SEMI-ANNUAL REPORT
NOVEMBER 30, 1999
Mercury
U.S. Large Cap
Fund
OF MERCURY ASSET
MANAGEMENT FUNDS, INC.
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 through investments
primarily in a diversified portfolio of equity securities of large
cap companies located in the United States that Fund management
believes are undervalued or have good prospects for earnings growth.
The Fund will seek to achieve its objective by investing all of its
assets in Mercury Master U.S. Large Cap Portfolio of Mercury Asset
Management Master Trust, which has the same investment objective as
the Fund. The Fund's investment experience will correspond to the
investment experience of the Portfolio.
Mercury U.S. Large Cap Fund of
Mercury Asset Management Funds, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MERCURY MASTER U.S. LARGE CAP PORTFOLIO
SECTOR REPRESENTATION
As a Percentage of Net Assets as of November 30, 1999
A pie chart depicting portfolio composition according
to sector representation of equities and fixed-income
securities for the quarter ended November 30, 1999.
Basic Industry 0.9%
Technology 25.0%
Finance 13.0%
Communications 14.6%
Consumer Cyclical 10.3%
Capital Goods 9.9%
Healthcare 9.2%
Energy/Natural Resources 7.2%
Consumer Staples 8.0%
Cash and Cash Equivalents 1.9%
INVESTMENTS AS OF NOVEMBER 30, 1999
Percent of
Ten Largest Holdings Net Assets
General Electric Company 5.6%
Microsoft Corporation 4.0
Cisco Systems, Inc. 3.8
America Online, Inc. 3.0
Wal-Mart Stores, Inc. 2.9
The Procter & Gamble Company 2.8
American International Group, Inc. 2.8
JDS Uniphase Corporation 2.8
Texas Instruments Incorporated 2.7
Bell Atlantic Corporation 2.6
Percent of
Ten Largest Industries Net Assets
Computer & Office Equipment 16.1%
Telephones 14.6
Electronics 8.9
Pharmaceuticals 8.6
Electrical Equipment 7.7
Retailing 7.4
Regional Banks 6.4
International Oil 4.7
Household Products 4.0
Finance Companies 3.8
November 30, 1999 2 Mercury U.S. Large Cap Fund
DEAR SHAREHOLDER
We are pleased to provide you with this semi-annual report to
shareholders for Mercury U.S. Large Cap Fund. For the three months
ended November 30, 1999, the Fund's Class I, Class A, Class B and
Class C Shares had total returns of +11.66%, +11.68%, +11.33% and
+11.33%, respectively. This compares with the total return of +5.52%
for the unmanaged Standard & Poor's (S&P) 500 Index for the same
three-month period. (Investment 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.)
Investment Environment
After the Federal Reserve Board raised interest rates in mid-August
by 0.25% to 5.25%, investors were concerned that the Federal Reserve
Board would raise interest rates again at its October meeting. This
investor nervousness pushed up the yield on 30-year Treasury bonds
to 6.12%. However, an expected October interest rate increase did
not materialize, and at the end of October the market was boosted by
a third quarter gross domestic product growth rate of 5.7%, combined
with the employment cost index up only 0.8% for the quarter and 3.1%
from a year ago. The 30-year Treasury bond rallied, and pushed down
the yield to 6.257%.
The Federal Reserve Board meeting on November 16, 1999 resulted in
an increase in interest rates of 0.25% to 5.50%, although the
Federal Reserve Board announced its move to a neutral stance. The
upward yield curve move during the second half of the month was
supported by a spike in oil prices to over $25 per barrel because of
the withdrawal of Iraqi exports.
The bond market saw yields on the 30-year bond trading between a low
of 5.972% and a high of 6.382%, closing the November quarter at
6.29%. Despite investor nervousness, the technology-rich National
Association of Securities Dealers Automated Quotations (NASDAQ)
showed strong performance, up 12.5% in November.
Market Review
During the three months ended November 30, 1999, the market
outperformers were telecommunications and technology, which rallied
toward the end of the period. During the same period, the unmanaged
S&P 500 Index was up 5.2% and the unmanaged Russell 2000 Index was
up 6.1%. In addition, the S&P Mid Cap Index was up 6.9% after
underperforming over the summer. The outperformance of large-
capitalization technology stocks was highlighted by the 23.4%
increase over the same period in the technology-oriented NASDAQ 100,
while the broader NASDAQ Composite Index increased by 21.8%.
Third quarter 1999 results were above expectations. The greatest
positive surprises were the energy and communications sectors. Out
of the flagship stocks, Microsoft Corporation showed strong growth
with an upbeat outlook, International Business Machines Corporation
was cautious on mainframes, and Intel Corporation's margin was
light. The inclusion of Microsoft and SBC Communications Inc. in the
Dow Jones Industrials Index was long overdue, in our view.
