SEMI-ANNUAL REPORT
NOVEMBER 30, 1998
[GRAPHIC OMITTED]
Mercury
International
Fund
OF MERCURY ASSET
MANAGEMENT FUNDS, INC.
----------------
MERCURY
ASSET MANAGEMENT
----------------
<PAGE>
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MERCURY MASTER INTERNATIONAL PORTFOLIO
SECTOR REPRESENTATION
- --------------------------------------------------------------------------------
As a Percentage of Net Assets as of November 30, 1998
A pie chart illustrating the following percentages
(As a Percentage of Net Assets as of November 30, 1998):
Materials 2.3%
Capital Equipment 6.5%
Energy 7.6%
Cash Equivalent 41.5%
Finance 13.3%
Services 14.9%
Consumer Goods 13.9%
GEOGRAPHIC ASSET MIX
- --------------------------------------------------------------------------------
As a Percent of Net Assets as of November 30, 1998
A pie chart illustrating the following percentages
(As a Percent of Net Assets as of November 30, 1998):
Japan 6.1%
Pacific Basin/Asia
(Ex Japan & Australia) 0.6%
Cash Equivalent 41.5%
Europe 50.5%
Australia 1.3%
November 30, 1998 1 Mercury International Fund
<PAGE>
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DEAR SHAREHOLDER
We are pleased to provide you with this first report to shareholders for Mercury
International Fund of Mercury Asset Management Funds, Inc. The Fund seeks
long-term capital growth through investments primarily in a diversified
portfolio of equity securities of companies located outside the United States.
The Fund will seek to achieve its objective by investing all of its assets in
Mercury Master International Portfolio of Mercury Asset Management Master Trust,
which has the same investment objective as the Fund. The Fund's investment
experience will correspond directly to the investment experience of the
Portfolio. In this and future reports to shareholders, we will provide
information on the Fund's performance, discuss our investment strategies, and
highlight some of the Portfolio's holdings. Complete performance information can
be found on page 5 of this report to shareholders.
Investment Environment
Since the Fund's inception on October 30, 1998, international stock markets have
staged a strong rally. Much of this improved sentiment can be attributed to the
US Federal Reserve Board's decision to cut interest rates in order to avert a
global slowdown in economic growth. In Europe, growth is showing signs of
slowing from its high rate at the start of the year. Leading economic indicators
there continue to suggest that business and consumer confidence have fallen. The
aggressive action by European central banks to reduce interest rates should help
ensure that the risk of recession is reduced. However, there has been a
significant rise in corporate activity as companies position themselves for the
advent of the single European currency. We expect that there will be
considerably more merger and acquisition activity in Europe over the next few
years and have positioned the Portfolio to take advantage of these
opportunities. In particular, we have already seen activity within the
healthcare, chemical, oil and financial services sectors. Despite the prospect
of a slowdown in corporate profit growth throughout Europe, the easier monetary
environment and expectations of further industry consolidation have driven
markets higher.
In Japan, the tough economic environment was confirmed recently by the
announcement of the fourth successive quarter of negative gross domestic product
(GDP) growth. However, investor sentiment was bolstered by signs that the
Japanese government is responding with policy initiatives. Specifically, the
bank stabilization bill and potential allocation of 60 trillion yen in public
funds to assist with bad debt resolution has assuaged concerns over further
financial shocks, though the risk of further individual bank failures remains
high. In addition, the government has announced additional fiscal stimulus
through a combination of public spending initiatives and tax cuts.
Portfolio Activities
Given our cautious stance on the investment outlook in the short term, we
invested cash steadily over the first month of operations as weakness in
individual companies' share prices presented buying opportunities. By November
month-end, 58.5% of the Portfolio was invested in equities. We initiated
positions in what we consider to be attractive sectors with relatively defensive
earnings streams. We also concentrated on companies with strong franchises and
superior earnings profiles. Within these themes, we favored stocks in the
healthcare sector such as Glaxo Wellcome PLC, Novartis AG, SmithKline Beecham
PLC and Roche Holding AG. We also preferred the consumer goods sector
November 30, 1998 2 Mercury International Fund
<PAGE>
[GRAPHIC OMITTED]
and purchased shares of British American Tobacco PLC and Unilever N.V. Another
area with attractive secular long-term growth prospects was telecommunications,
given the growing penetration of cellular telecommunication systems (for
example, Vodafone Group PLC, Mannesmann AG and Swisscom AG) and the prospect for
greater data transmission (such as Cable & Wireless PLC and Telecom Italia
S.p.A.). Similarly, we favor the technology sector with the increasing
application of cellular and other information systems (including Nokia Oyj,
Telefonaktiebolaget LM Ericsson, Koninklijke (Royal) Philips Electronics N.V.
and SAP AG (Systeme, Anwendungen, Produkte in der Datenverarbeitung)).
We expect to maintain a broadly neutral position in the financial services
sector because of the low interest rate environment and prospect for further
corporate activity in this sector. This is reflected by our holdings in Credit
Suisse Group, Axa and Allianz AG. We also favored companies with an emphasis on
restructuring and an increased focus on shareholder value, such as Vivendi,
Nestle S.A., Siemens AG and Koninklijke Numico N.V.
In Japan, we initiated exposure by establishing positions in companies with
resilient earnings and strong balance sheets. Japan Tobacco, Inc. and Yamanouchi
Pharmaceutical Co., Ltd. fell into this category. Ahead of likely stimulus
measures for the economy, we also created positions in retail through positions
in Aoyama Trading Co., Ltd.; in building materials and components through
Sekisui Chemical Co., Ltd.; and in chemicals by way of Asahi Chemical Industry
Co., Ltd. As a result of the stronger economic growth picture overseas, we
invested in Japan's globally competitive manufacturers such as Bridgestone
Corporation, Honda Motor Co., Ltd. and Komori Corporation. Finally, within the
financial services sector, our exposure is limited to those institutions such as
Sumitomo Bank, Ltd. and Bank of Tokyo-Mitsubishi, Ltd., which we believe will
emerge from the current uncertain and increasingly deregulated environment in
stronger competitive positions.
Investment Outlook
Over the next year, we believe that European equities will provide investors
with very attractive opportunities as the benefits of monetary union, a growing
equity culture and an emphasis on corporate restructuring and maximizing
shareholder value gain momentum. We believe that these factors will drive
European stock markets higher over the medium term as Europe is several years
behind the United States in these trends. Against this backdrop, we anticipate
investing the Portfolio's remaining cash in the coming weeks.
We believe that Japan has the potential to offer investors very exciting returns
over the next decade. Since the Portfolio's launch, the economic situation in
Japan has deteriorated further. The Japanese economy remains under serious
pressure, and it is estimated that the economy is currently contracting at a 3%
annual rate. The severity of the economic situation, combined with ongoing
concern surrounding Japan's financial sector, is forcing the Japanese
authorities into a strong policy response. We have already seen both houses of
the Diet pass a 60 trillion yen bank rescue package, a figure that is equivalent
to 12% of Japanese GDP. This bill is potentially a major step toward ensuring
lasting Japanese financial stability, and we have seen further fiscal measures
to back up the rescue plan. Although we believe it is too early to commit
further funds to Japanese equities, we anticipate that the time to do so is
coming soon. As the Japanese government shows a
November 30, 1998 3 Mercury International Fund
<PAGE>
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greater willingness to embrace economic reform, the relative attraction of Japan
will rise, and we expect to increase the Portfolio's exposure.
At November 30, 1998, the Portfolio had no investments in emerging markets. We
believe that this is not the time to emphasize emerging markets, given
persistent deflation in many of these economies combined with a slowdown in
global economic growth. Furthermore, we cannot find companies in these stock
markets that offer the same attractive investment opportunities as are available
in mainstream developed countries' stock markets.
