UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-6521
Name of Fund: Merrill Lynch International Equity Fund
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Terry K. Glenn, President,
Merrill Lynch International Equity Fund, 800 Scudders Mill Road,
Plainsboro, NJ, 08536. Mailing address: P.O. Box 9011, Princeton,
NJ, 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 05/31/04
Date of reporting period: 06/01/03 - 11/30/03
Item 1 - Attach shareholder report
(BULL LOGO)
Merrill Lynch Investment Managers
www.mlim.ml.com
Merrill Lynch
International Equity
Fund
Semi-Annual Report
November 30, 2003
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.
A description of the policies and procedures that the Fund uses to
determine how to vote proxies relating to portfolio securities is
available (1) without charge, upon request, by calling toll-free
1-800-MER-FUND (1-800-637-3863); (2) on www.mutualfunds.ml.com; and
(3) on the Securities and Exchange Commission's website at
http://www.sec.gov.
Merrill Lynch International Equity Fund
Box 9011
Princeton, NJ
08543-9011
Merrill Lynch International Equity Fund
Portfolio Information as of November 30, 2003
Percent of
Ten Largest Equity Holdings Net Assets
Vodafone Group PLC 3.3%
Royal Bank of Scotland Group PLC 3.0
BP Amoco PLC 2.6
GlaxoSmithKline PLC 2.3
TotalFinaElf SA 2.3
Barclays PLC 2.2
BNP Paribas SA 2.1
Nestle SA (Registered Shares) 1.9
Novartis AG (Registered Shares) 1.8
Credit Suisse Group 1.8
Percent of
Ten Largest Countries Net Assets
United Kingdom 31.0%
Japan 16.1
France 10.3
Switzerland 7.5
Italy 4.6
Sweden 3.6
Canada 3.5
Ireland 3.4
Netherlands 3.1
South Korea 2.5
Five Largest Industries++ Percent of
(Equity Investments) Net Assets
Commercial Banks 17.8%
Oil & Gas 8.2
Pharmaceuticals 7.4
Wireless Telecommunication Services 5.4
Automobiles 4.4
++For Fund compliance purposes, "Industries" means any one or more
industry sub-classifications used by one or more widely recognized
market indexes or ratings group indexes, and/or as defined by Fund
management. This definition may combine such industry sub-
classifications for reporting ease.
Percent of
Geographic Asset Mix Net Assets*
Europe (Ex United Kingdom) 38.6%
United Kingdom 31.0
Japan 16.1
Pacific Basin/Asia (Ex Japan) 7.5
North America 4.3
Latin America 0.0++
*Total may not equal 100%.
++Amount is less than 0.1%.
MERRILL LYNCH INTERNATIONAL EQUITY FUND, NOVEMBER 30, 2003
A Letter From the President
Dear Shareholder
As 2003 closes, it seems appropriate to reflect on what has been a
meaningful year in many respects. We saw the beginning and the end
of all-out war in Iraq, global equity market uncertainty turned to
strength and an economic slowdown that finally started to reverse
trend in important areas around the globe.
The U.S. economy benefited from stimulative monetary and fiscal
policy, improving corporate profits and tightening credit spreads.
Gross domestic product growth rallied from a dismal 1.4% in the
first quarter of the year to an extraordinary 8.2% in the third
quarter. In Europe, the central bank initiated more active monetary
policy in an effort to rouse economic growth. The economies of
several Asian countries experienced strong growth in 2003. China,
in particular, is expected to grow at an annualized rate of 8% for
2003-2004. Latin America has benefited from a combination of
declining global risk and relative political stability.
Equity markets have made a strong showing this year, rebounding from
one of the most dismal three-year periods in history. The S&P 500
Index posted year-to-date and 12-month returns of +22.27% and
+15.09%, respectively, as of November 30, 2003. The MSCI World
Index, which measures the performance of equity markets in 23
developed countries worldwide, returned +25.26% year-to-date and
+19.17% over the past 12 months.
Against this backdrop, our portfolio managers continued to work
diligently to deliver on our commitment to provide superior
performance within reasonable expectations for risk and return. This
included striving to outperform our peers and the market indexes.
With that said, remember that the advice and guidance of a skilled
financial advisor often can mean the difference between successful
and unsuccessful investing. A financial professional can help you
choose those investments that will best serve you as you plan for
your financial future.
Finally, I am proud to premiere a new look to our shareholder
communications. Our portfolio manager commentaries have been trimmed
and organized in such a way that you can get the information you
need at a glance, in plain language. Today's markets are confusing
enough. We want to help you put it all in perspective. The report's
new size also allows us certain mailing efficiencies. Any cost
savings in production or postage are passed on to the Fund and,
ultimately, to Fund shareholders.
We thank you for trusting Merrill Lynch Investment Managers with
your investment assets, and we look forward to serving you in the
months and years ahead.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Trustee
MERRILL LYNCH INTERNATIONAL EQUITY FUND, NOVEMBER 30, 2003
A Discussion With Your Fund's Portfolio Managers
During the period, many investors focused on more speculative
investments, a trend that we were not comfortable pursuing.
How did the Fund perform during the period in light of the existing
market conditions?
For the six-month period ended November 30, 2003, Merrill Lynch
International Equity Fund's Class A, Class B, Class C and Class I
Shares had total returns of +11.43%, +11.09%, +11.22% and +11.78%,
respectively. The Fund's unmanaged benchmark, the Morgan Stanley
Capital International World (Ex-U.S.) Index, returned +20.30% for
the same period. (Fund results shown do not reflect sales charges
and would be lower if sales charges were included. Complete
performance information can be found on pages 6-9 of this report to
shareholders.)
The Fund's underperformance occurred in an environment characterized
by high-risk investor appetites, plentiful liquidity and optimism
regarding the U.S. economy that perpetuated the sharp global equity
market rally that began in March 2003. Contributing to the market
momentum was accommodative monetary policy globally and positive
economic data, including improving company earnings, increases in
consumer confidence and business indicators, and strong third-
quarter gross domestic product (GDP) growth in the United States. In
our view, however, company earnings benefited from cost cutting and
currency translation effects, while the exceptional GDP growth was
aided by transitory stimulus from mortgage-refinancing and tax cuts.
Furthermore, the rally was concentrated in particular areas of the
market where our analysis had led us to take underweight positions
relative to the benchmark, and this negatively impacted performance.
Economically sensitive sectors performed best during the six-month
period. Sectors thought to benefit more from an economic recovery,
such as technology and industrials, outperformed the broader market
while sectors such as consumer staples and energy lagged. Our
analysis suggested the valuations of many companies in these
cyclical areas were excessive given the medium-term earnings profile
we expect.
Within these sectors, lower-quality shares in particular
outperformed. Investors focused on more risky, low-quality shares on
the expectation that they would provide potentially greater rewards
during economic recovery. Companies with strong balance sheets and
stable earnings and dividend growth lagged the lower-quality shares.
Momentum had taken these low-quality share prices to levels we could
not justify; as such, we did not carry exposure to these types of
stocks.
Within the information technology sector, our underweighting of
semiconductor-related and technology hardware stocks hindered
relative results as these areas made sharp gains. Stock valuations
in these areas implied levels of earnings growth that we thought
were too high given the competitive environment and excess-capacity
issues these companies faced.
Our strategy within the financials sector was impacted by activity
in the U.K. banking sector. Domestic investors appeared to sell
Royal Bank of Scotland Group Plc (a portfolio holding) to buy HSBC
(a portfolio underweight) on the basis that it offered greater
exposure to the United States and Asia. However, our analysis
suggested that investors had been overpaying for the potential
offered by HSBC. We found similar global exposure could be gained
more cheaply by holding a combination of banks, such as Royal Bank
of Scotland and DBS Group in Asia.
In Japan, our strategy was impacted by a number of issues. First,
the technical selling pressure caused by "Daiko Henjo" (the partial
return of pension management to the government) led to declines for
some of the blue chip stocks held by the Fund. Second, investors
were concerned that a stronger yen would hurt exporters. Therefore,
they aggressively rotated out of exporting companies into domestic
shares, ignoring the extended valuations of the latter. We maintain
our view that the exporters' hedging policies can alleviate currency
risk, and historic analysis suggests they can operate successfully
with a stronger yen than they currently face.
