MERRILL LYNCH INSURED EQUITY FUNDS INC, N-1A EL, 1996-02-13

MERRILL LYNCH INSURED EQUITY FUNDS INC
N-1A EL, 1996-02-13

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As filed with the Securities and Exchange Commission on February 13, 1996

Securities Act File No.
Investment Company Act File No.

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

_________________________________________

FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X

Pre-Effective Amendment No.
Post-Effective Amendment No.
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 X
Amendment No.
(Check appropriate box or boxes)
_________________________________________
Merrill Lynch Insured Equity Funds, Inc.
(Exact name of Registrant as specified in charter)

P.O. Box 9011, Princeton, New Jersey 08543-9011
(Address of Principal Executive Offices)

Registrant's Telephone Number, including Area Code (609) 282-2800

ARTHUR ZEIKEL
Box 9011
Princeton, New Jersey 08543-9011
(Name and Address of Agent for Service)

Copies to:
Counsel for the Fund: and
JOEL H. GOLDBERG, Esq. PHILIP L. KIRSTEIN, Esq.
Shereff, Friedman, Hoffman & Goodman, LLP Merrill Lynch Asset Management
919 Third Avenue P.O. Box 9011
New York, New York 10022 Princeton, New Jersey 08543-9011

The Registrant declares that an indefinite amount of common stock, par
value $.0001 per share, is being registered by this Registration Statement
pursuant to Section 24(f) under the Investment Company Act of 1940, as amended,
and Rule 24f-2 thereunder.

The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become

effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

MERRILL LYNCH INSURED EQUITY FUNDS, INC.
REGISTRATION STATEMENT ON FORM N-1A

CROSS REFERENCE SHEET
(as required by Rule 481(a))

N-1A Item No. Location in Prospectus
- ------------ ----------------------
Part A
- ------
Item 1. Cover Page . . . . . . . . . . . . . . . . . . Cover Page
Item 2. Synopsis . . . . . . . . . . . . . . . . . . Fee Table
Item 3. Condensed Financial Information . . . . . . . Not Applicable
Item 4. General Description of Registrant . . . . . . Investment Objective
and Policies;
Management of the
Fund; Other Investment
Policies and
Practices; Additional
Information

Item 5. Management of the Fund . . . . . . . . . . . . Fee Table; Management
of the Fund
Item 5A. Management's Discussion of Fund Performance . Not Applicable
Item 6. Capital Stock and Other Securities . . . . . . Additional Information
Item 7. Purchase of Securities Being Offered . . . . . Purchase of Shares;
Additional Information
Item 8. Redemption or Repurchase . . . . . . . . . . . Fee Table; Redemption
of Shares
Item 9. Pending Legal Proceedings . . . . . . . . . . Not Applicable

Part B
- ------
Item 10. Cover Page . . . . . . . . . . . . . . . . . . Cover Page
Item 11. Table of Contents . . . . . . . . . . . . . . Back Cover Page
Item 12. General Information and History . . . . . . . Not Applicable
Item 13. Investment Objectives and Policies . . . . . . Investment Objective
and Policies; Other
Investment Policies
and Practices
Item 14. Management of the Fund . . . . . . . . . . . . Management of the Fund
Item 15. Control Persons and Principle Holders of
Securities . . . . . . . . . . . . . . . . . Not Applicable
Item 16. Investment Advisory and Other Services . . . . Management of the
Fund; Purchase of
Shares; Additional
Information
Item 17. Brokerage Allocation . . . . . . . . . . . . . Other Investment
Policies and
Practices; and

Brokerage
Item 18. Capital Stock and Other Securities . . . . . . Additional Information
Item 19. Purchase, Redemption and Pricing of Securities
Being Offered . . . . . . . . . . . . . . . . Purchase of Shares;
Redemption of Shares;
Determination of Net
Asset Value;
Shareholder Services
Item 20. Tax Status . . . . . . . . . . . . . . . . . . Dividends and
Distributions; Taxes
Item 21. Underwriters . . . . . . . . . . . . . . . . . Purchase of Shares
Item 22. Calculations of Performance Data . . . . . . . Performance Data
Item 23. Financial Statements . . . . . . . . . . . . . Not Applicable

Part C
- ------
Information required to be included is set forth under the appropriate
Item, so numbered, in Part C to this Registration Statement.

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION - February 13, 1996

PROSPECTUS

, 1996
- ----------

Merril Lynch Insured Equity Fund
P.O. Box 9011, Princeton, New Jersey 08543-9011 Phone No. (609) 282-2800
------------

securities"). The Fund has obtained an insurance policy (the "Insurance Policy")
from _______ (the "Insurer") which insures the timely payment of the principal
of such zero coupon securities in the unlikely event of a default of the United
States Treasury with respect to such zero coupon securities. To seek
participation in the U.S. equity markets, the Fund expects to invest in
equity-oriented securities, including equity-linked obligations, such as options
on baskets of stocks, stock index options, stock index futures and related
options on such futures, securities the return on which is based on the value of
a stock index and equity swaps ("Equity-Linked Investments"). There can be no
assurance that this objective will be satisfied. For more information on the
Fund's investment objective and policies, see "Investment Objective and
Policies" on page 4.

Investors who purchase shares of the Fund after the subscription offering
(described below) will receive a total return on their investment which may be
less than the Targeted Minimum Cumulative Total Return and which will vary
according to the offering price of the Fund's shares at the time of purchase,
market conditions and the length of time remaining to the Maturity Date.

The Fund is not an index fund and, because of its substantial investments
in U.S. government obligations, is not expected to participate in the
appreciation, if any, of the U.S. equity markets to the same extent as an index
fund. However, unlike an index fund, the Fund is designed to seek a Targeted
Minimum Cumulative Total Return at its Maturity Date, regardless of the
performance of the U.S. equity markets.

THE FUND IS INTENDED FOR LONG-TERM INVESTORS WHO WILL HOLD THEIR ENTIRE
INVESTMENT IN THE FUND UNTIL THE MATURITY DATE AND WILL REINVEST ALL DIVIDENDS
AND DISTRIBUTIONS. IT IS DESIGNED FOR INVESTORS WHO DO NOT SEEK CURRENT INCOME
AND WHO DO NOT EXPECT TO REDEEM ALL OR A PORTION OF THEIR SHARES PRIOR TO THE
MATURITY DATE. THE INSURANCE POLICY DOES NOT INSURE THE MARKET VALUE OF THE
FUND'S ZERO COUPON SECURITIES AT ANY TIME PRIOR TO THEIR MATURITY.

Distribution of shares of the Fund is limited to investors who seek the
Fund's objective without regard to tax considerations, such as certain
tax-qualified employee benefit plans, including Individual Retirement Accounts
("IRAs") and corporate, governmental and other retirement plans qualified under
sections 401, 403(b) or 408 of the Internal Revenue Code of 1986, as amended
(the "Code").

Shares of the Fund will be offered to investors during the initial
subscription offering at $10.00 per share and during the continuous offering
at a price equal to the next determined net asset value per share, subject, in
both cases, to a contingent deferred sales charge (a "CDSC") which may be
imposed on redemptions made within three years of purchase, a redemption fee
imposed on redemptions made prior to the liquidation of the Fund at the Maturity
Date, and ongoing account maintenance and distribution fees. See "Purchase
of Shares." The minimum investment is $2,000, and the minimum subsequent
investment is $50. You may choose to make an initial investment of as little
as $250 and reach the $2,000 minimum with several additional investments, as
described in "Purchase of Shares." The Fund reserves the right to suspend the
offering of its shares at any time.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES

AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------
This Prospectus is a concise statement of information about the Fund that
is relevant to making an investment in the Fund. This Prospectus should be
retained for future reference. A statement containing additional information
about the Fund, dated ____________, 1996 (the "Statement of Additional
Information"), has been filed with the Securities and Exchange Commission and is
available, without charge, by calling or by writing the Fund at the above
telephone number or address. The Statement of Additional Information is hereby
incorporated by reference into this Prospectus.

------------
Merrill Lynch Asset Management-Manager
Merrill Lynch Funds Distributor, Inc.-Distributor

FEE TABLE

The following table illustrates expenses and fees that you would incur as
a shareholder of the Fund.

<TABLE>
<S> <C>
Shareholder Transaction Expenses:
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) None
Sales Charge Imposed on Dividend Reinvestments . . . . . . . . . . . . . . . . . . None
Deferred Sales Charge (as a percentage of original purchase price or redemption
proceeds, whichever is lower) . . . . . . . . . . . . . . . . . . . . . . . . . 2.5% during first year
2.0% during second year
1.0% during third year,
0.0% thereafter
Redemption fee (applicable to investors who redeem prior to the Fund's
liquidation, as a percentage of the amount redeemed) . . . . . . . . . . . . . . 1.0%
Exchange Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
Annual Fund Operating Expenses (as a percentage of average net assets):
Management Fees (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.35%
Rule 12b-1 Fees
Account Maintenance Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.25%
Distribution Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.50%
Other Expenses %
Custodian Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . %
Shareholder Servicing Costs(b) . . . . . . . . . . . . . . . . . . . . . . . . . %
---

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total Other Expenses %
---
Total Fund Operating Expenses %
===
</TABLE>
_____________________
(a) See "Management of the Fund--Management and Advisory Arrangements" --page
__.
(b) See "Management of the Fund--Transfer Agency Services" --page __.

<TABLE>
<CAPTION>
Cumulative
Expenses Paid
for the Period of
--------------------
1 Year 3 Years
Example: ------ -------
<S> <C> <C>
An investor would pay the following expenses on a $1,000 investment assuming (1) an operating
expense ratio of _____% (2) a 5% annual return throughout the period and
(3) redemption at the end of the period: . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $
An investor would pay the following expenses on the same $1,000 investment assuming no redemption
at the end of the period: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $

</TABLE>

The foregoing Fee Table is intended to assist investors in understanding
the costs and expenses that a shareholder in the Fund will bear directly or
indirectly. The expenses set forth under "Other Expenses" are based on estimated
amounts through the end of the Fund's first full fiscal year on an annualized
basis. The Example set forth above assumes reinvestment of all dividends and
distributions and utilizes a 5% annual rate of return as mandated by Securities
and Exchange Commission regulations. The Example should not be considered a
representation of past or future expenses or annual rate of return, and actual
expenses or annual rate of return may be more or less than those assumed for
purposes of the Example. In the event the term of the Fund continues beyond the
Maturity Date, shareholders who own their shares for an extended period of time
may pay more in Rule 12b-1 distribution fees than the economic equivalent of the
maximum front-end sales charge permitted under the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. Merrill Lynch may charge its
customers a postage and handling charge (presently $4.85) for confirming
purchases and repurchases. Purchases and redemptions directly through the Fund's
Transfer Agent are not subject to the postage and handling charge. See "Purchase
of Shares" and "Redemption of Shares."

INVESTMENT OBJECTIVE AND POLICIES

Merrill Lynch Insured Equity Fund is a non-diversified mutual fund whose
fundamental policy is to seek capital appreciation through investing in a

portfolio of equity-oriented securities (including equity-indexed obligations)
and U.S. government obligations. The Fund's objective is to provide investors
with a portion of the appreciation, if any, in the U.S. equity markets, but with
a Targeted Minimum Cumulative Total Return of 10% over the life of the Fund,
regardless of the performance of the U.S. equity markets. The term of the Fund
will end on or about the Maturity Date (dd/mm/2001). The Targeted Minimum
Cumulative Total Return represents an annualized rate of return of 1.9% over the
five year term of the Fund. To seek to satisfy its Targeted Minimum Cumulative
Total Return, the Fund expects to invest a majority of its assets in zero coupon
securities that are direct obligations of the United States Treasury ("zero
coupon securities"). The Fund has obtained the Insurance Policy from the Insurer
which insures the timely payment of the principal of such zero coupon securities
in the unlikely event of a default of the United States Treasury with respect to
such zero coupon securities. The Insurer has a rating of AAA from Standard &
Poor's Ratings Group ("S&P") and Aaa from Moody's Investors Service, Inc.
("Moody's"). The Insurer is not affiliated with the Fund and no representation
is made regarding the ability of the Insurer to pay any amount due pursuant to
the Insurance Policy. To seek participation in the U.S. equity markets, the Fund
expects to invest in equity-oriented securities, including equity-linked
obligations, such as options on baskets of stocks, stock index options, stock
index futures and related options on such futures, securities the return on
which is based on the value of a stock index and equity swaps ("Equity-Linked
Investments"). There can be no assurance that this objective will be satisfied.

Investors who purchase shares of the Fund after the subscription offering
will receive a total return on their investment which may be less than the
Targeted Minimum Cumulative Total Return and which will vary according to the
offering price of the Fund's shares at the time of purchase, market conditions
and the length of time remaining to the Maturity Date.

The Fund is not an index fund and, because of its substantial investments
in U.S. government obligations, is not expected to participate in the
appreciation, if any, of the U.S. equity markets to the same extent as an index
fund. However, unlike an index fund, the Fund is designed to seek a Targeted
Minimum Cumulative Total Return as of its Maturity Date, regardless of the
performance of the U.S. equity markets.

The Fund's fundamental policy may not be changed without a vote of a
majority of the Fund's outstanding voting securities, as defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act").

The Fund is structured as an open-end investment company and shareholders
may redeem their shares at any time and may elect to receive dividends and
distributions in cash. However, the Fund is designed for long-term investors who
intend to reinvest all dividends and distributions, who do not seek current
income and who do not expect to redeem all or a portion of their shares prior to
the Maturity Date. As a result, investors are encouraged to reinvest all
dividends and distributions and to evaluate their need to receive some or all of
their invested funds, dividends and distributions prior to the Maturity Date
before making an investment in the Fund.

While the Fund's objective is to provide investors with a portion of the
appreciation, if any, in the U.S. equity markets, but with a Targeted Minimum
Cumulative Total Return of 10% over the life of the Fund, regardless of such

market performance, partial or complete withdrawals of a shareholder's
investment in the Fund prior to the Maturity Date may diminish the likelihood of
such shareholder achieving the Targeted Minimum Cumulative Total Return.
Specifically, any redemption of shares prior to the Maturity Date or any
election by a shareholder to receive dividends or distributions in cash will
decrease the total amount of such shareholder's investment in the Fund available
to generate total return.

Shareholders who elect not to reinvest all dividends and distributions are
in effect withdrawing a portion of the accreted income on the zero coupon
securities that are held to provide that all shareholders receive at least the
Targeted Minimum Cumulative Total Return. In addition, because the zero coupon
securities are designed to mature on or about the Maturity Date, redemption of
shares prior to the Maturity Date may result in the shareholder receiving less
than the Targeted Minimum Cumulative Total Return with respect to such withdrawn
investment. Moreover, the value of any shares redeemed prior to the Maturity
Date will likely reflect disproportionately diminished participation in the
portion of the Fund's portfolio that seeks participation in the U.S. equity
markets. This is because a substantial portion or all of the Equity-Linked
Investments will be structured to provide participation in the U.S. equity
markets at the expiration of the Fund's five year term and will not likely
realize their full value until the Maturity Date. As a result, shareholders who
redeem shares of the Fund prior to the Maturity Date may receive less than their
proportionate share of the ultimate value of the Equity-Linked Investments. See
"Investment Objective and Policies -- Risk Factors -- Options and Futures
Transactions; --Redemption Prior to Maturity Date."

Shares redeemed prior to the liquidation of the Fund after the Maturity
Date will be subject to a 1% redemption fee. See "Redemption of Shares." The
proceeds of this fee will be retained by the Fund and will be used to defray
any costs associated with liquidating the Fund's portfolio holdings in
connection with such redemption that would otherwise be borne by the Fund's
continuing shareholders. No redemption fee will be charged to investors upon
the liquidation of the Fund after the Maturity Date. Shares redeemed within the
first three years of purchase will also be subject to a CDSC. See "Purchase of
Shares -- Contingent Deferred Sales Charge." To the extent that shares are
subject to a redemption fee and/or CDSC, the total return received in respect
of such shares will be reduced.

While the net asset value per share is the same for all shares at any given
time, shareholders who redeem shares prior to the Maturity Date or who have
elected not to reinvest all dividends and distributions will own fewer shares to
redeem at the Maturity Date and, therefore, will receive lower total redemption
proceeds than shareholders who have not redeemed shares and who have reinvested
all dividends and distributions. Therefore, it is less likely that such
shareholders will receive the Targeted Minimum Cumulative Total Return.
Accordingly, investors are encouraged to reinvest dividends and distributions
and to evaluate their need to receive some or all of their invested funds,
dividends and distributions prior to the Maturity Date before making an
investment in the Fund.

While the total amount sought to be returned at the Maturity Date to
shareholders who purchase shares of the Fund during the subscription offering
and who reinvest all dividends and distributions is expected to be at least 110%
of the original amount invested by such shareholders, the present value of that
amount may be substantially less. The Targeted Minimum Cumulative Total Return
of 10% per share over the life of the Fund does not mean that the net asset
value of shares redeemed at the Maturity Date will equal at least $11 per share,
but rather that the entire amount of redemption proceeds at the Maturity Date of
an investment made at the Fund's inception will exceed the dollar amount
originally invested by at least 10% assuming that no shares have been redeemed
and all dividends and distributions have been reinvested. Investors who purchase
shares of the Fund after the subscription offering will receive a total return
on their investment which may be less than the Targeted Minimum Cumulative Total
Return and which will vary according to the offering price of the Fund's shares
at the time of purchase, market conditions and the length of time remaining to
the Maturity Date.

The zero coupon securities that the Fund acquires will be selected so as to
mature at a specific face value on or about the Maturity Date. The minimum face
value of the zero coupon securities per Fund share necessary to provide for
payment of the Targeted Minimum Cumulative Total Return to shareholders will be
continually determined and maintained. The Fund has obtained the Insurance
Policy from the Insurer which insures the timely payment of the principal of
such zero coupon securities in the unlikely event of a default of the United
States Treasury with respect to such zero coupon securities. The Insurance
Policy does not insure the market value of the Fund's zero coupon securities at
any time prior to their maturity, which maturity is structured to correspond to
the Fund's Maturity Date. See "The Insurance Policy" below.

Promptly after the Maturity Date, and without shareholder approval, the
Fund's outstanding shares will be redeemed at the net asset value per share
determined on the date of redemption. In connection with this liquidation, all
the Fund's remaining portfolio holdings will be liquidated, the liabilities of
the Fund will be discharged or otherwise provided for, and the Fund will be
terminated. The estimated expenses of liquidation and termination of the Fund
are not expected to affect materially the net asset value of the Fund.

Zero Coupon Securities

A zero coupon security is a debt obligation that entitles the holder to
a specified sum at maturity but does not provide for any periodic payments of
interest prior thereto. Such a security is therefore issued and traded at a
discount from its amount due at maturity (the "face value"). Zero coupon
securities may be created by separating the interest and principal components of
securities issued or guaranteed by the United States Government or one of its
agencies or instrumentalities or issued by private corporate issuers. The Fund,
however, will invest in zero coupon securities only if they are direct
obligations of the United States Treasury. The discount from face value at which
zero coupon securities are purchased varies depending on the time remaining to
maturity, prevailing interest rates and the liquidity of the security. Because
the discount from face value is known at the time of investment, investors
holding zero coupon securities until maturity know the total amount of their
investment return at the time of investment.

In contrast to zero coupon securities, a portion of the total realized
return from conventional interest-paying obligations comes from the reinvestment
of periodic interest. Because the rate to be earned on these reinvestments may
be higher or lower than the rate quoted on the interest-paying obligations at
the time of the original purchase, the investor's return on reinvestments is
uncertain even if the securities are held to maturity. This uncertainty is
commonly referred to as reinvestment risk. With zero coupon securities, however,
there are no cash distributions to reinvest, so investors bear no reinvestment
risk if they hold the zero coupon securities to maturity; holders of zero coupon
securities, however, forego the possibility of reinvesting at a higher yield
than the rate paid on the originally issued security. For a discussion of risks

associated with the sale of zero coupon securities prior to maturity, see
"Investment Objective and Polices-- Risk Factors--Zero Coupon Securities."

Equity-Linked Investments

With respect to the portion of the Fund's portfolio not invested in zero
coupon securities (previously defined as the "Equity-Linked Investments"), the
Fund seeks to permit investors to participate in the appreciation, if any, of
the U.S. equity markets over a five year period. The Fund will not generally
invest in or hold individual equities or attempt to pick individual securities
which it believes have the potential to outperform the market. Rather, the Fund
will seek to maintain broad exposure to U.S. equity markets generally through
investments in options on baskets of stocks, stock index options, stock index
futures and related options on such futures, securities the return on which is
based on the value of a stock index, and equity swaps. Although certain of the
foregoing instruments may be issued by non-U.S. entities, all instruments held
by the Fund will be U.S. dollar denominated. A discussion of these investment
practices is set forth below.

New financial products and risk management techniques involving indexed
instruments continue to be developed and the Fund may use these new investments
and techniques to the extent consistent with its investment objectives and
policies.

Options and Futures. The Fund may purchase American or European style call
options on baskets of equity securities or on securities indices (e.g., the
Standard & Poor's 500 Composite Stock Price Index (the "S&P 500")).

As the holder of a call option on a basket of securities, the Fund has the
right to purchase the underlying securities at the exercise price at any time
during the option period (American style) or at the expiration of the option
(European style). The Fund may enter into closing sale transactions with respect
to such options or permit them to expire. The Fund will not generally exercise
an option and take possession of the underlying securities. A closing sale
transaction cancels out the Fund's position as the purchaser of an option by
means of an offsetting sale of an identical option prior to the expiration of
the option it has purchased.

Options on indices are similar to options on baskets of securities except
that on exercise or assignment, the parties to the contract pay or receive an
amount of cash equal to the difference between the closing value of the index
and the exercise price of the option, which may be multiplied by a specified
multiple. By buying an index option the Fund has a right to delivery of a
specified amount of cash if the underlying index increases to a specified
exercise price set at the time of the contract. The amount of any cash received
by the Fund will be partially offset by the amount of the premium paid for the
index option and any related transaction costs. Prior to its expiration, an
index option may be sold in a closing sale transaction and profit or loss from
the sale will depend on whether the amount received is more or less than the
premium paid for the option plus the related transaction costs. A closing sale
transaction cancels out the Fund's position as the purchaser of an index option
by means of an offsetting sale of an identical option prior to the expiration of
the option it has purchased.

A futures contract is an agreement between two parties which obligates the
purchaser of the futures contract to buy and the seller of a futures contract to
sell a security for a set price on a future date. Unlike most other futures
contracts, a stock index futures contract does not require actual delivery of
securities, but results in cash settlement based upon the difference in value of
the index between the time the contract was entered into and the time of its
settlement. Transactions by the Fund in stock index futures are subject to
limitations as described below under "Restrictions on the Use of Futures
Transactions."

The Fund has authority to purchase call options on futures contracts and
securities indices. Generally, these strategies are utilized under the same
market and market sector conditions (i.e., conditions relating to specific types
of investments) in which the Fund enters into futures transactions.

The Fund may engage in options and futures transactions on U.S. exchanges
and in options in the over-the-counter markets ("OTC options"). In general,
exchange-traded contracts are third-party contracts (i.e., performance of the
parties' obligations is guaranteed by an exchange or clearing corporation) with
standardized strike prices and expiration dates. OTC options transactions are
two-party contracts with price and terms negotiated by the buyer and seller.

Indexed Securities. The Fund may invest in securities whose potential
return is based on the change in particular measurements of value or rate (an
"index"). As an illustration, the Fund may invest in a debt security that pays
interest and returns principal based on the change in an equity index, such as
the S&P 500. To the extent that the Fund invests in such types of securities, it
will be subject to the risks associated with changes in the particular indices,
which may include reduced or eliminated interest payments and losses of invested
principal.

The indexed securities in which the Fund invests may include medium term
notes. Medium-term notes are debt securities with maturities varying from nine
months to thirty years from the date of issue which may be subject to redemption
at the option of the issuer or repayment at the option of the holder thereof
prior to the maturity date thereof.

Equity Swaps. The Fund may enter into equity swap agreements, which are
contracts in which one party agrees to make payments based on the change in
market value of a specified equity security, basket of equity securities or
securities index in return for payments based on a variable interest rate or the
return of a different equity security, basket of equity securities or securities
index.

Swap agreements and OTC options entail the risk that the Fund's
counterparty will default on its payment obligations to the Fund. The Fund will
seek to lessen the risk to some extent by entering into equity swaps and OTC
options only with counterparties that have substantial capital and meet the
Fund's credit criteria. Swap agreements also bear the risk that the Fund will
not be able to meet its obligation to the counterparty. The Fund, however, will
deposit in a segregated account with its custodian zero coupon bonds or cash
equivalents or other assets permitted to be so segregated by the Securities and
Exchange Commission in an amount equal to or greater than the market value of
its liabilities under the swap agreement, plus or minus any amount the Fund is

obligated to pay or is to receive under the swap agreement.

