UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-08163
Mercury International Value V.I. Fund
Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Terry K. Glenn, President,
Mercury International Value V.I. Fund, 800 Scudders Mill Road,
Plainsboro, NJ, 08536. Mailing address: P.O. Box 9011, Princeton,
NJ, 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 12/31/02
Date of reporting period: 01/01/02 - 12/31/02
Item 1 - Is shareholder report attached? - Y
Item 2 - Did registrant adopt a code of ethics, as of the end of the
period covered by this report, that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by
the registrant or a third party? If not, why not? Briefly describe
any amendments or waivers that occurred during the period. State
here if code of ethics/amendments/waivers are on website and give
website address-. State here if fund will send code of ethics to
shareholders without charge upon request--N/A (not answered until
July 15, 2003 and only annually for funds)
Item 3 - Did the registrant's board of directors determine that the
registrant either: (i) has at least one audit committee financial
expert serving on its audit committee; or (ii) does not have an
audit committee financial expert serving on its audit committee? If
yes, disclose name of financial expert and whether he/she is
"independent," (fund may, but is not required, to disclose
name/independence of more than one financial expert) If no, explain
why not. -N/A (not answered until July 15, 2003 and only annually
for funds)
Item 4 - Disclose annually only (not answered until December 15,
2003)
(a) Audit Fees - Disclose aggregate fees billed for each of the last
two fiscal years for professional services rendered by the principal
accountant for the audit of the registrant's annual financial
statements or services that are normally provided by the accountant
in connection with statutory and regulatory filings or engagements
for those fiscal years. N/A.
(b) Audit-Related Fees - Disclose aggregate fees billed in each of
the last two fiscal years for assurance and related services by the
principal accountant that are reasonably related to the performance
of the audit of the registrant's financial statements and are not
reported under paragraph (a) of this Item. Registrants shall
describe the nature of the services comprising the fees disclosed
under this category. N/A.
(c) Tax Fees - Disclose aggregate fees billed in each of the last
two fiscal years for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning.
Registrants shall describe the nature of the services comprising the
fees disclosed under this category. N/A.
(d) All Other Fees - Disclose aggregate fees billed in each of the
last two fiscal years for products and services provided by the
principal accountant, other than the services reported in paragraphs
(a) through (c) of this Item. Registrants shall describe the nature
of the services comprising the fees disclosed under this category.
N/A.
(e)(1) Disclose the audit committee's pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of Regulation
S-X. N/A.
(e)(2) Disclose the percentage of services described in each of
paragraphs (b) through (d) of this Item that were approved by the
audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X. N/A.
(f) If greater than 50%, disclose the percentage of hours expended
on the principal accountant's engagement to audit the registrant's
financial statements for the most recent fiscal year that were
attributed to work performed by persons other than the principal
accountant's full-time, permanent employees. N/A.
(g) Disclose the aggregate non-audit fees billed by the registrant's
accountant for services rendered to the registrant, and rendered to
the registrant's investment adviser (not including any sub-adviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the adviser
that provides ongoing services to the registrant for each of the
last two fiscal years of the registrant. N/A.
(h) Disclose whether the registrant's audit committee has considered
whether the provision of non-audit services that were rendered to
the registrant's investment adviser (not including any subadviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence. N/A.
Items 5-6 - Reserved
Item 7 - For closed-end funds that contain voting securities in
their portfolio, describe the policies and procedures that it uses
to determine how to vote proxies relating to those portfolio
securities. N/A.
Item 8--Reserved
Item 9(a) - Disclose the conclusions of the registrant's principal
executive officer or officers and principal financial officer or
officers, or persons performing similar functions, about the
effectiveness of the registrant's disclosure controls and procedures
(as defined in Rule 30a-2(c) under the Act (17 CFR 270.30a-2(c)))
based on their evaluation of these controls and procedures as of a
date within 90 days of the filing date of the report that includes
the disclosure required by this paragraph. N/A.
Item 9(b)--There were no significant changes in the registrant's
internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Item 10 - Exhibits
10(a) - Attach code of ethics or amendments/waivers, unless code of
ethics or amendments/waivers is on website or offered to
shareholders upon request without charge. N/A.
10(b) - Attach certifications (4 in total pursuant to Sections 302
and 906 for CEO/CFO). Attached hereto.
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Mercury International Value V.I. Fund
By: _/s/ Terry K. Glenn_______
Terry K. Glenn,
President of
Mercury International Value V.I. Fund
Date: February 24, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
By: _/s/ Terry K. Glenn________
Terry K. Glenn,
President of
Mercury International Value V.I. Fund
Date: February 24, 2003
By: _/s/ Donald C. Burke________
Donald C. Burke
Chief Financial Officer of
Mercury International Value V.I. Fund
Date: February 24, 2003
<ITEM 1>
(BULL LOGO)
Merrill Lynch Investment Managers
www.mlim.ml.com
Annual Report
December 31, 2002
Mercury
International
Value V.I.
Fund
of Mercury Variable Trust
This report is only for distribution to shareholders of Mercury
International Value V.I. Fund. 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 invests significantly in foreign stocks. Investment in
foreign securities involves special risks including fluctuating
foreign exchange rates, foreign government regulations, differing
degrees of liquidity, and the possibility of substantial volatility
due to adverse political, economic and other developments.
Mercury International Value V.I. Fund of
Mercury Variable Trust
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
PORTFOLIO INFORMATION (UNAUDITED)
WORLDWIDE INVESTMENTS AS OF DECEMBER 31, 2002
Ten Largest Percent of
Equity Holdings Net Assets
GlaxoSmithKline PLC 4.3%
Shell Transport & Trading Company 3.9
Royal Bank of Scotland Group PLC 3.3
TotalFinaElf SA 3.2
Unilever PLC 2.8
Yamanouchi Pharmaceutical
Co., Ltd. 2.7
Novartis AG (Registered Shares) 2.6
ENI SpA 2.5
Barclays PLC 2.5
Namco Ltd. 2.3
Five Largest Percent of
Industries* Net Assets
Pharmaceuticals 9.6%
Regional Banks 8.9
Oil & Gas 7.7
Banks 6.0
Electric--Utilities 5.0
*For Fund compliance purposes, "Industry" means any one or more of
the industry sub- classifications used by one or more widely
recognized market indexes or ratings group indexes, and/or as
defined by Fund management. This definition may not apply for
purposes of this report, which may combine such industry sub-
classifications for reporting ease.
