as close as possible to 100% invested at all times.
In Conclusion
We appreciate your investment in Merrill Lynch International 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 16, 1999
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 share holders.
Recent Performance Results
<TABLE>
<CAPTION>
12 Month 3 Month Since Inception
Total Return Total Return Total Return
============================================================================================
<S> <C> <C> <C>
ML International Index Fund Class A Shares* +8.83% +3.17% +43.85%
- --------------------------------------------------------------------------------------------
ML International Index Fund Class D Shares* +8.52 +3.17 +43.14
- --------------------------------------------------------------------------------------------
MSCI EAFE Index--GDP Weighted** +9.84 +3.52 +40.98
============================================================================================
</TABLE>
* Total investment returns are based on changes in net asset values for the
periods shown, and assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date. The Fund's
inception date is 4/09/97.
** This unmanaged gross domestic product-weighted Index is comprised of
equity securities of companies from various industrial sectors whose
primary trading markets are located outside the United States and which
are selected from among the larger-capitalization companies in such
markets. Since inception total return is from 4/30/97.
Average Annual Total Return
% Return
================================================================================
Class A Shares
================================================================================
Year Ended 6/30/99 + 8.83%
- --------------------------------------------------------------------------------
Inception (4/09/97) through 6/30/99 +17.76
- --------------------------------------------------------------------------------
% Return
================================================================================
Class D Shares
================================================================================
Year Ended 6/30/99 + 8.52%
- --------------------------------------------------------------------------------
Inception (4/09/97) through 6/30/99 +17.49
- --------------------------------------------------------------------------------
Page 2 & 3
<PAGE>
Merrill Lynch International Index Fund, June 30, 1999
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
MERRILL LYNCH
INTERNATIONAL
INDEX FUND As of June 30, 1999
====================================================================================================================================
<S> <C> <C>
Assets: Investment in Merrill Lynch International Index Series, at value
(identified cost--$101,657,022) (Note 1a) ........................................ $126,936,423
Deferred organization expenses (Note 1d).......................................... 13,451
Prepaid registration fees and other assets (Note 1d).............................. 39,786
------------
Total assets...................................................................... 126,989,660
------------
====================================================================================================================================
Liabilities: Payable to administrator (Note 2)................................................. 50,697
Payable to distributor (Note 2)................................................... 3,431
Accrued expenses and other liabilities............................................ 85,558
------------
Total liabilities ................................................................ 139,686
------------
====================================================================================================================================
Net Assets: Net assets........................................................................ $126,849,974
============
====================================================================================================================================
Net Assets Class A Shares of Common Stock, $.0001 par value, 125,000,000 shares authorized... $ 873
Consist of: Class D Shares of Common Stock, $.0001 par value, 125,000,000 shares authorized... 125
Paid-in capital in excess of par.................................................. 99,756,919
Undistributed investment income--net.............................................. 542,625
Undistributed realized capital gains on investments and foreign currency
transactions from the Series--net ............................................... 1,270,031
Unrealized appreciation on investments and foreign currency transactions from
the Series--net ................................................................. 25,279,401
============
Net assets........................................................................ $126,849,974
============
====================================================================================================================================
Net Asset Class A--Based on net assets of $110,999,473 and 8,731,569 shares outstanding..... $ 12.71
Value: ============
Class D--Based on net assets of $15,850,501 and 1,247,571 shares outstanding...... $ 12.71
============
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
MERRILL LYNCH
INTERNATIONAL
INDEX FUND For the Six Months Ended June 30, 1999
====================================================================================================================================
<S> <C> <C>
Investment Income Investment income allocated from the Series (net of $190,796 foreign
(Notes 1b & 1c): withholding tax).................................................................. $ 1,396,907
Expenses allocated from the Series................................................ (155,316)
------------
Net investment income from the Series............................................. 1,241,591
------------
====================================================================================================================================
Expenses: Administration fee (Note 2)....................................................... $ 153,925
Printing and shareholder reports.................................................. 39,992
Transfer agent fees (Note 2)...................................................... 28,355
Account maintenance fee--Class D (Note 2)......................................... 18,822
Registration fees (Note 1d)....................................................... 17,383
Professional fees................................................................. 14,112
Amortization of organization expenses (Note 1d)................................... 2,817
Accounting services (Note 2)...................................................... 491
------------
Total expenses before reimbursement............................................... 275,897
Reimbursement of expenses (Note 2)................................................ (5,130)
------------
Total expenses after reimbursement................................................ 270,767
------------
Investment income--net............................................................ 970,824
------------
====================================================================================================================================
Realized & Realized gain from the Series on:
Unrealized Investments--net................................................................ 674,698
Gain from the Foreign currency transactions--net.............................................. 30,402 705,100
Series--Net: ------------
Change in unrealized appreciation on investments and foreign currency
transactions from the Series--net ................................................ 5,351,903
------------
Net realized and unrealized gain on investments and foreign currency
transactions from the Series ..................................................... 6,057,003
------------
Net Increase in Net Assets Resulting from Operations.............................. $ 7,027,827
============
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
Page 4 & 5
<PAGE>
Merrill Lynch International Index Fund, June 30, 1999
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MERRILL LYNCH For the Six For the
INTERNATIONAL Months Ended Year Ended
INDEX FUND Increase (Decrease) in Net Assets: June 30, 1999 Dec. 31, 1998
====================================================================================================================================
<S> <C> <C> <C>
Operations: Investment income--net........................................................ $ 970,824 $ 1,422,489
Realized gain on investments and foreign currencytransactions
from the Series--net.......................................................... 705,100 11,017,899
Change in unrealized appreciation on investments and foreign
currency transactions from the Series--net ................................... 5,351,903 19,554,453
------------ ------------
Net increase in net assets resulting from operations.......................... 7,027,827 31,994,841
------------ ------------
====================================================================================================================================
Dividends & Investment income--net:
Distributions to Class A..................................................................... -- (1,103,767)
Shareholders Class D..................................................................... -- (108,053)
(Note 1e): In excess of investment income--net:
Class A..................................................................... -- (351,648)
Class D..................................................................... -- (34,425)
Realized gain on investments from the Series--net:
Class A..................................................................... -- (9,430,008)
