MERCURY QA EQUITY SERIES INC /NJ/, 497, 2000-03-14

MERCURY QA EQUITY SERIES INC /NJ/
497, 2000-03-14

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SUBJECT TO COMPLETION, DATED MARCH 13, 2000

The information contained in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

PROSPECTUS March 1, 2000

Mercury QA Equity Series, Inc.

Mercury QA Large Cap Core Fund

Mercury QA Large Cap Value Fund

Mercury QA Large Cap Growth Fund

Mercury QA Mid Cap Fund

Mercury QA Small Cap Fund

Mercury QA International Fund

[LOGO FOR QA EQUITY]

A SUBSCRIPTION PERIOD FOR SHARES OF THE FUNDS WILL END ON MAY 2, 2000, 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.

[LOGO OF MERCURY ASSET MANAGEMENT]

Table of Contents

PAGE

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FUND FACTS


About the Mercury QA Equity Funds 2

Risk/Return Bar Chart and Table 6

Fees and Expenses 7

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ABOUT THE DETAILS


How the Funds Invest 17

Investment Risks 19

Statement of Additional Information 25


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ACCOUNT CHOICES


Pricing of Shares 26

How to Buy, Sell, Transfer and Exchange Shares 31

How Shares are Priced 35

Fee-Based Programs 36

Dividends and Taxes 36

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THE PORTFOLIO MANAGEMENT


Management of the Funds 38

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TO LEARN MORE


Shareholder Reports back cover
Statement of Additional Information back cover

MERCURY QA EQUITY SERIES, INC.

[GRAPHIC] Fund Facts

In an effort to help you better understand the many concepts involved in making an investment decision, we have defined highlighted terms in this Prospectus in the sidebar.

Large-capitalization Companies —companies that have market capitalizations in the range of companies included in the Standard & Poor’s 500 Composite Stock Price Index (currently at least $5.3 billion).

Standard & Poor’s 500 Composite Stock Price Index — a market-weighted index composed of common stocks issued by 500 U.S. large-capitalization companies in a wide range of businesses. The stocks included in the index collectively represent a substantial portion of all common stocks publicly traded in the U.S.

Common Stock — units of ownership of a corporation.

Mid-capitalization Companies —companies that have market capitalizations in the range of companies included in the Standard & Poor’s MidCap 400 Index (currently between $137 million and $3.8 billion).

Standard & Poor’s MidCap 400 Index — a market-weighted index composed of common stocks issued by 400 U.S. mid-capitalization companies in a wide range of businesses.

Small-capitalization Companies —companies that have market capitalizations in the range of companies included in the Standard & Poor’s SmallCap 600 Index (currently below $382 million).

Standard & Poor’s SmallCap 600 Index — a market-weighted index composed of common stocks issued by 600 U.S. smaller-capitalization companies in a wide range of businesses.

ABOUT THE MERCURY QA EQUITY FUNDS

What is each Fund’s investment objective?

Mercury QA Large Cap Core Fund

The investment objective of the Mercury QA Large Cap Core Fund (the “Large Cap Core Fund”) is to provide long term growth of capital.

Mercury QA Large Cap Value Fund

The investment objective of the Mercury QA Large Cap Value Fund (the “Large Cap Value Fund”) is primarily to provide long term growth of capital and, secondarily to provide dividend income.

Mercury QA Large Cap Growth Fund

The investment objective of the Mercury QA Large Cap Growth Fund (the “Large Cap Growth Fund”) is to provide long term growth of capital.

Mercury QA Mid Cap Fund

The investment objective of the Mercury QA Mid Cap Fund (the “Mid Cap Fund”) is to provide long term growth of capital.

Mercury QA Small Cap Fund

The investment objective of the Mercury QA Small Cap Fund (the “Small Cap Fund”) is to provide long term growth of capital.

Mercury QA International Fund

The investment objective of the Mercury QA International Fund (the “International Fund”) is to provide long term growth of capital.

We cannot guarantee that a Fund will achieve its objectives.

What are the Funds’ main investment strategies?

Each Fund (other than the International Fund) normally invests at least 65% of its total assets in equity securities of U.S. issuers. Each of the Large Cap Core Fund, Large Cap Value Fund and Large Cap Growth Fund normally invests at least 65% of its total assets in equity securities of large-capitalization companies. Each of the Mid Cap Fund and Small Cap Fund normally invests at least 65% of its total assets in equity securities of mid-capitalization companies and small-capitalization companies, respectively. The International Fund normally invests at least 65% of its total assets in equity securities of companies whose primary trading markets are located outside of the United States.

MERCURY QA EQUITY SERIES, INC.

[GRAPHIC] Fund Facts

Quantitative Analysis — focuses on quantifiable measures as opposed to qualitative considerations such as the character of management.

“Top-down” Analysis — analysis in which the investment adviser first looks at trends in the general economy, and next selects industries and then companies that should benefit from those trends.

“Bottom-up” Stock Selection Approach — searching for outstanding performance of individual stocks before considering the impact of economic trends.

“Value” Strategy — a strategy in which the focus is to invest in “value” stocks.

“Value” Stocks — stocks of companies that are selling at low to modest valuations relative to general market measures, such as earnings, book value and other fundamental accounting measures, and that are expected to have favorable prospects for capital appreciation and/or dividend-paying ability.

“Growth” Strategy — a strategy in which the focus is to invest in “growth” stocks.

“Growth” Stocks — stocks of companies that are expected to have better prospects for earnings growth than the growth rate of the general domestic economy.

The investment adviser seeks to maximize each Fund’s expected return by utilizing a disciplined approach to sector weighting, stock selection and portfolio construction which combines quantitative analysis, in-depth research and risk management disciplines to produce style purity with respect to a particular market segment. The investment adviser uses three principal strategies to select investments for each Fund. First the investment adviser uses a “top-down” analysis to identify high performing sectors. Second, the investment adviser uses a “bottom-up” stock selection approach to identify those securities within a sector that seem to be the most attractive. Depending on the Fund, this analysis involves selection of stocks through a “value” strategy, a “growth” strategy, or a blend of the two. Third, the investment adviser uses quantitative risk management techniques to produce an overall portfolio with risk and style characteristics similar to each Fund ’s respective market segment.

The market segment and style investment analysis for each of the Funds is as follows:

Fund		Market Segment

Large Cap Core Fund		stocks of large-capitalization companies selected through a blend of “value” and “growth” strategies

Large Cap Value Fund		stocks of large-capitalization companies selected through a “value” strategy

Large Cap Growth Fund		stocks of large-capitalization companies selected through a “growth” strategy

Mid Cap Fund		stocks of mid-capitalization companies selected through a blend of “value” and “growth” strategies

Small Cap Fund		stocks of small-capitalization companies selected through a blend of “value” and “growth” strategies

International Fund		stocks of companies whose primary trading markets are located outside of the United States with an emphasis on larger capitalization companies in these markets selected through a blend of “value” and “growth” strategies

While certain sectors will be overweighted or underweighted, each Fund seeks to invest in a broad range of stocks from its market segment, and to include stocks from most major sectors of the U.S. economy, or, in the case of the International Fund, markets located outside the United States.

MERCURY QA EQUITY SERIES, INC.

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Volatility — the amount and frequency of price movement of a security, commodity, or market.

What are the main risks of investing in the Funds?

