SEMI-ANNUAL REPORT
NOVEMBER 30, 1999
Mercury
U.S. Small Cap
Growth
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. The Fund invests primarily
in a diversified portfolio of equity securities of small cap
companies located in the United States that Fund management believes
have above average prospects for earnings growth. The Fund may also
invest in securities that Fund management believes are undervalued.
In addition, the Fund may invest up to 10% of its assets in stocks
of companies located in Canada. The Fund will seek to achieve its
objective by investing all of its assets in Mercury Master U.S.
Small Cap Growth 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. Small Cap Growth Fund of
Mercury Asset Management Funds, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MERCURY MASTER U.S. SMALL CAP
GROWTH 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
Autos-Transportation 1.6%
Technology 37.9%
Consumer Discretionary 16.5%
Cash Equivalents 8.6%
Financials 7.8%
Health Care 7.8%
Utilities 6.5%
Producer Durables 6.1%
Materials and Processing 2.8%
Energy 2.6%
Consumer Staples 1.8%
INVESTMENTS AS OF NOVEMBER 30, 1999
Percent of
Ten Largest Holdings Net Assets
Intertrust Technologies Corporation 2.5%
HNC Software Inc. 2.2
Check Point Software
Technologies Ltd. 2.1
TIBCO Software Inc. 2.0
QRS Corporation 1.9
Spyglass, Inc. 1.7
Aspect Development, Inc. 1.6
Human Genome Sciences, Inc. 1.6
Verity, Inc. 1.6
TriQuint Semiconductor, Inc. 1.5
Percent of
Ten Largest Industries Net Assets
Software Systems 15.6%
Communications Technology 10.6
Computer Services 8.6
Services--Commercial 7.3
Telecommunications 5.7
Biotechnology Research &
Production 3.4
Electronics--
Semiconductors/Components 3.1
Banks 3.0
Telecommunication Equipment 3.0
Radio--TVBroadcasters 2.6
November 30, 1999 2 Mercury U.S. Small Cap Growth Fund
DEAR SHAREHOLDER
We are pleased to provide you with this first semi-annual report to
shareholders for Mercury U.S. Small Cap Growth Fund of Mercury Asset
Management Funds, Inc. The Fund seeks long-term capital growth. The
Fund invests primarily in a diversified portfolio of equity
securities of small cap companies located in the United States that
Fund management believes have above-average prospects for earnings
growth. The Fund may also invest in securities that Fund management
believes are undervalued. In addition, the Fund may also invest up
to 10% of its assets in the equity securities of companies located
in Canada. The Fund will seek to achieve its objective by investing
all of its assets in a Portfolio of Mercury Asset Management Master
Trust that has the same goals as the Fund. The Fund's investment
experience will correspond to the investment experience of the
Portfolio. In this and future reports to shareholders, we will
provide information on the Fund's performance, discuss investment
strategies, and highlight some of the Portfolio's holdings. Complete
performance information can be found on pages 6 and 7 of this report
to shareholders.
Investment Environment
Since the Fund commenced operations on October 29, 1999, US equity
markets continued their recovery from the October lows, rising
through to the end of November. These increases came despite a rise
in interest rates. The Federal Reserve Board raised the Federal
Funds rate during November for the third time this year to 5.5%, but
also adopted a neutral stance regarding future activity. While long-
term bond yields also rose during the period, equity investors
appeared to be generally satisfied that the Federal Reserve Board
was being proactive in heading off any potential future inflation.
In fact, despite the unemployment rate dropping to 4.1% in October
(a 30-year low) and gross domestic product growth for the third
quarter of 1999 coming in at a robust 5.7%, inflation remained in
control and US worker productivity rose a surprisingly strong 4.1%
in the September 30, 1999 quarter.
