MERRILL LYNCH
INTERNATIONAL
EQUITY FUND
FUND LOGO
Semi-Annual Report
November 30, 1998
Officers and Trustees
Arthur Zeikel, President and Trustee
Donald Cecil, Trustee
Edward H. Meyer, Trustee
Roland M. Machold, 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 Chart Depicting Total Return in US Dollars* of the Fund's Top
Country Positions For the Three-Month Period Ended November 30, 1998
Netherlands 4.7
Sweden 6.4
Germany 8.1
United Kingdom 8.6
France 9.6
Switzerland 9.7
Italy 12.1
Japan 18.8
Spain 21.8
Austrailia 22.9
Source: Morgan Stanley Capital International World (ex-US) Index.
[FN]
*For the three-month period ended November 30, 1998, total
investment return in US dollars for the Morgan Stanley Capital
International World (ex-US) Index was +12.69%.
Merrill Lynch International Equity Fund, November 30, 1998
DEAR SHAREHOLDER
During the three months ended November 30, 1998, the increased
volatility in equity markets over the past 18 months continued. For
the November quarter, the Morgan Stanley Capital International
(MSCI) World (ex-US) Index had a total return of +12.69%. (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 +9.97%,
+9.63%, +9.65% and +9.91%, respectively, for the quarter ended
November 30, 1998. (Complete performance information can be found on
pages 5 and 6 of this report to shareholders.) The Fund's
underperformance relative to the MSCI World (ex-US) Index largely
reflected hedges back into US dollars of some foreign exchange
exposure. The dollar fell sharply in the first half of the quarter,
affected by concerns over Latin American economic prospects after
Russia defaulted in August, and evidence that hedge funds were being
forced to close out short yen positions as global liquidity
conditions tightened.
The end of the sharp decline in developed equity markets that began
in July was marked by a quarter-point cut in the Federal Funds rate
in mid-October, a little over two weeks after the first such easing
since January 1996. Easings in monetary policy elsewhere in the
Group of Seven Industrialized Nations (notably Japan and the United
Kingdom), an International Monetary Fund package for Brazil, and the
announcement of measures aimed at alleviating Japanese banks' bad
debt problems, also helped to improve sentiment toward equity
markets.
During the three-month period ended November 30, 1998, the strongest
returns among developed markets were in Singapore and Hong Kong,
which rose by more than 50%. Several emerging Asian markets produced
even bigger returns. The sharp appreciation in the yen accelerated
the move down in interest rates in the region, which had already
been facilitated by the accumulation of large current account
surpluses. Other positive factors included evidence of a trough in
the economic cycles of some countries in the region, notably
Thailand and South Korea, and some signs that the policy easing in
China was beginning to stabilize growth there. Gains in European
stock markets lagged many other developed markets, with the
weakening dollar a major concern, although only two (Denmark and
Austria) produced negative returns over the quarter as a whole.
Portfolio Matters
During the three-month period ended November 30, 1998, the Fund's
effective equity exposure remained fairly steady at about 95% of net
assets. By region, the most significant change was an increase in
developed Pacific Basin (ex-Japan) holdings (mostly Australia and
Singapore) to a neutral position relative to the benchmark (about
5.5%). Among emerging markets not included in the benchmark, Asian
exposure was increased in South Korea and China, but the overall
exposure was cut slightly to about 3% of net assets as reductions
were made in Latin America and emerging Europe/Africa. The United
Kingdom remained the single largest country exposure, at 21.1% of
net assets, for most of the November quarter, followed by Japan,
which rose slightly to 18.0% of net assets by the end of the three-
month period.
We reversed our overweighted positions in Continental European basic
materials and other heavy cyclical sectors and initiated positions
in sectors with more predictable growth patterns, such as
telecommunications and software services. These sectors are expected
to perform better in an environment of low nominal economic growth.
We also increased our exposure to the European defense sector in
anticipation of a major consolidation, mirroring the trend in the US
market. In Japan, we maintained our overweighted positions in export
technology sectors, while increasing an overweighted position in
pharmaceuticals at the expense of financial sector stocks.
Economic and Investment
Environment
The declining trend in global industrial output growth, underway
since mid-1997, paused during the November quarter, with improvement
in some Asian economies offsetting deterioration elsewhere. Although
policy makers have eased monetary conditions over the past couple of
months, there is a strong risk of renewed pressure on industrial
companies' profit margins in the early months of 1999. Latin America
remains a particular concern in light of a sharp tightening in
fiscal policy in Brazil being proposed at a time when the economy is
already beginning to contract.
An important "home-grown" factor in the slowdown in the developed
countries was the drift higher in the average level of real
(inflation-adjusted) interest rates in 1997 and the first half of
1998 (nominal interest rates were stable at a time when inflation
was falling). Although this tightening of monetary conditions has
begun to be addressed, the competitive pressures suggest real
interest rates may have to fall further than widely expected in the
early part of 1999 before a growth rebound in late 1999/early 2000
can be assured. In the case of Japan, this may require a renewed
sharp depreciation in the yen since nominal interest rates are
already around zero.
Even if the outlook for 1999 global economic growth were to improve,
a significant degree of spare capacity in many key industries will
be maintained for some time. Therefore, secular trends toward lower
inflation rates and bond yields will likely remain in place unless
there is a massive change in emphasis in fiscal policy in the major
economies. Three months ago, we indicated that we were confident
that falling bond yields would provide support for equities over the
months ahead, since we expected global earnings growth to remain in
positive territory. The early months of 1999 are likely to provide a
major test of this thesis, with commodity prices providing as clear
a signal as any of the increasing strain of the forces of
deflationary pressures and reflationary policies.
Against the backdrop of weak commodity prices, consumer spending is
holding up considerably better than corporate spending across the
developed world. This trend is likely to be accentuated before it
reverses, which continues to argue against large holdings in markets
with a concentration of cyclical industries such as Germany. For
Europe as a whole, but Germany in particular, the fortunes of the
dollar will remain key, with more downside than upside risk in 1999,
in our view.
In a world of zero inflation, sectors and countries showing above-
average earnings momentum are likely to be accorded premium
valuations. In Europe during 1999, this should be most visible in
domestic demand-related sectors in those countries where the trend
toward lower interest rates has been accelerated by the need to
converge at 3%, ahead of the introduction of the euro on January 1,
1999, notably in Spain and Ireland. The relative merits of the UK
market (for example, the supply/demand balance and realistic long-
term profit expectations) are now more widely appreciated by
investors, but it retains its attraction as a defensive play given
the relatively high weight of service sectors.
The outlook for the Japanese market is improving, albeit at a slow
pace. The economic cycle may well have bottomed, based on leading
indicators, accelerating real money supply growth and fiscal policy
easing. Meanwhile, recent weeks have seen encouraging developments
regarding the banks' bad debt problem. Solvent banks have begun to
accept government funds, accelerating the process of writing bad
loans. Some housing and construction companies have successfully
sought forgiveness of debts. Meanwhile, some insolvent banks are
being nationalized, with a view to possible closure after any
attractive assets have been sold. We believe that there is
considerable upside potential for this market over the long term
based on low existing weightings among foreign institutional and
domestic retail investors.
Although we expect the yen to resume its decline against the dollar,
this may not necessarily be regarded as a problem for the rest of
Asia, depending on its cause. For instance, if yen weakness
reflected or was part of a clear policy by the Japanese authorities
to restructure the Japanese economy, it should no longer be regarded
as a major negative for growth in Asia. A genuine bull market in the
region (one lasting years rather than months) probably needs a big
Merrill Lynch International Equity Fund, November 30, 1998
reduction in supply; debt problems are too severe to allow interest
rate declines to give a major, sustained, boost to demand.
Therefore, we will remain very selective in the Asian markets in
which we invest. For example, we strongly prefer Singapore to Hong
Kong since real interest rates are now much lower in Singapore (this
is unlikely to change while the Hong Kong/US dollar peg is still in
existence). Moreover, Singapore stands to benefit more from signs of
cyclical improvement in the semiconductor industry, an industry
where capacity has been taken out in recent months.
In Conclusion
Volatility in global equity markets remains high, even as many
markets have rebounded following the corrections of recent months.
It is still too early to call the end of the downturn as many of the
world's economies stand on the cusp of deflation.
However, there are some signs for optimism in the coordinated
support that the developed countries have provided to the troubled
emerging economies, and in the efforts that some of these emerging
countries have made to stabilize their own economic and financial
systems. Nevertheless, we remain cautious as we expect the current
levels of volatility to persist, especially in those markets whose
economies are struggling with large debts and/or overcapacity. Our
strategy for the near term is to remain very selective, taking
opportunities to reinvest in those markets that demonstrate the
ability to balance productive efficiency and pricing power which, in
turn, should result in corporate earnings growth.
We thank you for your interest in Merrill Lynch International Equity
Fund, and we look forward to reviewing our strategy with you in our
next report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Clive D. Lang)
Clive D. Lang
Senior Vice President and
Portfolio Manager
January 15, 1999
PERFORMANCE DATA
About Fund
Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers 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* - 1.63% + 9.97% + 4.40%
ML International Equity Fund Class B Shares* - 2.67 + 9.63 +16.40
ML International Equity Fund Class C Shares* - 2.75 + 9.65 + 0.06
ML International Equity Fund Class D Shares* - 1.82 + 9.91 +21.35
Morgan Stanley Capital International World (Ex-US) Index** +15.46 +12.69 +33.40/+55.55
<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 since inception periods are Class A &
Class C Shares, from 10/21/94 to 11/30/98 and Class B & Class D
Shares, from 7/30/93 to 11/30/98.
**An unmanaged capitalization-weighted index comprised of over 1,109
companies in 21 countries, excluding the United States. Since
inception total returns are for the periods from 10/31/94 to
11/30/98 and from 7/31/93 to 11/30/98, respectively.
