MERRILL LYNCH REAL ESTATE SECURITIES FUND INC
N-1A EL, 1997-09-30
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  As filed with the Securities and Exchange Commission on September 30, 1997

                                               Securities Act File No. 333-  
                                       Investment Company Act File No. 811-  


                      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 REAL ESTATE
                                  FUND, INC.
              (Exact name of registrant as specified in charter)

      800 Scudders Mill Road
      Plainsboro, New Jersey                      08536
    (Address of Principal Executive Offices)    (Zip Code)

      Registrant's Telephone Number, including Area Code (609) 282-2000

                                Arthur Zeikel
                     Merrill Lynch Real Estate Fund, Inc.
                800 Scudders Mill Road, Plainsboro, New Jersey
       Mailing Address: P.O. Box 9011, Princeton, New Jersey 08543-9011
                             --------------------
                                  Copies to:

    Counsel for the Fund:                      Philip L. Kirstein, Esq.
    Brown & Wood LLP                       Merrill Lynch Asset Management
    One World Trade Center                         P.O. Box 9011
    New York, New York  10048-0557        Princeton, New Jersey  08543-9011
    Attention: John A. MacKinnon, Esq.
    
                              --------------------     
                Approximate Date of Proposed Public Offering:
     As soon as practicable after the effective date of this Registration
Statement.
                              --------------------

    An  indefinite number  of  shares of  common stock  of the  Registrant is
being registered by  this Registration Statement under the  Securities Act of
1933 pursuant to Rule 24f-2 under the Investment Company Act of 1940.

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

                     MERRILL LYNCH REAL ESTATE FUND, INC.
                     REGISTRATION STATEMENT ON FORM N-1A
                            CROSS REFERENCE SHEET

<TABLE>
<CAPTION>
                                           N-1A Item No.                                                Location
                                           -------------                                                --------
<S>           <C>                                                                 <C>
PART A
     Item 1.   Cover Page  . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
     Item 2.   Synopsis  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fee Table
     Item 3.   Condensed Financial Information . . . . . . . . . . . . . . . . . . Not Applicable
     Item 4.   General Description of Registrant . . . . . . . . . . . . . . . . . Cover Page; Risk Factors and Special
                                                                                   Considerations; Investment Objective and
                                                                                   Policies; Additional Information
     Item 5.   Management of the Fund  . . . . . . . . . . . . . . . . . . . . . . Fee Table; Management of the Fund; Inside Back
                                                                                   Cover Page
     Item 5A.  Management's Discussion of Fund Performance . . . . . . . . . . . . Not Applicable
     Item 6.   Capital Stock and Other Securities  . . . . . . . . . . . . . . . . Cover Page; Additional Information

     Item 7.   Purchase of Securities Being Offered  . . . . . . . . . . . . . . . Cover Page; Merrill Lynch Select Pricing(Service
                                                                                   Mark) System; Fee Table; Purchase of Shares;
                                                                                   Shareholder Services; Additional Information;
                                                                                   Inside Back Cover Page
     Item 8.   Redemption or Repurchase  . . . . . . . . . . . . . . . . . . . . . Merrill Lynch Select Pricing(Service Mark)
                                                                                   System; Fee Table; Purchase of Shares;
                                                                                   Redemption of Shares
     Item 9.   Pending Legal Proceedings . . . . . . . . . . . . . . . . . . . . . Not Applicable

PART B
     Item 10.  Cover Page  . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
     Item 11.  Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . Back Cover Page
     Item 12.  General Information and History . . . . . . . . . . . . . . . . . . General Information
     Item 13.  Investment Objective and Policies . . . . . . . . . . . . . . . . . Investment Objective and Policies 
     Item 14.  Management of the Fund  . . . . . . . . . . . . . . . . . . . . . . Management of the Fund
     Item 15.  Control Persons and Principal Holders of Securities . . . . . . . . Management of the Fund; Additional Information
     Item 16.  Investment Advisory and Other Services  . . . . . . . . . . . . . . Management of the Fund; Purchase of Shares;
                                                                                   General Information
     Item 17.  Brokerage Allocation and Other Practices  . . . . . . . . . . . . . Portfolio Transactions and Brokerage

     Item 18.  Capital Stock and Other Securities  . . . . . . . . . . . . . . . . General 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, Distributions and Taxes
     Item 21.  Underwriters  . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchase of Shares
     Item 22.  Calculation of Performance Data . . . . . . . . . . . . . . . . . . Performance Data
     Item 23.  Financial Statements  . . . . . . . . . . . . . . . . . . . . . . . Statement of Assets and Liabilities
</TABLE>

PART C

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

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

                            SUBJECT TO COMPLETION 
               PRELIMINARY PROSPECTUS DATED SEPTEMBER 30, 1997

PROSPECTUS
- --------
________ ___, 1997


                     MERRILL LYNCH REAL ESTATE FUND, INC.
  P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011   PHONE NO. (609) 282-2800
                               ----------------------
    Merrill Lynch  Real Estate Fund, Inc.  (the "Fund") is a non-diversified,
open-end  management investment  company  seeking total  return by  investing
primarily in equity securities of issuers that are principally engaged in the
real  estate industry.  Total return is a combination of capital appreciation
and investment income.  The Fund may employ a variety of techniques to  hedge
against  market or currency risk or to enhance total return.  The Fund should
be considered  as a  means of diversifying  an investment  portfolio and  not
itself a balanced  investment.   There can  be no assurance  that the  Fund's
investment objective will  be realized.  For  more information on  the Fund's
Investment Objective and Policies, see "Investment Objective and Policies" on
page 11.

    Pursuant to  the Merrill Lynch  Select Pricing(Service  Mark) System, the
Fund offers  four classes  of shares,  each with a  different combination  of
sales charges,  ongoing fees and  other features.   The Merrill  Lynch Select
Pricing(Service Mark)  System permits  an investor  to choose  the method  of
purchasing  shares that  the investor believes  is most  beneficial given the
amount of the purchase, the  length of time the investor expects to  hold the
shares   and  other  relevant  circumstances.    See  "Merrill  Lynch  Select
Pricing(Service Mark) System" on page 3.

    Merrill Lynch  Funds  Distributor,  Inc. (the  "Distributor"),  P.O.  Box
9081, Princeton, New Jersey 08543-9081 ((609) 282-2800), and other securities
dealers  which  have  entered  into  selected  dealer   agreements  with  the
Distributor,  including Merrill  Lynch, Pierce,  Fenner &  Smith Incorporated
("Merrill Lynch"), will solicit subscriptions for shares of the Fund during a
period expected to end  on __________, 1997, unless  extended.  On the  third
business   day  after  the   conclusion  of  the   subscription  period,  the
subscriptions will  be payable, the shares  will be issued and  the Fund will
commence operations.   The  public offering  price of  the shares during  the
subscription offering will be  $10.00 per share  in the case  of Class B  and
Class C shares and $10.00 per share  plus a sales charge of $.554, subject to
reductions on  purchases in  single transactions of  $25,000 or more,  in the
case of Class  A and Class  D shares.   After the  completion of the  initial
subscription offering, the  Fund will engage in a continuous  offering of its
shares as described herein under "Merrill Lynch  Select Pricing(Service Mark)
System."  The minimum initial purchase during the subscription and continuous
offerings  is $1,000 and  the minimum  subsequent purchase in  the continuous
offering is  $50, with  certain exceptions.    Merrill Lynch  may charge  its
customers a  processing fee  (presently $5.35)  for confirming  purchases and
repurchases.   Purchases  and redemptions  made directly  through the  Fund's
transfer  agent are  not subject  to the  processing fee.   See  "Purchase of
Shares" and "Redemption of Shares."
                               -----------------------
   THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
        AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
         ACCURACY OR ADEQUACY OF THIS PROSPECTUS.  ANY REPRESENTATION
                    TO THE CONTRARY IS A CRIMINAL OFFENSE.
                               -----------------------
    This Prospectus  is a  concise statement  of information  about the  Fund
that is relevant to making an investment in the Fund.  This Prospectus should
be  retained  for  future  reference.    A  statement  containing  additional
information  about the  Fund, dated  ________  ___, 1997  (the "Statement  of
Additional  Information"), has  been filed with  the Securities  and Exchange
Commission (the "Commission") and is available, without charge, by calling or
by writing the Fund at the above telephone number or address.  The Commission
maintains a  Web site  (http://www.sec.gov)  that contains  the Statement  of
Additional  Information,  material   incorporated  by  reference   and  other
information regarding the Fund.   The Statement of Additional Information  is
hereby incorporated by reference into this Prospectus.
                               -------------------------
                   MERRILL LYNCH ASSET MANAGEMENT--MANAGER
              MERRILL LYNCH FUNDS DISTRIBUTOR, INC.--DISTRIBUTOR

                                  FEE TABLE

    A general comparison  of the  sales arrangements  and other  nonrecurring
and recurring expenses applicable to shares of the Fund follows:

<TABLE>
<CAPTION>                                              Class A(a)    Class B(b)                     Class C          Class D
                                                       ----------    ----------                     -------          -------
<S>                                                   <C>           <C>                            <C>               <C>
Shareholder Transaction Expenses:
     Maximum Sales Charge Imposed on Purchases (as
         a percentage of offering price)  . . . . .    5.25%(c)      None                           None               5.25%(c)
     Sales Charge Imposed on Dividend Reinvestments 
                                                       None          None                           None             None
     Deferred Sales Charge (as a percentage of                       4.0% during the first
         original purchase price or redemption                       year, decreasing 1.0%
         proceeds, whichever is lower)  . . . . . .                  annually to 0.0% after the     1.0% for one
                                                       None(d)       fourth year(e)                 year(f)          None(d)

     Exchange Fee . . . . . . . . . . . . . . . . .    None          None                           None             None
Annual Fund Operating Expenses
     (as a percentage of average net assets):
    Investment Advisory Fees(g) . . . . . . . . . .        %         %                              %                %
    12b-1 Fees (includes account maintenance
      fees and distribution fees)(h)  . . . . . . .    None          1.00%                           1.00%             0.25%
                                                                     (Class B shares convert to
                                                                     Class D shares
                                                                     automatically after
                                                                     approximately eight years
                                                                     and cease being subject to
                                                                     distribution fees)
     Other Expenses:
             Custodial Fees   . . . . . . . . . . .        %                   %                         %               %
             Shareholder Servicing Costs(i)   . . .        %                   %                         %               %
             Other  . . . . . . . . . . . . . . . .        %                   %                         %               %
                                                     ------              ------                     -----           -----
                  Total Other Expenses  . . . . . .        %                   %                         %               %
                                                     ------              ------                     -----           -----
     Total Fund Operating Expenses  . . . . . . . .        %                   %                         %               %
                                                     ======              ======                     =====           =====
</TABLE>
_______________

(a) Class A  shares are  sold  to  a  limited  group of  investors  including
    existing Class A  shareholders,  certain  retirement  plans  and  certain
    participants  in fee-based  programs.   See "Purchase  of Shares--Initial
    Sales Charge  Alternatives--Class A and  Class D Shares"  on page 21  and
    "Shareholder Services--Fee-Based Programs" on page 28.
(b) Class B  shares  convert  to Class D  shares  automatically approximately
    eight years  after initial  purchase.  See "Purchase  of Shares--Deferred
    Sales Charge Alternatives--Class B and Class C Shares" on page 22.
(c) Reduced for purchases  of $25,000 and over,  and waived for purchases  of
    Class A  shares   by  certain   retirement  plans  and   participants  in
    connection  with  certain  fee-based  programs.    Class A  and   Class D
    purchases of $1,000,000  or more may not be  subject to an  initial sales
    charge.   See "Purchase  of Shares--Initial  Sales Charge  Alternatives--
    Class A and Class D Shares" on page 21.
(d) Class A and  Class D shares  are  not subject  to  a contingent  deferred
    sales charge  ("CDSC"), except  that certain  purchases of $1,000,000  or
    more which  are not  subject to an  initial sales charge  may instead  be
    subject to  a  CDSC  of 1.0% of  amounts redeemed  within the first  year
    after purchase.   Such CDSC may be waived in connection with certain fee-
    based programs.   See "Shareholder Services--Fee-Based Programs" on  page
    28.
(e) The CDSC  may be modified in connection with  certain fee-based programs.
    See "Shareholder Services--Fee-Based Programs" on page 28.
(f) The  CDSC may be  waived in  connection with certain  fee-based programs.
    See "Shareholder Services--Fee-Based Programs" on page 28.
(g) See "Management  of the  Fund--Management and  Advisory Arrangements"  on
    page 17.
(h) See "Purchase of Shares--Distribution Plans" on page 24.
(i) See "Management of the Fund--Transfer Agency Services" on page 18.

EXAMPLE:

<TABLE>
<CAPTION>                                                                                               CUMULATIVE EXPENSES PAID
                                                                                                           FOR THE PERIOD OF:
                                                                                                        -------------------------
                                                                                                         1 YEAR           3 YEARS
                                                                                                        --------          --------
<S>                                                                                                      <C>              <C>
An investor would pay the following expenses on a $1,000 investment including the maximum
     $52.50 initial sales charge (Class A and Class D shares only) and assuming (1) the Total
     Fund Operating Expenses for each class set forth on page 2, (2) a 5% annual return
     throughout the periods and (3) redemption at the end of the period (including any
     applicable CDSC for Class B and Class C shares):
         Class A  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           $___              $___
         Class B  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           $___              $___
         Class C  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           $___              $___
         Class D  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           $___              $___
An investor would pay the following expenses on the same $1,000 investment assuming no
     redemption at the end of the period:
         Class A  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           $___              $___
         Class B  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           $___              $___
         Class C  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           $___              $___
         Class D  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           $___              $___

</TABLE>

    The foregoing Fee Table is intended  to assist investors in understanding
the  costs and expenses that a shareholder  in the Fund will bear directly or
indirectly.   The expenses  set forth  under "Other  Expenses"  are based  on
estimated  amounts through  the end  of the  Fund's first  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 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.  Class B  and Class C shareholders who
hold their shares for an  extended period of time may pay more  in Rule 12b-1
distribution fees than the economic equivalent of the maximum front-end sales
charge permitted  under the  Conduct  Rules of  the National  Association  of
Securities  Dealers,  Inc. (the  "NASD").    Merrill  Lynch  may  charge  its
customers  a processing fee  (presently $5.35)  for confirming  purchases and
repurchases.   Purchases  and redemptions  made  directly through  the Fund's
transfer  agent are  not subject  to the  processing fee.   See  "Purchase of
Shares" and "Redemption of Shares."

              MERRILL LYNCH SELECT PRICING(SERVICE MARK) SYSTEM

    The Fund offers  four classes of  shares under the  Merrill Lynch  Select
Pricing(Service Mark) System.  The shares of each class may be purchased at a
price equal to  the next determined net asset value per  share subject to the
sales  charges and  ongoing  fee  arrangements described  below.   Shares  of
Class A and  Class D are sold to investors  choosing the initial sales charge
alternatives,  and  shares  of Class B  and  Class C  are  sold to  investors
choosing the  deferred sales charge  alternatives.  The Merrill  Lynch Select
Pricing(Service  Mark) System is  used by more  than 50 registered investment
companies advised  by Merrill  Lynch Asset  Management, L.P.  ("MLAM" or  the
"Manager")  or Fund  Asset Management,  L.P. ("FAM"),  an affiliate  of MLAM.
Funds  advised  by  MLAM  or  FAM  that  utilize  the  Merrill  Lynch  Select
Pricing(Service Mark) System are referred  to herein as "MLAM-advised  mutual
funds."

    Each Class A, Class B,  Class C or  Class D share of the  Fund represents
an  identical interest in  the investment portfolio  of the Fund  and has the
same  rights,  except that  Class B,  Class C  and  Class D shares  bear  the
expenses  of the  ongoing account  maintenance fees  and Class B  and Class C
shares bear the expenses of the ongoing distribution fees  and the additional
incremental transfer  agency costs resulting  from the deferred  sales charge
arrangements.  The CDSCs, distribution fees and account maintenance fees that
are imposed on Class B and Class C shares, as well as the account maintenance
fees  that are imposed on Class D shares,  are imposed directly against those
classes and not against all assets of the Fund and, accordingly, such charges
will  not affect the net asset value of any other class or have any impact on
investors choosing another sales charge option.  Dividends paid by the 
Fund for  each class of shares will  be calculated in the  same manner at the
same  time and will  differ only to  the extent that  account maintenance and
distribution fees  and any incremental  transfer agency  costs relating to  a
particular  class are  borne  exclusively  by that  class.    Each class  has
different  exchange   privileges.     See   "Shareholder   Services--Exchange
Privilege."

    Investors  should understand that the purpose and function of the initial
sales charges with respect to the Class A  and Class D shares are the same as
those of the deferred sales charges and distribution fees with respect to the
Class B and Class C  shares in that  the sales charges and  distribution fees
applicable to each class provide for the financing of the distribution of the
shares of the Fund.  The distribution-related revenues paid with respect to a
class will  not be used  to finance the distribution  expenditures of another
class.    Sales  personnel  may receive  different  compensation  for selling
different classes of shares.

    The  following   table  sets   forth  a   summary  of  the   distribution
arrangements  for each  class  of  shares  under  the  Merrill  Lynch  Select
Pricing(Service Mark) System, followed by a more detailed description of each
class and  a discussion  of the  factors that  investors  should consider  in
determining the  method of purchasing  shares under the Merrill  Lynch Select
Pricing(Service  Mark)  System  that  the   investor  believes  is  the  most
beneficial  under  his  or  her  particular  circumstances.    More  detailed
information as  to  each class  of shares  is  set forth  under "Purchase  of
Shares."

<TABLE>
<CAPTION>
                                                               Account Maintenance  Distribution              Conversion
        Class                    Sales Charge/(1)/                     Fee               Fee                    Feature
        ------                  --------------------            ------------------  -------------             ----------
<S>     <C>          <C>                                            <C>               <C>         <C>
          A                 Maximum 5.25% initial sales                No                No                       No
                                  charge/(2)(3)/
          B            CDSC for a period of four years, at a          0.25%             0.75%        B shares convert to D shares
                        rate of 4.0% during the first year,                                               automatically after
                       decreasing 1.0% annually to 0.0%/(4)/                                        approximately eight years/(5)/
          C                 1.0% CDSC for one year/(6)/               0.25%             0.75%                     No
          D           Maximum 5.25% initial sales charge/(3)/         0.25%              No                       No

</TABLE>
_______________
(1) Initial  sales  charges  are  imposed  at  the  time  of  purchase  as  a
    percentage  of the offering  price.  CDSCs are  imposed if the redemption
    occurs within  the  applicable CDSC  time period.    The  charge will  be
    assessed on an amount  equal to the lesser of the proceeds of  redemption
    or the cost of the shares being redeemed.
(2) Offered only  to eligible  investors.   See "Purchase of  Shares--Initial
    Sales Charge  Alternatives--Class A and  Class D Shares--Eligible Class A
    Investors." 
(3) Reduced  for purchases of  $25,000 or  more and  waived for  purchases of
    Class A   shares  by   certain  retirement  plans   and  participants  in
    connection with  certain fee-based programs.   Class A and Class D  share
    purchases of $1,000,000  or more may not  be subject to an initial  sales
    charge but instead may be subject to  a 1.0% CDSC if redeemed  within one
    year.   Such CDSC  may be  waived in  connection  with certain  fee-based
    programs.   A 0.75%  sales charge  for 401(k)  purchases over  $l,000,000
    will apply.  See "Class A" and "Class D" below.
(4) The CDSC may be modified in connection with certain fee-based programs.
(5) The   conversion  period   for  dividend  reinvestment   shares  and  the
    conversion  and  holding   periods  for  certain  retirement  plans   are
    modified.   Also,  Class B shares  of certain  other MLAM-advised  mutual
    funds into  which  exchanges  may be  made  have  a  ten-year  conversion
    period.  If Class B shares  of the Fund are  exchanged for Class B shares
    of another MLAM-advised mutual fund, the conversion period  applicable to
    the  Class B shares acquired in  the exchange will apply, and the holding
    period for the shares  exchanged will be tacked  onto the holding  period
    for the shares acquired.
(6) The CDSC may be waived in connection with certain fee-based programs.

Class A:     Class A  shares incur  an  initial sales  charge  when they  are
             purchased   and  bear   no  ongoing   distribution  or   account
             maintenance fees.    Class A shares  are  offered to  a  limited
             group of investors and also will be  issued upon reinvestment of
             dividends   on  outstanding  Class A   shares.    Investors  who
             currently  own  Class A shares  of  the  Fund  in a  shareholder
             account are  entitled to purchase  additional Class A  shares of
             the Fund  in  that account.   Other  eligible investors  include
             certain retirement  plans and participants in  certain fee-based
             programs.   In addition, Class A shares  will be offered  at net
             asset value to  Merrill Lynch & Co.,  Inc. ("ML & Co.")  and its
             subsidiaries  (the  term  "subsidiaries" when  used  herein with
             respect to ML & Co. includes the  Manager, FAM and certain other
             entities directly or indirectly  wholly owned and controlled  by
             ML & Co.), and their  directors and employees and to members  of
             the Boards  of MLAM-advised mutual  funds.  The  maximum initial
             sales charge  of 5.25% is reduced  for purchases of  $25,000 and
             over  and waived for  purchases by certain  retirement plans and
             participants in connection with   certain  fee-based   programs.
             Purchases  of
             $1,000,000 or  more may  not be  subject to  an initial
             sales charge, but if the initial sales charge is waived
             such purchases may  be subject  to a 1.0%  CDSC if  the
             shares are  redeemed within  one year  after  purchase.
             Such  CDSC may  be waived  in  connection with  certain
             fee-based  programs.   Sales  charges are  also reduced
             under  a right of accumulation  that takes into account
             the  investor's   holdings  of   all  classes  of   all
             MLAM-advised mutual  funds.  See  "Purchase of Shares--
             Initial Sales Charge Alternatives--Class A and  Class D
             Shares."

Class B:     Class B  shares  do  not incur  a  sales  charge  when they  are
             purchased,   but  they   are  subject  to   an  ongoing  account
             maintenance  fee of  0.25% and  an  ongoing distribution  fee of
             0.75% of the  Fund's average net assets attributable  to Class B
             shares, and a  CDSC if they  are redeemed  within four years  of
             purchase.   Such CDSC may be modified in connection with certain
             fee-based  programs.  Approximately  eight years after issuance,
             Class B shares will  convert automatically  into Class D  shares
             of the  Fund, which  are subject to  an account maintenance  fee
             but  no  distribution  fee;  Class B  shares  of  certain  other
             MLAM-advised mutual  funds  into  which exchanges  may  be  made
             convert into  Class D shares  automatically after  approximately
             ten  years.   If Class B  shares of  the Fund  are exchanged for
             Class B  shares   of  another  MLAM-advised  mutual   fund,  the
             conversion period applicable  to the Class B shares  acquired in
             the  exchange   will  apply,   as  will   the  Class D   account
             maintenance  fee of the  acquired fund upon  the conversion, and
             the holding  period for the shares exchanged will be tacked onto
             the  holding   period  for  the  shares   acquired.    Automatic
             conversion  of Class B shares into  Class D shares will occur at
             least once  a  month on  the  basis of  the relative  net  asset
             values of the shares of  the two classes on the conversion date,
             without the imposition of  any sales load, fee or  other charge.
             Conversion of  Class B  shares to  Class D  shares will  not  be
             deemed a purchase or sale of  the shares for Federal income  tax
             purposes.   Shares purchased through  reinvestment of  dividends
             on  Class B shares  also will  convert automatically  to Class D
             shares.  The conversion period for dividend  reinvestment shares
             and the conversion  and holding periods  for certain  retirement
             plans  are modified  as described  under  "Purchase of  Shares--
             Deferred Sales Charge Alternatives--Class B  and Class C Shares-
             -Conversion of Class B Shares to Class D Shares."

Class C:     Class C  shares do  not  incur  a  sales charge  when  they  are
             purchased,  but   they  are  subject   to  an  ongoing   account
             maintenance  fee of  0.25% and  an  ongoing distribution  fee of
             0.75% of the  Fund's average net assets attributable  to Class C
             shares.   Class C shares  are also  subject to  a 1.00% CDSC  if
             they are  redeemed within one year  of purchase.   Such CDSC may
             be  waived   in  connection  with  certain  fee-based  programs.
             Although Class C shares are subject to a  CDSC for only one year
             (as compared to four  years for Class B), Class C shares have no
             conversion feature and,  accordingly, an investor who  purchases
             Class C  shares will be  subject to distribution  fees that will
             be  imposed on Class C  shares for an  indefinite period subject
             to  annual  approval  by  the  Fund's  Board  of  Directors  and
             regulatory limitations.

Class D:     Class D  shares incur  an  initial sales  charge  when they  are
             purchased and are subject to an ongoing account  maintenance fee
             of  0.25%  of the  Fund's  average  net  assets attributable  to
             Class D shares.  Class D  shares are not  subject to an  ongoing
             distribution  fee  or any  CDSC  when they  are  redeemed.   The
             maximum initial sales charge  5.25% is reduced for  purchases of
             $25,000 and over.   Purchases of $1,000,000 or  more may not  be
             subject to  an initial  sales charge, but  if the initial  sales
             charge is waived  such purchases may be  subject to a 1.0%  CDSC
             if  the shares  are  redeemed within  one  year after  purchase.
             Such CDSC  may be  waived in  connection with  certain fee-based
             programs.   The schedule of initial sales charges and reductions
             for  Class D shares  is the  same  as the  schedule for  Class A
             shares,  except  that  there  is  no  waiver  for  purchases  by
             retirement  plans or  participants  in connection  with  certain
             fee-based programs.   Class D  shares also  will be issued  upon
             conversion  of   Class B   shares  as   described  above   under
             "Class B."   See  "Purchase  of   Shares--Initial  Sales  Charge
             Alternatives--Class A and Class D Shares."

    The  following is  a  discussion of  the  factors that  investors  should
consider  in determining the  method of  purchasing shares under  the Merrill
Lynch Select Pricing(Service Mark) System that the investor believes is  most
beneficial under his or her particular circumstances.

    Initial  Sales  Charge  Alternatives.   Investors  who prefer  an initial
sales charge  alternative may  elect to  purchase  Class D shares  or, if  an
eligible  investor, Class A  shares.   Investors choosing  the initial  sales
charge  alternative  who  are  eligible  to  purchase Class A  shares  should
purchase  Class A shares  rather  than Class D  shares  because there  is  an
account maintenance fee imposed on  Class D shares.  Investors qualifying for
significantly reduced initial sales charges may find the initial sales charge
alternative  particularly attractive because  similar sales charge reductions
are not  available  with respect  to  the CDSCs  imposed in  connection  with
purchases of Class B or Class C shares.  Investors not qualifying for reduced
initial sales charges who expect to maintain their investment for an extended
period of time also may elect to purchase Class A or Class D  shares, because
over time the accumulated ongoing  account maintenance and distribution  fees
on Class B or Class C shares may exceed  the initial sales charge and, in the
case of Class D shares, the account maintenance fee.  Although some investors
who 
previously purchased  Class A shares  may no longer  be eligible  to purchase
Class A shares of other MLAM-advised mutual funds, those previously purchased
Class A  shares, together with  Class B, Class C and  Class D share holdings,
will count  toward a right of accumulation which may qualify the investor for
reduced initial  sales charges  on new initial  sales charge  purchases.   In
addition,   the  ongoing   Class B  and   Class C  account   maintenance  and
distribution  fees  will cause  Class B  and Class C  shares  to have  higher
expense ratios, pay  lower dividends and  have lower total  returns than  the
initial sales  charge shares.   The ongoing Class D  account maintenance fees
will cause Class D shares to have a higher expense ratio, pay lower dividends
and have a lower total return than Class A shares.

    Deferred Sales  Charge Alternatives.   Because no  initial sales  charges
are deducted at the time of purchase, Class B  and Class C shares provide the
benefit of  putting all of the investor's  dollars to work from  the time the
investment  is  made.    The  deferred  sales  charge  alternatives   may  be
particularly appealing to  investors who do  not qualify  for a reduction  in
initial  sales charges.   Both  Class B  and Class C  shares  are subject  to
ongoing account maintenance fees and  distribution fees; however, the ongoing
account  maintenance and distribution fees  potentially may be  offset to the
extent any return is realized  on the additional funds initially  invested in
Class B or  Class C shares.   In addition, Class B  shares will  be converted
into Class D  shares of the Fund  after a conversion period  of approximately
eight years, and thereafter investors will be subject to lower ongoing fees.

    Certain investors  may elect to purchase Class B shares if they determine
it  to be most  advantageous to have  all their funds  invested initially and
intend to hold  their shares for  an extended period  of time.  Investors  in
Class B shares should take into account  whether they intend to redeem  their
shares  within the CDSC  period and,  if not,  whether they intend  to remain
invested until the end of the conversion period and thereby take advantage of
the  reduction in  ongoing fees  resulting from  the conversion  into Class D
shares.   Other investors, however,  may elect to purchase  Class C shares if
they determine  that it  is advantageous  to have  all their  assets invested
initially and they are uncertain as to the length of time they intend to hold
their assets in MLAM-advised mutual funds.  Although Class C shareholders are
subject to  a shorter CDSC  period at a lower  rate, they forego  the Class B
conversion feature,  making their investment  subject to account  maintenance
and distribution  fees for an indefinite period of  time.  In addition, while
both Class B and  Class C distribution fees are subject to the limitations on
asset-based sales charges imposed by  the NASD, the Class B distribution fees
are  further limited under  a voluntary waiver  of asset-based sales charges.
See  "Purchase  of  Shares--Limitations  on the  Payment  of  Deferred  Sales
Charges."

                   RISK FACTORS AND SPECIAL CONSIDERATIONS

RISKS ASSOCIATED WITH REAL ESTATE INVESTMENTS

    General.  Although the Fund  does not invest directly  in real estate, it
does  invest primarily in  equity securities of  issuers that are principally
engaged in the  real estate industry and does have  a policy of concentration
of its investments in the real estate industry.   Therefore, an investment in
the Fund is subject to certain risks associated with the direct  ownership of
real  estate  and with  the real  estate industry  in  general.   These risks
include, among others: possible  declines in the value of  real estate; risks
related  to  general   and  local  economic  conditions;   possible  lack  of
availability  of   mortgage  funds;   overbuilding;  extended   vacancies  of
properties; increases in competition,  property taxes and operating expenses;
changes in zoning laws;  costs resulting from the clean-up of,  and liability
to third parties for damages resulting from, environmental problems; casualty
or condemnation losses;  uninsured damages from floods, earthquakes  or other
natural  disasters; limitations on  and variations  in rents; and  changes in
interest rates.  To  the extent that assets underlying the Fund's investments
are concentrated  geographically,  by  property  type  or  in  certain  other
respects,  the Fund may  be subject to  certain of  the foregoing risks  to a
greater extent.  Investments by the Fund in securities of companies providing
mortgage servicing  will be subject to the risks associated with refinancings
and their impact on servicing rights.

    In addition,  if  the  Fund receives  rental income  or  income from  the
disposition of real property acquired as  a result of a default on securities
the  Fund owns, the  receipt of such  income may adversely  affect the Fund's
ability to retain its tax status as a regulated investment company because of
certain  source income  requirements applicable  to such  entities under  the
Internal Revenue Code of 1986, as amended (the "Code").

    Real Estate  Investment Trusts  ("REITs").  Investing  in REITs  involves
certain unique risks in addition to those risks associated with  investing in
the real estate industry in general.  Equity REITs may be affected by changes
in the value of  the underlying property owned  by the REITs, while  mortgage
REITs may  be affected  by the  quality of  any credit  extended.   REITs are
dependent upon management skills, are  not diversified, are subject to  heavy
cash flow dependency, default by borrowers and self-liquidation.  REITs  also
must meet certain requirements under  the Code to avoid entity level  tax and
pass-through of income  to shareholders.   REITs are consequently subject  to
the risk of failing  to meet these  requirements for favorable tax  treatment
and  failing  to  maintain  their  exemptions  from  registration  under  the
Investment Company Act of 1940, as amended (the "Investment Company Act").

    REITs  (especially  mortgage  REITs) are  also  subject to  interest rate
risks.   When interest  rates decline,  the value of  a REIT's  investment in
fixed rate  obligations can be  expected to rise.   Conversely, when interest
rates rise, the value of a REIT's investment in fixed rate obligations can be
expected to  decline.   In contrast,  as  interest rates  on adjustable  rate
mortgage loans are reset periodically, yields on a REIT's investments in such
loans will  gradually align themselves to reflect  changes in market interest
rates, causing the value of  such investments to fluctuate less  dramatically
in response  to interest  rate fluctuations than  would investments  in fixed
rate obligations.

    Investing  in REITs  involves  risks  similar to  those  associated  with
investing  in  small  capitalization  companies.    REITs  may  have  limited
financial resources,  may trade less  frequently and in  limited  volume  and
may be subject to more abrupt or erratic  price movements than larger company
securities.  Historically, small capitalization  stocks, such as REITs,  have
been more volatile in price than the larger capitalization stocks included in
the S&P Index of 500 Common Stocks.

    Mortgage-Backed Securities.  The Fund  may invest up to  35% of its total
assets   in  mortgage-backed  securities.     Investing   in  mortgage-backed
securities  involves  certain  unique  risks  in  addition   to  those  risks
associated with  investment in the  real estate  industry in general.   These
risks  include the  failure of  a  party to  meet its  commitments  under the
related operative documents, adverse interest rate changes and the effects of
prepayments on mortgage  cash flows.  When interest rates  decline, the value
of an  investment  in  fixed  rate  obligations  can  be  expected  to  rise.
Conversely,  when interest rates  rise, the value  of an  investment in fixed
rate obligations can  be expected  to decline.   In contrast, since  interest
rates on  adjustable rate mortgage  loans are  reset periodically, yields  on
investments  in such loans will gradually align themselves to reflect changes
in market interest  rates, causing the value of such investments to fluctuate
less  dramatically  in response  to  interest  rate fluctuations  than  would
investments in fixed rate obligations.

    Further, the yield  characteristics of  mortgage-backed securities,  such
as  those in  which the  Fund may  invest, differ  from those  of traditional
fixed-income  securities.    The  major  differences  typically  include more
frequent interest and principal payments (usually monthly), the adjustability
of  interest rates, and the possibility that  prepayments of principal may be
made substantially earlier than their stated final distribution dates.

    Prepayment rates  on mortgage loans are  influenced by changes in current
interest rates  and  a variety  of  economic, geographic,  social  and  other
factors,  and  cannot  be predicted  with  certainty.   Both  adjustable rate
mortgage loans and fixed rate mortgage loans may be subject to a greater rate
of principal prepayments  in a declining interest  rate environment and  to a
lesser   rate  of  principal  prepayments  in  an  increasing  interest  rate
environment.  Early payment associated with mortgage-backed securities causes
these   securities  to  experience  significantly  greater  price  and  yield
volatility  than  that experienced  by  traditional fixed-income  securities.
Under certain interest rate and prepayment  rate scenarios, the Fund may fail
to recoup fully its investment in  mortgage-backed securities notwithstanding
any direct  or  indirect governmental  or agency  guarantee.   When the  Fund
reinvests  amounts  representing  payments  and  unscheduled  prepayments  of
principal  of  the  mortgage-backed securities,  it  may  receive  a rate  of
interest that is lower than the rate on existing  mortgage-backed securities.
Thus, mortgage-backed securities,  and adjustable rate  mortgage pass-through
securities in particular,  may be less  effective than other  types of  fixed
income securities as a means of "locking in" interest rates.

DERIVATIVE INVESTMENTS

    The Fund  may engage in transactions  in certain instruments  that may be
characterized  as derivatives.   These instruments  include various  types of
options,   futures  and  options  thereon,  currency  forwards  and  options,
mortgage-backed   securities  and   indexed  securities,   including  inverse
securities.  The Fund  may engage in these transactions for  hedging purposes
or, in certain cases, to enhance total return.

    The risks  associated  with investments in mortgage-backed are securities
described  above.    Investments  in indexed  securities,  including  inverse
securities, subject  the Fund to  the risks  associated with  changes in  the
particular  indices,   which  may   include  losses   of  amounts   invested.
Transactions involving options,  futures, options on futures or  currency may
involve the loss  of an opportunity  to profit from a  price movement in  the
underlying asset beyond certain levels or a price increase on other portfolio
assets (in the case of transactions for hedging purposes) or expose  the Fund
to potential losses which  exceed the amount originally invested by  the Fund
in such instruments.   For a further discussion of  the risks associated with
these  investments, see  "Investment Objective  and Policies--Description  of
Certain Investments,"  "--Other Investment Policies  and Practices--Portfolio
Strategies Involving Options, Futures and Foreign Exchange Transactions"  and
Appendix A  to this  Prospectus, "Investment Practices  Involving the  Use of
Options, Futures and Foreign Exchange."

ILLIQUID SECURITIES

    The Fund may invest up  to 15% of its net assets in securities  that lack
an established secondary trading market or otherwise are considered illiquid.
Liquidity  of a  security relates  to the  ability to  dispose easily  of the
security and the price to be obtained upon disposition of the security, which
may  be less than  would be obtained  for a comparable  more liquid security.
Investment  of the  Fund's assets  in  illiquid securities  may restrict  the
ability of the Fund to dispose of its investments in a timely fashion and for
a  fair  price   as  well  as  its  ability  to   take  advantage  of  market
opportunities.   The risks associated  with illiquidity will  be particularly
acute in situations in which the Fund's operations require cash, such as when
the  Fund redeems  shares or  pays dividends,  and could  result in  the Fund
borrowing to meet short-term cash requirements or incurring capital losses on
the sale of illiquid investments.  Further,  issuers whose securities are not
publicly  traded  are  not  subject  to the  disclosure  and  other  investor
protection requirements  that would  be applicable  if their  securities were
publicly traded.   In  making investments  in such  securities, the  Fund may
obtain access  to  material, nonpublic  information  which may  restrict  the
Fund's ability  to conduct  portfolio transactions  in such  securities.   In
addition, the  Fund may invest in privately placed securities that may or may
not be freely transferable  under the laws of the  applicable jurisdiction or
due to  contractual restrictions  on resale.   See "Investment  Objective and
Policies--Description  of Certain  Investments--Illiquid Securities"  on page
13.

NO RATING CRITERIA FOR DEBT SECURITIES

    The Fund has not  established any rating criteria for the debt securities
in  which it  may invest  and such  securities may  not be  rated at  all for
creditworthiness.  Securities rated in the medium to low rating categories of
nationally  recognized statistical rating  organizations, such  as Standard &
Poor's  Ratings  Services   ("S&P")  and  Moody's  Investors   Service,  Inc.
("Moody's"), and unrated securities of  comparable quality (such lower  rated
and  unrated  securities are  referred  to herein  as  "high yield/high  risk
securities" or "junk bonds") are speculative  with respect to the capacity to
pay interest and repay principal in accordance with the terms of the security
and generally involve a greater volatility of price than securities in higher
rating categories.  In purchasing such  securities, the Fund will rely on the
Manager's   judgment,    analysis   and   experience   in    evaluating   the
creditworthiness of an issuer of such securities.  The Manager will take into
consideration,  among other  things,  the issuer's  financial resources,  its
sensitivity  to economic conditions  and trends,  its operating  history, the
quality of the issuer's management and regulatory matters.  The Fund does not
intend to purchase  debt securities that are in default.  See the Appendix to
the Statement of Additional Information.

    The market  values of  high yield/high  risk securities  tend to  reflect
individual  issuer developments  to a  greater  extent than  do higher  rated
securities, which  react primarily to  fluctuations in  the general level  of
interest rates.   Issuers of  high yield/high risk  securities may be  highly
leveraged and  may not  have available to  them more  traditional methods  of
financing.  Therefore, the risk  associated with acquiring the securities  of
such  issuers  generally  is  greater  than is  the  case  with  higher rated
securities.   For example, during an economic  downturn or a sustained period
of rising interest  rates, issuers of high yield/high risk  securities may be
more likely  to experience financial  stress, especially if such  issuers are
highly leveraged.  During such periods, service of debt  obligations also may
be  adversely  affected  by  specific issuer  developments,  or  the issuer's
inability   to   meet  specific   projected   business   forecasts,  or   the
unavailability of additional  financing.  The risk of loss  due to default by
the  issuer is significantly greater for the  holders of high yield/high risk
securities because such securities may  be unsecured and may be  subordinated
to other creditors of the issuer.