A significant highlight during November was the strength in the
small cap segment of the market, and small cap growth stocks in
particular. The Standard & Poor's 500 Index rose 2.1% during
November, compared to a rise of 6.1% for the Russell 2000 Index and
10.6% for the Russell 2000 Growth Index. The Fund's Class I, Class
A, Class B and Class C Shares, by comparison, rose +11.09%, +11.09%,
+10.99% and +10.99%, respectively, during November. (Fund results
shown do not reflect sales charges and would be lower if sales
charges were included.) The month of November can be characterized
as one of the longer periods of consecutive small cap growth stock
outperformance in quite some time, aided in part by strong inflows
into aggressive growth and technology-oriented mutual funds. In
addition, it became clear that momentum has returned to the small
cap growth segment of the market, as reflected in the strong year-to-
date performance experienced by the mutual funds that are
concentrated in this area.
November 30, 1999 3 Mercury U.S. Small Cap Growth Fund
Portfolio Activities
A significant portion of the first full month's Portfolio activity
was dedicated to investing the initial proceeds from the Fund's
offering. Fortunately, our strategy was to invest the proceeds as
quickly, yet as carefully as possible, which resulted in being
virtually fully invested in a shorter period of time than we
originally had anticipated. By November-end, the Portfolio was 91.4%
invested in equities, which was in line with our targets. While not
fully invested during the entire period of November, clearly the
Fund benefited from the strong performance that smaller growth
stocks in the United States achieved during the month.
The strongest sectors of the Russell 2000 Index continued to be
technology and healthcare. We moved to overweight the technology
area relative to the Russell 2000 Index and have increased our
exposure to the healthcare sector. Two of the weaker sectors of the
Russell 2000 Index were financials and consumer staples. At November
30, 1999, we were underweighted in the financial sector, which has
performed poorly given the rise in interest rates and lowered
earnings guidance from several regional banks.
Our performance was achieved in large part from strength in several
of our technology holdings, with strong themes including network
security software and solutions, Internet infrastructure, a
relatively new area of digital rights management, and drug discovery
(especially our genomics holdings).
Investment Outlook
We continue to be confident that the small cap segment of the market
is still very attractive relative to the broader market, largely
because of the long period of underperformance that the small cap
sector has experienced over the last five years. This
underperformance has resulted in well documented and significant
valuation differentials. 1999 was the first period of outperformance
by many small cap growth managers in quite some time, and while
there will likely be periods of weakness and minor corrections along
the way, we believe the small cap sector is well positioned for an
extended period of outperformance. We continue to target companies
and management teams that are leaders in their respective fields and
whose companies are growing at above-average rates, competing in the
growth segments within the US economy.
November 30, 1999 4 Mercury U.S. Small Cap Growth Fund
In Conclusion
We thank you for your investment in Mercury U.S. Small Cap Growth
Fund, and we look forward to serving your investment needs in the
months and years ahead.
Sincerely,
(Jeffrey Peek)
Jeffrey Peek
President
(James A. Skinner, III)
James A. Skinner, III
Portfolio Manager
January 10, 2000
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 5 Mercury U.S. Small Cap Growth 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" table assume reinvestment of all dividends and capital
gains distributions at net asset value on the ex-dividend date.
Investment return and principal value of shares will fluctuate so
that shares, when redeemed, may be worth more or less than their
original cost. Dividends paid to each class of shares will vary
because of the different levels of account maintenance, distribution
and transfer agency fees applicable to each class, which are
deducted from the income available to be paid to shareholders.
November 30, 1999 6 Mercury U.S. Small Cap Growth Fund
FUND PERFORMANCE DATA (CONCLUDED)
<TABLE>
RECENT PERFORMANCE RESULTS*
<CAPTION>
Since Inception Since Inception
Total Return Total Return
As of November 30, 1999 Without Sales Charge With Sales Charge
<S> <C> <C>
Class I +11.20% + 5.36%
Class A +11.20 + 5.36
Class B +11.10 + 7.10
Class C +11.10 +10.10
<FN>
*Sales charges to each class include maximum applicable charge as
detailed on page 6 in "About Fund Performance." 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 10/29/99.