In Conclusion
We thank you for your investment in Mercury International Fund, and we look
forward to serving your investment needs in the months and years ahead.
Sincerely,
/s/ Jeffrey Peek /s/ Charles Prideaux
Jeffrey Peek Charles Prideaux
President Portfolio Manager
December 28, 1998
OFFICERS AND DIRECTORS
Jeffrey M. Peek, Director and President
David O. Beim, Director
James T. Flynn, Director
W. Carl Kester, Director
Karen P. Robards, Director
Terry K. Glenn, Director and Executive Vice President
Peter John Gibbs, Senior Vice President
Donald C. Burke, Vice President
Gerald M. Richard, Treasurer
Robert E. Putney, III, 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
(888) 763-2260
November 30, 1998 4 Mercury International Fund
<PAGE>
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FUND PERFORMANCE DATA
ABOUT FUND PERFORMANCE
The Fund offers four classes of shares, each with its own sales charge and
expense structure allowing you to invest in the way that best suits your needs.
CLASS I SHARES incur a maximum initial sales charge of 5.25% and bear no ongoing
distribution and account maintenance fees. Class I shares are available only to
eligible investors.
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%
if redeemed during the first two years, decreasing to 3% for each of the next
two years and decreasing 1% each year thereafter to 0% after the sixth 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 A
shares after approximately 8 years.
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 may be subject to a 1%
contingent deferred sales charge if redeemed within one year after purchase.
None of the past results shown should be considered a representation of future
performance. Figures shown in the "Recent Performance Results" table 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.
RECENT PERFORMANCE RESULTS*
- --------------------------------------------------------------------------------
Since Inception
Total Return
- --------------------------------------------------------------------------------
Class I +2.20%
- --------------------------------------------------------------------------------
Class A +2.20
- --------------------------------------------------------------------------------
Class B +2.10
- --------------------------------------------------------------------------------
Class C +2.10
- --------------------------------------------------------------------------------
* 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 period shown, and
assume reinvestment of all dividends and capital gains at net asset value
on the ex-dividend date. The Fund commenced operations on 10/30/98.
November 30, 1998 5 Mercury International Fund
<PAGE>
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STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
As of November 30, 1998
- --------------------------------------------------------------------------------------------
MERCURY INTERNATIONAL FUND
- --------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investment in Mercury Master International Portfolio, at value (identified
cost--$257,354,586) (Note 1a) $262,283,055
Prepaid registration fees and other assets (Note 1d) 55,050
------------
Total assets 262,338,105
------------
- --------------------------------------------------------------------------------------------
Liabilities:
Payable to distributor (Note 2) 168,901
Payable to administrator (Note 2) 53,237
Accrued expenses and other liabilities 76,468
------------
Total liabilities 298,606
------------
- --------------------------------------------------------------------------------------------
Net Assets:
Net assets $262,039,499
============
- --------------------------------------------------------------------------------------------
Net Assets Consist of:
Class I Shares of Common Stock, $0.0001 par value, 100,000,000
shares authorized $ 217
Class A Shares of Common Stock, $0.0001 par value, 100,000,000
shares authorized 420
Class B Shares of Common Stock, $0.0001 par value, 100,000,000
shares authorized 1,117
Class C Shares of Common Stock, $0.0001 par value, 100,000,000
shares authorized 812
Paid-in capital in excess of par 256,687,748
Undistributed investment income--net 221,098
Undistributed realized capital gains on investments and foreign currency
transactions from the Portfolio--net 199,618
Unrealized appreciation on investments and foreign currency transactions from
the Portfolio--net 4,928,469
------------
Net assets $262,039,499
============
- --------------------------------------------------------------------------------------------
Net Asset Value:
Class I--Based on net assets of $22,148,759 and 2,167,419 shares
outstanding $ 10.22
============
Class A--Based on net assets of $42,936,541 and 4,202,565 shares
outstanding $ 10.22
============
Class B--Based on net assets of $114,085,862 and 11,174,228 shares
outstanding $ 10.21
============
Class C--Based on net assets of $82,868,337 and 8,116,593 shares
outstanding $ 10.21
============
- --------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
November 30, 1998 6 Mercury International Fund
<PAGE>
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STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Period October 30, 1998+ to November 30, 1998
- ---------------------------------------------------------------------------------------
MERCURY INTERNATIONAL FUND
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income (Notes 1b & 1c):
Investment income allocated from the Portfolio (net of $8,131
foreign withholding tax) $ 737,976
Expenses allocated from the Portfolio (199,859)
----------
Net investment income from the Portfolio 538,117
----------
- ---------------------------------------------------------------------------------------
Expenses:
Account maintenance and distribution fees--Class B (Note 2) $ 92,288
Account maintenance and distribution fees--Class C (Note 2) 67,672
Administration fee (Note 2) 53,237
Registration fees (Note 1d) 24,433
Printing and shareholder reports 18,433
Transfer agent fees--Class B (Note 2) 17,244
Transfer agent fees--Class C (Note 2) 12,677
Account maintenance fees--Class A (Note 2) 8,941
Organization expenses 8,701
Transfer agent fees--Class A (Note 2) 6,005
Professional fees 3,654
Transfer agent fees--Class I (Note 2) 2,888
Accounting services (Note 2) 388
Other 458
----------
Total expenses 317,019
----------
Investment income--net 221,098
----------
- ---------------------------------------------------------------------------------------
Realized & Unrealized Gain from the Portfolio--Net:
Realized gain from the Portfolio on:
Investments--net 114,263
Foreign currency transactions--net 85,355 199,618
----------
Unrealized appreciation on investments and foreign currency
transactions from the Portfolio--net 4,928,469
----------
Net realized and unrealized gain on investments and foreign
currency transactions from the Portfolio 5,128,087
----------
Net Increase in Net Assets Resulting from Operations $5,349,185
==========
- ---------------------------------------------------------------------------------------
</TABLE>
+ Commencement of operations
See Notes to Financial Statements.
November 30, 1998 7 Mercury International Fund
<PAGE>
[GRAPHIC OMITTED]
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Period October 30, 1998+ to November 30, 1998
- ---------------------------------------------------------------------------------------
MERCURY INTERNATIONAL FUND
- ---------------------------------------------------------------------------------------
Increase in Net Assets:
- ---------------------------------------------------------------------------------------
<S> <C>
Operations:
Investment income--net $ 221,098
Realized gain on investments and foreign currency transactions from the
Portfolio--net 199,618
Unrealized appreciation on investments and foreign currency transactions
from the Portfolio--net 4,928,469
------------
Net increase in net assets resulting from operations 5,349,185
------------
- ---------------------------------------------------------------------------------------
Capital Share Transactions (Note 4):
Net increase in net assets derived from capital share transactions 256,540,314
------------
- ---------------------------------------------------------------------------------------
Net Assets:
Total increase in net assets 261,889,499
Beginning of period 150,000
------------
End of period* $262,039,499
============
- ---------------------------------------------------------------------------------------
*Undistributed investment income--net $ 221,098
============
</TABLE>
+ Commencement of operations.
See Notes to Financial Statements.