    High  yield/high risk  securities may  have  call or  redemption features
which  would permit an issuer to repurchase the securities from the Fund.  If
a  call were exercised  by the issuer  during a period  of declining interest
rates, the  Fund likely would  have to  replace such  called securities  with
lower  yielding securities, thus decreasing the  net investment income to the
Fund and dividends to shareholders.

    The Fund may  have difficulty disposing of  certain high  yield/high risk
securities because there may  be a thin  trading market for such  securities.
To  the  extent that  a  secondary trading  market for  high  yield/high risk
securities does  exist, it generally is not as liquid as the secondary market
for higher rated securities.  Reduced secondary market liquidity may  have an
adverse  impact  on  market  price  and the  Fund's  ability  to  dispose  of
particular  issues when  necessary to meet  the Fund's liquidity  needs or in
response to  a  specific  economic  event such  as  a  deterioration  in  the
creditworthiness of  the  issuer.   Reduced  secondary market  liquidity  for
certain high yield/high risk  securities also may make it  more difficult for
the  Fund to obtain  accurate market quotations  for purposes  of valuing the
Fund's portfolio.   Market  quotations generally are  available on  many high
yield/high risk securities only from a  limited number of dealers and may not
necessarily represent firm bids  of such dealers or prices for  actual sales.
The  Fund's Directors,  or the  Manager will  consider carefully  the factors
affecting  the market  for high  yield/high risk,  lower rated  securities in
determining whether any particular security is liquid or illiquid and whether
current market quotations are readily available.

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

INVESTMENT IN FOREIGN ISSUERS

    General.   The Fund  may invest  up to  25% of  its total  assets in  the
securities of foreign issuers.   Investment in securities of foreign  issuers
involves  certain  risks not  typically  involved  in  domestic  investments,
including  fluctuations in  foreign  exchange  rates,  future  political  and
economic developments, different legal systems and the possible imposition of
exchange  controls  or  other  foreign  governmental  laws  or  restrictions.
Securities prices in different countries  are subject to different  economic,
financial, political  and  social  factors.    Changes  in  foreign  currency
exchange  rates  will affect  the value  of securities  in  the Fund  and the
unrealized  appreciation or depreciation  of investments.   In addition, with
respect   to  certain  foreign   countries,  there  is   the  possibility  of
expropriation  of assets, confiscatory  taxation, difficulty in  obtaining or
enforcing a  court  judgment, economic,  political or  social instability  or
diplomatic developments  that could  affect investments  in those  countries.
Certain foreign investments also may be subject to foreign withholding taxes.
These risks often are heightened for investments in smaller, emerging capital
markets.

    Public Information.  Securities of foreign  issuers may not be registered
with the Commission, nor may the issuers thereof be subject to  the reporting
requirements  of such  agency.    Accordingly,  there may  be  less  publicly
available information about  a foreign issuer  than about  a U.S. issuer  and
such foreign issuers may not be subject to accounting, auditing and financial
reporting standards and requirements comparable to those of U.S. issuers.

    Trading Volume,  Clearance and  Settlement.   Foreign financial  markets,
while generally growing in trading  volume, typically have substantially less
volume than U.S.  markets, and securities of many foreign  companies are less
liquid and their  prices more volatile than securities of comparable domestic
companies.  The foreign markets also  have different clearance and settlement
procedures.  Delays in settlement could result in  periods when assets of the
Fund  are uninvested  and no  return  is earned  thereon.   The  inability to
dispose  of a  portfolio security  due  to settlement  problems could  result
either in losses to the Fund due to subsequent declines in the  value of such
portfolio 
security or,  if the Fund has  entered into a contract to  sell the security,
could result in possible liability to the purchaser.

    Government   Supervision  and  Regulation.     There  generally  is  less
governmental  supervision and regulation of exchanges, brokers and issuers in
foreign countries than there is in the United States.  For example, there may
be no comparable provisions under certain foreign laws to insider trading and
similar  investor  protection securities  laws  that  apply  with respect  to
securities transactions consummated in the United States.  Further, brokerage
commissions  and other  transaction  costs  on foreign  securities  exchanges
generally are higher than in the United States.

NON-DIVERSIFICATION

    The Fund  is classified as a non-diversified investment company under the
Investment Company  Act, which  means that  the Fund  is not  limited by  the
Investment Company Act in the  proportion of its assets that may  be invested
in  the obligations of a single issuer.   Thus, the Fund may invest a greater
proportion  of its assets  in the securities  of a smaller  number of issuers
and, as a result, will be subject to greater risk of loss with respect to its
portfolio securities.  The Fund, however, intends to comply with requirements
imposed by the Code for qualification as a regulated investment company.  See
"Investment Objective and Policies--Investment Restrictions" and "Taxes."

BORROWING

    The  Fund may borrow  up to 331/3% of  its total  assets, taken at market
value,  but  only from  banks as  a  temporary measure  for  extraordinary or
emergency  purposes, including to  meet redemptions (so  as not to  force the
Fund  to  liquidate  securities  at  a disadvantageous  time)  or  to  settle
securities transactions.  The Fund will  not purchase securities at any  time
when borrowings  exceed 5%  of its total  assets, except  (a) to  honor prior
commitments  or   (b)  to  exercise  subscription   rights  when  outstanding
borrowings have been obtained exclusively for settlements of other securities
transactions.   The purchase  of securities while  borrowings are outstanding
will have  the effect of leveraging the Fund.   Such leveraging increases the
Fund's exposure to capital risk, and  borrowed funds are subject to  interest
costs that will reduce net income.

SUITABILITY

    The economic  benefit from an  investment in the  Fund depends upon  many
factors beyond  the control  of the  Fund,  the Manager  and its  affiliates.
Because of its emphasis on  securities of issuers principally engaged in  the
real estate  industry,  the  Fund  should  be considered  as  a  vehicle  for
diversification and not  as a balanced  investment program.  The  suitability
for any particular investor of  a purchase of shares of the Fund  will depend
upon,  among other  things, such  investor's investment  objectives and  such
investor's  ability  to  accept  the  risks of  investing  in  such  industry
including the risk of a loss of principal.


                      INVESTMENT OBJECTIVE AND POLICIES

    The  investment  objective  of  the  Fund  is to  seek  total  return  by
investing  primarily in  equity securities  of  issuers that  are principally
engaged  in  the real  estate industry.   Total  return  is a  combination of
capital appreciation and investment income.   This investment objective is  a
fundamental policy of the Fund and may not be changed without the approval of
the holders of  a majority of  the Fund's outstanding  voting securities,  as
defined in the  Investment Company Act.   There can be no assurance  that the
Fund's investment objective will be achieved.

    The Fund should  be considered as a  means of diversifying an  investment
portfolio  and not in itself a balanced investment program.  Accordingly, the
Fund may be appropriate only for  long-term investors who can assume the risk
of loss of principal, do not seek current  income and can accommodate taxable
distributions of income and capital gains.

    Under  normal market conditions, at least 65% of  the Fund's total assets
will be invested in equity securities of issuers that are principally engaged
in  the real  estate  industry.   An  issuer  "principally  engaged" in  that
industry  is an issuer that derives at least 50% of its gross revenues or net
profits from the ownership, development, construction,  financing, management
or sale  of commercial, industrial  or residential  real estate or  interests
therein.    Such issuers  may include,  for  example, real  estate investment
trusts   ("REITs"),  real  estate  brokers,  home  builders  or  real  estate
developers, companies  with substantial real  estate holdings (such  as paper
and lumber producers, agricultural  businesses and lodging and  entertainment
companies)  and companies  with significant  involvement  in the  real estate
industry, such  as building  supply  companies, financial  institutions  that
write  real estate mortgages  and companies that  provide mortgage servicing.
The equity securities in which the Fund will invest consist of common stocks,
shares or  units  of  beneficial  interest  of  REITs,  preferred  stock  and
securities with  equity characteristics,  such as convertible  securities and
warrants.  

    The Manager's  investment strategy  with respect to equity  securities of
real estate issuers is based on the premise that property market fundamentals
are the primary  determinant of growth underlying the  success of real estate
equity  securities.  Value added management will further distinguish the most
attractive real  estate  equity  securities.    The  Manager's  research  and
investment  process is  designed  to identify  issuers  with strong  property
fundamentals and strong management teams.   This process is comprised of real
estate market research, specific property inspection and securities analysis.
The  Manager believes that  this process will  result in a  portfolio of real
estate  equity securities  of issuers  that own  assets in  desirable markets
across the country, diversified both geographically and by property type.

    Under normal market  conditions, up to 35% of the Fund's total assets may
be  invested  in  (i)  non-convertible debt  securities, (ii) mortgage-backed
securities such  as mortgage pass-through certificates,  real estate mortgage
investment   conduit  ("REMIC")  certificates   and  collateralized  mortgage
obligations  ("CMOs"),  and  (iii) cash or  cash  equivalents  and investment
grade, short-term  securities including money  market securities  ("Temporary
Investments").  The Fund  may invest up to 25% of its total assets in foreign
securities.

    Because the  Fund has not  established any rating  criteria for  the debt
securities  in which  it  may invest,  its  assets may  be  invested in  non-
convertible debt securities, REMIC certificates  and CMOs that are unrated or
rated in  the  medium  to  low rating  categories  of  nationally  recognized
statistical  rating   organizations.     See   "Risk  Factors   and   Special
Considerations" and the Appendix to the Statement of Additional Information.

DESCRIPTION OF CERTAIN INVESTMENTS

    REITS.   REITs  are pooled investment  vehicles that  invest primarily in
income producing  real estate  or  real estate  related loans  or  interests.
REITs  are  generally  classified  as  equity  REITs,  mortgage  REITs  or  a
combination of  equity and mortgage REITs.   Equity REITs invest the majority
of their  assets directly in real  property and derive income  primarily from
the  collection of rents.   Equity  REITs can  also realize capital  gains by
selling properties that have appreciated in value.  Mortgage REITs invest the
majority of  their assets in real estate mortgages and derive income from the
collection of interest payments.  Similar to investment companies such as the
Fund, REITs are not taxed on income distributed to shareholders provided they
comply with several requirements of the Code.  The Fund will  indirectly bear
its  proportionate share  of expenses  incurred  by REITs  in which  the Fund
invests in addition to the expenses incurred directly by the Fund.

    Mortgage-Backed Securities.  Mortgage-backed securities  include mortgage
pass-through certificates and multiple-class pass-through securities, such as
REMIC   pass-through   certificates,   CMOs  and   stripped   mortgage-backed
securities,  and  other  types  of mortgage-backed  securities  that  may  be
available in the future.

    The Fund may invest in guaranteed mortgage pass-through  securities which
represent participation interests in pools of residential  mortgage loans and
which are  issued by  United States governmental  lendersor by  private 
lenders  and guaranteed  by  the  United States  Government  or  one  of  
its agencies  or instrumentalities,  including  but not  limited  to  the 
Government National Mortgage Association ("Ginnie Mae"), the  Federal National
Mortgage Association ("Fannie  Mae") and  the Federal  Home Loan  Mortgage 
Corporation ("Freddie Mac").  In general, Ginnie Mae certificates are 
guaranteed by the full faith and credit of the United States Government for 
timely payment of principal  and interest on the certificates.  Fannie Mae  
certificates are generally guaranteed by  Fannie Mae, a federally chartered  
and privately-owned  corporation for  full and  timely payment  of scheduled 
principal  and interest on  the certificates.  In  general, Freddie Mac 
certificates are  guaranteed by Freddie Mac, a  corporate instrumentality
of the  United States  Government, for  timely payment  of  interest and  the
ultimate collection of all principal of the related mortgage loans.

    Mortgage-backed  securities also  include CMOs and  REMIC pass-through or
participation certificates,  which  may be  issued by,  among others,  United
States  Government agencies and instrumentalities as well as private lenders.
CMOs  and REMIC certificates are issued in multiple classes and the principal
of  and interest on  the mortgage assets  may be allocated  among the several
classes of CMOs or REMIC certificates in various ways.  Each class of CMOs or
REMIC  certificates,  often referred  to  as  a  "tranche," is  issued  at  a
specified adjustable or  fixed interest  rate and  must be  fully retired  no
later than  its final  distribution date.   Generally,  interest  is paid  or
accrues on all classes of CMOs or REMIC certificates on a monthly basis.  The
Fund will not invest in the lowest tranche of CMOs and REMIC certificates.

    Typically,  CMOs  are  collateralized  by  Ginnie  Mae  or   Freddie  Mac
certificates but also may be collateralized  by other mortgage assets such as
whole  loans or private  mortgage pass-through  securities.  Debt  service on
CMOs  is provided from  payments of principal  and interest  on collateral of
mortgage assets and any reinvestment income thereon.

    A REMIC  is a  pool of assets  that qualifies for  special tax  treatment
under the Code and consists of certain mortgages  or deeds of trust primarily
secured  by  interests in  real  property  and  other permitted  investments.
Investors may  purchase "regular"  and "residual"  interests in  REMIC trusts
although the Fund does not intend to invest in "residual interests".

    Investing in mortgage-backed securities involves certain unique risks  in
addition  to those  generally associated  with investing  in the  real estate
industry in general.   These unique risks  include the failure of  a party to
meet its commitments under the  related operative documents, adverse interest
rate changes  and the  effects of prepayments  on mortgage  cash flows.   See
"Risk Factors and  Special Considerations--Risk Associated  with Real  Estate
Investments--Mortgage-Backed Securities" for a  more complete description  of
the risks associated with mortgage-backed securities.

    Temporary  Investments.   The Fund  reserves  the right,  as  a temporary
defensive  measure, to hold in excess of 35% of its total assets in Temporary
Investments.   Under  certain adverse  investment  conditions, the  Fund  may
restrict the markets  in which its assets  will be invested and  may increase
the proportion of assets invested in Temporary Investments.  Investments made
for defensive  purposes will be maintained  only during periods in  which the
Manager  determines that  economic or  financial conditions  are adverse  for
holding or  being primarily invested in equity securities.   A portion of the
Fund normally  would  be held  in Temporary  Investments  in anticipation  of
investment in equity securities or to provide for possible redemptions.

    Convertible Securities.   A convertible  security is  a bond,  debenture,
note,  preferred  stock  or other  security  that may  be  converted  into or
exchanged for a prescribed amount of common stock of the same or a  different
issuer within a particular period of time at a specified price or formula.  A
convertible security entitles  the holder to receive  interest generally paid
or  accrued  on debt  or  the  dividend paid  on  preferred  stock until  the
convertible  security  matures  or   is  redeemed,  converted  or  exchanged.
Convertible securities have several unique investment characteristics such as
(i) higher  yields  than common  stocks,  but lower  yields  than  comparable
nonconvertible securities, (ii)  a lesser degree of fluctuation in value than
the underlying stock since they have  fixed income characteristics, and (iii)
the potential for capital  appreciation if the market price of the underlying
common  stock  increases.    A  convertible  security  might  be  subject  to
redemption  at  the option  of  the  issuer at  a  price  established in  the
convertible security's governing instrument.  If a  convertible security held
by the Fund is called for redemption, the Fund may be required to  permit the
issuer to redeem the security, convert it into the underlying common stock or
sell it to a third party.

    Warrants.   The  Fund  may  invest  in  warrants,  which  are  securities
permitting,  but  not  obligating,  their  holder  to   subscribe  for  other
securities.  Warrants do not carry with them the right to dividends or voting
rights with  respect to  the securities  that they  entitle their holders  to
purchase, and they do not  represent any rights in the assets  of the issuer.
As a result,  an investment in  warrants may  be considered more  speculative
than certain other types of investments.  In addition, the value of a warrant
does not necessarily change with the value of the underlying securities and a
warrant ceases  to have value if it is not  exercised prior to its expiration
date.

    Indexed and Inverse  Securities.  The Fund  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,  the Fund may invest in a
debt security that pays interest and returns principal based on the change in
the value of a  securities index or a basket  of securities, or based on  the
relative changes  of  two indices.    In addition,  the  Fund may  invest  in
securities the potential return of which is based inversely on the  change in
an index.  For example, the Fund may invest in 
securities  that pay  a  higher  rate of  interest  when a  particular  index
decreases and pay a lower rate of interest (or do not fully return principal)
when  the  value  of the  index  increases.    If the  Fund  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.

    Certain indexed and inverse  securities may have the effect of  providing
investment leverage  because  the rate  of interest  or  amount of  principal
payable increases or decreases at a rate that is a multiple of the changes in
the relevant  index.  As a  consequence, the market value  of such securities
may  be substantially  more volatile  than the  market values  of  other debt
securities.    The  Fund believes  that  indexed and  inverse  securities may
provide  portfolio  management flexibility  that  permits  the Fund  to  seek
enhanced returns,  hedge other  portfolio  positions or  vary the  degree  of
portfolio leverage with  greater efficiency than would otherwise  be possible
under certain market conditions.

    Depositary Receipts.   The Fund may  invest in the securities  of foreign
issuers in  the form of  Depositary Receipts or other  securities convertible
into securities of foreign issuers.  Depositary  Receipts may not necessarily
be denominated in the same  currency as the underlying securities into  which
they  may be converted.   ADRs are  receipts typically issued  by an American
bank or  trust  company which  evidence  ownership of  underlying  securities
issued by a foreign corporation.   EDR's are receipts issued in  Europe which
evidence  a  similar  ownership  arrangement.     GDRs  are  receipts  issued
throughout the world which evidence  a similar arrangement.  Generally, ADRs,
in registered form, are designed for  use in the U.S. securities markets, and
EDRs, in  bearer form, are designed  for use in  European securities markets.
GDRs are tradeable both  in the U.S. and  in Europe and are designed  for use
throughout  the  world.    The  Fund  may  invest in  unsponsored  Depositary
Receipts.  The  issuers of unsponsored Depository Receipts  are not obligated
to  disclose material information in the  United States, and therefore, there
may be less information available regarding such issuers and there may not be
a correlation between such information and the market value of the Depositary
Receipts. 

    Illiquid Securities.  The Fund may invest  up to 15% of its net assets in
securities that lack an established secondary trading market or otherwise are
considered illiquid.   The Fund may invest in securities  of issuers that are
sold  in  private  placement  transactions  between  the  issuers  and  their
purchasers  and that are  neither listed on  an exchange nor  traded in other
established  markets.   In many  cases, privately  placed securities  will be
subject to contractual  or legal restrictions  on transfer.  See  "Investment
Restrictions" herein.

    The Fund  may purchase  securities that are  not registered  ("restricted
securities") under  the Securities Act  of 1933, as  amended (the "Securities
Act"), but can be offered and sold to "qualified institutional  buyers" under
Rule 144A under the Securities Act.  The Board of Directors has determined to
treat as  liquid Rule 144A securities that are either (i) freely tradeable in
their  primary markets offshore or  (ii) non-investment grade debt securities
which  the  Manager determines  are  as  liquid as  publicly-registered  non-
investment  grade  debt  securities.   The  Board  of  Directors has  adopted
guidelines and delegates to the Manager the daily function of determining and
monitoring  liquidity of  restricted  securities.   The  Board of  Directors,
however, will retain sufficient oversight  and be ultimately responsible  for
the determinations.

    Investment in Other Investment  Companies.  The Fund  may invest in other
investment companies whose investment objectives and  policies are consistent
with those of  the Fund.  In accordance with the  Investment Company Act, the
Fund  may  invest up  to  10% of  its  total assets  in  securities of  other
investment companies.  In addition, under the Investment Company Act the Fund
may  not  own more  than  3% of  the total  outstanding  voting stock  of any
investment  company and not  more than 5%  of the  value of the  Fund's total
assets may  be invested in the securities of  any investment company.  If the
Fund acquires  shares in investment  companies, shareholders would  bear both
their proportionate share of  expenses in the Fund (including  management and
advisory fees)  and, indirectly,  the expenses of  such investment  companies
(including management and advisory fees).
OTHER INVESTMENT POLICIES AND PRACTICES

    Portfolio  Strategies Involving  Options,  Futures  and Foreign  Exchange
Transactions.    The  Fund  is authorized  to  engage  in  certain investment
practices involving the  use of options, futures and  foreign exchange, which
may  expose the Fund  to certain risks.   These investment  practices and the
associated  risks are  described in  detail  in Appendix  A attached  to this
Prospectus.

    Portfolio Transactions.  Subject to policies established by  the Board of
Directors of the Fund, the Manager is primarily responsible for the execution
of the Fund's portfolio  transactions.  Since  portfolio transactions may  be
effected on  foreign  securities exchanges,  the  Fund may  incur  settlement
delays  on  certain  of  such  exchanges.   See  "Risk  Factors  and  Special
Considerations."  In executing portfolio  transactions, the Manager seeks  to
obtain the best net results for the Fund, taking into account such factors as
price (including the applicable brokerage commissions or dealer spread), size
of  order,  difficulty  of  execution,  operational  facilities of  the  firm
involved and the firm's risk in positioning a block of securities.  While the
Manager generally seeks reasonably competitive fees, commissions  or spreads,
the  Fund does  not  necessarily pay  the  lowest fee,  commission  or spread
available.  The Fund may invest in certain securities traded in the over-the-
counter ("OTC") market and, where possible, will deal directly with the 
dealers  who  make  a market  in  the  securities  involved  except in  those
circumstances  where better  prices and  execution  are available  elsewhere.
Such  dealers usually  are acting  as principal  for their  own account.   On
occasion, securities  may  be  purchased  directly from  the  issuer.    Such
portfolio securities are generally traded on a net  basis and do not normally
involve either brokerage commissions or transfer taxes.  Securities firms may
receive brokerage  commissions  on certain  portfolio transactions  including
futures, options  and options  on futures transactions  and the  purchase and
sale   of  underlying  securities  upon  exercise   of  options.    The  Fund
contemplates  that,  consistent with  its policy  of  obtaining the  best net
results, it will place orders  for transactions with a number of  brokers and
dealers, including Merrill  Lynch, an affiliate of  the Manager.  Subject  to
obtaining the  best  price  and  execution,  securities  firms  that  provide
supplemental investment research to the Manager, including Merrill Lynch, may
receive orders for transactions by the Fund.  Information so received will be
in addition to, and  not in lieu of, the services required to be performed by
the Manager and the expenses  of the Manager will not necessarily  be reduced
as a result of the receipt of such supplemental information.  See "Management
of the Fund--Management and Advisory Arrangements." 

    Under the Investment Company  Act, persons  affiliated with the Fund  and
persons  who are affiliated  with such affiliated  persons, including Merrill
Lynch,  are  prohibited from  dealing with  the Fund  as  a principal  in the
purchase  and sale  of  securities unless  a permissive  order  allowing such
transactions  is obtained  from the  Commission.   Affiliated persons  of the
Fund, and  affiliated persons of  such affiliated  persons, may serve  as the
Fund's  broker  in  transactions  conducted   on  an  exchange  and  in   OTC
transactions   conducted  on  an  agency  basis  and  may  receive  brokerage
commissions from the Fund.  In addition, the Fund may not purchase securities
during the existence  of any  underwriting syndicate for  such securities  of
which Merrill Lynch is a member except pursuant to procedures approved by the
Board  of  Directors of  the  Fund  that comply  with  rules  adopted by  the
Commission.   To  the extent  Merrill  Lynch is  active  in distributions  of
securities  of  issuers  in  certain  foreign  countries,  the  Fund  may  be
disadvantaged in that it may not purchase securities in such distributions or
may  be limited in the amount it may  purchase.  In addition, consistent with
the  Conduct Rules of the NASD, the Fund  may consider sales of shares of the
Fund as a factor in the selection of brokers or dealers to execute  portfolio
transactions for the Fund.  It is expected that the majority of the shares of
the Fund will  be sold by Merrill Lynch.   Costs associated with transactions
in foreign  securities are generally  higher than in  the U.S., although  the
Fund will endeavor to achieve the best net results in effecting its portfolio
transactions.

    The   Fund  anticipates   that  its   brokerage   transactions  involving
securities of  issuers domiciled  in countries other  than the  United States
generally  will be conducted  primarily on  the principal stock  exchanges of
such countries.  Brokerage commissions and other transaction costs on foreign
stock  exchange transactions generally are higher  than in the United States,
although the Fund will endeavor to achieve the best net results  in effecting
its portfolio transactions.  There generally is less governmental supervision
and  regulation of  foreign stock  exchanges and brokers  than in  the United
States.  See "Risk Factors and Special Considerations."

    Portfolio Turnover.   Generally, the  Fund does  not purchase  securities
for short-term trading profits.  However, the  Fund may dispose of securities
without regard  to  the time  they  have been  held  when such  actions,  for
defensive  or other reasons,  appear advisable to  the Manager in  light of a
change in circumstances in general  market, economic or financial conditions.
As a  result of its investment policies, the Fund may engage in a substantial
number  of portfolio transactions.   Accordingly, while  the Fund anticipates
that its annual portfolio  turnover rate should not exceed 100%  under normal
conditions,  it  is impossible  to  predict portfolio  turnover  rates.   The
portfolio turnover rate  is calculated by  dividing the lesser of  the Fund's
annual sales or purchases of  portfolio securities (exclusive of purchases or
sales of all securities whose maturities at the time of acquisition  were one
year or less) by the monthly average value of the securities in the portfolio
during  the year.    A  high portfolio  turnover  rate  involves certain  tax
consequences  and correspondingly greater  transaction costs  in the  form of
dealer spreads  and brokerage  commissions, which are  borne directly  by the
Fund.

    Repurchase Agreements  and Purchase  and Sale  Contracts.   The Fund  may
invest in securities pursuant to  repurchase agreements or purchase and  sale
contracts.   Repurchase  agreements and  purchase and  sale contracts  may be
entered into only with financial institutions  which (i) have, in the opinion
of the  Manager, substantial capital relative to the Fund's exposure, or (ii)
have  provided  the  Fund  with   a  third-party  guaranty  or  other  credit
enhancement.  Under  a repurchase agreement or a purchase  and sale contract,
the  seller  agrees,  upon entering  into  the  contract  with the  Fund,  to
repurchase the  security  at a  mutually  agreed-upon  time and  price  in  a
specified currency,  thereby determining  the yield  during the  term of  the
agreement.   This results in  a fixed  rate of return  insulated from  market
fluctuations during  such  period although  it may  be  affected by  currency
fluctuations.  In the case  of repurchase agreements, the price at  which the
trades are  conducted does  not reflect  accrued interest  on the  underlying
obligation; whereas, in  the case of purchase and sale  contracts, the prices
take  into account  accrued interest.   Such  agreements usually  cover short
periods, such as under one  week.  Repurchase agreements may be  construed to
be collateral loans by the purchaser to the seller secured by  the securities
transferred to  the purchaser.   In the  case of a  purchase agreement,  as a
purchaser, the Fund will require the  seller to provide additional collateral
if the Market value of the securities falls below the repurchase price at any
time during the term of the repurchase agreement; the Fund  does not have the
right  to  seek  additional collateral  in  the  case  of  purchase and  sale
contracts.   In  the event  of  a default  by the  seller under  a repurchase
agreement  construed to be  a collateralized loan,  the underlying securities
are  not owned by  the Fund but  only constitute collateral  for the seller's
obligation to pay the 
repurchase price.  Therefore, the fund may suffer time delays and incur costs
or possible  losses in connection with the disposition  of the collateral.  A
purchase  and sale contract  differs from a repurchase  agreement in that the
contract arrangements  stipulate that the securities  are owned by  the Fund.
In  the  event of  a default  under such  a repurchase  agreement or  under a
purchase and sale contract,  instead of the contractual fixed rate,  the rate
of return to the Fund shall be dependent upon intervening fluctuations of the
market value  of such securities and the  accrued interest on the securities.
In such event,  the Fund would have rights  against the seller for  breach of
contract  with  respect  to  any  losses  arising  from  market  fluctuations
following  the failure  of the  seller to  perform.   While the  substance of
purchase and sale contracts  is similar to repurchase agreements,  because of
the  different treatment  with  respect to  accrued  interest and  additional
collateral,  management believes that  purchase and  sale contracts   are not
repurchase agreements as such term is understood in the banking and brokerage
community.   The Fund  may not  invest more  than 15%  of its  net assets  in
repurchase  agreements or purchase and  sale contracts maturing  in more than
seven days together with all other illiquid investments.

    When-Issued Securities  and Delayed Delivery  Transactions.  The Fund may
purchase or sell securities that  it is entitled to receive 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  Fund with
payment and delivery taking place in  the future to secure what is considered
an advantageous yield and price to the Fund at the time of entering  into the
transaction.   Although  the  Fund  has  not established  any  limit  on  the
percentage of  its  assets that  may  be committed  in  connection with  such
transactions, the Fund will maintain  a segregated account with its custodian
of  cash,  cash  equivalents,  U.S.  Government  securities or  other  liquid
securities denominated in U.S. dollars or non-U.S. currencies in an aggregate
amount equal  to  the amount  of  its  commitments in  connection  with  such
purchase transactions.

    There  can be  no assurance  that a  security purchased on  a when-issued
basis or purchased or sold for delayed delivery will be issued, and the value
of the security, if issued, on the delivery date may be more or less than its
purchase price.  The Fund 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.

    Standby Commitment  Agreements.  The Fund,  from time to  time, may enter
into standby commitment agreements.   Such agreements commit the Fund, for  a
stated period  of time, to purchase a stated amount of equity securities that
may be issued and sold  to the Fund 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 Fund  is paid  a  commitment fee,
regardless  of whether  or not the  security is  ultimately issued,  which is
typically approximately 0.50% of the aggregate purchase price of the security
that the  Fund has  committed to  purchase.   The Fund  will enter  into such
agreements  only for the purpose of  investing in the security underlying the
commitment at a price that is considered advantageous  to the Fund.  The Fund
will not enter into a standby  commitment with a remaining term in  excess of
45 days and presently 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 portfolio securities subject to legal restrictions
on resale  that affect their  marketability, will not  exceed 15% of  its net
assets  taken at the time of  acquisition of such a commitment.   The Fund at
all times will maintain a segregated account with its custodian of cash, cash
equivalents,   U.S.  Government   securities   or  other   liquid  securities
denominated in  U.S. dollars  or non-U.S. currencies  in an  aggregate amount
equal to the purchase price of the securities underlying a 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 Fund may bear the risk of a decline in the value of such security
and may not benefit from an appreciation in the value of the  security during
the commitment period.

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

    Lending  of Portfolio Securities.   The Fund may  from time  to time lend
securities from its portfolio with a  value not exceeding 331/3% of its total
assets 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.
During  the period of such a loan, the Fund receives the income on the loaned
securities  and  either receives  the  income  on  the  collateral  or  other
compensation, i.e.,  negotiated loan  premium or fee,  for entering  into the
loan  and thereby  increases  its yield.    In the  event  that the  borrower
defaults  on  its  obligation  to  return  borrowed  securities,  because  of
insolvency  or otherwise,  the  Fund  could experience  delays  and costs  in
gaining access to the collateral and  could suffer a loss to the  extent that
the value  of the  collateral falls  below the market  value of  the borrowed
securities.

INVESTMENT RESTRICTIONS

    The  Fund's investment  activities are  subject to  further  restrictions
that are  described in the  Statement of Additional Information.   Investment
restrictions  and policies that  are fundamental policies  may not be changed
without the  approval of the holders of a  majority of the Fund's outstanding
voting  securities (which for  this purpose and  under the Investment Company
Act means the  lesser of (a)  67% of the shares  represented at a  meeting at
which  more than 50%  of the outstanding  shares are represented  or (b) more
than 50% of  the outstanding shares).   Among  its fundamental policies,  the
Fund may not invest more than 25%  of its total assets, taken at market value
at  the  time  of each  investment,  in  the  securities  of issuers  in  any
particular industry (excluding issuers principally engaged in the real estate
industry  and the U.S.  Government and  its agencies  and instrumentalities).
Investment restrictions and policies that are non-fundamental policies may be
changed  by the  Board  of  Directors without  shareholder  approval.   As  a
non-fundamental policy, the Fund  may not borrow money or  pledge its assets,
except that the Fund (a)  may borrow from a bank  as a temporary measure  for
extraordinary or  emergency purposes or  to meet  redemptions in amounts  not
exceeding 331/3% (taken  at market value) of its total  assets and pledge its
assets to secure  such borrowings, (b) may  obtain such short-term credit  as
may  be necessary  for the  clearance  of purchases  and  sales of  portfolio
securities and (c) may purchase securities on margin to the  extent permitted
by applicable law.   (However, at the present time,  applicable law prohibits
the Fund  from purchasing securities on  margin.) (The deposit  or payment by
the Fund of initial or variation margin in connection  with futures contracts
or options transactions is not considered to be the purchase of a security on
margin.)  The purchase  of securities while  borrowings are outstanding  will
have the  effect  of leveraging  the  Fund.   Such  leveraging  or  borrowing
increases the Fund's exposure to capital risk, and borrowed funds are subject
to interest costs which will reduce net income.

    As a non-fundamental policy, the Fund  will not invest in securities that
cannot readily be resold because of legal or contractual restrictions or that
are  not  otherwise  readily  marketable,  including  repurchase   agreements
maturing  in more  than seven days,  if, regarding all  such securities, more
than  15% of its net  assets taken at market value  would be invested in such
securities.   Notwithstanding the  foregoing, the  Fund may  purchase without
regard  to  this  limitation securities  that  are not  registered  under the
Securities Act, but that can be offered and  sold to "qualified institutional
buyers" under Rule 144A  under the Securities Act,  provided that the  Fund's
Board of  Directors continuously determines, based on the trading markets for
the  specific Rule 144A security, that it is  liquid.  The Board of Directors
may  adopt guidelines  and delegate  to  the Manager  the  daily function  of
determining and monitoring liquidity of restricted securities.  The Board has
determined that securities which are freely tradeable in their primary market
outside of  the United States should  be deemed liquid.   The Board, however,
will  retain  sufficient oversight  and  be  ultimately  responsible for  the
determinations.

    Non-Diversified  Status.   The  Fund  is  classified  as  non-diversified
within the meaning  of the Investment Company Act, which  means that the Fund
is not limited by such Act in the proportion of its assets that it may invest
in securities of  a single issuer.   The Fund's investments will  be limited,
however,  in order to qualify  for the special  treatment afforded "regulated
investment companies"  under the Code.   See "Taxes."   To qualify,  the Fund
will  comply with certain requirements, including limiting its investments so
that at  the close of each quarter of the  taxable year (i) not more than 25%
of  the market  value of  the Fund's  total  assets will  be invested  in the
securities of  a single issuer  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 will be invested  in the securities of  a single issuer, and the  Fund
will not  own more than 10% of the  outstanding voting securities of a single
issuer.   A  fund that  elects to  be classified  as "diversified"  under the
Investment Company Act  must satisfy  the foregoing 5%  and 10%  requirements
with respect to 75% of its total assets.  To the extent that the Fund assumes
large positions  in the securities of  a small number of  issuers, the Fund's
net asset value may fluctuate to a greater extent than  that of a diversified
company as a result of changes in the financial condition or  in the market's
assessment of the issuers, and the Fund may be more susceptible to any single
economic, political or regulatory occurrence than a diversified company.


                            MANAGEMENT OF THE FUND

DIRECTORS

    The Directors of the Fund  consist of ___  individuals, ____ of whom  are
not  "interested persons" of  the Fund as  defined in  the Investment Company
Act.    The Directors  are responsible  for  the overall  supervision  of the
operations  of  the Fund  and  perform  the  various duties  imposed  on  the
directors or trustees of investment companies by the Investment Company Act.

    The Directors are:

    ARTHUR  ZEIKEL/*/ --  President of  the Manager  and its  affiliate, FAM;
President and Director  of Princeton Services,  Inc. ("Princeton  Services");
Executive Vice President of ML & Co.; and Director of the Distributor.

          (Other Directors and Officers to be Provided by Amendment)
_______________

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

MANAGEMENT AND ADVISORY ARRANGEMENTS

    The Manager  acts as the manager for  the Fund and provides the Fund with
investment management services.  The Manager is owned and controlled by  ML &
Co., a financial services  holding company and  the parent of Merrill  Lynch.
The  Manager  or  FAM acts  as  the  investment  adviser  for more  than  140
registered  investment  companies.     The  Manager  also  offers   portfolio
management and portfolio  analysis services to individuals  and institutions.
As of August 31, 1997, the Manager and FAM had a total of approximately $    
billion in investment  company and other portfolio assets  under management,
including accounts  of  certain affiliates  of the  Manager.   The  principal
business address  of the Manager is  800 Scudders Mill Road,  Plainsboro, New
Jersey 08536.

    The  Fund  has entered  into  an investment  advisory agreement  with the
Manager (the  "Management  Agreement").    As  described  in  the  Management
Agreement, the Manager  will receive  for its  services to  the Fund  monthly
compensation at  the annual rate of ____% of the  average daily net assets of
the Fund.   The Management Agreement provides  that, subject to the direction
of the Board  of Directors of  the Fund, the  Manager is responsible  for the
actual  management of the  Fund's portfolio.   The responsibility  for making
decisions to buy, sell or hold  a particular security rests with the Manager,
subject to review by the Board of Directors.

    The  Manager provides the  portfolio manager  for the Fund  who considers
analyses from  various sources (including brokerage firms with which the Fund
does  business),  makes  the  necessary  decisions,  and  places  orders  for
transactions  accordingly.  The Manager is  also obligated to perform certain
administrative  and  management services  for the  Fund  and is  obligated to
provide  all  of  the  office  space,  facilities,  equipment  and  personnel
necessary to perform its duties under the Management Agreement.

    ___________________  is the Portfolio Manager of the Fund.  _____________
has been  a Vice  President of  the Manager since  _____.   ______________ is
responsible for the day-to-day management of the Fund's investment portfolio.

    The  Manager  has  also   entered  into  a  sub-advisory  agreement  (the
"Sub-Advisory Agreement")  with Merrill Lynch  Asset Management  U.K. Limited
("MLAM U.K."),  an  indirect, wholly  owned subsidiary  of  ML &  Co. and  an
affiliate of the Manager, pursuant to which the  Manager pays MLAM U.K. a fee
for providing investment advisory services to the Manager with respect to the
Fund in an amount to be determined from time to time by the  Manager and MLAM
U.K. but  in no event in excess  of the amount the  Manager actually receives
for providing  services to  the Fund  pursuant to  the Management  Agreement.
MLAM U.K. has offices at Milton Gate, 1 Moor Lane, London EC2Y 9HA, England.

    The  Management Agreement  obligates  the Fund  to pay  certain  expenses
incurred in  its  operations including,  among other  things, the  investment
advisory  fees,  legal  and   audit  fees,  registration  fees,  unaffiliated
Directors' fees  and expenses,  custodian and  transfer fees,  accounting and
pricing costs  and  certain of  the costs  of  printing proxies,  shareholder
reports, prospectuses and statements of additional information distributed to
shareholders.   Accounting services  are provided to the  Fund by the Manager
and the  Fund reimburses the  Manager for its  costs in connection  with such
services.

CODE OF ETHICS

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

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

TRANSFER AGENCY SERVICES

    Merrill  Lynch Financial  Data  Services,  Inc. (the  "Transfer  Agent"),
which is a subsidiary of ML & Co., acts as the Fund's transfer agent pursuant
to  a Transfer Agency,  Dividend Disbursing Agency  and Shareholder Servicing
Agency Agreement (the "Transfer Agency Agreement").  Pursuant to the Transfer
Agency  Agreement,  the  Transfer  Agent is  responsible  for  the  issuance,
transfer  and  redemption  of  shares  and  the  opening  and maintenance  of
shareholder  accounts.  Pursuant to  the Transfer Agency  Agreement, the Fund
pays the Transfer Agent a fee of up to $11.00 per Class A or Class D  account
and  up  to $14.00  per  Class B  or  Class C  account  and  is  entitled  to
reimbursement from the Fund for certain transaction charges and out-of-pocket
expenses incurred by  the Transfer Agent under the Transfer Agency Agreement.
Additionally,  a $.20 monthly closed  account charge will  be assessed on all
accounts which  close during the calendar year.  Application of this fee will
commence the month following the month the  account is closed.  At the end of
the calendar year, no further fees will be due.  For purposes of the Transfer
Agency  Agreement,  the   term  "account"  includes  a   shareholder  account
maintained  directly by the Transfer Agent and any other account representing
the  beneficial  interest of  a  person  in the  relevant  share  class on  a
recordkeeping  system, provided the  recordkeeping system is  maintained by a
subsidiary of ML & Co.


