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 811-21486
811-21538
Name of Fund: Merrill Lynch Real Investment Fund and
Master Real Investment Trust
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Robert C. Doll, Jr.,
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 - 11/30/04
Item 1 - Report to Stockholders
(BULL LOGO)
Merrill Lynch Investment Managers
www.mlim.ml.com
Merrill Lynch
Real Investment Fund
Annual Report
November 30, 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. Information about how the Fund voted proxies
relating to securities held in the Fund's portfolio during the
most recent 12-month period ended June 30 is available (1) at
www.mutualfunds.ml.com; and (2) 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
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission ("SEC") for the first and third
quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q are
available on the SEC's Web site at http://www.sec.gov. The Fund's
Forms N-Q may also be reviewed and copied at the SEC's Public
Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330.
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 at
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, NOVEMBER 30, 2004
A Letter From the President
Dear Shareholder
As we ended the current reporting period, several topics weighed
heavily on investors' minds. Among them were questions about
economic growth, corporate earnings, interest rates and inflation,
politics, the price of oil and terrorism - all issues that are worth
addressing here.
While the pace of economic expansion slowed somewhat between the
first and second quarters of 2004, gross domestic product
reaccelerated in the third quarter and is expected to approach 4%
for the year. The generally favorable economic environment has
benefited American corporations, which continued to post strong
earnings. Although the extraordinary results seen in 2004 are likely
to moderate in 2005, solid productivity, improved revenue growth and
cost discipline all point to a vital corporate sector.
In terms of inflation and interest rates, the Federal Reserve Board
has signaled its confidence in the economic recovery by increasing
the Federal Funds target rate five times since June 2004, from 1% to
2.25% as of the December 14 Federal Open Market Committee meeting.
Inflation, for its part, has remained fairly subdued.
While the re-election of President Bush was generally viewed as
business-friendly, the rising price of oil continued to be a concern
for consumers and corporations. Although the price of oil has
exceeded $50 per barrel recently, the situation is far from the
crisis proportions we saw in the 1980s. Lastly, but importantly,
terrorism and geopolitical tensions are unwelcome realities we are
forced to live with today. Historically, however, the financial
effects of any single event tend to be short-lived.
Amid the ambiguities, fixed income markets provided positive
results. The Lehman Brothers Aggregate Bond Index, for example,
returned +4.44% for the 12-month period and +3.82% for the six-month
period ended November 30, 2004. The 10-year Treasury yield was
essentially unchanged year-over-year, while the three-month Treasury
ended the period at 2.23%, up from 1.08% six months ago and .93% 12
months ago.
The key during uncertain times is to remain focused on the big
picture. Investment success comes not from reacting to short-term
volatility, but from maintaining a long-term perspective and
adhering to the disciplines of asset allocation, diversification and
rebalancing. We encourage you to work with your financial advisor to
ensure these time-tested techniques are incorporated into your
investment plan.
Finally, after 35 years in the asset management business, it is with
great satisfaction and some nostalgia that I embark on my
retirement, effective January 1, 2005. The industry has evolved
significantly over the past three and a half decades, and I am
privileged to have been a part of it. I wish you continued success
as you pursue your investment goals and, as always, I thank you for
allowing Merrill Lynch Investment Managers to be a part of your
financial life.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Trustee
MERRILL LYNCH REAL INVESTMENT FUND, NOVEMBER 30, 2004
A Discussion With Your Fund's Portfolio Managers
The commodities markets experienced a strong rally in recent months,
which served to benefit Fund returns considerably, despite some
relative underperformance during the Fund's initial ramp-up phase.
What is the Fund's investment objective?
The Fund seeks positive long-term total return, primarily through
investment in commodity-linked derivative instruments and short-term
debt obligations. The commodity-linked derivative instruments in
which the Fund may invest include 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, 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 November 30, 2004, the
Fund's Class A, Class B, Class C and Class I Shares had total
returns of +15.70%, +15.50%, +15.50% and +15.80%, respectively. For
the same period, the Fund's benchmark, the Goldman Sachs Commodity
Total Return Index, returned +20.18%. (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 - 8 of this report to shareholders.)
Fund returns are clearly linked to commodity prices (particularly
oil) and, to a lesser degree, also are influenced by the performance
of the overall credit markets. This is because we use credit-
sensitive debt securities to provide yield enhancement for the
portfolio. Commodities made a strong showing, especially in the
latter months of the period. In particular, oil had a profound
impact on the return of the Fund, hitting a record-high price level
of $55 per barrel on October 26, 2004. This compared to just $30 per
barrel a year earlier. This is significant, as energy represents
approximately 65% of the benchmark commodity index. Limited supply
amid torrid demand, and the approach of the winter heating season,
contributed to the high prices. In addition, our investment in low-
duration fixed income securities was slightly accretive to the Fund
and helped to offset some of the cost associated with the commodity-
linked notes.
While performance has been favorable on an absolute basis, the
Fund's relative results lagged the benchmark during the current
period. For the most part, this is attributed to the "ramp-up" phase
in the Fund's initial months, as we were gaining exposure to our
benchmark commodity index in a rising commodity price environment.
Once the Fund reached a fully invested stance in July, performance
moved more closely in step with the benchmark.
How have you managed the portfolio since its inception?
We use commodity-linked notes to gain exposure to our benchmark
index. These notes are issued to the Fund by high-quality banks and
insurance companies, including AIG, J.P. Morgan Chase Bank, Deutsche
Bank AG and, a recent addition, Barclays Bank PLC. Unlike other
fixed income securities, which pay a fixed or floating rate coupon,
the commodity-linked notes held by the Fund pay a periodic return
that is linked to and dependent on the performance of a specified
commodity index. With the addition of Barclays as an issuer of these
notes in the third quarter, the Fund was able to achieve 100%
exposure to its benchmark commodity index.
We augment our purchase of commodity-linked notes with positions in
low-duration fixed income securities that we believe may provide the
Fund with enhanced yield, thereby offsetting the cost of the notes.
These securities have low interest rate risk and consist primarily
of high-quality, structured asset-backed products, including home
equity floaters and other corporate and mortgage-backed floating
rate products. In addition to improving yield, these investments
represent our efforts to increase the diversification of the
portfolio.
MERRILL LYNCH REAL INVESTMENT FUND, NOVEMBER 30, 2004
How would you characterize the portfolio's position at the close of
the period?
At period-end, we continued to capture dollar-for-dollar exposure
to our benchmark commodity index enhanced through the use of low-
duration, high-quality fixed income securities. Given expectations
for continued volatility in the oil sector, we believe an investment
in commodities could provide attractive diversification
opportunities for a traditional investment portfolio. In fact,
Fund performance during the period demonstrated both the potential
volatility of investing in commodities and the diversification
benefits that can be achieved by adding commodities to an investment
portfolio. For example, while the Standard & Poor's 500 Index
returned -3.41% between March 26, 2004 (the Fund's inception)
and August 12, 2004 (the market low), our benchmark commodity index
was +12.54%.
