MERRILL LYNCH INVESTMENT MANAGERS FUNDS INC, N-1A/A, 2000-10-06

MERRILL LYNCH INVESTMENT MANAGERS FUNDS INC
N-1A/A, 2000-10-06

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<PAGE> 1

As filed with the Securities and Exchange Commission on October 6, 2000
Securities Act File No. 333-43552
Investment Company Act File No. 811-10053

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]

Pre-Effective Amendment No. 1 [X]
Post-Effective Amendment No. [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 1 [X]

(Check appropriate box or boxes)

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

MERRILL LYNCH INVESTMENT MANAGERS FUNDS, INC.
(Exact name of Registrant as Specified in Charter)

725 South Figueroa Street, Suite 4000, Los Angeles, California 90017
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, Including Area Code: (213) 430-1000

Turner Swan, Esq.
725 South Figueroa Street, Suite 4000
Los Angeles, California 90017
(Name and Address of Agent for Service)

Copies to:

Karin Jagel Flynn, Esq.
Gardner, Carton & Douglas
321 N. Clark Street
Chicago, Illinois 60610

APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: AS SOON AS PRACTICABLE
AFTER THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT.

Title of Securities Being Registered......................Shares of Common Stock
(par value $.01 per share)

Fund Asset Management Master Trust has also executed this Registration
Statement.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

<PAGE> 2

[MERRILL LYNCH LOGO]
Merrill Lynch Low Duration Fund
of Merrill Lynch Investment Managers Funds, Inc.

October 6, 2000

THIS PROSPECTUS CONTAINS INFORMATION YOU SHOULD KNOW BEFORE
INVESTING, INCLUDING INFORMATION ABOUT RISKS. PLEASE READ
IT BEFORE YOU INVEST AND KEEP IT FOR FUTURE REFERENCE.

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

PROSPECTUS
<PAGE> 3

Table of Contents

<TABLE>
<CAPTION>
PAGE
<S> <C>
[KEY FACTS ICON]
KEY FACTS
-----------------------------------------------------------------
The Merrill Lynch Low Duration Fund at a Glance............. 3
Risk/Return Bar Chart....................................... 4
Fees and Expenses........................................... 6

[DETAILS ABOUT THE FUND ICON]
DETAILS ABOUT THE FUND
-----------------------------------------------------------------
How the Fund Invests........................................ 8
Investment Risks............................................ 10
Statement of Additional Information......................... 18

[YOUR ACCOUNT ICON]
YOUR ACCOUNT
-----------------------------------------------------------------
Merrill Lynch Select Pricing(SM) System..................... 19
How to Buy, Sell, Transfer and Exchange Shares.............. 25
How Shares are Priced....................................... 29
Participation in Merrill Lynch Fee-Based Programs........... 29
Dividends and Taxes......................................... 30

[MANAGEMENT OF THE FUND ICON]
MANAGEMENT OF THE FUND
-----------------------------------------------------------------
Fund Asset Management....................................... 32
Master/Feeder Structure..................................... 32

[FOR MORE INFORMATION ICON]
FOR MORE INFORMATION
-----------------------------------------------------------------
Shareholder Reports....................................Back Cover
Statement of Additional Information....................Back Cover
</TABLE>

MERRILL LYNCH LOW DURATION FUND
<PAGE> 4
Key Facts [KEY FACTS ICON]

THE MERRILL LYNCH LOW DURATION FUND AT A GLANCE
--------------------------------------------------------------------------------

WHAT IS THE FUND'S STATED INVESTMENT OBJECTIVE?

The investment objective of the Fund is to maximize total return, consistent
with preservation of capital.

WHAT ARE THE FUND'S GOALS?

The Fund's main goal is total return -- it looks for securities that pay
interest or dividends and that will increase in value. We cannot guarantee that
the Fund will achieve its goals.

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

The Fund is a "feeder" fund that invests all of its assets in a corresponding
"master" portfolio (the "Low Duration Master Portfolio") of the Fund Asset
Management Master Trust (the "Trust") which has the same objective as the Fund.
All investments will be made at the Trust level. This structure is sometimes
called a "master/feeder" structure. The Fund's investment results will
correspond directly to the investment results of the Low Duration Master
Portfolio in which it invests. For simplicity, this prospectus uses the term
"Fund" to include the Low Duration Master Portfolio of the Trust.

The Fund invests in a diversified portfolio of bonds of different maturities,
including U.S. GOVERNMENT SECURITIES, CORPORATE BONDS, ASSET-BACKED SECURITIES
and MORTGAGE-BACKED SECURITIES. At least 70% of its investments are securities
rated A or better by a major rating agency. Up to 30% of its investments may be
in securities rated BBB/Baa and up to 10% of its investments may be in
securities rated below investment grade -- that is, rated below BBB/Baa (none
below B). The Fund's DURATION will be from one to three years. The Fund may
actively and frequently trade its portfolio securities.

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

As with any mutual fund, the value of the Fund's investments, and therefore the
value of Fund shares, may go down. These changes may occur in response to
interest rate changes or other factors that may affect a particular issuer or
obligation. Generally, when interest rates go up, the value of bonds goes down.
The value of the Fund's shares also may be affected by market conditions and
economic or political developments. The longer the duration of the Fund, the
more the Fund's price will go down if interest rates go up. If the value of the
Fund's investments goes down, you may lose money.

IN AN EFFORT TO HELP YOU BETTER UNDERSTAND THE MANY CONCEPTS INVOLVED IN MAKING
AN INVESTMENT DECISION, WE HAVE DEFINED THE HIGHLIGHTED TERMS IN THIS PROSPECTUS
IN THE SIDEBAR.

U.S. GOVERNMENT SECURITIES -- include direct obligations issued by the U.S.
Treasury and securities issued or guaranteed by U.S. government agencies and
instrumentalities.

CORPORATE BONDS -- debt securities issued by corporations, as distinct from
securities issued by a government or its agencies or instrumentalities.

ASSET-BACKED SECURITIES -- bonds or notes backed by loan paper or accounts
receivable originated by banks, credit card companies or other providers of
credit.

MORTGAGE-BACKED SECURITIES -- securities that give the holder the right to
receive a portion of principal and/or interest payments made on a pool of
residential or commercial mortgage loans, which in some cases are guaranteed by
government agencies.

MERRILL LYNCH LOW DURATION FUND 3

<PAGE> 5

[KEY FACTS ICON] Key Facts

DURATION -- a measure of how much the price of a bond would change compared to a
change in market interest rates. See page 9 for an example.

PREPAYMENT RISK -- the risk that certain obligations will be paid off by the
obligor more quickly than anticipated and the value of these securities will
fall.

EXTENSION RISK -- the risk that certain obligations will be paid off more slowly
by the obligor than anticipated and the value of these securities will fall.

VOLATILITY -- the amount and frequency of changes in a security's value.

"JUNK" BONDS -- bonds with a credit rating of BB/Ba or lower by rating agencies.

CREDIT RISK -- the risk that the issuer of bonds will be unable to pay the
interest or principal when due.

The Fund invests in mortgage-backed and asset-backed securities. In addition to
the normal bond risks, these securities are subject to PREPAYMENT RISK and
EXTENSION RISK, and may involve more VOLATILITY than other bonds of similar
maturities. The Fund also may invest in "JUNK" BONDS, which have more CREDIT
RISK and tend to be less liquid than higher-rated securities.

High portfolio turnover resulting from active and frequent trading results in
higher mark ups and other transaction costs and can result in a greater amount
of dividends from ordinary income rather than capital gains.

An investment in the Fund is not a bank deposit and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.

See "Investment Risks" for more information about the risks associated with the
Fund.

WHO SHOULD INVEST?

The Fund may be an appropriate investment for you if you:

- Are looking for an investment that provides income.

- Want a professionally managed and diversified portfolio.

- Are willing to accept the risk that the value of your investment
may decline as the result of interest rate movements in order to
seek to maximize total return, consistent with the preservation
of capital.

- Are prepared to receive taxable dividends.

RISK/RETURN BAR CHART
--------------------------------------------------------------------------------

The Fund recently commenced operations and does not have a performance record.
The Fund will be a feeder fund of the Low Duration Master Portfolio of the
Trust. The Fund and the Low Duration Master Portfolio have identical investment
objectives and policies and use the same portfolio management personnel.