                              PURCHASE OF SHARES

SUBSCRIPTION OFFERING

    The  Distributor, a  subsidiary of the  Manager and an  affiliate of both
FAM and Merrill Lynch, will act as the distributor of the shares of the Fund.

    The Distributor,  Merrill Lynch  and other securities dealers  which have
entered into  selected dealer  agreements with the  Distributor will  solicit
subscriptions for  shares of  the Fund  during a  period expected  to end  on
__________,  1997.   The subscription period  may be  extended upon agreement
between  the Fund and the  Distributor.  On the third  business day after the
conclusion of the subscription period, the subscriptions will be payable, the
Class A, Class B, Class C and Class D shares will be issued and the Fund will
commence operations.  The subscription offering may be terminated by the Fund
or the Distributor at  any time, in which event no Class A,  Class B, Class C
or Class D shares will be issued  (and, therefore, the Fund will not commence
operations  and no  amounts  will be  payable  by subscribers,  and  no sales
charges will be assessed) or a limited number of shares will be issued.

    The public offering price  of the Class A and  Class D shares  during the
subscription offering is set forth in the table below:

<TABLE>
<CAPTION>                                                                             Subscription Period
                                                                                                         Securities Dealers'
                                                                                Sales Charge                  Concession
                                                 Public                        Percentage* of                      Percentage* of
                                                Offering        Dollar         Public Offering        Dollar       Public Offering
                                                  Price         Amount             Price              Amount            Price
                                                ----------     ---------       ---------------     ------------    ---------------
<S>                                              <C>               <C>                 <C>               <C>               <C>
Less than $25,000 . . . . . . . . . . . . .        $10.554          $.554                5.25%            $.554             5.25%
$25,000 but less than $50,000 . . . . . . .         10.499           .499                4.75              .499             4.75
$50,000 but less than $100,000  . . . . . .         10.417           .417                4.00              .417             4.00
$100,000 but less than $250,000 . . . . . .         10.309           .309                3.00              .309             3.00
$250,000 but less than $1,000,000 . . . . .         10.204           .204                2.00              .204             2.00
$1,000,000 and over** . . . . . . . . . . .         10.000           .000                0.00              .000             0.00
</TABLE>

*   Rounded to the nearest one-hundredth percent.
**  The  initial sales charge may be waived on Class  A and Class D purchases
    of $1,000,000 or  more.  If  the sales  charge is waived,  such purchases
    will be subject to a CDSC  of 1.0% if the shares are redeemed within  one
    year after purchase.   The charge will be assessed on an amount  equal to
    the lesser of the proceeds of redemption or the cost of the  shares being
    redeemed.   A  sales  charge of  0.75%  will be  charged on  purchases of
    $1,000,000 or more of Class A or Class D shares by certain 401(k) plans.

    The  Distributor may reallow discounts to selected dealers and retain the
balance over such discounts.  At times the Distributor may reallow the entire
sales charge to such dealers.   Since securities dealers selling Class A  and
Class D  shares of the  Fund will receive a  concession equal to  most of the
sales charge, they may be deemed to be underwriters under the Securities Act.

    The  proceeds per  share to  the Fund from  the sale  of all Class  A and
Class D shares sold during the subscription period will be $10.00.

    The public offering  price of the  Class B and Class C  shares during the
subscription offering  will be $10.00  per share.   However, the Class  B and
Class C shares may  be subject to the  CDSCs described below under  "Deferred
Sales Charge  Alternatives--Class B  and Class C  Shares" if  redeemed within
four  years  of purchase,  in the  case of  Class  B shares,  or one  year of
purchase, in the case of  Class C shares, and are subject to  ongoing account
maintenance and distribution fees as described below.

    The minimum initial purchase  for Class A,  Class B, Class C  or Class  D
shares during the subscription period is $1,000, except for retirement plans,
where the minimum initial purchase is $100.

CONTINUOUS OFFERING

    Commencing immediately  after completion  of  the subscription  offering,
shares of the Fund will be  offered continuously for sale by the  Distributor
and other eligible securities dealers (including Merrill Lynch).   During the
continuous offering,  shares of  the Fund  may be  purchased from  securities
dealers or by mailing a  purchase order directly to the Transfer Agent.   The
minimum  initial purchase  during  the continuous  offering is  $1,000.   The
minimum subsequent purchase  is $50,  except that for  retirement plans,  the
minimum initial  purchase is $100 and  the minimum subsequent purchase  is $1
and  for participants  in  certain fee-based  programs,  the minimum  initial
purchase  is $500  and  the minimum  subsequent purchase  is $50.   Different
minimums may apply  to purchases made through the Merrill Lynch Blueprint/SM/
Program.   See "Purchase of  Shares--Merrill Lynch Blueprint/SM/  Program" in
the Statement of Additional Information.

    The Fund will  offer its  shares in  four classes  during the  continuous
offering  at a public offering  price equal to the  next determined net asset
value  per share plus sales charges imposed either at the time of purchase or
on a  deferred  basis depending  upon the  class of  shares  selected by  the
investor under  the Merrill  Lynch Select  Pricing/SM/  System, as  described
below.  The applicable offering price  for purchase orders is based upon  the
net asset  value of the  Fund next determined  after receipt of  the purchase
orders by  the Distributor.   As  to purchase  orders received  by securities
dealers prior to  the close of business  on the New York  Stock Exchange (the
"NYSE") (generally, 4:00 p.m., New York time), which includes orders received
after  the  determination  of net  asset  value  on  the  previous  day,  the
applicable offering  price will be  based on  the net asset  value, as of  15
minutes after the  close of business  on the NYSE  on that day, provided  the
Distributor in turn receives the order from the securities dealer prior to 30
minutes after the close of business on the NYSE on that day.  If the purchase
orders  are not  received by the  Distributor prior  to 30 minutes  after the
close of business on  the NYSE such  orders shall be  deemed received on  the
next  business day.  The  Fund or the Distributor  may suspend the continuous
offering of  the  Fund's shares  of  any class  at any  time  in response  to
conditions in the securities markets  or otherwise and may thereafter  resume
such  offering  from  time to  time.    Any  order  may be  rejected  by  the
Distributor  or  the  Fund.   Neither  the  Distributor nor  the  dealers are
permitted to withhold placing orders to benefit themselves by a price change.
Merrill Lynch may charge its customers a processing  fee (presently $5.35) to
confirm a sale of shares to  such customers.  Purchases made directly through
the Transfer Agent are not subject to the processing fee.

    The Fund  issues four classes  of shares  under the Merrill  Lynch Select
Pricing(Service  Mark) System,  which  permits each  investor  to choose  the
method  of purchasing  shares that the  investor believes  is most beneficial
given the amount of the purchase, the length of time  the investor expects to
hold the  shares and  other relevant  circumstances.   Shares of  Class A and
Class D are sold to investors choosing the initial  sales charge alternatives
and shares of Class B and Class C are sold to investors choosing the deferred
sales charge  alternatives.  Investors  should determine whether  under their
particular  circumstances it is  more advantageous to  incur an initial sales
charge or to have the entire initial purchase price invested in the Fund with
the investment thereafter  being subject to a  CDSC and ongoing  distribution
fees.    A discussion  of  the  factors  that investors  should  consider  in
determining the method  of purchasing shares  under the Merrill  Lynch Select
Pricing(Service  Mark)  System  is  set forth  under  "Merrill  Lynch  Select
Pricing(Service Mark) System" on page 3.

    Each Class A, Class B, Class C and Class D  share of the Fund  represents
an identical  interest in the  investment portfolio of  the Fund and  has the
same  rights,  except  that  Class B, Class C  and  Class D  shares  bear the
expenses of  the ongoing  account maintenance fees,  and Class B  and Class C
shares bear the expenses of the ongoing distribution  fees and the additional
incremental transfer  agency costs resulting  from the deferred  sales charge
arrangements.  The CDSCs, distribution fees and account maintenance fees that
are imposed on Class B and Class C shares, as well as the account maintenance
fees that  are imposed  on Class D shares,  will be imposed  directly against
those classes and not against all  assets of the Fund and, accordingly,  such
charges will not  affect the net asset  value of any other class  or have any
impact on  investors choosing another sales charge option.  Dividends paid by
the Fund for each class  of shares will be  calculated in the same manner  at
the same time and will differ only to the extent that account maintenance and
distribution fees  and any incremental  transfer agency  costs relating to  a
particular class are borne exclusively  by that class.  Class B, Class C  and
Class D shares each have exclusive voting 
rights with respect to the Rule 12b-1  distribution plan adopted with respect
to such class pursuant to which account maintenance  and/or distribution fees
are paid (except that Class B shareholders may vote upon any material changes
to expenses charged under the  Class D Distribution Plan).  See "Distribution
Plans"  below.    Each  class   has  different  exchange  privileges.     See
"Shareholder Services--Exchange Privilege."

    Investors should understand that the purpose and function of  the initial
sales charges with  respect to  Class A and Class D  shares are  the same  as
those of the  deferred sales  charges and distribution  fees with respect  to
Class B and Class C  shares in that the sales  charges and distribution fees,
if  any,  applicable  to  each  class  provide   for  the  financing  of  the
distribution  of the shares of  the Fund.   The distribution-related revenues
paid with respect to  a class will  not be used  to finance the  distribution
expenditures  of another  class.    Sales  personnel  may  receive  different
compensation for selling different classes of shares.  Investors are  advised
that only  Class A and Class D  shares may be available  for purchase through
securities dealers,  other than  Merrill Lynch,  which are  eligible to  sell
shares.

    The   following  table  sets   forth  a   summary  of   the  distribution
arrangements  for  each  class  of  shares  under  the  Merrill Lynch  Select
Pricing(Service Mark) System. 

<TABLE>
<CAPTION>
                                                              Account Maintenance   Distribution              Conversion
        Class                    Sales Charge/(1)/                    Fee                Fee                    Feature
        -----                   -------------------           -------------------   -------------             ----------
<S>      <C>         <C>                                            <C>                <C>         <C>                    
          A                 Maximum 5.25% initial sales                No                No                       No
                                  charge/(2)(3)/
          B            CSDC for a period of four years, at a         0.25%              0.75%        B shares convert to D shares
                        rate of 4.0% during the first year,                                               automatically after
                       decreasing 1.0% annually to 0.0%/(4)/                                        approximately eight years/(5)/
          C                 1.0% CDSC for one year/(6)/              0.25%              0.75%                     No
          D           Maximum 5.25% initial sales charge/(3)/        0.25%               No                       No

</TABLE>
_______________

(1) Initial  sales  charges  are  imposed  at  the  time  of  purchase  as  a
    percentage  of  the  offering  price.    CDSCs  may  be  imposed  if  the
    redemption  occurs within  the applicable CDSC  time period.   The charge
    will be assessed  on an amount  equal to  the lesser of  the proceeds  of
    redemption or the cost of the shares being redeemed.
(2) Offered  only  to   eligible  investors.    See  "Initial  Sales   Charge
    Alternatives--Class A and Class D Shares--Eligible Class A Investors."
(3) Reduced  for purchases  of $25,000  or more  and waived  for purchases of
    Class A  shares  by   certain  retirement   plans  and  participants   in
    connection with  certain fee-based  programs.  Class A and  Class D share
    purchases of $1,000,000 or more  may not be  subject to an initial  sales
    charge  but, if the initial sales  charge is waived,  may be subject to a
    1.0%  CDSC if  redeemed within  one year.    Such CDSC  may be  waived in
    connection  with certain fee-based  programs.   A 0.75% sales  charge for
    401(k) purchases over $1,000,000 will apply.
(4) The CDSC may be modified in connection with certain fee-based programs.
(5) The  conversion  period   for  dividend   reinvestment  shares  and   the
    conversion  and   holding  periods  for   certain  retirement  plans  are
    modified.   Also,  Class B shares  of certain  other MLAM-advised  mutual
    funds  into  which  exchanges  may be  made  have  a ten-year  conversion
    period.  If Class B  shares of the Fund are exchanged for Class B  shares
    of  another MLAM-advised mutual fund, the conversion period applicable to
    the Class B  shares acquired in the exchange will apply,  and the holding
    period  for the shares exchanged  will be tacked  onto the holding period
    for the shares acquired.
(6) The CDSC may be waived in connection with certain fee-based programs.

INITIAL SALES CHARGE ALTERNATIVES--CLASS A AND CLASS D SHARES

    Investors  choosing  the  initial   sales  charge  alternatives  who  are
eligible to  purchase Class A  shares should purchase  Class A shares  rather
than  Class D shares because  there is an account  maintenance fee imposed on
Class D shares.

    The public  offering price of Class A  and Class D shares for  purchasers
choosing the  initial sales  charge alternative  is the  next determined  net
asset  value plus  varying sales charges  (i.e., sales  loads), as  set forth
below:

<TABLE>
<CAPTION>                                                                                                           Discount to
                                                                                          Sales Charge as         Selected Dealers
                                                                   Sales Charge as         Percentage* of         as Percentage of
                                                                    Percentage of          the Net Amount           the Offering
Amount of Purchase                                                 Offering Price             Invested                 Price
- -------------------                                                ----------------       ----------------        ----------------
<S>                                                                      <C>                      <C>                    <C>
Less than $25,000 . . . . . . . . . . . . . . . . . . . . .                5.25%                   5.54%                   5.00%
$25,000 but less than $50,000 . . . . . . . . . . . . . . .                4.75                    4.99                    4.50
$50,000 but less than $100,000  . . . . . . . . . . . . . .                4.00                    4.16                    3.75
$100,000 but less than $250,000 . . . . . . . . . . . . . .                3.00                    3.09                    2.75
$250,000 but less than $1,000,000 . . . . . . . . . . . . .                2.00                    2.04                    1.80
$1,000,000 and over** . . . . . . . . . . . . . . . . . . .                0.00                    0.00                    0.00

</TABLE>
_________________

 *  Rounded to the nearest one-hundredth percent.
**  The initial sales charge may  bc waived on Class A  and Class D purchases
    of  $1,000,000  or  more  and  on  Class A  share  purchases  by  certain
    retirement plan  investors and  participants in  connection with  certain
    fee-based programs.  If  the sales charge is waived in connection with  a
    purchase of  $1,000,000 or more, such  purchases may be subject to a CDSC
    of 1.0% if the shares are redeemed within one year after purchase.   Such
    CDSC may be  waived in connection  with certain fee-based programs.   The
    charge  will be assessed on an amount equal to the lesser of the proceeds
    of redemption or  the cost of the shares  being redeemed.  A sales charge
    of 0.75% will be charged  on purchases of  $1,000,000 or more of  Class A
    or Class D  shares by  certain employer-sponsored  retirement or  savings
    plans.

    The Distributor may reallow discounts  to selected dealers and retain the
balance over such discounts.  At times the Distributor may reallow the entire
sales charge to  such dealers.  Since securities dealers  selling Class A and
Class D shares  of the Fund  will receive a concession  equal to most  of the
sales charge, they may be deemed to be underwriters under the Securities Act.
The proceeds from the account maintenance fees are used to compensate Merrill
Lynch for providing continuing account maintenance activities.

    Eligible  Class A Investors.   Class A  shares are  offered to  a limited
group of  investors and also will be issued upon reinvestment of dividends on
outstanding Class A shares.   Investors that currently own Class A  shares of
the Fund  in a  shareholder account(, including  participants in  the Merrill
Lynch Blueprint(Service Mark)  Program,) are entitled to  purchase additional
Class  A shares  of the  Fund in  that account.   Certain  employer-sponsored
retirement  or savings plans,  including eligible 401(k)  plans, may purchase
Class A  shares at  net  asset value  provided such  plans meet  the required
minimum number of eligible employees or  required amount of assets advised by
MLAM or  any of its  affiliates.  Class A shares  are available at  net asset
value to corporate warranty insurance reserve fund programs and U.S. branches
of foreign banking institutions  provided that the program  or branch has  $3
million  or  more initially  invested  in MLAM-advised  mutual  funds.   Also
eligible to purchase  Class A shares at net  asset value are participants  in
certain  fee-based programs  including  TMA(Service Mark)  Managed Trusts  to
which Merrill  Lynch Trust Company  provides discretionary trustee  services,
collective investment trusts for which  Merrill Lynch Trust Company serves as
trustee and  certain  purchases made  in  connection with  certain  fee-based
programs.  In addition, Class A shares are offered at net asset value to ML &
Co. and its subsidiaries and their directors and  employees and to members of
the Boards of MLAM-advised investment companies, including the Fund.  Certain
persons who acquired shares of certain MLAM-advised closed-end funds in their
initial offerings who wish to reinvest the  net proceeds from a sale of their
closed-end fund  shares  of common  stock  in shares  of  the Fund  also  may
purchase Class A shares  of the Fund if  certain conditions set forth  in the
Statement of Additional  Information are met.  In addition, Class A shares of
the Fund and certain other MLAM-advised mutual funds are offered at net asset
value to shareholders  of Merrill Lynch Senior Floating Rate  Fund, Inc. and,
if certain conditions set  forth in the  Statement of Additional  Information
are  met, to shareholders of Merrill  Lynch Municipal Strategy Fund, Inc. and
Merrill Lynch High Income Municipal Bond  Fund, Inc. who wish to reinvest the
net proceeds from  a sale of certain of their shares of common stock pursuant
to a tender offer conducted by  such funds in shares of the Fund  and certain
other MLAM-advised mutual funds.

    Reduced  Initial  Sales Charges.    No  sales  charges  are imposed  upon
Class A and Class D shares issued as  a result of the automatic  reinvestment
of dividends  or  capital gains  distributions.   Class A  and Class D  sales
charges also  may be reduced  under a Right  of Accumulation and a  Letter of
Intention.  Class A shares are offered at net asset value to certain eligible
Class A investors as set forth above  under "Eligible Class A Investors." See
"Shareholder Services--Fee-Based Programs."

    Provided applicable  threshold requirements  are met,  either Class A  or
Class D  shares are  offered at  net asset  value to  Employee Access(Service
Mark)  Accounts available through  authorized employers.   Class A shares are
offered at net asset  value to shareholders of Merrill  Lynch Senior Floating
Rate Fund,  Inc.,  and subject  to certain  conditions,  Class A and  Class D
shares  are  offered at  net asset  value  to shareholders  of  Merrill Lynch
Municipal Strategy Fund,  Inc. and Merrill Lynch  High Income Municipal  Bond
Fund, Inc., who wish to reinvest in  shares of the Fund the net proceeds from
a sale  of certain of their shares of  common stock pursuant to tender offers
conducted by those funds.

    Class D shares are  offered at net asset  value, without a  sales charge,
to an investor who has a business relationship with a Merrill Lynch Financial
Consultant, if  certain conditions set  forth in the Statement  of Additional
Information are met.   Class D shares  may be offered  at net asset value  in
connection with the acquisition of asses of other investment companies.

    Class D  shares are  offered with reduced  sales charges  and, in certain
circumstances, at  net asset  value,  to participants  in the  Merrill  Lynch
Blueprint(Service Mark) Program.

    Additional information  concerning these reduced initial sales charges is
set forth in the Statement of Additional Information.

DEFERRED SALES CHARGE ALTERNATIVES--CLASS B AND CLASS C SHARES

    Investors  choosing  the  deferred   sales  charge  alternatives   should
consider Class B  shares if they intend to hold  their shares for an extended
period of time  and Class C shares if they are uncertain  as to the length of
time they intend to hold their assets in MLAM-advised mutual funds.

    The public offering  price of  Class B and Class C  shares for  investors
choosing  the deferred sales charge  alternatives is the  next determined net
asset value per share without the imposition of a sales charge at the time of
purchase.   As discussed  below, Class B  shares are  subject to a  four year
CDSC, which declines  each year, while Class C  shares are subject only  to a
one  year 1.0%  CDSC.   On the  other hand,  approximately eight  years after
Class B shares are issued,  such Class B shares, together with  shares issued
upon  dividend reinvestment with  respect to those  shares, are automatically
converted into  Class D shares of the Fund and  thereafter will be subject to
lower continuing fees.  See "Conversion of  Class B Shares to Class D Shares"
below.  Both Class B and Class C shares are subject to an account maintenance
fee of 0.25% of  net assets and distribution fees  of 0.75% of net  assets as
discussed below under "Distribution Plans."  

    Class B and Class C  shares are sold  without an initial sales  charge so
that  the Fund  will  receive  the full  amount  of  the investor's  purchase
payment.   Merrill Lynch  compensates its  financial consultants  for selling
Class B and  Class C shares at the time of purchase  from its own funds.  See
"Distribution Plans" below.

    Proceeds  from  the  CDSC  and  the distribution  fee  are  paid  to  the
Distributor and are used in whole or in part by the Distributor to defray the
expenses  of   dealers  (including  Merrill   Lynch)  related   to  providing
distribution related services to the Fund in connection  with the sale of the
Class B and  Class C shares, such as the payment of compensation to financial
consultants  for selling  Class B and  Class C shares  from the  dealers' own
funds.    The combination  of  the  CDSC  and  the ongoing  distribution  fee
facilitates the ability of  the Fund to sell  the Class B and Class C  shares
without a sales charge  being deducted at the time of purchase.  The proceeds
from the account maintenance  fees are used to  compensate Merrill Lynch  for
providing continuing  account maintenance  activities.   Approximately  eight
years after issuance, Class B shares will convert  automatically into Class D
shares of the Fund,  which are subject to  an account maintenance fee  but no
distribution fee; Class B  shares of certain other  MLAM-advised mutual funds
into which exchanges may  be made convert  into Class D shares  automatically
after approximately ten years.   If Class B shares of the Fund  are exchanged
for Class B shares of another MLAM-advised mutual fund, the conversion period
applicable to the Class B shares acquired in the exchange will apply, and the
holding period  for the  shares exchanged  will  be tacked  onto the  holding
period for the shares acquired.

    Imposition  of the CDSC and  the distribution fee  on Class B and Class C
shares  is  limited  by  the  NASD  asset-based   sales  charge  rule.    See
"Limitations on the Payment of Deferred  Sales Charges" below.  The  proceeds
from the ongoing account maintenance fee are used to compensate Merrill Lynch
for   providing  continuing   account   maintenance  activities.      Class B
shareholders  of the Fund  exercising the exchange  privilege described under
"Shareholder Services--Exchange Privilege" will continue to be subject to the
Fund's  CDSC  schedule if  such  schedule is  higher than  the  CDSC schedule
relating to the Class B shares acquired as a result of the exchange.

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

    The following table sets forth the rates of the Class B CDSC:

<TABLE>
<CAPTION>                                                                                                         Class B
                                                                                                                 CDSC as a
            Year Since                                                                                         Percentage of
             Purchase                                                                                          Dollar Amount
           Payment Made                                                                                      Subject to Charge
          --------------                                                                                     ------------------
<S>     <C>                                                                                                        <C>
         0-1  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 4.0%
         1-2  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 3.0%
         2-3  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 2.0%

         3-4  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 1.0%
         4 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 None

</TABLE>

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

    To provide  an example, assume an  investor purchased 100  Class B shares
at $10 per share (at a cost of $1,000) and in the third  year after purchase,
the  net asset value per share is $12 and, during such time, the investor has
acquired 10 additional shares through dividend reinvestment.  If at such time
the  investor makes his  or her  first redemption  of 50 shares  (proceeds of
$600),  10  shares  will not  be  subject  to the  CDSC  because  of dividend
reinvestment.  With respect to  the remaining 40 shares, the CDSC  is applied
only to the  original cost of $10  per share and  not to the increase  in net
asset value of $2 per share.  Therefore, $400 of the $600 redemption proceeds
will be charged  at a rate  of 2.0%  (the applicable rate  in the third  year
after purchase).

    The Class B  CDSC is waived  on redemptions of shares  in connection with
certain  post-retirement withdrawals  from an  Individual  Retirement Account
("IRA") or other retirement plan or following death or disability (as defined
in  the  Code) of  a  shareholder.    The  Class B  CDSC also  is  waived  on
redemptions of  shares by certain  eligible 401(a) and eligible  401(k) plans
and in connection with certain group plans placing orders through the Merrill
Lynch  Blueprint(Service Mark)  Program.   The CDSC  is also  waived for  any
Class B shares that are purchased by eligible 401(a) or eligible 401(k) plans
that  are rolled over  into a  Merrill Lynch  or Merrill Lynch  Trust Company
custodied  IRA and  held in  such account  at the  time of  redemption.   The
Class B CDSC  is also waived for any Class B shares purchased within eligible
Employee Access(Service Mark) Accounts.  The Class B CDSC  also is waived for
any Class B shares which are  purchased by a Merrill Lynch rollover  IRA that
was  funded by a rollover from  a terminated 401(k) plan  managed by the MLAM
Private Portfolio Group and held  in such account at the time  of redemption.
Additional information concerning the waiver of the Class B CDSC is set forth
in the  Statement of Additional  Information.  The  terms of the  CDSC may be
modified in  connection with  certain fee-based  programs.   See "Shareholder
Services--Fee-Based Programs."

    Contingent Deferred  Sales Charges--Class C Shares.   Class C shares that
are redeemed within  one year after purchase  may be subject  to a 1.0%  CDSC
charged  as a percentage  of the dollar  amount subject thereto.   The charge
will  be assessed  on  an amount  equal  to  the lesser  of  the proceeds  of
redemption or the cost of the shares being redeemed.  Accordingly, no Class C
CDSC  will be  imposed on  increases  in net  asset value  above  the initial
purchase price.   In addition,  no Class C  CDSC will be  assessed on  shares
derived from reinvestment  of dividends or capital gains  distributions.  The
Class C  CDSC may be  waived in  connection with certain  fee-based programs.
See "Shareholder Services--Fee-Based Programs."

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

    Conversion  of Class B  Shares to  Class D Shares.   After  approximately
eight years  (the  "Conversion Period"),  Class B  shares will  be  converted
automatically into Class D shares of the Fund.  Class D shares are subject to
an ongoing account maintenance fee of 0.25% of net assets but are not subject
to  the  distribution  fee that  is  borne  by  Class B  shares.    Automatic
conversion of Class B shares into Class D shares will occur at least once 
each month (on the "Conversion Date") on the basis of the relative net  asset
values of the shares  of the two classes on the Conversion  Date, without the
imposition of  any sales load,  fee or other  charge.  Conversion  of Class B
shares to Class D shares will  not be deemed a purchase or sale of the shares
for Federal income tax purposes.

    In  addition,  shares purchased  through  reinvestment  of  dividends  on
Class B  shares also  will  convert  automatically to  Class D  shares.   The
Conversion  Date for dividend  reinvestment shares will  be calculated taking
into  account  the  length  of  time  the  shares  underlying  such  dividend
reinvestment shares were outstanding.  If at a Conversion Date the conversion
of  Class B shares  to Class D shares  of the  Fund in a  single account will
result in less  than $50 worth of Class B  shares being left in  the account,
all of the Class B shares  of the Fund held in the account  on the Conversion
Date will be converted to Class D shares of the Fund.

    Share certificates for Class B  shares of the Fund  to be converted  must
be delivered to the  Transfer Agent at least one week prior to the Conversion
Date applicable  to those  shares.   In the event  such certificates  are not
received  by the Transfer  Agent at  least one  week prior to  the Conversion
Date, the  related Class B shares will convert to  Class D shares on the next
scheduled Conversion Date after such certificates are delivered.

    In  general,  Class B  shares of  equity  MLAM-advised mutual  funds will
convert  approximately eight years after initial purchase, and Class B shares
of taxable and tax-exempt fixed income MLAM-advised mutual funds will convert
approximately ten  years after initial purchase.   If, during  the Conversion
Period,  a shareholder exchanges Class B shares with an eight-year Conversion
Period for Class B  shares with a  10-year Conversion Period, or  vice versa,
the  Conversion Period  applicable  to the  Class B  shares acquired  in  the
exchange will apply, and the holding  period for the shares exchanged will be
tacked onto the holding period for the shares acquired.

    The Conversion Period is  modified for shareholders who purchased Class B
shares  through certain retirement  plans that qualified for  a waiver of the
CDSC  normally imposed on  purchases of  Class B shares  ("Class B Retirement
Plans").  When the first share of any MLAM-advised mutual fund purchased by a
Class B  Retirement Plan has been held for 10  years (i.e., 10 years from the
date the  relationship  between MLAM-advised  mutual  funds and  the  Class B
Retirement  Plan was  established), all  Class B  shares of  all MLAM-advised
mutual funds  held in  that Class B  Retirement Plan  will be  converted into
Class D shares of the appropriate funds.  Subsequent to such conversion, that
Class B Retirement Plan will be sold Class D shares of  the appropriate funds
at net asset value per share.

    The Conversion  Period also may be modified for retirement plan investors
who participate in  certain fee-based programs.   See "Shareholder Services--
Fee-Based Programs."

DISTRIBUTION PLANS

    The Fund has  adopted separate  distribution plans  for Class B,  Class C
and Class D  shares pursuant to Rule  12b-1 under the  Investment Company Act
(each  a "Distribution Plan") with respect  to the account maintenance and/or
distribution fees  paid by the Fund  to the Distributor with  respect to such
classes.   The Class B and Class C Distribution Plans provide for the payment
of  account  maintenance  fees  and   distribution  fees,  and  the   Class D
Distribution Plan provides for the payment of account maintenance fees.

    The  Distribution  Plans  for Class B,  Class C  and Class D  shares each
provide  that  the Fund  pays  the  Distributor  an account  maintenance  fee
relating to the shares of the relevant class, accrued daily and paid monthly,
at the annual  rate of  0.25% of  the average daily  net assets  of the  Fund
attributable  to shares  of the  relevant class  in  order to  compensate the
Distributor and  Merrill Lynch  (pursuant to  a sub-agreement)  in connection
with account maintenance activities.

    The Distribution Plans for  Class B and Class C shares each provide  that
the Fund also pays the Distributor a distribution fee relating to  the shares
of the relevant class,  accrued daily and paid monthly, at the annual rate of
0.75% of the average daily  net assets of the Fund attributable to the shares
of  the relevant  class in  order to  compensate the Distributor  and Merrill
Lynch  (pursuant   to  a   sub-agreement)  for   providing  shareholder   and
distribution services,  and bearing certain  distribution-related expenses of
the Fund, including payments to financial consultants for selling Class B and
Class C shares of the Fund.   The Distribution Plans relating to  Class B and
Class C shares are  designed to permit  an investor  to purchase Class B  and
Class C  shares through  dealers without the  assessment of  an initial sales
charge and  at the same  time permit the  dealer to compensate  its financial
consultants in  connection with the sale  of the Class B and  Class C shares.
In this regard, the purpose and function of the ongoing distribution fees and
the CDSC  are the same as those  of the initial sales  charge with respect to
the Class A and Class D shares of the Fund in that the deferred sales charges
provide for  the financing  of the  distribution  of the  Fund's Class B  and
Class C shares.

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

    The  Fund has  no obligation with respect  to distribution and/or account
maintenance-related expenses incurred by the Distributor and Merrill Lynch in
connection with  the Class B,  Class C and Class D  shares, and  there is  no
assurance that  the Directors of the Fund will approve the continuance of the
Distribution Plans from  year to year.   However, the Distributor  intends to
seek annual continuation of the  Distribution Plans.  In their review  of the
Distribution Plans,  the Directors will  be asked to take  into consideration
expenses  incurred   in  connection  with  the   account  maintenance  and/or
distribution of each class of shares separately.  The  initial sales charges,
the  account maintenance fee, the distribution  fee and/or the CDSCs received
with respect to one class will not be used to subsidize the sale of shares of
another class.    Payments of  the distribution  fee on  Class B shares  will
terminate upon conversion of  those Class B shares into Class D shares as set
forth under "Deferred Sales Charge Alternatives--Class B and Class C Shares--
Conversion of Class B Shares to Class D Shares."

LIMITATIONS ON THE PAYMENT OF DEFERRED SALES CHARGES

    The maximum sales charge  rule in the Conduct Rules of the NASD imposes a
limitation on certain  asset-based sales charges such as the distribution fee
and the  CDSC borne by  the Class B  and Class C shares  but not  the account
maintenance fee.  The maximum sales charge rule is applied separately to each
class.   As applicable to the Fund,  the maximum sales charge rule limits the
aggregate of distribution fee payments  and CDSCs payable by the Fund  to (1)
6.25% of eligible gross sales of Class B shares and Class C shares,  computed
separately   (defined  to   exclude  shares   issued  pursuant   to  dividend
reinvestments and exchanges)  plus (2) interest on the unpaid balance for the
respective class, computed separately, at the prime rate plus 1%  (the unpaid
balance being  the maximum  amount payable  minus amounts  received from  the
payment of  the  distribution fee  and the  CDSC).   In  connection with  the
Class B  shares, the  Distributor has  voluntarily agreed  to waive  interest
charges  on the unpaid  balance in excess  of 0.50% of  eligible gross sales.
Consequently, the maximum amount payable  to the Distributor (referred to  as
the  "voluntary maximum") in  connection with the Class B  shares is 6.75% of
eligible gross sales.  The Distributor retains the right to stop  waiving the
interest  charges  at any  time.   To the  extent  payments would  exceed the
voluntary  maximum,  the   Fund  will  not  make  further   payments  of  the
distribution fee with respect to  Class B shares, and any CDSCs will  be paid
to the  Fund rather than to the Distributor;  however, the Fund will continue
to  make payments of  the account maintenance fee.   In certain circumstances
the amount payable pursuant  to the voluntary maximum  may exceed the  amount
payable under the NASD formula.  In such  circumstances payments in excess of
the amount payable under the NASD formula will not be made.


                             REDEMPTION OF SHARES

    The  Fund  is  required to  redeem for  cash  all shares  of the  Fund on
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.  Except for any CDSC that may be applicable, there will
be no charge for redemption if the redemption request is sent directly to the
Transfer Agent.    Shareholders liquidating  their holdings  will receive  on
redemption all dividends declared 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 by  tendering the shares
directly to the Fund's Transfer Agent, Merrill Lynch Financial Data Services,
Inc.,  P.O. Box 45289, Jacksonville, Florida 32232-5289.  Redemption requests
delivered other than  by mail should be delivered  to Merrill Lynch Financial
Data  Services,  Inc.,  4800  Deer  Lake  Drive East,  Jacksonville,  Florida
32246-6484.  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.
Redemption requests  should not be sent to the  Fund.  The redemption request
in either event requires the signature(s) of all persons in whose name(s) the
shares  are  registered, signed  exactly  as  such name(s)  appear(s)  on the
Transfer  Agent's register or  on the certificate,  as the case may  be.  The
signature(s)  on the redemption  request must  be guaranteed by  an "eligible
guarantor institution"  (including, for  example, Merrill Lynch  branches and
certain other financial institutions) as such term is defined in Rule 17Ad-15
under  the Securities  Exchange Act of  1934, as  amended, the  existence and
validity  of which may be  verified by the Transfer Agent  through the use of
industry publications.  Notarized 
signatures are not sufficient.  In  certain instances, the Transfer Agent may
require additional documents such as, but  not limited to, trust instruments,
death   certificates,   appointments   as  executor   or   administrator,  or
certificates  of corporate  authority.   For shareholders  redeeming directly
with the Transfer Agent, payments will be mailed within seven days of receipt
of a proper notice of redemption.

    At various times,  the Fund may be  requested to redeem shares for  which
it  has not yet  received good payment.   The Fund  may delay or  cause to be
delayed the mailing  of a redemption check until such time  as it has assured
itself that  good payment (e.g., cash,  or certified check drawn  on a United
States bank) has  been collected for the purchase of  such shares.  Normally,
this delay will not exceed 10 days.

REPURCHASE

    The  Fund  also  will repurchase  shares  through a  shareholder's listed
securities dealer.  The Fund will normally 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  regular close
of business  on the  NYSE (generally, 4:00  p.m., New  York time) on  the day
received  and is  received by  the Fund from  such dealer  not later  than 30
minutes after the close  of business on  the NYSE on the  same day.   Dealers
have the  responsibility of submitting  such repurchase requests to  the Fund
not later than 30 minutes after the close of business on the NYSE in order to
obtain that day's closing price.

    These  repurchase arrangements  are for  the convenience  of shareholders
and do not  involve a charge by the  Fund (other than any applicable  CDSC in
the  case of Class B or Class C  shares).  However, securities firms which do
not have selected dealer agreements with the Distributor may impose a  charge
on the shareholder  for transmitting the  notice of  repurchase to the  Fund.
Merrill Lynch may  charge its customers a processing fee (presently $5.35) to
confirm a repurchase of shares.  Repurchases made directly through the Fund's
Transfer Agent are not subject to the  processing fee.  The Fund reserves the
right to  reject any  order for  repurchase, which right  of rejection  might
affect adversely  shareholders  seeking  redemption  through  the  repurchase
procedure.  However, a shareholder whose  order for repurchase is rejected by
the Fund may redeem shares as set forth above.

    Redemption payments  will be made within seven days of  the proper tender
of the certificates, if any, and stock power or letter requesting redemption,
in each instance with signatures guaranteed as noted above.

REINSTATEMENT PRIVILEGE--CLASS A AND CLASS D SHARES

    Shareholders  who have  redeemed their Class A  or Class D  shares have a
privilege  to  reinstate  their  accounts by  purchasing  Class A  or Class D
shares, as the case may  be, of the Fund at  net asset value without a  sales
charge up to the dollar amount  redeemed.  The reinstatement privilege may be
exercised by sending a notice of exercise  along with a check for the  amount
to  be reinstated  to the Transfer  Agent within  30 days after  the date the
request for redemption was accepted by the Transfer Agent or the Distributor.
Alternatively,  the reinstatement  privilege  may  be exercised  through  the
investor's Merrill Lynch  Financial Consultant within 30 days  after the date
the request  was accepted  by the  Transfer Agent  or the  Distributor.   The
reinstatement will be made at  the net asset value per share  next determined
after the notice of reinstatement is received and cannot exceed the amount of
the redemption proceeds.


                             SHAREHOLDER SERVICES

    The Fund  offers a  number of shareholder  services and  investment plans
described below that are  designed to facilitate investment in shares  of the
Fund.   Certain of  such services  are not available  to investors  who place
orders for  the  Fund  through  the  Merrill  Lynch  Blueprint(Service  Mark)
Program.  Full  details as to  each of such  services, copies of  the various
plans described  below and  instructions  as to  how  to participate  in  the
various plans and services, or to change options with respect thereto, can be
obtained  from the Fund  by calling  the telephone  number on the  cover page
hereof or  from the Distributor or Merrill Lynch.   Certain of these services
are available only to U.S. 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 quarterly  statements will serve  as transaction
confirmations  for  automatic investment  purchases  and the  reinvestment of
ordinary  income dividends and  long-term capital gain  distributions.  These
statements  will also  show  any  other activity  in  the  account since  the
preceding  statement.     Shareholders  will  receive  separate   transaction
confirmations for  each  purchase or  sale transaction  other than  automatic
investment  purchases and the  reinvestment of ordinary  income dividends and
long-term capital  gains distributions.   Shareholders may make  additions to
their  Investment Accounts 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 may  be
opened  automatically  at  the  Transfer  Agent.    Shareholders  considering
transferring their Class A or Class D 
shares from  Merrill Lynch to another brokerage firm or financial institution
should be aware that, if the firm to which the Class A or Class D  shares are
to be transferred will not take delivery of shares of the Fund, a shareholder
either must redeem the Class A or Class D shares (paying any applicable CDSC)
so that the cash proceeds can  be transferred to the account at the  new firm
or such shareholder  must continue to maintain  an Investment Account  at the
Transfer Agent for those Class A  or Class D shares.  Shareholders interested
in transferring their Class B or Class C 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 at the Transfer  Agent.  If the new brokerage firm is willing
to accommodate the shareholder in  this manner, the shareholder must  request
that he or she be issued certificates for such  shares and then must turn the
certificates  over to  the new firm  for re-registration as  described in the
preceding sentence.   Shareholders  considering  transferring a  tax-deferred
retirement  account such  as an  individual retirement  account from  Merrill
Lynch  to another  brokerage firm  or financial  institution should  be aware
that, if  the firm to which the retirement account  is to be transferred will
not take delivery of shares of the Fund, a shareholder either must redeem the
shares  (paying  any applicable  CDSC)  so  that  the cash  proceeds  can  be
transferred to the account at the new firm, or such shareholder must continue
to maintain a retirement account at Merrill Lynch for those shares.

