ANNUAL REPORT
MAY 31, 2000
[GRAPHIC]
Mercury
Pan-European
Growth
Fund OF MERCURY ASSET
MANAGEMENT FUNDS, INC.
MERCURY ASSET
MANAGEMENT
<PAGE>
PORTFOLIO INFORMATION
GEOGRAPHIC ALLOCATION
================================================================================
As a Percentage of Net Assets as of May 31, 2000*
A pie chart illustrating the following percentages (As a Percentage of Net
Assets as of May 31, 2000*)
Belgium 2.1%
Finland 4.6%
France 15.8%
Germany 14.0%
Italy 4.0%
Netherlands 6.1%
Spain 4.0%
Sweden 4.8%
Switzerland 10.2%
United Kingdom 27.9%
Other 2.7%**
* Total may not equal 100%.
** Includes Denmark, Greece, Austria, United States, Ireland and Portugal.
WORLDWIDE INVESTMENTS AS OF MAY 31, 2000
================================================================================
Ten Largest Percent of
Equity Holdings Net Assets
--------------------------------------------------------------------------------
Vodafone AirTouch PLC 5.2%
--------------------------------------------------------------------------------
Nokia Oyj 4.6
--------------------------------------------------------------------------------
Telefonaktiebolaget LM
Ericsson AB 'B' 3.1
--------------------------------------------------------------------------------
Shell Transport & Trading Company 3.0
--------------------------------------------------------------------------------
Siemens AG 3.0
--------------------------------------------------------------------------------
BP Amoco PLC 2.7
--------------------------------------------------------------------------------
Total Fina SA 'B' 2.5
--------------------------------------------------------------------------------
Bayer AG 2.3
--------------------------------------------------------------------------------
Telefonica SA 2.2
--------------------------------------------------------------------------------
Novartis AG (Registered Shares) 1.9
--------------------------------------------------------------------------------
================================================================================
Ten Largest Percent of
Industry Holdings Net Assets
--------------------------------------------------------------------------------
Banks 12.1%
--------------------------------------------------------------------------------
Diversified Telecommunication
Services 10.1
--------------------------------------------------------------------------------
Communications Equipment 8.5
--------------------------------------------------------------------------------
Pharmaceuticals 8.5
--------------------------------------------------------------------------------
Oil & Gas 8.2
--------------------------------------------------------------------------------
Wireless Telecommunication
Services 6.6
--------------------------------------------------------------------------------
Insurance 6.3
--------------------------------------------------------------------------------
Food Products 4.0
--------------------------------------------------------------------------------
Chemicals 3.0
--------------------------------------------------------------------------------
Industrial Conglomerates 3.0
--------------------------------------------------------------------------------
May 31, 2000 (2) Mercury Pan-European Growth Fund
<PAGE>
DEAR SHAREHOLDER
Fiscal Year in Review
We are pleased to provide you with this annual report to shareholders. During
the fiscal year ended May 31, 2000, Mercury Pan-European Growth Fund's Class I,
Class A, Class B and Class C Shares had total returns of +14.99%, +14.69%,
+13.87% and +13.82%, respectively. This compares with total returns of +14.6%
for the unmanaged Morgan Stanley Capital International (MSCI) Europe Index and
+31.0% for the Lipper European Region Funds average. (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 7-9 of this report to
shareholders.) For much of the second half of 1999 and early 2000, the Portfolio
benefited from its exposure to a number of the leading growth companies in the
European telecommunications, media and technology sectors, which rallied
sharply. Particularly notable performers included Mannesmann AG, Siemens AG and
Nokia Oyj. Banking stocks were generally poor relative performers over the
fiscal year, as were retail and pharmaceutical companies.
More recently, the technology and technology-related sectors have had a severe
correction as valuation concerns began to dominate sentiment. Although this led
to the Portfolio giving up much of the outperformance against the benchmark MSCI
Europe Index, there has not been a significant negative impact from the dramatic
sector rotation seen in the past two months.
Economic Review
Although still lagging behind the United States, European economies have shown
strong signs of recovery over the past six months, with both business and
consumer confidence indicators rising strongly. Europe is particularly sensitive
to growth in Asian markets and the recovery there over the past year has
provided a major stimulus to exports. Helped by relatively loose monetary
policies and a growing political acceptance of deregulation across many sectors,
unemployment, although still high at 9.2%, is currently on a steady, declining
path. This is providing further support for consumer spending.
At this time, gross domestic product growth for the Eurozone economies is
expected to exceed 3.5% for the year. However, the strength of this recovery,
combined with a sharp increase in the oil price from the average levels of 1999,
has spurred the European Central Bank (ECB) to take pre-emptive action to ensure
that inflation remains under control. Consequently, short-term interest rates
have been raised steadily since last November, with the last increase to 3.75%
in April representing a rise of 125 basis points (1.25%) from the low seen last
year. Inflation across the Eurozone has remained relatively subdued, its latest
reading for April standing at 1.9%.
The other critical factor determining ECB policy has been the continuing
weakness of the euro against the US dollar, as the new European currency has
fallen 20.5% since
May 31, 2000 (3) Mercury Pan-European Growth Fund
<PAGE>
its introduction at the beginning of 1999 and 7.6% over the past six months. The
major factor behind this weakness has been the substantial net outflow of
liquidity, well over $100 billion from the Eurozone alone in 1999, as corporate
and portfolio investors looked to the United States for superior returns.
On a positive note, the weak euro has provided a boost to European exporters and
corporate profits generally have benefited substantially. Although growth trends
in the United States and Europe will probably have to show signs of convergence
before a significant reversal of the euro's decline is seen, the currency at
least appears to be past the worst, and has recently shown signs of bottoming
out.
Market Review
European stock markets rose strongly between December 1999 and March 2000 before
consolidating in April, although dollar investors lost much of this gain through
euro weakness. In line with other global markets, the principal factor behind
the strength at the turn of the year was investor enthusiasm for new economy
stocks in the technology and media sectors, with the leading European telephone
service companies providing a common thread to the bullish mood. However, since
the end of March there has been substantial sector rotation out of these high
growth, high valuation stocks into more traditional, defensive areas of the
market such as banks and food manufacturing. This resulted as the prospect of
more aggressive monetary tightening on both sides of the Atlantic caused a sharp
reassessment of prospects.
The best-performing markets over the past six months were Norway and Sweden,
reflecting the heavy weightings in their respective indexes of Nokia Oyj and
Telefonaktiebolaget LM Ericsson, both companies being leaders in the provision
of equipment to the wireless telephony industry. The largest markets of Germany,
France and Italy also did well compared with the European average, to a large
extent because of the major telephone operating companies in those countries
that have enjoyed a significant upgrading. The United Kingdom was a notable
underperformer, reflecting its large exposure to the oil and pharmaceuticals
sectors that lagged behind the average trend. Over the period as a whole,
financial, energy and consumer stocks generally underperformed, whereas the
technology, media and telecommunication sectors showed significant relative
strength in spite of the reversal in April.
Corporate activity has remained brisk as the need for further consolidation was
put into action across a broad range of European sectors. Particularly important
in this respect was the successful takeover of Mannesmann AG by Vodafone
AirTouch PLC, which has created a leading global wireless operator. Merger and
acquisition activity in the banking sector remained high, with Royal Bank of
Scotland buying Nat West Bank in the United Kingdom. In the information
technology consultancy sector, Cap Gemini SA and Ernst & Young Consulting have
agreed to merge, again creating a powerful business with global reach.
May 31, 2000 (4) Mercury Pan-European Growth Fund
<PAGE>
One other development of particular significance was the announcement at the end
of 1999 by the German government of a major reduction in both corporate and
personal taxation and a radical proposal to abolish all capital gains tax
liabilities on the sale of cross-holdings in quoted companies. This resulted in
a sharp recovery of German financial stocks. Although these measures have still
to obtain parliamentary approval, the extent to which capital will potentially
be freed up and invested more productively, particularly in the financial
sector, promises much better shareholder returns over the longer term and is
also explicitly intended to help make German business more competitive.
Portfolio Activity
The Portfolio remained fully invested throughout the last six months, and for
much of the period the focus has been on growth companies benefiting from the
new opportunities opening up in the telecommunications and media sectors. There
has been a particular concentration on suppliers of the high technology
equipment required for the many new services on offer, notably Nokia Oyj and
Telefonaktiebolaget LM Ericsson, but also on those companies such as Siemens AG
that are successfully restructuring their businesses. Among the telephone
companies, the Portfolio has remained most exposed to mobile service providers,
although following the takeover of Mannesmann AG, a new holding was introduced
in France Telecom SA. The Portfolio's previously underweighted position in
financials has been moved closer to neutral as the weighting in southern
European banks was increased to reflect the strong growth and further
restructuring potential in this area. Since February, we have steadily taken
profits in a number of smaller media and technology companies that had benefited
from the Internet euphoria seen last year.