The bar chart and table shown below are based upon performance of the other
feeder fund which is the predecessor of the recently organized Low Duration
Master Portfolio of the Trust. The bar chart and table provide an indication of
the risks of investing in the Low Duration Master Portfolio,

4 MERRILL LYNCH LOW DURATION FUND
<PAGE> 6

which are identical to the risks of investing in the Fund. The bar chart shows
changes in performance of the predecessor of the Low Duration Master Portfolio
for Class A shares for each calendar year since its inception. Sales charges are
not reflected in the bar chart. The bar chart reflects the actual expenses of
the predecessor fund, but does not reflect the estimated annual operating
expenses of the Fund, which may be different. If sales charges were reflected,
returns would be less than those shown. The table compares the average annual
total returns for the Fund's Class A shares for the periods shown with those of
the Merrill Lynch 1-3 Year U.S. Treasury Note Index. The average annual total
returns of the Fund's shares are based on the performance of the predecessor of
the Low Duration Master Portfolio. How the predecessor of the Low Duration
Master Portfolio performed in the past is not necessarily an indication of how
the Low Duration Master Portfolio or the Fund will perform in the future.

During the period shown in the bar chart, the highest return for a quarter was
4.02% (quarter ended June 30, 1995) and the lowest return for a quarter was
-0.09% (quarter ended December 31, 1998). The year-to-date return as of
September 30, 2000 was 5.32%.

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS PAST PAST SINCE
(FOR THE PERIODS ENDED DECEMBER 31, 1999) ONE YEAR FIVE YEARS INCEPTION
----------------------------------------------------------------------------------------
<S> <C> <C> <C>

CLASS A* 0.09% 6.39% 6.70%(1)
Merrill Lynch 1-3 Year U.S. Treasury Note Index 3.06% 6.51% 5.37%(1)
----------------------------------------------------------------------------------------
</TABLE>

The Merrill Lynch 1-3 Year U.S. Treasury Note Index is an unmanaged Index
comprised of U.S. Treasury securities with maturities ranging from one to three
years, which are guaranteed as to the timely payment of principal and interest
by the U.S. government. The Fund invests in securities that are not reflected in
the Index or guaranteed.

* The performance is that of the predecessor of the Low Duration Master
Portfolio, including sales charges. No performance is shown for Class B, C
or D shares because the predecessor of the Low Duration Master Portfolio had
not offered shares of these classes for at least a calendar year.

(1) Since May 18, 1993.

MERRILL LYNCH LOW DURATION FUND 5

<PAGE> 7

[KEY FACTS ICON] Key Facts
UNDERSTANDING EXPENSES

Fund investors pay various fees and expenses, either directly or indirectly.
Listed below are some of the main types of expenses, which the Fund may charge:

EXPENSES PAID DIRECTLY BY THE SHAREHOLDER:

SHAREHOLDER FEES -- these include sales charges which you may pay when you buy
or sell shares of the Fund.

EXPENSES PAID INDIRECTLY BY THE SHAREHOLDER:

ANNUAL FUND OPERATING EXPENSES -- expenses that cover the costs of operating the
Fund.

MANAGEMENT FEES -- fees paid to the Investment Adviser for managing the Trust.

DISTRIBUTION FEES -- fees used to support the Fund's marketing and distribution
efforts, such as compensating Financial Consultants.

SERVICE (ACCOUNT MAINTENANCE) FEES -- fees used to compensate securities dealers
for account maintenance activities.

FEES AND EXPENSES
--------------------------------------------------------------------------------

The Fund offers four different classes of shares. Although your money will be
invested the same way no matter which class of shares you buy, there are
differences among the fees and expenses associated with each class. Not everyone
is eligible to buy every class. After determining which classes you are eligible
to buy, decide which class best suits your needs. Your Merrill Lynch Financial
Consultant can help you with this decision.

This table shows the different fees and expenses that you may pay if you buy and
hold the different classes of shares of the Fund. Future expenses may be greater
or less than those indicated below.

<TABLE>
<CAPTION>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)(a): CLASS A CLASS B(b) CLASS C CLASS D
<S> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------
Maximum Sales Charge (Load) imposed on
purchases (as a percentage of offering price) 3.00%(c) None None 3.00%(c)
----------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as a
percentage of original purchase price or
redemption proceeds, whichever is lower) None(d) 4.00%(c) 1.00%(c) None(d)
----------------------------------------------------------------------------------------------
Sales Charge (Load) imposed on Dividend
Reinvestments None None None None
----------------------------------------------------------------------------------------------
Redemption Fee None None None None
----------------------------------------------------------------------------------------------
Exchange Fee None None None None
----------------------------------------------------------------------------------------------
Maximum Account Fee None None None None
----------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM
FUND ASSETS)(e):
----------------------------------------------------------------------------------------------
MANAGEMENT FEES(f) 0.21% 0.21% 0.21% 0.21%
----------------------------------------------------------------------------------------------
DISTRIBUTION AND/OR SERVICE (12b-1) FEES(g) None 0.90% 0.90% 0.25%
----------------------------------------------------------------------------------------------
Other Expenses (including transfer agency and
administrative fees)(h)(i) 0.88% 0.88% 0.88% 0.88%
----------------------------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES(j) 1.09% 1.99% 1.99% 1.34%
----------------------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement(j) 0.51% 0.51% 0.51% 0.51%
----------------------------------------------------------------------------------------------
NET TOTAL FUND OPERATING EXPENSES(k) 0.58% 1.48% 1.48% 0.83%
----------------------------------------------------------------------------------------------
</TABLE>

(a) In addition, Merrill Lynch may charge clients a processing fee (currently
$5.35) when a client buys or redeems shares. See "How to Buy, Sell,
Transfer and Exchange Shares."

(d) You may pay a deferred sales charge if you purchase $1 million or more and
you redeem within one year.

(e) For the Fund, the fees and expenses include both the Fund and the Low
Duration Master Portfolio.

(f) Paid by the Low Duration Master Portfolio.

(g) The Fund calls the "Service Fee" an "Account Maintenance Fee." Account
Maintenance Fee is the term used in this prospectus and in all other Fund
materials. If you hold Class B or Class C shares over time, it may cost you
more in distribution (12b-1) fees than the maximum sales charge that you
would have paid if you had bought one of the other classes.

6 MERRILL LYNCH LOW DURATION FUND
<PAGE> 8

(footnotes continued from previous page)

the year. This fee begins the month following the month the account is closed
and ends at the end of the calendar year.

(i) Includes administrative fees, which are payable to the Investment Adviser
by the Fund at the annual rate of 0.25%.

(j) The Investment Adviser has contractually agreed to waive management fees
and/or reimburse expenses through June 30, 2001 as shown in the table.

(k) The net total operating expenses reflect the Investment Adviser's estimate
of expenses that will actually be incurred during the Fund's current fiscal
year, restated to reflect the contractual fee waiver and/or expense
reimbursement currently in effect.

EXAMPLES:

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

These examples assume that you invest $10,000 in the Fund for the time periods
indicated, that your investment has a 5% return each year, that you pay the
sales charges, if any, that apply to the particular class and that the Fund's
operating expenses remain the same except for the expense reimbursement in
effect for the first year. This assumption is not meant to indicate you will
receive a 5% annual rate of return. Your annual return may be more or less than
the 5% used in these examples. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:

EXPENSES IF YOU DID REDEEM YOUR SHARES:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS
-----------------------------------------------------------------------------------
<S> <C> <C>
Class A $358 $ 587
-----------------------------------------------------------------------------------
Class B $551 $ 775
-----------------------------------------------------------------------------------
Class C $251 $ 575
-----------------------------------------------------------------------------------
Class D $382 $ 663
-----------------------------------------------------------------------------------
</TABLE>

EXPENSES IF YOU DID NOT REDEEM YOUR SHARES:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS
-----------------------------------------------------------------------------------
<S> <C> <C>
Class A $358 $587
-----------------------------------------------------------------------------------
Class B $151 $575
-----------------------------------------------------------------------------------
Class C $151 $575
-----------------------------------------------------------------------------------
Class D $382 $663
-----------------------------------------------------------------------------------
</TABLE>

MERRILL LYNCH LOW DURATION FUND 7
<PAGE> 9
Details About the Fund [DETAILS ABOUT THE FUND ICON]

HOW THE FUND INVESTS
--------------------------------------------------------------------------------

The Fund's investment objective is to maximize total return, consistent with
capital preservation. The Fund invests in bonds with a portfolio duration of one
to three years. The total rate of return for the Fund is expected to rise and
fall less than a longer duration bond fund.

