SEMI-ANNUAL REPORT
MAY 31, 2000
[GRAPHIC OMITTED]
Mercury
Global
Balanced
Fund OF MERCURY ASSET
MANAGEMENT FUNDS, INC.
----------------
MERCURY
ASSET MANAGEMENT
----------------
<PAGE>
MERCURY MASTER
GLOBAL BALANCED PORTFOLIO
SECTOR REPRESENTATION OF EQUITIES AND
FIXED-INCOME SECURITIES
--------------------------------------------------------------------------------
A pie chart illustrating the following percentages
(As a Percentage of Net Assets as of May 31, 2000)
Cash Equivalent 9.9%
Industries 5.6%
Health Care 5.6%
Financials 9.7%
Consumer Discretionary 4.4%
Energy 5.2%
Consumer Staples 4.4%
Telecommunications 7.2%
Utilities 1.3%
Fixed-Income Investments 31.4%
Materials 2.7%
Information Technology 12.6%
GEOGRAPHIC ASSET MIX
--------------------------------------------------------------------------------
A pie chart illustrating the following percentages
(As a Percentage of Equities as of May 31, 2000)
Pacific Basin/Asia 15.7%
North America 49.9%
Europe 34.4%
May 31, 2000 (2) Mercury Global Balanced Fund
<PAGE>
DEAR SHAREHOLDER
We are pleased to provide you with this semi-annual report. For the six-month
period ended May 31, 2000, Mercury Global Balanced Fund's Class I, Class A,
Class B and Class C Shares had total returns of +0.34%, +0.29%, -0.12% and
-0.10%, respectively. (Fund results shown do not reflect sales charges and would
be lower if sales charges were included. Complete performance information can be
found on pages 6 and 7 of this report to shareholders.)
Economic and Market Review
Global equity markets started the period strong. December saw steep price
appreciation within growth sectors, with investor support for National
Association of Securities Dealers Automated Quotations stocks having a positive
effect on the global technology sector. The favorable monetary environment
provided by the Federal Reserve Board to stave off a potential year 2000
liquidity crunch coincided with diminishing concerns about the likelihood of
widespread millennium bug disruption. The unmanaged Morgan Stanley Capital
International (MSCI) World Index rose over 8% in December alone. The new year
began with a brief correction of this trend as forecasts of aggressive Federal
Reserve Board tightening made headlines, but technology stocks quickly resumed
their disconnect from the rest of the market, outperforming the broader global
index by over 9% in the first quarter of 2000.
Just as global equity markets had taken their lead from the United States on the
way up, domestic American concerns undermined them in the last two months of the
six-month period. The anti-trust ruling against Microsoft Corporation sent the
stock and the global technology sector downward in a period that has been
characterized by considerable volatility. Although European and Japanese growth
has remained subdued by comparison, stronger-than-expected inflationary figures
in the United States sent world stock markets reeling, highlighting the growing
extent of global equity market inter-dependence and the enormous influence of
the United States on the world economy.
This environment of strong growth and interest rate concerns was negative for
bonds. The Fund's benchmark bond index (the Salomon Smith Barney World
Government Bond Index) produced negative returns in every month throughout the
period except March. The longer end of the US Treasury curve was an exception as
the Treasury announced a buy-back program in response to the growing budget
surplus. Shorter-dated bonds performed poorly in reaction to signs of emerging
inflationary pressures and investors' expectation of more aggressive interest
rate rises. Eurozone bonds faired no better as the European Central Bank raised
interest rates partly in response to continuing weakness in the euro. Japanese
bonds bucked the global trend to post gains as Japan's economy made only
tentative signs of recovery.
The Fund's relative underperformance of its composite benchmark (60% of the MSCI
World Index and 40% Salomon Smith Barney World Government Bond Index), which
provided a total return of +2.78% for the six months ended May 31, 2000, was a
result of our being underweighted in bonds for most of the six-month period and
maintaining a growth bias in the early stages of the period. From the end of
March, many of these growth holdings reduced the level of performance prior to
the reduction of their weighting in the portfolio.
May 31, 2000 (3) Mercury Global Balanced Fund
<PAGE>
Portfolio Activity
At the beginning of the six-month period ended May 31, 2000, we focused
primarily on growth sectors and held active positions in the technology and
telecommunications sectors. After the turn of the year, and as the environment
became characterized by increasing levels of uncertainty with regard to the
extent of the US interest rate cycle, we moved to a more neutral sectoral stance
within the equity portion of the portfolio. Toward the end of the six-month
period, we also reduced the Fund's long-held overweighted position in equities,
moving toward a neutral equity/bond allocation in keeping with our present
position of near-term caution.
In the healthcare sector, we purchased Shionogi, the Japanese drug company. The
outlook for the company had markedly improved as it approached a period of
restructuring, and focused on licensing out research and development of its
drugs for up-front fees. The underinvestment of international pharmaceutical
companies in Japan and the strength of Shionogi's domestic sales force also made
it an attractive acquisition target. Toward the end of the period, we sold our
position at a profit since it performed beyond our expectations and allocated
the proceeds in domestic competitor Fujisawa Pharmaceutical Co., Ltd. We expect
the company to benefit from restructuring of its international product business
and strong earnings growth, notably from its leading eczema drug.
Within the global telecommunications sector, we reduced our exposure to
incumbent fixed line operators as we grew concerned about the ability of these
highly rated companies to generate adequate returns on their assets, as well as
growing price pressure in long-distance voice communications. We reduced our
exposure to AT&T Corp. over the period, which subsequently revised its growth
forecast down following disappointing first quarter results. We also sold our
holding in MCI WorldCom Inc. in view of lackluster revenue growth; the company's
profitability is likely to suffer until it can offset this weakness against the
data part of its business. Purchases within the sector included Level 3
Communications, Inc., which is building out the first international
communications network to use Internet Protocol end to end. This
state-of-the-art high bandwidth network should enable Level 3 to compete
aggressively on price and to benefit from growth in data traffic.
By way of increasing our exposure to defensive growth stocks, we purchased
Anheuser-Busch Companies, Inc., the owner of Budweiser, in May. The pricing
environment for beer has improved dramatically with the decline of competitor
discounting. Furthermore, we expect to see strong domestic sales growth driven
by favorable demographic trends in the United States, as the number of 21 year
olds to 27 year olds increases by an estimated 15% by 2010.
During the six months ended May 31, 2000, the fixed-income component of the Fund
kept an underweight duration across the major bond markets. In the United
States, we favored the long end of the yield curve in the current interest rate
environment. As a result, we established a short-term holding of cash and cash
instruments to balance the greater duration exposure of long-dated bonds.
Investment Outlook
Recent data continues to provide a mixed picture as to the extent of slowdown
necessary that will be required in the US economy to bring it in line with its
long-term equilibrium
May 31, 2000 (4) Mercury Global Balanced Fund
<PAGE>
growth level. Recent rebounds in the stock market may be driven by a level of
optimism that is not yet justified. Until the picture becomes clearer, we plan
to maintain our cautious stance in global equity markets. In Japan, we are
marginally underweight since we believe that the prospects for self-sustained
growth are limited and that corporate restructuring remains sluggish. Europe
remains the favored equity area, with recent weakness in the euro showing signs
of bottoming out and inflationary pressures subdued.
Our decision to move from a negative stance to a neutral one in bonds reflects
our view that investors will at some point begin to focus on slowing US economic
growth. The relative attractiveness of bonds compared to equities could improve
as perceptions of a slower economy feed through to the belief that corporate
profit growth may slow.
In Conclusion
We thank you for your investment in Mercury Global Balanced Fund, and we look
forward to serving your investment needs in the months and years ahead.
Sincerely,
/s/ Jeffrey Peek /s/ Gary Lowe /s/ Rupert Watson
Jeffrey Peek Gary Lowe Rupert Watson
President Portfolio Manager Portfolio Manager
Equity Investments Fixed-Income Investments
July 10, 2000
May 31, 2000 (5) Mercury Global Balanced Fund
<PAGE>
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" and "Aggregate
Total Return" tables assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date. Investment return and
principal value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Dividends paid to each class of
shares will vary because of the different levels of account maintenance,
distribution and transfer agency fees applicable to each class, which are
deducted from the income available to be paid to shareholders.
RECENT PERFORMANCE RESULTS*
================================================================================
6 Month 12 Month Since Inception
As of May 31, 2000 Total Return Total Return Total Return
--------------------------------------------------------------------------------
Class I + 0.34% + 12.53% + 8.37%
--------------------------------------------------------------------------------
Class A + 0.29 + 12.38 + 8.11
--------------------------------------------------------------------------------
Class B - 0.12 + 11.41 + 7.17
--------------------------------------------------------------------------------
Class C - 0.10 + 11.43 + 7.19
--------------------------------------------------------------------------------
* Investment results shown do not reflect sales charges. Results shown would
be lower if sales charges were 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's inception date is 4/30/99.