November 30, 1998 8 Mercury International Fund
<PAGE>
[GRAPHIC OMITTED]
FINANCIAL HIGHLIGHTS
MERCURY INTERNATIONAL FUND
- --------------------------------------------------------------------------------
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
For the Period October 30, 1998+ to November 30, 1998
--------------------------------------------------------
Increase in Net Asset Value: Class I Class A Class B Class C
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00 $ 10.00
--------------------------------------------------------
Investment income--net .01 .01 .01 .01
Realized and unrealized gain on
investments and foreign currency
transactions from the Portfolio--net .21 .21 .20 .20
--------------------------------------------------------
Total from investment operations .22 .22 .21 .21
--------------------------------------------------------
Net asset value, end of period $ 10.22 $ 10.22 $ 10.21 $ 10.21
========================================================
- ---------------------------------------------------------------------------------------------------
Total Investment Return:**
Based on net asset value per share 2.20%++ 2.20%++ 2.10%++ 2.10%++
========================================================
- ---------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses++ 1.61%* 1.87%* 2.64%* 2.64%*
========================================================
Investment income--net 1.83%* 1.61%* .82%* .83%*
========================================================
- ---------------------------------------------------------------------------------------------------
Supplemental Data:
Net assets, end of period (in thousands) $22,149 $42,936 $114,086 $82,868
========================================================
- ---------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of operations.
++ Includes the Fund's share of the Portfolio's allocated expenses.
++ Aggregate total investment return.
See Notes to Financial Statements.
November 30, 1998 9 Mercury International Fund
<PAGE>
[GRAPHIC OMITTED]
NOTES TO FINANCIAL STATEMENTS
MERCURY INTERNATIONAL FUND
- --------------------------------------------------------------------------------
1 Significant Accounting Policies:
Mercury International Fund (the "Fund") is a part of Mercury Asset
Management Funds, Inc. (the "Corporation"). The Fund is registered under
the Investment Company Act of 1940 as a diversified, open-end management
investment company. The Fund seeks to achieve its investment objective by
investing all of its assets in the Mercury Master International Portfolio
(the "Portfolio") of Mercury Asset Management Master Trust, which has the
same investment objective as the Fund. The value of the Fund's investment
in the Portfolio reflects the Fund's proportionate interest in the net
assets of the Portfolio. The performance of the Fund is directly affected
by the performance of the Portfolio. The financial statements of the
Portfolio, including the Schedule of Investments, are included elsewhere
in this report and should be read in conjunction with the Fund's financial
statements. Prior to commencement of operations on October 30, 1998, the
Fund had no operations other than those relating to organizational matters
and the issuance of 15,000 capital shares of the Fund on July 29, 1998 to
Mercury Asset Management International Ltd. ("Mercury International") for
$150,000. 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. Class I and Class A Shares are sold with a front-end
sales charge. Class B and Class C Shares 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 (except
that Class B Shares have certain voting rights with respect to Class A
distribution expenditures). The following is a summary of significant
accounting policies followed by the Fund.
(a) Valuation of investments--Valuation of securities is discussed in Note
1a of the Portfolios' Notes to Financial Statements, which is included
elsewhere in this report.
(b) Income--The Fund's net investment income consists of the Fund's pro
rata share of the net investment income of the Portfolio, less all actual
and accrued expenses of the Fund determined in accordance with generally
accepted accounting principles.
(c) Income taxes--It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies
and to distribute substantially all of its taxable income to shareholders.
Therefore, no Federal income tax
November 30, 1998 10 Mercury International Fund
<PAGE>
[GRAPHIC OMITTED]
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
provision is required. Under the applicable foreign tax law, withholding
taxes may be imposed on interest, dividends and capital gains at various
rates.
(d) Prepaid registration fees--Prepaid registration fees are charged to
expenses as the related shares are issued.
(e) Dividends and distributions--Dividends and distributions paid by the
Fund are recorded on the ex-dividend dates.
(f) Investment transactions--Investment transactions are accounted for on
a trade date basis.
2 Transactions with Affiliates:
The Corporation has entered into an Administration Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is Princeton
Services, Inc. ("PSI"), a wholly-owned subsidiary of Merrill Lynch & Co.,
Inc. ("ML & Co."), which is the limited partner. The Fund pays a monthly
fee at an annual rate of 0.25% of the Fund's average daily net assets for
the performance of administrative services (other than investment advice
and related portfolio activities) necessary for the operation of the Fund.
The Corporation has also entered into a Distribution Agreement and
Distribution Plans with Mercury Funds Distributor ("MFD" or
"Distributor"), a division of Princeton Funds Distributor, Inc. ("PFD"), a
wholly-owned subsidiary of Merrill Lynch Group, Inc. Pursuant to the
Distribution Plans adopted by the Corporation in accordance with Rule
12b-1 under the Investment Company Act of 1940, the Fund pays the
Distributor ongoing account maintenance 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 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., and
selected dealers also provide account maintenance and distribution
services to the Fund. The ongoing account maintenance fee compensates the
Distributor, MLPF&S and selected dealers for providing account maintenance
services to Class A, Class B and Class C shareholders. The ongoing
distribution fee compensates the Distributor, MLPF&S and selected dealers
for providing shareholder and distribution-related services to Class B and
Class C shareholders.
November 30, 1998 11 Mercury International Fund
<PAGE>
[GRAPHIC OMITTED]
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For the period October 30, 1998 to November 30, 1998, MFD earned
underwriting discounts and MLPF&S earned dealer concessions on sales of
the Fund's Class I and Class A Shares as follows:
MFD MLPF&S
--------------------------------------------------------------------------
Class I $ 287 $669,634
Class A $5,005 $299,105
--------------------------------------------------------------------------
For the period October 30, 1998 to November 30, 1998, MLPF&S received
contingent deferred sales charges of $3,494 and $1,138 relating to
transactions in Class B and Class C Shares, respectively.
Financial Data Services, Inc. ("FDS"), an indirect wholly-owned subsidiary
of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Corporation are officers and/or
directors of Mercury International, FAM, PSI, PFD, FDS, and/or ML & Co.
3 Investments:
Increases and decreases in the Fund's investment in the Portfolio for the
period October 30, 1998 to November 30, 1998 were $256,690,313 and
$73,463, respectively.
4 Capital Share Transactions:
Net increase in net assets derived from capital share transactions was
$256,540,314 for the period October 30, 1998 to November 30, 1998.
Transactions in capital shares for each class were as follows:
Class I Shares for the Period October 30, 1998
to November 30, 1998+ Shares Dollar Amount
-------------------------------------------------------------------------
Shares sold 2,203,713 $ 22,066,870
Shares redeemed (40,044) (402,145)
-------------------------
Net increase 2,163,669 $ 21,664,725
=========================
-------------------------------------------------------------------------
+ Prior to October 30, 1998 (commencement of operations), the Fund issued
3,750 shares to Mercury International for $37,500.
November 30, 1998 12 Mercury International Fund
<PAGE>
[GRAPHIC OMITTED]
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
Class A Shares for the Period October 30, 1998
to November 30, 1998+ Shares Dollar Amount
-------------------------------------------------------------------------
Shares sold 4,278,094 $ 42,772,552
Shares redeemed (79,279) (793,264)
-------------------------
Net increase 4,198,815 $ 41,979,288
=========================
-------------------------------------------------------------------------
+ Prior to October 30, 1998 (commencement of operations), the Fund issued
3,750 shares to Mercury International for $37,500.
Class B Shares for the Period October 30, 1998
to November 30, 1998+ Shares Dollar Amount
-------------------------------------------------------------------------
Shares sold 11,347,755 $113,504,317
Shares redeemed (177,277) (1,771,515)
-------------------------
Net increase 11,170,478 $111,732,802
=========================
-------------------------------------------------------------------------
+ Prior to October 30, 1998 (commencement of operations), the Fund issued
3,750 shares to Mercury International for $37,500.
Class C Shares for the Period October 30, 1998
to November 30, 1998+ Shares Dollar Amount
-------------------------------------------------------------------------
Shares sold 8,218,619 $ 82,215,966
Shares redeemed (105,776) (1,052,467)
-------------------------
Net increase 8,112,843 $ 81,163,499
=========================
-------------------------------------------------------------------------
+ Prior to October 30, 1998 (commencement of operations), the Fund issued
3,750 shares to Mercury International for $37,500.