</TABLE>
November 30, 1999 7 Mercury U.S. Small Cap Growth Fund
<TABLE>
STATEMENT OF ASSETS AND
LIABILITIES
<CAPTION>
As of November 30, 1999
MERCURY U.S. SMALL CAP GROWTH FUND
<S> <C>
Assets:
Investment in Mercury Master U.S. Small Cap Portfolio, at value
(identified cost--$135,203,222) $148,409,895
Prepaid expenses 306,000
------------
Total assets 148,715,895
------------
Liabilities:
Payable to distributor 94,187
Payable to administrator 3,276
Accrued expenses and other liabilities 358,234
------------
Total liabilities 455,697
------------
Net Assets:
Net assets $148,260,198
============
Net Assets Consist of:
Class I Shares of Common Stock, $.0001 par value, 100,000,000
shares authorized $ 112
Class A Shares of Common Stock, $.0001 par value, 100,000,000
shares authorized 208
Class B Shares of Common Stock, $.0001 par value, 100,000,000
shares authorized 700
Class C Shares of Common Stock, $.0001 par value, 100,000,000
shares authorized 314
Paid-in capital in excess of par 134,875,637
Accumulated investment loss--net (81,813)
Undistributed realized capital gains on investments from the Portfolio--net 258,367
Unrealized appreciation on investments from the Portfolio--net 13,206,673
------------
Net assets $148,260,198
============
Net Asset Value:
Class I--Based on net assets of $12,428,066 and 1,117,554 shares
outstanding $ 11.12
============
Class A--Based on net assets of $23,117,736 and 2,079,278 shares
outstanding $ 11.12
============
Class B--Based on net assets of $77,814,702 and 7,003,839 shares
outstanding $ 11.11
============
Class C--Based on net assets of $34,899,694 and 3,141,254 shares
outstanding $ 11.11
============
See Notes to Financial Statements.
</TABLE>
November 30, 1999 8 Mercury U.S. Small Cap Growth Fund
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Period October 29, 1999++ to November 30, 1999
MERCURY U.S. SMALL CAP GROWTH FUND
<S> <C>
Investment Income:
Investment income allocated from the Portfolio $ 189,154
Expenses allocated from the Portfolio (100,378)
------------
Net investment income from the Portfolio 88,776
============
Expenses:
Account maintenance and distribution fees--Class B $ 62,109
Registration fees 28,265
Account maintenance and distribution fees--Class C 27,271
Administration fee 23,668
Offering costs 8,556
Transfer agent fees--Class B 6,135
Account maintenance fees--Class A 4,807
Transfer agent fees--Class A 2,713
Transfer agent fees--Class C 2,478
Professional fees 1,833
Printing and shareholder reports 1,375
Transfer agent fees--Class I 884
Accounting services 113
Other 382
------------
Total expenses 170,589
------------
Investment loss--net (81,813)
------------
Realized & Unrealized Gain from the Portfolio--Net:
Realized gain from the Portfolio on investments--net 258,367
Unrealized appreciation on investments from the Portfolio--net 13,206,673
------------
Net realized and unrealized gain on investments from the Portfolio 13,465,040
------------
Net Increase in Net Assets Resulting from Operations $ 13,383,227
============
<FN>
++Commencement of operations.
See Notes to Financial Statements.
</TABLE>
November 30, 1999 9 Mercury U.S. Small Cap Growth Fund
<TABLE>
STATEMENT OF CHANGES
IN NET ASSETS
<CAPTION>
For the Period October 29, 1999++ to November 30, 1999
MERCURY U.S. SMALL CAP GROWTH FUND
Increase (Decrease) in Net Assets:
<S> <C>
Operations:
Investment loss--net $ (81,813)
Realized gain on investments from the Portfolio--net 258,367
Unrealized appreciation on investments from the Portfolio--net 13,206,673
------------
Net increase in net assets resulting from operations 13,383,227
------------
Capital Share Transactions:
Net increase in net assets derived from capital share transactions 134,776,971
------------
Net Assets:
Total increase in net assets 148,160,198
Beginning of period 100,000
------------
End of period $148,260,198
============
<FN>
++Commencement of operations.
See Notes to Financial Statements.
</TABLE>
November 30, 1999 10 Mercury U.S. Small Cap Growth Fund
FINANCIAL HIGHLIGHTS
<TABLE>
MERCURY U.S. SMALL CAP GROWTH FUND
<CAPTION>
The following per share data and ratios have been derived from
information provided in the financial statements.