TYPES OF INVESTMENTS

The Fund seeks to achieve its objective by investing mainly in investment grade,
interest-bearing securities of varying maturities. These include:

- U.S. government securities

- preferred stocks

- mortgage-backed and other asset-backed securities

- corporate bonds

- bonds that are convertible into stocks

The Investment Adviser sells securities to manage portfolio duration, yield
curve exposure, sector exposure, diversification and credit quality.

In addition to these principal investments, the Fund also may invest in:

- bank certificates of deposit, fixed time deposits and bankers'
acceptances

- repurchase agreements, reverse repurchase agreements and dollar
rolls

- obligations of foreign governments or their subdivisions,
agencies and instrumentalities

- obligations of international agencies or supra-national entities

- municipal bonds

RATINGS LIMITATIONS

- at least 70% of total assets rated at least A or, if short-
term, the second highest quality grade, by a major rating agency
such as Moody's Investors Service ("Moody's") or Standard &
Poor's Ratings Group ("S&P")

- up to 30% of total assets rated Baa by Moody's or BBB by S&P

- up to 10% of total assets rated below investment grade (below
Baa/BBB), but none below B

ABOUT THE PORTFOLIO MANAGERS

Michael Sanchez is the co-Portfolio Manager of the Fund. He was the co-Portfolio
Manager of the other feeder fund that is the predecessor of the Low Duration
Master Portfolio since 1996. Before joining the Investment Adviser in 1996, Mr.
Sanchez was with Provident Investment Counsel as senior vice president and
portfolio manager from 1991 to 1995 and with ARCO Investment Management Company
as Director of Fixed Income Investments from 1988 to 1991.

John Queen is the co-Portfolio Manager of the Fund. He was the co-Portfolio
Manager of the other feeder fund that is the predecessor of the Low Duration
Master Portfolio since 1997. Prior to joining the Investment Adviser in 1997,
Mr. Queen was associated with The Capital Group as a member of an analyst team
responsible for $8 billion in fixed-income assets.

ABOUT THE INVESTMENT ADVISER

Fund Asset Management, L.P. is the Investment Adviser to the Fund.

8 MERRILL LYNCH LOW DURATION FUND
<PAGE> 10

The Investment Adviser can invest in unrated securities and will assign them the
rating of a rated security of comparable quality. After the Fund buys a
security, it may be given a lower rating or stop being rated. This will not
require the Fund to sell it, but the Investment Adviser will consider the change
in rating in deciding whether to keep the security.

MATURITY AND DURATION REQUIREMENTS

MATURITY -- The effective maturity of a bond is the weighted average period over
which principal is expected to be repaid. Stated maturity is the date when the
issuer is scheduled to make the final payment of principal. Effective maturity
is different than stated maturity because it estimates the effect of expected
principal prepayments and call provisions.

DURATION -- Duration measures the potential volatility of the price of a bond or
a portfolio of bonds prior to maturity. Duration is the magnitude of the change
in price of a bond relative to a given change in the market interest rate.
Duration incorporates a bond's yield, coupon interest payments, final maturity,
call and put features and prepayment exposure into one measure.

For any bond with interest payments occurring before principal is repaid,
duration is ordinarily less than maturity. Generally, the lower the stated or
coupon rate of interest of a bond, the longer the duration. The higher the
stated or coupon rate of interest of a bond, the shorter the duration. The
calculation of duration is based on estimates.

Duration is a tool to measure interest rate risk. Assuming a 1% change in
interest rates and the duration shown below, the Fund's price would change as
follows:

<TABLE>
<CAPTION>
DURATION CHANGE IN INTEREST RATES
----------------------------------------------------------------
<S> <C>
2 YRS. 1% DECLINE -> 2% gain in Fund price
----------------------------------------------------------------
1% RISE -> 2% decline in Fund price
----------------------------------------------------------------
</TABLE>

Other factors such as changes in credit quality, prepayments, the shape of the
yield curve and liquidity affect the price of the Fund and may correlate with
changes in interest rates. These factors can increase swings in the Fund's share
price during periods of volatile interest rate changes.

MERRILL LYNCH LOW DURATION FUND 9

<PAGE> 11

[DETAILS ABOUT THE FUND ICON] Details About the Fund

PORTFOLIO TURNOVER

As a result of the strategies described above, the Fund may have an annual
portfolio turnover rate above 100%. Portfolio turnover is generally the
percentage found by dividing the lesser of portfolio purchases or sales by the
monthly average value of the portfolio. High portfolio turnover (100% or more)
results in higher mark ups and other transaction costs and can affect the Fund's
performance. It also can result in a greater amount of dividends from ordinary
income rather than long-term capital gains.

FOREIGN BONDS

The Fund may invest in foreign bonds as follows:

- up to 25% of total assets in foreign bonds that are denominated
in U.S. dollars

- up to 15% of total assets in foreign bonds that are not
denominated in U.S. dollars

- up to 15% of total assets in emerging market foreign bonds

MONEY MARKET INVESTMENTS

To meet redemptions and when waiting to invest cash receipts, the Fund may
invest in short-term, investment grade bonds, money market mutual funds and
other money market instruments. Also, the Fund temporarily can invest up to 100%
of its assets in short-term, investment grade bonds and other money market
instruments in response to adverse market, economic or political conditions. The
Fund may not achieve its objective using this type of investing.

INVESTMENT RISKS

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

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

10 MERRILL LYNCH LOW DURATION FUND
<PAGE> 12

The Fund's principal risks are listed below:

MARKET AND SELECTION RISK

Market risk is the risk that the market will go down in value, including the
possibility that the market will go down sharply and unpredictably. Selection
risk is the risk that the investments that the Investment Adviser selects will
underperform the market or other funds with similar investment objectives and
investment strategies.

MORTGAGE-BACKED SECURITIES

Mortgage-backed securities are the right to receive a portion of principal
and/or interest payments made on a pool of residential or commercial mortgage
loans. When interest rates fall, borrowers may refinance or otherwise repay
principal on their mortgages earlier than scheduled. When this happens, certain
types of mortgage-backed securities will be paid off more quickly than
originally anticipated. Prepayment reduces the yield to maturity and average
life of mortgage-backed securities. In addition, when the Fund reinvests the
proceeds of a prepayment, it may receive a lower interest rate than the rate on
the security that was prepaid. This risk is known as "prepayment risk." When
interest rates rise, certain types of mortgage-backed securities will be paid
off more slowly than originally anticipated and the value of these securities
will fall. This risk is known as extension risk.

Because of prepayment risk and extension risk, mortgage-backed securities react
differently to changes in interest rates than other bonds. Small movements in
interest rates (both up and down) may quickly and significantly reduce the value
of certain mortgage-backed securities.

Mortgage-backed securities are issued by Federal government agencies like the
Government National Mortgage Association ("Ginnie Mae"), the Federal Home Loan
Mortgage Association ("Freddie Mac") or the Federal National Mortgage
Association ("Fannie Mae"). Principal and interest payments on mortgage-backed
securities issued by Federal government agencies are guaranteed by either the
Federal government or the government agency. This means that such securities
have very little credit risk. Other mortgage-backed securities are issued by
private corporations rather than Federal agencies. Private mortgage-backed
securities have credit risk as well as prepayment risk and extension risk.

MERRILL LYNCH LOW DURATION FUND 11

<PAGE> 13

[DETAILS ABOUT THE FUND ICON] Details About the Fund

Mortgage-backed securities may be either pass-through securities or
collateralized mortgage obligations ("CMOs"). Pass-through securities represent
a right to receive principal and interest payments collected on a pool of
mortgages, which are passed through to security holders (less servicing costs).
CMOs are created by dividing the principal and interest payments collected on a
pool of mortgages into several revenue streams ("tranches") with different
priority rights to portions of the underlying mortgage payments. Certain CMO
tranches may represent a right to receive interest only ("IOs"), principal only
("POs") or an amount that remains after other floating-rate tranches are paid
(an "inverse floater"). These securities are frequently referred to as "mortgage
derivatives" and may be extremely sensitive to changes in interest rates. If the
Fund invests in CMO tranches (including CMO tranches issued by government
agencies) and interest rates move in a manner not anticipated by the Investment
Adviser, it is possible that the Fund could lose all or substantially all of its
investment.