May 31, 2000 (6) Mercury Global Balanced Fund
<PAGE>
FUND PERFORMANCE DATA (CONCLUDED)
AGGREGATE TOTAL RETURN
================================================================================
% Return % Return
Without Sales With Sales
Class I Shares* Charge Charge**
--------------------------------------------------------------------------------
Inception (4/30/99)
through 3/31/00 +14.79% +8.76%
--------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
% Return % Return
Without Sales With Sales
Class A Shares* Charge Charge**
--------------------------------------------------------------------------------
Inception (4/30/99)
through 3/31/00 +14.52% +8.51%
--------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
% Return % Return
Without With
Class B Shares* CDSC CDSC**
--------------------------------------------------------------------------------
Inception (4/30/99)
through 3/31/00 +13.76% +9.76%
--------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 4% and is reduced to 0% after 6
years.
** Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without With
Class C Shares* CDSC CDSC**
--------------------------------------------------------------------------------
Inception (4/30/99)
through 3/31/00 +13.78% +12.78%
--------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after 1
year.
** Assuming payment of applicable contingent deferred sales charge.
May 31, 2000 (7) Mercury Global Balanced Fund
<PAGE>
STATEMENT OF ASSETS
AND LIABILITIES
As of May 31, 2000
--------------------------------------------------------------------------------
MERCURY GLOBAL BALANCED FUND
================================================================================
<TABLE>
<S> <C>
Assets:
Investment in Mercury Master Global Balanced Portfolio, at value (identified
cost--$446,076,292) $ 461,900,852
Other assets 155,708
-------------
Total assets 462,056,560
-------------
---------------------------------------------------------------------------------------------
Liabilities:
Payable to distributor 380,170
Payable to administrator 65,638
Accrued expenses and other liabilities 195,260
-------------
Total liabilities 641,068
-------------
---------------------------------------------------------------------------------------------
Net Assets:
Net assets $ 461,415,492
=============
---------------------------------------------------------------------------------------------
Net Assets Consist of:
Class I Shares of Common Stock, $.0001 par value, 100,000,000
shares authorized $ 115
Class A Shares of Common Stock, $.0001 par value, 100,000,000
shares authorized 384
Class B Shares of Common Stock, $.0001 par value, 100,000,000
shares authorized 2,536
Class C Shares of Common Stock, $.0001 par value, 100,000,000
shares authorized 1,325
Paid-in capital in excess of par 434,033,452
Accumulated investment loss--net (3,679,053)
Undistributed realized capital gains on investments from the Portfolio--net 15,232,173
Unrealized appreciation on investments and foreign currency transactions from
the Portfolio--net 15,824,560
-------------
Net assets $ 461,415,492
=============
---------------------------------------------------------------------------------------------
Net Asset Value:
Class I--Based on net assets of $12,191,283 and 1,145,669 shares
outstanding $ 10.64
=============
Class A--Based on net assets of $40,767,840 and 3,836,095 shares
outstanding $ 10.63
=============
Class B--Based on net assets of $268,307,052 and 25,357,501 shares
outstanding $ 10.58
=============
Class C--Based on net assets of $140,149,317 and 13,246,346 shares
outstanding $ 10.58
=============
---------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
May 31, 2000 (8) Mercury Global Balanced Fund
<PAGE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Six Months Ended May 31, 2000
---------------------------------------------------------------------------------------------
MERCURY GLOBAL BALANCED FUND
=============================================================================================
<S> <C>
Investment Income:
Investment income allocated from the Portfolio (net of $162,944
foreign withholding tax) $ 5,900,166
Expenses allocated from the Portfolio (1,646,542)
------------
Net investment income from the Portfolio 4,253,624
------------
---------------------------------------------------------------------------------------------
Expenses:
Account maintenance and distribution fees--Class B $ 1,406,370
Account maintenance and distribution fees--Class C 740,724
Administration fee 485,566
Registration fees 123,806
Transfer agent fees--Class B 82,431
Account maintenance fees--Class A 53,631
Transfer agent fees--Class C 45,272
Printing and shareholder reports 42,539
Offering costs 26,095
Transfer agent fees--Class A 9,493
Professional fees 4,406
Transfer agent fees--Class I 2,930
Other 590
------------
Total expenses 3,023,853
------------
Investment income--net 1,229,771
------------
---------------------------------------------------------------------------------------------
Realized & Unrealized Gain from the Portfolio--Net:
Realized gain from the Portfolio on:
Investments--net 16,312,942
Foreign currency transactions--net 4,899,439 21,212,381
------------
Change in unrealized appreciation on investments and
foreign currency transactions from the Portfolio--net (22,362,185)
------------
Net Increase in Net Assets Resulting from Operations $ 79,967
============
---------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
May 31, 2000 (9) Mercury Global Balanced Fund
<PAGE>
STATEMENTS OF CHANGES
IN NET ASSETS
MERCURY GLOBAL BALANCED FUND
================================================================================
<TABLE>
<CAPTION>
For the Six For the Period
Months Ended April 30, 1999+
Increase (Decrease) in Net Assets: May 31, 2000 to Nov. 30, 1999
----------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Investment income--net $ 1,229,771 $ 2,082,408
Realized gain (loss) on investments and foreign currency
transactions from the Portfolio--net 21,212,381 (6,493,184)
Change in unrealized appreciation on investments and foreign
currency transactions from the Portfolio--net (22,362,185) 38,186,745
------------------------------
Net increase in net assets resulting from operations 79,967 33,775,969
------------------------------
---------------------------------------------------------------------------------------------
Dividends to Shareholders:
Investment income--net
Class I (244,045) --
Class A (739,043) --
Class B (3,631,557) --
Class C (1,944,046) --
------------------------------
Net decrease in net assets resulting from dividends
to shareholders (6,558,691) --
------------------------------
---------------------------------------------------------------------------------------------
Capital Share Transactions:
Net increase (decrease) in net assets derived from capital
share transactions (12,255,118) 446,273,365
------------------------------
---------------------------------------------------------------------------------------------
Net Assets:
Total increase (decrease) in net assets (18,733,842) 480,049,334
Beginning of period 480,149,334 100,000
------------------------------
End of period* $ 461,415,492 $ 480,149,334
==============================
---------------------------------------------------------------------------------------------
* Undistributed (accumulated) investment income (loss)--net $ (3,679,053) $ 1,649,867
==============================
</TABLE>
+ Commencement of operations.
See Notes to Financial Statements.
May 31, 2000 (10) Mercury Global Balanced Fund
<PAGE>
FINANCIAL HIGHLIGHTS
MERCURY GLOBAL BALANCED FUND
================================================================================
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
Class I
-------------------------------------
For the Six For the Period
Months Ended April 30, 1999+
Increase (Decrease) in Net Asset Value: May 31, 2000++++ to Nov. 30, 1999
-----------------------------------------------------------------------------------------
<S> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 10.80 $ 10.00
------------------------------
Investment income--net .08 .11
Realized and unrealized gain (loss) on investments
and foreign currency transactions from
the Portfolio--net (.04) .69
------------------------------
Total from investment operations .04 .80
------------------------------
Less dividends from investment income--net (.20) --
------------------------------
Net asset value, end of period $ 10.64 $ 10.80
==============================
-----------------------------------------------------------------------------------------
Total Investment Return:**
Based on net asset value per share .34%+++ 8.00%+++
==============================
-----------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses++ 1.00%* 1.10%*
==============================
Investment income--net 1.42%* 1.73%*
==============================
-----------------------------------------------------------------------------------------
Supplemental Data:
Net assets, end of period (in thousands) $ 12,191 $ 13,333
==============================
-----------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Commencement of operations.
++ Includes the Fund's share of the Portfolio's allocated expenses.
+++ Aggregate total investment return.
++++ Based on average shares outstanding.
See Notes to Financial Statements.
May 31, 2000 (11) Mercury Global Balanced Fund
<PAGE>
FINANCIAL HIGHLIGHTS
(CONTINUED)
MERCURY GLOBAL BALANCED FUND
================================================================================
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
Class A
-------------------------------------
For the Six For the Period
Months Ended April 30, 1999+
Increase (Decrease) in Net Asset Value: May 31, 2000++++ to Nov. 30, 1999
-----------------------------------------------------------------------------------------
<S> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 10.78 $ 10.00
------------------------------
Investment income--net .06 .09
Realized and unrealized gain (loss) on investments
and foreign currency transactions from
the Portfolio--net (.02) .69
------------------------------
Total from investment operations .04 .78
------------------------------
Less dividends from investment income--net (.19) --
------------------------------
Net asset value, end of period $ 10.63 $ 10.78
==============================
-----------------------------------------------------------------------------------------
Total Investment Return:**
Based on net asset value per share .29%+++ 7.80%+++
==============================
-----------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses++ 1.25%* 1.35%*
==============================
Investment income--net 1.17%* 1.47%*
==============================
-----------------------------------------------------------------------------------------
Supplemental Data:
Net assets, end of period (in thousands) $ 40,768 $ 43,442
==============================
-----------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Commencement of operations.
++ Includes the Fund's share of the Portfolio's allocated expenses.
+++ Aggregate total investment return.
++++ Based on average shares outstanding.
See Notes to Financial Statements.
