SEMI-ANNUAL REPORT
NOVEMBER 30, 1998
[GRAPHIC OMITTED]
Mercury
Pan-European
Growth
Fund
OF MERCURY ASSET
MANAGEMENT FUNDS, INC.
----------------
MERCURY
ASSET MANAGEMENT
----------------
<PAGE>
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MERCURY MASTER
PAN-EUROPEAN GROWTH PORTFOLIO
SECTOR REPRESENTATION
- --------------------------------------------------------------------------------
As a Percentage of Net Assets as of November 30, 1998
[GRAPHIC OMITTED]
A pie chart illustrating the following percentages
(As a Percentage of Net Assets as of November 30, 1998):
Capital Equipment 4.5%
Energy 7.4%
Cash Equivalent 38.7%
Finance 12.0%
Consumer Goods 16.6%
Services 18.3%
Materials 2.5%
GEOGRAPHIC ALLOCATION
- --------------------------------------------------------------------------------
As a Percentage of Net Assets as of November 30, 1998
[GRAPHIC OMITTED]
A pie chart illustrating the following percentages
(As a Percentage of Net Assets as of November 30, 1998):
Austria 0.1%*
United Kingdom 20.7%
Cash Equivalent 38.7%
Switzerland 7.5%
Sweden 1.8%
Spain 2.7%
Portugal 0.4%
Netherlands 4.2%
Italy 3.6%
Greece 0.1%
Germany 9.5%
France 8.3%
Finland 0.5%
Belgium 2.0%
* Less than 0.1%.
November 30, 1998 1 Mercury Pan-European Growth Fund
<PAGE>
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DEAR SHAREHOLDER
We are pleased to provide you with this first report to shareholders for Mercury
Pan-European Growth 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 in Europe. The Fund will
seek to achieve its objective by investing all of its assets in Mercury Master
Pan-European Growth 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 4 of
this report to shareholders.
Investment Environment
Since the Portfolio commenced operations on October 30, 1998, European markets
have continued to recover from the lows reached in early October. Although the
recovery has not been as strong as that of the United States, approximately
two-thirds of the market drop since July had been regained by November
month-end. The recovery was fueled by the initial interest rate cut by the US
Federal Reserve Board, followed by interest rate cuts in Europe (with the
notable exception of the German Bundesbank at the end of November), as central
banks around the world took action to restore investor confidence. During
November, markets were also supported by an exceptional level of corporate
activity.
Europe is not immune from the fact that over 30% of the world economy is now in
recession, and European economic forecasts have been revised downwards. With
export markets weak, European growth has been dependent on a recovery by
domestic consumption and business confidence. There were signs of weakness in
the United Kingdom, where consumer spending continues to slow. There were also
signs of a deterioration of business confidence in Germany. With the exception
of the United Kingdom, where the probability of a recession has increased and
growth may now be as low as 0.5% in 1999, the rest of Europe should continue to
see a slower but nonetheless reasonable level of growth. Growth in Germany is
expected to slow from 2.5% in 1998 to 1.5% next year, with France slowing from
2.8% in 1998 to 2.5% in 1999.
Unemployment has fallen slightly but remains high in Europe, currently at 10.9%
for the eleven countries that are currently participating in the monetary union.
With unemployment rates still high and producer prices negative in some
countries, inflationary pressure remains low. These same eleven countries have
an inflation rate of 1%.
Lower economic growth forecasts have led to profit warnings by a number of
companies, particularly in the financial sector, where profits will be adversely
affected by trading losses and increased provisions for downsizing, as well as
in sectors exposed to the global economic cycle. However, with market confidence
improving, the financial sector has recovered strongly. Corporate activity has
again picked up and several large cross-border mergers have been announced; for
example, between Hoechst AG and Rhone Poulenc, and Alusuisse and Viag AG.
Corporate merger activity also involved US companies, such as the combination of
British Petroleum PLC and Amoco Corp. and the purchase by Deutsche Bank AG of
Bankers Trust.
November 30, 1998 2 Mercury Pan-European Growth Fund
<PAGE>
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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, 61% of the Portfolio was invested in equities. Sector allocation
reflected our strategic views and we established overweighted positions in
sectors that are relatively insulated from global economic weakness and are
expected to benefit from restructuring in Europe. At November 30, 1998, the
Portfolio was overweighted in services and utilities (water and
telecommunications).
The Portfolio benefited from the strong performance of both Telefonica S.A. and
Telecom Italia S.p.A. in telecommunications and from restructuring announcements
made by Philips Electronics N.V. and Siemens AG. The banking sector continued to
recover from lows reached in October as fears concerning the liquidity crunch
subsided. Our holdings in Credit Commercial de France and Banka Intesa S.p.A.
also contributed strongly to the Portfolio's performance. On the negative side,
the Portfolio's holdings in the energy sector--in particular British Petroleum
Company PLC and Shell Transport & Trading Co., PLC--were weak. Overall, the most
important contributor to performance has been our relatively rapid exposure to
the market early in the investment process.
Investment Outlook
As Europe looks forward to the introduction of the euro at the start of 1999 and
global confidence continues to recover, European stock markets may finish the
year on a strong note. However, it is likely that market volatility will remain
in the coming months. For the near term, equity markets remain vulnerable to
earnings disappointments and any further bad news from emerging markets.
