MERRILL LYNCH INDEX FUNDS INC, N-1A EL, 1996-10-31

MERRILL LYNCH INDEX FUNDS INC
N-1A EL, 1996-10-31

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<PAGE>
As filed with the Securities and Exchange Commission on October 31, 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 Index 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, L.P.
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.

Merrill Lynch Index Trust has also executed this Registration Statement

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.

================================================================================

<PAGE>
MERRILL LYNCH INDEX FUNDS, INC.
REGISTRATION STATEMENT ON FORM N-1A

CROSS REFERENCE SHEET
(as required by Rule 481(a))
<TABLE>
<CAPTION>
N-1A
Item No. Location in Prospectus
- -------- ----------------------
Part A
- ------
<S> <C> <C>
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 Objectives 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
<CAPTION>
Part B
- ------
<S> <C> <C>
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 Objectives and Policies
Item 14. Management of the Fund........................... Management of the Funds
Item 15. Control Persons and Principal Holders of
Securities..................................... Not Applicable
Item 16. Investment Advisory and Other Services........... Management of the Funds;
Purchase of Shares; Additional
Information
Item 17. Brokerage Allocation ............................ 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
</TABLE>

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

<PAGE>
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 - October __, 1996

PROSPECTUS

_____________, 1996

Merrill Lynch Index Funds, Inc.
P.O. Box 9011, Princeton, New Jersey 08543-9011 Phone No. (609) 282-2800

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

Merrill Lynch Index Funds, Inc. (the "Corporation") currently consists of
four portfolios or series: Merrill Lynch S&P 500 Index Fund ("S&P 500 Index
Fund"), Merrill Lynch Small Cap Index Fund ("Small Cap Index Fund"), Merrill
Lynch Aggregate Bond Index Fund ("Aggregate Bond Index Fund") and Merrill Lynch
International Index Fund ("International Index Fund")(collectively, the "Funds,"
and each, a "Fund"). Each Fund is a non-diversified mutual fund whose investment
objective is to provide investment results that, before expenses, seek to
replicate the total return (i.e., the combination of capital changes and income)
of a specified securities index. Each Fund will seek to achieve its objective by
investing all of its assets in the series (collectively, the "Series," and each,
a "Series") of Merrill Lynch Index Trust (the "Trust") that has the same
investment objective as the Fund. Each Fund's investment experience will
correspond directly to the investment experience of the respective Series in
which it invests. There can be no assurance that the investment objectives of
the Funds will be achieved. For more information on the Funds' and the Series'
investment objectives and policies, see "Investment Objectives and Policies" on
page __.

Each Fund offers two classes of shares, Class A shares and Class D shares.
Class A shares of each Fund are offered at a price equal to the next determined
net asset value per share without the imposition of any front-end or deferred
sales charge, and are not subject to any ongoing account maintenance or
distribution fee. Distribution of Class A shares of each Fund is limited to
certain eligible investors. Class D shares of each Fund are offered at a price
equal to the next determined net asset value per share without the imposition of
any front-end or deferred sales charge and are not subject to any ongoing
distribution fee, but are subject to an ongoing account maintenance fee at an
annual rate of 0.25% of average daily net assets.

Shares may be purchased directly from Merrill Lynch Funds Distributor, Inc.
(the "Distributor"), P.O. Box 9081, Princeton, New Jersey 08543-9081 ((609)
282-2800), which has entered into a dealer agreement with Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch"). Shareholders may redeem their
shares at any time at the next determined net asset value. The minimum initial
purchase is $1,000 and the minimum subsequent purchase is $50, except that for
retirement plans the minimum initial investment is $100 and the minimum
subsequent purchase is $1. Merrill Lynch may charge its customers a processing
fee (presently $4.85) for confirming purchases and repurchases. Purchases and
redemptions directly through the Funds' transfer agent are not subject to
processing fees. See "Purchase of Shares" and "Redemption of Shares."

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

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 Funds that
is relevant to making an investment in the Funds. This Prospectus should be
retained for future reference. A statement containing additional information
about the Funds, 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 Funds at the above
telephone number or address. The Statement of Additional Information is hereby
incorporated by reference into this Prospectus.

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

Merrill Lynch Asset Management, L.P.-Administrator
Merrill Lynch Funds Distributor, Inc.-Distributor

<PAGE>
FEE TABLE

The following table provides a summary of estimated expenses, both recurring
and non-recurring, relating to shares of the Fund. For purposes of this table,
expenses of the Series in which each Fund invests are treated as if they were
expenses of that Fund, since that is their practical effect. It is expected that
there will be little duplication of expenses by the Funds and the Series, and
that, accordingly, the combined per share expenses of each Fund and
corresponding Series should not be significantly greater than the expenses of
each Fund alone would be if, instead of investing in shares of the Series, the
Fund retained an investment adviser and invested directly in the types of
securities held by the Series.

<TABLE>
<CAPTION>
Class A Shares

S&P 500 Small Cap Aggregate Bond International
Index Fund Index Fund Index Fund Index Fund
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Charge Imposed on Purchases........ None None None None
Sales Charge Imposed on Dividend Reinvestment.... None None None None
Deferred Sales Charge............................ None None None None
Redemption Fee .................................. None None None None
Exchange Fee..................................... None None None None
Annual Fund Operating Expenses (as a percentage
of average net assets):
Investment Advisory Fees paid by the Series (a).. 0.__% 0.__% 0.__% 0.__%
Other expenses of the Series .................... 0.__% 0.__% 0.__% 0.__%
Total Operating Expenses of the Series ...... 0.__% 0.__% 0.__% 0.__%

Administrative Fees(b)............................ 0.__% 0.__% 0.__% 0.__%
Other Expenses of the Funds
Custodian Fees................................. % % % %
Other.......................................... % % % %
----- ----- ----- -----
Total Other Fund Expenses.................... % % % %
----- ----- ----- -----
Total Operating Expenses of the Funds ......... % % % %
===== ===== ===== =====
</TABLE>

<TABLE>
<CAPTION>
Class D Shares

Administrative Fees(b) ........................... 0.__% 0.__% 0.__% 0.__%
Rule 12b-1 Account Maintenance Fees............... 0.__% 0.__% 0.__% 0.__%
Other Expenses of the Fund
Custodian Fees................................. % % % %
Other.......................................... % % % %
----- ----- ----- -----
Total Other Fund Expenses.................... % % % %
----- ----- ----- -----
Total Operating Expenses of the Funds ......... % % % %
===== ===== ===== =====
</TABLE>
- ----------
(a) See "Management of the Funds--Expenses" --page __.
(b) See "Management of the Funds--Expenses" --page __.
(c) See "Management of the Funds--Transfer Agency Services" --page __.

<PAGE>
Example

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:

Class A Shares
S&P 500 Small Cap Aggregate Bond International
Index Fund Index Fund Index Fund Index Fund
---------- ---------- ---------- ----------
One year.........
Three years......

Class D Shares
S&P 500 Small Cap Aggregate Bond International
Index Fund Index Fund Index Fund Index Fund
---------- ---------- ---------- ----------
One year.........
Three years......

The foregoing Fee Table is intended to assist investors in understanding the
costs and expenses that a shareholder in each class of each Fund will bear
directly or indirectly. The expenses set forth under "Other Expenses" are based
on estimated amounts through the end of a Series' and a 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. Merrill Lynch may charge its
customers a processing fee (presently $4.85) for confirming purchases and
repurchases. Purchases and redemptions directly through the Funds' Transfer
Agent are not subject to the processing fee. See "Purchase of Shares" and
"Redemption of Shares."

<PAGE>
INVESTMENT OBJECTIVES AND POLICIES

The Corporation currently consists of four series: Merrill Lynch S&P 500
Index Fund, Merrill Lynch Small Cap Index Fund, Merrill Lynch Aggregate Bond
Index Fund and Merrill Lynch International Index Fund. Each Fund is a
non-diversified mutual fund whose investment objective is to provide investment
results that, before expenses, seek to replicate the total return (i.e., the
combination of capital changes and income) of a specified securities index. Each
Fund will seek to achieve its objective by investing all of its assets in the
series of Merrill Lynch Index Trust that has the same investment objective as
the Fund. Each Fund's investment experience will correspond directly to the
investment experience of the respective Series in which it invests. There can be
no assurance that the investment objectives of the Funds will be achieved.

Structure of the Funds and the Series

Unlike many other mutual funds, which directly acquire and manage their own
portfolio securities, each Fund seeks to achieve its investment objective by
investing all of its assets in the corresponding Series of the Trust. Each
Series is a separate series of a registered investment company with the same
investment objective as its corresponding investing Fund. Because the Funds will
not invest in any securities other than shares of the respective Series,
investors in the Funds will acquire an indirect interest in the Series. The
Funds' and Series' investment objectives cannot be changed without shareholder
approval.

In addition to selling their shares to the Funds, the Series may sell their
shares to other mutual funds and institutional investors. All investors in the
Series invest on the same terms and conditions and pay a proportionate share of
the Series' expenses. However, other investors in the Series may sell their
shares at prices different from those of the Funds as a result of the imposition
of sales charges or different operating expenses. Therefore, investors in the
Funds should be aware that these differences may result in different returns
experienced by the various entities investing in the Series. Information
concerning other holders of shares of the Series is available from the
Administrator by calling 1-800-_____.

The Board of Directors of the Corporation believes that this structure may
enable the Funds to benefit from certain economies of scale. This view is based
on the premise that (i) certain of the expenses of managing an investment
portfolio that seeks to replicate the total return of a securities index are
relatively fixed so that a larger investment portfolio may achieve a lower ratio
of operating expenses to net assets and (ii) a larger investment portfolio may
be able to reduce certain securities transaction costs to the extent that
contributions to and redemptions from the investment portfolio from different
investing entities may offset each other and thus produce a lower net cash flow.

A Fund's investment in a Series may be withdrawn by the Board of Directors
at any time if the Board determines that it is in the best interests of the Fund
to do so. If any such withdrawal were made, the Board would consider what action
might be taken, including the investment of all of the assets of the Fund in
another pooled investment entity having the same investment objective as the
Fund or the retaining of an investment adviser to manage the Fund's assets

directly in accordance with the investment objective of the Fund. The inability
to find another such pooled entity or equivalent investment management could
have a significant impact on the investments of the Fund's shareholders.

Investors in the Funds should be aware that smaller entities investing in
the Series may be materially affected by the actions of larger entities
investing in the Series. For example, investors in the Series holding larger
positions than the Funds could have greater voting power and effective voting
control over the operations of the Series. Changes in the investment objective,
policies or restrictions of a Series might cause a Fund to have difficulty in
finding a substitute Series or equivalent investment management and might cause
it to redeem its shares of the Series, and such a redemption could result in a
distribution in kind of portfolio securities held by the Series, instead of
cash. If securities were distributed to a Fund, and the Fund desired to convert
the securities to cash, it would incur brokerage, tax or other charges in
converting securities to cash. In addition, such a distribution in kind might
result in a less diversified portfolio of investments of a Fund. These
possibilities also exist for traditionally structured funds which have large or
institutional investors who may withdraw from the fund.

4
<PAGE>
Whenever a Fund is requested to vote on matters pertaining to a Series, the
Fund will hold a meeting of shareholders, and the Fund's votes with respect to
the Series will all be cast in the same proportion as the shares of the Fund for
which voting instructions are received.

Merrill Lynch S&P 500 Index Fund

The investment objective of the Merrill Lynch S&P 500 Index Fund is to
provide investment results that, before expenses, seek to replicate the total
return (i.e., the combination of capital changes and income) of the Standard &
Poor's(R) 500 Composite Stock Price Index (the "S&P 500"). There can be no
assurance that the investment objective of the Fund will be achieved.

The Fund seeks to achieve its investment objective by investing all of its
assets in the Merrill Lynch S&P 500 Index Series of the Trust, which has the
same investment objective as the Fund. The following is a description of the
investment policies of the Series.