ASSET-BACKED SECURITIES

Like traditional bonds, the value of asset-backed securities typically increases
when interest rates fall and decreases when interest rates rise. Certain asset-
backed securities may also be subject to the risk of prepayment. In a period of
declining interest rates, borrowers may pay what they owe on the underlying
assets more quickly than anticipated. Prepayment reduces the yield to maturity
and the average life of the asset-backed securities. In addition, when the Fund
reinvests the proceeds of a prepayment, it may receive a lower interest rate
than the rate on the security that was prepaid. In a period of rising interest
rates, prepayments may occur at a slower rate than expected. As a result, the
average maturity of the Fund's portfolio will increase. The value of long-term
securities changes more widely in response to changes in interest rates than
shorter-term securities.

CREDIT RISK

Credit risk is the risk that the issuer of bonds will be unable to pay the
interest or principal when due. The degree of credit risk depends on both the
financial condition of the issuer and on the terms of the specific bonds.

INTEREST RATE RISK

Interest rate risk is the risk that prices of bonds generally increase when
interest rates decline and decrease when interest rates increase. Prices of

12 MERRILL LYNCH LOW DURATION FUND
<PAGE> 14

longer-term securities generally change more in response to interest rate
changes than do prices of shorter-term securities.

CALL AND REDEMPTION RISK

Investments in bonds carry the risk that a bond's issuer will call the bond for
redemption prior to the bond's maturity. If there is an early call of a bond,
the Fund may lose income and may have to invest the proceeds of the redemption
in bonds with lower yields than the called bond.

JUNK BONDS

Junk bonds are bonds that are rated below investment grade by the major rating
agencies or are unrated securities that the Fund's Investment Adviser believes
are of comparable quality. Although junk bonds generally pay higher rates of
interest than investment grade bonds, they are high risk investments that may
cause income and principal losses for the Fund. Junk bonds generally are less
liquid and experience more price volatility than higher rated bonds. The issuers
of junk bonds may have a larger amount of outstanding debt relative to their
assets than issuers of investment grade bonds. In the event of an issuer's
bankruptcy, claims of other creditors may have priority over the claims of junk
bond holders, leaving few or no assets available to repay junk bond holders.
Junk bonds may be subject to greater call and redemption risk than higher rated
debt securities.

The Fund also may be subject to the following risks:

WHEN-ISSUED SECURITIES, DELAYED-DELIVERY SECURITIES AND FORWARD COMMITMENTS

These types of investments involve the risk that the security the Fund buys will
lose value prior to its delivery to the Fund. There also is the risk that the
security will not be issued or that the other party will not meet its
obligation, in which case the Fund loses the investment opportunity of the
assets it has set aside to pay for the security and any gain in the security's
price.

VARIABLE RATE DEMAND OBLIGATIONS

These are floating rate securities that consist of an interest in a long-term
bond and the conditional right to demand payment prior to the bond's maturity
from a bank or other financial institution. If the bank or other

MERRILL LYNCH LOW DURATION FUND 13
<PAGE> 15

[DETAILS ABOUT THE FUND ICON] Details About the Fund

financial institution is unable to pay on demand, the Fund may be adversely
affected. In addition, these securities are subject to credit risk.

INDEXED AND INVERSE FLOATING RATE SECURITIES

The Fund may invest in securities whose potential returns are directly related
to changes in an underlying index or interest rate, known as indexed securities.
The return on indexed securities will rise when the underlying index or interest
rate rises and fall when the index or interest rate falls. The Fund may also
invest in securities whose return is inversely related to changes in an interest
rate ("inverse floaters"). In general, inverse floaters change in value in a
manner that is opposite to most bonds -- that is, interest rates on inverse
floaters will decrease when short-term rates increase and increase when
short-term rates decrease. Investments in indexed securities and inverse
floaters may subject the Fund to the risk of reduced or eliminated interest
payments. Investments in indexed securities also may subject the Fund to loss of
principal. In addition, certain indexed securities and inverse floaters may
increase or decrease in value at a greater rate than the underlying interest
rate, which effectively leverages the Fund's investment. As a result, the market
value of such securities will generally be more volatile than that of fixed rate
securities. Both indexed securities and inverse floaters can be derivative
securities and can be considered speculative.

SOVEREIGN DEBT

The Fund may invest in sovereign debt securities. These securities are issued or
guaranteed by foreign government entities. Investments in sovereign debt subject
the Fund to the risk that a government entity may delay or refuse to pay
interest or repay principal on its sovereign debt. Some of these reasons may
include cash flow problems, insufficient foreign currency reserves, political
considerations, the relative size of its debt position to its economy or its
failure to put in place economic reforms required by the International Monetary
Fund or other multilateral agencies. If a government entity defaults, it may ask
for more time in which to pay or for further loans. There is no legal process
for collecting sovereign debts that a government does not pay.

CORPORATE LOANS

Corporate loans are subject to the risk of loss of principal and income.
Borrowers do not always provide collateral for corporate loans and the value of
the collateral may not completely cover the borrower's obligations at the

14 MERRILL LYNCH LOW DURATION FUND
<PAGE> 16

time of a default. If a borrower files for protection from its creditors under
the U.S. bankruptcy laws, these laws may limit the Fund's rights to its
collateral. In addition, the value of collateral may erode during a bankruptcy
case. In the event of a bankruptcy, the holder of a corporate loan may not
recover its principal, may experience a long delay in recovering its investment
and may not receive interest during the delay.

CONVERTIBLE SECURITIES

Convertibles are generally bonds or preferred stocks that may be converted into
common stock. Convertibles typically pay current income, as either interest
(bond convertibles) or dividends (preferred stocks). A convertible's value
usually reflects both the stream of current income payments and the value of the
underlying common stock. The market value of a convertible performs like regular
bonds; that is, if market interest rates rise, the value of a convertible
usually falls. Since it is convertible into common stock, the convertible also
has the same types of market and issuer risk as the underlying common stock.

FOREIGN MARKET RISK

The Fund may invest a portion of its assets in foreign securities. These
investments involve special risks not present in U.S. investments that can
increase the chances that the Fund will lose money. In particular, investments
in foreign securities involve the following risks, which are generally greater
for investments in emerging markets:

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

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

MERRILL LYNCH LOW DURATION FUND 15
<PAGE> 17

[DETAILS ABOUT THE FUND ICON] Details About the Fund

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

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

- Prices of foreign securities may go up and down more than prices
of securities traded in the U.S.

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

- The value of the Fund's foreign holdings (and hedging
transactions in foreign currencies) will be affected by changes
in currency exchange rates.

- The costs of foreign securities transactions tend to be higher
than those of U.S. transactions.

- If the Fund purchases a bond issued by a foreign government, the
government may be unwilling or unable to make payments when due.
There may be no formal bankruptcy proceeding by which the Fund
would be able to collect amounts owed by a foreign government.

EUROPEAN ECONOMIC AND MONETARY UNION (EMU)

A number of European countries have entered into EMU in an effort to reduce
trade barriers between themselves and eliminate fluctuations in their
currencies. EMU established a single European currency (the euro), which

16 MERRILL LYNCH LOW DURATION FUND
<PAGE> 18

was introduced on January 1, 1999 and is expected to replace the existing
national currencies of all initial EMU participants by July 1, 2002. Certain
securities (beginning with government and corporate bonds) were redenominated in
the euro. These securities trade and make dividend and other payments only in
euros. Like other investment companies and business organizations, including the
companies in which the Fund invests, the Fund could be adversely affected if the
transition to the euro, or EMU as a whole, does not take effect as planned or if
a participating country withdraws from EMU.

DERIVATIVES

The Fund also may use "derivatives." Derivatives are financial instruments, like
futures, forwards, options and swaps, the values of which are derived from other
securities, commodities (such as gold or oil) or indexes (such as the S&P 500).
Derivatives may allow the Fund to increase or decrease its level of risk
exposure more quickly and efficiently than transactions in other types of
instruments. If the Fund invests in derivatives, the investments may not be
effective as a hedge against price movements and can limit potential for growth
in the value of an interest in the Fund. Derivatives are volatile and involve
significant risks, including:

- LEVERAGE RISK -- Leverage risk is the risk associated with
certain types of investments or trading strategies that
relatively small market movements may result in large changes in
the value of an investment. Certain investments or trading
strategies that involve leverage can result in losses that
greatly exceed the amount originally invested.

- CREDIT RISK -- Credit risk is the risk that the counterparty on
a derivative transaction will be unable to honor its financial
obligation to the Fund.

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

- LIQUIDITY RISK -- Liquidity risk is the risk that certain
securities may be difficult or impossible to sell at the time
that the seller would like or at the price that the seller
believes the security is currently worth.