May 31, 2000 (12) Mercury Global Balanced Fund
<PAGE>
FINANCIAL HIGHLIGHTS
(CONTINUED)
MERCURY GLOBAL BALANCED FUND
================================================================================
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
Class B
---------------------------------------
For the Six For the Period
Months Ended April 30, 1999+
Increase (Decrease) in Net Asset Value: May 31, 2000++++ to Nov. 30, 1999
-------------------------------------------------------------------------------------------
<S> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 10.73 $ 10.00
--------------------------------
Investment income--net .02 .04
Realized and unrealized gain (loss) on investments
and foreign currency transactions from
the Portfolio--net (.03) .69
--------------------------------
Total from investment operations (.01) .73
--------------------------------
Less dividends from investment income--net (.14) --
--------------------------------
Net asset value, end of period $ 10.58 $ 10.73
================================
-------------------------------------------------------------------------------------------
Total Investment Return:**
Based on net asset value per share (.12%)+++ 7.30%+++
================================
-------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses++ 2.01%* 2.12%*
================================
Investment income--net .41%* .68%*
================================
-------------------------------------------------------------------------------------------
Supplemental Data:
Net assets, end of period (in thousands) $ 268,307 $ 277,296
================================
-------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Commencement of operations.
++ Includes the Fund's share of the Portfolio's allocated expenses.
+++ Aggregate total investment return.
++++ Based on average shares outstanding.
See Notes to Financial Statements.
May 31, 2000 (13) Mercury Global Balanced Fund
<PAGE>
FINANCIAL HIGHLIGHTS
(CONCLUDED)
MERCURY GLOBAL BALANCED FUND
================================================================================
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
Class C
--------------------------------------
For the Six For the Period
Months Ended April 30, 1999+
Increase (Decrease) in Net Asset Value: May 31, 2000++++ to Nov. 30, 1999
-------------------------------------------------------------------------------------------
<S> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 10.73 $ 10.00
--------------------------------
Investment income--net .02 .04
Realized and unrealized gain (loss) on investments
and foreign currency transactions from
the Portfolio--net (.03) .69
--------------------------------
Total from investment operations (.01) .73
--------------------------------
Less dividends from investment income--net (.14) --
--------------------------------
Net asset value, end of period $ 10.58 $ 10.73
================================
-------------------------------------------------------------------------------------------
Total Investment Return:**
Based on net asset value per share (.10%)+++ 7.30%+++
================================
-------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses++ 2.02%* 2.10%*
================================
Investment income--net .41%* .70%*
================================
-------------------------------------------------------------------------------------------
Supplemental Data:
Net assets, end of period (in thousands) $ 140,149 $ 146,078
================================
-------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Commencement of operations.
++ Includes the Fund's share of the Portfolio's allocated expenses.
+++ Aggregate total investment return.
++++ Based on average shares outstanding.
See Notes to Financial Statements.
May 31, 2000 (14) Mercury Global Balanced Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
MERCURY GLOBAL BALANCED FUND
================================================================================
(1) Significant Accounting Policies:
Mercury Global Balanced Fund (the "Fund") is 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's financial statements are prepared in
accordance with accounting principles generally accepted in the United
States of America, which may require the use of management accruals and
estimates. The Fund seeks to achieve its investment objective by investing
all of its assets in the Mercury Master Global Balanced Portfolio (the
"Portfolio") of Mercury Asset Management Master Trust (the "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. 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 Portfolio's Notes to Financial Statements, which are
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 accounting
principles generally accepted in the United States of America.
(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 provision is
required. Under the applicable foreign tax law, withholding taxes may be
imposed on interest, dividends and capital gains at various rates.
May 31, 2000 (15) Mercury Global Balanced Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
(d) Prepaid registration fees -- Prepaid registration fees are charged to
expense 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 .20% 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 the
"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.
May 31, 2000 (16) Mercury Global Balanced Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
For the six months ended May 31, 2000, MFD earned underwriting discounts
and MLPF&S earned dealer concessions on sales of the Fund's Class A Shares
as follows:
MFD MLPF&S
--------------------------------------------------------------------------
Class I $ 4 $ 90
--------------------------------------------------------------------------
Class A $4,485 $59,120
--------------------------------------------------------------------------
For the six months ended May 31, 2000, MLPF&S received contingent deferred
sales charges of $548,813 and $69,153 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 or trustees of the Trust, 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
six months ended May 31, 2000 were $5,349,817 and $27,304,794,
respectively.
(4) Capital Share Transactions:
Net increase (decrease) in net assets derived from capital share
transactions were $(12,255,118) and $446,273,365 for the six months ended
May 31, 2000 and for the period April 30, 1998 to November 30, 1999,
respectively.
Transactions in capital shares for each class were as follows:
<TABLE>
<CAPTION>
Class I Shares for the Six Months
Ended May 31, 2000 Shares Dollar Amount
----------------------------------------------------------------------------
<S> <C> <C>
Shares sold 114,453 $ 1,268,957
Shares issued to shareholders in reinvestment
of dividends 19,227 208,611
--------------------------
Total issued 133,680 1,477,568
Shares redeemed (223,024) (2,430,314)
--------------------------
Net decrease (89,344) $ (952,746)
==========================
----------------------------------------------------------------------------
<CAPTION>
Class I Shares for the Period April 30, 1999+
to November 30, 1999 Shares Dollar Amount
----------------------------------------------------------------------------
<S> <C> <C>
Shares sold 1,616,297 $ 16,138,828
Shares redeemed (383,784) (3,878,805)
--------------------------
Net increase 1,232,513 $ 12,260,023
==========================
----------------------------------------------------------------------------
</TABLE>
+ Prior to April 30, 1999 (commencement of operations), the Fund issued
2,500 shares to Mercury International for $25,000.
May 31, 2000 (17) Mercury Global Balanced Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
Class A Shares for the Six Months
Ended May 31, 2000 Shares Dollar Amount
--------------------------------------------------------------------------------
<S> <C> <C>
Shares sold 277,258 $ 3,048,490
Automatic conversion of shares 133,545 1,456,473
Shares issued to shareholders in reinvestment
of dividends 55,933 606,874
----------------------------
Total issued 466,736 5,111,837
Shares redeemed (660,435) (7,201,042)
----------------------------
Net decrease (193,699) $ (2,089,205)
============================
--------------------------------------------------------------------------------
<CAPTION>
Class A Shares for the Period April 30, 1999+
to November 30, 1999 Shares Dollar Amount
--------------------------------------------------------------------------------
<S> <C> <C>
Shares sold 4,650,095 $ 46,464,008
Shares redeemed (622,801) (6,280,604)
----------------------------
Net increase 4,027,294 $ 40,183,404
============================
--------------------------------------------------------------------------------
</TABLE>
+ Prior to April 30, 1999 (commencement of operations), the Fund issued
2,500 shares to Mercury International for $25,000.
<TABLE>
<CAPTION>
Class B Shares for the Six Months
Ended May 31, 2000 Shares Dollar Amount
--------------------------------------------------------------------------------
<S> <C> <C>
Shares sold 1,271,339 $ 13,857,974
Shares issued to shareholders in reinvestment
of dividends 282,395 3,061,161
----------------------------
Total issued 1,553,734 16,919,135
Automatic conversion of shares (133,914) (1,456,473)
Shares redeemed (1,902,164) (20,748,416)
----------------------------
Net decrease (482,344) $ (5,285,754)
============================
--------------------------------------------------------------------------------
<CAPTION>
Class B Shares for the Period April 30, 1999+
to November 30, 1999 Shares Dollar Amount
--------------------------------------------------------------------------------
<S> <C> <C>
Shares sold 27,272,894 $272,311,072
Shares redeemed (1,435,549) (14,441,505)
----------------------------
Net increase 25,837,345 $257,869,567
============================
--------------------------------------------------------------------------------
</TABLE>
+ Prior to April 30, 1999 (commencement of operations), the Fund issued
2,500 shares to Mercury International for $25,000.
<TABLE>
<CAPTION>
Class C Shares for the Six Months
Ended May 31, 2000 Shares Dollar Amount
--------------------------------------------------------------------------------
<S> <C> <C>
Shares sold 765,141 $ 8,349,409
Shares issued to shareholders in reinvestment
of dividends 156,253 1,693,783
----------------------------
Total issued 921,394 10,043,192
Shares redeemed (1,285,747) (13,970,605)
----------------------------
Net decrease (364,353) $ (3,927,413)
============================
--------------------------------------------------------------------------------
</TABLE>
May 31, 2000 (18) Mercury Global Balanced Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(CONCLUDED)
<TABLE>
<CAPTION>
Class C Shares for the Period April 30, 1999+
to November 30, 1999 Shares Dollar Amount
--------------------------------------------------------------------------------
<S> <C> <C>
Shares sold 14,563,255 $145,538,987
Shares redeemed (955,056) (9,578,616)
----------------------------
Net increase 13,608,199 $135,960,371
============================
--------------------------------------------------------------------------------
</TABLE>
+ Prior to April 30, 1999 (commencement of operations), the Fund issued
2,500 shares to Mercury International for $25,000.
