SEMI-ANNUAL REPORT
NOVEMBER 30, 1999
Mercury
Gold and
Mining
Fund
OF MERCURY ASSET
MANAGEMENT FUNDS, INC.
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
The Fund seeks long-term capital growth through investments
primarily in stocks of gold mining companies, and to a lesser extent
of companies engaged in other mining activities located throughout
the world. The Fund will seek to achieve its objective by investing
all of its assets in Mercury Master Gold and Mining 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. Prices of
gold mining shares are volatile. An investment in this Fund should
be considered for diversification reasons and not as a complete
investment plan.
Mercury Gold and Mining Fund of
Mercury Asset Management Funds, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MERCURY MASTER GOLD AND MINING
PORTFOLIO
BREAKDOWN OF STOCKS BY SECTOR
A pie chart illustrating the following percentages
(As a Percentage of Net Assets as of November 30, 1999)
Gold 86.8%
Silver 3.6%
Platinum 6.4%
Cash 3.2%
GEOGRAPHIC ASSET MIX
As a Percentage of Net Assets as of November 30, 1999
FT Gold Mercury Gold and
Mines Index++ Mining Portfolio
Australasia 13.4% 14.3%
North America 59.1 41.1
Latin America 3.5 7.8
South Africa 21.6 29.9
Africa 2.4 3.7
Cash -- 3.2
Total 100.0% 100.0%
[FN]
++An unmanaged geographically diversified Index of leading gold
mining companies.
November 30, 1999 2 Mercury Gold and Mining Fund
DEAR SHAREHOLDER
We are pleased to provide this semi-annual report to shareholders.
For the three months ended November 30, 1999, Mercury Gold and
Mining Fund's Class I, Class A, Class B and Class C Shares had total
returns of +11.11%, +11.13%, +10.89% and +10.89%, respectively. The
Fund's unmanaged benchmark, the Financial Times (FT) Gold Mines
Index, had a return of +4.75% over the same three-month period.
(Investment results shown do not reflect sales charges and would be
lower if sales charges were included. Complete performance
information can be found on pages 6 and 7 of this report to
shareholders.)
Investment Review
The three months ended November 30, 1999 were a dramatic and
volatile period in the gold market. On August 25, 1999, gold reached
a 20-year low of US$252 per ounce. Then, in early October, gold
recorded its strongest rise in 18 years, peaking at US$338 per ounce
on October 5, 1999. By the end of the quarter, gold investors were
left disappointed with the price slipping back below US$300 per
ounce. Gold shares also experienced extreme volatility but ended the
period up by 13% as measured by the benchmark FT Gold Mines Index.
We did not foresee that gold could fall as far as it did. When the
Fund was launched back in February, gold was US$287 per ounce, and
we felt strongly that the bottom in the gold price and gold shares
had been seen. However, following the news on May 7, 1999 that the
Bank of England planned to sell some of its gold holdings, gold
slumped to a low of US$252 per ounce by August. Interestingly,
despite the collapse in the gold price, gold shares themselves did
not hit new lows.
Despite being faced with fresh lows in the gold price, our best
decision during the November quarter was to continue to position the
Portfolio for a major rally. Our positive stance was vindicated
following the announcement of the Washington Agreement on September
26, 1999. The Agreement, between the European central banks,
restricts gold sales by these banks to a maximum of 400 tonnes per
year over the next five years. In addition, the Agreement prevents
any increase in gold lending by these central banks. In the
immediate aftermath of this surprise announcement, gold staged its
largest upward move in 18 years, climbing by US$80 per ounce to
reach US$338 per ounce. Gold shares initially performed strongly as
we had been expecting, and the benchmark FT Gold Mines Index rose by
42% from the level just prior to the Washington Agreement
announcement to the high reached on October 5, 1999. The Fund also
performed well during this time.
November 30, 1999 3 Mercury Gold and Mining Fund
The frustration for shareholders in the Fund is that after initially
doing well, the performance of gold shares waned despite the
dramatic increase in the gold price. The main reason for this
lackluster performance was that a higher gold price threatened the
solvency of certain gold mining companies, which had undertaken
aggressive gold hedging programs. This bizarre situation was
highlighted by the gold hedging misfortunes of Ashanti Goldfields
Company Ltd. and Cambior Inc., both of which were faced with large
hedge book losses as a result of the higher gold price. The
activities of these two companies in the gold derivatives market has
not only been devastating to their shareholders but also had the
added effect of deterring investors from the gold mining sector as a
whole.
General investor disinterest in the gold rally was another major
negative factor for gold shares. This was partly caused by the
derivative fiasco but also from an attitude borne of recent
experience that any gold price increase would only be short-lived.
There is a risk that this becomes self-fulfilling with promising
rallies in the gold price failing to stimulate the type of investor
interest necessary to create gold bull markets. In our view, this is
partly a function of the popularity of competing investment areas
such as Internet stocks, which for many investors have become the
modern equivalent of gold mines.
Investment Outlook
We believe that the Washington Agreement is a watershed and
represents the most important positive event in the gold market for
many years. Essentially, the Agreement represents a moratorium on
new gold sales by signatory countries for five years, after which
period the Agreement will be reviewed. The Agreement does provide
for gold sales of up to 400 tonnes per year, which encompasses
previously announced gold sales plans by the United Kingdom and
Switzerland. Very importantly, it also caps further lending of gold
by signatory banks. The parties to the Agreement account for 50% of
all the world's central bank gold holdings. Including the United
States and Japan, which also stated that they would not be selling
any gold, at least 85% of the world's central bank gold holdings are
in firm hands. The communique by the central bank signatories also
includes a statement reiterating their view that gold is an
important reserve asset.
