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MERCURY PAN-EUROPEAN GROWTH FUND
OF MERCURY ASSET MANAGEMENT FUNDS, INC.
[MERCURY ARTWORK]
A SUBSCRIPTION PERIOD FOR SHARES OF THE FUND
WILL END ON OCTOBER 27, 1998, UNLESS EXTENDED.
THIS PROSPECTUS CONTAINS INFORMATION YOU SHOULD
KNOW BEFORE INVESTING, INCLUDING INFORMATION
ABOUT RISKS. PLEASE READ IT BEFORE YOU INVEST
AND KEEP IT FOR FUTURE REFERENCE.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THESE SECURITIES OR
PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PROSPECTUS - AUGUST 14, 1998
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Table of Contents
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FUND FACTS
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About the Mercury Pan-European Growth Fund.................. 2
Fees and Expenses........................................... 4
[ABOUT THE DETAILS LOGO]
ABOUT THE DETAILS
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How the Fund Invests........................................ 6
Investment Risks............................................ 8
Adviser's Historical Performance Data....................... 13
[ACCOUNT CHOICES LOGO]
ACCOUNT CHOICES
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Pricing of Shares........................................... 18
How to Buy, Sell, Transfer and Exchange Shares.............. 23
How Shares are Priced....................................... 27
Fee-Based Programs.......................................... 28
Dividends, Capital Gains and Taxes.......................... 28
[THE MANAGEMENT TEAM LOGO]
THE MANAGEMENT TEAM
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Master/Feeder Structure..................................... 30
Management of the Fund...................................... 31
[TO LEARN MORE LOGO]
TO LEARN MORE
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Shareholder Reports....................................Back Cover
Statement of Additional Information....................Back Cover
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MERCURY PAN-EUROPEAN GROWTH FUND
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Fund Facts
IN AN EFFORT TO HELP YOU BETTER UNDERSTAND THE MANY CONCEPTS INVOLVED IN MAKING
AN INVESTMENT DECISION, WE HAVE DEFINED THE HIGHLIGHTED TERMS IN THIS PROSPECTUS
IN THE SIDEBAR.
COMMON STOCK -- units of ownership of a corporation.
PREFERRED STOCK -- class of capital stock that often pays dividends at a
specified rate and has preference over common stock in dividend payments and
liquidation of assets.
CONVERTIBLE SECURITIES -- corporate securities (usually preferred stock or
bonds) that are exchangeable for a fixed number of other securities (usually
common stock) at a set price or formula.
ABOUT THE MERCURY PAN-EUROPEAN GROWTH FUND
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WHAT ARE THE FUND'S GOALS?
The Fund's main goal is long-term capital growth through investments primarily
in a diversified portfolio of equity securities of companies located in Europe.
In other words, it tries to choose investments located in Europe that will
increase in value. Current income from dividends and interest will not be an
important consideration in selecting portfolio securities. We cannot guarantee
that the Fund will achieve its goals.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests primarily in stocks of companies located in European countries
that its management believes are undervalued or have good prospects for earnings
growth. A company's stock is considered to be undervalued by the Fund's
management when its price is less than what the Fund believes it is worth. A
company whose earnings per share grow faster than inflation and the economy in
general usually has a higher stock price over time than companies with slower
earnings growth. The Fund'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. The Fund purchases COMMON STOCK, PREFERRED STOCK, and
CONVERTIBLE SECURITIES and other instruments. The Fund may invest in securities
issued by companies of all sizes, but will focus mainly on medium and large
companies.
The Fund invests all of its assets in a Portfolio of Mercury Asset Management
Master Trust that has the same goals as the Fund. All investments will be made
at the level of the Portfolio. This structure is sometimes called a
"master/feeder" structure. The Fund's investment results will correspond
directly to the investment results of the underlying Portfolio it invests in.
For simplicity, this Prospectus uses the term "Fund" to include the underlying
Portfolio the Fund invests in.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
As with any equity fund, the value of the Fund's investments, and therefore the
value of your Fund's shares, may go up or down. These value changes in the
Fund's investments may occur because a particular stock market is rising or
falling. At other times, there are specific factors that may affect the value of
a particular investment. If the value of the Fund's investments goes down, you
may lose money.
2 MERCURY PAN-EUROPEAN GROWTH FUND
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Fund Facts
In addition, because the Fund will invest most of its assets in non-U.S.
securities, the Fund will be subject to additional risks. For example, the
Fund's securities may go up or down in value depending on foreign exchange
rates, foreign political and economic developments and U.S. and foreign laws
relating to foreign investment. Non-U.S. securities may also be less liquid,
more volatile and harder to value than U.S. securities. These risks are
heightened when the issuer of the securities is in a country with an emerging
capital market.
WHO SHOULD INVEST?
The Fund may be an appropriate investment for you if you:
- Are investing with long-term goals in mind, such as retirement or
funding a child's education.
- Are not looking for current income.
- Can tolerate the increased price volatility and currency
fluctuations associated with investments in non-U.S. securities.
- Are willing to accept the risk that your investment may fluctuate
over the short term in exchange for the potential of higher long-
term gains.
- Want to diversify your portfolio.
- Want to complement your U.S. holdings through European equity
investments.
- Are prepared to receive taxable short-term capital gains.
MERCURY PAN-EUROPEAN GROWTH FUND 3
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Fund Facts
UNDERSTANDING EXPENSES
Fund investors pay various expenses, either directly or indirectly. Listed below
are some of the main types of expenses, which all mutual funds may charge:
EXPENSES PAID DIRECTLY BY THE SHAREHOLDER:
SHAREHOLDER FEES -- fees paid directly from your investment. These include sales
charges and redemption fees, which you may pay when you buy or sell shares of
the Fund.
EXPENSES PAID INDIRECTLY BY THE SHAREHOLDER (these costs are deducted from the
Fund's total assets):
ANNUAL FUND OPERATING EXPENSES -- expenses that cover the costs of operating the
Fund.
MANAGEMENT FEE -- a fee paid to the investment adviser for managing the Fund.
DISTRIBUTION FEES -- fees used to support the Fund's marketing and distribution
efforts, such as advertising and promotion.
ACCOUNT MAINTENANCE FEES -- fees used to compensate dealers for account
maintenance activities.
FEES AND EXPENSES
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The Fund offers four different classes of shares. Although your money will be
invested the same way no matter which class of shares you buy, there are
differences among the fees and expenses associated with each class. Not everyone
is eligible to buy every class. After determining which classes you are eligible
to buy, decide which class best suits your needs. Your financial consultant can
help you with this decision.
THIS TABLE SHOWS THE DIFFERENT FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD THE DIFFERENT CLASSES OF SHARES OF THE FUND. FUTURE EXPENSES MAY BE GREATER
OR LESS THAN THOSE INDICATED BELOW.
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SHAREHOLDER FEES: CLASS I CLASS A CLASS B(b) CLASS C
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MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES (AS
A PERCENTAGE OF OFFERING PRICE) 5.25%(c) 5.25%(c) NONE NONE
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MAXIMUM DEFERRED SALES CHARGE (LOAD) (AS A PERCENTAGE
OF ORIGINAL PURCHASE PRICE OR REDEMPTION PROCEEDS,
WHICHEVER IS LOWER) NONE(d) NONE(d) 4.00%(c) 1.00%(c)
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MAXIMUM SALES CHARGE (LOAD) IMPOSED ON DIVIDEND
REINVESTMENTS NONE NONE NONE NONE
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REDEMPTION FEE NONE NONE NONE NONE
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EXCHANGE FEE NONE NONE NONE NONE
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MAXIMUM ACCOUNT FEE NONE NONE NONE NONE
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ANNUAL FUND OPERATING EXPENSES(a):
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MANAGEMENT FEE(e) 0.75% 0.75% 0.75% 0.75%
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DISTRIBUTION AND/OR ACCOUNT MAINTENANCE (12b-1)
FEES(f) NONE 0.25% 1.00% 1.00%
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OTHER EXPENSES (INCLUDING TRANSFER AGENCY FEES)(g) 0.37% 0.37% 0.37% 0.37%
ADMINISTRATIVE FEES(h) 0.25% 0.25% 0.25% 0.25%
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TOTAL OTHER EXPENSES 0.62% 0.62% 0.62% 0.62%
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TOTAL ANNUAL FUND OPERATING EXPENSES(i) 1.37% 1.62% 2.37% 2.37%
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(a) The fees and expenses include the expenses of both the Fund and the
Portfolio it invests in.
