MERRILL LYNCH INSTITUTIONAL INTERMEDIATE FUND, DEFS14A, 1996-10-01

MERRILL LYNCH INSTITUTIONAL INTERMEDIATE FUND
DEFS14A, 1996-10-01

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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant <checked-box>
Filed by a party other than the Registrant <square>
Check the appropriate box:
<square> Preliminary Proxy Statement
<checked box> Definitive Proxy Statement
<checked box> Definitive Additional Materials
<square> Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
- -------------------------------------------------------------------------------
Merrill Lynch Institutional Intermediate Fund
(Name of Registrant as Specified in Its Charter)
- -------------------------------------------------------------------------------
Merrill Lynch Institutional Intermediate Fund
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
<square> $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2) or Item 22(a)(2) of Schedule 14A.
<square> $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
<square> Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- -------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- -------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined):
- -------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- -------------------------------------------------------------------------------
(5) Total fee paid:
- -------------------------------------------------------------------------------
<checked box> Fee paid previously with preliminary materials.
- -------------------------------------------------------------------------------
<square> Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:
- -------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- -------------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
- -------------------------------------------------------------------------------

PROXY

Merrill Lynch Institutional Intermediate Fund
800 Scudders Mill Road
Plainsboro, New Jersey 08536

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES.
___________________________________________________________

The undersigned hereby appoints each of Robert W. Crook, Terry K. Glenn
and Jerry Weiss as proxies, each with the power to appoint his substitute, and
authorizes each of them to represent and to vote, as designated below, all
shares of beneficial interest of Merrill Lynch Institutional Intermediate Fund
(the "Fund") held of record by the undersigned on September 10, 1996 at a
special meeting of shareholders of the Fund to be held on October 25, 1996 or
any adjournment thereof. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN
THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3 AND 4.

1. To consider and act upon a proposal to elect the following persons as
Trustees of the Fund:

<square> FOR all nominees <square> WITHHOLD AUTHORITY to
listed below (except vote for all nominees
as marked to the listed below
contrary below)

Robert W. Crook, A. Bruce Brackenridge, Charles C. Cabot, Jr., James T.
Flynn, Terry K. Glenn, George W. Holbrook, Jr. and W. Carl Kester.

2. To consider and act upon a proposal to approve a change in the Fund's
investment objective and to change the name of the Fund to "Merrill Lynch
Intermediate Government Bond Fund".

<square> FOR <square> AGAINST <square> ABSTAIN

3. To consider and act upon a proposal to amend the investment restrictions
of the Fund.

<square> FOR <square> AGAINST <square> ABSTAIN

4. To consider and act upon a proposal to amend the Declaration of Trust of
the Fund in connection with the implementation of the Merrill Lynch Select
Pricing{SM} System (the 'Select Pricing System'), a multiclass
distribution system for the offer and sale of shares of the Fund.

<square> FOR <square> AGAINST <square> ABSTAIN

5. To consider and act upon a proposal to ratify the selection of Deloitte &
Touche LLP as the independent auditors of the Fund to serve for the
current fiscal year.

<square> FOR <square> AGAINST <square> ABSTAIN

6. In the discretion of such proxies, upon such other business as may
properly come before the meeting or any adjournment thereof.

Please sign this proxy in the space provided
below. Execution by shareholders who are not
individuals must be made by an authorized
signatory.

Dated:

Signature

Please mark boxes <checked-box> or <square> in blue or black ink.

Please sign, date and return this Proxy
promptly using the enclosed envelope.

PAGE
<PAGE>

MERRILL LYNCH INSTITUTIONAL INTERMEDIATE FUND

800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OCTOBER 25, 1996

TO THE SHAREHOLDERS OF MERRILL LYNCH INSTITUTIONAL INTERMEDIATE FUND:

Notice is hereby given that a Special Meeting of Shareholders (the
"Meeting") of Merrill Lynch Institutional Intermediate Fund (the "Fund") will
be held at the offices of Merrill Lynch Asset Management, 800 Scudders Mill
Road, Plainsboro, New Jersey, on Friday, October 25, 1996 at 9:00 A.M. for
the following purposes:

(1) To elect a Board of Trustees to serve until their successors
are duly elected and qualified;

(2) To consider and act upon a proposal to approve a change in the
Fund's investment objective and to change the name of the Fund to "Merrill
Lynch Intermediate Government Bond Fund;"

(3) To consider and act upon a proposal to amend the investment
restrictions of the Fund;

(4) To consider and act upon a proposal to amend the Declaration of
Trust of the Fund in connection with the implementation of the Merrill
Lynch Select Pricing{SM} System (the 'Select Pricing System'), a
multiclass distribution system for the offer and sale of shares of the
Fund;

(5) To consider and act upon a proposal to ratify the selection of
Deloitte & Touche LLP to serve as independent auditors of the Fund for its
current fiscal year; and

(6) To transact such other business as may properly come before the
Meeting or any adjournment thereof.

The Board of Trustees has fixed the close of business on September 10,
1996 as the record date for the determination of shareholders entitled to
notice of and to vote at the Meeting or any adjournment thereof.

A complete list of the shareholders of the Fund entitled to vote at the
Meeting will be available and open to the examination of any shareholder of the
Fund for any purpose germane to the Meeting during ordinary business hours from
PAGE
<PAGE>
and after October 11, 1996, at 800 Scudders Mill Road, Plainsboro,
New Jersey. Shareholders are cordially invited to attend the Meeting.
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING IN PERSON ARE REQUESTED TO
COMPLETE, DATE AND SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN
THE ENVELOPE PROVIDED FOR THIS PURPOSE. The enclosed proxy is being solicited
on behalf of the Board of Trustees of the Fund.

By Order of the Board of Trustees

Jerry Weiss
SECRETARY

Plainsboro, New Jersey
Dated: October 1, 1996

PAGE
<PAGE>

PROXY STATEMENT
____________________________________________

MERRILL LYNCH INSTITUTIONAL INTERMEDIATE FUND
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
_____________________________________________

SPECIAL MEETING OF SHAREHOLDERS
OCTOBER 25, 1996
INTRODUCTION

This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Trustees (the "Board") of Merrill Lynch
Institutional Intermediate Fund (the "Fund"), to be voted at the Special
Meeting of Shareholders of the Fund (the 'Meeting'), to be held at the offices
of Merrill Lynch Asset Management, L.P. ('MLAM'), 800 Scudders Mill Road,
Plainsboro, New Jersey, on October 25, 1996 at 9:00 A.M. The approximate
mailing date of this Proxy Statement is October 1, 1996.

All properly executed proxies received prior to the Meeting will be voted
at the Meeting in accordance with the instructions marked thereon or otherwise
as provided therein. Unless instructions to the contrary are marked, proxies
will be voted 'FOR' the election of the Board, 'FOR' the proposal to approve a
change in the Fund's investment objective and to change the name of the Fund,
'FOR' the proposal to amend the fundamental investment restrictions of the
Fund, 'FOR' the amendment to the Fund's Declaration of Trust in connection with
the implementation of the Merrill Lynch Select Pricing{SM} System (the 'Select
Pricing System') and 'FOR' the ratification of the selection of independent
auditors to serve for the Fund's current fiscal year. Any proxy may be revoked
at any time prior to the exercise thereof by giving written notice to the
Secretary of the Fund.

The Board has fixed the close of business on September 10, 1996 (the
'Record Date') for the determination of shareholders entitled to notice of and
to vote at the Meetings and at any adjournment thereof. Shareholders on the
Record Date will be entitled to one vote for each share held and fractional
votes for fractional shares held, with no shares having cumulative voting
rights. As of September 10, 1996, the Fund had outstanding 5,832,561 shares
of beneficial interest in the Fund, par value $.10 per share ("Beneficial
Interest"). To the knowledge of the Fund as of September 10, 1996, no
entities owned beneficially more than five percent of the outstanding shares of
the Fund at such date other than: International Meta Systems, Inc., 100 North
Sepulveda Boulevard, Suite 601, El Segundo, California 90245-4359, which owned
411,615 shares, representing 7.05% of such outstanding shares; First Singles
Church USA, Inc., 3812 Kirkwood Avenue, Orange, California 92669-5350, which
owned 414,537 shares, representing 7.10% of such outstanding shares; and
American Cancer Society, Illinois Division Inc., 77 East Monroe, Chicago,
Illinois 60603-5700, which owned 334,250 shares, representing 5.75% of such
outstanding shares.

PAGE
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PROPOSAL NO. 1 - ELECTION OF TRUSTEES

At the Meeting, each Trustee will be elected to serve for an indefinite
term until his or her successor is elected and qualified, until his or her
death, or until he or she resigns or is otherwise removed under the Fund's
Declaration of Trust. It is the intention of the persons named in the enclosed
proxy to nominate and vote in favor of the election of the persons listed
below.

The Board knows of no reason why any of these nominees will be unable to
serve, but in the event of any such unavailability, the proxies received will
be voted for such substitute nominee or nominees as the Board may recommend.

Certain information concerning the nominees is set forth as follows:

<TABLE>
<CAPTION> COMMON STOCK
BENEFICIALLY
PRINCIPAL OCCUPATIONS OWNED AS OF
NAME AND ADDRESS DURING PAST FIVE YEARS SEPTEMBER 1,
OF NOMINEE AND PUBLIC DIRECTORSHIPS{1} AGE 1996{2} PERCENT
________________ ___________________________ ___ _______________ _______
<S> <C> <C> <C> <C>

Robert W. Crook{1, 3}. . . . Senior Vice President of 60 0 ***
One Financial Center Management ("MLAM"), and of
Boston, Massachusetts Merrill Lynch Funds
02111-2646 Distributor, Inc. ("MLFD")
since 1990 and Vice President
of MLAM and MLFD prior thereto.
Director of the Fund since
since 1986.

A. Bruce Brackenridge. . . . Group Executive of J.P. 66 0
9 Elm Lane Morgan & Co., Inc. (banking)
Bronxville, New York and Morgan Guaranty Trust
10708 Company from 1979 to 1991
and an employee of J.P.
Morgan in various capacities
from 1952 to 1991. Director
of the Fund since 1992.

Charles C. Cabot, Jr.{1}. . . Partner of the law firm 66 0 ***
One Post Office Square Sullivan & Worcester P.C. and
Boston, Massachusetts associated with that firm since
02119 1966. Director of the Fund
since 1986.

James T. Flynn{1}. . . . . . Chief Financial Officer of J.P. 57 0 ***
340 East 72nd Street Morgan & Co., Inc. from 1990 to
New York, New York 1995 and an employee of
10021 J.P. Morgan in various capacities
from 1967 to 1995. Director of
the Fund since 1996.