In seeking to replicate the total return of the S&P 500, Merrill Lynch Asset
Management, L.P. ("MLAM" or the "Manager") generally will allocate the Series'
investments among common stocks in approximately the same weightings as the
index. In addition, the Manager may use options and futures contracts and other
types of financial instruments relating to all or a portion of the index. The
Series may also engage in securities lending and index arbitrage. See "Other
Types of Investments and Investment Techniques."

The S&P 500 is composed of the common stocks of 500 large capitalization
companies from various industrial sectors, most of which are listed on the New
York Stock Exchange Inc. A company's stock market capitalization is the total
market value of its outstanding shares. The S&P 500 represents a significant
portion of the market value of all common stocks publicly traded in the United
States.

Merrill Lynch Small Cap Index Fund

The investment objective of the Merrill Lynch Small Cap Index Fund is to
provide investment results that, before expenses, seek to replicate the total
return (i.e., the combination of capital changes and income) of the Russell 2000
Index (the "Russell 2000"). There can be no assurance that the investment
objective of the Fund will be achieved.

The Fund seeks to achieve its investment objective by investing all of its
assets in the Merrill Lynch Small Cap Index Series of the Trust, which has the
same investment objective as the Fund. The following is a description of the
investment policies of the Series.

In seeking to replicate the total return of the Russell 2000, the Manager
may not allocate the Series' investments among all of the common stocks in the
index, or in the same weightings as the index. Instead, the Series may invest in
a statistically selected sample of the stocks included in the Russell 2000 and
other types of financial instruments. The Manager may use options and futures
contracts and other types of financial instruments relating to all or a portion
of the index. The investments to be included in the Series will be selected with
the objective of reducing the selected investment portfolio's deviation from the
performance of the Russell 2000 (this deviation is referred to as "tracking
error"). The Series may also engage in securities lending and index arbitrage.
See "Other Types of Investments and Investment Techniques."

The Russell 2000 is composed of approximately 2,000 smaller-capitalization
common stocks from various industrial sectors. A company's stock market
capitalization is the total market value of its outstanding shares.

Merrill Lynch Aggregate Bond Index Fund

The investment objective of the Merrill Lynch Aggregate Bond Index Fund is
to provide investment results that, before expenses, seek to replicate the total
return (i.e., the combination of capital changes and income) of the Lehman
Brothers Aggregate Bond Index (the "Aggregate Bond Index"). There can be no
assurance that the investment objective of the Fund will be achieved.

5
<PAGE>
The Fund seeks to achieve its investment objective by investing all of its
assets in the Merrill Lynch Aggregate Bond Index Series of the Trust, which has
the same investment objective as the Fund. The following is a description of the
investment policies of the Series.

In seeking to replicate the total return of the Aggregate Bond Index, the
Manager may not allocate the Series' investments among all of the fixed-income
securities in the index, or in the same weightings as the index. Instead, the
Series may invest in a statistically selected sample of fixed-income securities
and other types of financial instruments. The Manager may use options and
futures contracts and other types of financial instruments relating to all or a
portion of the index. The investments to be included in the Series will be
selected with the objective of reducing the selected investment portfolio's
deviation from the performance of the Aggregate Bond Index (tracking error). The

Series may, from time to time, substitute a different type of bond for one
included in the index. Substitution may result in levels of interest rate,
credit or prepayment risks that differ from the levels of risks on the
securities composing the Aggregate Bond Index. See "Risk Factors -- Investments
in Fixed-Income Securities." The Series may also engage in securities lending
and index arbitrage. See "Other Types of Investments and Investment Techniques."

The Aggregate Bond Index is composed primarily of dollar-denominated
investment grade fixed-income securities in the following classes: U.S. Treasury
and agency securities, U.S. corporate bonds, foreign corporate bonds, foreign
sovereign debt (debt securities issued or guaranteed by foreign governments and
governmental agencies), supranational debt (debt securities issued by entities,
such as the World Bank, constituted by the governments of several countries to
promote economic development) and mortgage-backed securities with maturities
greater than one year. Corporate bonds contained in the index represent issuers
from various industrial sectors.

The Series may invest in U.S. Treasury bills, notes and bonds and other
"full faith and credit" obligations of the U.S. Government. The Series may also
invest in U.S. Government agency securities, which are debt obligations issued
or guaranteed by agencies or instrumentalities of the U.S. Government. "Agency"
securities may not be backed by the "full faith and credit" of the U.S.
Government. U.S. Government agencies may include the Federal Farm Credit Bank,
the Resolution Trust Corporation and the Government National Mortgage
Association. "Agency" obligations are not explicitly guaranteed by the U.S.
Government and so are perceived as somewhat riskier than comparable Treasury
bonds.

The Series' corporate fixed-income securities will be primarily of
investment grade quality -- i.e., those rated at least Baa3 by Moody's Investors
Service, Inc. ("Moody's") or BBB- by Standard & Poor's Ratings Services ("S&P"),
the equivalent by another nationally recognized statistical rating organization
("NRSRO") or, if unrated, of equal quality in the opinion of the Manager.
Securities rated Baa or BBB are considered medium grade obligations. Interest
payments and principal are regarded as adequate for the present but certain
protective elements found in higher rated bonds may be lacking. Such bonds lack
outstanding investment characteristics and, in fact, have speculative
characteristics. Descriptions of the ratings of fixed-income securities are
contained in Appendix B to this Prospectus.

The Series may also invest in other instruments that "pass through" payments
on such obligations, such as collateralized mortgage obligations ("CMOs").

Merrill Lynch International Index Fund

The investment objective of the Merrill Lynch International Index Fund is to
provide investment results that, before expenses, seek to replicate the total
return (i.e., the combination of capital changes and income) of the Morgan
Stanley Capital International EAFE(R) Index (the "EAFE Index"). There can be no
assurance that the investment objective of the Fund will be achieved.

The Fund seeks to achieve its investment objective by investing all of its
assets in the Merrill Lynch International Index Series of the Trust, which has
the same investment objective as the Fund. The following is a description of the

investment policies of the Series.

6
<PAGE>
In seeking to replicate the total return of the EAFE Index, the Manager may
not allocate the Series' investments among all of the countries, or all of the
companies within a country, represented in the index, or in the same weightings
as the index. Instead, the Series may invest in a statistically selected sample
of the equity securities included in the EAFE Index and other types of financial
instruments. In addition, the Manager may use options and futures contracts and
other types of financial instruments relating to all or a portion of the index.
The investments to be included in the Series will be selected with the objective
of reducing the selected investment portfolio's deviation from the performance
of the EAFE Index (tracking error). The Series may also engage in securities
lending and index arbitrage. See "Other Types of Investments and Investment
Techniques."

The EAFE Index is composed of equity securities of companies from various
industrial sectors whose primary trading markets are located outside the United
States and which are selected from among the larger capitalization companies in
such markets. A company's stock market capitalization is the total market value
of its outstanding shares. The countries currently included in the EAFE Index
are Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong,
Ireland, Italy, Japan, Malaysia, The Netherlands, New Zealand, Norway,
Singapore, Spain, Sweden, Switzerland and United Kingdom.

About Indexing and Management of the Series

About Indexing. The Series are not managed according to traditional methods
of "active" investment management, which involve the buying and selling of
securities based upon economic, financial, and market analyses and investment
judgment. Instead, each Series, utilizing essentially a "passive" or "indexing"
investment approach, seeks to replicate, before each Series' expenses (which can
be expected to reduce the total return of the Series), the total return of its
respective index.

Indexing and Managing the Series. Under normal conditions each Series will
invest at least 80% of its assets (exclusive of assets held as collateral for
securities loans or as margin for futures transactions) in securities or other
financial instruments which are contained in, or related to the securities
contained in, the applicable index (equity securities, in the case of the
Merrill Lynch S&P 500 Index Series, Merrill Lynch Small Cap Index Series and
Merrill Lynch International Index Series (the "Equity Series"), and fixed-income
securities in the case of the Merrill Lynch Aggregate Bond Index Series (the
"Fixed-Income Series")).

Because each Series seeks to replicate the total return of its respective
index, generally the Manager will not attempt to judge the merits of any
particular security as an investment but will seek only to replicate the total
return of the securities in the relevant index. However, the Manager may omit or
remove a security which is included in an index from the portfolio of a Series
if, following objective criteria, the Manager judges the security to be
insufficiently liquid or believes the merit of the investment has been
substantially impaired by extraordinary events or financial conditions.

In managing the Series, the Manager may employ index arbitrage. Index
arbitrage involves the sale of a replicating selection, or "basket" of stocks
with the simultaneous purchase of an equivalent dollar value of related futures
contracts, or alternatively the purchase of such an equity basket with a
simultaneous sale of related futures contracts. This technique is designed to
take advantage of a possible mispricing which could arise between the securities
market and the futures market. Extensive use of this technique could, however,
be limited by applicable tax laws.

In addition, the Manager may acquire certain financial instruments based
upon individual securities or upon one or more baskets of securities (which
basket may be based upon a target index ). Certain of these instruments may
represent an indirect ownership interest in such securities or baskets. Others
may provide for the payment to a Series or by a Series of amounts based upon the
performance (positive, negative or both) of a particular security or basket. The
Manager will select such instruments when it believes that the use of the
instrument will correlate substantially with the expected total return of a
target security or index.

Each Series' ability to replicate the total return of its respective index
may be affected by, among other things, transaction costs, administration and
other expenses incurred by the Series, taxes (including foreign withholding
taxes, which will affect the Merrill Lynch International Index Series due to
foreign tax withholding practices), changes in either the composition of the
index or the assets of a Series, and the timing and amount of

7
<PAGE>
Series investor contributions and withdrawals, if any. In addition, each Fund's
total return will be affected by incremental operating costs (e.g., transfer
agency, accounting) that will be borne by the Fund.

Other Types of Investments and Investment Techniques of the Series

Cash Management. Generally, the Manager will employ futures and options on
futures to provide liquidity necessary to meet anticipated redemptions or for
day-to-day operating purposes. However, if considered appropriate in the opinion
of the Manager, a portion of a Series' assets may be invested in certain types
of instruments with remaining maturities of 397 days or less for liquidity
purposes. Such instruments would consist of: (i) obligations of the U.S.
Government, its agencies, instrumentalities, authorities or political
subdivisions ("U.S. Government Securities"); (ii) other fixed-income securities
rated Aa or higher by Moody's or AA or higher by S&P or, if unrated, of
comparable quality in the opinion of the Manager; (iii) commercial paper; (iv)
bank obligations, including negotiable certificates of deposit, time deposits
and bankers' acceptances; and (v) repurchase agreements. At the time the Series
invests in commercial paper, bank obligations or repurchase agreements, the
issuer or the issuer's parent must have outstanding debt rated Aa or higher by
Moody's or AA or higher by S&P or outstanding commercial paper, bank obligations
or other short-term obligations rated Prime-1 by Moody's or A-1 by S&P; or, if
no such ratings are available, the instrument must be of comparable quality in
the opinion of the Manager.

Futures, Options, Swaps and Indexed Instruments. Each Series will also
utilize options, futures, options on futures, swaps and other indexed
instruments. Futures and options on futures may be employed to provide liquidity
as described in the preceding paragraph, and may also be employed in connection
with a Series' index arbitrage strategies. Futures, options on futures, swaps
and other indexed instruments may be employed as a proxy for a direct investment
in securities underlying the Series' index.

The Manager will choose among the foregoing instruments based on its
judgment of how best to meet each Series' goals. In connection therewith, the
Manager will assess such factors as current and anticipated securities prices,
relative liquidity and price levels in the options, futures and swap markets
compared to the securities markets, and the Series' cash flow and cash
management needs.

The Series' use of the foregoing instruments and the associated risks are
described in detail in Appendix A to this Prospectus.

Foreign Exchange Transactions. The Merrill Lynch International Index Series
may engage in foreign currency forward and spot transactions in connection with
transactions or anticipated transactions in securities denominated in foreign
currencies. Specifically, the Series may purchase or sell a currency to settle a
security transaction or sell a currency in which the Series has received or
anticipates receiving a dividend or distribution.