The effect of this Agreement is twofold: First and foremost, it
brings clarity to central banks' policy toward their gold reserves.
One of the major factors contributing to gold reaching a 20-year low
was the uncertainty and fear surrounding the potential for central
bank sales. Such uncertainty provided a cap on the gold market in
the past as investors worried about surprise gold sales. The
Washington Agreement considerably reduces market uncertainty.
Second, the limit on any further lending of gold is a very important
positive development for the market. Limiting the pool of gold
liquidity will almost certainly reduce the supply of gold coming
into the physical market. This will be positive for gold market
supply/demand fundamentals, which are already very supportive, given
that gold demand already considerably exceeds new mined supply. The
limit on lending will likely curb any further increase in total
mining company forward sales and, very importantly, speculative
short selling by funds, one of the biggest negative factors
impacting the gold price in the last couple of years.
November 30, 1999 4 Mercury Gold and Mining Fund
We are not too disheartened by the retracement of the gold price to
below US$300 per ounce. We believe that the fundamentals are
positive and therefore expect that the gold price, while remaining
volatile, will move toward a new higher equilibrium range in excess
of US$300 per ounce. This outlook rests very much on the improved
market fundamentals as a direct result of the Washington Agreement.
We will continue to structure the Portfolio for a rising gold price
environment. It has always been our policy to avoid as much as
possible those companies with gold hedging. We have concentrated our
holdings further on companies that have minimal gold hedging, and we
are confident that the gold companies we own are likely to be prime
beneficiaries of a rise in the gold price.
We also anticipate that 2000 will see further strength in metal
prices. This will be a positive for the shares of mining companies
generally, and we will actively manage the Portfolio to benefit from
opportunities as they arise. However, we reiterate that we see the
most upside potential in the shares of gold mining companies given
the importance of the Washington Agreement on the gold market's
prospects.
In Conclusion
We thank you for your investment in Mercury Gold and Mining Fund,
and we look forward to serving your investment needs in the months
and years ahead.
Sincerely,
(Jeffrey Peek)
Jeffrey Peek
President
(Trevor Steel)
Trevor Steel
Portfolio Manager
January 6, 2000
To reduce shareholder expenses, Mercury Gold and Mining Fund will no
longer be printing and mailing quarterly reports to shareholders. We
will continue to provide you with reports on a semi-annual and
annual basis.
November 30, 1999 5 Mercury Gold and Mining Fund
FUND PERFORMANCE DATA
ABOUT FUND PERFORMANCE
The Fund offers four classes of shares, each with its own sales
charge and expense structure, allowing you to invest in the way that
best suits your needs.
CLASS I SHARES incur a maximum initial sales charge of 5.25% and
bear no ongoing distribution and account maintenance fees. Class I
shares are available only to eligible investors.
CLASS A SHARES incur a maximum initial sales charge of 5.25% and an
account maintenance fee of 0.25% (but no distribution fee).
CLASS B SHARES are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first two years, decreasing to
3% for each of the next two years and decreasing 1% each year
thereafter to 0% after the sixth year. In addition, Class B shares
are subject to a distribution fee of 0.75% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class A shares after approximately 8 years.
CLASS C SHARES are subject to a distribution fee of 0.75% and an
account maintenance fee of 0.25%. In addition, Class C shares may be
subject to a 1% contingent deferred sales charge if redeemed within
one year after purchase.
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Recent Performance
Results" and "Aggregate Total Return" tables assume reinvestment of
all dividends and capital gains distributions at net asset value on
the ex-dividend date. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. Dividends paid to each class
of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
RECENT PERFORMANCE RESULTS*
3 Month Since Inception
As of November 30, 1999 Total Return Total Return
Class I +11.11% +17.00%
Class A +11.13 +16.80
Class B +10.89 +16.10
Class C +10.89 +16.10
[FN]
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included. Total
investment returns are based on changes in the Fund's net asset
values for the periods shown, and assume reinvestment of all
dividends and capital gains at net asset value on the ex-dividend
date. The Fund commenced operations on 2/26/99.
