MERRILL LYNCH
INTERNATIONAL
EQUITY FUND
FUND LOGO
Quarterly Report
August 31, 1998
Officers and Directors
Arthur Zeikel, President and Trustee
Donald Cecil, Trustee
Edward H. Meyer, Trustee
Charles C. Reilly, Trustee
Richard R. West, Trustee
Edward D. Zinbarg, Trustee
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Clive D. Lang, Senior Vice President
and Portfolio Manager
Donald C. Burke, Vice President
Gerald M. Richard, Treasurer
Ira P. Shapiro, Secretary
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
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
International
Equity Fund
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MERRILL LYNCH INTERNATIONAL EQUITY FUND
International
Stock Market
Performance
Bar Graph Depicting Total Return in US Dollars* of the Fund's Top Ten
Country Positions For the Three-Month Period Ended August 31, 1998
United Kingdom - 7.7%
France - 8.5%
Switzerland - 9.5%
Italy -10.3%
Germany -10.8%
Japan -11.3%
Netherlands -13.3%
Australia -13.9%
Sweden -16.2%
Canada -30.3%
Source: Morgan Stanley Capital International World (ex-US) Index.
[FN]
*For the three-month period ended August 31, 1998, total investment
return in US dollars for the Morgan Stanley Capital International
World (ex-US) Index was -11.73%.
Merrill Lynch International Equity Fund, August 31, 1998
DEAR SHAREHOLDER
Equity markets continued to experience increased volatility during
the three months ended August 31, 1998. For the August quarter, the
unmanaged Morgan Stanley Capital International (MSCI) World (ex-US)
Index had a total return of -11.7%. (All performance results in this
shareholder letter are measured in US dollar terms.) Total returns
for Merrill Lynch International Equity Fund's Class A, Class B,
Class C and Class D Shares were -16.01%, -16.21%, -16.34% and
- -16.13%, respectively, for the same three month period. (Investment
results shown do not reflect sales charges, and would be lower if
sales charges were included. Complete performance information can be
found on pages 4 and 5 of this report to shareholders.)
In July, the Fund's benchmark was changed from a customized
composite index based on a fixed weighting of developed and emerging
markets to the MSCI World (ex-US) Index in US dollar terms. We
believe that the new benchmark provides a better comparison for the
Fund's relative performance.
The Fund's underperformance relative to the MSCI World (ex-US) Index
partly reflected the Fund's exposure to emerging markets,
particularly in June. The bounce in emerging markets during July
partially offset the decline. By August, we reduced the Fund's
emerging markets exposure to its lowest level in over a year.
Overall, during the August quarter, we lowered the Fund's weighting
in emerging markets from 7.6% of net assets at the beginning of the
period to 4.2% by the end of August. In developed markets, the
increased weighting in Continental European markets was generally
beneficial, as these markets were among the better performers.
Portfolio Matters
Overall, the Fund's effective equity exposure remained fairly steady
during the three months ended August 31, 1998, at about 93% of net
assets. By region, the United Kingdom became the Fund's major
exposure, increasing steadily throughout the three-month period from
15.5% of net assets on May 31, 1998 to 21.9% on August 31, 1998. For
most of the quarter, we underweighted the United Kingdom relative to
the benchmark unmanaged MSCI World (ex-US) Index; only in the latter
part of August did we overweight our position in the United Kingdom.
We underweighted Japanese equities throughout the three-month
period, closing the August quarter at 16.8% of net assets.
We also reduced specific stock concentration in the portfolio and
increased exposure to more diversified investment vehicles within
targeted countries, in many cases through the use of index tracking
vehicles such as Optimized Portfolio As Listed Securities (OPALS).
These instruments are exchange quoted in Luxembourg, and provide the
owner with the equivalent investment exposure to that of the
specific MSCI country index. OPALS provide an efficient and cost
effective means of gaining market exposure for asset allocation
purposes. In countries and regions where we used portfolios of
actively selected stocks, the overweighted positions in Continental
European basic materials sectors and the underweighting in
healthcare sectors negatively impacted Fund performance.
Economic and Investment
Environment
The declining trend in global industrial output growth may be
interrupted in the near term by some improvement in Japan. However,
the secular trends in the global economy toward lower inflation,
nominal gross domestic product growth and lower bond yields are
still in place. Falling bond yields could provide support for
equities as long as global earnings growth remains positive. We
believe that these factors will remain stable, at least for the next
year. We are, therefore, viewing the steep declines in global equity
markets since July as a severe correction rather than the start of a
sustained bear market.
While equity valuations are looking fairly attractive after the
recent declines, based on prospective intermediate-term trends in
bond yields and earnings, a near-term concern is investors' growing
aversion to risk and the associated decline in liquidity. Excess
liquidity measures based on narrow money supply growth show an end
to a three-year positive trend. This decline in excess liquidity is
a restraining factor on equities and a problem for the currencies of
net debtor nations, including the United States.
Monetary indicators (for example, US/Japanese interest rate spreads
and yield curve slopes) point to renewed yen depreciation against
the dollar. Dollar weakness is likely to be relative to the
Deutschemark this year, and in 1999, relative to the euro as real
yield rate differentials move against the US dollar.
Among developed equity markets, we continued to favor Europe over
North America. However, leading indicators of the economic cycle
indicate some easing in the upward momentum of European corporate
earnings, partly reflecting a rise in real exchange rates in recent
quarters. However, the region as a whole remains at a fairly early
point in the profits cycle, compared with the United States. Only in
one or two of the peripheral European economies is there a risk of
higher wage growth eating into profit margins over the next year.
For example, Italy is a peripheral country not threatened by higher
wage growth, which is a major reason why we remain bullish on this
market. Within Europe, the scope for upside surprises to earnings
growth seems positive in Switzerland and Denmark, while negative
surprises are most likely to occur in Germany and Belgium. A
possible fall in the US dollar/Deutschemark rate below 1.65 would
initially be negative for European equities, but should not prove a
lasting setback since a by-product would be a fall in European
interest rate expectations.
The United Kingdom is one European market outside the European
Monetary Union bloc that we are looking to overweight, although we
have a cautious view on the currency. A clear peaking in wage growth
could help, not only through its effect on profit margins but also
by marking the turn of the basic interest rate cycle. This, in turn,
should help to narrow the spread relative to the Deutschemark, and
bring sterling down from uncompetitive levels on a trade-weighted
basis. In the United Kingdom, bottom-up earnings expectations may
have further to fall to match the more realistic top-down consensus
forecasts, but long-term earnings growth expectations already look
reasonable.
Short positions in Japanese stocks, held by foreign investors, leave
considerable upside eventually for the market on good domestic
economic news (for example, convincing signs of corporations
focusing on return on equity). However, before becoming more
bullish, we are looking for a widespread and severe downgrading of
earnings estimates for the second half of the fiscal year and
clarification on how the bridge bank proposal copes with the key
question of debt forgiveness. Although we expect the yen to resume
its decline against the dollar, this may not necessarily continue to
be regarded as a problem for the world economy, depending on its
cause. For instance, were it to reflect, or be part of, a clear
policy by the Japanese authorities to reinflate and restructure the
Japanese economy, it would no longer be regarded as a major negative
for growth in the rest of Asia.