The Portfolio did not maintain positions in any of the "big five"
Japanese banks, all of which made sharp gains during the period, and
performance was negatively affected as a result. (Mizuho Financial,
for example, was up 350% in U.S. dollar terms.) Investors speculated
that an improvement in the domestic economy and recent equity market
gains could lead to strong earnings upside for the banks. We believe
the banks still face structural hurdles and that recent sentiment
may be overly optimistic given the risks associated with these
stocks.
MERRILL LYNCH INTERNATIONAL EQUITY FUND, NOVEMBER 30, 2003
We remain committed to our strategy of investing in attractively
valued, high-quality franchises that we believe are capable of
producing sustained profits and cash-flow growth. We believe that,
in time, the positions we are taking will add value to the portfolio
relative to the benchmark.
What changes were made to the Portfolio during the period?
We increased our exposure to Japanese automakers by initiating
positions in Toyota Motor Corporation and Honda Motor Co., Ltd. In
our view, blue chip stocks such as these were being oversold as a
result of the "Daiko Henjo" phenomenon, creating a buying
opportunity. Both Toyota and Honda were trading at a discount
compared to many other Japanese shares and other automobile stocks,
particularly the three largest U.S. automakers.
In the financials sector, we added to our position in Credit Suisse
Group, which we believe had an attractive valuation relative to its
global peer group. Under new leadership, the company has lowered
costs and restructured its insurance business. We expect better
credit decisions going forward.
We reduced our exposure to materials, where we trimmed our positions
in the mining companies Rio Tinto PLC and BHP Billiton PLC as they
approached the top end of our fair value range. These shares
performed well as investors sought exposure to economically
sensitive stocks.
Changes in the Portfolio's technology exposure included reducing our
position in Nokia Oyj. Although the company is highly profitable and
the valuation undemanding for the sector, we became increasingly
concerned that Nokia's high margins would be threatened by intense
price competition in areas such as Asia. Some of the proceeds from
the sale were reinvested in Samsung, which was trading at a less
expensive valuation. Samsung has a leading position in the Asian
handset market.
How would you characterize the Portfolio's position at the close of
the period?
We continue to believe that stimulative fiscal and monetary policy
will underpin a U.S.-led global economic recovery. However,
plentiful capacity and low pricing power is likely to restrain
corporate investment spending. At the same time, we believe U.S.
consumer spending is not likely to accelerate significantly given
the waning momentum from falling interest rates, and income growth
will probably remain modest.
Overall, we remain focused on high-quality companies that offer a
combination of franchise strength and attractive valuations. The
Portfolio has economically sensitive areas concentrated in
financial, media, industrial and information technology printer
companies that possess these characteristics. We are underweight in
the retail and materials sectors, as well as in semiconductors,
networking and telecommunications equipment stocks, where valuations
remain too high in our view. The Portfolio also has exposure to
secular growth in areas such as medical equipment, as well as
undervalued franchises in areas such as banks, personal products and
beverages.
Historic evidence suggests that as the pace of economic and earnings
growth slows, investors will become more discerning and high-quality
stocks should resume market leadership. We believe the Portfolio is
positioned to benefit from this rotation. In addition, should the
U.S. dollar continue to weaken, international equities will
represent an attractive asset class for U.S. dollar-based investors.
Ian Rowley
Vice President and Co-Portfolio Manager
Nigel Waller
Co-Portfolio Manager
December 15, 2003
We are pleased to announce that Nigel Waller has been named
Co-Portfolio Manager of Merrill Lynch International Equity Fund.
Nigel Waller joins Ian Rowley, and together both are primarily
responsible for the day-to-day management of the Fund. Mr. Waller is
a Vice President of Merrill Lynch Investment Managers and has been a
member of Merrill Lynch Investment Managers' London-based Global
Equities Team since January 2003. Prior thereto, Mr. Waller was a
technology hardware and energy stocks analyst with Merrill Lynch
Investment Managers' European team from 2001 to 2003. He joined MLIM
in 1991, initially researching technology companies and then
managing European equity portfolios. Subsequently he managed Asian
equity portfolios, both in Singapore and after returning to the
United Kingdom in 1999.
MERRILL LYNCH INTERNATIONAL EQUITY FUND, NOVEMBER 30, 2003
Performance Data
About Fund Performance
Effective April 14, 2003, Class A Shares were redesignated Class I
Shares and Class D Shares were redesignated Class A Shares.
Investors are able to purchase shares of the Fund through multiple
pricing alternatives:
* Class A Shares incur a maximum initial sales charge of 5.25% and
an account maintenance fee of 0.25% (but no distribution fee).
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% declining to 0% after six years. All Class B Shares
purchased prior to June 1, 2001 will maintain the four-year
schedule. 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 A Shares after approximately eight
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 I Shares incur a maximum initial sales charge (front-end
load) of 5.25% and bear no ongoing distribution or account
maintenance fees. Class I Shares are available only to eligible
investors.
None of the past results shown should be considered a representation
of future performance. Performance results do not reflect the
deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. Figures shown in
each of the following 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.
MERRILL LYNCH INTERNATIONAL EQUITY FUND, NOVEMBER 30, 2003
Performance Data (continued)
Recent Performance Results
Ten-Year/
6-Month 12-Month Since Inception
As of November 30, 2003 Total Return Total Return Total Return
ML International Equity Fund--Class A Shares* +11.43% +17.15% +13.25%
ML International Equity Fund--Class B Shares* +11.09 +16.25 + 4.75
ML International Equity Fund--Class C Shares* +11.22 +16.30 - 7.25
ML International Equity Fund--Class I Shares* +11.78 +17.52 + 1.87
Morgan Stanley Capital International World (Ex-U.S.) Index** +20.30 +25.31 +57.99/+31.56
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge were included. Total
investment returns are based on changes in net asset values for the
periods shown, and assume reinvestment of all dividends and capital
gains distributions at net asset value on the ex-dividend date. The
Fund's ten year/since inception dates are ten years for Class A &
Class B Shares, and from 10/21/94 for Class C & Class I Shares.
**This unmanaged capitalization-weighted Index is comprised of a
representative sampling of stocks in 21 countries, excluding the
United States. Ten-year/since inception total returns are for ten
years and from 10/31/94, respectively.
MERRILL LYNCH INTERNATIONAL EQUITY FUND, NOVEMBER 30, 2003
Performance Data (continued)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
One Year Ended 11/30/03 +17.15% +11.00%
Five Years Ended 11/30/03 - 0.77 - 1.83
Ten Years Ended (11/30/03) + 1.25 + 0.71
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
One Year Ended 11/30/03 +16.25% +12.25%
Five Years Ended 11/30/03 - 1.53 - 1.91
Ten Years Ended 11/30/03 + 0.47 + 0.47
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after six years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
One Year Ended 11/30/03 +16.30% +15.30%
Five Years Ended 11/30/03 - 1.51 - 1.51
Inception (10/21/94) through
11/30/03 - 0.82 - 0.82
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after one year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return
Sales Charge Sales Charge**
Class I Shares*
One Year Ended 11/30/03 +17.52% +11.35%
Five Years Ended 11/30/03 - 0.49 - 1.56
Inception (10/21/94) through
11/30/03 + 0.20 - 0.39
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
MERRILL LYNCH INTERNATIONAL EQUITY FUND, NOVEMBER 30, 2003
Performance Data (concluded)
MSCI COUNTRY INDEX PERFORMANCE
Total Return for the Six-Month Period Ended November 30, 2003
Representing the Fund's Top Country Positions (In U.S. Dollars*)
A bar chart illustrating the following:
Country Percentage
Japan 32.65%
South Korea 31.75
Sweden 26.47
Canada 21.05
France 17.38
Netherlands 16.24
Switzerland 15.58
United Kingdom 14.76
Italy 11.34
Ireland 7.72
Source: Morgan Stanley Capital International World (Ex-U.S.) Index.
*For the six-month period ended November 30, 2003, total
investment return (in U.S. dollars) for the Morgan Stanley
Capital International World (Ex-U.S.) Index was +20.30%.