</TABLE>
Merrill Lynch International Equity Fund, November 30, 1998
PERFORMANCE DATA (concluded)
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 9/30/98 -25.68% -29.58%
Inception (10/21/94) through 9/30/98 - 2.67 - 3.99
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 9/30/98 -26.40% -28.66%
Five Years Ended 9/30/98 - 0.15 - 0.15
Inception (7/30/93) through 9/30/98 + 0.09 + 0.09
[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 9/30/98 -26.44% -27.01%
Inception (10/21/94) through 9/30/98 - 3.65 - 3.65
[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 9/30/98 -25.82% -29.71%
Five Years Ended 9/30/98 + 0.64 - 0.44
Inception (7/30/93) through 9/30/98 + 0.87 - 0.18
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Face Amount/ Value Percent of
AFRICA Industries Shares Held Investments Cost (Note 1a) Net Assets
<S> <S> <S> <C> <S> <C> <C> <C>
South Foreign ZAL 18,100,000 Republic of South Africa, 13% due
Africa Government 8/31/2010 $ 2,670,963 $ 2,678,219 1.0%
Bonds
Insurance 25,400 Liberty Life Association of
Africa Limited 689,381 434,306 0.2
Total Investments in Africa 3,360,344 3,112,525 1.2
EUROPE
Denmark Equity Basket 21,600 MSCI Denmark OPALS (Class B) (e)(g) 3,062,536 3,003,480 1.1
Total Investments in Denmark 3,062,536 3,003,480 1.1
Finland Equity Basket 15,200 MSCI Finland OPALS (Class B) (g) 2,995,768 3,196,408 1.2
Total Investments in Finland 2,995,768 3,196,408 1.2
France Aerospace 10,000 Thomson-CSF S.A. 320,258 377,438 0.1
& Military
Technology
Automobiles 2,500 Peugeot S.A. 471,467 396,839 0.1
Banking 7,000 Compagnie Financiere de Paribas 385,970 625,948 0.2
3,800 Societe Generale de Surveillance
(Class A) 423,415 600,515 0.2
------------ ------------ ------
809,385 1,226,463 0.4
Beverages & Tobacco 4,000 Pernod Ricard 257,124 261,103 0.1
Broadcasting & 1,500 Canal Plus 273,468 345,779 0.1
Publishing 3,600 Cap Gemini S.A. 534,858 528,273 0.2
------------ ------------ ------
808,326 874,052 0.3
Building Materials 4,900 Compagnie de St. Gobain 798,256 725,952 0.3
& Components 5,600 Lafarge Cooper (Ordinary) 545,276 529,401 0.2
------------ ------------ ------
1,343,532 1,255,353 0.5
Business & 5,900 Suez Lyonnaise des Eaux 1,095,109 1,168,595 0.4
Public Services 7,200 Vivendi 1,639,166 1,633,074 0.6
------------ ------------ ------
2,734,275 2,801,669 1.0
Electrical & 5,300 Alcatel Alsthom Cie Generale d'
Electronics Electricite S.A. 722,473 702,953 0.3
8,800 Schneider S.A. 510,583 542,453 0.2
------------ ------------ ------
1,233,056 1,245,406 0.5
Energy Sources 10,938 Elf Aquitaine S.A. 1,446,408 1,367,781 0.5
9,200 Total S.A. (Class B) 1,046,746 1,143,956 0.4
------------ ------------ ------
2,493,154 2,511,737 0.9
Equity Basket 34,100 MSCI France OPALS (Class B) (g) 5,663,757 6,432,283 2.4
Food & Household 1,600 Groupe Danone 374,905 468,447 0.2
Products
Health & Personal 1,100 L'Oreal S.A. 551,325 686,991 0.3
Care 15,500 Rhone-Poulenc S.A. 744,805 775,027 0.3
------------ ------------ ------
1,296,130 1,462,018 0.6
</TABLE>
Merrill Lynch International Equity Fund, November 30, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
EUROPE Shares Value Percent of
(continued) Industries Held Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
France Insurance 15,200 AXA-UAP $ 1,834,756 $ 1,970,440 0.7%
(concluded)
Merchandising 500 Carrefour S.A. 348,138 354,951 0.1
5,300 Pinault-Printemps-Redoute S.A. 839,432 906,734 0.3
850 Promodes S.A. 511,743 557,542 0.2
------------ ------------ ------
1,699,313 1,819,227 0.6
Multi-Industry 5,000 Lagardere S.C.A. 213,955 204,152 0.1
Recreation/Other 6,300 LVMH (Louis Vuitton Moet Hennessy) 1,218,349 1,221,154 0.5
Consumer Goods
Telecommunications 13,700 France Telecom S.A. 866,253 954,443 0.4
3,300 France Telecom S.A. (Warrants) (b) 0 0 0.0
------------ ------------ ------
866,253 954,443 0.4
Total Investments in France 23,637,995 25,482,224 9.4
Germany Automobiles 20 ++Bayerische Motoren Werke AG (BMW) 13,882 15,143 0.0
30,557 ++DaimlerChrysler AG 2,374,779 2,879,448 1.1
8,000 Volkswagen AG 582,069 653,061 0.2
------------ ------------ ------
2,970,730 3,547,652 1.3
Banking 20,000 Deutsche Bank AG 1,542,396 1,238,687 0.5
18,500 HypoVereinsbank AG 1,390,911 1,606,507 0.6
------------ ------------ ------
2,933,307 2,845,194 1.1
Business & Public 700 SAP AG (Systeme, Anwendungen,
Services Produkte in der Datenverarbeitung) 318,271 318,012 0.1
1,200 SAP AG (Systeme, Anwendungen,
Produkte in der Datenverarbeitung)
(Preferred) 519,445 626,797 0.2
------------ ------------ ------
837,716 944,809 0.3
Chemicals 26,747 BASF AG 1,108,623 1,015,769 0.4
26,500 Bayer AG 1,074,437 1,091,038 0.4
------------ ------------ ------
2,183,060 2,106,807 0.8
Electrical 20,000 Siemens AG 1,328,197 1,396,037 0.5
& Electronics
Insurance 5,550 AXA Colonia Konzern AG 663,555 653,327 0.2
6,100 Allianz AG 1,679,680 2,202,928 0.8
------------ ------------ ------
2,343,235 2,856,255 1.0
Merchandising 1,000 Karstadt AG 477,852 470,275 0.2
6,200 Metro AG 376,075 387,844 0.1
4,300 Metro AG 165,293 174,238 0.1
63,200 Metro AG (Rights) (f) 0 13,313 0.0
------------ ------------ ------
1,019,220 1,045,670 0.4
Metals--Steel 2,250 Thyssen AG 560,503 407,276 0.2
Multi-Industry 1,400 Preussag 485,935 514,286 0.2
Recreation/Other 4,000 Adidas-Salomon AG 461,013 437,740 0.2
Consumer Goods
Telecommunications 63,000 Deutsche Telekom AG 1,791,706 1,773,913 0.7
3,000 Mannesmann AG 295,983 325,643 0.1
------------ ------------ ------
2,087,689 2,099,556 0.8
Transportation-- 23,400 Deutsche Lufthansa AG 590,675 513,540 0.2
Airlines
Utilities-- 26,600 RWE AG 1,328,214 1,412,215 0.5
Electrical & Gas 25,317 VEBA AG 1,689,918 1,407,748 0.5
------------ ------------ ------
3,018,132 2,819,963 1.0
Total Investments in Germany 20,819,412 21,534,785 8.0
Greece Beverages & Tobacco 2,499 Hellenic Bottling Co. 82,854 66,960 0.0
Telecommunications 10,500 Hellenic Telecommunication
Organization S.A. (OTE) 300,227 262,833 0.1
Total Investments in Greece 383,081 329,793 0.1
Hungary Banking 7,200 OTP--Bank-Sponsored (GDR) (c) 407,520 305,280 0.1
Energy Sources 17,000 Mol Magyar Olaj-es Gazipari
Reszvenytarsasag (GDR) (c) 507,875 391,850 0.2
Health & 3,500 ++EGIS Reszvenytarsasag 124,535 79,763 0.0
Personal Care
Total Investments in Hungary 1,039,930 776,893 0.3
Ireland Banking 41,500 Bank of Ireland 904,986 861,821 0.3
Building Materials 36,000 CRH PLC 393,561 543,576 0.2
& Components
Insurance 65,000 Irish Life PLC 644,716 540,895 0.2
Total Investments in Ireland 1,943,263 1,946,292 0.7
Italy Equity Basket 52,000 MSCI Italy OPALS (Class B) (e)(g) 5,531,776 6,127,160 2.3
Multi-Industry 1,948,498 ++MontEdison S.p.A. 1,389,675 2,334,053 0.8
Telecommunications 982,230 Telecom Italia S.p.A. 3,915,079 6,155,809 2.3
Total Investments in Italy 10,836,530 14,617,022 5.4
Netherlands Appliances & 27,303 Koninklijke (Royal) Philips
Household Electronics N.V. 1,777,183 1,732,933 0.7
Durables
Banking 88,000 ABN AMRO Holding N.V. 1,859,207 1,818,716 0.7
Beverages & 21,500 Heineken N.V. 1,168,460 1,095,075 0.4
Tobacco
Broadcasting & 6,200 Wolters Kluwer N.V. 1,206,526 1,185,428 0.4
Publishing
Energy Sources 25,000 Royal Dutch Petroleum Company 1,201,040 1,201,217 0.4
Equity Basket 8,500 MSCI Netherlands OPALS (Class B) (g) 2,115,087 1,960,015 0.7
Financial Services 52,000 ING Groep N.V. 2,502,402 2,986,781 1.1
Food & Household 22,500 Unilever N.V. 1,808,024 1,764,451 0.7
Products
Total Investments in the Netherlands 13,637,929 13,744,616 5.1
Norway Business & 37,824 Merkantildata ASA 452,424 413,114 0.2
Public Services
Energy Sources 76,454 Saga Petroleum ASA 850,887 829,908 0.3
Equity Basket 7,000 MSCI Norway OPALS (Class B) (g) 843,080 574,910 0.2
Total Investments in Norway 2,146,391 1,817,932 0.7
</TABLE>