While waiting for a significant upturn in Japan, we believe Asian
countries need to engineer a turn in their own economic cycles.
Interest rates are beginning to fall in some countries, sometimes
with the approval of the International Monetary Fund.
Notwithstanding structural deficiencies, this may produce brief
rallies in equity markets. Near term, the risks to Chinese growth
are on the downside, and the country's economy remains vulnerable to
high real interest rates. However, the Hong Kong market may
eventually benefit from rising Chinese liquidity.
Latin American current account deficits are becoming a serious
problem for currencies and equity markets in the region as global
liquidity growth shrinks (as only about two-thirds of the deficits
are covered by foreign direct investment).
Merrill Lynch International Equity Fund, August 31, 1998
In Conclusion
Over the last year, international equity markets have become
increasingly volatile and more highly correlated. The correction was
triggered initially by the currency crisis in Asian markets and
depressed commodity prices, and recently was fueled by the debt
repayment crisis in Russia. These effects have negatively impacted
earnings and profits forecasts in most developed markets, as well as
in the emerging economies. A period of stock price consolidation
with low market liquidity is likely to develop while resolutions are
sought to the various economic problems that are affecting different
regional economies. However, the current high levels of volatility
are also likely to persist for some time, in our opinion. While the
Fund is currently focusing principally on more defensive
opportunities, we remain poised to reenter markets that show clear
signs of more stable economic, financial and political environments.
We thank you for your continuing interest in Merrill Lynch
International Equity Fund, and we look forward to reviewing our
strategy and performance with you in our upcoming semi-annual report
to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Clive D. Lang)
Clive D. Lang
Senior Vice President and
Portfolio Manager
October 13, 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 four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 5.25% and bear no ongoing distribution or account
maintenance fees. Class A Shares are available only to eligible
investors, as detailed in the Fund's prospectus. If you were a Class
A shareholder on October 21, 1994, your Class A Shares were
redesignated to Class D Shares on October 21, 1994. However, in the
case of certain eligible investors, the shares were simultaneously
exchanged for Class A Shares.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.75% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after approximately 8 years. (There is no initial
sales charge for automatic share conversions.)
* Class C Shares are subject to a distribution fee of 0.75% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 5.25% and
an account maintenance fee of 0.25% (but no distribution fee).
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.
<TABLE>
Recent
Performance
Results
<CAPTION>
12 Month 3 Month Since Inception
Total Return Total Return Total Return
<S> <C> <C> <C>
ML International Equity Fund Class A Shares* -18.88% -16.01% - 5.07%
ML International Equity Fund Class B Shares* -19.69 -16.21 + 6.18
ML International Equity Fund Class C Shares* -19.74 -16.34 - 8.75
ML International Equity Fund Class D Shares* -19.06 -16.13 +10.41
Morgan Stanley Capital International World (Ex-US) Index** - 1.07 -11.73 +18.37/+38.03
<FN>
*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 the Fund's 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 periods are Class A & Class C
Shares, from 10/21/94 to 8/31/98 and Class B & Class D Shares, from
7/30/93 to 8/31/98.
**An unmanaged capitalization-weighted index comprised of over 1,178
companies in 22 countries, excluding the United States. Since
inception total returns are for the periods from 10/31/94 to 8/31/98
and from 7/31/93 to 8/31/98, respectively.
</TABLE>
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/98 -11.77% -16.41%
Inception (10/21/94) through 6/30/98 + 2.93 + 1.44
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/98 -12.71% -15.66%
Inception (7/30/93) through 6/30/98 + 4.58 + 4.58
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 6/30/98 -12.66% -13.40%
Inception (10/21/94) through 6/30/98 + 1.91 + 1.91
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 6/30/98 -12.00% -16.62%
Inception (7/30/93) through 6/30/98 + 5.39 + 4.24
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
Merrill Lynch International Equity Fund, August 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Shares Percent of
AFRICA Industries Held Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
South Beverages 37,100 South African Breweries Ltd. $ 1,056,692 $ 522,942 0.2%
Africa
Insurance 25,400 Liberty Life Association of
Africa Ltd. 689,381 296,706 0.1
Total Investments in Africa 1,746,073 819,648 0.3
EUROPE
Austria Index Instruments 42,800 MSCI Austria OPALS (Class B)(f) 2,394,117 2,100,196 0.7
Total Investments in Austria 2,394,117 2,100,196 0.7
Denmark Index Instruments 26,600 MSCI Denmark OPALS (Class B)(f) 3,769,419 3,841,040 1.3
Total Investments in Denmark 3,769,419 3,841,040 1.3
Finland Diversified 53,183 Outokumpu OY 817,709 555,364 0.2
Paper & Forest 98,753 Enso OY (Class A) 763,580 834,190 0.3
Products 94,450 Metsa Serla OY (Class B) 770,035 722,108 0.2
54,270 UPM-Kymmene Corporation 1,040,224 1,103,069 0.4
-------------- -------------- ------
2,573,839 2,659,367 0.9
Total Investments in Finland 3,391,548 3,214,731 1.1
France Agricultural 1,200 Eridania Beghin-Say S.A. 177,610 222,519 0.1
Operations
Automobiles 4,682 Peugeot S.A. 779,304 780,267 0.3
7,000 Renault S.A. 212,154 312,427 0.1
-------------- -------------- ------