Terry K. Glenn{1, 3}. . . . . Executive Vice President of MLAM 55 0 ***
P.O. Box 9011 and Fund Asset Management, L.P.
Princeton, New Jersey ("FAM") since 1983; Executive
08543-9011 Vice President and Director of
Princeton Services, Inc. since
1993; President of MLFD since
1986 and Director thereof
since 1991; President of
Princeton Administrators,
L.P. since 1988. Director of
the Fund since 1986.
PAGE
<PAGE>
George W. Holbrook, Jr.{1}. . . Managing Partner of Bradley 65 0 ***
107 John Street Resources Company (private
Southport, Connecticut investment company) and
06490 associated with that firm
and its predecessors since
1953; Director of Canyon
Resources Corporation
(mineral exploration
company) and Thoratec
Laboratories Corporation
(medical device manufacturer).
Director of the Fund since 1986.

W. Carl Kester{1}. . . . . . MBA Class of 1958 Professor 44 0 ***
Morgan Hall 393 of Business Administration of
Harvard Business School Harvard University Graduate
Soldiers Field School of Business Administration
Boston, Massachusetts since 1981; Independent
02163 Consultant since 1978.
Director of the Fund since
1995.
_____ _____
***
===== =====
</TABLE>

______________________________
1 A director, trustee or member of an advisory board of certain other
investment companies for which FAM or MLAM acts as investment adviser. See
'Merrill Lynch Investment Company Board Memberships' below.
2 This information has been furnished by each nominee.
3 Interested person, as defined in the Investment Company Act of 1940, as
amended (the 'Investment Company Act'), of the Funds.

*** Less than 1%.

COMMITTEES AND BOARD MEETINGS. The Board has an Audit and Nominating
Committee (the "Committee"), which consists of the Trustees who are not
'interested persons' of the Fund within the meaning of the Investment Company
Act. The principal purpose of the Committee is to review the scope of the
annual audit conducted by the Fund's independent auditors and the evaluation by
such auditors of the accounting procedures followed by the Fund. The Committee
will also select and nominate the Trustees who are not 'interested persons' of
the Fund within the meaning of the Investment Company Act. The Committee
generally will not consider nominees recommended by shareholders of the Fund.
The non-interested Trustees have retained independent legal counsel to assist
them in connection with these duties.

Each of the current Trustees attended at least 75% of the aggregate of (i)
the total number of meetings of the Board held during the last fiscal year
while he was a Trustee and (ii) if a member, the total number of meetings of
the Committee held during the last fiscal year while he was a Trustee.

INTERESTED PERSONS. The Fund considers Mr. Crook and Mr. Glenn to be
"interested persons" of the Fund within the meaning of Section 2(a)(19) of the
Investment Company Act as a result of the positions they hold with MLAM and its
affiliates. Mr. Crook is the President of the Fund and a Senior Vice President
of MLAM and FAM. Mr. Glenn is the Executive Vice President of FAM and MLAM, a
Director of Princeton Services and President of Merrill Lynch Funds
Distributor, Inc.

COMPENSATION OF TRUSTEES. The Investment Adviser pays all compensation of
all officers of the Fund and all Trustees who are affiliated with ML & Co. or
PAGE
<PAGE>
its subsidiaries. The Fund pays each Trustee not affiliated with the
Investment Adviser an annual fee of $6,000 and pays each Trustee's out-of-
pocket expenses incurred in attending meetings of the Fund's Board of Trustees
or any committee thereof. These fees and expenses aggregated $30,000 for the
fiscal year ended October 31, 1995.

The following table sets forth, for the fiscal year ended October 31,
1995, compensation paid by the Fund to the non-affiliated Trustees and, for the
calendar year ending December 31, 1995, the aggregate compensation paid by all
investment companies advised by MLAM and its affiliate, FAM ("MLAM-advised
Funds"), to the non-affiliated Trustees. In addition, during the Fund's most
recently completed fiscal year, two Trustees who are no longer Trustees of the
Fund each received $6,000 in compensation from the Fund and $30,000 in
compensation from the Fund and MLAM-advised Funds.

<TABLE>
Pension or Retirement Aggregate Compensation from
Compensation Benefits Accrued as Part Fund and FAM/MLAM
Name of Trustee from Fund of Fund Expenses Advised Funds Paid To Trustee
_______________ ____________ ________________________ _____________________________
<C> <C> <C>
A. Bruce Brackenridge{1} $6,000 None $30,000
Charles C. Cabot, Jr.{1} 6,000 None 30,000
James T. Flynn{1,2} 0 None 0
George W. Holbrook{1} 6,000 None 30,000
W. Carl Kester{1,3} 0 None 7,500
</TABLE>

_______________________________
{1} The Trustees served on the boards of other MLAM-advised Funds as follows:
A. Bruce Brackenridge (5 funds and portfolios), Charles C. Cabot, Jr.
(5 funds and portfolios), James T. Flynn (5 funds and portfolios), George
W. Holbrook (5 funds and portfolios) and W. Carl Kester (5 funds and
portfolios).
{2 } Mr. Flynn became a Trustee in June 1996.
{3 } Mr. Kester became a Trustee in December 1995.

OFFICERS OF THE FUND. The Board of Trustees has elected 19 officers
of the Fund. The President, Treasurer and Secretary are elected annually.
The following sets forth information concerning each of these officers:

PRINCIPAL OCCUPATIONS
NAME AND ADDRESS OFFICE AND OTHER AFFILIATIONS AGE
________________ ______ ______________________ ___

<S> <C> <C> <C>
Robert W. Crook . . . . President Senior Vice President of 60
One Financial Center since 1986{1} Merrill Lynch Asset Management
Boston, Massachusetts ("MLAM"), and of Merrill Lynch
02111-2646 Funds Distributor, Inc. ("MLFD")
since 1990 and Vice President of
MLAM and MLFD prior thereto.

William E. Aldrich . . . Executive Vice President of MLAM, since 63
One Financial Center Vice President since 1993; Senior Vice President of
Boston, Massachusetts 1986{1} MLFD, since 1990; Vice President
02111-2646 of MLFD prior thereto and a Vice
President of FAM since 1981.

Michael J. Brady . . . . . . Senior Vice President of MLAM since 37
One Financial Center Vice President 1993; Vice President of MLFD
Boston, Massachusetts since 1990{1} since 1990 and an employee of MLFD
02111-2646 prior thereto.

William M. Breen . . . . . Senior Vice President of MLAM since 41
One Financial Center Vice President 1993 and Vice President of MLFD
Boston, Massachusetts since 1996 and since 1990 and Assistant Vice
02111-2646 Assistant Treasurer President of MLFD prior thereto.
since 1986{1}

Donald C. Burke. . . . . . Vice President Vice President of MLAM since 36
P.O. Box 9011 since 1994{1} 1990; emplopyee of Deloitte
Princeton, New Jersey & Touche llp from 1992 to 1990.
08543-9011

James J. Fatseas . . . . . Senior Vice President of MLAM since 40
One Financial Center Vice President since 1993; Vice President of MLFD
Boston, Massachusetts 1986{1} since 1990 and Assistant Vice
02111-2646 President of MLFD prior thereto.
PAGE
<PAGE>
N. John Hewitt . . . . . Senior Senior Vice President of 61
P.O. Box 9011 Vice President Princeton Services, Inc. since
Princeton, New Jersey since 1993{1} 1993; Senior Vice President of
08543-9011 MLAM and FAM since 1980.

William Wasel . . . . . . Senior Vice President of MLAM since 37
One Financial Center Vice President 1993; Vice President of MLFD
Boston, Massachusetts since 1986{1} since 1990 and Assistant Vice
02111-2646 President of MLFD prior thereto.

Karen D. Barbato . . . . Vice President Employee of MLFD since 32
One Financial Center since 1992{1} 1982.
Boston, Massachusetts
02111-2646

Ann Catlin . . . . . . . . Vice President Employee of MLFD since 35
One Financial Center since 1992{1} 1986.
Boston, Massachusetts
02111-2646

Charles O. Daly . . . . . Vice President Employee of MLFD since 61
One Financial Center since 1986{1} 1981.
Boston, Massachusetts
02111-2646

Diana Frankland . . . . . Vice President Employee of MLFD since 61
One Financial Center since 1986{1} 1979.
Boston, Massachusetts
02111-2646

Jay C. Harbeck . . . . . Vice President Vice President of MLAM since 61
P.O. Box 9011 since 1993{1} 1986.
Princeton, New Jersey
08543-9011

Mark E. Maguire . . . . Vice President Assistant Vice President of 36
One Financial Center since 1990{1} MLFD since 1990 and an employee
Boston, Massachusetts of MLFD since 1986.
02111-2646

Patricia A. Schena . . . Vice President Employee of MLFD since 38
One Financial Center since 1992 1980.
Boston, Massachusetts and Assistant
02111-2646 Secretary since
1986{1}

Barry F. X. Smith . . . Vice President Employee of MLFD since 31
One Financial Center since 1992{1} 1987.
Boston, Massachusetts
02111-2646

Dianne F. McDonough . Vice President Employee of MLFD since 35
One Financial Center since 1992 1983.
Boston, Massachusetts
02111-2646
PAGE
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Gerald M. Richard . . . Treasurer Senior Vice President and 47
P.O. Box 9011 since 1986{1} Treasurer of MLAM and FAM since
Princeton, New Jersey 1984; Vice President and
08543-9011 Treasurer of MLFD since 1981;
Senior Vice President and
Treasurer of Princeton
Administrators, Inc. since 1988;
Senior Vice President and
Treasurer of Princeton Services,
Inc. since 1993.

Jerry Weiss . . . . . . . . Secretary Vice President of MLAM since 38
P.O. Box 9011 since 1991 1990 and an attorney in private
Princeton, New Jersey practice prior thereto.
08543-9011
</TABLE>

_______________________________
1 Director/trustee or officer of certain other investment companies for which
FAM or MLAM acts as investment adviser.

2 This information has been furnished by each nominee.

Stock Ownership. At September 1, 1996, the Trustees and Officers of
the Fund as a group (twenty-four persons) owned an aggregate of less than
1/4 of 1% of the shares of common stock of ML & Co. and owned an aggregate of
less than 1% of the outstanding shares of the Fund.

THE BOARD OF TRUSTEES OF THE FUND, INCLUDING THE TRUSTEES WHO ARE NOT
INTERESTED PERSONS (AS SUCH TERM IS DEFINED UNDER THE INVESTMENT COMPANY ACT),
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.