November 30, 1998 13 Mercury International Fund
<PAGE>
[GRAPHIC OMITTED]
SCHEDULE OF INVESTMENTS
MERCURY MASTER INTERNATIONAL PORTFOLIO
================================================================================
<TABLE>
<CAPTION>
In US Dollars
---------------------------------------
Shares Value Percent of
Industries Held Investments Cost (Note 1a) Net Assets
- ----------------------------------------------------------------------------------------------------------
EUROPE
==========================================================================================================
<S> <C> <C> <C> <C> <C>
Belgium
Insurance 6,397 Fortis AG $ 1,923,092 $ 2,036,910 0.8%
- ----------------------------------------------------------------------------------------------------------
Utilities-- 3,995 Electrabel S.A. 1,498,401 1,547,117 0.6
Electric & Gas
- ----------------------------------------------------------------------------------------------------------
Total Investments in Belgium 3,421,493 3,584,027 1.4
- ----------------------------------------------------------------------------------------------------------
Finland
Electrical & 24,078 Nokia Oyj (Class A) 2,280,793 2,356,500 0.9
Electronics
- ----------------------------------------------------------------------------------------------------------
Total Investments in Finland 2,280,793 2,356,500 0.9
- ----------------------------------------------------------------------------------------------------------
France
Automobiles 18,271 Valeo S.A. 1,592,931 1,569,363 0.6
- ----------------------------------------------------------------------------------------------------------
Banking 7,353 Societe Generale (Class A) 1,019,085 1,161,997 0.4
- ----------------------------------------------------------------------------------------------------------
Business/ 18,713 Vivendi 4,276,775 4,244,403 1.6
Public Services
- ----------------------------------------------------------------------------------------------------------
Energy 6,050 Elf Aquitaine S.A. 735,101 756,543 0.3
Sources 24,413 Total S.A. (Class B) 2,957,626 3,035,586 1.2
---------------------------------------
3,692,727 3,792,129 1.5
- ----------------------------------------------------------------------------------------------------------
Insurance 21,539 Axa 2,563,094 2,792,191 1.1
- ----------------------------------------------------------------------------------------------------------
Leisure/ 10,348 Accor S.A. 2,225,674 2,281,386 0.9
Tourism
- ----------------------------------------------------------------------------------------------------------
Merchandising 1,757 Guilbert S.A. 247,591 247,910 0.1
14,405 Pinault-Printemps-Redoute S.A. 2,461,367 2,464,434 0.9
---------------------------------------
2,708,958 2,712,344 1.0
- ----------------------------------------------------------------------------------------------------------
Metals-- 53,679 Usinor S.A. 639,809 605,922 0.2
Steel
- ----------------------------------------------------------------------------------------------------------
Total Investments in France 18,719,053 19,159,735 7.3
- ----------------------------------------------------------------------------------------------------------
Germany
Automobiles 11,905 +DaimlerChrysler AG 992,179 1,121,819 0.4
- ----------------------------------------------------------------------------------------------------------
Banking 25,812 HypoVereinsbank 2,047,902 2,241,468 0.9
- ----------------------------------------------------------------------------------------------------------
Business/ 2,515 SAP AG (Systeme, Anwendun-
Public Services gen, Produkte in der Daten-
verarbeitung) (Preferred) 1,304,693 1,313,662 0.5
- ----------------------------------------------------------------------------------------------------------
Chemicals 37,696 Bayer AG 1,577,946 1,551,991 0.6
- ----------------------------------------------------------------------------------------------------------
Electrical & 39,484 Siemens AG 2,543,364 2,756,056 1.0
Electronics
- ----------------------------------------------------------------------------------------------------------
</TABLE>
November 30, 1998 14 Mercury International Fund
<PAGE>
[GRAPHIC OMITTED]
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
In US Dollars
---------------------------------------
Shares Value Percent of
Industries Held Investments Cost (Note 1a) Net Assets
- ----------------------------------------------------------------------------------------------------------
EUROPE (continued)
==========================================================================================================
<S> <C> <C> <C> <C> <C>
Germany (concluded)
Insurance 7,146 Allianz AG $ 2,496,099 $ 2,580,676 1.0%
- ----------------------------------------------------------------------------------------------------------
Telecommuni- 24,903 Mannesmann AG 2,579,850 2,703,165 1.0
cations
- ----------------------------------------------------------------------------------------------------------
Transporta- 28,187 Deutsche Lufthansa AG 633,451 618,597 0.2
tion--Airlines
- ----------------------------------------------------------------------------------------------------------
Utilities-- 21,941 VEBA AG 1,242,441 1,220,026 0.5
Electric & Gas
- ----------------------------------------------------------------------------------------------------------
Total Investments in
Germany 15,417,925 16,107,460 6.1
- ----------------------------------------------------------------------------------------------------------
Greece
Telecommuni- 18,810 +Panafon Hellenic Telecom Co. 339,051 338,214 0.1
cations
- ----------------------------------------------------------------------------------------------------------
Total Investments in Greece 339,051 338,214 0.1
- ----------------------------------------------------------------------------------------------------------
Italy
Banking 456,128 Unicredito Italiano S.p.A. 2,462,925 2,601,112 1.0
- ----------------------------------------------------------------------------------------------------------
Energy 308,763 ENI S.p.A. 1,896,832 1,921,237 0.7
Sources
- ----------------------------------------------------------------------------------------------------------
Telecommuni- 684,738 Telecom Italia S.p.A. 3,729,131 4,291,374 1.7
cations
- ----------------------------------------------------------------------------------------------------------
Total Investments in Italy 8,088,888 8,813,723 3.4
- ----------------------------------------------------------------------------------------------------------
Netherlands
Broadcasting 6,621 Wolters Kluwer N.V. 1,296,829 1,265,922 0.5
& Publishing
- ----------------------------------------------------------------------------------------------------------
Chemicals 40,907 Akzo Nobel N.V. 1,673,647 1,682,285 0.6
- ----------------------------------------------------------------------------------------------------------
Electrical & 27,366 Koninklijke (Royal) Philips
Electronics Electronics N.V. 1,639,345 1,736,931 0.7
- ----------------------------------------------------------------------------------------------------------
Energy 56,709 Royal Dutch Petroleum
Sources Company 2,800,496 2,724,792 1.0
- ----------------------------------------------------------------------------------------------------------
Food & 45,886 Koninklijke Numico N.V. 1,876,994 1,985,730 0.7
Household 25,490 Unilever N.V. 1,957,209 1,998,927 0.8
Products ---------------------------------------
3,834,203 3,984,657 1.5
- ----------------------------------------------------------------------------------------------------------
Insurance 48,589 ING Groep N.V. 2,549,426 2,790,860 1.1
- ----------------------------------------------------------------------------------------------------------
Total Investments in the
Netherlands 13,793,946 14,185,447 5.4
- ----------------------------------------------------------------------------------------------------------
</TABLE>
November 30, 1998 15 Mercury International Fund
<PAGE>
[GRAPHIC OMITTED]
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
In US Dollars
---------------------------------------
Shares Value Percent of
Industries Held Investments Cost (Note 1a) Net Assets
- ----------------------------------------------------------------------------------------------------------
EUROPE (continued)
==========================================================================================================
<S> <C> <C> <C> <C> <C>
Spain
Banking 110,298 Banco Santander, S.A. $ 2,135,334 $ 2,262,248 0.9%
- ----------------------------------------------------------------------------------------------------------
Telecommuni- 46,444 Telefonica S.A. 2,165,203 2,189,323 0.8
cations
- ----------------------------------------------------------------------------------------------------------
Utilities-- 53,122 Endesa S.A. 1,378,593 1,390,561 0.5
Electric & Gas
- ----------------------------------------------------------------------------------------------------------
Total Investments in Spain 5,679,130 5,842,132 2.2
- ----------------------------------------------------------------------------------------------------------
Sweden