991,458 1,092,694 0.4
Automobiles & 4,300 Compagnie Generale des Etablissements
Equipment Michelin (C.G.D.E.)(Class B) 272,009 182,607 0.1
2,600 Valeo S.A. 174,606 195,313 0.1
-------------- -------------- ------
446,615 377,920 0.2
Banking 9,552 Banque Nationale de Paris 422,296 631,090 0.2
13,923 Compagnie Financiere de Paribas 1,325,742 1,171,930 0.4
5,712 Societe Generale de Surveillance
S.A. (Class A)(Ordinary) 1,153,767 1,005,072 0.3
-------------- -------------- ------
2,901,805 2,808,092 0.9
Banking & 4,000 Financiere Industrielle Gaz et
Financial Eaux S.A. 230,242 207,089 0.1
Broadcast & 2,200 Canal Plus 401,086 444,057 0.1
Publishing
Building & 2,700 Compagnie de Saint Gobain S.A. 485,374 387,378 0.1
Construction 1,600 Suez Lyonnaise des Eaux S.A. 279,690 263,125 0.1
-------------- -------------- ------
765,064 650,503 0.2
Building Products 3,600 Lafarge S.A. 348,004 306,979 0.1
Chemicals 3,000 L'Air Liquide 495,013 398,443 0.1
Cosmetics & 700 L'OREAL 327,379 377,328 0.1
Toiletries
Diversified 2,900 LVMH Moet-Hennessy Louis Vuitton S.A. 607,269 477,895 0.1
5,000 Lagardere Groupe S.C.A. 213,955 187,801 0.1
-------------- -------------- ------
821,224 665,696 0.2
Electronics 400 Sagem S.A. 264,870 288,639 0.1
Financial Services 5,567 Societe EuraFrance S.A. 2,017,710 3,183,565 1.1
Foods 300 Fromageries Bel S.A. 225,982 275,104 0.1
1,600 Groupe Danone S.A. 374,905 423,382 0.1
-------------- -------------- ------
600,887 698,486 0.2
Insurance 4,200 Assurances Generales de France
S.A. (AGF) 173,288 230,234 0.1
12,123 AXA-UAP 1,494,876 1,394,745 0.4
-------------- -------------- ------
1,668,164 1,624,979 0.5
Metal Processing 500 Compagnie Generale d'Industrie et
Participations (CGIP) 260,324 243,211 0.1
Metals 5,900 Pechiney S.A. (Class A) 304,717 189,762 0.1
Oil & Related 34,851 Elf Aquitaine S.A. 4,238,765 3,449,426 1.2
6,700 Total S.A. (Class B) 748,648 650,673 0.2
-------------- -------------- ------
4,987,413 4,100,099 1.4
Retail 2,500 Pinault-Printemps-Redoute S.A. 376,495 390,830 0.1
Steel 114,584 Usinor Sacilor S.A. 1,840,824 1,209,719 0.4
Telecommunication 2,300 Alcatel Alsthom Cie Generale
Equipment d'Electricite S.A. 412,801 371,627 0.1
Telecommunications 3,300 France Telecom S.A. 180,153 242,035 0.1
Utilities--Water 2,400 Vivendi S.A. 566,133 478,335 0.2
Total Investments in France 21,385,991 20,572,607 6.9
Germany Airlines 9,900 Deutsche Lufthansa AG 297,812 244,340 0.1
Apparel 100 Hugo Boss AG (Preferred) 138,041 215,035 0.1
Automobiles 20 Bayerische Motoren Werke AG (BMW)
(New Shares) 13,882 14,638 0.0
380 Bayerische Motoren Werke AG (BMW) 372,916 282,440 0.1
11,370 Daimler-Benz AG 811,434 1,025,719 0.3
31,020 Volkswagen AG 1,923,719 2,231,680 0.8
-------------- -------------- ------
3,121,951 3,554,477 1.2
Banking 15,200 Commerzbank AG 584,625 439,830 0.2
30,333 Deutsche Bank AG 2,503,355 1,887,960 0.6
1,313 Dresdner Bank AG 76,120 59,076 0.0
-------------- -------------- ------
3,164,100 2,386,866 0.8
Building Products 1,200 Heidelberger Zement AG 111,226 98,383 0.0
Chemicals 35,153 BASF AG 1,395,635 1,406,120 0.5
38,576 Bayer AG 1,509,341 1,448,926 0.5
21,132 Henkel KGaA 907,822 1,456,759 0.5
1,000 Henkel KGaA (Preferred) 54,908 80,000 0.0
44,999 Hoechst AG 1,653,073 1,843,363 0.6
-------------- -------------- ------
5,520,779 6,235,168 2.1
Computer Software 500 SAP AG (Systeme, Anwendungen,
Produkte in der Datenverarbeitung)
(Preferred) 154,462 283,688 0.1
</TABLE>
Merrill Lynch International Equity Fund, August 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
EUROPE Shares Percent of
(continued) Industries Held Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Germany Diversified 4,000 Lahmeyer AG $ 217,346 $ 181,560 0.1%
(concluded) 6,000 Metallgesellschaft AG 125,140 99,574 0.0
31,060 RWE AG 1,528,965 1,489,118 0.5
19,999 Siemens AG 1,371,372 1,299,226 0.4
11,568 Thyssen AG 2,694,448 2,172,487 0.7
34,317 VEBA AG 2,281,372 1,730,550 0.6
400 VIAGAG 273,958 250,780 0.1
-------------- -------------- ------
8,492,601 7,223,295 2.4
Engineering & 1,615 Philipp Holzmann AG 492,283 284,057 0.1
Construction
Footwear 1,400 Adidas AG 192,132 165,220 0.1
Insurance 3,500 Allianz AG 812,772 1,004,823 0.3
1,100 Axa Colonia Konzern AG 157,515 124,823 0.0
500 Ergo-Versicherungsgruppe AG 96,573 70,638 0.0
400 Muenchener Rueckversicherungs-
Gesellschaft AG 217,545 155,461 0.1
-------------- -------------- ------
1,284,405 1,355,745 0.4
Machinery & 1,209 Jungheinrich AG (Preferred) 245,204 205,787 0.1
Equipment 17,205 Kloeckner Werke AG 1,038,843 1,029,860 0.3
-------------- -------------- ------
1,284,047 1,235,647 0.4
Manufacturing 12,100 FAG Kugelfischer Georg Schaefer AG 191,474 161,333 0.1
Retail 707 Karstadt AG 243,500 312,885 0.1
300 METRO AG 18,399 16,936 0.0
1,600 METRO AG (Preferred) 66,602 62,638 0.0
-------------- -------------- ------
328,501 392,459 0.1
Tire & Rubber 3,300 Continental AG 108,703 88,374 0.0
Total Investments in Germany 24,882,517 23,924,087 8.0
Greece Banking 2,500 Alpha Credit Bank S.A. 234,880 184,617 0.0
1,500 National Bank of Greece S.A. 239,845 201,241 0.1
-------------- -------------- ------
474,725 385,858 0.1
Beverages 4,999 Hellenic Bottling Co. S.A. 165,652 110,386 0.0
Telecommunications 10,500 Hellenic Telecommunication
Organization 300,227 243,003 0.1
Total Investments in Greece 940,604 739,247 0.2
Hungary Banking 7,200 OTP Bank Reszvenytarsasag (GDR)(c) 407,520 222,120 0.1
Oil & Gas Producers 17,000 Mol Magyar Olaj-es Gazipari
Reszvenytarsasag (GDR)(c) 507,875 328,100 0.1
Pharmaceuticals 3,500 Egis Gyogyzergyar Reszvenytarsasag 124,535 77,251 0.0
4,100 Richter Gedeon Vegyeszeti Gyar
Reszvenytarsasag (GDR)(c) 338,250 138,990 0.1
-------------- -------------- ------
462,785 216,241 0.1
Telecommunications 21,000 Magyar Tavkozlesi Reszvenytarsasag
(ADR)(a) 645,750 425,250 0.1
Total Investments in Hungary 2,023,930 1,191,711 0.4