For the Period October 29, 1999++
to November 30, 1999
Increase (Decrease) in Net Asset Value: Class I Class A Class B Class C
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00 $ 10.00
----------------------------------------------------
Investment income (loss)--net --+++++ --+++++ (.01) (.01)
Realized and unrealized gain on
investments from the Portfolio--net 1.12 1.12 1.12 1.12
----------------------------------------------------
Total from investment operations 1.12 1.12 1.11 1.11
----------------------------------------------------
Net asset value, end of period $ 11.12 $ 11.12 $ 11.11 $ 11.11
====================================================
Total Investment Return:**
Based on net asset value per share 11.20%+++ 11.20%+++ 11.10%+++ 11.10%+++
====================================================
Ratios to Average Net Assets:
Expenses++++ 1.48%* 1.73%* 2.49%* 2.49%*
====================================================
Investment income (loss)--net .09%* (.10%)* (.89%)* (.92%)*
====================================================
Supplemental Data:
Net assets, end of period (in thousands) $ 12,428 $ 23,118 $ 77,815 $34,899
====================================================
<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.
+++++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
November 30, 1999 11 Mercury U.S. Small Cap Growth Fund
NOTES TO FINANCIAL STATEMENTS
MERCURY U.S. SMALL CAP GROWTH FUND
1 Significant Accounting Policies:
Mercury U.S. Small Cap Growth 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 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 seeks to achieve its investment objective
by investing all of its assets in the Mercury Master U.S. Small Cap
Growth 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. Prior to commencement of operations on
October 29, 1999, the Fund had no operations other than those
relating to organizational matters and the issuance of 10,000
capital shares of the Fund on October 18, 1999 to Fund Asset
Management, L.P. ("FAM") for $100,000. 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.
November 30, 1999 12 Mercury U.S. Small Cap Growth Fund
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
(d) Dividends and distributions--Dividends and distributions paid by
the Fund are recorded on the ex-dividend dates.
(e) 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
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.
November 30, 1999 13 Mercury U.S. Small Cap Growth Fund
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
For the period October 29, 1999 to November 30, 1999, 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 A $1,590 $830,770
For the period October 29, 1999 to November 30, 1999, MLPF&S
received contingent deferred sales charges of $34 relating to
transactions in Class B 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 period October 29, 1999 to November 30, 1999 were
$134,876,971 and $20,892, respectively.
4 Capital Share Transactions:
Net increase in net assets derived from capital share transactions
was $134,776,971 for the period October 29, 1999 to November 30,
1999.
Transactions in capital shares for each class were as follows:
Class I Shares for the Period October 29, 1999++
to November 30, 1999 Shares Dollar Amount
Shares sold 1,139,555 $11,555,171
Shares redeemed (24,501) (262,347)
----------------------------
Net increase 1,115,054 $11,292,824
============================
[FN]
++Prior to October 29, 1999 (commencement of operations), the Fund
issued 2,500 shares to FAM for $25,000.
November 30, 1999 14 Mercury U.S. Small Cap Growth Fund
NOTES TO FINANCIAL STATEMENTS
(CONCLUDED)
Class A Shares for the Period October 29, 1999++
to November 30, 1999 Shares Dollar Amount
Shares sold 2,118,235 $21,307,922
Shares redeemed (41,457) (440,422)
----------------------------
Net increase 2,076,778 $20,867,500
============================
[FN]
++Prior to October 29, 1999 (commencement of operations), the Fund
issued 2,500 shares to FAM for $25,000.
Class B Shares for the Period October 29, 1999++
to November 30, 1999 Shares Dollar Amount
Shares sold 7,071,558 $71,508,810
Shares redeemed (70,219) (721,086)
----------------------------
Net increase 7,001,339 $70,787,724
============================
[FN]
++Prior to October 29, 1999 (commencement of operations), the Fund
issued 2,500 shares to FAMfor $25,000.
Class C Shares for the Period October 29, 1999++
to November 30, 1999 Shares Dollar Amount
Shares sold 3,185,457 $32,308,353
Shares redeemed (46,703) (479,430)
----------------------------
Net increase 3,138,754 $31,828,923
============================
[FN]
++Prior to October 29, 1999 (commencement of operations), the Fund
issued 2,500 shares to FAMfor $25,000.