Merrill Lynch International Equity Fund, November 30, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
EUROPE Shares Value Percent of
(continued) Industries Held Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Poland Banking 14,000 BIG Bank Gdanski S.A. (GDR) (c) $ 313,190 $ 219,800 0.1%
14,000 Bank Rozwoju Eksportu S.A. 454,573 317,816 0.1
------------ ------------ ------
767,763 537,616 0.2
Electronics 7,966 Softbank S.A. 154,384 175,252 0.1
Multi-Industry 14,000 Elektrim Spolka Akcyjna 193,710 117,874 0.0
Total Investments in Poland 1,115,857 830,742 0.3
Portugal Equity Basket 26,500 MSCI Portugal OPALS (Class B) (e)(g) 2,395,183 2,011,615 0.7
Total Investments in Portugal 2,395,183 2,011,615 0.7
Spain Banking 18,000 Banco Santander, S.A. 348,402 369,186 0.1
Energy Sources 6,250 ++Repsol, S.A. 343,908 355,454 0.1
Equity Basket 28,000 MSCI Spain OPALS (Class B) (e)(g) 2,719,920 3,461,080 1.3
Telecommunications 7,350 Telefonica, S.A. 341,896 346,472 0.1
Utilities-- 45,537 Endesa, S.A. 1,047,401 1,192,010 0.5
Electrical & Gas
Total Investments in Spain 4,801,527 5,724,202 2.1
Sweden Appliances & 62,520 Electrolux AB 578,325 955,857 0.3
Household
Durables
Automobiles 21,683 Volvo AB (B Shares) 702,814 505,282 0.2
Equity Basket 7,600 MSCI Sweden OPALS (Class B) (g) 1,282,226 1,517,188 0.6
Forest Products 30,636 Mo och Domsjo AB (Class B) Free 823,690 702,583 0.3
& Paper 929,741 Rottneros Bruks AB 1,435,615 424,147 0.1
57,871 Stora Kopparbergs Bergslags AB 766,518 713,532 0.3
------------ ------------ ------
3,025,823 1,840,262 0.7
Insurance 54,660 Skandia Forsakrings AB 365,588 778,402 0.3
Metals--Nonferrous 188,686 Avesta-Sheffield AB 1,710,791 600,222 0.2
Total Investments in Sweden 7,665,567 6,197,213 2.3
Switzerland Banking 6,500 Credit Suisse Group (Registered) 737,038 1,121,657 0.4
5,500 UBS AG 1,394,566 1,660,915 0.6
------------ ------------ ------
2,131,604 2,782,572 1.0
Equity Basket 4,200 MSCI Switzerland OPALS (Class B) (g) 1,378,992 1,510,782 0.6
Food & Household 1,000 Nestle S.A. (Registered Shares) 1,976,847 2,085,131 0.8
Products
Health & Personal 1,750 Novartis AG (Registered Shares) 3,352,606 3,296,664 1.2
Care 250 Roche Holding AG 2,945,695 2,947,944 1.1
------------ ------------ ------
6,298,301 6,244,608 2.3
Insurance 350 Schweiz Ruckverichere 876,545 887,834 0.3
1,150 Zurich Allied AG 745,316 824,382 0.3
------------ ------------ ------
1,621,861 1,712,216 0.6
Telecommunications 5,600 ++Swisscom AG (Registered) 1,907,332 1,892,436 0.7
Total Investments in Switzerland 15,314,937 16,227,745 6.0
United Aerospace & Military 228,200 British Aerospace PLC 1,690,172 1,961,959 0.7
Kingdom Technology 210,000 Rolls-Royce PLC 870,194 849,028 0.3
------------ ------------ ------
2,560,366 2,810,987 1.0
Banking 45,000 Abbey National 841,077 909,673 0.3
125,000 Bank of Scotland 1,369,684 1,382,043 0.5
80,876 HSBC Holdings PLC 2,139,242 2,188,770 0.8
120,200 Lloyds TSB Group PLC 1,472,356 1,671,133 0.6
77,468 National Westminster Bank
PLC (Ordinary) 1,434,144 1,413,885 0.5
------------ ------------ ------
7,256,503 7,565,504 2.7
Beverages & Tobacco 80,000 ++British American Tobacco PLC 697,674 733,679 0.3
27,500 Cadbury Schweppes PLC 418,012 412,963 0.2
80,000 Diageo PLC 821,088 896,389 0.3
------------ ------------ ------
1,936,774 2,043,031 0.8
Building Materials 125,000 Hanson PLC 688,134 928,238 0.3
& Components
Business & 4 Misys PLC 33 28 0.0
Public Services 15,300 Railtrack Group PLC 394,810 419,875 0.2
137,500 Shanks & McEwan Group PLC 439,604 453,805 0.2
82,800 United Utilities PLC 1,029,966 1,206,501 0.4
------------ ------------ ------
1,864,413 2,080,209 0.8
Chemicals 43,000 Imperial Chemical Industries PLC 425,695 397,368 0.1
Construction & 40,000 Jarvis PLC 482,375 433,673 0.2
Housing
Electronic 65,000 Williams PLC 414,139 402,236 0.2
Components &
Instrumentation
Energy Sources 191,500 British Petroleum Company PLC 2,811,255 2,986,326 1.1
5,263 British Petroleum Company PLC
(ADR) (a) 411,442 484,854 0.2
------------ ------------ ------
3,222,697 3,471,180 1.3
Equity Basket 55,700 MSCI United Kingdom OPALS
(Class B) (g) 11,154,899 11,942,080 4.4
Financial Services 55,000 Provident Financial PLC 870,545 825,925 0.3
Food & Household 192,000 Unilever PLC 1,792,874 1,997,666 0.7
Products
Health & Personal 49,000 Glaxo Wellcome PLC 1,340,866 1,550,082 0.6
Care 124,000 Nycomed Amersham PLC 847,113 818,499 0.3
206,100 SmithKline Beecham PLC 2,381,708 2,530,390 0.9
22,000 Zeneca Group PLC 827,961 914,871 0.4
------------ ------------ ------
5,397,648 5,813,842 2.2
Insurance 265,000 Guardian Royal Exchange PLC 1,456,503 1,443,100 0.5
60,000 Prudential Corporation PLC 891,134 875,266 0.3
53,000 Royal & Sun Alliance Insurance
Group PLC 508,387 442,551 0.2
------------ ------------ ------
2,856,024 2,760,917 1.0
Investment Trust 576,000 ++Fleming Japanese Investment
Trust PLC 1,410,545 1,387,752 0.5
</TABLE>
Merrill Lynch International Equity Fund, November 30, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
EUROPE Face Amount/ Value Percent of
(concluded) Industries Shares Held Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
United Merchandising 30,000 The Boots Company PLC $ 485,629 $ 484,169 0.2%
Kingdom 75,000 J Sainsbury PLC 686,678 628,107 0.2
(concluded) 93,000 Kingfisher PLC 743,149 887,049 0.3
180,000 Marks & Spencer PLC 1,323,690 1,223,788 0.5
155,000 Next PLC 1,292,562 1,253,327 0.5
300,000 Tesco PLC 894,877 886,157 0.3
------------ ------------ ------
5,426,585 5,362,597 2.0
Multi-Industry 237,000 BTR PLC 891,688 484,961 0.2
Telecommunications 44,600 British Telecommunications PLC 447,774 611,239 0.2
55,000 ++Cable & Wireless Communications PLC 463,853 490,109 0.2
157,000 Cable & Wireless PLC 1,859,885 1,994,927 0.7
31,500 Vodafone Group PLC 441,036 465,233 0.2
------------ ------------ ------
3,212,548 3,561,508 1.3
Transportation-- 67,900 British Airways PLC 695,896 459,399 0.2
Airlines
Transportation-- 82,500 Peninsular and Oriental Stream
Shipping Navigation Company PLC 845,712 1,000,640 0.4
Utilities-- 127,000 Scottish Power PLC 1,149,657 1,347,570 0.5
Electrical & Gas
Total Investments in the
United Kingdom 54,555,717 57,077,283 21.1
Total Investments in Europe 166,351,623 174,518,245 64.5
MIDDLE EAST
Israel Multi-Industry 33,833 Koor Industries Limited 789,523 575,161 0.2
Total Investments in the Middle East 789,523 575,161 0.2
NORTH AMERICA
Canada Aerospace & 26,550 Bombardier Inc. (Class B) 385,557 346,304 0.1
Military Technology
Banking 11,560 Bank of Montreal 592,273 487,493 0.2
22,270 National Bank of Canada 327,029 347,264 0.1
------------ ------------ ------
919,302 834,757 0.3
Beverages & Tobacco 9,500 The Seagram Company Ltd. 361,504 327,640 0.1
Broadcasting 3,600 The Thomson Corporation 84,650 85,322 0.0
& Publishing
Electrical & 13,450 Northern Telecom Ltd. 743,757 630,510 0.2
Electronics
Energy Sources 5,660 Enbridge Inc. 245,277 255,338 0.1
19,140 ++Poco Petroleums Limited 196,967 156,424 0.0
6,780 Suncor Energy, Inc. 218,718 206,570 0.1
------------ ------------ ------
660,962 618,332 0.2
Financial Services 15,980 Power Corporation of Canada 325,270 355,227 0.1
Forest Products 18,260 Abitibi-Consolidated Inc. 171,799 169,527 0.1
& Paper
Gold Mines 18,210 Placer Dome Inc. 258,174 264,905 0.1
Machinery & 9,100 United Dominion Industries Limited 282,604 188,902 0.1
Engineering
Merchandising 9,580 Canadian Tire Corp. 270,637 241,144 0.1
Metals--Nonferrous 18,270 Inco Limited 194,682 212,025 0.1
14,360 Rio Algom Limited 193,448 185,896 0.1
------------ ------------ ------
388,130 397,921 0.2
Multi-Industry 8,780 Imasco Limited 168,233 175,657 0.1
Telecommunications 13,700 BCE Inc. 548,476 487,718 0.2
Utilities-- 15,010 TransCanada PipeLines Limited 222,348 224,242 0.1
Electrical & Gas
Total Investments in Canada 5,791,403 5,348,108 2.0