MERRILL LYNCH INTERNATIONAL EQUITY FUND, NOVEMBER 30, 2003
Schedule of Investments
Value Percent of
Europe Industry* Shares Held Common Stocks (in U.S. dollars) Net Assets
Finland Communications 100,860 Nokia Oyj (Series A) $ 1,817,140 0.7%
Equipment
Paper & Forest 97,490 UPM-Kymmene Oyj 1,803,170 0.7
Products
Total Common Stocks in Finland 3,620,310 1.4
France Automobiles 21,650 PSA Peugeot Citroen 1,018,091 0.4
Building Products 34,870 Compagnie de Saint-Gobain 1,567,450 0.6
Chemicals 22,771 Air Liquide 3,684,906 1.5
Commercial Banks 92,333 BNP Paribas SA 5,213,008 2.1
Diversified 94,625 ++France Telecom SA 2,420,532 1.0
Telecommunication
Services
Food & Staples 11,956 Carrefour SA 646,931 0.3
Retailing
Food Products 3,948 Groupe Danone 618,060 0.2
Insurance 56,770 Axa 1,102,413 0.4
Media 26,341 ++Vivendi Universal SA 604,345 0.2
Oil & Gas 35,527 TotalFinaElf SA 5,757,657 2.3
Pharmaceuticals 32,915 Aventis SA 1,911,211 0.8
Road & Rail 41,544 Autoroutes du Sud de la France 1,344,568 0.5
Total Common Stocks in France 25,889,172 10.3
Germany Automobiles 25,887 Bayerische Motoren Werke (BMW) AG 1,139,760 0.5
Diversified 21,200 Deutsche Boerse AG 1,067,577 0.4
Financial Services
Electric Utilities 52,200 E.On AG 2,959,663 1.2
Thrifts & Mortgage 37,327 ++Hypo Real Estate Holding AG 796,888 0.3
Finance
Total Common Stocks in Germany 5,963,888 2.4
Ireland Commercial Banks 199,428 Allied Irish Banks PLC 2,949,931 1.2
22,188 Anglo Irish Bank Corporation PLC 301,341 0.1
106,720 Anglo Irish Bank Corporation PLC 1,450,673 0.6
185,174 Bank of Ireland 2,308,468 0.9
------------- ------
7,010,413 2.8
Construction 82,237 CRH PLC 1,537,809 0.6
Materials
Total Common Stocks in Ireland 8,548,222 3.4
MERRILL LYNCH INTERNATIONAL EQUITY FUND, NOVEMBER 30, 2003
Schedule of Investments (continued)
Value Percent of
Europe Industry* Shares Held Common Stocks (in U.S. dollars) Net Assets
Italy Commercial Banks 423,516 Banca Intesa SpA $ 1,188,452 0.5%
79,100 Banco Popolare di Verona e Novara Scrl 1,305,822 0.5
279,870 Intesa BCI SpA 1,054,079 0.4
680,584 Unicredito Italiano SpA 3,423,165 1.3
------------- ------
6,971,518 2.7
Insurance 80,000 Assicurazioni Generali 1,998,473 0.8
Oil & Gas 159,965 ENI SpA 2,727,261 1.1
Total Common Stocks in Italy 11,697,252 4.6
Netherlands Air Freight & 72,305 TNT Post Group NV 1,560,096 0.6
Logistics
Diversified 47,000 Euronext NV 1,126,215 0.4
Financial Services 72,779 ING Groep NV 1,558,982 0.6
------------- ------
2,685,197 1.0
Food Products 49,575 Unilever NV 'A' 2,974,249 1.2
Insurance 54,131 Aegon NV 722,191 0.3
Total Common Stocks in the Netherlands 7,941,733 3.1
Spain Commercial Banks 23,500 Banco Popular Espanol SA 1,232,132 0.5
Diversified 232,147 Telefonica SA 3,005,366 1.2
Telecommunication
Services
Tobacco 54,000 Altadis 1,441,533 0.6
Total Common Stocks in Spain 5,679,031 2.3
Sweden Building Products 172,423 Assa Abloy AB 'B' 1,962,438 0.8
Commercial Banks 138,000 Skandinaviska Enskilda Banken (SEB) 'A' 1,798,944 0.7
Insurance 240,700 Skandia Forsakrings AB 812,304 0.3
Machinery 36,012 SKF AB 'B' 1,317,785 0.5
103,846 Sandvik AB 3,305,272 1.3
------------- ------
4,623,057 1.8
Total Common Stocks in Sweden 9,196,743 3.6
Switzerland Capital Markets 132,325 Credit Suisse Group 4,391,215 1.8
43,663 UBS AG (Registered Shares) 2,811,793 1.1
------------- ------
7,203,008 2.9
Food Products 20,583 Nestle SA (Registered Shares) 4,784,523 1.9
Pharmaceuticals 105,800 Novartis AG (Registered Shares) 4,468,521 1.8
26,463 Roche Holding AG 2,384,792 0.9
------------- ------
6,853,313 2.7
Total Common Stocks in Switzerland 18,840,844 7.5
MERRILL LYNCH INTERNATIONAL EQUITY FUND, NOVEMBER 30, 2003
Schedule of Investments (continued)
Value Percent of
Europe Industry* Shares Held Common Stocks (in U.S. dollars) Net Assets
United Kingdom Beverages 270,005 Diageo PLC $ 3,366,669 1.3%
Building Products 69,000 Bovis Homes Group PLC 516,806 0.2
38,100 Wilson Bowden PLC 638,881 0.3
------------- ------
1,155,687 0.5
Commercial Banks 638,542 Barclays PLC 5,628,257 2.2
266,169 Royal Bank of Scotland Group PLC 7,429,620 3.0
------------- ------
13,057,877 5.2
Commercial Services 284,250 Bunzl PLC 2,169,349 0.9
& Supplies
Diversified 298,171 BT Group PLC 891,006 0.3
Telecommunication
Services
Electric Utilities 70,000 ++British Energy PLC (Deferred Shares) 1 0.0
Food & Staples 577,818 Tesco PLC 2,471,979 1.0
Retailing
Gas Utilities 584,685 Centrica PLC 1,903,042 0.7
Health Care 103,470 Alliance Unichem PLC 894,213 0.3
Providers & Services
Hotels, Restaurants 180,782 Compass Group PLC 1,086,658 0.4
& Leisure
Household Durables 81,200 Barratt Developments PLC 683,596 0.3
83,229 The Berkeley Group PLC 1,147,994 0.5
78,600 Persimmon PLC 629,940 0.2
------------- ------
2,461,530 1.0
Industrial 192,805 Smiths Industries PLC 2,208,428 0.9
Conglomerates
Insurance 215,614 Prudential Corporation PLC 1,654,801 0.7
Media 160,275 ++British Sky Broadcasting Group PLC ("BSkyB") 1,857,874 0.7
97,969 EMAP PLC 1,422,915 0.6
511,823 Reed Elsevier PLC 4,216,440 1.7
215,224 WPP Group PLC 2,061,752 0.8
------------- ------
9,558,981 3.8
Metals & Mining 86,380 Billiton PLC 647,724 0.2
49,800 Rio Tinto PLC (Registered Shares) 1,189,658 0.5
------------- ------
1,837,382 0.7
Multi-Utilities & 437,872 National Grid Group PLC 2,959,582 1.2
Unregulated Power
Oil & Gas 932,142 BP Amoco PLC 6,504,759 2.6
668,555 Shell Transport & Trading Company 4,231,317 1.6
------------- ------
10,736,076 4.2
Pharmaceuticals 53,087 AstraZeneca Group PLC 2,409,452 0.9
255,459 GlaxoSmithKline PLC 5,759,894 2.3
------------- ------
8,169,346 3.2
MERRILL LYNCH INTERNATIONAL EQUITY FUND, NOVEMBER 30, 2003
Schedule of Investments (continued)
Value Percent of
Europe Industry* Shares Held Common Stocks (in U.S. dollars) Net Assets
United Kingdom Tobacco 90,770 British American Tobacco PLC $ 1,138,828 0.4%
(concluded) 37,976 Imperial Tobacco Group PLC 695,584 0.3
------------- ------
1,834,412 0.7
Transportation 205,255 BAA PLC 1,667,962 0.7
Infrastructure
Wireless 3,585,791 Vodafone Group PLC 8,232,976 3.3
Telecommunication
Services
Total Common Stocks in the United Kingdom 78,317,957 31.0
Total Common Stocks in Europe
(Cost--$148,412,917) 175,695,152 69.6
North America
Canada Aerospace & Defense 225,459 Bombardier Inc. 'B' 893,233 0.3
Commercial Banks 61,439 Royal Bank of Canada 2,930,866 1.2
Diversified 59,356 Power Financial Corporation 2,136,980 0.8
Financial Services
Food & Staples 65,348 ++Shoppers Drug Mart Corporation 1,406,598 0.6
Retailing