Appliances & 115,946 Electrolux AB 1,790,923 1,772,678 0.7
Household
Durables
- ----------------------------------------------------------------------------------------------------------
Electrical & 58,135 ABB AB (A Shares) 637,193 630,772 0.2
Electronics 94,835 Telefonaktiebolaget LM
Ericsson (Class B) 2,324,094 2,642,588 1.0
---------------------------------------
2,961,287 3,273,360 1.2
- ----------------------------------------------------------------------------------------------------------
Total Investments in Sweden 4,752,210 5,046,038 1.9
- ----------------------------------------------------------------------------------------------------------
Switzerland
Banking 9,388 Credit Suisse Group
(Registered) 1,487,456 1,620,017 0.6
5,252 UBS AG 1,498,629 1,586,022 0.6
---------------------------------------
2,986,085 3,206,039 1.2
- ----------------------------------------------------------------------------------------------------------
Business/ 4,287 Adecco S.A. 1,787,968 1,867,934 0.7
Public Services
- ----------------------------------------------------------------------------------------------------------
Food & 1,594 Nestle S.A. (Registered
Household Shares) 3,458,128 3,323,699 1.3
Products
- ----------------------------------------------------------------------------------------------------------
Health & 2,038 Novartis AG (Registered
Personal Care Shares) 3,784,075 3,839,200 1.5
234 Roche Holding AG 2,793,201 2,759,275 1.0
---------------------------------------
6,577,276 6,598,475 2.5
- ----------------------------------------------------------------------------------------------------------
Telecommuni- 5,073 +Swisscom AG (Registered) 1,679,049 1,714,344 0.7
cations
- ----------------------------------------------------------------------------------------------------------
Total Investments in
Switzerland 16,488,506 16,710,491 6.4
- ----------------------------------------------------------------------------------------------------------
United Kingdom
Aerospace 166,980 British Aerospace PLC 1,289,783 1,435,618 0.6
& Military
Technology
- ----------------------------------------------------------------------------------------------------------
</TABLE>
November 30, 1998 16 Mercury International Fund
<PAGE>
[GRAPHIC OMITTED]
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
In US Dollars
---------------------------------------
Shares Value Percent of
Industries Held Investments Cost (Note 1a) Net Assets
- ----------------------------------------------------------------------------------------------------------
EUROPE (concluded)
==========================================================================================================
<S> <C> <C> <C> <C> <C>
United Kingdom (concluded)
Banking 82,187 Barclays PLC $ 1,788,259 $ 1,864,844 0.7%
26,369 HSBC Holdings PLC 647,116 713,632 0.3
247,983 Lloyds TSB Group PLC 3,178,577 3,447,692 1.3
---------------------------------------
5,613,952 6,026,168 2.3
- ----------------------------------------------------------------------------------------------------------
Beverages & 154,409 +British American Tobacco PLC 1,378,692 1,416,083 0.5
Tobacco 199,943 Diageo PLC 2,193,792 2,240,333 0.9
---------------------------------------
3,572,484 3,656,416 1.4
- ----------------------------------------------------------------------------------------------------------
Broadcasting 223,998 Reed International PLC 1,844,902 1,763,190 0.7
& Publishing
- ----------------------------------------------------------------------------------------------------------
Energy 166,128 British Petroleum
Sources Company PLC 2,536,686 2,590,665 1.0
- ----------------------------------------------------------------------------------------------------------
Health & 147,790 Glaxo Wellcome PLC 4,686,060 4,675,238 1.8
Personal 168,507 SmithKline Beecham PLC 2,169,996 2,068,843 0.8
Care 47,786 Zeneca Group PLC 1,896,710 1,987,183 0.8
---------------------------------------
8,752,766 8,731,264 3.4
- ----------------------------------------------------------------------------------------------------------
Insurance 103,756 +Allied Zurich PLC 1,297,615 1,481,037 0.6
100,297 CGU PLC 1,606,900 1,590,552 0.6
---------------------------------------
2,904,515 3,071,589 1.2
- ----------------------------------------------------------------------------------------------------------
Merchan- 165,846 Marks & Spencer PLC 1,239,517 1,127,558 0.4
dising 449,029 Tesco PLC 1,269,689 1,326,368 0.5
---------------------------------------
2,509,206 2,453,926 0.9
- ----------------------------------------------------------------------------------------------------------
Recreation & 146,530 EMI Group PLC 870,422 872,912 0.3
Other Con-
sumer Goods
- ----------------------------------------------------------------------------------------------------------
Telecommuni- 46,990 British Telecommunications
cations PLC 634,840 643,994 0.2
163,503 Cable & Wireless PLC 1,893,889 2,077,557 0.8
140,082 Vodafone Group PLC 1,972,007 2,068,912 0.8
---------------------------------------
4,500,736 4,790,463 1.8
- ----------------------------------------------------------------------------------------------------------
Transpor- 116,541 Peninsular and Oriental
tation-- Stream Navigation Company 1,271,529 1,413,522 0.5
Shipping
- ----------------------------------------------------------------------------------------------------------
Utilities-- 204,841 BG PLC 1,385,909 1,404,509 0.5
Electric & 89,512 National Grid Group PLC 701,436 711,606 0.3
Gas 119,193 Southern Electric PLC 1,267,471 1,371,929 0.5
---------------------------------------
3,354,816 3,488,044 1.3
- ----------------------------------------------------------------------------------------------------------
Total Investments in the
United Kingdom 39,021,797 40,293,777 15.4
- ----------------------------------------------------------------------------------------------------------
Total Investments in
Europe 128,002,792 132,437,544 50.5
- ----------------------------------------------------------------------------------------------------------
</TABLE>
November 30, 1998 17 Mercury International Fund
<PAGE>
[GRAPHIC OMITTED]
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
In US Dollars
---------------------------------------
Shares Value Percent of
Industries Held Investments Cost (Note 1a) Net Assets
- ----------------------------------------------------------------------------------------------------------
PACIFIC BASIN/ASIA
==========================================================================================================
<S> <C> <C> <C> <C> <C>
Australia
Banking 94,000 Colonial Limited $ 311,390 $ 323,730 0.1%
37,000 Commonwealth Bank of
Australia 473,871 510,680 0.2
---------------------------------------
785,261 834,410 0.3
- ----------------------------------------------------------------------------------------------------------
Beverages 248,000 Foster's Brewing Group
& Tobacco Limited 629,292 650,280 0.3
- ----------------------------------------------------------------------------------------------------------
Electrical & 201,000 +Telstra Corporation Limited 811,910 894,833 0.4
Electronics
- ----------------------------------------------------------------------------------------------------------
Merchan- 90,000 Woolworths Ltd. 321,365 316,915 0.1
dising
- ----------------------------------------------------------------------------------------------------------
Metals/ 25,000 Rio Tinto Limited 312,650 322,260 0.1
Non-Ferrous
- ----------------------------------------------------------------------------------------------------------
Utilities-- 42,000 Australian Gas Light
Electric & Gas Company Limited 311,383 312,716 0.1
- ----------------------------------------------------------------------------------------------------------
Total Investments in
Australia 3,171,861 3,331,414 1.3
- ----------------------------------------------------------------------------------------------------------
Hong Kong
Banking 11,000 HSBC Holdings PLC 253,043 282,725 0.1
- ----------------------------------------------------------------------------------------------------------
Industrial-- 54,000 Hutchison Whampoa Limited 391,204 383,597 0.2
Components
- ----------------------------------------------------------------------------------------------------------
Telecommu- 128,800 Hong Kong Telecommuni-
nications cations Ltd. 258,830 246,205 0.1
- ----------------------------------------------------------------------------------------------------------
Utilities-- 91,000 Hong Kong and China Gas
Electric & Gas Company Ltd. 128,000 120,471 0.0
- ----------------------------------------------------------------------------------------------------------
Total Investments in
Hong Kong 1,031,077 1,032,998 0.4
- ----------------------------------------------------------------------------------------------------------
Japan
Appliances & 26,000 Matsushita Electric
Household Industrial Company, Ltd. 403,604 418,401 0.2
Durables 23,000 Pioneer Electronic
Corporation 386,552 378,535 0.1
---------------------------------------
790,156 796,936 0.3
- ----------------------------------------------------------------------------------------------------------
