MERCURY ASSET MANAGEMENT MASTER TRUST, POS AMI, 1999-10-26

MERCURY ASSET MANAGEMENT MASTER TRUST
POS AMI, 1999-10-26

Previous: AMDOCS LTD, F-4, 1999-10-26

Next: MERCURY ASSET MANAGEMENT FUNDS INC, N-1A/A, 1999-10-26

<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 26, 1999
FILE NO. 811-09049

----------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

----------------------------------

FORM N-1A
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
AMENDMENT NO. 4

(CHECK APPROPRIATE BOX OR BOXES)

MERCURY ASSET MANAGEMENT MASTER TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(888) 763-2260
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

JEFFREY M. PEEK
BOX 9011
PRINCETON, NEW JERSEY 08543-9011
(NAME AND ADDRESS OF AGENT FOR SERVICE)

Copies to:

Counsel for the Trust:

JOEL H. GOLDBERG, Esq. and ROBERT E. PUTNEY, III, Esq.
Swidler Berlin Shereff Friedman, LLP P.O. Box 9011
919 Third Avenue Princeton, New Jersey 08543-9011
New York, New York 10022

<PAGE> 2

EXPLANATORY NOTE

This Registration Statement has been filed by the Registrant pursuant to
Section 8(b) of the Investment Company Act of 1940, as amended (the "Investment
Company Act"). However, beneficial interests in the Registrant are not being
registered under the Securities Act of 1933, as amended (the "1933 Act") because
such interests will be issued solely in private placement transactions that do
not involve any "public offering" within the meaning of Section 4(2) of the 1933
Act. Investments in the Registrant may be made only by a limited number of
institutional investors, including investment companies, common or commingled
trust funds, group trusts and certain other "accredited investors" within the
meaning of Regulation D under the 1933 Act. This Registration Statement does not
constitute an offer to sell, or the solicitation of an offer to buy, any
beneficial interests in the Registrant.

This Registration Statement has been prepared as a single document
consisting of Parts A, B and C, none of which is to be used or distributed as a
stand alone document.

- 1 -
<PAGE> 3

Parts A and B of Amendment No. 2 to the Registrant's Registration Statement,
dated April 27, 1999, which relate to the Mercury Master Global Balanced
Portfolio, are incorporated by reference into this Amendment No. 4 to the
Registrant's Registration Statement.

<PAGE> 4
TABLE OF CONTENTS

<TABLE>
<S> <C>
PART A. INFORMATION REQUIRED IN A PROSPECTUS

ITEM 1. FRONT AND BACK COVER PAGES ....................................................... *

ITEM 2. RISK/RETURN SUMMARY: INVESTMENTS, RISKS AND PERFORMANCE .......................... *

ITEM 3. RISK/RETURN SUMMARY: FEE TABLE ................................................... *

ITEM 4. INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES,
AND RELATED RISKS ................................................................ 2

ITEM 5. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE ...................................... *

ITEM 6. MANAGEMENT, ORGANIZATION, AND CAPITAL STRUCTURE .................................. 16

ITEM 7. SHAREHOLDER INFORMATION .......................................................... 20

ITEM 8. DISTRIBUTION ARRANGEMENTS ........................................................ 22

ITEM 9. FINANCIAL HIGHLIGHTS INFORMATION .................................................. *

PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION

ITEM 10. COVER PAGE ....................................................................... 1

ITEM 11. TRUST HISTORY .................................................................... 3

ITEM 12. DESCRIPTION OF THE PORTFOLIO AND ITS INVESTMENTS AND RISKS ....................... 3

ITEM 13. MANAGEMENT OF THE REGISTRANT ..................................................... 20

ITEM 14. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES .............................. 22

ITEM 15. INVESTMENT ADVISORY AND OTHER SERVICES ........................................... 23

ITEM 16. BROKERAGE ALLOCATION AND OTHER PRACTICES ......................................... 25

ITEM 17. CAPITAL STOCK AND OTHER SECURITIES ............................................... 27

ITEM 18. PURCHASE, REDEMPTION AND PRICING OF SECURITIES ................................... 28

ITEM 19. TAXATION OF THE TRUST ............................................................ 29

ITEM 20. UNDERWRITERS ..................................................................... 31

ITEM 21. CALCULATION OF PERFORMANCE DATA .................................................. 31

ITEM 22. FINANCIAL STATEMENTS ............................................................. 32

PART C. OTHER INFORMATION

ITEM 23. EXHIBITS ......................................................................... C-1

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT .................... C-3
</TABLE>

1
<PAGE> 5

<TABLE>
<S> <C>
ITEM 25. INDEMNIFICATION .................................................................... C-3

ITEM 26. -BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER .............................. C-5

ITEM 27. PRINCIPAL UNDERWRITERS ............................................................. C-9

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS ................................................... C-10

ITEM 29. MANAGEMENT SERVICES ................................................................ C-10

ITEM 30. UNDERTAKINGS ....................................................................... C-11
</TABLE>

* Responses to Items 1,2,3,5 and 9 have been omitted pursuant to paragraph 2(b)
of Instruction B of the General Instructions to Form N-1A.

2
<PAGE> 6

Mercury Master International Portfolio
Mercury Master Pan-European Growth Portfolio
Mercury Master U.S. Large Cap Portfolio
Mercury Master Gold and Mining Portfolio
Mercury Master U.S. Small Cap Growth Portfolio

PART A

ITEM 4. - INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES, AND RELATED
RISKS.

Mercury Asset Management Master Trust (the "Trust") is a no-load,
open-end management investment company which was organized as a Delaware
business trust on April 23, 1998. Mercury Master Pan-European Growth Portfolio
("Pan-European Growth Portfolio"), Mercury Master International Portfolio
("International Portfolio"), Mercury Master U.S. Large Cap Portfolio ("U.S.
Large Cap Portfolio"), Mercury Master Gold and Mining Portfolio ("Gold and
Mining Portfolio") and Mercury Master U.S. Small Cap Growth Portfolio ("U.S.
Small Cap Growth Portfolio") (together, the "Portfolios" and each, a
"Portfolio") are each separate series of the Trust. Each Portfolio is a
diversified investment company with different investment objectives and
policies. There can, of course, be no assurance that the respective investment
objectives of the Portfolios can be achieved.

INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES.

INTERNATIONAL PORTFOLIO AND PAN-EUROPEAN GROWTH PORTFOLIO

International Portfolio

International Portfolio's main objective is long-term capital growth
through investments primarily in a diversified portfolio of equity securities of
companies located outside the United States. In selecting securities, the
Portfolio emphasizes those securities that Portfolio management believes are
undervalued or have good prospects for earnings growth. International Portfolio
will, under normal circumstances, invest at least 80% of its total assets in
equity securities of at least two different countries outside the United States.

International Portfolio invests in securities of companies located in
developed countries and countries with emerging capital markets outside the
United States. International Portfolio may invest, without limit, in countries
with emerging capital markets, including countries in Eastern Europe, Latin
America and the Far East. International Portfolio allocates investments to
countries that the management of the Portfolio believes, based on an evaluation
of economic, political and social factors, present good prospects for overall
economic growth.

- 2 -
<PAGE> 7

Pan-European Growth Portfolio

Pan-European Growth Portfolio's main objective is long-term capital
growth through investments primarily in a diversified portfolio of equity
securities of companies located in Europe. In selecting securities, the
Portfolio emphasizes those securities that Portfolio management believes are
undervalued or have good prospects for earnings growth. Pan-European Growth
Portfolio will, under normal circumstances, invest at least 80% of its total
assets in equity securities of companies located in Europe.

Pan-European Growth Portfolio invests primarily in securities of companies
located in developed European countries, including Austria, Belgium,
Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the
Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United
Kingdom. The Portfolio may also invest in securities of companies located in
developing European countries, including Bulgaria, the Czech Republic, Hungary,
Poland, Romania, Slovakia, and the states which formerly comprised Yugoslavia
and the Soviet Union. Pan-European Growth Portfolio does not allocate
investments based on its analysis of the overall prospects for a particular
European country.

INTERNATIONAL PORTFOLIO AND PAN-EUROPEAN GROWTH PORTFOLIO
Equity securities consist of:

- Common Stock
- Preferred Stock
- Securities Convertible into Common Stock
- Derivative securities, such as options (including warrants) and
futures, the value of which is based on a common stock or group
of common stocks.

A company's stock is considered to be undervalued when the stock's
current price is less than what Portfolio management believes a share of the
company is worth. Portfolio management feels a company's worth can be assessed
by several factors such as:

- financial resources
- value of assets
- sales and earnings growth
- product development
- quality of management
- overall business prospects

The Portfolios consider a company to be "located" in the country where:

- It is legally organized, or
- The primary trading market for its securities is located, or
- At least 50% of the issuer's (and its subsidiaries') non-current
assets, capitalization, gross revenues or profits have been
located during one of the last two fiscal years.

- 3 -
<PAGE> 8
company's industry or market sector is an important factor in evaluating a
particular company's earnings prospects. Current income from dividends and
interest will not be an important consideration in selecting portfolio
securities for a Portfolio. Both Portfolios may invest in companies of any size,
but each Portfolio tends to focus on medium and large companies. The Portfolios
have no stated minimum holding period for investments, and each will buy or sell
securities whenever the Portfolio's management sees an appropriate opportunity.
A Portfolio does not consider potential tax consequences to investors when it
sells securities.

Each Portfolio may invest in debt securities that are issued together
with a particular equity security. Each Portfolio may invest in derivatives to
hedge (protect against price movements) or to enable it to reallocate its
investments more quickly than it could by buying and selling the underlying
securities. Each Portfolio is not required to hedge and may choose not to do so.

Each Portfolio will normally invest almost all of its assets as described
above. Each Portfolio may, however, invest in short-term instruments, such as
money market securities and repurchase agreements, to meet redemptions. Each
Portfolio may also, without limit, make short-term investments, purchase high
quality bonds or buy or sell derivatives to reduce exposure to equity securities
when the Portfolio believes it is advisable to do so (on a temporary defensive
basis). Short-term investments and temporary defensive positions may limit the
potential for growth in the value of an interest in the Portfolio, and the
Portfolio may therefore not achieve its investment objective.

U.S. LARGE CAP PORTFOLIO

U.S. Large Cap Portfolio's main objective is long-term capital growth.
The Portfolio tries to achieve its objective by investing primarily in a
diversified portfolio of equity securities of large cap companies located in the
U.S.. U.S. Large Cap Portfolio may also invest up to 10% of its assets in equity
securities of companies located in Canada. In selecting securities, the
Portfolio emphasizes those securities that Portfolio management believes are
undervalued or have good prospects for earnings growth.

U.S. Large Cap Portfolio will, under normal circumstances, invest at
least 65% of its total assets in equity securities of large cap companies
located in the U.S. The Portfolio may also invest in equity securities of
companies of any market capitalization located in Canada and of small or medium
capitalization companies located in the U.S. Normally, Canadian investments will
represent 10% or less of the Portfolio's assets. A large cap company is a
company whose market capitalization is at least $5 billion under current market
conditions. The Portfolio's definition of large cap companies may be increased
in response to changes in the market. A company's market capitalization may go
up or down due to market fluctuations. The Portfolio will not sell a company's
securities because

- 4 -
<PAGE> 9
that company's market capitalization drops below $5 billion or another amount
set by the Portfolio.

Equity securities consist of:

U.S. Large Cap Portfolio considers a company to be "located" in the U.S.
or Canada if:

- It is legally organized in the U.S. or Canada, or
- The primary trading market for its securities is located in the
U.S. or Canada, or
- At least 50% of the company's (and its subsidiaries') non-current
assets, capitalization, gross revenues or profits have been
located in the U.S. or Canada during one of the last two fiscal
years.

Under this definition a "foreign" company (a company organized or trading
outside the U.S. or Canada, or with substantial operations outside the U.S. or
Canada) may be considered to be "located" in the U.S. or Canada.

- financial resources
- value of assets
- sales and earnings growth
- product development
- quality of management
- overall business prospects

A company's stock may become undervalued when most investors fail to
perceive the company's strengths in one or more of these areas. A company whose
earnings per share grow faster than inflation and the economy in general usually
has a higher stock price over time than a company with slower earnings growth.
The Portfolio's evaluation of the prospects for a company's industry or market
sector is an important factor in evaluating a particular company's earnings
prospects. Current income from dividends and interest will not be an important
consideration in selecting portfolio securities.

- 5 -
<PAGE> 10
The Portfolio may invest in debt securities that are issued together with a
particular equity security. The Portfolio may invest in derivatives to hedge
(protect against price movements) or to enable it to reallocate its investments
more quickly than it could by buying and selling the underlying securities. The
Portfolio is not required to hedge and may choose not to do so.

The Portfolio has no stated minimum holding period for investments, and
will buy or sell securities whenever the Portfolio management sees an
appropriate opportunity. The Portfolio does not consider potential tax
consequences to investors when it sells securities.

The Portfolio will normally invest almost all of its assets as described
above. The Portfolio may, however, invest in short-term instruments, such as
money market securities and repurchase agreements, to meet redemptions. The
Portfolio may also, without limit, make short-term investments, purchase high
quality bonds or buy or sell derivatives to reduce exposure to equity securities
when the Portfolio believes it is advisable to do so (on a temporary defensive
basis). Short-term investments and temporary defensive positions may limit the
potential for growth in the value of an interest in the Portfolio and the
Portfolio may, therefore, not achieve its investment objective.

GOLD AND MINING PORTFOLIO

Gold and Mining Portfolio's main objective is long-term capital growth.
The Portfolio tries to achieve its objective by investing primarily in a
diversified portfolio of equity securities of gold mining companies, and, to a
lesser extent, of companies engaged in other mining activities, located
throughout the world. The Portfolio may also invest up to 10% of its assets
directly in gold bullion. In selecting securities, the Portfolio emphasizes
those securities that Portfolio management believes are undervalued or have good
prospects for earnings growth.

The Portfolio will, under normal circumstances, invest at least 80% of
its total assets in equity securities of gold mining companies, equity
securities of companies engaged in other mining activities, and gold bullion.
Gold and Mining Portfolio has a policy to concentrate its investments in
companies in the mining and related manufacturing industries. Mining related
manufacturing industries may include, for example, primary production of
aluminum or steel foundries. For simplicity, this Prospectus uses the term
"mining" to include exploring, mining, refining, processing, fabricating,
distributing, dealing in or owning a particular metal or mineral. The Portfolio
will invest in companies engaged in non-gold mining activities when Portfolio
management believes, based on an evaluation of global economic conditions and
the price of gold, that they present better prospects for growth than
investments in gold mining companies.

Equity securities consist of:

- 6 -
<PAGE> 11
- Common Stock
- Preferred Stock
- Securities Convertible into Common Stock
- Derivative securities, such as asset-based securities, options
(including warrants) and futures, the value of which is based on a
common stock or group of common stocks.

- financial resources,
- value of assets (including the type, quantity and quality of a
company's ore reserves, and mineral exploration prospects),
- sales and earnings growth,
- product development,
- quality of management,
- overall business prospects.

A company's stock may become undervalued when most investors fail to
perceive the company's strengths in one or more of these areas. A company whose
earnings per share grow faster than inflation and the economy in general usually
has a higher stock price over time than a company with slower earnings growth.
Current income from dividends and interest will not be an important
consideration in selecting portfolio securities.

Gold and Mining Portfolio invests in securities of companies located
throughout the world and generally intends to invest a substantial amount of its
assets in securities of companies located in the Republic of South Africa. The
Portfolio may invest, without limit, in securities of companies located in
countries with emerging capital markets including the Republic of South Africa,
the People's Republic of China, Russia, Indonesia, Uzbekistan, Peru, Brazil,
Mexico, Zimbabwe, Ghana, Mali, Tanzania, the Philippines and Papua New Guinea.
The Portfolio may also invest in securities of companies located in countries
with

- 7 -
<PAGE> 12
developed capital markets including the United States, Canada, Japan, United
Kingdom, Finland, France, Germany, Switzerland, Ireland, Luxembourg, Spain and
Australia.

The Portfolio may invest in debt securities that are issued together with a
particular equity security. The Portfolio may invest in derivatives to hedge
(protect against price movements) or to enable it to reallocate its investments
more quickly than it could by buying and selling the underlying assets. The
Portfolio is not required to hedge and may choose not to do so.

The Portfolio may invest in companies of any size, but the Portfolio
tends to focus on medium and large companies. The Portfolio has no stated
minimum holding period for investments, and will buy or sell securities and
other assets whenever the Portfolio's management sees an appropriate
opportunity. The Portfolio does not consider potential tax consequences to
investors when it sells assets.

The Portfolio may invest up to 10% of its assets in gold bullion when the
Portfolio believes it is undervalued relative to the price of securities of gold
mining companies. However, the Portfolio may have internal guidelines that limit
its investments in gold bullion to considerably less than 10% of the Portfolio's
assets.

The Portfolio will normally invest almost all of its assets as described
above. The Portfolio may, however, invest in short-term instruments, such as
money market securities and repurchase agreements, to meet redemptions. If the
Portfolio anticipates significant adverse changes in the price of gold, then the
Portfolio's investment in stocks of gold mining companies and gold, bullion may
be temporarily reduced to below 50% of the Portfolio's total assets. In this
case the Portfolio may make substantial investments, for temporary defensive
purposes, in other mineral mining companies (non-gold), and may hold substantial
amounts of short-term investments, such as money market securities and
repurchase agreements. Short term investments and temporary defensive positions
may limit the potential for growth in the value of an interest and the Portfolio
may therefore not achieve its investment objective.

U.S. SMALL CAP GROWTH PORTFOLIO

U.S. Small Cap Growth Portfolio's main objective is long-term capital growth.
The Portfolio tries to achieve its objective by investing primarily in a
diversified portfolio of equity securities of small cap companies located in the
U.S. The Portfolio may also invest up to 10% of its assets in equity securities
of companies located in Canada. In selecting securities, the Portfolio
emphasizes those securities that Portfolio management believes have above
average prospects for earnings growth. The Portfolio may also invest in
securities that Portfolio management believes are undervalued.

U.S. Small Cap Growth Portfolio will, under normal circumstances, invest at
least 65% of its total assets in equity securities of small cap companies
located in the U.S. The Portfolio may also invest in equity securities of
companies of any market capitalization located in Canada and of medium or large
capitalization companies located in the U.S. Normally, Canadian investments will
represent 10% or less of the Portfolio's assets. A company's market
capitalization may go up or down due to market fluctuations. The Portfolio will
not sell a company's securities solely because that company's market
capitalization rises above $2 billion. Equity securities consist of:

- Common Stock
- Preferred Stock
- Securities Convertible into Common Stock
- Derivative securities such as options (including warrants)
and futures, the value of which is based on a common stock or
group of common stocks

U.S. Small Cap Growth Portfolio considers a company to be "located" in the U.S.
or Canada if:

A company whose earnings per share grow faster than inflation and the economy in
general usually has a higher stock price over time than a company with slower
earnings growth. The Portfolio's evaluation of the prospects for a company's
industry or market sector is an important factor in evaluating a particular
company's earnings prospects. A company's stock is considered to be undervalued
when the stock's current price is less than what Portfolio management believes a
share of the company is worth. Portfolio management feels a company's worth can
be assessed by several factors, such as:

- sales and earnings growth
- quality of management
- financial resources
- product development
- overall business prospects
- position to take advantage of new technologies or emerging
industries
- value of assets

A company's stock may become undervalued when most investors fail to perceive
the company's strengths in one or more of these areas. Current income from
dividends and interest will not be an important consideration in selecting
portfolio securities. The Portfolio may invest in debt securities that are
issued together with a particular equity security. The Portfolio may invest in
derivatives to hedge (protect against price movements) or to enable it to
reallocate its investments more quickly than it could by buying and selling the
underlying securities. The Portfolio is not required to hedge and may choose not
to do so. The Portfolio may also purchase securities in initial public
offerings.

The Portfolio has no stated minimum holding period for investments, and will buy
or sell securities whenever Portfolio management sees an appropriate
opportunity. The Portfolio may engage in active and frequent trading of its
investments. Frequent trading will increase the Portfolio's commission costs,
and may increase taxable dividends. The Portfolio does not consider potential
tax consequences to Portfolio shareholders when it sells securities.

The Portfolio will normally invest almost all of its assets as described above.
The Portfolio may, however, invest in short-term instruments, such as money
market securities and repurchase agreements, to meet redemptions. The Portfolio
may also, without limit, make short-term investments, purchase high quality
bonds or buy or sell derivatives to reduce exposure to equity securities when
the Portfolio believes it is advisable to do so (on a temporary defensive
basis). Short term investments and temporary defensive positions may limit the
potential for growth in the value of your shares and the Portfolio may,
therefore, not achieve its investment objective.

The Portfolios may use many different investment strategies in seeking
their investment objectives, and each Portfolio has certain investment
restrictions. These strategies and certain of the restrictions and policies
governing each Portfolio's investments are explained in Part B of this
Registration Statement.

INVESTMENT RISKS.

This section contains a summary discussion of the general risks of
investing in a Portfolio. As with any mutual fund, there can be no guarantee
that a Portfolio will meet its goals, or that a Portfolio's performance will be
positive over any period of time.

- 8 -
<PAGE> 13
INTERNATIONAL PORTFOLIO, PAN-EUROPEAN GROWTH PORTFOLIO AND GOLD AND MINING
PORTFOLIO

Liquidity, Information and Valuation Risks.

Certain securities, including securities of companies in countries
with emerging capital markets, securities of small companies and
"restricted securities" may be illiquid or volatile, making it
difficult or impossible to sell them at the time and at the price
that a Portfolio would like. Restricted securities have
contractual or legal restrictions on their resale and include
"private placement" securities that a Portfolio may buy directly
from the issuer. Also, important information about certain
companies, securities or the markets in which they trade, may be
inaccurate or unavailable. It may be difficult to value accurately
these types of securities. Certain derivatives may be subject to
these risks as well.

European Economic and Monetary Union (EMU).

Certain European countries have entered into EMU, in an effort
to, among other things, reduce barriers between countries,
increase competition among companies, reduce government subsidies
in certain industries, and reduce or eliminate currency
fluctuations among these countries. EMU has established a single
common European currency (the "euro") which was introduced on
January 1, 1999 and has replaced the existing national currencies
of all initial EMU participants. The use of notes and coins of
the relevant national currencies will be phased out by July 1,
2002. Upon introduction of the euro, certain securities
(beginning with government and corporate bonds) were
redenominated in the euro. These securities trade and make
dividend and other payments only in euros. Like other investment
companies and business organizations, including the companies in
which the Fund invests, the Fund could be adversely affected:

- If the transition to euro, or EMU as a whole, does not
continue to proceed as planned. For example, sharp currency
fluctuations, exchange rate volatility, and other
disruptions of the markets could occur.

- If a participating country withdraws from EMU and, for
example, if securities redenominated in euros are
transferred back into that country's national currency.

- 10 -
<PAGE> 14
Other Foreign Security Risks.

- The value of each Portfolio's non-U.S. holdings (and
hedging transactions in foreign currencies) will be
affected by changes in currency exchange rates.

- The costs of non-U.S. securities transactions tend to be
higher than those of U.S. transactions.

- A Portfolio's non-U.S. securities holdings may be adversely
affected by U.S. or foreign government action.

- International trade barriers or economic sanctions against
certain non-U.S. countries may adversely affect a
Portfolio's non-U.S. holdings.

- A Portfolio may be able to invest in certain small non-U.S.
markets only by investing in another fund that in turn
invests in those markets. It may cost a Portfolio more to
buy shares of these funds than it would to buy the non-U.S.
securities directly.

- The foregoing risks are heightened when the investment is
made in a country that has an emerging capital market. The
development of a capital market depends on a number of
factors, including a country's success in making political,
economic and social reforms. If a country were to
discontinue its process of reform, or experience other
destabilizing events, a Portfolio's investments could be
adversely affected. In addition, because of the small size
of the capital market in a country with an emerging capital
market or governmental restrictions on foreign investment,
there may be fewer investment opportunities available to a
Portfolio than in more developed markets. This could limit
a Portfolio's ability to diversify its holdings among
issuers, industries and countries.

- If a Portfolio purchases a bond issued by a foreign
government, the government may be unwilling or unable to
make payments when due. There may be no formal bankruptcy
proceeding by which a Portfolio would be able to collect
amounts owed by a foreign government.

-11 -
<PAGE> 15

- Non-U.S. markets have different clearance and settlement
procedures, and in certain markets settlements may be
unable to keep pace with the volume of securities
transactions which may cause delays. This means that a
Portfolio's assets may be uninvested and not earning
returns. A Portfolio may miss investment opportunities or
be unable to dispose of a security because of these delays.

U.S. LARGE CAP PORTFOLIO AND U.S. SMALL CAP GROWTH PORTFOLIO

Canadian Investment Risk

Canadian investment risk is the risk that each Portfolio's
Canadian securities may go up or down in value depending on
fluctuations in the relative exchange rates of the U.S. dollar and
the Canadian dollar, U.S. and Canadian political and economic
developments, and changes in U.S. and Canadian laws relating to
investments in Canada.

Liquidity, Information and Valuation Risks.

Certain securities, including securities of small companies,
securities of Canadian companies and "restricted securities," may
be illiquid or volatile, making it difficult or impossible to sell
them at the time and at the price that a Portfolio would like.
Restricted securities have contractual or legal restrictions on
their resale and include "private placement" securities that a
Portfolio may buy directly from the issuer. Also, important
information about certain companies, securities or the markets in
which they trade, may be inaccurate or unavailable. It may be
difficult to value accurately these types of securities. Certain
derivatives may be subject to these risks as well.

Other Canadian Securities Risks.

Canadian securities are sensitive to conditions within Canada, but
also tend to follow the U.S. market. Canada's economy depends
heavily on exports to the U.S., Canada's largest trading partner.
The Canadian economy relies strongly on the production and
processing of natural resources. Historically, natural resource
prices have been volatile. Demand by many citizens of the Province
of Quebec for secession from Canada may significantly impact the
Canadian economy.

- The costs of Canadian securities transactions tend to be
higher than those of U.S. transactions.

- The Canadian securities market has different clearance and
settlement procedures, which may cause delays. This means
that a Portfolio's assets may be uninvested and not
earning returns. A Portfolio may miss investment
opportunities or be unable to dispose of a security because
of these delays.

Foreign Security Risks

The U.S. Large Cap Portfolio and the U.S. Small Cap Growth
Portfolio define companies located in the U.S. or Canada
broadly. As a result, each Portfolio's investments may include

- 12 -
<PAGE> 16

companies organized, traded or having substantial operations
outside the U.S. or Canada. This may expose each Portfolio to
risks associated with foreign investments.

- The value of holdings traded outside the U.S. (and any
hedging transactions in foreign currencies) will be
affected by changes in currency exchange rates.

- The costs of non-U.S. securities transactions tend to be
higher than those of U.S. transactions.

- These holdings may be adversely affected by U.S. or foreign
government action.

- International trade barriers or economic sanctions against
certain non-U.S. countries may adversely affect these
holdings.

GOLD AND MINING PORTFOLIO

Sector Risk

Sector risk is the risk that the Fund's concentration in gold and
other mining securities will expose the Fund more to the price
fluctuations of mining securities generally or of gold in
particular than more broadly diversified funds.

Mining Related Securities and Gold Bullion.

- Investments in or relating to gold and other metals or
minerals are considered speculative.

- Historically, during periods of economic or financial
instability the securities of mining companies in general,
and companies engaged in precious (including gold) and
industrial metals mining in particular, have been subject
to extreme fluctuations in market price. Gold bullion has
also been subject to extreme fluctuations in market price.

- The earnings and general financial condition of mining
companies are highly dependent on the market prices of the
underlying metals or minerals, which have historically been
extremely volatile.

- During periods of instability in the price of metals or
minerals, the liquidity of the Portfolio's portfolio
securities may be severely reduced; in other words, the
Portfolio may not, during these periods, be able to sell
its securities at the time and price that the Portfolio
would like.

- Actions of large producers, sellers, and holders of
precious metals (such as governments and central banks) may
severely impact supply of, or demand for, precious metals,
and their actions in general may

- 13 -
<PAGE> 17

have a significant impact on the prices of precious metals.
These actions can be affected by various economic,
financial, social and political factors which may be
unpredictable.

- The Portfolio generally intends to invest a substantial
amount of its assets in securities of companies located in
the Republic of South Africa. This investment focus could
increase volatility and risk compared to a fund that
invests a smaller percentage of its assets in South Africa.
In addition, South African companies are generally more
sensitive to movements in the price of gold than similar
companies in other countries.

- Gold bullion does not generate income and offers only the
potential for capital appreciation or depreciation.

U.S. SMALL CAP GROWTH PORTFOLIO

SMALL CAP RISK

Small cap risk is the specific risk associated with investment in small cap
companies. Small cap companies may have limited product lines or markets. They
may be less financially secure than larger, more established companies. They may
depend on a small number of key personnel. If a product fails, or if management
changes, or there are other adverse developments, the Portfolio's investment in
a small cap company may lose substantial value.

Small cap securities generally trade in lower volumes and are subject to greater
and more unpredictable price changes than larger cap securities or the stock
market as a whole. Moreover, small cap securities generally are not
income-producing investments and thus, do not cushion a portfolio's total return
from price changes.

GROWTH STYLE INVESTING RISK

Growth style investing may go in and out of favor. Small cap companies are
expected to have superior earnings growth and any disappointment in earnings or
growth can mean a substantial decline in the share price.

INITIAL PUBLIC OFFERING RISK

The volume of initial public offerings and the levels at which the newly issued
stocks trade in the secondary market are affected by the performance of the
stock market overall. If initial public offerings are brought to the market,
availability may be limited and the Portfolio may not be able to buy any shares
at the offering price, or if it is able to buy shares, it may not be able to buy
as many shares at the offering price as it would like. In addition, the prices
of securities involved in initial public offerings are often subject to greater
and more unpredictable price changes than more established stocks.

ALL PORTFOLIOS

Stock Market Risk

Stock market risk is the risk that the stock markets will go down
in value, including the possibility that the stock markets will
go down sharply and unpredictably.

Selection Risk

Selection risk is the risk that the investments that Portfolio
management selects will underperform the stock markets or other
portfolios with similar investment objectives and investment
strategies.

Borrowing and Leverage.