As with any mutual fund, the value of each Fund’s investments and, therefore, the value of a Fund’s shares may fluctuate. This may occur because a stock market is fluctuating. At other times, there are specific factors that may affect the value of a particular investment. Each Fund is also subject to the risk that the stocks the investment adviser selects will underperform relative to other securities in its market segment overall or other funds with similar investment objectives and investment strategies. If the value of a Fund’s investments goes down, you may lose money.

The Small Cap Fund and, to a lesser extent, the Mid Cap Fund are subject to the risks associated with investment in securities of smaller capitalization companies. Small companies’ securities generally trade in lower volumes and are subject to greater, less predictable price changes than the securities of larger, more established companies.

The International Fund invests in foreign securities, including securities denominated in foreign currencies. Investments in foreign securities involve special risks, including the possibility of substantial volatility due to adverse political, economic or other developments. Foreign securities may also be less liquid and harder to value than U.S. securities. In addition, the foreign securities in which the International Fund invests are subject to changes in value due to movements in exchange rates. Generally, when a foreign currency appreciates (or depreciates) in value against the U.S. dollar, securities denominated in that currency appreciate (or depreciate) in U.S. dollar terms.

Each Fund will attempt to be fully invested at all times, and will not hold a significant portion of its assets in cash. The Funds will generally not attempt to hedge against adverse market movements. Therefore, a Fund might go down in value more than other mutual funds in the event of a general market decline.

The Funds anticipate that the Mercury QA Strategy Series Funds, a group of funds managed by the investment adviser, will be significant investors in each Fund. The Mercury QA Strategy Series Funds are asset allocation funds, which means that they will pursue their investment objectives by changing the allocations of their assets among the Funds based on the investment adviser’s evaluation of market conditions. As a result, at times the Mercury QA Strategy Series Funds may make large purchases or redemptions of a Fund’s shares. This may increase transaction costs and tax liability for shareholders of that Fund. The investment adviser, as common adviser to the Funds and the Mercury QA Strategy Series Funds, will seek to balance the interests of shareholders of all funds.

MERCURY QA EQUITY SERIES, INC.

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Who should invest?

The Mercury QA Large Cap Core Fund may be an appropriate investment for you if you:

Want to invest in large U.S. companies

Are investing with long term goals, such as retirement or funding a child’s education

Are willing to accept the risk that the value of your investment may decline in order to seek long term growth of capital

Are not looking for a significant amount of current income

Want a professionally managed and diversified portfolio

The Mercury QA Large Cap Value Fund may be an appropriate investment for you if you:

Want to invest in large U.S. companies selected through a value strategy

Are investing with long term goals, such as retirement or funding a child’s education

Are willing to accept the risk that the value of your investment may decline in order to seek long term growth of capital and dividend income

Are not looking for a significant amount of current income

Want a professionally managed and diversified portfolio

The Mercury QA Large Cap Growth Fund may be an appropriate investment for you if you:

Want to invest in large U.S. companies selected through a growth strategy

Are investing with long term goals, such as retirement or funding a child’s education

Are willing to accept the risk that the value of your investment may decline in order to seek long term growth of capital

Are not looking for a significant amount of current income

Want a professionally managed and diversified portfolio

The Mercury QA Mid Cap Fund may be an appropriate investment for you if you:

Want to invest in medium sized companies and can accept the additional risk and volatility associated with stocks of these companies

MERCURY QA EQUITY SERIES, INC.

[GRAPHIC] Fund Facts

Are investing with long term goals, such as retirement or funding a child’s education

Are willing to accept the risk that the value of your investment may decline in order to seek long term growth of capital

Are not looking for a significant amount of current income

Want a professionally managed and diversified portfolio

The Mercury QA Small Cap Fund may be an appropriate investment for you if you:

Want to invest in smaller capitalization U.S. companies and can accept the additional risk and volatility associated with stocks of these companies

Are investing with long term goals, such as retirement or funding a child’s education

Are willing to accept the risk that the value of your investment may decline in order to seek long term growth of capital

Are not looking for a significant amount of current income

Want a professionally managed and diversified portfolio

The Mercury QA International Fund may be an appropriate investment for you if you:

Are looking for exposure to a variety of foreign markets and can accept the additional risk and volatility associated with foreign investing

Are investing with long term goals, such as retirement or funding a child’s education

Are willing to accept the risk that the value of your investment may decline in order to seek long term growth of capital

Are not looking for a significant amount of current income

Want a professionally managed and diversified portfolio

RISK/RETURN BAR CHART AND TABLE

Since the Funds are scheduled to begin operating on May 5, 2000, there is no current performance information for any Fund.

MERCURY QA EQUITY SERIES, INC.

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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 — these include sales charges, which you may pay when you buy or sell shares of the Fund.

Expenses paid indirectly by the shareholder:

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 compensating financial consultants, advertising and promotion.

Service (Account Maintenance) Fees — fees used to compensate securities dealers for account maintenance activities.

FEES AND EXPENSES

Each 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.

The tables show the different fees and expenses that you may pay if you buy and hold the different classes of shares of a Fund. Future expenses may be greater or less than those indicated below.

Mercury QA Large Cap Core Fund

Shareholder Fees (fees paid directly from your investment)(a):	Class I	Class A	Class B(b)	Class C

Maximum Sales Charge (Load) imposed on purchases (as a percentage of offering price)	5.25%(c)	5.25%(c)	None	None

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)

Maximum Sales Charge (Load) imposed on dividend reinvestments	None	None	None	None

Redemption Fee	None	None	None	None

Exchange Fee	None	None	None	None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

*Management Fee*(e)	.40%	.40%	.40%	.40%

Distribution and/or Service (12b-1) Fees(f)	None	0.25%	1.00%	1.00%

Other Expenses (including transfer agency fees)(g)	.41%	.41%	.41%	.41%
Administrative Fees	.35%	.35%	.35%	.35%

Total Other Expenses	.76%	.76%	.76%	.76%

Total Annual Fund Operating Expenses	1.16%	1.41%	2.16%	2.16%

MERCURY QA EQUITY SERIES, INC.

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Mercury QA Large Cap Value Fund

Shareholder Fees (fees paid directly from your investment)(a):	Class I	Class A	Class B(b)	Class C

Maximum Sales Charge (Load) imposed on purchases (as a percentage of offering price)	5.25%(c)	5.25%(c)	None	None

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)

Maximum Sales Charge (Load) imposed on dividend reinvestments	None	None	None	None

Redemption Fee	None	None	None	None

Exchange Fee	None	None	None	None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

Management Fee(e)	.40%	.40%	.40%	.40%

Distribution and/or Service (12b-1) Fees(f)	None	0.25%	1.00%	1.00%

Other Expenses (including transfer agency fees)(g)	.41%	.41%	.41%	.41%
Administrative Fees	.35%	.35%	.35%	.35%

Total Other Expenses	.76%	.76%	.76%	.76%

Total Annual Fund Operating Expenses	1.16%	1.41%	2.16%	2.16%

MERCURY QA EQUITY SERIES, INC.