November 30, 1999 3 Mercury U.S. Large Cap Fund
Technology was the top performer after a strong start to the
November quarter by the gold and financial sectors, but that
outperformance was short-lived. Gold was boosted by the moratorium
on new sales and restrictions on leasing announced by the European
Central Banks. The financial sector was boosted by legislation that
repealed the Glass-Steagall Act of 1933, which should allow banks,
brokers and insurers to enter each other's markets. In November,
technology was strong, particularly network software, on the back of
strong mutual fund inflows and expectations of a strong first
quarter in 2000. The inclusion of Yahoo Inc. in the S&P 500 Index at
the end of the month represents the second Internet stock after
America Online, Inc. We expect the first calendar quarter of 2000 to
be strong as many companies release expenditures frozen in response
to concerns surrounding the arrival of the Year 2000.
The market breadth was contracting through the period, and cyclical
stocks (particularly the office equipment and suppliers sectors)
were under pressure. The tobacco sector was dragged down by a
Florida ruling in favor of class actions. The aerospace/ defense
industry, particularly Lockheed Martin Corporation, was hit by poor
results. Health maintenance organizations dropped 30% in response to
a class action related to fiduciary duty. After the rush of
corporate activity over the summer, there were fewer announcements
on the transaction front.
Portfolio Activity
Over the quarter, we reduced our overweighting in retail with sales
of Staples, Inc. and CVS Corporation, and increased our
telecommunications overweight with additions to holdings of Bell
Atlantic Corporation and Global Crossing Ltd.
In the financial sector, we sold Bank One Corporation and purchased
Citigroup, and in technology we reduced our position in Microsoft
Corporation and bought more shares of Cisco Systems, Inc. and
America Online, Inc. On the buy side, we purchased shares of Citrix
Systems, Inc. and Conoco Inc. Other notable activity included
reducing our holding of Tyco International Ltd.
Investment Outlook
Third quarter results were positive for the technology sector with
Microsoft Corporation and Cisco Systems, Inc. showing impressive
revenue growth rates. There is still room for multiple expansion on
selective technology stocks given the creation of new markets,
including the network stocks that supply the infrastructure for the
data revolution. The telecommunications sector is also a beneficiary
of the Internet and is likely to benefit from operational leverage.
November 30, 1999 4 Mercury U.S. Large Cap Fund
We expect domestic consumer spending to be sustainable in 2000 but
we remain underweighted in the consumer staples sector because of
price competition. Similarly, we are skeptical of the value in the
financial area given the excess capital in the sector and the
backdrop of increasing interest rates. In the energy sector, we
prefer companies that we believe will benefit from relative earnings
per share (EPS) momentum in 2000. The market is likely to broaden in
2000 although the equity investors are willing to reward companies
that have consistently high EPS growth rates with handsome
multiples.
Investors are cautious about the interest rate outlook. We believe
this is justified given a revised third quarter of 1999 GDP growth
rate of 5.7%. The bond market is likely to remain volatile, in our
view. Currently, the Federal Reserve Board has adopted a neutral
outlook. Believers in long-term, low inflation highlight the
productivity benefits of software and the cost savings from the
Internet.
In Conclusion
We thank you for your investment in Mercury U.S. Large Cap Fund, and
we look forward to serving your investment needs in the months and
years ahead.
Sincerely,
(Jeffrey Peek)
Jeffrey Peek
President
(Michael Morony)
Michael Morony
Portfolio Manager
January 11, 2000
To reduce shareholders' expenses, Mercury U.S. Large Cap Fund will
no longer be printing and mailing quarterly reports to shareholders.
We will continue to provide you with reports on a semi-annual and
annual basis.
November 30, 1999 5 Mercury U.S. Large Cap Fund
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*
3 Month Since Inception
As of November 30, 1999 Total Return Total Return
Class I +11.66% +14.00%
Class A +11.68 +13.80
Class B +11.33 +13.00
Class C +11.33 +13.00
[FN]
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included. Total
investment returns are based on changes in the Fund's net asset
values for the periods shown, and assume reinvestment of all
dividends and capital gains at net asset value on the ex-dividend
date. The Fund commenced operations on 1/29/99.
November 30, 1999 6 Mercury U.S. Large Cap Fund
FUND PERFORMANCE DATA (CONCLUDED)
AGGREGATE TOTAL RETURN
% Return % Return
Without Sales With Sales
Class I Shares* Charge Charge**
Inception (1/29/99)
through 9/30/99 +1.40% -3.92%
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without With
Class B Shares* CDSC CDSC**
Inception (1/29/99)
through 9/30/99 +0.70% -3.30%
[FN]
*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 Sales With Sales
Class A Shares* Charge Charge**
Inception (1/29/99)
through 9/30/99 +1.30% -4.02%
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without With
Class C Shares* CDSC CDSC**
Inception (1/29/99)
through 9/30/99 +0.70% -0.30%
[FN]
*Maximum contingent deferred sales charge
is 1% and is reduced to 0% after 1 year.
