UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-21486
811-21538
Name of Fund: Merrill Lynch Real Investment Fund
Master Real Investment Trust
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Terry K. Glenn, President,
Merrill Lynch Real Investment Fund and Master Real Investment Trust,
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: 11/30/04
Date of reporting period: 12/01/03 - 05/31/04
Item 1 - Report to Stockholders
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Merrill Lynch Investment Managers
www.mlim.ml.com
Merrill Lynch
Real Investment Fund
Semi-Annual Report
May 31, 2004
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.
A description of the policies and procedures that the Fund uses to
determine how to vote proxies relating to portfolio securities is
available (1) without charge, upon request, by calling toll-free
1-800-MER-FUND (1-800-637-3863); (2) at www.mutualfunds.ml.com;
and (3) on the Securities and Exchange Commission's Web site at
http://www.sec.gov.
Merrill Lynch Real Investment Fund
Box 9011
Princeton, NJ
08543-9011
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Merrill Lynch Real Investment Fund
Officers and Trustees
Terry K. Glenn, President and Trustee
David O. Beim, Trustee
James T. Flynn, Trustee
W. Carl Kester, Trustee
Karen P. Robards, Trustee
Thomas Musmanno, Vice President
Frank Viola, Vice President
Donald C. Burke, Vice President and Treasurer
Phillip S. Gillespie, Secretary
Custodian
The Bank of New York
100 Church Street
New York, NY 10286
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
800-637-3863
Electronic Delivery
The Fund offers electronic delivery of communications to its
shareholders. In order to receive this service, you must
register your account and provide us with e-mail information.
To sign up for this service, simply access this Web site
http://www.icsdelivery.com/live and follow the instructions.
When you visit this site, you will obtain a personal identification
number (PIN). You will need this PIN should you wish to update your
e-mail address, choose to discontinue this service and/or make any
other changes to the service. This service is not available for
certain retirement accounts at this time.
MERRILL LYNCH REAL INVESTMENT FUND, MAY 31, 2004
A Letter From the President
Dear Shareholder
Fixed income markets were mixed over the most recent six-month and
12-month reporting periods. The high yield market, as measured by
the Credit Suisse First Boston High Yield Index, had a six-month
return of +3.24% and a 12-month return of +13.25% as of May 31,
2004. Corporate bonds, represented by the Merrill Lynch U.S.
Corporate Master Index, posted returns of +.67% and -.16% for the
six-month and 12-month periods ended May 31, 2004, respectively. The
Goldman Sachs Commodity Index returned +26.01% and +32.71% for the
same six-month and 12-month periods, while Treasury issues, as
measured by the Citigroup Treasury 1-3 Year Index, returned +.48%
and +.63%, respectively.
By May month-end, the Federal Reserve Board appeared poised to raise
the Federal Funds target rate from its 45-year low of 1%. This
anticipated shift in monetary policy was largely prompted by better-
than-expected employment reports for the months of March, April and
May, as well as by rising producer prices. The good news on the
employment front - previously a dim spot in an otherwise bright
economic picture - helped cause the yield on the 10-year Treasury
bond to spike 75 basis points (.75%), from 3.91% on April 1 to 4.66%
on May 28.
Equity markets, in the meantime, gleaned support from the improving
economic environment and provided attractive returns. Although we
did experience a market correction toward the end of the period,
for the six months and 12 months ended May 31, 2004, the Standard &
Poor's 500 Index returned +6.79% and +18.33%, respectively.
Significant fiscal and monetary stimulus in 2003, including low
interest rates and tax cuts, opened the door to consumer spending,
capital spending, increases in exports and long-awaited job growth.
As expected, these developments led the way to improvements in
corporate earnings - a positive for stock markets.
The events and efforts of the past year leave us with a much
stronger economy today. Of course, markets will always fluctuate,
and there are many uncertainties - including the possibility of
geopolitical events - that can translate into negative market
movements. Keeping this in mind, however, we encourage you to
revisit your portfolio and your asset allocation strategy to ensure
you are well positioned to take advantage of the opportunities that
lie ahead. Importantly, your financial advisor can help you develop
a strategy most suitable for your circumstances through all types of
market and economic cycles.
We thank you for trusting Merrill Lynch Investment Managers with
your investment assets, and we look forward to serving you in the
months and years ahead.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Trustee
MERRILL LYNCH REAL INVESTMENT FUND, MAY 31, 2004
A Discussion With Your Fund's Portfolio Managers
We are pleased to provide you with this first shareholder report for
Merrill Lynch Real Investment Fund. The Fund's investment objective
is to seek positive long-term total return.
What is the Fund's investment strategy?
The Fund invests primarily in commodity-linked derivative
instruments, as well as U.S. government securities and other debt
obligations. The commodity-linked derivative instruments in which
the Fund may invest includes hybrid instruments, such as structured
notes or commodity-linked notes, whose principal and/or interest
payments are tied to the value of a real asset or commodity index,
such as the Goldman Sachs Commodity Total Return Index. The debt
obligations in which the Fund invests are primarily investment
grade, fixed rate and floating rate debt securities of any maturity.
How has the Fund performed since its inception in light of the
existing market and economic conditions?
Since its inception on March 26, 2004 through May 31, 2004, the
Fund's Class A, Class B, Class C and Class I Shares all had total
returns of +6.20%. For the same period, the Fund's benchmark, the
Goldman Sachs Commodity Total Return Index, returned +9.10%. (Fund
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.)
While Fund performance has been favorable on an absolute
basis - commensurate with strong commodity prices in recent
months - relative performance has lagged the benchmark. This is
a fairly natural result during a "ramp-up" phase for a new Fund as
it begins the process of investing the proceeds from the initial
offering period, particularly when we have been gaining exposure to
our benchmark commodity index in a rising commodity price
environment.
The Fund's positive absolute returns are largely related to the
strong performance of energy, which represents approximately 65% of
the benchmark commodity index.
How have you managed the Fund since its inception?