November 30, 1999 15 Mercury U.S. Small Cap Growth Fund
SCHEDULE OF INVESTMENTS
<TABLE>
MERCURY MASTER U.S. SMALL CAP GROWTH PORTFOLIO
<CAPTION>
In US Dollars
Shares Percent of
Industries Held Common Stocks Value Net Assets
<S> <C> <S> <C> <C>
Advertising 35,300 ++Lamar Advertising Company $ 2,025,338 1.4%
Agencies
Air 42,400 ++Midwest Express Holdings 1,226,950 0.8
Transportation
Auto Parts 15,500 Borg-Warner Automotive, Inc. 627,750 0.5
37,500 ++Tower Automotive, Inc. 562,500 0.3
1,190,250 0.8
Banks 60,900 Carolina First Corporation 1,244,644 0.8
61,000 ++Imperial Bancorp 1,464,000 1.0
22,800 U.S. Trust Corporation 1,814,025 1.2
------------ ------
4,522,669 3.0
Biotechnology 60,400 ++Cephalon, Inc. 1,343,900 0.9
Research & 63,400 ++Geron Corporation 681,550 0.4
Production 21,300 ++Human Genome Sciences, Inc. 2,385,600 1.6
24,600 ++Invitrogen Corporation 741,075 0.5
------------ ------
5,152,125 3.4
Cable TV & 22,400 ++Adelphia Communications (Class A) 1,260,000 0.8
Radio
Commercial 48,600 ++QRS Corporation 2,824,875 1.9
Information
Systems
Communications 19,700 Aspect Telecommunications 650,100 0.4
Technology 38,600 ++Entrust Technologies Inc. 1,392,012 0.9
2,000 ++Finisar Corporation 230,500 0.2
46,600 ++Globix Corporation 1,861,087 1.2
26,600 ++Go2Net, Inc. 1,943,463 1.3
29,700 ++Harmonic Inc. 1,785,712 1.2
67,000 ++High Speed Access Corp. 1,478,188 1.0
57,200 ++MMC Networks, Inc. 1,126,125 0.8
87,200 ++Spyglass, Inc. 2,474,300 1.7
39,300 ++Tekelec 697,575 0.5
33,500 ++USinternetworking, Inc. 1,836,219 1.2
10,100 ++Virata Corporation 324,463 0.2
------------ ------
15,799,744 10.6
Computer 78,800 ++Acxiom Corp. 1,401,162 0.9
Services 44,900 ++Commtouch Software Ltd. 1,167,400 0.8
28,700 ++CyberSource Corporation 1,711,237 1.2
28,300 ++Intertrust Technologies Corporation 3,638,319 2.5
29,600 ++Macrovision Corporation 1,875,900 1.3
</TABLE>
November 30, 1999 16 Mercury U.S. Small Cap Growth Fund
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
MERCURY MASTER U.S. SMALL CAP GROWTH PORTFOLIO
<CAPTION>
In US Dollars
Shares Percent of
Industries Held Common Stocks Value Net Assets
<S> <C> <S> <C> <C>
Computer 29,700 ++National Infomation Consortium, Inc. $ 783,338 0.5%
Services 11,400 ++VeriSign, Inc. 2,117,550 1.4
(concluded) ------------ ------
12,694,906 8.6
Copper 39,000 ++Mueller Industries, Inc. 1,404,000 0.9
Crude 44,000 Devon Energy Corporation 1,551,000 1.1
Producers 61,900 ++Louis Dreyfus Natural Gas Corp. 1,114,200 0.7
------------ ------
2,665,200 1.8
Drug--Grocery 36,400 ++Whole Foods Market, Inc. 1,430,975 1.0
Store Chain
Drug-- 89,600 ++Anesta Corp. 1,310,400 0.9
Pharma- 23,500 ++Gilead Sciences, Inc. 1,128,000 0.8
ceuticals 45,800 ++SangStat Medical Corporation 1,079,163 0.7
------------ ------
3,517,563 2.4
Education 64,500 ++Education Management Corporation 606,703 0.4
Services 2,000 Strayer Education, Inc. 41,500 0.0
------------ ------