December 31, 2002,
Mercury International Value V.I. Fund
DEAR SHAREHOLDER
Fiscal Year in Review
We are pleased to present to you this annual report of Mercury
International Value V.I. Fund. For the 12 months ended December 31,
2002, the Fund had a total return of -11.54%, outperforming the
unmanaged benchmark Morgan Stanley Capital International Europe,
Australasia, Far East Index, which had a total return of -15.94%.
(Complete performance information can be found on page 6 of this
report to shareholders.)
During the 12 months ended December 31, 2002, value stocks and
growth stocks generated similar returns. However, there was a big
change in the trend in the third quarter of 2002 as economic data in
Europe deteriorated and the U.S. dollar started to weaken against
most currencies. Consequently, the more economically sensitive
stocks, which were mainly value stocks, started to underperform.
During the fiscal year, the worst-performing markets were Germany
and Sweden with the financial and capital good stocks causing most
of the damage, while the best performance came from Australia via
the strong resources stocks and New Zealand, thanks to the
telecommunication sector. On a sector level, the best performers
were food, beverage and tobacco (defensive), automobiles (low
interest rates) and energy (high oil price). The worst-performing
areas were insurance (market sensitive), technology hardware and
media (poor earnings visibility).
The Fund benefited from being underweight in the United Kingdom but
was negatively impacted by its underweight in Australia. Strong
stock selection was featured in Ireland, Sweden and Switzerland, but
was poor in Spain and Japan. The Fund's best contributions on a
sector level during 2002 were from telecommunication services,
banks, capital goods and pharmaceuticals, while the worst
contributions came from commercial services, real estate and
materials, mainly because of weak stock selection.
The positioning of the Fund remains toward the economically
sensitive sectors by being overweight compared to the broad
benchmark in diversified financials, capital goods, commercial
services and consumer durables at the expense of food, beverage and
tobacco, technology and banks. Although in the short term these
sectors might come under pressure because of deterioration in
earnings visibility, we believe that much of this has been
discounted in the share price and makes these investments attractive
on a longer-term view. We anticipate that fundamental factors such
as earnings and cash flow will be increasingly important to
investors and believe that the Fund is well positioned for progress
in the future.
Economic Environment
The U.S. economy has experienced an erratic recovery with alternate
quarters of strong and weak economic growth. In aggregate, real
gross domestic product (GDP) growth rose in excess of 3% during
2002, a reasonable outcome against a background of aggressive
corporate deleveraging but not sufficient to significantly raise low-
capacity utilization rates and profit margins.
December 31, 2002, Mercury International Value V.I. Fund
Economic indicators showed some loss of economic momentum entering
the fourth quarter. The Institute for Supply Management index fell,
consumer confidence softened and car sales declined from their
record levels at the end of the summer. We view this as a
continuation of the bumpy growth path seen over the last year. Most
economic indicators are consistent with low but positive economic
growth. Moreover, the balance of economic data has improved in
recent weeks, suggesting that the economy may be pulling out of its
soft patch; consumer confidence has risen and money growth has
accelerated.
The Eurozone economy has grown less than 1% in real terms during
2002, despite the tailwind of rising global trade. Progress in core
Europe has been particularly disappointing, with Germany, France and
Italy collectively failing to register any meaningful growth in
2002. This poor display reflects a combination of structural
headwinds, especially high labor costs, and unsupportive fiscal and
monetary policies. The significant rise in the value of the euro
during the fiscal year is starting to dampen the only dynamic sector
in Europe--exports. Business surveys across Europe have deteriorated
during the last few months, with the key German Information und
Forscheng survey dropping for five consecutive months, taking it
back into recessionary territory. The United Kingdom was unique
among the Group of Seven economies in avoiding a recession in 2001
and has continued to grow close to trend in 2002. It has now been
more than ten years since the United Kingdom posted a single quarter
of negative growth. U.K. GDP growth has recently been underpinned by
a robust consumer. Retail sales volumes are up 6% compared to year-
ago levels.
The export-led Japanese economic recovery is starting to lose
momentum. GDP rose by 1.5% in real terms during the period, a
reasonably strong recovery by Japan's experience over the last
decade. The recovery has been driven largely by exports on the back
of improving global demand. Exports to Asia have risen more than 30%
in the last year, and the near-term outlook for demand from Asia
remains firm. However, some leading economic indicators have
deteriorated, suggesting that Japan is in the process of peaking.
For example, money supply growth has slowed and the inventory/
production ratio has risen. Asian production surged in 2002
reflecting the high gearing of the region into the global trade
cycle and a rebound in domestic demand from depressed post-crisis
levels. However, we are now seeing signs of growth losing momentum,
coinciding with the deterioration in global leading economic
indicators. Moreover, there are rising concerns that the South
Korean consumption boom has been fueled by an unhealthy buildup of
credit card debt, much of which is currently going bad. The outlook
for the Australian economy remains well supported by rising
commodity prices, while Hong Kong and Singapore remain mired in
domestic deflation.
Economic growth remains below average but without double-dip
declines. We anticipate modest global growth rates in 2003,
particularly in nominal terms. Massive fiscal and monetary stimulus
allied to a significant expansion in government deficits should keep
the global growth engine moving slowly forward. We do not anticipate
many stimuli from capital expenditure--the global output gap allied
to slow ongoing balance sheet repair rules this out.
December 31, 2002, Mercury International Value V.I. Fund
More importantly, 2003 could be the year when the consumer
disappoints. Savings rates remain low and it seems unrealistic to
expect that housing inflation will underpin a wealth effect boost to
the same degree as in 2002. We are not suggesting that housing
prices will fall, rather that price rises of four-to-eight times
basic inflation must moderate over time. Housing has been a great
source of wealth creation in the long term and will remain so; it
seems natural that a pause in the rate of appreciation is at hand.
Any slowing in price appreciation and transaction volume could have
a significant multiplier impact on the housing market in 2003.
Subdued economic growth and inflation risk suggest that monetary
authorities will remain in an accommodative mode on price and
quantity in 2003. The United Kingdom may be the exception as core
inflation in a full employment economy suffers the upward pressure
of public sector pay claims, fiscal expansion and an overheating
housing market. Indeed, this has the capability of providing one of
2003's more unpleasant surprises. Elsewhere, authorities will
probably remain more relaxed on inflation risk. In a paradoxical way
this is hardly good news for the equity markets, where apart from
the United Kingdom, some rise in short-term interest rates would
represent encouraging signs of reviving growth. We believe
government bonds will struggle to make positive returns, given the
low level of nominal yields and limited chances of deflation.