Oil & Gas 24,000 EnCana Corp. 881,520 0.3
33,747 Suncor Energy, Inc. 754,174 0.3
------------- ------
1,635,694 0.6
Total Common Stocks in Canada 9,003,371 3.5
United States Software 77,738 ++Amdocs Limited 1,945,005 0.8
Total Common Stocks in the United States 1,945,005 0.8
Total Common Stocks in North America
(Cost--$8,916,791) 10,948,376 4.3
Pacific Basin/Asia
Australia Beverages 356,600 Foster's Brewing Group Limited 1,135,357 0.5
Commercial Banks 42,305 Commonwealth Bank of Australia 844,888 0.3
45,500 National Australia Bank Limited 952,156 0.4
166,900 Westpac Banking Corporation Limited 1,847,763 0.7
------------- ------
3,644,807 1.4
Commercial Services 145,345 Brambles Industries Limited 480,634 0.2
& Supplies
Total Common Stocks in Australia 5,260,798 2.1
MERRILL LYNCH INTERNATIONAL EQUITY FUND, NOVEMBER 30, 2003
Schedule of Investments (continued)
Pacific Value Percent of
Basin/Asia Industry* Shares Held Common Stocks (in U.S. dollars) Net Assets
Hong Kong Commercial Banks 478,200 Bank of East Asia, Ltd. $ 1,502,399 0.6%
99,200 Dah Sing Financial Group 734,455 0.3
------------- ------
2,236,854 0.9
Electric Utilities 206,635 Hongkong Electric Holdings Limited 827,466 0.3
Specialty Retail 189,000 Esprit Holdings Limited 603,531 0.3
Total Common Stocks in Hong Kong 3,667,851 1.5
Japan Automobiles 43,100 Honda Motor Co., Ltd. 1,763,039 0.7
275,800 Nissan Motor Co., Ltd. 3,152,863 1.2
131,500 Toyota Motor Corporation 3,950,283 1.6
------------- ------
8,866,185 3.5
Chemicals 120,000 Kuraray Co., Ltd. 894,083 0.3
40,700 Shin-Etsu Chemical Co., Ltd. 1,501,351 0.6
------------- ------
2,395,434 0.9
Construction & 263,000 Obayashi Corporation 1,006,182 0.4
Engineering
Consumer Finance 16,000 Orix Corporation 1,173,119 0.5
Electrical Equipment 17,900 Mabuchi Motor Co., Ltd. 1,291,180 0.5
Food Products 71,700 Katokichi Co., Ltd. 1,136,516 0.4
Health Care 75,000 Olympus Optical Co., Ltd. 1,605,871 0.6
Equipment & Supplies
Household Durables 7,200 Funai Electric Co., Ltd. 932,871 0.4
Household Products 21,000 Kao Corporation 428,552 0.2
Insurance 118 Millea Holdings, Inc. 1,271,366 0.5
Leisure Equipment 54,000 Fuji Photo Film 1,528,488 0.6
& Products
Office Electronics 94,000 Canon, Inc. 4,342,951 1.7
230,000 Ricoh Co., Ltd. 4,195,946 1.7
------------- ------
8,538,897 3.4
Pharmaceuticals 47,000 Takeda Chemical Industries, Ltd. 1,802,411 0.7
Semiconductors 7,700 Rohm Company Ltd. 900,630 0.4
& Semiconductor
Equipment
Trading Companies 211,000 Mitsubishi Corporation 1,936,222 0.8
& Distributors 211,000 Mitsui & Co., Ltd. 1,419,896 0.6
------------- ------
3,356,118 1.4
Wireless 339 KDDI Corporation 1,767,431 0.7
Telecommunication 1,235 NTT DoCoMo, Inc. 2,661,249 1.0
Services ------------- ------
4,428,680 1.7
Total Common Stocks in Japan 40,662,500 16.1
MERRILL LYNCH INTERNATIONAL EQUITY FUND, NOVEMBER 30, 2003
Schedule of Investments (continued)
Pacific Value Percent of
Basin/Asia Industry* Shares Held Common Stocks (in U.S. dollars) Net Assets
Singapore Road & Rail 1,285,165 ComfortDelGro Corporation Limited $ 574,017 0.2%
Total Common Stocks in Singapore 574,017 0.2
South Korea Metals & Mining 14,700 POSCO (ADR) (d) 438,795 0.2
Semiconductors 12,600 Samsung Electronics (GDR) (e)(f) 2,431,800 1.0
& Semiconductor
Equipment
Tobacco 305,500 KT&G Corporation (GDR) (e)(f) 2,850,315 1.1
Wireless 24,000 SK Telecom Co., Ltd. (ADR) (d) 428,400 0.2
Telecommunication
Services
Total Common Stocks in South Korea 6,149,310 2.5
Taiwan Computers & 57,300 Hon Hai Precision Industry Co., Ltd. (GDR) (e) 449,805 0.2
Peripherals
Diversified 95,500 Chunghwa Telecom Co., Ltd. (ADR) (d) 1,402,895 0.5
Telecommunication
Services
Total Common Stocks in Taiwan 1,852,700 0.7
Thailand Commercial Banks 357,200 ++Bangkok Bank Public Company Limited 'Foreign' 787,316 0.3
Wireless 315,100 Advanced Info Service Public Company
Telecommunication Limited 'Foreign Registered' 512,999 0.2
Services
Total Common Stocks in Thailand 1,300,315 0.5
Total Common Stocks in the Pacific Basin/Asia
(Cost---$55,111,179) 59,467,491 23.6
Europe Face Amount Fixed Income Securities
France Insurance US$ 3,548 ++Axa SA, 0%** due 12/21/2004 63,582 0.0
Total Fixed Income Securities in Europe
(Cost--$52,601) 63,582 0.0
Latin America
Brazil Metals & Mining 44,000 Companhia Vale do Rio Doce, 0% due
12/31/2049 (a) 0 0.0
Total Fixed Income Securities in
Latin America (Cost--$0) 0 0.0
MERRILL LYNCH INTERNATIONAL EQUITY FUND, NOVEMBER 30, 2003
Schedule of Investments (concluded)
Beneficial Interest/ Value Percent of
Shares Held Short-Term Securities (in U.S. dollars) Net Assets
US$ 3,161,309 Merrill Lynch Liquidity Series, LLC Cash
Sweep Series I (b) $ 3,161,309 1.3%
US$ 1,173,750 Merrill Lynch Liquidity Series, LLC Money
Market Series (b)(c) 1,173,750 0.5
391,250 Merrill Lynch Premier Institutional Fund (b)(c) 391,250 0.1
Total Short-Term Securities
(Cost--$4,726,309) 4,726,309 1.9
Total Investments (Cost--$217,219,797) 250,900,910 99.4
Other Assets Less Liabilities 1,572,270 0.6
------------- ------
Net Assets $ 252,473,180 100.0%
============= ======
++Non-income producing security.
*For Fund compliance purposes, "Industry" means any one or more
of the industry sub-classifications used by one or more widely
recognized market indexes or ratings group indexes, and/or as
defined by Fund management. This definition may not apply for
purposes of this report, which may combine such industry sub-
classifications for reporting ease.
**Represents a zero coupon or step bond; the interest rate on a step
bond represents the fixed rate of interest that will commence its
accrual on a predetermined date until maturity.
(a)Received through a bonus issue from Compania Vale do Rio Doce. As
of November 30, 2003, the debentures have not commenced trading and
the coupon rate has not been determined.
(b)Investments in companies considered to be an affiliate of the
Fund (such companies are defined as "Affiliated Companies" in
Section 2(a)(3) of the Investment Company Act of 1940) are as
follows:
Interest/
Net Dividend
Affiliate Activity Income
Merrill Lynch Liquidity Series,
LLC Cash Sweep Series I $ (712,922) $ 17,527
Merrill Lynch Liquidity Series,
LLC Money Market Series $ (4,969,530) $ 55,413
Merrill Lynch Premier
Institutional Fund (2,916,670) $ 28,711
(c)Security was purchased with the cash proceeds from securities
loans.
(d)American Depositary Receipts (ADR).
(e)Global Depositary Receipts (GDR).
(f)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
See Notes to Financial Statements.