Investment Leverage. Certain options, futures, options on futures, indexed
securities and equity swaps may have the effect of providing a degree of
investment leverage, because they may increase or decrease in value at a rate
that is a multiple of the changes in applicable indices. As a result, the market
value of such securities may be more volatile than the market values of the
securities comprising the underlying index. The Fund believes that indexed
securities represent flexible portfolio management instruments that may allow
the Fund to seek potential investment rewards relatively efficiently under
different market conditions.

Restrictions on the Use of Futures Transactions. Under regulations of the
Commodity Futures Trading Commission ("CFTC"), the futures trading activities
described herein will not result in the Fund being deemed to be a "commodity
pool," as defined under such regulations, provided that the Fund adheres to
certain restrictions. In particular, the Fund may enter into transactions to
increase exposure to the U.S. equity markets (i.e., non-hedging transactions),
provided that the Fund may not enter into such transactions if, immediately
thereafter, the sum of the amount of the initial margin deposits on the Fund's
existing futures positions and option premiums would exceed 5% of the market
value of the Fund's liquidating value, after taking into account unrealized
profits and unrealized losses on any such transactions. Margin deposits may
consist of cash or securities acceptable to the broker and the relevant contract
market. Certain other CFTC regulations also apply to hedging transactions in
which the Fund will not engage.

When the Fund purchases a futures contract, or purchases a call option
thereon, an amount of cash, U.S. Government securities or other liquid
high-grade debt securities (which may include zero coupon securities) will be
deposited in a segregated account with the Fund's custodian so that the amount
so segregated, plus the amount of initial and variation margin held in the
account of its broker, equals the market value of the futures contract, thereby
insuring that the use of such futures is unleveraged.

The Insurance Policy

The Fund has obtained the Insurance Policy from the Insurer in order to
insure timely payment of the principal of the zero coupon securities held in the
Fund's portfolio in the unlikely event of a default by the United States
Treasury with respect to such zero coupon securities. The Insurance Policy
provides that in the event of such default, the Insurer will pay to the Fund an
amount equal to the principal amount owed to the Fund in respect of such zero
coupon securities. The Insurance Policy does not insure the market value of the
Fund's zero coupon securities at any time prior to their maturity, which
maturity is structured to correspond to the Fund's Maturity Date.

The Insurer has a rating of AAA from S&P and Aaa from Moody's. The
Insurer is not affiliated with the Fund and no representation is made
regarding the ability of the Insurer to pay any amount due to the Fund
pursuant to the Insurance Policy. [Include A.M. Best rating.]

Other Investment Policies and Practices

U.S. Government Securities. The Fund is also permitted to invest in
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities ("U.S. Government Securities"). Such investments may be backed
by the "full faith and credit" of the United States, including U.S. Treasury
bills, notes and bonds as well as certain agency securities and mortgage-backed
securities issued by the Government National Mortgage Association (GNMA). The
guarantees on these securities do not extend to the securities' yield or value
or to the yield or value of the Fund's shares. Other investments in agency
securities are not necessarily backed by the "full faith and credit" of the
United States, such as certain securities issued by the Federal National
Mortgage Association (FNMA), the Federal Home Loan Mortgage Corporation, the
Student Loan Marketing Association and the Farm Credit Bank.

Illiquid Securities. The Fund may invest up to 15% of its net assets in
illiquid securities, although it will limit such investments to 10% of its net
assets to the extent required by state law. Pursuant to that restriction the
Fund may not invest in securities which cannot be readily resold because of
legal or contractual restrictions or which cannot otherwise be marketed,
redeemed, put to the issuer or a third party, or which do not mature within
seven days, or which the Board of Directors has not determined to be liquid, if,
regarding all such securities, more than 15% (or 10%) of its net assets, taken
at market value, would be invested in such securities.

The Fund may purchase, without regard to the above limitation, securities
that are not registered under the Securities Act of 1933 (the "Securities Act")
but that can be offered and sold to "qualified institutional buyers" under Rule
144A under the Securities Act, provided that the Fund's Board of Directors, or
Merrill Lynch Asset Management (the "Manager") pursuant to guidelines adopted by
the Board, continuously determines, based on the trading markets for the
specific Rule 144A security, that it is liquid. The Board of Directors, however,
will retain oversight and is ultimately responsible for the determinations.
Since it is not possible to predict with assurance exactly how this market for
restricted securities sold and offered under Rule 144A will develop, the Board
of Directors will carefully monitor the Fund's investments in these securities,
focusing on such factors, among others, as valuation, liquidity and availability
of information. This investment practice could have the effect of increasing the
level of illiquidity in the Fund to the extent that qualified institutional
buyers become for a time uninterested in purchasing these securities.

Repurchase Agreements. The Fund may invest in securities pursuant to
repurchase agreements. Repurchase agreements may be entered into only with a
member bank of the Federal Reserve System or primary dealer in U.S. Government
Securities. Under such agreements, the bank or primary dealer agrees, upon
entering into the contract, to repurchase the security at a mutually agreed upon
time and price in a specified currency, thereby determining the yield during the
term of the agreement. This results in a fixed rate of return insulated from
market fluctuations during such period although it may be affected by currency
fluctuations. In the event of default by the seller under a repurchase agreement
the Fund may suffer time delays and incur costs or possible losses in connection
with disposition of the collateral. Repurchase agreements maturing in more than
seven days are deemed liquid by the Securities and Exchange Commission and are
therefore subject to the Fund's investment restriction limiting investments in
securities that are not readily marketable to 15% (or 10% to the extent required

by state law) of the Fund's net assets.

Lending of Portfolio Securities. To the extent permitted by law, the Fund
may from time to time lend securities from its portfolio to banks, brokers and
other financial institutions and receive collateral in cash or securities issued
or guaranteed by the United States Government. Such collateral will be
maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities. The Fund's policy concerning lending is
fundamental and it may not be changed without the approval of the holders of a
majority of the Fund's outstanding voting securities, as defined in the
Investment Company Act. During the period of such a loan, the Fund receives the
income on the loaned securities and either receives the income on the collateral
or other compensation, i.e., negotiated loan premium or fee, for entering into
the loan and thereby increases its yield. In the event that the borrower
defaults on its obligation to return borrowed securities, because of insolvency
or otherwise, the Fund could experience delays and costs in gaining access to
the collateral and could suffer a loss to the extent that the value of the
collateral falls below the market value of the borrowed securities. Presently,
the Fund does not intend to lend portfolio securities representing in excess of
33 1/3% of its total assets.

Portfolio Transactions. In executing portfolio transactions, the Fund seeks
to obtain the best net results, taking into account such factors as price
(including the applicable brokerage commission or dealer spread), size of order,
difficulty of execution, operational facilities of the firm involved and the
firm's risk in positioning a block of securities. While the Fund generally seeks
reasonably competitive commission rates, the Fund does not necessarily pay the
lowest commission or spread available. The Fund contemplates that, consistent
with its policy of obtaining the best net results, it will place orders for
transactions with a number of brokers and dealers, including Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), an affiliate of the
Manager. Subject to obtaining the best price and execution, brokers who provide
supplemental investment research to the Fund may receive orders for transactions
by the Fund. Information so received will be in addition to, and not in lieu of,
the services required to be performed by the Manager and the expenses of the
Manager will not necessarily be reduced as a result of the receipt of such
supplemental information. See "Management of the Fund--Management and Advisory
Arrangements." In addition, consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., the Manager may consider sales
of shares of the Fund as a factor in the selection of brokers or dealers to
execute portfolio transactions for the Fund. It is expected that the majority of
the shares of the Fund will be sold by Merrill Lynch.

Portfolio Turnover. While the Fund generally does not expect to engage in
trading for short-term gains, the Manager will effect portfolio transactions
without regard to a holding period, if, in its judgment, such transactions are
advisable in light of a change in circumstance in general market, economic or
financial conditions. As a result of its investment policies, the Fund may
engage in a substantial number of portfolio transactions. Accordingly, while the
Fund anticipates that its annual turnover rate should not exceed ___% under
normal conditions, it is impossible to predict portfolio turnover rates. The
portfolio turnover rate is calculated by dividing the lesser of the Fund's
annual sales or purchases of portfolio securities (exclusive of purchases or
sales of securities whose maturities at the time of acquisition were one year or

less) by the monthly average value of the securities in the portfolio during the
year. High portfolio turnover involves correspondingly greater transaction costs
in the form of dealer spreads and brokerage commissions, which are borne
directly by the Fund.

Investment Restrictions

The Fund's investment activities are subject to further restrictions that
are described in the Statement of Additional Information. Investment
restrictions and policies which are fundamental policies may not be changed
without the approval of the holders of a majority of the Fund's outstanding
voting securities as defined in the Investment Company Act. Among the more
significant fundamental restrictions, the Fund may not invest more than 25% of
its total assets (taken at market value at the time of each investment) in the
securities of issuers in any particular industry (excluding the U.S. Government
and its agencies and instrumentalities). In addition, the Fund is classified as
a non-diversified fund under the Investment Company Act and is not subject to
the diversification requirements of the Investment Company Act. Accordingly, the
Fund may invest more than 5% of the value of its assets in the obligations of a
single issuer, subject to the diversification requirements of Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code"), in order to qualify
as a regulated investment company (a "RIC") for U.S. federal income tax
purposes. In order to qualify as a RIC under the Code, the Fund must comply with
certain requirements, including limiting its investments so that at the close of
each quarter of the taxable year (i) not more than 25% of the market value of
the Fund's total assets are invested in the securities of a single issuer, or
any two or more issuers which are controlled by the Fund and engaged in the
same, similar or related businesses, and (ii) with respect to 50% of the market
value of its total assets, not more than 5% of the market value of its total
assets are invested in the securities of a single issuer, and the Fund does not
own more than 10% of the outstanding voting securities of a single issuer. The
U.S. Government, its agencies and instrumentalities are not included within the
definition of "issuer" for purposes of the diversification requirements of the
Code.

A significant non-fundamental policy of the Fund (which may be changed by
vote of the Board of Directors) limits investment in securities which cannot be
readily resold because of legal or contractual restrictions, or which cannot
otherwise be marketed, redeemed or put to the issuer or a third party, if at the
time of acquisition more than 15% of its total assets (or 10% to the extent
required by state law) would be invested in such securities. Securities
purchased in accordance with Rule 144A under the Securities Act and determined
to be liquid by the Board of Directors are not subject to such 15% (or 10%)
limitation.

Risk Factors

Zero Coupon Securities. Zero coupon securities of the type held by the Fund
can be sold prior to their due date in the secondary market at their then
prevailing market value which, depending on prevailing levels of interest rates,
the time remaining to maturity and liquidity (i.e., relative levels of supply
and demand for the particular zero coupon security), may be more or less than
the securities' "accreted value," that is, their value based solely on the

amount due at maturity and accretion of interest from the date of purchase. The
market prices of zero coupon securities are generally more volatile than the
market prices of securities that pay interest periodically and, accordingly, are
likely to respond to a greater degree to changes in interest rates than do
non-zero coupon securities having similar maturities and yields. The current net
asset value of the Fund attributable to zero coupon securities and other debt
instruments generally will increase as prevailing interest rates decrease, and
they will decrease as such rates increase. Such fluctuations may be larger or
smaller depending on, among other things, the level of current rates and the
time remaining to maturity. As a result, the net asset value of shares of the
Fund may fluctuate over a greater range than shares of other mutual funds that
invest in zero coupon securities having similar maturities and yields but that
make current distributions of interest.

Each year the Fund will be required to accrue an increasing amount of
income on its zero coupon securities utilizing a constant interest rate method
which takes into account the compounding of accrued interest. To maintain its
tax status as a regulated investment company and also to avoid imposition of
excise taxes, however, the Fund will be required to distribute dividends equal
to substantially all of its net investment income, including the accrued income
on its zero coupon securities for which it receives no payments in cash prior to
their maturity. In the event the Fund does not meet such requirements, the Fund
may be required to pay an excise tax on any amounts not so distributed. See
"Taxes" below. A shareholder who elects to receive dividends or distributions in
cash, instead of reinvesting these amounts in additional shares of the Fund, may
realize an amount on the Maturity Date that is less than the Targeted Minimum
Cumulative Total Return on the amount originally invested by such shareholder.
Accordingly, the Fund is not designed for investors who would require cash
distributions from the Fund.

Options and Futures Transactions. Participation in the options or futures
markets involves investment risks and transaction costs to which the Fund would
not be subject absent the use of these strategies. If the Manager's predictions
of movements in the direction of the securities and interest rate markets are
inaccurate, the adverse consequences to the Fund may leave the Fund in a worse
position than if such strategies were not used. Risks inherent in the use of
options and futures contracts and options on futures contracts include (1)
dependence on the Manager's ability to predict correctly movements in the
direction of interest rates and securities prices; (2) the fact that skills
needed to use these strategies are different from those needed to select
portfolio securities; and (3) the possible absence of a liquid secondary market
for any particular instrument at any time. There is currently no expectation
that the Manager will attempt to predict the movements in the direction of
interest rates and securities prices.

There may not be a liquid market for certain options, futures and other
instruments in which the Fund may invest, although the Fund will seek to invest
in instruments which have the maximum liquidity consistent with efficient
investment strategies. However, there can be no assurance that a liquid
secondary market will exist in any of the Fund's Equity-Linked Investments at
any specific time. Thus, it may not be possible to close an options or futures
position. There is also the risk of loss by the Fund of margin deposits or
collateral in the event of bankruptcy of a broker with whom the Fund has an open
position in an option, a futures contract or related option.

Some of the options and futures in which the Fund may invest may have
inherent leverage, with the result that the Equity-Linked Investments may have
greater exposure to upward and downward price movements than the underlying
securities or indices and thus a greater volatility. In addition, as described
in the following paragraph, the Fund may invest in Equity-Linked Investments
with a volatility that is less than that of the underlying security or index.

The Equity-Linked Investments of the Fund may include certain instruments,
such as European style options, which have a set expiration date and
corresponding low "delta" coefficient. The delta coefficient of an option or
future is a measure of the sensitivity of the price of such an instrument in
relation to the underlying security or index. For example, the price of an
option with a delta coefficient of 1 would move up or down in exact proportion
to the price of the underlying security or index, whereas the price of an option
with a delta coefficient of 0.5 would fluctuate exactly half as much,
proportionately, as the price of the underlying security or index. Unlike
American style options which may be exercised at any time during the option
period, European style options may not be exercised until their expiration date.
An option which may not be exercised until a future date may have a low delta,
since the price of the option would reflect the uncertainty of the movement in
price of the underlying security or index during the time remaining until the
expiration date of the option. As the expiration date approaches, the delta
coefficient of an option would generally increase. This increase may be
reflected in a difference in the Fund's net asset value during the early years
of the term of the Fund as opposed to the later years. Prior to the expiration
date of such instruments, the Fund may be unable to realize the full value of
such an option with the result that shareholders who redeem shares of the Fund
during this period, especially early in the term of the Fund, may receive less
than their pro rata share of the full value of such instruments.

The exchanges on which the Fund intends to conduct options transactions
have generally established limitations governing the maximum number of call or
put options on the same underlying security (whether or not covered) which may
be written by a single investor, whether acting alone or in concert with others
(regardless of whether such options are written on the same or different
exchanges or are held or written on one or more accounts or through one or more
brokers). "Trading limits" are imposed on the maximum number of contracts which
any person may trade on a particular trading day. The Manager does not believe
that these trading and position limits will have any adverse impact on the
Fund's portfolio strategies.

Redemption Prior to Maturity Date. As an open-end investment company, the
Fund is required to redeem its shares upon the request of any shareholder at the
net asset value next determined after receipt of the request. However, a
shareholder who redeems shares prior to the Maturity Date may realize an amount
that is less than the Targeted Minimum Cumulative Total Return over the life of
the Fund on the amount originally invested. Because the zero coupon securities
are designed to mature on or about the Maturity Date, redemption of shares prior
to the Maturity Date may result in the shareholder receiving less than the
Targeted Minimum Cumulative Total Return with respect to such withdrawn
investment. Moreover, as described above in "Options and Futures Transactions,"
the value of any shares redeemed prior to the Maturity Date will likely reflect
disproportionately diminished return from the portion of the Fund's portfolio

that seeks participation in the U.S. equity markets.

MANAGEMENT OF THE FUND

Board of Directors

The Board of Directors of the Fund consists of six individuals, five of
whom are not "interested persons" of the Fund as defined in the Investment
Company Act. The Board of Directors of the Fund is responsible for the overall
supervision of the operations of the Fund and performs the various duties
imposed on the directors of investment companies by the Investment Company Act.

The Directors of the Fund are:

ARTHUR ZEIKEL*--President of MLAM and its affiliate, Fund Asset
Management, Inc. ("FAM"), President and Director of Princeton Services,
Inc.; Executive Vice President of Merrill Lynch & Co., Inc. ("ML&Co.");
Director of MLFD.

[Names of additional Directors to be inserted by amendment.]

Management and Advisory Arrangements

The Manager, with offices at 800 Scudders Mill Road, Plainsboro, New Jersey
(mailing address: Box 9011, Princeton, New Jersey 08543-9011) acts as manager
for the Fund and provides the Fund with management and investment advisory
services. The Manager is owned and controlled by ML & Co., a financial services
holding company and the parent of Merrill Lynch. The Manager or its affiliate,
FAM, acts as the manager for more than 130 other registered investment
companies. The Manager also offers portfolio management and portfolio analysis
services to individuals and institutions. As of January 31, 1996, the Manager
and FAM had a total of approximately $_____ billion in investment company and
other portfolio assets under management, including accounts of certain
affiliates of the Manager.

The Fund pays the Manager a monthly fee at the annual rate of 0.35% of the
average daily net assets of the Fund. In addition, the management agreement with
the Manager (the "Management Agreement") obligates the Fund to pay certain
expenses incurred in its operations including, among other things, the
investment advisory fee, legal and audit fees, registration fees, unaffiliated
Directors' fees and expenses, custodian and transfer agency fees, accounting
costs, the costs of issuing and redeeming shares and certain of the costs of
printing proxies, shareholder reports, prospectuses and statements of additional
information. Accounting services are provided to the Fund by the Manager, and
the Fund reimburses the Manager for its costs in connection with such services
on a semi-annual basis.

_____________________ is primarily responsible for the day-to-day
management of the Fund's investments. For the past five years,
_____________________ has [insert employment experience.]

Transfer Agency Services

Merrill Lynch Financial Data Services, Inc. (the "Transfer Agent"), which

is a wholly-owned subsidiary of ML & Co., acts as the Fund's Transfer Agent
pursuant to a Transfer Agency, Dividend Disbursing Agency and Shareholder
Servicing Agency Agreement (the "Transfer Agency Agreement"). Pursuant to the
Transfer Agency Agreement, the Transfer Agent is responsible for the issuance,
transfer and redemption of shares and the opening and maintenance of shareholder
accounts. Pursuant to the Transfer Agency Agreement, the Transfer Agent receives
a fee of [$14.00] per shareholder account and is entitled to reimbursement for
out-of-pocket expenses incurred by it under the Transfer Agency Agreement.

Codes of Ethics

The Board of Directors of the Fund has adopted a Code of Ethics pursuant to
Rule 17j-1 under the Investment Company Act which incorporates the Code of
Ethics of the Manager (together, the "Codes"). The Codes significantly restrict
the personal investing activities of all employees of the Manager and, as
described below, impose additional, more onerous, restrictions on fund
investment personnel.
- -----------------
* Interested person, as defined in the Investment Company Act,
of the Fund.

The Codes require that all employees of the Manager preclear any personal
securities investment (with limited exceptions, such as government securities).
The preclearance requirement and associated procedures are designed to identify
any substantive prohibition or limitation applicable to the proposed investment.
The substantive restrictions applicable to all employees of the Manager include
a ban on acquiring any securities in a "hot" initial public offering and a
prohibition from profiting on short-term trading in securities. In addition, no
employee may purchase or sell any security which at the time is being purchased
or sold (as the case may be), or to the knowledge of the employee is being
considered for purchase or sale, by any fund advised by the Manager.
Furthermore, the Codes provide for trading "blackout periods" which prohibit
trading by investment personnel of the Fund within periods of trading by the
Fund in the same (or equivalent) security (15 or 30 days depending upon the
transaction).

PURCHASE OF SHARES

The Distributor, an affiliate of both the Manager and Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), acts as the distributor
of the Fund.

Subscription Offering

The Distributor, Merrill Lynch and other securities dealers which have
entered into selected dealer agreements with the Distributor will solicit
subscriptions for shares of the Fund during a period expected to end on or
before , 1996. The subscription offering may be extended for up to an
additional 30 days upon agreement between the Fund and the Distributor. On
the fifth business day after the conclusion of the subscription offering, the
subscriptions will be due and payable, the shares will be issued against payment
and the Fund will commence operations. The subscription offering may be

terminated by the Fund or the Distributor at any time, in which event no shares
will be issued (and, therefore, the Fund will not commence operations, no
amounts will be payable by subscribers, any payments by the subscribers will be
refunded in full without interest) or a limited number of shares will be issued.

The public offering price of the shares during the subscription offering
will be $10.00 per share, subject to a CDSC described below under "Contingent
Deferred Sales Charges" if redeemed within three years of purchase, a
redemption fee if redeemed prior to the liquidation of the Fund after the
Maturity Date and ongoing account maintenance and distribution fees as
described below.

Continuous Offering

After completion of the subscription offering, the Fund may engage in a
continuous offering of its shares through the Distributor and other eligible
securities dealers (including Merrill Lynch). During the continuous offering,
shares of the Fund may be purchased from securities dealers or by mailing a
purchase order directly to the Transfer Agent. Investors who purchase shares of
the Fund after the subscription offering will receive a total return on their
investment which may be less than the Targeted Minimum Cumulative Total Return
and which will vary according to the offering price of the Fund's shares at the
time of purchase, market conditions and the length of time remaining to the
Maturity Date.

The applicable offering price for purchase orders is based upon the net
asset value of the Fund next determined after receipt of the purchase order by
the Distributor. As to the purchase orders received by securities dealers prior
to the close of business on the New York Stock Exchange (generally 4:00 p.m.,
New York time), which includes orders received after the close of business on
the previous day, the applicable offering price will be based on the net asset
value determined as of 15 minutes after the close of business on the New York
Stock Exchange on that day, provided the Distributor in turn receives orders
from the securities dealer prior to 30 minutes after the close of business on
the New York Stock Exchange on that day. If the purchase orders are not received
prior to 30 minutes after the close of business on the New York Stock Exchange,
such orders shall be deemed received on the next business day. The Fund or the
Distributor may suspend the continuous offering of the Fund's shares at any time
in response to conditions in the securities markets or otherwise and may
thereafter resume such offering from time to time. Neither the Distributor nor
the dealers are permitted to withhold placing orders to benefit themselves by a
price change. Merrill Lynch may charge its customers a postage and handling
charge (presently $4.85) to confirm a sale of shares to such customers.
Purchases directly through the Fund's Transfer Agent are not subject to the
postage and handling charge.

The minimum investment is $2,000, and the minimum subsequent investment is
$50. You may choose to make an initial investment of as little as $250 and reach
the $2,000 minimum with several additional investments. To do this you must
indicate on the Authorization Form your intent to invest at least the $2,000
minimum within [insert time period]. If you a have not invested at least the
minimum amount by the end of the such period, the Fund may redeem your shares
(which may occur at a time when the net asset value is less than when you
invested), and you will not be entitled to receive any more than the net asset
value per share of your investment.

Contingent Deferred Sales Charges

Shares which are redeemed within three years of purchase are subject to a
CDSC at the rates set forth below charged as a percentage of the dollar amount
subject thereto. The charge will be assessed on an amount equal to the lesser of
the proceeds of redemption or the cost of the shares being redeemed.
Accordingly, no CDSC will be imposed on increases in net asset value above the
initial purchase price. In addition, no CDSC will be assessed on shares derived
from reinvestment of dividends or capital gains distributions.

The following table sets forth the rates of the CDSC:

Year since the Purchase Payment Made CDSC as a Percentage of
------------------------------------ -----------------------
Dollar Amount Subject to
------------------------
Charge
------
0-1 2.5%
1-2 2.0%
2-3 1.0%
3 and thereafter 0.00%

In determining whether a CDSC is applicable to a redemption, the
calculation will be determined in the manner that results in the lowest possible
rate being charged. Therefore, it will be assumed that the redemption is first
of shares held for over one year or shares acquired pursuant to reinvestment of
dividends or distributions and then of shares held longest during the one-year
period. The charge will not be applied to dollar amounts representing an
increase in the net asset value since the time of purchase. A transfer of shares
from a shareholder's account to another account will be assumed to be made in
the same order as a redemption.