We invest in commodity-linked notes to gain exposure to our
benchmark commodity index. High-quality banks and insurance
companies, including AIG, J.P. Morgan Chase Bank and Deutsche Bank
AG, issue these notes to the Fund. Unlike other fixed income
securities which pay a fixed or floating rate coupon, the commodity-
linked notes pay a periodic return that is linked to and dependent
on the performance of a specified commodity index. At period-end,
the Fund was about 85% exposed to the benchmark commodity index. We
are looking for tactical opportunities to ramp up to 100% exposure
through the investment in the commodity-linked notes.
Any cash in the portfolio after investment in the commodity-linked
notes was invested in low-duration fixed income securities that we
believe can provide us with enhanced yield. Basically, we are using
traditional fixed income investments in mortgages, corporate bonds
and asset-back securities to generate a fixed income return that we
will exchange or swap, through investment in the commodity-linked
notes, for the return on an overall basket of commodities as
represented by our benchmark commodity index. The residual cash that
is left in the portfolio after the investment in commodity-linked
notes will be invested in securities that increase the yield of the
portfolio but produce low interest rate risk.
As the Fund's net assets grow, we expect to be able to capture
additional diversification in the portfolio.
How would you characterize the Fund's position at the close of the
period?
Our outlook is for continued strong global growth. The prices of oil
and other commodities, which are important inputs to this global
expansion, should benefit as a result. We remain cognizant, however,
that oil has had a large run-up in recent months and could take a
temporary pause. With all of this in mind, we are about 85% exposed
to our benchmark commodity index and are looking to increase that
exposure to 100% in the coming months.
MERRILL LYNCH REAL INVESTMENT FUND, MAY 31, 2004
We continue to believe that commodities are a prudent investment in
the current environment, allowing investors to diversify their
portfolios and thereby reduce overall risk. This is because
commodities tend to have a negative correlation to traditional
investment classes. That is, when stocks and bonds are down,
commodities may be on an upswing. In fact, commodities have a very
strong negative correlation to equities, thus potentially providing
a buffer against poor equity returns. Beyond the diversification
benefits, we believe commodities also provide a good tactical trade
in times when the economy is poised to grow and produce an increase
in commodity demand. Finally, our observations reveal that the
historical performance of the Goldman Sachs Commodity Total Return
Index, which is a futures-based index, has been comparable to that
of equity markets over the past 25 years.
Frank Viola
Vice President and Co-Portfolio Manager
Tom Musmanno
Vice President and Co-Portfolio Manager
June 9, 2004
MERRILL LYNCH REAL INVESTMENT FUND, MAY 31, 2004
Performance Data
About Fund Performance
Investors are able to purchase shares of the Fund through multiple
pricing alternatives:
* 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%, declining to 0% after six years. 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 10 years. (There is no initial
sales charge for automatic share conversions.)
* 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 are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class I Shares incur a maximum initial sales charge (front-end
load) of 5.25% and bear no ongoing distribution or account
maintenance fees. Class I Shares are available only to eligible
investors.
None of the past results shown should be considered a representation
of future performance. Current performance may be lower or higher
than the performance data quoted. Refer to www.mlim.ml.com to obtain
more current performance information. Performance results do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. Figures shown in
each of the following tables assume reinvestment of all dividends
and capital gain distributions, if any, 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. The Fund's Investment Adviser has voluntarily waived a
portion of its fee. Without such waiver, the Fund's returns would
have been lower.
Recent Performance Results
Since Inception
As of May 31, 2004 Total Return
ML Real Investment Fund Class A Shares* +6.20%
ML Real Investment Fund Class B Shares* +6.20
ML Real Investment Fund Class C Shares* +6.20
ML Real Investment Fund Class I Shares* +6.20
Goldman Sachs Commodity Index** +9.10
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included. Total
investment returns are based on changes in net asset values for the
periods shown, and assume reinvestment of all dividends and capital
gains distributions at net asset value on the ex-dividend date. The
Fund's inception date is 3/26/04.
**The unmanaged Index is calculated primarily on a world production-
weighted basis and comprises the principal physical commodities that
are the subject of active, liquid futures markets. Since inception
total returns are from 3/26/04.
MERRILL LYNCH REAL INVESTMENT FUND, MAY 31, 2004
Performance Data (concluded)
Aggregate Total Return
Return Without Return With
Sales Charge Sales Charge**
Class A Shares*
Inception (3/26/04)
through 5/31/04 +6.20% +0.62%
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
Return Return
Without CDSC With CDSC**
Class B Shares*
Inception (3/26/04)
through 5/31/04 +6.20% +2.20%
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after six year.
**Assuming payment of applicable contingent deferred sales charge.
Return Return
Without CDSC With CDSC**
Class C Shares*
Inception (3/26/04)
through 5/31/04 +6.20% +5.20%
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after one year.
**Assuming payment of applicable contingent deferred sales charge.
Return Without Return With
Sales Charge Sales Charge**
Class I Shares*
Inception (3/26/04)
through 5/31/04 +6.20% +0.62%
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
MERRILL LYNCH REAL INVESTMENT FUND, MAY 31, 2004
Statement of Assets and Liabilities Merrill Lynch Real Investment Fund
As of May 31, 2004
Assets
Investment in Master Real Investment Trust, at value
(identified cost--$48,917,830) $ 51,267,634
Other assets 69,290
---------------
Total assets 51,336,924
---------------
Liabilities
Payables:
Distributor $ 24,843
Other affiliates 7,091
---------------
Total liabilities 31,934
---------------
Net Assets
Net assets $ 51,304,990
===============
Net Assets Consist of
Class A Shares of beneficial interest, $.01 par value, unlimited number of
shares authorized $ 9,146
Class B Shares of beneficial interest, $.01 par value, unlimited number of
shares authorized 8,236
Class C Shares of beneficial interest, $.01 par value, unlimited number of
shares authorized 21,394
Class I Shares of beneficial interest, $.01 par value, unlimited number of
shares authorized 9,529
Paid-in capital in excess of par 48,897,043
Undistributed realized capital gains on investments allocated from the
Trust--net $ 9,838
Unrealized appreciation on investments allocated from the Trust--net 2,349,804
---------------
Total accumulated earnings--net 2,359,642
---------------
Net Assets $ 51,304,990
===============
Net Asset Value
Class A--Based on net assets of $9,713,772 and 914,645 shares of beneficial
interest outstanding $ 10.62
===============
Class B--Based on net assets of $8,747,689 and 823,628 shares of beneficial
interest outstanding $ 10.62
===============
Class C--Based on net assets of $22,721,640 and 2,139,407 shares of beneficial
interest outstanding $ 10.62
===============
Class I--Based on net assets of $10,121,889 and 952,905 shares of beneficial
interest outstanding $ 10.62
===============
See Notes to Financial Statements.