May 31, 2000 (19) Mercury Global Balanced Fund
<PAGE>
SCHEDULE OF INVESTMENTS
MERCURY MASTER GLOBAL BALANCED PORTFOLIO
================================================================================
<TABLE>
<CAPTION>
In US Dollars
-----------------------
Shares Percent of
Industries Held Common Stocks Value Net Assets
-----------------------------------------------------------------------------------------------------------
EUROPE
===========================================================================================================
<C> <C> <S> <C> <C>
Belgium
Electric Utilities 3,009 Electrabel SA $ 687,870 0.2%
-----------------------------------------------------------------------------------------------------------
Total Common Stocks in Belgium 687,870 0.2
-----------------------------------------------------------------------------------------------------------
Finland
Communications 111,141 Nokia Oyj 5,751,427 1.2
Equipment
-----------------------------------------------------------------------------------------------------------
Diversified 16,393 Sonera Oyj 825,516 0.2
Telecommunication
Services
-----------------------------------------------------------------------------------------------------------
Total Common Stocks in Finland 6,576,943 1.4
-----------------------------------------------------------------------------------------------------------
France
Banks 17,058 Banque Nationale de Paris (BNP) 1,530,545 0.3
-----------------------------------------------------------------------------------------------------------
Communications 19,760 Alcatel 1,077,535 0.2
Equipment
-----------------------------------------------------------------------------------------------------------
Food & Drug Retailing 23,060 Carrefour SA 1,622,116 0.3
-----------------------------------------------------------------------------------------------------------
Hotels, Restaurants 30,600 Accor SA 1,234,178 0.3
& Leisure
-----------------------------------------------------------------------------------------------------------
IT Consulting & 3,765 Cap Gemini SA 701,475 0.2
Services
-----------------------------------------------------------------------------------------------------------
Insurance 14,757 Axa 2,162,331 0.5
-----------------------------------------------------------------------------------------------------------
Multi-Utilities 26,366 Vivendi 2,811,960 0.6
-----------------------------------------------------------------------------------------------------------
Multiline Retail 5,742 Pinault-Printemps-Redoute SA 1,228,508 0.3
-----------------------------------------------------------------------------------------------------------
Oil & Gas 17,328 Total Fina SA 'B' 2,714,221 0.6
-----------------------------------------------------------------------------------------------------------
Semiconductor 22,914 STMicroelectronics NV 1,357,903 0.3
Equipment & Products
-----------------------------------------------------------------------------------------------------------
Total Common Stocks in France 16,440,772 3.6
-----------------------------------------------------------------------------------------------------------
Germany
Airlines 44,175 Deutsche Lufthansa AG (Registered Shares) 1,077,456 0.2
-----------------------------------------------------------------------------------------------------------
Automobiles 20,225 DaimlerChrysler AG 1,089,762 0.2
-----------------------------------------------------------------------------------------------------------
Banks 19,470 HypoVereinsbank 1,258,537 0.3
-----------------------------------------------------------------------------------------------------------
Diversified 42,880 Deutsche Telekom AG
Telecommunication (Registered Shares) 2,664,383 0.6
Services
-----------------------------------------------------------------------------------------------------------
</TABLE>
May 31, 2000 (20) Mercury Global Balanced Fund
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
In US Dollars
-----------------------
Shares Percent of
Industries Held Common Stocks Value Net Assets
-----------------------------------------------------------------------------------------------------------
EUROPE (continued)
===========================================================================================================
<C> <C> <S> <C> <C>
Germany (concluded)
Industrial 20,453 Siemens AG $ 3,012,136 0.7%
Conglomerates
-----------------------------------------------------------------------------------------------------------
Insurance 3,977 Allianz AG (Registered Shares) 1,429,205 0.3
-----------------------------------------------------------------------------------------------------------
Internet Software 9,118 +T-Online International AG 331,899 0.1
& Services
-----------------------------------------------------------------------------------------------------------
Total Common Stocks in Germany 10,863,378 2.4
-----------------------------------------------------------------------------------------------------------
Italy
Banks 393,066 Banca Intesa SpA 1,541,959 0.3
-----------------------------------------------------------------------------------------------------------
Total Common Stocks in Italy 1,541,959 0.3
-----------------------------------------------------------------------------------------------------------
Netherlands
Beverages 22,839 Heineken NV 1,166,008 0.2
-----------------------------------------------------------------------------------------------------------
Chemicals 21,898 Akzo Nobel NV 830,809 0.2
-----------------------------------------------------------------------------------------------------------
Diversified Financials 34,715 ING Groep NV 2,064,002 0.4
-----------------------------------------------------------------------------------------------------------
Household Durables 36,896 Koninklijke (Royal) Philips Electronics NV 1,637,642 0.4
-----------------------------------------------------------------------------------------------------------
Media 16,301 VNU NV 826,930 0.2
35,850 Wolters Kluwer NV 'A' 871,412 0.2
-----------------------
1,698,342 0.4
-----------------------------------------------------------------------------------------------------------
Oil & Gas 68,022 Royal Dutch Petroleum Company 4,165,410 0.9
-----------------------------------------------------------------------------------------------------------
Total Common Stocks in the Netherlands 11,562,213 2.5
-----------------------------------------------------------------------------------------------------------
Spain
Banks 151,905 Banco Santander Central Hispano, SA 1,480,614 0.3
-----------------------------------------------------------------------------------------------------------
Diversified 95,323 +Telefonica SA 1,944,856 0.4
Telecommunication
Services
-----------------------------------------------------------------------------------------------------------
Total Common Stocks in Spain 3,425,470 0.7
-----------------------------------------------------------------------------------------------------------
Sweden
Communications 130,966 Telefonaktiebolaget LM Ericsson AB 'B' 2,651,869 0.6
Equipment
-----------------------------------------------------------------------------------------------------------
Diversified Financials 61,882 Investor AB 'B' 854,800 0.2
-----------------------------------------------------------------------------------------------------------
Diversified 16,700 +Tele 1 Europe Holding AB 201,037 0.0
Telecommunication
Services
-----------------------------------------------------------------------------------------------------------
</TABLE>
May 31, 2000 (21) Mercury Global Balanced Fund
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
In US Dollars
-----------------------
Shares Percent of
Industries Held Common Stocks Value Net Assets
-----------------------------------------------------------------------------------------------------------
EUROPE (continued)
===========================================================================================================
<C> <C> <S> <C> <C>
Sweden (concluded)
Insurance 44,360 Skandia Forsakrings AB $ 1,132,009 0.3%
-----------------------------------------------------------------------------------------------------------
Total Common Stocks in Sweden 4,839,715 1.1
-----------------------------------------------------------------------------------------------------------
Switzerland
Banks 5,807 Credit Suisse Group (Registered Shares) 1,079,177 0.2
-----------------------------------------------------------------------------------------------------------
Commercial Services 1,985 Adecco SA (Registered Shares) 1,559,894 0.3
& Supplies
-----------------------------------------------------------------------------------------------------------
Food Products 990 Nestle SA (Registered Shares) 1,880,708 0.4
-----------------------------------------------------------------------------------------------------------
Pharmaceuticals 75 Roche Holding AG (Genuss) 787,611 0.2
-----------------------------------------------------------------------------------------------------------
Total Common Stocks in Switzerland 5,307,390 1.1
-----------------------------------------------------------------------------------------------------------
United Kingdom
Aerospace & 168,987 British Aerospace PLC 1,059,594 0.2
Defense
-----------------------------------------------------------------------------------------------------------
Banks 62,668 Barclays PLC 1,628,919 0.3
81,118 HSBC Holdings PLC 894,803 0.2
82,418 Lloyds TSB Group PLC 891,897 0.2
-----------------------
3,415,619 0.7
-----------------------------------------------------------------------------------------------------------
Communications 109,268 Marconi PLC 1,314,749 0.3
Equipment
-----------------------------------------------------------------------------------------------------------
Diversified 148,542 British Telecommunications PLC 2,151,429 0.5
Telecommunication
Services
-----------------------------------------------------------------------------------------------------------
Food & Drug 478,563 Tesco PLC 1,444,922 0.3
Retailing
-----------------------------------------------------------------------------------------------------------
Gas Utilities 199,681 BG Group PLC 1,196,837 0.2