648,203 0.4
Electrical 20,500 ++Oak Industries Inc. 1,543,906 1.0
Equipment/
Components
Electronics-- 17,800 ++Affymetrix, Inc. 1,744,400 1.2
Medical Systems
Electronics-- 24,100 ++Micrel, Inc. 1,186,925 0.8
Semi- 20,300 ++Powerwave Technologies, Inc. 1,214,194 0.8
conductors/ 25,700 ++TriQuint Semiconductor, Inc. 2,187,713 1.5
Components ------------ ------
4,588,832 3.1
Financial Data 25,700 ++The BISYS Group, Inc. 1,488,994 1.0
Processing 15,700 ++CheckFree Holdings Corporation 1,031,294 0.7
Services ------------ ------
2,520,288 1.7
Foods 65,000 ++U.S. Foodservice 1,178,125 0.8
Hotel/Motel 78,300 ++Choice Hotels International, Inc. 1,228,331 0.8
Machinery-- 197,100 ++Newpark Resources, Inc. 1,182,600 0.8
Oil Equipment &
Services
Medical/Dental 31,600 ++Henry Schein, Inc. 404,875 0.3
Instruments
Supplies
Medical 53,000 ++CryoLife, Inc. 715,500 0.5
Services
</TABLE>
November 30, 1999 17 Mercury U.S. Small Cap Growth Fund
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
MERCURY MASTER U.S. SMALL CAP GROWTH PORTFOLIO
<CAPTION>
In US Dollars
Shares Percent of
Industries Held Common Stocks Value Net Assets
<S> <C> <S> <C> <C>
Metals & 61,200 ++Stillwater Mining Company $ 1,484,100 1.0%
Minerals
Paper 51,800 Caraustar Industries, Inc. 1,265,862 0.9
Power Trans- 41,500 Regal-Beloit Corporation 913,000 0.6
mission Equipment
Production-- 70,600 ++ATMI, Inc. 2,148,887 1.5
Technology
Equipment
Radio--TV 18,000 ++Acme Communications, Inc. 608,625 0.4
Broadcasters 30,000 ++Cumulus Media Inc. (Class A) 1,200,000 0.8
17,900 ++Hispanic Broadcasting Corporation 1,474,513 1.0
22,200 ++Radio Unica Corp. 613,275 0.4
------------ ------
3,896,413 2.6
Retail 41,400 ++Beyond.com Corporation 424,350 0.3
32,000 ++Fatbrain.com Inc. 1,068,000 0.7
26,400 ++Land's End, Inc. 1,593,900 1.1
------------ ------
3,086,250 2.1
Savings & 44,800 ++Golden State Bancorp Inc. 870,800 0.6
Loans 41,900 ++Net.B@nk, Inc. 995,125 0.6
------------ ------
1,865,925 1.2
Security 47,700 Investment Technology Group, Inc. 1,278,956 0.9
Brokerage & 43,100 Jeffreries Group, Inc. 856,613 0.6
Services 28,400 ++Wit Capital Group, Inc. 553,800 0.4
2,689,369 1.9
Services-- 43,800 ABM Industries, Inc. 941,700 0.6
Commercial 87,900 ++Administaff, Inc. 1,472,325 1.0
126,700 ++Armor Holdings, Inc. 1,496,644 1.0
34,500 Central Parking Corporation 892,687 0.6
39,800 ++ChoicePoint Inc. 1,328,325 0.9
40,600 ++Getty Images, Inc. 1,603,700 1.1
41,100 ++MAXIMUS, Inc. 1,150,800 0.8
24,100 ++Pegasus Systems, Inc. 1,229,100 0.8
55,500 ++Wilmar Industries, Inc. 749,250 0.5
------------ ------
10,864,531 7.3
Software 3,900 ++Ariba, Inc. 704,194 0.5
Systems 51,100 ++Aspect Development, Inc. 2,440,025 1.6
22,300 ++Check Point Software Technologies Ltd. 3,158,237 2.1
18,100 ++Concord Communications, Inc. 968,350 0.7
46,500 ++HNC Software Inc. 3,301,500 2.2
</TABLE>
November 30, 1999 18 Mercury U.S. Small Cap Growth Fund