Ireland Banking 55,238 Bank of Ireland 1,204,879 875,117 0.3
Building & 47,742 CRH PLC 521,928 517,299 0.2
Construction
Insurance 86,548 Irish Life PLC 858,444 659,486 0.2
Total Investments in Ireland 2,585,251 2,051,902 0.7
Italy Chemicals 1,948,498 MontEdison S.p.A. 1,389,675 1,997,542 0.7
Telecommunications 982,230 Telecom Italia S.p.A. 3,915,079 4,890,994 1.6
Total Investments in Italy 5,304,754 6,888,536 2.3
Netherlands Banking 31,062 ING Groep N.V. 1,275,816 1,830,392 0.6
Chemicals 33,469 Akzo Nobel N.V. 1,045,712 1,374,839 0.5
22,008 European Vinyls Corporation
International N.V. 644,054 277,742 0.1
-------------- -------------- ------
1,689,766 1,652,581 0.6
Electronics 21,903 Philips Electronics N.V. 1,424,954 1,429,438 0.5
Index Instruments 35,200 MSCI Dutch OPALS (Class B)(f) 9,354,529 7,950,976 2.7
Oil--International 6,751 Royal Dutch Petroleum Company 347,160 299,381 0.1
3,405 Royal Dutch Petroleum Company (NY
Registered Shares) 156,639 135,349 0.0
-------------- -------------- ------
503,799 434,730 0.1
Packaging & 106,025 Koninklijke KNP BT N.V. 2,358,170 2,516,155 0.8
Containers
Steel 21,000 Ispat International N.V. 568,773 239,680 0.1
20,783 Ispat International N.V. (NY
Registered Shares) 491,090 224,716 0.1
-------------- -------------- ------
1,059,863 464,396 0.2
Total Investments in the Netherlands 17,666,897 16,278,668 5.5
Norway Computer Software 28,788 Merkantildata ASA 352,652 322,661 0.1
Index Instruments 29,000 MSCI Norway OPALS (Class B)(f) 3,492,760 2,408,450 0.8
Oil & Gas Producers 76,454 Saga Petroleum A.S. (Class B) 850,887 740,060 0.3
Total Investments in Norway 4,696,299 3,471,171 1.2
Poland Banking 29,000 BIG Bank Gdanski S.A. (GDR)(c) 648,750 332,050 0.1
20,000 Bank Rozwoju Eksportu S.A. 653,637 456,989 0.1
-------------- -------------- ------
1,302,387 789,039 0.2
Beverages 31,000 Okocimskie Zaklady Piwowarskie S.A. 240,021 181,667 0.1
Computer Software 14,001 Softbank Corp. (ADR)(a) 267,210 226,116 0.1
Electronics 34,000 Elektrim Spolka Akcyjna S.A. 470,439 283,333 0.1
Hotel 28,000 Orbis S.A. 255,842 173,118 0.1
Total Investments in Poland 2,535,899 1,653,273 0.6
Portugal Index Instruments 48,000 MSCI Portugal OPALS (Class B)(f) 4,338,445 3,646,560 1.2
Total Investments in Portugal 4,338,445 3,646,560 1.2
</TABLE>
Merrill Lynch International Equity Fund, August 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
EUROPE Shares Percent of
(continued) Industries Held Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Spain Utilities--Electric 66,924 Endesa S.A. $ 1,285,236 $ 1,271,529 0.4%
Total Investments in Spain 1,285,236 1,271,529 0.4
Sweden Automobiles & 21,683 Volvo AB (Class B) 702,814 598,170 0.2
Equipment
Electrical 62,520 Electrolux AB 578,325 997,721 0.3
Forest Products 30,636 Mo och Domsjo AB (Class B) 823,690 602,601 0.2
929,741 Rottneros Bruks AB 1,435,615 460,069 0.2
57,871 Stora Kopparbergs AB 766,517 701,597 0.2
-------------- -------------- ------
3,025,822 1,764,267 0.6
Index Instruments 14,100 MSCI Sweden OPALS (Class B)(f) 3,261,787 2,723,415 0.9
Insurance 54,660 Skandia Forsakrings AB 365,588 767,478 0.3
Metals & Mining 188,686 Avesta Sheffield AB 1,710,791 597,558 0.2
Total Investments in Sweden 9,645,127 7,448,609 2.5
Switzerland Banking & 1,270 Banque Cantonale de Geneve (BCG) 423,133 369,135 0.1
Financial 102 UBS AG 34,702 32,965 0.0
1,614 Union Bank of Switzerland (UBS) 563,851 521,618 0.2
-------------- -------------- ------
1,021,686 923,718 0.3
Food & Beverage 704 Nestle S.A. 1,314,121 1,306,663 0.4
Index Instruments 30,000 MSCI Swiss OPALS (Class B)(f) 11,000,916 10,042,500 3.4
Total Investments in Switzerland 13,336,723 12,272,881 4.1
Turkey Investment 5,600,000 Haci Omer Sabanci Holding A.S. 125,120 81,803 0.0
Management 8,000,000 Haci Omer Sabanci Holding A.S.
(Rights)(e) 203,240 70,406 0.0
-------------- -------------- ------
328,360 152,209 0.0
Retail 2,498,000 Carsi Buyuk Magazacilik A.S. 268,145 209,481 0.1
Total Investments in Turkey 596,505 361,690 0.1
United Aerospace & 83,200 British Aerospace PLC 627,504 532,260 0.2
Kingdom Defense
Airlines 55,100 British Airways PLC 611,560 414,319 0.1
Automobiles & 49,800 GKN PLC 716,751 554,610 0.2
Equipment 366,064 LucasVarity PLC 1,227,419 1,299,660 0.4
-------------- -------------- ------
1,944,170 1,854,270 0.6
Banking 49,600 Abbey National PLC 927,054 930,329 0.3
63,600 Bank of Scotland PLC 769,789 650,782 0.2
49,577 Barclays PLC 1,517,783 1,174,826 0.4
80,876 HSBC Holdings PLC 2,139,242 1,678,139 0.6
120,200 Lloyds TSB Group PLC 1,472,356 1,435,261 0.5
122,468 National Westminister Bank
PLC (Ordinary) 2,019,500 2,159,673 0.7
-------------- -------------- ------
8,845,724 8,029,010 2.7
Beverages 69,404 Bass PLC 1,148,619 932,172 0.3
89,500 Scottish & Newcastle PLC 1,241,710 1,115,899 0.4
-------------- -------------- ------
2,390,329 2,048,071 0.7
Broadcast--Media 76,200 Carlton Communications PLC 691,407 560,217 0.2
Building & 101,500 Hanson PLC 520,329 525,245 0.2
Construction 32,815 Jarvis PLC 400,166 274,776 0.1
-------------- -------------- ------
920,495 800,021 0.3
Computer Services 3,859 Misys PLC 47,298 171,261 0.1
Consumer Goods 116,800 Unilever PLC 1,003,446 1,089,520 0.4
& Services
Diversified 54,300 Granada Group PLC 998,804 700,209 0.2
Food & Beverage 203,563 Allied Domecq PLC (Ordinary) 1,635,856 1,724,989 0.6
Foods 73,300 Associated British Foods PLC 737,603 632,191 0.2
81,700 Tate & Lyle PLC 690,094 596,548 0.2
-------------- -------------- ------
1,427,697 1,228,739 0.4
Insurance 100,300 Guardian Royal Exchange PLC 738,828 431,689 0.1
102,100 Prudential Corporation PLC 1,516,412 1,446,549 0.5
153,192 Royal & Sun Alliance Insurance
Group PLC 1,558,372 1,287,884 0.4
-------------- -------------- ------
3,813,612 3,166,122 1.0
Investment Trust 576,000 Fleming Japanese Investment
Trust PLC 1,410,545 1,145,495 0.4
Merchandising 74,830 J Sainsbury PLC 551,343 645,387 0.2