Other Investment Policies and Practices of the Series

Illiquid Investments. Each of the Series may invest up to 15% of its net
assets in illiquid investments. Pursuant to that restriction the Series may not
invest in instruments which cannot be readily resold because of legal or
contractual restrictions, which cannot otherwise be marketed, redeemed, put to
the issuer or a third party, which do not mature within seven days, or which the
Trustees have not determined to be liquid, if, regarding all such instruments,
more than 15% of its net assets, taken at market value, would be invested in
such instruments.

The Series 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 Trustees, or the Manager
pursuant to guidelines adopted by the Trustees, continuously determines, based
on the trading markets for the specific Rule 144A security, that it is liquid.
The Trustees, however, will retain oversight and are ultimately responsible for
these determinations. The Trustees monitor the Series' 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 Series to the extent that qualified
institutional buyers become for a time uninterested in purchasing these
securities.

8
<PAGE>
Repurchase Agreements. Each Series may invest in securities pursuant to
repurchase agreements. Repurchase agreements may be entered into only with a

member bank of the Federal Reserve System, primary dealers in U.S. Government
securities, or an affiliate thereof, or with other entities which the Manager
otherwise deems to be creditworthy. Under repurchase agreements, the
counterparty agrees, upon entering into the contract, to repurchase the security
from the Series 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 Series 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
illiquid by the Securities and Exchange Commission and are therefore subject to
the Series' investment restrictions limiting investments in securities that are
not readily marketable to 15% of the Series' net assets.

Lending of Portfolio Securities. To the extent permitted by law, each Series
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. Each Series' policy concerning lending is
fundamental and it may not be changed without the approval of the holders of a
majority of the Series' outstanding voting securities, as defined in the
Investment Company Act. During the period of such a loan, the Series 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 Series 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 Series does not intend to lend portfolio securities representing
in excess of 33 1/3% of its total assets.

When-Issued Securities and Delayed Delivery Transactions. The Merrill Lynch
Aggregate Bond Index Series may purchase securities on a when-issued basis, and
it may purchase or sell securities for delayed delivery. These transactions
occur when securities are purchased or sold by the Series with payment and
delivery taking place in the future to secure what is considered an advantageous
yield and price to the Series at the time of entering into the transaction.
Although the Series has not established any limit on the percentage of its
assets that may be committed in connection with such transactions, the Series
will maintain a segregated account with its custodian of liquid securities in an
aggregate amount equal to the amount of its commitment in connection with such
purchase transactions.

Standby Commitment Agreements. The Merrill Lynch Aggregate Bond Index Series
may from time to time enter into standby commitment agreements. Such agreements
commit the Series, for a stated period of time, to purchase a stated amount of a
fixed income security which may be issued and sold to the Series at the option
of the issuer. The price and coupon of the security is fixed at the time of the
commitment. At the time of entering into the agreement, the Series is paid a
commitment fee, regardless of whether or not the security is ultimately issued,
which is typically approximately 0.5% of the aggregate purchase price of the

security which the Series has committed to purchase. The Series will enter into
such agreements only for the purpose of investing in the security underlying the
commitment at a yield and price which is considered advantageous to the Series.
The Series will not enter into a standby commitment with a remaining term in
excess of 90 days and will limit its investment in such commitments so that the
aggregate purchase price of the securities subject to such commitments, together
with the value of all other illiquid securities, will not exceed 15% of its
total assets taken at the time of acquisition of such commitment or security.
The Series will at all times maintain a segregated account with its custodian of
liquid securities in an aggregate amount equal to the purchase price of the
securities underlying the commitment.

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

9
<PAGE>
The purchase of a security subject to a standby commitment agreement and the
related commitment fee will be recorded on the date on which the security can
reasonably be expected to be issued, and the value of the security will
thereafter be reflected in the calculation of the Series' net asset value. The
cost basis of the security will be adjusted by the amount of the commitment fee.
In the event the security is not issued, the commitment fee will be recorded as
income on the expiration date of the standby commitment.

Investment Restrictions

The Fund's and the Series' 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 or
Series' outstanding voting securities as defined in the Investment Company Act.
Among the more significant fundamental restrictions, a Series or 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, although each 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., each Fund is required to comply with certain
requirements under the Internal Revenue Code of 1986, as amended (the "IRC
Code"). To ensure that the Funds satisfy these requirements, the Declaration of
Trust requires that each Series be managed in compliance with the IRC Code
requirements as though such requirements were applicable to the Series. These
requirements include 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
IRC Code.

Risk Factors

Each Fund will be subject to the risks associated with an investment in its
corresponding Series. These risks are set forth below.

Cash Flows; Expenses. The ability of each Series to satisfy its investment
objective depends to some extent on the Manager's ability to manage cash flow
(primarily from purchases and redemptions and distributions from the Series'
investments). The Manager will make investment changes to a Series' portfolio to
accommodate cash flow while continuing to seek to replicate the total return of
the Series' target index. Investors should also be aware that the investment
performance of each index is a hypothetical number which does not take into
account brokerage commissions and other transaction costs, custody and other
costs of investing, which will be borne by the Series, and any incremental
operating costs (e.g., transfer agency, accounting) that will be borne by the
Funds. Finally, since each Series seeks to replicate the total return of its
target index, the Manager generally will not attempt to judge the merits of any
particular security as an investment.

Options, Futures, Swaps and Indexed Instruments. The Manager expects to use
options, futures, options on futures, swaps and indexed instruments as described
above under "About Indexing and Management of the Series -- Other Types of
Investments and Techniques -- Futures, Options, Swaps and Indexed Instruments."
Use of such instruments may involve investment risks and transaction costs to
which the Series would not be subject absent the use of these instruments. A
discussion of these instruments is contained in Appendix A to this Prospectus.

Investment in Foreign Securities. Investments on an international basis
involve certain risks not typically involved in domestic investments, including
fluctuations in foreign exchange rates, future political and economic
developments, and the possible imposition of exchange controls or other foreign
or U.S. governmental laws or restrictions applicable to such investments.
Securities prices in different countries are subject to different economic,
financial, political and social factors. Moreover, individual foreign economies
may differ favorably or unfavorably from the United States economy in such
respects as growth of gross domestic product, rate of inflation, capital
reinvestment, resources, self-sufficiency and balance of payments position.
Also, it is

10
<PAGE>
anticipated that most of the foreign securities held by a Series will not be
registered with the Securities and Exchange Commission nor will the issuers
thereof be subject to the reporting requirements of such agency. In addition,
foreign investors such as the Series may be subject to withholding taxes in
certain countries, which may reduce the returns of the Series.

Since the Merrill Lynch International Index Series will invest heavily in

securities denominated or quoted in currencies other than the United States
dollar, changes in foreign currency exchange rates will affect the value of
securities in the Series' portfolio and the unrealized appreciation or
depreciation of investments so far as United States investors are concerned.
Currencies of certain foreign countries may be volatile and therefore may affect
the value of securities denominated in such currencies. Changes in foreign
currency exchange rates relative to the United States dollar will affect the
United States dollar value of the Series' assets denominated in that currency
and the return on such assets. The rate of exchange between the dollar and other
currencies is determined by forces of supply and demand in the foreign exchange
markets. These forces are, in turn, affected by the international balance of
payments, the level of interest and inflation rates and other economic and
financial conditions, government intervention, speculation and other factors.

Investment in Fixed-Income Securities. Because the Merrill Lynch Aggregate
Bond Index Series will invest in fixed-income securities, it will be subject to
the general risks inherent is such securities, primarily interest rate risk,
credit risk and prepayment risk.

Interest rate risk is the potential for fluctuations in bond prices due to
changing interest rates. As a rule bond prices vary inversely with interest
rates. If interest rates rise, bond prices generally decline; if interest rates
fall, bond prices generally rise. In addition, for a given change in interest
rates, longer-maturity bonds generally fluctuate more in price than
shorter-maturity bonds. To compensate investors for these larger fluctuations,
longer-maturity bonds usually offer higher yields than shorter-maturity bonds,
other factors, including credit quality, being equal. These basic principles of
bond prices also apply to U.S. Government Securities. A security backed by the
"full faith and credit" of the U.S. Government is guaranteed only as to its
stated interest rate and face value at maturity, not its current market price.
Just like other fixed-income securities, government-guaranteed securities will
fluctuate in value when interest rates change.

Credit risk is the possibility that an issuer of securities held by the
Series will be unable to make payments of either interest or principal or will
be perceived to have a diminished capacity to make such payments in the future.
The credit risk of the Series is a function of the diversification and credit
quality of its underlying securities.

The Series may also be exposed to event risk, which includes the possibility
that fixed-income securities held by the Series may suffer a substantial decline
in credit quality and market value due to issuer restructurings. Certain
restructurings such as mergers, leveraged buyouts, takeovers or similar events,
are often financed by a significant expansion of corporate debt. As a result of
the added debt burden, the credit quality and market value of a firm's existing
debt securities may decline significantly. Other types of restructurings (such
as corporate spinoffs or privatizations of governmental or agency borrowers or
the termination of express or implied governmental credit support) may also
result in decreased credit quality of a particular issuer.

Prepayment risk is the possibility that the principal of the mortgage loans
underlying mortgage-backed securities may be prepaid at any time. As a general
rule, prepayments increase during a period of falling interest rates and
decrease during a period of rising interest rates. As a result of prepayments,

in periods of declining interest rates the Series may be required to reinvest
its assets in securities with lower interest rates. In periods of increasing
interest rates, prepayments generally may decline, with the effect that the
mortgage-backed securities held by the Series may exhibit price characteristics
of longer-term debt securities.

The corporate substitution strategy used by the Series (discussed above) may
increase or decrease the Series' exposure to the foregoing risks relative to
those of the Aggregate Bond Index.

Investments in Small Companies. The Merrill Lynch Small Cap Index Series
will invest primarily in securities of smaller capitalization issuers.
Investments in securities of smaller capitalization issuers involve special
considerations and risks not typically associated with investments in securities
of larger capitalization

11
<PAGE>
issuers, including an issuer's limited product lines, markets or financial
resources, or dependence on a limited management group. In addition, many
smaller capitalization stocks trade less frequently and in smaller volume, and
may be subject to more abrupt or erratic price movements, than stocks of larger
companies. The securities of smaller companies may also be more sensitive to
market changes than the securities of larger companies.

Portfolio Turnover. Although the Series will use a passive, indexing
approach to investing, each Series may engage in a substantial number of
portfolio transactions. The rate of portfolio turnover will be a limiting factor
when the Manager considers whether to purchase or sell securities for a Series
only to the extent that the Manager will consider the impact of transaction
costs on a Series' tracking error. Changes in the securities comprising a
Series' index will tend to increase that Series' portfolio turnover rate, as the
Manager restructures the Series' holdings to reflect the changes in the index.
The portfolio turnover rate is, in summary, the percentage computed by dividing
the lesser of a Series' purchases or sales of securities by the average net
asset value of the Series. High portfolio turnover involves correspondingly
greater brokerage commissions for a Series investing in equity securities and
other transaction costs which are borne directly by a Series. A high portfolio
turnover rate may also result in the realization of taxable capital gains,
including short-term capital gains taxable at ordinary income rates.

While it is impossible to predict the portfolio turnover rates for each of
the Series, it is anticipated that the portfolio turnover rates for each of the
Series may exceed 100%.

Additional Information concerning the Indices

S&P 500. "Standard & Poor's(R)", "S&P(R)", "S&P 500(R)", "Standard & Poor's
500", and "500" are trademarks of The McGraw-Hill Companies, Inc. and have been
licensed for use by the Corporation and the Trust. The Fund and the Series are
not sponsored, endorsed, sold or promoted by Standard & Poor's, a division of
the McGraw Hill Companies, Inc. ("Standard & Poor's") and Standard & Poor's
makes no representation regarding the advisability of investing in the Fund or
the Series.