United US Government US$4,000,000 United States Treasury Note, 5.25%
States Obligations due 11/15/2028 4,007,500 4,111,240 1.5
Total Investments in the United States 4,007,500 4,111,240 1.5
Total Investments in North America 9,798,903 9,459,348 3.5
PACIFIC BASIN/ASIA
Australia Banking 70,900 Australia and New Zealand
Banking Group Ltd. 401,957 468,556 0.2
25,700 Commonwealth Bank of Australia 309,747 354,716 0.1
81,500 National Australia Bank Ltd. 1,177,534 1,220,708 0.5
105,000 Westpac Banking Corp. Ltd. 657,964 701,175 0.3
------------ ------------ ------
2,547,202 2,745,155 1.1
Beverages & 150,000 Foster's Brewing Group Limited 358,637 393,314 0.1
Tobacco 27,500 Rothmans Holdings, Ltd. 192,535 188,483 0.1
------------ ------------ ------
551,172 581,797 0.2
Broadcasting & 180,000 ++Cable & Wireless Optus Limited 246,307 337,288 0.1
Publishing 82,100 The News Corporation Limited 531,083 576,800 0.2
142,800 The News Corporation Limited
(Preferred) 780,772 897,926 0.3
------------ ------------ ------
1,558,162 1,812,014 0.6
Business & Public 13,000 Brambles Industries Limited 273,804 318,851 0.1
Services
Chemicals 36,000 Orica Ltd. 211,679 199,204 0.1
Construction & 28,700 Leighton Holdings Ltd. 111,840 116,761 0.0
Housing
Energy Sources 75,000 Broken Hill Proprietary Co., Ltd. 602,127 596,574 0.2
52,500 Woodside Petroleum Ltd. 295,364 267,397 0.1
------------ ------------ ------
897,491 863,971 0.3
Gold Mines 144,000 ++Newcrest Mining 215,225 204,637 0.1
219,000 Normandy Mining Limited 199,993 203,807 0.1
------------ ------------ ------
415,218 408,444 0.2
Insurance 25,200 ++AMP Limited 297,218 326,724 0.1
168,800 GIO Australia Holdings, Ltd. 433,511 550,874 0.2
89,200 QBE Insurance Group Ltd. 350,920 384,770 0.2
------------ ------------ ------
1,081,649 1,262,368 0.5
Leisure & Tourism 24,000 Tabcorp Holdings Ltd. 153,438 161,249 0.1
Merchandising 45,000 Coles Myers Limited 195,912 233,442 0.1
Metals--Nonferrous 405,000 M.I.M. Holdings Limited 194,844 198,638 0.1
60,000 WMC Limited 192,414 189,357 0.1
------------ ------------ ------
387,258 387,995 0.2
</TABLE>
Merrill Lynch International Equity Fund, November 30, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
PACIFIC
BASIN/ ASIA Shares Value Percent of
(continued) Industries Held Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Australia Real Estate 158,300 General Property Trust $ 273,438 $ 306,481 0.1%
(concluded) 13,500 Lend Lease Corp. 293,957 329,790 0.1
------------ ------------ ------
567,395 636,271 0.2
Telecommunications 264,900 ++Telstra Corporation Limited 949,028 1,179,309 0.4
Utilities-- 53,200 Australian Gas Light Company Limited 313,423 396,107 0.1
Electrical & Gas
Total Investments in Australia 10,214,671 11,302,938 4.2
China Telecommunications 46,600 ++China Telecom (Hong Kong) Limited
(ADR) (a) 1,473,934 1,843,613 0.7
Total Investments in China 1,473,934 1,843,613 0.7
Hong Kong Leisure & Tourism 165,000 Shanghai Industrial Holdings Limited 413,834 335,647 0.1
Multi-Industry 325 Hutchison Whampoa Limited 1,886 2,309 0.0
Real Estate 48,400 Great Eagle Holding (Warrants) (b) 0 0 0.0
Utilities-- 700 Hong Kong and China Gas Company Ltd. 1,084 927 0.0
Electrical & Gas 62,350 Hong Kong and China Gas Company Ltd.
(Warrants) (b) 0 6,523 0.0
------------ ------------ ------
1,084 7,450 0.0
Total Investments in Hong Kong 416,804 345,406 0.1
Japan Appliances & 68,000 Pioneer Electronic Corporation 1,226,663 1,119,148 0.4
Household Durables 16,100 Sony Corporation 1,407,429 1,178,974 0.4
------------ ------------ ------
2,634,092 2,298,122 0.8
Automobiles 54,000 Toyota Motor Corporation 1,466,686 1,369,311 0.5
Banking 102,000 Mitsubishi Trust & Banking Corp. 1,103,895 737,809 0.3
Beverages & Tobacco 211 Japan Tobacco, Inc. 1,369,720 1,852,080 0.7
Broadcasting & 27,000 Nippon Broadcasting System,
Publishing Incorporated 1,438,959 921,652 0.3
1,350 Nippon Television Network Corp. 406,228 429,007 0.2
------------ ------------ ------
1,845,187 1,350,659 0.5
Building Materials 86,000 Sanwa Bank Ltd. 655,950 779,340 0.3
& Components 116,000 Sekisui Chemical Co., Ltd. 610,575 707,087 0.3
------------ ------------ ------
1,266,525 1,486,427 0.6
Business & Public 455 NTT Data Corporation 2,104,723 1,989,516 0.7
Services 96,000 Ricoh Co., Ltd. 1,105,387 924,577 0.3
------------ ------------ ------
3,210,110 2,914,093 1.0
Chemicals 146,000 Kaneka Corp. 754,929 1,046,587 0.4
47,000 Shin-Etsu Chemical Co., Ltd. 872,405 1,050,471 0.4
------------ ------------ ------
1,627,334 2,097,058 0.8
Construction 163,000 Nishimatsu Construction Co. Ltd. 817,580 894,221 0.3
& Housing
Data Processing & 135,000 Fujitsu Limited 1,459,200 1,560,224 0.6
Reproduction
Electrical & 181,000 Hitachi Ltd. 1,684,174 1,090,060 0.4
Electronics 110,000 Uniden Corp. 1,534,226 1,001,300 0.4
------------ ------------ ------
3,218,400 2,091,360 0.8
Electronic 126,000 Anritsu Corp. 1,457,622 1,091,645 0.4
Components & 8,500 Keyence Corporation 964,384 960,257 0.4
Instrumentation 28,000 Murata Manufacturing Co., Ltd. 939,633 1,096,879 0.4
610 NTT Mobile Communication
Network, Inc. (e) 2,012,861 2,330,137 0.9
11,000 Rohm Company Ltd. 614,872 929,779 0.3
17,000 TDK Corporation 1,231,374 1,410,679 0.5
------------ ------------ ------
7,220,746 7,819,376 2.9
Financial 36,000 Jafco Co., Ltd. 2,046,897 1,026,983 0.4
Investment Company
Financial Services 220,000 Daiwa Securities Co., Ltd. 1,023,063 784,948 0.3
Health & Personal 135,000 Fujisawa Pharmacturical Co., Ltd. 1,218,297 1,618,376 0.6
Care 52,000 Sankyo Co., Ltd. 1,306,244 1,183,355 0.4
52,000 Taisho Pharmaceuticals Co. 1,016,737 1,289,012 0.5
------------ ------------ ------
3,541,278 4,090,743 1.5
Industrial Components 51,000 Bridgestone Corporation 923,203 1,193,758 0.4
222,000 Fujikura Ltd. 1,630,841 1,239,548 0.5
293,000 NSK Ltd. 1,727,845 1,154,950 0.4
------------ ------------ ------
4,281,889 3,588,256 1.3
Merchandising 25,000 Ito-Yokado Co., Ltd. 1,467,393 1,527,958 0.6
73,000 Uny Co., Ltd. 1,220,761 1,222,204 0.5
------------ ------------ ------
2,688,154 2,750,162 1.1
Metals--Steel 610,000 Nippon Steel Corporation 1,678,915 1,110,533 0.4
Miscellaneous 3,000 Toyo Seikan Kaisha, Ltd. 93,627 49,984 0.0
Materials &
Commodities
Multi-Industry 73,000 Ibiden Co., Ltd. 1,013,942 1,069,132 0.4
Non Index 660,099 Nikkei (Warrants) (b) 860,580 797,226 0.3
Real Estate 144,000 Mitsui Fudosan Co., Ltd. 1,523,472 1,104,811 0.4
Telecommunications 198 Nippon Telegraph & Telephone
Corporation (NTT) 1,766,676 1,480,494 0.5
Transportation-- 260 East Japan Railway Co. 1,217,743 1,510,891 0.6
Road & Rail 163,000 Nippon Express Co., Ltd. 961,435 847,854 0.3
295,000 Tokyu Corp. 1,832,883 774,423 0.3
------------ ------------ ------
4,012,061 3,133,168 1.2
Wholesale & 209,000 Mitsui & Co. 1,533,002 1,194,140 0.4
International Trade
Total Investments in Japan 53,303,031 48,651,320 18.0
New Electrical & 26,050 PDL Holdings Limited 118,808 57,923 0.0
Zealand Electronics
Merchandising 135,967 Lane Walker Rudkin Industries, Ltd. 120,378 77,372 0.0
Real Estate 729,340 Wrightson Ltd. 495,737 130,658 0.1
Total Investments in New Zealand 734,923 265,953 0.1
Singapore Equity Basket 105,000 MSCI Singapore OPALS (Class B) (g) 3,308,700 4,063,500 1.5
Total Investments in Singapore 3,308,700 4,063,500 1.5
</TABLE>
Merrill Lynch International Equity Fund, November 30, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
PACIFIC
BASIN/ ASIA Shares Value Percent of
(concluded) Industries Held Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
South Appliances & 6,700 ++Samsung Electronics (GDR) (c)(e) $ 402,000 $ 218,420 0.1%
Korea Household
Durables
Equity Basket 20,000 MSCI South Korea OPALS (Class B) (g) 772,800 1,098,800 0.4
Telecommunications 79,512 SK Telecommunications Co., Ltd.