November 30, 1999 6 Mercury Gold and Mining Fund
FUND PERFORMANCE DATA (CONCLUDED)
AGGREGATE TOTAL RETURN
% Return % Return
Without Sales With Sales
Class I Shares* Charge Charge**
Inception (2/26/99)
through 9/30/99 +33.80% +26.78%
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without With
Class B Shares* CDSC CDSC**
Inception (2/26/99)
through 9/30/99 +33.00% +29.00%
[FN]
*Maximum contingent deferred sales charge
is 4% and is reduced to 0% after 6 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without Sales With Sales
Class A Shares* Charge Charge**
Inception (2/26/99)
through 9/30/99 +33.70% +26.68%
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without With
Class C Shares* CDSC CDSC**
Inception (2/26/99)
through 9/30/99 +33.00% +32.00%
[FN]
*Maximum contingent deferred sales charge
is 1% and is reduced to 0% after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
November 30, 1999 7 Mercury Gold and Mining Fund
STATEMENT OF ASSETS AND
LIABILITIES
As of November 30, 1999
<TABLE>
MERCURY GOLD AND MINING FUND
<S> <C>
Assets:
Investment in Mercury Master Gold and Mining Portfolio, at value (identified
cost--$17,158,887) $ 18,689,884
Prepaid registration fees and other assets 171,405
------------
Total assets 18,861,289
------------
Liabilities:
Payable to distributor 9,722
Payable to administrator 1,488
Accrued expenses 35,818
------------
Total liabilities 47,028
------------
Net Assets:
Net assets $ 18,814,261
============
Net Assets Consist of:
Class I Shares of Common Stock, $.0001 par value, 100,000,000
shares authorized $ 55
Class A Shares of Common Stock, $.0001 par value, 100,000,000
shares authorized 13
Class B Shares of Common Stock, $.0001 par value, 100,000,000
shares authorized 44
Class C Shares of Common Stock, $.0001 par value, 100,000,000
shares authorized 50
Paid-in capital in excess of par 16,289,699
Accumulated investment loss--net (108,456)
Undistributed realized capital gains on investments and foreign currency
transactions from the Portfolio--net 1,101,859
Unrealized appreciation on investments and foreign currency transactions from
the Portfolio--net 1,530,997
------------
Net assets $ 18,814,261
============
Net Asset Value:
Class I--Based on net assets of $6,438,306 and 550,350 shares outstanding $ 11.70
============
Class A--Based on net assets of $1,571,448 and 134,568 shares outstanding $ 11.68
============
Class B--Based on net assets of $5,052,898 and 435,295 shares outstanding $ 11.61
============
Class C--Based on net assets of $5,751,609 and 495,462 shares outstanding $ 11.61
============
See Notes to Financial Statements.
</TABLE>
November 30, 1999 8 Mercury Gold and Mining Fund
STATEMENT OF OPERATIONS
For the Six Months Ended November 30, 1999
<TABLE>
MERCURY GOLD AND MINING FUND
<S> <C> <C>
Investment Income:
Investment income allocated from the Portfolio (net of $3,818
foreign withholding tax) $ 181,349
Expenses allocated from the Portfolio (112,439)
------------
Net investment income from the Portfolio 68,910
------------
Expenses:
Registration fees $ 48,840
Offering costs 37,576
Printing and shareholder reports 27,194
Account maintenance and distribution fees--Class C 26,535
Account maintenance and distribution fees--Class B 25,376
Administration fee 22,704
Professional fees 12,216
Transfer agent fees--Class C 2,394
Transfer agent fees--Class B 2,259
Account maintenance fees--Class A 2,117
Transfer agent fees--Class I 2,048
Accounting services 1,092
Transfer agent fees--Class A 570
Other 967
------------
Total expenses before reimbursement 211,888
Reimbursement of expenses (15,870)
------------
Total expenses 196,018
------------
Investment loss--net (127,108)
------------
Realized & Unrealized Gain (Loss) from the
Portfolio--Net:
Realized gain (loss) from the Portfolio on:
Investments--net 556,502
Foreign currency transactions--net (14,500) 542,002
------------
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions from the Portfolio--net 2,163,207
------------
Net realized and unrealized gain on investments and foreign
currency transactions from the Portfolio 2,705,209
------------
Net Increase in Net Assets Resulting from Operations $ 2,578,101
============
See Notes to Financial Statements.
</TABLE>
November 30, 1999 9 Mercury Gold and Mining Fund
STATEMENTS OF CHANGES
IN NET ASSETS
<TABLE>
MERCURY GOLD AND MINING FUND
<CAPTION>
For the Six For the Period
Months Ended February 26, 1999++
November 30, to May 31,
Increase (Decrease) in Net Assets: 1999 1999
<S> <C> <C>
Operations:
Investment loss--net $ (127,108) $ (17,785)
Realized gain on investments and foreign currency
transactions from the Portfolio--net 542,002 570,962
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions from the Portfolio--net 2,163,207 (632,210)
--------------------------------
Net increase (decrease) in net assets resulting from
operations 2,578,101 (79,033)
--------------------------------
Capital Share Transactions:
Net increase in net assets derived from capital share
transactions 169,260 16,045,933
--------------------------------
Net Assets:
Total increase in net assets 2,747,361 15,966,900
Beginning of period $ 16,066,900 100,000
-------------------------------
End of period* $ 18,814,261 $ 16,066,900
===============================
<FN>
*Undistributed (accumulated) investment income (loss)--net $ (108,456) $ 18,652
===============================
++Commencement of operations.
See Notes to Financial Statements.
</TABLE>
November 30, 1999 10 Mercury Gold and Mining Fund
FINANCIAL HIGHLIGHTS
<TABLE>
MERCURY GOLD AND MINING FUND
<CAPTIOn
The following per share data and ratios have been derived from
information provided in the financial statements.
Class I Class A
For the For the For the For the
Six Period Six Period
Months Feb. 26, Months Feb. 26,
Ended 1999++ Ended 1999++
Nov. 30, to May 31, Nov. 30, to May 31,
Increase (Decrease) in Net Asset Value: 1999++++++ 1999 1999++++++ 1999
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 10.09 $ 10.00 $ 10.08 $ 10.00
-----------------------------------------------------
Investment loss--net (.05) --+++++ (.05) --+++++
Realized and unrealized gain on investments
and foreign currency transactions from the
Portfolio--net 1.66 .09 1.65 .08
-----------------------------------------------------
Total from investment operations 1.61 .09 1.60 .08
-----------------------------------------------------
Net asset value, end of period $ 11.70 $ 10.09 $ 11.68 $ 10.08
=====================================================
Total Investment Return:**
Based on net asset value per share 15.96%+++ .90%+++ 15.87%+++ .80%+++
=====================================================
Ratios to Average Net Assets:
Expenses, net of reimbursement++++ 2.78%* 3.32%* 3.02%* 3.62%*
=====================================================
Expenses++++ 3.66%* 3.66%* 3.91%* 3.95%*
=====================================================
Investment loss--net (.82%)* (.08%)* (.92%)* (.06%)*
=====================================================
Supplemental Data:
Net assets, end of period (in thousands) $ 6,438 $ 5,263 $ 1,571 $ 1,676
=====================================================
<FN>
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Commencement of operations.