Payment of a CDSC on shares of the Fund at the time of redemption will
reduce a shareholder's redemption proceeds and will diminish the likelihood of
such shareholder achieving the Targeted Minimum Cumulative Total Return.

Distribution Plan

Pursuant to a distribution plan adopted by the Fund pursuant to Rule 12b-1
under the Investment Company Act (the "Distribution Plan"), the Fund pays the
Distributor an ongoing account maintenance fee and distribution fee, which are
accrued daily and paid monthly, at the annual rate of 0.25% and 0.50%,
respectively, of the average daily net assets of the Fund. Pursuant to a
sub-agreement with the Distributor, Merrill Lynch also provides account
maintenance and distribution services to the Fund. The ongoing account
maintenance fee compensates the Distributor and Merrill Lynch for providing
account maintenance services to shareholders. The ongoing distribution fee
compensates the Distributor and Merrill Lynch for providing shareholder and
distribution services and bearing certain distribution-related expenses of the
Fund, including payment to financial consultants for selling shares of the Fund.
The Distribution Plan is designed to permit an investor to purchase shares
through dealers without the assessment of a front-end sales load and at the same

time permit the dealer to compensate its financial consultants in connection
with the sale of the shares.

The payments under the Distribution Plan are based upon a percentage of
average daily net assets regardless of the amount of expenses incurred and,
accordingly, distribution-related revenues may be more or less than
distribution-related expenses. Information with respect to the
distribution-related revenues and expenses is presented to the Directors for
their consideration in connection with their deliberations as to the continuance
of the Distribution Plan. This information is presented annually as of December
31 of each year on a "fully allocated accrual" basis and quarterly on a "direct
expense and revenue/cash" basis. On the fully allocated accrual basis, revenues
consist of the account maintenance fees, the distribution fees, the contingent
deferred sales charges and certain other related revenues, and expenses consist
of financial consultant compensation, branch office and regional operation
center selling and transaction processing expenses, advertising, sales promotion
and marketing expenses, corporate overhead and interest expense. On the direct
expense and revenue/cash basis, revenues consist of the account maintenance
fees, the distribution fees and contingent deferred sales charges and the
expenses consist of financial consultant compensation.

The Fund has no obligation with respect to distribution-related expenses
incurred by the Distributor and Merrill Lynch in connection with the shares, and
there is no assurance that the Board of Directors of the Fund will approve the
continuance of the Distribution Plan from year to year. However, the Distributor
intends to seek annual continuation of the Distribution Plan. In their review of
the Distribution Plan, the Directors will not be asked to take into
consideration expenses incurred in connection with the distribution of shares of
other funds for which the Distributor acts as distributor.

Limitations On the Payment of Deferred Sales Charges

The maximum sales charge rule in the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. ("NASD") imposes a limitation on certain
asset-based sales charges such as the Fund's distribution fee and the contingent
deferred sales charge, but not the account maintenance fee. As applicable to the
Fund, the maximum sales charge rule limits the aggregate of distribution fee
payments and contingent deferred sales charges payable by the Fund to (1) 6.25%
of eligible gross sales of shares (defined to exclude shares issued pursuant to
dividend reinvestments and exchanges) plus (2) interest on the unpaid balance at
the prime rate plus 1% (the unpaid balance being the maximum amount payable
minus amounts received from the payment of the distribution fee and the
contingent deferred sales charge). The Distributor has voluntarily agreed to
waive interest charges on the unpaid balance in excess of 0.50% of eligible
gross sales. Consequently, the maximum amount payable to the Distributor
(referred to as the "voluntary maximum") is 6.75% of eligible gross sales. The
Distributor retains the right to stop waiving the interest charges at any time.
To the extent payments would exceed the voluntary maximum, the Fund will not
make further payments of the distribution fee and any contingent deferred sales
charges will be paid to the Fund rather than to the Distributor; however, the
Fund will continue to make payments of the account maintenance fee.

REDEMPTION OF SHARES

The Fund is required to redeem for cash all full and fractional shares of
the Fund upon receipt of a written request in proper form. A shareholder who
redeems shares prior to the Maturity Date may realize an amount that is less
than the Targeted Minimum Cumulative Total Return on the amount originally
invested. In addition, while the total amount sought to be returned at the
Maturity Date to shareholders who purchase shares of the Fund during the
subscription offering and who reinvest all dividends and distributions is
expected to be at least 110% of the original amount invested by such
shareholders, the present value of that amount may be substantially less. See
"Investment Objectives and Policies."

Shares redeemed prior to the liquidation of the Fund after the Maturity
Date are subject to a redemption fee equal to 1% of the dollar amount of the
shares redeemed. The redemption price is the net asset value per share next
determined after the initial receipt of proper notice of redemption. Redemption
proceeds may be reduced by any applicable redemption fee or CDSC. See "Purchase
of Shares -- Contingent Deferred Sales Charge." There will be no additional
charge for redemption if the redemption request is sent directly to the
Transfer Agent.

Payment of the redemption fee on shares redeemed prior to the liquidation
of the Fund after the Maturity Date will reduce a shareholder's redemption
proceeds and will diminish the likelihood of such shareholder achieving the
Targeted Minimum Cumulative Total Return.

Redemption

A shareholder wishing to redeem shares may do so without charge by
tendering the shares directly to the Fund's Transfer Agent, Merrill Lynch
Financial Data Services, Inc., P.O. Box 45289, Jacksonville, Florida 32232-5289.
Redemption requests delivered other than by mail should be delivered to Merrill
Lynch Financial Data Services, Inc., Transfer Agency Operations Department, 4800
Deer Lake Drive East, Jacksonville, Florida 32246-6484. Redemption requests
should not be sent to the Fund. Proper notice of redemption in the case of
shares deposited with the Transfer Agent may be accomplished by a written letter
requesting redemption. Proper notice of redemption in the case of shares for
which certificates have been issued may be accomplished by a written letter as
noted above accompanied by certificates for the shares to be redeemed. The
notice in either event requires the signatures of all persons in whose names the
shares are registered, signed exactly as their names appear on the Transfer
Agent's register or on the certificate, as the case may be. The signature(s) on
the notice must be guaranteed by an "eligible guarantor institution" as such
term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, the
existence and validity of which may be verified by the Transfer Agent through
the use of industry publications. Notarized signatures are not sufficient. In
certain instances, the Transfer Agent may require additional documents, such as,
but not limited to, trust instruments, death certificates, appointments as
executor or administrator, or certificates of corporate authority. For
shareholders redeeming directly with the Transfer Agent, payment will be mailed
within seven days of receipt of a proper notice of redemption.

At various times the Fund may be requested to redeem shares for which it
has not yet received good payment. The Fund may delay or cause to be delayed the
mailing of a redemption check until such time as it has assured itself that good
payment (e.g., cash or certified check drawn on a United States bank) has been
collected for the purchase of such shares. Normally, this delay will not exceed
10 days.
Promptly after the Maturity Date, without shareholder approval, the Fund
will redeem all of its outstanding shares. See "Investment Objectives and
Policies."

Repurchase

The Fund also will repurchase shares through a shareholder's listed
securities dealer. The Fund normally will accept orders to repurchase shares by
wire or telephone from dealers for their customers at the net asset value next
computed after receipt of the order by the dealer, provided that the request for
repurchase is received by the dealer prior to the close of business on the New
York Stock Exchange on the day received, and such request is received by the
Fund from such dealer not later than 30 minutes after the close of business on
the New York Stock Exchange, on the same day (generally 4:00 P.M., New York
time).

The foregoing repurchase arrangements are for the convenience of
shareholders and do not involve a charge by the Fund (other than any applicable
redemption fee and/or CDSC). Securities firms which do not have selected
dealer agreements with the Distributor, however, may impose a transaction
charge on the shareholder for transmitting the notice of repurchase to the
Fund. Merrill Lynch may charge its customers a postage and handling charge
(presently $4.85) to confirm a repurchase of shares to such customers.
Redemptions directly through the Fund's Transfer Agent are not subject to the
postage and handling charge. The Fund reserves the right to reject any order
for repurchase, which right of rejection might adversely affect shareholders
seeking redemption through the repurchase procedure. A shareholder whose order
for repurchase is rejected by the Fund, however, may redeem shares as set forth
above.

SHAREHOLDER SERVICES

The Fund offers a number of shareholder services and investment plans
described below which are designed to facilitate investment in its shares. Full
details as to each of such services, copies of the various plans described below
and instructions as to how to participate in the various plans and services, or
to change options with respect thereto, can be obtained from the Fund by calling
the telephone number on the cover page hereof or from the Distributor or Merrill
Lynch. Included in such services are the following:

Investment Account. Each shareholder whose account is maintained at the
Transfer Agent has an Investment Account and will receive monthly statements
from the Transfer Agent showing any reinvestments of dividends and capital gains
distributions and any other activity in the account since the preceding
statement. Shareholders also will receive separate confirmations for each
purchase or sale transaction other than reinvestment of dividends and capital
gains distributions. Shareholders may also maintain their accounts through
Merrill Lynch. Upon the transfer of shares out of a Merrill Lynch brokerage
account, an Investment Account in the transferring shareholder's name will be
opened automatically, without charge, at the Transfer Agent. Shareholders
interested in transferring their shares from Merrill Lynch and who do not wish
to have an Investment Account maintained for such shares at the Transfer Agent
may request their new brokerage firm to maintain such shares in an account
registered in the name of the brokerage firm for the benefit of the shareholder.
If the new brokerage firm is willing to accommodate the shareholder in this
manner, the shareholder must request that he be issued certificates for his
shares, and then must turn the certificates over to the new firm for

re-registration as described in the preceding sentence. Shareholders
considering transferring from Merrill Lynch to another brokerage firm or
financial institution should be aware that, if the firm to which the account is
to be transferred will not take contingent delivery of shares of the Fund, a
shareholder must either redeem the shares (paying any applicable redemption fee
and/or CDSC) so that the cash proceeds can be transferred to the account at the
new firm, or such shareholder must continue to maintain an account at Merrill
Lynch for those shares.

Automatic Reinvestment of Dividends and Capital Gains Distributions. All
dividends and capital gains distributions are reinvested automatically in full
and fractional shares of the Fund, without a sales charge, at the net asset
value per share next determined on the ex-dividend date of such dividends and
distributions. A shareholder may at any time, by written notification or by
telephone (1-800-MER-FUND) to the Transfer Agent, elect to have subsequent
dividends or capital gains distributions, or both, paid in cash, rather than
reinvested, in which event payment will be mailed on or about the payment date.
A shareholder whose account is maintained at Merrill Lynch may, at any time, by
written notification to Merrill Lynch, elect to have both dividends and capital
gains distributions paid in cash rather than reinvested. Cash payments can also
be directly deposited to the shareholder's bank account. However, any
redemption of shares prior to the Maturity Date or any election by a
shareholder to receive dividends or distributions in cash will decrease the
total amount of such shareholder's investment in the Fund available to generate
total return, with the result that such shareholder may receive less than the
Targeted Minimum Cumulative Total Return. See "Investment Objective and
Policies." A redemption fee, but no CDSC, may be imposed upon redemption of
shares issued as a result of the automatic reinvestment of dividends or capital
gains distributions.

Retirement Plans. Self-directed individual retirement accounts and other
retirement plans are available from Merrill Lynch. Under these plans,
investments may be made in the Fund and in certain of the other mutual funds
sponsored by Merrill Lynch as well as in other securities. Merrill Lynch charges
an initial establishment fee and an annual custodial fee for each account. In
addition, eligible shareholders of the Fund may participate in a variety of
qualified employee benefit plans which are available from the Distributor. The
minimum initial purchase to establish any such plan is $250 and the minimum
subsequent purchase is $1.

PERFORMANCE DATA

From time to time the Fund may include its average annual total return for
various specified time periods in advertisements or information furnished to
present or prospective shareholders. Average annual total return is computed in
accordance with a formula specified by the Securities and Exchange Commission.

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

including any CDSC and/or redemption fee that would be applicable to a
complete redemption of the investment at the end of the specified period.

The Fund also may quote total return and aggregate total return
performance data for various specified time periods. Such data will be
calculated substantially as described above, except that (1) the rates of
return calculated will not be average annual rates, but rather, actual annual,
annualized or aggregate rates of return and (2) neither the redemption fee nor
the maximum applicable sales charges will be included with respect to
annual or annualized rates of return calculations. Aside from the impact on the
performance data calculations of including or excluding the maximum applicable
sales charges, actual annual or annualized total return generally will be lower
than average annual total return data since the average annual rates of return
reflect compounding; aggregate total return data generally will be higher than
average annual total return data since the aggregate rates of return reflect
compounding over a longer period of time. The Fund's total return may be
expressed either as a percentage or as a dollar amount in order to illustrate
the effect of such total return on a hypothetical $1,000 investment in the Fund
at the beginning of each specified period.

Total return figures are based on the Fund's historical performance and are
not intended to indicate future performance. The Fund's total return will vary
depending on market conditions, the securities comprising the Fund's portfolio,
the Fund's operating expenses and the amount of realized and unrealized net
capital gains or losses during the period. The value of an investment in the
Fund will fluctuate and an investor's shares, when redeemed, may be worth more
or less than their original cost.

On occasion, the Fund may compare its performance to the S&P 500, the Value
Line Composite Index or the Dow Jones Industrial Average, or to data contained
in publications such as Lipper Analytical Services, Inc., or performance data
published by Morningstar Publications, Inc., Money Magazine, U.S. News and World
Report, Business Week, CDA Investment Technology, Inc., Forbes Magazine and
Fortune Magazine. From time to time, the Fund may include the Fund's Morningstar
risk-adjusted performance ratings in advertisements or supplemental sales
literature. As with other performance data, performance comparisons should not
be considered representative of the Fund's relative performance for any future
period.

The Fund's annual report will contain additional performance information
and will be available upon request and without charge.

TAXES

The Fund intends to qualify for the special tax treatment afforded
regulated investment companies ("RICs") under the Internal Revenue Code of 1986,
as amended (the "Code"). If it so qualifies, in any taxable year in which it
distributes (in cash or additional shares of the Fund) at least 90% of its
taxable net income, the Fund will not be subject to Federal income tax to the
extent that it distributes its net investment income and realized capital gains.
The Fund intends to distribute substantially all of such income.

The zero coupon securities will be treated as bonds that were issued to the

Fund at an original issue discount. Original issue discount is treated as
interest for federal income tax purposes and the amount of original issue
discount generally will be the difference between the bond's purchase price and
its stated redemption price at maturity. The Fund will be required to include in
gross income for each taxable year the daily portions of original issue discount
attributable to the zero coupon securities held by the Fund as such original
issue discount accrues. Such income will be subject to the distribution rules
applicable to RICs. In general, original issue discount that accrues daily under
a constant interest rate method which takes into account the compounding of
accrued interest. In the case of zero coupon securities, this method will
generally result in an increasing amount of income to the Fund, subject to the
distribution rules, described above, each year.

The Code requires a RIC to pay a nondeductible 4% excise tax to the extent
the RIC does not distribute, during each calendar year, 98% of its ordinary
income, determined on a calendar basis, and 98% of its capital gains,
determined, in general, on an October 31 year end, plus certain undistributed
amounts from previous years. While the Fund intends to distribute its income and
capital gains in the manner necessary to avoid imposition of the 4% excise tax,
there can be no assurance that sufficient amounts of the Fund's taxable income
and capital gains will be distributed to avoid entirely the imposition of the
tax. In such event, the Fund will be liable for the tax only on the amount by
which it does not meet the foregoing distribution requirements.

The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections and
the Treasury regulations promulgated thereunder. The Code and these Treasury
regulations are subject to change by legislative or administrative action either
prospectively or retroactively.

This summary does not discuss the state or local income tax, or the estate
or inheritance tax, consequences of an investment in the Fund.

Shareholders are urged to consult their advisers as to specific questions
as to Federal, foreign, state or local taxes.

ADDITIONAL INFORMATION

Dividends and Distributions

about the end of the calendar year in order to comply with a Federal income tax
requirement that certain percentages of its ordinary income and capital gains be
distributed during the calendar year.

See "Shareholder Services--Automatic Reinvestment of Dividends and Capital
Gains Distributions" for information as to how to elect either dividend
reinvestment or cash payments.

Determination of Net Asset Value

Net asset value per share is determined once daily as of 15 minutes after
the close of business on the New York Stock Exchange (generally 4:00 P.M., New
York time), on each day during which the New York Stock Exchange is open for
trading. The net asset value is computed by dividing the market value of the
securities held by the Fund plus any cash or other assets (including interest
and dividends accrued but not yet received) minus all liabilities (including
accrued expenses) by the total number of shares outstanding at such time.
Expenses, including the fees payable to the Manager and the Distributor, are
accrued daily.

Portfolio securities which are traded on stock exchanges are valued at the
last sale price as of the close of business on the day the securities are being
valued, or, lacking any sales, at the mean between closing bid and asked prices.
Securities traded in the over-the-counter market are valued at the last quoted
bid prices as at the close of trading on the New York Stock Exchange on each day
by brokers that make markets in the securities. Portfolio securities which are
traded both in the over-the-counter market and on a stock exchange are valued
according to the broadest and most representative market. Other investments,
including futures contracts and related options, are stated at market value.
Securities and assets for which market quotations are not readily available are
valued at fair market value, as determined in good faith by or under the
direction of the Board of Directors of the Fund, including valuations furnished
by a pricing service retained by the Fund.

Organization of the Fund

The Fund is currently the sole investment series of Merrill Lynch Insured
Equity Funds, Inc., a Maryland corporation incorporated on February 9, 1996. It
has an authorized capital of 100,000,000 shares of Common Stock, par value
$.0001 per share. Each share represents an identical interest in the assets of
the Fund. Shareholders are entitled to one vote for each full share held and to
fractional votes for fractional shares held in the election of Directors (to the
extent hereafter provided) and on other matters submitted to the vote of
shareholders. All shares of the Fund have equal voting rights. There normally
will be no meeting of shareholders for the purpose of electing Directors unless
and until such time as less than a majority of the Directors holding office have
been elected by the shareholders, at which time the Directors then in office
will call a shareholders' meeting for the election of Directors. Shareholders
may, in accordance with the terms of the Articles of Incorporation, cause a
meeting of shareholders to be held for the purpose of voting on the removal of
Directors. Also, the Fund will be required to call a special meeting of
shareholders in accordance with the requirements of the Investment Company Act
to seek approval of new management and advisory arrangements, of a material
increase in distribution or account maintenance fees or of a change in

fundamental policies, objectives or restrictions. Except as set forth above, the
Directors shall continue to hold office and appoint successor Directors. Each
issued and outstanding share is entitled to participate equally in dividends and
distributions declared and in net assets upon liquidation or dissolution
remaining after satisfaction of outstanding liabilities. Shares issued are
fully-paid and non-assessable by the Fund.

Shareholder Inquiries

Shareholder inquiries may be addressed to the Fund at the address or
telephone number set forth on the cover page of this Prospectus.

Shareholder Reports

Only one copy of each shareholder report and certain shareholder
communications will be mailed to each identified shareholder regardless of the
number of accounts such shareholder has. If a shareholder wishes to receive
separate copies of each report and communication for each of the shareholder's
related accounts the shareholder should notify in writing:

Merrill Lynch Financial Data Services, Inc.
P.O. Box 45289
Jacksonville, Florida 32232-5289

The written notification should include the shareholder's name, address, tax
identification number and Merrill Lynch and/or mutual fund account numbers. If
you have any questions regarding this please call your Merrill Lynch financial
consultant or Merrill Lynch Financial Data Services, Inc. at 800-637-3863.

MERRILL LYNCH INSURED EQUITY INDEX FUND -- AUTHORIZATION FORM

Manager
Merrill Lynch Asset Management
Administrative Offices:
800 Scudders Mill Road
Plainsboro, New Jersey

Mailing Address:
Box 9011
Princeton, New Jersey 08543-9011

Distributor
Merrill Lynch Funds Distributor, Inc.

Administrative Offices:
800 Scudders Mill Road
Plainsboro, New Jersey

Mailing Address:
Box 9081

Princeton, New Jersey 08543-9081

Custodian
[To Come]

Transfer Agent
Merrill Lynch Financial Data Services, Inc.

Administrative Offices:
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484

Mailing Address:
P.O. Box 45289
Jacksonville, Florida 32246-5289

Independent Auditors

[To Come]

Counsel
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022

No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus and the Statement
of Additional Information, in connection with the offer contained in this
Prospectus, and, if given or made, such other information or representations
must not be relied upon as having been authorized by the Fund, the Manager, or
the Distributor. This Prospectus does not constitute an offering in any state in
which such offering may not lawfully be made.

_____________________________

TABLE OF CONTENTS

Page
----
Fee Table ............................
Investment Objective and Policies.....
Management of the Fund...............
Purchase of Shares...................
Redemption of Shares................. [LOGO]
Shareholder Services.................
Performance Data.....................
Taxes................................
Additional Information...............
Authorization Form...................

Code #

Merrill Lynch
Insured Equity Fund

____________, 1996

Distributor:
Merrill Lynch Funds Distributor, Inc.

This Prospectus should be
retained for future reference.

Subject to Completion - February 13, 1996

STATEMENT OF ADDITIONAL INFORMATION

MERRILL LYNCH INSURED EQUITY FUND
Box 9011, Princeton, New Jersey 08543-9011 o Phone No. (609) 282-2800

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

Merrill Lynch Insured Equity Fund (the "Fund") is a non-diversified
mutual fund whose fundamental policy is to seek capital appreciation through
investing in a portfolio of equity-oriented securities (including equity-indexed
obligations) and U.S. government obligations. The Fund's objective is to provide
investors with a portion of the appreciation, if any, in the U.S. equity
markets, but with a targeted minimum cumulative total return of 10% over the
life of the Fund (the "Targeted Minimum Cumulative Total Return"), regardless of
the performance of the U.S. equity markets. The term of the Fund will end on or
about (dd/mm/2001) (the "Maturity Date") The Targeted Minimum Cumulative Total
Return represents an annualized rate of return of 1.9% over the five year term
of the Fund. To seek to satisfy its Targeted Minimum Cumulative Total Return,
the Fund expects to invest a majority of its assets in zero coupon securities
that are direct obligations of the United States Treasury ("zero coupon
securities"). The Fund has obtained an insurance policy (the "Insurance Policy")
from _______ (the "Insurer") which insures the timely payment of the principal
of such zero coupon securities in the unlikely event of a default of the United
States Treasury with respect to such zero coupon securities. To seek
participation in the U.S. equity markets, the Fund expects to invest in
equity-oriented securities, including equity-linked obligations, such as options
on baskets of stocks, stock index options, stock index futures and related
options on such futures, securities the return on which is based on the value of
a stock index and equity swaps ("Equity-Linked Investments"). There can be no
assurance that this objective will be satisfied. For more information on the
Fund's investment objective and policies, see "Investment Objective and
Policies."

Investors who purchase shares of the fund after the subscription offering
(described below) will receive a total return on their investment which may be
less than the Targeted Minimum Cumulative Total Return and which will vary
according to the offering price of the fund's shares at the time of purchase,
market conditions and the length of time remaining to the Maturity Date.

Shares of the Fund will be offered to investors during the initial
subscription offering at $10.00 per share and during the continuous offering at
a price equal to the next determined net asset value per share, subject, in
both cases, to a contingent deferred sales charge (a "CDSC") which may be
imposed on redemptions made within three years of purchase, a redemption fee
imposed on redemptions made prior to the liquidation of the Fund after the
Maturity Date and ongoing account maintenance and distribution fees. See
"Purchase of Shares." The minimum investment is $2,000, and the minimum
subsequent investment is $50. You may choose to make an initial investment of
as little as $250 and reach the $2,000 minimum with several additional
investments, as described in "Purchase of Shares." The Fund reserves the right
to suspend the offering of its shares at any time.

This Statement of Additional Information of the Fund is not a
prospectus and should be read in conjunction with the prospectus of the Fund,
dated , 1996 (the "Prospectus"), which has been filed with the Securities
and Exchange Commission and can be obtained, without charge, by calling or by
writing the Fund at the above telephone number or address. This Statement of
Additional Information has been incorporated by reference into the Prospectus.