Investment Outlook
With corporate results often coming in ahead of expectations, the impact on
profitability of stronger growth and the weak euro is becoming increasingly
evident. However, against a background of continuing interest rate uncertainty
and high valuations prevalent in certain sectors, we expect market volatility to
remain high in the short term. Consequently, the Portfolio's exposure is focused
on larger companies that we believe can demonstrate clear growth strategies and
a significant commitment to improving shareholder returns.
Corporate activity is likely to remain a potent factor in many sectors, and
although the supply of new equity will continue to be high, overall liquidity
flows should remain supportive. Any signs that the euro may at least stabilize,
or even begin to recover, would provide a further positive signal. A broad
commitment to improving competitiveness, strong economic growth potential and
the further expansion of an increasingly vibrant equity culture could continue
to underpin Europe's long-term attractions to investors.
May 31, 2000 (5) Mercury Pan-European Growth Fund
<PAGE>
In Conclusion
We thank you for your investment in Mercury Pan-European Growth Fund, and we
look forward to serving your investment needs in the months and years ahead.
Sincerely,
/s/ Jeffrey Peek /s/ Andreas E.F. Utermann
Jeffrey Peek Andreas E.F. Utermann
President Portfolio Manager
July 13, 2000
IMPORTANT TAX INFORMATION
================================================================================
The following information summarizes all per share distributions paid by Mercury
Pan-European Growth Fund during the year ended May 31, 2000.
--------------------------------------------------------------------------------
Domestic Foreign Total Foreign
Record Payable Non-Qualifying Source Ordinary Withholding
Date Date Income Income Income Tax*
--------------------------------------------------------------------------------
Class I 12/08/99 12/16/99 $.100668 $.105517 $.206185 $.018801
Class B 12/08/99 12/16/99 $.069610 $.072964 $.142574 $.018801
Class C 12/08/99 12/16/99 $.067179 $.070416 $.137595 $.018801
Class A 12/08/99 12/16/99 $.089663 $.093982 $.183645 $.018801
--------------------------------------------------------------------------------
* The foreign taxes paid or withheld represent taxes incurred by the Fund on
dividends and/or interest received by the Fund from foreign sources.
Foreign taxes paid or withheld should be included as foreign source
taxable income with an offsetting deduction from gross income or as a
credit for taxes paid to foreign governments. You should consult your tax
adviser regarding the appropriate treatment of foreign taxes paid.
Additionally, there were no long-term capital gains distributions paid by
the Fund during the year.
Please retain this information for your records.
May 31, 2000 (6) Mercury Pan-European Growth Fund
<PAGE>
FUND PERFORMANCE DATA
ABOUT FUND PERFORMANCE
The Fund offers four classes of shares, each with its own sales charge and
expense structure, allowing you to invest in the way that best suits your needs.
CLASS I SHARES incur a maximum initial sales charge of 5.25% and bear no ongoing
distribution and account maintenance fees. Class I shares are available only to
eligible investors.
CLASS A SHARES incur a maximum initial sales charge of 5.25% and an account
maintenance fee of 0.25% (but no distribution fee).
CLASS B SHARES are subject to a maximum contingent deferred sales charge of 4%
if redeemed during the first two years, decreasing to 3% for each of the next
two years and decreasing 1% each year thereafter to 0% after the sixth year. In
addition, Class B shares are subject to a distribution fee of 0.75% and an
account maintenance fee of 0.25%. These shares automatically convert to Class A
shares after approximately 8 years.
CLASS C SHARES are subject to a distribution fee of 0.75% and an account
maintenance fee of 0.25%. In addition, Class C shares may be subject to a 1%
contingent deferred sales charge if redeemed within one year after purchase.
None of the past results shown should be considered a representation of future
performance. Figures shown in the "Recent Performance Results" and "Average
Annual 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.
May 31, 2000 (7) Mercury Pan-European Growth Fund
<PAGE>
FUND PERFORMANCE DATA (CONTINUED)
TOTAL RETURN BASED ON A $10,000 INVESTMENT
================================================================================
A line graph depicting the growth of an investment in the Fund's Class I, Class
A, Class B & Class C Shares compared to growth of an investment in the MSCI
Europe. Beginning and ending values are:
10/30/98** 5/00
Mercury Pan-European Growth Fund+--Class I Shares* $ 9,475 $11,233
Mercury Pan-European Growth Fund+--Class A Shares* $ 9,475 $11,193
Mercury Pan-European Growth Fund+--Class B Shares* $10,000 $11,271
Mercury Pan-European Growth Fund+--Class C Shares* $10,000 $11,666
MSCI Europe Index++ $10,000 $12,087
* Assuming maximum sales charge, transaction costs and other operating
expenses, including advisory fees.
** Commencement of operations.
+ The Fund invests all of its assets in Mercury Master Pan-European Growth
Portfolio. The Portfolio invests primarily in stocks of companies located
in European countries that its management believes are undervalued or have
good prospects for earnings growth.
++ This unmanaged market capitalization-weighted Index is comprised of a
representative sampling of large-, medium- and small-capitalization
companies in developed European countries.
Past performance is not predictive of future results.
May 31, 2000 (8) Mercury Pan-European Growth Fund
<PAGE>
FUND PERFORMANCE DATA (CONCLUDED)
AVERAGE ANNUAL TOTAL RETURN
================================================================================
% Return % Return
Without Sales With Sales
Class I Shares* Charge Charge**
--------------------------------------------------------------------------------
Year Ended 3/31/00 +19.61% +13.33%
--------------------------------------------------------------------------------
Inception (10/30/98)
through 3/31/00 +17.34 +12.96
--------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
% Return % Return
Without With
Class B Shares* CDSC CDSC**
--------------------------------------------------------------------------------
Year Ended 3/31/00 +18.37% +14.37%
--------------------------------------------------------------------------------
Inception (10/30/98)
through 3/31/00 +16.17 +13.51
--------------------------------------------------------------------------------
* 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**
--------------------------------------------------------------------------------
Year Ended 3/31/00 +19.31% +13.04%
--------------------------------------------------------------------------------
Inception (10/30/98)
through 3/31/00 +17.05 +12.68
--------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
% Return % Return
Without With
Class C Shares* CDSC CDSC**
--------------------------------------------------------------------------------
Year Ended 3/31/00 +18.42% +17.42%
--------------------------------------------------------------------------------
Inception (10/30/98)
through 3/31/00 +16.20 +15.54
--------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after
1 year.
** Assuming payment of applicable contingent deferred sales charge.
RECENT PERFORMANCE RESULTS*
================================================================================
6 Month 12 Month Since Inception
As of May 31, 2000 Total Return Total Return Total Return
--------------------------------------------------------------------------------
Class I +4.91% +14.99% +18.55%
--------------------------------------------------------------------------------
Class A +4.82 +14.69 +18.13
--------------------------------------------------------------------------------
Class B +4.49 +13.87 +16.71
--------------------------------------------------------------------------------
Class C +4.44 +13.82 +16.66
--------------------------------------------------------------------------------
* Investment results shown do not reflect sales charges; results shown would
be lower if a sales charge was included. Total investment returns are
based on changes in net asset values for the periods shown, and assume
reinvestment of all dividends and capital gains distributions at net asset
value on the ex-dividend date. The Fund's inception date is 10/30/98.
May 31, 2000 (9) Mercury Pan-European Growth Fund
<PAGE>
STATEMENT OF ASSETS
AND LIABILITIES
As of May 31, 2000
--------------------------------------------------------------------------------
MERCURY PAN-EUROPEAN GROWTH FUND
================================================================================
Assets:
Investment in Mercury Master Pan-European
Growth Portfolio, at value (identified
cost--$437,411,041) $ 516,644,720
Prepaid registration fees 109,210
-------------
Total assets 516,753,930
-------------
--------------------------------------------------------------------------------
Liabilities:
Payable to distributor 387,272
Payable to administrator 90,838
Accrued expenses 218,792
-------------
Total liabilities 696,902
-------------
--------------------------------------------------------------------------------
Net Assets:
Net assets $ 516,057,028
=============
--------------------------------------------------------------------------------
Net Assets Consist of:
Class I Shares of Common Stock, $.0001 par
value, 100,000,000 shares authorized $ 340
Class A Shares of Common Stock, $.0001 par
value, 100,000,000 shares authorized 520
Class B Shares of Common Stock, $.0001 par
value, 100,000,000 shares authorized 2,500
Class C Shares of Common Stock, $.0001 par
value, 100,000,000 shares authorized 1,108
Paid-in capital in excess of par 439,701,509
Accumulated realized capital losses on
investments and foreign currency
transactions from the Portfolio--net (2,882,628)
Unrealized appreciation on investments and
foreign currency transactions from the
Portfolio--net 79,233,679
-------------
Net assets $ 516,057,028
=============
--------------------------------------------------------------------------------
Net Asset Value:
Class I--Based on net assets of $39,657,530
and 3,403,762 shares outstanding $ 11.65
=============
Class A--Based on net assets of $60,497,045
and 5,203,004 shares outstanding $ 11.63
=============
Class B--Based on net assets of $288,123,772
and 24,997,827 shares outstanding $ 11.53
=============
Class C--Based on net assets of $127,778,681
and 11,081,688 shares outstanding $ 11.53
=============
--------------------------------------------------------------------------------
See Notes to Financial Statements.
