MERRILL LYNCH
INTERNATIONAL
EQUITY FUND
FUND LOGO
Quarterly Report
February 28, 1998
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
<PAGE>
MERRILL LYNCH INTERNATIONAL EQUITY FUND
International
Stock Market
Performance
Bar Graph Depicting Total Return in US Dollars* of the Fund's
Top Country Positions For the Three-Month Period Ended February 28, 1998
Japan + 2.6%
Hong Kong + 3.9%
South Africa + 5.8%
Sweden + 8.3%
Australia + 9.7%
Canada +10.4%
Netherlands +15.1%
France +15.6%
Germany +15.7%
United Kingdom +16.2%
Source: Financial Times/S&P--Actuaries Index.
[FN]
*For the three-month period ended February 28, 1998, total investment return
in US dollars for the Financial Times/S&P--Actuaries World (Ex-US) Index
was +11.48%.
Merrill Lynch International Equity Fund, February 28, 1998
DEAR SHAREHOLDER
During the quarter ended February 28, 1998, international equity
markets remained volatile. The spreading Asian financial crisis
initially depressed returns, but a sharp bounce back in a limited
number of Asian markets mid-way through the quarter, together with
continued strong performances in most European equity markets,
resulted in a positive quarter for overall equity returns. European
equity markets returned +16.6% as measured by the unmanaged
Financial Times/Standard & Poor's (FT/S&P)--Actuaries European Index
in the three months ended February 28, 1998, with the strongest
performances in Italy and Spain.
<PAGE>
Having declined by more than 34% during the November quarter, Asian
emerging equity markets recovered slightly, returning almost +11% in
the February quarter according to the unmanaged International
Finance Corporation's (IFC) Asian Investables Index. However,
reflecting currency volatility, returns were still broadly dispersed
with Indonesian equities returning +19% in local currency terms but
- -31% in US dollar terms. In contrast, Thai and Malaysian equity
returns exceeded +25% in US dollar terms during the February
quarter.
Australia returned +9.7% in US dollar terms according to the FT/S&P
- --Actuaries World (Ex-US) Index during the February quarter as
strong domestic demand conditions continued to offset the depressing
impact of the economic slowdown in Asia. Elsewhere in the Pacific,
the Fund was slightly underweighted in Hong Kong and Japan, which
had poor returns of +3.9% and +2.6%, respectively, as measured by
the FT/S&P--Actuaries World (Ex-US) Index.
The Fund's Benchmark Index, which combines the unmanaged FT/S&P--
Actuaries World (Ex-US) Index and the unmanaged IFC Investables
Index using customized weights, returned +9.8%. Merrill Lynch
International Equity Fund's Class A, Class B, Class C and Class D
Shares returned +4.73%, +4.41%, +4.44% and +4.75%, respectively, for
the three months ended February 28, 1998. (Fund results shown do not
reflect sales charges, and would be lower if sales charges were
included. Complete performance information, including average annual
total returns, can be found on pages 4 and 5 of this report to
shareholders.)
Factors negatively impacting the Fund's performance were our
underweighting of Continental Europe and Malaysia and our holding of
cash. However, the Fund's underweightings of Japan and Hong Kong and
overweightings of Australia and the United Kingdom proved positive
for performance, as did tactical currency and market hedging. The
key negative factor for the Fund's performance was the defensive
nature of the Fund's European stock selection, where the value
orientation led to significant underweighted positions in the
outperforming banking and healthcare sectors. Additionally, in
Japan, the Fund was positioned in the larger blue-chip companies,
which underperformed low-priced domestic cyclicals that experienced
sharp recoveries. Overall, asset allocation and currency decisions
had a positive impact on Fund performance, while stock selection
continued to hamper performance.
Portfolio Matters
Anticipating a recovery in the equity market from oversold levels,
we raised our Japanese equity exposure in January. We increased the
Fund's overall effective Japanese equity exposure to 28% of net
assets as of February 28, 1998 from 25% three months earlier. We
continued to increase the Fund's exposure to Canada, while at the
same time reducing our Latin American holdings. During the February
quarter, we increased the Fund's Continental European exposure to
21% of net assets from 16% three months earlier, while reducing the
effective UK equity exposure to 12% of net assets from 15%. The
Fund's effective cash position declined slightly to 10% of net
assets as of February 28, 1998 from 14% three months earlier.
<PAGE>
Stock turnover was relatively light during the February quarter,
with the principal shifts occurring in Japan, where we bought a
number of domestic cyclical stocks, and in Australia, where we
increased the Fund's exposure to the insurance and fund management
sectors.
As of February 28, 1998, our overall portfolio beta (the estimated
systematic risk relative to the Benchmark Index) was around 0.94 (a
portfolio beta below 1.0 is generally consistent with a defensive
investment strategy). This low beta principally reflects cautious
value-oriented stock selection strategies in Europe, together with
the aggregate cash holdings.
Economic and Investment
Environment
Consensus expectations for 1998 gross domestic product (GDP) growth
for the Group of Seven Industrialized Nations have declined to 2.2%
from 2.5%. Most of the decline can be attributed to a sharp fall in
Japanese growth expectations, which now point toward flat activity
in 1998.
As of February 28, 1998, the impact of a lower global growth outlook
for developed markets has been more visible in bond markets, where
yields generally continued to decline (especially in Europe).
Surprisingly, although earnings momentum appears to have faltered
(especially in Hong Kong and Japan), corporate earnings expectations
globally still appear too optimistic relative to the recent
downgrades to economic growth. As the year progresses, we expect
further earnings downgrades, especially in companies exposed to
global trading conditions.
Despite a deterioration in aggregate growth expectations, domestic
demand indicators in the US and European economies have been
stronger than widely anticipated in recent months. US economic data
released in February tended to confirm early strong trends and,
fearing a stronger domestic economy, the US bond market recently
weakened.
Against this backdrop, expectations of potential US interest rate
cuts have now dissipated somewhat. Combined with a decline in
earnings momentum (and further high-profile earnings warnings such
as that from Intel Corp.), we believe that the US equity market has
risen to valuation levels that may be unsustainable. US profit
margins are under pressure from rising labor costs (up +3.5% in
1997), increasing foreign competition and significantly lower
foreign translated earnings.
In several European markets, bid activity has also propelled markets
to overextended valuations, reducing our intermediate-term return
expectations in Switzerland and Spain. Even in the United Kingdom,
the Netherlands and France (our preferred markets), valuations now
appear full and prone to earnings disappointments. For the moment, a
downward shift in interest rate expectations is supporting European
markets but this is unlikely to go much further, in our view.
<PAGE>
In Canada and Australia, we remain positive on equity returns.
Valuations appear relatively attractive and, after a period of
negative earnings revisions, earnings momentum has turned up
slightly, particularly in the domestic sectors. We remain generally
cautious on Asian equity valuations, principally because earnings
have yet to stabilize and liquidity is very poor. Although the
Japanese market holds good long-term value, the short-term outlook
is clouded by misguided government policy decisions and very poor
earnings momentum. There is little to suggest an early and lasting
recovery in industrial output. In Japan, we anticipate a resumption
of yen weakness in the May 31, 1998 quarter. We are likely to hedge
some yen exposure into US dollars.
Latin American equity valuations appear significantly more
attractive than Asian valuations as positive GDP growth, strong
financial sectors and low debt/equity ratios provide a solid
platform for earnings enhancement in the intermediate term.
Merrill Lynch International Equity Fund, February 28, 1998
In Conclusion
International equity markets have generally exceeded our return
expectations for 1998. During the February quarter, our defensive
investment strategy limited returns relative to major benchmarks. We
plan to maintain this defensive approach, since events in the
February quarter have generally reinforced our views of excessive
valuations in both major stock markets, and more particularly, in
larger-capitalization individual stocks in Europe. Through
relatively high effective cash reserves and defensive stock
selection strategies, we look to have the portfolio benefit if, as
we expect, there is a period of global earnings disappointments and
a deflation of what we view as excessive valuations in many major
markets.