------------
MERRILL LYNCH ASSET MANAGEMENT - MANAGER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC. - DISTRIBUTOR
____________

THE DATE OF THIS STATEMENT OF ADDITIONAL INFORMATION IS , 1996

INVESTMENT OBJECTIVE AND POLICIES

Merrill Lynch Insured Equity Fund is a non-diversified mutual fund
whose fundamental policy is to seek capital appreciation through investing in a
portfolio of equity-oriented securities (including equity-indexed obligations)
and U.S. government obligations. The Fund's objective is to provide investors

with a portion of the appreciation, if any, in the U.S. equity markets, but with
a Targeted Minimum Cumulative Total Return of 10% over the life of the Fund,
regardless of the performance of the U.S. equity markets. The term of the Fund
will end on or about the Maturity Date (dd/mm/2001). The Targeted Minimum
Cumulative Total Return represents an annualized rate of return of 1.9% over the
five year term of the Fund. To seek to satisfy its Targeted Minimum Cumulative
Total Return, the Fund expects to invest a majority of its assets in zero coupon
securities that are direct obligations of the United States Treasury ("zero
coupon securities"). The Fund has obtained the Insurance Policy from the Insurer
which insures the timely payment of the principal of such zero coupon securities
in the unlikely event of a default of the United States Treasury with respect to
such zero coupon securities. The Insurer has a rating of AAA from Standard &
Poor's Ratings Group ("S&P") and Aaa from Moody's Investors Service, Inc.
("Moody's"). The Insurer is not affiliated with the Fund and no representation
is made regarding the ability of the Insurer to pay any amount due pursuant to
the Insurance Policy. To seek participation in the U.S. equity markets, the Fund
expects to invest in equity-oriented securities, including equity-linked
obligations, such as options on baskets of stocks, stock index options, stock
index futures and related options on such futures, securities the return on
which is based on the value of a stock index and equity swaps ("Equity-Linked
Investments"). There can be no assurance that this objective will be satisfied.
See "Investment Objectives and Policies" in the Prospectus for further
information.

Investors who purchase shares of the Fund after the subscription
offering will receive a total return on their investment which may be less than
the Targeted Minimum Cumulative Total Return and which will vary according to
the offering price of the Fund's shares at the time of purchase, market
conditions and the length of time remaining to the Maturity Date.

The Fund is not an index fund and, because of its substantial
investments in U.S. government obligations, is not expected to participate in
the appreciation, if any, of the U.S. equity markets to the same extent as an
index fund. However, unlike an index fund, the Fund is designed to seek a
Targeted Minimum Cumulative Total Return as of its Maturity Date, regardless of
the performance of the U.S. equity markets.

ZERO COUPON SECURITIES

Reference is made to the discussion under the caption "Zero Coupon
Securities" in the Prospectus for further information with respect to the Fund's
investment in zero coupon securities.

There are currently two basic types of zero coupon securities, those
created by separating the interest and principal components of a previously
issued interest-paying security and those originally issued in the form of a
face amount only security paying no interest. Zero coupon securities of the U.S.
Government and certain of its agencies and instrumentalities and of private
corporate issuers are currently available, although the Fund will purchase only
those that are direct obligations of the United States Treasury.

Zero coupon securities of the U.S. Government that are currently
available are called STRIPS (Separate Trading of Registered Interest and
Principal of Securities). STRIPS are issued under a program introduced by the
U.S. Treasury and are direct obligations of the U.S. Government. The U.S.
Government does not issue zero coupon securities directly. The STRIPS program,
which is ongoing, is designed to facilitate the secondary market stripping of
selected Treasury notes and bonds into individual interest and principal
components. Under the program, the U.S. Treasury continues to sell its shares
and bonds through its customary auction process. However, a purchaser of those
notes and bonds who has access to a book-entry account at a Federal Reserve bank
may separate the specified Treasury notes and bonds into individual interest and
principal components. The selected Treasury securities may thereafter be
maintained in the book-entry system operated by the Federal Reserve in a manner
that permits the separate trading and ownership of the interest and principal
payments. The Federal Reserve does not charge a fee for this service; however,
the book-entry transfer of interest and principal components is subject to the
same fee schedule generally applicable to the transfer of Treasury securities.

Under the program, in order for a book-entry Treasury security to be
separated into its component parts, the face amount of the security must be an
amount which, based on the stated interest rate of the security, will produce a
semi-annual interest payment of $1,000 or a multiple of $1,000. Once a
book-entry security has been separated, each interest and principal component
may be maintained and transferred in multiples of $1,000 regardless of the face
amount initially required for separation or the resulting amount required for
each interest payment.

Investment banks may also strip Treasury securities and sell them under
proprietary names. These securities may not be as liquid as STRIPS and the Fund
has no present intention of investing in these instruments.

STRIPS are purchased at a discount from $1,000. Absent a default by the
U.S. Government, a purchaser will receive face value for each of the STRIPS
provided the STRIPS are held to their due dates. While STRIPS can be purchased
on any business day, they all currently come due on February 15, May 15, August
15 or November 15.

PORTFOLIO STRATEGIES INVOLVING OPTIONS AND FUTURES

Reference is made to the discussion under the caption "Investment
Objective and Policies -- Equity-Linked Investments" in the Prospectus for
information with respect to various portfolio strategies involving options and
futures. With respect to the portion of the Fund's portfolio not invested in
zero coupon securities (previously defined as the "Equity-Linked Investments"),
the Fund seeks to permit investors to participate in the appreciation, if any,
of the U.S. equity markets over a five year period. The Fund will not generally
invest in or hold individual equities or attempt to pick individual securities
which it believes have the potential to outperform the market. Rather, the Fund
will seek to maintain broad exposure to U.S. equity markets generally through
investments in options on baskets of stocks, stock index options, stock index
futures and related options on such futures, securities the return on which is
based on the value of a stock index, and equity swaps. Although certain of the
foregoing instruments may be issued by non-U.S. entities, all instruments held

by the Fund will be U.S. dollar denominated. The following is further
information relating to portfolio strategies involving options and futures the
Fund may utilize.

Options and Futures. Options referred to herein and in the Fund's
Prospectus may be options issued by The Options Clearing Corporation (the
"Clearing Corporation") which are currently traded on the Chicago Board Options
Exchange, American Stock Exchange, New York Stock Exchange, Philadelphia Stock
Exchange, Pacific Stock Exchange and Midwest Stock Exchange. An option position
may be closed out only on an exchange which provides a secondary market for an
option of the same series. If a secondary market does not exist, it might not be
possible to effect closing transactions in particular options. Reasons for the
absence of a liquid secondary market on an exchange include the following: (i)
there may be insufficient trading interest in certain options; (ii) restrictions
may be imposed by an exchange on opening transactions or closing transactions or
both; (iii) trading halts, suspensions or other restrictions may be imposed with
respect to particular classes or series of options or underlying securities;
(iv) unusual or unforeseen circumstances may interrupt normal operations on an
exchange; (v) the facilities of an exchange or the Clearing Corporation may not
at all times be adequate to handle current trading volume; or (vi) one or more
exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that exchange (or in
that class or series of options) would cease to exist, although outstanding
options on that exchange that had been issued by the Clearing Corporation as a
result of trades on that exchange would continue to be exercisable in accordance
with their terms. The Fund may also enter into over-the-counter option
transactions ("OTC options"), which are two-party contracts with price and terms
negotiated between the buyer and seller. The staff of the Securities and
Exchange Commission has taken the position that OTC options and the assets used
as cover for written OTC options are illiquid securities.

A futures contract is an agreement between two parties to buy and sell
a security or, in the case of an index-based futures contract, to make and
accept a cash settlement for a set price on a future date. A majority of
transactions in futures contracts, however, do not result in the actual delivery
of the underlying instrument or cash settlement, but are settled through
liquidation, i.e., by entering into an offsetting transaction. Futures contracts
have been designed by boards of trade which have been designated as "contracts
markets" by the Commodities Futures Trading Commission ("CFTC").

The purchase or sale of a futures contract differs from the purchase or
sale of a security in that no price or premium is paid or received. Instead, an
amount of cash or securities acceptable to the broker and the relevant contract
market, which varies, but is generally about 5% of the contract amount, must be
deposited with the broker. This amount is known as "initial margin" and
represents a "good faith" deposit assuring the performance of both the purchaser
and seller under the futures contract. Subsequent payments to and from the
broker, called "variation margin," are required to be made on a daily basis as
the price of the futures contract fluctuates, making the long and short
positions in the futures contract more or less valuable, a process known as
"mark to the market." At any time prior to the settlement date of the futures
contract, the position may be closed out by taking an opposite position which
will operate to terminate the position in the futures contract. A final

determination of variation margin is then made, additional cash is required to
be paid to or released by the broker and the purchaser realizes a loss or gain.
In addition, a nominal commission is paid on each completed sale transaction.

An order has been obtained from the Securities and Exchange Commission
exempting the Fund from the provisions of Section 17(f) and Section 18(f) of the
Investment Company Act of 1940 (the "Investment Company Act") in connection with
its strategy of investing in futures contracts. Section 17(f) relates to the
custody of securities and other assets of an investment company and may be
deemed to prohibit certain arrangements between the Fund and commodities brokers
with respect to initial and variation margin. Section 18(f) of the Investment
Company Act prohibits an open-end investment company such as the Fund from
issuing a "senior security" other than a borrowing from a bank. The staff of the
Securities and Exchange Commission has in the past indicated that a futures
contract may be a "senior security" under the Investment Company Act.

Restrictions on Use of Futures Transactions. Under regulations of the
CFTC, the futures trading activities described herein will not result in the
Fund being deemed to be a "commodity pool," as defined under such regulations,
provided that the Fund adheres to certain restrictions. In particular, the Fund
may enter into transactions to increase total return (i.e., non-hedging
transactions), provided that the Fund may not enter into such transactions if,
immediately thereafter, the sum of the amount of the initial margin deposits on
the Fund's existing futures positions and option premiums would exceed 5% of the
market value of the Fund's liquidating value, after taking into account
unrealized profits and unrealized losses on any such transactions. Margin
deposits may consist of cash or securities acceptable to the broker and the
relevant contract market. Certain other CFTC regulations also apply to hedging
transactions in which the Fund will not engage.

When the Fund purchases futures contracts or a call option with respect
thereto or writes a put option on a futures contract, an amount of cash, U.S.
Government Securities or other liquid high-grade debt securities (which may
include zero coupon securities) will be deposited in a segregated account with
the Fund's custodian so that the amount so segregated, plus the amount of
initial and variation margin held in the account of its broker, equals the
market value of the futures contract, thereby ensuring that the use of such
futures is unleveraged.

Restrictions on Options. As described more fully above, in connection
with options written by the Fund on securities indices, the Fund will not enter
into any such transaction unless, to the extent required by law, it owns either
(1) an offsetting covered position in securities or other options, or (2) cash,
U.S. Government securities or other liquid high-grade debt securities (which may
include zero coupon securities) with a value sufficient at all times to cover
its potential obligations to the extent not covered in (1) above.

principal.

The indexed securities in which the Fund invests may include medium
term notes. Medium-term notes are debt securities with maturities varying from
nine months to thirty years from the date of issue which may be subject to
redemption at the option of the issuer or repayment at the option of the holder
thereof prior to the maturity date thereof.

OTHER INVESTMENT POLICIES AND PRACTICES

Illiquid Securities. The Fund may invest up to 15% of its net assets in
illiquid securities, although it will limit such investments to 10% of its net
assets to the extent required by state law. However, the Fund may purchase,
without regard to that limitation, securities that are not registered under the
Securities Act of 1933, as amended (the "Securities Act"), but that can be
offered and sold to "qualified institutional buyers" under Rule 144A under the
Securities Act ("Rule 144A Securities"), provided that the Fund's Board of
Directors, or the Manager pursuant to guidelines adopted by the Board,
continuously determines, based on the trading markets for the specific Rule 144A
Security, that it is liquid. The Board of Directors, however, will retain
oversight and is ultimately responsible for the determinations. Since it is not
possible to predict with assurance exactly how this market for restricted
securities sold and offered under Rule 144A will develop, the Board of Directors
will carefully monitor the Fund's investments in these securities, focusing on
such factors, among others, as valuation, liquidity and availability of
information. This investment practice could have the effect of decreasing the
level of liquidity in the Fund to the extent that the qualified institutional
buyers become for a time uninterested in purchasing these securities.

term of the agreement. This results in a fixed rate of return insulated from
market fluctuations during such period although it may be affected by currency
fluctuations. The prices at which the trades are conducted do not reflect the
accrued interest on the underlying obligations. Such agreements usually cover
short periods, often under one week. Repurchase agreements may be construed to
be collateralized loans by the purchaser to the seller secured by the securities
transferred to the purchaser. The Fund will require the seller to provide
additional collateral if the market value of the securities falls below the
repurchase price at any time during the term of the repurchase agreement. In the
event of default by the seller under a repurchase agreement construed to be a
collateralized loan, the underlying securities are not owned by the Fund but
constitute only collateral for the seller's obligation to pay the repurchase
price. Therefore, the Fund may suffer time delays and incur costs or possible
losses in connection with the disposition of the collateral. In the event of a
default by the seller under such a repurchase agreement, instead of the
contractual fixed rate of return, the rate of return to the Fund will depend on
intervening fluctuations of the market value of such security and the accrued
interest on the security. In such event, the Fund would have rights against the
seller for breach of contract with respect to any losses arising from market
fluctuations following the failure of the seller to perform. The Fund may not
invest more than 15% (or 10% to the extent required by state law) of its net
assets in repurchase agreements maturing in more than seven days.

Lending of Portfolio Securities. Subject to the investment restrictions
stated below, the Fund may lend securities from its portfolio to approved
borrowers and receive therefor collateral in cash or securities issued or
guaranteed by the United States Government which are maintained at all times in
an amount equal to at least 100% of the current market value of the loaned
securities. The purpose of such loans is to permit the borrower to use such
securities for delivery to purchasers when such borrower has sold short. If cash
collateral is received by the Fund, it is invested in short-term money market
securities, and a portion of the yield received in respect of such investment is
retained by the Fund. Alternatively, if securities are delivered to the Fund as
collateral, the Fund and the borrower negotiate a rate for the loan premium to
be received by the Fund for lending its portfolio securities. In either event,
the total yield on the Fund's portfolio is increased by loans of its portfolio
securities. The Fund will have the right to regain record ownership of loaned
securities to exercise beneficial rights such as voting rights, subscription
rights and rights to dividends, interest or other distributions. Such loans are
terminable at any time. The Fund may pay reasonable finder's, administrative and
custodial fees in connection with such loans. With respect to the lending of
portfolio securities, there is the risk of failure by the borrower to return the
securities involved in such transactions.

Non-Diversified Status. The Fund is classified as a non-diversified
fund under the Investment Company Act and is not subject to the diversification
requirements of the Investment Company Act. Accordingly, the Fund may invest
more than 5% of the value of its assets in the obligations of a single issuer.
However, the Fund remains subject to the diversification requirements of
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), in
order to qualify as a regulated investment company (a "RIC") for U.S. federal
income tax purposes. In order to qualify as a RIC under the Code, the Fund must
comply with certain requirements, including limiting its investments so that at
the close of each quarter of the taxable year (i) not more than 25% of the

market value of the Fund's total assets are invested in the securities of a
single issuer, or any two or more issuers which are controlled by the Fund and
engaged in the same, similar or related businesses, and (ii) with respect to 50%
of the market value of its total assets, not more than 5% of the market value of
its total assets are invested in the securities of a single issuer, and the Fund
does not own more than 10% of the outstanding voting securities of a single
issuer. The U.S. Government, its agencies and instrumentalities are not included
within the definition of "issuer" for purposes of the diversification
requirements of the Code.

RISK FACTORS

Options and Futures Transactions. Participation in the options or
futures markets involves investment risks and transaction costs to which the
Fund would not be subject absent the use of these strategies. If the Manager's
predictions of movements in the direction of the securities and interest rate
markets are inaccurate, the adverse consequences to the Fund may leave the Fund
in a worse position than if such strategies were not used. Risks inherent in the
use of options and futures contracts and options on futures contracts include
(1) dependence on the Manager's ability to predict correctly movements in the
direction of interest rates and securities prices; (2) the fact that skills
needed to use these strategies are different from those needed to select
portfolio securities; and (3) the possible absence of a liquid secondary market
for any particular instrument at any time. There is currently no expectation
that the Manager will attempt to predict the movements in the direction of
interest rates and securities prices.

Prior to exercise or expiration, an exchange-traded option or futures
position can only be terminated by entering into a closing purchase or sale
transaction. This requires a secondary market on an exchange for options of the
same series. However, there can be no assurance that a liquid secondary market
will exist in any of the Fund's Equity-Linked Investments at any specific time.
Thus, it may not be possible to close an option or futures position. In the case
of a futures position or an option on a futures position written by the Fund in
the event of adverse price movements, the Fund would continue to be required to
make daily cash payments of variation margin. In such situations, if the Fund
has insufficient cash, it may have to sell portfolio securities to meet daily
variation margin requirements at a time when it may be disadvantageous to do so.
In addition, the Fund may be required to take or make delivery of the security
underlying futures contracts it holds. There is also the risk of loss by the
Fund of margin deposits in the event of bankruptcy of a broker with whom the
Fund has an open position in a futures contract or related option.

As described in the Prospectus, the Fund may invest in certain
instruments, such as European style options, which have a set expiration date
and corresponding low "delta" coefficient. The delta coefficient of an option or
future is a measure of the sensitivity of the price of such an instrument in
relation to the underlying security or index. For example, the price of an
option with a delta coefficient of 1 would move up or down in exact proportion
to the price of the underlying security or index, whereas the price of an option
with a delta coefficient of 0.5 would fluctuate exactly half as much,
proportionately, as the price of the underlying security or index. Unlike
American style options which may be exercised at any time during the option

period, European style options may not be exercised until their expiration date.
An option which may not be exercised until a future date may have a low delta,
since the price of the option would reflect the uncertainty of the movement in
price of the underlying security or index during the time remaining until the
expiration date of the option. As the expiration date approaches, the delta
coefficient of an option would generally increase. This increase may be
reflected in a difference in the Fund's net asset value during the early years
of the term of the Fund as opposed to the later years. Prior to the expiration
date of such instruments, the Fund may be unable to realize the full value of
such an option with the result that shareholders who redeem shares of the Fund
during this period, especially early in the term of the Fund, may receive less
than their pro rata share of the full value of such instruments.

The exchanges on which the Fund intends to conduct options transactions
have generally established limitations governing the maximum number of call or
put options on the same underlying security or currency (whether or not covered)
which may be written by a single investor, whether acting alone or in concert
with others (regardless of whether such options are written on the same or
different exchanges or are held or written on one or more accounts or through
one or more brokers). "Trading limits" are imposed on the maximum number of
contracts which any person may trade on a particular trading day. An exchange
may order the liquidation of positions found to be in violation of these limits
and it may impose other sanctions or restrictions. The Manager does not believe
that these trading and position limits will have any adverse impact on the
Fund's portfolio strategies.

INVESTMENT RESTRICTIONS

The Fund has adopted the following restrictions and policies relating
to the investment of its assets and its activities, which are fundamental
policies and may not be changed without the approval of the holders of a
majority of the Fund's outstanding voting securities (which for this purpose and
under the Investment Company Act means the lesser of (i) 67% of the shares
represented at a meeting at which more than 50% of the outstanding shares are
represented or (ii) more than 50% of the outstanding shares). The Fund may not:

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

2. Invest more than 25% of its assets, taken at market value,
in the securities of issuers in any particular industry (excluding the U.S.
Government and its agencies and instrumentalities).

3. Make investments for the purpose of exercising control or
management.

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

5. Make loans to other persons, except that the acquisition of bonds,
debentures or other corporate debt securities and investment in government

obligations, commercial paper, pass-through instruments, certificates of
deposit, bankers' acceptances, repurchase agreements or any similar instruments
shall not be deemed to be the making of a loan, and except further that the Fund
may lend its portfolio securities, provided that the lending of portfolio
securities may be made only in accordance with applicable law and the guidelines
set forth in the Fund's Prospectus and Statement of Additional Information, as
they may be amended from time to time.

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

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

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

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

The Fund has also adopted certain non-fundamental investment
restrictions, which may be changed by the Directors without approval by the
shareholders. Under the non-fundamental investment restrictions, the Fund may
not:

a. Purchase securities of other investment companies, except to
the extent such purchases are permitted by applicable law.

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

c. Invest in securities which cannot be readily resold because of
legal or contractual restrictions or which cannot otherwise be marketed,
redeemed or put to the issuer or a third party, if at the time of acquisition
more than 15% of its total assets would be invested in such securities. This
restriction shall not apply to securities which mature within seven days or
securities which the Board of Directors of the Fund has otherwise determined to
be liquid pursuant to applicable law. Notwithstanding the 15% limitation herein,
to the extent the laws of any state in which the Fund's shares are registered or

qualified for sale require a lower limitation, the Fund will observe such
limitation. As of the date hereof, therefore, the Fund will not invest more than
10% of its total assets in securities which are subject to this investment
restriction (c). Securities purchased in accordance with Rule 144A under the
Securities Act (a "Rule 144A security") and determined to be liquid by the
Fund's Board of Directors are not subject to the limitations set forth in this
investment restriction (c). Notwithstanding the fact that the Board may
determine that a Rule 144A security is liquid and not subject to limitations set
forth in this investment restriction (c), the State of Ohio does not recognize
Rule 144A securities as securities that are free of restrictions as to resale.
To the extent required by Ohio law, the Fund will not invest more than 50% of
its total assets in securities of issuers that are restricted as to disposition,
including Rule 144A securities.

d. Invest in warrants if, at the time of acquisition, its investments
in warrants, valued at the lower of cost or market value, would exceed 5% of the
Fund's net assets; included within such limitation, but not to exceed 2% of the
Fund's net assets, are warrants which are not listed on the New York Stock
Exchange or American Stock Exchange or a major foreign exchange. For purposes of
this restriction, warrants acquired by the Fund in units or attached to
securities may be deemed to be without value.

e. Invest in securities of companies having a record, together with
predecessors, of less than three years of continuous operation, if more than 5%
of the Fund's total assets would be invested in such securities. This
restriction shall not apply to mortgage-backed securities, asset-backed
securities or obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.

f. Purchase or retain the securities of any issuer, if those
individual officers and directors of the Fund, the officers and general partner
of the Manager, the directors of such general partner or the officers and
directors of any subsidiary thereof each owning beneficially more than one-half
of one percent of the securities of such issuer own in the aggregate more than
5% of the securities of such issuer.

g. Invest in real estate limited partnership interests or interests in
oil, gas or other mineral leases, or exploration or development programs, except
that the Fund may invest in securities issued by companies that engage in oil,
gas or other mineral exploration or development activities.

h. Write, purchase or sell puts, calls, straddles, spreads or
combinations thereof, except to the extent permitted in the Fund's Prospectus
and Statement of Additional Information, as they may be amended from time to
time.

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

Because of the affiliation of the Manager with the Fund, the Fund is
prohibited from engaging in certain transactions involving the Manager's
affiliate, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"),

or its affiliates except for brokerage transactions permitted under the
Investment Company Act involving only usual and customary commissions or
transactions pursuant to an exemptive order under the Investment Company Act.
See "Portfolio Transactions and Brokerage." Without such an exemptive order, the
Fund is prohibited from engaging in portfolio transactions with Merrill Lynch or
its affiliates acting as principal and from purchasing securities in public
offerings which are not registered under the Securities Act of 1933 in which
such firms or any of their affiliates participate as an underwriter or dealer.

THE INSURANCE POLICY

The Fund has obtained the Insurance Policy from the Insurer in order to
insure timely payment of the principal of the zero coupon securities held in the
Fund's portfolio in the unlikely event of a default by the United States
Treasury with respect to such zero coupon securities. The Insurance Policy
provides that in the event of such default, the Insurance Company will pay to
the Fund an amount equal to the principal amount owed to the Fund in respect of
such zero coupon securities. The Insurance Policy does not insure the market
value of the Fund's zero coupon securities at any time prior to their maturity,
which maturity is structured to correspond to the Fund's Maturity Date.

The foregoing is only a summary of the terms of the Insurance Policy
and is qualified in its entirety by reference to such agreement, a copy of which
has been filed as an exhibit to the registration statement of which this
Statement of Additional Information forms a part.

MANAGEMENT OF THE FUND

DIRECTORS AND OFFICERS

The Directors and executive officers of the Fund and their principal
occupations for at least the last five years are set forth below. Unless
otherwise noted, the address of each executive officer and Director is P.O.
Box 9011, Princeton, New Jersey 08543-9011.

[to be filed by amendment]

__________

(1) Interested person, as defined in the Investment Company Act, of the
Fund.
(2) Such Director or officer is a director, trustee or officer of other
investment companies for which the Manager or FAM acts as investment
adviser.

As of the date of this Statement of Additional Information, the
officers and Directors of the Fund as a group (__ persons) owned an aggregate of

less than 1/4 of 1% of the outstanding shares of Common Stock of Merrill Lynch &
Co., Inc. and owned an aggregate of less than 1% of the outstanding shares of
the Fund.