Class D..................................................................... -- (1,190,493)
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders................................................. -- (12,218,394)
------------ ------------
====================================================================================================================================
Capital Share Net decrease in net assets derived from capital share transactions........... (13,671,972) (22,007,983)
Transactions ------------ ------------
(Note 4):
====================================================================================================================================
Net Assets: Total decrease in net assets.................................................. (6,644,145) (2,231,536)
Beginning of period........................................................... 133,494,119 135,725,655
------------ ------------
End of period*................................................................ $126,849,974 $133,494,119
============ ============
====================================================================================================================================
* Undistributed (accumulated distributions in excess of) investment
income--net. ................................................................. $ 542,625 $ (428,199)
============ ============
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
The following per share data and ratios have been Class A
derived from information provided in the financial -----------------------------------------------------
MERRILL LYNCH statements. For the Six For the For the Period
INTERNATIONAL Months Ended Year Ended April 9, 1997+ to
INDEX FUND Increase (Decrease) in Net Asset Value: June 30, 1999++++ Dec. 31, 1998++++ Dec. 31, 1997
====================================================================================================================================
<S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period................... $ 12.04 $ 10.56 $ 10.00
Operating ------------ ------------ ------------
Performance: Investment income--net................................. .09 .15 .10
Realized and unrealized gain on investments and
foreign currency transactions from the Series--net..... .58 2.52 .75
------------ ------------ ------------
Total from investment operations....................... .67 2.67 .85
------------ ------------ ------------
Less dividends and distributions:
Investment income--net............................... -- (.12) (.12)
In excess of investment income--net.................. -- (.04) (.02)
Realized gain on investments from the Series--net.... -- (1.03) (.15)
------------ ------------ ------------
Total dividends and distributions...................... -- (1.19) (.29)
------------ ------------ ------------
Net asset value, end of period......................... $ 12.71 $ 12.04 $ 10.56
============ ============ ============
====================================================================================================================================
Total Investment Based on net asset value per share..................... 5.56%+++ 25.65% 8.45%+++
Return: ============ ============ ============
====================================================================================================================================
Ratios to Average Expenses, net of reimbursement++....................... .63%* .64% .86%*
Net Assets: ============ ============ ============
Expenses++............................................. .65%* .76% 1.10%*
============ ============ ============
Investment income--net................................. 1.54%* 1.26% 1.64%*
============ ============ ============
====================================================================================================================================
Supplemental Net assets, end of period (in thousands)............... $ 110,999 $ 118,692 $ 115,190
Data: ============ ============ ============
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
The following per share data and ratios have been Class D
derived from information provided in the financial ---------------------------------------------------
MERRILL LYNCH statements. For the Six For the For the Period
INTERNATIONAL Months Ended Year Ended April 9, 1997+ to
INDEX FUND Increase (Decrease) in Net Asset Value: June 30, 1999++++ Dec. 31, 1998++++ Dec. 31, 1997
===================================================================================================================================
<S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period................... $ 12.05 $ 10.56 $ 10.00
Operating ------------ ------------ ------------
Performance: Investment income--net................................. .08 .13 .15
Realized and unrealized gain on investments and
foreign currency transactions from the Series--net..... .58 2.51 .67
------------ ------------ ------------
Total from investment operations....................... .66 2.64 .82
------------ ------------ ------------
Less dividends and distributions:
Investment income--net............................... -- (.09) (.10)
In excess of investment income--net.................. -- (.03) (.01)
Realized gain on investments from the Series--net.... -- (1.03) (.15)
------------ ------------ ------------
Total dividends and distributions...................... -- (1.15) (.26)
------------ ------------ ------------
Net asset value, end of period......................... $ 12.71 $ 12.05 $ 10.56
============ ============ ============
====================================================================================================================================
Total Investment Based on net asset value per share..................... 5.48%+++ 25.40% 8.22%+++
Return: ============ ============ ============
====================================================================================================================================
Ratios to Average Expenses, net of reimbursement++....................... .89%* .89% 1.11%*
Net Assets: ============ ============ ============
Expenses++............................................. .90%* 1.02% 1.35%*
============ ============ ============
Investment income--net................................. 1.31%* 1.14% 1.67%*
============ ============ ============
====================================================================================================================================
Supplemental Net assets, end of period (in thousands)............... $ 15,851 $ 14,802 $ 20,536
Data: ============ ============ ============
====================================================================================================================================
</TABLE>
* Annualized.
+ Commencement of operations.
++ Includes the Fund's share of the Series' allocated expenses.
+++ Aggregate total investment return.
++++ Based on average shares outstanding.
See Notes to Financial Statements.
Page 6 & 7
<PAGE>
Merrill Lynch International Index Fund, June 30, 1999
NOTES TO FINANCIAL STATEMENTS
MERRILL LYNCH
INTERNATIONAL
INDEX FUND
1. Significant Accounting Policies:
Merrill Lynch International Index Fund (the "Fund") is part of Merrill Lynch
Index Funds, Inc. (the "Corporation"). The Fund is registered under the
Investment Company Act of 1940 as a non-diversified mutual fund. The Fund seeks
to achieve its investment objective by investing all of its assets in Merrill
Lynch International Index Series (the "Series") of 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's financial
statements are prepared in accordance with generally accepted accounting
principles, which may require the use of management accruals and estimates.
These unaudited financial statements reflect all adjustments that 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 offers two classes of shares, Class A and Class D. 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 and have
exclusive voting rights with respect to matters relating to its account
maintenance expenditures. 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 are 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 substantially all of its taxable income to 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.
(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. Distributions in excess of net investment
income are due primarily to differing tax treatments for post-October losses.
(f) Investment transactions--Investment transactions are accounted for on a
trade date basis.
2. Transactions with Affiliates:
The Corporation has 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 Merrill Lynch &
Co., Inc. ("ML & Co."), which is the limited partner. The Fund pays a monthly
fee at an annual rate of 0.24% 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, 1999, MLAM earned fees of $153,925, of which
$5,130 was voluntarily waived.
The Corporation has also entered into a Distribution Agreement and Distribution
Plans with Merrill Lynch Funds Distributor ("MLFD" or the "Distributor"), a
division of Princeton Funds Distributor, Inc. ("PFD"), which is a wholly-owned
subsidiary of Merrill Lynch Group, Inc. Pursuant to the Distribution Plans
adopted by the Corporation 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 Incorporated ("MLPF&S"), a subsidiary of 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.
Financial Data Services, Inc. ("FDS"), 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, FDS, and/or ML & Co.
3. Investments:
Increases and decreases in the Fund's investment in the Series for the six
months ended June 30, 1999 were $11,892,834 and $25,824,447, respectively.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions was
$13,671,972 and $22,007,983 for the six months ended June 30, 1999 and the year
ended December 31, 1998, respectively.