The rally in the markets that occurred during the fourth quarter has
removed some of the severe undervaluation that was apparent at the
end of the third quarter. The rally was led by a renewed confidence
in an early economic rebound in the U.S. economy in response to the
dramatic monetary easing by the Federal Reserve Board. From a
valuation standpoint, European markets presently trade at 16 times
2003 earnings, which are expected to be slightly up compared to
2002. Asian markets are valued at around 22 times 2003 earnings,
which are forecast to be flat to down in 2003. The outlook is for a
continued positive trend in the international markets for 2003,
although we need to see a positive development in global GDP and
earnings and a resolution to the Middle East conflict. We still
believe there are opportunities to select attractive investments in
a climate that is overshadowed with uncertainties regarding economic
recovery, a weak U.S. dollar and poor earnings visibility.
In Conclusion
We appreciate your support of Mercury International Value V.I. Fund,
and we look forward to serving your investment needs in the months
and years ahead.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Trustee
(James Macmillan)
James Macmillan
Portfolio Manager
February 11, 2003
December 31, 2002, Mercury International Value V.I. Fund
FUND PERFORMANCE DATA
ABOUT FUND PERFORMANCE
None of the past results shown should be considered a representation
of future performance. Figures shown in each of the following tables
assume reinvestment of all dividends and capital gains distributions
at net asset value on the ex-dividend date. Insurance-related fees
and expenses are not reflected in these returns. Investment return
and principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
TOTAL RETURN BASED ON A $10,000 INVESTMENT
A line graph illustrating the growth of a $10,000 investment in
Mercury International Value V.I. Fund*++ compared to a similar
investment in Morgan Stanley Capital International EAFE Index++++.
Values illustrated are as follows:
Mercury International Value V.I. Fund*++
Date Value
6/10/1998 $10,000.00
December 1998 $ 9,561.00
December 1999 $11,632.00
December 2000 $11,967.00
December 2001 $10,423.00
December 2002 $ 9,095.00
Morgan Stanley Capital International EAFE Index++++
Date Value
6/30/1998 $10,000.00
December 1998 $10,351.00
December 1999 $13,142.00
December 2000 $11,280.00
December 2001 $ 8,861.00
December 2002 $ 7,449.00
*Assuming transaction costs and other operating expenses, including
advisory fees. Does not include insurance-related fees and expenses.
**Commencement of operations.
++Mercury International Value V.I. Fund seeks current income and
long-term growth of income, accompanied by growth of capital through
investments in international stocks.
++++The Morgan Stanley Capital International EAFE Index is an
arithmetical average weighted by market value of the performance of
over 1,000 non-U.S. companies representing 20 stock markets in
Europe, Australasia and the Far East. The starting date for the
Index in the graph is from 6/30/98.
AVERAGE ANNUAL TOTAL RETURN
% Return
One Year Ended 12/31/02 -11.54%
Since inception (6/10/98) through 12/31/02 - 1.74
RECENT PERFORMANCE RESULTS
6-Month 12-Month Since Inception
As of December 31, 2002 Total Return Total Return Total Return*
Mercury International Value V.I. Fund -17.09% -11.54% - 7.70%
MSCI EAFE Index** -14.55 -15.94 -25.51
*The Fund commenced operations on 6/10/98.
**Since inception total return is from 6/30/98.
December 31, 2002
Mercury International Value V.I. Fund
SCHEDULE OF INVESTMENTS
In U.S. Dollars
Shares
Industry* Investments Held Value
COMMONSTOCKS--104.8%
Australia--1.3%
Oil & Gas--1.3% Santos Limited 899,411 $ 3,048,879
Total Common Stocks in Australia 3,048,879
France--14.1%
Auto Services--2.0% PSA Peugeot Citroen 118,818 4,845,361
Consumer/Office Societe BIC SA 87,666 3,022,092
Products--1.3%
Electrical Equipment--0.4% ++Alstom 195,782 975,905
Hotels, Restaurants & Accor SA 91,888 2,782,891
Leisure--1.1%
Metals & Mining--2.6% ++Arcelor 272,318 3,349,230
Pechiney SA 'A' 81,544 2,861,537
-----------
6,210,767
Multi-Line Retail--1.2% Pinault-Printemps-Redoute SA 39,628 2,915,152
Oil--International--3.2% TotalFinaElf SA 53,007 7,570,637
Regional Banks--2.3% BNP Paribas SA 134,778 5,491,961
Total Common Stocks in France 33,814,766
Germany--4.3%
Electric--Utilities--1.5% E.On AG 89,740 3,616,249
Financial Services--1.7% DePfa Bank PLC 76,641 4,021,353
Machinery--1.1% Linde AG 71,083 2,610,808
Total Common Stocks in Germany 10,248,410
Hong Kong--4.5%
Electric--Utilities--2.1% Hongkong Electric Holdings Limited 1,305,280 4,946,018
Media--0.6% South China Morning Post
Holdings Ltd. 3,469,000 1,445,713
Real Estate--1.8% Henderson Land Development
Company Limited 1,454,000 4,372,217
Total Common Stocks in Hong Kong 10,763,948
Ireland--1.7%
Regional Banks--1.7% Allied Irish Banks PLC 299,356 4,052,592
Total Common Stocks in Ireland 4,052,592
Italy--8.6%
Banks--2.0% Intesa BCI SpA 2,315,596 4,884,273
Building Products--0.9% Buzzi Unicem SpA 309,688 2,203,409
December 31, 2002
Mercury International Value V.I. Fund
SCHEDULE OF INVESTMENTS
In U.S. Dollars
Shares
Industry* Investments Held Value
COMMONSTOCKS (continued)
Italy (concluded)
Insurance--1.7% Assicurazioni Generali 195,836 $ 4,028,002
Oil & Gas--2.5% ENI SpA 380,968 6,056,785
Telecommunications--1.5% Telecom Italia SpA 478,245 3,628,522
Total Common Stocks in Italy 20,800,991
Japan--20.8%
Auto Services--2.1% Honda Motor Co., Ltd. 137,000 5,068,088
Chemicals--0.6% Sumitomo Bakelite Company Limited 325,000 1,341,957
