MERRILL LYNCH GLOBAL GROWTH FUND INC, 485BPOS, 1998-03-06

MERRILL LYNCH GLOBAL GROWTH FUND INC
485BPOS, 1998-03-06

Previous: DURA PRODUCTS INTERNATIONAL INC, 4, 1998-03-06

Next: U S A FLORAL PRODUCTS INC, POS AM, 1998-03-06

<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 6, 1998

SECURITIES ACT FILE NO. 333-32899
INVESTMENT COMPANY ACT FILE NO. 811-8327

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

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

----------------
FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[X]

PRE-EFFECTIVE AMENDMENT NO.
[X]
POST-EFFECTIVE AMENDMENT NO. 1
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]

AMENDMENT NO. 2 [X]
(Check appropriate box or boxes)

----------------
MERRILL LYNCH GLOBAL GROWTH FUND, INC.
(Exact Name of Registrant as Specified in charter)
800 SCUDDERS MILL ROAD, 08536
PLAINSBORO, NEW JERSEY
(Address of Principal Executive (Zip Code)
Office)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (609) 282-2000

ARTHUR ZEIKEL
MERRILL LYNCH GLOBAL GROWTH 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: BROWN & WOOD LLP PHILIP L. KIRSTEIN, ESQ. MERRILL LYNCH
ONE WORLD TRADE CENTER NEW YORK, NEW ASSET MANAGEMENT P.O. BOX 9011
YORK 10048-0557 ATTENTION: JOHN A. PRINCETON, NEW JERSEY 08543-9011
MACKINNON, ESQ.
----------------

IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK
APPROPRIATE BOX):

[X] immediately upon filing pursuant to paragraph (b)

[_] on (date) pursuant to paragraph (b)

[_] 60 days after filing pursuant to paragraph (a)(1)

[_] on (date) pursuant to paragraph (a)(1)

[_] 75 days after filing pursuant to paragraph (a)(2)

[_] on (date) pursuant to paragraph (a)(2) of rule 485.

IF APPROPRIATE, CHECK THE FOLLOWING BOX:

[_] this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.

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

TITLE OF SECURITIES BEING REGISTERED: Shares of Common Stock, par value, $.10
per share.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

MERRILL LYNCH GLOBAL GROWTH FUND, INC.
REGISTRATION STATEMENT ON FORM N-1A

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

CROSS REFERENCE SHEET

<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
- ----------- --------
PART A

<C> <S> <C>
Item 1. Cover Page................ Cover Page
Item 2. Synopsis.................. Fee Table
Condensed Financial
Item 3. 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 SM System; Fee Table;
Purchase of Shares; Shareholder
Services; Additional Information;
Inside Back Cover Page
Item 8. Redemption or Repurchase.. Merrill Lynch Select Pricing SM
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...... Financial Statements
</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.
<PAGE>

PROSPECTUS

MARCH 6, 1998

MERRILL LYNCH GLOBAL GROWTH FUND, INC.
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 . PHONE NO. (609) 282-2800

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

Merrill Lynch Global Growth Fund, Inc. (the "Fund") is a diversified, open-
end management investment company that seeks to provide shareholders with
long-term growth of capital. The Fund will seek to achieve its investment
objective by investing in a diversified portfolio of equity securities of
issuers located in various foreign countries and the United States, placing
particular emphasis on companies that have exhibited above-average growth
rates in earnings. The Fund may employ a variety of techniques, including
derivative investments, to hedge against market and currency risk, to enhance
total return or to gain exposure to equity markets. The Fund should be
considered as a means of diversifying an investment portfolio and not in
itself a balanced investment program. There can be no assurance that the
Fund's investment objective will be achieved. For more information on the
Fund's investment objective and policies, see "Investment Objective and
Policies" on page 13.

Investments on an international basis in foreign securities markets involve
risks and special considerations not typically associated with investments in
securities of United States issuers. See "Risk Factors and Special
Considerations."

Pursuant to the Merrill Lynch Select Pricing SM 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 SM 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 SM System" on page 3.

Shares may be purchased directly from Merrill Lynch Funds Distributor, Inc.
(the "Distributor"), P.O. Box 9081, Princeton, New Jersey 08543-9081 [(609)
282-2800], and other securities dealers that have entered into selected dealer
agreements with the Distributor, including Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch"). To permit the Fund to invest the net
proceeds from the sale of its shares in an orderly manner, the Fund may, from
time to time, suspend the sale of its shares, except for dividend
reinvestments. The minimum initial purchase is $1,000, and 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. Merrill Lynch may charge its
customers a processing fee (presently $5.35) for confirming purchases and
repurchases. Purchases and redemptions made directly through Merrill Lynch
Financial Data Services, Inc. (the "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 ACCU-
RACY 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 March 6, 1998 (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, L.P. -- MANAGER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC. -- DISTRIBUTOR
<PAGE>

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
original purchase
price or redemption 4.0% during the first year,
proceeds, whichever is decreasing 1.0% annually 1.0% for one
lower)................ None(d) to 0.0% after the 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)............... 0.75% 0.75% 0.75% 0.75%
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(i):
Shareholder Servicing
Costs(j).............. 0.08% 0.10% 0.10% 0.08%
Other.................. 0.11% 0.11% 0.11% 0.11%
----- ----- ----- -----
Total Other Expenses... 0.19% 0.21% 0.21% 0.19%
----- ----- ----- -----
Total Fund Operating
Expenses............... 0.94% 1.96% 1.96% 1.19%
===== ===== ===== =====
</TABLE>
- --------

(a) Class A shares are sold to a limited group of investors including existing
Class A shareholders, certain retirement plans and participants in certain
fee-based programs. See "Purchase of Shares--Initial Sales Charge
Alternatives--Class A and Class D Shares" on page 24 and "Shareholder
Services--Fee-Based Programs" on page 36.

(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 26.

(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 24.

(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 36.

(e) The CDSC may be modified in connection with certain fee-based programs.
See "Shareholder Services--Fee-Based Programs" on page 36.

(f) The CDSC may be waived in connection with certain fee-based programs. See
"Shareholder Services--Fee-Based Programs" on page 36.

(g) See "Management of the Fund--Management and Advisory Arrangements" on
page 20.

(h) See "Purchase of Shares--Distribution Plans" on page 29.

(i) Information under "Other Expenses" is estimated for the Fund's first
fiscal year ending August 31, 1998.

(j) See "Management of the Fund--Transfer Agency Services" on page 21.

2
<PAGE>

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................................................ $62 $81
Class B................................................ $60 $82
Class C................................................ $30 $62
Class D................................................ $64 $88
An investor would pay the following expenses on the same
$1,000 investment assuming no redemption at the end of
the period:
Class A................................................ $62 $81
Class B................................................ $20 $62
Class C................................................ $20 $62
Class D................................................ $64 $88
</TABLE>
- --------

* Assumes conversion of Class B shares to Class D shares approximately eight
years after initial purchase.

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 for the Fund's first fiscal year ending August 31, 1998 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 SM SYSTEM

The Fund offers four classes of shares under the Merrill Lynch Select
Pricing SM 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 SM 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 SM System are referred to herein as "MLAM-advised
mutual funds."

3
<PAGE>

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, 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.

The following table sets forth a summary of the distribution arrangements
for each class of shares under the Merrill Lynch Select PricingSM 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 PricingSM 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>
A Maximum 5.25% initial No No No
sales charge(/2/)(/3/)
- -----------------------------------------------------------------------------------------
B CDSC for a period of four 0.25% 0.75% B shares convert to
years, at a rate of 4.0% during D shares automatically
the first year, decreasing 1.0% after approximately
annually to 0.0%(/4/) eight years(/5/)
- -----------------------------------------------------------------------------------------
C 1.0% CDSC for one year(/6/) 0.25% 0.75% No
- -----------------------------------------------------------------------------------------
D Maximum 5.25% initial 0.25% No No
sales charge(/3/)
</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."

(Footnotes continued on next page)

4
<PAGE>

(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 $1,000,000
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
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 is 5.25%, which 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 instead 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 the Class B shares, as well as 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

5
<PAGE>

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 for certain
retirement plans is 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 the 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 is 5.25%,
which 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 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
PricingSM 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 that may qualify the investor for reduced

6
<PAGE>

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."

7
<PAGE>

FINANCIAL HIGHLIGHTS

The financial information in the table below is unaudited. Unaudited
financial statements for the fiscal period October 31, 1997 (commencement of
operations) to December 31, 1997, are included in the Statement of Additional
Information.

The following per share data and ratios have been derived from information
provided in the Fund's unaudited financial statements.

<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 31, 1997+ TO DECEMBER 31, 1997
-------------------------------------------------
CLASS A CLASS B CLASS C CLASS D
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning
of period................ $ 10.00 $ 10.00 $ 10.00 $ 10.00
-------- --------- --------- ---------
Investment income (loss)--
net...................... .02 .00++ .00++ .01
Realized and unrealized
gain (loss) on
investments and foreign
currency
transactions--net........ (.01) (.01) (.01) .00++
-------- --------- --------- ---------
Total from investment
operations............... .01 (.01) (.01) .01
-------- --------- --------- ---------
Less dividends and
distributions:
Investment income--net... -- -- -- --
In excess of investment
income--net............. -- -- -- --
-------- --------- --------- ---------
Total dividends and
distributions............ -- -- -- --
-------- --------- --------- ---------
Net asset value, end of
period................... $ 10.01 $ 9.99 $ 9.99 $ 10.01
======== ========= ========= =========
TOTAL INVESTMENT RETURN:*
Based on net asset value
per share................ 0.10%# (0.10%)# (0.10%)# 0.10%#
======== ========= ========= =========
RATIOS TO AVERAGE NET
ASSETS:
Expenses.................. .94%** 1.96%** 1.96%** 1.19%**
======== ========= ========= =========
Investment income (loss)--
net...................... .98%** (.03%)** (.02%)** .75%**
======== ========= ========= =========
SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands)........... $ 32,985 $ 943,188 $ 189,768 $ 173,898
======== ========= ========= =========
Portfolio turnover........ 3.81% 3.81% 3.81% 3.81%
======== ========= ========= =========
Average commission rate
paid##................... $ .0327 $ .0327 $ .0327 $ .0327
======== ========= ========= =========
</TABLE>
- --------

+ Commencement of operations.

++ Amount is less than $.01 per share.

* Total investment returns exclude the effect of sales loads.

** Annualized.

# Aggregate total investment return.

## Includes commissions paid in foreign currencies, which have been converted
into U.S. dollars using the prevailing exchange rate on the date of the
transaction. Such conversions may significantly affect the rate shown.

8
<PAGE>

RISK FACTORS AND SPECIAL CONSIDERATIONS

GENERAL

Because a substantial portion of the Fund's assets may be invested in
securities of non-U.S. issuers, an investor in the Fund should be aware of
certain risk factors and special considerations relating to international
investing, which may involve risks that are not typically associated with
investments in securities of U.S. issuers. 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. The Fund should be considered as a means of diversifying an investment
portfolio and not in itself a balanced investment program.

INVESTING ON AN INTERNATIONAL BASIS

Specific Risks. Investing on an international basis involves certain risks
not 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. Since
the Fund invests heavily in securities denominated or quoted in currencies
other than the U.S. dollar, changes in foreign currency exchange rates will
affect the value of securities in the Fund and the unrealized appreciation or
depreciation of investments. Currencies of certain countries may be volatile
and therefore may affect the value of securities denominated in such
currencies. 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. Moreover, individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product, rates of inflation, capital reinvestment, resources, self-sufficiency
and balance of payments position. Certain foreign investments also may be
subject to foreign withholding taxes. These risks often are heightened for
investments in smaller, emerging capital markets.

As a result of these potential risks, the Manager may determine that,
notwithstanding otherwise favorable investment criteria, it may not be
practicable or appropriate to invest in a particular country. The Fund may
invest in countries in which foreign investors, including the Manager, have had
no or limited prior experience.

Public Information. Many of the securities held by the Fund will not be
registered with the Commission, nor will 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. As a
result, traditional investment measurements, such as price/earnings ratios, as
used in the United States, may not be applicable to certain smaller, emerging
foreign capital markets. Foreign issuers, and issuers in smaller, emerging
capital markets in particular, generally are not subject to uniform accounting,
auditing and financial reporting standards or to practices and requirements
comparable to those applicable to domestic issuers.

Trading Volume, Clearance and Settlement. Foreign financial markets, while
often growing in trading volume, have, for the most part, substantially less
volume than U.S. markets, and securities of many foreign companies are less
liquid and their prices may be more volatile than securities of comparable
domestic

9
<PAGE>

companies. Foreign markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
failed to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Further, satisfactory custodial
services for investment securities may not be available in some countries
having smaller, emerging capital markets, which may result in the Fund
incurring additional costs and delays in transporting and custodying such
securities outside such countries. Delays in settlement could result in periods
when assets of the Fund are uninvested and no return is earned thereon. The
inability of the Fund to make intended security purchases due to settlement
problems or the risk of intermediary counterparty failures could cause the Fund
to miss attractive investment opportunities. 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.

Depositary Receipts. The Fund may purchase sponsored or unsponsored American
Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") and Global
Depositary Receipts ("GDRs") (collectively, "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. In addition, the issuers of the
securities underlying unsponsored Depositary 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. Depositary Receipts also involve the risks of other investments in
foreign securities, as discussed above.

Restrictions on Foreign Investment. Some countries prohibit or impose
substantial restrictions on investments in their capital markets, particularly
their equity markets, by foreign entities such as the Fund. As illustrations,
certain countries require governmental approval prior to investments by foreign
persons, or limit the amount of investment by foreign persons in a particular
company, or limit the investment by foreign persons in a company to only a
specific class of securities that may have less advantageous terms than
securities of the company available for purchase by nationals. Certain
countries may restrict investment opportunities in issuers or industries deemed
important to national interests.

A number of countries have authorized the formation of closed-end investment
companies to facilitate indirect foreign investment in their capital markets.
In accordance with the Investment Company Act of 1940, as amended (the
"Investment Company Act"), the Fund may invest up to 10% of its total assets in
securities of closed-end investment companies, not more than 5% of which may be
invested in any one such company. This restriction on investments in securities
of closed-end investment companies may limit opportunities for the Fund to
invest indirectly in certain smaller capital markets. Shares of certain closed-
end investment companies may at times be acquired only at market prices
representing premiums to their net asset values. If the Fund acquires

10
<PAGE>

shares in closed-end investment companies, shareholders would bear both their
proportionate share of expenses in the Fund (including investment advisory
fees) and, indirectly, the expenses of such closed-end investment companies.
The Fund also may seek, at its own cost, to create its own investment entities
under the laws of certain countries.

In some countries, banks or other financial institutions may constitute a
substantial number of the leading companies or companies with the most actively
traded securities. The Investment Company Act limits the Fund's ability to
invest in any equity security of an issuer which, in its most recent fiscal
year, derived more than 15% of its revenues from "securities related
activities," as defined by the rules thereunder. These provisions may also
restrict the Fund's investments in certain foreign banks and other financial
institutions.

Foreign Sub-custodians and Securities Depositories. Rules adopted under the
Investment Company Act permit the Fund to maintain its foreign securities and
cash in the custody of certain eligible non-U.S. banks and securities
depositories. Certain banks in foreign countries may not be eligible sub-
custodians for the Fund, in which event the Fund may be precluded from
purchasing securities in certain foreign countries in which it otherwise would
invest or the Fund may incur additional costs and delays in providing
transportation and custody services for such securities outside of such
countries. The Fund may encounter difficulties in effecting on a timely basis
portfolio transactions with respect to any securities of issuers held outside
their countries. Other banks that are eligible foreign sub-custodians may be
recently organized or otherwise lack extensive operating experience. In
addition, in certain countries there may be legal restrictions or limitations
on the ability of the Fund to recover assets held in custody by foreign sub-
custodians in the event of the bankruptcy of the sub-custodian.

BORROWING

The Fund may borrow up to 33 1/3% of its total assets (including the amount
borrowed), 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.

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. The Fund may engage in these transactions
for hedging purposes to enhance total return or to gain exposure to equity
markets.

Transactions involving options, futures and options on futures or currencies
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--Other Investment Policies

11
<PAGE>

and Practices--Portfolio Strategies Involving Options, Futures and Foreign
Exchange Transactions" and the Appendix 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 14.

WITHHOLDING AND OTHER TAXES

Income and capital gains on securities held by the Fund may be subject to
withholding and other taxes imposed by certain jurisdictions, which would
reduce the return to the Fund on those securities. The Fund intends, unless
ineligible, to elect to "pass-through" to the Fund's shareholders the amount of
foreign taxes paid by the Fund. The taxes passed through to shareholders will
be included in each shareholder's income and could potentially be offset by
either a deduction or a credit. Certain shareholders, including non-U.S.
shareholders, will not be entitled to the benefit of a deduction or credit with
respect to foreign taxes paid by the Fund. Non-U.S. shareholders may
nevertheless be subject to withholding tax on the foreign taxes included in
their income. Other taxes, such as transfer taxes, may be imposed on the Fund,
but would not give rise to a credit or deduction for shareholders.

FEES AND EXPENSES

The management fee (at the annual rate of 0.75% of the Fund's average daily
net assets) and other operating expenses of the Fund may be higher than the
management fees and operating expenses of other mutual funds managed by the
Manager and other investment advisers or of investment companies investing
exclusively in the securities of U.S. issuers. The management fees and
operating expenses, however, are believed by the Manager to be comparable to
expenses of other open-end management investment companies that invest on a
global basis with investment objectives similar to the investment objective of
the Fund.

12
<PAGE>

INVESTMENT OBJECTIVE AND POLICIES

The investment objective of the Fund is to seek long-term growth of capital.
The Fund will seek to achieve its investment objective by investing in a
diversified portfolio of equity securities of issuers located in various
foreign countries and the United States, placing particular emphasis on
companies that have exhibited above-average growth rates in earnings. There
can be no assurance that the investment objective of the Fund will be
realized. The investment objective of the Fund set forth in the first sentence
of this paragraph is a fundamental policy of the Fund which may not be changed
without a vote of a majority of its outstanding shares as defined below.