**Assuming payment of applicable contingent
deferred sales charge.
November 30, 1999 7 Mercury U.S. Large Cap Fund
<TABLE>
STATEMENT OF ASSETS AND
LIABILITIES
<CAPTION>
As of November 30, 1999
MERCURY U.S. LARGE CAP FUND
<S> <C>
Assets:
Investment in Mercury Master U.S. Large Cap Portfolio, at value (identified
cost--$907,591,961) $1,044,801,064
Prepaid registration fees and other assets 228,428
--------------
Total assets 1,045,029,492
--------------
Liabilities:
Payable to distributor 725,375
Payable to administrator 17,588
Accrued expenses and other liabilities 453,632
--------------
Total liabilities 1,196,595
--------------
Net Assets:
Net assets $1,043,832,897
==============
Net Assets Consist of:
Class I Shares of Common Stock, $.0001 par value, 100,000,000
shares authorized $ 1,058
Class A Shares of Common Stock, $.0001 par value, 100,000,000
shares authorized 1,092
Class B Shares of Common Stock, $.0001 par value, 100,000,000
shares authorized 4,660
Class C Shares of Common Stock, $.0001 par value, 100,000,000
shares authorized 2,408
Paid-in capital in excess of par 922,329,256
Accumulated investment loss--net (3,126,335)
Accumulated realized capital losses on investments from the Portfolio--net (12,588,345)
Unrealized appreciation on investments from the Portfolio--net 137,209,103
--------------
Net assets $1,043,832,897
==============
Net Asset Value:
Class I--Based on net assets of $120,616,097 and 10,577,946 shares
outstanding $ 11.40
==============
Class A--Based on net assets of $124,278,048 and 10,923,387 shares
outstanding $ 11.38
==============
Class B--Based on net assets of $526,743,112 and 46,595,764 shares
outstanding $ 11.30
==============
Class C--Based on net assets of $272,195,640 and 24,079,167 shares
outstanding $ 11.30
==============
See Notes to Financial Statements.
</TABLE>
November 30, 1999 8 Mercury U.S. Large Cap Fund
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Six Months Ended November 30, 1999
MERCURY U.S. LARGE CAP FUND
<S> <C> <C>
Investment Income:
Investment income allocated from the Portfolio $ 4,922,399
Expenses allocated from the Portfolio (2,645,862)
--------------
Net investment income from the Portfolio 2,276,537
==============
Expenses:
Account maintenance and distribution fees--Class B $ 2,498,896
Account maintenance and distribution fees--Class C 1,290,009
Administration fee 746,576
Transfer agent fees--Class B 270,209
Account maintenance fees--Class A 155,508
Transfer agent fees--Class C 145,383
Printing and shareholder reports 61,686
Registration fees 57,243
Transfer agent fees--Class A 56,152
Transfer agent fees--Class I 51,029
Offering costs 42,540
Professional fees 15,343
Accounting services 9,531
Other 2,767
--------------
Total expenses 5,402,872
--------------
Investment loss--net (3,126,335)
--------------
Realized & Unrealized Gain (Loss) from the Portfolio--Net:
Realized loss from the Portfolio on investments--net (11,262,062)
Change in unrealized appreciation/depreciation on investments
from the Portfolio--net 148,229,215
--------------
Net realized and unrealized gain on investments from the
Portfolio 136,967,153
--------------
Net Increase in Net Assets Resulting from Operations $ 133,840,818
==============
See Notes to Financial Statements.
</TABLE>
November 30, 1999 9 Mercury U.S. Large Cap Fund
<TABLE>
STATEMENTS OF CHANGES
IN NET ASSETS
<CAPTION>
MERCURY U.S. LARGE CAP FUND
For the Six For the Period
Months Ended January 29, 1999++
November 30, to May 31,
Increase (Decrease) in Net Assets: 1999 1999
<S> <C> <C>
Operations:
Investment loss--net $ (3,126,335) $ (1,733,591)
Realized loss on investments from the Portfolio--net (11,262,062) (1,326,283)
Change in unrealized appreciation/depreciation on
investments from the Portfolio--net 148,229,215 (11,020,112)
-------------------------------
Net increase (decrease) in net assets resulting from
operations 133,840,818 (14,079,986)
-------------------------------
Capital Share Transactions:
Net increase (decrease) in net assets derived from capital
share transactions (12,783,128) 936,755,193
-------------------------------
Net Assets:
Total increase in net assets 121,057,690 922,675,207
Beginning of period 922,775,207 100,000
-------------------------------
End of period $1,043,832,897 $ 922,775,207
===============================
<FN>
++Commencement of operations.
See Notes to Financial Statements.
</TABLE>
November 30, 1999 10 Mercury U.S. Large Cap Fund
FINANCIAL HIGHLIGHTS
<TABLE>
MERCURY U.S. LARGE CAP FUND
<CAPTION>
The following per share data and ratios have been derived from
information provided in the financial statements.