Pursuant to the terms of the management agreement with the Fund, the
Manager pays all compensation of officers of the Fund as well as the fees of all
Directors who are affiliated persons of the Manager. The Fund pays each Director
not affiliated with the Manager a fee of $ per year plus $ per meeting
attended, together with such Director's out-of-pocket expenses relating to
attendance at meetings. The Fund also compensates members of its Audit and
Nominating Committee, which consists of all of the Directors of the Fund who are
not interested persons of the Fund, with a fee of $ per year; the Chairman
of the Audit and Nominating Committee receives an additional annual fee of
$ per year.

COMPENSATION OF DIRECTORS

The following table sets forth the aggregate compensation the Fund
expects to pay to the non-interested Directors for the fiscal year ended
__________, 1996 and the aggregate compensation paid by all investment companies
advised by MLAM and its affiliate, FAM ("MLAM-Advised Funds") to the
non-interested Directors for the calendar year ended December 31, 1995.

<TABLE>
<CAPTION>
Total Compensation
Pension or Retirement From Fund and MLAM/FAM
Aggregate Compensation Benefits Accrued as Advised Funds Paid to
Name of Director From Fund Part of Fund Expenses Directors(1)
- ------------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C>

</TABLE>
_________________

(1) In addition to the Fund, the Directors served on other MLAM/FAM
Advised Funds as follows:

MANAGEMENT AND ADVISORY ARRANGEMENTS

The Manager is owned and controlled by Merrill Lynch & Co., Inc., a
financial services holding company and the parent of Merrill Lynch. Reference is
made to "Management of the Fund--Management and Advisory Arrangements" in the
Prospectus for certain information concerning the management and advisory
arrangements of the Fund.

Securities held by the Fund may also be held by, or be appropriate
investments for, other funds or investment advisory clients for which the
Manager or its affiliates act as an adviser. Because of different objectives or
other factors, a particular security may be bought for one or more clients when

one or more clients are selling the same security. If purchases or sales of
securities by the Manager for the Fund or other funds for which it acts as
investment adviser or for its advisory clients arise for consideration at or
about the same time, transactions in such securities will be made, insofar as
feasible, for the respective funds and clients in a manner deemed equitable to
all. To the extent that transactions on behalf of more than one client of the
Manager or its affiliates during the same period may increase the demand for
securities being purchased or the supply of securities being sold, there may be
an adverse effect on price.

The Fund has entered into a management agreement with the Manager (the
"Management Agreement"). As discussed in the Prospectus, the Manager receives
for its services to the Fund monthly compensation at the annual rate of 0.35% of
the average daily net assets of the Fund.

California imposes limitations on the expenses of the Fund. These
expense limitations require that the Manager reimburse the Fund in an amount
necessary to prevent the ordinary operating expenses of the Fund (excluding
interest, taxes, distribution fees, brokerage fees and commissions and
extraordinary charges such as litigation costs) from exceeding 2.5% of the
Fund's first $30 million of average daily net assets, 2.0% of the next $70
million of average daily net assets and 1.5% of the remaining average daily net
assets. The Manager's obligation to reimburse the Fund is limited to the amount
of the management fee. No fee payment will be made to the Manager during any
fiscal year which will cause such expenses to exceed the most restrictive
expense limitation applicable at the time of such payment.

The Management Agreement obligates the Manager to provide investment
advisory services and to pay all compensation of and furnish office space for
officers and employees of the Fund connected with investment and economic
research, trading and investment management of the Fund, as well as the fees of
all Directors of the Fund who are affiliated persons of the Manager or any of
their affiliates. The Fund pays all other expenses incurred in the operation of
the Fund, including, among other things, taxes, expenses for legal and auditing
services, costs of printing proxies, stock certificates, shareholder reports and
prospectuses and statements of additional information (except to the extent paid
by Merrill Lynch Funds Distributor, Inc. (the "Distributor")), charges of the
Custodian, any Sub-custodian and Transfer Agent, expenses of redemption of
shares, Securities and Exchange Commission fees, expenses of registering the
shares under federal, state or foreign laws, fees and expenses of unaffiliated
Directors, accounting and pricing costs (including the daily calculation of net
asset value), insurance, interest, brokerage costs, litigation and other
extraordinary or non-recurring expenses, and other expenses properly payable by
the Fund. The Distributor will pay the promotional expenses of the Fund incurred
in connection with the offering of its shares. Certain expenses will be financed
by the Fund pursuant to the Distribution Plan in compliance with Rule 12b-1
under the Investment Company Act. See "Purchase of Shares--Distribution Plan."

Duration and Termination. Unless earlier terminated as described below,
the Management Agreement will remain in effect for two years from the date of
its adoption. Thereafter, it will remain in effect from year to year if approved
annually (a) by the Board of Directors or by a majority of the outstanding
shares of the Fund and (b) by a majority of the Directors who are not parties to
such contract or interested persons (as defined in the Investment Company Act)

of any such party. Such contracts are not assignable and may be terminated
without penalty on 60 days' written notice at the option of either party thereto
or by the vote of the shareholders of the Fund.

PURCHASE OF SHARES

Reference is made to "Purchase of Shares" in the Prospectus for certain
information as to the purchase of Fund shares.

The Fund has entered into a distribution agreement with the Distributor
in connection with the offering of shares of the Fund (the "Distribution
Agreement"). The Distribution Agreement obligates the Distributor to pay certain
expenses in connection with the offering of the shares of the Fund. After the
prospectuses, statements of additional information and periodic reports have
been prepared, set in type and mailed to shareholders, the Distributor pays for
the printing and distribution of copies thereof used in connection with the
offering to dealers and investors. The Distributor also pays for other
supplementary sales literature and advertising costs. The Distribution Agreement
is subject to the same renewal requirements and termination provisions as the
Management Agreement described above.

The Fund reserves the right to suspend the offering of its shares at
any time.

Distribution Plan. Reference is made to "Purchase of
Shares--Distribution Plan" in the Prospectus for certain information with
respect to the Distribution Plan of the Fund.

The payment of the account maintenance fee and the distribution fee is
subject to the provisions of Rule 12b-1 under the Investment Company Act of
1940. Among other things, the Distribution Plan provides that the Distributor
shall provide and the Directors shall review quarterly reports of the
disbursement of the account maintenance fees and distribution fees paid to the
Distributor. In their consideration of the Distribution Plan, the Directors must
consider all factors they deem relevant, including information as to the
benefits of the Distribution Plan to the Fund and its shareholders. The
Distribution Plan further provides that, so long as the Distribution Plan
remains in effect, the selection and nomination of Directors who are not
"interested persons" of the Fund, as defined in the Investment Company Act of
1940 (the "Independent Directors"), shall be committed to the discretion of the
Independent Directors then in office. In approving the Distribution Plan in
accordance with Rule 12b-1, the Independent Directors concluded that there is
reasonable likelihood that the Distribution Plan will benefit the Fund and its
shareholders. The Distribution Plan can be terminated at any time, without
penalty, by the vote of a majority of the Independent Directors or by the vote
of the holders of a majority of the outstanding voting securities of the Fund.
The Distribution Plan cannot be amended to increase materially the amount to be
spent by the Fund without shareholder approval, and all material amendments are
required to be approved by the vote of Directors, including a majority of the
Independent Directors who have no direct or indirect financial interest in the
Distribution Plan, cast in person at a meeting called for that purpose. Rule
12b-1 further requires that the Fund preserve copies of the Distribution Plan
and any report made pursuant to such plan for a period of not less than six

years from the date of the Distribution Plan or such report, the first two years
in an easily accessible place.

The maximum sales charge rule in the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. ("NASD") imposes a limitation
on certain asset-based sales charges such as the distribution fee but not the
account maintenance fee. As applicable to the Fund, the maximum sales charge
rule limits the aggregate distribution fee payments payable by the Fund to (1) 6
1/4 of the eligible gross sales of shares of the Fund (defined to exclude shares
issued pursuant to dividend reinvestment) plus (2) interest on the unpaid
balance at the prime rate plus 1% (the unpaid balance being the maximum amount
payable minus amounts received from payment of the distribution fee). To the
extent payments would exceed the maximum permitted by the NASD, the Fund will
not make further payments of the distribution fee; however, the Fund will
continue to make payments of the account maintenance fee. In certain
circumstances, the amount payable pursuant to the voluntary maximum may exceed
the amount payable under NASD formula. In such circumstances payment in excess
of the amount payable under the NASD formula will not be made.

REDEMPTION OF SHARES

Reference is made to "Redemption of Shares" in the Prospectus for
certain information as to the redemption and repurchase of Fund shares.

The right to redeem shares or to receive payment with respect to any
such redemption may be suspended only for any period during which trading on the
New York Stock Exchange is restricted as determined by the Securities and
Exchange Commission or such Exchange is closed (other than customary weekend and
holiday closings), for any period during which an emergency exists as defined by
the Securities and Exchange Commission as a result of which disposal of
portfolio securities or determination of the net asset value of the Fund is not
reasonably practicable, and for such other periods as the Securities and
Exchange Commission may by order permit for the protection of shareholders of
the Fund.

Shares are redeemable at the option of the Fund if, in the opinion of
the Fund, ownership of the shares has or may become concentrated to the extent
which would cause the Fund to be deemed a personal holding company within the
meaning of the Code.

PORTFOLIO TRANSACTIONS AND BROKERAGE

The Manager is responsible for making the Fund's portfolio decisions,
placing the Fund's brokerage business, evaluating the reasonableness of
brokerage commissions and negotiating the amount of any commissions paid subject
to a policy established by the Fund's Directors and officers. The Fund has no
obligation to deal with any broker or group of brokers in the execution of
transactions in portfolio securities. Orders for transactions in portfolio
securities are placed for the Fund with a number of brokers and dealers,
including Merrill Lynch. In placing orders, it is the policy of the Fund to
obtain the most favorable net results, taking into account various factors,
including price, commissions, if any, size of the transaction and difficulty of
execution. Where practicable, the Manager surveys a number of brokers and
dealers in connection with proposed portfolio transactions and selects the

broker or dealer which offers the Fund the best price and execution or other
services which are of benefit to the Fund. Securities firms also may receive
brokerage commissions on transactions including covered call options written by
the Fund and the sale of underlying securities upon the exercise of such
options. In addition, consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. and policies established by the Fund's
Directors, the Manager may consider sales of shares of the Fund as a factor in
the selection of brokers or dealers to execute portfolio transactions for the
Fund.

The Fund does not use any particular broker or dealer, and brokers who
provide supplemental investment research to the Manager may receive orders for
transactions by the Fund. Such supplemental research services ordinarily consist
of assessments and analyses of the business or prospects of a company, industry
or economic sector. Information so received will be in addition to and not in
lieu of the services required to be performed by the Manager under the
Management Agreement. If in the judgment of the Manager the Fund will be
benefited by supplemental research services, the Manager is authorized to pay
brokerage commissions to a broker furnishing such services which are in excess
of commissions which another broker may have charged for effecting the same
transaction. The expenses of the Manager will not necessarily be reduced as a
result of the receipt of such supplemental information, and the Manager may use
such information in servicing its other accounts.

The Fund invests in certain securities traded in the over-the-counter
market and, where possible, deals directly with the dealers who make a market in
the securities involved, except in those circumstances in which better prices
and execution are available elsewhere. Under the Investment Company Act of 1940,
persons affiliated with the Fund are prohibited from dealing with the Fund as
principal in purchase and sale of securities. Since transactions in the
over-the-counter market usually involve transactions with dealers acting as
principal for their own accounts, affiliated persons of the Fund, including
Merrill Lynch, will not serve as the Fund's dealer in such transactions.
However, affiliated persons of the Fund may serve as its broker in the
over-the-counter transactions conducted on an agency basis.

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

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

Portfolio Turnover. The Fund has not placed any limit on its rate of

portfolio turnover and securities may be sold without regard to the time they
have been held when, in the opinion of the Manager, investment considerations
warrant such action. As a result, portfolio turnover rate may vary greatly from
year to year or during periods within a year. Also, the use of covered call
options at times when the underlying securities are appreciating in value may
result in higher portfolio turnover than would otherwise be the case. The Fund
pays brokerage commissions in connection with writing call options transactions
and effecting closing purchase transactions, as well as in connection with
purchases and sales of portfolio securities. A high rate of portfolio turnover
would result in correspondingly greater brokerage commission expenses. Portfolio
turnover rate is calculated by dividing the lesser of the Fund's annual sales or
purchases of portfolio securities (exclusive of purchases and sales of
Government securities and of all other securities, including options, whose
maturity or expiration dates at the time of acquisition were one year or less)
by the monthly average value of the securities in the Fund during the fiscal
year.

DETERMINATION OF NET ASSET VALUE

Reference is made to "Additional Information--Determination of Net
Asset Value" in the Prospectus concerning the determination of net asset value.

The net asset value of the shares of the Fund is determined once daily
Monday through Friday as of 15 minutes after the close of business on the New
York Stock Exchange (generally 4:00 P.M., New York time) on each day the New
York Stock Exchange is open for trading. The New York Stock Exchange is not open
for trading on New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value is computed by dividing the value of the securities held by the Fund plus
any cash or other assets (including interest and dividends accrued but not yet
received) minus all liabilities (including accrued expenses) by the total number
of shares outstanding at such time. Expenses, including the fees payable to the
Manager and the Distributor and any account maintenance and/or distribution
fees, are accrued daily.

Zero coupon securities will be valued at the last reported bid.
Securities traded in the over-the-counter market are valued at the last
available bid price or yield equivalents obtained from one or more dealers in
the over-the-counter market prior to the time of valuation. Options purchased by
the Fund are valued at their last bid price in the case of exchange-traded
options or in the case of options traded in the over-the-counter market, the
last bid price. Other investments, including futures contracts and related
options, are stated at market value. Securities and assets for which market
quotations are not readily available are valued at fair market value, as
determined in good faith by or under the direction of the Board of Directors of
the Fund, including valuations furnished by a pricing service retained by the
Fund. Such valuations and procedures will be reviewed periodically by the Board
of Directors.

SHAREHOLDER SERVICES

The Fund offers a number of shareholder services described below which
are designed to facilitate investment in its shares. Full details as to each of

such services and copies of the various plans described below can be obtained
from the Fund, the Distributor or Merrill Lynch. Certain of these services are
available only to United States investors.

INVESTMENT ACCOUNT

Each shareholder whose account is maintained at Merrill Lynch Financial
Data Services, Inc. (the "Transfer Agent") has an Investment Account and will
receive, at least quarterly, quarterly statements from the Transfer Agent. These
statements will serve as transaction confirmations for automatic investment
purchases and the reinvestments of dividends and capital gains distributions.
These statements will also show any other activity in the account since the
preceding statement. Shareholders also will receive separate confirmations for
each purchase or sale transaction other than reinvestment of dividends and
capital gains distributions. A shareholder may make additions to his Investment
Account at any time by mailing a check directly to the Transfer Agent.

Share certificates are issued only for full shares and only upon the
specific request of the shareholder. Issuance of certificates representing all
or only part of the full shares in an Investment Account may be requested by a
shareholder directly from the Transfer Agent. Shareholders interested in
transferring their shares from Merrill Lynch and who do not wish to have an
Investment Account maintained for such shares at the Transfer Agent may request
their new brokerage firm to maintain such shares in an account registered in the
name of the brokerage firm for the benefit of the shareholder. If the new
brokerage firm is willing to accommodate the shareholder in this manner, the
shareholder must request that he be issued certificates for his shares, and then
must turn the certificates over to the new firm for re-registration as described
in the preceding sentence.

AUTOMATIC REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

Unless specific instructions are given as to the method of payment of
dividends and capital gains distributions, dividends and distributions will be
reinvested automatically in additional shares of the Fund. Such reinvestment
will be at the net asset value of shares of the Fund, without sales charge, as
of the close of business on the ex-dividend date of the dividend or
distribution. Shareholders may elect in writing or by telephoning
(1-800-MER-FUND) to receive either their income dividends or capital gains
distributions, or both, in cash, in which event payment will be mailed on or
about the payment date. Shareholders may, at any time, notify the Transfer Agent
in writing that they no longer wish to have their dividends and/or distributions
reinvested in shares of the Fund or vice versa and, commencing ten days after
the receipt by the Transfer Agent of such notice, those instructions will be
effected. However, any redemption of shares prior to the Maturity Date or any
election by a shareholder to receive dividends or distributions in cash will
decrease the total amount of such shareholder's investment in the Fund available
to generate total return, with the result that such shareholder may receive less
than the Targeted Minimum Cumulative Total Return. See "Investment Objectives
and Policies," "Purchase of Shares -- Contingent Deferred Sales Charge" and
"Redemption of Shares" in the Prospectus.

RETIREMENT PLANS

Self-directed individual retirement accounts and other retirement plans
are available from Merrill Lynch. Under these plans, investments may be made in
the Fund and certain of the other mutual funds sponsored by Merrill Lynch as
well as in other securities. Merrill Lynch charges an initial establishment fee
and an annual custodial fee for each account. Information with respect to these
plans is available on request from Merrill Lynch. The minimum initial purchase
to establish any such plan is $250 and the minimum subsequent purchase is $1.

Capital gains and income received in each of the plans referred to
above are exempt from Federal taxation until distributed from the plans.
Investors considering participation in any such plan should review specific tax
laws relating thereto and should consult their attorneys or tax advisers with
respect to the establishment and maintenance of any such plan.

DIVIDENDS, DISTRIBUTIONS AND TAXES

DIVIDENDS AND DISTRIBUTIONS

It is the Fund's intention to distribute all of its net investment
income, if any. Dividends from such net investment income are paid annually. All
net realized long- or short-term capital gains, if any, are distributed to the
Fund's shareholders at least annually. From time to time, the Fund may declare a
special distribution at or about the end of the calendar year in order to comply
with a Federal income tax requirement that certain percentages of its ordinary
income and capital gains be distributed during the taxable year. Premiums from
expired call options written by the Fund and net gains from closing purchase
transactions are treated as short-term capital gains for Federal income tax
purposes. See "Shareholder Services--Reinvestment of Dividends and Capital Gains
Distributions" for information concerning the manner in which dividends and
distributions may be reinvested automatically in shares of the Fund.
Shareholders may elect in writing to receive any such dividends or
distributions, or both, in cash. However, any redemption of shares prior to the
Maturity Date or any election by a shareholder to receive dividends or
distributions in cash will decrease the total amount of such shareholder's
investment in the Fund available to generate total return, with the result that
such shareholder may receive less than the Targeted Minimum Cumulative Total
Return.

TAXES

The Fund intends to qualify for the special tax treatment afforded
regulated investment companies ("RICs") under the Internal Revenue Code of 1986,
as amended (the "Code"). As a RIC, the Fund will not be subject to Federal
income tax on the part of its net ordinary income and net realized capital gains
which it distributes to shareholders. In order to qualify, the Fund must among
other things, (i) derive at least 90% of its gross income from dividends,
interest, payments with respect to certain securities loans, gains from the sale
of securities, or other income (including but not limited to gains from options
or futures) derived with respect to its business of investing in such stock or
securities; (ii) derive less than 30% of its gross income from gains from the
sale or other disposition of stock, securities, options or futures; (iii)

distribute at least 90% of its dividend, interest and certain other taxable
income each year; (iv) at the end of each fiscal quarter maintain at least 50%
of the value of its total assets in cash, government securities, securities of
other RICs, and other securities of issuers which represent, with respect to
each issuer, no more than 5% of the value of the Fund's total assets and 10% of
the outstanding voting securities of such issuer; and (v) at the end of each
fiscal quarter have no more than 25% of its assets invested in the securities
(other than those of the government or other RICs) of any one issuer or of two
or more issuers which the Fund controls and which are engaged in the same,
similar or related trades and businesses.

The Code requires a RIC to pay a nondeductible 4% excise tax to the
extent the RIC does not distribute, during each calendar year, 98% of its
ordinary income, determined on a calendar basis, and 98% of its capital gains,
determined, in general, on an October 31 year end, plus certain undistributed
amounts from previous years. While the Fund intends to distribute its income and
capital gains in the manner necessary to avoid imposition of the 4% excise tax,
there can be no assurance that sufficient amounts of the Fund's taxable income
and capital gains will be distributed to avoid entirely the imposition of the
tax. In such event, the Fund will be liable for the tax only on the amount by
which it does not meet the foregoing distribution requirements.

Tax Treatment of Zero Coupon Securities. The zero coupon securities
will be treated as bonds that were issued to the Fund at an original issue
discount. Original issue discount is treated as interest for federal income tax
purposes and the amount of original issue discount generally will be the
difference between the bond's purchase price and its stated redemption price at
maturity. The Fund will be required to include in gross income for each taxable
year the daily portions of original issue discount attributable to the zero
coupon securities held by the Fund as such original issue discount accrues. Such
income will be subject to the distribution rules applicable to RICS. In general,
original issue discount accrues daily under a constant interest rate method
which takes into account the compounding of accrued interest. In the case of
zero coupon securities, this method will generally result in an increasing
amount of income to the Fund each year.

Tax Treatment of Options and Futures Transactions. The Fund may
purchase options or futures contracts. Unless the Fund is eligible to make and
makes a special election, such options and futures contracts that are "Section
1256 contracts" will be "marked to market" for Federal income tax purposes at
the end of each taxable year, i.e., each option or futures contract will be
treated as sold for its fair market value on the last day of the taxable year.
In general, unless the special election referred to in the previous sentence is
made, gain or loss from transactions in options and futures contracts will be
60% long-term and 40% short-term capital gain or loss.

Code Section 1092, which applies to certain "straddles," may affect the
taxation of the Fund's transactions in options and futures contracts. Under
Section 1092, the Fund may be required to postpone recognition for tax purposes
of losses incurred in certain closing transactions in options and futures.

One of the requirements for qualification as a RIC is that less than
30% of the Fund's gross income may be derived from gains from the sale or other
disposition of securities held for less than three months. Accordingly, the Fund

may be restricted in effecting closing transactions within three months after
entering into an option or futures contract.

The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect, and does
not address the state and local tax, or estate or inheritance tax, consequences
of an investment is the Fund. For the complete provisions, reference should be
made to the pertinent Code sections and the Treasury regulations promulgated
thereunder. The Code and the Treasury regulations are subject to change by
legislative or administrative action either prospectively or retroactively.

Shareholders are urged to consult their own tax advisers regarding
specific questions as to Federal, state, local or foreign taxes or estate or
inheritance tax. Foreign investors should consider applicable foreign taxes in
their evaluation of an investment in the Fund.

PERFORMANCE DATA

From time to time the Fund may include its average annual total return
and other total return data in advertisements or information furnished to
present or prospective shareholders. Total return figures are based on the
Fund's historical performance and are not intended to indicate future
performance. Average annual total return is determined in accordance with a
formula specified by the Securities and Exchange Commission.

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

The Fund also may quote annual, average annual and annualized total return
and aggregate total return performance data, both as a percentage and as a
dollar amount based on a hypothetical $1,000 investment. Such data will be
computed as described above, except that (i) as required by the periods of the
quotations, actual annual, annualized or aggregate data, rather than average
annual data, may be quoted and (ii) neither the redemption fee nor the maximum
applicable sales charges will be included. Actual annual or annualized total
return data generally will be lower than average annual total return data since
the average rates of return reflect compounding of return; aggregate total
return data generally will be higher than average annual total return data
since the aggregate rates of return reflect compounding over a longer period of
time.

From time to time, the Fund may include the Fund's Morningstar
risk-adjusted performance ratings in advertisements or supplemental sales
literature.

GENERAL INFORMATION

DESCRIPTION OF SHARES

The Fund was incorporated under Maryland law on February 9, 1996. It
has an authorized capital of 100,000,000 shares of Common Stock, par value
$0.0001 per share. Each share of Common Stock represents an interest in the same
assets of the Fund and is identical in all respects. Shareholders are entitled
to one vote for each share held and fractional votes for fractional shares held
and will vote on the election of Directors and any other matter submitted to a
shareholder vote. The Fund does not intend to hold meetings of shareholders in
any year in which the Investment Company Act of 1940 does not require
shareholders to act upon any of the following matters: (i) election of
Directors; (ii) approval of an investment advisory agreement; (iii) approval of
a distribution agreement; and (iv) ratification of selection of independent
accountants. Also, the by-laws of the Fund require that a special meeting of
stockholders be held upon the written request of at least 10% of the outstanding
shares of the Fund entitled to vote at such meeting. Voting rights for Directors
are not cumulative. Shares issued are fully paid and non-assessable and have no
preemptive or conversion rights. Redemption rights are discussed elsewhere
herein and in the Prospectus. Each share is entitled to participate equally in
dividends and distributions declared by the Fund and in the net assets of the
Fund upon liquidation or dissolution after satisfaction of outstanding
liabilities. Stock certificates are issued by the Transfer Agent only on
specific request. Certificates for fractional shares are not issued in any case.