The Fund should be considered as a means of diversifying an investment
portfolio and not in itself a balanced investment program. 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.

Issuers may achieve above-average growth rates in earnings from a variety of
factors including, but not limited to, above-average growth rates in sales,
profit margin improvement, proprietary or niche products or services, leading
market shares, and underlying strong industry growth. Management of the Fund
believes that companies which possess above-average earnings growth frequently
provide the prospect of above-average stock market returns, although such
companies tend to have higher relative stock market valuations. Emphasis also
will be given to companies having medium to large stock market capitalizations
($2 billion or more). Investment in companies with lower market
capitalizations, especially those under $1 billion, may involve special risks
including limited product lines, market or financial resources or a limited
management group. In addition, many smaller company stocks trade less
frequently and in smaller volume, and may be subject to more abrupt or erratic
price movements or may be more sensitive to market fluctuations, than stocks
of larger companies.

The Fund will emphasize investments in equity securities, primarily common
stock, and, to a lesser extent, securities convertible into common stock,
preferred stock, rights to subscribe for common stock and other investments
the return on which is determined by the performance of a common stock or a
basket or index of common stocks. Under normal market conditions, at least 65%
of the Fund's total assets will be invested in equity securities of issuers
from at least three different countries. The Fund reserves the right, as a
defensive measure and to provide for redemptions, to hold other types of
securities, including non-convertible preferred stocks and debt securities
rated investment grade by a nationally recognized statistical rating
organization, U.S. Government and money market securities, including
repurchase agreements, or cash, in such proportions as, in the opinion of the
Manager, prevailing market or economic conditions warrant.

DESCRIPTION OF CERTAIN INVESTMENTS

Temporary Investments. The Fund reserves the right, as a temporary defensive
measure, to hold in excess of 35% of its total assets in cash or cash
equivalents in U.S. dollars or foreign currencies and investment grade, short-
term securities including money market securities denominated in U.S. dollars
or foreign currencies ("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 fully 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.

13
<PAGE>

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 that evidence ownership of underlying securities issued by a
foreign corporation. EDRs are receipts issued in Europe that evidence a
similar ownership arrangement. GDRs are receipts issued throughout the world
that 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
Depositary 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.

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.

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.

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 freely tradeable in their
primary markets offshore. The Board of Directors may adopt guidelines and
delegate to the Manager the daily function of determining and monitoring
liquidity of restricted

14
<PAGE>

securities. The Board of Directors, however, will retain sufficient oversight
and be ultimately responsible for the determinations. The Board of Directors
will carefully monitor the Fund's investments in these securities purchased
pursuant to Rule 144A, focusing on such factors, among others, as valuation,
liquidity and availability of information. Investment in these types of
securities could have the effect of increasing the level of illiquidity in the
Fund to the extent that qualified institutional buyers become for a time
uninterested in purchasing these securities.

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 the Appendix 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 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 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 or in a private placement in which Merrill Lynch serves as placement
agent except pursuant to procedures approved by the

15
<PAGE>

Board of Directors of the Fund that either comply with rules adopted by the
Commission or with interpretations of the Commission staff. 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 United
States, 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."

The Fund's ability and decisions to purchase and sell portfolio securities
may be affected by foreign laws and regulations relating to the convertibility
and repatriation of assets.

Lending of Portfolio Securities. The Fund, from time to time, may lend
securities from its portfolio, with a value not exceeding 33 1/3% of its total
assets, to banks, brokers and other financial institutions and receive
collateral in cash or securities issued or guaranteed by the U.S. Government,
which collateral is maintained at all times in an amount equal to at least
100% of the current market value of the loaned securities. This limitation is
a fundamental policy, and it may not be changed without the approval of the
holders of a majority of the Fund's outstanding voting securities, as defined
in the Investment Company Act. During the period of such a loan, the Fund
typically receives the income on both the loaned securities and the collateral
and thereby increases its yield. In certain circumstances, the Fund may
receive a flat fee. Such loans are terminable at any time, and the borrower,
after notice, will be required to return borrowed securities within five
business days. 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 the value of the collateral falls below the market
value of the borrowed securities.

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 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.

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

16
<PAGE>

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.

17
<PAGE>

although, to the extent the repurchase agreement is not denominated in U.S.
dollars, the Fund's return may be affected by currency fluctuations. In the
case of repurchase agreements, the prices 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.

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 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 33 1/3% (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

18
<PAGE>

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 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 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.

For purposes of the diversification requirements set forth above with
respect to regulated investment companies, and to the extent required by the
Commission, the Fund, as a non-fundamental policy, will consider securities
issued or guaranteed by the government of any one foreign country as the
obligations of a single issuer.

MANAGEMENT OF THE FUND

DIRECTORS

The Directors of the Fund consist of seven individuals, six 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*--Chairman of the Manager and its affiliate, FAM; Chairman and
Director of Princeton Services, Inc. ("Princeton Services"); and Executive
Vice President of ML & Co.

Donald Cecil--Special Limited Partner of Cumberland Partners (an investment
partnership).

M. Colyer Crum--Currently James R. Williston Professor of Investment
Management Emeritus, Harvard Business School.

Edward H. Meyer--Chairman of the Board of Directors, President and Chief
Executive Officer of Grey Advertising Inc.

Jack B. Sunderland--President and Director of American Independent Oil
Company, Inc. (an energy company).

J. Thomas Touchton--Managing Partner of The Witt-Touchton Company (a private
investment partnership).

Fred G. Weiss--Managing Director of FGW Associates; and Director of Noven
Corporation (a pharmaceutical company).
- --------
* Interested person, as defined by the Investment Company Act, of the Fund.

19
<PAGE>

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 100 registered
investment companies. The Manager also offers portfolio management services to
individuals and institutions. As of January 31, 1998, the Manager and FAM had
a total of approximately $287.0 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"). 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 and constantly
reviews the Fund's holdings in light of its own research analysis and that
from other relevant sources. 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.

The Manager receives for its services to the Fund monthly compensation at
the annual rate of 0.75% of the average daily net assets of the Fund. For the
period October 31, 1997 (commencement of operations) to December 31, 1997, the
fee paid by the Fund to the Manager was $1,632,926 (based on average daily net
assets of approximately $1.3 billion).

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.

Lawrence R. Fuller, Senior Vice President of the Fund, is the Fund's
Portfolio Manager. Mr. Fuller has been a First Vice President of the Manager
since 1997. Mr. Fuller was a Vice President of the Manager from 1992 to 1997
and is responsible for the day-to-day management of the Fund's investment
portfolio.

The Fund pays 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

20
<PAGE>

services on a semi-annual basis. For the period October 31, 1997 (commencement
of operations) to December 31, 1997, the Fund reimbursed the Manager $21,828
for accounting services. For the period October 31, 1997 (commencement of
operations) to December 31, 1997, the ratio of total expenses to average net
assets for Class A, Class B, Class C and Class D shares was 0.94%, 1.96%,
1.96% and 1.19%, respectively.

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 that
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

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 Transfer Agent receives 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 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 that 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. For the period October 31, 1997 (commencement of operations) to December
31, 1997, the Fund paid $202,972 to the Transfer Agent pursuant to the
Transfer Agency Agreement.

PURCHASE OF SHARES

The Distributor, an affiliate of each of the Manager, FAM, and Merrill
Lynch, acts as the distributor of the shares of the Fund. Shares of the Fund
are offered continuously for sale by the Distributor and other eligible

21
<PAGE>

securities dealers (including Merrill Lynch). 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 is $1,000, and the minimum
subsequent purchase is $50, except for retirement plans, for which 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 BlueprintSM Program. See "Purchase
of Shares--Merrill Lynch BlueprintSM Program" in the Statement of Additional
Information.

The Fund offers its shares in four classes 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 PricingSM
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 include
orders received after the close of business on the previous day, the
applicable offering price will be based on the net asset value determined as
of 15 minutes after the close of business on the NYSE on the day the orders
are placed with the Distributor, provided the Distributor receives the orders
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 on
that day, 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
PricingSM 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 PricingSM System is
set forth under "Merrill Lynch Select PricingSM 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

22
<PAGE>

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 shares 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 CDSCs 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 PricingSM System.

<TABLE>
<CAPTION>
ACCOUNT
MAINTENANCE DISTRIBUTION CONVERSION
CLASS SALES CHARGE(/1/) FEE FEE FEATURE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A Maximum 5.25% initial No No No
sales charge(/2/)(/3/)
- -------------------------------------------------------------------------------------------------
B CDSC for a period of four 0.25% 0.75% B shares convert to D shares
years, automatically after
at a rate of 4.0% during the approximately
first year, decreasing 1.0% eight years(/5/)
annually to 0.0%(/4/)
- -------------------------------------------------------------------------------------------------
C 1.0% CDSC for one year(/6/) 0.25% 0.75% No
- -------------------------------------------------------------------------------------------------
D Maximum 5.25% initial 0.25% No No
sales charge(/3/)
</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 "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.

(Footnotes continued on next page)

23
<PAGE>

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>
SALES CHARGE
AS DISCOUNT TO
SALES CHARGE AS PERCENTAGE* OF SELECTED DEALERS
PERCENTAGE OF THE NET AMOUNT AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE INVESTED THE OFFERING PRICE
- ------------------ --------------- -------------- ------------------
<S> <C> <C> <C>
Less than $25,000........... 5.25% 5.54% 5.00%
$25,000 but less than
$50,000.................... 4.75 4.99 4.50
$50,000 but less than
$100,000................... 4.00 4.17 3.75
$100,000 but less than
$250,000................... 3.00 3.09 2.75
$250,000 but less than
$1,000,000................. 2.00 2.04 1.80
$1,000,000 and over**....... 0.00 0.00 0.00
</TABLE>
- --------
* Rounded to the nearest one-hundredth percent.

** The initial sales charge may be waived on Class A and Class D share
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 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 charge is 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 million 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 the
Distributor and Merrill Lynch (pursuant to a sub-agreement) for providing
continuing account maintenance activities.

On September 10, 1997, the Fund commenced the public offering of Class A and
Class D shares. On October 28, 1997, the Fund completed the subscription
offering of its shares of Common Stock by issuing 2,652,387 Class A shares for
net proceeds to the Fund of $26,523,870, and 14,755,679 Class D shares for net
proceeds to the Fund of $147,556,789. There were no gross sales charges for
the sale of Class A shares of the Fund in the subscription offering. The gross
sales charges for the sale of Class D shares in the subscription offering were
$4,971,837, all of which were received by Merrill Lynch. For the period
October 31, 1997 (commencement of operations) to December 31, 1997, the Fund
sold 756,768 Class A shares for aggregate net proceeds of $7,528,278. The
gross sales charges for the sale of Class A shares of the Fund for that period
were $16, of which $1 and $15 were received by the Distributor and Merrill
Lynch, respectively. For that period, the Distributor received no CDSCs with
respect to redemptions within one year after purchase of Class A shares

24
<PAGE>

purchased subject to a front-end sales charge waiver. For the period October
31, 1997 (commencement of operations) to December 31, 1997, the Fund sold
3,231,347 Class D shares for aggregate net proceeds of $32,140,425. The gross
sales charges for the sale of Class D shares of the Fund for that period were
$354,004, of which $22,956 and $331,048 were received by the Distributor and
Merrill Lynch, respectively. For that period, the Distributor received no
CDSCs with respect to redemptions within one year after purchase of Class D
shares purchased subject to a front-end sales charge waiver.

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
BlueprintSM 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 investment
programs including TMASM 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 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 (for closed-end funds that commenced operations prior to
October 21, 1994). 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 SM 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

25
<PAGE>

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 assets 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 SM 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. On September 10, 1997, the Fund commenced the public offering of
Class B and Class C shares. On October 28, 1997, the Fund completed the
subscription offering of its shares of Common Stock by issuing 81,511,175
Class B shares for net proceeds to the Fund of $815,111,750 and 16,348,060
Class C shares for net proceeds to the Fund of $163,480,600. 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." The proceeds from the ongoing account maintenance fees
are used to compensate the Distributor and Merrill Lynch (pursuant to a sub-
agreement) for providing continuing account maintenance activities.

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. Approximately

26
<PAGE>

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. 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 after 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
PERCENTAGE OF
YEAR SINCE PURCHASE DOLLAR AMOUNT
PAYMENT MADE SUBJECT TO CHARGE
- ------------------- -----------------
<S> <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).

27
<PAGE>

For the period October 31, 1997 (commencement of operations) to December 31,
1997, the Distributor received CDSC's of $83,778 with respect to redemptions
of Class B shares, all of which were paid to Merrill Lynch. Additional CDSCs
payable to the Distributor may have been waived or converted to a contingent
obligation in connection with a shareholder's participation in certain fee-
based programs.

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
BlueprintSM 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 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.
The Class B CDSC is also waived for any Class B shares that are purchased
within qualifying Employee AccessSM Accounts. 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.

For the period October 31, 1997 (commencement of operations) to December 31,
1997, the Distributor received CDSCs of $8,806 with respect to redemptions of
Class C shares, all of which were paid to Merrill Lynch.

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.

28
<PAGE>

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.

29
<PAGE>

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.

For the period October 31, 1997 (commencement of operations) to December 31,
1997, the Fund paid the Distributor $1,528,435 pursuant to the Class B
Distribution Plan (based on average daily net assets subject to such Class B
Distribution Plan of approximately $899.8 million) all of which was paid to
Merrill Lynch for providing account maintenance and distribution-related
activities and services in connection with Class B shares. For the period
October 31, 1997 (commencement of operations) to December 31, 1997, the Fund
paid the Distributor $310,152 pursuant to the Class C Distribution Plan (based
on average daily net assets subject to such Class C Distribution Plan of
approximately $182.6 million) all of which was paid to Merrill Lynch for
providing account maintenance and distribution-related activities and services
in connection with Class C shares. For the period October 31, 1997
(commencement of operations) to December 31, 1997, the Fund paid the
Distributor $71,188 pursuant to the Class D Distribution Plan (based on
average daily net assets subject to such Class D Distribution Plan of
approximately $167.6 million) all of which was paid to Merrill Lynch for
providing account maintenance activities in connection with Class D 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.

Information about the fully allocated revenues and expenses incurred by the
Distributor and Merrill Lynch with respect to Class B and Class C shares as of
December 31, 1997 is not presented because such information is not yet
available. As of December 31, 1997, direct cash expenses for the period since
the commencement of operations of Class B shares exceeded direct cash revenues
by $10,093,700 (1.07% of Class B net assets at that

30
<PAGE>

date). As of December 31, 1997, direct cash expenses for the period since the
commencement of operations of Class C shares exceeded direct cash revenues by
$289,634 (0.15% of Class C net assets at that date).

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.

31
<PAGE>

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 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.

The foregoing 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 that 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.

32
<PAGE>

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 which 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 SM 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

33
<PAGE>

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.
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 SM 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.

34
<PAGE>

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(R), CBA(R) 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 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." 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."

35
<PAGE>

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(R) or
CBA(R) accounts may arrange to have periodic investments made in the Fund in
their CMA(R) or CBA(R) accounts or in certain related accounts in amounts of
$100 or more through the CMA(R) or CBA(R) 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.

36
<PAGE>

(assuming the shares are held as a capital asset). Recent legislation creates
additional categories of capital gains taxable at different rates. Generally
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, as well as the amount of
capital gain dividends in the different categories of capital gain referred to
above.

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. Shareholders may be
able to claim U.S. foreign tax credits with respect to such taxes, subject to
certain conditions and limitations contained in the Code. For example, certain
retirement accounts cannot claim foreign tax credits on investments in foreign
securities held in the Fund. In addition, recent legislation permits a foreign
tax credit to be claimed with respect to withholding tax on a dividend only if
the shareholder meets certain holding period requirements. If more than 50% in
value of the Fund's total assets at the close of its taxable year consists of
securities of foreign corporations, the Fund will be eligible, and intends, to
file an election with the Internal Revenue Service pursuant to which
shareholders of the Fund will be required to include their proportionate
shares of such withholding taxes in their U.S. income tax returns as gross
income, treat such proportionate shares as taxes paid by them, and deduct such
proportionate shares in computing their taxable incomes or, alternatively, use
them as foreign tax credits against their U.S. income taxes. In the case of
foreign taxes passed through by a RIC, the holding period requirements
referred to above must be met by both the shareholder and the RIC. No
deductions for foreign taxes, moreover, may be claimed by noncorporate
shareholders who do not itemize deductions. A shareholder that is a
nonresident alien individual or a foreign corporation may be subject to U.S.
withholding tax on the income resulting from the Fund's election described in
this paragraph but may not be able to claim a credit or deduction against such
U.S. tax for the foreign taxes treated as having been paid by such
shareholder. The Fund will report annually to its shareholders the amount per
share of such withholding taxes and other information needed to claim the
foreign tax credit.

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.

37
<PAGE>

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 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.

38
<PAGE>

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 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 and 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)

39
<PAGE>

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 Dow Jones
Industrial Average or performance data published by Lipper Analytical
Services, Inc. and Morningstar Publications, Inc., 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 capital gains, if any, are
distributed as dividends to the Fund's shareholders annually after the close
of the Fund's fiscal year. 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 to that class. See "Additional Information--
Determination of Net Asset Value." Dividends and distributions will be
automatically reinvested 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.

Gains or losses attributable to certain foreign currency transactions may
increase or decrease the amount of the Fund's income available for
distribution to shareholders. If such losses exceed other ordinary income
during a taxable year, (a) the Fund would not be able to make any ordinary
income dividend distributions and (b) all or a portion of distributions made
before the losses were realized but in the same taxable year would be
recharacterized as returns of capital to shareholders, rather than as ordinary
income dividends, thereby reducing

40
<PAGE>

each shareholder's tax basis in his or her Fund shares for Federal income tax
purposes and resulting in a capital gain for any shareholder who received a
distribution greater than the shareholder's tax basis in Fund shares (assuming
that the shares were held as a capital asset). For a detailed discussion of
the Federal tax considerations relevant to foreign currency transactions, see
"Additional Information--Taxes."