PROPOSAL NO. 2 - TO CHANGE THE FUND'S INVESTMENT OBJECTIVE AND TO CHANGE THE
NAME OF THE FUND TO "MERRILL LYNCH INTERMEDIATE GOVERNMENT BOND FUND"

The investment objective of the Fund presently is "to seek current income
[by investing] only in assets that qualify both as 'liquid assets' under the
regulations of Office of Thrift Supervision and as investments permitted by the
Federal Credit Union Act and the regulations of the National Credit Union
Administration ("Permitted Investments"), as such regulations may be in effect
from time to time." It is proposed that the Fund's investment objective be
changed to read as follows: "The investment objective of the Fund is to seek
the highest possible current income consistent with the protection of capital
afforded by investing in intermediate-term debt securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities with a maximum
maturity not to exceed fifteen years." Under normal circumstances, all or
substantially all of the Fund's assets will be invested in such securities.
Under normal market conditions, the Fund will maintain a dollar-weighted
average maturity of six to eight years. Accordingly, adoption of this proposal
would permit the Fund to invest in debt securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities and would not limit the Fund
to investments that qualify as Permitted Investments. Since its inception, the
Fund has primarily invested in debt securities issued by or guaranteed by the
U.S. Government and its agencies and instrumentalities with maturities not to
exceed five years. As a result, upon adoption of the proposal, the Fund would
continue to invest primarily in the same sorts of debt securities as it has in
the past, although these debt securities may have longer maturities. Debt
securities with longer maturities generally provide a higher current yield than
shorter term debt securities, but are subject to greater changes in value in
response to changes in the general level of interest rates. Therefore, if the
PAGE
<PAGE>
proposal is adopted, an investment in shares of the Fund will involve
somewhat greater risk of changes in value due to changes in interest rates.

The Fund's current investment objective was designed to facilitate
investment in the Fund by federal savings and loan associations and federal
credit unions. However, this market has proven to be of limited viability for
the Fund, and as of September 10, 1996, approximately 10.6% of the shares
in the Fund were held by such investors. As a result, the Fund now seeks
to eliminate the restriction of its current investment objective. AS A RESULT
OF SUCH A CHANGE, THE INVESTMENTS OF THE FUND WILL NO LONGER BE CONSIDERED
PERMITTED INVESTMENTS FOR FEDERAL SAVINGS AND LOAN ASSOCIATIONS AND FEDERAL
CREDIT UNIONS. The elimination of the restriction of its current investment
objective will, however, give the Fund greater flexibility in its investments,
which should appeal to a broader range of investors.

The reorganization of the Fund entails a shift from institutional
investors to "retail" investors. In order for the Fund to operate in a retail
sales environment, it is proposed that it cease offering certain shareholder
conveniences associated with service of institutional investors. For example,
the Fund would no longer offer its shareholders telephone transfer privileges;
its settlement policy, including its dividend payment policy, would be
converted from same-day settlement to a trade date plus three day ("T plus 3")
settlement; and the Fund would offer shareholders quarterly, rather than
monthly statements.

In addition, the name of the Merrill Lynch Institutional Intermediate Fund
is proposed to be changed to "Merrill Lynch Intermediate Government Bond Fund"
to more accurately reflect the proposed new investment objective of the Fund.

Unless the Board of Trustees determines otherwise, it is anticipated that
this proposal, if approved by the shareholders of the Fund, will be implemented
on or about November 1, 1996.

PROPOSAL NO. 3 - AMENDMENT TO THE FUNDAMENTAL INVESTMENT RESTRICTIONS OF THE
FUND

The Fund has adopted investment restrictions that govern generally its
operations. Investment restrictions that are deemed fundamental may not be
changed without a vote of the outstanding shares of the Fund, while
non-fundamental investment restrictions may be changed by the Fund's Board if
it deems it in the best interest of the Fund and its shareholders to do so. In
addition to investment restrictions, the Fund operates pursuant to investment
objectives and policies, described in the Fund's Prospectus and Statement of
Additional Information, each dated April 26, 1996, that govern the investment
activities of the Fund and further limit its ability to invest in certain types
of securities or engage in certain types of transactions. These investment
objectives and policies will be unaffected by the adoption of the proposed
investment restrictions (but may be affected by the adoption of Proposal 2
contained in this Proxy Statement). Generally, the investment objective of a
Fund is a fundamental policy of the Fund that may be changed only by
shareholder vote. The investment policies of a Fund are non-fundamental and
may not be changed unless and until (i) the Board of Trustees of the Fund
explicitly authorizes, by resolution, a change in the investment policy of the
Fund and (ii) the Prospectus of the Fund is amended to reflect the change in
policy and, if appropriate, to include additional disclosure. Shareholders
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should note that certain of the proposed fundamental investment
restrictions are stated in terms of "to the extent permitted by applicable law.
"Applicable law can change over time and may become more or less restrictive
as a result. The restrictions have been drafted in this manner so that a
change in law would not require the Fund to seek a shareholder vote to amend
the restriction to conform to applicable law, as revised.

It is proposed that the investment restrictions of the Fund be modified in
order to conform them more closely to those of the other MLAM-advised Funds.
The proposed uniform restrictions are designed to provide the Fund with as much
investment flexibility as possible under the Act and applicable state
securities regulations, and to help promote operational efficiencies and
facilitate monitoring of compliance. Substantially all of the MLAM-advised
Funds operate under investment restrictions substantially similar to the
proposed restrictions.

The proposed changes to the investment restrictions are not expected to
affect materially the current operations of the Fund (other than as they may be
affected by adoption of Proposal 2 in this proxy statement). Although adoption
of new or revised investment restrictions is not likely to have any effect on
the current investment techniques employed by the Fund, it will contribute to
the overall goal of uniformity and standardization, as well as provide the Fund
with a greater ability to make future changes in non-fundamental investment
restrictions through Board action. In this regard, the Board proposes that the
Fund adopt, as described below, the uniform, updated investment restrictions.

The proposed restrictions restate many of the fundamental and non-
fundamental restrictions currently in effect for the Fund. In some instances,
certain fundamental or non-fundamental restrictions have been modified or
eliminated in accordance with developments in Federal regulations or in the
securities markets since the inception of the Fund. In other instances,
certain restrictions previously deemed fundamental have been redesignated
non-fundamental. Fundamental investment restrictions may not be changed
without a vote of the shareholders of the Fund, and the costs of shareholder
meetings for these purposes generally are borne by the Fund and its
shareholders. By making certain restrictions non-fundamental, the Board may
amend a restriction as it deems appropriate and in the best interest of the
Fund and its shareholders, without incurring the costs of seeking a shareholder
vote.

The Fund's current investment restrictions are set forth in Appendix A.
Set forth below is each proposed restriction, followed by a commentary
describing the proposed restriction and detailing the significance, if any, of
the proposed changes for the Fund.

PROPOSED FUNDAMENTAL INVESTMENT RESTRICTIONS. The fundamental investment
restrictions discussed below are proposed for the Fund. Under the proposed
fundamental investment restrictions, the Fund may not:

1. MAKE ANY INVESTMENT INCONSISTENT WITH THE FUND'S CLASSIFICATION AS A
DIVERSIFIED COMPANY UNDER THE INVESTMENT COMPANY ACT.

Commentary: Current applicable law regarding diversification of assets
requires that with respect to 75% of its total assets, a Fund may not
invest more than 5% of its total assets (taken at market value at the time
of each investment) in the securities of any one issuer or acquire more
than 10% of the voting securities of any one issuer. The U.S. Government,
its agencies and instrumentalities are not included within the definition
of "issuer" for purposes of these limitations.

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<PAGE>

At one time, state blue sky regulations applied the
diversification restriction to 100% of a mutual fund's assets, thereby
prohibiting an investment company from investing more than 5% of total
assets in a single issuer or from holding more than 10% of the voting
securities of a single issuer. These state blue sky limitations,
however, have been eliminated. The current fundamental investment
restrictions of the Fund do not contemplate 100% diversification.

If the uniform restrictions are approved, the Fund, which is currently
classified as "diversified," would be subject, as a matter of investment
policy, to the diversification restriction described above only with
respect to 75% of its total assets. As to the remaining 25% of total
assets, there would be no fundamental investment limitation on the amount
of (i) total assets the Fund could invest in a single issuer or (ii)
voting securities of a single issuer that could be held by the Fund. The
Fund could, for example, invest up to 25% of its assets in a single issuer
without limitation as to the percentage ownership of that issuer's
outstanding securities. The primary purpose of the proposal is to give
the fund the same investment flexibility as MLAM funds that have a
diversification restriction with respect to 75% of their assets, as well
as to enable the Fund to comply with any future changes in applicable law
regarding diversification requirements without incurring the costs of
soliciting a shareholder vote.

2. INVEST MORE THAN 25% OF ITS ASSETS, TAKEN AT MARKET VALUE, IN THE
SECURITIES OF ISSUERS IN ANY PARTICULAR INDUSTRY (EXCLUDING THE U.S. GOVERNMENT
AND ITS AGENCIES AND INSTRUMENTALITIES).

Commentary: The proposed restriction addresses concentration in a
particular industry. The U.S. Government, its agencies and
instrumentalities, states, municipalities and their political subdivisions
are not considered to be part of any industry.

3. MAKE INVESTMENTS FOR THE PURPOSE OF EXERCISING CONTROL OR
MANAGEMENT.

Commentary: The proposed restriction is in substance identical to the
applicable restriction in effect for the Fund.

4. PURCHASE OR SELL REAL ESTATE, EXCEPT THAT 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.

Commentary: The proposed restriction is substantially similar to the
applicable restriction in effect for the Fund. Under the proposed uniform
restrictions, investment in real estate limited partnerships is prohibited
in non-fundamental investment restriction (g) to provide the flexibility
to the Board to modify the restriction in response to future changes in
applicable law without incurring the expense of a shareholder vote.

5. MAKE LOANS TO OTHER PERSONS, EXCEPT THAT THE ACQUISITION OF BONDS,
DEBENTURES OR OTHER CORPORATE DEBT SECURITIES AND INVESTMENT IN GOVERNMENT
OBLIGATIONS, COMMERCIAL PAPER, PASS-THROUGH INSTRUMENTS, CERTIFICATES OF
DEPOSIT, BANKERS ACCEPTANCES, REPURCHASE AGREEMENTS OR ANY SIMILAR INSTRUMENTS
SHALL NOT BE DEEMED TO BE THE MAKING OF A LOAN, AND EXCEPT FURTHER THAT THE
FUND MAY LEND ITS PORTFOLIO SECURITIES, PROVIDED THAT THE LENDING OF PORTFOLIO
SECURITIES MAY BE MADE ONLY IN ACCORDANCE WITH APPLICABLE LAW AND THE
GUIDELINES SET FORTH IN THE FUND'S PROSPECTUS AND STATEMENT OF ADDITIONAL
INFORMATION, AS THEY MAY BE AMENDED FROM TIME TO TIME.

Commentary: The proposed restriction, with respect to the making of
loans, is in substance similar to the applicable restrictions in effect
for the Fund. The Fund addresses loans to other persons and securities
lending in two separate restrictions. The Fund may, as an investment
PAGE
<PAGE>
policy, restrict investment in the instruments specifically
permitted in the exception beyond the limitations set forth in
the proposed restriction.