Transactions in capital shares for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Six Months Dollar
Ended June 30, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ...................... 2,040,290 $ 25,106,583
Shares redeemed .................. (3,166,865) (38,970,677)
---------- ------------
Net decrease ..................... (1,126,575) $(13,864,094)
========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended December 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ...................... 5,652,758 $ 64,794,136
Shares issued to shareholders in
reinvestment of dividends
and distributions ................ 910,386 10,606,003
---------- ------------
Total issued ..................... 6,563,144 75,400,139
Shares redeemed .................. (7,618,229) (89,230,079)
---------- ------------
Net decrease ..................... (1,055,085) $(13,829,940)
========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Six Months Dollar
Ended June 30, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ...................... 997,657 $ 12,114,990
Shares redeemed .................. (978,837) (11,922,868)
---------- ------------
Net increase ..................... 18,820 $ 192,122
========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Year Dollar
Ended December 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ...................... 444,487 $ 5,440,002
Shares issued to shareholders in
reinvestment of dividends
and distributions ................ 98,508 1,148,598
---------- ------------
Total issued ..................... 542,995 6,588,600
Shares redeemed .................. (1,258,899) (14,766,643)
---------- ------------
Net decrease ..................... (715,904) $ (8,178,043)
========== ============
- --------------------------------------------------------------------------------
Page 8 & 9
<PAGE>
Merrill Lynch International Index Fund, June 30, 1999
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
Merrill Lynch International Index Series
------------------------------------------------------------------
Shares Value
COUNTRY Investments Held (Note 1a)
=======================================================================================
<S> <C> <C> <C>
Australia AMP Limited 11,700 $ 127,904
Australian Gas Light Company Limited 13,800 83,943
Boral Limited 52,100 88,282
Broken Hill Proprietary Company Limited 42,100 487,655
CSR Limited 41,600 118,951
Coca-Cola Amatil Limited 19,800 79,800
Coca-Cola Beverages PLC (a) 18,100 38,337
Coles Myer Limited 26,000 151,271
Foster's Brewing Group Limited 66,700 187,985
National Australia Bank Limited 29,000 479,878
The News Corporation Limited 39,500 337,010
The News Corporation Limited (Preferred) 25,400 193,509
------------------------------------------------------------------
<CAPTION>
Shares Held/ Value
Investments Face Amount (Note 1a)
==================================================================
<S> <C> <C> <C>
Normandy Mining Limited 60,300 $ 40,152
North Limited 42,900 86,890
Orica Limited 19,000 103,765
Pacific Dunlop Limited 64,900 93,647
Pioneer International Limited 40,800 103,971
Rio Tinto Limited 12,100 198,399
Santos Limited 27,700 90,756
Schroders Property Fund 107,300 166,901
Smith (Howard) Limited 12,800 97,855
TABCORP Holdings Limited 20,500 138,132
WMC Limited 35,400 152,069
Westpac Banking Corporation Limited 41,200 267,249
------------------------------------------------------------------
Total Investments in Australia
(Cost--$3,787,795)--2.6% 3,914,311
<CAPTION>
Shares Value
COUNTRY Investments Held (Note 1a)
=======================================================================================
<S> <C> <C> <C>
Austria Bank Austria AG 8,000 420,485
Flughafen Wien AG 3,200 134,192
Generali Holding Vienna AG 700 128,413
Mayr-Melnhof Karton AG 1,950 88,425
OMV AG 2,350 209,471
------------------------------------------------------------------
<CAPTION>
Shares Held/ Value
Investments Face Amount (Note 1a)
==================================================================
<S> <C> <C> <C>
Oesterreichische Elektrizitaetswirtschafts-
AG "Verbund" 'A' 2,750 400,182
VA Technologie AG 1,500 135,807
Wienerberger Baustoffindustrie AG (a) 8,800 227,730
------------------------------------------------------------------
Total Investments in Austria
(Cost--$1,822,772)--1.1% 1,744,705
<CAPTION>
Shares Value
COUNTRY Investments Held (Note 1a)
=======================================================================================
<S> <C> <C> <C>
Belgium Barco NV 640 102,961
Bekaert NV 159 68,004
Cimenteries CBR Cementbedrijven 1,940 178,343
Delhaize "Le Lion" SA 2,720 231,407
Electrabel SA 1,370 441,932
Fortis 10,530 330,450
------------------------------------------------------------------
<CAPTION>
Shares Held/ Value
Investments Face Amount (Note 1a)
==================================================================
<S> <C> <C> <C>
Glaverbel SA 650 61,094
Groupe Bruxelles Lambert SA 910 153,713
PetroFina SA (a) 4,140 43
Solvay SA 2,580 171,103
Union Miniere SA 1,160 47,820
------------------------------------------------------------------
Total Investments in Belgium
(Cost--$1,569,664)--1.2% 1,786,870
<CAPTION>
Shares Value
COUNTRY Investments Held (Note 1a)
=======================================================================================
<S> <C> <C> <C>
Denmark A/S Dampskibsselskabet Svendborg 'B' 21 259,608
D/S 1912 'B' 30 265,560
Danisco A/S 2,130 96,047
Den Danske Bank Group 1,502 162,758
------------------------------------------------------------------
<CAPTION>
Shares Held/ Value
Investments Face Amount (Note 1a)
==================================================================
<S> <C> <C> <C>
Novo Nordisk A/S 'B' 2,190 236,095
Tele Danmark A/S 6,400 314,344
Unidanmark A/S 'A' 1,845 122,874
------------------------------------------------------------------
Total Investments in Denmark
(Cost--$1,166,519)--1.0% 1,457,286
<CAPTION>
Shares Value
COUNTRY Investments Held (Note 1a)
=======================================================================================
<S> <C> <C> <C>
Finland Kesko Oyj 'B' 4,300 57,832
Merita PLC 17,500 99,376
Nokia Oyj 21,000 1,839,621
------------------------------------------------------------------
<CAPTION>
Shares Held/ Value
Investments Face Amount (Note 1a)
==================================================================
<S> <C> <C> <C>
Outokumpu Oyj 5,900 66,278
Sampo Insurance Company Ltd. 'A' 1,800 52,128
UPM-Kymmene Oyj 5,100 146,118
------------------------------------------------------------------
Total Investments in Finland
(Cost--$718,480)--1.5% 2,261,353
<CAPTION>
Shares Value
COUNTRY Investments Held (Note 1a)
=======================================================================================
<S> <C> <C> <C>
France Accor SA 800 200,761
Air Liquide 2,166 340,423
Alcatel 3,950 555,674
Axa 7,699 938,662
Banque Nationale de Paris (BNP) 5,200 433,017
Bouygues SA 750 198,107
Bouygues SA (Rights) (c) 750 1,994
Canal Plus (a) 750 210,320
Carrefour SA 5,502 808,026
Compagnie de Saint Gobain 2,122 337,881
Compagnie Financiere de Paribas (CFP) 4,000 448,105
Compagnie Generale des Etablissements
Michelin 'B' 3,500 143,094
Elf Aquitaine SA 6,146 901,338
Eridania Beghin-Say SA 609 87,241
France Telecom SA 19,150 1,445,661
Groupe Danone SA 1,712 441,097
Imetal SA 600 89,044
L'Oreal SA 1,494 1,009,284
LVMH (Louis Vuitton Moet Hennessy) 1,943 568,497
LVMH (Louis Vuitton Moet Hennessy)
(Rights) (d) 1,943 56,770
Lafarge SA (Ordinary) 2,500 237,553
Lagardere SCA 3,200 119,055
------------------------------------------------------------------