Diversified Financials--1.2% Sanyo Shinpan Finance Co., Ltd. 157,700 2,850,480
Diversified Nippon Telegraph & Telephone
Telecommunication Corporation (NTT) 1,002 3,639,184
Services--1.5%
Electronic Equipment & Hitachi Ltd. 846,000 3,243,701
Instruments--1.4%
Finance--1.7% Takefuji Corporation 72,000 4,156,063
Hotels, Restaurants & Namco Ltd. 330,000 5,528,272
Leisure--2.3%
Household Durables--2.9% Daiwa House Industry Co., Ltd. 433,000 2,437,381
Matsushita Electric Industrial
Company, Ltd. 457,000 4,505,688
-----------
6,943,069
Machinery--1.7% Amada Co., Ltd. 289,000 789,045
Komatsu Ltd. 990,000 3,228,533
-----------
4,017,578
Pharmaceuticals--2.7% Yamanouchi Pharmaceutical
Co., Ltd. 227,000 6,580,265
Small Loans & Promise Co., Ltd. 96,500 3,439,749
Finance--1.4%
Wireless KDDI Corporation 963 3,124,252
Telecommunication
Services--1.3%
Total Common Stocks in Japan 49,932,658
Netherlands--10.6%
Chemicals/ Akzo Nobel NV 101,288 3,213,196
Pharmaceuticals--1.4%
Commercial Services & Vedior NV 'A' 366,095 2,089,940
Supplies--0.9%
December 31, 2002
Mercury International Value V.I. Fund
SCHEDULE OF INVESTMENTS
In U.S. Dollars
Shares
Industry* Investments Held Value
COMMONSTOCKS (continued)
Netherlands (concluded)
Diversified Fortis 284,028 $ 4,965,663
Financials--3.6% ING Groep NV 217,855 3,689,879
-----------
8,655,542
Electronics--1.3% Koninklijke (Royal) Philips
Electronics NV 177,843 3,116,695
Media--1.8% Wolters Kluwer NV 'A' 251,138 4,374,834
Regional Banks--1.6% ABN AMRO Holding NV 239,797 3,920,598
Total Common Stocks in the Netherlands 25,370,805
New Zealand--0.8%
Diversified Telecom Corporation of
Telecommunication New Zealand Limited 773,000 1,831,734
Services--0.8%
Total Common Stocks in New Zealand 1,831,734
Portugal--1.4%
Electric--Utilities--1.4% Electricidade de Portugal, SA (EDP) 1,997,369 3,333,492
Total Common Stocks in Portugal 3,333,492
Spain--2.0%
Telecommunications--2.0% ++Telefonica SA 536,555 4,802,909
Total Common Stocks in Spain 4,802,909
Sweden--1.5%
Banks--1.5% Nordbanken Holding AB 834,594 3,678,102
Total Common Stocks in Sweden 3,678,102
Switzerland--5.8%
Building Products--1.8% Geberit AG (Registered Shares) 14,760 4,248,557
Construction Holcim Ltd. 'B' 18,641 3,383,880
Materials--1.4%
Pharmaceuticals--2.6% Novartis AG (Registered Shares) 172,124 6,280,217
Total Common Stocks in Switzerland 13,912,654
United Kingdom--27.4%
Airports--1.9% BAA PLC 567,360 4,603,500
Banks--2.5% Barclays PLC 966,810 5,992,400
Diversified Smiths Industries PLC 379,733 4,251,815
Companies--2.9% Tomkins PLC 904,755 2,767,474
-----------
7,019,289
December 31, 2002
Mercury International Value V.I. Fund
SCHEDULE OF INVESTMENTS
In U.S. Dollars
Shares
Industry* Investments Held Value
COMMONSTOCKS (concluded)
United Kingdom (concluded)
Diversified BT Group PLC 994,892 $ 3,123,269
Telecommunication
Services--1.3%
Energy--0.0% ++British Energy PLC (Deferred Shares) 54,000 1
Food & Drug J Sainsbury PLC 981,362 4,403,956
Retailing--1.8%
Foods--2.8% Unilever PLC 717,988 6,831,303
Insurance-- AVIVA PLC 554,527 3,954,807
Multiline--1.7%
Oil & Gas--3.9% Shell Transport & Trading Company 1,422,037 9,363,390
Pharmaceuticals--4.3% GlaxoSmithKline PLC 539,346 10,350,054
Regional Banks--3.3% Royal Bank of Scotland Group PLC 326,916 7,831,375
Security Services--1.0% Chubb PLC 1,668,644 2,357,272
Total Common Stocks in the
United Kingdom 65,830,616
Total Common Stocks
(Cost--$273,235,987) 251,422,556
Preferred Stocks--1.7%
Germany--1.7%
Chemicals--1.7% Henkel KGaA 65,255 4,129,259
Total Preferred Stocks
(Cost--$4,339,186) 4,129,259
Total Investments
(Cost--$277,575,173)--106.5% 255,551,815
Time Deposit**--0.1% 184,568
Liabilities in Excess of
Other Assets--(6.6%) (15,734,469)
------------
Net Assets--100.0% $240,001,914
============
*For Fund compliance purposes, "Industry" means any one or more of
the industry sub-classifications used by one or more widely
recognized market indexes or ratings group indexes, and/or as
defined by Fund management. This definition may not apply for
purposes of this report, which may combine such industry sub-
classifications for reporting ease. These industry classifications
are unaudited.
**Time deposit bears interest at .74% and matures on 1/02/2003.
++Non-income producing security.
See Notes to Financial Statements.
December 31, 2002
Mercury International Value V.I. Fund
STATEMENT OF ASSETS AND LIABILITIES
As of December 31, 2002
Assets:
Investments, at value (including securities loaned of
$2,422,644) (identified cost--$277,575,173) $255,551,815
Investments held as collateral for loaned securities, at value 2,535,752
Cash 1,280
Time deposit 184,568
Receivables:
Dividends $ 943,336
Securities sold 315,002
Capital shares sold 45,850 1,304,188
-------------
Prepaid expenses 4,102
-------------
Total assets 259,581,705
-------------
Liabilities:
Collateral on securities loaned, at value 2,535,752
Payables:
Capital shares redeemed 16,660,429
Investment adviser 168,011
Securities purchased 119,378 16,947,818
-------------
Accrued expenses and other liabilities 96,221
-------------
Total liabilities 19,579,791
-------------
Net Assets:
Net assets $ 240,001,914
=============
Net Assets Consist of:
Paid-in capital $ 347,205,395
Undistributed investment income--net $ 10,836
Accumulated realized capital losses on investments and
foreign currency transactions--net (85,301,305)
Unrealized depreciation on investments and foreign currency
transactions--net (21,913,012)
-------------
Total accumulated losses--net (107,203,481)
-------------
Net assets--Equivalent to $8.26 per share based on
29,047,364 shares outstanding++ $ 240,001,914
=============
++Unlimited shares of no par value authorized.