DETERMINATION OF NET ASSET VALUE

The net asset value of shares of all classes of the Fund is determined by
the Manager once daily, 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; in addition, 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 for long positions and
at the last available ask price for short positions. 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. Long positions in securities traded in the OTC market are
valued at the last available bid price in the OTC market prior to the time of
valuation. Short positions in securities traded in the OTC market are valued
at the last available ask 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 the 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 stated at market value.
Securities and assets for which market quotations are not readily available

41
<PAGE>

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 August 4, 1997. As of the
date of this Prospectus, the Fund has an authorized capital of 600,000,000
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. Class A, Class
C and Class D each consists of 100,000,000 shares and Class B consists of
300,000,000 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 at least 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.

42
<PAGE>

APPENDIX

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. However, the Fund will not
purchase options on securities if, as a result of such purchase, the aggregate
cost (option premiums paid) of all outstanding options on securities held by
the Fund would exceed 5% of the market value of the Fund's total assets.

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

43
<PAGE>

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 not write
covered call options on underlying securities in an amount exceeding 15% of
the market value of its assets.

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 call or 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 also 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

44
<PAGE>

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, including stock index
futures contracts and financial futures contracts, and 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 contracts 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 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 United
States 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.

45
<PAGE>

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 United States 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 United States 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 substantially 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 demonstrable 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.~ The Fund
will not incur potential net liabilities of more than 33 1/3% of its total
assets from Currency Instruments.

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.

46
<PAGE>

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

47
<PAGE>

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. In
particular, the Fund will engage in OTC Options, including OTC foreign
currency options and options on foreign currency futures, only with member
banks of the Federal Reserve System and primary dealers in U.S. Government
Securities or with affiliates of such banks or dealers that have capital of at
least $50 million or whose obligations are guaranteed by an entity having
capital of at least $50 million.

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.

48
<PAGE>

MERRILL LYNCH GLOBAL GROWTH FUND, INC.--AUTHORIZATION FORM (PART 1)
- -------------------------------------------------------------------------------
NOTE: THIS FORM MAY NOT BE USED FOR PURCHASES THROUGH THE MERRILL LYNCH
BLUEPRINTSM PROGRAM. YOU MAY REQUEST A MERRILL LYNCH BLUEPRINTSM 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 Global Growth 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.......................................................................
(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 One: [_] 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 Global Growth 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 ............................... Date...................
(if joint account, both must sign)
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.
- -------------------------------------------------------------------------------

49
<PAGE>

MERRILL LYNCH GLOBAL GROWTH FUND, INC.--AUTHORIZATION FORM (PART 1) --
(CONTINUED)
- -------------------------------------------------------------------------------

3. SOCIAL SECURITY NUMBER OR TAXPAYER IDENTIFICATION NUMBER
[ ]

Social Security Number or 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......
Date of Initial Purchase

Dear Sir/Madam:

Although I am not obligated to do so, I intend to purchase shares of Merrill
Lynch Global Growth 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 Global Growth
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 Global Growth 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
Branch Office, Address, Stamp 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.

- - - ....................................
Dealer Name and Address

By .................................
Authorized Signature of Dealer
This form when completed should be
mailed to: [ ][ ][ ] [ ][ ][ ][ ]
Branch-Code F/C No. ...............
Merrill Lynch Global Growth Fund, Inc. F/C Last Name
c/o Merrill Lynch Financial
Data Services, Inc. [ ][ ][ ] [ ][ ][ ][ ][ ]
P.O. Box 45289 Dealer's Customer Account No.
Jacksonville, FL 32232-5289

50
<PAGE>

MERRILL LYNCH GLOBAL GROWTH 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 Social Security Number or
Name Taxpayer Identification
Number

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 Global Growth 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
(month), or as soon as possible thereafter.

SPECIFY THE AMOUNT OF WITHDRAWAL YOU WOULD LIKE PAID TO YOU: $ of (check
one) [_] 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 SHOULD 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.

51
<PAGE>

MERRILL LYNCH GLOBAL GROWTH 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 Global Growth 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 SERVICES, INC. AUTHORIZATION TO HONOR ACH DEBITS
DRAWN BY MERRILL LYNCH FINANCIAL
You are hereby authorized to draw an DATA SERVICES, INC.
ACH debit each month on my bank
account for investment in Merrill To..........................Bank
Lynch Global Growth Fund, Inc. as (Investor's Bank)
indicated below:
Bank Address.....................
Amount of each check or ACH debit
$.................................
City....... State........ Zip....
Account Number ...................
As a convenience to me, I hereby
Please date and invest ACH debits on request and authorize you to pay
the 20th of each month beginning and charge to my account ACH
......(month) or as soon thereafter as debits drawn on my account by and
possible. payable to Merrill Lynch Financial
Data Services, Inc. I agree that
I agree that you are preparing these your rights in respect to each
ACH debits voluntarily at my request such debit shall be the same as if
and that you shall not be liable for it were a check drawn on you and
any loss arising from any delay in signed personally by me. This
preparing or failure to prepare any authority is to remain in effect
such debit. If I change banks or until revoked by me in writing.
desire to terminate or suspend this Until you receive such notice, you
program, I agree to notify you shall be fully protected in
promptly in writing. I hereby honoring any such debit. I further
authorize you to take any action to agree that if any such debit be
correct erroneous ACH debits of my dishonored, whether with or
bank account or purchases of fund without cause and whether
shares including liquidating shares intentionally or inadvertently,
of the Fund and crediting my bank you shall be under no liability.
account. I further agree that if a
debit is not honored upon ........ .......................
presentation, Merrill Lynch Financial Date Signature of Depositor
Data Services, Inc. is authorized to Depositor
discontinue immediately the Automatic
Investment Plan and to liquidate ........ .......................
sufficient shares held in my account Bank Signature of Depositor
to offset the purchase made with the Account (If joint account
dishonored debit. Number 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.

52
<PAGE>

(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>

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

State Street Bank and Trust Company

P.O. Box 351
225 Franklin Street
Boston, Massachusetts 02101

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

Ernst & Young LLP
202 Carnegie Center
Princeton, New Jersey 08543-5321

COUNSEL

Brown & Wood LLP
One World Trade Center
New York, New York 10048-0557
<PAGE>

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION WITH
THE OFFER CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER IN-
FORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE FUND, THE MANAGER OR THE DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTI-
TUTE AN OFFERING IN ANY STATE IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.

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

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fee Table.................................................................. 2
Merrill Lynch Select PricingSM System...................................... 3
Financial Highlights....................................................... 8
Risk Factors and Special Considerations.................................... 9
Investment Objective and Policies.......................................... 13
Description of Certain Investments........................................ 13
Other Investment Policies and Practices................................... 15
Investment Restrictions.................................................... 18
Management of the Fund..................................................... 19
Directors................................................................. 19
Management and Advisory Arrangements...................................... 20
Code of Ethics............................................................ 21
Transfer Agency Services.................................................. 21
Purchase of Shares......................................................... 21
Initial Sales Charge Alternatives--
Class A and Class D Shares............................................... 24
Deferred Sales Charge Alternatives--
Class B and Class C Shares............................................... 26
Distribution Plans........................................................ 29
Limitations on the Payment of Deferred Sales Charges...................... 31
Redemption of Shares....................................................... 31
Redemption................................................................ 32
Repurchase................................................................ 32
Reinstatement Privilege--Class A and Class D Shares....................... 33
Shareholder Services....................................................... 33
Investment Account........................................................ 33
Exchange Privilege........................................................ 34
Automatic Reinvestment of Dividends and Capital Gains Distributions....... 35
Systematic Withdrawal Plans............................................... 35
Automatic Investment Plans................................................ 36
Fee-Based Programs........................................................ 36
Taxes...................................................................... 36
Performance Data........................................................... 39
Additional Information..................................................... 40
Dividends and Distributions............................................... 40
Determination of Net Asset Value.......................................... 41
Organization of the Fund.................................................. 42
Shareholder Reports....................................................... 42
Shareholder Inquiries..................................................... 42
Appendix................................................................... 43
Authorization Form......................................................... 49
</TABLE>

Code #19012-0398

[LOGO] MERRILL LYNCH

Merrill Lynch
Global Growth Fund, Inc.

[ART]

PROSPECTUS

March 6, 1998

Distributor:
Merrill Lynch
Funds Distributor, Inc.

This prospectus should be retained for future reference.
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

MERRILL LYNCH GLOBAL GROWTH FUND, INC.
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 . PHONE NO. (609) 282-2800

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

Pursuant to the Merrill Lynch Select PricingSM 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 PricingSM 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 March 6,
1998 (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 March 6, 1998.
<PAGE>

INVESTMENT OBJECTIVE AND POLICIES

The investment objective of the Fund is to seek long-term growth of capital.
The Fund will seek to achieve its investment objective by investing in a
diversified portfolio of equity securities of issuers located in various
foreign countries and the United States, placing particular emphasis on
companies that have exhibited above-average growth rates in earnings. The Fund
may employ a variety of techniques, including derivative investments, to hedge
against market and currency risk, to enhance total return or to gain exposure
to equity markets. The Fund should be considered as a means of diversifying an
investment portfolio and not in itself a balanced investment program. There
can be no assurance that the Fund's investment objective will be achieved.

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 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. For the period October 31, 1997
(commencement of operations) to December 31, 1997, the Fund's portfolio
turnover rate was 3.81%. 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. 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 the Appendix in the Prospectus.

OTHER INVESTMENT POLICIES AND PRACTICES

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.

2
<PAGE>

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.

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

3
<PAGE>

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, which
collateral is 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,
for example 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
of 1940, as amended (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. Make any investment inconsistent with the Fund's classification as a
diversified company under the Investment Company Act.

2. 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.

4
<PAGE>

3. 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.

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

5. Make loans to other persons, except that the acquisition of bonds,
debentures or other corporate debt securities and investment in government
obligations, commercial paper, pass-through instruments, certificates of
deposit, bankers' acceptances 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.

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

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

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

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

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.

5
<PAGE>

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 (7) 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 33 1/3% (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.

6
<PAGE>

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 (2), 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 subject to material legal restrictions on repatriation of assets.

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.

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)--Chairman of the Manager
and Fund Asset Management, L.P. ("FAM") (which terms as used herein include
their corporate predecessors) since 1997; President of the Manager and FAM
from 1977 to 1997; Chairman of Princeton Services, Inc. ("Princeton Services")
since 1997, and Director thereof since 1993; President of Princeton Services
from 1993 to 1997; Executive Vice President of Merrill Lynch & Co., Inc. ("ML
& Co.") since 1990.

Donald Cecil (71)--Director(2)--1114 Avenue of the Americas, New York, New
York 10036. Special Limited Partner of Cumberland Partners (an investment
partnership) since 1982; Member of Institute of Chartered Financial Analysts;
Member and Chairman of Westchester County (N.Y.) Board of Transportation.

M. Colyer Crum (65)--Director(2)--Soldiers Field Road, Boston, Massachusetts
02163. Currently James R. Williston Professor of Investment Management
Emeritus, Harvard Business School; James R. Williston Professor of Investment
Management, Harvard Business School, from 1971 to 1996; Director of Cambridge
Bancorp, Copley Properties, Inc. and Sun Life Assurance Company of Canada.

Edward H. Meyer (71)--Director(2)--777 Third Avenue, New York, New York
10017. President of Grey Advertising Inc. since 1968, Chief Executive Officer
since 1970 and Chairman of the Board of Directors since 1972; Director of The
May Department Stores Company, Bowne & Co., Inc. (financial printers), Harman
International Industries, Inc. and Ethan Allen Interiors, Inc.

Jack B. Sunderland (69)--Director(2)--P.O. Box 7, West Cornwall, Connecticut
06796. President and Director of American Independent Oil Company, Inc. (an
energy company) since 1987; Member of Council on Foreign Relations since 1971.

7
<PAGE>

J. Thomas Touchton (59)--Director(2)--Suite 3405, One Tampa City Center, 201
North Franklin Street, Tampa, Florida 33602. Managing Partner of The Witt-
Touchton Company and its predecessor The Witt Co. (a private investment
partnership) since 1972; Trustee Emeritus of Washington and Lee University;
Director of TECO Energy, Inc. (an electric utility holding company).

Fred G. Weiss (56)--Director(2)--5141 Via de Amalfi Drive, Boca Raton,
Florida 33496. Managing Director of FGW Associates since 1997; Director of
Noven Corporation (a pharmaceutical company); Vice President, Planning,
Investment, and Development of Warner-Lambert Co. from 1979 to 1997.

Terry K. Glenn (57)--Executive Vice President(1)(2)--Executive Vice
President of Merrill Lynch Funds Distributor, Inc. ("MLFD" or the
"Distributor") the Manager and FAM since 1983; President of Merrill Lynch
Funds Distributor, Inc. ("MLFD" or the "Distributor") since 1986 and Director
thereof since 1991; Executive Vice President and Director of Princeton
Services since 1993; President of Princeton Administrators, L.P. since 1988.

Norman R. Harvey (64)--Senior Vice President(1)(2)--Senior Vice President of
the Manager and FAM since 1982; Senior Vice President of Princeton Services
since 1993.

Lawrence R. Fuller (56)-- Senior Vice President(1)--First Vice President of
the Manager since 1997; Vice President of the Manager from 1992 to 1997;
Senior Vice President and Director of Benefit Capital Management from 1984 to
1992.

Donald C. Burke (37)--Vice President(1)(2)--First Vice President of the
Manager since 1997; Vice President of the Manager from 1990 to 1997; and
Director of Taxation of the Manager since 1990.

Gerald M. Richard (48)--Treasurer(1)(2)--Senior Vice President and Treasurer
of the Manager and FAM since 1984; Senior Vice President and Treasurer of
Princeton Services since 1993; Vice President of the Distributor since 1981
and Treasurer thereof since 1984.

Philip M. Mandel (50)--Secretary(1)(2)-- First Vice President of the Manager
since 1997; Assistant General Counsel of Merrill Lynch from 1989 to 1997.
- --------
(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 February 2, 1998, the officers and Directors of the Fund as a group (13
persons) owned an aggregate of less than 1% of the outstanding shares of the
Fund and 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 $3,500 per year plus $500 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 $2,500 per year. The Chairman of the
Committee receives an additional $1,000 annually. Fees and expenses paid to
non-

8
<PAGE>

affiliated Directors aggregated $43,400 for the period October 31, 1997
(commencement of operations) to December 31, 1997.

The following table sets forth for the period October 31, 1997 (commencement
of operations) to December 31, 1997 compensation paid by the Fund to the non-
affiliated Directors, and for the calendar year ended December 31, 1997 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.
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
FROM FUND AND
MLAM/FAM-
PENSION OR RETIREMENT ADVISED
COMPENSATION BENEFITS ACCRUED AS FUNDS PAID TO
NAME OF DIRECTOR FROM FUND PART OF FUND EXPENSES DIRECTORS(1)
---------------- ------------ --------------------- -------------
<S> <C> <C> <C>
Donald Cecil.................................... $8,000 None $275,850
M. Colyer Crum.................................. 7,000 None 115,600
Edward H. Meyer................................. 7,000 None 222,100
Jack B. Sunderland.............................. 7,000 None 132,600
J. Thomas Touchton.............................. 6,500 None 132,100
Fred G. Weiss(2)................................ 0 None 0
</TABLE>
- --------

(1) The Directors serve on the boards of MLAM/FAM-Advised Funds as follows: Mr.
Cecil (33 registered investment companies consisting of 33 portfolios); Mr.
Crum (15 registered investment companies consisting of 15 portfolios); Mr.
Meyer (33 registered investment companies consisting of 33 portfolios); Mr.
Sunderland (18 registered investment companies consisting of 30
portfolios); Mr. Touchton (18 registered investment companies consisting of
30 portfolios); and Mr. Weiss (15 registered investment companies
consisting of 15 portfolios).

(2) Mr. Weiss was elected a Director of the Fund on February 3, 1998.

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 0.75% of the average daily net assets of the Fund. For the period October
31, 1997 (commencement of operations) to December 31, 1997, the total advisory
fees payable by the Fund to the Manager aggregated $1,632,926. For the period
October 31, 1997 (commencement of operations) to December 31, 1997, the Fund
reimbursed the Manager $21,828 for accounting services.

9
<PAGE>

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
PricingSM 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

10
<PAGE>

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 SM 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 SM 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

For the period October 31, 1997 (commencement of operations) to December 31,
1997, the Fund sold its Class A shares and Class D shares through the
Distributor and Merrill Lynch, as selected dealer. The gross sales charges for
the sale of Class A shares of the Fund for that period were $16, of which $1
and $15 were received by the Distributor and Merrill Lynch, respectively. For
that period, the Distributor received no CDSCs with respect to redemptions
within one year after purchase of Class A shares purchased subject to a front-
end sales charge waiver. The gross sales charges for the sale of Class D
shares of the Fund for that period were $354,004, of which $22,956 and
$331,048 were received by the Distributor and Merrill Lynch, respectively. For
that period, the Distributor received no CDSCs with respect to redemptions
within one year after purchase of Class D shares purchased subject to a front-
end sales charge waiver.

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 that 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.

11
<PAGE>

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 SM 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.

12
<PAGE>

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 SM Program. Class D shares of the Fund are offered
to participants in the Merrill Lynch Blueprint SM 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

13
<PAGE>

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 SM Program, P.O. Box 30441, New Brunswick, New Jersey 08989-0441.

Employee Access SM Accounts. Provided applicable threshold requirements are
met, either Class A or Class D shares are offered at net asset value to
Employee Access SM 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

14
<PAGE>

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 SM Managed Trusts. Class A shares are offered to TMA SM 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.

15
<PAGE>

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.

The following table sets forth comparative information for the period
October 31, 1997 (commencement of operations) to November 30, 1997, with
respect to the Class B and Class C shares of the Fund indicating the

16
<PAGE>

maximum allowable payments that can be made under the NASD maximum sales
charge rule and, with respect to Class B shares, the Distributor's voluntary
maximum.