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 annual report to
shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Andrew Bascand)
Andrew Bascand
Senior Vice President and
Portfolio Manager
<PAGE>
March 27, 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).
<PAGE>
None of the past results shown should be considered a representation
of future performance. Figures shown in the "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 - 0.22% + 4.73% +11.14%
ML International Equity Fund Class B Shares - 1.21 + 4.41 +24.87
ML International Equity Fund Class C Shares - 1.25 + 4.44 + 7.46
ML International Equity Fund Class D Shares - 0.37 + 4.75 +29.46
Financial Times/S&P--Actuaries World (Ex-US) Index** +13.23 +11.48 +26.57/+46.08
<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 dates are: Class A and Class
C Shares, 10/21/94; and Class B and Class D Shares, 7/30/93.
**An unmanaged capitalization-weighted index comprised of over 1,800
companies in 24 countries, excluding the United States. Since
inception total returns are for the periods from 10/21/94 to 2/28/98
and from 7/30/93 to 2/28/98, respectively.
</TABLE>
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
<PAGE>
Class A Shares*
Year Ended 12/31/97 -5.03% -10.02%
Inception (10/21/94) through 12/31/97 +0.89 - 0.80
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/97 -5.95% -9.08%
Inception (7/30/93) through 12/31/97 +3.37 +3.37
[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 12/31/97 -5.95% -6.73%
Inception (10/21/94) through 12/31/97 -0.11 -0.11
[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 12/31/97 -5.33% -10.30%
Inception (7/30/93) through 12/31/97 +4.16 + 2.90
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<PAGE>
Merrill Lynch International Equity Fund, February 28, 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 Africa Banking 155,450 Nedcor Ltd. (GDR)(c) $ 1,691,871 $ 4,529,937 0.9%
Beverages 58,993 South African Breweries Ltd. 1,690,442 1,655,148 0.3
Diversified 87,200 Sasol Ltd. 1,228,216 744,907 0.1
Insurance 60,400 Liberty Life Association
of Africa Ltd. 1,640,547 1,834,008 0.4
Metals & Mining 31,500 MSCI South Africa Opals
(Class B) 1,292,055 1,328,355 0.3
Mining 36,800 Anglo American Corp. of
South Africa, Ltd. 2,492,605 1,542,024 0.3
44,400 Anglo American Corp. of
South Africa, Ltd. (ADR)(a) 2,969,175 1,875,900 0.4
125,116 Evander Gold Mines Ltd. 1,234,116 189,953 0.0
-------------- -------------- ------
6,695,896 3,607,877 0.7
Paper & Forest 85,200 Sappi Ltd. 815,036 378,571 0.1
Products
Total Investments in Africa 15,054,063 14,078,803 2.8
EUROPE
Denmark Metals & Mining 40,000 MSCI Denmark Opals (Class B) 5,663,867 5,934,400 1.2
Total Investments in Denmark 5,663,867 5,934,400 1.2
Finland Diversified 93,283 Outokumpu OY 1,430,243 1,219,275 0.2
Paper & Forest 98,753 Enso OY (Class A) 763,580 905,333 0.2
Products 198,250 Metsa Serla OY (Class B) 1,504,575 1,763,502 0.3
54,270 UPM-Kymmene Corporation 1,040,224 1,408,843 0.3
-------------- -------------- ------
3,308,379 4,077,678 0.8
Total Investments in Finland 4,738,622 5,296,953 1.0
<PAGE>
France Aerospace & 2,200 Labinal S.A. 661,265 615,349 0.1
Defense
Agricultural 5,300 Eridania Beghin-Say S.A. 784,443 945,900 0.2
Operations
Automobiles 9,792 Peugeot S.A. 1,320,327 1,395,179 0.3
31,800 Renault S.A. 963,786 1,107,905 0.2
-------------- -------------- ------
2,284,113 2,503,084 0.5
Automobiles & 14,600 Sommer-Allibert S.A. 556,610 569,604 0.1
Equipment 12,100 Valeo S.A. 812,589 1,036,007 0.2
-------------- -------------- ------
1,369,199 1,605,611 0.3
Banking 41,101 Banque Nationale de Paris 2,017,670 2,485,648 0.5
18,814 Compagnie Financiere de Paribas 954,003 1,790,190 0.3
13,500 Credit Commercial de France 807,214 998,578 0.2
15,912 Societe Generale de Surveillance
S.A. (Class A)(Ordinary) 2,058,813 2,400,529 0.5
-------------- -------------- ------
5,837,700 7,674,945 1.5
Beverages 14,900 Pernod Ricard 729,409 974,560 0.2
Building & 1,000 Compagnie de Saint Gobain S.A. 158,379 140,181 0.0
Construction
Chemicals 3,700 L'Air Liquide 621,112 598,324 0.1
4,900 Rhone-Poulenc (Class A) 219,779 225,956 0.1
-------------- -------------- ------
840,891 824,280 0.2
Consumer--Goods 2,000 LVMH (Moet-Hennessy
Louis Vuitton) 426,479 402,301 0.1
Cosmetics & 6,600 Christian Dior S.A. 848,213 800,460 0.2
Toiletries 2,400 L'OREAL 940,983 1,081,479 0.2
-------------- -------------- ------
1,789,196 1,881,939 0.4
Diversified 2,000 Compagnie Generale des Eaux S.A. 237,884 314,873 0.1
Electronics 16,300 Schneider S.A. 1,013,429 1,015,234 0.2
24,400 Thomson CSF 781,245 842,071 0.2
-------------- -------------- ------
1,794,674 1,857,305 0.4
<PAGE>
Engineering & 20,949 Bouygues S.A. 2,042,270 2,940,090 0.6
Construction
Financial 7,100 Credit National/Natexis 445,918 431,717 0.1
Services 11,334 Societe EuraFrance S.A. 3,545,896 5,280,508 1.0
-------------- -------------- ------
3,991,814 5,712,225 1.1
Foods 1,600 Bongrain S.A. 605,274 723,090 0.2
900 Fromageries Bel S.A. 634,403 669,565 0.1
2,100 Groupe Danone S.A. 345,335 424,486 0.1
-------------- -------------- ------
1,585,012 1,817,141 0.4
Hotels 5,411 Accor S.A. 756,346 1,250,266 0.2
Insurance 21,300 Assurances Generales de
France S.A. (AGF) 878,817 1,156,886 0.2
19,728 Axa-UAP 1,259,348 1,909,580 0.4
-------------- -------------- ------
2,138,165 3,066,466 0.6
Leisure 7,900 Club Mediterranee S.A. 639,800 586,820 0.1
7,900 Club Mediterranee S.A.