(ADR) (a)(e) 1,283,904 819,968 0.3
Utilities-- 32,880 Korea Electric Power Corporation 1,365,347 633,831 0.2
Electrical & Gas
Total Investments in South Korea 3,824,051 2,771,019 1.0
Total Investments in the
Pacific Basin/Asia 73,276,114 69,243,749 25.6
SOUTHEAST ASIA
India Banking 300 State Bank of India 2,095 1,037 0.0
Beverages & Tobacco 200 ITC Ltd. 2,905 3,212 0.0
Chemicals 100 Indian Petrochemicals Corp. Ltd. 396 120 0.0
1,298 Reliance Industries Ltd. 6,720 3,426 0.0
147 Tata Chemicals Limited 740 270 0.0
------------ ------------ ------
7,856 3,816 0.0
Energy Sources 400 Hindustan Petroleum Corporation Ltd. 4,871 2,289 0.0
Health & Personal Care 40 Ranbaxy Laboratories Limited 378 227 0.0
225 ++Reckitt & Coleman of India Ltd. 1,926 1,630 0.0
2,304 1,857 0.0
Metals--Steel 100 ++Steel Authority of India Ltd. 68 12 0.0
Total Investments in Southeast Asia 20,099 12,223 0.0
SHORT-TERM Face
SECURITIES Amount Issue
Commercial US$ 8,048,000 Ford Motor Credit Company, 5.51%
Paper* due 12/01/1998 8,048,000 8,048,000 3.0
Total Investments in Commercial Paper 8,048,000 8,048,000 3.0
US Government 3,000,000 United States Treasury Bill, 3.865%
Obligations* due 1/21/1999 (d) 2,983,574 2,980,830 1.1
Total Investments in US Government
Obligations 2,983,574 2,980,830 1.1
Total Investments in Short-Term
Securities 11,031,574 11,028,830 4.1
<CAPTIN>
OPTIONS Nominal Value Covered Premiums
PURCHASED by Options Purchased Paid
<S> <C> <S> <C> <C> <C>
Currency Put 12,000,000 Japanese Yen, expiring October 1999
Options Purchased at YEN 150 107,400 121,200 0.0
Total Options Purchased 107,400 121,200 0.0
Total Investments 264,735,580 268,071,281 99.1
OPTIONS Nominal Value Covered Premiums
WRITTEN by Options Written Received
<S> <C> <S> <C> <C> <C>
Call Options Written 346 Nestle AG, expiring December 1998
at NLG 281 (37,738) (35,797) (0.0)
Currency Call 12,000,000 Japanese Yen, expiring October 1999
Options Written at YEN 96.45 (107,400) (141,600) (0.0)
Total Options Written (145,138) (177,397) (0.0)
Total Investments, Net of Options Written $264,590,442 267,893,884 99.1
============
Time Deposit++++ 4,047,172 1.5
Variation Margin on Financial Futures Contracts** (144,628) (0.1)
Unrealized Depreciation on Forward Foreign Exchange Contracts*** (76,418) 0.0
Liabilities in Excess of Other Assets (1,308,578) (0.5)
------------ ------
Net Assets $270,411,432 100.0%
============ ======
<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)Security held as collateral in connection with open financial
futures contracts.
(e)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
(f)The rights may be exercised until 12/07/98.
(g)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 Obligations are traded
on a discount basis; the interest rates shown reflect the discount
rate paid at the time of purchase by the Fund.
**Financial futures contracts sold as of November 30, 1998 were as
follows:
Number of Expiration Value
Contracts Issue Exchange Date (Notes 1a & 1c)
27 Nikkei Index CME December 1998 $ 1,997,325
49 SFE-- SFE--
Ordinary Ordinary December 1998 2,141,378
5 DAX Index DTB December 1998 1,490,387
------------
Total Financial Futures Contracts Sold
(Total Contract Price--$5,615,024) $ 5,629,090
============
Financial futures contracts purchased as of November 30, 1998 were
as follows:
Number of Expiration Value
Contracts Issue Exchange Date (Notes 1a & 1c)
17 FTSE 100 LIFFE December 1998 $ 1,629,902
21 IBEX 35 IBEX December 1998 1,405,305
20 Hang Seng Hang Seng December 1998 1,349,047
97 CAC 40 Index CAC December 1998 3,288,621
-----------
Total Financial Futures Contracts Purchased
(Total Contract Price--$7,604,188) $ 7,672,875
===========
***Forward foreign exchange contracts as of November 30, 1998 were
as follows:
Unrealized
Foreign Appreciation
Currency Expiration (Depreciation)
Purchased Date (Note 1c)
DM 6,740,940 January 1999 $ (4,398)
KRW 1,100,000,000 December 1998 45,651
-----------
(US$ Commitment--$4,837,139) $ 41,253
-----------
Unrealized
Foreign Appreciation
Currency Expiration (Depreciation)
Sold Date (Note 1c)
A$ 6,576,005 January 1999 $ 61,664
Pound Sterling 1,249,764 January 1999 7,936
KRW 3,353,000,000 December 1998 (357,570)
SGD 977,700 December 1998 5,484
YEN 346,155,000 December 1998 183,969
YEN 1,468,380,000 January 1999 (19,154)
-----------
(US$ Commitment--$24,199,194) $ (117,671)
-----------
Total Unrealized Depreciation on Forward Foreign
Exchange Contracts--Net $ (76,418)
===========
++Non-income producing security.
++++Time deposit bears interest at 7.687% and matures on 2/01/1999.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch International Equity Fund, November 30, 1998
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of November 30, 1998
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$264,628,180) (Note 1a) $ 267,950,081
Options purchased, at value (cost--$107,400) (Notes 1a & 1c) 121,200
Foreign cash (Note 1b) 8,857,828
Foreign time deposits (Note 1b) 4,047,172
Receivables:
Securities sold $ 10,176,330
Dividends 1,359,403
Beneficial interest sold 123,583
Interest 113,505
Forward foreign exchange contracts (Note 1c) 15,310 11,788,131
-------------
Deferred organization expenses (Note 1f) 4,111
Prepaid registration fees and other assets (Note 1f) 96,038
-------------
Total assets 292,864,561
-------------
Liabilities: Options written, at value (premiums received--$145,138)
(Notes 1a & 1c) 177,397
Unrealized depreciation on forward foreign exchange contracts
(Note 1c) 76,418
Payables:
Securities purchased 12,778,376
Custodian bank (Note 1h) 5,768,097
Beneficial interest redeemed 2,580,792
Variation margin (Note 1c) 144,628
Distributor (Note 2) 184,164
Investment adviser (Note 2) 171,885
Forward foreign exchange contracts (Note 1c) 58,274 21,686,216
-------------
Accrued expenses and other liabilities 513,098
-------------
Total liabilities 22,453,129
-------------
Net Assets: Net assets $ 270,411,432
=============
Net Assets Class A Shares of beneficial interest, $0.10 par value, unlimited
Consist of: number of shares authorized $ 243,564
Class B Shares of beneficial interest, $0.10 par value, unlimited
number of shares authorized 2,308,113
Class C Shares of beneficial interest, $0.10 par value, unlimited
number of shares authorized 106,205
Class D Shares of beneficial interest, $0.10 par value, unlimited
number of shares authorized 512,333
Paid-in capital in excess of par 340,557,750
Undistributed investment income--net 1,948,328
Accumulated realized capital losses on investments and foreign
currency transactions--net (21,980,923)
Accumulated distributions in excess of realized capital gains
on investments and foreign currency
transactions--net (Note 1g) (56,646,574)
Unrealized appreciation on investments and foreign currency
transactions--net 3,362,636
-------------
Net assets $ 270,411,432
=============
Net Asset Class A--Based on net assets of $20,676,217 and 2,435,638 shares of
Value: beneficial interest outstanding $ 8.49
=============
Class B--Based on net assets of $197,066,212 and 23,081,135 shares of
beneficial interest outstanding $ 8.54
=============
Class C--Based on net assets of $8,936,726 and 1,062,048 shares of
beneficial interest outstanding $ 8.41
=============
Class D--Based on net assets of $43,732,277 and 5,123,328 shares of
beneficial interest outstanding $ 8.54
=============
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Six Months Ended November 30, 1998
<S> <S> <C> <C>
Investment Income Dividends (net of $323,186 foreign withholding tax) $ 3,446,580
(Notes 1d & 1e): Interest and discount earned 1,080,175
-------------
Total income 4,526,755
-------------
Expenses: Investment advisory fees (Note 2) $ 1,244,726
Account maintenance and distribution fees--Class B (Note 2) 1,209,719
Transfer agent fees--Class B (Note 2) 439,627
Custodian fees 193,190
Accounting services (Note 2) 117,090
Transfer agent fees--Class D (Note 2) 86,737
Printing and shareholder reports 79,660
Account maintenance fees--Class D (Note 2) 66,665
Account maintenance and distribution fees--Class C (Note 2) 56,626
Professional fees 46,081
Registration fees (Note 1f) 41,592
Transfer agent fees--Class A (Note 2) 40,776
Pricing fees 23,397
Trustees' fees and expenses 21,507
Transfer agent fees--Class C (Note 2) 21,367
Amortization of organization expenses (Note 1f) 2,274
Other 10,740
-------------
Total expenses 3,701,774
-------------
Investment income--net 824,981
-------------
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net (22,057,208)
(Loss) on Foreign currency transactions--net 76,285 (21,980,923)
Investments & -------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net (12,721,927)
(Notes 1b, 1c, Foreign currency transactions--net (2,126,905) (14,848,832)
1e & 3): ------------- -------------
Net realized and unrealized loss on investments and
foreign currency transactions (36,829,755)
-------------
Net Decrease in Net Assets Resulting from Operations $ (36,004,774)
=============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch International Equity Fund, November 30, 1998
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Six For the
Months Ended Year Ended
November 30, May 31,
Increase (Decrease) in Net Assets: 1998 1998
<S> <S> <C> <C>
Operations: Investment income--net $ 824,981 $ 1,123,347
Realized gain (loss) on investments and foreign currency
transactions--net (21,980,923) 19,117,687
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions--net (14,848,832) (74,763,524)
------------- -------------
Net decrease in net assets resulting from operations (36,004,774) (54,522,490)
------------- -------------
Distributions to Realized gain on investments--net:
Shareholders Class A -- (3,212,433)
(Note 1g): Class B -- (35,928,520)
Class C -- (1,650,362)
Class D -- (8,612,883)
In excess of realized gain on investments--net:
Class A (938,942) (2,887,423)
Class B (8,734,187) (32,293,544)
Class C (406,931) (1,483,391)
Class D (2,160,659) (7,741,497)
------------- -------------
Net decrease in net assets resulting from distributions
to shareholders (12,240,719) (93,810,053)
------------- -------------
Beneficial Net decrease in net assets derived from beneficial interest
Interest transactions (109,228,991) (195,416,794)
Transactions ------------- -------------
(Note 4):
Net Assets: Total decrease in net assets (157,474,484) (343,749,337)
Beginning of period 427,885,916 771,635,253
------------- -------------
End of period* $ 270,411,432 $ 427,885,916
============= =============
<FN>
*Undistributed investment income--net $ 1,948,328 $ 1,123,347
============= =============
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Class A
For the For the
The following per share data and ratios Six Period
have been derived from information provided Months Oct. 21,
in the financial statements. Ended 1994++ to
Nov. 30, For the Year Ended May 31, May 31,
Increase (Decrease) in Net Asset Value: 1998++++ 1998++++ 1997++++ 1996++++ 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.57 $ 12.58 $ 11.94 $ 10.25 $ 11.73
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .06 .12 .12 .16 .26
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net (.78) (1.08) 1.09 1.53 (1.05)
--------- --------- --------- --------- ---------
Total from investment operations (.72) (.96) 1.21 1.69 (.79)
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net -- -- (.24) -- (.15)
In excess of investment income--net -- -- (.01) -- --
Realized gain on investments--net -- (1.08) (.32) -- (.54)
In excess of realized gain on
investments--net (.36) (.97) -- -- --
--------- --------- --------- --------- ---------
Total dividends and distributions (.36) (2.05) (.57) -- (.69)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 8.49 $ 9.57 $ 12.58 $ 11.94 $ 10.25
========= ========= ========= ========= =========
Total Investment Based on net asset value per share (7.64%)+++ (6.02%) 10.76% 16.49% (6.78%)+++
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses 1.39%* 1.16% 1.11% 1.06% 1.23%*
Net Assets: ========= ========= ========= ========= =========
Investment income--net 1.32%* 1.08% 1.04% 1.47% 4.64%*
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 20,676 $ 33,960 $ 44,624 $ 116,628 $ 74,478
Data: ========= ========= ========= ========= =========
Portfolio turnover 66.10% 107.50% 60.56% 71.86% 63.95%
========= ========= ========= ========= =========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of operations.