Class I Class A
For the For the For the For the
Six Period Six Period
Months Jan. 29, Months Jan. 29,
Ended 1999++ to Ended 1999++ to
Nov. 30, May 31, Nov. 30, May 31,
Increase (Decrease) in Net Asset Value: 1999++++++ 1999 1999++++++ 1999
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 9.91 $ 10.00 $ 9.90 $ 10.00
-----------------------------------------------------
Investment income (loss)--net .01 --+++++ --+++++ --+++++
Realized and unrealized gain (loss) on
investments from the Portfolio--net 1.48 (.09) 1.48 (.10)
-----------------------------------------------------
Total from investment operations 1.49 (.09) 1.48 (.10)
-----------------------------------------------------
Net asset value, end of period $ 11.40 $ 9.91 $ 11.38 $ 9.90
=====================================================
Total Investment Return:**
Based on net asset value per share 15.04%+++ (.90%)+++ 14.95%+++ (1.00%)+++
=====================================================
Ratios to Average Net Assets:
Expenses++++ .81%* .94%* 1.06%* 1.19%*
=====================================================
Investment income (loss)--net .18%* .28%* (.07%)* (.04%)*
=====================================================
Supplemental Data:
Net assets, end of period (in thousands) $120,616 $103,709 $124,278 $121,826
=====================================================
<FN>
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Commencement of operations.
++++Includes the Fund's share of the Portfolio's allocated expenses.
++++++Based on average shares outstanding.
+++Aggregate total investment return.
+++++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
November 30, 1999 11 Mercury U.S. Large Cap Fund
FINANCIAL HIGHLIGHTS (CONCLUDED)
<TABLE>
MERCURY U.S. LARGE CAP FUND
<CAPTION>
The following per share data and ratios have been derived from
information provided in the financial statements.
Class B Class C
For the For the For the For the
Six Period Six Period
Months Jan. 29, Months Jan. 29,
Ended 1999++ to Ended 1999++ to
Nov. 30, May 31, Nov. 30, May 31,
Increase (Decrease) in Net Asset Value: 1999+++++ 1999 1999+++++ 1999
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 9.88 $ 10.00 $ 9.88 $ 10.00
-----------------------------------------------------
Investment loss--net (.04) (.03) (.04) (.02)
Realized and unrealized gain (loss) on
investments from the Portfolio--net 1.46 (.09) 1.46 (.10)
-----------------------------------------------------
Total from investment operations 1.42 (.12) 1.42 (.12)
-----------------------------------------------------
Net asset value, end of period $ 11.30 $ 9.88 $ 11.30 $ 9.88
=====================================================
Total Investment Return:**
Based on net asset value per share 14.37%+++ (1.20%)+++ 14.37%+++ (1.20%)+++
=====================================================
Ratios to Average Net Assets:
Expenses++++ 1.82%* 1.96%* 1.83%* 1.96%*
=====================================================
Investment loss--net (.84%)* (.82%)* (.84%)* (.82%)*
=====================================================
Supplemental Data:
Net assets, end of period (in thousands) $526,743 $460,464 $272,196 $236,776
=====================================================
<FN>
*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.
</TABLE>
November 30, 1999 12 Mercury U.S. Large Cap Fund
NOTES TO FINANCIAL STATEMENTS
Mercury U.S. LARGE CAP FUND
1 Significant Accounting Policies:
Mercury U.S. Large Cap Fund (the "Fund") is a part of Mercury Asset
Management Funds, Inc. (the "Corporation"). The Fund is registered
under the Investment Company Act of 1940 as a diversified, open-end
management investment company. The Fund seeks to achieve its
investment objective by investing all of its assets in the Mercury
Master U.S. Large Cap 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. The Fund's
financial statements are prepared in accordance with generally
accepted accounting principles, which may require the use of
management accruals and estimates. These unaudited financial
statements reflect all adjustments, which are, in the opinion of
management, necessary to a fair statement of the results for the
interim period presented. All such adjustments are of a normal
recurring nature. The Fund offers four classes of shares. Class I
and Class A Shares are sold with a front-end sales charge. Class B
and Class C Shares may be subject to a contingent deferred sales
charge. All classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions,
except that Class A, Class B and Class C Shares bear certain
expenses related to the account maintenance of such shares, and
Class B and Class C Shares also bear certain expenses related to the
distribution of such shares. Each class has exclusive voting rights
with respect to matters relating to its account maintenance and
distribution expenditures (except that Class B Shares have certain
voting rights with respect to Class A distribution expenditures).
The following is a summary of significant accounting policies
followed by the Fund.
(a) Valuation of investments--Valuation of securities is discussed
in Note 1a of the 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 generally accepted accounting principles.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to shareholders. Therefore, no Federal income tax
provision is required. Under the applicable foreign tax law,
withholding taxes may be imposed on interest, dividends and capital
gains at various rates.