(Rights)(e) 0 11,490 0.0
-------------- -------------- ------
639,800 598,310 0.1
Metals 15,100 Pechiney S.A. (Class A) 779,869 670,008 0.1
Oil & Related 27,679 Elf Aquitaine S.A. 3,267,090 3,152,267 0.6
32,600 Total S.A. (Class B) 3,642,674 3,578,767 0.7
-------------- -------------- ------
6,909,764 6,731,034 1.3
Retail 1,200 Carrefour S.A. 724,778 720,592 0.1
6,400 Castorama Dubois Investisse 667,842 867,707 0.2
13,000 Etablissements Economiques
du Casino Guichard-Perachon
S.A. (Preferred) 628,696 551,191 0.1
-------------- -------------- ------
2,021,316 2,139,490 0.4
Steel 188,022 Usinor Sacilor S.A. 2,784,300 2,822,647 0.6
Telecommuni- 20,644 Alcatel Alsthom Cie Generale
cation d'Electricite S.A. 2,141,090 2,686,943 0.5
Equipment
Total Investments in France 42,703,378 50,174,948 9.9
</TABLE>
<PAGE>
Merrill Lynch International Equity Fund, February 28, 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 Apparel 400 Hugo Boss AG (Preferred) $ 554,061 $ 628,307 0.1%
Automobiles 200 Bayerische Motoren Werke
AG (BMW) 166,583 201,720 0.0
30,800 Daimler-Benz AG 2,116,666 2,522,531 0.5
3,724 Volkswagen AG 2,113,566 2,451,674 0.5
-------------- -------------- ------
4,396,815 5,175,925 1.0
Banking 21,200 BHF-Bank AG 659,850 605,247 0.1
2,900 Bayerische Vereinsbank AG 181,879 180,930 0.1
4,000 Commerzbank AG 143,873 144,841 0.0
15,300 Deutsche Bank AG 1,130,313 1,051,116 0.2
33,900 Dresdner Bank AG 1,578,886 1,537,682 0.3
-------------- -------------- ------
3,694,801 3,519,816 0.7
Batteries 1,700 Varta AG 265,084 268,904 0.0
Chemicals 32,799 BASF AG 1,134,988 1,193,989 0.2
82,476 Bayer AG 3,125,747 3,477,411 0.7
21,132 Henkel KGaA 907,822 1,297,456 0.3
31,102 Henkel KGaA (Preferred) 1,490,115 2,014,156 0.4
90,675 Hoechst AG 3,534,025 3,513,256 0.7
-------------- -------------- ------
10,192,697 11,496,268 2.3
Computer 3,600 SAP AG (Systeme, Anwendungen,
Software Produkte in der
Datenverarbeitung) (Preferred) 1,112,123 1,484,127 0.3
Diversified 31,100 Metallgesellschaft AG 648,642 629,062 0.1
20,100 RWE AG 912,302 1,111,682 0.2
14,843 Thyssen AG 3,379,527 3,268,176 0.7
13,700 VEBA AG 711,893 919,298 0.2
200 Viag AG 98,727 108,245 0.0
-------------- -------------- ------
5,751,091 6,036,463 1.2
Electronics 17,000 Siemens AG 1,161,189 1,046,103 0.2
Engineering & 6,715 Philipp Holzmann AG 2,443,499 1,587,707 0.3
Construction
<PAGE>
Footwear 5,600 Adidas AG 768,527 876,543 0.2
3,400 Salamander AG 543,961 534,061 0.1
-------------- -------------- ------
1,312,488 1,410,604 0.3
Insurance 6,000 AMB Aachener und Muenchener
Beteiligungs AG 622,244 669,643 0.1
8,200 Allianz AG 1,952,028 2,582,837 0.5
-------------- -------------- ------
2,574,272 3,252,480 0.6
Machinery & 26,200 AGIV-AG fuer Industrie und
Equipment Verkehrswesen 550,255 563,161 0.1
36,200 FAG Kugelfischer Georg
Schaefer AG 572,840 496,792 0.1
40,605 Kloeckner Werke AG 2,319,977 2,790,699 0.5
600 Mannesmann AG 281,495 360,450 0.1
-------------- -------------- ------
3,724,567 4,211,102 0.8
Metals 15,200 Degussa AG 707,440 787,478 0.2
Pharmaceuticals 8,100 Schering AG 834,092 910,268 0.2
Retail 3,843 Karstadt AG 1,323,579 1,370,382 0.3
Telecommuni- 4,400 Deutsche Telekom AG 86,992 88,878 0.0
cations
Total Investments in Germany 40,134,790 43,274,812 8.5
Ireland Building & 76,142 CRH PLC 826,936 947,345 0.2
Construction
Total Investments in Ireland 826,936 947,345 0.2
Italy Building 39,204 Italcementi S.p.A 217,403 371,388 0.1
Products
Chemicals 2,942,444 MontEdison S.p.A. 2,447,998 3,039,198 0.6
Telecommuni- 716,688 Telecom Italia S.p.A. 1,886,485 3,480,838 0.7
cations
Total Investments in Italy 4,551,886 6,891,424 1.4
<PAGE>
Netherlands Chemicals 11,761 Akzo Nobel N.V. 1,465,176 2,388,198 0.5
54,664 European Vinyls Corporation
International N.V. 2,077,567 1,010,316 0.2
-------------- -------------- ------
3,542,743 3,398,514 0.7
Electronics 37,572 Philips Electronics N.V. 2,434,123 2,920,960 0.6
Insurance 31,062 ING Groep N.V. 1,275,816 1,644,834 0.3
Packaging & 145,282 Koninklijke KNP BT N.V. 3,275,604 3,878,544 0.8
Containers
Steel 21,000 Ispat International N.V. 568,773 493,888 0.1
20,783 Ispat International N.V.
(NY Registered Shares) 491,090 511,781 0.1
-------------- -------------- ------
1,059,863 1,005,669 0.2
Telecommuni- 26,391 Royal PTT Nederland N.V. 930,260 1,329,099 0.2
cations
Total Investments in the
Netherlands 12,518,409 14,177,620 2.8
Norway Metals & Mining 48,000 MSCI Norway Opals (Class B) 5,781,119 5,131,680 1.0
Oil & Gas 76,454 Saga Petroleum A.S. (Class B) 850,887 1,141,557 0.2
Producers
Total Investments in Norway 6,632,006 6,273,237 1.2
Poland Automobiles & 61,910 T.C. Debica S.A. 834,795 1,674,688 0.3
Equipment
Metals & Mining 20,000 MSCI Poland Opals (Class B) 1,328,251 1,421,800 0.3
Total Investments in Poland 2,163,046 3,096,488 0.6
Portugal Metals & Mining 10,000 MSCI Portugal Opals (Class B) 619,095 762,300 0.1
Total Investments in Portugal 619,095 762,300 0.1
Russia Closed-End Funds 9,100 Templeton Russia Fund, Inc. 330,016 305,988 0.1
Total Investments in Russia 330,016 305,988 0.1
Spain Metals & Mining 28,000 MSCI Spain Opals (Class B) 2,509,468 2,980,040 0.6
Utilities-- 50,973 Endesa S.A. 866,496 1,126,841 0.2
Electric
Total Investments in Spain 3,375,964 4,106,881 0.8
</TABLE>
<PAGE>
Merrill Lynch International Equity Fund, February 28, 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>
Sweden Electrical 20,264 Electrolux AB $ 855,790 $ 1,544,879 0.3%
Forest Products 44,636 Mo och Domsjo AB (Class B) 1,200,098 1,299,812 0.3
929,741 Rottneros Bruks AB 1,435,615 697,192 0.1
92,871 Stora Kopparbergs AB 1,238,849 1,352,214 0.3
-------------- -------------- ------
3,874,562 3,349,218 0.7
Insurance 27,846 Skandia Forsakrings AB 684,767 1,573,043 0.3
Metals & Mining 188,686 Avesta Sheffield AB 1,710,791 1,179,096 0.2