SCHEDULE OF INVESTMENTS (CONCLUDED)
<TABLE>
MERCURY MASTER U.S. SMALL CAP GROWTH PORTFOLIO
<CAPTION>
In US Dollars
Shares Percent of
Industries Held Common Stocks Value Net Assets
<S> <C> <S> <C> <C>
Software 22,800 ++MDSI Mobile Data Solutions Inc. $ 433,200 0.3%
Systems 28,100 ++Macromedia, Inc. 1,847,575 1.2
(concluded) 4,200 ++Micromuse, Inc. 480,375 0.3
18,200 ++Peregrine Systems, Inc. 1,274,000 0.9
132,300 ++Smith-Gardner & Associates, Inc. 1,455,300 1.0
29,900 ++TIBCO Software Inc. 2,900,300 2.0
23,000 ++Verity, Inc. 2,379,781 1.6
18,100 ++Vitria Technology, Inc. 1,806,606 1.2
------------ ------
23,149,443 15.6
Telecom- 33,900 ++ANTEC Corporation 1,898,400 1.3
munication 45,600 ++American Tower Corporation (Class A) 1,191,300 0.8
Equipment 63,800 ++Crown Castle International Corp. 1,343,787 0.9
------------ ------
4,433,487 3.0
Telecom- 37,800 ++ITC/\DeltaCom, Inc. 1,037,138 0.7
munications 40,100 ++Insight Communications Company, Inc. 992,475 0.7
38,700 ++McLeodUSA Incorporated (Class A) 1,664,100 1.1
29,500 ++NEXTLINK Communications, Inc. (Class A) 1,475,000 1.0
20,500 Teligent, Inc. (Class A) 1,159,531 0.8
20,400 ++Viatel, Inc. 856,800 0.6
23,800 ++WinStar Communications, Inc. 1,207,850 0.8
------------ ------
8,392,894 5.7
Total Common Stocks
(Cost--$122,453,132) 135,659,816 91.4
Face
Amount Short-Term Securities
Commercial $5,853,000 General Motors Acceptance Corp.,
Paper** 5.75% due 12/01/1999 5,853,000 4.0
Total Short-Term Securities
(Cost--$5,853,000) 5,853,000 4.0
Total Investments
(Cost--$128,306,132) 141,512,816 95.4
Time Deposit* 7,000,000 4.7
Liabilities in Excess of Other Assets (102,810) (0.1)
------------ ------
Net Assets $148,410,006 100.0%
============ ======
<FN>
*Time deposit bears interest at 5.687% and matures on 12/01/1999.
**Commercial paper is traded on a discount basis; the interest rate
shown reflects the discount rate paid at the time of purchase by the
Portfolio.
++Non-income producing security.
See Notes to Financial Statements.
</TABLE>
November 30, 1999 19 Mercury U.S. Small Cap Growth Fund
<TABLE>
STATEMENT OF ASSETS AND
LIABILITIES
<CAPTION>
As of November 30, 1999
MERCURY MASTER U.S. SMALL CAP GROWTH PORTFOLIO
<S> <C> <C>
Assets:
Investments, at value (identified cost--$128,306,132) $141,512,816
Time deposits 7,000,000
Receivables:
Contributions $1,758,730
Dividends 2,155
Interest 1,106 1,761,991
----------
Prepaid expenses and other assets 23,026
------------
Total assets 150,297,833
------------
Liabilities:
Payables:
Securities purchased 1,624,177
Withdrawals 219,227
Investment adviser 11,479 1,854,883
----------
Other liabilities 32,944
------------
Total liabilities 1,887,827
------------
Net Assets:
Net assets $148,410,006
============
Net Assets Consist of:
Partners' capital $135,203,322
Unrealized appreciation on investments 13,206,684
------------
Net assets $148,410,006
============
See Notes to Financial Statements.