Looking further ahead, we believe European stock markets will be well supported
by the longer-term trends of wider share ownership in Europe and the more
rigorous realization by European corporate managements of the importance of
maximizing shareholder value. The markets may also be supported by further cuts
in interest rates. Against this backdrop, we anticipate investing the
Portfolio's remaining cash in the coming weeks.
In Conclusion
We thank you for your investment in Mercury Pan-European Growth Fund, and we
look forward to serving your investment needs in the months and years ahead.
Sincerely,
/s/ Jeffrey Peek /s/ Andreas E.F. Utermann
Jeffrey Peek Andreas E.F. Utermann
President Portfolio Manager
December 28, 1998
November 30, 1998 3 Mercury Pan-European Growth 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 +2.50%
- --------------------------------------------------------------------------------
Class A +2.40
- --------------------------------------------------------------------------------
Class B +2.40
- --------------------------------------------------------------------------------
Class C +2.40
- --------------------------------------------------------------------------------
* 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 net asset values for the period shown, and assume reinvestment of
all dividends and capital gains distributions at net asset value on the
ex-dividend date. The Fund commenced operations on 10/30/98.
November 30, 1998 4 Mercury Pan-European Growth Fund
<PAGE>
[GRAPHIC OMITTED]
STATEMENT OF ASSETS
AND LIABILITIES
<TABLE>
<CAPTION>
As of November 30, 1998
- ------------------------------------------------------------------------------------------------
MERCURY PAN-EUROPEAN GROWTH FUND
================================================================================================
<S> <C>
Assets:
Investment in Mercury Pan-European Growth Portfolio, at value
(identified cost--$493,686,357) (Note 1a) $ 505,979,472
Prepaid registration fees and other assets (Note 1d) 84,250
-------------
Total assets 506,063,722
-------------
- ------------------------------------------------------------------------------------------------
Liabilities:
Payable to distributor (Note 2) 336,954
Payable to administrator (Note 2) 104,704
Accrued expenses and other liabilities 46,957
-------------
Total liabilities 488,615
-------------
- ------------------------------------------------------------------------------------------------
Net Assets:
Net assets $ 505,575,107
=============
- ------------------------------------------------------------------------------------------------
Net Assets Consist of:
Class I Shares of Common Stock, $0.0001 par value, 100,000,000 shares
authorized $ 304
Class A Shares of Common Stock, $0.0001 par value, 100,000,000 shares
authorized 866
Class B Shares of Common Stock, $0.0001 par value, 100,000,000 shares
authorized 2,517
Class C Shares of Common Stock, $0.0001 par value, 100,000,000 shares
authorized 1,249
Paid-in capital in excess of par 493,847,739
Undistributed investment income--net 407,709
Accumulated realized capital losses on investments and foreign currency
transactions from the Portfolio--net (3,546)
Unrealized appreciation on investments and foreign currency
transactions from the Portfolio--net 11,318,269
-------------
Net assets $ 505,575,107
=============
- ------------------------------------------------------------------------------------------------
Net Asset Value:
Class I--Based on net assets of $31,167,041 and 3,041,479 shares
outstanding $ 10.25
=============
Class A--Based on net assets of $88,768,937 and 8,664,670 shares
outstanding $ 10.24
=============
Class B--Based on net assets of $257,720,836 and 25,172,631 shares
outstanding $ 10.24
=============
Class C--Based on net assets of $127,918,293 and 12,494,263 shares
outstanding $ 10.24
=============
- ------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
November 30, 1998 5 Mercury Pan-European Growth Fund
<PAGE>
[GRAPHIC OMITTED]
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Period October 30, 1998+ to November 30, 1998
- ------------------------------------------------------------------------------------------------
MERCURY PAN-EUROPEAN GROWTH FUND
================================================================================================
Investment Income (Notes 1b & 1c):
<S> <C> <C>
Investment income allocated from the Portfolio (net of
$15,417 foreign withholding tax) $ 1,356,810
Expenses allocated from the Portfolio (378,419)
-----------
Net investment income from the Portfolio 978,391
-----------
- ------------------------------------------------------------------------------------------------
Expenses:
Account maintenance and distribution fees--Class B (Note 2) $ 212,334
Account maintenance and distribution fees--Class C (Note 2) 105,591
Administration fee (Note 2) 104,704
Registration fees (Note 1d) 41,361
Transfer agent fees--Class B (Note 2) 27,165
Printing and shareholder reports 23,584
Account maintenance fees--Class A
(Note 2) 19,029
Transfer agent fees--Class C (Note 2) 13,493
Transfer agent fees--Class A (Note 2) 8,610
Organization expenses 7,933
Transfer agent fees--Class I (Note 2) 2,801
Professional fees 2,200
Accounting services (Note 2) 1,111
Other 766
-------
Total expenses 570,682
-----------
Investment income--net 407,709
-----------
- ------------------------------------------------------------------------------------------------
Realized & Unrealized Gain (Loss) from the Portfolio--Net:
Realized gain (loss) from the Portfolio on:
Investments--net 87,421
Foreign currency transactions--net (90,967) (3,546)
-------
Unrealized appreciation on investments and foreign
currency transactions from the Portfolio--net 11,318,269
-----------
Net realized and unrealized gain on investments and
foreign currency transactions from the Portfolio 11,314,723
-----------
Net Increase in Net Assets Resulting from Operations $11,722,432
===========
- ------------------------------------------------------------------------------------------------
</TABLE>
+ Commencement of operations.