MERRILL LYNCH LOW DURATION FUND 17
<PAGE> 19

[DETAILS ABOUT THE FUND ICON] Details About the Fund

STATEMENT OF ADDITIONAL INFORMATION

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

If you would like further information about the Fund, including how it invests,
please see the Statement of Additional Information.

18 MERRILL LYNCH LOW DURATION FUND
<PAGE> 20
Your Account [YOUR ACCOUNT ICON]

MERRILL LYNCH SELECT PRICING(SM) SYSTEM
--------------------------------------------------------------------------------

The Fund offers four share classes, each with its own sales charge and expense
structure, allowing you to invest in the way that best suits your needs. Each
share class represents the same ownership interest in the same investment
portfolio. When you choose your class of shares you should consider the size of
your investment and how long you plan to hold your shares. Your Merrill Lynch
Financial Consultant can help you determine which share class is best suited to
your personal financial goals.

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

If you select Class B or C shares, you will invest the full amount of your
purchase price but you will be subject to an account maintenance fee of 0.25%
and a distribution fee of 0.65%.

Because these fees are paid out of the Fund's assets on an ongoing basis, over
time these fees increase the cost of your investment and may cost you more than
paying other types of sales charges. In addition, you may be subject to a
deferred sales charge when you sell Class B or C shares.

The Fund's shares are distributed by FAM Distributors, Inc., an affiliate of
Merrill Lynch.

MERRILL LYNCH LOW DURATION FUND 19

<PAGE> 21

[YOUR ACCOUNT ICON] Your Account

The table below summarizes key features of the Merrill Lynch Select Pricing(SM)
System.

<TABLE>
<CAPTION>
CLASS A CLASS B
<S> <C> <C>
------------------------------------------------------------------------------
Availability Limited to certain Generally available
investors including: through Merrill Lynch.
- Current Class A Limited availability
shareholders through selected
- Certain Retirement Plans securities dealers and
- Participants in certain other financial
Merrill Lynch-sponsored intermediaries.
programs
- Certain affiliates of
Merrill Lynch, selected
securities dealers and
other financial
intermediaries.
------------------------------------------------------------------------------
Initial Sales Yes. Payable at time of No. Entire purchase price
Charge? purchase. Lower sales is invested in shares of
charges available for the Fund.
larger investments.
------------------------------------------------------------------------------
Deferred Sales No. (May be charged for Yes. Payable if you redeem
Charge? purchases over $1 million within four years of
that are redeemed within purchase.
one year.)
------------------------------------------------------------------------------
Account Maintenance No. 0.25% Account Maintenance
and Distribution Fee
Fees? 0.65% Distribution Fee.
------------------------------------------------------------------------------
Conversion to Class No. Yes, automatically after
D shares? approximately ten years.
------------------------------------------------------------------------------

<CAPTION>
CLASS C CLASS D
<S> <C> <C>
------------------------------------------------------------------------------
Availability Generally available Generally available
through Merrill Lynch. through Merrill Lynch.
Limited availability Limited availability
through selected through selected
securities dealers and securities dealers and
other financial other financial
intermediaries. intermediaries.
------------------------------------------------------------------------------
Initial Sales No. Entire purchase price Yes. Payable at time of
Charge? is invested in shares of purchase. Lower sales
the Fund. charges available for
larger investments.
------------------------------------------------------------------------------
Deferred Sales Yes. Payable if you redeem No. (May be charged for
Charge? within one year of purchases over $1 million
purchase. that are redeemed within
one year.)
------------------------------------------------------------------------------
Account Maintenance 0.25% Account Maintenance 0.25% Account Maintenance
and Distribution Fee Fee No Distribution Fee.
Fees? 0.65% Distribution Fee.
------------------------------------------------------------------------------
Conversion to Class No. No.
D shares?
------------------------------------------------------------------------------
</TABLE>

20 MERRILL LYNCH LOW DURATION FUND

<PAGE> 22

RIGHT OF ACCUMULATION -- permits you to pay the sales charge that would apply to
the cost or value (whichever is higher) of all shares you own in the Merrill
Lynch mutual funds that offer Select Pricing(SM) options.

LETTER OF INTENT -- permits you to pay the sales charge that would be applicable
if you add up all shares of Merrill Lynch Select Pricing(SM) System funds that
you agree to buy within a 13 month period. Certain restrictions apply.

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

If you select Class A or Class D shares, you will pay a sales charge at the time
of purchase.

<TABLE>
<CAPTION>
DEALER
AS A % OF COMPENSATION
OFFERING AS A % OF YOUR AS A % OF
YOUR INVESTMENT PRICE INVESTMENT* OFFERING PRICE
-------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 3.00% 3.09% 2.50%
-------------------------------------------------------------------------
$50,000 but less
than $100,000 2.50% 2.56% 2.00%
-------------------------------------------------------------------------
$100,000 but less
than $250,000 2.00% 2.04% 1.75%
-------------------------------------------------------------------------
$250,000 but less
than $500,000 1.50% 1.52% 1.25%
-------------------------------------------------------------------------
$500,000 but less
than $1,000,000 1.25% 1.27% 1.00%
-------------------------------------------------------------------------
$1,000,000 but less
than $2,000,000** 0.00% 0.00% 0.50%
-------------------------------------------------------------------------
$2,000,000 and
over** 0.00% 0.00% 0.25%
-------------------------------------------------------------------------
</TABLE>

* Rounded to the nearest one-hundredth percent.

** If you invest $1,000,000 or more in Class A or Class D shares, you may not
pay an initial sales charge. However, if you redeem your shares within one
year after purchase, you may be charged a deferred sales charge. This charge
is 1.00% of the lesser of the original cost of the shares being redeemed or
your redemption proceeds. A sales charge of 0.75% will be charged on
purchases of $1,000,000 or more of Class A or Class D shares by certain
employer-sponsored retirement or savings plans.

No initial sales charge applies to Class A or Class D shares that you buy
through reinvestment of dividends or distributions.

A reduced or waived sales charge on a purchase of Class A or Class D shares may
apply for:

- Purchases under a RIGHT OF ACCUMULATION or LETTER OF INTENT.

- Merrill Lynch Blueprint(SM) Program participants.

- TMA(SM) Managed Trusts.

- Certain Merrill Lynch investment or central asset accounts.

- Certain employer-sponsored retirement or savings plans.

MERRILL LYNCH LOW DURATION FUND 21

<PAGE> 23

[YOUR ACCOUNT ICON] Your Account

- Purchases using proceeds from the sale of certain Merrill Lynch
closed-end funds under certain circumstances.

- Certain investors, including directors or trustees of Merrill
Lynch mutual funds and Merrill Lynch employees.

- Certain fee-based programs of Merrill Lynch and other financial
intermediaries that have agreements with the Distributor or its
affiliates.

Only certain investors are eligible to buy Class A shares. Your Merrill Lynch
Financial Consultant can help you determine whether you are eligible to buy
Class A shares or to participate in any of these programs.

If you decide to buy shares under the initial sales charge alternative and you
are eligible to buy both Class A and Class D shares, you should buy Class A
shares since Class D shares are subject to an account maintenance fee, while
Class A shares are not.

If you redeem Class A or Class D shares and within 30 days buy new shares of the
same class, you will not pay a sales charge on the new purchase amount. The
amount eligible for this "Reinstatement Privilege" may not exceed the amount of
your redemption proceeds. To exercise the privilege, contact your Merrill Lynch
Financial Consultant, other financial intermediary or the Fund's Transfer Agent
at 1-800-MER-FUND.

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

If you select Class B or Class C shares, you do not pay an initial sales charge
at the time of purchase. However, if you redeem your Class B shares within four
years after purchase or your Class C shares within one year after purchase, you
may be required to pay a deferred sales charge. You will also pay distribution
fees of 0.65% and account maintenance fees of 0.25% on both Class B and Class C
shares each year under a distribution plan that the Fund has adopted under Rule
12b-1 of the Investment Company Act of 1940. Because these fees are paid out of
the Fund's assets on an ongoing basis, over time these fees increase the cost of
your investment and may cost you more than paying other types of sales charges.
The Distributor uses the money that it receives from the deferred sales charges
and the distribution fees to cover the costs of marketing, advertising and
compensating the Merrill Lynch Financial Consultant, selected securities dealer
or other financial intermediary who assists you in purchasing Fund shares.