The Fund is permitted to engage in securities lending, but has
restrictions in this regard. In particular, the Fund has a fundamental
investment restriction limiting securities lending to less than 33 1/3% of
total assets. In addition to investment restrictions, the Fund has
imposed limitations on securities lending as an investment policy.

Applicable law generally permits the lending of a fund's portfolio
securities in an amount up to 33 1/3% of the fund's total assets, provided
that such loans are made in accordance with prescribed guidelines which
are set forth in the Fund's Statement of Additional Information. The Fund
will continue to be subject to the lending limitations set forth as an
investment policy in the Prospectus and Statement of Additional
Information following approval of the proposed uniform investment
restrictions, unless and until the Board determines that an amendment to
such investment policy is in the best interest of the Fund and its
shareholders and the Prospectus of the Fund is amended.

6. ISSUE SENIOR SECURITIES TO THE EXTENT SUCH ISSUANCE WOULD NOT
VIOLATE APPLICABLE LAW.

Commentary: The Fund currently limits through an investment policy the
extent to which it may issue senior securities. The proposed restriction
substitutes instead a limitation on the issuance of senior securities
based upon applicable law.

Applicable law currently prohibits the issuance of senior securities,
defined as any bond, debenture, note or similar obligation or instrument
evidencing indebtedness, and any stock of any class having priority as to
any other class as to distribution of assets or payment of dividends, but
not including (i) bank borrowings provided that immediately thereafter the
Fund has 300% asset coverage for all borrowings, or (ii) any note or other
evidence of indebtedness representing a loan made to the Fund for
temporary purposes (i.e., to be repaid in 60 days without extension or
renewal) in an amount not exceeding 5% of the fund's total assets when the
loan is made.

certain other investment techniques, which involve leverage or establish a
prior claim to the fund's assets, may be considered senior securities,
absent appropriate segregation of assets or exemptive relief. these
techniques include standby commitment agreements, contracts for the
purchase of securities on a delayed delivery basis (i.e., firm commitment
agreements), reverse repurchase agreements, engaging in financial futures
and options thereon, forward foreign currency contracts, put and call
options, the purchase of securities on a when-issued basis and short
sales. the manner and extent to which the fund can issue senior
securities is governed by applicable law, is set forth in the Prospectus
and Statement of Additional Information and may be changed only upon
resolution of the Board.

Investments in swaps, to the extent permitted, are not treated as senior
securities so long as the fund segregates high-grade liquid debt
securities with the Fund's custodian in an amount equal to any net
payments required to be made on the swaps.

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<PAGE>
7. BORROW MONEY, EXCEPT THAT (I) THE FUND MAY BORROW FROM
BANKS (AS DEFINED IN THE INVESTMENT COMPANY ACT) IN AMOUNTS UP TO 33 1/3% OF
ITS TOTAL ASSETS (INCLUDING THE AMOUNT BORROWED), (II) THE FUND MAY BORROW
UP TO AN ADDITIONAL 5% OF ITS TOTAL ASSETS FOR TEMPORARY PURPOSES, (III)
THE FUND MAY OBTAIN SUCH SHORT-TERM CREDIT AS MAY BE NECESSARY FOR THE
CLEARANCE OF PURCHASES AND SALES OF PORTFOLIO SECURITIES AND (IV) THE
FUND MAY PURCHASE SECURITIES ON MARGIN TO THE EXTENT PERMITTED BY APPLICABLE
LAW. THE FUND MAY NOT PLEDGE ITS ASSETS OTHER THAN TO SECURE SUCH BORROWINGS
OR, TO THE EXTENT PERMITTED BY THE FUND'S INVESTMENT POLICIES AS SET FORTH IN
ITS PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION, AS THEY MAY BE
AMENDED FROM TIME TO TIME, IN CONNECTION WITH HEDGING TRANSACTIONS,
SHORT SALES, WHEN-ISSUED AND FORWARD COMMITMENT TRANSACTIONS AND SIMILAR
INVESTMENT STRATEGIES.

Commentary: The Fund's investment policies, as stated in its Prospectus
and Statement of Additional Information, include a limitation on
borrowing, and on the pledging of assets to secure borrowings, that limits
such borrowing to 10% of total assets and is more restrictive than the
restrictions in proposed restriction (7). The Fund will continue to be
limited by such investment policy on a non-fundamental basis. If the Fund
intends to borrow from a bank or to offer debt securities privately as
part of its investment policies, it will so state in its prospectus, and
if the Fund intends as an investment policy to engage in a level of
borrowing higher than 10% of total assets for investment purposes,
additional disclosure with respect to the purposes of such borrowing and
the consequences of leverage will be included in the Prospectus and
Statement of Additional Information.

With regard to purchases on margin, under current applicable law, the Fund
may not establish or use a margin account with a broker for the purpose of
effecting securities transactions on margin, except that the Fund may
obtain such short term credit as necessary for the clearance of
transactions. However, the Fund may pay initial or variation margin in
connection with futures and related options transactions, as set forth in
investment restriction (9) below, without regard to this prohibition.

8. UNDERWRITE SECURITIES OF OTHER ISSUERS EXCEPT INSOFAR AS THE FUND
TECHNICALLY MAY BE DEEMED AN UNDERWRITER UNDER THE SECURITIES ACT OF 1933 IN
SELLING PORTFOLIO SECURITIES.

Commentary: The proposed restriction is in substance identical to the
applicable restriction in effect for the Fund.

9. PURCHASE OR SELL COMMODITIES OR CONTRACTS ON COMMODITIES, EXCEPT TO
THE EXTENT 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.

Commentary: The Fund prohibits investment in commodities. Under the
Investment Company Act, a fund must state its policy relating to the
purchase and sale of commodities. The Fund currently does not anticipate
investment in tangible commodities and would be greatly restricted from
making such direct investments by the current provisions of the federal
tax laws; however, the Fund may invest in financial instruments linked to
commodities as described below. Adoption of the proposed uniform
restrictions will enable the Fund to invest in commodities only in
accordance with applicable law and with the Fund's investment policies as
stated in its Prospectus and Statement of Additional Information.
PAGE
<PAGE>
The Fund has obtained an exemptive order from the commission which, among
other things, permits investment in the commodities markets to the extent
such investment is limited to financial futures and options thereon for
hedging purposes only. The terms of the exemptive order are slightly more
restrictive than currently applicable law.

Regulations of the Commodity Futures Trading Commission applicable to the
Fund provide that futures trading activities, as described in the Fund's
Prospectus and Statement of Additional Information, will not result in the
fund being deemed a "commodity pool operator" as defined under such
regulations if the Fund adheres to certain restrictions. In particular,
to the extent that the Fund is permitted, as a matter of investment
policy, to purchase and sell futures contracts and options thereon, it may
do so (i) for bona fide hedging purposes and (ii) for non-hedging
purposes, if the aggregate initial margin and premiums required to
establish positions in such contracts and options do not exceed 5% of the
liquidation value of the Fund's portfolio, after taking into account
unrealized profits and unrealized losses on any such contracts and
options.

_________________________

If approved by the shareholders, the above-listed restrictions will
replace the fundamental investment restrictions for the Fund and, accordingly,
will become the only fundamental investment restrictions under which the Fund
will operate. If approved, the above restrictions may not be changed without
the approval of the holders of a majority of a Fund's outstanding shares (which
for this purpose and under the Investment Company Act means the lesser of (i)
67% of the shares represented at a meeting at which more than 50% of the
outstanding shares are represented or (ii) more than 50% of the outstanding
shares). PERSONS WHO ARE SHAREHOLDERS OF THE FUND ON THE RECORD DATE WILL BE
ELIGIBLE TO VOTE ON AMENDING THE INVESTMENT RESTRICTIONS, AS DESCRIBED HEREIN.
Unless the Board of Trustees determines otherwise, it is anticipated that this
proposal, if approved by the shareholders of the Fund, will be implemented on
November 1, 1996.

PROPOSED NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. The Board has adopted
the following non-fundamental investment restrictions, subject to approval of
the fundamental investment restrictions described above. Certain of the
proposed non-fundamental restrictions are in substance similar or identical to
current fundamental investment restrictions. Redesignating a restriction as
non-fundamental allows the Board the flexibility to modify the restriction in
response to changes in the securities markets or applicable law if the Board
deems it in the best interest of the Fund and its shareholders to do so.
Although future modification of a non-fundamental investment restriction would
not require a shareholder vote, modification of these restrictions would
require both (i) authorization by resolution by the Board and (ii) amendment of
the Fund's Prospectus.

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

A. PURCHASE SECURITIES OF OTHER INVESTMENT COMPANIES, EXCEPT TO THE
EXTENT SUCH PURCHASES ARE PERMITTED BY APPLICABLE LAW.

Commentary: The Fund currently states a restriction relating to
securities of other investment companies as a fundamental, rather than a
non-fundamental, restriction. Applicable law currently allows the Fund to
PAGE
<PAGE>
purchase the securities of other investment companies if immediately
thereafter not more than (i) 3% of the total outstanding voting
stock of such company is owned by the Fund, (ii) 5% of the Fund's
total assets, taken at market value, would be invested in any one such
company, (iii) 10% of the Fund's total assets, taken at market value,
would be invested in such securities, and (iv) the Fund, together with
other investment companies having the same investment adviser and
companies controlled by such companies, owns not more than 10% of the
total outstanding stock of any one closed-end investment company.

The Fund has excepted from the prohibition on purchases of securities of
other investment companies purchases made in connection with a plan of
merger, consolidation, reorganization, or acquisition. This exception is
not required and has therefore been deleted from the proposed restriction.

B. MAKE SHORT SALES OF SECURITIES OR MAINTAIN A SHORT POSITION EXCEPT
TO THE EXTENT PERMITTED BY APPLICABLE LAW.

Commentary: In a short sale, an investor sells a borrowed security and
has a corresponding obligation to "cover" by delivering at a later date
the identical security. In a short sale "against the box," an investor
sells the securities short while either owning the same securities in the
same amount or having the right to obtain securities to cover through, for
example, the investor's ownership of warrants, options, or convertible
securities. The Fund currently prohibits short sales under any
circumstances.

Under current applicable law, short sales are considered to involve the
creation of senior securities. A fund that includes short sales in its
investment policies must secure its obligation to replace the borrowed
security by depositing collateral in a segregated account in compliance
with Commission guidelines.

Short sales "against the box" are not considered speculative sales and do
not create senior securities. The Fund is not specifically authorized to
engage in short sales "against the box" but does not consider such sales
to be short sales for purposes of its investment restrictions.

If the proposed investment restrictions are adopted, the Fund will not
make short sales unless and until such policy is amended by resolution of
the Board and the Fund's Prospectus is amended. However, short sales
"against the box" will continue to be authorized to the extent permitted
under applicable law.

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 TRUSTEES HAS OTHERWISE DETERMINED TO BE LIQUID PURSUANT TO
APPLICABLE LAW.