MERRILL LYNCH INTERNATIONAL EQUITY FUND, NOVEMBER 30, 2003
Statement of Assets and Liabilities
As of November 30, 2003
Assets
Investments, at value (including securities loaned at $1,495,153)
(identified cost--$217,219,797) $ 250,900,910
Cash 46,697
Foreign cash (cost--$842,377) 872,860
Receivables:
Securities sold $ 1,967,232
Dividends 715,456
Beneficial interest sold 214,027
Interest 1,721
Securities lending--net 420 2,898,856
---------------
Prepaid registration fees 73,025
---------------
Total assets 254,792,348
---------------
Liabilities
Collateral on securities loaned, at value 1,565,000
Payables:
Beneficial interest redeemed 280,894
Securities purchased 145,538
Investment adviser 140,079
Other affiliates 114,254
Distributor 46,071 726,836
---------------
Accrued expenses 27,332
---------------
Total liabilities 2,319,168
---------------
Net Assets
Net assets $ 252,473,180
===============
Net Assets Consist of
Class A Shares of beneficial interest, $.10 par value, unlimited number
of shares authorized $ 1,654,338
Class B Shares of beneficial interest, $.10 par value, unlimited number
of shares authorized 235,326
Class C Shares of beneficial interest, $.10 par value, unlimited number
of shares authorized 147,727
Class I Shares of beneficial interest, $.10 par value, unlimited number
of shares authorized 1,176,146
Paid-in capital in excess of par 326,642,296
Undistributed investment income--net $ 935,648
Accumulated realized capital losses on investments and foreign currency
transactions--net (112,056,491)
Unrealized appreciation on investments and foreign currency
transactions--net 33,738,190
---------------
Total accumulated losses--net (77,382,653)
---------------
Net Assets $ 252,473,180
===============
Net Asset Value
Class A--Based on net assets of $130,277,130 and 16,543,377 shares of
beneficial interest outstanding $ 7.87
===============
Class B--Based on net assets of $18,208,428 and 2,353,256 shares of
beneficial interest outstanding $ 7.74
===============
Class C--Based on net assets of $11,223,890 and 1,477,266 shares of
beneficial interest outstanding $ 7.60
===============
Class I--Based on net assets of $92,763,732 and 11,761,456 shares of
beneficial interest outstanding $ 7.89
===============
See Notes to Financial Statements.
MERRILL LYNCH INTERNATIONAL EQUITY FUND, NOVEMBER 30, 2003
Statement of Operations
For the Six Months Ended November 30, 2003
Investment Income
Dividends (net of $244,821 foreign withholding tax) $ 2,544,799
Interest 17,667
Securities lending--net 84,124
---------------
Total income 2,646,590
---------------
Expenses
Investment advisory fees $ 862,952
Account maintenance--Class A 145,793
Transfer agent fees--Class A 114,376
Account maintenance fees and distribution fees--Class B 93,194
Transfer agent fees--Class I 82,539
Custodian fees 67,388
Accounting services 61,080
Account maintenance and distribution fees--Class C 53,415
Professional fees 42,033
Printing and shareholder reports 30,095
Registration fees 27,052
Trustees' fees and expenses 24,279
Transfer agent fees--Class B 22,928
Transfer agent fees--Class C 12,756
Pricing fees 7,357
Other 10,013
---------------
Total expenses 1,657,250
---------------
Investment income--net 989,340
---------------
Realized & Unrealized Gain on Investments & Foreign Currency Transactions--Net
Realized gain on:
Investments--net 3,203,256
Foreign currency transactions--net 100,783 3,304,039
---------------
Change in unrealized appreciation on:
Investments--net 21,422,157
Foreign currency transactions--net 6,729 21,428,886
--------------- ---------------
Total realized and unrealized gain on investments and foreign currency
transactions--net 24,732,925
---------------
Net Increase in Net Assets Resulting from Operations $ 25,722,265
===============
See Notes to Financial Statements.
MERRILL LYNCH INTERNATIONAL EQUITY FUND, NOVEMBER 30, 2003
Statements of Changes in Net Assets
For the Six
Months Ended For the Year
November 30, Ended May 31,
Increase (Decrease) in Net Assets: 2003 2003
Operations
Investment income--net $ 989,340 $ 1,934,319
Realized gain (loss)on investments and foreign currency transactions--net 3,304,039 (40,478,318)
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions--net 21,428,886 12,371,050
--------------- ---------------
Net increase (decrease) in net assets resulting from operations 25,722,265 (26,172,949)
--------------- ---------------
Dividends to Shareholders
Investment income--net:
Class A (1,550,638) (545,683)
Class B (32,996) --
Class C (57,142) --
Class I (1,278,065) (495,809)
--------------- ---------------
Net decrease in net assets resulting from dividends to shareholders (2,918,841) (1,041,492)
--------------- ---------------
Beneficial Interest Transactions
Net increase in net assets derived from beneficial interest transactions 13,499,323 16,990,107
--------------- ---------------
Net Assets
Total increase (decrease) in net assets 36,302,747 (10,224,334)
Beginning of period 216,170,433 226,394,767
--------------- ---------------
End of period* $ 252,473,180 $ 216,170,433
=============== ===============
*Undistributed investment income--net $ 935,648 $ 2,865,149
=============== ===============
See Notes to Financial Statements.
MERRILL LYNCH INTERNATIONAL EQUITY FUND, NOVEMBER 30, 2003
Financial Highlights
Class A
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
November 30, For the Year Ended May 31,
Increase (Decrease) in Net Asset Value: 2003 2003++ 2002++ 2001++ 2000++
Per Share Operating Performance
Net asset value, beginning of period $ 7.16 $ 8.19 $ 9.13 $ 11.10 $ 9.20
---------- ---------- ---------- ---------- ----------
Investment income--net*** .03 .07 .03 .01 .06
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net .78 (1.06) (.84) (1.89) 1.84
---------- ---------- ---------- ---------- ----------
Total from investment operations .81 (.99) (.81) (1.88) 1.90
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.10) (.04) (.04) -- --
Realized gain on investments--net -- -- (.09) -- --
In excess of realized gain on
investments--net -- -- -- (.09) --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.10) (.04) (.13) (.09) --
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 7.87 $ 7.16 $ 8.19 $ 9.13 $ 11.10
========== ========== ========== ========== ==========
Total Investment Return**
Based on net asset value per share 11.43%++++ (12.06%) (8.96%) (17.01%) 20.65%
========== ========== ========== ========== ==========
Ratios to Average Net Assets
Expenses, excluding reorganization expenses 1.43%* 1.53% 1.57% 1.51% 1.57%
========== ========== ========== ========== ==========
Expenses 1.43%* 1.53% 1.57% 1.54% 1.66%
========== ========== ========== ========== ==========
Investment income--net .87%* 1.07% .40% .14% .55%
========== ========== ========== ========== ==========
Supplemental Data
Net assets, end of period (in thousands) $ 130,277 $ 108,162 $ 103,791 $ 28,905 $ 41,931
========== ========== ========== ========== ==========
Portfolio turnover 41.40% 140.97% 135.54% 154.99% 149.78%
========== ========== ========== ========== ==========
*Annualized.
**Total investment returns exclude the effects of sales charges.
***Based on average shares outstanding.
++Effective April 14, 2003, Class D Shares were redesignated Class A
Shares.
++++Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH INTERNATIONAL EQUITY FUND, NOVEMBER 30, 2003
Financial Highlights (continued)
Class B
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
November 30, For the Year Ended May 31,
Increase (Decrease) in Net Asset Value: 2003 2003 2002 2001 2000
Per Share Operating Performance
Net asset value, beginning of period $ 6.98 $ 8.00 $ 8.96 $ 10.97 $ 9.17
---------- ---------- ---------- ---------- ----------
Investment income (loss)--net*** --++ --++ (.05) (.07) (.03)
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net .77 (1.02) (.82) (1.85) 1.83
---------- ---------- ---------- ---------- ----------
Total from investment operations .77 (1.02) (.87) (1.92) 1.80
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.01) -- -- -- --
Realized gain on investments--net -- -- (.09) -- --
In excess of realized gain on
investments--net -- -- -- (.09) --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.01) -- (.09) (.09) --
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 7.74 $ 6.98 $ 8.00 $ 8.96 $ 10.97
========== ========== ========== ========== ==========
Total Investment Return**
Based on net asset value per share 11.09%++++ (12.75%) (9.76%) (17.58%) 19.63%
========== ========== ========== ========== ==========
Ratios to Average Net Assets
Expenses, excluding reorganization expenses 2.22%* 2.35% 2.33% 2.30% 2.35%
========== ========== ========== ========== ==========
Expenses 2.22%* 2.35% 2.33% 2.33% 2.44%
========== ========== ========== ========== ==========
Investment income (loss)--net .11%* .06% (.60%) (.65%) (.26%)
========== ========== ========== ========== ==========
Supplemental Data
Net assets, end of period (in thousands) $ 18,208 $ 19,491 $ 40,854 $ 97,211 $ 150,140
========== ========== ========== ========== ==========
Portfolio turnover 41.40% 140.97% 135.54% 154.99% 149.78%
========== ========== ========== ========== ==========
*Annualized.