++++Includes the Fund's share of the Portfolio's allocated expenses.
++++++Based on average shares outstanding.
+++Aggregate total investment return.
+++++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
November 30, 1999 11 Mercury Gold and Mining Fund
FINANCIAL HIGHLIGHTS (CONCLUDED)
<TABLE>
MERCURY GOLD AND MINING FUND
<CAPTION>
The following per share data and ratios have been derived from
information provided in the financial statements.
Class B Class C
For the For the For the For the
Six Period Six Period
Months Feb. 26, Months Feb. 26,
Ended 1999++ Ended 1999++
Nov. 30, to May 31, Nov. 30, to May 31,
Increase (Decrease) in Net Asset Value: 1999+++++ 1999 1999+++++ 1999
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 10.06 $ 10.00 $ 10.06 $ 10.00
-----------------------------------------------------
Investment loss--net (.10) (.02) (.10) (.02)
Realized and unrealized gain on investments
and foreign currency transactions from the
Portfolio--net 1.65 .08 1.65 .08
-----------------------------------------------------
Total from investment operations 1.55 .06 1.55 .06
-----------------------------------------------------
Net asset value, end of period $ 11.61 $ 10.06 $ 11.61 $ 10.06
=====================================================
Total Investment Return:**
Based on net asset value per share 15.41%+++ .60%+++ 15.41%+++ .60%+++
=====================================================
Ratios to Average Net Assets:
Expenses, net of reimbursement++++ 3.79%* 4.33%* 3.81%* 4.31%*
=====================================================
Expenses++++ 4.68%* 4.67%* 4.68%* 4.65%*
=====================================================
Investment loss--net (1.79%)* (.87%)* (1.84%)* (.90%)*
=====================================================
Supplemental Data:
Net assets, end of period (in thousands) $ 5,053 $ 4,643 $ 5,752 $ 4,485
=====================================================
<FN>
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Commencement of operations.
++++Includes the Fund's share of the Portfolio's allocated expenses.
+++Aggregate total investment return.
+++++Based on average shares outstanding.
See Notes to Financial Statements.
</TABLE>
November 30, 1999 12 Mercury Gold and Mining Fund
NOTES TO FINANCIAL STATEMENTS
MERCURY GOLD AND MINING FUND
1 Significant Accounting Policies:
Mercury Gold and Mining 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 Gold and Mining Portfolio (the "Portfolio") of Mercury Asset
Management Master Trust (the "Trust"), which has the same investment
objective as the Fund. The value of the Fund's investment in the
Portfolio reflects the Fund's proportionate interest in the net
assets of the Portfolio. The performance of the Fund is directly
affected by the performance of the Portfolio. The financial
statements of the Portfolio, including the Schedule of Investments,
are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements. The Fund's
financial statements are prepared in accordance with generally
accepted accounting principles, which may require the use of
management accruals and estimates. These unaudited financial
statements reflect all adjustments, which are, in the opinion of
management, necessary to a fair statement of the results for the
interim period presented. All such adjustments are of a normal
recurring nature. The Fund offers four classes of shares. Class I
and Class A Shares are sold with a front-end sales charge. Class B
and Class C Shares may be subject to a contingent deferred sales
charge. All classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions,
except that Class A, Class B and Class C Shares bear certain
expenses related to the account maintenance of such shares, and
Class B and Class C Shares also bear certain expenses related to the
distribution of such shares. Each class has exclusive voting rights
with respect to matters relating to its account maintenance and
distribution expenditures (except that Class B Shares have certain
voting rights with respect to Class A distribution expenditures).
The following is a summary of significant accounting policies
followed by the Fund.
(a) Valuation of investments--Valuation of securities is discussed
in Note 1a of the Portfolio's Notes to Financial Statements, which
are included elsewhere in this report.
(b) Income--The Fund's net investment income consists of the Fund's
pro rata share of the net investment income of the Portfolio, less
all actual and accrued expenses of the Fund determined in accordance
with generally accepted accounting principles.
November 30, 1999 13 Mercury Gold and Mining Fund
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to shareholders. Therefore, no Federal income tax
provision is required. Under the applicable foreign tax law,
withholding taxes may be imposed on interest, dividends and capital
gains at various rates.
(d) Prepaid registration fees--Prepaid registration fees are charged
to expenses as the related shares are issued.
(e) Dividends and distributions--Dividends and distributions paid by
the Fund are recorded on the ex-dividend dates.
(f) Investment transactions--Investment transactions are accounted
for on a trade date basis.
2 Transactions with Affiliates:
The Corporation has entered into an Administration Agreement with
Fund Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), a wholly-owned subsidiary of
Merrill Lynch & Co., Inc. ("ML & Co."), which is the limited
partner. The Fund pays a monthly fee at an annual rate of .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. For
the six months ended November 30, 1999, FAM earned fees of $22,704,
of which $15,870 was voluntarily waived.