May 31, 2000 (10) Mercury Pan-European Growth Fund
<PAGE>
STATEMENT OF OPERATIONS
For the Year Ended May 31, 2000
--------------------------------------------------------------------------------
MERCURY PAN-EUROPEAN GROWTH FUND
================================================================================
Investment Income:
Investment income allocated from the
Portfolio (net of $1,161,649 foreign
withholding tax) $ 8,709,332
Expenses allocated from the Portfolio (4,762,421)
------------
Net investment income from the Portfolio 3,946,911
------------
--------------------------------------------------------------------------------
Expenses:
Account maintenance and distribution
fees--Class B $ 3,004,300
Account maintenance and distribution
fees--Class C 1,412,037
Administration fee 1,385,588
Transfer agent fees--Class B 351,437
Account maintenance fees--Class A 181,679
Transfer agent fees--Class C 169,666
Printing and shareholder reports 95,797
Transfer agent fees--Class A 71,362
Registration fees 66,875
Transfer agent fees--Class I 39,043
Professional fees 33,735
Accounting services 2,544
------------
Total expenses 6,814,063
------------
Investment loss--net (2,867,152)
------------
--------------------------------------------------------------------------------
Realized & Unrealized Gain (Loss) from the Portfolio--Net:
Realized gain (loss) from the Portfolio on:
Investments--net 448,293
Foreign currency transactions--net (328,441) 119,852
------------
Change in unrealized appreciation on investments
and foreign currency transactions from the
Portfolio--net 75,497,598
------------
Net Increase in Net Assets Resulting from Operations $ 72,750,298
============
--------------------------------------------------------------------------------
See Notes to Financial Statements.
May 31, 2000 (11) Mercury Pan-European Growth Fund
<PAGE>
STATEMENTS OF CHANGES
IN NET ASSETS
MERCURY PAN-EUROPEAN GROWTH FUND
================================================================================
<TABLE>
<CAPTION>
For the For the Period
Year Ended Oct. 30, 1998+
Increase (Decrease) in Net Assets: May 31, 2000 to May 31, 1999
----------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Investment income (loss)--net $ (2,867,152) $ 1,734,186
Realized gain on investments and foreign
currency transactions from the Portfolio--net 119,852 5,212,570
Change in unrealized appreciation on investments
and foreign currency transactions from the
Portfolio--net 75,497,598 3,736,081
------------------------------
Net increase in net assets resulting from operations 72,750,298 10,682,837
------------------------------
----------------------------------------------------------------------------------------------
Dividends & Distributions to Shareholders:
In excess of investment income--net:
Class I (319,718) --
Class A (438,153) --
Class B (897,376) --
Class C (358,303) --
Realized gain on investments from the Portfolio--net:
Class I (353,344) --
Class A (628,989) --
Class B (2,829,357) --
Class C (1,321,333) --
------------------------------
Net decrease in net assets resulting from dividends
and distributions to shareholders (7,146,573) --
------------------------------
----------------------------------------------------------------------------------------------
Capital Share Transactions:
Net increase (decrease) in net assets derived from capital
share transactions (101,982,761) 541,603,227
------------------------------
----------------------------------------------------------------------------------------------
Net Assets:
Total increase (decrease) in net assets (36,379,036) 552,286,064
Beginning of period 552,436,064 150,000
------------------------------
End of period* $ 516,057,028 $ 552,436,064
==============================
----------------------------------------------------------------------------------------------
*Undistributed investment income--net $ -- $ 2,013,145
==============================
</TABLE>
+Commencement of operations.
See Notes to Financial Statements.
May 31, 2000 (12) Mercury Pan-European Growth Fund
<PAGE>
FINANCIAL HIGHLIGHTS
MERCURY PAN-EUROPEAN GROWTH FUND
================================================================================
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
Class I
----------------------------------
For the For the Period
Year Ended Oct. 30, 1998+
Increase (Decrease) in Net Asset Value: May 31, 2000++++ to May 31, 1999
--------------------------------------------------------------------------------------------
<S> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 10.31 $ 10.00
---------------------------------
Investment income--net .04 .08
Realized and unrealized gain on investments and
foreign currency transactions from the Portfolio--net 1.51 .23
---------------------------------
Total from investment operations 1.55 .31
---------------------------------
Less dividends and distributions:
In excess of investment income--net (.10) --
Realized gain on investments from the Portfolio--net (.11) --
---------------------------------
Total dividends and distributions (.21) --
---------------------------------
Net asset value, end of period $ 11.65 $ 10.31
=================================
--------------------------------------------------------------------------------------------
Total Investment Return:**
Based on net asset value per share 14.99% 3.10%++++
=================================
--------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses+++ 1.24% 1.41%*
=================================
Investment income--net .36% 1.42%*
=================================
--------------------------------------------------------------------------------------------
Supplemental Data:
Net assets, end of period (in thousands) $ 39,657 $ 39,781
=================================
--------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Commencement of operations.
++ Based on average shares outstanding.
+++ Includes the Fund's share of the Portfolio's allocated expenses.
++++ Aggregate total investment return.
See Notes to Financial Statements.
May 31, 2000 (13) Mercury Pan-European Growth Fund
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
MERCURY PAN-EUROPEAN GROWTH FUND
================================================================================
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
Class A
----------------------------------
For the For the Period
Year Ended Oct. 30, 1998+
Increase (Decrease) in Net Asset Value: May 31, 2000++ to May 31, 1999
--------------------------------------------------------------------------------------------
<S> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 10.30 $ 10.00
-----------------------------
Investment income--net .01 .07
Realized and unrealized gain on investments and foreign
currency transactions from the Portfolio--net 1.51 .23
-----------------------------
Total from investment operations 1.52 .30
-----------------------------
Less dividends and distributions:
In excess of investment income--net (.08) --
Realized gain on investments from the Portfolio--net (.11) --
-----------------------------
Total dividends and distributions (.19) --
-----------------------------
Net asset value, end of period $ 11.63 $ 10.30
=============================
--------------------------------------------------------------------------------------------
Total Investment Return:**
Based on net asset value per share 14.69% 3.00%++++
=============================
--------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses+++ 1.49% 1.66%*
=============================
Investment income--net .08% 1.05%*
=============================
--------------------------------------------------------------------------------------------
Supplemental Data:
Net assets, end of period (in thousands) $ 60,497 $ 83,316
============ ============
--------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Commencement of operations.
++ Based on average shares outstanding.
+++ Includes the Fund's share of the Portfolio's allocated expenses.
++++ Aggregate total investment return.
See Notes to Financial Statements.
May 31, 2000 (14) Mercury Pan-European Growth Fund
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
MERCURY PAN-EUROPEAN GROWTH FUND
================================================================================
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
Class B
----------------------------------
For the For the Period
Year Ended Oct. 30, 1998+
Increase (Decrease) in Net Asset Value: May 31, 2000++ to May 31, 1999
--------------------------------------------------------------------------------------------
<S> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 10.25 $ 10.00
-----------------------------
Investment income (loss)--net (.08) .02
Realized and unrealized gain on investments and foreign
currency transactions from the Portfolio--net 1.50 .23
-----------------------------
Total from investment operations 1.42 .25
-----------------------------
Less dividends and distributions:
In excess of investment income--net (.03) --
Realized gain on investments from the Portfolio--net (.11) --
-----------------------------
Total dividends and distributions (.14) --
-----------------------------
Net asset value, end of period $ 11.53 $ 10.25
=============================
--------------------------------------------------------------------------------------------
Total Investment Return:**
Based on net asset value per share 13.87% 2.50%++++
=============================
--------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses+++ 2.26% 2.43%*
=============================
Investment income (loss)--net (.69%) .36%*
=============================
--------------------------------------------------------------------------------------------
Supplemental Data:
Net assets, end of period (in thousands) $ 288,124 $ 286,612
=============================
--------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Commencement of operations.
++ Based on average shares outstanding.
+++ Includes the Fund's share of the Portfolio's allocated expenses.
++++ Aggregate total investment return.
See Notes to Financial Statements.