**Total investment returns exclude the effects of sales charges.
***Based on average shares outstanding.
++Amount is less than $.01 per share.
++++Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH INTERNATIONAL EQUITY FUND, NOVEMBER 30, 2003
Financial Highlights (continued)
Class C
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
November 30, For the Year Ended May 31,
Increase (Decrease) in Net Asset Value: 2003 2003 2002 2001 2000
Per Share Operating Performance
Net asset value, beginning of period $ 6.87 $ 7.88 $ 8.83 $ 10.81 $ 9.03
---------- ---------- ---------- ---------- ----------
Investment income (loss)--net*** --++ .01 (.04) (.07) (.02)
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net .77 (1.02) (.82) (1.82) 1.80
---------- ---------- ---------- ---------- ----------
Total from investment operations .77 (1.01) (.86) (1.89) 1.78
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.04) -- -- -- --
Realized gain on investments--net -- -- (.09) -- --
In excess of realized gain on
investments--net -- -- -- (.09) --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.04) -- (.09) (.09) --
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 7.60 $ 6.87 $ 7.88 $ 8.83 $ 10.81
========== ========== ========== ========== ==========
Total Investment Return**
Based on net asset value per share 11.22%++++ (12.82%) (9.79%) (17.56%) 19.71%
========== ========== ========== ========== ==========
Ratios to Average Net Assets
Expenses, excluding reorganization expenses 2.22%* 2.33% 2.33% 2.29% 2.41%
========== ========== ========== ========== ==========
Expenses 2.22%* 2.33% 2.33% 2.32% 2.51%
========== ========== ========== ========== ==========
Investment income (loss)--net .10%* .17% (.50%) (.66%) .54%
========== ========== ========== ========== ==========
Supplemental Data
Net assets, end of period (in thousands) $ 11,224 $ 10,586 $ 14,696 $ 20,987 $ 33,999
========== ========== ========== ========== ==========
Portfolio turnover 41.40% 140.97% 135.54% 154.99% 149.78%
========== ========== ========== ========== ==========
*Annualized.
**Total investment returns exclude the effects of sales charges.
***Based on average shares outstanding.
++Amount is less than $.01 per share.
++++Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH INTERNATIONAL EQUITY FUND, NOVEMBER 30, 2003
Financial Highlights (concluded)
Class I
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
November 30, For the Year Ended May 31,
Increase (Decrease) in Net Asset Value: 2003 2003++ 2002++ 2001++ 2000++
Per Share Operating Performance
Net asset value, beginning of period $ 7.17 $ 8.20 $ 9.14 $ 11.08 $ 9.16
---------- ---------- ---------- ---------- ----------
Investment income--net*** .04 .09 .06 .05 .09
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net .80 (1.06) (.86) (1.90) 1.83
---------- ---------- ---------- ---------- ----------
Total from investment operations .84 (.97) (.80) (1.85) 1.92
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.12) (.06) (.05) -- --
Realized gain on investments--net -- -- (.09) -- --
In excess of realized gain on
investments--net -- -- -- (.09) --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.12) (.06) (.14) (.09) --
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 7.89 $ 7.17 $ 8.20 $ 9.14 $ 11.08
========== ========== ========== ========== ==========
Total Investment Return**
Based on net asset value per share 11.78%++++ (11.86%) (8.82%) (16.77%) 20.96%
========== ========== ========== ========== ==========
Ratios to Average Net Assets
Expenses, excluding reorganization expenses 1.18%* 1.28% 1.31% 1.26% 1.32%
========== ========== ========== ========== ==========
Expenses 1.18%* 1.28% 1.31% 1.29% 1.41%
========== ========== ========== ========== ==========
Investment income--net 1.11%* 1.34% .72% .45% .83%
========== ========== ========== ========== ==========
Supplemental Data
Net assets, end of period (in thousands) $ 92,764 $ 77,931 $ 67,054 $ 32,933 $ 34,693
========== ========== ========== ========== ==========
Portfolio turnover 41.40% 140.97% 135.54% 154.99% 149.78%
========== ========== ========== ========== ==========
*Annualized.
**Total investment returns exclude the effects of sales charges.
***Based on average shares outstanding.
++Effective April 14, 2003, Class A Shares were redesignated Class I
Shares.
++++Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH INTERNATIONAL EQUITY FUND, NOVEMBER 30, 2003
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 amended, as a
diversified, open-end management investment company. The Fund's
financial statements are prepared in conformity with accounting
principles generally accepted in the United States of America, 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 multiple classes of
shares. Shares of Class A and Class I 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 A, Class B and Class C
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. Income, expenses
(other than expenses attributable to a specific class) and realized
and unrealized gains and losses on investments and foreign currency
transactions are allocated daily to each class based on its relative
net assets. The following is a summary of significant accounting
policies followed by the Fund.
(a) Valuation of investments--Equity securities that are held by the
Fund that are traded on stock exchanges or the Nasdaq National
Market are valued at the last sale price or official close price on
the exchange, as of the close of business on the day the securities
are being valued or, lacking any sales, at the last available bid
price for long positions, and at the last available ask price for
short positions. In cases where equity securities are traded on more
than one exchange, the securities are valued on the exchange
designated as the primary market by or under the authority of the
Board of Trustees of the Fund. Long positions traded in the over-the-
counter ("OTC") market, Nasdaq Small Cap or Bulletin Board are
valued at the last available bid price or yield equivalent obtained
from one or more dealers or pricing services approved by the Board
of Trustees of the Fund. Short positions traded in the OTC market
are valued at the last available ask price. Portfolio securities
that are traded both in the OTC market and on a stock exchange are
valued according to the broadest and most representative market.
Options written are valued at the last sale price in the case of
exchange-traded options or, in the case of options traded in the OTC
market, the last ask price. Options purchased are valued at their
last sale price in the case of exchange-traded options or, in the
case of options traded in the OTC market, the last bid price. Swap
agreements are valued daily based upon quotations from market
makers. Financial futures contracts and options thereon, which are
traded on exchanges, are valued at their last sale price as of the
close of such exchanges. Obligations with remaining maturities of 60
days or less are valued at amortized cost unless the Investment
Adviser believes that this method no longer produces fair
valuations.
Repurchase agreements are valued at cost plus accrued interest. The
Fund employs pricing services to provide certain securities prices
for the Fund. Securities and assets for which market quotations are
not readily available are valued at fair value as determined in good
faith by or under the direction of the Board of Trustees of the
Fund, including valuations furnished by the pricing services
retained by the Fund, which may use a matrix system for valuations.
The procedures of a pricing service and its valuations are reviewed
by the officers of the Fund under the general supervision of the
Fund's Board of Trustees. Such valuations and procedures will be
reviewed periodically by the Board of Trustees of the Fund.
MERRILL LYNCH INTERNATIONAL EQUITY FUND, NOVEMBER 30, 2003
Notes to Financial Statements (continued)
Generally, trading in foreign securities, as well as U.S. government
securities and money market instruments, is substantially completed
each day at various times prior to the close of business on the New
York Stock Exchange ("NYSE"). The values of such securities used in
computing the net asset value of the Fund's shares are determined as
of such times. Foreign currency exchange rates also are generally
determined prior to the close of business on the NYSE. Occasionally,
events affecting the values of such securities and such exchange
rates may occur between the times at which they are determined and
the close of business on the NYSE that may not be reflected in the
computation of the Fund's net asset value. If events (for example, a
company announcement, market volatility or a natural disaster) occur
during such periods that are expected to materially affect the value
of such securities, those securities may be valued at their fair
value as determined in good faith by the Fund's Board of Trustees or
by the Investment Adviser using a pricing service and/or procedures
approved by 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 U.S. 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 investment strategies both to increase the return of the
Fund and to hedge, or protect, its exposure to interest rate
movements and movements in the securities 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 contracts and options on such futures contracts.
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-U.S. 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 may enter into
forward foreign exchange contracts as a hedge against either
specific transactions or portfolio positions. The contract is marked-
to-market daily and the change in market value is recorded by the
Fund as an unrealized gain or loss. When the contract is closed, the
Fund records a realized gain or loss equal to the difference between
the value at the time it was opened and the value at the time it was
closed.