EXCHANGE PRIVILEGE

    U.S. shareholders  of  each class  of  shares of  the Fund  each have  an
exchange  privilege with certain  other MLAM-advised mutual  funds.  There is
currently no limitation on the number of times a shareholder may exercise the
exchange privilege.  The exchange privilege may be  modified or terminated in
accordance with the rules of the Commission.

    Under the  Merrill  Lynch  Select Pricing(Service  Mark) System,  Class A
shareholders may exchange Class A shares of the Fund  for Class A shares of a
second  MLAM-advised mutual fund if the  shareholder holds any Class A shares
of the second fund in the account in  which the exchange is made at the  time
of the  exchange or is otherwise  eligible to purchase Class A  shares of the
second fund.  If the Class A shareholder wants to exchange Class A shares for
shares of  a second MLAM-advised  mutual fund,  and the shareholder  does not
hold Class A shares of the  second fund in his or her account  at the time of
the exchange and  is not otherwise eligible to acquire  Class A shares of the
second  fund, the shareholder will receive Class D  shares of the second fund
as  a result  of  the exchange.   Class D  shares also  may be  exchanged for
Class A  shares of a second MLAM-advised mutual fund  at any time as long as,
at the  time of  the exchange,  the shareholder holds  Class A shares  of the
second fund in  the account  in which the  exchange is  made or is  otherwise
eligible to purchase Class A shares of the second fund.

    Exchanges of  Class A and  Class D shares are  made on the  basis of  the
relative net asset values per Class A or Class D share, respectively, plus an
amount equal to the  difference, if any, between the  sales charge previously
paid on  the Class A or Class D  shares being exchanged and  the sales charge
payable at the time of the exchange on the shares being acquired.

    Class B, Class C and  Class D shares are exchangeable  with shares of the
same class of other MLAM-advised mutual funds.

    Shares  of the Fund that  are subject  to a CDSC are  exchangeable on the
basis of relative  net asset value per share without the  payment of any CDSC
that might otherwise  be due upon redemption of the shares  of the Fund.  For
purposes of  computing the CDSC that may be payable upon a disposition of the
shares  acquired in the exchange, the holding period for the previously owned
shares  of the Fund is "tacked" to  the holding period for the newly acquired
shares of the other fund.

    Class A, Class B,  Class C and  Class D shares also are  exchangeable for
shares  of certain MLAM-advised money market funds specifically designated as
available  for exchange by  holders of  Class A, Class B, Class C  or Class D
shares.  The period of time  that Class A, Class B, Class C or Class D shares
are held in a money market fund, however,  will not count toward satisfaction
of the  holding period requirement for reduction of  any CDSC imposed on such
shares, if any,  and, with respect to Class B shares,  toward satisfaction of
the Conversion Period.

    Class B shareholders  of the Fund  exercising the exchange privilege will
continue to be subject to the Fund's CDSC schedule if such schedule is higher
than the  CDSC schedule  relating to  the new Class B  shares.   In addition,
Class B shares  of the  Fund acquired through  use of the  exchange privilege
will be subject  to the Fund's CDSC schedule if such  schedule is higher than
the CDSC schedule relating to  the Class B shares of the MLAM-advised  mutual
fund from which the exchange has been made.

    Exercise of the  exchange privilege is treated as a sale of the exchanged
shares and a purchase of the acquired shares for Federal income tax purposes.
For further information,  see "Shareholder  Services--Exchange Privilege"  in
the Statement of Additional Information.

AUTOMATIC REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

    All   dividends   and   capital  gains   distributions   are   reinvested
automatically in  full and  fractional shares of  the Fund,  without a  sales
charge, at the net asset  value per share next determined after the  close of
business  on  the  NYSE  on  the   ex-dividend  date  of  such  dividend   or
distribution.   A  shareholder may at  any time,  by written  notification to
Merrill  Lynch if the shareholder's account  is maintained with Merrill Lynch
or by written notification  or by telephone (1-800-MER-FUND) to  the Transfer
Agent if  the shareholder's  account is maintained  with the  Transfer Agent,
elect to have subsequent dividends  or capital gains distributions, or  both,
paid in cash,  rather than reinvested, in which event  payment will be mailed
on or about the payment date.  The Fund is not responsible for any failure of
delivery  to the shareholder's address of record  and no interest will accrue
on amounts  represented by uncashed distribution or  redemption checks.  Cash
payments also  can be directly deposited  to the shareholder's  bank account.
No CDSC will be imposed  upon redemption of shares issued as a  result of the
automatic reinvestment of dividends or capital gains distributions.

SYSTEMATIC WITHDRAWAL PLANS

    A shareholder  may elect  to receive systematic withdrawal  payments from
his or  her Investment Account  in the form of  payments by check  or through
automatic payment by direct  deposit to his or  her bank account on  either a
monthly or quarterly  basis.  Alternatively,  a shareholder whose  shares are
held  within  a  CMA(Registered  Trademark),  CBA(Registered  Trademark)   or
Retirement Account may elect to have shares redeemed on a monthly, bimonthly,
quarterly,  semiannual  or annual  basis  through  the Systematic  Redemption
Program, subject to certain conditions.  With respect to redemptions of Class
B and Class  C shares pursuant to  a systematic withdrawal plan,  the maximum
value of Class  B or  Class C  shares that can  be redeemed  from an  account
annually shall not exceed 10% of  the value of shares of such class  in that
account at the time the  election to join the systematic withdrawal  plan was
made.  Any CDSC  that otherwise might be due on such redemption of Class B or
Class C  shares will be  waived.   Shares redeemed pursuant  to a  systematic
withdrawal plan  will be redeemed  in the  same order as  Class B or  Class C
shares are  otherwise  redeemed.   See  "Purchase of  Shares--Deferred  Sales
Charge Alternatives--Class B and  Class C  Shares--Contingent Deferred  Sales
Charges--Class B  Shares" and "--"Contingent  Deferred Sales Charges--Class C
Shares."  Where the systematic withdrawal  plan is applied to Class B shares,
upon conversion  of the last Class B  shares in an account to Class D shares,
the systematic withdrawal plan will automatically be  applied  thereafter  to 
Class  D   shares.     See   "Purchase  of   Shares--Deferred  Sales   Charge 
Alternatives--Class B  and  Class  C  Shares--Conversion of Class B Shares to 
Class D Shares."

AUTOMATIC INVESTMENT PLANS

    Regular additions of Class A, Class B, Class C  and Class D shares may be
made to an  investor's Investment Account by  pre-arranged charges of $50  or
more  to  his  or  her  regular   bank  account.    Investors  who   maintain
CMA(Registered Trademark)  or CBA(Registered Trademark) accounts  may arrange
to  have  periodic investments  made  in  the  Fund in  their  CMA(Registered
Trademark)  or  CBA(Registered Trademark)  accounts  or  in  certain  related
accounts in amounts of $100 or more through the  CMA(Registered Trademark) or
CBA(Registered Trademark) Automated Investment Program.

FEE-BASED PROGRAMS

    Certain Merrill Lynch fee-based programs, including pricing  alternatives
for  securities  transactions  (each  referred  to in  this  paragraph  as  a
"Program"), may  permit the  purchase of Class A  shares at net  asset value.
Under specified circumstances,  participants in certain Programs  may deposit
other classes of shares that  will be exchanged for Class A shares.   Initial
or deferred sales charges otherwise due in connection with such exchanges may
be  waived  or  modified, as  may  the Conversion  Period  applicable  to the
deposited shares.   Termination of participation in  a Program may result  in
the redemption of  shares held therein or  the automatic exchange  thereof to
another class at net asset value, which may be shares of a money market fund.
In addition, upon termination of participation in a Program, shares that have
been held for less than specified periods within such Program may  be subject
to a  fee based upon the current  value of such shares.   These Programs also
generally prohibit such  shares from being transferred to  another account at
Merrill Lynch, to another broker-dealer or to the  Transfer Agent.  Except in
limited  circumstances  (which may  also  involve  an  exchange as  described
above), such shares must  be redeemed and another  class of shares  purchased
(which may involve the  imposition of initial  or deferred sales charges  and
distribution and account maintenance fees) in order for the investment not to
be subject  to Program  fees.   Additional information  regarding a  specific
Program (including  charges and limitations on  transferability applicable to
shares  that may  be held  in such  Program) is  available in  such Program's
client   agreement  and   from  the   Transfer   Agent  at  (800) MER-FUND or 
(800) 637-3863.


                                    TAXES

    The Fund intends  to elect and to qualify  for the special  tax treatment
afforded regulated investment companies ("RICs") under the  Code.  As long as
it so qualifies, the  Fund (but not its shareholders) 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   Class A,   Class B,  Class C  and  
Class D  shareholders  (together,  the "shareholders").  The Fund  intends to 
distribute  substantially all of  such income.

    Dividends paid by the Fund from its ordinary income or from an excess  of
net  short-term capital  gains over  net  long-term capital  losses (together
referred  to  hereafter  as  "ordinary  income  dividends")  are  taxable  to
shareholders as ordinary  income.  Distributions made  from an excess  of net
long-term capital gains  over net short-term capital losses  (including gains
or  losses  from  certain  transactions in  warrants,  futures  and  options)
("capital gain dividends") are taxable  to shareholders as long-term  capital
gains,  regardless of  the  length of  time  the shareholder  has owned  Fund
shares.   Recent legislation creates  additional categories of  capital gains
taxable  at different rates.   Although the legislation  does not explain how
gain in these categories will be taxed to shareholders of RICs, it authorizes
regulations applying the new categories of gain and the new rates of sales of
securities by RICs.  In the absence of guidance, there is some uncertainty as
to  the manner in  which the  categories of  gain and  related rates  will be
passed through  to shareholders in capital gain dividends.  Any loss upon the
sale or exchange of Fund shares held for six months or less, however, will be
treated as long-term capital loss to the extent of any capital gain dividends
received by  the shareholder.  Distributions in excess of the Fund's earnings
and  profits will first  reduce the adjusted  tax basis of  a holder's shares
and,  after such  adjusted  tax basis  is reduced  to  zero, will  constitute
capital  gains to  such holder  (assuming the  shares are  held as  a capital
asset).

    Dividends  are taxable to shareholders even though they are reinvested in
additional shares of the Fund.  Not later than 60 days after the close of its
taxable year, the  Fund will provide its  shareholders with a  written notice
designating  the amounts  of any  ordinary income  dividends or  capital gain
dividends.  It is anticipated that IRS guidance permitting categories of gain
and  related rates  to be passed  through to shareholders  would also require
this written notice to designate the amount of various  categories of capital
gain income  included in capital  gain dividends.   A portion  of the  Fund's
ordinary  income  dividends  may  be  eligible  for  the  dividends  received
deduction allowed to corporations under  the Code if certain requirements are
met.   If the  Fund pays  a dividend  in January  which was  declared in  the
previous  October,  November  or December  to  shareholders  of  record on  a
specified date in one of  such months, then such dividend will be treated for
tax purposes as being  paid by the Fund and  received by its shareholders  on
December 31 of the year in which such dividend was declared.

    Ordinary  income  dividends  paid  to shareholders  who  are  nonresident
aliens or  foreign entities  will be subject  to a  30% U.S.  withholding tax
under existing  provisions of the Code applicable  to foreign individuals and
entities unless  a reduced rate of withholding  or a withholding exemption is
provided under applicable treaty law.   Nonresident shareholders are urged to
consult  their own  tax  advisers concerning  the applicability  of  the U.S.
withholding tax.

    Dividends and interest received  by the Fund may give rise to withholding
and other  taxes  imposed by  foreign  countries.   Tax  conventions  between
certain countries and the U.S. may reduce or eliminate such taxes.  

    Under certain provisions of  the Code,  some shareholders may be  subject
to a 31% withholding tax on ordinary income dividends, capital gain dividends
and  redemption  payments  ("backup withholding").    Generally, shareholders
subject to  backup withholding will be  those for whom no  certified taxpayer
identification number  is  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 Fund may  invest up to 10% of its total assets in securities of other
investment companies.  If the Fund purchases shares of an investment  company
(or similar investment entity) organized under foreign  law, the Fund will be
treated as owning shares in a passive foreign investment company ("PFIC") for
U.S. Federal  income tax purposes.   The Fund may be subject  to U.S. Federal
income tax,  and an additional tax  in the nature of  interest (the "interest
charge"),  on a portion of the distributions  from such a company and on gain
from  the disposition of the shares  of such a company (collectively referred
to as "excess distributions"), even if  such excess distributions are paid by
the Fund as a dividend to its shareholders.  The Fund may be eligible to make
an election with respect to  certain PFICs in which it owns  shares that will
allow it to avoid the taxes on excess  distributions.  However, such election
may cause the Fund to recognize income in a particular  year in excess of the
distributions  received  from  such   PFICs.    Alternatively,  under  recent
legislation, the  Fund could  elect to "mark  to market"  at the end  of each
taxable year all shares  that it holds in PFICs.   If it made  this election,
the Fund would recognize as ordinary income any increase in the value of such
shares over  their adjusted basis and  as ordinary loss any  decrease in such
value to the extent it did not exceed prior increases included in income.  By
making the mark-to-market  election, the Fund could  avoid imposition of  the
interest  charge with  respect to  its distributions from  PFICs, but  in any
particular year  might  be required  to  recognize income  in excess  of  the
distributions it  received from PFICs and  its proceeds from  dispositions of
PFIC stock.

    Under  Code Section  988, foreign currency  gains or  losses from certain
debt instruments, from certain forward contracts, from futures contracts that
are  not  "regulated  futures  contracts"  and  from  unlisted  options  will
generally be treated as ordinary income or loss.  Such Code Section 988 gains
or  losses will  generally  increase or  decrease  the amount  of the  Fund's
investment company taxable income available to be distributed to shareholders
as ordinary income.   Additionally, if Code Section  988 losses exceed  other
investment company taxable  income during a taxable year,  the Fund would not
be  able to make  any ordinary  income dividend  distributions, and all  or a
portion of distributions made before the losses were realized but in the same
taxable year would be recharacterized as a return of capital to shareholders,
thereby reducing the basis of each shareholder's Fund shares and resulting in
a capital gain for any  shareholder who received a distribution  greater than
such shareholder's tax basis in Fund shares (assuming the shares were held as
a capital asset).

    No  gain  or  loss will  be  recognized by  Class B  shareholders  on the
conversion of  their Class B  shares into  Class D shares.   A  shareholder's
basis in the Class D shares  acquired will be the same as  such shareholder's
basis in the Class B shares converted, and the holding period of the acquired
Class D  shares will  include the  holding period  for the  converted Class B
shares.

    If  a  shareholder exercises  an  exchange privilege  within  90  days of
acquiring the shares,  then the  loss the  shareholder can  recognize on  the
exchange will  be reduced (or  the gain  increased) to the  extent any  sales
charge paid to the Fund on the  exchanged shares reduces any sales charge the
shareholder would  have  owed upon  the purchase  of  the new  shares in  the
absence of  the exchange  privilege.   Instead,  such  sales charge  will  be
treated as an amount paid for the new shares.

    A  loss realized on  a sale  or exchange  of shares  of the Fund  will be
disallowed if other  Fund shares are acquired (whether  through the automatic
reinvestment  of dividends or otherwise) within  a 61-day period beginning 30
days  before and ending 30  days after the date that  the shares are disposed
of.   In such a case,  the basis of the  shares acquired will be  adjusted to
reflect the disallowed loss.

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

    Ordinary income and capital gain  dividends may also be  subject to state
and local taxes.

    Certain states exempt  from state income taxation  dividends paid by RICs
that are  derived from interest  on U.S.  Government obligations.   State law
varies  as  to  whether  dividend  income  attributable  to  U.S.  Government
obligations is exempt from state income tax.

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

                               PERFORMANCE DATA

    From time to  time the Fund may include  its average annual  total return
and yield for various specified time periods in advertisements or information
furnished  to present  or  prospective shareholders.    Average annual  total
return is  computed  separately for  Class A,  Class B, Class C  and  Class D
shares in accordance with formulas specified by the 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 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 will be computed assuming all dividends
and distributions  are  reinvested and  taking  into account  all  applicable
recurring and  nonrecurring  expenses,  including  any  CDSC  that  would  be
applicable  to a  complete redemption  of the  investment at  the end  of the
specified period such as  in the case of  Class B and Class C shares and  the
maximum sales  charge in the case  of Class A and Class D  shares.  Dividends
paid by the Fund  with respect to all shares, to the extent any dividends are
paid, will be calculated  in the same manner at the same time on the same day
and  will  be in  the  same  amount, except  that  account maintenance  fees,
distribution charges  and any incremental  transfer agency costs  relating to
each class of shares will be borne exclusively  by that class.  The Fund will
include performance  data  for all  classes  of shares  of  the Fund  in  any
advertisement or information including performance data of the Fund.

    The  Fund  also  may  quote  total  return  and  aggregate  total  return
performance data  for  various specified  time periods.   Such  data will  be
calculated substantially  as described above,  except that  (1) the rates  of
return  calculated will  not  be average  annual  rates, but  rather,  actual
annual,  annualized  or  aggregate  rates  of  return  and  (2)  the  maximum
applicable sales  charges will  not be  included with  respect  to annual  or
annualized  rates of  return  calculations.   Aside  from the  impact  on the
performance  data   calculations  of  including  or   excluding  the  maximum
applicable sales  charges,  actual annual  or  annualized total  return  data
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.    In
advertisements distributed to investors whose purchases are subject to waiver
of the  CDSC in the case of Class B and  Class C shares (such as investors in
certain retirement plans) or  to reduced sales loads  in the case of  Class A
and Class D shares, the performance  data may take into account the  reduced,
and not the maximum, sales  charge or may not take into account  the CDSC and
therefore may reflect greater  total return since,  due to the reduced  sales
charges or waiver of the CDSC, a  lower amount of expenses is deducted.   See
"Purchase of Shares."  The Fund's total return  may be expressed either  as a
percentage or as a  dollar amount in order to illustrate such total return on
a  hypothetical $1,000  investment  in  the Fund  at  the  beginning of  each
specified period.

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

    On  occasion,  the Fund  may  compare  its performance  to  that  of  the
Standard & Poor's 500 Index,  The Financial Times/Standard & Poor's Actuarial
World Indices, the  Morgan Stanley Capital International  Indices, the Morgan
Stanley REIT Index,  the NAREIT Equity Total Return Index,  the Wilshire REIT
Index,  the Dow  Jones Industrial  Average or  performance data  published by
Lipper Analytical Services, Inc., Morningstar Publications, Inc.,  Value Line
Mutual Fund Advisor, Money Magazine, U.S. News & World Report, Business Week,
CDA  Investment Technology, Inc., Forbes Magazine, Fortune Magazine, or other
industry publications.   From time to  time, the Fund may  include the Fund's
risk-adjusted performance  ratings assigned by Morningstar Publications, Inc.
in  advertisements  or   supplemental  sales  literature.    As   with  other
performance   data,  performance   comparisons  should   not  be   considered
representative of the Fund's relative performance for any future period.


                            ADDITIONAL INFORMATION

DIVIDENDS AND DISTRIBUTIONS

    It  is the  Fund's intention to  distribute substantially all  of its net
investment income, if any.  Dividends from such net investment income will be
paid at least annually.  All  net realized long- or short-term capital gains,
if any, will be distributed as dividends to  the Fund's shareholders at least
annually.  The per share dividends and distributions on each class  of shares
will be  reduced as a  result of  any account  maintenance, distribution  and
transfer agency fees applicable to that class.  See "Additional Information--
Determination of  Net Asset  Value."   Dividends  and distributions  will  be
reinvested automatically  in shares of the Fund at  net asset value without a
sales charge.   However,  a shareholder  whose account  is maintained at  the
Transfer Agent or whose account is maintained through Merrill Lynch may elect
in writing to receive  any such dividends or  distributions or both in  cash.
Dividends  and distributions are  taxable to shareholders  as discussed below
whether they are reinvested in shares of  the Fund or received in cash.  From
time to time, the Fund may declare a special distribution at or about the end
of the calendar year  in order to comply  with Federal tax requirements  that
certain percentages of its  ordinary income and capital gains  be distributed
during the calendar year.

DETERMINATION OF NET ASSET VALUE

    The net asset value of  shares of all classes of  the Fund is  determined
once  daily,  as of  15 minutes  after  the close  of  business  on the  NYSE
(generally, 4:00 p.m.  New York time),  on each day during which the NYSE  is
open for trading.  Any assets or liabilities initially expressed in  terms of
non-U.S. dollar currencies are translated into U.S. dollars at the prevailing
market  rates as  quoted  by one  or more  banks  or dealers  on  the day  of
valuation.  

    The net asset  value per share  is computed  by dividing the  sum of  the
value  of the  securities held  by the  Fund plus  any cash  or other  assets
(including interest  and dividends  accrued but not  yet received)  minus all
liabilities  (including  accrued  expenses)  by the  total  number  of shares
outstanding  at such time, rounded to  the nearest cent.  Expenses, including
the  investment  advisory  fees  payable  to  the  Manager  and  any  account
maintenance and/or distribution fees payable to the  Distributor, are accrued
daily.   The per  share net asset  value of Class A  shares generally will be
higher than  the  per share  net  asset value  of  shares of  other  classes,
reflecting   the  daily   expense  accruals   of  the   account  maintenance,
distribution and  higher transfer agency fees applicable  with respect to the
Class B  and Class C  shares and  the daily  expense accruals of  the account
maintenance fees applicable with respect to Class D shares; moreover, the per
share net asset value of Class D shares generally will be higher than the per
share  net asset  value of Class B  and Class C shares,  reflecting the daily
expense  accruals  of  the  distribution  and  higher  transfer  agency  fees
applicable  with respect  to Class B  and Class C  shares.   It is  expected,
however, that the per share net asset value of the  four classes will tend to
converge  (although not necessarily  meet) immediately  after the  payment of
dividends or distributions, which will differ  by approximately the amount of
the expense accrual differentials between the classes.

    Portfolio  securities that  are traded on  stock exchanges  are valued at
the last  sale price (regular way)  on the exchange on  which such securities
are traded,  as of the close of business on  the day the securities are being
valued or,  lacking any  sales, at the  last available bid  price.   In cases
where securities  are traded on  more than one  exchange, the securities  are
valued on the exchange designated  by or under the authority of  the Board of
Directors  as the primary  market.  Securities  traded in the  OTC market are
valued at the last available bid price in the OTC market prior to the time of
valuation.  Securities that are traded both in the OTC market  and on a stock
exchange are valued according to the broadest and most representative market.
When the  Fund  writes an  option,  the amount  of  the premium  received  is
recorded  on the books of  the Fund as an asset  and an equivalent liability.
The  amount of  the liability is  subsequently valued to  reflect the current
market  value of the option  written, based upon  the last sale  price in the
case of exchange-traded options  or, in the case of options traded in the OTC
market,  the last asked price.   Options purchased by  the Fund are valued at
their last sale price in the case  of exchange-traded options or, in the case
of options  traded in  the OTC  market, the last  bid price.   Any  assets or
liabilities expressed in terms of foreign currencies are translated into U.S.
dollars at the prevailing market rates as obtained from one or  more dealers.
Other  investments,  including futures  contracts  and  related options,  are
valued at market  value.  Securities and assets for  which market  quotations
are  not readily available  are valued  at fair  value as determined  in good
faith by or under the direction of the Board of Directors of the  Fund.  Such
valuations  and procedures  will  be reviewed  periodically by  the  Board of
Directors.

ORGANIZATION OF THE FUND

    The Fund was incorporated  under Maryland law on September 24, 1997.   It
has authorized capital of 400,000,000 shares of Common Stock, par value $0.10
per share, divided  into four classes, designated  Class A, Class B,  Class C
and Class D Common Stock,  each consisting of 100,000,000 shares.   Shares of
Class A, Class B, Class C  and Class D Common Stock represent  an interest in
the same assets  of the Fund  and are identical  in all respects except  that
Class B, Class C  and Class D  shares bear  certain expenses  related to  the
account maintenance  associated  with such  shares, and  Class B and  Class C
shares  bear certain expenses related  to distribution of  such shares.  Each
class has exclusive voting rights with respect to matters relating to account
maintenance and distribution expenditures, as  applicable.  See "Purchase  of
Shares." The  Directors of the Fund may classify and reclassify the shares of
the Fund into additional classes of Common Stock at a future date.

    Shareholders are entitled to  one vote for each share held and fractional
votes for fractional shares held  and will vote on the election  of Directors
and any  other matter submitted  to a  shareholder vote.   The Fund  does not
intend to hold meetings of  shareholders in any year in which  the Investment
Company Act does  not require shareholders to  act upon any of  the following
matters: (i)  election of Directors; (ii) approval  of an investment advisory
agreement;  (iii) approval of a distribution agreement; and (iv) ratification
of  selection of  independent accountants.   Also,  the by-laws  of the  Fund
require  that a  special meeting  of shareholders  be  held upon  the written
request of a majority of the outstanding shares of  the Fund entitled to vote
at such meeting, if they comply  with applicable Maryland law.  Voting rights
for Directors  are  not  cumulative.    Shares  issued  are  fully  paid  and
non-assessable and  have no  preemptive rights.   Shares have  the conversion
rights described  in this Prospectus.  Each share of Common Stock is entitled
to participate equally  in dividends and  distributions declared by the  Fund
and  in the  net assets  of the  Fund upon  liquidation or  dissolution after
satisfaction of outstanding liabilities except,  as noted above, the Class B,
Class C and Class D shares bear certain additional expenses.

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.

SHAREHOLDER INQUIRIES

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


                                  APPENDIX A

          INVESTMENT PRACTICES INVOLVING THE USE OF OPTIONS, FUTURES
                             AND FOREIGN EXCHANGE

    The  Fund  is  authorized  to  engage  in  certain  investment  practices
involving  the use  of options,  futures and  foreign exchange,  as described
below.  Such instruments, which may  be regarded as derivatives, are referred
to collectively herein as "Strategic Instruments."

OPTIONS ON SECURITIES AND SECURITIES INDICES

    Purchasing Options.   The Fund  is authorized to purchase  put options on
securities held  in its  portfolio or securities  indices the  performance of
which  is substantially  correlated with  securities held  in its  portfolio.
When  the  Fund purchases  a  put option,  in consideration  for  an up-front
payment (the "option premium"), the Fund acquires a right to sell  to another
party  specified  securities owned  by  the Fund  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 Fund's risk of
loss in the event of a decline in the market value of the  portfolio holdings
underlying the  put option  prior to the  option's expiration  date.   In the
event the market value  of the portfolio  holdings underlying the put  option
increases  rather than  decreases, however,  the  Fund 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.

    The Fund  is also authorized  to purchase  call options on  securities it
intends  to  purchase   or  securities  indices  the   performance  of  which
substantially correlates  with the performance of the  types of securities it
intends to purchase.  When the Fund purchases a call option, in consideration
for the option premium,  the Fund acquires a  right to purchase from  another
party specified  securities at the exercise price on or before the expiration
date,  in the case  of an  option on securities,  or to receive  from another
party a  payment based on the  amount a specified securities  index increases
beyond a specified level on or before the expiration date, in the case  of an
option on a securities index.  The purchase of a call option may protect  the
Fund  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  Fund  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
Fund believes to  be attractive,  in the case  of an option  on an index  (an
"anticipatory hedge").   In the event  the Fund determines not  to purchase a
security underlying  a call  option, however,  the Fund may  lose the  entire
option premium.

    The  Fund  may  also purchase  put  or  call options  in  connection with
closing out put or call options it has previously sold.

    Writing  Options.   The Fund  is  authorized to  write (i.e.,  sell) call
options  on  securities  held  in its  portfolio  or  securities  indices the
performance of which is substantially  correlated with securities held in its
portfolio.   When  the Fund  writes a  call option, in  return for  an option
premium, the Fund  gives another party the right to  buy specified securities
owned by the Fund  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.   The Fund may  write call options to  earn income, through
the receipt of option premiums.  In the event the party to which the Fund 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 Fund
will partially offset any decline in  the value of the underlying  securities
through the receipt of the  option premium and will realize a  greater return
than would have been realized on the underlying securities alone.  By writing
a call  option, however, the Fund  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.

    The Fund may also write put options  on securities or securities indices.
When the Fund writes a put option,  in return for an option premium, the Fund
gives another party the right to sell to the Fund 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 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.   The Fund
may write put options to earn income, through the receipt of option premiums.
In the  event the  party to  which the Fund  has written  an option  fails to
exercise its  right under  the option  because  the value  of the  underlying
securities is greater  than the exercise price,  the Fund will profit  by the
amount of the  option premium.  By  writing a put  option, however, the  Fund
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.  Accordingly,  when the Fund 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 Fund
for writing the put option.  The Fund  will write a put option on a  security
or a securities index only if the Fund is using the put as an 
anticipatory  hedge  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").

    The Fund  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  Fund  will only
write  call  or  put options  that  are  "covered."   A  put  option  will be
considered covered  if the  Fund has segregated  assets with respect  to such
option in  the manner  described  in "Risk  Factors in  Options, Futures  and
Currency Instruments" below.  A call option will be considered covered if the
Fund owns the securities it would be required to deliver upon exercise of the
option (or, in the case of an option on  a securities index, securities 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.   The Fund 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 the seller, but generally do not require the parties to
post margin  and are subject  to greater risk  of counterparty default.   See
"Additional Risk Factors of OTC  Transactions; Limitations on the Use of  OTC
Strategic Investments" below.

FUTURES

    The  Fund may  engage  in transactions  in futures  and, including  stock
index  futures and financial  futures contracts, options  thereon.  Financial
futures  contracts 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.  Stock
index futures contracts  are similar to other  futures contracts except  that
they do not require actual delivery  of securities but instead result in cash
settlement based on the difference in value of the index between the time the
contract was entered into and the time of its settlement.

    No price  is paid upon  entering into a futures  contract.  Rather,  upon
purchasing  or selling  a futures contract  the Fund  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 Fund  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 sale  of a futures  contract for  hedging purposes limits  the Fund's
risk of  loss through  a decline in  the market  value of  portfolio holdings
correlated  with  the  futures  contract  prior  to  the  futures  contract's
expiration date.   In the  event the market  value of the  portfolio holdings
correlated  with  the  futures  contract  increases  rather  than  decreases,
however, the  Fund will realize  a loss on  the futures position  and a lower
return on  the portfolio holdings  than would have been  realized without the
purchase of the futures contract.

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

    The Fund  will limit transactions  in futures and  options on futures  to
the extent necessary to prevent the Fund from being deemed a "commodity pool"
under regulations of the Commodity Futures Trading Commission.

FOREIGN EXCHANGE TRANSACTIONS

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

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

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

    The Fund may  also hedge against the decline  in the value of a  currency
against the  U.S.  dollar through  the  use of  currency options.    Currency
options are similar  to options  on securities, but  in consideration for  an
option premium the writer of a currency  option is obligated to sell (in  the
case of a call option) or purchase (in the case of a put  option) a specified
amount  of a  specified  currency on  or  before the  expiration  date for  a
specified amount of another currency.  The Fund may engage in transactions in
options on  currencies either  on exchanges or  OTC markets.   See  "Types of
Options" above and "Additional Risk Factors of  OTC Transactions; Limitations
on the Use of OTC Strategic Instruments" below.

    When entering into a  transaction in a Currency Instrument, the Fund will
not  hedge  a  currency  in  excess of  the  aggregate  market  value  of the
securities  which it  owns  (including receivables  for unsettled  securities
sales), or has committed to  or anticipates purchasing, which are denominated
in such currency.  The Fund may, however, hedge a currency by entering into a
transaction in a Currency Instrument denominated in a currency other than the
currency being  hedged (a "cross-hedge").   The Fund  will only enter  into a
cross-hedge if  the Manager believes  that (i)  there is a  demonstrably high
correlation between the currency in which the cross-hedge is denominated  and
the  currency  being  hedged and  (ii)  executing a  cross-hedge  through the
currency in which the  cross-hedge is denominated will be  significantly more
cost-effective or  provide substantially greater  liquidity than executing  a
similar hedging transaction by means of the currency being hedged.

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

RISK FACTORS IN OPTIONS, FUTURES AND CURRENCY INSTRUMENTS

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

    The Fund  intends to enter  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;  Limitations  on the  Use  of  OTC  Strategic
Instruments."  However, there can be no assurance that, at any specific time,
either a liquid secondary market will exist for a Strategic Instrument or the
Fund 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., forward  foreign
exchange transactions, futures transactions, sales of put options) may expose
the Fund to  potential losses which exceed the amount  originally invested by
the  Fund in such instruments.  When  the Fund engages in such a transaction,
the  Fund will  deposit  in a  segregated  account  at its  custodian  liquid
securities with a value at least equal  to the Fund's 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 Fund has assets available to satisfy its  obligations with respect to the
transaction, but will not limit the Fund's exposure to loss.

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

    Certain  Strategic  Instruments  traded  in OTC  markets,  including  OTC
options, may be substantially less liquid than other instruments in which the
Fund  may  invest.    The  absence of  liquidity  may  make  it  difficult or
impossible for the Fund  to sell such instruments  promptly at an  acceptable
price.  The absence of liquidity may also make it more difficult for the Fund
to ascertain a  market value for such  instruments.  The Fund  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  Fund 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  Fund  has  therefore  adopted  an
investment policy pursuant to which it 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  Fund, the market value  of the securities
underlying OTC call options currently outstanding which have been sold by the
Fund and margin deposits on the Fund's outstanding OTC options exceeds 15% of
the total assets of the Fund, taken at market value, together with all  other
assets of  the Fund  which are  deemed to be  illiquid or  are otherwise  not
readily  marketable.   However, if  an OTC option  is sold  by the  Fund to a
dealer in U.S. government  securities recognized as a "primary dealer" by the
Federal  Reserve  Bank  of  New  York  and  the  Fund  has  the unconditional
contractual right  to repurchase  such OTC option  at a  predetermined price,
then the Fund 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  the  Fund  has  unrealized gains  in  such
instruments or has deposited collateral with  its counterparty the Fund is at
risk that  its counterparty will become  bankrupt or otherwise  fail to honor
its  obligations.    The  Fund  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 Fund with a third-party guaranty or other credit enhancement.
ADDITIONAL LIMITATIONS ON THE USE OF STRATEGIC INSTRUMENTS

    The Fund may  not use any  Strategic Instrument  to gain  exposure to  an
asset or class of assets that it would be prohibited from purchasing directly
by its investment restrictions.
- ----------------------------------------------------------------------------  
    MERRILL LYNCH REAL ESTATE FUND, INC.--AUTHORIZATION FORM (PART 1)
(NOTE: THIS  FORM MAY NOT  BE USED  FOR PURCHASES  THROUGH THE MERRILL  LYNCH
BLUEPRINT/SM/ PROGRAM.  YOU MAY REQUEST A MERRILL LYNCH BLUEPRINT/SM/ PROGRAM
APPLICATION BY CALLING TOLL FREE (800) 637-3766.)
- -----------------------------------------------------------------------------
1. SHARE PURCHASE APPLICATION

    I, being of legal age, wish to purchase: (choose one)

  / / Class A shares / / Class B shares / / Class C shares / / Class D shares
of  Merrill Lynch Real Estate Fund, Inc.  and establish an Investment Account
as described  in the  Prospectus.   In the event  that I  am not  eligible to
purchase Class A shares, I understand that Class D shares will be purchased.
    Basis for establishing an Investment Account:
         A. I  enclose  a  check for  $..........  payable  to  Merrill Lynch
    Financial  Data  Services,   Inc.,  as  an  initial  investment  (minimum
    $1,000).   I  understand  that this  purchase  will  be executed  at  the
    applicable  offering price  next to be determined  after this Application
    is received by you.
         B. I already own shares of the following Merrill Lynch mutual  funds
    that would  qualify  for the  right of  accumulation as  outlined in  the
    Statement  of  Additional Information:  (Please  list all  funds.   Use a
    separate sheet of paper if necessary.)
    1...................    4.. . . . . . . . . . . . .
    2...................    5.  . . . . . . . . . . . .
    3...................    6.  . . . . . . . . . . . .
Name  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
                    First Name                 Initial          Last Name
Name of Co-Owner (if any) . . . . . . . . . . . . . . . . . . . . . . . . . .
                             First Name        Initial          Last Name
Address . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
 .........................    Date . . . . . . . . . . . . . . . . . . . . . .
        (Zip Code)
Occupation.........................................................
Name and Address of Employer  . . . . . . . . . . . . . . . . . . . 
                            . . . . . . . . . . . . . . . . . . . . 
                            . . . . . . . . . . . . . . . . . . . .

 .......................     .......................................
   Signature of Owner        Signature  of  Co-Owner   (if any)
- -------------------------------------------------------------------------------
(In  the case of co-owner, a joint tenancy with right of survivorship will be
presumed unless otherwise specified.)

2. DIVIDEND AND CAPITAL GAIN DISTRIBUTION OPTIONS

        Ordinary Income Dividends           Long-Term Capital Gains
        SELECT   / /  Reinvest              SELECT / /  Reinvest
        ONE:     / /  Cash                  ONE:   / /  Cash

If  no election is  made, dividends and  capital gains  will be automatically
reinvested at net asset value without a sales charge.

IF CASH, SPECIFY HOW YOU WOULD LIKE YOUR DISTRIBUTIONS PAID TO YOU:
/ /  Check  or / /  Direct Deposit to bank account

IF DIRECT DEPOSIT TO BANK ACCOUNT IS SELECTED, PLEASE COMPLETE BELOW:

I hereby  authorize payment  of dividend  and capital  gain distributions  by
direct  deposit to  my  bank account  and, if  necessary,  debit entries  and
adjustments for any credit entries made to my account in accordance  with the
terms  I  have  selected  on  the  Merrill  Lynch  Real   Estate  Fund,  Inc.
Authorization Form.

SPECIFY TYPE OF ACCOUNT (CHECK ONE): / /  checking   / / savings

Name on your Account  . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bank Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bank Number. . . . . . . . . . . . . . . . . . . . . . . . . Account Number .
Bank Address  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

I AGREE THAT THIS AUTHORIZATION WILL REMAIN IN EFFECT UNTIL I PROVIDE WRITTEN
NOTIFICATION TO  MERRILL  LYNCH FINANCIAL  DATA  SERVICES, INC.  AMENDING  OR
TERMINATING THIS SERVICE.

Signature of Depositor  . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signature of Depositor . . . . . . . . . . . . . . . . . . . . . .  . . . . .
(If joint account, both must sign) Date . . . . . . . . . . . . . . . . . . .

NOTE:  IF DIRECT DEPOSIT  TO BANK ACCOUNT  IS SELECTED,  YOUR BLANK, UNSIGNED
CHECK  MARKED  "VOID" OR  A DEPOSIT  SLIP  FROM YOUR  SAVINGS  ACCOUNT SHOULD
ACCOMPANY THIS APPLICATION.

MERRILL  LYNCH  REAL  ESTATE  FUND,  INC.--AUTHORIZATION  FORM  (PART  1)  --
(CONTINUED)
- ----------------------------------------------------------------------
3.  SOCIAL SECURITY NUMBER OR TAXPAYER IDENTIFICATION NUMBER

        ----------------------------------------------
       [                                              ]
        ----------------------------------------------
     Social Security Number of Taxpayer Identification Number

     Under penalty of perjury, I certify (1) that the number set forth above is
my correct Social Security Number or Taxpayer Identification Number and (2) 
that I am not subject to backup withholding (as discussed in the Prospectus 
under "Taxes") either because I have not been notified that I am subject 
thereto as a result of a failure to report all interest or dividends, or the
Internal Revenue Service ("IRS") has notified me that I am no longer 
subject thereto.

     Instruction: You must strike out language in (2) above if you have been 
notified that you are subject to backup withholding due
to underreporting and if you have not received a notice from the IRS that 
backup withholding has been terminated.  The undersigned
authorizes the furnishing of this certification to other Merrill Lynch 
sponsored mutual funds.