</TABLE>
November 30, 1999 20 Mercury U.S. Small Cap Growth Fund
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Period October 29, 1999++ to November 30, 1999
MERCURY MASTER U.S. SMALL CAP GROWTH PORTFOLIO
<S> <C> <C>
Investment Income:
Interest and discount earned $ 186,999
Dividends 2,155
------------
Total income 189,154
============
Expenses:
Investment advisory fees $ 82,888
Custodian fees 5,151
Accounting services 4,908
Trustees' fees and expenses 3,438
Professional fees 1,833
Offering costs 579
Pricing fees 588
Other 993
-----------
Total expenses 100,378
------------
Investment income--net 88,776
------------
Realized & Unrealized Gain on Investments--Net:
Realized gain from investments--net 258,367
Unrealized appreciation on investments--net 13,206,684
------------
Net realized and unrealized gain on investments 13,465,051
------------
Net Increase in Net Assets Resulting from Operations $ 13,553,827
============
<FN>
++Commencement of operations.
See Notes to Financial Statements.
</TABLE>
November 30, 1999 21 Mercury U.S. Small Cap Growth Fund
<TABLE>
STATEMENT OF CHANGES
IN NET ASSETS
<CAPTION>
For the Period October 29, 1999++ to November 30, 1999
MERCURY MASTER U.S. SMALL CAP GROWTH PORTFOLIO
<S> <C>
Increase (Decrease)in Net Assets:
Operations:
Investment income--net $ 88,776
Realized gain on investments--net 258,367
Unrealized appreciation on investments--net 13,206,684
------------
Net increase in net assets resulting from operations 13,553,827
------------
Net Capital Contributions:
Increase in net assets derived from net capital contributions 134,756,079
------------
Net Assets:
Total increase in net assets 148,309,906
Beginning of period 100,100
------------
End of period $148,410,006
============
<FN>
++Commencement of operations.
See Notes to Financial Statements.
</TABLE>
November 30, 1999 22 Mercury U.S. Small Cap Growth Fund
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
MERCURY MASTER U.S. SMALL CAP GROWTH PORTFOLIO
The following ratios have been derived from information provided in
the financial statements.
For the Period
October 29, 1999++
to November 30, 1999
<S> <C>
Ratios to Average Net Assets:
Expenses .85%*
===========
Investment income--net .75%*
===========
Supplemental Data:
Net assets, end of period (in thousands) $ 148,410
===========
Portfolio turnover 2.80%
===========
<FN>
*Annualized.
++Commencement of operations.
See Notes to Financial Statements.
</TABLE>
November 30, 1999 23 Mercury U.S.Small Cap Growth Fund
NOTES TO FINANCIAL STATEMENTS
MERCURY MASTER U.S. SMALL CAP GROWTH PORTFOLIO
1 Significant Accounting Policies:
Mercury Master U.S Small Cap Growth Portfolio (the "Portfolio") is
part of Mercury Asset Management Master Trust (the "Trust"). The
Trust is registered under the Investment Company Act of 1940 and is
organized as a Delaware business trust. The 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 in the over-the-counter market 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. Small Cap Growth 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 US ("Mercury US"), a division 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. Small Cap Growth Fund
NOTES TO FINANCIAL STATEMENTS
(CONCLUDED)
Mercury US 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 .70% of the average daily value of the
Portfolio's net assets. Mercury US has entered into a Sub-Advisory
Agreement with Mercury Asset Management International Ltd. ("Mercury
International") with respect to the Portfolio, pursuant to which
Mercury US may provide investment advisory services with respect to
the Portfolio's assets. Mercury US has agreed to pay Mercury
International 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
US 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 period October 29, 1999 to November 30, 1999 were
$123,963,423 and $1,999,112, respectively.
Net realized gains (losses) for the period October 29, 1999 to
November 30, 1999 and net unrealized gains as of November 30, 1999
were as follows:
Realized Unrealized
Gains (Losses) Gains
Investments:
Long-term investments $ 488,821 $ 13,206,684
Financial futures contracts (230,454) --
------------- ------------
Total investments $ 258,367 $ 13,206,684
============= ============
As of November 30, 1999, net unrealized appreciation for Federal
income tax purposes aggregated $13,206,684, of which $16,323,357
related to appreciated securities and $3,116,673 related to
depreciated securities. At November 30, 1999, the aggregate cost of
investments for Federal income tax purposes was $128,306,132.
November 30, 1999 26 Mercury U.S. Small Cap Growth Fund