* Options--The Fund may 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).
MERRILL LYNCH INTERNATIONAL EQUITY FUND, NOVEMBER 30, 2003
Notes to Financial Statements (continued)
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). Realized gains and losses on security
transactions are determined on the identified cost basis. 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 is recognized on the accrual basis.
(f) Prepaid registration fees--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.
(h) Securities lending--The Fund may lend securities to financial
institutions that provide cash or securities issued or guaranteed by
the U.S. government as collateral, which will be maintained at all
times in an amount equal to at least 100% of the current market
value of the loaned securities. The market value of the loaned
securities is determined at the close of business of the Fund and
any additional required collateral is delivered to the Fund on the
next business day. Where the Fund receives securities as collateral
for the loaned securities, it collects a fee from the borrower. The
Fund typically receives the income on the loaned securities but does
not receive the income on the collateral. Where the Fund receives
cash collateral, it may invest such collateral and retain the amount
earned on such investment, net of any amount rebated to the
borrower. Loans of securities are terminable at any time and the
borrower, after notice, is required to return borrowed securities
within five business days. The Fund may pay reasonable finder's,
lending agent, administrative and custodial fees in connection with
its loans. In the event that the borrower defaults on its obligation
to return borrowed securities because of insolvency or for any other
reason, the Fund could experience delays and costs in gaining access
to the collateral. The Fund also could suffer a loss where the value
of the collateral falls below the market value of the borrowed
securities, in the event of borrower default or in the event of
losses on investments made with cash collateral.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Merrill Lynch Investment Managers, L.P. ("MLIM"). The general
partner of MLIM 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 FAM Distributors,
Inc., ("FAMD" or the "Distributor"), which is a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
MLIM 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 .75%, on an annual basis,
of the average daily value of the Fund's net assets. MLIM has
entered into a Sub-Advisory Agreement with Merrill Lynch Asset
Management U.K. Limited ("MLAM U.K."), an affiliate of MLIM,
pursuant to which MLAM U.K. provides investment advisory services to
MLIM with respect to the Fund. There is no increase in the aggregate
fees paid by the Fund for these services.
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.
MERRILL LYNCH INTERNATIONAL EQUITY FUND, NOVEMBER 30, 2003
Notes to Financial Statements (continued)
The fees are accrued daily and paid monthly at annual rates based
upon the average daily net assets of the shares as follows:
Account
Maintenance Distribution
Fee Fee
Class A .25% --
Class B .25% .75%
Class C .25% .75%
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 A, Class B and Class C 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, 2003, FAMD earned underwriting
discounts and direct commissions and MLPF&S earned dealer
concessions on sales of the Fund's Class A and Class I Shares as
follows:
FAMD MLPF&S
Class A $1,841 $14,413
Class I $ 19 $ 188
For the six months ended November 30, 2003, MLPF&S received
contingent deferred sales charges of $8,848 and $3,420 relating to
transactions in Class B and Class C Shares, respectively.
The Fund has received an exemptive order from the Securities and
Exchange Commission permitting it to lend portfolio securities to
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), a
subsidiary of ML&Co., or its affiliates. Pursuant to that order, the
Fund also has retained Merrill Lynch Investment Managers, LLC
("MLIM, LLC"), an affiliate of MLIM, as the securities lending agent
for a fee based on a share of the returns on investment of cash
collateral. MLIM, LLC may, on behalf of the Fund, invest cash
collateral received by the Fund for such loans, among other things,
in a private investment company managed by MLIM, LLC or in
registered money market funds advised by MLIM or its affiliates. For
the six months ended November 30, 2003, MLIM, LLC received $14,402
in securities lending agent fees.
In addition, MLPF&S received $2,156 in commissions on the execution
of portfolio security transactions for the Fund for the six months
ended November 30, 2003.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
For the six months ended November 30, 2003, the Fund reimbursed MLIM
$2,613 for certain accounting services.
Certain officers and/or trustees of the Fund are officers and/or
directors of MLIM, FAMD, PSI, FDS, MLAM U.K. and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended November 30, 2003 were $102,997,257 and
$93,445,558, respectively.
Net realized gains for the six months ended November 30, 2003 and
net unrealized gains as of November 30, 2003 were as follows:
Realized Unrealized
Gains Gains
Long-term investments $ 3,203,256 $ 33,681,113
Foreign currency transactions 100,783 57,077
------------ ------------
Total $ 3,304,039 $ 33,738,190
============ ============
As of November 30, 2003, net unrealized appreciation for Federal
income tax purposes aggregated $25,736,730, of which $30,564,370
related to appreciated securities and $4,827,640 related to
depreciated securities. At November 30, 2003, the aggregate cost of
investments for Federal income tax purposes was $225,164,180.
4. Beneficial Interest Transactions:
Net increase in net assets derived from beneficial interest
transactions was $13,499,323 and $16,990,107 for the six months
ended November 30, 2003 and for the year ended May 31, 2003,
respectively.
MERRILL LYNCH INTERNATIONAL EQUITY FUND, NOVEMBER 30, 2003
Notes to Financial Statements (continued)
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the
Six Months Ended Dollar
November 30, 2003 Shares Amount
Shares sold 3,056,627 $ 22,658,561
Automatic conversion of shares 319,283 2,388,854
Shares issued to shareholders
in reinvestment of dividends 199,755 1,454,218
-------------- --------------
Total issued 3,575,665 26,501,633
Shares redeemed (2,148,094) (15,872,825)
-------------- --------------
Net increase 1,427,571 $ 10,628,808
============== ==============
Class A Shares for the Year Dollar
Ended May 31, 2003++ Shares Amount
Shares sold 3,725,348 $ 25,520,501
Automatic conversion of shares 1,643,835 11,268,804
Shares issued to shareholders
in reinvestment of dividends 73,120 507,452
-------------- --------------
Total issued 5,442,303 37,296,757
Shares redeemed (3,005,397) (20,716,357)
-------------- --------------
Net increase 2,436,906 $ 16,580,400
============== ==============
++Effective April 14, 2003, Class D Shares were redesignated Class A
Shares.
Class B Shares for the
Six Months Ended Dollar
November 30, 2003 Shares Amount
Shares sold 265,684 $ 1,940,994
Shares issued to shareholders
in reinvestment of dividends 4,030 28,895
-------------- --------------
Total issued 269,714 1,969,889
Shares redeemed (384,402) (2,811,446)
Automatic conversion of shares (326,219) (2,388,854)
-------------- --------------
Net decrease (440,907) $ (3,230,411)
============== ==============
Class B Shares for the Year Dollar
Ended May 31, 2003 Shares Amount
Shares sold 593,373 $ 3,970,548
Shares redeemed (1,226,302) (8,214,072)
Automatic conversion of shares (1,681,049) (11,268,804)
-------------- --------------
Net decrease (2,313,978) $ (15,512,328)
============== ==============
Class C Shares for the
Six Months Ended Dollar
November 30, 2003 Shares Amount
Shares sold 120,519 $ 856,055
Shares issued to shareholders
in reinvestment of dividends 6,900 48,573
-------------- --------------
Total issued 127,419 904,628
Shares redeemed (190,103) (1,355,843)
-------------- --------------
Net decrease (62,684) $ (451,215)
============== ==============
Class C Shares for the Year Dollar
Ended May 31, 2003 Shares Amount
Shares sold 245,559 $ 1,629,243
Shares redeemed (570,532) (3,792,108)
-------------- --------------
Net decrease (324,973) $ (2,162,865)
============== ==============
Class I Shares for the
Six Months Ended Dollar
November 30, 2003 Shares Amount
Shares sold 6,183,053 $ 45,798,087
Shares issued to shareholders
in reinvestment of dividends 163,988 1,195,471
-------------- --------------
Total issued 6,347,041 46,993,558
Shares redeemed (5,450,934) (40,441,417)
-------------- --------------
Net increase 896,107 $ 6,552,141
============== ==============
Class I Shares for the Year Dollar
Ended May 31, 2003++ Shares Amount
Shares sold 12,923,188 $ 87,086,396
Shares issued to shareholders
in reinvestment of dividends 65,602 455,275
-------------- --------------
Total issued 12,988,790 87,541,671
Shares redeemed (10,299,147) (69,456,771)
-------------- --------------
Net increase 2,689,643 $ 18,084,900
============== ==============
++Effective April 14, 2003, Class A Shares were redesignated Class I
Shares.