 ..................................     ......................................
         Signature of Owner                Signature of Co-Owner (if any)
- -----------------------------------------------------------------------------
4. LETTER OF INTENTION - CLASS A AND D SHARES ONLY (See terms and conditions 
in the Statement of Additional Information)
                                              ...................., 19.....
Dear Sir/Madam:                               Date of initial purchase  

     Although I am not obligated to do so, I intend to purchase shares of 
Merrill Lynch Real Estate Fund, Inc. or any other
investment company with an initial sales charge or deferred sales charge 
for which Merrill Lynch Funds Distributor, Inc. acts as
distributor over the next 13 month period which will equal or exceed:

 / /$25,000       / /$50,000        / /$100,000  / /$250,000  / /$1,000,000

     Each purchase will be made at the then reduced offering price 
applicable to the amount checked above, as described in the
Merrill Lynch Real Estate Fund, Inc. Prospectus.

     I agree to the terms and conditions of this Letter of Intention.  
I hereby irrevocably constitute and appoint Merrill Lynch
Funds Distributor, Inc., my attorney, with full power of substitution, 
to surrender for redemption any or all shares of Merrill
Lynch Real Estate Fund, Inc. held as security.

By:..................................          ...........................
         Signature of Owner                      Signature of Co-Owner

                 (If registered in joint parties, both must sign)

     In making purchases under this letter, the following are the related 
accounts on which reduced offering prices are to apply:

(1) Name.............................           (2) Name.................
Account Number.......................           Account Number..........
- ---------------------------------------------------------------------------
5. For Dealer Only
<TABLE>
<CAPTION>
               Branch Office, Address, Stamp
<S>                                          <C>
[                                   ]         We  hereby authorize Merrill  Lynch Funds Distributor,  Inc. to act as
                                              our  agent in  connection with  transactions under  this authorization
                                              form and  agree to notify  the Distributor of  any purchases  or sales
                                              made  under  a  Letter  of  Intention,  Automatic  Investment  Plan or
                                              Systematic Withdrawal Plan.  We guarantee the shareholder's signature.

This form when completed should be mailed to:
  Merrill Lynch Real Estate Fund, Inc.                     
  c/o Merrill Lynch Financial Data
  Services, Inc.                               ......................................................
  P.O. Box 45289                                                Dealer Name and Address
  Jacksonville, Florida  32232-5289
                                               By....................................................
                                                                Authorized Signature of Dealer

                                               / // // /              / // // // /

                                               Branch Code       F/C No.  ......................
                                               / // // /         / // // // // /   F/C Last Name 
                                                               
                                               Dealer's Customer Account No.
</TABLE>

    MERRILL LYNCH REAL ESTATE FUND, INC.--AUTHORIZATION FORM (PART 2)
- -------------------------------------------------------------------------
NOTE: THIS FORM IS REQUIRED TO APPLY FOR THE SYSTEMATIC WITHDRAWAL OR
AUTOMATIC INVESTMENT PLANS ONLY.
- -------------------------------------------------------------------------
1.  ACCOUNT REGISTRATION
(PLEASE PRINT)
                                                      --------------------
Name of Owner.................................        [                  ]
              First Name  Initial    Last Name        --------------------
                                                       Social Security No.
                                                   Taxpayer Identification No.

Name of Co-Owner (if any).................................................
                         First Name     Initial      Last Name

Address.....................................

 ............................................  Account Number ............
                           (Zip Code)                (if existing account)


2.  SYSTEMATIC WITHDRAWAL PLAN--(See terms and conditions in the Statement of
Additional Information)

MINIMUM  REQUIREMENTS:    $10,000  for   monthly  disbursements,  $5,000  for
quarterly, of / / Class  A, / / Class B*, / / Class C* or  / / Class D shares
in Merrill  Lynch Real Estate Fund,  Inc. at cost or  current offering price.
Withdrawals to be made either (check one) / / Monthly on the 24th day of each
month, or  / /  Quarterly on  the  24th day  of  March, June,  September  and
December.   If the  24th falls on  a weekend or holiday,  the next succeeding
business   day  will   be   utilized.     Begin   systematic  withdrawal   on
______________, or as soon as possible thereafter.
    (month)

SPECIFY  THE AMOUNT OF THE WITHDRAWAL YOU WOULD LIKE PAID TO YOU (CHECK ONE):
/ / $_______ of the current value of / / Class A, 
/ / Class B*, / / Class C* or / / Class D shares in the account.
SPECIFY WITHDRAWAL METHOD:  / /  check or / / direct deposit to  bank account
(check one and complete part (a) or (b) below):
DRAW CHECKS PAYABLE (CHECK ONE)
(a)  I hereby authorize payment by check
/ / as indicated in Item 1.
/ / to the order of . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mail to (check one)
/ / the address indicated in Item 1.
/ / Name (please print) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Address . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signature of Owner  . . . . . .  Date. . . . . . . . . . . . . . . . . . . . 
Signature of Co-Owner (if any)  . . . . . . . . . . . . . . . . . . . . . . .

(B)  I HEREBY  AUTHORIZE PAYMENT BY DIRECT DEPOSIT TO MY BANK ACCOUNT AND, IF
NECESSARY, DEBIT  ENTRIES AND ADJUSTMENTS  FOR ANY CREDIT ENTRIES  MADE TO MY
ACCOUNT.   I AGREE  THAT THIS  AUTHORIZATION WILL  REMAIN IN  EFFECT UNTIL  I
PROVIDE WRITTEN NOTIFICATION  TO MERRILL LYNCH FINANCIAL DATA  SERVICES, INC.
AMENDING OR TERMINATING THIS SERVICE.

Specify type of account (check one):  / / checking  / / savings

Name on your account  . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bank Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bank Number . . . . . . .  Account Number. . . . . . . . . . . . . . . . . . 
Bank Address  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
              . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signature of Owner  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signature of Depositor  . . . . . . . . . .  Date. . . . . . . . . . . . . . 
Signature of Depositor  . . . . . . . . . . . . . . . . . . . . . . . . . . .
(If joint account, both must sign)
Note:  If direct deposit is elected, your blank, unsigned check marked "VOID"
or a deposit slip from your savings account shall accompany this application.
                                                                  
*  Annual withdrawal cannot  exceed 10% of the value of shares  of such class
held in the account at the time the election to join the systematic withdrawal
plan is made.

   MERRILL LYNCH REAL ESTATE FUND, INC.--AUTHORIZATION FORM (PART 2) --
(continued)   
- ---------------------------------------------------------------------------
3.  APPLICATION FOR AUTOMATIC INVESTMENT PLAN

    I hereby request that  Merrill Lynch  Financial Data Services, Inc.  draw
an automated clearing house ("ACH") debit on my checking account as described
below each month to purchase:  (choose one)
 / /Class A shares  / /Class B shares    / /Class C shares   / /Class D shares
of Merrill  Lynch Real  Estate Fund,  Inc., subject  to the  terms set  forth
below.   In the  event that I am  not eligible to purchase  Class A shares, I
understand that Class D shares will be purchased.

  MERRILL LYNCH FINANCIAL DATA           AUTHORIZATION TO HONOR ACH DEBUTS
  SERVICES, INC.                                        DRAWN BY
  You  are hereby  authorized to  draw        MERRILL LYNCH FINANCIAL DATA
  an  ACH debit each month  on my bank               SERVICES, INC.
  account  for  investment  in Merrill
  Lynch  Real  Estate  Fund,  Inc.  as    To  . . . . . . . . . . . . .   Bank
  indicated below:                                  (Investor's Bank)

  Amount of each check or ACH             Bank Address  . . . . . . . . . . . 
   debit $.............................
                                          City  .............................
                                          State. . . . . . .  Zip. . . . . 

                                               As   a  convenience  to  me,  I
                                          hereby request and authorize  you to
  Account Number . . . . . . . . . . .    pay  and  charge  to my  account ACH
  Please  date  and invest  ACH debits    debits drawn  on my  account by  and
  on the 20th of each month               payable to  Merrill Lynch  Financial
                                          Data Services,  Inc.   I agree  that
  beginning _____________  or as  soon    your  rights in respect to each such
  thereafter as possible.                 debit  shall be  the  same as  if it
          (month)                         were   a  check  drawn  on  you  and
       I agree that you  are preparing    signed  personally  by  me.     This
  these ACH  debits voluntarily  at my    authority  is  to  remain in  effect
  request and  that you  shall not  be    until  revoked  by  me  in  writing.
  liable  for  any  loss  arising from    Until you receive  such notice,  you
  any  delay  in preparing  or failure    shall   be   fully    protected   in
  to  prepare any  such  debit.   If I    honoring  any such debit.  I further
  change  banks or desire to terminate    agree  that  if any  such  debit  be
  or  suspend this program, I agree to    dishonored, whether with  or without
  notify you  promptly in writing.   I    cause and  whether intentionally  or
  hereby  authorize  you to  take  any    inadvertently,  you  shall  be under
  action  to  correct  erroneous   ACH    no liability.
  debits  of   my   bank  account   or
  purchases of  Fund shares  including    
  liquidating shares of  the Fund  and    
  crediting   my  bank   account.    I    ..................      ............
  further  agree  that  if a  debit is             Date             Signature
  not   honored   upon   presentation,                             of Depositor
  Merrill    Lynch   Financial    Data
  Services,  Inc.  is  authorized   to  
  discontinue     immediately      the    
  Automatic  Investment  Plan  and  to    ...................    ............. 
  liquidate  sufficient shares held in        Bank Account          Signature
  my  account to  offset the  purchase            Number          of Depositor
  made with the dishonored debit.                            (If joint account,
                                                                both must sign)

  ............    ....................
     Date       Signature of Depositor

  ...................................
        Signature of Depositor
   (If joint account, both must sign)

  NOTE:  IF AUTOMATIC INVESTMENT PLAN IS ELECTED, YOUR BLANK, UNSIGNED CHECK
MARKED "VOID" SHOULD ACCOMPANY THIS APPLICATION.

                                   MANAGER
                        Merrill Lynch Asset Management

                           Administrative Offices:
                            800 Scudders Mill Road
                         Plainsboro, New Jersey 08536
                               Mailing Address:
                                P.O. Box 9011
                       Princeton, New Jersey 08543-9011

                                 DISTRIBUTOR
                    Merrill Lynch Funds Distributor, Inc.

                           Administrative Offices:
                            800 Scudders Mill Road
                         Plainsboro, New Jersey 08536


                               Mailing Address:
                                P.O. Box 9081
                       Princeton, New Jersey 08536-9081
                                  CUSTODIAN
                          _________________________
                          _________________________
                          _________________________

                                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 32232-5289

                             INDEPENDENT AUDITORS
                          _________________________
                          _________________________
                          _________________________

                                   COUNSEL
                               Brown & Wood LLP
                            One World Trade Center
                        New York, New York 10048-0557

<TABLE>
<CAPTION>

<S>                                                                 <C>
   No  person has been authorized  to give any information or to     (LOGO)
make any  representations, other  than those  contained in  this
Prospectus,  in connection  with  the offer  contained  in  this     MERRILL LYNCH REAL ESTATE FUND, INC.
Prospectus, and,  if given  or made, such  other information  or
representations  must  not  be  relied   upon  as  having   been
authorized by  the Fund, the Manager  or the  Distributor.  This
Prospectus  does not  constitute an  offering  in any  state  in
which such offering may not lawfully be made.

                        _______________

                       TABLE OF CONTENTS                             (GRAPHIC)
                                                            PAGE
Fee Table . . . . . . . . . . . . . . . . . . . . . . . . .    2
Merrill Lynch Select Pricing(Service Mark) System . . . . .    3
Risk Factors and Special Considerations . . . . . . . . . .    7
Investment Objective and Policies . . . . . . . . . . . . .   11
  Description of Certain Investments  . . . . . . . . . . .   11
  Other Investment Policies and Practices . . . . . . . . .   13
  Investment Restrictions . . . . . . . . . . . . . . . . .   16
Management of the Fund  . . . . . . . . . . . . . . . . . .   16
  Directors . . . . . . . . . . . . . . . . . . . . . . . .   16
  Management and Advisory Arrangements  . . . . . . . . . .   17
  Code of Ethics  . . . . . . . . . . . . . . . . . . . . .   17
  Transfer Agency Services  . . . . . . . . . . . . . . . .   18
Purchase of Shares  . . . . . . . . . . . . . . . . . . . .   18
  Subscription Offering . . . . . . . . . . . . . . . . . .   18
  Continuous Offering . . . . . . . . . . . . . . . . . . .   19
  Initial Sales Charge Alternatives
    --Class A and Class D Shares  . . . . . . . . . . . . .   21
  Deferred Sales Charge Alternatives--
    Class B and Class C Shares  . . . . . . . . . . . . . .   22
  Distribution Plans  . . . . . . . . . . . . . . . . . . .   24
  Limitations on the Payment of Deferred Sales
    Charges . . . . . . . . . . . . . . . . . . . . . . . .   25
Redemption of Shares  . . . . . . . . . . . . . . . . . . .   25
  Redemption  . . . . . . . . . . . . . . . . . . . . . . .   25
  Repurchase  . . . . . . . . . . . . . . . . . . . . . . .   26
  Reinstatement Privilege--Class A and
    Class D Shares  . . . . . . . . . . . . . . . . . . . .   26
Shareholder Services  . . . . . . . . . . . . . . . . . . .   26     PROSPECTUS
  Investment Account  . . . . . . . . . . . . . . . . . . .   26
  Exchange Privilege  . . . . . . . . . . . . . . . . . . .   27     _______  ___, 1997
  Automatic Reinvestment of Dividends and
    Capital Gains Distributions . . . . . . . . . . . . . .   27     Distributor:
  Systematic Withdrawal Plans . . . . . . . . . . . . . . .   28     Merrill Lynch
  Automatic Investment Plans  . . . . . . . . . . . . . . .   28     Funds Distributor, Inc.
  Fee-Based Programs  . . . . . . . . . . . . . . . . . . .   28
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .   28     This prospectus should be
Performance Data  . . . . . . . . . . . . . . . . . . . . .   30     retained for future reference.
Additional Information  . . . . . . . . . . . . . . . . . .   31
  Dividends and Distributions . . . . . . . . . . . . . . .   31
  Determination of Net Asset Value  . . . . . . . . . . . .   31
  Organization of the Fund  . . . . . . . . . . . . . . . .   32
  Shareholder Reports . . . . . . . . . . . . . . . . . . .   32
  Shareholder Inquiries . . . . . . . . . . . . . . . . . .   32
Appendix A  . . . . . . . . . . . . . . . . . . . . . . . .   33
Authorization Form  . . . . . . . . . . . . . . . . . . . .   37

                                              Code # _____ - _97

</TABLE>

   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  STATEMENT  OF  ADDITIONAL  INFORMATION  DOES  NOT
CONSTITUTE A PROSPECTUS.
    

                            SUBJECT TO COMPLETION 
               PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION
                           DATED SEPTEMBER 30, 1997

STATEMENT OF ADDITIONAL INFORMATION
- -----------------------------------

                     MERRILL LYNCH REAL ESTATE FUND, INC.
  P.O. Box 9011, Princeton, New Jersey 08543-9011 - Phone No. (609) 282-2800

    Merrill Lynch Real Estate  Fund, Inc. (the "Fund")  is a non-diversified,
open-end management  investment company  that seeks  to provide  shareholders
with total return by investing primarily in equity securities of issuers that
are  principally engaged in  the real estate  industry.  Total  return is the
combination  of capital  appreciation and  investment income.   The  Fund may
employ a variety of techniques to hedge against market or currency risk or to
enhance total  return.    There  can be  no  assurance  that  the  investment
objective of the Fund will be realized.

    Pursuant to  the Merrill Lynch Select  Pricing(Service Mark) System,  the
Fund offers four classes of shares each with a different combination of sales
charges,  ongoing  fees  and  other  features.    The  Merrill  Lynch  Select
Pricing(Service  Mark) System  permits an  investor to  choose the  method of
purchasing shares  that the investor  believes is  most beneficial given  the
amount of the  purchase, the length of time the investor  expects to hold the
shares and other relevant circumstances.

    This Statement of Additional Information of the Fund is  not a prospectus
and should be  read in  conjunction with the  prospectus of  the Fund,  dated
___________,  1997   (the  "Prospectus"),  which  has  been  filed  with  the
Securities and  Exchange Commission (the  "Commission") and can  be obtained,
without charge,  by calling or  by writing  the Fund  at the above  telephone
number  or address.    This  Statement  of Additional  Information  has  been
incorporated by  reference into the Prospectus.   Capitalized terms  used but
not defined herein have the same meanings as in the Prospectus.

                  Merrill Lynch Asset Management -- Manager

             Merrill Lynch Funds Distributor, Inc. -- Distributor

  The date of this Statement of Additional Information is __________, 1997.

                      INVESTMENT OBJECTIVE AND POLICIES

    The  investment  objective  of  the Fund  is  to  seek  total  return  by
investing primarily  in  equity securities  of issuers  that are  principally
engaged  in the  real estate  industry.   Total  return is  a combination  of
capital  appreciation and investment income.  There  can be no assurance that
the  Fund's investment  objective will  be  achieved.   Reference is  made to
"Investment Objective and Policies" in the Prospectus for a discussion of the
investment objective and policies of the Fund.

    The Fund may invest up to 25% of its total assets in foreign securities.

    While it  is the policy of  the Fund  generally not to engage  in trading
for short-term gains, the Manager  will effect portfolio transactions without
regard to  holding  period,  if,  in  its  judgment,  such  transactions  are
advisable in light of  a change in circumstances  of a particular company  or
within a particular industry or in the  general market, economic or financial
conditions.  The Fund will, however, monitor its trading so as to comply with
the  requirements for the special tax treatment afforded regulated investment
companies  under the  Code.   See "Taxes."   The  portfolio turnover  rate is
calculated by dividing the lesser of the Fund's annual sales or  purchases of
portfolio securities (exclusive of purchases or sales of all securities whose
maturities at the time of acquisition were  one year or less) by the  monthly
average value of the securities in the portfolio during the year.   While the
Fund anticipates that its  annual portfolio turnover  rate should not  exceed
100% under normal  conditions, it is impossible to predict portfolio turnover
rates.   Higher  portfolio turnover  may contribute  to higher  transactional
costs and negative  tax consequences,  such as  an increase  in capital  gain
dividends or in ordinary income dividends of accrued market discount, as well
as  greater  difficulty  meeting  the  requirement  for  qualification  as  a
regulated  investment company  that  less than  30% of  its  gross income  be
derived from the sale or  other disposition of securities held for  less than
three months, a requirement  that will no longer apply to  the Fund after its
fiscal  year ending  December 31,  1997.   See "Dividends,  Distributions and
Taxes."

PORTFOLIO  STRATEGIES  INVOLVING  OPTIONS,   FUTURES  AND  FOREIGN   EXCHANGE
TRANSACTIONS

    The  Fund  is  authorized  to  engage  in  certain  investment  practices
involving the use of options, futures and foreign exchange, which  may expose
the Fund  to certain risks.   These  investment practices and  the associated
risks are described in detail in Appendix A in the Prospectus.

OTHER INVESTMENT POLICIES AND PRACTICES

    Non-Diversified  Status.    The  Fund  is classified  as  non-diversified
within  the meaning of  the Investment Company  Act of 1940,  as amended (the
"Investment Company  Act"), which means that the Fund  is not limited by such
Act in the   proportion of its assets  that it may invest in  securities of a
single issuer.  The Fund's investments are limited, however, in order for the
Fund  to qualify  as  a "regulated  investment  company" under  the  Internal
Revenue  Code of 1986, as amended (the "Code").  See "Taxes." To qualify, the
Fund complies  with certain requirements, including  limiting its investments
so that at  the close of each quarter  of the taxable year (i)  not more than
25% of the  market value of the Fund's  total assets will be invested  in the
securities of  a single issuer  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 will be  invested in the securities  of a single issuer.   A fund that
elects to  be classified  as "diversified" under  the Investment  Company Act
must satisfy the foregoing 5% and 10% requirements with respect to 75% of its
total assets.   To the  extent that the  Fund assumes large positions  in the
securities  of a  small number  of issuers,  the Fund's  net asset  value may
fluctuate to a greater extent than that of a diversified company as  a result
of changes in  the financial condition or  in the market's assessment  of the
issuers,  and the  Fund  may be  more  susceptible  to any  single  economic,
political or regulatory occurrence than a diversified company.

    When-Issued Securities  and Delayed Delivery  Transactions.  The Fund 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 Fund with payment and  delivery taking place in
the future to  secure what is considered  an advantageous yield and  price to
the Fund at the time of entering into the transaction.  Although the Fund has
not  established any  limit  on the  percentage  of its  assets  that may  be
committed  in connection  with such  transactions, the  Fund will  maintain a
segregated  account  with  its  custodian of  cash,  cash  equivalents,  U.S.
Government securities or other liquid securities denominated  in U.S. dollars
or non-U.S.  currencies in  an aggregate  amount equal to  the amount  of its
commitment in connection with such purchase transactions.

    There  can be no  assurance that  a security  purchased on  a when-issued
basis or purchased or sold  through a forward 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.  The Fund 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.

    Standby Commitment Agreements.   The Fund, from  time to time, may  enter
into standby commitment agreements.   Such agreements commit the Fund,  for a
stated period of time, to purchase a stated amount of equity securities which
may be issued and sold to the Fund at the option of the issuer.  The price of
the security is fixed at the time of the commitment.  At the time of entering
into the  agreement the Fund is paid a  commitment fee, regardless of whether
or not the  security is ultimately issued,  which is typically  approximately
0.50%  of the  aggregate purchase  price of  the security  that the  Fund has
committed to purchase.  The Fund will enter into such agreements only for the
purpose of  investing in  the security underlying  the commitment at  a price
that is considered advantageous to  the Fund.  The Fund will not enter into a
standby commitment with  a remaining term in excess of  45 days and presently
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 portfolio securities subject to  legal restrictions on resale that  affect
their marketability, will not exceed 15% of its net  assets taken at the time
of  acquisition of such a commitment.  The  Fund at all times will maintain a
segregated account  with  its  custodian  of  cash,  cash  equivalents,  U.S.
Government securities or other liquid  securities denominated in U.S. dollars
or non-U.S. currencies in an aggregate  amount equal to the purchase price of
the securities underlying a 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 Fund may bear the risk of a decline in the value of such security
and may not benefit from an appreciation in  the value of the security during
the commitment period.

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

    Repurchase Agreements  and Purchase  and Sale  Contracts.   The Fund  may
invest in securities pursuant to  repurchase agreements or purchase and  sale
contracts.   Repurchase  agreements and  purchase and  sale contracts  may be
entered into only with financial institutions which  (i) have, in the opinion
of the Manager,  substantial capital relative to the Fund's exposure, or (ii)
have  provided  the  Fund  with   a  third-party  guaranty  or  other  credit
enhancement.  Under  a repurchase agreement or a purchase  and sale contract,
the  seller  agrees,  upon  entering into  the  contract  with  the Fund,  to
repurchase  the security  at  a mutually  agreed-upon  time  and price  in  a
specified currency,  thereby determining  the yield  during the  term of  the
agreement.   This results  in a  fixed rate  of return insulated  from market
fluctuations during  such  period although  it may  be  affected by  currency
fluctuations.  In the case  of repurchase agreements, the price at  which the
trades  are conducted  do  not reflect  accrued  interest  on the  underlying
obligation; whereas, in the  case of purchase and sale contracts,  the prices
take  into account  accrued interest.   Such  agreements usually  cover short
periods, such as under one  week.  Repurchase agreements may be  construed to
be  collateralized loans  by  the  purchaser to  the  seller  secured by  the
securities  transferred to  the  purchaser.   In  the  case of  a  repurchase
agreement,  as a  purchaser,  the Fund  will  require the  seller to  provide
additional collateral if  the market value of the securities  falls below the
repurchase price at any time during the term of the repurchase agreement; the
Fund does not have  the right to  seek additional collateral  in the case  of
purchase and sale contracts.   In the event of default by  the seller under a
repurchase  agreement construed to  be a collateralized  loan, the underlying
securities are not  owned by the Fund but only  constitute collateral for the
seller's obligation  to pay  the repurchase price.   Therefore, the  Fund may
suffer time delays and incur costs or possible losses in connection  with the
disposition of the collateral.   A purchase and sale contract differs  from a
repurchase  agreement in that  the contract  arrangements stipulate  that the
securities are owned  by the Fund.   In the event  of a default under  such a
repurchase agreement or  under a purchase and  sale contract, instead of  the
contractual  fixed rate, the  rate of return  to the Fund  shall be dependent
upon intervening fluctuations of the market value of such securities  and the
accrued  interest on  the securities.   In  such event,  the Fund  would have
rights against  the seller for breach of contract  with respect to any losses
arising  from  market fluctuations  following the  failure  of the  seller to
perform.   While the substance of  purchase and sale contracts  is similar to
repurchase  agreements, because of  the different  treatment with  respect to
accrued interest and additional collateral, management believes that purchase
and sale contracts are not repurchase agreements as such term 
is  understood in  the banking  and brokerage  community.   The Fund  may not
invest more  than 15% of its net assets  in repurchase agreements or purchase
and sale contracts maturing in  more than seven days together with  all other
illiquid investments.

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

INVESTMENT RESTRICTIONS

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

         1.  Invest more than  25% of  its assets, taken  at market value  at
    the  time  of  each  investment, in  the  securities  of issuers  in  any
    particular  industry (excluding issuers  principally engaged  in the real
    estate  industry   and  the   U.S.  Government  and   its  agencies   and
    instrumentalities).     For   purposes  of   this   restriction,  states,
    municipalities  and their political  subdivisions are not considered part
    of any industry.

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

         3.  Purchase or  sell  real  estate,  except  that,  to  the  extent
    permitted by applicable law,  the Fund may invest in securities  directly
    or indirectly secured by  real estate or interests  therein or issued  by
    companies which invest in real estate  or interests therein and  may hold
    and sell  real estate acquired by the  Fund as a  result of the ownership
    of securities.

         4.  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  and repurchase agreements
    and purchase and sale contracts or any  similar instruments shall not  be
    deemed to be  the making of a loan, and  except further that the Fund may
    lend its  portfolio securities,  provided that the  lending of  portfolio
    securities may be  made only in  accordance with  applicable law and  the
    guidelines set  forth  in the  Fund's  Prospectus and  this Statement  of
    Additional Information, as they may be amended from time to time.

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

         6.  Borrow money, except  that (i)  the Fund  may borrow from  banks
    (as defined  in the  Investment Company Act)  in amounts up to  331/3% of
    its  total assets  (including the  amount borrowed),  (ii)  the Fund  may
    borrow  up  to  an  additional 5%  of  its  total  assets  for  temporary
    purposes,  (iii) the Fund  may obtain  such short-term  credit as  may be
    necessary   for  the  clearance  of  purchases  and  sales  of  portfolio
    securities and (iv) the 
    Fund  may  purchase  securities on  margin  to  the  extent  permitted by
    applicable law.  The Fund  may not pledge its assets other than to secure
    such  borrowings or,  to the  extent permitted  by the  Fund's investment
    policies  as set  forth  in its  Prospectus  and Statement  of Additional
    Information, as  they may be  amended from  time to  time, in  connection
    with  hedging   transactions,  short  sales,   when-issued  and   forward
    commitment transactions and similar investment strategies.

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

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

    Under the non-fundamental investment restrictions, the Fund may not:

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

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

         c.  Invest  in securities which cannot  be readily resold because of
    legal or contractual restrictions  or which cannot otherwise be marketed,
    redeemed  or put  to  the issuer  or a  third party,  if at  the time  of
    acquisition more than 15% of its total assets  would be invested in  such
    securities.  This restriction shall  not apply to securities which mature
    within seven days or securities which the Board of Directors of the  Fund
    has  otherwise  determined  to  be  liquid pursuant  to  applicable  law.
    Securities purchased  in accordance with  Rule 144A  under the Securities
    Act  and determined  to  be liquid  by the  Board  of Directors  are  not
    subject to the limitations set forth in this investment restriction.

         d.  Notwithstanding  fundamental investment  restriction (6)  above,
    borrow money or  pledge its assets, except that  the Fund (a)  may borrow
    from  a bank  as  a  temporary  measure  for extraordinary  or  emergency
    purposes or to meet  redemptions in amounts not  exceeding 331/3%  (taken
    at market value)  of its  total assets  and pledge  its assets to  secure
    such  borrowings,  (b)  may  obtain  such  short-term  credit as  may  be
    necessary  for  the  clearance   of  purchases  and  sales  of  portfolio
    securities  and (c)  may  purchase securities  on  margin to  the  extent
    permitted by applicable  law.   However, at the present  time, applicable
    law  prohibits  the Fund  from  purchasing  securities  on  margin.   The
    deposit  or  payment by  the  Fund  of initial  or  variation  margin  in
    connection with  financial futures  contracts or options  transactions is
    not considered to  be the purchase of a security on margin.  The purchase
    of securities while borrowings  are outstanding will have  the effect  of
    leveraging  the Fund.  Such  leveraging or borrowing increases the Fund's
    exposure to  capital risk,  and borrowed  funds are  subject to  interest
    costs  which will  reduce  net  income.    The  Fund  will  not  purchase
    securities while borrowings exceed 5% of its total assets.

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

    The staff  of the Commission has taken the position  that purchased over-
the-counter ("OTC")  options and  the assets used  as cover  for written  OTC
options  are  illiquid securities.    Therefore,  the  Fund  has  adopted  an
investment policy pursuant to which it will not  purchase or sell OTC options
if, as a result of  any such transaction, the sum of the  market value of OTC
options currently  outstanding that are held by the Fund, the market value of
the underlying securities  covered by OTC call options  currently outstanding
that were sold  by the Fund and  margin deposits on  the Fund's existing  OTC
options on financial futures contracts, exceeds 15% of the net assets  of the
Fund, taken at market value, together 
with  all other assets  of the  Fund that are  illiquid or are  not otherwise
readily marketable.   However, if  the OTC option  is sold  by the Fund  to a
primary U.S. Government  securities dealer recognized by  the Federal Reserve
Bank of  New York and if the Fund has  the unconditional contractual right to
repurchase such OTC option from the dealer at a predetermined price, then the
Fund will treat  as illiquid such amount  of the underlying securities  as is
equal  to  the repurchase  price  less  the amount  by  which  the option  is
"in-the-money" (i.e., current market value of the underlying securities minus
the option's strike price).  The repurchase price with the primary dealers is
typically a  formula price  which is  generally based  on a  multiple of  the
premium  received for  the option,  plus the  amount by  which the  option is
"in-the-money."  This policy as to OTC options is not a fundamental policy of
the Fund and may be amended by the Board of Directors of the Fund without the
approval of the  Fund's shareholders.  However,  the Fund will not  change or
modify  this policy  prior to  the change  or modification by  the Commission
staff of its position.

    In addition,  as a non-fundamental  policy which  may be  changed by  the
Board of Directors and to the extent required by the Commission or its staff,
the Fund will, for  purposes of investment restriction (1),  treat securities
issued  or guaranteed by  the government  of any  one foreign country  as the
obligations of a single issuer.

    As  another  non-fundamental   policy,  the  Fund  will  not  invest   in
securities   that  are  (a)   subject  to  material   legal  restrictions  on
repatriation of assets  or (b) cannot be  readily resold because of  legal or
contractual  restrictions  or which  are  not  otherwise readily  marketable,
including repurchase agreements and purchase  and sale contracts maturing  in
more than seven days, if, regarding all such securities, more than 15% of its
net assets, taken at market value would be invested in cash securities.

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


                            MANAGEMENT OF THE FUND

DIRECTORS AND OFFICERS

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

    ARTHUR ZEIKEL  (65) -- President and  Director(1)(2) -- President of  the
Manager (which term as used herein includes its corporate predecessors) since
1977; President  of Fund Asset Management,  L.P. ("FAM") (which  term as used
herein  includes  its  corporate  predecessors)  since  1977;  President  and
Director  of  Princeton Services,  Inc.  ("Princeton  Services") since  1993;
Executive Vice  President of  Merrill Lynch  & Co., Inc.  ("ML &  Co.") since
1990;  Director  of  Merrill Lynch  Funds  Distributor, Inc.  ("MLFD"  or the
"Distributor") since 1977.

(Other Directors to be Provided by Amendment)
_______________
(1) Interested  person, as  defined  in the  Investment  Company Act,  of the
Fund.
(2) Such Director or  officer is  a trustee, director  or officer of  certain
    other  investment  companies  for  which  the  Manager  or  FAM  acts  as
    investment adviser or manager.

    At __________,  1997, the officers  and Directors of the  Fund as a group
(__ persons) owned an aggregate of less than 1% of  the outstanding shares of
the Fund.  At such date, Mr. Zeikel, a Director and officer of  the Fund, and
the other officers of the Fund, owned less than 1% of the  outstanding shares
of common stock of ML & Co.

COMPENSATION OF DIRECTORS

    The  Fund  pays  each Director  who is  not  affiliated with  the Manager
(each, a  "non-affiliated Director") a fee  of $_____ per year  plus $___ per
Board meeting  attended, together with  such Director's actual  out-of-pocket
expenses relating to attendance at meetings.   The Fund also compensates each
member  of  the  Audit  and Nominating  Committee  (the  "Committee"),  which
consists of the non-affiliated Directors, a  fee of $_____ per year plus $___
per Committee meeting attended.  

    The following table  sets forth the estimated  compensation to be paid by
the Fund  to the non-affiliated  Directors projected  through the end  of the
Fund's first  full fiscal year,  and the aggregate  compensation paid by  all
registered  investment  companies  advised  by  MLAM  or its  affiliate,  FAM
("MLAM/FAM-Advised Funds"),  to the  non-affiliated  Directors for  the  year
ended December 31, 1996.

<TABLE>
<CAPTION>                                                                                                         Aggregate
                                                                                                                Compensation
                                                                                   Pension or                   from Fund and
                                                                              Retirement Benefits             MLAM/FAM-Advised
                                                        Compensation            Accrued as Part                 Funds Paid to
          Name of                                        From Fund             of Fund Expenses               Directors/(1)/
          Director                                    ---------------         ----------------------          ------------------
        ------------
<S>                                                     <C>                          <C>                            <C>
_________________ . . . . . . . . . . . . . . . .        $ ________                   None                           $________
_________________ . . . . . . . . . . . . . . . .          ________                   None                            ________
_________________ . . . . . . . . . . . . . . . .          ________                   None                            ________
_________________ . . . . . . . . . . . . . . . .          ________                   None                            ________
_________________ . . . . . . . . . . . . . . . .          ________                   None                            ________

</TABLE>
_______________
(1) The Directors  serve on the boards  of MLAM/FAM-Advised Funds as follows:
    ____________  (__  registered   investment  companies  consisting  of  __
    portfolios); __________  (__ registered  investment companies  consisting
    of  __  portfolios);  __________  (__  registered   investment  companies
    consisting  of   __  portfolios);   _______  (__  registered   investment
    companies consisting of  __ portfolios);  and Mr.  ______ (__  registered
    investment companies consisting of __ portfolios).  

MANAGEMENT AND ADVISORY ARRANGEMENTS

    Reference is  made to  "Management of  the Fund--Management and  Advisory
Arrangements"  in  the  Prospectus  for  certain information  concerning  the
management and advisory arrangements of the Fund.

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

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

    As described  in  the Prospectus,  the Manager  has also  entered into  a
sub-advisory agreement  with  Merrill  Lynch Asset  Management  U.K.  Limited
("MLAM  U.K.")  pursuant to  which  MLAM  U.K.  provides investment  advisory
services to the Manager with respect to the Fund.

    The  Management Agreement  obligates the  Manager  to  provide investment
advisory services and to pay all compensation of and furnish office space for
officers  and employees of  the Fund  connected with investment  and economic
research, trading and investment management of  the Fund, as well as the fees
of all Directors  of the Fund who are affiliated persons of the Manager.  The
Fund pays  all  other  expenses  incurred  in  the  operation  of  the  Fund,
including, among  other  things,  taxes,  expenses  for  legal  and  auditing
services, costs of printing proxies, stock certificates, 
shareholder reports and prospectuses and statements of additional information
(except to the extent paid by the Distributor), charges of the custodian, any
sub-custodian   and  transfer  agent,  expenses   of  redemption  of  shares,
Commission fees, expenses of registering  the shares under Federal, state  or
foreign laws, fees  and expenses of non-affiliated  Directors, accounting and
pricing  costs  (including  the  daily  calculation  of   net  asset  value),
insurance, interest,  brokerage costs, litigation and  other extraordinary or
nonrecurring  expenses, and  other  expenses properly  payable  by the  Fund.
Accounting  services are provided  to the Fund  by the Manager,  and the Fund
reimburses the  Manager for its costs  in connection with such  services on a
semi-annual basis.  The Distributor will pay certain  promotional expenses of
the  Fund incurred in  connection with  the offering  of shares of  the Fund.
Certain expenses will  be financed by the Fund pursuant to distribution plans
in  compliance with  Rule  12b-1  under  the Investment  Company  Act.    See
"Purchase of Shares-- Distribution Plans."

    The Manager is  a limited partnership, the partners of which are ML & Co.
and Princeton  Services.  ML  & Co.  and Princeton Services  are "controlling
persons" of the Manager  as defined under the Investment  Company Act because
of  their ownership of  its voting  securities or  their power to  exercise a
controlling  influence  over  its  management or  policies.    Similarly, the
following  entities may  be considered  "controlling  persons" of  MLAM U.K.:
Merrill  Lynch  Europe Limited  (MLAM  U.K.'s  parent),  a subsidiary  of  ML
International  Holdings, a subsidiary of Merrill Lynch International, Inc., a
subsidiary of ML & Co.

    Duration  and  Termination.    Unless  earlier  terminated  as  described
herein, the Management Agreement will continue in effect for a period  of two
years from the date of execution and  will remain in effect from year to year
thereafter  if approved  annually  (a) by  the  Board of  Directors  or by  a
majority of the outstanding shares of  the Fund and (b) by a majority  of the
Directors who  are not parties to  such contract or  "interested persons" (as
defined in the Investment Company Act) of any such party.  Such contracts are
not assignable  and may  be terminated  without penalty  on 60  days' written
notice at  the  option  of  either  party  thereto or  by  the  vote  of  the
shareholders of the Fund.

                              PURCHASE OF SHARES

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

    The Fund issues  four classes  of shares under  the Merrill Lynch  Select
Pricing(Service Mark)  System;  shares of  Class A and  Class D  are sold  to
investors  choosing the  initial  sales charge  alternatives,  and shares  of
Class B and Class C are sold to investors choosing  the deferred sales charge
alternatives.   Each Class A, Class B, Class C and  Class D share of the Fund
represents an identical interest in the investment portfolio of the Fund  and
has the same rights except that  Class B, Class C and Class D shares bear the
expenses of  the ongoing  account maintenance fees,  and Class B  and Class C
shares bear the expenses of the ongoing distribution fees and  the additional
incremental  transfer agency costs  resulting from the  deferred sales charge
arrangements.  Class B, Class C and Class D shares each have exclusive voting
rights with respect to the Rule 12b-1 distribution plan  adopted with respect
to such class pursuant to which account maintenance and/or distribution  fees
are paid (except that Class B shareholders may vote upon any material changes
to  expenses charged under  the Class D Distribution  Plan).   Each class has
different  exchange   privileges.     See   "Shareholder   Services--Exchange
Privilege."

    The Merrill Lynch  Select Pricing(Service  Mark) System is  used by  more
than  50  registered  investment companies  advised  by  the  Manager or  its
affiliate, FAM.  Funds advised by the Manager or FAM that utilize the Merrill
Lynch  Select  Pricing(Service  Mark)  System  are  referred   to  herein  as
"MLAM-advised mutual funds."