Metals & Mining 73,963 Rio Tinto PLC 1,071,610 723,376 0.2
Oil & Related 199,100 British Petroleum Co. PLC 2,919,047 2,512,416 0.8
10,986 British Petroleum Co. PLC (ADR)(a) 858,845 803,351 0.3
79,894 Shell Transport & Trading Co. PLC 472,876 423,138 0.1
-------------- -------------- ------
4,250,768 3,738,905 1.2
Pharmaceuticals 55,800 Glaxo Wellcome PLC 1,519,945 1,682,069 0.5
170,660 SmithKline Beecham PLC 1,952,182 2,014,920 0.7
-------------- -------------- ------
3,472,127 3,696,989 1.2
Railroads 19,800 Railtrack Group PLC 510,930 469,201 0.2
Retail 549,600 ASDA Group PLC 1,806,751 1,546,297 0.5
113,500 Kingfisher PLC 906,961 931,384 0.3
149,045 Safeway PLC 837,222 771,282 0.3
349,800 Tesco PLC 986,472 984,161 0.3
-------------- -------------- ------
4,537,406 4,233,124 1.4
Steel 303,591 British Steel PLC 626,225 544,014 0.2
Telecommunications 87,600 British Telecommunications PLC 761,955 1,188,300 0.4
143,625 Cable & Wireless PLC 1,711,131 1,395,067 0.5
49,400 Orange PLC 266,427 587,384 0.2
-------------- -------------- ------
2,739,513 3,170,751 1.1
Tobacco 161,096 B.A.T. Industries PLC 1,444,395 1,583,652 0.5
877,572 BTR PLC 3,493,241 1,899,548 0.7
-------------- -------------- ------
4,937,636 3,483,200 1.2
</TABLE>
Merrill Lynch International Equity Fund, August 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
EUROPE Shares Percent of
(concluded) Industries Held Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
United Utilities--Electric 96,800 Scottish Power PLC $ 828,081 $ 936,191 0.3%
Kingdom
(concluded) Utilities--Water 64,400 Anglian Water PLC 909,925 937,222 0.3
121,303 United Utilities PLC 1,383,481 1,787,686 0.6
-------------- -------------- ------
2,293,406 2,724,908 0.9
Total Investments in the
United Kingdom 52,187,492 47,830,549 16.0
Total Investments in Europe 172,966,754 158,758,987 53.2
LATIN
AMERICA
Brazil Oil & Gas Producers 52,000 Petroleo Brasileiro S.A.--
Petrobras (ADR)(a) 945,061 526,500 0.2
Telecommunications 9,825 Telecomunicacoes Brasileiras S.A.
--Telebras (ADR)(a) 1,395,823 694,505 0.2
Utilities--Electric 20,247 Companhia Energetica de Minas Gerais
S.A. (CEMIG)(ADR)(a) 428,418 369,508 0.1
Total Investments in Brazil 2,769,302 1,590,513 0.5
Mexico Beverages 25,000 Panamerican Beverages, Inc. (US
Registered Shares) 790,562 398,438 0.1
Building Products 224,600 Cementos Mexicanos, S.A. de C.V.
(Cemex)(Class B) 917,478 540,933 0.2
Financial Services 80,000 Grupo Financiero Bancomer, S.A. de
C.V. (ADR)(a) 665,624 221,472 0.1
Total Investments in Mexico 2,373,664 1,160,843 0.4
Total Investments in Latin America 5,142,966 2,751,356 0.9
MIDDLE
EAST
Israel Telecommunications 68,000 Koor Industries Limited (ADR)(a) 1,591,485 1,215,500 0.4
Total Investments in the
Middle East 1,591,485 1,215,500 0.4
NORTH
AMERICA
Canada Automobile Parts 27,690 Canadian Tire Corporation Ltd. 782,249 565,643 0.2
Banking 30,210 Bank of Nova Scotia (The) 705,899 497,554 0.2
Banking-- 18,320 Bank of Montreal 889,568 644,972 0.2
International 17,010 Royal Bank of Canada 954,216 642,286 0.2
-------------- -------------- ------
1,843,784 1,287,258 0.4
Beverages 17,110 Seagram Company Ltd. (The) 651,087 535,200 0.2
Diversified 48,520 Bombardier Inc. (Class B) 704,603 517,258 0.2
36,680 Power Corporation of Canada 746,615 655,627 0.2
-------------- -------------- ------
1,451,218 1,172,885 0.4
Machinery 18,750 United Dominion Industries Ltd. 580,946 457,828 0.2
Telecommunication 18,570 Northern Telecom Limited 1,050,297 892,048 0.3
Equipment
Telecommunications 19,540 BCE Inc. 788,874 631,168 0.2
15,670 Teleglobe Inc. 442,680 381,122 0.1
-------------- -------------- ------
1,231,554 1,012,290 0.3
Total Investments in North America 8,297,034 6,420,706 2.2
PACIFIC
BASIN
Australia Airlines 234,500 Qantas Airways Limited 396,435 315,215 0.1
Banking 63,400 Australia and New Zealand Banking
Group Limited 359,933 320,291 0.1
55,700 Commonwealth Bank of Australia 673,999 594,356 0.2
102,600 National Australia Bank Ltd. 1,460,203 1,268,993 0.4
97,800 Westpac Banking Corporation Ltd. 653,591 520,257 0.2
-------------- -------------- ------
3,147,726 2,703,897 0.9
Broadcast & 44,600 News Corporation Limited (The) 304,983 272,715 0.1
Publishing
Building & 18,800 Leighton Holdings Limited 77,331 57,532 0.0
Construction 345,200 Pioneer International Limited 842,364 631,854 0.2
-------------- -------------- ------
919,695 689,386 0.2
Diversified 111,300 Orica Limited 779,622 509,309 0.2
26,600 Pacific Dunlop Ltd. 51,287 46,346 0.0
-------------- -------------- ------
830,909 555,655 0.2
Foods 74,400 Goodman Fielder Limited 92,534 87,241 0.0
Insurance 213,800 GIO Australia Holdings Limited 569,452 613,914 0.2
176,600 National Mutual Holdings Limited 290,057 279,812 0.1
38,200 QBE Insurance Group Limited 163,139 122,100 0.1
-------------- -------------- ------
1,022,648 1,015,826 0.4
Metals & Mining 88,200 Comalco Ltd. 376,510 293,117 0.1
217,800 Pasminco Limited 149,053 142,023 0.1
95,000 Rio Tinto Ltd. 1,345,480 921,606 0.3
-------------- -------------- ------
1,871,043 1,356,746 0.5
Oil & Gas Producers 66,700 Australian Gas Light Company (The) 392,957 378,472 0.1
222,600 Oil Search Limited 284,385 269,934 0.1
-------------- -------------- ------
677,342 648,406 0.2
Real Estate 73,100 General Property Trust 120,063 107,042 0.0
Retail 93,100 Woolworth Limited 344,263 278,514 0.1
Telecommunications 89,900 Telstra Corp. Ltd. 218,410 232,945 0.1
Tobacco 14,000 Rothmans Holdings Ltd. 94,898 83,283 0.0
Transportation 16,000 Brambles Industries Ltd. 336,989 316,659 0.1
Total Investments in Australia 10,377,938 8,663,530 2.9
</TABLE>
Merrill Lynch International Equity Fund, August 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
PACIFIC BASIN Shares Percent of
(concluded) Industries Held Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
China Telecommunications 85,300 China Telecom (Hong Kong) Ltd.