22 MERRILL LYNCH LOW DURATION FUND

<PAGE> 24

CLASS B SHARES

If you redeem Class B shares within four years after purchase, you may be
charged a deferred sales charge. The amount of the charge gradually decreases as
you hold your shares over time, according to the following schedule:

<TABLE>
<CAPTION>
YEARS SINCE PURCHASE SALES CHARGE*
-------------------------------------
<S> <C>
0 - 1 4.00%
-------------------------------------
1 - 2 3.00%
-------------------------------------
2 - 3 2.00%
-------------------------------------
3 - 4 1.00%
-------------------------------------
4 AND THEREAFTER 0.00%
-------------------------------------
</TABLE>

* The percentage charge will apply to the lesser of the original cost of the
shares being redeemed or the proceeds of your redemption. Shares acquired
through reinvestment of dividends or distributions are not subject to a
deferred sales charge. Not all Merrill Lynch funds have identical deferred
sales charge schedules. If you exchange your shares for shares of another
fund, the higher charge will apply.

The deferred sales charge relating to Class B shares may be reduced or waived in
certain circumstances, such as:

- Certain post-retirement withdrawals from an IRA or other
retirement plan if you are over 59 1/2 years old.

- Redemption by certain eligible 401(a) and 401(k) plans, certain
related accounts and group plans participating in the Merrill
Lynch Blueprint(SM) Program and certain retirement plan
rollovers.

- Redemption in connection with participation in certain fee-based
programs of Merrill Lynch and other financial intermediaries
that have agreements with the Distributor or its affiliates.

- Withdrawals resulting from shareholder death or disability as
long as the waiver request is made within one year of death or
disability or, if later, reasonably promptly following
completion of probate, or in connection with involuntary
termination of an account in which Fund shares are held.

- Withdrawal through the Merrill Lynch Systematic Withdrawal Plan
of up to 10% per year of your Class B account value at the time
the plan is established.

MERRILL LYNCH LOW DURATION FUND 23

<PAGE> 25

[YOUR ACCOUNT ICON] Your Account

Your Class B shares convert automatically into Class D shares approximately ten
years after purchase. Any Class B shares received through reinvestment of
dividends or distributions paid on converting shares will also convert at that
time. Class D shares are subject to lower annual expenses than Class B shares.
The conversion of Class B to Class D shares is not a taxable event for Federal
income tax purposes.

Different conversion schedules apply to Class B shares of different Merrill
Lynch mutual funds. For example, Class B shares of a fixed-income fund convert
approximately ten years after purchase compared to approximately eight years for
equity funds. If you exchange Class B shares with an eight-year conversion
schedule for Class B shares with a ten-year conversion schedule, or vice versa,
the conversion schedule applicable to the Class B shares acquired in the
exchange will apply. If you acquire your Class B shares in an exchange from
another fund, the Fund's ten year conversion schedule will apply. If you
exchange your Class B shares in the Fund for Class B shares of another fund, the
other fund's conversion schedule will apply. The length of time that you hold
both the original and exchanged Class B shares in both funds will count toward
the conversion schedule. The conversion schedule may be modified in certain
other cases as well.

CLASS C SHARES

If you redeem Class C shares within one year after purchase, you may be charged
a deferred sales charge of 1.00%. The charge will apply to the lesser of the
original cost of the shares being redeemed or the proceeds of your redemption.
You will not be charged a deferred sales charge when you redeem shares that you
acquire through reinvestment of Fund dividends or distributions. The deferred
sales charge relating to Class C shares may be reduced or waived in connection
with involuntary termination of an account in which Fund shares are held and
withdrawals through the Merrill Lynch Systematic Withdrawal Plan.

Class C shares do not offer a conversion privilege.

24 MERRILL LYNCH LOW DURATION FUND
<PAGE> 26

HOW TO BUY, SELL, TRANSFER AND EXCHANGE SHARES
--------------------------------------------------------------------------------

The chart on the following pages summarizes how to buy, sell, transfer and
exchange shares through Merrill Lynch or other securities dealers. You may also
buy shares through the Transfer Agent. To learn more about buying, selling,
transferring or exchanging shares through the Transfer Agent, call
1-800-MER-FUND. Because the selection of a mutual fund involves many
considerations, your Merrill Lynch Financial Consultant may help you with this
decision.

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

Certain financial intermediaries may charge additional fees in connection with
transactions in Fund shares. The Fund may accept orders from certain authorized
financial intermediaries or their designees. The Fund will be deemed to receive
an order when accepted by the intermediary or designee and the order will
receive the net asset value next computed by the Fund after such acceptance. If
the payment for a purchase order is not made by a designated later time, the
order will be canceled and the financial intermediary could be held liable for
any losses.

The Investment Adviser, the Distributor or their affiliates may make payments
out of their own resources to selected securities dealers and other financial
intermediaries for providing services intended to result in the sale of Fund
shares or for shareholder servicing activities.

MERRILL LYNCH LOW DURATION FUND 25
<PAGE> 27

[YOUR ACCOUNT ICON] Your Account

Next, determine the amount of your The minimum initial investment for the Fund is $1,000 for
investment all accounts except:
- $500 for Employee Access(SM) Accounts
- $250 for certain Merrill Lynch fee-based programs
- $100 for the Merrill Lynch Blueprint(SM) Program
- $100 for retirement plans
(The minimums for initial investments may be waived under
certain circumstances.)
------------------------------------------------------------------------------------------------------
Have your Merrill Lynch Financial The price of your shares is based on the next calculation
Consultant or securities dealer of net asset value after your order is placed. Any purchase
submit your purchase order orders placed prior to the close of regular trading on the
New York Stock Exchange (generally 4:00 p.m. Eastern time)
will be priced at the net asset value determined that day.
Purchase orders placed after that time will be priced at
the net asset value determined on the next business day.
The Fund may reject any order to buy shares and may suspend
the sale of shares at any time. Merrill Lynch may charge a
processing fee to confirm a purchase. This fee is currently
$5.35.
------------------------------------------------------------------------------------------------------
Or contact the Transfer Agent To purchase shares directly, call the Transfer Agent at
1-800-MER-FUND and request a purchase application. Mail the
completed purchase application to the Transfer Agent at the
address on the inside back cover of this prospectus.
-------------------------------------------------------------------------------------------------------------------------------
Add to Your Purchase additional shares The minimum investment for additional purchases is
Investment generally $50 for all accounts except that retirement plans
have a minimum additional purchase of $1 and the minimum
for certain programs such as automatic investment plans may
be higher than the $50 minimum.
(The minimum for additional purchases may be waived under
certain circumstances.)
------------------------------------------------------------------------------------------------------
Acquire additional shares through the All dividends and capital gains distributions are
automatic dividend reinvestment plan automatically reinvested without a sales charge.
------------------------------------------------------------------------------------------------------
Participate in the automatic You may invest a specific amount on a periodic basis
investment plan through certain Merrill Lynch investment or central asset
accounts.
-------------------------------------------------------------------------------------------------------------------------------
Transfer Shares to Transfer to a participating You may transfer your Fund shares only to another
Another Securities securities dealer or other financial securities dealer that has entered into an agreement with
Dealer intermediary Merrill Lynch. Certain shareholder services may not be
available for the transferred shares. You may only purchase
additional shares of funds previously owned before the
transfer. All future trading of these assets must be
coordinated by the receiving firm.
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

26 MERRILL LYNCH LOW DURATION FUND

<PAGE> 28

<TABLE>
<CAPTION>
IF YOU WANT TO YOUR CHOICES INFORMATION IMPORTANT FOR YOU TO KNOW
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Transfer Shares to Transfer to a non-participating You must either:
Another Securities securities dealer or other financial - Transfer your shares to an account with the Transfer
Dealer (continued) intermediary Agent; or
- Sell your shares, paying any applicable deferred sales
charge.
-------------------------------------------------------------------------------------------------------------------------------
Sell Your Shares Have your Merrill Lynch Financial The price of your shares is based on the next calculation
Consultant, securities dealer or of net asset value after your order is placed. You must
other financial intermediary submit submit your request to your dealer prior to that day's
your sales order close of regular trading on the New York Stock Exchange
(generally 4:00 p.m. Eastern time). Any redemption request
placed from a dealer after that time will be priced at the
net asset value at the close of regular trading on the next
business day.
Securities dealers, including Merrill Lynch, may charge a
fee to process a redemption of shares. Merrill Lynch
currently charges a fee of $5.35. No processing fee is
charged if you redeem shares held by the Transfer Agent.
The Fund may reject an order to sell shares under certain
circumstances.
------------------------------------------------------------------------------------------------------
Sell through the Transfer Agent You may sell shares held at the Transfer Agent by writing
to the Transfer Agent at the address on the inside back
cover of this prospectus. All shareholders on the account
must sign the letter. A signature guarantee generally will
be required but may be waived in certain limited
circumstances. You can obtain a signature guarantee from a
bank, securities dealer, securities broker, credit union,
savings association, national securities exchange or
registered securities association. A notary public seal is
not acceptable. If you hold stock certificates, return the
certificates with the letter. The Transfer Agent will
normally mail redemption proceeds within seven days
following receipt of a properly completed request. If you
make a redemption request before the Fund has collected
payment for the purchase of shares, the Fund or the
Transfer Agent may delay mailing your proceeds. This delay
will usually not exceed ten days.
You may also sell shares held by the Transfer Agent by
telephone request if the amount being sold is less than
$50,000 and if certain other conditions are met. Contact
the Transfer Agent at 1-800-MER-FUND for details.
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