-----------------------------------------------------------------------------------------------------------
Hotels, Restaurants 81,728 Granada Group PLC 724,402 0.2
& Leisure
-----------------------------------------------------------------------------------------------------------
Insurance 87,453 Allied Zurich PLC 980,370 0.2
74,308 CGU PLC 1,128,453 0.2
-----------------------
2,108,823 0.4
-----------------------------------------------------------------------------------------------------------
Marine 77,559 The Peninsular and Oriental
Steam Navigation Company 812,651 0.2
-----------------------------------------------------------------------------------------------------------
Media 65,103 Reuters Group PLC 969,202 0.2
-----------------------------------------------------------------------------------------------------------
Metals & Mining 220,925 Billiton PLC 749,592 0.2
61,370 Rio Tinto PLC (Registered Shares) 905,373 0.2
-----------------------
1,654,965 0.4
-----------------------------------------------------------------------------------------------------------
</TABLE>
May 31, 2000 (22) Mercury Global Balanced Fund
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
In US Dollars
-----------------------
Shares Percent of
Industries Held Common Stocks Value Net Assets
-----------------------------------------------------------------------------------------------------------
EUROPE (concluded)
===========================================================================================================
<C> <C> <S> <C> <C>
United Kingdom (concluded)
Oil & Gas 155,526 BP Amoco PLC $ 1,414,548 0.3%
-----------------------------------------------------------------------------------------------------------
Pharmaceuticals 71,851 AstraZeneca Group PLC 3,026,411 0.7
100,698 Glaxo Wellcome PLC 2,844,701 0.6
74,382 SmithKline Beecham PLC 949,467 0.2
-----------------------
6,820,579 1.5
-----------------------------------------------------------------------------------------------------------
Specialty Retail 169,622 Dixons Group PLC 802,435 0.2
-----------------------------------------------------------------------------------------------------------
Wireless 1,353,610 Vodafone AirTouch PLC 6,170,885 1.3
Telecom-
munications
Services
-----------------------------------------------------------------------------------------------------------
Total Common Stocks in the
United Kingdom 32,061,640 6.9
-----------------------------------------------------------------------------------------------------------
Total Common Stocks in Europe
(Cost--$86,584,207) 93,307,350 20.2
-----------------------------------------------------------------------------------------------------------
NORTH AMERICA
===========================================================================================================
Canada
Communications 48,700 Nortel Networks Corporation 2,645,019 0.6
Equipment
-----------------------------------------------------------------------------------------------------------
Total Common Stocks in Canada 2,645,019 0.6
-----------------------------------------------------------------------------------------------------------
United States
Aerospace & 49,500 The Boeing Company 1,933,594 0.4
Defense 58,600 United Technologies Corporation 3,541,638 0.8
-----------------------
5,475,232 1.2
-----------------------------------------------------------------------------------------------------------
Automobiles 30,500 Ford Motor Company 1,481,156 0.3
-----------------------------------------------------------------------------------------------------------
Banks 33,700 The Chase Manhattan Corporation 2,516,969 0.6
53,500 FleetBoston Financial Corporation 2,022,969 0.4
-----------------------
4,539,938 1.0
-----------------------------------------------------------------------------------------------------------
Beverages 25,300 Anheuser-Busch Companies, Inc. 1,960,750 0.4
102,700 PepsiCo, Inc. 4,178,606 0.9
-----------------------
6,139,356 1.3
-----------------------------------------------------------------------------------------------------------
Communications 68,400 +Cisco Systems, Inc. 3,894,525 0.9
Equipment 10,420 +Efficient Networks, Inc. 502,765 0.1
12,220 +JDS Uniphase Corporation 1,074,596 0.2
6,400 +VeriSign, Inc. 866,000 0.2
-----------------------
6,337,886 1.4
-----------------------------------------------------------------------------------------------------------
</TABLE>
May 31, 2000 (23) Mercury Global Balanced Fund
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
In US Dollars
-----------------------
Shares Percent of
Industries Held Common Stocks Value Net Assets
-----------------------------------------------------------------------------------------------------------
NORTH AMERICA (continued)
===========================================================================================================
<C> <C> <S> <C> <C>
United States (continued)
Computers & 45,400 +Dell Computer Corporation $ 1,957,875 0.4%
Peripherals 16,600 +EMC Corporation 1,930,787 0.4
24,700 +Sun Microsystems, Inc. 1,892,637 0.4
-----------------------
5,781,299 1.2
-----------------------------------------------------------------------------------------------------------
Diversified Financials 69,300 American Express Company 3,729,206 0.8
71,250 Citigroup Inc. 4,430,859 1.0
-----------------------
8,160,065 1.8
-----------------------------------------------------------------------------------------------------------
Diversified 34,100 AT&T Corp. 1,182,844 0.2
Telecommunication 11,500 +Amdocs Limited 712,281 0.2
Services 70,000 Bell Atlantic Corporation 3,701,250 0.8
18,400 +Level 3 Communications, Inc. 1,404,150 0.3
31,500 SBC Communications Inc. 1,376,156 0.3
25,300 Sprint Corp. (FON Group) 1,530,650 0.3
-----------------------
9,907,331 2.1
-----------------------------------------------------------------------------------------------------------
Energy Equipment 40,000 Halliburton Company 2,040,000 0.4
& Service 20,100 Schlumberger Limited 1,478,606 0.3
-----------------------
3,518,606 0.7
-----------------------------------------------------------------------------------------------------------
Food & Drug 140,700 Walgreen Co. 3,992,363 0.9
Retailing
-----------------------------------------------------------------------------------------------------------
Healthcare 53,500 Medtronic, Inc. 2,761,937 0.6
Equipment
& Supplies
-----------------------------------------------------------------------------------------------------------
Household Products 16,283 The Dial Corporation 232,033 0.1
23,400 The Procter & Gamble Company 1,556,100 0.3
-----------------------
1,788,133 0.4
-----------------------------------------------------------------------------------------------------------
IT Consulting & 26,500 Electronic Data Systems Corporation 1,704,281 0.4
Services
-----------------------------------------------------------------------------------------------------------
Industrial 176,400 General Electric Company 9,283,050 2.0
Conglomerates
-----------------------------------------------------------------------------------------------------------
Insurance 40,700 American International Group, Inc. 4,581,294 1.0
-----------------------------------------------------------------------------------------------------------
Internet Software 52,800 +America Online, Inc. 2,798,400 0.6
& Services 17,700 +Be Free, Inc. 162,619 0.0
12,300 +Commerce One, Inc. 439,725 0.1
2,200 +i2 Technologies, Inc. 234,025 0.1
3,200 +Phone.com, Inc. 223,600 0.0
5,870 +TIBCO Software Inc. 326,152 0.1
-----------------------
4,184,521 0.9
-----------------------------------------------------------------------------------------------------------
</TABLE>
May 31, 2000 (24) Mercury Global Balanced Fund
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
In US Dollars
-----------------------
Shares Percent of
Industries Held Common Stocks Value Net Assets
-----------------------------------------------------------------------------------------------------------
NORTH AMERICA (concluded)
===========================================================================================================
<C> <C> <S> <C> <C>
United States (concluded)
Multiline Retail 39,700 +Kohl's Corporation $ 2,054,475 0.5%
75,400 Wal-Mart Stores, Inc. 4,344,925 0.9
-----------------------
6,399,400 1.4
-----------------------------------------------------------------------------------------------------------
Oil & Gas 27,400 Chevron Corporation 2,532,787 0.6
65,310 Exxon Mobil Corporation 5,441,139 1.2
51,000 Texaco Inc. 2,929,313 0.6
-----------------------
10,903,239 2.4
-----------------------------------------------------------------------------------------------------------
Paper & Forest 41,300 International Paper Company 1,437,756 0.3
Products 39,900 Weyerhaeuser Company 1,980,038 0.4
-----------------------
3,417,794 0.7
-----------------------------------------------------------------------------------------------------------
Personal Products 31,800 The Estee Lauder Companies Inc.
(Class A) 1,425,038 0.3
-----------------------------------------------------------------------------------------------------------
Pharmaceuticals 50,500 Bristol-Myers Squibb Company 2,780,656 0.6
37,100 Merck & Co., Inc. 2,768,588 0.6
60,300 Pfizer Inc. 2,687,119 0.6
45,417 Pharmacia Corporation 2,358,845 0.5
17,300 Warner-Lambert Company 2,112,763 0.4
-----------------------
12,707,971 2.7
-----------------------------------------------------------------------------------------------------------
Semiconductor 9,000 +Applied Materials, Inc. 751,500 0.2
Equipment & 29,700 Intel Corporation 3,703,219 0.8
Products 38,800 Texas Instruments Incorporated 2,803,300 0.6
-----------------------
7,258,019 1.6
-----------------------------------------------------------------------------------------------------------
Software 28,580 +Citrix Systems, Inc. 1,504,022 0.3
58,000 +Microsoft Corporation 3,625,000 0.8
16,700 +Oracle Corporation 1,199,269 0.3
-----------------------
6,328,291 1.4
-----------------------------------------------------------------------------------------------------------
Specialty Retail 15,900 The Home Depot, Inc. 776,119 0.2
-----------------------------------------------------------------------------------------------------------
Wireless 16,400 +Nextel Communications, Inc.