(b) Class B shares automatically convert to Class A shares about eight years
after you buy them and will no longer be subject to distribution fees.
(c) Some investors may qualify for reductions in the sales charge (load).
(d) You may pay a deferred sales charge if you purchase $1 million or more and
you redeem within one year. See page 20 for details.
(e) Paid by the Portfolio. The investment adviser pays the sub-adviser out of
this fee. The investment adviser or its affiliate provides accounting
services to the Portfolio at its cost.
(f) If you hold Class B or C shares for a long time, it may cost you more in
distribution (12b-1) fees than the maximum sales charge that you would have
paid if you had bought one of the other classes. Class B and C shares pay a
Distribution Fee of 0.75% and an Account Maintenance Fee of 0.25%. Class A
shares pay only an Account Maintenance Fee of 0.25%.
(g) Based on estimated amounts for the current fiscal year. The Transfer Agent
is an affiliate of the investment adviser. The Fund pays the Transfer Agent
a fee for each shareholder account and reimburses it for out-of-pocket
expenses. The fee ranges from $11.00 to $23.00 per account (depending on the
level of services required), but is set at 0.10% for certain accounts that
participate in certain fee-based programs.
(h) Paid by the Fund. The administrator provides accounting services to the Fund
at its cost.
(i) In addition, certain securities dealers may charge a fee to process a
purchase or sale of shares.
4 MERCURY PAN-EUROPEAN GROWTH FUND
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Fund Facts
EXAMPLE
These examples are intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
These examples assume that you invest $10,000 in the Fund for the time periods
indicated, that your investment has a 5% return each year, that you pay the
sales charges, if any, that apply to the particular class and that the Fund's
operating expenses remain the same. This assumption is not meant to indicate you
will receive a 5% annual rate of return. Your annual return may be more or less
than the 5% used in these examples. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be:
Expenses if you did redeem your shares:
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CLASS I CLASS A CLASS B CLASS C
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ONE YEAR $ 657 $ 681 $ 640 $ 340
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THREE YEARS $ 936 $ 1,009 $ 1,040 $ 740
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Expenses if you did not redeem your shares:
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CLASS I CLASS A CLASS B CLASS C
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ONE YEAR $ 657 $ 681 $ 240 $ 240
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THREE YEARS $ 936 $ 1,009 $ 740 $ 740
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MERCURY PAN-EUROPEAN GROWTH FUND 5
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[ABOUT THE DETAILS LOGO]
About the Details
ABOUT THE PORTFOLIO MANAGEMENT TEAM -- The Fund is managed by members of a team
of 26 investment professionals who participate in the team's research process
and stock selection. The senior investment professionals in this group include
Simon Flood, Samuel Joab, Michel Legros, Andreas Utermann, and Charlotte
Winther. Andreas Utermann is primarily responsible for the day-to-day management
of the Fund.
ABOUT THE INVESTMENT ADVISER -- Mercury Asset Management International Ltd. is
the investment adviser.
HOW THE FUND INVESTS
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The Fund's main goal is long-term capital growth through investments primarily
in a diversified portfolio of equity securities of companies located in Europe.
In selecting securities, the Fund emphasizes those securities that Fund
management believes to be undervalued or have good prospects for earnings
growth.
The Fund will generally invest at least 80% of its total assets in equity
securities of companies located in Europe. 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 undervalued when the stock's current price is
less than what the Fund's management believes a share of the company is worth.
Fund 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
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 companies with slower earnings growth. The
Fund'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.
The Fund will invest primarily in securities of companies located in developed
European countries, including the United Kingdom, Germany, the Netherlands,
Switzerland, Sweden, France, Italy, Belgium, Norway, Denmark, Finland, Portugal,
Austria, Spain, Greece, Ireland and Luxembourg.
6 MERCURY PAN-EUROPEAN GROWTH FUND
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About the Details
The Fund 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 formally comprised Yugoslavia and the
Soviet Union. The Fund does not allocate investments based on its analysis of
the overall prospects for a particular European country. The Fund may invest in
debt securities that are issued together with a particular equity security. The
Fund 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 Fund may invest in companies of any size, but tends to focus on medium and
large companies. The Fund has no stated minimum holding period for investments,
and will buy or sell securities whenever the Fund's management sees an
appropriate opportunity. The Fund does not consider potential tax consequences
to Fund shareholders when it sells securities.
The Fund will normally invest almost all of its assets in the above described
manner. The Fund may, however, invest in short-term instruments, such as money
market securities and repurchase agreements, to meet redemptions. The Fund may
also make short-term investments, purchase high quality bonds or buy or sell
derivatives, to reduce exposure to equity securities when the Fund 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.
The Fund may use many different investment strategies in seeking its investment
objectives and it has certain investment restrictions. These strategies and
certain of the restrictions and policies governing the Fund's investments are
explained in the Fund's Statement of Additional Information. If you would like
to learn more about how the Fund may invest, request the Statement of Additional
Information.
MERCURY PAN-EUROPEAN GROWTH FUND 7
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[ABOUT THE DETAILS LOGO]
About the Details
INVESTMENT RISKS
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This section contains a summary discussion of the general risks of investing in
the Fund.
As with any mutual fund, there can be no guarantee that the Fund will meet its
goals, or that the Fund's performance will be positive over any period of time.
The Fund is subject to three principal risks: market risk, selection risk and
foreign investment risk. Market risk is the risk that the equity markets will go
down in value, including the possibility that the equity markets will go down
sharply and unpredictably. Selection risk is the risk that the stocks that the
Fund's adviser selects will underperform the markets or other funds with similar
investment objectives and investment strategies. Foreign investment risk is the
risk that the Fund's investments in non-U.S. securities may go up or down in
value depending on foreign exchange rates, foreign political and economic
developments and U.S. and foreign laws relating to non-U.S. investment. In
addition to these risks, certain investment techniques that the Fund may use
entail other risks:
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 the Fund would like. Restricted securities have
contractual or legal restrictions on their resale and include "private
placement" securities that the Fund may buy directly from the issuer. Also,
important information about these 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 agreed to enter 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. Among other things, EMU
establishes a single common European currency (the "euro") that will be
introduced on January 1, 1999 and is expected to replace the existing national
currencies of all EMU participants by July 1, 2002. Upon introduction of the
euro, certain securities (beginning with government and corporate bonds)
8 MERCURY PAN-EUROPEAN GROWTH FUND
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About the Details
will be redenominated in the euro, and, thereafter, will be listed, trade and
make dividend and other payments only in euros. Although EMU is generally
expected to have a beneficial effect, it could negatively affect the Fund in a
number of situations, including as follows:
- If the euro, or EMU as a whole, does not take effect as planned,
the Fund's investments could be adversely affected. For example,
sharp currency fluctuations, exchange rate volatility, and other
disruptions of the markets could occur.