See Notes to Financial Statements.
November 30, 1998 6 Mercury Pan-European Growth Fund
<PAGE>
[GRAPHIC OMITTED]
STATEMENT OF CHANGES
IN NET ASSETS
<TABLE>
<CAPTION>
For the Period October 30, 1998+ to November 30, 1998
- ------------------------------------------------------------------------------------------------
MERCURY PAN-EUROPEAN GROWTH FUND
================================================================================================
Increase (Decrease) in Net Assets:
- ------------------------------------------------------------------------------------------------
<S> <C>
Operations:
Investment income--net $ 407,709
Realized loss on investments and foreign currency transactions from the
Portfolio--net (3,546)
Unrealized appreciation on investments and foreign currency
transactions from the Portfolio--net 11,318,269
------------
Net increase in net assets resulting from operations 11,722,432
------------
- ------------------------------------------------------------------------------------------------
Capital Share Transactions (Note 4):
Net increase in net assets derived from capital share transactions 493,702,675
------------
- ------------------------------------------------------------------------------------------------
Net Assets:
Total increase in net assets 505,425,107
Beginning of period 150,000
------------
End of period* $505,575,107
============
- ------------------------------------------------------------------------------------------------
* Undistributed investment income--net $ 407,709
============
</TABLE>
+ Commencement of operations.
See Notes to Financial Statements.
November 30, 1998 7 Mercury Pan-European Growth Fund
<PAGE>
[GRAPHIC OMITTED]
FINANCIAL HIGHLIGHTS
MERCURY PAN-EUROPEAN GROWTH 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 (Decrease) 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 .24 .23 .23 .23
----------------------------------------------------
Total from investment operations .25 .24 .24 .24
----------------------------------------------------
Net asset value, end of period $ 10.25 $ 10.24 $ 10.24 $ 10.24
====================================================
- ------------------------------------------------------------------------------------------------------.
Total Investment Return:**
Based on net asset value per share 2.50%++ 2.40%++ 2.40%++ 2.40%++
====================================================
- ------------------------------------------------------------------------------------------------------.
Ratios to Average Net Assets:
Expenses++ 1.44%* 1.71%* 2.46%* 2.46%*
====================================================
Investment income--net 1.76%* 1.57%* .77%* .77%*
====================================================
- ------------------------------------------------------------------------------------------------------.
Supplemental Data:
Net assets, end of period (in thousands) $31,167 $88,769 $257,721 $127,918
====================================================
- ------------------------------------------------------------------------------------------------------.
</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 8 Mercury Pan-European Growth Fund
<PAGE>
[GRAPHIC OMITTED]
NOTES TO FINANCIAL STATEMENTS
MERCURY PAN-EUROPEAN GROWTH FUND
1 Significant Accounting Policies:
Mercury Pan-European Growth 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 Pan-European Growth
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 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 9 Mercury Pan-European Growth 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 10 Mercury Pan-European Growth 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 $ 50 $ 87,587
--------------------------------------------------------------------------
Class A $9,455 $3,382,553
--------------------------------------------------------------------------
For the period October 30, 1998 to November 30, 1998, MLPF&S received
contingent deferred sales charges of $3,930 and $2,943 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 $494,678,416 and
$992,059, respectively.
4 Capital Share Transactions:
Net increase in net assets derived from capital share transactions was
$493,702,675 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 3,127,662 $ 31,313,510
Shares redeemed (89,933) (905,603)
--------------------------------
Net increase 3,037,729 $ 30,407,907
================================
--------------------------------------------------------------------------
+ Prior to October 30, 1998 (commencement of operations), the Fund issued
3,750 shares to Mercury Pan-European Growth Fund for $37,500.
Class A Shares for the Period October 30,
1998+ to November 30, 1998 Shares Dollar Amount
--------------------------------------------------------------------------
Shares sold 9,140,881 $ 91,405,023
Shares redeemed (479,961) (4,814,597)
--------------------------------
Net increase 8,660,920 $ 86,590,426
================================
--------------------------------------------------------------------------
+ Prior to October 30, 1998 (commencement of operations), the Fund issued
3,750 shares to Mercury Pan-European Growth Fund for $37,500.
November 30, 1998 11 Mercury Pan-European Growth Fund
<PAGE>
[GRAPHIC OMITTED]
NOTES TO FINANCIAL STATEMENTS
(CONCLUDED)
Class B Shares for the Period October 30,
1998+ to November 30, 1998 Shares Dollar Amount
--------------------------------------------------------------------------
Shares sold 25,438,880 $254,483,201
Shares redeemed (269,999) (2,692,926)
---------------------------------
Net increase 25,168,881 $251,790,275
=================================
--------------------------------------------------------------------------
+ Prior to October 30, 1998 (commencement of operations), the Fund issued
3,750 shares to Mercury Pan-European Growth Fund for $37,500.