MERRILL LYNCH LOW DURATION FUND 27

<PAGE> 29

[YOUR ACCOUNT ICON] Your Account

<TABLE>
<CAPTION>
IF YOU WANT TO YOUR CHOICES INFORMATION IMPORTANT FOR YOU TO KNOW
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Sell Shares Participate in the Fund's Systematic You can choose to receive systematic payments from your
Systematically Withdrawal Plan Fund account either by check or through direct deposit to
your bank account on a monthly or quarterly basis. If you
have a Merrill Lynch CMA(R), CBA(R) or Retirement Account
you can arrange for systematic redemptions of a fixed
dollar amount on a monthly, bi-monthly, quarterly,
semi-annual or annual basis, subject to certain conditions.
Under either method you must have dividends and other
distributions automatically reinvested. For Class B and C
shares your total annual withdrawals cannot be more than
10% per year of the value of your shares at the time your
plan is established. The deferred sales charge is waived
for systematic redemptions. Ask your Merrill Lynch
Financial Consultant or other financial intermediary for
details.
-------------------------------------------------------------------------------------------------------------------------------
Exchange Your Select the fund into which you want You can exchange your shares of the Fund for shares of many
Shares to exchange. Be sure to read that other Merrill Lynch mutual funds. You must have held the
fund's prospectus shares used in the exchange for at least 15 calendar days
before you can exchange to another fund.
Each class of Fund shares is generally exchangeable for
shares of the same class of another Merrill Lynch fund. If
you own Class A shares and wish to exchange into a fund in
which you have no Class A shares (and are not otherwise
eligible to purchase Class A shares), you will exchange
into Class D shares.
Some of the Merrill Lynch mutual funds impose a different
initial or deferred sales charge schedule. If you exchange
Class A or D shares for shares of a fund with a higher
initial sales charge than you originally paid, you will be
charged the difference at the time of exchange. If you
exchange Class B shares for shares of a fund with a
different deferred sales charge schedule, the higher
schedule will apply. The time you hold Class B or C shares
in both funds will count when determining your holding
period for calculating a deferred sales charge at
redemption. If you exchange Class A or D shares for money
market fund shares, you will receive Class A shares of
Summit Cash Reserves Fund. Class B or C shares of the Fund
will be exchanged for Class B shares of Summit.
To exercise the exchange privilege contact your Merrill
Lynch Financial Consultant or call the Transfer Agent at
1-800-MER-FUND.
Although there is currently no limit on the number of
exchanges that you can make, the exchange privilege may be
modified or terminated at any time in the future.
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

28 MERRILL LYNCH LOW DURATION FUND

<PAGE> 30

NET ASSET VALUE -- the market value of the Fund's total assets after deducting
liabilities, divided by the number of shares outstanding.

HOW SHARES ARE PRICED
--------------------------------------------------------------------------------

When you buy shares, you pay the NET ASSET VALUE, plus any applicable sales
charge. This is the offering price. Shares are also redeemed at their net asset
value, minus any applicable deferred sales charge. The Fund calculates its net
asset value (generally by using market quotations) each day the New York Stock
Exchange is open, after the close of regular trading on the Exchange (the
Exchange generally closes at 4:00 p.m. Eastern time). If market quotations are
not available, the Fund may use fair value. The net asset value used in
determining your price is the next one calculated after your purchase or
redemption order is placed. Foreign securities owned by the Fund may trade on
weekends or other days when the Fund does not price its shares. As a result, the
Fund's net asset value may change on days when you will not be able to purchase
or redeem the Fund's shares.

Generally, Class A shares will have the highest net asset value because that
class has the lowest expenses, and Class D shares will have a higher net asset
value than Class B or Class C shares. Class B shares will have a higher net
asset value than Class C shares because Class B shares have lower distribution
expenses than Class C shares. Also dividends paid on Class A and Class D shares
will generally be higher than dividends paid on Class B and Class C shares
because Class A and Class D shares have lower expenses.

PARTICIPATION IN MERRILL LYNCH FEE-BASED PROGRAMS
--------------------------------------------------------------------------------

If you participate in certain fee-based programs offered by Merrill Lynch or
other financial intermediary, you may be able to buy Class A shares at net asset
value, including by exchanges from other share classes. Sales charges on the
shares being exchanged may be reduced or waived under certain circumstances.

You generally cannot transfer shares held through a fee-based program into
another account. Instead, you will have to redeem your shares held through the
program and purchase shares of another class, which may be subject to
distribution and account maintenance fees. This may be a taxable event and you
will pay any applicable sales charges.

If you leave one of these programs, your shares may be redeemed or automatically
exchanged into another class of Fund shares or into a money market fund. The
class you receive may be the class you originally owned

MERRILL LYNCH LOW DURATION FUND 29

<PAGE> 31

[YOUR ACCOUNT ICON] Your Account
DIVIDENDS -- ordinary income and capital gains paid to shareholders. Dividends
may be reinvested in additional Fund shares as they are paid.
"BUYING A DIVIDEND"

Unless your investment is in a tax deferred account, you may want to avoid
buying shares shortly before the Fund pays a dividend or distribution. The
reason? If you buy shares when a fund has realized but not yet distributed
income or capital gains, you will pay the full price for the shares and then
receive a portion of the price back in the form of a taxable dividend. Before
investing you may want to consult your tax adviser.

when you entered the program, or in certain cases, a different class. If the
exchange is into Class B shares, the period before conversion to Class D shares
may be modified. Any redemption or exchange will be at net asset value. However,
if you participate in the program for less than a specified period, you may be
charged a fee in accordance with the terms of the program.

Details about these features and the relevant charges are included in the client
agreement for each fee-based program and are available from your Merrill Lynch
Financial Consultant, selected securities dealer or other financial
intermediary.

DIVIDENDS AND TAXES
--------------------------------------------------------------------------------

The Fund will distribute any net investment income monthly, and any net realized
long-term or short-term capital gains annually. The Fund may also pay a special
distribution at the end of the calendar year to comply with Federal tax
requirements. DIVIDENDS may be reinvested automatically in shares of the Fund at
net asset value without a sales charge or may be taken in cash. If you would
like to receive dividends in cash, contact your Merrill Lynch Financial
Consultant, selected securities dealer, other financial intermediary or the
Transfer Agent. Although this cannot be predicted with any certainty, the Fund
anticipates that the majority of its dividends, if any, will consist of ordinary
income. Capital gains paid by the Fund, if any, may be taxable to you at
different rates depending, in part, on the length of time the Fund has held the
assets sold.

You may be subject to Federal income tax on dividends from the Fund whether you
receive them in cash or additional shares. If you redeem Fund shares or exchange
them for shares of another fund, you will generally be treated as having sold
your shares and any gain on the transaction may be subject to Federal income
tax. Capital gains are generally taxed at different rates than ordinary income
dividends. In addition, dividends from the Fund may be subject to state and
local income taxes.

If you are neither a lawful permanent resident nor a citizen of the U.S. or if
you are a foreign entity, the Fund's ordinary income dividends (which

30 MERRILL LYNCH LOW DURATION FUND
<PAGE> 32

include distributions of net short-term capital gains) will generally be subject
to a 30% U.S. withholding tax, unless a lower treaty rate applies.

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.

By law, the Fund must withhold 31% of your dividends and redemption proceeds if
you have not provided a taxpayer identification number or social security number
or if the number you have provided is incorrect.