<CAPTION>
Shares Held/ Value
Investments Face Amount (Note 1a)
==================================================================
<S> <C> <C> <C>
Legrand SA 650 132,236
PSA Peugeot Citroen 1,300 204,986
Pathe 1,107 132,798
Pernod Ricard 1,700 113,881
Pinault-Printemps-Redoute SA 2,700 463,028
Promodes 490 321,429
Rallye, 3% due 1/01/2003 (Convertible) Frf 537 31,546
Rallye, 4.50% due 1/01/2005
(Convertible) Frf 537 56,450
Rhone-Poulenc SA 8,684 396,563
SEITA 1,750 100,999
Sagem SA 120 80,139
Sanofi-Synthelabo SA (a) 11,000 466,501
Schneider SA 3,731 209,369
Sidel SA 1,050 127,583
Societe BIC SA 1,550 81,709
Societe Generale 'A' 2,450 431,517
Sodexho Alliance 800 137,688
Suez Lyonnaise des Eaux 2,850 513,718
Thomson CSF 3,000 104,194
Total Fina SA 'B' 9,759 1,258,209
Usinor SA 6,600 98,288
Valeo SA 1,800 148,406
Vivendi 11,490 930,157
------------------------------------------------------------------
Total Investments in France
(Cost--$11,124,474)--10.5% 16,112,998
<CAPTION>
Shares Value
COUNTRY Investments Held (Note 1a)
=======================================================================================
<S> <C> <C> <C>
Germany AMB Aachener & Muenchener
Beteiligungs AG 1,250 126,893
Adidas-Salomon AG 1,370 135,897
Allianz AG (Registered Shares) 6,450 1,788,143
Axa Colonia Konzern AG 1,050 100,638
BASF AG 16,705 737,713
Bayer AG 20,131 838,179
Beiersdorf AG 2,516 167,248
Buderus AG 20 8,018
Continental AG 4,500 106,667
DaimlerChrysler AG 19,312 1,671,848
Degussa-Huels AG (a) 1,815 74,822
Deutsche Bank AG 14,650 893,064
Deutsche Lufthansa AG (Registered Shares) 11,447 207,396
Deutsche Telekom AG 59,444 2,493,407
Dresdner Bank AG 13,850 540,977
Friedrich Grohe AG (Preferred) 167 47,158
Heidelberger Zement AG 1,531 126,228
Hochtief AG 2,312 106,271
HypoVereinsbank 11,034 716,413
Karstadt AG 290 139,275
Linde AG 322 192,807
MAN AG 4,100 139,863
------------------------------------------------------------------
<CAPTION>
Shares Held/ Value
Investments Face Amount (Note 1a)
==================================================================
<S> <C> <C> <C>
Mannesmann AG 10,219 1,523,937
Merck KGaA 4,570 148,548
Metro AG 6,700 415,682
Muenchener Rueckversicherungs-
Gesellschaft AG 2,250 410,436
Preussag AG 5,000 268,471
Muenchener Rueckversicherungs-
Gesellschaft AG (Registered Shares) 2,250 416,234
RWE AG 9,250 427,939
RWE AG (Preferred) 2,685 93,253
SAP AG (Systeme, Anwendungen,
Produkte in der Datenverarbeitung) 1,653 558,775
SAP AG (Systeme, Anwendungen,
Produkte in der Datenverarbeitung)
(Preferred) 1,000 399,358
SGL Carbon AG 800 61,836
Schering AG 2,028 214,858
Siemens AG 15,437 1,190,021
Thyssen Krupp AG (a) 12,000 263,792
Veba AG 12,794 751,573
Viag AG 691 326,162
Volkswagen AG 8,200 524,802
Volkswagen AG (Preferred) 2,200 81,283
------------------------------------------------------------------
Total Investments in Germany
(Cost--$15,521,675)--12.7% 19,435,885
</TABLE>
Page 10 & 11
<PAGE>
Merrill Lynch International Index Fund, June 30, 1999
SCHEDULE OF INVESTMENTS (continued)
Merrill Lynch International Index Series (continued)
<TABLE>
<CAPTION>
Shares Value
COUNTRY Investments Held (Note 1a)
=======================================================================================
<S> <C> <C> <C>
Hong Kong CLP Holdings Limited 27,000 $ 131,196
Cheung Kong (Holdings) Ltd. 36,000 320,161
Hang Seng Bank Limited 21,200 237,040
Hong Kong Telecom Limited 123,400 319,689
Hutchison Whampoa Limited 40,000 362,179
Sun Hung Kai Properties Ltd. 32,000 291,805
------------------------------------------------------------------
Total Investments in Hong Kong
(Cost--$1,359,928)--1.1% 1,662,070
<CAPTION>
Shares Value
COUNTRY Investments Held (Note 1a)
=======================================================================================
<S> <C> <C> <C>
Ireland Allied Irish Banks PLC 23,100 303,537
CRH PLC 14,000 248,168
Greencore Group PLC 29,000 89,662
Jefferson Smurfit Group PLC 42,000 98,474
------------------------------------------------------------------
Total Investments in Ireland
(Cost--$612,569)--0.5% 739,841
<CAPTION>
Shares Value
COUNTRY Investments Held (Note 1a)
=======================================================================================
<S> <C> <C> <C>
Italy Assicurazioni Generali 35,400 1,225,837
Banca Commerciale Italiana 75,400 550,167
Banca Intesa SpA 33,100 158,966
Banca Popolare di Milano (BPM) 13,000 100,350
Benetton Group SpA 95,400 187,790
Bulgari SpA 13,300 89,370
Burgo (Cartiere) SpA 12,600 80,770
ENI SpA 287,072 1,713,009
Edison SpA 23,397 202,549
Fiat SpA 153,600 485,981
Fiat SpA (Preferred) 51,000 81,732
Fiat SpA (RNC) 42,200 71,978
Istituto Nazionale delle
Assicurazioni (INA) 175,600 407,190
Italcementi SpA 9,700 122,961
Italgas SpA 25,746 107,993
Mediaset SpA 44,649 396,652
Mediobanca SpA 22,300 233,271
Montedison SpA 113,724 185,182
Olivetti SpA (a) 113,726 273,090
Olivetti SpA (Rights) (e) 113,726 15,295
Parmalat Finanziaria SpA 81,000 106,018
Pirelli SpA 78,100 212,493
Riunione Adriatica di Sicurta SpA 16,300 158,245
San Paolo-IMI SpA 61,765 840,246
Sirti SpA 17,290 83,393
Telecom Italia Mobile (TIM) SpA 66,800 245,773
Telecom Italia Mobile (TIM) SpA 240,256 1,433,649
Telecom Italia SpA 38,500 208,707
Telecom Italia SpA 139,403 1,448,181
Unicredito Italiano SpA 108,200 475,037
Unione Immobiliare SpA 175,600 77,819
------------------------------------------------------------------
Total Investments in Italy
(Cost--$7,972,041)--7.8% 11,979,694
<CAPTION>
Shares Value
COUNTRY Investments Held (Note 1a)
=======================================================================================
<S> <C> <C> <C>
Japan The 77 Bank, Ltd. 12,000 105,141
Acom Co., Ltd. 4,700 405,976
Advantest Corporation 2,800 307,819
Ajinomoto Co., Inc. 25,000 285,171
Alps Electric Co., Ltd. 5,000 117,168
Aoyamma Trading Co., Ltd. 3,700 116,829
The Asahi Bank, Ltd. 78,000 373,946
Asahi Breweries Limited 12,000 149,380
Asahi Chemical Industry Co., Ltd. 55,000 305,050
Asahi Glass Company, Limited 35,000 227,104
Autobacs Seven Co., Ltd. 1,300 63,184
The Bank of Tokyo-Mitsubishi, Ltd. 131,000 1,865,705
The Bank of Yokohama, Ltd. 38,000 97,686
Bridgestone Corp. 25,000 756,323
CSK Corporation 1,300 29,550
Canon, Inc. 27,000 776,657
Casio Computer Co., Ltd. 10,000 76,046
The Chiba Bank, Ltd. 30,000 110,845
Chugai Pharmaceutical Co., Ltd. 18,000 194,016
Citizen Watch Co. 17,000 147,545
Cosmo Oil Co., Ltd. 48,000 88,081
Credit Saison Co., Ltd. 3,800 79,468
Dai Nippon Printing Co., Ltd. 22,000 351,876
The Daiei, Inc. 20,000 68,441
The Daimaru, Inc. 22,000 107,654
Dainippon Ink and Chemicals, Inc. 36,000 122,599
Dainippon Screen Manufacturing Co., Ltd. 5,000 25,831
Daiwa House Industry Co., Ltd. 19,000 199,926
Daiwa Securities Group Inc. 41,000 271,119
Denso Corporation 10,000 203,339
East Japan Railway Company 115 617,871
Ebara Corporation 15,000 178,418
Eisai Company, Ltd. 10,000 197,140
Fanuc Ltd. 7,600 408,332
The Fuji Bank, Limited 94,000 655,778
Fuji Photo Film 15,000 567,862
Fujikura Ltd. 7,000 33,444
Fujita Kanko Inc. 1,000 9,506
Fujitsu Limited 55,000 1,107,001
The Gunma Bank Ltd. 12,000 75,384
Hankyu Department Stores, Inc. 2,000 13,275
Hirose Electric Co. Ltd. 1,300 134,964
Hitachi Ltd. 102,000 956,935
Honda Motor Co., Ltd. 29,000 1,229,707
Hoya Corporation 2,000 112,911
The Industrial Bank of Japan, Limited 72,000 571,334
Isetan Company Ltd. 7,000 60,349
Ito-Yokado Co., Ltd. 10,000 669,532
Itochu Corporation 53,000 131,865
JUSCO Co., Ltd. 12,000 218,218
Japan Airlines Company, Ltd. (JAL) 55,000 181,848
Japan Energy Corp. 72,000 84,510