(ADR)(a) $ 2,706,681 $ 1,961,900 0.7%
Total Investments in China 2,706,681 1,961,900 0.7
Hong Kong Conglomerates 325 Hutchison Whampoa Ltd. 1,886 1,409 0.0
Property 48,400 Great Eagle Holdings Ltd.
(Warrants)(b) 0 0 0.0
Utilities--Gas 700 Hong Kong and China Gas Co. Ltd. 1,084 732 0.0
62,350 Hong Kong and China Gas Co. Ltd.
(Warrants)(b) 0 2,334 0.0
-------------- -------------- ------
1,084 3,066 0.0
Total Investments in Hong Kong 2,970 4,475 0.0
Japan Automobiles 77,000 Toyota Motor Corp. 2,091,386 1,641,663 0.6
Banking 150,000 Mitsubishi Trust and Banking Corp. 1,623,375 743,731 0.2
295,000 Sakura Bank Ltd. 2,109,796 518,204 0.2
200,000 Sanwa Bank, Ltd. 1,657,563 1,144,638 0.4
-------------- -------------- ------
5,390,734 2,406,573 0.8
Broadcast--Media 31,000 Nippon Broadcasting System Inc. 1,740,635 1,218,657 0.4
Building & 223,000 Nishimatsu Construction Co. Ltd. 1,125,863 1,026,704 0.3
Construction
Chemicals 271,000 Kaneka Corp. 1,408,288 1,393,583 0.4
116,000 Sekisui Chemical Co., Ltd. 610,575 533,248 0.2
102,000 Shin-Etsu Chemical Co., Ltd. 1,876,777 1,441,351 0.5
-------------- -------------- ------
3,895,640 3,368,182 1.1
Computer Software 550 NTT Data Corporation 2,570,427 1,979,034 0.7
Diversified 88,000 Ibiden Co., Ltd. 1,222,287 1,371,299 0.5
Electrical Equipment 126,000 Anritsu Corp. 1,457,622 955,844 0.3
322,000 Fujikura Ltd. 2,426,030 1,106,177 0.4
8,500 Keyence Corporation 964,384 857,345 0.3
42,000 Murata Manufacturing Co., Ltd. 1,411,027 1,386,315 0.5
122,000 NEC Corporation 1,531,345 899,575 0.3
18,000 Rohm Co., Ltd. 1,006,155 1,835,954 0.6
-------------- -------------- ------
8,796,563 7,041,210 2.4
Electronics 235,000 Dainippon Screen Manufacturing
Co., Ltd. 1,827,755 729,069 0.2
165,000 Fujitsu Limited 1,782,668 1,671,271 0.6
272,000 Hitachi Ltd. 2,529,531 1,362,119 0.4
86,000 Pioneer Electronic Corp. 1,543,510 1,416,277 0.5
24,100 Sony Corp. 1,985,144 1,759,959 0.6
-------------- -------------- ------
9,668,608 6,938,695 2.3
Financial Services 345,000 Daiwa Securities Co., Ltd. 1,613,715 1,141,203 0.4
36,000 Jafco Co., Ltd. 2,046,897 693,583 0.2
-------------- -------------- ------
3,660,612 1,834,786 0.6
Manufacturing 293,000 NSK Ltd. 1,727,845 1,062,587 0.4
Office Equipment 166,000 Ricoh Co., Ltd. 1,946,004 1,589,687 0.5
Packaging & 3,000 Toyo Seikan Kaisha, Ltd. 93,627 37,697 0.0
Containers
Paper & Forest 241,000 Oji Paper Co., Ltd. 1,578,844 851,813 0.3
Products
Pharmaceuticals 172,000 Fujisawa Pharmaceutical Co., Ltd. 1,558,352 1,483,893 0.5
67,000 Sankyo Co., Ltd. 1,683,045 1,456,934 0.5
67,000 Taisho Pharmaceutical Co., Ltd. 1,310,026 1,364,393 0.4
-------------- -------------- ------
4,551,423 4,305,220 1.4
Real Estate 239,000 Mitsui Fudosan Co., Ltd. 2,508,483 1,540,516 0.5
Retail 37,000 Ito-Yokado Co., Ltd. 2,168,164 1,721,844 0.6
90,000 Takashimaya Co. 962,508 615,172 0.2
116,000 Uny Co., Ltd. 1,934,412 1,640,827 0.5
-------------- -------------- ------
5,065,084 3,977,843 1.3
Steel 610,000 Nippon Steel Corp. 1,678,915 998,088 0.3
Telecommunications 240 Nippon Telegraph & Telephone
Corporation 2,167,488 1,818,954 0.6
128,000 Uniden Corporation 1,784,679 1,092,506 0.4
-------------- -------------- ------
3,952,167 2,911,460 1.0
Television 4,350 Nippon Television Network Corp. 1,318,852 1,260,200 0.4
Tire & Rubber 74,000 Bridgestone Corporation 1,339,549 1,630,118 0.6
Tobacco 272 Japan Tobacco, Inc. 1,766,057 1,836,067 0.6
Trading 274,000 Mitsui & Co. 2,009,772 1,473,056 0.5
628,000 Nissho Iwai Corp. 2,213,680 911,886 0.3
-------------- -------------- ------
4,223,452 2,384,942 0.8
Transport Services 315 East Japan Railway Company 1,475,343 1,510,519 0.5
Transportation 238,000 Nippon Express Co., Ltd. 1,403,813 1,089,021 0.4
380,000 Tokyu Corp. 2,351,160 882,845 0.3
-------------- -------------- ------
3,754,973 1,971,866 0.7
Total Investments in Japan 77,143,373 56,695,426 19.0
New Zealand Agriculture 1,472,340 Wrightson Ltd. 1,065,190 306,285 0.1
Electronics 26,050 PDL Holdings Ltd. 118,808 56,771 0.0
Textiles 203,950 Lane Walker Rudkin Industries, Ltd. 192,134 113,138 0.1
Total Investments in New Zealand 1,376,132 476,194 0.2
South Electronics 6,700 Samsung Electronics (GDR)(c) 402,000 115,073 0.0
Korea 645 Samsung Electronics (Rights) 0 0 0.0
-------------- -------------- ------
402,000 115,073 0.0
Telecommunications 159,024 SK Telecom Co. Ltd. (ADR)(a) 2,561,162 954,144 0.3
Utilities--Electric 67,880 Korea Electric Power Corp. 2,753,162 884,066 0.3
Total Investments in South Korea 5,716,324 1,953,283 0.6
Total Investments in the
Pacific Basin 97,323,418 69,754,808 23.4
</TABLE>
Merrill Lynch International Equity Fund, August 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
SOUTHEAST Shares Percent of
ASIA Industries Held Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
India Banking 300 State Bank of India $ 2,095 $ 1,298 0.0%
Chemicals 100 Indian Petrochemicals Corporation Ltd. 396 99 0.0
1,298 Reliance Industries Ltd. 6,720 3,297 0.0
147 Tata Chemicals Ltd. 741 345 0.0