The use of borrowing can create leverage. Leverage increases the
Portfolio's exposure to risk by increasing its total investments.
If the Portfolio borrows money to make more investments than it
otherwise could or to meet redemptions, and the Portfolio's
investments go down in value, the Portfolio's losses will be
magnified. Borrowing will cost the Portfolio interest expense and
other fees.

Certain securities that a Portfolio buys may create leverage,
including, for example, derivative securities. Like borrowing,
these investments may increase a Portfolio's exposure to risk.

Derivatives.

A Portfolio may also use instruments referred to as
"Derivatives." Derivatives are financial instruments whose value
is derived from another security, a commodity (such as gold or
oil) or an index (a measure of value or rates, such as the S&P
500 or the prime lending rate). Derivatives may allow a Portfolio
to increase or decrease its level of risk exposure more quickly
and efficiently than transactions in other types of instruments.
Derivatives, however, are volatile and involve significant risks,
including many of the risks described above. Derivatives may not
always be available or cost efficient. If the Portfolio invests in
derivatives, the investments may not be effective as a hedge
against price movements and can limit potential for growth in the
value of an interest in the Portfolio. Other risks include:

- 14 -
<PAGE> 18

- Credit risk -- the risk that the counterparty on a
derivative transaction will be unable to honor its
financial obligation to a Portfolio.

- Currency risk -- the risk that changes in the exchange rate
between two currencies will adversely affect the value (in
U.S. dollar terms) of an investment.

- Leverage risk -- the risk associated with certain types of
investments or trading strategies that relatively small
market movements may result in large changes in the value
of an investment. Certain investments or trading strategies
that involve leverage can result in losses that greatly
exceed the amount originally invested.

- Liquidity risk -- the risk that certain securities may be
difficult or impossible to sell at the time that the seller
would like or at the price that the seller believes the
security is currently worth.

- Index risk -- If the derivative is linked to the
performance of an index, it will be subject to the risks
associated with changes in that index. If the index
changes, a Portfolio could receive lower interest payments
or experience a reduction in the value of the derivative to
below what the Portfolio paid. Certain indexed securities,
including inverse securities (which move in an opposite
direction to the index), may create leverage, to the extent
that they increase or decrease in value at a rate that is a
multiple of the changes in the applicable index.

A Portfolio may use the following types of derivative instruments:
futures, forwards, options, indexed and inverse securities and swaps.

- 15 -
<PAGE> 19

The Gold and Mining Portfolio may also use asset-based securities.

Convertible Securities.

Convertible securities, including bonds and preferred stock, are
convertible into common stock. As a result of the conversion
feature, the interest or dividend rate on a convertible security
is generally less than would be the case if the security were not
convertible. The value of a convertible security will be affected
both by its stated interest or dividend rate and the value of the
underlying common stock. Therefore, its value will be affected by
the factors that affect both debt securities (such as interest
rates) and equity securities (such as stock market movements
generally). Some convertible securities might require a Portfolio
to sell the securities back to the issuer or a third party at a
time that is disadvantageous to the Portfolio.

Debt Securities.

Debt securities, such as bonds, involve credit risk, which is the
risk that the borrower will not make timely payments of principal
and interest. These securities are also subject to interest rate
risk, which is the risk that the value of the security may fall
when interest rates rise. In general, the market price of debt
securities with longer maturities will go up or down more in
response to changes in interest rates than shorter term
securities.

PART B

If you would like further information about the Portfolios, including
how they invest, please see Part B.

ITEM 6. - MANAGEMENT, ORGANIZATION, AND CAPITAL STRUCTURE.

INVESTMENT ADVISER.

Mercury Asset Management International Ltd. ("Mercury") manages the
International Portfolio, Pan-European Growth Portfolio, Gold and Mining
Portfolio, and U.S. Large Cap Portfolio. Mercury Asset Management US, a division
of Fund Asset Management, L.P. ("FAM") manages the Mercury Master U.S. Small Cap
Growth Portfolio. Mercury and Mercury Asset Management US are each referred to
herein as the "Investment Adviser." Each Investment Adviser manages each
Portfolio's investments under the overall supervision of the Board of Trustees
of the Mercury Asset Management Master Trust. Each Investment Adviser and its
affiliates have the responsibility for making all investment decisions for each
Portfolio.

- 16 -
<PAGE> 20

As of September, 1999 the Investment Advisers and their affiliates manage
portfolios with over $514 billion in assets for individuals and institutions
seeking investments worldwide. This amount includes assets managed for the
Advisers' affiliates. Of this amount, Mercury manages a total of approximately
$2.4 billion in investment company assets and FAM manages a total of
approximately $154.4 billion in investment company assets. The advisory
agreement between the Trust on behalf of each Portfolio and the Investment
Adviser gives the Investment Adviser the responsibility for making all
investment decisions.

With respect to International Portfolio, Pan-European Growth Portfolio,
and Gold and Mining Portfolio, the Investment Adviser is paid at the rate of
.75% of the Portfolio's average daily net assets. With respect to U.S. Large Cap
Portfolio, the Investment Adviser is paid at the rate of .50% of the Portfolio's
average daily net assets. With respect to U.S. Small Cap Growth Portfolio, the
Investment Adviser is paid at the rate of .70% of the Portfolio's average daily
net assets.

Fund Asset Management L.P., an affiliate of Mercury, may manage all or a
portion of the International Portfolio, the Pan-European Growth Portfolio, the
U.S. Large Cap Portfolio and the Gold and Mining Portfolio's daily cash assets,
to the extent not managed by Mercury. These Portfolios do not pay any
incremental fee for this service, although Mercury may make payments to Fund
Asset Management, L.P. Mercury, an affiliate of Mercury Asset Management US, may
provide assistance to Mercury Asset Management US in managing the U.S. Small Cap
Growth Portfolio or may manage all or a portion of the U.S. Small Cap Growth
Portfolio to the extent not managed by Mercury Asset Management US. The U.S.
Small Cap Growth Portfolio does not pay any incremental fee for this service,
although Mercury Asset Management US may make payments to Mercury.

International Portfolio is managed by members of a team of 18 investment
professionals who participate in the team's research process and stock
selection. The senior investment professionals in this group that have managed
the International Portfolio since the Portfolio started operations include:

Claus Anthon, Director of Mercury Asset Management, has been employed as
an investment professional by the Investment Adviser or its Mercury
affiliates since 1982.

Tammy Chow, Associate Director of Mercury Asset Management, has been
employed as an investment professional by the Investment Adviser or its
Mercury affiliates since 1994.

Gary Lowe, Managing Director of Mercury Asset Management, has been
employed as an investment professional by the Investment Adviser or its
Mercury affiliates since 1992.

Juliet Marber, Director of Mercury Asset Management, has been employed as
an investment professional by the Investment Adviser or its Mercury
affiliates since 1987.

Charles Prideaux, Managing Director of Mercury Asset Management, has
been employed as an investment professional by the Investment Adviser or
its Mercury affiliates since 1988. Mr. Prideaux is primarily responsible
for the day-to-day management of the International Portfolio.

Manraj Sekhon, Fund Manager of Mercury Asset Management, has been
employed as an investment professional by the Investment Adviser or its
Mercury affiliates since 1994.

Pan-European Growth Portfolio is managed by members of a team of 26
investment professionals who participate in the team's research process and
stock selection. The senior

- 17 -

<PAGE> 21

investment professionals in this group that have managed the Pan European Growth
Portfolio since the Portfolio started operations include:

Simon Flood, Director of Mercury Asset Management, has been employed as
an investment professional by the Investment Adviser or its Mercury
affiliates since 1989.

Samuel Joab, Director of Mercury Asset Management, has been employed as
an investment professional by the Investment Adviser or its Mercury
affiliates since 1992.

Michel Legros, Managing Director of Mercury Asset Management, has been
employed as an investment professional by the Investment Adviser or its
Mercury affiliates since 1991.

Andreas Utermann, Managing Director of Mercury Asset Management, has been
employed as an investment professional by the Investment Adviser or its
Mercury affiliates since 1990. Mr. Utermann is primarily responsible for
the day-to-day management of the Pan-European Growth Portfolio.

Charlotte Winther, Associate Director of Mercury Asset Management, has
been employed as an investment professional by the Investment Adviser or
its Mercury affiliates since 1998. Ms. Winther was employed at Unibank
Asset Management from 1989 to 1998.

U.S. Large Cap Portfolio is managed by members of a team of 17 investment
professionals who participate in the team's research process and stock
selection. The senior investment professionals in this group that have managed
the Portfolio since the Portfolio started operations include:

Garrett Fish, Associate Director of Mercury Asset Management, has been
employed as an investment professional by the Investment Adviser or its
Mercury affiliates since 1997. Mr. Fish was employed at Jardine Fleming
Hong Kong as a U.S. fund manager from 1994 to 1997. From 1991 to 1993 Mr.
Fish was an account manager at Aetna Capital Management in the U.S.

Andrew J. Hudson, Managing Director of Mercury Asset Management, has been
employed as an investment professional by the Investment Adviser or its
Mercury affiliates since 1992.

Michael Morony, Director of Mercury Asset Management, has been employed
as an investment professional by the Investment Adviser or its Mercury
affiliates since 1997. Mr. Morony worked for Threadneedle Investment
Managers from 1992 to 1997. Mr. Morony is primarily responsible for the
day-to-day management of the Portfolio.

Gold and Mining Portfolio is managed by members of a team of 7 investment
professionals who participate in the team's research process and stock
selection. The

- 18 -
<PAGE> 22
senior investment professionals in the group that have managed the Portfolio
since the Portfolio started operations include:

David Baker, Director of Mercury Asset Management, has been employed as
an investment professional by the Investment Adviser or its Mercury
affiliates since 1992.

Graham Birch, Managing Director of Mercury Asset Management, has been
employed as an investment professional by the Investment Adviser or its
Mercury affiliates since 1993.

Geoff Campbell, Director of Mercury Asset Management, has been employed
as an investment professional by the Investment Adviser or its Mercury
affiliates since 1994. Mr. Campbell was employed at Ord Minnett and
Fleming Martin from 1988 to 1994. Both of these firms are divisions of
Robert Fleming.

Trevor Steel, Associate Director of Mercury Asset Management, has been
employed as an investment professional by the Investment Adviser or its
Mercury affiliates since 1991. Mr. Steel is primarily responsible for the
day to day management of the Portfolio.

U.S. Small Cap Growth Portfolio is managed by the U.S. Small Cap team, which
consists of three investment professionals who are responsible for
research and stock selection for the Portfolio. The investment professionals in
this group that have managed the Portfolio since the Portfolio started
operations include:

James A. Skinner, III, Associate Director of Mercury Asset Management, is
primarily responsible for the day-to-day management of the Portfolio. Mr.
Skinner has been employed as an investment professional by the Investment
Adviser or its Mercury affiliates since 1994.

Oliver Ruppert has been employed as an investment professional by the Investment
Adviser or its Mercury affiliates since 1997.

Zahid Ali has been employed as an investment professional by the Investment
Adviser or its Mercury affiliates since 1996.

CAPITAL STOCK.

Investors in the Trust have no preemptive or conversion rights and
beneficial interests in the Trust are fully paid and non-assessable. The Trust
has no current intention to hold annual meetings of investors, except to the
extent required by the Investment Company Act, but will hold special meetings
of investors, when in the judgment of the Trustees, it is necessary or
desirable to submit matters for an investor vote. Upon liquidation of the Trust
or Portfolio, investors would be entitled to share, in proportion to their
investment in the Trust or the Portfolio (as the case may be), in the assets of
the Trust or Portfolio available for distribution to investors.

The Trust is organized as a Delaware business trust and currently
consists of twenty-seven Portfolios. Each investor is entitled to a vote in
proportion to its investment in the Trust or the Portfolio (as the case may be).
Investors in a Portfolio will participate equally in accordance with their pro
rata interests in the earnings, dividends and assets of the particular
Portfolio. The Trust reserves the right to create and issue interests in
additional Portfolios.

Investments in the Trust may not be transferred, but an investor may
withdraw all or any portion of its investment in any Portfolio at net asset
value on any day on which the New York Stock Exchange is open.

- 19 -
<PAGE> 23

ITEM 7. - SHAREHOLDER INFORMATION.

PRICING.

Each Portfolio calculates its net asset value (generally by using market
quotations) each day the New York Stock Exchange is open ("Pricing Day"),
prior to the close of business on the Exchange (the New York Stock Exchange
generally closes at 4:00 p.m. Eastern time). The net asset value used in
determining the price of an interest in the Portfolio is the one calculated
after the purchase or redemption order is received. The net asset value is
determined by deducting the amount of the Portfolio's total liabilities from the
value of its total assets. Net asset value is generally calculated by valuing
each security at its closing price for the day. Many of the International
Portfolio's, Pan-European Growth Portfolio's and Gold and Mining Portfolio's
investments are traded on non-U.S. securities exchanges that close many hours
before the New York Stock Exchange. Events that could affect securities prices
that occur between these times normally are not reflected in a Portfolio's net
asset value. Non-U.S. securities sometimes trade on days that the New York Stock
Exchange is closed. As a result, a Portfolio's net asset value may change on
days when an investor will not be able to purchase or redeem the Portfolio's
shares. If an event occurs after the close of a non-U.S. exchange that is likely
to significantly affect a Portfolio's net asset value, "fair value" pricing may
be used. This means that a Portfolio may value its foreign holdings at prices
other than their last closing prices, and the Portfolio's net asset value will
reflect this. Securities and assets for which market quotations are not readily
available are also valued at fair value as determined in good faith by or under
the direction of the Board of Trustees.

Each investor in the Trust may add to or reduce its investment in a
Portfolio on each Pricing Day. The value of each investor's beneficial interest
in a Portfolio will be determined by multiplying the net asset value of the
Portfolio by the percentage, effective for that day, that represents that
investor's share of the aggregate beneficial interests in such Portfolio. Any
additions or withdrawals, which are to be effected on that day, will then be
effected. The investor's percentage of the aggregate beneficial interests in a
Portfolio will then be re-computed as the percentage equal to the fraction (i)
the numerator of which is the value of such investor's investment in the
Portfolio as of the time of determination on such day plus or minus, as the case
may be, the amount of any additions to or withdrawals from the investor's
investment in the Portfolio effected on such day and (ii) the denominator of
which is the aggregate net asset value of the Portfolio as of such time on such
day plus or minus, as the case may be, the amount of the net additions to or
withdrawals from the aggregate investments in the Portfolio by all investors in
the Portfolio. The percentage so determined will then be applied to determine
the value of the investor's interest in such Portfolio prior to the close of
business of the New York Stock Exchange on the next Pricing Day of the
Portfolio.

PURCHASE OF SECURITIES.

- 20 -
<PAGE> 24

Beneficial interests in the Trust are issued solely in private placement
transactions that do not involve any "public offering" within the meaning of
Section 4(2) of the 1933 Act. Investments in each Portfolio of the Trust may
only be made by a limited number of institutional investors including investment
companies, common or commingled trust funds, group trusts, and certain other
"accredited investors" within the meaning of Regulation D under the 1933 Act.
This Registration Statement does not constitute an offer to sell, or the
solicitation of an offer to buy, any "security" within the meaning of the 1933
Act.

There is no minimum initial or subsequent investment in each Portfolio.
However, because each Portfolio intends to be as fully invested at all times as
is reasonably consistent with its investment objectives and policies in order to
enhance the return on its assets, investments must be made in federal funds
(i.e., monies credited to the account of the respective Portfolio's custodian
bank by a Federal Reserve Bank).

Each Portfolio reserves the right to cease accepting investments at any
time or to reject any investment order.

REDEMPTION.

An investor in the Trust may withdraw all or a portion of its investment
in any Portfolio on any Pricing Day at the net asset value next determined after
a withdrawal request in proper form is furnished by the investor to the
Portfolio. The proceeds of the withdrawal will be paid by the Portfolio normally
on the business day on which the withdrawal is effected, but in any event within
seven days. Investments in any Portfolio of the Trust may not be transferred.

TAX CONSEQUENCES.

Under the anticipated method of operation of the Portfolios, each
Portfolio will be treated as a separate partnership for tax purposes and, thus,
will not be subject to any income tax. Based upon the status of each Portfolio
as a partnership, each investor in a Portfolio will be taxable on its share (as
determined in accordance with the governing instruments of the Portfolio) of
such Portfolio's ordinary income and capital gain in determining its income tax
liability. The determination of such share will be made in accordance with the
Internal Revenue Code of 1986, as amended (the "Code") and Treasury Regulations
promulgated thereunder.

It is intended that each Portfolio's assets, income and distributions
will be managed in such a way that an investor in any Portfolio will be able to
satisfy the requirements of Subchapter M of the Code assuming that the investor
invested all of its assets in the Portfolio.

- 21 -
<PAGE> 25

A NOTE ABOUT YEAR 2000:

Many computer systems were designed using only two digits to designate
years. These systems may not be able to distinguish the year 2000 from the year
1900 (commonly known as the "Year 2000 Problem"). The Portfolios could be
adversely affected if the computer systems used by Portfolio management or other
Portfolio service providers do not properly address this problem before January
1, 2000. Portfolio management expects to have addressed this problem before
then, and does not anticipate that the services it provides will be adversely
affected. Each Portfolio's other service providers have told Fund Asset
Management, L.P. that they also expect to resolve the Year 2000 Problem, and
Fund Asset Management, L.P. will continue to monitor the situation as the Year
2000 approaches. However, if the problem has not been fully addressed, the
Portfolios could be negatively affected. The Year 2000 Problem could also have a
negative impact on the companies in which the Portfolios invest. This negative
impact may be greater for companies in non-U.S. markets, since they may be less
prepared for the Year 2000 Problem than domestic companies and markets. If the
companies in which the Portfolios invest have Year 2000 Problems, the
Portfolios' returns could be adversely affected.

ITEM 8. - DISTRIBUTION ARRANGEMENTS.

Investments in a Portfolio will be made without a sales load. All
investments are made at net asset value next determined after an order is
received by the Portfolio. The net asset value of each Portfolio is determined
on each Pricing Day.

The Trust's placement agent is Mercury Funds Distributor, a division of
Princeton Funds Distributor, Inc.

- 22 -
<PAGE> 26

PART B

Except as otherwise indicated herein, all capitalized terms shall have
the meaning assigned to them in Part A hereof.

ITEM 10.

Mercury Master International Portfolio ("International Portfolio"), Mercury
Master Pan-European Growth Portfolio ("Pan-European Growth Portfolio"), Mercury
Master U.S. Large Cap Portfolio ("U.S. Large Cap Portfolio"), Mercury Master
Gold and Mining Portfolio ("Gold and Mining Portfolio") and Mercury Master U.S.
Small Cap Growth Portfolio ("U.S. Small Cap Growth Portfolio") (together, the
"Portfolios" and each, a "Portfolio") are each separate series of Mercury Asset
Management Master Trust (the "Trust"). This Statement of Additional Information
is not a prospectus and should be read in conjunction with the Prospectus of the
Portfolios, dated October 26, 1999 (the "Prospectus"), which has been filed
with the Securities and Exchange Commission and can be obtained, without charge,
by calling the Trust at 1-888-763-2260, or by writing to Mercury Asset
Management Master Trust, P.O. Box 9011, Princeton, New Jersey 08543-9011. The
Prospectus is incorporated by reference into this Statement of Additional
Information, and this Statement of Additional Information has been incorporated
by reference into the Prospectus. The Portfolios' audited financial statements
are incorporated in this Statement of Additional Information by reference to
their 1999 annual report to shareholders. You may request copies of the annual
report at no charge by calling 1-888-763-2260 between 8:00 a.m. and 8:00 p.m. on
any business day. In addition, the Prospectus and Statement of Additional
Information included in Amendment No. 2 to the Registrant's Registration
Statement, dated April 27, 1999, which relate to the Mercury Master Global
Balanced Portfolio, are incorporated by reference into this Statement of
Additional Information.

The date of this Statement of Additional Information is October 26,
1999.

<PAGE> 27

ITEM 11. - TRUST HISTORY.

The Trust is a Delaware business trust organized on April 23, 1998.
International Portfolio, Pan-European Growth Portfolio, U.S. Large Cap
Portfolio, Gold and Mining Portfolio and U.S. Small Cap Growth Portfolio are
each separate series of the Trust.

ITEM 12. - DESCRIPTION OF THE PORTFOLIOS AND THEIR INVESTMENTS AND RISKS.

INVESTMENT OBJECTIVES, STRATEGIES AND RISKS.

International Portfolio's investment objective is long-term capital
growth through investments primarily in a diversified portfolio of equity
securities of companies located outside the United States.
Pan-European Growth Portfolio's investment objective is long-term capital
growth through investments primarily in a diversified portfolio of equity
securities of companies located in Europe.
U.S. Large Cap Portfolio's investment objective is long-term capital
growth. The Portfolio tries to achieve its objective by investing primarily in a
diversified portfolio of equity securities of large cap companies located in the
U.S. The Portfolio may also invest up to 10% of its assets in equity securities
of companies of any market capitalization located in Canada.
Gold and Mining Portfolio's investment objective is long-term capital
growth. The Portfolio tries to achieve its objective by investing primarily in a
diversified portfolio of equity securities of gold mining companies and, to a
lesser extent, of companies engaged in other mining activities located
throughout the world. The Portfolio may also invest directly in gold bullion.

U.S. Small Cap Growth Portfolio's investment objective is long-term capital
growth. The Portfolio tries to achieve its objective by investing primarily in a
diversified portfolio of equity securities of small cap companies located in the
U.S. The Portfolio may also invest up to 10% of its assets in equity securities
of companies of any market capitalization located in Canada.

International Portfolio, Pan-European Growth Portfolio, U.S. Large Cap
Portfolio, Gold and Mining Portfolio and U.S. Small Cap Growth Portfolio are
diversified, open-end, management investment companies. Each Portfolio's
investment objective is a fundamental policy and cannot be changed without
shareholder approval. The investment objectives and policies are described in
more detail in Part A. There can be no guarantee that a Portfolio's investment
objective will be achieved.

For purposes of each Portfolio's investment policies, an issuer
ordinarily will be considered to be located in the country under the laws of
which it is organized or where the primary trading market of its securities is
located. A Portfolio, however, may consider a company to be located in a
country, without reference to its domicile or to the primary trading market of
its securities, when at least 50% of its non-current assets, capitalization,
gross revenues or profits in any one of the two most recent fiscal years
represents (directly or indirectly through subsidiaries) assets or activities
located in such country. A Portfolio also may consider closed-end investment

- 3 -
<PAGE> 28

companies to be located in the country or countries in which they primarily make
their portfolio investments.

The Gold and Mining Portfolio attempts to achieve its investment policies
by seeking to identify securities of companies that, in management's opinion,
are undervalued relative to the value of the gold or other mining holdings of
such companies in light of current and anticipated economic or financial
conditions. The Portfolio considers a company to have substantial gold or other
mining assets when, in management's opinion, the company's holdings of the
assets are of such magnitude, when compared to capitalization, revenues or
operating profits of the company that changes in the economic value of the
assets will affect the market price of the equity securities of such company.
Generally a company has substantial gold or other mining assets when at least
50% of its non-current assets, capitalization, gross revenues or operating
profits of the company in the most recent or current fiscal year are involved in
or result from (directly or indirectly through subsidiaries) exploring, mining,
refining, processing, fabricating, dealing in or owning gold and other mining
assets. Examples of other mining assets include other precious metals (e.g.,
silver and platinum), non-ferrous metals (e.g., copper and nickel) and
industrial minerals (e.g., coal and iron ore). With the exception of gold
bullion, the Portfolio presently does not intend to invest directly in metals
and minerals assets or contracts related thereto.

ALL PORTFOLIOS

It is the policy of the International Portfolio, the Pan-European Growth
Portfolio, the U.S. Large Cap Portfolio and the Gold and Mining Portfolio
generally not to engage in trading for short-term gains. Mercury Asset
Management International Ltd. ("Mercury International" or the "Investment
Adviser") and Mercury Asset Management US ("Mercury US" or the "Investment
Adviser") will effect portfolio transactions without regard to a holding period
if, in its judgment, such transactions are advisable in light of a change in
circumstances of a particular company or within a particular industry or in
general market, economic or financial conditions.

The U.S. Government has from time to time in the past imposed
restrictions through taxation and otherwise, on non-U.S. investments by U.S.
investors such as the Portfolios. If such restrictions should be reinstated, it
might become necessary for a Portfolio to invest all or substantially all of its
assets in U.S. securities. In such event, a Portfolio would review its
investment objectives or fundamental policies to determine whether changes are
appropriate. Any changes in the investment objectives or fundamental policies
set forth under "Investment Restrictions" below would require the approval of
the holders of a majority of the Portfolio's outstanding voting securities.

A Portfolio's ability and decisions to purchase or sell portfolio
securities may be affected by laws or regulations relating to the convertibility
and repatriation of assets. Under present conditions, the Investment Adviser
does not believe that these considerations will have any significant effect on
its portfolio strategies, although there can be no assurance in this regard.

The Portfolios may invest in the securities of non-U.S. issuers in the
form of American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs"), Global Depositary

- 4 -
<PAGE> 29
Receipts ("GDRs") or other securities convertible into securities of
non-U.S. issuers. These securities may not necessarily be denominated in the
same currency as the securities into which they may be converted. However, they
would generally be subject to the same risks as the securities into which they
may be converted (as more fully described in Part A and below). ADRs are
receipts typically issued by a U.S. bank or trust company that evidence
ownership of underlying securities issued by a non-U.S. corporation. EDRs are
receipts issued in Europe that evidence a similar ownership arrangement. GDRs
are receipts issued throughout the world that evidence a similar ownership
arrangement. Generally, ADRs, in registered form, are designed for use in the
U.S. securities markets, and EDRs, in bearer form, are designed for use in
European securities markets. GDRs are tradeable both in the United States and
Europe and are designed for use throughout the world. The Portfolios may invest
in unsponsored ADRs, EDRs and GDRs. The issuers of unsponsored ADRs, EDRs and
GDRs are not obligated to disclose material information in the United States,
and therefore, there may be no correlation between such information and the
market value of such securities.

Each Portfolio's investment objectives and policies are described in Part
A. Certain types of securities in which a Portfolio may invest and certain
investment practices that the Portfolio may employ are discussed more fully
below.

INTERNATIONAL PORTFOLIO, PAN-EUROPEAN GROWTH PORTFOLIO, AND GOLD AND MINING
PORTFOLIO
International Investing. International investments involve certain risks
not typically involved in domestic investments, including fluctuations in
foreign exchange rates, future political and economic developments, different
legal systems and the existence or possible imposition of exchange controls or
other U.S. or non-U.S. governmental laws or restrictions applicable to such
investments. Securities prices in different countries are subject to different
economic, financial and social factors. Because International Portfolio,
Pan-European Growth Portfolio and Gold and Mining Portfolio will invest in
securities denominated or quoted in currencies other than the U.S. dollar,
changes in foreign currency exchange rates may affect the value of securities in
the portfolio and the unrealized appreciation or depreciation of investments
insofar as U.S. investors are concerned. Foreign currency exchange rates are
determined by forces of supply and demand in the foreign exchange markets. These
forces are, in turn, affected by international balance of payments and other
economic and financial conditions, government intervention, speculation and
other factors. With respect to certain countries, there may be the possibility
of expropriation of assets, confiscatory taxation, high rates of inflation,
political or social instability or diplomatic developments that could affect
investments in those countries. In addition, certain non-U.S. investments may be
subject to non-U.S. withholding taxes. As a result, management of these
Portfolios may determine that, notwithstanding otherwise favorable investment
criteria, it may not be practicable or appropriate to invest in a particular
country.

For a number of years, certain European countries have been seeking
economic unification that would, among other things, reduce barriers between
countries, increase competition among companies, reduce government subsidies in
certain industries, and reduce or eliminate currency

- 5 -
<PAGE> 30

fluctuations among these European countries. The Treaty on European Union (the
"Maastricht Treaty") seeks to set out a framework for the European Economic and
Monetary Union ("EMU") among the countries that comprise the European Union
("EU"). Among other things, EMU establishes a single common European currency
(the "euro") that was introduced on January l, 1999 and has replaced the
existing national currencies of all EMU participants. The use of notes and coins
of the relevant national currencies will be phased out by July 1, 2002. Upon
implementation of EMU, certain securities issued in participating EU countries
(beginning with government and corporate bonds) were or are being redenominated
in the euro, and thereafter, will be listed, traded, and make dividend and other
payments only in euros.

No assurance can be given that EMU will continue to proceed as planned,
that the changes planned for the EU can be successfully implemented, or that
these changes will result in the economic and monetary unity and stability
intended. There is a possibility that EMU will not be completed, or will be
completed but then partially or completely unwound. Because any participating
country may opt out of EMU within the first three years, it is also possible
that a significant participant could choose to abandon EMU, which would diminish
its credibility and influence. Any of these occurrences could have adverse
effects on the markets of both participating and non-participating countries,
including sharp appreciation or depreciation of the participants' national
currencies and a significant increase in exchange rate volatility, a resurgence
in economic protectionism, an undermining of confidence in the European markets,
an undermining of European economic stability, the collapse or slowdown of the
drive toward European economic unity, and/or reversion of the attempts to lower
government debt and inflation rates that were introduced in anticipation of EMU.
Also, withdrawal from EMU by an initial participant could cause disruption of
the financial markets as securities that have been redenominated in euros are
transferred back into that country's national currency, particularly if the
withdrawing country is a major economic power. Such developments could have an
adverse impact on the Portfolios' investments in Europe generally or in specific
countries participating in EMU. Gains or losses resulting from the euro
conversion may be taxable to a Portfolio's interest holders under foreign or, in
certain limited circumstances, U.S. tax laws.

Many of the securities held by International Portfolio, Pan-European Growth
Portfolio and Gold and Mining Portfolio will not be registered in the U.S. with
the Securities and Exchange Commission nor will the issuers thereof be subject
to the Commission's reporting requirements. Accordingly, there may be less
publicly available information about a non-U.S. company than about a U.S.
company, and non-U.S. companies may not be subject to accounting, auditing and
financial reporting standards and requirements comparable to those to which U.S.
companies are subject.