The Joyo Bank, Ltd. 30,000 116,796
Kajima Corporation 55,000 200,033
Kaneka Corporation 24,000 226,153
Kansai Electric Power Company, Inc. 25,900 492,395
Kao Corporation 20,000 562,076
Kawasaki Heavy Industries Ltd. 66,000 178,939
Kawasaki Steel Corporation 124,000 231,642
Keihin Electric Express Railway Co., Ltd. 50,000 165,317
Kinden Corporation 17,000 183,377
Kirin Brewery Company, Ltd. 39,000 467,433
Kokuyo Co., Ltd. 5,000 80,592
Komatsu Ltd. 36,000 230,021
Konami Co., Ltd. 1,950 80,592
Kubota Corporation 57,000 170,557
Kurita Water Industries Ltd. 2,000 35,874
Kyocera Corporation 6,700 393,205
Lion Corporation 66,000 272,772
Marubeni Corporation 67,000 140,114
Marui Co., Ltd. 12,000 198,380
Matsushita Electric Industrial
Company, Ltd. 61,000 1,184,907
Minebea Company Ltd. 10,000 111,589
Mitsubishi Chemical Corporation 72,000 249,364
Mitsubishi Corporation 45,000 305,009
Mitsubishi Electric Corporation 86,000 330,550
Mitsubishi Estate Company, Limited 39,000 380,716
Mitsubishi Heavy Industries, Ltd. 118,000 478,906
Mitsubishi Logistics Corp. 3,000 33,749
Mitsubishi Materials Corporation 63,000 141,122
Mitsubishi Trust & Banking Corp. 33,000 320,780
Mitsui & Co., Ltd. 51,000 355,794
Mitsui Fudosan Co., Ltd. 19,000 153,910
Mitsui Marine and Fire Insurance
Company, Ltd. 35,000 172,136
Mitsui Mining & Smelting Co., Ltd. 12,000 61,994
Mitsui O.S.K. Lines, Ltd. 53,000 113,903
The Mitsui Trust & Banking Co., Ltd. 52,000 82,956
Mitsukoshi, Ltd. (a) 11,000 47,826
Murata Manufacturing Co., Ltd. 7,000 460,572
Mycal Corporation 15,000 94,230
NEC Corporation 50,000 622,004
NKK Corporation 155,000 126,839
NSK Limited 24,000 131,724
Namco Ltd. 1,300 34,923
Nankai Electric Railway Co., Ltd. 50,000 231,857
The Nichido Fire & Marine Insurance
Co., Ltd. 15,000 77,244
Nikon Corporation 10,000 163,663
Nippon COMSYS Corporation 5,000 81,212
Nippon Express Co., Ltd. 53,000 317,614
The Nippon Fire & Marine Insurance
Co., Ltd. 14,000 47,446
Nippon Light Metal Co., Ltd. 48,000 71,814
Nippon Mitsubishi Oil Corp. 44,000 185,485
Nippon Paper Industries Co. Ltd. 30,000 156,472
Nippon Steel Corporation 230,000 534,221
Nippon Telegraph & Telephone
Corporation (NTT) 356 4,149,116
Nippon Yusen Kabushiki Kaisha 45,000 173,334
Nissan Motor Co., Ltd. 83,000 396,545
Nissin Food Products Co., Ltd. 3,000 73,153
The Nomura Securities Co., Ltd. 56,000 655,910
Noritake Co., Ltd. 2,000 10,415
Obayashi Corporation 19,000 95,644
Oji Paper Co., Ltd. 41,000 237,229
Omron Corporation 7,000 121,508
Orix Corporation 2,000 178,542
Osaka Gas Co. 72,000 244,602
Pioneer Corporation 5,000 97,330
Rohm Company Ltd. 3,000 469,912
SMC Corporation 2,000 224,004
The Sakura Bank, Ltd. 122,000 462,870
Sankyo Company, Ltd. 15,000 378,162
Sanyo Electric Co., Ltd. 87,000 353,811
Secom Co., Ltd. 3,000 312,448
Sega Enterprises Ltd. 3,800 50,288
Seino Transportation Co., Ltd. 19,000 113,077
</TABLE>
Page 12 & 13
<PAGE>
Merrill Lynch International Index Fund, June 30, 1999
SCHEDULE OF INVESTMENTS (continued)
Merrill Lynch International Index Series (continued)
<TABLE>
<CAPTION>
Shares Value
COUNTRY Investments Held (Note 1a)
=======================================================================================
<S> <C> <C> <C>
Japan Sekisui Chemical Co., Ltd. 16,000 $ 92,842
(concluded) Sekisui House, Ltd. 24,000 259,084
Sharp Corporation 38,000 449,165
Shimano Inc. 5,000 118,408
Shimizu Corporation 37,000 144,354
Shin-Etsu Chemical Co., Ltd. 12,000 401,719
Shiseido Company, Limited 14,000 209,919
The Shizuoka Bank, Ltd. 20,000 199,372
Sony Chemicals Corp. 23,900 1,357,191
Sony Corporation 300 32,361
The Sumitomo Bank, Ltd. 89,000 1,104,224
Sumitomo Chemical Co., Ltd. 68,000 311,952
Sumitomo Corporation 33,000 241,404
Sumitomo Electric Industries 28,000 318,466
Sumitomo Heavy Industries, Ltd. 24,000 53,563
The Sumitomo Marine & Fire Insurance
Co., Ltd. 22,000 132,749
Sumitomo Metal Industries Ltd. 83,000 103,596
Taisho Pharmaceutical Company, Ltd. 8,000 264,507
Taiyo Yuden Co., Ltd. 2,000 32,832
Takara Shuzo Co., Ltd. 2,000 16,317
Takashimaya Co., Ltd. 11,000 105,199
Takeda Chemical Industries 26,000 1,205,654
Toho Co., Ltd. 1,300 190,197
Tohoku Electric Power Co., Inc. 19,800 299,831
The Tokai Bank Ltd. 63,000 359,316
The Tokio Marine & Fire Insurance
Co. Ltd. 33,000 358,696
Tokyo Broadcasting System, Inc. 5,000 72,326
Tokyo Dome Corporation 3,000 17,408
Tokyo Electric Power 36,100 762,403
Tokyo Electron Limited 3,000 203,587
Tokyo Gas Co. 108,000 266,027
Tokyu Corporation 31,000 78,153
Toppan Printing Co., Ltd. 22,000 245,677
Toray Industries, Inc. 50,000 250,455
Tostem Corporation 8,000 153,744
Toto Limited 10,000 77,286
Toyo Seikan Kaisha, Ltd. 7,000 157,381
Toyoda Automatic Loom Works, Ltd. 10,000 169,863
Toyota Motor Corporation 107,000 3,387,419
Uny Co., Ltd. 6,000 90,263
Wacoal Corp. 15,000 152,753
The Yamaguchi Bank, Ltd. 7,000 63,358
Yamaha Corporation 7,000 84,187
Yamanouchi Pharmaceutical Co., Ltd. 14,000 535,791
Yamato Transport Co., Ltd. 15,000 261,613
Yamazaki Baking Co., Ltd. 10,000 124,153
Yokogawa Electric Corporation 14,000 82,741
------------------------------------------------------------------
Total Investments in Japan
(Cost--$46,840,600)--34.6% 52,931,864
<CAPTION>
Shares Value
COUNTRY Investments Held (Note 1a)
=======================================================================================
<S> <C> <C> <C>
Netherlands ABN AMRO Holding NV 14,700 318,146
Akzo Nobel NV 4,200 176,604
Elsevier NV 8,900 103,189
Heineken NV 4,950 253,288
ING Groep NV 9,300 503,190
KPN NV 6,300 295,421
Koninklijke Ahold NV 6,300 216,859
Koninklijke (Royal) Philips Electronics NV 3,496 344,625
Royal Dutch Petroleum Company 19,200 1,123,931
TNT Post Group NV 6,300 150,308
Unilever NV 'A' 5,803 390,830
Wolters Kluwer NV 'A' 3,600 143,212
------------------------------------------------------------------
Total Investments in the Netherlands
(Cost--$3,044,544)--2.6% 4,019,603
<CAPTION>
Shares Value
COUNTRY Investments Held (Note 1a)
=======================================================================================
<S> <C> <C> <C>
New Zealand Brierley Investments Limited 138,800 38,959
Carter Holt Harvey Limited 89,000 106,524
Fletcher Challenge Building 34,900 50,828
Fletcher Challenge Energy 13,000 35,112
Fletcher Challenge Paper 50,300 37,561
Lion Nathan Limited 24,700 59,127
Telecom Corporation of New Zealand
Limited 86,900 372,780
------------------------------------------------------------------
Total Investments in New Zealand
(Cost--$846,392)--0.5% 700,891
<CAPTION>
Shares Value
COUNTRY Investments Held (Note 1a)
=======================================================================================
<S> <C> <C> <C>
Norway Christiania Bank Og Kreditkasse 30,022 108,026
Den Norske Bank ASA 33,476 110,664
Dyno ASA 4,107 74,151
Elkem ASA 4,019 71,540
Kvaerner ASA 1,996 41,113
Merkantildata ASA 5,893 56,944
NCL Holdings ASA (a) 11,553 38,632
Norsk Hydro ASA 11,251 424,863
Orkla ASA 'A' 6,900 107,470
Petroleum Geo-Services (a) 3,700 55,747
Storebrand ASA (a) 15,200 102,428
Tomra Systems ASA 2,133 80,276
------------------------------------------------------------------
Total Investments in Norway
(Cost--$1,316,024)--0.8% 1,271,854
<CAPTION>
Shares Value
COUNTRY Investments Held (Note 1a)
=======================================================================================
<S> <C> <C> <C>
Portugal Banco Comercial Portugues, SA (BCP)
(Registered Shares) 6,500 168,343
Banco Espirito Santo, SA
(Registered Shares) 4,950 115,089
Cimpor-Cimentos de Portugal, SGPS, SA 3,750 96,619
EDP--Electricidade de Portugal, SA 13,200 237,524