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Mercury QA Large Cap Growth Fund

Shareholder Fees (fees paid directly from your investment)(a):	Class I	Class A	Class B(b)	Class C

Maximum Sales Charge (Load) imposed on purchases (as a percentage of offering price)	5.25%(c)	5.25%(c)	None	None

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)

Maximum Sales Charge (Load) imposed on dividend reinvestments	None	None	None	None

Redemption Fee	None	None	None	None

Exchange Fee	None	None	None	None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):


Management Fee(e)	.40%	.40%	.40%	.40%

Distribution and/or Service (12b-1) Fees(f)	None	0.25%	1.00%	1.00%

Other Expenses (including transfer agency fees)(g)	.41%	.41%	.41%	.41%
Administrative Fees	.35%	.35%	.35%	.35%

Total Other Expenses	.76%	.76%	.76%	.76%

Total Annual Fund Operating Expenses	1.16%	1.41%	2.16%	2.16%

MERCURY QA EQUITY SERIES, INC.

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Mercury QA Mid Cap Fund

Shareholder Fees (fees paid directly from your investment)(a):	Class I	Class A	Class B(b)	Class C

Maximum Sales Charge (Load) imposed on purchases (as a percentage of offering price)	5.25%(c)	5.25%(c)	None	None

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)

Maximum Sales Charge (Load) imposed on dividend reinvestments	None	None	None	None

Redemption Fee	None	None	None	None

Exchange Fee	None	None	None	None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

Management Fee(e)	.55%	.55%	.55%	.55%

Distribution and/or Service (12b-1) Fees(f)	None	0.25%	1.00%	1.00%

Other Expenses (including transfer agency fees)(g)	.70%	.70%	.70%	.70%
Administrative Fees	.35%	.35%	.35%	.35%

Total Other Expenses	1.05%	1.05%	1.05%	1.05%

Total Annual Fund Operating Expenses	1.60%	1.85%	2.60%	2.60%

MERCURY QA EQUITY SERIES, INC.

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Mercury QA Small Cap Fund

Shareholder Fees (fees paid directly from your investment)(a):	Class I	Class A	Class B(b)	Class C

Maximum Sales Charge (Load) imposed on purchases (as a percentage of offering price)	5.25%(c)	5.25%(c)	None	None

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)

Maximum Sales Charge (Load) imposed on dividend reinvestments	None	None	None	None

Redemption Fee	None	None	None	None

Exchange Fee	None	None	None	None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

Management Fee (e)	.55%	.55%	.55%	.55%

Distribution and/or Service (12b-1) Fees (f)	None	0.25%	1.00%	1.00%

Other Expenses (including transfer agency fees) (g)	.82%	.82%	.82%	.82%
Administrative Fees	.35%	.35%	.35%	.35%

Total Other Expenses	1.17%	1.17%	1.17%	1.17%

Total Annual Fund Operating Expenses	1.72%	1.97%	2.72%	2.72%

Fee Waiver (h)	(.07)%	(.07)%	(.07)%	(.07)%

Total Net Operating Expenses (i)	1.65%	1.90%	2.65%	2.65%

MERCURY QA EQUITY SERIES, INC.

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Mercury QA International Fund

Shareholder Fees (fees paid directly from your investment)(a):	Class I	Class A	Class B(b)	Class C

Maximum Sales Charge (Load) imposed on purchases (as a percentage of offering price)	5.25%(c)	5.25%(c)	None	None

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)

Maximum Sales Charge (Load) imposed on dividend reinvestments	None	None	None	None

Redemption Fee	None	None	None	None

Exchange Fee	None	None	None	None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

*Management Fee*(e)	.65%	.65%	.65%	.65%

*Distribution and/or Service (12b-1) Fees*(f)	None	0.25%	1.00%	1.00%

Other Expenses (including transfer agency fees) (g)	1.16%	1.16%	1.16%	1.16%
Administrative Fees	.35%	.35%	.35%	.35%

Total Other Expenses	1.51%	1.51%	1.51%	1.51%

Total Annual Fund Operating Expenses	2.16%	2.41%	3.16%	3.16%

Fee Waiver (h)	(.41)%	(.41)%	(.41)%	(.41)%

Total Net Operating Expenses (i)	1.75%	2.00%	2.75%	2.75%

(a)

In addition, certain securities dealers may charge a fee to process a purchase or sale of shares.

(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.

(e)

The investment adviser or its affiliate provides accounting services to the Fund at its cost.

(f)

The Fund calls the “Service Fee” an “Account Maintenance Fee. ” Account Maintenance Fee is the term used elsewhere in this Prospectus and in all other materials. Class B and Class C shares pay a Distribution Fee of 0.75% and a Service (Account Maintenance) Fee of 0.25%. Class A shares pay only a Service (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. Each 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)

With respect to each Fund, the investment adviser has entered into a contractual arrangement with the Funds as necessary to assure that expenses incurred (excluding Distribution and/or Service Fees) by each class of each Fund will not exceed 1.50% for Mercury QA Large Cap Core Fund, Mercury QA Large Cap Value Fund and Mercury QA Large Cap Growth Fund, 1.65% for Mercury QA Mid Cap Fund and Mercury QA Small Cap Fund, and 1.75% for Mercury QA International Fund. This arrangement has a one-year term and is renewable.

(i)

The Total Net Operating Expenses reflect the investment adviser’s estimate of expenses that will actually be incurred during each Fund ’s current fiscal year, restated to reflect the contractual fee waiver and/or expense reimbursement currently in effect.

MERCURY QA EQUITY SERIES, INC.

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Examples:

These examples are intended to help you compare the cost of investing in a Fund with the cost of investing in other mutual funds.

These examples assume that you invest $10,000 in a 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 such 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:

Mercury QA Large Cap Core Fund

Expenses if you did redeem your shares:

	Class I	Class A	Class B	Class C

One Year	$637	$661	$619	$319

Three Years	$874	$948	$976	$676

Expenses if you did not redeem your shares:

	Class I	Class A	Class B	Class C

One Year	$637	$661	$219	$219

Three Years	$874	$948	$676	$676

MERCURY QA EQUITY SERIES, INC.

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Mercury QA Large Cap Value Fund

Expenses if you did redeem your shares:

	Class I	Class A	Class B	Class C

One Year	$637	$661	$619	$319

Three Years	$874	$948	$976	$676

Expenses if you did not redeem your shares:

	Class I	Class A	Class B	Class C

One Year	$637	$661	$219	$219

Three Years	$874	$948	$676	$676

Mercury QA Large Cap Growth Fund

Expenses if you did redeem your shares:

	Class I	Class A	Class B	Class C

One Year	$637	$661	$619	$319

Three Years	$874	$948	$976	$676

Expenses if you did not redeem your shares:

	Class I	Class A	Class B	Class C

One Year	$637	$661	$219	$219

Three Years	$874	$948	$676	$676

MERCURY QA EQUITY SERIES, INC.

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Mercury QA Mid Cap Fund

Expenses if you did redeem your shares:

	Class I	Class A	Class B	Class C

One Year	$ 679	$ 703	$ 663	$363

Three Years	$1,003	$1,076	$1,108	$808

Expenses if you did not redeem your shares:

	Class I	Class A	Class B	Class C

One Year	$ 679	$ 703	$263	$263

Three Years	$1,003	$1,076	$808	$808

Mercury QA Small Cap Fund

Expenses if you did redeem your shares:

	Class I	Class A	Class B	Class C

One Year	$ 684	$ 708	$ 668	$368

Three Years†	$1,032	$1,105	$1,138	$838

Expenses if you did not redeem your shares:

	Class I	Class A	Class B	Class C

One Year	$ 684	$ 708	$268	$268

Three Years†	$1,032	$1,105	$838	$838

MERCURY QA EQUITY SERIES, INC.