The Corporation has also entered into a Distribution Agreement and
Distribution Plans with Mercury Funds Distributor ("MFD" or the
"Distributor"), a division of Princeton Funds Distributor, Inc.
("PFD"), a wholly-owned subsidiary of Merrill Lynch Group, Inc.
Pursuant to the Distribution Plans adopted by the Corporation in
accordance with Rule 12b-1 under the Investment Company Act of 1940,
the Fund pays the Distributor ongoing account maintenance and
distribution fees. The fees are accrued daily and paid monthly at
annual rates based upon the average daily net assets of the shares
as follows:
Account
Maintenance Fee Distribution Fee
Class A .25% --
Class B .25% .75%
Class C .25% .75%
November 30, 1999 14 Mercury Gold and Mining Fund
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 six months ended November 30, 1999, MFD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of the
Fund's Class A Shares as follows:
MFD MLPF&S
Class A $1,602 $24,600
For the six months ended November 30, 1999, MLPF&S received
contingent deferred sales charges of $43,121 and $4,053 relating to
transactions in Class B and Class C Shares, respectively.
Financial Data Services, Inc. ("FDS"), an indirect wholly-owned
subsidiary of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Corporation are officers
and/or directors or trustees of the Trust, Mercury International,
FAM, PSI, PFD, FDS, and/or ML & Co.
3 Investments:
Increases and decreases in the Fund's investment in the Portfolio
for the six months ended November 30, 1999 were $3,006,418 and
$3,096,518, respectively.
4 Capital Share Transactions:
Net increase in net assets derived from capital share transactions
was $169,260 and $16,045,933 for the six months ended November 30,
1999 and for the period February 26, 1999 to May 31, 1999,
respectively.
November 30, 1999 15 Mercury Gold and Mining Fund
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Transactions in capital shares for each class were as follows:
Class I Shares for the Six Months
Ended November 30, 1999 Shares Dollar Amount
Shares sold 112,641 $ 1,197,764
Shares redeemed (83,962) (872,923)
------------------------------
Net increase 28,679 $ 324,841
==============================
Class I Shares for the Period February 26, 1999++
to May 31, 1999 Shares Dollar Amount
Shares sold 608,076 $ 6,180,596
Shares redeemed (88,905) (966,174)
------------------------------
Net increase 519,171 $ 5,214,422
==============================
[FN]
++Prior to February 26, 1999 (commencement of operations), the Fund
issued 2,500 shares to Mercury International for $25,000.
Class A Shares for the Six Months
Ended November 30, 1999 Shares Dollar Amount
Shares sold 65,052 $ 700,166
Shares redeemed (96,735) (1,089,444)
------------------------------
Net decrease (31,683) $ (389,278)
==============================
Class A Shares for the Period February 26, 1999++
to May 31, 1999 Shares Dollar Amount
Shares sold 180,792 $ 1,829,006
Shares redeemed (17,041) (186,405)
------------------------------
Net increase 163,751 $ 1,642,601
==============================
[FN]
++Prior to February 26, 1999 (commencement of operations), the Fund
issued 2,500 shares to Mercury International for $25,000.
Class B Shares for the Six Months
Ended November 30, 1999 Shares Dollar Amount
Shares sold 120,388 $ 1,479,980
Shares redeemed (146,500) (1,846,422)
------------------------------
Net decrease (26,112) $ (366,442)
==============================
Class B Shares for the Period February 26, 1999++
to May 31, 1999 Shares Dollar Amount
Shares sold 485,372 $ 4,924,796
Shares redeemed (26,465) (270,294)
------------------------------
Net increase 458,907 $ 4,654,502
==============================
[FN]
++Prior to February 26, 1999 (commencement of operations), the Fund
issued 2,500 shares to Mercury International for $25,000.
November 30, 1999 16 Mercury Gold and Mining Fund
NOTES TO FINANCIAL STATEMENTS
(CONCLUDED)
Class C Shares for the Six Months
Ended November 30, 1999 Shares Dollar Amount
Shares sold 109,444 $ 1,330,548
Shares redeemed (59,765) (730,409)
------------------------------
Net increase 49,679 $ 600,139
==============================
Class C Shares for the Period February 26, 1999++
to May 31, 1999 Shares Dollar Amount
Shares sold 488,313 $ 5,028,088
Shares redeemed (45,030) (493,680)
------------------------------
Net increase 443,283 $ 4,534,408
==============================
++Prior to February 26, 1999 (commencement of operations), the Fund
issued 2,500 shares to Mercury International for $25,000.
5 Subsequent Event:
On December 8, 1999, the Portfolio's Board of Directors declared an
ordinary income dividend in the amount of $.759343 per Class I
Share, $.732857 per Class A Share, $.664957 per Class B Share and
$.672642 per Class C Share payable on December 16, 1999 to
shareholders of record as of December 8, 1999.