++++Based on average shares outstanding.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch International Equity Fund, November 30, 1998
<TABLE>
FINANCIAL HIGHLIGHTS (continued)
<CAPTION>
The following per share data Class B
and ratios have been derived For the For the
from information provided in Six Period
the financial statements. Months July 30,
Ended 1993++ to
Increase (Decrease) in Net Nov. 30, For the Year Ended May 31, May 31,
Asset Value: 1998++++ 1998++++ 1997++++ 1996++++ 1995 1994++++
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning
Operating of period $ 9.62 $ 12.42 $ 11.76 $ 10.19 $ 11.44 $ 10.00
Performance: --------- --------- --------- --------- --------- ---------
Investment income (loss)--net .01 --+++++ .01 .04 .02 (.02)
Realized and unrealized gain
(loss) on investments and
foreign currency trans-
actions--net (.79) (1.04) 1.08 1.53 (.69) 1.46
--------- --------- --------- --------- --------- ---------
Total from investment
operations (.78) (1.04) 1.09 1.57 (.67) 1.44
--------- --------- --------- --------- --------- ---------
Less dividends and
distributions:
Investment income--net -- -- (.10) -- (.04) --
In excess of investment
income--net -- -- (.01) -- -- --
Realized gain on invest-
ments--net -- (.93) (.32) -- (.54) --
In excess of realized gain
on investments--net (.30) (.83) -- -- -- --
--------- --------- --------- --------- --------- ---------
Total dividends and distri-
butions (.30) (1.76) (.43) -- (.58) --
--------- --------- --------- --------- --------- ---------
Net asset value, end of
period $ 8.54 $ 9.62 $ 12.42 $ 11.76 $ 10.19 $ 11.44
========= ========= ========= ========= ========= =========
Total Investment Based on net asset value
Return:** per share (8.14%)+++ (7.01%) 9.70% 15.41% (5.91%) 14.40%+++
========= ========= ========= ========= ========= =========
Ratios to Average Expenses 2.44%* 2.21% 2.14% 2.09% 2.13% 2.07%*
Net Assets: ========= ========= ========= ========= ========= =========
Investment income (loss)--net .29%* (.01%) .08% .37% .23% (.19%)*
========= ========= ========= ========= ========= =========
Supplemental Net assets, end of period
Data: (in thousands) $ 197,066 $ 311,520 $ 583,213 $ 945,368 $ 961,941 $ 844,295
========= ========= ========= ========= ========= =========
Portfolio turnover 66.10% 107.50% 60.56% 71.86% 63.95% 50.63%
========= ========= ========= ========= ========= =========
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS (continued)
<CAPTION>
Class C
For the For the
The following per share data and ratios Six Period
have been derived from information provided Months Oct. 21,
in the financial statements. Ended 1994++ to
Nov. 30, For the Year Ended May 31, May 31,
Increase (Decrease) in Net Asset Value: 1998++++ 1998++++ 1997++++ 1996++++ 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.49 $ 12.26 $ 11.65 $ 10.10 $ 11.62
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .01 --+++++ --+++++ .05 .24
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net (.79) (1.02) 1.08 1.50 (1.09)
--------- --------- --------- --------- ---------
Total from investment operations (.78) (1.02) 1.08 1.55 (.85)
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net -- -- (.14) -- (.13)
In excess of investment income--net -- -- (.01) -- --
Realized gain on investments--net -- (.92) (.32) -- (.54)
In excess of realized gain on
investments--net (.30) (.83) -- -- --
--------- --------- --------- --------- ---------
Total dividends and distributions (.30) (1.75) (.47) -- (.67)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 8.41 $ 9.49 $ 12.26 $ 11.65 $ 10.10
========= ========= ========= ========= =========
Total Investment Based on net asset value per share (8.27%)+++ (6.96%) 9.71% 15.35% (7.36%)+++
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses 2.45%* 2.21% 2.15% 2.09% 2.30%*
Net Assets: ========= ========= ========= ========= =========
Investment income (loss)--net .28%* (.01%) .04% .45% 4.26%*
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 8,937 $ 14,717 $ 24,774 $ 46,985 $ 25,822
Data: ========= ========= ========= ========= =========
Portfolio turnover 66.10% 107.50% 60.56% 71.86% 63.95%
========= ========= ========= ========= =========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of operations.
++++Based on average shares outstanding.
+++Aggregate total investment return.
+++++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch International Equity Fund, November 30, 1998
<TABLE>
FINANCIAL HIGHLIGHTS (concluded)
<CAPTION>
The following per share data Class D
and ratios have been derived For the For the
from information provided in Six Period
the financial statements. Months July 30,
Ended 1993++ to
Increase (Decrease) in Net Nov. 30, For the Year Ended May 31, May 31,
Asset Value: 1998++++ 1998++++ 1997++++ 1996++++ 1995 1994++++
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning
Operating of period $ 9.63 $ 12.59 $ 11.94 $ 10.27 $ 11.51 $ 10.00
Performance: --------- --------- --------- --------- --------- ---------
Investment income--net .05 .09 .10 .13 .10 .04
Realized and unrealized gain
(loss) on investments and
foreign currency transactions (.80) (1.07) 1.09 1.54 (.68) 1.47
--------- --------- --------- --------- --------- ---------
Total from investment
operations (.75) (.98) 1.19 1.67 (.58) 1.51
--------- --------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net -- -- (.21) -- (.12) --
In excess of investment
income--net -- -- (.01) -- -- --
Realized gain on invest-
ments--net -- (1.04) (.32) -- (.54) --
In excess of realized gain on
investments--net (.34) (.94) -- -- -- --
--------- --------- --------- --------- --------- ---------
Total dividends and distri-
butions (.34) (1.98) (.54) -- (.66) --
--------- --------- --------- --------- --------- ---------
Net asset value, end of
period $ 8.54 $ 9.63 $ 12.59 $ 11.94 $ 10.27 $ 11.51
========= ========= ========= ========= ========= =========
Total Investment Based on net asset value
Return:** per share (7.82%)+++ (6.18%) 10.50% 16.26% (5.11%) 15.10%+++
========= ========= ========= ========= ========= =========
Ratios to Average Expenses 1.65%* 1.42% 1.36% 1.31% 1.34% 1.31%*
Net Assets: ========= ========= ========= ========= ========= =========
Investment income--net 1.08%* .77% .86% 1.13% .85% .55%*
========= ========= ========= ========= ========= =========
Supplemental Net assets, end of period
Data: (in thousands) $ 43,732 $ 67,689 $ 119,024 $ 175,151 $ 188,583 $ 208,007
========= ========= ========= ========= ========= =========
Portfolio turnover 66.10% 107.50% 60.56% 71.86% 63.95% 50.63%
========= ========= ========= ========= ========= =========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of operations.
++++Based on average shares outstanding.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch International Equity Fund (the "Fund") is registered
under the Investment Company Act of 1940 as a diversified, open-end
management investment company. The Fund's financial statements are
prepared in accordance with generally accepted accounting principles
which may require the use of management accruals and estimates.
These unaudited financial statements reflect all adjustments which
are, in the opinion of management, necessary to a fair statement of
the results for the interim period presented. All such adjustments
are of a normal recurring nature. The Fund offers four classes of
shares under the Merrill Lynch Select Pricing SM System. Shares of
Class A and Class D are sold with a front-end sales charge. Shares
of Class B and Class C may be subject to a contingent deferred sales
charge. All classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions,
except that Class B, Class C and Class D Shares bear certain
expenses related to the account maintenance of such shares, and
Class B and Class C Shares also bear certain expenses related to the
distribution of such shares. Each class has exclusive voting rights
with respect to matters relating to its account maintenance and
distribution expenditures. The following is a summary of significant
accounting policies followed by the Fund.