- 6 -
<PAGE> 31

Non-U.S. financial markets, while generally growing in trading volume,
typically have substantially less volume than U.S. markets, and securities of
many non-U.S. companies are less liquid and their prices more volatile than
securities of comparable domestic companies. The non-U.S. markets also have
different clearance and settlement procedures, and in certain markets there have
been times when settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions.
Further, satisfactory custodial services for investment securities may not be
available in some countries having smaller capital markets, which may result in
a Portfolio incurring additional costs and delays in transporting and custodying
such securities outside such countries. Delays in settlement could result in
temporary periods when assets of a Portfolio are uninvested and no return is
earned thereon and could cause a Portfolio to miss attractive investment
opportunities. Inability to dispose of a portfolio security due to settlement
problems either could result in losses to a Portfolio due to subsequent declines
in value of the portfolio security or, if the Portfolio has entered into a
contract to sell the security, could result in possible liability to the
purchaser. Brokerage commissions and other transaction costs on non-U.S.
securities exchanges are generally higher than in the United States. In some
countries there is less governmental supervision and regulation of
exchanges, brokers and issuers than there is in the United States.

A number of countries have authorized the formation of
closed-end investment companies to facilitate indirect foreign investment in
their capital markets. In accordance with the Investment Company Act of 1940, as
amended (the "Investment Company Act"), each Portfolio may invest up to 10% of
its total assets in securities of closed-end investment companies, not more than
5% of which may be invested in any one such company. This restriction on
investments in securities of closed-end investment companies may limit
opportunities for a Portfolio to invest indirectly in certain smaller capital
markets. Shares of certain closed-end investment companies may at times be
acquired only at market prices representing premiums to their net asset values.
If a Portfolio acquires shares in closed-end investment companies, shareholders
would bear both their proportionate share of expenses in the Portfolio
(including investment advisory fees) and, indirectly, the expenses of such
closed-end investment companies. A Portfolio also may seek, at its own cost, to
create its own investment entities under the laws of certain countries.

In some countries, banks or other financial institutions may constitute a
substantial number of the leading companies or companies with the most
actively-traded securities. The Investment Company Act limits each Portfolio's
ability to invest in any equity security of an issuer that, in its most recent
fiscal year, derived more than 15% of its revenues from "securities related
activities" as defined by the rules thereunder. These provisions may restrict a
Portfolio's investments in certain foreign banks and other financial
institutions.

As described above, International Portfolio, Pan-European Growth
Portfolio and Gold and Mining Portfolio will invest in a diverse array of
countries. The securities and commodities markets of many countries
have at times in the past moved relatively independently of one another due to
different economic, financial, political and social factors. When such lack of
correlation or negative correlation in movements of these securities and
commodities markets occurs, it may reduce risk for a Portfolio's portfolio as a
whole. This negative correlation also may offset unrealized gains a Portfolio
has

- 7 -
<PAGE> 32

derived from movements in a particular market. To the extent the various markets
move independently, total portfolio volatility is reduced when the various
markets are combined into a single portfolio. Of course, movements in the
various securities and commodities markets may be offset by changes in foreign
currency exchange rates, where the different markets are denominated in
different currencies. Exchange rates frequently move independently of securities
and commodities markets in a particular country. As a result, gains in a
particular securities or commodities market may be affected by changes in
exchange rates.

Investment in Emerging Markets. International Portfolio, Pan-European
Growth Portfolio and Gold and Mining Portfolio have the ability to invest in
the securities of issuers domiciled in various countries with emerging capital
markets. Specifically, a country with an emerging capital market is any
country that the World Bank, the International Finance Corporation, the United
Nations or its authorities has determined to have a low or middle income
economy. Countries with emerging markets can be found in regions such as Asia,
Latin America, Eastern Europe and Africa.

Investments in the securities of issuers domiciled in countries with
emerging capital markets involve certain additional risks not involved in
investments in securities of issuers in more developed capital markets, such as
(i) low or non-existent trading volume, resulting in a lack of liquidity and
increased volatility in prices for such securities, as compared to securities of
comparable issuers in more developed capital markets, (ii) uncertain national
policies and social, political and economic instability, increasing the
potential for expropriation of assets, confiscatory taxation, high rates of
inflation or unfavorable diplomatic developments, (iii) possible fluctuations in
exchange rates, differing legal systems and the existence or possible imposition
of exchange controls, custodial restrictions or other non-U.S. or U.S.
governmental laws or restrictions applicable to such investments, (iv) national
policies that may limit a Portfolio's investment opportunities such as
restrictions on investment in issuers or industries deemed sensitive to national
interests, and (v) the lack or relatively early development of legal structures
governing private and foreign investments and private property. In addition to
withholding taxes on investment income, some countries with emerging markets may
impose differential capital gains taxes on foreign investors.

Such capital markets are emerging in a dynamic political and economic
environment brought about by events over recent years that have reshaped
political boundaries and traditional ideologies. In such a dynamic environment,
there can be no assurance that these capital markets will continue to present
viable investment opportunities for a Portfolio. In the past, governments of
such nations have expropriated substantial amounts of private property, and most
claims of the property owners have never been fully settled. There is no
assurance that such expropriations will not reoccur. In such an event, it is
possible that a Portfolio could lose the entire value of its investments in the
affected markets.

Also, there may be less publicly available information about issuers in
emerging markets than would be available about issuers in more developed capital
markets, and such issuers may not be subject to accounting, auditing and
financial reporting standards and requirements comparable to those to which U.S.
companies are subject. In certain countries with emerging capital markets,
reporting standards vary widely. As a result, traditional investment
measurements used in the U.S., such as price/earnings ratios, may not be
applicable. Emerging market securities may be substantially less liquid and more
volatile than those of

- 8 -
<PAGE> 33

mature markets, and companies may be held by a limited number of persons. This
may adversely affect the timing and pricing of a Portfolio's acquisition or
disposal of securities.

Practices in relation to settlement of securities transactions in
emerging markets involve higher risks than those in developed markets, in part
because a Portfolio will need to use brokers and counterparties that are less
well capitalized, and custody and registration of assets in some countries may
be unreliable.

In Russia, for example, registrars are not subject to effective
government supervision nor are they always independent from issuers. The
possibility of fraud, negligence, undue influence being exerted by the issuer or
refusal to recognize ownership exists, which along with other factors, could
result in the registration being completely lost. Therefore, investors should be
aware that a Portfolio would absorb any loss resulting from these registration
problems and may have no successful claim for compensation. Some of these
concerns may also exist in other emerging capital markets.

U.S. LARGE CAP PORTFOLIO AND U.S. SMALL CAP GROWTH PORTFOLIO

The U.S. Large Cap Portfolio and the U.S. Small Cap Growth Portfolio define
companies located in the U.S. or Canada broadly. As a result, a Portfolio's
investments may include companies organized, traded or having substantial
operations outside the U.S. or Canada. This may expose a Portfolio to risks
associated with foreign investments, as described above.

Investing in Canada. While the U.S. Large Cap Portfolio will invest at
least 65% of its total assets in large cap companies located in the United
States and the U.S. Small Cap Growth Portfolio will invest at least 65% of its
total assets in small cap companies located in the United States, each may
invest up to 10% or less of its assets in Canada. Canadian securities are
sensitive to conditions within Canada, but also tend to follow the U.S. market.
The country's economy relies strongly on the production and processing of
natural resources and foreign trade. The Canadian government has attempted to
reduce restrictions against foreign investment, and its recent trade agreements
with the United States and Mexico are expected to increase trade; however, these
reforms could be reversed. Demand by many citizens in the Province of Quebec for
secession from Canada may significantly impact the Canadian economy.

144A Securities. The U.S. Large Cap Portfolio and the U.S. Small Cap
Growth Portfolio may purchase restricted securities that can be offered and sold
to "qualified institutional buyers" under Rule 144A under the Securities Act.
The Board of Trustees has determined to treat as liquid Rule 144A securities
that are either (i) freely tradable in their primary markets offshore or (ii)
non-investment grade debt securities which the Fund's management determines are
as liquid as publicly registered non-investment grade debt securities. The Board
of Trustees has adopted guidelines and delegated to the Portfolios' management
the daily function of determining and monitoring liquidity of restricted
securities. The Board of Trustees, however, will retain sufficient oversight and
be ultimately responsible for the determinations. Since it is not possible to
predict with assurance exactly how this market for restricted securities sold
and offered under Rule 144A will develop, the Board of Trustees will carefully
monitor investments in these securities. This investment practice could have the
effect of increasing the level of illiquidity in a Portfolio to the extent that
qualified institutional buyers become for a time uninterested in purchasing
these securities.

- 9 -
<PAGE> 34

GOLD AND MINING PORTFOLIO

Investing in Gold and Other Mining Industries. The Gold and Mining
Portfolio invests principally in the equity securities of foreign and domestic
companies engaged in the exploration, mining, fabrication, processing or
marketing and distribution of gold. The Portfolio also invests in equity
securities of foreign and domestic companies engaged in these activities with
respect to silver, platinum, diamonds or other precious and rare metals, base
metals and minerals. The Portfolio may also invest up to 10% of its assets
directly in gold bullion when the Portfolio believes it is undervalued relative
to the price of securities of gold mining companies. However, the Portfolio may
have internal guidelines that limit its investments in gold bullion to
considerably less than 10% of the Fund's assets. The industry risks associated
with an investment in the Portfolio include the sharp price volatility of gold
and other metals and of mining company shares. Investments related to gold or
other metals or minerals are considered speculative and are affected by a host
of worldwide economic, financial and political factors. Prices of gold and other
metals may fluctuate sharply over short periods due to several factors: changes
in inflation or expectations regarding inflation in various countries; currency
fluctuations; metal sales by governments, central banks or international
agencies; investment speculation; changes in industrial and commercial demand;
and government prohibitions or restrictions on the private ownership of certain
metals or minerals. Political and economic conditions in gold-producing
countries may also have a direct effect on the mining and distribution of gold
and, consequently, its price.

The Portfolio may invest, without limit, in securities of companies
located in countries with emerging capital markets including the Republic of
South Africa, the People's Republic of China, Russia, Indonesia, Uzbekistan,
Peru, Brazil, Mexico, Zimbabwe, Ghana, Mali, Tanzania, the Philippines and Papua
New Guinea. The Portfolio may also invest in securities of companies located in
countries with developed capital markets including the United States, Canada,
Japan, United Kingdom, Finland, France, Germany, Switzerland, Ireland,
Luxembourg, Spain and Australia.

Sales of gold by companies in Russia are largely unpredictable and often
relate to political and economic considerations rather than to market forces. In
South Africa, the activities of gold-mining companies are subject to policies
promulgated by the Ministry of Mines. The Reserve Bank of South Africa, as the
sole authorized agent for South African gold, influences the price and timing of
sales of South African gold. The South African government has also from time to
time imposed restrictions on the flow of international capital. Political and
social problems in South Africa may also pose certain risks. These include the
effect of social and political unrest on mining production and gold prices, as
well as the threat of nationalization or exploration by the government of South
Africa.

- 10 -
<PAGE> 35

The Portfolio also invests to a lesser extent in other precious metal
shares, base metal shares and other mining related shares, and may also invest
directly in gold bullion. To the extent that the Portfolio invests in bullion,
it will be bought from and sold only to banks (both U.S. and non-U.S.), and
dealers who are members of or affiliated with members of a regulated U.S.
commodities exchange, in accordance with applicable investment laws. Gold
bullion will not be purchased in any form that is not readily marketable. Coins
will not be purchased for their numismatic value and will not be considered for
the Portfolio if they cannot be bought or sold in an active market. Any bullion
or coins purchased by the Portfolio will be delivered to and stored with a
qualified custodian bank in the U.S. Investors should be aware that bullion and
coins do not generally generate income, offering only the potential for capital
appreciation or depreciation, and may subject the Portfolio to higher custody
and transaction costs than those normally associated with the ownership of
securities. However, in order to generate return, the Portfolio may lend its
gold bullion. The risks associated with lending gold bullion are the same as
lending securities as described below in "Securities Lending."

Asset-Based Securities. The Gold and Mining Portfolio may invest in debt
securities, preferred stocks or convertible securities, the principal amount,
redemption terms or conversion terms of which are related to the market price of
gold bullion or some other natural resource asset. For the purposes of the
Portfolio's investment policies, these securities are referred to as
"asset-based securities." The Portfolio will only purchase asset-based
securities which are rated or are issued by issuers that have outstanding debt
obligations rated investment grade (that is, AAA, AA, A or BBB by Standard &
Poor's Ratings Services ("Standard & Poor's") or Aaa, Aa, A or Baa by Moody's
Investors Service, Inc. ("Moody's") or commercial paper rated A-1 by S&P or
Prime-1 by Moody's) or in unrated securities of issuers that the Investment
Adviser has determined to be of similar creditworthiness. Obligations ranked in
the fourth highest rating category, while considered "investment grade," may
have certain speculative characteristics and may be more likely to be downgraded
than securities rated in the three highest rating categories. If an asset-based
security is backed by a bank letter of credit or other similar facility, the
Investment Adviser may take such backing into consideration in determining the
creditworthiness of the issuer. While the market prices for an asset-based
security and the related gold bullion or other natural resource asset generally
are expected to move in the same direction, there may not be perfect correlation
in the two price movements. Asset-based securities may not be secured by a
security interest in or claim on the gold bullion or other underlying natural
resource assets.

The Portfolio will not acquire asset-based securities for which no
established secondary trading market exists if at the time of acquisition more
than 15% of its net assets are invested in securities that are not readily
marketable. The Portfolio may invest in asset-based securities, without limit,
when it has the option to put such securities to the issuer or a stand-by bank
or broker and receive the principal amount or redemption price thereof less
transaction costs on no more than seven days' notice or when the Portfolio has
the right to convert such securities into a readily marketable security in which
it could otherwise invest upon not less than seven days' notice.

The asset-based securities in which the Portfolio may invest may bear
interest or pay preferred dividends at below market (or even relatively nominal)
rates. The Portfolio's holdings of such securities therefore might not generate
appreciable current income, and the return from such

- 11 -
<PAGE> 36

securities primarily will be from any profit on the sale, maturity or conversion
thereof at a time when the price of the related asset is higher than it was when
the Portfolio purchased such securities.

U.S. SMALL CAP GROWTH PORTFOLIO

Small Cap Companies. An investment in the U.S. Small Cap Growth Portfolio
involves greater risk than is customarily associated with funds that invest in
more established companies. The securities of smaller companies may be subject
to more abrupt or erratic market movements than larger, more established
companies or the market average in general. These companies may have limited
product lines, markets or financial resources, or they may be dependent on a
limited management group. Because of these factors, the Portfolio believes that
its shares may be suitable for investment by persons who can invest without
concern for current income and who are in a financial position to assume
above-average investment risk in search of above-average long-term reward. It is
not intended as a complete investment program but is designed for those
long-term investors who are prepared to experience above-average fluctuations in
net asset value.

While the issuers in which the Portfolio will primarily invest may offer
greater opportunities for capital appreciation than large cap issuers,
investments in smaller companies may involve greater risks and thus may be
considered speculative. Portfolio management believes that properly selected
companies of this type have the potential to increase their earnings or market
valuation at a rate substantially in excess of the general growth of the
economy. Full development of these companies and trends frequently takes time
and, for this reason, the Portfolio should be considered as a long-term
investment and not as a vehicle for seeking short-term profits.

The securities in which the Portfolio invests may be traded only in the
over-the-counter market or on a regional securities exchange and may not be
traded every day or in the volume typical of trading on a national securities
exchange. As a result, the disposition by the Portfolio of portfolio
securities to meet redemptions or otherwise may require the Portfolio to sell
these securities at a discount from market prices or during periods when in
management's judgment such disposition is not desirable or to make many small
sales over a lengthy period of time.

While the process of selection and continuous supervision by Portfolio
management does not, of course, guarantee successful investment results, it does
provide access to an asset class not available to the average individual due to
the time and cost involved. Careful initial selection is particularly important
in this area as many new enterprises have promise but lack certain of the
fundamental factors necessary to prosper. Investing in small companies requires
specialized research and analysis. In addition, many investors cannot invest
sufficient assets in such companies to provide wide diversification.

Small companies are generally little known to most individual investors
although some may be dominant in their respective industries. Portfolio
management believes that relatively small companies will continue to have the
opportunity to develop into significant business enterprises. The Portfolio may
invest in securities of small issuers in the relatively early stages of business
development that have a new technology, a unique or proprietary product or
service, or a favorable market position. Such companies may not be counted upon
to develop into major industrial companies, but management believes that
eventual recognition of their special value characteristics by the investment
community can provide above-average long-term growth to the portfolio.

Equity securities of specific small cap issuers may present different
opportunities for long-term capital appreciation during varying portions of
economic or securities markets cycles, as well as during varying stages of their
business development. The market valuation of small cap issuers tends to
fluctuate during economic or market cycles, presenting attractive investment
opportunities at various points during these cycles.

Smaller companies, due to the size and kinds of markets that they serve,
may be less susceptible than large companies to intervention from the Federal
government by means of price controls, regulations or litigation.

Initial Public Offering Risk. The volume of initial public offerings and
the levels at which the newly issued stocks trade in the secondary market are
affected by the performance of the stock market overall. If initial public
offerings are brought to the market, availability may be limited and the
Portfolio may not be able to buy any shares at the offering price, or if it is
able to buy shares, it may not be able to buy as many shares at the offering
price as it would like. In addition, the prices of securities involved in
initial public offerings are often subject to greater and more unpredictable
price changes than more established stocks.

ALL PORTFOLIOS

Convertible Securities. Convertible securities entitle the holder to
receive interest payments paid on corporate debt securities or the dividend
preference on a preferred stock until such time as the convertible security
matures or is redeemed or until the holder elects to exercise the conversion
privilege.

The characteristics of convertible securities include the potential for
capital appreciation as the value of the underlying common stock increases, the
relatively high yield received from dividend or interest payments as compared to
common stock dividends and decreased risks of decline in value relative to the
underlying common stock due to their fixed-income nature. As a result of the
conversion feature, however, the interest rate or dividend preference on a
convertible security is generally less than would be the case if the securities
were issued in non-convertible form.

In analyzing convertible securities, the Investment Adviser will consider
both the yield on the convertible security and the potential capital
appreciation that is offered by the underlying common stock.

Convertible securities are issued and traded in a number of securities
markets. Even in cases where a substantial portion of the convertible securities
held by a Portfolio are denominated in U.S. dollars, the underlying equity
securities may be quoted in the currency of the country where the issuer is
domiciled. With respect to a convertible security denominated in a currency
different from that of the underlying equity security, the conversion price may
be based on a fixed exchange rate established at the time the security is
issued. As a result, fluctuations in the exchange rate between the currency in
which the debt security is denominated and the currency in which the share price
is quoted will affect the value of the convertible security.

Apart from currency considerations, the value of a convertible security
is influenced by both the yield of non-convertible securities of comparable
issuers and by the value of the underlying common stock. The value of a
convertible security viewed without regard to its conversion feature (i.e.,
strictly on the basis of its yield) is sometimes referred to as its "investment
value." To the extent interest rates change, the investment value of the
convertible security typically will fluctuate. However, at the same time, the
value of the convertible security will be influenced by its "conversion value,"
which is the market value of the underlying common stock that would be obtained
if the convertible security were converted. Conversion value fluctuates
directly with the price of the underlying common stock. If, because of a low
price of the common stock the conversion value is substantially below the
investment value of the convertible security, the price of the convertible
security is governed principally by its investment value.

To the extent the conversion value of a convertible security increases to
a point that approximates or exceeds its investment value, the price of the
convertible security will be influenced principally by its conversion value. A
convertible security will sell at a premium over the conversion value to the
extent investors place value on the right to acquire the underlying common stock
while holding a fixed-income security.

Holders of convertible securities generally have a claim on the assets of
the issuer prior to the common stockholders but may be subordinated to other
debt securities of the same issuer. A convertible security may be subject to
redemption at the option of the issuer at a price established in the charter
provision, indenture or other governing instrument pursuant to which the
convertible security was issued. If a convertible security held by a Portfolio
is called for redemption, the Portfolio will be required to redeem the security,
convert it into the underlying common stock or sell it to a third party. Certain
convertible debt securities may provide a put option to the holder which
entitles the holder to cause the security to be redeemed by the issuer at a
premium over the stated principal amount of the debt security under certain
circumstances.

Borrowing and Leverage. Each Portfolio may borrow from banks (as defined
in the Investment Company Act) in amounts up to 33 1/3% of its total assets
(including the amount borrowed) and may borrow up to an additional 5% of its
total assets for temporary purposes. A Portfolio may obtain such short-term
credit as may be necessary for the clearance of purchases and sales of portfolio
securities and may purchase securities on margin to the extent permitted by
applicable law, and may use borrowing to enable it to meet redemptions.

The use of leverage by a Portfolio creates an opportunity for greater
total return, but, at the same time, creates special risks. For example,
leveraging may exaggerate changes in the net asset value of Portfolio interests
and in the yield on the Portfolio's portfolio. Although the principal of such
borrowings will be fixed, a Portfolio's assets may change in value during the
time the borrowings are outstanding. Borrowings will create interest expenses
for a Portfolio which can exceed the income from the assets purchased with the
borrowings. To the extent the income or capital appreciation derived from
securities purchased with borrowed funds exceeds the interest a Portfolio will
have to pay on the borrowings, the Portfolio's return will be greater than if
leverage had not been used. Conversely, if the income or capital appreciation
from the securities purchased with such borrowed funds is not sufficient to
cover the cost of borrowing, the return to the Portfolio will be less than if
leverage had not been used, and therefore, the amount available for distribution
to shareholders as dividends and other distributions will be reduced. In the
latter case, the Investment Adviser in its best judgment nevertheless may
determine to maintain the Portfolio's leveraged position if it expects that the
benefits to the Portfolio's interestholders of maintaining the leveraged
position will outweigh the current reduced return.

Debt Securities. Each Portfolio may hold convertible and non-convertible
debt securities, and preferred securities. The Portfolios have established no
rating criteria for the debt securities in which they may invest. Therefore, a
Portfolio may invest in debt securities either (a) rated in one of the top four
rating categories by a nationally recognized statistical rating organization or
unrated but, in the Investment Adviser's judgment, possess similar credit
characteristics ("investment grade securities") or (b) rated below the top four
rating categories or unrated but, in the Investment Adviser's judgment, possess
similar credit characteristics ("high yield securities"). The Investment Adviser
considers ratings as one of several factors in its independent credit analysis
of issuers.

Issuers of high yield securities may be highly leveraged and may not have
available to them more traditional methods of financing. Therefore, the risks
associated with acquiring the securities of such issuers generally are greater
than is the case with higher rated securities. For example, during an economic
downturn or a sustained period of rising interest rates, issuers of high yield
securities may be more likely to experience financial stress, especially if such
issuers are highly leveraged. With respect to Gold and

- 12 -
<PAGE> 37

Mining Portfolio, high yield debt issuers that are mining companies may also
experience financial stress as a result of low metal or mineral prices. High
yield securities tend to be more volatile than higher rated fixed income
securities and adverse economic events may have a greater impact on the prices
of high yield securities than on higher rated fixed income securities. The
issuer's ability to service its debt obligations also may be adversely affected
by specific issuer developments or the issuer's inability to meet specific
projected business forecasts or the unavailability of additional financing. The
risk of loss due to default by the issuer is significantly greater for the
holder of high yield securities because such securities may be unsecured and may
be subordinated to other creditors of the issuer.

High yield securities frequently have call or redemption features that
would permit the issuer to repurchase such securities from a Portfolio. If a
call were exercised by an issuer during a period of declining interest rates, a
Portfolio likely would have to replace such called security with a lower
yielding security, thus decreasing the net investment income for the Portfolio
and dividends to interestholders.

A Portfolio may have difficulty disposing of certain high yield
securities because there may be a thin trading market for such securities.
Because not all dealers maintain markets in all high yield securities, there is
no established retail secondary market for many of these securities, and the
Portfolios anticipate that such securities could be sold only to a limited
number of dealers or institutional investors. To the extent that a secondary
trading market for high yield securities does exist, it is generally not as
liquid as the secondary market for higher rated securities. Reduced secondary
market liquidity may have an adverse impact on market price and a Portfolio's
ability to dispose of particular issues when necessary to meet the Portfolio's
liquidity needs or in response to a specific economic event such as a
deterioration in the creditworthiness of the issuer. Reduced secondary market
liquidity for certain securities also may make it more difficult for the
Portfolios to obtain accurate market quotations for purposes of valuing a
Portfolio's holdings. Market quotations are generally available on many high
yield securities only from a limited number of dealers and may not necessarily
represent firm bids of such dealer or prices for actual sales.

Adverse publicity and investor perceptions, which may not be based on
fundamental analysis, also may decrease the value and liquidity of high yield
securities, particularly in a thinly traded market. To the extent a Portfolio
holds high yield securities, factors adversely affecting the market value of
high yield securities are likely to adversely affect the Portfolio's net asset
value. In addition, a Portfolio may incur additional expenses to the extent it
is required to seek recovery upon a default on a portfolio holding or
participate in the restructuring of the obligation.

Illiquid or Restricted Securities. Each Portfolio may invest up to 15% of
its net assets in securities that lack an established secondary trading market
or otherwise are considered illiquid. Liquidity of a security relates to the
ability to dispose easily of the security and the price to be obtained upon
disposition of the security, which may be less than would be obtained for a
comparable more liquid security. Illiquid securities may trade at a discount
from comparable, more liquid investments. Investment of a Portfolio's assets in
illiquid securities may restrict the ability of the Portfolio to dispose of its
investments in a timely fashion and for a fair price as well as its ability to
take advantage of market opportunities. The risks

- 13 -
<PAGE> 38

associated with illiquidity will be particularly acute where a Portfolio's
operations require cash, such as when the Portfolio redeems shares or pays
dividends, and could result in the Portfolio borrowing to meet short-term cash
requirements or incurring capital losses on the sale of illiquid investments.

Each Portfolio may invest in securities that are "restricted securities."
Restricted securities have contractual or legal restrictions on their resale and
include "private placement" securities that a Portfolio may buy directly from
the issuer. Restricted securities may be neither listed on an exchange nor
traded in other established markets. Privately placed securities may or may not
be freely transferable under the laws of the applicable jurisdiction or due to
contractual restrictions on resale. As a result of the absence of a public
trading market, privately placed securities may be more difficult to value than
publicly traded securities and may be less liquid, or illiquid, and therefore
may be subject to the risks associated with illiquid securities, as described in
the preceding paragraph. Some restricted securities, however, may be liquid. In
addition, issuers whose securities are not publicly traded may not be subject to
the disclosure and other investor protection requirements that may be applicable
if their securities were publicly traded. If any privately placed securities
held by a Portfolio are required to be registered under the securities laws of
one or more jurisdictions before being resold, the Portfolio may be required to
bear the expenses of registration. Certain of a Portfolio's investments in
private placements may consist of direct investments and may include investments
in smaller, less-seasoned issuers, which may involve greater risks. These
issuers may have limited product lines, markets or financial resources, or they
may be dependent on a limited management group. In making investments in such
securities, a Portfolio may obtain access to material nonpublic information
which may restrict the Portfolio's ability to conduct portfolio transactions in
such securities.

Sovereign Debt. Each Portfolio may invest more than 5% of its assets in
debt obligations ("sovereign debt") issued or guaranteed by non-U.S. governments
or their agencies and instrumentalities ("governmental entities"). Investment in
sovereign debt may involve a high degree of risk that the governmental entity
that controls the repayment of sovereign debt may not be able or willing to
repay the principal and/or interest when due in accordance with the terms of
such debt. A governmental entity's willingness or ability to repay principal and
interest due in a timely manner may be affected by, among other factors, its
cash flow situation, the extent of its foreign reserves, the availability of
sufficient foreign exchange on the date a payment is due, the relative size of
the debt service burden to the economy as a whole, the governmental entity's
policy towards the International Monetary Fund and the political constraints to
which a governmental entity may be subject. In certain countries, governmental
entities may also be dependent on expected disbursements from foreign
governments, multilateral agencies and others abroad to reduce principal and
interest arrearages on their debt. The commitment on the part of these
governments, agencies and others to make such disbursements may be conditioned
on a governmental entity's implementation of economic reforms and/or economic
performance and the timely service of such debtor's obligations. Failure to
implement such reforms, achieve such levels of economic performance or

- 14 -
<PAGE> 39

repay principal or interest when due may result in the cancellation of such
third parties' commitments to lend funds to the governmental entity, which may
further impair such debtor's ability or willingness to timely service its debts.
Consequently, governmental entities may default on their sovereign debt.

Holders of sovereign debt, including a Portfolio, may be requested to
participate in the rescheduling of such debt and to extend further loans to
governmental entities. There is no bankruptcy proceeding by which sovereign debt
on which a governmental entity has defaulted may be collected in whole or in
part.

The sovereign debt instruments in which a Portfolio may invest involve
great risk and are deemed to be the equivalent in terms of quality to high
yield/high risk securities discussed above and are subject to many of the same
risks as such securities. Similarly, a Portfolio may have difficulty disposing
of certain sovereign debt obligations because there may be a thin trading market
for such securities.

Securities Lending. Each Portfolio may lend securities with a value not
exceeding 33 1/3% of its total assets. In return, the Portfolio receives
collateral in an amount equal to at least 100% of the current market value of
the loaned securities in cash or securities issued or guaranteed by the U.S.
Government. If cash collateral is received by a Portfolio, it is invested in
short-term money market securities and a portion of the yield received in
respect of such investment is retained by the Portfolio. Alternatively, if
securities are delivered to a Portfolio as collateral, the Portfolio and the
borrower negotiate a rate for the loan premium to be received by the Portfolio
for lending its portfolio securities. In either event, the total yield on a
Portfolio's portfolio is increased by loans of its portfolio securities. A
Portfolio may receive a flat fee for its loans. The loans are terminable at any
time and the borrower, after notice, is required to return borrowed securities
within five business days. A Portfolio may pay reasonable finder's,
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, a Portfolio could experience
delays and costs in gaining access to the collateral and could suffer a loss to
the extent the value of the collateral falls below the market value of the
borrowed securities.