This section summarizes some of the consequences under current Federal income
tax law of an investment in the Fund. It is not a substitute for personal tax
advice. Consult your personal tax adviser about the potential tax consequences
of an investment in the Fund under all applicable tax laws. The Fund's Statement
of Additional Information has more information about taxes.

MERRILL LYNCH LOW DURATION FUND 31
<PAGE> 33
Management of the Fund [MANAGEMENT OF THE FUND ICON]

FUND ASSET MANAGEMENT
--------------------------------------------------------------------------------

Fund Asset Management, L.P., the Fund's Investment Adviser, manages the Fund's
investments and its business operations under the overall supervision of the
Board of Trustees of the Trust. The Investment Adviser has the responsibility
for making all investment decisions for the Fund. The Trust pays the Investment
Adviser a fee at the annual rate of 0.21% of the average daily net assets of the
Low Duration Master Portfolio of the Trust. The Fund pays the Investment Adviser
an administrative fee at the annual rate of 0.25% of the average daily net
assets of the Fund.

Fund Asset Management was organized as an investment adviser in 1977 and offers
investment advisory services to more than 50 registered investment companies.
Fund Asset Management and its affiliates, including Merrill Lynch Investment
Managers, had approximately $555 billion in investment company and other
portfolio assets under management as of June 2000. This amount includes assets
managed for Merrill Lynch affiliates.

MASTER/FEEDER STRUCTURE
--------------------------------------------------------------------------------

The Fund is a "feeder" fund that invests in a corresponding "master" portfolio
of the Fund Asset Management Master Trust. (Except where indicated, this
prospectus uses the term "Fund" to mean this feeder fund and the Low Duration
Master Portfolio taken together.) Investors in the Fund will acquire an indirect
interest in the Low Duration Master Portfolio.

The Low Duration Master Portfolio may accept investments from other feeder
funds, and all the feeders of the Low Duration Master Portfolio bear the
Portfolio's expenses in proportion to their assets. This structure may enable
the Fund to reduce costs through economies of scale. A larger investment
portfolio may also reduce certain transaction costs to the extent that
contributions to and redemptions from the Portfolio from different feeders may
offset each other and produce a lower net cash flow.

However, each feeder can set its own transaction minimums, fund-specific
expenses, and other conditions. This means that one feeder could offer access to
the Low Duration Master Portfolio on more attractive terms, or could experience
better performance, than another feeder. Information about feeders is available
by calling 1-800-MER-FUND.

32 MERRILL LYNCH LOW DURATION FUND

<PAGE> 34

Whenever the Low Duration Master Portfolio holds a vote of its feeder funds, the
fund investing will pass the vote through to its own shareholders. Smaller
feeder funds may be harmed by the actions of larger feeder funds. For example, a
larger feeder fund could have more voting power than the Fund over the
operations of the Low Duration Master Portfolio.

The Fund may withdraw from the Low Duration Master Portfolio at any time and may
invest all of its assets in another pooled investment vehicle or retain an
investment adviser to manage the Fund's assets directly.

MERRILL LYNCH LOW DURATION FUND 33

<PAGE> 35

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MERRILL LYNCH LOW DURATION FUND

<PAGE> 36

[ML POTENTIAL INVESTORS CHART]

MERRILL LYNCH LOW DURATION FUND

<PAGE> 37

(LOGO)

For More Information [FOR MORE INFORMATION ICON]

SHAREHOLDER REPORTS

Additional information about the Fund's investments is available in the Fund's
annual and semi-annual reports to shareholders. In the Fund's annual report you
will find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year. You
may obtain these reports at no cost by calling 1-800-MER-FUND.

The Fund will send you one copy of each shareholder report and certain other
mailings, regardless of the number of Fund accounts you have. To receive
separate shareholder reports for each account, call your Merrill Lynch Financial
Consultant or write to the Transfer Agent at its mailing address. Include your
name, address, tax identification number and Merrill Lynch brokerage or mutual
fund account number. If you have any questions, please call your Merrill Lynch
Financial Consultant or the Transfer Agent at 1-800-MER-FUND.

STATEMENT OF ADDITIONAL INFORMATION
The Fund's Statement of Additional Information contains further
information about the Fund and is incorporated by reference (legally
considered to be part of this prospectus). You may request a free copy
by writing the Fund at Financial Data Services, Inc., P.O. Box 45289,
Jacksonville, Florida 32232-5289 or by calling 1-800-MER-FUND.

Contact your Merrill Lynch Financial Consultant or the Fund at the telephone
number or address indicated on the inside back cover of this prospectus if you
have any questions.

Information about the Fund (including the Statement of Additional Information)
can be reviewed and copied at the SEC's Public Reference Room in Washington,
D.C. Call 1-202-942-8090 for information on the operation of the public
reference room. This information is also available on the SEC's Internet site at
http://www.sec.gov and copies may be obtained upon payment of a duplicating fee
by writing the Public Reference Section of the SEC, Washington, D.C. 20549-6009.

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. NO ONE IS
AUTHORIZED TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT.

File #811-10053
Code #ML-P-3070-1000
(C) Fund Asset Management, L.P.

Merrill Lynch
Low Duration Fund

October 6, 2000

Prospectus
<PAGE> 38

[MERRILL LYNCH LOGO]
Merrill Lynch Total Return Bond Fund
of Merrill Lynch Investment Managers Funds, Inc.

October 6, 2000

THIS PROSPECTUS CONTAINS INFORMATION YOU SHOULD KNOW BEFORE
INVESTING, INCLUDING INFORMATION ABOUT RISKS. PLEASE READ
IT BEFORE YOU INVEST AND KEEP IT FOR FUTURE REFERENCE.

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

[PROSPECTUS GRAPHIC]
<PAGE> 39

Table of Contents

<TABLE>
<CAPTION>
PAGE
<S> <C>
[KEY FACTS ICON]
KEY FACTS
-----------------------------------------------------------------
The Merrill Lynch Total Return Bond Fund at a Glance........ 3
Risk/Return Bar Chart....................................... 4
Fees and Expenses........................................... 6

MERRILL LYNCH TOTAL RETURN BOND FUND

<PAGE> 40

[KEY FACTS ICON]
IN AN EFFORT TO HELP YOU BETTER UNDERSTAND THE MANY CONCEPTS INVOLVED IN MAKING
AN INVESTMENT DECISION, WE HAVE DEFINED THE HIGHLIGHTED TERMS IN THIS PROSPECTUS
IN THE SIDEBAR.

U.S. GOVERNMENT SECURITIES -- include direct obligations issued by the U.S.
Treasury and securities issued or guaranteed by U.S. government agencies and
instrumentalities.

CORPORATE BONDS -- debt securities issued by corporations, as distinct from
securities issued by a government or its agencies or instrumentalities.

ASSET-BACKED SECURITIES -- bonds or notes backed by loan paper or accounts
receivable originated by banks, credit card companies or other providers of
credit.

THE MERRILL LYNCH TOTAL RETURN BOND FUND AT A GLANCE
--------------------------------------------------------------------------------

WHAT IS THE FUND'S STATED INVESTMENT OBJECTIVE?

The investment objective of the Fund is to maximize long-term total return.

WHAT ARE THE FUND'S GOALS?

The Fund's main goal is total long-term return -- it looks for securities that
pay interest or dividends and that will increase in value over time. We cannot
guarantee that the Fund will achieve its goals.

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

The Fund is a "feeder" fund that invests all of its assets in a corresponding
"master" portfolio (the "Total Return Bond Master Portfolio") of the Fund Asset
Management Master Trust (the "Trust") which has the same objective as the Fund.
All investments will be made at the Trust level. This structure is sometimes
called a "master/feeder" structure. The Fund's investment results will
correspond directly to the investment results of the Total Return Bond Master
Portfolio in which it invests. For simplicity, this prospectus uses the term
"Fund" to include the Total Return Bond Master Portfolio of the Trust.

The Fund invests in a diversified portfolio of bonds of different maturities,
including U.S. GOVERNMENT SECURITIES, CORPORATE BONDS, ASSET-BACKED SECURITIES
and MORTGAGE-BACKED SECURITIES. At least 85% of its investments are investment
grade -- that is, rated in the top four categories by a major rating agency. Up
to 15% of its investments may be rated below investment grade (none below B).
The Fund's DURATION will be from two to eight years. The Fund may actively and
frequently trade its portfolio securities.

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

MERRILL LYNCH TOTAL RETURN BOND FUND 3

<PAGE> 41

[KEY FACTS ICON]