(d) Prepaid registration fees--Prepaid registration fees are charged
to expenses as the related shares are issued.
November 30, 1999 13 Mercury U.S. Large Cap Fund
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
(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 .15% 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
Maintenance Fee Distribution 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.
For the six months ended November 30, 1999, MFD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of the
Fund's Class I and Class A Shares as follows:
MFD MLPF&S
Class I $ 50 $ 954
Class A $11,456 $186,059
November 30, 1999 14 Mercury U.S. Large Cap Fund
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
For the six months ended November 30, 1999, MLPF&S received
contingent deferred sales charges of $936,086 and $183,399 relating
to transactions in Class B and Class C Shares, respectively.
Furthermore, MLPF&S received contingent deferred sales charges of
$31,769 relating to transactions subject to front-end sales charge
waivers in Class A Shares.
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 Asset Management
International Ltd. ("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 November 30, 1999 were $20,522,184 and
$38,764,850, respectively.
4 Capital Share Transactions:
Net increase (decrease) in net assets derived from capital share
transactions was $(12,783,128) and $936,755,193 for the six months
ended November 30, 1999 and for the period January 29, 1999 to May
31, 1999, respectively.
Transactions in capital shares for each class were as follows:
Class I Shares for the Six Months
Ended November 30, 1999 Shares Dollar Amount
Shares sold 1,323,786 $13,939,598
Shares redeemed (1,207,527) (12,707,079)
-------------------------------
Net increase 116,259 $ 1,232,519
===============================
Class I Shares for the Period January 29, 1999++
to May 31, 1999 Shares Dollar Amount
Shares sold 11,040,475 $112,204,404
Shares redeemed (581,288) (5,951,042)
-------------------------------
Net increase 10,459,187 $106,253,362
===============================
[FN]
++Prior to January 29, 1999 (commencement of operations), the Fund
issued 2,500 shares to Mercury International for $25,000.
Class A Shares for the Six Months
Ended November 30, 1999 Shares Dollar Amount
Shares sold 1,164,778 $ 12,107,059
Automatic conversion of shares 64 703
-------------------------------
Total issued 1,164,842 12,107,762
Shares redeemed (2,542,454) (26,631,292)
-------------------------------
Net decrease (1,377,612) $(14,523,530)
===============================
November 30, 1999 15 Mercury U.S. Large Cap Fund
NOTES TO FINANCIAL STATEMENTS
(CONCLUDED)
Class A Shares for the Period January 29, 1999++
to May 31, 1999 SharesDollar Amount
Shares sold 13,021,908 $130,676,870
Shares redeemed (723,409) (7,288,570)
-------------------------------
Net increase 12,298,499 $123,388,300
===============================
[FN]
++Prior to January 29, 1999 (commencement of operations), the Fund
issued 2,500 shares to Mercury International for $25,000.
Class B Shares for the Six Months
Ended November 30, 1999 Shares Dollar Amount
Shares sold 3,009,599 $ 31,384,303
Automatic conversion of shares (64) (703)
Shares redeemed (3,024,157) (31,809,251)
-------------------------------
Net decrease (14,622) $ (425,651)
===============================
Class B Shares for the Period January 29, 1999++
to May 31, 1999 Shares Dollar Amount
Shares sold 48,075,512 $481,578,245
Shares redeemed (1,467,626) (14,818,009)
-------------------------------
Net increase 46,607,886 $466,760,236
===============================
[FN]
++Prior to January 29, 1999 (commencement of operations), the Fund
issued 2,500 shares to Mercury International for $25,000.
Class C Shares for the Six Months
Ended November 30, 1999 Shares Dollar Amount
Shares sold 2,229,670 $ 23,221,120
Shares redeemed (2,118,352) (22,287,586)
-------------------------------
Net increase 111,318 $ 933,534
===============================
Class C Shares for the Period January 29, 1999++
to May 31, 1999 Shares Dollar Amount
Shares sold 24,968,499 $250,490,253
Shares redeemed (1,003,150) (10,136,958)
-------------------------------
Net increase 23,965,349 $240,353,295
===============================
[FN]
++Prior to January 29, 1999 (commencement of operations), the Fund
issued 2,500 shares to Mercury International for $25,000.