Repurchase Agreements. Each Portfolio may invest in securities pursuant
to repurchase agreements. Repurchase agreements may be entered into only with a
member bank of the Federal Reserve System or primary dealer in U.S. Government
securities or an affiliate thereof. Under such agreements, the bank or primary
dealer or an affiliate thereof agrees, upon entering into the contract, to
repurchase the security at a mutually agreed upon time and price, thereby
determining the yield during the term of the agreement. This insulates the
Portfolio from fluctuations in the market value of the underlying security
during such period, although, to the extent the repurchase agreement is not
denominated in U.S. dollars, a Portfolio's return may be affected by currency
fluctuations. A Portfolio may not invest more than 15% of its total assets in
repurchase agreements maturing in more than seven days (together with other
illiquid securities). Repurchase agreements may be construed to be
collateralized loans by the purchaser to the seller secured by the securities
transferred to the purchaser. A Portfolio will require the seller to provide
additional collateral if the market value of the securities falls below the
repurchase price at any time during the term of the repurchase agreement. In the
event of default by the seller under a repurchase agreement construed to be a
collateralized loan, the underlying securities are not owned by a Portfolio but
only constitute collateral for the seller's obligation to pay the repurchase
price. Therefore, a Portfolio may suffer time

- 15 -
<PAGE> 40

delays and incur costs or possible losses in connection with the disposition of
the collateral. In the event of a default under such a repurchase agreement,
instead of the contractual fixed rate of return, the rate of return to a
Portfolio shall be dependent upon intervening fluctuations of the market value
of such security and the accrued interest on the security. In such event, the
Portfolio would have rights against the seller for breach of contract with
respect to any losses arising from market fluctuations following the failure of
the seller to perform.

Warrants. Each Portfolio may invest in warrants, which are securities
permitting, but not obligating, the warrant holder to subscribe for other
securities. Buying a warrant does not make a Portfolio a shareholder of the
underlying stock. The warrant holder has no right to dividends or votes on the
underlying stock. A warrant does not carry any right to assets of the issuer,
and for this reason an investment in warrants may be more speculative than other
equity-based investments.

When-lssued Securities and Forward Commitments. Each Portfolio may
purchase or sell securities that they are entitled to receive on a when-issued
basis. Each Portfolio may also purchase or sell securities through a forward
commitment. These transactions involve the purchase or sale of securities by a
Portfolio at an established price with payment and delivery taking place in the
future. A Portfolio enters into these transactions to obtain what is considered
an advantageous price to the Portfolio at the time of entering into the
transaction. Each Portfolio has not established any limit on the percentage of
its assets that may be committed in connection with these transactions. When a
Portfolio is purchasing securities in these transactions, the Portfolio
maintains a segregated account with its custodian of cash, cash equivalents,
U.S. Government securities or other liquid securities in an amount equal to the
amount of its purchase commitments.

There can be no assurance that a security purchased on a when-issued
basis will be issued, or a security purchased or sold through a forward
commitment will be delivered. The value of securities in these transactions on
the delivery date may be more or less than a Portfolio's purchase price. The
Portfolio may bear the risk of a decline in the value of the security in these
transactions and may not benefit from an appreciation in the value of the
security during the commitment period.

Standby Commitment Agreements. Each Portfolio may enter into standby
commitment agreements. These agreements commit a Portfolio, for a stated period
of time, to purchase a stated amount of securities which may be issued and sold
to the Portfolio at the option of the issuer. The price of the security is fixed
at the time of the commitment. At the time of entering into the agreement the
Portfolio is paid a commitment fee, regardless of whether or not the security is
ultimately issued. A Portfolio will enter into such agreements for the purpose
of investing in the security underlying the commitment at a price that is
considered advantageous to the Portfolio. A Portfolio will not enter into a
standby commitment with a remaining term in excess of 45 days and will limit its
investment in such commitments so that the aggregate purchase price of
securities subject to such commitments, together with the value of portfolio
securities subject to legal restrictions on resale that affect their
marketability, will not exceed 15% of its net assets taken at the time of the
commitment. A Portfolio will maintain a segregated account with its custodian of
cash, cash equivalents, U.S. Government securities or other liquid securities in
an aggregate amount equal to the purchase price of the securities underlying the
commitment.

- 16 -
<PAGE> 41

There can be no assurance that the securities subject to a standby
commitment will be issued, and the value of the security if issued, on the
delivery date may be more or less than its purchase price. Since the issuance of
the security underlying the commitment is at the option of the issuer, a
Portfolio may bear the risk of a decline in the value of such security and may
not benefit from an appreciation in the value of the security during the
commitment period.

The purchase of a security subject to a standby commitment agreement and
the related commitment fee will be recorded on the date on which the security
can reasonably be expected to be issued, and the value of the security
thereafter will be reflected in the calculation of a Portfolio's net asset
value. The cost basis of the security will be adjusted by the amount of the
commitment fee. In the event the security is not issued, the commitment fee will
be recorded as income on the expiration date of the standby commitment.

Other Special Considerations. The International Portfolio, Pan-European
Portfolio, U.S. Large Cap Portfolio and U.S. Small Cap Growth Portfolio, may,
without limit, make short-term investments, purchase high quality bonds or buy
or sell derivatives to reduce exposure to equity securities when a Portfolio
believes it is advisable to do so (on a temporary defensive basis).

If the Gold and Mining Portfolio anticipates significant adverse changes
in the price of gold, then the Portfolio's investments in stocks of gold mining
companies and gold bullion may be temporarily reduced to below 50% of the
Portfolio's total assets. In this case the Portfolio may make substantial
investments for temporary defensive purposes, in other mineral mining companies
(non-gold), and may hold substantial amounts of short-term investments, such as
money market securities and repurchase agreements.

Short-term investments and temporary defensive positions may limit the
potential for growth in the value of the interests of a Portfolio.

The U.S. Small Cap Growth Portfolio may also engage in short-term trading
of stocks purchased in initial public offerings. To the extent the U.S. Small
Cap Growth Portfolio does so, it may realize short-term gains.

INVESTMENT RESTRICTIONS.

The Trust has adopted the following restrictions and policies relating to
the investment of each Portfolio's assets and each Portfolio's activities. The
fundamental restrictions set forth below may not be changed with respect to a
Portfolio without the approval of the holders of a majority of a Portfolio's
outstanding voting securities (which for this purpose and under the Investment
Company Act means the lesser of (i) 67% of the interests represented at a
meeting at which more than 50% of the outstanding interests are represented or
(ii) more than 50% of the outstanding interests). No Portfolio may:

1. Make any investment inconsistent with the Portfolio's classification
as a diversified company under the Investment Company Act.

2. Invest more than 25% of its assets, taken at market value, in the
securities of issuers in any particular industry (excluding the U.S. Government
and its agencies and instrumentalities), except that Gold and Mining Portfolio
will invest more than 25% of its assets in issuers principally engaged in
the mining and related manufacturing industries.

3. Make investments for the purpose of exercising control or management.
Investments by the Portfolio in wholly-owned investment entities created under
the laws of certain countries will not be deemed the making of investments for
the purpose of exercising control or management.

4. Purchase or sell real estate, except that, to the extent permitted by
applicable law, the Portfolio may invest in securities directly or indirectly
secured by real estate or interests therein or issued by companies that invest
in real estate or interests therein.

5. Make loans to other persons, except that the acquisition of bonds,
debentures or other corporate debt securities and investment in governmental
obligations, commercial paper, pass-through instruments, certificates of
deposit, bankers' acceptances, repurchase agreements or any similar instruments
shall not be deemed to be the making of a loan, and except further that the
Portfolio may lend its portfolio securities, provided that the lending of
portfolio securities may be made only in accordance with applicable

- 17 -
<PAGE> 42

law and the guidelines set forth in the Portfolio's Registration Statement, as
it may be amended from time to time.

6. Issue senior securities to the extent such issuance would violate
applicable law.

7. Borrow money, except that (i) the Portfolio may borrow from banks (as
defined in the Investment Company Act) in amounts up to 33 1/3% of its total
assets (including the amount borrowed), (ii) the Portfolio may borrow up to an
additional 5% of its total assets for temporary purposes, (iii) the Portfolio
may obtain such short-term credit as may be necessary for the clearance of
purchases and sales of portfolio securities and (iv) the Portfolio may purchase
securities on margin to the extent permitted by applicable law. A Portfolio may
not pledge its assets other than to secure such borrowings or, to the extent
permitted by the Portfolio's investment policies as set forth in its
Registration Statement, as it may be amended from time to time, in connection
with hedging transactions, short sales, when-issued and forward commitment
transactions and similar investment strategies.

8. Underwrite securities of other issuers except insofar as a Portfolio
technically may be deemed an underwriter under the Securities Act of 1933, as
amended (the "Securities Act"), in selling portfolio securities.

9. Purchase or sell commodities or contracts on commodities, except to
the extent that a Portfolio may do so in accordance with applicable law and the
Portfolio's Registration Statement, as it may be amended from time to time, and
without registering as a commodity pool operator under the Commodity Exchange
Act.

In addition, the Trust has adopted non-fundamental restrictions that may
be changed with respect to a Portfolio by the Board of Trustees without
shareholder approval. Under the non-fundamental investment restrictions, no
Portfolio may:

(a) Purchase securities of other investment companies, except to the
extent such purchases are permitted by applicable law. As a matter of policy,
however, a Portfolio will not purchase interests of any registered open-end
investment company or registered unit investment trust, in reliance on Section
12 (d) (1) (F) or (G) (the "fund of funds" provisions) of the Investment Company
Act, at any time the Portfolio's interests are owned by another investment
company that is part of the same group of investment companies as the Portfolio.

(b) Make short sales of securities or maintain a short position, except
to the extent permitted by applicable law. The Portfolios currently do not
intend to engage in short sales, except short sales "against the box."

(c) Invest in securities that cannot be readily resold because of legal
or contractual restrictions or that cannot otherwise be marketed, redeemed or
put to the issuer or a third party, if at the time of acquisition more than 15%
of its net assets would be invested in such securities. This restriction shall
not apply to securities that mature within seven days or securities that the
Trustees of the Trust have otherwise

- 18 -
<PAGE> 43

determined to be liquid pursuant to applicable law. Securities purchased in
accordance with Rule 144A under the Securities Act (which are restricted
securities that can be resold to qualified institutional buyers, but not to the
general public) and determined to be liquid by the Trustees are not subject to
the limitations set forth in this investment restriction.

If a percentage restriction on the investment or use of assets set forth
above is adhered to at the time a transaction is effected, later changes in
percentages resulting from changing values will not be considered a violation.

The staff of the Commission has taken the position that purchased
over-the-counter ("OTC") options and the assets used as cover for written OTC
options are illiquid securities. Therefore, the Trust has adopted an investment
policy pursuant to which no Portfolio will purchase or sell OTC options
(including OTC options on futures contracts) if, as a result of such
transaction, the sum of the market value of OTC options currently outstanding
that are held by the Portfolio, the market value of the underlying securities
covered by OTC call options currently outstanding that were sold by the
Portfolio and margin deposits on the Portfolio's existing OTC options on futures
contracts exceeds 15% of the net assets of the Portfolio taken at market
value, together with all other assets of the Portfolio that are illiquid or are
not otherwise readily marketable. However, if the OTC option is sold by a
Portfolio to a primary U.S. Government securities dealer recognized by the
Federal Reserve Bank of New York and if the Portfolio has the unconditional
contractual right to repurchase such OTC option from the dealer at a
predetermined price, then the Portfolio will treat as illiquid such amount of
the underlying securities as is equal to the repurchase price less the amount by
which the option is "in-the-money" (i.e., current market value of the underlying
securities minus the option's strike price). The repurchase price with the
primary dealers is typically a formula price that is generally based on a
multiple of the premium received for the option plus the amount by which the
option is "in-the-money." This policy as to OTC options is not a fundamental
policy of the Portfolios and may be amended by the Trustees without the approval
of the interestholders. However, the Trustees will not change or modify this
policy prior to the change or modification by the Commission staff of its
position.

Portfolio securities of the Portfolios generally may not be purchased
from, sold or loaned to the Investment Adviser or its affiliates or any of their
directors, general partners, officers or employees, acting as principal, unless
pursuant to a rule or exemptive order under the Investment Company Act.

Because of the affiliation of Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") with the Investment Adviser and Fund Asset
Management, L.P. ("FAM"), a Portfolio is prohibited from engaging in certain
transactions involving Merrill Lynch, the Investment Adviser, or any of its
affiliates, except for brokerage transactions permitted under the Investment
Company Act involving only usual and customary commissions or transactions
pursuant to an exemptive order under the Investment Company Act. See "Portfolio
Transactions and Brokerage." Rule 10f-3 under the Investment Company Act sets
forth conditions under which a Portfolio may purchase from an underwriting
syndicate of which Merrill Lynch is a member.

- 19 -
<PAGE> 44

ITEM 13. - MANAGEMENT OF THE REGISTRANT.

TRUSTEES AND OFFICERS.

The Trustees of the Trust consist of six individuals, four of whom are
not "interested persons" of the Trust as defined in the Investment Company Act.
The Trustees are responsible for the overall supervision of the operations of
the Trust and perform the various duties imposed on the trustees of investment
companies by the Investment Company Act. Information about the Trustees and
executive officers of the Trust, their ages and their principal occupations for
at least the last five years are set forth below. Unless otherwise noted, the
address of each executive officer and Trustee is P.O. Box 9011, Princeton, New
Jersey 08543-9011.

Jeffrey M. Peek (52)--Trustee and President(1)(2)--President of MLAM and
FAM since 1997; President and Director of Princeton Services, Inc. since 1997;
Executive Vice President of Merrill Lynch & Co., Inc. ("ML & Co.") since 1997;
Co-Head of Merrill Lynch Investment Banking Division from March 1997 to December
1997; Director of Merrill Lynch Global Securities Research and Economics
Division from 1995 to 1997; Head of Merrill Lynch Global Industries Group from
1993 to 1995.

Terry K. Glenn (58)--Trustee and Executive Vice President(1)
(2)--Executive Vice President of MLAM and FAM since 1983; Executive Vice
President and Director of Princeton Services, Inc. since 1993; President of
Princeton Funds Distributor, Inc. since 1986 and Director thereof since 1991;
President of Princeton Administrators, L.P. since 1988.

David O. Beim (59)--Trustee(2)--410 Uris Hall, Columbia University, New
York, New York 10027. Professor at Columbia University since 1991; Chairman of
Outward Bound USA since 1997; Chairman of Wave Hill, Inc. since 1980.

James T. Flynn (60)--Trustee(2)--340 East 72nd Street, New York, New York
10021. Chief Financial Officer of J.P. Morgan & Co. Inc. from 1990 to 1995 and
an employee of J.P. Morgan in various capacities from 1967 to 1995.

W. Carl Kester (47)--Trustee(2)--Harvard Business School, Morgan Hall
393, Soldiers Field, Boston, Massachusetts 02163. Industrial Bank of Japan
Professor of Finance, Senior Associate Dean and Chairman of the MBA Program of
Harvard University Graduate School of Business Administration since 1999; James
R. Williston Professor of Business Administration of Harvard University Graduate
School of Business from 1997 to 1999; MBA Class of 1958 Professor of Business
Administration of Harvard University Graduate School of Business Administration
from 1981 to 1997; Independent Consultant since 1978.

Karen P. Robards (49)--Trustee(2)--Robards & Company, 173 Riverside
Drive, New York, New York 10024. President of Robards & Company, a financial
advisory firm, for more than five years; Director of Enable Medical Corp. since
1996; Director of CineMuse Inc. since 1996; Director of the Cooke Center for
Learning and Development, a not-for-profit organization, since 1987.

- 20 -
<PAGE> 45

Peter John Gibbs (41)--Senior Vice President(1)(2)--33 King William
Street, London, EC4R 9AS, England. Chairman and Chief Executive Officer of
Mercury International since 1998; Director of Mercury Asset Management Ltd.
since 1993; Director of Mercury Asset Management International Channel Islands
Ltd. since 1997.

Donald C. Burke (38)--Treasurer and Vice President(1)(2)--Senior Vice
President and Treasurer of MLAM and FAM since 1999; Senior Vice President and
Treasurer of Princeton Services, Inc. since 1999; Vice President of Princeton
Funds Distributor, Inc. since 1999; First Vice President of MLAM and FAM from
1997 to 1999; Director of Taxation of MLAM since 1990; Vice President of MLAM
and FAM from 1990 to 1997.

Robert E. Putney, III (39)--Secretary(1)(2)--Director (Legal Advisory) of
MLAM and Princeton Administrators, L.P. since 1997; Vice President of MLAM from
1994 to 1997; Vice President of Princeton Administrators, L.P. from 1996 to
1997; Attorney with MLAM from 1991 to 1994.

- ------------
(1) Interested person, as defined in the Investment Company Act, of the
Trust.

(2) Such Trustee or officer is a trustee, director or officer of other
investment companies for which the Investment Adviser, or the Portfolios'
sub-adviser, FAM, or their affiliates, acts as investment adviser.

As of October 18, 1999 the officers and Trustees of the Trust as a group
(nine persons) owned an aggregate of less than 1% of the outstanding shares of
common stock of ML & Co.

COMPENSATION OF DIRECTORS/TRUSTEES.

Mercury Asset Management Funds, Inc., (the "Corporation"), the registered
investment company whose series (the "Funds") invest all of their assets in the
corresponding Portfolios, and the Trust pay each Director/Trustee not affiliated
with the Investment Adviser or FAM or with an affiliate of the Investment
Adviser or FAM (each a "non-affiliated Director/Trustee"), for service to each
Portfolio, a fee of $3,000 per year plus $500 per in-person meeting attended,
together with such individual's actual out-of-pocket expenses relating to
attendance at meetings. The Corporation and the Trust also compensate members of
the Audit and Nominating Committee, which consists of all of the non-affiliated
Directors/Trustees, at the rate of $1,000 annually for the service to each Fund
and Portfolio.

The following table sets forth the aggregate compensation the Corporation
and the Trust expect to pay to the non-affiliated Directors/Trustees for their
first full fiscal year and the aggregate compensation paid by all investment
companies advised by Mercury International, FAM, or their affiliates ("Mercury
and Affiliates-Advised Funds") to the non-affiliated Directors/Trustees for the
calendar year ended December 31, 1998.

- 21 -

<PAGE> 46

<TABLE>
<CAPTION>
TOTAL COMPENSATION FROM
FUNDS/PORTFOLIOS AND
PENSION OR RETIREMENT MERCURY AND
BENEFITS ACCRUED AS PART AFFILIATES-ADVISED FUNDS
AGGREGATE COMPENSATION OF FUNDS/PORTFOLIOS PAID TO
NAME OF DIRECTOR/TRUSTEE FROM FUNDS/PORTFOLIOS EXPENSES DIRECTORS/TRUSTEES(1)
- ------------------------ ------------------------- ------------------------ --------------------------
<S> <C> <C> <C>
David O. Beim......................... $6,000 None $10,000

James T. Flynn........................ $6,000 None $49,000

W. Carl Kester........................ $6,000 None $49,000

Karen P. Robards $6,000 None $10,000
</TABLE>

- ----------------
(1) In addition to the Corporation and the Trust, the Directors/Trustees
serve on other Mercury and Affiliates-Advised Funds as follows: Mr. Beim
(1 registered investment company consisting of 2 portfolios); Mr. Flynn
(3 registered investment companies consisting of 8 portfolios); Mr.
Kester (3 registered investment companies consisting of 8 portfolios);
and Ms. Robards (1 registered investment company consisting of 2
portfolios).

ITEM 14. - CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.

Mercury International Fund ("International Fund") of Mercury Asset
Management Funds, Inc. (the "Corporation") a Maryland corporation, controls
International Portfolio. As of October 18, 1999, International Fund owns 100% of
the currently outstanding interests of International Portfolio. As of October
18, 1999, International Fund's holdings of International Portfolio represent
22.3% of the Trust as a whole.

Mercury Pan-European Growth Fund ("Pan-European Growth Fund") of the
Corporation controls Pan-European Growth Portfolio. As of October 18, 1999
Pan-European Growth Fund owns 100% of the currently outstanding interests of
Pan-European Growth Portfolio. As of October 18, 1999, Pan-European Growth
Fund's holdings of Pan-European Growth Portfolio represent 27.3% of the Trust as
a whole.

- 22 -
<PAGE> 47

Mercury U.S. Large Cap Fund ("U.S. Large Cap Fund") of the Corporation
controls U.S. Large Cap Portfolio. As of October 18, 1999, U.S. Large Cap Fund
owns 100% of the currently outstanding interests of U.S. Large Cap Portfolio. As
of October 18, 1999, U.S. Large Cap Fund's holdings of U.S. Large Cap Portfolio
represent 49.2% of the Trust as a whole.

Mercury Gold and Mining Fund ("Gold and Mining Fund") of the Corporation
controls Gold and Mining Portfolio. As of October 18, 1999, Gold and Mining Fund
owns 100% of the currently outstanding interests of Gold and Mining Portfolio.
As of October 18, 1999, Gold and Mining Fund's holdings of Gold and Mining
Portfolio represent 1.2% of the Trust as a whole.

Mercury U.S. Small Cap Growth Fund ("U.S. Small Cap Growth Fund") of the
Corporation controls U.S. Small Cap Growth Portfolio. As of October 18, 1999,
U.S. Small Cap Growth Fund owns 99.9% of the currently outstanding interests of
the Portfolio and FAM owns 100% of the currently outstanding interests in the,
U.S. Small Cap Growth Fund. As of October 18, 1999, U.S. Small Cap Growth Fund's
holdings of U.S. Small Cap Growth Portfolio represent less than .1% of the Trust
as a whole.

All holders of interests ("Holders") are entitled to vote in proportion
to the amount of their interest in a Portfolio or in the Trust, as the case may
be. There is no cumulative voting. Accordingly, the Holder or Holders of more
than 50% of the aggregate beneficial interests of the Trust would be able to
elect all the Trustees. With respect to the election of Trustees and
ratification of accountants the Holders of separate Portfolios vote together;
they generally vote separately by Portfolio on other matters.

ITEM 15. - INVESTMENT ADVISORY AND OTHER SERVICES.

The Trust on behalf of each of the Pan-European Growth Portfolio,
International Portfolio, U.S. Large Cap Portfolio and Gold and Mining Portfolio
has entered into investment advisory agreements with Mercury International as
Investment Adviser and the Trust on behalf of the U.S. Small Cap Growth
Portfolio has entered into an investment advisory agreement with Mercury US
as Investment Adviser (collectively, the "Advisory Agreements"). As discussed
in Part A, the Investment Adviser for International Portfolio, Pan-European
Growth Portfolio, and Gold and Mining Portfolio receives for its services to
each Portfolio monthly compensation at the annual rate of 0.75% of the average
daily net assets of each Portfolio. With respect to U.S. Small Cap Growth
Portfolio, the Investment Adviser receives for its service to the Portfolio
monthly compensation at the annual rate of 0.70% of the average daily net
assets of the Portfolio. With respect to U.S. Large Cap Portfolio, the
Investment Adviser receives for its services to the Portfolio monthly
compensation at the annual rate of 0.50% of the average daily net assets of the
Portfolio.

The table below sets forth information about the total investment
advisory fees paid by Portfolios to the Investment Adviser.

International Pan-European U.S. Large Gold and
Period Ending Portfolio Growth Portfolio Cap Portfolio Mining Portfolio
- -------------- ------------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C>

May 31, 1999* $1,312,369 $2,397,815 $1,343,092 $28,743

</TABLE>

- --------------------

* Period is from commencement of operations (October 30, 1998 for the
International Portfolio and the Pan-European Growth Portfolio, January 29,
1999 for the U.S. Large Cap Portfolio and February 26, 1999 for the Gold and
Mining Portfolio).

The Advisory Agreements obligate the respective Investment Adviser to
provide investment advisory services and to pay, or cause an affiliate to pay,
for maintaining its staff and personnel and to provide office space, facilities
and necessary personnel for the Trust. Each Investment Adviser is also
obligated to pay, or cause an affiliate to pay, the fees of all Officers,
Trustees and Directors who are affiliated persons of the Investment Adviser or
any sub-adviser or of an affiliate of the Investment Adviser or any
sub-adviser. The Trust pays, or causes to be paid, all other expenses incurred
in the operation of the Portfolios and the Trust (except to the extent paid by
Mercury Funds Distributor, a division of Princeton Funds Distributors, Inc., as
Placement Agent), including, among other things, taxes, expenses for legal and
auditing services, costs of printing proxies, shareholder reports, copies of
the Registration Statement, charges of the Custodian, any Sub-custodian and
Transfer Agent, expenses of portfolio transactions, expenses of redemption of
shares, Commission fees, expenses of registering the shares under federal,
state or non-U.S. laws, fees and actual out-of-pocket expenses of Trustees who
are not affiliated persons of the respective Investment Adviser or any
sub-adviser, or of an affiliate of the Investment Adviser or of any
sub-adviser, accounting and pricing costs (including the daily calculation of
net asset value), insurance, interest, brokerage costs, litigation and other
extraordinary or non-recurring expenses, and other expenses properly payable by
the Trust or the Portfolios.

- 23 -
<PAGE> 48

The Placement Agent will pay certain of the expenses of the Portfolios incurred
in connection with continuous offering of its interests. Accounting services are
provided to the Trust by the respective Investment Adviser or an affiliate of
the Investment Adviser, and the Trust reimburses the Investment Adviser or an
affiliate of the Investment Adviser for its costs in connection with such
services.

Securities held by the Portfolios, or other portfolios of the Trust, may
also be held by, or be appropriate investments for, other funds or investment
advisory clients for which each Investment Adviser or their affiliates act as
an adviser. Because of different objectives or other factors, a particular
security may be bought for one or more clients of an Investment Adviser or an
affiliate when one or more clients of the Investment Adviser or an affiliate
are selling the same security. If purchases or sales of securities arise for
consideration at or about the same time that would involve a Portfolio or other
clients or funds for which an Investment Adviser or an affiliate acts as
manager, transactions in such securities will be made, insofar as feasible, for
the respective funds and clients in a manner deemed equitable to all. To the
extent that transactions on behalf of more than one client of an Investment
Adviser or an affiliate during the same period may increase the demand for
securities being purchased or the supply of securities being sold, there may be
an adverse effect on price.

Mercury International is located at 33 King William Street, London EC4R
9AS, England. Mercury International's intermediate parent company is Mercury
Asset Management Group Ltd., a London-based holding company of a group engaged
in the provision of investment management and advisory services globally. The
ultimate parent of Mercury Asset Management Group Ltd. is ML & Co., a financial
services holding company. ML & Co. is a controlling person of Mercury
International as defined under the Investment Company Act because of its power
to exercise a controlling influence over its management or policies.

Mercury US, a division of FAM, is located at 800 Scudders Mill Road,
Plainsboro, New Jersey 08536. FAM, an affiliate of Mercury International, is a
wholly owned subsidiary of ML & Co., a financial services holding company and
the parent of Merrill Lynch. ML & Co. and Princeton Services, Inc., the
partners of FAM, are "controlling persons" of FAM as defined under the
Investment Company Act because of their power to exercise a controlling
influence over its management or policies.

The Trust has entered into sub-advisory agreements (the "Sub-Advisory
Agreements") with FAM with respect to the Pan-European Growth Portfolio, the
International Portfolio, the U.S. Large Cap Portfolio and the Gold and Mining
Portfolio pursuant to which FAM provides investment advisory services with
respect to all or a portion of each Portfolio's daily cash assets. The Trust has
agreed to use its reasonable best efforts to cause the Investment Adviser to pay
to FAM a fee in an amount to be determined from time to time by the Investment
Adviser and FAM but in no event in excess of the amount that the Investment
Adviser actually receives for providing services to the Trust pursuant to the
Advisory Agreement. Mercury US has entered into a sub-advisory agreement with
Mercury International with respect to the U.S. Small Cap Growth Portfolio
pursuant to which Mercury International may provide assistance to Mercury US in
managing the Portfolio, or may manage all or a portion of the Portfolio to the
extent not managed by Mercury US. Mercury US will pay Mercury International a
fee in an amount to be determined from time to time by Mercury US and Mercury
International but in no event in excess of the amount that Mercury US actually
receives for providing services to the Trust pursuant to the Advisory Agreement.

Duration and Termination. Unless earlier terminated as described below,
the Advisory Agreements and Sub-Advisory Agreements will each remain in effect
for two years from their effective dates. Thereafter, they will remain in effect
from year to year if approved annually (a) by the Board of Trustees or by a
majority of the outstanding shares of the respective Portfolio and (b) by a
majority of the Trustees who are not parties to such contract or interested
persons (as defined in the Investment Company Act) of any such party. Such
contracts are not assignable and may be terminated with respect to each
Portfolio

- 24 -
<PAGE> 49

without penalty on 60 days' written notice at the option of either party thereto
or by the vote of the shareholders of the Portfolio.

CODE OF ETHICS.

The Board of Trustees of the Trust, the Board of Directors of the
Corporation, the Investment Adviser, and FAM have each adopted a Code of Ethics
under Rule 17j-1 of the Investment Company Act (together the "Codes"). The Codes
significantly restrict the personal investing activities of all employees of the
Investment Adviser and FAM and, as described below, impose additional, more
onerous, restrictions on portfolio investment personnel. Among other substantive
restrictions, the Codes contain reporting and preclearance requirements for
employees of the Investment Adviser and FAM and provide for trading "blackout
periods" that prohibit trading by decision making access persons (those who
recommend or determine which securities transactions the Trust undertakes) of
the Trust within periods of trading by the Trust in the same (or equivalent)
security.

INDEPENDENT AUDITORS.

Deloitte & Touche LLP, 117 Campus Drive, Princeton, New Jersey 08540, has
been selected as the independent auditors of the Trust. The independent auditors
are responsible for auditing the annual financial statements of the Trust.

LEGAL COUNSEL.

Swidler Berlin Shereff Friedman, LLP, 919 Third Avenue, New York 10022,
is counsel for the Trust.

CUSTODIAN.

Brown Brothers Harriman & Co., 40 Water Street, Boston, Massachusetts
02109, acts as the custodian of the Portfolios' assets. Under its contract with
the Trust, the Custodian is authorized to establish separate accounts in foreign
currencies and to cause foreign securities owned by the Portfolios to be held in
its offices outside the United States and with certain foreign banks and
securities depositors. The Custodian is responsible for safe guarding and
controlling the Portfolios' cash and securities, handling the receipt and
delivery of securities and collecting interest and dividends on the Portfolios'
investments.

ITEM 16. - BROKERAGE ALLOCATION AND OTHER PRACTICES.