The Manager provided the initial capital for the Fund by purchasing
10,000 shares of Common Stock for an aggregate of $100,000. Such shares were
acquired for investment and can only be disposed of by redemption. The
organizational expenses of the Fund (estimated to be approximately $ ) will
be paid by the Fund and amortized over a period not exceeding five years. The
proceeds realized by the Manager upon redemption of any of such shares will be
reduced by the proportionate amount of the unamortized organizational expenses
which the number of shares redeemed bears to the number of shares initially
purchased.

COMPUTATION OF OFFERING PRICE PER SHARE

An illustration of the computation of the initial offering price for
shares of the Fund based on the value of the Fund's assets and number of shares
outstanding on the date its shares are first offered for sale to public
investors is as follows:

Net Assets $100,000
Number of Shares Outstanding 10,000
Net Asset Value Per Share (net assets divided by
number of shares outstanding) $ 10.00
Sales Charge none*
Offering Price $ 10.00
=======
___________________

* Shares are not subject to an initial sales charge but may be subject
to a CSDC on redemption of shares within one year of purchase. See
"Purchase of Shares--Contingent Deferred Sales Charge" in the Prospectus.

INDEPENDENT AUDITORS

________________________, has been selected as the independent auditors
of the Fund. The selection of independent auditors is subject to ratification by
the Fund's shareholders in years when an annual meeting of shareholders is held.
In addition, employment of such auditors may be terminated without any penalty
by vote of a majority of the outstanding shares of the Fund at a meeting called
for the purpose of terminating such employment. The independent auditors are
responsible for auditing the annual financial statements of the Fund.

CUSTODIAN

[ ] acts as the Custodian of the Fund's assets. The Custodian is
responsible for safeguarding and controlling the Fund's cash and securities,
handling the receipt and delivery of securities and collecting interest and
dividends on the Fund's investments.

TRANSFER AGENT

Merrill Lynch Financial Data Services, Inc., 4800 Deer Lake Drive East,
Jacksonville, Florida 32246-6484, acts as the Fund's Transfer Agent. The
Transfer Agent is responsible for the issuance, transfer and redemption of
shares and the opening, maintenance and servicing of shareholder accounts. See
"Management of the Fund--Transfer Agency Services" in the Prospectus.

LEGAL COUNSEL

Shereff, Friedman, Hoffman & Goodman, LLP, 919 Third Avenue, New York,
New York 10022, is counsel for the Fund.

REPORTS TO SHAREHOLDERS

The fiscal year of the Fund ends [______________] of each year. The
Fund sends to its shareholders at least quarterly reports showing the Fund's
portfolio and other information. An annual report, containing financial
statements audited by independent auditors, is sent to shareholders each year.
After the end of each year shareholders will receive Federal income tax
information regarding dividends and capital gains distributions.

ADDITIONAL INFORMATION

The Prospectus and this Statement of Additional Information do not
contain all the information set forth in the Registration Statement and the
exhibits relating thereto, which the Fund has filed with the Securities and
Exchange Commission, Washington, D.C., under the Securities Act of 1933 and the
Investment Company Act of 1940, to which reference is hereby made.

Under a separate agreement Merrill Lynch has granted the Fund the right
to use the "Merrill Lynch" name and has reserved the right to withdraw its
consent to the use of such name by the Fund at any time or to grant the use of
such name to any other company, and the Fund has granted Merrill Lynch, under
certain conditions, the use of any other name it might assume in the future,
with respect to any corporation organized by Merrill Lynch.

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders,
Merrill Lynch Insured Equity Fund:

We have audited the accompanying statement of assets and liabilities of Merrill
Lynch Insured Equity Fund as of ___________________, 1996. This financial
statement is the responsibility of the Fund's management. Our responsibility
is to express an opinion on this financial statement based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement.
An audit also inclues assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, such statement of assets and liabilities presents fairly, in
all material respects the financial position of Merrill Lynch Insured Equity
Fund as of _________________, 1996 in conformity with generally accepted
accounting principles.

, 1996.

MERRILL LYNCH INSURED EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
, 1996
<TABLE>
<S> <C>
Assets
Cash in bank ............................................................... $
Prepaid registration fees (Note 3)..........................................
Deferred organization expenses (Note 4).....................................
------
Total Assets ...............................................................
Liabilities - accrued expenses...................................................
------

Net Assets (equivalent to $10.00 per share on 10,000 shares of common stock (par
value $0.0001) outstanding with
an unlimited number of shares authorized) (Note 1)............................. $
======
</TABLE>
- -----------
(1) Merrill Lynch Insured Equity Fund (the "Fund") is currently the sole
investment series of Merrill Lynch Insured Equity Funds, Inc. (the
"Corporation"), which was organized as a Maryland corporation on ,
1996. The Corporation is registered under the Investment Company Act of
1940 as an open-end investment company.

(2) The Fund intends to enter into a Management Agreement (the "Management
Agreement") with Merrill Lynch Asset Management (the "Manager"), and a
distribution agreement (the "Distribution Agreement") with Merrill Lynch
Funds Distributor, Inc. (the "Distributor"). (See "Management and
Advisory Arrangements" in the Statement of Additional Information.)
Certain officers and/or directors of the Fund are officers and/or
directors of the Manager and the Distributor.

(3) Prepaid registration fees are charged to income as the related shares
are issued.

(4) Deferred organization expenses will be amortized over a period from the
date the Fund commences operations not exceeding five years. In the event
that the Manager (or any subsequent holder) redeems any of its original
shares prior to the end of the five-year period, the proceeds of the
redemption payable in respect of such shares shall be reduced by the pro
rata share (based on the proportionate share of the original shares
redeemed to the total number of original shares outstanding at the time
of redemption) of the unamortized deferred organization expenses as of
the date of such redemption. In the event that the Fund is liquidated
prior to the end of the five-year period, the Manager (or any subsequent
holder) shall bear the unamortized deferred organization expenses.

TABLE OF CONTENTS

Page
in this
Statement
---------
Investment Objective and Policies.......
Portfolio Strategies Involving
Options and Futures.................
Other Investment Policies and
Practices...........................
Risk Factors ...........................
Investment Restrictions...............
The Insurance Policy....................
Management of the Fund..................
Directors and Officers................
Management and Advisory Arrangements...
Purchase of Shares.......................
Redemption of Shares.....................
Portfolio Transactions and Brokerage.....
Determination of Net Asset Value.........
Shareholder Services.....................
Investment Account.....................
Automatic Investment Plan..............
Automatic Reinvestment of Dividends
and Capital Gains Distributions.......
Retirement Plans.......................
Dividends, Distributions and Taxes......
Dividends and Distributions............

Taxes..................................
Performance Data.........................
General Information......................
Description of Shares..................
Computation of Offering Price
per Share............................
Independent Auditors...................
Custodian..............................
Transfer Agent.........................
Legal Counsel..........................
Reports to Shareholders................
Additional Information.................
Report or Independent Auditors
Financial Statements...................

Code #

STATEMENT OF
ADDITIONAL INFORMATION

[LOGO]

MERRILL LYNCH
INSURED EQUITY
FUND

_______________, 1996

Distributor:
Merrill Lynch Funds
Distributor, Inc.
PART C. OTHER INFORMATION

Item 24. Financial Statements and Exhibits.
(a) Financial Statements:

Contained in Part A, the Prospectus:

None

Contained in Part B, the Statement of Additional Information:

To be filed by amendment.

(b) Exhibits:

Exhibit
Number
- ------

1 -- Articles of Incorporation of Registrant.
2 -- By-Laws of Registrant.
3 -- None.
4 -- Instruments Defining Rights of Shareholders. Incorporated
by reference to Exhibits 1 and 2 above.
5 -- Management Agreement between Registrant and Merrill Lynch
Asset Management.*
6 -- Distribution Agreement between Registrant and Merrill Lynch
Funds Distributor, Inc.*
7 -- None.
8 -- Custody Agreement between Registrant and [ ]*.
9(a)-- Transfer Agency, Dividend Disbursing Agency and
Shareholder Servicing Agency Agreement between Registrant and
Merrill Lynch Financial Data Services, Inc.*
(b) -- Form of License Agreement relating to Use of Name between
Merrill Lynch & Co., Inc. and Registrant.*
(c) -- Form of Insurance Policy.*
10 -- Opinion and consent of Shereff, Friedman, Hoffman & Goodman,
LLP, counsel for Registrant.*
11 -- Consent of [ ], independent auditors for the
Registrant.*
12 -- None.
13 -- Certificate of Merrill Lynch Asset Management.*
14 -- Not Applicable.
15 -- Distribution Plan of the Registrant and Distribution Plan
Sub-Agreement.*
16 -- Not Applicable.
17 -- Not Applicable.

- ---------------------
* To be filed by amendment.

Item 25. Persons Controlled By or Under Common Control with Registrant.

Prior to the effective date of this Registration Statement, the

Registrant will sell 10,000 shares of the Registrant to Merrill Lynch Asset
Management (the "Manager" or "MLAM").

Item 26. Number of Holders of Securities

As of ____________, 1996, the number of records holders of securities
of the Registrant was 1.

Item 27. Indemnification.

Reference is made to Article VI of Registrant's Articles of
Incorporation, Article VI of Registrant's By-Laws, Section 9 of the Distribution
Agreement, Article IV of the Management Agreement and Section 2-418 of the
Maryland General Corporation Law.

Article VI of the By-Laws provides that each officer and Director of
the Registrant shall be indemnified by the Registrant to the full extent
permitted under the General Laws of the State of Maryland, except that such
indemnity shall not protect any such person against any liability to the
Registrant or any stockholder thereof to which such person would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office. Absent a
court determination that an officer or director seeking indemnification was not
liable on the merits or guilty of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office, the decision by the Registrant to indemnify such person must be based
upon the reasonable determination of independent counsel or non-party
independent directors, after review of the facts, that such officer or director
is not guilty of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.

Each officer and Director of the Registrant claiming indemnification
with the scope of Article VI of the By-Laws shall be entitled to advances from
the Registrant for payment of the reasonable expenses incurred by him in
connection with proceedings to which he is a party in the manner and to the full
extent permitted under the General Laws of the State of Maryland; provided,
however, that the person seeking indemnification shall provide to the Registrant
a written affirmation of his good faith belief that the standard of conduct
necessary for indemnification by the Registrant has been met and a written
undertaking to repay any such advance, if it should ultimately be determined
that the standard of conduct has not been met, and provided further that at
least one of the following additional conditions is met: (a) the person seeking
indemnification shall provide a security in form and amount acceptable to the
Registrant for his undertaking; (b) the Registrant is insured against losses
arising by reason of the advance; (c) a majority of a quorum of non-party
independent directors, or independent legal counsel in a written opinion, shall
determine, based on a review of facts readily available to the Registrant at the
time the advance is proposed to be made, that there is reason to believe that
the person seeking indemnification will ultimately be found to be entitled to
indemnification.

The Registrant may indemnify or purchase insurance to the extent
provided in Article VI of the By-Laws on behalf of an employee or agent who is

not an officer or Director of the Registrant.

The Registrant may purchase insurance on behalf of an officer or
director protecting such person to the full extent permitted under the General
Laws of the State of Maryland from liability arising from his activities as
officer or director of the Registrant. The Registrant, however, may not purchase
insurance on behalf of any officer or director of the Registrant that protects
or purports to protect such person from liability to the Registrant or to its
stockholders to which such officer or director would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office.

The Registrant has purchased an insurance policy insuring its officers
and Directors against liabilities, and certain costs of defending claims against
such officers and Directors, to the extent such officers and Directors are not
found to have committed conduct constituting willful misfeasance, bad faith,
gross negligence or reckless disregard in the performance of their duties.

Article IV of the Management Agreement between Registrant and MLAM
(Exhibit 5 hereof) limits the liability of MLAM to liabilities arising from
willful misfeasance, bad faith or gross negligence in the performance of their
respective duties or from reckless disregard of their respective duties and
obligations.

In Section 9 of the Distribution Agreement relating to the securities
being offered hereby, the Registrant agrees to indemnify the Distributor and
each person, if any, who controls the Distributor within the meaning of the
Securities Act of 1933 (the "Act"), against certain types of civil liabilities
arising in connection with the Registration Statement or Prospectus and
Statement of Additional Information.

Insofar as indemnification for liabilities arising under the Act may be
permitted to Directors, officers and controlling persons of the Registrant and
the principal underwriter pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a Director, officer, or controlling person of the Registrant
and the principal underwriter in connection with the successful defense of any
action, suit or proceeding) is asserted by such Director, officer or controlling
person or the principal underwriter in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

Item 28. Business and Other Connections of Investment Adviser.

Merrill Lynch Asset Management, L.P. (the "Manager" or "MLAM") also
acts as investment adviser for the following open-end investment companies:
Merrill Lynch Adjustable Rate Securities Fund, Inc., Merrill Lynch Americas
Income Fund, Inc., Merrill Lynch Asset Growth Fund, Inc., Merrill Lynch Asset

Income Fund, Inc., Merrill Lynch Balanced Fund for Investment and Retirement,
Inc., Merrill Lynch Capital Fund, Inc., Merrill Lynch Developing Capital Markets
Fund, Inc., Merrill Lynch Dragon Fund, Inc., Merrill Lynch EuroFund, Merrill
Lynch Fundamental Growth Fund, Inc., Merrill Lynch Fund for Tomorrow, Inc.,
Merrill Lynch Global Allocation Fund, Inc., Merrill Lynch Global Fund for
Investment and Retirement, Merrill Lynch Global Convertible Fund, Inc., Merrill
Lynch Global Holdings, Merrill Lynch Global Resources Trust, Merrill Lynch
Global SmallCap Fund, Inc., Merrill Lynch Global Utility Fund, Inc., Merrill
Lynch Growth Fund for Investment and Retirement, Merrill Lynch Healthcare Fund,
Inc., Merrill Lynch Institutional Intermediate Fund, Merrill Lynch International
Equity Fund, Merrill Lynch Latin America Fund, Inc., Merrill Lynch Middle
East/Africa Fund, Inc., Merrill Lynch Municipal Series Trust, Merrill Lynch
Pacific Fund, Inc., Merrill Lynch Ready Assets Trust, Merrill Lynch Retirement
Asset Builder Program, Inc., Merrill Lynch Retirement Series Trust, Merrill
Lynch Series Fund, Inc., Merrill Lynch Short-Term Global Income Fund, Inc.,
Merrill Lynch Strategic Dividend Fund, Merrill Lynch Technology Fund, Inc.,
Merrill Lynch U.S.A. Government Reserves, Merrill Lynch U.S. Treasury Money
Fund, Merrill Lynch Utility Income Fund, Inc. and Merrill Lynch Variable Series
Funds, Inc.; and the following closed-end investment companies: Convertible
Holdings, Inc., Merrill Lynch High Income Municipal Bond Fund, Inc. and Merrill
Lynch Senior Floating Rate Fund, Inc. Fund Asset Management, L.P. ("FAM"), an
affiliate of MLAM, acts as the investment adviser for the following open-end
investment companies: CBA Money Fund, CMA Government Securities Fund, CMA Money
Fund, CMA Multi-State Municipal Series Trust, CMA Tax-Exempt Fund, CMA Treasury
Fund, The Corporate Fund Accumulation Program, Inc., Financial Institutions
Series Trust, Merrill Lynch Basic Value Fund, Inc., Merrill Lynch California
Municipal Series Trust, Merrill Lynch Corporate Bond Fund, Inc., Merrill Lynch
Federal Securities Trust, Merrill Lynch Funds for Institutions Series, Merrill
Lynch Multi-State Limited Maturity Municipal Series Trust, Merrill Lynch
Multi-State Municipal Series Trust, Merrill Lynch Municipal Bond Fund, Inc.,
Merrill Lynch Phoenix Fund, Inc., Merrill Lynch Special Value Fund, Inc.,
Merrill Lynch World Income Fund, Inc. and The Municipal Fund Accumulation
Program, Inc.; and the following closed-end investment companies: Apex Municipal
Fund, Inc., Corporate High Yield Fund, Inc., Corporate High Yield Fund II, Inc.,
Emerging Tigers Fund, Inc., Income Opportunities Fund 1999, Inc., Income
Opportunities Fund 2000, Inc., MuniAsset Fund, Inc., MuniEnhanced Fund, Inc.,
MuniInsured Fund, Inc., MuniVest Fund, Inc., MuniVest California Insured Fund,
Inc., MuniVest Florida Fund, MuniVest Michigan Insured Fund, Inc., MuniVest New
Jersey Fund, Inc., MuniVest New York Insured Fund, Inc., MuniVest Pennsylvania
Insured Fund, MuniYield Arizona Fund, Inc., MuniYield California Fund, Inc.,
MuniYield California Insured Fund, Inc., MuniYield California Insured Fund II,
Inc., MuniYield Florida Fund, MuniYield Florida Insured Fund, MuniYield Fund,
Inc., MuniYield Insured Fund, Inc., MuniYield Insured Fund II, Inc., MuniYield
Michigan Fund, Inc., MuniYield Michigan Insured Fund, Inc., MuniYield New Jersey
Fund, Inc., MuniYield New Jersey Insured Fund, Inc., MuniYield New York Insured
Fund, Inc., MuniYield New York Insured Fund II, Inc., MuniYield New York Insured
Fund III, Inc., MuniYield Pennsylvania Fund, MuniYield Quality Fund, Inc.,
MuniYield Quality Fund II, Inc., Senior High Income Portfolio, Inc., Senior High
Income Portfolio II, Inc., Senior Strategic Income Fund, Inc., Taurus
MuniCalifornia Holdings, Inc., Taurus MuniNew York Holdings, Inc., and Worldwide
DollarVest Fund, Inc. The address of each of these investment companies is P.O.
Box 9011, Princeton, New Jersey 08543-9011, except that the address of Merrill
Lynch Funds for Institutions Series and Merrill Lynch Institutional Intermediate
Fund is One Financial Center, 15th Floor, Boston, Massachusetts 02111-2646. The

address of the Manager, FAM, Princeton Services, Inc. ("Princeton Services") and
Princeton Administrators, L.P. ("Princeton Administrators") is also P.O. Box
9011, Princeton, New Jersey 08543-9011. The address of Merrill Lynch Funds
Distributor, Inc. ("MLFD") is P.O. Box 9081, Princeton, New Jersey 08543-9081.
The address of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch") and Merrill Lynch & Co., Inc. ("ML&Co.") is World Financial Center,
North Tower, 250 Vesey Street, New York, New York 10281. The address of Merrill
Lynch Financial Data Services ("FDS") is 4800 Deer Lake Drive East,
Jacksonville, Florida 32246-6484.

Set forth below is a list of each executive officer and director of the
Manager indicating each business, profession, vocation or employment of a
substantial nature in which each such person has been engaged since February 1,
1994 for his own account or in the capacity of director, officer, employee,
partner or trustee. In addition, Mr. Zeikel is President, Mr. Richard is
Treasurer and Mr. Glenn is Executive Vice President of all or substantially all
of the investment companies advised by the Manager or FAM, and Messrs. Durnin,
Giordano, Harvey, Hewitt, Kirstein and Monagle are directors or officers of one
or more of such companies.

Officers and partners of MLAM are set forth as follow:

Other Substantial Business,
Name Positions with Manager Profession, Vocation or Employment
---- ---------------------- ----------------------------------
ML&Co............... Limited Partner Financial Services Holding Company

Merrill Lynch
Investment.......... Limited Partner Investment Advisory Management,
Inc.

Princeton
Services............ Limited Partner General Partner of FAM

Arthur Zeikel....... President President of FAM; President and
Director of Princeton Services;
Director of ("MLFD"); Executive
Vice President of ML & Co.

Terry K. Glenn...... Executive Vice Executive Vice President of FAM;
President Executive Vice President and
Director of Princeton Services;
President and Director of MLFD;
President of Princeton
Administrators; Director of FDS

Vincent R. Giordano. Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services

Norman R.Harvey..... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services

N. John Hewitt...... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services

Philip L. Kirstein.. Senior Vice President, Senior Vice President, General
General Counsel, Counsel and Secretary of
Director and Secretary FAM; Senior Vice President,
General Counsel, Director and
Secretary of Princeton Services;
Director of MLFD

Ronald M. Kloss..... Senior Vice President Senior Vice President and
Controller of FAM; Senior
Vice President and Controller
of Princeton Services

Stephen M.M. Miller. Senior Vice President Executive Vice President of
Princeton Administrators, L.P.

Joseph T.Monagle.... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services

Gerald M. Richard... Senior Vice President Senior Vice President and
and Treasurer Treasurer of FAM; Senior
Vice President and Treasurer
of Princeton Services;
Vice President and Treasurer
of MLFD

Richard L. Reller... Senior Vice President First Vice President of MLAM;
First Vice President of
Princeton Services;

Ronald L. Welburn... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services

Anthony Wiseman..... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services

Item 29. Principal Underwriters.

(a) MLFD acts as the principal underwriter for the Registrant and for
each of the open-end investment companies referred to in the first paragraph of
Item 28 except CBA Money Fund, CMA Government Securities Fund, CMA Money Fund,
CMA Multi-State Municipal Series Trust, CMA Tax-Exempt Fund, CMA Treasury Fund,
The Corporate Fund Accumulation Program, Inc. and The Municipal Fund
Accumulation Program, Inc., and also acts as principal underwriter for the
following closed-end funds: Merrill Lynch High Income Municipal Bond Fund, Inc.,
Merrill Lynch Senior Floating Rate Fund, Inc. and Merrill Lynch Municipal

Strategy Fund, Inc.

(b) Set forth below is information concerning each director and
officer of MLFD. The principal business address of each such person is Box
9011, Princeton, New Jersey 08543-9011, except that the address of Messrs.
Crook, Brady, Aldrich, Graczyk, Fatseas, Wasel and Ms. Schena is One Financial
Center, Boston, Massachusetts 02111-2665.

(1) (2) (3)
Positions and Offices Positions and Offices
Name with the Distributor with Registrant
---- -------------------- ---------------

Terry K. Glenn.......... President Executive Vice
Arthur Zeikel........... Director President and Director
Philip L. Kirstein...... Director None
William E. Aldrich...... Senior Vice President None
Robert W. Crook......... Senior Vice President None
Kevin P. Boman.......... Vice President None
Michael J. Brady........ Vice President None
Sharon Creveling........ Vice President and None
Assistant Treasurer
Mark A. DeSario......... Vice President None
James J. Fatseas........ Vice President None
Stanley Graczyk......... Vice President None
Debra W. Landsman-Yaros. Vice President None
Michelle T. Lau......... Vice President None
Gerald M. Richard....... Vice President and Treasurer
Treasurer
Salvatore Venezia....... Vice President None
William Wasel........... Vice President None
Lisa Gobora............. Assistant Vice President None
Susan Kibler............ Assistant Vice President None
Mark A. Maguire......... Assistant Vice President None
Richard Romm............ Assistant Vice President None
Patricia A. Schena...... Assistant Vice President None
Robert Harris........... Secretary None

Item 30. Location of Accounts and Records.

All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940, as amended, and the rules
thereunder are maintained at the offices of the Registrant, 800 Scudders Mill
Road, Plainsboro, New Jersey 08536, and its Transfer Agent, Merrill Lynch
Financial Data Services, Inc., 4800 Deer Lake Drive East, Jacksonville, Florida
32246-6484.

Item 31. Management Services.

Other than as set forth under the caption "Management of the

Fund--Management and Advisory Arrangements" in the Prospectus constituting Part
A of the Registration Statement and under "Management of the Fund--Management
and Advisory Arrangements" in the Statement of Additional Information
constituting Part B of the Registration Statement, the Registrant is not party
to any Management-related service contract.

Item 32. Undertakings.

To file a post-effective amendment, using financial statements which
may not be certified, within four to six months of the effective date of this
Registration Statement.

The Registrant will furnish each person to whom a Prospectus is
delivered with a copy of Registrant's latest annual request to shareholders,
upon request and without charge.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the Township of Plainsboro, and State of New
Jersey, on the 8th day of February, 1996.

MERRILL LYNCH INSURED
EQUITY FUNDS, INC.

Registrant

By: /s/ Philip L. Kirstein
----------------------------------
(Philip L. Kirstein, President)

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.

SIGNATURES TITLE DATE

/s/ Philip L. Kirstein President and Director February 8, 1996
- ------------------------ (Principal Executive Officer)
(Philip L. Kirstein)

/s/ Ira. P. Shapiro Treasurer (Principal Financial February 8, 1996
- ------------------------ Accounting Officer)
(Ira P. Shapiro) and Director

/s/ Mark B. Goldfus Director February 8, 1996
- ------------------------
(Mark B. Goldfus)

INDEX TO EXHIBITS

Exhibit
Number Description Page Number
- ------ ----------- -----------
(1) Articles of Incorporation of Registrant......
(2) By-Laws of Registrant........................

ARTICLES OF INCORPORATION

MERRILL LYNCH INSURED EQUITY FUNDS, INC.