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Mercury QA International Fund

Expenses if you did redeem your shares:

	Class I	Class A	Class B	Class C

One Year	$ 694	$ 717	$ 678	$378

Three Years†	$1,130	$1,202	$1,239	$939

Expenses if you did not redeem your shares:

	Class I	Class A	Class B	Class C

One Year	$ 694	$ 717	$278	$278

Three Years†	$1,130	$1,202	$939	$939

†

These expenses do not reflect the continuation of the contractual arrangement between the investment adviser and each Fund that limits expenses incurred by each class of that Fund (excluding Distribution and/or Service fees) to 1.65% for Mercury QA Small Cap Fund and 1.75% for Mercury QA International Fund beyond the first year. As stated above, the arrangement has a one-year term and is renewable.

MERCURY QA EQUITY SERIES, INC.

[GRAPHIC] About the Details

About the Portfolio Manager — Philip Green is a Senior Vice President and the Portfolio Manager of the Funds. Mr Green has been a Senior Vice President of Fund Asset Management, L.P. and certain of its affiliates since 1999. Mr Green is primarily responsible for the day-to-day management of the Funds.

About the Investment Adviser —Mercury Asset Management US, a division of Fund Asset Management, L.P., is the investment adviser.

HOW THE FUNDS INVEST

The investment adviser seeks to maximize each Fund’s expected return by investing in securities to create a portfolio that has risk and style characteristics similar to those of a particular market segment. The investment adviser uses three principal strategies to select investments for each Fund. First, the investment adviser uses objective quantitative criteria to construct an “optimal” portfolio of investments that has similar risk and style characteristics as a particular market segment, but which will overweight sectors the investment adviser believes to be attractive and underweight sectors the investment adviser believes to be less attractive. Next, the investment adviser analyzes the stocks among such sectors using technical and in-depth quantitative research to identify those stocks that may perform well relative to the overall market segment. This analysis is designed to identify a portfolio of investments that the adviser believes will outperform the market segment. Depending on the Fund, this analysis involves selection of stocks through a “value ” strategy, a “growth” strategy or a blend of the two. Third, the investment adviser uses quantitative risk management techniques to ensure that each Fund’s portfolio remains consistent with, and within appropriate risk levels relative to, its respective market segment.

The market segment and style of investment analysis for each of the Funds is as follows:

Fund		Market Segment

Large Cap Core Fund		stocks of large-capitalization companies selected through a blend of “value” and “growth” strategies

Large Cap Value Fund		stocks of large-capitalization companies selected through a “value” strategy

Large Cap Growth Fund		stocks of large-capitalization companies selected through a “growth” strategy

Mid Cap Fund		stocks of mid-capitalization companies selected through a blend of “value” and “growth” strategies

Small Cap Fund		stocks of small-capitalization companies selected through a blend of “value” and “growth” strategies

International Fund		stocks of companies whose primary trading markets are located outside of the United States with an emphasis on larger capitalization companies in these markets selected through a blend of “value” and “growth” strategies

The investment adviser uses portfolio construction techniques to structure the “optimal” portfolio. These portfolio construction techniques rely on objective formulas, and are designed to maintain a disciplined and style controlled strategy for each Fund. The adviser then uses technical and in-depth quantitative analysis to select individual investments from the universe of the “optimal” portfolio. This technical and in-depth quantitative analysis is the most significant part of the investment process, and is designed to identify those investments that the adviser believes will outperform the relevant market segment.

The technical and in-depth quantitative analysis focuses on a variety of measures, such as:

earnings (surprises and analysts’ revisions)

momentum (price and earnings)

Ÿ valuation (enterprise value, price versus cash flows, and dividend discount models)

For each Fund, the investment adviser emphasizes identifying and purchasing those stocks that it believes are priced most attractively and which appear to present good opportunities for gain, based on the investment adviser’s technical and in-depth quantitative analysis. The Large Cap Value Fund focuses on stocks of companies that appear to be undervalued by the market or which appear to be temporarily out of favor, but which the investment adviser believes offer promising long term prospects. The Large Cap Growth Fund focuses on stocks of companies that are expected to have better prospects for earnings growth than the growth rate of the general domestic economy. The investment adviser uses a blend of value and growth strategies in selecting investments for the other four Funds.

To achieve further efficiencies, and/or add value, each Fund may also invest in futures contracts. The investment adviser selects futures that it believes may serve as substitutes for individual securities in an attempt to broadly represent a particular market or market segment. Each Fund regularly invests a small portion of its assets in futures contracts correlated with an index representing the Fund’s particular market segment. Futures allow the Funds to increase or decrease exposure to the market segment quickly and at less cost than buying or selling individual stocks. Each Fund invests in futures in order to gain market exposure quickly in the event of subscriptions, to maintain liquidity in the event of redemptions and to keep trading costs low. Each Fund also invests in futures whenever the investment adviser believes a futures contract presents price or return characteristics superior to those of stocks represented in the market segment. Furthermore, the International Fund uses futures as an efficient and less costly way of increasing or decreasing its exposure to stocks of companies in particular countries represented in its market segment. The Funds consider futures that provide exposure to equity indices to be equity securities for purposes of the percentages described above.

MERCURY QA EQUITY SERIES, INC.

[GRAPHIC] About the Details

Standard & Poor’s 500/Barra Value Index — consists of the common stocks in the S&P 500 that are considered to be “value” stocks.

Standard & Poor’s 500/Barra Growth Index — consists of the common stocks in the S&P 500 that are considered to be “growth” stocks.

Morgan Stanley Capital International Europe, Asia and Far East Capitalization Weighted Index — composed of equity securities of companies from various industrial sectors whose primary trading markets are located outside the United States. Companies included in the EAFE Index are selected from among the larger capitalization companies in these markets. The weighting of the EAFE Index is based on the market capitalization of each of the countries in the index.

Each of the market segments targeted by a Fund is reflected in a broad-based market index. Therefore, while none of the Funds is an index fund that seeks to replicate an index, the portfolio construction techniques discussed above are designed with the goal of ensuring that each Fund will have risk and style characteristics similar to the index listed below:

Fund		Index

Large Cap Core Fund		Standard & Poor’s 500 Composite Stock Price Index (“S&P 500 ”)

Large Cap Value Fund		*Standard & Poor ’s 500/Barra Value Index*

Large Cap Growth Fund		*Standard & Poor ’s 500/Barra Growth Index*

Mid Cap Fund		Standard & Poor’s Mid Cap 400 Index

Small Cap Fund		Standard & Poor’s Small Cap 600 Index

International Fund		Morgan Stanley Capital International Europe, Asia and Far East Capitalization Weighted Index (“EAFE” Index)

Each Fund may invest in short term, fixed-income securities that are considered to be cash equivalents. These instruments may include obligations of the U.S. Government, its agencies or instrumentalities, highly rated bonds or comparable unrated bonds, commercial paper, bank obligations and repurchase agreements. The Funds will not invest in short term money market instruments in order to lessen the Funds’ exposure to common stocks as a defensive strategy, but will instead attempt to remain fully invested at all times.