Total Investments in Sweden 7,125,910 7,646,236 1.5
Switzerland Diversified 7,210 Oerlikon-Buehrle Holding AG 737,840 1,129,944 0.2
Leisure 703 Fotolabo S.A. 292,689 203,323 0.1
Total Investments in Switzerland 1,030,529 1,333,267 0.3
Turkey Metals & Mining 20,000 MSCI Turkey Opals (Class B) 2,649,088 2,535,600 0.5
Total Investments in Turkey 2,649,088 2,535,600 0.5
United Kingdom Advertising 160,150 Saatchi & Saatchi PLC 294,244 303,001 0.1
Automobile 378,300 Thorn PLC 929,456 949,439 0.2
Rental
Automobiles & 440,671 LucasVarity PLC 1,402,834 1,696,481 0.3
Equipment
Banking 97,596 HSBC Holdings PLC 2,624,901 2,996,142 0.6
220,400 Lloyds TSB Group PLC 2,784,941 3,314,183 0.6
101,951 National Westminister
Bank PLC (Ordinary) 1,115,597 1,876,896 0.4
-------------- -------------- ------
6,525,439 8,187,221 1.6
<PAGE>
Broadcast-- 122,200 British Sky Broadcasting
Media Group PLC 878,374 790,101 0.1
123,600 Carlton Communications PLC 1,025,565 868,290 0.2
-------------- -------------- ------
1,903,939 1,658,391 0.3
Building & 193,800 Hanson PLC 993,495 978,838 0.2
Construction 483,500 Tarmac PLC 953,628 803,409 0.2
-------------- -------------- ------
1,947,123 1,782,247 0.4
Chemicals 219,920 Inspec Group PLC 643,151 736,288 0.1
Closed-End Funds 23,000 Alliance Trust PLC 939,253 1,050,427 0.2
178,100 Scottish Invest Trust PLC 950,072 1,060,697 0.2
172,800 Scottish Mortgage & Trust PLC 958,612 1,043,346 0.2
-------------- -------------- ------
2,847,937 3,154,470 0.6
Computer Services 12,911 Misys PLC 158,243 571,388 0.1
Diversified 865,073 BTR PLC 2,815,264 2,294,939 0.5
Food & Beverage 210,563 Allied Domecq PLC (Ordinary) 1,460,147 2,028,279 0.4
Food Processing 175,441 Unilever PLC 1,369,883 1,587,495 0.3
Foods 173,800 Booker PLC 936,772 700,543 0.1
93,200 Compass Group PLC 990,423 1,358,527 0.3
-------------- -------------- ------
1,927,195 2,059,070 0.4
Gas Distribution 4,400 BG PLC 19,863 22,061 0.0
Health & 355,600 London International Group PLC 916,008 1,023,808 0.2
Personal
Investment Trust 576,000 Fleming Japanese Investment
Trust PLC 1,410,545 1,497,264 0.3
Leisure 228,700 Ladbroke Group PLC 1,040,195 1,151,347 0.2
Merchandising 74,830 J Sainsbury PLC 551,343 579,850 0.1
Metals & Mining 73,963 Rio Tinto PLC 1,071,610 997,808 0.2
Oil & Related 99,700 British Petroleum Co. PLC 1,510,631 1,374,542 0.3
157,000 Shell Transport & Trading
Co. PLC 1,236,717 1,122,298 0.2
-------------- -------------- ------
2,747,348 2,496,840 0.5
<PAGE>
Pharmaceuticals 56,100 Glaxo Wellcome PLC 1,289,699 1,569,027 0.3
59,300 SmithKline Beecham PLC 599,655 741,459 0.2
13,800 Zeneca Group PLC 482,299 599,379 0.1
-------------- -------------- ------
2,371,653 2,909,865 0.6
Publishing 85,500 Pearson PLC 1,103,006 1,273,015 0.3
Real Estate 110,500 MEPC PLC 997,658 1,090,768 0.2
Investment 155,900 Slough Estates PLC 964,878 1,034,924 0.2
Trusts -------------- -------------- ------
1,962,536 2,125,692 0.4
Retail 298,315 Safeway PLC 1,826,652 1,757,020 0.4
73,700 W.H. Smith Group PLC 442,617 596,556 0.1
-------------- -------------- ------
2,269,269 2,353,576 0.5
Steel 289,305 British Steel PLC 595,418 693,718 0.1
Telecommuni- 61,300 British Telecommunications PLC 438,137 618,719 0.1
cations 107,516 Cable & Wireless PLC 751,154 1,174,519 0.3
-------------- -------------- ------
1,189,291 1,793,238 0.4
Tobacco 232,092 B.A.T. Industries PLC 1,985,578 2,313,937 0.5
201,600 Gallaher Group PLC 985,492 1,180,753 0.2
158,700 Imperial Tobacco Group PLC 988,953 1,114,868 0.2
-------------- -------------- ------
3,960,023 4,609,558 0.9
Transportation 124,800 BAA PLC 1,205,979 1,166,223 0.2
Utilities-- 162,385 Energy Group PLC 1,707,502 2,078,472 0.4
Electric 197,200 National Grid Group PLC 1,124,236 1,109,562 0.2
-------------- -------------- ------
2,831,738 3,188,034 0.6
Utilities-- 59,647 Anglian Water PLC 515,153 824,302 0.2
Water 69,700 Severn Trent PLC 1,031,043 1,072,169 0.2
119,103 United Utilities PLC 1,349,824 1,598,938 0.3
-------------- -------------- ------
2,896,020 3,495,409 0.7
Total Investments in
the United Kingdom 52,366,700 58,386,015 11.5
Total Investments in Europe 187,430,242 211,143,514 41.6
</TABLE>
<PAGE>
Merrill Lynch International Equity Fund, February 28, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
LATIN Shares Percent of
AMERICA Industries Held Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Argentina Banking 54,381 Banco de Galicia y Buenos
Aires S.A. (ADR)(a) $ 1,216,332 $ 1,339,132 0.3%
Oil & Related 309,197 Perez Companc S.A. 1,704,558 2,035,575 0.4
17,180 Yacimientos Petroliferos
Fiscales S.A. (YPF)(ADR)(a) 509,834 543,318 0.1
-------------- -------------- ------
2,214,392 2,578,893 0.5
Real Estate 7,500 IRSA Inversiones y R
epresentaciones S.A. (GDR)(c) 269,955 261,563 0.1
Telecommuni- 33,820 Telefonica de Argentina S.A.
cations (Class B)(ADR)(a) 1,215,243 1,217,520 0.2
Total Investments in Argentina 4,915,922 5,397,108 1.1
Brazil Oil & Gas 5,900,000 Petroleo Brasileiro
Producers S.A.--Petrobras (Preferred) 1,551,794 1,336,637 0.3
Telecommuni- 39,325 Telecomunicacoes Brasileiras
cations S.A.--Telebras (ADR)(a) 3,314,151 4,814,855 0.9
9,292,800 Telecomunicacoes de Sao
Paulo S.A. (Preferred) 2,773,097 2,574,023 0.5
-------------- -------------- ------
6,087,248 7,388,878 1.4
Utilities-- 27,985 Companhia Energetica de
Electric Minas Gerais S.A. (CEMIG)
(ADR)(a) 727,189 1,196,359 0.2
35,500,000 Companhia Energetica de
Minas Gerais S.A. (CEMIG)
(Preferred) 2,012,653 1,523,673 0.3
-------------- -------------- ------
2,739,842 2,720,032 0.5
Total Investments in Brazil 10,378,884 11,445,547 2.2
<PAGE>
Mexico Beverages 169,900 Fomento Economico Mexicano,
S.A. de C.V. (Femsa)(Class B) 900,192 1,266,273 0.3
Building & 51,750 Empresas ICA Sociedad
Construction Controladora, S.A. de C.V. 124,844 103,014 0.0
Building 324,600 Cementos Mexicanos, S.A.