Jeronimo Martins SGPS, SA 2,400 79,224
Portugal Telecom, SA (Registered Shares) 6,000 243,943
Portugal Telecom, SA (Rights) (f) 6,000 62
------------------------------------------------------------------
Total Investments in Portugal
(Cost--$1,104,809)--0.6% 940,804
<CAPTION>
Shares Value
COUNTRY Investments Held (Note 1a)
=======================================================================================
<S> <C> <C> <C>
Singapore City Developments Limited 16,900 108,263
Creative Technology Limited 1,600 20,876
DBS Land Limited 91,300 182,439
Keppel Corporation Ltd. 93,000 317,014
Oversea-Chinese Banking Corporation Ltd.
'Foreign' 51,600 430,632
Singapore Airlines Ltd. 'Foreign' 26,200 249,450
Singapore Telecommunications, Ltd. 126,000 216,233
United Overseas Bank Ltd. 'Foreign' 33,000 230,796
------------------------------------------------------------------
Total Investments in Singapore
(Cost--$1,096,990)--1.1% 1,755,703
<CAPTION>
Shares Value
COUNTRY Investments Held (Note 1a)
=======================================================================================
<S> <C> <C> <C>
Spain Acerinox, SA 2,500 73,044
Argentina, Caja Postal y Banco
Hipotecario de Espana, SA 13,200 300,511
Autopistas, Concesionari Espanola, SA 9,800 114,634
Autopistas, Concesionari Espanola, SA
(Rights) (g) 9,800 5,656
Banco Bilbao Vizcaya, SA 48,900 706,053
Banco Santander Central Hispano, SA 78,560 817,736
Corporacion Financiera Alba, SA 700 113,263
Endesa, SA 25,300 539,214
Fomento de Construcciones y Contratas, SA 2,400 137,276
Gas Natural SDG, SA 'E' 4,000 290,629
Iberdrola, SA 22,800 347,061
Repsol, SA 25,200 514,228
Tabacalera, SA 'A' 6,000 121,199
Telefonica, SA (a) 23,600 1,136,088
Union Electrica Fenosa, SA 9,700 126,760
------------------------------------------------------------------
Total Investments in Spain
(Cost--$3,352,028)--3.5% 5,343,352
<CAPTION>
Shares Value
COUNTRY Investments Held (Note 1a)
=======================================================================================
<S> <C> <C> <C>
Sweden ABB AB 'A' 10,700 142,625
Drott AB 'B' 2,700 21,976
Electrolux AB 'B' 5,700 119,682
Hennes & Mauritz AB 'B' 10,400 257,623
Skandia Forsakrings AB 7,400 138,791
Skandinaviska Enskilda Banken (SEB) 'A' 8,400 98,095
Skanska AB 'B' 2,700 102,076
Svenska Cellulosa AB (SCA) 'B' 4,800 124,565
Svenska Handelsbanken AB 10,200 122,725
Telefonaktiebolaget LM Ericsson 'B' 20,900 671,808
Volvo AB 'B' 5,200 151,200
------------------------------------------------------------------
Total Investments in Sweden
(Cost--$1,214,714)--1.3% 1,951,166
<CAPTION>
Shares Value
COUNTRY Investments Held (Note 1a)
=======================================================================================
<S> <C> <C> <C>
Switzerland ABB AG (Bearer) 74 109,616
Credit Suisse Group (Registered Shares) 1,320 228,686
Nestle SA (Registered Shares) 235 423,929
Novartis AG (Registered Shares) 360 526,309
Roche Holding AG 40 411,670
Schweizerische Rueckversicherungs-
Gesellschaft (Registered Shares) 83 158,228
Swisscom AG (Registered Shares) 400 150,705
UBS AG (Registered Shares) 1,044 311,983
Zurich Allied AG 258 146,887
------------------------------------------------------------------
Total Investments in Switzerland
(Cost--$1,951,888)--1.6% 2,468,013
=======================================================================================
</TABLE>
Page 14 & 15
<PAGE>
Merrill Lynch International Index Fund, June 30, 1999
SCHEDULE OF INVESTMENTS (concluded)
Merrill Lynch International Index Series (concluded)
<TABLE>
<CAPTION>
Shares Value
COUNTRY Investments Held (Note 1a)
=======================================================================================
<S> <C> <C> <C>
United Kingdom Abbey National PLC 14,300 $ 268,311
Allied Zurich PLC 16,150 202,906
AstraZeneca Group PLC 19,032 735,783
BG PLC 41,700 254,565
BP Amoco PLC 53,100 951,143
Barclays PLC 14,700 427,504
Bass PLC 11,996 173,961
Boots Company PLC 13,700 162,628
British Aerospace PLC 18,700 121,301
British Airways PLC 15,200 104,824
British American Tobacco PLC 16,150 151,766
British Sky Broadcasting Group PLC
("BSkyB") 20,200 187,279
British Telecommunications PLC 61,600 1,031,585
Burmah Castrol PLC 10,416 197,569
Cable & Wireless PLC 25,900 329,891
Cadbury Schweppes PLC 31,400 199,849
Carlton Communications PLC 20,200 167,389
Diageo PLC 25,837 269,661
EMI Group PLC 15,300 122,687
General Electric Company PLC 34,100 347,576
Glaxo Wellcome PLC 33,000 916,552
Granada Group PLC 11,800 218,801
The Great Universal Stores PLC 13,400 148,406
HSBC Holdings PLC 17,000 601,519
HSBC Holdings PLC 8,700 307,973
Imperial Chemical Industries PLC 10,400 102,729
Invensys PLC 22,901 108,325
J Sainsbury PLC 22,200 139,896
Kingfisher PLC 19,000 218,508
Lloyds TSB Group PLC 49,400 669,293
Marks & Spencer PLC 30,600 176,921
National Grid Group PLC 24,825 172,668
National Power PLC 15,200 110,631
Pearson PLC 9,100 184,793
The Peninsular and Oriental Steam
Navigation Company 13,900 208,579
Prudential Corporation PLC 20,400 300,170
Railtrack Group PLC 7,900 161,420
Rank Group PLC 22,900 91,003
Reed International PLC 15,000 100,018
Reuters Group PLC 19,406 255,125
Rio Tinto PLC (Registered Shares) 13,300 222,833
Royal Bank of Scotland Group PLC 10,500 213,719
Royal & Sun Alliance Insurance Group PLC 16,454 147,494
Scottish & Newcastle PLC 13,500 140,474
Scottish Power PLC 18,100 156,261
SmithKline Beecham PLC 52,000 675,437
Tesco PLC 75,616 194,472
Unilever PLC 30,267 269,168
Vodafone Group PLC 33,000 649,853
------------------------------------------------------------------
Total Investments in the United Kingdom
(Cost--$11,299,534)--9.3% 14,271,219
=======================================================================================
Total Investments (Cost--$117,723,440)
--95.9% 146,749,482
=======================================================================================
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM Face
SECURITIES Amount Issue
=======================================================================================
<S> <C> <C> <C>
Commercial $6,531,000 General Motors Acceptance Corp.,
Paper* 5.63% due 7/01/1999 6,531,000
---------------------------------------------------------------------
Total Investments in Commercial Paper
(Cost--$6,531,000)--4.3% 6,531,000
=======================================================================================
US Government & 200,000 Federal Home Loan Mortgage Corporation,
Agency 4.87% due 8/26/1999 (b) 198,420
Obligations* 100,000 Federal National Mortgage Association,
4.69% due 7/07/1999 (b) 99,915
200,000 US Treasury Bills, 4.46% due 7/29/1999 (b) 199,366
---------------------------------------------------------------------
Total Investments in US Government &
Agency Obligations (Cost--$497,713)--0.3% 497,701
=======================================================================================
Total Investments in Short-Term Securities
(Cost--$7,028,713)--4.6% 7,028,701
=======================================================================================
Total Investments (Cost--$124,752,153)--100.5% 153,778,183
Unrealized Depreciation on Forward Foreign Exchange
Contracts--Net**--0.0% (3,470)
Variation Margin on Financial Futures Contracts***--0.0% (58,195)
Liabilities in Excess of Other Assets--(0.5%) (672,643)
------------
Net Assets--100.0% $153,043,875
============
=======================================================================================
</TABLE>
(a) Non-income producing security.
(b) Security held as collateral in connection with open financial