November 30, 1999 17 Mercury Gold and Mining Fund
SCHEDULE OF INVESTMENTS
<TABLE>
MERCURY MASTER GOLD AND MINING PORTFOLIO
<CAPTION>
In US Dollars
Shares Percent of
Industry Held Investments Value Net Assets
<S> <C> <S> <C> <C>
AFRICA
Mali
Gold Mines 189,500 ++Randgold Resources Limited (GDR)(b) $ 615,875 3.3%
22,500 ++Randgold Resources Limited (GDR)(b)(c) 73,125 0.4
Total Investments in Mali 689,000 3.7
South Africa
Gold Mines 17,700 AngloGold Limited 903,500 4.8
500,000 ++Avgold Limited 328,148 1.8
292,000 Gold Fields Limited 1,313,077 7.0
194,900 Harmony Gold Mining Company Limited 1,263,328 6.8
138,700 ++Western Areas Limited 355,122 1.9
----------------------------
4,163,175 22.3
Metals/ 255,000 Gencor Limited 975,207 5.2
Non-Ferrous 12,300 Impala Platinum Holdings Limited 448,469 2.4
----------------------------
1,423,676 7.6
Total Investments in South Africa 5,586,851 29.9
Total Investments in Africa
(Cost--$5,503,096) 6,275,851 33.6
LATIN AMERICA
Mexico
Metals/ 220,300 Industrias Penoles SA 677,487 3.6
Non-Ferrous
Total Investments in Mexico 677,487 3.6
Peru
Gold Mines 48,000 Compania de Minas Buenaventura SA (ADR)(a) 789,000 4.2
Total Investments in Peru 789,000 4.2
Total Investments in Latin America
(Cost--$1,349,211) 1,466,487 7.8
</TABLE>
November 30, 1999 18 Mercury Gold and Mining Fund
<TABLE>
SCHEDULE OF INVESTMENT (CONTINUED)
<CAPTION>
In US Dollars
Shares Percent of
Industry Held Investments Value Net Assets
<S> <C> <S> <C> <C>
NORTH AMERICA
Canada
Gold Mines 85,000 Agnico-Eagle Mines Limited $ 631,959 3.4%
27,500 Barrick Gold Corporation 495,000 2.7
93,000 ++Goldcorp Inc. 'A' 505,160 2.7
272,340 ++IAMGOLD, International African Mining
Gold Corporation 619,459 3.3
226,500 ++Kinross Gold Corporation 469,056 2.5
85,400 ++Meridian Gold Inc. 530,561 2.8
70,000 Placer Dome Inc. 796,250 4.3
----------------------------
4,047,445 21.7
Metals/ 51,006 Franco-Nevada Mining Corporation Ltd. 935,064 5.0
Non-Ferrous
Total Investments in Canada 4,982,509 26.7
United States
Gold Mines 158,900 ++Battle Mountain Gold Company 397,250 2.1
116,000 Homestake Mining Company 957,000 5.1
43,000 Newmont Mining Corporation 1,018,562 5.5
75,000 ++Royal Gold, Inc. 318,750 1.7
Total Investments in the United States 2,691,562 14.4
Total Investments in North America
(Cost--$7,441,041) 7,674,071 41.1
</TABLE>
November 30, 1999 19 Mercury Gold and Mining Fund
<TABLE>
SCHEDULE OF INVESTMENT (CONCLUDED)
<CAPTION>
In US Dollars
Shares Percent of
Industry Held Investments Value Net Assets
<S> <C> <S> <C> <C>
PACIFIC BASIN/ASIA
Australia
Gold Mines 483,000 Acacia Resources Limited $ 870,297 4.6%
287,900 Delta Gold NL 479,583 2.6
282,700 Normandy Mining Limited 203,107 1.1
----------------------------
1,552,987 8.3
Metals / 180,000 ++Aquarius Platinum Limited 257,872 1.4
Non-Ferrous
Total Investments in Australia 1,810,859 9.7
Papua New Guinea
Gold Mines 1,116,000 ++Lihir Gold Limited 865,654 4.6
Total Investments in Papua New Guinea 865,654 4.6
Total Investments in the
Pacific Basin/Asia (Cost--$2,268,566) 2,676,513 14.3
Face
Amount Short-Term Securities
Commer- US$470,000 General Motors Acceptance Corp.,
cial 5.75% due 12/01/1999 470,000 2.5
Paper*
Total Investments in Short-Term Securities
(Cost--$470,000) 470,000 2.5
Total Investments (Cost--$17,031,914) 18,562,922 99.3
Other Assets Less Liabilities 127,081 0.7
----------------------------
Net Assets $ 18,690,003 100.0%
============================
<FN>
(a)American Depositary Receipts (ADR).
(b)Global Depositary Receipts (GDR).
(c)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
*Commercial Paper is traded on a discount basis; the interest rate
shown reflects the discount rate paid at the time of purchase by the
Portfolio.
++Non-income producing security.
See Notes to Financial Statements.
</TABLE>
November 30, 1999 20 Mercury Gold and Mining Fund
STATEMENT OF ASSETS AND
LIABILITIES
As of November 30, 1999
<TABLE>
MERCURY MASTER GOLD AND MINING PORTFOLIO
<S> <C> <C>
Assets:
Investments, at value (identified cost--$17,031,914) $ 18,562,922
Cash 199
Receivables:
Contributions $ 278,950
Dividends 6,531
Investment adviser 1,914 287,395
------------
Prepaid expenses 8,042
------------
Total assets 18,858,558
------------
Liabilities:
Payable for withdrawals 136,840
Accrued expenses 31,715
------------
Total liabilities 168,555
------------
Net Assets:
Net assets $ 18,690,003
============
Net Assets Consist of:
Partners' capital $ 17,158,995
Unrealized appreciation on investments and foreign currency
transactions--net 1,531,008
------------
Net assets $ 18,690,003
============
See Notes to Financial Statements.