Products de C.V. (Cemex)(Class B) 1,329,717 1,554,423 0.3
Health & 49,150 Kimberly-Clark de Mexico,
Personal S.A. de C.V. (ADR)(a) 891,987 1,099,731 0.2
Multi-Industry 239,800 Grupo Carso, S.A. de C.V. 'A1' 1,182,883 1,469,197 0.3
Telecommuni- 676,000 Telefonos de Mexico, S.A.
cations de C.V. (Series L) 1,504,394 1,697,934 0.3
Total Investments in Mexico 5,934,017 7,190,572 1.4
Total Investments in
Latin America 21,228,823 24,033,227 4.7
NORTH AMERICA
Canada Banking 27,400 The Bank of Nova Scotia 636,333 675,949 0.1
Banking-- 14,700 Bank of Montreal 638,276 785,212 0.1
International
Beverages 10,000 The Seagram Co. Ltd. 379,859 380,000 0.1
Building 410,000 Noranda Forest, Inc. 3,010,830 2,521,437 0.5
Products
Metals & Mining 84,000 Alcan Aluminium Ltd. 2,897,989 2,600,647 0.5
5,219 Alcan Aluminium, Ltd.
(US Registered Shares) 203,163 162,115 0.0
129,000 Barrick Gold Corp. 2,922,974 2,475,190 0.5
24,000 MSCI Canada Opals (Class B) 3,782,914 3,974,640 0.8
279,000 Noranda, Inc. 5,952,644 5,343,513 1.1
-------------- -------------- ------
15,759,684 14,556,105 2.9
Oil & Gas 25,000 Imperial Oil Limited 1,460,464 1,475,084 0.3
Producers 255,700 Ranger Oil Ltd. 2,417,066 1,644,402 0.3
-------------- -------------- ------
3,877,530 3,119,486 0.6
<PAGE>
Telecommuni- 68,000 BC Telecom, Inc. 1,805,550 2,306,016 0.5
cations
Telecommuni- 21,000 Newbridge Networks Corporation 770,758 492,234 0.1
cation
Equipment
Transportation 132,700 Canadian Pacific Ltd. 4,078,767 3,791,295 0.8
7,100 Canadian Pacific Ltd.
(US Registered Shares) 216,106 202,794 0.0
-------------- -------------- ------
4,294,873 3,994,089 0.8
Total Investments in
North America 31,173,693 28,830,528 5.7
PACIFIC BASIN
Australia Auto--Related 306,200 Orbital Engine Corporation Ltd. 202,196 214,841 0.1
Banking 157,000 Australia and New Zealand
Banking Group Ltd. 967,631 1,080,179 0.2
41,100 Commonwealth Bank of Australia 494,731 510,951 0.1
113,200 National Australia Bank Ltd. 1,538,530 1,565,370 0.3
55,700 St. George Bank Ltd. 318,213 334,656 0.1
302,500 Westpac Banking
Corporation Ltd. 1,828,684 2,097,721 0.4
-------------- -------------- ------
5,147,789 5,588,877 1.1
Beverages 6,700 Foster's Brewing Group Ltd. 14,192 14,833 0.0
Broadcast--Media 90,400 Seven Network Ltd. 353,321 324,529 0.1
Building & 112,800 James Hardie Industries Ltd. 348,129 350,387 0.1
Construction
Building 476,775 Boral Ltd. 1,471,675 1,156,214 0.2
Products 442,500 CSR Ltd. 1,702,598 1,467,969 0.3
-------------- -------------- ------
3,174,273 2,624,183 0.5
Closed-End 103,200 Franked Income Fund (Units) 307,049 358,529 0.1
Funds
Commercial 75,468 Mayne Nickless Ltd. 430,405 416,411 0.1
Services
Containers 338,500 Amcor Limited 2,215,472 1,478,058 0.3
<PAGE>
Diversified 58,400 Email Ltd. 205,257 131,281 0.0
44,600 Smith (Howard) Ltd. 355,716 365,186 0.1
63,000 Southcorp Ltd. 215,581 233,461 0.0
45,100 Wesfarmers Ltd. 404,120 435,640 0.1
1,180,674 1,165,568 0.2
Food & 117,001 Coca-Cola Amatil, Ltd. 710,460 1,008,219 0.2
Beverage
Foods 112,400 Burns, Philp & Company Ltd. 205,483 18,376 0.0
40,900 Foodland Associated Ltd. 312,023 307,865 0.1
15,000 Goodman Fielder Ltd. 21,015 25,954 0.0
146,487 National Foods Ltd. 207,173 275,412 0.0
-------------- -------------- ------
745,694 627,607 0.1
Insurance 521,594 National Mutual Holdings Ltd. 1,054,730 1,055,270 0.2
228,100 QBE Insurance Group Limited 974,138 944,721 0.2
-------------- -------------- ------
2,028,868 1,999,991 0.4
</TABLE>
Merrill Lynch International Equity Fund, February 28, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
PACIFIC BASIN Shares Percent of
(continued) Industries Held Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Australia Investment 108,700 Australian Foundation
(concluded) Management Investment Company Ltd. $ 199,151 $ 194,002 0.0%
13,587 Australian Foundation
Investment Company Ltd.
(Rights)(f) 0 1,851 0.0
276,900 Colonial Limited 804,236 822,402 0.2
-------------- -------------- ------
1,003,387 1,018,255 0.2
Media 102,500 The News Corp., Ltd.
(Preferred) 452,683 562,075 0.1
25,000 Publishing & Broadcasting
Limited 128,114 126,874 0.0
-------------- -------------- ------
580,797 688,949 0.1
<PAGE>
Metals & Mining 71,000 Aberfoyle Ltd. 199,927 104,469 0.0
144,000 Ashton Mining Ltd. 200,569 152,044 0.0
85,800 Comalco Ltd. 360,009 376,398 0.1
81,700 Metal Manufactures Ltd. 199,358 122,439 0.0
79,500 Newcrest Mining Ltd. 200,819 106,686 0.0
351,400 Normandy Mining Ltd. 377,750 349,486 0.1
62,200 Plutonic Resources Ltd. 198,444 192,786 0.0
163,400 QCT Resources Ltd. 199,493 139,914 0.0
53,300 RGC Ltd. 198,386 72,616 0.0
205,500 Rio Tinto Ltd. 3,201,506 2,698,942 0.6
294,000 WMC Ltd. 1,869,153 997,359 0.2
-------------- -------------- ------
7,205,414 5,313,139 1.0
Oil & Gas 58,800 Australian Gas Light Co., Ltd. 388,634 468,638 0.1
Producers 124,000 Australian Oil & Gas
Corporation Ltd. 203,609 152,044 0.0
136,000 Woodside Petroleum Ltd. 989,076 837,495 0.2
-------------- -------------- ------
1,581,319 1,458,177 0.3
Pharmaceuticals 59,600 F.H. Faulding & Co. Ltd. 289,344 313,672 0.1
Property 104,041 Lend Lease Corp. 1,624,348 2,618,747 0.5
Publishing 101,500 PMP Communications Ltd. 232,830 212,265 0.1
Real Estate 110,100 Capital Property Trust 199,840 179,250 0.0
Investment 80,255 Stockland Trust Group 208,223 205,011 0.0
Trusts 100,500 Westfield Holdings Ltd. 405,646 492,916 0.1
-------------- -------------- ------
813,709 877,177 0.1
Resources 117,834 Broken Hill Proprietary Co. 1,572,893 1,163,894 0.2
Retail 122,600 Coles Myer Ltd. 616,707 636,385 0.1
Steel 173,000 Australian National
Industries Ltd. 204,471 147,310 0.0
Telecommuni- 193,000 Telstra Corp. Ltd. 367,872 514,054 0.1
cations
Transportation 80,100 Brambles Industries Ltd. 1,591,530 1,680,575 0.3
Total Investments in Australia 34,543,143 32,814,632 6.4
China Telecommuni- 85,300 China Telecom (Hong Kong)
cations Ltd. (ADR)(a) 2,706,682 3,060,138 0.6
Total Investments in China 2,706,682 3,060,138 0.6
<PAGE>
Hong Kong Airlines 248,000 Cathay Pacific Airways 377,731 213,020 0.1
Banking 85,000 Dao Heng Bank Group Ltd. 405,772 243,735 0.1
112,200 HSBC Holdings PLC 1,724,207 3,246,293 0.6
52,400 Hang Seng Bank Ltd. 582,227 495,776 0.1
-------------- -------------- ------
2,712,206 3,985,804 0.8
Conglomerates 99,325 Hutchison Whampoa Ltd. 576,942 702,408 0.1
Diversified 137,000 Citic Pacific Ltd. 725,923 530,871 0.1
125,000 Swire Pacific Ltd. (Class B) 165,722 125,936 0.0
-------------- -------------- ------
891,645 656,807 0.1
Property 99,000 Cheung Kong (Holdings) Ltd. 716,374 693,716 0.1
48,400 Great Eagle Holdings Ltd.