<TABLE>
<CAPTION>
DATA CALCULATED FOR THE PERIOD OCTOBER 31, 1997
(COMMENCEMENT OF OPERATIONS) TO NOVEMBER 30, 1997
---------------------------------------------------------------------------------
ALLOWABLE ALLOWABLE AMOUNTS ANNUAL
ELIGIBLE AGGREGATE INTEREST MAXIMUM PREVIOUSLY AGGREGATE DISTRIBUTION
GROSS SALES ON UNPAID AMOUNT PAID TO UNPAID FEE AT CURRENT
SALES(1) CHARGES BALANCE(2) PAYABLE DISTRIBUTOR(3) BALANCE NET ASSET LEVEL(4)
-------- --------- ---------- ------- -------------- --------- ------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS B SHARES:
Under NASD Rule
as Adopted............. $872,561 $54,535 $ 11 $54,546 $532 $54,014 $6,733
Under Distributor's
Voluntary Waiver....... $872,561 $54,265 $4,632 $58,897 $532 $58,365 $6,733
CLASS C SHARES:
Under NASD Rule
as Adopted............. $184,766 $11,548 $ 42 $11,590 $104 $11,486 $1,371
</TABLE>
- --------

(1) Purchase price of all eligible Class B or Class C shares sold during the
period indicated other than shares acquired through dividend reinvestment
and the exchange privilege.

(2) Interest is computed on a monthly basis based upon the prime rate, as
reported in The Wall Street Journal, plus 1%, as permitted under the NASD
Rule.

(3) Consists of CDSC payments, distribution fee payments and accruals. See
"Purchase of Shares--Distribution Plans" in the Prospectus. This figure
may include CDSCs that were deferred when a shareholder redeemed shares
prior to the expiration of the applicable CDSC period and invested the
proceeds, without the imposition of a sales charge, in Class A shares in
conjunction with the shareholder's participation in the Merrill Lynch
Mutual Fund Advisor (Merrill Lynch MFA/SM/) Program (the "MFA Program").
The CDSC is booked as a contingent obligation that may be payable if the
shareholder terminates participation in the MFA program.

(4) Provided to illustrate the extent to which the current level of
distribution fee payments (not including any CDSC payments) is amortizing
the unpaid balance. No assurance can be given that payments of the
distribution fee will reach either the NASD maximum or, with respect to
Class B shares, the voluntary maximum.

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.

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 any such time.

17
<PAGE>

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 59 1/2 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. For the period
October 31, 1997 (commencement of operations) to December 31, 1997, the
Distributor received CDSCs of $83,778 with respect to redemptions of Class B
shares, and $8,806 with respect to redemptions of Class C shares, all of which
were paid to Merrill Lynch. Additional CDSCs payable to the Distributor with
respect to Class B shares may have been waived or converted to a contingent
obligation in connection with a shareholder's participation in certain fee-
based programs.

Merrill Lynch Blueprint SM Program. Class B shares are offered to certain
participants in the Blueprint SM 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
BlueprintSM 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 the 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

18
<PAGE>

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.

For the period October 31, 1997 (commencement of operations) to December 31,
1997, the Fund paid total brokerage commissions of $1,366,145, of which
$11,396 or 0.83% was paid to Merrill Lynch for effecting 0.55% of the
aggregate dollar amount of transactions in which the Fund paid brokerage
commissions.

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. 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 or in a private placement in which Merrill Lynch serves as
placement agent except pursuant to procedures approved by the Board of
Directors of the Fund that either comply with rules adopted by the Commission
or with interpretations of the Commission staff. 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

19
<PAGE>

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 that 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 possible 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. 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.

20
<PAGE>

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 for long positions and
at the last available ask price for short positions. 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. Long positions in securities traded in the OTC market are
valued at the last available bid price in the OTC market prior to the time of
valuation. Short positions in securities traded in the OTC market are valued
at the last available ask 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 the 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 stated 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.

21
<PAGE>

Share certificates are issued only for full shares and only upon the
specific request of the shareholder. Issuance of certificates representing all
or only part of the full shares 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 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 such shareholder must 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(R) or CBA(R) account
may arrange to have periodic investments made in the Fund in amounts of $100
or more ($1 for retirement accounts) through the CMA(R) or CBA(R) 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 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.

22
<PAGE>

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) if their account is
maintained with the Transfer Agent 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. 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.

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 in the form of payments
by check or through automatic payment by direct deposit to such shareholder's
bank account on either a monthly or quarterly basis 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 class of shares to be redeemed. Redemptions will be made at net
asset value as determined as of 15 minutes after 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 shares of 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.

A shareholder whose shares are held within a CMA(R), CBA(R) or Retirement
Account may elect to have shares redeemed on a monthly, bimonthly, quarterly,
semiannual or annual basis through the CMA(R) or CBA(R) Systematic Redemption
Program. The minimum fixed dollar amount redeemable is $50. The proceeds of
systematic redemptions will be posted to the shareholder's account three
business days after the date the shares are redeemed. All redemptions are made
at net asset value. A shareholder 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

23
<PAGE>

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 fourth 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 CMA(R) or CBA(R) 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(R) or CBA(R) Systematic Redemption Program, eligible shareholders
should contact their Merrill Lynch Financial Consultant.

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 amounts being withdrawn in a
systematic withdrawal plan the investor should contact his or her 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 PricingSM 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,

24
<PAGE>

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 purposes of
reducing the CDSC or, with respect to Class B shares, towards satisfaction of
the conversion period. However, shares of a money

25
<PAGE>

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 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 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."

26
<PAGE>

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. Any loss upon the
sale or exchange of Fund shares held for six months or less 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). Recent legislation
creates additional categories of capital gains taxable at different rates.
Generally 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 as well as the amount
of capital gain dividends in the different categories of capital gain referred
to above.

Dividends are taxable to shareholders even though they are reinvested in
additional shares of the Fund. 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.

27
<PAGE>

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.
Shareholders may be able to claim United States foreign tax credits with
respect to such taxes, subject to certain conditions and limitations contained
in the Code. For example, certain retirements accounts cannot claim foreign
tax credits on investments in foreign securities held in the Fund. In
addition, recent legislation permits a foreign tax credit to be claimed with
respect to withholding tax on a dividend only if the shareholder meets certain
holding period requirements. If more than 50% in value of the Fund's total
assets at the close of its taxable year consists of securities of foreign
corporations, the Fund will be eligible, and intends, to file an election with
the Internal Revenue Service pursuant to which shareholders of the Fund will
be required to include their proportionate shares of such withholding taxes in
their United States income tax returns as gross income, treat such
proportionate shares as taxes paid by them, and deduct such proportionate
shares in computing their taxable incomes or, alternatively, use them as
foreign tax credits against their United States income taxes. In the case of
foreign taxes passed through by a RIC, the holding period requirements
referred to above must be met by both the shareholder and the RIC. No
deductions for foreign taxes, moreover, may be claimed by noncorporate
shareholders who do not itemize deductions. A shareholder that is a
nonresident alien individual or a foreign corporation may be subject to United
States withholding tax on the income resulting from the Fund's election
described in this paragraph but may not be able to claim a credit or deduction
against such United States tax for the foreign taxes treated as having been
paid by such shareholder. The Fund will report annually to its shareholders
the amount per share of such withholding taxes and other information needed to
claim the foreign tax credit. For this purpose, the Fund will allocate foreign
source income among the Class A, Class B, Class C and Class D shareholders
according to a method similar to that described above for the allocation of
dividends eligible for the dividends received deduction.

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

28
<PAGE>

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 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.

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.

29
<PAGE>

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.

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.

30
<PAGE>

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.

Set forth in the tables below is total return information for the Class A,
Class B, Class C and Class D shares of the Fund for the period indicated.

<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
--------------------------------------- ---------------------------------------
REDEEMABLE VALUE
EXPRESSED AS A OF A HYPOTHETICAL EXPRESSED AS A REDEEMABLE VALUE
PERCENTAGE BASED $1,000 INVESTMENT AT PERCENTAGE BASED OF A HYPOTHETICAL
ON A HYPOTHETICAL THE END OF THE ON A HYPOTHETICAL $1,000 INVESTMENT AT
PERIOD $1,000 INVESTMENT PERIOD $1,000 INVESTMENT THE END OF THE PERIOD
------ ------------------ -------------------- ----------------- ---------------------
<S> <C> <C> <C> <C>
Average
Annual
Total
Return
(including
maximum
applicable
sales
charges)
Inception (October 31,
1997) to December 31,
1997.................. (27.15)% $ 948.40 (22.14)% $959.00
Annual
Total
Return
(excluding
maximum
applicable
sales
charges)
Inception (October 31,
1997) to December 31,
1997.................. 0.10 % $1,001.00 (0.10)% $999.00
Aggregate
Total
Return
(including
maximum
applicable
sales
charges)
Inception (October 31,
1997) to December 31,
1997.................. (5.16)% $ 948.40 (4.10)% $959.00
</TABLE>

31
<PAGE>

<TABLE>
<CAPTION>
CLASS C SHARES CLASS D SHARES
--------------------------------------- -----------------------------------------
EXPRESSED AS A REDEEMABLE VALUE EXPRESSED AS A REDEEMABLE VALUE
PERCENTAGE BASED OF A HYPOTHETICAL PERCENTAGE BASED ON OF A HYPOTHETICAL
ON A HYPOTHETICAL $1,000 INVESTMENT AT A HYPOTHETICAL $1,000 INVESTMENT AT
PERIOD $1,000 INVESTMENT THE END OF THE PERIOD $1,000 INVESTMENT THE END OF THE PERIOD
------ ----------------- --------------------- ------------------- ---------------------
<S> <C> <C> <C> <C>
Average Annual Total Return
(including maximum applicable sales
charges)
Inception (October 31,
1997) to December 31,
1997.................. (6.40)% $989.00 (27.15)% $ 948.40
Annual Total Return
(excluding maximum applicable sales
charges)
Inception (October 31,
1997) to December 31,
1997.................. (0.10)% $999.00 0.10% $1,001.00
Aggregate Total Return
(including maximum applicable sales
charges)
Inception (October 31,
1997) to December 31,
1997 (1.10)% $989.00 (5.16)% $ 948.40
</TABLE>

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 August 4, 1997. As of the
date of this Statement of Additional Information, the Fund has an authorized
capital of 600,000,000 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. Class A, Class C and Class D each consists of 100,000,000 shares
and Class B consists of 300,000,000 shares. Shares of Class A, Class B, Class
C and Class D Common Stock represent interests 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 in 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

32
<PAGE>

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 (2,500 shares each of Class A, Class B, Class C and
Class D) 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 $68,600) 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 that the number of such initial shares being redeemed bears to the
number of shares initially purchased.

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 value of the Fund's net
assets on December 31, 1997 and its shares outstanding on December 31, 1997 is
calculated as set forth below:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Assets.................. $32,984,965 $943,187,873 $189,767,857 $173,897,951
=========== ============ ============ ============
Number of Shares
Outstanding................ 3,295,383 94,396,060 18,992,443 17,381,080
=========== ============ ============ ============
Net Asset Value Per Share
(net assets divided by
number of shares
outstanding)............... $ 10.01 $ 9.99 $ 9.99 $ 10.01
Sales Charge (for Class A
and Class D Shares: 5.25%
of offering price (5.54% of
net amount invested*)...... .55 ** ** .55
----------- ------------ ------------ ------------
Offering Price.............. $ 10.56 $ 9.99 $ 9.99 $ 10.56
=========== ============ ============ ============
</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

Ernst & Young LLP 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.

33
<PAGE>

CUSTODIAN

State Street Bank and Trust Company 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 August 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.

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 February 2, 1998.

34
<PAGE>

REPORT OF INDEPENDENT AUDITORS

TO THE BOARD OF DIRECTORS AND SHAREHOLDER OF
MERRILL LYNCH GLOBAL GROWTH FUND, INC.

We have audited the accompanying statement of assets and liabilities of
Merrill Lynch Global Growth Fund, Inc. as of September 5, 1997. This statement
of assets and liabilities is the responsibility of the Fund's management. Our
responsibility is to express an opinion on this statement of assets and
liabilities based on our audit.

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

In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of Merrill
Lynch Global Growth Fund, Inc. at September 5, 1997 in conformity with
generally accepted accounting principles.

/s/ Ernst & Young LLP
Princeton, New Jersey

September 8, 1997

35
<PAGE>

MERRILL LYNCH GLOBAL GROWTH FUND, INC.

STATEMENT OF ASSETS AND LIABILITIES

SEPTEMBER 5, 1997

<TABLE>
<S> <C>
Assets:
Cash in Bank........................................................ $100,000
Prepaid registration fees (Note 3).................................. 94,600
Deferred organization expenses (Note 4)............................. 68,600
--------
Total Assets.......................................................... 263,200
Liabilities--accrued expenses......................................... 163,200
--------
Net Assets (equivalent to $10.00 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
========
</TABLE>
- --------
Notes to Statement of Assets and Liabilities.
(1) Merrill Lynch Global Growth Fund, Inc. (the "Fund") was organized as a
Maryland corporation on August 4, 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.

36
<PAGE>

UNAUDITED FINANCIAL STATEMENTS FOR

MERRILL LYNCH GLOBAL GROWTH FUND, INC.

FOR THE PERIOD OCTOBER 31, 1997 (COMMENCEMENT OF OPERATIONS)

TO DECEMBER 31, 1997

37
<PAGE>

MERRILL LYNCH GLOBAL GROWTH FUND, INC. DECEMBER 31, 1997
SCHEDULE OF INVESTMENTS (IN US DOLLARS)

<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRIES HELD INVESTMENTS COST (NOTE 1A) NET ASSETS
<C> <C> <S> <C> <C> <C>

NORTH AMERICA
CANADA
BANKING 380,000 Bank of Montreal $ 17,744,280 $ 16,821,326 1.3%
575,000 Canadian Imperial Bank
of Commerce 18,142,347 17,919,782 1.3
500,000 National Bank of Canada 7,419,127 8,245,406 0.6
300,000 Royal Bank of Canada 16,480,599 15,847,949 1.2
-------------- -------------- ------
59,786,353 58,834,463 4.4

COMMUNICATIONS 330,000 +Newbridge Networks
Corp. 15,967,272 11,541,122 0.9
EQUIPMENT 250,000 Northern Telecom Ltd. 23,928,428 22,211,935 1.6
-------------- -------------- ------
39,895,700 33,753,057 2.5

TOTAL INVESTMENTS IN
CANADA 99,682,053 92,587,520 6.9
UNITED STATES
ADVERTISING 85,000 Interpublic Group of
Companies, Inc. 4,101,446 4,234,063 0.3
BANKING & 140,000 Banc One Corp.
FINANCIAL 7,522,284 7,603,750 0.6
200,000 BankAmerica Corp. 15,030,600 14,600,000 1.1
132,000 Citicorp 17,428,427 16,689,750 1.2
245,000 Mellon Bank Corp. 13,235,775 14,853,125 1.1
145,000 State Street Corp. 8,424,401 8,437,188 0.6
-------------- -------------- ------
61,641,487 62,183,813 4.6

BEVERAGES 80,000 Coca-Cola Company 4,643,760 5,330,000 0.4

COMPUTER 135,000 +Cisco Systems, Inc.
SERVICES 7,735,941 7,526,250 0.6

COMMUNICATIONS 440,000 +FORE Systems, Inc. 7,553,744 6,710,000 0.5
EQUIPMENT 90,000 Lucent Technologies,
Inc. 7,704,135 7,188,750 0.5
-------------- -------------- ------
15,257,879 13,898,750 1.0

COMPUTERS 350,000 Compaq Computer Corp. 23,821,910 19,753,125 1.5
45,000 Hewlett-Packard Co. 2,922,777 2,812,500 0.2
-------------- -------------- ------
26,744,687 22,565,625 1.7

COSMETICS & 110,000 Gillette Company 10,104,061 11,048,125 0.8
TOILETRIES 20,000 International Flavors &
Fragrances, Inc. 968,044 1,030,000 0.1
-------------- -------------- ------
11,072,105 12,078,125 0.9

ELECTRICAL 35,000 Emerson Electric Co.
EQUIPMENT 1,975,074 1,975,312 0.2
260,000 General Electric Co. 18,067,322 19,077,500 1.4
60,000 Honeywell, Inc. 4,264,134 4,110,000 0.3
-------------- -------------- ------
24,306,530 25,162,812 1.9

ELECTRONICS 227,000 Intel Corporation 17,179,260 15,932,563 1.2

ENERGY 185,000 El Paso Natural Gas Co. 11,683,959 12,302,500 0.9
230,000 Enron Corp. 8,842,626 9,559,375 0.7
-------------- -------------- ------
20,526,585 21,861,875 1.6
</TABLE>

38
<PAGE>

MERRILL LYNCH GLOBAL GROWTH FUND, INC. DECEMBER 31, 1997
SCHEDULE OF INVESTMENTS (CONTINUED) (IN US DOLLARS)

<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRIES HELD INVESTMENTS COST (NOTE 1A) NET ASSETS
<C> <C> <S> <C> <C> <C>

NORTH AMERICA (CONTINUED)
UNITED STATES (CONTINUED)
ENTERTAINMENT 150,000 +Viacom, Inc. (Class B) $ 4,666,230 $ 6,215,625 0.4%
90,000 Walt Disney Company 7,702,866 8,915,625 0.7
-------------- -------------- ------
12,369,096 15,131,250 1.1

FINANCIAL 130,000 American Express Company
SERVICES 10,480,860 11,602,500 0.9
380,000 Federal National
Mortgage Association 19,743,079 21,683,750 1.6
-------------- -------------- ------
30,223,939 33,286,250 2.5

FOOD 205,000 Albertson's, Inc. 7,862,784 9,711,875 0.7
70,000 ConAgra, Inc. 2,380,203 2,296,875 0.2
175,000 +Fred Meyer, Inc. 5,481,473 6,365,625 0.5
35,000 Wrigley (Wm.) Jr.
Company (Class B) 2,610,412 2,784,688 0.2
-------------- -------------- ------
18,334,872 21,159,063 1.6