- Withdrawal from EMU by a participating country could also have a
negative effect on the Fund's investments, for example if
securities redenominated in euros are transferred back into that
country's national currency.
- Computer, accounting, and trading systems must be capable of
recognizing the euro as a distinct currency. Like other investment
companies and business organizations, the Fund could be adversely
affected if the systems used by the investment adviser, the Fund's
other service providers, or entities with which the Fund or its
service providers do business do not properly address this issue
prior to euro conversion over the first weekend of 1999 (January 1
through January 3). These issues may negatively affect the
operations of the companies the Fund invests in as well.
OTHER FOREIGN SECURITY RISKS
- The value of the Fund'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.
- The Fund's non-U.S. securities holdings may be adversely affected
by foreign government action.
- International trade barriers or economic sanctions against certain
non-U.S. countries may adversely affect the Fund's non-U.S.
holdings.
MERCURY PAN-EUROPEAN GROWTH FUND 9
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About the Details
- The Fund 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 the Fund 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, the Fund'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 the Fund than
in more developed markets. This could limit the Fund's ability to
diversify its holdings among issuers, industries and countries.
- If the Fund 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 the Fund
would be able to collect amounts owed by a foreign government.
- 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 the Fund's assets may be uninvested
and not earning returns. The Fund may miss investment
opportunities or be unable to dispose of a security because of
these delays.
BORROWING
The use of borrowing can increase the Fund's exposure to market risk. That is,
when the Fund borrows money to make more investments than it otherwise could or
to meet redemptions, and the Fund's investments go down in value, the Fund's
losses will be magnified.
10 MERCURY PAN-EUROPEAN GROWTH FUND
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About the Details
DERIVATIVES
The Fund may also use instruments referred to as "Derivatives." Derivatives
are financial instruments the value of which 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 allow the Fund
to increase or decrease the level of risk to which the Fund is exposed more
quickly and efficiently than transactions in other types of instruments.
Derivatives, however, are volatile and involve significant risks, including
many of the risks described above. Other risks include:
- Credit risk -- the risk that the counterparty on a derivative
transaction will be unable to honor its financial obligation to the
Fund.
- 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 (such as borrowing money to
increase the amount of investments) 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, the Fund could receive lower
interest payments or experience a reduction in the value of the
derivative to below what the Fund 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.
MERCURY PAN-EUROPEAN GROWTH FUND 11
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About the Details
The Fund may use the following types of derivative instruments:
- Futures -- exchange-traded contracts involving the obligation of
the seller to deliver, and the buyer to receive, certain assets
(or a money payment based on the change in value of
certain assets or an index) at a specified time. Futures may
involve leverage risk and currency risk.
- Forwards -- private contracts involving the obligation of the
seller to deliver, and the buyer to receive, certain assets (or a
money payment based on the change in value of certain assets or an
index) at a specified time. Forwards involve credit risk and
leverage risk, and may involve currency risk.
- Options -- exchange-traded or private contracts involving the
right of a holder to deliver (a "put") or receive (a "call")
certain assets (or a money payment based on the change of certain
assets or an index) from another party at a specified price within
a specified time period. Options may involve leverage risk.
Private options also involve credit risk and liquidity risk.
Options may also involve currency risk.
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 the Fund to sell the securities back to the issuer or a third party at a
time that is disadvantageous to the Fund.
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.
12 MERCURY PAN-EUROPEAN GROWTH FUND
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About the Details
ADVISER'S HISTORICAL PERFORMANCE DATA
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The following tables present historical performance data for all accounts that
have been managed by the investment adviser or another Mercury investment
adviser and that have substantially similar (although not necessarily identical)
objectives and policies to the Fund's. These accounts have been managed using
investment styles and strategies substantially similar to those to be used in
managing the Fund. THESE FIGURES DO NOT REPRESENT THE PERFORMANCE OF THE FUND.
The Fund is newly organized and does not yet have a performance record. The
Fund's actual performance may be higher or lower, and past performance is no
guarantee of future results.
The composite figures shown in the tables presented below were calculated in the
following manner:
- Many of the accounts in the composite were managed by the
investment adviser's Mercury affiliates. All personnel of the
investment adviser and its Mercury affiliates are employed by a
single holding company. Portfolio managers perform management
services for accounts of various Mercury advisers, including the
Fund's investment adviser, depending on the nature of each
adviser's clients. The investment process, including the resources
available to the portfolio managers and the supervisory review, is
the same across advisers. As a practical matter, there is no
significant distinction between the process used in determining
the recommendations of the investment adviser and those of its
Mercury affiliates.
- The accounts included in the composite are not U.S. mutual funds,
and are not subject to the same rules and regulations (for
example, diversification and liquidity requirements and
restrictions on transactions with affiliates) as the Fund, or to
the same types of expenses that the Fund will pay. These
differences might have affected the performance figures shown
below.
- The composite figures have been calculated by weighting the
performance of each included account by the level of the account's
total assets at the beginning of each monthly or quarterly period.
Accounts were added to the composite as of
MERCURY PAN-EUROPEAN GROWTH FUND 13
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About the Details
the first full quarter under management and excluded at the end of
the last full quarter under management. Accordingly, the number of
accounts included in the composite vary by quarter, from two at
the beginning of 1992 to thirteen in the most recent quarter.
- The performance of each of the accounts in the composite may have
been influenced by the level of the account's total assets. Had an
account's assets been different, its performance might have been
higher or lower.
- The accounts presented were accounted for in various base
currencies other than U.S. dollars. The Fund will calculate its
net asset value daily in U.S. dollars. For purposes of this
presentation, the accounts' performance history was converted into
U.S. dollars on at least a quarterly basis using exchange rate
movements to approximate the equivalent U.S. dollar returns which
might have been achieved.
- The figures shown below represent the performance, converted to
U.S. dollars, of the composite's included accounts. THEY ARE NOT
THE PERFORMANCE OF THE FUND. Figures show total returns. Total
return shows you how much an investment has changed in value over
the stated time period and includes both capital appreciation and
income. The first table reflects average annual total returns.
This smooths out variations in annual performance by averaging
returns over the stated period. The second table shows actual
total returns for each one year period.
- To provide you with additional information, these composite
performance figures are presented two different ways. The "Gross
of Fees and Charges" row reflects the composite's gross
performance -- that is, performance before any deductions for fees
or expenses. These figures are hypothetical and presented for
information only; they do not reflect actual performance of the
accounts because the accounts would have paid fees and expenses.
The first table (average annual total returns) also includes a
"Net of Fees and Charges" section, which reflects
14 MERCURY PAN-EUROPEAN GROWTH FUND
<PAGE> 16
[ABOUT THE DETAILS LOGO]
About the Details
adjustments of the gross performance to reflect the deduction of
all of the fees and expenses that the Fund or a shareholder is
projected to pay as shown in the "Fees and Expenses" section at
the beginning of the Prospectus. Like the gross figures, the net
figures are hypothetical, because they do not reflect the actual
fees and charges paid by the included accounts. The net figures
assume the shareholder bought the shares at the beginning of the
period and sold (redeemed) the shares at the end of the period. To
the extent the Fund's expenses deviate from the projections, the
"Net of Fees and Charges" figures will be inaccurate. The effect
would be greater over longer periods due to compounding. The "Net
of Fees and Charges" performance figures differ by class because
the sales charges and account maintenance fees differ for each
class of shares. The net figures shown -- that is, the performance
results after all applicable deductions -- are equal to or lower
than the actual net results of the included accounts.
- Both tables include figures for a benchmark index (MSCI Europe)
and for the Lipper European funds universe so that
you can compare the composite's performance to the performance of
the market as a whole. The MSCI Europe Index is an unmanaged index
and does not reflect any fees or charges. The Lipper European
Funds Average reflects advisory fees and other fees and charges,
but does not reflect front-end or contingent deferred sales
charges.