Class C Shares for the Period October 30,
1998+ to November 30, 1998 Shares Dollar Amount
--------------------------------------------------------------------------
Shares sold 12,650,288 $126,513,751
Shares redeemed (159,775) (1,599,684)
---------------------------------
Net increase 12,490,513 $124,914,067
=================================
--------------------------------------------------------------------------
+ Prior to October 30, 1998 (commencement of operations), the Fund issued
3,750 shares to Mercury Pan-European Growth Fund for $37,500.
November 30, 1998 12 Mercury Pan-European Growth Fund
<PAGE>
[GRAPHIC OMITTED]
SCHEDULE OF INVESTMENTS
MERCURY MASTER PAN-EUROPEAN GROWTH PORTFOLIO
================================================================================
<TABLE>
<CAPTION>
In US Dollars
--------------------------------------
Shares Value Percent of
Industries Held Investments Cost (Note 1a) Net Assets
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Austria
Business/ 5,000 Flughafen Wien AG $ 224,332 $ 223,241 0.0%
Public Services
- ----------------------------------------------------------------------------------------------------
Total Investments in Austria 224,332 223,241 0.0
- ----------------------------------------------------------------------------------------------------
Belgium
Insurance 14,172 Fortis AG 4,224,763 4,512,599 0.9
- ----------------------------------------------------------------------------------------------------
Utilities-- 13,989 Electrabel S.A. 5,200,706 5,417,427 1.1
Electric & Gas
- ----------------------------------------------------------------------------------------------------
Total Investments in Belgium 9,425,469 9,930,026 2.0
- ----------------------------------------------------------------------------------------------------
Finland
Electrical & 23,839 Nokia Oyj (Class A) 2,234,772 2,333,110 0.5
Electronics
- ----------------------------------------------------------------------------------------------------
Total Investments in Finland 2,234,772 2,333,110 0.5
- ----------------------------------------------------------------------------------------------------
France
Banking 30,909 Credit Commercial de France 2,205,158 2,667,971 0.5
- ----------------------------------------------------------------------------------------------------
Beverages 8,787 LVMH (Louis Vuitton
& Tobacco Moet Hennessy) 1,653,598 1,703,219 0.3
- ----------------------------------------------------------------------------------------------------
Business/ 56,549 Vivendi 12,588,514 12,826,205 2.6
Public Services
- ----------------------------------------------------------------------------------------------------
Energy 18,767 Elf Aquitaine S.A. 2,230,369 2,346,785 0.5
Sources 37,651 Total S.A. (Class B) 4,543,168 4,681,639 0.9
--------------------------------------
6,773,537 7,028,424 1.4
- ----------------------------------------------------------------------------------------------------
Insurance 36,028 Axa 4,209,630 4,670,461 0.9
- ----------------------------------------------------------------------------------------------------
Leisure/ 12,925 Accor S.A. 2,808,689 2,849,527 0.6
Tourism
- ----------------------------------------------------------------------------------------------------
Merchandising 4,090 Carrefour S.A. 2,813,739 2,903,498 0.6
11,732 Guilbert S.A. 1,617,605 1,655,367 0.3
32,438 Pinault-Printemps-
Redoute S.A 5,543,555 5,549,554 1.1
--------------------------------------
9,974,899 10,108,419 2.0
- ----------------------------------------------------------------------------------------------------
Total Investments in France 40,214,025 41,854,226 8.3
- ----------------------------------------------------------------------------------------------------
</TABLE>
November 30, 1998 13 Mercury Pan-European Growth 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
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Germany
Automobiles 38,241 +DaimlerChrysler AG $ 2,987,992 $ 3,603,568 0.7%
21,676 Volkswagen AG 1,718,467 1,769,469 0.4
--------------------------------------
4,706,459 5,373,037 1.1
- ----------------------------------------------------------------------------------------------------
Banking 70,000 Deutsche Bank AG 4,492,361 4,335,404 0.9
34,203 HypoVereinsbank 2,692,816 2,970,127 0.6
--------------------------------------
7,185,177 7,305,531 1.5
- ----------------------------------------------------------------------------------------------------
Business/ 1,941 SAP AG (Systeme,
Public Services Anwendungen, Produkte in
der Datenverarbeitung) 865,008 881,803 0.2
- ----------------------------------------------------------------------------------------------------
Chemicals 150,009 Bayer AG 6,294,233 6,176,058 1.2
- ----------------------------------------------------------------------------------------------------
Construction 53,605 Hochtief AG 2,019,745 2,084,903 0.4
& Housing 3,320 Heidelberger Zement AG 246,103 246,471 0.1
--------------------------------------
2,265,848 2,331,374 0.5
- ----------------------------------------------------------------------------------------------------
Electrical & 90,315 Siemens AG 5,614,017 6,304,153 1.2
Electronics
- ----------------------------------------------------------------------------------------------------
Insurance 11,878 Allianz AG 4,127,752 4,289,571 0.8
- ----------------------------------------------------------------------------------------------------
Merchan- 22,000 Metro AG 1,429,343 1,376,220 0.3
dising 51,598 Metro AG (Preferred) 2,079,422 2,090,780 0.4
63,200 Metro AG (Rights) (a) 0 47,240 0.0
--------------------------------------
3,508,765 3,514,240 0.7
- ----------------------------------------------------------------------------------------------------
Telecommu- 79,746 Deutsche Telekom AG 2,231,522 2,245,436 0.4
nications 41,390 Mannesmann AG 4,231,195 4,492,792 0.9
--------------------------------------