Commentary: Under the Investment Company Act, open-end investment
companies are required to determine net asset value and offer redemption
on a daily basis with payment to follow within seven days. In order to
ensure that adequate cash is available at all times to cover redemptions,
a fund is required to limit its investments in securities deemed illiquid
to 15% of the fund's net assets.

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Under current applicable law, an illiquid asset is any asset which
may not be sold or disposed of in the ordinary course of business
within seven days at approximately the value at which a fund has valued
the investment. The types of securities that will be considered
illiquid will vary over time based on changing market conditions and
regulatory interpretations.

Under current Commission interpretations, a fund may purchase, without
regard to the foregoing limitation, securities which are not registered
under the Securities Act of 1933, as amended (the "Securities Act"),
provided that they are determined to be liquid pursuant to guidelines and
procedures established by the Board. Included among such securities are
foreign securities traded in a foreign securities market and securities
which can be offered and sold to "qualified institutional buyers," as
defined in Rule 144A under the securities act ("Rule 144A Securities").
the MLAM-advised Funds are currently permitted to invest in Rule 144A
securities.

The proposed investment restriction would increase the Fund's flexibility
with respect to the amount of securities deemed illiquid in which the fund
may invest up to the current Commission limit. The Fund, in the
Prospectus and Statement of Additional Information, may limit investment
in illiquid securities by the Fund to a percentage of less than 15% for
certain reasons.

Current applicable law does not require a fund to state its limitation on
investment in illiquid securities as a fundamental policy; however, the
Fund currently states its limitation on illiquid securities as a
fundamental, rather than a non-fundamental, restriction.

D. INVEST IN WARRANTS IF, AT THE TIME OF ACQUISITION, ITS INVESTMENTS
IN WARRANTS, VALUED AT THE LOWER OF COST OR MARKET VALUE, WOULD EXCEED 5% OF
THE FUND'S TOTAL ASSETS; INCLUDED WITHIN SUCH LIMITATION, BUT NOT TO EXCEED 2%
OF THE FUND'S TOTAL ASSETS, ARE WARRANTS WHICH ARE NOT LISTED ON THE NEW YORK
STOCK EXCHANGE OR AMERICAN STOCK EXCHANGE OR A MAJOR FOREIGN EXCHANGE. FOR
PURPOSES OF THIS RESTRICTION, WARRANTS ACQUIRED BY THE FUND IN UNITS OR
ATTACHED TO SECURITIES MAY BE DEEMED TO BE WITHOUT VALUE.

Commentary: The Fund is otherwise authorized to invest in warrants as a
matter of investment policy; however it will now be subject to the
limitation set forth in proposed non-fundamental investment restriction
(D).

E. INVEST IN SECURITIES OF COMPANIES HAVING A RECORD, TOGETHER WITH
PREDECESSORS, OF LESS THAN THREE YEARS OF CONTINUOUS OPERATION, EXCEPT TO THE
EXTENT PERMITTED UNDER APPLICABLE LAW. THIS RESTRICTION SHALL NOT APPLY TO
MORTGAGE-BACKED SECURITIES, ASSET-BACKED SECURITIES OR OBLIGATIONS ISSUED OR
GUARANTEED BY THE U.S. GOVERNMENT, ITS AGENCIES OR INSTRUMENTALITIES.

Commentary: The proposed restriction, which addresses investment by the
Fund in "unseasoned issuers," is in substance identical to the applicable
restriction in effect for the Fund; however, the Fund states this
restriction as a fundamental, rather than a non-fundamental, restriction.
There is currently no applicable legal limitation concerning investment in
unseasoned issuers.

F. PURCHASE OR RETAIN THE SECURITIES OF ANY ISSUER, IF THOSE INDIVIDUAL
OFFICERS AND TRUSTEES OF THE FUND, THE OFFICERS AND GENERAL PARTNER OF THE
INVESTMENT MANAGER, THE DIRECTORS OF SUCH GENERAL PARTNER OR THE OFFICERS AND
DIRECTORS OF ANY SUBSIDIARY THEREOF EACH OWNING BENEFICIALLY MORE THAN ONE-HALF
OF ONE PERCENT OF THE SECURITIES OF SUCH ISSUER OWN IN THE AGGREGATE MORE THAN
5% OF THE SECURITIES OF SUCH ISSUER.
PAGE
<PAGE>
Commentary: The proposed restriction, which addresses investment
by the Fund in securities of an issuer in which management of
the Fund owns shares, is in substance similar to the applicable
restriction in effect for the Fund; however, the Fund currently states
this restriction as a fundamental, rather than a non-fundamental,
restriction.

The proposed restriction applies only to MLAM and certain affiliates.
under the revised restriction, MLFD, as a subsidiary of the Investment
Manager, will continue to be included in and covered by the revised
restriction.

G. INVEST IN REAL ESTATE LIMITED PARTNERSHIP INTERESTS OR INTERESTS IN
OIL, GAS OR OTHER MINERAL LEASES, OR EXPLORATION OR DEVELOPMENT PROGRAMS,
EXCEPT THAT THE FUND MAY INVEST IN SECURITIES ISSUED BY COMPANIES THAT ENGAGE
IN OIL, GAS OR OTHER MINERAL EXPLORATION OR DEVELOPMENT ACTIVITIES.

Commentary: The proposed restriction is in substance similar to
applicable restrictions in effect for the Fund; however, the Fund states
such restrictions as a fundamental, rather than a non-fundamental,
restriction.

H. WRITE, PURCHASE OR SELL PUTS, CALLS, STRADDLES, SPREADS OR
COMBINATIONS THEREOF, EXCEPT TO THE EXTENT PERMITTED IN THE PROSPECTUS AND
STATEMENT OF ADDITIONAL INFORMATION, AS THEY MAY BE AMENDED FROM TIME TO TIME.

Commentary: The proposed restriction is in substance similar to the
applicable restriction in effect for the Fund. However, the Fund states
the restriction as a fundamental restriction. As a practical matter, the
adoption of the foregoing as a non-fundamental restriction will not change
the current policy of the Fund.

If the proposed restrictions are approved, the Fund would not be permitted
to engage in such transactions unless and until the Board determines to
establish an investment policy in this regard and the Fund's Prospectus is
amended.

PROPOSAL NO. 4 - APPROVAL OR DISAPPROVAL OF AMENDMENTS TO THE FUND'S
DECLARATION OF TRUST IN CONNECTION WITH THE IMPLEMENTATION OF THE MERRILL LYNCH
SELECT PRICING{SM} SYSTEM

DESCRIPTION OF THE SELECT PRICING SYSTEM

General. In 1988, MLAM developed a two-class distribution system for most
of its retail funds pursuant to which investors may choose to purchase Class A
shares of certain MLAM-advised Funds with a front-end sales charge or Class B
shares with a contingent deferred sales charge ('CDSC') and ongoing
distribution fees (the 'Dual Distribution System'). The Dual Distribution
System was among the first in the mutual fund industry to offer investors
alternative sales charge arrangements within the same fund.

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On April 12, 1994, the SEC issued an exemptive order permitting
certain MLAM-advised mutual funds to issue multiple classes of shares
(the 'Order'). The Order permits each such fund to create an unlimited
number of classes of shares to expand the types of sales charge arrangements
available to Fund investors without otherwise affecting investment in the
fund. In this regard, the Fund intends to implement the Select Pricing System,
as have certain other MLAM-advised Funds. Under the Select Pricing System,
eligible investors may choose from different sales charge alternatives in four
classes of shares.

At its meeting held September 9, 1996, the Board of Trustees of the Fund
approved the manner in which shares of each class will be offered and sold
under the Select Pricing System, as described in detail below. Although the
Fund currently intends to implement the Select Pricing System as described
herein, changes may be made to the distribution arrangements of any class at
any time; however, changes will not be made to the terms of the Select Pricing
System as it applies to the Fund unless and until (i) the Board of Trustees of
the Fund explicitly authorizes, by resolution, any change in the terms and (ii)
the Prospectus of the Fund is amended to reflect the change. Changes to the
Select Pricing System ordinarily would not require a vote of the shareholders
of a Fund, except in certain circumstances necessitating an amendment to the
Fund's Declaration of Trust or in which fees paid by existing shareholders
pursuant to Rule 12b-1 under the Investment Company Act ('Rule 12b-1') are
increased.

Upon implementation of the Select Pricing System, each holder of shares of
the Fund will continue to hold such shares except that they will be
reclassified as Class D shares (see "Reclassification of Outstanding Shares of
the Fund" below). Although purchasers of Class D shares generally will be
subject to a 1% front-end sales load, the Fund's existing shareholders will not
be subject to any sales load with respect to either their reclassified Class D
shares or any additional Class D shares of the Fund that they may purchase in
this Fund in the future. In addition, while the Fund's existing shares are
subject to a 0.15% annual distribution fee, the Class D shares will be subject
to a 0.10% annual account maintenance fee. Any holder may, prior to the
implementation of the Select Pricing System, exchange or redeem his shares in
accordance with the rights, privileges, designations and preferences currently
in effect.

The following table sets forth a summary of the distribution arrangements
for each class of shares under the Select Pricing System, followed by a more
detailed description of each class.

PAGE
<PAGE>
<TABLE>
<CAPTION>
Account
Class Sales Charge{1} Maintenance Distribution Conversion
Fee Fee Feature
_____ _____________ ____________ ____________ __________
<S> <C> <C> <C> <C>
A{2} Maximum 1.00% initial No No No
sales charge{3}
B CDSC for one year, at a 0.25% 0.25% B shares convert to D
rate of 1.0% during the shares automatically
first year, decreasing after approximately
to 0.0% after the first ten years{4}
year
C{5} CDSC for one year, at a 0.25% 0.25% No
rate of 1.0% during the
first year, decreasing
to 0.0% after the first
year
D Maximum 1.00% initial 0.10% No No
sales charge{3}
</TABLE>

1 Initial sales charges are imposed at the time of purchase as a percentage of
the offering price. Contingent deferred sales charges ("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. No charge will be
assessed on shares derived from reinvestment of dividends or capital gain
distributions.
2 Offered only to eligible investors. See "Class A" below.
3 Reduced for purchases of $100,000 or more. 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 0.20% CDSC for one year. See "Class
A" and "Class D" below.
4 The conversion period for dividend reinvestment shares and certain
retirement plans was modified. Also, Class B shares of certain other MLAM-
advised Funds into which exchanges may be made have an eight-year conversion
period. If Class B shares of the Fund are exchanged for Class B shares of
another MLAM-advised 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.
5 Class C shares are available only through the Exchange Privilege, as defined
below.