May 31, 2000 (15) Mercury Pan-European Growth Fund
<PAGE>
FINANCIAL HIGHLIGHTS (CONCLUDED)
MERCURY PAN-EUROPEAN GROWTH FUND
================================================================================
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
Class C
----------------------------------
For the For the Period
Year Ended Oct. 30, 1998+
Increase (Decrease) in Net Asset Value: May 31, 2000++ to May 31, 1999
--------------------------------------------------------------------------------------------
<S> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 10.25 $ 10.00
-----------------------------
Investment income (loss)--net (.08) .02
Realized and unrealized gain on investments and foreign
currency transactions from the Portfolio--net 1.50 .23
-----------------------------
Total from investment operations 1.42 .25
-----------------------------
Less dividends and distributions:
In excess of investment income--net (.03) --
Realized gain on investments from the Portfolio--net (.11) --
-----------------------------
Total dividends and distributions (.14) --
-----------------------------
Net asset value, end of period $ 11.53 $ 10.25
=============================
--------------------------------------------------------------------------------------------
Total Investment Return:**
Based on net asset value per share 13.82% 2.50%++++
=============================
--------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses+++ 2.26% 2.43%*
=============================
Investment income (loss)--net (.70%) .35%*
=============================
--------------------------------------------------------------------------------------------
Supplemental Data:
Net assets, end of period (in thousands) $ 127,779 $ 142,727
=============================
--------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Commencement of operations.
++ Based on average shares outstanding.
+++ Includes the Fund's share of the Portfolio's allocated expenses.
++++ Aggregate total investment return.
See Notes to Financial Statements.
May 31, 2000 (16) Mercury Pan-European Growth Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
MERCURY PAN-EUROPEAN GROWTH FUND
================================================================================
(1) Significant Accounting Policies:
Mercury Pan-European 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 seeks to achieve its investment objective by
investing all of its assets in the Mercury Master Pan-European Growth
Portfolio (the "Portfolio") of Mercury Asset Management Master Trust (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 accounting principles generally
accepted in the United States of America, which may require the use of
management accruals and estimates. The Fund offers four classes of shares.
Class I and Class A Shares are sold with a front-end sales charge. Class B
and Class C Shares may be subject to a contingent deferred sales charge.
All classes of shares have identical voting, dividend, liquidation and
other rights and the same terms and conditions, except that Class A, Class
B and Class C Shares bear certain expenses related to the account
maintenance of such shares, and Class B and Class C Shares also bear
certain expenses related to the distribution of such shares. Each class
has exclusive voting rights with respect to matters relating to its
account maintenance and distribution expenditures (except that Class B
Shares have certain voting rights with respect to Class A expenditures).
The following is a summary of significant accounting policies followed by
the Fund.
(a) Valuation of investments--Valuation of securities is discussed in Note
1a of the Portfolio's Notes to Financial Statements, which are included
elsewhere in this report.
(b) Income--The Fund's net investment income consists of the Fund's pro
rata share of the net investment income of the Portfolio, less all actual
and accrued expenses of the Fund determined in accordance with accounting
principles generally accepted in the United States of America.
(c) Income taxes--It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies
and to distribute substantially all of its taxable income to shareholders.
Therefore, no Federal income tax provision is required. Under the
applicable foreign tax law, withholding taxes may be imposed on interest,
dividends and capital gains at various rates.
May 31, 2000 (17) Mercury Pan-European Growth Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
(d) Prepaid registration fees--Prepaid registration fees are charged to
expenses as the related shares are issued.
(e) Dividends and distributions--Dividends and distributions paid by the
Fund are recorded on the ex-dividend dates. Dividends in excess of net
investment income are due primarily to differing tax treatments for
foreign currency transactions.
(f) Investment transactions--Investment transactions are accounted for on
a trade date basis.
(g) Reclassification--Generally accepted accounting principles require
that certain components of net assets be adjusted to reflect permanent
differences between financial and tax reporting. Accordingly, current
year's permanent book/tax differences of $2,892,067 have been reclassified
between accumulated net realized capital losses and accumulated net
investment loss and $24,512 has been reclassified between accumulated net
investment loss and paid-in capital in excess of par. These
reclassifications have no effect on net assets or net asset values per
share.
(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 .25% of the Fund's average daily net assets for
the performance of administrative services (other than investment advice
and related portfolio activities) necessary for the operation of the Fund.
The Corporation has also entered into a Distribution Agreement and
Distribution Plans with Mercury Funds Distributor ("MFD" or 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%
--------------------------------------------------------------------------
May 31, 2000 (18) Mercury Pan-European Growth Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
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 year ended May 31, 2000, MFD earned underwriting discounts and
direct commissions 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 $ 2 $ 37
--------------------------------------------------------------------------
Class A $10,037 $174,825
--------------------------------------------------------------------------
For the year ended May 31, 2000, MLPF&S received contingent deferred sales
charges of $1,574,895 and $131,924 relating to transactions in Class B and
Class C Shares, respectively.
Furthermore, MLPF&S received contingent deferred sales charges of $99,059
and $5,323 relating to transactions subject to front-end sales charge
waivers in Class I and Class A Shares, respectively.
Financial Data Services, Inc. ("FDS"), an indirect wholly-owned subsidiary
of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Corporation are officers and/or
directors of Mercury International, FAM, PSI, PFD, FDS, and/or ML & Co.
(3) Investments:
Increases and decreases in the Fund's investment in the Portfolio for the
year ended May 31, 2000 were $13,987,077 and $130,103,449, respectively.
(4) Capital Share Transactions:
Net increase (decrease) in net assets derived from capital share
transactions were $(101,982,761) and $541,603,227 for the year ended May
31, 2000 and for the period October 30, 1998 to May 31, 1999.
May 31, 2000 (19) Mercury Pan-European Growth Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Transactions in capital shares for each class were as follows:
Class I Shares for the Year Ended
May 31, 2000 Shares Dollar Amount
--------------------------------------------------------------------------------
Shares sold 2,199,781 $ 25,444,355
Shares issued to shareholders in reinvestment
of dividends and distributions 49,390 577,868
----------------------------
Total issued 2,249,171 26,022,223
Shares redeemed (2,703,356) (30,700,632)
----------------------------
Net decrease (454,185) $ (4,678,409)
============================
--------------------------------------------------------------------------------
Class I Shares for the Period October 30, 1998+
to May 31, 1999 Shares Dollar Amount
--------------------------------------------------------------------------------
Shares sold 4,955,745 $ 50,769,993
Shares redeemed (1,101,548) (11,585,701)
----------------------------
Net increase 3,854,197 $ 39,184,292
============================
--------------------------------------------------------------------------------
+ Prior to October 30, 1998 (commencement of operations), the Fund issued
3,750 shares to Mercury International for $37,500.
Class A Shares for the Year Ended
May 31, 2000 Shares Dollar Amount
--------------------------------------------------------------------------------
Shares sold 482,270 $ 5,502,162
Shares issued to shareholders in reinvestment
of dividends and distributions 75,117 878,116
----------------------------
Total issued 557,387 6,380,278
Shares redeemed (3,446,031) (38,346,833)
----------------------------
Net decrease (2,888,644) $(31,966,555)
============================
--------------------------------------------------------------------------------
Class A Shares for the Period October 30, 1998+
to May 31, 1999 Shares Dollar Amount
--------------------------------------------------------------------------------
Shares sold 10,324,602 $103,931,685
Shares redeemed (2,236,704) (23,289,859)
----------------------------
Net increase 8,087,898 $ 80,641,826
============================
--------------------------------------------------------------------------------
+ Prior to October 30, 1998 (commencement of operations), the Fund issued
3,750 shares to Mercury International for $37,500.
Class B Shares for the Year Ended
May 31, 2000 Shares Dollar Amount
--------------------------------------------------------------------------------
Shares sold 1,719,545 $ 19,392,147
Shares issued to shareholders in reinvestment
of dividends and distributions 265,161 3,083,821
----------------------------
Total issued 1,984,706 22,475,968
Shares redeemed (4,946,474) (55,762,145)
----------------------------
Net decrease (2,961,768) $(33,286,177)
============================
--------------------------------------------------------------------------------
May 31, 2000 (20) Mercury Pan-European Growth Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(CONCLUDED)
Class B Shares for the Period October 30, 1998+
to May 31, 1999 Shares Dollar Amount
--------------------------------------------------------------------------------
Shares sold 29,837,631 $301,081,394
Shares redeemed (1,881,787) (19,635,007)
----------------------------
Net increase 27,955,844 $281,446,387
============================
--------------------------------------------------------------------------------
+ Prior to October 30, 1998 (commencement of operations), the Fund issued
3,750 shares to Mercury International for $37,500.
Class C Shares for the Year Ended
May 31, 2000 Shares Dollar Amount
--------------------------------------------------------------------------------
Shares sold 887,587 $ 10,055,386
Shares issued to shareholders in reinvestment
of dividends and distributions 121,468 1,413,888
----------------------------
Total issued 1,009,055 11,469,274
Shares redeemed (3,850,764) (43,520,894)
----------------------------
Net decrease (2,841,709) $(32,051,620)
============================
--------------------------------------------------------------------------------
Class C Shares for the Period October 30, 1998+
to May 31, 1999 Shares Dollar Amount
--------------------------------------------------------------------------------
Shares sold 15,587,252 $157,781,489
Shares redeemed (1,667,606) (17,450,767)
----------------------------
Net increase 13,919,646 $140,330,722
============================
--------------------------------------------------------------------------------
+ Prior to October 30, 1998 (commencement of operations), the Fund issued
3,750 shares to Mercury International for $37,500.