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. To that point, our
overall outlook is for continued strong global growth. We believe
the prices of oil and other commodities, which are important inputs
to this global expansion, should benefit as a result. Of course, we
are fully aware that oil has had a large run-up in recent months and
could take a temporary pause. Having said that, we will continue to
monitor the economy and the markets, and stand ready to adjust our
strategy as conditions warrant.
Frank Viola
Vice President and Co-Portfolio Manager
Thomas Musmanno
Vice President and Co-Portfolio Manager
December 15, 2004
MERRILL LYNCH REAL INVESTMENT FUND, NOVEMBER 30, 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 (front-end
load) of 5.25% and an account maintenance fee of 0.25% per year (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% per year
and an account maintenance fee of 0.25% per year. 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% per year
and an account maintenance fee of 0.25% per year. 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
performance data current to the most recent month-end. 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
6-Month Since Inception
As of November 30, 2004 Total Return Total Return
ML Real Investment Fund Class A Shares* + 8.95% +15.70%
ML Real Investment Fund Class B Shares* + 8.76 +15.50
ML Real Investment Fund Class C Shares* + 8.76 +15.50
ML Real Investment Fund Class I Shares* + 9.04 +15.80
Goldman Sachs Commodity Index** +10.16 +20.18
* 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.
** This 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, NOVEMBER 30, 2004
Performance Data (continued)
TOTAL RETURN BASED ON A $10,000 INVESTMENT
Class A & Class B Shares
A line graph illustrating the growth of a $10,000 investment in
ML Real Investment Fund++ Class A and Class B Shares* compared to a
similar investment in Goldman Sachs Commodity Index++++. Values
illustrated are as follows:
ML Real Investment Fund++
Class A Shares*
Date Value
3/26/2004** $ 9,475.00
November 2004 $10,963.00
ML Real Investment Fund++
Class B Shares*
Date Value
3/26/2004** $10,000.00
November 2004 $11,150.00
Goldman Sachs Commodity Index++++
Date Value
3/26/2004** $10,000.00
November 2004 $12,018.00
* Assuming maximum sales charge, transaction costs and other
operating expenses, including administration fees.
** Commencement of operations.
++ ML Real Investment Fund invests all of its assets in Master
Real Investment Trust. The Portfolio invests primarily in
commodity-linked derivative instruments, and U.S. Government
securities and other debt obligations.
++++ This 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.
Aggregate Total Return
Return Without Return With
Sales Charge Sales Charge**
Class A Shares*
Inception (3/26/04)
through 11/30/04 +15.70% +9.63%
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
Return Return
Without CDSC With CDSC**
Class B Shares*
Inception (3/26/04)
through 11/30/04 +15.50% +11.50%
* Maximum contingent deferred sales charge is 4% and is reduced to
0% after six years.
** Assuming payment of applicable contingent deferred sales charge.
MERRILL LYNCH REAL INVESTMENT FUND, NOVEMBER 30, 2004
Performance Data (concluded)
TOTAL RETURN BASED ON A $10,000 INVESTMENT
Class C & Class I Shares
A line graph illustrating the growth of a $10,000 investment in
ML Real Investment Fund++ Class C and Class I Shares* compared to a
similar investment in Goldman Sachs Commodity Index++++. Values
illustrated are as follows:
ML Real Investment Fund++
Class C Shares*
Date Value
3/26/2004** $10,000.00
November 2004 $11,450.00
ML Real Investment Fund++
Class I Shares*
Date Value
3/26/2004** $ 9,475.00
November 2004 $10,972.00
Goldman Sachs Commodity Index++++
Date Value
3/26/2004** $10,000.00
November 2004 $12,018.00
* Assuming maximum sales charge, transaction costs and other
operating expenses, including administration fees.
** Commencement of operations.
++ ML Real Investment Fund invests all of its assets in Master
Real Investment Trust. The Portfolio invests primarily in
commodity-linked derivative instruments, and U.S. Government
securities and other debt obligations.
++++ This 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.
Aggregate Total Return
Return Return
Without CDSC With CDSC**
Class C Shares*
Inception (3/26/04)
through 11/30/04 +15.50% +14.50%
* 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 11/30/04 +15.80% +9.72%
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
MERRILL LYNCH REAL INVESTMENT FUND, NOVEMBER 30, 2004
Disclosure of Expenses
Shareholders of this Fund may incur the following charges:
(a) expenses related to transactions, including sales charges,
redemption fees and exchange fees; and (b) operating expenses
including advisory fees, distribution fees including 12(b)-1 fees,
and other Fund expenses. The following example (which is based on a
hypothetical investment of $1,000 invested on June 1, 2004 and held
through November 30, 2004) is intended to assist shareholders both
in calculating expenses based on an investment in the Fund and in
comparing these expenses with similar costs of investing in other
mutual funds.
The first table below provides information about actual account
values and actual expenses. In order to estimate the expenses a
shareholder paid during the period covered by this report,
shareholders can divide their account value by $1,000 and then
multiply the result by the number in the first line under the
heading entitled "Expenses Paid During the Period."
The second table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before
expenses. In order to assist shareholders in comparing the ongoing
expenses of investing in this Fund and other funds, compare the 5%
hypothetical example with the 5% hypothetical examples that appear
in other funds' shareholder reports.
The expenses shown in the table are intended to highlight
shareholders ongoing costs only and do not reflect any transactional
expenses, such as sales charges, redemption fees or exchange fees.
Therefore, the second table is useful in comparing ongoing expenses
only, and will not help shareholders determine the relative total
expenses of owning different funds. If these transactional expenses
were included, shareholder expenses would have been higher.
Expenses Paid
Ending During the Period*
Beginning Account Value June 1, 2004 to
Account Value November 30, November 30,
June 1, 2004 2004 2004
Actual
Class A $1,000 $1,089.50 $7.86
Class B $1,000 $1,087.60 $9.32
Class C $1,000 $1,087.60 $9.42
Class I $1,000 $1,090.40 $6.86
Hypothetical (5% annual return before expenses)**
Class A $1,000 $1,017.55 $7.59
Class B $1,000 $1,016.14 $9.00
Class C $1,000 $1,016.04 $9.10
Class I $1,000 $1,018.50 $6.63
* For each class of the Fund, expenses are equal to the annualized expense ratio for the class
(1.50% for Class A, 1.78% for Class B, 1.80% for Class C and 1.31% for Class I), multiplied
by the average account value over the period, multiplied by 183/365 (to reflect the one-half
year period shown). Because the Fund is a feeder fund, the expense table example reflects the
expenses of both the feeder fund and the master fund in which it invests.
** Hypothetical 5% annual return before expenses is calculated by pro-rating the number of days in
the most recent fiscal half-year divided by 365.