futures contracts.
(c) The rights may be exercised until July 9, 1999.
(d) The rights may be exercised until September 21, 1999.
(e) The rights may be exercised until July 9, 1999.
(f) The rights may be exercised until July 2, 1999.
(g) The rights may be exercised until July 12, 1999.
* Commercial Paper and certain US Government & Agency
Obligations are traded on a discount basis; the interest rates
shown reflect the discount rates paid at the time of purchase
by the Series.
** Forward foreign exchange contracts as of June 30, 1999 were as
follows:
- --------------------------------------------------------------------------------
Unrealized
Foreign Appreciation
Currency Expiration (Depreciation)
Purchased Date (Note 1b)
- --------------------------------------------------------------------------------
A$ 1,605,000 July 1999 $(1,300)
(euro) 1,530,000 July 1999 (2,410)
HK$ 9,750,000 July 1999 149
(pound) 190,000 July 1999 244
(yen) 20,000,000 July 1999 (153)
- --------------------------------------------------------------------------------
Total Unrealized Depreciation on Forward
Foreign Exchange Contracts--Net
(US$ Commitment--$4,364,874) $(3,470)
=======
- --------------------------------------------------------------------------------
*** Financial futures contracts purchased as of June 30, 1999 were
as follows:
- --------------------------------------------------------------------------------
Number of Expiration Value
Contracts Issue Exchange Date (Notes 1a & 1b)
- --------------------------------------------------------------------------------
16 Hang Seng HKFE July 1999 $1,397,159
8 CAC MATIF July 1999 374,685
11 DTB DAX September 1999 1,527,182
3 FTSE LIFFE September 1999 299,995
2 MIB 30 MSE September 1999 360,638
8 Nikkei 300 OSAKA September 1999 183,237
22 All Ordinaries SFE September 1999 1,083,762
- --------------------------------------------------------------------------------
Total Financial Futures Contracts Purchased
(Total Contract Price--$5,251,680) $5,226,658
==========
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
Page 16 & 17
<PAGE>
Merrill Lynch International Index Fund, June 30, 1999
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
MERRILL LYNCH
INTERNATIONAL
INDEX SERIES As of June 30, 1999
====================================================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$124,752,153) (Note 1a)........... $153,778,183
Foreign cash (Note 1c).................................................... 930,309
Receivables:
Contributions........................................................... $ 748,832
Dividends............................................................... 521,785
Forward foreign exchange contracts (Note 1b)............................ 24,491
Interest................................................................ 22 1,295,130
------------
Deferred organization expenses (Note 1f).................................. 8,536
Other assets.............................................................. 1,174
------------
Total assets.............................................................. 156,013,332
------------
====================================================================================================================================
Liabilities: Unrealized depreciation on forward foreign exchange contracts (Note 1b)... 3,470
Payables:
Withdrawals............................................................ 2,580,771
Securities purchased................................................... 212,719
Variation margin (Note 1b)............................................. 58,195
Forward foreign exchange contracts (Note 1b)........................... 30,264
Investment adviser (Note 2)............................................ 15,023 2,896,972
------------
Accrued expenses and other liabilities.................................... 69,015
------------
Total liabilities ........................................................ 2,969,457
------------
====================================================================================================================================
Net Assets: Net assets................................................................ $153,043,875
============
====================================================================================================================================
Net Assets Partners' capital......................................................... $124,049,998
Consist of: Unrealized appreciation on investments and foreign currency
transactions--net....................................................... 28,993,877
------------
Net assets................................................................ $153,043,875
============
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
MERRILL LYNCH
INTERNATIONAL
INDEX SERIES For the Six Months Ended June 30, 1999
====================================================================================================================================
<S> <C> <C> <C>
Investment Income Dividends (net of $226,734 foreign withholding tax)....................... $ 1,563,584
(Notes 1d & 1e): Interest and discount earned.............................................. 93,513
------------
Total income.............................................................. 1,657,097
------------
====================================================================================================================================
Expenses: Investment advisory fees (Note 2)......................................... $ 82,890
Custodian fees............................................................ 56,646
Professional fees......................................................... 25,833
Accounting services (Note 2).............................................. 17,158
Amortization of organization expenses (Note 1f)........................... 1,444
Trustees' fees and expenses............................................... 558
Other..................................................................... 1,366
------------
Total expenses before reimbursement....................................... 185,895
Reimbursement of expenses (Note 2)........................................ (3,466)
Total expenses............................................................ 182,429
------------
Investment income--net.................................................... 1,474,668
------------
====================================================================================================================================
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net........................................................ 1,477,071
(Loss) on Foreign currency transactions--net...................................... (630,670) 846,401
Investments & ------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net........................................................ 6,676,234
(Notes 1b, 1c, Foreign currency transactions--net...................................... (35,800) 6,640,434
1e & 3): ------------ ------------
Net realized and unrealized gain on investments and
foreign currency transactions........................................... 7,486,835
------------
Net Increase in Net Assets Resulting from Operations...................... $ 8,961,503
============
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
Page 18 & 19
<PAGE>
Merrill Lynch International Index Fund, June 30, 1999
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MERRILL LYNCH For the Six For the
INTERNATIONAL Months Ended Year Ended