Each Fund’s investment objective is fundamental and may not be changed without shareholder approval. Each Fund ’s policies not specifically designated as fundamental in this Prospectus or the Statement of Additional Information are non-fundamental and may be changed without shareholder approval.

INVESTMENT RISKS

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

All Funds

Stock Market Risk

Stock market risk is the risk that the stock markets in one or more countries in which a Fund invests will go down in value, including the possibility that one or more markets will go down sharply and unpredictably.

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[GRAPHIC] About the Details

Selection Risk

Selection risk is the risk that investments that Fund management selects may underperform relative to other securities in the particular market segment overall or other funds with similar investment objectives and investment strategies.

Derivatives

Derivatives, such as futures, may allow a Fund to increase or decrease its level of risk exposure more quickly and efficiently than other types of instruments.

Derivatives are volatile and involve significant risks, which may include:

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.

Credit risk — the risk that the counterparty (the party on the other side of the transaction) on a derivative transaction will be unable to honor its financial obligation to a Fund.

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

Liquidity risk — the risk that certain securities may be difficult or impossible to sell at the time that a Fund would like or at the price that a Fund believes the security is then worth.

A Fund may use derivatives for anticipatory hedging and for non-hedging purposes. Anticipatory hedging is a strategy in which a Fund uses a derivative to offset the risk that securities in which such Fund intends to invest will increase in value before such Fund has an opportunity to purchase the securities. A Fund will use derivatives for anticipatory hedging in order to gain exposure efficiently to their underlying indexes in the event such Fund receives cash inflows. Derivatives may not always be available or cost efficient. If a Fund invests in derivatives, the investments may not be effective as a hedge against price movements.

Correlation Risk

Each Fund may purchase an asset and concurrently sell that asset in a different market, or sell a related asset, in order to capture small price discrepancies between markets or related assets. This strategy involving related assets carries the risk that the value of the related assets will not track or affect each other in the manner anticipated by the investment adviser. This strategy generally assumes that the price of related assets will move closer to some historical level, and that price differences from this level will disappear. However, in the event the price differences do not disappear or widen, a Fund could lose money on a transaction.

Borrowing and Leverage

The Funds may borrow for temporary emergency purposes including to meet redemptions. Borrowing may exaggerate changes in the net asset value of Fund shares and in the yield on a Fund’s portfolio. Borrowing will cost a Fund interest expense and other fees. The costs of borrowing may reduce a Fund’s return.

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

Illiquid Securities

Each Fund may invest up to 15% of its net assets in illiquid securities that it cannot easily resell within seven days at current value or that have contractual or legal restrictions on resale. If a Fund buys illiquid securities it may be unable to quickly resell them or may be able to sell them only at a price below current value.

Restricted Securities

Restricted securities have contractual or legal restrictions on their resale. They include private placement securities that a Fund buys directly from the issuer. Private placement and other restricted securities may not be listed on an exchange and may have no active trading market.

Restricted securities may be illiquid. A Fund may be unable to sell them on short notice or may be able to sell them only at a price below current value. A Fund may get only limited information about the issuer, and so may be less able to predict a loss. In addition, if Fund management or the investment adviser receives material adverse non-public information about the issuer, a Fund will not be able to sell the security.

Rule 144A Securities

Rule 144A securities are restricted securities that can be resold to qualified institutional buyers but not to the general public. Rule 144A securities may have an active trading market but carry the risk that the active trading market may not continue.

MERCURY QA EQUITY SERIES, INC.

[GRAPHIC] About the Details

Securities Lending

Each Fund may lend securities to financial institutions that provide cash or government securities as collateral. Securities lending involves the risk that the borrower may fail to return the securities in a timely manner or at all. As a result, a Fund may lose money and there may be a delay in recovering the loaned securities. A Fund may also lose money if it does not recover the securities and the value of the collateral falls. These events could trigger adverse tax consequences to a Fund.

Risk from Large Investors

The Funds anticipate that the Mercury QA Strategy Series Funds, a group of funds managed by the investment adviser, will be significant investors in each Fund. The Mercury QA Strategy Series Funds are asset allocation funds, which means that they will pursue their investment objectives by changing the allocations of their assets among the Funds based on their evaluation of market conditions. As a result, at times the Mercury QA Strategy Series Funds may make large purchases or redemptions of a Fund’s shares. This may increase transaction costs and tax liability for shareholders of that Fund. The investment adviser, as common adviser to the Funds and the Mercury QA Strategy Series Funds, will seek to balance the interests of shareholders of all funds.

Mercury QA Mid Cap Fund and Mercury QA Small Cap Fund

Small Cap Risk

Small cap companies and, to a lesser extent, mid 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 Fund’s investment in a small cap or mid cap company may lose substantial value.

Small cap securities and, to a lesser extent, mid 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 often are not income producing investments and thus, may not cushion the Fund’s total return from price changes.

When selling a large quantity of a particular stock, the Fund may have to sell at a discount from quoted prices or may have to make a series of small sales over an extended period of time due to the more limited trading volume of smaller company stocks.

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[GRAPHIC] About the Details

Volatility

Stocks of small and medium companies tend to be more volatile than stocks of larger companies and can be particularly sensitive to expected changes in interest rates, borrowing costs and earnings.

Mercury QA International Fund

Foreign Market Risk

Because the International Fund may invest in foreign securities, it offers the potential for more diversification than an investment only in the United States. Stocks traded on foreign markets have often (though not always) performed differently than stocks in the United States.

However, such investments involve special risks not present in U.S. investments that can increase the chances that the Fund will lose money. In particular, investment in foreign securities involves the following risks, which are generally greater for investments in emerging markets:

The economies of certain foreign markets often do not compare favorably with that of the United States in areas such as growth of gross domestic product, reinvestment of capital, resources, and balance of payments. Some of these economies may rely heavily on particular industries or foreign capital. They may be more vulnerable to adverse diplomatic developments, the imposition of economic sanctions against a particular country or countries, changes in international trading patterns, trade barriers and other protectionist or retaliatory measures.

Investments in foreign markets may be adversely affected by governmental actions such as the imposition of capital controls, nationalization of companies or industries, expropriation of assets or the imposition of punitive taxes.

The governments of certain countries may prohibit or impose substantial restrictions on foreign investing in their capital markets or in certain industries. Any of these actions could severely affect security prices. They could also impair the Fund ’s ability to purchase or sell foreign securities or transfer its assets or income back into the United States, or otherwise adversely affect the Fund’s operations.

Other foreign market risks include foreign exchange controls, difficulties in pricing securities, defaults on foreign government securities, difficulties in enforcing favorable legal judgments in foreign courts, and political and social instability. Legal remedies available to investors in some foreign countries may be less extensive than those available to investors in the United States.

Because there are generally fewer investors on foreign exchanges and a fewer number of shares traded each day, it may be more difficult for the Fund to buy and sell securities on those exchanges. In addition, prices of foreign securities may go down more than prices of securities traded in the United States.

Foreign markets may have different clearance and settlement procedures. In certain markets, settlements may be unable to keep pace with the volume of securities transactions. If this occurs, settlement may be delayed and the Fund’s assets may be uninvested and not earning returns. The Fund may miss investment opportunities or be unable to sell an investment because of these delays.