MERRILL LYNCH REAL INVESTMENT FUND, NOVEMBER 30, 2004
Statement of Assets and Liabilities Merrill Lynch Real Investment Fund
As of November 30, 2004
Assets
Investment in Master Real Investment Trust (the "Trust"), at value
(identified cost--$62,021,132) $ 69,558,013
Prepaid expenses and other assets 91,660
---------------
Total assets 69,649,673
---------------
Liabilities
Payables:
Distributor $ 38,754
Other affiliates 12,586 51,340
---------------
Accrued expenses 22,048
---------------
Total liabilities 73,388
---------------
Net Assets
Net assets $ 69,576,285
===============
Net Assets Consist of
Class A Shares of beneficial interest, $.01 par value, unlimited number of
shares authorized $ 9,392
Class B Shares of beneficial interest, $.01 par value, unlimited number of
shares authorized 9,228
Class C Shares of beneficial interest, $.01 par value, unlimited number of
shares authorized 29,775
Class I Shares of beneficial interest, $.01 par value, unlimited number of
shares authorized 11,779
Paid-in capital in excess of par 61,760,634
Undistributed investment income--net $ 214,735
Undistributed realized capital gains allocated from the Trust--net 3,861
Unrealized appreciation allocated from the Trust--net 7,536,881
---------------
Total accumulated earnings--net 7,755,477
---------------
Net Assets $ 69,576,285
===============
Net Asset Value
Class A--Based on net assets of $10,867,373 and 939,250 shares of beneficial
interest outstanding $ 11.57
===============
Class B--Based on net assets of $10,662,921 and 922,810 shares of beneficial
interest outstanding $ 11.55
===============
Class C--Based on net assets of $34,402,963 and 2,977,459 shares of beneficial
interest outstanding $ 11.55
===============
Class I--Based on net assets of $13,643,028 and 1,177,924 shares of beneficial
interest outstanding $ 11.58
===============
See Notes to Financial Statements.
MERRILL LYNCH REAL INVESTMENT FUND, NOVEMBER 30, 2004
Statement of Operations Merrill Lynch Real Investment Fund
For the Period March 26, 2004++ to November 30, 2004
Investment Income Allocated from the Trust--Net
Net investment income allocated from the Trust:
Interest (including $19,069 from affiliates) $ 619,926
Expenses (net of $20,352 reimbursement) (258,713)
---------------
Net investment income allocated from the Trust 361,213
---------------
Expenses
Investment advisory fees $ 381,192
Account maintenance and distribution fees--Class C 179,410
Offering costs 122,800
Account maintenance and distribution fees--Class B 62,369
Registration fees 26,862
Transfer agent fees--Class C 22,397
Professional fees 19,264
Printing and shareholder reports 16,465
Account maintenance fees--Class A 16,005
Transfer agent fees--Class I 8,272
Transfer agent fees--Class B 7,785
Transfer agent fees--Class A 7,042
Other 11,539
---------------
Total expenses before waiver and reimbursement 881,402
Waiver and reimbursement of expenses (551,786)
---------------
Total expenses after waiver and reimbursement 329,616
---------------
Investment income--net 31,597
---------------
Realized & Unrealized Gain Allocated from the Trust--Net
Realized gain on investments, swaps and options written allocated from
the Trust 37,437
Unrealized appreciation/depreciation on investments, swaps and options
written allocated from the Trust--net 7,536,881
---------------
Total realized and unrealized gain allocated from the Trust--net 7,574,318
---------------
Net Increase in Net Assets Resulting from Operations $ 7,605,915
===============
++ Commencement of operations.
See Notes to Financial Statements.
MERRILL LYNCH REAL INVESTMENT FUND, NOVEMBER 30, 2004
Statement of Changes in Net Assets Merrill Lynch Real Investment Fund
For the Period
March 26, 2004++
to November 30,
Increase in Net Assets: 2004
Operations
Investment income--net $ 31,597
Realized gain allocated from the Trust--net 37,437
Unrealized appreciation/depreciation allocated from the Trust--net 7,536,881
---------------
Net increase in net assets resulting from operations 7,605,915
---------------
Beneficial Interest Transactions
Net increase in net assets derived from beneficial interest transactions 61,870,370
---------------
Net Assets
Total increase in net assets 69,476,285
Beginning of period 100,000
---------------
End of period* $ 69,576,285
===============
* Undistributed investment income $ 214,735
===============
++ Commencement of operations.
See Notes to Financial Statements.
MERRILL LYNCH REAL INVESTMENT FUND, NOVEMBER 30, 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 November 30, 2004
Increase (decrease) 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 (loss)--net .01 --++++ --++++ .02
Realized and unrealized gain allocated from the Trust--net 1.56 1.55 1.55 1.56
---------- ---------- ---------- ----------
Total from investment operations 1.57 1.55 1.55 1.58
---------- ---------- ---------- ----------
Net asset value, end of period $ 11.57 $ 11.55 $ 11.55 $ 11.58
========== ========== ========== ==========
Total Investment Return**
Based on net asset value per share 15.70%+++ 15.50%+++ 15.50%+++ 15.80%+++
========== ========== ========== ==========
Ratios to Average Net Assets
Expenses, net of waiver and reimbursement*** 1.42%* 1.65%* 1.67%* 1.27%*
========== ========== ========== ==========
Expenses*** 2.61%* 3.37%* 3.37%* 2.36%*
========== ========== ========== ==========
Investment income (loss)--net .19%* (.03%)* (.03%)* .35%*
========== ========== ========== ==========
Supplemental Data
Net assets, end of period (in thousands) $ 10,867 $ 10,663 $ 34,403 $ 13,643
========== ========== ========== ==========
Portfolio turnover of the Trust 19.40% 19.40% 19.40% 19.40%
========== ========== ========== ==========
* Annualized.
** Total investment returns exclude the effect of sales charges. The Fund's Investment Adviser
waived a portion of its management fee. Without such waiver, the Fund's performance would
have been lower.
*** Includes the Fund's share of the Trust's allocated expenses.
++ Commencement of operations.
++++ Amount is less than $(.01) per share.
+++ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH REAL INVESTMENT FUND, NOVEMBER 30, 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 and strategies by investing all of its
assets in Master Real Investment Trust (the "Trust"), which has the
same investment objectives and strategies 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. 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 November 30, 2004 was 91.5%. 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 (except that Class
B shareholders may vote on certain changes to the Class A
distribution plan). 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 and offering costs--Prepaid
registration fees and offering costs 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.
(g) Reclassifications--U.S. generally accepted accounting principles
require that certain components of net assets be adjusted to reflect
permanent differences between financial and tax reporting.
Accordingly, during the current year, $149,562 has been reclassified
between paid-in capital in excess of par and undistributed net
investment income and $33,576 has been reclassified between
undistributed net realized capital gains and undistributed net
investment income as a result of permanent differences attributable
to non-deductible expenses and the tax treatment of swap agreements.
These reclassifications have no effect on net assets or net asset
values per share.
MERRILL LYNCH REAL INVESTMENT FUND, NOVEMBER 30, 2004
Notes to Financial Statements (continued)
Merrill Lynch Real Investment Fund
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.
During the Fund's start-up phase, MLIM elected to waive a portion of
its management fee. For the period March 26, 2004 to November 30,
2004, MLIM earned fees of $381,192, all of which was waived. In
addition, for the period March 26, 2004 to November 30, 2004, MLIM
reimbursed the Fund in the amount of $170,594. 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
Fund. There is no increase in the aggregate fees paid by the Fund
for these services.