Class A: Class A shares will be sold subject to a front-end sales charge and
will bear no ongoing distribution or account maintenance fees. They
will be offered to a limited group of investors. Among such
investors will be certain retirement plans and participants in
certain investment programs. In addition, Class A shares will be
offered to directors and employees of ML & Co. and its subsidiaries
(the term "subsidiaries," when used with respect to ML & Co.,
includes MLAM, FAM and certain other entities directly or indirectly
wholly-owned and controlled by ML & Co.) and to members of the
boards of MLAM-advised mutual funds without an initial sales charge.
As to such ML & Co.- and MLAM-related investors, the initial sales
PAGE
<PAGE>
charge for Class A shares will be waived in its entirety.
Class A shares also will be issued on reinvestment of dividends
paid on Class A shares. The maximum initial sales charge is 1.00%
and is reduced for purchases of $100,000 and over and waived for
purchases of Class A shares by certain retirement plans in
connection with certain investment programs.

EXCHANGE PRIVILEGE. THE EXCHANGE PRIVILEGE FOR CLASS A SHAREHOLDER
UNDER THE SELECT PRICING SYSTEM WILL BE MORE RESTRICTIVE THAN THE
CURRENT EXCHANGE PRIVILEGE. Under the Select Pricing System, Class
A shareholders may exchange Class A shares of one MLAM-advised Fund
for Class A shares of a second MLAM-advised Fund if the shareholder
holds any Class A shares of the second fund in his account in which
the exchange is made at the time of the exchange. If the Class A
shareholder wants to exchange his Class A shares for shares of a
second fund, and the shareholder does not hold Class A shares of
the second fund in his account at the time of the exchange, the
shareholder will receive Class D shares of the second fund as a
result of the exchange. Class A or Class D shares may be exchanged
for Class A shares of a second 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.

For example, a shareholder owns 50 Class A shares of Merrill Lynch
Basic Value Fund, Inc. ("Basic Value") and 50 Class A shares of
Merrill Lynch World Income Fund, Inc. ('World Income') in his
personal account and 50 Class A shares of Merrill Lynch Pacific
Fund, Inc. ("Pacific") in his individual retirement account
("IRA"). In his personal account, the shareholder eliminates his
position in Basic Value by exchanging 25 shares of Basic Value for
shares of equivalent value of World Income and 25 shares of Basic
Value for shares of equivalent value of Pacific. The shareholder
will receive Class A shares of World Income, because he holds World
Income Class A shares in his personal account at the time of the
exchange, and he will receive Class D shares of Pacific, because
although he owns Pacific Class A shares, he does not hold them in
his personal account. Similarly, if the shareholder decides to
exchange back into Basic Value, he will receive Class D shares,
because he no longer holds Class A shares of Basic Value in his
personal account.

In his IRA, if the investor decides to exchange 25 Class A shares
of Pacific for shares of equivalent value of Merrill Lynch Fund for
Tomorrow, Inc. ("Fund for Tomorrow"), he will receive Class D
shares of Fund for Tomorrow, because he holds no Class A shares of
Fund for Tomorrow in his IRA. If he decides, however, to exchange
back into Pacific, he can receive Class A shares of Pacific as long
as he still holds any Class A shares of Pacific in his IRA at the
time of the exchange.

Class A shareholders also may exchange Class A shares for shares of
certain MLAM-advised money market funds. For further information
regarding the Select Pricing System exchange privilege, see
"Exchange Privilege" below.

REDUCED INITIAL SALES CHARGES. Class A investors may qualify for
reduced initial sales charges through a right of accumulation taking
into account an investor's holdings of all classes of all MLAM-
advised Funds. See "Right of Accumulation" below. Under a right of
accumulation, certain Class A shareholders who purchase or
accumulate Class A shares, together with Class B, Class C and Class
D shares, of any MLAM-advised Funds which aggregate at least $1
million also qualify to add to their investment in Class A shares
of a Fund without the imposition of a front-end sales charge.
Although these investors may not be subject to a front-end sales
charge, they may be subject to a CDSC of up to 0.20% if the shares
are redeemed within one year after purchase.
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RECLASSIFICATION OF EXISTING SHARES. Shares of the Fund outstanding
on the date of the implementation of the Select Pricing System (the
"Implementation Date") automatically will be reclassified as Class D
shares. The reclassification of the Fund's shares as Class D shares
will not be deemed a purchase or sale of the shares for Federal
income tax purposes. See "Reclassification of Outstanding Shares of
the Fund" below.

Class B: Class B shares will be sold on a deferred sales charge basis. Class
B shares do not incur a front-end sales charge, but they are
subject to an ongoing 0.25% account maintenance fee, an ongoing
0.25% distribution fee and a CDSC for a period of one year.

CONVERSION OF CLASS B SHARES TO CLASS D SHARES. After approximately
ten 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 but no
distribution fee. Automatic conversion of Class B shares into Class
D shares will occur at least once a month (on the "Conversion
Date") on the basis of the relative net asset values of the shares
of the two classes on the Conversion Date, without the imposition
of any sales load, fee or other charge. Conversion of Class B
shares to Class D shares will not be deemed a purchase or sale of
the shares for Federal income tax purposes. In addition, shares
purchased through reinvestment of dividends on Class B shares also
will convert automatically to Class D shares. The Conversion Date
for dividend reinvestment shares will be calculated taking into
account the length of time the shares underlying such dividend
reinvestment shares were outstanding. In general, Class B shares of
equity Funds will convert approximately eight years after initial
purchase, and Class B shares of taxable and tax-exempt fixed income
Funds will convert approximately ten years after initial purchase.
If during the Conversion Period a shareholder exchanges Class B
shares with a ten-year Conversion Period for Class B shares with an
eight-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 for certain retirement plans will be modified as
described under "Proposed Amendment to the Declaration of Trust of
the Fund--Class B Retirement Plans" below.

The Class B distribution fee is subject to the limitations on
asset-based sales charges imposed by the National Association of
Securities Dealers, Inc. (the "NASD"), as voluntarily modified by
MLFD. See "Limitations on Asset-Based Sales Charges" below.

EXCHANGE PRIVILEGE. Class B shareholders may exchange Class B
shares of the Fund for Class B shares of any MLAM-advised mutual
fund as well as shares of certain MLAM-advised money market funds.
See 'Exchange Privilege' below.

Class C: Class C shares will not incur a front-end sales charge when
purchased, but Class C shares are subject to a maximum ongoing
0.25% account maintenance fee and a 0.25% ongoing distribution fee.
Class C distribution fees will equal Class B distribution fees.
Class C shares are sold subject to a CDSC of 1.0% for one year. The
Class C distribution fee will be charged indefinitely subject to
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approval of the continuance of the Fund's Class C
Distribution Plan pursuant to Rule 12b-1 and the limitations on
asset-based sales charges imposed by the NASD. See "Limitations on
Asset-Based Sales Charges" below.

EXCHANGE PRIVILEGE. Class C shareholders may exchange Class C
shares of the Fund for Class C shares of any MLAM-advised mutual
fund as well as shares of certain MLAM-advised money market funds.
See 'Exchange Privilege' below.

Class D: Class D shares will be sold subject to a front-end sales charge
which will be identical to the front-end sales charge imposed on
Class A shares under the Select Pricing System, except that there is
no waiver for purchase by retirement plans in connection with
certain investment programs and that purchases of Class D shares of
the Fund by the Fund's current shareholders will not be subject to
an initial sales charge.

Class D shares are charged an ongoing 0.10% account maintenance fee
but are not subject to an ongoing distribution fee.

REDUCED INITIAL SALES CHARGES. Class D investors may qualify for
reduced initial sales charges through a right of accumulation taking
into account the investor's holdings in Class A, Class B, Class C
and Class D shares of any MLAM-advised Fund. See "Right of
Accumulation" below. Under a right of accumulation, certain
investors who purchase or accumulate at least $1 million in Class A,
Class B, Class C and/or Class D shares of any MLAM-advised Funds
may not be subject to a front-end sales charge upon the purchase
of Class D shares; however, they may be subject to a CDSC of 1.0%
if the shares are redeemed within one year after purchase.

EXCHANGE PRIVILEGE. Class D shareholders may exchange Class D
shares of one Fund for Class D shares of any MLAM-advised mutual
fund. If the shareholder holds any Class A shares of the second fund
in his account at the time of the exchange, he may exchange Class D
shares for Class A shares of the second fund. Class D shareholders
also may exchange Class D shares of the Fund for shares of certain
MLAM-advised money market funds. See "Exchange Privilege" below.

Class D shares also will be issued upon conversion of Class B
shares after the Class B Conversion Period, as more fully described
below.

MLAM developed the Dual Distribution System to provide investors with the
alternative within the same Fund of purchasing shares pursuant to either the
front-end sales charge method or the deferred sales charge method. The Select
Pricing System was developed to expand the alternatives available under the
Dual Distribution System by providing investors with additional distribution
alternatives. These alternative sales arrangements permit the investor to
choose the method of purchasing shares that the investor believes is most
beneficial given the amount of the investor's purchase, the length of time the
investor expects to hold the shares and other relevant circumstances.

FRONT-END SALES CHARGE ALTERNATIVES. Investors who prefer a front-end
sales charge alternative may elect to purchase Class D shares or, if an
eligible investor, Class A shares. Investors choosing the front-end sales
charge alternative who are eligible to purchase Class A shares should purchase
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Class A shares rather than Class D shares because of the account
maintenance fee imposed on Class D shares. Investors qualifying for
significantly reduced front-end sales charges may find the front-end
sales charge alternative particularly attractive because similar sales
charge reductions are not available with respect to the deferred sales
charges 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 front-end sales charge and, in the case of Class D
shares, the account maintenance fee. Although some investors that previously
purchased Class A shares may no longer be eligible to purchase Class A shares
of other MLAM-advised Funds, those previously purchased Class A shares, as well
as any Class B, Class C or Class D shares acquired, will count toward a
right of accumulation which may qualify the investor for reduced initial
sales charges on new front-end 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 front-end 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.

The benefit of an initial sales charge waiver for investors who purchase
at least $1 million in Class A, Class B, Class C or Class D shares of any MLAM-
advised Funds may be offset to the extent the shareholder must pay a CDSC on
shares redeemed in less than one year.

DEFERRED SALES CHARGE ALTERNATIVES. Investors that do not qualify for a
reduction of front-end sales charges may prefer the deferred sales charge
alternatives, because while Class A and Class D 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. Both Class B and Class C shares are subject to ongoing
account maintenance fees and distribution fees; however, the ongoing account
maintenance and distribution charges 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 the Conversion Period and thereafter will be subject
to significantly lower ongoing fees. Class C shares of the Fund may only be
purchased through the Exchange Privilege.

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. In making this
decision, Class B purchasers will 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. Other investors, however, may elect
to purchase Class C shares if they determine that it is advantageous to have
all their funds invested initially and they are uncertain as to the amount of
time they intend to hold the shares. Class C shareholders forgo 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
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Class B and Class C distribution fees are subject to the limitations on
asset-based sales charges imposed by the NASD, Class B shares are further
limited under a MLFD voluntary waiver of asset-based sales charges. See
"Limitations on Asset-Based Sales Charges" below.