    The  Fund  has  entered into  separate  distribution agreements  with the
Distributor in  connection with  the  continuous offering  of each  class  of
shares  of  the  Fund  (the "Distribution  Agreements").    The  Distribution
Agreements  obligate the Distributor  to pay  certain expenses  in connection
with  the  offering  of  each  class  of  shares  of the  Fund.    After  the
prospectuses, statements of additional information and periodic reports  have
been prepared,  set in type and mailed  to shareholders, the Distributor pays
for the printing  and distribution of copies thereof used  in connection with
the offering to dealers and prospective investors.  The Distributor also pays
for  other  supplementary  sales  literature  and  advertising  costs.    The
Distribution  Agreements are  subject to  the  same renewal  requirements and
termination   provisions   as  the   Management  Agreement   described  under
"Management of the Fund--Management and Advisory Arrangements."

INITIAL SALES CHARGE ALTERNATIVES--CLASS A AND CLASS D SHARES

    The term  "purchase," as  used in  the Prospectus and  this Statement  of
Additional  Information  in connection  with  an  investment  in Class A  and
Class D shares of the Fund, refers to a single purchase by an  individual, or
to  concurrent purchases, which  in the aggregate  are at least  equal to the
prescribed amounts  by an individual,  his or her  spouse and their  children
under the age of 21 years purchasing shares for his, her or their own account
and single purchases by a trustee or other fiduciary purchasing shares  for a
single  trust estate  or  single fiduciary  account  although more  than  one
beneficiary is involved.  The term "purchase"  also includes purchases by any
"company," as that term  is defined in the  Investment Company Act, but  does
not include purchases by any such company which has not been in existence for
at least six  months or that has no purpose other than the purchase of shares
of the Fund or shares of other registered investment companies at a discount;
provided, however,  that  it shall  not  include purchases  by  any group  of
individuals whose sole organizational nexus  is that the participants therein
are credit  cardholders of a company, policyholders  of an insurance company,
customers of  either a  bank  or broker-dealer  or clients  or an  investment
advisor.

    Closed-End  Fund Investment Option.  Class A shares of the Fund and other
MLAM-advised  mutual funds  ("Eligible Class A  shares") are  offered at  net
asset value  to  shareholders of  certain  closed-end  funds advised  by  the
Manager or FAM who purchased such closed-end fund shares prior to October 21,
1994  (the  date  the  Merrill  Lynch  Select  Pricing(Service  Mark)  System
commenced operations)  and wish  to reinvest  the net proceeds  of a  sale of
their closed-end fund shares  of common stock in Eligible Class A  shares, if
the conditions set forth below are satisfied.  Alternatively, closed-end fund
shareholders who  purchased such shares on or after October 21, 1994 and wish
to reinvest the net proceeds  from a sale of their closed-end fund shares are
offered Class A  shares (if eligible to buy Class A shares) or Class D shares
of the Fund and other  MLAM-advised mutual funds ("Eligible Class D shares"),
if the  following conditions are  met.   First, the sale  of closed-end  fund
shares must be made through Merrill Lynch and the net proceeds therefrom must
be reinvested immediately in Eligible Class A or Class D shares.  Second, the
closed-end  fund shares must either have been  acquired in the initial public
offering  or be  shares representing  dividends from  shares of  common stock
acquired in such offering.  Third,  the closed-end fund shares must have been
continuously maintained in a Merrill Lynch securities account.  Fourth, there
must be a minimum purchase of $250 to be eligible for the investment option.

    Shareholders  of  certain MLAM-advised  continuously  offered  closed-end
funds may reinvest at net asset value the net proceeds from a sale of certain
shares of common stock of such funds in shares of the Fund.  Upon exercise of
this  investment option, shareholders  of Merrill Lynch  Senior Floating Rate
Fund, Inc.  will  receive Class A  shares  of the  Fund and  shareholders  of
Merrill  Lynch Municipal  Strategy Fund, Inc.  and Merrill  Lynch High Income
Municipal  Bond Fund, Inc.  will receive Class D  shares of the  Fund, except
that shareholders already owning Class A shares of  the Fund will be eligible
to  purchase additional  Class A  shares pursuant  to  this  option, if  such
additional Class A shares will  be held in the  same account as the  existing
Class A   shares  and  other  requirements  pertaining  to  the  reinvestment
privilege  are  met.    In  order  to  exercise  this  investment  option,  a
shareholder of  one of the  above-referenced continuously  offered closed-end
funds (an "eligible fund") must sell his or her shares of common stock of the
eligible fund (the "eligible shares") back to the eligible fund in connection
with a  tender offer conducted by the eligible fund and reinvest the proceeds
immediately in the  designated class of shares of the  Fund.  This investment
option is available only with respect to eligible shares as to which no Early
Withdrawal Charge or CDSC (each as defined in the eligible fund's prospectus)
is  applicable.  Purchase orders  from eligible fund  shareholders wishing to
exercise this  investment option will  be accepted only  on the day  that the
related tender offer terminates and  will be effected at the net  asset value
of the designated class of the Fund on such day.

REDUCED INITIAL SALES CHARGES

    Right of Accumulation.   Reduced sales charges  are applicable  through a
right of  accumulation  under  which  eligible  investors  are  permitted  to
purchase  shares of  the  Fund subject  to  an initial  sales  charge at  the
offering price applicable to  the total of (a)  the public offering price  of
the shares then being purchased plus (b) an  amount equal to the then current
net asset value  or cost, whichever  is higher, of  the purchaser's  combined
holdings  of all  classes of  shares of  the Fund  and of  other MLAM-advised
mutual  funds.  For any such right of  accumulation to be made available, the
Distributor must be provided at the time of purchase, by the purchaser or the
purchaser's  securities  dealer,   with  sufficient  information   to  permit
confirmation of qualification.  Acceptance  of the purchase order is  subject
to such confirmation.  The right of accumulation may be amended or terminated
at  any time.   Shares  held in  the  name of  a nominee  or custodian  under
pension,  profit-sharing, or other employee benefit plans may not be combined
with other shares to qualify for the right of accumulation.

    Letter of Intention.  Reduced  sales charges are applicable  to purchases
aggregating $25,000 or more of the  Class A or Class D shares of the Fund  or
of any other MLAM-advised mutual funds made within a 13-month period starting
with the  first  purchase pursuant  to  a Letter  of  Intention in  the  form
provided in  the Prospectus.   The Letter of  Intention is available  only to
investors  whose accounts  are  maintained at  Merrill  Lynch Financial  Data
Services, Inc., the Fund's transfer agent (the "Transfer Agent").  The Letter
of Intention  is not available  to employee benefit  plans for  which Merrill
Lynch  provides  plan participant  recordkeeping  services.   The  Letter  of
Intention is not a  binding obligation to purchase  any amount of Class A  or
Class D shares but its execution will result in the purchaser paying  a lower
sales charge  at the  appropriate quantity  purchase level.   A purchase  not
originally made  pursuant to a  Letter of Intention  may be included  under a
subsequent Letter of  Intention executed within 90  days of such purchase  if
the  Distributor is  informed in  writing of  this intent within  such 90-day
period.  The value  of Class A and  Class D shares of the  Fund and of  other
MLAM-advised  mutual funds presently held, at  cost or maximum offering price
(whichever is higher), on the date of  the first purchase under the Letter of
Intention, may be included as a credit toward the completion of  such Letter,
but the  reduced sales charge applicable to the amount covered by such Letter
will be  applied  only to  new purchases.    If the  total  amount of  shares
purchased does  not  equal the  amount  stated  in the  Letter  of  Intention
(minimum of  $25,000), the investor will be notified  and must pay, within 20
days  of the  expiration of  such  Letter, the  difference between  the sales
charge on the Class A or Class D shares purchased at the reduced rate and the
sales charge applicable  to the sales actually purchased  through the Letter.
Class A or  Class D shares equal to five percent  of the intended amount will
be held in  escrow during the 13-month period (while  remaining registered in
the name of the  purchaser) for this purpose.   The first purchase under  the
Letter of Intention  must be at least  five percent of  the dollar amount  of
such Letter.  If a purchase during the term of such Letter otherwise would be
subject to a further reduced sales charge based on the right of accumulation,
the purchaser will be entitled  on that purchase and subsequent purchases  to
the reduced percentage  sales charge  which would be  applicable to a  single
purchase equal  to the total  dollar value of  the Class A or Class  D shares
then being purchased  under such  Letter, but  there will  be no  retroactive
reduction of the  sales charges on any previous  purchase.  The value  of any
shares   redeemed  or  otherwise  disposed  of  by  the  purchaser  prior  to
termination or  completion of the Letter  of Intention will be  deducted from
the total  purchases made under such Letter.  An exchange from a MLAM-advised
money market fund into the Fund that creates a sales charge will count toward
completing a new or existing Letter of Intention from the Fund.

    Merrill Lynch Blueprint(Service  Mark) Program.   Class D  shares of  the
Fund are offered to participants in the Merrill Lynch Blueprint(Service Mark)
Program ("Blueprint").  In addition,  participants in Blueprint who own Class
A  shares of the  Fund may  purchase additional  Class A  shares of  the Fund
through  Blueprint.    Blueprint  is   directed  to  small  investors,  group
Individual Retirement Accounts ("IRAs") and participants in  certain affinity
groups   such  as  credit  unions,  trade  associations  and  benefit  plans.
Investors placing  orders to purchase Class A  or Class D shares  of the Fund
through Blueprint  will acquire the  Class A or Class D  shares at  net asset
value plus a  sales charge calculated in accordance with  the Blueprint sales
charge  schedule (i.e., up to  $5,000 at 3.50%  and $5,000.01 or  more at the
standard sales  charge  rates disclosed  in the  Prospectus).   In  addition,
Class A and  Class D shares of the Fund are  being offered at net asset value
plus  a sales  charge of  .50% for  corporate or  group IRA  programs placing
orders  to  purchase  their  Class A  or  Class D shares  through  Blueprint.
Services  available to  Class  A  and Class  D  investors through  Blueprint,
including  exchange privileges,  may  differ from  those  available to  other
investors in Class A or Class D shares.

    Class A and Class D  shares are offered  at net asset value  to Blueprint
participants  through the Merrill  Lynch Directed IRA  Rollover Program ("IRA
Rollover Program") available from Merrill Lynch Business  Financial Services,
a business unit of Merrill  Lynch.  The IRA Rollover Program is  available to
custodian  rollover  assets from  Employee  Sponsored Retirement  and Savings
Plans (as defined  below) whose trustee and/or plan  sponsor has entered into
the Merrill Lynch Directed IRA Rollover Program Service Agreement.

    Orders for purchases and  redemptions of Class A or Class D shares of the
Fund may be grouped for execution purposes which,  in some circumstances, may
involve the execution of such orders two business days following the day such
orders are placed.   The minimum initial  purchase price is $100, with  a $50
minimum for subsequent  purchases through  Blueprint.  There  are no  minimum
initial or subsequent purchase requirements for participants who are  part of
an automatic  investment plan.   Additional information  concerning purchases
through  Blueprint, including  any annual  fees and  transaction charges,  is
available  from  Merrill  Lynch,  Pierce, Fenner  &  Smith  Incorporated, The
Blueprint(Service  Mark) Program, P.O.  Box 30441, New  Brunswick, New Jersey
08989-0441.

    Employee Access(Service  Mark) Accounts.   Provided  applicable threshold
requirements are met,  either Class A or  Class D shares  are offered at  net
asset  value  to  Employee Access(Service  Mark)  Accounts  available through
authorized employers.  The initial minimum for such accounts is  $500, except
that the initial  minimum for shares purchased for such  accounts pursuant to
the Automatic Investment Program is $50.

    Purchase Privilege of Certain Persons.  Directors of the Fund,  directors
and   trustees  of  other  MLAM-advised  mutual  funds,  ML  &  Co.  and  its
subsidiaries (the term "subsidiaries," when used herein with  respect to ML &
Co.,  includes  the  Manager, FAM  and  certain  other  entities directly  or
indirectly wholly owned and controlled  by ML & Co.) and their  directors and
employees, and any trust, pension,  profit-sharing or other benefit plan  for
such persons, may purchase Class A shares of the Fund at net asset value.

    Class D shares of  the Fund are  offered at  net asset  value, without  a
sales charge, to an investor who has a business relationship with a Financial
Consultant who joined Merrill Lynch  from another investment firm within  six
months prior  to the  date of  purchase by  such investor,  if the  following
conditions are satisfied:  first, the investor must advise Merrill Lynch that
it will purchase  Class D shares of the Fund with  proceeds from a redemption
of a mutual fund  that was sponsored by  the Financial Consultant's  previous
firm and was subject to a sales charge either at the time of purchase or on a
deferred  basis; and  second,  the  investor also  must  establish that  such
redemption had been made within 60 days prior to the investment in  the Fund,
and the proceeds from  the redemption had been  maintained in the interim  in
cash or a money market fund.

    Class D shares of the  Fund are also offered at net asset value,  without
a sales charge, to an investor who has a business relationship with a Merrill
Lynch Financial Consultant and who has invested in a mutual fund sponsored by
a non-Merrill  Lynch company for which Merrill Lynch has served as a selected
dealer and where Merrill Lynch has  either received or given notice that such
arrangement  will be terminated  ("notice"), if the  following conditions are
satisfied: first, the investor must purchase Class D  shares of the Fund with
proceeds from a redemption of shares of such other mutual fund and the shares
of such  other fund were  subject to  a sales  charge either at  the time  of
purchase or on a deferred basis; and second,  such purchase of Class D shares
must be made within 90 days after such notice.

    Class D shares of the  Fund are also offered at net asset value,  without
a sales charge, to an investor who has a business relationship with a Merrill
Lynch Financial Consultant  and who has invested  in a mutual fund  for which
Merrill Lynch has not served as a selected dealer if the following conditions
are  satisfied: first, the  investor must advise  Merrill Lynch that  it will
purchase Class D shares  of the  Fund with  proceeds from  the redemption  of
shares of  such other mutual fund and that  such shares have been outstanding
for a period of no less than six months; and second, such purchase of Class D
shares must be made within 60 days after the redemption and the proceeds from
the redemption  must be maintained in the  interim in cash or  a money market
fund.

    TMA(Service  Mark)  Managed  Trusts.    Class A  shares  are  offered  to
TMA(Service  Mark)  Managed  Trusts  to which  Merrill  Lynch  Trust  Company
provides discretionary trustee services at net asset value.

    Acquisition of Certain  Investment Companies.  The public offering  price
of Class D  shares of the  Fund may  be reduced  to the net  asset value  per
Class D share  in connection with the acquisition of  the assets of or merger
or consolidation with a public  or private investment company.  The  value of
the assets or  company acquired in a tax-free transaction  may be adjusted in
appropriate cases  to reduce possible  adverse tax  consequences to the  Fund
that  might  result  from an  acquisition  of  assets  having net  unrealized
appreciation  that is disproportionately  higher at  the time  of acquisition
than the  realized or unrealized appreciation  of the Fund.   The issuance of
Class D shares  for consideration  other than  cash is  limited to  bona fide
reorganizations,  statutory  mergers  or  other  acquisitions  of   portfolio
securities  that (i) meet the investment  objective and policies of the Fund;
(ii)  are  acquired  for  investment  and not  for  resale  (subject  to  the
understanding that the disposition of  the Fund's portfolio securities  shall
at all times remain within its control); and (iii) are liquid securities, the
value  of  which is  readily ascertainable,  that  are not  restricted  as to
transfer  either by  law or  liquidity of  market (except  that the  Fund may
acquire  through such transactions  restricted or illiquid  securities to the
extent the Fund does not exceed the applicable limits on acquisition  of such
securities set forth under "Investment Objective and Policies" herein).

    Reductions in  or exemptions from the  imposition of a sales load are due
to the nature of the investors and/or  the reduced sales efforts that will be
needed in obtaining such investments.

EMPLOYER-SPONSORED RETIREMENT OR SAVINGS PLANS AND CERTAIN OTHER ARRANGEMENTS

    Certain  employer-sponsored retirement or savings plans and certain other
arrangements may purchase Class A or Class D shares at net asset value, based
on the  number of employees or number of employees eligible to participate in
the plan,  the aggregate amount invested by the plan in specified investments
and/or  the services provided  by Merrill Lynch  to the plan.   Certain other
plans may  purchase Class B shares with  a waiver of the  contingent deferred
sales  charge ("CDSC")  upon  redemption, based  on similar  criteria.   Such
Class B shares will convert into Class D shares approximately ten years after
the plan purchases the first share of any  MLAM-advised mutual fund.  Minimum
purchase  requirements may be  waived or varied  for such plans.   Additional
information regarding purchases  by employer-sponsored retirement  or savings
plans and  certain  other arrangements  is available  toll-free from  Merrill
Lynch Business Financial Services at (800) 237-7777.

DISTRIBUTION PLANS

    Reference  is made  to "Purchase  of Shares--Distribution  Plans" in  the
Prospectus for certain information with respect to  the separate distribution
plans  for Class B, Class C  and Class D shares pursuant  to Rule 12b-1 under
the  Investment Company Act (each a "Distribution  Plan") with respect to the
account  maintenance  and/or  distribution  fees  paid by  the  Fund  to  the
Distributor with respect to such classes.

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

LIMITATIONS ON THE PAYMENT OF DEFERRED SALES CHARGES

    The  maximum sales  charge rule  in  the Conduct  Rules of  the  National
Association of Securities Dealers, Inc. (the "NASD")  imposes a limitation on
certain asset-based sales charges such  as the distribution fee and the  CDSC
borne by  the Class B and Class C shares but not the account maintenance fee.
The  maximum sales  charge rule  is  applied separately  to each  class.   As
applicable to the Fund, the maximum sales charge rule limits the aggregate of
distribution fee  payments and  CDSCs payable  by the  Fund to  (1) 6.25%  of
eligible  gross  sales  of  Class B  shares  and   Class C  shares,  computed
separately  (defined   to  exclude   shares  issued   pursuant  to   dividend
reinvestments and exchanges), plus (2) interest on the unpaid balance for the
respective class, computed separately, at the prime rate plus  1% (the unpaid
balance  being the  maximum amount  payable minus  amounts received  from the
payment  of the  distribution fee  and  the CDSC).   In  connection with  the
Class B shares,  the  Distributor has  voluntarily agreed  to waive  interest
charges  on the unpaid  balance in excess  of 0.50% of  eligible gross sales.
Consequently, the  maximum amount payable to the  Distributor (referred to as
the "voluntary maximum")  in connection with the  Class B shares is 6.75%  of
eligible gross sales.  The Distributor retains the  right to stop waiving the
interest  charges at  any time.    To the  extent payments  would  exceed the
voluntary  maximum,  the  Fund   will  not  make  further  payments   of  the
distribution fee with  respect to Class B shares, and any  CDSCs will be paid
to the Fund rather than  to the Distributor; however, the Fund  will continue
to make  payments of the account  maintenance fee.  In  certain circumstances
the amount payable pursuant to the voluntary maximum may exceed the amount 
payable under the NASD formula In such circumstances payment in excess of the
amount payable under the NASD formula will not be made.

                             REDEMPTION OF SHARES

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

    The right to  redeem shares  or to  receive payment  with respect to  any
such redemption may be suspended for more than seven days after the tender of
such  shares only  for periods  during which  trading on  the New  York Stock
Exchange (the "NYSE") is restricted as determined by the 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 Commission, as
a result of  which disposal of  portfolio securities or determination  of the
net asset value of the Fund is not reasonably practicable, and for such other
periods  as the  Commission  may  by  order  permit  for  the  protection  of
shareholders of the Fund.

DEFERRED SALES CHARGES--CLASS B AND CLASS C SHARES

    As discussed in the  Prospectus under "Purchase of Shares--Deferred Sales
Charge  Alternatives--Class B  and  Class C  Shares,"  while  Class B  shares
redeemed  within four  years of  purchase are  subject to  a CDSC  under most
circumstances, the charge is waived (i)  on redemptions of Class B shares  in
certain  instances,  including  in connection  with  certain  post-retirement
withdrawals from  an IRA or other  retirement plan or (ii)  on redemptions of
Class B  shares following the death  or disability of  a Class B shareholder.
Redemptions for which the waiver applies in the case of such withdrawals are:
(a)  any  partial  or  complete  redemption  in  connection  with  a tax-free
distribution following  retirement under  a tax-deferred  retirement plan  or
attaining age 591/2  in the case of an IRA or  other retirement plan, or part
of a series of  equal periodic payments (not  less frequently than  annually)
made for the life (or  life expectancy) or any redemption resulting  from the
tax-free  return of an excess  contribution to an IRA;  or (b) any partial or
complete  redemption following  the death  or disability  (as defined  in the
Code) of a Class B shareholder (including one who owns the Class B  shares as
joint  tenant with his  or her spouse), provided  the redemption is requested
within one year of the death or initial determination of disability.

    Merrill  Lynch  Blueprint(Service  Mark) Program.    Class B  shares  are
offered  to  certain participants  in  the  Blueprint(Service Mark)  Program.
Blueprint is  directed to  small investors,  group IRAs  and participants  in
certain  affinity  groups  such  as trade  associations  and  credit  unions.
Class B shares  of the Fund are offered through  Blueprint only to members of
certain affinity  groups.  The  CDSC is  waived in  connection with  purchase
orders placed through Blueprint.  Services, including the exchange privilege,
available  to Class B investors  through Blueprint, however,  may differ from
those  available  to other  Class B  investors.    Orders for  purchases  and
redemptions  of Class B  shares of  the Fund  will be  grouped  for execution
purposes which,  in some  circumstances, may  involve the  execution of  such
orders  two business  days following  the day  such orders  are placed.   The
minimum initial  purchase price  is $100, with  a $50 minimum  for subsequent
purchases  through Blueprint.   There  is  no minimum  initial or  subsequent
purchase requirement  for investors  who are  part of  a Blueprint  automatic
investment plan.  Additional information concerning these Blueprint programs,
including any annual  fees or transaction charges, is  available from Merrill
Lynch,  Pierce,  Fenner &  Smith  Incorporated,  The Blueprint(Service  Mark)
Program, P.O. Box 30441, New Brunswick, New Jersey 08989-0441.

                     PORTFOLIO TRANSACTIONS AND BROKERAGE

    Subject to policies established  by the Board of  Directors of the  Fund,
the  Manager  is  primarily  responsible  for  the  execution  of the  Fund's
portfolio transactions  and the  allocation of  brokerage.   The Fund  has no
obligation  to deal  with any  broker  or group  of brokers  in execution  of
transactions in portfolio securities and  does not use any particular  broker
or dealer.   In executing transactions with brokers and  dealers, the Manager
seeks to obtain the  best net results for the Fund,  taking into account such
factors as  price (including  the applicable  brokerage commission  or dealer
spread), size of order, difficulty of execution and operational facilities of
the firm  involved and the firm's risk in  positioning a block of securities.
While the  Manager generally  seeks reasonably competitive  commission rates,
the Fund does  not necessarily pay the lowest commission or spread available.
In addition,  consistent with  the  Conduct Rules  of the  NASD and  policies
established by  the Board of Directors of the  Fund, the Manager may consider
sales of shares of the Fund as a factor in 
the selection of brokers or dealers to execute portfolio transactions for the
Fund; however,  whether or not a particular broker  or dealer sells shares of
the Fund neither qualifies nor disqualifies such broker  or dealer to execute
transactions for the Fund.  

    Subject to obtaining  the best  price and execution, brokers  who provide
supplemental investment research  services to the Manager  may receive orders
for transactions by the Fund.  Such supplemental research services ordinarily
consist  of assessments  and  analyses  of the  business  or  prospects of  a
company,  industry or  economic sector.   Information so received  will be in
addition to and  not in lieu of the services required  to be performed by the
Manager under the Management Agreement, and  the expenses of the Manager will
not necessarily be reduced  as a result of  the receipt of such  supplemental
information.  If in  the judgment of the  Manager the Fund will benefit  from
supplemental  research services, the  Manager is authorized  to pay brokerage
commissions to  a  broker furnishing  such  services that  are  in excess  of
commissions  that  another broker  may have  charged  for effecting  the same
transaction.  Certain  supplemental research  services may primarily  benefit
one  or  more other  investment  companies or  other  accounts for  which the
Manager exercises  investment discretion.   Conversely, the  Fund may  be the
primary beneficiary  of  the supplemental  research  services received  as  a
result  of  portfolio  transactions  effected  for  such  other  accounts  or
investment companies.

    The Fund  may invest in  certain securities traded in  the OTC market and
intends to deal 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  Fund and persons who are affiliated with such affiliated
persons are  prohibited  from  dealing with  the  Fund as  principal  in  the
purchase and  sale  of securities  unless a  permissive  order allowing  such
transactions is obtained from  the Commission.  Since transactions in the OTC
market  usually involve  transactions with  dealers  acting as  principal for
their own accounts, the Fund will not deal with affiliated persons, including
Merrill Lynch  and  its affiliates,  in  connection with  such  transactions.
However, an  affiliated person  of the Fund  may serve as  its broker  in OTC
transactions conducted on an agency  basis provided that, among other things,
the fee  or commission received by  such affiliated broker  is reasonable and
fair compared to the fee or commission received by  non-affiliated brokers in
connection  with comparable  transactions.    See "Investment  Objective  and
Policies--Investment Restrictions."  

    Foreign  equity securities  may  be held  by  the  Fund  in the  form  of
American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"),
Global  Depositary  Receipts ("GDRs")  or other  securities  convertible into
foreign  equity securities.   ADRs,  EDRs  and GDRs  may be  listed  on stock
exchanges,  or traded  in over-the-counter  markets in  the United  States or
Europe, as the case may be.  ADRs, like other securities traded in the United
States, will be subject to  negotiated commission rates.  The  Fund's ability
and decisions to purchase or sell portfolio securities of foreign issuers may
be  affected  by  laws  or regulations  relating  to  the  convertibility and
repatriation of assets.  Because the  shares of the Fund are redeemable  on a
daily  basis  in  United  States dollars,  the  Fund  intends  to  manage its
portfolio  so as to give reasonable assurance that  it will be able to obtain
United  States   dollars  to  the   extent  necessary  to   meet  anticipated
redemptions.    Under  present  conditions, it  is  not  believed  that these
considerations will have any significant effect on its portfolio strategy.

    Section  11(a)  of the  Securities  Exchange  Act  of  1934, as  amended,
generally  prohibits  members  of   the  United  States  national  securities
exchanges from  executing  exchange  transactions for  their  affiliates  and
institutional accounts which  they manage unless the member  (i) has obtained
prior express  authorization from  the account to  effect such  transactions,
(ii) at least annually furnishes the  account with the aggregate compensation
received  by the  member in effecting  such transactions,  and (iii) complies
with any rules the Commission has prescribed with respect to the requirements
of clauses (i) and (ii).  To the extent Section 11(a)  would apply to Merrill
Lynch acting as  a broker for the Fund  in any of its  portfolio transactions
executed on any such securities exchange of which it is a member, appropriate
consents  have been  obtained  from  the Fund  and  annual  statements as  to
aggregate compensation will be provided to the Fund.

    The Board  of Directors  of the  Fund has considered  the possibility  of
seeking  to recapture for the  benefit of the  Fund brokerage commissions and
other expenses of portfolio transactions by conducting portfolio transactions
through affiliated entities.  For  example, brokerage commissions received by
affiliated brokers could be offset against the advisory  fee paid by the Fund
to the Manager.  After considering all factors deemed relevant, the  Board of
Directors made  a determination not to  seek such recapture.   The Board will
reconsider this matter from time to time.

                       DETERMINATION OF NET ASSET VALUE

    The  net asset value of the shares of the  Fund will be determined by the
Manager once daily Monday through Friday, as of 15 minutes after the close of
business  on the  NYSE (generally,  4:00 p.m.,  New York  time), on  each day
during which  the NYSE  is open for  trading.   The NYSE is  not open  on New
Year's Day,  Martin  Luther King,  Jr.  Day,  Presidents' Day,  Good  Friday,
Memorial  Day, Independence Day,  Labor Day,  Thanksgiving Day  and Christmas
Day.   Any assets  or liabilities  initially expressed in  terms of  non-U.S.
dollar currencies are translated  into U.S. dollars at the  prevailing market
rates as quoted by one or more banks or dealers on the day of valuation.  The
Fund also will determine  its net asset  value on any day  in which there  is
sufficient trading in its portfolio securities that the net asset value might
be affected materially, but  only if on any such day the  Fund is required to
sell  or redeem shares.  Net asset value is computed by dividing the value of
the securities  held by  the Fund  plus any cash  or other  assets (including
interest  and dividends accrued  but not yet  received) minus all liabilities
(including accrued  expenses) by  the total number  of shares  outstanding at
such time.  Expenses, including the investment advisory  fees and any account
maintenance  and/or distribution fees, are accrued daily.   The per share net
asset  value of Class B,  Class C and Class D  shares generally will be lower
than the per share  net asset value of  Class A shares, reflecting the  daily
expense accruals of the account maintenance, distribution and higher transfer
agency fees  applicable with respect  to Class B and  Class C shares  and the
daily  expense  accruals of  the  account  maintenance fees  applicable  with
respect to Class D shares; moreover, the per share net asset value of Class B
and Class C shares generally will be lower than the per share net asset value
of Class D shares, reflecting the  daily expense accruals of the distribution
fees and higher transfer agency  fees applicable with respect to Class  B and
Class C shares of the Fund.  It is expected, however, that the  per share net
asset  value  of  the four  classes  will  tend  to  converge  (although  not
necessarily   meet)   immediately  after   the   payment   of  dividends   or
distributions, which  will differ by approximately the  amount of the expense
accrual differentials between the classes.

    Portfolio securities that  are traded  on stock exchanges  are valued  at
the last sale price  (regular way) on the  exchange on which such  securities
are traded, as of the  close of business on the day the  securities are being
valued or, lacking  any sales,  at the last  available bid price.   In  cases
where securities  are traded on  more than one  exchange, the securities  are
valued on the exchange designated by or  under the authority of the Board  of
Directors  as the primary  market.  Securities  traded in the  OTC market are
valued at the last available bid price in the OTC market prior to the time of
valuation.  Portfolio  securities that are traded both in  the OTC market and
on  a  stock   exchange  are  valued  according  to  the  broadest  and  most
representative  market.  When  the Fund writes  an option, the  amount of the
premium  received is  recorded on the  books of the  Fund as an  asset and an
equivalent liability.   The amount of the liability is subsequently valued to
reflect the current market value  of the option written, based upon  the last
sale price in the case of exchange-traded  options or, in the case of options
traded in  the OTC market,  the last asked price.   Options purchased  by the
Fund  are valued  at their  last sale  price in  the case  of exchange-traded
options  or, in the  case of options traded  in the OTC  market, the last bid
price.   Other investments, including financial futures contracts and related
options, are  valued at market value.  Securities and assets for which market
quotations are not readily available are  valued at fair value as  determined
in good  faith by or  under the direction  of the Board  of Directors  of the
Fund.   Such valuations and procedures  will be reviewed periodically  by the
Board of Directors.

    Generally,  trading in  foreign securities,  as well  as U.S.  Government
securities and money market instruments, is substantially  completed each day
at various times prior  to the close of business on the NYSE.   The values of
such securities  used in computing the  net asset value of  the Fund's shares
are determined as of  such times.  Foreign  currency exchange rates are  also
generally  determined   prior  to  the   close  of  business   on  the  NYSE.
Occasionally,  events  affecting  the  values of  such  securities  and  such
exchange rates may  occur between the times at which  they are determined and
the  close  of business  on  the  NYSE  that will  not  be  reflected in  the
computation of  the Fund's net asset  value.  If  events materially affecting
the value of such securities occur during such period,  then these securities
will  be valued  at  their fair  value as  determined  in good  faith by  the
Directors.


                             SHAREHOLDER SERVICES

    The Fund  offers a number of  shareholder services described below  which
are designed to facilitate investment in its shares.  Full details as to each
of  such services  and copies  of the  various plans  described below  can be
obtained from the Fund, the  Distributor or Merrill Lynch.  Certain  of these
services are available only to U.S. 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.   The statements will serve  as transaction confirmations
for automatic  investment purchases and  the reinvestment of  ordinary income
dividends and capital gain  distributions.  The statements also will show any
other activity in  the account since the  preceding statement.   Shareholders
will receive  separate transaction  confirmations for  each purchase  or sale
transaction other  than automatic  investment purchases, the  reinvestment of
ordinary  income  dividends and  long-term  capital  gain  distributions.   A
shareholder may make additions to  his or her Investment Account at  any time
by mailing a check directly to the Fund's Transfer Agent.

    Share certificates  are issued  only for  full shares and  only upon  the
specific request of the shareholder.   Issuance of certificates  representing
all or only part of the full shares in an Investment Account may be requested
by shareholders directly from the Transfer Agent.

    Shareholders  considering transferring  their  Class A or  Class D shares
from Merrill  Lynch to another brokerage firm or financial institution should
be aware  that, if the firm to which the  Class A or Class D shares are to be
transferred  will not  take delivery  of shares  of the  Fund, a  shareholder
either must redeem the Class A or Class D shares (paying any applicable CDSC)
so that the cash proceeds  can be transferred to the account at  the new firm
or such  shareholder must continue to  maintain an Investment Account  at the
Transfer Agent for those Class A or Class D shares.  Shareholders  interested
in transferring their Class B or Class C 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 or  she be
issued certificates for  the shares and then must turn  the certificates over
to the new firm for  re-registration as described in the  preceding sentence.
Shareholders considering  transferring a tax-deferred retirement account such
as  an  IRA  from  Merrill  Lynch to  another  brokerage  firm  or  financial
institution should be aware that, if the firm to which the retirement account
is  to  be transferred  will  not take  delivery  of  shares of  the  Fund, a
shareholder  must either  redeem the shares  (paying any  applicable CDSC) so
that the cash proceeds can be transferred to the account  at the new firm, or
continue to maintain a retirement account at  Merrill Lynch for those shares.
A shareholder may make additions to his or her Investment Account at any time
by mailing a check directly to the Transfer Agent.

AUTOMATIC INVESTMENT PLANS

    A U.S.  shareholder may make  additions to an  Investment Account at  any
time  by  purchasing  Class A shares  (if  an  eligible  Class A investor  as
described  in the Prospectus)  or Class B, Class C  or Class D  shares at the
applicable public offering price  either through the shareholder's securities
dealer, or by mail directly  to the Transfer Agent, acting as  agent for such
securities dealer.  Voluntary accumulation also can be made through a service
known as the  Fund's Automatic Investment Plan whereby the Fund is authorized
through pre-authorized  checks or automated  clearing house debits of  $50 or
more to charge the regular bank account of the shareholder on a regular basis
to  provide   systematic  additions  to   the  Investment  Account   of  such
shareholder.    An investor  whose  shares  of the  Fund  are  held within  a
CMA(Registered Trademark) or CBA(Registered Trademark) account may arrange to
have periodic investments made in the Fund in amounts of $100 or more ($1 for
retirement accounts) through the CMA(Registered Trademark)  or CBA(Registered
Trademark) Automated Investment Program.

AUTOMATIC REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

    Unless specific instructions to  the contrary are given  as to the method
of  payment  of  dividends  and capital  gains  distributions,  dividends and
distributions  will be automatically  reinvested in additional  shares of the
Fund.   Such reinvestment will  be at the  net asset  value of shares  of the
Fund, without a sales charge, as of the  close of business on the NYSE on the
ex-dividend  date of the dividend or distribution.  Shareholders may elect in
writing to receive either their  dividends or capital gains distributions, or
both, in cash, in which event payment will be mailed on or about the  payment
date.  Cash payments also can be directly deposited to the shareholder's bank
account.

    Shareholders may, at  any time, notify  Merrill Lynch  in writing if  the
shareholder's account is maintained with Merrill Lynch or notify the Transfer
Agent in writing or by telephone (1-800-MER-FUND) that they no longer wish to
have  their dividends and/or capital gains 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   make  systematic  withdrawals  from  an
Investment Account of Class A, Class B, Class C or Class D shares on either a
monthly  or quarterly  basis as  provided below.   Quarterly  withdrawals are
available for  shareholders who  have acquired shares  of the  Fund having  a
value, based  on cost or the  current offering price, of $5,000  or more, and
monthly withdrawals are available for shareholders with shares having a value
of $10,000 or more.

    At the  time of each withdrawal  payment, sufficient  shares are redeemed
from those on deposit in the shareholder's account to  provide the withdrawal
payment specified by the shareholder.  The shareholder may specify the dollar
amount and the class of shares to  be redeemed.  Redemptions will be made  at
net  asset  value  as  determined  at  the  close  of business  on  the  NYSE
(generally, 4:00 p.m.,  New York time) on the  24th day of each  month or the
24th day of the last month of each quarter, whichever is applicable.   If the
NYSE is not open for  business on such date, the  shares will be redeemed  at
the close  of business  on the  following business day.   The  check for  the
withdrawal payment  will be mailed, or the  direct deposit for the withdrawal
payment will be  made, on the next business day following redemption.  When a
shareholder is making systematic withdrawals,  dividends on all shares in the
Investment Account are reinvested automatically in the Fund.  A shareholder's
Systematic Withdrawal Plan  may be terminated at any time,  without charge or
penalty, by the shareholder, the Fund, the Transfer Agent or the Distributor.

    Withdrawal payments  should not  be  considered  as dividends,  yield  or
income.    Each withdrawal  is  a  taxable event.    If  periodic withdrawals
continuously   exceed  reinvested   dividends,  the   shareholder's  original
investment  may be reduced  correspondingly.  Purchases  of additional shares
concurrent with withdrawals are ordinarily disadvantageous to the shareholder
because of  sales charges and tax  liabilities.  The Fund  will not knowingly
accept purchase orders  for shares of the Fund from  investors who maintain a
Systematic Withdrawal  Plan unless  such purchase  is equal  to at  least one
year's scheduled  withdrawals  or $1,200,  whichever  is greater.    Periodic
investments  may  not  be  made  into  an  Investment Account  in  which  the
shareholder has elected to make systematic withdrawals.

    With  respect to redemptions of Class  B and Class C shares pursuant to a
systematic withdrawal plan, the maximum  number of Class B or Class  C shares
that can be  redeemed from an  account annually shall  not exceed 10% of  the
value of shares  of such class  in that account at  the time the  election to
join the systematic withdrawal plan was made.  Any CDSC that  otherwise might
be  due on  such redemption  of Class  B or  Class C  shares will  be waived.
Shares redeemed pursuant to a systematic  withdrawal plan will be redeemed in
the  same order as  Class B or  Class C shares  are otherwise redeemed.   See
"Purchase  of Shares--Deferred Sales Charge Alternatives--Class B and Class C
Shares--Contingent Deferred Sales Charges--Class B Shares" and "--"Contingent
Deferred Sales  Charges--Class  C  Shares"  in the  Prospectus.    Where  the
systematic withdrawal plan is  applied to Class B shares, upon  conversion of
the last Class  B shares  in an  account to  Class D  shares, the  systematic
withdrawal plan will automatically be  applied thereafter to Class D  shares.
See  "Purchase of Shares--Deferred  Sales Charge  Alternatives--Class  B  and
Class C   Shares--Conversion   of  Class  B  Shares to Class D Shares" in the
Prospectus; if an  investor wishes  to  change the  amount being withdrawn in
a systematic withdrawal plan the investor should contact his or her Financial
Consultant.

    Alternatively,   a   shareholder   whose  shares   are   held   within  a
CMA(Registered  Trademark), CBA(Registered  Trademark) or  Retirement Account
may  elect  to  have shares  redeemed  on  a  monthly, bimonthly,  quarterly,
semiannual  or   annual  basis  through  the   CMA(Registered  Trademark)  or
CBA(Registered Trademark) Systematic Redemption  Program.  The minimum  fixed
dollar amount redeemable is $50.  The proceeds of systematic redemptions will
be posted  to the shareholder's account five business days after the date the
shares are redeemed.   All redemptions are made at net asset value.  A share-
holder may elect to have his or her shares redeemed  on  the  first,  second,
third or fourth Monday of each month, in the case of monthly redemptions,  or 
of  every  other month, in the case of bimonthly redemptions,  For quarterly,
semiannual or annual redemptions, the shareholder may  select  the  month  in
which the shares are to be redeemed and may designate  whether the redemption 
is to be made on the first, second, third or forth  Monday  of the month.  If
the Monday selected is not a business day, the redemption will be processed at
net asset value on the next business day.  The  Systematic Redemption Program
is  not available if Fund shares  are  being  purchased  within  the   account  
pursuant  to  the   Automatic   Investment  Program.    For  more information
on the  CMA(Registered  Trademark)  or  CBA(Registered  Trademark) Systematic  
Redemption  Program,  eligible  shareholders  should  contact  their  Merrill 
Lynch Financial Consultant.