Currency Risk and Exchange Risk

Securities in which the International Fund invests may be denominated or quoted in currencies other than the U.S. dollar. Changes in foreign currency exchange rates will affect the value of the Fund’s portfolio. Generally, when the U.S. dollar rises in value against a foreign currency, a security denominated in that currency loses value because the currency is worth fewer U.S. dollars. Conversely, when the U.S. dollar decreases in value against a foreign currency, a security denominated in that currency gains value because the currency is worth more U.S. dollars. This risk, generally known as “currency risk,” means that a stronger U.S. dollar will reduce returns for U.S. investors while a weak U.S. dollar will increase those returns.

Governmental Supervision and Regulation/Accounting Standards

Many foreign governments supervise and regulate stock exchanges, brokers and the sale of securities less than the United States does. Some countries may not have laws to protect investors the way that the U.S. securities laws do. For example, some foreign countries may have no laws or rules against insider trading. Insider trading occurs when a person buys or sells a company’s securities based on non-public information about that company. Accounting standards in other countries are not necessarily the same as in the United States. If the accounting standards in another country do not require as much detail as U.S. accounting standards, it may be harder for the Fund’s portfolio manager to completely and accurately determine a company’s financial condition. Also, brokerage commissions and other costs of buying or selling securities often are higher in foreign countries than they are in the United States. This reduces the amount the Fund can earn on its investments.

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[GRAPHIC] About the Details

Certain Risks of Holding Fund Assets Outside the United States

The International Fund generally holds the foreign securities and cash in which it invests in foreign banks and securities depositories. Certain of such foreign banks and securities depositories may be recently organized or new to the foreign custody business. In addition, there may be limited or no regulatory oversight over their operations. Also, the laws of certain countries may put limits on the Fund’s ability to recover its assets if a foreign bank, depository or issuer of a security, or any of its agents, goes bankrupt. In addition, it is often more expensive for the Fund to buy, sell, and hold securities in certain foreign markets than in the U.S. The increased expense for investing in certain foreign markets reduces the amount the Fund can earn on its investments and typically results in a higher operating expense ratio for the Fund than for funds invested only in the U.S.

Dividends or interest on, or proceeds from the sale of, foreign securities may be subject to foreign withholding taxes, and special U.S. tax considerations may apply.

European Economic and Monetary Union (“EMU ”)

A number of European countries have entered into EMU in an effort to reduce barriers between themselves and eliminate fluctuations in their currencies. EMU established a single European currency (the euro), that was introduced on January 1, 1999 and is expected to replace the existing national currencies of all EMU participants by July 1, 2002. 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 International Fund invests, the International Fund could be adversely affected:

If the transition to euro, or EMU as a whole, does not continue to proceed as planned.

If a participating country withdraws from EMU.

STATEMENT OF ADDITIONAL INFORMATION

If you would like further information about the Funds, including how they invest, please see the Statement of Additional Information.

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PRICING OF SHARES

Each 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 of a Fund 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 Class A shares of a Fund, you generally pay a sales charge at the time of purchase. If you buy Class A shares of a Fund, you also pay an ongoing account maintenance fee of 0.25%. You may be eligible for a sales charge reduction or waiver.

If you select Class B or Class C shares of a Fund, you will invest the full amount of your purchase price, but you will be subject to a distribution fee of 0.75% and an account maintenance fee of 0.25%. 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. In addition, you may be subject to a deferred sales charge when you sell Class B or Class C shares.

Each Fund’s shares are distributed by Mercury Funds Distributor, a division of Princeton Funds Distributor, Inc.

A subscription period for the Funds’ shares will end on May 2, 2000, unless extended. Subscriptions will be payable, shares will be issued and each Fund will commence operations on the third business day after the end of the subscription period. A 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 a Fund commences operations, its shares can be purchased on each business day.

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To better understand the pricing of each Fund’s shares, we have summarized the information below:

	Class I		Class A	Class B	Class C

Availability?	Limited to certain investors including:		Generally available through selected securities dealers.	Generally available through selected securities dealers.	Generally available through selected securities dealers.
	Ÿ	Current Class I shareholders
	Ÿ	Certain Retirement Plans
	Ÿ	Participants of certain sponsored programs
	Ÿ	Certain affiliates of selected securities dealers

Initial Sales Charge?	Yes. Payable at time of purchase. Lower sales charges available for certain larger investments.		Yes. Payable at time of purchase. Lower sales charges available for certain larger investments.	No. Entire purchase price is invested in shares of the Fund.	No. Entire purchase price is invested in shares of the Fund.

Deferred Sales Charge?	No. (May be charged for purchases over $1 million that are redeemed within one year).		No. (May be charged for purchases over $1 million that are redeemed within one year).	Yes. Payable if you redeem within six years of purchase.	Yes. Payable if you redeem within one year of purchase.

Account Maintenance and Distribution Fees?	No.		0.25% Account Maintenance Fee. No Distribution Fee.	0.25% Account Maintenance Fee. 0.75% Distribution Fee.	0.25% Account Maintenance Fee. 0.75% Distribution Fee.

Conversion to Class A shares?	No.		No.	Yes, automatically after approximately 8 years.	No.

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[GRAPHIC] 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 Class A Shares — Initial Sales Charge Options

The public offering price of Class I and Class A shares of a Fund during the subscription period is $10.00 per share. If you select Class I or Class 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.

Your Investment	As a % of Offering Price		As a % of Your Investment*		Dealer Compensation as a % of Offering Price

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	%

*	Rounded to the nearest one-hundredth percent.

If you invest $1,000,000 or more in Class I or Class A shares, you may not pay an initial sales charge. In that case, the investment adviser compensates the selling dealer from its own funds. 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 Class 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.

A reduced or waived sales charge on a purchase of Class I or Class 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

Certain investors, including mutual funds sponsored by Mercury or its affiliates, directors or trustees of mutual funds sponsored by Mercury or its affiliates, employees of Mercury and its affiliates, and employees of selected dealers

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[GRAPHIC] Account Choices

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

Purchases through certain accounts over which Mercury or an affiliate exercises investment discretion

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 0.25% 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 Funds’ transfer agent at 1-888-763-2260.

Class B and Class 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 under distribution plans that each Fund has adopted under Rule 12b-1 under the Investment Company Act of 1940. Because these fees are paid out of each 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 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 securities dealer who assists you in your decision to purchase the shares of such Fund.

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Class B Shares

If you redeem Class B shares of a Fund 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:

Year Since Purchase		Sales Charge*

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%

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 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 may be reduced or waived in certain circumstances, such as:

Certain post-retirement withdrawals from an IRA or other retirement plan if you are over 59¹ /2 years old

Redemption by certain eligible 401(a) and 401(k) plans, certain related accounts, 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 or, if later, reasonably promptly following completion of probate, or in connection with involuntary termination of an account in which shares of a Fund are held

Withdrawal through the Systematic Withdrawal Plan of up to 10% per year of your account value at the time the plan is established

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Your Class B shares convert automatically into Class A shares approximately eight years after purchase. Any Class B shares received through reinvestment of dividends 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 of a Fund in an exchange from another Mercury fund with a shorter conversion schedule, the Fund’s eight year conversion schedule will apply. If you exchange your Class B shares in a Fund for Class B shares of another Mercury 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 of a Fund 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. The deferred sales charge relative to Class C shares may be reduced or waived in connection with certain involuntary termination(s) of an account in which Fund shares are held and withdrawals through the Systematic Withdrawal Plan.

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.