Automobiles 10,000 Honda Motor Co., Ltd. 314,626 359,233 0.1
- ----------------------------------------------------------------------------------------------------------
Banking 33,000 Bank of Tokyo-Mitsubishi, Ltd. 330,534 359,395 0.1
40,000 Sanwa Bank Ltd. 335,140 362,484 0.1
31,000 Sumitomo Bank, Ltd. 323,651 344,920 0.1
---------------------------------------
989,325 1,066,799 0.3
- ----------------------------------------------------------------------------------------------------------
</TABLE>
November 30, 1998 18 Mercury International Fund
<PAGE>
[GRAPHIC OMITTED]
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
In US Dollars
---------------------------------------
Shares Value Percent of
Industries Held Investments Cost (Note 1a) Net Assets
- ----------------------------------------------------------------------------------------------------------
PACIFIC BASIN/ASIA (continued)
==========================================================================================================
<S> <C> <C> <C> <C> <C>
Japan (continued)
Beverages 55 Japan Tobacco, Inc. $ 477,332 $ 482,770 0.2%
& Tobacco
- ----------------------------------------------------------------------------------------------------------
Building 85,000 Sekisui Chemical Co., Ltd. 493,927 518,124 0.2
Materials &
Components
- ----------------------------------------------------------------------------------------------------------
Chemicals 146,000 Asahi Chemical Industry
Co., Ltd. 644,122 607,542 0.2
133,000 Toray Industries, Inc. 647,120 632,355 0.2
---------------------------------------
1,291,242 1,239,897 0.4
- ----------------------------------------------------------------------------------------------------------
Construction 90,000 Nishimatsu Construction
& Housing Co. Ltd. 491,584 493,742 0.2
- ----------------------------------------------------------------------------------------------------------
Data 44,000 Fujitsu Limited 484,039 508,518 0.2
Processing &
Reproduction
- ----------------------------------------------------------------------------------------------------------
Electrical & 91,000 Hitachi Ltd. 494,259 548,041 0.2
Electronics 110 NTT Data Corporation 480,206 480,982 0.2
---------------------------------------
974,465 1,029,023 0.4
- ----------------------------------------------------------------------------------------------------------
Electronic 6,000 +Fujitsu Support and
Components/ Service Inc. 304,920 335,501 0.1
Instruments 5,000 Rohm Company Ltd. 454,396 422,627 0.2
---------------------------------------
759,316 758,128 0.3
- ----------------------------------------------------------------------------------------------------------
Financial 82,000 Nomura Securities Co., Ltd. 651,606 797,741 0.3
Services
- ----------------------------------------------------------------------------------------------------------
Food & 23,000 Kao Corporation 472,452 435,549 0.2
Household
Products
- ----------------------------------------------------------------------------------------------------------
Health & 9,000 Nichii Gakkan Company 338,630 343,791 0.1
Personal 14,000 Takeda Chemical Industries 472,365 472,204 0.2
Care 16,000 Yamanouchi Pharmaceutical
Co., Ltd. 472,954 468,140 0.2
---------------------------------------
1,283,949 1,284,135 0.5
- ----------------------------------------------------------------------------------------------------------
Industrial-- 21,000 Bridgestone Corporation 484,126 491,547 0.2
Components
- ----------------------------------------------------------------------------------------------------------
Insurance 27,000 Tokio Marine & Fire Insurance
Co., Ltd. 323,651 305,023 0.1
- ----------------------------------------------------------------------------------------------------------
</TABLE>
November 30, 1998 19 Mercury International Fund
<PAGE>
[GRAPHIC OMITTED]
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
In US Dollars
---------------------------------------
Shares Value Percent of
Industries Held Investments Cost (Note 1a) Net Assets
- ----------------------------------------------------------------------------------------------------------
PACIFIC BASIN/ASIA (concluded)
==========================================================================================================
<S> <C> <C> <C> <C> <C>
Japan (concluded)
Machinery & 25,000 Komori Corporation $ 482,907 $ 519,140 0.2%
Engineering
- ----------------------------------------------------------------------------------------------------------
Merchan- 12,000 JUSCO Co., Ltd. 212,008 228,706 0.1
dising 14,000 Tokyo Electron Limited 469,298 523,407 0.2
---------------------------------------
681,306 752,113 0.3
- ----------------------------------------------------------------------------------------------------------
Metals-- 355,000 Nippon Steel Corporation 643,817 646,294 0.2
Steel
- ----------------------------------------------------------------------------------------------------------
Real Estate 68,000 Mitsubishi Estate Company
Limited 647,215 649,935 0.3
- ----------------------------------------------------------------------------------------------------------
Telecommu- 170 NTT Mobile Communication
nications Network, Inc. (a) 624,564 649,382 0.3
99 Nippon Telegraph & Telephone
Corporation (NTT) 802,376 740,248 0.3
---------------------------------------
1,426,940 1,389,630 0.6
- ----------------------------------------------------------------------------------------------------------
Textiles & 19,000 Aoyama Trading Co., Ltd. 479,683 523,488 0.2
Apparel
- ----------------------------------------------------------------------------------------------------------
Utilities-- 43,000 Tokyo Electric Power 1,108,342 982,038 0.4
Electric & Gas
- ----------------------------------------------------------------------------------------------------------
Total Investments in Japan 15,752,006 16,029,803 6.1
- ----------------------------------------------------------------------------------------------------------
New Zealand
Telecommu- 53,000 Telecom Corporation of
nications New Zealand Limited 233,083 226,198 0.1
- ----------------------------------------------------------------------------------------------------------
Total Investments in
New Zealand 233,083 226,198 0.1
- ----------------------------------------------------------------------------------------------------------
Singapore
Broadcasting 30,000 Singapore Press Holdings
& Publishing Ltd. (Foreign) 266,039 318,955 0.1
- ----------------------------------------------------------------------------------------------------------
Total Investments in
Singapore 266,039 318,955 0.1
- ----------------------------------------------------------------------------------------------------------
Total Investments in the
Pacific Basin/Asia 20,454,066 20,939,368 8.0
- ----------------------------------------------------------------------------------------------------------
</TABLE>
November 30, 1998 20 Mercury International Fund
<PAGE>
[GRAPHIC OMITTED]
SCHEDULE OF INVESTMENTS (CONCLUDED)
<TABLE>
<CAPTION>
In US Dollars
---------------------------------------
Shares Value Percent of
Industries Held Investments Cost (Note 1a) Net Assets
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial US$ 13,000,000 CIT Group Holdings,
Paper* Inc. (The), 5.44% due
12/01/1998 $ 13,000,000 $ 13,000,000 5.0%
13,000,000 Ford Motor Credit
Company, 5.51% due
12/01/1998 13,000,000 13,000,000 5.0
13,000,000 General Electric
Capital Corp.,
5.45% due
12/01/1998 13,000,000 13,000,000 5.0
10,005,000 General Motors
Acceptance
Corp., 5.50% due
12/01/1998 10,005,000 10,005,000 3.7
13,000,000 Rabobank
Nederland N.V.,
5.40% due
12/01/1998 13,000,000 13,000,000 5.0
- ----------------------------------------------------------------------------------------------------------
Total Investments in
Commercial Paper 62,005,000 62,005,000 23.7
- ----------------------------------------------------------------------------------------------------------
Foreign DEM 87,000,000 German Treasury
Government Bill, 3.27% due
Obligations* 4/16/1999 50,939,026 50,848,168 19.3
- ----------------------------------------------------------------------------------------------------------
Total Investments in
Foreign Government
Obligations 50,939,026 50,848,168 19.3
=======================================
- ----------------------------------------------------------------------------------------------------------
Total Investments in
Short-Term Securities 112,944,026 112,853,168 43.0
=======================================
- ----------------------------------------------------------------------------------------------------------
Total Investments $261,400,884 266,230,080 101.5
============
Time Deposits** 25,669,249 9.8
Liabilities in Excess of
Other Assets (29,616,172) (11.3)
------------------------
Net Assets $262,283,157 100.0%
========================
- ----------------------------------------------------------------------------------------------------------
</TABLE>
* Commercial Paper and certain Foreign Government Obligations are traded on
a discount basis; the interest rates shown reflect the discount rates paid
at the time of purchase by the Fund.