The S&P 500 Index Fund and the Series are not sponsored, endorsed, sold or
promoted by Standard & Poor's. Standard & Poor's makes no representation or
warranty, express or implied, to the owners of shares of the Fund or the Series
or any member of the public regarding the advisability of investing in
securities generally or in the Fund or the Series particularly or the ability of
the S&P 500 to track general stock market performance. Standard & Poor's only
relationship to the Fund and the Series is the licensing of certain trademarks
and trade names of Standard & Poor's and of the S&P 500 which is determined,
composed and calculated by Standard & Poor's without regard to the Fund and the
Series. Standard & Poor's has no obligation to take the needs of the Fund and
the Series or the owners of shares of the Fund and the Series into consideration
in determining, composing or calculating the S&P 500 Index. Standard & Poor's is
not responsible for and has not participated in the determination of the prices
and amount of the Fund and the Series or the timing of the issuance of sale of
shares of the Fund and the Series or in the determination or calculation of the
equation by which the Fund and the Series is to be converted into cash. Standard
& Poor's has no obligation or liability in connection with the administration,
marketing or trading of the Fund and the Series.

STANDARD & POOR'S DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE
S&P 500 INDEX OR ANY DATA INCLUDED THEREIN AND STANDARD & POOR'S SHALL HAVE NO
LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. STANDARD & POOR'S
MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE FUND,
THE SERIES, OWNERS OF SHARES OF THE FUND AND THE SERIES, OR ANY OTHER PERSON OR
ENTITY FROM THE USE OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. STANDARD
& POOR'S MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH
RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITED ANY
OF THE FOREGOING, IN NO EVENT SHALL STANDARD & POOR'S HAVE ANY LIABILITY FOR ANY
SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS),
EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

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<PAGE>
Russell 2000. The Merrill Lynch Small Cap Index Fund and the Series are neither
sponsored by nor affiliated with the Frank Russell Company. Frank Russell's only
relationship to the Fund and the Series is the licensing of the use of the
Russell 2000 Small Stock Index. Frank Russell Company is the owner of the
trademarks and copyrights relating to the Russell indices.

EAFE Index. The Merrill Lynch International Index Fund and the Series are not
sponsored, endorsed, sold or promoted by Morgan Stanley & Co. Incorporated
("Morgan Stanley"). Morgan Stanley makes no representation or warranty, express
or implied, to the owners of the Fund and the Series or any member of the public
regarding the advisability of investing in securities generally or in the Fund
and a the Series particularly or the ability of the EAFE Index to track general
stock market performance. Morgan Stanley is the licensor of certain trademarks,
service marks and trade names of Morgan Stanley and of the EAFE Index which is
determined, composed and calculated by Morgan Stanley without regard to the
issuer of the Fund and the Series. Morgan Stanley has no obligation to take the
needs of the issuer of the Fund and the Series or the owners of the Fund and the
Series into consideration in determining, composing or calculating the EAFE
Index. Inclusion of a security in the EAFE Index in no way implies an opinion by

Morgan Stanley as to its attractiveness as an investment. Morgan Stanley is not
responsible for and has not participated in the determination of the timing of,
prices at, or quantities of the Fund and the Series to be issued or in the
determination or calculation of the equation by which the Fund and the Series is
redeemable for cash. Morgan Stanley has no obligation or liability to owners of
the Fund and the Series in connection with the administration, marketing or
trading of the Fund and the Series. The Fund and the Series are neither
sponsored by nor affiliated with Morgan Stanley.

ALTHOUGH MORGAN STANLEY SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN
THE CALCULATION OF THE INDEXES FROM SOURCES WHICH MORGAN STANLEY CONSIDERS
RELIABLE, MORGAN STANLEY DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS
OF THE INDEXES OR ANY DATA INCLUDED THEREIN. MORGAN STANLEY MAKES NO WARRANTY,
EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, LICENSEE'S
CUSTOMERS AND COUNTERPARTIES, OWNERS OF THE PRODUCTS, OR ANY OTHER PERSON OR
ENTITY FROM THE USE OF THE INDEXES OR ANY DATA INCLUDED THEREIN IN CONNECTION
WITH THE RIGHTS LICENSED HEREUNDER OR FOR ANY OTHER USE. MORGAN STANLEY MAKES NO
EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE INDEXES
OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT
SHALL MORGAN STANLEY HAVE ANY LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL,
PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF
NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

MANAGEMENT OF THE FUNDS

Board of Directors

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

The Directors of the Fund are:

[Names of Directors to be inserted by amendment.]

- ----------
* Interested person, as defined by the Investment Company Act, of the Fund.

The Directors of the Corporation are also Trustees of the Trust. The
Directors have adopted procedures that they believe are reasonably designed to
resolve any conflicts that arise in connection with this overlap.

13
<PAGE>
Administration of the Corporation and the Funds

The Corporation does not have an investment adviser, since all of each
Fund's assets will be invested in its corresponding Series. The Corporation has
retained the services of MLAM as administrator of the Funds (the
"Administrator"). Under the Administration Agreement, the Administrator provides
the Funds with administrative services.

Advisory Arrangements of the Trust and the Series

MLAM, with offices at 800 Scudders Mill Road, Plainsboro, New Jersey
(mailing address: Box 9011, Princeton, New Jersey 08543-9011) also acts as
manager for the Trust and each Series and provides them with management and
investment advisory services.

MLAM is owned and controlled by ML & Co., a financial services holding
company and the parent of Merrill Lynch. MLAM or its affiliate, FAM, acts as the
manager and investment adviser for more than 130 other registered investment
companies. MLAM also offers portfolio management and portfolio analysis services
to individuals and institutions. As of ___,__ 1996, MLAM and FAM had a total of
approximately $_____ billion in investment company and other portfolio assets
under management, including accounts of certain affiliates of MLAM.

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

Expenses

The Funds pay the Administrator monthly compensation at the annual rates of
the average daily net assets of each Fund as follows:

Name of Fund Administration Fee
------------ ------------------
Merrill Lynch S&P 500 Index Fund ........................ 0.__%
Merrill Lynch Small Cap Index Fund ...................... 0.__%
Merrill Lynch Aggregate Bond Index Fund ................. 0.__%
Merrill Lynch International Index Fund .................. 0.__%

In addition, the administration agreement with the Administrator (the
"Administration Agreement") obligates the Corporation to pay certain expenses
incurred in its operations including, among other things, 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 each Fund by the Administrator, and each Fund reimburses the
Administrator for its costs in connection with such services on a semi-annual
basis.

The Series of the Trust pay the Manager monthly compensation at the annual
rates of the average daily net assets of each Series as follows:

Name of Series Management Fee
-------------- --------------
Merrill Lynch S&P 500 Index Series....................... 0.__%
Merrill Lynch Small Cap Index Series..................... 0.__%
Merrill Lynch Aggregate Bond Index Series................ 0.__%
Merrill Lynch International Index Series................. 0.__%

In addition, the management agreement with the Manager (the "Management

Agreement") obligates the Trust to pay certain expenses incurred in its
operations including, among other things, legal and audit fees, registration
fees, unaffiliated trustees' 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

14
<PAGE>
statements of additional information. Accounting services are provided to the
Trust by the Manager, and each Series reimburses the Manager for its costs in
connection with such services on a semi-annual basis.

The Directors of the Corporation believe that the aggregate per share
expenses of each Fund and corresponding Series will be less than or
approximately equal to the expenses which each Fund would incur if it retained
the services of an investment adviser and the assets of each Fund were invested
directly in the type of securities held by the corresponding Series.

Transfer Agency Services

Merrill Lynch Financial Data Services, Inc. ("MLFDS" or the "Transfer
Agent"), which is a wholly-owned subsidiary of ML & Co., acts as the
Corporation'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 [$____] per shareholder account
and is entitled to reimbursement for out-of-pocket expenses incurred by it under
the Transfer Agency Agreement. MLFDS also acts as the transfer agent to the
Trust.

Codes of Ethics

The Board of Directors of the Corporation has adopted a Code of Ethics
pursuant to Rule 17j-1 under the Investment Company Act which incorporates the
Codes of Ethics of the Trust and of MLAM (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.

[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 Trust within periods of trading by the
Series in the same (or equivalent) security (15 or 30 days depending upon the

transaction).]

PURCHASE OF SHARES

Merrill Lynch Funds Distributor, Inc. (the "Distributor"), an affiliate of
both MLAM and Merrill Lynch, acts as the distributor of the shares of the Fund.

The Fund offers two classes of shares, Class A shares and Class D shares.
Class A shares of the Fund are offered at a price equal to the next determine
net asset value per share without the imposition of any front-end or deferred
sales charge, and are not subject to any ongoing account maintenance or
distribution fee. Distribution of Class A shares of the Fund is limited to
certain eligible investors. Class D shares of each Fund are offered at a price
equal to the next determined net asset value per share without the imposition of
any front-end or deferred sales charge and are not subject to any ongoing
distribution fee, but are subject to an ongoing account maintenance fee at an
annual rate of 0.25% of average daily net assets.

Class A shares are offered to a limited group of investors who participate
in certain investment programs which charge a fee for participation, including
the Merrill Lynch Mutual Fund Adviser program. In addition, Class A shares are
offered to ML & Co. and its subsidiaries and their directors and employees and
to members of the Boards of MLAM-advised investment companies, including the
Corporation. For more information about these programs, contact ____ at
1-800-_______.

15
<PAGE>
Shares may be purchased directly from the Distributor, P.O. Box 9081,
Princeton, New Jersey 08543-9081 ((609) 282-2800), which has entered into a
dealer agreement with Merrill Lynch. Shareholders may redeem their shares at any
time at the next determined net asset value. The minimum initial purchase is
$1,000 and the minimum subsequent purchase is $50, except that for retirement
plans the minimum initial investment is $100 and the minimum subsequent purchase
is $1. Merrill Lynch may charge its customers a processing fee (currently $4.85)
for confirming purchases and repurchases. Purchase and redemptions directly
through the Corporation's transfer agent are not subject to processing fees.

The Distributor also acts as the placement agent for the Trust.

Account Maintenance Plan

Pursuant to a plan adopted by the Corporation with respect to the Class D
shares of each Fund pursuant to Rule 12b-1 under the Investment Company Act (the
"Plan"), the Class D shares of each Series pay the Distributor an ongoing
account maintenance fee, accrued daily and paid monthly, at the annual rate of
0.25% of the average daily net assets attributable to such shares. Pursuant to a
sub-agreement with the Distributor, Merrill Lynch also provides account
maintenance services in respect of the Class D shares of each Fund. The ongoing
account maintenance fee compensates the Distributor and Merrill Lynch for
providing account maintenance services to Class D shareholders.

REDEMPTION OF SHARES

Each Fund is required to redeem all full and fractional shares of the Fund
upon receipt of a written request in proper form. The redemption price is the
net asset value per share next determined after the initial receipt of proper
notice of redemption. There will be no additional charge for redemption if the
redemption request is sent directly to the Transfer Agent. Shareholders
liquidating their holdings will receive upon redemption all dividends reinvested
through the date of redemption. The value of shares at the time of redemption
may be more or less than the shareholder's cost, depending on the market value
of the securities held by the Fund at such time.

Redemption

A shareholder wishing to redeem shares may do so without charge by tendering
the shares directly to the 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 Corporation. 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. "Eligible guarantor institution(s)" include
certain banks, brokers, dealers, credit unions, securities exchanges and
associations, clearing agencies and savings association. 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 a 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.

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Repurchase

Each Fund also will repurchase shares through a shareholder's listed
securities dealer. The Funds 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 a Fund
from such dealer not later than 30 minutes after the close of business on the
New York Stock Exchange (generally 4:00 P.M., New York time), on the same day.
Dealers have the responsibility to submit such repurchase requests to the Fund
not later than 30 minutes after the close of business on the New York Stock
Exchange in order to obtain that day's closing price.

The foregoing repurchase arrangements are for the convenience of
shareholders and do not involve a charge by a Fund. 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 processing fee (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 processing fee. The
Corporation 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 a
Fund, however, may redeem shares as set forth above.