MERRILL LYNCH REAL INVESTMENT FUND, MAY 31, 2004
Statement of Operations Merrill Lynch Real Investment Fund
For the Period March 26, 2004++ to May 31, 2004
Investment Income Allocated from the Trust--Net
Net investment income allocated from the Trust:
Interest (including $2,029 from affiliates) $ 83,143
Expenses (net of $20,351 reimbursement) (34,624)
---------------
Net investment income allocated from the Trust 48,519
---------------
Expenses
Investment advisory fees $ 74,924
Offering costs 35,973
Account maintenance and distribution fees--Class C 34,089
Account maintenance and distribution fees--Class B 12,457
Registration fees 4,181
Professional fees 3,948
Transfer agent fees--Class C 3,772
Printing and shareholder reports 3,700
Account maintenance fees--Class A 3,307
Transfer agent fees--Class I 1,489
Transfer agent fees--Class B 1,372
Transfer agent fees--Class A 1,307
Other 1,278
---------------
Total expenses before waiver and reimbursement 181,797
Waiver and reimbursement of expenses (133,278)
---------------
Total expenses after waiver and reimbursement 48,519
---------------
Investment income--net --
---------------
Realized & Unrealized Gain on Investments Allocated from the Trust--Net
Realized gain on investments allocated from the Trust--net 9,838
Unrealized appreciation on investments allocated from the Trust--net 2,349,804
---------------
Total realized and unrealized gain on investments allocated from the Trust--net 2,359,642
---------------
Net Increase in Net Assets Resulting from Operations $ 2,359,642
===============
++Commencement of operations.
See Notes to Financial Statements.
MERRILL LYNCH REAL INVESTMENT FUND, MAY 31, 2004
Statement of Changes in Net Assets Merrill Lynch Real Investment Fund
For the Period
March 26, 2004++
to May 31,
Increase in Net Assets: 2004
Operations
Investment income--net $ --
Realized gain on investments allocated from the Trust--net 9,838
Unrealized appreciation allocated from the Trust--net 2,349,804
---------------
Net increase in net assets resulting from operations 2,359,642
---------------
Beneficial Interest Transactions
Net increase in net assets derived from beneficial interest transactions 48,845,348
---------------
Net Assets
Total increase in net assets 51,204,990
Beginning of period 100,000
---------------
End of period $ 51,304,990
===============
++Commencement of operations.
See Notes to Financial Statements.
MERRILL LYNCH REAL INVESTMENT FUND, MAY 31, 2004
Financial Highlights Merrill Lynch Real Investment Fund
The following per share data and ratios have been derived
from information provided in the financial statements. For the Period March 26, 2004++
to May 31, 2004
Increase in Net Asset Value: Class A Class B Class C Class I
Per Share Operating Performance
Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00 $ 10.00
---------- ---------- ---------- ----------
Investment income--net -- -- -- --
Realized and unrealized gain on investments allocated
from the Trust--net .62 .62 .62 .62
---------- ---------- ---------- ----------
Total from investment operations .62 .62 .62 .62
---------- ---------- ---------- ----------
Net asset value, end of period $ 10.62 $ 10.62 $ 10.62 $ 10.62
========== ========== ========== ==========
Total Investment Return**
Based on net asset value per share 6.20%+++ 6.20%+++ 6.20%+++ 6.20%+++
========== ========== ========== ==========
Ratios to Average Net Assets
Expenses, net of waiver and reimbursement*** 1.11%* 1.11%* 1.11%* 1.11%*
========== ========== ========== ==========
Expenses*** 2.74%* 3.50%* 3.50%* 2.48%*
========== ========== ========== ==========
Investment income--net -- -- -- --
========== ========== ========== ==========
Supplemental Data
Net assets, end of period (in thousands) $ 9,714 $ 8,748 $ 22,722 $ 10,122
========== ========== ========== ==========
Portfolio turnover of Master Real Investment Trust .01% .01% .01% .01%
========== ========== ========== ==========
*Annualized.
**Total investment returns exclude the effect of sales charges.
***Includes the Fund's share of the Trust's allocated expenses.
++Commencement of operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH REAL INVESTMENT FUND, MAY 31, 2004
Notes to Financial Statements
Merrill Lynch Real Investment Fund
1. Significant Accounting Policies:
Merrill Lynch Real Investment Fund (the "Fund") is registered under
the Investment Company Act of 1940, as amended, as a non
diversified, open-end investment company. The Fund seeks to achieve
its investment objective by investing all of its assets in Master
Real Investment Trust (the "Trust"), which has the same investment
objective as the Fund. The value of the Fund's investment in the
Trust reflects the Fund's proportionate interest in the net assets
of the Trust. The performance of the Fund is directly affected by
the performance of the Trust. The financial statements of the Trust,
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 conformity with U.S. generally accepted accounting principles,
which may require the use of management accruals and estimates.
Actual results may differ from these 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. Prior to commencement of operations on
March 26, 2004, the Fund had no operations other than those relating
to organizational matters and the sale of 10,000 shares of Common
Stock on March 10, 2004 to Merrill Lynch Investment Managers, L.P.
("MLIM") for $100,000. The percentage of the Trust owned by the Fund
at May 31, 2004 was 90.1%. The Fund offers multiple classes of
shares. Shares of Class A and Class I are sold with a front-end
sales charge. Shares of Class B and Class C 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. Income, expenses
(other than expenses attributable to a specific class) and realized
and unrealized gains and losses on investments are allocated daily
to each class based on its relative net assets. The following is a
summary of significant accounting policies followed by the Fund.