THE UNDERSIGNED, PATRICK S. FARRELLY, whose post office address is Shereff,
Friedman, Hoffman & Goodman, LLP, 919 Third Avenue, New York, New York 10022,
being at least eighteen years of age, does hereby act as an incorporator, under
and by virtue of the General Laws of the State of Maryland authorizing the
formation of corporations and with the intention of forming a corporation.

ARTICLE I
NAME

The name of the corporation is MERRILL LYNCH INSURED EQUITY FUNDS, INC.
(the "Corporation").

ARTICLE II
PURPOSES AND POWERS

The purpose or purposes for which the Corporation is formed, the powers,
rights and privileges that the Corporation shall be authorized to exercise and
enjoy, and the business or objects to be transacted, carried on and promoted by
it are as follows:

(1) To conduct and carry on business of an investment company of the
management type.

(2) To hold, invest and reinvest its assets in securities, and in
connection therewith to hold part or all of its assets in cash.

(3) To issue and sell shares of its own capital stock in such amounts and
on such terms and conditions, for such purposes and for such amount or kind of
consideration now or hereafter permitted by the General Laws of the State of
Maryland and by these Articles of Incorporation, as its Board of Directors may
determine; provided, however, that the value of the consideration per share to
be received by the Corporation upon the sale or other disposition of any shares
of its capital stock shall not be less than the net asset value per share of
such capital stock outstanding at the time of such event.

(4) To exchange, classify, reclassify, change the designation of, convert,
rename, redeem, purchase or otherwise acquire, hold, dispose of, resell,
transfer, reissue or cancel (all without the vote or consent of the stockholders
of the Corporation) shares of its issued or unissued capital stock of any class
or series, as its Board of Directors may determine, in any manner and to the
extent now or hereafter permitted by the General Laws of the State of Maryland
and by these Articles of Incorporation.

(5) To do any and all such further acts or things and to exercise any and
all such further powers or rights as may be necessary, incidental, relative,
conducive, appropriate or desirable for the accomplishment, carrying out or
attainment of all or any of the foregoing purposes or objects.

(6) The Corporation shall be authorized to exercise and enjoy all of the

powers, rights and privileges granted to, or conferred upon, corporations by the
General Laws of the State of Maryland now or hereafter in force, and the
enumeration of the foregoing purposes, powers, rights and privileges, shall not
be deemed to exclude any powers, rights or privileges so granted or conferred.

ARTICLE III
PRINCIPAL OFFICE AND RESIDENT AGENT

The post office address of the principal office of the Corporation in the
State of Maryland is c/o The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202. The name of the resident agent of the Corporation in
this State is The Corporation Trust Incorporated, a corporation of this State,
and the post office address of the resident agent is 32 South Street, Baltimore,
Maryland 21202.

ARTICLE IV
CAPITAL STOCK

(1) The total number of shares of capital stock which the Corporation shall
have authority to issue is One Hundred Million (100,000,000) shares, of the par
value of One Hundredth of One Cent ($.0001) per share, and of the aggregate par
value of Ten Thousand Dollars ($10,000). The capital stock initially consists of
one series, known as Merrill Lynch Insured Equity Fund, which initially consists
of one class of common stock.

(2) The Board of Directors may classify and reclassify any unissued shares
of capital stock, of any class or series, into one or more additional or other
classes or series as may be established from time to time by setting or changing
in any one or more respects the designations, preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends, qualifications
or terms or conditions of redemption of such shares of stock and pursuant to
such classification or reclassification to increase or decrease the number of
authorized shares of any existing class or series.

(3) Unless otherwise expressly provided in the charter of the Corporation,
including any Articles Supplementary creating any class or series of capital
stock, the holders of each class or series of capital stock shall be entitled to
dividends and distributions in such amounts and at such times as may be
determined by the Board of Directors, and the dividends and distributions paid
with respect to the various classes or series of capital stock may vary among
such classes and series. Dividends on a class or series may be declared or paid
only out of the net assets of that class or series. Expenses related to the
distribution of, and other identified expenses that should properly be allocated
to, the shares of a particular class or series of capital stock may be charged
to and borne solely by such class or series and the bearing of expenses solely
by a class or series of capital stock may be appropriately reflected (in a
manner determined by the Board of Directors) and cause differences in the net
asset value attributable to, and the dividend, redemption and liquidation rights
of, the shares of each class or series of capital stock.

(4) Unless otherwise expressly provided in the charter of the Corporation,
including those matters set forth in Article II, Section (4) hereof and
including any Articles Supplementary creating any class or series of capital
stock, on each matter submitted to a vote of stockholders, each holder of a

share of capital stock of the Corporation shall be entitled to one vote for each
share standing in such holder's name on the books of the Corporation,
irrespective of the class or series thereof, and all shares of all classes and
series shall vote together as a single class; provided, however, that (a) as to
any matter with respect to which a separate vote of any class or series is
required by the Investment Company Act of 1940, as amended, and in effect from
time to time, or any rules, regulations or orders issued thereunder, or by the
Maryland General Corporation Law, such requirement as to a separate vote by that
class or series shall apply in lieu of a general vote of all classes and series
as described above, (b) in the event that the separate vote requirements
referred to in (a) above apply with respect to one or more classes or series,
then, subject to paragraph (c) below, the shares of all other classes and series
not entitled to a separate class vote shall vote as a single class, and (c) as
to any matter which does not affect the interest of a particular class or
series, such class or series shall not be entitled to any vote and only the
holders of shares of the affected classes and series, if any, shall be entitled
to vote.

(5) Notwithstanding any provision of the Maryland General Corporation Law
requiring a greater proportion than a majority of the votes of all classes or
series of capital stock of the Corporation (or of any class or series entitled
to vote thereon as a separate class or series) to take or authorize any action,
the Corporation is hereby authorized (subject to the requirements of the
Investment Company Act of 1940, as amended, and in effect from time to time, and
any rules, regulations and orders issued thereunder) to take such action upon
the concurrence of a majority of the votes entitled to be cast by holders of
capital stock of the Corporation (or a majority of the votes entitled to be cast
by holders of a class or series entitled to vote thereon as a separate class or
series).

(6) Unless otherwise expressly provided in the charter of the Corporation,
including any Articles Supplementary creating any class or series of capital
stock, in the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of each class or
series of capital stock of the Corporation shall be entitled, after payment or
provision for payment of the debts and other liabilities of the Corporation, to
share ratably in the remaining net assets of the Corporation applicable to that
class or series.

(7) Any fractional shares shall carry proportionately all the rights of a
whole share, excepting any right to receive a certificate evidencing such
fractional share, but including, without limitation, the right to vote and the
right to receive dividends.

(8) The presence in person or by proxy of the holders of shares entitled to
cast one-third of the votes entitled to be cast shall constitute a quorum at any
meeting of stockholders, except with respect to any matter which requires
approval by a separate vote of one or more classes of stock, in which case the
presence in person or by proxy of the holders of shares entitled to cast
one-third of the votes entitled to be cast by each class entitled to vote as a
separate class shall constitute a quorum.

(9) All persons who shall acquire stock in the Corporation, of any class or
series, shall acquire the same subject to the provisions of the charter and

By-Laws of the Corporation. As used in the charter of the Corporation, the terms
"charter" and "Articles of Incorporation" shall mean and include the Articles of
Incorporation of the Corporation as amended, supplemented and restated from time
to time by Articles of Amendment, Articles Supplementary, Articles of
Restatement or otherwise.

(10) The Board of Directors may classify and reclassify any issued shares
of capital stock into one or more additional or other classes or series as may
be established from time to time by setting or changing in any one or more
respects the designations, preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications or terms or
conditions of redemption of such shares of stock and pursuant to such
classification or reclassification to increase or decrease the number of
authorized shares of any existing class or series; provided, however, that any
such classification or reclassification shall not substantially adversely affect
the rights of holders of such issued shares. The Board's authority pursuant to
this paragraph shall include, but not be limited to, the power to vary among all
the holders of a particular class or series (a) the length of time shares must
be held prior to reclassification to shares of another class or series (the
"Holding Period(s)"), (b) the manner in which the time for such Holding
Period(s) is determined and (c) the class or series into which the particular
class or series is being reclassified; provided, however, that, subject to the
first sentence of this section, with respect to holders of the Corporation's
shares issued on or after the date of the Corporation's first effective
prospectus which sets forth Holding Period(s) (the "First Holding Period
Prospectus"), the Holding Period(s), the manner in which the time for such
Holding Period(s) is determined and the class or series into which the
particular class or series is being reclassified shall be disclosed in the
Corporation's prospectus or statement of additional information in effect at the
time such shares, which are the subject of the reclassification, were issued.

(11) Notwithstanding any other provision of these Articles of Incorporation
or the By-Laws of the Corporation, or the General Laws of the State of Maryland,
the Board of Directors of the Corporation may, without the vote or consent of
the stockholders, terminate the series of the Corporation designated Merrill
Lynch Insured Equity Fund (the "Series") on or about the date disclosed in the
Corporation's prospectus or statement of additional information in effect at the
time of the initial public offering of the shares comprising the Series. If the
Board of Directors determines that the termination of the Series would be in the
best interests of the stockholders, the Board shall liquidate the assets
belonging to the Series and, after paying or making provision for the payment of
all the liabilities in respect of the Series, the Corporation shall distribute
to the stockholders the net asset value of such stockholders' shares in the
Series. The net asset value of the Corporation's shares in the Series shall be
determined by the Board of Directors in accordance with the provisions of
applicable law, less any applicable fee or charge, if any, as may be fixed by
resolution of the Board of Directors.

(12)(a) Each series of capital stock of the Corporation shall relate to a
separate portfolio of investments. All shares of stock in each series shall be
identical except that there may be variations between the different series as to
the purchase price, determination of net asset value, designations, preferences,
conversion or other rights, voting powers, restrictions, special and relative
rights and limitations as to dividends and on liquidation, qualifications or

terms or conditions of redemption of such shares of stock.

(b) Each series of stock of the Corporation shall have the following
powers, preferences and voting or other special rights, and the qualifications,
restrictions and limitations thereof shall be as follows:

(i) All consideration received by the Corporation for the issue or
sale of stock of each series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits and
proceeds received thereon, including any proceeds derived from the sale,
exchange or liquidation thereof, and any assets, funds or payments derived from
any reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to the series of stock with respect to which such assets,
payments or funds were received by the Corporation for all purposes, subject
only to the rights of creditors, and shall be so handled in the books of account
of the Corporation. Such assets, funds and payments, including any proceeds
derived from the sale, exchange or liquidation thereof, and any assets, funds or
payments derived from any reinvestment of such proceeds in whatever form the
same may be, are herein referred to as "assets belonging to" such series. In the
event that there are any income, earnings, profits, and proceeds thereof,
assets, funds or payments that are not readily identifiable as belonging to any
particular series, the Board of Directors of the Corporation shall allocate them
among any one or more of the series established and designated from time to time
in such manner and on such basis as the Board of Directors, in their sole
discretion, deem fair and equitable. Each allocation by the Board of Directors
shall be conclusive and binding on the stockholders of the Corporation of all
series for all purposes.

(ii) The assets belonging to each series of stock shall be charged
with the liabilities in respect of such series, and also shall be charged with
its share of the general liabilities of the Corporation, in proportion to the
asset value of the respective series determined in accordance with the Articles
of Incorporation of the Corporation. The determination of the Board of Directors
shall be conclusive as to the amount of liabilities, including accrued expenses
and reserves, as to the allocation of the same to a given series, and as to
whether the same or general assets of the Corporation are allocable to one or
more series.

ARTICLE V
PROVISIONS FOR DEFINING, LIMITING AND
REGULATING CERTAIN POWERS OF THE CORPORATION
AND OF THE DIRECTORS AND STOCKHOLDERS

(1) The number of directors of the Corporation shall be three, which number
may be increased pursuant to the By-Laws of the Corporation but shall never be
less than three. The names of the directors who shall act until their successors
are duly elected and qualify are:

Philip L. Kirstein
Mark B. Goldfus
Ira P. Shapiro

(2) The Board of Directors of the Corporation is hereby empowered to
authorize the issuance from time to time of shares of capital stock, of any
class or series, whether now or hereafter authorized, for such consideration as
the Board of Directors may deem advisable, subject to such limitations as may be
set forth in these Articles of Incorporation or in the By-Laws of the
Corporation or in the General Laws of the State of Maryland.

(3) No holder of stock of the Corporation shall, as such holder, have any
right to purchase or subscribe for any shares of the capital stock of the
Corporation or any other security of the Corporation which it may issue or sell
(whether out of the number of shares authorized by these Articles of
Incorporation, or out of any shares of the capital stock of the Corporation, of
any class or series, acquired by it after the issue thereof, or otherwise) other
than such right, if any, as the Board of Directors, in its discretion, may
determine.

(4) Each director and each officer of the Corporation shall be indemnified
by the Corporation to the full extent permitted by the General Laws of the State
of Maryland, subject to the requirements of the Investment Company Act of 1940,
as amended. No amendment of these Articles of Incorporation or repeal of any
provision hereof shall limit or eliminate the benefits provided to directors and
officers under this provision in connection with any act or omission that
occurred prior to such amendment or repeal.

(5) To the fullest extent permitted by the General Laws of the State of
Maryland, subject to the requirements of the Investment Company Act of 1940, as
amended, no director or officer of the Corporation shall be personally liable to
the Corporation or its security holders for money damages. No amendment of these
Articles of Incorporation or repeal of any provision hereof shall limit or
eliminate the benefits provided to directors and officers under this provision
in connection with any act or omission that occurred prior to such amendment or
repeal.

(6) The Board of Directors of the Corporation is vested with the sole
power, to the exclusion of the stockholders, to make, alter or repeal from time
to time any of the By-Laws of the Corporation except any particular By-Law which
is specified as not subject to alteration or repeal by the Board of Directors,
subject to the requirements of the Investment Company Act of 1940, as amended.

(7) The Board of Directors of the Corporation from time to time may change
the Corporation's name, or change the name or other designation of any class or
series of its stock, without the vote or consent of the stockholders of the
Corporation, in any manner and to the extent now or hereafter permitted by the
General Laws of the State of Maryland and by these Articles of Incorporation.

(8) Notwithstanding any other provision of these Articles of Incorporation
or the By-Laws of the Corporation, or the General Laws of the State of Maryland,
the Board of Directors of the Corporation may, upon the affirmative vote of the
majority of the entire Board of Directors and without the vote or consent of the
stockholders, dissolve the Corporation in the manner otherwise provided by the
laws of the State of Maryland.

ARTICLE VI

REDEMPTION

Each holder of shares of capital stock of the Corporation shall be entitled
to require the Corporation to redeem all or any part of the shares of capital
stock of the Corporation standing in the name of such holder on the books of the
Corporation, and all shares of capital stock issued by the Corporation shall be
subject to redemption by the Corporation, at the redemption price of such shares
as in effect from time to time as may be determined by the Board of Directors of
the Corporation in accordance with the provisions hereof, subject to the right
of the Board of Directors of the Corporation to suspend the right of redemption
of shares of capital stock of the Corporation or postpone the date of payment of
such redemption price in accordance with provisions of applicable law. The
redemption price of shares of capital stock of the Corporation shall be the net
asset value thereof as determined by the Board of Directors of the Corporation
from time to time in accordance with the provisions of applicable law, less such
redemption fee or other charge, if any, as may be fixed by resolution of the
Board of Directors of the Corporation. Payment of the redemption price shall be
made in cash by the Corporation at such time and in such manner as may be
determined from time to time by the Board of Directors of the Corporation.

ARTICLE VII
DETERMINATION BINDING

Any determination made in good faith, so far as accounting matters are
involved, in accordance with accepted accounting practice by or pursuant to the
direction of the Board of Directors, as to the amount of assets, obligations or
liabilities of the Corporation, as to the amount of net income of the
Corporation from dividends and interest for any period or amounts at any time
legally available for the payment of dividends, as to the amount of any reserves
or charges set up and the propriety thereof, as to the time of or purpose for
creating reserves or as to the use, alteration or cancellation of any reserves
or charges (whether or not any obligation or liability for which such reserves
or charges shall have been created, shall have been paid or discharged or shall
be then or thereafter required to be paid or discharged), as to the price of any
security owned by the Corporation or as to any other matters relating to the
issuance, sale, redemption or other acquisition or disposition of securities or
shares of capital stock of the Corporation, and any reasonable determination
made in good faith by the Board of Directors as to whether any transaction
constitutes a purchase of securities on "margin," a sale of securities "short,"
or an underwriting or the sale of, or a participation in any underwriting or
selling group in connection with the public distribution of, any securities,
shall be final and conclusive, and shall be binding upon the Corporation and all
holders of its capital stock, past, present and future, and shares of the
capital stock of the Corporation are issued and sold on the condition and
understanding, evidenced by the purchase of shares of capital stock or
acceptance of share certificates, that any and all such determinations shall be
binding as aforesaid. No provision of these Articles of Incorporation shall be
effective to (a) require a waiver of compliance with any provision of the
Securities Act of 1933, as amended, or the Investment Company Act of 1940, as
amended, or of any valid rule, regulation or order of the Securities and
Exchange Commission thereunder or (b) protect or purport to protect any director
or officer of the Corporation against any liability to the Corporation or its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties

involved in the conduct of his office.

ARTICLE VIII
PERPETUAL EXISTENCE

The duration of the Corporation shall be perpetual.

ARTICLE IX
AMENDMENT

The Corporation reserves the right to amend, alter, change or repeal any
provision contained in these Articles of Incorporation, in any manner now or
hereafter prescribed by statute, including any amendment which alters the
contract rights, as expressly set forth in the charter, of any outstanding stock
and substantially adversely affects the stockholder's rights, and all rights
conferred upon stockholders herein are granted subject to this reservation.

IN WITNESS WHEREOF, the undersigned incorporator of MERRILL LYNCH INSURED
EQUITY FUNDS, INC. hereby executes the foregoing Articles of Incorporation and
acknowledges the same to be his act and further acknowledges that, to the best
of his knowledge, the matters and facts set forth therein are true in all
material respects under penalties for perjury.

Dated this 9th day of February, 1996
/s/ Patrick S. Farrelly
---------------------------------
Patrick S. Farrelly

BY-LAWS
OF
MERRILL LYNCH INSURED EQUITY FUNDS, INC.

ARTICLE I
Offices
Section 1. Principal Office. The principal office of Merrill Lynch
Insured Equity Funds, Inc. (the "Corporation") shall be in the City of
Baltimore, State of Maryland.

Section 2. Principal Executive Office. The principal executive office
of the Corporation shall be at 800 Scudders Mill Road, Plainsboro,
New Jersey 08536.

Section 3. Other Offices. The Corporation may have such other
offices in such places as the Board of Directors may from time to
time determine.

ARTICLE II
Meetings of Stockholders

Section 1. Annual Meeting. So long as the Corporation is registered as an
investment company under the Investment Company Act of 1940, as amended (such
term to include the rules and regulations promulgated under the Investment
Company Act of 1940, as amended, unless otherwise specified or the context
otherwise requires), annual meetings of the stockholders shall not be held,
except where required to be held by the Investment Company Act of 1940, as
amended, or by the Maryland General Corporation Law or when called by the Board
of Directors or by an officer or officers authorized to take such action by the
Board of Directors. If in any calendar year the Corporation is required or
elects to hold an annual meeting, the meeting shall be held on such day, not a
Saturday, Sunday or legal holiday, as the Board of Directors or the officer or
officers calling the meeting may prescribe. At each such annual meeting, the
stockholders shall elect a Board of Directors and transact such other business
as may properly come before the meeting. The provisions of these By-Laws which
contemplate the holding of an annual meeting of stockholders shall be suspended
during any calendar year in which no annual meeting of stockholders is held.

Section 2. Special Meetings. Special meetings of the stockholders, unless
otherwise provided by law, may be called for any purpose or purposes by a
majority of the Board of Directors, the President, or on the written request of
the holders of at least 10% of the outstanding shares of capital stock of the
Corporation entitled to vote at such meeting if they comply with the applicable
requirements of the Maryland General Corporation Law.

Section 3. Place of Meetings. Meetings of the stockholders shall be held at
such place within the United States as the Board of Directors may from time to
time determine.

Section 4. Notice of Meetings; Waiver of Notice. Notice of the place, date
and time of the holding of each stockholders' meeting and, if the meeting is a
special meeting, the purpose or purposes of the special meeting, shall be given
personally or by mail, not less than ten nor more than ninety days before the

date of such meeting, to each stockholder entitled to vote at such meeting and
to each other stockholder entitled to notice of the meeting. Notice by mail
shall be deemed to be duly given when deposited in the United States mail
addressed to the stockholder at his address as it appears on the records of the
Corporation, with postage thereon prepaid.

Notice of any meeting of stockholders shall be deemed waived by any
stockholder who shall attend such meeting in person or by proxy, or who shall,
either before or after the meeting, submit a signed waiver of notice which is
filed with the records of the meeting. When a meeting is adjourned to another
time and place, unless the Board of Directors, after the adjournment, shall fix
a new record date for an adjourned meeting, or the adjournment is for more than
one hundred and twenty days after the original record date, notice of such
adjourned meeting need not be given if the time and place to which the meeting
shall be adjourned were announced at the meeting at which the adjournment is
taken.

Section 5. Quorum. At all meetings of the stockholders, the holders of
shares of stock of the Corporation entitled to cast one-third of the votes
entitled to be cast, present in person or by proxy, shall constitute a quorum
for the transaction of any business, except with respect to any matter which
requires approval by a separate vote of one or more classes of stock, in which
case the presence in person or by proxy of the holders of shares entitled to
cast one-third of the votes entitled to be cast by each class entitled to vote
as a separate class shall constitute a quorum. In the absence of a quorum no
business may be transacted, except that the holders of a majority of the shares
of stock present in person or by proxy and entitled to vote may adjourn the
meeting from time to time, without notice other than announcement thereat except
as otherwise required by these By-Laws, until the holders of the requisite
amount of shares of stock shall be so present. At any such adjourned meeting at
which a quorum may be present any business may be transacted which might have
been transacted at the meeting as originally called. The absence from any
meeting, in person or by proxy, of holders of the number of shares of stock of
the Corporation in excess of a majority thereof which may be required by the
laws of the State of Maryland, the Investment Company Act of 1940, as amended,
or other applicable statute, the Articles of Incorporation, or these By-Laws,
for action upon any given matter shall not prevent action at such meeting upon
any other matter or matters which may properly come before the meeting, if there
shall be present thereat, in person or by proxy, holders of the number of shares
of stock of the Corporation required for action in respect of such other matter
or matters.

Section 6. Organization. At each meeting of the stockholders, the Chairman
of the Board (if one has been designated by the Board), or in his absence or
inability to act, the President, or in the absence or inability to act of the
Chairman of the Board and the President, a Vice President, shall act as chairman
of the meeting. The Secretary, or in his absence or inability to act, any person
appointed by the chairman of the meeting, shall act as secretary of the meeting
and keep the minutes thereof.

Section 7. Order of Business. The order of business at all meetings
of the stockholders shall be as determined by the chairman of the meeting.

Section 8. Voting. Except as otherwise provided by statute or the Articles

of Incorporation, each holder of record of shares of stock of the Corporation
having voting power shall be entitled at each meeting of the stockholders to one
vote for every share of such stock standing in his name on the record of
stockholders of the Corporation as of the record date determined pursuant to
Section 9 of this Article or if such record date shall not have been so fixed,
then at the later of (i) the close of business on the day on which notice of the
meeting is mailed or (ii) the thirtieth day before the meeting.

Each stockholder entitled to vote at any meeting of stockholders may
authorize another person or persons to act for him by a proxy signed by such
stockholder or his attorney-in-fact. No proxy shall be valid after the
expiration of eleven months from the date thereof, unless otherwise provided in
the proxy. Every proxy shall be revocable at the pleasure of the stockholder
executing it, except in those cases where such proxy states that it is
irrevocable and where an irrevocable proxy is permitted by law. Except as
otherwise provided by statute, the Articles of Incorporation or these By-Laws,
any corporate action to be taken by vote of the stockholders (other than the
election of directors, which shall be by plurality vote) may be authorized by a
majority of the total votes cast at a meeting of stockholders by the holders of
shares present in person or represented by proxy and entitled to vote on such
action.

If a vote shall be taken on any question other than the election of
directors, which shall be by written ballot, then unless required by statute or
these By-Laws, or determined by the chairman of the meeting to be advisable, any
such vote need not be by ballot. On a vote by ballot, each ballot shall be
signed by the stockholder voting, or by his proxy, if there be such proxy, and
shall state the number of shares voted.

Section 9. Fixing of Record Date. The Board of Directors may set a record
date for the purpose of determining stockholders entitled to vote at any meeting
of the stockholders. The record date, which may not be prior to the close of
business on the day the record date is fixed, shall be not more than ninety nor
less than ten days before the date of the meeting of the stockholders. All
persons who were holders of record of shares at such time, and not others, shall
be entitled to vote at such meeting and any adjournment thereof.