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If you want to	Your choices	Information important for you to know

Buy shares	First, select the share class appropriate for you	Please refer to the pricing of shares table on page 27. Be sure to read this Prospectus carefully.

	Next, determine the amount of your investment	The minimum initial investment for each Fund is $1,000 for all accounts except:
		Ÿ $500 for certain fee-based programs
		Ÿ $100 for retirement plans

		(The minimums for initial investments may be waived or reduced under certain circumstances.)

	Have your financial consultant or securities dealer submit your purchase order	The price of your shares is based on the next calculation of net asset value after your order is placed. Any purchase orders placed prior to the close of business on the New York Stock Exchange (generally 4:00 p.m. Eastern time) 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. A 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	To purchase shares directly, call the transfer agent to request a purchase application. Mail the completed purchase application to the transfer agent at the address on the inside back cover of this Prospectus.

Add to your investment	Purchase additional shares	The minimum investment for additional purchases is generally $100 for all accounts except:
		Ÿ $50 for certain fee-based programs
		Ÿ $1 for retirement plans

		(The minimums for additional purchases may be waived under certain circumstances).

	Acquire additional shares through the automatic dividend reinvestment plan	All dividends are automatically reinvested without a sales charge.

	Participate in the automatic investment plan	You may automatically invest a specific amount on a periodic basis through your securities dealer:
		Ÿ The current minimum for such automatic investments is $100. The minimum may be waived or revised under certain circumstances.

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If you want to	Your choices	Information important for you to know

Transfer shares to another securities dealer	Transfer to a participating securities dealer	To transfer your shares of a Fund to another securities dealer, authorized dealer agreements must be in place between the distributor and the transferring securities dealer and the distributor and the receiving securities dealer. Certain shareholder services may not be available for the transferred shares. All future trading of these shares must be coordinated by the receiving securities dealer.

	Transfer to a non-participating securities dealer	You cannot transfer your shares of a Fund to a securities dealer that does not have an authorized dealer agreement with the distributor. You must either:
		Ÿ Transfer your shares to an account with the transfer agent; or
		Ÿ Sell your shares, paying any applicable deferred sales charge.

Sell your shares	Have your financial consultant or securities dealer submit your sales order	The price of your shares is based on the next calculation of net asset value after your order is placed. For your redemption request to be priced at the net asset value on the day of your request, you must submit your request to your dealer prior to that day’s close of business on the New York Stock Exchange (generally 4:00 p.m. Eastern time). Any redemption request placed after that time will be priced at the net asset value 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.

		A 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. A signature guarantee will generally be required but may be waived in certain limited circumstances. You can obtain a signature guarantee from a bank, securities dealer, securities broker, credit union, savings association, national securities exchange and registered securities association. A notary public seal will not be acceptable. If you hold stock certificates, return the certificates with the letter. The transfer agent will normally mail redemption proceeds within seven days following receipt of a properly completed request. If you make a redemption request before a 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.

Sell shares systematically	Participate in a Fund’s Systematic Withdrawal Plan	You can generally arrange through your selected dealer for systematic redemptions of a fixed dollar amount on a monthly, bi-monthly, quarterly, semi-annual or annual basis, subject to certain conditions. You must have dividends automatically reinvested. For Class B and Class C shares your total annual withdrawals cannot be more than 10% of the value of your shares at the time the Plan is established. The deferred sales charge is waived for systematic redemptions. Ask your financial consultant for details.

MERCURY QA EQUITY SERIES, INC.

[GRAPHIC] Account Choices

If you want to	Your choices	Information important for you to know

Exchange your shares	Select the fund into which you want to exchange. Be sure to read that fund’s prospectus.	You can exchange your shares of a Fund for shares of other Mercury mutual funds or for shares of the Summit Cash 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 shares of a Fund is generally exchangeable for shares of the same class of another Mercury fund. If you own Class I shares and wish to exchange into a fund in which you have no Class I shares (and you are not eligible to buy Class I shares), you will exchange into Class A shares. 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.

Because of the high cost of maintaining smaller shareholder accounts, the Funds may redeem the shares in your account (without charging any deferred sales charge) if the net asset value of your account falls below $500 due to redemptions you have made. You will be notified that the value of your account is less than $500 before the Funds make an involuntary redemption. You will then have 60 days to make an additional investment to bring the value of your account to at least $500 before the Funds take any action. This involuntary redemption does not apply to retirement plans or Uniform Gifts or Transfers to Minors Act accounts.

Each Fund also reserves the right to terminate any account engaging in market-timing mutual funds. For purposes of this policy, “market timing” involves three or more purchases and sales of shares of mutual funds within a 90 day period to capture short term profits resulting from market volatility.

MERCURY QA EQUITY SERIES, INC.

[GRAPHIC] Account Choices

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. Each Fund calculates its net asset value (generally by using market quotations) each day the New York Stock Exchange is open, after the close of business on the Exchange, based on prices at the time of closing. The Exchange generally closes at 4:00 p.m. Eastern time. The net asset value used in determining your price is the next one calculated after your purchase or redemption order is placed. Net asset value is generally calculated by valuing each security or other asset at its closing price for the day. Many of the International Fund’s investments are traded on foreign 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. Foreign securities sometimes trade on days that the New York Stock Exchange is closed. As a result, the International Fund’s net asset value may change on days when you will not be able to purchase or redeem the Fund’s shares. Securities and assets for which market quotations are not readily available are generally valued at fair value as determined in good faith by or under the direction of the Board of Directors of the Funds.

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 because Class B and Class C shares have distribution fees and higher transfer agency fees. 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 QA EQUITY SERIES, INC.

[GRAPHIC] Account Choices

Dividends — ordinary income and capital gains paid to shareholders. Dividends may be reinvested in additional Fund shares as they are paid.

FEE-BASED PROGRAMS

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 shares of a Fund or into Summit. 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 AND TAXES

Each Fund will distribute at least annually any net investment income and any net realized long or short term capital gains. Each Fund may also pay a special distribution at the end of the calendar year to comply with Federal tax requirements. Dividends may be reinvested automatically in shares of a Fund at net asset value without a sales charge or may be taken in cash. If your account is with a securities dealer that has an agreement with a 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 in cash, contact the transfer agent. Although this cannot be predicted with any certainty, the Funds anticipate that the majority of their dividends, if any, will consist of capital gains.

You will pay tax on dividends from a Fund whether you receive them in cash or additional shares. If you redeem shares of a Fund or exchange them for shares of another fund, any gain on the transaction may be subject to tax. Each Fund intends to pay dividends that will either be taxed as ordinary income or capital gains. Capital gain dividends of individuals are generally taxed at different rates than ordinary income dividends.

Dividends and interest received by the International Fund may give rise to withholding and other taxes imposed by foreign countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. The International Fund expects to make an election that will generally require shareholders to include in income their share of foreign withholding taxes paid by the Fund. Shareholders may be entitled to treat these taxes as taxes paid by them, and therefore, deduct such taxes in computing their taxable income or, in some cases, to use them as foreign tax credits against the U.S. income taxes otherwise owed.

If you are neither a lawful permanent resident nor a citizen of the U.S., or if you are a foreign entity, a 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, a Fund must withhold 31% of your distributions and redemption proceeds if you have not provided a taxpayer identification number or social security number or if the number you have provided is incorrect.