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 November 30, 2004, FAMD earned
underwriting discounts and direct commissions and MLPF&S earned
dealer concessions on sales of the Fund's Class A and Class I Shares
as follows:
FAMD MLPF&S
Class A $24,564 $373,572
Class I -- 4
For the period March 26, 2004 to November 30, 2004, MLPF&S received
contingent deferred sales charges of $10,627 and $5,185 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, PSI, ML & Co., FAMD, FDS, and/or MLIM, LLC.
3. Beneficial Interest Transactions:
Net increase in net assets derived from capital share transactions
were $61,870,370 for the period March 26, 2004 to November 30, 2004.
Transactions in beneficial interest for each class were as follows:
Class A Shares for the
Period March 26, 2004++ Dollar
to November 30, 2004 Shares Amount
Shares sold 1,268,517 $ 13,208,986
Automatic conversion of shares 13,919 163,571
--------------- ----------------
Total issued 1,282,436 13,372,557
Shares redeemed (345,686) (3,775,939)
--------------- ----------------
Net increase 936,750 $ 9,596,618
=============== ================
++ Prior to commencement of operations, the Fund issued 2,500
shares to MLIM for $25,000.
MERRILL LYNCH REAL INVESTMENT FUND, NOVEMBER 30, 2004
Notes to Financial Statements (concluded)
Merrill Lynch Real Investment Fund
Class B Shares for the
Period March 26, 2004++ Dollar
to November 30, 2004 Shares Amount
Shares sold 1,036,613 $ 10,714,246
--------------- ----------------
Shares redeemed (102,372) (1,148,566)
Automatic conversion of shares (13,931) (163,571)
--------------- ----------------
Total redeemed (116,303) (1,312,137)
--------------- ----------------
Net increase 920,310 $ 9,402,109
=============== ================
++ Prior to commencement of operations, the Fund issued 2,500
shares to MLIM for $25,000.
Class C Shares for the
Period March 26, 2004++ Dollar
to November 30, 2004 Shares Amount
Shares sold 3,174,366 $ 33,037,378
Shares redeemed (199,407) (2,243,680)
--------------- ----------------
Net increase 2,974,959 $ 30,793,698
=============== ================
++ Prior to commencement of operations, the Fund issued 2,500
shares to MLIM for $25,000.
Class I Shares for the
Period March 26, 2004++ Dollar
to November 30, 2004 Shares Amount
Shares sold 1,440,324 $ 15,025,559
Shares redeemed (264,900) (2,947,614)
--------------- ----------------
Net increase 1,175,424 $ 12,077,945
=============== ================
++ Prior to commencement of operations, the Fund issued 2,500
shares to MLIM for $25,000.
4. Distributions to Shareholders:
The Fund paid an ordinary income dividend in the amount of $.066330
per Class A Share, $.022464 per Class B Share, $.026978 per Class C
Share and $.080689 per Class I Share on December 31, 2004 to
shareholders of record on December 20, 2004.
As of November 30, 2004, the components of accumulated earnings on a
tax basis were as follows:
Undistributed ordinary income--net $ 214,137
Undistributed long-term capital gains--net --
----------------
Total undistributed earnings--net 214,137
Capital loss carryforward (3,197)*
Unrealized gains--net 7,544,537**
----------------
Total accumulated earnings--net $ 7,755,477
================
* On November 30, 2004, the Fund had a net capital loss carry-
forward of $3,197, all of which expires in 2012. This amount
will be available to offset like amounts of any future taxable
gains.
** The difference between book-basis and tax-basis net unrealized
gains is attributable primarily to the deferral of post-October
capital losses for tax purposes, the treatment of swap agreements
and other book/tax temporary differences.
MERRILL LYNCH REAL INVESTMENT FUND, NOVEMBER 30, 2004
Report of Independent Registered Public Accounting Firm
Merrill Lynch Real Investment Fund
To the Shareholders and Board of Trustees
of Merrill Lynch Real Investment Fund:
We have audited the accompanying statement of assets and liabilities
of Merrill Lynch Real Investment Fund as of November 30, 2004, and
the related statement of operations, the statement of changes in net
assets and the financial highlights for the period March 26, 2004
(commencement of operations) to November 30, 2004. 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
audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (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. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Merrill Lynch Real Investment Fund at November
30, 2004, the results of its operations, the changes in its net
assets and its financial highlights for the period March 26, 2004
through November 30, 2004, in conformity with U.S. generally
accepted accounting principles.
(Ernst & Young LLP)
Philadelphia, Pennsylvania
January 14, 2005
MERRILL LYNCH REAL INVESTMENT FUND, NOVEMBER 30, 2004
Schedule of Investments Master Real Investment Trust (in U.S. dollars)
Face
Amount Asset-Backed Securities++ Value
$ 3,000,000 Accredited Mortgage Loan Trust, Series 2004-3, Class 2A6,
2.761% due 10/25/2034 (a) $ 3,003,690
138,258 AmeriCredit Automobile Receivables Trust, Series 2000-D,
Class A4, 2.541% due 9/12/2007 (a) 138,317
200,000 American Express Credit Account Master Trust, Series 2002-1,
Class A, 2.21% due 9/15/2009 (a) 200,421
200,000 BA Master Credit Card Trust, Series 2001-A, Class A, 2.22%
due 6/15/2008 (a) 200,303
200,000 Bank One Issuance Trust, Series 2002-A5, Class A5, 2.22% due
6/15/2010 (a) 200,491
Capital Auto Receivables Asset Trust, Series 2003-2 (a):
190,870 Class A3B, 2.14% due 2/15/2007 190,888
200,000 Class A4B, 2.16% due 1/15/2009 200,150
Capital One Auto Finance Trust (a):
189,725 Series 2003-A, Class A3B, 2.26% due 10/15/2007 189,854
500,000 Series 2003-B, Class A3, 2.21% due 1/15/2008 500,499
200,000 Capital One Master Trust, Series 1999-3, Class A, 2.35% due
9/15/2009 (a) 200,761
1,500,000 Capital One Multi-Asset Execution Trust, Series 2002-C1, Class C1,
4.85% due 7/15/2010 (a) 1,582,989
200,000 Chase Credit Card Master Trust, Series 2002-8, Class A, 2.16% due
3/17/2008 (a) 200,081
200,000 Citibank Credit Card Issuance Trust, Series 2002-A5, Class A5,
1.92% due 9/17/2007 (a) 200,019