(a) Valuation of investments--The Fund records its investment in the
Trust at fair value. Valuation of securities held by the Trust is
discussed in Note 1a of the Trust's Notes to Financial Statements,
which are included elsewhere in this report.
(b) Investment income and expenses--The Fund records daily its
proportionate share of the Trust's income, expenses and realized and
unrealized gains and losses. In addition, the Fund accrues its own
expenses.
(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.
(d) Prepaid registration fees--Prepaid registration fees will be
amortized over a 12-month period beginning with the commencement of
operations of the Fund.
(e) Dividends and distributions--Dividends and distributions paid by
the Fund are recorded on the ex-dividend dates.
(f) Investment transactions--Investment transactions in the Trust
are accounted for on a trade date basis.
2. Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with
MLIM. The general partner of MLIM is Princeton Services, Inc.
("PSI"), an indirect, wholly-owned subsidiary of Merrill Lynch &
Co., Inc. ("ML & Co."), which is the limited partner. MLIM is
responsible for the management of the Fund's portfolio 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 of 1.00%, on an annual basis, of the
average daily value of the Fund's net assets. MLIM has contractually
agreed to waive the Fund's investment advisory fee in the amount of
the Fund's share of the investment advisory fee paid by the Trust.
For the period March 26, 2004 to May 31, 2004, MLIM earned fees of
$74,924, all of which was waived. In addition, for the period March
26, 2004 to May 31, 2004, MLIM reimbursed the Fund in the amount of
$58,354. MLIM has entered into a Sub-Advisory Agreement with Merrill
Lynch Investment Mangers, LLC ("MLIM,LLC") an affiliate of MLIM,
pursuant to which MLIM, LLC provides investment advisory services to
MLIM with respect to the Fund. There is no increase in the aggregate
fees paid by the Fund for these services.
MERRILL LYNCH REAL INVESTMENT FUND, MAY 31, 2004
Notes to Financial Statements (concluded)
Merrill Lynch Real Investment Fund
The Fund has also entered into a Distribution Agreement and
Distribution Plans with FAM Distributors, Inc. ("FAMD" or the
"Distributor"), a wholly-owned subsidiary of Merrill Lynch Group,
Inc. Pursuant to the Distribution Plans adopted by the Fund 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 Distribution
Fee Fee
Class A .25% --
Class B .25% .75%
Class C .25% .75%
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("MLPF&S"), a subsidiary of
Merrill Lynch & Co., Inc. ("ML & Co."), also provides account
maintenance and distribution services to the Fund. The ongoing
account maintenance fee compensates the Distributor and MLPF&S for
providing account maintenance services to Class A, Class B and Class
C shareholders. The ongoing distribution fee compensates the
Distributor and MLPF&S for providing shareholder and distribution-
related services to Class B and Class C shareholders.
For the period March 26, 2004 to May 31, 2004, FAMD earned
underwriting discounts and direct commissions and MLPF&S earned
dealer concessions on sales of the Fund's Class A Shares as follows:
FAMD MLPF&S
Class A $17,786 $ 273,488
For the period March 26, 2004 to May 31, 2004, MLPF&S received
contingent deferred sales charges of $210 and $265 relating to
transactions in Class B and Class C Shares, respectively.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Certain officers and/or directors of the Fund are officers and/or
directors of MLIM, ML & Co., FDS, and/or MLIM, LLC.
3. Beneficial Interest Transactions:
Net increase in net assets derived from capital share transactions
was $48,845,348 for the period March 26, 2004 to May 31, 2004.
Transactions in beneficial interest for each class were as follows:
Class A Shares for the
Period March 26, 2004++ Dollar
to May 31, 2004 Shares Amount
Shares sold 959,823 $ 9,802,245
Shares redeemed (47,678) (499,750)
-------------- --------------
Net increase 912,145 $ 9,302,495
============== ==============
++Prior to commencement of operations, the Fund issued 2,500 shares
to FAM for $25,000.
Class B Shares for the
Period March 26, 2004++ Dollar
to May 31, 2004 Shares Amount
Shares sold 838,827 $ 8,512,118
Shares redeemed (17,699) (179,552)
-------------- --------------
Net increase 821,128 $ 8,332,566
============== ==============
++Prior to commencement of operations, the Fund issued 2,500 shares
to FAM for $25,000.
Class C Shares for the
Period March 26, 2004++ Dollar
to May 31, 2004 Shares Amount
Shares sold 2,166,485 $ 21,907,325
Shares redeemed (29,578) (303,425)
-------------- --------------
Net increase 2,136,907 $ 21,603,900
============== ==============
++Prior to commencement of operations, the Fund issued 2,500 shares
to FAM for $25,000.