(a) Valuation of investments--Portfolio securities which are traded
on stock exchanges are valued at the last sale price on the exchange
on which such securities are traded, as of the close of business on
the day the securities are being valued or, lacking any sales, at
the last available bid price. Securities traded in the over-the-
counter market are valued at the last available bid price prior to
the time of valuation. In cases where securities are traded on more
than one exchange, the securities are valued on the exchange
designated by or under the authority of the Board of Trustees as the
primary market. Securities which are traded both in the over-the-
counter market and on a stock exchange are valued according to the
broadest and most representative market. Options written or
purchased are valued at the last sale price in the case of exchange-
traded options. In the case of options traded in the over-the-
counter market, valuation is the last asked price (options written)
or the last bid price (options purchased). Short-term securities are
valued at amortized cost, which approximates market value. Other
investments, including futures contracts and related options, are
stated at market value. Securities and assets for which market
quotations are not available are valued at fair value as determined
in good faith by or under the direction of the Fund's Board of
Trustees.
(b) Foreign currency transactions--Transactions denominated in
foreign currencies are recorded at the exchange rate prevailing when
recognized. Assets and liabilities denominated in foreign currencies
are valued at the exchange rate at the end of the period. Foreign
currency transactions are the result of settling (realized) or
valuing (unrealized) assets or liabilities expressed in foreign
currencies into US dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on
investments.
(c) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the equity, debt, and
currency markets. Losses may arise due to changes in the value of
the contract or if the counterparty does not perform under the
contract.
* Financial futures contracts--The Fund may purchase or sell
financial futures contacts and options on such futures contracts for
the purpose of hedging the market risk on existing securities or the
intended purchase of securities. Futures contracts are contracts for
delayed delivery of securities at a specific future date and at a
specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to
the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin
and are recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss equal
to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
* Foreign currency options and futures--The Fund may also purchase
or sell listed or over-the-counter foreign currency options, foreign
currency futures and related options on foreign currency futures as
a short or long hedge against possible variations in foreign
exchange rates. Such transactions may be effected with respect to
hedges on non-US dollar denominated securities owned by the Fund,
sold by the Fund but not yet delivered, or committed or anticipated
to be purchased by the Fund.
* Forward foreign exchange contracts--The Fund is authorized to
enter into forward foreign exchange contracts as a hedge against
either specific transactions or portfolio positions. Such contracts
are not entered on the Fund's records. However, the effect on
operations is recorded from the date the Fund enters into such
contracts. Premium or discount is amortized over the life of the
contracts.
Merrill Lynch International Equity Fund, November 30, 1998
NOTES TO FINANCIAL STATEMENTS (continued)
* Options--The Fund is authorized to write and purchase put and call
options. When the Fund writes an option, an amount equal to the
premium received by the Fund is reflected as an asset and an
equivalent liability. The amount of the liability is subsequently
marked to market to reflect the current market value of the option
written. When a security is purchased or sold through an exercise of
an option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or the Fund enters into a closing transaction), the Fund
realizes a gain or loss on the option to the extent of the premiums
received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(d) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required. Under the applicable foreign tax law, a
withholding tax may be imposed on interest, dividends, and capital
gains at various rates.
(e) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Dividend income is recorded on the ex-
dividend dates. Dividends from foreign securities where the ex-
dividend date may have passed are subsequently recorded when the
Fund has determined the ex-dividend date. Interest income (including
amortization of discount) is recognized on the accrual basis.
Realized gains and losses on security transactions are determined on
the identified cost basis.
(f) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are charged to expense on a straight-
line basis over a five-year period. Prepaid registration fees are
charged to expense as the related shares are issued.
(g) Dividends and distributions--Dividends and distributions paid by
the Fund are recorded on the ex-dividend dates. Distributions in
excess of realized capital gains are due primarily to differing tax
treatments for post-October losses.
(h) Custodian bank--The Fund recorded an amount payable to the
Custodian Bank reflecting an overnight overdraft which resulted from
a timing difference of security and foreign currency transaction
settlements.
2. Investment Advisory Agreement and Transactions with
Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Merrill Lynch Asset Management, L.P. ("MLAM"). The general partner
of MLAM is Princeton Services, Inc. ("PSI"), an indirect wholly-
owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is
the limited partner. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds
Distributor ("MLFD" or "Distributor"), a division of Princeton Funds
Distributor, Inc. ("PFD"), which is a wholly-owned subsidiary of
Merrill Lynch Group, Inc.
MLAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee of 0.75%, on an annual basis,
of the average daily value of the Fund's net assets. MLAM has
entered into a Sub-Advisory Agreement with Merrill Lynch Asset
Management U.K., Ltd. ("MLAM U.K."), an affiliate of MLAM, pursuant
to which MLAM pays MLAM U.K. a fee in an amount to be determined
from time to time by MLAM and MLAM U.K. but in no event in excess of
the amount that MLAM actually receives. For the six months ended
November 30, 1998, MLAM paid MLAM U.K. a fee of $162,229 pursuant to
such Agreement.
Pursuant to the Distribution Plans adopted by the Fund in accordance
with Rule 12b-1 under the Investment Company Act of 1940, the Fund
pays the Distributor ongoing account maintenance and distribution
fees. The fees are accrued daily and paid monthly at annual rates
based upon the average daily net assets of the shares as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.75%
Class C 0.25% 0.75%
Class D 0.25% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("MLPF&S"), a subsidiary of ML &
Co., also provides account maintenance and distribution services to
the Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the six months ended November 30, 1998, MLFD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of the
Fund's Class A and Class D Shares as follows:
MLFD MLPF&S
Class A $ 54 $ 710
Class D $425 $6,942
For the six months ended November 30, 1998, MLPF&S received
contingent deferred sales charges of $204,753 and $1,562 relating to
transactions in Class B and Class C Shares, respectively.
In addition, MLPF&S received $23,130 in commissions on the execution
of portfolio security transactions for the Fund for the six months
ended November 30, 1998.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of MLAM, PSI, FDS, PFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended November 30, 1998 were $206,977,608 and
$311,194,468, respectively.
Net realized gains (losses) for the six months ended November 30,
1998 and net unrealized gains (losses) as of November 30, 1998 were
as follows:
Realized Unrealized
Gains (Losses) Gains (Losses)
Investments:
Long-term $(12,425,032) $ 3,324,645
Short-term 9,236 (2,744)
Financial futures contracts (9,346,709) 54,621
Options written 79,794 1,941
Options purchased (374,497) --
------------ -------------
Total investments (22,057,208) 3,378,463
------------ -------------
Currency transactions:
Options purchased -- 13,800
Options written 755,300 (34,200)
Forward foreign exchange
contracts (1,144,911) (76,418)
Foreign currency
transactions 465,896 80,991
------------ -------------
Total currency transactions 76,285 (15,827)
------------ -------------
Total $(21,980,923) $ 3,362,636
============ =============
Transactions in call options written for the six months ended
November 30, 1998 were as follows:
Nominal Value
Covered by Premiums
Written Options Received
Outstanding call options
written at beginning of period $ 862,711 $ 55,794
Options written 12,027,675 169,138
Options expired (890,040) (79,794)
------------ -------------
Outstanding call options
written at end of period $ 12,000,346 $ 145,138
============ =============
As of November 30, 1998, net unrealized appreciation for Federal
income tax purposes aggregated $3,323,842, of which $21,590,160
related to appreciated securities and $18,266,318 related to
depreciated securities. At November 30, 1998, the aggregate cost of
investments, net of written options, for Federal income tax purposes
was $264,590,442.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest
transactions was $109,228,991 and $195,416,794 for the six months
ended November 30, 1998 and for the year ended May 31, 1998,
respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Six Months Dollar
Ended November 30, 1998 Shares Amount
Shares sold 1,030,187 $ 8,845,369
Shares issued to shareholders in
reinvestment of distributions 89,014 770,857
------------ --------------
Total issued 1,119,201 9,616,226
Shares redeemed (2,230,456) (19,686,939)
------------ --------------
Net decrease (1,111,255) $ (10,070,713)
============ ==============
Merrill Lynch International Equity Fund, November 30, 1998
NOTES TO FINANCIAL STATEMENTS (concluded)
Class A Shares for the Year Dollar
Ended May 31, 1998 Shares Amount
Shares sold 2,078,080 $ 21,677,428
Shares issued to shareholders in
reinvestment of distributions 633,646 5,506,383
------------ --------------
Total issued 2,711,726 27,183,811
Shares redeemed (2,710,923) (28,909,949)
------------ --------------
Net increase (decrease) 803 $ (1,726,138)
============ ==============
Class B Shares for the Six Months Dollar
Ended November 30, 1998 Shares Amount
Shares sold 964,669 $ 8,274,654
Shares issued to shareholders in
reinvestment of distributions 865,770 7,566,829
------------ --------------
Total issued 1,830,439 15,841,483
Shares redeemed (10,773,316) (91,788,382)
Automatic conversion of shares (348,028) (2,886,912)
------------ --------------
Net decrease (9,290,905) $ (78,833,811)
============ ==============
Class B Shares for the Year Dollar
Ended May 31, 1998 Shares Amount
Shares sold 5,510,516 $ 60,695,234
Shares issued to shareholders in
reinvestment of distributions 6,679,391 58,578,259
------------ --------------
Total issued 12,189,907 119,273,493
Shares redeemed (26,306,021) (275,682,157)
Automatic conversion of shares (474,667) (5,290,768)
------------ --------------
Net decrease (14,590,781) $ (161,699,432)
============ ==============
Class C Shares for the Six Months Dollar
Ended November 30, 1998 Shares Amount
Shares sold 486,567 $ 4,136,325
Shares issued to shareholders in
reinvestment of distributions 42,444 365,869
------------ --------------
Total issued 529,011 4,502,194
Shares redeemed (1,018,010) (8,666,829)
------------ --------------
Net decrease (488,999) $ (4,164,635)
============ ==============
Class C Shares for the Year Dollar
Ended May 31, 1998 Shares Amount
Shares sold 1,734,570 $ 19,355,604
Shares issued to shareholders in
reinvestment of distributions 320,806 2,774,977
------------ --------------
Total issued 2,055,376 22,130,581
Shares redeemed (2,524,843) (27,261,896)
------------ --------------
Net decrease (469,467) $ (5,131,315)
============ ==============
Class D Shares for the Six Months Dollar
Ended November 30, 1998 Shares Amount
Shares sold 316,171 $ 2,655,303
Automatic conversion of shares 348,685 2,886,912
Shares issued to shareholders in
reinvestment of distributions 217,406 1,895,784
------------ --------------
Total issued 882,262 7,437,999
Shares redeemed (2,791,249) (23,597,831)
------------ --------------
Net decrease (1,908,987) $ (16,159,832)
============ ==============
Class D Shares for the Year Dollar
Ended May 31, 1998 Shares Amount
Shares sold 3,449,207 $ 39,786,340
Automatic conversion of shares 470,693 5,290,768
Shares issued to shareholders in
reinvestment of distributions 1,613,654 14,103,337
------------ --------------
Total issued 5,533,554 59,180,445
Shares redeemed (7,952,491) (86,040,354)
------------ --------------
Net decrease (2,418,937) $ (26,859,909)
============ ==============
5. Commitments:
At November 30, 1998, the Fund had entered into foreign exchange
contracts, in addition to the contracts listed on the Schedule of
Investments, under which it had agreed to purchase and sell foreign
currency with an approximate value of $1,224,000 and $686,000,
respectively.