May 31, 2000 (21) Mercury Pan-European Growth Fund
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Mercury Pan-European Growth Fund
(One of the Series constituting Mercury Asset Management Funds, Inc.):
We have audited the accompanying statement of assets and liabilities of Mercury
Pan-European Growth Fund as of May 31, 2000, the related statements of
operations for the year then ended and changes in net assets and the financial
highlights for the year then ended and for the period October 30, 1998
(commencement of operations) to May 31, 1999. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Mercury Pan-European
Growth Fund as of May 31, 2000, the results of its operations for the year then
ended and the changes in its net assets, and the financial highlights for the
year then ended and for the period from October 30, 1998 (commencement of
operations) to May 31, 1999, in accordance with accounting principles generally
accepted in the United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
July 17, 2000
May 31, 2000 (22) Mercury Pan-European Growth Fund
<PAGE>
SCHEDULE OF INVESTMENTS
MERCURY MASTER PAN-EUROPEAN GROWTH PORTFOLIO
================================================================================
<TABLE>
<CAPTION>
In US Dollars
-------------------------
Shares Percent of
Industries Held Investments Value Net Assets
--------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C>
Auto Components
France 42,426 Valeo SA $ 2,136,481 0.4%
Total Investments in
Auto Components 2,136,481 0.4
--------------------------------------------------------------------------------------------------
Automobiles
Germany 40,000 DaimlerChrysler AG 2,155,278 0.4
--------------------------------------------------------------------------------------------------
Total Investments in Automobiles 2,155,278 0.4
--------------------------------------------------------------------------------------------------
Banks
France 85,000 Banque Nationale de Paris (BNP) 7,626,706 1.5
--------------------------------------------------------------------------------------------------
Germany 46,000 Deutsche Bank AG (Registered Shares) 3,532,281 0.7
67,000 HypoVereinsbank 4,330,865 0.8
---------------------
7,863,146 1.5
--------------------------------------------------------------------------------------------------
Ireland 50,000 Allied Irish Banks PLC 459,063 0.1
--------------------------------------------------------------------------------------------------
Italy 1,200,000 Banca Intesa SpA 4,707,482 0.9
20 Banca Intesa SpA (Rights) 0 0.0
870,000 Unicredito Italiano SpA 3,824,412 0.7
---------------------
8,531,894 1.6
--------------------------------------------------------------------------------------------------
Spain 240,000 Banco Bilbao Vizcaya, SA 3,338,640 0.6
570,000 Banco Santander Central Hispano, SA 5,555,775 1.1
---------------------
8,894,415 1.7
--------------------------------------------------------------------------------------------------
Switzerland 1,400 Julius Baer Holdings Ltd. 4,997,050 1.0
57,500 UBS AG (Registered) 7,726,032 1.5
---------------------
12,723,082 2.5
--------------------------------------------------------------------------------------------------
United Kingdom 190,000 Barclays PLC 4,938,638 0.9
610,000 HSBC Holdings PLC 6,728,841 1.3
460,000 Lloyds TSB Group PLC 4,977,949 1.0
---------------------
16,645,428 3.2
--------------------------------------------------------------------------------------------------
Total Investments in Banks 62,743,734 12.1
--------------------------------------------------------------------------------------------------
Chemicals
Germany 315,000 Bayer AG 12,079,617 2.3
--------------------------------------------------------------------------------------------------
Netherlands 90,000 Akzo Nobel NV 3,414,594 0.7
--------------------------------------------------------------------------------------------------
Total Investments in Chemicals 15,494,211 3.0
--------------------------------------------------------------------------------------------------
</TABLE>
May 31, 2000 (23) Mercury Pan-European Growth Fund
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
In US Dollars
-------------------------
Shares Percent of
Industries Held Investments Value Net Assets
--------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C>
Commercial Services & Supplies
Denmark 60,000 +ISS A/S $ 4,322,713 0.8%
--------------------------------------------------------------------------------------------------
France 8,724 +Atos SA 847,899 0.2
--------------------------------------------------------------------------------------------------
Switzerland 5,000 Adecco SA (Registered Shares) 3,929,204 0.8
--------------------------------------------------------------------------------------------------
United Kingdom 1,000,000 Hays PLC 5,605,125 1.1
--------------------------------------------------------------------------------------------------
Total Investments in Commercial
Services & Supplies 14,704,941 2.9
--------------------------------------------------------------------------------------------------
Communications Equipment
Finland 454,000 Nokia Oyj 23,494,010 4.6
--------------------------------------------------------------------------------------------------
Sweden 800,000 Telefonaktiebolaget LM Ericsson AB 'B' 16,198,824 3.1
--------------------------------------------------------------------------------------------------
United Kingdom 360,000 Marconi PLC 4,331,641 0.8
--------------------------------------------------------------------------------------------------
Total Investments in
Communications Equipment 44,024,475 8.5
--------------------------------------------------------------------------------------------------
Construction & Engineering
Austria 47,720 VA Technologie AG 2,606,208 0.5
--------------------------------------------------------------------------------------------------
Total Investments in
Construction & Engineering 2,606,208 0.5
--------------------------------------------------------------------------------------------------
Construction Materials
Germany 30,074 Heidelberger Zement AG 1,743,164 0.3
--------------------------------------------------------------------------------------------------
Total Investments in
Construction Materials 1,743,164 0.3
--------------------------------------------------------------------------------------------------
Diversified Financials
Belgium 210,000 Fortis (B) 5,423,899 1.0
--------------------------------------------------------------------------------------------------
Netherlands 155,000 ING Groep NV 9,215,620 1.8
--------------------------------------------------------------------------------------------------
Total Investments in
Diversified Financials 14,639,519 2.8
--------------------------------------------------------------------------------------------------
Diversified Telecommunication Services
France 36,360 France Telecom SA 5,277,221 1.0
--------------------------------------------------------------------------------------------------
Germany 140,000 Deutsche Telekom AG
(Registered Shares) 8,699,012 1.7
--------------------------------------------------------------------------------------------------
Greece 110,000 Hellenic Telecommunications
Organization SA (OTE) 2,697,993 0.5
--------------------------------------------------------------------------------------------------
Italy 950,000 Olivetti SpA 3,206,949 0.6
775,000 Telecom Italia SpA (Registered) 4,779,588 0.9
---------------------
7,986,537 1.5
--------------------------------------------------------------------------------------------------
Netherlands 32,000 +KPN NV 2,872,714 0.6
--------------------------------------------------------------------------------------------------
</TABLE>
May 31, 2000 (24) Mercury Pan-European Growth Fund
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
In US Dollars
-------------------------
Shares Percent of
Industries Held Investments Value Net Assets
--------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C>
Diversified Telecommunication Services (concluded)
Spain 550,000 +Telefonica SA $ 11,221,540 2.2%
--------------------------------------------------------------------------------------------------
United Kingdom 640,000 British Telecommunications PLC 9,269,532 1.8
152,625 Cable & Wireless PLC 2,543,634 0.5
---------------------
11,813,166 2.3
--------------------------------------------------------------------------------------------------
United States 29,092 +NTL Incorporated 1,716,399 0.3
--------------------------------------------------------------------------------------------------
Total Investments in Diversified
Telecommunication Services 52,284,582 10.1
--------------------------------------------------------------------------------------------------
Electrical Equipment
Switzerland 37,500 ABB Ltd. 4,634,956 0.9
--------------------------------------------------------------------------------------------------
Total Investments in
Electrical Equipment 4,634,956 0.9
--------------------------------------------------------------------------------------------------
Food & Drug Retailing
France 45,000 Carrefour SA 3,165,448 0.6
--------------------------------------------------------------------------------------------------
United Kingdom 1,650,000 Tesco PLC 4,981,835 1.0
--------------------------------------------------------------------------------------------------
Total Investments in
Food & Drug Retailing 8,147,283 1.6
--------------------------------------------------------------------------------------------------
Food Products
Netherlands 125,000 Koninklijke Numico NV 5,351,098 1.0
--------------------------------------------------------------------------------------------------
Switzerland 620 Lindt & Spruengli AG 'R' 3,361,534 0.7
4,350 Nestle SA (Registered Shares) 8,263,717 1.6
---------------------
11,625,251 2.3
--------------------------------------------------------------------------------------------------
United Kingdom 570,000 Unilever PLC 3,759,357 0.7
--------------------------------------------------------------------------------------------------
Total Investments in Food Products 20,735,706 4.0
--------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure
France 145,000 Accor SA 5,848,231 1.2
--------------------------------------------------------------------------------------------------
United Kingdom 430,000 Compass Group PLC 4,813,980 0.9
--------------------------------------------------------------------------------------------------