Telecommunications (Class A) 1,518,025 0.3
Services 41,800 +Sprint Corp. (PCS Group) 2,319,900 0.5
-----------------------
3,837,925 0.8
-----------------------------------------------------------------------------------------------------------
Total Common Stocks in the
United States 132,690,244 28.7
-----------------------------------------------------------------------------------------------------------
Total Common Stocks in North
America (Cost--$125,965,796) 135,335,263 29.3
-----------------------------------------------------------------------------------------------------------
</TABLE>
May 31, 2000 (25) Mercury Global Balanced Fund
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
In US Dollars
-----------------------
Shares Percent of
Industries Held Common Stocks Value Net Assets
-----------------------------------------------------------------------------------------------------------
PACIFIC BASIN/ASIA
===========================================================================================================
<C> <C> <S> <C> <C>
Australia
Banks 71,000 Commonwealth Bank of Australia $ 1,129,334 0.3%
-----------------------------------------------------------------------------------------------------------
Containers & 103,000 Amcor Limited 296,158 0.1
Packaging
-----------------------------------------------------------------------------------------------------------
Diversified 160,000 Telstra Corporation Limited 620,704 0.1
Telecommunication
Services
-----------------------------------------------------------------------------------------------------------
Hotels, Restaurants 29,000 TABCORP Holdings Limited 153,864 0.0
& Leisure
-----------------------------------------------------------------------------------------------------------
Industrial 17,000 Brambles Industries Limited 465,518 0.1
Conglomerates
-----------------------------------------------------------------------------------------------------------
Metals & Mining 46,000 Broken Hill Proprietary
Company Limited 467,388 0.1
59,000 Rio Tinto Limited 842,632 0.2
-----------------------
1,310,020 0.3
-----------------------------------------------------------------------------------------------------------
Multiline Retail 104,000 Coles Myer Limited 373,792 0.1
-----------------------------------------------------------------------------------------------------------
Paper & 34,333 +Paperlinx Limited 59,544 0.0
Forest Products
-----------------------------------------------------------------------------------------------------------
Total Common Stocks in Australia 4,408,934 1.0
-----------------------------------------------------------------------------------------------------------
Hong Kong
Airlines 474,000 Cathay Pacific Airways 851,643 0.2
-----------------------------------------------------------------------------------------------------------
Banks 57,200 HSBC Holdings PLC 631,314 0.2
-----------------------------------------------------------------------------------------------------------
Diversified 45,100 Hutchison Whampoa Limited 519,472 0.1
Financials
-----------------------------------------------------------------------------------------------------------
Gas Utilities 899,800 Hong Kong and China Gas
Company Ltd. 975,784 0.2
-----------------------------------------------------------------------------------------------------------
Total Common Stocks in Hong Kong 2,978,213 0.7
-----------------------------------------------------------------------------------------------------------
Japan
Automobiles 348,000 +Nissan Motor Co., Ltd. 1,826,051 0.4
23,000 Toyota Motor Corporation 1,044,532 0.2
-----------------------
2,870,583 0.6
-----------------------------------------------------------------------------------------------------------
Banks 145,000 The Sumitomo Bank, Ltd. 1,901,463 0.4
-----------------------------------------------------------------------------------------------------------
Chemicals 281,000 Asahi Chemical Industry Co., Ltd. 1,748,502 0.4
-----------------------------------------------------------------------------------------------------------
Computers & 12,000 Fujitsu Support and
Peripherals Service Inc. (FSAS) 1,124,495 0.2
-----------------------------------------------------------------------------------------------------------
</TABLE>
May 31, 2000 (26) Mercury Global Balanced Fund
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
In US Dollars
-----------------------
Shares Percent of
Industries Held Common Stocks Value Net Assets
-----------------------------------------------------------------------------------------------------------
PACIFIC BASIN/ASIA (continued)
===========================================================================================================
<C> <C> <S> <C> <C>
Japan (concluded)
Diversified 100,000 The Nikko Securities Co., Ltd. $ 926,863 0.2%
Financials 58,000 The Nomura Securities Co., Ltd. 1,330,485 0.3
-----------------------
2,257,348 0.5
-----------------------------------------------------------------------------------------------------------
Diversified 39 NTT Mobile Communications
Telecommunication Network, Inc. 1,006,919 0.2
Services 212 Nippon Telegraph & Telephone
Corporation (NTT) 2,520,176 0.6
-----------------------
3,527,095 0.8
-----------------------------------------------------------------------------------------------------------
Electronic 160,000 Hitachi Ltd. 1,982,261 0.4
Equipment
& Instruments
-----------------------------------------------------------------------------------------------------------
Household Durables 11,800 Sony Corporation 1,068,493 0.2
-----------------------------------------------------------------------------------------------------------
Machinery 437,000 Sumitomo Heavy Industries, Ltd. 1,132,324 0.2
-----------------------------------------------------------------------------------------------------------
Metals & Mining 278,000 Mitsubishi Materials Corporation 924,300 0.2
828,000 Nippon Steel Corporation 1,814,795 0.4
-----------------------
2,739,095 0.6
-----------------------------------------------------------------------------------------------------------
Office Electronics 53,000 Canon, Inc. 2,441,421 0.5
-----------------------------------------------------------------------------------------------------------
Pharmaceuticals 49,000 Fujisawa Pharmaceutical Co., Ltd. 1,811,191 0.4
19,000 Takeda Chemical Industries, Ltd. 1,296,958 0.3
-----------------------
3,108,149 0.7
-----------------------------------------------------------------------------------------------------------
Real Estate 152,000 Mitsubishi Estate Company, Limited 1,788,567 0.4
-----------------------------------------------------------------------------------------------------------
Road & Rail 230 East Japan Railway Company 1,311,539 0.3
-----------------------------------------------------------------------------------------------------------
Semiconductor 12,000 Murata Manufacturing Co., Ltd. 2,072,905 0.5
Equipment &
Products
-----------------------------------------------------------------------------------------------------------
Textiles & Apparel 15,450 World Co., Ltd. 614,126 0.1
-----------------------------------------------------------------------------------------------------------
Trading Companies 191,000 Sumitomo Corporation 1,773,857 0.4
& Distributors
-----------------------------------------------------------------------------------------------------------
Total Common Stocks in Japan 33,462,223 7.2
-----------------------------------------------------------------------------------------------------------
Singapore
Airlines 82,000 Singapore Airlines Limited 714,401 0.1
-----------------------------------------------------------------------------------------------------------
Media 56,000 Singapore Press Holdings Ltd. 843,296 0.2
-----------------------------------------------------------------------------------------------------------
Total Common Stocks in Singapore 1,557,697 0.3
-----------------------------------------------------------------------------------------------------------
Total Common Stocks in Pacific
Basin/Asia (Cost--$38,764,494) 42,407,067 9.2
-----------------------------------------------------------------------------------------------------------
</TABLE>
May 31, 2000 (27) Mercury Global Balanced Fund
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
In US Dollars
-----------------------
Face Percent of
Industries Amount Fixed-Income Securities Value Net Assets
-----------------------------------------------------------------------------------------------------------
EUROPE
===========================================================================================================
<C> <C> <S> <C> <C>
France
Foreign (euro) 10,450,000 French Btan, 4.50% due 7/12/2002 $ 9,590,327 2.1%
Government 3,680,000 French OAT, 5.25% due 4/25/2008 3,400,181 0.7
Obligations -----------------------
12,990,508 2.8
-----------------------------------------------------------------------------------------------------------
Total Fixed-Income Securities
in France 12,990,508 2.8
-----------------------------------------------------------------------------------------------------------
Germany
Banks US$ 3,100,000 Deutsche Ausgleichsbank,
6.50% due 9/15/2004 3,011,033 0.7
-----------------------------------------------------------------------------------------------------------
Foreign Bundesobligation:
Government (euro) 7,080,000 5.125% due 11/21/2000 6,579,413 1.4
Obligations 10,500,000 5% due 8/20/2001 9,744,925 2.1
11,000,000 3.25% due 2/17/2004 9,593,876 2.1
8,800,000 4.25% due 11/26/2004 7,871,376 1.7
Bundesrepublic Deutschland:
2,320,000 6.875% due 5/12/2005 2,310,900 0.5
13,970,000 6% due 7/04/2007 13,516,297 2.9
5,000,000 6.25% due 1/04/2030 5,230,842 1.1
-----------------------
54,847,629 11.8
-----------------------------------------------------------------------------------------------------------
Total Fixed-Income Securities
in Germany 57,858,662 12.5
-----------------------------------------------------------------------------------------------------------
United Kingdom
Foreign (pound) 3,690,000 UK Treasury, 5.75% due 12/07/2009 5,704,501 1.2
Government 4,100,000 United Kingdom Gilt, 6.75%
Obligations due 11/26/2004 6,351,265 1.4
-----------------------
12,055,766 2.6
-----------------------------------------------------------------------------------------------------------
Total Fixed-Income Securities in
the United Kingdom 12,055,766 2.6
-----------------------------------------------------------------------------------------------------------
Total Fixed-Income Securities in
Europe (Cost--$89,995,554) 82,904,936 17.9
-----------------------------------------------------------------------------------------------------------
NORTH AMERICA
===========================================================================================================