6,462,717 6,738,228 1.3
- ----------------------------------------------------------------------------------------------------
Utilities-- 92,385 VEBA AG 5,019,142 5,137,054 1.0
Electric & Gas
- ----------------------------------------------------------------------------------------------------
Total Investments in Germany 46,049,118 48,051,049 9.5
- ----------------------------------------------------------------------------------------------------
Greece
Telecommu- 15,050 +Panfon Hellenic Telecom Co. 271,277 270,607 0.1
nications
- ----------------------------------------------------------------------------------------------------
Total Investments in Greece 271,277 270,607 0.1
- ----------------------------------------------------------------------------------------------------
</TABLE>
November 30, 1998 14 Mercury Pan-European Growth 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
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Italy
Banking 698,568 Banka Intesa S.p.A. $ 3,697,812 $ 3,912,699 0.8%
505,607 Unicredito Italiano S.p.A. 2,707,601 2,883,271 0.6
---------------------------------------
6,405,413 6,795,970 1.4
- ----------------------------------------------------------------------------------------------------
Energy 456,342 ENI S.p.A. 2,788,866 2,839,528 0.6
Sources
- ----------------------------------------------------------------------------------------------------
Insurance 45,479 Assicurazioni Generali 1,670,436 1,703,628 0.3
- ----------------------------------------------------------------------------------------------------
Telecommu- 1,077,322 Telecom Italia S.p.A. 5,735,094 6,751,767 1.3
nications
- ----------------------------------------------------------------------------------------------------
Total Investments in Italy 16,599,809 18,090,893 3.6
- ----------------------------------------------------------------------------------------------------
Netherlands
Broadcasting 11,210 Wolters Kluwer N.V. 2,186,415 2,143,330 0.4
& Publishing
- ----------------------------------------------------------------------------------------------------
Chemicals 79,649 Akzo Nobel N.V. 3,016,528 3,275,536 0.7
- ----------------------------------------------------------------------------------------------------
Electrical & 51,030 Koninklijke (Royal) Philips
Electronics Electronics N.V. 2,903,294 3,238,895 0.6
- ----------------------------------------------------------------------------------------------------
Food & 110,419 Koninklijke Numico N.V. 4,477,013 4,778,414 0.9
Household Products
- ----------------------------------------------------------------------------------------------------
Insurance 84,166 ING Groep N.V. 4,328,356 4,834,335 1.0
- ----------------------------------------------------------------------------------------------------
Merchan- 86,265 Hagemeyer N.V. 3,012,014 3,036,289 0.6
dising
- ----------------------------------------------------------------------------------------------------
Total Investments in the
Netherlands 19,923,620 21,306,799 4.2
- ----------------------------------------------------------------------------------------------------
Portugal
Construction 40,500 Brisa-Auto Estradas de
& Housing Portugal, S.A. 1,955,447 2,196,388 0.4
- ----------------------------------------------------------------------------------------------------
Total Investments in Portugal 1,955,447 2,196,388 0.4
- ----------------------------------------------------------------------------------------------------
Spain
Banking 221,953 Banco Santander, S.A. 4,266,851 4,552,328 0.9
- ----------------------------------------------------------------------------------------------------
Telecommu- 136,857 Telefonica S.A. 6,153,855 6,451,300 1.3
nications
- ----------------------------------------------------------------------------------------------------
Utilities-- 107,538 Endesa S.A. 2,766,735 2,814,994 0.5
Electric & Gas
- ----------------------------------------------------------------------------------------------------
Total Investments in Spain 13,187,441 13,818,622 2.7
- ----------------------------------------------------------------------------------------------------
</TABLE>
November 30, 1998 15 Mercury Pan-European Growth 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
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sweden
Appliances 180,481 Electrolux AB $ 2,835,011 $ 2,759,342 0.5%
& Household
Durables
- ----------------------------------------------------------------------------------------------------
Electrical 180,737 Telefonaktiebolaget LM
& Electronics Ericsson (Class B) 4,293,744 5,036,257 1.0
- ----------------------------------------------------------------------------------------------------
Machinery & 69,911 Atlas Copco AB (A Shares) 1,651,790 1,598,975 0.3
Engineering
- ----------------------------------------------------------------------------------------------------
Total Investments in Sweden 8,780,545 9,394,574 1.8
- ----------------------------------------------------------------------------------------------------
Switzerland
Automobiles 82,009 Safra Republic Holdings
S.A. (ADR) (b) 3,981,376 4,141,455 0.8
- ----------------------------------------------------------------------------------------------------
Banking 14,840 UBS AG 4,202,595 4,481,450 0.9
- ----------------------------------------------------------------------------------------------------
Business/ 4,084 Adecco S.A. 1,695,885 1,779,482 0.4
- ----------------------------------------------------------------------------------------------------
Public Services
Food & 3 Lindt & Sprungli AG 80,237 76,790 0.0
- ----------------------------------------------------------------------------------------------------
Household 5,000 Nestle S.A. (Registered
Products Shares) 10,824,466 10,425,654 2.1
---------------------------------------
10,904,703 10,502,444 2.1