MERCURY PAN-EUROPEAN GROWTH FUND 15
<PAGE> 17
[ABOUT THE DETAILS LOGO]
About the Details
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
THIS IS NOT THE FUND'S PERFORMANCE.
<TABLE>
<CAPTION>
FOR FOR FOR FOR FOR FOR FOR SIX AND
ONE-YEAR TWO-YEAR THREE-YEAR FOUR-YEAR FIVE-YEAR SIX-YEAR ONE-HALF YEAR
PERIOD PERIOD PERIOD PERIOD PERIOD PERIOD PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1998 1998 1998 1998 1998 1998 1998(1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
COMPOSITE OF SIMILAR ACCOUNTS,
RECALCULATED:
- ---------------------------------------------------------------------------------------------------------------------------------
NET OF FEES AND CHARGES (2):
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS I FEES AND CHARGES 24.7% 24.7% 25.4% 23.1% 21.3% 17.2% 17.1%
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A FEES AND CHARGES 24.4 24.4 25.1 22.8 21.0 16.9 16.8
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B FEES AND CHARGES 26.3 25.3 25.8 23.1 21.3 17.0 16.9
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS C FEES AND CHARGES 29.3 26.9 26.4 23.5 21.4 17.0 16.9
- ---------------------------------------------------------------------------------------------------------------------------------
GROSS OF FEES AND CHARGES (3): 33.4 29.9 29.5 26.5 24.3 19.8 19.7
- ---------------------------------------------------------------------------------------------------------------------------------
MSCI EUROPE INDEX (4): 37.1 33.5 26.9 24.8 23.0 18.3 17.8
- ---------------------------------------------------------------------------------------------------------------------------------
LIPPER EUROPEAN FUNDS AVERAGE
(DOES NOT INCLUDE SALES
CHARGES) (5): 34.0 28.6 24.9 22.4 21.6 17.1 16.7
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The investment adviser and its affiliates first began managing accounts with
substantially similar objectives and policies to those of the Fund on
January 1, 1992.
(2) Reflects the reinvestment of dividends and distributions, and the deduction
of all fees and expenses that the Fund or a shareholder is projected to pay
(including the maximum front-end sales charges paid when purchasing shares,
or the maximum deferred sales charge paid upon redeeming shares at the end
of each period shown). To the extent the Fund's expenses deviate from the
projections, the "Net of Fees and Charges" figures will be inaccurate. The
effect would be greater over longer periods due to compounding.
(3) Does not reflect the deduction of any fees, charges or expenses other than
certain brokerage commissions. These figures are hypothetical and presented
for information only; they do not reflect actual performance of the accounts
because the accounts would have paid fees and expenses.
(4) An unmanaged index comprised of stocks traded in the developed markets of
Europe. No sales charges, 12b-1 fees or advisory fees, and no other expenses
(e.g., custody or brokerage fees) are reflected in the total returns of the
Index. Index returns reflect reinvestment of net dividends and
distributions.
(5) An average of the performance of other U.S. investment companies that
concentrate their investments in equity securities whose primary trading
markets or operations are concentrated in the European region or a single
country within the region. The average does not reflect front-end or
contingent deferred sales charges that might be paid by an investor in a
fund included in the average, but does include 12b-1 fees, advisory fees and
other expenses. The average also reflects reinvestment of dividends and
distributions.
16 MERCURY PAN-EUROPEAN GROWTH FUND
<PAGE> 18
[ABOUT THE DETAILS LOGO]
About the Details
TOTAL RETURNS ON AN ANNUAL BASIS
- --------------------------------------------------------------------------------
THIS IS NOT THE FUND'S PERFORMANCE.
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS
ENDED
JUNE 30, FOR EACH YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
COMPOSITE OF SIMILAR ACCOUNTS,
RECALCULATED: GROSS OF FEES AND
CHARGES (1): 27.0% 18.9% 29.0% 24.2% 2.8% 27.7% 1.6%
- ------------------------------------------------------------------------------------------------
MSCI EUROPE INDEX (2): 26.5 23.8 21.1 21.6 2.3 29.3 (4.7)
- ------------------------------------------------------------------------------------------------
LIPPER EUROPEAN FUNDS AVERAGE
(DOES NOT INCLUDE SALES CHARGES)
(3): 27.9 17.1 24.7 16.7 3.0 28.5 (5.3)
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) Does not reflect the deduction of any fees, charges or expenses, other than
certain brokerage commissions. These figures are hypothetical and presented
for information only; they do not reflect actual performance of the accounts
because the accounts would have paid fees and expenses. If these fees and
expenses were included, the performance figures would be lower.
(2) An unmanaged index comprised of stocks traded in the developed markets of
Europe. No sales charges, 12b-1 fees or advisory fees, and no other expenses
(e.g., custody or brokerage fees) are reflected in the total returns of the
Index. Index returns reflect reinvestment of net dividends and
distributions.
(3) An average of the performance of other U.S. investment companies that
concentrate their investments in equity securities whose primary trading
markets or operations are concentrated in the European region or a single
country within the region. The average does not reflect front-end or
contingent deferred sales charges that might be paid by an investor in a
fund included in the average, but does include 12b-1 fees, advisory fees and
other expenses. The average also reflects reinvestment of dividends and
distributions.
MERCURY PAN-EUROPEAN GROWTH FUND 17
<PAGE> 19
[ACCOUNT CHOICES LOGO]
Account Choices
PRICING OF SHARES
- --------------------------------------------------------------------------------
The Fund offers four classes of shares, each with its own sales charge and
expense structure allowing you to invest in the way that best suits your needs.
Each share class represents an ownership interest in the same investment
portfolio. The class of shares you should choose will be affected by the size of
your investment and how long you plan to hold your shares. Your financial
consultant can help you determine which pricing option is best suited to your
personal financial goals.
For example, if you select Class I or A, you will pay a sales charge at the time
of purchase. If you buy Class A shares, you also will pay an ongoing account
maintenance fee of 0.25%. If you select Class B or C shares, you can invest the
full amount of your purchase price, but you will be subject to a distribution
fee and account maintenance fee payable over time and possibly a deferred sales
charge when you sell shares. You may be eligible for a sales charge waiver. See
the table below.
If you purchase Class B or C shares you pay a distribution fee of 0.75% and an
account maintenance fee of 0.25% on an ongoing basis. Because these fees are
paid out of the Fund's assets on an ongoing basis, over time these fees increase
the cost of your investment and may cost you more than paying an initial sales
charge.
The Fund's shares are distributed by Mercury Funds Distributor, a division of
Princeton Funds Distributor, Inc.
A subscription period for the shares will end on October 27, 1998, unless
extended. Subscriptions will be payable, shares will be issued and the Fund will
commence operations on the third business day after the end of the subscription
period. The Fund or the Distributor can terminate the subscription offering at
any time, in which case the Fund will not commence operations or will commence
operations with a limited number of shares.
After the Fund commences operations, shares can be purchased on each business
day.