SHAREHOLDER SERVICES

The Corporation offers a number of shareholder services and investment plans
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 Corporation, 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 statements, at least
quarterly, from the Transfer Agent. These statements will serve as transaction
confirmations for automatic investment purchases and the reinvestment of
ordinary income dividends and long-term capital gains distributions. The
statement will also show any other activity in the account since the preceding
statements. Shareholders will receive separate transaction confirmations for
each purchase or sale transaction other than automatic investment purchase and
the reinvestment of ordinary income dividends and long-term capital gains
distribution. Shareholders may make additions to their Investment Account at any
time by mailing a check directly to the Transfer Agent. 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 delivery of shares of a Fund, a shareholder must

either redeem the shares 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.

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.

Automatic Reinvestment of Dividends and Capital Gains Distributions. All
dividends and capital gains distributions are reinvested automatically in full
and fractional shares of the Funds 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

17
<PAGE>
written notification or by telephone (1-800-MER-FUND) or by written notification
to Merrill Lynch if the shareholder's account is maintained with Merrill Lynch,
or the Transfer Agent, if the shareholder's account is maintained with the
Transfer Agent, elect to have subsequent dividends, or both dividends and
capital gains distributions, paid in cash rather than reinvested, in which event
payment will be mailed on or about the payment date.

Systematic Withdrawal Plans. A shareholder may elect to receive systematic
withdrawal payments from such shareholder's Investment Account in the form of
payments by check or through automatic payment by direct deposit to such
shareholder's bank account on either a monthly or quarterly basis. Shareholders
whose shares are held within a CMA(R), CBA(R) or Retirement Account may elect to
have shares redeemed on a monthly, bi-monthly, quarterly, semiannual or annual
basis through the Systematic Redemption Program, subject to certain conditions.

Automatic Investment Plans. Regular additions of shares may be made in an
investor's Investment Account by prearranged charges of $50 or more to such
investor's regular bank account. Investors who maintain CMA(R) accounts may
arrange to have periodic investments made in the Funds in their CMA(R) account
or in certain related accounts in amounts of $100 or more through the CMA(R)
Automated Investment Program.

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 Funds 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 a 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 $100 and the minimum
subsequent purchase is $1.

PERFORMANCE DATA

From time to time a Fund may include its average annual total return and/or
yield for various specified time periods in advertisements or information
furnished to present or prospective shareholders. Average annual total return

and yield are computed in accordance with formulas 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.

Each 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 the rates of return calculated
will not be average annual rates, but rather, actual annual, annualized or
aggregate rates of return. 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. A 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 a Fund's historical performance and are
not intended to indicate future performance. A 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 a Fund
will fluctuate and an investor's shares, when redeemed, may be worth more or
less than their original cost.

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<PAGE>
Yield quotations will be computed based on a 30-day period by dividing (a)
the net income based on the yield of each security earned during the period by
(b) the average number of shares outstanding during the period that were
entitled to receive dividends multiplied by the maximum offering price per share
on the last day of the period.

Each Fund will generally compare its performance to the index it attempts to
replicate. A Fund may also compare its performance 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, a 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 a Fund's relative performance for any future
period.

The Funds' annual report will contain additional performance information and

will be available upon request and without charge.

TAXES

Each Fund intends to qualify for the special tax treatment afforded
regulated investment companies ("RICs") under the IRC 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. Each Fund intends to distribute substantially all of
such income.

The IRC 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 ___ year end, plus certain undistributed amounts
from previous years. While each 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.

Under certain provisions of the IRC Code, some shareholders may be subject
to a 31% withholding tax on reportable dividends, capital gains distributions
and redemption payments ("backup withholding"). Generally, shareholders subject
to backup withholding will be those for whom a certified taxpayer identification
number is not on file with the Fund or who, to the Fund's knowledge, have
furnished an incorrect number. When establishing an account, an investor must
certify under penalty of perjury that such number is correct and that such
investor is not otherwise subject to backup withholding.

The foregoing is a general and abbreviated summary of the applicable
provisions of the IRC Code and Treasury regulations presently in effect. For the
complete provisions, reference should be made to the pertinent IRC Code sections
and the Treasury regulations promulgated thereunder. The IRC 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 a Fund.

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

The Series. The Trust and each of the Series has received a private letter
ruling from the ("IRS"), pursuant to which each Series is classified as a
partnership for tax purposes. If any of the facts upon which such ruling is
premised change in any material respect (e.g., if the Trust were required to
register its interests under the Securities Act) and the Trust is unable to
obtain a revised private letter ruling from the IRS indicating that each

19
<PAGE>

Series will continue to be classified as a partnership, then the Board of
Directors of the Corporation will determine, in its discretion, the appropriate
course of action for the Funds. One possible course of action would be to
withdraw the Funds' investments from the Series and to retain an investment
adviser to manage the Funds' assets in accordance with the investment policies
applicable to the respective Fund. See "Investment Objectives and Policies."

ADDITIONAL INFORMATION

Dividends and Distributions

It is each Fund's intention to distribute all of its net investment income,
if any. Dividends from such net investment income will be paid at lease annually
with respect to each Fund. All net realized long- or short-term capital gains,
if any, are distributed to the Funds' shareholders at least annually. Dividends
will be reduced by account maintenance and transfer agency fees payable by the
shareholders of a Fund. Dividends and distributions will be reinvested
automatically in shares of the Funds, at net asset value. Shareholders may elect
in writing to receive any such dividends or distributions, or both, in cash.
Dividends and distributions are taxable to shareholder as discussed above
whether they are reinvested in shares of a Fund or received in cash. From time
to time, a 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 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 day during which the New York Stock Exchange is open for trading
(a "Pricing Day"). The net asset value is computed by dividing the market value
of the securities held by a 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 Administrator and the
Distributor, and the advisory fees payable indirectly by the Series of the Trust
to the Manager, are accrued daily.

The principal assets of each Fund will normally be its interest of the
underlying Series, which will be valued at its net asset value. A Series'
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
Trustees of the Trust.

Each investor in the Trust may add to or reduce its investment in any Series
on each Pricing Day. The value of each investor's (including the respective
Funds') interest in a Series will be determined as of 15 minutes after the close
of business on the New York Stock Exchange (generally 4:00 p.m., New York Time)
by multiplying the net asset value of the Series by the percentage, effective
for that day, that represents that investor's share of the aggregate interests
in such Series. Any additions or withdrawals, which are to be effected on that
day, will then be effected. The investor's percentage of a Series will then be
re-computed as the percentage equal to the fraction (i) the numerator of which
is the value of such investor's investment in the Series as of the time or
determination on such day plus or minus, as the case may be, the amount of any
additions to or withdrawals from the aggregate investments in the Series by all
investors in the Series. The percentage so determined will then be applied to
determine the value of the investor's interest in such Series as of such time on
the next Pricing Day of the Series.

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<PAGE>
Organization of the Corporation

The Corporation is a Maryland corporation incorporated on October 25, 1996.
It has an authorized capital of 1,000,000,000 shares of Common Stock, par value
$0.0001 per share, divided into 125,000,000 shares each of Class A and Class D
shares for each of the four Funds: Merrill Lynch S&P 500 Index Fund, Merrill
Lynch Small Cap Index Fund, Merrill Lynch Aggregate Bond Index Fund and Merrill
Lynch International Index Fund. Class A and Class D shares of a Fund represent
interests in the same assets of the Series and are identical in all respects
except that the Class D shares bear certain expenses related to the account
maintenance associated with such shares. Class D shares have exclusive voting
rights with respect to matters relating to the class' account maintenance
expenditures.

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 each Fund have equal voting rights, except that each
Fund has exclusive voting rights to matters affecting only such Fund, and except
that as noted above, Class D shares have exclusive voting rights with respect to
matters relating to the class' account maintenance expenditures. 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 Corporation 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 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, except that, as noted
above, Class D shares bear certain additional expenses. Shares issued are
fully-paid and non-assessable by the Fund. Voting rights for Directors are not
cumulative.

The Trust consists of four Series, and is organized as a Delaware business
trust. Whenever investors in a Series are requested to vote on a fundamental
policy of a Series, the Corporation will hold a meeting of its shareholders and
will cast its vote as instructed by such shareholders.

Shareholder Inquiries

Shareholder inquiries may be addressed to the Funds 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.

<PAGE>
APPENDIX A

The Series are authorized to use certain instruments, including indexed
securities, options, futures and swaps, as described below. Such instruments,
which may be regarded as derivatives, are referred to collectively herein as
"Strategic Instruments."

Indexed Securities

The Series may invest in securities the potential return of which is based
on the change in particular measurements of value or rate (an "index"). As an
illustration, a Series may invest in a debt security that pays interest and
returns principal based on the change in the value of a securities index or a
basket of securities, or based on the relative changes of two indices. If a
Series invests in such securities, it may be subject to reduced or eliminated
interest payments or loss of principal in the event of an adverse movement in
the relevant index or indices.

Options on Securities and Securities Indices

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

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

option premium.

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

Writing Options. Each Series is authorized to write (i.e., sell) call
options on securities held in its portfolio or securities indices the
performance of which is substantially replicated by securities held in its
portfolio. When a Series writes a call option, in return for an option premium
the Series gives another party the right to buy specified securities owned by
the Series at the exercise price on or before the expiration date, in the case
of an option on securities, or agrees to pay to another party an amount based on
any gain in a specified securities index beyond a specified level on or before
the expiration date, in the case of an option on a securities index. In the
event the party to which a Series has written an option fails to exercise its
rights under the option because the value of the underlying securities is less
than the exercise price, the Series will partially offset any decline in the
value of the underlying securities through the receipt of the option premium. By
writing a call option, however, a Series limits its ability to sell the
underlying securities, and gives up the opportunity to profit from any increase
in the value of the underlying securities beyond the exercise price, while the
option remains outstanding.

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

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

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

Types of Options. Each Series may engage in transactions in options on
securities or securities indices on exchanges and in the over-the-counter
("OTC") markets. In general, exchange-traded options have standardized exercise
prices and expiration dates and require the parties to post margin against their
obligations, and the performance of the parties' obligations in connection with
such options is guaranteed by the exchange or a related clearing corporation.
OTC options have more flexible terms negotiated between the buyer and seller,
but generally do not require the parties to post margin and are subject to
greater risk of counterparty default. See "Additional Risk Factors of OTC
Transactions" below.

Futures

Each Series may engage in transactions in futures and options thereon.
Futures are standardized, exchange-traded contracts which obligate a purchaser
to take delivery, and a seller to make delivery, of a specific amount of a
commodity at a specified future date at a specified price. No price is paid upon
entering into a futures contract. Rather, upon purchasing or selling a futures
contract the Series is required to deposit collateral ("margin") equal to a
percentage (generally less than 10%) of the contract value. Each day thereafter
until the futures position is closed, the Series will pay additional margin
representing any loss experienced as a result of the futures position the prior
day or be entitled to a payment representing any profit experienced as a result
of the futures position the prior day. The Series will further limit
transactions in futures and options on futures to the extent necessary to
prevent the Series from being deemed a "commodity pool" under regulations of the
Commodity Futures Trading Commission.

Swaps

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

23
<PAGE>
also be used to obtain exposure to an equity or market without owning or taking
physical custody of securities in circumstances in which direct investment is
restricted by local law or is otherwise impractical.

Risk Factors in Strategic Instruments

The Series intend to enter into transactions involving Strategic Instruments
only if there appears to be a liquid secondary market for such instruments or,
in the case of illiquid instruments traded in OTC transactions, such instruments
satisfy the criteria set forth below under "Additional Risk Factors of OTC
Transactions." However, there can be no assurance that, at any specific time,
either a liquid secondary market will exist for a Strategic Instrument or a
Series will otherwise be able to sell such instrument at an acceptable price. It
may therefore not be possible to close a position in a Strategic Instrument
without incurring substantial losses, if at all.