This section summarizes some of the consequences under current Federal tax law of an investment in a Fund. It is not a substitute for personal tax advice. Consult your personal tax advisor about the potential tax consequences of an investment in a Fund under all applicable tax laws.

MERCURY QA EQUITY SERIES, INC.

[GRAPHIC] The Portfolio Management

MANAGEMENT OF THE FUNDS

Mercury Asset Management US, a division of Fund Asset Management, L.P., is the Funds’ investment adviser. The investment adviser manages the Funds’ investments and their business operations under the overall supervision of the Board of Directors of the Funds. The investment adviser has the responsibility for making all investment decisions for the Funds. The investment adviser’s principal business address is 800 Scudders Mill Road, Plainsboro, New Jersey 08536.

Philip Green is a Senior Vice President and Portfolio Manager of each Fund and is primarily responsible for the day-to-day management of the Funds’ respective portfolios. Mr. Green has been a Senior Vice President of Fund Asset Management, L.P. and certain of its affiliates since 1999, a Managing Director and Portfolio Manager of Global Institutional Services at Bankers Trust from 1997 to 1999, a Vice President of Quantitative Equities at Bankers Trust in 1996, a Vice President of Asset Allocations Strategies at Bankers Trust from 1994 to 1996, a Vice President of Foreign Exchange and Currency Overlay Strategies at Bankers Trust from 1988 to 1999 and an Assistant Treasurer of Asset Management Group at Bankers Trust from 1985 to 1988.

Mercury Asset Management US is a division of Fund Asset Management, L.P. Fund Asset Management, L.P. was organized as an investment adviser in 1977 and offers investment advisory services to more than 50 registered investment companies. Fund Asset Management, L.P. and its affiliated advisers had approximately $550.07 billion in investment company and other portfolio assets under management as of January 31, 2000. This amount includes assets managed for affiliates.

The investment adviser is paid a fee by each Fund as a percentage of the respective Fund’s average daily net assets as follows:

Fund		Annual Fee Rate
Large Cap Core Fund		0.40%
Large Cap Value Fund		0.40%
Large Cap Growth Fund		0.40%
Mid Cap Fund		0.55%
Small Cap Fund		0.55%
International Fund		0.65%

MERCURY QA EQUITY SERIES, INC.

[GRAPHIC] The Portfolio Management

The investment adviser also provides administrative services to the Funds. As compensation for these administrative services, the investment adviser receives an administrative fee equal to 0.35% of each Fund’s average daily net assets.

The Funds have entered into a contractual arrangement with the investment adviser which provides that the management fee of the Funds when combined with the administrative fees of the Funds and other expenses will not exceed specific amounts. As a result of these contractual arrangements, the investment adviser receives advisory fees equal to 0.40%, 0.40%, 0.40%, 0.55%, 0.48%, and 0.24% for the Mercury QA Large Cap Core Fund, Mercury QA Large Cap Value Fund, Mercury QA Large Cap Growth Fund, Mercury QA Mid Cap Fund, Mercury QA Small Cap Fund and Mercury QA International Fund, respectively, and administrative fees equal to 0.35% for each Fund.

Each Fund may in the future invest all of its assets in another mutual fund that has the same investment objective and fundamental policies as the Fund. All portfolio investments would then be made at the level of the underlying fund and each Fund ’s investment results would correspond directly to the respective fund’s investment results. This type of mutual fund structure is sometimes referred to as a “master/feeder” structure. If other entities also invest in the underlying fund, this could enable the Funds to realize economies of scale by investing through an entity with more assets (the underlying fund). However, there are additional costs involved in operating a “master/feeder” structure. If these additional costs are not offset as a result of economies of scale, it is possible that a Fund’s expenses would increase rather than decrease if it converts to this structure. The Board of Directors of the Funds has the authority, on behalf of each Fund, to make the change to a “master/feeder” structure without first holding a vote of the Fund’s shareholders if it believes it is in the best interests of the Fund to do so.

A Note About Year 2000

As the year 2000 began, there were few problems caused by the inability of certain computer systems to tell the difference between the year 2000 and the year 1900 (commonly known as the “Year 2000 Problem”). It is still possible that some computer systems could malfunction in the future because of the Year 2000 Problem or as a result of actions taken to address the Year 2000 Problem. Fund management does not anticipate that its services or those of the Funds’ other service providers will be adversely affected, but Fund management will continue to monitor the situation. If malfunctions related to the Year 2000 Problem do arise, the Funds and their investments could be negatively affected.

MERCURY QA EQUITY SERIES, INC.

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Funds

Mercury QA Large Cap Core Fund

Mercury QA Large Cap Value Fund

Mercury QA Large Cap Growth Fund

Mercury QA Mid Cap Fund

Mercury QA Small Cap Fund

Mercury QA International Fund

of Mercury QA Equity Series, Inc.

P.O. Box 9011

Princeton, New Jersey 08543-9011

(1-888-763-2260)

Investment Adviser and Administrator

Mercury Asset Management US,

a division of Fund Asset Management, L.P.

800 Scudders Mill Road

Plainsboro, New Jersey 08536

Transfer Agent

Financial Data Services, Inc.

Administrative Offices:

4800 Deer Lake Drive East

Jacksonville, Florida 32246-6484

Mailing Address:

P.O. Box 45289

Jacksonville, Florida 32232-5289

(1-888-763-2260)

Independent Auditors

Deloitte & Touche LLP

Princeton Forrestal Village

116-300 Village Boulevard

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

The Chase Manhattan Bank

4 Chase MetroTech, 18th Floor

Brooklyn, New York 11245

Counsel

Swidler Berlin Shereff Friedman, LLP

The Chrysler Building

405 Lexington Avenue

New York, New York 10174

MERCURY QA EQUITY SERIES, INC.

[GRAPHIC] To Learn More

SHAREHOLDER REPORTS

Additional information about the Funds’ investments is available in the Funds’ annual and semi-annual reports to shareholders. In the Funds’ annual report you will find a discussion of the market conditions and investment strategies that significantly affected the Funds’ performance during its last fiscal year. You may obtain these reports at no cost by calling 1-888-763-2260.

If you hold your shares in a Fund 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 Funds’ Statement of Additional Information contains further information about the Funds and is incorporated by reference (legally considered to be part of this Prospectus). You may request a free copy by writing to the Funds at Financial Data Services, Inc., P.O. Box 45289, Jacksonville, Florida 32232-5289 or by calling 1-888-763-2260.

Contact your financial consultant or the Funds at the telephone number or address indicated on the inside back cover of this Prospectus if you have any questions.

Information about the Funds (including the Statement of Additional Information) can be reviewed and copied at the SEC ’s Public Reference Room in Washington, D.C. Call 1-202-942-8090 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 electronic request at the following e-mail address: [email protected], or by writing the Public Reference Section of the SEC, Washington, D.C. 20549-0102.

You should rely only on the information contained in this Prospectus. No one is authorized to provide you with information that is different from the information contained in this Prospectus.

Investment Company Act file # 811-09611

Code # 19088-0300. RED

Mercury QA Equity Series, Inc.

Mercury QA Large Cap Core Fund

Mercury QA Large Cap Value Fund

Mercury QA Large Cap Growth Fund

Mercury QA Mid Cap Fund

Mercury QA Small Cap Fund

Mercury QA International Fund

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PROSPECTUS · March 13, 2000

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