(Warrants)(b) 0 4,126 0.0
255,000 Henderson Investment Ltd. 263,642 214,092 0.0
137,000 Wharf (Holdings) Ltd. 517,577 285,785 0.1
-------------- -------------- ------
1,497,593 1,197,719 0.2
Telecommuni- 1,759,200 Hong Kong Telecommunications
cations Ltd. 3,011,513 3,703,818 0.7
Utilities-- 523,000 China Light and Power Co. Ltd. 2,382,158 2,715,655 0.5
Electric 214,000 Hong Kong Electric Holdings
Ltd. 746,766 760,140 0.2
-------------- -------------- ------
3,128,924 3,475,795 0.7
Utilities-- 1,247,000 Hong Kong and China Gas Co. Ltd. 2,043,031 2,238,866 0.5
Gas
Total Investments in Hong Kong 14,239,585 16,174,237 3.2
Japan Auto & Truck 340,000 Nissan Motor Co., Ltd. 1,565,986 1,479,667 0.3
Automobiles 813,000 Mitsubishi Motors Corp. 5,881,904 2,977,455 0.6
114,000 Toyota Motor Corp. 3,104,108 3,153,864 0.6
-------------- -------------- ------
8,986,012 6,131,319 1.2
Banking 5,000,000 Japanese Bank Knock Out
(Warrants)(b) 5,157,500 4,590,000 0.9
175,000 Mitsubishi Trust and
Banking Corp. 1,893,937 2,066,984 0.4
390,000 Sakura Bank Ltd. 2,790,344 1,632,342 0.3
-------------- -------------- ------
9,841,781 8,289,326 1.6
<PAGE>
Broadcast-- 51,000 Nippon Broadcasting
Media System Inc. 3,249,909 2,506,540 0.5
Building & 420,000 Nishimatsu Construction
Construction Co. Ltd. 2,133,233 2,167,420 0.4
Chemicals 420,000 Kaneka Corp. 2,175,335 2,397,146 0.5
161,000 Shin-Etsu Chemical Co., Ltd. 2,950,021 3,547,998 0.7
-------------- -------------- ------
5,125,356 5,945,144 1.2
Computer 420 NTT Data Corporation 2,058,902 2,040,904 0.4
Software
Electric 220,000 Taihei Dengyo Kaisha, Ltd. 5,020,707 1,055,093 0.2
Construction
Electrical 280,000 Anritsu Corp. 3,227,556 2,841,062 0.5
Equipment 485,000 Fujikura Ltd. 3,722,189 3,417,876 0.7
92,000 Murata Manufacturing Co., Ltd. 3,154,267 2,924,455 0.6
315,000 NEC Corporation 3,934,785 3,520,809 0.7
27,000 Rohm Co., Ltd. 1,509,233 2,675,386 0.5
-------------- -------------- ------
15,548,030 15,379,588 3.0
</TABLE>
Merrill Lynch International Equity Fund, February 28, 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>
Japan Electronics 497,000 Hitachi Ltd. $ 4,597,191 $ 3,734,887 0.7%
(concluded) 193,000 Pioneer Electronic Corp. 3,438,147 3,411,732 0.7
54,700 Sony Corp. 4,198,085 4,943,163 1.0
-------------- -------------- ------
12,233,423 12,089,782 2.4
Financial 310,000 Daiwa Securities Co., Ltd. 1,464,816 1,530,955 0.3
Services 58,000 Jafco Co., Ltd. 3,280,960 2,689,655 0.5
-------------- -------------- ------
4,745,776 4,220,610 0.8
<PAGE>
Machinery 265,000 Daifuku Co., Ltd. 3,487,026 1,365,438 0.3
780,000 NSK Ltd. 4,515,521 3,060,642 0.6
-------------- -------------- ------
8,002,547 4,426,080 0.9
Manufacturing 430,000 Dainippon Screen
Manufacturing Co., Ltd. 3,372,153 2,505,351 0.5
Office 274,000 Ricoh Co., Ltd. 3,290,416 2,932,224 0.6
Equipment
Packaging & 3,000 Toyo Seikan Kaisha, Ltd. 93,627 49,227 0.0
Containers
Paper & 571,000 Oji Paper Co., Ltd. 3,710,043 3,077,923 0.6
Forest Products
Pharmaceuticals 400,000 Fujisawa Pharmaceutical
Co., Ltd. 3,672,024 4,026,952 0.8
85,000 Sankyo Co., Ltd. 2,135,206 2,284,186 0.4
144,000 Taisho Pharmaceutical
Co., Ltd. 2,818,019 3,390,250 0.7
-------------- -------------- ------
8,625,249 9,701,388 1.9
Real Estate 284,000 Mitsubishi Estate Co., Ltd. 3,273,551 3,174,316 0.6
334,000 Mitsui Fudosan Co., Ltd. 3,475,443 3,600,793 0.7
-------------- -------------- ------
6,748,994 6,775,109 1.3
Retail 70,000 Ito-Yokado Co., Ltd. 3,999,042 3,828,775 0.7
370,000 Takashimaya Co. 3,885,286 3,167,658 0.6
120,000 Uny Co., Ltd. 1,991,583 1,835,910 0.4
-------------- -------------- ------
9,875,911 8,832,343 1.7
Steel 1,891,000 Nippon Steel Corp. 5,069,989 3,552,652 0.7
Telecommuni- 501 DDI Corp. 3,083,565 1,306,611 0.2
cations 420 Nippon Telegraph &
Telephone Corporation 2,004,056 1,931,034 0.4
175,000 Uniden Corporation 2,438,638 1,845,026 0.4
-------------- -------------- ------
7,526,259 5,082,671 1.0
Television 4,350 Nippon Television
Network Corp. 1,327,272 1,317,241 0.3
Textiles 222,000 Teijin Ltd. 890,133 681,046 0.1
<PAGE>
Tire & Rubber 184,000 Bridgestone Corporation 3,348,443 4,244,471 0.8
Tobacco 460 Japan Tobacco, Inc. 2,980,710 3,387,555 0.7
Trading 654,000 Mitsui & Co. 4,795,072 4,204,471 0.8
1,274,000 Nissho Iwai Corp. 4,454,051 3,635,672 0.8
-------------- -------------- ------
9,249,123 7,840,143 1.6
Transport 315 East Japan Railway Company 1,475,343 1,490,725 0.3
Services
Transportation 263,000 Nippon Express Co., Ltd. 1,551,272 1,644,923 0.3
500,000 Tobu Railway Co., Ltd. 2,416,593 1,767,737 0.4
800,000 Tokyu Corp. 4,912,056 3,525,961 0.7
-------------- -------------- ------
8,879,921 6,938,621 1.4
Total Investments in Japan 154,975,248 134,140,163 26.4
Malaysia Chemicals 30,000 Malaysian Oxygen BHD 152,864 86,649 0.0
Diversified 33,000 YTL Corporation BHD (Class A) 0 57,098 0.0
Foods 24,000 Nestle (Malaysia) BHD 185,302 129,482 0.0
Leisure 48,500 Berjaya Sports Toto BHD 192,778 136,117 0.0
Telecommuni- 76,800 Telekom Malaysia BHD 236,353 261,580 0.1
cations
Total Investments in Malaysia 767,297 670,926 0.1
New Zealand Beverages 120,000 DB Group Ltd. 178,681 204,032 0.0
Chemicals 72,900 Fernz Corporation Ltd. 207,719 196,610 0.0
Diversified 1,000,000 Brierley Investments Ltd. 713,677 680,108 0.1
Electronics 69,000 PDL Holdings Ltd. 340,434 311,501 0.1
Finance 2,359,040 Wrightson Ltd. 1,751,988 1,106,484 0.2
Forestry 3,130,000 Fletcher Challenge Forests 4,303,655 2,330,601 0.5
Investment 422,500 Infrastructure & Utilities Ltd. 294,896 227,895 0.1
Companies
Leisure 30,000 Tourism Holdings Ltd. 40,407 18,117 0.0
<PAGE>
Publishing 20,000 Independent Newspapers Ltd. 112,216 97,560 0.0
Restaurants 100,000 Restaurant Brands New Zealand Ltd. 144,699 78,564 0.0
Retail 120,000 Hallenstein Glasson Holdings Ltd. 177,276 115,384 0.0
Telecommuni- 163,000 Telecom Corporation of
cations New Zealand Ltd. 775,731 783,649 0.2
Textiles 577,500 Lane Walker Rudkin
Industries, Ltd. 630,520 453,708 0.1
Total Investments in New Zealand 9,671,899 6,604,213 1.3
Singapore Airlines 140,000 Singapore Airlines Ltd.