Canada
Foreign C$ 5,350,000 Canadian Government Bond,
Government 7.25% due 6/01/2007 3,786,780 0.8
Obligations
-----------------------------------------------------------------------------------------------------------
Total Fixed-Income Securities in Canada 3,786,780 0.8
-----------------------------------------------------------------------------------------------------------
</TABLE>
May 31, 2000 (28) Mercury Global Balanced Fund
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
In US Dollars
-----------------------
Face Percent of
Industries Amount Fixed-Income Securities Value Net Assets
-----------------------------------------------------------------------------------------------------------
NORTH AMERICA (concluded)
===========================================================================================================
<C> <C> <S> <C> <C>
United States
US US$ 7,700,000 Federal Home Loan Mortgage
Government Corporation, 5% due 1/15/2004 $ 7,115,262 1.5%
Agency Federal National Mortgage
Obligations Association:
(yen)660,000,000 2.125% due 10/09/2007 6,408,451 1.4
US$ 8,000,000 5.25% due 1/15/2009 6,853,760 1.5
-----------------------
20,377,473 4.4
-----------------------------------------------------------------------------------------------------------
US US Treasury Bonds:
Government 6,435,000 8% due 11/15/2021 7,643,557 1.6
Obligations 1,600,000 6.25% due 5/15/2030 1,650,752 0.4
US Treasury Notes:
5,315,000 5.875% due 6/30/2000 5,319,146 1.2
7,800,000 6.50% due 2/15/2010 7,914,582 1.7
-----------------------
22,528,037 4.9
-----------------------------------------------------------------------------------------------------------
Total Fixed-Income Securities
in the United States 42,905,510 9.3
-----------------------------------------------------------------------------------------------------------
Total Fixed-Income Securities
in North America
(Cost--$46,812,264) 46,692,290 10.1
-----------------------------------------------------------------------------------------------------------
PACIFIC BASIN/ASIA
===========================================================================================================
Japan
Banks (yen)1,085,000,000 International Bank Reconstruction &
Development, 2% due 2/18/2008 10,502,860 2.3
530,000,000 KFW International Finance,
2.05% due 9/21/2009 5,070,103 1.1
-----------------------
15,572,963 3.4
-----------------------------------------------------------------------------------------------------------
Total Fixed-Income Securities
in Japan 15,572,963 3.4
-----------------------------------------------------------------------------------------------------------
Total Fixed-Income Securities
in Pacific Basin/Asia
(Cost--$15,769,825) 15,572,963 3.4
-----------------------------------------------------------------------------------------------------------
</TABLE>
May 31, 2000 (29) Mercury Global Balanced Fund
<PAGE>
SCHEDULE OF INVESTMENTS (CONCLUDED)
<TABLE>
<CAPTION>
In US Dollars
-----------------------
Face Percent of
Amount Short-Term Securities Value Net Assets
-----------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C>
US US Treasury Bills:
Government US$3,050,000 5.68% due 6/22/2000 $ 3,041,491 0.7%
Obligations* 2,850,000 5.71% due 6/22/2000 2,842,048 0.6
6,900,000 5.55% due 6/29/2000 6,874,608 1.5
2,100,000 5.715% due 6/29/2000 2,092,272 0.4
3,200,000 5.45% due 7/20/2000 3,178,048 0.7
8,250,000 5.60% due 7/20/2000 8,193,405 1.8
-----------------------------------------------------------------------------------------------------------
Total Investments in Short-Term
Securities (Cost--$26,204,661) 26,221,872 5.7
=======================
-----------------------------------------------------------------------------------------------------------
Total Investments
(Cost--$430,096,801) 442,441,741 95.8
Other Assets Less Liabilities 6,382,762 1.4
Time Deposit** 9,463,000 2.0
Unrealized Appreciation on Forward
Foreign Exchange Contracts*** 3,613,456 0.8
-----------------------
Net Assets $461,900,959 100.0%
=======================
-----------------------------------------------------------------------------------------------------------
</TABLE>
+ Non-income producing security.
* Certain US Government Obligations are traded on a discount basis; the
interest rates shown reflect the discount rates paid at the time of
purchase by the Portfolio.
** Time deposit bears interest at 6.75% and matures on 6/01/2000.
*** Forward foreign exchange contracts as of May 31, 2000 were as follows:
--------------------------------------------------------------------------------
Unrealized
Foreign Expiration Appreciation
Currency Purchased Date (Depreciation)
--------------------------------------------------------------------------------
Dkr 37,300,000 July 2000 $ 147,173
(euro) 7,020,000 July 2000 (65,164)
--------------------------------------------------------------------------------
(US$ Commitment--$11,090,343) $ 82,009
----------
--------------------------------------------------------------------------------
Foreign Expiration Unrealized
Currency Sold Date Appreciation
--------------------------------------------------------------------------------
C$ 5,500,000 July 2000 $ 43,351
Dkr 37,300,000 July 2000 174,641
(euro) 82,170,000 July 2000 2,113,891
(pound) 8,160,000 July 2000 531,205
(yen) 2,351,000,000 July 2000 668,359
--------------------------------------------------------------------------------
(US$ Commitment--$122,476,792) $3,531,447
----------
--------------------------------------------------------------------------------
Total Unrealized Appreciation on
Forward Foreign Exchange
Contracts--Net $3,613,456
==========
--------------------------------------------------------------------------------
See Notes to Financial Statements.
May 31, 2000 (30) Mercury Global Balanced Fund
<PAGE>
STATEMENT OF ASSETS
AND LIABILITIES
<TABLE>
<CAPTION>
As of May 31, 2000
---------------------------------------------------------------------------------------------
MERCURY MASTER GLOBAL BALANCED PORTFOLIO
=============================================================================================
<S> <C> <C>
Assets:
Investments, at value (identified cost--$430,096,801) $442,441,741
Unrealized appreciation on forward foreign exchange contracts 3,613,456
Time deposit 9,463,000
Receivables:
Securities sold $ 12,543,432
Interest 3,392,743
Dividends 780,590
Contributions 223,046
Forward foreign exchange contracts 110,372 17,050,183
------------
Prepaid expenses 3,322,688
------------
Total assets 475,891,068
------------
---------------------------------------------------------------------------------------------
Liabilities:
Payables:
Securities purchased 10,939,060
Custodian bank 2,038,024
Withdrawals 629,404
Investment adviser 197,042
Forward foreign exchange contracts 5,036 13,808,566
------------
Accrued expenses and other liabilities 181,543
------------
Total liabilities 13,990,109
------------
---------------------------------------------------------------------------------------------
Net Assets:
Net assets $461,900,959
============
---------------------------------------------------------------------------------------------
Net Assets Consist of:
Partners' capital $446,076,396
Unrealized appreciation on investments and foreign currency
transactions--net 15,824,563
------------
Net assets $461,900,959
============
---------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
May 31, 2000 (31) Mercury Global Balanced Fund
<PAGE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Six Months Ended May 31, 2000
---------------------------------------------------------------------------------------------
MERCURY MASTER GLOBAL BALANCED PORTFOLIO
=============================================================================================
<S> <C> <C>
Investment Income:
Interest and discount earned (net of $1,448 foreign
withholding tax) $ 3,829,214
Dividends (net of $161,496 foreign withholding tax) 2,070,953
------------
Total income 5,900,167
------------
---------------------------------------------------------------------------------------------
Expenses:
Investment advisory fees $ 1,457,860
Custodian fees 95,113
Accounting services 42,245
Professional fees 27,328
Trustees' fees and expenses 14,273
Pricing fees 3,050
Offering costs 2,556
Other 4,117
------------
Total expenses 1,646,542
------------
Investment income--net 4,253,625
------------
---------------------------------------------------------------------------------------------
Realized & Unrealized Gain (Loss) on Investments
& Foreign Currency Transactions--Net:
Realized gain from:
Investments--net 16,312,946
Foreign currency transactions--net 4,899,440 21,212,386
------------
Change in unrealized appreciation on:
Investments--net (21,615,695)
Foreign currency transactions--net (746,496) (22,362,191)
-----------------------------
Net Increase in Net Assets Resulting from Operations $ 3,103,820
============
---------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
May 31, 2000 (32) Mercury Global Balanced Fund
<PAGE>
STATEMENTS OF CHANGES
IN NET ASSETS
MERCURY MASTER GLOBAL BALANCED PORTFOLIO
================================================================================
<TABLE>
<CAPTION>
For the Six For the Period
Months Ended April 30, 1999+
Increase (Decrease) in Net Assets: May 31, 2000 to Nov. 30, 1999
-------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Investment income--net $ 4,253,625 $ 5,519,600
Realized gain (loss) on investments and foreign currency
transactions--net 21,212,386 (6,493,185)
Change in unrealized appreciation on investments and foreign
currency transactions--net (22,362,191) 38,186,754
--------------------------------
Net increase in net assets resulting from operations 3,103,820 37,213,169
--------------------------------
-------------------------------------------------------------------------------------------------
Net Capital Contributions:
Increase (decrease) in net assets derived from
capital contributions (21,954,977) 443,438,847
--------------------------------
-------------------------------------------------------------------------------------------------
Net Assets:
Total increase (decrease) in net assets (18,851,157) 480,652,016
Beginning of period 480,752,116 100,100
--------------------------------
End of period $ 461,900,959 $ 480,752,116
================================
-------------------------------------------------------------------------------------------------
</TABLE>
+ Commencement of operations.
See Notes to Financial Statements.
May 31, 2000 (33) Mercury Global Balanced Fund
<PAGE>
FINANCIAL HIGHLIGHTS
MERCURY MASTER GLOBAL BALANCED PORTFOLIO
================================================================================
The following ratios have been derived from information provided in the
financial statements.