HOTELS 25,000 Marriott International,
Inc. 1,702,250 1,731,250 0.1

HOUSEHOLD 70,000 Colgate-Palmolive Co.
PRODUCTS 4,576,684 5,145,000 0.4
20,000 Kimberly-Clark Corp. 1,056,650 986,250 0.1
115,000 Procter & Gamble Company 8,266,016 9,178,438 0.7
-------------- -------------- ------
13,899,350 15,309,688 1.2

INFORMATION PROCESSING 290,000 First Data Corp. 8,605,112 8,482,500 0.6

INSURANCE 10,000 Aetna Inc. 737,856 705,625 0.1
110,000 American International
Group, Inc. 11,521,852 11,962,500 0.9
400,000 Travelers Group, Inc. 19,984,610 21,550,000 1.6
-------------- -------------- ------
32,244,318 34,218,125 2.6

MEDICAL 150,000 +Boston Scientific Corp.
TECHNOLOGY 7,648,860 6,881,250 0.5
90,000 Guidant Corporation 5,835,558 5,602,500 0.4
-------------- -------------- ------
13,484,418 12,483,750 0.9

OIL SERVICES 250,000 Baker Hughes, Inc. 11,947,955 10,906,250 0.8
280,000 Diamond Offshore
Drilling, Inc. 18,685,044 13,475,000 1.0
190,000 Schlunberger Ltd. 17,756,792 15,295,000 1.2
-------------- -------------- ------
48,389,791 39,676,250 3.0

PHARMACEUTICALS 115,000 Amgen, Inc. 6,112,399 6,224,375 0.5
120,000 Bristol-Myers Squibb Co. 11,138,426 11,355,000 0.8
50,000 Johnson & Johnson 3,006,780 3,293,750 0.2
70,000 Merck & Co., Inc. 6,160,511 7,437,500 0.6
100,000 Pfizer Inc. 7,279,046 7,456,250 0.6
-------------- -------------- ------
33,697,162 35,766,875 2.7

PHOTOGRAPHY 30,000 Eastman Kodak Co. 1,880,844 1,824,375 0.1

POLLUTION 20,000 Waste Management, Inc.
CONTROL 505,400 550,000 0.0
</TABLE>

39
<PAGE>

MERRILL LYNCH GLOBAL GROWTH FUND, INC. DECEMBER 31, 1997
SCHEDULE OF INVESTMENTS (CONTINUED) (IN US DOLLARS)

<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRIES HELD INVESTMENTS COST (NOTE 1A) NET ASSETS
<C> <C> <S> <C> <C> <C>

NORTH AMERICA (CONCLUDED)
UNITED STATES (CONCLUDED)
RESTAURANTS 30,000 McDonald's Corporation $ 1,391,850 $ 1,432,500 0.1%

RETAIL STORES 420,000 Wal-Mart Stores, Inc. 15,286,530 16,563,750 1.2
165,000 Walgreen Co. 4,931,108 5,176,875 0.4
-------------- -------------- ------
20,217,638 21,740,625 1.6

RETAIL -- 80,000 CVS Corporation
SPECIALTY 5,197,738 5,125,000 0.4
290,000 +Staples, Inc. 7,849,691 8,047,500 0.6
-------------- -------------- ------
13,047,429 13,172,500 1.0

SOFTWARE COMPUTER 35,000 +Microsoft Corp. 4,676,564 4,521,563 0.3
85,000 +Oracle Corp. 2,832,084 1,891,250 0.2
-------------- -------------- ------
7,508,648 6,412,813 0.5

TOYS 200,000 Mattel, Inc. 7,823,472 7,450,000 0.6

TRAVEL & LODGING 60,000 Carnival Corp. (Class A) 2,997,084 3,322,500 0.3

TOTAL INVESTMENTS IN THE
UNITED STATES 461,532,353 463,924,190 34.7

TOTAL INVESTMENTS IN
NORTH AMERICA 561,214,406 556,511,710 41.6

PACIFIC BASIN
JAPAN
AUTOMOBILES 160,000 Honda Motor Co., Ltd. 5,634,642 5,884,069 0.4
500,000 Toyota Motor Corp. 13,656,899 14,357,006 1.1
-------------- -------------- ------
19,291,541 20,241,075 1.5

COMPUTERS 350,000 Fujitsu Ltd. 3,810,106 3,761,996 0.3
350,000 NEC Corporation 3,809,917 3,735,125 0.3
-------------- -------------- ------
7,620,023 7,497,121 0.6

LEISURE 70,000 Sony Corp. 6,073,720 6,234,165 0.5

OFFICE EQUIPMENT 100,000 Canon, Inc. 2,458,831 2,333,973 0.2

PHOTOGRAPHY 150,000 Fuji Photo Film Co.,
Ltd. 5,749,735 5,758,157 0.4

TELECOMMUNICATIONS 4,000 Nippon Telegraph &
Telephone Corp. 17,026,750 17,197,696 1.2

TOTAL INVESTMENTS IN
JAPAN 58,220,600 59,262,187 4.4

TOTAL INVESTMENTS IN THE
PACIFIC BASIN 58,220,600 59,262,187 4.4
</TABLE>

40
<PAGE>

MERRILL LYNCH GLOBAL GROWTH FUND, INC. DECEMBER 31, 1997
SCHEDULE OF INVESTMENTS (CONTINUED) (IN US DOLLARS)

<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRIES HELD INVESTMENTS COST (NOTE 1A) NET ASSETS
<C> <C> <S> <C> <C> <C>

WESTERN EUROPE
DENMARK
TELECOMMUNICATIONS 70,000 Tele-Danmark A.S. $ 4,531,731 $ 4,342,685 0.3%

TOTAL INVESTMENTS IN
DENMARK 4,531,731 4,342,685 0.3

FINLAND
COMMUNICATION 130,000 Nokia Oyj (Class A) 11,910,977 9,235,429 0.7
EQUIPMENT

TOTAL INVESTMENTS IN
FINLAND 11,910,977 9,235,429 0.7

FRANCE
COMMUNICATION 50,000 Alcatol Alsthom Cie
EQUIPMENT Generale d'Electricite
S.A. 6,141,367 6,354,876 0.5

COSMETICS 10,000 L'OREAL 3,739,626 3,912,610 0.3

INFORMATION 180,000 Cap Gemini S.A. 15,395,411 14,758,265 1.1
PROCESSING

INSURANCE 100,000 Assurances Generales de
France S.A. (AGF) 5,670,755 5,298,222 0.4
165,000 Axa-UAP 11,694,023 12,766,323 1.0
-------------- -------------- ------
17,364,778 18,064,545 1.4

RETAIL 20,000 Carrefour S.A. 11,290,715 10,433,627 0.8

SEMICONDUCTOR 75,000 +SGS-Thomson
CAPITAL EQUIPMENT Microelectronics N.V.
(NY Registered Shares) 5,759,158 4,641,552 0.3

TOTAL INVESTMENTS IN
FRANCE 59,691,055 58,165,475 4.4

GERMANY
APPAREL 50,000 Adidas AG 7,026,333 6,576,607 0.5

AUTOMOBILES 40,000 Daimler-Benz AG 2,783,283 2,806,315 0.2

BANKING 600,000 Commerzbank AG 21,297,933 23,615,744 1.7
335,000 Deutsche Bank AG 21,864,670 23,651,879 1.8
525,000 Dresdner Bank AG 22,202,477 24,224,483 1.8
-------------- -------------- ------
65,365,080 71,492,106 5.3

CHEMICALS 150,000 BASF AG 5,213,865 5,316,044 0.4
150,000 Bayer AG 5,341,904 5,603,736 0.4
140,000 Hoechst AG 5,771,079 4,903,269 0.4
-------------- -------------- ------
16,326,848 15,823,049 1.2
</TABLE>

41
<PAGE>

MERRILL LYNCH GLOBAL GROWTH FUND, INC. DECEMBER 31, 1997
SCHEDULE OF INVESTMENTS (CONTINUED) (IN US DOLLARS)

<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRIES HELD INVESTMENTS COST (NOTE 1A) NET ASSETS
<C> <C> <S> <C> <C> <C>

WESTERN EUROPE (CONTINUED)
GERMANY (CONCLUDED)
ELECTRONICS 250,000 Siemens AG $ 16,074,487 $ 14,801,534 1.1%

INSURANCE 50,000 Allianz AG 12,294,451 12,953,080 1.0

MULTI-INDUSTRY 50,000 VEBA AG 2,887,107 3,405,048 0.2

RETAIL 180,000 Metro AG 7,700,813 6,454,303 0.5

SOFTWARE 110,000 SAP AG (Systems,
Anwendungen, Producte in
der Datenverarbeitung)
(Preferred) 34,118,327 35,987,881 2.7

TOTAL INVESTMENTS IN
GERMANY 164,576,729 170,299,923 12.7

IRELAND
BANKING & 500,000 Allied Irish Banks PLC
FINANCIAL 4,385,255 4,769,081 0.4

TOTAL INVESTMENTS IN
IRELAND 4,385,255 4,769,081 0.4

ITALY
INSURANCE 200,000 Assicurazioni Generali
S.p.A. 4,582,887 4,911,825 0.3
2,500,000 Instituto Nazionale
delle Assicurazioni
S.p.A. (INA) 4,431,867 5,065,849 0.4

TOTAL INVESTMENTS IN
ITALY 9,014,754 9,977,674 0.7

NETHERLANDS
HOUSEHOLD 200,000 Unilever N.V.
PRODUCTS 11,380,224 12,329,848 0.9
INSURANCE 70,000 AEGON N.V. 5,669,294 6,231,505 0.5
235,000 ING Groep N.V. 10,003,319 9,897,909 0.7
-------------- -------------- ------
15,672,613 16,129,414 1.2

LEISURE 35,000 Philips Electronics N.V. 2,809,946 2,099,033 0.1
50,000 PolyGram N.V. 2,816,709 2,391,991 0.2
-------------- -------------- ------
5,626,655 4,491,024 0.3

RETAIL STORES 200,000 Koninklijke Ahold N.V. 5,266,766 5,217,992 0.4

SOFTWARE 720,000 +Baan Company, N.V. 26,223,931 23,578,615 1.8

TOTAL INVESTMENTS IN THE
NETHERLANDS 64,170,189 61,746,893 4.6
</TABLE>

42
<PAGE>

MERRILL LYNCH GLOBAL GROWTH FUND, INC. DECEMBER 31, 1997
SCHEDULE OF INVESTMENTS (CONTINUED) (IN US DOLLARS)

<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRIES HELD INVESTMENTS COST (NOTE 1A) NET ASSETS
<C> <C> <S> <C> <C> <C>

WESTERN EUROPE (CONTINUED)
SPAIN
BANKING 200,000 Banco Bilbao Vizcaya,
S.A. $ 5,505,054 $ 6,460,913 0.5%
175,000 Banco Santander S.A. 4,941,976 5,836,773 0.4

TOTAL INVESTMENTS IN
SPAIN 10,447,030 12,297,686 0.9

SWEDEN
COMMUNICATION 500,000 Telefonaktiebolaget LM 22,955,241 18,798,413 1.4
EQUIPMENT Ericsson (Class B)

TOTAL INVESTMENTS IN
SWEDEN 22,955,241 18,798,413 1.4

SWITZERLAND
FOODS 7,000 Nestle S.A. (Registered) 10,009,777 10,498,801 0.8

INSURANCE 20,000 Zurich Versicherungs-
Gesellschaft (Registered
Shares) 8,709,180 9,537,513 0.7

PHARMACEUTICALS 17,000 Novartis AG (Registered
Shares) 26,865,087 27,605,344 2.1

TOTAL INVESTMENTS IN
SWITZERLAND 45,584,044 47,641,658 3.6

UNITED KINGDOM
BANKING & 875,000 Barclays PLC 22,582,208 23,253,694 1.7
FINANCIAL 200,000 HSBC Holdings PLC 5,150,870 5,124,600 0.4
1,800,000 Lloyds TSB Group PLC 22,830,755 23,267,655 1.7
1,500,000 National Westminster
Bank PLC (Ordinary) 22,162,632 24,933,150 1.9
-------------- -------------- ------
72,726,465 76,579,099 5.7

CHEMICALS 365,000 Imperial Chemical
Industries PLC 5,501,341 5,701,364 0.4

DIVERSIFIED 500,000 Siebe PLC 9,950,432 9,813,938 0.7

HOUSEHOLD 750,000 Unilever PLC
PRODUCTS 5,692,608 6,418,069 0.5
RETAIL 1,320,000 J Sainsbury PLC 11,275,003 11,035,629 0.8
1,400,000 Tesco PLC 11,323,155 11,382,525 0.8
-------------- -------------- ------
22,598,158 22,418,154 1.6

INFORMATION -- 1,200,000 Reuters Holdings PLC 13,444,894 13,107,150 1.0
PROCESSING
INSURANCE 1,000,000 Commercial Union PLC 14,287,623 13,944,825 1.1
2,500,000 Guardian Royal Exchange
PLC 13,253,258 13,581,422 1.0
1,500,000 Royal & Sun Alliance
Insurance Group PLC 14,866,023 15,102,787 1.1
-------------- -------------- ------
42,406,904 42,629,034 3.2

</TABLE>

43
<PAGE>

MERRILL LYNCH GLOBAL GROWTH FUND, INC. DECEMBER 31, 1997
SCHEDULE OF INVESTMENTS (CONCLUDED) (IN US DOLLARS)

<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRIES HELD INVESTMENTS COST (NOTE 1A) NET ASSETS
<C> <C> <S> <C> <C> <C>

WESTERN EUROPE (CONCLUDED)
UNITED KINGDOM (CONCLUDED)
PHARMACEUTICALS 265,000 Glaxo Wellcome PLC $ 5,881,443 $ 6,267,780 0.5%
575,000 SmithKline Beecham PLC 5,491,124 5,883,846 0.4
100,000 Zeneca Group PLC 3,282,246 3,510,022 0.3
-------------- -------------- ------
14,654,813 15,661,648 1.2

PUBLISHING 500,000 Pearson PLC 6,515,593 6,496,087 0.5

STORES 750,000 Boots Company PLC 11,223,919 10,797,384 0.8

TELECOMMUNICATIONS 300,000 +COLT Telecom Group PLC 2,965,073 3,030,412 0.2
2,000,000 Vodafone Group PLC 11,380,920 14,421,150 1.1
-------------- -------------- ------
14,345,993 17,451,562 1.3

TOTAL INVESTMENTS IN THE
UNITED KINGDOM 219,061,120 227,073,489 16.9

TOTAL INVESTMENTS IN
WESTERN EUROPE 616,328,125 624,348,406 46.6

<CAPTION>
SHORT-TERM FACE
SECURITIES AMOUNT

COMMERCIAL PAPER* $10,000,000 CBC Inc., 6.10% due
1/05/1998 9,993,222 9,993,222 0.7
59,518,000 General Motors
Acceptance Corp., 6.75%
due 1/02/1998 59,506,841 59,506,841 4.5
15,000,000 Lehman Brothers
Holdings, Inc., 6.00%
due 1/20/1998 14,952,500 14,952,500 1.1
-------------- -------------- ------
84,452,563 84,452,563 6.3

US GOVERNMENT 15,000,000 Federal Home Loan 14,966,633 14,966,633 1.1
AGENCY Mortgage Corp., 5.72%
OBLIGATIONS* due 1/15/1998

TOTAL INVESTMENTS IN 99,419,196 99,419,196 7.4
SHORT-TERM SECURITIES
TOTAL INVESTMENTS $1,335,182,327 1,339,541,499 100.0
--------------
OTHER ASSETS LESS LIABILITIES 297,147 0.0
-------------- ------
NET ASSETS $1,339,838,646 100.0
-------------- ------

</TABLE>

* Commercial Paper and certain US Government Agency Obligations are
traded on a discount basis; the interest rates shown are the discount
rates paid at the time of purchase by the Fund.

+ Non-income producing security.

See Notes to Financial Statements.