'Foreign' 1,202,318 1,040,248 0.2
Auto & Truck 120,800 Inchcape BHD 226,144 183,257 0.0
Beverages 98,000 Fraser & Neave Ltd. (Ordinary) 709,035 430,836 0.1
Commercial 120,800 Inchcape Marketing Services Ltd. 214,837 30,667 0.0
Services
Publishing 19,000 Singapore Press Holdings Ltd.
'Foreign' 383,583 272,941 0.1
Shipbuilding 342,000 Keppel Corporation Ltd. 1,483,483 986,824 0.2
Steel 343,000 NatSteel Ltd. 901,687 475,740 0.1
Total Investments in Singapore 5,121,087 3,420,513 0.7
South Korea Electronics 6,700 Samsung Electronics (GDR)(c) 402,000 217,750 0.0
Telecommuni- 159,025 SK Telecom Co. Ltd. (ADR)(a) 2,561,162 1,371,589 0.3
cations
Utilities-- 67,880 Korea Electric Power Corp. 2,753,162 907,286 0.2
Electric
Total Investments in
South Korea 5,716,324 2,496,625 0.5
Total Investments in the
Pacific Basin 227,741,265 199,381,447 39.2
</TABLE>
<PAGE>
Merrill Lynch International Equity Fund, February 28, 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 Auto & Truck 32,500 Mahindra & Mahindra Ltd. $ 400,126 $ 204,522 0.0%
82,400 Tata Engineering &
Locomotive Co. Ltd. 1,057,491 521,692 0.1
-------------- -------------- ------
1,457,617 726,214 0.1
Banking 169,100 State Bank of India 1,213,200 1,107,228 0.2
Chemicals 100,300 Indian Petrochemicals
Corporation Ltd. 397,090 148,214 0.0
279,000 Reliance Industries Ltd. 1,420,686 1,137,324 0.2
225,700 Tata Chemicals Ltd. 1,144,588 764,792 0.2
-------------- -------------- ------
2,962,364 2,050,330 0.4
Cosmetics & 55,800 Reckitt & Coleman of India Ltd. 479,729 563,331 0.1
Toiletries
Diversified 47,600 Hindustan Lever Ltd. 1,845,441 1,849,730 0.4
Electrical 67,900 Bharat Heavy Electricals
Equipment Ltd. (BHEL) 739,463 553,580 0.1
Financial 1,359 Industrial Credit & Investment
Services Corporation of India Ltd. 4,205 3,113 0.0
Hotels 30,700 East India Hotels Ltd. (GDR)(c) 588,417 383,750 0.1
Metals & Mining 25,600 Hindalco Industries Ltd. 673,996 417,101 0.1
Oil & Related 77,500 Hindustan Petroleum
Corporation Ltd. 981,054 914,204 0.2
Pharmaceuticals 22,200 Ranbaxy Laboratories Ltd. 405,992 387,157 0.1
Real Estate 311 Housing Development Finance
Corp., Ltd. 25,978 23,931 0.0
Steel 1,432,400 Steel Authority of India Ltd. 830,064 266,408 0.0
126,000 Tata Iron and Steel Co. Ltd. 675,065 424,708 0.1
-------------- -------------- ------
1,505,129 691,116 0.1
<PAGE>
Telecommuni- 199,900 Mahanagar Telephone Nigam Ltd. 1,638,364 1,328,253 0.3
cations
Tobacco 89,400 ITC Ltd. 1,298,486 1,506,703 0.3
Utilities-- 12,900 Bombay Suburban Electric
Electric Supply Co. Ltd. (GDR)(c) 263,890 265,740 0.0
Total Investments in India 16,083,325 12,771,481 2.5
Indonesia Telecommuni- 1,469,000 P.T. Telekomunikasi Indonesia 2,514,069 587,600 0.1
cations 40,500 P.T. Telekomunikasi Indonesia
(ADR)(a) 1,313,769 344,250 0.1
Total Investments in Indonesia 3,827,838 931,850 0.2
Total Investments in
Southeast Asia 19,911,163 13,703,331 2.7
SHORT-TERM Face
SECURITIES Amount Issue
Commercial US$ 4,533,000 General Motors Acceptance Corp.,
Paper* 5.69% due 3/02/1998 4,531,567 4,531,567 0.9
Total Investments in
Commercial Paper 4,531,567 4,531,567 0.9
US Government 3,000,000 United States Treasury Bills,
Obligations* 5.10% due 4/02/1998 (d) 2,985,975 2,986,950 0.6
Total Investments in
US Government Obligations 2,985,975 2,986,950 0.6
Total Investments in
Short-Term Securities 7,517,542 7,518,517 1.5
OPTIONS Nominal Value Covered Premiums
PURCHASED by Options Purchased Paid
Currency Put 14,000,000 Japanese Yen, expiring
Options August 1998 at YEN 130 195,300 221,200 0.0
Purchased
Put Options 1,640 DAX 30 Index, expiring
Purchased March 1998 at DM 4,500 97,291 28,382 0.0
1,230 FTSE 100 Index, expiring
June 1998 at Pound
Sterling 5,325 345,199 188,194 0.0
-------------- -------------- ------
442,490 216,576 0.0
<PAGE>
Total Investments in Options 637,790 437,776 0.0
Total Investments $ 510,694,581 499,127,143 98.2
==============
Variation Margin on Financial Futures Contracts** (348,320) 0.0
Unrealized Appreciation on Forward Foreign Exchange Contracts*** 102,017 0.0
Other Assets Less Liabilities 9,322,480 1.8
------------- ------
Net Assets $ 508,203,320 100.0%
============= ======
Net Asset Class A--Based on net assets of $34,426,359 and
Value: 3,658,599 shares of beneficial interest outstanding $ 9.41
=============
Class B--Based on net assets of $374,835,765 and
39,533,668 shares of beneficial interest outstanding $ 9.48
=============
Class C--Based on net assets of $17,737,732 and 1,897,262
shares of beneficial interest outstanding $ 9.35
=============
Class D--Based on net assets of $81,203,464 and 8,579,240
shares of beneficial interest outstanding $ 9.47
=============
<FN>
(a)American Depositary Receipts (ADR).