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

Additional Risk Factors of OTC Transactions; Limitations on the Use of OTC
Strategic Instruments

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

The staff of the Securities and Exchange Commission has taken the position
that purchased OTC options and the assets underlying written OTC options are
illiquid securities. The Series have therefore adopted an investment policy
pursuant to which they will not purchase or sell OTC options (including OTC
options on futures contracts) if, as a result of such transactions, the sum of
the market value of OTC options currently outstanding which are held by the
Series, the market value of the securities underlying OTC call options currently
outstanding which have been sold by the Series and margin deposits on the
Series' outstanding OTC options exceeds 15% of the total assets of the Series,
taken at market value, together with all other assets of the Series which are
deemed to be illiquid or are otherwise not readily marketable. However, if an
OTC option is sold by the Series to a dealer in U.S. government securities
recognized as a "primary dealer" by the Federal Reserve Bank of New York and the
Series has the unconditional contractual right to repurchase such OTC option at
a predetermined price, then the Series will treat as illiquid such amount of the
underlying securities as is equal to the repurchase price less the amount by
which the option is "in-the-money" (i.e., current market value of the underlying

security minus the option's exercise price).

Because Strategic Instruments traded in OTC markets are not guaranteed by an
exchange or clearing corporation and generally do not require payment of margin,
to the extent that a Series has unrealized gains in such instruments or has
deposited collateral with its counterparty the Series is at risk that its
counterparty will become bankrupt or otherwise fail to honor its obligations.
The Series will attempt to minimize the risk that a counterparty will become
bankrupt or otherwise fail to honor its obligations by engaging in transactions
in Strategic Instruments traded in OTC markets only with financial institutions
which have substantial capital or which have provided the Series with a
third-party guaranty or other credit enhancement.

Additional Limitations on the Use of Strategic Instruments. The Series may
not use any Strategic Instrument to gain exposure to an asset or class of assets
that it would be prohibited by its investment restrictions from purchasing
directly.

<PAGE>
APPENDIX B - DESCRIPTION OF COMMERCIAL
PAPER AND BOND RATINGS

Commercial Paper

Description of relevant commercial paper ratings of Standard & Poor's Ratings
Services ("S&P") are as follows:

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

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

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

Description of the relevant commercial paper ratings of Moody's Investors
Service, Inc. ("Moody's") are as follows:

PRIME-1: Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics:

-- Leading market positions in well-established industries.

-- High rates of return on funds employed.

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

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

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

PRIME-2: Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but
to a lesser degree. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.

PRIME-3: Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of
industry characteristics and market compositions may be more
pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurement and may require
relatively high financial leverage. Adequate alternate liquidity is
maintained.

Corporate Bonds

Descriptions of the bond ratings of S&P are:

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

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

25
<PAGE>
A -- Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher
rated categories.

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

BB, B, CCC, CC or C--Debt rated BB, B, CCC, CC or C is regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. While such
debt will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse debt
conditions.

C1 -- The rating C1 is reserved for income bonds on which no interest is
being paid.

D -- Debt rated D is in default and payment of interest and/or repayment of
principal is in arrears.

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

Descriptions of the bond ratings of Moody's are as follows:

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

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

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

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

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

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

26
<PAGE>
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.

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

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

Moody's applies modifiers to each rating classification from Aa through B to
indicate relative ranking within its rating categories. The modifier "1"
indicates that a security ranks in the higher end of its rating category; the
modifier "2" indicates a mid-range ranking; and the modifier "3" indicates that
the issue ranks in the lower end of its rating category.

<PAGE>
MERRILL LYNCH INDEX FUNDS, INC. -- AUTHORIZATION FORM

[To Come]

<PAGE>
Administrator of the Corporation and Manager of the Trust
Merrill Lynch Asset Management, L.P.
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

Deloitte & Touche, LLP
117 Campus Drive
Princeton, New Jersey 08540-6400

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

<PAGE>
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 Corporation 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 Objectives and Policies..
Management of the Funds.............
Purchase of Shares..................
Redemption of Shares................
Shareholder Services................
Performance Data....................
Taxes...............................
Additional Information..............
Authorization Form..................

Code #

[LOGO]

Merrill Lynch
Index Funds, Inc.

____________, 1996

Distributor:
Merrill Lynch Funds Distributor, Inc.

This Prospectus should be
retained for future reference.

Subject to Completion - ______, __ 1996

STATEMENT OF ADDITIONAL INFORMATION

MERRILL LYNCH INDEX FUNDS, INC.
Box 9011, Princeton, New Jersey 08543-9011 o Phone No. (609) 282-2800

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

Merrill Lynch Index Funds, Inc. (the "Corporation") currently consists
of four portfolios or series: Merrill Lynch S&P 500 Index Fund ("S&P 500 Index
Fund"), Merrill Lynch Small Cap Index Fund ("Small Cap Index Fund"), Merrill
Lynch Aggregate Bond Index Fund ("Aggregate Bond Index Fund") and Merrill Lynch
International Index Fund ("International Index Fund")(collectively, the "Funds,"
and each, a "Fund"). Each Fund is a non-diversified mutual fund whose investment
objective is to provide investment results that, before expenses, seek to
replicate the total return (i.e., the combination of capital changes and income)
of a specified securities index. Each Fund will seek to achieve its objective by
investing all of its assets in the series (collectively, the "Series," and each,
a "Series") of Merrill Lynch Index Trust (the "Trust") that has the same
investment objective as the Fund. Each Fund's investment experience will
correspond directly to the investment experience of the respective Series in
which it invests. There can be no assurance that the investment objectives of
the Funds will be achieved.

Each Fund offers two classes of shares, Class A shares and Class D
shares. Class A shares of each Fund are offered at a price equal to the next
determined net asset value per share without the imposition of any front-end or
deferred sales charge, and are not subject to any ongoing account maintenance or
distribution fee. Distribution of Class A shares of each Fund is limited to
certain eligible investors. Class D shares of each Fund are offered at a price
equal to the next determined net asset value per share without the imposition of
any front-end or deferred sales charge and are not subject to any ongoing
distribution fee, but are subject to an ongoing account maintenance fee at an
annual rate of 0.25% of average daily net assets.

This Statement of Additional Information for the Funds is not a
prospectus and should be read in conjunction with the prospectus of the Funds,
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 Funds at the above telephone number or address. This Statement of
Additional Information has been incorporated by reference into the Prospectus.

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

Merrill Lynch Asset Management, L.P. - Administrator
Merrill Lynch Funds Distributor, Inc. - Distributor

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

The date of this Statement of Additional Information is ________, 1996

-----------

<PAGE>
INVESTMENT OBJECTIVES AND POLICIES

Merrill Lynch Index Funds, Inc. currently consists of four series: Merrill
Lynch S&P 500 Index Fund, Merrill Lynch Small Cap Index Fund, Merrill Lynch
Aggregate Bond Index Fund and Merrill Lynch International Index Fund. Each Fund
is a non-diversified mutual fund whose investment objective is to provide
investment results that, before expenses, seek to replicate the total return
(i.e., the combination of capital changes and income) of a specified securities
index. Each Fund will seek to achieve its objective by investing all of its
assets in the Series of Merrill Lynch Index Trust that has the same investment
objective as the Fund. Each Fund's investment experience will correspond
directly to the investment experience of the respective Series in which it
invests. Reference is made to the discussion under "Investment Objectives and
Policies" in the Prospectus for information with respect to each Fund's and each
Series' investment objective and policies. There can be no assurance that the
investment objectives of the Funds will be achieved.

Investment Restrictions

The Corporation has adopted the following restrictions and policies
relating to the investment of each Fund's assets and activities, which are
fundamental policies and may not be changed with respect to a Fund 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 of 1940,
as amended (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). Provided that
none of the following restrictions shall prevent a Fund from investing all of
its assets in shares of another registered investment company with the same
investment objective (in a master/feeder structure), each 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, a 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 a 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) a 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) a Fund may

2
<PAGE>
borrow up to an additional 5% of its total assets for temporary purposes, (iii)
a 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. A 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 the Fund's
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 a Fund
technically may be deemed an underwriter under the Securities Act in selling
portfolio securities.

9. Purchase or sell commodities or contracts on commodities, except to the
extent that a 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 Trust has adopted investment restrictions substantially identical to
the foregoing, which are fundamental policies of the Trust and may not be
changed with respect to any Series without the approval of the holders of a
majority of the interests of the Series.

Portfolio securities of each Fund's underlying Series generally may not be
purchased from, sold or loaned to MLAM 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 MLAM with the Corporation, the Series are
prohibited from engaging in certain transactions involving MLAM'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 Series are
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 in which such firms
or any of their affiliates participate as an underwriter or dealer.

MANAGEMENT OF THE FUNDS

Directors and Officers

The Directors and executive officers of the Corporation 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 Funds.

3
<PAGE>
(2) Such Director or officer is a director, trustee or officer of other
investment companies for which MLAM or FAM acts as investment adviser.

As of the date of this Statement of Additional Information, the officers
and Directors of the Corporation 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
any of the Funds.

Pursuant to the terms of the Administration Agreement with the Corporation,
MLAM pays all compensation of officers of the Corporation as well as the fees of
all Directors who are affiliated persons of MLAM. The Corporation pays each
Director not affiliated with MLAM a fee of $_______ per year plus $_______ per
meeting attended, together with such Director's out-of-pocket expenses relating
to attendance at meetings. The Corporation also compensates members of its Audit
and Nominating Committee, which consists of all of the Directors who are not
interested persons of the Funds, 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 Corporation
expects to pay to the non-interested Directors for the fiscal year ended
December 31, 1997 and the aggregate compensation paid by all investment
companies advised by MLAM and its affiliate, FAM ("MLAM/FAM-Advised Funds") to
the non-interested Directors for the calendar year ended December 31, 1995 (the
most recent year for which such information is available).

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

____________________________________________________________________________________________________

____________________________________________________________________________________________________
</TABLE>
- ----------
(1) In addition to the Corporation, the Directors served on other MLAM/FAM
Advised Funds as follows:

Administration Arrangements

MLAM 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 Funds" in the Prospectus for certain information concerning
the administration arrangements of the Corporation and the management and
advisory arrangements of the Trust.

4
<PAGE>
The Corporation has entered into an administration agreement with MLAM as
Administrator (the "Administration Agreement"). As discussed in the Prospectus,
the Administrator receives for its services to the Funds monthly compensation at
the annual rates of the average daily net assets of each Fund as follows:

Name of Fund Administration Fee
------------ ------------------
Merrill Lynch S&P 500 Index Fund ........................... 0.__%
Merrill Lynch Small Cap Index Fund ......................... 0.__%
Merrill Lynch Aggregate Bond Index Fund .................... 0.__%
Merrill Lynch International Index Fund ..................... 0.__%

The Administration Agreement obligates the Administrator to provide certain
administrative services to the Corporation and the Funds and to pay all
compensation of and furnish office space for officers and employees of the
Corporation as well as the fees of all Directors who are affiliated persons of
the Administrator or any of their affiliates. Each 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 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 Corporation or the Fund. Merrill Lynch Funds Distributor, Inc. (the
"Distributor") will pay the promotional expenses of the Funds incurred in
connection with the offering of its shares.

Duration and Termination. Unless earlier terminated as described below, the
Administration Agreement will remain in effect for two years from the date of
its adoption. Thereafter, it will remain in effect from year to year with
respect to each Fund if approved annually (a) by the Board of Trustees and (b)
by a majority of the Trustees who are not parties to such contract or interested
persons (as defined in the Investment Company Act) of any such party. Such
contract is not assignable and may be terminated with respect to a Fund without
penalty on 60 days' written notice at the option of either party thereto or by
the vote of the shareholders of the Fund.