EXCHANGE PRIVILEGE

    U.S. shareholders of  each class of shares of  the Fund have  an exchange
privilege with  certain other MLAM-advised  mutual funds.   Under the Merrill
Lynch Select Pricing(Service Mark) System, Class A  shareholders may exchange
Class A shares of the Fund for Class A shares of a second MLAM-advised mutual
fund  if  the  shareholder holds any Class A shares of the second fund in the 
account in which the  exchange is  made  at the  time of  the exchange  or is  
otherwise eligible  to purchase  Class A  shares  of  the  second  fund.   If  
the Class A shareholder  wants  to  exchange  Class A  shares  for  shares of 
a  second MLAM-advised mutual fund, but does not hold Class A shares  of  the 
second fund in his  or her  account at  the time  of  the   exchange  and  is 
not  otherwise eligible to acquire  Class A shares of  the  second fund,  the 
shareholder will receive  Class D shares  of  the  second   fund as  a result  
of the  exchange. Class D  shares   also   may  be   exchanged   for  Class A  
shares  of  a  second MLAM-advised mutual fund at any time as long as, at the 
time of the exchange,  the  shareholder  holds Class A  shares of the  second 
fund  in  the   account in  which  the   exchange  is  made  or is  otherwise 
eligible  to  purchase   Class A  shares  of  the  second  fund.    Class  B,  
Class C  and  Class D  shares  are  exchangeable  with   shares  of the  same 
class  of   other  MLAM-advised  mutual  funds.   For purposes  of  computing 
the  CDSC that  may  be payable  upon  a  disposition of the  shares acquired 
in the  exchange, the holding  period for  the previously owned shares of the 
Fund is "tacked" to the holding period  of  the newly acquired  shares of the 
other  fund as more fully  described below.  Class A, Class B,  Class  C  and 
Class D shares also are exchangeable for shares of certain MLAM-advised money 
market funds as follows:  Class A  shares  may  be  exchanged  for shares  of  
Merrill Lynch  Ready Assets  Trust,  Merrill  Lynch Retirement Reserves Money 
Fund (available  only for exchanges within certain retirement plans), Merrill
Lynch U.S.A. Government Reserves and Merrill Lynch U.S. Treasury  Money Fund;
Class B,  Class C  and  Class D  shares  may  be exchanged  for  shares  of  
Merrill  Lynch  Government  Fund,  Merrill  Lynch Institutional Fund, 
Merrill  Lynch Institutional Tax-Exempt Fund  and Merrill Lynch  Treasury 
Fund.   Shares with a  net asset  value of at  least $100 are required to 
qualify for the exchange privilege, and any shares utilized in an exchange  
must  have been  held  by  the  shareholder for  15  days.   It  is 
contemplated  that the  exchange privilege  may  be applicable  to other  new
mutual funds whose shares may be distributed by the Distributor.

    Exchanges of Class A or Class D  shares outstanding ("outstanding Class A
or  Class D shares") for  Class A or  Class D shares of  another MLAM-advised
mutual fund  ("new Class A or Class D shares") are transacted on the basis of
relative net asset value per Class A or Class D share, respectively, plus  an
amount equal to the  difference, if any, between the sales  charge previously
paid  on the  outstanding Class A  or  Class D shares  and  the sales  charge
payable  at the time  of the exchange  on the new Class A  or Class D shares.
With respect  to outstanding Class A or  Class D shares as to  which previous
exchanges have taken  place, the "sales charge previously paid" shall include
the aggregate  of the  sales charges  paid with  respect to  such Class A  or
Class D shares in the initial purchase  and any subsequent exchange.  Class A
or  Class D shares  issued pursuant  to dividend reinvestment  are sold  on a
no-load basis in each of  the funds offering Class A or Class D shares.   For
purposes of  the  exchange privilege,  Class A  and Class D  shares  acquired
through dividend  reinvestment shall be deemed to have been sold with a sales
charge equal  to the sales charge  previously paid on the  Class A or Class D
shares on which  the dividend was paid.   Based on this  formula, Class A and
Class D shares of  the Fund generally will  be exchanged into the  Class A or
Class D shares  of the other  funds or  into shares of  certain money  market
funds without a sales charge.

    In  addition,  each  of  the  funds  with  Class B  and   Class C  shares
outstanding ("outstanding Class B or Class C shares") offers  to exchange its
Class B  or Class C shares  for Class B  or Class C shares,  respectively, of
another MLAM-advised  mutual fund  ("new Class B or  Class C shares")  on the
basis of  relative net asset value per Class B  or Class C share, without the
payment  of  any CDSC  that  might  otherwise be  due  on  redemption of  the
outstanding Class  B or  Class C  shares.  Class B  shareholders of  the Fund
exercising the exchange privilege  will continue to be subject  to the Fund's
CDSC schedule  if such schedule is higher than  the CDSC schedule relating to
the new  Class B shares acquired through  use of the exchange  privilege.  In
addition, Class B or Class  C shares of the Fund acquired through  use of the
exchange  privilege  will be  subject  to the  Fund's CDSC  schedule  if such
schedule is higher than the CDSC schedule relating to the Class B  or Class C
shares  of the fund from  which the exchange has been  made.  For purposes of
computing the  sales load that  may be payable  on a  disposition of the  new
Class B or  Class C shares, the holding period for the outstanding Class B or
Class C  shares is  "tacked" to  the  holding period  of the  new  Class B or
Class C shares.   For example,  an investor  may exchange Class B  or Class C
shares  of the  Fund for  those  of Merrill  Lynch Special  Value Fund,  Inc.
("Special  Value Fund") after  having held the Fund's  Class B shares for two
and a half years.   The 2%  CDSC that generally would  apply to a  redemption
would not  apply to the exchange.  Three years  later the investor may decide
to redeem the  Class B shares of Special Value Fund and  receive cash.  There
will be no CDSC due on this redemption, since by "tacking" the two and a half
year holding  period of  the Fund Class B  shares to  the three  year holding
period for the Special Value Fund Class B shares, the investor will be deemed
to have held the Special Value Fund Class B shares for more than five years.

    Shareholders also may exchange shares of the Fund into  shares of certain
money market funds advised by  the Manager or its affiliates, but  the period
of time that Class B or  Class C shares are held in a money  market fund will
not count towards satisfaction of the  holding  period  requirement  for pur-
poses of reducing the CDSC or, with  respect  to  Class  B  shares,   towards 
satisfaction of the  conversion period.   However, shares  of a  money market 
fund  that were acquired as a result of an exchange for Class  B  or  Class C 
shares of the Fund may, in turn, be exchanged back into  Class B  or  Class C 
shares, respectively, of  any fund  offering such  shares,  in   which  event  
the holding  period for Class B or Class C shares of the newly acquired  fund 
will be aggregated with previous  holding periods  for  purposes of  reducing
the CDSC.    Thus, for example, an  investor may exchange Class B  shares  of
the Fund for shares of Merrill Lynch Institutional Fund ("Institutional Fund")
after having held the Fund Class B shares for two and a  half years and three
years later decide to redeem the  shares  of Institutional  Fund  for   cash. 
At the time of this redemption, the 2% CDSC that would have been due had  the 
Class B shares of the  Fund  been  redeemed  for  cash rather than  exchanged
for shares  of Institutional  Fund will  be payable.   If,  instead  of  such
redemption  the shareholder  exchanged such  shares for  Class B shares  of a 
fund  that the shareholder  continued to hold  for an  additional  two  and a  
half years, any subsequent redemption would not incur a CDSC.

    Before effecting  an exchange,  shareholders  should  obtain a  currently
effective prospectus of the fund into which the exchange is to be made.

    To exercise the exchange privilege, a  shareholder should contact his  or
her Merrill  Lynch Financial  Consultant, who  will advise  the  Fund of  the
exchange.  Shareholders of the  Fund, and shareholders of other  MLAM-advised
mutual funds  with shares for  which certificates  have not been  issued, may
exercise the  exchange privilege  by wire through  their securities  dealers.
The  Fund  reserves  the  right  to  require a  properly  completed  Exchange
Application.    This exchange  privilege  may be  modified  or  terminated in
accordance  with the rules of the Commission.  The Fund reserves the right to
limit  the number of  times an investor may  exercise the exchange privilege.
Certain funds may suspend the offering of their shares to the  general public
at any time and thereafter  may resume such offering from time to  time.  The
exchange privilege is available only to U.S. shareholders in states where the
exchange legally may be made.

       DIVIDENDS, DISTRIBUTIONS AND TAXES DIVIDENDS AND DISTRIBUTIONS

    The  Fund  intends  to distribute  substantially  all its  net investment
income, if any.   Dividends from such  net investment income will  be paid at
least annually.  All net realized long- or  short-term capital gains, if any,
will be distributed to the Fund's shareholders at least annually.   From time
to  time, the Fund may declare a special  distribution at or about the end of
the  calendar year  in order  to comply  with Federal  tax requirements  that
certain percentages of its ordinary  income and capital gains be  distributed
during the  calendar year.  If  in any fiscal  year, the Fund has  net income
from certain foreign  currency transactions, such income  will be distributed
at least annually.

    See  "Shareholder  Services--Automatic  Reinvestment  of   Dividends  and
Capital Gains Distributions" for information  concerning the manner in  which
dividends and distributions may be reinvested automatically in  shares of the
Fund.   A shareholder  whose account is  maintained at the  Transfer Agent or
whose account  is maintained through  Merrill Lynch may  elect in  writing to
receive any such dividends or distributions, or both, in cash.  Dividends and
distributions are taxable  to shareholders, as discussed  below, whether they
are reinvested in  shares of the  Fund or received  in cash.   The per  share
dividends on each class of shares will be reduced as a result  of any account
maintenance, distribution and transfer agency fees applicable with respect to
such class of shares.  See "Determination of Net Asset Value."

TAXES

    The Fund intends  to elect and to  qualify for the special tax  treatment
afforded regulated investment companies ("RICs") under the Code.   As long as
it so qualifies, the  Fund (but not its shareholders) will  not be subject to
Federal income tax  on the part of  its net ordinary income  and net realized
capital gains that  it distributes to  Class A, Class B, Class C and  Class D
shareholders (together, the "shareholders").  The Fund  intends to distribute
substantially all of such income.

    Dividends paid by  the Fund from its ordinary income or from an excess of
net  short-term capital  gains over  net  long-term capital  losses (together
referred  to  hereafter  as  "ordinary  income  dividends")  are  taxable  to
shareholders as  ordinary income.  Distributions  made from an  excess of net
long-term capital gains over net short-term capital losses 
(including gains or losses from certain transactions in warrants, futures and
options)  ("capital gain dividends") are taxable to shareholders as long-term
capital gains, regardless  of the  length of time  the shareholder has  owned
Fund  shares.  Recent  legislation creates  additional categories  of capital
gains taxable at different rates.  Although  the legislation does not explain
how  gain  in these  categories will  be taxed  to  shareholders of  RICs, it
authorizes regulations applying the new categories of gain and the  new rates
to sales  of securities by RICs.   In the absence of  guidance, there is some
uncertainty as  to the  manner in which  the categories  of gain  and related
rates will  be passed through to shareholders in capital gain dividends.  Any
loss upon the sale or  exchange of Fund shares held  for six months or  less,
however,  will be  treated as  long-term capital  loss to  the extent  of any
capital gain  dividends received by the shareholder.  Distributions in excess
of the Fund's earnings and  profits will first reduce the adjusted  tax basis
of a holder's shares  and, after such adjusted tax basis  is reduced to zero,
will constitute capital gains to such holder (assuming the shares are held as
a capital asset).

    Dividends are taxable  to shareholders even though they are reinvested in
additional shares of the Fund.  Not later than 60 days after the close of its
taxable year,  the Fund will  provide its shareholders with  a written notice
designating  the amounts  of any  ordinary income  dividends or  capital gain
dividends.  It is anticipated that IRS guidance permitting categories of gain
and  related rates to  be passed through  to shareholders  would also require
this written notice to  designate the amount of various categories of capital
gain income  included in capital  gain dividends.   A portion  of the  Fund's
ordinary  income  dividends  may  be  eligible  for  the  dividends  received
deduction allowed to corporations under the Code, if certain requirements are
met.   For this  purpose, the Fund  will allocate dividends  eligible for the
dividends received deduction among the  Class A, Class B, Class C and Class D
shareholders according to a  method (which it believes is consistent with the
Commission  rule permitting  the  issuance and  sale of  multiple  classes of
stock)  that  is based  on the  gross income  allocable to  Class A, Class B,
Class C and  Class D shareholders  during  the taxable  year, or  such  other
method as  the Internal Revenue  Service may prescribe.   If the Fund  pays a
dividend in  January that was declared  in the previous October,  November or
December to shareholders of record on a specified date in one of such months,
then such dividend will be treated for tax purposes as being paid by the Fund
and received  by its shareholders  on December 31  of the year in  which such
dividend was declared.

    Ordinary  income  dividends paid  to  shareholders  who  are  nonresident
aliens or  foreign entities  will be  subject to a  30% U.S.  withholding tax
under existing  provisions of the Code applicable  to foreign individuals and
entities unless a reduced rate of  withholding or a withholding exemption  is
provided under applicable treaty law.   Nonresident shareholders are urged to
consult  their own  tax  advisers concerning  the applicability  of  the U.S.
withholding tax.

    Under certain  provisions of  the Code, some shareholders  may be subject
to a 31% withholding tax on ordinary income dividends, capital gain dividends
and  redemption  payments ("backup  withholding").   Generally,  shareholders
subject to backup withholding  will be those for  whom no certified  taxpayer
identification  number  is 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.

    Dividends and interest received by  the Fund may give rise to withholding
and other  taxes  imposed by  foreign  countries.   Tax  conventions  between
certain countries and the United States may reduce or eliminate such taxes.  

    No  gain  or  loss will  be  recognized by  Class B  shareholders  on the
conversion  of their  Class B shares  into Class D  shares.   A shareholder's
basis in  the Class D shares acquired will be  the same as such shareholder's
basis in the Class B shares converted, and the holding period of the acquired
Class D shares  will include  the holding  period for  the converted  Class B
shares.

    If  a  shareholder  exercises an  exchange  privilege within  90  days of
acquiring the  shares, then the  loss the  shareholder can  recognize on  the
exchange  will be reduced  (or the  gain increased)  to the extent  any sales
charge paid to the Fund  on the exchanged shares reduces any sales charge the
shareholder  would  have owed  upon the  purchase of  the  new shares  in the
absence  of  the exchange  privilege.   Instead,  such sales  charge  will be
treated as an amount paid for the new shares.

    A loss  realized on  a sale  or exchange of  shares of  the Fund will  be
disallowed if other  Fund shares are acquired (whether  through the automatic
reinvestment of dividends or otherwise)  within a 61-day period beginning  30
days before and ending  30 days after the date  that the shares are  disposed
of.  In  such a case, the  basis of the  shares acquired will be  adjusted to
reflect the disallowed loss.

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

    The Fund  may invest in  securities rated in the  medium to lower  rating
categories  of  nationally recognized  rating organizations,  and  in unrated
securities  ("high  yield/high   risk  securities"),  as  described   in  the
Prospectus.  Some of these  high yield/high risk securities may be  purchased
at  a discount  and may  therefore cause  the Fund  to accrue  and distribute
income  before amounts due  under the obligations  are paid.   In addition, a
portion of the interest payments on such  high yield/high risk securities may
be treated as dividends for Federal income tax purposes; in such case, if the
issuer  of such high  yield/high risk  securities is a  domestic corporation,
dividend payments  by the Fund  will be  eligible for the  dividends received
deduction  to the  extent of  the deemed  dividend  portion of  such interest
payments.

    The Fund may invest  up to 10% of its total assets in securities of other
investment companies.  If the Fund purchases shares  of an investment company
(or similar investment entity)  organized under foreign law, the Fund will be
treated as owning shares in a passive foreign investment company ("PFIC") for
U.S. Federal  income tax purposes.   The Fund may be subject  to U.S. Federal
income tax, and  an additional tax in  the nature of interest  (the "interest
charge"),  on a portion of the distributions  from such a company and on gain
from the disposition  of the shares of such a  company (collectively referred
to as  "excess distributions"), even if such excess distributions are paid by
the Fund as a dividend to its shareholders.  The Fund may be eligible to make
an election with respect to  certain PFICs in which it owns  shares that will
allow it to avoid the taxes  on excess distributions.  However, such election
may cause the Fund to recognize income in a particular year  in excess of the
distributions   received  from  such  PFICs.    Alternatively,  under  recent
legislation the  Fund could  elect to "mark  to market"  at the  end of  each
taxable year all shares that  it holds in PFICs.   If it made this  election,
the Fund would recognize as ordinary income any increase in the value of such
shares over their  adjusted basis and as  ordinary loss any decrease  in such
value to the extent it did not exceed prior increases included in income.  By
making the  mark-to-market election, the  Fund could avoid imposition  of the
interest charge  with respect to  its distributions  from PFICs,  but in  any
particular  year might  be  required to  recognize income  in  excess of  the
distributions it received  from PFICs and its  proceeds from dispositions  of
PFIC stock.

    The  Fund may make investments  that produce taxable  income which is not
matched by a corresponding  receipt of cash or an offsetting  loss deduction.
Such investments would include obligations that have original issue discount,
accrue negative  amortization  or  are subordinated  in  the  mortgage-backed
securities structure.  Such taxable income  would be treated as income earned
by the  Fund and would  be subject  to the distribution  requirements of  the
Code.  Because such income may  not be matched by a corresponding receipt  of
cash by the Fund or an offsetting loss deduction, the Fund may be required to
borrow money or dispose of other securities to be able to  make distributions
to  shareholders.     The  Fund  intends   to  make  sufficient   and  timely
distributions  to  shareholders to  qualify  for  the special  tax  treatment
afforded RICs at all times and to avoid imposition of the excise tax.

TAX TREATMENT OF OPTIONS AND FUTURES TRANSACTIONS

    The  Fund  may  write,  purchase or  sell  options,  futures and  forward
foreign exchange contracts.  Options and futures contracts that are  "Section
1256 contracts" will be "marked to market" for Federal income tax purposes at
the end of each taxable year, i.e., each such option or futures contract will
be treated as sold  for its fair market value on the last  day of the taxable
year.   Unless such contract is a  forward foreign exchange contract, or is a
non-equity option or a regulated futures contract for a non-U.S. currency for
which  the Fund elects to have gain or  loss treated as ordinary gain or loss
under Code Section 988 (as  described below), gain or loss from  Section 1256
contracts  will be  60% long-term  and 40%  short-term capital gain  or loss.
Application  of these rules  to Section 1256  contracts held by  the Fund may
alter  the  timing and  character  of  distributions  to shareholders.    The
mark-to-market rules  outlined  above, however,  will  not apply  to  certain
transactions entered into by the Fund solely to reduce the risk of changes in
price or interest or currency exchange rates with respect to its investments.

    A forward foreign  exchange contract that is a Section 1256 contract will
be marked  to market, as described above.   However, the character of gain or
loss from such a contract will generally be  ordinary under Code Section 988.
The Fund  may, nonetheless,  elect to  treat the  gain or  loss from  certain
forward foreign  exchange contracts as capital.   In this case,  gain or loss
realized in connection  with a  forward foreign exchange  contract that is  a
Section  1256  contract  will be  characterized  as  60%  long-term  and  40%
short-term capital gain or loss.

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

    One of the requirements  for qualification as a RIC is that less than 30%
of the  Fund's gross  income be  derived from gains  from the  sale or  other
disposition of securities held for less than  three months.  Accordingly, the
Fund may  be restricted in effecting closing transactions within three months
after entering into  an option or  futures contract.  Under  recently enacted
legislation, this  requirement will  no longer  apply to  the Fund  after the
fiscal year ending December 31, 1997.

SPECIAL RULES FOR CERTAIN FOREIGN CURRENCY TRANSACTIONS

    In general,  gains from  "foreign currencies"  and from foreign  currency
options,  foreign currency  futures and  forward  foreign exchange  contracts
relating to  investments in stocks, securities or  foreign currencies will be
qualifying income for purposes of determining whether the Fund qualifies as a
RIC.   It is currently unclear, however, who will be treated as the issuer of
a foreign  currency instrument or  how foreign currency  options, futures, or
forward foreign  exchange contracts will  be valued  for purposes of  the RIC
diversification requirements applicable to the Fund.

    Under  Code   Section  988,  special   rules  are  provided  for  certain
transactions in  a  foreign currency  other  than the  taxpayer's  functional
currency (i.e., unless certain special rules apply, currencies other than the
U.S. dollar).  In general, foreign currency gains or losses from certain debt
instruments,  from certain forward contracts, from futures contracts that are
not "regulated futures  contracts" and from unlisted options  will be treated
as ordinary income or loss under Code Section 988.  In certain circumstances,
the  Fund may  elect capital gain  or loss  treatment for  such transactions.
Regulated futures  contracts, as  described above, will  be taxed  under Code
Section 1256  unless application of Section  988 is elected by the  Fund.  In
general, however, Code Section 988 gains or losses will  increase or decrease
the amount  of the Fund's investment  company taxable income available  to be
distributed  to  shareholders  as  ordinary income.    Additionally,  if Code
Section 988 losses  exceed other investment  company taxable income  during a
taxable year, the Fund would not be able to make any ordinary income dividend
distributions, and all  or a portion of distributions  made before the losses
were realized  but in  the same taxable  year would  be recharacterized  as a
return  of  capital  to shareholders,  thereby  reducing  the  basis of  each
shareholder's Fund shares and resulting in a capital gain for any shareholder
who  received a distribution  greater than  such shareholder's basis  in Fund
shares (assuming the  shares were held as a capital asset).   These rules and
the mark-to-market rules  described above, however, will not apply to certain
transactions entered into  by the Fund solely to reduce  the risk of currency
fluctuations with respect to its investments.

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

    Ordinary income and  capital gain dividends may  also be subject to state
and local taxes.

    Certain states exempt from  state income taxation dividends paid by  RICs
which are derived from  interest on U.S. Government  obligations.  State  law
varies  as  to  whether  dividend  income  attributable  to  U.S.  Government
obligations is exempt from state income tax.

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

                               PERFORMANCE DATA

    From time to  time the Fund may  include its average annual total  return
and  other total return  data in  advertisements or information  furnished to
present or prospective shareholders.   Total return figures are based on  the
Fund's  historical  performance  and  are not  intended  to  indicate  future
performance.    Average  annual  total return  is  determined  separately for
Class A,  Class B, Class C  and Class D  shares  in accordance  with formulas
specified by the 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  are
reinvested  and taking into account all applicable recurring and nonrecurring
expenses,  including the  maximum sales  charge  in the  case of  Class A and
Class D shares and the CDSC that would be applicable to a complete redemption
of the investment at the  end of the specified period in the  case of Class B
and Class C shares.

    The  Fund also  may quote  annual, average  annual  and annualized  total
return and aggregate total return performance data, both as  a percentage and
as a  dollar amount based  on a  hypothetical $1,000 investment,  for various
periods  other  than those  noted  below.   Such  data  will  be computed  as
described  above,  except  that  (i)  as  required  by  the  periods  of  the
quotations, actual annual, annualized or aggregate data,  rather than average
annual data, may be quoted and (ii) the maximum applicable sales charges will
not  be  included  with respect  to  annual  or  annualized  rates of  return
calculations.  Aside  from the impact on the performance data calculations of
including or excluding the maximum applicable sales charges, actual annual or
annualized  total return  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.

    In order to reflect  the reduced sales charges in the case of  Class A or
Class D shares or  the waiver of the  CDSC in the case of  Class B or Class C
shares applicable  to  certain investors,  as  described under  "Purchase  of
Shares"  and "Redemption  of  Shares," respectively,  the  total return  data
quoted by the Fund in advertisements directed to such investors may take into
account the  reduced, and not the maximum, sales charge  or may not take into
account the CDSC and therefore may reflect greater total return since, due to
the reduced sales charges  or the waiver of sales charges, a  lower amount of
expenses is deducted.


                             GENERAL INFORMATION

DESCRIPTION OF SHARES

    The Fund was incorporated under Maryland law on  September 24, 1997.   It
has an  authorized capital of 400,000,000  shares of Common Stock,  par value
$.10 per share, divided into four classes designated  Class A, Class B, Class
C and Class D Common Stock, each consisting of 100,000,000 shares.  Shares of
Class A, Class B,  Class C and Class D Common Stock  represent an interest in
the same assets of the Fund and are identical in all respects except that the
Class B,  Class C and  Class D shares  bear certain  expenses related  to the
account  maintenance and/or distribution  of such  shares and  have exclusive
voting  rights with respect  to matters relating  to such expenditures.   The
Fund may issue  additional classes or shares if the  Board of Directors deems
such issuance to be in the best  interests of the Fund.  Upon liquidation  of
the Fund, shareholders of  each class are entitled to  share pro rata on  the
net assets of the Fund available for distribution to shareholders, except for
any expenses which may  be attributable only  to one class.   Shares have  no
preemptive or conversion  rights.  The rights of  redemption and exchange are
described elsewhere herein and in the Prospectus.  Shares are fully  paid and
nonassessable by the Fund.  

    Shareholders  are entitled  to one  vote  for each  full share  held  and
fractional votes  for fractional shares held in the election of Directors and
any other matter submitted to a  shareholder vote.  The Fund does  not intend
to hold annual  meetings of shareholders in any year  in which the Investment
Company Act does not  require shareholders to act  upon any of the  following
matters: (i) election  of Directors; (ii) approval of  an investment advisory
agreement; (iii) approval of a  distribution agreement; and (iv) ratification
of  selection of  independent accountants.    Also, the  by-laws of  the Fund
require 
that a special meeting of shareholders be held upon the written request of at
least 25%  of the outstanding  shares of the  Fund entitled  to vote at  such
meeting, if  they comply  with applicable  Maryland law.   Voting rights  for
Directors  are   not  cumulative.     Shares  issued   are  fully   paid  and
non-assessable  and have  no preemptive  rights.   Redemption  and conversion
rights are discussed  elsewhere herein and in the Prospectus.   Each share of
Class B, Class C and  Class D Common Stock is entitled to participate equally
in dividends and distributions declared by the Fund and in the  net assets of
the Fund  upon liquidation or  dissolution after satisfaction  of outstanding
liabilities.  Stock certificates will be issued by the Transfer Agent only on
specific request.  Certificates for fractional  shares are not issued in  any
case.

    The  Manager provided  the initial  capital for  the  Fund by  purchasing
10,000 shares of  common stock of the  Fund for $100,000.   Such shares  were
acquired for  investment and  can only  be disposed  of by  redemption.   The
organizational  expenses of the Fund (estimated at approximately $_____) will
be paid by the  Fund and will be  amortized over a period not  exceeding five
years.  The proceeds realized  by the Manager upon  the redemption of any  of
the shares  initially purchased  by it will  be reduced  by the  proportional
amount of  the unamortized organizational  expenses which the number  of such
initial shares  being  redeemed  bears  to the  number  of  shares  initially
purchased.  As of the  date of this Statement of Additional  Information, the
Manager  owned 100% of  the outstanding shares  of Common Stock  of the Fund.
The Manager may be deemed to control the Fund until such time as it owns less
than 25% of the outstanding shares of the Fund.  

COMPUTATION OF OFFERING PRICE PER SHARE

    An illustration  of the  computation of the  offering price  for Class A,
Class B, Class C and Class D shares of the Fund based on  the projected value
of the Fund's estimated net assets and projected number of shares outstanding
on the date its shares first  are offered for sale to public investors  is as
follows:  

<TABLE>
<CAPTION>                                                       Class A            Class B          Class C            Class D  
                                                                -------            -------          -------            -------
<S>                                                            <C>                <C>              <C>                <C>
Net Assets  . . . . . . . . . . . . . . . . . . . . . . .       $25,000            $25,000          $25,000            $25,000
Number of Shares Outstanding  . . . . . . . . . . . . . .        2,500              2,500            2,500              2,500
Net Asset Value Per Share (net assets
     divided by number of shares 
     outstanding) . . . . . . . . . . . . . . . . . . . .        $10.00            $10.00            $10.00            $10.00
Sales Charge (for Class A and Class D
     Shares:  5.25% of offering price
     (5.54% of net amount invested*)) . . . . . . . . . .        $  .55              **                **              $  .55
Offering Price  . . . . . . . . . . . . . . . . . . . . .        $10.55            $10.00            $10.00            $10.55
</TABLE>
                            
- -------------------------
 *  Rounded to  the  nearest  one-hundredth percent;  assumes  maximum  sales
    charge is applicable.  
**  Class B and  Class C shares  are not subject to  an initial  sales charge
    but  may be subject to a  CDSC on redemption.  See  "Purchase of Shares--
    Deferred Sales Charge  Alternatives--Class B and Class  C Shares"  in the
    Prospectus and  "Redemption  of Shares--Deferred  Sales Charges--Class  B
    and Class C Shares" herein.  

INDEPENDENT AUDITORS

    ________________________________________   has  been   selected  as   the
independent  auditors of the Fund.  The  selection of independent auditors is
subject  to  approval  by  the  Independent  Directors  of  the  Fund.    The
independent  auditors  are responsible  for  auditing  the  annual  financial
statements of the Fund.

CUSTODIAN

    __________________________________________ acts  as the Custodian of  the
Fund's  assets.    Under  its  contract  with  the  Fund,  the  Custodian  is
authorized, among  other things,  to establish  separate accounts  in foreign
currencies  and to cause foreign securities  owned by the Fund  to be held in
its offices  outside of the United States and  with certain foreign banks and
securities depositories.   The Custodian is responsible  for safeguarding and
controlling the Fund's cash and securities, handling the receipt and delivery
of   securities  and  collecting   interest  and  dividends   on  the  Fund's
investments.

TRANSFER AGENT

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

LEGAL COUNSEL

    Brown & Wood LLP,  One World Trade Center, New York New York  10048-0557,
is counsel for the Fund.

REPORTS TO SHAREHOLDERS

    The fiscal year of  the Fund ends on December 31  of each year.  The Fund
sends  to its shareholders at least  semi-annually reports showing the Fund's
portfolio  and other  information.   An annual  report, containing  financial
statements audited  by  independent auditors,  is sent  to shareholders  each
year.  After the end  of each year, shareholders will receive  Federal income
tax information regarding  dividends and capital gains distributions.   It is
anticipated that IRS guidance permitting categories of gain and related rates
to be passed  through to shareholders would also require  this Federal income
tax information to indicate the amounts of various categories of capital gain
income included in capital gain dividends.

ADDITIONAL INFORMATION

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

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

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

    To the knowledge of the Fund,  no person owned beneficially 5% or more of
the Fund's shares on          , 1997.
                      -------

                                                                     APPENDIX

                      RATINGS OF FIXED INCOME SECURITIES

DESCRIPTION  OF  MOODY'S  INVESTORS  SERVICE,  INC.'S  ("MOODY'S")  CORPORATE
RATINGS
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 most 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 larger than in "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
    sometime 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.

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
    in a high degree.  Such issues are often in default or have  other marked
    shortcomings.

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

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

DESCRIPTION OF MOODY'S SHORT-TERM DEBT RATINGS

    Moody's short-term debt  ratings are opinions of  the ability  of issuers
to  repay punctually  senior debt  obligations.   These  obligations have  an
original  maturity not exceeding one year,  unless explicitly noted.  Moody's
makes  no representation that rated bank or insurance company obligations are
exempt  from registration  under  the Securities  Act of  1933  or issued  in
conformity with  any other applicable  law or regulation.   Nor does  Moody's
represent that any  specific bank or insurance company  obligation is legally
enforceable or a valid senior obligation of a rated issuer.  Moody's 
employs the following three designations, all incured to be investment grade,
to indicate the relative repayment ability of rated issuers:

    PRIME-1.      Issuers rated  Prime-l (or supporting  institutions) have  a
superior ability for repayment of senior short-term debt obligations.  Prime-
I 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.   Earnings trends and coverage  ratios, while sound, may  be
more  subject  to  variation.   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 measurements  and may require relatively high
financial leverage.  Adequate alternate liquidity is maintained.

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

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

DESCRIPTION OF MOODY'S PREFERRED STOCK RATINGS

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

    Preferred stock rating symbols and their definitions are as follows:

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

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

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

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

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

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

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

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

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

    Note:  Moody's  applies numerical modifiers  l, 2  and 3  in each  rating
classification: the modifier indicates that  the security ranks in the higher
end of  its generic  rating category,  the modifier  2 indicates  a mid-range
ranking; and the  modifier 3 indicates that the issue ranks  in the lower end
of its generic rating category.

DESCRIPTION  OF STANDARD  &  POOR'S RATINGS  SERVICES  ("STANDARD &  POOR'S")
CORPORATE DEBT RATINGS

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

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

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

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

INVESTMENT GRADE

AAA Debt  rated "AAA" has the  highest rating assigned by  Standard & Poor's.
    Capacity to pay interest and repay principal is extremely strong.
AA  Debt rated "AA"  has a  very strong  capacity to  pay interest and  repay
    principal  and  differs from  the  highest  rated issues  only  in  small
    degree.
A   Debt rated "A" has a strong capacity to pay interest  and repay principal
    although  it  is somewhat  more  susceptible to  the  adverse  effects of
    changes  in circumstances  and economic  conditions  than debt  in higher
    rated categories.
BBB Debt rated  "BBB"  is regarded  as having  an  adequate  capacity to  pay
    interest  and repay  principal.   Whereas it  normally exhibits  adequate
    protection   parameters,   adverse   economic   conditions  or   changing
    circumstances  are more  likely to  lead to  a  weakened capacity  to pay
    interest and repay  principal for  debt in this  category than in  higher
    rated categories.

SPECULATIVE GRADE

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

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

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

CCC Debt rated "CCC" has a  currently identifiable vulnerability  to default,
    and  is  dependent  upon  favorable  business,  financial,  and  economic
    conditions  to   meet  timely  payment   of  interest  and  repayment  of
    principal.   In the  event of  adverse business,  financial, or  economic
    conditions,  it is not likely  to have the  capacity to  pay interest and
    repay  principal.   The  "CCC" rating  category  is  also used  for  debt
    subordinated to senior debt that is assigned an actual or implied "B"  or
    "B--" rating.

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

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

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

D   Debt rated "D"  is in payment default.   The "D" rating category is  used
    when interest  payments or principal  payments are not  made on the  date
    due even if the applicable  grace period has not expired, unless Standard
    &  Poor's believes  that  such payments  will be  made during  such grace
    period.    The  "D"  rating  also will  be  used  upon  the  filing of  a
    bankruptcy petition if debt service payments are jeopardized.

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

    N.R.  indicates not rated.

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

    Bond   Investment  Quality  Standards:  Under   present  commercial  bank
regulations issued by the Comptroller of the Currency, bonds rated in the top
four categories  ("AAA",  "AA", "A",  "BBB",  commonly known  as  "investment
grade" 
ratings)  are generally  regarded  as  eligible  for  bank  investment.    In
addition,  the Legal  Investment Laws  of various  states may  impose certain
rating or other standards for obligations eligible  for investment by savings
banks, trust companies, insurance companies and fiduciaries generally.

DESCRIPTION OF STANDARD & POOR'S COMMERCIAL PAPER RATINGS

    A  Standard & Poor's commercial  paper rating is  a current assessment of
the  likelihood  of timely  payment  of  debt  considered short-term  in  the
relevant market.  Ratings are graded into four categories, ranging from "A-l"
for the  highest  quality  obligations to  "D"  for  the lowest.    The  four
categories are as follows:

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

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

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

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

B   Issues  rated "B" are  regarded as  having only an  adequate capacity for
    timely payment.

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

D   Debt rated "D"  is in payment default.   The "D" rating  category is used
    when interest payments  or principal payments  are not made  on the  date
    due even if  the applicable grace period has not expired, unless Standard
    &  Poor's  believes that  such payments  will be  made during  such grace
    period.

    A commercial  paper rating is not  a recommendation to  purchase, sell or
hold a  security  inasmuch as  it does  not  comment as  to market  price  or
suitability for  a particular  investor.   The ratings  are based on  current
information  furnished to  Standard &  Poor's  by the  issuer or  obtained by
Standard  &  Poor's from  other sources  it considers  reliable.   Standard &
Poor's  does not perform an  audit in connection with  any rating and may, on
occasion,  rely  on unaudited  financial  information.   The  ratings may  be
changed, suspended, or withdrawn as a  result of changes in or unavailability
of such information or based on other circumstances.

DESCRIPTION OF STANDARD & POOR'S PREFERRED STOCK RATINGS

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

    The preferred stock ratings are based on the following considerations:

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

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

         III. Relative position  of the issue  in the event of bankruptcy,
    reorganization, or other  arrangement under  the laws  of bankruptcy  and
    other laws affecting creditors' rights.

AAA This is  the highest rating that may  be assigned by Standard & Poor's to
    a preferred  stock issue and  indicates an  extremely strong capacity  to
    pay the preferred stock obligations.
AAA preferred stock issue rated  "AA" also qualifies as a high-quality  fixed
    income security.   The  capacity to  pay preferred  stock obligations  is
    very strong, although not as overwhelming as for issues rated "AAA".

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

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

BBB Preferred stock rated "BB", "B", and  "CCC" are regarded, on  balance, as
    predominately speculative  with respect  to the issuer's capacity  to pay
    preferred  stock  obligations.    "BB"  indicates  the  lowest  degree of
    speculation  and "CCC"  the highest  degree of  speculation.   While such
    issues  will  likely  have some  quality and  protective characteristics,
    these are  outweighed by large uncertainties  or major risk exposures  to
    adverse conditions.
CC  The rating  "CC" is  reserved for a  preferred stock issue in  arrears on
    dividends or sinking fund payments but that is currently paying.

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

DA  preferred  stock rated  "D"  is a  non-paying issue  with  the  issuer in
    default on debt instruments.

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

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

    The preferred stock  rating is not a  recommendation to purchase, sell or
hold  a security,  inasmuch  as it  does not  comment as  to market  price or
suitability  for a particular  investor.  Preferred  stock ratings are wholly
unrelated to  Standard &  Poor's earnings  and dividend  rankings for  common
stocks.

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


                     MERRILL LYNCH REAL ESTATE FUND, INC.

                     STATEMENT OF ASSETS AND LIABILITIES
                            _______________, 1997

Assets:
    Cash in Bank...............................         $100,000
    Prepaid registration fees (Note 3).........             
    Deferred organization expenses (Note 4)....         -------

Total Assets...................................             
Liabilities--accrued expenses..................         -------

Net Assets (equivalent to $0.10 per share
    on 2,500 Class A shares of Common Stock
    (par value $0.10), 2,500 Class B shares
    of Common Stock (par value $0.10),
    2,500 Class C shares of Common Stock
    (par value $0.10) and 2,500 Class D
    shares of Common Stock (par value $0.10)
    outstanding with 400,000,000 shares authorized)
    (Note 1)...................................        $100,000
                                                       ========
_______________
Notes to Statement of Assets and Liabilities.

(1) Merrill Lynch  Real Estate Fund,  Inc. (the  "Fund") was  organized as  a
    Maryland  corporation on  September 24,  1997.   The  Fund  is registered
    under  the  Investment Company  Act  of 1940  as  an open-end  management
    investment company.   To  date, the  Fund  has not  had any  transactions
    other than  those relating  to  organizational matters  and  the sale  of
    2,500 Class A  shares, 2,500 Class  B shares,  2,500 Class  C shares  and
    2,500 Class D shares of  Common Stock to Merrill  Lynch Asset Management,
    L.P. (the "Manager").

(2) The  Fund  has  entered into  a  management  agreement  (the  "Management
    Agreement")   with   the  Manager,   and  distribution   agreements  (the
    "Distribution Agreements")  with  Merrill Lynch  Funds Distributor,  Inc.
    (the  "Distributor").    (See  "Management  of  the  Fund--Management and
    Advisory  Arrangements"  in  the  Statement  of  Additional Information.)
    Certain  officers  and/or  directors  of  the  Fund  are  officers and/or
    directors of the Manager and the Distributor.