18 MERCURY PAN-EUROPEAN GROWTH FUND
<PAGE> 20
[ACCOUNT CHOICES LOGO]
Account Choices
To better understand the pricing of the Fund's shares, we have summarized the
information below:
<TABLE>
<CAPTION>
CLASS I CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AVAILABILITY? LIMITED TO CERTAIN GENERALLY AVAILABLE GENERALLY AVAILABLE GENERALLY AVAILABLE
INVESTORS INCLUDING: THROUGH SELECTED THROUGH SELECTED THROUGH SELECTED
- Current Class I SECURITIES DEALERS. SECURITIES DEALERS. SECURITIES DEALERS.
shareholders
- Certain Retirement
Plans
- Participants of
certain sponsored
programs
- Certain affiliates
of selected securities
dealers
- ---------------------------------------------------------------------------------------------------------------------------
INITIAL SALES CHARGE? YES. PAYABLE AT TIME OF YES. PAYABLE AT TIME OF NO. ENTIRE PURCHASE NO. ENTIRE PURCHASE
PURCHASE. LOWER SALES PURCHASE. LOWER SALES PRICE IS INVESTED IN PRICE IS INVESTED IN
CHARGES AVAILABLE FOR CHARGES AVAILABLE FOR SHARES OF THE FUND. SHARES OF THE FUND.
CERTAIN LARGER CERTAIN LARGER
INVESTMENTS. INVESTMENTS.
- ---------------------------------------------------------------------------------------------------------------------------
DEFERRED SALES NO. (MAY BE CHARGED FOR NO. (MAY BE CHARGED FOR YES. PAYABLE IF YOU YES. PAYABLE IF YOU
CHARGE? PURCHASES OVER $1 PURCHASES OVER $1 REDEEM WITHIN SIX YEARS REDEEM WITHIN ONE YEAR
MILLION THAT ARE MILLION THAT ARE OF PURCHASE. OF PURCHASE.
REDEEMED WITHIN ONE REDEEMED WITHIN ONE
YEAR.) YEAR.)
- ---------------------------------------------------------------------------------------------------------------------------
ACCOUNT MAINTENANCE NO. 0.25% ACCOUNT 0.25% ACCOUNT 0.25% ACCOUNT
AND DISTRIBUTION MAINTENANCE FEE. NO MAINTENANCE FEE. 0.75% MAINTENANCE FEE. 0.75%
FEES? DISTRIBUTION FEE. DISTRIBUTION FEE. DISTRIBUTION FEE.
- ---------------------------------------------------------------------------------------------------------------------------
CONVERSION TO CLASS A NO. NO. YES, AUTOMATICALLY NO.
SHARES? AFTER 8 YEARS.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
MERCURY PAN-EUROPEAN GROWTH FUND 19
<PAGE> 21
[ACCOUNT CHOICES LOGO]
Account Choices
RIGHT OF ACCUMULATION -- permits you to pay the sales charge applicable to the
cost or value (whichever is higher) of all shares you own in the Mercury mutual
funds.
LETTER OF INTENT -- permits you to pay the sales charge that would be
applicable if you add up all shares of Mercury mutual funds that you agree to
buy within a 13 month period. Certain restrictions apply.
CLASS I AND A SHARES -- INITIAL SALES CHARGE OPTIONS
The public offering price of Class I and Class A shares during the subscription
period is $10.00 per share. If you select Class I or A shares, you will pay a
sales charge at the time of purchase (whether during or after the subscription
period) as shown in the following table. During the subscription period,
securities dealers will receive compensation equal to the entire sales charge
(and therefore, may be deemed to be underwriters). After the subscription
period, the dealer compensation will be as shown in the last column.
<TABLE>
<CAPTION>
DEALER
COMPENSATION
AS A % OF AS A % OF AS A % OF
YOUR INVESTMENT OFFERING PRICE YOUR INVESTMENT* OFFERING PRICE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
LESS THAN $25,000 5.25% 5.54% 5.00%
- ---------------------------------------------------------------------------------------
$25,000 BUT LESS THAN
$50,000 4.75% 4.99% 4.50%
- ---------------------------------------------------------------------------------------
$50,000 BUT LESS THAN
$100,000 4.00% 4.17% 3.75%
- ---------------------------------------------------------------------------------------
$100,000 BUT LESS THAN
$250,000 3.00% 3.09% 2.75%
- ---------------------------------------------------------------------------------------
$250,000 BUT LESS THAN
$1,000,000 2.00% 2.04% 1.80%
- ---------------------------------------------------------------------------------------
$1,000,000 AND OVER** 0.00% 0.00% 0.00%
- ---------------------------------------------------------------------------------------
</TABLE>
* Rounded to the nearest one-hundredth percent.
** If you invest $1,000,000 or more in Class I or A shares, you may not pay an
initial sales charge. However, if you redeem your shares within one year
after purchase, you may be charged a deferred sales charge. This charge is 1%
of the lesser of the original cost of the shares being redeemed or your
redemption proceeds. A sales charge of 0.75% will be charged on purchases of
$1,000,000 or more of Class I and A shares by certain employer sponsored
retirement or savings plans.
No initial sales charge applies to Class I or Class A shares that you buy
through reinvestment of dividends or distributions.
A reduced or waived sales charge on a purchase of Class I or A shares may apply
for:
- Purchases under a RIGHT OF ACCUMULATION or LETTER OF INTENT.
- Certain trusts managed by banks, thrifts or trust companies
including those affiliated with Mercury or its affiliates.
- Certain employer-sponsored retirement or savings plans.
20 MERCURY PAN-EUROPEAN GROWTH FUND
<PAGE> 22
[ACCOUNT CHOICES LOGO]
Account Choices
- Certain investors, including directors of mutual funds sponsored
by Mercury or its affiliates, employees of Mercury and its
affiliates, and employees of selected dealers.
- Certain fee-based programs managed by Mercury or its affiliates.
- Certain fee-based programs managed by selected dealers that have
an agreement with Mercury.
- Purchases through certain financial advisers that meet and adhere
to standards established by Mercury.
Only certain investors are eligible to buy Class I shares, including existing
Class I shareholders of the Fund, certain retirement plans and participants in
certain programs sponsored by Mercury or its affiliates. Your financial
consultant can help you determine whether you are eligible to buy Class I shares
or to participate in any of these programs.
If you decide to buy shares under the initial sales charge alternative and you
are eligible to buy both Class I and Class A shares, you should buy Class I
shares since Class A shares are subject to an account maintenance fee, while
Class I shares are not.
If you redeem Class I or Class A shares and within 30 days buy new shares of the
same class, you will not pay a sales charge on the new purchase amount. The
amount eligible for this "Reinstatement Privilege" may not exceed the amount of
your redemption proceeds. To exercise the privilege, contact your financial
consultant or the Fund's Transfer Agent at 1-888-763-2260.
CLASS B AND C SHARES -- DEFERRED SALES CHARGE OPTIONS
If you select Class B or Class C shares, you do not pay an initial sales charge
at the time of purchase. However, if you redeem your Class B shares within six
years after purchase or Class C shares within one year after purchase, you may
be required to pay a deferred sales charge. You will also pay distribution fees
of 0.75% and account maintenance fees of 0.25% each year. The Distributor uses
the money that it receives from the deferred sales charge and the distribution
fees to cover the costs of marketing, advertising and compensating the financial
consultant or other dealer who assists you in your decision to purchase Fund
shares. The public offering price of Class B and C shares during the
subscription period will be $10.00 per share.
MERCURY PAN-EUROPEAN GROWTH FUND 21
<PAGE> 23
[ACCOUNT CHOICES LOGO]
Account Choices
CLASS B SHARES
If you redeem Class B shares within six years after purchase, you may be charged
a deferred sales charge. The amount of the charge gradually decreases as you
hold your shares over time, according to the following schedule:
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE Sales Charge*
- ---------------------------------------
<S> <C>
0 - 1 4.00%
- ---------------------------------------
1 - 2 4.00%
- ---------------------------------------
2 - 3 3.00%
- ---------------------------------------
3 - 4 3.00%
- ---------------------------------------
4 - 5 2.00%
- ---------------------------------------
5 - 6 1.00%
- ---------------------------------------
6 AND AFTER 0.00%
- ---------------------------------------
</TABLE>
* The percentage charge will apply to the lesser of the original cost of the
shares being redeemed or the proceeds of your redemption. Shares acquired by
dividend or capital gain reinvestment are not subject to a deferred sales
charge. Mercury funds may not all have identical deferred sales charge
schedules. In the event of an exchange for the shares of another Mercury fund,
the higher charge, if any, would apply.