CountryWide Asset-Backed Certificates (a):
1,000,000 Series 2003-2, Class M1, 2.881% due 6/26/2033 1,005,479
1,000,000 Series 2004-5, Class M2, 2.851% due 7/25/2034 999,923
2,000,000 Series 2004-8, Class M1, 2.881% due 2/25/2035 2,000,000
200,000 Household Automotive Trust, Series 2002-3, Class A4B, 2.45% due
5/18/2009 (a) 200,430
69,401 Long Beach Mortgage Loan Trust, Series 2003-4, Class AV3, 2.521%
due 8/25/2033 (a) 69,489
365,000 MBNA Credit Card Master Note Trust, Series 2001-C1, Class C1,
3.15% due 10/15/2008 (a) 368,188
600,000 MBNA Master Credit Card Trust USA, Series 2000-C, Class C, 2.90%
due 7/15/2007 (a) 600,471
609,258 MSDWCC Heloc Trust, Series 2003-2, Class A, 2.441% due 4/25/2016 (a) 608,876
Morgan Stanley ABS Capital I (a):
1,000,000 Series 2003-NC5, Class M2, 4.181% due 4/25/2033 1,019,079
1,489,171 Series 2004-NC1, Class A2, 2.551% due 12/27/2033 1,492,877
Residential Asset Securities Corporation (a):
196,944 Series 2000-KS4, Class AII, 2.411% due 9/25/2031 197,114
1,000,000 Series 2004-KS8, Class MII2, 3.013% due 9/25/2034 999,923
126,297 Saxon Asset Securities Trust, Series 2003-2, Class AV2, 2.481%
due 6/25/2033 (a) 126,461
161,363 Wachovia Asset Securitization Inc., Series 2003-HE1, Class A1,
2.471% due 3/25/2033 (a) 161,253
Total Asset-Backed Securities (Cost--$16,861,549)--22.2% 16,858,026
Government Agency Mortgage-Backed Securities++
2,871,061 Fannie Mae, Series 2004-36, Class FJ, 2.48% due 3/25/2018 (a) 2,874,078
Total Government Agency Mortgage-Backed Securities
(Cost--$2,867,024)--3.8% 2,874,078
Non-Government Agency Mortgage-Backed Securities++
Collateralized Mortgage 1,000,000 ACE Securities Corporation Home Equity Loan Trust, Series 2004-OP1,
Obligations--27.2% Class M3, 3.183% due 4/25/2034 (a) 1,001,853
Ameriquest Mortgage Securities Inc. (a):
1,000,000 Series 2004-IA1, Class M4, 3.681% due 9/25/2034 1,005,096
1,500,000 Series 2004-R1, Class M2, 2.761% due 2/25/2034 1,499,886
200,000 Asset Backed Securities Corporation Home Equity Loan Trust,
Series 2004-HE9, Class M2, 3.16% due 10/29/2034 200,000
1,000,000 Bear Stearns Asset Backed Securities Inc., Series 2004-FR3,
Class M2, 3.506% due 10/25/2034 (a) 1,000,313
2,000,000 Centex Home Equity, Series 2004-D, Class MV1, 2.801% due
9/25/2034 (a) 2,006,754
1,318,639 Countrywide Alternative Loan Trust, Series 2004-2CB, Class 1A4,
2.581% due 3/25/2034 (a) 1,317,529
2,000,000 Fremont Home Loan Trust, Series 2004-3, Class M2, 4.63% due
11/25/2034 (a) 2,001,875
2,720,617 GMAC Mortgage Corporation Loan Trust, Series 2004-J2, Class A2,
2.68% due 6/25/2034 (a) 2,719,823
MERRILL LYNCH REAL INVESTMENT FUND, NOVEMBER 30, 2004
Schedule of Investments (continued) Master Real Investment Trust (in U.S. dollars)
Face
Amount Asset-Backed Securities++ Value
Collateralized Granite Mortgages PLC (a):
Mortgage Obligations $ 275,000 Series 2002-1, Class 1C, 3.379% due 4/20/2042 $ 271,717
(concluded) 500,000 Series 2003-1, Class 1C, 3.529% due 1/20/2043 514,400
224,431 Greenwich Capital Commercial Funding Corporation, Series 2003-FL1,
Class A, 2.651% due 7/05/2018 (a) 224,449
Holmes Financing PLC, Series 8 (a):
535,000 Class 1C, 2.69% due 7/15/2040 535,334
1,900,000 Class 2C, 2.79% due 7/15/2040 1,903,563
3,000,000 Impac Secured Assets CMN Owner Trust, Series 2004-3, Class M1,
2.781% due 12/25/2034 (a) 3,008,372
1,000,000 Master Asset Backed Securities Trust, Series 2004-HE1, Class M5,
3.53% due 9/25/2034 (a) 1,003,221
459,000 Wells Fargo Home Equity Trust, Series 2004-2, Class M5, 3.431%
due 11/25/2033 (a) 463,348
Total Non-Government Agency Mortgage-Backed Securities
(Cost--$20,657,367)--27.2% 20,677,533
Industry++++ Corporate Bonds & Structured Notes
Finance--41.6% AIG-FP Structured Finance (Cayman) Limited (Goldman Sachs Commodity
Index Total Return Linked Notes) (c):
7,000,000 1.58% due 4/01/2005 10,908,155
3,000,000 1.50% due 5/14/2007 3,831,034
Barclays Bank PLC (Goldman Sachs Commodity Index Total Return
Linked Notes) (c):
4,000,000 1.863% due 9/13/2007 (b) 5,337,477
5,000,000 Cayman Branch, 2.53% due 9/08/2005 6,389,507
1,500,000 Deutsche Bank AG (Goldman Sachs Commodity Index Total Return
Linked Notes), 1.58% due 4/11/2005 (c) 2,262,590
1,500,000 J.P. Morgan Chase Bank (Goldman Sachs Commodity Index Total
Return Linked Notes), 1.58% due 4/04/2005 (c) 2,357,091
500,000 Sigma Finance Incorporated, 4.375% due 3/31/2014 (a)(b) 502,516
------------
31,588,370
Oil Exploration & 250,000 Pemex Project Funding Master Trust, 3.188% due 6/15/2010 (a)(b) 256,250
Production--0.3%
Total Corporate Bonds & Notes (Cost--$23,519,880)--41.9% 31,844,620
Beneficial
Interest Short-Term Investments
$ 3,263,625 Merrill Lynch Liquidity Series, LLC Cash Sweep Series I (d) 3,263,625
Total Short-Term Investments (Cost--$3,263,625)--4.3% 3,263,625
Number of
Contracts Call Options Purchased
3+++ London InterBank Offered Rate (LIBOR) Linked Floor, expiring
April 2005 at USD 0.015, Broker J.P. Morgan Chase Bank 30
Total Options Purchased (Premiums Paid--$1,800)--0.0% 30
Total Investments (Cost--$67,171,245)--99.4% 75,517,912
MERRILL LYNCH REAL INVESTMENT FUND, NOVEMBER 30, 2004
Schedule of Investments (concluded) Master Real Investment Trust (in U.S. dollars)
Number of
Contracts Call Options Written Value
2+++ Consumer Price Index (CPI) Linked Floor, expiring April 2009
at USD 1, Broker, Morgan Stanley Capital Services Inc. $ (3,200)
Total Options Written (Premiums Received--$3,200)--0.0% (3,200)
Total Investments, Net of Options Written (Cost--$67,168,045*)--99.4% 75,514,712
Other Assets Less Liabilities--0.6% 467,050
------------
Net Assets--100.0% $ 75,981,762
============
++ 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.
These industry classifications are unaudited.
+++ One contract represents a notional amount of $1,000,000.
* The cost and unrealized appreciation/depreciation of investments as of
November 30, 2004, as computed for federal income tax purposes,
were as follows:
Aggregate cost $ 67,167,384
==============
Gross unrealized appreciation $ 8,371,971
Gross unrealized depreciation (24,643)
--------------
Net unrealized appreciation $ 8,347,328
==============
(a) Floating rate note.