Total Investments in Hotels,
Restaurants & Leisure 10,662,211 2.1
--------------------------------------------------------------------------------------------------
Household Durables
Netherlands 148,000 Koninklijke (Royal) Philips
Electronics NV 6,569,034 1.3
--------------------------------------------------------------------------------------------------
Total Investments in
Household Durables 6,569,034 1.3
--------------------------------------------------------------------------------------------------
IT Consulting & Services
France 13,594 Cap Gemini SA 2,532,762 0.5
--------------------------------------------------------------------------------------------------
Total Investments in IT
Consulting & Services 2,532,762 0.5
--------------------------------------------------------------------------------------------------
</TABLE>
May 31, 2000 (25) Mercury Pan-European Growth Fund
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
In US Dollars
-------------------------
Shares Percent of
Industries Held Investments Value Net Assets
--------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C>
Industrial Conglomerates
Germany 105,000 Siemens AG $ 15,463,468 3.0%
--------------------------------------------------------------------------------------------------
Total Investments in
Industrial Conglomerates 15,463,468 3.0
--------------------------------------------------------------------------------------------------
Insurance
France 60,000 Axa 8,791,752 1.7
50,000 Axa (Rights) 88,567 0.0
---------------------
8,880,319 1.7
--------------------------------------------------------------------------------------------------
Germany 13,500 Allianz AG (Registered Shares) 4,851,461 0.9
9,570 Marschollek, Lautenschlaeger
und Partner AG (Preferred) 4,526,361 0.9
596 Marschollek, Lautenschlaeger
und Partner AG 208,379 0.0
12,000 Muenchener Rueckversicherungs-
Gesellschaft AG (Registered Shares) 3,505,572 0.7
---------------------
13,091,773 2.5
--------------------------------------------------------------------------------------------------
Sweden 210,000 Skandia Forsakrings AB 5,358,926 1.1
--------------------------------------------------------------------------------------------------
United Kingdom 465,000 Allied Zurich PLC 5,212,766 1.0
--------------------------------------------------------------------------------------------------
Total Investments in Insurance 32,543,784 6.3
--------------------------------------------------------------------------------------------------
Machinery
Sweden 160,000 Atlas Copco AB 'A' 3,550,427 0.7
--------------------------------------------------------------------------------------------------
United Kingdom 1,200,000 Invensys PLC 4,125,372 0.8
--------------------------------------------------------------------------------------------------
Total Investments in Machinery 7,675,799 1.5
--------------------------------------------------------------------------------------------------
Media
Belgium 45,000 Compagnie Luxembourgeoise pour
l'Audio-Visuel et la Finance (Audiofina) 5,091,426 1.0
--------------------------------------------------------------------------------------------------
Netherlands 70,000 VNU NV 3,551,015 0.7
2,711 Wolters Kluwer NV 'A' 65,897 0.0
---------------------
3,616,912 0.7
--------------------------------------------------------------------------------------------------
United Kingdom 577,200 Reed International PLC 3,813,315 0.7
--------------------------------------------------------------------------------------------------
Total Investments in Media 12,521,653 2.4
--------------------------------------------------------------------------------------------------
Metals & Mining
France 225,000 Usinor SA 2,691,779 0.5
--------------------------------------------------------------------------------------------------
United Kingdom 240,000 Rio Tinto PLC (Registered Shares) 3,540,645 0.7
--------------------------------------------------------------------------------------------------
Total Investments in Metals & Mining 6,232,424 1.2
--------------------------------------------------------------------------------------------------
</TABLE>
May 31, 2000 (26) Mercury Pan-European Growth Fund
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
In US Dollars
-------------------------
Shares Percent of
Industries Held Investments Value Net Assets
--------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C>
Multi-Utilities
France 90,000 Vivendi $ 9,598,590 1.9%
--------------------------------------------------------------------------------------------------
Germany 85,000 Veba AG 4,335,595 0.8
--------------------------------------------------------------------------------------------------
Total Investments in Multi-Utilities 13,934,185 2.7
--------------------------------------------------------------------------------------------------
Multiline Retail
France 34,000 Pinault-Printemps-Redoute SA 7,274,340 1.4
--------------------------------------------------------------------------------------------------
Total Investments in Multiline Retail 7,274,340 1.4
--------------------------------------------------------------------------------------------------
Oil & Gas
France 82,500 Total Fina SA 'B' 12,922,623 2.5
--------------------------------------------------------------------------------------------------
United Kingdom 1,550,000 BP Amoco PLC 14,097,637 2.7
1,870,000 Shell Transport & Trading Company 15,463,830 3.0
---------------------
29,561,467 5.7
--------------------------------------------------------------------------------------------------
Total Investments in Oil & Gas 42,484,090 8.2
--------------------------------------------------------------------------------------------------
Personal Products
France 5,750 L'Oreal SA 3,938,088 0.8
--------------------------------------------------------------------------------------------------
Total Investments in
Personal Products 3,938,088 0.8
--------------------------------------------------------------------------------------------------
Pharmaceuticals
France 115,000 Sanofi-Synthelabo SA 4,985,934 1.0
--------------------------------------------------------------------------------------------------
Switzerland 6,750 Novartis AG (Registered Shares) 9,915,929 1.9
900 Roche Holding AG (Genuss) 9,451,327 1.9
---------------------
19,367,256 3.8
--------------------------------------------------------------------------------------------------
United Kingdom 115,000 AstraZeneca Group PLC 4,843,874 0.9
310,000 Glaxo Wellcome PLC 8,757,447 1.7
445,000 SmithKline Beecham PLC 5,680,308 1.1
---------------------
19,281,629 3.7
--------------------------------------------------------------------------------------------------
Total Investments in Pharmaceuticals 43,634,819 8.5
--------------------------------------------------------------------------------------------------
Software
Germany 7,144 SAP AG (Systeme, Anwendungen,
Produkte in der Datenverarbeitung)
(Preferred) 3,763,196 0.7
47,000 Software AG 4,162,635 0.8
--------------------------------------------------------------------------------------------------
Total Investments in Software 7,925,831 1.5
--------------------------------------------------------------------------------------------------
</TABLE>
May 31, 2000 (27) Mercury Pan-European Growth Fund
<PAGE>
SCHEDULE OF INVESTMENTS (CONCLUDED)
<TABLE>
<CAPTION>
In US Dollars
-------------------------
Shares Percent of
Industries Held Investments Value Net Assets
--------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C>
Textiles & Apparel
France 8,500 LVMH (Louis Vuitton Moet Hennessy) $ 3,446,404 0.7%
--------------------------------------------------------------------------------------------------
Total Investments in
Textiles & Apparel 3,446,404 0.7
--------------------------------------------------------------------------------------------------
Wireless Telecommunication Services
Italy 1,050,000 Telecom Italia Mobile (TIM) SpA 4,401,440 0.9
--------------------------------------------------------------------------------------------------
Portugal 170,000 +Telecel-Comunicacoes Pessoais, SA 2,743,249 0.5
--------------------------------------------------------------------------------------------------
United Kingdom 5,900,000 Vodafone AirTouch PLC 26,897,127 5.2
--------------------------------------------------------------------------------------------------
Total Investments in Wireless
Telecommunication Services 34,041,816 6.6
--------------------------------------------------------------------------------------------------
Total Investments
(Cost--$417,583,041) 496,931,246 96.2
Other Assets Less Liabilities 932,594 0.2
Foreign Time Deposits* 18,781,000 3.6
---------------------
Net Assets $516,644,840 100.0%
=====================
--------------------------------------------------------------------------------------------------
</TABLE>
+ Non-income producing security.
* Foreign time deposits bear interest at 6.75% and mature on 6/01/2000.
See Notes to Financial Statements.
May 31, 2000 (28) Mercury Pan-European Growth Fund
<PAGE>
STATEMENT OF ASSETS
AND LIABILITIES
As of May 31, 2000
--------------------------------------------------------------------------------
MERCURY MASTER PAN-EUROPEAN GROWTH PORTFOLIO
================================================================================
Assets:
Investments, at value (identified
cost--$417,583,041) $496,931,246
Cash 582
Foreign cash 15,437
Foreign time deposits 18,781,000
Receivables:
Securities sold $ 19,044,835
Dividends 1,795,649
Contributions 321,142
Interest 3,522 21,165,148
-----------------------------
Total assets 536,893,413
------------
--------------------------------------------------------------------------------
Liabilities:
Payables:
Securities purchased 19,119,978
Withdrawals 665,103
Investment adviser 272,271 20,057,352
------------
Accrued expenses 191,221
------------
Total liabilities 20,248,573
------------
--------------------------------------------------------------------------------
Net Assets:
Net assets $516,644,840
============
--------------------------------------------------------------------------------
Net Assets Consist of:
Partners' capital $437,411,145
Unrealized appreciation on investments
and foreign currency transactions--net 79,233,695
------------
Net assets $516,644,840
============
--------------------------------------------------------------------------------
See Notes to Financial Statements.