See Notes to Financial Statements.
December 31, 2002
Mercury International Value V.I Fund
STATEMENT OF OPERATIONS
For the Year Ended December 31, 2002
Investment Income:
Dividends (net of $902,414 foreign withholding tax) $ 7,064,673
Securities lending--net 72,118
Interest 55,397
Other 119,581
-------------
Total 7,311,769
-------------
Expenses:
Investment advisory fees $ 2,398,273
Custodian fees 155,241
Accounting services 127,050
Trustees' fees and expenses 51,971
Printing and shareholder reports 50,662
Transfer agent fees 44,904
Professional fees 29,722
Pricing fees 6,619
Other 31,343
-------------
Total 2,895,785
-------------
Investment income--net 4,415,984
-------------
Realized & Unrealized Gain (Loss)on Investments &
Foreign Currency Transactions--Net:
Realized loss from:
Investments--net (26,024,389)
Foreign currency transactions--net (13,472) (26,037,861)
-------------
Change in unrealized appreciation/depreciation on:
Investments--net (14,789,439)
Foreign currency transactions--net 107,925 (14,681,514)
------------- -------------
Total realized and unrealized loss on investments and
foreign currency transactions--net (40,719,375)
-------------
Net Decrease in Net Assets Resulting from Operations $(36,303,391)
=============
See Notes to Financial Statements.
December 31, 2002
Mercury International Value V.I. Fund
STATEMENTS OF CHANGES
IN NET ASSETS
For the
Year Ended
December 31,
Increase (Decrease)in Net Assets: 2002 2001
Operations:
Investment income--net $ 4,415,984 $ 7,440,188
Realized loss on investments and foreign currency
transactions--net (26,037,861) (39,789,351)
Change in unrealized appreciation/depreciation on
investments and foreign currency transactions--net (14,681,514) (22,588,455)
------------- -------------
Net decrease in net assets resulting from operations (36,303,391) (54,937,618)
------------- -------------
Dividends & Distributions to Shareholders:
Investment income--net (11,858,577) (9,492,333)
Realized gain on investments--net -- (9,684,296)
------------- -------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (11,858,577) (19,176,629)
------------- -------------
Capital Share Transactions:
Net increase (decrease) in net assets derived from capital
share transactions (61,154,402) 67,140,815
------------- -------------
Net Assets:
Total decrease in net assets (109,316,370) (6,973,432)
Beginning of year 349,318,284 356,291,716
------------- -------------
End of year* $ 240,001,914 $ 349,318,284
============= =============
*Undistributed investment income--net $ 10,836 $ 7,387,233
============= =============
See Notes to Financial Statements.
December 31, 2002
Mercury International Value V.I. Fund
FINANCIAL HIGHLIGHTS
The following per share data and ratios have been derived from
information provided in the financial statements.
For the
Period
June 10, 1998++
Increase (Decrease) in For the Year Ended December 31, to Dec. 31,
Net Asset Value: 2002 2001 2000 1999 1998
Per Share Operating Performance:
Net asset value, beginning of
period $ 9.69 $ 11.68 $ 11.52 $ 9.52 $ 10.00
--------- --------- --------- --------- ---------
Investment income--net .13++++ .20++++ .22 .15 .04
Realized and unrealized gain (loss)
on investments and foreign
currency transactions--net (1.21) (1.71) .10 1.91 (.48)
--------- --------- --------- --------- ---------
Total from investment operations (1.08) (1.51) .32 2.06 (.44)
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.35) (.24) (.11) (.06) (.04)
Realized gain on
investments--net -- (.24) (.05) -- --
--------- --------- --------- --------- ---------
Total dividends and distributions (.35) (.48) (.16) (.06) (.04)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 8.26 $ 9.69 $ 11.68 $ 11.52 $ 9.52
========= ========= ========= ========= =========
Total Investment Return:**
Based on net asset value per
share (11.54%) (12.90%) 2.85% 21.68% (4.38%)+++
========= ========= ========= ========= =========
Ratios to Average Net Assets:
Expenses, excluding reorganization
expenses .91% .99% .93% 1.01% 1.05%*
========= ========= ========= ========= =========
Expenses .91% 1.01% .93% 1.01% 1.05%*
========= ========= ========= ========= =========
Investment income--net 1.38% 1.83% 2.20% 1.63% 1.09%*
========= ========= ========= ========= =========
Supplemental Data:
Net assets, end of period
(in thousands) $240,002 $349,318 $356,292 $284,834 $289,135
========= ========= ========= ========= =========
Portfolio turnover 55% 62% 39% 71% 24%
========= ========= ========= ========= =========
*Annualized.
**Total investment returns exclude insurance-related fees and
expenses.
++Commencement of operations.
++++Based on average shares outstanding.
+++Aggregate total investment return.
See Notes to Financial Statements.
December 31, 2002
Mercury International Value V.I. Fund
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Mercury International Value V.I. Fund (the "Fund") (formerly Mercury
HW International Value VIP Portfolio) is a fund of Mercury Variable
Trust (the "Trust") (formerly Mercury HW Variable Trust). The Trust
is registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company, which is
organized as a Massachusetts business trust. The Fund's financial
statements are prepared in conformity with accounting principles
generally accepted in the United States of America, which may
require the use of management accruals and estimates. Shares of the
Fund are not offered to the general public, but may only be
purchased by the separate accounts of participating insurance
companies for the purpose of funding variable annuity contracts
and/or variable life insurance contracts. The following is a summary
of significant accounting policies followed by the Fund.
(a) Valuation of investments--Portfolio securities that are traded
on stock exchanges are valued at the last sale price on the exchange
on which such securities are traded, as of the close of business on
the day the securities are being valued or, lacking any sales, at
the last available bid price. Securities traded in the over-the-
counter market are valued at the last available bid price prior to
the time of valuation. In cases where securities are traded on more
than one exchange, the securities are valued on the exchange
designated by or under the authority of the Board of Trustees as the
primary market. Securities that are traded both in the over-the-
counter market and on a stock exchange are valued according to the
broadest and most representative market. Short-term securities are
valued at amortized cost, which approximates market value. Other
investments are stated at market value. Securities and assets for
which market value quotations are not available are valued at their
fair value as determined in good faith by or under the direction of
the Trust's Board of Trustees.