</TABLE>
November 30, 1999 21 Mercury Gold and Mining Fund
STATEMENT OF OPERATIONS
For the Six Months Ended November 30, 1999
<TABLE>
MERCURY MASTER GOLD AND MINING PORTFOLIO
<S> <C> <C>
Investment Income:
Dividends (net of $3,818 foreign withholding tax) $ 169,347
Interest and discount earned 12,002
------------
Total income 181,349
------------
Expenses:
Investment advisory fees $ 67,629
Custodian fees 40,021
Professional fees 24,255
Accounting services 23,389
Trustees' fees and expenses 14,696
Offering costs 4,578
Pricing fees 553
Other 1,478
------------
Total expenses before reimbursement 176,599
Reimbursement of expenses (64,160)
------------
Total expenses after reimbursement 112,439
------------
Investment income--net 68,910
------------
Realized & Unrealized Gain (Loss) on Investments &
Foreign Currency Transactions--Net:
Realized gain (loss) from:
Investments--net 556,506
Foreign currency transactions--net (14,500) 542,006
------------
Change in unrealized appreciation/depreciation on:
Investments--net 2,163,738
Foreign currency transactions--net (517) 2,163,221
------------ ------------
Net realized and unrealized gain on investments and foreign
currency transactions 2,705,227
------------
Net Increase in Net Assets Resulting from Operations $ 2,774,137
============
See Notes to Financial Statements.
</TABLE>
November 30, 1999 22 Mercury Gold and Mining Fund
STATEMENTS OF CHANGES
IN NET ASSETS
<TABLE>
MERCURY MASTER GOLD AND MINING PORTFOLIO
<CAPTION>
For the Six For the Period
Months Ended February 26, 1999++
November 30, to May 31,
Increase (Decrease)in Net Assets: 1999 1999
<S> <C> <C>
Operations:
Investment income--net $ 68,910 $ 67,322
Realized gain on investments and foreign currency
transactions--net 542,006 570,965
Change in unrealized appreciation/depreciation
on investments and foreign currency transactions--net 2,163,221 (632,213)
------------------------------
Net increase in net assets resulting from operations 2,774,137 6,074
------------------------------
Net Capital Contributions:
Increase (decrease) in net assets derived from net capital
contributions (90,101) 15,999,893
------------------------------
Net Assets:
Total increase in net assets 2,684,036 16,005,967
Beginning of period 16,005,967 --
------------------------------
End of period $ 18,690,003 $ 16,005,967
==============================
<FN>
++Commencement of operations.
See Notes to Financial Statements.
</TABLE>
November 30, 1999 23 Mercury Gold and Mining Fund
FINANCIAL HIGHLIGHTS
<TABLE>
MERCURY MASTER GOLD AND MINING PORTFOLIO
<CAPTION
The following ratios have been derived from information provided in
the financial statements.
For the Six For the Period
Months Ended February 26, 1999++
November 30, to May 31,
1999 1999
<S> <C> <C>
Ratios to Average Net Assets:
Expenses, net of reimbursement 1.24%* 1.70%*
==============================
Expenses 1.95%* 2.00%*
==============================
Investment income--net .76%* 1.76%*
==============================
Supplemental Data:
Net assets, end of period (in thousands) $ 18,690 $ 16,006
==============================
Portfolio turnover 53.34% 32.95%
==============================
<FN>
*Annualized.
++Commencement of operations.
See Notes to Financial Statements.
</TABLE>
November 30, 1999 24 Mercury Gold and Mining Fund
NOTES TO FINANCIAL STATEMENTS
MERCURY MASTER GOLD AND MINING PORTFOLIO
1 Significant Accounting Policies:
Mercury Master Gold and Mining Portfolio (the "Portfolio") is part
of Mercury Asset Management Master Trust (the "Trust"). The Trust is
registered under the Investment Company Act of 1940 and is organized
as a Delaware business trust. The Portfolio's financial statements
are prepared in accordance with generally accepted accounting
principles, which may require the use of management accruals and
estimates. These unaudited financial statements reflect all
adjustments, which are, in the opinion of management, necessary to a
fair statement of the results for the interim period presented. All
such adjustments are of a normal recurring nature. The following is
a summary of significant accounting policies followed by the
Portfolio.
(a) Valuation of investments--Portfolio securities that are traded
on stock exchanges are valued at the last sale price as of the close
of business on the day the securities are being valued or, lacking
any sales, at the last available bid price for long positions and
the last available ask price for short positions. Securities traded
in the over-the-counter market are valued at the last available bid
price prior to the time of valuation. Securities traded both in the
over-the-counter market and on a stock exchange are valued according
to the broadest and most representative market. Short positions in
securities traded in the over-the-counter market are valued at the
last available ask price prior to the time of valuation. Options
written or purchased are valued at the last sale price in the case
of exchange-traded options. In the case of options traded in the
over-the-counter market, valuation is the last asked price (options
written) or the last bid price (options purchased). Short-term
securities are valued at amortized cost, which approximates market
value. Other investments, including futures contracts and related
options, are stated at market value. Securities and assets for which
market quotations are not readily available are valued at fair
market value, as determined in good faith by or under the direction
of the Trust's Board of Trustees.
(b) Derivative financial instruments--The Portfolio may engage in
various portfolio investment strategies to seek to increase its
return by hedging its holdings against adverse movements in the
equity, debt and currency markets. Losses may arise due to changes
in the value of the contract or if the counterparty does not perform
under the contract.