(b) The security may be offered and sold to "qualified institutional buyers"
under rule 144A of the Securities Act of 1933.
(c) Represents a structured note; the interest rate shown reflects the
effective yield at the time of purchase by the Trust.
(d) 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) were as follows:
Net Interest
Affiliate Activity Income
Merrill Lynch Liquidity Series, LLC
Cash Sweep Series I $3,263,625 $21,048
Swaps outstanding as of November 30, 2004 were as follows:
Unrealized
Notional Appreciation/
Amount Depreciation
Sold credit default protection on
Granite Mortgages PLC. and
receive .45% interest
Broker, Deutsche Bank AG, London
Expires June 2044 $2,000,000 $ 1,800
Sold credit default protection on
Permanent Financing PLC. and
receive .55% interest
Broker, Deutsche Bank AG, London
Expires June 2042 $2,000,000 1,724
Sold credit default protection on
Credit Default Exchange and
receive .60% interest
Broker, J.P. Morgan Chase Bank
Expires September 2009 $1,998,382 (11,650)
Sold credit default protection on
Holmes Financing PLC. and
receive .55% interest
Broker, Deutsche Bank AG, London
Expires June 2040 $2,000,000 624
--------
Total $(7,502)
========
See Notes to Financial Statements.
MERRILL LYNCH REAL INVESTMENT FUND, NOVEMBER 30, 2004
Statement of Assets and Liabilities Master Real Investment Trust
As of November 30, 2004
Assets
Investments in unaffiliated securities, at value (identified cost--$63,905,820) $ 72,254,257
Investments in affiliated securities, at value (identified cost--$3,263,625) 3,263,625
Options purchased, at value (premiums paid--$1,800) 30
Unrealized appreciation on swaps 4,148
Receivables:
Contributions $ 607,494
Interest (including $4,434 from affiliates) 228,224
Swaps 8,142 843,860
---------------
Prepaid expenses and other assets 3,116
---------------
Total assets 76,369,036
---------------
Liabilities
Swap premiums received 1,511
Options written, at value (premiums received--$3,200) 3,200
Unrealized depreciation on swaps 11,650
Payables:
Securities purchased 200,123
Withdrawals 90,832
Custodian bank 51,420
Investment adviser 2,107
Other affiliates 559 345,041
---------------
Accrued expenses 25,872
---------------
Total liabilities 387,274
---------------
Net Assets
Net assets $ 75,981,762
===============
Net Assets Consist of
Investors' capital $ 67,642,597
Unrealized appreciation--net 8,339,165
---------------
Net Assets $ 75,981,762
===============
See Notes to Financial Statements.
MERRILL LYNCH REAL INVESTMENT FUND, NOVEMBER 30, 2004
Statement of Operations Master Real Investment Trust
For the Period March 26, 2004++ to November 30, 2004
Investment Income
Interest (including $21,048 from affiliates) $ 682,545
---------------
Total income 682,545
---------------
Expenses
Investment advisory fees $ 209,273
Accounting services 65,872
Custodian fees 9,987
Trustees' fees and expenses 7,362
Professional fees 4,022
Printing and shareholder reports 3,054
Pricing fees 2,753
Other 4,148
---------------
Total expenses before waiver 306,471
Waiver of expenses (20,745)
---------------
Total expenses after waiver 285,726
---------------
Investment income--net 396,819
---------------
Realized & Unrealized Gain (Loss)--Net
Realized gain (loss) on:
Investments--net (16,812)
Swaps--net 45,467
Options written--net 12,690 41,345
---------------
Unrealized appreciation/depreciation on:
Investments--net 8,346,667
Swaps--net (7,502)
Options written--net -- 8,339,165
--------------- ---------------
Total realized and unrealized gain--net 8,380,510
---------------
Net Increase in Net Assets Resulting from Operations $ 8,777,329
===============
++ Commencement of operations.
See Notes to Financial Statements.
MERRILL LYNCH REAL INVESTMENT FUND, NOVEMBER 30, 2004
Statement of Changes in Net Assets Master Real Investment Trust
For the Period
March 26, 2004++
to November 30,
Increase (Decrease) in Net Assets: 2004
Operations
Investment income--net $ 396,819
Realized gain--net 41,345
Unrealized appreciation/depreciation--net 8,339,165
---------------
Net increase in net assets resulting from operations 8,777,329
---------------
Capital Transactions
Proceeds from contributions 82,947,925
Fair value of withdrawals (15,843,492)
---------------
Net increase in net assets derived from capital transactions 67,104,433
---------------
Net Assets
Total increase in net assets 75,881,762
Beginning of period 100,000
---------------
End of period $ 75,981,762
===============
++ Commencement of operations.
See Notes to Financial Statements.
MERRILL LYNCH REAL INVESTMENT FUND, NOVEMBER 30, 2004
Financial Highlights Master Real Investment Trust
For the Period
March 26, 2004++
The following ratios have been derived from to November 30,
information provided in the financial statements. 2004
Total Investment Return
Total investment return 16.20%*
===============
Ratios to Average Net Assets
Expenses, net of waiver .68%**
===============
Expenses .73%**
===============
Investment income--net .95%**
===============
Supplemental Data
Net assets, end of period (in thousands) $ 75,982
===============
Portfolio turnover 19.40%
===============
* Aggregate total investment return.
** Annualized.
++ Commencement of operations.
See Notes to Financial Statements.
MERRILL LYNCH REAL INVESTMENT FUND, NOVEMBER 30, 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. The following is a summary of significant
accounting policies followed by the Trust.
(a) Valuation of investments--Debt securities are traded primarily
in the over-the-counter markets and are valued at the last available
bid price in the over-the-counter market or on the basis of yield
equivalents as obtained by the Trust's pricing service from one or
more dealers that make markets in the securities. Financial futures
contracts and options thereon, which are traded on exchanges, are
valued at their closing prices as of the close of such exchanges.
Options written or purchased are valued at the last sales price in
the case of exchange-traded options. In the case of options traded
in the over-the-counter ("OTC") market, valuation is the last asked
price (options written) or the last bid price (options purchased).
Swap agreements are valued by quoted fair valuations received daily
by the Trust from the counterparty. Short-term investments with a
remaining maturity of 60 days or less are valued at amortized cost,
which approximates market value. 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 utilize a matrix system for valuations. The procedures of
the pricing service and its valuations are reviewed by the officers
of the Trust under the general direction of the Board of Trustees.
Such valuations and procedures will be reviewed periodically by the
Board of Trustees of the Trust.
Equity securities that are held by the Trust, which 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 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.
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 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, NOVEMBER 30, 2004
Notes to Financial Statements (continued)
Master Real Investment Trust
* Hybrid instruments--The Trust 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 variables. 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) 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.
(d) 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.
(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. Interest income is
recognized on the accrual basis.
MERRILL LYNCH REAL INVESTMENT FUND, NOVEMBER 30, 2004
Notes to Financial Statements (concluded)
Master Real Investment Trust
(f) 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.
(g) Custodian bank--The Trust recorded an amount payable to the
custodian bank reflecting an overnight overdraft, which resulted
from management estimates of available cash.