The deferred sales charge relating to Class B shares will be reduced or waived
in certain circumstances, such as:
- Certain post-retirement withdrawals from an IRA or other
retirement plan if you are over 59 1/2 years old (certain legal
documentation may be required at the time of liquidation
establishing eligibility for qualified distribution).
- Redemption by certain eligible 401(a) and 401(k) plans and certain
retirement plan rollovers.
- Redemption in connection with participation in certain fee-based
programs managed by Mercury or its affiliates.
- Redemption in connection with participation in certain fee-based
programs managed by selected dealers that have agreements with
Mercury.
- Withdrawals resulting from shareholder death or disability as long
as the waiver request is made within one year after death or
disability (certain legal documentation may be required at the
time of liquidation establishing eligibility for qualified
distribution).
- Withdrawal through the Systematic Withdrawal Plan of up to 10% per
year of your account value at the time the plan is established.
22 MERCURY PAN-EUROPEAN GROWTH FUND
<PAGE> 24
[ACCOUNT CHOICES LOGO]
Account Choices
Your Class B shares convert automatically into Class A shares approximately
eight years after purchase. Any Class B shares received through reinvestment of
dividends or distributions paid on converting shares will also convert at that
time. Class A shares are subject to lower annual expenses than Class B shares.
The conversion of Class B shares to Class A shares is not a taxable event for
federal income tax purposes.
Different conversion schedules may apply to Class B shares of different Mercury
mutual funds. If you acquire your Class B shares in an exchange from another
fund with a shorter conversion schedule, the Fund's eight year conversion
schedule will apply. If you exchange your Class B shares in the Fund for Class B
shares of a fund with a longer conversion schedule, the other fund's conversion
schedule will apply. In any event, the length of time that you hold the original
and exchanged Class B shares in both funds will count toward the conversion
schedule.
The conversion schedule may be modified in certain other cases as well.
CLASS C SHARES
If you redeem Class C shares within one year after purchase, you may be charged
a deferred sales charge of 1.00%. The charge will apply to the lesser of the
original cost of the shares being redeemed or the proceeds of your redemption.
You will not be charged a deferred sales charge when you redeem shares that you
acquire through reinvestment of Fund dividends or distributions.
Class C shares do not offer a conversion privilege.
HOW TO BUY, SELL, TRANSFER AND EXCHANGE SHARES
- --------------------------------------------------------------------------------
The chart below summarizes how to buy, sell, transfer and exchange shares
through certain securities dealers. You may also buy shares through the Transfer
Agent. To learn more about buying shares through the Transfer Agent, call
1-888-763-2260. Because the selection of a mutual fund involves many
considerations, your financial consultant may help you with this decision.
MERCURY PAN-EUROPEAN GROWTH FUND 23
<PAGE> 25
[ACCOUNT CHOICES LOGO]
Account Choices
<TABLE>
<CAPTION>
IF YOU WANT TO YOUR CHOICES INFORMATION IMPORTANT FOR YOU TO KNOW
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BUY SHARES First, select the share class Please refer to the pricing of shares table on page 19. Be
appropriate for you sure to read this Prospectus carefully.
-------------------------------------------------------------------------------------------------
Next, determine the amount of The minimum initial investment for the Fund is $1,000 for
your investment all accounts except:
- $500 for certain fee-based programs
- $100 for retirement plans
(The minimums for initial investments may be waived or
reduced under certain circumstances.)
-------------------------------------------------------------------------------------------------
Have your financial consultant Any purchase orders received by a securities dealer prior to
or securities dealer submit the close of business on the New York Stock Exchange and
your purchase order received by the Distributor from the securities dealer
within thirty minutes after the close of business on the New
York Stock Exchange will be priced at the net asset value
determined that day.
Purchase orders received after that time will be priced at
the net asset value determined on the next business day. The
Fund may reject any order to buy shares and may suspend the
sale of shares at any time. Certain securities dealers may
charge a fee to process a purchase. For example, the fee
charged by Merrill Lynch, Pierce, Fenner & Smith
Incorporated is currently $5.35. The fees charged by other
securities dealers may be higher or lower.
-------------------------------------------------------------------------------------------------
Or contact the Transfer Agent Instead of purchasing through a financial consultant or
securities dealer, you can purchase shares of the Fund by
mailing a purchase order directly to the Transfer Agent at
the address on the inside back cover of this Prospectus.
- ------------------------------------------------------------------------------------------------------------------------
ADD TO YOUR Purchase additional shares The minimum investment for additional purchases is $100 for
INVESTMENT all accounts except:
- $50 for certain fee-based programs
- $1 for retirement plans
(The minimums for additional purchases may be waived under
certain circumstances.)
-------------------------------------------------------------------------------------------------
Acquire additional shares All dividends and capital gains distributions are
through the automatic dividend automatically reinvested without a sales charge.
reinvestment plan
-------------------------------------------------------------------------------------------------
Participate in the automated You may automatically invest a specific amount in the Fund
investment plan on a periodic basis through your securities dealer:
- The current minimum for such automatic investments is $50.
The minimum may be waived or revised under certain
circumstances.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
24 MERCURY PAN-EUROPEAN GROWTH FUND
<PAGE> 26
[ACCOUNT CHOICES LOGO]
Account Choices
<TABLE>
<CAPTION>
IF YOU WANT TO YOUR CHOICES INFORMATION IMPORTANT FOR YOU TO KNOW
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TRANSFER SHARES TO Transfer to a participating To transfer your shares of the Fund to another securities
ANOTHER SECURITIES securities dealer dealer, authorized dealer agreements must be in place
DEALER between the Distributor and the transferring securities
dealer and the Distributor and the receiving securities
dealer. All shareholder services will be available for all
transferred shares. All future trading of these shares must
be coordinated by the receiving securities dealer.
-------------------------------------------------------------------------------------------------
Transfer to a non-participating You cannot transfer your shares of the Fund to a securities
securities dealer dealer that does not have an authorized dealer agreement
with the Distributor.
You must either:
- Transfer your shares to an account with the Transfer
Agent; or
- Sell your shares.
- ------------------------------------------------------------------------------------------------------------------------
SELL YOUR SHARES Have your financial consultant To ensure that your sales order will be priced at the net
or securities dealer submit asset value on the day of your request, you must submit your
your sales order request to your dealer before that day's close of business
on the New York Stock Exchange (generally 4:00 p.m. Eastern
time). The Fund accepts sales orders from dealers on any
business day until thirty minutes after the close of
business on the New York Stock Exchange (meaning that the
request must be received from the dealer by 4:30 p.m.
Eastern time on most days, and earlier on a few days). Any
sales order request received from a dealer after that time
will be priced at the close of business on the next business
day.
Certain securities dealers may charge a fee to process a
sale of shares. For example, the fee charged by Merrill
Lynch, Pierce, Fenner & Smith, Incorporated is currently
$5.35. The fees charged by other securities dealers may be
higher or lower.
The Fund may reject an order to sell shares under certain
circumstances.