44
<PAGE>

MERRILL LYNCH GLOBAL GROWTH FUND, INC. DECEMBER 31, 1997
FINANCIAL INFORMATION

STATEMENT OF ASSETS AND LIABILITIES AS OF DECEMBER 31, 1997

ASSETS: Investments, at value
(identified cost --
$1,335,182,327) (Note
1a)....................... $1,339,541,499
Cash...................... 220
Foreign cash (Note 1b).... 1,772,281
Receivables:
Securities sold........... $61,660,000
Capital Shares sold....... 3,333,552
Dividends................. 909,594 65,903,146
-----------
Deferred organization
expenses (Note 1f)........ 134,583
Prepaid registration fees
and other assets (Note
1f)....................... 426,917
--------------
Total assets.............. 1,407,778,646
--------------

LIABILITIES: Payables:
Securities purchased...... 63,832,753
Capital Shares redeemed... 1,690,951
Distributor (Note 2)...... 1,042,601
Investment adviser (Note 891,441
2)........................ 67,457,746
-----------
Accrued expenses and other
liabilities............... 482,254
--------------
Total liabilities......... 67,940,000
--------------
NET ASSETS: Net assets................ $1,339,838,646
--------------

NET ASSETS Class A Shares of Common
CONSIST OF: Stock, $0.10 par value,
100,000,000 shares
authorized................ $ 329,538
Class B Shares of Common
Stock, $0.10 par value,
300,000,000 shares
authorized................ 9,439,606
Class C Shares of Common
Stock, $0.10 par value,
100,000,000 shares
authorized................ 1,899,244
Class D Shares of Common
Stock, $0.10 par value,
100,000,000 shares
authorized................ 1,738,108
Paid-in capital in excess
of par.................... 1,325,946,711
Undistributed investment
income -- net............. 219,664
Accumulated realized
capital losses on
investments and foreign
currency transactions --
net...................... (4,092,736)
Unrealized appreciation on
investments and foreign
currency transactions --
net...................... 4,358,511
--------------
Net assets................ $1,339,838,646
--------------
NET ASSET Class A -- Based on net
VALUE: assets of $32,984,965
and 3,295,383 shares
outstanding.......... $ 10.01
--------------
Class B -- Based on net
assets of
$943,187,873 and
94,396,060 shares
outstanding.......... $ 9.99
--------------
Class C -- Based on net
assets of
$189,767,857 and
18,992,443 shares
outstanding.......... $ 9.99
--------------
Class D -- Based on net
assets of
$173,897,951 and
17,381,080 shares
outstanding.......... $ 10.01
--------------

See Notes to Financial
Statements.
</TABLE>

45
<PAGE>

MERRILL LYNCH GLOBAL GROWTH FUND, INC. DECEMBER 31, 1997
FINANCIAL INFORMATION (CONTINUED)

STATEMENT OF OPERATIONS FOR THE PERIOD OCTOBER 31, 1997+ TO DECEMBER 31,
1997

<TABLE>
<CAPTION>
<C> <S> <C> <C>
INVESTMENT Dividends (net of $93,492
foreign withholding tax).... $ 1,222,461
INCOME Interest and discount 2,981,079
earned......................
-----------
(NOTES 1D & Total income................
1E): 4,203,540
-----------

EXPENSES: Investment advisory fees 1,632,926
(Note 2)....................
Account maintenance and 1,528,435
distribution fees -- Class B
(Note 2)....................
Account maintenance and 310,152
distribution fees -- Class C
(Note 2)....................
Transfer agent fees -- Class 146,197
B (Note 2)..................
Registration fees (Note 124,438
1f).........................
Account maintenance fees -- 71,188
Class D (Note 2)...........
Custodian fees.............. 50,763
Transfer agent fees -- Class 30,833
C (Note 2)..................
Printing and shareholder 23,182
reports.....................
Accounting services (Note 21,828
2)..........................
Transfer agent fees -- Class 21,815
D (Note 2)..................
Directors' fees and 7,344
expenses....................
Professional fees........... 4,569
Amortization of organization 4,554
expenses (Note 1f)..........
Transfer agent fees -- Class 4,127
A (Note 2)..................
Pricing fees................ 846
Other....................... 679
-----------
Total expenses.............. 3,983,876
-----------
Investment income -- net.... 219,664
-----------
REALIZED & Realized loss from:
UNREALIZED Investments -- net.......... $(2,865,797)
GAIN (LOSS) ON Foreign currency (1,226,939)
transactions -- net......... (4,092,736)
-----------
INVESTMENTS & Unrealized
appreciation/depreciation
on:
FOREIGN Investments -- net.......... 4,359,172
CURRENCY
TRANSACTIONS -- Foreign currency (661)
NET transactions -- net......... 4,358,511
----------- -----------
(NOTES 1B, 1C, Net realized and unrealized
1E & 3): gain on investments and
foreign currency
transactions................ 265,775
-----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS... $ 485,439
-----------

+Commencement of operations.
See Notes to Financial
Statements.
</TABLE>

46
<PAGE>

MERRILL LYNCH GLOBAL GROWTH FUND, INC. DECEMBER 31, 1997

FINANCIAL INFORMATION (CONTINUED)

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 31, 1997+
INCREASE (DECREASE) IN NET TO DECEMBER 31,
ASSETS: 1997
<C> <S> <C> <C>

OPERATIONS: Investment income -- net........ $ 219,664
Realized loss on investments and
foreign currency transactions --
net............................ (4,092,736)
Unrealized appreciation on
investments and foreign currency
transactions -- net............. 4,358,511
--------------
Net increase in net assets
resulting from operations....... 485,439
--------------

BENEFICIAL Net increase in net assets
INTEREST derived from capital share
transactions.................... 1,339,253,207
--------------
TRANSACTIONS
(NOTE 4):

NET ASSETS: Total increase in net assets.... 1,339,738,646
Beginning of period............. 100,000
--------------
End of period*.................. $1,339,838,646
--------------

*Undistributed investment
income -- net................... $ 219,664
--------------

+Commencement of operations.
See Notes to Financial
Statements.
</TABLE>

47
<PAGE>

MERRILL LYNCH GLOBAL GROWTH FUND, INC. DECEMBER 31, 1997
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
THE FOLLOWING PER SHARE DATA AND
RATIOS HAVE BEEN DERIVED FROM
INFORMATION PROVIDED IN THE FINANCIAL CLASS A
STATEMENTS. -----------------
FOR THE PERIOD
OCTOBER 31, 1997+
INCREASE (DECREASE) IN NET ASSET TO DECEMBER 31,
VALUE: 1997

<C> <S> <C>
PER SHARE Net asset value, beginning of
period............................... $ 10.00
-------
OPERATING Investment income -- net............. 0.02
PERFORMANCE: Realized and unrealized loss on
investments and foreign currency
transactions -- net.................. (0.01)
-------
Total from investment operations..... 0.01
-------
Net asset value, end of period....... $ 10.01
-------

TOTAL Based on net asset value per share...
INVESTMENT 0.10%#
-------
RETURN:**

RATIOS TO Expenses.............................
AVERAGE 0.94%*
-------
NET ASSETS: Investment income -- net............. 0.98%*
-------

SUPPLEMENTAL Net assets, end of period (in
thousands)........................... $32,985
-------
DATA: Portfolio turnover................... 3.81%
-------
Average commission rate paid##....... $0.0327
-------

*Annualized.
**Total investment returns exclude
the effects of sales loads.
+Commencement of operations.
#Aggregate total investment return.
##Includes commissions paid in foreign currencies,
which have been converted into US dollars using the
prevailing exchange rate on the date of the
transaction. Such conversions may significantly affect
the rate shown.
See Notes to Financial Statements.
</TABLE>

48
<PAGE>

MERRILL LYNCH GLOBAL GROWTH FUND, INC. DECEMBER 31, 1997
FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
THE FOLLOWING PER SHARE DATA AND
RATIOS HAVE BEEN DERIVED FROM
INFORMATION PROVIDED IN THE FINANCIAL CLASS B
STATEMENTS. -----------------
FOR THE PERIOD
OCTOBER 31, 1997+
INCREASE (DECREASE) IN NET ASSET TO DECEMBER 31,
VALUE: 1997

<C> <S> <C>
PER SHARE Net asset value, beginning of
period............................... $ 10.00
--------
OPERATING Investment loss -- net............... 0.00++
PERFORMANCE: Realized and unrealized loss on
investments and foreign currency
transactions -- net.................. (0.01)
--------
Total from investment operations..... (0.01)
--------
Net asset value, end of period....... $ 9.99
--------

TOTAL Based on net asset value per share...
INVESTMENT (0.10)%#
--------
RETURN:**

RATIOS TO Expenses.............................
AVERAGE 1.96%*
--------
NET ASSETS: Investment loss -- net............... (0.03)%*
--------

SUPPLEMENTAL Net assets, end of period (in
thousands)........................... $943,188
--------
DATA: Portfolio turnover................... 3.81%
--------
Average commission rate paid##....... $0.0327
--------

*Annualized.
**Total investment returns exclude
the effects of sales loads.
+Commencement of operations.
++Amount is less than $.01 per share.
#Aggregate total investment return.
##Includes commissions paid in foreign currencies,
which have been converted into US dollars using the
prevailing exchange rate on the date of the
transaction. Such conversions may significantly affect
the rate shown.
See Notes to Financial Statements.
</TABLE>

49
<PAGE>

MERRILL LYNCH GLOBAL GROWTH FUND, INC. DECEMBER 31, 1997
FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
THE FOLLOWING PER SHARE DATA AND
RATIOS HAVE BEEN DERIVED FROM
INFORMATION PROVIDED IN THE FINANCIAL CLASS C
STATEMENTS. -----------------
FOR THE PERIOD
OCTOBER 31, 1997+
INCREASE (DECREASE) IN NET ASSET TO DECEMBER 31,
VALUE: 1997

TOTAL Based on net asset value per share...
INVESTMENT (0.10)%#
--------
RETURN:**

RATIOS TO Expenses.............................
AVERAGE 1.96%*
--------
NET ASSETS: Investment loss -- net............... (0.02)%*
--------

SUPPLEMENTAL Net assets, end of period (in
thousands)........................... $189,768
--------
DATA: Portfolio turnover................... 3.81%
--------
Average commission rate paid##....... $0.0327
--------

50
<PAGE>

MERRILL LYNCH GLOBAL GROWTH FUND, INC. DECEMBER 31, 1997
FINANCIAL HIGHLIGHTS (CONCLUDED)

<TABLE>
<CAPTION>
THE FOLLOWING PER SHARE DATA AND
RATIOS HAVE BEEN DERIVED FROM
INFORMATION PROVIDED IN THE FINANCIAL CLASS D
STATEMENTS. -----------------
FOR THE PERIOD
OCTOBER 31, 1997+
INCREASE (DECREASE) IN NET ASSET TO DECEMBER 31,
VALUE: 1997

<C> <S> <C>
PER SHARE Net asset value, beginning of
period............................... $ 10.00
--------
OPERATING Investment income -- net............. 0.01
PERFORMANCE: Realized and unrealized loss on
investments and foreign currency
transactions -- net.................. 0.00++
--------
Total from investment operations..... 0.01
--------
Net asset value, end of period....... $ 10.01
--------

TOTAL Based on net asset value per share...
INVESTMENT 0.10%#
--------
RETURN:**

RATIOS TO Expenses.............................
AVERAGE 1.19%*
--------
NET ASSETS: Investment income -- net............. 0.75%*
--------

SUPPLEMENTAL Net assets, end of period (in
thousands)........................... $173,898
--------
DATA: Portfolio turnover................... 3.81%
--------
Average commission rate paid##....... $0.0327
--------

51
<PAGE>

MERRILL LYNCH GLOBAL GROWTH FUND, INC. DECEMBER 31, 1997

NOTES TO FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES:

Merrill Lynch Global Growth Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. Prior to commencement of operations on October 31, 1997, the Fund had
no operations other than those relating to organizational matters and the
issuance of 10,000 capital shares of the Fund to Merrill Lynch Asset
Management, L.P. ("MLAM") for $100,000. These unaudited financial statements
reflect all adjustments which are, in the opinion of management, necessary to a
fair statement of the results for the interim period presented. All such
adjustments are of a normal recurring nature. The Fund offers four classes of
shares under the Merrill Lynch Select PricingSM System. Shares of Class A and
Class D are sold with a front-end sales charge. Shares of Class B and Class C
may be subject to a contingent deferred sales charge. All classes of shares
have identical voting, dividend, liquidation and other rights and the same
terms and conditions, except that Class B, Class C and Class D Shares bear
certain expenses related to the account maintenance of such shares, and Class B
and Class C Shares also bear certain expenses related to the distribution of
such shares. Each class has exclusive voting rights with respect to matters
relating to its account maintenance and distribution expenditures. The
following is a summary of significant accounting policies followed by the Fund.

(a) Valuation of investments -- Portfolio securities which are traded on stock
exchanges are valued at the last sale price 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.
Securities traded in the over-the-counter market are valued at the last
available bid price prior to the time of valuation. 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 which are traded both in the over-the-counter market and on
a stock exchange are valued according to the broadest and most representative
market. Options written are valued at the last sale price in the case of
exchange-traded options or, in the case of options traded in the over-the-
counter market, the last asked price. Options purchased are valued at the last
sale price in the case of exchange-traded options or, in the case of options
traded in the over-the-counter market, the last bid price. Short-term
securities are valued at amortized cost, which approximates market value. Other
investments, including futures contracts and related options, are stated at
market value. Securities and assets for which market quotations are not
available are valued at fair value as determined in good faith by or under the
direction of the Fund's Board of Directors.

(b) Foreign currency transactions -- Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized. Assets
and liabilities denominated in foreign currencies are valued at the exchange
rate at the end of the period. Foreign currency transactions are the result of
settling (realized) or valuing (unrealized) assets or liabilities expressed in
foreign currencies into US dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on investments.

(c) Derivative financial instruments -- The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its portfolio
against adverse movements in the equity, debt, and currency markets. Losses may
arise due to changes in the value of the contract or if the counterparty does
not perform under the contract.

. Options -- The Fund is authorized to write and purchase call and put options.
When the Fund writes an option, an amount equal to the premium received by the
Fund is reflected as an asset and an equivalent liability. The amount of the
liability is subsequently marked to market to reflect the current market value
of the option written. When a security is purchased or sold through an exercise
of an option, the related premium paid (or received) is added to (or deducted
from) the basis of the security acquired or deducted from (or added to) the
proceeds of the security sold. When an option expires (or the Fund enters into
a closing transaction), the Fund realizes a gain or loss on the option to the
extent of the premiums received or paid (or gain or loss to the extent the cost
of the closing transaction exceeds the premium paid or received).

52
<PAGE>

MERRILL LYNCH GLOBAL GROWTH FUND, INC. DECEMBER 31, 1997
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Written and purchased options are non-income producing investments.

. Forward foreign exchange contracts -- The Fund is authorized to enter into
forward foreign exchange contracts as a hedge against either specific
transactions or portfolio positions. Such contracts are not entered on the
Fund's records. However, the effect on operations is recorded from the date the
Fund enters into such contracts. Premium or discount is amortized over the life
of the contracts.

. Foreign currency options and futures -- The Fund may also purchase or sell
listed or over-the-counter foreign currency options, foreign currency futures
and related options on foreign currency futures as a short or long hedge
against possible variations in foreign exchange rates. Such transactions may be
effected with respect to hedges on non-US dollar denominated securities owned
by the Fund, sold by the Fund but not yet delivered, or committed or
anticipated to be purchased by the Fund.

. Financial futures contracts -- The Fund may purchase or sell stock index
futures contracts and options on such futures contracts for the purpose of
hedging the market risk on existing securities or the intended purchase of
securities. Futures contracts are contracts for delayed delivery of securities
at a specific future date and at a specific price or yield. Upon entering into
a contract, the Fund deposits and maintains as collateral such initial margin
as required by the exchange on which the transaction is effected. Pursuant to
the contract, the Fund agrees to receive from or pay to the broker an amount of
cash equal to the daily fluctuation in value of the contract. Such receipts or
payments are known as variation margin and are recorded by the Fund as
unrealized gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed.

(d) Income taxes -- It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required. Under the applicable
foreign tax law, a withholding tax may be imposed on interest, dividends, and
capital gains at various rates.

(e) Security transactions and investment income -- Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Dividend income is recorded on the ex-dividend dates. Dividends from foreign
securities where the ex-dividend date may have passed are subsequently recorded
when the Fund has determined of the ex-dividend date. Interest income
(including amortization of discount) is recognized on the accrual basis.
Realized gains and losses on security transactions are determined on the
identified cost basis.

(f) Deferred organization expenses and prepaid registration fees -- Deferred
organization expenses are charged to expense on a straight-line basis over a
five year period. Prepaid registration fees are charged to expense as the
related shares are issued.

(g) Dividends and distributions -- Dividends and distributions paid by the Fund
are recorded on the ex-dividend dates.

2. INVESTMENT ADVISORY AGREEMENT AND TRANSACTIONS WITH AFFILIATES:

The Fund has entered into an Investment Advisory Agreement with Merrill Lynch
Asset Management, L.P. ("MLAM"). The general partner of MLAM is Princeton
Services, Inc. ("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch &
Co., Inc. ("ML & Co."), which is the limited partner. The Fund has also entered
into a Distribution Agreement and Distribution Plans with Merrill Lynch Funds
Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned subsidiary of
Merrill Lynch Group, Inc.

MLAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certai n other services
necessary to the operations of the Fund. For

such services, the Fund pays a monthly fee of 0.75%, on an annual basis, of the
average daily value of the Fund's net assets.

53
<PAGE>

MERRILL LYNCH GLOBAL GROWTH FUND, INC. DECEMBER 31, 1997
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Pursuant to the Distribution Plans adopted by the Fund in accordance with Rule
12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are accrued daily
and paid monthly at annual rates based upon the average daily net assets of the
shares as follows:

<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
ACCOUNT
MAINTENANCE DISTRIBUTION
FEE FEE
- --------------------------------------------------------------------------------
<S> <C> <C>
Class B................................................ 0.25% 0.75%
Class C................................................ 0.25% 0.75%
Class D................................................ 0.25% --
- --------------------------------------------------------------------------------
</TABLE>

Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Inc. ("MLPF&S"), a subsidiary of ML & Co., also provides account
maintenance and distribution services to the Fund. The ongoing account
maintenance fee compensates the Distributor and MLPF&S for providing account
maintenance services to Class B, Class C and Class D shareholders. The ongoing
distribution fee compensates the Distributor and MLPF&S for providing
shareholder and distribution-related services to Class B and Class C
shareholders.

For the period October 31, 1997 (commencement of operations) to December 31,
1997, MLFD earned underwriting discounts and commissions and MLPF&S earned
dealer concessions on sales of the Fund's Class A and Class D Shares as
follows:

<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
MLFD MLPF&S
- --------------------------------------------------------------------------------
<S> <C> <C>
Class A...................................................... $ 1 $ 15
Class D...................................................... $22,956 $5,302,885
- --------------------------------------------------------------------------------
</TABLE>

For the period October 31, 1997 (commencement of operations) to December 31,
1997, MLPF&S received contingent deferred sales charges of $83,778 and $8,806
relating to transactions in Class B and Class C Shares, respectively.

In addition, MLPF&S received $11,396 in commissions on the execution of
portfolio security transactions for the Fund for the period October 31, 1997
(commencement of operations) to December 31, 1997.

Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-owned
subsidiary of ML & Co., is the Fund's transfer agent.

Accounting services are provided to the Fund by MLAM at cost.

Certain officers and/or directors of the Fund are officers and/or directors of
MLAM, PSI, MLFDS, MLFD, and/or ML & Co.

3. INVESTMENTS:

Purchases and sales of investments, excluding short-term securities, for the
period October 31, 1997 (commencement of operations) to December 31, 1997 were
$1,269,294,502 and $30,665,572, respectively.