MERRILL LYNCH INTERNATIONAL EQUITY FUND, NOVEMBER 30, 2003
Notes to Financial Statements (concluded)
5. Short-Term Borrowings:
The Fund, along with certain other funds managed by MLIM and its
affiliates, is a party to a $500,000,000 credit agreement with Bank
One, N.A. and certain other lenders. The Fund may borrow under the
credit agreement to fund shareholder redemptions and for other
lawful purposes other than for leverage. The Fund may borrow up to
the maximum amount allowable under the Fund's current prospectus and
statement of additional information, subject to various other legal,
regulatory or contractual limits. The Fund pays a commitment fee of
..09% per annum based on the Fund's pro rata share of the unused
portion of the credit agreement. Amounts borrowed under the credit
agreement bear interest at a rate equal to, at each fund's election,
the Federal Funds rate plus .50% or a base rate as determined by
Bank One, N.A. On November 28, 2003, the credit agreement was
renewed for one year under the same terms, except that the
commitment was reduced from $1,000,000,000 to $500,000,000. The Fund
did not borrow under the credit agreement during the six months
ended November 30, 2003.
6. Commitments:
At November 30, 2003, the Fund had entered into foreign exchange
contracts under which it had agreed to purchase and sell various
foreign currencies with approximate values of $55,000 and
$1,877,000, respectively.
7. Capital Loss Carryforward:
On May 31, 2003, the Fund had a net capital loss carryforward of
$97,973,461, of which $24,504,507 expires in 2007; $30,743,912
expires in 2010; and $42,725,042 expires in 2011. This amount will
be available to offset like amounts of any future taxable gains.
8. Plan of Reorganization:
The Fund's Board of Directors approved a plan of reorganization,
subject to shareholder approval and certain other conditions,
whereby Merrill Lynch International Value Fund of Mercury Funds II
("International Value") will acquire all of the assets and will
assume all of the liabilities of the Fund in exchange for newly
issued shares of International Value.
MERRILL LYNCH INTERNATIONAL EQUITY FUND, NOVEMBER 30, 2003
Officers and Trustees
Terry K. Glenn, President and Trustee
Ronald W. Forbes, Trustee
Cynthia A. Montgomery, Trustee
Charles C. Reilly, Trustee
Kevin A. Ryan, Trustee
Roscoe S. Suddarth, Trustee
Richard R.West, Trustee
Edward D. Zinbarg, Trustee
Robert C. Doll, Jr., Senior Vice President
Ian Rowley, Vice President
Donald C. Burke, Vice President and Treasurer
Phillip S. Gillespie, Secretary
Effective January 1, 2004, Charles C. Reilly, Trustee of Merrill
Lynch International Equity Fund, retired. The Fund's Board of
Trustees wishes Mr. Reilly well in his retirement.
Custodian
Brown Brothers Harriman & Co.
40 Waters Street
Boston, MA 02109-3661
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
800-637-3863
MERRILL LYNCH INTERNATIONAL EQUITY FUND, NOVEMBER 30, 2003
Electronic Delivery
The Fund is now offering electronic delivery of communications to
its shareholders. In order to receive this service, you must
register your account and provide us with e-mail information.
To sign up for this service, simply access this website
http://www.icsdelivery.com/live and follow the instructions.
When you visit this site, you will obtain a personal identification
number (PIN). You will need this PIN should you wish to update your
e-mail address, choose to discontinue this service and/or make any
other changes to the service. This service is not available for
certain retirement accounts at this time.
MERRILL LYNCH INTERNATIONAL EQUITY FUND, NOVEMBER 30, 2003
Item 2 - Did registrant adopt a code of ethics, as of the end of the
period covered by this report, that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by
the registrant or a third party? If not, why not? Briefly describe
any amendments or waivers that occurred during the period. State
here if code of ethics/amendments/waivers are on website and give
website address-. State here if fund will send code of ethics to
shareholders without charge upon request--N/A (annual requirement
only)
Item 3 - Did the registrant's board of directors determine that the
registrant either: (i) has at least one audit committee financial
expert serving on its audit committee; or (ii) does not have an
audit committee financial expert serving on its audit committee? If
yes, disclose name of financial expert and whether he/she is
"independent," (fund may, but is not required, to disclose name/
independence of more than one financial expert) If no, explain why
not. - N/A (annual requirement only)
Item 4 - Disclose annually only (not answered until December 15,
2003)
(a) Audit Fees - Disclose aggregate fees billed for each of the last
two fiscal years for professional services rendered by the principal
accountant for the audit of the registrant's annual financial
statements or services that are normally provided by the accountant
in connection with statutory and regulatory filings or engagements
for those fiscal years. N/A.
(b) Audit-Related Fees - Disclose aggregate fees billed in each of
the last two fiscal years for assurance and related services by the
principal accountant that are reasonably related to the performance
of the audit of the registrant's financial statements and are not
reported under paragraph (a) of this Item. Registrants shall
describe the nature of the services comprising the fees disclosed
under this category. N/A.
(c) Tax Fees - Disclose aggregate fees billed in each of the last
two fiscal years for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning.
Registrants shall describe the nature of the services comprising the
fees disclosed under this category. N/A.
(d) All Other Fees - Disclose aggregate fees billed in each of the
last two fiscal years for products and services provided by the
principal accountant, other than the services reported in paragraphs
(a) through (c) of this Item. Registrants shall describe the nature
of the services comprising the fees disclosed under this category.
N/A.
(e)(1) Disclose the audit committee's pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of Regulation
S-X. N/A.
(e)(2) Disclose the percentage of services described in each of
paragraphs (b) through (d) of this Item that were approved by the
audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X. N/A.
(f) If greater than 50%, disclose the percentage of hours expended
on the principal accountant's engagement to audit the registrant's
financial statements for the most recent fiscal year that were
attributed to work performed by persons other than the principal
accountant's full-time, permanent employees. N/A.
(g) Disclose the aggregate non-audit fees billed by the registrant's
accountant for services rendered to the registrant, and rendered to
the registrant's investment adviser (not including any sub-adviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the adviser
that provides ongoing services to the registrant for each of the
last two fiscal years of the registrant. N/A.
(h) Disclose whether the registrant's audit committee has considered
whether the provision of non-audit services that were rendered to
the registrant's investment adviser (not including any subadviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence. N/A.
Item 5 - If the registrant is a listed issuer as defined in Rule
10A-3 under the Exchange Act, state whether or not the registrant
has a separately-designated standing audit committee established in
accordance with Section 3(a)(58)(A) of the Exchange Act. If the
registrant has such a committee, however designated, identify each
committee member. If the entire board of directors is acting as the
registrant's audit committee in Section 3(a)(58)(B) of the Exchange
Act, so state.
If applicable, provide the disclosure required by Rule 10A-3(d)
under the Exchange Act regarding an exemption from the listing
standards for audit committees. N/A
(Listed issuers must be in compliance with the new listing rules by
the earlier of their first annual shareholders meeting after January
2004, or October 31, 2004 (annual requirement))
Item 6 - Reserved
Item 7 - For closed-end funds that contain voting securities in
their portfolio, describe the policies and procedures that it uses
to determine how to vote proxies relating to those portfolio
securities. N/A
Item 8--Reserved
Item 9(a) - The registrant's certifying officers have reasonably
designed such disclosure controls and procedures to ensure material
information relating to the registrant is made known to us by others
particularly during the period in which this report is being
prepared. The registrant's certifying officers have determined that
the registrant's disclosure controls and procedures are effective
based on our evaluation of these controls and procedures as of a
date within 90 days prior to the filing date of this report.
Item 9(b)--There were no significant changes in the registrant's
internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Item 10 - Exhibits
10(a) - Attach code of ethics or amendments/waivers, unless code of
ethics or amendments/waivers is on website or offered to
shareholders upon request without charge. N/A.
10(b) - Attach certifications pursuant to Section 302 of the
Sarbanes-Oxley Act. Attached hereto.
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Merrill Lynch International Equity Fund
By: _/s/ Terry K. Glenn_______
Terry K. Glenn,
President of
Merrill Lynch International Equity Fund
Date: January 21, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
By: _/s/ Terry K. Glenn________
Terry K. Glenn,
President of
Merrill Lynch International Equity Fund
Date: January 21, 2004
By: _/s/ Donald C. Burke________
Donald C. Burke,
Chief Financial Officer of
Merrill Lynch International Equity Fund
Date: January 21, 2004
Attached hereto as a furnished exhibit are the certifications
pursuant to Section 906 of the Sarbanes-Oxley Act.