Class I Shares for the
Period March 26, 2004++ Dollar
to May 31, 2004 Shares Amount
Shares sold 971,612 $ 9,831,236
Shares redeemed (21,207) (224,849)
-------------- --------------
Net increase 950,405 $ 9,606,387
============== ==============
++Prior to commencement of operations, the Fund issued 2,500 shares
to FAM for $25,000
MERRILL LYNCH REAL INVESTMENT FUND, MAY 31, 2004
Schedule of Investments Master Real Investment Trust (in U.S. dollars)
S&P Moody's Face
Ratings Ratings Amount Asset-Backed Securities++ Value
AAA Aaa $ 204,396 AmeriCredit Automobile Receivables Trust, Series 2000-D,
Class A4, 1.31% due 9/12/2007 (a) $ 204,619
AAA Aaa 200,000 American Express Credit Account Master Trust, Series 2002-1,
Class A, 1.21% due 9/15/2009 (a) 200,413
AAA Aaa 200,000 BA Master Credit Card Trust, Series 2001-A, Class A, 1.22%
due 6/15/2008 (a) 200,378
AAA Aaa 200,000 Bank One Issuance Trust, Series 2002-A5, Class A5, 1.22% due
6/15/2010 (a) 200,444
Capital Auto Receivables Asset Trust, Series 2003-2 (a):
AAA Aaa 250,000 Class A3B, 1.14% due 2/15/2007 250,088
AAA Aaa 200,000 Class A4B, 1.16% due 1/15/2009 200,118
Capital One Auto Finance Trust (a):
AAA Aaa 200,000 Series 2003-A, Class A3B, 1.26% due 10/15/2007 200,359
AAA Aaa 500,000 Series 2003-B, Class A3, 1.21% due 1/15/2008 500,785
AAA Aaa 200,000 Capital One Master Trust, Series 1999-3, Class A, 1.35% due
9/15/2009 (a) 200,967
BBB Baa2 1,500,000 Capital One Multi-Asset Execution Trust, Series 2002-C1,
Class C1, 3.85% due 7/15/2010 (a) 1,596,735
AAA Aaa 200,000 Chase Credit Card Master Trust, Series 2002-8, Class A,
1.16% due 3/17/2008 (a) 200,135
AAA Aaa 200,000 Citibank Credit Card Issuance Trust, Series 2002-A5, Class A5,
1.15% due 9/17/2007 (a) 200,045
AAA Aaa 200,000 Household Automotive Trust, Series 2002-3, Class A4B, 1.44%
due 5/18/2009 (a) 200,615
AAA Aaa 120,000 Long Beach Mortgage Loan Trust, Series 2003-4, Class AV3, 1.44%
due 8/25/2033 (a) 120,273
BBB Baa2 365,000 MBNA Credit Card Master Note Trust, Series 2001-C1, Class C1,
2.15% due 10/15/2008 (a) 368,759
BBB NR* 600,000 MBNA Master Credit Card Trust USA, Series 2000-C, Class C, 1.90%
due 7/15/2007 (a) 601,866
AAA Aaa 718,023 MSDWCC Heloc Trust, Series 2003-2, Class A, 1.36% due
4/25/2016 (a) 718,518
AAA Aaa 2,218,948 Morgan Stanley ABS Capital I, Series 2004-NC1, Class A2, 1.47%
due 12/27/2033 (a) 2,227,853
AAA Aaa 272,420 Residential Asset Securities Corporation, 2000-KS4 AII, 2.338%
due 9/25/2031 (a) 272,748
AAA Aaa 222,771 Saxon Asset Securities Trust, Series 2003-2, Class AV2, 1.40%
due 6/25/2033 (a) 223,271
AAA Aaa 183,185 Wachovia Asset Securitization Inc., Series 2003-HE1, Class A1,
1.39% due 3/25/2033 (a) 183,353
Total Asset-Backed Securities (Cost--$9,060,825)--16.0% 9,072,342
Government Agency Mortgage-Backed Securities++
AAA Aaa 3,089,602 Federal National Mortgage Association, Series 2004-36,
Class FJ, 1.40% due 3/25/2018 (a) 3,087,921
Total Government Agency Mortgage-Backed Securities
(Cost--$3,085,257)--5.4% 3,087,921
Non-Government Agency Mortgage-Backed Securities++
Collateralized Granite Mortgages PLC, Class 1C (a):
Mortgage BBB Baa2 275,000 Series 2002-1, 2.45% due 4/20/2042 278,266
Obligations-- BBB Baa2 500,000 Series 2003-1, 2.60% due 1/20/2043 512,150
5.7% Holmes Financing PLC, Series 8 (a):
BBB Baa2 535,000 Class 1C, 1.734% due 7/15/2040 535,000
BBB Baa2 1,900,000 Class 2C, 1.834% due 7/15/2040 1,900,000
Total Non-Government Agency Mortgage-Backed Securities
(Cost--$3,229,247)--5.7% 3,225,416
MERRILL LYNCH REAL INVESTMENT FUND, MAY 31, 2004
Schedule of Investments (continued) Master Real Investment Trust (in U.S. dollars)
S&P Moody's Face
Industry+++ Ratings Ratings Amount Asset-Backed Securities++ Value
Finance--28.2% AIG-FP Structured Finance (Cayman) Limited (Goldman Sachs Commodity
Index Total Return Linked Notes) (c):
AAA Aaa $ 7,000,000 1.58% due 4/01/2005 $ 8,810,175
AAA Aaa 3,000,000 1.50%** due 5/14/2007 3,030,285
A1 A+ 1,500,000 Deutsche Bank AG (Goldman Sachs Commodity Index Total Return
Linked Notes), 1.58% due 4/11/2005 (c) 1,802,476
A2 A 1,500,000 J.P. Morgan Chase Bank (Goldman Sachs Commodity Index Total
Return Linked Notes), 1.58% due 4/04/2005 (c) 1,906,880
AA A2 500,000 Sigma Finance Incorporated, 2.38% due 3/31/2014 (a) 499,485
Total Corporate Bonds & Structured Notes
(Cost--$13,500,000)--28.2% 16,049,301
Face Amount/
Beneficial Interest Short-Term Investments
$26,000,000 Federal Home Loan Mortgage Corporation, 0.79% due 6/01/2004** 26,000,000
$ 2,465,314 Merrill Lynch Liquidity Series, LLC Cash Sweep Series I (b) 2,465,314
Total Short-Term Investments
(Cost--$28,465,314)--50.0% 28,465,314
Number of
Contracts Call Options Purchased
108 Euro-Dollar Future, expiring July 2004 at USD 98.25,
Broker Credit Suisse First Boston International 13,500
108 Euro-Dollar Future, expiring July 2004 at USD 98.5,
Broker Credit Suisse First Boston International 4,050
3 London InterBank Offered Rate (LIBOR) Linked Floor,
expiring April 2005 at USD 0.015,
Broker, J.P. Morgan Chase Bank (d) 498
Total Options Purchased (Premiums Paid--$20,160)--0.0% 18,048
Total Investments (Cost--$57,360,803)--105.3% 59,918,342
Call Options Written
2 Consumer Price Index (CPI) Linked Floor, expiring April 2009
at USD 1, Broker, Morgan Stanley Capital Services, Inc. (d) (3,200)
216 Euro-Dollar Future, expiring July 2004 at USD 98.38,
Broker Credit Suisse First Boston International (13,500)
Total Options Written (Premiums Received--$15,890)--0.0% (16,700)
Total Investments, Net of Options Written (Cost--$57,344,913)--105.3% 59,901,642
Liabilities in Excess of Other Assets--(5.3%) (3,018,153)
-------------
Net Assets--100.0% $ 56,883,489
=============
MERRILL LYNCH REAL INVESTMENT FUND, MAY 31, 2004
Schedule of Investments (concluded)
Master Real Investment Trust (in U.S. dollars)
*Not Rated.
