Merrill Lynch Intermediate Government Bond Fund
Supplement dated December 22, 1998 to the
Prospectus dated February 18, 1998
The following should be added to page ten of The Merrill Lynch
Intermediate Government Bond Fund's Prospectus dated February 18, 1998:
The Fund may invest some portion of its assets in mortgage-backed
securities. The value of mortgage-backed securities, like that of other
traditional fixed-income securities, typically increases when interest rates
fall and decreases when interest rates rise. However, mortgage-backed securities
are also subject to the risk of prepayment. In a period of declining interest
rates, borrowers may pay what they owe on the underlying assets more quickly
than anticipated, which will reduce the yield to maturity and the average life
of the mortgage-backed securities. In addition, when the Fund reinvests the
proceeds of a prepayment it will likely receive an interest rate lower than the
rate on the security that was prepaid. In a period of rising interest rates,
prepayments may occur at a slower than expected rate. As a result, the average
maturity of the Fund's portfolio will increase. The value of long-term
securities generally changes more widely in response to changes in interest
rates than short-term securities.