November 30, 1999 16 Mercury U.S. Large Cap Fund
SCHEDULE OF INVESTMENTS
<TABLE>
MERCURY MASTER U.S. LARGE CAP PORTFOLIO
<CAPTION>
In US Dollars
Shares Percent of
Industries Held Common Stocks Value Net Assets
<S> <C> <S> <C> <C>
Aerospace 406,700 United Technologies Corporation $ 22,978,550 2.2%
Autos & Auto 168,500 Ford Motor Company 8,509,250 0.8
Related
Beverages 442,600 PepsiCo, Inc. 15,297,362 1.5
Computer & 424,900 ++America Online, Inc. 30,884,919 3.0
Office 131,600 ++BMC Software, Inc. 9,582,125 0.9
Equipment 451,500 ++Cisco Systems, Inc. 40,239,938 3.8
145,500 ++Citrix Systems, Inc. 13,831,594 1.3
379,200 ++Dell Computer Corporation 16,305,600 1.6
188,030 ++EMC Corporation 15,712,257 1.5
456,300 ++Microsoft Corporation 41,523,300 4.0
----------------------------
168,079,733 16.1
Cosmetics & 202,600 The Estee Lauder Companies Inc.
Toiletries (Class A) 8,547,187 0.8
Domestic Oil 372,600 Conoco Inc. (Class B) 9,757,463 0.9
264,500 Texaco Inc. 16,117,969 1.6
25,875,432 2.5
Electrical 450,100 General Electric Company 58,513,000 5.6
Equipment 99,800 Honeywell Inc. 11,171,362 1.1
259,100 Tyco International Ltd. 10,380,194 1.0
----------------------------
80,064,556 7.7
Electronics 222,800 Intel Corporation 17,072,050 1.6
127,700 ++JDS Uniphase Corporation 29,203,394 2.8
66,500 ++Sun Microsystems, Inc. 8,790,469 0.9
149,100 ++Tellabs, Inc. 9,663,544 0.9
295,200 Texas Instruments Incorporated 28,357,650 2.7
----------------------------
93,087,107 8.9
Finance 140,300 American Express Company 21,229,144 2.0
Companies 61,000 Providian Financial Corporation 4,826,625 0.5
389,500 U.S. Bancorp 13,316,031 1.3
39,371,800 3.8
November 30, 1999 17 Mercury U.S. Large Cap Fund
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (CONTINUED)
<CAPTION>
In US Dollars
Shares Percent of
Industries Held Common Stocks Value Net Assets
<S> <C> <S> <C> <C>
Food 509,000 ++The Kroger Co. $ 10,848,062 1.0%
197,900 ++Safeway Inc. 7,297,562 0.7
----------------------------
18,145,624 1.7
Forest 147,400 Weyerhaeuser Company 9,028,250 0.9
Products
Household 436,100 The Dial Corporation 12,238,056 1.2
Products 277,100 The Procter & Gamble Company 29,926,800 2.8
----------------------------
42,164,856 4.0
Insurance 283,975 American International Group, Inc. 29,320,419 2.8
International 274,100 ++Exxon Corporation 21,739,556 2.1
Oil 260,300 Mobil Corporation 27,152,544 2.6
----------------------------
48,892,100 4.7
Media 440,900 ++Infinity Broadcasting Corporation
(Class A) 16,065,294 1.5
218,300 The Walt Disney Company 6,085,112 0.6
----------------------------
22,150,406 2.1
Medical 112,200 Cardinal Health, Inc. 5,869,463 0.6
Services
Pharmaceu- 314,500 Bristol-Myers Squibb Company 22,978,156 2.2
ticals 321,000 Merck & Co., Inc. 25,198,500 2.4
336,800 Pfizer Inc. 12,187,950 1.2
215,200 Schering-Plough Corporation 11,002,100 1.0
211,400 Warner-Lambert Company 18,959,938 1.8
----------------------------
90,326,644 8.6
Regional 157,800 Bank of America Corporation 9,231,300 0.9
Banks 503,000 Citigroup Inc. 27,099,125 2.6
317,500 FleetBoston Financial Corporation 12,005,469 1.1
513,400 Mellon Financial Corporation 18,707,012 1.8
----------------------------
67,042,906 6.4
Retailing 241,700 The Home Depot, Inc. 19,109,406 1.8
187,700 ++Kohl's Corporation 13,549,594 1.3
520,860 Wal-Mart Stores, Inc. 30,014,557 2.9
500,500 Walgreen Co. 14,577,063 1.4
77,250,620 7.4
</TABLE>
November 30, 1999 18 Mercury U.S. Large Cap Fund
<TABLE>
SCHEDULE OF INVESTMENTS (CONCLUDED)
<CAPTION>
In US Dollars
Shares Percent of
Industries Held Common Stocks Value Net Assets
<S> <C> <S> <C> <C>
Telephones 230,750 AT&T Corp. $ 12,893,156 1.2%
434,800 Bell Atlantic Corporation 27,528,275 2.6
326,504 ++Global Crossing Ltd. 14,202,924 1.4
211,700 ++MCI WorldCom Inc. 17,504,944 1.7
157,900 ++Nextel Communications, Inc. (Class A) 15,651,837 1.5
240,600 SBC Communications Inc. 12,496,162 1.2
372,000 Sprint Corp. (FON Group) 25,807,500 2.5
290,400 ++Sprint Corp. (PCS Group) 26,644,200 2.5
----------------------------
152,728,998 14.6
Total Investments
(Cost--$887,522,146) 1,024,731,263 98.1
Time Deposit* 21,221,000 2.0
Liabilities in Excess of Other Assets (1,151,085) (0.1)
----------------------------
Net Assets $1,044,801,178 100.0%
============================
<FN>
*Time deposit bears interest at 5.687% and matures on 12/01/1999.