INDEX SERIES Increase (Decrease) in Net Assets: June 30, 1999 Dec. 31, 1998
====================================================================================================================================
<S> <C> <C> <C>
Operations: Investment income--net.................................................... $ 1,474,668 $ 2,151,038
Realized gain on investments and foreign currency transactions--net....... 846,401 11,405,413
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions--net ..................................... 6,640,434 21,936,836
------------ ------------
Net increase in net assets resulting from operations...................... 8,961,503 35,493,287
------------ ------------
====================================================================================================================================
Net Capital Decrease in net assets derived from net capital contributions............. (7,437,863) (27,390,852)
Contributions: ------------ ------------
====================================================================================================================================
Net Assets: Total increase in net assets.............................................. 1,523,640 8,102,435
Beginning of period....................................................... 151,520,235 143,417,800
------------ ------------
End of period............................................................. $153,043,875 $151,520,235
============ ============
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
MERRILL LYNCH For the Six For the For the Period
INTERNATIONAL The following ratios have been derived from Months Ended Year Ended April 9, 1997+ to
INDEX SERIES information provided in the financial statements. June 30, 1999 Dec. 31, 1998 Dec. 31, 1997
====================================================================================================================================
<S> <C> <C> <C> <C>
Ratios to Average Expenses, net of reimbursement........................... .24%* .26% .33%*
Net Assets: ============ ============ ============
Expenses................................................. .25%* .33% .36%*
============ ============ ============
Investment income--net................................... 1.96%* 1.66% 1.99%*
============ ============ ============
====================================================================================================================================
Supplemental Net assets, end of period (in thousands)................. $ 153,044 $ 151,520 $ 143,418
Data: ============ ============ ============
Portfolio turnover....................................... 3.17% 34.63% 14.79%
============ ============ ============
====================================================================================================================================
</TABLE>
+ Commencement of operations.
* Annualized.
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
MERRILL LYNCH
INTERNATIONAL
INDEX SERIES
1. Significant Accounting Policies:
Merrill Lynch International 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. The Series' financial
statements are prepared in accordance with generally accepted accounting
principles, which may require the use of management accruals and estimates.
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 that 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 that are traded both in the
over-the-counter market and on a stock exchange are valued according to the
broadest and most representative market. Options written or purchased are valued
at the last sale price in the case of exchange-traded options. In the case of
options traded in the over-the-counter market, valuation is the last asked price
(options written) or the last bid price (options purchased). Short-term
securities are valued at amortized cost, which approximates market value. Other
investments, including futures contracts and related options, are stated at
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 arise 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
Page 20 & 21
<PAGE>
Merrill Lynch International Index Fund, June 30, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
MERRILL LYNCH
INTERNATIONAL
INDEX SERIES
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 trans action), 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.
o Forward foreign exchange contracts--The Series is authorized to enter into
forward foreign exchange contracts as a hedge against either specific
transactions or portfolio positions. Such contracts are not entered on the
Series' records. However, the effect on operations is recorded from the date the
Series enters into such contracts.
o Foreign currency options and futures--The Series 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-US dollar denominated securities owned by the
Series, sold by the Series but not yet delivered, or committed or anticipated to
be purchased by the Series.
(c) 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 US dollars. Realized and unrealized gains or losses from
investments include the effects of foreign exchange rates on investments.
(d) 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.
(e) 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. Dividends from
foreign securities where the ex-dividend date may have passed are subsequently
recorded when the Series has determined the ex-dividend date. Interest income
(includ ing amortization of discount) is recognized on the accrual basis.
Realized gains and losses on security transactions are determined on the
identified cost basis.
(f) 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 Trust 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 Series' portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Series. For such services, the Series pays a monthly
fee at an annual rate of 0.11% of the average daily value of the Series' net
assets. For the six months ended June 30, 1999, MLAM earned fees of $82,890, of
which $3,466 was voluntarily waived.
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, 1999 were $4,624,953 and $12,572,661, respectively.
Net realized gains (losses) for the six months ended June 30, 1999 and net
unrealized gains (losses) as of June 30, 1999 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains (Losses) Gains (Losses)
- --------------------------------------------------------------------------------
Investments:
Long-term .......................... $ 799,657 $ 29,026,042
Short-term ......................... -- (12)
Financial futures contracts ........ 677,414 (25,022)
------------ ------------
Total investments .................... 1,477,071 29,001,008
------------ ------------
Currency transactions:
Foreign currency transactions ...... (395,415) (3,661)
Forward foreign exchange
contracts .......................... (235,255) (3,470)
------------ ------------
Total currency transactions .......... (630,670) (7,131)
------------ ------------
Total ................................ $ 846,401 $ 28,993,877
============ ============
- --------------------------------------------------------------------------------
As of June 30, 1999, net unrealized appreciation for Federal income tax purposes
aggregated $29,026,030, of which $33,847,445 related to appreciated securities
and $4,821,415 related to depreciated securities. At June 30, 1999, the
aggregate cost of investments for Federal income tax purposes was $124,752,153.
Page 22 & 23
<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 2--6/99
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