-------------- -------------- ------
7,857 3,741 0.0
Cosmetics & 225 Reckitt & Coleman of India Ltd. 1,926 1,786 0.0
Toiletries
Oil & Related 400 Hindustan Petroleum Corporation Ltd. 5,063 2,641 0.0
Pharmaceuticals 20 Ranbaxy Laboratories Ltd. 378 240 0.0
Steel 100 Steel Authority of India Ltd. 68 14 0.0
Tobacco 200 ITC Ltd. 2,905 2,974 0.0
Total Investments in Southeast Asia 20,292 12,694 0.0
SHORT-TERM Face
SECURITIES Amount Issue
Commercial US$ 12,381,000 General Motors Acceptance Corp., 5.81%
Paper* due 9/01/1998 12,381,000 12,381,000 4.2
8,000,000 International Securitization
Corporation, 5.54% due 9/17/1998 7,980,302 7,980,302 2.7
7,000,000 Park Avenue Receivables Corp., 5.55%
due 10/08/1998 6,960,071 6,960,071 2.3
Total Investments in Commercial Paper 27,321,373 27,321,373 9.2
US Government & 19,000,000 Federal Home Loan Mortgage Corp.,
Agency 5.46% due 9/17/1998 18,953,893 18,953,893 6.3
Obligations* United States Treasury Bills (d):
2,000,000 5.04% due 10/08/1998 1,989,825 1,990,196 0.7
2,500,000 5% due 10/22/1998 2,482,522 2,483,143 0.8
Total Investments in US Government
& Agency Obligations 23,426,240 23,427,232 7.8
Total Investments in Short-Term
Securities 50,747,613 50,748,605 17.0
Total Investments 337,835,635 290,482,304 97.4
OPTIONS Nominal Value Covered Premiums
WRITTEN by Options Written Received
Call Options 27,329 HSBC Holdings PLC, expiring October
Written 1998 at Pound Sterling 1475.54 (24,000) (12,490) (0.0)
Total Options Written (24,000) (12,490) (0.0)
Total Investments, Net of Options Written $ 337,811,635 290,469,814 97.4
==============
Variation Margin on Financial Futures Contracts** (1,273,137) (0.4)
Unrealized Depreciation on Forward Foreign Exchange Contracts*** (474,201) (0.2)
Other Assets Less Liabilities 9,427,635 3.2
-------------- ------
Net Assets $ 298,150,111 100.0%
============== ======
Net Asset Class A--Based on net assets of $20,333,382 and
Value: 2,633,595 shares outstanding $ 7.72
==============
Class B--Based on net assets of $219,050,157 and
28,135,942 shares outstanding $ 7.79
==============
Class C--Based on net assets of $10,139,096 and
1,321,424 shares outstanding $ 7.67
==============
Class D--Based on net assets of $48,627,476 and
6,259,800 shares outstanding $ 7.77
==============
<FN>
(a)American Depositary Receipts (ADR).
(b)Warrants entitle the Fund to purchase a predetermined number of
shares of Common Stock and are non-income producing. The purchase
price and number of shares are subject to adjustment under certain
conditions until the expiration date.
(c)Global Depositary Receipts (GDR).
(d)Securities held as collateral in connection with open futures
contracts.
(e)The rights may be exercised until 9/3/1998.
(f)Optimized Portfolio As Listed Securities (OPALS) are investments
that are exchange quoted and provide an equivalent investment
exposure to that of the specific Morgan Stanley Capital
International (MSCI) country index.
*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 Fund.
**Financial futures contracts purchased as of August 31, 1998 were
as follows:
Number of Expiration
Contracts Issue Exchange Date Value
61 MIB FIB September 1998 $10,979,055
207 FTSE 100 LIFFE September 1998 18,217,135
151 IBEX 135 IBEX September 1998 8,337,067
167 MATIF CAC September 1998 5,170,629
6 DAX Index DTB September 1998 1,642,893
-----------
Total Financial Futures Contracts Purchased
(Total Contract Price--$49,858,574) $44,346,779
===========
Financial futures contracts sold as of August 31, 1998 were as
follows:
Number of Expiration
Contracts Issue Exchange Date Value
65 Nikkei Index SIMEX September 1998 $ 3,236,648
43 Nikkei Index CME September 1998 2,891,750
-----------
Total Financial Futures Contracts Sold
(Total Contract Price--$6,497,389) $ 6,128,398
===========
***Forward foreign exchange contracts as of August 31, 1998 were as
follows:
Foreign Expiration Unrealized
Currency Sold Date Depreciation
Pound 6,769,963 September 1998 $ (329,294)
Sterling
YEN 2,959,882,600 September 1998 (134,974)
-----------
(US$ Commitment--$31,875,877) $ (464,268)
===========
Foreign Expiration Unrealized
Currency Purchased Date Depreciation
YEN 873,158,400 September 1998 (9,933)
-----------
(US$ Commitment--$6,200,000) $ (9,933)
===========
Total Unrealized Depreciation on Forward
Foreign Exchange Contracts--Net $ (474,201)
===========
</TABLE>
Merrill Lynch International Equity Fund, August 31, 1998
EQUITY PORTFOLIO CHANGES
For the Quarter Ended August 31, 1998
Additions
ASDA Group PLC
Abbey National PLC
Alpha Credit Bank S.A.
Australia and New Zealand Banking
Group Limited
Australian Gas Light Company (The)
Axa Colonia Konzern AG
BCE Inc.
BIG Bank Gdanski S.A. (GDR)
Bank of Ireland
Bank of Scotland PLC
Bank Rozwoju Eksportu S.A.
Banque Cantonale de Geneve (BCG)
Barclays PLC
Bayerische Motoren Werke AG
(BMW)(New Shares)
Bombardier Inc. (Class B)
British Aerospace PLC
British Airways PLC
British Petroleum Co. PLC (ADR)
Canadian Tire Corporation Ltd.
Carlton Communications PLC
Carsi Buyuk Magazacilik A.S.