++Non-income producing security.
See Notes to Financial Statements.
</TABLE>
November 30, 1999 19 Mercury U.S. Large Cap Fund
<TABLE>
STATEMENT OF ASSETS AND
LIABILITIES
<CAPTION>
As of November 30, 1999
MERCURY MASTER U.S. LARGE CAP PORTFOLIO
<S> <C> <C>
Assets:
Investments, at value (identified cost--$887,522,146) $1,024,731,263
Cash 550,663
Time Deposits 21,221,000
Receivables:
Securities sold $ 10,023,978
Contributions 1,445,598
Dividends 843,508
Interest 3,353 12,316,437
--------------
Prepaid expenses and other assets 16,285
--------------
Total assets 1,058,835,648
--------------
Liabilities:
Payables:
Securities purchased 12,542,892
Withdrawals 1,374,165
Investment adviser 58,681 13,975,738
--------------
Accrued expenses and other liabilities 58,732
--------------
Total liabilities 14,034,470
--------------
Net Assets:
Net assets $1,044,801,178
==============
Net Assets Consist of:
Partners' capital $ 907,592,061
Unrealized appreciation on investments--net 137,209,117
--------------
Net assets $1,044,801,178
==============
See Notes to Financial Statements.
</TABLE>
November 30, 1999 20 Mercury U.S. Large Cap Fund
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Six Months Ended November 30, 1999
MERCURY MASTER U.S. LARGE CAP PORTFOLIO
<S> <C> <C>
Investment Income:
Dividends $ 4,346,947
Interest and discount earned 575,452
--------------
Total income 4,922,399
==============
Expenses:
Investment advisory fees $ 2,490,344
Custodian fees 51,722
Accounting services 44,329
Professional fees 29,175
Trustees' fees and expenses 16,932
Offering costs 5,213
Other 8,147
--------------
Total expenses 2,645,862
--------------
Investment income--net 2,276,537
--------------
Realized & Unrealized Gain (Loss) on Investments--Net:
Realized loss from investments--net (11,262,063)
Change in unrealized appreciation/depreciation on investments--net 148,229,229
--------------
Net realized and unrealized gain on investments 136,967,166
--------------
Net Increase in Net Assets Resulting from Operations $ 139,243,703
==============
See Notes to Financial Statements.
</TABLE>
November 30, 1999 21 Mercury U.S. Large Cap Fund
<TABLE>
STATEMENTS OF CHANGES
IN NET ASSETS
<CAPTION>
MERCURY MASTER U.S. LARGE CAP PORTFOLIO
For the Six For the Period
Months Ended January 29, 1999++
November 30, to May 31,
Increase (Decrease)in Net Assets: 1999 1999
<S> <C> <C>
Operations:
Investment income--net $ 2,276,537 $ 1,647,889
Realized loss on investments--net (11,262,063) (1,326,283)
Change in unrealized appreciation/depreciation
on investments--net 148,229,229 (11,020,112)
-------------------------------
Net increase (decrease) in net assets resulting from
operations 139,243,703 (10,698,506)
-------------------------------
Net Capital Contributions:
Increase (decrease) in net assets derived from net capital
contributions (18,242,666) 934,398,547
-------------------------------
Net Assets:
Total increase in net assets 121,001,037 923,700,041
Beginning of period 923,800,141 100,100
-------------------------------
End of period $1,044,801,178 $ 923,800,141
===============================
<FN>
++Commencement of operations.
See Notes to Financial Statements.
</TABLE>
November 30, 1999 22 Mercury U.S. Large Cap Fund
FINANCIAL HIGHLIGHTS
<TABLE>
MERCURY MASTER U.S. LARGE CAP PORTFOLIO
<CAPTION>
The following ratios have been derived from information provided in
the financial statements.
For the Six For the Period
Months Ended January 29, 1999++
November 30, to May 31,
1999 1999
<S> <C> <C>
Ratios to Average Net Assets:
Expenses .53%* .54%*
===============================
Investment income--net .46%* .61%*
===============================
Supplemental Data:
Net assets, end of period (in thousands) $ 1,044,801 $ 923,800
===============================
Portfolio turnover 31.25% 17.13%
===============================
<FN>
*Annualized.
++Commencement of operations.
See Notes to Financial Statements.