** Time deposits bear interest at 5%, 3% and 3.33% and mature on 12/01/1998,
12/01/1998 and 12/02/1998, respectively.
+ Non-income producing security.
(a) 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.
November 30, 1998 21 Mercury International Fund
<PAGE>
[GRAPHIC OMITTED]
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
As of November 30, 1998
- ---------------------------------------------------------------------------------------------
MERCURY MASTER INTERNATIONAL PORTFOLIO
=============================================================================================
<S> <C> <C>
Assets:
Investments, at value (identified cost--$261,400,884) (Note 1a) $266,230,080
Cash 902
Foreign cash (Note 1c) 252,507
Time deposits (Note 1c) 25,669,249
Receivables:
Contributions $ 2,695,258
Securities sold 474,250
Dividends 52,261
Interest 2,236 3,224,005
------------
Other assets 240,430
------------
Total assets 295,617,173
------------
- ---------------------------------------------------------------------------------------------
Liabilities:
Payables:
Securities purchased 32,822,358
Withdrawals 331,799
Investment adviser (Note 2) 159,784 33,313,941
------------
Accrued expenses and other liabilities 20,075
------------
Total liabilities 33,334,016
------------
- ---------------------------------------------------------------------------------------------
Net Assets:
Net assets $262,283,157
============
- ---------------------------------------------------------------------------------------------
Net Assets Consist of:
Partners' capital $257,354,686
Unrealized appreciation on investments and foreign currency
transactions--net 4,928,471
------------
Net assets $262,283,157
============
- ---------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
November 30, 1998 22 Mercury International Fund
<PAGE>
[GRAPHIC OMITTED]
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Period October 30, 1998+ to November 30, 1998
- ---------------------------------------------------------------------------------------
MERCURY MASTER INTERNATIONAL PORTFOLIO
=======================================================================================
<S> <C> <C>
Investment Income (Notes 1d & 1e):
Interest and discount earned $ 685,481
Dividends (net of $8,131 foreign withholding tax) 52,496
-----------
Total income 737,977
-----------
- ---------------------------------------------------------------------------------------
Expenses:
Investment advisory fees (Note 2) $ 159,784
Custodian fees 20,047
Accounting services (Note 2) 9,735
Trustees' fees and expenses 4,367
Professional fees 2,717
Organization expenses 2,184
Pricing fees 552
Other 473
-----------
Total expenses 199,859
-----------
Investment income--net 538,118
-----------
- ---------------------------------------------------------------------------------------
Realized & Unrealized Gain on Investments &
Foreign Currency Transactions--Net (Notes 1b,
1c, 1e & 3):
Realized gain from:
Investments--net 114,263
Foreign currency transactions--net 85,355 199,618
-----------
Unrealized appreciation on:
Investments--net 4,829,196
Foreign currency transactions--net 99,275 4,928,471
-------------------------
Net realized and unrealized gain on investments and foreign
currency transactions 5,128,089
-----------
Net Increase in Net Assets Resulting from Operations $ 5,666,207
===========
- ---------------------------------------------------------------------------------------
</TABLE>
+ Commencement of operations.
See Notes to Financial Statements.
November 30, 1998 23 Mercury International Fund
<PAGE>
[GRAPHIC OMITTED]
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Period October 30, 1998+ to November 30, 1998
- --------------------------------------------------------------------------------------------
MERCURY MASTER INTERNATIONAL PORTFOLIO
============================================================================================
Increase in Net Assets
- --------------------------------------------------------------------------------------------
<S> <C>
Operations:
Investment income--net $ 538,118
Realized gain on investments and foreign currency transactions--net 199,618
Unrealized appreciation on investments and foreign currency transactions--net 4,928,471
------------
Net increase in net assets resulting from operations 5,666,207
------------
- --------------------------------------------------------------------------------------------
Net Capital Contributions:
Increase in net assets derived from net capital contributions 256,616,950
------------
- --------------------------------------------------------------------------------------------
Net Assets:
Total increase in net assets 262,283,157
Beginning of period --
------------
End of period $262,283,157
============
- --------------------------------------------------------------------------------------------
</TABLE>
+ Commencement of operations.
See Notes to Financial Statements.
November 30, 1998 24 Mercury International Fund
<PAGE>
FINANCIAL HIGHLIGHTS
MERCURY MASTER INTERNATIONAL PORTFOLIO
================================================================================
The following ratios have been derived from information
provided in the financial statements. For the Period
October 30, 1998+
to November 30, 1998
- --------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses .94%*
===========
Investment income--net 2.53%*
===========
- --------------------------------------------------------------------------------
Supplemental Data:
Net assets, end of period (in thousands) $ 262,283
===========
Portfolio turnover .82%
===========
- --------------------------------------------------------------------------------
* Annualized.
+ Commencement of operations.
See Notes to Financial Statements.
November 30, 1998 25 Mercury International Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
MERCURY MASTER INTERNATIONAL PORTFOLIO
================================================================================
1 Significant Accounting Policies:
Mercury Master International Portfolio (the "Portfolio") is part of
Mercury Asset Management Master Trust (the "Trust"). The Trust is
registered under the Investment Company Act of 1940 and is organized as a
Delaware business trust. 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 following is a summary of significant accounting policies followed by
the Portfolio.
(a) Valuation of investments--Portfolio securities that are traded on
stock exchanges are valued at the last sale price as of the close of
business on the day the securities are being valued or, lacking any sales,
at the last available bid price for long positions and the last available
ask price for short positions. Securities traded in the over-the-counter
market are valued at the last available bid price prior to the time of
valuation. Securities traded both in the over-the-counter market and on a
stock exchange are valued according to the broadest and most
representative market. Short positions in securities traded in the
over-the-counter market are valued at the last available ask price prior
to the time of valuation. Options written or purchased are valued at the
last sale price in the case of exchange-traded options. In the case of
options traded in the over-the-counter market, valuation is the last asked
price (options written) or the last bid price (options purchased).
Short-term securities are valued at amortized cost, which approximates
market value. Other investments, including futures contracts and related
options, are stated at market value. Securities and assets for which
market quotations are not readily available are valued at fair market
value, as determined in good faith by or under the direction of the
Trust's Board of Trustees.