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%.
During the Fund's start-up phase, MLIM elected to waive a portion of
its management fee. For the period March 26, 2004 to November 30,
2004, MLIM earned fees of $209,273, 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 as the securities 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 November 30, 2004, the Trust
reimbursed MLIM $831 for certain accounting services.
Certain officers and/or trustees of the Trust are officers and/or
trustees 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 November 30, 2004 were $71,779,471
and $7,865,118, respectively.
Transactions in call options written for the period March 26, 2004
to November 30, 2004 were as follows:
Number of Premiums
Contracts Received
Outstanding call options written,
beginning of period -- --
Options written 218 $ 15,890
Options expired (216) (12,690)
-------------- ---------------
Outstanding call options
written, end of period 2 $ 3,200
============== ===============
MERRILL LYNCH REAL INVESTMENT FUND, NOVEMBER 30, 2004
Report of Independent Registered Public Accounting Firm
Master Real Investment Trust
To the Investors and Board of Trustees of
Master Real Investment Trust:
We have audited the accompanying statement of net assets, including
the schedule of investments, of Master Real Investment Trust as
of November 30, 2004, the related statement of operations, the
statement of changes in net assets and the financial highlights for
the period March 26, 2004 (commencement of operations) to November
30, 2004. 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 audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (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. Our procedures included
confirmation of securities owned as of November 30, 2004, 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Master Real Investment Trust at November 30,
2004, the results of its operations, the changes in its net assets
and its financial highlights for the period March 26, 2004 through
November 30, 2004, in conformity with U.S. generally accepted
accounting principles.
(Ernst & Young LLP)
Philadelphia, Pennsylvania
January 14, 2005
MERRILL LYNCH REAL INVESTMENT FUND, NOVEMBER 30, 2004
Portfolio Information Master Real Investment Trust
Asset Mix as of November 30, 2004
Percent of
Total
Investments
Corporate Bonds & Structured Notes 42.2%
Non-Government Agency
Mortgage-Backed Securities 27.4
Asset-Backed Securities 22.3
Government Agency Mortgage-Backed
Securities 3.8
Other* 4.3
* Includes portfolio holdings in short-term investments
and options.
MERRILL LYNCH REAL INVESTMENT FUND, NOVEMBER 30, 2004
Officers and Trustees
Number of
Portfolios in Other Public
Position(s) Length of Fund Complex Directorships
Held with Time Overseen by Held by
Name, Address & Age Fund/Trust Served Principal Occupation(s) During Past 5 Years Trustee Trustee
Interested Director
Terry K. Glenn* President 2004 to President of the Merrill Lynch Investment 124 Funds None
P.O. Box 9011 and present Managers, L.P. ("MLIM")/Fund Asset 157 Portfolios
Princeton, Trustee Management, L.P. ("FAM")-advised funds
NJ 08543-9011 since 1999; Chairman (Americas Region) of
Age: 64 MLIM from 2000 to 2002; Executive Vice
President of MLIM and FAM (which terms as
used herein include their corporate
predecessors) from 1983 to 2002; President
of FAM Distributors, Inc., ("FAMD") from
1986 to 2002 and Director thereof from 1991
to 2002; Executive Vice President and
Director of Princeton Services, Inc.
("Princeton Services") from 1993 to 2002;
President of Princeton Administrators, L.P.
from 1989 to 2002; 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 MLIM or FAM acts as
investment adviser. Mr. Glenn is an "interested person," as
described in the Investment Company Act, of the Fund/Trust based on
his present and former positions with MLIM, FAM, FAMD, Princeton
Services and 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/Trust
President, Mr. Glenn serves at the pleasure of the Board of Trustees.
Independent Trustees*
David O. Beim Trustee 2004 to Professor of Finance and Economics at the 14 Funds None
P.O. Box 9095 present Columbia University Graduate School of 17 Portfolios
Princeton, Business since 1991; Chairman of Outward
NJ 08543-9095 Bound U.S.A. from 1997 to 2002; Chairman
Age: 64 of Wave Hill, Inc. since 1990.
James T. Flynn Trustee 2004 to Chief Financial Officer of J.P. Morgan & 14 Funds None
P.O. Box 9095 present Co., Inc. from 1990 to 1995 and an employee 17 Portfolios
Princeton, of J.P. Morgan in various capacities from
NJ 08543-9095 1967 to 1995.
Age: 65
W. Carl Kester Trustee 2004 to Mizuho Financial Group Professor of Finance; 14 Funds None
P.O. Box 9095 present Senior Associate Dean and Chairman of the 17 Portfolios
Princeton, MBA Program of Harvard University Graduate
NJ 08543-9095 School of Business Administration since 1999;
Age: 53 James R. Williston Professor of Business
Administration of Harvard University Graduate
School of Business from 1997 to 1999; MBA
Class of 1977, Professor of Business
Administration of Harvard University Graduate
School of Business Administration from 1981
to 1997; Independent Consultant since 1978.
Karen P. Robards Trustee 2004 to President of Robards & Company, a financial 14 Funds None
P.O. Box 9095 present advisory since 1987; formerly an investment 17 Portfolios
Princeton, banker with Morgan Stanley for more than
NJ 08543-9095 ten years; Director of Enable Medical Corp.
Age: 54 since 1996; Director of Atricure, Inc. since
2000; Director of CineMuse Inc. from 1996 to
2000; Director of the Cooke Center for
Learning and Development, a not-for-profit
organization, since 1987.
* 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.
MERRILL LYNCH REAL INVESTMENT FUND, NOVEMBER 30, 2004
Officers and Trustees (concluded)
Position(s) Length of
Held with Time
Name, Address & Age Fund/Trust Served Principal Occupation(s) During Past 5 Years
Fund Officers*
Donald C. Burke Vice 2004 to First Vice President of MLIM and FAM since 1997 and Treasurer thereof since
P.O. Box 9011 President present 1999; Senior Vice President and Treasurer of Princeton Services since 1999 and
Princeton, and Director since 2004; Vice President of FAMD since 1999; Vice President of MLIM
NJ 08543-9011 Treasurer and FAM from 1990 to 1997; Director of MLIM Taxation since 1990.
Age: 44
Frank Viola Vice 2004 to Managing Director (Global Fixed Income) of MLIM since 1997; Treasurer of
P.O. Box 9011 President present Merrill Lynch Bank & Trust from 1996 to 1997 and Vice President of Merrill
Princeton, Lynch Capital Markets from 1993 to 1996.
NJ 08543-9011
Age: 40
Thomas Musmanno Vice 2004 to Director (Global Fixed Income) of MLIM since 2004; Vice President of MLIM from
P.O. Box 9011 President present 1997 to 2004; Derivatives and Structured Products Specialist with MLIM from
Princeton, 2000 to 2002; Portfolio Manager with MLIM from 1996.