**Certain U.S. Government Agency Obligations are traded on a
discount basis; the interest rate shown reflects the discount rate
paid at the time of purchase by the Trust.
++Asset-Backed and Mortgage-Backed Obligations are subject to
principal paydowns as a result of prepayments or refinancings of the
underlying mortgage instruments. As a result, the average life may
be substantially less than the original maturity.
+++For Trust 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 Trust management. This definition may not apply for
purposes of this report, which may combine such industry sub-
classifications for reporting ease.
(a)Floating rate note.
(b)Investments in companies considered to be an affiliate of the
Trust (such companies are defined as "Affiliated Companies" in
Section 2(a)(3) of the Investment Company Act of 1940) are as
follows:
Net Interest
Affiliate Activity Income
Merrill Lynch Liquidity Series, LLC
Cash Sweep Series I $2,465,314 $2,202
(c)Represents a structured note; the interest rate shown reflects
the effective yield at the time of purchase by the Trust.
(d)One contract represents a notional amount of $1,000,000.
Swap contracts entered into as of May 31, 2004 were as follows:
Notional Unrealized
Amount Depreciation
Receive a variable return equal to
CMBS Investment Grade Index
Excess Return and pay floating rate
based on 1-month USD LIBOR,
minus .65%
Broker, Deutsche Bank AG, London
Expires October 2004 $3,000,000 --
Receive a variable rate based on
3-month USD LIBOR, plus .56%,
which is capped at a fixed coupon
of 8% and callable quarterly
beginning June 2004 and pay
floating rate based on 3-month
USD LIBOR
Broker, J.P. Morgan Chase Bank
Expires June 2010 $5,000,000 $ (2,960)
---------
Total $ (2,960)
=========
See Notes to Financial Statements.
MERRILL LYNCH REAL INVESTMENT FUND, MAY 31, 2004
Statement of Assets and Liabilities Master Real Investment Trust
As of May 31, 2004
Assets
Investments in unaffiliated securities, at value (identified cost--$54,875,329) $ 57,434,980
Investments in affiliated securities, at value (identified cost--$2,465,314) 2,465,314
Options purchased, at value (premiums paid--$20,160) 18,048
Cash 152,278
Receivables:
Contributions $ 1,043,579
Interest (including $70 from affiliates) 46,532
Options written 12,690
Swaps 2,687 1,105,488
---------------
Other assets 1,510
---------------
Total assets 61,177,618
---------------
Liabilities
Options written, at value (premiums received--$15,890) 16,700
Unrealized depreciation on swaps 2,960
Payables:
Securities purchased 3,932,406
Withdrawals 294,238
Investment adviser 18,904
Options purchased 18,360
Other affiliates 10,514 4,274,422
---------------
Accrued expenses 47
---------------
Total liabilities 4,294,129
---------------
Net Assets
Net assets $ 56,883,489
===============
Net Assets Consist of
Investors' capital $ 54,329,720
Unrealized appreciation/depreciation on investments 2,553,769
---------------
Net Assets $ 56,883,489
===============
See Notes to Financial Statements.
MERRILL LYNCH REAL INVESTMENT FUND, MAY 31, 2004
Statement of Operations Master Real Investment Trust
For the Period March 26, 2004++ to May 31, 2004
Investment Income
Interest (including $2,202 from affiliates) $ 88,410
---------------
Total income 88,410
---------------
Expenses
Investment advisory fees $ 39,649
Accounting services 12,564
Trustees' fees and expenses 2,150
Professional fees 1,810
Custodian fees 627
Pricing fees 237
Other 1,241
---------------
Total expenses before waiver 58,278
Waiver of expenses (20,745)
---------------
Total expenses after waiver 37,533
---------------
Investment income--net 50,877
---------------
Realized & Unrealized Gain on Investments--Net
Realized gain from investments--net 10,702
Unrealized appreciation/depreciation on investments--net 2,553,769
---------------
Net realized and unrealized gain on investments 2,564,471
---------------
Net Increase in Net Assets Resulting from Operations $ 2,615,348
===============
++Commencement of operations.
See Notes to Financial Statements.
MERRILL LYNCH REAL INVESTMENT FUND, MAY 31, 2004
Statement of Changes in Net Assets Master Real Investment Trust
For the Period
March 26, 2004++
to May 31,
Increase (Decrease) in Net Assets: 2004
Operations
Investment income--net $ 50,877
Realized gain on investments--net 10,702
Unrealized appreciation/depreciation on investments--net 2,553,769
---------------
Net increase in net assets resulting from operations 2,615,348
---------------
Capital Transactions
Proceeds from contributions 55,916,950
Fair value of withdrawals (1,748,809)
---------------
Net increase in net assets derived from capital transactions 54,168,141
---------------
Net Assets
Total increase in net assets 56,783,489
Beginning of period 100,000
---------------
End of period $ 56,883,489
===============
++Commencement of operations.
See Notes to Financial Statements.
MERRILL LYNCH REAL INVESTMENT FUND, MAY 31, 2004
Financial Highlights Master Real Investment Trust
For the Period
March 26, 2004++
The following ratios have been derived from to May 31,
information provided in the financial statements. 2004
Total Investment Return
Total investment return 6.36%*
===============
Ratios to Average Net Assets
Expenses, net of waiver .47%**
===============
Expenses .73%**
===============
Investment income--net .64%**
===============
Supplemental Data
Net assets, end of period (in thousands) $ 56,883
===============
Portfolio turnover .01%
===============
*Aggregate total investment return.
**Annualized.
++Commencement of operations.
See Notes to Financial Statements.