May 31, 2000 (29) Mercury Pan-European Growth Fund
<PAGE>
STATEMENT OF OPERATIONS
For the Year Ended May 31, 2000
--------------------------------------------------------------------------------
MERCURY MASTER PAN-EUROPEAN GROWTH PORTFOLIO
================================================================================
<TABLE>
<S> <C> <C>
Investment Income:
Dividends (net of $1,161,649 foreign withholding tax) $ 8,583,859
Interest and discount earned 125,475
------------
Total income 8,709,334
------------
-------------------------------------------------------------------------------------
Expenses:
Investment advisory fees $ 4,151,090
Custodian fees 442,426
Professional fees 74,048
Accounting services 44,547
Trustees' fees and expenses 26,262
Interest expense 8,667
Pricing fees 5,754
Other 9,628
------------
Total expenses 4,762,422
------------
Investment income--net 3,946,912
------------
-------------------------------------------------------------------------------------
Realized & Unrealized Gain (Loss) on Investments &
Foreign Currency Transactions--Net:
Realized gain (loss) from:
Investments--net 448,294
Foreign currency transactions--net (328,441) 119,853
------------
Change in unrealized appreciation/depreciation on:
Investments--net 75,495,051
Foreign currency transactions--net 2,563 75,497,614
----------------------------
Net Increase in Net Assets Resulting from Operations $ 79,564,379
============
-------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
May 31, 2000 (30) Mercury Pan-European Growth Fund
<PAGE>
STATEMENTS OF CHANGES
IN NET ASSETS
MERCURY MASTER PAN-EUROPEAN GROWTH PORTFOLIO
================================================================================
<TABLE>
<CAPTION>
For the For the Period
Year Ended Oct. 30, 1998+
Increase (Decrease) in Net Asset Value: May 31, 2000 to May 31, 1999
-------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Investment income--net $ 3,946,912 $ 6,010,445
Realized gains on investments and foreign
currency transactions--net 119,853 5,212,573
Change in unrealized appreciation/depreciation on
investments and foreign currency transactions--net 75,497,614 3,736,081
------------------------------
Net increase in net assets resulting from operations 79,564,379 14,959,099
------------------------------
-------------------------------------------------------------------------------------
Net Capital Contributions:
Increase (decrease) in net assets derived from net
capital contributions (116,116,372) 538,087,634
------------------------------
-------------------------------------------------------------------------------------
Net Assets:
Total increase (decrease) in net assets (36,551,993) 553,046,733
Beginning of period 553,196,833 150,100
------------------------------
End of period $ 516,644,840 $ 553,196,833
==============================
-------------------------------------------------------------------------------------
</TABLE>
+ Commencement of operations.
See Notes to Financial Statements.
May 31, 2000 (31) Mercury Pan-European Growth Fund
<PAGE>
FINANCIAL HIGHLIGHTS
MERCURY MASTER PAN-EUROPEAN GROWTH PORTFOLIO
================================================================================
The following ratios have been derived from information provided in the
financial statements.
For the For the Period
Year Ended Oct. 30, 1998+
May 31, 2000 to May 31, 1999
------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses .86% .89%*
============================
Investment income--net .71% 1.88%*
============================
------------------------------------------------------------------------------
Supplemental Data:
Net assets, end of period (in thousands) $ 516,645 $ 553,197
============================
Portfolio turnover 55.61% 18.95%
============================
------------------------------------------------------------------------------
* Annualized.
+ Commencement of operations.
See Notes to Financial Statements.
May 31, 2000 (32) Mercury Pan-European Growth Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
MERCURY MASTER PAN-EUROPEAN GROWTH PORTFOLIO
================================================================================
(1) Significant Accounting Policies:
Mercury Master Pan-European Growth Portfolio (the "Portfolio") is part of
Mercury Asset Management Master Trust (the "Trust"). The Trust is
registered under the Investment Company Act of 1940 and is organized as a
Delaware business trust. The Portfolio's financial statements are prepared
in accordance with accounting principles generally accepted in the United
States of America, which may require the use of management accruals and
estimates. The following is a summary of significant accounting policies
followed by the Portfolio.
(a) Valuation of investments--Portfolio securities that are traded on
stock exchanges are valued at the last sale price as of the close of
business on the day the securities are being valued or, lacking any sales,
at the last available bid price for long positions and the last available
ask price for short positions. Securities traded in the over-the-counter
market are valued at the last available bid price prior to the time of
valuation. Securities traded both in the over-the-counter market and on a
stock exchange are valued according to the broadest and most
representative market. Short positions in securities traded in the
over-the-counter market are valued at the last available ask price prior
to the time of valuation. Options written or purchased are valued at the
last sale price in the case of exchange-traded options. In the case of
options traded in the over-the-counter market, valuation is the last asked
price (options written) or the last bid price (options purchased).
Short-term securities are valued at amortized cost, which approximates
market value. Other investments, including futures contracts and related
options, are stated at market value. Securities and assets for which
market quotations are not readily available are valued at fair market
value, as determined in good faith by or under the direction of the
Trust's Board of Trustees.
(b) Derivative financial instruments--The Portfolio may engage in various
portfolio investment strategies to increase or decrease the level of risk
to which the Portfolio is exposed more quickly and efficiently than
transactions in other types of instruments. Losses may arise due to
changes in the value of the contract or if the counterparty does not
perform under the contract.
o Financial futures contracts--The Portfolio may purchase or sell
financial futures contracts and options on such futures contracts for the
purpose of hedging the market risk on existing securities or the intended
purchase of securities. Upon entering into a contract, the Portfolio
deposits and maintains as collateral such initial margin as required 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
May 31, 2000 (33) Mercury Pan-European Growth Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
closed, the Portfolio records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and
the value at the time it was closed.
o Options--The Portfolio is authorized to purchase and write call and put
options. When the Portfolio writes an option, an amount equal to the
premium received by the Portfolio is reflected as an asset and an
equivalent liability. The amount of the liability is subsequently marked
to market to reflect the current market value of the option written. When
a security is purchased or sold through an exercise of an option, the
related premium paid (or received) is added to (or deducted from) the
basis of the security acquired or deducted from (or added to) the proceeds
of the security sold. When an option expires (or the Portfolio enters into
a closing transaction), the Portfolio realizes a gain or loss on the
option to the extent of the premiums received or paid (or a gain or loss
to the extent that the cost of the closing transaction exceeds the premium
paid or received).
Written and purchased options are non-income producing investments.
o Forward foreign exchange contracts--The Portfolio is authorized to enter
into forward foreign exchange contracts as a hedge against either specific
transactions or portfolio positions. Such contracts are not entered on the
Portfolio's records. However, the effect on operations is recorded from
the date the Portfolio enters into such contracts.
o Foreign currency options and futures--The Portfolio may also purchase or
sell listed or over-the-counter foreign currency options, foreign currency
futures and related options on foreign currency futures as a short or long
hedge against possible variations in foreign exchange rates. Such
transactions may be effected with respect to hedges on non-US
dollar-denominated securities owned by the Portfolio, sold by the
Portfolio but not yet delivered, or committed or anticipated to be
purchased by the Portfolio.
(c) Foreign currency transactions--Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized.
Assets and liabilities denominated in foreign currencies are valued at the
exchange rate at the end of the period. Foreign currency transactions are
the result of settling (realized) or valuing (unrealized) assets or
liabilities expressed in foreign currencies into US dollars. Realized and
unrealized gains or losses from investments include the effects of foreign
exchange rates on investments.
(d) Income taxes--The Portfolio is classified as a partnership for Federal
income tax purposes. As a partnership for Federal income tax purposes, the
Portfolio will not incur Federal income tax liability. Items of
partnership income, gain, loss and deduction will pass through to
investors as partners in the Portfolio. Therefore, no Federal income tax
May 31, 2000 (34) Mercury Pan-European Growth Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
provision is required. Under the applicable foreign tax law, withholding
taxes may be imposed on interest, dividends, and capital gains at various
rates.
(e) Security transactions and investment income--Security transactions are
accounted for on the date the securities are purchased or sold (the trade
dates). Dividend income is recorded on the ex-dividend dates. Dividends
from foreign securities where the ex-dividend date may have passed are
subsequently recorded when the Portfolio has determined the ex-dividend
date. Interest income (including amortization of discount) is recognized
on the accrual basis. Realized gains and losses on security transactions
are determined on the identified cost basis.
(2) Investment Advisory Agreement and Transactions with Affiliates:
The Trust has entered into an Investment Advisory Agreement with Mercury
Asset Management International Ltd. ("Mercury International"), an
affiliate of Fund Asset Management, L.P. ("FAM"). The general partner of
FAM is Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the limited
partner.