__________________________________________________

Each Class A, Class B, Class C and Class D share of the Fund will
represent identical interests in the investment portfolio of the Fund and have
the same rights, except that Class B, Class C and Class D shares bear the
expenses of the ongoing account maintenance fee and Class B and Class C shares
also bear the expenses of the ongoing distribution fee and the additional
incremental transfer agency costs resulting from the deferred sales charge
arrangement. Class B, Class C and Class D shares have exclusive voting rights
with respect to the distribution plan adopted pursuant to Rule 12b-1 applicable
to each respective class. Each class also has different exchange privileges.
The deferred sales charges that are imposed on Class B and Class C shares will
be imposed directly and respectively 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.

The implementation of the Select Pricing System will not adversely affect
the net asset value of a current shareholder's investment in the Fund.
Outstanding shares will not be subject to any charge as a result of the
reclassification. Four new and separate classes will be added (and the
outstanding shares of the Fund will be reclassified as one of these), having no
adverse effect on the shares that are issued and outstanding; however, the
creation of Class D will provide a significant benefit to Class B shareholders
as described herein.

EXCHANGE PRIVILEGE. As previously stated, investors who hold Class A
shares of a MLAM-advised Fund in an account will be entitled, subsequent to the
Implementation Date, to purchase additional Class A shares of that fund in that
account only. Current Class A shareholders that do not qualify to purchase
Class A shares under the Select Pricing System and wish to exchange their Class
A shares for shares of a second MLAM-advised Fund will receive Class A shares
of that fund only if such shareholder owned Class A shares of the second fund
on the date of the exchange. Otherwise, shareholders that do not qualify to
purchase Class A shares under the Select Pricing System will receive Class D
shares in exchange for Class A shares after the Implementation Date. Investors
will have the right to exchange Class D shares for Class A shares of any MLAM-
advised Fund held in the account, provided that Class A shares of such fund
acquired in the exchange are held in the account at the time of the exchange.

Class A and Class D shares also will be exchangeable for shares of certain
money market funds specifically designated as available for exchange by holders
of Class A or Class D shares. The period of time that Class A 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 in connection
with a reduced initial sales charge purchase.

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
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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 charge 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 may be exchanged into the Class A or
Class D shares of the other funds or into shares of the Class A and Class D
money market funds with a reduced or without a sales charge.

Class B and Class C shares will be exchangeable only with shares of the
same class of other mutual funds advised by MLAM as well as certain money
market funds specifically designated as available for exchange by holders of
Class B or Class C shares. The period of time that Class B or Class C shares
are held in a money market fund, however, will not count toward satisfaction of
the holding period requirement for reduction of the CDSC for Class B or Class C
shares or the Conversion Period for Class B shares.

Class B shareholders of the Fund exercising the exchange privilege will
continue to be subject to the CDSC schedule applicable to the Fund if such
schedule is higher than the CDSC schedule relating to the Class B shares
acquired in the exchange. In addition, Class B shares of the Fund acquired
through use of the exchange privilege will be subject to the Fund's CDSC
schedule only 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, otherwise the CDSC schedules of the other fund will apply.

RIGHT OF ACCUMULATION. Under the Select Pricing System, reduced sales
charges will be applicable through a right of accumulation under which eligible
investors are permitted to purchase Class A or Class D shares of a MLAM-advised
Fund at the offering price applicable to the total of (a) the dollar amount
then being purchased plus (b) an amount equal to the then net asset value or
cost, whichever is higher, of the purchaser's combined holdings of Class A,
Class B, Class C and Class D shares of such fund and of any other MLAM-advised
Fund.

RECLASSIFICATION OF OUTSTANDING SHARES OF THE FUND. Outstanding shares of
the Fund will be automatically redesignated Class D shares on the
Implementation Date. Subsequent to the Implementation Date, reinvestment of
dividends paid on these reclassified shares of the Fund will be in Class D
shares.

Reclassification of shares of the Fund in connection with the
implementation of the Select Pricing System will not be deemed a purchase or
sale of the shares for Federal income tax purposes.

LIMITATIONS ON ASSET-BASED SALES CHARGES. Class B and Class C
distribution fees are subject to the limitations on asset-based sales charges
imposed by the NASD. As applicable to the Fund, the NASD 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 or Class C shares (defined to exclude
shares issued pursuant to dividend reinvestments and exchanges) plus (2)
interest on the unpaid balance at the prime rate plus 1% (the unpaid balance
being the maximum amount payable minus amounts received from the payment of the
distribution fee and the CDSC). The maximum allowable payments under the NASD
rule is referred to as the NASD maximum. Aggregate distribution fee payments on
Class C shares will be limited in accordance with the NASD maximum.

With respect to Class B shares, MLFD has agreed voluntarily to waive
interest charges on the unpaid balance in excess of 0.50% of eligible gross
sales. Consequently, the maximum amount payable to MLFD (referred to as the
"Class B voluntary maximum") is 6.75% of eligible gross sales. MLFD retains the
right to stop waiving the interest charges at any time. To the extent payments
would exceed the Class B voluntary maximum, in the case of Class B shares, or
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the NASD maximum, in the case of Class C shares, the Fund will not make
further payments of the distribution fee and any CDSCs will be paid to the
Fund rather than to MLFD; however, the Fund will continue to make payments of
the account maintenance fee. In certain circumstances the amount payable
pursuant to the Class B voluntary maximum may exceed the amount payable under
the NASD formula. In such circumstances payments in excess of the amount
payable under the NASD maximum will not be made.
PROPOSED AMENDMENT TO THE DECLARATION OF TRUST OF THE FUND

On September 9, 1996, the Board of Trustees of the Fund approved the
Select Pricing System and related amendments to the Fund's Declaration of
Trust. The proposed amendments to the Declaration of Trust, among other things,
will enable the Fund to issue additional classes of shares and to institute the
Class B to Class D automatic conversion feature which is integral to the
implementation of the Select Pricing System. In addition, the proposed
amendment to the Fund's charter also will permit the Board to institute
automatic conversion features with respect to all classes by reclassifying
issued shares of the Fund into additional classes at a future date.

CLASS B RETIREMENT PLANS. Certain investors may purchase Class B shares
of the Fund through retirement plans. These purchases may qualify for a waiver
of the CDSC normally imposed on purchases of Class B shares (retirement plans
holding Class B shares purchased without a CDSC are herein referred to as
"Class B Retirement Plans"). Since these Class B shares may be sold without a
CDSC, the length of time that such shares are held may not be tracked, and
therefore it may not be possible to convert Class B Retirement Plan shares to
Class D shares in the same manner as other Class B shares.

To ensure that both the Class B Retirement Plan shareholders and the other
Class B shareholders are treated fairly under the Select Pricing System, rather
than imposing the usual Class B Conversion Periods which apply to the shares, a
ten-year Conversion Period will be applied to each Class B Retirement Plan.
After the Implementation Date, the Class B Retirement Plans will continue to
purchase Class B shares without a CDSC. When the first share of any MLAM-
advised fund purchased by a Class B Retirement Plan has been held for ten years
(i.e., ten years from the date the relationship between the MLAM-advised funds
and the plan was established), all Class B shares of the Fund held in that
Class B Retirement Plan will be converted into Class D shares of the Fund.
Subsequent to such conversion, that retirement plan will be sold Class D shares
of the Fund.

TEXT OF PROPOSED CHARTER AMENDMENT. Section 6.1 will be amended in its
entirety to read as follows:

Beneficial Interest. The interest of the beneficiaries
____________________
hereunder shall be divided into transferable shares of beneficial
interest, par value $0.10 per share. The number of such shares of
beneficial interest authorized hereunder is unlimited. The
Trustees, in their discretion, without a vote of the Shareholders,
may divide the shares of beneficial interest into classes. In such
event, each class shall represent interests in the Trust property
and have identical voting, dividend, liquidation and other rights
and the same terms and conditions except that expenses related
directly or indirectly to the distribution of the shares of a class
may be borne solely by such class (as shall be determined by the
Trustees) and, as provided in Section 10.8, a class may have
exclusive voting rights with respect to matters relating to the
expenses being borne solely by such class. The bearing of such
expenses solely by a class of Shares shall be appropriately
reflected (in the manner determined by the Trustees) in the net
asset value, dividend and liquidation rights of the Shares of such
class. The Trustees may provide that shares of a class will be
exchanged for shares of another class without any act or deed on the
part of the holder of shares of the class being exchanged, whether
or not shares of such class are issued and outstanding, all on terms
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and conditions as the Trustees may specify. The
Trustees may redesignate a class or series of shares of beneficial
interest or a portion of a class or series of shares of
beneficial interest whether or not shares of such class or
series are issued and outstanding, provided that such redesignation
does not substantially adversely affect the preference, conversion
or other rights, voting powers, restrictions, limitations as to
dividends, qualifications or terms or conditions of redemption of
such issued and outstanding shares of beneficial interest.
The division of the Shares into classes and the terms and
conditions pursuant to which the Shares of the classes will be
issued must be made in compliance with the 1940 Act. All Shares
issued hereunder including, without limitation, Shares issued in
connection with a dividend in Shares or a split of Shares, shall be
fully paid and nonassessable.

Section 6.2 will be amended in its entirety to read as follows:

Rights of Shareholders. The ownership of the Trust Property of
______________________
every description and the right to conduct any business hereinbefore
described are vested exclusively in the Trustees, and the
Shareholders shall have no interest therein other than the
beneficial interest conferred by their Shares, and they shall have
no right to call for any partition or division of any property,
profits, rights or interests of the Trust nor can they be called
upon to share or assume any losses of the Trust or suffer an
assessment of any kind by virtue of their ownership of Shares. The
Shares shall be personal property giving only the rights in this
Declaration specifically set forth. The Shares shall not entitle
the holder to preference, preemptive, appraisal, conversion or
exchange rights (except for rights of appraisal specified in Section
11.4 and except as may be specified by the Trustees in connection
with the division of shares into classes or the redesignation of
classes or portions of classes in accordance with Section 6.1).

Section 10.8 will be amended in its entirety to read as follows:

Voting Powers. The Shareholders shall have power to vote (i)
_____________
for the removal of Trustees as provided in Section 2.3; (ii) with
respect to any advisory or management contract as provided in
Section 4.1; (iii) with respect to the amendment of this Declaration
as provided in Section 11.8; (iv) with respect to such additional
matters relating to the Trust as may be required or authorized by
the 1940 Act, the laws of the Commonwealth of Massachusetts or other
applicable law or by this Declaration or the By-Laws of the Trust;
and (v) with respect to such additional matters relating to the
Trust as may be properly submitted for Shareholder approval. If the
Shares of a Series shall be divided into classes as provided in
Article VI hereof, the Shares of each class shall have identical
voting rights except that the Trustees, in their discretion, may
provide a class with exclusive voting rights with respect to matters
related to expenses being borne solely by such class whether or not
shares of such class are issued and outstanding.