The respective Investment Adviser is responsible for making portfolio
decisions for each Portfolio, placing the Portfolio's brokerage business,
evaluating the reasonableness of brokerage commissions and negotiating the
amount of any commissions paid subject to a policy established by the Trust's
Trustees and officers. The Trust has no obligation to deal with any broker or
group of brokers in the execution of transactions in portfolio securities.
Orders for transactions in portfolio securities are placed for the Trust with a
number of brokers and dealers, including affiliates of the Investment Advisers.
In placing orders, it is the policy of the Trust to obtain the most favorable
net results, taking into account various factors, including price,

- 25 -
<PAGE> 50

commissions, if any, size of the transaction and difficulty of execution. Where
applicable, the Investment Advisers survey a number of brokers and dealers in
connection with proposed portfolio transactions and selects the broker or dealer
that offers the Trust the best price and execution or other services that are of
benefit to the Trust. Securities firms also may receive brokerage commissions on
transactions including covered call options written by the Trust and the sale of
underlying securities upon the exercise of such options. In addition, consistent
with the NASD Conduct Rules and policies established by the Trustees, the
Investment Advisers may consider sales of shares of a corresponding series of
the Corporation as a factor in the selection of brokers or dealers to execute
portfolio transactions for the Trust.

Brokers who provide supplemental investment research to the Investment
Advisers may receive orders for transactions by the Trust. Such supplemental
research services ordinarily consist of assessments and analyses of the
business or prospects of a company, industry or economic sector. Information so
received will be in addition to and not in lieu of the services required to be
performed by each Investment Adviser under the respective Advisory Agreement.
If in the judgment of an Investment Adviser the Trust will be benefited by
supplemental research services, the Investment Adviser is authorized to pay
brokerage commissions to a broker furnishing such services in excess of
commissions that another broker may have charged for effecting the same
transaction. The expenses of an Investment Adviser will not necessarily be
reduced as a result of the receipt of such supplemental information, and the
Investment Adviser may use such information in servicing its other accounts.

For the periods ended May 31, 1999, the following table shows the amount
of brokerage commissions paid by each Portfolio, the amount of brokerage
commissions paid by each Portfolio to Merrill Lynch, the percentage of each
Portfolio's brokerage commissions paid to Merrill Lynch, the percentage of each
Portfolio's aggregate dollar amount of transactions involving the payment of
commissions effected through Merrill Lynch and aggregate brokerage commissions
paid by each Portfolio:

<TABLE>
<CAPTION>
Pan-
Period Ending European U.S. Large Gold and
- ------------- International Growth Cap Mining
May 31, 1999* Portfolio Portfolio Portfolio Portfolio

<S> <C> <C> <C> <C>
Aggregate brokerage commissions paid..... $1,214,551 $2,448,655 $542,919 $77,420

Aggregate brokerage commissions paid
to Merrill Lynch.................... $ 426 $ 7,248 $ 0 $ 0

% of Portfolio's aggregate brokerage
commissions paid to Merrill Lynch... 0.04% 0.30% --% --%

% of Portfolio's aggregate dollar amount
of transactions effected through
the broker.......................... 0.03% 0.44% --% --%

Aggregate brokerage commissions paid..... $1,214,551 $2,448,655 $542,919 $77,420
</TABLE>

- -------------
* Period is from commencement of operations. International Portfolio and
Pan-European Growth Portfolio commenced operations on October 30, 1998, U.S.
Large Cap Portfolio commenced operations on January 29, 1999 and Gold and Mining
Portfolio commenced operations on February 26, 1999.

The Trust invests in certain securities traded in the over-the-counter
market and, where possible, deals directly with dealers who make a market in the
securities involved, except in those circumstances in which better prices and
execution are available elsewhere. Under the Investment Company Act, persons
affiliated with the Trust generally are prohibited from dealing with the Trust
as principal in purchase and sale of securities. Since transactions in the
over-the-counter market usually involve transactions with dealers acting as
principal for their own accounts, affiliated persons of the Trust, including
Merrill Lynch, will not serve as the Trust's dealer in such transactions.
However, affiliated persons of the Trust may serve as its broker in the
over-the-counter transactions conducted on an agency basis.

Pursuant to Section 11(a) of the Securities Exchange Act of 1934, as
amended, Merrill Lynch may execute transactions for the Trust on the floor of
any U.S. national securities exchange provided that prior authorization of such
transactions is obtained and Merrill Lynch furnishes a statement to the Trust at
least annually setting forth the compensation it has received in connection with
such transactions.

The Trustees of the Trust have considered the possibility of recapturing
for the benefit of the Trust brokerage commissions, dealer spreads and other
expenses of possible portfolio transactions, such as underwriting commissions,
by conducting such portfolio transactions through affiliated entities, including
Merrill Lynch. For example, brokerage commissions received by Merrill Lynch
could be offset against the management fee paid by the Trust to the Investment
Adviser. After considering all factors deemed relevant, the Trustees made a
determination not to seek such recapture. The Trustees will reconsider this
matter from time to time.

- 26 -
<PAGE> 51

The portfolio turnover rate is calculated by dividing the lesser of
a Portfolio's annual sales or purchases of portfolio securities (exclusive of
purchases and sales of securities whose maturities at the time of acquisition
were one year or less) by the monthly average value of the securities in the
Portfolio during the year. The portfolio turnover rate is generally anticipated
to be under 200%. A high rate of portfolio turnover results in correspondingly
higher brokerage commission expenses and may also result in negative tax
consequences such as an increase in capital gains dividends or ordinary income
dividends.

ITEM 17. - CAPITAL STOCK AND OTHER SECURITIES.

Under the Declaration of Trust that establishes the Trust, a Delaware
business trust, the Trustees are authorized to issue beneficial interests in
each Portfolio of the Trust. Investors are entitled to participate, in
proportion to their investment, in distributions of taxable income, loss, gain
and deduction with respect to the Portfolio in which they have invested. Upon
liquidation or dissolution of a Portfolio, investors are entitled to share in
proportion to their investment in such Portfolio's net assets available for
distribution to its investors. Interests in a Portfolio have no preference,
preemptive, conversion or similar rights and are fully paid and nonassessable,
except as set forth below. Investments in a Portfolio generally may not be
transferred.

Each investor is entitled to a vote in proportion to the amount of its
interest in a Portfolio or in the Trust, as the case may be. Investors in the
Trust, or in any Portfolio, do not have cumulative voting rights, and investors
holding more than 50% of the aggregate beneficial interests in the Trust may
elect all of the Trustees of the Trust if they choose to do so and in such event
the other investors in the Trust would not be able to elect any Trustee. The
Trust is not required and has no current intention to hold annual meetings of
investors but the Trust will hold special meetings of investors when in the
judgment of the Trustees it is necessary or desirable to submit matters for an
investor vote.

A Portfolio shall be dissolved by unanimous consent of the Trustees by
written notice of dissolution to the Holders of the interests of the Portfolio.
The Trust shall be dissolved upon the dissolution of the last remaining
Portfolio.

The Declaration of Trust provides that obligations of the Trust and the
Portfolios are not binding upon the Trustees individually but only upon the
property of the Portfolios and that the Trustees will not be liable for any
action or failure to act (including without limitation, the failure to compel in
any way any former or acting Trustee to redress any breach of trust), but
nothing in the Declaration of Trust protects a Trustee against any liability to
which he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct of
his office. The Declaration of Trust provides that the Trust may maintain
appropriate insurance (for example, fidelity bond and errors and omissions
insurance) for the protection of the Portfolios, their Holders, Trustees,
officers, employees and agents covering possible tort and other liabilities.

The Trust currently consists of twenty-seven Portfolios. The Trust
reserves the right to create and issue interests in a number of additional
Portfolios. As indicated above, Holders of each Portfolio participate equally
in the earnings and assets of the particular Portfolio. Holders of each
Portfolio are entitled to vote separately to approve advisory agreements or
changes in investment policy, but Holders of all Portfolios vote together in
the election or selection of Trustees and accountants for the Trust. Upon
liquidation or

- 27 -
<PAGE> 52

dissolution of a Portfolio, the Holders of such Portfolio are entitled to share
in proportion to their investment in the net assets of such Portfolio available
for distribution to Holders.

ITEM 18. - PURCHASE, REDEMPTION AND PRICING OF SECURITIES.

Beneficial interests in the Trust are not offered to the public and are
issued solely in private placement transactions that do not involve any "public
offering" within the meaning of Section 4(2) of the 1933 Act. Investments in the
Trust may be made only by a limited number of institutional investors, including
investment companies, common or commingled trust funds, group trusts and certain
other entities that are "accredited investors" within the meaning of Regulation
D under the 1933 Act. The number of Holders of any Portfolio shall be limited to
fewer than 100. This Registration Statement does not constitute an offer to
sell, or the solicitation of an offer to buy, any "security" within the meaning
of the 1933 Act.

The net asset value of the interests of each Portfolio is determined once
daily Monday through Friday after the close of business on the New York Stock
Exchange ("NYSE") on each day the NYSE is open for trading (a "Pricing Day").
The close of business on the NYSE is generally 4:00 p.m., Eastern time. Any
assets or liabilities initially expressed in terms of non-U.S. dollar currencies
are translated into U.S. dollars at the prevailing market rates as quoted by one
or more banks or dealers on the day of valuation. The NYSE is not open for
trading on New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. The net asset value is computed by deducting the amount of the
Portfolio's total liabilities from the value of its total assets. Expenses,
including the advisory fees payable to the Investment Adviser, are accrued
daily.

Portfolio securities, including ADRs, EDRs, or GDRs, that are traded on
stock exchanges are valued at the last sale price (regular way) on the exchange
on which such securities are traded, as of the close of business on the day the
securities are being valued, or lacking any sales, at the last available bid
price for long positions, and at the last available ask price for short
positions. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange designated by or under the authority of
the Board of Trustees as the primary market. Long positions in securities
traded in the OTC market are valued at the last available bid price in the OTC
market prior to the time of valuation. 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. Short positions in securities traded on the OTC
market are valued at the last available ask price in the OTC market prior to the
time of valuation. When the Portfolio writes an option, the amount of the
premium received is recorded on the books of the Portfolio as an asset and an
equivalent liability. The amount of the liability is subsequently valued to
reflect the current market value of the option written, based upon the last sale
price in the case of exchange-traded options or, in the case of options traded
in the OTC market, the last asked price. Options purchased by the Portfolio 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. With respect
to Gold and Mining Portfolio, gold bullion will be valued at the last sale price
on the Commodity Exchange, Inc. Other investments, including financial futures
contracts and related options, are stated at market value. Securities and assets
for which market quotations are not readily available are valued at fair value
as determined in good faith by or under the direction of the Board of Trustees
of the Trust. Such valuations and procedures will be reviewed periodically by
the Board of Trustees.

- 28 -
<PAGE> 53

Generally, trading in non-U.S. 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 NYSE. The values of such
securities used in computing the net asset value of the Portfolio's interests
are determined as of such times. Foreign currency exchange rates are also
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 will not be reflected in the computation of a Portfolio's net asset
value.

Each investor in the Trust may add to or reduce its investment in a
Portfolio on each Pricing Day. The value of each investor's interest in the
Portfolio will be determined after the close of business on the NYSE by
multiplying the net asset value of the Portfolio by the percentage, effective
for that day, that represents that investor's share of the aggregate interests
in the Portfolio. The close of business on the NYSE is generally 4:00 p.m.,
Eastern time. Any additions or withdrawals to be effected on that day will then
be effected. The investor's percentage of the aggregate beneficial interests in
the Portfolio will then be recomputed as the percentage equal to the fraction
(i) the numerator of which is the value of such investor's investment in the
Portfolio as of the time or determination on such day plus or minus, as the case
may be, the amount of any additions to or withdrawals from the investor's
investments in the Portfolio effected on such day, and (ii) the denominator of
which is the aggregate net asset value of the Portfolio as of such time on such
day plus or minus, as the case may be, the amount of the net additions to or
withdrawals from the aggregate investments in the Portfolio by all investors in
the Portfolio. The percentage so determined will then be applied to determine
the value of the investor's interest in the Portfolio after the close of
business of the NYSE on the next Pricing Day of the Portfolio. For further
information concerning the Portfolios' net asset value, and the valuation of the
Portfolios' assets, see Part A.

REDEMPTIONS.

ITEM 19. - TAXATION OF THE TRUST

The Trust is organized as a Delaware business trust. Each Portfolio is
treated as a separate partnership under the Internal Revenue Code of 1986, as
amended (the "Code") and, thus, is not subject to income tax. Based upon the
status of each Portfolio as a partnership, each investor in a Portfolio will be
taxable on its share (as determined in accordance with the governing instruments
of such Portfolio) of such Portfolio's ordinary income and capital gain in
determining its income tax liability. The determination of such share will be
made in accordance with the Code and regulations promulgated thereunder.

- 29 -
<PAGE> 54

Although, as described above, the Portfolios will not be subject to
federal income tax, they will file appropriate income tax returns. Each
prospective Investor Fund which is a regulated investment company ("RIC") will
be required to agree, in its subscription agreement, that, for purposes of
determining its required distribution under Code Section 4982(a), it will
account for its share of items of income, gain, loss and deduction of a
Portfolio as they are taken into account by the Portfolio.

All of the Portfolios may invest in futures contracts or options. Certain
options, futures contracts and options on futures contracts are "section 1256
contracts." Any gains or losses on section 1256 contracts are generally
considered 60% long-term and 40% short-term capital gains or losses ("60/40").
Also, section 1256 contracts held by a Portfolio at the end of each taxable year
are treated for federal income tax purposes as being sold on such date for their
fair market value. The resultant paper gains or losses are also treated as 60/40
gains or losses. When the section 1256 contract is subsequently disposed of, the
actual gain or loss will be adjusted by the amount of any preceding year-end
gain or loss.

Foreign currency gains or losses on non-U.S. dollar denominated bonds and
other similar debt instruments and on any non-U.S. dollar denominated futures
contracts, options and forward contracts that are not section 1256 contracts
generally will be treated as ordinary income or loss.

Certain hedging transactions undertaken by a Portfolio may result in
"straddles" for federal income tax purposes. The straddle rules may affect the
character of gains (or losses) realized by the Portfolios. In addition, losses
realized by the Portfolios on positions that are part of a straddle may be
deferred, rather than being taken into account in calculating taxable income for
the taxable year in which such losses are realized. Because only a few
regulations implementing the straddle rules have been promulgated, the tax
consequences of hedging transactions to the Portfolios are not entirely clear.
The Portfolios may make one or more of the elections available under the Code
which are applicable to straddles. If the Portfolios make any of the elections,
the amount, character and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the elections made. The rules applicable under certain of the elections
operate to accelerate the recognition of gains or losses from the affected
straddle positions. Additionally, the conversion transaction or constructive
sale rules may apply to certain transactions (including straddles) to change the
character of capital gains to ordinary income or require the recognition of
income prior to the economic recognition of such income.

The Portfolios may be subject to a tax on dividend or interest income
received from securities of a non-U.S. issuer withheld by a foreign country at
the source. The United States has entered into tax treaties with many foreign
countries which entitle the Portfolios to a reduced rate of tax or exemption
from tax on such income. It is impossible to determine the effective rate of
foreign tax in advance since the amount of each Portfolio's assets to be
invested within various countries is not known.

The Portfolios may make investments that produce income that is not
matched by a corresponding cash receipt by the Portfolios, such as investments
in obligations having original issue discount or market discount (if a Portfolio
elects to accrue the market discount on a current basis with respect to such
instruments). Because such income may not be matched by a corresponding cash
receipt, the Portfolios may be required to borrow money or dispose of other
securities to be able to make distributions to investors.

- 30 -
<PAGE> 55

Each Portfolio's taxable income will in most cases be determined on the
basis of reports made to such Portfolio by the issuers of the securities in
which such Portfolio invests. The tax treatment of certain securities in which a
Portfolio may invest is not free from doubt, and it is possible that an Internal
Revenue Service examination of the issuers of such securities or of such
Portfolio could result in adjustments to the income of the Portfolio.

Under the Trust, each Portfolio is to be managed in compliance with the
provisions of the Code applicable to RICs as though such requirements were
applied at the Portfolio level. Thus, consistent with its investment objectives,
each Portfolio will meet the income and diversification of assets tests of the
Code applicable to RICs. The Portfolios have received rulings from the Internal
Revenue Service that Holders of interests in the Portfolios that are RICs will
be treated as owners of their proportionate shares of the Portfolios' assets and
income for purposes of the Code's requirements applicable thereto.

ITEM 20. - UNDERWRITERS.

The exclusive placement agent for each Portfolio of the Trust is Mercury
Funds Distributor, a division of Princeton Funds Distributor, Inc., (the
"Placement Agent"), an affiliate of the Investment Adviser and of Merrill Lynch,
with offices at 800 Scudders Mill Road, Plainsboro, New Jersey 08536. The
Placement Agent receives no compensation for serving in this capacity.
Investment companies, common and commingled trust funds and similar
organizations and entities may continuously invest in the Portfolios.

ITEM 21. - CALCULATION OF PERFORMANCE DATA.

Beneficial interests in the Trust are not offered to the public and are
issued solely in private placement transactions that do not involve any "public
offering" within the meaning of Section 4(2) of the 1933 Act. Accordingly, the
Trust will not advertise the Portfolios' performance. However, certain of the
Trust's Holders may from time to time advertise their performance, which will be
based upon the Trust's performance.

Total return figures are based on historical performance and are not
intended to indicate future performance. Average annual total return is
determined in accordance with a formula specified by the Securities and Exchange
Commission.

Average annual total return quotations for the specified periods are
computed by finding the average annual compounded rates of return (based on net
investment income and any realized and unrealized capital gains or losses on
portfolio investments over such periods) that would equate the initial amount
invested to the redeemable value of such investment at the end of each period.
Average annual total return is computed assuming all dividends and distributions
are reinvested and taking into account all applicable recurring and nonrecurring
expenses.

Annual, average annual and annualized total return and aggregate total
return performance data, both as a percentage and as a dollar amount, are based
on a hypothetical $1,000 investment and computed as

- 31 -
<PAGE> 56

described above, except that as required by the periods of the quotations,
actual annual, annualized or aggregate data, rather than average annual data,
may be quoted. Actual annual or annualized total return data generally will be
lower than average annual total return data since the average rates of return
reflect compounding of return; aggregate total return data generally will be
higher than average annual total return data since the aggregate rates of return
reflect compounding over a longer period of time.

ITEM 22. - FINANCIAL STATEMENTS

The International Portfolio, Pan-European Growth Portfolio, U.S. Large
Cap Portfolio and Gold and Mining Portfolio's audited financial statements are
incorporated in this Part B by reference to their 1999 annual reports to
shareholders. You may request a copy of the annual reports at no charge by
calling 1-888-763-2260 between 8:00 a.m. and 8:00 p.m. on any business day.

- 32 -
<PAGE> 57

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Investor,
Mercury Master U.S. Small Cap Growth Portfolio of
Mercury Asset Management Master Trust:

We have audited the accompanying statement of assets and liabilities of Mercury
Master U.S. Small Cap Growth Portfolio of Mercury Asset Management Master Trust
as of October 18, 1999. This financial statement is the responsibility of the
Trust's management. Our responsibility is to express an opinion on this
financial statement based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. 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, such financial statement presents fairly, in all material
respects, the financial position of the Mercury Master U.S. Small Cap Growth
Portfolio of Mercury Asset Management Trust as of October 18, 1999 in conformity
with generally accepted accounting principles.

/s/ DELOITTE & TOUCHE LLP

Deloitte & Touche LLP
Princeton, New Jersey
October 22, 1999

<PAGE> 58

MERCURY MASTER U.S. SMALL CAP GROWTH PORTFOLIO OF
MERCURY ASSET MANAGEMENT MASTER TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 18, 1999

Mercury Master
U.S. Small Cap Growth
Portfolio
---------------------
<S> <C>
Assets:
Cash $100,100
Prepaid offering costs (Note 3) 14,500
---------------------

Total Assets 114,600
---------------------
Less liabilities and accrued expenses 14,500
---------------------
Net Assets applicable to investors' interest
in the Portfolio. (Note 1) $100,100
---------------------
</TABLE>

- --------------------------------------------

Notes to Financial Statement.

(1) Mercury Asset Management Master Trust (the "Trust") was organized
as a Delaware business trust on April 23, 1998. Mercury Master U.S.
Small Cap Growth Portfolio (the "Portfolio") is a portfolio of the
Trust. To date, the Portfolio has not had any transactions other than
those relating to organizational matters, an indirect $100,000 capital
contribution to the Portfolio by Fund Asset Management, L.P., of which
Mercury Asset Management US (the "Investment Adviser") is a division
through the corresponding fund of Mercury Asset Management Funds,
Inc., and a $100 partnership contribution to the Portfolio by Mercury
Funds Distributor Inc.

(2) The Trust on behalf of the Portfolio has entered into an investment
advisory agreement (the "Advisory Agreement") with the Investment
Adviser. (See "Investment Advisory and Other Services" in Part B of
the Registration Statement.) Certain officers and/or Trustees of the
Trust are officers and/or directors of the Investment Adviser.

(3) Prepaid offering costs consist of legal and printing fees related
to preparing the registration statement, and will be amortized over a
12 month period beginning with the commencement of operations of the
Portfolio. The Investment Adviser on behalf of the Portfolio will
incur organization costs, estimated at $12,000.

- 32 -
<PAGE> 59

APPENDIX A

Investment Policies Involving the Use of Indexed
Securities, Options, Futures, Swaps and Foreign Exchange

The Portfolios are authorized to use certain derivative instruments,
including indexed and inverse securities, options, futures, and swaps, and to
purchase and sell foreign currency, as described below. Such instruments are
referred to collectively herein as "Strategic Instruments."

Although certain risks are involved in options and futures transactions
(as defined below in "Risk Factors in Options, Futures and Currency
Instruments"), the Investment Adviser believes that, because the Portfolios will
generally engage in these transactions, if at all, for hedging purposes,
including anticipatory hedges (other than options on securities that may be used
to seek increased return), the options and futures portfolio strategies of the
Portfolios will not subject the Portfolios to the risks frequently associated
with the speculative use of options and futures transactions. While the
Portfolios' use of hedging strategies is intended to reduce the volatility of
the net asset value of Portfolio interests, the Portfolios' net asset value will
fluctuate. There can be no assurance that the Portfolios' hedging transactions
will be effective. Furthermore, the Portfolios will engage in hedging
activities, if at all, only from time to time and may not necessarily be
engaging in hedging activities when movements in the equity markets, interest
rates or currency exchange rates occur. The Portfolios are not required to
enter into hedging transactions and may choose not to do so.

INDEXED AND INVERSE SECURITIES

The Portfolios may invest in securities the potential return of which is
based on the change in particular measurements of value or rate (an "index"). As
an illustration, a Portfolio may invest in a debt security that pays interest
and returns principal based on the change in the value of a securities index or
a basket of securities, or based on the relative changes of two indices. In
addition, a Portfolio may invest in securities the potential return of which is
based inversely on the change in an index. For example, a Portfolio may invest
in securities that pay a higher rate of interest when a particular index
decreases and pay a lower rate of interest (or do not fully return principal)
when the value of the index increases. If a Portfolio invests in such
securities, it may be subject to reduced or eliminated interest payments or loss
of principal in the event of an adverse movement in the relevant index or
indices. Furthermore, where such a security includes a contingent liability, in
the event of such an adverse movement, a Portfolio may be required to pay
substantial additional margin to maintain the position.

Certain indexed and inverse securities may have the effect of providing
investment leverage because the rate of interest or amount of principal payable
increases or decreases at a rate that is a multiple of the changes in the
relevant index. As a consequence, the market value of such securities may be
substantially more volatile than the market values of other debt securities. The
Portfolios believe that indexed and inverse securities may provide portfolio
management flexibility that permits the Portfolios

- A-1 -

<PAGE> 60

to seek enhanced returns, hedge other portfolio positions or vary the degree of
portfolio leverage with greater efficiency than would otherwise be possible
under certain market conditions.

OPTIONS ON SECURITIES AND SECURITIES INDICES

Purchasing Options. Each Portfolio is authorized to purchase put options
on equity securities held in its portfolio or securities indices the performance
of which is substantially replicated by securities held in its portfolio. When a
Portfolio purchases a put option, in consideration for an up-front payment (the
"option premium") the Portfolio acquires a right to sell to another party
specified securities owned by the Portfolio at a specified price (the "exercise
price") on or before a specified date (the "expiration date"), in the case of an
option on securities, or to receive from another party a payment based on the
amount a specified securities index declines below a specified level on or
before the expiration date, in the case of an option on a securities index. The
purchase of a put option limits a Portfolio's risk of loss in the event of a
decline in the market value of the portfolio holdings underlying the put option
prior to the option's expiration date. If the market value of the portfolio
holdings associated with the put option increases rather than decreases,
however, a Portfolio will lose the option premium and will consequently realize
a lower return on the portfolio holdings than would have been realized without
the purchase of the put.

Each Portfolio is also authorized to purchase call options on securities
it intends to purchase or securities indices the performance of which
substantially replicates the performance of the types of securities it intends
to purchase. When a Portfolio purchases a call option, in consideration for the
option premium the Portfolio acquires a right to purchase from another party
specified securities at the exercise price on or before the expiration date, in
the case of an option on securities, or to receive from another party a payment
based on the amount a specified securities index increases beyond a specified
level on or before the expiration date, in the case of an option on a securities
index. The purchase of a call option may protect a Portfolio from having to pay
more for a security as a consequence of increases in the market value for the
security during a period when the Portfolio is contemplating its purchase, in
the case of an option on a security, or attempting to identify specific
securities in which to invest in a market the Portfolio believes to be
attractive, in the case of an option on an index (an "anticipatory hedge"). In
the event a Portfolio determines not to purchase a security underlying a call
option, however, the Portfolio may lose the entire option premium.

Each Portfolio is also authorized to purchase put or call options in
connection with closing out put or call options it has previously sold.

Writing Options. Each Portfolio is authorized to write (i.e., sell) call
options on securities held in its portfolio or securities indices the
performance of which is substantially replicated by securities held in its
portfolio. When a Portfolio writes a call option, in return for an option
premium the Portfolio is legally obligated to sell specified securities owned by
the Portfolio at the exercise price on or before the expiration date, in the
case of an option on securities, or to pay to another party an amount based on
any gain in a specified securities index beyond a specified level on or before
the expiration date, in the case of an option on a securities index, however
much the exercise price exceeds the market price. A

- A-2 -
<PAGE> 61

Portfolio may write call options to earn income through the receipt of option
premiums. In the event the party to which the Portfolio has written an option
fails to exercise its rights under the option because the value of the
underlying securities is less than the exercise price, the Portfolio will
partially offset any decline in the value of the underlying securities through
the receipt of the option premium. By writing a call option, however, the
Portfolio limits its ability to sell the underlying securities, and gives up the
opportunity to profit from any increase in the value of the underlying
securities beyond the exercise price, while the option remains outstanding.

A Portfolio may also write put options on securities or securities
indices. When a Portfolio writes a put option, in return for an option premium
the Portfolio gives another party the right to sell to the Portfolio a specified
security at the exercise price on or before the expiration date, in the case of
an option on a security, or agrees to pay to another party an amount based on
any decline in a specified securities index below a specified level on or before
the expiration date, in the case of an option on a securities index. A Portfolio
may write put options to earn income through the receipt of option premiums. In
the event the party to which a Portfolio has written an option fails to exercise
its right under the option because the value of the underlying securities is
greater than the exercise price, the Portfolio will profit by the amount of the
option premium. By writing a put option, however, a Portfolio will be obligated
to purchase the underlying security at a price that may be higher than the
market value of the security at the time of exercise as long as the put option
is outstanding, in the case of an option on a security, or make a cash payment
reflecting any decline in the index, in the case of an option on an index.
Accordingly, when a Portfolio writes a put option it is exposed to a risk of
loss in the event the value of the underlying securities falls below the
exercise price, which loss potentially may substantially exceed the amount of
option premium received by the Portfolio for writing the put option. A Portfolio
will write a put option on a security or a securities index only if the
Portfolio would be willing to purchase the security at the exercise price for
investment purposes (in the case of an option on a security) or is writing the
put in connection with trading strategies involving combinations of options -
for example, the sale and purchase of options with identical expiration dates on
the same security or index but different exercise prices (a technique called a
"spread").

Each Portfolio is also authorized to sell put or call options in
connection with closing out call or put options it has previously purchased.

Other than with respect to closing transactions, a Portfolio will write
only call or put options that are "covered." A put option will be considered
covered if a Portfolio has segregated assets with respect to such option in the
manner described in "Risk Factors in Options, Futures and Currency Instruments"
below. A call option will be considered covered if the Portfolio owns the
securities it would be required to deliver upon exercise of the option (or, in
the case of an option on a securities index, securities that substantially
correlate with the performance of such index) or owns a call option, warrant or
convertible instrument that is immediately exercisable for, or convertible into,
such security.

Types of Options. Each Portfolio may engage in transactions in options on
securities or securities indices, on exchanges and in the over-the-counter
("OTC") markets. In general, exchange-traded options have standardized exercise
prices and expiration dates and require the parties to post margin

- A-3 -
<PAGE> 62

against their obligations, and the performance of the parties' obligations in
connection with such options is guaranteed by the exchange or a related clearing
corporation. OTC options have more flexible terms negotiated between the buyer
and the seller, but generally do not require the parties to post margin and are
subject to greater risk of counterparty default. See "Additional Risk Factors of
OTC Transactions; Limitations on the Use of OTC Strategic Instruments" below.

FUTURES

The Portfolios may engage in transactions in futures and options thereon.
Futures are standardized, exchange-traded contracts that obligate a purchaser to
take delivery, and a seller to make delivery, of a specific amount of a
commodity at a specified future date at a specified price. No price is paid upon
entering into a futures contract. Rather, upon purchasing or selling a futures
contract, a Portfolio is required to deposit collateral ("margin") equal to a
percentage (generally less than 10%) of the contract value with the Futures
Commission Merchants (the "FCM") effecting the Portfolio's exchanges or in a
third-party account with the Portfolio's Custodian. Each day thereafter until
the futures position is closed, the Portfolio will pay additional margin
representing any loss experienced as a result of the futures position the prior
day or be entitled to a payment representing any profit experienced as a result
of the futures position the prior day. Whether the margin is deposited with the
FCM or with the Custodian, the margin may be deemed to be in the FCM's custody,
and, consequently, in the event of default due to the FCM's bankruptcy, the
margin may be subject to pro rata treatment as the FCM's assets, which could
result in potential losses to a Portfolio and its interestholders. Even if a
transaction is profitable, a Portfolio may not get back the same assets which
were deposited as margin or may receive payment in cash.