Net realized and unrealized gains (losses) as of December 31, 1997 were as
follows:

<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
REALIZED UNREALIZED
LOSSES GAINS (LOSSES)
- --------------------------------------------------------------------------------
<S> <C> <C>
Long-term investments............................... $(2,865,797) $4,359,172
Foreign currency transactions....................... (1,226,939) (661)
----------- ----------
Total............................................... $(4,092,736) $4,358,511
=========== ==========
- --------------------------------------------------------------------------------
</TABLE>

As of December 31, 1997, net unrealized appreciation for Federal income tax
purposes aggregated $4,359,172, of which $51,773,674 related to appreciated
securities and $47,414,502 related to depreciated securities. At December 31,
1997, the aggregate cost of investments for Federal income tax purposes was
$1,335,182,327.

54
<PAGE>

MERRILL LYNCH GLOBAL GROWTH FUND, INC. DECEMBER 31, 1997

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

4. CAPITAL SHARE TRANSACTIONS:

Net increase in net assets derived from capital share transactions was
$1,339,253,207 for the period October 31, 1997 (commencement of operations) to
December 31, 1997.

Transactions in capital shares for each class were as follows:

<TABLE>
- ------------------------------------------------------------------------------
<CAPTION>
CLASS A SHARES FOR THE PERIOD OCTOBER 31, 1997+ TO DOLLAR
DECEMBER 31, 1997 SHARES AMOUNT
- ------------------------------------------------------------------------------
<S> <C> <C>
Shares sold........................................... 3,409,155 $34,052,148
Shares redeemed....................................... (116,272) (1,150,458)
--------- -----------
Net increase.......................................... 3,292,883 $32,901,690
========= ===========
- ------------------------------------------------------------------------------
</TABLE>

+Prior to October 31, 1997 (commencement of operations), the Fund issued 2,500
shares to MLAM for $25,000.

<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
CLASS B SHARES FOR THE PERIOD OCTOBER 31, 1997+ DOLLAR
TO DECEMBER 31, 1997 SHARES AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C>
Shares sold........................................... 96,426,773 $962,956,707
Shares redeemed....................................... (2,008,005) (19,778,001)
Automatic conversion of shares........................ (25,208) (249,963)
---------- ------------
Net increase.......................................... 94,393,560 $942,928,743
========== ============
- --------------------------------------------------------------------------------
</TABLE>

+Prior to October 31, 1997 (commencement of operations), the Fund issued 2,500
shares to MLAM for $25,000.

<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
CLASS C SHARES FOR THE PERIOD OCTOBER 31, 1997+ DOLLAR
TO DECEMBER 31, 1997 SHARES AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C>
Shares sold........................................... 19,539,339 $195,154,082
Shares redeemed....................................... (549,396) (5,420,961)
---------- ------------
Net increase.......................................... 18,989,943 $189,733,121
========== ============
- --------------------------------------------------------------------------------
</TABLE>

+Prior to October 31, 1997 (commencement of operations), the Fund issued 2,500
shares to MLAM for $25,000.

<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
CLASS D SHARES FOR THE PERIOD OCTOBER 31, 1997+ DOLLAR
TO DECEMBER 31, 1997 SHARES AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C>
Shares sold........................................... 17,987,026 $179,697,214
Automatic conversion of shares........................ 25,182 249,963
---------- ------------
Total issued.......................................... 18,012,208 179,947,177
Shares redeemed....................................... (633,628) (6,257,524)
---------- ------------
Net increase.......................................... 17,378,580 $173,689,653
========== ============
- --------------------------------------------------------------------------------
</TABLE>

+Prior to October 31, 1997 (commencement of operations), the Fund issued 2,500
shares to MLAM for $25,000.

5. COMMITMENTS:

At December 31, 1997, the Fund had entered into foreign exchange contracts
under which it had agreed to purchase foreign currency with an approximate
value of $2,604,000.

55
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objective and Policies......................................... 2
Portfolio Strategies Involving Options, Futures and Foreign Exchange
Transactions............................................................ 2
Other Investment Policies and Practices.................................. 2
Investment Restrictions.................................................. 4
Management of the Fund.................................................... 7
Directors and Officers................................................... 7
Compensation of Directors................................................ 8
Management and Advisory Arrangements..................................... 9
Purchase of Shares........................................................ 10
Initial Sales Charge Alternatives--
Class A and Class D Shares.............................................. 11
Reduced Initial Sales Charges............................................ 12
Employer-Sponsored Retirement or Savings Plans and Certain Other
Arrangements............................................................ 15
Distribution Plans....................................................... 15
Limitations on the Payment of Deferred Sales Charges..................... 16
Redemption of Shares...................................................... 17
Deferred Sales Charges--
Class B and Class C Shares.............................................. 18
Portfolio Transactions and Brokerage...................................... 18
Determination of Net Asset Value.......................................... 20
Shareholder Services...................................................... 21
Investment Account....................................................... 21
Automatic Investment Plans............................................... 22
Automatic Reinvestment of Dividends and Capital Gains Distributions...... 22
Systematic Withdrawal Plans.............................................. 23
Exchange Privilege....................................................... 24
Dividends, Distributions and Taxes........................................ 26
Dividends and Distributions.............................................. 26
Taxes.................................................................... 27
Tax Treatment of Options and Futures Transactions........................ 29
Special Rules for Certain Foreign Currency Transactions.................. 30
Performance Data.......................................................... 31
General Information....................................................... 32
Description of Shares.................................................... 32
Computation of Offering Price Per Share.................................. 33
Independent Auditors..................................................... 33
Custodian................................................................ 34
Transfer Agent........................................................... 34
Legal Counsel............................................................ 34
Reports to Shareholders.................................................. 34
Additional Information................................................... 34
Security Ownership of Certain Beneficial Owners.......................... 34
Report of Independent Auditors............................................ 35
Statement of Assets and Liabilities....................................... 36
Financial Statements (unaudited).......................................... 37
</TABLE>

Code #19013-0398

[LOGO] MERRILL LYNCH

Merrill Lynch
Global Growth Fund, Inc.

[ART]

STATEMENT OF
ADDITIONAL
INFORMATION

March 6, 1998

Distributor:
Merrill Lynch
Funds Distributor, Inc.
<PAGE>

PART C. OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.

(A)FINANCIAL STATEMENTS:

Contained in Part A:

Financial Highlights for the period October 31, 1997 (commencement of
operations) to December 31, 1997 (unaudited).

Contained in Part B:

Report of the Independent Auditors

Statement of Assets and Liabilities as of September 5, 1997.

Schedule of Investments as of December 31, 1997 (unaudited).

Statement of Assets and Liabilities as of December 31, 1997 (unaudited).

Statement of Operations for the period October 31, 1997 (commencement of
operations) to December 31, 1997 (unaudited).

Statement of Changes in Net Assets for the period October 31, 1997
(commencement of operations) to December 31, 1997 (unaudited).

Financial Highlights for the period October 31, 1997 (commencement of
operations) to December 31, 1997 (unaudited).

(B)EXHIBITS:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1(a) --Articles of Incorporation of the Registrant, dated August 4, 1997.(a)
(b) --Articles Supplementary to the Articles of Incorporation of the
Registrant, dated November 3, 1997.
2 --By-Laws of the Registrant.(b)
3 --None.
4(a) --Portions of the Articles of Incorporation and the By-Laws of the
Registrant defining the rights of holders of shares of the
Registrant.(c)
(b) --Form of specimen certificate for shares of Common Stock of the
Registrant.(b)
5(a) --Management Agreement between the Registrant and Merrill Lynch Asset
Management, L.P.
(the "Manager").(b)
(b) --Sub-Advisory Agreement between the Manager and Merrill Lynch Asset
Management U.K. Limited.(b)
6(a) --Class A Shares Distribution Agreement between the Registrant and
Merrill Lynch Funds Distributor, Inc. (the "Distributor").(b)
(b) --Class B Shares Distribution Agreement between the Registrant and the
Distributor.(b)
(c) --Class C Shares Distribution Agreement between the Registrant and the
Distributor.(b)
(d) --Class D Shares Distribution Agreement between the Registrant and the
Distributor.(b)
7 --None.
8 --Custody Agreement between the Registrant and State Street Bank and
Trust Company.(b)
9(a) --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) --Agreement relating to use of name between the Registrant and Merrill
Lynch & Co., Inc. ("ML & Co")(b)
10 --None.
11 --Consent of Ernst & Young LLP, independent auditors for the
Registrant.
12 --None.
13 --Certificate of the Manager.(b)
14 --None.
</TABLE>

C-1
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
15(a) --Class B Shares Distribution Plan and Class B Shares Distribution
Plan Sub-Agreement of the Registrant.(b)
(b) --Class C Shares Distribution Plan and Class C Shares Distribution
Plan Sub-Agreement of the Registrant.(b)
(c) --Class D Shares Distribution Plan and Class D Shares Distribution
Plan Sub-Agreement of the Registrant.(b)
16(a) --Schedule of computation of each performance quotation provided in
the Registration Statement in response to Item 22 to Class A Shares.
(b) --Schedule of computation of each performance quotation provided in
the Registration Statement in response to Item 22 to Class B Shares.
(c) --Schedule of computation of each performance quotation provided in
the Registration Statement in response to Item 22 to Class C Shares.
(d) --Schedule of computation of each performance quotation provided in
the Registration Statement in response to Item 22 to Class D Shares.
17(a) --Financial Data Schedule for Class A Shares.
(b) --Financial Data Schedule for Class B Shares.
(c) --Financial Data Schedule for Class C Shares.
(d) --Financial Data Schedule for Class D Shares.
18 --Merrill Lynch Select PricingSM System Plan Pursuant to Rule 18f-
3.(d)
</TABLE>
- --------

(a) Previously filed on August 5, 1997 as an Exhibit to the Registrant's
Registration Statement on Form N-1A (File No. 333-32899) under the
Securities Act of 1933, as amended (the "Registration Statement").

(b) Previously filed on September 10, 1997 as an Exhibit to Pre-Effective
Amendment No. 1 to the Registration Statement.

(c) 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 the Registration Statement 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 the Registration Statement.

(d) 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.

Registrant is not controlled by or under common control with any other
person.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES.

<TABLE>
<CAPTION>
NUMBER OF
RECORD HOLDERS
TITLE OF CLASS AT DECEMBER 31, 1997
-------------- --------------------
<S> <C>
Class A shares of Common Stock, par value $0.10 per
share............................................. 2,680
Class B shares of Common Stock, par value $0.10 per
share............................................. 66,477
Class C shares of Common Stock, par value $0.10 per
share............................................. 16,248
Class D shares of Common Stock, par value $0.10 per
share............................................. 8,094
</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 ("Merrill Lynch").

ITEM 27. INDEMNIFICATION.

Reference is made to Article VI of Registrant's Amended and Restated
Articles of Incorporation, Article VI of Registrant's By-Laws, 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.

C-2
<PAGE>

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.

C-3
<PAGE>

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 investment
companies: Merrill Lynch Adjustable Rate Securities Fund, Inc., Merrill Lynch
Americas Income Fund, Inc., Merrill Lynch Asset Builder Program, Inc., Merrill
Lynch Asset Growth Fund, Inc., Merrill Lynch Asset Income Fund, Inc., Merrill
Lynch Capital Fund, Inc., Merrill Lynch 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 Growth 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 Real Estate Fund, Inc., Merrill Lynch Retirement Series
Trust, Merrill Lynch Series Fund, Inc., Merrill Lynch Short-Term Global Income
Fund, Inc., Merrill Lynch Strategic Dividend Fund, Merrill Lynch Technology
Fund, Inc., Merrill Lynch U.S.A. Government Reserves, Merrill Lynch U.S.
Treasury Money Fund, Merrill Lynch Utility Income Fund, Inc., Merrill Lynch
Variable Series Funds, Inc. and Hotchkis and Wiley Funds (advised by Hotchkis
and Wiley, a division of MLAM); and 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 Advisors Trust.

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.,
Corporate High Yield Fund III, 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 Fund II, Inc., MuniHoldings
California Insured Fund, Inc., MuniHoldings California Insured Fund II, Inc.,
MuniHoldings Florida Insured Fund, MuniHoldings Florida Insured Fund II,
MuniHoldings New York Fund, Inc. 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. and Worldwide
DollarVest Fund, Inc.

The address of each of these investment companies is P.O. Box 9011,
Princeton, New Jersey 08543-9011, except that the address of Merrill Lynch
Funds for Institutions Series and Merrill Lynch Intermediate Government Bond
Fund is One Financial Center, 23rd Floor, Boston, Massachusetts 02111-2646.
The address

C-4
<PAGE>

of the Manager, FAM, Princeton Services, Inc. ("Princeton Services") and
Princeton Administrators L.P. is also P.O. Box 9011, Princeton, New Jersey
08543-9011. The address of the Distributor is P.O. Box 9081, Princeton, New
Jersey 08543-9081. The address of Merrill Lynch and ML&Co. is World Financial
Center, North Tower, 250 Vesey Street, New York, New York 10281. The address
of the Transfer Agent, Merrill Lynch Financial Data Services, Inc., 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
December 31, 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
---- ------------- ----------------------------------
<C> <S> <C>
ML & Co................. Limited Partner Financial Services Holding
Company; Limited Partner of FAM
Princeton Services...... General Partner General Partner of FAM
Arthur Zeikel........... Chairman Chairman of FAM; President of
the Manager and FAM from 1977
to 1997; Chairman and Director
of Princeton Services;
President of Princeton Services
from 1993 to 1997; Executive
Vice President of ML & Co.
Jeffrey M. Peek......... President President of FAM; President and
Director of Princeton Services;
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 the Distributor;
Director of MLFDS; President of
Princeton Administrators, L.P.
Linda L. Federici....... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services
Vincent R. Giordano..... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services
Elizabeth A. Griffin.... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services
Norman R. Harvey........ Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services
Michael J. Hennewinkel.. Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services
</TABLE>

C-5
<PAGE>

<TABLE>
<CAPTION>
POSITION WITH OTHER SUBSTANTIAL BUSINESS,
NAME THE MANAGER PROFESSION, VOCATION OR EMPLOYMENT
---- ------------- ----------------------------------
<C> <S> <C>
Philip L. Kirstein....... Senior Vice President, Senior Vice President, General
General Counsel and Counsel and Secretary of FAM;
Secretary Senior Vice President, General
Counsel, Director and Secretary
of Princeton Services
Ronald M. Kloss.......... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services
Debra W. Landsman-Yaros.. Senior Vice President Senior Vice President of FAM;
Vice President of the
Distributor; Senior Vice
President 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
Richard L. Reller........ Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services; Director of
the Distributor
Gerald M. Richard........ Senior Vice President Senior Vice President and
and Treasurer Treasurer of FAM: Senior Vice
President and Treasurer of
Princeton Services; Vice
President and Treasurer of the
Distributor
Gregory D. Upah.......... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services
Ronald L. Welburn........ 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
Asset Growth Fund, Inc., Merrill Lynch Asset Income Fund, Inc., Merrill Lynch
Basic Value Fund, Inc., Merrill Lynch Capital Fund, Inc., Merrill Lynch
Consults International Portfolio, Merrill Lynch Convertible Fund, Inc.,
Merrill Lynch Corporate Bond 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 Fund for Tomorrow, Inc., Merrill Lynch Global Allocation
Fund, Inc., Merrill Lynch Global Bond Fund for Investment

C-6
<PAGE>

and Retirement, Merrill Lynch Global Convertible Fund, Inc., Merrill Lynch
Global Growth 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
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 Real Estate Fund, Inc. Merrill Lynch
Series Fund, Inc., Merrill Lynch Short-Term Global Income Fund, Inc., Merrill
Lynch Special Value Fund, Inc., Merrill Lynch Strategic Dividend Fund, Merrill
Lynch Technology Fund, Inc., Merrill Lynch Utility Income Fund, Inc., Merrill
Lynch Variable Series Funds, 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 December
31, 1995, for his or her own account or in the capacity of director, officer,
partner or trustee. In addition, Messrs. Zeikel, Albert, and Richard 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
---- ------------- ----------------------------------
<C> <S> <C>
Arthur Zeikel....... Director and Chairman Chairman of the Manager and FAM; Chairman
and Director of Princeton Services;
President of Princeton Services from 1993
to 1997; President of the Manager and FAM
from 1977 to 1997; 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 the Distributor
Carol Ann Langham... Company Secretary None
Debra Anne Searle... Assistant Company None
Secretary
</TABLE>

ITEM 29. PRINCIPAL UNDERWRITERS.

(a) The Distributor acts as the principal underwriter for the Registrant.
The Distributor acts as the principal underwriter for each of the open-end
registered 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 the Distributor also acts
as the principal underwriter for the following closed-end registered
investment companies: Merrill Lynch High Income Municipal Bond Fund, Inc.,
Merrill Lynch Municipal Strategy Fund, Inc. and Merrill Lynch Senior Floating
Rate Fund, Inc.

C-7
<PAGE>

(b) Set forth below is information concerning each director and officer of
the Distributor. 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, 23rd
Floor 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
Richard L. Reller....... Director None
Thomas J. Verage........ 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- Vice President None
Yaros..................
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>

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 (the "1940 Act"), and
the rules thereunder are maintained at the offices of the Registrant, 800
Scudders Mill Road, Plainsboro, New Jersey 08536, and its transfer agent,
Merrill Lynch Financial Data Services, Inc., 4800 Deer Lake Drive East,
Jacksonville, Florida 32246-6484.

ITEM 31. MANAGEMENT SERVICES.

Other than as set forth under the caption "Management of the Fund--Management
and Advisory Arrangements" in the Prospectus constituting Part A of the
Registration Statement and under the caption "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 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.

C-8
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE INVESTMENT
COMPANY ACT OF 1940, THE REGISTRANT CERTIFIES THAT IT MEETS ALL OF THE
REQUIREMENTS FOR EFFECTIVENESS OF THIS POST-EFFECTIVE AMENDMENT TO ITS
REGISTRATION STATEMENT PURSUANT TO RULE 485(B) UNDER THE SECURITIES ACT OF 1933
AND HAS DULY CAUSED THIS POST-EFFECTIVE AMENDMENT TO ITS 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 5TH DAY OF MARCH,
1998.