November 30, 1999 25 Mercury Gold and Mining Fund
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
* Financial futures contracts--The Portfolio may purchase or sell
financial futures contracts and options on such futures contracts
for the purpose of hedging the market risk on existing securities or
the intended purchase of securities. Upon entering into a contract,
the Portfolio deposits and maintains as collateral such initial
margin as required by the exchange on which the transaction is
effected. Pursuant to the contract, the Portfolio agrees to receive
from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are
known as variation margin and are recorded by the Portfolio as
unrealized gains or losses. When the contract is closed, the
Portfolio records a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the
value at the time it was closed.
* Options--The Portfolio is authorized to purchase and write call
and put options. When the Portfolio writes an option, an amount
equal to the premium received by the Portfolio is reflected as an
asset and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written. When a security is purchased or sold through an
exercise of an option, the related premium paid (or received) is
added to (or deducted from) the basis of the security acquired or
deducted from (or added to) the proceeds of the security sold. When
an option expires (or the Portfolio enters into a closing
transaction), the Portfolio realizes a gain or loss on the option to
the extent of the premiums received or paid (or a gain or loss to
the extent that the cost of the closing transaction exceeds the
premium paid or received).
Written and purchased options are non-income producing investments.
* Forward foreign exchange contracts--The Portfolio is authorized to
enter into forward foreign exchange contracts as a hedge against
either specific transactions or portfolio positions. Such contracts
are not entered on the Portfolio's records. However, the effect on
operations is recorded from the date the Portfolio enters into such
contracts.
* 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.
November 30, 1999 26 Mercury Gold and Mining Fund
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
(c) Foreign currency transactions--Transactions denominated in
foreign currencies are recorded at the exchange rate prevailing when
recognized. Assets and liabilities denominated in foreign currencies
are valued at the exchange rate at the end of the period. Foreign
currency transactions are the result of settling (realized) or
valuing (unrealized) assets or liabilities expressed in foreign
currencies into US dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on
investments.
(d) Income taxes--The Portfolio is classified as a partnership for
Federal income tax purposes. As a partnership for Federal income tax
purposes, the Portfolio will not incur Federal income tax liability.
Items of partnership income, gain, loss and deduction will pass
through to investors as partners in the Portfolio. Therefore, no
Federal income tax provision is required. Under the applicable
foreign tax law, withholding taxes may be imposed on interest,
dividends, and capital gains at various rates.
(e) Security transactions and investment income--Security
transactions are accounted for on the date the securities are
purchased or sold (the trade dates). Dividend income is recorded on
the ex-dividend dates. Dividends from foreign securities where the
ex-dividend date may have passed are subsequently recorded when the
Portfolio has determined the ex-dividend date. Interest income
(including amortization of discount) is recognized on the accrual
basis. Realized gains and losses on security transactions are
determined on the identified cost basis.
2 Investment Advisory Agreement and Transactions with Affiliates:
The Trust has entered into an Investment Advisory Agreement with
Mercury Asset Management International Ltd. ("Mercury
International"), an affiliate of Fund Asset Management, L.P.
("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co.,
Inc. ("ML & Co."), which is the limited partner.
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. For the six months
ended November 30, 1999, Mercury International earned fees of
$67,629, of which $64,160 was voluntarily waived.
November 30, 1999 27 Mercury Gold and Mining Fund
NOTES TO FINANCIAL STATEMENTS
(CONCLUDED)
Accounting services are provided to the Portfolio by FAM at cost.
Certain officers and/or trustees of the Trust are officers and/or
directors of Mercury Asset Management Funds, Inc., Mercury
International, FAM, PSI, and/or ML & Co.
3 Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended November 30, 1999 were $9,770,734 and
$9,250,780, respectively.
Net realized gains (losses) for the six months ended November 30,
1999 and net unrealized gains as of November 30, 1999 were as
follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments $ 556,506 $1,531,008
Foreign currency transactions (14,500) --
-----------------------------
Total $ 542,006 $1,531,008
=============================
As of November 30, 1999, net unrealized appreciation for Federal
income tax purposes aggregated $1,531,008, of which $2,228,949
related to appreciated securities and $697,941 related to
depreciated securities. At November 30, 1999, the aggregate cost of
investments for Federal income tax purposes was $17,031,914.
November 30, 1999 28 Mercury Gold and Mining Fund
PORTFOLIO INFORMATION
WORLDWIDE INVESTMENTS AS OF NOVEMBER 30, 1999
Percent of
Ten Largest Holdings Net Assets
Gold Fields Limited 7.0%
Harmony Gold Mining Company
Limited 6.8
Newmont Mining Corporation 5.5
Gencor Limited 5.2
Homestake Mining Company 5.1
Franco-Nevada Mining
Corporation Ltd. 5.0
AngloGold Limited 4.8
Acacia Resources Limited 4.6
Lihir Gold Limited 4.6
Placer Dome Inc. 4.3
November 30, 1999 29 Mercury Gold and Mining Fund
OFFICERS AND DIRECTORS
Jeffrey M. Peek, Director and President
David O. Beim, Director
James T. Flynn, Director
W. Carl Kester, Director
Karen P. Robards, Director
Terry K. Glenn, Director and
Executive Vice President
Peter John Gibbs, Senior Vice President
Donald C. Burke, Vice President and
Treasurer
Robert E. Putney, III, Secretary
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(888) 763-2260
November 30, 1999 30 Mercury Gold and Mining Fund