- ----------------------------------------------------------------------------------------------------
Health & 6,025 Novartis AG (Registered
Personal Shares) 11,139,035 11,349,943 2.2
Care 465 Roche Holding AG 5,570,088 5,483,175 1.1
---------------------------------------
16,709,123 16,833,118 3.3
- ----------------------------------------------------------------------------------------------------
Total Investments in
Switzerland 37,493,682 37,737,949 7.5
- ----------------------------------------------------------------------------------------------------
United Kingdom
Banking 100,000 Barclays PLC 2,211,579 2,269,025 0.4
70,084 HSBC Holdings PLC 1,675,549 1,896,703 0.4
284,462 Lloyds TSB Group PLC 3,574,461 3,954,857 0.8
---------------------------------------
7,461,589 8,120,585 1.6
- ----------------------------------------------------------------------------------------------------
Beverages 181,495 British American Tobacco PLC 1,605,540 1,664,488 0.3
& Tobacco 251,334 Diageo PLC 2,761,556 2,816,162 0.6
---------------------------------------
4,367,096 4,480,650 0.9
- ----------------------------------------------------------------------------------------------------
Broadcasting 291,851 Pearson PLC 5,190,609 5,249,576 1.0
& Publishing 931,049 Reed International PLC 7,526,360 7,328,709 1.4
---------------------------------------
12,716,969 12,578,285 2.4
- ----------------------------------------------------------------------------------------------------
</TABLE>
November 30, 1998 16 Mercury Pan-European Growth 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
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
United Kingdom (concluded)
Business/ 413,290 Compass Group PLC $ 4,148,964 $ 4,358,051 0.9%
Public 368,376 Hays PLC 2,790,085 3,112,418 0.6
Services ---------------------------------------
6,939,049 7,470,469 1.5
- ----------------------------------------------------------------------------------------------------
Energy 367,959 British Petroleum
Sources Company PLC 5,575,405 5,738,096 1.1
1,372,964 Shell Transport & Trading
Co., PLC 8,414,789 8,281,006 1.6
---------------------------------------
13,990,194 14,019,102 2.7
- ----------------------------------------------------------------------------------------------------
Food & 340,000 Cadbury Schweppes PLC 5,189,266 5,105,719 1.0
Household 273,337 Unilever PLC 2,763,420 2,843,938 0.6
Products 7,952,686 7,949,657 1.6
- ----------------------------------------------------------------------------------------------------
Health & 416,200 Glaxo Wellcome PLC 12,894,808 13,166,210 2.6
Personal 500,251 SmithKline Beecham PLC 6,233,187 6,141,826 1.2
Care 91,730 Zeneca Group PLC 3,601,163 3,814,596 0.8
---------------------------------------
22,729,158 23,122,632 4.6
- ----------------------------------------------------------------------------------------------------
Insurance 137,887 +Allied Zurich PLC 1,682,028 1,968,231 0.4
563,963 Royal & Sun Alliance
Insurance Group PLC 4,974,884 4,709,098 0.9
---------------------------------------
6,656,912 6,677,329 1.3
- ----------------------------------------------------------------------------------------------------
Merchan- 600,000 Safeway PLC 3,003,716 2,960,459 0.6
dising 991,524 Tesco PLC 2,775,913 2,928,821 0.6
---------------------------------------
5,779,629 5,889,280 1.2
- ----------------------------------------------------------------------------------------------------
Metals/ 254,947 Rio Tinto PLC (Registered) 3,095,285 2,987,066 0.6
Non-Ferrous
- ----------------------------------------------------------------------------------------------------
Recreation 510,100 EMI Group PLC 3,100,183 3,038,779 0.6
& Other Con-
sumer Goods
- ----------------------------------------------------------------------------------------------------
Telecommu- 208,156 British Telecommunications PLC 2,780,747 2,852,759 0.6
nications
360,805 +Cable & Wireless
Communications PLC 2,801,251 3,215,162 0.6
162,769 Vodafone Group PLC 2,259,588 2,403,983 0.5
---------------------------------------
7,841,586 8,471,904 1.7
- ----------------------------------------------------------------------------------------------------
Total Investments in the
United Kingdom 102,630,336 104,805,738 20.7
- ----------------------------------------------------------------------------------------------------
</TABLE>
November 30, 1998 17 Mercury Pan-European Growth Fund
<PAGE>
[GRAPHIC OMITTED]
SCHEDULE OF INVESTMENTS (CONCLUDED)
<TABLE>
<CAPTION>
In US Dollars
---------------------------------------
Face Short-Term Value Percent of
Amount Securities Cost (Note 1a) Net Assets
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial US $4,701,000 General Motors
Paper* Acceptance Corp.,
5.50% due 12/01/1998 $ 4,701,000 $ 4,701,000 0.9%
- ----------------------------------------------------------------------------------------------------
Foreign FRF 347,000,000 French Treasury Bill,
Government 3.30% due 4/08/1999 60,497,165 60,497,165 12.0
Obliga-
tions* DM 63,000,000 German Treasury Bill,
3.22% due 1/15/1999 37,192,502 37,119,634 7.3
71,000,000 German Treasury Bill,
3.27% due 4/16/1999 41,570,929 41,496,781 8.2
- ----------------------------------------------------------------------------------------------------
Total Investments in
Short-Term Securities 143,961,596 143,814,580 28.4
- ----------------------------------------------------------------------------------------------------
Total Investments $442,951,469 453,827,802 89.7
============
Time Deposits** 110,856,631 21.9
Liabilities in Excess of Other Assets (58,704,859) (11.6)
-------------------------
Net Assets $505,979,574 100.0%
=========================
- ----------------------------------------------------------------------------------------------------
</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 deposit bears interest at 5%, 3%, and 3.33% and matures on
12/01/1998, 12/01/1998, and 12/02/1998, respectively.