-------------------------------------------------------------------------------------------------
Sell through the Transfer Agent You may sell shares held at the Transfer Agent by writing to
the Transfer Agent at the address on the inside back cover
of this Prospectus. All shareholders on the account must
sign the letter and signatures must be guaranteed. Depending
on the type of account and/or type of distribution, certain
additional documentation may be required. The Transfer Agent
will normally mail sale proceeds within seven days following
receipt of a properly completed request. If you make a sales
order request before the Fund has collected payment for the
purchase of shares, the Fund or the Transfer Agent may delay
mailing your proceeds. This delay usually will not exceed
ten days.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
MERCURY PAN-EUROPEAN GROWTH FUND 25
<PAGE> 27
[ACCOUNT CHOICES LOGO]
Account Choices
<TABLE>
<CAPTION>
IF YOU WANT TO YOUR CHOICES INFORMATION IMPORTANT FOR YOU TO KNOW
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SELL SHARES Participate in the Fund's You can generally arrange through your selected dealer for
SYSTEMATICALLY Systematic Redemption Program systematic sales of shares of a fixed dollar amount on a
monthly, bi-monthly, quarterly, semi-annual or annual basis,
subject to certain conditions. You must have dividends and
other distributions automatically reinvested. For Class B
and C shares your total annual withdrawals cannot be more
than 10% of the value of your shares at the time the Program
is established. The deferred sales charge is waived for
systematic sales of shares. Ask your financial consultant
for details.
- ------------------------------------------------------------------------------------------------------------------------
EXCHANGE YOUR Select the fund into which you You can exchange your shares of the Fund for shares of other
SHARES want to exchange. Be sure to Mercury mutual funds or for shares of the Summit Cash
read that fund's prospectus Reserves Fund. You must have held the shares used in the
exchange for at least 15 calendar days before you can
exchange to another fund.
Each class of Fund shares is generally exchangeable for
shares of the same class of another Mercury fund. If you own
Class I or Class A shares and wish to exchange into Summit,
you will exchange into Class A shares of Summit. Class B or
Class C shares can be exchanged for Class B shares of
Summit.
Some of the Mercury mutual funds may impose a different
initial or deferred sales charge schedule. If you exchange
Class I or Class A shares for shares of a fund with a higher
initial sales charge than you originally paid, you may be
charged the difference at the time of exchange. If you
exchange Class B or Class C shares for shares of a fund with
a different deferred sales charge schedule, the higher
schedule will apply. The time you hold Class B or Class C
shares in both funds will count when determining your
holding period for calculating a deferred sales charge at
redemption. Your time in both funds will also count when
determining the holding period for a conversion from Class B
to Class A shares.
Although there is currently no limit on the number of
exchanges that you can make, the exchange privilege may be
modified or terminated at any time in the future.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
26 MERCURY PAN-EUROPEAN GROWTH FUND
<PAGE> 28
[ACCOUNT CHOICES LOGO]
Account Choices
NET ASSET VALUE -- the market value in U.S. dollars of a Fund's total assets
after deducting liabilities, divided by the number of shares outstanding.
HOW SHARES ARE PRICED
- --------------------------------------------------------------------------------
When you buy shares, you pay the NET ASSET VALUE, plus any applicable sales
charge. This is the offering price. Shares are also redeemed at their net asset
value, minus any applicable deferred sales charge. The Fund calculates its net
asset value (generally by using market quotations) each day the New York Stock
Exchange is open, fifteen minutes after the close of business on the Exchange
(the Exchange generally closes at 4:00 p.m. Eastern time). The net asset value
used in determining your price is the one calculated after your purchase or
redemption order is received. Net asset value is generally calculated by valuing
each security at its closing price for the day. Many of the Fund'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 the Fund's net asset value.
Non-U.S. securities sometimes trade on days that the New York Stock Exchange is
closed. As a result, the Fund's net asset value may change on days when you will
not be able to purchase or redeem the Fund's shares. If an event occurs after
the close of a non-U.S. exchange that is likely to significantly affect the
Fund's net asset value, "fair value" pricing may be used. This means that the
Fund may value its foreign holdings at prices other than their last closing
prices, and the Fund'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.
Generally, Class I shares will have the highest net asset value, because that
class has the lowest expenses, and Class A shares will have a higher net asset
value than Class B or Class C shares. Also, dividends paid on Class I and Class
A shares will generally be higher than dividends paid on Class B and Class C
shares because Class I and Class A shares have lower expenses.
MERCURY PAN-EUROPEAN GROWTH FUND 27
<PAGE> 29
[ACCOUNT CHOICES LOGO]
Account Choices
DIVIDENDS -- income paid to shareholders. Dividends may be reinvested in
additional Fund shares as they are paid.
DISTRIBUTIONS -- capital gains paid to shareholders. Distributions may be
reinvested in the Fund as they are paid.
FEE-BASED PROGRAMS
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If you participate in certain fee-based programs offered by Mercury or an
affiliate of Mercury, or by selected dealers that have an agreement with
Mercury, you may be able to buy Class I shares at net asset value, including
through exchange from other share classes. Sales charges on the shares being
exchanged may be reduced or waived under certain circumstances.
You generally cannot transfer shares held through a fee-based program into
another account. Instead, you will have to redeem your shares held through the
program and purchase shares of another class, which may be subject to
distribution and account maintenance fees. This may be a taxable event and you
will pay any applicable sales charges.
If you leave one of these programs, your shares may be redeemed or automatically
exchanged into another class of Fund shares or into the Summit fund. The class
you receive may be the class you originally owned when you entered the program,
or in certain cases, a different class. If the exchange is into Class B shares,
the period before conversion to Class A shares may be modified. Any redemption
or exchange will be at net asset value. However, if you participate in the
program for less than a specified period, you may be charged a fee in accordance
with the terms of the program.
Details about these features and the relevant charges are included in the client
agreement for each fee-based program and are available from your financial
consultant or your selected dealer.
DIVIDENDS, CAPITAL GAINS AND TAXES
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The Fund will distribute any net investment income and any net realized long or
short-term capital gains at least annually. The Fund may also pay a special
distribution at the end of the calendar year to comply with federal tax
requirements. DIVIDENDS and DISTRIBUTIONS may be reinvested automatically in
shares of the Fund at net asset value without a sales charge or taken in cash.
If your account is with a securities dealer that has an agreement with the Fund,
contact your financial consultant about which option you would like. If your
account is with the Transfer Agent, and you would like to receive dividends and
distributions in cash, contact the Transfer Agent.
28 MERCURY PAN-EUROPEAN GROWTH FUND
<PAGE> 30
[ACCOUNT CHOICES LOGO]
Account Choices
"BUYING A DIVIDEND"
Unless your investment is in a tax-deferred account, you may want to avoid
buying shares shortly before the Fund pays a dividend or distribution. The
reason? If you buy shares when a fund has realized but not yet distributed
income or capital gains, you will pay the full price for the shares and then
receive a portion of the price back in the form of a taxable distribution.
Before investing you may want to consult your tax advisor.
You will pay tax on dividends and distributions from the Fund whether you
receive them in cash or additional shares.
If you redeem Fund shares or exchange them for shares of another fund, any gain
on the transaction may be subject to tax.
The Fund intends to make distributions that will either be taxed as ordinary
income or capital gains. Capital gains distributions may be taxable at different
rates depending on the length of time the Fund has held the assets sold.
The Fund expects to make an election that will require you to include in income
your share of foreign withholding taxes paid by the Fund. You will be entitled
to treat these taxes as taxes paid by you, and therefore, deduct such taxes in
computing your taxable income or, in some cases, to use them as foreign tax
credits against the U.S. income taxes you otherwise owe.
If you are neither a lawful permanent resident nor a citizen of the U.S. or if
you are a foreign entity, the Fund's ordinary income dividends (which include
distributions of net short-term capital gains) will generally be subject to a
30% U.S. withholding tax, unless a lower treaty rate applies.
By law, the Fund must withhold 31% of your distributions and proceeds if you
have not provided a taxpayer identification number or social security number.