The sale of a futures contract limits the Portfolio's risk of loss
through a decline in the market value of portfolio holdings correlated with the
futures contract prior to the futures contract's expiration date. In the event
the market value of the portfolio holdings correlated with the futures contract
increases rather than decreases, however, a Portfolio will realize a loss on the
futures position and a lower return on the portfolio holdings than would have
been realized without the purchase of the futures contract.

The purchase of a futures contract may protect a Portfolio from having to
pay more for securities as a consequence of increases in the market value for
such securities during a period when the Portfolio was attempting to identify
specific securities in which to invest in a market the Portfolio believes to be
attractive. In the event that such securities decline in value or a Portfolio
determines not to complete an anticipatory hedge transaction relating to a
futures contract, however, the Portfolio may realize a loss relating to the
futures position.

The Portfolios will limit transactions in futures and options on futures
to financial futures contracts (i.e., contracts for which the underlying
commodity is a currency or securities or interest rate index) purchased or sold
for hedging purposes (including anticipatory hedges). The Portfolios will
further limit transactions in futures and options on futures to the extent
necessary to prevent a Portfolio from being deemed a "commodity pool operator"
under regulations of the Commodity Futures Trading Commission. A Portfolio will
only engage in futures and options transactions from time to time. A Portfolio
is under no obligation to use such transactions and may choose not to do so.

- A-4 -
<PAGE> 63

SWAPS

The Portfolios are authorized to enter into equity swap agreements, which
are OTC contracts in which one party agrees to make periodic payments based on
the change in market value of a specified equity security, basket of equity
securities or equity index in return for periodic payments based on a fixed or
variable interest rate or the change in market value of a different equity
security, basket of equity securities or equity index. Swap agreements may be
used to obtain exposure to an equity or market without owning or taking physical
custody of securities.

A Portfolio will enter into a swap transaction only if, immediately
following the time the Portfolio enters into the transaction, the aggregate
notional principal amount of swap transactions to which the Portfolio is a party
would not exceed 5% of the Portfolio's net assets.

FOREIGN EXCHANGE TRANSACTIONS

The Portfolios may engage in spot and forward foreign exchange
transactions and currency swaps, purchase and sell options on currencies and
purchase and sell currency futures and related options thereon (collectively,
"Currency Instruments") for purposes of hedging against the decline in the value
of currencies in which its portfolio holdings are denominated against the U.S.
dollar.

Forward foreign exchange transactions are OTC contracts to purchase or
sell a specified amount of a specified currency or multinational currency unit
at a price and future date set at the time of the contract. Spot foreign
exchange transactions are similar but require current, rather than future,
settlement. The Portfolios will enter into foreign exchange transactions only
for purposes of hedging either a specific transaction or a portfolio position. A
Portfolio may enter into a foreign exchange transaction for purposes of hedging
a specific transaction by, for example, purchasing a currency needed to settle a
security transaction at a future date or selling a currency in which the
Portfolio has received or anticipates receiving a dividend or distribution. A
Portfolio may enter into a foreign exchange transaction for purposes of hedging
a portfolio position by selling forward a currency in which a portfolio position
of the Portfolio is denominated or by purchasing a currency in which the
Portfolio anticipates acquiring a portfolio position in the near future. The
Portfolios may also hedge portfolio positions through currency swaps, which are
transactions in which one currency is simultaneously bought for a second
currency on a spot basis and sold for the second currency on a forward basis.

The Portfolios may also hedge against the decline in the value of a
currency against the U.S. dollar through use of currency futures or options
thereon. Currency futures are similar to forward foreign exchange transactions
except that futures are standardized, exchange-traded contracts. See "Futures"
above.

The Portfolios may also hedge against the decline in the value of a
currency against the U.S. dollar through the use of currency options. Currency
options are similar to options on securities, but in consideration for an option
premium the writer of a currency option is obligated to sell (in the case of a

- A-5 -
<PAGE> 64

call option) or purchase (in the case of a put option) a specified amount of a
specified currency on or before the expiration date for a specified amount of
another currency. A Portfolio may, however, hedge a currency by entering into a
transaction in a Currency Instrument denominated in a currency other than the
currency being hedged (a "cross-hedge"). A Portfolio will only enter into a
cross-hedge if the Investment Adviser believes that (i) there is a demonstrably
high correlation between the currency in which the cross-hedge is denominated
and the currency being hedged, and (ii) executing a cross-hedge through the
currency in which the cross-hedge is denominated will be significantly more
cost-effective or provide substantially greater liquidity than executing a
similar hedging transaction by means of the currency being hedged.

The Portfolios will not speculate in Currency Instruments. Accordingly, a
Portfolio will not hedge a currency in excess of the aggregate market value of
the securities that it owns (including receivables for unsettled securities
sales), or has committed to or anticipates purchasing, which are denominated in
such currency.

Risk Factors in Hedging Foreign Currency. While the Portfolio's use
of Currency Instruments to effect hedging strategies is intended to reduce the
volatility of the net asset value of a Portfolio's interests, the net asset
value of the Portfolio's shares will fluctuate. Moreover, although Currency
Instruments will be used with the intention of hedging against adverse currency
movements, transactions in Currency Instruments involve the risk that
anticipated currency movements may not be accurately predicted and a Portfolio's
hedging strategies may be ineffective. To the extent that a Portfolio hedges
against anticipated currency movements that do not occur, the Portfolio may
realize losses, and decrease its total return, as the result of its hedging
transactions. Furthermore, a Portfolio will only engage in hedging activities
from time to time and may not be engaging in hedging activities when movements
in currency exchange rates occur. It may not be possible for a Portfolio to
hedge against currency exchange rate movements, even if correctly anticipated,
in the event that (i) the currency exchange rate movement is so generally
anticipated that the Portfolio is not able to enter into a hedging transaction
at an effective price, or (ii) the currency exchange rate movement relates to a
market with respect to which Currency Instruments are not available or in which
their availability is limited (such as certain emerging markets) and it is not
possible to engage in effective foreign currency hedging.

RISK FACTORS IN OPTIONS, FUTURES AND CURRENCY INSTRUMENTS

Use of Strategic Instruments for hedging purposes involves the risk of
imperfect correlation in movements in the value of the Strategic Instruments and
the value of the instruments being hedged. If the value of the Strategic
Instruments moves more or less than the value of the hedged instruments, a
Portfolio will experience a gain or loss that will not be completely offset by
movements in the value of the hedged instruments.

The Portfolios intend to enter into transactions involving Strategic
Instruments only if there appears to be a liquid secondary market for such
instruments or, in the case of illiquid instruments traded in OTC transactions,
such instruments satisfy the criteria set forth below under "Additional Risk
Factors

- A-6 -
<PAGE> 65

of OTC Transactions; Limitations on the Use of OTC Strategic Instruments."
However, there can be no assurance that, at any specific time, either a liquid
secondary market will exist for a Strategic Instrument or a Portfolio will
otherwise be able to sell such instrument at an acceptable price. Therefore, it
may not be possible to close a position in a Strategic Instrument without
incurring substantial losses, if at all.

Certain transactions in Strategic Instruments (e.g., forward foreign
exchange transactions, futures transactions, sales of put options) may expose a
Portfolio to potential losses that exceed the amount originally invested by the
Portfolio in such instruments. When a Portfolio engages in such a transaction,
the Portfolio will deposit in a segregated account at its custodian liquid
securities with a value at least equal to the Portfolio's exposure, on a
mark-to-market basis, to the transaction (as calculated pursuant to requirements
of the Commission). Such segregation will ensure that a Portfolio has assets
available to satisfy its obligations with respect to the transactions, but will
not limit the Portfolio's exposure to loss.

ADDITIONAL RISK FACTORS OF OTC TRANSACTIONS; LIMITATIONS ON THE USE OF OTC
STRATEGIC INSTRUMENTS

Certain Strategic Instruments traded in OTC markets, including indexed
securities, swaps and OTC options, may be substantially less liquid than other
instruments in which a Portfolio may invest. The absence of liquidity may make
it difficult or impossible for a Portfolio to sell such instruments promptly at
an acceptable price. The absence of liquidity may also make it more difficult
for a Portfolio to ascertain a market value for such instruments. A Portfolio
will therefore acquire illiquid OTC instruments (i) if the agreement pursuant to
which the instrument is purchased contains a formula price at which the
instrument may be terminated or sold, or (ii) for which the Investment Adviser
anticipates the Portfolio can receive on each business day at least two
independent bids or offers, unless a quotation from only one dealer is
available, in which case that dealer's quotation may be used.

- A-7 -
<PAGE> 66

Because Strategic Instruments traded in OTC markets are not guaranteed by
an exchange or clearing corporation and generally do not require payment of
margin, to the extent that a Portfolio has unrealized gains in such instruments
or has deposited collateral with its counterparty, the Portfolio is at risk that
its counterparty will become bankrupt or otherwise fail to honor its
obligations. The Portfolio will attempt to minimize the risk that a counterparty
will default by engaging in transactions in Strategic Instruments traded in OTC
markets only with financial institutions that have a credit rating of AA- or
better from Standard & Poor's, or Aa3 or better from Moody's, or AA or better of
Fitch.

ADDITIONAL LIMITATIONS ON THE USE OF STRATEGIC INSTRUMENTS

A Portfolio may not use any Strategic Instrument to gain exposure to an
asset or class of assets that it would be prohibited by its investment
restrictions from purchasing directly.

- A-8 -
<PAGE> 67

APPENDIX B

RATINGS OF FIXED INCOME SECURITIES

DESCRIPTION OF MOODY'S INVESTORS SERVICES, INC.'S CORPORATE DEBT RATINGS

Aaa Bonds that are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.

Aa Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present that make the long-term risks appear
somewhat larger than in Aaa securities.

A Bonds that are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present that suggest a susceptibility to impairment sometime in
the future.

Baa Bonds that are rated Baa are considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.

Ba Bonds that are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and therefore not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.

B Bonds that are rated B generally lack characteristics of desirable
investments. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.

Caa Bonds that are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.

- B-1 -
<PAGE> 68

Ca Bonds that are rated Ca represent obligations that are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.

C Bonds that are rated C are the lowest rated bonds, and issues so rated
can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

Note: Moody's may apply numerical modifiers 1, 2 and 3 in each generic
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking, and the modifier
3 indicates that the issue ranks in the lower end of its generic category.

DESCRIPTION OF MOODY'S COMMERCIAL PAPER RATINGS

The term "commercial paper" as used by Moody's means promissory
obligations not having an original maturity in excess of nine months. Moody's
makes no representations as to whether such commercial paper is by any other
definition "commercial paper" or is exempt from registration under the
Securities Act of 1933, as amended (the "Securities Act").

Moody's commercial paper ratings are opinions of the ability of issuers
to repay punctually promissory obligations not having an original maturity in
excess of nine months. Moody's makes no representation that such obligations are
exempt from registration under the Securities Act, nor does it represent that
any specific note is a valid obligation of a rated issuer or issued in
conformity with any applicable law. Moody's employs the following three
designations, all judged to be investment grade, to indicate the relative
repayment capacity of rated issuers:

Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:

- Leading market positions in well-established industries

- High rates of return on funds employed

- Conservative capitalization structures with moderate reliance on
debt and ample asset protection

- Broad margins in earnings coverage of fixed financial charges and
higher internal cash generation

- Well established access to a range of financial markets and
assured sources of alternate liquidity

Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to

- B-2 -
<PAGE> 69

variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

Issuers rated Prime-3 (or related supporting institutions) have an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
level of debt protection measurements and the requirement for relatively high
financial leverage. Adequate alternative liquidity is maintained.

Issuers rated Not Prime do not fall within any of the Prime rating
categories.

If an issuer represents to Moody's that its commercial paper obligations
are supported by the credit of another entity or entities, then the name or
names of such supporting entity or entities are listed within parentheses
beneath the name of the issuer, or there is a footnote referring the reader to
another page for the name or names of the supporting entity or entities. In
assigning ratings to such issuers, Moody's evaluates the financial strength of
the indicated affiliated corporations, commercial banks, insurance companies,
foreign governments or other entities, but only as one factor in the total
rating assessment. Moody's makes no representation and gives no opinion on the
legal validity or enforceability of any support arrangement. You are cautioned
to review with your counsel any questions regarding particular support
arrangements.

DESCRIPTION OF MOODY'S PREFERRED STOCK RATINGS

Because of the fundamental differences between preferred stocks and
bonds, a variation of the bond rating symbols is being used in the quality
ranking of preferred stocks. The symbols, presented below, are designed to avoid
comparison with bond quality in absolute terms. It should always be borne in
mind that preferred stocks occupy a junior position to bonds within a particular
capital structure and that these securities are rated within the universe of
preferred stocks.

Preferred stock rating symbols and their definitions are as follows:

aaa An issue that is rated "aaa" is considered to be a top-quality preferred
stock. This rating indicates good asset protection and the least risk of
dividend impairment within the universe of preferred stocks.

aa An issue that is rated "aa" is considered a high-grade preferred stock.
This rating indicates that there is reasonable assurance that earnings
and asset protection will remain relatively well maintained in the
foreseeable future.

a An issue that is rated "a" is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater than in
the "aaa" and "aa" classifications, earnings and asset protection are,
nevertheless, expected to be maintained at adequate levels.

- B-3 -
<PAGE> 70

baa An issue that is rated "baa" is considered to be medium grade, neither
highly protected nor poorly secured. Earnings and asset protection
appear adequate at present but may be questionable over any great length
of time.

ba An issue that is rated "ba" is considered to have speculative elements
and its future cannot be considered well assured. Earnings and asset
protection may be very moderate and not well safeguarded during adverse
periods. Uncertainty of position characterizes preferred stocks in this
class.

b An issue that is rated "b" generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of
other terms of the issue over any long period of time may be small.

caa An issue that is rated "caa" is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the
future status of payments.

ca An issue that is rated "ca" is speculative in a high degree and is
likely to be in arrears on dividends with little likelihood of eventual
payment.

c This is the lowest rated class of preferred or preference stock. Issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

Note: Moody's may apply numerical modifiers 1, 2 and 3 in each rating
classification from "aa" through "b" in its preferred stock rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.

DESCRIPTION OF STANDARD & POOR'S CORPORATE DEBT RATINGS

A Standard & Poor's corporate or municipal rating is a current assessment
of the creditworthiness of an obligor with respect to a specific obligation.
This assessment may take into consideration obligers such as guarantors,
insurers or lessees.

The debt rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor.

The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. Standard
& Poor's does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended or withdrawn as a result of changes in, or unavailability of, such
information, or for other reasons.

- B-4 -
<PAGE> 71

The ratings are based, in varying degrees, on the following
considerations: (1) likelihood of default-capacity and willingness of the
obligor as to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation; (2) nature of and provisions of the
obligation; and (3) protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization or other arrangement under
the laws of bankruptcy and other laws affecting creditors' rights.

AAA Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

AA Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in small
degree.

A Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in
higher-rated categories.

BBB Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than for debt in
higher-rated categories.

Debt rated BB, B, CCC and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest degree
of speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.

BB Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions that
could lead to inadequate capacity to meet timely interest and principal
payment. The BB rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied BBB- rating.

B Debt rated B has a greater vulnerability to default but presently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions would likely impair capacity
or willingness to pay interest or repay principal. The B rating category
is also used for debt subordinated to senior debt that is assigned an
actual or implied BB or BB-rating.

CCC Debt rated CCC has a current identifiable vulnerability to default, and
is dependent upon favorable business, financial and economic conditions
to meet timely payments of interest and repayments of principal. In the
event of adverse business, financial or economic conditions, it is

- B-5 -
<PAGE> 72

not likely to have the capacity to pay interest and repay principal. The
CCC rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied B or B-rating.

CC The rating CC is typically applied to debt subordinated to senior debt
that is assigned an actual or implied CCC rating.

C The rating C is typically applied to debt subordinated to senior debt
that is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed
but debt service payments are continued.

CI The rating CI is reserved for income bonds on which no interest is being
paid.

D Debt rated D is in default. The D rating is assigned on the day an
interest or principal payment is missed. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.

PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
ratings categories.

PROVISIONAL RATINGS: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project being financed by the debt being rated and indicates that payment of
debt service requirements is largely or entirely dependent upon the successful
and timely completion of the project. This rating, however, while addressing
credit quality subsequent to completion of the project, makes no comment on the
likelihood or risk of default upon failure of such completion. The investor
should exercise judgment with respect to such likelihood and risk.

L The letter "L" indicates that the rating pertains to the principal
amount of those bonds to the extent that the underlying deposit
collateral is insured by the Federal Savings & Loan Insurance Corp. or
the Federal Deposit Insurance Corp. and interest is adequately
collateralized.

* Continuance of the rating is contingent upon Standard & Poor's receipt
of an executed copy of the escrow agreement or closing documentation
confirming investments and cash flows.

NR Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that Standard & Poor's does not
rate a particular type of obligation as a matter of policy.

Debt obligations of issuers outside the United States and its territories
are rated on the same basis as domestic corporate and municipal issues. The
ratings measure the creditworthiness of the obligor but do not take into account
currency exchange and related uncertainties.

BOND INVESTMENT QUALITY STANDARDS: Under present commercial bank
regulations issued by the Comptroller of the Currency, bonds rated in the top
four categories ("AAA," "AA," "A," "BBB,"

- B-6 -

<PAGE> 73

commonly known as "investment grade" ratings) are generally regarded as eligible
for bank investment. In addition, the laws of various states governing legal
investments impose certain rating or other standards for obligations eligible
for investment by savings banks, trust companies, insurance companies and
fiduciaries generally.

DESCRIPTION OF STANDARD & POOR'S COMMERCIAL PAPER RATINGS

A Standard & Poor's commercial paper rating is a current assessment of
the likelihood of timely payment of debt having an original maturity of no more
than 365 days. Ratings are graded into four categories, ranging from "A" for the
highest quality obligations to "D" for the lowest. The four categories are as
follows:

A Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with
the numbers 1, 2 and 3 to indicate the relative degree of safety.

A-1 This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined
to possess overwhelming safety characteristics are denoted with a plus
(+) sign designation.

A-2 Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues
designated "A-1."

A-3 Issues carrying this designation have a satisfactory capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the higher
designations.

B Issues rated "B" are regarded as having only adequate capacity for
timely payment. However, such capacity may be damaged by changing
conditions or short-term adversities.

C This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.

D This rating indicates that the issue is either in default or is expected
to be in default upon maturity.

The commercial paper rating is not a recommendation to purchase or sell a
security. The ratings are based on current information furnished to Standard &
Poor's by the issuer or obtained from other sources it considers reliable. The
ratings may be changed, suspended, or withdrawn as a result of changes in or
unavailability of such information.

- B-7 -
<PAGE> 74

DESCRIPTION OF STANDARD & POOR'S PREFERRED STOCK RATINGS

A Standard & Poor's preferred stock rating is an assessment of the
capacity and willingness of an issuer to pay preferred stock dividends and any
applicable sinking fund obligations. A preferred stock rating differs from a
bond rating inasmuch as it is assigned to an equity issue, which issue is
intrinsically different from, and subordinated to, a debt issue. Therefore, to
reflect this difference, the preferred stock rating symbol will normally not be
higher than the bond rating symbol assigned to, or that would be assigned to,
the senior debt of the same issuer.

The preferred stock ratings are based on the following considerations:

I. Likelihood of payment-capacity and willingness of the issuer to meet the
timely payment of preferred stock dividends and any applicable sinking
fund requirements in accordance with the terms of the obligation.

II. Nature of, and provisions of, the issue.

III. Relative position of the issue in the event of bankruptcy,
reorganization, or other arrangements affecting creditors' rights.

AAA This is the highest rating that may be assigned by Standard & Poor's to
a preferred stock issue and indicates an extremely strong capacity to
pay the preferred stock obligations.

AA A preferred stock issue rated "AA" also qualifies as a high-quality
fixed income security. The capacity to pay preferred stock obligations
is very strong, although not as overwhelming as for issues rated "AAA."

A An issue rated "A" is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions.

BBB An issue rated "BBB" is regarded as backed by an adequate capacity to
pay the preferred stock obligations. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to make
payments for a preferred stock in this category than for issues in the
"A" category.

BB, Preferred stock rated "BB," "B," and "CCC" are regarded, on balance, as
B, predominantly speculative with respect to the issuer's capacity to pay
CCC preferred stock obligations. "BB" indicates the lowest degree of
speculation and "CCC" the highest degree of speculation. While such
issues will likely have some quality and protection characteristics,
these are outweighed by large uncertainties or major risk exposures to
adverse conditions.

- B-8 -
<PAGE> 75

CC The rating "CC" is reserved for a preferred stock issue in arrears on
dividends or sinking fund payments but that is currently paying.

C A preferred stock rated "C" is a non-paying issue.

D A preferred stock rated "D" is a non-paying issue in default on debt
instruments.

NR indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.

PLUS (+) or MINUS (-): To provide more detailed indications of preferred
stock quality, the ratings from "AA" to "CCC" may be modified by the addition of
a plus or minus sign to show relative standing within the major rating
categories.

The preferred stock ratings are not a recommendation to purchase or sell
a security, inasmuch as market price is not considered in arriving at the
rating. Preferred stock ratings are wholly unrelated to Standard & Poor's
earnings and dividend rankings for common stocks.

The ratings are based on current information furnished to Standard &
Poor's by the issuer, and obtained by Standard & Poor's from other sources it
considers reliable. The ratings may be changed, suspended, or withdrawn as a
result of changes in, or unavailability of, such information.

DESCRIPTION OF FITCH IBCA, INC.'S ("FITCH") INVESTMENT GRADE BOND RATINGS

Fitch investment grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
represent Fitch's assessment of the issuer's ability to meet the obligations of
a specific debt issue or class of debt in a timely manner.

The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and of any
guarantor, as well as the economic and political environment that might affect
the issuer's future financial strength and credit quality.

Fitch ratings do not reflect any credit enhancement that may be provided
by insurance policies or financial guaranties unless otherwise indicated.

Bonds carrying the same rating are of similar but not necessarily
identical credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.

Fitch ratings are not recommendations to buy, sell, or hold any security.
Ratings do not comment on the adequacy of market price, the suitability of any
security for a particular investor, or the tax-exempt nature or taxability of
payments made in respect of any security.

- B-9 -
<PAGE> 76

Fitch ratings are based on information obtained from issuers, other
obligers, underwriters, their experts, and other sources Fitch believes to be
reliable. Fitch does not audit or verify the truth or accuracy of such
information. Ratings may be changed, suspended, or withdrawn as a result of
changes in, or the unavailability of, information or for other reasons.

AAA Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.

AA Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated "AAA." Because bonds
rated in the "AAA" and "AA" categories are not significantly vulnerable
to foreseeable future developments, short-term debt of these issuers is
generally rated "F-1+."

A Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes
in economic conditions and circumstances than bonds with higher ratings.

BBB Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and therefore, impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than
for bonds with higher ratings.

PLUS (+) OR MINUS (-): Plus and minus signs are used with a rating
symbol to indicate the relative position of a credit within the rating category.
Plus and minus signs, however, are not used in the "AAA" category.

NR Indicates that Fitch does not rate the specific issue.

CONDITIONAL A conditional rating is premised on the successful completion of a
project or the occurrence of a specific event.

SUSPENDED A rating is suspended when Fitch deems the amount of information
available from the issuer to be inadequate for rating purposes.

WITHDRAWN A rating will be withdrawn when an issue matures or is called or
refinanced and, at Fitch's discretion, when an issuer fails to
furnish proper and timely information.

FITCHALERT Ratings are placed on FitchAlert to notify investors of an
occurrence that is likely to result in a rating change and the
likely direction of such change. These are designated as "Positive"
indicating a potential upgrade, "Negative," for potential
downgrade, or

- B-10 -
<PAGE> 77

"Evolving," where ratings may be raised or lowered. FitchAlert is
relatively short-term, and should be resolved within 12 months.

RATINGS OUTLOOK: An outlook is used to describe the most likely direction
of any rating change over the intermediate term. It is described as "Positive"
or "Negative." The absence of a designation indicates a stable outlook.

DESCRIPTION OF FITCH SPECULATIVE GRADE BOND RATINGS

Fitch speculative grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
("BB" to "C") represent Fitch's assessment of the likelihood of timely payment
of principal and interest in accordance with the terms of obligation for bond
issues not in default. For defaulted bonds, the rating ("DDD" to "D") is an
assessment of the ultimate recovery value through reorganization or liquidation.

The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength.

Bonds that have the same rating are of similar but not necessarily
identical credit quality since rating categories cannot fully reflect the
differences in degrees of credit risk.

BB Bonds are considered speculative. The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified
which could assist the obligor in satisfying its debt service
requirements.

B Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the
obligor's limited margin of safety and the need for reasonable business
and economic activity throughout the life of the issue.

CCC Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.

CC Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.

C Bonds are in imminent default in payment of interest or principal.

- B-11 -
<PAGE> 78

DDD Bonds are in default on interest and/or principal payments. Such bonds
DD are extremely speculative and should be valued on the basis of their
D ultimate recovery value in liquidation or reorganization of the obligor.
"DDD" represents the highest potential for recovery on these bonds, and
"D" represents the lowest potential for recovery.

DESCRIPTION OF FITCH INVESTMENT GRADE SHORT-TERM RATINGS

Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal and
investment notes.

The short-term rating places greater emphasis than a long-term rating on
the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.

Fitch short-term ratings are as follows:

F-1+ Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.

F-1 Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues
rated "F-1+."

F-2 Good Credit Quality. Issues assigned this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not
as great as for issues assigned "F-1+" and "F-1" ratings.

F-3 Fair Credit Quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate,
however, near-term adverse changes could cause these securities to be
rated below investment grade.

F-S Weak Credit Quality. Issues assigned this rating have characteristics
suggesting a minimal degree of assurance for timely payment and are
vulnerable to near-term adverse changes in financial and economic
conditions.

D Default. Issues assigned this rating are in actual or imminent payment
default.

LOC The symbol "LOC" indicates that the rating is based on a letter of
credit issued by a commercial bank.

- B-12 -
<PAGE> 79

PART C. OTHER INFORMATION

ITEM 23. - EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- --------
<S> <C> <C>
1(a) -- Declaration of Trust of Registrant(1)
1(b) -- Amendment No. 1 to Declaration of Trust of Registrant(1)
1(c) -- Certificate of Trust(1)
1(d) -- Certificate of Amendment of Certificate of Trust(1)
1(e) -- Certificate of Amendment of Certificate of Trust(2)
1(f) -- Certificate of Amendment of Certificate of Trust(3)
1(g) -- Amendment No. 2 to Declaration of Trust of Registrant(4)
1(h) -- Amendment No. 3 to Declaration of Trust of Registrant(4)
1(i) -- Certificate of Amendment of Certificate of Trust
1(j) -- Amendment No. 4 to Declaration of Trust of Registrant
2 -- Amended and Restated By-Laws of Registrant(1)
3 -- Instrument Defining Rights of Security Holders. Incorporated by reference to Exhibits 1 and 2 above.
4(a) -- Investment Advisory Agreement between the Trust on behalf of Mercury Master International Portfolio
and Mercury Asset Management International Ltd.(1)
4(b) -- Investment Advisory Agreement between the Trust on behalf of Mercury Master Pan-European Growth
Portfolio and Mercury Asset Management International Ltd.(1)
4(c) -- Sub-Advisory Agreement between the Trust on behalf of Mercury Master International Portfolio and Fund Asset
Management, L.P.(3)
4(d) -- Sub-Advisory Agreement between the Trust on behalf of Mercury Master Pan-European Growth Portfolio and Fund
Asset Management, L.P.(3)
4(e) -- Investment Advisory Agreement between the Trust on behalf of Mercury Master U.S. Large Cap Portfolio and
Mercury Asset Management International Ltd.(2)
4(f) -- Investment Advisory Agreement between the Trust on behalf of Mercury Master Gold and Mining Portfolio and
Mercury Asset Management International Ltd.(2)
4(g) -- Sub-Advisory Agreement between the Trust on behalf of Mercury Master U.S. Large Cap Portfolio and Fund Asset
Management, L.P.(3)
4(h) -- Sub-Advisory Agreement between the Trust on behalf of Mercury Master Gold and Mining Portfolio and Fund Asset
Management, L.P.(3)
4(i) -- Investment Advisory Agreement between the Trust on behalf of Mercury Master Global Balanced Portfolio and
Mercury Asset Management International Ltd.(3)
4(j) -- Sub-Advisory Agreement between the Trust on behalf of Mercury Master Global Balanced Portfolio and Fund Asset
Management L.P.(3)
4(k) -- Investment Advisory Agreement between the Trust on behalf of Mercury Master U.S. Small Cap Growth Portfolio and
Mercury Asset Management US, a division of Fund Asset Management, L.P.
4(l) -- Sub-Advisory Agreement between Mercury Asset Management US, a division of Fund Asset Management, L.P. and
Mercury Asset Management International, Ltd.
5 -- Not Applicable.
6 -- Not Applicable.
7 -- Custody Agreement between Registrant and Brown Brothers Harriman & Co.(1)
8(a) -- Placement Agent Agreement between Registrant and Mercury Funds Distributor, a division of Princeton Funds
Distributor, Inc. .(1)
8(b) -- License Agreement relating to Use of Name among Mercury Asset Management International Ltd., Mercury Asset
Management Group Ltd. and Mercury Funds Distributor, a division of Princeton Funds Distributor, Inc.(1)
8(c) -- License Agreement relating to Use of Name among Mercury Asset Management International Ltd., Mercury Asset
Management Group Ltd. and Registrant.(1)
8(d) -- Fee Agreement among Mercury Asset Management International Ltd., Fund Asset Management, L.P. and the Trust on
behalf of Mercury Master Pan-European Growth Portfolio(4)
8(e) -- Fee Agreement among Mercury Asset Management International Ltd., Fund Asset Management, L.P. and the Trust on
behalf of Mercury Master International Portfolio(4)
8(f) -- Fee Agreement among Mercury Asset Management International Ltd., Fund Asset Management, L.P. and the Trust on
behalf of Mercury Master U.S. Large Cap Portfolio(4)
8(g) -- Fee Agreement among Mercury Asset Management International Ltd., Fund Asset Management, L.P. and the Trust on
behalf of Mercury Master Gold and Mining Portfolio(4)
8(h) -- Fee Agreement among Mercury Asset Management International Ltd., Fund Asset Management, L.P. and the Trust on
behalf of Mercury Master Global Balanced Portfolio(4)
9 -- Not Applicable.
10(a) -- Consent of Deloitte & Touche LLP, independent auditors for the Registrant
10(b) -- Consent of Swidler Berlin Shereff Friedman, LLP, counsel for Registrant.
11 -- Not Applicable.
12(a) -- Certificate of Mercury Asset Management Funds, Inc. with respect to Mercury Master International Portfolio
and Mercury Master Pan-European Growth Portfolio(1)
12(b) -- Certificate of Mercury Asset Management Funds, Inc. and Mercury Funds Distributor, a division of Princeton
Funds Distributor, Inc. with respect to Mercury Master U.S. Large Cap Portfolio and Mercury Master Gold
and Mining Portfolio(2)
12(c) -- Certificate of Mercury Asset Management Funds, Inc. and Mercury Funds Distributor, a division of Princeton
Funds Distributor, Inc. with respect to Mercury Master Global Balanced Portfolio.(3)
12(d) -- Certificate of Mercury Asset Management Funds, Inc. and Mercury Funds Distributor, a division of Princeton
Funds Distributor, Inc. with respect to Mercury Master U.S. Small Cap Growth Portfolio.
13 -- Not Applicable.
14 -- Not Applicable.