NJ 08543-9011
Age: 35
Jeffrey Hiller Chief 2004 to Chief Compliance Officer of the MLIM/FAM-advised funds and First Vice President
P.O. Box 9011 Compliance present and Chief Compliance Officer of MLIM since 2004; Global Director of Compliance
Princeton, Officer at Morgan Stanley Investment Management from 2002 to 2004; Managing Director and
NJ 08543-9011 Global Director of Compliance at Citigroup Asset Management from 2000 to 2002;
Age: 53 Chief Compliance Officer at Soros Fund Management in 2000; Chief Compliance
Officer at Prudential Financial from 1995 to 2000.
Alice A. Pellegrino Secretary 2004 to Director (Legal Advisory) of MLIM since 2002; Vice President of MLIM from 1999
P.O. Box 9011 present to 2002; Attorney with MLIM since 1997.
Princeton,
NJ 08543-9011
Age: 44
* Officers of the Fund/Trust serve at the pleasure of the Board of Trustees.
Further information about the Fund's Officers and Trustees is
available in the Fund's Statement of Additional Information, which
can be obtained without charge by calling 1-800-MER-FUND.
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
Effective January 1, 2005, Terry K. Glenn will retire as President
and Trustee of Merrill Lynch Real Investment Fund and Master Real
Investment Trust. The Fund's/Trust's Board of Trustees wishes
Mr. Glenn well in his retirement.
Effective January 1, 2005, Robert C. Doll, Jr. will become President
and Trustee of the Fund and the Trust.
MERRILL LYNCH REAL INVESTMENT FUND, NOVEMBER 30, 2004
Item 2 - Code of Ethics - The registrant has adopted 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 and principal accounting officer,
or persons performing similar functions. A copy of the code of
ethics is available without charge upon request by calling toll-free
1-800-MER-FUND (1-800-637-3863).
Item 3 - Audit Committee Financial Expert - The registrant's board
of directors has determined that (i) the registrant has the
following audit committee financial experts serving on its audit
committee and (ii) each audit committee financial expert is
independent: (1) David O. Beim, (2) W. Carl Kester, (3) James T.
Flynn and (4) Karen P. Robards.
The registrant's board of directors has determined that David O.
Beim, W. Carl Kester and Karen P. Robards qualify as financial
experts pursuant to Item 3(c)(4) of Form N-CSR.
Mr. Beim has a thorough understanding of generally accepted
accounting principles, financial statements and internal control
over financial reporting as well as audit committee functions. For
25 years, Mr. Beim was an investment banker actively engaged in
financial analysis for securities transactions and mergers. These
transactions presented a breadth and level of complexity of
accounting issues that are generally comparable to the breadth and
complexity of issues that can reasonably be expected to be raised by
the Registrant's financial statements. Mr. Beim has also been a
professor of finance and economics at the Columbia University
Graduate School of Business for the past 11 years.
Prof. Kester has a thorough understanding of generally accepted
accounting principles, financial statements and internal control
over financial reporting as well as audit committee functions.
Prof. Kester has been involved in providing valuation and other
financial consulting services to corporate clients since 1978.
Prof. Kester's financial consulting services present a breadth and
level of complexity of accounting issues that are generally
comparable to the breadth and complexity of issues that can
reasonably be expected to be raised by the Registrant's financial
statements.
Ms. Robards has a thorough understanding of generally accepted
accounting principles, financial statements and internal control
over financial reporting as well as audit committee functions.
Ms. Robards has been President of Robards & Company, a financial
advisory firm, since 1987. Ms. Robards was formerly an investment
banker for more than 10 years where she was responsible for
evaluating and assessing the performance of companies based on their
financial results. Ms. Robards has over 30 years of experience
analyzing financial statements. She also is the member of the Audit
Committees of two privately held companies and a non-profit
organization.
Item 4 - Principal Accountant Fees and Services
Merrill Lynch Real Investment Fund
(a) Audit Fees - Fiscal Year Ending November 30, 2004 - $5,000
Fiscal Year Ending November 30, 2003 - $N/A
Master Real Investment Trust
(a) Audit Fees - Fiscal Year Ending November 30, 2004 - $37,500
Fiscal Year Ending November 30, 2003 - $N/A
Merrill Lynch Real Investment Fund
(b) Audit-Related Fees -
Fiscal Year Ending November 30, 2004 - $0
Fiscal Year Ending November 30, 2003 - $N/A
Master Real Investment Trust
(b) Audit-Related Fees -
Fiscal Year Ending November 30, 2004 - $0
Fiscal Year Ending November 30, 2003 - $N/A
Merrill Lynch Real Investment Fund
(c) Tax Fees - Fiscal Year Ending November 30, 2004 - $5,000
Fiscal Year Ending November 30, 2003 - $N/A
The nature of the services include tax compliance, tax advice and
tax planning.
Master Real Investment Trust
(c) Tax Fees - Fiscal Year Ending November 30, 2004 - $5,000
Fiscal Year Ending November 30, 2003 - $N/A
The nature of the services include tax compliance, tax advice and
tax planning.
Merrill Lynch Real Investment Fund
(d) All Other Fees -
Fiscal Year Ending November 30, 2004 - $0
Fiscal Year Ending November 30, 2003 - $N/A
Master Real Investment Trust
(d) All Other Fees -
Fiscal Year Ending November 30, 2004 - $0
Fiscal Year Ending November 30, 2003 - $N/A
(e)(1) The registrant's audit committee (the "Committee") has
adopted policies and procedures with regard to the pre-approval of
services. Audit, audit-related and tax compliance services provided
to the registrant on an annual basis require specific pre-approval
by the Committee. The Committee also must approve other non-audit
services provided to the registrant and those non-audit services
provided to the registrant's affiliated service providers that
relate directly to the operations and the financial reporting of the
registrant. Certain of these non-audit services that the Committee
believes are a) consistent with the SEC's auditor independence rules
and b) routine and recurring services that will not impair the
independence of the independent accountants may be approved by the
Committee without consideration on a specific case-by-case basis
("general pre-approval"). However, such services will only be
deemed pre-approved provided that any individual project does not
exceed $5,000 attributable to the registrant or $50,000 for all of
the registrants the Committee oversees. Any proposed services
exceeding the pre-approved cost levels will require specific pre-
approval by the Committee, as will any other services not subject to
general pre-approval (e.g., unanticipated but permissible services).
The Committee is informed of each service approved subject to
general pre-approval at the next regularly scheduled in-person board
meeting.
(e)(2) 0%
(f) Not Applicable
(g) Fiscal Year Ending November 30, 2004 - $5,000
Fiscal Year Ending November 30, 2003 - $N/A
(h) The registrant's audit committee has considered and determined
that the provision of non-audit services that were rendered to the
registrant's 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.
Regulation S-X Rule 2-01(c)(7)(ii) - $945,000, 0%
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 second 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 - See Item 2
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/ Robert C. Doll, Jr._______
Robert C. Doll, Jr.,
President of
Merrill Lynch Real Investment Fund and
Master Real Investment Trust
Date: January 13, 2005
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/ Robert C. Doll, Jr.________
Robert C. Doll, Jr.,
President of
Merrill Lynch Real Investment Fund and
Master Real Investment Trust
Date: January 13, 2005
By: _/s/ Donald C. Burke________
Donald C. Burke,
Chief Financial Officer of
Merrill Lynch Real Investment Fund and
Master Real Investment Trust
Date: January 13, 2005