This section summarizes some of the consequences under current federal tax law
of an investment in the Fund. It is not a substitute for personal tax advice.
Consult your personal tax advisor about the potential tax consequences of an
investment in the Fund under all applicable tax laws.
MERCURY PAN-EUROPEAN GROWTH FUND 29
<PAGE> 31
[THE MANAGEMENT TEAM LOGO]
The Management Team
MASTER/FEEDER STRUCTURE
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Unlike many other mutual funds, which directly buy and manage their own
portfolio securities, the Fund seeks to achieve its investment objectives by
investing all its assets in the corresponding Portfolio of the Mercury Asset
Management Master Trust. Investors in the Fund will acquire an indirect interest
in the underlying Portfolio.
Other "feeder" funds may also invest in the "master" Portfolio. This structure
may enable the Fund to reduce costs through economies of scale. A larger
investment portfolio may also reduce certain transaction costs to the extent
that contributions to and redemptions from the master from different feeders may
offset each other and produce a lower net cash flow.
The Fund may withdraw from the Portfolio at any time and may invest all of its
assets in another pooled investment vehicle or retain an investment adviser to
manage the Fund's assets directly.
Smaller feeder funds may be harmed by the actions of larger feeder funds. For
example, a larger feeder fund could have more voting power than the Fund over
the operations of the Portfolio.
Whenever the Portfolio holds a vote of its feeder funds, the Fund will pass the
vote through to its own shareholders.
30 MERCURY PAN-EUROPEAN GROWTH FUND
<PAGE> 32
[THE MANAGEMENT TEAM LOGO]
The Management Team
MANAGEMENT OF THE FUND
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Mercury Asset Management International Ltd. manages the underlying Portfolio's
investments under the overall supervision of the Board of Trustees of the
Mercury Asset Management Master Trust. The investment adviser has the
responsibility for making all investment decisions for the Fund.
The senior investment professionals in the group that have managed the Fund's
portfolio since the Fund started operations include:
Simon Flood, Director of Mercury Asset Management. He has been employed as an
investment professional by the investment adviser since 1989.
Samuel Joab, Associate Director of Mercury Asset Management. He has been
employed as an investment professional by the investment adviser since 1992.
Michel Legros, Director of Mercury Asset Management. He has been employed as an
investment professional by the investment adviser and its affiliates since 1991.
Andreas Utermann, Director of Mercury Asset Management. He has been employed as
an investment professional by the investment adviser since 1990. Mr. Utermann is
primarily responsible for the day-to-day management of the Fund.
Charlotte Winther has been employed as an investment professional by the
investment adviser since 1998. Ms. Winther was employed at Unibank Asset
Management from 1989 to 1998.
Mercury and its affiliates manage portfolios with over $489.3 billion in assets
(as of June 1998) for individuals and institutions seeking investments
worldwide. This amount includes assets managed for its affiliates. The
management agreement between the Trust and the investment adviser gives the
investment adviser the responsibility for making all investment decisions.
MERCURY PAN-EUROPEAN GROWTH FUND 31
<PAGE> 33
[THE MANAGEMENT TEAM LOGO]
The Management Team
The investment adviser is paid at the rate of 0.75% of the Portfolio's average
daily net assets.
The investment adviser has hired Fund Asset Management, L.P., an affiliate, to
manage daily cash assets. The Fund does not pay any incremental fee for this
service, although Mercury may make payments to Fund Asset Management, L.P. See
"Fees and Expenses" under "Fund Facts" for information about the fees paid to
Mercury Asset Management and its affiliates.
The Fund does not have an investment adviser, since the Fund's assets will be
invested in its corresponding Portfolio. Fund Asset Management, L.P. provides
administrative services to the Fund.
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 Fund could be adversely
affected if the computer systems used by the investment adviser or other Fund
service providers do not properly address this problem before January 1, 2000.
The investment adviser expects to have addressed this problem before then, and
does not anticipate that the services it provides will be adversely affected.
The Fund's other service providers have told the administrator that they also
expect to resolve the Year 2000 Problem, and the administrator will continue to
monitor the situation as the year 2000 approaches. However, if the problem has
not been fully addressed, the Fund could be negatively affected. The Year 2000
Problem could also have a negative impact on the companies in which the Fund
invests, and this could hurt the Fund's investment returns.
32 MERCURY PAN-EUROPEAN GROWTH FUND
<PAGE> 34
[THE MANAGEMENT TEAM LOGO]
The Management Team
FUND
Mercury Pan-European Growth Fund
of Mercury Asset Management Funds, Inc.
P.O. Box 9011
Princeton, New Jersey 08543-9011
(888-763-2260)
INVESTMENT ADVISER
Mercury Asset Management International Ltd.
33 King William Street
London EC4R 9AS
England
ADMINISTRATOR AND SUB-ADVISER
Fund Asset Management, L.P.
800 Scudders Mill Road
Plainsboro, New Jersey 08536
TRANSFER AGENT
Financial Data Services, Inc.
P.O. Box 45289
Jacksonville, Florida 32232-5289
(888-763-2260)
INDEPENDENT AUDITORS
Deloitte & Touche LLP
117 Campus Drive
Princeton, New Jersey 08540-6400
DISTRIBUTOR
Mercury Funds Distributor,
a division of Princeton Funds Distributor, Inc.
P.O. Box 9081
Princeton, New Jersey 08543-9081
CUSTODIAN
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
COUNSEL
Swidler Berlin Shereff Friedman, LLP
919 Third Avenue
New York, New York 10022
MERCURY PAN-EUROPEAN GROWTH FUND
<PAGE> 35
[TO LEARN MORE LOGO]
To Learn More
SHAREHOLDER REPORTS
Additional information about the Fund's investments is available in the Fund's
annual and semi-annual reports to shareholders. In the Fund's annual report you
will find a discussion of the relevant market conditions and investment
strategies that significantly affected the Fund's performance during its last
fiscal year. You may obtain these reports at no cost by calling 1-888-763-2260.
If you hold your Fund shares through a brokerage account or directly at the
Transfer Agent, you may receive only one copy of each shareholder report and
certain other mailings regardless of the number of Fund accounts you have. If
you prefer to receive separate shareholder reports for each account (or if you
are receiving multiple copies and prefer to receive only one), call your
financial consultant or, if none, write to the Transfer Agent at its mailing
address. Include your name, address, tax identification number and brokerage or
mutual fund account number. If you have any questions, please call your
financial consultant or the Transfer Agent at 1-888-763-2260.
STATEMENT OF ADDITIONAL INFORMATION
The Fund's Statement of Additional Information contains further information
about the Fund and is incorporated by reference (legally considered to be part
of this Prospectus). You may request a free copy by writing or calling the Fund
at the address and telephone number indicated above.
Contact your financial consultant or the Fund at the telephone number or address
indicated on the inside back cover of this Prospectus if you have any questions.
Information about the Fund (including the Statement of Additional Information)
can be reviewed and copied at the SEC's Public Reference Room in Washington,
D.C. Call 1-800-SEC-0330 for information on the operation of the public
reference room. This information is also available on the SEC's Internet Site at
http://www.sec.gov and copies may be obtained upon payment of a duplicating fee
by writing the Public Reference Section of the SEC, Washington, D.C. 20549-6009.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. NO ONE IS
AUTHORIZED TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT.
Investment Company Act File #811-08797.
CODE #19034-0898
(C) Mercury Asset Management International Ltd.
MERCURY PAN-EUROPEAN GROWTH FUND
OF MERCURY ASSET MANAGEMENT FUNDS, INC.
[MERCURY ARTWORK]
PROSPECTUS - AUGUST 14, 1998
[MERCURY ASSET MANAGEMENT LOGO]