Implementation of the Select Pricing System is conditioned upon approval
of the amendment to the Fund's Declaration of Trust by all shareholders of the
Fund, voting as a single class. On September 9, 1996, the Board of Trustees of
the Fund approved the proposed amendment to the Fund's Declaration of Trust.
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Unless the Board of Trustees determines otherwise, it is anticipated
that this proposal, if approved by the shareholders of the Fund, will be
implemented on November 1, 1996.

PROPOSAL NO. 5 - SELECTION OF INDEPENDENT AUDITORS

The Board, including a majority of the Trustees who are not interested
persons of the Fund, has selected independent auditors to examine the financial
statements of the Fund for the current fiscal year. The Fund knows of no direct
or indirect financial interest of such auditors in the Fund. Such appointment
is subject to ratification or rejection by the shareholders of the Fund.
Unless a contrary specification is made, the accompanying proxy will be voted
in favor of ratifying the selection of such auditors.

Deloitte & Touche LLP ("D&T") acts as independent auditors for ML & Co.
and all of its subsidiaries and for most other investment companies for which
MLAM or FAM acts as investment adviser. The fees received by D&T from these
other entities are substantially greater, in the aggregate, than the total fees
received by it from the Fund. The Board considered the fact that D&T has been
retained as the independent auditors for ML & Co. and the other entities
described above in its evaluation of the independence of D&T with respect to
the Fund.

Representatives of the Fund's independent auditors are expected to be
present at the Meeting and will have the opportunity to make a statement if
they so desire and to respond to questions from shareholders.

ADDITIONAL INFORMATION

The expenses of preparation, printing and mailing by the Fund of the proxy
materials in connection with the matters to be considered at the meeting will
be borne by the Fund. The Fund will reimburse banks, brokers and others for
their reasonable expenses in forwarding proxy solicitation material to the
beneficial owners of the shares of the Fund. The Fund also may hire proxy
solicitors at the expense of the Fund.

The proposal to elect the Fund's Board of Trustees (Proposal 1) may be
approved by a plurality of the votes cast by the Fund's shareholders, voting in
person or by proxy, at a meeting at which a quorum is duly constituted.

The proposal to ratify the selection of the Fund's independent auditors
(Proposal 5) may be approved by the affirmative vote of a majority of the
Fund's shares represented at a meeting at which a quorum is duly constituted.

The proposals to amend the fundamental investment restrictions of the Fund
(Proposal 3) and to change the investment objectives and policies and the name
of the Fund (Proposal 2) require the affirmative vote of the lesser of (i) 67%
of the shares represented at the Meeting at which more than 50% of the
outstanding shares are represented or (ii) more than 50% of the outstanding
shares.
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The proposal to amend the Fund's Declaration of Trust (Proposal 4)
must be approved by the affirmative vote of a majority of the outstanding
shares of the Fund.

In order to obtain the necessary quorum at the Meeting, supplementary
solicitation may be made by mail, telephone, telegraph or personal interview by
officers of the Fund. It is anticipated that the cost of such supplementary
solicitation, if any, will be nominal. A quorum consists of 33 1/3% of the
shares entitled to vote at the Meeting, present in person or by proxy.

All shares represented by properly executed proxies, unless such proxies
have previously been revoked, will be voted at the Meeting in accordance with
the directions on the proxies; if no direction is indicated, the shares will be
voted "FOR" the Board nominees, "FOR" the ratification of the independent
auditors, 'FOR' the amendments to the fundamental investment restrictions of
the Fund and "FOR" the charter amendment.

Broker-dealer firms, including Merrill Lynch, holding Fund shares in
"street name" for the benefit of their customers and clients will request the
instructions of such customers and clients on how to vote their shares on each
Proposal before the Meeting. The Fund understands that, under the rules of the
New York Stock Exchange, such broker-dealer firms may, without instructions
from their customers and clients, grant authority to the proxies designated to
vote on the election of Trustees (Proposal 1) the ratification of the
selection of independent auditors (Proposal 5) and the proposed charter
amendment (Proposal 4) if no instructions have been received prior to the date
specified in the broker-dealer firm's request for voting instructions. Broker-
dealer firms, including Merrill Lynch, will not be permitted to grant voting
authority without instructions with respect to the amendments to the
fundamental investment restrictions (Proposal 3) and the changes to the Fund's
investment objectives and policies and name (Proposal 2). The Fund will include
shares held of record by broker-dealers as to which such authority has been
granted in its tabulation of the total number of votes present for purposes of
determining whether the necessary quorum of shareholders exists. Proxies which
are returned but which are marked 'abstain' or on which a broker-dealer has
declined to vote on any proposal ('broker non-votes') will be counted as
present for the purposes of a quorum. Merrill Lynch has advised the Fund that
it intends to exercise discretion over shares held in its name for which no
instructions have been received by voting such shares on Proposals 1, 2 and 5
in the same proportion as it has voted shares for which it has received
instructions. However, abstentions and broker non-votes will not be counted as
votes cast. Abstentions and broker non-votes will not have an effect on the
vote on Proposal 1; however, abstentions and broker non-votes will have the
same effect as a vote against Proposals 2, 3, 4 and 5.

The Fund's Declaration of Trust, which is on file with the Secretary of
State of the Commonwealth of Massachusetts, provides that the name of the Fund
refers to the Trustees under the charter collectively as Trustees, but not as
individuals or personally; and no Trustee, shareholder, Officer, employee or
agent of the Fund shall be held to any personal liability, nor shall resort be
had to their private property for the satisfaction of any obligation or claim
of the Fund but the Fund Estate only shall be liable.

ADDRESS OF INVESTMENT ADVISER

The principal office of MLAM is located at P.O. Box 9011, Princeton, New
Jersey 08543-9011.

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ANNUAL REPORT DELIVERY

The Fund will furnish, without charge, a copy of its annual report for the
fiscal year ended October 31, 1995 and its semi-annual report for the six
months ended April 30, 1996 to any stockholder upon request. Such requests
should be directed in writing to State Street Bank and Trust Company, P.O. Box
8500, Boston, Massachusetts 02266-8500.

MEETINGS OF SHAREHOLDERS

The Fund's Declaration of Trust does not require that the Fund hold an
annual meeting of shareholders. The Fund will be required, however, to call
special meetings of shareholders in accordance with the requirements of the
Investment Company Act to seek approval of new management and advisory
arrangements or of a change in the fundamental policies, objectives or
restrictions of the Fund. The Fund also would be required to hold a special
shareholders' meeting to elect new Trustees at such time as less than a
majority of the Trustees holding office have been elected by shareholders. The
Declaration of Trust of the Fund provides for the calling of shareholders'
meetings at the request of 10% of the outstanding shares or by a majority of
the Trustees.

By Order of the Board

JERRY WEISS
SECRETARY

Dated: October 1, 1996

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APPENDIX A

INVESTMENT RESTRICTIONS

In addition to the investment restrictions set forth in the Prospectus,
the Fund has adopted the following investment restrictions, none of which may
be changed without the approval of a majority of the Fund's outstanding shares
(which for this purpose and under the Investment Company Act of 1940 means the
vote of (i) 67% or more of the Fund's shares present at a meeting, if the
holders of more than 50% of the outstanding shares of the Fund are present or
represented by proxy, or (ii) more than 50% of the Fund's outstanding shares,
whichever is less). The Fund may not:

(1) Make investments for the purpose of exercising control or
management.

(2) Purchase or sell real estate; provided that to the extent
permitted by the regulations of the Office of Thrift Supervision and the
National Credit Union Administration (the "Regulations"), the Fund may
invest in securities secured by real estate or interests therein or issued
by companies which invest in real estate or interests therein.

(3) Purchase any securities on margin (except that the Fund may
obtain such short-term credit as may be necessary for the clearance of
purchases and sales of portfolio securities), or make short sales of
securities or maintain a short position.

(4) Make loans to other persons (except as provided in (11) below);
provided that for purposes of this restriction the acquisition of a
portion of an issue of publicly distributed bonds, debentures, or other
corporate debt securities and investment in governmental and supranational
obligations, short-term commercial paper, certificates of deposit,
bankers' acceptances and repurchase agreements shall not be deemed to be
the making of a loan.

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

(6) Purchase or sell interests in oil, gas or other mineral
exploration or development programs.

(7) Purchase or sell commodities or commodity contracts, except
that the Fund may purchase interest rate futures and related options to
the extent permitted by the Regulations (such transactions currently are
not permitted by the Regulations).

Additional investment restrictions which may be changed by the trustees,
but only if such changes would comply with the Regulations, provide that the
Fund may not:

(8) Invest in securities of issuers (other than U.S. Government
agencies or instrumentalities) having a record, together with
predecessors, of less than three years of continuous operation if more
than 5% of the Fund's total assets, taken at market value at the time of
investment, would be invested in such securities.

(9) Purchase securities of other investment companies, except in
connection with a merger, consolidation, acquisition or reorganization.

(10) Write, purchase or sell puts, calls, straddles, spreads or
combinations thereof.

(11) Lend its portfolio securities, except that the Fund may lend
portfolio securities with an aggregate value up to 33 1/3 percent of its
total assets, taken at market value, in accordance with the guidelines set
forth below.

Subject to investment restriction (11) above, the Fund may from time to
time lend securities from its portfolio to brokers, dealers and financial
institutions and receive collateral in cash (or cash equivalents consisting of
securities issued or guaranteed by the U.S. Government which may be held as
portfolio securities pursuant to the Fund's investment policies) which will be
maintained in an amount equal to at least 102% of the current market value of
the loaned securities. During the period of the loan, the Fund receives income
on the loaned securities and a loan fee and thereby increases the current
income of the Fund. Such loans will be terminable at any time. 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. The Fund may pay reasonable fees
to persons unaffiliated with the Fund for services in arranging such loans.

The trustees have established the policy that the Fund will not purchase
or retain the securities of any issuer, if those individual officers and
trustees or directors of the Fund, the Investment Adviser or the Distributor
for the Fund each owning beneficially more than one-half of 1% of the
securities of such issuer own in the aggregate more than 5% of the securities
of such issuer. Portfolio securities of the Fund generally may not be
purchased from, sold or loaned to the Investment Adviser 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 of 1940.

Because of the affiliation of the Investment Adviser with the Fund, the
Fund is prohibited from engaging in certain transactions involving the
Investment Adviser's affiliate, FAM, or its affiliates except for brokerage
transactions permitted under the Investment Company Act of 1940 involving only
usual and customary commissions or transactions pursuant to an exemptive order
under the Investment Company Act of 1940. Without such an exemptive order, the
Fund is prohibited from engaging in portfolio transactions with Merrill Lynch
or its affiliates acting as principal and from purchasing securities in public
offerings which are not registered under the Securities Act of 1933 in which
such firms or any of their affiliates participate as an underwriter or dealer.