</TABLE>
November 30, 1999 23 Mercury U.S. Large Cap Fund
NOTES TO FINANCIAL STATEMENTS
MERCURY MASTER U.S. LARGE CAP PORTFOLIO
1 Significant Accounting Policies:
Mercury Master U.S. Large Cap 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 generally accepted accounting
principles, which may require the use of management accruals and
estimates. These unaudited financial statements reflect all
adjustments, which are, in the opinion of management, necessary to a
fair statement of the results for the interim period presented. All
such adjustments are of a normal recurring nature. The following is
a summary of significant accounting policies followed by the
Portfolio.
(a) Valuation of investments--Portfolio securities that are traded
on stock exchanges are valued at the last sale price as of the close
of business on the day the securities are being valued or, lacking
any sales, at the last available bid price for long positions and
the last available ask price for short positions. Securities traded
in the over-the-counter market are valued at the last available bid
price prior to the time of valuation. Securities traded both in the
over-the-counter market and on a stock exchange are valued according
to the broadest and most representative market. Short positions in
securities traded in the over-the-counter market are valued at the
last available ask price prior to the time of valuation. Options
written or purchased are valued at the last sale price in the case
of exchange-traded options. In the case of options traded in the
over-the-counter market, valuation is the last asked price (options
written) or the last bid price (options purchased). Short-term
securities are valued at amortized cost, which approximates market
value. Other investments, including futures contracts and related
options, are stated at market value. Securities and assets for which
market quotations are not readily available are valued at fair
market value, as determined in good faith by or under the direction
of the Trust's Board of Trustees.
(b) Derivative financial instruments--The Portfolio may engage in
various portfolio investment strategies to seek to increase its
return by hedging its holdings against adverse movements in the
equity, debt and currency markets. Losses may arise due to changes
in the value of the contract or if the counterparty does not perform
under the contract.
* Financial futures contracts--The Portfolio may purchase or sell
financial futures contracts and options on such futures contracts
for the purpose of hedging the market risk on existing securities or
the intended purchase of securities. Upon entering into a contract,
the Portfolio deposits and maintains as collateral such initial
margin as required by the exchange on which the transaction is
effected. Pursuant to the contract, the Portfolio agrees to receive
from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are
known as variation margin and are recorded by the Portfolio as
unrealized gains or losses. When the contract 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.
November 30, 1999 24 Mercury U.S. Large Cap Fund
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
* 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.
* 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.
(c) Foreign currency transactions--Transactions denominated in
foreign currencies are recorded at the exchange rate prevailing when
recognized. Assets and liabilities denominated in foreign currencies
are valued at the exchange rate at the end of the period. Foreign
currency transactions are the result of settling (realized) or
valuing (unrealized) assets or liabilities expressed in foreign
currencies into US dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on
investments.
(d) Income taxes--The Portfolio is classified as a partnership for
Federal income tax purposes. As a partnership for Federal income tax
purposes, the Portfolio will not incur Federal income tax liability.
Items of partnership income, gain, loss and deduction will pass
through to investors as partners in the Portfolio. Therefore, no
Federal income tax provision is required. Under the applicable
foreign tax law, withholding taxes may be imposed on interest,
dividends, and capital gains at various rates.
(e) Security transactions and investment income--Security
transactions are accounted for on the date the securities are
purchased or sold (the trade dates). Dividend income is recorded on
the ex-dividend dates. Dividends from foreign securities where the
ex-dividend date may have passed are subsequently recorded when the
Portfolio has determined the ex-dividend date. Interest income
(including amortization of discount) is recognized on the accrual
basis. Realized gains and losses on security transactions are
determined on the identified cost basis.
2 Investment Advisory Agreement and Transactions with Affiliates:
The Trust has entered into an Investment Advisory Agreement with
Mercury Asset Management International Ltd. ("Mercury
International"), an affiliate of Fund Asset Management, L.P.
("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co.,
Inc. ("ML & Co."), which is the limited partner.
November 30, 1999 25 Mercury U.S. Large Cap Fund
NOTES TO FINANCIAL STATEMENTS
(CONCLUDED)
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 .50% 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.
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.
3 Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended November 30, 1999 were $298,259,183 and
$307,707,264, respectively.
Net realized losses for the six months ended November 30, 1999 and
net unrealized gains as of November 30, 1999 were as follows:
Realized Unrealized
Losses Gains
Long-term investments $ (11,262,063) $137,209,117
--------------------------------
Total $ (11,262,063) $137,209,117
================================
As of November 30, 1999, net unrealized appreciation for Federal
income tax purposes aggregated $137,209,117, of which $169,905,901
related to appreciated securities and $32,696,784 related to
depreciated securities. At November 30, 1999, the aggregate cost of
investments for Federal income tax purposes was $887,522,146.
4 Capital Loss Carryforward:
At May 31, 1999, the Portfolio had a net capital loss carryforward
of approximately $712,000, all of which expires in 2007. This amount
will be available to offset like amounts of any future taxable
gains.
November 30, 1999 26 Mercury U.S. Large Cap Fund
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
November 30, 1999 27 Mercury U.S. Large Cap Fund