For the Six For the Period
Months Ended April 30, 1999+
May 31, 2000 to Nov. 30, 1999
--------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses .68%* .70%*
==============================
Investment income--net 1.75%* 2.10%*
==============================
--------------------------------------------------------------------------------
Supplemental Data:
Net assets, end of period (in thousands) $ 461,901 $ 480,752
==============================
Portfolio turnover 54.45% 71.04%
==============================
--------------------------------------------------------------------------------
* Annualized.
+ Commencement of operations.
See Notes to Financial Statements.
May 31, 2000 (34) Mercury Global Balanced Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
MERCURY MASTER GLOBAL BALANCED PORTFOLIO
================================================================================
(1) Significant Accounting Policies:
Mercury Master Global Balanced 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 Portfolio's financial statements are prepared
in accordance with accounting principles generally accepted in the United
States of America, which may require the use of management accruals and
estimates. These unaudited financial statements reflect all adjustments,
which are, in the opinion of management, necessary to a fair statement of
the results for the interim period presented. All such adjustments are of
a normal recurring nature. The 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 increase or decrease the level
of risk to which the Portfolio is exposed more quickly and efficiently
than transactions in other types of instruments. 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
May 31, 2000 (35) Mercury Global Balanced Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
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 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 Portfolio's records. However, the effect on operations is
recorded from the date the Portfolio enters into such 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
May 31, 2000 (36) Mercury Global Balanced Fund
<PAGE>
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.
(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.
(f) Custodian bank -- The Portfolio recorded an amount payable to the
custodian bank reflecting an overdraft that resulted from a timing
difference of security transaction settlements.
(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 Portfolio's
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
.60% of the average daily value of the Portfolio's net assets. The Trust
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.
For the six months ended May 31, 2000, the Portfolio paid Merrill Lynch
Security Pricing Service, an affiliate of MLPF&S, $536 for security price
quotations to compute the net asset value of the Fund.
In addition, MLPF&S received $13,193 in commissions on the execution of
Portfolio security transactions for the Portfolio for the six months ended
May 31, 2000.
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 Asset Management Funds, Inc., Mercury International,
FAM, PSI, and/or ML & Co.
May 31, 2000 (37) Mercury Global Balanced Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(CONCLUDED)
(3) Investments:
Purchases and sales of investments, excluding short-term securities, for
the six months ended May 31, 2000 were $249,434,381 and $286,475,897,
respectively.
Net realized gains (losses) for the six months ended May 31, 2000 and net
unrealized gains (losses) as of May 31, 2000 were as follows:
Realized Unrealized
Gains (Losses) Gains (Losses)
--------------------------------------------------------------------------
Investments:
Long-term $ 16,313,964 $ 12,327,729
Short-term (1,018) 17,211
------------------------------
Total investments 16,312,946 12,344,940
------------------------------
Currency transactions:
Forward foreign exchange contracts 974,430 3,613,456
Foreign currency transactions 3,925,010 (133,833)
------------------------------
Total currency transactions 4,899,440 3,479,623
------------------------------
Total $ 21,212,386 $ 15,824,563
==============================
--------------------------------------------------------------------------
As of May 31, 2000, net unrealized appreciation for Federal income tax
purposes aggregated $12,344,940, of which $43,303,823 related to
appreciated securities and $30,958,883 related to depreciated securities.
At May 31, 2000, the aggregate cost of investments for Federal income tax
purposes was $430,096,801.
(4) Commitments:
At May 31, 2000, the Portfolio had entered into foreign exchange
contracts, in addition to the contracts listed in the Schedule of
Investments, under which it had agreed to purchase and sell various
foreign currencies with approximate values of $7,965,000 and $7,711,000,
respectively.
(5) Capital Loss Carryforward:
At November 30, 1999, the Portfolio had a net capital loss carryforward of
approximately $4,188,000, all of which expires in 2007. This amount will
be available to offset like amounts of any future taxable gains.
May 31, 2000 (38) Mercury Global Balanced Fund
<PAGE>
PORTFOLIO INFORMATION
WORLDWIDE INVESTMENTS AS OF MAY 31, 2000
================================================================================
Ten Largest Percent of
Equity Holdings Net Assets
--------------------------------------------------------------------------------
General Electric Company 2.0%
--------------------------------------------------------------------------------
Vodafone AirTouch PLC 1.3
--------------------------------------------------------------------------------
Nokia Oyj 1.2
--------------------------------------------------------------------------------
Exxon Mobil Corporation 1.2
--------------------------------------------------------------------------------
American International Group, Inc. 1.0
--------------------------------------------------------------------------------
Citigroup Inc. 1.0
--------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 0.9
--------------------------------------------------------------------------------
PepsiCo, Inc. 0.9
--------------------------------------------------------------------------------
Royal Dutch Petroleum Company 0.9
--------------------------------------------------------------------------------
Walgreen Co. 0.9
--------------------------------------------------------------------------------
Ten Largest Percent of
Fixed-Income Holdings Net Assets
--------------------------------------------------------------------------------
Bundesrepublic Deutschland,
6% due 7/04/2007 2.9%
--------------------------------------------------------------------------------
International Bank Reconstruction
& Development, 2% due 2/18/2008 2.3
--------------------------------------------------------------------------------
Bundesobligation,
5% due 8/20/2001 2.1
--------------------------------------------------------------------------------
Bundesobligation,
3.25% due 2/17/2004 2.1
--------------------------------------------------------------------------------
French Btan,
4.50% due 7/12/2002 2.1
--------------------------------------------------------------------------------
US Treasury Notes, 6.50%
due 2/15/2010 1.7
--------------------------------------------------------------------------------
Bundesobligation, 4.25% due
11/26/2004 1.7
--------------------------------------------------------------------------------
US Treasury Bonds, 8% due
11/15/2021 1.6
--------------------------------------------------------------------------------
Federal Home Loan Management
Corporation, 5% due 1/15/2004 1.5
--------------------------------------------------------------------------------
Federal National Mortgage
Association, 5.25% due 1/15/2009 1.5
--------------------------------------------------------------------------------
Ten Largest Industries Percent of
(Equity Investments) Net Assets
--------------------------------------------------------------------------------
Pharmaceuticals 5.1%
--------------------------------------------------------------------------------
Diversified Telecommunication
Services 4.7
--------------------------------------------------------------------------------
Communications Equipment 4.3
--------------------------------------------------------------------------------
Oil & Gas 4.2
--------------------------------------------------------------------------------
Banks 4.0
--------------------------------------------------------------------------------
Diversified Financials 3.0
--------------------------------------------------------------------------------
Industrial Conglomerates 2.8
--------------------------------------------------------------------------------
Insurance 2.5
--------------------------------------------------------------------------------
Semiconductor Equipment & Products 2.4
--------------------------------------------------------------------------------
Wireless Telecommunication Services 2.1
--------------------------------------------------------------------------------
Percent of
Asset Mix Net Assets
--------------------------------------------------------------------------------
Common Stock 58.7%
--------------------------------------------------------------------------------
Fixed-Income Securities 31.4
--------------------------------------------------------------------------------
Cash & Cash Equivalents 9.9
--------------------------------------------------------------------------------
Total 100.0%
--------------------------------------------------------------------------------
Country Percent of
Representation Net Assets
--------------------------------------------------------------------------------
United States 38.0%
--------------------------------------------------------------------------------
Germany 14.9
--------------------------------------------------------------------------------
Japan 10.6
--------------------------------------------------------------------------------
United Kingdom 9.5
--------------------------------------------------------------------------------
France 6.4
--------------------------------------------------------------------------------
Netherlands 2.5
--------------------------------------------------------------------------------
Finland 1.4
--------------------------------------------------------------------------------
Canada 1.4
--------------------------------------------------------------------------------
Switzerland 1.1
--------------------------------------------------------------------------------
Sweden 1.1
--------------------------------------------------------------------------------
Australia 1.0
--------------------------------------------------------------------------------
Spain 0.7
--------------------------------------------------------------------------------
Hong Kong 0.7
--------------------------------------------------------------------------------
Singapore 0.3
--------------------------------------------------------------------------------
Italy 0.3
--------------------------------------------------------------------------------
Belgium 0.2
--------------------------------------------------------------------------------
May 31, 2000 (39) Mercury Global Balanced Fund
<PAGE>
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
and 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
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.
The Fund seeks long-term capital growth and current income. The Fund will seek
to achieve its objective by investing all of its assets in Mercury Master Global
Balanced Portfolio of Mercury Asset Management Master Trust, which has the same
investment objective as the Fund. The Portfolio is managed in two segments, an
equity segment and a bond segment. The Portfolio invests in a mix of stocks and
high-quality bonds of issuers located in the United States and other developed
countries. The Portfolio's neutral position consists of approximately 60%
invested in stocks and 40% in bonds, although the Portfolio may vary each of
these percentages up to 15% in either direction based on current economic and
market conditions. The Fund's investment experience will correspond to the
investment experience of the Portfolio.
Mercury Global Balanced Fund of
Mercury Asset Management Funds, Inc.
Box 9011
Princeton, NJ
08543-9011
[RECYCLE LOGO] Printed on post-consumer recycled paper MERCBAL--5/00