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

(4) Deferred organization expenses will  be amortized over a period from  the
    date the  Fund commences  operations not  exceeding five  years.  In  the
    event that  the Manager  (or any subsequent  holder) redeems  any of  its
    original  shares prior to the  end of the  five-year period, the proceeds
    of the redemption payable in  respect of such shares  shall be reduced by
    the  pro rata  share (based on  the proportionate  share of  the original
    shares redeemed  to the  total number of  original shares  outstanding at
    the  time  of  redemption)  of   the  unamortized  deferred  organization
    expenses as  of the date of such redemption.   In the event that the Fund
    is liquidated prior to the end of the  five-year period, the Manager  (or
    any subsequent holder)  shall bear the  unamortized deferred organization
    expenses.
<TABLE>
<CAPTION>
                       TABLE OF CONTENTS                             (LOGO)
<S>                                                                 <C>
                                                            PAGE
Investment Objective and Policies . . . . . . . . . . . . .    2     MERRILL LYNCH
  Portfolio Strategies Involving Options,                            REAL ESTATE 
    Futures and Foreign Exchange Transactions . . . . . . .    2     FUND, INC.
  Other Investment Policies and Practices . . . . . . . . .    2
  Investment Restrictions . . . . . . . . . . . . . . . . .    4     (GRAPHIC)
Management of the Fund  . . . . . . . . . . . . . . . . . .    6
  Directors and Officers  . . . . . . . . . . . . . . . . . .  6
  Compensation of Directors . . . . . . . . . . . . . . . .    7
  Management and Advisory Arrangements  . . . . . . . . . .    7
Purchase of Shares  . . . . . . . . . . . . . . . . . . . .    8
  Initial Sales Charge Alternatives--
    Class A and Class D Shares  . . . . . . . . . . . . . . .  9
  Reduced Initial Sales Charges . . . . . . . . . . . . . . .  9
  Employer-Sponsored Retirement or Savings 
    Plans and Certain Other Arrangements  . . . . . . . . .   12
  Distribution Plans  . . . . . . . . . . . . . . . . . . .   12
  Limitations on the Payment of Deferred Sales
    Charges . . . . . . . . . . . . . . . . . . . . . . . .   12
Redemption of Shares  . . . . . . . . . . . . . . . . . . .   13
  Deferred Sales Charges--
    Class B and Class C Shares  . . . . . . . . . . . . . .   13
Portfolio Transactions and Brokerage  . . . . . . . . . . .   13     STATEMENT OF
Determination of Net Asset Value  . . . . . . . . . . . . .   15     ADDITIONAL
Shareholder Services  . . . . . . . . . . . . . . . . . . .   15     INFORMATION
  Investment Account  . . . . . . . . . . . . . . . . . . .   16
  Automatic Investment Plans  . . . . . . . . . . . . . . .   16     __________, 1997
  Automatic Reinvestment of Dividends and
    Capital Gains Distributions . . . . . . . . . . . . . .   16     Distributor:
  Systematic Withdrawal Plans . . . . . . . . . . . . . . .   17     Merrill Lynch
  Exchange Privilege  . . . . . . . . . . . . . . . . . . .   17     Funds Distributor, Inc.
Dividends, Distributions and Taxes  . . . . . . . . . . . .   19
  Dividends and Distributions . . . . . . . . . . . . . . .   19
  Taxes . . . . . . . . . . . . . . . . . . . . . . . . . .   19
  Tax Treatment of Options and Futures
    Transactions  . . . . . . . . . . . . . . . . . . . . .   21
  Special Rules for Certain Foreign
    Currency Transactions . . . . . . . . . . . . . . . . .   22
Performance Data  . . . . . . . . . . . . . . . . . . . . .   23
General Information . . . . . . . . . . . . . . . . . . . .   23
  Description of Shares . . . . . . . . . . . . . . . . . .   23
  Computation of Offering Price Per Share . . . . . . . . .   24
  Independent Auditors  . . . . . . . . . . . . . . . . . .   24
  Custodian . . . . . . . . . . . . . . . . . . . . . . . .   24
  Transfer Agent  . . . . . . . . . . . . . . . . . . . . .   25
  Legal Counsel . . . . . . . . . . . . . . . . . . . . . .   25
  Reports to Shareholders . . . . . . . . . . . . . . . . .   25
  Additional Information  . . . . . . . . . . . . . . . . .   25
  Security Ownership of Certain Beneficial
    Owners  . . . . . . . . . . . . . . . . . . . . . . . .   25
Independent Auditors' Report  . . . . . . . . . . . . . . .   26
Appendix  . . . . . . . . . . . . . . . . . . . . . . . . .   26
Financial Statements  . . . . . . . . . . . . . . . . . . .   32

</TABLE>

                    PART C.  OTHER INFORMATION

ITEM 24.  FINANCIAL STATEMENTS AND EXHIBITS

(A) FINANCIAL STATEMENTS

    Contained in Part B:

         Independent Auditors' Report

         Statement of Assets and Liabilities as of ___________, 1997.

(B) EXHIBITS

<TABLE>
<CAPTION>

 EXHIBIT
  NUMBER                                                             DESCRIPTION

<S>          <C>
  1           --Articles of Incorporation of the Registrant, dated September 23, 1997.
  2           --By-Laws of the Registrant.
  3           --None.
  4           --Portions of the Articles of Incorporation and the By-Laws of the Registrant defining the rights of holders of
                shares of the Registrant.(a)
  5(a)        --Form of Management Agreement between the Registrant and Merrill Lynch Asset Management, L.P. (the "Manager").(b)
   (b)        --Form of Sub-Advisory Agreement between the Manager and Merrill Lynch Asset Management U.K. Limited.(b)
  6(a)        --Form of Class A Shares Distribution Agreement between the Registrant and Merrill Lynch Funds Distributor, Inc. (the
                "Distributor").(b)
   (b)        --Form of Class B Shares Distribution Agreement between the Registrant and the Distributor.(b)
   (c)        --Form of Class C Shares Distribution Agreement between the Registrant and the Distributor.(b)
   (d)        --Form of Class D Shares Distribution Agreement between the Registrant and the Distributor.(b)
  7           --None.
  8           --Form of Custody Agreement between Registrant and _____________.(b)
  9(a)        --Form of Transfer Agency, Dividend Disbursing Agency and Shareholder Servicing Agency Agreement between the
                Registrant and Merrill Lynch Financial Data Services, Inc. (the "Transfer Agent").(b)
   (b)        --Form of Agreement relating to use of name between the Registrant and Merrill Lynch & Co., Inc.(b)
 10           --Opinion of Brown & Wood LLP, counsel for the Registrant.(b)
 11           --Consent of ____________________, independent auditors for the Registrant.(b)
 12           --None.
 13           --Certificate of the Manager.(b)
 14           --None.
 15(a)        --Form of Class B Shares Distribution Plan and Class B Shares Distribution Plan Sub-Agreement of the Registrant.(b)
   (b)        --Form of Class C Shares Distribution Plan and Class C Shares Distribution Plan Sub-Agreement of the Registrant.(b)
   (c)        --Form of Class D Shares Distribution Plan and Class D Shares Distribution Plan Sub-Agreement of the Registrant.(b)
 16           --None
 17(a)        --Financial Data Schedule for Class A Shares.(b)
   (b)        --Financial Data Schedule for Class B Shares.(b)
   (c)        --Financial Data Schedule for Class C Shares.(b)
   (d)        --Financial Data Schedule for Class D Shares.(b)
 18           --Merrill Lynch Select Pricing(Service Mark) System Plan Pursuant to Rule 18f-3.(c)

</TABLE>
_______________
(a) Reference is made to  Articles IV, V (Sections  3, 5, 6 and  7), VI,  VII
    and  IX of  the Registrant's Articles of  Incorporation filed herewith as
    Exhibit 1 to this  Registration Statement on Form  N-1A; and to  Articles
    II,  III  (Sections  1, 3,  5  and  6), VI,  VII,  XIII  and XIV  of  the
    Registrant's By-Laws,  filed herewith as Exhibit  2 to this  Registration
    Statement on Form N-1A.
(b) To be filed by amendment.
(c) Incorporated by  reference  to  Post-Effective Amendment  No. 13  to  the
    Registration Statement on Form  N-1A under the Securities Act of 1933, as
    amended, filed  on January 25,  1996 relating to shares  of Merrill Lynch
    New  York  Municipal  Bond  Fund  series  of  Merrill  Lynch  Multi-State
    Municipal Series Trust (File No. 2-99473).

ITEM 25.  PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE REGISTRANT

    Prior to  the effective  date of  this Registration  Statement, the  Fund
will sell 2,500 Class A  shares of its Common Stock, 2,500 Class  B shares of
its Common Stock, 2,500 Class C shares of its  Common Stock and 2,500 Class D
shares of its Common Stock to the Manager for an aggregate of $100,000.

ITEM 26.  NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>                                                                                                        Number of
                                                                                                              Record Holders
                                           Title of Class                                                    at _____ __, 1997
                                           ---------------                                                   -----------------
<S>                                                                                                                <C>
Class A shares of Common Stock, par value $0.10 per share . . . . . . . . . . . . . . . . . . . .                    0
Class B shares of Common Stock, par value $0.10 per share . . . . . . . . . . . . . . . . . . . .                    0
Class C shares of Common Stock, par value $0.10 per share . . . . . . . . . . . . . . . . . . . .                    0
Class D shares of Common Stock, par value $0.10 per share . . . . . . . . . . . . . . . . . . . .                    0

</TABLE>
_______________
*   The number of holders includes holders of record plus beneficial  owners,
    whose shares are held of record by Merrill Lynch, Pierce,  Fenner & Smith
    Incorporated.

ITEM 27.  INDEMNIFICATION

    Reference is  made to  Article VI  of Registrant's  Amended and  Restated
Articles of Incorporation, Article VI  of Registrant's Bylaws, Section  2-418
of  the Maryland  General  Corporation Law  and  Section  9 of  the  Class A,
Class B, Class C and Class D Distribution Agreements.

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

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

    The Registrant may indemnify, make advances 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.

    In Section 9 of  the Class A,  Class B, Class C and Class D  Distribution
Agreements  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 "1933
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 1933  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 1933 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 1933 Act and will be governed by the final
adjudication of such issue.

ITEM 28.  BUSINESS AND OTHER CONNECTIONS OF MANAGER

    (a) Merrill Lynch Asset  Management, L.P. ("MLAM" or the "Manager")  acts
as  the investment adviser  for the following  open-end registered companies:
Merrill Lynch Adjustable  Rate Securities Fund, Inc.,  Merrill Lynch Americas
Income  Fund, Inc., Merrill Lynch Asset  Builder Program, Inc., Merrill Lynch
Asset Growth Fund, Inc., Merrill Lynch Asset Income Fund, Inc., Merrill Lynch
Capital  Fund, Inc.,  Merrill  Lynch Convertible  Fund,  Inc., Merrill  Lynch
Developing Capital  Markets  Fund, Inc.,  Merrill  Lynch 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 Bond  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 Global  Value Fund,
Inc., Merrill Lynch Growth Fund, Merrill Lynch Healthcare Fund, Inc., Merrill
Lynch  Intermediate Government Bond Fund,  Merrill Lynch International Equity
Fund,  Merrill  Lynch  Latin  America   Fund,  Inc.,  Merrill  Lynch   Middle
East/Africa Fund, Inc.,  Merrill Lynch Municipal Series Trust,  Merrill Lynch
Pacific  Fund,  Inc.,  Merrill  Lynch   Ready  Assets  Trust,  Merrill  Lynch
Retirement Series  Trust,  Merrill Lynch  Series  Fund, Inc.,  Merrill  Lynch
Short-Term Global Income  Fund, Inc., Merrill Lynch Strategic  Dividend Fund,
Merrill   Lynch  Technology  Fund,  Inc.,  Merrill  Lynch  U.S.A.  Government
Reserves, Merrill  Lynch  U.S. Treasury  Money  Fund, Merrill  Lynch  Utility
Income Fund, Inc., Merrill Lynch Variable Series Funds, Inc. and Hotchkis and
Wiley  Funds (advised by Hotchkis and Wiley,  a dvision of MLAM); and for the
following  closed-end  registered investment  companies:  Merrill Lynch  High
Income Municipal Bond Fund, Inc. and Merrill Lynch Senior Floating Rate Fund,
Inc.  MLAM also acts as sub-adviser to Merrill Lynch World Strategy Portfolio
and Merrill Lynch Basic Value  Equity Portfolio, two investment portfolios of
EQ Advisory Trust.

    (b) Fund  Asset Management, L.P.  ("FAM"), an  affiliate of the  Manager,
acts  as  the  investment  adviser  for  the  following  open-end  registered
investment companies:  CBA Money  Fund, CMA  Government Securities  Fund, CMA
Money Fund, CMA  Multi-State Municipal Series Trust, CMA Tax-Exempt Fund, CMA
Treasury Fund, The Corporate Fund Accumulation Program, Inc., Debt Strategies
Fund, 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 Emerging Tigers Fund, Inc., Merrill
Lynch Federal Securities Trust, Merrill  Lynch Funds for Institutions Series,
Merrill  Lynch Multi-State Limited  Maturity Municipal  Series Trust, Merrill
Lynch  Multi-State Municipal Series Trust, Merrill Lynch Municipal Bond Fund,
Inc.,  Merrill Lynch Phoenix  Fund, Inc.,  Merrill Lynch Special  Value Fund,
Inc.,  Merrill  Lynch  World  Income  Fund,  Inc.  and  The  Municipal   Fund
Accumulation   Program,  Inc.;  and   the  following   closed-end  registered
investment companies: Apex  Municipal Fund, Inc., Corporate  High Yield Fund,
Inc., Corporate High Yield Fund II,  Inc., Debt Strategies Fund, Inc., Income
Opportunities  Fund 1999, Inc., Income Opportunities Fund 2000, Inc., Merrill
Lynch Municipal  Strategy  Fund, Inc.,  MuniAssets  Fund, Inc.,  MuniEnhanced
Fund, Inc., MuniHoldings  Fund, Inc.,  MuniHoldings California Insured  Fund,
Inc.,  MuniHoldings Florida Insured Fund, MuniHoldings New York Insured Fund,
Inc., MuniInsured  Fund, Inc., MuniVest  Fund, Inc., MuniVest Fund  II, Inc.,
MuniVest  Florida Fund, MuniVest  Michigan Insured  Fund, Inc.,  MuniVest New
Jersey  Fund, Inc.,  MuniVest Pennsylvania  Insured  Fund, 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  Michigan Fund, Inc., MuniYield  Michigan Insured Fund,
Inc.,  MuniYield New  Jersey Fund, Inc.,  MuniYield New  Jersey Insured Fund,
Inc., MuniYield New York Insured Fund, Inc., MuniYield New York  Insured Fund
II,  Inc.,   MuniYield  Pennsylvania  Fund,  MuniYield  Quality  Fund,  Inc.,
MuniYield Quality Fund II, Inc., Senior High 
Income  Portfolio,  Inc.,  Taurus   MuniCalifornia  Holdings,  Inc.,   Taurus
MuniNewYork 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 is One  Financial Center, 15th  Floor, Boston,
Massachusetts  02111-2646.   The  address of  the  Investment Adviser,  MLAM,
Princeton Services, Inc.  ("Princeton Services") and Princeton Administrators
L.P. 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 & 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, Inc. ("MLFDS")
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
January 1,  1995  for his,  her or  its 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 two paragraphs  of this Item 28 and Messrs.  Giordano, Harvey, Kirstein
and  Monagle  are directors,  trustees or  officers of  one  or more  of such
companies.

    Officers and Partners of MLAM are set forth as follows:

<TABLE>
<CAPTION>                                     Position with                         Other Substantial Business,
               Name                            the 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.
Terry K. Glenn  . . . . . . . . .    Executive Vice President       Executive vice President of FAM; Executive Vice President
                                                                        and Director of Princeton Services; President and
                                                                        Director of MLFD; Director of MLFDS; President of
                                                                        Princeton Administrators, L.P.
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
Philip L. Kirstein  . . . . . . .    Senior Vice President, Genera  Senior Vice President, General Counsel and Secretary of
                                          Counsel and Secretary         FAM; Senior Vice 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 FAM; Senior Vice
                                          Controller                    President and Controller of Princeton Services
Stephen M.M. Miller . . . . . . .    Senior Vice President          Executive Vice President of Princeton Administrators, L.P.;
                                                                        Senior Vice President of Princeton Services
Joseph T. Monagle, Jr.  . . . . .    Senior Vice President          Senior Vice President of FAM; Senior Vice President of
                                                                        Princeton Services
Michael L. Quinn  . . . . . . . .    Senior Vice President          Senior Vice President of FAM; Senior Vice President of
                                                                        Princeton Services; Managing Director and First Vice
                                                                        President of Merrill Lynch from 1989 to 1995
Gerald M. Richard . . . . . . . .    Senior Vice President and      Senior Vice President and Treasurer of FAM: Senior Vice
                                          Treasurer                     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>

    (b)  Merrill Lynch  Asset Management U.K.  Limited ("MLAM  U.K.") acts as
sub-adviser for the following registered investment companies: Corporate High
Yield Fund, Inc.,  Corporate High Yield Fund  II, Inc., Income  Opportunities
Fund 1999, Inc., Income Opportunities Fund 2000, Inc., Merrill Lynch Americas
Income Fund Inc.,  Merrill Lynch Asset  Builder Program, Inc.,  Merrill Lynch
Basic Value  Fund,  Inc., Merrill  Lynch Capital  Fund,  Inc., Merrill  Lynch
Convertible Fund,  Inc.,  Merrill  Lynch Developing  Capital  Markets,  Inc.,
Merrill Lynch  Dragon Fund, Inc.,  Merrill Lynch Emerging  Tigers Fund, Inc.,
Merrill Lynch EuroFund,  Merrill Lynch Fundamental Growth Fund  Inc., Merrill
Lynch  Global Allocation  Fund,  Inc.,  Merrill Lynch  Global  Bond Fund  for
Investment and  Retirement,  Merrill  Lynch Global  Convertible  Fund,  Inc.,
Merrill  Lynch Global Holdings,  Inc., Merrill Lynch  Global Resources Trust,
Merrill Lynch Global  SmallCap Fund, Inc., Merrill  Lynch Global Value  Fund,
Inc., Merrill Lynch Healthcare Fund, Inc., Merrill Lynch International Equity
Fund,  Merrill  Lynch   Latin  America  Fund,  Inc.,  Merrill   Lynch  Middle
East/Africa  Fund, Inc.,  Merrill  Lynch Pacific  Fund,  Inc., Merrill  Lynch
Phoenix  Fund,  Inc.,  Merrill  Lynch Short-Term  Global  Income  Fund, Inc.,
Merrill Lynch Special Value Fund, Inc., Merrill Lynch  Technology Fund, Inc.,
Merrill  Lynch World Income Fund,  Inc., and Worldwide  DollarVest Fund, Inc.
The  address  of  each  of  these  investment  companies  is P.O.  Box  9011,
Princeton, New Jersey 08543-9011.  The address of MLAM U.K. is Milton Gate, 1
Moor Lane, London EC2Y 9HA, England.

    Set forth  below is a list of each executive officer and director of MLAM
U.K.  indicating  each business,  profession,  vocation  or employment  of  a
substantial nature in which  each such person has been engaged  since January
1,  1995, for his or her own account or in the capacity of director, officer,
partner or trustee.   In addition,  Messrs.  Zeikel, Albert,  Bascand, Glenn,
Richard and  Yardley are officers of one or more of the registered investment
companies listed in the first two paragraphs of this Item 28.

<TABLE>
<CAPTION>                                     Position with                             Other Substantial Business,
               Name                             MLAM U.K.                            Profession, Vocation or Employment
            ----------                 --------------------------             ----------------------------------------------
<S>                                 <C>                                <C>
Arthur Zeikel . . . . . . . . . .    Director and Chairman              President of the Manager and FAM; President and Director of
                                                                            Princeton Services, Director of MLFD; Executive Vice
                                                                            President of ML&Co.
Alan J. Albert  . . . . . . . . .    Senior Managing Director           Vice President of the Manager
Nicholas C.D. Hall  . . . . . . .    Director                           Director of Merrill Lynch Europe PLC.; General
                                                                           Counsel of Merrill Lynch International Private
                                                                           Banking Group
Gerald M. Richard . . . . . . . .    Senior Vice President              Senior Vice President and Treasurer of the Manager and FAM;
                                                                            Senior Vice President and Treasurer of Princeton
                                                                            Services; Vice President and Treasurer of MLFD
Carol Ann Langham . . . . . . . .    Company Secretary                  None
Debra Anne Searle . . . . . . . .    Assistant Company Secretary        None

</TABLE>

ITEM 29.  PRINCIPAL UNDERWRITERS

    (a)  MLFD acts  as the  principal underwriter for  the Registrant.   MLFD
acts  as  the  principal underwriter  for  each  of  the open-end  investment
companies referred to in the first two paragraphs 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., MuniAssets Fund, Inc. and The Municipal Fund
Accumulation Program, Inc., and  MLFD also acts as the  principal underwriter
for the following closed-end investment  companies: Merrill Lynch High Income
Municipal  Bond Fund, Inc.,  Merrill Lynch Municipal  Strategy Fund, Inc. and
Merrill Lynch Senior Floating Rate Fund, Inc.

    (b)  Set forth below is information concerning  each director and officer
of MLFD.   The principal  business address  of each such  person is  P.O. Box
9011, Princeton,  New Jersey 08543-9011, except  that the address  of Messrs.
Aldrich, Brady,  Breen, Crook,  Fatseas, and Wasel  is One  Financial Center,
Boston, Massachusetts 02111-2646.

<TABLE>
<CAPTION>
                                                           Positions and Offices                    Position(s) and Office(s)
                    Name                                         with MLFD                               with Registrant
              --------------------                   -------------------------------              -----------------------------
<S>                                            <C>                                           <C>
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
Michael J. Brady  . . . . . . . . . . . . .     Vice President                                None
William M. Breen  . . . . . . . . . . . . .     Vice President                                None
Michael G. Clark  . . . . . . . . . . . . .     Vice President                                None
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

</TABLE>

    (c)  Not Applicable.

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  will be maintained  at the  offices of the  Registrant, 800
Scudders Mill Road, Plainsboro, New Jersey 08536, and 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 a
party to any management-related service contract.

ITEM 32.  UNDERTAKINGS

    (a)  The Registrant  undertakes to file a post-effective amendment, using
financial  statements which need not be certified,  within four to six months
from the effective date of the Registrant's registration statement  under the
1933 Act.

    (b)  The Fund,  if requested to do  so by the holders of at  least 10% of
the Fund's  outstanding shares, will call  a meeting of shareholders  for the
purpose of voting upon the question of removal of a director or directors and
will assist  communications with  other shareholders  as required  by Section
16(c) of the 1940 Act.

                                  SIGNATURES

    Pursuant to  the requirements  of  the  Securities Act  of 1933  and  the
Investment  Company  Act  of  1940,  the  Registrant  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 29th day of September, 1997.

                               MERRILL LYNCH REAL ESTATE FUND, INC.
                                 (Registrant)



                               By:    /S/ PHILIP L. KIRSTEIN      
                                   -----------------------------
                                   (Philip L. Kirstein, President)

    Each person  whose signature  appears below hereby  authorizes Philip  L.
Kirstein,  Robert   Harris  and  Philip   M.  Mandel  or  any   of  them,  as
attorney-in-fact, to sign  on his behalf,  individually and in each  capacity
stated  below,  any  amendments  to  the  Registration  Statement  (including
post-effective amendments) and to file  the same, with all exhibits  thereto,
with the Securities and Exchange Commission.

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

<TABLE>
<CAPTION>        Signatures                                                Title                                      Date
                -------------                                           ------------                                -------
<S>                                               <C>                                                      <C>
             /s/ Philip L. Kirstein                                                                         September 29, 1997
           ---------------------------
              (Philip L. Kirstein)                  President and Director (Principal Executive Officer)

                /s/ Robert Harris                   Treasurer (Principal Financial and Accounting           September 29, 1997
            ---------------------------
                 (Robert Harris)                        Officer) and Director

              /s/ Philip M. Mandel                  Director                                                September 29, 1997
            ---------------------------
               (Philip M. Mandel)

</TABLE>

                                EXHIBIT INDEX
Exhibit
Number
- -----

 1  -    Articles of  Incorporation of  the Registrant,  dated September  23,
         1997.
 2  -    By-Laws of the Registrant.




                          ARTICLES OF INCORPORATION
                                      OF
                     MERRILL LYNCH REAL ESTATE FUND, INC.

     THE UNDERSIGNED, MICHAEL B. ROBINSON whose post office address is One
World Trade Center, New York, New York  10048-0557, 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 REAL ESTATE FUND, 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 the 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.

     (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, in any manner and to the extent now or hereafter permitted by the
General Laws of the State of Maryland and by these Articles of Incorporation.

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

     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 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 Four Hundred Million (400,000,000) shares,
of the par value of Ten Cents ($.10) per share, and of the aggregate par
value of Forty Million Dollars ($40,000,000).  The capital stock initially is
classified into four classes, consisting of One Hundred Million (100,000,000)
shares of Class A Common Stock, One Hundred Million (100,000,000) shares of
Class B Common Stock, One Hundred Million (100,000,000) shares of Class C
Common Stock and One Hundred Million (100,000,000) shares of Class D Common
Stock.

     (2)  The Board of Directors may classify and reclassify any unissued
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.

     (3)  The Board of Directors may vary among all of the holders of a
particular class or series (a) the length of time shares must be held prior
to conversion into 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 converted; provided, however, that 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 Holding
Periods(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 converted 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 conversion, were issued.

     (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, Section (4)
hereof and including any Articles Supplementary creating any class or series
of capital stock, on each matter submitted to a vote of stockholders, each
holder of a share of capital stock of the Corporation shall be entitled to
one vote for each share standing in such holder's name on the books of the
Corporation, irrespective of the class or series thereof, and all shares of
all classes and series shall vote together as a single class; provided,
however, that (a) as to any matter with respect to which a separate vote of
any class or series is required by the Investment Company Act of 1940, as
amended, and in effect from time to time, or any rules, regulations or orders
issued thereunder, or by the Maryland General Corporation Law, such
requirement as to a separate vote by that class or series shall apply in lieu
of a general vote of all classes and series as described above, (b) in the
event that the separate vote requirements referred to in (a) above apply with
respect to one or more classes or series, then, subject to paragraph (c)
below, the shares of all other classes and series not entitled to a separate
class vote shall vote as a single class and (c) as to any matter which does
not affect the interest of a particular class or series, such class or series
shall not be entitled to any vote and only the holders of shares of the
affected classes and series, if any, shall be entitled to vote.

     (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, 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.

     (8)  Any fractional shares shall carry proportionately all of 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.

     (9)  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 or series
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 or series entitled to vote as a separate class shall constitute a
quorum.

     (10)  All persons who shall acquire stock in the Corporation shall
acquire the same subject to the provisions of the charter and the By-Laws of
the Corporation.  As used in the charter of the Corporation, the terms
"charter" and "Articles of Incorporation" shall mean and include the Articles
of Incorporation of the Corporation as amended, supplemented and restated
from time to time by Articles of Amendment, Articles Supplementary, Articles
of Restatement or otherwise.

                                  ARTICLE V

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

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

                              Philip L. Kirstein
                                Robert Harris
                               Philip M. Mandel

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

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

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

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

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

     (7)  The Board of Directors of the Corporation from time to time may
change the Corporation's name, 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.

                                  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.  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
liquidation fee, contingent deferred sales charge or other charge or fee
(which fees and charges may vary within and among the classes and series of
capital stock), if any, as may be approved by the Board of Directors of the
Corporation.  Payment of the redemption price shall be made 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.

     (2)  The Corporation shall, to the extent permitted by applicable law,
have the right at any time to redeem the shares owned by any holder of
capital stock of the Corporation (i) if the redemption is, in the opinion of
the Board of Directors, desirable in order to prevent the Corporation from
being deemed a "personal holding company" within the meaning of the Internal
Revenue Code of 1986, as amended, or (ii) if the value of the shares in the
account maintained by the Corporation or its transfer agent for any class of
stock for the stockholder is below an amount determined from time to time by
the Board of Directors (the "Minimum Account Balance") and the stockholder
has been given written notice of the redemption as required by the General
Laws of the State of Maryland and has failed to make additional purchases of
shares in an amount sufficient to bring the value in his account to at least
the Minimum Account Balance before the redemption is effected by the
Corporation.

     (3)  Payment of the redemption price by the Corporation may be made
either in cash or in securities or other assets at the time owned by the
Corporation or partly in cash and partly in securities or other assets at the
time owned by the Corporation.

                                 ARTICLE VII

                            DETERMINATION BINDING
                            ---------------------

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

                                 ARTICLE VIII
 
                            PERPETUAL EXISTENCE
                             -------------------

     The duration of the Corporation shall be perpetual.

                                  ARTICLE IX

                                  AMENDMENT
                                  ---------

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


     IN WITNESS WHEREOF, the undersigned incorporator of Merrill Lynch Real
Estate Fund, Inc. hereby executes the following Articles of Incorporation and
acknowledges the same to be his act.

     Dated this 23rd day of September, 1997.

                                              /s/ Michael Robinson        
                                             _______________________
                                                Michael B. Robinson

















































                                   BY-LAWS
                                      OF
                     MERRILL LYNCH REAL ESTATE FUND, INC.


                                  ARTICLE I

                                   OFFICES
                                   -------

     Section 1.  Principal Office.  The principal office of Merrill Lynch
                 ----------------
Real Estate Fund, 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 from time to time may determine.

                                  ARTICLE II

                           MEETINGS OF STOCKHOLDERS
                           ------------------------

     Section 1.  Annual Meeting.  The Corporation shall not be required to
                 --------------
hold an annual meeting of its stockholders in  any year in which the election
of directors is  not required to be  acted upon under the  Investment Company
Act  of 1940, as amended  (the "Investment Company Act").   In the event that
the Corporation shall be required  to hold an annual meeting  of stockholders
to elect directors by the Investment Company Act, such meeting 
shall  be held  no later  than  120 days  after the  occurrence of  the event
requiring the  meeting.   Any stockholders' meeting  held in  accordance with
this  Section  for  all  purposes  shall constitute  the  annual  meeting  of
stockholders for the year in which the meeting 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  upon the written
request of the holders  of at least a majority  of the outstanding shares  of
capital stock of  the Corporation entitled  to vote at  such meeting if  they
comply with Section 2-502(b) 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 from
time to time may 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 10 nor more than 90 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 or her  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,
either before or  after the meeting, shall  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 120  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.  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
or  series 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 or series entitled to vote as a  separate class or series 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, 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 properly may come before the meeting, if there shall be present
thereat, in person or by proxy,  holders of the number of shares of  stock of
the  Corporation  required for  action in  respect  of such  other  matter or
matters.

     Section 6.  Organization.  At each meeting of the stockholders, the
                 ------------
Chairman of the Board (if one has been designated by the Board), or in his or
her  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 or
her 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 by 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 or her
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 or her by a proxy signed
by such stockholder or his 
or her  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 by  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 or  her 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 90 days  nor less  than  10 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, in advance of any meeting of
                  ----------
stockholders, may appoint  one or more inspectors  to act at such  meeting or
any adjournment thereof.   If the inspectors shall not be  so appointed or if
any of  them shall fail  to appear or  act, the  chairman of the  meeting may
appoint inspectors.   Each inspector,  before entering upon the  discharge of
his or  her 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  or her  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 by 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  in no
event shall the number of directors be less than the minimum permitted by the
General Law  of the  State of Maryland  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 or  her term  unless such  director is  specifically removed  pursuant to
Section 5 of this Article III at  the time of such decrease.  Directors  need
not be stockholders.

     Section 3.  Election and Term of Directors.  Directors shall be elected
                 ------------------------------
annually  at a  meeting  of  stockholders held  for  that purpose;  provided,
however,  that  if  no meeting  of  the  stockholders of  the  Corporation is
required to be held in a particular year  pursuant to Section 1 of Article II
of these By-Laws, directors shall be  elected at the next meeting held.   The
term of office of each director shall be from the time of his or her election
and  qualification until the election of directors next succeeding his or her
election and  until his or  her successor shall  have been elected  and shall
have qualified, or  until his or  her death, or  until he or  she shall  have
resigned  or until  December 31 of  the year  in which  he or she  shall have
reached 72  years of  age, or  until he  or she  shall have  been removed  as
hereinafter provided in these By-Laws, or as otherwise provided by statute or
by the Charter.

     Section 4.  Resignation.  A director of the Corporation may resign at
                 -----------
any time by giving  written notice of his or her 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  (with or  without cause)  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 60 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  from time  to time  may determine  or as  shall be
specified in the notice of such meeting.

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

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

     Section 10.  Telephone Meetings.  Members of the Board of Directors or
                  ------------------
of  any  committee  thereof  may participate  in  a  meeting  by  means of  a
conference  telephone  or  similar communications  equipment  if  all persons
participating  in the meeting can hear each  other at the same time.  Subject
to the provisions of the Investment Company Act 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  24 hours
before the time at which such meeting is to be held, or by first-class  mail,
postage prepaid, addressed to  him or her at his  or her  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,  either before or after  the
meeting,  shall 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 or notice of  any
meeting need not state the purposes of such meeting.

     Section 13.  Quorum and Voting.  One-third, but not less than two
                  -----------------
(unless there is only one Director), 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, 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, by resolution adopted by a
                  ------------
majority  of the  entire Board, may  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
or her 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 or her  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,  any action  required or
permitted to be  taken at any  meeting of  the Board of  Directors or of  any
committee thereof may be taken without a meeting if all members of the  Board
or committee,  as  the case  may  be, consent  thereto  in writing,  and  the
writings or writing  are filed  with the  minutes of the  proceedings of  the
Board or committee.

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

     Section 17.  Investment Policies.  It shall be the duty of the Board of
                  -------------------
Directors  to direct  that  the  purchase, sale,  retention  and disposal  of
portfolio securities and the other investment practices of the Corporation at
all times are  consistent with the investment policies  and restrictions with
respect  to  securities  investments  and otherwise  of  the  Corporation, as
recited in  the Prospectus  of the Corporation  included in  the Registration
Statement  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.    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.


                                  ARTICLE IV

                                  COMMITTEES
                                  ----------

     Section 1.  Executive Committee.  The Board, by resolution adopted by
                 -------------------
a  majority  of  the  entire  board, may  designate  an  Executive  Committee
consisting  of  two  or more  of  the  directors  of the  corporation,  which
committee  shall have and may exercise all of 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, or the taking of  any other action required  to be taken by the
Board of Directors by the Investment Company Act;

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

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

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

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

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

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

     Section 3.  General.  One-third 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  she or  they constitute  a
quorum, unanimously  may 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 and Qualifications.  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 also may appoint such other officers,
agents and employees  as it may deem  necessary or proper.   Any two or  more
offices may be held  by the same person, except the offices  of President and
Vice  President, but  no officer  shall  execute, acknowledge  or verify  any
instrument in more than one capacity.   Such officers shall be elected by the
Board of Directors each year at a meeting of the  Board of Directors, each to
hold office for the  ensuing year and until  his or her successor  shall have
been duly  elected and shall  have qualified, or  until his or  her death, or
until he or  she shall have  resigned, or have  been removed, as  hereinafter
provided  in these  By-Laws.   The  Board from  time to  time may  elect 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.  The President also  shall have the power to
appoint  such  assistant  officers  (including one  or  more  Assistant  Vice
Presidents,  one or  more  Assistant  Treasurers and  one  or more  Assistant
Secretaries) as may be necessary  or appropriate to facilitate the management
of  the Corporation's  affairs.   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,  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 or  her
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  or her 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  or  she  shall  preside  at  all  meetings  of  the
stockholders and of the  Board Directors.  He  or she shall have,  subject to
the control  of the Board  of Directors, general  charge of the  business and
affairs  of the Corporation.    He or she  may employ and discharge employees
and agents  of the  Corporation, except  such as  shall be  appointed by  the
Board, and he or she may delegate these powers.

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

     Section 9.  Treasurer.  The Treasurer shall:
                 ---------
     (a)   have  charge and custody  of, and  be responsible for,  all of 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;

     (c)  cause all moneys and other valuables to  be deposited to the credit
of 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 of  the duties incident  to the office  of
Treasurer and such other duties  as from time to time may be  assigned to him
or her 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  of the duties  incident to the  office of
Secretary and such other duties as from  time to time may be assigned to  him
or her by the Board or the President.

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

                                  ARTICLE VI

                               INDEMNIFICATION
                               ---------------

     Section 1.   General 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  or her
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 or her office, the decision by the Corporation
to indemnify such person  must be based upon the  reasonable determination of
independent  legal counsel  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,  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
or her 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 or her in
connection with proceedings to which he or  she 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  or her  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 or her undertaking; (b) the Corporation is insured against losses arising
by reason of the advance; (c) a majority of a quorum of non-party independent
directors,  or   independent  legal  counsel  in  a  written  opinion,  shall
determine, based on a review of facts readily available to the Corporation at
the time the advance is proposed to be  made, that there is reason to believe
that  the person  seeking  indemnification  will ultimately  be  found to  be
entitled to indemnification.

     The  Corporation may  purchase  insurance  on behalf  of  an officer  or
director  protecting such  person  to  the full  extent  permitted under  the
General Laws of the State of Maryland, from liability arising from his or her
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 or her 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.

     Section 2.  Other Rights.  The indemnification provided by this Article
                 ------------
VI  shall  not  be  deemed  exclusive  of  any other  right,  in  respect  of
indemnification or otherwise, to which those seeking such indemnification may
be entitled under any insurance or other agreement, 
vote  of stockholders  or disinterested  directors or  otherwise, both  as to
action  by a director  or officer of  the Corporation in  his or her official
capacity and as  to action by such  person in another capacity  while holding
such office or position, and shall continue as to a person who  has ceased to
be a  director  or officer  and shall  inure  to the  benefit of  the  heirs,
executors and administrators of such person.

                                 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  or her,  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 sig-
nature  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 of the business and transactions
of the Corporation.  

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

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

     Section 5.  Lost, Destroyed or Mutilated Certificates.  The holder of
                 -----------------------------------------
any  certificates  representing  shares of  stock  of  the Corporation  shall
immediately notify the Corporation of  any loss, destruction or mutilation of
such certificate, and the Corporation may issue a new certificate of stock in
the place of any certificate theretofore issued by it which the owner thereof
shall allege  to  have been  lost or  destroyed  or which  shall  have   been
mutilated, and the Board, in its discretion, may require such owner or his or
her 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 90 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 or  her  agent may  inspect  and copy  during  usual
business hours the  Corporation's By-Laws, minutes of the  proceedings of its
stockholders, annual statements  of its affairs, and  voting trust agreements
on file at its principal office.

                                 ARTICLE VIII

                                    SEAL
                                    ----

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

                                  ARTICLE IX

                                 FISCAL YEAR
                                 -----------

     Unless  otherwise  determined by  the  Board,  the  fiscal year  of  the
Corporation shall end on the 31st day of December.


                                  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 from time to time may determine.

     Section 2.  Custodians.  All securities and other investments shall be
                 ----------
deposited in the safekeeping 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  safekeeping
of the securities and investments of the Corporation shall contain provisions
complying  with  the  Investment  Company  Act, 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  from time  to time  shall  designate by
resolution.

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

                                 ARTICLE XII

                        INDEPENDENT PUBLIC ACCOUNTANTS
                        ------------------------------

     The firm of  independent public accountants which shall  sign or certify
the  financial  statements  of  the  Corporation which  are  filed  with  the
Securities and Exchange Commission shall be selected annually by the Board of
Directors and, if required  by the provisions of the  Investment Company Act,
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 or her address as the
same appears on  the books of the  Corporation.  Such annual  statement shall
also be  available at any annual meeting of  stockholders and shall be placed
on file at the Corporation's 
principal office in the  State of Maryland, and if no annual  meeting is held
pursuant to Article II, Section 1, such  annual statement of affairs shall be
placed on file at  the Corporation's principal office  within 120 days  after
the end of  the Corporation's fiscal year.   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 also  shall 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, 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
affirmative vote of a majority of  the Board of Directors.  The  stockholders
shall have no power to make, amend, alter or repeal By-Laws.



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