Continental AG
Deutsche Lufthansa AG
Egis Gyogyzergyar Reszvenytarsasag
Ergo-Versicherungsgruppe AG
Elektrim Spolka Akcyjna S.A.
*Eregli Demir Ve Celik Fa
Financiere Industrielle Gaz et Eaux S.A.
GKN PLC
General Property Trust
Goodman Fielder Limited
Granada Group PLC
Grupo Financiero Bancomer, S.A. de C.V.
(ADR)
Haci Omer Sabanci Holding A.S.
Heidelberger Zement AG
Hellenic Bottling Co.
Hellenic Telecommunication Organization
Irish Life PLC
Keyence Corporation
Kingfischer PLC
Koor Industries Limited (ADR)
LVMH Moet-Hennessy Louis Vuitton S.A.
Lagardere Groupe S.C.A.
Lahmeyer AG
Magyar Tavkozlesi Reszvenytarsasag (ADR)
Merkantildata ASA
METRO AG
METRO AG (Preferred)
Mol Magyar Olaj-es Gazipari
Reszvenytarsasag (GDR)
Muenchener Rueckversicherungs-
Gesellschaft AG
National Bank of Greece S.A.
National Mutual Holdings Limited
Nestle S.A.
News Corporation Limited (The)
*Northern Rock PLC
Northern Telecom Limited
OTP Bank Reszvenytarsasag (GDR)
Oil Search Limited
Okocimskie Zaklady Piwowarskie S.A.
Orbis S.A.
Panamerican Beverages, Inc.
(US Registered Shares)
Pasminco Limited
Petroleo Brasileiro S.A.--Petrobras
(ADR)
Power Corporation of Canada
Railtrack Group PLC
Richter Gedeon Vegyeszeti Gyar
Reszvenytarsasag
Royal Bank of Canada
Royal Dutch Petroleum Company
Royal Dutch Petroleum Company
(NY Registered Shares)
Sanwa Bank, Ltd.
Scottish & Newcastle PLC
Seagram Company Ltd. (The)
Sekisui Chemical Co., Ltd.
Softbank Corp. (ADR)
*Stet Hellas S.A. (ADR)
Suez Lyonnaise des Eaux S.A.
*TNT Post Group
Teleglobe Inc.
Tesco PLC
*Turkey Garnati Bank
*Turkiye Is Bankasi AS
UBS AG
Union Bank of Switzerland (UBS)
United Dominion Industries Ltd.
VIAG AG
Vivendi S.A.
*Yapi Kredi Bankasi
Deletions
AGIV-AG fuer Industrie und Verkehrswesen
AMB Aachener und Muenchener
Beteiligungs AG
Anglo American Corp. of South Africa, Ltd.
(ADR)
BC Telecom, Inc.
BHF-Bank AG
Bayerische Vereinsbank AG
Bharat Heavy Electricals Ltd. (BHEL)
Bouygues S.A.
Canadian Pacific Ltd.
Canadian Pacific Ltd. (US Registered
Shares)
Cattles PLC
Companhia Energetica de Minas Gerais S.A.
(CEMIG)(Preferred)
Credit National/Natexis
Degussa AG
Deutsche Telekom AG
EMAP PLC
EMI Group PLC
East India Hotels Ltd. (GDR)
*Eregli Demir Ve Celik Fa
Eurotunnel S.A.
FKI PLC
Fomento Economico Mexicano, S.A. de C.V.
(Femsa)(Class B)
Gallaher Group PLC
Grupo Carso, S.A. de C.V. 'A1'
HSBC Holdings PLC (Hong Kong)
Hindustan Lever Ltd.
Inspec Group PLC
Kimberly-Clark de Mexico, S.A. de C.V. (ADR)
Laporte PLC
M.I.M. Holdings Limited
MSCI Greece OPALS (Class B)
MSCI Poland OPALS (Class B)
MSCI South Africa OPALS (Class B)
MSCI Turkey OPALS (Class B)
Mahanagar Telephone Nigam Ltd.
Man (ED&F) Group PLC
Mannesmann AG
Newcrest Mining Ltd.
Noranda Forest, Inc.
Noranda, Inc.
North Limited
*Northern Rock PLC
Novartis AG (Registered Shares)
Oerlikon-Buehrle Holding AG
Pernod Ricard
Promodes S.A.
Royal Bank of Scotland Group PLC
Royal PTT Nederland N.V.
Salamander AG
Santos Limited
Sasol Ltd.
Schering AG
Schroders Property Fund
Seven Network Ltd.
Severn Trent PLC
*Stet Hellas S.A. (ADR)
Stockland Trust Group
T.C. Debica S.A.
*TNT Post Group
Taihei Dengyo Kaisha, Ltd.
Telefonos de Mexico, S.A. de C.V. (Series L)
Thames Water PLC
Tobu Railway Co., Ltd.
*Turkey Garnati Bank (Ordinary)
*Turkiye Is Bankasi AS
Varta AG
Westfield Holdings Ltd.
*Yapi Kredi Bankasi
[FN]
*Added and deleted in the same quarter.
PORTFOLIO INFORMATION
Worldwide
Investments as of
August 31, 1998
Ten Largest Industries Percent of
(Equity Investments) Net Assets
Index Instruments 11.0%
Banking 7.6
Telecommunications 6.0
Chemicals 4.6
Diversified 4.1
Retail 3.1
Electronics 3.0
Insurance 2.9
Pharmaceuticals 2.7
Oil & Related 2.6
Percent of
Ten Largest Equity Holdings Net Assets
MSCI Swiss OPALS (Class B) 3.4%
MSCI Dutch OPALS (Class B) 2.7
Telecom Italia S.p.A. 1.6
MSCI Denmark OPALS (Class B) 1.3
MSCI Portugal OPALS (Class B) 1.2
Elf Aquitaine S.A. 1.2
MSCI Sweden OPALS (Class B) 0.9
Koninklijke KNP BT N.V. 0.8
British Petroleum Co. PLC 0.8
MSCI Norway OPALS (Class B) 0.8
Percent of
Geographical Asset Mix* Net Assets
Europe (Ex-United Kingdom
and Ireland) 36.5%
Japan 19.0
Pacific Basin (Ex-Japan) 4.4
United Kingdom and Ireland 16.7
Other Emerging Markets 1.6
North America 2.2
[FN]
*Percent of net assets may not equal 100% and excludes the impact
of futures and options.
Percent of
Ten Largest Countries Net Assets
Japan 19.0%
United Kingdom 16.0
Germany 8.0
France 6.9
Netherlands 5.5
Switzerland 4.1
Australia 2.9
Sweden 2.5
Italy 2.3
Canada 2.2
Financial Futures Contracts
Percent of
Country Issue Exchange Net Assets
France MATIF CAC 1.7%
Germany DAX Index DTB 0.6
Italy MIB FIB 3.7
Japan Nikkei Index CME (1.0)
Japan Nikkei Index SIMEX (1.1)
Spain IBEX 135 IBEX 2.8
United Kingdom FTSE 100 LIFFE 6.1
-----
12.8%
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