+ Non-income producing security.
(a) The rights may be exercised until 12/07/98.
(b) American Depositary Receipt (ADR).
See Notes to Financial Statements.
November 30, 1998 18 Mercury Pan-European Growth Fund
<PAGE>
[GRAPHIC OMITTED]
STATEMENT OF ASSETS
AND LIABILITIES
<TABLE>
<CAPTION>
As of November 30, 1998
- ------------------------------------------------------------------------------------------------
MERCURY MASTER PAN-EUROPEAN GROWTH PORTFOLIO
================================================================================================
<S> <C> <C>
Assets:
Investments, at value (identified cost--$442,951,469)
(Note 1a) $453,827,802
Cash 481
Foreign time deposits (Note 1c) 110,856,631
Receivables:
Securities sold $ 60,784,014
Contributions 2,938,980
Dividends 86,950
Interest 6,758 63,816,702
----------------------------
Total assets 628,501,616
------------
- ------------------------------------------------------------------------------------------------
Liabilities:
Payables:
Securities purchased 121,978,247
Investment adviser (Note 2) 314,250
Withdrawals 185,376 122,477,873
------------
Accrued expenses and other liabilities 44,169
------------
Total liabilities 122,522,042
------------
- ------------------------------------------------------------------------------------------------
Net Assets:
Net assets $505,979,574
============
- ------------------------------------------------------------------------------------------------
Net Assets Consist of:
Partners' capital $494,661,303
Unrealized appreciation on investments and foreign
currency transactions--net 11,318,271
------------
Net assets $505,979,574
============
- ------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
November 30, 1998 19 Mercury Pan-European Growth Fund
<PAGE>
[GRAPHIC OMITTED]
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Period October 30, 1998+ to November 30, 1998
- ------------------------------------------------------------------------------------------------
MERCURY MASTER PAN-EUROPEAN GROWTH PORTFOLIO
================================================================================================
<S> <C> <C>
Investment Income (Notes 1d & 1e):
Dividends (net of $15,417 foreign withholding tax) $ 87,366
Interest and discount earned 1,269,445
------------
Total income 1,356,811
------------
- ------------------------------------------------------------------------------------------------
Expenses:
Investment advisory fees (Note 2) $ 314,250
Custodian fees 43,057
Accounting services (Note 2) 11,610
Trustees' fees and expenses 3,456
Professional fees 2,692
Organization expenses 2,160
Pricing fees 546
Other 648
------------
Total expenses 378,419
------------
Investment income--net 978,392
------------
- ------------------------------------------------------------------------------------------------
Realized & Unrealized Gain (Loss) on Investments &
Foreign Currency Transactions--Net (Notes 1b,
1c, 1e & 3): Realized gain (loss) from:
Investments--net 87,421
Foreign currency transactions--net (90,967) (3,546)
------------
Unrealized appreciation on:
Investments--net 10,876,333
Foreign currency transactions--net 441,938 11,318,271
----------------------------
Net realized and unrealized gain on investments and
foreign currency transactions 11,314,725
------------
Net Increase in Net Assets Resulting from Operations $ 12,293,117
============
- ------------------------------------------------------------------------------------------------
</TABLE>
+ Commencement of operations.
See Notes to Financial Statements.
November 30, 1998 20 Mercury Pan-European Growth Fund
<PAGE>
[GRAPHIC OMITTED]
STATEMENT OF CHANGES
IN NET ASSETS
For the Period October 30, 1998+ to November 30, 1998
- --------------------------------------------------------------------------------
MERCURY MASTER PAN-EUROPEAN GROWTH PORTFOLIO
================================================================================
Increase (Decrease) in Net Assets:
- --------------------------------------------------------------------------------
Operations:
Investment income--net $ 978,392
Realized loss on investments and foreign
currency transactions--net (3,546)
Unrealized appreciation on investments and
foreign currency
transactions--net 11,318,271
-------------
Net increase in net assets resulting from operations 12,293,117
-------------
- --------------------------------------------------------------------------------
Net Capital Contributions:
Increase in net assets derived from net capital
contributions 493,686,457
-------------
- --------------------------------------------------------------------------------
Net Assets:
Total increase in net assets 505,979,574
Beginning of period --
-------------
End of period $ 505,979,574
=============
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
MERCURY MASTER PAN-EUROPEAN GROWTH PORTFOLIO
================================================================================
The following ratios have been derived from information For the Period
provided in the financial statements. October 30, 1998+
to November 30, 1998
- --------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses .90%*
=============
Investment income--net 2.34%*
=============
- --------------------------------------------------------------------------------
Supplemental Data:
Net assets, end of period (in thousands) $ 505,980
=============
Portfolio turnover .30%
=============
- --------------------------------------------------------------------------------
* Annualized.