</TABLE>

- C-1 -

<PAGE> 80
- ------------------------

(1) Incorporated by reference to same numbered exhibits to
Registrant's initial Registration Statement on Form N-1A (File No. 811-09049).

(2) Incorporated by reference to identically numbered exhibit to
Amendment No. 1 to Registrant's Registration Statement on Form N-1A (File No.
811-09049).

(3) Incorporated by reference to identically numbered exhibit to
Amendment No. 2 to Registrant's Registration Statement on Form N-1A (File No.
811-09049).

(4) Incorporated by reference to identically numbered exhibit to
Amendment No. 3 to Registrant's Registration Statement on Form N-1A (File No.
811-09049).

- C-2 -

<PAGE> 81

ITEM 24. - PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE TRUST.

Mercury International Fund ("International Fund") of Mercury Asset
Management Funds, Inc. (the "Corporation") controls Mercury Master International
Portfolio ("International Portfolio"). As of October 18, 1999, International
Fund owns 100% of the currently outstanding interests of International
Portfolio. As of October 18, 1999, International Fund's holdings of
International Portfolio represent 22.3% of the Trust as a whole.

Mercury Pan-European Growth Fund, Inc. ("Pan-European Growth Fund")
of the Corporation controls Mercury Master Pan-European Growth Portfolio ("Pan-
European Growth Portfolio"). As of October 18, 1999, Pan-European Growth Fund
owns 100% of the currently outstanding interests of Pan-European Growth
Portfolio. As of October 18, 1999, Pan-European Growth Fund's holdings of
Pan-European Growth Portfolio represent 27.3% of the Trust as a whole.

Mercury U.S. Large Cap Fund ("U.S. Large Cap Fund ") of the
Corporation controls Mercury Master U.S. Large Cap Portfolio ("U.S. Large Cap
Portfolio"). As of October 18, 1999, U.S. Large Cap Fund owns 100% of the
currently outstanding interests of U.S. Large Cap Portfolio. As of October 18,
1999, U.S. Large Cap Fund's holdings of U.S. Large Cap Portfolio represent 49.2%
of the Trust as a whole.

Mercury Gold and Mining Fund ("Gold and Mining Fund") of the
Corporation controls Mercury Master Gold and Mining Portfolio ("Gold and Mining
Portfolio"). As of October 18, 1999, Gold and Mining Fund owns 100% of the
currently outstanding interests of Gold and Mining Portfolio. As of October 18,
1999, Gold and Mining Fund's holdings of Gold and Mining Portfolio represent
1.2% of the Trust as a whole.

Mercury U.S. Small Cap Growth Fund ("U.S. Small Cap Growth Fund") of
the Corporation controls U.S. Small Cap Growth Portfolio. As of October 18,
1999, U.S. Small Cap Growth Fund owns 99.9% of the currently outstanding
interests of the Portfolio and FAM owns 100% of the currently outstanding
interests in the U.S. Small Cap Growth Fund. As of October 18, 1999, U.S. Small
Cap Growth Fund's holdings of U.S. Small Cap Growth Portfolio represents less
than .1% of the Trust as a whole.

The Investment Adviser to the International Fund, Pan-European
Growth Fund, U.S. Large Cap Fund and Gold and Mining Fund was incorporated under
the laws of England and Wales. Mercury Asset Management Funds, Inc. was
incorporated under the laws of the State of Maryland. FAM was organized as a
Delaware limited partnership.

ITEM 25. - INDEMNIFICATION.

As permitted by Section 17(h) and (i) of the Investment Company Act
of 1940, as amended (the "1940 Act"), and pursuant to Sections 8.2, 8.3 and 8.4,
of Article VIII of the Registrant's Declaration of Trust (Exhibit 1 to this
Registrant Statement), Trustees, officers, employees and agents of the Trust
will be indemnified to the maximum extent permitted by Delaware law and the 1940
Act.

- C-3 -
<PAGE> 82

Article VIII, Section 8.2 provides, inter alia, that no Trustee,
officer, employee or agent of the Registrant shall be liable to the Registrant,
its holders, or to any other Trustee, officer, employee or agent thereof for any
action or failure to act (including, without limitation, the failure to compel
in any way any former or acting Trustee to redress any breach of trust) except
for his own bad faith, willful misfeasance, gross negligence or reckless
disregard of his duties.

Article VIII, Section 8.3 of the Registrant's Declaration of Trust
provides:

Section 8.3. Indemnification. The Trust shall indemnify each of
its Trustees, officers, employees and agents (including persons who serve at
its request as directors, officers or trustees of another organization in which
it has any interest, as a shareholder, creditor or otherwise) against all
liabilities and expenses (including amounts paid in satisfaction of judgments,
in compromise, as fines and penalties, and as counsel fees) reasonably incurred
by him in connection with the defense or disposition of any action, suit or
other proceeding, whether civil or criminal, in which he may be involved or
with which he may be threatened, while in office or thereafter, by reason of
his being or having been such a Trustee, officer, employee or agent, except
with respect to any matter as to which he shall have been adjudicated to have
acted in bad faith, willful misfeasance, gross negligence or reckless disregard
of his duties, such liabilities and expenses being liabilities belonging to the
Series out of which such claim for indemnification arises; provided, however,
that as to any matter disposed of by a compromise payment by such Person,
pursuant to a consent decree or otherwise, no indemnification either for said
payment or for any other expenses shall be provided unless there has been a
determination that such Person did not engage in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office by the court or other body approving the settlement or
other disposition or, in the absence of a judicial determination, by a
reasonable determination, based upon a review of readily available facts (as
opposed to a full trial-type inquiry), that he did not engage in such conduct,
which determination shall be made by a majority of a quorum of Trustees who are
neither Interested Persons of the Trust (within the meaning of the 1940 Act)
nor parties to the action, suit or proceeding, or by written opinion from
independent legal counsel approved by the Trustees. The rights accruing to any
Person under these provisions shall not exclude any other right to which he may
be lawfully entitled; provided that no Person may satisfy any right of
indemnity or reimbursement granted herein or to which he may be otherwise
entitled except out of the Trust Property. The Trustees may make advance
payments in connection with indemnification under this Section 8.3; provided
that any advance payment of expenses by the Trust to any Trustee, officer,
employee or agent shall be made only upon the undertaking by such Trustee,
officer, employee or agent to repay the advance unless it is ultimately
determined that he is entitled to indemnification as above provided, and only
if one of the following conditions is met:

(a) the Trustee, officer, employee or agent to be
indemnified provides a security for his undertaking; or

(b) the Trust shall be insured against losses arising by
reason of any lawful advances; or

- C-4 -

<PAGE> 83

(c) there is a determination, based on a review of readily
available facts, that there is reason to believe that
the Trustee, officer, employee or agent to be
indemnified ultimately will be entitled to
indemnification, which determination shall be made by:

(i) a majority of a quorum of Trustees who are
neither Interested Persons of the Trust nor
parties to the Proceedings; or

(ii) an independent legal counsel in a written opinion.

Article VIII, Section 8.4 of the Registrant's Declaration of Trust further
provides:

Section 8.4. No Protection Against Certain 1940 Act Liabilities.
Nothing contained in Sections 8.1, 8.2 or 8.3 hereof shall protect any Trustee
or officer of the Trust from any liability to the Trust or its Holders to which
he would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office. Nothing contained in Sections 8.1, 8.2 or 8.3 hereof or in any agreement
of the character described in Section 4.1 or 4.2 hereof shall protect any
Investment Adviser to the Trust or any Series against any liability to the Trust
or any Series to which he would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of his or its
duties to the Trust or Series, or by reason of his or its reckless disregard to
his or its obligations and duties under the agreement pursuant to which he
serves as Investment Adviser to the Trust or any Series.

As permitted by Article VIII, Section 8.7, the Registrant may insure
its Trustees and officers against certain liabilities, and certain costs of
defending claims against such Trustees and officers, to the extent such Trustees
and officers are not found to have committed conduct constituting conflict of
interest, intentional non-compliance with statutes or regulations or dishonest,
fraudulent or criminal acts or omissions. The Registrant will purchase an
insurance policy to cover such indemnification obligation. The insurance policy
also will insure the Registrant against the cost of indemnification payments to
Trustees and officers under certain circumstances. Insurance will not be
purchased that protects, or purports to protect, any Trustee or officer from
liability to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of duty.

The Registrant hereby undertakes that it will apply the
indemnification provisions of its Declaration of Trust and Bylaws in a manner
consistent with Release No. 11330 of the Securities and Exchange Commission
under the 1940 Act so long as the interpretation of Section 17(h) and 17(i) of
such Act remain in effect and are consistently applied.

ITEM 26. - BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.

- C-5 -

<PAGE> 84
Set forth below is a list of each executive officer and partner of
the adviser indicating each business, profession, vocation or employment of a
substantial nature in which each such person or entity has been engaged since
May 1997 for his own account or in the capacity of director, officer, partner
or trustee.

<TABLE>
<CAPTION>
NAME POSITIONS OTHER SUBSTANTIAL BUSINESS,
WITH ADVISER PROFESSION, VOCATION OR EMPLOYMENT
- ---------- ------------------- -----------------------------------------------
<S> <C> <C>
Peter John Gibbs Chairman and Chief Director of Mercury Asset Management Ltd; Director
Executive Officer of Mercury Asset Management International Channel
Islands Ltd.
Carol Consuelo Brooke Deputy Chairman Director of Munich London Investment Management Ltd.;
Director of Merrill Lynch (UK) Pension Plan
Trustees Limited;
Director of Benenden School (Kent) Ltd., Cranbrook Kent,
TN17 4AA; Director of Mercury Asset Management Pension
Trustee Co. Ltd.
David Morris Fitzgerald Scott Director Director of Corporation of St. Lawrence College
Debra Anne C. Searle Secretary Secretary of Mercury Asset Management Ltd., Secretary of
Mercury Asset Management Group Ltd.
John Eric Nelson Director None
Steve Warner Golann Director None
</TABLE>

Set forth below is a list of the name and principal business
address of any company for which a person listed above serves in the capacity
of director, officer, employee, partner or trustee. The address of each
is 33 King William Street, London, England EC4R 9AS.

Ms. Searle also serves as officer of the following companies:

Forum House Limited; Grosvenor Alternate Partner Limited; Grosvenor
General Partner Limited; Grosvenor Ventures Limited; Grosvenor Venture Managers
Limited; 33 King William Street Ltd.; Mercury Asset Management Employee Trust
Co. Ltd.; Mercury Asset Management Finance Ltd.; Mercury Asset Management Group
Services Ltd.; Mercury Asset Management Holdings Ltd.; Mercury Asset Management
No. 1 Limited; Mercury Asset Management No. 2 Limited; Mercury Asset Management
Pension Trustee Co. Ltd.; Mercury Executor & Trustee Co. Ltd.; Mercury (Finance)
Ltd.; Mercury Fund Managers Limited; Mercury Financial Services Ltd.; Mercury
Investment Management Limited; Mercury Investment Services Ltd.; Mercury
Investment Trust Managers Ltd.; Mercury Life Assurance Company Ltd.; Mercury
Life Limited; Mercury Life Nominees Ltd.; Mercury Private Equity Holdings Ltd.;
Mercury Rowan Mullens Ltd.; Munich London Investment Management Ltd.; Mercury
Private Equity MUST 3 Limited; Seligman Trust Limited; and Third Grosvenor
Limited.

The address of each of the following is 25 Ropemaker Place, London,
England EC4R 9AS.

Ms. Searle also serves as officer of the following companies:

Wimco Nominees Ltd.; SNC International (Holdings) Limited; SNC
Securities Limited; SNCS Limited; Storey Saver Limited; Merrill Lynch Private
Capital Limited; Merrill Lynch, Pierce, Fenner & Smith (Brokers & Dealers)
Limited; Merrill Lynch, Pierce, Fenner & Smith Limited; Mership Nominees
Limited; ML Europe Property Ltd.; ML Invest Holdings Limited; ML Invest Limited;
N.Y. Nominees Limited; Paramount Nominees Limited; Prismbond Limited; RNML
Limited; S.N.C. Nominees Limited; Sealion Nominees Limited; Smith Bros (Services
& Leasing) Limited; Smith Bros Nominees Limited; Smith Bros Participations
Limited; Smith Bros PLC; SNC Corporate Finance Limited; SNC Financial Services;
Merrill Lynch (UK) Pension Plan Trustees Limited; Merrill Lynch Capital Markets
Bank Limited; Merrill Lynch Equities Limited; Merrill Lynch Europe Funding;
Merrill Lynch Europe Holdings Limited; Merrill Lynch Europe PLC; Merrill Lynch
Financial Services Limited; Merrill Lynch Gilts (Nominees) Limited; Merrill
Lynch Gilts Holdings Limited; Merrill Lynch Gilts Investments Limited; Merrill
Lynch Gilts Limited; Merrill Lynch Group Holdings Limited; Merrill Lynch
International; Merrill Lynch International Bank Limited; Merrill Lynch
Investment Services Limited; Merrill Lynch Investments Limited; Merrill Lynch
Limited; Merrill Lynch Nominees Limited; Benson Nominees Limited; C.P.W.
Limited; Capital Markets; Chetwynd Nominees Limited; Citygate Nominees Limited;
and CLO Funding Limited.

Set forth below is a list of each executive officer and director of
Fund Asset Management, L.P. ("FAM") indicating each business, profession,
vocation or employment of a substantial nature in which each such person has
been engaged since May 1997 for his own account or in the capacity of director,
officer, partner or trustee.

C-6

<PAGE> 85
<TABLE>
<CAPTION>
POSITIONS WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION,
NAME FAM VOCATION OR EMPLOYMENT
- ---- ----------- ---------------------------------------
<S> <C> <C>
ML & Co. Limited Partner Financial Services Holding Company; Limited
Partner of Merrill Lynch
Asset Management, L.P. ("MLAM")
Fund Asset Management, Inc. Limited Partner Investment Advisory Service
Princeton Services General Partner General Partner of MLAM
Jeffrey M. Peek President President of MLAM; President and Director of
Princeton Services; Executive Vice President of
ML & Co.; Managing Director and Co-Head of
the Investment Banking Division of Merrill
Lynch in 1997
Executive Vice President of MLAM; Executive
Terry K. Glenn Executive Vice President Vice President and Director of Princeton
Services; President and Director of Princeton
Funds Distributor, Inc.; Director of FDS;
President of Princeton Administrators, L.P.
Gregory A. Bundy Chief Operating Officer Chief Operating Officer and Managing Director of
and Managing Director MLAM and FAM; Chief Operating Officer and
Managing Director of Princeton Services; Co-CEO
of Merrill Lynch Australia from 1997 to 1999
Donald C. Burke Senior Vice President Senior Vice President and Treasurer of MLAM since
and Treasurer 1999; Senior Vice President and Treasurer of
Princeton Services; Vice President
of Princeton Funds Distributor, Inc.; First Vice
President of MLAM from 1997 to 1999; Vice
President of MLAM from 1990 to 1997; Director of
Taxation of MLAM since 1990
Michael G. Clark Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services; Director and Treasurer
of Princeton Funds Distributor, Inc.
Robert C. Doll Senior Vice President Senior Vice President of MLAM and FAM; Senior Vice
President of Princeton Services; Chief Investment
Officer of Oppenheimer Funds, Inc. in 1999 and
Executive Vice President thereof from 1991 to 1999
Linda L. Federici Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
Vincent R. Giordano Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
Michael J. Hennewinkel Senior Vice President, Senior Vice President, Secretary and General
Secretary and General Counsel of MLAM; Senior Vice President of
Counsel Princeton Services
Philip L. Kirstein Senior Vice President Senior Vice President of MLAM; Senior Vice
President, General Counsel, Director and
Secretary of Princeton Services
Debra W. Landsman-Yaros Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services; Vice President
of Princeton Funds Distributor, Inc.
Stephen M.M. Miller Senior Vice President Executive Vice President of Princeton
Administrators; Senior Vice President of
Princeton Services

Joseph T. Monagle, Jr. Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
Brian A. Murdock Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
Gregory D. Upah Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
</TABLE>

Mr. Glenn is President and Mr. Burke is Vice President and Treasurer
of all or substantially all of the investment companies described in the
following two paragraphs. Mr. Glenn is a director of substantially all such
companies. Messrs. Giordano, Doll, and Monagle are directors or officers of one
or more of such companies.

FAM, located at P.O. Box 9011, Princeton, New Jersey 08543-9011, an
affiliate of the Investment Adviser, acts as the investment adviser for the
following open-end registered investment companies: CBA Money Fund, CMA
Government Securities Fund, CMA Money Fund, CMA Multi-State Municipal Series
Trust, CMA Tax-Exempt Fund, CMA Treasury Fund, The Corporate Fund Accumulation
Program, Inc., Financial Institutions Series Trust, Merrill Lynch Basic Value
Fund, Inc., Merrill Lynch California Municipal Series Trust, Merrill Lynch
Corporate Bond Fund, Inc., Merrill Lynch Corporate High Yield Fund, Inc.,
Merrill Lynch Emerging Tigers Fund, Inc., Merrill Lynch Federal Securities
Trust, Merrill Lynch Funds for Institutions Series, Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, Merrill Lynch Multi-State Municipal
Series Trust, Merrill Lynch Municipal Bond Fund, Inc., Merrill Lynch Phoenix
Fund, Inc., Merrill Lynch Special Value Fund, Inc., Merrill Lynch World Income
Fund, Inc. and The Municipal Fund Accumulation Program, Inc.; and the following
closed-end investment companies: Apex Municipal Fund, Inc., Corporate High Yield
Fund, Inc., Corporate High Yield Fund II, Inc., Corporate High Yield Fund III,
Inc., Debt Strategies Fund, Inc., Debt Strategies Fund II, Inc., Debt Strategies
Fund III, Inc., Income Opportunities Fund 1999, Inc., Income Opportunities Fund
2000, Inc., Merrill Lynch Municipal Strategy Fund, Inc., MuniAssets Fund, Inc.,
MuniEnhanced Fund, Inc., MuniHoldings Fund, Inc., MuniHoldings Fund II, Inc.,
MuniHoldings Insured Fund Inc., MuniHoldings Insured Fund II, Inc., MuniHoldings
Insured Fund III, Inc., MuniHoldings California Insured Fund, Inc., MuniHoldings
California Insured Fund II, Inc., MuniHoldings California Insured Fund III,
Inc., MuniHoldings California Insured Fund IV, Inc., MuniHoldings California
Insured Fund V, Inc., MuniHoldings Michigan Insured Fund, Inc., MuniHoldings
Michigan Insured Fund II, Inc., MuniHoldings New York Insured Fund, Inc.,
MuniHoldings New York Insured Fund II, Inc., MuniHoldings New York Fund III,
Inc., MuniHoldings New York Insured Fund IV, Inc., MuniHoldings Florida Insured
Fund, MuniHoldings Florida Insured Fund II, MuniHoldings Florida Insured Fund
III, MuniHoldings Florida Insured Fund IV, MuniHoldings Florida Insured Fund V,
MuniHoldings New Jersey Insured Fund, Inc., MuniHoldings New Jersey Insured Fund
II, Inc., MuniHoldings New Jersey Insured Fund III, Inc., MuniHoldings New
Jersey Insured Fund IV, Inc., MuniHoldings Pennsylvania Insured Fund,
MuniInsured Fund, Inc., MuniVest Fund, Inc., MuniVest Fund II, Inc., MuniVest
Florida Fund, MuniVest Michigan Insured Fund, Inc., MuniVest New Jersey Fund,
Inc., MuniVest Pennsylvania Insured Fund,

C-7
<PAGE> 86

MuniYield Arizona Fund, Inc., MuniYield California Fund, Inc., MuniYield
California Insured Fund, Inc., MuniYield California Insured Fund II, Inc.,
MuniYield Florida Fund, Inc., MuniYield Florida Insured Fund, Inc., MuniYield
Fund, Inc., MuniYield Insured Fund, Inc., MuniYield Michigan Fund, Inc.,
MuniYield Michigan Insured Fund, Inc., MuniYield New Jersey Fund, Inc.,
MuniYield New Jersey Insured Fund, Inc., MuniYield New York Insured Fund, Inc.,
MuniYield New York Insured Fund II, Inc., MuniYield Pennsylvania Fund, MuniYield
Quality Fund, Inc., MuniYield Quality Fund II, Inc., Senior High Income
Portfolio, Inc., and Worldwide DollarVest Fund, Inc.

MLAM, located at P.O. Box 9011, Princeton, New Jersey 08543-9011,
acts as investment adviser for the following open-end registered investment
companies: Merrill Lynch Adjustable Rate Securities Fund, Inc., Merrill Lynch
Americas Income Fund, Inc., Merrill Lynch Asset Builder Program, Inc., Merrill
Lynch Asset Growth Fund, Inc., Merrill Lynch Asset Income Fund, Inc., Merrill
Lynch Capital Fund, Inc., Merrill Lynch Convertible Fund, Inc., Merrill Lynch
Developing Capital Markets Fund, Inc., Merrill Lynch Disciplined Equity Fund,
Inc., Merrill Lynch Dragon Fund, Inc., Merrill Lynch EuroFund, Merrill Lynch
Fundamental Growth Fund, Inc., Merrill Lynch Global Allocation Fund, Inc.,
Merrill Lynch Global Bond Fund for Investment and Retirement, Merrill Lynch
Global Growth Fund, Inc., Merrill Lynch Global Holdings, Inc., Merrill Lynch
Global Resources Trust, Merrill Lynch Global SmallCap Fund, Inc., Merrill Lynch
Global Technology Fund, Inc., Merrill Lynch Global Utility Fund, Inc., Merrill
Lynch Global Value Fund, Inc., Merrill Lynch Growth Fund, Merrill Lynch
Healthcare Fund, Inc., Merrill Lynch Intermediate Government Bond Fund, Merrill
Lynch International Equity Fund, Merrill Lynch Latin America Fund, Inc., Merrill
Lynch Middle East/Africa Fund, Inc., Merrill Lynch Municipal Series Trust,
Merrill Lynch Pacific Fund, Inc., Merrill Lynch Ready Assets Trust, Merrill
Lynch Retirement Series Trust, Merrill Lynch Series Fund, Inc., Merrill Lynch
Short-Term Global Income Fund, Inc., Merrill Lynch Strategic Dividend Fund,
Merrill Lynch Technology Fund, Inc., Merrill Lynch U.S. Treasury Money Fund,
Merrill Lynch U.S.A. Government Reserves, Merrill Lynch Utility Income Fund,
Inc., Merrill Lynch Variable Series Funds, Inc. and Hotchkis and Wiley Funds
(advised by Hotchkis and Wiley, a division of MLAM); and for the following
closed-end registered investment companies: Merrill Lynch High Income Municipal
Bond Fund, Inc., Merrill Lynch Senior Floating Rate Fund, Inc. and Merrill
Lynch Senior Floating Rate Fund II, Inc. MLAM also acts as sub-adviser to
Merrill Lynch World Strategy Portfolio and Merrill Lynch Basic Value Equity
Portfolio, two investment portfolios of EQ Advisors Trust.

- C-8 -
<PAGE> 87
ITEM 27. - PRINCIPAL UNDERWRITERS.

(a) Mercury Funds Distributor, a division of Princeton Funds
Distributor, Inc. ("MFD") acts as placement agent for the Registrant and as
principal underwriter for each of the following open-end investment companies:

Mercury Global Balanced Fund of Mercury Asset Management Funds,
Inc.; Mercury Gold and Mining Fund of Mercury Asset Management Funds, Inc.;
Mercury U.S. Large Cap Fund of Mercury Asset Management Funds, Inc.; Mercury
U.S. Small Cap Growth Fund of Mercury Asset Management Funds, Inc.; Mercury
International Fund of Mercury Asset Management Funds, Inc.; Mercury Pan-European
Growth Fund of Mercury Asset Management Funds, Inc.; Summit Cash Reserves Fund
of Financial Institutions Series Trust; Mercury V.I. U.S. Large Cap Fund of
Mercury Asset Management V.I. Funds, Inc.

A separate division of Princeton Funds Distributor, Inc. acts as the
principal underwriter for a number of other investment companies.

- C-9 -

<PAGE> 88

(b) Set forth below is information concerning each director and
officer of MFD. The principal business address of each such person is P.O. Box
9081, Princeton, New Jersey 08543-9081, except that the address of Messrs.
Crook, Aldrich, Breen, Fatseas, and Wasel is One Financial Center, 23rd Floor,
Boston, Massachusetts 02111-2665.

<TABLE>
<CAPTION>
(1) (2) (3)
NAME POSITIONS AND POSITIONS AND
OFFICES WITH PRINCETON FUNDS OFFICES WITH REGISTRANT
DISTRIBUTOR, INC.
- -------- ------------------------------- --------------------------
<S> <C> <C>
Terry K. Glenn President and Director Executive Vice President
Michael G. Clark Director and Treasurer None
Thomas J. Verage Director None
Robert W. Crook Senior Vice President None
Michael J. Brady Vice President None
William M. Breen Vice President None
James J. Fatseas Vice President None
Debra W. Landsman-Yaros Vice President None
Michelle T. Lau Vice President None
Donald C. Burke Vice President Vice President and Treasurer
Salvatore Venezia Vice President None
William Wasel Vice President None
Robert Harris Secretary None
</TABLE>

ITEM 28. - LOCATION OF ACCOUNTS AND RECORDS.

All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940, as amended, and the rules
thereunder are maintained at the offices of:

(1) the registrant, Mercury Asset Management Master Trust,
800 Scudders Mill Road, Plainsboro, New Jersey 08536;

(2) the custodian, Brown Brothers Harriman & Co., 40 Water
Street, Boston, Massachusetts 02109;

(3) Mercury Asset Management International Ltd., the
investment adviser of International Portfolio, Pan-European
Growth Portfolio, U.S. Large Cap Portfolio, and Gold and
Mining Portfolio, 33 King William Street, London EC4R 9AS,
England, and Mercury Asset Management US, a division of Fund
Asset Management, L.P., the investment adviser of U.S. Small
Cap Growth Portfolio, 800 Scudders Mill Road, Plainsboro,
New Jersey 08536 or 225 Liberty Street, New York, New York
10080; and

(4) Fund Asset Management, L.P., the sub-adviser of
International Portfolio, Pan-European Growth Portfolio, U.S.
Large Cap Portfolio, and Gold and Mining Portfolio, 800
Scudders Mill Road, Plainsboro, New Jersey 08536, and
Mercury Asset Management International Ltd., the sub-adviser
of U.S. Small Cap Growth Portfolio, 33 King Williams Street,
London EC4R 9AS, England.

ITEM 29. - MANAGEMENT SERVICES.

- C-10 -
<PAGE> 89
Other than as set forth under the caption "Management, Organization,
and Capital Structure of the Fund" in Part A of the Registration Statement and
under "Investment Advisory and Other Services" in Part B of the Registration
Statement, the Registrant is not party to any management related service
contract.

ITEM 30. - UNDERTAKINGS.

None.

- C-11 -

<PAGE> 90

SIGNATURES

Pursuant to the requirements of the Investment Company Act of 1940,
the Registrant has duly caused this Amendment to the Registration Statement to
be signed on its behalf by the undersigned, duly authorized, in the Township of
Plainsboro, and State of New Jersey, on the 25th day of October 1999.

MERCURY ASSET MANAGEMENT
MASTER TRUST
(Registrant)

By: /s/ Donald C. Burke
-----------------------
(Donald C. Burke, Vice
President)

- C-12 -

<PAGE> 91

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
NUMBER -----------
- -------
<S> <C>
1(i) -- Certificate of Amendment of Certificate of Trust
1(j) -- Amendment No. 4 to Declaration of Trust of Registrant
4(k) -- Investment Advisory Agreement between the Trust on behalf of Mercury
Master U.S. Small Cap Growth Portfolio and Mercury US, a division
of Fund Asset Management, L.P.
4(l) -- Sub-Advisory Agreement between Mercury US, a division of Fund Asset
Management, L.P. and Mercury Asset Management International, Ltd.
10(a) -- Consent of Deloitte & Touche LLP, independent auditors for the Registrant
10(b) -- Consent of Swidler Berlin Shereff Friedman, LLP, counsel for Registrant
12(d) -- Certificate of Mercury Asset Management Funds, Inc. and Mercury Funds
Distributor, a division of Princeton Funds Distributor, Inc. with respect
to Mercury Master U.S. Small Cap Growth Portfolio
</TABLE>

- C-13 -

<PAGE> 1
EXHIBIT 1(i)

CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF TRUST
OF
MERCURY ASSET MANAGEMENT MASTER TRUST

MERCURY ASSET MANAGEMENT MASTER TRUST, a business trust organized and
existing under the Delaware Business Trust Act (12 Del. C. Section 3801, et
seq.), does hereby certify that:

1. Name. The name of the business trust (hereinafter called the "Trust")
is MERCURY ASSET MANAGEMENT MASTER TRUST.

2. Paragraph 5 of the Certificate of Trust of the Trust is hereby amended
to change the name of one of the series of the Trust from "Mercury Master
Emerging Economies Portfolio" to "Mercury Master U.S. Small Cap Growth
Portfolio" and to add twenty new series of the Trust. As amended, Paragraph 5 of
the Certificate of Trust of the Trust shall read in its entirety as follows:

The Trust consists of twenty-seven portfolios, known as Mercury Master
Pan-European Growth Portfolio, Mercury Master International Portfolio, Mercury
Master Japan Capital Portfolio, Mercury Master U.S. Small Cap Growth Portfolio,
Mercury Master Gold and Mining Portfolio, Mercury Master U.S. Large Cap
Portfolio, Mercury Master Global Balanced Portfolio, Mercury Master Emerging
Economies Portfolio, Mercury Master Portfolio 9, Mercury Master Portfolio 10,
Mercury Master Portfolio 11, Mercury Master Portfolio 12, Mercury Master
Portfolio 13, Mercury Master Portfolio 14, Mercury Master Portfolio 15, Mercury
Master Portfolio 16, Mercury Master Portfolio 17, Mercury Master Portfolio 18,
Mercury Master Portfolio 19, Mercury Master Portfolio 20, Mercury Master
Portfolio 21, Mercury Master Portfolio 22, Mercury Master Portfolio 23, Mercury
Master Portfolio 24, Mercury Master Portfolio 25, Mercury Master Portfolio 26
and Mercury Master Portfolio 27.