Management and Advisory Arrangements

Each Fund invests all of its assets in shares of the corresponding Series
of the Trust. Accordingly, the Funds do not invest directly in portfolio
securities and do not require investment advisory services. All portfolio
management occurs at the level of the Trust. The Trust has entered into a
management agreement with MLAM as Manager (the "Management Agreement"). As
discussed in the Prospectus, the Manager receives for its services to the Series
monthly compensation at the annual rates of the average daily net assets of each
Series as follows:

Name of Series Management Fee
-------------- -------------
Merrill Lynch S&P 500 Index Series.......................... 0.__%
Merrill Lynch Small Cap Index Series........................ 0.__%
Merrill Lynch Aggregate Bond Index Series................... 0.__%
Merrill Lynch International Index Series.................... 0.__%

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 Trust connected with investment and

5
<PAGE>
economic research, trading and investment management of the Trust, as well as
the fees of all Trustees who are affiliated persons of the Manager or any of
their affiliates. Each Series pays all other expenses incurred in the operation
of the Series, 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 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 Trustees, accounting and pricing
costs (including the daily calculation of net asset value), insurance, interest,
brokerage costs, litigation and other extraordinary or non-recurring expenses,
and other expenses properly payable by the Trust or the Series. The Distributor
will pay the promotional expenses of the Trust incurred in connection with the
offering of its shares.

Securities held by the Series of the Trust 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 Series 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.

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 with respect to
each Series if approved annually (a) by the Board of Trustees or by a majority
of the outstanding shares of the Series and (b) by a majority of the Trustees
who are not parties to such contract or interested persons (as defined in the
Investment Company Act) of any such party. Such contract is not assignable and
may be terminated with respect to a Series without penalty on 60 days' written
notice at the option of either party thereto or by the vote of the shareholders
of the Series.

PURCHASE OF SHARES

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

The Corporation has entered into a distribution agreement with the
Distributor in connection with the offering of shares of the Funds (the
"Distribution Agreement"). The Distribution Agreement obligates the Distributor
to pay certain expenses in connection with the offering of the shares of the
Funds. 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 Corporation reserves the right to suspend the offering of its shares at
any time.

6
<PAGE>

Account Maintenance Plan. Reference is made to "Purchase of Shares--Account
Maintenance Plan" in the Prospectus for certain information with respect to the
Account Maintenance Plan (the "Plan") of the Class D shares of the Funds.

The payment of the account maintenance fee is subject to the provisions of
Rule 12b-1 under the Investment Company Act. Among other things, the Plan
provides that the Distributor shall provide and the Directors shall review
quarterly reports of the disbursement of the account maintenance fees paid to
the Distributor. In their consideration of the Plan, the Directors must consider
all factors they deem relevant, including information as to the benefits of the
Plan to the Funds and their shareholders. The Plan further provides that, so
long as the Plan remains in effect, the selection and nomination of Directors
who are not "interested persons" of the Funds, as defined in the Investment
Company Act (the "Independent Directors"), shall be committed to the discretion
of the Independent Directors then in office. In approving the Plan in accordance
with Rule 12b-1, the Independent Directors concluded that there is reasonable
likelihood that the Plan will benefit the Fund and its shareholders. The Plan
can be terminated at any time, without penalty, by the vote of a majority of the
Independent Directors or with respect to any Fund by the vote of the holders of
a majority of the outstanding Class D shares of the Fund. The Plan cannot be
amended to increase materially the amount to be spent by the Class D shares of a
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 Plan, cast in
person at a meeting called for that purpose. Rule 12b-1 further requires that
the Fund preserve copies of the Plan and any report made pursuant to such plan
for a period of not less than six years from the date of the Plan or such
report, the first two years in an easily accessible place.

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 a 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.

The value of share at the time of redemption may be more or less than the
shareholder's cost, depending on the market value of the securities held by the
Fund and the Series at that time.

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

<PAGE>
PORTFOLIO TRANSACTIONS AND BROKERAGE

Because the Funds will invest exclusively in shares of their corresponding
Series it is expected that all transactions in portfolio securities will be
entered into by the Series. The Manager is responsible for making the Series'
portfolio decisions, placing the Series' brokerage business, evaluating the
reasonableness of brokerage commissions and negotiating the amount of any
commissions paid subject to a policy established by the Trust's Trustees and
officers. The Trust has no obligation to deal with any broker or group of
brokers in the execution of transactions in portfolio securities. Orders for
transactions in portfolio securities are placed for the Trust with a number of
brokers and dealers, including Merrill Lynch. In placing orders, it is the
policy of the Trust 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 Trust the best
price and execution or other services which are of benefit to the Trust.
Securities firms also may receive brokerage commissions on transactions
including covered call options written by the Trust and the sale of underlying
securities upon the exercise of such options. In addition, consistent with the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.
and policies established by the Trustees, the Manager may consider sales of
shares of the Funds as a factor in the selection of brokers or dealers to
execute portfolio transactions for the Trust.

The Trust 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 Trust. Such supplemental research services ordinarily
consist of, quantitative and modeling information, 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 Trust 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 Trust anticipates that brokerage transactions involving securities of
companies domiciled in countries other than the United States will be conducted
primarily on the principal stock exchanges of such countries. Brokerage
commissions and other transaction costs on foreign stock exchange transactions
are generally higher than in the United States, although the Trust will endeavor
to achieve the best net results in effecting its portfolio transactions. There
is generally less government supervision and regulation of foreign stock
exchanges and brokers than in the United States.

The Trust 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, persons
affiliated with the Trust are prohibited from dealing with the Trust as
principal in purchase and sale of securities. Since transactions in the
over-the-counter market usually involve transactions with dealers acting as
principal for their own accounts, affiliated persons of the Trust, including
Merrill Lynch, will not serve as the Trust's dealer in such transactions.
However, affiliated persons of the Trust may serve as its broker in the
over-the-counter transactions conducted on an agency basis.

8
<PAGE>
Pursuant to Section 11(a) of the Securities Exchange Act of 1934, as
amended, Merrill Lynch may execute transactions for the Trust on the floor of
any national securities exchange provided that prior authorization of such
transactions is obtained and Merrill Lynch furnishes a statement to the Trust at
least annually setting forth the compensation it has received in connection with
such transactions.

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

Portfolio Turnover. Although the Series will use a passive, indexing
approach to investing, each Series may engage in a substantial number of
portfolio transactions. The rate of portfolio turnover will be a limiting factor
when the Manager considers whether to purchase or sell securities for a Series
only to the extent that the Manager will consider the impact of transaction
costs on a Series' tracking error. Changes in the securities comprising a
Series' index will tend to increase that Series' portfolio turnover rate, as the
Manager restructures the Series' holdings to reflect the changes in the index. 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 Series' 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 Series 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 Funds 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 (a "Pricing Day"). 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 a 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 Administrator and the Distributor, and the
advisory fees payable indirectly by the Series of the Trust to the Manager, are
accrued daily.

9
<PAGE>
not readily available are valued at fair market value, as determined in good
faith by or under the direction of the Trustees of the Trust.

Each investor in the Trust may add to or reduce its investment in any
Series on each Pricing Day. The value of each investor's (including the
respective Funds') interest in a Series will be determined as of 15 minutes
after the close of business on the New York Stock Exchange (generally 4:00 p.m.,
New York Time) by multiplying the net asset value of the Series by the
percentage, effective for that day, that represents that investor's share of the
aggregate interests in such Series. Any additions or withdrawals, which are to
be effected on that day, will then be effected. The investor's percentage of the
aggregate beneficial interests in a Series will then be re-computed as the
percentage equal to the fraction (i) the numerator of which is the value of such
investor's investment in the Series as of the time or determination on such day
plus or minus, as the case may be, the amount of any additions to or withdrawals
from the aggregate investments in the Series by all investors in the Series. The
percentage so determined will then be applied to determine the value of the
investor's interest in such Series as of such time on the next Pricing Day of
the Series.

SHAREHOLDER SERVICES

The Funds offer a number of shareholder services described below which are
designed to facilitate investment in their shares. Full details as to each of
such services and copies of the various plans described below can be obtained
from the Funds, 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 the Transfer Agent has an
Investment Account and will receive statements, at least quarterly, from the
Transfer Agent. These statements will serve as transaction confirmations for
automatic investment purchases and the reinvestment of ordinary income dividends
and long-term capital gains distributions. The statement will also show any
other activity in the account since the preceding statements. Shareholders will
receive separate transaction confirmations for each purchase or sale transaction
other than automatic investment purchase and the reinvestment of ordinary income
dividends and long-term capital gains distribution. Shareholders may make
additions to their Investment Account at any time by mailing a check directly to
the Transfer Agents. 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 delivery of shares of a Fund, a shareholder must
either redeem the shares 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.

10
<PAGE>
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 of an Investment Account may be requested by a
shareholder directly from Merrill Lynch Financial Data Services, Inc. (the
"Transfer Agent").

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 Funds. Such reinvestment
will be at the net asset value of shares of a 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.

Systematic Withdrawal Plans.

A shareholder may elect to receive systematic withdrawal payments from such
shareholder's Investment Account in the form of payments by check or through
automatic payment by direct deposit to such shareholder's bank account on either
a monthly or quarterly basis. Shareholders whose shares are held within a
CMA(R), CBA(R) or Retirement Account may elect to have shares redeemed on a
monthly, bi-monthly, quarterly, semiannual or annual basis through the
Systematic Redemption Program, subject to certain conditions.

Automatic Investment Plans.

Regular additions of shares may be made in an investor's Investment Account
by prearranged charges of $50 or more to such investor's regular bank account.
Investors who maintain CMA(R) accounts may arrange to have periodic investments
made in the Funds in their CMA(R) account or in certain related accounts in
amounts of $100 or more through the CMA(R) Automated Investment Program.

Retirement Plans

Self-directed individual retirement accounts and other retirement plans are
available from Merrill Lynch. Under these plans, investments may be made in a
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 $100 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.

<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES

Dividends and Distributions

It is the Corporation's intention to distribute all of its net investment
income, if any. Dividends from such net investment income will be paid at lease
annually. All net realized long- or short-term capital gains, if any, are
distributed to Fund shareholders at least annually. From time to time, a 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.
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 Funds.
Shareholders may elect in writing to receive any such dividends or
distributions, or both, in cash.

Taxes

The Funds intend 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, a 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 each 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.

Under certain provisions of the Code, some shareholders may be subject to a

31% withholding tax on reportable dividends, capital gains distributions and
redemption payments ("backup withholding"). Generally, shareholders subject to
backup withholding will be those for whom a certified taxpayer identification
number is not on file with the Corporation or who, to the Corporation's
knowledge, have furnished an incorrect number. When establishing an account, an
investor must certify under penalty of perjury that such number is correct and
that such investor is not otherwise subject to backup withholding.

12
<PAGE>
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 a 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 a Fund.

The Series. The Trust has received a private letter ruling from the
("IRS"), pursuant to which each Series is classified as a partnership for tax
purposes. If any of the facts upon which such ruling is premised change in any
material respect (e.g., if the Trust were required to register its interests
under the Securities Act) and the Trust is unable to obtain a revised private
letter ruling from the IRS indicating that each Series will continue to be
classified as a partnership, then the Board of Directors of the Corporation will
determine, in its discretion, the appropriate course of action for the Funds.
One possible course of action would be to withdraw the Funds' investments from
the Series and to retain an investment adviser to manage the Funds' assets in
accordance with the investment policies applicable to the respective Fund. See
"Investment Objectives and Policies."

PERFORMANCE DATA

From time to time a Fund may include its Fund's average annual total
return, other total return data and/or yield in advertisements or information
furnished to present or prospective shareholders. Total return figures are based
on a Fund's historical performance and are not intended to indicate future
performance. Average annual total return and yield are 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.

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

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

<PAGE>
GENERAL INFORMATION

Description of Shares

Stock certificates are issued by the Transfer Agent only on specific
request. Certificates for fractional shares are not issued in any case.

The Trust consists of four Series, and is organized as a Delaware business
trust. Whenever a Fund is requested to vote on a fundamental policy of a Series,
the Corporation will hold a meeting of the investing Fund's shareholders and
will cast its vote as instructed by such Fund's shareholders.

MLAM provided the initial capital for each Fund by purchasing [ ] shares of
Class A and Class D for an aggregate of $[ ]. Such shares were acquired for
investment and can only be disposed of by redemption. The organizational

expenses of the Corporation (estimated to be approximately $_________) will be
paid by the Corporation and amortized over a period not exceeding five years.
The proceeds realized by MLAM 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.