(b) Derivative financial instruments--The Fund may engage in various
portfolio investment strategies to increase or decrease the level of
risk to which the Fund 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.
* Forward foreign exchange contracts--The Fund is authorized to
enter into forward foreign exchange contracts as a hedge against
either specific transactions or portfolio positions. The contract is
marked-to-market daily and the change in market value is recorded by
the Fund as an unrealized gain or loss. When the contract is closed,
the Fund records a realized gain or loss equal to the difference
between the value at the time it was opened and the value at the
time it was closed.
(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 U.S. dollars. Realized and unrealized gains or
losses from investments include the effects of foreign exchange
rates on investments.
December 31, 2002
Mercury International Value V.I. Fund
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
(d) 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 its 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.
(e) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Realized gains and losses on security
transactions are determined on the identified cost basis. 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 Fund has determined the ex-dividend
date. Interest income is recognized on the accrual basis.
(f) Dividends and distributions--Dividends and distributions paid by
the Fund are recorded on the ex-dividend dates.
(g) Deferred organization expenses--Expenses incurred by the Trust
in connection with the organization, registration and the initial
public offering of shares are being deferred and amortized over the
period of benefit, but not to exceed sixty months from the Fund's
commencement of operations. The proceeds of any redemption of the
initial shares by the original shareholder will be reduced by a pro-
rata portion of any then unamortized organization expenses in the
same proportion as the number of initial shares being redeemed bears
to the number of initial shares outstanding at the time of such
redemption.
(h) Securities lending--The Fund may lend securities to financial
institutions that provide cash or securities issued or guaranteed by
the U.S. government as collateral, which will be maintained at all
times in an amount equal to at least 100% of the current market
value of the loaned securities. Where the Fund receives securities
as collateral for the loaned securities, it collects a fee from the
borrower. The Fund typically receives the income on the loaned
securities but does not receive the income on the collateral. Where
the Fund receives cash collateral, it may invest such collateral and
retain the amount earned on such investment, net of any amount
rebated to the borrower. Loans of securities are terminable at any
time and the borrower, after notice, is required to return borrowed
securities within five business days. The Fund may pay reasonable
finder's, lending agent, administrative and custodial fees in
connection with its loans. In the event that the borrower defaults
on its obligation to return borrowed securities because of
insolvency or for any other reason, the Fund could experience delays
and costs in gaining access to the collateral. The Fund also could
suffer a loss where the value of the collateral falls below the
market value of the borrowed securities, in the event of borrower
default or in the event of losses on investments made with cash
collateral.
December 31, 2002
Mercury International Value V.I. Fund
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
(i) Reclassification--Accounting principles generally accepted in
the United States of America require that certain components of net
assets be adjusted to reflect permanent differences between
financial and tax reporting. Accordingly, the current year's
permanent book/tax difference of $67,956 has been reclassified
between accumulated net realized capital losses and undistributed
net investment income and $1,760 has been reclassified between
undistributed net investment income and paid-in capital in excess of
par. These reclassifications have no effect on net assets or net
asset value per share.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Trust has entered into an Investment Advisory Agreement for the
Fund with Fund Asset Management, L.P., doing business as Mercury
Advisors. The general partner of Mercury Advisors is Princeton
Services, Inc. ("PSI"), an indirect, wholly-owned subsidiary of
Merrill Lynch & Co., Inc. ("ML & Co."), which is the limited
partner.
Mercury Advisors is responsible for the management of the Fund's
investments and provides the necessary personnel, facilities,
equipment and certain other services necessary to the operations of
the Fund. For such services, the Fund pays a monthly fee at an
annual rate of .75% of the average daily value of the Fund's net
assets. Mercury Advisors has contractually agreed to pay all annual
operating expenses in excess of 1.35% as applied to the Fund's daily
net assets through April 30, 2003.
Mercury Advisors has entered into a Sub-Advisory Agreement for the
Fund with Merrill Lynch Asset Management U.K., Ltd., an affiliate of
Mercury Advisors. The sub-advisory arrangement is for investment
research, recommendations and other investment-related services to
be provided to the Fund. There is no increase in the aggregate fees
paid by the Fund for these services.
The Fund has received an exemptive order from the Securities and
Exchange Commission permitting it to lend portfolio securities to
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), a
subsidiary of ML & Co., or its affiliates. As of December 31, 2002,
the Fund lent securities with a value of $573,235 to MLPF&S or its
affiliates. Pursuant to that order, the Fund also has retained
Merrill Lynch Investment Advisors, LLC ("MLIA"), an affiliate of
Mercury Advisors, as the securities lending agent for a fee based on
a share of the returns on investment of cash collateral. MLIA may,
on behalf of the Fund, invest cash collateral received by the Fund
for such loans, among other things, in a private investment company
managed by MLIA or in registered money market funds advised by
Mercury Advisors or its affiliates. As of December 31, 2002, cash
collateral of $1,343,949 was invested in the Money Market Series of
the Merrill Lynch Liquidity Series, LLC and $1,191,803 was invested
in the Merrill Lynch Premier Institutional Fund. For the year ended
December 31, 2002, MLIA received $31,145 in securities lending agent
fees.
December 31, 2002
Mercury International Value V.I. Fund
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Financial Data Services, Inc. ("FDS"), an indirect, wholly-owned
subsidiary of ML & Co., is the Fund's transfer agent.
In addition, MLPF&S received $16,472 in commissions on the execution
of portfolio security transactions for the Fund for the year ended
December 31, 2002.
FAM Distributors, Inc. ("FAMD"), an indirect, wholly-owned
subsidiary of Merrill Lynch Group, Inc., is the Fund's distributor.
For the year ended December 31, 2002, the Fund reimbursed Mercury
Advisors $9,459 for certain accounting services.
Certain officers and/or trustees of the Trust are officers and/or
directors of Mercury Advisors, FAMD, PSI, FDS, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended December 31, 2002 were $171,465,338 and
$207,067,926, respectively.
Net realized losses for the year ended December 31, 2002 and net
unrealized gains (losses) as of December 31, 2002 were as follows:
Realized Unrealized
Losses Gains (Losses)
Long-term investments $(26,024,389) $(22,023,358)
Foreign currency transactions (13,472) 110,346
------------- -------------
Total $(26,037,861) $(21,913,012)
============= =============
As of December 31, 2002, net unrealized depreciation for Federal
income tax purposes aggregated $26,076,527, of which $15,930,432
related to appreciated securities and $42,006,959 related to
depreciated securities. At December 31, 2002, the aggregate cost of
investments for Federal income tax purposes was $281,628,342.