PORTFOLIO INFORMATION
Worldwide
Investments as of
November 30, 1998
Percent of
Ten Largest Equity Holdings Net Assets
MSCI United Kingdom OPALS
(Class B) 4.4%
MSCI France OPALS (Class B) 2.4
Telecom Italia S.p.A. 2.3
MSCI Italy OPALS (Class B) 2.3
MSCI Singapore OPALS (Class B) 1.5
MSCI Spain OPALS (Class B) 1.3
Novartis AG (Registered Shares) 1.2
MSCI Finland OPALS (Class B) 1.2
MSCI Denmark OPALS (Class B) 1.1
ING Groep N.V. 1.1
Ten Largest Industries Percent of
(Equity Investments) Net Assets
Banking 8.3%
Telecommunications 7.6
Health & Personal Care 6.3
Insurance 4.5
Merchandising 4.3
Energy Sources 3.7
Business & Public Services 3.4
Electronic Components &
Instrumentation 3.1
Utilities--Electrical & Gas 2.4
Food & Household Products 2.4
Percent of
Ten Largest Countries Net Assets
United Kingdom 21.1%
Japan 18.0
France 9.4
Germany 8.0
Switzerland 6.0
Italy 5.4
Netherlands 5.1
Australia 4.2
Sweden 2.3
Spain 2.1
Percent of
Geographical Asset Mix* Net Assets
Europe (Ex-United Kingdom
and Ireland) 42.7%
Japan 18.0
Pacific Basin (Ex-Japan) 7.6
United Kingdom and Ireland 21.8
Other Emerging Markets 1.4
North America 3.5
[FN]
*Percent of net assets may not equal 100%, and
excludes the impact of futures and options.
Financial Futures Contracts
Percent of
Country Issue Exchange Net Assets
Australia SFE-Ordinary SFE-Ordinary (0.8)%
France CAC 40 Index CAC 1.2
Germany DAXIndex DTB (0.5)
Hong Kong Hang Seng Hang Seng 0.5
Japan Nikkei Index CME (0.7)
Spain IBEX 35 IBEX 0.5
United Kingdom FTSE 100 LIFFE 0.6
------
0.8%
======
Merrill Lynch International Equity Fund, November 30, 1998
EQUITY PORTFOLIO CHANGES
For the Quarter Ended November 30, 1998
Additions
ABN AMRO Holding N.V.
AMP Limited
Abitibi--Consolidated Inc.
*Allied Zurich PLC
Banco Santander, S.A.
The Boots Company PLC
British American Tobacco PLC
Broken Hill Proprietary Co., Ltd.
*Buhrmann N.V.
Cable & Wireless Communications PLC
Cable & Wireless Optus Limited
Cadbury Schweppes PLC
Cap Gemini S.A.
Carrefour S.A.
Coles Myers Limited
Credit Suisse Group (Registered)
Deutsche Telekom AG
Diageo PLC
Enbridge Inc.
Foster's Brewing Group Limited
Heineken N.V.
Hindustan Petroleum Corporation Limited
HypoVereinsbank AG
Imasco Limited
Imperial Chemical Industries PLC
Inco Limited
Lend Lease Corp.
M.I.M. Holdings Limited
MSCI Finland OPALS (Class B)
MSCI France OPALS (Class B)
MSCI Italy OPALS (Class B)
*MSCI Korea OPALS (Class B)
MSCI Singapore OPALS (Class B)
MSCI South Korea OPALS (Class B)
MSCI Spain OPALS (ClassB)
MSCI United Kingdom OPALS (Class B)
Mannesmann AG
Marks & Spencer PLC
NTT Mobile Communication Network, Inc.
National Bank of Canada
Newcrest Mining
News Corporation Limited (Preferred)
Next PLC
Normandy Mining Limited
Novartis AG (Registered Shares)
Nycomed Amersham PLC
Peninsular and Oriental Stream
Navigation Company
Pernod Ricard
Placer Dome Inc.
Poco Petroleums Limited
Preussag
Promodes S.A.
Provident Financial PLC
Repsol, S.A.
Rhone-Poulenc S.A.
Rio Algom Limited
Roche Holding AG
Rolls-Royce PLC
SAP AG (Systeme, Anwendungen,
Produkte in der Datenverarbeitung)
Schneider S.A.
Schweiz Ruckverichere
Shanghai Industrial Holdings Limited
Shanks & McEwan Group PLC
Suncor Energy, Inc.
Swisscom AG (Registered)
TDK Corporation
Tabcorp Holdings
Telefonica, S.A.
Thomson--CSF S.A.
The Thomson Corporation
TransCanada PipeLines Limited
Unilever N.V.
Vodafone Group PLC
WMC Limited
Williams PLC
Wolters Kluwer N.V.
Woodside Petroleum
Zeneca Group PLC
Zurich Allied AG
Deletions
ASDA Group PLC
Akzo Nobel N.V.
Allied Domecq PLC (Ordinary)
*Allied Zurich PLC
Alpha Credit Bank S.A.
Anglian Water PLC
Associated British Foods PLC
Assurances Generales de France S.A. (AGF)
B.A.T. Industries PLC
Bank of Nova Scotia (The)
Banque Cantonale de Geneve (BCG)
Banque Nationale de Paris
Barclays PLC
Bass PLC
Bayerische Motoren Werke AG (BMW)
British Steel PLC
*Buhrmann N.V.
Compagnie Generale d'Industrie et
Participations (CGIP)
Compagnie Generale des Etablissements
Michelin (C.G.D.E.)(Class B)
Carlton Communications PLC
Carsi Buyuk Magazacilik A.S.
Cementos Mexicanos, S.A. de C.V. (Cemex)
(Class B)
Comalco Ltd.
Commerzbank AG
Companhia Energetica de Minas Gerais S.A.
(CEMIG) (ADR)
Continental AG
Dainippon Screen Manufacturing Co., Ltd.
Dresdner Bank AG
Enso OY (Class A)
Ergo-Versicherungsgruppe AG
Eridania Beghin-Say S.A.
European Vinyls Corporation
International N.V.
FAG Kugelfischer Georg Schaefer AG
Financiere Industrielle Gaz et Eaux S.A.
Fromageries Bel S.A.
GKN PLC
Goodman Fielder Limited
Granada Group PLC
Grupo Financiero Bancomer, S.A.
de C.V. (ADR)
Haci Omer Sabanci Holdings A.S.
Heidelberger Zement AG
Henkel KGaA
Henkel KGaA (Preferred)
Hoechst AG
Hugo Boss AG (Preferred)
Ispat International N.V.
Ispat International N.V. (NY Registered
Shares)
Jungheinrich AG (Preferred)
Kloeckner Werke AG
L'Air Liquide
Lahmeyer AG
LucasVarity PLC
MSCI Austria OPALS (Class B)
*MSCI Korea OPALS (Class B)
Magyar Tavkozlesi Reszvenytarsasag (ADR)
Metallgesellschaft AG
Metsa Serla OY (Class B)
Muenchener Rueckversicherungs--
Gesellschaft AG
NEC Corporation
National Bank of Greece S.A.
National Mutual Holdings
Nissho Iwai Corp.
Oil Search Limited
Oji Paper Co., Ltd.
Okocimskie Zaklady Piwowarskie S.A.
Orange PLC
Orbis S.A.
Outokumpu OY
Pacific Dunlop Ltd.
Panamerican Beverages, Inc. (US
Registered Shares)
Pasminco Limited
Pechiney, S.A. (Class A)
Petroleo Brasileiro S.A.--Petrobras (ADR)
Phillip Holzman AG
Pioneer International Limited
Qantas Airways Limited
Renault S.A.
Richter Gedeon Vegyeszeti Gyar
Reszvenytarsasag (GDR)
Rio Tinto Ltd.
Rio Tinto PLC
Royal Bank of Canada
Royal Dutch Petroleum Company
(NY Registered Shares)
Safeway PLC
Sagem S.A.
Sakura Bank Ltd.
Scottish and Newcastle PLC
Shell Transport & Trading Co. PLC
Societe EuraFrance S.A.
South African Breweries Ltd.
Takashimaya Co.
Tate & Lyle PLC
Telecomunicacoes Brasileiras S.A.--
Telebras (ADR)
Teleglobe Inc.
Union Bank of Switzerland (UBS)
UPM-Kymmene Corporation
Usinor Sacilor S.A.
Valeo S.A.
VIAG AG
Woolworth Limited
[FN]
*Added and deleted in the same quarter.