3. Effective Date. This Certificate of Trust shall be effective upon the
date and time of filing.

IN WITNESS WHEREOF, the undersigned, being a trustee of the Trust, has
executed this Certificate of Amendment as of September 2, 1999.

By: /s/ Terry K. Glenn
------------------
Name: Terry K. Glenn
Title: Trustee

<PAGE> 1
EXHIBIT 1(j)

AMENDMENT NO. 4 TO DECLARATION OF TRUST
OF MERCURY ASSET MANAGEMENT MASTER TRUST

The undersigned Secretary of Mercury Asset Management Master Trust (the
"Trust"), a Delaware business trust, DOES HEREBY CERTIFY, pursuant to the
authority conferred on the Secretary of the Trust by Section 10.4(c) of the
Trust's Declaration of Trust dated April 23, 1998 (the "Declaration of Trust"),
that the following amendment was duly adopted by the Board of Trustees on
September 2, 1999.

1. Section 5.2 of the Declaration of Trust is hereby amended to
change the name of the "Mercury Master Emerging Economies
Portfolio" to "Mercury Master U.S. Small Cap Growth Portfolio" and
to add twenty new series of the Trust. As amended, Section 5.2 OF
THE DECLARATION OF TRUST SHALL READ IN ITS ENTIRETY AS FOLLOWS:

Section 5.2. Establishment and Designation of Series. The establishment
and designation of any Series shall be effective upon the execution by the
Secretary or an Assistant Secretary of the Trust, pursuant to authorization by a
majority of the Trustees, of an instrument setting forth such establishment and
designation and the relative rights and preferences of the Interests of such
Series, or as otherwise provided in such instrument. At any time that there are
no Interests outstanding of any particular Series previously established and
designated, the Trustees may by resolution adopted by a majority of their
number, and evidenced by an instrument executed by the Secretary or an Assistant
Secretary of the Trust, abolish that Series and the establishment and
designation thereof. Each instrument referred to in this paragraph shall have
the status of an amendment to this Declaration of Trust.

Without limiting the authority of the Trustees set forth above to
establish and designate further Series, the Trustees hereby establish and
designate twenty-seven Series: Mercury Master Pan-European Growth Portfolio,
Mercury Master International Portfolio, Mercury Master Japan Capital Portfolio,
Mercury Master U.S. Small Cap Growth Portfolio, Mercury Master Gold And Mining
Portfolio, Mercury Master U.S. Large Cap Portfolio, Mercury Master Global
Balanced Portfolio, Mercury Master Emerging Economies Portfolio, Mercury Master
Portfolio 9, Mercury Master Portfolio 10, Mercury Master Portfolio 11, Mercury
Master Portfolio 12, Mercury Master Portfolio 13, Mercury Master Portfolio 14,
Mercury Master Portfolio 15, Mercury Master Portfolio 16, Mercury Master
Portfolio 17, Mercury Master Portfolio 18, Mercury Master Portfolio 19, Mercury
Master Portfolio 20, Mercury Master Portfolio 21, Mercury Master Portfolio 22,
Mercury Master Portfolio 23, Mercury Master Portfolio 24, Mercury Master
Portfolio 25, Mercury Master Portfolio 26 and Mercury Master Portfolio 27. The
Interests of each of these Series and any Interests of any further Series that
may from time to time be established and designated by the Trustees shall
(unless the Trustees otherwise determine with

<PAGE> 2

respect to some further Series at the time of establishing and designating the
same) have the following relative rights and preferences:

(a) Assets Belonging to Series. All consideration received by the
Trust for the issue or sale of Interests of a particular Series, together
with all assets in which such consideration is invested or reinvested,
all income, earnings, profits, and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation of such assets,
and any funds or payments derived from any reinvestment of such proceeds
in whatever form the same may be, shall be held by the Trustees in a
separate trust for the benefit of the holders of Interests of that Series
and shall irrevocably belong to that Series for all purposes, and shall
be so recorded upon the books of account of the Trust. Such
consideration, assets, income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of
such assets, and any funds or payments derived from any reinvestment of
such proceeds, in whatever form the same may be, are herein referred to
as "assets belonging to" that Series. No Series shall have any right to
or interest in the assets belonging to any other Series, and no Holder
shall have any right or interest with respect to the assets belonging to
any Series in which it does not hold an Interest.

(b) Liabilities Belonging to Series. The assets belonging to each
particular Series shall be charged with the liabilities in respect of
that Series and all expenses, costs, charges and reserves attributable to
that Series. The liabilities, expenses, costs, charges and reserves so
charged to a Series are herein referred to as "liabilities belonging to"
that Series. Subject to Section 8.1 hereof, no Series shall be liable for
or charged with the liabilities belonging to any other Series.

(c) Voting. On each matter submitted to a vote of the Holders,
each Holder of an Interest in each Series shall be entitled to a vote
proportionate to its Interest in such Series as recorded on the books of
the Trust and all Holders of Interests in each Series shall vote as a
separate class except as to voting for Trustees and as otherwise required
by the 1940 Act, in which case all Holders shall vote together as a
single class. As to any matter which does not affect the interest of a
particular Series, only the Holders of Interests of the one or more
affected Series shall be entitled to vote.

IN WITNESS WHEREOF, the undersigned has executed this Amendment to the
Declaration of Trust as of September 2, 1999.

/s/ Robert E. Putney, III
------------------------------
Robert E. Putney, III
Secretary

<PAGE> 1
EXHIBIT 4(k)

INVESTMENT ADVISORY AGREEMENT

AGREEMENT made as of September 22, 1999, by and between MERCURY ASSET
MANAGEMENT MASTER TRUST, a Delaware business trust (hereinafter referred to as
the "Trust") on behalf of its series MERCURY MASTER U.S. SMALL CAP GROWTH
PORTFOLIO (the "Portfolio") and MERCURY ASSET MANAGEMENT US, (hereinafter
referred to as the "Investment Adviser"), a division of Fund Asset Management,
L.P., a Delaware limited partnership.

W I T N E S S E T H:

WHEREAS, the Trust is engaged in business as an open-end management
investment company registered under the Investment Company Act of 1940, as
amended (hereinafter referred to as the "Investment Company Act"); and

WHEREAS, the Trustees of the Trust (the "Trustees") are authorized to
establish separate series relating to separate portfolios of securities, each of
which may offer separate classes of shares; and

WHEREAS, the Trustees have established and designated the Portfolio as a
series of the Trust; and

WHEREAS, the Investment Adviser is engaged principally in rendering
management and investment advisory services and is registered as an investment
adviser under the Investment Advisers Act of 1940; and

WHEREAS, the Trust desires to retain the Investment Adviser to provide
management and investment advisory services to the Portfolio in the manner and
on the terms hereinafter set forth; and

<PAGE> 2

WHEREAS, the Investment Adviser is willing to provide management and
investment advisory services to the Portfolio on the terms and conditions
hereafter set forth;

NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Trust and the Investment Adviser hereby agree as
follows:

ARTICLE I
DUTIES OF THE INVESTMENT ADVISER

The Trust hereby employs the Investment Adviser to act as a manager and
investment adviser of the Portfolio and to furnish, or arrange for affiliates to
furnish, the management and investment advisory services described below,
subject to the policies of, review by and overall control of the Trustees, for
the period and on the terms and conditions set forth in this Agreement. The
Investment Adviser hereby accepts such employment and agrees during such period,
at its own expense, to render, or arrange for the rendering of, such services
and to assume the obligations herein set forth for the compensation provided for
herein. The Investment Adviser and its affiliates shall for all purposes herein
be deemed to be independent contractors and shall, unless otherwise expressly
provided or authorized, have no authority to act for or represent the Trust or
the Portfolio in any way or otherwise be deemed agents of the Trust or the
Portfolio.

(a) Management Services. The Investment Adviser shall perform (or
arrange for the performance by affiliates of) the management and administrative
services necessary for the operation of the Trust and the Portfolio. The
Investment Adviser shall provide the Trust and the Portfolio with office space,
facilities, equipment and necessary personnel and such other services as the
Investment Adviser, subject to review by the Trustees, shall from time to time
determine to be necessary or useful to perform its obligations under this
Agreement. The Investment Adviser shall also, on behalf

2
<PAGE> 3

of the Trust and the Portfolio, conduct relations with custodians, depositories,
transfer agents, dividend disbursing agents, other shareholder servicing agents,
accountants, attorneys, underwriters, brokers and dealers, corporate
fiduciaries, insurers, banks and such other persons in any such other capacity
deemed to be necessary or desirable. The Investment Adviser shall generally
monitor the Trust's and the Portfolio's compliance with investment policies and
restrictions as set forth in the Registration Statement of the Trust filed with
the Securities and Exchange Commission under the Investment Company Act, as
amended from time to time (the "Registration Statement"). The Investment Adviser
shall make reports to the Trustees of its performance of obligations hereunder
and furnish advice and recommendations with respect to such other aspects of the
business and affairs of the Portfolio as it shall determine to be desirable.

(b) Investment Advisory Services. The Investment Adviser shall provide
(or arrange for affiliates to provide) the Trust with such investment research,
advice and supervision as the latter may from time to time consider necessary
for the proper supervision of the assets of the Portfolio, shall furnish
continuously an investment program for the Portfolio and shall determine from
time to time which securities shall be purchased, sold or exchanged and what
portion of the assets of the Portfolio shall be held in the various securities
and other financial instruments in which the Portfolio invests or cash, subject
always to the restrictions of the Declaration of Trust and By-Laws of the Trust,
as amended from time to time, the provisions of the Investment Company Act and
the statements relating to the Portfolio's investment objectives, investment
policies and investment restrictions as the same are set forth in the Trust's
current Registration Statement. The Investment Adviser shall make decisions for
the Trust as to the manner in which voting rights, rights to consent to
corporate action and any other rights pertaining to the Portfolio's portfolio
securities shall be

3
<PAGE> 4

exercised. Should the Trustees at any time, however, make any definite
determination as to investment policy and notify the Investment Adviser thereof
in writing, the Investment Adviser shall be bound by such determination for the
period, if any, specified in such notice or until similarly notified that such
determination has been revoked. The Investment Adviser shall take, on behalf of
the Portfolio, all actions which it deems necessary to implement the investment
policies determined as provided above, and in particular to place all orders for
the purchase or sale of portfolio securities for the Portfolio's account with
brokers or dealers selected by it, and to that end, the Investment Adviser is
authorized as the agent of the Trust to give instructions to the custodian of
the Portfolio as to deliveries of securities and payments of cash for the
account of the Portfolio. In connection with the selection of such brokers or
dealers and the placing of such orders with respect to assets of the Portfolio,
the Investment Adviser is directed at all times to seek to obtain execution and
price within the policy guidelines determined by the Trustees and set forth in
the then current Registration Statement. Subject to this requirement and the
provisions of the Investment Company Act, the Securities Exchange Act of 1934,
as amended, and other applicable provisions of law, the Investment Adviser may
select brokers or dealers with which it or the Trust is affiliated.

(c) Affiliated Sub-Advisers. In carrying out its responsibilities
hereunder, the Investment Adviser may employ, retain or otherwise avail itself
of the services of other persons or entities including without limitation,
affiliates of the Investment Adviser, on such terms as the Investment Adviser
shall determine to be necessary, desirable or appropriate. However, if the
Investment Adviser chooses to retain or avail itself of the services of another
person or entity to manage assets of the Portfolio, such other person or entity
must be (i) an affiliate of the Investment Adviser, (ii) retained at the
Investment Adviser's own cost and expense, and (iii) retained subject to the

4
<PAGE> 5

requirements of Section 15 of the Investment Company Act. Retention of one or
more affiliated sub-advisers, or the employment or retention of other persons or
entities to perform services, shall in no way reduce the responsibilities or
obligations of the Investment Adviser under this Agreement and the Investment
Adviser shall be responsible for all acts and omissions of such affiliated
sub-advisers, or other persons or entities, in connection with the performance
of the Investment Adviser's duties hereunder.

ARTICLE II
ALLOCATION OF CHARGES AND EXPENSES

(a) The Investment Adviser. The Investment Adviser assumes and shall
pay, or cause its affiliate to pay, for maintaining the staff and personnel
necessary to perform its obligations under this Agreement, and shall, at its own
expense, provide the office space, facilities and necessary personnel which it
is obligated to provide under Article I hereof. The Investment Adviser shall
pay, or cause its affiliate to pay, compensation of all Officers of the Trust
and all Trustees of the Trust who are affiliated persons of the Investment
Adviser or any sub-adviser, or of an affiliate of the Investment Adviser or any
sub-adviser.

(b) The Trust. The Trust assumes and shall pay or cause to be paid all
other expenses of the Trust and the Portfolio (except for the expenses paid by
Mercury Funds Distributor division of Princeton Funds Distributor, Inc. (the
"Distributor")), including, without limitation: taxes, expenses for legal and
auditing services, costs of printing proxies, shareholder reports, copies of the
Registration Statement, charges of the custodian, any sub-custodian and transfer
agent, expenses of portfolio transactions, expenses of redemption of shares,
Securities and Exchange Commission fees, expenses of registering the shares
under Federal, state and foreign laws, fees and actual out-of-pocket

5
<PAGE> 6

expenses of Trustees who are not affiliated persons of the Investment Adviser or
any sub-adviser, or of an affiliate of the Investment Adviser or any
sub-adviser, accounting and pricing costs (including the daily calculation of
the net asset value), insurance, interest, brokerage costs, litigation and other
extraordinary or non-recurring expenses, and other expenses properly payable by
the Trust or the Portfolio. It is also understood that the Trust shall reimburse
the Investment Adviser or an affiliate of the Investment Adviser for its costs
in providing accounting services to the Trust and the Portfolio. The Distributor
will pay certain of the expenses of the Portfolio incurred in connection with
the continuous offering of shares of beneficial interest of the Portfolio.

ARTICLE III
COMPENSATION OF THE INVESTMENT ADVISER

Management and Investment Advisory Fee. For the services rendered, the
facilities furnished and expenses assumed by the Investment Adviser, the
Portfolio shall pay to the Investment Adviser at the end of each calendar month
a fee based upon the average daily value of the net assets of the Portfolio, as
determined and computed in accordance with the description of the determination
of net asset value contained in the Registration Statement, at the annual rate
of 0.70% of the average daily net assets of the Portfolio, commencing on the day
following effectiveness hereof. If this Agreement becomes effective subsequent
to the first day of a month or shall terminate before the last day of a month,
compensation for that part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fee as set forth
above. Payment of the Investment Adviser's compensation for the preceding month
shall be made as promptly as possible after completion of the computations
contemplated above. During any period when the determination of net asset value
is suspended by the Trustees, the net asset value of a share as of the last
business day

6
<PAGE> 7

prior to such suspension shall for this purpose be deemed to be the
net asset value at the close of each succeeding business day until it is again
determined.

ARTICLE IV
LIMITATION OF LIABILITY OF THE INVESTMENT ADVISER

The Investment Adviser shall not be liable for any error of judgment or
mistake of law or for any loss arising out of any investment or for any act or
omission in the management of the Trust and the Portfolio, except for willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
by reason of reckless disregard of its obligations and duties hereunder. As used
in this Article IV, the term "Investment Adviser" shall include any affiliates
of the Investment Adviser performing services for the Trust or the Portfolio
contemplated hereby and partners, directors, officers and employees of the
Investment Adviser and such affiliates.

ARTICLE V
ACTIVITIES OF THE INVESTMENT ADVISER

The services of the Investment Adviser to the Trust and the Portfolio are
not to be deemed to be exclusive, and the Investment Adviser and each affiliate
is free to render services to others. It is understood that Trustees, officers,
employees and shareholders of the Trust and the Portfolio are or may become
interested in the Investment Adviser and its affiliates, as directors, officers,
employees, partners and shareholders or otherwise, and that the Investment
Adviser and directors, officers, employees, partners and shareholders of the
Investment Adviser and its affiliates are or may become similarly interested in
the Trust or the Portfolio as shareholders or otherwise.

7
<PAGE> 8

ARTICLE VI
DURATION AND TERMINATION OF THIS AGREEMENT

This Agreement shall become effective as of the date first above written,
and shall remain in force for two years thereafter, and thereafter continue from
year to year, but only so long as such continuance is specifically approved at
least annually by (i) the Trustees, or by the vote of a majority of the
outstanding voting securities of the Portfolio, and (ii) a majority of those
Trustees who are not parties to this Agreement or interested persons of any such
party cast in person at a meeting called for the purpose of voting on such
approval.

This Agreement may be terminated at any time, without the payment of any
penalty, by the Trustees or by the vote of a majority of the outstanding voting
securities of the Portfolio, or by the Investment Adviser, on sixty days'
written notice to the other party. This Agreement shall automatically terminate
in the event of its assignment.

ARTICLE VII
AMENDMENTS OF THIS AGREEMENT

This Agreement may be amended by the parties only if such amendment is
specifically approved by (i) by the vote of a majority of outstanding voting
securities of the Portfolio, and (ii) a majority of those Trustees who are not
parties to this Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval.

ARTICLE VIII
DEFINITIONS OF CERTAIN TERMS

The terms "vote of majority of the outstanding voting securities,"
"assignment," "affiliated person" and "interested person," when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act and the Rules and Regulations thereunder, subject,

8
<PAGE> 9

however, to such exemptions as may be granted by the Securities and Exchange
Commission under said Act.

ARTICLE IX
GOVERNING LAW

This Agreement shall be construed in accordance with laws of the State of
New York and the applicable provisions of the Investment Company Act. To the
extent that the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.

ARTICLE X
LIMITATION OF OBLIGATIONS OF THE PORTFOLIO

The obligations of the Portfolio shall be limited to the assets of the
Portfolio, shall be separate from the obligations of any other series of the
Trust, and the Portfolio shall not be liable for the obligations of any other
series of the Trust.

9
<PAGE> 10

IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written. This Agreement may be executed by
the parties hereto on any number of counterparts, all of which together shall
constitute one and the same instrument.

MERCURY ASSET MANAGEMENT MASTER
TRUST on behalf of its series,
MERCURY MASTER U.S. SMALL CAP
GROWTH PORTFOLIO

By: /s/ DONALD C. BURKE
---------------------------------
Title: Vice President and Treasurer

MERCURY ASSET MANAGEMENT US,
a division of Fund Asset Management, L.P.

By: PRINCETON SERVICES, INC.,
GENERAL PARTNER

By: /s/ TERRY K. GLENN
---------------------------------
Title: Executive Vice President
and Director

<PAGE> 1

EXHIBIT 4(l)

SUB-ADVISORY AGREEMENT

AGREEMENT made as of September 22, 1999, by and between MERCURY
ASSET MANAGEMENT US (hereinafter referred to as "Mercury US"), a division of
Fund Asset Management, L.P., a Delaware limited partnership, and MERCURY ASSET
MANAGEMENT INTERNATIONAL LTD., a corporation organized under the laws of England
and Wales (hereinafter referred to as "Mercury International").

W I T N E S S E T H:

WHEREAS, the Mercury Asset Management Master Trust, a Delaware business
trust (hereinafter referred to as the "Trust") is engaged in business as an
open-end management investment company registered under the Investment Company
Act of 1940, as amended (hereinafter referred to as the "Investment Company
Act"); and

WHEREAS, the Trustees of the Trust (the "Trustees") are authorized to
establish separate series relating to separate portfolios of securities, each of
which may offer separate classes of shares; and

WHEREAS, the Trustees have established and designated the Mercury Master
U.S. Small Cap Growth Portfolio (hereinafter referred to as the "Portfolio") as
a series of the Trust; and

WHEREAS, Mercury US and Mercury International are engaged principally in
rendering investment advisory services and are registered as investment advisers
under the Investment Advisers Act of 1940, as amended; and

WHEREAS, Mercury International is regulated by the Investment
Management Regulatory Organization, a self-regulating organization recognized
under the Financial Services

<PAGE> 2

Act of 1986 of the United Kingdom (hereinafter referred to as "IMRO"), and the
conduct of its investment business is regulated by IMRO; and

WHEREAS, Mercury US has entered into an investment advisory agreement
(the "Mercury US Advisory Agreement"), dated September 22, 1999 with the Trust,
pursuant to which Mercury US will provide investment advisory and management
services to the Trust with respect to the Portfolio; and

WHEREAS, Mercury International is willing to provide investment advisory
services to Mercury US in connection with the Portfolio's operations on the
terms and conditions hereinafter set forth;

NOW THEREFORE, in consideration of the premises and the covenants
hereinafter contained, Mercury US and Mercury International hereby agree as
follows:

ARTICLE I

Duties of Mercury International

Mercury US hereby employs Mercury International to act as an investment
adviser to Mercury US and to furnish, or arrange for affiliates to furnish, the
investment advisory services, as described below, subject to the broad
supervision of Mercury US and the Trust, for the period and on the terms and
conditions set forth in this Agreement. Mercury International hereby accepts
such employment and agrees during such period, at its own expense, to render, or
arrange for the rendering of, such services and to assume the obligations herein
set forth for the compensation provided for herein. Mercury US and its
affiliates shall for all purposes herein be deemed a Non-private Customer as
defined under the rules promulgated by IMRO (hereinafter

2
<PAGE> 3

referred to as the "IMRO Rules"). Mercury International and its affiliates shall
for all purposes herein be deemed to be independent contractors and shall,
unless otherwise expressly provided or authorized, have no authority to act for
or represent the Trust or Portfolio in any way or otherwise be deemed agents of
the Trust or Portfolio.

Mercury International shall have the right to make unsolicited calls on
Mercury US and shall provide (or arrange for affiliates to provide) Mercury US
with such investment research, advice and supervision as the latter may from
time to time consider necessary for the proper supervision of the assets of the
Portfolio; shall make recommendations from time to time as to which securities
shall be purchased, sold or exchanged and what portion of the assets of the
Portfolio shall be held in the various securities in which the Portfolio
invests, options, futures, options on futures or cash; all of the foregoing
subject always to the restrictions of the Declaration of Trust and By-Laws of
the Trust, as they may be amended from time to time, the provisions of the
Investment Company Act and the statements relating to the Portfolio's investment
objectives, investment policies and investment restrictions as the same are set
forth in the Trust's current Registration Statement.

Mercury International will not hold money on behalf of Mercury US, the
Trust or the Portfolio, nor will Mercury International be the registered holder
of the registered investments of Mercury US, the Trust or the Portfolio or be
the custodian of documents and other evidence of title.

3
<PAGE> 4

ARTICLE II

Allocation of Charges and Expenses

Mercury International assumes and shall pay for maintaining the staff and
personnel necessary to perform its obligations under this Agreement and shall at
its own expense provide the office space, equipment and facilities which it is
obligated to provide under Article I hereof and shall pay all compensation of
officers of the Trust and all Trustees of the Trust who are affiliated persons
of Mercury International to the extent not otherwise paid by Mercury US.

ARTICLE III

Compensation of Mercury International

For the services rendered, the facilities furnished and expenses assumed
by Mercury International, Mercury US shall pay to Mercury International at the
end of each calendar month a fee in an amount to be determined from time to time
by Mercury US and Mercury International, but in no event in excess of the amount
that Mercury US actually receives for providing services to the Trust and the
Portfolio pursuant to the Mercury US Advisory Agreement.

4
<PAGE> 5

ARTICLE IV

Limitation of Liability of Mercury International

Mercury International shall not be liable for any error of judgment or
mistake of law or for any loss arising out of any investment or for any act or
omission in the performance of sub-advisory services rendered hereunder with
respect to the Trust and the Portfolio, except for willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of
reckless disregard of its obligations and duties hereunder. As used in this
Article IV, the term "Mercury International" shall include any affiliates of
Mercury International performing services for the Mercury US contemplated hereby
and directors, officers and employees of Mercury International and such
affiliates.

ARTICLE V

Activities of Mercury International

The services of Mercury International to the Trust and the Portfolio are
not to be deemed to be exclusive, and Mercury International and any person
controlled by or under common control with Mercury International (for purposes
of this Article V referred to as "affiliates") is free to render services to
others. It is understood that Trustees, officers, employees and shareholders of
the Trust and Portfolio are or may become interested in Mercury International
and its affiliates, as directors, officers, partners, employees and shareholders
or otherwise, and that Mercury International and its affiliates are or may
become similarly interested in the Trust or Portfolio.

<PAGE> 6

ARTICLE VI

Mercury International Statements Pursuant to IMRO Rules

Any complaints concerning Mercury International should be in writing
addressed to the attention of the Managing Director of Mercury International.
Mercury US has the right to obtain from Mercury International a copy of the IMRO
complaints procedure and to approach IMRO and the Investment Ombudsman directly.

Mercury International may make recommendations, subject to the investment
restrictions referred to in Article I herein, regarding Investments Not Readily
Realisable (as that term is used in the IMRO Rules) or investments denominated
in a currency other than British pound sterling. There can be no certainty that
market makers will be prepared to deal in unlisted or thinly traded securities
and an accurate valuation may be hard to obtain. The value of investments
recommended by Mercury International may be subject to exchange rate
fluctuations which may have favorable or unfavorable effects on investments.

Mercury International may make recommendations, subject to the investment
restrictions referred to in Article I herein, regarding options, futures or
contracts for differences. Markets can be highly volatile and such investments
carry a high degree of risk of loss exceeding the original investment and any
margin on deposit.

ARTICLE VII
Duration and Termination of this Agreement

This Agreement shall become effective as of the date first above written,
and shall remain in force until the date of termination of the Mercury US
Advisory Agreement (but not later than

6
<PAGE> 7

two years after the effective date of this Agreement) and thereafter, but only
so long as such continuance is specifically approved at least annually by (i)
the Trustees of the Trust, or by the vote of a majority of the outstanding
voting securities of the Portfolio, and (ii) a majority of those Trustees who
are not parties to this Agreement or interested persons of any such party cast
in person at a meeting called for the purpose of voting on such approval.

This Agreement may be terminated at any time, without the payment of any
penalty, by Mercury US or by vote of a majority of the outstanding voting
securities of the Portfolio, or by Mercury International, on sixty days' written
notice to the other party. This Agreement shall automatically terminate in the
event of its assignment. Any termination shall be without prejudice to the
completion of transactions already initiated.

ARTICLE VIII

Amendments of this Agreement

This Agreement may be amended by the parties only if such amendment is
approved in compliance with the requirements of the Investment Company Act and
the rules and regulations thereunder.

ARTICLE IX

Definitions of Certain Terms

The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act and the rules and regulations

7
<PAGE> 8

hereunder, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under said Act.

ARTICLE X

Governing Law

This Agreement shall be construed in accordance with the laws of the
State of New York and the applicable provisions of the Investment Company Act.
To the extent that the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.

ARTICLE XI

Limitation of Obligations of the Portfolio

8
<PAGE> 9

IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first above written. This Agreement may be
executed by the parties hereto in any number of counterparts, all of which
together shall constitute one and the same instrument.

MERCURY ASSET MANAGEMENT US,
a division of Fund Asset Management, L.P.

By: PRINCETON SERVICES, INC.,
GENERAL PARTNER

By: /s/ TERRY K. GLENN
----------------------------------------------
Title: Executive Vice President and Director

MERCURY ASSET MANAGEMENT INTERNATIONAL LTD.

By: /s/ PETER J. GIBBS
----------------------------------------------
Title: Chairman and Chief Executive Officer

<PAGE> 1

Exhibit 10(a)

INDEPENDENT AUDITORS' CONSENT
Mercury Asset Management Master Trust:

We consent to the incorporation by reference in this Amendment No. 4 to
Registration Statement No. 811-09049 for Mercury Asset Management Master Trust
of our reports dated July 19, 1999 appearing in the annual reports to
shareholders of Mercury Master International Portfolio, Mercury Master
Pan-European Growth Portfolio, Mercury Master U.S. Large Cap Portfolio and
Mercury Master Gold and Mining Portfolio, and to the inclusion of our report
dated October 22, 1999 for Mercury Master U.S. Small Cap Growth Portfolio,
appearing in Part B of such Registration Statement.

Deloitte & Touche LLP
Princeton, New Jersey
October 22, 1999

<PAGE> 1
EXHIBIT 10(b)

CONSENT OF SWIDLER BERLIN SHEREFF FRIEDMAN, LLP

We hereby consent to the reference to our firm included in Part A and
Part B of Mercury Asset Management Master Trust, filed as part of Registration
Statement No. 811-09049.

/s/ SWIDLER BERLIN SHEREFF FRIEDMAN, LLP
------------------------------------------
Swidler Berlin Shereff Friedman, LLP

New York, New York
October 25, 1999

<PAGE> 1

EXHIBIT 12(d)

CERTIFICATE OF HOLDER OF BENEFICIAL INTERESTS

Mercury Asset Management Funds, Inc., the holder of the beneficial
interests in the amount of $100,000 of Mercury Master U.S. Small Cap Growth
Portfolio of Mercury Asset Management Master Trust (the "Trust"), does hereby
confirm to the Trust its representation that it purchased such shares for
investment purposes, with no present intention of redeeming or reselling any
portion thereof.

Mercury Asset Management Funds, Inc.

By: /s/ Donald Burke
--------------------------------

Dated: October 18, 1999