4. Capital Share Transactions:
Transactions in capital shares for each class were as follows:
For the Year
Ended December 31, 2002 Shares Dollar Amount
Shares sold 18,668,459 $ 172,994,436
Shares issued to shareholders
in reinvestment of dividends 1,268,867 11,858,577
------------- -------------
Total issued 19,937,326 184,853,013
Shares redeemed (26,933,266) (246,007,415)
------------- -------------
Net decrease (6,995,940) $(61,154,402)
============= =============
December 31, 2002
Mercury International Value V.I. Fund
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
For the Year
Ended December 31, 2001 Shares Dollar Amount
Shares sold 74,748,271 $ 800,106,928
Shares issued resulting
from reorganization 10,211,084 115,814,267
Shares issued to shareholders
in reinvestment of dividends
and distributions 2,012,238 19,176,629
------------- -------------
Total issued 86,971,593 935,097,824
Shares redeemed (81,431,267) (867,957,009)
------------- -------------
Net increase 5,540,326 $ 67,140,815
============= =============
5. Short-Term Borrowings:
The Trust, along with certain other funds managed by Mercury
Advisors and its affiliates, is a party to a $500,000,000 credit
agreement with Bank One, N.A. and certain other lenders. The Fund
may borrow under the credit agreement to fund shareholder
redemptions and for other lawful purposes other than for leverage.
The Fund may borrow up to the maximum amount allowable under the
Fund's current prospectus and statement of additional information,
subject to various other legal, regulatory or contractual limits.
The Fund pays a commitment fee of .09% per annum based on the Fund's
pro rata share of the unused portion of the credit agreement.
Amounts borrowed under the credit agreement bear interest at a rate
equal to, at each fund's election, the Federal Funds rate plus .50%
or a base rate as determined by Bank One, N.A. On November 29, 2002,
the credit agreement renewed for one year under the same terms
except that the total commitment was reduced from $1,000,000,000 to
$500,000,000. The Fund did not borrow under the credit agreement
during the year ended December 31, 2002.
6. Commitments:
On December 31, 2002, the Fund had entered into foreign exchange
contracts under which it had agreed to purchase and sell foreign
currency with approximate values of $12,000 and $208,000,
respectively.
7. Distributions to Shareholders:
The tax character of distributions paid during the fiscal years
ended December 31, 2002 and December 31, 2001 was as follows:
12/31/2002 12/31/2001
Distributions paid from:
Ordinary income $ 11,858,577 $ 19,176,629
------------ -------------
Total taxable distributions $ 11,858,577 $ 19,176,629
============ =============
December 31, 2002
Mercury International Value V.I. Fund
NOTES TO FINANCIAL STATEMENTS
(CONCLUDED)
As of December 31, 2002, the components of accumulated losses on a
tax basis were as follows:
Undistributed ordinary income--net $ 234,746
Undistributed long-term capital gains--net --
-------------
Total undistributed earnings--net 234,746
Capital loss carryforward (75,532,445)*
Unrealized losses--net (31,905,782)**
--------------
Total accumulated losses--net $(107,203,481)
==============
*On December 31, 2002, the Fund had a net capital loss carryforward
of $75,532,445, of which $15,582,411 expires in 2008, $18,093,629
expires in 2009 and $41,856,405 expires in 2010. This amount will be
available to offset like amounts of any future taxable gains.
**The difference between book-basis and tax-basis net unrealized
losses is attributable primarily to the tax deferral of losses on
wash sales, the tax deferral of losses on straddles, the realization
for tax purposes of unrealized gains (losses) on certain foreign
currency contracts, the realization for tax purposes of unrealized
gains on investments in passive foreign investment companies, the
deferral of post-October capital losses for tax purposes and other
book/tax temporary differences.
December 31, 2002
Mercury International Value V.I. Fund
REPORT OF INDEPENDENT
AUDITORS
To the Board of Trustees of Mercury Variable Trust and
Shareholders of Mercury International Value V.I. Fund:
We have audited the accompanying statement of assets and liabilities
of Mercury International Value V.I. Fund (formerly Mercury HW
International Value VIP Portfolio, one of the portfolios comprising
Mercury Variable Trust) (the "Fund") including the schedule of
investments, as of December 31, 2002, and the related statement of
operations for the year then ended and the statement of changes in
net assets and financial highlights for each of the two years in the
period then ended. 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. The
financial highlights for each of the two years in the period
ended December 31, 2000 and for the period from June 10, 1998
(commencement of operations) to December 31, 1998, were audited by
other auditors, whose report dated February 13, 2001, expressed an
unqualified opinion on those financial highlights.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. 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 and financial highlights. Our procedures
included confirmation of securities owned as of December 31, 2002,
by correspondence with the custodian and others. 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, the financial statements and financial highlights
audited by us, referred to above present fairly, in all material
respects, the financial position of Mercury International Value V.I.
Fund at December 31, 2002, the results of its operations for the
year then ended and the changes in its net assets and the financial
highlights for each of the two years in the period then ended, in
conformity with accounting principles generally accepted in the
United States.
(Ernst & Young LLP)
MetroPark, New Jersey
February 4, 2003
December 31, 2002
Mercury International Value V.I. Fund
OFFICERS AND TRUSTEES
INTERESTED TRUSTEE
Number of
Portfolios in Other
Position(s) Length Fund Complex Directorships
Name, Address Held of Time Overseen by Held by
& Age with Fund Served Principal Occupation(s) During Past 5 Years Trustee Trustee
Terry K. Glenn* President 1999 to Chairman, Americas Region since 2001 and Executive 117 Funds None
P.O. Box 9011 and present Vice President since 1983 of Fund Asset Management 162 Portfolios
Princeton, NJ Trustee and L.P. ("FAM") and Merrill Lynch Investment Managers,
08543-9011 1998 to L.P. ("MLIM"); President of Merrill Lynch Mutual Funds
Age: 62 present since 1999; President of FAM Distributors, Inc. ("FAMD")
since 1986 and Director thereof since 1991; Executive
Vice President and Director of Princeton Services, Inc.
("Princeton Services") since 1993; President of Princeton
Administrators, L.P. since 1988; Director of Financial
Data Services, Inc. since 1985.
* Mr. Glenn is a director, trustee or member of an advisory board of
certain other investment companies for which FAM or MLIM acts as
investment adviser. Mr. Glenn is an "interested person," as
described in the Investment Company Act, of the Fund based on his
positions as Chairman (Americas Region) and Executive Vice President
of FAM and MLIM; President of FAMD; Executive Vice President of
Princeton Services; and President of Princeton Administrators, L.P.