14
<PAGE>
Computation of Offering Price per Share

[To follow]

Independent Auditors

Deloitte & Touche, LLP, has been selected as the independent auditors of
the Corporation and the Trust. The selection of the Corporation's independent
auditors is subject to ratification by 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 Corporation at a meeting called for the purpose of terminating such
employment. The independent auditors are responsible for auditing the annual
financial statements of the Funds.

Custodian

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

Transfer Agent

Merrill Lynch Financial Data Services, Inc., 4800 Deer Lake Drive East,
Jacksonville, Florida 32246-6484, acts as the Transfer Agent of the Corporation
and the Trust. 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 Funds--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 Corporation and the Trust.

Reports to Shareholders

The fiscal years of the Corporation and the Trust ends December 31 of each
year. The Corporation sends to its shareholders at least quarterly reports
showing the Funds' 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 Corporation has filed with the Securities and
Exchange Commission, Washington, D.C., under the Securities Act and the
Investment Company Act, to which reference is hereby made.

15
<PAGE>
Under separate agreements Merrill Lynch has granted the Corporation and the
Trust 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 Corporation and the Trust at
any time or to grant the use of such name to any other company, and the
Corporation and the Trust have 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.

16
<PAGE>
[Financials and Auditor's Report to be added by amendment.]

<PAGE>
TABLE OF CONTENTS

Page
in this
Statement
---------
Investment Objectives and Policies..
Investment Restrictions...........
Management of the Funds.............
Directors and Officers............
Administration Arrangements.......
Management and Advisory
Arrangements.....................
Purchase of Shares..................
Redemption of Shares................
Portfolio Transactions and
Brokerage..........................
Determination of Net Asset Value....
Shareholder Services................
Investment Account................
Automatic Reinvestment of
Dividends and Capital Gains
Distributions....................
Systematic Withdrawal Plans ......
Automatic Investment Plans .......
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
INDEX FUNDS, INC.

___________, 1996

Distributor:
Merrill Lynch Funds
Distributor, Inc.

<PAGE>
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 -- Instrument Defining Rights of Shareholders. Incorporated by reference
to Exhibits 1 and 2 above.
5 -- Not Applicable
6 -- Distribution Agreement between Registrant and Merrill Lynch Funds
Distributor, Inc.*
7 -- None.
8 -- Custody Agreement between Registrant and [ ]*.
9(a) -- Administration Agreement between Registrant and Merrill Lynch Asset
Management, L.P.*
(b) -- Transfer Agency, Dividend Disbursing Agency and Shareholder Servicing
Agency Agreement between Registrant and Merrill Lynch Financial Data
Services, Inc.*
(c) -- Form of License Agreement relating to Use of Name between Merrill
Lynch & Co., Inc. and Registrant.*
10 -- Opinion and consent of Shereff, Friedman, Hoffman & Goodman, LLP,
counsel for Registrant.*
11 -- Consent of Deloitte & Touche, LLP, independent auditors for the
Registrant.*
12 -- None.
13 -- Certificate of Merrill Lynch Asset Management.*
14 -- Not Applicable.
15 -- Administrative Services Plan of the Registrant and Plan
Sub-Agreement.*
16 -- Not Applicable.
17 -- Not Applicable.
18 -- Rule 18f-3 Plan*
- ----------
* To be filed by amendment.

C-1
<PAGE>

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

Prior to the effective date of this Registration Statement, the
Registrant will sell shares of the each Series of Registrant to Merrill Lynch
Asset Management, L.P. (the "Manager" or "MLAM").

Item 26. Number of Holders of Securities

None.

Item 27. Indemnification.

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

Article VI of the By-Laws provides that each current and former
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 has purchase 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.

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.

C-2
<PAGE>
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 Builder Program, Inc., Merrill Lynch
Asset Growth Fund, Inc., Merrill Lynch Asset Income Fund, 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,
Inc., 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 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.,

C-3
<PAGE>
MuniAssets Fund, Inc., MuniEnhanced Fund, Inc., MuniInsured Fund, Inc., MuniVest
Fund, Inc., MuniVest Fund II, 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., 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 partner of the
Manager indicating each business, profession, vocation or employment of a
substantial nature in which each such person or entity has been engaged since
February 1, 1993 for his own account or in the capacity of director, officer,
partner or trustee. In addition, Mr. Zeikel is President, Mr. Richard is
Treasurer and Mr. Glenn is Executive Vice President of substantially all of the
investment companies described in the first paragraph of Item 28, and Messrs.
Giordano, Harvey, Hewitt, Kirstein and Monagle are directors, trustees or
officers of one or more of such companies.

<TABLE>
<CAPTION>
Other Substantial Business,
Name Positions with Manager Profession, Vocation or Employment
---- ---------------------- ----------------------------------
<S> <C> <C>
ML&Co.................. Limited Partner Financial Services Holding Company;
Limited Partner of FAM

Princeton Services..... General 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.
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
Other Substantial Business,
Name Positions with Manager Profession, Vocation or Employment
---- ---------------------- ----------------------------------
<S> <C> <C>
Terry K. Glenn......... Executive Vice President Executive Vice President of FAM;
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

Elizabeth Griffin ..... Senior Vice President Senior Vice President of FAM

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

Michael J. Hennewinkel. 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 Counsel
General Counsel and and Secretary of FAM; Senior Vice
Secretary President, General Counsel, Director
and Secretary of Princeton Services;
Director of MLFD

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

Stephen M.M. Miller.... Senior Vice President Executive Vice President of Princeton
Administrators; Senior Vice President
of Princeton Services

Michael J. Quinn....... Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services;
Managing Director and First Vice
President of Merrill, Lynch, Pierce,
Fenner & Smith Incorporated from
1989 to 1995.

Richard L. Reller...... Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services

Joseph T. Monagle...... Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
Other Substantial Business,
Name Positions with Manager Profession, Vocation or Employment
---- ---------------------- ----------------------------------
<S> <C> <C>
Gerald M. Richard ..... Senior Vice President and Senior Vice President and Treasurer of
Treasurer FAM; Senior Vice President and
Treasurer of Princeton Services; Vice
President and Treasurer of MLFD

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
</TABLE>

Item 29. Principal Underwriters.

(a) MLFD acts as the placement agent for the Registrant and as principal
underwriter 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 9081, Princeton, New
Jersey 08543-9081, except that the address of Messrs. Crook, Aldrich, Breen,
Fatseas and Wasel is One Financial Center, Boston, Massachusetts 02111-2646.

(1) (2) (3)
Positions and Offices Positions and Offices
Name with the Distributor with Registrant
---- -------------------- ---------------
Terry K. Glenn........... President and Director Executive Vice President
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
William M. Breen ........ Vice President None
Mark A. DeSario.......... Vice President None

C-6
<PAGE>
James T. Fatseas ........ 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
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.

C-7

<PAGE>
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 31st day of October, 1996.

MERRILL LYNCH INDEX FUNDS, INC.

Registrant

By: /s/ Mark B. Goldfus
------------------------------------
(Mark B. Goldfus, 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/ Mark B. Goldfus President and Director (Principal October 31, 1996
- ------------------------- Executive Officer)
(Mark B. Goldfus)

/s/ Robert Harris Treasurer (Principal Financial October 31, 1996
- ------------------------- Accounting Officer) and
(Robert Harris) Director

/s/ Jerry Weiss Director October 31, 1996
- -------------------------
(Jerry Weiss)

SIGNATURE

The sole Trustee of Merrill Lynch Index Trust has caused this
Registration Statement of Merrill Lynch Index Funds, Inc. to be signed on its
behalf by the undersigned, thereunto duly authorized, in the Township of
Plainsboro and State of New Jersey on the 31st day of October, 1996.

MERRILL LYNCH INDEX TRUST

By: /s/ Mark B. Goldfus
-------------------------------------
Mark B. Goldfus, Trustee

C-8

<PAGE>
INDEX TO EXHIBITS

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

C-9

<PAGE>
ARTICLES OF INCORPORATION

MERRILL LYNCH INDEX FUNDS, INC.

THE UNDERSIGNED, Kenneth L. Johnson, 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 INDEX 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.

<PAGE>
(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
four series, known as Merrill Lynch Large Cap Index Fund, Merrill Lynch Small
Cap Index Fund, Merrill Lynch Aggregate Bond Index Fund and Merrill Lynch
International Equity Index Fund (collectively, the "Series", and each, a
"Series"). Each Series shall consist, until further changed, of Twenty Five
Million (25,000,000) shares. The shares of each Series shall consist, until
further changed, of two classes of shares designated Class A shares and Class D
shares (the "Classes"). Each Class of each Series shall consist, until further
changed, of Twelve Million Five Hundred Thousand (12,500,000) shares.

(2) Unless otherwise expressly provided in the charter of the Corporation,
the Class A and Class D shares of each Series shall represent and equal
proportionate interest in the assets belonging to that Series (subject to the
liabilities of that Series) and each share of a particular Series shall have
identical voting, dividend, liquidation and other rights; provided, however,
that notwithstanding anything in the charter of the Corporation to the contrary:

(i) The Class A and Class D shares may be issued and sold subject to
such different sales loads or charges, whether initial, deferred or
contingent, or any combination thereof, as the Board of Directors may
from time to time establish in

2
<PAGE>
accordance with the Investment Company Act of 1940, as amended, and
other applicable law.

(ii) Liabilities of a Series which are determined by or under the
supervision of the Board of Directors to be attributable to a
particular Class of that Series may be charged to that Class and
appropriately reflected in the net asset value of, or dividends
payable on, the shares of that Class of the Series.

(iii) The Class A and Class D shares of a particular Series may have
such different exchange and conversion rights as the Board of
Directors shall provide in compliance with the Investment Company Act
of 1940, as amended.

(3) 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.

(4) 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.

(5) Unless otherwise expressly provided in the charter of the Corporation,
including those matters set forth in Article II, Sections (2) and (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

3
<PAGE>
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.

(6) 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).

(7) Unless otherwise expressly provided in the charter of the Corporation,
including any Articles Supplementary creating any class or series of capital
stock, subject to compliance with the requirements of the Investment Company Act
of 1940, as amended, the Board of Directors shall have the authority to provide
that holders of shares of any class or series shall have the right to convert or
exchange said shares into shares of one or more other classes or series in
accordance with such requirements and procedures as may be established by the
Board of Directors.

(8) 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.

(9) 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; provided, however, that the Corporation shall not be
required to issue share certificates for such fractional shares.

(10) 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.

4
<PAGE>
(11) 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. Any reference to "shares," "stock" or "shares of
stock" in these Articles of Incorporation shall be deemed to refer, unless the
context otherwise requires, to the shares of each separate class and/or series.
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.

(12) 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.

(13)(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

5
<PAGE>
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:

Mark B. Goldfus
Robert Harris
Jerry Weiss

(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.

6
<PAGE>
(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 currently acting and former director and 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. The
foregoing rights of indemnification shall not be exclusive of any other rights
to which those seeking indemnification may be entitled.

(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.

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ARTICLE VI
REDEMPTION

(1) 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.

(2) All shares of stock of the Corporation shall be redeemable at the
option of the Corporation. The Board of Directors may by resolution from time to
time authorize the Corporation to require the redemption of all or any part of
the outstanding shares of any class or series upon such terms and conditions as
the Board of Directors, in its discretion, shall deem advisable, and upon the
sending of written notice thereof to each holder whose shares are to be
redeemed.

(3) 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

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"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 INDEX
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 24th day of October, 1996

/s/ Kenneth L. Johnson
-----------------------------------
Kenneth L. Johnson

<PAGE>
BY-LAWS
OF
MERRILL LYNCH INDEX FUNDS, INC.

ARTICLE I
Offices

Section 1. Principal Office. The principal office of Merrill Lynch Index
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

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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 series or 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 series or 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.

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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

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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.

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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

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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

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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;

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(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 com mittees 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

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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.

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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.

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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

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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

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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

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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.

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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.