(b)Warrants entitle the Fund to purchase a predetermined number of
shares of Common Stock. 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 financial
futures contracts.
(e)The rights may be exercised until 3/09/1998.
(f)The rights may be exercised until 3/25/1998.
*Commercial Paper and certain US Government Obligations are traded
on a discount basis; the interest rates shown are the discount rates
paid at the time of purchase by the Fund.
**Financial futures contracts sold as of February 28, 1998 were as
follows:
Number of Expiration
Contracts Issue Exchange Date Value
61 DAX Index DTB March 1998 $15,823,220
162 CAC 40 Index CAC March 1998 18,273,919
-----------
Total Financial Futures Contracts Sold
(Total Contract Price--$31,977,809) $34,097,139
===========
<PAGE>
***Forward foreign exchange contracts as of February 28, 1998 were
as follows:
Foreign Unrealized
Currency Expiration Appreciation
Sold Date (Depreciation)
NZ$ 9,471,654 March 1998 $ (49,243)
YEN 3,894,219,400 April 1998 151,260
------------
Total Unrealized Appreciation on
Forward Foreign Exchange Contracts--Net
(US$ Commitment--$36,716,929) $ 102,017
============
</TABLE>
Merrill Lynch International Equity Fund, February 28, 1998
PORTFOLIO INFORMATION
Worldwide
Investments as of
February 28, 1998
Ten Largest Industries Percent of
(Equity Investments) Net Assets
Banking 8.8%
Metals & Mining 8.4
Telecommunications 7.2
Chemicals 5.5
Electronics 3.7
Diversified 3.1
Electrical Equipment 3.1
Retail 3.0
Pharmaceuticals 2.9
Automobiles 2.7
<PAGE>
Percent of
Ten Largest Equity Holdings Net Assets
MSCI Denmark Opals (Class B) 1.2%
Noranda, Inc. 1.1
Societe EuraFrance S.A. 1.0
MSCI Norway Opals (Class B) 1.0
Sony Corp. 1.0
Telecomunicacoes Brasileiras S.A.--
Telebras (ADR) 0.9
Japanese Bank Knock Out
(Warrants) 0.9
Nedcor Ltd. (GDR) 0.9
Bridgestone Corporation 0.8
Mitsui & Co. 0.8
Percent of
Geographical Asset Mix* Net Assets
Europe (Ex-United Kingdom and
Ireland) 29.9%
Japan 26.4
Pacific Basin (Ex-Japan) 12.8
United Kingdom and Ireland 11.7
Other Emerging Markets 10.2
North America 5.7
Cash 1.5
[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 26.4 %
United Kingdom 11.5
France 9.9
Germany 8.5
Australia 6.4
Canada 5.7
Hong Kong 3.2
Netherlands 2.8
South Africa 2.8
India 2.5
<PAGE>
Financial Futures Contracts
Percent of
Country Issue Exchange Net Assets
Germany DAX Index DTB (3.1)%
France CAC 40 Index CAC (3.6)
-------
(6.7)%
=======
EQUITY PORTFOLIO CHANGES
For the Quarter Ended February 28, 1998
Additions
Amcor Limited
Bank of Montreal
The Bank of Nova Scotia
*British Airways PLC
Colonial Limited
*Cordiant Communications Group PLC
Daiwa Securities Co., Ltd.
East Japan Railway Company
Fleming Japanese Investment Trust PLC
*G.T. Japan Investment Trust PLC
Imperial Oil Limited
Inchcape Marketing Services Ltd.
J Sainsbury PLC
Karstadt AG
*MSCI Italy Opals (Class B)
MSCI Norway Opals (Class B)
*MSCI Philippines Opals (Class B)
MSCI Poland Opals (Class B)
MSCI Portugal Opals (Class B)
MSCI South Africa Opals (Class B)
MSCI Spain Opals (Class B)
MSCI Turkey Opals (Class B)
NTT Data Corporation
National Mutual Holdings Ltd.
Newbridge Networks Corporation
Nippon Telegraph & Telephone Corporation
Nippon Television Network Corp.
Nissan Motor Co., Ltd.
*Nokia Oyj (Class A)
*Polygram N.V.
<PAGE>
Publishing & Broadcasting Limited
QBE Insurance Group Limited
*Royal Dutch Petroleum Co.
Saatchi & Saatchi PLC
Sankyo Co., Ltd.
*Schroeder Japan Growth Stock
The Seagram Co. Ltd.
St. George Bank Ltd.
Telecom Corporation of New Zealand Ltd.
Telecomunicacoes de Sao Paulo S.A. (Preferred)
*Westfield Holdings Ltd.
Deletions
AAPC Ltd.
ABN Amro Holding N.V.
ASDA Group PLC
Advantest Corp.
Alfa, S.A. de C.V. (Class A)
Altana AG
Amcor Ltd.
Arnotts Ltd.
Asahi Glass Co., Ltd.
Assicurazioni Generali S.p.A.
Banco Frances del Rio de la Plata S.A. (ADR)
Barclays PLC
Beiersdorf AG
Berjaya Group BHD
Bilfinger & Berger Bau AG
*British Airways PLC
C.P. Pokphand Co. Ltd.
Cadbury Schweppes PLC
Carso Global Telecom, S.A. de C.V. 'A1'
Chilgener S.A. (ADR)
Cimpor-Cimentos de Portugal S.A. (SGPS)
City Developments Ltd.
Compagnie Industrial Riunite S.p.A. (CIR)
Companhia Cervejaria Brahma S.A. PN (Preferred)
Compania de Telecomunicaciones de Chile S.A. (ADR)
*Cordiant Communications Group PLC
Cordiant PLC
DBS Land Ltd.
Delta Corporation Ltd.
Edaran Otomobil Nasional BHD
Fuji Bank Ltd.
*G.T. Japan Investment Trust PLC
Great Eagle Holdings Ltd.
Harpen AG
Henderson Land Development Co. Ltd.
<PAGE>
IOI Corporation BHD
Idris Hydraulic (Malaysia) BHD
Imperial Chemical Industries PLC
Isetan Co., Ltd.
Istituto Nazionale delle Assicurazioni S.p.A. (INA)
Kawasaki Steel Corp.
Lingui Development BHD
*MSCI Italy Opals (Class B)
*MSCI Philippines Opals (Class B)
Magyar TarKozlesi Reszvenytarsasag (Ordinary)
Malayan Banking BHD
Malayan United Industries BHD
Malaysian Airline System BHD
Mitsubishi Heavy Industries, Ltd.
Multi-Purpose Holdings BHD
Munich Re Group
New World Development Co. Ltd.
*Nokia Oyj (Class A)
Novartis AG (Registered Shares)
P.T. Astra International Inc.
P.T. Bank Internasional Indonesia
P.T. Indofood Sukses Makmur
Perusahaan Otomobil Nasional BHD
*Polygram N.V.
Repsol S.A.
*Royal Dutch Petroleum Co.
*Schroeder Japan Growth Stock
Sharp Corporation
Sime Darby BHD
Singapore Land Ltd.
Sonae Investimentos--SGPS, S.A.
Springer (Axel) Verlag AG
Sun Hung Kai Properties Ltd.
Swire Pacific Ltd. (Class A)
T & N PLC
Tenaga Nasional BHD
Tomkins PLC
Ube Industries Ltd.
United Engineers (Malaysia) Ltd.
United Industrial Corporation Ltd.
WPP Group PLC
Wing Tai Holdings Ltd.
*Westfield Holdings Ltd.
YTL Corporation BHD
[FN]
*Added and deleted in the same quarter.
<PAGE>
Merrill Lynch International Equity Fund, February 28, 1998
OFFICERS AND TRUSTEES
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
Andrew John Bascand, Senior Vice President
and Portfolio Manager
Norman R. Harvey, Senior Vice President
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
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