The Trustee's term is unlimited. Trustees serve until their
resignation, removal or death, or until December 31 of the year in
which they turn 72. As Fund President, Mr. Glenn serves at the
pleasure of the Board of Trustees.
INDEPENDENT TRUSTEES
Number of
Portfolios in Other
Position(s) Length Fund Complex Directorships
Name, Address Held of Time Overseen by Held by
& Age with Fund Served* Principal Occupation(s) During Past 5 Years Trustee Trustee
James H. Trustee 2002 to Director and Executive Vice President, The China 42 Funds None
Bodurtha present Business Group, Inc. since 1996; Chairman, Berkshire 61 Portfolios
P.O. Box 9095 Holding Corporation since 1980.
Princeton, NJ
08543-9095
Age: 58
Joe Grills Trustee 1998 to Member of the Committee of Investment of Employee Benefit 42 Funds Kimco
P.O. Box 9095 present Assets of the Association of Financial Professionals 61 Portfolios Realty
Princeton, NJ ("CIEBA") since 1986; Member of CIEBA's Executive Corporation
08543-9095 Committee since 1988; Member of the Investment Advisory
Age: 67 Committees of the State of New York Common Retirement
Fund since 1989; Member of the Investment Advisory
Committee of the Howard Hughes Medical Institute from
1997 to 2000; Director, Duke Management Company since
1992 and Vice Chairman thereof since 1998; Director LaSalle
Street Fund from 1995 to 2001; Member of the Investment
Advisory Committee of the Virginia Retirement System since
1998; Director, Montpelier Foundation since 2000; Member of
the Investment Committee of the Woodberry Forest School
since 2000; Member of the Investment Committee of the
National Trust for Historic Preservation since 2000.
OFFICERS AND TRUSTEES (CONTINUED)
INDEPENDENT TRUSTEES (CONCLUDED)
Number of
Portfolios in Other
Position(s) Length Fund Complex Directorships
Name, Address Held of Time Overseen by Held by
& Age with Fund Served* Principal Occupation(s) During Past 5 Years Trustee Trustee
Herbert I. Trustee 2002 to John M. Olin Professor of Humanities, New York 42 Funds None
London present University since 1993 and Professor thereof since 1980; 61 Portfolios
P.O. Box 9095 President of Hudson Institute since 1997 and Trustee
Princeton, NJ thereof since 1980.
08543-9095
Age: 63
Andre F. Trustee 2002 to George Gund Professor of Finance and Banking, Harvard 42 Funds None
Perold present Business School since 2000 and a member of the faculty 61 Portfolios
P.O. Box 9095 since 1979; Director of Stockback.com since 2002.
Princeton, NJ
08543-9095
Age: 50
Roberta Cooper Trustee 2002 to Shareholder, Modrall, Sperling, Roehl, Harris & Sisk, P.A. 42 Funds Cooper's,
Ramo present since 1993. 61 Portfolios Inc.;
P.O. Box 9095 ECMC, Inc.
Princeton, NJ
08543-9095
Age: 60
Robert S. Trustee 2002 to Principal of STI Management since its founding in 1994; 42 Funds None
Salomon, Jr. present Trustee of Commonfund from 1980 to 2002; Trustee and 61 Portfolios
P.O. Box 9095 Chairman of the Investment Management Workshop
Princeton, NJ from 1978 to 2000; Director of Rye Country Day School
08543-9095 since 2001.
Age: 66
Melvin R. Trustee 2002 to Director, Silbanc Properties, Ltd. (real estate, investment 42 Funds None
Seiden present and consulting) since 1987. 61 Portfolios
P.O. Box 9095
Princeton, NJ
08543-9095
Age: 72
Stephen B. Trustee 2002 to Chairman, Fernwood Advisors (investment advisor) 42 Funds International
Swensrud present since 1996; Principal of Fernwood Associates (financial 61 Portfolios Mobile
P.O. Box 9095 consultant) since 1975; Chairman of RPP Corporation Communi-
Princeton, NJ since 1978; Director, International Mobile Communi- cations,
08543-9095 cations, Inc. since 1998. Inc.
Age: 69
*The Trustee's term is unlimited. Trustees serve until their
resignation, removal or death, or until December 31 of the year
which they turn 72.
December 31, 2002
Mercury International Value V.I. Fund
OFFICERS AND TRUSTEES (CONCLUDED)
FUND OFFICERS
Position(s) Length
Name, Address Held of Time
& Age with Fund Served* Principal Occupation(s) During Past 5 Years
Donald C. Burke Vice 1998 to First Vice President of FAM and MLIM since 1997 and Treasurer thereof since
P.O. Box 9011 President present 1999; Senior Vice President and Treasurer of Princeton Services since 1999;
Princeton, NJ and and Vice President of FAMD since 1999; Director of MLIM Taxation since 1990.
08543-9011 Treasurer 1999 to
Age: 42 present
Robert C. Senior Vice 2000 to President and Global Chief Investment Officer of MLIM and member of the Executive
Doll, Jr. President present Management Committee of ML & Co., Inc. since 2001; Chief Investment Officer,
P.O. Box 9011 Senior Vice President and Co-Head of MLIM Americas from 1999 to 2001; Chief
Princeton, NJ Investment Officer of Oppenheimer Funds, Inc. from 1987 to 1999 and Executive
08543-9011 Vice President from 1991 to 1999.
Age: 49
James Macmillan Vice 2001 to Managing Director of MLIM, U.K. since 2000; Portfolio Manager of MLIM, U.K.
P.O. Box 9011 President present since 1993.
Princeton, NJ
08543-9011
Age: 37
Stephen M. Secretary 2002 to Vice President (Legal Advisory) of MLIM since 2000; Associate with Kirkpatrick &
Benham present Lockhart LLP from 1997 to 2000.
P.O. Box 9011
Princeton, NJ
08543-9011
Age: 43
*Officers of the Fund serve at the pleasure of the Board of
Trustees.
Further information about the Fund's Trustees is available in the
Fund's Statement of Additional Information, which can be obtained
without charge by calling 1-888-763-2260.
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109-3661
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
888-763-2260
Effective January 1, 2003, Melvin R. Seiden, Trustee of Mercury
International Value V.I. Fund, retired. The Fund's Board of Trustees
wishes Mr. Seiden well in his retirement.
December 31, 2002
Mercury International Value V.I. Fund
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