MERRILL LYNCH REAL INVESTMENT FUND, MAY 31, 2004
Notes to Financial Statements
Master Real Investment Trust
1. Significant Accounting Policies:
Master Real Investment Trust (the "Trust") is registered under the
Investment Company Act of 1940, as amended, and is organized as a
Delaware statutory trust. The Declaration of Trust permits the
Trustees to issue nontransferable interests in the Trust, subject to
certain limitations. Prior to commencement of operations on March
26, 2004, the Trust had no operations other than those relating to
organizational matters and a $100,000 capital contribution to the
Trust by the Merrill Lynch Real Investment Fund. The Trust's
financial statements are prepared in conformity with U.S. generally
accepted accounting principles, which may require the use of
management accruals and estimates. Actual results may differ from
these 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 Trust.
(a) Valuation of investments--Equity securities that are held by the
Trust that are traded on stock exchanges or the Nasdaq National
Market are valued at the last sale price or official close price on
the exchange, 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 at the last available ask price for
short positions. In cases where equity securities are traded on more
than one exchange, the securities are valued on the exchange
designated as the primary market by or under the authority of the
Board of Trustees of the Trust. Long positions traded in the over-
the-counter ("OTC") market, Nasdaq Small Cap or Bulletin Board are
valued at the last available bid price or yield equivalent obtained
from one or more dealers or pricing services approved by the Board
of Trustees of the Trust. Short positions traded in the OTC market
are valued at the last available ask price. Portfolio securities
that are traded both in the OTC market and on a stock exchange are
valued according to the broadest and most representative market.
Options written are valued at the last sale price in the case of
exchange-traded options or, in the case of options traded in the OTC
market, the last ask price. Options purchased are valued at their
last sale price in the case of exchange-traded options or, in the
case of options traded in the OTC market, the last bid price. Swap
agreements are valued daily based upon quotations from market
makers. Financial futures contracts and options thereon, which are
traded on exchanges, are valued at their last sale price as of the
close of such exchanges. Obligations with remaining maturities of 60
days or less are valued at amortized cost unless the Investment
Adviser believes that this method no longer produces fair
valuations.
Repurchase agreements are valued at cost plus accrued interest. The
Trust employs pricing services to provide certain securities prices
for the Trust. Securities and assets for which market quotations are
not readily available are valued at fair value as determined in good
faith by or under the direction of the Board of Trustees of the
Trust, including valuations furnished by the pricing services
retained by the Trust, which may use a matrix system for valuations.
The procedures of a pricing service and its valuations are reviewed
by the officers of the Trust under the general supervision of the
Trust's Board of Trustees. Such valuations and procedures will be
reviewed periodically by the Board of Trustees of the Trust.
Generally, trading in foreign securities, as well as U.S. government
securities and money market instruments, is substantially completed
each day at various times prior to the close of business on the New
York Stock Exchange ("NYSE"). The values of such securities used in
computing the net assets of the Trust's shares are determined as of
such times. Foreign currency exchange rates also are generally
determined prior to the close of business on the NYSE. Occasionally,
events affecting the values of such securities and such exchange
rates may occur between the times at which they are determined and
the close of business on the NYSE that may not be reflected in the
computation of the Trust's net assets. If events (for example, a
company announcement, market volatility or a natural disaster) occur
during such periods that are expected to materially affect the value
of such securities, those securities may be valued at their fair
value as determined in good faith by the Trust's Board of Trustees
or by the Investment Adviser using a pricing service and/or
procedures approved by the Trust's Board of Trustees.
(b) Derivative financial instruments--The Trust may engage in
various portfolio investment strategies both to increase the return
of the Trust and to hedge, or protect, its exposure to interest rate
movements and movements in the securities and commodities markets.
Losses may arise due to changes in the value of the contract or if
the counterparty does not perform under the contract.
MERRILL LYNCH REAL INVESTMENT FUND, MAY 31, 2004
Notes to Financial Statements (continued)
Master Real Investment Trust
* Hybrid instruments--The Fund may invest in hybrid instruments,
including structured notes and commodity-linked notes. The principal
and/or interest payments on these hybrid instruments are linked to
the value of commodities, commodity futures contracts, or the
performance of one or more indexes or other readily measurable
economic variable. The principal value of the hybrid instruments,
and/or the value of the interest that they pay, will rise or fall in
response to changes in the values of the underlying commodities,
commodity futures contracts, or commodity indexes. Although these
hybrid instruments are primarily debt obligations, they indirectly
provide exposure to changes in the value of the underlying
commodities.
* Options--The Trust may purchase and write covered call and put
options. When the Trust writes an option, an amount equal to the
premium received by the Trust 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 Trust enters into a closing transaction), the Trust
realizes a gain or loss on the option to the extent of the premiums
received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
* Financial futures contracts--The Trust may purchase or sell
financial futures contracts and options on such futures contracts.
Futures contracts are contracts for delayed delivery of securities
at a specific future date and at a specific price or yield. Upon
entering into a contract, the Trust deposits and maintains as
collateral such initial margin as required by the exchange on which
the transaction is effected. Pursuant to the contract, the Trust
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 Trust
as unrealized gains or losses. When the contract is closed, the
Trust 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.
* Swaps--The Trust may enter into swap agreements, which are over-
the-counter contracts in which the Trust and a counterparty agree to
make periodic net payments on a specified notional amount. The net
payments can be made for a set period of time or may be triggered by
a pre-determined credit event. The net periodic payments may be
based on a fixed or variable interest rate; the change in market
value of a specified security, basket of securities, or index; or
the return generated by a security.
(c) Repurchase agreements--The Trust invests in U.S. government
securities pursuant to repurchase agreements. Under such agreements,
the counterparty agrees to repurchase the security at a mutually
agreed upon time and price. The Trust takes possession of the
underlying securities, marks to market such securities and, if
necessary, receives additional securities daily to ensure that the
contract is fully collateralized. If the counterparty defaults and
the fair value of the collateral declines, liquidation of the
collateral by the Trust may be delayed or limited.