+ Commencement of operations.
See Notes to Financial Statements.
November 30, 1998 21 Mercury Pan-European Growth Fund
<PAGE>
[GRAPHIC OMITTED]
NOTES TO FINANCIAL STATEMENTS
MERCURY MASTER PAN-EUROPEAN GROWTH PORTFOLIO
1 Significant Accounting Policies:
Mercury Master Pan-European Growth 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 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 margin and are recorded
by the Portfolio as unrealized gains or losses. When the contract
November 30, 1998 22 Mercury Pan-European Growth Fund
<PAGE>
[GRAPHIC OMITTED]
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
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 23 Mercury Pan-European Growth 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.
In addition, MLPF&S received $4,535 in commissions on the execution of
portfolio security transactions for the Portfolio for the period October
30, 1998 to November 30, 1998.
Certain officers and/or trustees of the Trust are officers and/or
directors of Mercury International, FAM, PSI, and/or ML & Co.
3 Investments:
Purchases and sales of investments, excluding short-term securities, for
the period October 30, 1998 to November 30, 1998 were $300,032,766 and
$1,130,315, respectively.
November 30, 1998 24 Mercury Pan-European Growth Fund
<PAGE>
[GRAPHIC OMITTED]
NOTES TO FINANCIAL STATEMENTS
(CONCLUDED)
Net realized gains (losses) for the period October 30, 1998 to November
30, 1998 and net unrealized gains as of November 30, 1998 were as follows:
Realized Unrealized
Gains (Losses) Gains
--------------------------------------------------------------------------
Long-term Investments $ 87,421 $10,876,333
Foreign currency transactions (90,967) 441,938
--------------------------
Total $ (3,546) $11,318,271
==========================
--------------------------------------------------------------------------
As of November 30, 1998, net unrealized appreciation for Federal income
tax purposes aggregated $10,876,333, of which $12,999,114 related to
appreciated securities and $2,122,781 related to depreciated securities.
At November 30, 1998, the aggregate cost of investments for Federal income
tax purposes was $442,951,469.
4 Commitments:
At November 30, 1998, the Fund had entered into foreign exchange contracts
under which it had agreed to purchase and sell foreign currency with an
approximate value of $68,692,000 and $60,510,000, respectively.
November 30, 1998 25 Mercury Pan-European Growth Fund
<PAGE>
[GRAPHIC OMITTED]
PORTFOLIO INFORMATION
WORLDWIDE INVESTMENTS AS OF NOVEMBER 30, 1998
================================================================================
Ten Largest Percent of
Equity Holdings Net Assets
- --------------------------------------------------------------------------------
Glaxo Wellcome PLC 2.6%
..------------------------------------------------------------------------------
Vivendi 2.6
- --------------------------------------------------------------------------------
Novartis AG (Registered Shares) 2.2
- --------------------------------------------------------------------------------
Nestle S.A. (Registered Shares) 2.1
- --------------------------------------------------------------------------------
Shell Transport & Trading Co., PLC 1.6
- --------------------------------------------------------------------------------
Reed International PLC 1.4
- --------------------------------------------------------------------------------
Telecom Italia S.p.A. 1.3
- --------------------------------------------------------------------------------
Telefonica S.A. 1.3
- --------------------------------------------------------------------------------
Siemens AG 1.2
- --------------------------------------------------------------------------------
Bayer AG 1.2
- --------------------------------------------------------------------------------
Percent of
Ten Largest Industries Net Assets
- --------------------------------------------------------------------------------
Health & Personal Care 7.9%
- --------------------------------------------------------------------------------
Banking 6.8
- --------------------------------------------------------------------------------
Telecommunications 5.7
- --------------------------------------------------------------------------------
Insurance 5.2
- --------------------------------------------------------------------------------
Energy Sources 4.7
- --------------------------------------------------------------------------------
Business/Public Services 4.7
- --------------------------------------------------------------------------------
Food & Household Products 4.6
- --------------------------------------------------------------------------------
Merchandising 4.5
- --------------------------------------------------------------------------------
Electrical & Electronics 3.3
- --------------------------------------------------------------------------------
Broadcasting & Publishing 2.8
- --------------------------------------------------------------------------------
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 26 Mercury Pan-European Growth 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 Pan-European Growth Fund of
Mercury Asset Management Funds, Inc.
Box 9011
Princeton, NJ
08543-9011
[RECYCLE LOGO] Printed on post-consumer recycled paper MERCPAN--11/98