Mercury International is responsible for the management of the Portfolio's
investments and provides the necessary personnel, facilities, equipment
and certain other services necessary to the operations of the Portfolio.
For such services, the Portfolio pays a monthly fee at an annual rate of
.75% 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.
In addition, MLPF&S received $46,344 in commissions on the execution of
portfolio security transactions for the Portfolio for the year ended May
31, 2000.
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 year ended May 31, 2000, were $301,746,084 and $425,253,274,
respectively.
May 31, 2000 (35) Mercury Pan-European Growth Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(CONCLUDED)
Net realized gains (losses) for the year ended May 31, 2000 and net
unrealized gains (losses) as of May 31, 2000 were as follows:
Realized Unrealized
Gains (Losses) Gains (Losses)
-------------------------------------------------------------------------------
Long-term Investments $ 448,294 $ 79,348,205
Foreign currency transactions (328,441) (114,510)
-----------------------------
Total $ 119,853 $ 79,233,695
=============================
-------------------------------------------------------------------------------
As of May 31, 2000, net unrealized appreciation for Federal income tax
purposes aggregated $78,773,251, of which $100,735,551 related to
appreciated securities and $21,962,300 related to depreciated securities.
At May 31, 2000, the aggregate cost of investments for Federal income tax
purposes was $418,157,995.
(4) Commitments:
At May 31, 2000, the Portfolio had entered into foreign exchange contracts
under which it had agreed to purchase and sell various foreign currencies
with approximate values of $13,910,000 and $13,920,000, respectively.
May 31, 2000 (36) Mercury Pan-European Growth Fund
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Investors,
Mercury Master Pan-European Growth Portfolio
(One of the Series constituting Mercury Asset Management Master Trust):
We have audited the accompanying statement of assets and liabilities of Mercury
Master Pan-European Growth Portfolio, including the schedule of investments, as
of May 31, 2000, the related statements of operations for the year then ended
and changes in net assets and the financial highlights for the year then ended
and for the period October 30, 1998 (commencement of operations) to May 31,
1999. These financial statements and financial highlights are the responsibility
of the Portfolio's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned at May 31, 2000 by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Mercury Master
Pan-European Growth Portfolio as of May 31, 2000, the results of its operation
for the year then ended and the changes in its net assets, and the financial
highlights for the year then ended and for the period from October 30, 1998
(commencement of operations) to May 31, 1999, in accordance with accounting
principles generally accepted in the United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
July 17, 2000
May 31, 2000 (37) Mercury Pan-European Growth Fund
<PAGE>
MERCURY MASTER PAN-EUROPEAN
GROWTH PORTFOLIO (UNAUDITED)
INDUSTRY WEIGHTINGS RELATIVE TO THE MSCI EUROPE INDEX
================================================================================
Portfolio Index Portfolio
As of May 31, 2000 Allocation Allocation Versus Index
--------------------------------------------------------------------------------
CONSUMER DISCRETIONARY
Auto Components 0.5% 0.4% +0.1
Automobiles 0.5 1.4 -0.9
Hotels, Restaurants & Leisure 2.2 0.9 +1.3
Household Durables 1.2 1.1 +0.1
Internet & Catalog Retail 0.0 0.1 -0.1
Media 2.4 2.9 -0.5
Multiline Retail 1.5 1.1 +0.4
Specialty Retail 0.0 0.6 -0.6
Textiles & Apparel 0.6 0.9 -0.3
--------------------------------------------------------------------------------
Total Consumer Discretionary 8.9 9.4 -0.5
--------------------------------------------------------------------------------
CONSUMER STAPLES
Beverages 0.0 1.0 -1.0
Food & Drug Retailing 1.6 1.9 -0.3
Food Products 4.1 2.7 +1.4
Personal Products 0.7 0.8 -0.1
Tobacco 0.0 0.3 -0.3
--------------------------------------------------------------------------------
Total Consumer Staples 6.4 6.7 -0.3
--------------------------------------------------------------------------------
ENERGY
Energy Equipment & Service 0.0 0.1 -0.1
Oil & Gas 8.2 8.2 0.0
--------------------------------------------------------------------------------
Total Energy 8.2 8.3 -0.1
--------------------------------------------------------------------------------
FINANCIALS
Banks 11.8 12.8 -1.0
Diversified Financials 2.8 1.8 +1.0
Insurance 6.5 6.9 -0.4
Real Estate 0.0 0.6 -0.6
--------------------------------------------------------------------------------
Total Financials 21.1 22.1 -1.0
--------------------------------------------------------------------------------
HEALTH CARE
Biotechnology 0.0 0.1 -0.1
Health Care Equipment & Supplies 0.0 0.2 -0.2
Health Care Providers & Services 0.0 0.2 -0.2
Pharmaceuticals 8.5 8.7 -0.2
--------------------------------------------------------------------------------
Total Health Care 8.5 9.2 -0.7
--------------------------------------------------------------------------------
May 31, 2000 (38) Mercury Pan-European Growth Fund
<PAGE>
MERCURY MASTER PAN-EUROPEAN
GROWTH PORTFOLIO (UNAUDITED) (CONCLUDED)
Portfolio Index Portfolio
As of May 31, 2000 Allocation Allocation Versus Index
--------------------------------------------------------------------------------
INDUSTRIALS
Aerospace & Defense 0.0 0.4 -0.4
Air Freight & Couriers 0.0 0.3 -0.3
Airlines 0.0 0.4 -0.4
Building Products 0.0 0.3 -0.3
Commercial Services & Supplies 2.7 1.0 +1.7
Construction & Engineering 0.5 0.6 -0.1
Electrical Equipment 0.8 0.8 0.0
Industrial Conglomerates 2.9 1.7 +1.2
Machinery 1.3 1.1 +0.2
Marine 0.0 0.6 -0.6
Road & Rail 0.0 0.1 -0.1
Trading Companies & Distributors 0.0 0.1 -0.1
Transportation Infrastructure 0.0 0.2 -0.2
--------------------------------------------------------------------------------
Total Industrials 8.2 7.6 +0.6
--------------------------------------------------------------------------------
INFORMATION TECHNOLOGY
Communications Equipment 8.7% 8.0% +0.7
Computers & Peripherals 0.0 0.1 -0.1
IT Consulting & Services 0.4 0.8 -0.4
Semiconductor Equipment & Products 0.0 1.2 -1.2
Software 1.7 1.2 +0.5
--------------------------------------------------------------------------------
Total Information Technology 10.8 11.3 -0.5
--------------------------------------------------------------------------------
MATERIALS
Chemicals 3.0 1.5 +1.5
Construction Materials 0.4 0.8 -0.4
Containers & Packaging 0.0 0.1 -0.1
Metals & Mining 1.2 0.8 0.4
Paper & Forest Products 0.0 0.3 -0.3
--------------------------------------------------------------------------------
Total Materials 4.6 3.5 +1.1
--------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES
Diversified Telecommunication
Services 10.1 11.1 -1.0
Wireless Telecommunications
Services 6.7 5.5 +1.2
--------------------------------------------------------------------------------
Total Telecommunication Services 16.8 16.6 +0.2
--------------------------------------------------------------------------------
UTILITIES
Electric Utilities 0.0 2.5 -2.5
Gas Utilities 0.0 0.7 -0.7
Multi-Utilities 2.7 2.0 +0.7
Water Utilities 0.0 0.1 -0.1
--------------------------------------------------------------------------------
Total Utilities 2.7 5.3 -2.6
--------------------------------------------------------------------------------
CASH/CASH EQUIVALENT 3.8 0.0 +3.8
--------------------------------------------------------------------------------
TOTAL 100.0% 100.0%
--------------------------------------------------------------------------------
May 31, 2000 (39) Mercury Pan-European Growth Fund
<PAGE>
OFFICERS AND DIRECTORS
Jeffrey M. Peek, Director and President
David O. Beim, Director
James T. Flynn, Director
W. Carl Kester, Director
Karen P. Robards, Director
Terry K. Glenn, Director and
Executive Vice President
Peter John Gibbs, Senior Vice President
Donald C. Burke, Vice President and
Treasurer
Robert E. Putney, III, Secretary
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(888) 763-2260
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of the Fund unless accompanied or preceded by the Fund's
current prospectus. Past performance results shown in this report should not be
considered a representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Statements and other information
herein are as dated and are subject to change.
The Fund seeks long-term capital growth through investments primarily in a
diversified portfolio of equity securities of companies located in Europe. The
Fund will seek to achieve its objective by investing all of its assets in
Mercury Master Pan-European Growth Portfolio of Mercury Asset Management Master
Trust, which has the same investment objective as the Fund. The Fund's
investment experience will correspond to the investment experience of the
Portfolio.
Mercury Pan-European Growth Fund of
Mercury Asset Management Funds, Inc.
Box 9011
Princeton, NJ
08543-9011
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