(b) Derivative financial instruments--The Portfolio may engage in various
portfolio investment strategies to seek to increase its return by hedging
its holdings 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.
o Financial futures contracts--The Portfolio may purchase or sell
financial futures contracts and options on such futures contracts for the
purpose of hedging the market risk on existing securities or the intended
purchase of securities. Upon entering into a contract, the Portfolio
deposits and maintains as collateral such initial margin as required by
the exchange on which the transaction is effected. Pursuant to the
contract, the Portfolio 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
November 30, 1998 26 Mercury International Fund
<PAGE>
[GRAPHIC OMITTED]
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
margin and are recorded by the Portfolio as unrealized gains or losses.
When the contract is closed, the Portfolio records a realized gain or loss
equal to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
o Options--The Portfolio is authorized to purchase and write call and put
options. When the Portfolio writes an option, an amount equal to the
premium received by the Portfolio 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 Portfolio enters into
a closing transaction), the Portfolio realizes a gain or loss on the
option to the extent of the premiums received or paid (or a gain or loss
to the extent that the cost of the closing transaction exceeds the premium
paid or received).
Written and purchased options are non-income producing investments.
o Forward foreign exchange contracts--The Portfolio 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
Portfolios' records. However, the effect on operations is recorded from
the date the Portfolio enters into such contracts. Premium or discount is
amortized over the life of the contracts.
o Foreign currency options and futures--The Portfolio 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 Portfolio, sold by the
Portfolio but not yet delivered, or committed or anticipated to be
purchased by the Portfolio.
(c) Foreign currency transactions--Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized.
Assets and liabilities denominated in foreign currencies are valued at the
exchange rate at the end of the period. Foreign currency transactions are
the result of settling (realized) or valuing (unrealized) assets or
liabilities expressed in foreign currencies into US dollars. Realized and
unrealized gains or losses from investments include the effects of foreign
exchange rates on investments.
(d) Income taxes--The Portfolio is classified as a partnership for Federal
income tax purposes. As a partnership for Federal income tax purposes, the
Portfolio will not incur Federal income tax liability. Items of
partnership income, gain, loss and deduction will pass through to
investors as partners in the Portfolio. Therefore, no Federal income tax
provision is required. Under the applicable foreign tax law, withholding
taxes may be imposed on interest, dividends, and capital gains at various
rates.
November 30, 1998 27 Mercury International Fund
<PAGE>
[GRAPHIC OMITTED]
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(e) Security transactions and investment income--Security transactions are
accounted for on the date the securities are purchased or sold (the trade
dates). Dividend income is recorded on the ex-dividend dates. Dividends
from foreign securities where the ex-dividend date may have passed are
subsequently recorded when the Portfolio 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.
2 Investment Advisory Agreement and Transactions with Affiliates:
The Trust has entered into an Investment Advisory Agreement with Mercury
Asset Management International Ltd. ("Mercury International"), an
affiliate of Fund Asset Management, L.P. ("FAM"). The general partner of
FAM is Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the limited
partner.
Mercury International is responsible for the management of the Portfolios'
investments and provides the necessary personnel, facilities, equipment
and certain other services necessary to the operations of the Portfolio.
For such services, the Portfolio pays a monthly fee at an annual rate of
0.75% of the average daily value of the Portfolios' net assets. Mercury
International has entered into a Sub-Advisory Agreement with FAM with
respect to the Portfolio, pursuant to which FAM provides investment
advisory services with respect to the Portfolio's daily cash assets.
Mercury International has agreed to pay FAM a fee in an amount to be
determined from time to time by both parties but in no event in excess of
the amount that Mercury International actually receives for providing
services to the Trust pursuant to the Investment Advisory Agreement.
Accounting services are provided to the Portfolio by FAM at cost.
Certain officers and/or trustees of the Trust are officers and/or
directors of Mercury International, FAM, PSI, and/or ML & Co.
November 30, 1998 28 Mercury International Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
3 Investments:
Purchases and sales of investments, excluding short-term securities, for
the period October 30, 1998 to November 30, 1998 were $149,430,599 and
$1,088,004, respectively.
Net realized gains for the period October 30, 1998 to November 30, 1998
and net unrealized gains (losses) as of November 30, 1998 were as follows:
Realized Unrealized
Gains Gains (Losses)
- --------------------------------------------------------------------------------
Investments:
Long-term $ 114,263 $ 4,920,054
Short-term -- (90,858)
--------------------------------
Total investments 114,263 4,829,196
--------------------------------
Currency transactions:
Foreign currency transactions 85,355 99,275
Total currency transactions 85,355 99,275
--------------------------------
Total $ 199,618 $ 4,928,471
================================
- --------------------------------------------------------------------------------
As of November 30, 1998, net unrealized appreciation for Federal income
tax purposes aggregated $4,829,196, of which $6,074,732 related to
appreciated securities and $1,245,536 related to depreciated securities.
At November 30, 1998, the aggregate cost of investments for Federal income
tax purposes was $261,400,884.
4 Commitments:
At November 30, 1998, the Fund had entered into foreign exchange contracts
under which it had agreed to purchase and sell various foreign currencies
with approximate values of $26,595,000 and $972,000, respectively.
November 30, 1998 29 Mercury International Fund
<PAGE>
[GRAPHIC OMITTED]
PORTFOLIO INFORMATION
WORLDWIDE INVESTMENTS AS OF NOVEMBER 30, 1998
================================================================================
Ten Largest Percent of
Equity Holdings Net Assets
- -------------------------------------------------
Glaxo Wellcome PLC 1.8%
- -------------------------------------------------
Telecom Italia S.p.A 1.7
- -------------------------------------------------
Vivendi 1.6
- -------------------------------------------------
Novartis AG (Registered Shares) 1.5
- -------------------------------------------------
Lloyds TSB Group PLC 1.3
- -------------------------------------------------
Nestle S.A. (Registered Shares) 1.3
- -------------------------------------------------
Total S.A. (Class B) 1.2
- -------------------------------------------------
Axa 1.1
- -------------------------------------------------
ING Groep N.V 1.1
- -------------------------------------------------
Roche Holding AG 1.0
- -------------------------------------------------
Percent of
Ten Largest Countries Net Assets
- -------------------------------------------------
United Kingdom 15.4%
- -------------------------------------------------
France 7.3
- -------------------------------------------------
Switzerland 6.4
- -------------------------------------------------
Germany 6.1
- -------------------------------------------------
Japan 6.1
- -------------------------------------------------
Netherlands 5.4
- -------------------------------------------------
Italy 3.4
- -------------------------------------------------
Spain 2.2
- -------------------------------------------------
Sweden 1.9
- -------------------------------------------------
Belgium 1.4
- -------------------------------------------------
Ten Largest Industries Percent of
(Equity Investments) Net Assets
- -------------------------------------------------
Banking 7.5%
- -------------------------------------------------
Telecommunications 6.9
- -------------------------------------------------
Health & Personal Care 6.4
- -------------------------------------------------
Insurance 5.3
- -------------------------------------------------
Electrical & Electronics 4.6
- -------------------------------------------------
Energy Sources 4.2
- -------------------------------------------------
Utilities--Electric & Gas 3.4
- -------------------------------------------------
Food & Household Products 3.0
- -------------------------------------------------
Business/Public Services 2.8
- -------------------------------------------------
Merchandising 2.3
- -------------------------------------------------
November 30, 1998 30 Mercury International Fund
<PAGE>
[GRAPHIC OMITTED]
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.
Mercury International Fund of
Mercury Asset Management Funds, Inc.
Box 9011
Princeton, NJ
08543-9011
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