(d) Dollar rolls--The Trust sells mortgage-backed securities for
delivery in the current month and simultaneously contracts to
repurchase substantially similar (same type, coupon and maturity)
securities on a specific future date.
(e) Income taxes--The Trust is classified as a partnership for
Federal income tax purposes. As such, each investor in the Trust is
treated as owner of its proportionate share of the net assets,
income, expenses and realized and unrealized gains and losses of the
Trust. Therefore, no Federal income tax provision is required. It is
intended that the Trust's assets will be managed so an investor in
the Trust can satisfy the requirements of subchapter M of the
Internal Revenue Code.
(f) 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. Interest income is
recognized on the accrual basis.
MERRILL LYNCH REAL INVESTMENT FUND, MAY 31, 2004
Notes to Financial Statements (concluded)
Master Real Investment Trust
(g) Securities lending--The Trust 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. The market value of the loaned
securities is determined at the close of business of the Trust and
any additional required collateral is delivered to the Trust on the
next business day. Where the Trust receives securities as collateral
for the loaned securities, it collects a fee from the borrower. The
Trust typically receives the income on the loaned securities but
does not receive the income on the collateral. Where the Trust
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 Trust 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 Trust could experience delays and costs in gaining
access to the collateral. The Trust 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.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Trust has entered into an Investment Advisory Agreement with
Merrill Lynch Investment Managers, L.P. ("MLIM"). The general
partner of MLIM is Princeton Services, Inc. ("PSI"), an indirect,
wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."),
which is the limited partner.
MLIM is responsible for the management of the Trust's investments
and provides the necessary personnel, facilities, equipment and
certain other services necessary to the operations of the Trust. For
such services, the Trust pays a monthly fee based upon the average
daily value of the Trust's net assets at the annual rate of 0.50%.
For the period March 26, 2004 to May 31, 2004, MLIM earned fees of
$39,649, of which $20,745 was waived. MLIM has entered into a Sub-
Advisory Agreement with Merrill Lynch Investment Managers, LLC
("MLIM, LLC") an affiliate of MLIM, pursuant to which MLIM, LLC
provides investment advisory services to MLIM with respect to the
Trust. There is no increase in the aggregate fees paid by the Trust
for these services.
The Trust 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. Pursuant to that order,
the Trust also has retained MLIM, LLC, an affiliate of MLIM, as the
securities and lending agent for a fee based on a share of the
returns on investment of cash collateral. MLIM, LLC may, on behalf
of the Trust, invest cash collateral received by the Trust for such
loans, among other things, in a private investment company managed
by MLIM, LLC or in registered money market funds advised by MLIM or
its affiliates.
For the period March 26, 2004 to May 31, 2004, the Trust reimbursed
MLIM $132 for certain accounting services.
Certain officers and/or trustees of the Trust are officers and/or
directors of MLIM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the period March 26, 2004 to May 31, 2004 were $28,993,127 and
$115,663 respectively.
Net realized gains (losses) for the period March 26, 2004 to May 31,
2004 and net unrealized appreciation/depreciation as of May 31, 2004
were as follows:
Unrealized
Realized Appreciation/
Gains (Losses) Depreciation
Long-term investments $ (184) $ 2,559,651
Options purchased -- (2,112)
Options written -- (810)
Swaps 10,886 (2,960)
------------- -------------
Total $ 10,702 $ 2,553,769
============= =============
As of May 31, 2004, net unrealized appreciation for Federal income
tax purposes aggregated $2,556,729, of which $2,564,946 related to
appreciated securities and $8,217 related to depreciated securities.
At May 31, 2004, the aggregate cost of investments, net of options,
for Federal income tax purposes was $57,344,913.
Transactions in call options written for the period March 26, 2004
to May 31, 2004 were as follows:
Number of Premiums
Contracts Received
Outstanding call options written,
beginning of period -- --
Options written 218 $ 15,890
------------- -------------
Outstanding call options written,
end of period 218 $ 15,890
============= =============
MERRILL LYNCH REAL INVESTMENT FUND, MAY 31, 2004
Item 2 - Code of Ethics - Not Applicable to this semi-annual report
Item 3 - Audit Committee Financial Expert - Not Applicable to this
semi-annual report
Item 4 - Principal Accountant Fees and Services - Not Applicable to
this semi-annual report
Item 5 - Audit Committee of Listed Registrants - Not Applicable
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for
Closed-End Management Investment Companies - Not Applicable
Item 8 - Purchases of Equity Securities by Closed-End Management
Investment Company and Affiliated Purchasers - Not Applicable
Item 9 - Submission of Matters to a Vote of Security Holders - Not
Applicable
Item 10 - Controls and Procedures
10(a) - The registrant's certifying officers have reasonably
designed such disclosure controls and procedures to ensure material
information relating to the registrant is made known to us by others
particularly during the period in which this report is being
prepared. The registrant's certifying officers have determined that
the registrant's disclosure controls and procedures are effective
based on our evaluation of these controls and procedures as of a
date within 90 days prior to the filing date of this report.
10(b) - There were no changes in the registrant's internal control
over financial reporting (as defined in Rule 30a-3(d) under the Act
(17 CFR 270.30a-3(d)) that occurred during the last fiscal half-year
of the period covered by this report that has materially affected,
or is reasonably likely to materially affect, the registrant's
internal control over financial reporting.
Item 11 - Exhibits attached hereto
11(a)(1) - Code of Ethics - Not Applicable to this semi-annual
report
11(a)(2) - Certifications - Attached hereto
11(a)(3) - Not Applicable
11(b) - Certifications - 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.
Merrill Lynch Real Investment Fund and Master Real Investment Trust
By: _/s/ Terry K. Glenn_______
Terry K. Glenn,
President of
Merrill Lynch Real Investment Fund and
Master Real Investment Trust
Date: July 19, 2004
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
Merrill Lynch Real Investment Fund and
Master Real Investment Trust
Date: July 19, 2004
By: _/s/ Donald C. Burke________
Donald C. Burke,
Chief Financial Officer of
Merrill Lynch Real Investment Fund and
Master Real Investment Trust
Date: July 19, 2004