MERRILL LYNCH GLOBAL GROWTH FUND,
INC.
(Registrant)

/s/ Gerald M. Richard
By: __________________________________
(GERALD M. RICHARD, TREASURER)

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>
President and
Arthur Zeikel* Director
- ------------------------------------ (Principal
(ARTHUR ZEIKEL) Executive Officer)

Treasurer
Gerald M. Richard* (Principal
- ------------------------------------ Financial and
(GERALD M. RICHARD) Accounting
Officer)

Donald Cecil* Director
- ------------------------------------
(DONALD CECIL)

M. Colyer Crum* Director
- ------------------------------------
(M. COLYER CRUM)

Edward H. Meyer* Director
- ------------------------------------
(EDWARD H. MEYER)

Director
Jack B. Sunderland*
- ------------------------------------
(JACK B. SUNDERLAND)

J. Thomas Touchton* Director
- ------------------------------------
(J. THOMAS TOUCHTON)

Fred G. Weiss* Director
- ------------------------------------
(FRED G. WEISS)
</TABLE>

*By:
/s/ Gerald M. Richard March 5, 1998
----------------------------------
GERALD M. RICHARD, ATTORNEY-IN-FACT

C-9
<PAGE>

POWER OF ATTORNEY

The undersigned hereby authorizes Arthur Zeikel, Terry K. Glenn or Gerald M.
Richard, or any of them, as attorney-in-fact, to sign on his behalf,
individually and in the capacity stated below, any amendments to the
Registration Statement (including post-effective amendments) of Merrill Lynch
Global Growth Fund, Inc. and to file the same, with all exhibits thereto, with
the Securities and Exchange Commission.

/s/ Fred G. Weiss Director February 14, 1998

_____________________

FRED G. WEISS

C-10
<PAGE>

POWER OF ATTORNEY

/s/ J. Thomas Touchton Director February 14, 1998

_________________________

J. THOMAS TOUCHTON

C-11
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<C> <S> <C>
1 (b) --Articles Supplementary to the Articles of Incorporation of the
Registrant, dated November 3, 1997.
11 --Consent of Ernst & Young LLP, independent auditors for the
Registrant
16(a) --Schedule of computation of each performance quotation provided
in the Registration Statement in response to Item 22 to Class A
Shares.
16(b) --Schedule of computation of each performance quotation provided
in the Registration Statement in response to Item 22 to Class B
Shares.
16(c) --Schedule of computation of each performance quotation provided
in the Registration Statement in response to Item 22 to Class C
Shares.
16(d) --Schedule of computation of each performance quotation provided
in the Registration Statement in response to Item 22 to Class D
Shares.
17(a) --Financial Data Schedule for Class A Shares
(b) --Financial Data Schedule for Class B Shares
(c) --Financial Data Schedule for Class C Shares
(d) --Financial Data Schedule for Class D Shares
</TABLE>
<PAGE>

APPENDIX FOR GRAPHIC AND IMAGE MATERIAL

Pursuant to Rule 304 of Regulation S-T, the following table presents
fair and accurate narrative descriptions of graphic and image material omitted
from this EDGAR Submission file due to ASCII-incompatibility and crossreferences
this material to the location of each occurrence in the text.

DESCRIPTION OF OMITTED LOCATION OF GRAPHIC
GRAPHIC OR IMAGE OR IMAGE IN TEXT
- ---------------------- -------------------
Compass plate, circular Back cover of Prospectus and
graph paper and Merrill Lynch back cover of Statement of
logo including stylized market Additional Information
bull

<PAGE>

<ARTICLE> 6
<CIK> 0001043434
<NAME> MERRILL LYNCH GLOBAL GROWTH FUND, INC.
<SERIES>
<NUMBER> 001
<NAME> CLASS A

<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> OCT-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1335182327
<INVESTMENTS-AT-VALUE> 1339541499
<RECEIVABLES> 65903146
<ASSETS-OTHER> 2334001
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1407778646
<PAYABLE-FOR-SECURITIES> 63832753
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4107247
<TOTAL-LIABILITIES> 67940000
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1339353207
<SHARES-COMMON-STOCK> 3295383
<SHARES-COMMON-PRIOR> 2500
<ACCUMULATED-NII-CURRENT> 219664
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4092736)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4358511
<NET-ASSETS> 32984965
<DIVIDEND-INCOME> 1222461
<INTEREST-INCOME> 2981079
<OTHER-INCOME> 0
<EXPENSES-NET> (3983876)
<NET-INVESTMENT-INCOME> 219664
<REALIZED-GAINS-CURRENT> (4092736)
<APPREC-INCREASE-CURRENT> 4358511
<NET-CHANGE-FROM-OPS> 485439
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3409155
<NUMBER-OF-SHARES-REDEEMED> (116272)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1339738646
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1632926
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3983876
<AVERAGE-NET-ASSETS> 31729180
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> (.01)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.01
<EXPENSE-RATIO> .94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>

<ARTICLE> 6
<CIK> 0001043434
<NAME> MERRILL LYNCH GLOBAL GROWTH FUND, INC.
<SERIES>
<NUMBER> 002
<NAME> CLASS B

<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> OCT-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1335182327
<INVESTMENTS-AT-VALUE> 1339541499
<RECEIVABLES> 65903146
<ASSETS-OTHER> 2334001
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1407778646
<PAYABLE-FOR-SECURITIES> 63832753
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4107247
<TOTAL-LIABILITIES> 67940000
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1339353207
<SHARES-COMMON-STOCK> 94396060
<SHARES-COMMON-PRIOR> 2500
<ACCUMULATED-NII-CURRENT> 219664
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4092736)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4358511
<NET-ASSETS> 943187873
<DIVIDEND-INCOME> 1222461
<INTEREST-INCOME> 2981079
<OTHER-INCOME> 0
<EXPENSES-NET> (3983876)
<NET-INVESTMENT-INCOME> 219664
<REALIZED-GAINS-CURRENT> (4092736)
<APPREC-INCREASE-CURRENT> 4358511
<NET-CHANGE-FROM-OPS> 485439
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 96426773
<NUMBER-OF-SHARES-REDEEMED> (2033213)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1339738646
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1632926
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3983876
<AVERAGE-NET-ASSETS> 899804482
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> (.01)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.99
<EXPENSE-RATIO> 1.96
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>

<ARTICLE> 6
<CIK> 0001043434
<NAME> MERRILL LYNCH GLOBAL GROWTH FUND, INC.
<SERIES>
<NUMBER> 003
<NAME> CLASS C

<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> OCT-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1335182327
<INVESTMENTS-AT-VALUE> 1339541499
<RECEIVABLES> 65903146
<ASSETS-OTHER> 2334001
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1407778646
<PAYABLE-FOR-SECURITIES> 63832753
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4107247
<TOTAL-LIABILITIES> 67940000
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1339353207
<SHARES-COMMON-STOCK> 18992443
<SHARES-COMMON-PRIOR> 2500
<ACCUMULATED-NII-CURRENT> 219664
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4092736)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4358511
<NET-ASSETS> 189767857
<DIVIDEND-INCOME> 1222461
<INTEREST-INCOME> 2981079
<OTHER-INCOME> 0
<EXPENSES-NET> (3983876)
<NET-INVESTMENT-INCOME> 219664
<REALIZED-GAINS-CURRENT> (4092736)
<APPREC-INCREASE-CURRENT> 4358511
<NET-CHANGE-FROM-OPS> 485439
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 19539339
<NUMBER-OF-SHARES-REDEEMED> (549396)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1339738646
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1632926
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3983876
<AVERAGE-NET-ASSETS> 182589292
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> (.01)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.99
<EXPENSE-RATIO> 1.96
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>

<ARTICLE> 6
<CIK> 0001043434
<NAME> MERRILL LYNCH GLOBAL GROWTH FUND, INC.
<SERIES>
<NUMBER> 004
<NAME> CLASS D

<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> OCT-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1335182327
<INVESTMENTS-AT-VALUE> 1339541499
<RECEIVABLES> 65903146
<ASSETS-OTHER> 2334001
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1407778646
<PAYABLE-FOR-SECURITIES> 63832753
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4107247
<TOTAL-LIABILITIES> 67940000
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1339353207
<SHARES-COMMON-STOCK> 17381080
<SHARES-COMMON-PRIOR> 2500
<ACCUMULATED-NII-CURRENT> 219664
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4092736)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4358511
<NET-ASSETS> 173897951
<DIVIDEND-INCOME> 1222461
<INTEREST-INCOME> 2981079
<OTHER-INCOME> 0
<EXPENSES-NET> (3983876)
<NET-INVESTMENT-INCOME> 219664
<REALIZED-GAINS-CURRENT> (4092736)
<APPREC-INCREASE-CURRENT> 4358511
<NET-CHANGE-FROM-OPS> 485439
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 18012208
<NUMBER-OF-SHARES-REDEEMED> (633628)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1339738646
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1632926
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3983876
<AVERAGE-NET-ASSETS> 167636691
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .01
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.01
<EXPENSE-RATIO> 1.19
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>

EXHIBIT 99.1B

MERRILL LYNCH GLOBAL GROWTH FUND, INC.
ARTICLES SUPPLEMENTARY TO ARTICLES OF INCORPORATION
INCREASING THE AUTHORIZED CAPITAL STOCK OF THE
CORPORATION

MERRILL LYNCH GLOBAL GROWTH FUND, INC., a Maryland corporation having
its principal Maryland office c/o The Corporation Trust Incorporated, 32 South
Street, Baltimore, Maryland 21202 (hereinafter called the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation, that:

FIRST: The Corporation is registered as an open-end company under the
Investment Company Act of 1940, as amended, with authority to issue FOUR HUNDRED
MILLION (400,000,000) shares of capital stock. The Corporation has four classes
of capital stock 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. All shares of all
classes and series of the Corporation's capital stock have a par value of Ten
Cents ($.10) per share and an aggregate par value of FORTY MILLION Dollars
($40,000,000).

SECOND: The Board of Directors of the Corporation, acting in accordance
with Section 2-105(c) of the Maryland Corporations and Associations Code, hereby
increases the total number of authorized shares of Class B Common Stock of the
Corporation by TWO HUNDRED MILLION (200,000,000) shares.

THIRD: After this increase in the number of authorized shares of capital
stock of the Corporation, the Corporation will have authority to issue SIX
HUNDRED MILLION (600,000,000) shares of capital stock and the capital stock will
consist of ONE HUNDRED MILLION (100,000,000) shares of Class A Common Stock,
THREE HUNDRED MILLION (300,000,000) 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.

FOURTH: After this increase in the number of authorized shares of
capital stock of the Corporation, all shares of all classes and series of the
Corporation's capital stock will have a par value of Ten Cents ($.10) per share
and an aggregate par value of SIXTY MILLION Dollars ($60,000,000).
<PAGE>

IN WITNESS WHEREOF, MERRILL LYNCH GLOBAL GROWTH FUND, INC. has caused
these Articles Supplementary to be signed in its name and on its behalf by a
duly authorized officer and attested by its Secretary on November 3, 1997.

MERRILL LYNCH GLOBAL GROWTH FUND,
INC.

By: /s/ Lawrence R. Fuller
----------------------
Name: Lawrence R. Fuller
Title: Vice President

Attest:

/s/ PHILIP M. MANDEL
- ---------------------------
Philip M. Mandel, Secretary

THE UNDERSIGNED officer of MERRILL LYNCH GLOBAL GROWTH FUND, INC., who
executed on behalf of said CORPORATION the foregoing Articles Supplementary, of
which this certificate is made a part, hereby acknowledges, in the name and on
behalf of said Corporation, the foregoing Articles Supplementary to be
the corporate act of said Corporation and further certifies that, to the best of
his knowledge, information and believe, the matters and facts set forth therein
with respect to the authorization and approval thereof are true in all material
respects, and that this statement is made under the penalties for perjury.

/s/ Lawrence R. Fuller
-------------------------
Name: Lawrence R. Fuller
Title: Vice President

<PAGE>

EXHIBIT 99.11

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "General Information -
Independent Auditors" and to the use of our report dated September 8, 1997, in
this Registration Statement on Form N-1A under the Securities Act of 1933 (File
No. 333-32899) and under the Investment Company Act of 1940 (File No. 811-8327)
and related Prospectus of Merrill Lynch Global Growth Fund, Inc.

/s/ ERNST & YOUNG LLP

Princeton, New Jersey
March 2, 1998

<PAGE>

EXHIBIT 99.16A

<TABLE>
<CAPTION>
Since Inception
Global Growth Fund Class A Average Annual Since Inception
October 31, 1997 to December 31, 1997 Total Return Total Return*
======================================================= ================ ================
<S> <C> <C>
Initial Investment $ 1,000.00 $ 1,000.00

Divided by Initial Maximum Offering Price 10.55
----------------
Divided by Initial Net Asset Value 10.00
----------------
Equals Shares Purchased 94,750 100,000

Plus Shares Acquired through Dividend Reinvestment -- --
--------------- ----------------

Equals Shares held at Ending Period Date 94,750 100,000

Multiplied by Net Asset Value at Ending Period Date 10.01 10.01
---------------- ----------------

Equals Ending Redeemable Value (ERV) at Period End Date $ 948.45 $ 1,001.00

Divide ERV by $1000 (P) 0.9484 1.0010

Subtract 1 -0.0516 0.0010

Expressed as a Percentage - Equals the
Aggregate Total Return for the Period -5.16%
===============

Expressed as a Percentage - Equals the
Aggregate Total Return for the Period 0.10%
================

Divide ERV by $1000 (P) 0.9484

Raise to the power of 5.9836

Equals 0.7285

Subtract 1 -0.2715

Expressed as a Percentage - Equals the
Average Annualized Total Return for the Period -27.16%
================
</TABLE>
* Does NOT include sales charge for the period.

<PAGE>
Avg Ann-CDSL
EXHIBIT 99.16B

<TABLE>
<CAPTION>
Since Inception
Global Growth Fund Class B Average Annual Since Inception
October 31, 1997 to December 31, 1997 Total Return Total Return*
======================================================= ================ ================
<S> <C> <C>
Initial Investment $ 1,000.00 $ 1,000.00

Divided by Initial Net Asset Value 10.00 10.00
--------------- ----------------

Equals Shares Purchased 100,000 100,000

Plus Shares Acquired through Dividend Reinvestment -- --
--------------- ----------------

Equals Shares held at Ending Period Date 100,000 100,000

Multiplied by Net Asset Value at Ending Period Date 8.88 9.89
---------------- ----------------

Equals Ending Value before Deduction of CDSL
at Period End Date 888.00 888.00

Less Deferred Sales Charge 39.96 --
---------------- ----------------

Equals Ending Redeemable Value (ERV) at Period End Date $ 959.04 $ 888.00

Divide ERV by $1000 (P) 0.9580 0.8880

Subtract 1 -0.0410 -0.0010

Expressed as a Percentage - Equals the
Aggregate Total Return for the Period -4.10%
================

Expressed as a Percentage - Equals the
Aggregate Total Return for the Period -0.10%
===============

Divide ERV by $1000 (P) 0.9590

Raise to the power of 5.9838

Equals 0.7786

Subtract 1 -0.2214

Expressed as a Percentage - Equals the
Average Annualized Total Return for the Period -22.14%
================
</TABLE>
* Does NOT include sales charge for the period.

<PAGE>
Avg Ann-CDSL (2)
EXHIBIT 99.16C

<TABLE>
<CAPTION>
Since Inception
Global Growth Fund Class C Average Annual Since Inception
October 31, 1997 to December 31, 1997 Total Return Total Return*
======================================== ================ ================
<S> <C> <C>
Initial Investment $ 1,000.00 $ 1,000.00

Divided by Initial Net Asset Value 10.00 10.00
--------------- ----------------

Equals Shares Purchased 100,000 100,000

Plus Shares Acquired through Dividend Reinvestment -- --
--------------- ----------------

Equals Shares held at Ending Period Date 100,000 100,000

Multiplied by Net Asset Value at Ending Period Date 9.89 9.98
---------------- ----------------

Equals Ending Value before Deduction of CDSL
at Period End Date 888.00 888.00

Less Deferred Sales Charge 9.98 --
---------------- ----------------

Equals Ending Redeemable Value (ERV) at Period End Date $ 989.01 $ 989.00

Divide ERV by $1000 (P) 0.9880 0.9990

Subtract 1 -0.0110 -0.0010

Expressed as a Percentage - Equals the
Aggregate Total Return for the Period -1.10%
===============

Expressed as a Percentage - Equals the
Aggregate Total Return for the Period -0.10%
===============

Divide ERV by $1000 (P) 0.9890

Raise to the power of 5.9838

Equals 0.9360

Subtract 1 -0.0840

Expressed as a Percentage - Equals the
Average Annualized Total Return for the Period -8.40%
================
</TABLE>
* Does NOT include sales charge for the period.

<PAGE>

EXHIBIT 99.16D

<TABLE>
<CAPTION>
Since Inception
Global Growth Fund Class D Average Annual Since Inception
October 31, 1997 to December 31, 1997 Total Return Total Return*
======================================================= ================ ================
<S> <C> <C>
Initial Investment $ 1,000.00 $ 1,000.00

Divided by Initial Maximum Offering Price 10.55
---------------

Divided by Initial Net Asset Value 10.00
----------------

Equals Shares Purchased 94,750 100,000

Plus Shares Acquired through Dividend Reinvestment -- --
---------------- ----------------

Equals Shares held at Ending Period Date 94,750 100,000

Multiplied by Net Asset Value at Ending Period Date 10.01 10.01
---------------- ----------------

Equals Ending Redeemable Value (ERV) at Period End Date $ 848.45 $ 1,001.00

Divide ERV by $1000 (P) 0.9484 1.0010

Subtract 1 -0.0516 0.0010

Expressed as a Percentage - Equals the
Aggregate Total Return for the Period -5.16%
================

Expressed as a Percentage - Equals the
Aggregate Total Return for the Period 0.10%
================

Divide ERV by $1000 (P) 0.9484

Raise to the power of 5.9838

Equals 0.7285

Subtract 1 -0.2715

Expressed as a Percentage - Equals the
Average Annualized Total Return for the Period -27.15%
================
</TABLE>
* Does NOT include sales charge for the period.