Section 10. Inspectors. The Board may, in advance of any meeting of
stockholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If the inspectors shall not be so appointed or if any of
them shall fail to appear or act, the chairman of the meeting may, and on the
request of any Stockholder entitled to vote thereto shall, appoint inspectors.
Each inspector, before entering upon the discharge of his duties, may be
required to take and sign an oath to execute faithfully the duties of inspector
at such meeting with strict impartiality and according to the best of his
ability. The inspectors may be empowered to determine the number of shares
outstanding and the voting powers of each, the number of shares represented at
the meeting, the existence of a quorum, the validity and effect of proxies, and
shall receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots or consents, determine the result, and do such acts as are proper
to conduct the election or vote with fairness to all stockholders. On request of

the chairman of the meeting or any stockholder entitled to vote thereat, the
inspectors shall make a report in writing of any challenge, request or matter

determined by them and shall execute a certificate of any fact found by them. No
director or candidate for the office of director shall act as inspector of an
election of directors. Inspectors need not be stockholders.

Section 11. Consent of Stockholders in Lieu of Meeting. Except as otherwise
provided by statute or the Articles of Incorporation, any action required to be
taken at any meeting of stockholders, or any action which may be taken at any
meeting of such stockholders, may be taken without a meeting, without prior
notice and without a vote, if the following are filed with the records of
stockholders meetings: (i) a unanimous written consent which sets forth the
action and is signed by each stockholder entitled to vote on the matter and (ii)
a written waiver of any right to dissent signed by each stockholder entitled to
notice of the meeting but not entitled to vote thereat.

ARTICLE III
Board of Directors

Section 1. General Powers. Except as otherwise provided in the Articles of
Incorporation, the business and affairs of the Corporation shall be managed
under the direction of the Board of Directors. All powers of the Corporation may
be exercised by or under authority of the Board of Directors except as conferred
on or reserved to the stockholders by law or by the Articles of Incorporation or
these By-Laws.

Section 2. Number of Directors. The number of directors shall be fixed from
time to time by resolution of the Board of Directors adopted by a majority of
the entire Board of Directors; provided, however, that the number of directors
shall in no event be less than three nor more than fifteen. Any vacancy created
by an increase in Directors may be filled in accordance with Section 6 of this
Article III. No reduction in the number of directors shall have the effect of
removing any director from office prior to the expiration of his term unless
such director is specifically removed pursuant to Section 5 of this Article III
at the time of such decrease. Directors need not be stockholders.

Section 3. Election and Term of Directors. Directors shall be elected
annually at a meeting of stockholders held for that purpose; provided, however,
that if no meeting of the stockholders of the Corporation is required to be held
in a particular year pursuant to Section 1 of Article II of these By-Laws,
directors shall be elected at the next meeting held. The term of office of each
director shall be from the time of his election and qualification until the
election of directors next succeeding his election and until his successor shall
have been elected and shall have qualified, or until his death, or until he
shall have resigned or until December 31 of the year in which he shall have
reached seventy-two years of age, or until he shall have been removed as
hereinafter provided in these By-Laws, or as otherwise provided by statute or
the Articles of Incorporation.

Section 4. Resignation. A director of the Corporation may resign at any
time by giving written notice of his resignation to the Board or the Chairman of
the Board or the President or the Secretary. Any such resignation shall take

effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt; and,
unless otherwise specified therein, the acceptance of such resignation shall not

be necessary to make it effective.

Section 5. Removal of Directors. Any director of the Corporation may
be removed by the stockholders by a vote of a majority of the votes
entitled to be cast for the election of directors.

Section 6. Vacancies. Any vacancies in the Board, whether arising from
death, resignation, removal, an increase in the number of directors or any other
cause, may be filled by a vote of the majority of the Board of Directors then in
office even though such majority is less than a quorum, provided that no
vacancies shall be filled by action of the remaining directors, if after the
filling of said vacancy or vacancies, less than two-thirds of the directors then
holding office shall have been elected by the stockholders of the Corporation.
In the event that at any time there is a vacancy in any office of a director
which vacancy may not be filled by the remaining directors, a special meeting of
the stockholders shall be held as promptly as possible and in any event within
sixty days, for the purpose of filling said vacancy or vacancies.

Section 7. Place of Meetings. Meetings of the Board may be held at such
place as the Board may from time to time determine or as shall be specified in
the notice of such meeting.

Section 8. Regular Meetings. Regular meetings of the Board may be
held without notice at such time and place as may be determined by
the Board of Directors.

Section 9. Special Meetings. Special meetings of the Board may be
called by two or more directors of the Corporation or by the Chairman
of the Board or the President.

Section 10. Telephone Meetings. Members of the Board of Directors or of any
committee thereof may participate in a meeting by means of a conference
telephone or similar communications equipment if all persons participating in
the meeting can hear each other at the same time. Subject to the provisions of
the Investment Company Act of 1940, as amended, participation in a meeting by
these means constitutes presence in person at the meeting.

Section 11. Notice of Special Meetings. Notice of each special meeting of
the Board shall be given by the Secretary as hereinafter provided, in which
notice shall be stated the time and place of the meeting. Notice of each such
meeting shall be delivered to each director, either personally or by telephone
or any standard form of telecommunication, at least twenty-four hours before the
time at which such meeting is to be held, or by first-class mail, postage
prepaid, addressed to him at his residence or usual place of business, at least
three days before the day on which such meeting is to be held.

Section 12. Waiver of Notice of Meetings. Notice of any special meeting
need not be given to any director who shall, either before or after the meeting,
sign a written waiver of notice which is filed with the records of the meeting
or who shall attend such meeting. Except as otherwise specifically required by

these By-Laws, a notice or waiver of notice of any meeting need not state the
purposes of such meeting.

Section 13. Quorum and Voting. One-third, but not less than two, of the

members of the entire Board shall be present in person at any meeting of the
Board in order to constitute a quorum for the transaction of business at such
meeting, and except as otherwise expressly required by statute, the Articles of
Incorporation, these By-Laws, the Investment Company Act of 1940, as amended, or
other applicable statute, the act of a majority of the directors present at any
meeting at which a quorum is present shall be the act of the Board. In the
absence of a quorum at any meeting of the Board, a majority of the directors
present thereat may adjourn such meeting to another time and place until a
quorum shall be present thereat. Notice of the time and place of any such
adjourned meeting shall be given to the directors who were not present at the
time of the adjournment and, unless such time and place were announced at the
meeting at which the adjournment was taken, to the other directors. At any
adjourned meeting at which a quorum is present, any business may be transacted
which might have been transacted at the meeting as originally called.

Section 14. Organization. The Board may, by resolution adopted by a
majority of the entire Board, designate a Chairman of the Board, who shall
preside at each meeting of the Board. In the absence or inability of the
Chairman of the Board to preside at a meeting, the President or, in his absence
or inability to act, another director chosen by a majority of the directors
present, shall act as chairman of the meeting and preside thereat. The Secretary
(or, in his absence or inability to act, any person appointed by the Chairman)
shall act as secretary of the meeting and keep the minutes thereof.

Section 15. Written Consent of Directors in Lieu of a Meeting. Subject to
the provisions of the Investment Company Act of 1940, as amended, any action
required or permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting if all members of the Board
or committee, as the case may be, consent thereto in writing, and the writings
or writing are filed with the minutes of the proceedings of the Board or
committee.

Section 16. Compensation. Directors may receive compensation for
services to the Corporation in their capacities as directors or otherwise
in such manner and in such amounts as may be fixed from time to time
by the Board.

Section 17. Investment Policies. It shall be the duty of the Board of
Directors to direct that the purchase, sale, retention and disposal of
securities and the other investment practices of the Corporation are at all
times consistent with the investment policies and restrictions with respect to
securities investments and otherwise of the Corporation, as recited in the
current Prospectus and Statement of Additional Information of the Corporation,
as filed from time to time with the Securities and Exchange Commission and as
required by the Investment Company Act of 1940, as amended. The Board however,
may delegate the duty of management of the assets and the administration of its
day to day operations to an individual or corporate management company and/or
investment adviser pursuant to a written contract or contracts which have
obtained the requisite approvals, including the requisite approvals of renewals

thereof, of the Board of Directors and/or the stockholders of the Corporation in
accordance with the provisions of the Investment Company Act of 1940, as
amended.

ARTICLE IV
Committees

Section 1. Executive Committee. The Board may, by resolution adopted by a
majority of the entire board, designate an Executive Committee consisting of two
or more of the directors of the corporation, which committee shall have and may
exercise all the powers and authority of the Board with respect to all matters
other than:

(a) the submission to stockholders of any action requiring
authorization of stockholders pursuant to statute or the Articles of
Incorporation;

(b) the filling of vacancies on the Board of Directors;

(c) the fixing of compensation of the directors for serving on
the Board or on any committee of the Board, including the Executive
Committee;

(d) the approval or termination of any contract with an investment adviser
or principal underwriter, as such terms are defined in the Investment Company
Act of 1940, as amended, or the taking of any other action required to be taken
by the Board of Directors by the Investment Company Act of 1940, as amended;

(e) the amendment or repeal of these By-Laws or the adoption of
new By-Laws;

(f) the amendment or repeal of any resolution of the Board which
by its terms may be amended or repealed only by the Board;

(g) the declaration of dividends and the issuance of capital stock
of the Corporation; and

(h) the approval of any merger or share exchange which does not
require stockholder approval.

The Executive Committee shall keep written minutes of its proceedings and
shall report such minutes to the Board. All such proceedings shall be subject to
revision or alteration by the Board; provided, however, that third parties shall
not be prejudiced by such revision or alteration.

Section 2. Other Committees of the Board. The Board of Directors may from
time to time, by resolution adopted by a majority of the whole Board, designate
one or more other committees of the Board, each such committee to consist of two
or more directors and to have such powers and duties as the Board of Directors
may, by resolution, prescribe.

Section 3. General. One-third, but not less than two, of the members of any

committee shall be present in person at any meeting of such committee in order
to constitute a quorum for the transaction of business at such meeting, and the
act of a majority present shall be the act of such committee. The Board may
designate a chairman of any committee and such chairman or any two members of
any committee may fix the time and place of its meetings unless the Board shall
otherwise provide. In the absence or disqualification of any member of any

committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. The Board shall
have the power at any time to change the membership of any committee, to fill
all vacancies, to designate alternate members to replace any absent or
disqualified member, or to dissolve any such committee. Nothing herein shall be
deemed to prevent the Board from appointing one or more committees consisting in
whole or in part of persons who are not directors of the Corporation; provided,
however, that no such committee shall have or may exercise any authority or
power of the Board in the management of the business or affairs of the
Corporation, except as may be prescribed by the Board.

ARTICLE V
Officers, Agents and Employees

Section 1. Number, Qualification, Election and Tenure. The officers of the
Corporation shall be a President, a Secretary and a Treasurer, each of whom
shall be elected by the Board of Directors. The Board of Directors may elect or
appoint one or more Vice Presidents and may also appoint such other officers,
agents and employees as it may deem necessary or proper. Any two or more offices
may be held by the same person, except the offices of President and Vice
President, but no officer shall execute, acknowledge or verify any instrument in
more than one capacity. Such officers shall be elected by the Board of Directors
each year at a meeting of the Board of Directors, each to hold office for the
ensuing year and until his successor shall have been duly elected and shall have
qualified, or until his death, or until he shall have resigned, or have been
removed, as hereinafter provided in these By-Laws. The Board may from time to
time elect, or delegate to the President the power to appoint, such officers
(including one or more Assistant Vice Presidents, one or more Assistant
Treasurers and one or more Assistant Secretaries) and such agents, as may be
necessary or desirable for the business of the Corporation. Such officers and
agents shall have such duties and shall hold their offices for such terms as may
be prescribed by the Board or by the appointing authority.

Section 2. Resignations. Any officer of the Corporation may resign at any
time by giving written notice of resignation to the Board, the Chairman of the
Board, the President or the Secretary. Any such resignation shall take effect at
the time specified therein or, if the time when it shall become effective shall
not be specified therein, immediately upon its receipt; and, unless otherwise
specified therein, the acceptance of such resignation shall be necessary to make
it effective.

Section 3. Removal of Officer, Agent or Employee. Any officer, agent or
employee of the Corporation may be removed by the Board of Directors with or
without cause at any time, and the Board may delegate such power of removal as

to agents and employees not elected or appointed by the Board of Directors. Such
removal shall be without prejudice to such person's contract rights, if any, but
the appointment of any person as an officer, agent or employee of the
Corporation shall not of itself create contract rights.

Section 4. Vacancies. A vacancy in any office, whether arising from death,
resignation, removal or any other cause, may be filled for the unexpired portion

of the term of the office which shall be vacant, in the manner prescribed in
these By-Laws for the regular election or appointment to such office.

Section 5. Compensation. The compensation of the officers of the
Corporation shall be fixed by the Board of Directors, but this power may
be delegated to any officer in respect of other officers under his control.

Section 6. Bonds or Other Security. If required by the Board, any officer,
agent or employee of the Corporation shall give a bond or other security for the
faithful performance of his duties, in such amount and with such surety or
sureties as the Board may require.

Section 7. President. The President shall be the chief executive officer of
the Corporation. In the absence of the Chairman of the Board (or if there be
none), he shall preside at all meetings of the stockholders and of the Board
Directors. He shall have, subject to the control of the Board of Directors,
general charge of the business and affairs of the Corporation. He may employ and
discharge employees and agents of the Corporation, except such as shall be
appointed by the Board, and he may delegate these powers.

Section 8. Vice President. Each Vice President shall have such powers
and perform such duties as the Board of Directors or the President may
from time to time prescribe.

Section 9. Treasurer. The Treasurer shall

(a) have charge and custody of, and be responsible for, all the funds and
securities of the Corporation, except those which the Corporation has placed in
the custody of a bank or trust company or member of a national securities
exchange (as that term is defined in the Securities Exchange Act of 1934, as
amended) pursuant to a written agreement designating such bank or trust company
or member of a national securities exchange as custodian of the property of the
Corporation;

(b) keep full and accurate accounts of receipts and disbursements
in books belonging to the Corporation;

(d) receive, and give receipts for, moneys due and payable,
to the Corporation from any source whatsoever;

(e) disburse the funds of the Corporation and supervise the
investment of its funds as ordered or authorized by the Board, taking
proper vouchers therefor; and

(f) in general, perform all the duties incident to the office of Treasurer
and such other duties as from time to time may be assigned to him by the Board
or the President.

Section 10. Secretary. The Secretary shall

(a) keep or cause to be kept in one or more books provided for the

purpose, the minutes of all meetings of the Board, the committees of
the Board and the stockholders;

(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;

(c) be custodian of the records and the seal of the Corporation and affix
and attest the seal to all stock certificates of the Corporation (unless the
seal of the Corporation on such certificates shall be a facsimile, as
hereinafter provided) and affix and attest the seal to all other documents to be
executed on behalf of the Corporation under its seal;

(d) see that the books, reports, statements, certificates and other
documents and records required by law to be kept and filed are properly kept and
filed; and

(e) in general, perform all the duties incident to the office of Secretary
and such other duties as from time to time may be assigned to him by the Board
or the President.

Section 11. Delegation of Duties. In case of the absence of any officer of
the Corporation, or for any other reason that the Board may deem sufficient, the
Board may confer for the time being the powers or duties, or any of them, of
such officer upon any other officer or upon any director.

ARTICLE VI
Indemnification

Each officer and director of the Corporation shall be indemnified by the
Corporation to the full extent permitted under the Maryland General Corporation
Law, except that such indemnity shall not protect any such person against any
liability to the Corporation or any stockholder thereof to which such person
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office. Absent a court determination that an officer or director seeking
indemnification was not liable on the merits or guilty of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office, the decision by the Corporation to indemnify such person
must be based upon the reasonable determination by special legal counsel in a
written opinion or the vote of a majority of a quorum of the directors who are
neither "interested persons," as defined in Section 2(a)(19) of the Investment
Company Act of 1940, as amended, nor parties to the proceeding ("non-party
independent directors"), after review of the facts, that such officer or
director is not guilty of willful misfeasance, bad faith, gross negligence or

reckless disregard of the duties involved in the conduct of his office.

Each officer and director of the Corporation claiming indemnification
within the scope of this Article VI shall be entitled to advances from the
Corporation for payment of the reasonable expenses incurred by him in connection
with proceedings to which he is a party in the manner and to the full extent
permitted under the Maryland General Corporation Law without a preliminary
determination as to his or her ultimate entitlement to indemnification (except
as set forth below); provided, however, that the person seeking indemnification

shall provide to the Corporation a written affirmation of his good faith belief
that the standard of conduct necessary for indemnification by the Corporation
has been met and a written undertaking to repay any such advance, if it should
ultimately be determined that the standard of conduct has not been met, and
provided further that at least one of the following additional conditions is
met: (a) the person seeking indemnification shall provide a security in form and
amount acceptable to the Corporation for his undertaking; (b) the Corporation is
insured against losses arising by reason of the advance; (c) a majority of a
quorum of non-party independent directors, or independent legal counsel in a
written opinion, shall determine, based on a review of facts readily available
to the Corporation at the time the advance is proposed to be made, that there is
reason to believe that the person seeking indemnification will ultimately be
found to be entitled to indemnification.

The Corporation may purchase insurance on behalf of an officer or director
protecting such person to the full extent permitted under the General Laws of
the State of Maryland, from liability arising from his activities as officer or
director of the Corporation. The Corporation, however, may not purchase
insurance on behalf of any officer or director of the Corporation that protects
or purports to protect such person from liability to the Corporation or to its
stockholders to which such officer or director would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.

The Corporation may indemnify, make advances or purchase insurance to the
extent provided in this Article VI on behalf of an employee or agent who is not
an officer or director of the Corporation.

ARTICLE VII
Capital Stock

Section 1. Stock Certificates. Each holder of stock of the Corporation
shall be entitled upon request to have a certificate or certificates, in such
form as shall be approved by the Board, representing the number of shares of
stock of the Corporation owned by him, provided, however, that certificates for
fractional shares will not be delivered in any case. The certificates
representing shares of stock shall be signed by or in the name of the
Corporation by the Chairman, President or a Vice President and by the Secretary
or an Assistant Secretary or the Treasurer or an Assistant Treasurer and sealed
with the seal of the Corporation. Any or all of the signatures or the seal on
the certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar

before such certificate shall be issued, it may be issued by the Corporation
with the same effect as if such officer, transfer agent or registrar were still
in office at the date of issue.

Section 2. Books of Account and Record of Stockholders. There shall be kept
at the principal executive office of the Corporation correct and complete books
and records of account of all the business and transactions of the Corporation.
There shall be made available upon request of any stockholder, in accordance
with Maryland law, a record containing the number of shares of stock issued
during a specified period not to exceed twelve months and the consideration

received by the Corporation for each such share.

Section 3. Transfers of Shares. Transfers of shares of stock of the
Corporation shall be made on the stock records of the Corporation only by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a transfer agent or
transfer clerk, and on surrender of the certificate or certificates, if issued,
for such shares properly endorsed or accompanied by a duly executed stock
transfer power and the payment of all taxes thereon. Except as otherwise
provided by law, the Corporation shall be entitled to recognize the exclusive
right of a person in whose name any share or shares stand on the record of
stockholders as the owner of such share or shares for all purposes, including,
without limitation, the rights to receive dividends or other distributions, and
to vote as such owner, and the Corporation shall not be bound to recognize any
equitable or legal claim to or interest in any such share or shares on the part
of any other person.

Section 4. Regulations. The Board may make such additional rules and
regulations, not inconsistent with these By-Laws, as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation. It may appoint, or authorize any officer or officers
to appoint, one or more transfer agents or one or more transfer clerks and one
or more registrars and may require all certificates for shares of stock to bear
the signature or signatures of any of them.

Section 5. Lost, Destroyed or Mutilated Certificates. The holder of any
certificates representing shares of stock of the Corporation shall immediately
notify the Corporation of any loss, destruction or mutilation of such
certificate, and the Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it which the owner thereof shall
allege to have been lost or destroyed or which shall have been mutilated, and
the Board may, in its discretion, require such owner or his legal
representatives to give to the Corporation a bond in such sum, limited or
unlimited, and in such form and with such surety or sureties, as the Board in
its absolute discretion shall determine, to indemnify the Corporation against
any claim that may be made against it on account of the alleged loss or
destruction of any such certificate, or issuance of a new certificate. Anything
herein to the contrary notwithstanding, the Board, in its absolute discretion,
may refuse to issue any such new certificate, except pursuant to legal
proceedings under the laws of the State of Maryland.

Section 6. Fixing of a Record Date for Dividends and Distributions. The
Board may fix, in advance, a date not more than ninety days preceding the date

fixed for the payment of any dividend or the making of any distribution or the
allotment of rights to subscribe for securities of the Corporation, or for the
delivery of evidences of rights or evidences of interests arising out of any
change, conversion or exchange of common stock or other securities, as the
record date for the determination of the stockholders entitled to receive any
such dividend, distribution, allotment, rights or interests, and in such case
only the stockholders of record at the time so fixed shall be entitled to
receive such dividend, distribution, allotment, rights or interests.

Section 7. Information to Stockholders and Others. Any stockholder of the
Corporation or his agent may inspect and copy during usual business hours the

Corporation's By-Laws, minutes of the proceedings of its stockholders, annual
statements of its affairs, and voting trust agreements on file at its principal
office.

ARTICLE VIII
Seal

The seal of the Corporation shall be circular in form and shall bear, in
addition to any other emblem or device approved by the Board of Directors, the
name of the Corporation, the year of its incorporation and the words "Corporate
Seal" and "Maryland." Said seal may be used by causing it or a facsimile thereof
to be impressed or affixed or in any other manner reproduced.

ARTICLE IX
Fiscal Year

Unless otherwise determined by the Board, the fiscal year of the
Corporation shall be as determined by the Board of Directors from time to time.

ARTICLE X
Depositories and Custodians

Section 1. Depositories. The funds of the Corporation shall be
deposited with such banks or other depositories as the Board of Directors
of the Corporation may from time to time determine.

Section 2. Custodians. All securities and other investments shall be
deposited in the safe keeping of such banks or other companies as the Board of
Directors of the Corporation may from time to time determine. Every arrangement
entered into with any bank or other company for the safe keeping of the
securities and investments of the Corporation shall contain provisions complying
with the Investment Company Act of 1940, as amended, and the general rules and
regulations thereunder.

ARTICLE XI
Execution of Instruments

Section 1. Checks, Notes, Drafts, etc. Checks, notes, drafts, acceptances,

bills of exchange and other orders or obligations for the payment of money shall
be signed by such officer or officers or person or persons as the Board of
Directors by resolution shall from time to time designate.

Section 2. Sale or Transfer of Securities. Stock certificates, bonds or
other securities at any time owned by the Corporation may be held on behalf of
the Corporation or sold, transferred or otherwise disposed of subject to any
limits imposed by these By-Laws and pursuant to authorization by the Board and,
when so authorized to be held on behalf of the Corporation or sold, transferred
or otherwise disposed of, may be transferred from the name of the Corporation by
the signature of the President or a Vice President or the Treasurer or pursuant
to any procedure approved by the Board of Directors, subject to applicable law.

ARTICLE XII
Independent Public Accountants

The firm of independent public accountants which shall sign or certify the
financial statements of the Corporation which are filed with the Securities and
Exchange Commission shall be selected annually by the Board of Directors and, if
required by the provisions of the Investment Company Act of 1940, as amended,
ratified by the stockholders.

ARTICLE XIII
Annual Statement

The books of account of the Corporation shall be examined by an independent
firm of public accountants at the close of each annual period of the Corporation
and at such other times as may be directed by the Board. A report to the
stockholders based upon each such examination shall be mailed to each
stockholder of the Corporation of record on such date with respect to each
report as may be determined by the Board, at his address as the same appears on
the books of the Corporation. Such annual statement shall also be available at
the annual meeting of stockholders, if any, and, within 20 days after the
meeting (or, in the absence of an annual meeting, within 120 days after the end
of the fiscal year), be placed on file at the Corporation's principal office.
Each such report shall show the assets and liabilities of the Corporation as of
the close of the annual or quarterly period covered by the report and the
securities in which the funds of the Corporation were then invested. Such report
shall also show the Corporation's income and expenses for the period from the
end of the Corporation's preceding fiscal year to the close of the annual or
quarterly period covered by the report and any other information required by the
Investment Company Act of 1940, as amended, and shall set forth such other
matters as the Board or such firm of independent public accountants shall
determine.

ARTICLE XIV
Amendments

These By-Laws or any of them may be amended, altered or repealed by the
Board of Directors. The stockholders shall have no power to make, amend, alter

or repeal By-Laws.